proximately one-third of their revenue they are dependent upon the products of farms, it does not establish that the edible-livestock traffic is not paying its equitable proportion of the revenues or that it must be looked to as a source of additional revenue.

Southwestern carriers.-The southwestern carriers reaffirm their original proposals of a base scale of rates on beef cattle, and on hogs and sheep fit for slaughter and shipped in double-deck cars, which is 30 per cent of the first-class rate applying in the Southwest, and the same basis of rates on stocker and feeder animals as on fat animals. This would result in a higher level of rates in the Southwest than in western trunk-line territory. The following change in traffic density is shown:

1 Arkansas, Oklahoma, Louisiana west of Mississippi River, and Texas.
Kansas, Nebraska, Missouri, Iowa, South Dakota, North Dakota, and Minnesota.
Western trunk-line States to southwestern States.

122, 39 125.80

It will be noted that substantial areas in western trunk-line territory are omitted from this comparison.10 There are also omitted from the figures for the Southwest, data for the eastern portion of New Mexico. As disclosing the financial condition of the carriers these respondents rely upon data previously set forth herein. For the first three months of 1931, eight roads, operating 1,773 miles of line, out of 24 southwestern railroads operating 26,571 miles of line, had deficits in net railway operating income aggregating $304,858. For the same period in 1932, 10 roads had deficits aggregating $390,295.

One brief of the southwestern lines is devoted almost entirely to an endeavor to show that in the original report we erroneously included so-called differential territory in Texas and Oklahoma in the same rate group as Texas common-point territory. In an endeavor to sustain the proposition, frequent reference is made to their original brief and briefs of exceptions to the examiners' proposed report in the original proceedings, and apparently no endeavor is made to base such contention upon changed conditions since the

176 I. C. C. 1, 23, 27.

10 Montana east of Havre, Laurel, and Harlowton, included in the territory taking Appendix H rates, is also omitted from the comparison.

record was closed in 1928. Prepared in the manner it is, this brief is not responsive to the issues before us on the further hearing, and is an attempt to obtain a retrial of issues upon other than changed conditions, contrary to our announcement of February 5, 1932, assigning the proceedings for further hearing.11

A few items of change as respects the relation of differential territory to common-point territory in Texas are to be found in the record, such for instance as the change in population between the 1920 census and 1930 census; the fact that the petroleum traffic in differential territory has, as was originally contended it would, proved temporary in nature; the construction of additional lines of railroad in the Panhandle section of Texas; and the ratio of tonmiles per mile of line in the two territories on the Rio Grande division of the Texas & Pacific Railway Company for 1928 to 1930, which remained fairly constant. But we find in the record evidence of no significant changes affecting the relation of rates in these two territories.

Mountain-Pacific lines.-Respondents operating in MountainPacific territory contend that the rates prescribed produce much greater reductions than we contemplated; that the reductions made. will contribute further to the already serious impairment of the financial integrity and stability of these respondents and the adequacy of transportation; that the economic condition of the livestock industry is due to world-wide economic depression and overproduction and respondent rail lines are in no position to act as a shock absorber for the economic distress of the livestock or any other industry; that the prescribed rates, particularly for distances greater than 500 miles, are unduly and unreasonably low; and that upon the basis of relative cost of transportation rates in Mountain-Pacific territory should be not less than 30 per cent higher than those applicable in Appendix H scale territory.

The first contention will be dealt with hereinafter under the head "The Traffic Tests." To show their impaired financial position respondents rely in part upon general statistics for the western district previously discussed herein. For 14 carriers 12 operating almost wholly 13 within Mountain-Pacific territory the average annual net

11 Supra, page 614, footnote 4.

1 The Denver and Rio Grande Western Railroad Company, Denver and Salt Lake Railway Company, Los Angeles & Salt Lake Railroad Company, Nevada Northern Railway Company, Northwestern Pacific Railroad Company, Oregon Short Line Railroad Company, Oregon-Washington Railroad & Navigation Company, Pacific Electric Railway Company, Sacramento Northern Railway, San Diego and Arizona Railway Company, Southern Pacific Company (Pacific lines), Spokane, Portland and Seattle Railway Company, Tidewater Southern Railway Company, and Western Pacific Railroad Company.

18 A portion of the line of the Denver and Rio Grande Western Railroad is in western trunk-line territory.

railway operating income for the five years 1925-1929 was $75,257,613 and, based upon book value of the roads, represented an average return of 3.34 per cent, and during these years the return remained fairly constant. In 1930 the net railway operating income was $56,554,782, representing a return of 2.40 per cent on the book value, and in 1931 the corresponding figures were $31,179,706, and 1.32 per cent. For the first three months of the five years mentioned the average net railway operating income was $12,212,815; for the first three months of 1930 the net railway operating income was $9,244,200, in 1931 it was $3,269,397, and in 1932, a deficit of $9,459. Similar figures follow for a group of 19 carriers, including the foregoing and five additional lines 14 operating partly in MountainPacific territory and partly in the rate territory to the east thereof: Net railway operating income, 1925-1929, $229,595,817 (average), 1930, $172,719,169, 1931, $106,999,357; rate of return based on book value, 1925-1929, 4.09 per cent, 1930, 2.92 per cent, 1931, 1.82 per cent. Net railway operating income for first three months of 1925-1929, $36,377,979 (average), 1930, $22,670,879, 1931, $14,085,581, 1932, $1,581,743.

The following data for the Southern Pacific Company's Pacific lines are submitted as indicating the change in the relative volume of the different classes of traffic, and in connection therewith the contention is advanced that the perishable agricultural traffic is the most expensive traffic to transport:

In support of a contention that it is impracticable to increase rates on other traffic to recoup revenue losses on livestock, the Southern Pacific Company, Pacific lines, submits a record of such tonnage as it was able to get a record of, covering a great variety of commodities moved by automobile trucks over a period of one year from March 1, 1930, between points served by this respondent's lines. The record shows a movement of 6,303,917 tons, and it is asserted that the freight revenue thereon, had these commodities moved by rail, would have aggregated more than $16,900,000. General mer

14 The Atchison, Topeka and Santa Fe Railway Company, Chicago, Milwaukee, St. Paul and Pacific Railroad Company, Great Northern Railway Company, Northern Pacific Railway Company, and Union Pacific Railroad Company.

chandise and petroleum and its product comprise 63 per cent of the tonnage and 49 per cent of the revenue. Livestock comprises only 0.6 per cent of the tonnage and 1.5 per cent of the revenue. Loss of transcontinental traffic to water carriers operating via the Panama Canal is depicted by statistics. It is shown that even automobiles are now moving westbound by water in considerable volume.

The Southern Pacific Company submitted data for the years 19211931 to show the changes that are gradually taking place in operating conditions on that line. This company now has over 9,000 miles of road in Mountain-Pacific territory. The groups of gross revenues most affected by competing forms of transportation are pointed out as those derived from passengers, express, and less-than-carload freight. Based on the yearly totals, it is indicated that a decline in gross revenues from these sources during the period 1921-1931 is taking place at an average annual rate of more than $500 per mile of road; applied to the present mileage, this average rate of decline indicates a loss in gross revenues from these sources at an average rate of $4,500,000 a year. Gross freight revenues from carload perishable traffic over the period 1921-1930 show an average growth of about 3 per cent a year. This is mostly long-haul traffic. Largely because of competitive influences, respondent believes, the gross revenues from other carload freight, which includes livestock and also the short-haul traffic in general, but undoubtedly also much longhaul traffic, for the same period declined at an average rate of 1.8 per cent a year. The following comparisons are made, using 1921 as the basis of comparison: During the period 1921 to 1930 the net increase in traffic volume amounted to 27 per cent, an average of 2.7 per cent a year. Between 1921 and 1930, both years of depression, the decrease in carload freight revenue was from 100 to 92.79. Between 1923 and 1929, both years of general prosperity, the decrease in carload freight revenue was from 114.37 to 112.63. Based on these figures, the average gross freight revenue has fallen off at the rate of slightly less than 1 per cent per annum in the face of an increase of 2.7 per cent in the traffic volume. Revenues received by the carrier from other than railroad operations, such as those from the Pacific Fruit Express, are not included in the foregoing comparisons. It may be noted that freight rates were at their peak in 1921 and that there was a general reduction of freight rates in 1922. The effect of using the year 1921 as the base period in these and other comparisons made of record is, therefore, to exaggerate the losses in freight revenue in subsequent years which are attributed by the witness in whole to competition from other forms of transportation when in fact they are due in part to the general rate reduction of 1922.

A study purporting to show that the cost to one group of carriers operating almost wholly within Mountain-Pacific territory of transporting carload freight was 30.6 per cent greater than the cost to another group of carriers operating almost wholly in western trunkline and southwestern territories, was also submitted by this respondent. Based thereon, respondents seek a level of rates in Mountain-Pacific territory not less than 30 per cent higher than prescribed for western trunk-line and southwestern territories. It is contended that the mileage included in each group is sufficient to give results that are close to the average in each territory and fairly portray the relative conditions as to cost; but whether this is true or not, particularly in Mountain-Pacific territory, can not be definitely determined from this record in the absence of data with respect to the operations within each territory of those transcontinental carriers whose lines extend into both territories.15 On the roads covered by the study, the traffic density in the two territories was substantially the same,116 and the greater cost per unit shown in MountainPacific territory is mainly attributable to the greater property investment per mile of road used in the former than in the latter, and to greater maintenance and transportation expense occasioned by the more rugged or mountainous character of the territory traversed. The study leaves no room for doubt that for the groups of roads compared the average cost of freight service as a whole, per unit, is higher in Mountain-Pacific than in western trunk-line and southwestern territories. It is not confined to the livestock traffic, but is based upon all traffic. Furthermore it proceeds upon the theory that any deficiency in the passenger revenues to meet the charges against that service for its proportion of the operating expenses, taxes, rents, and interest on investment, shall constitute an obligation upon the freight service and be included as part of the cost of rendering the latter service, a principle which we have held is not applicable to livestock traffic in the western district under present conditions. A difference in cost was recognized by us in imposing a scale of rates 10 per cent higher, and a minimum weight on fat cattle, 2,000 pounds greater in Appendix J than in Appendix H scale territory. The study covers only the year 1930, and there is no showing of any change in conditions since the former hearings were closed.

15 Transcontinental lines omitted from the study are the Great Northern Railway Com pany, Northern Pacific Railway Company, the Chicago, Milwaukee, St. Paul & Pacific Railroad Company, Union Pacific Railroad Company, and Atchison, Topeka & Santa Fe Railway Company. Their lines within Mountain-Pacific territory total 68.6 per cent of the mileage of the Mountain-Pacific group reported in the study.

16 Mountain-Pacific territory, 947,000 revenue ton-miles and 2,885,000 gross-weight tonmiles per mile of road; western trunk-line and southwestern territories, 990,000 revenue ton-miles and 2,827,000 gross-weight ton-miles per mile of road.