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at the western class-rate hearings or published by our Bureau of Statistics, as well as from other sources, purporting to show that traffic and transportation conditions in eastern Montana are really more favorable than in the western parts of North Dakota and South Dakota. We deem it unnecessary to detail this evidence. Not only were these considerations given due weight in the western trunk-line revision in fixing the boundaries and rate levels for zone III, but division 3 has subsequently had occasion to specifically state that transportation conditions in eastern Montana are less favorable than the average transportation conditions throughout zone III. See Elk River Concrete Prod. Co. v. Chicago, M., St. P. & P. R. Co., 186 I.C.C. 377.

Complainants further contend that the Billings rate of 97.5 cents from Milwaukee and North Milwaukee to Montana destinations for distances ranging from 920 to 1,032 miles was and is unreasonable when compared with the same rate from Chicago, Ill., and St. Louis, Mo., to Billings for 1,289 and 1,309 miles respectively, or when compared with the rate of 78 cents from St. Paul and Omaha, Nebr., to Billings for 882 and 892 miles respectively. Comparison is also made of the 97.5-cent rate with a rate of 76 cents on iron and steel pier tubing, which is said to be similar to pipe, contemporaneously in effect from Portland, Oreg., and Seattle, Wash., to Havre, Mont., for 908 and 861 miles respectively. The 76-cent rate also applies to various other Montana points substantially less distant. Further and similar comparisons are made with the rates from Chicago and Peoria, Ill., and other points, to Denver, Colo., and Salt Lake City, Utah.

Defendants assert that the history of the rates assailed attests their reasonableness. In connection with the 97.5-cent rate to Montana destinations they point out that a rate of 60 cents was established on July 22, 1912, from Milwaukee to Salt Lake City in compliance with Commercial Club, Salt Lake City v. A., T. & S. F. Ry. Co., 19 I.C.C. 218, and that this rate was the same as the rate to Seattle which was established to meet water competition. They state that fourth-section relief was then in effect in connection with the rates to Pacific coast points and that the rate to Spokane, Wash., was 79 cents, to Butte, Mont., as representative of Montana common points, 69 cents, and to Billings and points in eastern Montana, 65 cents. They then point out that the rate of 60 cents to Salt Lake City was subsequently increased to 69 cents, or the same as to Butte, in The Iron and Steel Cases, 36 I.C.C. 86, and infer that this action was tantamount to the approval of the rate to Butte. They further state that class and commodity rates to Montana common points have long been maintained on the same basis

as those to Salt Lake City, that the rates to Billings have been maintained in relation to the rates to Butte and other Montana common points, and that the rates of 69 cents to Butte and 65 cents to Billings, as affected by the subsequent general changes, are now $1.04 and 97.5 cents respectively. In the light of the foregoing, defendants argue that the Billings rate may be said to have been approved by us. Defendants also stress the fact that eastern Montana is sparsely settled. They assert that there are few large towns or distributing points which justify specific commodity rates, that the movement of pipe into this territory would ordinarily be negligible and might properly move on the classification basis, and that the application of the Billings rate to points in eastern Montana was and is manifestly fair.

With respect to the rates assailed on the shipments to North Dakota, defendants point out, as previously indicated, that these rates were generally combinations of commodity rates of 27.5 and and 50 cents to St. Paul and Moorhead respectively, plus the class B rates beyond. As to the commodity factors defendants state that in 1915 a rate of 14 cents applied on iron and steel articles from Milwaukee to Minneapolis and St. Paul. From St. Paul to Moorhead there was a class B rate of 18.9 cents published as an intrastate rate. This rate was also applied on interstate shipments. The combination of 14 cents from Milwaukee to St. Paul plus the class B rate of 18.9 cents beyond produced a through rate to Moorhead of 32.9 cents which was published as a commodity rate. This rate as affected by the subsequent general increases and reduction resulted in the rate of 50 cents.

Defendants assert that the 14-cent rate from Milwaukee to the Twin Cities was a subnormal rate compelled by competition from the East via the Great Lakes. They point out that in conformity with our decision in Western Trunk Lines Iron and Steel, 47 I.C.C. 109, that rate was increased to 90 percent of fifth class and that the 27.5-cent rate in effect prior to December 3, 1931, reflected that basis. They further point out that, although this rate was increased to 40 cents in conformity with the western trunk-line revision, it was subsequently voluntarily reduced by the carriers to 28 cents, which is the present rate.

In further relation to the class-rate factors beyond St. Paul or Moorhead, defendants state that prior to 1909 class B rates applied only on cast-iron pipe in western trunk-line territory; and that this basis was an exception to the classification and was granted largely because of the heavy movement and carrier competition. They assert that, while wrought-iron pipe is a more valuable commodity, it was

also accorded the class B rating as an exception to the classification, in order to place it on rate parity with cast-iron pipe. Defendants contend that the foregoing explanation of the class and commodity factors establishes that they were subnormal rates and that therefore the combinations did not result in higher than reasonable maximum rates.

With respect to the rate of $1.01 to Cartwright, which is on a branch line of the Great Northern Railway operating out of East Fairview, N.Dak., defendants state that the legally applicable rate at the time of movement was $1.075, based on the full combination of rates over East Fairview. They further state that upon application this rate was reduced to $1.01, equal to the through commodity rate to Richey, Mont., also on a branch line of the Great Northern Railway operating out of Sidney, Mont., and that with our approval refund was made to complainant Montana-Dakota Power Company to that basis.

While complainants admit that the 27.5-cent rate from Milwaukee to the Twin Cities was a depressed rate, they nevertheless assert that we have frequently condemned through rates based on full combinations and in many instances have fixed rates based on 80 percent thereof. They argue therefore that on shipments through St. Paul the rates assailed should not have exceeded the MilwaukeeSt. Paul rate plus 80 percent of the rate beyond, and on shipments through Moorhead the rates assailed should not have exceeded 80 percent of the combinations as shown in the preceding table.

Defendants urge that consideration be given to the fact that the pipe considered was used for the construction of permanent pipe lines for the transportation of natural gas, and that the increased use of such gas has created a competitive situation which has resulted in a large decrease in the movement of coal by rail into this territory with consequent loss of revenue to defendants. They assert that there is very little industrial development in the destination territory here considered and that, due to the permanent nature of the pipe lines already constructed, there is little likelihood of future movements of pipe except for replacement purposes.

Dealing first with rates for the future:

The present rates on pipe from Milwaukee and North Milwaukee to zone III destinations in North Dakota were established in conformity with our decision in the western trunk-line revision, and consequently rates for the future to these points are not in issue. Although the record affords no sound basis for extending the western class-rate adjustment into eastern Montana, we are convinced that the present rates are unreasonable and that some revision is justified

when comparison is made with the rates prescribed on the same commodity to North Dakota destinations in zone III.

In Covey-Ballard Motor Co. v. Alton & S. R., 174 I.C.C. 674, decided May 29, 1931, hereinafter called the Covey-Ballard case, in which rates and minimum weights on passenger automobiles and parts from Racine Junction, Milwaukee, and Kenosha, Wis., Detroit, Mich., and Auburn and Connersville, Ind., to Salt Lake City, Utah, were prescribed, division 4 found that the transportation conditions in the territory west of zone III warranted a basis of rates 20 percent higher than in the territory immediately east thereof. Accordingly, the rates therein found reasonable for the future were constructed in the same manner as those prescribed in the western trunk-line revision, except that an additional 20 percent of zone III scale was added for the distance beyond that zone.

In Parkersburg Rig & Reel Co. v. Chicago,, B. & Q. R. Co., 179 I.C.C. 571, hereinafter called the Parkersburg case, division 2 prescribed rates on tank material, which is included in the iron and steel list, in carloads, from origins in Pennsylvania, Ohio, and West Virginia, fabricated in transit at Parkersburg, W.Va., to destinations in Wyoming beyond zone III or subzone III on the basis of 32.5 percent of the first-class rates to the point or points on the western boundary of zone III or subzone III, as the case might be, through which the shortest routes over which carload traffic can be moved without transfer of lading are constructed from Parkersburg to final destination, plus arbitraries for the short-line distances beyond such boundaries equivalent to 32.5 percent of the first-class arbitraries for corresponding distances as set forth in appendix B to that report. In that case we stated that such first-class arbitraries were designed to reflect, as nearly as possible, the same treatment of transportation conditions in the territory west of zone III and subzone III as in the Covey-Ballard case. We are of opinion that rates constructed in a similar manner will result in a reasonable basis for future application on shipments of pipe from Milwaukee and North Milwaukee to the Montana destinations here considered.

With respect to the question of past unreasonableness, defendants stress their present acute financial condition and contend, in substance, that because of this they should not be required to pay reparation. A shipper is entitled to reasonable rates notwithstanding the financial condition of a carrier. However, in this connection, it may be noted that defendants' showing as to their financial condition during the period of movement was not at all unfavorable. They also stress the fact that in the western trunk-line revision reparation was denied, and they insist that there is no warrant for awarding repara

tion in the instant proceeding. While it is true that, in general adjustments of rates involving numerous increases and reductions, we have denied reparation, we have in certain instances modified this position where the rates assailed exceeded those found reasonable for the future by such substantial amounts as to make them unreasonable under any adjustment. We consider that the rates here assailed clearly fall within that category. In many instances, however, we have awarded reparation to a basis which, in the light of the facts and circumstances presented, we considered as reasonable in the past but which was higher than the basis prescribed for the future. See the Covey-Ballard case and Parkersburg case, and the cases therein cited.

As previously stated, pipe is rated fifth class, in carloads, in the western classification, although by exception thereto class B rates have generally applied in that territory. In the western trunk-line revision, fifth class was made 37.5 percent of first class. Class B was made 32.5 percent of first class and was the basis prescribed on pipe and now in effect. Considering the period of movement herein, we conclude that the rates assailed exceeded the maximum of reasonableness. We further conclude that rates equivalent to 37.5 percent of the first-class rates approved in the western trunk-line revision for application from Milwaukee and North Milwaukee to the destinations here considered in North Dakota will represent a proper basis for reparation on shipments to such destinations, and that rates equivalent to 37.5 percent of the first-class rates therein prescribed from Milwaukee and North Milwaukee to the point or points on the western boundary of zone III in North Dakota through which carload traffic can be moved without transfer of lading, plus arbitraries for the short-line distances beyond such boundary equivalent to 37.5 percent of the first-class arbitraries for corresponding distances as set forth in appendix B hereto, will represent a proper basis for reparation on shipments to the Montana destinations considered.

No. 25233 (Sub-No. 1).-This complaint involves the rates charged on 29 carloads of pipe which moved during the period from April 10 to June 18, 1930, from points in eastern Montana to points in North Dakota in zone III. The weight of the shipments ranged from 48,800 to 115,700 pounds per car. Charges were assessed at the applicable local fifth-class rates for single-line movements and combinations of the fifth-class rates for joint-line movements. Complainants contend that reasonable rates on this traffic should not exceed 35 percent of the zone III first-class rates for equivalent distances. Their evidence in support of this contention has been previously discussed and requires no further comment.

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