Sanderson is of the opinion that the available hardwood supply justified the construction of a mill at Sebastopol, a station on the Waco about 8 miles east of Trinity, with a daily capacity of about 35,000 feet, or two carloads, of lumber. With respect to the degree of assurance he had in regard to the establishment of such a mill, he stated:

The location for the mill is there, and it is a good one, and the timber is there. It is just a question of getting somebody to get it out, and it will come out some time. Now when, I don't know. We hope to get something started on it this year while we have a good market. That is when people feel most like investing.

He stated that he selected Sebastopol, instead of Trinity, as the site for a hardwood mill because in his judgment such a mill should be located as close as possible to the area to be cut, and also because at times it would not be possible to haul logs into Trinity over the existing highway. This is the same highway which extends past the fuller's earth, or clay, mill at Luce. A Southern Pacific witness testified that a week before the hearing he had traveled over this highway without any trouble, and that if it was passable then it would be passable at any time because there had been more rain in the area than there had been for years. As previously stated, pine logs are being hauled by truck for distances as great as 40 miles.

Sanderson also testified with respect to his previous efforts to finance the construction of a paper mill on the Livingston line, either 2 or 3 miles east of Trinity, or 5 miles west of Livingston. He stated that there is available in the area sufficient raw material to permit operation of such a mill indefinitely and that there is an adequate water supply at hand.

Testimony was submitted, and reference made to testimony submitted, in behalf of the Waco at the hearing held in 1930 on the application involving control of the Cotton Belt, as to rock, sand, and gravel deposits between Weldon and Trinity, lignite and brick clay in the vicinity of Weldon and Trinity, and fuller's earth near Carlisle, and to predictions made in the construction applications of the Waco as to the probability of oil discoveries in the

Since then, as shown herein, the Kittrell oil field has been developed and also the fuller's earth deposits at Luce. The petitioners state that the remaining resources have not been developed because they have not had funds for that purpose, and that the "haunting fear" of discontinuance of operation of their line has hampered development by outside interests.

From the record made at the hearing, it appeared that the principal source of new traffic from the timber area was pulpwood. The Champion Paper and Fibre Company, which operates a pulp and paper mill at Pasadena, 3 or 4 miles from Houston, offered to enter into a contract with Sanderson for the annual purchase of 500 carloads of pulpwood from areas served by the Waco, provided that

the rail haul from Waco points be converted into a single-line haul direct to the Pasadena mill, on rates comparable with those on other railroads. The present 2-line rate from Onalaska, about midway on the Waco, to the mill is $2.11 a cord. The average single-line rate on other railroads for the same distance is $1.70. The traffic manager for the Champion Company testified that the single-line rate from Onalaska by way of Livingston to the mill would be $1.65 a cord, but he declined to state definitely that this rate would be a satisfactory minimum, because the rate his company could afford to pay would depend upon the amount the pulpwood seller would demand for the wood. Loads of pulpwood consist of about 17 cords in boxcars and 22 cords on open-end open-top cars (special equipment) designed for the handling of such traffic. The Texas Company showed that in 1940 it participated in the transportation of 3,006 carloads of pulpwood from various points in Texas on its lines and lines of its connections to the Pasadena plant, a considerable portion of which moved at rates higher than $1.65 a cord, some computed on single-line rates and others on joint-line rates, citing movements from 9 points, 48.5 to 107 miles from Pasadena, on rates ranging from $1.73 to $2.21. On the other hand, the traffic manager of the Champion Company stated that most of the wood into the plant comes in on an average rate of $1.55. From 69 to 73 percent was delivered to the plant in the special equipment. On the basis of 20 cords to a car, and a single-line rate of $1.65 from Onalaska, the Texas Company would receive gross revenue of $33 a car for an 85-mile haul to Pasadena, out of which it would have to pay a switching charge of $5.50. That carrier is of the view that on the present rates, giving consideration to the special equipment required, the empty back haul, and the switching charge, it is doubtful whether on the majority of the movements of pulpwood the revenues equal the costs of handling. The petitioners estimate that the 500 carloads would produce from $14,450 to $17,700 a year for the Texas Company if the Waco were a part thereof, and contend that low-rated traffic affords adequate revenue when it moves in sufficient volume, and point out that there are other areas available for cutting, not controlled by Sanderson.

On exceptions, the petitioners state that, after the hearing in February 1941, the Champion Company cut 349 carloads of pulpwood from the area between Trinity and Livingston and forwarded it to the Pasadena plant, that that company is at present actively engaged in shipping such wood, that presumably it is not being deterred by the 2-line rate situation, that the company now is accepting any type of car which can be used for handling of the wood, and that the Southern Pacific is soliciting the routing of this traffic. The Waco's annual report to us for 1941 shows that it originated 349 carloads of pulpwood,

all of which was delivered to connecting carriers, producing revenues of $5,671, or $16.25 a car. In 1939, the Waco originated 17 carloads of pulpwood, of which 15 were interchanged with the Texas Company, and, in 1940, it originated 80 carloads, of which 63 were billed from Livingston and delivered to the Texas Company. There is no information as to how many of the 349 carloads originated in 1941 were interchanged with the Texas Company.

FEEDER VALUE

The petitioners express the view that, when we assigned the Waco to the Southern Pacific system (Consolidation of Railroads, 159 I. C. C. 522, 542, decided December 9, 1929), and denied the Waco's request that the Missouri Pacific Railroad Company be required to acquire it as a condition to approval of a proposed lease, which was never consummated (Missouri Pac. R. Co. Unification, 166 I. C. C. 154, 172), we intended that the Southern Pacific should have the benefit of traffic that pertains to the road.

In attempting to prove the feeder value of the Waco to the Southern Pacific, if their line were a branch of the Texas Company, the petitioners have assumed that all out-bound and in-bound traffic would be handled by the Texas Company, via Livingston, and the Cotton Belt, that the Southern Pacific could hold all of the originated traffic to lines of its system for the longest possible hauls, whether the Trinity gateway be open or closed, and that no traffic would be interchanged with the International at Trinity. In the opinion of the Southern Pacific, this would require the closing of the Trinity gateway. In our report authorizing control of the Cotton Belt, at page 206, we required that all routes and channels of trade via existing gateways be maintained and held open, unless and until otherwise authorized by us.

Applying their assumptions to 1939 traffic, and including prospective revenue from 500 carloads of pulpwood, the petitioners compute that the total revenue from Waco traffic would have been $202,433 for the Southern Pacific, and $106,055 for the Cotton Belt, or a total of $308,488 for the combined systems. Details of this estimate are given below. On the basis of the approximate 75-percent operating ratio of the Texas Company in 1940, the petitioners conclude that the Waco traffic would have produced net operating revenues of $77,122 annually for the systems named, making that amount available for payment of taxes, car hire, et cetera.

Estimates of interchange prepared monthly by the Texas Company, said to approximate closely interchanged tonnages, and revenues therefrom, show that its revenues from traffic received by it from 252 I. C. C.

the Waco in the years 1936-39 and the first 9 months of 1940 were, in order, $13,574, $10,547, $8,549, $6,341, and $4,132, and revenues from traffic delivered to the Waco were $18,159, $16,726, $14,629, $13,024, and $10,207, respectively, totals $31,733, $27,273, $23,178, $19,365, and $14,339. Its actual revenues from Waco interchange in 1939 were $8,262 from received traffic and $14,589 from delivered traffic, total $22,851.

Crude oil.-The Kittrell oil field was discovered late in 1934. Under proration orders of the Texas authorities, the allowable production for each well was about 125 barrels a day. By 1940, the allowable production was reduced to less than 24 barrels a day and increased later to 35 barrels. Actual production in the field decreased from 382,660 barrels from 12 wells in 1935 to 342,282 barrels from 14 wells in 1937, and to 119,622 barrels from 15 wells in 1940, or an average daily production of 87 barrels for each well in 1935, 74 in 1937, and 22 in 1940. Shipments from the field decreased from 1,598 carloads in 1937 to 547 in 1940 and increased to 573 in 1941. As previously stated, the entire output is forwarded by rail, and all of it is interchanged with the International at Trinity, and finally delivered to Whiting, Ind. The consignee routes its traffic. A witness for the Texas Company testified that the consignee was willing to route some of the crude oil by way of West Livingston but, after examination of the Waco's line, dropped the negotiations. The present rate from the oil racks to Whiting is 31 cents a hundred pounds. If the crude oil had been routed Waco to West Livingston, thence Texas Company, and thence Cotton Belt to East St. Louis, the Waco would have received 4.4 cents a hundred pounds, the Texas Company 4.7 cents, and the Cotton Belt 12.6 cents. The lines east of St. Louis would have received 9.3 cents. Assuming carloads of 74,000 pounds each, and 800 cars a year, the petitioners calculate that the Texas Company would have received revenues of $61,020, and the Cotton Belt, $67,444, total $128,464. If the 25,789 tons handled by the Waco in 1939 had been so routed, the Waco would have received $22,694, the Texas Company $24,242, total $46,935, and the Cotton Belt $64,988. The 18,842 tons handled in 1940 would have produced revenues as follows: Waco $16,581, Texas Company $17,711, total $34,292, and the Cotton Belt $47,482. If the Waco had been part of the Texas Company, the latter would have received slightly less than the totals above mentioned for the reason that its divisions would have been computed on different bases.

Lumber. The out-bound rail shipments from the Texas Long Leaf Lumber Company at Sequoyah amounted to 1,063 cars in 1939, of hich about one-half were destined to points in Texas and the reining half largely to Central Frieght Association territory. The athern Pacific, in its analyses of the Waco's 1939 traffic, shows that

968 of those cars were delivered to the International at Trinity. The Texas Company received at West Livingston 66 carloads from Sequoyah and 29 from Trinity. From the list of out-bound mill shipments, the Southern Pacific computed that, if all of them had been routed by way of West Livingston, thence by the Texas Company, and the Cotton Belt treated as a preferred connection, the Waco would have received $26,368, the Texas Company $39,558, total $67,926, and the Cotton Belt $34,419. If the Waco had been a part of the Texas Company, the latter would have received $60,092, and the Cotton Belt $38,823. The petitioners point out that on 123 carloads destined to 40 points in west and northwest Texas, mostly local to the Atchison, Topeka & Santa Fe system, the Southern Pacific assumed that the Texas Company would have received $3,396 of the total freight charges of $15,940 on the basis of interchange with the Atchison system at Cleveland, 62.6 miles from Sequoyah, whereas the Southern Pacific should have assumed that those cars could have been held to its lines for hauls of about 284 miles, through Austin, Burnet, and as far west as Lampasas, and that therefore a substantial amount should be added to the $60,092.

Sanderson testified that the consignees usually designate the routing of the lumber, but a Southern Pacific witness stated that the consignees do not undertake to designate the intermediate carriers. In response to an inquiry as to his attitude toward the closing of the Trinity gateway, Sanderson stated that he would oppose the closing of any gateway which would curtail his territory.

The Waco owns the track which serves the lumber company's plant, passing the planer, planer shed, and loading rack, ending near the log pond. The lumber company owns a track extending from a point on the Waco's track northeasterly to a connection with the main line of the International, which the lumber company at one time used for hauling logs into the plant, but it was never used for the handling of the out-bound lumber. The lumber must be loaded on the Waco tracks, and, with minor exceptions, has been delivered by the Waco to the International at Trinity. The Southern Pacific expresses the view that, even if the Trinity gateway were closed, it could not be assured of the lumber traffic because the International could not be expected to refrain from building industry tracks to the mill, and also to the basket factory mentioned below, which the Southern Pacific is of opinion could be done without our authority. We do not concede that such construction would fall within the exemption of section 1 (22) of the act.

Baskets. The basket factory at Trinity was established in 1936. It shipped to points on the Pacific coast and to points in Louisiana and southern Texas 106 carloads of its products in 1939, 172 in