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Mr. Kountz not being in his office, the contents of this telegram was phoned to Carl Young, staff secretary, division of production, API, in Dallas and he proceeded to send telegrams to Mr. Boyd and Mr. Dow stating that, officers of committee particularly anxious that ICC are not invited to this meeting

The desire of the central committee and their legal right to discuss this momentous matter among themselves before discussing it with the Commission was, in every way, a normal desire.

It is, however, the single instance of a closed meeting which a quarter century of records discloses in connection with pipeline valuation.

The minutes of the meeting of September 28 clearly show why it would have been embarrassing had Commission representatives been present. Col. H. T. Klein, Fayette B. Dow, and others present, engaged in a general discussion of whether or not the Commission had the authority under the law to do what they were proposing.

It was not until the annual meeting of the institute on November 15, 1934, that they conceded, tentatively, that the Commission had such right.

The meeting in New York on September 28, 1934, was well attended, the notice of meeting and Mr. Lewis' letter being read into the minutes. After the debate on the law was concluded, Mr. Kountz, in accordance with an earlier action, appointed a committee on pipeline valuation, consisting of: H. T. Klein, chairman, the Texas Co., Fayette B. Dow, secretary, American Petroleum Institute; D. S. Bushnell, member, Northern Group of Pipe Lines; James J. Cosgrove, member, Continental Oil Co.; Clark . Kountz, ex officio chairman, central committee on pipeline transportation. (This is the committee often referred to in the records as the steering committee.)

On October 1 1934, Chairman Kountz wrote Director Ernest I. Lewis, ICC, the following letter:

OCTOBER 1, 1934. Subject : Valuation of pipelines. Hon. ERNEST I. LEWIS, Director Bureau of Valuation,

Interstate Commerce Commission, Washington, D. C. DEAR MR. LEWIS : Your letter of September 13 addressed to Axtell J. Byles, president, American Petroleum Institute, on this subject has been referred to the institute's central committee on pipeline transportation.

As chairman of that committee, I wish to inform you that your letter was considered by the central committee at a special meeting held in New York on September 28 at which time I was directed to appoint a committee on valuation of pipelines which should confer with you in the matter of valuation of common carrier pipelines.

I have appointed the committee with membership as follows: H. T. Klein, chairman, the Texas Co.; Fayette B. Dow, secretary ; American Petroleum Institute; D. S. Bushnell, Northern Group of Pipe Lines ; James J. Cosgrove, Continental Oil Co.; Clark H. Kountz, ex officio chairman, central committee on pipeline transportation.

The committee will be glad to confer with you at your convenience if you will kindly inform the secretary, Fayette B. Dow, 930 Munsey Building, Washington, D. C., when and where such a conference might best be held. Very truly yours,

C. H. KOUNTZ, Chairman.

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CONSENT DECREE PROGRAM-DEPARTMENT OF JUSTICE 843 Copies to: Members of committee on valuation of pipelines; Mr. C. A. Young.

if the carriers' opinions are being sought, Mr. Dow places the quesThe annual meeting of the American Petroleum Institute was held

a before them by mail, summarizes their replies and presents them 6 weeks after the special pipeline meeting in New York in September.

the Commission's Bureau of Accounting, with all of the corresThat annual meeting was held in Dallas, Tex., in mid-November and

madence if desired. on November 15, 1931, the central committee on pipeline transporta

: Hagnitude of the pipeline valuation problem: Referring to the tion held its meeting.

Intion of all carriers the Commission has declared: At this meeting, Col. H. T. Klein reported for the committee on

fork of primary valuation" of these agencies of transport and communi. pipeline valuation referring to several conferences with the Valua

Gonay very conservatively be termed the most stupendous appraisal task ever tion Section of ICC on its valuation order No. 26 and related subjects.

The minutes of this meeting then state that the pipeline valuation In addition to the primary valuation the law requires that the Comcommiitee finally decided to appoint a special subcommittee of practical engineers and accountants to confer with the representatives

1:49 itself informed with respect to all new construction, extensions, improreof the Commission to consider various sections of valuation order

is retirements or other changes in the condition, quantity, use, and classifi

to of the property of all conimon carriers as to which original valuations No. 26.

a legen made and the cost of all additions and betterments thereto and all This engineers-accountants subcommittee under the committee

as in the investment thereinon pipeline valuation, consisted of Ralph B. McLaughlin, chairman,

'n have occurred since basic valuations were established, and to Fayette B. Downs, secretary, together with 9 engineers and 8 ac

information available at all times" that will enable the comcountants as members

na to revise and change its previous inventories, classifications, Reference was made earlier to the committee on pipeline account

dialuations. ing regulations which came into being in 1932. Fayette B. Dow was

l just one example of the tremendous detail involved in the pipechairman of this committee which reported directly to the central

raluation work, the Engineers-Accountants Valuation Subcomcommittee.

the arranged for the printing of 340,000 forms which were purThis is the committee referred to by Director Lewis in his letter

al br individual pipeline carriers in order to comply with ICC to Mr. Byles of September 13, 1934. This committee, as stated by

wine Valuation Order No. 28 of 1948. Director Lewis, had already been working on depreciation charges

Commission's plan for valuation of pipelines: The plan for coand accounting classifications. Then, and in addition, we have the committee on pipeline valua- Suration bet ween the Interstate Commerce Commission and commit

ma of the carriers for the valuation of pipelines as required under tion under Col. H. T. Klein with its engineers-accountants valua

19 of the Commerce Act was developed by the Commission. tion subcommittee under Ralph B. McLaughlin with Mr. Dow serv

falowed both in principle and practice the plan developed by the ing as secretary of both.

ansion for valuation of the railroads. It should be noted here that the appointment of Mr. Dow as seca

The railroad raluation work had started in 1913, reached a maxiretary of these committees was merely a convenient way of having

bei of activity from 1917 to 1919 and was substantially completed a Washington resident on the committee. Other members were located all over the country,

2 tu primary valuations by 1933. At the climax of this tremendous Mr. Dow, counsel and Washington representative of API, was

htaking some 1.530 persons were employed by the Commission located in the Nation's capital, The business of these committees required that there be someone

willing to Federal Taluation of the Railroads in the United States

Tiere is attached on this subject annex B, being copies of records in Washington to maintain contact with ICC. This contact could not be maintained by the staff of the division of production for they

These records give the organizations of committees representing were located in Dallas. Thus, by making Mr. Dow“secretary” and adding an addressograph

railroads that cooperated with the Commission as required by plate with his name to that of the committee, he would receive all communications relating to these committees.

The railroad committee structure was, of course, more elaborate than He did not, in fact, do the secretarial work of these committees.

"at zed by the pipeline carriers for their valuation work, but the This was done by their chairmen,

As explained, the pipeline carriers in 1934 had already organized The reasons for having Mr. Dow attached to these committees are

Central Committee on Pipe Line Transportation in the American clearly set forth by members in correspondence in the institute files Mr. Dow's chairmanship of the Committee on Pipe Line Accounting

When the Commission called on the institute to assist with the pipe

ime valuation work, the Central Committee created a Committee on Regulations was based on similar considerations. Most of the work of this committee is carried on by mail, by Mr. Dow referring questions

PreLine Valuation of 5 members and under it an Engineers-Accountrelating to accounting originating either with the Commission or the carriers, to the appropriate group for opinion.

aluation work alone.

orter 1916

eral pattern was the same.

during the year 1934.

peroleum Institute. It had 37 members.

Valuation Committee of 19 members.

If the carriers' opinions are being sought, Mr. Dow places the question before them by mail, summarizes their replies and presents them to the Commission's Bureau of Accounting, with all of the correspondence if desired.

5. Magnitude of the pipeline valuation problem: Referring to the valuation of all carriers the Commission has declared:

The work of "primary valuation" of these agencies of transport and communication may very conservatively be termed the most stupendous appraisal task ever undertaken * * *

In addition to the primary valuation the law requires that the Commissionkeep itself informed with respect to all new construction, extensions, improvements, retirements or other changes in the condition, quantity, use, and classification of the property of all common carriers as to which original valuations have been made and the cost of all additions and betterments thereto and all changes in the investment therein-which have occurred since basic valuations were established, and to have information available at all times" that will enable the Commission to revise and change its previous inventories, classifications, and valuations.

As just one example of the tremendous detail involved in the pipeline valuation work, the Engineers-Accountants Valuation Subcommittee arranged for the printing of 340,000 forms which were purchased by individual pipeline carriers in order to comply with ICC pipeline Valuation Order No. 28 of 1948.

6. Commission's plan for valuation of pipelines: The plan for cooperation between the Interstate Commerce Commission and committees of the carriers for the valuation of pipelines as required under section 19 of the Commerce Act was developed by the Commission. It followed both in principle and practice the plan developed by the Commission for valuation of the railroads.

The railroad valuation work had started in 1913, reached a maximum of activity from 1917 to 1919 and was substantially completed as to primary valuations by 1933. At the climax of this tremendous undertaking some 1,550 persons were employed by the Commission for valuation work alone.

There is attached on this subject annex B, being copies of records relating to Federal Valuation of the Railroads in the United StatesOctober 1916

These records give the organizations of committees representing the railroads that cooperated with the Commission as required by law.

The railroad committee structure was, of course, more elaborate than that used by the pipeline carriers for their valuation work, but the general pattern was the same.

As explained, the pipeline carriers in 1934 had already organized a Central Committee on Pipe Line Transportation in the American Petroleum Institute. It had 37 members.

When the Commission called on the institute to assist with the pipeline valuation work, the Central Committee created a Committee on Pipe Line Valuation of 5 members and under it an Engineers-Accountants Valuation Committee of 19 members.

The Committee on Pipe Line Accounting Regulations of 14 members was already in existence at the time the valuation work on pipelines was undertaken.

These were the committees which undertook to cooperate with the Interstate Commerce Commission for the valuation of pipelines.

It will be recalled that Director Lewis in his letter to President Byles, API, said that

In the valuation of the railroads the carriers created an organization and committees to represent them generally.

This is the organization described in annex B. There is also included in annex B, a statement of the practices followed in the valuation of the railroads, abstracted from the Texas Midland Railroad case (75 I.C.C.1, p. 8), decided July 31, 1918.

In a letter read by Mr. Dow to the Central Committee on Pipe Line Transportation on November 15, 1934, which he had received from Director Lewis, the basic plan for the field survey is outlined by the Director with a number of persons in the party both for the Commission and the carriers with the duties stated for each.

At a meeting of representatives of the Engineers-Accountants Valuation Subcommittee with representatives of the Engineering Section, Bureau of Valuation, ICC, held in Washington, December 3 to 7, 1935, the ICC representatives described in detail the valuation plan which would be followed for pipelines.

At this same meeting, representatives of the Commission accepted the Pipe Line Valuation Committee and its Engineers-Accountants Valuation Subcommittee as representative of the pipeline carriers.

Thus, it will be seen that the plan of organization and procedure for the valuation of pipelines followed that used for the railroads; that the pipeline plan originated with the Commission and was based on the railroad plan, and that the committees organized in the American Petroleum Institute to cooperate with the Commission as required by law were approved by the Commission (annex C).

Mr. Moss. I want to stop at this time and take about 3 minutes to show you and the committee the organization of the division of transportation into which these committees group.

This is the railroad section. There are 140,000 tank cars in the United States. They are not owned by the railroads. They are owned by the oil companies and by leasing companies.

We have since 1919 had these committees which deal with the railroad problem. There are many cooperative arrangements that we have to have with the Interstate Commerce Commission and with the Association of American Railroads.

The CHAIRMAN. Do you want these charts in the record, Mr. Moss?

Mr. Moss. Yes, sir, I would like to have them in the record, and they have been reproduced in facsimile.

The CHAIRMAN. They will be accepted in the record. (The charts referred to are as follows:)

Central Committee

On Railroad

Transportation
Transportation Regulations
Railroad Equipment
Car Service
Diversion & Reconsignment
Freight Classification
Tank Car Compensation
Tank Car Compensation Methods

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