mediate, Nevada, Utah, Wyoming, and Nebraska main line points, it is proposed to charge the shipper the present rate of $1.58 for hundredweight, or $31.60 per ton, or an excess of $288 on a 30-ton car shipment, for the very much shorter haul and lesser service; or stated differently, in order to illustrate the excessive cost of service, the railroad in fact will take a similar shipment in the same train, on over the Rocky and Sierra Nevada ranges to Oakland, Calif., and thence by ferry to San Francisco, at a rebate amounting to $288 per car to the favored jobber, at San Francisco.

These three commodities are merely illustrated, and while many others might be shown with like result, they serve to point out the fact that to those considering the establishment of industries in the far western country, Nevada and other intermountain states would not appeal to them, and they would, of course, as has been the case for many years past, move on and locate at either San Francisco, Los Angeles, Portland, or Seattle. When consideration is given to the number of cars of freight any substantial industry, or in fact, any large section of the country such as that lying west of the Missouri River, is required to handle during a given year, in order to transact any appreciable volume of business, it will be found when the number of cars, for example, is multiplied by $150 per carload of structural steel, $210 per carload of rough castings and forgings; and $288 per carload for dry goods; in excess of the rates charged to San Francisco, Los Angeles, Portland, and Seattle, that the aggregate thereof will, of course, run into figures which spells the difference between success and failure of the industrial venture, or in fact, of the communities themselves; and incidentally, it should be noted in passing that this is the character of profit which the transcontinental lines are seeking to accord to the Pacific coast terminal industries and jobbers at the expense of Nevada and other western and intermountain States. This is the reason we are here asking your honorable committee to report the long and short haul bill favorably and to assist us in securing its passage. Without it we can have no assurance of that certainty and security that is necessary to enable us to invite new capital and population on which to carry forward an aggressive development program for the future.

EFFECT OF PRESENT LONG-AND-SHORT-HAUL APPLICATION, IF GRANTED

As illustrative of the effect of this application, if granted, it may be noted that the present car earnings on an 80,000-pound carload of iron and steel articles amounting to $800 per car are to be maintained to all western, intermountain, and interior Pacific coast State points, but to reduce the earnings thereof to the Pacific coast terminals to $640 per carload, or a reduction of $160 per car. Likewise, the earnings on rough castings and forgings will be reduced from $600 to $450 at the Pacific coast terminals, or $150 per car. Likewise, the earnings on an 80,000-pound carload of nails, spikes, etc., will be reduced from $800 to $640, or a reduction of $160 per carload. Likewise, the earnings on a 80,000-pound carload of structural iron and steel will be reduced from $800 to $640, or $160 per car. Likewise, the earnings on a 40,000-pound carload of wrappings, bags, etc., will be reduced from $500 to $400, or a reduction of $100 per car. Likewise, on a 40,000-pound carload of wallpaper, etc., the earnings will be reduced from $540 to $400, or a reduction of $140 per car. Likewise, on a 60,000-pound carload of rosin earnings will be reduced from $720 to $450, or a reduction of $270 per car. Likewise, on a 60,000-pound carload of soap earnings will be reduced from $750 to $600, or a reduction of $150 per carload. Likewise, on a 60,000-pound carload of soda earnings will be reduced from $600 to $450, or a reduction of $150 per carload. Likewise, on a 40,000-pound carload of ammunition the earnings will be reduced from $560 to $440, or a reduction of $120 per car. Likewise, on a 40,000-pound carload of dry goods, cotton piece goods, etc., the earnings will be reduced from $632 to $440, or a reduction of $192 per carload. As above stated it is to be understood of course that the higher rate named in each instance is to be maintained at western, intermountain, and interior Pacific coast points, while the reduced rates in each instance is to be made applicable at the Pacific coast terminals or ports. Other examples could be shown, but this illustrates how severely the carriers are attempting to sacrifice their earnings on these high grade manufactured articles, which, as before stated, must be required to bear their proportion of the fair returns prevailing in section 15a.

Before the Senate Committee on Interstate Commerce in the hearings on S. 2327, and page 764, March 5, 1924, I gave reference to the following finding by the Interstate Commerce Commission in the 1922 Transcontinential case (74 I. C. C., 78), which illustrates the loss in revenue flowing from long and short haul rates about which I have been speaking.

"It appears that somewhere near half of the traffic covered by this application was moving by rail lines, and presumable still is, On the assumption that half of the traffic is moving by rail and using the proposed rates on iron and steel articles from Pittsburgh as an illustration, the carriers, as a whole would appear to lose in net revenue from the establishment of the proposed rates. Let us assume a movement of 1,000,000 tons per annum of iron and steel from Pittsburgh. The carriers propose to reduce the existing rate of $1,665 to $1. That means that on the 500,000 tons that the carriers were handling there would be a direct loss of $6,650,000. If we assume that the effect of establishing the reduced rate of $1 is to take away from the boats one-half of the tonnage they now have, it will mean a gross gain to the carriers of $5,000,000 which amount allows nothing for the expense of handling the additional business. If $1.665 was a reasonable rate, the cost of service could hardly be less than half that amount, or about 83 cents. On that theory the cost of handling the added business would be $4,150,000, or a net gain from the added traffic of only $850,000 to apply against a loss on the traffic which is now being handled of $6,650,000, or a net loss of $5,800,000."

RAILROADS REDUCED RATES UNIFORMILY

Here it will be noted the carriers were desirous of reducing the rates of iron and steel articles from $1.661⁄2 to $1 to cover the movement from Pittsburgh to San Francisco, while maintaining the rate of $1.662 at intermountain points, and that there would be a loss of $5,800,000 in net earnings on this one commodity moving from Pittsburgh alone. Notwithstanding the Interstate Commerce Commission denied this long-and-short-haul application the carriers voluntarily on April 17, 1923, filed tariffs reducing these rates to $1.15 per hundredweight, from Pittsburgh and to $1 per hundredweight, from Chicago. These rates to apply uniformly to all western, intermountain and Pacific coast State points as well as to the Pacific coast terminal points, or without long and short haul discrimination-but as before stated they are now before the commission with an application from Chicago asking to be allowed to establish long-and-short-haul rates by which they will maintain present rates to western, intermountain and interior Pacific coast State points and reduce them to Pacific coast terminals an average of 20 to 25 per cent.

POSITION OF PORTLAND CHAMBER OF COMMERCE

As illustrative of the position of some of the Pacific coast terminals the Portland Chamber of Commerce has issued a printed circular in opposition to the Gooding bill. Among other things it states in advocating the continuing of the long-and-short-haul rates that out-of-pocket cost rates must return sufficient to more than cover the actual cost of the haul to the carriers. In the other words, the transportation expenses as distinguished from maintenance and overhead cost, and then follows the remarkable statement that such rates "must not impose an undue burden on other traffic," or to more clearly define it the rate must not be so low as to put the carrier "to the necessity of making rates higher than reasonable to other points or in other territories.' Not a word is said about these rates contributing their fair share toward the fair return of 534 per cent fixed by the Interstate Commerce Commission. Necessarily if any substantial volume of traffic moves on out-of-pocket cost rates the unavoidable consequent thereof is to require other communities and other traffic to bear more than their fair portion of the fair return provision of section 15-a, and this is clearly indefensible.

The circular then gives reference to an example of the long-and-short-haul rates between San Francisco and Portland, a distance of 746 miles using the firstclass freight rate as illustrative and showing that the rate from San Francisco to Portland is 72 cents per hundredweight, whereas for a haul of less than half the distance from San Francisco to Medford, the rate is $1.60 per hundredweight. Rates somewhat similar are made although the volume is less between San Francisco and Los Angeles, using Bakersfield as the short haul high rated point. These rates are wholly indefensible especially in the view of the fact that the lines between Los Angeles, San Francisco, Portland and Seattle, have a heavy traffic density and do not need any such adjustment. They are destructive and wasteful and do not pay their share of the fair return and result in nothing less than unjustifiable rebates to the recipients thereof. Continuing the circular goes on

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with a most amazing argument; speaking of the transcontinental line's application at present before the Interstate Commerce Commission for long-and-short-haul rates, it says:

"There is at the present time an application for fourth section relief in the rates on a limited number of commodities from the East to the West pending before the commission, the granting of which is of vital interest to Portland as a regulator of water rates."

And in commenting on the effect of the Gooding bill the circular states: "It will compel Portland shippers to depend largely upon the slow water lines * * * competition between the water lines and the rail lines is the best method of regulating the water rates and to keep freight rates down generally

* * *

it will rob Portland of the advantages of its location, as the point where rail and ocean transportation meet. When it becomes impossible for the rail lines to meet the water competition, we can expect very material increases in the water rates as these lines free from competition will of course make as high rates as possible and still retain the traffic. A monopoly will have been established which will benefit only the water lines. A monopoly helped into existence by law whereas the general public policy is against monopoly. Its effect (the Gooding bill) will be the first step toward arbitrary congressional rate making without public hearing in each instance as is now the practice.”

Think of it gentlemen, this is a petition to your honorable body to continue a violation of the mandatory or declaratory part of section 4 and in lieu thereof to continue giving effect to the proviso of such section which when exercised as Portland would have it exercised carrys with it the vice of nullifying section 4 in toto, or nullifying section 2 of the interstate commerce act regarding discrimination; of nullifying section 3 preventing unreasonable preferences and advantages; of nullifying the minimum rate provision of section 15; of seriously disrupting the group plan of rate making and of very seriously interfering with a proper equilization of rates and the fair return provision of section 15-a (par. 2). It will also nullify section 500 of the transportation act. In our view only by the enactment of the long and short haul bill here under consideration into law, can said section be carried out effectively and which provides:

"It is hereby declared to be the policy of Congress to promote, encourage, and develop water transportation, service and facilities, in connection with the commerce of the United States, and to foster and preserve in full vigor both rail and water transportation."

PORTLAND, ME., COMPARED WITH PORTLAND, OReg.

Further answering Portland, it may be noted that there are no long and short haul rates on the opposite side of the country for the purpose of meeting water competition, say from Portland, Me., down the Atlantic coast to Norfolk, and intermediate points on said coast, and there is no more reason for such rates on the immediate Pacific coast line than there is on the Atlantic coast.

EXERCISE OF WISE NATIONAL POLICY

There is no merit in Portland's contention that the passage of the legislation herein under way is a step towards arbitrary congressional rate making. Incidentally the Railway Age in a recent issue treats the matter from the same standpoint. It goes on to state, "That Congress is not a fit body to directly regulate rates. That Congress created the Interstate Commerce Commission to deal with the subject." This is placing an exaggerated construction on the legislation here under consideration. To the extent that it forbids discrimination in rates it is regulatory, but within recent years Congress enacted legislation making "rebating unlawful," and because Congress saw fit to pass that piece of remedial legislation I presume The Railway Age, if called upon for an opinion, would refer to it in an effort looking to the regulation of rates, and which in fact was the result of the legislation. But this went further than the mere matter of regulation and was an exercise of wise national policy just as will be the case when Congress has acted with a view to correcting for the future long and short haul abuses.

RAIL AND WATER TRAFFIC COMPARED

The railroad traffic managers figure that there will be annually 6,000,000 tons of traffic being transported by the intercoastal water lines through the Panama Canal between Atlantic and Pacific coast ports, and vice versa. Of this amount

possibly 32 million tons may be moving westward from the Atlantic coast to Pacific coast ports and the balance, or 22 million tons may be moving in the reverse direction from the Pacific coast to the Atlantic coast ports.

Compared with this relatively small tonnage carried through the Panama Canal, the all-rail tonnage handled by the transcontinental lines reaching the Pacific coast (of which there are nine (9) lines) aggregated over 248,000,000 tons for the year 1923, which was an increase of 25,600,000 tons over the previous year, and there was an increase of 70,000,000 tons in 1923 over 1921. Moreover, one system reaching Pacific coast ports, viz, the Southern Pacific Co. increased its tonnage in 1923 over 1922 by approximately 7,000,000 tons, or 1,000,000 tons in excess of the aforesaid canal traffic. The railway traffic managers contend that they are entitled to what they term a fair share of this canal traffic and that if permitted to establish long-and-short-haul rates their share will approximate 3,000,000 tons, per annum. In other words cut the business of the canal half in two. And, then it is said that by the acquisition of this amount of traffic it will enable the transcontinental carriers to add substantially to their earnings and thus make it possible to carry other traffic at lower rates, and which, if it can not be secured might have the effect of increasing rates on other traffic, but the traffic managers do not tell us to what extent there will be reduction in the earnings on the traffic that is already moving by rail to the Pacific coast terminals. Neither do they tell us how much or less of said Panama Canal traffic they will secure, because it can not be done. It is admitted by some of them in testimony that they will take it all, if they can get it. Others recognize that the reduction of their rail rates to Pacific coast terminals may precipitate a rate war between rail and intercoastal carriers, which would require very much lower rail rates if they are to get any considerable amount of traffic, in which event the intermediate States would bear the burden of this fight, the water carriers would be crippled, and the inexcusable fact remains that the carriers would be voluntarily throwing off a large amount of revenue, for the purpose of neutralizing the activity of the canal lines, or of destroying them if they can. Due to a rate war in 1922 among the canal lines, or commonly known as the conference lines operating between the Atlantic and Pacific ports, the water rates were reduced more than 50 per cent and while on August 1, 1923, they were increased 33% per cent, it is said they are still too low to afford a reasonable adequate return on the investment in property devoted to this service. Compared therewith westbound transcontinental railroad rates on heavy moving commodities were on April 17, 1923, reduced 25 per cent in addition to the decreased 10 per cent provided for in reduced rates 1922, effective July 1, 1922. And, now there is pending before the Interstate Commerce Commission a long-and-short-haul application on behalf of the transcontinental carriers by which the rates on 47 leading westbound commodities from Chicago territory to the Pacific coast terminals are proposed to be reduced a further amount averaging between 20 and 25 per cent. These rates should not be further reduced, because the traffic being of manufacturer articles is of that character which should carry its fair share of the transportation burden, or in other words, its share of the fair return provided for in section 15-a.

THREE TRANSCONTINENTAL LINES CONSTRUCTED IN COMPETITION WITH OTHER RAIL LINES AND WITHOUT REGARD TO OUT-OF-POCKET COST RATES

There is another point that may be adverted to, the carriers intimate, not directly to be sure, but indirectly, that in the event that they are required to forego the practice of long-and-short-haul rating, there may be a possibility that rates will be increased in order to make good traffic which is being taken by the boat lines. I think I have already sufficiently analyzed this point by showing how meager the domestic water traffic through the Panama Canal is, in fact, when compared to the total tonnage of the transcontinental lines reaching Pacific coast terminals and especially when contrast is made with their increase tin traffic of over 25,000,000 tons during the year 1923; and yet by the way of nd further suggestion, I feel I should again bring to your attention that in the face of the carriers' arguments that it is necessary to handle the business at out-ofpocket cost rates to Pacific coast terminals, and without anything approaching a fair proportion of the net earnings return required, and after listening to this argument for the past 20 years, I have found to my surprise, to be sure, that during this period the Los Angeles & Salt Lake Railroad, a part of the Union Pacific system, constructed its line from Salt Lake City to Los Angeles, a distance of 900 miles, to meet this out-of-pocket cost competitive traffic that moved by the ocean transportation lines; and I recall that the west end of the Missouri Pacific system, namely the Western Pacific Railroad extended its lines from

Salt Lake City to San Francisco, a distance of over 900 miles, for the same purpose; and likewise, I recall that up in the Northwest, the Chicago, Milwaukee, & St. Paul extended its lines from Mobridge, S. Dak., a distance of over 1,300 miles, on out to Seattle and Tacoma, right in the face of these ocean-going transportation lines and out-of-pocket cost rates. I cite this in support of the proposition that the traffic to and from the Pacific-coast terminals is highly desirable and compensatory from a railroad competitive standpoint and without regard to out-of-pocket cost rates and the comparatively meager amount of domestic traffic moving through the Panama Canal; otherwise these three lines would never have been built.

TONNAGE AND EARNINGS COMPARED

Reference is made to my testimony before the Senate committee in hearings on S. 2327 (March 5, 1924, pp. 331, 763) with particular reference to tables set up on pages 777 to 827, inclusive, wherein will be found a detailed analysis of the long-and-short-haul rates above referred to. There will be found on pages 783-787 statement of tonnage and earnings as follows:

This table shows that the transcontinental carriers reaching the Pacific coast terminals are prosperous and that through the medium of the transportation act they have been well and adequately taken care of, and they therefore should not be permitted to throw off a large amount of revenue at the Pacific-coast terminals, which are in the nature of rebates and have the three-fold effect of casting an unjust burden on southern, western, intermountain and interior Pacific coast State points by imposing double taxation for the construction of waterway facilities; of neutralizing and in time of destroying waterway transportation through the Panama Canal.

RATES IN PRESENT LONG-AND-SHORT-HAUL APPLICATION

I submit for the record at this point a statement showing first, rates. headed "At present" on various commodities from Chicago, Ill., to San Francisco, Calif., second, rates "Originally proposed" by carriers when the pending application was filed; and third, rates as Subsequently proposed" by them at the Chicago hearing, before the Interstate Commerce Commission in 1923. The key to the statement is entirely simple, for the reason that under the rates as shown in the column "At present" in effect it is to be understood that at this time they apply uniformly to both the intermountain and to the Pacific coast terminal points, whereas, the rates shown in columns under headings "Originally" and "Subsequently" proposed are, if authority is granted, to apply to the Pacific-coast terminals, while the rates shown in the column "At present" in effect are to remain as the rates applicable at the far western and intermountain points. noting the rates in this order the proposed long-and-short-haul discrimination against said western and the intermountain points is apparent at a glance.

By