controversy here. My contention is that in its very text the HochSmith resolution does not modify in the remotest way or degree the transportation act.

Senator COUZENS. Mr. Chairman, this whole case has developed into a rate-making case and it is not a question of whether this commissioner should be confirmed or not. If we are going to refuse confirmation or confirm him on this record, we are doing it on a single issue. I do not believe we are justified in confirming or refusing to confirm a man on a single issue, and if this issue is going to be predominant now, let us get all the commissioners in and see whether he is in harmony with them or otherwise.

Senator NEELY. Inasmuch as the only matter properly before the committee is that of ascertaining the fitness of Mr. Esch for confirmation, would not anything beyond that be irrelevant to this investigation?

The CHAIRMAN. I have said to Commissioner Esch and to his friends that he can call other commissioners or others outside the commission for the purpose of throwing light on this matter.

Senator HAWES. Mr. Chairman, I want to request as a member of this committee that other members of the Interstate Commerce Commission be called to give their opinion as to whether the Hoch-Smith resolution affected their attitude in the decision in this case.

The CHAIRMAN. I think that is entirely proper. The committee will rise now and meet again at 2.30 p. m. in the Interstate Commerce Committee room of the Capitol.

(Thereupon, at 12 o'clock noon, a recess was taken until 2.30 o'clock p. m.)

AFTER RECESS

The committee reconvened at 2.30 o'clock p. m., Tuesday, February 21, 1928, in the committee room of the Interstate Commerce Committee of the Senate, in the Capitol.

The CHAIRMAN. Have you concluded your examination?
Senator SACKETT. I have concluded as far as I am concerned.
The CHAIRMAN. Have you concluded, Senator Neely?
Senator NEELY. Let me proceed for a moment.

The CHAIRMAN. Very well.

STATEMENT OF HON. JOHN J. ESCH, A MEMBER OF THE INTERSTATE COMMERCE COMMISSION-Continued

Senator NEELY. Mr. Commissioner, in your last Lake Cargo decision you reduced the rate of the northern carriers to such an extent as to leave them only 20 cents a ton profit for carrying coal from the Pennsylvania district to the lake ports?

Commissioner ESCH. Well, there were some cost figures introduced after elaborate studies to the effect that the cost to the northern carriers to Lake Erie ports would average something around $1.23.

Senator NEELY. Does not the evidence of the witness Oliver for the northern mining districts show that the total cost of transportation to the northern carriers from the Pennsylvania or Pittsburgh field is $1.23 a ton?

Commissioner ESCH. Well, that was the statement made in the

record.

Senator NEELY. There was no controversy as to that being the cost? Commissioner ESCH. I think it was $1.23.

Senator NEELY. And you allowed the carriers a profit of 20 cents a ton, thereby making the entire rate $1.43 a ton?

Commissioner Escн. We fixed the rate at $1.43.

Senator NEELY. Did not the southern carriers show by undisputed evidence that the out-of-pocket cost of transporting coal from the West Virginia and Kentucky districts to Lake Erie ports was only 77 cents a ton?

Commissioner ESCH. That may be the cost without allowing any fair return. But the $1.23-I understand it allowed a fair return to the carrier.

Senator NEELY. Was it not further shown that the overhead cost to the southern carriers was approximately 44 cents a ton; and that the total cost of transporting a ton of coal from the West Virginia and Kentucky field to Lake Erie ports is $1.21?

Commissioner ESCH. I can not recollect the figures, Senator. If you state that they are in the report, why of course, that is true. Senator NEELY. Do you remember that a witness by the name of Parker testified for the southern mining districts on that point? Commissioner EsCH. I think there was such a witness.

Senator NEELY. You do not remember whether the figures I have stated are the ones that he gave?

Commissioner ESCH. No. I assume, of course, that you give the figures that he gave.

Senator NEELY. When the commission suspended the reduction of 20 cents a ton that the southern carriers proposed to make, did it not thereby compel them to charge a transportation profit of approximately 70 cents a ton on West Virginia and Kentucky coal?

Commissioner ESCH. I can not keep the figures in mind, but I do not know whether those figures include or exclude the terminal costs. Senator NEELY. What is the southern rate that is now in effect? Commissioner ESCH. The southern rates are $1.71, $1.91, and $2.06. Senator NEELY. How much?

Commissioner ESCH. $2.06 from the low-volatile field and $1.91 from the high-volatile fields, and, I think, $1.71 from Fairmont.

Senator NEELY. Taking the $1.91 rate as the basis of an answer to my question, and provided the record does show that the total cost of transporting a ton of the high-volatile coal from West Virginia and Kentucky to lake ports is only $1.21, the profit of the southern carrier is 70 cents a ton?

Commissioner ESCH. On the basis you have stated.

Senator NEELY. Do you deny that the figures I have stated are in the record.

Commissioner ESCH. That they have been put in the record I do not dispute. Of course, one can draw different conclusions and make different deductions from figures, and cost studies are about the most indefinite thing that we have to deal with. They are only approximations.

Senator NEELY. Recurring to your admission that the paramount purpose of the commission is to protect the public, please explain how the commission served this purpose in suspending the 20 cents a ton reduction proposed by the southern carriers, since the evidence shows that after the 20-cent reduction is made the remaining freight rate on

southern coal will afford the carriers an adequately compensatory return on their investment?

Commissioner ESCH. That is the very issue now under consideration by the commission. The main issue in that case, if I may state it, is as to the reasonableness of those rates reduced by 20 cents and the question as to whether or not such rates will create a burden upon other traffic. Those are the issues now involved.

Senator NEELY. But do you believe that the commission served the public in suspending the proposed reduction in rates, or did it simply serve the Pittsburgh coal industry at the expense of the southern railroads, at the expense of the West Virginia and Kentucky coal operators, and at the expense of the ultimate consumers who testify that the effect of the suspension is to increase the cost of their coal $5,000,000 a year?

Commissioner ESCH. No; I think that those issues are very intimately involved in this suspension case, as you well realize. And as I stated before, there is not that added charge to the consumers of the Northwest that you state.

Senator NEELY. There is no evidence in the record to contradict my statement, is there Mr. Esch?

Commissioner ESCH, I do not recollect that there is any evidence contradicting that particular statement, but the statement

Senator NEELY. Ôn what basis do you dispute the sworn record if there is no evidence there on which to predicate your contra

diction?

Commissioner ESCH. I can not immediately recall the entire record, because it consists of 2,500 pages and 350 exhibits.

Senator NEELY. Mr. Esch, you admitted yesterday, and you do not now deny, that there is testimony before your commission to the effect that the suspension of the reduction proposed by the southern carriers will cost the consumers of the Northwest $5,000,000 a year?

Commissioner ESCH. It costs it, provided we do not allow the reduction.

Senator NEELY. But you have suspended the reduction and the suspension is costing the northwestern consumers $5,000,000 a year. Commissioner ESCH. There is, of course, at present no movement, as the Lake season is closed.

Senator NEELY. But it did not close until several months after you suspended the rate reduction.

Commissioner Escн. Oh, it is not months, Senator.

Senator NEELY. When did the suspension become effective? Commissioner ESCH. The suspension of the rates would be effective the 28th of August.

Senator NEELY. And the lake-shipment season does not close until approximately the first day of December, is that not a fact?

Commissioner ESCH. Yes; some time in November. It depends on when the locks close at the Soo.

Senator NEELY. Then the reduction was suspended for at least three months of the lake-cargo season, was it not?

Commissioner Escн. Oh, approximately three months, I think. Approximately three months. Of course, some of that coal is sold on contracts made earlier in the season and the contracts carry through the open season. There are, however, contracts where the

Senator SACKETT. You do not think there is coercion in that, Mr. Commissioner?

Commissioner ESCH. It is not a prohibition.

Senator SACKETT. You do not think there is coercion in it?
Commissioner ESCH. It is probably an admonition.

Senator GLASS. An admonition that would necessarily be followed by a prohibition.

Commissioner ESCH. It would not be unless they had introduced or filed their reduced rates, and protests were made against such reduced rates.

Senator SACKETT. Do you not think there is a certain amount of coercion in the way in which you handled that rate?

Commissioner ESCH. Evidently it did not amount to coercion, because even before those reduced rates were made effective on the 10th day of August last, the southern carriers filed their reduced

rates.

Senator SACKETT. Do you not know, as a matter of fact, that they jeopardized their whole relation with the commission if they dared to take that sort of an attitude, and considered fully the penalties that might be put upon them by the commission if they dared to do it?

Commissioner ESCH. What penalties?

Senator SACKETT. I do not know what penalties. They have many other cases before the commission.

Commissioner ESCH. That would not affect the attitude of the commission with reference to them. They decide every case upon its own facts.

Senator COUZENS. For information, Mr. Commissioner, I would like to know if this language appears in the transportation act: "To the end that commodities may freely move." Is that only in the Hoch-Smith resolution, or is that language in the transportation act? Commissioner Esch. I think that is in the Hoch-Smith resolution. Senator COUZENS. It is, but is it also in the transportation act? Commissioner Escн. I do not remember that it is.

The CHAIRMAN. I do not think it is in the transportation act, Senator.

Senator GLASS. I believe you were not in here when I asked the question if the commission had construed, or proposes to construe, that language to mean the movement of commodities in one field as against another, or the total movement of tonnage in that particular industry.

Senator COUZENS. But what I am trying to get at is this: Is appears from the evidence that this Hoch-Smith resolution injected into the minds of the commission at least a new theory, or at least an additional theory, in rate making, and that was that the rate making should be based on the free movement of traffic. If that is true, and I understood from the commissioner that they did consider this resolution in their rate making after that, that it was perfectly proper for them to consider whether traffic was moving freely from all districts; I can conceive of collusion, for instance-may be that is not a nice word, but we will call it that-between the railroads and the mine operators of the northern fields to the extent that they were unable to get a greater differential under a higher rate in the southern fields,