Second. The tentative prices agreed to by Mr. Peabody's committee last week, which have been heralded as great reductions, are from 50 to 100 per cent greater than many coal companies have voluntarily contracted their output to the railroads for the ensuing year, these contracts having been agreed to within the last three months.

The Chesapeake & Ohio, at the request of counsel for the shippers in the Fifteen Per Cent case, filed the prices provided in its contracts for coal during the year 1917. There are twelve new contracts. The highest price provided in any one of the contracts (with only one exception) is lower than the lowest price named by the Peabody committee. The average 1917 price on coal (including overlapping contracts and new contracts) for the Chesapeake & Ohio is far below $2 per ton.

Senator TOWNSEND. When was that contract made?

Mr. THORNE. That is the average of all, which includes overlapping and new contracts. I have the list and will read it to you if you desire.

Senator TOWNSEND. The reason I ask that question is because one of the independent operators from the Pittsburgh district testified the other day that they were selling that coal at an average of $1.95 a ton. When I asked him that question, he said that meant their old contracts on free coal, which ranged all the way from 85 cents to $3 a ton.

Senator PоMERENE. Who was the man-Mr. Maurer?

Senator TOWNSEND. That is the man.

Mr. THORNE. On that very proposition I call your attention to this fact.

This spring the Norfolk & Western made 46 coal contracts, not one of which was for more than $2 per ton. We are not surprised that the Secretary of the Navy declined to approve a $2.50 or $3 for the United States Government.

Third. We have the average prices at which the coal operators of Indiana have been selling their product during the past few months, and we find the prices established by the committee are over 50 per cent greater than the actual prices averaged in any one of the past six months, up to and including April, 1917.

Fourth. If by any chance these Peabody prices should be accepted ultimately by this Government as fair and reasonable, it will mean that the fuel bill of the American people through the ensuing year will be more than $700,000,000 greater than that of last year.

Senator WATSON. On soft coal alone.

Mr. THORNE. Yes, sir. In support of these propositions, I have a mass of data here, but I do not presume you gentlemen would care to sit here very long to listen to it. But I will recite a few facts from it, and when you desire me to suspend I shall be glad to have you so indicate.

Senator WATSON. As I came into the room, you spoke of the year's price average being 50 per cent higher than the previous year. What is that average this year, do you know? You base your statement upon the report of the public utilities commission, do you?

Mr. THORNE. I base the statement on the report of the committee of coal operators in reply to the finding of the public utilities com

mission.

Senator WATSON. That is to say, on the testimony of the coal operators themselves?

Mr. THORNE. On their statements filed with the governor. The CHAIRMAN. Does the public utility commission of Indiana have the power to fix the price of coal?

Senator WATSON. No.

Mr. THORNE. The public utilities commission of Indiana recently made an investigation of the prices of coal, and have made public a report of their investigation. Here is the gist of the report in one paragraph:

Our investigation has left no shadow of doubt in the mind of a single one of the five members of this commission that in this critical period prices for this necessity have been advanced to a point that we can not designate other than outrageous. This is a just statement, especially in light of the fact that this is a time of war crisis, when our people of all classes are being called on to make sacrifice for the public welfare and for the world-wide cause of democracy, and when personal greed, if not voluntarily laid aside, must be met, if necessary, by the sovereign powers of the State, even if the exercise of those powers in the matter of necessities must go to the extreme of either temporarily or permanently sweeping aside the individual with all asserted rights.

The operators in Indiana asked for an opportunity to be heard in regard to that finding of the public utilities commission, of which I have only quoted one paragraph, and their statement, which is quite extended, I rather believe it might be well for the committee to consider the advisability of including it in its record.

Senator WATSON. I have no objection to having it included if it contains something besides a stump speech.

Mr. THORNE. Of the operators?

Senator WATSON. I refer to what you have been reading there. I have no objection to it if it is a statement as to facts and figures. We know all about war prices without going over them again and again. If they have some facts and figures there, very well.

Mr. THORNE. I would not have imposed upon the committee if I did not have some facts.

Senator WATSON. I am talking about this statement.

Mr. THORNE. And I am talking about the statement also.

Senator WATSON. I know what that statement is. I am perfectly familiar with it.

Mr. THORNE. Do you consider it a stump speech?

Senator WATSON. I am speaking of this part of it where they talk about was necessities and war prices and all that sort of thing. Senator TOWNSEND. That was the public utilities commission. Now he is reading from the answer of the operators.

Mr. THORNE. Do you consider their answer a stump speech?
Senator WATSON. Yes.

Mr. THORNE. I think there are some facts in that, and if the committee will bear with me, I will cite a few of them. This statement shows that for one company, which produced almost 1,100,000 tons of coal during this period, that 941 per cent of its output was contracted and that it had of free coal only 2 per cent; another company 91 per cent, and that it had of free coal only 6 per cent; the balance in each of those cases being consumed under mine boilers. Further, in contrast to the very large prices quoted on free coal-which were referred to by the public utilities commission-these mine operators in Indiana, covering a very substantial output, have compiled the following average price per ton, month by month, from April, 1916, to March, 1917, inclusive.

Senator TOWNSEND. On free coal?

Mr. THORNE. On all coal, and this included 11,042,258 tons during that period. The average prices are as follows: April, $1.20; May, $1.173; June, $1.164; July, $1.173; August, $1.191; September, $1.219; October, $1.306; November, $1.643; December, $1.749; January, $1.804; February, $1.880; March, $1.688.

Senator POMERENE. Of what year are you speaking?

Mr. THORNE. 1917. Then, for April, covering 809,494 tons, the average realization price amounted to $1.779.

The CHAIRMAN. That was the realization price at the mine?
Mr. THORNE. Yes, sir.

The CHAIRMAN. And it is the average price of all coal?

Mr. THORNE. Yes, sir; it is the average price actually received. Now the average coal price covered by contracts during the period was $1.16 per ton.

The CHAIRMAN. And mainly their coal was produced at that price and sold at that price, was it not?

Mr. THORNE. Yes, sir; 78 and a fraction per cent of their total output sold at that price according to this statement.

Senator WATSON. In other words, the real fact of the matter is, as far as Indiana is concerned-as gleaned from the operators and the utilities commission combined-that if we had the car service we now have in Indiana-and they have it up now to 85 per cent of efficiency-as far as coal distribution is concerned, they can mine coal in our State at the mine for not to exceed $1.40, and perhaps, as the governor says, $1.35 at the plant of the coal operator himself. So that if we were to sell it an $2 a ton they would be reaping a very rich harvest out of $2 a ton, and if this price of $3.50 a ton is fixed, it would simply be out of all reason and out of all proportion.

The CHAIRMAN. $3.50?

Senator WATSON. Yes.

Senator POMERENE. If we were to go into those districts we would find in the Pittsburgh district, in this one concern-I am understating it now-more than 700 or 800 per cent on the capital invested. Senator WATSON. Beyond any doubt.

The CHAIRMAN. Do you know what average profit the mine owners expect to get or regard as fair per ton above the cost of production?

Mr. THORNE. It has been variously stated. Some of them will tell you that under ordinary conditions they are willing to take 15 cents a ton-that is, in the ordinary days and 25 cents a ton under the war conditions. That would be a net increase of 75 per cent in their net profits. The coal operators of Indiana state that if they could be assured of a net profit of 25 cents a ton on a contract for 10 years they would enter into contracts.

Senator WATSON. That is right, and that is why I spoke a while ago of the stump speech. It went on with a lot of grandiloquent sentences, and all that sort of thing, in order to cover up, as I thought and as I said to some of them-the real gist of the matter. In other words, I said, "What does it cost to mine your coal, and how much profit would you be willing to take, stated in figures? I do not care about speeches; we can make speeches; I want the figures."

Senator POMERENE. You forget that they have to use these grandiloquent sentences in order to prove their patriotism.

Senator WATSON. I think the best way to do would be to mine coal at the smallest price and to sell the coal at the smallest price.

Senator CUMMINS. We have had two coal operators before us who stated that if they could be assured of 10 cents a ton profit regularly they would make their contracts based on that.

Senator WATSON. There is no doubt about it.

Senator CUMMINS. It is true that other mine operators said that they ought to have 25 cents. One of them said they ought to have 50 cents; but suppose they ought to have 50 cents, there is no mine operator who has said or given any evidence of seriousness in saying that the cost has increased more than 50 cents a ton.

Senator WATSON. Nowhere that I know of.

Senator CUMMINS. The cost was $1.15, in that neighborhoodfrom $1 to $1.15. Suppose it was $1.15 and you had 50 cents increased cost, it would bring it up to $1.65 and then give $1.25 a ton profit and still have the price up $1.90 a ton as being the outside price that they ought to ask.

The CHAIRMAN. I do not quite understand that. You stated that the cost in the contract was $1.15?

Senator CUMMINS. Not to exceed $1.15 a ton a year ago.

The CHAIRMAN. And you added the cost of production, 50 cents? Senator CUMMINS. No; I allowed that; I did not concede that. I assume the added cost is 50 cents a ton.

The CHAIRMAN. And that would make $1.65.

Senator CUMMINS. Yes; and add 25 cents and you have $1.90 as being the price, I think, 25 per cent a year added to capital after charging for depletion and deterioration and everything.

The CHAIRMAN. May I ask you about this free coal or spot coal? Is that of a better quality as a rule than the average coal that is furnished the railroads and the public utilities and to factories, etc.?

Mr. THORNE. The character of the coal furnished to industries varies greatly. The railroads demand a better coal than the utilities do. The gas coal is better than the ordinary average of other kinds required by utilities, and better than the railroad companies require because the utilities want to get this gas coal as free of slate and other foreign materials as far as possible. Free coal varies at different times. There are some mines putting all they possibly can under that head, cutting out contracts for the future. The contracts for screenings going to the utilities and factories, of course, is much lower in character than that going to railroads.

Senator POMERENE. And you can add to that statement, with perfect truth, that in a good many instances they are refusing to carry out their long contracts and insisting on selling their coal, their spot coal, to the people with whom they have those contracts.

Mr. THORNE. I can give you the name of a party and you can subpœna him to come, if you desire, who will testify that he had contracts for certain coal to be delivered by a certain company. The operator stated he could not get the cars. This party then had another person-an official of a plant which he had just purchased at Fairfield, Iowa-order coal from the same operator

Senator POмMERENE. Where was that?

Mr. THORNE. At Fairfield, Iowa. He ordered coal from the same operator and he got it promptly.

The CHAIRMAN. But at a higher price?

Mr. THORNE. At about three times as high a price as the contract called for.

Senator WATSON. I have correspondence before me showing that that is the case.

Mr. THORNE. Since the discussion has gone onto the subject of prices of to-day as compared with former times, I would like to submit concrete data, showing that the prices suggested by the Peabody committee are 100 per cent higher than those prevailing in the very same districts last year.

Senator POMERENE. There is no doubt about that proposition, but I should be glad to have your statement in the record.

Mr. THORNE. If you do not care for it I do not desire to occupy your time in going into something with which you are satisfied.

Senator POMERENE. I should be very glad to have you do that, because other Senators who have not looked into the question would find it of value to them.

Senator CUMMINS. We have a large amount of testimony already upon that point.

The CHAIRMAN. What have you to say with reference to the reasons that have apparently operated to induce the Council of National Defense, or part of it, at least, to shift this modus vivendi suggested by the mine operators until Congress can determine what method of regulation to pursue? As I understand it, in England the Government itself very frankly conceded a price of 4 shillings in excess of the normal price prior to the war in order to stimulate production, and later on conceded 62 cents, or 2 shillings, as the additional price that they might charge above the 4 shillings, or $1 for coal to be sent to the allies. Now, as I understand it, they do that with full knowledge of all the facts, the cost, etc., and as a stimulus to production, which they regard as very important. Following that analogy, if the cost of production of coal in this country is, as you say, $1.15was that the amount?

Senator CUMMINS. At different places.

The CHAIRMAN. Well, the average, we will say, of $1.25

Senator CUMMINS. I do not think it was $1.25 on an average, but that is near enough.

The CHAIRMAN. Well, the addition of $1, or 4 shillings, would inake $2.25; and 623 cents added to that, as far as the foreign customer was concerned, would amount to $2.875, or approximating the $3. Now, in addition to that, in this plan, or this modus vivendiI imagine it is only to be regarded as such while legislation is pending on this subject-concession is made to the Government of 50 cents a ton, which reduces it to $2.50. What do you think as to the modus that seems to operate on the Government in England, or its application to the situation here?

Mr. THORNE. I have heard a statement made relative to what was done in England, and I have no doubt but you have heard the same statement. It may be accurate, I do not know.

The CHAIRMAN. It was stated recently-I may say by Mr. Colver, of the Federal Trade Commission, who appeared before us-that the Federal Trade Commission has been inquiring into the cost of contracts, and also the cost under legislation abroad.