The Pacific Fruit Express Co. is owned jointly by the Union Pacific Railroad Co. and the Southern Pacific Co., and owns the refrigerator cars and refrigeration plants necessary to provide refrigerator car service for those lines and their subsidiaries.

of these cars includes the Oregon Short Line Railroad Co. which serves the heavy producing districts of southern Idaho as well as districts in Utah and other States. An examination of this statement shows that the capital stock of the Pacific Fruit Express Co. amounts to $24,000,000. The average total value of the property used in its business during the period covered aggregates $118,040,123; the gross operating revenues average over $40,000,000 per year, and the operat ing expenses, over $23,000,000 per year. The average net operating revenues for those years runs over $16,750,000 per year, or better than 14 percent per year on the value of the property used. These earnings, as stated above, do not appear as railway operating revenues in the annual reports of the railroad carriers to the Interstate Commerce Commission. But the dividends paid which averaged over $16,000,000 per year throughout this period go to swell the actual earnings of the parent companies-Union Pacific and Southern Pacific. We do not know the extent to which this practice is carried on by other railroads, but we earnestly request this committee and the Congress to make whatever investigation may be necessary to learn the true facts with respect to such practices and to amend the Interstate Commerce Act to correct this situation. We feel that it is unfair to producers using refrigerator car services to be required to pay rates and charges which produce such excessive profits.

Mr. MARTIN. Where are those other earnings accounted for? Mr. Roor. They are included as a part of the corporation's income, but they are not included as railway operating revenues, and that is the main point I wish to show. For instance, in 1933, the railway operating revenue of the Union Pacific Lines was around $19,000,000, but after paying all of the interest on the bonded debt and all of the fixed charges they had more than $22,000,000. Now, in figuring return on investment they use this $19,000,000 figure and the $8,000,000 or more which they received from the Pacific Fruit Express Co. is eliminated entirely from that showing and they come to the Interstate Commerce Commission, or possibly would comewhether or not they do I do not know-and would show that they are not making sufficient return upon their investment, where the true facts are that if they included the revenues received from these subsidiaries, which are merely the railroad companies, they would show a pretty good earning.

Mr. MARTIN. Yes; but the Interstate Commerce Commission knows whether they have this other revenue or not; does it not?

Mr. ROOT. Yes, it does; but the law does not say anything at all about other revenue being included as a part of the railway earnings. Mr. BELL. May I ask a question of the witness?

Mr. MARTIN. Do you wish to submit to a question?
Mr. Root. I am rather limited in my time here.

Mr. BELL, I think that may be explained and I am ready to do it.
Mr. ROOT. I think that would be proper in rebuttal.

Mr. MARTIN. I am willing to have the explanation go in the record.

Mr. BELL. I will write it out.

Mr. MARTIN. Very well.

Mr. Root. Another situation to which we desire to call your attention is the earnings of the Union Pacific Coal Co., owned wholly by the Union Pacific Railroad Co. I have prepared a statement for filing with the committee, and I would like to leave that with you upon the record.

Mr. MARTIN. It will be inserted in the record.

(The statement above referred to is printed in the record as follows:)

1

Statement showing capital stock and book value of Union Pacific Coal Co., and dividends paid by that company to the Union Pacific Railroad Co.; the capitai stock of Union Pacific Coal Co. is owned 100 percent by Union Pacific Railroad Co. [Authority: Report of Union Pacific Railroad Co. to Interstate Commerce Commission]

Mr. Roor. According to the statement which I submitted herewith, covering the period from 1924 to 1933, both inclusive, the book value or cost of the property of the Union Pacific Coal Co. is $49,000. That is the cost of the property to the Union Pacific which owns it.

The Union Pacific Railroad and its subsidiaries use practically all of the coal mined by the Union Pacific Coal Co. They have paid the Union Pacific Coal Co. prices for its coal which has enabled that company to earn a net profit of $1,250,000 in 1924, and $1,750,000 each year from 1925 to 1933. These earnings since 1925 have averaged over 3,500 percent per annum on the book cost of that mine.

The cost of this coal to the railroad company appears as an operating expense item in that company's accounts, but the dividends received from the coal company do not appear in that company's reports to the Interstate Commerce Commission as a part of its railway operating revenues. We earnestly request this committee to so amend the Interstate Commerce Act as to make such practices unlawful, and to require the revenues of subsidiary companies receiving their revenues directly or indirectly from railway operations to be included with the railway operating revenues of the parent companies. Now, I would like to add just one other word.

Mr. MARTIN. We thank you very much for your statement.
Mr. Roor. Could I add just a few words.?

Mr. MARTIN. Yes.

Mr. Roor. It seems to me that if the Congress of the United States desires to make a desert out of the intermountain and intermediate section of this country it could so by adopting the Pettengill bill.

If the railroads are allowed, for the sake of a few tons of traffic which they hope to get away from the water carriers they will have to make it back in remunerative returns from the intermountain and intermediate points, that will break them and somebody will have to help them pay the bill for the losses they sustain on this traffic, and we will, as a result, have a fringing population located around the coast and the interior points will be desolate, and for that reason we believe that you should leave the rate structure alone as now protected under the fourth section.

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

I am sorry, but we will have to adjourn now until tomorrow morning at 9 o'clock sharp.

(Thereupon, at 12:05 p. m., an adjournment was taken until 9 a. m., of the following day, Wednesday, June 19, 1935.)

AMEND FOURTH SECTION INTERSTATE COMMERCE ACT

WEDNESDAY, JUNE 19, 1935

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE OF THE COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE, Washington, D. C. The subcommittee met, pursuant to adjournment, in room 115, House Office Building, at 9 a. m., Hon. John A. Martin presiding. Mr. MARTIN. The committee will be in order. The first witness we will hear this morning will be Mr. Harry Holden, speaking for the Public Utilities Commission of Idaho.

STATEMENT OF HARRY HOLDEN, MEMBER PUBLIC UTILITIES COMMISSION, BOISE, IDAHO

Mr. HOLDEN. Mr. Chairman and members of the committee, my name is Harry Holden; I reside at Boise, Idaho. I am a member of and speak for the Public Utilities Commission of Idaho.

We had no advance notice of the time when this committee would begin its hearing on the Pettengill bill now under consideration, therefore, no opportunity to make any preparation in opposition to the bill was had. Practically all the evidence tendered by proponents herein had been received prior to the arrival of Idaho's representatives. We, therefore, are for the most part in the dark as to the nature, scope, or materiality thereof. However, from a very hurried examination of a part of the record I have been privileged to examine, it appears that many proponents of this bill complain quite bitterly because the Federal Government has extended financial aid to boats and truckscompetitors of rails. Conceding that such aid has been extended, we must not lose sight of the fact that such Federal generosity was and is not limited to boats and trucks.

Fabulous sums have been lavished by the Government on transcontinental railroads, of which the boats and trucks may complain with equal propriety.

In support of this statement and in answer to such complaints by proponents, I desire briefly to refer to one historical incident of this kind for your consideration.

The following quotations are taken from the pamphlet issued by the land department of the Union Pacific Railroad Co., and now on file in the Congressional Library, Washington, D. C. From the title page [reading]:

Guide to the Union Pacific Railroad lands; 12,000,000 acres; 3,000,000 acres in central and eastern Nebraska, now for sale. Omaha, Nebr., land department, Union Pacific Railroad Co., 1879. The Republican Printing & Publishing House, Omaha.

635-35-38

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The Union Pacific Railroad beginning at Omaha, on the Missouri River, extends through the State of Nebraska, crosses the northeast corner of Colorado and southern Wyoming, and at Ogden, in Utah, in the Great Salt Lake, connected with the Central Pacific Railroad for San Francisco and the Pacific coast.

By the completion of the Great Missouri River Bridge, at Omaha, the last link has been supplied, and railroad connection established from ocean to ocean. The grand project of uniting the Atlantic and Pacific Oceans by railroad was first brought prominently before the American people by Asa Whitney, of New York. At a meeting held under his auspices, in Philadelphia, on the 23d day of December 1846, a movement was inaugurated for the purpose of interesting the public mind and securing the aid of the Government in the accomplishment of their great enterprise. Earnest discussions followed, in which the ablest minds of the Nation participated, extending over a period of nearly 20 years, during which various places were urged, extensive explorations were made, and the practicability of the different routes thoroughly canvassed.

The efforts culminated on the 1st of July 1862, in the passage, by the United States Congress, of an act incorporating the Union Pacific Railroad Co., and the adoption of the Central Route. The organization of the company took place October 29, 1863; ground was broken with appropriate ceremonies, December 2, 1863; the first contract for construction was let early in 1864, and the great work formally commenced.

The progress of the work was characterized by an exhibition of energy enterprise and engineering skill and by a rapidity of construction without a parallel in the annals of railroad building; and on the 10th day of May 1869 the junction of the Union and Central Pacific Railroads effected, near the head of Great Salt Lake in the Territory of Utah.

In order to clearly visualize the tremendous natural resources, and intrinsic wealth, limitless in contemplation, let us see what the land department of the Union Pacific Railroad has to say about this vast empire through which the Union Pacific Railroad runs. On page 2 of their pamphlet we find the following [reading]:

The second map represents the Great Valley of the Platte, in the State of Nebraska, through which the Union Pacific Railroad extends for 400 miles and in which are located the lands offered for sale by the company. The Platte Valley is from 5 to 15 miles in width, and consists of gently undulating bottom lands, skirted by low rounded hills, and crossed by timber-bordered streams. It has long been recognized as one of the most fertile and beautiful regions in America.

Let us now get a glimpse of the most spontaneous outburst of national generosity in all the world's history. On page 4, of this pamphlet under the caption, "The Land Grant", we read the follow

ing:

The lands granted the company to aid in the construction of the road, consists of the alternate sections, or square miles, in a belt 40 miles in width, and 1,032 miles in length, and extends from Omaha, on the Missouri, to Ogden, in Utah; they are contained in a breadth of 20 miles on each side of the track, along the entire length of the road, and comprises about 19,000 square miles, or 12,000,000 acres of choice farming, grazing, and mineral lands.

The foregoing acts of national generosity were expressed in terms of rich and valuable land approximating 19,000 square miles, carved out of the public domain and laid in the lap of the Union Pacific Railroad. But this tide of generosity in the national heart still surged without diminution. We now turn to the History of the Union Pacific Railway, by Henry Kirke White, of Chicago, for further enlightenment, and quote the following relative to Federal aid in building this transcontinental line, wherein referring to the act of 1862, it is said [reading]:

But at last there was enacted an amendatory act which radicalty altered the terms of the act of 1862. This received the President's signature July 2, 1864.