The railroads now have before the Interstate Commerce Commission an application (fourth-section application 12436), in which they are seeking permission to carry lower rates to the coast than to the intermediate territory. The case has been submitted and a tentative report has been issued which proposes to deny the railroads application. The rates to the coast now are not lower than to the intermediate territory, being, as we understand, the result of a decision of the Interstate Commerce Commission, in 1917 (46 I. C. C. 236), in which the Interstate Commerce Commission found that water competition between the Atlantic and Pacific coast through the Panama Canal was then a negligible feature, and relief from the long-and-short-haul clause was denied. Water transportation between the coasts of the United States through the Panama Canal is something that is here, and is here to stay. Traffic is moving between the Atlantic and the Pacific coasts, and between the Pacific coast and the Gulf coast, at much lower rates than the railroads can afford to make as a general proposition. For example, iron and steel bolts and nuts can be shipped by boat from New York to San Francisco for 40 cents; the rate from Kansas City to San Francisco by rail is 90 cents per hundred, and the rate is proportionately higher New York to San Francisco via rail. Oil well tubing can move by boat through the Panama Canal, New York to Los Angeles, for 50 cents; the rate by railroad from Kansas City to Los Angeles is $1.13, and proportionately higher from New York. It certainly can not be conceived that the railroads under such an adjustment as this, which is typical of the general rate situation, can obtain anything like their fair share of the transcontinental traffic. The argument is heard that to permit the railroads to make a rate which will put them on a competitive basis with the boat lines will eliminate the traffic via the boat lines. But this argument is not sound, as you will see by referring to the rule of rate making which the Interstate Commerce Commission has adopted in governing the measure of the rate to the farther distant points, namely, that such rates must be reasonably compensatory, that is to say, must pay the out-of-pocket cost and something more; must not be so low as to en danger legitimate water competition; must not burden other traffic nor jeopardize the reasonable return under the Transportation Act. The railroads, with the Gooding bill enacted into law, are faced by two possibilities: (a) If they wish to retain a fair share of the transcontinental business they must make rates to the Pacific coast which will get the traffic and scale those rates back to the intermediate territory. 1 ་་། This would mean lower rates for the intermediate territory, but it is inconceivable that the railroads would, or could, do any such thing as this. The transcontinental lines are not now earning their full reasonable return. They would not and could not cut their revenue to such an extent as this. The rate on bolts and nuts, Kansas City to Denver, is 61 cents. In making a competitive rate to the coast under those circumstances they would be obliged to cut the rate even to Kansas City to Denver. They would be faced with bankruptcy. If the intermountain section, which is pushing this bill, is of the belief that the Gooding bill is going to bring them lower rates they will certainly be grievously disappointed. If it did bring them lower rates such a condition could not long exist because of the ruinously low levels which would result. The Gooding bill, instead of bringing lower rates for the intermediate territory, would eventually mean higher rates. (b) The railroads can relinquish the thought of handling transcontinental traffic and devote their efforts in entirety to traffic to and from the interior. This procedure would cut down their volume of traffic, and when an organization or business institution is running on less than its capacity, overhead expenses are on a relatively higher basis per unit. If the railroads must confine their activities to traffic mainly to and from the interior and give up the coast business, it means the loss of revenue in connection with the coast traffic must be made up by higher rates to and from the interior. Thus you will see that either move the railroads make in following the mandate of this proposed bill will mean higher freight rates for the interior. Giving up the coast traffic will also mean that the railroads will not have as many empty cars available to haul the products out of the interior. With the decreased movement of loaded cars westward will come the need of moving more cars empty into the western territory to carry out the products. The hauling of empty cars is an expense. This expense will have to be made up and it will tend toward higher freight rates. If it were possible to see where the Gooding bill would benefit the interior or the intermountain section, this chamber could see that there would be some reason why it should be enacted into law, but we are utterly unable to comprehend how the Gooding bill, if it were enacted into law, could or would confer any benefit upon the interior or intermountain section. It can not bring lower freight rates, as we have endeavored to explain. If the railroads go out of the coast traffic, the lower rates via the steamship lines will still be in effect and traffic will be moving to San Francisco and Seattle and other ports via the boat lines at much lower rates than obtain by rail to Spokane and Salt Lake. The volume of traffic is going to move at the low rates via the boat lines; that being so, why should not the railroads be allowed to handle some of this traffic? It is upon the railroads that the vast interior of this continent depends for transportation. It is because of the railroads and the service which they render that the vast interior of this country has been opened up and is being farmed, and is being developed. Congress should not do anything unnecessarily to hurt or injure the railroads because with injury to the railroads comes injury to the vast interior of this country. With the safeguards that have been thrown around relief from the long-and-shorthaul law, that the relief must not jeopardize legitimate water competition, that the rates made to the farther distant points must be reasonably compensatory, that the ability of the railroads to earn their reasonable return must not be jeopardized, that other traffic must not be burdened, it does seem that the welfare of the public and of this country, and water transportation, is fully protected. It is surely not the intent of Congress to confine traffic to and from the Pacific coast to the water lines via the Panama Canal. There has been developed in the middle western section in the past 20 years extensive manufacturing enterprises which want to reach the Pacific coast at rates via rail in competition with rates which their competitors at the eastern seaboard enjoy via the Panama Canal. How can the manufacturer of this section expect to put bolts and nuts and other steel articles in San Francisco at a 90-cent rate when the steel may move from Philadelphia to San Francisco via boat line for 40 cents? It surely is not the intent nor desire of Congress to confine traffic to and from the Pacific coast entirely to the boat lines to the exclusion of the railroads. It is surely not the intent nor desire of Congress to create a situation whereby middle western manufacturers cannot sell their products at Pacific coast cities in competition with their competitors at the eastern seaboard, and drive the business from the Midwest to the eastern seaboard. The railroads should be allowed some latitude in this regard, within reasonable limits, to obtain a fair share of this coast traffic. The Pacific Railway acts, which preceded the building of the Union Pacific Railroad, forming a line of railway from the Missouri River to the Pacific coast, we believe set out a policy that the railroads should be entitled to haul traffic to and from the Pacific coast. The transcontinental railroads were built primarily to reach the coast. That was the intent of the Pacific Railway acts. If the railroads were only to be allowed to haul traffic to and from the interior certainly the transcontinental railroads would never have been built. We urge then upon Congress our views: (1) The Gooding bill will not accomplish the ends which its proponents seek. (2) The Gooding bill will destroy existing and much needed elasticity in the freight-rate structure. (3) The Gooding bill will set by statute a rule concerning rates, and we contend that it would be much better to leave the rules on the subject as they are at the present time, allowing the Interstate Commerce Commission to adjudicate each case upon the facts and upon its merits. In conclusion, we direct your attention to the report of the Congressional Joint Commission of Agricultural Inquiry, part 3, page 405, where that commission considered the long-and-short-haul rate rule. Their conclusion is set out below: "In a country where there is as wide a variation of local conditions of competition, both as between industries and as between different means of transportation, as in this, the application of a rigid prohibition against charging higher rates for short hauls than for long hauls under any circumstances would result in greater discrimination and more rigid restriction upon competition as between industries and means of transportation than would result from the exceptions which might be permitted under a more flexible provision. We believe that a broad view of all the facts and circumstances surrounding this question will convince you that the Gooding bill is wrong in principle. We trust that the Congress will not enact the Gooding bill into law. Respectfully submitted. THE CHAMBER OF COMMERCE OF Kansas CITY, MISSOURI. President. Dear Mr. HAYNES: The National Industrial Traffic League circular No. 724 urges members to authorize you to speak for them in opposition to the Gooding bill at the hearing before the House committee the last of this month. I have already sent you a copy of my letter to our Senators and Congressmen giving our views on the subject, but do not believe that I have specifically authorized you to represent us. Will you please consider this your authority to speak for this organization in opposition to the bill. Very truly yours, (To J. H. Beek.) C. E. CHILde. NEW YORK Mr. J. P. HAYNES, AMERICAN-LAFRANCE FIRE ENGINE Co. (INC.), Chairman National Industrial Traffic League, Washington, D. C. DEAR SIR: It is the writer's understanding that you are in Washington as the chairman of a special committee of the National Industrial Traffic League opposing the passing of the so-called Gooding fourth-section bill, S. 2327. The writer is opposed to the provision of the bill primarily from the fact that the strict elimination of the fourth section will tend to restrict the free movement of commodities. It will also tend to absolutely localize industries and eliminate competition and will be of great harm to industries and communities which have been built up due to the fact that the fourth-section violations has permitted their meeting their competitors on somewhere near an equal freight-rate basis. In regard to the good of the bill, would state that it will only help those States in the far West which through unfavorable location are somewhat at a disadvantage in competition with the Pacific coast points, but we do not feel that the removing of the competitors on the Pacific Coast will benefit them in any particular, because no matter what rates are placed in effect in the intermountain territory, the water competition will not be affected except that it is possible that the water rates may be increased, and as a result of this, the entire Pacific coast will of course suffer and the intermountain territory will not be particularly benefited, because the same ratio will probably apply. It looks to us as though a few towns in the territory most strongly advocating this particular bill are hardly justified in their efforts on account of the far-reaching effect that it will have on the balance of the country. Why should such a small part of our country be in a position to dictate to the balance of the country the basis on which they are going to make freight rates. I would therefore authorize you to represent us in our protest against the proposed bill inasmuch as the writer is unfortunately unable to attend. Very truly yours, JOHN J. DELANCY, JAMESTOWN CHAMBER OF COMMERCE, Mr. J. P. HAYNES, Chairman Special Committee, Washington, D. C. DEAR SIR: I have before me National Industrial Traffic League Circular No. 724, with regards action to be taken by its special committee on the Gooding fourth section bill; also requesting that as many members of the league as possible be present when hearings upon this bill come before the House Committee on Interstate and Foreign Commerce. I wish to say that it will be impossible for me to be present at this hearing, and this is your authority to represent the Jamestown Chamber of Commerce at this hearing before this committee, as our position with regards passage of the Gooding fourth-section bill is the same as that of the National Industrial Traffic League. We are opposed to the passing of any rigid fourth-section bill, feeling that it is only one step more along the lines of political rate making. We also feel that the application of the fourth section of the act to regulate commerce should be left with the Interstate Commerce Commission to grant fourth-section relief where it can be shown by either the carriers or the shippers that the same is necessary. I also wish to say that I have been instructed by my transportation committee to, as soon as this bill comes up before the House of Representatives, present our position to our representatives from this district at Washington, D. C. Thanking you for representing us at this hearing, we are, Yours very truly, JAMESTOWN CHAMBER OF COMMERCE, KENTUCKY ALCOHOL CORPORATION, New York, N. Y., January 21, 1925. Re: S. 2327 (Gooding fourth-section bill): Chairman Special Committee, National Industrial Traffic League, Washington, D. C. DEAR Mr. HAYNES: Our company, being a member of the National Industrial Traffic League, and in full accord with the position taken by the league with respect to the so-called ". Gooding fourth-section bill," believing at this writing we will not be able to have individual representation at the above scheduled hearing, desire that you speak specifically for our industry in your capacity as chairman of the league's special committee. General statement. Our company is one of the largest producers of industrial alcohol, having plants located at Westwego (New Orleans), La., and Peoria, Ill.; and in connection with this subject we speak specifically for our plant located at Westwego, La., which is within the port limits of New Orleans. Great progress has been made in the industrial alcohol industry, due to the extended uses of alcohol as an essential solvent or a raw material, these uses being extended by the enactment by Congress in 1906 of the first law authorizing the use in this country of alcohol free from tax for denaturation. Location of industry.—Alcohol distillers have located in the interior near the supply of corn in such States as Illinois, Indiana, and Ohio, or at the North Atlantic seaboard ports, such as Philadelphia and Baltimore, or on the Gulf coast at New Orleans, near the supply of refuse or blackstrap molasses. Volume of traffic and consuming territory. The volume of traffic for the year ended June 30, 1924, amounted to 72,000,000 wine gallons. The use of industrial alcohol extends to all industries. It is now an essential agency to our great industries manufacturing our basic products. Its use in the automotive industry has grown to a considerable extent, and is now being considered as an agency to offset the rapid depletion of gasoline as a fuel. Our company has made considerable investment in locating an industrial alcohol plant in the New Orleans district, with a view to obtaining our basic raw material, to wit, refuse or blackstrap molasses, at a minimum cost. In other words, we deemed New Orleans offered to us certain natural advantages. Our plant has assisted in the development of the commerce of the port of New Orleans, not merely as a "transit port" but as a port of manufacture as well as a port of entry. While only speaking for our company individually, the industry as a whole at New Orleans has developed to the point where the combined monthly output of the industrial alcohol plants at that point now amounts to about seven hundred (700) carloads. The industry at New Orleans is now represented by the following companies: Kentucky Alcohol Corporation, United States Industrial Alcohol Corporation, Jefferson Distilling & Denaturing Co., Federal Products Co., Rossville Co., Crescent Industrial Alcohol Co., National Industrial Alcohol Co., International Alcohol Corporation, Industrial Manufacturing Co., and W. H. Barber Industrial Alcohol Co. The uses of our product being with those of the chemical and manufacturing industries, makes our only point of consumption in the industrial territory on and north of the Potomac, Ohio, and Mississippi Rivers. To place our product in the consuming territory we have to complete with the industrial-alcohol plants located in the consuming territory, more principally those located at Philadelphia and Baltimore. Philadelphia and Baltimore, being located in the consuming territory, have a striking geographical advantage as far as the rail rate on the outbound finished product is concerned, and the advantage of accomplishing delivery in less than half the time from New Orleans. An approximate geographical percentage of consumption is as follows (see Exhibit A): (a) On and east of an imaginary line drawn through Buffalo and Pittsburgh and to the Potomac River east to the Atlantic Ocean, 67 per cent; (b) west thereof to the western border of the State of Illinois, south to the Ohio River, including Ohio River cities, and north to the Canadian border, 22 per cent; (c) west of the Mississippi River_extending to the Utah line, including the State of Wisconsin, 10 per cent; (d) In the entire territory south of the Ohio and Potomac Rivers and east of the Mississippi River only, 1 per cent. In other words, in the immediate southern territory the industrial-alcohol industry at New Orleans can only find a market for about 1 per cent of its output. The industry accordingly has to transport its product from New Orleans, an average of 800 miles, before the nearest market is reached for the disposal of any volume of its output. Alcohol being sold f. o. b. lowest rate point, the plants at New Orleans, to place their output in the consuming territory, must absorb the difference in the rate to compete with the plants located at Philadelphia and Baltimore, who have the same or more favorable production location as to the raw materials. New Orleans likewise has to compete with the interior plants in Illinois, Indiana, and Ohio. This absorption for our company amounted to an average freight rate absorption for the year 1924 of 22 cents per gallon, and is believed representative as to the other plants at New Orleans. The industry at New Orleans being a home industry to that port, the carriers have wisely seen that with the southern States being an agricultural section and the possible consumption of industrial alcohol to the southern territory being infinitesimal, the industry at that point had to have a scale of rates which would permit marketing the product in the industrial north. Such rates have been afforded to our industry and have been relatively in effect for some 20 years. A rigid mileage scale of rates based upon a rigid fourth-section requirement would bar the New Orleans distillers in competing with the competitive plants in the north, more especially Philadelphia and Baltimore, and would result in the closing down of the New Orleans plants. The port of New Orleans has claimed to be the second port in the United States in the extent of commerce handled. The industrial alcohol industry has assisted in that development, as a good many cargoes are handled yearly into that port for account of our industry. We now see the port of Philadelphia laying claim to being the second largest port. A handicap that would tend to close down our industry at New Orleans would drive the raw product molasses to the competitive ports of Philadelphia, Baltimore or New York via ocean routes direct. Conclusion. The restriction of the New Orleans competition would localize the industry to competing plants in the north, and a restriction of competition and the localizing of same almost always tends to increase the price to the consumer. Our rates from New Orleans to permit us to reach the northern markets might be said to be on a depressed basis to permit us to compete. We have little or no market for our product in the intermediate southern territory. We fear the Gooding bill, which calls for a rigid application of the fourth section of the interstate commerce act, would not enable the Interstate Commerce Commission to permit the southern carriers to continue in force the rates on which our industry at New Orleans has developed, in which we have invested on the good faith of these rates and upon which the life of our plant depends. A change in our rates would tend to impair or destroy the value of our investments. |