No. 276901

ROCHESTER & PITTSBURGH COAL COMPANY v. BALTIMORE & OHIO RAILROAD COMPANY

Submitted January 14, 1938. Decided February 14, 1938

Rates on bituminous coal, in carloads, from the Reynoldsville, Freeport, Pittsburgh, and Connellsville districts in Pennsylvania, to Buffalo, N. Y., and points taking the same rates, not shown to be unreasonable. Complaints dismissed.

William W. Collin, Jr., A. B. McElvany, August G. Gutheim, A. S. Boden, and W. P. Buffington for complainants.

John J. Fitzpatrick, E. J. Halberg, Edward A. Kaier, Guernsey Orcutt, W. T. Pierson, J. J. Snyder, R. L. Schwartzenberg, and Leo P. Day for defendants.

Fred M. Renshaw, William B. Faulkner, J. E. Duffy, F. T. McEvoy, Alex. M. Bull, John B. Keeler, Albert A. Mattson, and F. E. Siepert for interveners.

REPORT OF THE COMMISSION

MCMANAMY, Commissioner:

Complainants filed exceptions to the report proposed by the examiner, to which defendants replied, and the parties have been heard in oral argument.

These cases were heard together and will be disposed of in one report. The first of the complaints included in this report, No. 27690, was filed on March 25, 1937, by the Rochester & Pittsburgh Coal Company, which operates mines located on lines of the Baltimore and Ohio Railroad Company, in the Reynoldsville district, in western Pennsylvania. It alleges that the rate of $2.09 on bituminous coal, in carloads, from its mines and shipping points to Buffalo, N. Y., is unreasonable under section 1 of the act. The next complaint, No. 27690 (Sub-No. 1), was filed April 6, 1937, by 12 companies operating mines on the lines of the Pittsburg & Shawmut Railroad Company in the Reynoldsville district. It also alleges that the rate of $2.09 on bituminous coal, in carloads, from complainants' mines and other shipping points in the Reynoldsville district to

1 This report also embraces No. 27690 (Sub-No. 1), Ringgold Coal Company et al. v. Baltimore & Ohio Railroad Company et al., and No. 27717, Western Pennsylvania Coal Traffic Bureau v. Baltimore & Ohio Railroad Company et al.

* Rates are stated in amounts per ton of 2,000 pounds and are those in effect at the time of the hearing.

Buffalo and other points included in the Buffalo rate group, is unreasonable. The third complaint, No. 27717, was filed on April 23, 1937, by the Western Pennsylvania Coal Traffic Bureau, a voluntary association of mine operators in the Freeport, Pittsburgh, and Connellsville districts in western Pennsylvania. It alleges that the rates on bituminous coal, in carloads, from mines in the districts mentioned, to Buffalo, are unreasonable. The rates from Freeport, Pittsburgh, and Connellsville to Buffalo exceed the rates from Reynoldsville, the base district and the district nearest to Buffalo, by fixed differentials of 5, 15, and 30 cents, respectively, so that the rates assailed are $2.14, $2.24, and $2.39, respectively. This fixed differential basis over Reynoldsville has been observed with respect to the rates from Pittsburgh and Connellsville for more than 30 years, except for a brief interruption during Federal control. There were numerous interventions which it is unnecessary to enumerate.

The Reynoldsville complainants contend that a reasonable rate from Reynoldsville to Buffalo would be $1.84. The complainant in No. 27717 contends that reasonable rates from Freeport, Pittsburgh, and Connellsville to Buffalo would be $1.89, $1.99, and $2.14, respectively. The Reynoldsville complainants took no position and offered no testimony in opposition to reductions from Freeport, Pittsburgh, and Connellsville. The producers in those fields actively supported the reduction sought from Reynoldsville, provided their rates are correspondingly reduced.

The Baltimore and Ohio Railroad Company, which is the principal carrier operating between Reynoldsville and Buffalo, is a defendant in all three proceedings, and is the only defendant in No. 27690. No evidence was presented in its behalf, but it took the position, without detailing the reasons therefor, that, upon the present record, the complaints must be dismissed. The Pittsburg & Shawmut Railroad Company, which is owned by the same interests as some of the mines which it serves, while expressing no opinion as to the reasonableness or unreasonableness of the rates assailed from Reynoldsville, actively supported the contentions of the Reynoldsville complainants for a reduction in rates. Subsequent general reference herein to defendants will be understood not to include the two roads mentioned.

Before entering upon a detailed discussion of the evidence here presented, it seems appropriate to mention certain general considerations which have an important bearing upon these proceedings. Coal rates, from the origin fields which are here complaining and from others in the same general producing territory, to Buffalo, and to an extensive surrounding destination territory in New York, Pennsylvania, and Ohio, have been before us in a number of previous cases,

the more important of which are cited below. Descriptions of the origin and destination groups and histories of the rate adjustments and the relations between them are contained in those reports. General reference is made to them for details with respect to these matters, which will be referred to in this report only to the extent necessary in the interest of clarity.

This record contains extensive showings with respect to coal tonnage which would be affected directly by a change in the rates here under attack and to tonnage which, according to defendants, would also be affected indirectly. Generally similar showings have been discussed at length in previous cases, and it is sufficient here merely to state that the coal movement considered is very large, running into the millions of tons, and is of vital importance both to the shippers and to the railroads concerned, a large proportion of whose traffic is coal and a large proportion of whose revenues is derived from the coal traffic.

Complaints dwell at length upon the lake-cargo coal-rate adjustment and its effect upon the movement of coal to Buffalo. The lake-cargo adjustment is described in detail in Pittsburgh Coal Producers' Assn. v. Ashland C. & I. Ry. Co., 219 I. C. C. 691, and previous reports; and Coal to Lower Lake and St. Lawrence River Ports, 219 I. C. C. 683. Its effect upon the movement of coal to Buffalo is described in Bituminous Coal to Buffalo, N. Y., 219 I. C. C. 554. In that proceeding the Baltimore and Ohio Railroad Company and certain other lines serving the Reynoldsville district sought fourth-section relief in connection with the proposed establishment of a rate of $1.92 on coal from Reynoldsville to certain industries at Buffalo. This rate was stated to be equal to, and was designed to meet the competition of, the through rail-and-lake charge from Pittsburgh to Buffalo. The relief sought was denied.

For present purposes it is sufficient to say that the lake-cargo rate of $1.46 now in effect from Pittsburgh to lower Lake Erie ports, Erie, Pa., to Toledo, Ohio, both inclusive, was prescribed by us, and that subsequently the Baltimore and Ohio Railroad Company established this same rate on lake-cargo coal from the Reynoldsville district to Fairport, Ohio, a Lake Erie port a few miles west of Ashtabula, Ohio, and to Buffalo, for competitive reasons. The distances from Reynoldsville to Fairport and Buffalo are about the

3 Ohio-Michigan Coal Cases, 80 I. C. C. 663; Lackawanna Steel Co. v. Director General, 87 I. C. C. 383; Lackawanna Steel Co. v. Pennsylvania R. Co., 88 I. C. C. 759; National Petroleum Assn. v. Baltimore & O. R. Co., 126 I. C. C. 11, 163 I. C. C. 625; International Paper Co. v. Buffalo, R. & P. Ry. Co., 146 I. C. C. 59; East Rochester Assn. v. Baltimore & O. R. Co., 146 I. C. C. 357, 151 I. C. C. 783; Kistler Leather Co. v. Pittsburg, S. & N. R. Co., 169 I. C. C. 247; Intrastate Rates on Bituminous Coal Within Ohio, 192 I. C. C. 413; Showalter, Receiver, v. Akron, C. & Y. Ry. Co., 208 I. C. C. 645.

same, and are substantially greater than the distances from the Pittsburgh district to Ashtabula and Erie, through which ports lakecargo coal moves from Pittsburgh to Buffalo.

For a time the lake-cargo rate from Reynoldsville to Buffalo was applied on coal transshipped at that point for delivery at Buffalo and surrounding points. This is no longer permissible on coal destined to Buffalo and immediately adjacent points, but Reynoldsville coal may move to such points over the rail-and-lake route through Fairport, in which case the lake-cargo rate applies for the transportation to the port. On Reynoldsville coal transshipped at Buffalo and delivered by water to points in the general vicinity such, for instance, as Harriet, N. Y., the lake-cargo rate still applies for the movement to Buffalo.

In the case last cited, the charges incident to the boat transportation of Pittsburgh coal from Ashtabula and Erie to Buffalo are stated as 46 cents, and similar charges on coal transshipped at Buffalo and transferred by boat to points in the vicinity as 36 cents. This record indicates that these charges are somewhat greater at the present time. From Fairport, the water distance to Buffalo, about 145 miles, and the charge for the water service, are slightly greater than from Ashtabula and Erie. The lake-cargo rates from Pittsburgh and Reynoldsville to the ports of transshipment, plus the charges incident to transportation by boat from such ports to Buffalo and points in the vicinity are substantially less than the local rate from Reynoldsville to Buffalo.

The ultimate result of the lake-cargo adjustment has been that a large tonnage of coal which formerly moved to Buffalo all rail has been diverted to the rail-and-lake routes. Under the all-rail adjustment the rate from Reynoldsville to Buffalo is less than from Pittsburgh by the amount of the 15-cent fixed differential. On lakecargo coal from Reynoldsville to Buffalo and points in the vicinity the total rail-and-lake charges, when the transshipping port is Buffalo, are somewhat less, and when the transshipping port is Fairport, somewhat more, than the total rail-and-lake charges from Pittsburgh, by reason of the differences in the boating charges beyond the respective ports of transshipment. Therefore, Reynoldsville's 15-cent differential under Pittsburgh in the all-rail adjustment is substantially reduced by the lake-cargo adjustment, on coal transshipped at Buffalo, and is transformed into a small differential over Pittsburgh on coal transshipped at Fairport. Furthermore, it was testified on behalf of some of the smaller operators in the Reynoldsville district that they have no ownership of nor affiliation with boat lines, docks or other transshipping facilities, and that they are not equipped to accumulate cargo lots of coal. They are, therefore, largely precluded

from using the lake-cargo rates so that their advantage over the other fields in the all-rail adjustment is transformed into a disadvantage measured by the difference between the local rate from Reynoldsville to Buffalo and the total rail-and-lake charges from Reynoldsville and other districts.

The effect of the lake-cargo adjustment in reducing Reynoldsville's all-rail differential under Pittsburgh, or transforming it into a differential over Pittsburgh, forms the underlying motive or incentive for the Reynoldsville complaints. It is stated on brief for the Reynoldsville complainants that if Reynoldsville now had a 15-cent differential under Pittsburgh in the rates which actually move the traffic, their complaints would not have been filed. They also call attention to the 63-cent difference between the local and the lake-cargo rates from Reynoldsville to Buffalo and refer to the belief expressed by the Commission in Pittsburgh Coal Producers' Assn. v. Ashland C. & I. Ry. Co., supra, that the spreads between the local and lakecargo rates are greater than warranted by present conditions.

Notwithstanding the important part which the relation between the local and lake-cargo rates plays in this proceeding, complainants have seen fit to draw their complaints so as completely to exclude that matter as an issue. The result is that the only consideration that can be given to the lake-cargo rates is by way of comparison with the rates assailed to show that the latter are unreasonably high. This is a comparison of unlike things, the lake-cargo rates being in the nature of proportional rates. Furthermore, the lake-cargo rate from Reynoldsville to Buffalo was voluntarily established, for competitive reasons, upon a lower basis, distance considered, than the lake-cargo rate prescribed from Pittsburgh. In these circumstances comparison of the local and the lake-cargo rates lacks probative force and the lakecargo adjustment will not be further considered.

The rates assailed represent those in effect more than 30 years ago, subjected only to subsequent general changes. The total increase in cents per ton is the same, but the percentages of increase are different. For instance, prior to July 1, 1917, the rates from Reynoldsville, Pittsburgh, and Connellsville to Buffalo were $1.10, $1.25, and $1.40, respectively. Each of these rates has been increased 99 cents, but the percentages of increase are 90 for Reynoldsville, 79 for Pittsburgh, and 71 for Connellsville. Other coal rates are cited in which the increases since 1917 have been substantially less than 90 percent, and the Reynoldsville complainants contend that the percentage of increase in their rate to Buffalo indicates its unreasonableness. A situation similar to that shown exists in any adjustment where rates which are different are increased uniformly. To show that the percentage of increase of the Reynoldsville rate is not unique, defendants cited