of fuel, material, and supplies, and our operation brings into the immediate territory the expenditure locally of many thousands of dollars.

Reference has been made above to the Beaver Portland Cement Co., located at Gold Hill, Oreg., on the Southern Pacific, 316 miles south of Portland. This plant likewise was established at Gold Hill based upon assurance from the Southern Pacific, with the approval of the Oregon Railroad Commission, of the establishment of fourthsection rate on cement from Gold Hill to Portland.

I have no hesitancy in saying that without the advantage of marketing our product in the Portland market under fourth-section rates, the establishment and operation of these two cement plants at Lime and Gold Hill, Oreg., could not have been justified.

All industries at this time have great excess productive capacity. This is true of railroads of their commodity, transportation. What happens in my own industry is that when contracts of large size offer, the competitive field is greatly enlarged so that regular market prices cannot be or at least are not maintained. This is true of the Portland cement market, as is reflected in the bidding on Boulder Dam, Fort Peck, Tennessee Valley, Bonneville, and will be true on Grand Coulee.

Prices made by cement manufacturers on these projects are not compensatory in the sense required by the fourth section. Indeed, in many cases sales are made at a price below the manufacturer's out-of-pocket cost. The general average of prices obtained on large contracts and of commercial sales produce a net mill price which, if not satisfactory to cement manufacturers, is at least not a loss. The Federal Government, presently the only large buyer of cement, profits in this, to the loss of its taxpayers, the cement manufacturers. Railroads are prohibited by the fourth section from such competition, and in many cases must accept a short haul at low freight rates on commodities which have moved by water long haul at rates not now compensatory to them in competition with other forms of transportation.

A very definite illustration of the above is on cement moving from California. ports to Bonneville, Oreg., and entering into the construction of the dam across the Columbia River at that point. Even though land-grant rates are applicable throughout the 700-mile haul on the Southern Pacific Railway from San Francisco to Portland, it is found cheaper to ship cement by water to Portland than to use these comparatively low land-grant rates.

Mr. MARTIN. That is just about 50 percent.

Mr. NEWLANDS. Well, it is very difficult for anyone to know, and anyone who thoroughly understands how these land-grant rates are made-well, there is no Einstein in the United States-can change them.

The

Mr. MARTIN. You need not look at me when you say that. Mr. NEWLANDS. It is impossible to obtain it beforehand. railroads are not permitted by the Government to say what they are, and, of course, that is a Government rate and no other person is allowed to enjoy it.

It is my understanding that at the present time the Interstate Commerce Commission is empowered to fix maximum or minimum or maximum and minimum rates to be charged by the railroads, and

it is further empowered to suspend any rates filed by the railroads. investigate them through the process of hearings, and determine whether to permit such rates to become effective or not, and under these provisions of the law, as I understand it, it is my opinion that the Pettengill bill should be enacted into law.

The Portland Chamber of Commerce has not passed any recent resolution with respect to the fourth section. This question was considered by the board of directors in the fall of 1932, at which time I was a member of the board. The occasion for such consideration was the United States Chamber of Commerce referendum no. 62, dated Washington, D. C., October 28, 1932.

In reply to questionnaire VII, which reads:

The long-and-short-haul clause should be amended to place upon the railroads responsibility for determining whether proposed rates will be reasonably compensatory for the service performed

the board of directors of the Portland Chamber of Commerce, on December 9, 1932, authorized the following reply to the above questionnaire VII of referendum no. 62:

Our people have always been for fourth-section relief of the rail carriers. They have just voted to support the principle that the rail carriers be permitted to fix the fourth-section relief rates. However, they would desire that the railroads should be granted permission to quote rates of this character only by permission of the Interstate Commerce Commission, leaving the amount of the rates subject to railway management policy and also with the further provision that in the event those rates over a period of time were quoted so low as to destroy competitive shipping for the purpose of driving such shiping from the water route, that the Interstate Commerce Commission should have the power to intervene and prevent such destructive rate levels. I have always thought that was a very sound resolution.

This power to prevent destructive competition with wates lines is, as I have stated above, now placed in the Interstate Commerce Commission by its authority to fix minimum rates and to suspend tariffs as filed by the railroads.

To my mind, the railroads should be liberated so they may act promptly to meet the necessities of shippers, manufacturers, and communities, and it seems to me contrary to the public interest to tie them up so that they cannot afford an urgent service without submitting their applications to formal hearings by the Interstate Commerce Commission.

If their rate schedules are unsound or discriminatory, the shippers will protest against such schedules being permitted to become effective, in which case the Commission has the right to suspend same for hearing and final decision.

Mr. MARTIN. How far is Lime from Portland?

Mr. NEWLANDS. 398 miles.

Mr. MARTIN. East?

Mr. NEWLANDS. East.

Mr. MARTIN. An entirely different character of country?

Mr. NEWLANDS. Entirely; yes.

Mr. MARTIN. You do not do any water shipping?

Mr. NEWLANDS. No; we do not have any water transportation.

like the California fellows enjoy with returning lumber. Mr. MARTIN. Do you want to ask any questions?

Mr. O'BRIEN. No questions.

Mr. MARTIN. We thank you very much, Mr. Newlands, for your

statement.

Mr. NEWLANDS. Thank you.

Mr. MARTIN. We will next hear Mr. Dehne, manager of the Arkansas Rice Traffic Bureau.

STATEMENT OF C. C. DEHNE, MANAGER ARKANSAS RICE TRAFFIC BUREAU, STUTTGART, ARK.

Mr. DEHNE. Mr. Chairman and members of the committee, my name is C. C. Dehne. I am manager of the Arkansas Rice Traffic Bureau with headquarters at Stuttgart, Ark. This is a voluntary organization composed of Arkansas rice millers and Arkansas rice growers cooperative associations, operating rice-milling plants throughout the State of Arkansas, and is maintained for the purpose of fostering and protecting the interests of the rice millers and rice shippers in all matters pertaining to transportation.

Quite naturally any benefits accruing from freight-rate adjustments revert to the farmers producing the rice. I have had 25 years' experience in railway accounting and traffic matters, the last 18 years in southwestern territory and the past 3 years in the rice industry.

Rice is shipped to all parts of the United States and a considerable quantity is exported each season. This is due to the fact that the four producing States produce approximately 8 pounds of rice per capita, while the general average consumption of rice within continental United States is only 5 pounds per capita. Until about 5 years ago, Arkansas ranked second place in rice production, but today, by adverse freight-rate adjustments, Arkansas is fourth or last.

The greatest rice-consuming territory in the United States is along the South Atlantic coast, or North and South Carolina and Georgia, where it is estimated the average per capita annual consumption is 40 pounds. New York City, by reason of its foreign-element population, consumes and distributes annually approximately 2,000,000 bags of 100 pounds each. The southeastern territory and the north Atlantic territory, consuming such large quantities of rice, is quite naturally very desirable marketing territory of the various rice-milling interests of Louisiana, Texas, and Arkansas.

However, by steamship transportation from Louisiana and Texas, those rice millers are permitted to reach the south Atlantic territory through either Charleston, S. C., or Wilmington, N. C., on a very low steamship rate, thence with truck lines from the ports to the interior are enabled very effectively to keep the Arkansas rice miller out of distribution in that territory.

This is also true so far as New York City is concerned, and in the past several years the steamship lines have transported rice on unusually low rates to such ports as Norfolk, Baltimore, Philadelphia, and New York.

About 2 years ago the eastern trunk-line rail carriers, in their endeavors to meet competition via barge line through the New York State Canal, established rates on rice to Akron, Cleveland, Columbus, and Toledo, Ohio, and Detroit, Mich., and because it was impossible to secure fourth-section relief it was necessary to maintain these rates as a maximum to all intermediate points. By virtue of this set-up it

was possible for the Louisiana and Texas rice-milling interests to reach such points as Louisville, Ky., and Indianapolis, Ind., on a lower total transportation cost than is afforded the Arkansas rice miller, even though we are closer to these consuming territories by many hundreds of miles.

Louisiana and Texas rice millers, by utilizing steamship transportation through the Panama Canal, are permitted to reach all of the Pacific coast territory, where rather large quantities of rice is consumed because of the Japanese element, to the detriment of the Arkansas rice producer. Any change in the present rate situation as respecting transportation from Arkansas to the Pacific coast necessarily follows that any reduction to Pacific coast points must be held as a maximum to intermediate territory.

Arkansas then only has a small section of Central Western United States, of very low rice consumption, where we are forced to find our distribution, and, for the most part, the Arkansas rice grower and miller must sacrifice considerable of their due earnings and profits in order to reach the larger consuming-trade territories.

I trust you can readily see from this statement that fourth-section relief is quite necessary to this one phase of industry, which is the largest in eastern Arkansas, and involves many millions of dollars in farms and farming-equipment investments, as well as rice-milling investments, and on behalf of the Arkansas rice farmer we urgently request this committee to take the necessary action that will afford us relief.

Mr. MARTIN. This area is in eastern Arkansas, you say, the rice area?

Mr. DEHNE. Yes.

Mr. MARTIN. How close to the Louisiana rice fields?

Mr. DEHNE. About 400 miles, generally.

Mr. MARTIN. About 400 miles between the fields of the two States! Mr. DEHNE. That is right.

Mr. MARTIN. And is that sufficient to deprive you of the water advantages, as your statement indicates, that the Louisiana growers have, in connection with the Texas growers?

Mr. DEHNE. Yes. Our lowest rate to the port is 25 cents.
Mr. MARTIN. To the port?

Mr. DEHNE. Yes; that would be to New Orleans, Louisiana, Lake Charles, Houston, Galveston, and Beaumont.

Mr. MARTIN. What are the Louisiana rice fields' rates?

Mr. DEHNE. The maximum from the interior rice mills and mill

ing points to Lake Charles is 9 cents.

Mr. MARTIN. A difference of 16 cents, in their favor.

Mr. DEHNE. Yes.

Mr. MARTIN. That is 16 cents a hundred.

Mr. DEHNE. Yes.

Mr. MARTIN. And that naturally is a substantial difference to your shippers?

Mr. DEHNE. Yes.

Mr. MARTIN. Do you know anything about the sentiment generally in Arkansas?

Mr. DEHNE. No.

Mr. MARTIN. With respect to this bill?

Mr. DEHNE. No; not of my own knowledge.

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