No. 940.

POWHATAN COAL & COKE COMPANY

v.

NORFOLK & WESTERN RAILWAY COMPANY; ALGOMA COAL & COKE COMPANY; ARLINGTON COAL & COKE COMPANY; ASHLAND COAL & COKE COMPANY; BROWNING COAL & COKE COMPANY; BOOTH-BOWEN COAL & COKE COMPANY; BUCKEYE COAL & COKE COMPANY; BOTTOM CREEK COAL & COKE COMPANY; COALDALE COAL & COKE COMPANY; CROZER COAL & COKE COMPANY; CRYSTAL COAL & COKE COMPANY; CRANE CREEK COAL & COKE COMPANY; EUREKA COAL & COKE COMPANY; EMPIRE COAL & COKE COMPANY; ELKHORN COAL & COKE COMPANY; ELK RIDGE COAL & COKE COMPANY; GOODWILL COAL & COKE COMPANY; GILLIAM COAL & COKE COMPANY; GREENBRIER COAL & COKE COMPANY; HOUSTON COAL & COKE COMPANY; INDIAN RIDGE COAL & COKE COMPANY; KEYSTONE COAL & COKE COMPANY; LOUISVILLE COAL & COKE COMPANY; LYNCHBURG COAL & COKE COMPANY; MILL CREEK COAL & COKE COMPANY; McDOWELL COAL & COKE COMPANY; MONITOR COAL & COKE COMPANY; MIDDLE STATES COAL & COKE COMPANY; POCAHONTAS COLLIERIES COAL & COKE COMPANY; POCAHONTAS CONSOLIDATED COAL & COKE COMPANY; ANGLE COAL & COKE COMPANY; CHEROKEE COAL & COKE COMPANY; CASWELL CREEK COAL & COKE COMPANY; DELTA COAL & COKE COMPANY; LICK BRANCH COAL & COKE COMPANY; NORFOLK COAL & COKE COMPANY; ROLFE COAL & COKE COMPANY; SHAMOKIN COAL & COKE COMPANY; SAGAMORE COAL & COKE COMPANY; PULASKI COAL & COKE COMPANY; PEERLESS COAL & COKE COMPANY; PINNACLE COAL & COKE COMPANY; PAGE COAL & COKE COMPANY; ROANOKE COAL & COKE COMPANY; SHAWNEE COAL & COKE COMPANY; TIDEWATER COAL & COKE COMPANY; THOMAS COAL & COKE

COMPANY; UPLAND COAL & COKE COMPANY; HIAWATHA COAL & COKE COMPANY; PAWAMA COAL & COKE COMPANY; PIEDMONT COAL & COKE COMPANY; SMOKELESS COAL & COKE COMPANY; SPRING COAL & COKE COMPANY; WALBRIDGE LEASE NO. 9; WENONAH COAL & COKE COMPANY; WEYANOKE COAL & COKE COMPANY, AND ZENITH COAL & COKE COMPANY.

Submitted November 26, 1907. Decided January 14, 1908.

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1. Complaint alleges that the method of car distribution known as the "cokeoven basis," enforced by defendant railway company in the Pocahontas Flat Top coal district in West Virginia, unduly discriminates against complainant, and asks that the so-called capacity basis" of car distribution be adopted; Held, upon all the facts and circumstances in the case, that the coke-oven basis does not fairly measure the relative rights of the various operators in said coal district, but unduly discriminates against complainant and operates to the unreasonable preference of other mining companies in the same field.

2. While the mine capacity of a given shipper may be greater than his allotment of cars, yet where this is also the case as to other shippers similarly situated in the same coal field, it is the duty of the carrier, when the supply of cars is inadequate, to fairly distribute the available number among all operators.

Z. T. Vinson and Geo. S. Graham for complainant.

Joseph I. Doran and John H. Holt for Norfolk & Western Railway Company.

W. L. Penfield and W. S. Penfield for Indian Ridge Coal & Coke Company.

William A. Glasgow, jr., for Booth-Bowen Coal & Coke Company, Crane Creek Coal & Coke Company, Shawnee Coal & Coke Company, Crystal Coal & Coke Company, Keystone Coal & Coke Company, Weyanoke Coal & Coke Company, Thomas Coal & Coke Company, Pocahontas Collieries Company, Pawama Coal & Coke Company, Arlington Coal & Coke Company, Gilliam Coal & Coke Company, Pocahontas Consolidated Coal & Coke Company, Elk Ridge Coal & Coke Company, Tidewater Coal & Coke Company, Bottom Creek Coal & Coke Company, Buckeye Coal & Coke Company, Roanoke Coal & Coke Company, Ashland Coal & Coke Company, Pinnacle Coal & Coke Company, Pulaski Coal & Coke Company, Algoma Coal & Coke Company, Spring Coal & Coke Company, Piedmont Coal & Coke Company, Greenbrier Coal & Coke Company, Louisville Coal & Coke Company.

KNAPP, Chairman:

REPORT OF THE COMMISSION.

The complaint in this proceeding alleges that the method of car distribution, known as the "coke-oven basis," adopted and enforced by the defendant railway company in the Pocahontas Flat Top coal district in West Virginia, unduly and unjustly discriminates against complainant to the undue preference and advantage of other mine operators in said district: First, because the basis is itself essentially inequitable in that it places an arbitrary limit upon the amount of coal complainant may ship; and, second, because the "coke-oven basis" is, in fact, disregarded in the apportionment of the available car supply to certain operations in said district.

In the complaint the manner in which cars loaded with fuel coal for the use of defendant and other carriers are charged in the apportionment of cars to the coal field was also declared to be unjustly discriminatory; but as complainant is contending for the adoption of the so-called "capacity basis" of car distribution, and as the method of counting cars loaded with coal for carriers' use presents a question common to both the "capacity basis" and "coke-oven basis,” that feature of the case was, by mutual consent of the parties, eliminated from the issue and need not be considered in this report. The material facts are as follows:

The complainant is a corporation, with a capitalization of $150,000, organized under the laws of West Virginia, engaged at the time of filing this petition and since 1889 in the business of mining, selling, and shipping coal from the Pocahontas Flat Top coal district to markets outside of the State of West Virginia. The defendant railway company is a common carrier subject to the act to regulate commerce. The other defendants are corporations or individuals operating mines in and shipping coal from the said Pocahontas Flat Top coal district. The Pocahontas Flat Top coal district, hereinafter called the Pocahontas district, is situated in the counties of McDowell and Mercer, W. Va., and the county of Tazewell, Va., and as now developed embraces a territory about 25 miles long and 5 miles or more wide. During 1906 the total production of coal in this district was over 6,000,000 tons, of which complainant mined and shipped about 121,000 tons. The defendant railway company is the only carrier by rail which enters the Pocahontas district. Mining conditions are substantially the same throughout the entire district, except for certain advantages possessed by the operators of thick beds of coal, as compared to thin beds, which will be mentioned hereafter.

The theory of the "coke-oven basis" of distribution is that the available supply of coal cars shall be distributed to mine operators

13 I. C. C. Rep.

in proportion to the number of coke ovens erected by each operator. That is to say, the number of ovens erected by any individual operation divided by the total number of coke ovens in the district will give the percentage of the available car supply to which such operation is at any time entitled. There are important exceptions made in the application of this basis of distribution, which will be noted in due course.

The adoption of this method of car distribution seems to have been the result of a tripartite agreement between the railway company, the land companies, and the lessee operators. While it is difficult to ascertain the exact date when this method of distribution was first put in force, it is clear from the record that it has been in existence since 1889. Its adoption is due both to the quality of the coal produced in this district and to the fact that practically all of the mine operators, being lessees of the land companies, were required by their lessors to build a definite number of coke ovens per 100 acres of coal land.

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The Pocahontas coal is a soft coal, and when this field was opened it was believed to be good business policy to require the coal to be screened and the slack manufactured into coke, the expected result being that the operator, instead of having for sale merely the inferior run-of-mine" coal, would produce both good coal and good coke. By this means the landowners would increase their royalties, the railway company its freights, and the mine operators their products. A further consideration leading to this agreement was the belief held. at the time by the railway company and landowners that the Pocahontas field would become a great iron-ore producing district. To facilitate the output of this mineral wealth it was desirable and necessary to produce coke in the same field. Therefore, the landowners required their lessees to construct from 10 to 20 coke ovens per 100 acres of land leased.

An agreement entitled "Coal Producers' Contract," entered into August 11, 1886, by and between the railway company and certain landlord companies then in the Pocahontas field, provided, inter alia, as follows:

The parties hereto agree that during the existence of this contract they will make no leases or sales of lands or mining rights for coal operations until special arrangements have been made with the railroad company for such additional equipment as may be needed, and upon the express condition that the purchaser, lessee, or sublessee, shall become a party to this agreement.

The contract was to become effective January 1, 1887, and continue in force until December 31, 1896. The record does not disclose that the railway company, by any formal instrument, bound itself to provide 1 coal cars for each coke oven constructed, but letters signed by its president appear to show the intention of the railway company,

during the period from 1886 to 1901, to provide cars upon that basis, and also the understanding of the operators that for each coke oven constructed the railway company would be required to add 1 coal cars to the equipment apportioned to the Pocahontas field.

During this time additional ovens were not allowed to be erected without the consent of the railway company, which exercised its right, under the contract above quoted, to limit and restrain such construction. In the fall of 1902, being importuned to remove this restraint, it did so, upon the express condition that it would thereafter recognize no obligation upon it to build 1 cars for each oven constructed.

The Pocahontas Coal & Coke Company, a corporation organized under the laws of the State of New Jersey, is the owner of the greater. portion of the Pocahontas coal lands that have been leased to the defendant operators; a majority of the stock of the Pocahontas Coal & Coke Company is owned by the Norfolk & Western Railway Company; the Pocahontas Coal & Coke Company neither mines nor ships coal.

There are in the Pocahontas district variations from the strict theory of the coke oven basis in three important particulars. (1) Certain operations east of the Great Flat Top Mountain receive an arbitrary percentage of the total number of available cars in the district before the residue of such cars are prorated among the remaining operations on the coke oven basis; (2) the percentage of available coal cars for another group of operations is based upon the number of ovens actually erected, plus a certain number of allotted or imaginary ovens; (3) another group of operations have erected no ovens, but receive a percentage of available coal cars based wholly on allotted or imaginary ovens. The facts concerning these arbitrary allotments of cars are:

(1) In the beginning of the development of coal operations in the Pocahontas district the railway was constructed only to the east side of the Great Flat Top Mountain. Several coal developments were made there, which shipped their product exclusively to the east, inasmuch as there was no outlet by railroad to the west. Subsequently, at great expense, the railway was extended through the Great Flat Top Mountain by tunnel and down the grades on the western side through the adjacent coal field. In consequence of physical conditions, it cost 5 or 10 cents more per ton to haul coal to tide water from the western than from the eastern group of mines. In order that the eastern mines might not have an undue advantage in freight rates over the western operations, it was sought to attain some form of compromise between the two divisions of the field, by which both would be given the same freight rate, and the eastern some advantage