The action taken at this conference brings about the following results: Present prices on bituminous coal mined in Pennsylvania have ranged from $4.75 to 6. Under the ruling the price is reduced to $3 for mine run and $3.50 for domestic lump, egg, and nut.

The present range of prices in West Virginia is from $4.50 to $6; price reduced to $3 for mine run and $3.50 for domestic lump, egg, and nut.

The range of prices for Ohio coal has been from $4.50 to $5; prices reduced to: No. 8 district, the thick vein, Hocking and Cambridge districts, $3 for mine run and $3.50 for domestic lump, egg, and nut; thin vein Hocking, Pomeroy, Crooksville, Coshocton, Columbiana County, Tuscarawas County, AmsterdamBergholz district, $3.25 for mine run and $3.50 for domestic lump, egg, and nut; the Massillon and Palmyra districts and Jackson County, $3.50 for all grades of coal.

The prevailing prices in Alabama have been from $5.50 to $5.75; prices reduced to: Cahaba and Black Creek, $4; Pratt, Jaeger, and Corona, $3.50; Big Seam, $3 for all grades.

The prevailing prices for coal mined in Maryland have been from $5.75 to $6; reduced prices will be $3 for mine run and $3.50 for domestic lump, egg, and nut.

The prevailing prices on coal mined in Virginia have been $4.50 to $5; reduced price, $3 for mine run and $3.50 for lump, egg, and nut.

The prevailing prices on coal mined in Kentucky have been from $4 to $4.50; reduced price, $3 for mine run and $3.50 for the domestic sizes.

The prevailing prices on coal mined in Illinois and Indiana have been from $3.50 to $4; reduced price, $2.75 for mine run and seam sizes and $3.50 for screened domestic sizes.

The prevailing prices on coal mined in Tennessee have been from $4.50 to $5; reduced price, $3.50 for all sizes.

At the conclusion of the conference Secretary Lane said:

66

Gentlemen, this is a very novel proceeding. I think I am within the fact when I say that no such hearing or gathering as this has ever been held in the United States before, or perhaps in the world. You are, I hope, pioneers in a good movement. I come from the land of pioneers, the far western country, where we look back with respect and admiration and some reverence upon those who crossed the hard and stony and waterless places to the richer spots beyond. And I hope that you will be looked back upon not only by those who succeed you in the coal business, but by the industries of the United States, with respect and admiration for the manner in which you have acted at this conference. You have responded as men should, to a call made upon you in the name of the people of the United States. You are not a removed class. You are of us. You belong to the people. Most of you are men who were not born to wealth. You come up out of the soil like the rest of us, and you have shown a sympathy and an understanding of your relations with the people from which you spring. That is the essential quality in democracy. Unless we can maintain in our minds always a consciousness of the source of power in this country, democracy is a failure. There is a strong contention made that this Government can not so organize itself as to meet to the full the demands that are, and are to be, made upon it; that other forms of government in times of strees or, in fact, in any times, are more competent and more efficient, because there is the strong hand of the government above, threatening, menacing, compelling. If we in the United States are to work out our problem economic, social, as we have worked out our problem political, we must work it out, in my judgment, in the spirit in which you have worked-with sympathy, with recognition of those whom you serve. There is a kind of corporation in this country that we know as a public utility. A public utility is one that is at the service of anyone and must render him the kind of service that it holds out to give. In the biggest and broadest sense each one of you in running a coal mine is managing a public utility, because the public is dependent upon you. And this world is going forward and not backward, it is going to keep its confidence in democracy, if the men who have the management of industry and the men who give direction to the thought of the country have in their hearts always the welfare of the people. The one thing that will turn us back is the exercise of arbitrary power by those who have power and who exercise it ruthlessly. You have been up against an extremely odd situation. And now you have gathered here and met that situation in man fashion. I think you have reason to be proud of what you have done.

"Speaking for Gov. Fort and for Mr. Peabody and his committee and for myself, we are proud of what you have done. You have said to the American people that within your power, exercising your judgment, protecting yourselves, you will not be oblivious to the rights of those whom you serve; you will, within your power, protect them. That is the spirit that makes for the success of our country. And if all the industries of the United States will have that same spirit there will be no question as to our ability to mobilize the resources of this country and carry this war to a successful conclusion. Good sense, common sense, vision, the judgment of large-minded men-those are the things that must characterize us if we are to carry on this great venture. We must not work singly and alone for selfish ends in the hope of reaping rich rewards, which will distinguish us merely as men who are in industry as makers of money. We must work as the men that the papers said landed in Europe yesterday will work. We must work in companies, in battalions, in regiments, and we must have in our minds the purpose that we are going to march forward to victory, victory not for ourselves, but victory for the country that is dearer to us than anything we have except our own families. This war is not a war of a day. It is not a war upon which we entered lightly. It is not a war in which any man, no matter how old he is, no matter what his resources may be, will not be compelled to play his part. We are the greatest business Nation on earth, and therefore we must look to the business men of the country to lead our people in spirit. And I think that the word that comes out from this gathering will be an inspiration to the people of the country."

Senator CUMMINS. If we pass any legislation to fix a tentative price, that contemplates that there will be something more enduring later. We will follow it by some provision for fixing what might be called permanent prices, or at least those that will endure longer than the tentative prices. Are you thinking of such a system to be continued beyond the present war?

Mr. THORNE. No, sir.

Senator CUMMINS. What is in your mind with regard to the proper way to organize the body which is to fix the price permanently, after due investigation?

Senator LA FOLLETTE. You mean during the war?

Senator CUMMINS. I mean permanently during the war. We have got to put it in form. Now, who ought to do that?

Mr. THORNE. I presume it is a function that should be exercised by the administration. It seems to me that the Federal Trade Commission is a very appropriate body to exercise the power and do the actual work.

Senator CUMMINS. If we do agree that it shall go to the administration, either with the direction or inference that the work is to be done by the Federal Trade Commission, what rule have you in your mind to give to the commission through which it can arrive at a fair price?

Mr. THORNE. I think the suggestion I made awhile ago would be sufficient, that it should be based on the cost of production plus a reasonable profit.

Senator CUMMINS. The cost of production we will assume will embrace the labor cost and the depreciation cost and the depletion cost and the maintenance cost generally?

Mr. THORNE. Yes, sir.

Senator CUMMINS. And take in every item except what might be called capital cost?

Mr. THORNE. Yes, sir.

Senator CUMMINS. What, in your opinion, would be a fair sum per ton to be added to the cost of production, ascertained in the way I have just suggested?

Mr. THORNE. It should be a fair return on the value of the plant. Senator LA FOLLETTE. How would you ascertain the value of the plant, Mr. Thorne?

Mr. THORNE. Senator, that is a stupendous question. The Supreme Court has been wrestling with that for a generation. I think that is a factor that the tribunal to whom the task is assigned must determine; it must be left to that tribunal; they must take into consideration the various factors essential to the determination of present value, the chief one of which is the actual investment.

Senator CUMMINS. Mr. Thorne, some companies are operating upon a royalty paid to the owner of the coal land; others are operating under ownership; some have a large amount of coal lands in ownership, much of which can not be operated upon for years and years to come; others have very little. In some States the coal mines are operated through temporary structures underground, such as timber supports, and everything of that kind, while in other States they must have concrete or permanent fixtures under ground. Would it not be almost impossible to ascertain in the case of each individual coal mine the price by referring to the capital invested in the plant? Mr. THORNE. It is equally impossible for you to determine the same for each individual railway and make a different price for each railroad, but the commission has rightly said what must be taken into consideration is the average typical railroad. This would apply to the same phase of your problem in reference to coal properties, it seems to me. Now, as to the coal companies that did not own their land, but leased it, you would probably find an item in their expense account for rentals. That would have to come out before they got their net profit.

Senator CUMMINS. But we have been going on fixing rates on railroads now for 30 years without knowing anything about the value of the property, and we have not got that valuation yet, although we have been at it, diligently, I suppose, for the last three or four years; and if we wait to fix a price on coal until somebody ascertains the actual value of all the properties in each individual mine we shall be delaying any relief, I fear, for a good many years.

Mr. THORNE. Numerous railroads have been valued. Many test cases have been before the Supreme Court. The Minnesota rate cases involved, I do not know how many, but a large number of railroads; but the Supreme Court reached conclusions on three. In the Missouri cases there were 15 or 20 railroads involved. They reached conclusions, I think, based on one or two. The West Virginia case, the North Dakota case, and many others have been passed upon by the Supreme Court. The only point I am making is that you must give a large amount of discretion to the tribunal authorized to act. And that is a problem that should properly be left with them.

Senator CUMMINS. Of course, then, each individual mine might have a different price?

Mr. THORNE. Not at all, Senator. When I said a moment ago that you take a representative railroad in the district, that does not mean that every other railroad has a different rate. They take the average typical representative railroad and fix the price, and that governs in that district.

Senator CUMMINS. Then what you mean is that the commission, whoever exercises this power, shall really ascertain what amount of capital ought to be invested in order to produce, efficiently, the coal that is produced and fix a reward for capital accordingly?

Mr. THORNE. Under exercise of reasonable care, foresight, and knowledge of the existing situation. That is the best test we have, Senator, it seems to me.

Senator CUMMINS. Inasmuch as we are exercising a war power and may not be subject to judicial review on that account, would it not be better just to add to the cost what may be regarded as a fair, average profit-a certain amount per ton?

Mr. THORNE. I imagine if you fixed a price by that method that did not yield an adequate return on the value of the plant, that it would be held to be confiscatory by the courts. The Supreme Court has stated that the basis of all compensation as to the reasonableness of rates shall be the value of the plant. I think, however, as a possible war measure, you might adopt a different standard. I certainly suggest a different standard for this tentative price-the pending investigation.

Senator TOWNSEND. Suppose you ever wanted to buy a certain mine. How would the Government find the price if they could not agree between themselves, and the Government had to resort to condemnation of it in order to proceed to buy that mine?

Mr. THORNE. The Government could confiscate it, if necessary, for public service. But the method followed in other countries for the purchase of properties (in what might be called condemnation proceedings of railroad and other properties), has been by the capitalization of net earnings over a representative period.

Senator TOWNSEND. That is what I was going to suggest. Could you not find out what the value of this property is, through the net earnings?

Mr. THORNE. It is owing to what earnings you would take. If you want to find the market value of a plant to-day you will capitalize at $5 a ton if there is a reasonable prospect of that continuing but, in view of the sentiment throughout the United States, I do not think there is very much probability of that net earning continuing, so the market value of that plant is not anywhere near the capitalization of $5 a ton. If you used the net earnings over a period of years, concluding, say, with January 1, 1917, you would get a more reasonable basis. Even then you have the opposition of coal operators from the fact, as they claim it, that their earnings have been very small during the past 5 or 10 years.

Senator CUMMINS. They claim, many of them-or most of them, I think that they have been operating at a loss

Mr. THORNE. In regard to that proposition-operating at a lossSenator CUMMINS. They claim-many of them-that they have been operating at a loss during previous seasons.

Mr. THORNE. "Is it true that coal profits are exorbitant," is the title of an article in the Black Diamond, which is extremely friendly, as anybody must admit, to the position taken by the operators. This article shows that in a good district in Illinois last year the poor and prosperous companies in that district combined made an average of 18 per cent on their investment. Now, that is for the period end

ing with March, 1917, when you had these average prices, and in the Indiana district the average price on coal for that district was, I think, $1.50.

Senator CUMMINS. For last year?

Mr. THORNE. Yes, sir.

Senator CUMMINS. It was a little less than $1.50, if I remember right.

Mr. THORNE. My average includes both free and contract coal at $1.50. The average of contract coal was about $1.16. Here is a representative, good district in Illinois, under the prices they were getting the year ending March, 1917, and they made 18 per cent on the investment. The editor, or author of the article, estimates the average throughout Illinois as something like 10 per cent on the invest

ment.

The CHAIRMAN. Mr. Thorne, when you say they made 18 per cent on the investment, does that not imply that by the mining of the coal or marketing of the coal that the supply is being gradually exhausted, so that the capital is really being reduced all the time?

Mr. THORNE. I do not quite follow that, Senator. You have the investment regardless of the exhaustion of the coal.

The CHAIRMAN. Yes; but you understand you have an investment and make 18 per cent upon that investment, and if at the end of six years, we will say, the coal is entirely exhausted, you can hardly say that that company has earned 18 per cent on its investment, can you? Mr. THORNE. There should be a sinking fund to take care of the property which they lose, providing the investment is there. I am not questioning that, Mr. Chairman.

The CHAIRMAN. Is it not a much safer rule, without going into the question of cost of the plant, and so forth, to first ascertain what the average profit per ton, the cost of production at the mine has been, and then to increase that to such an amount as will stimulate production and insure beyond any doubt a supply that will meet the demands of this exigency?

Mr. THORNE. As to that assurance of supply, that was a favorite argument advanced by the railroads with reference to their advance in freight rates. The fact is the railroads are willing to work to the limit provided they can get the prices of last year, because every additional ton that they handle means that much more profit to them. That does not prevent them seeking higher rates, but it does destroy the argument that with higher rates it would make them work harder.

The coal miners in Boone, Iowa, have filed a petition with the State authorities of Iowa, that their mines are only working two days a week under the present excessive prices, and they want the State authorities to cause these mines to be operated more. That petition is now in the hands of Col. French, of Davenport, and can be secured by this committee, if desired.

The CHAIRMAN. Do you think they are designedly limiting production?

Mr. THORNE. I do not know.

The CHAIRMAN. Or that they can not get cars.

Mr. THORNE. As far as furnishing cars is concerned, the advance in prices will not furnish more cars.

The CHAIRMAN. Oh, no; I understand that.