M c G r a w - H i l l C o m p a n y , I n c . D e v o te d to t h e O p e ra tin g , T e c h n ic a l a n d B u s in e s s „ n . r r . TT
J a m e s H . M c G r a w , President _ ui * <--u n 1 • t a +■ T D a w s o n H a l l
E . J . M e h r e n , Vice-President P ro b le m s o f t h e C o al-M in m g I n d u s t r y Engineering Editor
Volume 27 N E W Y O R K , J U N E 25, 1925 N um ber 2«
Blaze a Clear Trail
T
H E N ational Coal Association has undertaken an im p ortan t piece of w ork in the study its special com m ittee is about to make to determ ine w hat statistics on coal should be compiled and how they may best be utilized fo r th e best in te re st of the in d u stry and the public— ivell w ith in the laic. T here is need fo r sober though t on th is subject and fo r definite and advanced action. The in d u stry and th e country a t large sorely need a thorough going coal statistica l service and th ere is no b etter agency th an the N ational to lay out a proper course to follow. The association will do well to blaze a clear tra il fo r coal tra d e associations and to perm it no g ra ss to grow under its fe et in th e process.H oratius Lewis Is Still at the Bridge
T
WO M ONTHS AGO P resid en t Lewis of the U nited Mine W orkers declared to a Coal A g e editor th a t his refusal in 1922 to p erm it a reduction of m in ers’w ar-tim e wages was the facto r th a t saved th e U nited S tates fi’om sinking into E nglan d’s deplorable economic condition. Had the m iners surrendered to the demand fo r a leveling down of pay, the cou ntry’s whole wage stru c tu re would have broken down, the n atio n ’s buying power would have shrunk, g re a t unemploym ent would have resulted and chaos m ig h t have prevailed. Mr.
Lewis is still p u ttin g up his fight fo r high wages in spite of overwhelm ing w eight of sentim ent and circum stance a g a in st him. T his m an Lew is simply compels adm iration.
And now, having stood like H o ra tiu s a t th e bridge since 1922, he calls atten tio n in h is new high-w age propaganda book— “The M iners’ F ig h t fo r Am erican S ta n d a rd s”— to another g re a t service he is perform ing.
The coal in d u stry is rescuing itself by m achinery and his high-w age policy is responsible! H igh w ages are driving the in d u stry to do th is th in g fo r itself. The books say s: “The policy of the U nited Mine W orkers of A m erica will inevitably b rin g about the utm ost em
ployment of m achinery of which coal m ining is physi
cally capable. The policy of those who seek a disruption of th e existing wage stru c tu re would only postpone m echanization of th e in d u stry and p erpetuate obsolete m ethods.” T here you have it.
W hat we rise to inquire is th is : Since it is Mr.
Lew is’ high wages th a t are driving coal men to design and adopt m achines, w hy is so much of the present- day m echanical progress made in non-union fields? And why are union m ines compelled to indulge in such a stru g g le w ith Mr. Lew is’ organization to g et m |ch in e scales and w orking conditions adopted? Somehow we are still old-fashioned enough to cling, even a f te r read
ing Mr. Lew is’ book, to the theory th a t m achinery everyw here has been adopted in spite of and never because of M r. Lew is’ scale or h is a ttitu d e tow ard the introduction of m achines.
However, th e m in ers’ leader foresees th a t th e inrush
of ^tnachinery cannot be halted. The th in g now is fo r the union to claim all th e credit possible. We can onJy hope th is presages a m ore wholesome s p irit of help
fulness on the p a rt of th e union tow ard m achinery.
H old the T hought
N
'O T ONLY in w in ter but in sum m er also is coal destined to be m an's g re a te st com forter and friend.The public needs to be cooled in sum m er alm ost as much as to be w arm ed in w in ter. The use fo r coal is not seasonal, and, when we learn th a t fact, th e coal m arket will cease to decline in th e sum m er months.
We have accepted th e sum m er too long w ith o u t any attem p t a t the am elioration of our lot. We have regarded its approach w ith a fatalism th a t does us r.*a credit. We have sw eltered w here we m ig h t have been cool, ju s t as our fa th e rs went cold when th ey m igfit have been warm . I f the tem p eratu re of th e a te rs can be kept 20 deg. below th a t of the street, why no t all public auditorium s, why not th e houses and offices in which people live and work?
If the public will only “hold the th o u g h t” in th e next generation, we shall be com fortable indoors in both sum m er and w inter, fo r the heating and ventilating engineer has devised the way. Rapid tran sp o rta tio n , fu rtherm ore, will keep us cool when outdoors despite the sum m er heat, so th a t the burden of th e Ju n e sun will re st in th e fu tu re less heavily upon us.
Pow er aud P rofile Peaks
P
OWER, or ra th e r energy, peaks and peaks in the grades in the mine have a close connection. Every roadw ay should be carefully profiled sc> as-: to ascertain w here power is w asted by excessive grades. These steep ascents lim it the load th a t can be safely and economically hauled by locomotives. W ith steep grades not only does one have energy peaks but w ear and tei-. r on th e equipm ent and lowered tonnage p e r locomotive and som etim es the cost of m ain tain in g u pum p to keep out w ater into th e bargain.No railro ad would to lerate such inequalities, in grade, and, in m any places, the m ine operato r should not re g ard them w ith any more equanim ity. In m any m ines power shovels are used to a ssist in m ucking and in lowering the cost of grading. W here th e re is much work to be done th e shovel soon pays fo r itself and is ready fo r f u r th e r work. W here the bottom is cut, a coating of cement, streng th ened by a reinforcem ent of n ettin g will p ro tect the clay so th a t it will not d eteriorate to such a degree th a t the adjacen t pillars will squeeze i t into the roadway, fu r th e r weakening the roof support.
R ailroading underground should be nc different from ra ilro ad in g on the surface. A grade th a t would not be tolerated on an outside road is often le ft in th e mine, though th e effect is equally harm ful. N or should t r a ditional practice be allowed to in te rfe re w ith th e neces- 929
930 C O A L A G E VOL. 27, No. 26
sitie s of operation. Because roads have been too often allowed to ris e and fall w ith th e undulations of the coal seam is no reason why progressive m anagem ent should p erm it the profile of a m ine roadw ay to have excessive peaks. A bad grade is a lim iting fa cto r in haulage, ra ise s power bills, lowers speed, dam ages loco
motives, cars and th e ir couplings, causes accidents and should never go uncorrected. M any electric problems a re not to be m et electrically b u t should be rectified by im provem ent of roadways.
More Firebosses, More Safety
A
T MANY m ines firebosses are given too large an area to inspect. In consequence gas and bad roof go undetected. One superintendent recently trie d to dispense w ith a fireboss, and the safety engineer, p ro testin g a g a in st such a specious economy, suggested th a t he and the superintendent try to cover th e ground in the tim e it should be covered by th e fireboss. They scrambled around the beat giving only a cursory inspection and w astin g not a m oment by the way. When the tim e set fo r the fireboss to m ake his daily rounds had been consumed they found they had not covered the full beat and were quite w earied in the chase.
In consequence the force of firebosses was not re duced, fo r it was clearly proved th a t the p resen t staff, if industrious and efficient was not sufficient to do a good job. W hat would have happened if they had found gas somewhere and had been compelled to p u t up b ra t
tice cloth or if th e ir safety lamps had gone out and they had been obliged to go to a safe place to relig ht them or w hat again if th e ir re lig h ters had failed to operate? W hat indeed? And th is was a t th e mine o f a company rated as one of the m ost exemplary anywhere.
Company officials should tr y out the ru n s th a t they impose on firebosses and forem en so as to see if they can perfo rm a t least the legal requirem ent under nor
m al conditions. I f they cannot, th e law is not being obeyed, no m a tte r w hat the instructions. W hen an accident occurs from a gas explosion it would be well fo r th e inspector to go over each fireboss’ te rrito ry in order to find out if too g re a t a burden has been placed on any or all of them. The practice of overtasking forem en and firebosses should be stopped. I t is a source of m any accidents. The fireboss in such a case is less a protection ag a in st safety th an an “alibi” again st prosecution.
When a fireboss is discharged and an other not hired, if th e tonnage is not decreasing, the m a tte r is w orthy o f an investigation by the state inspector. Do inspec
to rs w ith sufficient frequency inquire into th e num ber of firebosses on the job and th e num ber of places in
spected? Of course the coal thickness, th e q uan tity of gobbed rock, the presence or absence of bad roof and th e prevalence of gas are facto rs in determ ining the num ber of firebosses needed, but the inspector should have a definite idea how m any are requisite and, if not, should acquire th a t knowledge by tak in g a fireboss around him self, te stin g the roof and inspecting fo r gas as th e re g u la r fu nction ary would be required to do.
H ere is an other m a tte r th a t is left too often to guess
work. Yet how easy it would be to try it out m ethodi
cally. Doesn’t the m anager w ant to know w hether the w-ork is, or can be, done in accordance w ith law and th e dictates of safety ? Sometimes, it seems th e m anager, doesn’t w ant to m ake a scientific study, fo r the resu lts would be em barassing. H ere th is editorial m ust close,
fo r in these days of fierce com petition and m ines ru n a t a loss, th ere a re only too m any b urn in g ears. A fte r all is said, would not one d isaster wipe out fo r m any decades of operation th e fallacious saving of dispensing w ith an additional fireboss? Savings such as these do n o t pay.
B lending Coal
H
IT H E R T O only coal fo r coking and b riq u ettin g has been blended in th e U nited S tates, as f a r as we know, except a t tim es when a n th ra c ite was scarce and had to be supplem ented by bitum inous, but w hether we do well to m ake a general practice of selling u n blended coal is a m a tte r w orthy of investigation. In other countries, p articu larly in South Wales, the p ractice of blending is quite common. In N atal also, ac
cording to W. J. W ybergh, two separate colleries oper
ated under independent m anagem ent are m ixing the sem i-bitum inous coal of th e one colliery w ith th e an th ra c ite of the other, th ere being in th a t country the objection to an th ra cite th a t is 'so usual in all countries bu t th e U nited States.
W here proper equipm ent is not provided fo r the b u rn in g of an th ra cite it is not a satisfacto ry fuel. I t is a question w hether an th racite would have found a welcome in th e U nited S tates had bitum inous been equally available a t th e beginning of the last century.
The citizens of the E a s t had little else th an an th ra cite to burn. Accordingly th e technique w as m astered, and a n th ra c ite became th e sole domestic fuel of th e E ast.
L a te r the an th ra cite operators w ith Eckley B. Coxe as leader, diligently found out how to bu rn small an
th rac ite fo r steam -raisin g purposes. H ad it not been fo r th is aggressive activity an th ra cite would have been ignored today fo r steam raisin g, fo r the large sizes, steam boat and the like, are too expensive.
In N atal, however, bitum inous coal is close a t hand, and, consequently, an th racite, which req u ires special equipment, does not get an opportunity fo r operation under favorable circum stances. T herefore an th ra cite is blended in N atal w ith bitum inous. I f th is w ere done in A m erica we m ig ht correct th e tendency of bitum inous to cake and to smoke by adding an th racite, and th us the an th ra cite operators m ig h t find a m ark e t fo r th e ir coal in th e bitum inous regions. The a n th ra c ite would also hold fire longer and reduce the stoking th a t would otherw ise be necessary.
The blended fuel m igh t possibly be b e tte r th a n either.
A slow -burning a n th ra c ite m igh t be m ade free-b u rn in g by th e addition of bitum inous. However, the blend would have to be w atched lest a com bination be attain ed th a t would clinker freely. Two kinds of ash both w ith a fa irly high fu sin g tem p eratu re m ay fu se a t a low tem p eratu re when mixed. T his difficulty which often gives rise in the sou thern states to “molasses clinker” is not so common in the n o rth ern fields.
Blending is w orthy of consideration, not so much to eke out a scarcity of an th ra cite as of a way of procuring a fuel having less objectionable ch a rac te ris
tics th an bitum inous, less prone to coke, less disposed to smoke, less likely to explode, less inclined to spon
taneous com bustion and m ore easily kept b u rn in g over long periods w itho ut stoking. The suggestion, i t would seem, m ig h t be w orthy of tria l especially by companies operating in both fields. The only obstacle to the an th racite operators try in g it m ight be th e fe a r of having the tables tu rn ed on them by the introduction of blends into anthracite-b itum ino us te rrito ry .
Ju n e 2 5 , 1 9 2 5
C O A L A G E 931
N atio n al Coal A ssociation Seeks W ay to Serve In d u s try w ith S tatistical D ata
R e ce n t Sup rem e Court R u lin g C lears W a y for O perators in C o n v en tio n a t C h ica g o — T h e y D is c u ss M an y P ro b lem s and E le c t M. L. G ould, o f In d ia n a p o lis, P r e sid e n t for 1925
By R. Dawson Hall
E n g i n e e r i n g E d i t o r , G o a l A g e , N e w Y o r k ; C i t y
G
U ID ED by the lig h t of th e recent tra d e association decision made opportunely by th e Suprem e Court, th e N ational Coal Association a t th e E dgew ater Beach Hotel, Chicago, 111., Ju n e 17-19, prepared to recommence a collection of coal sales s ta tis tics th a t would be entirely w ith in the law. The A ssociation chose as its president, M. L. Gould, p resi
dent of th e L inton Coal Co., of Indianapolis, Ind., and listened to able presen tatio n s of th e financing problems of th e coal in d u stry by R. K. C assatt and of the gov
ern m en t’s retren ch m en t program in W ashington by General H e rb e rt M. Lord. George T. Buckingham w arned th e A ssociation in collecting sales d ata to w atch its step and seek only to dissem inate ascertained fa c ts ; not to impose, or even suggest, action in accord w ith th e fa c ts ascertained.
The question of collecting and dissem inating tra d e inform ation on coal w as one of th e forem ost subjects a t th e convention. H. L. Gandy, executive secretary, in h is re p o rt recommended th a t a com m ittee be ap
pointed by th e presid en t to determ ine th e extent and scope of a proper sta tistic a l service fo r th e in d u stry and to w ork out details of co-operation in such a service between th e N ational and various tra d e associations and bureaus th e country over. This was done as one of th e principal acts of the convention. P resid en t Gould h as not yet m ade h is appointm ents bu t th e com m ittee is expected to be created a t once. I t m ay recommend th a t th e N ational itself operate a large-scale data serv
ice on coal, although the convention did .not direct it to do so.
Following th e address of welcome by W illiam Dever, m ayor of Chicago and th e appointm ent of com m ittees, S. Pem berton H utchinson, the president, m ade a re p o rt of th e affairs of th e A ssociation which covered much th e sam e lines as those which followed. Mr. H utch in son declared th a t th e A ssociation found itself a t th e end of the y ear w ith a la rg e r m em bership tonnage th an it had a t th e beginning and complimented the M em bership Com m ittee and D elbert H. P ape on th is achievem ent.
N ext in order came th e annual statem en t of the executive secretary, who said th a t th e A ssociation was on a s tro n g financial basis despite th e fa c t th a t it had spent $23,000 m ore th an it received d u rin g th e fiscal y ea r ended M arch 31 of th is year. “ C onsideration,”
said he, “m u st be given to the heavy loss on account o f Coal R eview from th e beginning of th e fiscal year, A pril 1, 1924, to its discontinuance, Dec. 24, 1924, and also to th e fa c t th a t, d u rin g the year, nearly $20,000 was paid on p a s t obligations of th e Association. Col
lection of th e accounts receivable, on w hich paym ents are being received from tim e to tim e, would liquidate th e obligations of the Association and leave in tact its reserve fu n d of $100,000 in bonds. The tre a su ry is
M. L. Gould
E l e c t e d P r e s i d e n t o f t h e N a t i o n a l ' C o a l A s s o c i a t i o n
in b e tte r condition by approxim ately $10,000 a t th is tim e th a n it w as a t th e close of th e fiscal year on
M arch 31.” . . •
Mr. Gandy said th a t th e assigned-car order of the In te rs ta te Commerce Commission had been attacked by th e railro ad s and p riv ate car owners and th a t th e m at
te r was pending before certain U nited S tates d istric t courts. On advice of counsel it w as decided to w ait till these cases reach the Suprem e Court, if they ever do, and th en file a b rie f as a frie n d of the co urt in support of th e position previously taken by th e Asso
ciation.
“The M aynard Coal Co.’s case a g a in st the Federal T rade Commission challenging th e au th o rity of th a t commission to dem and special accountings and rep orts on th e in tim ate details of the business of coal-producing companies was decided,” said Mr. Gandy, “a g a in st the commission and is pending before th e C ourt of Appeals of th e -D is tric t of Columbia.” The C laire F u rn ace Co.
case is sim ilar, according to Mr. Gandy, and in th a t case th e C ourt of Appeals had decided a g a in st the com
mission, so th e indications are good fo r th e success of th e M aynard Coal Co.’s case. However, th e Claire F urn ace Co. has yet to su stain its position before th é Suprem e Court. R eargum ent is dated fo r Nov. 2.
Mr. Gandy re ferred to th e N ational conference on th e utilization of fo re st products, Nov. 19 and 20, 1924, and quoted th e statem en t m ade a t th a t conference th a t 79,000,000 cu.ft. of m ine tim bers, th e equivalent of th e annual grow th on 1,500,000 acres of land w ere lost each y e a r by decay. T w o-thirds o f-th is loss is said to be preventable thro u g h p reserv ative trea tm e n t.
9 3 2
C O A L A G E
Vo l. 2 7 , N o . 2 6Discussing the recent decision of the U. S. Suprem e Court in reg ard to tra d e associations, Mr. Gandy said th a t “in Jan u ary , 1924, a committee of local association secretaries subm itted to the Board of D irectors of the Association a program fo r statistica l activities based on the general association or bureau activities which would re ta in the details but subm it only sum m arized statem ents to the N ational headquarters, upon which sum m aries covering th e en tire country could be based.
T hat plan was again called to the atten tio n of the Board of D irectors a t its m eeting in March th is year, but action was deferred.” In consequence of the decisions he recommended the creation of a special advisory committee to give full C onsideration to out
lining a pla'ii lo r the collection an d 'd isse m in atio n of trad e inform ation and to -report to the Board of D irectors a t 'th e earliest possible- date.
Mr. Gandy drew atten tio n to the facti th a t in bis last annual report-the D irector of the B ureau of the Census recommended th a t Congress put the census of- m anu
fa ctu rers on a'com pu lsory basis to include the collec
tion, compilation and publication of sta tistic s of cu rren t production, consum ption and stocks, shipm ents, orders and receipts and sales of commodities used in m anu
facture. — ■ J-- -•->
The rep o rt of T re asu re r C. E. Bockus showed receipts of $199,034.95 and disbursem ents of $222,048.39, a deficit of $23,103.44. The assets of the Association are
$270,500.27, less debts of $133,451.68,5 leaving a surplus of $137,048.59. Among the 'credits " a re $136,193.65 accounts receivable. The tre a s u re r recommended th a t the ordinary assessm ent be m ade one mill p er ton.
W. H. Cunningham , chairm an of the Government R elations Committee, urged the collection of statistics regarding th e coal industry, w ith care not to overstep the m ark and violate th e term s of the Sherm an Act.
“Looking ahead,” said he, “only a sh o rt period, to next December, i t does not require a f a r stretch of the im agination to visualize a hectic session of th e 69th Congress, w ith th e by-election in the offing, when some of the n atio n ’s law m akers clamor fo r laws w ith teeth.” In his opinion the suggested national confer
ence on m ine safety was dead b u t m ight come to life and the proposed child-labor am endm ent was in a state of coma.
W alter B arnum , fo r the M em bership Committee of which he is chairm an, declared th a t as the m em bers of the coal ind u stry w ere widely scattered they needed organization m ore than any o th er industry. He said needless rep o rtin g to some busy bureau would cost every mine in th e country in clerk h ire alone m ore than the dues of the Association. As chairm an of the pub
licity committee, M. L. Gould described the purpose of the board as not to attem p t to give out to th e public the news of the in d u stry as it would like to see it recorded bu t to inform th e press as to the whole tru th of any situ atio n. “ If an in d u stry ,” said he, “cannot play the publicity game w ith the cards on the table, it is much w iser not to sit in on the' gam e.”
E fforts would be, and are being, made to give pub
licity to the story of coal by m agazine articles, radio, m otion-picture films, addresses and contributions to loeal papers. ■ “I t has been out of the question,” said Mr. Gould, “to consider adv ertisin g which necessarily would have to be on a national scale. To project an idea to th e A m erican publiS thro u g h th is m edium would cost considerably m o re 'th a n the sum represented by the total income of the Association.”
C. H. Jenkins, chairm an of the tran sp o rta tio n com
m ittee declared in h is re p o rt th a t as th e railro ad s were fu rn ish in g 100-per cent tra n sp o rta tio n service and had been doing so fo r a long .time, the com m ittee had little to do. It, w ith the A m erican W holesale Coal Associa
tion, had been able to effect an arran g em en t w hereby shipm ents could be made to Canada w ith fre ig h t charges collect.
The efforts of th e research com m ittee to assist in the progress of the bitum inous coal in d u stry w ere detailed by J. C. B ryden in his report. He said th a t a proposal had been made and considered th a t a coal-burning equipm ent exposition be held in conjunction w ith the p resent m eeting but was considered inadvisable.
E fforts were being made w ith the A m erican In stitu te
C. E. Bockus
of A rchitects, the N ational Boiler and R ad iato r M anu
fa c tu re rs Association, the N ational Association of Stove M anu factu rers and the A m erican Society of H eating and V entilating E ngineers to obtain modifications in building regulations which would req u ire properly con
stru cted h eatin g installations. The com m ittee had also offered to co-operate w ith the Boston Cham ber of Com
merce in its efforts to popularize th e use of bitum inous coal in New England.
The Executive Com mittee of the Association has authorized the employment of a full-tim e secretary fo r the research com m ittee and the employment a t à later date of an engineer to ca rry on tests re la tin g to coal com bustion in co-operation w ith educational or o th er in stitu tio n s having the proper equipm ent, contingent, however, on sufficient additional revenue being obtained by th e Association.
A t th is point Russel B. Cooper of Johnston, Pa., was introduced. He has been given a y ear’s fellowship a t the Carnegie In stitu te of Technology to ascertain the ta rs and oils resulting from low -tem perature distillation at 500-700 deg. Ç. instead of a t 1,000 C. as is th e m ore usual tem perature. Low tem perature distillation, it is well known, gives two or th ree tim es as much distillate as high tem p eratu re b u t w h a t is the value of the product? It will be his endeavor to ascertain how much light, or m otor, oil can be obtained, how much m edium or Diesel oil and how much heavy oil and ta r.
A nother inqùiry th a t should be made in th is direc
tion, he said, was as to the value of cresols in wood
Ju n e
25, 1925 C O A L A G E 933
preservation. Cresols made from coal have been ex
cluded in certain stan d ard specifications, only wood cresols being approved. G erm an data seemed to show th a t im pregnated w ith such coal-distillation cresols the life of th e wood was tw ice as long as when wood- distillation cresols w ere used. I t w as th e hope th a t low -tem perature distillation would give a new type of coke to th e coal consumer, one th a t would be about as easily ignited as coal and yet absolutely smokeless.
He believed these possibilities appealed to every coal man.
M em orandum 2,319 in the Income T ax B ulletin of Sept. 15, 1924, has been occasioning much trouble fo r the special ta x and cost-accounting com m ittee of which M. L. Gould is chairm an. In fact, the committee was form ed to m eet th a t p a rtic u la r difficulty. The mem orandum re ad : “C ar wheels, lig h t rails, copper cable, horses, h arn ess and chain-haul replacem ent, p u r
chased and used by a coal company in its business should be capitalized and no t tre a te d as m inor item s or c u rre n t expenses.” As the chairm an set fo rth in his report, such item s did not increase production, decrease cost or add to th e value of the property. The solicitor overlooked the fa c t th a t the purchase m ig h t be merely the replacem ent of a w orn-out item of equipm ent of a sim ilar nature.
As the re su lt of the representations, M emorandum 2319-A w as published by the Solicitor, Feb. 2, 1925, sta tin g th a t th e original m em orandum had reference to a “p a rtic u la r situ atio n .” The Solicitor fu r th e r stated th a t no genex-al rule could be m ade by which to d if
fe re n tia te between “m ajo r” and “m inor” item s of plant and equipm ent and th a t each case m u st be judged on its own m erits, th a t th e length of life of the property is no t an absolute te s t and th a t th e fa c t th a t th e equip
m ent has a life “som ew hat” in excess of one year does not necessarily m ake it a capital item . I t m u st not be classed, however, as a m inor item unless satisfac to ry proof exists th a t it is a m inor item of th e class con
tem plated by th e R egulations.
The com m ittee took th e position th a t it w as a well- established practice in the bitum inous coal-m ining in
d u stry to provide th a t capital charges should cease w ith the full development of th e mine and the installation of the equipm ent necessary to produce th e projected ca
pacity, and th a t unless cost was m aterially or p e r
m anently decreased th e cost of new equipm ent of a kind already in use should be charged as an expense of c u rre n t operation.
F u rth e r changes in A rt. 224 of th e Income Tax R egulations are to be recommended to th e T reasu ry D epartm ent so th a t the distinction between capital expenditures and c u rre n t o perating expense will be clarified.
In th e afternoon of W ednesday, W est V irg in ia, P en n sylvania and Kentucky held th e ir s ta te and d istric t m eetings in separate rooms. A t 6:30 p.m. the Smoke
less Coal O perators Association of W est V irg in ia held a dinner in the Hotel Sovereign.
T h ursd ay m o rning’s session saw a large accession of operators. W. D. Ord, presid en t of th e E m p ire Coal &
Coke Co. of L andgraff, W. Va„ dealt th é practice of open consignm ent of coal a verbal jo lt or two in an address on th a t subject w hich will appear in next week’s issue.
W. L. Robinson, vice-president of the Youghiogheny
& Ohio Coal Co., Cleveland, Ohio, then m ade some rem ark s on th e “P ro g ress of th e S afety Movement in th e B itum inous Coal In d u stry .” He said th a t b itu m i
nous coal m ining was not so hazardous as m any other occupations. The insurance ra te for m en w orking underground in th e various states varies from $2.50 to
$5.60 per hundred dollars of pay-roll and averages
$3.50, which is about the ra te th a t obtains in Indiana, nam ely $3.55.
The Ind ian a ra te for fa rm hands is h ig h e r; seventy- seven occupations ca rry a hig h er ra te th an m ining.
Even the m acaroni facto ry men have a 12 per cent higher ra te th an underground mine w orkers, and w in
dow cleaners have a ra te 2 Î tim es hig h er th an the m an who w orks in the mine. In h is estim ation the safety lamps should be uniform only fo r like conditions, and th e ad m in istratio n appointed by the sta te should d eter
m ine ju s t w hat are the conditions under which the m ine
is operated.' U niform laws would put an undue burden on certain m ines and leave others unprotected.
Mr. Robinson rem arked th a t “The U. S. B ureau ol Mines has been m aking safety surveys of m ining prop
ertie s a t th e request of operato rs of m ines and on the basis of those surveys has m ade re p o rts of conditions tog eth er w ith recom m endations. The num ber of requests coming to the B ureau from bitum inous coal m ine operators fo r surveys of th is kind has been in creasing so rapidly th a t th e B ureau already finds it difficult to finance the num ber of surveys desired.”
Coupling w ith th is th e introduction of safety engi
neers, Mr. Robinson saw much evidence of increased in te re st in safety. J u s t as surely, said he, as th e carbide lamp has supplanted the oil lamp and candle other th in g s in th e line of progress are going to occur.
T his paper aroused much discussion. R. E. Howe, secretary of the S outhern Coal O perators Association, Knoxville, Tenn., com m enting on the article’s reference to th e value of safety teaching and inculcation as a g a in st m ere mechanical protection related the efforts of th e operators of his local organization to prom ote first aid and safety th ro u g h th e m edium of th e Joseph A. Holmes S afety Association. J. F. C allbreath, exec
utive secretary of th e Am erican M ining Congress, W ashington, D. C., spoke about the new aw ards offered fo r safety in coal m ining, m etal m ining and qu arrying.
C. E. Bockus, president, Clinchfield Coal Coropration, announced th a t his company was aw arding $10 gold pieces fo r success in prom oting safety. It had arrived a t a ra te of 2,000,000 tons of coal fo r one life.
934 C O A L A G E V ol . 27, No. 26
Eugene McAuliffe, president Union Pacific Coal Co., took exception to the use of actuarial rates as bearing on relative hazards. He urged, on the audience the im
portance of rem em bering th a t the mine w orker worked less hours th an the window cleaner and consequently a change would be m anifest if the compensation w ere put, as the U. S. B ureau of Mines is try in g to p u t its statistics, on a m an-shift basis.
He believed th a t the inadequate tra in in g of forem en in safety was one cause fo r a high accident rate. These men had only a limited opportunity fo r association w ith men from other regions ; consequently they m issed the education th a t goes w ith such contact. The cost of coal has too often prevented adequate effort being made to prevent accidents. A fte r all was said, the g rie f of the accidental death lay in the u n fo rtu n ate evils it brought to dependents. D eath comes sooner or la te r to all of us bu t w ant was not so inevitable, and accident b ro ught w ant and deprivation.
E u g e n e M c A u lif f e P r e s i d e n t U n i o n P a c i f i c C o a l C o .
In his own company Mr. McAuliffe said he had put on an engineer as a safety m an and another as a ventilation engineer. Two men from th e faces of the w orkings w ere p u t on a t every mine to w atch fo r the safety of th e mines, one chosen by the superintendent and one by th e union. The B ureau of M ines’ m en were brought in by arran g em en t w ith th e Bureau, and they found m any unsafe conditions which the company's men had overlooked. The fa ta lity record of the Union Pacific m ines was not as good, he said, as th a t of th e m ines of th e Clinchfield Coal Corporation.
J. G. Bradley, president, Elk R iver Coal & Lum ber Co., Dundon, W. Va., said th e B ureau of M ines w as not w ithin its rig h ts in exam ining p riv ate properties, even w here requested. The endeavor should be to economize a t W ashington and let every mine engage its own safety experts.
T. T. Read, S afety D irector, U. S. B ureau of Mines, said th a t the B ureau rendered a g re a t service to indus
t r y and th e states by m aking perm issible tests. Each s ta te could not afford to make its own, nor would it be well if it could, as such a m ultiplication of effort was to be deplored. The B ureau of Mines had carefully regulated itself from its inception so as not to u n d er
take an y th in g th a t could be more acceptably done by
individual states. R egulation, th e B ureau felt, was a s ta te fu nction and not a national one. T h a t was why P resid en t Coolidge favored the governors’ conference, not to advance federal interference, b u t to call the states to a sense of th e ir personal responsibility.
Thom as Lewis declared governm ent in terferen ce un
desirable. Mr. B radley had said th a t M r. McAuliffe’s record was not as good as th a t of M r. Bockus because of Mr. McAuliffe’s reliance on Governm ent aid and Mr.
Bockus’ sta lw a rt d eterm ination to rely on the jud gm ent of him self and his men. M r. Bockus asked privilege to declare th a t he him self had called in two B ureau of M ines officials who helped him organize his force and did th e company g re a t service.
C onfronted by a severance ta x in his own state, J. E.
Johnson, H azard Coal O perators’ Exchange, Lexington, Ky., has m ade a careful study of such taxes and gave th e Association th e benefit of his investigation and th oug ht on the subject in T hursday m ornin g’s m eeting.
“A severance or production tax ,” said Mr. Johnson, is a ta x levied upon th e production of a commodity taken from the land or from the w aters and is to be paid when taken or severed, calculated upon th e quan
tity so taken or upon th e sale value of th e product a f te r it has been severed. I t has no relation to the sale value before being thus parted from the land or w aters. A severance tax, in th e face of in te rsta te com petition, really can be imposed successfully only upon a commodity in g re a t demand, lim ited in quantity, and upon which the te rrito ry has practically a monopoly.
“Five states in th e Union, as f a r as I have ascer
tain ed,” said Mr. Johnson, “levy a severance ta x upon bitum inous coal and about tw enty states levy them on various products. Alabam a collects 14 per cent o f th e sale price of coal produced in the sta te in addi
tion to other taxes. A rkansas likewise has a tonnage tax of lc. p er ton and M ontana of 5c. in addition to oth er imposts. Oklahoma’s tax is only 0.5 per cent of the value of th e coal produced, b u t inasm uch as the m ines of th a t sta te are located largely on lands leased from the Indians and In d ian lands are exem pt fro m taxes, practically no ta x is collected under th e act.
In Wyoming, I understand, th e coal-m ining assessm ent is based on th e value of th e output and not on the value of th e coal in the ground.”
Mr. Johnson questioned w h eth er under the plain pro
visions of th e constitutions of th e states, a severance tax could be upheld.
“I t could be only under the assum ption th a t those engaged in producing coal enjoy a special privilege, and th en th a t provision of th e co nstitution is invoked which entitles th e s ta te to lay a ta x upon privileges gra n te d by th e state. I t w as never the intention ,” said he, “of th e m akers of th e constitution th a t a legitim ate in d u stry should be so classified.”
So im p o rtan t was th e com m unication of R obert K.
C assatt, president of C assatt & Co., Philadelphia, Pa., to T hu rsd ay’s m eeting th a t i t is published a t length elsewhere in th is issue and so no reference to it need be m ade here.
On T hu rsday a luncheon was given to th e local asso
ciation p residen ts and secretaries a t which th e new decision of th e Suprem e C ourt was discussed and the powers and o pportunities of th e associations to assist th e ir m em bers by th e collection of sta tistic s considered The nieetin'g was addressed by C. B. Neel, secretary V irg in ia Coal O perators’ Association, N orton, Va.,
Ju n e 2 5 , 1 9 2 5
C O A L A G E 935
George Bausewine, of the O perators’ A ssociation of the W illiamson Field, W illiamson, W. Va., and D r. F.
C. Honnold of the Honnold Coal B ureau, Chicago, 111.
T h at evening, a f te r a banquet w ith m usical num bers and much good fellowship, Governor D. R. C rissinger of the Federal Reserve Board, spoke on the activities of th e body over which he presided. H e lauded A ndrew Mellon as a second “A lexander H am ilton” and declared th a t fo u r principles should govern the relations of business to the governm ent. I t should seek less ta x a tion a t home concurrently w ith the reduction of Federal ta x a tio n ; it should u rge th a t banking be kep t out of politics; i t should advocate the re ten tio n of its oppor
tu n ity to ru n its own affairs, and it should do its best to prevent any centralization of power in W ashington.
In relation to the last adm onition he rem arked th a t m any m a tte rs are of local im portance and should be m anaged and controlled locally. The Federal Reserve
claim ing th a t Congress gave us both the F ederal Reserve B oard and th e D irector of th e B udget and h ea rty co-operation w ith both. Mr. Hoover had said th ere w ere two hundred bureaus of the governm ent.
Everyone seems bent on having even more. I t would be b etter, said Congressm an Hickey, to look to econ
omies and p ro p erty to solve our problems. Addresses in hum orous vein w ere also made by E zra Van H orn and Holly Stover.
A t th e m eeting on F riday , C. E. Bockus, president, Clinchfield Coal Corporation, spoke on the “Value of Association W ork to th e Individual O perator,” quoting the U. S. D epartm ent of Commerce as listin g in 1913 no few er th an 1,197 trad es associations, each of m ore th an local interest, covering eith er the en tire nation or larg e sections of it.
D espite th e inevitable divergence between groups of m em bers on such vital subjects as labor and fre ig h t
General Herbert M. Lord
B oard A ct he regarded w ith alm ost as m uch reverence as th e C onstitution.
General H e rb e rt M. L ord described in h is address his battle to keep down expenditures— a m ission every
body approved ^generally b u t which alm ost everybody opposed specifically. However, th e B udget Board, of w hich he is director, lias succeeded in cu ttin g the expenditures of th e U nited S tates to such a degree th a t in 1924 they w ere $3,048,000,000 as a g a in st'o v e r
$5,000,000,000 in 1921. In fo u r years, despite th e reduction in revenue due to low ering of taxation, th e debt of the U nited S tates has been reduced
$3,426,000,000.
In 1921 th e federal taxes w ere 60 p e r cent of all taxes, federal and state, and th e sta te taxes w ere 40 p e r cent. These figures are now 33 and 66 instead of 60 and 40, so g reatly has sta te tax ation grow n and federal taxatio n declined. Those who believe th ey have nothing a t stake are careless about taxes, b u t in th e end they have to pay them . The dollar h as become sm all change, and we all suffer from th a t fact. Our cost of living h as been raised by taxation.
C. P . W hite, in charge of th e Coal Division, U. S.
D epartm ent of Commerce, offered in h is address the aid of th e D epartm ent to th e coal industry, and Con
gressm an A. J. Hickey, of Indiana, when called tft hi^
fe e t denied the proclivities of Congress to be w asteful,
George T. Buckingham
rates, Mr. Bockus could see much th a t th e N ational Coal A ssociation could do to assist m em bers entirely outside th is realm of in h eren t conflict. T he cost of coal had risen in th e w ar period immensely, so had railroad fre ig h t ra te s “and th e fuel of householder became a burden much g re a te r th a n it had ever been before. T his opened th e in d u stry to political attack and led to political regulation which I believe on the whole,” said Mr. Bockus, “lim ited profits m ore closely on bitum inous coal th an on any other reg ulated indus
tr y d u rin g th e w ar period. To quite an extent th is was due to a lack of available inform atio n re g ard in g costs.”
He th o u g h t if th e Fuel A dm inistratio n had been possessed of figures of cost it could have prom ptly set prices w ith equity to th e in du stry. As it was, i t was compelled to fum ble fo r a while.
“The in d u stry needs always to have these figures handy. The evidence of cost in 1923,” said Mr. Bockus,
“will no t ca rry th e slig h test w eight, in my opinion, in 1926 or 1927. A nother form of assistance to m em bers m ig h t be inform atio n as to th e cost of various item s in operation so th a t each operator m ig h t b e tte r his practice and low er h is cost fo r any item as near as m ig h t be to th a t of the form having th e lowest cost.
R esearch also ■sgould serve to advance the in te re st of th e m em bers.”
936 C O A L A G E
Vol.27, No. 26
G e o r g e B . H a r r i n g t o n l r a u
George T. Buckingham of Defrees, Buckingham &
Eaton, Chicago, 111., one of the counsel of defense in the Cement Association case recently decided by the Suprem e Court, then discussed the h istory of the in te r
p retatio n of the Sherm an A n ti-T ru st Law saying th a t
“re s tra in t of tra d e ” was not synonymous w ith “re s tra in t of com petition.” I t may or m ay not be the same thing. The Suprem e C ourt decision in the Stand
ard Oil Co. case said th a t the fa c ts m u st be considered in every case before the law can be ascertained. A com bination was not in itself necessarily a tru st.
“I have always advised my clients,” said Mr. Buck
ingham , “th a t an association which had fo r its sole object th e collection and dissem ination of inform ation, concerning transactions which w ere p ast and completed, ought to be regarded as legal under the Sherm an L a w ; provided, however, th a t no agreem ent or understanding was predicated on the inform ation. I t has always seemed to me th a t the collection and dissem ination of inform ation concerning p a st events was purely s ta tis tical, th a t the facts which were th u s broadcasted were the therm om eters of y esterd ay ’s tem perature, the benchm ark of yesterday’s flood; th a t it was perfectly proper fo r every com petitor to have, and to use, all such statistical inform ation, in order to guide his own indi
vidual course.
“ I t is not,” he added, “the collection and dissem ina
tion of statistical inform ation, w ithin th e ran k s of a business industry, which is condemned, b u t only illegal use m ade of such inform ation when collected. In th is connection, it is tim ely . to sound a w arning. The Suprem e C ourt has not said th a t any and every trad e association is a legal activity. I t is my belief th a t a large proportion of them are not w ithin the boundaries m arked.”
Mr. Buckingham said tra d e inform ation issued by an association m ust be presented w ith out comment so th at each m em ber m ay use his own will and ju dg m ent in shaping his course w ith re g ard to the data presented.
C ertainly no p re ssu re should be bro ught on any m em ber to m odify his coui’se of action.
Mr. Long said th a t th e argum ent of th e Supreme C ourt was one of th e m ost rem arkable statem ents of the value of trad e association activity he had ever read.
He believed th a t th e m em bers could no t choose a b etter m eans of extending th e m em bership th an by quoting the co urt’s argum ent.
mens W alter Barnum
E. C. M ahan asked if th e names of consignees o f coal m ight be recorded. Mr. Buckingham said th e deci
sion of the co urt was wholly silent as to this, b u t h e would not advise any such practice. W . D. Ord w anted to know w hether prices m ig h t be discussed provided no decision was suggested as to w hat prices should be.
Mr. Buckingham said he always urged his clients not to discuss prices, fo r it is always difficult to prove th a t only ju s t th a t and no m ore was done. O thers asked w hether th e secretary m ig ht not request th e sending of invoices as an evidence of good fa ith in m aking re tu rn s. M r. Buckingham replied th a t to answ er th a t it would be necessary to g et a m ore complete knowledge- of th e coal business th an he possessed.
The election of officers resulted -thus: P residen t, M. L. Gould, L inton Coal Co., Indianapolis, In d .; V ice- presidents, Ira Clemens, p residen t of th e Clemens Coal Co., P ittsb u rg h , K ans.; Michael Gallagher, general m anager, M. A. H anna Co., Cleveland, Ohio; G. B.
H a rrin g to n , president, Chicago, W ilm ington & F ran k lin Coal Co., Chicago, 111. and W alter B arnum , president, Pacific Coast Co., New York C ity; tre a su re r, C. E.
Bockus, president, Clinchfield Coal C orporation, New York C ity ; executive secretary, H. L. Gandy.
D irectors a t large chosen a t Chicago a r e : Michael G allagher, Cleveland, Ohio; E. C. M ahan, Knoxville, Tenn.; J. B. Pauley, Chicago, 111., and G. H. Caperton,.
Charleston, W. Va.
The following sta te directors were n am ed : R. C.
Tway, E a ste rn K entucky; C. C. Dickinson, Charleston, W. V a.; V. N. H acker, K noxville,.Tenn.; L. T. Dee, Rock Springs, W yo.; C. H. Jenkins, F airm o nt, W. V a ., F . S.
Love, P ittsb u rg h , P a.; F . W. Lukins, K ansas City, Mo., S. H. Robbins, Cleveland, Ohio; W. J. Sampson, Y oungs
town, Ohio; Telford Lewis, Johnstow n. Pa., and A. W.
Callaway of Philadelphia, Pa. representin g M aryland.
M ichigan is not represented on the board. T h is ap pointm ent was le ft to the executive com m ittee to be made in the n ear fu tu re .
W. D. Ord presented several resolutions am ong which w ere one fo r the reduction in tax atio n and one fo r th e creation of the A ssociation’s committee to plan p ro p er collection and d istrib u tio n of statistics w ith in th e law.
All th e nom inations and resolutions received approval.
The new president took th e ch air and declared th a t he would follow th e excellent lines laid down by h is predecessor, S. Pem bei'ton H utchinson.
Ju n e 2 5 , 1 9 2 5
C O A L A G E
9 3 7B a n k er T ells Coal In d u stry How to Aid Itself
“L ea v e C oal in Ground T h a t C annot B e S o ld at a P ro fit”— H e A d v ise s M ergers, T rad e A sso c ia tio n s, C ost A c co u n tin g — O u tlin es B a n k s’ A ttitu d e T ow ard Coal
By Robert K. Cassatt
C a s s a t t & C o ., P h i l a d e l p h i a , P a .
Robert K. Cassatt
A LTHOUGH the outlook fo r your in d u stry seems Z \ very dark, I am convinced th a t it will w eather I V th e p resen t storm , as it has p ast storm s. I am not alarm ed for the fu tu re , eith er by th e th re a t of com petition from fuel oil or by the development of w a te r power. I say th is because I believe m any causes are co n trib u tin g to reduce the com petition of fuel oil, and because the potential com petition of w ater power is much exaggerated by the laym an, who sees in every considerable stream a g re a t source of power. N othing is m ore erroneous. Good w a te r power sites are few and f a r between. Such alarm as I may feel fo r th e fu tu re p ro sp erity of your in d u stry comes from causes which I shall discuss la te r and which I believe to be alm ost wholly w ithin the control of you men h eie before me.
Now, let me see if I can p u t before you the banker s a ttitu d e tow ard the coal industry. 1 m ust ask your indulgence in order to define th e exact sense in whicn I shall use th e term “b anker” in th is talk. My rem ark s will not re fe r to the banking in stitu tio n which g ra n ts tem porary or seasonal cred it to coal companies, bu t to th a t class of bankers known as “investm ent bankers whose function is to m arshal idle fu n d s in the public’s hands fo r the use of productive ind ustry, in the form of more or less perm anent investm ent.
In approaching any financing the banker first asks him self, “W hat is the n a tu re of th is in d u stry ? ” In your case he finds th a t it is an in d u stry beset w ith unusual risks, and w ith unusual uncertainties, whose existence m ust be kept constantly in mind. We can only safely judge the industry and its fu tu re by a study of th e p a s t; and th a t reveals a conglom erate picture.
Investm ent bankers can only to a lim ited ex ten t con
trol and guide the investing public. I h e y can and should give th e closest study to the condition of an \ given company and form th e ir financial plans accoi d- ingly. They can and do select the best form of security to be offered to th e public. B ut in the last analysis it is th e investing public itself which has th e final word. The appeal to the public m ust be such as to draw fo rth its idle funds. Securities offeied m ust be such as to compare favorably w ith other available securities, all things considered. If the public will not
T h i s a r t i c l e i s f r o m a p a p e r r e a d b y M r . C a s s a t t b e f o r e t h e N a t i o n a l C o a t A s s o c i a t i o n a t C h i c a g o , J u n e 1 8 ,
buy, bankers are powerless to help, because bankers them selves are not, and should not be, investors.
T aking all th is into consideration and b ea rin g in m ind th a t bankers m ust always feel th e public pulse, you will recognize th a t th e g re a te st care m u st be exercised by bankers in studying coal financing.
U nfortunately, coal securities have not been popular w ith the public in th e past, due I believe to its lack of knowledge; and ju s t now we are living a t a tim e when the coal in d u stry has few frien ds, and m any who seem to wish to discredit it. In my opinion, a long and earnest cam paign of education is required to give coal secu rities the stan d in g to which I believe them to be e n title d ; and the m ost pow erful fa cto r in th e success of such a cam paign will be a firm determ in atio n on the p a rt of all concerned not to sell to the public securities which m ay resu lt in loss to th e investor.
The last few years have w itnessed a d istin ct broad
ening of in te re st in coal securities. Investm ent centers, and im p o rtan t investm ent houses which form erly took little in te re st in coal are becoming m ore open-minded, and the field fo r th e sale of coal securities is now much w ider th an, say, fifteen years ago. B ut only a begin
ning has been m ade and I hope and believe th a t w ith the help of you m en and thro u g h th e exercise of care on the p a rt of bankers, coal securities will slowly bu t surely improve in th e public estim ation.
B efore giving you th e bankers’ view of sound coal finance, I m ust im press upon you th a t my rem arks re fe r prim arily to th e financing of bitum inous properties.
P ennsylvania a n th ra c ite occupies such a unique position am ong n a tu ra l resources, its financing is so largely an accomplished fact, and the field is so largely controlled by stro n g companies, th a t it is not likely th a t bankers will be required to devote much atten tio n to an th racite financing in the fu tu re .
The investm ent banker acts as in term ed iary between the corporation re q u irin g funds and th e public. He first assists the company in creatin g sound securities, and then finds investors who will buy these securities, th u s fu rn ish in g capital fo r the corporation. Such in b rief are the bankers’ principal functions.
B ut the banker has u rg en t duties to th e public and to him self. I shall re fra in from m entioning any of these except th e one param o un t duty to which I wish to direct your p a rtic u la r attentio n. W hen he is consid-
938 C O A L A G E V ol . 27; No. 26
W h a t A p p e a l s to t h e B a n k e r I am unalterably opposed to creating new production until demand and potential output are m ore nearly in balance. B ut th ere are o ther reasons fo r giving financial backing to coal companies which are, in m y opinion, perfectly legitim ate even in these times. F o r instance, to refund m atu rin g obligations; to fu rn ish additional w orking c a p ita l; to install m achinery which will reduce cost, and finally, to assist in th e m erging of com peting companies fo r the good of all.”
_________________________
erin g a specific piece of financing th e investm ent banker should ask him self these questions: Is th is construc
tive finance? Does i t serve any useful purpose? Is it needed?
There a re a thousand and one cases w here th e banker can ju s tify him self fo r seeking th e public’s money fo r productive industry. B u t th ere is one class of financing which is em phatically wrong, and th a t is th e type of financing designed to increase th e production of an already over-developed essential industry. You see, of course, w here this statem en t leads me. I say to you th a t th ere is no possible justification fo r any p resent project, which has fo r its object increasing the p resent output of coal, and th a t if eith er coal men or bankers do an ything a t th is tim e to prom ote such an increase it is nothing sh o rt of an iniquity.
How can any of you m en here contem plate w ith a clear conscience opening a new m ine or increasing p ro duction w ith th e certain knowledge th a t your action will plunge your in d u stry deeper into the m ire, w ithout benefit to th e public, to labor, or to anyone, except pos
sibly increased profit to him self? How can a banker conscientiously assist in such a w rong?
I came h ere largely to tr y to drive home to you men my firm belief th a t hope fo r recovery of your very sick ind u stry depends in large m easure on a long truce in the development of new production, and it is my duty to w arn you th a t those of you who approach bankers fo r funds to increase production will g et a very cold reception. I realize th a t th is doctrine m ay w ork h ard ship on owners of valuable v irg in coal, bu t these are tim es when individuals m ust suffer fo r th e good of all.
And in th e last analysis coal in th e ground is as safe as any form of asset w ith which I am fam iliar.
Exception m ay also be m ade in th e ease of th e old- established company, w ith well-established m arkets, whose production is declining th ro u g h exhaustion of reserves. In the m ain, however, I am unalterably opposed to creatin g new production until dem and and potential output are m ore nearly in balance.
B u t th ere are other reasons fo r giving financial back
ing to coal companies which are in m y opinion perfectly legitim ate even in these tim es. F or instance, to refund m atu rin g obligations; to fu rn ish additional w orking ca p ital; to install m achinery which will reduce cost, and finally to assist in th e m erging of com peting com
panies fo r th e good of all.
T here are, certainly, plenty of reasons w hy bankers and coal owners should co-operate, aside from increasr in g production. T h a t being the case, how can money best be obtained from th e public?
T heie is no doubt th a t th e sound w ay to finance any company is th ro u g h th e sale of stock, b u t th a t is often difficult, and in th e case of y our in d u stry , w ith th e feel
in g of uneasiness th a t exists in th e public m ind, th a t type o f finance needs scarcely to be discussed. S h o rt
term obligations do n o t appeal to me fo r y our ind ustry . I am going, th erefo re, to confine m yself to a discussion of long-term m ortgage bonds, m erely prefacin g my rem ark s by th e statem en t th a t w herever possible coal companies re q u irin g funds should obtain them by sell
in g p re fe rre d or common stock to p resen t owners.
W here th is is impossible and when th e need of funds is im perative, it is justifiable to re so rt to th e creation of m ortgage indebtedness.
Now let me enum erate one by one th e points as to which a borrow er on the security o f coal p ro p e rty will have to sa tisfy his b an ker:
(1) Undeveloped coal p roperty, however valuable, does not co n stitu te proper security fo r th e issuance and sale to th e public of coal bonds. A dem onstrated earn in g power sufficient to m eet fixed charges w ith a reasonable m arg in of safety is an essential req u ire
m ent. F o r th is reason and because th e development of new m ines is not now desirable, bankers will not look w ith fa v o r on bonding p ro perties in the course of development or whose earn in g s are based on estim ates.
(2) Coal should be of th e best quality which reaches th e com petitive m ark ets of the d is tric t un der consid
eration, and th e banker m ust be satisfied th a t an ample m arket exists.
(3) I know of few lines of business w here able m an
agem ent counts m ore th an in th e production and sale of coal. The wise banker, th erefore, investigates th is fe a tu re very thoroughly before buying an issue of bonds, and he should be satisfied th a t the m anagem ent is capable of applying th e m ost up-to-date and scientific m ining and selling m ethods. He believes also th a t it is im p o rtan t fo r th e m anagem ent to have a considerable financial in te re st in secu rities ju n io r to th e proposed bond issue.
(4) The secu rity fo r th e bonds, aud th e ir ultim ate safety, depend upon w h eth er sound ju d g m en t is used by experts in valuing th e property, and by th e b ank er in d eterm ining how much m ay be safely loaned on the security. T he b an k er’s first th o u g h t and continuing concern m ust be on th e question, “W h at will th is p ro p erty sell fo r a t forced sale under conditions which will probably preclude th e possibility of obtaining a f a ir p rice?” The reason fo r th is is th a t foreclosure sales usually occur in tim es when few are w illing to invest in th e in d u stry in question.
To answ er th is question, th e b ank er employs experts to value th e property, to re p o rt on th e ch a rac te r of
B a n k e r s F r o w n o n M o r e O u t p u t
“My firm belief is th a t hope fo r recovery of y our very sick in d u stry depends in large m easure on a long tru c e in th e development of new production and it is m y duty to w arn you th a t those of you who approach bankers fo r fun ds to increase production will g et a very cold reception. I realize th a t th is doctrine m ay w ork h ard ship on owners of valuable v irg in coal, b u t these a re tim es w hen individuals m ust suffer fo r the good of all.”
