EXHIBIT S-333

Estimated per ton assembly costs in production of basic pig iron, 1934

NOTE.-Material ratios used: 1.94 gross tons of ore per gross ton of pig iron, except for Birmingham for which a ratio of 2.5 gross tons was used; 1.54 net tons of coal (producing 1 ton net coke, i. e., 65 percent yield from coal) per gross ton of pig iron, except for Birmingham for which a ratio of 2.07 net tons was used; 0.45 gross tons of limestone per gross ton of pig iron, except for Birmingham for which no limestone ratio was used (Birmingham was generally self-fluxing).

Source: Special computations made for bureau of business research, University of Pittsburgh, by H. R. Moorehouse, of Arthur G. McKee & Co., Cleveland, Ohio. Based on rail, rail-water, and water transportation according to tynical routes over which the materials are transported to their districts. Costs are based on a 100-percent ore burden of 51.5-percent iron content. Table is from C. R. Daugherty, M. G. de Chazeau, and S. S. Stratton, the Economies of the Iron and Steel Industry (New York, McGraw-Hill, 1937), vol. I, p. 378.

EXHIBIT S-334

Assembly cost of raw materials for production of 1 long ton of basic pig iron and I long ton of finished steel at different centers, 1939

1 In deriving these assembly costs, blast-furnace practices shown in table 26 for Youngstown were used for Pittsburgh, Cleveland, Buffalo, Weirton-Steubenville, Ashland, Hamilton, and St. Louis; those for Chicago-Gary were used for Detroit and Duluth; those for eastern New York were used for Bethlehem and Sparrows Point; and those for Provo were used for Pueblo and San Bernardino.

Following are the proportions of iron ore and coal from the different sources which were used. They are those used by Marion Worthing in Pittsburgh Business Review, Jan. 31, 1938, p. 23, and they are also found in Beaver and Mahoning Rivers, Pa. and Ohio, hearings before the Committee on Rivers and Harbors, House of Representatives, 77th Cong., 1st sess., 1941, pp. 47-48:

Iron ore: 75 percent Minnesota, 25 percent of Michigan (100 percent direct ore at points on lakes; at inland points, 80 percent direct ore and 20 percent dock ore).

Coal: Pittsburgh and Weirton-Steubenville, 100 percent western Pennsylvania by barge. Chicago, 70 percent eastern Kentucky and West Virginia, 30 percent Pocahontas-50 percent rail-lake; 50 percent all-rail for coking; southern Illinois for other coal. Cleveland, 80 percent Pittsburgh field by barge-rail, 20 percent Pocahontas, all-rail. Detroit, 80 percent eastern Kentucky and West Virginia, 20 percent Pocahontas-80 percent rail-water, 20 percent all-rail. Buffalo, 60 percent Pittsburgh and central Pennsylvania, rail-water; 20 percent Pittsburgh field, all-rail; 20 percent Pocahontas, rail-water; Youngstown, 85 percent western Pennsylvania, barge-rail; 15 percent Pocahontas, all-rail. Duluth, same as Chicago, except none from southern Illinois. Other points obtained materials from the cheapest available source. This figure applies at Middletown, which is 12 miles from Hamilton. Hamilton does not make steel and Middletown does not make pig iron.

Negligible.

Source: P. 124, Board of Investigation and Research, The Economics of Iron and Steel Transportation Sen. Doc. 80, 79th Cong., 1st sess. (Washington, 1945).

APPENDIX

Hon. EMANUEL CELLER,

Chairman, Judiciary Committee,

LONE STAR STEEL CO., Dallas 5, Tex., April 26, 1950.

House of Representatives, Washington, D. C.

DEAR MR. CHAIRMAN: My attention has been directed to the study your committee is making of the steel industry in the United States. Counsel for your committee, Mr. Bernhardt, very kindly extended an invitation for me to appear before the committee, but pressing business engagements have deprived me of the pleasure. Perhaps the committee will not consider it improper for me to file this statement.

Lone Star Steel Co. was incorporated in 1942 with authority to construct, own, and operate an integrated steel mill, including all related facilities. At that time Defense Plant Corporation had concluded that the proper defense of the country required the acquisition of an immense iron-ore deposit in the vicinity of Daingerfield, Tex., the construction of a 1,200 ton (daily) blast furnace, the acquisition of coal deposits in Oklahoma, and the construction of coal-washing and ore-beneficiating facilities to serve the blast furnace. Lone Star Steel Co. was employed to supervise the acquisition and construction program and to operate the completed properties for the Government.

Your committee has given some consideration to the shortage of iron ore in this country. In the acquisition and construction program we did acquire for the Defense Plant Corporation some 30,000 acres of east Texas iron ore. So that the 1,200-ton blast furnace might have a 100-year supply within 5 miles of the plant. The ultra-modern plant was completed, but just before its completion in 1944 the war need for pig iron had been practically satisfied; therefore, Lone Star, as lessee, never was able to put the furnace in blast to determine whether iron could actually be produced.

The ore is either on the surface or beneath just a few feet of over-burden and is obtained by strip mining. It is of a relatively low grade but when processed through the plant's ultra-modern beneficiation plant it reaches the blast furnace with a metallic content of roughly 50 percent iron.

After the war the Government concluded that the properties should be sold. They were purchased by the company at a price of about $7,000,000, which was considered to be a reasonable price at the time of the sale. The purchaser assumed the risk of the actual ability of the blast furnace to produce iron. Thereafter, the company took such steps and made such expenditures as were necessary to make the plant ready for actual operation, and except for a few interruptions has been operating the blast furnace and all of the related facilities since October 1947.

When the idea of locating a blast furnace at Daingerfield was first initiated by the people of Texas, it was the intention that an integrated steel mill would be constructed ultimately at the site, as the dependable market for the pig iron to be produced by the blast furnace. There is not an adequate normal market for 1,200 tons daily of pig iron in the economical trade area of the plant. In other words, an end product must be manufactured to make the plant a success in normal times. Of course, in the fall of 1947 and through the year 1948 there was an abnormal demand for pig iron. Our company enjoyed the advantage of that market situation, and because of earnings during the period, attained a position which enabled it to commence the program which will culminate finally in an integrated steel mill at the site of the blast furnace. The company feels that it has the logical site for a steel mill specializing in the manufacture of pipe for oil country needs, since about 80 percent of the oil country pipe used in this country is used within 400 miles of the plant and further since a pipe mill of

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the size which the company feels that it should build would supply only 20 percent of the market within the 400-mile radius.

There has never ben any doubt in the minds of the 4,000 stockholders of Lone Star Steel Co. that the company will build the necessary steel mill. Early in 1949, the company having taken stock of its assets and liabilities, filed an application with the Reconstruction Finance Corporation for a loan to be used in adding steel-making facilities to its present plant; which steel-making facilities would be capable of producing annually approximately 350,000 net tons of electric weld pipe. Taking into consideration the permanent improvements which the company had made to the property after its purchase, the blast furnace, its related facilities and its coal-producing facilities had an estimated present-day replacement value of about $45,300,000. The additional facilities needed for producing steel pipe will cost approximately $50,000,000, plus approximately $5,000,000 to retire funded debt. In other words, the cost of constructing an integrated steel mill, including the blast furnace would be about $95,300,000, if we didn't already have the blast furnace. Our enginering report showed an ability to repay the loan within the 10-year period permitted under the Reconstruction Finance Corporation Act. Therefore, we had hoped that the blast furnace and related facilities, plus the new facilities, would be sufficient security for about 60 percent of the combined value of both. If this theory had been approved by the RFC, the loan for the entire expenditure would have been approved.

The RFC representatives gave very careful consideration to the application and with unusual patience and courtesy listened to the presentation of our request for the 60 percent loan. But the RFC Board concluded that it should not make a commitment for all of the money needed for the new facilities. The Board felt that the company, itself, should inject a substantial amount of equity money irrespective of value of the facilities actually owned by the company. The RFC took into consideration the fact that the actual cost to the company of the existing facilities was considerably less than their present replacement value, and that such condition indicated the wisdom of requiring the injection of a substantial amount of money from the sale of stock and junor securities. Thus, a few months ago the RFC Board adopted a loan resolution committing the RFC for a loan of $34,000,000 of the cost, provided the company would inject the remainder, and provided the company would arrange for some $4,000,000 of additional working capital.

At the time the RFC commitment was made, some 8 months ago, the company found that it could not acquire that much equity and junior financing without additional favorable operating experience. Meanwhile the RFC is letting its commitment remain effective.

So, the company concluded that it would make an intermediate step in its financing. We decided to build a cast-iron pressure pipe foundry to manufacture cast-iron pressure pipe used largely by municipalities for water-supply lines and mains, to refinance our outstanding long-term indebtedness of some $1,800,000 and to inject about $5,200,000 of additional working capital, out of which the foundry will be built. To that end, we have recently issued $5,000,000 of refunding bonds to insurance companies and have sold additional stock in the net amount of $2,000,000. The foundry will be completed by late summer and this should add substantially to use of our pig iron and to our net earnings. Having thus stabilized the demand for pig iron and having a free working capital of some $4,000,000, we feel that after the company shall have experienced a few months of successful operation of the foundry it will then be prepared to complete the financing of the steel mill. We hope by that time that either all of the money necessary for the construction of the steel mill can be obtained from business lending sources and sale of securities to the public or by taking advantage of the RFC commitment and the sale of some stock to the public. By that time perhaps the RFC will be convinced that the company is entitled to a loan in excess of $34,000,000 when secured by its expanded first lien loan on properties and the steel-making facilities. In any event, the present bonded indebtedness will have to be retired at that time. We are hopeful that there will be no criticism of the RFC's willingness to provide the standby financing to the extent that it is presently committed.

In passing, we call attention to the fact that the RFC has been very helpful to this company in making loan commitments. So far it has never been necessary for us to incur indebtedness to the RFC, since on each occasion in the past the money has been made available by banks and insurance companies before we were required to take down any RFC money. At the time the RFC made its

first commitment to our company to lend $1,500,000 of working capital in 1947, we had been unable to obtain such a commitment from banking sources, but before we actually accepted the RFC loan the Dallas bankers agreed to supply our needs. Again in our recent financing program involving $7,000,000 we had pending a loan application to the RFC for $5,000,000 of this money. The appication had made considerable progress in the RFC. We feel that the practal availability of that source of financing inspired in the private bankers the confidence which we needed in obtaining the $7,000,000 of financing. Also, the mere fact that the RFC was originally willing to lend us 12 million dollars after a careful check, proved to our private bankers the essential solvency of the loan. Personally, I feel that in providing potential credit of this kind for our new industry the RFC has performed and is performing a substantial public service without interfering with the injection of money from private sources when money from that source becomes available.

Furthermore, I feel that the continuing effectiveness of the RFC's larger commitment to this company will make possible, in an orderly manner, the financing of an integrated steel mill at the very site of an ore supply sufficient for 100 years of operation. We feel that the operation of a steel mill at the site of its self-owned ore supply is unique in this country and is in the public interest.

Very truly yours,

E. B. GERMANY, President.

STATEMENT FOR THE AMERICAN SHORT LINE RAILROAD ASSOCIATION BY C. A MILLER, VICE PRESIDENT AND GENERAL COUNSEL

For the record, my name is C. A. Miller. I am vice president and general counsel of the American Short Line Railroad Association, with offices at 2000 Massachusetts Avenue, NW., Washington 6, D. C. This statement is submitted in behalf of that association and its members. The opportunity to present the views of that association, and its members, is greatly appreciated.

The American Short Line Railroad Association is a voluntary, nonprofit, cooperative association, organized more than 36 years ago for the purpose of cooperative action in the consideration and solution of problems of management and policy affecting the operation or welfare of short-line railroads, and the promotion of harmonious and friendly cooperation between all classes of railroads. The association now has 317 members.

I make a particular point of the fact that all the members of our association are common carriers, and all but two of them are engaged in interstate commerce, and, therefore, subject to and regulated by the Interstate Commerce Commission. The other two members are engaged wholly in intrastate commerce, and are subject to the regulation of the States in which they operate.

By way of explanation, I think I should say that a short line, generally speaking, is a railroad less than 100 miles in length and having gross revenues amounting to less than $1,000,000 per year. As classified by the Interstate Commerce Commission, these carriers are known as class II and class III car riers. A few of them are classified as electric lines. More than 80 percent of the members of our association fall in that group. We do have, however, some 68 railroads with gross annual revenues in excess of $1,000,000 each, and we have several members with lines of railroad more than 100 miles in length. However, regardless of length, and regardless of revenues, all of the members of our association have the same common problems.

Our association, and its members, are greatly interested in the so-called commodities clause of the Interstate Commerce Act, and its proper interpre tation and application. Consequently, during the more than 19 years that I have had the privilege of serving the association, I have participated in a number of proceedings wherein the commodities clause was involved.

In the case of U. S. v. Elgin, Joliet & Eastern Ry. Co., decided by the Supreme Court of the United States on May 25, 1936, and reported at 298 United States Reports 492, I filed a brief as amicus curiae for the association. I also filed a brief amicus curiae for the association in that case in the District Court of the United States for the Northern District of Illinois. The opinion of the court in that case is reported at 11 Federal Supplement 435. That case is hereinafter referred to as the Elgin case.

In the case of U. S. of America v. South Buffalo Ry. Co., et al., I submitted a brief amicus curiae for the association, both in the District Court of

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the United States for the Western District of New York and in the Supreme Court of the United States. That case is reported at 333 United States Report 771, and was decided on April 26, 1948. The opinion of the district court is reported in 69 Federal Supplement 456. That case is hereinafter referred to as the South Buffalo case.

I also participated in the proceedings before the Interstate Commerce Commission known as Er Parte 128-Investigation of South Buffalo Ry. Co., in behalf of our association. In that case I submitted a brief amicus curiae with respect to the reports proposed by the examiners, and participated in the oral arguments of that proceeding before the entire Interstate Commerce Commission. This recital is made for the purpose of showing the long-continued interest which the members of our association have had in proceedings relating to the commodities clause. Perhaps I should also say that our association very strongly opposed certain proposed amendments of the commodities clause when the Transportation Act of 1940 was under consideration by the Senate Committee on Interstate Commerce. I shall, a little later on, discuss all of these proceedings. The subject of the commodities clause having been interjected into this committee's study of monopoly power, the chairman invited certain testimony with respect to it. Consequently, on April 19, 1950, your committee heard the testimony of a witness who had had charge of the preparation of the South Buffalo case for the Department of Justice. His testimony appears at pages 452 to 495, of the stenographic report of the proceedings before this committee. Again, on May 5, 1950, your committee heard the testimony presented on behalf of the Interstate Commerce Commission. 1349 to 1418 of the proceedings. That testimony appears at pages

So much by way of introduction.

The commodities clause of the Interstate Commerce Act is section 1 (8) of that act. It was originally enacted by section 1 of the Hepburn Act of 1906 (34 Stat. L. 585), and was amended as it now reads, by section 7 of the MannElkins Act of 1910 (36 Stat. L. 547). Presently, section 1 (8) of the Interstate Commerce Act reads as follows:

"(8) Transportation of commodity manufactured or produced by railroad forbidden.-From and after May first, nineteen hundred and eight, it shall be unlawful for any railroad company to transport from any State, Territory, or the District of Columbia, to any other State, Territory, or the District of Columbia, or to any foreign country, any article or commodity, other than timber and the manufactured products thereof, manufactured, mined, or produced by it, or under its authority, or which it may own in whole or in part, or in which it may have any interest, direct or indirect, except such articles or commodities as may be necessary and intended for its use in the conduct of its business as a common carrier."

The amendment of the act in 1910 made no change in the purpose and intent of the statute. So, for all practical purposes, the statute has been in effect since 1906.

Correlative with the commodities clause is section 15 (13) of the Interstate Commerce Act, which we generally refer to as the Shippers' allowances clause. That clause was also first enacted by the Hepburn Act of 1906 and amended by the Mann-Elkins Act of 1910, to which references have heretofore been made. Section 15 (13) of the Interstate Commerce Act, now reads as follows:

"(13) Allowance for service or facilities furnished by shipper.-If the owner of property transported under this act, directly or indirectly, renders any service connected with such transportation, or furnishes any instrumentality used therein, the charge and allowance therefor shall be no more than is just and reasonable, and the Commission may, after hearing on a complaint or on its own initiative, determine what is a reasonable charge as the maximum to be paid by the carrier or carriers for the services so rendered or for the use of the instrumentality so furnished, and fix the same by appropriate order, which order shall have the same force and effect and be enforced in like manner as the orders above provided for under this section."

Any consideration of this subject must necessarily include both the legislative history and the judicial history of the commodities clause, and I hope I may be pardoned, therefore, for going into these phases of the subject in as much detail as I have. But, I do think it is important that I do so.

It has come to be recognized as axiomatic that legislation may begin where the evils begin. So far as the commodities clause is concerned, the "evils" were first brought to the attention of the Congress on December 5, 1905, by President