fourth section. In other words, to use a topical term, to make it foolproof. The CHAIRMAN. Do you know any such thing anywhere? Mr. HUDDLESTON. There are several factors in competition in transporation among which are rates, safety, and speed. There can be no competition between a water carrier and a rail carrier in the elements of safety and speed? Mr. HAYWARD. I do not think there can be; no. Mr. HUDDLESTON. So that where a rail carrier makes a rate as low as the water carrier that destroys water competition, because they are able to offer factors of value which the water carrier can not offer. Now, is not that an answer to Mr. Newton's question? Mr. HAYWARD. I think that is true; if the Congress would be permitted to extend that consideration to a water carrier. Mr. HUDDLESTON. But rail carriers may compete with each other in every factor. Therefore there is justice in fixing equality in rates; but since a water carrier can never compete in safety and speed in transportation, to allow a rail carrier to make as low a rate inevitably drives the water carrier out of business. Mr. HAYWARD. That is true. The only factor that will influence the movement of freight by water where there is equal competition is a lower rate, that is the only ground on which they could make a plea for business? Mr. HUDDLESTON. So that the reason for applying a different rule to competition between rail carriers and water carriers to that which you would apply to rail carriers competing with other rail carriers is that the rail carriers have an advantage over the water carrier in certain factors, which would have to be considered. Mr. HAYWARD. That is true, they would have to be considered if there was any distinction to be drawn. Mr. HUDDLESTON. The rail carrier is entitled to a higher rate than the warer carrier because the rail carrier renders more service? Mr. HAYWARD. I think that does not admit of any controversy. Mr. NEWTON. It is my understanding that the barge line which you referred to as being the primary objective carries traffic at a rate that is 20 per cent less than the rail rate; that is what they are permitted under the law. Is not that right, Mr. Denison? Mr. DENISON. Yes. Mr. HAYWARD. Yes; 20 per cent under the rail rate. Mr. NEWTON. So the railroads do not make the same rates as the barge line. On the other hand, the barge line is 20 per cent less than the rail rate? Mr. HAYWARD. That is very true, Mr. Newton; there is an established basis for making those barge rates; but if the carriers can get down to a water territory, to a noncompensatory level, they can bring it to a point where the water carrier can not make it 20 per cent under that, but still the water carrier can not recoup its losses at interior points, but the rail carrier can. Mr. BURTNESS. Are there any departures to speak of from the general provisions of the fourth section? Mr. HAYWARD. There are hundreds of them; there are innumerable fourth-section departures; I could not undertake to state them. Mr. BURTNESS. Have any such been granted since 1919? Mr. HAYWARD. Oh, yes; if not actually granted, they have been permitted to continue. Mr. BURTNESS. But have any new ones been granted that you know of? Mr. HAYWARD. I can not cite any particular instance, but I am pretty sure they have. The paper case is suggested to me as one of the cases. Mr. HAWES. If we followed this subject to a logical conclusiona congressional act compelling railroads to maintain a high rate will result in a higher rate on steamboats; this will compel railroads to raise rates and make shippers pay for it. Mr. HAYWARD. Oh, of course, if they are going to raise the rate the shipper will have to pay it; the consumer pays the rate in the end. But we disposed of that condition, or, rather, the commission did, by an equalizing process; the depressed rates at the river were brought up to a reasonable level, and those in the interior brought down to a reasonable level, and so you reached a norm to which the subnormal rates were raised and the abnormal rates were reduced. Mr. HAWES. As a matter of adjustment were changes made from time to time in the old rates? Mr. HAYWARD. I could not hear that question. Mr. HAWES. The whole rate-making problem is a matter that must be adjusted from time to time; it can not be fixed originally? Mr. HAYWARD. I agree with you there; there has to be a certain amount of flexibility in rate making; you can not make a rigid rule that a rate shall be established indefinitely. There are controlling conditions that will influence the measure of the rate from time to time. The CHAIRMAN. Are there any other questions? Thank you. Mr. FRENCH. May Mr. Brown be permitted to make a statement that he wanted to conclude in his remarks? The CHAIRMAN. Yes. Mr. BROWN. I neglected to state that I have with me a copy of part of a resolution passed by the American Farm Bureau Federation, which is a federation of all farm bureaus in the United States, passed in 1921 on this matter of legislation, which has never been rescinded. I am sorry I did not state that before. Mr. FRENCH. And at this time let me file a statement that has been handed me from the American Mining Congress, over the signature of McKinley W. Kreigh, commercial counsel of the American Mining Congress. (The statement referred to is as follows:) MUNSEY BUILDING, Washington, D. C., January 23, 1925. The metal-mining industries of the intermountain States are vitally affected by fourth section departures in the matter of transcontinental rail rates. Rates to the Pacific coast that are lower than rates to intermediate territory impose an undue burden upon industries in intermediate territory, which, in effect, are compelled to bear a portion of the cost of transportation of commodities to Pacific-coast points. If the railroads would put forth as great efforts to build up business in the intermountain territory as they exert in the endeavor to meet water competition through the Panama Canal, it is not unreasonable to assert that their increased business would more than offset any loss of traffic that might be attributable to that water competition. MCKINLEY W. KRIEGH, Commerce Counsel the American Mining Congress. Mr. FRENCH. I will now call on Mr. Amos A. Betts, a member of the Arizona Corporation Commission, and yield to him 15 minutes. STATEMENT OF MR. AMOS A. BETTS, OF ARIZONA Mr. BETTS. Mr. Chairman and gentlemen, the Arizona Corporation Commission, of which I am a member, is a constitutional body consisting of three members elected by a direct vote of the people. Mr. Loren Vaughn, one of my associates, is here with me, and he and I have prepared a statement setting forth our views on this bill, which I wish, as a matter of economy of time, to file, and have made a part of the record, and the balance of the few minutes I have I would like to devote to a brief discussion of a subject that has been discussed at considerable length here, and of which much more will be said, I doubt not, by the opponents to the bill before they finish their case, namely, the question of empty-car movement. I wish to place a copy of this in the hand of each member of the committee. This statement shows the percentage of empty to total freight car-miles for the years 1912, 1913, 1921, 1922, 1923 and for the first ten months of 1924, first showing the United States as a whole, and underneath that the western district, which comprises the intermountain Pacific coast territory. It will be noted that in every year except the year 1923 the empty-car movement was less in the western district than in the United States as a whole, and that for 1923 the western district exceeded the United States as a whole by only four one-hundredths. Underneath that we have shown the principal transcontinental carriers in the western district. Mr. BURTNESS. Can you give us roughly the difference between the movement east and the movement west on transcontinental roads? Mr. BETTS. No; I have not the segregation east and west bound for these figures; but I will give you a little later the figures for the first 10 months of 1920 and 1923, or perhaps I can give them now. No; I see this is not east and west bound, it is eastern and western districts. I have not that segregation. Coming back to the transcontinental lines mentioned, it will be noted that in 1912 and 1913 the empty-car movement was less on those lines than in the western district. In 1921 the percentage was 77.26 as against 35.98 in the western district. That was only one line, the Atchison, Topeka & Santa Fe. In 1922 the Santa Fe, the Great Northern, and the Chicago, Milwaukee & St. Paul exceeded by a fraction of 1 per cent the western district; and in 1923 only the Great Northern and the Chicago, Milwaukee & St. Paul exceeded by a fraction of 1 per cent the western district. We find, then, that four of those roads-the Union Pacific, the Northern Pacific, the Great Northern, and the Milwaukee on those four roads the empty-car movement was less than on the six transcontinental lines except in 1923, when it was 34.5 per cent as against 4.35 per cent, or one-tenth of 1 per cent. For the first 10 months of 1920 the movement in the United States as a whole was 42.6; and the eastern district 48.7; and in the western district it was 36.9 per cent. 30420-25-11 For the year 1923 for the United States the movement was 46.8; eastern district, 50.2; and western district, 44.8. I would like to give you the tonnage of the Class I roads in the western district for the first 10 months of 1923 The rail revenue, ton-miles, amounted to $475,065,000. In 1922, for the same period, $379,576,000. That was an increase in 1923 of $95,489,000, or a percentage increase of 25.16 per cent. For the same period the total westbound tonnage through the canal was 4,086,001, or 0.86 of 1 per cent. Of the westbound traffic through the canal 77.32 per cent moving to the south coast points, and 22.68 per cent to the north coast points, while the carriers contend that the westbound empty movement is on the northern lines, and that on the southern lines it is eastbound. Now, if I may have one or two more minutes, I would like to speak of the movement of fresh fruit and vegetables, or, in other words, the traffic in refrigerator cars originating on the Southern Pacific and Santa Fe. In the year 1923, for the first nine months the Santa Fe originated 21,400 cars of citrus fruits; 11,767 cars of other fresh fruits, and 6,200 cars of other fresh vegetables. During the same time the Southern Pacific originated 17,713 cars of citrus fruits; 54,670 cars of other fresh fruits; and 18,762 cars of other fresh vegetables. The total number of cars originating on the Santa Fe, hauling this fruit and these vegetables for the first nine months of 1923 was 39,367 cars; and on the Southern Pacific the total figures were 91,145 carloads. Extended for a year, that would be 52,489 carloads on the Santa Fe and 121,524 carloads on the Southern Pacific that must move in refrigerator equipment. Inasmuch as that is a seasonal movement it is clear that the carriers could not under any circumstances prevent an empty car movement to care for it; but notwithstanding that fact the western district has a less empty car movement than does the United States as a whole. During the same period just mentioned, the first nine months of 1923, the Santa Fe originated on its lines a total traffic of 18,670,684 carloads, and the Southern Pacific originated a total of 18,368,279 carloads. In 1924, the Santa Fe originated a total of 18,200,118 carloads and the Southern Pacific originated a total of 17,888,165 carloads or a fraction less than in 1923. I speak of that to compare it with the small tonnage through the Panama Canal. -. I want to speak of the class rate case, of which Mr. McGee made mention, I C. C. No. 3994, which was handled by Mr. Eastman, one of the ablest men who ever held membership on the Interstate Commerce Commission. These hearings were commenced in May, 1923, and concluded in March, 1924. The transcript contained more than 15,000 pages. In that connection I want to read finding No. 25 by Commissioner Eastman. [Reading:] That in connection with the adjustment of rates herein recommended, fourth section relief should be granted to weak lines or short lines upon the ground of financial disability and to all lines upon the ground of actual or constructive. circuity, such relief to be limited to lines not excessively circuitous, and to instances where the rates will not be less than reasonably compensatory. He did not recommend one single exception to meet water competition. In that great case, the largest the commission has ever handled I believe and if I may have one more minute I want to read a quotation that he gave in detail, with approval, from volume 3 of the Interstate Commerce Commission report, one of the earliest of the Interstate Commerce Commission reports, in discussing this southeastern situation. [Reading:] The belief has forced itself upon this commission with increasing truth during the period in which it has observed the operation of various systems of rate making in the Southern States and elsewhere that this system of combined, joint and local rates to points in Southern States intermediate to the so-called basing points, is in a very great degree responsible for the lack of local development in that region except that favored localities. Mr. COOPER. This question of the empty car movement is not a very important question. You do not think that it is a question that it is vital for this committee to consider, do you? Mr. BETTS. I certainly do not. Mr. COOPER. Is not that a question for the Interstate Commerce Commission? Mr. BETTS. Yes, if it becomes a serious question. I do not think it is a serious question at all, I think it was brought in here merely as an excuse for the prevention of the passage of this bill. I do not think there is anything serious to it at all. Mr. NEWTON. What percentage of your freight goes eastward? Mr. BETTS. I could not tell you in percentage, but all our citrus fruits, including cantaloupes move to eastern points. Mr. NEWTON. Is the East the principal market for the products of your State... Mr. BETTS. Yes, sir. Mr. NEWTON. What do you think is the real complaint, is it the discrimination or excessive rates that you pay on your fruits? Mr. BETTS. It is the discrimination, because it places us at a disadvantage and absolutely prevents the investment of capital which would tend to build up our natural resources, which are as great as they are any place in the United States; but we can not build them up under discriminatory freight rates. I thank you. (Mr. Betts submitted the following paper:) The subscribers hereto are two of the three duly elected, qualified, and acting members of the Arizona Corporation Commission, a body created by the constitution of the State of Arizona, empowered, directed, and required to establish and maintain just, reasonable, and nondiscriminatory rates, charges, rules, and regulations applicable to the service of public service corporations within the State and authorized to intervene in any and all proceedings relating to interstate rates; fares, charges, and regulations affecting the people of the State of Arizona whenever in its judgment such intervention is necessary in the interest of the public welfare. We wish first to direct particular attention to the fact that the Gooding bill has been approved and indorsed by the National Association of Railway and Utilities Commissioners in convention assembled. This association consists of the members of the State regulatory commissions from 47 of the 48 states of the Union. (There is no commission in the State of Delaware.) It has been in existence for more than 35 years and during that time has held annual conventions for the purpose of discussing the problems with which its members are confronted. |