REPORT OF INVESTIGATION BY INTERSTATE COMMERCE COMMISSION INTO RAILROAD DISCRIMINATIONS AND MONOPOLIES IN COAL AND OIL.

LETTER FROM THE CHAIRMAN OF THE INTERSTATE COMMERCE COMMISSION, TRANSMITTING, IN RESPONSE TO A JOINT RESOLUTION OF MARCH 7, 1906, A REPORT OF THE INVESTIGATION BY THE COMMISSION INTO THE SUBJECT OF RAILROAD DISCRIMINATIONS AND MONOPOLIES IN COAL AND OIL.

APRIL 28, 1908.-Referred to the Committee on Interstate Commerce and ordered to be printed with illustration.

APRIL 28, 1908.

To the Senate and House of Representatives:

By joint resolution of the Congress, approved March 7, 1906, the Interstate Commerce Commission was instructed to make an investigation of the subject of railroad discriminations and monopolies in coal and oil, and to report to the Congress, or to the President when the Congress was not in session, from time to time, as the investigation proceeded.

Under date of January 25, 1907, the Commission transmitted a report of its investigations up to that date, which report related mainly to matters connected with the transportation of bituminous coal from points of origin in the eastern bituminous fields to tide water points on the Chesapeake Bay and the North Atlantic seaboard. On January 28, 1907, the Commission transmitted to the Congress a further report which related to discriminations and monopolies in the transportation of petroleum and its products.

In the meantime investigations had been conducted in Utah, Colorado, and Nebraska in regard to the coal situation in that section of the country and the relations thereto of certain railroads. As the Congress was not in session when the reports of these investigations were prepared, they were transmitted to the President in accordance with the terms of the joint resolution above mentioned.

In February, 1907, the investigation was further prosecuted in the Indian Territory, now State of Oklahoma, a report of which was sent to the President, because the Congress had adjourned before the report was completed. In order to inform the Congress of the results of these inquiries, and with the approval of the President, the three reports last mentioned are herewith transmitted.

MARTIN A. KNAPP, Chairman.

REPORT OF INVESTIGATIONS IN THE STATES OF COLORADO AND UTAH.

The purpose of this investigation was to inquire into the relations. of the Denver and Rio Grande Railroad Company with respect to coal lands and coal operations located on its lines. Some testimony was introduced at Salt Lake City with reference to the Union Pacific Railroad Company and the Union Pacific Coal Company, which was supplementary to that taken in former investigation of their affairs.

A great deal of testimony was given in regard to the methods by which coal lands were acquired by those interested in the development of coal properties, particularly the Pleasant Valley Coal Company, the Utah Fuel Company, and also the Colorado Fuel and Iron Company. In this regard it will be remembered that section 2347 of the Revised Statutes of the United States provides that—

Every person above the age of twenty-one years, who is a citizen of the United States, or who has declared his intention to become such, or any association of persons severally qualified as above, shall, upon application to the register of the proper land office, have the right to enter, by legal subdivisions, any quantity of vacant coal lands of the United States not otherwise appropriated or reserved by competent authority not exceeding one hundred and sixty acres to such individual person, or three hundred and twenty acres to such association, upon payment to the receiver of not less than ten dollars per acre for such lands, where the same shall be situated more than fifteen miles from any completed railroad, and not less than twenty dollars per acre for such lands as shall be within fifteen miles of such road.

The testimony showed that the practice was to solicit persons so entitled to make application under the above section to file what were known as coal declaratory statements, at which time oath was taken that the entry was for their own use and benefit. Such statements would run for twelve months and, frequently before patent to the land was issued, the persons making the statements, who, in many instances, were young women and apparently had no idea what they were signing, would be solicited to appoint certain persons attorneys in fact and to relinquish their right for from $50 to $150. One witness testified that Robert Forrester, geologist and engineer of the Pleasant Valley Coal Company, between January, 1899, and September, 1902, had acted as attorney in fact for 77 entrymen and entrywomen in the filing of coal declaratory statements in Carbon County, Utah, of which 28 became the property of the Pleasant Valley Coal Company of the Utah Fuel Company.

By the enabling act of July 16, 1894, under which Utah was admitted to the Union as a State, the United States Government granted to the State of Utah about 7,500,000 acres of land for university, school, public buildings, water reservoirs, institutional, eleemosynary, and other public purposes. Section 13 of the act provides

That all land granted in quantity or as indemnity by this act shall be selected under the direction of the Secretary of the Interior, from the unappropriated public lands of the United States within the limits of said State of Utah.

The act also provides that the land so granted shall be "disposed of exclusively for the purposes herein mentioned in such manner as the legislature of the State may provide."

Under special act of the legislature of the State of Utah, passed in pursuance of and for the purpose of carrying out the above provision, à State land board, composed of the governor, secretary of state, and other State officers, was created, which has control of the land

granted by the Federal Government. The testimony of the secretary of that board shows that when a person desires to secure a piece of land from the State application is made to the State land board, and the law requires that affidavit be made that the land so sought to be acquired is nonmineral, i. e., grazing or agricultural land. It then becomes the duty of the land board to ascertain the character of the land in order to determine whether or not the application shall be granted and the land sold. The usual method taken by the board in order to inform itself of the character of the land is to appoint the applicant a State agent to report on the land; in other words, the applicant is permitted to state whether the land for which he applies is coal or mineral or grazing and agricultural land. The State board relies upon and accepts the applicant's report, and if his statement is that it is grazing or agricultural land his application for it is granted. Grazing or agricultural land, formerly sold for $1.50 an acre, but the price is now $2.50 an acre, whereas coal land is salable at from $10 to $20 an acre, dependent on its nearness to a completed railroad.

Special agents for the Land Department testified that when the application for a State selection reaches the United States land office, if the land is located within a township which contains land underlaid with coal, the fact that application has been made for said land is advertised for sixty days, and if protest is filed alleging that the land is not grazing or agricultural land, but is coal or mineral land, such protest is set down for hearing. If at the hearing no appearance is entered by the person making the protest, a patent to the land as grazing or agricultural land is issued to the applicant.

It is in evidence that persons interested in the Pleasant Valley Coal Company and the Utah Fuel Company have bought off protestants and the so-called grazing and agricultural land finally became the property of one or the other of said companies. One witness testified that within six years of the date of the hearing the Pleasant Valley Coal Company had obtained in the above manner 5,579.56 acres of land contiguous to its mine at Castle Gate, and that the Utah Fuel Company had similarly acquired 12,142.32 acres of land contiguous to its mine at Sunnyside. How much more land was obtained by this method prior to the six-year period of limitation is not in evidence, nor is there testimony to show the amount contiguous to other mines of these companies. Counsel for the Denver and Rio Grande Railroad Company adverted to the necessity of having horses and mules in the operation of the mines, for which, he alleged, grazing lands are required, and it was also suggested that some lands had been so acquired for the purpose of getting the timber on them. The fair presumption, however, is that the lands so secured by these coal and fuel companies are substantially all underlaid with valuable deposits of coal.

It was also shown by the testimony that if land was entered upon in territory which the Pleasant Valley Coal Company or the Utah Fuel Company desired to develop the policy was to discourage the person or persons so entering by expensive litigation or even by strong coercive measures. The coal company has acquired, according to one witness, about 30,000 acres of land, principally in Carbon and Emery counties. Counsel for the railroad companies contended that whether or not the proceedings of the officers of the Utah Fuel Company and the Pleasant Valley Coal Company in acquiring land in the foregoing ways were unlawful had not been

determined and that suits had been brought by the Government against those companies to determine this disputed question of law. True it is, however, that the evidence adduced was ample to show that the Pleasant Valley Coal Company and the Utah Fuel Company had, through employees and other persons, by paying them for the relinquishment of their rights, acquired a large quantity of land to which they would not otherwise be entitled; in other words, the solicitation of such officers that persons entitled to entry should exercise their right with the intention that the title to the land should ultimately vest in the companies is not similar to a bona fide transfer of land for which entry was made without such intention. Notwithstanding the conflict of opinion as to the lawfulness of methods pursued in acquiring land under State selections, it is at least certain that buying off protestants can not be justified.

The Pleasant Valley Coal Company was organized in 1882, is capitalized at $3,250,000, of which $2,000,000 is stock and $1,250,000 bonds. The entire capital stock is owned by the Utah Fuel Company. About $100,000 of the bonds have been redeemed, and the remainder, is in the hands of the general public. Mr. C. H. Schlaacks is president of the coal company.

The Utah Fuel Company is a New Jersey corporation, capitalized at $10,000,000, book value $6,000,000; the entire capital stock is owned by the Rio Grande Western Railway Company. Its principal officers are E. T. Jeffery, president; C. H. Schlaacks, vice-president; Jesse White, treasurer. The Morton Trust Company, of New York, is trustee of the bonds of the corporation, $1,100,000.

The Rio Grande Western Railway Company is owned by the Denver and Rio Grande Railroad Company, and they, together with other railway companies, form what is commonly known as the "Gould System.'

It was also shown that the Calumet Fuel Company was a collateral company of the Utah Fuel Company; that the Wasatch Store Company is subsidiary to the latter fuel company, and that the Holladay Coal Company is owned by the Rio Grande Western Railway Company.

While the Pleasant Valley Coal and the Utah Fuel companies are owned by the Rio Grande Western Railway Company and the officers of the railway and railroad companies are also officers of the coal and fuel companies, none of the officers of the railway owns stock in any coal company.

Prior to August 1, 1906, there was in effect a flat rate on railway companies' material from all Utah points upon all commodities used by the Utah Fuel Company. The tariff covering these movements was "secret" or "private," but it was explained that it was believed the rate was justified, inasmuch as the Utah Fuel Company was owned by the Denver and Rio Grande Railroad Company and was therefore considered to be a department of the railroad company. In view of the amendment to the law, these rates were canceled August 1, 1906. Attention was called by counsel for the railroad companies to the fact that there were on file with the Commission tariffs showing railway companies' material rate of one-half a cent per ton per mile-that is. 25 cents per 100 pounds on carloads for 1,000 miles.

The testimony at Pueblo and Denver showed that the Colorado Fuel and Iron Company is incorporated under the laws of Colorado, is capitalized at $46,200,000; general mortgage bonds, $6,000,000,

and is engaged in the mining of coal and the manufacture of coke and steel. Its steel plant is located at Minnequa, a suburb of Pueblo, and a considerable portion of the switch tracks of the Colorado and Wyoming Railway Company, which connects with the Denver and Rio Grande Railroad Company, is located within the plant. Its mines in Las Animas County are located on the lines of the Denver and Rio Grande Railroad, Colorado and Southern Railway, Atchison, Topeka and Santa Fe Railway, and Colorado and Wyoming Railway companies; its mines in Huerfano County, on the Colorado and Southern Railway and Denver and Rio Grande Railroad companies; in Fremont County, on the Atchison, Topeka and Santa Fe Railway, and in Gunnison County, on the Denver and Rio Grande Railroad. It also has mines in Garfield, Pitkin, Routt, and other counties in Colorado. It owns no coal lands outside of Colorado, but has ore lands in Wyoming and New Mexico.

The daily production of coal by the Colorado Fuel and Iron Company is 12,000 to 15,000 tons. At the time the testimony was taken it had orders for more coal than it could produce and was not able to secure a sufficient number of cars in which to ship the coal which it did produce. Several of the mills have been delayed for from one to three hours owing to lack of coal, but the entire plant of the fuel company has not been compelled to shut down.

The Colorado and Wyoming Railway Company, running from Trinidad to Tercio, Colo. (the Southern Division), and from Hartville Junction to Sunrise, Wyo. (the Northern Division), mileage about 105 miles, is an auxiliary company of the Colorado Fuel and Iron Company. The president, vice-president, secretary, treasurer, and auditor of both companies are the same, and 95 per cent of the business of the railway is that of the fuel company.

It was in evidence that taking effect October 1, 1903, the Atchison, Topeka and Santa Fe Railway, Colorado and Southern Railway, and Denver and Rio Grande Railroad companies agreed at a conference of officers of those roads and officers of the Colorado Fuel and Iron Company and Colorado and Wyoming Railway Company, held at Chicago on that date, to accept 6 mills per ton per mile on all coal and coke to Minnequa, Colo., for the Colorado Fuel and Iron Company for its use at its works at Minnequa, Colo., when coming from joint track districts, Canon City, Walsenburg, and Trinidad groups, also from Colorado and Wyoming Railway (Southern Division), the minimum rate to be 374 cents per ton; no allowance to be made to the Colorado and Wyoming Railway for switching at Minnequa on freight transported under the 6 mills per ton per mile rate.

It was also agreed that where the Colorado and Wyoming Railway was allowed a division of a through rate on traffic other than coal and coke, no allowance would be made for switching at Minnequa. The Colorado and Wyoming Railway receives an arbitrary rate of 10 cents per ton on all coal and coke moving over its line (Southern Division) consigned to Minnequa, and an arbitrary rate of 5 cents per hundred pounds on lumber, cattle, and merchandise. In other words the minimum rate on coal or coke to the plant of the Colorado Fuel and Iron Company is 37 cents, which increases according to distance until the highest rate is reached, which is 56 cents. These rates, as indicated by the above agreement, are given by all roads serving the steel plant, but the business is purely local, wholly within the State of Colorado. However, coal dealers in Pueblo are charged a very