served in large part by the Waco's 115 miles of line, although some of the principal points are also reached by lines of other railroads. Based on his experience during the past three years in operating the Waco, the receiver has undertaken to show by a detailed analysis that a "normal" volume of traffic could be handled without a corresponding increase in operating expenses, and that the economies which have been effected would permit the road to pay 6 percent interest on the emergency loan and show a net income in excess of $25,000 per annum. What the receiver proposes to attain is, in effect, an operating ratio of 70 percent for the present lines, whereas they have shown no earnings applicable to the payment of interest since 1923, except in the year 1926. The forecast takes no specific account of prospective traffic from the proposed paper mill hereinbefore mentioned, nor from future developments in lumbering or the oil business. Confidence in these prospects is expressed by the receiver, but they are not relied on to support the above forecast. Information received since the filing of the emergency application shows the success of oil drilling at a point approximately 15 miles southeast of Livingston, the holdings of several large oil companies in the territory, the prospect of a large and productive field, and an indication that the extension of the Waco through the field, on the line projected, would be of service. The nearest station on another railroad is some 7 miles distant and the local highways are unimproved. In view of the present chaotic conditions in the oil industry, we are of the opinion that the amount and duration of the business of the Waco in connection with the new oil field is highly conjectural.

Despite the expenditures made by the receiver for maintenance, the existing lines have reached such a condition that apparently they must either be rehabilitated or abandoned. The property is encumbered with a heavy indebtedness. We doubt that the present lines can ever be made profitable or that the expenditure for repairs necessary for continued operation can be justified either by the history of the property or the outlook for new traffic. Our consideration, therefore, of the emergency application on its independent merits does not permit us to make an affirmative finding and to approve a loan without regard to the main application. Our denial of approval of the latter will be understood to embrace the advance sought in the emergency request.

In the report of August 12, 1932, we commented on the applicants' argument that section 5 of the Reconstruction Finance Corporation Act provides for the making of loans to railroads and railways in process of construction. The applicants state that this was written into the act at their instance. We think it is clear, how

ever, that approval of a loan for the purpose of completing a construction project must be founded on the demonstrated soundness of the enterprise at the time of the decision. More specifically, under the terms of the same act we are required to find that the Finance Corporation will be adequately secured in making the loan.

The applicants also seek support for approval of the loan from the fact of the issuance of our certificate of public convenience and necessity in July 1927. The certificate was conditioned on the commencement of construction on or before December 31, 1927, and completion within two years from that date. It was predicated on the use of private funds. Failing to obtain such funds, the applicant requested and was granted three extensions of time for completion, the last order fixing the date at December 31, 1933. The industry of the country in 1929 passed into a period of severe depression; extensive changes have since occurred in railroad traffic and earnings, rate structures, motor competition, and commerce generally. The Waco went into receivership. The entire situation has altered since the record in the convenience and necessity cases was closed, and we must give consideration to that fact. In Atchison, etc., Ry. Co. v. U.S., 284 U.S. 248, the Supreme Court of the United States took judicial notice of "the economic depression, amounting to a changed economic level, severely affecting the railroads." This record, as now supplemented, shows conclusively that the lines now serving the Sabine district, particularly the K.C.S., are in no position to suffer any unnecessary reduction in their revenues; and giving all the claimed effect to the theory that the completion of the Waco extensions would result in new accessions of traffic for the existing lines, it is obvious that such result could not be realized during the present economic emergency or in the near future. Recognizing a comprehensive change in the conditions upon which our finding in 1927 was based, and the fact that it is now proposed to use Government money and not private capital for carrying out the plan, it is plain that the issuance of the certificate in 1927 cannot be invoked as a reason for approving the loan. This is not to say that upon the present showing we may properly revoke the certificate, the life of which has been extended by our order of December 12, 1932, to the close of the present year.

Conclusions. Upon further consideration and investigation of the loan application, as amended by the petition for reconsideration and the supplemental application filed in Finance Docket No. 9234 on December 20, 1932, we conclude that the prospective earning power of the carrier and the security offered for the proposed loan are not such as to afford reasonable assurance of its ability to repay such loan. We are unable to find that the Finance Corporation

would be adequately secured. Accordingly, our previous denial of approval of a loan to the applicants is affirmed.

Upon the facts presented and the circumstances described, we find that the petition filed January 23, 1933, by the protestants in Finance Dockets Nos. 3197 and 5104 for the vacation of our certificate and order dated July 12, 1927, should be denied.

An appropriate supplemental order will be entered.

COMMISSIONERS AITCHISON, EASTMAN, BRAINERD, and LEE did not participate in the disposition of this case.

193 I.C.C.

FINANCE DOCKET No. 97601

UNIFICATION OF LINES IN SOUTHERN NEW JERSEY

Submitted May 12, 1933. Decided June 10, 1933

Order and certificate issued, authorizing:

1. The Atlantic City Railroad Company to acquire control of the West Jersey & Seashore Railroad Company by assignment of lease now held by the Pennsylvania Railroad Company.

2. The Pennsylvania Railroad Company to acquire control of the Atlantic City Railroad Company by purchase of capital stock.

3. The Pennsylvania Railroad Company and the Reading Company to assume obligation and liability by guaranteeing certain payments in respect of $4,587,000 of first consolidated mortgage gold bonds, $11,586,450 of common capital stock, and $104,000 of special guaranteed capital stock of the West Jersey & Seashore Railroad Company.

4. The West Jersey & Seashore Railroad Company, the Pennsylvania Railroad Company as lessee, and the Atlantic City Railroad Company as prospective lessee, to abandon certain portions of the West Jersey & Seashore Railroad in Cape May County, N.J. Conditions prescribed.

5. The Atlantic City Railroad Company to abandon certain portions of its line of railroad in Camden, Gloucester, and Atlantic Counties, N.J.

6. The Atlantic City Railroad Company to operate under trackage rights over certain tracks of the United New Jersey Railroad & Canal Company in Camden County, N.J.

7. The Atlantic City Railroad Company, the Wildwood & Delaware Bay Short Line Railroad Company, and the West Jersey & Seashore Railroad Company to construct certain tracks connecting existing facilities and to operate over an industrial track, dismissing the application as to the construction of other tracks and the operation over another industrial track; all in Camden, Atlantic, Cape May, and Gloucester Counties, N.J. W. I. Woodcock, Jr., Albert Ward, W. L. Kinter, and Henry Wolf Biklé for applicants.

Louis D. Champion, Robert K. Bell, G. W. Bergner, and George A. Redding for protestants.

Donald R. Richberg for Railway Labor Executives Association, intervener.

Joseph B. Perskie, Anthony J. Siracusa, Charles C. Read, R. V. Dean, S. Rusling Leap, Ralph Buvinger, C. C. Small, M. M. Saf

1 This report also embraces the following: Finance Dockets No. 9756, Atlantic City Railroad Company Control; No. 9757, Pennsylvania Railroad Company and Reading Com pany Assumption of Obligation and Liability; No. 9759, West Jersey & Seashore Railroad Company Abandonment; No. 9761, Atlantic City Railroad Company Abandonment; No. 9762, Atlantic City Railroad Company Operation; and No. 9758, Atlantic City Railroad Company Construction.

roney,

J. K. Lippincott, L. W. Parker, George J. Franks, and J. H. Fisher for various interests.

REPORT OF THE COMMISSION

DIVISION 4, COMMISSIONERS MEYER, EASTMAN, AND MAHAFFIE BY DIVISION 4:

By concurrent applications filed December 17, 1932, the following authorizations were sought, all of which will be considered in this report:

(a) The Atlantic City Railroad Company, hereinafter sometimes called the Atlantic City, to acquire control of the West Jersey and Seashore Railroad Company, hereinafter sometimes called the West Jersey, by the assignment to the Atlantic City of a lease now held by The Pennsylvania Railroad Company, Finance Docket No. 9760. (b) The Pennsylvania Railroad Company to acquire control of the Atlantic City by purchase of capital stock. Finance Docket No. 9756.

(c) The Pennsylvania and the Reading Company to assume obligation and liability by guaranteeing, jointly and severally, certain payments in respect of the securities of the West Jersey as hereinafter set forth, Finance Docket No. 9757.

(d) The West Jersey to abandon certain portions of its railroad in Cape May County, N.J., hereinafter more particularly described, and the Pennsylvania, the present lessee, and the Atlantic City, the prospective lessee, to abandon the operation of said portions of railroad, Finance Docket No. 9759.

(e) The Atlantic City to abandon certain portions of its line of railroad in Camden, Gloucester, and Atlantic Counties, N.J., hereinafter more particularly described, Finance Docket No. 9761.

(f) The Atlantic City to operate under trackage rights over tracks of the United New Jersey Railroad and Canal Company, a subsidiary of the Pennsylvania, between Federal Street station and Pavonia classification yard, 2.52 miles, in the city of Camden, Camden County, N.J., Finance Docket No. 9762.

(g) The Atlantic City, the Wildwood & Delaware Bay Short Line Railroad Company, hereinafter sometimes called the W. & D. B., and the West Jersey to construct tracks connecting existing facilities, and the Atlantic City to operate over certain industrial tracks, all in Camden, Atlantic, Cape May, and Gloucester Counties, N.J., as hereinafter more particularly described, Finance Docket No. 9758. Protests were received and a hearing was held for us by the New Jersey Board of Public Utility Commissioners, and the case was argued before us. The New Jersey board has recommended that the applications be approved upon conditions hereinafter noted.