The Sunday Oregonian., June 28, 1908, SECTION THREE, Page 10, Image 32

THE SUNDAY OREGOXIAX, PORTLAND, JUNE 28, I90S.
LAW LAID DOWN FOR AMERICAN RAILROADS ON LUMBER RATES
TEXT OF DECISIONS OF INTERSTATE COMMISSION ON SUITS INVOLVING FATE OF PRINCIPAL INDUSTRY OF PACIFIC NORTHWEST
10
OREGOXIAX NEWS BUREAU. Wash
ington. June 21. Because of the extreme
length of the decisions of the interstate
Commerce Commission In the Pacific
Coast lumber rate cases, recently decided,
and reviewed In these dispatches, it is
Impossible to quote the findings of the
Commission in full. However, the fol
lowing liberal extracts are made from
the decisions in the "Portland Gateway"
case:
Synopsis of Decision.
1. The lumber and shingle producing and
hipping Interests of Western Washington
brought proceeding to compel the Northern
Paclnc and the Great Northern railways to
establish a through route and a- Joint rate
applicable to the movement of lumber and
shingles through Portland, Or., over the
lines of the Union Pacific system to Eastern
destinations: but the commission Is clearly
of the opinion that a satisfactory route
within the meaning of the statute already
exists from these Washington points to
Colorado common points and to destina
tions east of Colorado common points, and
that this commission has therefore no Juris
diction to establish a route asked for to
those destinations.
2 The present routes from Washington
to certain Utah points are not reasonably
satisfactory, and the route prayed for via
Portland to these destinations should be
established.
:t. Refusal upon the part of carriers to
establish and maintain Just and reasonable
through routes Is of Itself a violation of the
4. Distance Is an Important element In
determining whether a route is satisfactory.
A circuitous route Involving a longer haul
and therefore greater delay would not be,
ordinarily, as desirable as a direct route.
Hill Roads Originate Traffic.
"The lumber produced in these mills of
Western Washington is mainly consumed
In the East. It is probable that the
average consumption is 2000 miles from
the point of production. The Northern
Pacific and the Great Northern extend
from these forests 2000 miles east. They
have penetrated these forests with branch
lines which are of no value except as
they originate this traffic. They have
put themselves In shape to handle this
business over practically the entire length
of their lines. They have done this
upon the theory that they were to be
allowed to carry this traffic over their
own lines, and they could not afford to
construct their originating railroads and
to establish and maintain the rates which
have been maintained unless they were
permitted the long haul upon this busi
ness. They could not afford to operate
upon the same basis if they were obliged
to deliver it over to the Union Pacific
at Portland. It is very doubtful whether
the common interest of the public and the
railway does not require that these sev
eral transcontinental lines shall be al
lowed to handle this traffic which they
originate.
"Justice dictates the same conclusion.
These forests of Western Washington
will furnish the present output for half
a century to come. These railroads were
constructed upon the theory that in so
far as they could they would be allowed
to control this traffic. Certainly the first
consideration Is the public Interest; but
if these lines furnish satisfactory trans
portation facilities upon which this lum
ber can be moved to Eastern markets. Is
It not their right to carry It there?
Colorado Route Not as Good.
"We are clearly of the opinion that a
satisfactory route within the meaning of
the statute already exists from these
Washington points to destinations east
of Colorado common points and that this
Commission has therefore no Jurisdiction
to establish the route asked for to those
destinations.
"With respect to Colorado common
points the situation is somewhat differ
ent. The distance from Tacoma to Den
ver via the Burlington Route and the
Billings gateway Is 1728 miles: via the
Portland gateway and the Union Pacific.
1535 miles. The testimony shows that in
the past the service via the Billings
gateway into Colorado common-point ter
ritory has been satisfactory and. on the
whole, we are Inclined, though with some
hesitation, to hold that the route to Col
orado common points via Billings ought
also to be regarded as satisfactory and
that we ought' not to establish a Joint
rate via Portland to these destinations.
Under the present arrangement this ter
ritory appears to be able to buy lumber
freely either In Washington or In Ore
gon, and In times when traffic moves
normally there seems to be no special
demand for this new route.
Open' Gateway to Utah.
"Utah points, of which Ogden and Salt
Lake City are illustrations, can only be
reached by either the Spokane or Silver
Bow gateway. In both ;ases the traffic
must move through Pocatello, and the
relative distance to Pocatello Indicates
therefore the relative distances to these
consuming points. From Tacoma to
Pocatello via Portland Is 875 miles, via
Spokane 132S miles, via Silver Bow 1209
miles. While the entire distance Is much
less, the difference in distance by the
present gateway is much greater than In
case of Colorado common points. The
testimony also shows that the service
by this route even under favorable con
ditions Is unsatisfactory. In our opin
ion the present routes from Washing
ton points to these Utah points are not
reasonably satisfactory, and we are of
the further opinion that the route prayed
for via Portland to these destinations
should be established.
"The rate In the past has been 5 cents
higher to these Utah points from Wash
ington territory than from Portland. In
our opinion this difference ought not to
exceed 2H cents by the new route. No
opinion is expressed as to what division
should be allowed lines north of Port
land. This rate and route should apply
from originating points upon the North
ern Pacific as far north as Seattle and
to Utah common points and those tak
ing similar rates east and south of Poca
tello. Different as to Passengers. m
"Attention should be called to the fact
that a wide difference exists between a
reasonable through route for the move
ment of freight and one for passenger
traffic. There enters into the passenger
service a personal element which does
not exist In the case of property. We
might well say that a passenger should
have the right to Journey from Seattle
to Omaha via Portland with the conven
iences of a through service although a
carload of lumber was not entitled to
that privilege.
"It remains to Inquire whether we
ought, at the time this case was heard,
to have opened this gateway as a tem
porary expedient. The case made by the
complainants was one which appealed
strongly to this Commission and which
we. should have attempted to relieve in
any proper manner. It did not appear
to us that the opening of this gateway
would have relieved the situation: nor
that it would, under the circumstances,
have been just.
Objections of Oregon Men.
"The Oregon & Washington Lumber
Manufacturers' Association, representing
the lumber and shingle Interests In the
State of Oregon, intervened in this pro
ceeding against the prayer of the pe
tition, appeared by counsel at the hear
ing. Introduced testimony, and most vig
orously protested against the opening of
the route asked for. This intervener put
Its objection upon the ground that Oregon
mills were dependent for their transpor
tation facilities upon the Union Pacific
System: that these facilities were already
overtaxed and utterly inadequate, and
that, therefore. It would be rank injus
tice to them if that system were required
to devote, a portion of its capacity to the
service of the complainants.
"The Quantity of lumber sawed in Ore
gon Is only about one-half that produced
in Washington, being, approximately.
J.000.000.0U0 feet board measure, as against
4.000,000,000 feet in Washington. These
Oregon mills sell their product largely in
the same markets with the Washington
mills. The only avenue by which they
can reach these destinations is the Union
Pacific System, starting from Portland
over the line of the Oregon Railway &
Navigation Company. A certain amount
of lumber goes south by the Southern
Pacific to San Francisco and California
points, and it was said that as an emer
gency route it might be shipped to Sac
ramento and thence east over the South
ern Pacific; but the quantity so handled
Is small and may be disregarded. Prac
tically the only avenue to Eastern points
is via the Oregon Railway & Navigation
Company from Portland.
Oregon Facilities Bad.
"The intervener claimed and conclusive
ly showed that transportation conditions
at Oregon mills were in every respect as
bad as at Washington mills. The Union
Pacific System had failed to meet their
requirements in exactly the same way
and for exactly the same reason that
the Great Northern and Northern Pa
cific had failed with respect to Wash
ington shipments. ' .
The total cars of lumber delivered by
the Oregon Railway & Navigation Com
pany to the Oregon Short Line at Hunt
ington were 7322 in the year 1901; 17,709
in the year 1906. The total number of
loaded cars delivered by the Oregon
Railway & Navigation Company to the
Short Line in 1906 was 37,574. of which
more than one-half were lumber and
shingles. It was said that the capacity
of the road was fully taxed In the hand
ling of this traffic and that it was im
possible to greatly Increase the' amount.
While every effort was being made to
improve its track and add to Its equip
ment, at appears from the testimony that
there is more likelihood in the future of
inability to handle lumber shipments
from Oregon upon the part of the Union
Pacific System than from Washington
upon the part of the Hill lines.
The railroad of the Oregon Railway &
Navigation Company was peculiarly in
tended to serve these Oregon Interests;
the policy of that company in the past
has been to develop those interests. We
might well hesitate to diminish the abil
ity to fulfill the duty which it owes them
by devoting a part of its capacity to the
mills which these complainants represent;
nor did it seem likely that to have done
so would have benefited the whole sit
uation. Joint Rate to Utah.
"Before this report had been promul
gated it came to the attention of the
commission that rates from Pacific
Coast points to Eastern destinations
were likely to be advanced, and it did
not seem best, in view of this fact, to
attempt to fix a joint through rate
from these Washington points. Still
later, the advances were made, and
proceedings were begun before the
commission in consequence. As a re
sult of those proceedings we have es
tablished a rate of 374 cents per 100
pounds on fir and spruce from Port
land to Salt Lake and Utah points, and
47 cents per 100 pounds' on cedar
and shingles. This would produce a
rate from these Washington points of
40 cents upon fir and spruce and 50
cents upon cedar and shingles.
"It is our opinion, then, that a Joint
route should be established, as above in
dicated, and that from points north of
Portland a joint rate not exceeding 40
cents should be applied to the transpor
tation of fir and spruce and 50 cents to
shingles and cedar, and an order will be
Issued accordingly.
Gateway Not Permanently Open.
"The confident opinion was expressed
by the officials of the Northern Pa
cific that within a year at most that
line would be in shape to handle ail
the lumber offered. As already said.
It is handling this traffic today, not
because its facilities have increased,
but because the traffic has decreased.
"Under these circumstances It hardly
seems to us that we ought to open
this Portland gateway as a perma
nent policy. The statute expressly
forbids it, since, within the fair mean
ing of that provision, there is already
in existence a reasonable and a satis
factory route. Even If there were no
such provision In the statute, if this
commission were left entirely, free to
exercise Its Judgment It would be a
matter of grave doubt whether we
ought to grant the prayer of this petition."
CASE OF WILLAMETTE VALLEY
Harrlman Cannot Ruin. Established
Industry Arbitrarily, Is Ruling.
OREGONIAN NEWS BUREAU, Wash
ington, June 21. Appended is virtually the
complete text of the decision rendered by
the Interstate Commerce Commission In
the case of the Willamette Valley and
Southern Oregon lumber manufacturers
who appealed from the action of the
Southern Pacific Company in raising the
rate on lumber and lath from $3.10 to $5
a ton.
The Commission's decision is that tho
railroad company, having fostered the
lumber industry by its low rates, -cannot
kill the industry arbitrarily. This
decision Is well summarized in the two
paragraphs Immediately following:
1. Where a rate has been established for
a considerable period for the purpose of de
veloping a particular Industry and with full
knowledge that the Industry could not be
developed without it, and where, under the
Influence of such rato, large amounts of
money have been Invested in property, the
value of which must be seriously Impaired
by an advance of the rate, that fact Is an
Important consideration in passing upon the
reasonableness of such advance.
2. The Southern Paclnc Company estab
lished a rate of $3.10 per ton upon rough
green flr lumber and lath from points In the
Willamette Valley to San Francisco for the
purpose of developing the lumber Industry
In that section, and maintained the rate in
effect, with a brief Interval, for six years;
and on the strength of this rate that In
dustry attained considerable proportions. In
April. 1907. this rate was advanced to $5 per
ton; Held. That the advance was unreason
able and that the rate ought not for the
furure to exceed $3.40 per ton. .
Green fir lumber weighs about 3300
pounds to the 1000 feet, and therefore
an advance of $1.90 per . ton would bo
equivalent to $3.13V4 per 1000 feet. The
profit in manufacturing lumber in the
Willamette Valley during the last seven
or eight years has probably ranged from
$1.50 to $2.50 per 1000. These profits nerve
often been greater and often less, but
the above are perhaps the fair average
limits. Most operators in this section
own their own timber, but stumpage is
frequently bought, and has ranged from
25 cents to $1 per 1000. In arriving at
the above profit stumpage is always
charged as a cost of production. The
Booth-Kelly Company charges itself for
stumpage 50 cents per 1000, although un
der the price at which that company
bought its land the actual cost would be
somewhat less. If the cost of stumpage
should be eliminated the profits would be
Increased by 50 cents per 1000 feet. It
will be seen, therefore, that this advance
In the freight rate exceeds by consider
able the average profit of manufacture
in the Willamette Valley plus the price
of stumpage.
This lumber competes with that pro
duced at Portland and shipped from Port
land by water to San Francisco. It was
not denied that in the past Portland lum
ber had successfully met lumber from
the Willamette Valley in San Francisco
upon the former rates of transportation.
The rate from tho Willamette Valley is
now increased by more than the profit
in the manufacture of this lumber. There
can be but one result lumber reaching
San .Francisco by water must supplant
that from the Willamette Valley In the
San Francisco market.
Was to Meet Water Rate.
The'rate of $3.10 was intended to meet
the water rate from Portland and ap
plied only at San Francisco and other
bay" points which could be reached by
water. Lumber from Portland to an
interior destination must be loaded upon
the cars at the water line and trans
ported by rail to the Interior point. Lum
ber from the WHlamette Valley to the
same interior point was charged the $3.10
rate to San Francisco plus the local rail
rate from San Francisco to destination,
thus maintaining the competitive equality
between Portland and the Willamette. -It
will be seen, therefore, that the $3.10 rate
gradually increased as the distance from
San Francisco Bay increased, until the
$5 limit was reached. The present rate of
$5 applies to all the territory which could
formerly be reached at $5 and less. Hence
the advance to points distant from San
Francisco Bay is less- than $1.90 per ton
by a gradually diminishing amount until
it reaches the old $5 limit.
It will also be remembered that the
Willamette Valley now has an outlet to
Eastern destinations via Portland. When
this original rato was established there
could be no movement through the Port
land gateway and a rate was made to
Eastern destinations via Sacramento.
The movement to the South over the Sis
kiyou and afterwards to the East over
SYNOPSIS OF DECISION OF INTERSTATE COMMERCE COMMISSION IN LUMBER
RATE CASES.
In the Portland gateway case, the Commission decides that the mllfs in Washington aro not entitled to
have the Portland gateway opened to Colorado and points east of Colorado, because they have another route
equally good; the Portland gateway should be opened, however, to mills in Washington along the line of tho
Northern Pacific Railroad between Portland and Seattle to Utah common points at an additional rato of 2
cents pe hundred. ,
Rules in Willametto Valley caso that where a railroad has built up an industry by giving a low rato on Its
products, thereby Inducing Investment of capital with the knowledge that only the low rate will Justify such
investment, such railroad cannot arbitrarily increase such rate and thereby kill that industry.
Holds that in same case that the new $5 rate dealt a staggering blow to the Valley lumber industry, in
asmuch as it closed the California market to Its products, that being tho only distant market to which Valley
lumber could be shipped. ; :
Points out in same case that Harrlman road made $2500 a mile, net, in 1957, and that its net earnings in that
year were larger than Its gross earnings ten years before, as proof that tho old Valley lumber rate was profit
able. States as general truth, in Eastern rate cases, that the widest" possible market for common and medium
lumber is what the lumbermen of the . North Pacific Coast need, since every market for such lumber that can
reasonably be opened operates to lessen the waste and natural supply.
Follows ruling of Supreme Court in another case to the effect that when railroad lines are prospering, as
the Hill and Harriman lines wero prospering under the 40-cent rate, the burden of proof is on thero. to show
that any Increase is justified.
Eastern rate controversy cannot be determined wholly on tho ground that' the lumbermen have enjoyed a
specially low rate for years, and that business Interests have been built up under that rate that will suffer
heavy loss by tho increase; the true test is the justness of the ra,te, and the raise must bo Justified regardless
of the prosperous nature of the lumber industry, or where the Increase will ultimately bo absorbed.
While the expenses of operation of the railroads have increased since the 40-cent rate was made, so also
have the expenses of lumber manufacture.
The Western rates, from tho Coast to the Mississippi Valley, have yielded greater revenue, mile for mile,
than the rates on yellow pine from the South. Old. or 40-cent rates, gave tho transcontinental lines a large pro
portion of their revenue, and were reasonable for the service performed.
In the Spokane case the Commission holds that, although the product of the mills of tho Spokane district Is
Inferior, they prospered under the old rates; the railroads had In part admitted the propriety of a differential
In favor of "the Spokane district, however, and careful examination of the testimony shows that a graded dif
ferential should exist.
Even In dissenting opinion of Knapp and Harlan, in 40-cent rato cases, tho railroads get small comfort, in
asmuch as tho dissenters admit that a less Increase would have been more just.
In the dissenting opinion it Is held that, the rates raised wero special and did not belong to tho class that
cannot be raised without proof of Injustice of old rate.
Testimony shows, say the dissenters, that the old rate was regarded from both sides as an unusually low, if
not abnormal one, and both parties evidently expected that rate would sometime be advanced.
Dissenters cannot but believe that conditions have so changed as to Justify carriers In refusing to continue
old rates in force. Lumber has nearly doubled in value and expenses of railroad operation have Increased. Tho
roads have built up a surplus, but it Is not clear that much or any of it resulted, from the 40-cent business.
tho Sierra Nevada was extremely ex
pensive, and when the Southern Pacific
and Union Pacific became united In 1901
joint rates were established for tho
movement of this lumber through Port
land over tho Union Pacific lines, where
the grades wero much easier and the
cost of operation much lees. These mills,
therefore, reach today via Portland the
same Eastern destinations which they
formerly reached via Sacramento. These
rates from the Willamette Valley to
various Eastern points aro the same as
from Portland, as a rule, and unually tho
same as from mills in Washington upon
the west of tho Cascades. Those rates
have also been advanced and proceedings
are pending before the Commission for a
restoration of tho original rates, but tho
questions Involved aro entirely distinct
from this. The defendant apparently con
cedes that whatever rate is established
to Eastern points from Portland should
also be accorded these Willametto Valley
mills.
Closes Southern Market.
It follows, therefore, that the effect of
this advance Is to shut up, as to the Wil
lamette Valley, the San Francisco mar
ket, and to limit the market in tho vicin
ity of San Francisco. All other markets
are open to these mills to exactly tho
same degree that they have been in tho
past. What, then, is tho effect of with
drawing that particular market?
The timber cut at these Willametto
mills Is known as Oregon fir and is very
similar to Washington fir except that
the trees are smaller. Tho testimony
fairly shows that grade for grade tho
lumber sells at the same price with
Washington fir and with tho same readi
ness. It would seem, however, that tho
percentage of high-grade lumber runs
somewhat less with these mills than in
Washington and, still further, that tho
poorer grades are not as good hero as in
Washington.
Tho testimony showed that this poorer
lumber could not be shipped to Eastern
markets and that the only market in
which It could be disposed of was San
Francisco and points in that Immediate
vicinity, and this seems probable, for
thero are few Eastern points which can
bo reached at less than a 40-cent rate,
and it fairly appears In this case that
thero aro today few If any markets to
which No. 2 lumber can bo shipped upon
a rate as high as that. As was very
truly said by counsel for tho defense in
tho argument of tho Eastern rato cases,
tho common board is everywhere, and tho
Pacific Coast manufacturer can not ex
pect to send to the East this grade of
his product. These lower grades must
be disposed of In comparatively nearby
markets. Mills upon the Coast can mar
ket this lumber by water; interior mills
In Washington seem to find a considerable
local market, and the same Is true of
Portland, but these operations In tho
Willametto Valley have no local mar
ket of any account and havo relied in
tho past upon tho San Francisco mar
ket for the disposing of this part of their
output. To deprive them of this mar
ket or to require them to take $3.13 per
1000 feet less for this part of their pro
duct, which Is a considerable percentage
of the whole, would turn a profitable
into an unprofitable business.
if appears probable, too. that the effect
of withdrawing this market will be more
serious upon the small mill than upon
the two or three largo operators who aro
affected by these rates. In order to ship
lumber long distances it must frequently
be dressed and kiln-dried. Tho larger
mills havo facilities for doing this, but
the smaller operators are w-ithout such
facilities; nor can they' afford to provide
them. They must sell their lumber In
the rough and they do sell a very con
siderable portion of It In this market.
Not Closed Permanently.
We can hardly agree to the claim ' of
tho complainants that a maintenance of
the advanced rate would generally and
permanently close these mills In the Wil
lamette Valley. It would, in our opin
ion, very greatly diminish the profits
otherwise obtainable from a prosecution
of that business. It would limit the
operations of these larger companies and
would probably drive out of business for
the time being many of the smaller ones.
This locality is not today dependent upon
the San Francisco market to the same
extent that it was In 1898. for other mar
kets have been developed; but that Is
still the only available market for any
considerable quantity of the lower grades
of lumber and without a market for those
grades the business in this valley cannot
be successfully prosecuted. In time, as
cost of stumpage to the Portland mill
and the Puget Sound mill advances the
manufacturer In the Willamette Valley
will derive from the lower price of his
logs an advantage which will enable him
to compete in these markets upon the
higher rate, but some years must elapse
before that condition will be reached.
Meanwhile the operator who has invested
his money must suffer.
Mills in the Willamette Valley are not
situated near the river and are not,
therefore, as a rule, upon the main line
of the defendants, but are reached by
short branch lines of different lengths.
The service of collecting this lumber and.
putting it Into the trains of the defend
ant upon its main line Is, therefore, a
somewhat expensive one.
The present rate of $5 per ton Is equiva
lent to 25 cents per 100 pounds, and the
defendants insist that this rate,, tested
by a comparison with lumber rates in
different parts of the United States, tak
ing into account the operating conditions
which obtain here, cannot be regarded as
extravagant.
Comparisons with other lumber rates
are not conclusive nor greatly profitable.
since operating conditions aro seldom the
saime, much less, traffic and commercial
conditions. The old rate of $3.10 paid, as
above stated, an average return of about
5 mills per ton-mile. There are many
instances within the knowledge ' of the
Commission where lumber has been and
is now being transported for a less charge
than this.. The $3.10 rate was certainly a
low one, but we are satisfied that it did
yield when established, has ever since
yielded, and would for tho future yield
a substantial return over and above the
cost- of operation and that its mainten
ance in the past has contributed much
to the prosperity of the defendants.
Harriman's Huge Profits.
It appears that net earnings of tho
Southern Pacific in 1907 were more than
gross earnings had been ten years be
fore and that present net earnings are
about $2500 per mile. When it is remem
bered that moro than half of this mile
age consists of .branch lines, not ex
pensive to construct, it would appear that
the above returns are fairly compensa
tory. '
The above figures abundantly confirm
the Judgment of Mr. Huntington that a
rate should be made- which would de
velop tho lumber industry of this region,
and In our opinion the maintenance of
this $3.10 rate would be also for the ad
vantage of the defendants In the immed
iate future. These mills are established
and they will continue to do business
upon a margin of profit much smaller
than would have been sufficient to in
duce their construction In the beginning.
But It has been seen that their only
market for poorer grades of common lum
ber Is to the south and that without a
market for this class of lumber they can
not successfully compete with other mills
upon the Pacific Coast.
As already suggested, when tho prieo
of stumpage has sufficiently Increased in
other sections, this lumber in the Willam
ette Valley can be manufactured at a
profit upon the $6 rate, but for the pres
ent It seems highly probable that tho con
tinuance of the lower rate is necessary
to a continuance of the business itself
In anything like its present volume.
Upon these facts, what conclusion
should be reached as to the justice of tho
advance of April 18, 1907, and as to tho
lawfulness of the present rate? Tho de
fendant insists that the present rate is a
reasonable one and that the defendant
companies aro under no obligation to
maintain a rato which is unreasonably
low for tho future because they have vol
untarily done so in tho past. The com
plainants Insist that the present rate Is
unreasonable. They say that the old
rate paid the defendants a handsome
profit over the cost of operation: that
under It and largely by reason of It tho
present prosperity of these defendants
has come, and that, this being so. it
would be most unjust to allow them to
advance It, In view of the circumstances
under which-It was established and has
been maintained in tho past. The' com
plainants earnestly insist that wo may
and should look into tho past history of
this rate In disposing of this question.
No Contract Is Asserted.
It is not claimed that the defendants
were under contract with any one ship
per, nor with the general body of ship
pers in that region to maintain the $3.10
rate. It Is doubtful if such a contract
would be valid, and at any rato no such
contract was ever made. While the de
fendants announced that they would es
tablish a rate of $3.10 they never stated
that they would maintain this rate in ef
fect for any given length of time. What
happened was this:
It was well understood that this lum
ber could not be manufactured and would
not be manufactured unless a rato was
established from these mills to San Fran
cisco, which was fairly equivalent to the
water rate from Portland and Puget
Sound points to that same market. This
being so. the Southern- Pacific Company
had possibly two courses open to It. It
might continue in effect its 25-cent rate
until such time as with the depletion of
forests elsewhere this timber in the Will
amette Valley could be profitably market-
ed upon that rate. Such a course would
deprive that company of Immediate
traffic, but would in the end give to it
a much larger measure of profit from
the handling of the. traffic. It might, in
the second place, establish the low rate
and develop the industry at once in com
petition with mills at other points upon
the Pacific Coast. It elected to adopt tha
latter policy. It so announced to tho
public and to Individuals who wero con
templating the construction of mills in
this section. It inaugurated that policy
by the putting in of the rate Itself.
Having maintained that rate for five
years, It withdrew it, but upon further
consideration announced once more that
it would adhere to its former policy and
would restore tho rate, which It did.
Upon tho strength of this action these
mills in tho Willametto Valley have been
established; tlu?y would never have been
established without it; they cannot profit
ably exist today without it. The expense
of handling traffic under this rate is not
greater than the revenue, thereby oc
casioning a loss which must be made up
upon other business. Such a rate would
present an entirely different question from
that before us. Here the business Is re
munerative directly, beside being highly
beneficial to the defendants indirectly.
Cites a Typical Case.
No argument and no citation of authori
ty can, however, add to the naked state
ment of the fact. Take, for example,
tho case of Mr. Miles. This gentleman
had established a mill upon the strength
of the $3.10 rate, which he was operating
In the year 1903. He had also made ar-
ran gements for the building of another
mill and for the purchase of a large tract
of timber. Hearing rumors that this rate
was to be withdrawn, he suspended his
operations. Subsequently, upon being as
sured by tho officials of the Southern Pa
cific Company that It would continue its
former policy, and relying upon the res
toration of the rate itself, he resumed the
construction of his mill and completed the
purchase of his. timber. Is it Just and
reasonable that within less than three
years this company shall be allowed to
again reverse its policy and to destroy tho
value of this man's property? We think
not; tho tremendous interests Involved in
the stability of railway rates must not bo
Juggled with in this manner. We do not
hold, as a general proposition that a rail
road company having established and
maintained a rate Is conclusively estopped
from advancing that rate, nor that where
a rate Is put in for a special purpose it
may not be taken out when that purpose
has been subserved and new conditions
havo grown up. We apply our decision
entlrly to the facts in the case before us.
Considering all the circumstances, having
in mind the just interests of all parties,
wo conclude that these defendants ought
to maintain, for the Immediate future at
least, substantially the same rate which
they have maintained in tho past.
It has been seen that this . timber in
the Willamette Valley must be given a
rate to San Francisco which Is sub
stantially equivalent to tho water rate
from Portland. All parties were original
ly satisfied that the' $3.10 rate substan
tially nt this condition. Water charters
from Portland have ranged somewhat
higher in the last few years than when
this original rate was established; tho
testimony indicates from 25 to 50 cents per
1000 feef. This being so. it seems reasonable
that this lumber rate should be also some
what advanced, and we think that for tho
next two years a rate of 17 cents per 100
pounds, or $3.40 per ton, might properly
be charged.
The second question presented Is
whether this rate shall also be applied
to west side mills above Corvallls. or
whether rates from those mills shall be iij
the future as in the past, 25 cents per. ton
Mgher than from mills upon the east
bank.
As to Corvallls & Eastern.
It will bo remembered that the main lino
of the defendants runs from Portland
south along the east bank of tho Will
amette River, but that there 1s another
lino with branches extending up tho west
bank of the river. Connection Is made
between these lines upon the west and
tho east at Portland and also by cross
ing tho river from Corvallls to Albany.
The road from Corvallls to Albany was
formerly an Independent lino known as
the Corvallls & Eastern. Lumber originat
ing upon the west bank for transporta
tion south over the lines of tho defendant
companies could either be hauled to Port
land by tho defendants and thence by
their own lines south or it could be hauled
by the defendant's lines south to Cor
vallls and thence over the Corvallls &
Eastern to a connection with the main
lino at Albany. The rate charged byj tho
Corvallls & Eastern for this service was
25 cents per ton. The length of the road
is about 15 miles, and this would seem
to be, under the circumstances, a reason
able charge.
Within a comparatively recent time It
appears that the Southern Pacific
interests have purchased the stock of the
Corvallls & Eastern, so that that road,
while still operated In name as an In
dependent proposition, is in reality a part
of tho defendants' lines. The complain
ants Insist that for this reason the charge
of 25 cents should no longer be Imposed
against the west bank.
Tho cost to the defendants of handling
this lumber from the west side Is un
doubtedly more, upon the average, than
where it originates upon the east side.
Bates in tho past havo always been
higher from that section, and In our
opinion there is no reason why the same
difference may not exist or tho future
and for the same reason.
The third question arises upon the claim
tkt tfaa interveners that whatever rate is
its
51
ce
Valley should be extended to Portland
has been seen that originally the $3.10
rato applied to Portland, but that since
1903 this has not been true. During a
portion of the time the rato from there
to San, Francisco has been hither than $5.
but the rate now is $5 and this has been
the ruling rat since August, 1903.
Portland's Superior Location.
Tito considerations which induce us to
apply this lower rato to mills in the Will
ametto Valley do not obtain in case of
Portland. These manufacturers have the
benefit of the water rate and are not
therefore dependent at all upon the de
fendants for reaching the San Francisco
market. The low rate was only applied
to "Portland for a comparatively short
tlmo and has not been in force there for
tho last four years. It is of no special
importance to the' manufacturer at that
point and no injustice is done by with
drawing it. The distance from Portland
is considerably greater than the average
distance from Willamette Valley mills,
and. on tho whole, we think the defend
ants should be left to their option in
meeting or declining to meet water rates
at Portlands The claim of the interveners
Is therefore denied.
We are of the opinion, then, that tho
present rate of $5 from all mills in the
Willamette Valley, not Including Port
land, Is unjust and unreasonable; that
for tho future from mills upon the east
bank, and upon the west bank south of
Corvallls. that rate should not exceed 17
cents per 100 pounds, or $3.40 per ton,
upon rough, green fir lumber and lath,
and that from points upon the west bank
north of Corvallis it should not exceed
$3.63 per ton. All questions of repara
tion are reserved for further proceedings.
An order will be Issued accordingly.
DECISIONS OX EASTERN RATE
Two Opinions Practically Identical
Are Handed Down. .
OREGONIAN NEWS BUREAU, Wash
ington, June 21. The Interstate Com
merce Commission rendered two iden
tical decisions on the complaints of
Pacific Coast lumber manufacturers
against the advance of 10 cents In
rates on Pacific Coast lumber, shipped
to points East, one opinion by Commis
sioner Clark, the other by Commis
sioner Clements. Commissioner Clark
rendered his opinion on the complaint
of the Oregon & Washington Lumber
Manufacturers' Association, and the de
cision of Commissioner Clements was
rendered on the complaints of the Pa
cific Coast Lumber Manufacturers' As
sociation and Southwest Washington
Lumber Manufacturers' Association.
The Clark decision, which is identical
with that by Commissioner Clements,
orders that:
Text of Court's Order.
The defendants ... be and they are
are hereby, notified, and required to cease
and desist on or before the lflth day of
August, 1908. from enforcing their present
rates on interstate shipments of lumber,
shingles and other forest products, from
points of origin in Oregon, Washington.
Idaho. Montana and British Columbia, to
points In various stages and territories east
and southeast thereof, excluding those points
to which rates are prescribed by the Com
mission In Case No. 1054 (Portland Gateway
case (Southern Oregon case).
It is further ordered. That said defend
ants, and each of them. be. and they are
hereby, notified and required to establish
and put in force on or before the said 15th
day of August. 1908, and maintain In force
thereafter during a period of not less than
two years, rates on said Interstate shipments
of lumber, shingles and other forest products
from said points of origin to said
points of destination . which shall in
no instance exceed the rates on
ilka shipments between the same points
which had been duly filed with the com
mission as required by law and which were
in effect Immediately prior to November 1,
1907, subject to present minimum weight
regulations and to the following limitations:
The rates on said lumber, shingles, and
other forest products from said points of ori
gin to all points on and west of a line drawn
from Pembina, N. D-, to Port Arthur. Texas,
along the Kansas City Southern Railway,
also including all points that now take the
same rates as any of the points located on
said line between and Including Sioux City,
Iowa, and Kansas City. Mo., and excluding
those points to whloh rates are prescribed In
Case No. 1054 (Portland Gateway), and in
Case No. 1331 (Southern Oregon) which
were In effect Immediately prior to Novem
ber 1, 1907. shall be restored, except that
the differentials prescribed In Case No. 1.(48
(Potlatch case) shall be observed: the rates
which were In effect Immediately prior to
November 1, 1907, from said polntB of ori
gin to points east of the line mentioned, and
excluding all points to which the rates are
now the aume as to any of the points located
on said line between and including Sioux
City. Iowa, and Kansas City. Mo., may be
increased, in no case exceeding 5 cents per
100 pounds, and subject to the differentials
prescribed in said Case No. 134S. (PotlatchV
This case will be held open for such sup
plemental proceedings as it may b5 neces
sary for interested parties to Institute In
respect to reparation.
Views of Commissioner.
In explaining his reasons for ad
judging tho new rate unreasonable.
Commissioner Clark, in part, says:
The widest possible, market for their
medium and common lumber Is what
the North Pacific Coast lumber men
need most and every market that can
reasonably be opened to their common
lumber operates to lessen the waste
and destruction in the natural supply.
From 30 to 50 per cent of the finished
output of the Oregon mills reaches the
territory affected by the Increase in
rates. The combined North Pacific
Coast Interests market about 6,000,
000.000 feet annually, as against ap
proximately 19,000,000.000 feet of
Southern pine and white pine, which
shows that the latter two predominate
and fix the price In competitive mar
kets. It Is alleged by yellow-plno
dealers that an advance of 5 to 10
cents per 100 pounds In their freight
rates would drive them out of competi
tive territory.
It may be. safely said that all the
carriers Involved in this complaint
show In their reports large Incomes
and large surplus earnings over and
above the cost of operation, mainte
nance of way and equipment, deprecia
tion thereof, fixed charges and various
sinking funds for extension of lines
and retiring of bonds, and reasonable
dividends upon the amounts invested.
See report in Pacific Coast Lumber
Manufacturers' Association et al. and
Southwest Washington Lumber Manu
facturers' Association et al. vs. North
ern Pacific Railway Company et al.,
infra.
From this it appears that the sched
ule of rates applying to each defendant
lino, as a whole, furnishes sufficient
revenue. The density of traffic on the
defendant lines has Increased fo such
an extent that It is more than can be
advantageously handled on single
track roads. Double-track extensions
are now In progress on some of them,
and It was claimed by defendants at
time of hearing that within seven
months they would be able to handle
all traffic offered.
The Supremo Court of the United
States has said In Interstate Commerce
Commission vs. Chicago great "Western
Railway Company, 209 U. S., 108, that
an Increase of rates by a carrier raises
no presumption of wrong. It seems,
however, that when certain rates have
been in force for a long period of time
and business conditions have become
well settled thereon and the carrier Is
earning a liberal income and paying
liberal dividend while expending large
sums In- improvements and renewals, a
material increase in those rates unac
established from mills in the Willametto
companied by a corresponding decrease
In other rates places upon tho carrier
the obligation of Justifying the in
crease. Basis of Complaint.
Under this presumption complainants ,
contend that the. old rates were rea
sonable and remunerative; that under
them many mills have been built and
large amounts of money havo been In
vested w-hich under the new rates will
be lost because the mills cannot find an
outlet for their product In the terri
tory affected by the advance in tho
rates; that the consumers in the affect
ed territory are likewise interested;
that the carriers should grant rates
that will permit the widest possible
competition in commodities; that tho
carriers' total Incomes from their en
tire schedules of rates are sufficiently
remunerative and profitable, and such
being the case the carriers aro
estopped from increasing a rato on any
commodity that will increase the in
come; that if the total income Is suf
ficient they are not permitted to In
crease the rate on a given commodity
that may be lower than the cost of
transportation. To this last proposi
tion we, of course, can not assent.
While denying an intent to claim
that a rate on a commodity may bo
based upon the profitable nature of an
Industry producing it. yet defendants
indirectly advance that theory. They
also InslBt that every commodity
should bear Its Just burden of rates
and that lumber did not bear Its Just
proportion and that therefore the rates
thereon should have been increased. If
this Is true, some other commodity is
bearing too high a rate, but defendants
have not suggested which one. They
also insist that the changed conditions
since the law rates were inaugurated
required the advance. Neither of tho
parties are right in all their conten
tions. Competitive rates made by the several
carriers serving tho different points of
production may be lower than they could
be compelled tcA make. Tho law permits
the making of a competitive rate to the
extent above mentioned, but there Is no)
law that requires the carriers to go to
that extent. -This controversy can not
be determined wholly upon the ground
that complainants have enjoyed tho
lower rate for many years and that In
terests have been built up thereunder,
and that loss of business, investments,
profits and markets will result under tho
increased rates. It must be determined
on the justness or reasonableness of tho
rates In controversy. Neither do tha
Interests of the public require that lum
ber should be transported at other than
Just and reasonable rates.
Review of Conditions.
It seems quite clear that tha price of
lumber prior to this advance in rates had
reached a point where further increase
In the price would have brought about
tho use of substitutes therefor in all In
stances where substitutes could bo used.
On tho prico prevailing prior to July,
1907. it is clear that the Pacific Coast
lumber dealers could not have absorbed
in their selling price "this increase In
rate, nor could they have added it there
to and competed successfully with yellow
pine. It Is undoubtedly true that this ad
vance in the rate must be absorbed some
place, and if the logs aro to be deemed
the raw material, as an economic princi
ple the raw material would havo to ab
sorb this Increased rate If disposition Is)
to bo made of such raw material. This
theory assumes that the logs aro cut.
The advance in the rate would not reduce
the price of timber land or stumpage,
and up to the time of the hearing had la
no way affected them.
Whether tho advance In the rates be)
absorbed in the price of tho raw material
or whether it comes out of tho manufac
tured product. It Is apparent that some
one's profits aro reduced under this ad
vance in tho rates, and whether the log
gers havo been making 'an unusual profit
or tho mill men owning their own logs
have made an abnormal profit thereon,
or the mills have made large profits on
the manufactured product, the advanced
rato cannot be Justified on these propo
sitions. It must bo justified on the
ground that is Just and reasonable, re
gardless of the prosperous condition of
the Industry affected, or where It will be
absorbed. So that we have these proposi
tions: If tho old rates wero too low to
be just and reasonable, complainants
cannot urge their loss as a ground for
maintaining them; If the old rates were
Just and reasonable, tho defendants can
not justify the advance on the ground of
the prosperity of the lumber business, or
that the loggers will absorb tho Increase
in the decreased price of raw material.
The defendants urge with great vigor
that the empty eastbound car movement
prevailing at tho time of tho establish
ment of the 40-ccnt rate was the principal
factor Influencing tho establishment of
that rate and as the empty-car move
ment Is now westbound, a condition has
arisen which was not contemplated at
the time of the establishment of tho 40
cent rate. An examination of tho records
of the various defendants shows that the
empty-car movement Is now westbound.
The group system of rate-making is
well recognized In constructing rates up
on such commodities as lumber and coal,
and It obtains in the yellow pine district
as well. It is also a well-established
principle to make transcontinental rates
apply alike to large areas over which
such rates "blanket." It would seem un
wise to attempt to give Seattle and Ta
coma a better rate than Portland or other
points in tho North Pacific territory.
From Clements' Opinion.
Tho following extracts are taken from
the statement by Commissioner Clements1:
It appears that, notwithstanding tho
vast increase In the volume of this traf
fic since It began to move, as will bo
shown In a subsequent statement, tho
rates In many instances were higher Just
before these last advances than they had
been prior thereto for considerable
periods of time when the volume of the
traffic was much less than at the tlmo
of tho Increases complained of, and in
some noticeable Instances they are now
materially higher than they were 30 years
ago.
An examination of the tariffs shows
that there has been a steady Increase In.
the carload mlnlmums prescribed for this
traffic. Up to 1894 the minimum was
usually 20.000 pounds, since which time
thero has been a gradual increase In tho
mlnlmums and in the capacity of the
cars. In 1906 the minimum weight was
changed to be governed by cubical ca
pacity of the car and ranged from 23. CX)
to 67.000 pounds. .It is claimed by com
plainants' that the increase in the mini
mum loading requirements has amounted
to an advance of from $70 to $100 per car
In tho charges. It is conceded that the
average loading in 1906 and 1907 was ap
proximately 58.000 pounds per car. It Is
not open to question, therefore, that the
earnings per car under the present mini
mum rules are considerably more than
In former years, but it must also be borne
in mind that the larger and more modern,
equipment is heavier and -costs more to
construct.
The principal lines over which this
traffic moves have been moreexpensive
to, construct and operate than the lines
leading from the south to Chicago and
other competitive points In that region.
It appears that the empty car move
ment westward predominates to a greater
extent ,on the Great Northern road and
other lines on which the products of tho
mines constitute a greater proportion of
the' traffic handled than forest products,
than on the Northern Pacific, whlcli