No. 869.

IN THE MATTER OF THE RELATION OF COMMON CARRIERS SUBJECT TO THE ACT TO REGULATE COMMERCE TO COAL AND OIL AND THE TRANSPORTATION THEREOF.

June 9, 1914.

The relations of trunk lines and their officials to coal operations in the state of Illinois and incidentally in the state of Indiana, described, pursuant to the so-called Tillman-Gillespie resolution.

REPORT OF THE COMMISSION TO THE SENATE AND HOUSE OF REPRESENTATIVES OF THE UNITED STATES.

BY THE COMMISSION:

Much of the information contained herein was gathered considerably over a year ago, but the submission of the report has been delayed owing to the difficulty experienced by the Commission, as explained more fully in the appendix to the report, in securing the facts pertaining to the interests of the New York Central system and its officials in Illinois coal properties.

Illinois is said to contain the largest area of bituminous coal within any single state. This coal area, estimated to be over 37,000 square miles in extent, underlies 85 of the 102 counties. The parts of the state having no coal deposits are the northern one-fifth, a narrow strip bordering the Mississippi River, and a few small counties in the southern part.

The Illinois coal region comprises about three-fourths of what is known as the Eastern Interior Field, the remainder lying in adjacent parts of Indiana and Kentucky. This coal-bearing area is shaped somewhat like a basin or bowl of a spoon, its greatest length lying southeasterly across the state from between Rock Island and La Salle to beyond the Wabash and Ohio rivers. Coal comes toward the surface around the edges of the basin and in a general way dips toward the center from all sides. The large producing fields are to a great extent along the outer side of the basin where coal is most easily reached. Since in the lowest areas the thick coal beds lie 1,200 feet or more below the surface, they probably will not be utilized for some time to come. While the original amount of coal

underlying the state of Illinois is variously estimated to have been from 140 to 240 billion tons, and calculations show that less than 1 per cent has been exhausted, the remaining coal is not all available for mining under present conditions; in fact, coal from the thinner and deeper seams will always be at a disadvantage as long as it has to compete with more cheaply mined coal from this and other fields. Illinois is the second largest coal-producing state. The following statistics will serve to show the extent of its output during the year ending June 30, 1912:

Number of counties producing coal----.

Number of counties producing for shipment over 500,000 tons each_
Number of mines of all kinds (local and shipping).

Output of all mines, .tons___.

Number of shipping or commercial mines-

Output of shipping mines, tons--

52

21

879

380

57, 500, 000

56, 000, 000

51,500,000

4,500,000

53, 000, 000

Total tons shipped---

Disposed of locally by shipping mines (including locomotive chute coal), tons‒‒‒

Output of shipping mines in 21 counties, tons_-_

Aside from railroad fuel and coal sold at points near the mines, most of the Illinois coal is marketed in St. Louis, Chicago, and points located in the north, northwest, and west.

Up to about 15 years ago, the coal deposits underlying land in the Illinois coal basin very largely belonged to the owners of the land. At the present time the larger part of the most available coal near the margin of the basin is owned by mining, railroad, and industrial companies. Several of the large railroads have acquired from 20,000 to 40,000 acres each of this coal as a reserve to protect future traffic and fuel requirements. A number of Illinois railroads have direct or associated financial interest in mining companies which produce locomotive fuel and also compete with independent operators in the production and selling of commercial coal.

The demand for coal fluctuates between summer and winter to such an extent that the output of Illinois mines can not be uniform throughout the year. Illinois coal can not be mined in the summer and stored for use in the winter because it contains such a percentage of moisture that the lumps crumble and slack when exposed to the elements for a month or more. It must be mined substantially as it is consumed, and consequently the production is much less in the months from April to September than in the other months of the year. A sufficient capacity must be maintained to meet the full requirements of the winter season; but because of the tendency of the coal to slack when exposed, the mines can not be operated to their full capacity during the summer season. When the annual running

time of mines falls below three-quarters full time, as it has for sev eral years past, the annual average cost per ton increases excessively, owing to the fact that administrative expenses, taxes, interest, and other fixed charges are as great when the mines are closed down as when they are operating to full capacity. On this account the fear of idle time causes keen competition among mine operators for contracts with railroads and with industries which use large quantities of coal during the summer as well as the winter months. The result of this competition is that operators often contract to furnish coal at prices no higher than the cost of production, and sometimes, it is said, at less. In such cases they depend for their profit on the increased commercial demands and higher prices prevailing during the winter season. That the need of operators to secure railroad contracts, even though unremunerative, to tide them over the summer months makes an incentive for a carrier unduly to favor mining companies associated with it, is indicated in another part of this report.

The results in detail of the investigation are reported under the several clauses of the resolution. It should be understood that the facts related herein are those existent at the time of the Commission's investigation.

FIRST (a). WHETHER ANY COMMON CARRIERS BY RAILROAD, SUBJECT TO THE INTERSTATE-COMMERCE ACT, OR EITHER OF THEM, OWN OR HAVE ANY INTEREST IN, BY MEANS OF STOCK OWNERSHIP IN OTHER CORPORATIONS OR OTHERWISE, ANY OF THE COAL OR OIL WHICH THEY, OR EITHER OF THEM, DIRECTLY OR THROUGH OTHER COMPANIES WHICH THEY CONTROL OR IN WHICH THEY HAVE ANY INTEREST, CARRY OVER THEIR OR ANY OF THEIR LINES AS COMMON CARRIERS,

Atchison, Topeka & Santa Fe Railway Company.-The Atchison, Topeka & Santa Fe Railway Company owns all the outstanding bonds ($389,000) of the Toluca Coal Company. The capital stock of the coal company ($500,000) is held in the names of three individuals, and apparently neither the carrier nor any of its officials are interested therein.

The coal company owns about 12,000 acres of coal lands in Marshall county in the state of Illinois, and operates one mine near Toluca, with a daily capacity of about 1,500 tons. It is served by the Atchison, Topeka & Santa Fe Railway and the Chicago & Alton Railroad. During the year ending June 30, 1912, this mine produced 257,473 tons of coal, of which about 71 per cent was sold to the Santa Fe and of 1 per cent to the Alton; 191 per cent was sold and shipped commercially, and the remainder, 9 per cent, disposed of locally. Of

the commercial shipments, 29 per cent moved over the Santa Fe and 71 per cent over the Alton.

Chicago & North Western Railway Company.-The Chicago & North Western Railway Company owns the entire capital stock of the Superior Coal Company ($2,000,000) and of the Macoupin County Railway Company ($10,000). Neither of these subsidiary companies has any bonded indebtedness.

The Superior Coal Company owns about 45,000 acres of coal lands in Macoupin county, in the state of Illinois, upon which it operates three mines served by the Macoupin County Railway. These were opened in 1904 for the purpose of furnishing fuel coal for use of the North Western line; and they produce about 2,000,000 tons of coal per year, of which between 90 and 95 per cent is sold to the North Western line, the balance consisting largely of screenings being sold commercially, principally in Chicago.

The Chicago & North Western has no track connection with the Macoupin County Railway but is now building a line from Peoria to a junction with it near Girard. The new line will be known as the St. Louis, Peoria & North Western Railway and will serve six independent mines when opened up.

The assertion has been made that the low price at which the Superior Coal Company, by virtue of its association with the carrier, sells screenings in the commercial market, is detrimental to its competitors.

Chicago, Indianapolis & Louisville Railway Company. The Chicago, Indianapolis & Louisville Railway Company owns $299,500 of the capital stock of the Chicago & Indianapolis Coal Company, being the entire amount outstanding except directors' shares. The coal company has no bonded indebtedness. It owns about 3,400 acres of coal lands and one mine in Sullivan county in the state of Indiana, both being leased on a royalty basis to the Monon Coal Company.

The Monon Coal Company was formed by certain bankers in 1911, at the solicitation of the president of the railway company, for the purpose of developing coal properties along the line of the Chicago, Indianapolis & Louisville Railway. The Monon Coal Company has issued stock to the amount of $1,000,000, and has outstanding bonds to the amount of $2,750,000. The railway company owns 25 per cent of the stock which was acquired under the organization plan and is carried on its books at a nominal value. No dividends have yet been paid on this stock. The remaining 75 per cent of the stock and all the bonds are owned, it is said, by persons not associated in any way with the railway company. The Chicago, Indianapolis & Louisville Railway Company guarantees the interest on the bonds of the coal company.