cause of the character of the machinery for changing freight rates, and the slowmoving process thereunder.

The railroads did nothing.

The Secretary of Labor, who supported the elimination of the wage differential, was reported to have said her attention had been called to the matter of the adverse freight differential, and that if it was out of adjustment-as it clearly was— that she would be glad to sign any order or paper that might be brought to her to correct that. She apparently thought that it was as simple as that. The southern coal industry seemingly lost a great opportunity when it neglected to present to the Madame Secretary the necessary paper for her signature.

The President indicated that the coal freight-differential matter should have attention, and many interpreted his statement as indicating that he, or the appropriate branch of the Government, would do something about it, but nothing has been done.

The railroads stand pat; they do nothing.

President Coolidge, in a message to Congress (in December 1923) (Luther M. Walter statement (1925), p. 9), said:

"Competent authorities agree that an entire reorganization of the rate structure for freight is necessary. This should be ordered at once by Congress.'

Did Congress order it? It did not. It made a gesture in that direction. It passed the Hoch-Smith resolution.

Explaining the purpose of his resolution, Congressman Hoch said (p. 8 of the Walter statement):

"The maladjustments in the freight structure have been greatly increased by the flat horizontal freight increases made in recent years." (He was speaking in 1925.)

Those maladjustments of which Congressman Hoch spoke have not been adjusted yet. Bad as they were then, they were, at least so far as the coal industry of the South is concerned, made much worse by the changes in 1927 to which we have called attention.

When the policy Congress decided by the Hoch-Smith resolution was not followed, and the steps it directed be taken accomplished nothing, what did Congress do?

It has done nothing to relieve the coal industry of the South of the 400-percentincreased differential against it.

On one division of one railroad alone, 54 coal companies failed and went out of business between 1927 and 1932, while hundreds of other mines closed down or became inactive. This situation was typical of all the southern coal fields from, say, 1917 on.

The following table presents the relative cost of production in the northern and western districts and the smokeless and high-volatile, or the southern districts, in 1937 and 1944 as reported by the Bituminous Coal Division for 1937 and OPA for 1944 and the relative increase in cost in the southern districts.

Comparison of relative costs per ton for 1937 and January to June 1944 (commercial mines only-hand, machine-loaded, and strip-mining combined)

Due to these conditions millions upon millions of dollars of securities of coal companies became utterly worthless-became totally valueless, in the hands of their owners; while other millions more were liquidated at 10 cents or less on the dollar.

It will not do to look at the condition of this industry (nor any other industry for that matter) under wartime conditions only. We must look to the after-thewar period, and consider what the future holds for it. It is the considered opinion of the well informed that the future of our coal industry under the equality of wages with other fields, with the freight differentials continuing, will be deplorable indeed; it will be worse than that, it will be worse than it has ever been unless some way can be found to reduce the transportation cost into competitive markets. It is believed that the canalization of the Big Sandy River will afford this relief to the coal-operating companies contiguous thereto.

In order that the United States Board of Engineers may understand more fully the manner in which these railroads exercise their premetive control of the vast areas they serve, the following statement concerning the coal fields of Buchanan County, Va., is included:

RAILROAD POLICY AS TO UNDEVELOPED AREAS IN THE BIG SANDY VALLEY

The way the railroads have tied up and prevented the development of great sections of the country in their own selfish interest and to the detriment of the public and the injury and damage of the property owners of the regions may be illustrated by reference to the coal fields of Buchanan County, Va.

These coal fields lie largely in the watershed of the Levisa Fork of the Big Sandy River and its tributaries.

For 20 or 30 years various coal-land-owning companies and hundreds and hundreds of individual citizens sought and besought and implored the railroads to afford the region railroad facilities to develop, mine, and ship the coal from this territory. But in vain.

There was some sort of "gentlemen's agreement" between the high representatives of different railroad interests allocating certain territory to each railroad; the respective railroads were not to trespass upon, or "develop" within the domain of the other.

The territory thus artificially cut in two was a natural drainage basin, one of the basins involved in this canalization project.

Thus the drainage basin of the upper Levisa was denied development for a quarter of a century; the property owners were thus compelled to carry their properties, pay taxes, and carrying charges for years and years, while denied the opunity to produce from them coal to pay the costs of carrying. Some companies, at least, were not able to do this, failed and sold their properties, or went into bankruptcy.

The region finally got railway development, because, as is generally believed, and was undoubtedly true, there had been a death or two in high railway circles, and the "gentlemen's agreements," of such dangerous import and questionable legality as never to have been committed to formal writing, were repudiated or forgotten.

From all this territory the waters of the Levisa courses downward to the Big Sandy and the Ohio, and canalization would have prevented the oppression of the communities and the property owners by the railroads in the manner indicated.

The action and conduct of the railroads was in effect an illegal conspiracy against the rights of the property owners of the region; and in equity and good conscience they owe the coal companies who were willing, able and anxious to develop their properties at the least the carrying charges upon their properties for the many years that development was deferred and denied by the railroads.

Under the circumstance, faithfully presented in the above statement, the directors of the Big Sandy Valley Association suggest that the opposition to the Big Sandy Valley canalization project by both the Chesapeake & Ohio and Norfolk & Western railways and the northern and western coal-producing districts and cer

tain favored operators is to be expected as it is consistent with their past attitudes. Such opposition does not concern itself with the merits of the canalization project itself except to the extent that reasons may be found to defeat the undertaking and maintain the present status.

Mr. RANKIN. You do not think this is going to hurt the railroads at all?

Mr. GARVEY. I do not. It seems like it is going to help them.

While these freight-rate differentials increased 200 percent from 1912, I would like to call something to your attention that would give you a thought on it. I am reading from the Business Week of April 6, this week. It says:

Meanwhile, Pennsy's management was busily building up the system in other

ways.

In 1901, for example, it acquired control of the prosperous Norfolk & Western system, one of the Nation's leading bituminous carriers. This has since proved a master stroke. The investment has been Pennsy's principal source of "outside" income for years, and the Norfolk & Western has likewise consistently provided it with huge annual volumes of coal traffic.

Mr. RANKIN. You are referring to the Pennsylvania Railroad?

Mr. GARVEY. The Pennsylvania Railroad owns or has control of that stock.

The reason I bring this out is to show this: That the great Norfolk & Western Railroad is controlled by the Pennsylvania Railroad up north. We have had this 400-percent increase in differentials at the Lakes. Here is a statement from the Securities and Exchange Commission which was filed by the Pennsylvania Railroad and the Pennsylvania Co., which are one and the same, as a matter of fact, their directors are identical all the way through, which states that they own 45 percent of the stock of the Norfolk & Western Railroad. What can we do about it when a northern railroad has that control upon the railroad upon which we ship.

Mr. PETERSON of Georgia. Without objection, the document will be included in the record.

(The matter referred to follows:)

PAGE 101 OF EXHIBIT A TO FORM 12-K, ANNUAL REPORT for the FISCAL YEAR ENDED DECEMBER 31, 1944, THE PENNSYLVANIA RAILROAD Co.

Give particulars of the various directors and officers of the respondent at the close of the year. Returns in column (e) of schedule No. 102 and column (d) of schedule No. 103 should represent the number of shares of voting stock recorded in the name of each director and principal general officer. In schedule No. 103 give the title, name, and address of the principal general officers having system jurisdiction by departments, as follows: Executive, legal, fiscal and accounting, purchasing, operating (including heads of construction, maintenance of way, mechanical, and transportation departments), and traffic. If there are receivers, trustees, or committees, who are recognized as in the controlling management of the road or of some department of it, give also their names and titles, and the location of their offices. If the duties of an officer extend to more than one department, or if his duties are not in accordance with the customary acceptance of his given title, state briefly the facts under "Explanatory remarks" below.

21. Give the names and titles of all officers of the Board of Directors in control of the respondent at the close of the year.

Chairman of board, None. Secretary of board, J. T. Willcox.

22. Name the members of the executive committee of the Board of Directors of the respondent at the close of the year (naming first the chairman), and state briefly the powers and duties of that committee: None.

103. Principal general officers of corporation, receiver, or trustee

PAGE 104 OF ANNUAL REPORT TO THE ICC OF THE PENNSYLVANIA Co., FILED AS AN EXHIBIT TO THE FORM 12-K ANNUAL REPORT FOR THE FISCAL YEAR Ended Dec. 31, 1944, of the PennsylvANIA R. R. Co.

Give particulars of the various directors of respondents at the close of the year: