It is therefore safe to assume there is an abundant reserve of coal in the hills to maintain the estimated tonnage for the 50-year life of the project.

(d) Probable cost of project, cost of operation and rate of amortization.-The probable cost of the project is not known. This is being worked out by the United States district engineer at Huntington. It is understood that a preliminary estimate of $60 000 000 has been made.

For the purpose of this study it is assumed that it will cost $50 per annum to operate each of the 10 dams projected or a total operating cost of $500,000 per annum. On the basis of a total net saving to the ultimate consumer of $7,500,000 per annum, this leaves $7,000,000 per annum available for amortization, and interest.

A sinking fund of $7,000,000 per annum, without interest will accumulate a fund of $350,000,000 in 50 years or, substantially six times the amount to provide the stipulated economic justification required by the Rivers and Harbors Committee of the Congress.

There is, therefore, an abundant "economic justification" for the project under the Rivers and Harbors Committee's rule.

These figures are very impressive and provide a sound economic background upon which to base the promotion program of this association.

THE PROBLEM OF THE COAL INDUSTRY

Lower cost transportation is vital to the coal industry of the Big Sandy Valley. During the abnormal market created by World War II cost or relative cost has not been a vital factor but during the postwar period the serious differences in both transportation cost and mine cost which have been built up against the southern districts will create a life and death struggle for continued existence. The following analysis is based on publications of the Department of Interior, Bituminous Coal Division and OPA.

The following brief discussion of the Lake cargo and Chicago markets is intended to show how vitally important they are to the Big Sandy and Smokeless districts. Table B shows the volume of coal shipped into the Great Lakes market by the. northern districts and the southern districts during the 5-year period 1936 to 1940, inclusive. (See map No. 2 for district locations.)

Likewise the importance of the Chicago area is shown by table C.
TABLE C.-Shipments into the Chicago market area

It is quite obvious that these two great markets and others in the Northwest and Middle West must be held by the southern districts if they are going to continue to exist.

Table D shows the railway freight differentials in favor of competitive districts into the Great Lakes and Chicago markets.

The wide differentials in favor of the northern districts on lake cargo rates and the even wider differentials in favor of the western districts into the Chicago market present part of the problem.

During the war period, and taking advantage of war conditions, the relative mine cost differentials have been substantially changed in favor of the northern and western districts. The following table shows these changes and the extent to which the southern districts have been penalized.

Table E shows relative cost and unfavorable changes in favor of the western and northern districts between 1937 and 1944.

TABLE E.-Comparison of relative costs per ton for 1937 and January-June 1944 1 [Commercial mines only-hand, machine loaded, and strip mining combined]

Source: Figures for 1937 from Bituminous Coal Division's Cost Publications. Figures for 1944 from OPA records.

A moment's consideration of these four tables, B, C, D, and E reveals the serious predicament of the southern districts. With the wide differentials in freight rates already existing in favor of the competitive districts, the addition of these cost-differential increases ranging from 37 to 88 cents a ton against smokeless coal and 14 to 65 cents a ton against high-volatile coal, presents a problem of survival.

The lowering of transportation cost by means of river transportation may therefore be the deciding factor in the continued availability of these coals to the industrial districts of the Middle West and the Northwest on a competitive basis. This consideration alone should justify the building of the Big Sandy River improvement project.

POSTWAR JOBS

It is a self-evident fact that, with the return to the prewar normal, production of coal in the Big Sandy Valley will diminish and a great many people are going to be thrown out of employment.

Competent engineers, familiar with this type of work, have estimated that 10,000 man-years of work will be required to install the Big Sandy River improvement project. This estimate disregards man-hours used in fabricating materials used on the structures such as cement, steel, lumber, gravel, etc. This means jobs for 2,000 people in the valley over a period of 5 years or its equivalent.

After the installation has been completed a 20-man crew will be required at each of the 10 locks and dams or a total of 200 jobs. Assuming that one towboat will be required for each 750,000 tons moved, 12 to 15 towboats will be required. These boats will each employ 10- to 15-man crews. This means permanent jobs for 120 to 225 men to operate these vessels. Terminal operators, office staff, and miscellaneous employees will add another 100 jobs.

Summing up, it is estimated that at least 500 permanent jobs will be provided after the river reaches an operating basis.

With this in mind and in order to prosecute the work in such a manner as to provide a maximum number of jobs in the locality where maximum unemployment exists, it is strongly recommended that work be started at the head of navigation on both the Tug Fork and the Levisa Fork where the maximum unemployment will exist.

Such a program has the additional advantage of permitting prospective coal terminals to be built before the channels are filled with water, thus making them available to begin immediate shipments when the channels are filled.

The very tangible guaranty offered by this plan that the project will be completed as planned would have great weight with prospective investors in river terminals and equipment and encourage the early utilization of the project.

RAILWAY OPPOSITION

Both the Chesapeake & Ohio and the Norfolk & Western Railways have already filed briefs in opposition to this project.

Both briefs contend that the project is not justified because the railways are already supplying adequate transportation to the valley and can continue to do so. This association recognizes that the railway service is probably adequate so far as volume is concerned but contends that the freight rates are so high and differentials in favor of competitive districts are so severe that lower cost transportation must be made available if the coal industry shall continue to exist and the economic development at the valley is to keep pace with other localities served by cheap river transportation, notably the Great Kanawha and Monongahela Valleys.

The association further contends that the true rule to be followed is that "anything which is beneficial to a community served by a railway, is beneficial to that railway." There can be no valid argument as to the value to the Big Sandy Valley of unlimited, low-cost river transportation.

And finally the railroads have been asked to point out a single instance where the over-all revenue of a railway has been reduced by a river improvement such as that contemplated in the canalization of the Big Sandy River. Certainly such is not the case on the Great Kanawha or the Monongahela.

VALLEY-WIDE ORGANIZATION ESSENTIAL

In order to uphold the hands of our Representatives in Congress and enable them to secure the support of their fellow Congressmen, it is absolutely essential that every element in the valley shall get behind this program and uphold the hand, not only of their Representatives in Congress, but the officers and directors of the association as well. Every businessman and every citizen of the valley, as well as the corporations, should take out memberships and do their bit toward putting this program across.

It is intended by the association to organize a committee in each county headed by a local member of the board of directors of the association and you are urged to get behind this committee and cooperate with them on this great job.

John C. C. Mayo was largely instrumental in securing the railway development of the Levisa Fork. That was his life work and it was a worthy one. Many of us can remember the valley before this transportation service was available and can therefore visualize what a great new transportation service can do for a community. The same is true of the modern highways.

The canalization of the Big Sandy River will bring a bigger, and better and unlimited transportation service into the valley. A railway is just one restricted transportation service privately held. A waterway is a great public highway of many transportation services from the modest John boat to the majestic towboat. This canalization will bring into the valley many new industries and open up markets to these industries and the Big Sandy coals not now available because of high freight rates.

CONCLUSIONS

Our project is feasible. It has abundant economic justification. It is needed in order to provide postwar jobs. It will guarantee the continued life of our coal industry. It will be a large factor in the industrial expansion of the valley. It will stabilize and reduce the present system of freight rates in and out of the valley.

Mr. GARVEY. With regard to this prospectus I would like to call your attention to the freight rates, on page 15, table D, in which is shown the rail rate on lake cargo coal from various districts that ship coal to various points by way of the Lakes. I would also like to call your attention to table E, page 16, showing the cost of producing coal in the low volatile districts of West Virginia as compared with the cost of producing coal in other districts. This statement shows the cost as determined by Bituminous Coal Commission for the year 1937

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and also by the Office of Price Administration for the 6 months period ending June 1944. In 1937 the smokeless districts had a cost of 19%1⁄2 ceats under our chief competitor, eastern Pennsylvania. Between 1937 and 1944 differentials in labor rates which were eliminated and other conditions imposed upon the southern coal operator have eliminated any advantage we had in production cost, which did partly offset freight differentials. For the 6 months period ending June 1944 the production costs of the low volatile mines exceeded those of eastern Pennsylvania by 21.6 cents per ton. The actual differential in the combined transportation and labor costs in 1937 was 45 cents less 191⁄2 cents or 25%1⁄2 cents while now the actual differential in transportation costs is 45 cents a ton plus the increase in labor costs of 21.6 cents per ton or 66.6 cents per ton. So far as I know, the railroads have done nothing to help correct this extremely bad situation.

While the average weighted freight differential into that territory lying between a line running north and south through Detroit and Portland, Maine, and lying north of the Potomac and Ohio Rivers, is approximately 45 cents, when coals from the N. & W. moves west of that north and south line through Detroit the differential becomes far greater as they meet the coals mined in Indiana and Illinois. See tables, page 15 and 16 of prospectus No. 1. East of the line they meet in competition coals mined in northern West Virginia, Pennsylvania, and Ohio.

The Board of Engineers did not take into consideration the matter of differentials between high- and low-volatile coals mined from southern West Virginia and Kentucky in making their report. If they had it would have increased savings to the public at least a minimum of 18 cents per ton on estimated tonnage of coal moving from the Pocahontas-Tug River fields, a sum of nearly a half million dollars.

I would like to describe the movement of a cargo of screened coal loaded from the Pocahontas district, the ultimate destination being Minneapolis by way of the Great Lakes. Smokeless coal is very soft and friable and therefore does not withstand rough handling as well as the harder splint and block coals. However, degradation is also a serious factor in handling these firmer coals. Great care is taken in screening all the fines out of the prepared sizes and when a car of screened coal leaves the tipple there is a very little, if any, fines present. When it is transferred from rail to boats on the Great Lakes it is dumped in carload lots into the hold of a vessel with a vertical drop of about 30 feet, thereby causing considerable breakage and degradation. When this cargo arrives at Duluth or Superior it is taken from the hold of the vessel by means of a clamshell which causes degradation, and with another vertical drop on to the stock pile further degradation takes place as it is loaded into storage on the docks. Later when the coal is picked up from the storage piles on the docks and placed in a railroad car for shipment to Minneapolis again degradation takes place, with the result that only about 40 or 45 percent of the entire cargo of screened coal can be shipped as screened coal from the docks. The degradation or slack coal must be sold at a reduced price and likewise the screened coal that is shipped to Minneapolis must be sold at a much higher price than would have been the case had degradation not taken place over the Lakes.