Now, we are making progress. The investment by the people of the United States in this area through TVA is beginning to pay off in the upper reaches of the Tennessee river system. Lower cost electricity-particularly with shifts in population and markets in the southeast-has become a competitive advantage overshadowing trainable cheap labor which used to be our principal asset.

What has happened in recent months in our area-as well as others I am certain-is distressing to us. The many and complex factors that comprise the present Energy Crisis could set our progress back many years.

The issues are complex. I don't think we can say what the specific first causes of the problem are. Certainly one was the Coal Mine Safety Act.

The Coal Mine Safety Act has directly and adversely affected unemployment rates and income levels and it has also indirectly affected unemployment, income and the area's attractiveness to new industry.

The direct effect of the Act was to force small deep mine coal producers to permanently close mines because they could not afford the safety improvements required by the Act. This left some 500 miners in four counties-perhaps morewithout jobs, raising unemployment and lowering incomes. A further result of these small mine closings has been that large coal suppliers who buy from these mines have been unable to meet local contract commitments. Low income families who normally use coal to heat with (and some even use it to cook with) will find coal hard to obtain this winter even if they can afford to pay the increased price (which many cannot afford to do).

The remaining deep mine owners have had to invest substantial sums of money in safety improvements. This expenditure has forced a drastic rise in the cost of coal sold to local power companies. Within four months of the enforcement of the Act the cost of coal to power plants had increased an average of 45% (TVA figures used). Much of our coal comes from strip mining. With the dire need for coal, many more strip areas have been opened recently. With only two state inspectors to see that good conservation practices are used there is a real danger that meeting the coal crises may be the cause of a Conservation Crisis about which we are also greatly concerned. Some new stripping has the potential of irrevocably damaging water supplies town and cities in several counties are dependent upon.

Stripping has not measurably reduced the cost of coal because conservation measures are costly.

The power rate increase will hurt our area. Private users with low or fixed incomes-homeowners-will find it difficult to pay the increase unless they curtail their use of electricity. The average household last year paid $150 for electricity. With the rate increase, the same household will pay $187.50 next year. This doesn't sound like much, but when you consider the median family income in the District is only $4,000 it is a lot. The increase will use almost 1% more of the family's income to pay for electricity. (Before rate increase, the electric bill was 3.74% of income, after increase is $.68% of income or a difference of .94%). If the family is on a fixed income this means less money for food, rent. and clothing.

The majority (2/3) of new homes in the area use electric heat. Schools, hospitals using coal or electricity are caught in the cost squeeze operating, as families do on relatively fixed incomes determined by tax rates and reasonable charges for services rendered.

Cheap electricity was one of the major selling points of this area in attracting new industry. Now with the cost of electricity going up, and going up at a faster rate than in other parts of the country, this competitive advantage in attracting much needed industry is being lost. (Öther power companies have requested rate increase varying from 14 to 20%. Carolina Power and Light, 14%; Cincinnati Gas and Electric, 14%; Duke Power Company, 18%; Missouri Public Service Company, 20%, as compared to TVA's 22%.)

In addition, the power rate increase is affecting industries already in the area. Older marginal plants or plants competing in national markets are being forced to curtail production. Some may close down entirely, aggravating the unemployment and income problems still more. With the area's competitive advantage in attracting new industry decreased, new plants cannot be expected in enough numbers to take up the newly unemployed workers, to train them and put them to work.

The current concern with air pollution and the resultant regulations governing discharges into the air many industries now using "dirty" energy are being forced to convert to other fuels. For many, if electric power is not available in quantity at a reasonable price these industries will have to either close or continue to pollute in violation of regulations and local well-being.

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This will also increase the demand for electric power in the area. If the supply of electricity cannot be expanded at a reasonable cost, it will hurt not only the industry of the area, but the private consumer who is already caught in the price squeeze in so many other areas.

Gentlemen, as I indicated, the causes, the question of who to put the finger on for principal blame in this situation is complex and one we cannot readily answer. We do know that the power increase stands somewhere in the chain reaction-a domino reaction you might say-radically affecting the average citizen who may be facing a period of layoff or unemployment. Without a job his abiilty to provide for his family, to heat his home will be affected. He will have less money to spend in local stores and businesses. His children's schools, hospitals, and other services will be threatened. Few new jobs will be created because of loss of the competitive advantage of low cost power. New environmental hazards maybe in the making. To us it is truly a crisis of the highest magnitude affecting everyone. We ask your help.

Mr. SMITH. Well, thank you, Mr. Mayor. I could not help recall the stories I think I have seen in Readers Digest over the years about TVA was the big flop, they produced a lot of electricity that was not needed, and all these stories, and, then, I hear, sitting here on the committee, the mayor of Oak Ridge comes in and tells us there is a shortage of electricity. It is a big long step from those days, is it not? Mayor BISSELL. Yes, sir.

Mr. EVINS. I want to thank the mayor for coming and giving us his forceful and effective statement of the critical power situation that exists in our area. I would say about TVA's power projections, all the studies and all the reports that I have had have all underestimated the needs, and most all power projections have been on the conservative side, and, so, we need more electric power, we need more coal supply, and all sources of energy.

I think the mayor referred to the shortage of coal. There is no shortage of coal. There is an alleged shortage of coal. There is an abundance of coal in supply, both by the TVA and otherwise owned, and he has made some fine recommendations about making this coal available, and it is nearby, and the mines should be opened and the people put to work. I think his suggestions and recommendations will be very helpful.

I do note that the mayor and city of Oak Ridge have been pioneers in the field of ecology.

Mayor BISSELL. Yes, sir.

Mr. EVINS. They were the first to stop pollution in the area, and now that they have converted to electricity, they are having some critical problems.

I have no questions for the Mayor, but I want to thank him for his appearance.

Mr. CONTE. Mr. Chairman, I want to welcome the Mayor to our committee, and also join with you in commending him for the fine statement he made here today. He has done his homework and done it well. Mr. Mayor, you certainly do have a problem down there, and I hope that these hearings can help you solve that problem.

Mayor BISSELL. Thank you, sir.

Mr. SMITH. Mr. HORTON?

Mr. HORTON. I do not have any questions. I, too, want to join with my colleagues in thanking the Mayor for coming and giving us the benefit of his information.

Mr. SMITH. Thank you, Mr. Mayor.

Mayor BISSELL. Thank you, Mr. Chairman and gentlemen of the

committee.

Mr. EVINS. I suggest, since the House went in at 10 o'clock this morning and is in session, that we recess until 2 p.m.

(Whereupon, at 12:05 p.m., a recess was taken until 2 p.m., the same day.)

AFTERNOON SESSION

Mr. SMITH. The committee will come to order.

The first witnesses for this afternoon Mr. Dexter Raines of the Tennessee Land and Mining Co. of La Follette, Tenn.; and Mr. Jack Walls of Oliver Springs, Tenn.

We are glad to have you gentlemen with us. I understand each of you has a statement, then we will question the two of you.

Mr. Evins.

Mr. EVINS. Mr. Chairman, may I interrupt you to say I join in welcoming both of these distinguished gentlemen. They are friends of mine from Tennessee, and small businessmen, and we certainly appreciate their coming.

TESTIMONY OF DEXTER RAINES, GENERAL MANAGER, TENNESSEE LAND & MINING CO.

Mr. RAINES. Thank you, Mr. Chairman.

My name is Dexter Raines, and I am the general manager of Tennessee Land & Mining Co., 118 Broad Street, Clinton, Tenn. To begin with, I would like to thank Chairman Joe L. Evins for inviting me to appear before this committee to express my views on such an important subject. Chairman Evins is my Congressman, and we are certainly thankful to have such a distinguished and hardworking Congressman. He has proved concerned and dedicated to alleviating problems which continually plague the small businessman. The Tennessee Land & Mining Co. specializes in income property, particularly involving coal and timber in east Tennessee. We have a number of small coal operators who have leased property from the company for coal mining purposes. I have been associated with the coal industry for a number of years. I have been a producer as general manager of Tennco Inc. and Tennessee Auger Inc. from 1955 to 1969. The purpose of these hearings, as I understand it, is to investigate the impact of the fuel and energy crisis on small business. Nearly all of the coal operators in east Tennessee are small businesses, classified as such come under the Small Business Administration Regulations.

It has been these small businessmen who have been severely hurt. over the past decade due to various reasons which I shall outline. It has been reported that there is a current coal shortage by public and private utilities which is difficult for us to understand. Tennessee Land & Mining Co. alone has in excess of 240 million tons of recoverable coal, all of which is located within 40 miles of two of the largest steamplants in the country, Bull Run Steam Plant and Kingston Steam Plant. This coal could be made available to these plants by trucking, thereby eliminating the problem of railroad car shortages.

Of the numerous small mines in east Tennessee, I would estimate that 50 percent of them have been forced out of business for one reason or another over the last 10 years. Perhaps the single most important reason has been the depressed coal market. These businesses, had they stayed in operation, today could have increased their operations and become sound and stable concerns.

One of the most damaging things to the small coal operator has been the contract requirements imposed by utilities. These contracts normally contain an escalation clause based on the wholesale commodity index. This clause is supposed to help the small operator by increasing his sales price when the general wholesale price increases. However, the general wholesale price index does not present a fair yardstick as to added cost to the mining industry. This clause would be more equitable if it related only to materials used by the mining industry. Furthermore, utilities use a complicated bid form which very few, if any, small coal operators understand. If it weren't for coal brokers, many of these small businessmen could not even offer bids.

Utility contracts with coal operators also contain what is called a gross inequity clause. The purpose of this clause is to allow an adjustment of price for costs not contemplated when bid is offered. This purpose seems fair enough but the utilities do not administer it properly. I have known of companies which have been forced to stop deliveries because a utility would not adjust the contract price under

this clause.

The small coal operator over the past 5 years has been constantly threatened with the potential of nuclear power. He has been told numerous times that within the next 5 to 10 years his coal will be worthless. Faced with rising costs of labor and equipment, complicated bidding procedures and the eventuality of nuclear power, the small coal operator has come to the conclusion that he does not want to invest any more money in the coal industry. It is no wonder, therefore, that so many small coal mines have closed over the years.

In conclusion, I would like to offer the following recommendations: 1. That utilities, particularly the Tennessee Valley Authority, should ask for bids for specific steamplants rather than asking bids for an entire system of such plants.

2. That bid bonds required by TVA for small coal operators should be eliminated. Small businessmen cannot get such a bond without endorsements, and very few private utilities require such bonds.

3. There should be a close study of spot coal bid buying procedures. 4. The TVA should offer more technical help and management assistance to the small coal operator.

That concludes my statement, Mr. Chairman, and I again want to thank the committee for inviting me to testify.

Mr. SMITH. Mr. Evins.

Mr. EVINS. Well, thank you, Mr. Chairman.

I want to thank Mr. Raines for coming before the committee and making these recommendations. Certainly the committee will take your recommendations into consideration as we write our report and our recommendations to the TVA and all the agencies of the Govern

ment.

Certainly, you pointed out that there is not any shortage of coal. You say there are 240 million tons of recoverable coal right in your immediate area. This has been pretty well demonstrated.

When you speak of the depressed coal markets, what would you say are the contributing factors to the depressed coal market? There is an abundance of coal; what has brought about a depression in the coal industry?

Mr. RAINES. Well, it is the way that the utilities pool has used one operator against the other in buying his coal at a very cheap price, by turning down bids, by keeping him hamstrung and down in the lower end of the coal market, by not accepting bids as the bids were offered. Mr. EVINS. In other words, you say many times bids for delivery of coal are submitted and then they will reject them—

Mr. RAINES. That is right.

Mr. EVINS (continuing). To depress the price.

Mr. RAINES. That is right, sir.

Mr. EVINS. How many coal mines would you say are in operation let us say, in Campbell, Scott, and Anderson Counties and the immediate neighborhood of the TVA area, how many in operation in round. figures today?

Mr. RAINES. Well, there are around 40 operators.

Mr. EVINS. About 40.

How many mines were formally in operation, let us say, 10 years? Mr. RAINES. One particular time I personally offered a bid to TVA and there was 72 bids. That was in 1955, 72 bids for one bid letting. Six months ago I offered a bid to TVA and there was seven bids. Mr. EVINS. There used to be 70 bidders and now there are seven. Mr. RAINES. Now there are seven.

Mr. EVINS. Would you say there are half as many operating today as there were 10 years ago?

Mr. RAINES. Yes, sir; 50 percent of the mines have been closed.

Mr. EVINS. You made, Mr. Raines, some interesting suggestions that have not been called to my attention before. I want to review them quickly again:

That utilities including TVA should bid on specific steam plant projects. I imagine that is a pretty good suggestion. You can make a delivery at one specific plant at a cheaper rate than you can for distance and a combination of plants located at various points. They have never done this before?

Mr. RAINES. That is right, sir. If they have a bid letting the Tennessee Valley Authority includes four or five steamplants in one bid letting, and they ask for a specified amount of tonnages to be offered to buy.

Mr. EVINS. You do not know whether it is going to be at a close point or a distant point.

Mr. RAINES. That is right, sir. Our people are interested in bidding the Kingston Steam Plant, but the competitive bids are let for four or five plants. In that way we are in competition with people bidding at Gallatin, Johnsonsville, John Sevier, Bull Run.

Mr. EVINS. I can see the advantage both to the contractor making out both to the contractor and supplier for a specific point.

What about elaborating a little bit on the bid bond to be eliminated. Mr. RAINES. The problem of obtaining a coal contract performance bond is a common factor among small operators. In many cases a contractor would be awarded a contract only to find that even though the contract is his he cannot begin delivery because no company is willing to grant a performance bond. This is a bond that they require to guarantee performance under the contract.

Mr. EVINS. In other words, you might get the contract and then would have a bond requirement which would preclude you from carrying out the contract.