Mr. MARTIN. Just concerning your own industry?

Mr. DEHNE. Yes.

Mr. MARTIN. We thank you very much for your statement.

Mr. DEHNE. Thank you.

Mr. MARTIN. The next witness will be Mr. Miller, general counsel of the American Short Line Railroad Association.

STATEMENT OF C. A. MILLER, GENERAL COUNSEL THE AMERICAN SHORT LINE RAILROAD ASSOCIATION, WASHINGTON, D. C.

Mr. MILLER. Mr. Chairman and gentlemen of the committee, my name is C. A. Miller. I appear before your committee in my capacity as general counsel of the American Short Line Railroad Association, with offices at 401 Union Trust Building, Washington, D. C.

I may explain to you that the American Short Line Railroad Association is composed of approximately 325 short-line railroads, located in practically every State of the Union and operating more than 11,000 miles of railroad. Our association represents approximately 75 percent of the independently owned and operated short-line railroad mileage of the United States.

At the commencement of these hearings the distinguished chairman of this committee wisely stated that "it is not necessary to be eternal in order to be immortal." I am in accord with that statement, and shall therefore present the views of the members of our association with as much brevity as is possible.

Some years ago the question was asked: "How long should a brief be?" The answer was made, "It should be just as long as a lady's skirt should be-long enough to cover the subject and short enough to be interesting."

I shall endeavor to cover my subject briefly enough to be interesting, if a technical subject, such as is before you, can be said to be so. In the interest of brevity, I want, first of all, to give our general endorsement of what has been presented to you by the distinguished general counsel of the Association of American Railroads, and by Mr. Kerr, who so ably presented to you the convincing array of facts supporting what Judge Fletcher has said in general.

In the time which has been allotted to me, I shall endeavor to show why our association believes that the so-called "Pettengill bill", H. R. 3263, should be enacted into law in preference to H. R. 5362, which I shall generally refer to as the Coordinator's bill.

I shall first attempt to show you that there is no present need for the long-and-short-haul clause of section 4, whatever may have been the need for it at the time it was originally enacted.

I shall also endeavor to show you that the act as it now stands, or even as it would be amended under the Coordinator's proposal, imposes upon the railroads oppressive restrictions for the benefit of other competitive forms of transportation, and that this is particularly true so far as the short-line railroads are concerned.

I shall also attempt to show you that the public interest will not be adversely affected by the repeal of the long-and-short-haul clause of section 4 of the act.

I think perhaps I should here make it clear that what I say, especially as to the administration of the long-and-short-haul clause, is not to be construed as a criticism of the Interstate Commerce Com

mission. That Commission undoubtedly has endeavored to administer this provision of the act as it thinks it should be administered, and many of the difficulties confronting the railroads with respect to it are inherent in the situation and could not be avoided by any sort of administration of the act.

In approaching the question as to whether there is any present need for the long-and-short-haul clause of section 4, it will be well for us to go back sometime prior to the enactment of the Interstate Commerce Act.

The inception of the Interstate Commerce Act may well be said to be the appointment by the Senate, in 1872, of a special committee to investigate the possibility of securing cheaper transportation between the interior and the seaboard. That committee was known as the "Windom Committee ", and made its report to the Senate in 1874, Senate Report 307, Forty-third Congress, first session, part 1. According to the report, the defects and abuses of the then existing transportation system were: First, insufficient facilities; second, unfair discriminations; and third, extortionate charges.

That committee attached more importance to the first and third of these charges than it did to the second, and its report discussed principally methods of improving facilities and reducing rates but said very little about the removal of discriminations. No action was taken upon the proposals of the Windom Committee.

In 1874 the House of Representatives passed a bill providing for the regulation of the railroads and another bill was passed by it in 1878, but neither bill received the approval of the Senate.

In 1884 the House passed the Reagan bill to regulate interstate commerce, and in 1885 the Senate passed the Cullom bill as a substitute for the Reagan bill. These bills were quite different and resulted in a deadlock between the House and the Senate, and this in turn resulted in the appointment of a Senate Select Committee on Interstate Commerce, known as the "Cullom Committee ", which made its report in 1886.

The Cullom report, Senate Report 46, Fortieth Congress, first session, in contrast with the Windom report, made 12 years previous, laid more emphasis upon the evils of discrimination than upon the improvement of facilities and the reduction of rates.

In order to get an act to regulate interstate commerce, it was therefore necessary that the differences between the House and the Senate be reconciled.

The House insisted upon a rigid long-and-short-haul clause, while the Senate desired a flexible one.

It was but natural that the Congress should look to the English system of regulating carriers in order to obtain a basis for the regulation of the carriers in this country. The English railways had from the very start been subject to a more stringent measure of regulation than were the American railways.

The first three sections of our original Interstate Commerce Acts were modeled upon the first three sections of the English acts, particularly those of 1845 and 1854. (See 145 U. S. 263; 162 U. S. 197; 168 U. S. 144.) The English acts, however, did not contain any provision similar to the long-and-short-haul clause of our fourth

section.

Long-and-short-haul discrimination is a special type of place discrimination, and the long-and-short-haul provision in the original act was insisted upon largely in the interest of the development of interior points.

Sections 1, 3, and 15 of the present Interstate Commerce Act, as interpreted and applied by the Interstate Commerce Commission and the courts, now give the Interstate Commerce Commission ample power to protect the public in any case of unjust discrimination, and there exists at the present time no real need, in the public interest, for the retention of the long-and-short-haul clause of section 4. Looking at the situation, therefore, from the standpoint of the public, we believe that the Pettengill bill, H. R. 3263, should be enacted into law in preference to the Coordinator's bill, H. R. 5362. I now want to present to you some facts which I believe will demonstrate that as the act would be amended under the Coordinator's proposal it would impose upon the railroads, and particularly the short lines, oppressive restrictions for the benefit of other competitive forms of transportation.

Before going into the narration of these oppressive restrictions, I think I should give the committee some brief review of the situation of our short lines, because unless you know something of their background and development, and of their troubles, you cannot appreciate, in full, the significance of the difficulties to which I have referred.

It is, therefore, not possible to give any very exact definition of a short-line railroad. The most apt description of such a road which I have heard is that it is one that is short in mileage and in revenues. Of course, most of the railroads are short in revenues at the present time, though they are not all short in mileage.

Generally speaking, however, we use the term "short-line railroad" to describe the class II and class III carriers, as classified by the Interstate Commerce Commission, that is, roads having gross annual revenues of less than $1,000,000.

At the present time there are about 570 such roads in the United States. They operate about 15,000 miles of track, and serve more than 12,000 communities. They furnish transportation to a large territory, much of which is still in the process of development. It is the short lines that, generally speaking, have gone into the undeveloped territory and furnished modern transportation facilities.

A very considerable portion of the present short-line mileage of the United States was originally constructed for the purpose of transporting mineral, forest, and farm products out of regions that were then inaccessible. Villages, towns, and farming communities were gradually built up along these lines, and hundreds of important industries have been established on them. All these are now dependent on the short lines for their rail-transportation service.

There is no railroad today, either large or small, which is completely self-sustaining. That is, no such road originates and delivers on its own rails sufficient traffic to afford it a living.

Although we sometimes feel that they do not realize it, it is nevertheless a fact that it is in the interest of the trunk lines that these short lines should be continued in operation, because the loss of

the traffic which the short lines produce would have a very serious effect upon the volume of traffic and the financial operation of the trunk lines.

In a recent report of the Interstate Commerce Commission it is stated that, according to an exhibit filed by the transcontinental railroads, about 55 percent of the tonnage of the east-bound, and about 20 percent of the west-bound, and about 47.5 percent of all the transcontinental traffic originated or terminated on branch or short lines in transcontinental territory.

During the period of Federal control, the Government found it advisable in many instances to route traffic via the short lines, so as to avoid the congestion at large terminals.

Congress has, in times past, been especially solicitous of the welfare of these short lines. This was particularly true when it was considering the Transportation Act of 1920. That Congress was sympathetic with the position of the short lines because it had come to have an understanding of their problems, and realized that it was in the public interest that these essential railroads be preserved as a part of the national transportation system. It included in that act several special provisions designed to solve their problems. Unfortunately, however, for one reason or another, these provisions failed to accomplish the purposes sought by Congress, and many of the short lines have been forced to abandon.

I stated a moment ago that there were now 570 such roads in the United States. In 1929 there were 805 short lines. While a number of these small roads have been abandoned due to the exhaustion of the natural resources which constituted the majority of their traffic, and for which they were originally built to transport, it is also true that a very considerable number of them have had to abandon by reason of the unregulated competition to which they were subjected. This is particularly true with respect to the competition of highway motor vehicles. According to the best available figures, about 38 percent of the short lines do not earn operating expenses and taxes, and about 55 percent of them do not earn their fixed charges.

I am not going to recite to you the detailed figures with respect to the short lines, as related to their operating income, operating expenses, taxes, and similar items, which were placed before you in detail by Judge Fletcher so far as the class I carriers are concerned. I shall content myself here with saying to you that so far as these short lines are concerned, the figures will be, on the general average, 5 percent of those placed in the record by Judge Fletcher.

I point this out to you to show two things in particular: First, that these short lines must be put in a position to participate in as much traffic as possible; and, second, to show you that they should be relieved of all unnecessary burdensome and oppressive restrictions.

In order to get some fair idea of the oppressiveness of the present requirement of the short lines for obtaining fourth-section relief from the Interstate Commerce Commission, we should first review the situations which the Commission considers as justifying departures from the long-and-short-haul clause. There are nine rather well recognized situations:

First. About 90 percent of all authorizations for fourth-section relief are granted to circuitous lines or routes which are in competition with more direct routes.

Second. Relief is frequently granted to rail lines which are in competition with water carriers,

Third. Relief is sometimes granted on account of commercial or market competition.

Fourth. Relief is also granted to carriers which are in poor financial condition and whose costs of operation are high, in order that they may meet the rates of stronger lines at the points where they come into competition. In cases of this sort the stronger line sets the rate and the weaker line must meet it or lose the traffic. The Interstate Commerce Commission has dealt rather fairly with the short lines in the matter of granting fourth-section relief based on financial condition and revenue needs. Where, however, the denial. of fourth-section relief to the trunk-line connections happens to include the short lines, and it frequently does, the short lines are subjected to a proportionately greater injury than is inflicted on the trunk lines, because the latter usually have more purely local traffic to fall back upon.

Fifth. Relief is also granted to railroads competing with cheaper forms of transportation, such as unregulated motor-truck competition.

Sixth. Relief may be granted to carriers operating joint-line routes between points which are also served by a single-line route. This is particularly true when joint-line arbitraries are allowed to points on joint-line routes. In these cases the maintenance of higher rates where the joint-line routes come into competition with the single-line route would drive the traffic from the former to the latter.

Seventh. Relief is sometimes granted to a line handicapped by operating through intermediate-point territory which is given a higher rate level than the territory traversed by the competing line." Eighth. Relief is sometimes granted to preserve a system of group

rates.

Ninth. Temporary fourth-section relief is sometimes granted in emergency situations, such as droughts, unusual traffic congestion, and so forth.

In every application for fourth-section relief it must be shown: First. That the reduced rates are compelled rates, lower than reasonable rates for application via the petitioning line or route, and not within its control.

Second. That the lower rates for the longer hauls are reasonably compensatory.

Third. That the rates at the intermediate points are reasonable within themselves.

Fourth. Where the applications are based on circuity or on water competition special matters must be shown.

Fifth. If the application is based on circuity, the petitioner must establish (a) the degree of circuity; (b) that the short line observes the fourth section; (c) that the rates on the circuitous line will conform to the equidistant clause.

Sixth. If the application is based on water competition, it must be shown that the competition is actual and not merely potential. The mere recital of these shows the complexity of these so-called "fourth-section applications."

The expense of obtaining fourth-section relief is alone a very considerable item, and especially insofar as the short lines are concerned.

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