MASTER NEGATIVE NO. 94 COPYRIGHT STATEMENT The copyright law of the United States (Title 17, United States Code) governs the making of photocopies or other reproductions of copyrighted materials including foreign works under certain conditions. In addition, the United States extends protection to foreign works by means of various international conventions, bilateral agreements, and proclamations. Under certain conditions specified in the law, libraries and archives are authorized to furnish a photocopy or other reproduction. One of these specified conditions is that the photocopy or reproduction Is not to be "used for any purpose other than private study, scholarship, or research." If a user makes a request for, or later uses, a photocopy or reproduction for purposes in excess of "fair use," that user may be liable for copyright infringement. The Columbia University Libraries reserve the right to refuse to accept a copying order If, in its judgement, fulfillment of the order would involve violation of the copyright law. Author: U.S. Interstate Commerce Commission Title: Consolidation of railroads Place: [Washington, D.C.] Date: [1921] MASTER NEGATIVE * COLUMBIA UNIVERSITY LIBRARIES PRESERVATION DIVISION BIBLIOGRAPHIC MICROFORM TARGET ORIGINAL MATERIAL AS "ILMEJ - 2XIZ1MG ^[" L.OGF.APHIw R£:;OAD 630 Un332 U. S. Interstate commerce commission. ... Consolidation of railroads. In the matter of con- solidation of the railway properties of the United States into a limited number of systems. August 3, 1921. Ten- tative plan of the commission. [Washington, Govt, print, off., 1921] i' ^ p.^ 455-660 incl. illus. (maps) tables. 31 fold, maps, diagrs.(l fold.) Caption title. Docket no. 12964. "Appendix. Report to the Interstate commerce commission on consolida- tion of railways under section 5, paragraph (4), of the Interstate commerce act, by William Z. Ripley. 1921" : p. 465-660. -, h ^^lte?*^^~^* S«.'l Railroads— Consolidation] i. Ripley, William Zebina, 1867- ii. Title. — • A 21-1329 Railway Economics. Printed by L. C. t3i RESTRICTIONS ON USE: TECHNICAL MICROFORM DATA RLM SIZE: 3S^rY^ REDUCTION RATIO: DATE FILMED: Io-2q-Q^ TRACKING # : fiUi 0D21^ \2l IMAGE PLACEMENT: lA ^ IB IIB INITIALS: W\a1 FILMED BY PRESERVATION RESOURCES, BETHLEHEM. PA. BIBLIOGRAPHIC IRREGULARITIES MAIN ENTRY: U.S. Interstate Commerce Commission Consolidation of railroads Bibliographic Irregularities in the Original Document: List all volumes and pages affected; include name of Institution if filming borrowed text. Page(s) missing/not available: yolume(s) missing/not available:. Illegible and/or damaged page(s): .Page(s) or volume(s) misnumbered:. Bound out of sequence: .Page(s) or volume(s) filmed from copy borrowed from X Other: Pagination begins with page 455 TRACKING*: MSH02298 '^, V7^ CXI 3 3 0) o > 1^ OP o I? I— »_j CJl ox ^-< OOM o V, 4!^ CJl mm > o m (DO OQ K> — ^ o o CO < N X -< <^%y^ ^, a^' a-v a? '^ -^^^, ^^. ^e r^ > o i 1 A^ > 8 3 i en f' o ff O cx> O i 00 IO In 1.0 mm 1.5 mm 2.0 mm ABCDEFGHIJKLMNOPQRSTUVWXYZ abcclefghiiklmnopqrstuvwi(yzl234 567890 ABCDEFGHIJKLMNOPQRSTUVWXYZ abcdefgh i j kl mnopq rstu vwxyz 1 234567890 ABCDEFGHIJKLMNOPQRSTUVWXYZ abcdefghijklmnopqrstuvwxyz 1234567890 2.5 mm ABCDEFGHIJKLMNOPQRSTUVWXYZ abcdefghijklmnopqrstuvwxyz 1234567890 rX- ^^ #. ^cr 'fp 4> f^ ^C. .A# '^. V ^^ -'A ,^V-'C '^ 4^ c^ o o -D[T1-0 OL,"0 > C CO X Tl ^ m o m i^ <^ ■^ (H* IO Ul o 3 = 3 E Is IS I s Is 3 r- 50 8 X t if I 13^ r2xO -(^ 'tT v^o X SCHOpL OF BUSINESS :> 2.<;) INTERSTATE COMMERCE COM No. 12964. CONSOLIDATION OF RAILROADS. IN THE MATTER OF CONSOLIDATION OF THE RAILWAY PROPERTIES OF THE UNITED STATES INTO A LIMITED NUMBER OF SYSTEMS. Augusts, 1921 _T) sso Tentative Plan of the Commission. i_^ Vi ^ ^ By the Commission: x^ rA\ This tentative plan is prepared and served under paragraphs (4) and (5) of section 5 of the interstate commerce act, which read as follows '. **• (4) The Commission shall'las soon as practicable prepare and adopt a plan for the consohdation of the railway properties of the continental United States mtx) a himted ^nmber of systems. In the division of such railways into such systems under such In. competition shall be preser^-ed a. fully as possible aiid wherever practicable the existing routes and channels of trade and commerce shall be "^^^^^^f . ^f ^,^- ^ect to the foregoing requirements, the several systems shall be so arranged that the St o^ transportation a^ between competitive systems and as related to the values of the propertieTthrough which the service is rendered shall be the same, so far as prac- ricable so that these systems can employ uniform rates in the movement of compeU- dve traffic and under efficient management earn substantially the same rate of return apon the value of their respective railway properties. .,„-.. (5) When the Commission has agreed upon a tentative plan, it shall give the same due publicity and upon reasonable notice, including notice to the Governor of each Slate shall hear all persons who may file or present objections thereto. The Commis- sion is authorized to prescribe a procedure for such hearings and to fix a time for bringing them to a close. After the hearings are at an end. the Commission shall adopt a plan for such consolidation and publish the same; but it may at any time thereafter, upon its own motion or upon appUcation, reopen the subject for «uch changes or modifications as in its judgment will promote the pubhc interest. The consolidations herein pro\ided for shall be in harmony with such plan. Under our direction Prof. William Z. Ripley, of Harvard Univer- sity, has prepared a report to us, which is the appendix. In some respects our tentative plan does not follow his recommendations, but presents alternatives thereto for like consideration. We indicate the main differences. We have sought to minimize dismemberment of existing lines or systems. This tentative plan is put forward m order to elicit a full record upon which the plan to be ultimately adopted can rest, and without prejudgment of any matters which may be presented upon that record. Whenever we refer to a prop- erty, the properties controlled thereby under lease, stock ownership, or otherwise should be understood as included unless otherwise indicated. Ga I. c. C. 03763—21 1 455 I \ i « ^4 ■ 456 INTERSTATE COMMERCE COMMISSION REPORTS. We find for the purposes of this tentative plan that the railway properties of the continental United States may be consolidated under the statute into the following systems : SYSTEM NO. 1. — NEW YORK CENTRAL. New York Central. Pittsburgh & Lake Erie. Rutland. Michigan Central. Chicago, Kalamazoo & Saginaw. Cleveland, Cincinnati, Chicago & St. Louis. Cincinnati Northern. Western Maryland. Fonda, Johnstown & Gloversville. Lake Erie & Pittsburgh. Central Indiana. Pittsburgh, Chartiers & Youghiogheny. Monongahela. Boston & Maine. Maine Central. Bangor & Aroostook. And all railway properties controlled by the above carriers through lease, stock ownership, or otherwise, except: Lake Erie & Western and Toledo &lBoth now controlled by Ohio Central. J New York Central. Zanesville & Western and Kanawha &1 Both now controlled by Michigan. J Toledo & Ohio Central. Indiana Harbor Belt, now controlled by New York Central, 30 per cent; Michigan Central, 30 per cent; Chicago & North Western, 20 per cent; Chicago, Milwaukee & St. Paul, 20 per cent. Note. — Prof. Ripley recommends the inclusion of the Western Maryland in s^'stem No. 5, Nickel Plate-Lehigh Valley. Prof. Ripley makes no specific assignment of the Fonda, Johnstown & Gloversville. The Lake Erie & Pittsburgh; Central Indiana; Pittsburgh, Chartiers & Youghio- ^eny; and Monongahela may be incori)orated in either system No. 1 or No. 2. Prof. Ripley mak^ no specific assignment of these four roads, which are con- trolled jointly in the interest of the New York Central and the Pennsylvania. The Boston & Maine, Maine Central, and Bangor & Aroostook may be included in system No. 7, New England, or system No. 7a, New England-Great Lakes. Prof. Ripley rejects the trunk line treatment of the New England roads, but we present this alternative with a view to developing the situation upon hearing. The Lake Erie & Western may be included in system No. 5, Nickel Plate-Lehigh Valley. The Toledo & Ohio Central, Zanesville & Western, and Kanawha & Michigan may be included in system No. 9, Norfolk & Western. The Indiana Harbor Belt is reserved for consideration in connection with terminal situations. 63 1. C. C. oOLIDATION OF RAILROADS. SYSTEM NO. 2. — PENNSYLVANIA. 457 Pennsylvania. West Jersey & Seashore. Long Island. Baltimore, Chesapeake & Atlantic. Cumberland Valley. Maryland, Delaware & Virginia. New York, Philadelphia & Norfolk. Pittsburgh, Cincinnati, Chicago & St. Louis. Waynesburg & Washington. Grand Rapids & Indiana. Cincinnati, Lebanon & Northern. Ohio River & Western. Louisville Bridge & Terminal. Wheeling Terminal. Toledo, Peoria & Western. Lorain, Ashland & Southern. Lake Erie & Pittsburgh. Central Indiana. Pittsburgh, Chartiers & Youghiogheny. Monongahela. And all other railway properties controlled by any of the above carriers under lease, stock ownership, or otherwise, except the Norfolk & Western and railway properties controlled by it, which may be included in system No. 9, Norfolk & Western. Notes.— The Lorain, Ashland & Southern may be included in system No. 4, Erie, which owns one-half the stock, the Pennsylvania owning the other "half. The Lake Erie & Pittsburgh; Central Indiana; Pittsburgh, Chartiers & Youghio- gheny; and Monongahela may be included in system No. 1» New York Central, which controls one-half the stock, the Pennsylvania controlling the other half. SYSTEM NO. 3. — BALTIMORE & OHIO. Baltimore & Ohio. Sandy Valley & Elkhorn. Staten Island Rapid Transit. Reading system, comprising the Philadelphia & Reading, Central Railroad of New Jersey, and various others. Cincinnati, Indianapolis & Western. Chicago, Indianapolis & I^ouisville. New York, New Haven & Hartford. Central New England. Lehigh & New England. Lehigh & Hudson. 63I.C.C. r. i -t H 458 INTEBSTATE COMMERCE COMMISSION BEPOBTS. Notes. — The Baltimore & Ohio Chicago Terminal is reserved for consideration in connection with terminal situations. The New York, New Haven & Hartford: Central New England; Lehigh & New England; and Lehigh & Hudson may be included in system No. 7, New England, or system No. 7a, New England-Great Lakes. SYSTEM NO. 4. — ERIE. Erie. Chicago & Erie. New Jersey & New York. New York, Susquehanna & Western. Delaware & Hudson. Delaware, Lackawanna & Western. Ulster & Delaware. Bessemer & Lake Erie. Buffalo & Susquehanna. Pittsburg & Shawmut. Pittsburg, Shawmut & Northern. Lorain, Ashland & Southern. Wabash lines east of the Missouri River. Notes. — Prof. Ripley recommends including the Lehigh Valley in thi^ system; but in this tentative plan that carrier is proposed as a main stem for system No. 5, Nickel Plate-Lehigh Valley. The Delaware & Hudson, Delaware, Lackawanna & Western, Ulster & Delaware, Pittsburg & Shawmut, and Pittsbiu-g, Shawmut & Northern may be included in system No. 7a, New England-Great Lakes. The Bessemer & Lake Erie may be included in system No. 5, Nickel Plate-Lehigh VaUey. The Lorain, Ashland & Southern may be included in system No. 2, Pennsylvania. SYSTEM NO. 5. — NICKEL PLATE-LEHIOH VALLEY. Lehigh Valley. New York, Chicago & St. Louis. Toledo, St. Louis & Western. Detroit & Toledo Shore Line. Lake Erie & Western. Wheeling & Lake Erie. Pittsburgh & West Virginia. Bessemer & Lake Erie. Notes. — Prof. Ripley recommends the Lackawanna as main stem in this system. In this tentative plan it is replaced for that purpose by the Lehigh Valley, and made available for either system No. 7a, New England-Great Lakes, or system No. 4, Erie. He also includes the Buffalo, Rochester & Pittsburgh and Wheeling & Lake Erie in this system. The Bessemer & Lake Erie may be included in system No. 4, Erie. 68 1. 0. 0. CONSOMDATION OP RAILROADS. SYSTEM NO. 6. — PERE MARQUETTE. 459 Pere Marquette. Detroit & Mackinac. Ann Arbor. Detroit, Toledo & Ironton. Boyne City, Gaylord & Alpena. Note. — The last-named road is a class-II road not specifically covered by Prof. Ripley's report. SYSTEM NO. 7. — NEW ENGLAND. New York, New Haven & Hartford. New York, Ontario & Western. Central New England. Boston & Maine. Maine Central. Bangor & Aroostook. Lehigh & Hudson River. Lehigh & New England. Notes. — Prof. Ripley recommends inclusion of the New York, Ontario & Western in system No. 4, Erie. The Lehigh & Hudson River is not included in any system under Prof. Ripley's report, but is left as a "bridge line. " SYSTEM NO. 7A. — NEW ENGLAND-GREAT LAKES. Same as system No. 7 with addition of the following, which other- wise with the exception of the Buffalo, Rochester & Pittsburgh may be included in system No. 4, Erie. That carrier may be included in system No. 5, Nickel Plate-Lehigh Valley. Delaware & Hudson. Ulster & Delaware. Delaware, Lackawanna & Western. Buffalo, Rochester & Pittsburgh. * • Pittsburg & Shawmut. Pittsburg, Shawmut & Northern. Note. — ^The addition of these lines has not been recommended by Prof. Ripley. SYSTEM NO. 8. — CHESAPEAKE & OHIO. Chesapeake & Ohio. Hocking Valley. Virginian. Note. — Prof. Ripley recommends consolidation of the Virginian with the Norfolk & Western, Toledo & Ohio Central, and Kanawha & Michigan, in order to afford a western outlet for coal originating on the Virginian. This apparently would involve 63 1. C. C. 460 INTERSTATE COMMERCE COMMISSION REPORTS. CONSOLIDATION OF RAILROADS. 461 '9 HUH upgrade eastbound haul of westbound coal to the vicinity of Roanoke, unless there be new construction near Gauley Bridge, W. Va. The Virginian's present outlet to the west is via Deepwater, W. Va., and the Chesapeake & Ohio. SYSTEM NO. 9. — NORFOLK & WESTERN. Norfolk & Western. Toledo & Ohio Central. Zanesville & Western. Kanawha & Michigan. Kanawha & West Virginia. Note.— From the Norfolk & Western is excepted the branch from Roanoke to Win- ston-Salem, which may be included in system No. 11, Atlantic Coast Line-Louisville & Nashville and the branch from Lynchburg to Durham which may be included in system No. 12, Illinois Central-Seaboard. SYSTEM NO. 10. — SOUTHERN. Southern. Alabama Great Southern. Georgia, Southern & Florida. Mobile & Ohio. Southern Railway in Mississippi. Northern Alabama. Cincinnati, New Orleans & Texas Pacific. New Orleans Great Northern. Alabama & Vicksburg. Note.— Prof. Ripley recommends inclusion of the Georgia Southern & Florida branch from Valdosta, Ga., to Palatka, Fla., in the Seaboard system. SYSTEM NO. 11.— ATLANTIC COAST LINE-LOUISVILLE A NASHVILLE. Atlantic Coast Line. Atlanta & West Point. Charleston & Western Carolina. Louisville & Nashville. • Nashville, Chattanooga & St. Louis. Louisville, Henderson & St. Louis. Western Railway of Alabama. Richmond, Fredericksburg & Potomac. Norfolk Southern. Atlanta, Birmingham & Atlantic. Winston-Salem Southbound. Roanoke to Winston-Salem branch of Norfolk & Western. Florida East Coast. Carolina, Clinchfield & Ohio. Georgia & Florida. 63 1. C. O. Gulf, Mobile & Northern. Mississippi Central. Notes. — Prof. Ripley recommends that the Richmond, Fredericksburg & Potomac and Florida East Coast retain their present status without inclusion in any system. The Carolina, Clinchfield & Ohio may be included in system No. 12, Illinois Cen- tral-Seaboard. Prof. Ripley recommends inclusion in system No. 10, Southern. The Gulf, Mobile & Northern and Mississippi Central are not specifically included in any system under Prof. Ripley's report. SYSTEM NO. 12 — ^ILLINOIS CENTRAL-SEABOARD. Illinois Central. / Yazoo & Mississippi Valley. Central of Georgia. Seaboard Air Line. Lynchburg, Va., to Durham, N. C, branch of Norfolk & Western. Gulf & Ship Island. Tennessee Central. Carolina, Clinchfield & Ohio. Notes. — Prof. Ripley recommends that a separate system be built around the Seaboard Air I^ine. The Gulf & Ship Island is not included in any system by Prof. Ripley. The Carolina, Clinchfield & Ohio may be included in system No. 11, Atlantic Coast Line-Louisville & Nashville. SYSTEM NO. 13. — UNION PAOIFIC-NORTH WESTERN, Union Pacific. St. Joseph & Grand Island. Oregon Short Line. Oregon- Washington Railroad & Navigation Company. Los Angeles & Salt Lake. Chicago & North Western. Chicago, St. Paul, Minneapolis & Omaha. Lake Superior & Ishpeming. Wabash lines west of the Missouri River. Notes. — Prof. Ripley recommends inclusion of the Central Pacific in this system. The Lake Superior & Ishpeming is not specifically included in any system by Prof. Ripley. ' SYSTEM NO. 14. — BURLINGTON-NORTHERN PACIFIO. Chicago, Burlington & Quincy, Northern Pacific. Chicago Great Western. Minneapolis & St. Louis. Spokane, Portland & Seattle. 63 1, a C. r // 462 INTERSTATE COMMERCE COMMISSION REPORTS. CONSOLIDATION OF RAILROADS. 463 i 1 ^ Notes.— From the Chicago, Burlington & Quincy are excepted the Colorado & Southern and Fort Worth & Denver City, which may be included in eystem No. 16, Santa Fe. Prof. Ripley recommends that they be included in system No. 19, Chicago- Missouri Pacific. Prof. Ripley recommends extension of this system to the Pacific coast by includ- ii^ the Denver & Rio Grande and the Western Pacific. He also recommends redis- tribution of portions of the Minneapolis & St. Louis and Chicago Great Western. The Spokane, Portland & Seattle may be included in system No. 15, Milwaukee- Great Northern. SYSTEM NO. 15. — MILWAUKEE-GREAT NORTHERN. Chicago, Milwaukee & St. Paul. Great Northern. Chicago, Terre Haute & Southeastern. Duluth & Iron Range. Duluth, Missabe & Northern. Green Bay & Western. Spokane, Portland & Seattle. Butte, Anaconda & Pacific. Notes.— The Green Bay & Western and Butte, Anaconda & Pacific are not included in any system under Prof. Ripley's report. The Spokane, Portland & Seattle may be included in system No. 14, Burlington- Northern Pacific. Prof. Ripley recommends that the eastern half of the Chicago & Eastern Illinois be included in this system. SYSTEM NO. 16. — SANTA FE. Atchison, Topeka & Santa Fe. Gulf, Colorado & Santa Fe. Colorado & Southern. Fort Worth & Denver City. Denver & Rio Grande. Western Pacific. Utah Railway. Northwestern Pacific. Nevada Northern. Notes.— Prof. Ripley recommends inclusion of the Colorado & Southern and the Fort W^orth & Denver City in the Missouri Pacific system. He also recommends inclusion of a part of the Gulf Coast Lines in the above system. Prof. Ripley recommends that the Northwestern Pacific retain its present status. The Nevada Northern is not specifically included in any system by Prof. Ripley. It may be included in system No. 17, Southern Pacific-Rock Island. SYSTEM NO. 17. — SOUTHERN PACIFIC-ROOK ISLAND. Southern Pacific Company. Nevada Northern. Chicago, Rock Island & Pacific. Chicago, Rock Island & Gulf. 63 Lao. Arizona — ^Trunk Une territory 506 Exhibit 2. — ^Michigan peninsula roads 5O6 Exhibit 3. — New England region 524 Exhibit 4. — Chesapeake region 534 Exhibit 5 and 5-A. — Southeastern region 538, 555 Exhibit 6 and 6-A . — Western transcontinental region 613 ' Exhibit 7. — Southwestern-Gulf region 634 Exhibit 8 . — Grand summary of twenty-one proposed systems 638 List op Maps. 1. Showing available stems in trunk line territory. 2. The Pennsylvania system. 3. The New York Central system. 4. The Baltimore & Ohio-Reading system. 5. The Erie-Lehigh Valley- Wabash system. 6. Lackawanna-Nickel Plate-Clover Leaf system. 7. The Michigan peninsula system. 7-a. Michigan railroads. 8. New England railroads and connections as also contributing coal fields. 9. The Chesapeake group. 10. The Southern Railway system. 11. Louisville & Nashville-Atlantic Coast line system. 12. The Illinois Central system. 13. The Seaboard Air Line system. 14. Main stems of western transcontinental systems. 15. The Union Pacific-North Western system. 16. The BurUngton-Northern Pacific system. 17. The St. Paul-Great Northern system. 63I.G.C. * 467 468 INTERSTATE COMMERCE COMMISSION REPORTS. CONSOUDATION OF RAILROADS. 469 17-a. Possible northwestern transcontinental systems. 19. Proposed Burlington-Northern Pacific and St. Paul-Great Northern systems. 20. Proposed Union Pacific-Chicago & North Western and Burhngton-Northem Pacific systems. 21. Proposed Union Pacific-Chicago & North Western and St. Paul-Great Northern systems. 22. Santa Fe system. 23. Rock Island-Southern Pacific system. 24. Proposed Rock Island-Southern Pacific and Santa Fe systems. 25. St. Louis & San Francisco system. 26. Missouri Pacific-Gulf system. 26-a. Proposed St. Louis-San Francisco and Missouri Pacific systems. 27. Main stems of proposed railway systems. 63 I. C. C. m I PROPOSED RAILROAD CONSOLIDATION PLAN. UNDER SECTION 5, PARAGRAPH (4), OF THE INTERSTATE COMMERCE ACT. 1. o Trunk Line Region: Pennsylvania system. New York Central system (less Toledo & Ohio Central, Kanawha & Michigan, and Lake Erie & Western). 3. Baltimore & Ohio— Reading system (including Central of New Jersey and Monon). 4. Erie — Lehigh Valley — Wabash system (Delaware & Hudson, Wabash lines east, Bessemer & Lake Erie, etc.). 5. Lackawanna— Nickel Plate — Clover Leaf system (also includes Wheeling & Lake Erie — ^Western Maryland — Lake Erie & Western — Buffalo, Rochester & Pittsburgh, etc.). Chesapeake Bay Lake-to-Tide Soft-Coal Region: 6. Chesapeake & Ohio system. 7. Norfolk & Western — Sandusky system (extended to Lake Erie). 8. Virginian — ^Kanawha — Toledo system (including Toledo & Ohio Central and Kanawha & Michigan). (Or 7 and 8 combined.) Soitheastern Region: 9. Southern Railway system (with certain minor changes). 10. Louisville & Nashville — Atlantic Coast Line system (plus Atlanta, Birming- ham & Atlantic, etc.). 11. Illinois Central — Central of Georgia system (certain details modified). 12. Seaboard Air Line system. Western Transcontinental Region: 13. Union Pacific — Chicago & North Western system (plus Central Pacific; also western Wabash lines, etc.). 14. Burlington — Northern Pacific — Denver & Rio Grande — Western Pacific sys- tem (Chicago Great Western; Minneapolis & St. Louis [parts], etc.). 15. Chicago, Milwaukee & St. Paul — Great Northern system (east part of Chicago & Eastern Illinois and iron-ore roads). 16. Atchison, Topeka & Santa Fe system (with line into St. Louis; Gulf Coast, etc.), 17. Southern Pacific — Rock Island system (part of St. Louis Southwestern, etc.). (tulf Region (west of Mississippi, south of St. Louis and Kansas City): . 18. St. Louis & San Francisco system (with Katy [part]; St. Louis Southwestern [part], etc.; Alton). 19. Missouri Pacific — Iron Mountain system (including Kansas City Southern, etc.; Chicago & Eastern Illinois, western half). Independent Regional Groups: 20. New England system (except Boston & Albany and Grand Trunk lines). 21. Michigan peninsula system (Pere Marquette; Ann Arbor, and Ironton). 22. Florida East Coast Railway. 63 I. a c. 63763—21 2 l\ I 470 INTEKSTATE COMMERCE COMMISSION REPORTS. CONSOLIDATION OF RAILROADS. 471 w TOPICAL OUTLINE. INTRODUCTION. V Text of the statute as to consolidation into systems, 475. — Other correlative sections, as to leases and mergers, quoted, 475. — The purpose and spirit of the act, 4^6. — Its legis- lative history, 476. — Relation to the new statutory definition of reasonable rates, 476. — Three requirements as to procedure in consolidation, 476. — Different methods of approach, finances, traffic, and operation, 477. — ^Broad outlines tested by details for practicability, 478.— The employment of statistical data, 478.— Its limitations, 478.— Certain data for 1917 compiled for ready reference, 478. — ^Mileag*^ comprehended, and the proportion of short lines still to be assigned place, 479. The test of competitive ability, 479. — Not size but more evenly balanced opportu- nity, 479. — The geographical scope of systems, 480.— Conforming to the customary rate- making areas, 480. — Shall these regional boundaries be rigidly or loosely drawn? 481. — Is corporate dismemberment permissible? 481. — Definition of ''weak" and*'eitrong" roads, 481. — The difficulty incident to affinity between weak roads, 481. — Financial reorganization as a prerequisite to consolidation, 482. — Constitutionality of the new l^;islation conferring administrative in place of judicial control over corporate rela- tionships taken for granted. 482. — Unification of terminals also a prerequisite, 483. — Relation of consolidation to alternate routes and gateways, 484. — Broader aspects of a comprehensive national policy, 484. CHAPTER I. — TRUNK LINE TERRITORY. Elements of the situation stated, 485. — Five east-and-west stems available, 486. — Are there enough branches and feeders for five or only four systems? 487. — The components for only four systems too competitive and unnaturally related, 487. — Five systems appear necessary, 488. The New York Central system slightly reduced, 488.— Transfer of Lake Erie & Western, 488.— Also the Toledo & Ohio Central, and the Kanawha & Michigan, 488.— The Rutland Railroad and possibly the Worcester, Nashua & Portland added, 489. The Pennsylvania system already large enough, 489. — The Norfolk & Western con- trol, 489. The Baltimore & Ohio system needs stated, 490.— Strengthening the western end by the Monon, 490. — The New York terminal situation, 490. — Baltimore & Ohio investment in the Philadelphia & Reading, 491. — Shall the Reading be absorbed or treated as an independent terminal property? 491.— The geographic situation (map), 491. — Analysis of Reading traffic interchange (diagram), 492.— The terminal situation again, 493.— Western Maryland relationships, 493.— Legal obstacles to its merger, 494.— The Pere Marquette connection. 494. The present Erie system described, 495. — The Delaware & Hudson added, 495. — New York. Ontario & Western added, mainly for its terminal rights, 495. — The Lehigh Valley contributes strength, 496.— The Wabash eastern lines reach St. Louis, 496. — Pittsburgh problem stated, 496.— Status of the Bessemer & Lake Erie, 496.— United States Steel Corporation claims independence, 497. — ^Its contentions met. 498. — ^Effect of inclusion of the Bessemer road, 498. The New York, Chicago & St. Louis (Nickel Plate) stem, 499.— The Delaware, Lackawanna & Western, 499.— The Clover Leaf line to St. Louis, 499.— Lake Erie & Western and other additions, 499.— Access to Pittsburgh via Wheeling & Lake Erie 63 1. C. C. 500. — ^Baltimore and the Western Maryland, 500. — Southern detour about Washington, 501. — ^Buffalo, Rochester & Pittsburgh adds traffic, 501. — Comparative statistics, 501. — The Lackawanna system and the New England roads, 502. The Michigan peninsula traffic, 502. — ^An independent group or parceled among the trunk lines? 503. — ^Difficulty of partition stated, 503. — Similarity to New England situation, 503. — ^The Ironton added as a fuel Une, 505. — ^The American lines in Canada, 505. The Lehigh & Hudson and Lehigh & New England as "bridges, ' ' 506. — Independent or assigned to New England group, 506. Statistical analysis, based upon exhibits, 506. •• • CHAPTER n. — THE NEW ENGLAND REGION. Geographic peculiarities of New England, 509. — Gateways and rail connections (map), 510. — ^Volume of traffic by gateways analyzed, 510. — ^Excess of inbound tonnage and character of shipments, 512. — Interchange wiCh outside companies analyzed (diagram), 512. The advantages of trunk line plans outlined, 514. — Objections to Pennsylvania- New Haven alliance, 515. — ^A New York Central-Boston & Maine merger also objec- tionable, 516. — ^Alternative alliance with Erie and Lackawanna-Nickel Plate, 517. The plan forr^onal consolidation described, 517. — ^Advantages as respects outside relationships, especially routing, 518. — ^Effect upon dealings concerning division of through rates, 519. — Coal supply and a possible common fuel line, 519. — Coastwise traffic encouraged and Canadian differential lines, 519. — ^Proposed fuel line to Harris- burg by consolidation of all New England lines with Lehigh & New England, 520. — Possible merger with certain trunk line coal roads, 521. — ^Domestic intra-New England considerations, 522. — Concentration of local interest and responsibility, commercial, financial, and political, 522. — Legal aspect as to preservation of competition met, 523. — The outstanding objection of financial weakness, 523. — ^The aevelopment of Boston as a seaport, 524. — ^Final acceptance of the regional plan as compelled by circumstances, 525. CHAPTER in. — CHESAPEAKE REGION (LAKE-TO-TIDE, SOFT COAL). Three railroads based on (Chesapeake Bay, described, 526. — Specialization in coal traffic, 526.— The geographic location (map), 527.— Technique of coal road operation, 528.— Two varieties of coal, 528.— Eastern and western markets described, 529. Need of Jlexibility in carriage east and west, 529. — ^Plans for Virginian Railway extension to Toledo (map), 530.— Involved history of Toledo & Ohio Central and Kanawha & Michigan, 530.— Norfolk & Western extension to Lake Erie, 530.— Pennsylvania Railroad claims for continued control, 532. — Consolidation of Virginian and Norfolk & Western feasible, 533.— Possible joint use of two Toledo & Ohio Central Unes, 533. Statistical verification, 534. CHAPTER IV. — THE SOUTHEASTERN REGION. Southern transportation conditions contrast sharply with trunk line and western situation, 535. — ^East-and-west division by the Allegheny range, 536. — Greater unity recently promoted by raib-oad systems, especially the Southern, 536.— Unity some- what less apparent between Louisville & Nashville and Atlantic Coast Line, 537.— MutuaUty of interest lacking between Illinois Central and Seaboard Air Line, 537.— Main stems (map) as indicating unity of southern systems, 537.— Statistical com- parison of the four leading systems, 538.— Southern seaport development and railroad policy, 538. esLac. 472 INTERSTATE COMMERCE COMMISSION REPORTS. CONSOLIDATION OF RAILROADS. 473 i H The Southern Railway system logical and compact, 539. — Relation to the Mobile & Ohio, 539. — ^Decisive objections to transfer of the Louisvill^St. Louis division, 540. — Corporate structure of the Queen & Crescent Line, 540.^Relation to the Carolina, Clinchfield & Ohio, 541. — The Georgia Southern & Florida and New Orleans Great Northern included, 541. The Louisville & Nashville as a complete and satisfactory system, 542. — Interest in the Atlanta, Birmingham & Atlantic, 542. — Division of the field between Atlantic Coast Line and the Southern Railway in relation thereto, 543. — The Georgia & Florida Railway and the Atlanta-Montgomery lines considered, also the Norfolk Southern, 544.— Divorce of theMonon, 545. — ^Addition of the Winston-Salem branch of the Norfolk & Western, 545. — Proposal to actually merge the Louisville & Nash- ville and the Atlantic C^w^t Line Railway, 546. Shall the Seaboard Air Line system remain independent? 546. — Relation to the Georgia Southern & Florida Railway, 547. — Addition of the Durham branch of the Norfolk & Western Railway, 547. Inherent strength of the Illinois Central system, 548. — The proposal to dissociate the western line across Illinois and Iowa rejected, 548. — Possible incorporation of the Memphis-Birmingham division of the Frisco system, 549. — The Yazoo & Mississippi road left undisturbed, 550. The Carolina, Clinchfield & Ohio road as strategically located, 550. — Its relation to southeastern coal supply, 551. — Importance as a connection for neighboring rail- roads, 551.— Development of its traffic relationships, 552. — ^Merger with Southern Railway, reserving trackage rights for others, recommended, 553. The Washington-Richmond to remain a joint line as at present, 554. The Florida East ('oast Railway to remain an independent bridge line, 555. Statistical confirmation, 555. CHAPTER v. — THE WESTERN TRANSCONTINENTAL REGION. Through routes determined primarily by seven available Rocky Moimtain gate- ways, 557. — ^Matching these within three groups, as also group j^ainst group, 558. — Geographical distribution of mileage based on population, a complication, 558. — Denver conditions as an illustration, 559. — ^Decision to extend all systems into Chicago, 559. — Traffic analysis, indicating importance of carloads and of special equipment in solid traiAloads, 559. The western situation most broadly considered, 560. — The Union Pacific, a key road, strongest and most direct through line, 560. — The Western Pacific-Denver & Rio Grande also pivotal as a matched bridge line, 561. — The Burlington as a support for the precarious bridge, matched against the Union Pacific, 562. — Burlington must derive added strength from a northern through line, 562. — The Santa Fe, a second possible supporter of the Western Pacific-Denver & Rio Grande bridge, 562. — ^Tho Chambers comprehensive plan, its advantages and defects, 563. — ^Possible modifica- tions of a Santa Fe-Denver & Rio Grande plan, 564. — General competitive situation, north and south, especially the Panama Canal, as affecting a choice between the Biur- lington and the Santa Fe, 565. — Final selection of the Burlington road as coimterpoise }or the Union Pacific, 566. The northern twin cities transcontinental group described, 566. — Objection on competitive grounds to three northwestern through systems, 567. — Not enough good Chicago connections for three such systems, 567. — Two instead of three chosen, 568. — Broader advantages considered, 568. — A Burlington-Northern Pacific-Western Pacific combination necessary as a counterpart of the Union Pacific-Northwestem-Central Pacific line, 563. — ^Alternatives considered spell widespread dismemberments, 568. — St. Paul-Northern Pacific combination advantageous for operation, bat fatal to compe- tition, 569. — ^Merits of a St. Paul-Great Northern miei^er, commercial and financial, 63 1. C. C. commend this choice, 569.— The final test of financial stability, 570.— Western addi- tions necessary to round out such a system, 573.— Proposed changes at the eastern, end, 573.— The Soo lines added, if available for consolidation, 595.— Other possible reenforcement, 573. The Union Pacific closely related to the Chicago & North Western at Omaha, 573.— The Wabash western lines for a Union Pacific entrance to St. Louis, with minor eastern additions, 575.— Judicial attempts to separate the Central Pacific from the Southern Pacific, 575.— These two properties, historically and organically inter- related, 576.— The geographical location indicating interdependence (map), 576.— Financial relationships also intricate, 577.— This case to be judged by economic rather than legal reasoning, 578.— Complete country-wdde, not half-hearted or local competition, essential, 578.— General outline of transcontinental competition, 578.— Territorial limitation of Sunset Route competition, 579.— Theoretically, north-and- south gathering lines distinct from east-and-west long-haul lines desirable, 579.— Physical upbuilding and development of Central Pacific favored by unmerger, 580.— The Pacific Railroad acts again, 580.— Finally Central Pacific merger needed to balance the Burlington-Western Pacific through line, 580.— Temporary prejudicial effect upon local transportation, a valid objection, 581.— Agreement for dissolution in 1914 establishes practicabilit>% 581.— Pacific coast public sentiment versus national interest and policy, 586.— Possible advantages of transfer of Southern Pacific lines in Oregon to the Union Pacific, 587.— Objections thereto are conclusive, 587.— National defense requires completion of an interior north and south line of communication. 589.— Recapitulation of distribution of California and Oregon lines, 590. Chicago, Burlington & Quincy Northern Pacific to preserve balance of power against the Union Pacific Northwestern, 590.- Traffic interchange at Billings, Mont., 591.— The Denver & Salt Lake project essential to future development, 592.— Its relation to Denver & Rio Grande and Western Pacific, 592.— Alternative alliance, 592.— Tenninals at San Francisco, 592.— Chicago Great Western provides necessary con- nections between twin cities and Missouri River gateways, 593.— The Minneapolis & St. Louis used still further to supplement deficiencies southwest of Minneapolis and St. Paul, 594.— Northern Pacific should have trackage into Great Falls, Mont., district, 594.— The possible inclusion of the Mobile & Ohio as a Gulf line, 594. Strengthening the St. Paul Great Northern combination by addition of the Minne- apolis, St. Paul & Sault Ste. Marie Railway, 595.— Local traflic, lumber and coal business might help, 596.— Two iron-ore roads added for financial strength, 597.— Protecting the St. Paul Great Northern by trackage contract at Council Bluffs, 598.— Terra Haute and Southeaatern merger and the Indiana line of the Chicago & Eastern Illinois, 598.— Independent access to St. Louis and other minor changes, 599 — The Chicago, Rock Island & Pacific intimately related to the Southern Pacific, 600.— Each partner contributes elements of strength, 601.— Provision of a line from' Mem- phis up to Burlington, la., desirable, 602.— Certain minor changes in the Rock Island, 604.— Several mergers of Texas properties in the Southern Pacific, 604 — What shall be done with the Northwestern Pacific? 605. The Atchison, Topeka & Santa Fe, compact, complete, and impregnable, 605.— An entrance to St. Louis proposed, 606.— Access to New Orleans by merger of the Gulf Coast Lines, 607.— Peculiar importance of the Cole-ado & Southern system, 607.— Choice between the Santa Fe and the Southern Pacific- Rock Island, 608.— Serious disadvantages of Santa Fe merger, 609.— Rock Island afliliation also rejected, 609.— Made a neutral through route in the Missouri Pacific system, 610.— Certain minor Santa Fe changes, 610. Geographical test of foregoing combinations, maps, 159. Statistical verification of earning power in terms of investment account for proposed five systems, 613. 63I.C.C. 474 i t INTERSTATE COMMERCE COMMISSION REPORTS. CHAPTER VI. — SOUTHWESTERN-GULP REGION. The territory bounded and described, 614.— Its transportation problems not prop- erly transcontinental, 615.— Nature of the traffic, 615.— Many small independent roads, 616. — Many of them precarious financially, 616. — Statistical data, 617. — Con- fusion incident to separate incorporation and financing of the Texas properties, 617. National interest in short hauls to the Gulf, 618.— Final choice for main stems of two local systems, Frisco and Missouri Pacific, respectively, 619. — Shall they extend into Chicago? 619.— Detailed comparison with southeastern conditions, 619. — South- western lines in relation to primary markets, 621. The St. Louis-San Francisco Railway system described, 621.— Its comparative financial strength, 622.— Its operating characteristics improved by an exchange with the Santa Fe, 622.— Plight of the Kansas City, Clinton & Springfield Railway, 623.— The Missouri, Kansas & Texas included, 623.— St. Louis Southwestern divided with the Rock Island, 624.— New through routes to the Gulf provided from St. Louis and Kansas City, 625. — Galveston as well as New Orleans considered , 626. — The Kansas City, Mexico & Orient divided at Altus, 626.— The Vicksburg, ShreveportA Pacific admits into Louisiana territory, 626.— The Chicago & Alton for entry into Chicago, 627. The Missouri Pacific system as now constituted, 628.— Its financial and operating status, 629.— Imperative need of a direct line to the Gulf satisfied by including the Kansas City Southern, 629. — Financial advantages incident thereto, 629. — New low- grade detour via Kansas, Oklahoma & Gulf, which is therefore included, 629.— The Louisiana & Arkansas and the Fort Smith & Western as minor additions, 630.— The Texarkana & Fort Smith as well as other Texas subsidiaries considered, 630. — Shall the Omaha line and the Kansas branch be left undisturbed? 630. — And what about the Colorado division into Pueblo? 631.— Possible dispositions of the Colorado & Southern- Fort Smith & Denver City line, 631.— Relation to the Gulf Coast Lines, as allocated to the Santa Fe, 632.— A Chicago entrance provided by merger of western line of the Chicago & Eastern Illinois, 633. Summary comparison of the two Southwestern-Gulf systems (map 26-A) as above constituted, 633.— Statistical comparison of the two systems as evenly matched competitors, 634. CHAPTER VU. — RECAPITULATION. R^sum^ and broader aspects of consolidation policy, especially as respects govern- ment ownership, 635.— Conspectus of the plan, proposing 21 independent systems, and comment upon the summary map of their respective locations, 636. — Their rela- tive extent and volume of traffic, 638. — General assembly of statistics of earning power, with comment upon r^onal variations, 640. — Capital account now compared with physical valuation, 641. — Positive conclusions thus obtainable, discussed re- gionally, 643. — ^Effect of consolidation upon train movement, 643. — And upon the welfare of individual properties, 643.— Extensive resort to trackage, avoiding need- less duplication, 644.— Certain objectionable practices demanding legislative cor- rection, 645. — The tendency toward consolidation in the British Isles significant, 646. 63 1. 0. 0. CONSOLIDATION OF RAILROADS. Introduction. 475 Ik' Text of the statute as to consolidation into systems, 475. — Other correlative sectiona, as to leases and mergers, quot^, 475. — ^The purpose and spirit of the act, 476. — Its legislative history, 476. — Relation to the new statutory definition of reasonable rates, 476. — ^Three requirements as to procedure in consolidation, 476. — Different methods of approach, finances, traffic, and operation, 477. — Broad outlines tested by details for practicability, 478.— The employment of statistical data, 478.— Its limitations, 478.— Certain data for 1917 compiled for ready reference, 478.— Mile- age comprehended, and the proportion of short lines still to be assigned place, 479. The test of competitive abiUty, 479. — Not size but more evenly balanced opportu- nity, 479.— The geographical scope of systems, 480. — Conforming to the customary rate-making areas, 480. — Shall these regional boundaries be rigidly or loosely drawn? 481. — Is corporate dismemberment permissible? 481.— Definition of "weak" and "strong" roads, 481.— The difficulty incident to aflinity between weak roads, 481. — Financial reorganization as a prerequisite to consolida- tion, 482. — Constitutionality of the new legislation conferring administrative in place of judicial control over corporate relationships taken for granted, 482. — Uni- fication of terminals also a prerequisite, 483. — Relation of consolidation to alternate routes and gateways, 484. — Broader aspects of a comprehensive national policy, 484. The transportation act of 1920 deals with the consolidation of railways into systems by the amendment of section 5, paragraph (4) of the act to r^^ulate commerce, of 1887, making it read as follows: The Commission shall as soon as practicable prepare and adopt a plan for the consolidation of the railway properties of the continental United States into a limited number of systems. In the division of such railways into such systems under such plan competition shall be preserved as fully as possible and wherever practicable the existing routes and channels of trade and commerce shall be maintained. Subject to the foregoing requirements, the several systems shall be so arranged that the cost of transiwrtation as between comi)etitive systems and as related to the values of the proi)erties through which the service is rendered shall be the same, so far as practicable, so that these systems can employ uniform rates in the movement of competitive traffic and under efficient management earn substantially the same rate of return upon the value of their respective railway properties. The act to regulate commerce, of 1887, is further amended as to procedure in effecting consolidation by the following paragraphs of section 5: When the Commission has agreed upon a tentative plan it shall give the same due publicity and upon reasonable notice, including notice to the Governor of each State, shall hear all persons who may file or present objections thereto. The Commission is authorized to prescribe a procedure for such hearings and to fix a time for bringing them to a close. A fter the hearings are at an end the Commission shall adopt a plan for such consolidation and publish the same; but it may at any time thereafter, upon its own motion or upon application, reopen the subject for such changes or modifications as in its judgment will promote the public interest. The consolidations herein provided for shall be in harmony with such plan. It shall be lawful for two or more earners by railroad, subject to this Act, to consolidate their properties or any part thereof, into one corporation for the ownership, management, and operation of the properties theretofore in separate ownership, management, and operation, under the following conditions: (a) The proposed consolidation must be in harmony with and in furtherance of the complete plan of consolidation mentioned in paragraph (5) and must be approved by the Commission. (b) The bonds at par of the corporation which is to become the owner of the consolidated properties, together with the outstanding capital stock at par of such corporation, shall not exceed the value of the consolidated properties as determined by the Commission. The value of the properties sought to be con- solidated shall be ascertained by the Commission under section 19a of this Act, and it shall be the duty of the Commission to proceed immediately to the ascertainment of such value for the properties involved in a proposed consolidation upon the filing of the application for such consolidation. (c) Whejiever two or more carriers propose a consolidation under this section they shall present their application therefor to the Commission, and thereupon the Commission shall notify the Governor of each State in which any part of the properties sought to be consolidated is situated and the carriers involved in 63 1. C. C. '\ 476 INTERSTATE COMMERCE (.'OMMISSTON REPORTS. CONSOLIDATION OF RAILROADS. 477 "IB^Im r \ the iwoposed consolidation of the time and place for a public hearing. If after such hearing the Commission finds that the public interest will be promoted by the consolidation and that the conditions of this section have been and will Ixj fulfilled, it may enter an order approving and authorizmg such consoUdation, with such modifications and upon such terms and conditions as it may prescribe, and thereupon such consolida- tion may be elTected, in accordance with such order, if all the earners involved assent thereto, the law of any State or the decision or order of any State authority to the contrary notwithstanding. The spirit and intent of this legislation, as well as the manner in which it was antici- pated that its ends would be attained, are significant. The sections above cited do not stand alone. They are integrally related to section 15a, paragraph (2), of the act to regulate commerce, as amended, which prescribes a new statutory rule of rate- making. The statute reads as follows: In the exercise of its power to prescribe just and reasonable rates the Commission shall initiate, modify, establish, or adjust such rates so that carriers as a whole (or as a whole in each of such rate groups or territories as the Commission mayfram time to time designate) will, under honest, efficient, and economical management and reasonable expenditures for maintenance of way, structures and equipment, earn an aggr^ate annual net railway operating income equal, as nearly as may be, to a fair return upon the aggregate value of the railway property of such carriers held for and used in the service of transportation. [Italics mine.] This new rule seeks to fix rates, not for any single carrier, but for the carriers by nat- ural groups. By far the larger proportion of the traffic of the United States is carried by so-called strong or prosperous roads. But it is equally true that a large amount of mileage is in the hands of corporations which, in a financial sense, may be denominated chronically weak. The causes for such weakness are various, including disadvan- tageous location, unwise investment or administration, an unwieldy financial struc- ture, or even downright impairmant of capital by waste or fraud. But, regardless of the sources of this disability, these weak lines are as essential to the welfare of the conmiunities which they serve as are the strong lines to their patrons. 1 1 is the theory of this legislation that the railways must be considered as a whole, group by group, fixing by means of the new statutory rule of rate making, a general level of return adequate to maintain them all at a proper pitch of efficiency. The difficulty in the past, as stated by Senator Cummins on December 2, 1919, in Congress, is that "It has been utterly impossible for any body of men to make a system of rates that will sustain the weaker railroads of the country without gi\ing to the stronger railroads an income excessive and intolerable in its extent; and there lies the great funda- mental obstacle in our system of rate making. * * * It was obvious, I thinkj to the students of the subject, long before the government took possession, that we must adopt some plan that would remove this inherent fundamental difficulty." The section of the act dealing with consolidation into systems, above cited, was in- tended to supplement the new sections dealing with statutory definition of reasonable rates, in coping with this difficulty. To this end, the Senate bill sought to reduce the carrier corporations to a common denominator of earning power in terms of valuation by compulsory consolidation. It was intended to compel the stronger roads to merge their identity with the weaker ones for the common good of the country as a whole. But the measure ultimately emerged from conference committee with the procedure as above described, in place of compulsion. It was evidently expected that the new statutory rule of rate making would afford an incentive sufficiently powerful to induce the strong companies to^ merge with weaker ones, rather than to be compelled to pay over their surplus earn- ings above the rate of return fixed as reasonable, into a revolving fund for the general benefit of their respective groups. An incentive to the weaker roads might also con- ceivably obtain. The aid extended by the act from the surplus earnings of the strong roads consists merely of advances or loans, except in so far as a better balanced oppor- tunity yields larger earnings. Or else x>088ibly a fairer administration of the division of through rates may help. But the weaker roads are encouraged to seek shelter through affiliation. They are not taken care of by any definite guaranty of earnings. 63 1. C. C. But the motive for consolidation, it was held, should not be permitted to bring about indiscriminate mergers, regardless of natural relationships of the carriers either to one another, or to the needs of their respective territories. It was in order that there might be consonance between such mergers as took place and the public welfare, rather than that mere immediate profit to those concerned might result, that the formal pro- cedure as above described was enacted into law. Not otherwise, thus, than in its direct relationship to the fundamental principle of the new act can the significance of the particular consolidation provisions be understood. And it is because of this causal relationship that the act further prescribes that no mergers which are not in accordance with this plan, as thus adopted, may lawfully take place. As to procedure in undertaking this investigation, the leading paragraph of the statute, dealing with consolidation, above quoted, contains three requirements which must be observed. The first is that competition, presumably in service, shall be preserved; the second is that existing routes and channels of commerce shall not be "disturbed; and the third, subject it will be noted, to the foregoing requirements, is that the financial aspects of such mergers shall be kept in view. Without having regard to the fundamental principle involved, both in consolidation and the new statutory rule of rate making, it might appear that these several requirements were stated in the order of their importance; in other words, that the element of financial strength was less significant than the preservation of competition and of the existing traffic routes. But hiving due regard to the matter in its larger practical aspects, it is evident that any plan adopted will not only be a mere paper plan, ineffectual and futile, but that it will fail to conform to the spirit of the act, unless the financial requirements be given equal weight with those of operation and traffic. For the plan will never be put into effect unless a financial motive for consolidation be afforded; and unless it is put into effect, a positive bar to the attainment of uniform reasonable rates, under which all the carriers alike may thrive, will continue to exist, if the underlying principle of the legislation is in reality sound. Assuming the thre* requirements for consolidation to be of equal importance, two quite distinct methods of approach might be adopted according as one began at the operating and traffic end, or, on the other hand, began with the financial aspects of the matter. Under normal conditions these two methods seemingly promise results of equal value. One might, presumably, first ascertain the relative financial standing of the corporations; and thereafter check up the alliances thua indicated, by applying the test of operating efficiency and satisfaction of the traffic needs of the territories concerned. Or, contrariwise, one might first seek the natural alignment of these properties as operating and traffic units, before inquiry as to whether such alignment contained an effective invitation to merger, based ujwn considerations of earning power and financial stability. The former method appeals particularly to financial students of the subject. It has resulted in the formulation of several significant pro- posals. The latter calls for a somewhat wider range of information, dealing not alone, as it does, with the operating and traffic characteristics of the carrier companies, but also looking to the broader considerations of the traffic needs of the entire communities served. For it is held that the maintenance of the "existing routes and channels of trade and conmierce" implies not the preservation of merely artificial currents and conditions, but that the statute contains an invitation to consider these carrier cor- porations in their basic relationship to the welfare, present and prospective, of the country. Viewed in this larger sense the act is at once an invitation and an oppor- tunity. It calls for an analysis of the commercial geography of the United States, in its relation to the layout of its railway net. For, unless the location of its railways conforms to the commercial requirements of the country, there can be no permanent prosperity for either. The further requirement in the act for a certificate of public exigency for proposed new construction of railways is but another expression of this intent in the law. 63 1. G. C. 478 INTERSTATE COMMERCE COMMISSION REPORTS. CONSOLIDATION OF RAILROADS. 479 ! I As to procedure, also, it has been represented stoutly that this plan should confine itself strictly to broad outlines; and even, perhaps, merely propose but a statement of principles. It is contended that useless complications and prejudice to future negotiations, as well as a dangerous effect upon market values, may result from descent into detail. Fully conceding the force of this reasoning, experience demonstrates that general principles and broad outlines may only be tested, as to their feasibility, by tentative elaboration of the finer points. Only thus are the thousand and one com- plications rendered appreciable to the naked eye. In brief, general principles and broad treatment require the test of practicability. If, therefore,' it appears at times that these proposals descend imduly into the intricacies of corporate relationship, it should be borne in mind that the purpose is not so much to reach a final judgment, as it is to reveal the various considerations upon the basis of which such final decision may at some time perha|)s have to be rendered. Certain statistical data have been compiled and are incorporated in this text, as well as appended as exhibits, in order to check up the plan, as proposed, by territories and by systems, respectively. The calendar year 1917 has been chosen for the pur- pose, largely because the results for that period most closely approximate the standard requirement established by the statute of an operating income amounting to 5.5 per cent of the investment in road and equipment. For 1917, the actual rate of return was in fact 5.45 per cent. The tables and exhibits, as prepared by the bureau of statistics of the Interstate Commerce Conmiission, are necessarily confined to a few pertinent items. Among these are investment in road and equipment, total and per mile of line ; revenue ton-miles ; revenue per ton-mile ; and railway operating revenue , total and per mile of line; net operating income, total and per mile of Une; mileage operated ; and percentage of net operating income on investment in road and equip- ment. It should be noted that the net operating income, however, is not that of the calendar year 1917, but is based upon the standard return — that is to say, the average annual net railway operating income for the three years ended June 30, 1917. The reason for using the average income (standard return) for the three years for purposes of comparison with the property investment as of December 31, 1917, is that this figure was provided by Congress as the fair rental (subject to correction) for the prop- erty actually taken over at the close of 1917. This standard retiun for some roads in process of rapid development is considerably less than the actual income of the cal- endar year 1917. But for other roads the standard return will be found to exceed the 1917 income. The net result is that for class-I roads as a whole, the 1917 income exceeds the standard return by about 7.5 per cent. Thus it appears that for a few roads, perhaps imdergoing rapid development, the standard return imderstates the case; but for all of the rest, the three-year average affords a safer basis than the results of any single year. The foregoing data for class-I roads, including their subsidiaries, as segregated by systems set up under this plan, afford a rough indication of the competitive strength, geographical scope, and inherent financial stability of the relationships proposed. But it is evident that such data constitute merely a rough check upon the plan. The figures are no more to be trusted implicitly than are seductive maps nicely fashioned to produce the effect of symmetry upon paper. Such symmetry, until it be checked up and tested in detail for all manner of traffic and operating conditions, may be grossly misleading. Statistics, as well as maps, imder these given circumstances must be regarded and treated as imperfect criteria. The realignment of properties, with the consequent disturbance of all traffic, is bound to be instantly reflected in earning power. The putting together or dismemberment of individual properties may bring about results which are quite unpredictable by the arbitrary means of statistical investigation. Elaborate calculations by experts concerning the develop- ment of business under the new conditions are really necessary in order to afford a 63 I. C. C. reliable forecast. Not published statistics, but rather an intimate acquaintance with local traffic conditions afford the only entirely reliable data. Yet inasmuch as these data are the .best we have, they are analyzed and published for what they are worth. This consolidation plan, it should be noted, has thus far been concerned only with class-I roads; that is to say, roads having an operating revenue in excess of $1,000,000. The aggregate mileage of these class-I roads herein consolidated in 1917 was 220,000 miles. There thus remains the not inconsiderable aggregate of 39,000 miles of line, consisting of the so-called short lines, the remaining class-I roads, and those within classes II and III. That the number of these is quite large is evident from inspection of section C of the Annual Report on the Statistics of Railways for 1917, pages 469 et seq. No attempt has been made to trace the natural relationships of these minor prop- erties, and probably it is not necessary at this time. But the fact of their existence and of, in many cases, their grave necessities may not be ignored. A comprehensive plan of railroad consolidation would include their allocation in due course; but the dat^ are not at present available. The case of the Illinois Traction Company, with its widespread interstate ramifications is typical of a number of other electric public utilities. No attempt is made to assign them in this tentative plan, which confines its attention solely to the larger steam roads. As for the troublesome problem of allocation or abandonment of certain properties not serviceable to their respective communities, the matter is discussed in chapter VI. For it is in the southwestern states that the question presents itself in the most acute form. »i I What test shall be applied in order to ascertain competitive ability; that is to say, ability to prosper reasonably along with other railroads in the same group under a uniform set of rates? Do the requirements of the statute call for the creation of systems of substantially equal mileage or enjoying much the same volume of gross earnings or net income from operation? Shall one seek to construct comprehensive groups conforming to one or several of these standards, or may one assume that size, as thus indicated, is merely of secondary importance? It has been urged with some cogency that this plan does not call for wide-spread disturbance of existing relation- ships except to take care of the properties that are either well above par or substan- tially below it. In other words, it has been urged on behalf of several properties of moderate size that they are already doing fairly well under the statute, conforming to the requirements and enjoying the reasonable return fixed by the Commission without further alliance with other companies. One has to decide as to such claims, and particularly must one decide where to draw the line in the search for uniformity in magnitude. Deciding roughly, as one must under existing conditions, it is held to be more important to create self-sustaining systems as to earnings derived from as large a proportion as possible of the area of the several great subdivisions of the country, rather than to attempt to put these properties together in such an exact way that they shaU all have approximately equal mileage or equal gross or net earnings within each group. Neither mileage nor volume of business is the real test of ability to exist under the statute. In brief, as illustrated by trunk line territory, it is held that a Baltimore & Ohio system adequate to satisfy the requirements of the statute may be created by giving it a mileage or a gross volume of traffic by no means com- mensurate with either the New York Central or the Pennsylvania. Its ability to serve may perhaps be dependent upon quite other considerations than those of size. If quality can be conferred by means of better developed traffic relationships, and if natural alignment and relationship can be adhered to, it is believed that the situation so far as the act is concerned will be satisfactorily met. The dynamic aspect of consolidation must also be kept in mind. The purpose being to promote a more evenly balanced competition, especially by means of equal- izatio|i Qf opportunity in originating traffic as well as in its interchange and delivery, 63 L a 0. 1 ;\ ^1 If 480 INTEBSTATE COMMEBCE COMMISSIOK BEPOBTS. 00V80UDATI0N OF BAILROADS. 481 it is conceivable that congestion may be in a measure relieved by this i)lan. The growth of business in future years must accrue largely to the existing stem?. Sounetween various plans proposed for consolidati'Mi ari>e concerning the size and scope of the mergers. Shall they be continental in ransje. reaching, that is to say, clear across the country, from east to west, and from ( ana^ia to the Gulf; or shall they conform to territorial divisions of the rountry? ('oa-^idera- tions of operating efl&ciency and of conformity to the traffic; needs of the country, as well as preservation of competition and of the established channels of trade and commerce, are not sufficient. It is essential also that administrati^'e organization both within the company and in its relations to the government should be likewise comprehended. Particularly is it important that corresiwndence be maintained between the scope of these railroad systems and the long-standing rate-making areas and statistical divisions which have commended themselves upon the basis of long experience to the parties concerned. All of these considerations join in commending a divisiim of the country for purposes of consolidation primarily into the great sub- divisions of trunk line territory; 8- stantial system must have breadth as well as length, an amplitude of feeders as well as main stems; and there seems withal to be a pretty clearly defined upper limit of the aggregate mileage which may be efficiently operated. This limit of mileage will, of course, var>' widely with the density of traffic and the details of operation. But. viewing the matter broadly, it seems not unlikely that any system ranging far and wide beyond the natural territorial divisions above described will either be la( king in breadth and stability of Wation, or will exceed the ability of a An^\6 management efficiently to handle. The experience of the federal Railroad Administration in dividing up the area of the country seems to confirm this view, that for operating and traffic purposes each system should be comprehended within the certain great territories above named. The new statutory rule of rate making and the first decision rendered thereunder by the Interstate Commerce Commiasion — Ex Parte 74 — also render it imperative in planning for comprehensive consolidation not to transgress the boundaries of these traditional territorial subdivisions. The purpose of the law being to fix reasonable rates, not for individual railroads but for entire groups, renders it essential that the grouping adopted for this purpose conform to that which is adopted in effecting the consolidations. Otherwise confusion in the administration of the new law would be bound to result. 68Laa Having adopted a subdivision of the country into certain great territorial districts for purposes of consolidation, how important is it that each system shall be rigidly confined within its own particular territory? In other words, are these boundaries to be strictly or loosely applied to the consolidations which are proposed? The desira- bility is obvious of disturbing or disrupting existing corporations and relationships as little as possible; and yet consideration of the map indicates not infrequently that so-called trunk lines extend west of the Mississippi; that western railroads and southern companies penetrate one another's areas in order to reach strategic points; or that the southern lines have in the past found it desirable to extend northward across trunk line territory to Chicago. What shall be done with these odd bits and loose ends? Shall the Kansas City, Memphis & Birmingham, for example, be treated as an integral part of the southeastern systems, because it lies east of the Mississippi, although it is really a western railroad? Or shall the Illinois Central continue to reach the Afissouri River at Omaha? The most difficult problem in this connection, fortunately confined to a single system, is to decide what to do with the Wabash. This property alone bridges two great and entirely distinct traffic areas, east and west of the Mississippi. Standing alone as a system in this regard, it may more fittingly be discussed elsewhere . But as to the loose ends of other systems which lie beyond their o^vn appropriate terri- tories, an attempt has been made to find for them, so far as may be, a natural align- ment with the other properties within each of the great territorial subdivisions. It is believed that by such treatment a greater ease of administration of the law will be in the future provided . But precision must at all times be tempered by practicability; and, as in the limitation of rate areas or classification territory, an occasional lapse from system is deemed preferable to corporate or traffic dismemberment. The preparation of a comprehensive consolidation plan necessarily upon occasion involves a disruption as well as a putting together of relationships for other purposes also than the one above mentioned. Obviously, such dismemberment should be rigidly minimized; and no proposal for so doing is made unless the evidence in its favor is most convincing. Were the plan in effect a final one involving large financial considerations, one might hesitate even under these circumstances. But having in mind that these proposals are purely tentative, that they are the preparation of a sketch or an ideal layout, the plan assumes the right to tear apart as well as to con- solidate; in other words, to effect where necessary a comprehensive readjustment. The financial means to be adopted under these circumstances lie beyond the scope of this plan; but occasionally, as in chapter V concerning the dissolution agreement between the Central Pacific and the Southern Pacific Company, a concrete illustration of the entire feasibility of unmerger, even in the face of an extreme financial and corporate entanglement, is afforded. This tentative plan for consolidation proceeds upon the assumption that the dis- tinction between so-called weak and strong roads, financially, is at present highly uncertain; and that it will require a period of experience under the new rates and under the new division of through rates as Well as under the slowly readjusted commercial and industrial conditions after the war, in order to establish the relative earning power and credit of each. A period of trial is often necessary, both to reveal elements of strength and of weakness. Substantial equilibrium seems unlikely to be attained for a considerable period of time. Yet in the meanwhile, tentative plans must be set up, in preparation for the application of the final test of relative financial strength as soon as the available data make this possible. Not infrequently it will be found that in these plans it has been necessary to put together what appears to be a dispro- portionate number of weak roads, or at all events, of roads which have yet to establish their claim to entire stability. Particularly has this been the case in the so-called Gulf region, where practically all of the properties seem to be below par. No strong roads exist with which these may be consolidated, without extension of the scope of •8 I. C. C. 482 INTEBSTATE COMMERCE COMMISSION BEPORTS. CONSOLIDATION OF RAILROADS. 483 1^ conaoUdation far beyond the bounds which are apparently laid down by traffic and operatin.T experience. The same condition would obtain under the so-called New Ei^land°plan for that particular territory, as well as for the peninsula of Michigan. r'The assumption is thus made that the purpose of this act being to rehabiUtate the / carriers through a new definition of reasonable rates, these entire groups of roads may be expected to prosper, to a degree as yet not ascertained, but none the less to a sub- l stantial amount. Whether this rehabiUtation will ultimately warrant the grouping N herein tentatively proposed, the future alone can decide. But necessarily the first step must be to provide for proper grouping in order to promote the best operating and traffic results. The responsibility for the subsequent financial success of the under- takings must then rest upon the exercise of the new rate-making poweis, conferred upon the Interstate Commerce Commission by the act. A peciUiar difficulty in effecting consolidation of strong with weak roads and of reconciling such merger with existing operating and traffic relationships, arises from the tendency of the weak roads to link up in series and to form thereby through routes extending sometimes clear across the country'. For example, at Peona a number of such roads meet: The Lake Erie & Western from the east, the Minneapolis & St. Louis from the north, and the Chicago, Peoria & St. Louis from the south. These various properties, together with the Wabash, the Chicago Great Western, the Clover Leaf and the Nickel Plate, tend to exchange more freely with one another than with' the standard or strong lines. From these strong lines, which have their own routes from end to end of each territory, they are naturally excluded, so that they are more or less compelled to associate with one another in the formation of what mav be called substandard routes. Such routes were peculiariy the offenders in the old days of rate cutting. Th^ present-day bid for traffic is not infrequently based upon peculiar attention to dispatch or certainty of prompt delivery. This competition in service is naturally expensive and tends still further to attenuate their net earnings. Furthermore, these smaller subnormal properties oftentimes serve as the natural arms or extensions of the larger companies, which by reason of a paucity of feeders, are forced to rely upon such association. Thus the Erie, itself in precarious case financially, will be found more often to have united with these lesser substandard properties to form ''existing routes and channels of trade " Under such conditions, the mandate of the statute, to preserve "as fully as possible {and wherever practicable" such traffic associations, impels one of necessity toward consolidation of a number of equally substandard roads. Conformity with the other mandate of the statute by seeking to ally strong and weak properties to a like degree/ thus threatens to overset the traffic relationships which have become customarily established by very force of circumstances. It is because of the clash between these at times discordant requirements, that the emergent result is so often a piebald com- promise. ,' ' Several assumptions akin to the foregoing one are made in the foUowmg plan. , The first is that for a number of roads a substantial readjustment of capitalization must occur as a prerequisite for consolidation. It is clear that this must be so by virtue of the authority vested in the Commission under section 5, paragraph 6b, already quoted (page 475, mpra). The purpose, obviously, is to bring about the re- establishment of a due relationship between the total volume of securities outstand- ing and the valuation assignable to the property for rate-making purposes, as well as the assurance of a sound relationship between indebtedness and capital stock. The experience of a number of recently reorganized properties is significant as in- dicating the recuperative effect of a drastic reorganization of capitalization. Roads once weak have become strong, not only capable of supporting themselves but of projecting their vigor into other properties with which they may be associated. Such notably seems to have been the case of late with the Pere Marquette and also the 63LC.C. !l .* Pittsburgh & West Virginia. And it may well be that the Erie Railroad as well as others may upon such financial readjustment disclose an actual earning power which has in the past been concealed through a distorted relationship between capitaliza- tion and investment. It is likewise presupposed throughout this report that all of the new powers con- ferred upon the Interstate Commerce Commission by the transportation act, 1920, will be upheld constitutionally. An entire transformation in the relation between this administrative branch of the government and the judicial arm has been brought about. Sporadic control by the courts, as evidenced in the pending dissolution proceedings concerning the Central Pacific and Southern Pacific companies and the Philadelphia & Reading and Central of New Jersey, it is assumed now yield place to a continuing supervision and control by the Interstate Commerce Commission, act- ing as a branch of the executive authority. Such a complete reversal of public policy must lead to protracted litigation; but regardless of the final outcome no course in connection with this report is possible save to hold that the will of Con- gress as expressed in the transportation act is governing and supreme. Not even judicial decisions under the Sherman act or the commodity clause of the act to regu- late commerce are held to constitute a bar to the free allocation of these properties to the new systems provided by this plan. All of the roads concerned in such pro- ceedings are therefore treated with entire freedom, assuming that the final decision as to the propriety of such placement will rest in future not with the courts but with the Interstate Commerce Commission. Another far-reaching assumption is vital to the success of this plan. This has to do with the operation of terminals at great centers. Historically, there has been the greatest diversity of experience in this regard between the carriers of the coun- try. Some roads are peculiarly fortified as to terminals, while possessing weak lines from an operating standpoint across the open country. For others, the reverse is true. Some companies, entering the field late, enjoy good locations as to line, but have always worked under a handicap at the terminals. Such lines are strong in the open but weak at the ends. Others — the Atlanta, Birmingham & Atlantic, for example — were really constructed across country rather to utilize an existent ter- minal than because of a demonstrated need for the new cross-country line. But whatever the cause for the existing situation, a practically universal demand of shippers is that they be able freely to exercise their routing rights by the provision of open terminals, both at the point of shipment and at destination. The right of route across country is impaired if the only possible delivery is at an inconvenient point. To put together railway lines on the map without having a constant regard to the possibility of free delivery or receipt at either end would indeed be futile. As to the particular means for accomplishment of this object — ^free and untrammeled utilization of terminals — there may well be difference of opinion. Conceivably, joint ownership and operation, as at St. Louis, may succeed in that environment, while reciprocal switching may satisfactorily answer the purpose as at Chicago. But, whatever the means adopted to this end, it is submitted that a proper adjustment of the various terminal situations, always of course for due compensation, is an im- portant adjunct to any comprehensive consolidation plan. No recommendation, therefore, as to particular terminal remedies is offered in this report. The subject technically is so involved, that it might well be made matter for a special investi- gation. Its bearing upon and relation to the subject of the division of through rates is as obvious as is its intimate connection with consolidation. The pending New York Cential application to acquire the Chicago Junction Railway raises in itself almost all the possible aspects of terminal problems. Consolidation can never be effectively brought about without the adoption of a comprehensive policy as to ter- minal ownership, operation, or both. It is herein assumed that free access will be 63 1. C. C. r 464 INTERSTATE COMMERCE COMMISSION REPORTS. 'J somehow provided, either under the present emergency powers as contained in section 1, paragraph 15c, or by the adoption under a consolidation plan of perma- nent arrangements in all of the important centers. Possibly the assignment of ter- minal properties might take place by means of leases based upon valuation by the Commission and at a rate fixed by the Commission as reasonable. This would per- mit the terminal companies to remain under the joint control of the several par- ticipating raiboads, rather than that entirely independent terminal companies, actually owing these facilities, should be set up. The important point, whatever the means adopted to this end, is that there should be unified operation and entirely free access to all participants alike. Another general principle con3tantly kept in mind in connection with consolidation and having substantial effect upon it is the encouragement of alternate routes and gateways, in order to relieve present or prospective congestion at the great railway meeting points. A tendency has been strikingly manifest for many years for all the great systems to expend funds unstintingly upon their main stems, and all of these main stems tend to run together at certain nodal points, notably New York, St. Tx>ui8. and Chicago. Such concentration upon great cities i? a natural response to the com- mercial forces which tend with increasing power to attract traffic, even although it may not be destined for that place but may be passing through en route to point« beyond. The shippers' routing often dictates such shipments in order to take advan- tage of a change in market conditions. The result has been an undue congestion in times of emergency, which paralyzes the commerce of the country-. There is always a certain proportion of business, however, which by careful attention to the matter might be consolidated and shipped by an alternate route which should avoid the great center. Thus the Michigan ferry routes or certain of the gateways south of Chicago have in the past afforded relief. But the latter especially, it is submitted, have not in the past received the attention which they deserve, and an attempt has been made wherever possible to cultivate such direct relationships between the different systems proposed by the establishment of definite and common gatewavs of this sort. The preparation of such a plan of consolidation thus affords a unique opportunity for the evolution of a comprehensive plan for the development of national resources. Too often in the past purely temporary or personal considerations of advantage or profit have determined the location of our American railways. The administrative control of the terms on which the carrier companies may be allowed further to allj- themselves in the future may, if wisely administered, contribute to diminish economic waste and to promote commercial development. But such wise administration demands a comprehensive plan adopted in advance, and it is evidently the purpose of the act to draw up this plan, not alone for the attainment of the immediate rate- making end but also with a view to the larger purpose of a right direction of our economic resources as a nation in the years to come. 63 1. C. C. CONSOLIDATION OF RAILROADS. 485 Chapter I.— Trunk Line Territory. Elements of the situation stated, 485. — Five east-and-west stems available, 486.— Are there enough branches and feeders for five or only four systems? 487. — The components for only four systems too competitive and unnaturally related, 487. — Five systems appear necessary, 488. The New York Central system slightly reduced, 488.— Transfer of Lake Erie & Western, 488.— Also the Toledo & Ohio Central, and the Kanawha & Michigan, 488. — The Rutland Railroad and possibly the Worcester, Nashua & Portland added, 489. The Pennsylvania system already large enough, 489.— The Norfolk & Western con- trol, 489. The Baltimore & Ohio system needs stated, 489. — Strengthening the western end by the Monon, 490.— The New York terminal situation, 490.— Baltimore & Ohio investment in the Philadelphia & Reading, 491.— Shall the Reading be absorbed or treated as an independent terminal property? 491. — The geographic situation (map), 491. — ^Analysis of Reading trafiic interchange (diagram), 492. — The terminal situation again, 493. — Western Maryland relationships, 493. — Legal obstacles to its merger, 494.— The Pere Marquette connection, 494. The present Erie system described, 495.— The Delaware & Hudson added, 495.— New York, Ontario & Western added, mainly for its terminal rights, 495.— The Lehigh Valley contributes strength, 496.— The Wabash eastern lines reach St. Louis, 496.— Pittsburgh problem stated, 496.— Status of the Bessemer & Lake Erie, 496. — United States Steel Corporation claims independence, 497. — Its con- tentions met, 498. — Effect of inclusion of the Bessemer road, 498. The New York, Chicago & St. Louis (Nickel Plate) stem, 499.— The Delaware, Lackawanna & Western, 499.— The Clover Leaf line to St. Louis, 499.— Lake Erie & Western and other additions, 499.— Access to Pittsburgh via Wheeling & Lake Erie, 500.— Baltimore and the Western Maryland, 500.— Southern detour about Washington, 501.— Buffalo, Rochester & Httsbiu-gh adds traffic, 501. — Comparative statistics, 501.— The Lackawanna system and the New England roads, 502. The Michigan peninsula trafiic, 502. — An independent group or parceled among the trunk lines? 503.— Difficulty of partition stated, 503.— Similarity to New England situation, 503.— The Ironton added as a fuel line, 505.— The American lines in Canada, 505. The Lehigh & Hudson and Lehigh & New England as "bridges, " 506.— Independent or assigned to New England group, 506. Statistical analysis, based upon exhibits, 506. The creation of independent self-sufficient systems in trunk line territory which shall compete with one another on more nearly equal terms than at present is simpli- fied by the fact that the traffic is predominantly east and west along parallel lines. But it is complicated by the disparity in size and competing strength of the various properties, as well as by the fact that a considerable number of the railroads consist of disjoint^^d links lying east or west of the Niagara frontier or else divided at the head of Lake Erie. Furthermore, some of the strongest systems enjoy a superfluity of 63 I. C. C. 63763—21 3 486 INTEBSTATE COMMEKCE COMMISSION REPORTS. CONSOLIDATION OF RAILROADS. 487 I i \ ■I 4 approaches to strategic points, acquired perhaps for their ''nuisance value" at some time in the past; while other competing roads are denied access to those strat-egic points. And the rugged Allegheny territory, with its north-and-south valleys and ridges, in any event leaves but a few available east-and-west passageways which are capable of utilization. The elements of the tnmk line situation, it is believed, are set forth in the first large map in the series hereto appended. This sketch embodies an attempt to produce all of the existent through routes from Chicago and St. Louis to the seaboard. All cross lines north and south and all feeders are eliminated. The map purports to show, therefore, only the available stems; that is to say, available in the light, first, of existing corporate relationships, and, secondly, of geographic barriers. If one were to cast all of these lines into a melting pot, other routes might conceivably be developed, notably those which run directly east across northern Pennsylvania. But the physical obstacles are so considerable that these are ignored. The stems shown upon this map are, however, compounded of different corporate entities in some cases. The details of their allocation are subsequently worked out, one by one. Consideration of map 1, then, discloses five east-and-west trunk line stems. First is the historic New York Central route by way of the Hudson and the Mohawk Valley, thence north and south of Lake Erie. This is shown by the heavy black line. The second, shown by a string of beads is the Pennsylvania system, splitting in Ohio into stems to Chicago and St. Louis respectively. The third, likewise historic, is the Erie, in a broken line with crosses which follows the northern boundary of Pennsyl- vania up the Delaware River and passes south of Lake Erie on to Chici^. Its natural extension to St, Louis is by way of the Wabash Railroad as indicated. The fourth route, historically considered, under unified corporate control, both to Chicago and St. Louis, is the Baltimore & Ohio, which splits into two branches in Western Mary- land. This is shown by the heavy broken line. The fifth rail route depicted on the map is composite, consisting of a combination of lines east and west of Buffalo. It is designated by a broken line with circles. West of Buffalo the Nickel Plate merely duplicates the Lake Shore & Michigan Southern. East of Buffalo, access to the seaboard may be had either over the Lehigh Valley or the Delaware, Lackawanna & Western. The most direct line to New York — almost as the crow flies — consists of the Lackawanna from New York to Scranton, then up the valley of the Susquehanna, along the line of the Lehigh Valley Railroad and from Elraira along the Lackawanna i^in. But in order to take advantage of the superb physical equipment of the Lackawanna, its line is followed, even somewhat indirectly, as it makes an elbow at Binghamton. The combination then of the Lackawanna east of Buffalo, and the Nickel Plate from Buffalo to Chicago, completes the array of the five standard tnmk lines, all within the territory of the United States. To complete the picture presented by this array of through routes east and west, the following table of distances and of elevation to be overcome at the highest point, is significant. Route. Pennsylvania Lackawanna-Nickel Plate New York Ontral Erie-Wabash Baltimore & Ohio New New York to York to Chicago. St. Louis. Mileg. MiUs. 908.9 1,052.9 919.0 1,11.5.4 978.72 1.157.62 998. ."> 1,174.3 1,013.8 1,117.8 Hi^est point above sea level. Feel. 2,192 1,115 920 1,773 2,374 63 1. C. C. There can be little doubt as to the justification for systems as separate combinations, based upon the first three of the five lines above enumerated, namely, the New York Central, the Pennsylvania, and the Baltimore & Ohio. Nor can there be any doubt of the existence of the two other primary through routes. But a most difficult ques- tion to decide is as to whether these remaining two routes, the Erie and the Lacka- wanna-Nickel Plate, can each alone be provided with sufficient entrances, appurten- ances, and feeders to enable them to engage successfully in a well-balanced competi- tion with the first three relatively powerful ones. These three have so far preempted the best lines and facilities that the supply remaining is rather inadequate. For it is obvious that mere stems are insufficient. There must be access to important lalre and Ohio River gateways. There must be access to direct connection with western trunk lines through gateways other than Chicago, along the Illinois River or the Mississippi. There should be free participation in Michigan ferry routes, avoiding Chicago by going northwest through Michigan. And, of especial importance, there must be access to the great soft-coal deposits and to the centers of production of iron and steel. Without a fair proportion of business of these various sorts no trunk line can persist in successful competition. The prime decision then as to trunk line consolidation has to do with the fate of the Erie stem and that of the Lackawanna-Nickel Plate. They ought to constitute the trunks of independent self-sufficient systems. It would contribute to stability were they to do so. But if there are not enough available extensions and feeders, the only thing to do, in pursuance of the mandate of the statute, is to consolidate the two possible systems, and to utilize the existing approaches and feeders for their joint benefit. To this procedure there are two objections, of decisive importance. The first is that the Erie and the Nickel Plate- Lackawanna, with their extensions to St. Louis, as above described, parallel each other almost completely from end to end- without at the same time being near enough together to produce the possible advantage oi joint operation. Did they lie still closer together, especially where they are single- track lines, the two systems might constitute together a double-track railroad, each specializing in one direction. But they are too far apart for this, and yet not unique enough in location as to one another as to fully warrant independent existence. It has been urged by competent authority that the Nickel Plate and the Erie might be worked as a double-track line because of the peculiar character of much of their busi- ness. They are both relatively light passenger lines and transport large amounts oi fruit, vegetables, beef, and other tonnage which moves in carload or trainload lots, little of it being local. It is urged that one of these lines could be utilized for the prompt return of the foreign empties, which tend to pile up in trunk Une territory. The continual surplus of cars in the east, due to the heavy influx of bulky raw materials, renders it a matter of common importance to all lines that these empty cars should be handled westboimd in big units. Another reason urged for throwing all of these lines, except the Pennsylvania, New York Central, and Baltimore & Ohio, into a single system, is that their aggregate tonnage would then just about equal that of the Pennsylvania system. This will appear from examination of the operating statistics in exhibit 1. But, on the other hand, such a system would have an aggr^ate mile- age operated of 12,500 miles as compared with 10,700 miles for the Pennsylvania. Its aggregate volume of traffic in revenue ton-miles, would. far and away exceed that of the present New York Central system. , Considering the detached character of many of these properties, a heterogeneous aggregation altogether surpassing the possibility of efficient management would certainly be produced. It is believed, therefore, that five systems rather than four will best satisfy the needs of the territory in the year? to come. Another objection to constituting one system out of the Erie and the Lackawanna- Nickel Plate stems is that it would enforce corporate relationships which are unnat- 63 1. C. C. u 488 INTERSTATE COMMERCE COMMISSION REPORTS. uTal or strained. Each of the two end-to-end alliances, as herein indicated, is so self-evident and advantageous that the matter of consolidation has in the past already been given private and self-interested consideration . To put these properties together in each group might be practicable; but to attempt a combination of the two parallel groups would compel roads which have been bitter competitors for many years to become partners. All things considered, especiaUy having in view the fact that most of the trunk line business of future years is likely to accrue to these existing companies, it is believed that sound national policy should indorse the independence of all five. Feeders, entrances, and approaches may be built in futiu-e years, but new main stems are unlikely. If perchance these two stems of the Erie and the Lackawanna-Nickel Plate are not yet adequately supported in this regard, the defi- ciencies may be supplied. But if the two stems were once merged and in years to come there proved to be business enough for both , it would be difficult if not impossible to dismember the alliance. This plan proceeds, therefore, to construct, as well as may be out of the existing material, five independent trunk lines. There will also be, of course, a sixth pseudo trunk line, the Chesapeake & Ohio, which is, however, considered in the separate Chesapeake Bay group of properties, based upon Hampton Roads and preeminently engaged in soft-coal business. It is next in order to consider the constitution of these five proposed groups in detail, having in mind size, financial strength, and comprehensive possession of the trunk line territory. By all three of these tests, the New York (Central and the Penn- sylvania have substantially fulfilled their destiny within the confines of this region. In other words, they reach all of the important centers and gateways, and enjoy a sufficiency of direct lines criss-cross from point to point all over their own rails. Their problems for the future are of intensive rather than extensive development; and it will be found that certain lines may be abstracted, or, at all events, given joint usage by the other groups, without injury to them commensurate with the advantage which would accrue to the trunk line territory as a whole from equalization of com- petitive strength. The present New York Central system (map 3) has a somewhat greater mileage than the Pennsylvania, but the Pennsylvania, by reason of its density of traffic, has a much greater railway operating revenue and volume of tonnage. By either test these two great systems so far exceed all of the others in trunk line territory that the problem is, in the main, one of withdrawal of subsidiary lines rather than of additions thereto. Thus, the Lake Erie & Western, which is controlled by stock investment, but has long been operated separately as a competing road, is transferred. It is believed that a better use may be found for it in connection with the other components of the Lackawanna system, giving it access to the Peoria gateway as a means of avoiding congestion at Chicago. The New York Central now concentrates upon the so-called Kankakee division as a Chicago belt line, affording a western gateway susceptible of still further development. As for the southeastern gateway at Williamsport, it is proposed elsewhere in connection with the Baltimore & Ohio (page 493, infra) to protect this by trackage into Jersey City. The withdrawal of the Lake Erie & West- em, thus recommended, would not appear to be prejudicial. The New York Central would still be in possession of contacts and routes adequate for all through business, although, of course, it might lose the local traffic originating along this line. But not quite all of the Lake Erie & Western is taken. The line from Connersville and Rush- ville to Fort Wayne affords a natural connection for the New York Central from Louis- ville and Cincinnati to Fort Wayne and Jackson for connection with the Michigan Central. But, with this exception, the Lake Erie & Western, which has been con- trolled by the Lake Shore since 1899, is taken away. The Kanawha & Michigan and parts of the Toledo & Ohio Central Railroad are also, as it will appear in treatment of the Chesapeake soft-coal roads, assigned to the Chesapeake railways, in order to create 63LaG. CONSOLIDATION OF RAILROADS. 489 an independent outlet to the lakes. And a portion of the Toledo & Ohio Central is also utilized to complete certain necessary routes in the Nickel Plate group. On the other hand, the New York Central lines are extended by definite inclusion of the Rutland Railroad, thereby giving more complete control of a route to the Cana- dian maritime provinces. The relations between the New York Central and the Rutland are quite intimate. In 1917 it delivered two and five-tenths times as many loads to the Rutland Railroad as did its nearest neighbor, the Delaware <& Hudson; and received back from the Rutland five times as many loads as did the Delaware & Hudson. Whether the New York Central shall be extended into Portland, Me., by transfer to the Boston & Albany of the old Worcester, Nashua & Portland, running from Worcester northeast, is problematical. If New England is to remain split up into, a number of dissociated properties, this strong trunk line ought to penetrate to Portland in order to give that center the benefit of direct interchange. If New Eng- land be treated as a single group, or even if the northern half be consolidated, there would obviously be no advantage in this extension. The Pennsylvania system (map 2) is at present richly represented by mileage tliroiigliout trunk line territory. But it is in volume of traffic handled that it stands forth preeminent among its neighbors, not excepting the New York Central. By exliibit 1 it appears that in 1917 its revenue ton-miles exceeded those of this, its sole great rival, by approximately 20 per cent. Both in size and in influence, therefore, it so far exceeds the lesser systems that the burden of proof necessarily rests upon any proposal to add still further to its extent. The possibility of merger with the New York, New Haven & Hartford is discussed in connection with New England ; and the proposal is rejected among other reasons upon the ground that the Pennsyl- vania has already attained a predominance among the trunk lines which renders further accessions undesirable. This, again, is a serious objection to permanent incorporation within the Pennsylvania group of the Norfolk & Western Railway. This property has been controlled and largely developed under a substantial stock ownership by the credit of the Pennsylvania. Its immense coal traffic undoubtedly constitutes a reserve upon which the Pennsylvania might draw after depletion of its own coal measures in Pennsylvania. The Norfolk & Western is a connection and not a competitor. The Pennsylvania transports most of its coal from Columbus and Cin- cinnati west and northwest, and also carries its coal to the east and northeast. But despite this long-standing connection and the substantial investment, wise direction, and highly efficient management it is believed that sound public policy, viewing the railroad situation as a whole, warrants treatment of the Norfolk & Western as independent rather than as a subsidiary part of one of the great trunk Unes. This matter is discussed elsewhere in connection with the Hampton Roads properties. (See page 533, infra.) But wliether the Norfolk & Western be separated entirely as to stock ownership from the Pennsylvania or not, it is proposed that the line of the Norfolk & Western be extended independently from Columbus to Lake Erie. This, as will appear in connection with the treatment of the Chesapeake group, is part of a definite policy to create a group of independent lake-to-tide properties, cutting in their courses all of the five trunk lines and thereby contributing to a greater freedom of movement. Several proposals for the accomplishment of this end are offered in due time for con- sideration, but the only one which directly affects the Pennsylvania is the suggestion either of a grant of trackage rights or actual lease of the former Columbus, Sandusky & Hocking, now a division of the Pennsylvania system. The other method, and the one recommended for adoption, of utilization of the Toledo & Ohio Central lines would obviate this necessity for the disturbance of the Pennsylvania. But regardless of means, there can be no question as to the national advantage of provision by one way or another of a western outlet to the Norfolk & Western independent of the Pennsylva- nia system. 63 1. C. C. li I \ 490 INTERSTATE COMMERCE COMMISSION REPORTS. 1 ' Next in order of importance in trunk line territory is the Baltimore & Ohio system. Its location appears on map 4. This property has less than one-half of the mileage of the Pennsylvania. Its revenue ton-mileage in 1917 was scarcely more than one- third as great. It has a considerable extent, reaching Chicago and St. Louis and the neighborhood of Philadelphia upon its own rails, but it has no access of its own into New York, being dependent upon the favor of the Reading and the Central of New Jersey. It is a powerful trunk line, but with an extensive development only in the middle field of Ohio, West Virginia, and western Pennsylvania. It is attenuated both east and west. And in order to strengthen it financially and as a competitive factor throughout trunk line territory it needs upbuilding at each of its extremities. The problem with the Baltimore & Ohio, therefore, is to incorporate it with other properties which shall let it into New York and into good traffic-originating eastern territor>' and which shall also extend its mileage to the Michigan peninsula and ferries and out across Indiana and Illinois to connections other than through Chicago with trans-Mississippi systems. The last of these objects is accomplished by reassign- ment to the Baltimore & Ohio of the Cincinnati, Indianapolis & Western Railroad. This property was formerly a part of the Cincinnati, Hamilton & Dayton but was set off from it under reorganization. Its reinclusion in the system, if this road were physically improved to standard, might also lead on, by means of trackage over the Chicago & Alton or the Illinois Central, for example, as shown by map 4, into the common gateway set up as a meeting point for all systems east and west at Peoria. The Baltimore & Ohio is also strengthened at its western end by inclusion of the Chicago, Indianapolis & Louisville, otherwise known as the Monon. This road is now jointly controlled through stock ownersliip by the Southern Railway and the Louis- ville & Nashville; but, as elsewhere set forth in chapter IV, it seems to be of little use to the Louisville & Nashville, which exchanges Chicago business primarily at Evans- ville. And, furthermore, the policy is definitely adopted in this plan of confining the southeastern systems closely within their own territory-; stopping them, that is to say, at the Ohio River gateways. This policy releases tlie Monon and permits it to be built into the Baltimore & Ohio, giving it direct connection between Louisville, Indianapolis, and Chicago. An identity of interest, manifested in the past by the joint maintenance of passenger and freight service by the Baltimore & Ohio and the Monon between Cincinnati and Chicago, is thus revived. The outstanding problem as respects upbuilding the Baltimore & Ohio system has to do with the status of the Philadelpliia & Reading Railroad. Shall it be incor- porated therein or treated as an independent terminal not unlike New England? Its location is such that close relationship through ownership and interchange of traffic with the Baltimore & Ohio has subsisted for many years, and it is now proposed that it be completely merged in the Baltimore & Ohio system. But the relationship of the Reading to the other trunk lines and its strategic location in the heart of one of the greatest industrial districts in the United States render this a difficult matter to decide. On the one hand its essential relation to the Baltimore & Ohio must be conceded, but on the other it is of the utmost importance that the general interest of the other trunk lines in this territory should not be placed in jeopardy. Independent entrance into New York over its own rails is essential to a Baltimore & Ohio group if it is to continue to compete effectively with the other systems. At present it is dependent upon the Philadelphia & Reading and the Central of New Jersey, not even having trackage rights, but turning over its trains beyond Phila- delphia to those roads for operation. It is necessary for improvement of the service, and the public would be correspondingly benefited, if the Baltimore & Ohio were enabled to operate its own trains with its own crews and engines into New York. It already owns substantial freight terminals on Staten Island, with a warehouse and 63 1. C. C. C! CONSOLIDATION OF RAILROADS. 491 delivery yard on Manhattan Island. But these properties, operated with Baltimore elivered. Baltimore This establishes the substantial interest of the three great trunk lines. But it also makes plain the predominant interest of the Baltimore & Ohio. The Reading received almost 40 per cent more cars from the Baltimore & Ohio than from the New York Central, and its deliveries were almost double. Baltimore & Ohio records indicate a total interchange of from 1,400 to 1,600 cars per day, which appears to be more than KLlf . 63I.aC. 4 It NSW YO/KK ^ PORT fieADWS e^OSSlHS CAR /l^£:/^CH^/VG£ CAMffT ro/f OcrOB£ff. /920. 0n/e3s o^hefwise noiecff fhe numketof cats shown QSf^ce'i^tf or . & Laughlm or any of the other great nulls, on either of the other terminal railroads the Montour or the Monongahela Connecting Railroad. ' ft I ' A« stich, authorized by the Commission in 1919 to make joint through rates. (V3 I. C. C. 498 INTERSTATE COMMERCE COMMISSION REPORTS. CONSOLIDATION OF RAILROADS. 499 On the other hand, decisive evidence in favor of railroad rather than industrial control of this important common carrier is adduced. There is, first, the outstanding fact that 60 per cent of its total traffic is for common public account. The road was built by the Carnegie Company originally as a " pacemaker " for rates. The Bessemer tariffs , it is alleged universally by the best raibx)ad executive authority, have tended to maintain coal and ore rates below a fair standard of remuneration. The extraordi- nary efficiency of this property in operation, particularly its enormous trainloads and evenly balanced traffic, can hardly be matched by its competitors. The continued possession of this road gives the steel corporation an undoubted advantage in cost of production over all of its competitors, inducing them to attempt with their several carriers, all of which are public, to give rates which are hardly remunerative. The days of rebating, in which the Carnegie and other steel corporations were notorious, are, it is hoped, over; but the pressure of great corporations for rates which are not fairly remunerative is unquestionably much strengthened by the continued posses- sion of this property by the steel corporation. If the commodities clause excludes railroads from the conduct of industry, the Congress ought logically and fairly to exclude manufacturing industry from participation in conducting railroads. If legislation be necessary to bring about this result, it should be had in the interest of stability and rehabilitation of the American railway net. The contention that the Bessemer might speedily starve if transferred from it» present ownership, may be met by the consideration that diversion of the steel corpora- tion's tonnage would affect at the outset only 40 per cent of its business, and that this might be in part made up by traffic from other sources. Much depends lipon the development of more nearly unified terminal operation arouind Pittsburgh. The present condition of complete separation, physically, between the several belt rail- roads ought to be taken in hand by the city of Pittsburgh, and the development of a belt line by joining the Union Railroad with the Montour Railroad would con- tribute substantially to this end. The abandonment of the Bessemer by the steel corporation for its ore carriage is a threat which would be costly to put into effect. There is already congestion by other routes, and it is hardly conceivable that they would stand the overloading which this shift would bring about. All told, it appears not only that the other common carriers strongly desire inclusion of the Bessemer under railroad ownership and management, but also that great com- petitive steel operators would welcome the same change. It would tend to balance up transportation conditions and to put an end to a peculiar competitive advantage which the steel corporation enjoys. In case of such transfer to railroad ownership, it is equally clear that the natiural affiliation is with the Erie rather than any other property. The two roads now have a short mileage in common. They exchange some business. And there is important conmiunity of interest through the banking^ house of J. P. Morgan & Co. This common control, otherwise possibly threatening an extension of industrial influence to cover an entire trunk line system, is, however, happily now subject to administrative supervision and regulation by law. The Erie system, obviously, should be admitted by means of trackage to the great railroad centers of Indianapolis and Columbus. No choice is made, however, as to- the particular lines to be employed for this purpose. But it is believed that the device of trackage, where lines are not otherwise congested, and especially where they are already double tracked^will afford compliance with many such requirements. It is important that the Erie have more soft-coal tonnage. The two small prop- erties, Pittsburg, Shawmut & Northern, and the Pittsburg & Shawmut, connect with difficulty, to be sure, by heavy grades and even switchbacks. But the same is true of any connection yet free for allocation north and east out of the Clearfield region. The Buffalo, Rochester & Pittsburgh has already, it will be recalled, been assigned to the Nickel Plate system; and all of the other three trunk lines are already 63Laa richly provisioned with soft coal. The Erie's crying need for company fuel com- mends this disposition, despite the physical obstacles to be overcome, as well as the necessitous condition of these little properties. They contribute coal even if they fail to add revenue. Finally, the main stem of a fifth trunk line is found in the New York, Chicago & St. Louis— commonly known as the Nickel Plate— which closely parallels the Lake Shore from Buffalo all the way to Chicago. This location is shown in detail on map 6 . The Nickel Plate in itself is not a great raih-oad. In 1917 it operated only 523 miles and owned less than 500 miles of line. Most of this is single track. Its investment in road and equipment in 1917 stood at $67,470,000, and its railway operating revenue for that year was $16,901,000. Its gross business amounted to 2,615,524,000 revenue ton-miles. Originally built in order to blackjack the Lake Shore into its purchase, this little property has only recently been sold by the New York Central system. Ite complete independence is perhaps not as yet fully assured; but there can be no question that it possesses in its strategic location an importance which entitles it to development as a competitive stem with the other trunk lines. The Nickel Plate at the present time has neither a line of its own to St. Louis nor extension to the Atlantic seaboard. At Buffalo it is dependent for such share of trunk line traffic as it can win in competition from a number of independent com- panies entering Buffalo from the east. Among these independent companies, based upon New York, the Delaware, Lackawanna & Western stands i*eeminent. It affords absolutely a first-class trunk line, constructed at enormous cost, with every possible facility for safety and dispatch. And the Lackawanna, furthermore, is one of the strongest companies financially in the United States. Apparently the natural interrelationship between these two properties has induced consideration not infre- quently of absorption of the Nickel Plate by the Lackawanna. The obstacle has been the evident necessity of very great expenditure upon the Nickel Plate line in order to bring it up to Lackawanna standard. The Nickel Plate has no feeders, and but little access toimportant cities, even just off its main line. At Cleveland, however it possesses fine terminals. The expense alone for the aboUtion of grade crossings to the Lake Shore standard would be enormous. But there can be Uttle question that with the growth of future years this low-grade direct line through the heart of the trunk line territory will be needed in the public interest. The preeminent financial strength of the Lackawanna would appear naturally to be most serviceably employed in the creation of a new system, just where it is most likely to be of advantage in the course of time. The natural extension to St. Louis of the Nickel Plate stem, based upon existing traffic relationships as well as geography, is the Toledo, St. Louis & Western, otherwise known as the Clover Leaf (map 6) . This road crosses the Nickel Plate at Continental, a Uttle southwest of Toledo, and runs directly to St. Louis. It also is nothing but a stem, with no branches or feeders; but it also runs up to Detroit (Detroit & Toledo Shore Line Railroad, one-half owned by the Grand Trunk Western), and its strength arises in part from the fact that it cuts across every east-and-west line of importance in central freight association territory. Adequate feeders at the western end are also pro- vided by adding the Lake Erie & Western Unes. These are withdrawn from the New York Central system, as abeady described, the Lake Shore having in 1899 acquired a controlUng interest in its stock. But the Lake Erie & Western for the most part appears to be superfluous to the New York Central; that is to say, except for the north- and-south branches between Cincinnati and Jackson. The other Unes all paraUel existing New York Central routes. And it seems to be generally understood that the purpose of acquiring this Une in 1899 was to put it out of harm's way. In the New York Central system it has never functioned successfully. Thus transferred and made part of a new group, it might perform valuable sendee. The Lake Erie & Western, also 63 1. C. C. 500 IXTEKSTATE (JOIIMEBCE COMMISSION KEPORTS. w^Hr^und C Jeir *^' I'-'^»-°- r*^"' -•» ^-^ 'or a cozmection with the m"S cItS ^- '• """"^ ""'""•'^ ""' IndianapoUs and to the great lakes at Cohuubus^ accordiug to this plan, is reached over the Marysv-iUe division of the Toledo 4 Ohio Central; and east of Col,unb,. the Une passes on by conZed let ^ on Ae same road to the Zanesnlle & Western. Through this property phv^ca connection ,s had with the Wheeling & I,ake Erie, as shown on map e^he Norther E^e * wT *^'' -H""- ^''""°" * Younsstown, imtil recenfiy part of fhe l4" Ene& Western, are^o Uttle properties now in independent haneninsula, especially in connection with the recent phenomenal rise of the auto- ihobile industry, and it is also extremely important that free and direct access be had to the so-called Michigan ferries. These boat lines across Lake Michigan afford a convenient means of avoiding the congestion about Chicago, besides, of course, being far more direct for traffic which comes through Canada from the east. A great and growing coal tonnage to the northwest is handled by this means. It is evident that each of the great trunk lines ought to have representation in this territory , if it is to be divided up — canalized, so to speak. So long as the field is free and open, every cross route is open to all comers; but when once apportionment begins, it must be carried through logically to the end. The available lines in the lower Michigan peninsula are not numerous. Both the New York Central and the Pennsylvania systems have provided for their own needs, as the large maps for these systems indicate. The following railroads remain, as shown on map 7 and more in detail on map 7-a. The most important is the Pere Marquette, also shown on the large Baltimore & Ohio map (4), because of its historic and natural relationship with that road. It has connection at Toledo. Its uses Baltimore <& Ohio terminals at Chicago and joint passenger service is maintained to Cincinnati. It is by far the most desirable property still free, having been reorganized and put upon its feet substantially. Next to the Pere Marquette, the most important raiboad is 63 1. 0. C. constituted of the Grand Trunk lines west of the Detroit River., The location of these 18 shown also on map 7. But it is open to question whether this property may be appropriated for consoUdation, at least without diplomatic procedure, inasmuch as it now forms part of a government-owned Canadian system. Were it free and available some of Its lines might be utilized to good effect, but most of them trend in the wron^ direction. The principal ones lead from Chicago to the northeastern connections with the Unes m Ontario north of Lake Erie. What the American systems in trunk Une territory need are connections along another diagonal toward the northwest for ferry connection across Lake Michigan. And then, finally, there remains in the peninsula the Ann Arbor Railroad, which runs like a string straight nortl^west from Toledo to Frankfort. This property is capable of supplementing the others under consoUdation The only other property in Michigan is the Detroit & Mackinac, which closely parallels the west shore of Lake Huron clear to the straits. There are two possible methods of treatment of these Michigan peninsula railways One is to divide them up among the different trunk Unes, giving each one independ- ently access to this territory and also passage to the lake ferry routes to the northwest to each system. The other plan is to treat these lines as a unit, as in New England putting them all together into a regional group, which shaU offer its facilities freely on equal terms of neutraUty to all comers and which shall specialize its services uithm Itself. As between these two, the latter alternative is chosen, for the reasons hereafter set forth. A valid objection to parceUng out these Michigan Unes among the five trunk Une groups 18 that there are not enough good railroads to go round . The New York Central and the Pennsylvania, as their maps show, already have their own lines across this territory. The former is richly represented by the Michigan Centrarand the latter by the Grand Rapids & Indiana. Only three serviceable roads remain, therefore for satisfaction of the Michigan needs of the Baltimore & Ohio, the Nickel Plate, and the Ene systems. And obviously no one of these three may fairly be left without representation. The difficulty of dividing up, giving the Pere Marquette to one, the Cxrand Trunk Unes to another, and the Ann Arbor to the third, is very great. Quite possibly the Grand Trunk, as a foreign government-owned road, might not be available m any event. That Would have to be determined diplomatically. Then, again many of its Unes run in the wrong direction to serve the trunk Unes. Those forming part of the routes north of Lake Erie trend generally northeast. What is wanted for the Lake Michigan ferry routes are Unes trending northwest from Detroit or Toledo These Michigan properties are also of widely different extent and financial strength The Pere Marquette would, as now reorganized, be a real addition to any system but the Ann Arbor or the Detroit & Mackinac would be a liabiUty rather than an asset. Could the three roads, v^ith possibly the Grand Trunk, be put into a melting pot and entirely new divisions be created, with a view to the needs of the trunk lines this partitiomng plan might be worked out. But in order to avoid dismemberment of existing corporations, it seems preferable to adopt the second choice and to set off the Michigan Unes as a r^onal unit. There are many similarities between the Michigan peninsula and the New England situation Each has a long water frontage. Each has a rich industrial district in the south with many junction points, but in each case the population becomes more sparse and the traffic thinner as one proceeds northward. Each region is absolutely depend- ent for coal and many suppUes on outside connections. And the ferry routes across Lake Michigan to the northwest bear certain resemblances, potentiaUy to the dif- ferential Canadian routes from New England. Each is operated at a disadvantage against standard all-rail Unes, and yet each is important, especially in times of congestion, and each exercises a certain check upon the rate situation as determined bv 63 L C. C. • -^ I' 504 INTERSTATE COMMERCE COMMISSION REPORTS. CONSOLIDATION OF RAILROADS. 505 the standard routes. For the same reasons, therefore, which apply in New England^ it is recommended that all of these roads be consolidated in a single group under the leadership of the Pere Marquette. These lines, with the Grand Trunk possibly in- cluded as a foreign government-owned road, will be available, it is anticipated, through gateways at the south for all connections. The provision of the statute as to competition will be satisfied nominally by leaving the Pennsylvania line — the Grand Rapids & Indiana — and the Michigan Central, as part of the New York Central system, as at present. The operating advantage of such consolidation is clear. The Ann Arbor road, a single-track bridge line, would give the Pere Marquette, also largely a single- track road, practically a double-track system for the business from Ludington to the various connections at Toledo, the line of heavy through business. The two roads have a common terminal at Toledo and adjacent yards capable of joint operation. Both roads use the same track out of Toledo Yard to Alexis. The Saginaw locomotive shops would do for both. And the Ann Arbor boat line under consolidation with the Pere Marquette could be much more effectively operated. The following table gives the carloads interchanged by the Chicago & North Western at Manitowoc, Wis., for four months preceding February, 1921: Ann Arbor. Pere Marquette. Received by North Western 2,136 carloads. 4,425 carloads. Delivered by North Western. 2,807 carloads. 5,598 carloads. It is certain that joint operation of this goodly volume of business would }>e advan- tageous. The tonnage of the North Western at Ludington, the other ierry, is so heavy that a double-track road is desired to handle it in Wisconsin Two tracks in ^fichigan would be afforded by this merger. As to the Detroit & Mackinac, it is a natural supplement to the Pere ^farquette, in mileage, as well as in terminals, both freight and passenger. Whether the Detroit & Toledo Shore Line, half owned respectively by the Grand Trunk and the Clover Leaf, and solely devoted to freight business, could be spared by its present owners, or developed for the benefit of all the neighboring roads, is as yet uncertain. In many ways it builds in very well with this proposed Michigan s>'stem. Another advantage which renders the r^onal group treatment attractive to cer- tain shippers is the fact that it contributes somewhat to a greater independence from the trunk lines. A manufacturer in this territory desiring to export to South America, let us say, finds himself exposed to a strong tendency to have his traffic worked by way of the Atlantic seaboard, were the Michigan lines pardtioned out among the trunk lines. But organizations like the Mississippi Valley Association, or the Southeastern States Association, desirous of upbuilding the south Atlantic and Gulf ports, would welcome encouragement to turn the traffic in these directions, provided bottoms at attractive rates could be had. This group treatment, with access of its own to Chicago for connection with all of the through lines serving these ports, will, it is submitted, contribute to a greater flexioility in movement. On the other hand, the question must be facec* as to the effect of such grouping upon rate construc- tion. Unless through rates were given, the sum of locals might add to the expense; and it would be particularly imfortunate if the trunk lines were to treat either this group or the New England region as a justification for charging extra verminal expenses, so to speak. Shippers object to such additional terminal charges, fully as much on the ground oi inconvenience and annoyance as on account of the money involved. They regard them also as a surtax. If the regional treatment is going to impose such a system of rates, the recommendation for this treatment might be modified. But assuming that this matter were satisfactorily arranged, it is believed that such a group would be feasible. Suggestion has been made that it might be "fattened up" by inclusion of the Michigan Central line and the Grand Rapids & Indiana. There is, perhaps, force in this contention, as contributing to entire equality competitively 63LC.C. between the trimk lines; but it involves a rather serious invasion of the existing systems of the Pennsylvania and the New York Central, which ought to be avoided, if possible. The Michigan Central, particularly, despite the appearance of duplica- tion of lines between Detroit and Chicago, is a necessary and integral part of the New York Central system. Without it the latter would be prejudiced seriouslv for Detroit business east, as map 7 plainly shows. The two roads have grown cooper- atively. Each is dependent upon the other for terminals, and Michigan Central sponsorship for the Detroit tunnel is conditioned upon a continued alliance. It would be unfair and economically unwise to disturb the existing relationship. The need of an independent railroad for a soft-coal fuel line of its own is as obvious and imperative for the Michigan peninsula as it is for New England. The bituminous^ fields of West Virginia, as described in chapter III, should be rendered more directly accessible to this great and rapidly growing industrial district. To this end it is recommended that the Detroit, Toledo & Ironton road, shown on map 7, be incor- porated with the Pere Marquette and its fellows. This Uttle property, after a long, shady, and viciesitudinous past, has recently been purchased bv Mr. Henry Ford' for the identical purpose above outlined.* Despite its present broken-down condition It IS admirably adapted to serve as a connecting link and fuel-supply road. It cuts the main stem of every trunk line. At the south, it connects with the Chesapeake & Ohio, practically at the mouth of the Big Sandy River; and so forms a direct route over the Clmchfield road to the southeast (page 550, in/rn, and map 9). It has access immediately to Ohio coal fields and leads naturally to the best Kentucky and West Virginia measures. The Ironton would build into the Pere Marquette svstem well at the upper end. At present excluded from Detroit, its line could be brought into the Fort street union depot, controlled by the Pere Marquette; and the present heaw switehing interchange with the Pere Marquette for River Rouge Ford plant traffic could be more effectively operated. The necessity for heaw capital expenditures in relocating the main line could be in part avoided by taking trackage up the Scioto Valley from the Norfolk & Western, here double-tracked; and from the Cincinnati Hamilton & Dayton as well. The public advantage of this merger appears to be unalloved. Closely allied with the Michigan peninsula roads are the American lines through southern Canada between Buffalo and Detroit. These are drawn on map 7-a Beside the Michigan Central, there are two of these lines available for distribution among the trunk Une groups which could profitably make use of this short cut There is the Wabash, consistii^ solely of trackage rights over the Grand Trunk; and then in the second place, there is ,the Pere Marquette, which owns a Une to St. Thomas' but which depends upon the Michigan Central for ti-ackage from that point east into Buffalo. What treatment shall be accorded these two extraterritorial lines? It is obvious that they are needed as supplementary routes for the two trunk line svstems which enter Buffalo from the east, namely, the Erie ana the Lackawanna-Nickel J^late. Each of these could use such a Canadian line bs the New York Central utiUzes Its Michigan Central route. The Baltimore & Ohio and the Pennsylvania both Ue too remotely south to have need for such a short cut. Neither of them have an easterly entrance into Buffalo. As to the choice in distribution for the two Canadian lini above mentioned, the Wabash, seemingly, would go to the Erie svstem; as that property, ^t of the Mississippi, is built into this group for a St. Loiiis connection. Ihen the Pere Marquette Canadian line might either go to the Lackawanna-Nickel l-late to round out its facilities; or else, if it seems preferable, it might remain as a teeaer attached to the moependent Michigan group, a^ above outUned. The Canadian img^^tiajelijvej^i^ht s omehow thus be trea ted a^ a part o f the trunk lines rather ' Full history in RaUway Age, July 23, 1920, page 143. 63 1. C. C. 506 INTERSTATE COMMERCE COMMISSION REPORTS. than as afFiliated with the Michigan peninsula group. For, if iDcludcd in the penin- sula group, they would add to the temptation to work this Michigan traffic east rather than, when shipa were available, southward to the Gulf ports, or south Atlantic cities. Statistical exhibit 2 manifests the possible financial results of a regional Michigan treatment. Bearing in mind that the normal return on capital in\ estment for the year 1917 for the country at large was approximately 5 per cent, it is apparent that the group herein proposed is somewhat subnormal in this regard. But an advantage of the regional treatment is of course the possibility of enhancing tlie local revenue by an increase of the di\'ision8 of through rates. It is hardly conceivable that sub- stantial increases can be effected in the through rates themselves witliout driving traffic away from the ferry routes. But nevertheless some local rates might conceiv- ably be increased. The inclusion of the Michiq:an Central, as will be observed from the figures in exhibit 1, would produce the ideal result. Its addition would much more than double the net operating income while much less than doubling the invest- ment account. The recommendation has been indorsed by a leading trunk line president that the Micliigan Central should be made the bellwether of this flock, and the desirability of withdrawing it from the New York Central, in view of the predominance of that road over its tnmk line neighbors and also of taking out the Grand Rapids & Indiana from the Pennsylvania is self-evident. But, as already observed, this proposition must be rejected as impracticable and unfair. The Michi- gan group, if it stand alone, must take its chances of survival. It is believed to be self-sufficient. Two little properties, the Leliigh & New England and the Lehigh & Hudson are mere bridges to connect New England with all of the trunk lines by an up-river cross-country route. These properties are shown by double lines upon all the large trunk line maps. They extend from Campbell Uall and Maybrook, respectively, over into the Delaware Valley and into the heart of tlie anthracite coal territory. At present the Lehigh & Hudson is controlled jointly by five railroads and a coal company, the number of shares being indicated by the accompanying table: Central Kailroad of New Jersey 2,095 shares. Delaware, Lackawanna & Western Railroad 2, 159 shares. Erie Railroad 2,093 shares. Lehigh Coal and Navigation Company 6,519 shares. Lehigh Valley Railroad 2,093 shares. Pennsylvania Railroad 2,094 shares. Sundry persons 147 shares. Total 17, 200 shares. The Lehigh & New England is at present controlled by the Lehigh Coal & Na\'igation Company, and is used by that company for the carriage of its anthracite coal. Its coal traffic is competitive with that which is mined along the Reading, Erie, Lacka- wanna, Lehigh Valley, Central of New Jersey, and other anthracite systems. It does not reach the Pennsylvania system at present, a small gap intervening. And the Penns\ivania might profitably use it as a back entrance to New England, unless it were to be merged with the New England roads as a group for a fuel line to Harris- burg. Such, indeed, is my recommendation (page 521, infra). And as for the Lehigh A Hudson it is believed that it may safely remain as at present, as ^ joint bridge line for common use by all the trunk lines. It might perhaps be owned by some one of them, but its rails should be open to all alike on equal terms. The statistical test of conformity to the statute of this plan for five trunk line systems divides itself naturally into two parts. The first concerns the relative size of these five systems. The second has to do with their earning capacity as compared with one another. The relative size of the five is depicted in exhibit 1, which sets forth the component parts of each system and thereafter aggregates them into five totals 63 1. C. C. CONSOLIDATION OF RAILROADS. 507 which may be compared. These statistics, it should be observed, are to be interpreted with all the reservations already made. The figures for the calendar year 1917 are therefore presented merely as a rough verification of the soundness of the plan. Con- cerning size, as it appears, the results are as follows: System. Pennsylvania system New York Central system ...'. Baltimore & Ohio-Reading system. Erie- Lehigh Vallev- Wabash system Lackawanna-Nickel Plate system.. Average mileage operated. 11,276 11,414 8,253 7,613 4,879 Revenue ton-miles. 47,871,000,000 38, 477, 000, 000 29,118,000,000 27,769,000,000 16,986,000,000 Revenue ton-miles per mile operated. 4,245,000 3,370,000 3,528.000 3,648,000 3,481,000 These data bring out the predominance of the Pennsylvania system, but they also manifest the degree to which the three smaller systems have been magnified in impor- tance to a size more nearly commensurable with the Pennsylvania. Actually the New York Central, Baltimore & Ohio-Reading, and Erie systems are brought quite closely together as respects the volume of traffic handled, in revenue ton-miles. The Lackawanna-Nickel Plate is still relatively about as much smaller than this middle group of three systems as the Pennsylvania system exceeds it, measured, that is to say, by the revenue ton-miles. But the soundest test, of course, of the capac- ity of the roads as operating units is afforded by the third column, indicatiug density of tonnage. The relative financial magnitudes are depicted by figures of the calendar year 1917 for operating revenue and income. They are as follows: System. Railway operating revenue. Total. Per mile of line. Pennsjrlvania system i $482,220,000 New 1 ork Central system i W 121 OOO Baltimore & Ohio-Reading system ..'.,....., .'\ 259 492' 000 Erie-Lehigh Valley- Wabash svstem •-.•-- , , Erie-Lehigh Valley- Wabash system Lackawanna-Nickel Plate system 218, 539, 000 130, 941, 000 $42,762 33,477 31,442 28,707 26,835 Net operating income (standwtl return). Total. $83,316,000 84,453,000 56, 412, 000 46,902,000 28,833,000 Per milecrf line. $7,388 7,399 6,835 6,161 This test of size shows, again, the rather overwhelming predominance of the Pennsyl- vania system, pecuUarly marked by the density of its traffic. This density when applied to its large mileage produces an aggregate which it is impossible to match. The closest correspondence again is between the three middle systems in the table, the New York Central, the Baltimore & Ohio-Reading, and the Erie. Still, as respect^ railway operating revenue and net operating income, the Lackawanna is about as far below the middle group of three as the Pennsylvania is above it. The consideration of the figures, not in total, but per mile of line, somewhat corrects this apparent dis- ability and brings the five systems much more closely together. And of course it is the net operating income in terms of investment which constitutes the final test. The relative magnitudes of these systems are also indicated by the amount of their property as carried on the books for the calendar year 1917. 63 1. C. C. I{ 508 INTERSTATE COMMERCE COMMISSION KEPORTS. Investment in road and equipment, Dec. 31, 1917. System. Total. Pennsylvania system ii fi.T2.400 nnn New York Central system ^ .\\W\\\liy.[V.:i::[::::: ' -'^^-^'"^ Baltimore «t Ohio-Reading system Erie-Lehigh Valley- Wabash system !I"I*!!!!!!!!!!!!!.**!* Lackawanna-Nickel Plate system ^.I.i.I.'!'!!! 1,383,012,000 1,0©8>579,000 1, 095, 165, 000 656,222,000 Per mile of line. 1169,465 138^787 133,215 162,995 143,118 Percentage relation; net operat- ing income to invest- ment. 4.50 6.11 5.14 4.28 4.39 By this showing the Pennsylvania is still about three times as big as the Lackawanna- Nickel Plate system, but the correspondence between the middle group of three systems is believed this time to be rendered misleading by the enormous investment figures for the Erie Raih-oad Company. This swollen investment account, amounting for the Erie Railroad to $210,000 per mile of Une, distorts the results for that system appreciably. Making due allowance for this factor, the five companies range them- selves in order from top to bottom of the table. But the gap between them is sub- stantially lessened when the results are compared per mile of line rather than for the total. And, be it observed, as repeatedly stated, it is not total size but relative earning capacity which constitutes the final test. Coming finally then to the percentage of net operating income on investment, the figures draw nearer to equality. These data correct, or rather eliminate, the element of gdze; and are only distorted by defects, that is to say, overstatement of investment. This overstatement is probably most marked for the Erie system. Consideration of the right-hand column of the above table shows that the order of precedence among the five companies is substantially changed in terms of this relationship of earning capacity to investment. The New York Central system heads the list with a per- centage of 6.11. The Baltimore & Ohio follows with 5.14 per cent, exceeding the Pennsylvania with its percentage of 4.50. The Erie percentage of 4.28 is obviously too low, supposing the investment to be overstated. But the surprising feature of this final test, and one which it is believed stamps the plan as conforming to the statute, is the tendency of the operating income in percentage on investment to approx- imate the corresponding rate for the country as a whole. This figure for 1917, it will be remembered, was 5.45; and the year 1917 was chosen as typical because this figure was what might be regarded as a normal standard under the statute. The ideal for which one strives is a rate of return, of course, for each system throughout the country which shall be equal, first, to the rate for that region, and, secondly, for all the regions combined. A truly balanced competitive condition, permitting of the successful application of percentage rate increases or decreases to the country as a whole or by groups, would alone obtain under such circumstances. It is futile to expect more than an approximation statistically, but it is believed that the approximation herein is as close as the limitations of the data warrant. 63 1. C. C. CONSOLIDATION OF KAILROADS. Chapter II.— The New England Region. 509 (ic'ographic peculiarities ofNew England, 509.— Gateways and rail connections (map\ 510.— Volume of traffic by gateways analyzed, 5l6.— Excess of inbound tonnage and character of shipments, 512.— Interchange with outside companies analyzed (diagram), 512. The advantages of trunk line plans outlined, 514.— Objections to Pennsjlvania- New Haven alliance, 515.— A New York Central-Boston & Maine merger also objectionable, 516.— Alternative alliance with Erie and Lackawanna-Nickel Plate, 517. The plan for regional consolidation described, 517.— Advantages as respects outside rtelationships, especially routing, 518.— Effect upon dealings concerning division of through rates, 519.— Coal supply and a possible common fuel line, 519.— CoaBtMise traffic encouraged and Canadian differential lines, 519.— Proposed fuel line to Harrisburg by consolidation of all New England lines with I ehigh & New England, 520.— Possible merger with certain trunk line coal roads, 521.— Do- mestic intra-New England considerations, 522.— Concentration of local interest and responsibility, conmiercial, financial, and political, 522.— Legal aspect as to preservation of competition met, 523.— The outstanding objection of financial weakness, 523.— The development of Boston as a seaport, 524.— Final accept- ance of the regional plan as compelled by circumstances, 525. The transportation problem of New England as respects consolidation is unique. (See map 8.) It is an economic unit on the outskirts of the central commercial terri- tory of the United States. Although intensively developed industrially and densely populated all along the seaboard, its principal asset is its ample supplv of high-grade labor. Its transportation problem, broadly viewed, is to foster its manufactures in three ways; first, by provision for the cheapest possible inbound caniage of raw ma- tenals, coal, cotton, iron, and steel; secondly, by insuring cheap transportation for foodstuffs and other necessities of common life from the remote centers of their pro- duction; and, thirdly, to make certain that the freight rates on its finished products outbound, shall keep them in the various markets throughout the heart of the United States, in the face of constantly rising local competition thereabouts. Its density of traffic, particulariy in passenger service, is noteworthy. The intricate and retail char- acter of much of its trade and its highly specialized manufactures demand a conven- ient and efficient articulation of its railway net at numerous junction points Its problem is so peculiar that it must be considered in somewhat minute detail as respects consolidation. The geographical relationships of rail routings now available may best be considered first with reference to the gateways and rail connections. These may be listed as follows, the location being indicated upon the accompanying map- Gateway. Harlem River, N. Y. (all raU). New York, N. Y. Carrier. Rail connections. N. Y., N. H. & H. NewiEngland Steamship Com- pany, sound lines. 63 1. C. C. Pennsylvania. Lehigh ^'alley. Central of New Jersey. Philadelphia & Reading. Baltmiore & Ohio. Delaware, Lackawanna & Western. Cx«astwise steamship lines to the south. (Pennsylvania. LeJiigh Valley. Central of New Jersey: Philadelphia ing charts and statistics as to car interchange. These figures, it should be observed, are applicable only to New England as a group of railroads. They do not indicate the loads received or delivered by the different railways for their own individual account. Thus loads received by the New Haven may include cars for points in New England beyond its system, and loads delivered by the New Haven may include cars origi- nating on the Boston & Maine, but passing through the New Ilaven system to this pirticular gateway. But considering the New England railroads as a group, this data affords a picture of the relative volumes of tonnage for the common account of the region as a whole through the different gateways. Disregarding details, this record discloses that the overwhelming preponderance of traffic received and delivered passes through five gateways across the Harlem or Hudson River. The most important single railroad as to receipts at one gateway alone is the Boston & Albany, which in 1919 received 277,236 loaded cars; but the New Haven at its two gateways of the Harlem River and Maybrook considerably surpasses it, with total receipts of 420,121 loads during 1919. In the same calendar year the Boston & Maine, through its two gateways at Rotterdam Junction and Mechanicville, was in receipt of 261,546 loaded cars. In other words, as to receipts, the Boston & Maine was not far behind the Albany, and both alike were greatly exceeded as to inbound loaded-car movement by the New Haven. But, as above stated, we have no way of ascertaining how large a proportion of this New Haven movement inbound from the west and south, was in iact destined to the different individual roads. 63 1. C. C. Loaded FoEK^fr Caps Coming hrlo and ooing oaf aP Nevif £ng/anof actnng Ca/^ndar year- f9/9 Showing To^/ Gecxipfs and 7&M/ D&/fV&yes itHXHjgh a// ffi^ewayff wtfh oHierihan New cnQ/aind Lmce. S^COO lOOWO 90000O 900000 M.C. I 4t9C0O SPOOOO 100000 TBOCOe m ^ u Ol9Cfy MfOffVIBd ^Loods D^^Wftd Legend lofat Gsccn^oed Ibhat Defivcned 4-827 2 5/e 294 357 i33 080 326 652 /36 883 52 888 24 776 45 698 ZZ S&4 474 30e / 89 336 4e 127 33 579 1244 855 542 764 Abe^/^ Pfgtuntite ejcpneoocd in Rercenhge of" loaded core de/n^ervd "ha Loctdod cars necenied Boston AND Mmn£ QJl Ptesfdenfh Offhe Och^ t9ZO. 0.-^763—21. (To foce page 510.) No. 1. Loocfed fretghf- eana coming irrh> ancf gdino oiAof Afenr Enghnd , Caf^ndar \^r 1919 Shotvn graphtcally for ga-t^ways whar^ morm ^hcffy 20,000 haded ccrro were reeerved or deHvered. ^Ftgurms oontx u rmd in o44aehttd s -f a -fm tt mt^. ^ ^^am Loads f^ec&vecf. wiMMa loads Oefiv^red. Numerate re^r -^ gai^ewayB //9^b«/ on acconrTpanylng srfa^emen^. Boston & Maine P P Presidents Office Oct. 1920 63763-21. (To face page 510.) No. 2 CONSOLIDATION OF RAILROADS. 511 Cft ® &-2-S *• « > l2 £"|5^ I lO Ol 'O Q 08 ae o t>. O ^ 'T CM * •*« S 3 c 5 I i* n 4 s I J! C5 •-■bCM! !8 •-I «oos^» CO C^ CO Od ac eox«o tcco«o u3CMa» S OQC^ &5 .^•8 3^ a; Ol, ct cooiao •— c^i r» Q CM OlM i35 8 Xi— ( .-I •OCM » CM to CMM 01t~ IS CM >« «o So »-iCM S3 CM rot* CM •r'cM*" 90 CO n coco •CO c^i«o eo«2 C^1-H t>^CM*" U3CM CO CM ■— i I— ( w )■« « r* it* C0.-1 CM Of-i od" S8S t*«o OS 0>CM CMTft Sis' ac«o s CM oo" 05 «-• CM CMO «ro rot* S^ s CM CM OTO CM QOtJO CM CO So s? ro vTM ro g - CM i-tl- « 1-1 "5 o o»t* oo" eo eo I* OS g Oil CO "^ © ■«i" -1" O ro^ OS "5 t*»o ■«»>t>. oocm" f 36 «c«o •o'ro' X c»» t* 3? 00 o>t<- CMCM ^CM t*X TfOJ CM 04 T-ir* roS CM ^ g W Q© $ r* CM i o r* t* cm" "? o" t* CM ... © p eg St o o o ee O ■»-> JHPH o o > (4 S d d o h 03 1^ > B it « •a PQ .24 o o 03 ■3 CO C w 08 •3 .^ Coo « 5 O So PQ o «Q as .o o Eh 3 P4 J 08 c o o "So o o o o p^ o T3 g £3 QQ O I CQ •a *^ o H :i 08 03 60 eS S c .a 00 o "3 -s 18 4i3 O 08 -a 2 o 63 1. C. C. I '' 512 INTERSTATE COMMERCE COMMISSIOX REPORTS. Loaded and empty cars interchanged bij New England carriers icith connecting lines dnrinff the calendar year 1919. Cars received. Gars delivered. New England railroads. I Loaded. Empty. Total. Loaded. Empty. Total. Bangor -8tem8. And such plans customarily divide this territory- north and south of the Boston & Albany, leaving that line undisturbed in the possession of the New York Central. (Map 8.) Trunk line plans, for example, propose to attach the New Haven, south of this divid- ing line, either to the Pennsylvania, the Baltimore & Ohio, or the Lackawanna- Nickle Plate sj-stems. And such trunk line plans coincidently attach the Boston & Maine, alone or in some connection with the other roads north of it, either to the New York Central system or to the one built upon the Erie. The argument, theo- retically, in behalf of the trunk line plan, is primarily that the New England roads require the support and encouragement of the stronger trunk lines in order to main- tain themselves and their patrons in this out-of-the-way comer of the United States. It is alleged that only by the financial support of these trunk lines, by the traffic which they have to offer, and by the rate adjustment which the trunk lines would tend to set up, in order to support their investments, may the New England carriers be pro- tected from insolvency. The soundness of this argument in the abstract may be illus- trated in many ways. Thus, in the matter of equipment, such trunk lines as the Pennsylvania possess a surplus of cars which might well be drawn upon to supply the deficiencies of New England. The Pennsylvania with one twenty-fifth of the railroad mileage of the country owns one-tenth of the equipment. Some New England lines are peculiarly short of such equipment, except perhaps the New Haven and the Bangor & Aroostook. Again, New England suffers by being chronically a per diem debit region. The resources of its roads are drained by constant and heavy balances due to the holding of equipment on its terminal rail lines. These debit balances would surely be reduced were the ample supply of equipment of the stronger trunk G3 I. C. C- CONSOLIDATION OF RAILROADS. 515 lines to be drawn upon. It is alleged, furthermore, that a more efficient operation in train loading and movement might be had were the New England rails to be physi- cally united for operation with those of the trunk line stems. General overhead expenses for administration might perhaps be more appropriately distributed, a better balance of traffic in and out might obtain, and particularly might the supply of com- pany fuel be brought directly from the coal fields at cost were the New England roads to be attached to one or another of the great eastern systems. Assiu-edly valid- ity attaches to many of these arguments, as they are subsequently discussed in connection with the alternative plans. The essential difficulty in the trunk line plans, however, \s not their soundness in the abstract but their concrete application; that is to say, the particular choice to be made for such affiliation among the five possible trunk line systems set up under this plan. Nor may the choice among these five be made indiscriminately. The trunk lines pair off, so to speak, as respects financial and operating strength. It would upset all balance to ally the New Haven with one of the strongest trunk lines, and to deny to the Boston & Maine affiliation with an- other trunk line equally dominant. It is at all times essential to keep in mind a certain balance of power; that is to say, of competitive strength. The most frequently suggested trunk line plan proposes to incorporate the New Haven road in the Pennsylvania system. The reasons are obvious, consisting of the preponderance of traffic interchanged already mentioned, the close working arrange- ments, the enormous joint investment in connecting railways at New York, and tiie interlocking stock ownership. But there are a number of substantial objections to such consolidation. The foremost one is the already preponderating size of the Pennsylvania system as a whole, an objection almost equally applicable to the addi- tion of any other railways to the New York Central group. A prime object in effecting consolidation is to equalize competitive conditions, so that to ally a New England road with systems already so large as to betray evidence of unwieldiness would be entirely contrary to the spirit of the statute. A second objection to the Pennsyl- vania-New Haven alliance is that the Pennsylvania has no surplus earning power at present with which to upbuild a broken-down New England property— broken by impairment of its assets through unwise investments in outside properties. But of even greater weight is the undesirability of further congesting transportation condi- tions in and about New York city. The entire contact of the Pennsylvania is through the Harlem River or metropolitan gateways and these are routes periodically subject to embargo by reason of overloading. Such congestion might of course be remedied by amplification of facilities; but the expense of such improvements through the heart of the metropolitan district becomes more appalling with the passage of time. To set up a prime connection which would throw the traffic of New England inevitably more and more through this gateway seems unwise. And then on top of it all, the absence or any present disposition to consolidate, the Pennsylvania having abundant problems of its own, leads one inevitably to reject this possibility. What shall be said about an alliance of the New Haven with the Lackawanna- Nickel Plate system. The physical connection between the two, as depicted on map 6, is immediate and direct through the Poughkeepsie bridge gateway. This choice would emphasize the utilization of the natural all-rail up-river gateway. By means of the two bridge lines of the Lehigh & Hudson and the Lehigh & New England the New Haven could assuredly be brought to a close connection either with the Lackawanna or the Lehigh Valley, and thus be made part of a comprehensive trunk line system . Such an alliance has the added advantage of avoiding congestion through the metropolitan district of New York. Fifty years from now it is believed the truth of this observation will be far more apparent than at the present time. But considera- tion of map 6, viewed in the light of the topography, the grades and curvature, indi- cates that an enormous investment would have to be made in upbuilding the connect- G3 I. C. C. y 516 INTERSTATE COMMERCE COMMISSION ilEPORTS. CONSOLIDATION OF RAILROADS. 517 I t h ing links; and even then the route to the west is markedly indirect as compared with the Boston & Albany and New York Central line up the Mohawk Valley. The Nickel Plate-Lackawanna system exists as yet only on paper in a tentative plan. It is not even in embryo. Its financial stability, if ever created, must of necessity for a long time be uncertain. One hesitates, therefore, to commit the fortunes of the southern half of New England served almost exclusively by the New Haven system to such an alliance. Consolidation of the New Haven with the Baltimore & Ohio amplified system as proposed in this report deserves the most serious consideration. This is the third possible choice. The relationships are set forth on map 4, whence it is evident that an extraordinary advantage might accrue to New England from such a merger. The Philadelphia & Reading and Jersey Central overwhelmingly predominate as anthra- cite coal roads, and the soft-coal tonnage of the Baltimore & Ohio is drawn from some of the richest reserves in the United States. The bridge lines as depicted on map 4 admirably connect the two. Such an alliance would carry out in effect the plan under which a number of years ago the Philadelphia & Reading undertook an entrance into New England by acquiring control of the Boston & Maine Railroad. The project then feU through largely because of banking opposition. But the operating and traffic advantages then obvious obtain at the present time. The arrangement is far from being ideal, however. Many objections immediately suggest themselves. The first is that the Baltimore & Ohio is from New England the longest of all the trunk line routes to Chicago. As indicated on page 486, the distance over the rails of the Baltimore & Ohio from New York to Chics^^o is 105 miles greater than by way of the Pennsylvania. The summit to be surpassed is appreciably higher than by any other route and is actually 1,500 feet higher than the highest elevation of the New York Central line. Chicago is a long way farther from Boston by this circuitous route than by any other. But, on the other hand, the Baltimore & Ohio leads as directly as any other trunk line to St. Louis and the southwest. And the connection at Harlem River is for freight purposes, owing to the abundant floating equipment owned by this system, almost as good as the Pennsylvania. Another serious objection has to do with the future of New England seaports. And the Baltimore & Ohio trunk line plan unquestionably violates New England interest in this regard. It is inconceivable that such a trunk line should bring export traffic through to Boston, passing in series every one of the other great Atlantic seaports. This serious disadvantage, along with the greater distance, must be set off against the benefits which might flow from the cheapened fuel supply. On the whole, following out the principle of trunk line consolidation, the Baltimore & Ohio choice is the most attractive one, assuming of course that this system has the financial stamina to imdertake the task. Possible trunk line affiliation for the northern half of New England must now be sought. What shall be done with the Boston & Maine, the Maine Central, and the Bangor & Aroostook? The baldest proposal is a consolidation of all of these properties with the New York Central. The financial advantage is obvious. But a serious objection is the size and preponderance already in trunk line territory of this great road. To add to its great mileage and enormous volimie of traffic a network of over 4,000 miles of line transporting almost 5,000,000,000 revenue ton-miles of freight is a serious proposal. The burden of proof rests upon its advocates. A second serious objection is that this alliance would in nowise foster competition at most of the import- ant New England centers. Rather would it tend to cut it down. For the Boston & Albany, as a subsidiary of the New York Central, already cuts through the heart of New England. And along its entire length there is now competition between the New York Central system and the Boston & Maine, the latter operating to the west through the gateways at Mechanicville and Rotterdam Junction. Merger of the Boston & Maine in the New York Central sj'stem would*put an end to all this competi- 63 1. C. C. tion and limit it only to those points touched by the New Haven. Massachusetts from end to end, instead of having as at present three railroads in competition with the west, would have but two. And then, in the third place, the statistics of car interchange, already discussed, show that the Boston & Maine is substantially closer to-day to the Delaware & Hudson than to the New York Central, there being a pre- ponderance in interchange of at lea^t 50 per cent with this smaller company during the calendar year 1918. Considerations, therefore, of equal weight to those which led to the rejection of the Pennsylvania Railroad for the New Haven, impel one to reject this trunk line plan for the Boston & Maine. Why not, then, ally the Boston & Maine with the proposed trunk line system built upon the Ene stem. The result of such an alliance is sketched on map 5 The con- nection IS direct by way of the Delaware & Hudson and much is to be said in favor of the arrangement. But here again the plan falls short financially. Is there a sufficient surplus of financial resource for the rehabilitetion of 4,000 miles of indigent railroad? Or again, is there sufficient direct contact with New York and Philadelphia and the territory to the southeast. One demurs at a canalization of New England traffic through the routes alone depicted on the map of the Erie system The most appealing choice under a trunk line plan for the northern half of New England is somewhat complicated. It proposes to draw upon tJie superabundant resources of the New York Central, and yet at the same time to prevenV extinction of the existing competition all along the line of the Boston & Albany. The proposal IS this: That the Boston & Maine Railroad be consolidated with the propo^d Erie system (map 5), and that the Maine Central and tJie Bangor & AroostookXuld be consolidated wi^ the New York Central, connection tlierewith being obtained over the rails of the Worcester, Nashua & Portland division of the Boston & Maine This latter bridge line parallels the sea coast from Worcester to Portland, still leaving the Boston & Maine undisturbed in possession of ite two main stems between Boston and Portland The Worcester, Nashua & Portland for many years retained its cor- porate identity. It would afford a convenient link to bind the New York Central with the second great seaport of New England. The railroads of Maine would thereby be enabled to draw upon the financial resources and the surplus equipment of a wealthy trunk line, and the development of Portland as a seaport, in tJie enjoyment of cornpetition from three independent railroad systems, might well be prorioted. The Cham of cities along this route and the line of the Boston & Albany would enjoy a degree of cornpetition which has not been witnessed for the last generation Many objections to this arrangement suggest themselves, but they must be accounted part and parcel of tlie disadvantage of any trunk line plan. Balancing advantages and de ecte, the arrangement seems to be not impracticable and to comply substantially with the purpose of the federal statute. It is my own choice for northern New England if a trunk line plan 18 to be adopted at all. gi u The alternative consolidation plan for New England proposes to create a single comprehensive system out of its existing carriers, preserving only such domestic competition among them a. shall satisfythe demands of the stLte This plantro- ceeds upon the theory that the New England railroads, as distinct from those in trunk me terntory, possessing a distinct individuality, are confronted with peculiar prob- ems native to the district, and that in this regard they have an entire mutuality of merest. The underiying theory is that the New England carriers are closely inter- locked with one another by historical, financial, and commercial considerations based upon geography; and that their joint rehabilitation may be best brought about by concerted action, not only as respects relations with trunk line or foreign raU- road connections, but also as respects their, relationship with the New England pub- nL J !k ^^^^tions peculiar to New England have already been set forth; Tqt r. .!'' '^°'^^^^'" ^^"""^ ^^ material' and the great central consuming mar' w I. Kj^ C, : 63763—21 5 M \ 518 INTERSTATE COMMER(^E COMMISSION REPORTS. CONSOLIDATION OK RAILROADS. 519 ^i •1 '' kets; their high proportion of passenger business and density of traffic; their mani- fold junction points, and the expensiveness of terminal operation; their coastwise location and propinquity to Canada; to say nothing of the peculiar financial and political situation. This plan proposes, then, the creation of a New England rail- road corporation which shall take over the New Haven, the Boston & Maine, the Maine Central, and the Bangor <& Aroostook. It is all plotted on map 8. But in order to satisfy the statute as to competition, and aL«o, of course, because it is believed to create a more healthy competitive condition as a whole, the territory of this trans- portation group Ls to remain criss-crossed, as at present, by independent lines. The Boston & Albany would be left as an east-and-west competitor (with possibly, as hereinbefore discussed, an extension to Portland by abstraction of the old Worces- ter, Nashua & Portland line from the Boston & Maine). The Grand Trunk, in the person of the Central Vermont, would still penetrate clear across this territory from the northwestern corner of Vermont down to New London on Long Island Sound. And the Grand Trihik would also continue to operate into Portland as at present. And in addition, of course, all of the coastwise connections by sea would remain in full force and effect. In brief, the group plan for New England revives the policy once pursued under the Morgan-Mellen administration of the New Haven for an almost complete New England railroad system. The advantages from the stand- point of traffic and operation as then contemplated obtain in full force to-day; but the disadvantages which attended and brought about its colossal failure would be stripped away. This plan contemplates no monopoly of trolleys or water power; no exclusive control of steamship lines or of the water front appurtenant thereto; no detouring of freight in order to overweigh the proportion of through joint rates; no prodigal or deceptive financing; and no attempt at corruption of public opinion. Certain advantages of a group treatment of New England are manifest. They may best be considered, first, as concerns foreign relations, that is to say, dealings with carriers outside of New England; and, secondly, as to problems of domestic concern. As to the former, relationship with outside carriers, the outstanding ad- vantage is the preservation of the existing freedom of interchange with connections from every part of the country-. New England has prospered in the past because each and every trunk line has had access equally with all other trunk lines to the New England gateways. They have all enjoyed an equal opportunity, almost as free as by competition of water carriers, to benefit not only from the immense con- suming but from the gathering and distributing systems of these New England roads. By eight gateways, no less than 30 railways west and south, have had free access; and New England merchants and manufacturers have in consequence enjoyed the rivalry of the.-^e different carriers in the disposal of their products. The peculiar need of the trunk lines for westbound loadings, renders them particularly suscep- tible to the offerings of thousands of cars daily all along the line of the Hudson River. This entire freedom of routing is a great boon, and the competition in service which attends upon it is of prime importance. There is also as to rates a responsiveness in the granting of commodity carload ratings, not to be overlooked. What would be the effect upon this existing freedom of routing of an alliance of the two halves of New England with any two trunk Unes, let alone the fact, as already set forth, that this choice might fall upon the relatively weaker ones? What other motive could such foreign connections have for assuming the heavy financial obligation of uphold- ing these New England properties, other than the expectation that they would be able to direct the major part of the traffic over their own rails? Assuredly that would be the motive, and necessarily the effect of any New Haven-Pennsylvania alliance. Despite the legal right of the shipper to prescribe his route, it seems inevitable that the traffic would tend to be more and more canalized. Every possible influence would make for that result, and such influence would be as powerful in any alliance 63 1. C. C. with the Erie or the Lackawanna-Nickel Plate combinations as it would with the Pennsylvania. This objection is decisive by itself alone as commending an endorse- ment of a plan of group independence from any trunk line affiliation whatsoever. Another advantage of the New England plan is that it affords a consolidated power in dealing with all trunk line connections as to divisions of through rates. The pending problem as to such prorating in connection with the recent increases of rates, illustrates the difficulty of effecting these divisions by administrative decree of the Interstate Commerce Commission. The preservation of an open market for trad- ing with connections emphasizes the desirability of mass tactics by all of these ter- minal carriers, which are sulijected to peculiar conditions as to expense. Nothing would contribute more to bringing about a division of through rates on an equitable basis than a wholesome respect among the trunk lines for the consolidated power of a New England group, free to divert its immense and lucrative traffic through any of its numerous gateways. With a well-balanced trunk line competition among the five systems set up by this plan, the advantage attendant upon consolidation is obvious. In the field of foreign relations, the group plan promises also to keep open not only the coastwise routes but the differential lines from Canada. As to Caftada, the experi- ence under the Railroad Administration is conclusive. It was only by constant watchfulness and zeal that the trunk lines were prevented from altogether closing these outlets to the west through which, of course, a diversion of traffic from their own raUs persistently occurs. But of far greater importance, not potentially but actually, is the preservation of entirely open connections by sea. Much has been made of the rivalry of Atlantic seaportr^, and it is perhaps true that the port of Boston would be less apt to prosper were several of its carriers to be brought under closer control by great railroad systems having a major interest in the development of New York. But the coastwi e situation is of equal significance. More than half of the population of New England is located within 25 miles of tidewater, and three-quarters of its population IS resident within 50 miles of the seacoast. For all New England, but particularly for this belt of territory, such a relationship between rates— all-rail rates to the west or south, and rates by rail east out to tide, then on by water— must be maintained as shall keep open the coastwise routes. A recent example is afforded by the output of canners of corn and other vegetables in Maine. Their season's pack in 1919 might go to the Pacific coast either all rail or by a short local haul by rail to Portland and thence by sea. Is there any question that if the New England roads were part of a trunk line system, the rate adjustment would be such as to discourage the short haul to the New England seaport as against the long haul to Chicago? But, on the other hand, given a local New England railroad, with the choice only as between the short local haul to the seaport and the scarcely longer haul to the Hudson River on a prorate ba-is, IS It not likely that a freer adjustment would obtain whereby the coastwise route would enjoy at least equal encouragement with the all-rail haul? Such considerations apply with peculiar force to the maintenance of coal supply. With approximately 35,000,000 tons of fuel annually requirea, it is of vital importance, not only as respects co^t of carnage, but also the chance of congestion, that the sea routes be kept fully alive. This, it is submitted, is far more likely to happen under a New England group plan than under a trunk line affiliation. Another possible advantage of a regional New England consolidation has to do with the fuel conditions territorially. An outstanding disability of these railroads 1.^ their remoteness from a soft-coal fuel supply for company use. The industries of this out-of-the-way region are also utterly dependent upon the carriers for their indus- trial supplies; and an immense volume of anthracite is required for domestic consump- tion. The aggregate tonnage for this purpose alone is huge. Of 326,652 cars received at Boston & Maine gateways in 1919, about 123,000 were loaded with coal. All-rail w I, C. C, 520 INTERSTATE COMMERCE COMMISSION REPORTS. CONSOLIDATION OF RAILROADS. 521 rates to the western gateway's of southern New England rose above $3 a ton after the war. Rail rates from the southern mines to tide are nearly as high, and to this figure the ocean rate had to be added. These ocean rates before the war, about 00 to 75 cents from Hampton Roads to Bo.^ton, rose to $3 a ton and are now about $1.80. Under such unusual circumstances and even at all times normally, southern and western New England is almost entirely dependent for its company fuel upon all- rail carriers. Water rates are highly fluctuating and the higher the water rate the greater the encouragement to all-rail carriage. Long-haul through carriage in solid trainloads, and particularly service at cost without the necessity of publishing rates, the coal being treated as company fuel, might result in substantial economies. Yet it should be understood that such a fuel line would be serviceable only for southern and western New England, inasmuch as the normal course for fuel in Elaine and the vicinity of Boston is by rail and tide. A larger proportion of company fuel is thus all rail for the New Haven than for the Boston & Maine. The exact line of demarkation between all-rail and tide territory varies )wth as to location and according to the movement of charter rates. The Boston & Maine for a part of its all-rail coal, however, draws from the northern Pennsylvania field by way of the New York Central. But the New Haven generally arranges better deliveries over the Pennsylvania via the New York gateway or by the Baltimore & Ohio through Maybrook. Thus it appears that no single fuel line at present serves all New England; and not infrequently the roads have found it desirable to scatter their risks by spreading their contracts, in order to insure against change of market conditions or interruptions from strikes. In general there appears to be, even underl>4ng the abnormal tendencies effected by the war, a normal and economic tendency to substitute all-rail for a broken rail-and- water service. The decline of Atlantic coastwise traflBc is a case in point. New Eng- land perhaps may safely anticipate important developments in this direction, and the zone throughout which all-rail coal may successfully compete with tidewater coal will correspondingly broaden out as the years go by. For 1919, 80 per cent of the bitu- minous commercial fuel handled by the New Haven moved all rail. For anthracite 95 per cent so moved. Nor does this include tidewater movement foi; port consump- tion, a considerable proportion of which moved all rail. Sulistantial reassertion of prewar conditions will doubtless occur, but it is also likely that the pendulum will never swing as far back as before. All of which emphasizes the desirability of planning for a company and a commercial fuel line for this district. The two most accessible sources of soft coal are the Clearfield region lying north and northeast of Pittsbui^h, and the Fairmount and Connellsville district lyiag mainly due south of Httsburgh. The location of these coal measures is indicated roughly on map 8. As for the Clearfield region, it is tapped either by the Pennsylvania or New York Central systems or by the Buffalo, Rochester & Pittsburgh line (see map (J), which latter road traverses it almost from end to end. Coal from this Clearfield region, necessarily reaches the western New England gateways by nearly all of the trunk lines, but perhaps the lai^est amount is now brought from the Buffalo, Rochester & Pittsburgh and over the rails of the New York Central, principally to northern New England. The other soft-coal region, lying in southwestern Pennsylvania or northern West Virginia, is reached principally over the rails of the Baltimore & Ohio and the Western Maryland. These roads, as already describe^l in connection with these properties, deliver the coal either to the Pennsylvania or the Philadelphia & Reading system for carriage by way of Harrisburg and Reading. The route is shown on both maps 4 and 6. This coal is then traiisported to the New Haven rails by way of the bridge lines of the Lehigh & Hudson or the Lehigh & New England. The former has already been described (page 506, supra). It serves a number of trunk lines interested iu this business in common. As for the Lehigh & New England, the northerly of the two bridge lines shown on map 8, it cuts across the northwestern comer of New Jersey 63 1, c. e. to a connection at Campbell Hall with the Central of New England ai\d the Pough- keepsie bridge gateway. This road at present is controlled by the Lehigh Coal & Navigation Company, closely affiliated with the Central Railroad of New Jersey and more or less interlocked with it. But it is also an independent originating coal road as well as a bridge line. Its tonnage is highly competitive with that which moves over the parallel bridge line of the Lehigh & Hudson. The competition between these two bridge properties should by all means be perpetuated. The Lehigh & Hudson, however, is at present interlocked in ownership with the Lehigh & New England by reason of the fact, as indicated on page 506, that the Lehigh Coal & Navi- gation Company, controlling the Lehigh & New England, together with the Central Railroad of New Jersey, actually owns a majority of its shares. This interlocking relationship should be broken up if true competition is to be promote'stem. The needed competition of all-rail coal routes would by this means be promo te-ing throughout the entire extent of the southeast. Beginning in the nineties, its lines were steadily extended until at this time it reaches every important section, with the sole exception of parts of Florida. Its system is in nowise separable in interest into an eastern or a western half; but its important through lines connect all of the extremities of this vast territory. 63LO.C. A co.Tiplete identity of interest between the eastern and the western halves of the south is not quite so apparent with the next great existing combination, that of the Louisville & Nashville and the Atlantic Coast Line. Historically these two halves remained entirely distinct until 1902; when, as a result of a speculative coup, the Louisville & Nash\ille was acquired through stock ownership by the Atlantic Coast Line. Since this time these two properties have evolved, not so much as allies, as integral parts of one and the same great sj^stem. The first appearance of rank arti- ficiality in this relationship has to a considerable degree yielded place to an identity of interest, particularly arising from the intensive development in southern Georgia and Florida. For all this region there is the same need of free movement for the long haul, either east or west of Atlanta, that is manifested in the great diagonal currents of traffic in the Southern Railway system. To resolve this existing combination into its original constituent parts before 1902, namely, once more to divide the united system into an eastern and a western subdivision, would not contribute to the free movement of traffic, nor would it preserve existing routes and channels of trade, as the statute contemplates. It is clear that for this second great existing combination, as well as for the Southern Railway, it must be regarded as having established its right to unity as it stands. Tne remaining large systems in the southeast are those of the Illinois Central and the Seaboard Air Line Railway, respectively. Is there any identity of interest between these widely separated properties, and is a like disposition manifested b>' either to extend across and bind the two halves of the south more closely together? That is an important matter to decide. For upon it will depend the choice between four, or three, independent systems in the southeastern territory. To unite these two, would provide only three great consolidations. To leave them separate would require the constitution of four. The location of the backbo les or stems of the principal southern systems is shown by map 27. This brings out rather strikingly the manner in which the eastern and the western halves of this region are indissolubly bound together by the diagonal route, which meet and cross one another at Atlanta. A great parallelogram is depicted with Richmond, St. Louis, New Orleans, and Jacksonville at the four corners— Cin- cinnati and Louisville being midway of the northern side. Three at least of the four southern systems pretty completely cross this territory competitively, either from Richmond toward New Orleans, or from Jacksonville to the northwest through Atlanta. Thus there are the two main Southern Railway stems as diagonals of this territory; and against them there are the competitive lines of the Louisville & Nash- ville, although the Atlantic Coast Line division makes a somewhat wider sweep toward the sea, leaving the Southern Railway as distinctly an interior system. Such , indeed, the Southern Railway was planned to be. And in thus refraining from development of branches and feeders in Florida, there is evidence of a division of the field with the Louisville & Nashville-Atlantic Coast Line, so richly represented in the Flori.la peninsula. The Southern system and that of the Louisville & Nash- ville-Atlantic Coast Line are the most comprehensively developed, and the remaining two systems, under this plan are substantially more localized. The Illinois Central is unsurpassed in its possession of a great north-and-south direct trunk line, but it is yet somewhat handicapped in its approach to the seaboard at Savannah over the controlled lines of the Central of Georgia Railway. The Seaboard Air Line (map 13) on its part gives the appearance of overextension, being relatively so thin in feeders. But its main stem from Richmond through Savannah to Tampa is a fair parallel and competitor for the eastern stem of the Atlantic Coast Line. Summarily therefore this layout discloses a fairly comprehensive competitive situation except in one r^ard. Between almost all of the strategic points there are two fairly evenly bal- anced systems except as against the Illinois Central main line from Chicago to New 63 1. C. C. I* 1 •iw 538 INTERSTATE COMMERCE COMMISSION REPORTS. CONSOLIDATION OF RAILROADS. 539 M Orleans. That is unparalleled to New Orleans. The nearest direct competitor is the line of the Mobile & Ohio (in the Southern system) to the rival port of Mobile, and, as will hereafter appear, this property is hardly integral in the Southern Railway as an interior system. Its final disposition is one of the knotty problems presented by the south. The comparative financial status of the six learling southeastern railways, as sepa- rately reported to the Interstate Commerce Commission, for 1017, is as follows: Carrier. \ tlantic Toast Line IlUnois retitral Louisville The composition of the important Cincinnati-New Orleans line within the South- em Railway system (map 10) is of peculiar interest as illustrating the present intri- cacy of corporate structure in the southern states. It also bears upon the problem-, oi federal incorporation. At the same time it distinctly emphasizes the integral. 63LC.C. relationship within a system between the thin long-haul lines and the gathering- branches and feeders. For these reasons a brief review of the structure of the so- called Queen & Crescent route is pertinent. This is so succinctly stated by Presi- dent Harrison of the Southern Railway that his communication is incorporated here- with: The railroad from New Orleans to Meridian is owned by the New Orleans and Northeastern Railroad Company, a Louisiana corporation. The voting securities of that Company consLst of 60,000 shares of common stock, of which the Southern Railway Company owns 59,693 shares, or 99.5 per cent of the total issue. The railroad from Meridian to Chattanooga is owned by the Alabama Great Southern Railroad Com- pany, an Alabama corporation. The voting securities of that company consist of 224,207 shares of stock, ordinary and preferred, of which the Southern Railway Company owns 126,611 shares, or 56.5 per cent of the total issue, this holding being pledged by Southern Railway Company under its First Consolidated Mortgage securing bonds due in 1994. The railroad from Chattanooga to Cincinnati is owned by the City of Cincinnati, and is leased for a term to expire in 1965, to the Cincinnati, New Orleans & Texas Pacific Railway Company, an Ohio corpora- tion. The voting securities of that company consist of 29,900 shares of common stock, of which 20,493 shares, or 68.5 per cent of the total issue are owned by Southwestern Construction Company, a New Jersey corporation. Southwestern Construction Company is merely a holding company, with an outstanding stock issue of one share for each share of CNO&TP stock owned by it. Of the 20,493 outstanding shares- of Southwestern Construction Company, 12,986 shares, or 63.4 per cent of the total issue, are owned by- Southern Railway Company and The Alabama Great Southern Railroad Company, the former owning' 3,235 of such shares and the latter 9,751 shares. For thirty years, or since 1890, these three roads have been parts of the system known since 1S94 as the Southern. They have been linked up under the trade name of "Queen & Crescent" to form a through line from Cincinnati to New Orleans by an English syndicate headed by Baron Erlanger. This syndicate,, failed to make a li\ing, and, in 1890, sold out most of its holdings to the E. T. V. & G. In their present relation these three roads are necessary to the complete service the Southern gives to the South in respect to traffic moving between the South and the Ohio River, and in that relation also they are the direct and only effective competitors with the L. & N. and I. C. The traffic they handle has origin or destination largely upon the lines of the Southern proper, east of the Alleghanies and they owe- their recent success to their affiliation with the Southern. Financially, they have shown better results than the Southern proper because the Southern is carrymg the burden of unprofitable branch lines and terminals, of which they are free. As these branch lines and terminals develop much of the traffic handled on the Cincinnati-New Orleans mainline, the companies owning that mainline get the benefit of whali. is a disability to the Southern proper. So true is this that if the Southern traffic should be withdrawn, e. g. from the C, N. O. & T. P., that line would again dry up as it did under the Erlangers unless some equally fertilizing relation was substituted. No other such relation is possible upon the present railroad map if competition is to continue. On the other hand, while they complement, these lines do not compete with any of the lines of the Southern proper. The C, N. O. & T. P. is a traffic bridge through a mountainous country, producing little tonnage itself. It has been largely double tracked to enable it to handle the traffic the Southern produces and deliversr to it. The same is true of the N. O. & N. E., which depends upon the independent investment of the- Southern of $15,000,000 in the New Orleans Terminal. This statement is true also, but in less degree, ot the A. G. S., which produces relatively more traffic itself. It is probable that the greatest public interest in respect to these three railroads would be accomplished- by a financial consolidation of them with the Southern proper— thus to butter more evenly the earnmgs and the burdens. The possible interest of the Southern Railway in the Carolina, Clinchfield & Ohio i» discussed in connection with that property (page 550) and the conclusion is reached that it properly belongs in that system although a sufficient general interest of all the roads alike has been therein demonstrated to warrant the reservation of certain running rights over the Carolina, Clinchfield & Ohio as a joint bridge for common entry to Carolina territory. The dependence of the Seaboard Air Line Railway, in other words, serving this territory, is so considerable that no exclusive policy by the South- em or any other single railroad appears permissible. Certain recent changes in the status of the Southern Railway lines in southeastern. Georgia call for slight modification of the railway map. The main line of the Georgia. Southern & Florida from Macon to Jacksonville (map 10) has been so improved phys- ically that the policy has been pursued bv the Southern Railway ofgradually diverting 63 I. C. C. : I 1 542 INTERSTATE COMMERCE COMMISSION REPORTS. CONSOLIDATION OF RAILROADS. 543 \i I ■ftl' all of its traffic to and from Jacksonville to this line. The policy also is pursued of making this the only entrance into Jacksonville, and the only connection with the large terminal investment in the St. John's River Terminal Company. This accession of interest in the Georgia Southern & Florida route is slowly tending toward probable abandonment of the existing traffic arrangement, indicated by the dotted line on the map, between Savannah and Jacksonville. The northern half above Jesup has already been relinquished, and it is proposed shortly to give up also the remaining trackage, which is over the Atlantic Coast Line rails from Jesup into Jacksonville. The New Orleans Great Northern Railway operates an independent property, almost 300 miles in length, extending up to Jackson, Miss. By trackage it is admitted to New Orleans. Seemingly it links up with the Alabama & Vicksburg, which cuts across the state of Mississippi from Meridian west. To allocate these little properties to the Illinois Central would apparently put an end to north-and-south competition; and in the Illinois Central system there would be no connection afforded on the east. Similarly there is no physical connection with the Louisville & Xashville. Thus by a proceas of elimination, these little properties seem foreordained for inclusion in the Southern Railway; and it is therefore recommended that they be thus merged. Tlie Louisville & Nashville and Atlantic Coast Line railways, as united in 1902, under the conditions already set forth, constitute a second system throughout the south which admirably matches the Southern Railway. It differs from the Southern prin- cipally through its ramifications in Kentucky and Tennessee and through its network of lines in southern Georgia and Florida. It also, like the Southern Railway, is well fitted to stand largely unchanged under this plan for federal consolidation. At one point, however, it is markedly weak, due probablv to the independent evolution of its two great wings, eastern and western. This defect is the lack of connection afford- ing through routes between north and south across the whole of middle Georgia, be- tween Atlanta and Waycross. The first point concerning its recreation is the bridging of this gap. The Atlanta, Birmingham & Atlantic Railway, depicted on map 11, is the largest single property in the southern states which is still independent of tlie creat systems. Its 638 miles of line were completed in 1910, extending from Brunswick, Ga., north- west to Atlanta and Birmingham, Ala. The physical plant has never been utilized to capacity, and it has always suffered from the fact of its independence and lack of interchange. Its history is highly significant, inasmuch as it explains why so consid- erable an enterprise was projected in a territory already so abundantly supplied with railroads in every direction. 'The railroad was an outgrowth of a terminal enterprise. Fine properties, well located strategically, were acquired in anticipation of the entrj' of the Seaboard and Louisville & Nashville into Atlanta. Subsequently, after the options had been taken, it appeared that these railroads had already made other plantn. This left the promoters heavily obligated to northern investors for the purchase of admirable terminals for which there was no railroad. The only way to save the situa- tion, therefore, was to construct a railroad to serve the terminal. Such was the begin- ning of the enterprise. The construction, however, once determined upon, was carried through most completely. The road is well built, modem in every respect, with excellent terminals, comparatively heavy rails (80 pounds for the most part), and with modem steel bridges, capable of carrying heavy loads. It is difficult to justify the enterprise originally; and its subsequent bankruptcy and reorganization were the inevitable consequences of the construction of so high-grade a line through a rather thin territory, gridironed in every direction with competing lines. A source of weakness also was the failure to extend the line to Jacksonville, although it was expected to undertake this construction from "Waycross south just before the war. 63 1. C. C. Despite its history, a very considerable value attaches to the Atlanta, Birming- ham & Atlantic Railway. This arises from its relation to the larger systems round about, particularly the Atlantic Coast Line and the Louisville & Nashville. A -comparison of maps 10, 11, and 12 evidences an apparent division of the territory of Georgia, Alabama, and Florida, historically. The Southern Railway is very inadequately represented in southern Georgia, and does not extend south of Palatka. The Central of Georgia system (map 12) gridirons th er the New York Central lines. Both the great southeastern systems therefore are Acquiescent in the matter of this relinquishment of their joint investment in the^ Monon Railway. As to other ndnor additions to the Louis\dlle & Nashville- Atlantic Coast Line 8> s- tem, there is only one further suggestion. This has to do with the Winston-Salem branch of the Norfolk & Western. In pursuance of the general policy to adhere as -strictly as may be to the established boundary of southeastern territory, following the main line of the Norfolk & Western Railroad, this branch should be transferred to a 63 1. C. C. 546 INTERSTATE COMMERCE COMMISSION REPORTS. CONSOLIDATION OF RAILROADS. 547 ^'^■■■^l southern system.'* As shown on map 11, it extends from Roanoke southward to a connection at Winston-Salem with the so-called Winston-Salem Southbound Railroad. This latter road is at present jointly owned by the Atlantic Coast Line and the Norfolk & Western. It is recommended that this entire line up to Roanoke be merged in the Atlantic Coast line system. Finally, a matter of general interest, corporatively, concerns the entire Louis\ille & Nashville- Atlantic Coast Line system. This is the tenuous connection by which the two operating halves of this great system are bound together. The Atlantic Coast Line Railroad, since its original purchase of the Louisville & Nashville in 1902 ha» continued its control by the ownership of a bare majority of the capital stock. In 1919 it held $36,720,000 of the outstanding shares of the Louisx-ille & Nashville Railroad. This situation was forced upon the Atlantic Coast Line in 1902 by a threat of the bankers in control to dispose of the controlling block of the Louis\ille& Nashville stock to the Seaboard Air Line. The then business of the Plant lines in Florida, now incorporated in the Atlantic Coast Line Railway, was di\-ided about half and half each side of the mountains to the north. The Loui8^ille & Nashville in the hands of the Seaboard, a competitor, might close the western outlet to the Atlantic Coast Line. The only alternative was to take the stock and pay the price. The investment has turned out to be a fortunate one; but that does not warrant indefinitely a continuance of this tenuous connection. The temptation can not be resisted to recommend there- fore, in so far as it falls within the scope of this consolidation plan, that a complete merger by exchange of securities shall supplant the existing arrangement. The continued independence of the existing Seaboard Air Line Railway merits attentive consideration. Its financial condition does not permit it to support further additions which are not at least of equal contributing strength. Map 13 shows that at present the road is unduly spread out and that its various arms westward are en- tirely disconnected. These arms, on the other hand, extend somewhat entreatingly toward a connection with some western system, notably the Illinois Central. And a combination of the two properties, as already worked out in the Oldham plan, gives a general comprehensiveness to the combined group, quite analogous to the reach and scope of the other two great systems. There are substantial reasons commending such a merger. Especially would advantage follow in view of the possible inclusion of the Frisco line from Memphis to Binhingham in the Illinois Central. There would thus be set up, over the lines subsequently recommended in this plan for inclusion in the Seaboard, an in\'iting route between Florida and the west. Yet, assuredly^ such a merger of the Seaboard and the Illinois Central would be a radical and forced alliance. The Central of Georgia being already controlled by the Illinois Central, the effect of adding the Seaboard would be to abolish competition entirely at Americus^ Ga., Huntsville, Ala., and a number of other smaller places. The Seaboard and the Central of Georgia are to-day strong competitors at Savannah, at Albany, Columbus, Athens, and Atlanta in Georgia, and at Montgomery and Birmingham, Ala. The merger would abolish competition, and it would not follow established routes of com- merce. For the Atlantic Coast Line is to-day the preferred connection with the Central of Georgia on traflBc from the west; and the Atlantic Coast Line and the South- em Railway are preferred connections on eastern traffic. The Seaboard Air Line is not at present a preferred connection of either the Illinois Central or the Central of Georgia Railway. Nor would such a merger contribute to the distribution of coal, since both the Illinois Central in Alabama and Tennessee and the entire Seaboard system are lacking in coal development. For these and other reasons the alternative is elected of retaining the independence of the Seaboard Air Line as a fourth system in the southeast. This recommendation is made with some misgivings; but it is sCf. the policy laid down in the Bhufield Shippers A$90. t. N. dt W. Ry. Co., 22 1. C. C, 519. 63 I. C. C. apparently compelled as a compromise with the situation. *Such being the case, the Seaboard system must be strengthened wherever that is possible without committing, lines essential to the general situation to its slightly precarious charge. And yet there are certain elements of stren^h in the Seaboard Air Line which, if it can be built up sufllciently to enable it to survive in competition, may render it ultimately an important factor in the development of the southeast. It has a highly diversified traffic. It enjoys a long haul on rapidly growing business in Florida. And the abstention of the Southern Railway from Florida development leaves the Seaboard with only one competitor, the Atlantic Coast Line, for this lucrative and rapidly growing business. Given a coal supply from the north by participation in the affairs of the Clinchfield property, and the Seaboard may well establish itself finally as a great railroad. But if its strength be dissipated in overextension without sufficient originating lines, this future may be conceivably be jeopardized . Such recom- mendations for addition, therefore, as ar? herein made are essentially conservative. The Georgia Southern & Florida Rg-ilway operates about 400 miles of line in south- ern Georgia and northern Florida. It extends from Macon on the north to Jacksonville and Palatka, as shown on map 10 by the dotted line. It was constructed in the nineties, largely with reference to orange culture, but the second great freeze drove this business farther south, and as a local proposition the line seems somewhat to have languished. It is controlled at present by the Southern Railway through a majority stock ownership, together with $2,000,000 of bonds. It would accord appar- ently with the announced policy of the Southern to abstain from local development in Florida to withdraw from a part of this investment. The Southern Railway, as elsewhere described, is most profitably utilizing the main line of this railroad. But the southern branch from Valdosta, Ga., to Palatka (map 10) quite appropriately fits into the Florida network of lines in the Seaboard system. Negotiations were opened some years ago for this transfer, but the Seaboard at that time was unable to arrange the financing. A considerable flow of through traffic has been recently forwarded by the Seaboard over this line, thus indicating that it is a natural part of its system. The Seaboard has manifested a further interest in the entire Georgia Southern & Florida Railway (dotted on map 13). This would carry them up to Macon and inci- dentally would tie together the two dissociated western arms of the Seaboard system. Taken in connection with the Atlanta, Birmingham & Atlantic (also dotted on map 13), a through line up to Birmingham might be provided. Were the Seaboard finan- cially strong enough also to take on the Memphis-Birmingham Frisco division, almost an air line from (Kansas City) Memphis to Florida could be set up. But, as elsewhere stated in connection with the Illinois Central and the Frisco, it is doubtful even whether as strong a system as the Illinois Central should be permitted to break up the long-standing interest of the Frisco in this route. The Seaboard may still enjoy the interchange of traffic with this route, but it seems inexpedient to risk overexten- sion until its finances have become more substantially consolidated, as it is hoped with the present rate of growth they may in time become. It is furthermore recommended that the Durham branch of the Norlolk & Western Railway (shown on map 13), extending from Lynchburg south, be merged in the Seaboard Air Line system. This is analogous to the disposition of the other Winston- Salem branch (page 545, supra). At Durham it connects with the Seaboard, the Norfolk Southern, and the Durham & Southern. This last (shown on map 13) is one of the so-called Duke lines, and interchanges almost exclusively with the Seaboard, The transfer of the Durham branch from the Norfolk & Western would conform to the general plan of strict delimitation of southern rate territory, and it would also effect a material saving of tmileage on all traffic coming from the west either by the Norfolk & Western or the Chesapeake & Ohio Railway. The net result as to the Virginia gateways would be to give access for the Southern Railway to all of them except 63 1. C. C. ^L 548 INTERSTATE COMMERCE COMMISSION REPORTS. CONSOLIDATION OF RAILROADS. 549 W Roanoke and. Petersburg; to give the Atlantic Coast Lino access to every Virginia .gateway except Lynchburg, and to let the Seaboard into all of them except Roanoke. Coincidently all these southern systems would be afforded satisfactory interchange points with all three of the principal Chesapeake routes to the west. The Atlantic- Coast liine perhaps would be slightly favored because the Roanoke gateway would afford a through route to the east by way of the Norfolk & Western to Hagerstown. But this advantage is a necessary feature of the situation. The Seaboard Air Line would also profit from a connection by trackage or otherwise between Spartanburg and Columbia, S. C. Without this link, as map 13 shows, the southern half of the property would not be in position to benefit by any connection with the Clinchfield enterprise, soon to be discussed. This link would, however, assist substantially in the development of coal business toward the south and of long- haul business from Florida; possibly some day to Cincinnati, as elsewhere described. The Illinois Central occupies a unique position among the carriers of the country. Traversing one of the most fertile regions on the earth, confronted by no physical obstacles of grade or alignment, and rigidly confining its activities to the cultivation of Its native territory, it has prospered accordingly. In the rare instances where it has acquired control of other lines, the choice has been so well exercised as to con- tribute strength to the parent company. The net operating income in percentage of the investment in road and equipment for the typical year 1917 clearly reflects its T^elative prosperity and the general strength of all of its parts. For the Illinois Central Raihx)ad this return for 1917 was 5.17 per cent. For the Central of Georgia Railway it was 4.62 per cent, and for the Yazoo & Mississippi Valley it was 6.05 per cent. It is evident that one has to do here with a system which is industriously pursuing its -own best ends and contributing thereby to the upbuilding of the country. It is competent to stand alone and has an average return which approximates closely the average return of 5 per cent which it is the endeavor of this consolidation plan to make general for all of the great systems. Neither from an operating, traffic, or financial standpoint does there appear to be a nacessity for disturbance of the existing situation. Such modification as is suggested is merely in detail. The only broad question, which has already been decided in the negative, is as to whether the superflous strength of this existing system should be used through merger to average up the Seaboard Air Line status. The Illinois Central system at present, a-? shown by map 12, is something of a hybrid. It is a north-and-south trunk line; but between Chicago and Omaha it is also an east- and-west stem. It operates in the southeast, in trunk line territory, and in the western field. Obviously it can not be cut in halves at the Ohio River in order to conform to the policy adopted for the other southeastern roads. It must remain as a trunk line to the Gulf. Serious question is raised, however, as to its continuance under a consolidation plan, as practically a stem line in the western territory between Chicago and the Missouri River. It is urgently represented that this western stem should l(^cally be amputated and merged in one of the other western transcontinental systems. The practical elimination of Omaha as an open trading center for traffic interchange tends to confirm this proposal. The already predominant interest of the Union Pacific Railroad in this property commends the suggestion that a transfer of this entire western division to the Union Pacific would scarcel\- disturb the existing relationships. 1 1 will be recalled that the Union Pacific control was originally acquired by Mr. Hirrimin with the expectation that it would afford him an independent entry into Chicago for his great transcontinental system. To be sure, it was never utilized exclusively for that purpose, because of the complications which developed at the proposal to change the rdle of the Union Pacific east of Council Bluffs to a competitor rather than a connection with its neighbors on the east. During 1917, 63 1. G. C. the Union Pacific delivered 13,375 carloads of freight at Council Bluffs to the Illinois Central, and received from it 5,692 cars. Comparison with other roads, as afforded by the general table on page 573 indicates that the traffic interchanged with this road was surpassed only by the North Western and the St. Paul. Obviously this western •division is of very great importance. There is a heavy- movement of lumber, coal, and grain. So important a channel of commerce is it, that the burden of proof assuredly rests upon the proposal to change. Among the objections to dismemberment of the Illinois Central the historical con ■aderations are of weight. The line into Sioux Falls was the first railroad west of Chicago to reach the Missouri River. During all the years since intervening, the Illinois Central has built itself into the traffic conditions in this region, and it is a serious matter to uproot the established relationships. Another historical considera- tion is disclosed by map 12. The main line traversing Illinois is not, as commonly supposed, the road into Chicago. That was subsequently built and was always known as the Chicago "branch." The "main line" authorized in the original charter ran from Clentralia, 111., due north through Freeport up to Madison, Wis. This "main line" is largely dependent for its through traffic upon tonnage received over the western division. For naturally none of the western lines into Chicago would consent ito short-haul themselves on traffic destined to the Gulf. This "main line," to be jsure, would still be largely utilized for coal destined to the northwest. But it would be substantially dried up by amputation of the western arm. Furthermore, if thus transferred, the inclusion of this line to Council Bluffs would practically duplicate the facilities already possessed by the different systems, as enlarged under this plan. Uniting the Chicago & North Western with the Union Pacific disposes of any further need of another line between Chicago and Council Bluffs (map 15). Even worse duplication would arise from incorporation of this line in the Burlington system (map 16); particularly as this division of the Illinois Central almost completely parallels the Chicago Great Western. It is true that the addition would let the Bur- lington into eastern South Dakota, and possibly some more detailed segregation of this western Illinois Central division might be worked out, assigning different parts AS has already been done in various cases. But by and large it is recommended that no change take place in so far as the stem from Chicago to Council Bluffs is concerned. The Memphis-Birmingham division of the St. Louis-San Francieco Railway is one of the great arteries of commerce in the south. The old Kansas City, Fort Scott & Memphis line, by these rails, handled a very lucrative business in the supply of foodstuffs to the southern states and the return carriage of coal and steel products to the western country. It is a serious matter to recommend any interference with a property which has so thoroughly established itself in the trade currents of any region. Yet this extension of a western road, east of the Mississippi, into the heart of the southeast, xaolates the general principle already laid down, of drawing rather strictly the boundaries of consolidation territory. Whatever disposition is made, however, must fully protect the route and assure its continued upkeep and development. The Birmingham division of the Frisco could be utilized, as eleewhere eet forth, in several ways. The Seaboard system evidently covets it, to complete a through line to Jacksonville, but this claim has been rejected largely on financial grounds (page 546 ). The other disposition of it, and one which is recommended by the best authority among unprejudiced railway executives, is that it be assigned to the Illinois Central system. Consideration of map 12 demonstrates that for three reagons it should be thUg placed. The Illinois Central is already dependent upon this Frieco line, as shown by map 12, from Jasper into Birmingham. Also, the inclusion of this division would take care of the Illinois Central stub at Aberdeen Junction. The Illinois Central, moreover, has the financial strength to support and develop the line. There is one objectionj however, which, were the Seaboard system financially stronger, mi^ht 63 i: Ci C. ' 63763—21 7 It I I 550 INTEBSTATE COMMERCE COMMISSION REPORTS. CONSOLIDATION OF RAILROADS. 551 I ;i turn the scales. The Illinois Central has, in fact, another competitive route over is own lines up to St. Louis. And it would preserve competition more fully were these two competitive routes between the packing-house centres and the south to be kept independent of one another. But conformably to the best expert opinion, it seems that the Illinois Central on the whole could take better care of the line than anyone else, were it to be transferred. As against the foregoing proposal, it should be borne in mind that high-grade fast through service from Kansas City to Birmingham and the southeast generally passes in large volume over this line. The return movement of company fuel for the Frisco system, and of a large volume of the products of the Birmingham district rolling mills — rails, angles, bars, bolts, spikes, and all other products manufactured from iron — ^is very heavy. The division is one of the best revenue-producing units, both gross and net, in the Frisco system. It is \irged that the Illinois Central already has a good line from the north into Birmingham through Martin, Tenn., and really does not need the other inlet. The important point to consider is the effect upon the through movement of traffic, of breaking up this route. Of course it would have to break somewhere between Jacksonville or Savannah and Kansas City, in any event. But if the greater volume of it stops or originates in the Birmingham district, there would seem to be good ground for the contention that the through route from Kansas City to Birmingham should remain intact in the hands of a single management. The Illinois Centtal has so far built the Yazoo & Mississippi Valley road (map 13) into its system that to recommend any transfer would be manifestly prejudicial to the parent system. A competing line might be set up, by transfer of this property to one of the Gulf systems across the river, for example, the St. Louis-San Francieco; and this proposal has been made as a possible plan. But, on the other hand, the Yazoo road; with its many branches and feeders, must be treated as an originating property, fitted for attachment to a strong through line: and the established relation- ship is therefore recommended for continuance. The only other addition to the Illinois Central system is the Tennessee Central, affording entrance into Nashville map 13): and the Gulf & Ship Island, which more naturally attaches to this system than to any other. The Carolina, Clinchfield & Ohio Railroad, although operating only 291 miles of line, is so situated strategically in its relation to the southeastern territory, and par- ticularly to the coal supply, that its disposition under a national consolidation plan merits most careful consideration. It is at once a bridge line and also an almost indispensable fuel line for the south. As a bridge it traverses the rugged mountain region which divides the Ohio Valley above Cincinnati from the southeastern piedmont and seacoast belt of the Carolinas and Georgia. The northeast-southwest trend of the Allegheny range affords a nimiber of gaps or openings for the lines which follow the general direction of the mountain ridges. The situation is beet depicted on map 10. The Norfolk & Western, for example, finds its way naturally in souUi western Virginia through the gap at Roanoke down to a connection with the Southern Railway at Bris- tol, then on to Knoxville, Chattanooga, and New Orleans. But an impenetrable wall or ridge extends along almost the entire western boundary of Vii^nia, broken only by the Chespeake & Ohio passage at Covington, and the Norfolk & Western which, as above described, slips through the gap west of Roanoke. South of Roanoke the impassable barrier, lying south of the Norfolk & Western line as far as Bristol, again effectively shuts off all connection between north and south at right angles to the trend of the ridge. And toward the southwest again, north of Asheville, the long stretch of the Unaka Mountains extends down into northern Georgia. This Allegheny barrier, running the whole length of the western boundary of North Carolina (map 10 again), is penetrated into Tennessee by only two lines. One is the Southern Railway line 63 1. C. C. by Paint Rock, above Asheville. This is an important link in the great Southern Railway system. The Carolina, Clinchfield & Ohio is the other bridge line. Its location is shown on maps 10, 11, and 13 in relation to the other carriers. It is not only independent, but it cuts clear through both the Carolina-Tennessee ridge, known as the Iron Mountains and then goes on up to the northwest and penetrates again the parallel barrier between Virginia and Kentucky. In other woi-ds, it cuts clear thi ough all the intervening ridges, occup>ing perhaps the only available location for a direct through line between the uppar Ohio Valley and the Carolinas. Not only does it entirely penetrate this otherwise almost impassable country, but it does so with a high standard of construction and easy grades which fit it for the carriage of an immense tonnage. Consequently, the line, because of its strategic location, is essential in many ways to the successful operation of a number of adjoining systems. The second dominant feature of the Clinchfield property is its relation to the coal supply of the southern states. The coal measures of the territory of eastern Kentucky western Virginia, and northeastern Tennessee constitute the supply primarily for the entire southeastern territory. This is true not only of the company fuel needed for railroad purposes, but also for the fuel supply of the great industrial development in recent years of the Carolinas and Georgia. The Birmingham district lies so much farther west that it need not be considered except as competitive in parts of Georgia. The Central of Georgia R^lroad is said to have only one coal operation on its lines. The Illinois Central has none in either Alabama or Tennessee. There are no coal measures whatsoever in the territory of the Seaboard Air Line, except through its entrance at long range into Birmingham. But the recent participation of the Louis- ville & Nashville and of the Southern Railway in the development of these Kentucky Virginia, and Tennessee coal fields is of the utmost importance. The interest of the Louisville & Nashville in this region has to do largely with shipments toward the northwest. The location of these lines, shown on map 11, which tap the so-called Harlan and Hazard fields in southeastern Kentucky, demonstrates that their service- ableness lies in the direction of carriage away from rather than into the south. Cer- tainly the Louisville & Nashville is dependent upon a very roundabout route via Atlanta to a contact with the Atlantic Coast Line at Augusta. The demand, in fact for the Louisville & Nashville coal from the direction of the Ohio Valley has increased 80 phenomenally as to tax the facilities of that railroad to the utmost. On the other hand, the interest of the Southern Railway in the development of the coal fields necessary to supply the phenomenal growth of manufactures throughout the piedmont belt is manifested on map 10 by the lines which extend to the boundary between Virginia and Kentucky and which penetrate Kentucky just west of the extreme western tip of Virginia. But this company, unlike the Louisville & Nashville, is primarily concerned in the carriage of this coal to the southern states, the gateway being by way of Paint Rock, just north of Asheville. As the map discloses, the Paint Rock gateway also affords the only connection over its own rails between the eastern and western wings of the Southern Railway system, north of Atlanta. There is only one other railroad operating in this region. This is the Seaboard Air Line. Having no coal development whatsoever on its own lines, it in turn is rendered entirely depend- ent upon its neighbors for its own fuel supply as well as the need of its industries. The foregoing general description may now serve to elucidate the important rdle assumed by the recently constructed Carolina, Clinchfield & Ohio. Both as a bridge, affording connection to the railways north and south of the barrier, and also in its relation to the coal supply of many of its neighbors, it is almost indispensable. Its interest to the Southern Railway, shown on map 10, lies in the fact that it affords a much more direct carriage from much of the coal territory opened up by this railroad than is possible by the roundabout shipment southbound via Paint Rock and Asheville 03 I. C. C. It 552 INTERSTATE (*0M MERCK (^MMISSIOX REPORTS. into the Carolinas. And, in the opposite direction, northbound, the Southern might conceivably find it very advantageous to have another through route opened up from the ('arolinas into the Ohio Valley other than away around through Knoxville and Har- riraan Junction up to Cincinnati. The Clinchfield might thus serve more effectively to bind the widely separated halves of the Southern system together. The Clinch- field moreover is the short route between the Carolinas, and north of the Ohio River fast of a line from Portsmouth, Ohio, through Columbus to Detroit; whereas Paint Rock, for miscellaneous traffic, is the short line to points vest of the zone thus defined. But this miscellaneous traffic is a negligible part of the whole, so that incorporation of the Clinchfield in the Southern system would by no means put an end to competition, fts called for under the transportation act. As for relationship to the Louisville & Nashville Railroad, the Clinchfield does not yet touch this property; but, according to map 11, its eastern Kentucky lines and also one in Virginia come close to a contact with the Clinchfield. This, if made, might pos- sibly afford a valuable outlet for Louisville & Nashville coal or traflSc into the Caro- linas. And such a connection has been already projected by means of a tunnel through the divide. This is bound to come in due season. But until that time the interest of the Louisville & Nashville may be regarded ae relatively remote, although certainly prospective. If once effected, consideration of map 11 shows that a new bond would also be afforded between the two gr^at halves of the LouisWUe & Nash- ville-Atlantic Coast line system. At present they meet only at Augusta. Were the Hazard and Harlan coals to be made available for fuel supply to the Atlantic Coast Line system in the Carolinas, great advantages to the entire system might accrue. But it is to the Seaboard Air Line, smallest and weakest of the southern systems, that the Clinchfield road is most nearly indispensable. As already set forth, the Seaboard has no independent coal supply. The Clinchfield, if incorporated therein, would put it into the heart of the great fuel reserves of the south. The relationship of the Clinchfield as a bridge in long-haul through-rout* develop- ment to these several southern systems must also be comprehended. On the north its connection is direct with Cincinnati over the CTiesapeake & Ohio, as shown by dotted lines on maps 10, 11, and 13. Unfortunately, in the past this road has ap- parently given slight consideration to the possibilities of through carriage. This is possibly due to the major interest of the Chesapeake A Ohio in the Virginia gateways, which afford it, of course, a much longer haul to and from the west. But there can be little question that the national interest demands that greater attention be given to the provision of this new throu^ route between the west and the Carolinas. Toward the south a through route utilizing the Clinchfield bridge, judging by maps 10, 11, And 13, is most naturally constituted either over the Atlantic Coast Line from. Spartan- burg (map 11) or by way of the Southern Railway via Columbia, S. C, thence to Charleston and Savannah (map 10). The little Georgia & Florida Railway (map II ), recommended for inclusion in the Louisville & Nashville- Atlantic Coast T ine system, contends that it is naturally serviceable in the constitution of such a through route down into Florida. The Seaboard in this conBection (map 13) is relatively weak. Its lines are so located that it could make at present but very indirect use of the Clinchfield road as a great north-and-south bridge. Until it connects Spartanburg and Columbia, S. C, by tra(*kage or over its own rails, it is ill-suited to perform this necessary function. Certain details of the history of the Clinchfield in its relation to its neighbors are pertinent. The road apparently was projected by the same people — the Blair interests — who then controlled the Seaboard Air Line. The Cumberland corporation, dissolved in 1918, was originally a holding company which included certain Clinch- field coal properties, parts of the Clinchfield as successively built, and a large block of Seaboard Air Line stock. The coal properties were first sold, and then the Seaboard as I.e.! CONSOLIDATION OF RAILKi 553 holdings, leaving only the Clinchfield stock at the time of dissolution. The Seaboard is said to have had a charter itself to build upon this location; and it is alleged that the Clinchfield was built specifically to serve that property. Certainly the same people were heavily interested in both companies, and on behalf of the Seaboard Air Line it seems to have been expected that ultimately the Clinchfield would become part of the Seaboard system. A lease of the Clinchfield to the Seaboard was in fact almost consummated at the time of the Hawley administration of the Chesapeake & Ohio. This latter road, especially its traffic people, have also kept a watchful eye upon its (le\elopment and are said in fact to have ''almost flirted" with it some years ago. iiut, unfortunately, despite the paramount interest of the Seaboard Air Line, it seems not to have been fully alive to the possibilities of the Clinchfield road for independent successful operation. It is even charged that unwillingness to cooperate with the ( 'linchfield and the general attitude respecting a lease indicate an anticipation that it might be subsequently acquired more cheaply after its downfall financially. At all e\ ents, a sharp division of policy is apparent in the Clinchfield management. Certain members have been consistently favorable to the Seaboard affiliation, but certain others have resented some aspects of interchange and policy of the Seaboard people, and in the meantime the record shows that the Southern Railway has assiduously cultivated the Clinchfield. It is, indeed, alleged to have been as friendly as the Seaboard was the reverse. At all events, the interchange of traffic with the Southern Railway has most rapidly developed in recent years, and this relationship was strengthened by the federal Railroad Administration, which allocated the Clinchf eld to the Southern system for operation. This was done particularly in order to facilitate direc t (oal shipments rather than by the roundabout route through Paint Rock, already described. The friendly relation with the Southern system has, in fact, crystallized into a profitable traffic agreement which is alleged to be more favorable than is a.iorded by any other railroad thereabout. Analysis of the traffic interchange between the Clinchfield and the three principal syst^'ms operating in the Carolinas confirms the impression as to the great and in- creasing preponderance of business with the Southern Railway. The bulk of the total Clinchfield traffic, about 70 per cent, is coal, most of which is distributed in North Carolina, Georgia, and Florida and the Spartanburg district of South Carolina, to- gether with a growing movement of fuel to Charleston for export. Of the coal de- liveries by the Clinchfield to all its connections, the proportion going to the Southern Railway increased from 51 per cent in 1917 to 71 per cent in 1920. The coal de- liveries, both to the Atlantic Coast Line and the Seaboard, during the corresponding pi^riod appreciably diminished. The Atlantic Coast Line received 29 per cent of the coal in 1917 and only 20 per cent three years later. And the Seaboard Air Line, which received only 14 per cent in 1917, shrunk to 6 per cent in 1920. As to receipts of fniscellaneous freight, the proportions remain substantially unchanged during this period, and the deliveries of miscellaneous freight remain distributed among the three i>rincipal companies about constant. The Southern Railway not only receiA ed almost three-quarters of the Clinchfield coal delivered to connections in 1920; it also turned over to the Clinchfield in exchange a substantial amount of its Virginia c oal, 25,f{5fi cars in 1920. In brief, the Clinchfield interchange with the Southern Railway L'reatly exceeds that with all other lines combined. This is partly the result of the natural geographical relationship abo\e described; it also followed upon the arrange- ment under federal control, since embodied in the traffic agreement above mentioned, under which the Southern Railway most advantageously turns o\ er the greater part of its coal southbound because of the numerous grades and heavy curvature on the Southern Railway route. This diversion also relieves the Paint Rock route, enabling it to handle the heavy miscellaneous freight traffic as well as coal entering from. Ten- nessee and Kentucky. The arrangem.ent at once yields the Clinchfield a profit and c:^Lc.c. ^L- ,-T « 554 INTERSTATE COMMERCE COMMISSION REPORTS. CONSOLIDATION OF RAILROADS. 555 relieves the Soiithem Railway of imdue operating expense and of the necessity of rebuilding its own difficult coal lines. Financially, judging by the returns for the typical year 1917, the Carolina, Clinch- field & Ohio has a large railway operating revenue per mile of line, $13,411, which yielded a net operating income per mile of line in 1917 of |5,073. This exceeds the net operating income by far for all the other southern roads except the Alabama Great Southern, which of course is also a main stem. Even the Illinois Central, as shown by the comparative returns on page 538, had a net operating income per mile of line in 1917 of only $3,417. But the handicap of the Clinchfield is the enormous capital account, $189,627 per mile of line. This is over three times the corresponding figure *or the Louisville & Nashville, and practically five times the investment account of the Atlantic Coast Line. The Southern Railway has a high investment account, but for the Clinchfield it is considerably more than twice as great. This heavy in- vestment account, due partly to the difficult and expensive construction, partly to the thoroughness of the work, reduces the percentage of net operating income to investment to the lowest figtu"e for any of the six leading southeastern railways (page 538). Either reorganization with a reduction of the capital account, or an extended support through a policy of free interchange of traffic from its neighbors, is evidently necessary to bring this property up to a parity with the general standard for the region. It is in part because of this necessity of support and interchange in order to realize the magnificent possibilities to which the road is entitled that certain recommendations for joint participation in its affairs are made. It would not be made, otherwise, for it is believed that an examination of the operating accounts of most jointly controlled propjerties will show a lack of the economy and efficiency which obtains under con- centrated responsibility. In conclusion, it is clear that while originally the Seaboard stood closest to the Clinchfield enterprise, that the rdle of next friend has been most successfully assumed by the Southern system. The Seaboard, to be sure, has no other coal, but its lines traverse a distinctly nonindustrial district, so that the major part of its reliance is for company fuel. And most of the coal now taken by the* Atlantic Coast Line is like- wise for its own fuel. The Southern Railway, traversing the great industrial ])ied- mont belt, has assuredly built itself into the enterprise. For this reason it is recom- mended that the Clinchfield be merged with the Southern Railway. But. neverthe- less, the interest of the other railways above outlined in this important enterj)ri8e should be protected. The Clinchfield can hardly be regarded as purely local in charac- ter; yet the proposal to vest its control in a joint holding by the Coast Line, the Sea- board, and the Southern is rejected on the ground that it does not conduce to upkeep and efficient operation to the same degree as an undivided proprietary relationship. To make the Southern Railway distinctly responsible for the property and then to invite such trackage arrangements as shall protect the reasonable interest of neighbor- ing railroadi?, commends itself as the wisest plan under all the circumstances. WTiether or not the high capital accoimt is excessive will depend upon the results of federal valuation, and the terms under which it might be taken over must of necessity be the result of a trade. The Richmond-Washington Company, incorporated in New Jersey in 1901, owns about two-thirds of the voting common stock of the Richmond. Fredericksburg & Potomac Railway and all of the stock of the Washington Southern. It thus controls the Union Railway line between Washington and Richmond. Va. This again is a bridge used by the six railways entering from the south. These six roads are the Pennsylvania, the Atlantic Coast Line, the Baltimore & Ohio, the Southern, the Seaboard, and the Chesapeake & Ohio. Each of these six railways owns one-sixth of the capital stock of the Richmond-Washington Company, Our consolidation plan proposes no disturbance to this arrangement. Tlie suggestion as to a detour from the 63 I. C. C. west around Washington (page 501) is intended to be worked out in connection with this existing scheme for joint operation of the bridge line to Richmond. But other- wise conditions may well be allowed to go on as they stand at present. The geographical location of the Florida East Coast Railway is depicted on maps 10, 11, and 13. It is plotted in its relation to all these southeastern railways because of the fact that it is a bridge line, operating in a territory which assuredly will not support, at least for many years to come, another competing line. The entire coimtry is dependent upon it for rail connection with Cuba, the operation of car ferries to Havana having been initiated in 1915. Such properties, lying on the confines of the United States, are entirely analogous to the New England railroads or those which occupy the Michigan peninsula. For all such roads, in so far as they perform a uni- versal service either as terminals or as bridges to something beyond, the policy which has thus far been pursued in these other cases is again reconmiended for the Florida East- Coast Railway. It would be a manifest injustice and a hardship to other rail- roads to tie this property up to any single system. Fortimately the financial status based upon the returns for the typical year 1917 is so near normal that the road may be trusted to pursue its own course. It neither has strength to contribute to others, nor does it need to draw upon its neighbors for support. The percentage of net oper- ating income to investment in road and equipment for 1917 was 4.74. This, for a rapidly growing property, is about as near as one coiild hope to find to the standard of 5 per cent for 1917, elected as a standard for the country as a whole. It is recom- mended, therefore, that the Florida East Coast Railway remain independent, or else that some plan be evolved which shall guarantee by joint control equal and impartial treatment for the Southern Railway, the Louisville & Nashville-Atlantic Coast Line system, and the Seaboard Air Line. The statistical summary herewith is intended to show the probable results upon net operating income in proportion to investment of the mergers herewith recom- mended. The calendar year 1917 is, as usual, chosen as typical. Briefly stated, the results are as follows: System. Southern Railway Louisville & NasJiville- Atlantic Coast Line Illinois Central , Seaboard Air Line Florida East Coast Percentage relation; net oi>er- ating in- come to investment inroad equip- ment. 4.31 5.34 4.83 3.45 4.74 Road and equipment investment per mile of line. $75,392 48,634 58,005 54,515 67,236 Thus it appears that the earning power of these systems while by no means equal so far as one can predict by such data, is more nearly equal than in the case of the constituent roads, each taken separately. As was expected, the percentage of net operating income to investment is well below par for the Seaboard at 3.45, but, on the other hand, the investment account for the Seaboard stands at 154,515, a figure ap- proximating that for the Illinois Central and substantially higher than for the Louis- ville & Nashville- Atlantic Coast Line system. The results of federal valuation can alone be depended on to show whether this investment account of the Seaboard is ex- cessive. And if indeed it be so, then the percentage of net operating income thereon will be automatically increased. Such a check on these results in terms of valuation rather than capital account is, of course, necessary as a basis for any final dependable conclusions. 63 I. C. C. »• *u^ 556 I J INTEKSTATE COMMERCE COMMISSION REPORTS. Chapter V.— The Western Transcontinental Region-, (CONSOLIDATION OF RAILROADS, 557 Through routes determined primarily by seven available Rocky Mountain gateways^ ^7. — ^Matching these within three groups, as also group against group, 558. — Geographical distribution of mileage based on population, a complication, 558 . — Denver conditions as an illustration, 559. — Decision to extend all systems into Chicago, 559. — Traffic analysis, indicating importance of carloads and of special equipment in solid trainloads, 559. The western situation most broadly considered, 560.— The Union Pacific, a key road,, strongest and most direct through line, 560.— The Western Pacific-Denver & Rio Grande also pivotal as a matched bridge line, 561. — The Burlington as a support for the precarious bridge, matched against the Union Pacific, 562,— Biu-hngton must derive added strength from a northern through line, 562.— The Santa Fe, a second possible supporter of the Western Pacific-Denver & Rio Grande bridge, 563. — The Chambers comprehensive plan, its advantages and defects, 563. — Possible modifications of a Santa Fe-Denver & Rio Grande plan, 564. ^General competitive situation, north and south, especially the Panama Canal, as affecting a choice between the Burlington and the Santa Fe, 565. — Final selection of the Burlington road as counterpoise for the Union Pacific, 566, The northern twin cities transcontinental group described. 566, — Objection on com- petitive grounds to three northwestern through systems, 567. — Not enough good Chicago connections for three such sjstems, 567.— Two instead of three chosen, 568.— Broader advantages considered, 568.— A Burlington-Northern Pacific- Western Pacific combination necessary as a counterpart of the Union Pacific-North Western-Central Pacific line, 568.— Alternatives considered spell widespread dismemberments, 568.— St. Paul-Northern Pacific combination advantageous for operation, but fatal to competition, 569.— Merits of a St. Paul- Great Northern merger, commercial and financial, commend this choice, 570.— The final test of financial stabilitv, 570.— Western additions necessarv to round out such a system, 573.— Proposed changes at the eastern end, 573.— The Soo lines added, if available for consolidation, 573— Other possible reenforcement, 573. The Union Pacific closely related to the Chicago & North Western at Omaha, 574. — The Wabash western lines for a Union Pacific entrance to St. Louis, with minor eastern additions, 575.— Judicial attempts to separate the Central Pacific from the Southern Pacific, 576. — These two properties historically and organically interre- lated, 576. — The geographical location indicating interdependence (map), 576. — Financial relationships also intricate, 577.— This case to be judged by economic rather than legal reasoning, 578.— Complete country-wide, not half-hearted of local competition, essential, 578.— General outline of transcontinental competi- tion, 578.— Territorial limitation of Sunset Route competition, 578.— Theoreti- cally, north-and-south gathering lines distinct from east-and-west long-haul lines desirable, 579.— Physical upbuilding and development of Central Pacific favored by unmerger, 580.— The Pacific Railroad acts again, 580.— Finally Central Pacific merger needed to balance the Burlington- Western Pat ific through line, 580.— Temporary prejudicial effect upon local transportation, a vali_d objection, 581.— Agreement for dissolution in 1914 establishes pfttcticability^ 581. -Pacific coast public sentiment versus national interest and policy, 586. — Possible advantages of transfer of Southern Pacific lines in Oregon to the Union Pacific, 586.— Objections thereto are conclusive, 588— National defense requires completion of an interior north-and-south line of ypmmunication, 589. — Ret-apitulation of distribution of California and Oregon lines, 589. ' 03 I. C. C, ( 'hicago, Burlington & Quincy-Northem Pacific to preserve balance of power against TTie Union Pacific-North Western, 590. — Traffic interchange at Billings. Mont., 591. — ^The Denver & Salt Lake project essential to future development, 591.— Its relation to Denver & Rio Grande and Western Pacific, '92. — Alternative alliance, 592. — Terminals at San Francisco, 592. — (hicago Great Western provides necessary connections between twin cities and Missouri River gateways^ 593. — The Minneapolis & St. Louis used still further to supplement deficiencies southwest of Minneapolis and St. Paul, 593. — ^Northern Pacific should have trackage into Great Falls, Mont., district, 594. — The possible inclusion of the Mobile & Ohio as a Gulf line, 594. Strengthening the St. Paul-Great Northern combination by addition of the Minne- apolis, St. Paul & Sault Ste. Marie Railway, 595. — Local traffic, lumber and coal business might help, 596. — Two iron-ore roads added for furnace coal strength, 597. — Protecting the St. Paul-Great Northern by trackage contract at Council Bluffs, 598. — Terre Haute & Southeastern merger, and the Indiana line of the Chicago & Eastern Illinois, 593. — Independent access to St. Louis and other minor changes, 599. The Chicago. Rock Island & Pacific intimately related to the Southern Pacific, 600. — Each partner contributes elements of strength, 601. — Provision of a line from Memphis up to Burlington, Iowa, desirable, 602. — (-ertain minor changes in the Rock Island. 604. — Several mergers of Texas properties in the Southern Pacific, 604. — What shall be done with the Northwestern Pacific? 605. The Atchison, Topeka & Santa Fe. compact, complete, and impregnable, 605. — An entrance to St. Louis proposed, 606. — Access to New Orleans by merger of the Gulf Coast Lines, 607. — Peculiar importance of the (V)lorado & Southern 8\'8- tem, 608. — Choice between the Santa Fe and the Southern Pacific-Rock Island. 608. — Serious disadvantages of Santa Fe merger, 609. — Rock Island affiliation also rejected. 609 — ^Made a neutral through route in the Missouri Pacific system, 610. — (^ertain minor Santa Fe changes, 611. Geographical test of foregoing combinations (maps), 611. Statistical verification of earning power in terms of investment account for pro])oged five systems, 613. The grand strategy for transcontinental traffic in western territory necessarily depends upon the supply of available through routes connecting either Chicago or St. Louis with the Pacific coast. And the number of passes through the Rocky Mountain barrier, either now traversed or remaining for future construction, must in turn be ultimately decisive in fixing the numl^er of these competitive routes. The gateways, therefore, are the starting points of analysis. The location of the water- shed, or father of the most difficult Rocky Mountain territory, is indicated roughly on map 14 by a dotted line. This runs from the neighborhood of Spokane, Wash. , straight toward Puel)lo, Colo., but turns southwesterly before reaching that point and passes off toward Mexico across Arizona. The gateways through this bai'rier at present in use are limited to seven; and the stems of the seven shorter transcontinental routes, stripped of all branches and feeders which serve these gateways, are likewise shown upon map 14. The number of these gateways is thus strictly limited. But that is not all. These transmountain routes evidently, by the map, lie in three groups — northern, middle, and southern, respectively. In the northern group there are three lines: The Great Northern, the Northern Pacific, and the Chicago, Milwaukee & St. Paul. Then proceeding southward there is an unbroken barrier across Idaho and Wyoming at present not penetrated by rail. The middle group of gateways is located in Wyo- ming and Colorado. There is the Union Pacific at Cheyenne, north of Denver, and south of Denver, penetrating the mountains behind Pueblo, is the Denver & Kio r>8 I. C. C. 558 INTERSTATE COMMERCE COMMISSION REPORTS. Grande. Still following southward along the Rocky Mountains there is a wide desert strip of territory until one reaches the southern gateways across Arizona and New Mexico. These states are traversed by the Santa Fe and the Southern Pacific lines. This completes the present array of possible transcontinental stems. The most proba- ble construction in the future which will tie in the Pacific coast with dsmontane territory is the provision of some through route passing directly by Denver, for at present the existing gateways lie about equidistant north and south of that city. And then some day a way will doubtless be found by which the Burlington may penetrate the great mountain barrier. The western transcontinental problem thus resolves itself into such an arrangement of these seven existent stems as shall best preserve a well-balanced competition within each of the three territorial groups above described, and which, again, in an even broader way, shall promote a normal rivalry as between group and group, cover- ing the entire transcontinental field from Canada to Mexico. It thus appears that there are two distinct phases of the matter in hand. One obtains locally within each of the three subdistricts taken by itself— southern California or Washington-Oregon, for example. The other phase is completely national, as comprehensive in scope as the entire field of the United States west of the Mississippi. Of these, the latter, because of its comprehensiveness, merits first consideration. After its analysis, the more restricted phase, group by group, will be taken up, and then in conclusion the individual systems within each subdistrict may be treated in detail. Such is the general plan of campaign to be pursued. And in and through it all, furthermore, to conform to the statute, there must be as little disturbance as possible of existing corporate relationships and of the present currents of traffic. The situation in western territory is greatly complicated by a general circumstance again well illustrated by map 14, The population, proceeding westward, becomes progressively less dense as one approaches the Rocky Mountains and the nimiber of east-and-west lines with through connections to the coast also lessens. The entire railway net, comprising branches and feeders, necessarily becomes more open west of middle Kansas, Nebraska, and the Dakotas. These east-and-west plain lines natu- rally end at important centers like Omaha and Denver. And, to a considerable degree, the situation at St. Paul-Minneapolis is the same. More through lines, in short, enter each of these cities from the east than there are available through lines leaving them toward the west. The neck of the bottle, in other words, becomes progressively narrower. This circumstance greatly complicates the strategic analysis, for it forces a choice as to stem connections among a much greater nimiber of available roads toward the east than the seven possible gateways which penetrate the Rocky Mountains. Many are called, but few can possibly be chosen. Not only must the choice be made, but provision must follow for those lines which are rejected as through routes. Stated in another way, the lines within this territory are distinguishable into two groups, according to their character. One, out on the open plains, is con- stituted mainly of the so-called granger roads which originally stopped short of the base of the mountains. These roads ramify widely and have a large proportion of local business. The other type consists of the bridge lines. They traverse the inhospitable deserts or mountain territory, relying upon through traffic moved in solid trainloads. There is relatively little local business. Such are the Central Pacific and the Western Pacific, entirely separate entities. At times corporatively their fate is merged with other roads, such as the Southern Pacific. And some of the lines are resolvable into two elements, only the western of which is properly a bridge line. This is the case with the St. Paul-, the Great Northern, and the Northern Pacific. But whether actually separated as distinct corporations or not, the difference between the ordinary railroad and the mere bridge line is basic and dfeterminant. 63 1. C. C. CONSOLIDATION OF RAILROADS. 559 The practical effect of the foregoing condition is well exemplified in detail by the Colorado situation. Denver, the leading commercial center in the middle Rocky Mountain territory, is entered from the east, as map 14 shows, by six railroads; •whereas there are only two lines, the Union Pacific and the Denver (fe Rio Grande, which go out due west. These six railroads from the east are indicated by dotted lines on the map. They are, from north to south, the Union Pacific, the Burlington, the Rock Island, the Kansas Pacific (Union Pacific system), together with the Missouri Pacific and the Santa Fe lines into Denver via Pueblo . Obviously only two of these six lines entering tfrom the east can be treated as trunk Unes, to be linked up with the two roads which penetrate the mountain barrier westward. To be sure one might attempt to provide •each westward stem with two trunk lines to Chicago and St. Louis respectively. But even then, only four of the six available lines across the plains would be utilized. It is evident that some stub ends must be left in any event. The point, however, at this moment is to indicate the nature and the necessity of the choice with which one is ■confronted. Not yet need the choice actually be made. That step will be taken in due course. A precisely similar complication presents itself at the twin cities, as it ^11 appear, where six trunk lines enter from Chicago and only three (with possibly one more through Canada) go out toward the west. The number of roads entering Omaha and leaving it east and west respectively is even more ill -balanced. Kansas City is more fortunately situated, owing to the number of stems southward to the Gulf of Mexico . But the roads thereabouts are to be considered in a Gulf group by themselves . They need not complicate the transcontinental situation. A general principle must be settled at this point, before laying a shoiJder to the main propositions. Why should all these transcontinental systems be based upon Chicago in fact , rather than upon the twin cities and the Omaha gateways respectively? It ha s been urgently represented, especially by the Union Pacific, that the western trans- •continental situation does not demand the severely logical projection of all these systems into a common base at Chicago. This point is discussed more fully in another connection, but the final judgment rests upon the policy laid down by the majority of these roads themselves. The scope and reach of the most comprehensive ones pre- scribe in fact the raiige to be given to their competitors; and inasmuch as the Santa Fe, the St. Paul, and the Hill lines have all elected to conduct transcontinental business competitively under unified ownership clear through from the Pacific coast into Ohicago, it seems imperative that the same scope should be given to all the rest. The price paid is avowedly a heavy one; for the open market for choice of routing at the Missouri River gateways and at the twin cities is bound to be restricted by the pro- vision of these corporatively unified through routes. But the advantage on the whole seems to compensate for the loss in flexibility which must necessarily result . The fact that the Gulf-Southwestern Unes have also been projected into Chicago under this plan is also by no means immaterial. Certain peculiarities of transcontinental traffic, particulJarly from California, deserve mention on account of their bearing upon problems of operation. One of these is the large proportion of tonnage transported in refrigerator cars or other forms of special equipment. Fruit, packing-house products, and fresh vegetables all require such special equipment. Many of them require fast movement on account of the perish- able nature of the goods. The total freight earnings of the Santa Fe for 1917 amounted to $110,000,000. These earnings were distributed among staple commodi- ties as follows: Fruit and vegetables $10,000,000 Grain 8,000,000 Livestock 6,000,000 Coal and coke - 7,000,000 Crude and refined oil 10,000,000 Lumber 7,000,000 Total 48,000,000 63 1. C. C. 4h ^iB !l ' CONSOLIDATION OF RAILROADS. 561 560 m .|1 p Interstate commerce commission reports. A corresponding exhibit for the Southern Pacific lines west of El Paso and Ogden, covering movement in carloads to points east, during the calendar year 1917, is also reproduced. Commodity. Tonnage. Fresh fruit and vegetables 870 644 Smelter products " 523' 407 Other a^icultural products ...............!!.!..!! 1 , 063* 053 Animals and flsh, and products I ' 147' 009 Forest products [ I 573' 705 Ca n ned goods !.....'..!...!!".!]" ' 298,' 6 1 3 Suear J 264,074 Other manufactured products j 554 574 Other mineral products \ 31o' 06:} Miscellaneous products "... .\ .'..[['.'.'. .\ .][..][ .1 21 320 Total. 4,632,462 Propor- tion. Per cent. 18.8 11.3 22.9 3.2 12.4 6.4 5.7 12 6.7 .6 100 This second exhibit, it will be noted, is for tonnage and not earnings. But the agree- ment is significant. For both roads, approximately one-fifth of the staple traffic named, as it appears, is fresh fruit and vegetables. For the Santa Fe another fifth is constituted for the m ovement of oil . also special-eq uipment b usiness . Traffic analysis of the Union Pacific interchange at Council Bluffs still further emphasizes the importance of the transcontinental tonnage moved in special equip- ment. The number of carloads for 1920, of such products eaetbound was as follows: Eggs and poultry ; 218c3rlrads. Citrus fruits 9^ 76 carloads. Apples and other fresh fruits 32, 909 carloads. Vegetables 4,210c-arlcads. The total of this perishable traflic, 46.513 carloads, compares with the other heavy movements eastbound of — . Cannedgoods 5, 098 carloads. f'oal 2, 472 carloads. ' Lumber, etc 3.5, « I carloads. Sugar, etc 4^ 1 4j< carlcads. Wool,etc , 1,625 carloads. The relative importance of this special -equipment business is as striking therefore on the Union Pacific as on either of the other two roads above mentioned. This is all carload traffic, and much of it moves in solid trainloads. especially fruit and vegetables, more so at Ogden than at Council Bluffs. A^i vtic goods, all imported, moved through Council Bluffs eastbound in 192 ) to the am > i it of 517 carloids. Of export goods, prac- tically all cotton, 1,917 carloads m js-ed westbound in 1920. Solid trainloads west- bound are miinly confined to automj'jiles and steel products. Of the former 14,463 and of the latter 5,332 carloids were handled westbound. Summarily, therefore, the evidence still further points to the importance of the carload traffic and particularly of the carload traffic handled by special equipment. Based upon the movement of perishable products, the operating relationship of the Union Pacific is certainly closer to the southern group of roads than to any of the carriers which lie farther north. The Union Pacific Railroad is the key log to the transcontinental jam— it is the clue to the p'ot. It is at once th » old-^n and th > shortest, logically the most perfect and financially the strongest, among all of the transcontinental stems. Not only does it antedate by many years the opening of any other Pacific coast rail route, because, naturally enough, of its directness and physical inevitability, but it was * also the first to receive the official sanction and financial support of the federal gov- 63I.<\C. ernment. Inspection of map 14 throws into strong relief the superiority, geographi- cally, of this route over any of the others which penetrate to the coast, either by the northern or the southern gateways. And imtil the completion of the Western Pa- cific line from Ogden (Salt Lake City) westward, the Union Pacific was a veritable monopoly, the only through route directly to San Francisco. Never, indeed, would it have been put through, in face of the physical obstacles to be overcome, without the full appreciation of its significance as a key line, a bridge, which, despite federal support, actually broke down \mtil taken in hand by a master mind in the late nineties. The present situation is unique. The Union Pacific has attained an inordinate strength and a dominant position, as practically the ofily first-claas direct through route. And yet there is available for competition with it another new bridge line, the Western Pacific, which, while physically prepared to fimction, has broken down because of the lack of interchange, connection, and support at both ends. The first essential choice to be made therefore is of such a meiiger for the Western Pacific — and with it also, of course, the Denver & Rio Grande — as shall enable them to be matched against this dominant key Hne, the Union Pacific Rail- road. And as will shortly appear, by the Union Pacific is meant also the through route comprising both the Union Pacific and the Central Pacific as well (page 565 infra) . The new competition to be provided must face not only a perfection of operating facilities but a strength of financial resources which is almost without parallel. The financial status of the Union Pacific in 1917 is of an investment account per mile of line of $76,153 and a net operating income of $4,805 per mile of line. The result thereof is a return of 6.42 per cent upon what, by comparison with other roads and in the light of the physical circumstances, does not appear to be an inordinate valuation of the property. Yet this is not the whole story. Behind the Union Pacific stands its imposing array of investments, yielding an income from interest and dividends alone in 1920 equal to 80 per cent of its own fixed charges. These investments are in part the result of thrift, and masterly management and in part the result of bold and successful speculation. Regardless of source, however, the fact remains that to successfully ri^al the Union Pacific will call for an array of operating and financial resources which it will be extremely troublesome to find. The difficulty of matching the Union Pacific by a rival direct route is not confined alone to the carriage of the burden of the Western Pacific. This bridge line is pivotal to the situation. It is manifestly a precarious bridge, with absolutely no friendly footing at the western bridgehead. But that is not all. The Denver & Rio Grande is almost equally a bridge line, essential to the constitution of any direct through route by way of Salt I^ake City. It also is in a pathetic and parlous state. Even before the present general breakdown, it had gone to pieces and is now undergoing reorganization. It has within itself a great network of branch and feeder lines, many of them narrow gauge, with very light traffic. But their continued opera- tion is essential to the population of a great state. WTiere shall strength be found adequate to carry this appalUng array of liabiUties, able also through its interchange and support to transform these liabilities into a national asset for the United States? And where, also, may sufficient credit be found to carry through the enterprise of providing the Denver & Rio Grande with a low-grade gateway through the Rocky Mountains, the last essential for an effective competitive direct through route to San Francisco? There are but two railroads in western territory which by reason of their geographi- cal location, their traffic interchange, and their inherent financial strength are ade- quate to undertake the effective utilization and development of the Western Pacific- Denver & Rio Grande bridge. The first of these is the Chicago. Burlington & Quincy ; the other is the Santa Fe. As for the former, it is easily first among the granger properties. Map 16 shows its geographical location. A comparison of its layout 63 1. C. C. ^Utoi 562 INTERSTATE COMMERCE COMMISSION REPORTS. CONSOLIDATION OF RAILROADS. 563 i'fri with that of its neighbors discloees, particularly, its close-knit compactness, entirely within the richest territory in the heart of the United States. Unlike the Rock Island, it does not sprawl all over the map. Unlike the Chicago & North Western, it does not divide its energies between extension dne west from Chicago and wide ramification frwn Chicago north. Over a series of parallel lines closely bound in with one another, the BurUngton runs directly west to the base of the mountains both at Denver and at Cheyenne. It is self-sufficient, having amply strengthened itself by the provision of coal hues the entire length of Illinois. These feeders afford an ample coal supply for company use as well as for fuel for the western country. Furthermore, the resources of the Burlington have been carefully husbanded through the continued reinvestment of surplus earnings above a reasonable dividend rate, until by the close of 1919 its corporate surplus amounted to $241 ,000,000. The details concerning its property and capitalization are to be found in the record of the recent application to capitalize its surplus. The financial strength revealed in these pro- ceedings before the Interstate Commerce Commission finds no counterpart elsewhere among American railroads except in the statements of the Union Pacific. The Union Pacific possesses an enormous reservoir of investment in outside properties. The resources of the Burlington are to be found in its own reserved earnings. It is the accumulation of these revenues, especially through recent years — $70,000,000 added to the suplus during the last five and one-half years, for example — which constitutes the foundation for the belief that an earning power is inherent in the Biu-hngton which can be well extended for the support of another transcontinental bridge line. Add to this the fact that the Biu"lington road is unquestionably first among the six roads, already described, which enter Denver from the east, and the strength of its claim to priority is well-nigh estabUshed. But not even the Burlington with all its inherent strength could be intrusted to carry the Western Pacific-Denver & Rio Grande bridge line alone. The handicap is bound to be enormous at the western end, without abundant local branches or feed- ers. The main source of Western Pacific traffic in CaUfomia is at San Francisco, the one point where water competition is always bound to be white hot. And then again the cost of developing the new gateway west of Denver, soon to be outlined in detail, will be enormous. Large sums must also be spent upon the Denver & Rio Grande to effect its own rehabilitation. Evidently the Burlington must be still further strength- ened by some alliance with another strong railroad. The direction in which this alU- ance must be sought is immediately disclosed upon examination of map 16 by the twa BurUngton extensions to the northwest, to meet the Northern Pacific near Billings, Mont. The nature of the traffic interchanged over these lines will shortly be analyzed ; but in the meantime it will suffice to call attention to the physical contacts e\inced by the map. All the relationships which oiu* subsequent examination reveals, point to- the Northern Pacific Railroad as the most obvious side partner with which to undertake a difficult joint enterprise, the support of the Western Pacific bridge line. There is yet another reason for some such alliance between the Burlington and one of the northern transcontinental lines — the Northern Pacific or some other. That will be considered in connection with the twin cities' affairs. It will there be shown that an effective counterpart for the Union Pacific can be produced only by, some such alliance between a middle transcontinental road and one lying in the north. From these two distinct points of view, then, comes corroboration of the opinion that the Burlington must add to its strength and traffic resources by drawing upon this northern region, if it is successfully to undertake to match up with the Union Pacific. And of these northern properties, as will be established in due time, the Northern Pacific appears to be the one to select. The second choice for a through system as a counterpart to the Union Pacific is the Atchison, Topeka & Santa Fe. Its admirable and effective layout will be somewhat 63 1. C. C. minutely described in due time. The geographical location is shown on map 22, to- gether with the relationship to the Denver & Rio Grande and the Western Pacific. Inspection of this map immediately brings out the interdependence between the three. The through route from Chicago to San Francisco would not be as direct as by the Bur- lington line, shown on map 16, particularly to Denver. Denver, in fact, lies well to the north of Pueblo and it is by way of Denver that the new gateway must be ap- proached. The proposal nevertheless embodies certain significant advantages. All the necessary financial strength is there, and this is certainly essential. But the plan commends itself especially on operating and traffic grounds. The previous analysis of transcontinental business has brought out the high proportion of traffic which moves from California in refrigerator cars or other special equipment, not less than 20 per cent in fact of the tonnage and earnings of staple commodities. This equipment represents a large investment which ought to be made productive by being used throughout the year. The immense tonnage of fresh fruits and vegetables out of California consists in the main of citrus fruits in the early part of the year and the deciduous fndts later on. The utilization of this special equipment would be much more effective, it is alleged^ were the Ogden gateways to be operated under the same management as the Arizona gateways. The same cars could be moved by the southern route during the cold season and be chilled by ventilation over the Ogden route with the advent of warm weather. This advantage was contemplated and in part realized under the Haniman regime as well as under the federal Railroad Administration, on the Union Pacific. There can be no question of a natural affiliation in this regard between the middle routes via Ogden and those which traverse New Mexico and Arizona. Nor is this all. The location of the Denver & Rio Grande is such, and the Santa Fe so approaches it^ that this property to the Santa Fe would be a feeder, more than a mere bridge. This reason alone, it is quite clear, was the reason for a long persistent interest in Rio Grande affairs on the part of the Santa Fe directorate. Note, however, that it was not inter- ested equally in the Western Pacific, when built, as the Santa Fe already had a first- class through line of its own. To the Burlington, both the Denver & Rio Grande and the Western Pacific would be merely means to an end. To the Santa Fe, one of them — the former — would be a thing in itself. For these reasons, the Santa Fe is better fitted to assume the new obligation of the Western Pacific bridge Une than the Burlington. The foregoing advantages of Santa Fe- Western Pacific merger are made the basis of a significant comprehensive plan for consoUdation prepared by Mr. Edward Chambers, vice president and traffic manager of the Santa Fe system. A subdivision of all the railroad mileage west of the Mississippi into five great systems, is proposed. The first consists of the alliance between the Santa Fe, the Denver & Rio Grande, and the Western Pacific, as ab«ve described, thus setting up a key line to match against the Union Pacific. The superabundant strength of the Santa Fe, in other words, is de- voted to carrying the load of the unproductive western bridge route. This project fulfills in effect the ultimate plans of the late E. P. Ripley. The Santa Fe is thus pro- vided with an east-and-west entry into CaUfomia, both at San Francisco and Los Angeles. This is the foundation stone of the Chambers system. The second group fulfills the original plans of the late E. H. Haniman, by pro\iding for the amalgamation of the Union Pacific, the Southern Pacific, the Rock Island, and the North Western. This system, Ukewise, it will be observed, provides for an east-and-west Une both into northern CaUfornia and into the south under the same managranent. The same economies in the use of special equipment would be afforded as for the proposed Santa Fe system. The third group under the Chambers' plan is that of the Hill Unes as at present related — the BurUngton, the Northern Pacific, and the Great Northern. The natural advantages of this affiUation are too obvious to require description. The fourth system Ues in the southwest, comprising the Frisco, the Missouri Pacific, the Katy , etc. ; and the fifth includes all the rest, notably the St. Paul, the Soo. the Chicago Great Western, the MinneapoUs & St. Louis, the Chicago & Alton, etc 63 1. C. C. 564 INTERSTATE i'OAlMERCK TOMMISSH N P.: P^HTS. CONSOLIDATION OF RAILBOADS. 565 I *♦ It is needless to specify in detail certain advantages ot the Chambers plan. Its emphasis upon the natural interest of the Santa Fe in Colorado arfairs; more effective management of the refrigerator business; the manner in which the Western Pacific could be tied in with the California feeders of the Santa Fe; these are all incontro- vertible. But certain radical defects attend such grouping. The first is the hopeless weakness of the fifth system built upon the St. Paul. It contains nothing but "leav- ings, " membra disjecta. One can not conceivably figure out a return on an invest- ment account which is fairly comparable with that of the three strongest systems. Financial ill-balance, then, is the first defect. The Chambers plan is in the second place faulty, in that it violates the transportation act by matching the three strongest Hill roads in the northwest against the very weakest one, the St. Paul, even loading down this weakest one, as above indicated, with all the broken-down carriers out of Chicago. Thirdly, although the act requires competition, both all the Hill lines and the Harriman lines are amalgamated. Thus the federal attack upon both these combinations is entirely ignored, unless the Sherman act is held to be entirely repealed as to railroads by the transportation act of 1920. This defect is fundamental. The next objection is that in the Southwestern-Gulf region most of the now outstanding competitors, the Missouri Pacific, the Frisco, and the Katy lose their identity within a unified system. Competition vanishes over night. It is also objected that the size of the projXMed Chambers systems is inordinate. Only five systems for all the railroad mileage west of the Mississippi threatens to render them unwieldy, and as between one and another they are found to vary too greatly in extent, ton mileage, €tc., to say nothing of earning power. This Chambers plan would produce systems for exceeding a length of 25,000 miles of line, and this figure is held by the most compe- tent authority to be too large for really effective management. California, looking far ahead, is surely bound to be adequate to provide support for four transcontinental bridges, independent of one another, instead of limiting the number to three. Or «ven, as under the (Chambers plan, merging them all in only two huge competitive units. The Chambers plan, built upon the Santa Fe, being held in general inadequate, contains nevertheless a suggestion of great weight. This, as we have seen, is that the Santa Fe has a natural interest in and superabundant strength to carry the weak or bridge line of the Denver & Rio Grande- Western Pacific. Yet to give it exclusive control of this bridge line shuts out the Burlington from San Francisco, at least until such time as it builds through to the coast, and the very purpose of the act is to dis- courage premature duplication. How would it do to recognize the joint interest of these two powerful companies, and to require them in unison to carry the load of the new bridge enterprise, through the period of its tender yq^ith at least? Or why not even let the Central Pacific and the Western Pacific, as under federal adminis- tration, be operated as a double-track line for the benefit of all parties concerned, the Union Pacific, the Burlington, and the Santa Fe? The objection to such an arrangement is always that joint and equal ownership, even of a short line, serves to dwarf initiative. It denatures, so to speak, the local officers rendering them so chary of criticism on both sides that they take the line of least resistance. These two bridge lines are too longperhaps for such administration. Perhaps something might be worked out like the existing cooperative arrangement between Portland, Oreg., and Seattle. This bridge line is owned by the Northern Pacific; but full trackage rights are enjoyed both by the Oregon Short Line and the Great Northern Railway. Each of the three runs both its own engines and train crews over the line. There are joint station agents, but train dispatchers are provided by the Northern Pacific owner. This joint operation is said to be as effective as by the two competing lines between St. Paul and St. Cloud, Minn. In effect the entire advantage.6f double-track operation i« said to be enjoyed by such means, and except for local business, a full measure of competition would continue to exist. 63 1. C. C. There are other objections, however, to this modification of the Chambers plan, certainly unless all the Harriman roads are remerged, and this we assume is out of the queition legally, as well as impossible by reason of size. If, however, the Southern Pacific and the Central Pacific be separated, and if then the Central Pacific, for the cogent reasons hereinafter given, be transferred to the Union Pacific, to constitute it a through key line to the coast, the impracticability of either of the above-mentioned cooperative plans shines forth. How manifestly unfair it would be to the Southern Pacific, for example, to take away its Central Pacific line through the Ogden gateway and then coincidently to confer upon its great rival, the Santa Fe, the entire or even a part interest in the other Ogden bridge line. Such action would be utterly inde- fensible from every point of view. This objection is fundamental, interlocking as it does with the treatment to be accorded the Central Pacific. It should be clearly recognized that Santa Fe participation in the Western Pacific is utterly incompatible with a merger of the Central Pacific with the Union Pacific. If the latter is desirable, the former becomes thereby impossible. Also, as a general consideration, it should be borne in mind that the Santa Fe line into southeafltem Colorado is a branch. Its entrance is by way of Pueblo, and the Denver & Rio Grande gateway back to Pueblo is physically impossible for the stem of a great national railroad. The James Peak project, soon to be described, providing a route directly through Denver, the metropo- lis and capital of the state, would not be feasible as part of a Santa Fe development. Physically, therefore, whether in part or in whole, the Santa Fe merger is deemed impracticable. The foregoing discussion of the relative interest of the Santa Fe and the Burlington in an Ogden gateway induces a somewhat general comparison of the relationship which subsists between the middle transcontinental routes and those lying north and south, respectively. For the Burlington, with either the Great Northern or the North- em Pacific, has its roots embedded primarily in the north; while the Santa Fe stands for all of the interests and affiliations of the southern lines. It may be enlightening, therefore, to compare the situation north and south in a large way, in order to discover its bearing upon the choice which must in this instant case be made. The first differ- ence between the Santa Fe and the Burlington-Northern Pacific (or Great Northern) as respects California business is that the former has a considerable gathering mileage the length of California. The Burlington, taking the Western Pacific, would be quite neutral at the coast— as neutral as the Union Pacific, in fact— reaching San Francisco by means of the Central Pacific alone. There is the same objection to Santa Fe control of the Western Pacific, that is to say, of two gateways into California, as there is to the single control by the Southern Pacific of both these same two gateways. Seeking to produce evenly matched conditions, therefore, the Burlington- Western Pacific is much more closely parallel to a Union Pacific-Central Pacific system than any combination built upon the Santa Fe could possibly be. The physical conformation of North America creates a wide difference between transcontinental competitive conditions, north and south. The continent narrows toward the equator, distances become less from coast to coast, and the Panama Canal is much closer to and potentially more important to the Arizona gateways than to any of the others, middle or north. The greater intensity of this competition with the Panama Canal through the southern gateways constitutes in fact the only rightful claim which the southern lines have to continued control of the north-and-south originating roads throughout California. Were it not for the form of the continent and the imminence and intensity of Panama competition, an evenly matched rivalry would not obtain were so much of the local north-and-south California mileage to remain in the control of the southern transcontinental lines. But this justifiable control of the gathering and distributing lines in California, in order to afford com- pensation for the Panama Canal handicap, in turn requires that the Ogden gateways 63 I. C. C. 63763—21 8 4^ 566 INTERSTATE COMMERCE COA[ MISSION REPORTS. CONSOLIDATION OF RAILROADS. 567 remain independent of southern control. It is just as essential that the Western Pacific be administered free from Santa Fe control, as that the Central Pacific be divorced from the Southern Pacific Company. Not to do so would far more than counterbalance the Panama handicap. It would then so far press the advantage against the other railroad connections into Ogden from the east as to jeopardize their future. The situation is so rigid that it may be otherwise stated in the form of a syllogism: Given equality of competing strength of the Santa Fe and Southern Pacific, and ffiven also merger of the Rock Island and Southern Pacific systems, then — (1) If the Central Pacific remains a part of the Southern Pacific system, and the Santa Fe and the Denver & Rio Grande (Western Pacific) are combined, 'the Union Pacific is not only completely eliminated from San Francisco, hut is also threatened both at Los Angeles and Seattle. For it will stand only as part of a broken direct through route, with its essential connection to San Francisco controlled by a competitor (the Southern Pacific) having one complete indirect route of its own via El Paso, and another direct one almost joined up, by way of Ogden (the only link lacking, with Rock Island entrance to Denver, being between Ogden and that point). The only choice under these circumstances to save the Union Pacific from being pocketed would be to cut off the Denver division of the Rock Island. Or else — (2) If the Central Pacific be transferred from the Southern to the Union Padfic, this alter- native jeopardizes the Southern Pacific everywhere in California by withdrawing its Central Pacific Ogden link, while coincidently adding a new Ogden link to its deadly rival, the Santa Fe, creating thereby a new direct through line. Either way you treat the Central Pacific, a complete upset of the competitive equilibrium results. The conclusion is inescapable that the Burlington rather than the Santa Fe must be charged with sponsorship for the Denver & Rio Grande (Western Pacific) route. These wearisome general considerations, then, all go to fortify the opinion that a northern and not a southern affiliation for both of the Ogden bridge lines will tend most effectively to produce an evenly matched rivalry all round. In brief, the con- clusion is reached that the Burlington and not the Santa Fe should be elected as the David to meet the Goliath of the Union Pacific on its own ground. The situation must now be viewed from the eastern end. Inasmuch as there are only three transcontinental roads in the northern group, all naturally based upon the twin cities, there can not possibly be more than three northwestern through systems; and the express terms of the statute as to competition do not permit less than two. But the choice between the alternative, two or three, depends in part upon the avail- able first-class Chicago connections, suitable for the stems of such transcontinental systems. There are only four of these, traceable on map 14. Two are the water-grade Mississippi River lines of the Burlington, on the left bank, and the St. Paul, on the right bank. Then, across Wisconsin there is the Soo line (Minneapolis, St. Paul & Sault Ste. Marie) and the line of the Chicago & North Western system through Madison. Another route across Iowa, possibly also deserving consideration as a connection between St. Paul and Chicago, is that of the Chicago Great Western. This also is dotted upon the map. And the Rock Island has a competitive line, but it is so much more circuitous that it may well be ignored in this connection (See table on page 574.) The distances, Chicago to the twin cities (St. Paul) by these several routes, constitute one factor in their availability. These are as follows: Chicago & North Western via Janesville 396. 1 miles. Chics^o & North Western via Milwaukee 408. 9 mile?. Chicago, Milwaukee & St. Paul via Janesville 40S.8miles. Chicago, Milwaukee & St. Paul via Milwaukee 410 miles. Chicago G reat Western 424. 7 miles. Chicago, Burlington & Qnincy 430. 8 miles. Minneapolis, St. Paul & Sault Ste. Marie 450.7 miles. Chicago, Rock Island e of the joint system is relatively much narrower than that which would result from other groupings. It has been calculated roughly tliat the St. Paul west of Wisconsin, combined with the Northern Pacific, would serve an area of 630,000 square miles. Combined with the Great Northern, owing to the wider sep- aration between the main stems, this area would amount to about 730,000 square miles, about 16 per cent more territory. But as against this, the territory of the Northern Pa(»ific is more fully developed than that of the Great Northern, because of its longer life. In either event, it is believed that the objection springing from the almost complete obliteration of competition by merger is conclusive in and of it- self. Almost ever>' advantage except that of economy and efficiency from joint opera- tion attaches to a consolidation of the Chicago, Milwaukee & St. Paul with the Great Northern Railway. The two lines instead of being locally competitive, and keenly so, are in several ways supplementary. This is made clear by map 17. The two main stems are so far apart that they give a wide comprehensiveness to the system as a whole. There are very few points locally except Great Falls and Lewiston, Mont., where the two roads meet; although of course, on tlirough business at Spokane, Seattle, etc., the condition is practically the same as with the Northern Pacific. As to branches and feeders, the Great Northern is materially more developed at the west- ern end than the St. Paul, and its numerous feeders through North Dakota add to, rather than duplicate, the St. Paul lines. The lines and terminals of the Great Northern at Duluth and Superior appreciably strengthen the slight connection through trackage which the St. Paul now has with those important points. And this merger has certain decided advantages as to terminals over the St. Paul-North- ern Pacific combination. Both the Great Northern passenger station at Minneapolis and the joint line between Minneapolis and St. Paul could be directly used, avoid- ing a back-up lor passenger trains and very expensive track-elevation proposals. Financial considerations of weight also favor grouping the Great Northern rather than the Northern Pacific with the St. Paul. The St. Paul for the year 1917 earned (in operating income) only 4.43 per cent on its investment (of. exhibit 6). The Northern Pacific earned 6.08 per cent, as against the Great Northern with 7.09 per cent. The same results comparatively are disclosed by average annual results for a 10-year period. The St. Paul for 1910-1919 inclusive had a surplus above dividends of only $1,062,678; the Northern Pacific $5,148,233; while the Great Northern produced a surplus of $6,039,693. The strength of the Great Northern, comparatively, consists of its low proportion of funded debt to total capitalization. This appears in the following table of funded debt outstanding and ratio to total capitalization: 63I.C.O. CONSOLIDATION OF RAILROADS. 571 Year. Chicago, Milwaukee St. Paul. Great Northern. Northern Pacific. Chicago, Burlington & Quincy. Debt. Ratio. Debt. Ratio. Debt. Ratio. Debt. Ratio. 1910 $147,807,600 192,860,655 227,599,155 299,554,755 331,227,455 356,146,655 356,157,255 380,833,255 381,961,255 379,255,255 Per a. 38.97 45.44 49.53 56.39 58.75 6a 42 60.45 62.04 62.07 61.92 $109,385,900 144,441,909 143,757,909 143,655,900 143,478,900 143,391,909 143,275,758 163,140,515 163,051,515 162,910,515 • Perd. 34.3 40.8 40.6 40.6 38.4 36.5 36.5 39.5 39.5 39.5 $190,952,500 190,325,500 191,365,500 192,352,500 194,737,500 206,479,000 205,922,000 203,474,000 202,713,000 202,108,000 Perd. 43.5 43.4 43.5 43.7 44 45.5 45.4 45.1 45 44.9 $196,787,300 200,459,800 199,196,200 197,245,400 203,222,900 181,690,000 179, 858, 500 174,972,200 174,599,300 168,050,000 Peret. 63.9 1911 64.4 1912 64.2 1913 64 1914 64.7 1915 62.1 1916 61.9 1917 61.2 1918 61 2 1919 60.2 Again the Great Northern heads the list with only 39.5 per cent of funded debt to total capitalization for 1919. This compares with 44.9 per cent for the Northern Pacific and 61.92 per cent for the St. Paul. Assuming that these companies are not to require financial reorganization, but would be merged by exchange of securities as they stand, it is obvious that the best balance as to margin of safety of earnings above fixed chai^ges, would be produced by combining the road with the lowest proportion of funded debt (the Great Northern) with the one having the highest proportion (the St. Paul); both set off against the Northern Pacific, which occupies a mean position in this regard. Furthermore, viewed over a term of years, the fixed charges proportionately have been rising most rapidly on the St. Paul, and appre- ciably so on the Northern Pacific, while on the Great Northern they have remained constant. The fundamental test of financial stability, namely, margin of safety above fixed charges, commends the Great Northern-St. Paul combination. The same result is disclosed by the figures as to capital stock and total capitalization per mile of line. This, again, appears by the accompanying tables as to capital structure. A combina- Items. Capital structure. Capital stock Funded debt Total capital Capital stock per mile of road Funded debt per mile of road Total capital per mile of road Property investment account Road and equipment less depreciation Improvements on leased lines Investment in affiliated companies Other investments Total investment Income account. Standard return Other income Gross income Fixed charges. ..'. Net income Dividends ^ Balance Chicago, Mil- waukee & St. Paul and Great Northern (18,400 miles operated). $482,728,950 542,165,770 1,024,894,719 26,220 29,480 55,700 1,001,052,180 5,157,465 126,679,491 32,980,702 1,165,860,828 56,632,792 6,069,419 62,702.211 29,319, < 42 33,382,469 25,572,095 7,810,374 Chicago, Mil- waukee & St. Paul and Nor, Pacific (16,772 miles operated). $481,251,800 581,363,255 1,062,615,054 28,700 34,630 62,300 1,088,085,964 11,172,341 77,396,237 47,918,431 1,224,572,973 58,035,511 6,610,572 64,645,783 31,736,202 32,909,581 25,469,206 7,440,375 ^ Annual dividends at the rate of 7 per cent on St. Paul preferred stock are herein included. 63I.C.C. l^ 672 INTERSTATE COMMERCE COMMISSION REPORTS. tion of the St. Paul and the Great Northern yields total capitalization per mile of road of 155,700, as against the figure of $62,300 for the St. Paul combination with the Northern Pacific. But of course this comparison is hardly fair; because the Northern Pacific in turn is to be merged with the Burlington, according to this plan. Com- parison should be made therefore with the final combination. This is impossible until a decision is had upon the pending application of the Burlington to capitalize its surplus. But it is believed that on the whole the conclusions as above stated would be borne out by more detailed and careful computations. m Percent of Capital Stock and Funded Debt of total capitalization CMft STP-©TNOR. SYSTEM c&a Q.-NOR.n%c SYSTEM « n ti 49 «J. • V» SX3% tctik AA t •a D CAPITAL STOCK PUNOED DEBT" M CBJtO. Jfc45 m* wttMti in f\>na«Tnent by the Central Pacific Railway Company of a proportion of the expense of maintenance and operation of said Une of railroad, with its termi- nals and other appurtenances. • Said contract shall contain substantially the terms expressed in, and shall be substantially in the form of, the draft of contract hereto attached and marked Exhibit B, except such changes in said form as shall be made by the parties and approved by the Railroad Commission of California. 14. From the effective date hereof the Central Pacific Railway Company shall be entitled to trackage or running rights for a term of 999 years over the line of railroad of the Southern Pacific Railroad Company and Southern Pacific Company between Redwood and San Francisco, for the operation of through freight trains only, without right to do local business— Redwood to be considered local to Southern Pacific Com- pany—with an option, however, to the Central Pacific Railway Company to with- draw from such trackage or nmning rights at any time within two years from the effective date hereof; the rental to be paid by the Central Pacific Railway Company for such trackage or running rights to be determined by arbitration in the manner hereinafter provided, if the parties hereto are unable to agree thereon. 15. Union Pacific Railroad Company and Central Pacific Railway Company hereby apee that the Central Pacific Railway Company shall, and Central Pacific Railway Company does hereby, grant to the said Southern Pacifac Company and said Southern Pacific Railroad Company, or either of them, an option for a period of two years from the effective date hereof to acquire the equal joint use and possession, for the term of 999 years, of the railway owned by the Central Pacific Railway Company, from Newark to Redwood, California, and the appurtenances thereof, except rolling stock and supplies, upon the same terms, conditions and rights provided in the foregoing Sec- tion 13 with reference to the joint use and possession Ojf the line of railroad between Sacramento and Oakland. Such use shall extend to the cars or trains of any corporar tion owned or controlled by the Southern Pacific Company. Fourth. 17. From the effective date hereof, the terminals of the Southern Pacific Raifroad Company (or the Southern Pacific Company) and the Central Pacific Railway Com- pany at all junctions of thefr respective lines within city limits, including industry tracks, shall become and be subject to the joint and equal use of both parties, their 63 I. C. C. I 584 INTERSTATE COMMERCE COMMISSION REPORTS. CONSOLIDATION OF RAILROADS. 585 i ^ 9 lessees or assigns, for a tenn of 999 vears, with the option to either party to withdraw from its use of any of the terminals of the other at anv time within two years from the effective date hereof, and the maintenance and opsrating expenses and taxes thereof shall be apportioned by agreement or by arbitration. The value of such terminals when owned exclusively bv one party, and the difference in the value when jointly owned by several parties, shall be ascertained by arbitration, if the parties hereto are unable to agree thereon, and a rental upon the value, or the excess value, as the case may be, at the rate of two and one-half per cent, shall be paid for the use of such terminals bv the tenant company. The foregoing grant and provisions contained in this section shall extend in all respects, in favor of the Central Pacific Railway Company, to the freight terminals of the Southern Pacific Railroad Company and of the Southern Pacific Company, including roundhouses and shop facilities for light and temporary repairs, in tne City and County of San Francisco, but not in- cluding shops or roundhouses at other points: and, in favor of either the Southern Pacific Company and Southern Pacific Railroad Company on the one part, or the Central Pacific Railway Company on the other part, to all freight and passenger terminals at Oakland, Oakland Mole, Alameda and Alameda Mole, and all femes between Oakland and San Francisco, and Oakland Mole and San P'rancisco, and Alameda Mole and San Francisco, and ferry slip and landings in San Francisco, and the passenger buildings adjacent thereto, owned or leased by the other of said parties. But the ownership and operation of electric lines, and stations and terminals thereon, are to remain as at present until otherwise disposed of, with an equitable apportion- ment of the earnings and expenses in the meantime. 18. The Central Pacific Railway Company agrees that it will use and employ its shops and shop facilities, roundhouses and other appurtenances at Sacramento, Oakland and other points in California for the repair and maintenance of the engines and cars and for other shop work of the Southern Pacific Company and the Southern Pacific Railroad Company in the same manner as it uses and employs the same for the repair and maintenance of its own equipment and for its own other shop work, without discrimination, for five years from the effective date hereof; the compensation of said Central Pacific Railway Company for the repair and shop work and shop facilities to be fixed upon some equitable basis, including a return upon the value of the plant, and if the parties are unable to agree upon such compensation the same shall be determined by arbitration as hereinafter provided. Fifth. 19 The Southern Pacific Company hereby agrees to sell, assign and transfer to the Union Pacific Railroad Company, and the Union Pacific Railroad Company hereby at^rees to purchase, immediately upon the effective date of this agreement, $3 000 000, face value, of First Mortgage Bonds of the Central California Railway Company, $1,000,000, face value, of First Mortgage Bonds of the Chico and Northern Railroad Company, $8,500,000 face value, of First Mortgage Bonds of the Nevada and California Railway Company, $2,500,000, face value, of the First Mortgage Bonds of the Sacramento Southern Railroad Company, and $3,084,252.33, face value, of Extensions Purchase Notes of the Central Pacific Railway Company, dated March 1 1912 now held by the Southern Pacific Company, for and in consideration of the payment by the Union Pacific Railroad Company of a sum equal to the aggregate principal amount of said bonds and notes, together with the accrued interest thereon, (except that the consideration for the purchase of said First Mortgage Bonds of the Chico and Northern Railroad Company shall be the book cost thereof to the Southern Pacific Company), and the Southern Pacific Company agrees to deliver to the Union Pacific Railroad Company the bonds and notes aforesaid; and the Southern Pacific Company further agrees to sell, assign and transfer to the Union Pacific Railroad Company, and the Union Pacific Raih-oad Company agrees to purchase, at the face value thereof and accrued interest, all other indebtedness of the Central Pacific Railway Company to the Southern Pacific Company, on account of advances or otherwise, representing expenditures for construction and betterments made since the 29th day of February, 1912, and on account of materials and supphes not paid for out of earnings, in connections with the lines of railroad formerly owned respec- tively by the Central California Railway Company, Chico and Northern Railroad Company, Nevada and California Railway Company, Sacramento Southern Railroad Company, Goose Lake and Southern Railway Company, Fernley and Lassen Railway Company and Modoc Northern Railway Company, acquired by the aforesaid, each dated February 29, 1912. 63LO.O. Supplementary agreement, dated March Uj 1913 {not executed). Section 4. That all of the provisions contained in Sections 13, 14 and 15 of the Original Agreement are hereby abrogated and annulled . Section 5. That Section 16 of the Original Agreement is hereby modified and amended by striking out the following words at the beginning of said section, viz: "During the continuance of the option rights in regard to trackage or joint use or" Section 6. That all of the provisions contained in Section 17 of the Original Agree- ment are hereby abrogated and annulled. Section 7. That the parties hereto hereby agree upon the following additional provisions to be inserted in the Original Agreement and numbered respectively Sections 17-A, 17-B, and 17-C. ^ .^ Section 17-A. Prior to the effective date of the surrender by the Southern Pacific Company of the possession of the railroads of the Central Pacific Railway Company, the Southern Pacific Company and the Central Pacific Railway Company will file with the Railroad Commission of the State of California tariffs, effective upon the effective date of such surrender,. of joint rates and fares for the transportation of freight and passengers between all points in the State of California between which the Southern Pacific Company had tariffs in effect on February 24, 1913, whether over the raiboad lines of the Central Pacific Railway Company or other lines operated by the Southern Pacific Railway Company, which said joint rates and fares shall not exceed the rates and fares of the Southern Pacific Company between the same points on file with the said Railroad Commission on said 24th day of February, 1913. The Southern Pacific Company and the Central Pacific Railway Company, respectively, will also file with said Railroad Commission, effective upon the effective date of such surrender, their tariffs of local rates and fares between points within the State of California so far as such new tariffs shall be required by reason of the altered conditions as to the ownership and operation of railroad lines resulting from Original Agreement or from this Supplementary Agreement, which rates and fares shall not exceed the rates and fares in effect between said points on the 24th day of February, 1913, over the lines then operated by the Southern Pacific Company. Section 17-B. The Southern Pacific Company intends to route all interstate traflSc having origin or destination in the State of California at Santa Barbara or Mojave or points north thereof over its lines via Los Angeles, so far as it may be able to secure the routing of the same via its lines, but as to all such traffic, which it cannot so secure it hereby agrees to preferentially solicit and route the same via the through routes composed of its own lines and the lines of the Central Pacific Railway, Union Pacific Raiboad and Oregon Short Line Railroad Company if not otherwise routed by the shipper or consignee. And the Central Pacific Railway Company, Union Pacific Railroad Copipany and Oregon Short Line Railroad Company intend to route all interstate traffic having origin or destination in the State of California at Santa Barbara or Mojave or points north thereof over their own lines, so far as they or either of them, may be able to secure the routing of the same via such lines; but as to such traflfic which they, or either of them, cannot so seciite, they, and each of them hereby agree to preferentially solicit and route the same via the through routes composed of their own lines respectively and the lines of the Southern Pacific Company if not otherwise routed by the shipper or consignee. Section 17-C. The Southern Pacific Company intends to route via its own lines all traffic having origin or destination at points in Oregon so far as it may be able to secure the routing of the same via its lines, but as to all traflfic moving through the Portland gateway which it cannot so secure it hereby agrees to preferentially solicit and route the same via the through routes composed of its own lines and the lines of the Oregon-Washington Railroad & Navigation Company, Oregon Short Line Railroad Company and Union Pacific Railroad Company, if not otherwise routed by the shipper or consignee, at equal divisions of rates. And Union Pacific Railroad Company and Oregon Short Line Railroad Company for themselves and as owners of all the capital stock of the Oregon-Washington Rail- road & Navigation Company hereby agree to solicit and route all traffic moving through the Portland gateway to or from points in the State of Oregon south of Portland via the through routes composed of their own lines and the lines of the Southern Pacific Company, if not otherwise routed by the shipper or consignee, at equal divisions r.f rates. Equally worthy of attention is the objection to unmerger that it is not desired either by the shipping or the general California public. In other words, it is alleged, and seems actually to be a fact, that the California authorities, expressive of public eenti- 63 1. C. C. I • 1 I i If I ii p' 586 INTERSTATE COMMERCE COMMISSION REPORTS. CONSOLIDATION OF RAILEOADS. 587 ipi' ! FmRf 4* ' ment, still hold to the view above quoted from an opinion of the railroad commission. To this view, as part of a national plan, two answers may be given. The fu^t has, in fact, already been stated. It is that disturbance temporarily of established condi- tions, and perhaps long-time prejudice to the conduct of strictly local business — traffic to and fro from points on the Pacific slope — may be expected; but that the compensating advantage of a keener rivalry for traffic with the outside world may ensue. But what about the other motive in public sentiment? This concerns the natural desire of state authorities and of the California shipping public to control the local situation. So long as the Central Pacific is a part of the Southern Pacific system, a large fraction of the lines jointly owned by both are subject to the jurisdic- tion of the state of California. The withdrawal of the Central Pacific and transference of ita ownership and management to the Union Pacific, which is but slightly repre- sented by mileage in California, would materially lessen the weight in its councils of local opinion and authority. This is a real objection from the point of view of California: but it can not be allowed to interfere with national policy. The conflict of state and federal government is again in evidence at this point; and it is confidently believed that the claim of the nation is paramount to that of the locality. Dissolu- tion, obviously, if ever effected, must be carried out with due regard to this local opinion. But it is not believed that this objection locally should be allowed to pre- vail. Along with the Central Pacific lines there are a considerable number of isolated branches. Those which appear to belong to the Central Pacific are as follows; known as the Placerville, lone, Valley Springs, Raymond, Madera, and Oakdale branches. These are matters of detail, but are instanced in order to show the likelihood of a decision being called for in the event of final consummation of a consolidation program. Summarizing, the resultant layout in California, after unmerger of the Central Pacific and the Southern Pacific, will leave the following lines as depicted on map 23 in the Southern Pacific system. The smaller map on page 576 supray already utilized in discussion of Central Pacific affairs, shows it more in detail. There will be a through line to Tehama and on to Portland, with existing trackage to Seattle, together with the spur from Weed, This latter is important as extending toward a connection some dav from the north down the Deschutes River. The Southern Pacific will also have full running rights from Brighton, near Sacramento, to Lathrop, Niles, Red- wood, and Oakland, thus completing a through line the length of California and into San Francisco. But decision is reserved for further examination, as to whether it would cripple service, wholly to exclude the Southern Pacific from the line from Lathrop down the west side of the San Joaquin Valley to a Southern Pacific connec- tion again at Goshen. The important point is that service shall not be prejudicially affected by too drastic an attempt at separation. Cooperative utilization under a pooling arrangement for the two lines down the San Joaquin Valley would probably suffice. In exchange, the Southern Pacific should give full privileges to the Central Pacific from Redwood into the San Francisco terminals, together with a grant of equal running rights over the Benicia cut-off line from Sacramento to Oakland. In this cut-off the Western Pacific should also participate. What shall become of the Southern Pacific lines in Oregon? North of the California boundary they are separately incorporated as the Oregon & California Railroad. The location appears in relation to the Southern Pacific and also to the Union Pacific systems on maps 15 and 23, respectively. The geographical circumstances should be understood . The watershed along the summit of the Siskiyou Range follows the north- em boundary of California. But the natural separation from a transportation stand- point between the two properties occurs at Tehama, Calif. This is the head of the fertile Sacramento Valley and the beginning of the canyon or bridge line. It is stoutly urged that these lines, either north of California or north of Tehama should be 68LC.C. transferred from the Southern Pacific Company to the Oregon Short Line, thus also forming part of the Union Pacific system. The argument therefor is largely an operat- ing one, and there are substantial precedents for such action. Under the Harriman regime, when all the lines throughout this territory were corporatively united the Oregon & California Railroad was managed as a part of the Union Pacific system. A similar policy was pursued by the federal Railroad Administration, and the then regional director recommends that this policy be pursued. Furthermore, it is repre- sented that public opinion along the Willamette Valley, traversed by these lines, strongly favors such segregation. The argument in all these cases is that the Siskiyou Range is a difficult watershed to cross. The natural flow of traffic, it is alleged, is down hill to the north from the CalifOTnia boundary, and thence out to the east by the Or^:on Short Line; and, similarly, that southbound traffic should move toward San Francisco from the frontier. Complaint is cited of car shortages in the Willamette r^on, due to this cause. It is alleged that there is heavy tonnage, lumber and the like, out of this territory, and that this calls for a constant inward flow of empty cars. The lumber loaded thereon moves from the Willamette Valley either to Omaha, St. Paul, etc., or else southward to California, Arizona, and New Mexico. The empties, it is alleged, under Southern Pacific management, even for eastbound traffic over the Oregon Short Line, must climb over the summit of the Union Pacifio-Central Pacific line, and then up through northern California and over yet another high range into Oregon. And inasmuch as the Southern Pacific only enjoys the short haul on this directly eastbound business, a consistent neglect to provide an adequate supply of empty cars is alleged. The net effect, it is said, is to discourage lumber movement to the eastern market, as against the one located along the main Southern Pacific lines. All told, the gist of this contention is that operating efficiency would be pro- moted were this segregation to take place, and that a broader lumber market would also necessarily result. The Southern Pacific {vigorously combats [this proposal. A [heavy investment, of long standing, [has been made. It is alleged that the ability of the Southern Pacific to compete effectively in Oregon with the other transcontinental routes would be destroyed by dismemberment. The Southern Pacific line through northern Cali- fornia was constructed, it appears, with a view to continuous operation through into Oregon; and amputation would leave these lines in the air at the California boundary. A comprehensive analysis of traffic on the Oregon lines is offered in orderjtoshow that the principal business hereabouts is north and south rather than east and west. Of the total number of passengers picked up on the Oregon lines over 80 per cent are said to be ticketed to stations on the existing Southern Pacific system. Less than 20 per cent of the passengers from points on these lines to other destinations are noted. Over 80 per cent of the carloads of freight are alleged to be picked up or delivered at or to stations embraced in the present Southern Pacific system. Certain other details con- cerning traffic are set forth in the following memorandum: Four passenger trains in each direction are operated daily between Portland and San Francisco, which now nin over a single system, that would have to be operated over two systems if the Oregon lines were sepa- rated from the Southern Pacific. These trains earn an average of approximately $4.23 per train mile, which earnings are not approached by any East or Westbound transcontinental train. They indicate the volume of the north and south passenger business. Of the total number of carloads of freight picked up or delivered at points on Southern Pacific lines in Oregon, more than 80% are to or from stations in Oregon, California, Nevada, Utah, Arizona and New Mexico— the service bein{f performed almost entirely by the "Ines embraced in existing Southern Pacific System. Of the total nimiber of carloads of freight picked up or delivered at points on Southern Pacific lines in Oregon, less than 20% originate at or are destined to points north and east of Portland, Ogden and El Paso. These include all carloads to and from American and Canadian Northwest which are delivered at Portland to or by the Northern Pacific, Great Northern and Chicago, Milwaukee & St. Paul. They include all car- loads to and from the Middle West and East which are routed via Ogden, the Denver & Rio Grande and its Eastern connections, and all carloads which are routed via El Paso and the Rock Island, as well as the 63 I. C. C. I I ? I tf I f\ 688 INTERSTATE COMMERCE COMMISSION REPORTS. Texas Pacific. They also include all carloads from and to points in Mexico served only by the i-'outhem Pacific Railroad of Mexico, and all carloads routed via El Paso to and from all points in Louisiana and Texas (including points in the Republic of Mexico interchanged by Southern Pacific at Rio Grande cross- ings and of carloads interchanged with ocean lines at Gulf ports) as well as of carloads routed via the steam- ship lines of the Southern Pacific Company between Gulf ports and the Atlantic Seaboard— the diversion of which would materially reduce the revenue of these lines and the Southern Pacific System as a whole This is certainly an impressive exhibit, coupled with the possible effect upon through service of substituting two new sets of terminals at junctions for the present terminals at Portland and San Francisco. The only point not successfully met is the alleged effect upon the lumber mark3t. The precise details of administration under the Harriman and federal r^mes should be analyzed. The possibility even of the withdrawal of through rates from and to these points via the Central Pacific route, in order to confine movement of the Oregon traffic through Portland, must ba con- sidered . 1 1 seems preferable without detailed examination of these conflicting claims to reserve decision upon this important matter. Further time for comparison of data is necessary. Subsequent investigation and especially a comparison of earning power in propor- tion to investment account, as shown on page 613, infra, for each of the five competing transcontinental systems, gives naming that the Southern Pacific-Rock Island system in order to compete on evenly-balanced terms with its neighbors, despite its present strength, must not be too roughly handled. The accompanying table is significant. It is a statement of total tons passing through El Paso, Ogden, and Portland, during the period March to November, 1920. It shows how very large, relatively, is the ton- nage through both the Ogden and the Portland gateways as compared with the El Paso line. Westbound. Eastbound. ViaEl Paso 802,226tons. 1,046,733 tons. Via Ogden 1,076,395 tons. 1,616,861 tons. Via Portland 571,172tons. 749,557tons. '^^^^ 2, 449, 793 tons. 3, 413, 151 tons. The amputation of the Central Pacific is a real loss. By no means all of this tonnage^ of course, will desert the Southern Pacific, but some portion of it is bound to be taken away. Panama competition will certainly increase, and the roundabout transconti- nental routes can hardly be expected to hold their own unless afforded every encour agement. To take away the Portland traffic also, or even a goodly share of it, in addi- tion to the loss of such part of the Central Pacific traffic as \\ ill be diverted by the new arrangement, would be manifestly unfair. This is peculiarly true in vie^ of the competitive strength of tha Union Pacific and the Burlington as disclosed by our statistical exhibit for 1917. Southern Pacific competition throughout Oregon and up into Washington should probably be left undisturbed. It is, tharefora, finally recom- mended that these Oregon lines remain in the possession of the Southern Pacific-Rock Island system. The several maps are constructed upon this basis. The broadest national interests invite attention to the course of future construction in the great undeveloped triangle, with its western base on Portland-Sacramento and its apex at Salt Lake City. Tliis great domain, bounded on the west and south by the Southern Pacific lines, and on the north by the Oregon Short Line, was apparently marked by the late E. H. Harriman ^ for exclusive development, upon acquisition by the Union Pacific of the Soutliem Pacific in 1901. Then came the invasion from the north by the Hill interests, which projected a line down the Deschutes River, evidently headed toward San Francisco. Harriman retaliated by the Columbia River construction, entered Seattle, and immediately proceeded to parallel the Deschutes River line. His plans contemplated a line (dotted on map 15) from Ontario on the eastern boundary straight across southern Oregon to Crescent Lake, near which a junc- * Cf. Commissioner Lane's report and map, 12 1. C. C, 277 63 1. C. C. CONSOLIDATION OF RAILROADS. 589 tion would be effected with the line down the Deschutes River. The natural con- tinuation of this line to the west would then come out at Eugene, Oreg., on the San Francisco-Portland main line. This construction was lialted by the federal dissolu- tion suits. For, obviously, there was danger that, if built, the line might go to a rival company. From a national point of view, the important line, strategically, is the continuation of the north-and-south Deschutes River line to complete another route between the Columbia River and California. This project is the so-called Oregon Trunk Railway. It would come out at the southern end by Klamath Falls, and so on to a connection at Weed witlf the Southern Pacific at San Francisco. The larger significance of this project is that it would provide the Pacific coast with at least two through lines of railway to connect California and Washington. Southern California has three railroads north and south, parallel to the coast. Northern California and Oregon, at the narrowest point in Oregon, have only one complete through line. Two roads are built part way; but from Tehama to Eugene there is but a tenuous line of communication. A trestle blown up, or a tunnel wrecked, in time of war would com- pel military communication to take place by encircling the entire huge triangle east to the Great Salt Lake. The need of such another interior north-and-south line of communication was clearly demonstrated in the late war. North, in Washington, the military necessities are adequately covered. Complete protection would not be afforded, however, merely by effecting a junction of the Oregon Trunk Railway into Weed. Tliere would still be a little stretch in northern California with but a single line of communication. The program ultimately necessary for completion of an entire interior line of communication should be the reconstruction of the Nevada-California Oregon Railway (map 16) from Reno, Nev., north, acquired by the Western Pacific in 1917; bringing it to standard gauge; and then completing it to a connecticn from the north with the Deschutes line. Thus would be provided a military detour route wliich might be of great importance in time of need. The only foreshadowing conclusion which may be ventured as to the great unde- veloped area in and about southern Oregon, is that it probably ought to fall rather under the control of the Union Pacific and Burlington-Northern Pacific systems, than that it should be developed by the St. Paul-Great Northern system. The extension southward of this last system has hardly the justification which attaches to an attempt of either of the other great systems to unite the western ends of their transcontinental stems to Seattle and San Francisco, respectivel^^ Unless indeed, viewing the matter still more broadly, it should be held desirable that at some future time the St. Paul- Great Northern system should reach San Francisco by rail from the north, just as the two great southwestern transcontinental systems attain it from the south. Then, indeed, the scheme for evenly balanced competition all round, would be complete. But it is yet a long way from the railhead of the Oregon Trunk Railway down the Deschutes River to San Francisco. Rather does it seem desirable that the interior north-and-south line should be pushed up from the Western Pacific at Reno, and perliaps down from the north by a line down the Deschutes River under Northern Pacific auspices, to effect the junction. The foregoing projects for penetrating the great undeveloped area in southern Oregon manifest a keen competition between all of the great interests. The Union Pacific is intruding from the east; the Southern Pacific (Oregon & California Railroad) is coming in from the west; the Hill and Union Pacific lines follow the Willamette and Deschutes rivers down from the north; while from +he south, at Reno, the Western Pacific (Burlington-Northern Pacific, under this plan) and the Southern Pacific by Klamath Lake, are pressing forward to effect a junction in the interior. Shall zones of influence be laid out in advance, or is the wiser course to encourage construction by a grant of wide latitude? The issue is bound to arise upon application for further 63 1. C. C. 590 INTERSTATE COMMERCE COMMISSION REPORTS. CONSOLIDATION OF RAILROADS. 591 < j construction. But at this time it is re-ommended that no general policy as to control be foreshadowed . Ultimately, of course, it is to be hoped that the great systems reach« ing the coast in Washington and California, respectively, shall be linked up by north- and-south connecting lines. But as yet it seems too early to declare just which lines shall be elected for that purpose. This plan contents itself, therefore, merely with emphasizing the national interest in the completion of an interior line of communica- tion parallel to the coast, reserving details for future consideration. What bounds shall be set to the zone of influence of the Oregon Short Line in the northwest, in order to balance up conditions? Shall the Union Pacific system con- tinue to extend from Portland north into Seattle, by means of the existing trackage contract with the Northern Pacific? When the Oregon Short Line competes at Seattle with the Great Northem-St. Paul system, it must do so for the same trans- continental through rate as at Portland, although there is a lateral haul of 150 miles without compensation. This looks like a premium set upon roundabout haulage. But, on the other liand, under the new conditions set up by this plan, the Burlington- Northern Pacific combination, set up as a counterpoise to the Union Pacific, will be left unbalanced against it at Seattle unless the Union Pacific is also admitted. It would appear as if an equipoise would best be promoted by continuation of the existing trackage riglits to the Oregon Short Line into Seattle, coupling this with such an adjustment of rates as to discourage roundabout hauling. The activities of the Union Pacific in the northwest ought not fairly to be circumscribed short of the same competitive opportunities wliich attach to its great rival, the Buriington- Northern Pacific. To drive the Union Pacific entirely out of Seattle, while also not giving it the Oregon lines of the Soutliern Pacific, would manifestly constitute most unfair discrimination. Tlie desirability of balancing conditions in the north- west in this manner constitutes an additional reason to those already cited, for the transfer of the Southern Pacific lines in Oregon to its system, the point upon which final derision was however rendered in the negative. It would doubtless contribute to more effective operation of the Union Pacific system as well as to promote competition, were full and equal trackage rights to be accorded by the Colorado & Southern Railroad from Orin Junction, Wyo., south to Cheyenne. Duplication of the line is apparently unnecessary at the present time. To the same end there ought to be trackage on the Burlington line (compare map 16) from Pratt, the end of a Union Pacific stub, also up to Orin Junction. Thus again it would appear as if more effective operation might be promoted without the necessity of duplication of an existing line. The Union Pacific Railroad has a substantial investment in the Chicago & Alton. For a decade, to 1919, it has held 110,343,100 par value of the preferred stock of this road. And in 1912, in order to further safeguard this investment by financing the needs of the Alton, the Union Pacific Raih-oad acquired one-half of a substantial amount of its general-mortgage bonds. Subsequently additional bonds were taken, the aggregate in 1919 being upwards of $8,000,000. It is recommended that tliis control be transferred, as elsewhere set forth, to the Gulf system of the St. Louis- San Francisco system (page 627, infra), in order to afford a direct entrance into Chicago. The Chicago, Burlington & Quincy Railroad has been selected as the Chicago connection for the Northern Pacific and also as the main stem of the second trans- continental line set up for competition with the powerful Union Pacific-Chicago & North Western combination . The reasons , based upon both the broadest consid era tion of western transcontinental conditions and of local situation in the northwest, have been already set forth. It is next in order to develop the necessary relationships within this great system, which ramifies throughout the far west almost as broadly as its great competitor. The geographical location is shown in detail by map 16. As 63 1. C. C to the northwest, the justification for alliance with the Northern Pacific appears in the two routes across Wyoming to Billings, Mont. The traffic interchange with the Burlington at this point, although the Great Northern comes down directly through Great Falls, Mont., is very heavily in favor of the Northern Pacific as against th*- Great Northern. The course of this interchange since 1896 is manifested by the accompanying table of interchange of freight traffic at Billings. From this it appears that the Burlington received from the Northern Pacific in 1919 much more than double the tonnage received from the Great Northern, and that it delivered to the Northern Pacific almost three times as much traffic as to the Great Northern. Ton- nage is stated in tons of 2,000 pounds. Year. 1896. 1897. 1898. 1899. 1900. 1901. 1902. 1903- 1904. 1905. 1906. 1907. Received by Chicago, Bur- lington & Quincy from— Great Northern Northern. Pacific. Total. Tons. 1908 » 23, 514 1909 168,957 J910 228, 644 1911 202, 516 1912 213,290 1913 197, 17S 1914 205,672 1915 277,036 1916 303,925 1917 310,651 1918 354,493 1919 392,023 Tom. 86,994 137,610 122,202 140, 742 172. 512 261,630 339,354 341, 118 366, 135 476, 720 528, 034 513,900 463,092 482,473 481,956 394,469 406,240 422,411 420, 224 494, 129 698,490 871,941 803,473 961,887 Tons. 86,994 137,610 122,202 140,742 172,512 261,630 339,354 341, 118 386, 135 476,720 528, 034 513,900 486,608 651,430 710,610 598, 985 619,530 619,589 625, 896 771, 165 1,005,415 1,182,592 1, 157, 966 1,353,910 Delivered by Chicago, Bur- lington & Quincy to — Great i Northern Northern. Pacific. Tons. U,907 97,912 152, 793 ISO, 891 170,472 206,308 155,331 185, 104 318, 177 424, 638 293, 565 229,698 Tons. 22,071 43,014 55, 735 66,704 76, 178 93, i93 lO;-*, 505 146, 263 167, 159 273,892 369,9Si7 499,273 345,098 389, 561 439,437 265,286 311,482 375, 242 310,389 358,610 577, 756 674,366 637,853 636,954 Total. Tons. 22,071 43,014 55,735 66,704 72, 178 93, 593 108, 505 146,263 167, 159 273, 892 369,987 599,273 350,005 487, 473 592, 230 440,157 481,954 581,550 465, 720 I 543, 714 I 875,933 11,099,004 I 931,418 866,652 Total interchange. Great Northern Tons. Northern Pacific. 128,421 266,869 381,437 383, 407 383,762 403,486 361,003 462,140 625, 102 735, 289 648, 058 621,721 1, Ton<(. 109,065 180,624 177,937 207,406 244,690 355,223 447,859 487,381 533,294 759,612 898,021 113, 173 808,190 872,034 921,403 659,735 717, 722 797,653 739,613 852,739 256,246 546,307 441,326 598,841 Total. TonJi. 109,085 180,624 177,937 '207,406 244,690 355,223 447,859 487,381 533,294 750,612 898, 021 1, 113, 173 836,611 1,138,903 1,302,840 1,043,142 1,101,484 1,201,139 1,091,611 1,314,879 1,881,341 2,281,596 2, 089, 384 2, 220, 562 ' Connection with the Great Northern was completed October, 1933. There can be no doubt as to the course of this natural current of traffic to the north- west. These two routes are a competitive counterpart for the Oregon Short Line in the other great rival Union Pacific system. The Colorado situation must be examined in detail. At present the Burlington route to the Pacific coast by way of the Denver & Rio Grande at Pueblo, is most indirect. Of the six lines into the Denver district, shown on map 14, it is one of the most roundabout. Three others leading to Colorado Springs or Pueblo direct are shorter. But the choice under this plan is made not for the immediate present, but as part of a national policy for the future. The bulwark of the Rocky Mountains behind Denver is bound to be overcome before long by the construction of a penetrat- ing direct line toward Salt Lake City. The need of such provision of a through route is imperative, not only for the upbuilding of Denver, but for the satisfaction of national commercial needs. It is not alone that the roundabout twist by way of Pueblo is a waste of distance. The route through by Pueblo, by reason of physical obstacles of grade and curvature, can never be brought to first-class transcontinental standards. It is probably in order to supply this need that the Denver & Salt Lake City project has been so persistent, in the face of seemingly insuperable obstacles. Its location as a short cut west of Denver is shown by a distinctive designation on map 16. The 68Laa «f^ 592 IXTERSTATE COMMERCE COMMISSION REPORTS. CONSOLIDATION OF RAILROADS. 593 M^^ i original project for a through line to Salt Lake City follows the river course out through the northwestern comer of Colorado. But it is said to be feasible, by a short and not difficult piece of construction, to leave the Denver & Salt Lake at McCoy, by the dotted line on the map and to reach the Denver & Rio Grande at Dotsero, Colo. Thus the most difficult portions of the Denver & Rio Grande line are avoided. The heavy grades at Tennessee Pass and Palmer Lake would be eliminated. By a short con- struction of 40 miles, the roundabout route by way of Pueblo would be reduced by 175 miles. The remainder of the Denver & Rio Grande on to Salt Lake City is almost all water grade and could readily be fitted to carry the Burlington load of traffic. But the Denver & Salt Lake Railroad itself is a formidable project, especially where it cuts through the continental divide by the proposed James Peak tunnel. At present its grades and curvatures are prohibitive. In 1913 the Denver tunnel commission estimated a cost of $4,420,000 and a necessarj^ period of construction of possibly five years. The city of Denver authorized $3,000,000 of bonds, but the Colorado supreme court in 1914 declared the authorization to be illegal. Since that time nothing has been accomplished, although a referendum vote in 1920 rejected the project as a mimicipal enterprise by a narrow margin. It seems quite possible that with strong financial support, and the promised traflic which could be guaranteed by a great system, a combination of public and private enterprise might bring the project to fruition. Thus might the great investment in an admirable new trunk line west of Denver to a junction at Salt Lake City with the Western Pacific be made available as a national asset. The Western Pacific with its most favorable grade and curvature, rising only 5 000 feet in altitude by 1 per cent grades, while the Central Pacific rises to 7,000 feet, is only 80 miles longer between San Francisco and Salt Lake City. With the pending reorganization of the Denver & Rio Grande com- petently put through, and the credit of a great system and of the Colorado public jointly employed, the Western Pacific, the Denver & Rio Grande, and the Burhngton might readily become a first-class transcontinental route. It would thus match up, as already shown, with the Union Pacific combination. The only other treatment for the Colorado situation, and one which rather tem- porizes with existing conditions than boldly proceeds to build for the future, would be to link the Denver & Rio Grande and Western Pacific with either the Santa Fe line into Pueblo, or the Rock I si and- Southern Pacific combination into Colorado Springs, Financially the Missouri Pacific is incompetent to afford the necessary strength. But to link this second transcontinental route through the Denver and Salt Lake City openings with either of the two transcontinental routes by way of Arizona and New Mexico, would, as we have seen, completely distort the balance of power which i t is sought by this proposal to set up. To permit the Southern Pacific , retaining hold on the Central Pacific, to combine with the Rock Island would threaten disastrously the Union Pacific system. And to give the Western Pacific route to the Southern Pacific-Rock Island combination, would leave the Union Pacific-North Western powerful combination without a peer in Washington and Oregon. To recapitulate, therefore, the grand strate^ is to produce a combination which shall cover California. Washington, and Ore2fon with a competitive and financial power equivalent to that of the Union Pa-^ific group. This consideration forces the alliance set forth in this general plan. The question of terminals at San Francisco and of California feeders for the Western Pacific is a complicated one. It depends somewhat upon the treatment of the Central Pacific and of the Santa Fe. Feeders will doubtless come in time. But obviously a line to the coast is of no use without adequate approaches to the water front at once. The joint use of essential facilities, which was insisted upon by the California rail- road commission in 1914 at the time of the proposed separation of the Central Pacific 63 1. C. C. from the Southern Pacific, ought to be upheld and developed. This matter is dis- (nissed more fully in connection with Central Pacific affairs, but it is also a general terminal question, worthy of detailed examination as part of a national program. An outstanding characteristic of the Biwlington-Northem Pacific system is the lack of connection between the twin cities and the Missouri River gateways. Confirmation of this is afforded by map 16. As already described, the St. Paul division, up the Mississippi Valley, is as isolated from the rest of the system as is the thumb of a hand from the fingers. It seems desirable to bridge this gap. For this purpose it is recom- mended that the Chicago Great Western be merged with this group. The distances by various routes across this territory appear in the accompanying table. Omaha to St. Paul via— Chicago Great Western 346.1 miles. Illinois Central— Fort Dodge— Minneapolis & St. Louis .'. 365.8 miles. Chicago, St. Paul, Minneapolis* Omaha 390.0 miles. Chicago, Rock Island & Pacific 403.1 miles. Chicago, Milwaukee & St. Paul 456.9 miles. Chicago. Burlington & Quincy— Sioux City— Great Northern 466.5 miles. Chicago, Burlington & Quincy 718.5 miles. Kansas City to St. Paul via— Chicago, Rock Island & Pacific 482.5 miles. Chicago G reat Western 529.0 miles. Wabash— Albia— Minneapolis & St. Louis 578.9 miles. Missouri Pacific— Omaha— Chicago, St. Paul, Minneapolis — Omaha 594.0 miles. Chicago, Minneapolis & St. Paul 599.4 miles. Chicago, Burlington & Quincy— Sioux City— Great Northern 645.8 miles. Chicago, Burlington & Quincy 713.1 miles. The Chicago Great Western is by far the shortest line between Omaha and St. Paul; and between Kansas City and St. Paul it stands second upon the list; whereas the Burlington is one of the most roundabout in each instance. The Great Western and the Rock Island alone operate through passenger trains between Omaha and Kansas City and the twin cities. Furthermore, the Chicago Great Western line from St. Paid to Chicago in future years may well serve as a detour route or as a supplementary means of relieving congestion on the main line. The St. Paul-Great Northern has two trunks, and this arrangement gives its competitor through the twin cities an equiva- lent advantage in operation. The only part of the Chicago Great Western which is superfluous to the Burlington system lies between Des Moines and Kansas City. There is here, unquestionably, duplication. This di\ision, however, admirably supplies a need in the Union Pacific-North Western system, as map 15 discloses, (page 575 infra). In fact, without this addition this latter system lacks entirely a Kansas City-St. Paul direct route. This recommendation as to the Great Western is conditioned, however, upon its drastic reorganization, financially. With a book investment in road and equipment for 1917 of $119,825 per mile of line, it is little wonder that the percentage of net operating income to investment is only 1.75. The net operating income per mile of Une, $1,974, is low, to be siu-e; but as an operating property provided with powerful connections to give it business, it might cease to be a disturbing factor in the western railroad situation within an amplified Burlington- Northern Pacific system. . The Minneapolis & St. Louis may also find a fitting employment in completing the supplementary lines in the Burlington system, along with the Chicago Great Western. Its relation thereto is also shown on map 16. The line of the Minneapolis & St. Louis, west through South Dakota, being connected up along the Missouri River Valley with the not-distant Northern Pacific lines, might afford another short cut across country toward Chicago, thus avoiding congestion at the twin cities. The missing hnk for such a route is supplied by the Rock Island lines in Minnesota and 63 1. C. C. I s y ii I 594 INTERSTATE COMMERCE COMMISSION REPORTS. South Dakota. These lines, as shown by map 24, are of httle use to the Rock Island system, the destiny of which abides in the southwest. They lie outside its natural territory. But by a short trackage west of Estherville, Iowa, a route would be com- pleted clear through from Watertown, S. Dak., to Des Moines and down to the Peoria gateway. This Peoria gateway division is one of the main elements of strength in the MinneapoUs & St. Louis line. At the extreme lower end, there is dupHcation with existing BurUngton lines; but from the Missiasippi River crossing, straight up through to Bismarck, N. Dak., it appears as if these rails might be more profitably employed to feed the grain of that territory down to trunk line or southern connections than under their present utilization. There is, however, one break in this cut-off which needs to be bridged within the present MinneapoUs & St. Louis system. West of Fort Dodge. Iowa, a little bit of Illinois Central trackage would afford a connection with the western Minneapolis A St. Louis line, and then southeast of Fort Dodge 22 miles of new construction to Story City would there piece on again to a branch leading directly into Marshalltown, Iowa. Or, in lieu of this, the missing link might be sup- plied throughout by trackage on the Illinois Central and Chicago & North Western rails between the same points. In either case a complete new through line down to Peoria, entirely within the proposed BurUngton system, would result. Fortunately there is a way to avoid useless dupUcation by still further partition. Between Des Moines and Oskaloosa, Iowa, (map 16) the MinneapoUs & St. Louis merely uses track- age. It is from Oskaloosa on to Peoria that this Une pierces the very bowels of the present BurUngton system. But consideration of map 15 demonstrates that this Peoria division admirably builds into the Union Pacific-North Western system, which lacks just such an inlet to the Peoria gateway. It is alleged that a better pro- vision of station faciUties at Marshalltown will also be afforded by such a transfer. In this same connection it will be recalled (page 599 infra) that one further subtraction is made from the MinneapoUs & St. Louis. This is the taking of the road from Mason City, Iowa, south to Albia for the St. Paul-Great Northern system, in order to give it a through Une from the twin cities to St. Louis. Thus by means of these detailed assignments the MinneapoUs & St. Louis, which has in the past suffered from dearth of traffic and connections, but which possesses many attributes of strength, if properly Unked up, may find stable lodgment as an element in the larger systems. The Great Falls, Mont., industrial district is one of present and growing importance. Probably more tonnage originates there than from the whole stretch of local points west of BilUngs. It will be recalled that it was the preservation of competition at these local stations which in part affected the decision to ally the Great Northern with the St. Paul road, rather than to take the Northern Pacific. But a comparison of maps 16 and 17 brings out the fact that this particular choice combines two rail- roads, the Great Northern and the St. Paul, each of which enters Great Falls, whereas the Northern Pacific, standing alone, does not approach it. The requirement of the statute as to competition certainly demands that this situation be met. How, then, shall the Northern Pacific be admitted to the Great Falls district? The St. Paul- Great Northern system, according to map 17, has four other Unes in, two of them from the south, on or near the Une of the Northern Pacific, at Buigoyne and Butte respect- ively. To avoid unnecessary dupUcation, it would appear as if trackage might be granted to the Northern Pacific over one of these approaches. It is recommended that this be done, and it is so indicated on map 16. The Mobile & Ohio Railroad might conceivably be consolidated with the Buriington system in order to afford a direct outlet to the Gulf of Mexico at Mobile as part of a national policy of encouragement of foreign trade routes through these new outlets. The location of the line is shown on map 10, and in the chapter on the southeastern railways the relation of this property to the Southern Railway system is described. In its present connection and ownership it is largely a useless appendage. In order 63I.C.C. CONSOLIDATION OF RAILROADS. 595 to satisfy a similar need for a Gulf outlet in future years, the Burlington purchased control of the Colorado & Southern in 1908. And by a joint arrangement with the Rock Island system it was expected that the Trinity & Brazos Valley Railroad would carry the line on to Galveston. The utilization of this latter route has been somewhat disappointing; but, nevertheless, the extraordinary growth of the port of Galveston proves that roads following these directions constitute natural currents of commerce. The Union Pacific system in turn controls the lUinois Central and through it a line via the Central of Georgia to Savannah, thus enjoying a double outlet through southern ports. Might not the Burlington-Northern Pacific system, likewise, amplified through Iowa, Minnesota, and South Dakota by the incorporation of the railroads as above described in the aggregate offer a tonnage at St. Louis which would substantially build up the Mobile & Ohio and its port on the Gulf of Mexico. The line under present ownership yields no profit and the project of its transfer is worth consideration. No positive recommendation to this effect is made, however, because of the risk of up- setting a nice balance of power, through so formidable a projection of another north- western system beyond its natural gateways. Many aspects of Chicago, Milwaukee & St. Paul business have already been dis- cussed in connection with the general railroad alignment through the twin cities. But there are certain other matters peculiar individuaUy to the St. Paul-Great Northern system which deserve attention. The first is the need of strengthening this combination, in face of the formidable competition which is set up through constitution of the Union Pacific-North Western and Burlington-Northern Pacific groups. Statisti- cally, based upon results for 1917, as it appears, this St. Paul-Great Northern combi- nation is materiaUy stronger than the Southern Pacific-Rock Island system. But each of them is just a bit in danger of being elbowed back against the frontier, north and south, by the overwhelming power of the two great middle systems. It is in- cumbent, therefore, upon this plan to strengthen the St. Paul-Great Northern by every possible means. One of these is the possible additipn of the financial strength and mileage of the Minneapolis, St. Paul & Sault Ste. Marie Railway, commonly known as the Soo. Its geographical location is given on maps 17 and 18. The Soo stands not by itself alone, however, but forms part of the great Canadian Pacific system. Its rails all trend northwest-southeast and keenly compete for business with the American lines throughout Wisconsin, Minnesota, and North Dakota. Merger with the St. Paul would, however, eliminate the Soo as a competitor from quite a long list of common points. But practically aU of these, it should be observed, would in any event enjoy competition from the other great systems which gridiron the same territory. Hence no violation of the statute in this regard would result. The Soo interchanges abundantly with the St. Paul at Minnesota Transfer, giving it during 1920 in fact more tonnage than any other lines except the Northern Pacific and the Great Northern. In exchange the St. Paul gave to the Soo more traflic than any other railroad except the Northern Pacific. Thus the St. Paul exchange with the Soo at Minnesota Transfer was third in order of St. Paul receipts, and second in de- liveries. The exceUent freight terminals of the Soo, considerably exceeding its present needs at Chicago, together with its superior facilities in the twin cities, con- stitute still further elements of strength. The Soo main line from a connection near the half-way point of the St. Paul's Techny cut-off, northerly to a connection with its La Crosse division, could also be utilized for through freight, thereby shortening the distance and avoiding congestion and the long ruling gradients each way out of Milwaukee. The Portage branch of the Soo could also be used for a cut-off from the La Crosse division to the Wisconsin Valley division of the St. Paul to advantage. The operation of one company between Eau Claire and Chippewa FaUs would be elimi- nated. Other economies, it is alleged, could be worked out in connection with the handling of ore in the Iron Mountain district. Probably the Wisconsin & Northem,^ 63LC.C. I 4iL^ 596 INTERSTATE COMMERCE COMMISSION REPORTS. CONSOLIDATION OF RAILROADS. 597 i which recently the Soo line haa petitioned the Commission to merge, would also go in with the rest; and the Duluth, South Shore & Atlantic and the Copper Range ought to be included. These properties will not add much strength, as their lines contribute little business except between Marquette and Calumet. The Spokane International is controlled by the same interests as the two last-named railroads. It would probably be better for the St. Paul to take this than to leave it in tJie hands of competitors. It would at all events afford an eastern connection with the Canadian Pacific system. The Soo system at present is financially above the average. For 1917, the type year, the net operating income amounted to 5.7 per cent upon an investment in road and equipment of 144,414 per mile of line, a capital account about equal to that of the Rock Island, but substantially lower than either the Burlington or the North Western. The corresponding investment account for the Great Northern was $56,077 per mile of line and for the Northern Pacific $71,035. The Soo earned in 1917 $2,502 per mile of line as against the Great Northern $3,452, and the Northern Pacific $4,512. But its capital account is so low that it showed up in percentage of retiu*n almost as well as the Northern Pacific and substantially better in percentage on investment than the St. Paul. Statistically, then, the Soo would strengthen the proposed Great Northern- St. Paul combination. It may well be contended that the Soo line should remain as part of an independent Canadian transcontinental route. It has three outlets to the border, and unquestion- ably at times has afforded access on better terms to the Pacific coast than would have been enjoyed without its keen rivalry with the American roads. Despite the heavy interchange with the parent company, the Canadian Pacific, about 10,000 cars yearly go through to the Pacific coast; and the annual interchange with the Canadian Pacific amounts to 27,000 carloads. Yet in many respects it is still largely a local Wisconsin property. So that the Soo must be treated , as it appears, as part of an American system certainly for protection of the local interests of Wisconsin. In that state there is a large local traffic, particularly forest products, hauled to the sawmills and paper mills in the Fox River and Wisconsin River valleys. The proposal to incorporate the Soo in the St. Paul-Great Northern system, however, at once raises a question as to the effect upon competition throughout this territory. The foregoing list of common points shows how widespread this is. Much of the business is locally competitive; approximately 150 out of 500 Soo stations are served by two or more roads operating herein. This circumstance is fortunate in some ways, however, for competition is so keen and there are so many railroad lines that the merger of the Soo and the St. Paul-Great Northern would still leave the entire region penetrated through and through with competitive local service both from the Union Pacific-North Western and the Burlington-Great Northern systems. This circumstance is well illustrated by maps 19 and 21. These portray the interlacing lines of all three of these systems in their various possible combinations. The only district where competition might largely disappear through this merger would be in North Dakota. There is little mileage there except the Great Northern and the Soo; and it may well be worth considering that only the Soo lines east of St. Paul should be incorporated with the Great Northern, leaving these western portions to function still as parts of a Canadian Pacific system. The Canadian Pacific, in fact, might possibly be left with trackage into Chicago over a main stem, which through transfer of ownership under this plan would form part of an American system. Carload traffic — and 95 per cent of Soo freight business moves in carloads — often betokens long-haul through business, and all such through business belonging to the Canadian Pacific might be handled by a trackage contract over rails which formed part of the Great Northem-St. Paul. Strength, it is believed, might also be added by the Soo to the Great Northern-St. Paul, especially in connection with the movement of coal. There is an immense 63LC.C. tonnage, rapidly increasing, which goes by water to the head of the lakes, and of course the growth of grain traffic from Duluth and Superior eastbound is enormous. If the inclusion of the Soo lines would contribute to hold this business for the Great Northern-St. Paul, it would perhaps enable that system to support more easily the long bridge lines through the relatively barren territory of Montana and Idaho. The Soo also provides access to Stevens Point, Rhinelander, Manistique, Manitowoc, and other lake-ferry points and affords admission to the Bessemer and Gogebic iron dis- tricts in northern Wisconsin and Michigan, with an ore dock at Ashland. It also taps the new iron-ore district west of Duluth, known as the Cuyuna Range in competi- tion with the Northern Pacific. All told, as part of the constitution of an all-American railway system, it is difficult to see what better disposition of this Soo mileage can be made than to treat it thus. In the Northern Pacific-Burlington system, to be sure, it would perpetuate competition in northern North Dakota, instead of putting an end to it. And also it would quicken competition by letting that system into Wisconsin, where, according to maps 16 and 17, the St. Paul is already entrenched, while the Northern Pacific and the Burlington are entirely absent. But probably better than either plan, would be to leave it alone as it is, as part of an independent foreign system. Such indeed, despite the foregoing recital of advantages, is my fijial rec- ommendation. But it is dotted in on all the St. Paul-Great Northern maps to show how the land lies, if it be included. Two very profitable railroads in Minnesota are the Duluth & Iron Range and the Duluth, Missabe & Northern. Both are owned either directly or through subsidiaries by the United States Steel Corporation. Their location is shown on map 17. Of the two, the Duluth & Iron Range, the more easterly road, penetrates the iron-ore r^on at right angles to the shore line of Lake Superior all by itself, whereas the Missabe runs directly in from Duluth, parallel throughout to the rails of the Great Northern. Both of these properties, as shown by exhibit 6, yield a large return annually upon their respective investment accounts. The Iron Range in 1917 earned 8.07 per cent on an average investment per mile of line of $102,784. The Missabe earned 11.65 per cent on a corresponding capital account of $108,997 per mile of line. To accom- plish this result, the net operating income per mile of line must necessarily be high, being for the two roads, respectively, $8,698 and $12,381 per mile of line. Evidently one has to do here with very high-grade properties from the point of view of produc- tivity and profitableness. This arises, of course, from the extraordinarily heavy train- loads shuttling back and forth from the ore beds to the docks. These iron-ore properties must, of course, be treated as common carriers. As such they must find place in this consolidation scheme. Shall they remain together, as now, under one ownership and management, or, as prescribed by the statute, must they be so distributed as to be competitive one with another? The situation obviously differs broadly from that which obtains where a great number of competitive shippers are concerned. The situation at present is highly monopolistic except in so far as the Great Northern, the only railroad transporting this ore which is independent of the steel corporation, serves the other competitive steel manufacturers. Three treat- ments are possible. Under the fiurst, proceedii^ upon the assumption that the Great Northern is already equipped and highly skilled in handling the business, both these iron-ore roads would go to the St. Paul-Great Northern system. But if a com- petitive situation be deemed necessary, then the Iron Range, which is not, according to the map, competitive with the Great Northern, might go in with it in order to round out its system . And the Missabe might be assigned either to the Burlington-Northern Pacific or the Union Pacific-North Western system. This arrangement would intro- duce competition in the carriage of the iron ore between two of the three northern transcontinental systems set up under this plan. But a third even more competitive situation would result if all three of these systems alike had access to this fertile 63 1. C. C. 63763—21 10 f!i I 598 INTERSTATE COMMERCE COMMISSION REPORTS. traffic.producing territory. The Great Northern is already there. The Iron Range and ^e Miambe one way or another, might go respectively to the systems built upon the Union Pacific and the Burlington-Northern Pacific. It is diflicult to decide between these possibiUties without an extended examination of all the circumstances. IJut provisionally it is recommended that, for the sake of its profitableness, these two iron^re properties should be aUocated to the Great Northem-St. Paul system And It will be observed from inspection of exhibit 6 that the result is appreciably to strengthen this combination more nearly to a parity with the other two great systems. quite possibly this conclusion might be modified upon further inquiry. But at all events the maps and the statistical exhibits are constructed upon this basis. The St. Paul-Great Northern system ought also to be provided at the start, in view of the ^^olent disruption of long-estabUshed relationships, with some sort of a traffic arrangement which would protect it both at Council Bluffs and at the t^in citie'' The stub end at the Missouri River, as it has already appeared, must look for its nvelihood from western interchange ^vith either the Union Pacific or the BurUngton. M ^xf '^^""^ connection with the latter and for many years as a close second to the North Western for interchange ^-ith the former (page 574, mpra), this St. Paul stub at Omaha would of necessity dry up were these traffic interchanges to he diverted else- where. And the same thing is true at the twin cities. Breaking up the existing Hil combination, and allying the Buriington solely with the Northern Pacific, might well deprive the Great Northern of so much business northbound from the Buriington Kiver line from Chicago as to jeopardize its welfare. No division of traffic could hope to be constantly maintained for a long term of years; but during a transitional period, whUe the vanous systems are getting upon their feet, some protection to the Great Northern-St. Paul ought to be afforded by such a contract. The heavy investment of the Great Northern in the BurUngton, which will doubtless continue for many yews, would naturally tend to encourage such favors. Perhaps the Great Northern will not need this protection, but it ought not to be denied it. Strength for the St. Paul will undoubtedly flow from the recent acquisition of the Terre Haute & Southeastern Railroad. This will provide a much-needed coal supply for company use, and will also enable the St. Paul to share more largely in the lucrative busmess of supplying fuel for the northwest. One of the elements of strength in the Burlington system, as ah-eady pointed out, is the north-and-south coal Une, the length of Illinois. The Chicago & North Western simUariy taps the Illinois measures and derives a large revenue from this traffic. In October, 1920, for example it re- ceived 773 carioads of soft coal from the Chicago & Eastern Illinois, .573 from the Terre Haute & Southeastern, and 577 from the Illinois Central for through way- bilhng. The proposal to include the Terre Haute & Southeastern in the St. Paul will permit it to share in this profitable traffic. But all of the arguments in favor of this plan commend a more substantial one operating in the same direction. The Chicago & Eastern IlUnois is clearly separable into two parts,. lying in Indiana and Illinois, respectively. Both traverse coal territory, and both alike are bridge Imee. The eastern division to EvansviUe via Terre Haute is a preferred connection of the LouisviUe & Nashville into Chicago. Most of ita coal goes north to the Chicago district or the northwest, and has of late been displacing the lake-ports c^, both for domestic and raih-oad uses. The western or Illinois half of the Chicago & Eastern Illinois, on the other hand, is a bridge for the railroads south- west of St. Louis into Chicago. As will appear in chapter VI, it is proposed to make use of It for the amplified Missouri Pacific system. Coal from the IlUnois mines moreover, more largely moves southwest, so that this Missouri Pacific consolidation foUows along natural economic Unes. It is recommended, therefore, that this Uttle property be subdivided and that the eastern half go to the St. Paul-Great Northern system, reciprocal trackage being granted, so that each half may continue to reach Chicago freely. 63 1. C. C. CONSOLIDATION OF RAILROADS. 599 Addition of the Chicago & Eastern Illinois would materially strengthen the St. Paul-Great Northern system (even more so were the Soo to be included) in several ways. First and foremost it would afford direct connection between coal fields and a great cold but coaUess territory. It follows a line of established traffic. The St. Paul during three months to December, 1920, received at Chicago and Ladd, 9,588 carloads, mostly coal, from this property. Its deliveries were much lighter and should be increased, if the St. Paul-Great Northern gets its share of the South American and Panama Canal business. For this it needs an Ohio River gateway of this very sort, connecting \vith the Southern Railway and the Louisville & Nashville. Thus \nll Illinois Central competition be afforded. Furthermore, this little road parallels the Terre Haute & Southeastern for 150 miles in such fashion that the two can be worked as double track. It is also believed that after a drastic financial overhauling, now in process, the Chicago & Eastern Illinois will contribute in earning power on the investment, and .thus serve to equaUze conditions as compared with the other competing systems. The acquisition of the Terre Haute & Southeastern by the St. Paul, already an accomplished fact, raises the point as to the physical connection between the two properties, and it is urged that the Chicago, Milwaukee & Gary Railroad should also be incorporated in the St. Paul system. Its present connection with the eastern line- is over the Indiana Harbor Belt Railroad and by means of the Elgin, Joliet & Eastern; but it is represented that the Chicago, Milwaukee & Gary, although originally intended for an outer belt Une, has never been constructed beyond Rockford on the north and Momence, 111., on the south. By a short extension east of Momence c(»nnection could be had with all the eastern lines, to form still another outer belt for handling through traffic aroimd Chicago. Upon this point decision is reserved, to the end perhaps that a more careful examination may be made of the whole question of terminal facilities. It would be a mistake unquestionably to transfer a single belt line to one system, even an outer one, if it could be otherwise cooperatively developed for the use of all; and yet the St. Paul group should surely have some con- necting link around Chicago. The St. Paul-Great Northern ought surely to have an independent access to St. Louis. It is of the essence of this plan in general that all the transcontinental systems should have a dual base — Chicago and St. Louis. The most feasible connection seems to be to take the line of the Minneapolis & St. Louis from Mason City, Iowa, south to Albia. From this point Wabash trackage with the Union Pacific would carry the line to Moberly, Mo. This route is plotted on map 17. Then from Moberly into St. Louis a feasible line would be to cross the Missouri River and come in by trackage on the Katy (Frisco system) to St. Louis; or, if preferred, entrance into St. Louis could be had jointly with the Union Pacific over the Wabash line. Thus would be provided a route to mateh with the Burlington-Northern Pacific river line via Dubuque. The possession of this Dubuque line, in fact, renders the Mason City- Albia division of the MinneapoUs & St. Louis superfluous in that system. The independence and prestige of the St. Paul-Great Northern system might well be promoted by taking over the Burlington Une from Shoshoni, Wyo^, up to Laurel, Mont., or at all events, trackage rights might be given thereon. Inspection of map 16 shows that the Burlington has two parallel lines to the northwest across Wyoming up toward Billings, Mont. Surely it could spare trackage over the western of these two, without risk of an overload. The result would be to establish a direct liaison, as shown by map 21, between the Union Pacific and the Great Northem-St. Paul systems, which otherwise would be widely separated. The estabUshment of such contacts will surely be more economically effected than by a wasteful expenditure c»f capital in parallel construction. 63 1. C. C. *Xhmm, 600 INTERSTATE COMMERCE COMMISSION REPORTS. Entrance of the St. Paul-Great Northern to Portland, as already suggested, will be provided by means of the Spokane, Portland & Seattle. The Spokane Merchants' Association recommends that this line should be made joint for the common use of all systems, and quite probably this might be done. Incidentally, the Northern Pacific, as it appears, might withdraw from a part of this investment in favor of the St. Paul, in so far at least as it has a parallel line of its own. Merger of the Chicago, Rock Island & Pacific Railway and of the Southern Pacific Company to constitute a through transcontinental system via the southern gateway 18, after due examination, unreservedly recommended. Such a combination matches almost point for point with the Santa Fe system. The correspondence even as to details is extraordinary, especially after the supplementary changes herewith recom- mended. The opinion of experts is unanimous. President Carl Gray, of the Union Pacific, formerly regional director under the federal Railroad Administration, writes that "The Rock Island-El Paso 3 I. C. C. / 1 'f!l^ 602 INTERSTATE COMMERCE COMMISSION REPORTS. CONSOLIDATION OF RAILROADS. 603 the two roads obtains. The Rock Island is distinctively a granger property. The Southern Pacific derives a large revenue from the carriage of California fruits and vegetables. If the Kansas wheat crop fails, the Pacific coast traffic may remain undisturbed and vice versa. It may reasonably be inquired at this point, why, if this complementary relation- ship between the Rock Island and the Southern Pacific obtains, no proposal for closer alliance or merger has ever been made heretofore. The explanation is afforded by certain competitive complications which have at times engendered rivalries not provocative of consolidation. The first arises from the independence of the El Paso & Southwestern. It originates a rich traffic for which both the Rock Island and the Southern Pacific compete, eastbound. The bridge portion across New Mexico north of El Paso constitutes no element of discord. But it is the section parallel to the Southern Pacific as far as Tucson which originates most of the lucrative business. This might go east by way of the Southern Pacific to the Gulf or else northeast via Tucumcari over the Rock Island. As long as this property remains independent of the other two systems there is bound to be competition for this traffic other than smelter products, which naturally go by water via the Gulf. The second obstacle to identity of interest heretofore concerns the routing of through traffic from California. The Southern Pacific is able to reach the central west by other connections than the Rock Island, which afford it a longer haul and consequently a better division of the through rate. The connection at Sierra Blanca with the Texas & Pacific and at Alpine with the Kansas City, Mexico & Orient, although inferior otherwise, permits traffic to be handled by a route longer than that of the Rock Island (cf. maps 25 and 26). And by carriage still further east to a connection with the Katy, or even at New Orleans with the Illinois Central, the Southern Pacific enjoys a still greater proportion of the joint through rate. Thus on the Southern Pacific side there is impatience, perhaps at the close affiliation of the Rock Island with the Phelps-Dodge interests, and a corresponding ground of complaint, contrariwise, against the Southern Pacific on account of its routing propensities. This roundabout routing, by the way, appears to constitute an unmitigated economic waste. Were the El Paso & South- western to be merged with both the other properties, each of these sources of misunder- standing would tend to disappear. From every point of view it is confidently believed that the merger would promote efficiency, thereby affording better service to the public, and that it would put an end to certain uneconomic practices in transporta- tion. The substitution of direct hauls for roundabout ones was one of the great contri- butions of the federal Railroad Administration. This merger would tend to perpetuate those gains. A prime requisite for logically rounding out the Rock Island-Southern Pacific system is the provision of a line up the Mississippi Valley from Memphis to St. Louis, and thence on to the north. Consideration of map 23 shows that the Rock Island at present has two long isolated branches running eastward to the Mississippi River at Memphis and S t. Louis, respectively. There is no connection north-and-south between the ends of these two arms and Chicago. The result is that traffic taken on by inter- change from southwestern connections, or originating in Louisiana or Arkansas is carried only a short distance by the Rock Island, and is then turned over for the long haul to other roads. It has long been appreciated that this arrangement constituted an outstanding defect of the system. The ill-fated merger with the Frisco was in part intended to remedy this defect. Backed up and supplemented by the Southern Pacific mile^e, so richly represented throughout Texas and Louisiana, this disabilit} becomes all the more glaring. To meet the situation, an exchange with the St. Louis Southwestern is proposed, elsewhere discussed in chapter VI (page 625, infra). This, it ia believed, permits of a satisfaction of the Rock Island need and will not preju- dicially affect the resultant Frisco system. As indicated on map 23, the proposal es I. c. c. takes the form of merger in the Rock Island of the St. Louis Southwestern road from Brinkley, Ark., west of Memphis, up to lllmo at the Thebes bridgehead. In taking this mileage the Rock Island will assume all rights and trackage obligations of the St. Louis Southwestern in its relation to the Missouri Pacific. The Missouri Pacific, in other words, will still have trackage between lUmo and Paragould, Ark. ; and in return the Rock Island will take trackage east of the Mississippi from the Thebes bridge up to St. Louis. And the St. Louis Southwestern, as part of the amplified Frisco, will come north over the river division of that system up the west bank of the Mississippi. Supplementation of the Rock Island system by a line up the Mississippi Valley north of St. Louis is as important as entrance to St. Louis from the south. The Mer- chants' Exchange of that city proposes that Burlington trackage be taken, absorbing the St. Louis & Hannibal Railway and using trackage on the Wabash to ihe North St. Louis yards of the Rock Island. The need, however, rather passes the limit of mere trackage; and the recommendation is made, instead, that the river line of the Bur- lington, at least as far up as Keokuk, should be actually merged in the Rock Island system, and that such use as the Burlington desires to make of it shall be had by means of trackage. This reversal of relationship is based upon a considerable change of operating conditions within the Burlington system since the construction of the low- grade direct north-and-south line (map 16) from St. Louis to Davenport, Iowa. Origi- nally the Burlington road up the west bank of the Mississippi to Keokuk, known as the St. Louis, Keokuk & Northwestern, formed part of the Burlington line between St. Louis and St. Joseph, by way of the former Hannibal & St. Jo Railroad; but with the completion of a better route direct to Kansas City via Mexico, the east-and-west line from Hannibal has assumed a mere local importance; and, with the Illinois north-and- south line above mentioned, the river road up to Keokuk becomes also almost super- fluous, except for local traffic. Assuredly the Burlington ought not to be embarrassed in any way by withdrawal of such nonessential links in its system. Doubtless an arrangement one way or another for exchange of facilities could be worked out, and a reconunendation to this effect is herewith made. This should of course cover not alone the line up to Keokuk but its continuation on to Burlington. Thus would the Rock Island be fortified for efficient operation in a very substantial way. As for the proposal that the Rock Island (map 23) should be tied in at Peoria by merger of the Chicago, Peoria & St. Louis, this little railroad is so crooked, with such heavy gradients, and in such poor condition that it would cost more to make it a main stem Sian to lay out a new line. As a Rock Island operating proposition between St. Louis and Chicago the proposal is preposterous for through business. The Alton, the Chicago & Eastern Illinois, the Wabash, and the Illinois Central lines betwen these points vary in length from 284 to 294 miles. The Chicago, Peoria & St. Louis line over Rock Island rails would be 362 miles long, a fatal handicap, aggravated by the poor condition of the line. This little road, bs it appears, must be treated purely as a local proposition. What the Rock Island needs across Illinois is another main stem, not a branch. Taking a broad view of the effect upon the Rock Island-Southern Pacific system of completing the line up the Mississippi Valley, it may be worth while to trace with the eye on map 23 the route which would be afforded under the new arrangement from Texas points north. Starting from San Antonio, thence to Houston, traffic would move north over the Houston East & West Texas to Shreveport, thence either by trackage east over the Vicksburg, Shreveport & Pacific to Ruston, La., on the Rock Island division in Louisiana; or else perhaps by trackage from Shreveport north over the St. Louis Southwestern to a similar connection at Fordyce, Ark. The traffic would then go on over the route described in the preceding paragraph. In the opposite direction tonnage might be moved from Towa points or north in almost equal compe- tition with the Illinois Central as far down as Louisiana and Texas. A substantial reenforcement of the system could thus be effected and keen competition in service be engendered throughout. 63 L 0. 0. » •f »* 604 INTERSTATE COMMERCE COMMISSION KEPOUTS. Certain other minor changes are recommended here and there in the Rock Island- Southern Pacific system to fit it more evenly to match up with the Santa Fe. The northwestern branch into South Dakota, it will be recalled, is elsewhere recommended for more effective use in the BurUngton-Northem Pacific system (pa^ 593, supra). It is extraneous to the Rock Island and quite serviceable by exchange with the Bur- lington. Northwest of Kansas City the merger is recommended of the Missouri Pacific branch from Concordia, Kans., to Hastings. Tex. This proposal adds no strength but rather a liabihty. But it is part of a plan to withdraw the Missouri Pacific from local Kansas service, as elsewhere discussed in connection with that road (page 630. infra) . The Santa Fe is to take the east-and-west line out to Lenora, Kans. , thus par- alleling the Denver line of the Rock Island in northern Kansas; but the Concordia- Hastings line fita in better to the Rock Island system to perfect this matched com- petition in this territory. The burden must be asstuned in order to steady the situa- tion. ContrariH-ise, UabiUty for the Rock Island might well be laid down by the abandonment of the so-called Decorah branch from Cedar Rapids north in eastern Iowa. There are now so many east-and-west lines through this territory that there is not a decent li\ing for a local north-and-sotith branch. Another minor change in the Rock Island system might well be the inclusion of the Vicksburg, Shreveport & Pacific road (map 23), cutting east-and-west across northern Louisiana. An alternative disposition is suggested in chapter VI, but this merger is on the whole deemed preferable. For, as the map shows, it would tie in all the Southern Pacific Unes in Texas with connections up toward the northeast, and particularly up the new river hne above described, reaching clear up to BurUngton, Iowa. Yet another addition is feasible. The Midland Valley Railroad (see map 23) is a little independent property running from Wichita, Kans.. southwest to near Fort Sinith, Ark. It must be cared for somehow under a general plan. But like so many of ita sort, it must be regarded as a burden rather than an asset. In either the Missouri Pacific or the Frisco systems its merger would put an end to competition, as these lines ramify widely through northeastern Oklahoma. B ut in the Rock Island system , as the map shows, the Mdland Valley would cut off a comer if connected by trackage of a few miles at the southern end, and it might open up a pretty good route from Wichita down to New Orieans, including the Southern Pacific entrance thereto. It would also let the Rock Island into Tulsa and make that place another common point with the Santa Fe. Several mergers of subsidiary roads are recommended for the Southern Pacific sys- tem. The San Antonio & Aransas Pass, as shown on map ^3, ramifies throughout Bouthem Texas, north and south of the main line of the Southern Pacific between San Antonio and Houston. None of the stock is now owned by the Southern Pacific Company, owing to the Texas railroad policy; but the Southern Pacific is the guar- antor of principal and interest for $17,544,000 of first-mortgage bonds. It pays sub- stantially all of the interest, approximately $700,000 yearly. Being responsible for the properties, but at the present without effective control, this company ought property to be merged . As an integral part of the Southern Pacific system the annual deficit can not be borne without such operating economies and saving of overhead as merger would permit. The Texas-Mexican Railway (also shown on map 23) affords contact with Laredo and really ought to go with the San Antonio & Aransas Pass to afford a connection with the Mexican National Railways. Possibly, however, this line oug-ht to go to the Frisco system for a Mexican connection, inasmuch as the South- ern Pacific has another contact with the Mexican railroads at Eagle Pass. The Texas Midland is also shown on map 23 as a small road running southwest from Paris, Tex. It originates a good deal of cotton going to the Gulf and, moreover, affords a con- venient connection with the Frisco system. It ought either to be allocated to the Rock Island-Southern Pacific or to the Frisco. Other subsidiaries which might well 63 1. C. C. CONSOLIDATION OF RAILROADS. 605 be included are the San Diego & Arizona, the Arizona & New Mexico, the Houston & Brazos Valley, and the Franklin & Abbeville. But these are all details and might be left for future action. The San Antonio, Uvalde & Gulf road is another little property which also probably belongs in the Southern Pacific group, but which may best be reserved without final decision at this time. Unless it be included here it probably should be tied in with one of the Southwestern-Gulf systems. Some disposition ought to be made of the Northwestern Pacific, the line from San Francisco between the ocean and the Coast Range. Its location appears upon maps 16 and 22. At present this railroad is controlled through equal stock ownership by the Santa Fe system and the Southern Pacific. But the Southern Pacific has pro- vided funds for extensions and owns $26,029,000 of $30,399,000 of the outstanding bonds. Furthermore, the physical connection of the line apparently commends at least a continuation of the present joint control. The strength of the two middle- group transcontinental lines is such that it hardly seems fair to weaken this partici- pation of the present holders for their especial benefit. Certainly the Union Pacific has no claim to it. The Burlington, without any north-and-south line in California, has a slightly stronger interest; but it, again, is a direct line with superabundant resources as compared with the two roundabout southern transcontinental systems. There is one possibility which has merit. The weakest of all the transcontinental systems, isolated up along the Canadian border, is the St. Paul-Great Northern. Some day it ought to have access to California territory, and the two lines shown on map 17 down the Willamette and Deschutes valleys are fingers pointing in the direction of a natural extension. If, in due time, another north-and-south through line shall be required, as it undoubtedly will, why might not the Northwestern Pacific be then treated as appurtenant to this Great Northern-St. Paul system. It is the one way left by which it may enter. The gap from Trinidad on the coast in northern Cali- fornia to Eugene, Oreg., is already in part bridged by logging roads. These may conceivably develop into substantial railroad lines. When that time comes the Commission might well encourage trading, to the end that the Northwestern Pacific shall pass out of its present hands and into those of the St. Paul-Great Northern. But such affairs need not be seriously considered at this time. There is certainly no ground for recommending any such afilliation at present. The Atchison, Topeka & Santa Fe system stands as one of the most compact, com- plete, and financially weU-balanced railroads in the United States. It is a monument to the sagacity of its late distinguished president and his fellow managers of the enter- prise. A combination of courage and intelligence has produced a railroad which at present reaches almost every point that it should, and which has such connections hither and thither as to consolidate its strength at all strategic points. Nor is energy dissipated anywhere by useless or unnatural extensions beyond its natural gateways. A brief analysis of its layout is necessary to confirm this assertion. And the statement has a direct bearing upon the recommendation that the Santa Fe is inherently strong enough to be trusted to continue alone, even altnough surrounded by much larger consolidations. It is a prime example of the principle that net mileage, that is to say, mileage which counts, is of more value that a mere heterogeneous aggregation of more or less ill-connected parts. The Santa Fe system, referring to map 22, forms roughly a huge triangle with one corner at Kansas City, another in Texas behind Galveston, and the third corner not far from Santa Fe, N. Mex., at Belen Junction. From each comer there are lines out to strategic gateways on the confines of its natural territory. Northeast, the main line runs into Chicago. Southerly, the line reaches the Gulf of Mexico at Galveston, and' might easily be extended to reach it again at New Orleans. And then there is the main line straight thi-ough from the western angle at Belen Junction to Los Angeles and San Francisco. Incidentally, to the northwest there is also the line into Pueblo and Denver. 63 1. C. C. ly . to match the Southern Pacific with the Santa Fe. The Southern Pacific is to have the San Antonio & Aransas Pass (map 23 and page 604, supra). The Gulf Coast Lines compete directly in this same region. Were the Santa Fe to take the entire Gulf Coast Lines instead of a part, the complication of dismemberment would be avoided, and a matehed competition be- tween the two great transcontinental systems in southern Texas would be promoted. There is just one other possibility. The San Antonio & Aransas Pass might be lifted out of the Southern Pacific system altogether, and allocated to the Frisco, as developed in chapter VI. With the southwestern half of the Gulf Coast Lines in the Missouri Pacific, and the San Antonio & Aransas Pass in the Frisco, the two evenly matched Southwestern-Gulf systems would keenly compete with one another clear down through the southern portion of Texas to the Mexican border. There is some merit in the suggestion; but on the whole the treatment herewith recommended seems prefer- able. Everything turns upon whether southern Texa»LS to be regarded as a natural field for competition between the two Southwestern-Gulf systems or between the two southwestern transcontinental systems. Provisionally, the latter choice is made. The Colorado & Southern, together with its extension across Texas, known as the Fort Worth & Denver City, is another one of those hybrid properties which it is extremely difficult to allocate. The through route thereby constituted from north of Cheyenne, Wyo., as shown on map 16, cuts at right angles across all the east-and-west lines and tends to draw traffic from the far northwest down to the Gulf ports. The through con- nection from Fort Worth to Galveston, originally planned, was to consist of the Trinity & Brazos Valley Railroad. This route, northwest of Fort Worth, is now part of the Burlington system, and the portion southeast of Fort Worth, the Trinity & Brazos Valley, is jointly owned by the Burlington and the Rock Island. North of 63 1. C. C. II i 608 INTERSTATE COMMERCE COMMISSION REPORTS. CONSOLIDATION OF RAILROADS. 609 « tl O Fort Worth the system betrayed in 1917 a considerable earning power. The Colorado & Southern, proper, jdelded a net operating income of 3.24 per cent even on the high investment account of $62,952 per mile of line. The Fort Worth & Denver City did much better, earning 7.34 per cent upon a corresponding capital account of $5(),732. The Trmity & Brazos Valby, at the other end, even with a low investment account of $37,686 per mile of line, had an actual deficit of 2.09 per cent in 1917. Evidently there is some maladjustment aa to interchange of traffic at various points along this line especially evidenced by the barren results for the southern link into Galveston It i^ alleged that the Fort Worth & Denver City is peculiarly profitable because of an ex- cessive division of the through rates. The traffic throughout is light— no lumber, ore. coal— although there is a considerable movement of beet sugar and vegetables from Colorado to Texas. There are no large cities and no manufactures, but of late there has been some movement of oil. It is a dry territory, bare agriculturally, even at the southern end. The heaviest movement is of live stock and on this the rate is unre- munerative. It it alleged that the Colorado & Southern system, owing to its unique location and enjoying a monopoly between Denver and the Gulf direct, is artificially prosperous because of prorating maladjustment, and that a revision of percentages on interchanged business will substantially lessen its profits. But for the present, at all events, it is obvious that one has to do with a fairiy strong Une, of vital importance nationally, and yet which is so located that it is neither an east-and-west transcon- tinental road nor one havingeverything in common with the Southwestern-Gulf roads. Four possible dispositions may be made of the Colorado & Southern svstem, as above described. It is now an integral part of the BurUngton system (map 1*6) and might so remain under this plan. Were the Chambers plan (page 563, siipra), or anything like it, to be adopted for utilizing the Santa Fe as the stem of a middle-group transconti- nental system (map 22), matched against the Union Pacific, the Colorado & Southern would naturally play a leading part therein. But with the rejection of tlie Santa Fe in favor of the Burlington for this purpose, the Colorado & Southern would lose its main value to the Santa Fe system. A third disposition would be to incorporate it in the Southern Pacific-Rock Island group. Its possible place therein is lightly dotted on map 23, and the advantages and defects of this arrangement must be carefully consid- ered. A fourth utilization, and one which has great force and merit, is that the Colo- rado & Southern should be treated as appurtenant to the Southwestern-Gulf railroads, rather than as a part of any transcontinental system. This suggestion is based upon such sound operating reasons that it, too, must be canvassed attentively. The choice, in fact, narrows down to these last three possibilities. For the first one, namely, that it should remain as a constituent part of the Burlington, must be rejected on general grounds, of far-reaching significance. According to map 16, the Colorado & Southern, as a part of the Buriington, obviously extends its rails far beyond any gateway set for the competitors of that system. As elsewhere described in connection with the affairs of the Kansas City Southern and of the Union Pacific (pages 142, 166) the proposition has been broached of using the former as a Gulf outlet for the great Union Pacific system. There is force in the suggestion ; l>ut it is rejected because of the need of con- serving the earning power of the Southwestern-Gulf properties, in order to enable them to carry the heavy burden of their network of branches and feeders. And unless the Kansas City Southern or some other through line to the Gulf were made a part of the Union Pacific system, the Burlington, matched against it point by point, ought likewise to withdraw from entry into the Gulf territory. There are other minor con- siderations, such as the already excessive mileage within the Burlington system, as compared with all the rest; but the really conclusive reason for withdrawal of the Colorado Southern has to do with the general balance of power, as above described. The Colorado & Southern system, incorporated in the Santa Fe, would bring to fruition plans carefully developed by the late E. P. Ripley. No possible question 63I.C.C. about its value to this system exists, provided that the Denver & Rio Grande and Western Pacific were also merged. But without these last-named properties, the only value of the Colorado & Southern would arise from its contacts with Colorado common points. And with most of these the Santa Fe already has connection over its own rails. The Santa Fe also has its own Gulf line; so that it would have no use for the Colorado & Southern, independently of the Ogden gateway, for this purpose. To allocate the Colorado & Southern to the Santa Fe solely with reference to its utilization as a short cut to the Gulf would, in effect, put an end to the competition which now exists between it and the Santa Fe. In view of the absence of prime advantage to the Santa Fe, therefore, and of this manifest disadvantage, under the express terms of the statute, the project of Santa Fe aflfiUation is ruled out. 'Considering, next in order, the feasi- bility of assigning the Colorado & Southern to the Rock Island-Southern Pacific* system, inspection of map 23 brings out the value it might possees from tying in the loose'^stub end of the Rock Island at Denver. This, as has already been pointed cut, is left isolated and possibly unproductive, except for local business, by the provisions of the general plan for transcontinental systems herewith proposed. There are sub- stantial supporting reasons for transferring the Colorado & Southern to this system. Among these are the following: The Colorado & Southern has some good local Colorado territory which would serve as a much needed feeder for the Rock Island's Denver line. Included hereunder might be especially mentioned the coal production about Trini- dad, serviceable both for locomotive and commercial use. The Colorado & Southern might also be utilized in place of the existing onerous trackage contract with the Denver & Rio Grande, covering the line between Pueblo and Denver — perhaps also the Union Pacific trackage between Limon and Denver. Rock Island f re^ht, and possibly passenger trains, to and from Denver might be routed via Colorado Springs. In that event a most burdensome contract might be eliminated. A larger interchange of traffic at Amarillo between Colorado, north and east, and Oklahoma and Arkansas, including the territory now served through the Memphis gateway, together with a closer working relationship between the Morgan steamship line, as part of the Southern Pacific, and the Colorado & Southern system, would be supported and distinctly encouraged by this relationship. And the extensive mileage of the Southern Pacific in Texas and Louisiana might originate tonnage which could be moved northwest by this line rather than by way of the Missouri Pacific. An objection, on the other hand, would be that the inclusion of the Trinity & Brazos Valley in the Rock Island-Southern Pacific system would put an end to the present competition with the parallel route of the Houston & Texas Central line. This road now connects Houston and Fort Worth over Southern Pacific rails. Unless the Trinity & Brazos Valley therefore went else- where, notably to the Frisco, as elsewhere suggested (map 25), this conflict with the pro- vision of the transportation act might be a source of embarrassment. If it be objected that the addition of the Colorado & Southern system to the Rock Island-Southern Pacific, instead of the Santa Fe, is prejudicial to the evenly matched competition which is intended to prevail between these two systems, it may be added that the Santa Fe, by means of a little construction, could practically parallel this route from end to end. This possibility is shown by a dotted line on map 22. Such a route would consist of trackage over the El Paso & Southwestern side line between French and Tucumcari, N. Mex. (incidentally, the Rock Island probably could not entirely spare so important an artery for company fuel), a bit of new construction from there on to Texico, and thence over the Santa Fe's own rails direct to Galveston. The little gap between Pueblo and Trinidad could be readily bridged by trackage taken from the Colorado & Southern. At present, of course, there is hardly business enough for one Une, certainly not for the two which would hereby be set up. But the possibility of such a route within the Santa Fe system in the remote future is not to be gainsaid. 63 1. C. C. 4. 610 INTERSTATE COMMERCE COMMISSION REPORTS. #? f On the whole, rejecting; the allocations above described, there remainP for the Colorado A Southern only the possibility of ite transference from the Burhngton aystem to tliat of the Missouri Pacific. The underiying reason, based upon the broadest considerations for so doing, is that this strategic line would oe thereby neu- traUzed, in effect, as between the two middle-group transcontinental svrstems. As proposed under this plan, the Roclc Islanr.-Southem Pa-ifin svtem wilf have other hnes to connect the whole of Califomia and Oregon and practically all Louisiana and lexas points. It will have a dire< t line from Memphis through Arkansas and Oklahoma, with a direct line from St. Louis. The Santa Fe svstem likewise serves the same temtones, with the exception of Memphis and Arkansas. But both these systems are interested solely in the El Paso or Arizona gatewavs. A prime purpose of the entire Central Pacific readjustment is to render the Ogden routes truly com- petitive with the southern ones Xferging the Colorado & Southern with either of tiiese transcontinental systems therefore would still leave the incentive to work business by the southern rather than the middle routes. For the Colorado & Southern in either hands would only afford them a short haul through Denver, as against a long haul through Arizona. Such disposition therefore would ine\ntably tend to dry up a verv- important competitive artery. Both the Union Pacific and the Bur- lington are entitled to participate competitively in this business. To place the Colorado & Southern then, in neutral hands, like either the Missouri Pacific or Frisco ^sterns, would afford adequate through connection between the territories described. Besides protecting the middle-group transcontinental lines, it would also protect ^e Gulf-Southwestern lines. For both the Burlington and the Union Pacific would thus be rendered dependent upon these roads in order to reach Texas and Louisiana by a direct haul A trading basis would thereby be set up which would manifestly be to the advantage of the Gulf-Southwestern roads. Perfectlv neutral support, coupled with competitive opportunity, would be created for both the connections through Ogden. The Gulf-Southwestern roads, with various loose ends of rail ex- tending into Colorado, and always threatened with starvation through diversion of business from the northwest to the Arizona gateways, would be prevented from being bottled up in one comer of the United States. And on top of this, accordin^^^ to the showing for 1917, the Colorado & Southern lines south of Denver would mat^ nally contribute financial strength. The proposal is not without disadvantage, however, and this illustrates how difl^icult it is to think in terms of widespread con- Bohdation which so completely upsets all existing traffic interchange. Putting the Colorado & Southern sj-stem into the Missouri Pacific group would end the quite keen competition which now exists with the competitive route of the Kansas City Southern. For it will be remembered that this road, herein assigned to the Missouri Pacific system, is now a perfect connection for the Union Pacific, in fact the Marys- viUe, Kans , cut-off was in large measure assumed in order to develop this route. And then another disadvantage, unquestionably is that this proposal tends to upset the quite perfect balance of earning capacity between the Frisco and the Missouri Pacific, which has been worked out in chapter VI. Of the two Gulf-Southwestern systems, the Missouri Pacific is abeady the larger. Whether it is financially stronger 18 somewhat problematical. And the inclusion of the Colorado & Southern sj-stem would tend to disturb this equipoise. But nevertheless, for the several reasons herein outhned, as well as further developed in chapter VI, this recommendation for its transfer to the Missouri Pacific sj-stem seems preferable to all of the others. Certain minor additions, not affecting the Santa Fe in anv large way, are also recommended. None of them will appreciably influence the financial status, although certain ones may be considered as liabilities which must be more or less shared by everybody in order to save the general situation. The first is the merger of the Kansas branch of the Missouri Pacific from Atchison to Lenora, Kans., the north- 68 1. 0. C. CONSOLIDATION OF RAILROADS. 611 and-south branch, however, from Concordia up to Hastings is allocated to the Rock Island, as its inclusion here would merely consolidate two parallel and competing lines. The effect of this transfer^will be to consistently make the Santa Fe a Kansas network of local lines. Another change, subsequently discussed in chapter VI. is the transfer of the Santa Fe branch from Dallas to Paris, Tex., to the Frisco system. This now is a part of the Gulf, C/olorado & Santa Fe. the Texas subsidiary in the Santa Fe system. This transfer would encourage the utilization of this stretch as part of a main line rather than as a branch which trends nowhere in particular, within the Santa Fe system. In the same connection in chapter VI the recommendation is made that the Fort Worth & Rio Grande, running southwest from Fort Worth as a subsicliary of the Frisco system, be assigned to the Santa Fe. Map 22 shows that this would afford a more direct entrance 'rom the west to Fort Worth instead of passing around two sides of a triangle. The objection of course is that a still shorter line from the west might strike off from the Santa Fe further out, and such a line is is said to have been considered. But for the present, at least, it appears as if the Fort Worth & Rio Grande would answer the purpose, and would result in a more effective utilization of what is now an unprofitable branch in the Frisco system. The suggestion has also been made that the Missouri & North Arkansas should also be included in the Santa Fe, together with trackage into Memphis from Brinkley over the Rock Island. This would give the Santa Fe a bridge line over the Ozarks from the Kansas wheat fields into the southern states east of the Mississippi. The suggestion contains the possibility of caring for a weak independent line through merger in a strong system. The Santa Fe is probably better able to carry it than the Frisco, and no other sponsors are in sight. But the property really ought to be abandoned to the care of its local constituency, like so many others of its kind; as, in fact, since writing the foregoing, it has been discontinued for operation by the receiver, leaving five counties in Missouri absolutely without railroad connection with the outside world. The feasibility of the foregoing proposals must now be tested, first, as respects the continuance of competition, and, secondly, with regard to the uniformity of earning power. Unless these two essentials are met, the general plan can not stand fire under criticism. As to the former, the perpetuation of competition, the most satisfactory test is graphic. A series of maps is submitted herewith (maps 19, 20, 21, and 24) upon which these five transcontinental systems are shown in pairs. And each of the significant couples is separately displayed. In order to facilitate this compariEon and to complete a composite picture, moreover, the same graphic designations are employed for each system throughout the series of maps. One may thus by eye carry across and compare impressions from map to map, until the entire situation is envis- aged. But no attempt has been made to match the two southern systems, the Santa Fe and the Rock Island-Southern Pacific, with the three northern systems for two reasons. One is that there is an obvious superfluity of competition from interlocking of all five systems between the Missouri River gateways and Chicago. The other is that west of Kansas City, the two southern systems break so entirely loose from the rest that their problems thenceforth are separate and apart. Only is there a slight overlying where the Rock Island system gridirons Iowa. These four maps are so self-evident in purpose that no elaborate comment is necessary. All that seems to be called for, is a running commentary upon the general layout. The ramifications of the Burlington-Northern Pacific system as against the St. Paul-Great Northern are depicted on map 19. The zone within which the two compete is quite localized along the Canadian border states and down through Iowa, Minnesota, and Wisconsin. Within this zone and particularly in the far northwest the two systems, as amplified,, match almost point for point. At the eastern end the St. Paul-Great Northern is 63 1. C. C. •i »li II 612 INTERSTATE COMMERCE COMMISSION REPORTS. free from this particular Burlington- Northern Pacific rivalry, in Wisconsin and the northerly strip of North Dakota and Montana. But within these particular locaUties as the other maps make manifest, competition in abundance is provided throughout \\ isconsin by the Union Pacific-North Western system. It is only in the upper tnird of North Dakota that anything approaching a monopoly by the St. Paul-Great .Northern system appears. And setting off the Soo from this group, treating 'it as a foreign line, would meet this difficulty.. This same monopoly extends across Montana from end to end. But it is submitted that this in itself is a necessary compensation for the other handicaps under which this particular system must operate. The fore- going fmancial analysis evidences that this group is compelled to carrv the load of a far-flung bridge line, and that all along between the twin cities and Pacific coast points It lies out on the edge of things. Special favor and encouragement ought to be given to all of these marginal systems in order to even things up. P^ing next in series to map 20, the Burlington system, by means of an identical graphic designation, is shown in juxtaposition to the remaining northern transconti- nental system, that of the Union Pacific-North Western. In this instance the rivalry of the two is more widely disseminated, embracing as it does not only the northwest but the Ogden gateways to San Francisco. Two almost perfectly matched routes obtam between Chicago and the Golden Gate direct, and also two routes passing through Kansas City and Omaha and penetrating the far northwest, in the one case across Idaho via Boise or Butte, while by the Burlington route the contact is estab- lished by way of Billings, Mont. The coextensive rivalry at the eastern end between these two systems, according to this map, Ues in the main south of St. Paul down to Kansas City. All about the periphery on the other hand, taking Omaha as a center, such competition as exists must proceed from other combinations, which will be displayed on the succeeding maps. Wisconsin, again, is portrayed without rivalry from this particular combination, and Colorado likewise is evidently monopolized. Each of these, however, as it will appear, is touched in another connection by the remaining systems. The third possible juxtaposition of northern groups is displayed by map 21. This exhibits the Union Pacific-North Western system pitted geographically against the St. Paul-Great Northern. No longer is there rivalry through the Ogden gateway, but competition is evidently perpetuated for the far northwest by at least two routed in every important instance. Here at last the neces8ar>- competition throughout Wisconsin is afforded, together with the necessary interweaving across South Dakota. And It goes without saying, of course, that the field south of the twin cities is well provided with a crisscross of lines. Taking the series thus far, the only region wherein substantial monopoly will prevail is along the marginal strip bordering Canada, across North Dakota and Montana, in southern Colorado, and down along the line of the Los Angeles & Salt Lake road. There is comfort, however, in the consideration that withm these last-named zones, conditions as respects competition will continue no worse than as at present. They are in no wise affected by this consolidation plan, with the sole exception of northern North Dakota. It must be confessed that the merger of the Soo system in that of the St. Paul-Great Northern puts an end to the pre- existing rivalry. As for Colorado and the San Pedro lines, such competition as may develop must be had not from these northern transcontinental railways but from those which pass by way of the Arizona and New Mexico gateways. The conditions set up under this plan for an evenly matched rivahy via the southern transcontinental gateways appear upon map 24, and here, as already prophesied, an almost perfectly even-handed geographical layout obtains. The two through routes run side by side clear through from Chicago to northern California. Note, by the way, the two stub end lines into Denver, which must continue to draw a liveli- hood from distinctively C olorado business. The two systems of the Santa Fe and the 63 1. C. C. CONSOLIDATION OF RAILROADS. 613 Rock Island-Southern Pacific alike gridiron Texas, Oklahoma, and southern Louisiana. The only divergencies appear in the Rock Island lines across Iowa and in the Choctaw division of the Rock Island into Memphis. Here are two territories from which the Santa P'e is at present excluded. From the northern region up to St. Paul the Santa Fe is perhaps as well off to be free of this complication. Down to Memphis, if it be given the Missouri & North Arkansas, an inlet to the southeastern states may be said to be afforded. By and large, with these minor exceptions above noted, it is believed that such a substantial matching of one system against the other is afforded as may satisfy the requirements in this regard of the transportation act. The second' test to be applied to the proposed layout for the western transcontinental systems is that of uniformity of financial return. The appended exhibits, conformably to the system elsewhere adopted, based upon 1917, display the results. Summarily, they are as follows for the five proposed systems. System. Union Pacific-North Wftstern Burlington-Northern Pacific. St. Paul-Great Northern Rock Island- Southern Pacific Santa Fe Road and equipment invest- ment per mile of line. S67,656 64,4a3 61,304 68,680 65,582 Percentage relation; net operat- ing income to invest- ment. Per cent. 0.55 5.39 5.62 4.69 5.64 The fair degree of uniformity in earning capacity based upon capital account as repre- sented in this exhibit is self-evident. The variation in fact is so much less than the probable deviation of the investment account from federal valuation, as to bring the returns, it is believed, well within the requirements of the statute. Not until finally checked by valuation, as more fully discussed in the recapitulation, is anything approximating precision possible in the way of a check or test. 63 I. C. C. 6376.3—21 11 I 614 11 INTERSTATE COMMERCE COMMISSION REPORTS. Chapter VI. — Southwestern-Gulf Region. CONSOLIDATION OF RAILROADS. 615 The territorj' bounded and described, 614.— Its transportation problems not properly transcontinental, 615.— Nature of the traffic, 615.— Many small independent roads, 616.— Many of them precarious financially, 616.— Statistical data, 617. — Confusion incident to separate incorporation and financing of the Texas prop- erties, 617. National interest in short hauls to the Gulf, 618.— Final choice for main stems of two local systems, Frisco and Missouri Pacific, respectively, 619.— Shall they extend into Chicago, 619?— Detailed comparison with southeastern conditions, 619.— Southwestern lines in relation to primary markets, 621. The St. Louis-San Francisco Railway system described, 621.— Its comparative financial strength, 622.— Its operating characteristics improved by an exchange with the Santa Fe, 622.— Plight of the Kansas City, Clinton & Springfield Rail- way, 623.— The Missouri, Kansas & Texas included, 623.— St. Louis South- western divided with the Rock Island, 624.— New through routes to the Gulf provided from St. Louis and Kansas City, 625.— Galveston as well as New Orleans considered, 626.— The Kansas City, Mexico & Orient divided at Altus, 626.— The Vicksburg, Shreveport & Pacific admits into Louisiana territory, 626.— The Chicago & Alton for entry into Chicago, 627. The Missouri Pacific system as now constituted, 628.— Its financial and operating status, 629.— Imperative need of a direct line t-o the Gulf satisfied by including the Kansas City Southern, 629.— Financial advantages incident thereto, 629.— New low-grade detour via Kansas, Oklahoma & Gulf, which is therefore mcluded, 629.— The Louisiana & Arkansas and the Fort Smith & Western as minor addi- tions, 630.— The Texarkana & Fort Smith as well as other Texas subsidiaries considered, 630.— Shall the Omaha line and the Kansas branch be left undis- turbed, 630.— And what about the Colorado division into Pueblo, 631?— Possible dispositions of the Colorado & Southern, -.—Fort Worth & Denver City line, 631.— Relation to the Gulf Coast Lines, as allocated to the Santa Fe, 632.— A Chicago entrance provided by merger of western line of the Chicago & Eastern Illinois, 633. Summary comparison of -the two Southwestern-Gulf systems (map 26-A) as above constituted, 633. — Statistical comparison of the two systems as evenly matched competitors, 634. The railroads operating in the great sector of southwestern territory lying between the Mississippi River and the main lines of the Santa Fe and the Southern Pacific- Rock Island transcontinental systems, are possessed of a sufficient individuality to require that they be treated as an independent group. This region is bounded on the north by the Missouri River between St. Louis and Kansas City and upon the south the boundary is set by the Gulf and the Mexican frontier. The physical geography must be understood in order to interpret rightly the relationship between the several carriers operating therein. The territory is divided east and west by the Ozark mountain range and its foothills. These highlands, sparsely populated and of relatively slight traffic importance, extend from southern Missouri pretty well across Arkansas down to the Red River Valley on the southern boundary of Oklahoma. In other words, northwestern Arkansas and eastern Oklahoma as well as southern Missouri, while penetrated by fertile valleys— that of the Arkansas River, for example— are little inviting for railroad development. The result, as shown by both maps 25 and 26, is that the great railway systems avoid this highland territory, except G3 I. C. C. for certain bridge lines. From Kansas City and St. Louis, therefore, there radiate certain systems which either split into two distinct halves east and west of the Ozark highlands, or else confine their activities entirely to one or the other flank of these uplands. In the former group is the Frisco system (map 25), mainly lying west and north; and the Missouri Pacific (map 26), widely extended on both sides, with certain bridge lines thrown across. All the other railways except these two operate exclusively on one side or the other of the Ozarks. The Missouri, Kansas & Texas (map 25), fomiliarly known as the Katy, and so designated hereafter for purposes of convenience, spreads out to the west and south from Kansas City down to Texas (map 25); the Kansas City Southern (map 26), an air line straight south to the Gulf from Kansas City, only cuts across the southern tip of the Ozark highlands; and the St. Louis South- western (map 25), commonly known as the Cotton Belt, skirts the Ozarks down the Mississippi Valley, only swinging west well south of Little Rock, Ark., where open country occurs. Beside these properties, there remain for consideration only the goodly number of lesser roads constituting the network of lines in Texas and Louis- iana, such as the Texas & Pacific (map 26) and the International & Great Northern; the Kansas City, Mexico & Orient (maps 25 and 26); the Louisiana Railway & Navi- gation Company (map 2G); and the so-called Gulf Coast Lines (map 22). All of the railroads al>ove enumerated, operating in the Southwestern-Gulf region, possess certain characteristics in common. The more important lines are based upon Kansas City and St. Louis in so far as they have been built from the north down, following the spread of population. But they are nearly all dependent, like\\ise, not alone upon business in and out of these Missouri River gateways, but upon their relation to the Gulf ports. They have had in the past a certain interest in trans- continental traffic, but only in so far as the Southern Pacific Company ha.s utilized them as a connection through to the Missouri River gateways. And the Southern Pacific has rather consistently cultivated these connections iu preference to the obAious and short lines — the Rock Island, for instance — because of the longer Southern Pacific haul resulting therefrom. The extreme instance is afforded by the policy developed under the Harriman regime of shipments to central freight association territory from southern California by way of New Orleans and the Illinois Central. This roundabout carriage thus kept the traffic entirely within the Harriman systems. Elsewhere, in chapter V, in connection with the Rock Island-Southern Pacific combi- nation, other illustrations of this roundabout routing are cited, such as, for example, the connection at Sierra Blanca with the Texas & Pacific, and at Alpine with the Kansas City, Mexico & Orient. The economic waste involved in such indirect car- riage is bound to be emphasized under the keen competition now engendered with the Panama Canal and the new American merchant marine. It is confidently predicted that the withdrawal of these circuitous routings for transcontinental business is bound to take place, if the railroads are to continue to share in transcontinental business, susceptible of shipment by sea. Traffic conditions throughout the Southwestern-Gulf region are fairly uniform. Naturally there are no manufactures, and the carriage outward consists of the products of the territory. Inbound, there L?, of course, the lesser volume of manufactures and supplies which are consumed by the population. But the principal earnings of all these roads arise from the carriage of grain, shading off into the carriage of cotton and lumber Irom the southern and southeastern portions, the carriage of petroleum in large volume from the recently developed oil fields, and the handling of coal in con- siderable volume from the measures which quite generally underlie a part of the region. These different clashes of traffic fluctuate in proportion from year to year. Particularly is this the case with gitiin, which is very intermittent, as determined by conditions in the drier half of the territory, and reliance upon the grain is ako rendered 63 I. C. C. 616 INTERSTATE COMMERCE COMMISSION REPORTS. CONSOLIDATION OF RAILROADS. 617 H if ' T I: uncertain by reason of the steady decline in the productivity of the soil. Whereas the yield in Kansas as virgin territory is said once to have been 35 or more bushels of wheat to the acre, the average has now fallen to perhaps 11-13 bushels. The cutting of timber has been going on apace, and this also represents an exhaustion of resources. These circumstances still further emphasize the need of conserving the transportation facilities, by resisting the temptation to separate the through from the local lines. Only by holding them all together, abandoning where absolutely necessary lines which may be dispensed T\ith, can a constructive policy be pursued to the end. Again, one is driven to the conclusion that a general rearrangement of these roads, s^regating them into two competing systems in order to conform to the requirements of the act, is the proper course to pursue. One therefore rejects suggestions which have been pressed by competent authority for the creation of three rather than two competitive systems within this Southwestern-Gulf territory. The objection to this course is not only that it brings about forced and abnormal relationships but that it necessarily sets off the through stems from the weaker branches and feeders. It also leaves the pystems too small comparatively as conaistent units in the great national system which is proposed by this plan. A marked characteristic of the Southwestern-Gulf territory is the very large amount of mileage which still remains in independent hands. The number of local properties, varying in length from 100 to 300 miles, is very considerable. Some of these, like the Louisiana Railway & Navigation Company, follow the river courses, and are obviously destined to form main stems to strategic points. But many others, like the Midland Valley, the Fort Smith & Western, the Louisiana & Arkansas, etc., out in the open country, have a very uncertain future so far as relationship to the great systems is concerned. Most of these roads are in a precarious condition, hanging on the verge of receivership, into which some of them have plunged again and again. To recom- mend positively their inclusion in one or another of the two great systems proposed of course operates automatically to close their open market for trading in case of sale. Furthermore, it imposes a definite direction upon the movement of their business; and as yet, with the country only partly developed, such merger ought to he the result of slow conviction based upon demonstrated natural relationships through the years to come. For most of these smaller properties, however, an endeavor has been made to place them in their best present relationship to the proposed systems so far as one can ascertain it. But these recommendations are made only tentatively, in the expectation that the course of events during the next 25 years may induce the Commission, as it is permitted to do under the statute, to revise its conclusions in this regard. But the systems for this entire region are constituted under this plan with this reservation, merely so as to take up and place definitely most of these properties in their relation to the larger whole. Only thus, it is submitted, may the significance and feasibility of the consolidation plan be envisaged in a large way. If, as these smaller roads more definitely "find themselves," it be discovered that other relation- ships than these are more natural, there is always opportunity for an application for revision of this plan. Another general feature of the Southwestern-Gulf r^on is that there are too many railroads to be supported by the available traffic. This is partly due to the well- known activities of the railway promoter, who has found in this territory the last, and a most inviting, field for the practice of his art. There are more railways in fact than the country can probably support for many years ahead. This condition is more true in this region than anywhere else in the United States, and it is a considerable source of embarrassment. One hesitates to recommend the downright abandonment of a railroad line once constructed. Property values have been conditioned upon its operation, and manifest injustice may result from the withdrawal of transportation. 63 1. 0. C. But it is nevertheless true that many lines have been laid down for which there was never originally a long-time justification. Useless duplication of facilities has ren- dered both properties unremunerative. Such matters have been brought to a head in connection with the repeated bankruptcies and reorganizations which have char- acterized the lives of many of these properties. At the moment, for example, the reorganization committee of the Missouri, Kansas & Texas is abandoning to the bond- holders as hopeless the two lines of the Katy (map 25), from Oklahoma City southeast to Atoka in Oklahoma, and from Greenville, Tex., southeast to Shreveport, La., re-'pe-'tively. Another line which after protracted bankruptcy has just discontinued operation is the Missouri & North Arkansas from Joplin, Mo., to Helena, Ark. This road, 362 miles in length, cuts clear across the state of Arkansas to Helena on the Mississippi River, as shown by the dotted line on map 26. Originally a logging road, it not only lies almost entirely in the inhospitable Ozark region, but it is paral- leled on either side by the lines of the Missouri Pacific. It is alleged that there is not a living for the property and that the only thing to do is to tear it up. It is evident from the map that the road neither begins nor ends anywhere, and it is difficult to see how it could perform any useful function except to serve the towns locally along its line. Whether they can afford sufficient business to keep it alive is open to ques- tion. The case is cited merely to illustrate certain local conditions in the South- western-Gulf territory which must be dealt with in this plan. As affording a summary view of the financial status of the principal Southwestern- (lulf lines, the accompanjing table, showing data for 1917, is pertinent. It merely assembles the principal data which must enter into any conclusion as to whether the respective roads are strong or weak. Carrier. Fort Smith & Western I nternational & Great Northern Kansas City Southern Louisiana Railway & Navigation Co. Midland Valley Missouri, Kansas & Texas Missouri Pacific New Orleans , Texas & Mexico St . Louis-San Francisco St. Louis, San Francisco & Texas . . . St. Louis Southwestern St. Louis-Southwestern of Texas Texas& Pacific Investment in road and equipment per mile of line. Railway operating revenue per mile of line. $59,461 14,651 37,153 10,856 203,710 16,025 63,248 7,087 51,848 7,629 102,499 14,900 51,216 10,598 87,948 7,936 73,528 12,074 32,497 6,170 99,423 12,161 39,057 7,206 60,965 11,669 Net operat- ing income per mile of line. Percentage I net operat- ing income to invest- ment. d«sr. 1317 1,203 4,153 1,014 1,151 3,355 1,895 1,144 2,877 1,846 3,558 684 2,110 def. 0.67 3.39 3.95 L69 2.36 3.43 3.96 1.44 3.93 12.01 4.70 1.14 3.64 A peculiarity of the Southwestern-Gulf situation, which introduces an element of confusion into all statistical comparisons is the separate incorporation and accounting of the railway lines located in Texas. This is, of course, the result of the strict require - ments of the public-service regulations of that commonwealth, particularly of that portion known as the stock and bond law of 1893, which was directed to the prevention of overcapitalization.^ In this particular regard the statute has perhaps been success- ful, but an indirect effect, certainly, has been to penalize improvement and better- ment by existing companies. New capital, where imperatively needed by large systems having branches in Texas, has necessarily been raised through the issue of their own collateral trust securities, based upon the deposit of Texas-line bonds. Con- comitantly this financial segregation has left a considerable number of these supple- mentary Texas lines in very bad case financially. The following table showing 1 Cf. analysis in Ripley's "Railroads: Finance and Organization," pp. 301-6. 63 I. C. C. ll 1 ^ 1^ 618 INTERSTATE COMMERCE COMMISSION REPORTS. l)ercentage of net operating income to investment in road and equipment 1917 illustrates the point: ' ' Percent- Kansas City Southern *"®', Texarkana', in pursuance of such a plan, would be dismembered north and south of Denison, Tex. But Denison is the very heart of the Katy scheme of operation. And such rough handling, it is submitted, should be avoided wherever possible under this consolidation plan. It is therefore recommended that the >ri8souri, Kansas & Texas in general be merged with the Frisco, subject, perhaps, to negotiation with the Missouri Pacific concerning some of the minor exchanges above suggested. Only one express amputation of a Katy division is recommended at this time. Con- sideration of map 25 demonstrates that the line (dotted on the map) from Fort Scott to Oklahoma City is superfluous in a Frisco combination. It would merely parallel the line through Vinita. At present the ^fissouri Pacific has no lice into Oklahoma City: and the transfer of this division of the Katy would remedy this defect and substantially balance up competitive conditions in Oklahoma. It is recommended therefore that the line from Parsons, Mo., into Oklahoma City, with the branch to TiUsa and ^tuskogee (also dotted on map 25) be so shifted. The Katy line from Oklahoma City southeast to Atoka (also dotted on map 25) and the Katy line from Green\'ille, Tex., east to Shreve- port are, i t is understood, to be left out of the pending Katy reorganization. Consid- eration of maps 25 and 26 indicates, however, that the Atoka line derives a new useful- ness in this more comprehensive plan. It provides a short cut between the Frisco Red River division and the lines west of Oklahoma City, as against the long line \aa Sapulpa. The growing tendency to use the Gulf ports, in connection with water haul to and from north Atlantic ports, makes this cut-off desirable. As to the line from Greenville to Shreveport, it does not supplement this amplified Frisco system, as the Cotton Belt between Texas and ^temphis already furnishes a direct line. The St. Louis Southwestern Railway, otherwise known as the Cotton Belt (shown on naap 25) is, as has been already stated, to be utilized under this plan to provide a Frisco competitive service across Arkansas, to match the old Iron Mountain route. Assuredly it could not go into a Miiisouri Pacific combination, as in that event all com- petition in the Mississippi Valley throughout Arkansas would disappear, except for the Choctaw line of the Rock Island into Memphis. The St. Ixjuis Southwestern is the strongest financially of all these southwestern properties. As the table on page 617 shows, its capital account is high. $99,423 per mile of line. Its railway operating revenue per mile of line in 1917 was $12. 161 , yielding a net operating income per mile of line of 13,558. Even on the very high investment account therefore this Welded a return on investment of 4.70 per cent. The record since return to private control has been favorable. The Cotton Belt is one of the two or three roads which rejected the government guaranty to good effect. Its net income for the six months to September 1, 1920, exceeded the standard return for the period by $306,000 after liberal expendi- tures upon maintenance. Assignment of the St. Louis Southwestern to the Frisco system without reservation would result in entirely unnecessary duplication of lines up the Mississippi Valley be- tween Memphis and St. Louis. Coincidently, as elsewhere set forth in chapter V, the 63 1. C. C. CONSOLIDATION OF RAILBOADS. 625 Rock Island-Southern Pacific system is greatly in need of a line to tie in the Memphis division (map 23) with St. Louis and Chicago. Expert opinion on both sides supports the recommendation that useless duplication to the Frisco be avoided, while, at one and the same time, the Rock Island can be pro\dded with a necessary line, by division of the St. Louis Southwestern at Brinkley, Ark. This is the jimction of the Rock Island line to Memphis with the Cotton Belt stem. It is recommended that the lines north of Brinkley (as dotted on map 25) go to the Rock Island system. They are so added on map 23. This alters the Cotton Belt line into St. Louis, which thereafter will be from Brinkley by Rock Island trackage to West Memphis and thence up the low-grade river line of the Frisco into St. Louis. The taking over by the Rock Island of the Cotton Belt line north of Brinkley, operates merely to substitute the Rock Island for the Cotton Belt in respect to trackage relations with the Missouri Pacific. At present the Missouri Pacific takes trackage over the Cotton Belt between lUmo at the Thebes bridgehead, south to Paragould, where contact with Missouri Pacific rails is again established. In exchange therefor the Missouri Pacific at present gives trackage north of the Thebes bridge up the east bank of the Mississippi River into St. lx)uis to the Cotton Belt. This reciprocal trackage arrangement under this plan will continue between the Missouri Pacific and the Rock Island A prime requisite for an effective Southwestern-Gulf system is the provision of through routes to the sea; and these ought to be afforded both to New Orleans and Galveston. This is something which the Frisco has always lacked in competition with the Missoiuri Pacific, which has enjoyed access both to New Orleans and Gal- veston over other affiliated Gould lines. The provision of through routes to the Gulf therefore is fundamental. As to New Orleans, a route is afforded, as shown on map 25, by the inclusion of the Louisiana Railway & Navigation Company, from Shreveport to New Orleans, closely paralleling the Red River all the way. Unfor- tunately this line can not add strength financially, according to the data for the type 3'ear 1917. Its investment account is very heavy, $63,248 per mile of line. Its rail- way operating revenue was $7,087 per mile of line, yielding net operating income of only $1,014. This is a rate of return on investment of only 1.69 per cent. Evi- dently this Edenborn line, so-called, must be supported by through traflic from a large system. It is so plainly marked to match against the Texas & Pacific from Shreveport down the other bank of the river (map 26) in the Missouri Pacific com- bination, that it finds a natural and valuable place in the Frisco group. Of course in due time its disability of freight transfer by ferry service instead of a bridge, will disappear. Until then it operates under a heavy handicap. Consideration of map 25, however, shows that the route from Kansas City to New Orleans provided within this proposed Frisco system will still be quite indirect from Shreveport north. There is nothing corresponding for directness with the air line of the Kansas City Southern, north of that city. The location of this line is dotted on map 25. It traverses a sparsely settled upland territory on the border of Oklahoma- Arkansas west of Hot Springs. To duplicate this line with the present volume of traflSc would be a useless expenditure. But possibly trackage might be given which would avoid the wide detour otherwise necessary to the west. It is recommended therefore that trackage be provided, first over the Texas & Pacific from Shreveport to Texarkana, and from that point on over the Kansas City Southern to Hartford Junction, where the main line of the Frisco is once more reached. This double utilization of the key line of the Kansas City Southern, as the country develops and through traflEic increases, may conceivably in time lead to the building of a parallel bridge line across this district, or, if necessary, to the double-tracking of the road. But in the meantime, doubtless, the existing rails of the Kansas City Southern can carry all the business, and the overhead charges can be shared by the two systems. Responsibility for upkeep should still rest with the enlarged Missouri Pacific system, but transportation over the premises might well be allowed to the Frisco. 63 1. 0. 0. ffjl 626 nVTERSTATE COMMERCE COMMISSION REPORTS. CONSOLIDATION^ OF RAILROADS. 627 £'11. A second through route to the Gulf must reach Galveston as well as New Orleans. The best way apparently is by trackage over the excellent roadway of the Trinity & Brazos Valley (map 25). This is an air Hne from Dallas and Fort Worth to Gal- veston. At present its relationbhip to other railroads is extremely involved. Origi-^ nally it was a joint enterprise of the Colorado & Southern and the old Rock Island Company, the now defunct holding corporation which headed the old Reid-Moore enterprise. The Rock Island receiver in 1915 disaffirmed the old contracts relative to half-and-half interest in the Trinity & Brazos Valley with the Colorado & Southern. But litigation was finally avoided by an agreement decree. At present the Rock Island Railway is the owner of one-half of the first-mortgage bonds and of the capital stock. The Trinity & Brazos Valley, it may be added, controls the so-called Gal- veston Terminal Railway. The line has never been utilized to the degree which it deserves. It ought to become an important stem. By means of trackage, to throw business from the great network of lines in the proposed Frisco system to the north over it might add to its earning capacity and overcome the very heavy deficit of 2.09 per cent of net operating income in relation to investment. There is, how- ever, another possible line to Galveston, which is dotted on map 25. Trackage over the Houston East & West Texas, a part of the Southern Pacific system, woukl serve to connect the southernmost extremity of the St. Louis Southwestern at Lufkin, Tex., with Houston and thus with Galveston. Apparently the rails would stand the additional traffic without prejudice to the interest of the Southern Pacific. But both this line to Galveston and the Trinity & Brazos Valley are not apparently needed; and of the two, the Trinity & Brazos Valley, making the through line from Dallas and Fort Worth, seems to be preferable. A considerable railroad, which must be taken care of somehow, is the Kansas City, Mexico & Orient. This enterprise, never completed through to the Pacific Ocean at Topolobampo in Mexico, remains stranded high and dry as a local line from Wichita southwest across the arid plains of Texas almost to the Mexican border. The property had an investment account of $39,723 per mUe of line in 1917, on which it earned only 0.03 per cent. The road as a whole could not be placed effectively in either one of the two great systems proposed for this region. Its line from Wichita across Oklahoma (map 26) absolutely parallels an existing line of the Frisco (map 25 j. And from the Red River, forming the northern boundary of Texas, on to Mexico, the Orient road parallels the Texas & Pacific (cf. maps 25 and 26). Thus it is evident that to place this property as a whole in either one of these combinations would abolish competition and create superfluous lines within the same system for either the one half or the other of the property. But to split it up north and south of Altus, Okla., as shown on map 25, permits the southern half across Texas to be added to the Frisco system where it has no line; and then the northern half above Altus may be utilized in the Missouri Pacific system (map 26), to give it a road across western Okla- homa, without which it would have no representation in that district. Further- more, as shown by map 26, by this means the two systems are much more evenly matched against one another. Each is .given a far-flung line clear across western Texas, and each is equally represented in the territory of western Oklahoma. And in both localities competition is provided by means of practically parallel lines. This proposal to subdivide this property, it may be added, has the approval of sub- stantial expert railroad authority. Unless it were so plain a case calling for dis- memberment, the recommendation would not be so confidently made. The Frisco system as compared with the Missouri Pacific is peculiarly lacking in mileage in northern Louisiana. There is a little line known as the Vicksburg, Shreveport & Pacific, according to map 25, which runs due east and west between Shreveport and Vicksburg. It is controlled by the Sterling Trust, Limited, an English holding company, which also owns the Alabama & Vicksburg Railway run- 63 1. G. G. ning straight on east across Mississippi to Meridian (map 10). This line east of the Mississippi has been allocated in chapter IV to the Southern Railway. The object in cutting the road asunder at the Mississippi River is to allocate the railway mileage to the different rate territories for governmental administrative purposes. The Vicks- burg, Shreveport & Pacific Railway, in 1917, had a net operating income of 3.67 per cent upon the investment in road and equipment. As recently reorganized in 1917, it appears to be a not inordinately weak member of the southwestern group. It is recommended that it be added to the Frisco combination as a part of this general plan. The best railroad for affording an entry into Chicago for the enlarged Frisco system, as heretofore described, is believed to be the Chicago & Alton Railway. Its location in relation to the Frisco is depicted on map 25. The Alton can not add financial strength. At least until it is reorganized, it is bound to be unstable. The immense overload of bonded indebtedness, imposed upon it years ago as a capitalization of its surplus, has rendered it a continual drain upon the Union Pacific treasury. But once reorganized, its rails, according to the map, afford an admirable connection both for Kansas City and St. Louis to Cliicago. In the Union Pacific system^ as at present, the traffic brought by that system into Kansas City is largely local. The Union Pacific delivery of cars at Kansas City to the Alton amounted to only 5,359 carloads in 1917, most of which originated on the system. The Alton in return deliv- ered to the Union Pacific 4,345 carloads, about one-half of which were destined to points on the Union Pacific system. These figures demonstrate that the Alton is of relatively slight value in its present connection. Yet this road, according to the map, is peculiarly well fitted to serve the Frisco system. For it not only gives a short line from St. Louis to Chicago, but it also affords a better line to the Frisco, as herein amplified, between Kansas City and St. Louis than otherwise would obtain. Consideration of map 25 shows that the existing Frisco system has no direct line at all between Kansas City and St. Louis. The inclusion of the Katy, however, gives it such a route but, according to the map, it is composite and quite roundabout. The river line of the Katy, in fact, from New Franklin down the north bank of the Missouri to St. Charles is so ill-suited that the present reorganization committee is considering its abandonment to the bondholders, and they also find so little value attached to the Hannibal line that that also is scheduled for abandonment. It is recommended, however, in view of the proposed merger of the Katy and the Alton that the Hannibal division be included at least as far as Higbee, Mo., the junction of the Hannibal division with the Chicago & Alton. There is quite a heavy tonnage interchanged at this point, amounting in January, 1921, to a delivery by the Katy of 3^12 cars, more than three times as much as tlie Katy delivered to the Alton at St. Louis, As for the Katy line from Boonville into St. Louis along the north bank of the Missouri River, under the cliffs, it is recommended that it be transferred to the Missouri Pacific system. As a low-grade line, in the opinion of the Missouri Pacific officials, it would practically give them a double track, \nth a lower grade in fact than they now have along the south bank of the river. It should also be noted in connection with the Katy line from Moberly to Hannibal that it may well go to the Union Pacific-North Western system along with the Wabash, west of the 5kiississippi (see map 15). For the Wabash already uses it by trackage as a part of its system. The addition of the Chicago & Alton and the transfer to the Missouri Pacific system of the Katy line down the north bank, as hereinbefore described, would still leave the Frisco system \\ith admirable short routes both from Elansas City into St, Louis and up to Chi(iago as well. The Higbee connection will also be advantageous as affording an alternate route to avoid congestion in the St. Louis terminal. Further- more, the Chicago & Alton and Frisco terminals at Kansas City are tributary, admitting of practical consolidation. And then at Chicago the Frisco would get a good terminal, 63 1. C. G. 628 IJiTERSTATE COMMERCE COMMISSION REPORTS. CONSOLIDATION OF RAILROADS. 629 ' I ' including the modern freight-house layout just completed. It is alleged that the modem Alton facilities at Kansas City would also well serve the Frisco. The pro- vision of a coal supply from the lines of the Alton is also a factor of importance to the Frisco. Macoupin and Sangamon counties in Illinois, traversed by the Alton, rank third and fourth in production among the districts of Illinois. For 50 miles, from Carlinville to Springfield, abundant coal supply is found. The Alton in 1918 shipped 3,364,000 tons of coal from Illinois and 290,817 from Missouri mines in the vicinity of Higbee, Mo. Evidently an adequate supply of fuel for company use and for general consumption throughout the southwest will be afforded by this merger of the Alton in the Frisco system. Nor is this recommendation prejudicial to the competing system built upon the Missouri Pacific. For that system already has adequate com- munication between Kansas City and St. Louis; so that the Chicago & Eastern Illi- nois amply suffices for its Chicago entrance and at the same time gives that system a coal supply from along its line well matched against the production of the Alton. The Missouri Pacific system, portrayed on map 26, assumes the shape of a wide- open fan, ranging widely all over the territory between Pueblo, Colo., on the west and Hhe mouth of the Mississippi River. The system in 1918 operated 7,108 miles of line, of which about 6,800 were owned in fee. This compares with the Frisco mileage of 5,064, owned and operated. The Missouri Pacific therefore is substan- tially larger already, as a nucleus for the second great competing southwestern system, to match against the Frisco. Moreover, as a result of its reoi^nization. and because of the historic association between it and the other so-called Gould lines in Texas, there is a greater degree of unity in the geographic layout than is evinced by the Frisco. The reorganization in 1917 merged the St. Louis, Iron Mountain & Southern Railway down along the Mississippi Valley, with the old Missouri Pacific Railway, which formerly comprehended only the lines due west from St. Louis in Missouri and Kansas. The other Gould properties, separately shown on map 26 — such as the Texas & Pacific and the International & Great Northern — are, in other words, more integrally related to the main stem than if they had always been controlled by inde- pendent and perhaps competitive owners. A weakness of the Missouri Pacific system, however, as at present constituted is at once apparent upon examination of the map (26). This is the sharp separation on the two flanks of the Ozarks between the western and the southern hal ves. These are at present united only by two long bridge lines running northwest-southeast over the Ozark uplands or along the valley of the Arkansas River. Nor is this dis- ability a slight one in view of the growing importance of tlu*ough traffic to the Gulf. The lack of a direct north-and-south route, especially from Kansas City, has in the past proved a serious handicap. From St. Louis, taken in connection with the Texas & Pacific and the International & Great Northern, the old Iron Mountain route had lines both to New Orleans and Galveston. But as connecting the original Missouri Pacific Railroad, lying west of the Ozarks, and Tx)uisiana and Texas points, the disability was very great. Carriage by way of Coffey ville, Kans., then down the Arkansas River Valley to Little Rock, and thence by a sharp turn back toward Galveston was assuredly zigzag. The so-called Womble branch was originally in- tended to bridge the last gap in a direct route. It was never completed. Under this plan there is no longer need for it. As against this route, the Kansas City South- ern Railway goes straight as an arrow from Kansas City (see map 26) down the eastern boundary of Kansas, Oklahoma, and Texas to the Gulf. Nothing could be shorter than this competitive route, which, of course, got most of the long-haul lucrative traffic. WTiatever business was held by the Missouri Pacific was of necessity carried at an inordinate cost by reason of the circuitous routing. To remedy this defect it is recommended that the Kansas City Southern Railway be included in the Missouri 63 1. C. C. Pacific system. Merger of the two provides a supplementation for each of its own individual shortcomings. A far better through route is afforded between Kansas City and New Orleans than was afforded by either route alone. For the short line from Kansas City to New Orleans at present consists of the Kansas City Southern to Shreveport, thence over the Louisiana Railway & Navigation Company to New Orleans. But this latter line having been taken from the Frisco system, the Texas & Pacific answers practically as well. The Kansas City Southern, on its part, also gains, because access is provided more freely to the great Gulf ports without leaving the road entirely dependent, as at present, upon its own outlet at Port Arthur. Such merger of the Kansas City Southern in the Missouri Pacific system is confidently recommended as operating in the public interest. Financial considerations of weight, as provided by the statute, commend the merger of the Kansas City Southern with the Missouri Pacific. Consideration of the table on page 617 discloses practically the same percentage return of net operating income to investment for each. The Missouri Pacific in 1917 earned 3.96 per cent, as against the corresponding figure of 3.95 for the Kansas City Southern. But this similarity is only apparent. The investment account reveals a striking difference. The capital statement of the Kansas City Southern in 1917 was practically four times that of the Missouri Pacific. At $203,710 per mile of Une, it is more than double the next highest figure for this region— $99,423 per mile of line. The investment account of the Missouri Pacific stands at only $51,216 per mile of line. This is, of course, due in part to the great network of lightly built branch lines; whereas the Kansas City Southern is practically all main track. It is a stem line from one end to the other. The Missouri Pacific investment account was presumably scaled down in the recent reorganization, although as a matter of fact the outstanding capitalization actually increased by 4.42 per cent. But while the investment account of the Kansas City Southern per mile of line is fourfold that of the Missouri Pacific, its net operating income is practically double. The indications are that the investment account is still excessive, due allowance being made for the physical characteristics and history of the two properties. Federal valuation will doubtless reveal the situation more clearly. But with a reduction of the Kansas City Southern investment account, its relative earning power would be correspondingly enhanced. The road is assuredly in the best condition perhaps of any property within this group, and its strength, largely built upon its main-Hue business, should be properly utilized to support the great extent of branch mileage of the Missouri Pacific. Unless the theory of the statute is at fault, this is the procedure which is called for by law. An improvement now being developed by the Kansas City Southern in order to make it a low-grade line to the Gulf is under way. At present the main line south of Joplin has some grades as high as 1.4 per cent, through the western foothills of the Ozarks. Swinging the road farther to the west, out into the flat country, would make it possible to eliminate this handicap. Negotiations are now in hand for trackage rights over the Kansas, Oklahoma & Gulf (see map 26) from Joplin, through Baxter Springs down to Muskogee, Okla. Thence trackage is to be taken over the Missouri Pacific back to the main line of the Kansas City Southern at Sallisaw, Okla. This detour would give a low-grade line with a maximum of 0.5 per cent grade to be utilized for through freight only. The old main line, still tapping important territory, would be utilized for passenger and lighter business. The significance of this proposal is that it suggests at once the inclusion in the Missouri Pacific system of the entire Kansas, Oklahoma & Gulf road. The purpose of this is at once disclosed by consid- eration of the map. It would give the Missoiui Pacific system, as enlarged, a line directly matching and paralleling the Katy between Muskogee and Denison, Tex. This would open up at once also another through route between Kansas City and Galveston. The inclusion of the Kansas, Oklahoma & Gulf, unfortunately, would 63LO.C. 63763—21 12 ^\ i: ■\. 630 INTERSTATE COMMERCE COMMISSION REPORTS. add a liability rather than an asset, as at present operated. The road, according to the returns for 1917, had a net operating income deficit of $251 per mile of line. Its investment account of $38,049 seems not abnormal by comparison with its neighbors. Doubtless the property is in poor shape. But, judging by the map, it possesses a line which if incorporated upon suitable financial terms would provide a necessary link in the enlarged system. Two other minor additions to the Missouri Pacific system should be enumerated. Each has already been discussed in connection with the Frisco consolidation. One is the line of the Katy, as shown on map 26, from Fort Smith into Oklahoma City, with the side line through Tulsa into Muskogee. The other proposed addition is that of the northern half of the Kansas City, Mexico & Orient road from Wichita to Altus, Okla., near the Texas boundary. This is part of the arrangement, as it will be recalled, under which this property was to be divided, the southern half to go to the Frisco system, reserving this northern half in order to give the Missouri Pacific group a line down through western Oklahoma. Another small addition to the Missouri Pacific system is that of the Louisiana & Arkansas. This is one of the little independent roads so characteristic of the region. It extends from Alexandria, La., northwest to Hope, Ark. The location is dotted on map 26. Judging by the map, this line closely parallels both the Louisiana Railway & Navigation Company (Frisco system, map 25) and the Texas & Pacific Railway (Missouri Pacific, map 26). It is diflBcult to decide whether it is more serviceable to the one or the other; but on the whole, because of the fact that, with its line to the east opposite Natchez, Miss., it ties into the Missouri Pacific system at tliree points it is recommended for inclusion therein. Along with this there seemingly should also be merged with this system the Fort Smith & Western, which is depicted on map 26, as running across Oklahoma, roughly between Fort Smith, Ark., and Guthrie, Okla. It provides further representation for the Missouri Pacific in Oklahoma, where, as a whole, the Frisco system is already richly represented. This little road also must be regarded as a liability rather than an asset, its net operating income being equal only to 0.67 per cent on the investment in road and equipment for 1917. The Louisiana & Arkansas was in better case, with a corresponding figure of 2.95 per cent. Neither of these results is very encouraging, but if the policy be to include all the odds and ends, these properties must certainly be taken in. What shall become of the mileage in the Missouri Pacific system (map 26) north and west of Kansas City? A rigid application of the principle of territorial sub- division would lead to the amputation both of the main river line up to Omaha and of the branch extending far across northern Kansas and up into Nebraska at Hastings. It has been urgently represented t^iat these should be transferred to one of the trans- continental groups. And the force of this contention is conceded as to the Kansas branch. This does not properly belong in a Southwestern-Gulf system. It lies in the territory of the Union Pacific, the Rock Island, or the Santa Fe. Decision is reserved as to its precise allocation, and of course it would do no particular harm to let it rest where it is. But if a desire should develop among any of these transcon- tinental lines for additional mileage in this region, it is believed that a transfer would be not incompatible with the public welfare. Not so with the main river line up to Omaha. This is as important to the Missouri Pacific system, especially in the carriage of packing-house products, as is the Kansas City-Memphis-Birmingham line in the Frisco group. It might, of course, be transferred to the Union Pacific-North Western system (map 15), in order to match it against the corresponding line on the east bank of the river in the Burlington system (map 16). For these two great systems are not at present evenly matched in this regard. If the line went anywhere else, Buch should be its destination. But the Missouri Pacific systemn eeds upbuilding in order to sustain its heavy burden of branch mileage. The Union Pacific can do without it. It is therefore recommended that no such transfer take place and that conditions as to the Omaha line be left undisturbed. 63 1. C. C. CONSOLIDATION OF RAILROADS. 631 The status of the Missouri Pacific line into Colorado, under the plans propoaed for transcontinental merger, is somewhat disquieting. The problem is not peculiar to this line. It attaches likewise to the Rock Island and possibly to the Santa Fe Unea into Colorado. Combining the Denver & Rio Grande with the Burlington, or with any other great system, for that matter, automatically tends to close the through line to outsiders. There is always, of course, a certain amount of local business, and it would appear as if at all events the Missouri Pacific should have trackage up to Den- ver. The interchange of the Missoiu-i Pacific with the Denver & Rio Grande was considerable in 1917. Not less than 526.000 tons were delivered to the Denver & Rio Grande, and 828.000 tons were received back from it. The seasonal character of the business indicates that much of it consisted of agricultural products. So serious would be the loss of this business that one is almost tempted to recommend the bodily transfer of this Denver division to the Burlington system. As constituted under this plan, the Burlington system has no appreciable mileage in Kansas (map 16) to match against the Union Pacific Une, which traverses that state from end to end due west from Kansas City (map 15). This, in fact, is the old line of the Kansas Pacific. Its status seems to be largely that of a provincial road within the present Union Pacific system. Conceivably this Missouri Pacific Denver line might go to the Burlington system in order to give it something to match with the Kansas mileage of its great competitor. The suggestion is made only tentatively, however, subject to confirma- tion upon further inquiry. The disposition of the Colorado & Southern Railway, with its Texas line, known as the Fort Worth & Denver City, is a matter of peculiar difficulty, owing to the fact that these properties are concerned both in transcontinental business and also engage in through carriage to the Gulf of Mexico. Their national function is to afford a short and direct line from Galveston through to the far northwest by way of Denver. Following this course, all of the east-and-west transcontinental routes are cut at right angles. Because of existing stock control by the Chicago, Biu-lington & Quincy, their status is discussed primarily in chapter V, and reasons are there given for the hesitancy in a definitive allocation to this Southwestern-Gulf group of roads of the line between Denver and Fort Worth. The final choice, as there stated, must be made between transfer of this important bridge line either to the Santa Fe, to the Rock Island-Southern Pacific system, or to the Missouri Pacific. But one point that is definitely settled is that this portion of the Colorado & Southern system should not remain in the control of the Burlington. The main reason therefor is that such extension carries one of the principal northern transcontinental railroads clear out- side its natural territory— unless, indeed, one is equally to extend the Union Pacific system, which is matched against the Biu-Hngton for transcontinental purposes. And the way to accomplish this last-named transfer is closed by other disposition of the Kansas City Southern, as herein made (p. 628, supra).' The projection, in other words, of the Biu-lington-Northern Pacific transcontinental system into the Okla- homa and Texas field, if continued, entails such other amplifications as to completely upset the plan for evenly balanced east-and-west competitive systems. One of the express purposes, indeed, in the differentiation of the Southwestern-Gulf propertit-s from the transcontinental railroads would be fnistrated thereby. The respective claims of the Santa Fe and the Rock Island-Southern Pacific for control of the Colorado & Southern south of Denver being also discussed in chapter V as elements in the transcontinental situation, it is here and now pertinent to set forth aflinnatively the reasons for including it instead in the Southwestern-Gulf group. In this latter region it would be treated as a distinctly neutral road for trans- continental traffic. Through connection at the various junctions it could handle all the business destined to the Gulf ports ^fdth strict impartiality. The proposal is indorsed by the late regional director of the western federal Railroad Administration. 63 I. C. C. N i 632 INTERSTATE COMMERCE COMMISSION REPORTS. But if it be so regarded, choice must then be made between the Missouri Pacific and Frisco systems which it is planned to set up hereabouts. To the Missouri Pacific the Colorado & Southern is peculiarly attractive, because it would serve to tie in Pueblo, Colo., already reached by the forthstanding stub of the Missouri Pacific across Kansas! Moreover, this system, according to map 26, is pooriy represented, as compared with the Fnsco, in the panhandle region of Texas, and the Colorado & Southern directly traverses this field. It goes without saying that the Une would add financial strength either to the Frisco or the Missouri Pacific. The Fort Worth & Denver City in 1917 earned 7.34 per cent upon its investment account, although the Colorado & Southern only earned 3.24 per cent. But the general financial status is distinctly higher than that of either of the Southwestern-Gulf roads. In how far this earning power is due to the express interest of the Burlington system is of course indetermi- nate. But as against any loss from this source through its transfer, there would need to be set the gain to accrue from a neutral relationship with all of the other transcon- tinental roads. As between the two, according to our statistical data, the need for financial support of the Frisco is somewhat greater than for the Missouri Pacific. But the layout on the map points to the Missouri Pacific as the preferable recipient. It is historically of interest that the Wichita Falls & Northwestern- the constituent m the Katy system (map 25) which follows up the western boundary of Oklahoma and ends at Forgan— was originally intended to go on to a Colorado connection at Trimdad or Pueblo. Its completion was expected to break the monopoly which the Colorado & Southern has so long enjoyed of the short and direct Une between Denver and Galveston. Perhaps some day this will be put through. In this event, with the Colorado & Southern south of Denver as a part of the Missouri Pacific, the two Southwestern-Gulf competitors would again be ahnost perfectly matched against one another in this r^^ard. On the whole, therefore, weighing the evidence adduced, it appears that the clami of the Missouri Pacific, particulariy for the further support of its Pueblo divi- sion, IS substantiated, and the road is therefore shown tentativelv by means of a dotted line upon map 26. Under this consolidation plan it should finally rest either here or in one of the two competing southern transcontinental systems. The Missouri Pacific system as thus amplified has a certain interest in the so-called Gulf Coast Lines. This latter road, as shown on map 22, closely parallels the sea- board all the way from the Mexican frontier up to New Orieans. From Beaumont, Tex., east to DeQuincy, there is an important stretch wherein the Gulf Coast Lines rely upon the Kansas aty Southern entirely for trackage to connect the two halves of their extensive system. The Kansas City Southern (map 26) as it approaches the Gulf turns sharply to the west, parallel to the coast, just where it forks at DeQuincy. The trackage relationship thiks set up between the Gulf Coast Lines and the Kan.«as (Hty Southern is quite intimate, and it seems not unlikely that a reciprocal favor might be extended, giving trackage to the Kansas City Southern over the Gulf Coast into Houston. Such trackage, dotted on the map, .serves to tie in what would other- wise be widely separated operating units. The advantage of such connnection is often times great in the matter of car supply. It enables a prompt provision of equip- ment in time of need. The Missouri Pacific interest in the Gulf Coast Lines is evi- denced in the daily trainload through the crop season out of the Brownsville dis- trict, which moves through Houston over the International & Great Northern to Long- view, thence over the Texas & Pacific to Texarkana. At this point another train- load daily of California products is reclassified with it, and the two move to St. Louis over the Mi3.souri Pacific stem. All of these connections, it will be noted, are in the Missouri Pacific group of roads. On this basis it is reommended that the southern half of the Gulf Coast Lines, from Beaumont on, be assigned to this svstem. From DeQuincy ea^t, as elsewhere described, the Gulf Coast Lines go to the Santa Fe for 63 1. C. C. CONSOLIDATION OF RAILROADS. 633 an entrance into New Orleans. This division of the Gulf Coast Lines dovetails in, it will be observed, with the break in its owned mileage between Beaumont and De- Quincy. In connection with access to Houston the proposal has also been made that trackage should be given over the Houston East & West Texas. This would unquestionably give a more direct line into Shreveport. But inasmuch as trackage (map 25) has already been recommended for the Frisco over this subsidiary of the Southern Pacific system, it is not believed to be desirable to superadd anything further. The need is by no means as great for this entry into Houston for the Missouri Pacific system as it appeared to be in the Frisco. The necessity for a Chicago line \vithin the enlarged Missouri Pacific system having, it is believed, been demonstrated, it is recommended that the western half of the Chi- cago & Eastern Illinois, as shown on map 26, be incorporated within this system. At present, to be sure, there is a somewhat heavier interchange of the Missouri Pacific with the Chicago & Alton than with this road. In October, 1920, for example, the Missouri Pacific received 482 carloads at St. Louis and Dupo, 111., from the Alton as against only 164 from the Chicago & Eastern Illinois. Coincidently it delivered 720 to the Alton and only 373 to the other road. But this indicates no physical dis- ability of the latter road. It is the judgment of those best informed that the Chicago & Eastern Illinois is the most natural connection for the Missouri Pacific into Chicago. The balance of the Chicago & Eastern Illinois, it will be remembered (page 597, supra) ^ is recommended for inclusion in the St. Paul-Great Northern system. It is not alone that this Chicago connection is direct and in good condition for service. The Chicago & Eastern Illinois has also been recently reorganized in order to bring its capitaliza- tion into Une with its earning power and its physical valuation. But the recommenda- tion is also made because of the fuel supply for the southwest, which such a merger would provide. Chicago & Eastern Illinois coal tonnage in general is derived from two distinct fields. One of these, known as the central Illinois field, is directly northeast of East St. Louis. The other, the southern Illinois field, lies south of St. Elmo, along the line of the southerly fork of the Chicago & Eastern Illinois, just below the crook in it (map 26). The coal from this southern Illinois field prac- tically all goes into the southwest by way of the Thebes bridge, or into the southeast via Joppa. In either event, the carriage is by way of the Chicago & Eastern Illinois. And in this way this road feeds directly into the Missouri Pacific system. On the other hand, the coal from the eastern half of the Chicago & Eastern Illinois, as shown on map 5 by means of the heavier designation, all moves north for consumption in Chicago or beyond. The western half of the Chicago & Eastern Illinois is thus allocated to the Missouri Pacific not only for fuel purposes, but because it affords all of the connec- tion which the Missouri Pacific requires with the other Missouri River gateways. For, as heretofore described in connection with the Frisco system, the Missouri Pacific already has one good low-grade river line between Kansas City and St. Louis. It has also been given a second track, it will be recalled, by taking the Katy river line east of Boonville. The portion of the Chicago & Eastern Illinois reserved for the Chicago bridge line is tenuous to be sure, as map 26 indicates, but it is believed that it affords both the fuel supply and the through connection which is required for the service of its proposed parent system. An operating advantage which still further commands this arrangement is the traffic to and from Chicago and New Orleans and east Texas points, which could be handled down the east side of the Mississippi River to Illmo. This would obviate the necessity of routing much business through the congested terminals either of St. Louis or East St. Louis. The plan under which the two Southwestern-Gulf systems, as heretofore developed under this plan, match one another throughout their common territory is disclosed by 63 1. C. C. 634 I.XTERSTATE COMMERCE COMMISSION' REPORTS. CONSOLIDATION OF RAILROADS. 635 i!^! W' l! map 26- A. The manner in which all of the leading cities are constituted common points through the entry of each of these evenly balanced competitors, is so clearly s it forth as scarcely to require comment. And yet in order to confirm the demonstra- tion, attention is especially directed to the two Unos into New Orleans, into Galveston and San Antonio, and the two matching lines far flung across western Texas. And as for direct through lines from Kansas City and St. Louis respectively to New Orleans and Galveston respectively, those essential routes have already been described minutely. Broadly \-iewed. the Missouri Pacific system is still substantially stronger in the lower Mississippi Valley; and. per contra, the Frisco has the advantage in western Oklahoma. But all such minor differences might readily be dealt with through new constniction in the futiire, in pursuance of a carefully de\'ised plan. The control henceforth which the Commission may exercise over new constniction affords an opportunity to direct aTairs in such a manner as still further to promote even-handed competition. One of the leading traffic officials characterized this plan as presenting "wonderful possi- bilities " for the future. Whatever these may be, it is submitted, must arise from some such orderly rearrangement of corporate relationships as is herein cnidely set forth. The table on page 617 and exhibit 7 bring out the relative earning power in terms of investment account for the Southwestern-Gulf region, based as always upon the type year 1917 . It establishes, so far as these figures can be rehed upon, a low yield, which was all that one might expect from this undeveloped and over-befailroaded territory. The encouraging feature, however, if the theory of this consolidation plan be sound, is the substantial equality of the return between the two great systems. For the Frisco the rate is 3.06 per cent on investment account; while for the Missouri Pacific it is 3.75 per cent. But these figures may not stand as baldly stated, for an instant inspection of the data concerning investment per mile of line shows that the Frisco capital account is approximately 25 per cent greater than that of the Missouri Pacific system. Specifically the investment account for the Frisco stands at $72,924 per mile of line as against that of the Missouri Pacific of $57,920 per mile of line. The former, in other words, is 25 per cent greater than the latter. Yet there is no evidence that in any large way the Frisco property is correspondingly worth as much more than the other, as this investment account apparently indicates. The predilection is entirely in favor of a substantial writing down of the Frisco account and in fact probably, as will subsequently appear in the succeeding chapter, of a substantial reduction of both capital accounts. Certainly there is no sound warrant for the disparity in this regard as between the two systems lying side by side throughout this region. For this reason it is submitted that a correction may justifiably be made in the Frisco returns. To write down the capital account by one-fifth would automatically write up the rate of return, bringing it from 3.06 per cent to a sul)stantial eqidvaient with that of the Missouri Pacific, standing at 3.75 per cent per mile of line. The uniformity of earning power obtainable, supposing that the returns for the type year 1917 be regarded as once more possible with the reestabhshment of normal operat- ing conditions, is noteworthy. ParticiUarly is this significant when taken in con- nection with the investment in road and equipment according to this showing. But one further step remains, namely to check up the investment account by'^federal valuation, and this step is reserved for the succeeding chapter, a general recapitulation. • . 63LC.C. Chapter VII. — Recapitulation. R^sum^ and broader aspects of consolidation policy, especially as respects govern- ment ownership, 635.— Conspectus of the plan, proposing 21 independent sys- tems, and comment upon the summary map of their respective locations, 636.— Their relative extent and volume of traffic, 638.— General assembly of statistics of earning power, with comment upon regional variations, 640.— Capital account now compared with physical valuation, 641.— Positive conclusions thus obtain- able, discussed regionally, 643.— Effect of consolidation upon train movement, 643.— And upon the welfare of individual properties, 643. — Extensive resort to trackage, avoiding needless duplication, 644.— Certain objectionable practices demanding legislative correction, 645.— The tendency toward consolidation in the British Isles significant, 646. The objects sought in the foregoing plan are as follows: An inherently natural geographic scope for each system; a sound operating adaptation of each unit to its surroundings, due consideration being given to the nature of its traffic; administrative practicability, that is to say, a size under each particular set of circumstances, com- mensurate with human capacity in management; an ever-present competition between rival roads, in order to insure the continuance of an alert and accelerated service to the public, assuming that the foregoing physical arrangements have already provided economical carriage by each competitor; and such an equalization of earning capacity between these competitors, as to perpetuate such rivalry in service on an even-handed and wholesome basis. This ideal has been otherwise well described by Chairman Clark of the Interstate Commerce Commission, as a service "rendered by large systems with their component parts properly coordinated under a common policy rather than by a substantial number of weaker and, in some instances, impecunious systems, each with its selfish interests and its separate organization striving to pro- mote those interests. " All of these requisites for a sound consolidation plan, it should be understood, must of necessity be combined with the least possible disturbance of existing corporate integrity. Matters might be quite differently arranged, were it not for this precipient condition. And indeed it is basic, for two reasons. The first is that the formation of a better sort of competitive system than we now enjoy, must in the nature of things probably be voluntary. The other is that the existing physical instrumentalities, such as division points, roundhouses, residence of employees, and the like, have been closely coordinated with the present corporate structiure. Both of these circumstances therefore commend, as the most feasible governmental policy, a process of induced although necessarily voluntary trading between the existing railroad companies through interchange of their corporate securities. Should the policy of voluntary consolidation not prevail, after due encouragement by governmental authority, it seems clear that an added incentive to government ownership will be afforded. In other words, a failure to seek earnestly the economies of large-scale and systematic operation must necessarily strengthen the arms of those who are contending for the entire supersession of private ownership through a govern- ment taking. This phase of the matter can not be overemphasized, in no sense because of antagonism to government ownership, as such, but merely that in the final event a wise adaptation of means to the desired end of the best possible service at reasonable cost to the people may result. The issue of governmental versus private ownership and operation of raiboads is constantly pressing itself upon the attention of the Con- gress and the people. The principal argument in its favor is that it conduces to economy and efficiency because of unified operation. All the wastes of competitive management, it is alleged, may thus be avoided. Nor can it be denied that in con- siderable measiure such economies were brought about in the United States during 63 I. C. G. \ 636 INTERSTATE COMMERCE COMMISSION REPORTS. CONSOLIDATION OF RAILROADS. 637 the period of federal control.^ Joint use of terminals, yards, and engine houses, of running tracks and of motive power and cars; the consolidation of car-inspection forces and of ticket offices, with the abolition of off-line offices and competitive consolidation; the short routing of freight and diversion of export traffic to the best- suited ports; "sailing days," pooling of business, consolidated trainloads; standard- ization of equipment and of operating statistics; simplification of interroad account- ing — all these and other eliminations of waste were either realized or in process of attainment during this period. No impartial student can deny the force of the con- tention that unified operation in and of itself is advantageoujs both as regards cost and expedition in service. But it is equally incontrovertible that the cessation of competition under a system of complete regional monopoly such, for example, as seems to be contemplated under the pending British plans, is destructive of one of the great incentives to efficiency. That was perhaps one reason why the cost of operation mounted so phenomenally during the war. The instrumentalities may be present; but the vigor and initiative which are commonly set on foot through rivalry are bound to be lessened. One of the larger aspects, then, of this proposed consoli- dation plan is that it offers a third choice, in place either of completely unified regional ownership and operation with its lack of incentive, on the one hand; or of the economic wastes which are incident to helter-skelter competition between a heterogeneous congeries of more or less imperfectly developed properties, on the other. One alter- native threatens stagnation; the other has driven our railroads to the verge of bank-* ruptcy. May not a well-ordered consolidation program offer a way out, without resorting to the ultimate expedient of government ownership from which, once adopted, there can be no withdrawal. It is believed that an opportunity presents itself to seek the advantages of each of the other arrangements, with some chance of escape from their several inherent defects. Such, at least, is the underlying principle contemplated in this plan. A total of 21 systems has resulted from the foregoing proposals, made serially in detail. These, it will be recalled, are as follows: Five systems within the trunk Une region; two lake-to-tide soft-coal systems in the Chesapeake Bay region; in the southeast, four systems; five transcontinental systems west of the Mississippi; and two running southwest toward the Gulf ports. In addition to these, and complete ing the list, there are three outlying regional groups; in New England, in the south- em Michigan peninsula and down the east coast of Florida toward Cuba, respectively. For these 21 systems the main stems are portrayed on map 27. This assembles the regional strategy of all of the different districts. The map, as it appears, throws into the foreground certain primary bases. Some of these, like New York, Jackson- ville, New Orleans, Galveston, San Francisco, and Seattle, are located along the seacoast at nodal points, generally at the comers of the great territorial divisions, trunk line, southeastern, western, etc. In the heart of the country there are ac- tually only two primary strategic bases, Chicago and St. Louis, although for the southern territory the Ohio River gateways are in a sense secondary bases. And Toledo, Ohio, and Norfolk, Va., are secondary bases for the group of Chesapeake Bay coal roads. But in the main everything is based, centrally, upon Chicago and St. Louis as far as the main stems are concerned. Wherever possible, the systems are brought in through their main stems to these points. But, as frequently reit- erated, it is proposed also to create detours or alternative belt lines, by whidi con- gestion may be avoided at these great centers; and cross-country routes which shall avoid them entirely appear upon the detailed and elaborate maps for each system. 1 The best authoritative review of this matter is the account by Prof. W. J. Cuoningham in the Quar- terly Journal of Economics, xxxv, 1921, pages 288-340. 63LC.C. The general practice of basing on Chicago and St. Louis, in the heart of the coun- try, is exemplified in detail within each great region upon the map (27). The five trunk lines from the Atlantic seaboard split somewhere in their westerly courses, with branches to each great central base. Similarly the five transcontinental stems which spread out on the Pacific coast, from north to south, are drawn together to the pame dual base on Chicago and St. Louis: and from the southwest, likewise, the two sys- tems, only secondarily based on Kansas City and St. Louis, each run also irito Chicago. And of course there is always, at the junction points where these main stems from every direction cross one another, the opportunity of free interchai^e, avoiding the congested centers entirely. Only from the southeast, for the reasons fully set forth in the chapter thereon, has it been deemed wise to stop the systems at the Ohio River and to have them carried into Chicago and St. Louis over trunk line connections. The objective of conformity to the statute as respects competition, it will be ob- served, is sought wherever possible by having each considerable city all over the United States tapped by at least two railways; and all of the great competitive routes, hither and thither, are so arranged that there is a matching for competitive purposes everywhere. Thus, following on map 27 with the eye the two southwestern trans- continental systems eastward, it will be noted that the Santa Fe and the Southern Pacific-Rock Island each split in western Texas, with one branch mnning to the Gulf and another to the dual base on Chicago and St. Louis. For two of the remain- ing three western transcontinental lines the same thing happens in an inverse direc- tion. Both the Union Pacific and the Burlington-Northern Pacific start out from Chicago (and St. Louis) and split in order to send arms to Seattle and San Francisco, respectively. One, to be sure, splits far back at Chicago; whereas the Union Pacific- North Westem splits somewhere out in Wyoming and Utah. The St. Paol-Great Northern system is the only transcontinental one which is localized in the north. And the possibility of its future entrance into San Francisco is clearly foreshadowed. But each and every line has another road of approximately equal competing strength set up to match it. Take the southeast as another illustration. Starting from Rich- mond one notes, going southwest, parallel to the seacoast, that each of the three systems splits somewhere in the Carolinas, with a southerly arm to Savannah and a northerly one to Atlanta. Or, from the Ohio River gateways, three roads enter from the north, the Southem Railway at Cinciimati, the Louisville & Nashville at Evans- \ille, and the Illinois Central at Cairo. All three alike spUt into two arms, one of which goes to New Orleans and the other easterly to Savannah or Jacksonville, via either Atlanta or Birmingham. Or, turning to the Southwestern-Gulf region, one finds two systems which really spring from Kansas City and St. Louis as bases matched against each other. They each, to be sure, mn up to Lake Michigan, but their Chi- cago operating divisions are mere bridges. The real originating stems lie southwest of the Missouri River gateways; and each of the two systems reaches San Antonio, Galveston, and New Orleans, albeit by routes which for each particular city are more or less indirect. But by and large, the difference in length of haul between each pair of competitive routes is less than the 15 per cent allowed under the ad- ministration of the long-and-short-haul clause. In other words, the routes matched against one another are held to be properly competitive, neither being so indirect in length as to unfit it for rivalry with the other. The foregoing description of competitive routes, matched in pairs, does not, of course, preclude the possibility of competition between a larger number of roads than two. At most nodal points, for example, it will be found that from three to five are as likely to compete as two. Thus at Seattle, San Francisco, Savannah, Atlanta, or the twin cities, one discovers three systems in competition. At Galves- ton four systems enter. New Orleans has three systems from the southeast and four 63 1. C. C. > I l\ 638 INTERSTATE COMMERlK COMMTSSIOX KKPOKTr from west of the >assis8ippi. Kansas City wall be touched by at least four of the transcontinental lines, with the two Southwestern-Gulf systems in addition. In short, as a city rises in the scale from third to second or first place, as a strategic cen- ter, the number of systems which independently seek to provide competition in- creases. This, it is submitted, conforms to the spirit of the act. It is inevitable, in any event, that competition becomes keener the greater the commercial import- ance of the'city. But the progression under a well-ordered system seems to be more nearly an expression of the natural geographical fitness of that center, rather than, as sometimes heretofore, because of a fortuitous or artificial, and to that degree, leas deserved advantage. The principle that earning capacity in terms of valuation constituted the ultimate test of the feasibility of any proposed grouping of niilroads, in contradistinction to any attempt to bring about an al^eolute equalization in size among these projective competitive units, was avowedly adopted at the outset. The plan has thus far l)een worked through solely with this end in view. Yet the relative magnitude of the different systems proposed is not entirely immaterial. An attempt has been made in the grand summary (exhibit 8) to bring out the facts in this regard. Size, rela- tively, is shown in two respects. One measures the volume of business by the revenue ton-miles. The other finds expression in the mileage operated. The latter shows the geographical scope of the fixed investment, whereas the revenue ton-miles afford a measure of the utilization to which this mileage is subjei ted. In other words, the revenue ton-miles exhibit the density of traffic rather than the extent of the systems on the map. Ea< h of these two testa of magnitude insignificant for its own particular purpose. With this distinction in mind, the exhibits above men- tioned may now be considered. The range of mile^ige is < onr^iderable. Exor8. measured ]>y revenue ton-miles, as the Santa Fe system is smaller than the other western transcontinental roads. Likewise, in the southeastern region the volume of business, in view of the mileage operated, is surprisingly light. The retail character of the New England traffic is evident. It is clear that the proposed systems are as diverse in this respect of revenue ton-miles as they have appeared to be in miles of line operated. 63 I. C. C. CONSOLIDATIOX OF RAILROADS. 639 The really significant feature of the exhibits respecting size, however, and one which has ])een kc^pt in mind tliroughout the evolution of this plan, is the fact that the load thrown upon any single system for administrative purposes is kept well below the existing standards. The criterion for administration must necessarily be found in the revenue ton-miles: that is to say, in the density and the total move- ment of traffic. The attainment of the Pennsylvania in 1917 to 47,871,000 revenue ton-miles, followed next in order by the New York Central standing at 38,477,000 revenue ton-miles, is not elsewhere approached by any of the oth^r proposed systems. And thcjse two great groups, above named, represent in this plan not additions to the existing corporate buv^iness handled, but at least in the case of the New York Central, a substantial subtraction therefrom. The only proposed systems which approach within hailing distance of either the New York Central or the Pennsyl- vania in volume of businc^ss are the Baltimore & Ohio-Reading, the Erie-Lehigh Valley- W^abash, the Burlington, and the Union Pacific systems. In fine, if it lie within the boimds of human capacity to operate the Pennsylvania and the New York Central systems as at present constituted, there is no reason to suppose that these newly suggested systems are too big to be properly managed. This consider- ation is indeed a very vital one. Its significance could perhaps be better appre- ciated were it possible to outline all of the comprehensive proposals which have been in turn rejected, largely because of the undue magnitude of their operating units. This plan, it is confidently submitted, has been fashioned with a view to withstanding this test. Another reason for limitation upon the size and scope of these proposed systems than the one above mentioned, operates in the interest of the local stations along the line. The question is often raised why more than two competing through syetems are nece.«?sary. inasmuch as two are adecpiate to provide the competition in ser\'i( e called for by the transportation act, W^hy, in other words, propose three com- peting sj'stems in the northwest instead of putting all of the mileage into only two? Or why have five in tnmk line territory instead of four? It is sulimitted in answer to this contention that more and more do the little local communities along the lines of these primary railroads need encouragement and support in face of the commercial and industrial rivalry of the great centers of population. Too comprehensive a scheme of consolidation would unquestionably operate to lessen the number of tnmk lines between competitive centers, over each of which there would be provided a main-line quality of transportation. The cities of the intermediate class, Des Moines, Iowa, for example, can not expect all of the rivalry which would arise between carriers at a primary center like Kansas City or St. Louis. But the chances for development attendant upon first-class main-line service will be considerably increased if there are, for example, three or four competing trunk lines of lai^e systems across the state of Iowa, rather than a smaller number. It is also true that each main stem of a system may discover such an advantage due to its location or connections as will encourage it to specialize in certain classes of business. Upon such foundations are reputations as a reward of merit based. And such a speciali- zation of function surely promotes that high grade of transportation which it is the aim of this legislation to promote. If, for example, the system which happens to include the present Kansas City Southern continues to bend its every effort to the best and quickest carriage of grain to the Gulf for export, and similarly if the greater system which comprehends the Frisco line from Memphis to Birmingham con- tinues to better its special facilities for handling packing-house products or iron and steel, each system by so doing will tend by the excellence of its service especially to promote the public welfare. There is a certain danger that too comprehensive a consolidation scheme may be productive of that very stagnation of initiative and pursuit which attaches to any water-tight regional scheme — that of the Pnissian or French railways, for example, or oi" the present British government. 63 1. C. C. 14 \ > / ■1 'If :J 640 INTERSTATE COMMEBCE COMMISSION REPORTS. A convenient check upon the uniformity of earning power of these proposed systems 18 aftorded m exhibit 8 by the net operating income per mile of line. Obviously this test may be applied only »vithin each region taken by itself. But aesumin- that the conditions are fairly uniform within trunk line territory, let us say, this exhibit indi- cates a rather unexpected uniformity. Thus for the Pennsylvania and the New York Central systems, as proposed, they are almost absolutely equal; and the Baltimore & Ohio is close upon them. The other two trunk lines pair off at |6,100 and $5 900 per mile of line respectively— rather close correspondence. Turning to the southeastern states, with the exception of the Seaboard' Air Line (always subnormal) the three leading systems lie between $2,400 and $2,900 per mile of line. For the western transcontinental region the range falls within $3,092 and $3,658 per mile of line The most completely satisfying result in this regard occurs in the Southwestern-Gulf re- gion, for the two proposed competing systems the net operating income per mile of line falls almost exactly at $2,000 for each one. Quite irrespective of size, the ultimate financial test of the feasibility of the 21 systems herein proposed is applied by the subjoined table. The significant feature is the right-hand column, bringing out the net operating income in percentage of invest- ment. Further details concerning this relationship are, of course, to be found in the grand summary (exhibit 8) herewith, from which, in fact, these particular figures are compiled. This table, it will be recalled, merely assembles the data already shown at the close of each chapter, dealing with the various regions one after another- and the relativity within each region, that is to say, the earning capacitv of each system as com- pared with Its immediate neighbors, has been already discussed. What this summary table attempts is to set up side by side the returns for all the different regions. Other- wise stated, this exhibit is intended to compare region with region rather than line with line; and m the background there is always retained the theoretical standard for the country as a whole of a 5 per cent return on valuation. The measure of success there- fore, 18 the relative approximation of the earning capacitv of each system to that figure. Systems. Trunk line region: 1. Pennsylvania. . . 2. New Vork Central [[[[""[[[[ 3. Baltimore = «^«2-a I 00 11 P5^ §S§?5S^g "^ ""•*-<« >c ?5 ft « f* " )C^— « g S I i S S I e 2? 2 = :;? $"g-g £"g {2 5 5f SS?5 «0 I o ao ft 5 ® 3 22 g ?f g ?3 ?f s § II 5-c>'3?;'2 5 1 § :f sf g§ ? -i r'S CO., PI I *- c ■a ® CO a O C « a 50- I 5 3 o "O 5 r. ■— 6^ CO «S ■LA an O tS -s ft. & <9 o o s 55 A "X^s JO = » r- r- o X S .-J o ^: :? Vl ^ .=; tt x' cc iS i^ r^ Li ae ^. 7!3 5; '^ *_> X -r X I ^ iC X C — • r - - o -3 2 3 ;s 5 2 2 XJ ;r: X '2 =; =* = ^ -2 •- f- «^ ^ C^ r? X gS g ^ J5 K |g 5 2 ^~S c; :5 i; S S : 2 2 ZS 12 r^ '"^ """ * ** '•' '^ "^ ""^ •" '^ '*' * '•' s M si .^"5 a :- : : •"S : • a ■^ • ■a » . :tf ^ : •fe3 : _ 5 »s - £ «•« ■n 9i CC 9J * C -^ #' "- ^ -w >> 3 -*' 5 fe -rS'S 2 S !^ as 93 »"'^ = Si c fc, I- fl ^"S S « " 2 « Sm'^^.a.^ > J- fe =.S "^OCaJ-s-rJej- CONSOLIDATION OF RAILROADS. 643 di8C0unt on securities and those which are not in accord with the standardized form of capital accounts. Nor is appreciation or depreciation fully rejected in these figures. The latter is deducted in column 4, in order to produce the total present value. But total present value, as the recorded data show in periods like the last five years char- acterized by rapidly mounting prices, may be quite misleading. Certainly a total present value as of 1914 for the Boston & Elaine is quite incomparable with a corre- sponding ligure for the Central Vermont taken three years later. A superMcial exami- nation of the phenomenal price changes during that period suffices to discredit all such comparisons. The force and purpose of this recital of qualifications is not that it may totally discredit the exhibit, it ehould nevertheless establish the need of interpretation only in the very broade>t and most general terms. The chance of erroi is certainly magnified l)y these circumstances. Turning now from means and methods of valuation to results, the carriers may best be treated in the great regional groups utilized for consolidation purposes. Consider- able testimony along the same line wa^ adduced in Ex Parte 74 by Mr. T. W. Ihilme. Most of his statistical data concerned the same properties as are comprehended in this exhibit. His conclusion was that valuation was substantially more than capital account for New England, and for the eastern and southern regions as a whole. <>nly for the roads west of the Mississippi did he acknowledge that reproduction cost of road and equii)ment showed a slight deiiciency imder the capital accoimt; and even for these western roads he excluded the so-called standard properties, such as the Bur- lington, the North Western, the llock Island, etc. He contended, furthermore, that appreciation would probably more than coimterbalance the depreciation during the years interve:iing since the date of examination. It is pertinent at this point to test the soundness of these allegations by reference to the statistical exhibit herewith and then to apply the conclusions very broadly to the matter in hand. The ratio of present value to recorded investment, as shown by the last column of tliis exhibit, is very imeven for the New England group. It varies from 125 per cent— a hea\'y excess of valuation over capital account— for the New Haven, to 108 per cent for the Boston & Maine, falling to practical equivalence for the Maine Central and the Central Vermont, and to a deficit of 18 per cent for the Bangor & Aroostook. But the valuation dates, it should be noted, cover a range of three years, characterized by fast mounting prices. The only trunk lines cited are the Chicago & Eastern Illinois, with present value at 78 per cent of recorded uivestmenf. the Big Four, at 85 per cent: the New York. Ontario & Western, at 43 per cent; and the Pere Marquette, at 64 per cent. For the Virginian Railway the corresponding figure is only 54 per cent . None of these roads is in the most thickly settled and highly developed region, and several of them are distinctly subnormal financially. The somewhat disquietirg retunis for these roads, therefore, need not necessarily shake one's confidence in a full valuation or even an excess for the first-class roads like the Pennsylvania and the New York Central. No data fc- the Erie or the Baltimore & Ohio are available. The returns for trunk line territory, however, are on the whole not as reassuring as the testimony in Ex Parte 74 makes it appear.^ For the southeastern region, wherein, according to Ex Parte 74, the capital account stands strongly reanforce:l by valuation data, the same variability is apparent. The Central of Georgia manifests an excess of valuation at lOG per cent, the Florida East Coast and the Mobile & Ohio stand in the neighborhood at 90 pei: cent, while the Georgia Southern & Florida drops to 73 per cent. For the Atlanta, Birmingham & Atlantic the deficit is large. There is nothing especially to shake the testimony of Mr. Hulme, yet it is quite apparent that the conditions are most uneven as between « For turther discussion of investment account for the trunk lines compare The Five Per Cent Case, 31 1. C. C, 351, and idem, 32, 328; and for the anthracita coal roads 35 idem, 2«), etc 63 1. C. C. i 4 63 1. C. 0. »i 644 INTERSTATE COMMERCE COMMISSION REPORTS. CONSOLIDATION OF RAILROADS. 645 i one property and another. Some will be ^oasly ov^ervalued and others perhaps under- capitalized. Such data as is herewith afforded betrays the same irr^ularity for the western roads as for the southeast. Tlie Rock Island is surprisingly sound with a practical correspondence of present value and recorded investment. At the other extreme stands the Western Pacific, now undergoing reorganization, with present value constituting only 39 per cent of investment accoimt. And the San Pedro, too, is low at 52.8 per cent. Probably, and this confirms the general impression, con- ditions will be found more. uniform in the Southwestern-Gulf region tlian almost any- where else in the coimtry. This valuation table includes the two most prosperous properties in that territory. For the St. LouLs Southwestern the present value is only 52 per cent of recorded investment: for the Kansas City Southern it is only 38 per cent. In view of the long record of bankruptcies and reorganization for most of the roads hereabouts, the conclusion is inescapable that an excessive property valua- tion will have to be dealt with. Applying this conclusion to the matter in hand, namely, the percentages of return figiurable under this plan for the proposed Frisco and Missouri Pacific systenjis of less than 3.5 per cent, it is evident that the actual rate of return is substantially higher than this figure. Whether it is enough higher. in the light of due correction of the investment account, to bring the results for these properties to a parity with those for the trunk lines, the southeastern states and the transcontinental roads, must be only a matter of surmise. But incontrovertibly the effect of any aiid all corrections must be in the direction of a regional uniformity for the country as a whole. Seeking, as this plan proposes, to produce an even-handed distribution of earning power under a given schedule of rates, there is some comfort at least to be drawn from this conclusion. Examination of transportation conditions iii the preparation of this report has disclosed a number of substantial advantages which might be attained through the lai^er-scale operation which such consolidation permits. One or two of these may be mentioned in passing as indicative of the trend of events. One in particular is the greater proportion of solid train movement from points of origin through to destination, specially with the creation of shipping days between the less important places, which thus permits of solid train movement from the primary yard at least to the neighbor- hood of destination. The improvements recently put into effect on the Pennsylvania Railroad for coal and coke traffic and also in the carriage of steel, illustrate the point. Among the advantages are the avoidance of congestion by better train loading, more expeditious serWce, and lessened expense through the constant breaking up of trains and switching of cars en route as well as an improved car supply in times of business acti\dty. It is somewhat difficult to predict accurately the effect of a larger-scale operation under consolidation upon the several individual properties. The earning power of some of them which have already attained some of the foregoing efficiencies through a high degree of specialization of function will perhaps be lessened. Roads like the Kansas City Southern, for example, which have concentrated upon one class of business, such as the carriage of grain for export, will undoubtedly, as parts of a larger system, display less concentrated energy in the solicitation of such business. This may not always be an unmixed loss. There can be no doubt that an undue solicitation of traffic by the device of shrinkage of the proportional rate and similar means has contributed to the earning power of particular lines. In so far as the movement of this traffic has not been forced or unnatural, this is as it should be. But it is also conceivable that a less highly specialized and a more simple and natural movement of tonnage may follow under such new conditions as are here proposed. Another operating economy, conducive it is believed to efficiency through a better utilization of the fixed investment, is a considerable elaboration of the device of trackage. The principle, embodied for the first time in the transportation act of 63 1. C. C. 1920, that it is economically sound and socially expedient to avoid useless duplication of facilities, is clearly illustrated in this connection. Already and for many years trackage has been taken by the existing railroads either because a carrier was too weak financially to duplicate a line already in operation, or because the road in question was not for most purposes a competitor and therefore could afford to strengthen the lessee carrier. There is a surprising frequency of downright gaps in the very heart of some of the great systems. Whole divisions, even on the mam line, will be found not owned, reliance being had upon long-time traffic agreements. The Rock Island, for example, is honeycombed with such trackage, in many cases the contracts being very much more favorable as to maintenance than could have been expected under downright ownership. For 54 miles on the main line into Kansas City from the east and 67 miles westward to Topeka, the Rock Island apparently is just bs well able to afford service as if it owned the rails instead of merely taking trackage. Another significant example occurs between Paris and Dallas, Tex. This trackage is merely a branch line of the Santa Fe system, but it is necessary as a through con- nection for the shortest passenger service of the Frisco between St. Louis and San Antonio. The Santa Fe at present takes the Frisco trains over this stretch with their entire crews and engines somewhat as the Baltimore & Ohio operates into Jersey City over the Reading-Jersey Central rails. But in the former case a branch line of rails is utilized for a main-line equipment and service. Unless both roadbed and equipment conform in character, there is obviously always the danger of a roadbed not developed to the standard of the rolling stock. The highest degree of pubUc safety is not promoted by such maladjustment. This plan proposes wherever pos- sible to unify the control of the roadbed and the control of the running equipment in the same hands. It is needless to multiply illustrations, but everywhere one discovers instances of such economy in construction through the joint use of an existing line. The recommendation in the Southwestern-Gulf territory for the allowance of trackage over the Kansas City Southern line (made a part of the Missouri Pacific system under this plan) to the Frisco system, affords an extreme illustration «f the principle. Here are two great systems, the Frisco and the Missouri Pacific, which it is proposed to match as even-handedly as may be against one another in the Southwestern-Gulf region. The Kansas City Southern more naturally falls to the Missouri Pacific system, but there is one link in it (map 25) from Texarkana to Hartford Junction, Okla., which crosses an inhospitable territory which is not likely to support another parallel line. Unless the competing Frisco system be given trackage, it will be greatly handicapped in competition between Kansas City and New Orleans. Therefore, if this link will not be congested by the traffic from these two directly competing systems, it is believed to be in the public interest that they should jointly contribute to the support of the bridge, even although they are directly com- peting one with another. Everywhere, as in this instance, where trackage may be had, even as between direct competitors, the device has been resorted to freely. When the traffic develops to a point where the single line is outgrown, it may then be double-tracked or a new link be constructed. What actually happens is that competition arises between different sets of operators over a common highway, a principle which 75 years ago it was believed would be applicable as a general railway policy. Unreservedly applied such competition breaks down, perhaps, because of the lack of responsibility for maintenance of the roadway, if no one of the operators is accountable for it. But where one line owns and it can be made serviceable to others, even though they be direct competitors, it is believed that useless duplication of facilities is thereby avoided to common advantage. Carehil analysis of prevalent conditions respecting traffic interchange strengthens the conviction that certain practices prevail which call for correction. A carrier too often refuses to interchange business destined for intermediate points within its own 63 I. C. C. 63763—21- 13 • / . ». 646 INTERSTATE COMMERCE COMMISSION REPORTS. territory, while doing so, somewhat grudgingly perhaps, on business which is truly competitive because of the existence of rival routes. Thus, for example, at Denver, it is alleged that the Union Pacific will not now accept business on equal terms for Colorado or Utah points with those accorded to traffic solicited from Pacific coast tenninals. Such conditions practically exclude the Rock Island, the Missouri Pacific, and other companies having stub ends of line in Colorado from effective participation in local business. It might conceivably greatly strengthen such stub ends were authority to be conferred upon the Commission to require interchange upon petition and hearing. It is not unlikely that some such jurisdiction may be necessary in order to fully protect the stub ends which can not possibly all be cared for under this plan. As indicating the trend of transportation events abroad, it is significant that mergers are well under way in the British Isles since the war. The government's declaration that, if parliament approves, it proposes to group the railways into large systems upon the termination of control in August, 1921, is already having an effect. The Hull & Bamsley Company, which was built specifically to compete with the London & Northeastern, has already provisionally agreed to amalgamate. The London & North- western has just announced the terms upon which it offers to exchange its securities for the Lancashire & Yorkshire Railway. The way has been prepared by close cooperation, especially under government operation during the war. The Lancashire & Yorkshire is not a large property, and yet the Manchester Guardian refers to the merger as "the biggest all-out purchase that has ever taken place in railway history." It is hoped to be able to procure further data upon the policy of the government, correspondence having abeady been instituted to that end. From Canada also comes the proposal from Lord Shaughnessy, president of the Canadian Pacific Railway, in April, in a letter to the premier. A merger, making for administration and operation of the entire Canadian national railways by the Canadian Pacific would, it is allied, bring about such economies as to greatly lessen the current deficit. The defects and shortcoming of this comprehensive scheme are manifold and in many cases self-evident. No illusion need be entertained in this regard. The out- come is avowedly almost everywhere a compromise, a choice between evils. All of the warring and conflicting interests; all of the hopes, aspirations, fears, and preju- dices have come home to roost in the course of its preparation. An extraordinary amount of friendliness and cooperation has been encountered. But, as is inherent Mid natural i nder the circumstances, much of this assistance has necessarily been circumscribed by the particular interest of the participants; and a governmental plan, in contradistinction to one projected for private profit or interest, may not content itself with caring even for most of the properties. It must of necessity recog- nize the right and the interest of every last one of them. It is this requirement of universality which so often compels the halfway expedient, the compromise, the solu- tion which falls so far short of the ideal. And then, again, there are the class interests which deserve recognition. Administrative influences impel one in certain direc- tions; the bankers would have some matters otherwise; the representatives of the employees entertain quite positive views, it may be; and all of the shippers' organiza- tions have to be satisfied. But despite these divergent interests, the desirability, nay more, the downright necessity for the furtherance of consolidation on a large scale as a remedy for the existing situation is almost universally conceded. 63 1. C. C. N /■^•'^''^ I \ r* ! I 648 rl INTERSTATE COMMERCE COMMISSION REPORTS. CONSOLIDATION OF RAILROADS. §ogi^c5-3§ fe » 2 2-- 2 « era l1 fe- O 04® o OO (B cO -^ '< S O Q. S2 • Co ®2 i s ¥. Is o i«l I'l S oc S i? «o ^^^ e^ ill 5 >rf a a »rf 2^ ^ c? o »rf »<5 ci «e ® ec -^ ■* tr OS »fl «c cc to t^ o» e>i c< X "* t- W t^ * «C OS lO c i-< <-> OS cni 5i ic ?i ^ OS » "^ ^ e^ c*i ■* rs i« 50 !>. tr'«o'--' los r» •aS;0^;D OSc^S OS »cr^ OS X f ^ ■ OS— 1 1 10 ^ ui to o V ^< ;o X to "C •-< «o CC *^ ^ ^^ ?c O: ^S«C SSS 50 OS ■^ «' o o ■^ s p* xow OS u5 OS 10 vH lA ■<«cie* 06 u3eo ■»»< "* S5 s"*'' !; 8- «N cirj — 285 «« >c OS ^ « M d= t^ ^ A «D "i -H OS w tC ^ ^^ ^H Qa g£^^ n itoor^os XOSt^wJX » X :*c5 COOiOtO-fl" 'S N- ?i5SS2S§ ^^ a CO OS ^ ^ fO OS S r* X c>< t« 35 s 2? o- « « W 0» X 'J X ^ccx id5 y ^ >o K X ^ * S X -< OS ■* OS S -"T S »^0» "^ cm" o •-HOOt- OS sis S5 •* •k "K •» |^«H (O Oft §s OS CM Ob cC CO CO C4 00 •CI •o< oTs • «o IX CM -;«x O ?s X S "* 1-« »H O »-!«••« 3$^ lis S 15S s Sxcocs«'-'^P-t>-x ecx«-^ooOsox«OrH Jeoosx'-iWt^'^Osec cN'"Qc®'t»"v;,'i^c^«cr cm' s t s a, I • en :l at g^ flB ;« ^ u -I £>>«.= OS as > S tf'O « VI y> c —i^ C s •- at >. vi c — — ~ '' 05 5 c8 O ^ .— a es (3 X «9 CO "O 00 •a o g 2 09 C "S s OS a « Sra •0 s ft; i o k. o • u. :| . s aj-3«,^ "^ O 08 « ^•3 1-4 08 08 "« s .-aoJ n *^ 08^ 09 "^ o c 0) 2 08 t o 2;a,Sb»=« 63 I. 0. C. ■^epX^O»0®<^Qf 2"igr2^°fS2^2§So' b- >* t- « Vi^^Oi C « ^ t^ ^t^iO^-O CM ^ 5 wt^SxxoccSSro c5>-'5 0S'«f^Xt>0'l'«0 ecCMrHXt^t^CMW-^i OSCOCOOS'^f-''-ii-iOO iS CO W W 1-t <— -^ •-• "^ OS>CXOSCOtO>OtOt-A SQC«'0'-HTi«t^g5jO> (OCMroXCM^^XOSt^ C0<-'t^C^X^H»rt<-lCMCO X « o l-t CO »o X CM mooo5c^'-<''^SS CO CM «o xr^cMcooosxr^oo CMt^»0^CMOO'0»^ §*CO0ldCMt^O(5t^->!l''^t^ t»-H-»"r^t^':j ^;0'C«D«OCMt~-X»Ctf) CO ^4 ^ ,, ., ^ ^ _ t-(M -^ CM CM •* OS ^ ■<*< SXCM ?4 ^ •^ ■^CM c»^x'co"io''^c*ro""x~?o'^co" & liiC-^-HiOC^CC-^ Qt^XCO ^ OS ^ ^ CM*"eo~o'co" -^.-CMOS. . CM t» >-< "-^ <— • co" SSxCMOO-*>OOOS •«i5J'^a6«0"^»icoco ) XO «5 < It* •O"^^ CM ^ X "^ X X '^ SSa_8SS3S^S >^tirQo'®"^t>^co'i-i ^ m ^ ©CM^r-^ t^t^ot^os •^<* eioi g i85R§& ?2 > to "5 CM »t*«D-*i »H CO XOt*C0t0'-tX»0< 0«CM<-ii-tt»CMCC< )X !OS ^ X^t^SCMOSOsCM CMi-lW^H CM rH l-H ^ -H 1 1>- >c iCi-H ic 5* > ro CO <— I OS 'J' CM i X OS -^ X ro -^ io"'*<"Os"crorcp';Crx C O OSCOXC^"^'^eo"'^CM'~co'"sp"^'~ lOOCMOS •f OS 1-1 « CO t- 8 CO -ShooSco^cMr-t* ill > t» o >o :4< r^ X iiO ■*t»«o «DI>C0C0'^'^?OC0'O X'^'OtcAcoroCMt* •^t^tO'OCM'OOcOCO tocotC'i'r^X'/ixco ScMOT'^coccr-'Oco .-ixt^coascMto-*'"* S85 os; I ■^ Tt< Ift t>- — I >-H ^ 5 lOCM t*^ XX^ tfr-^'"cM'"»c~t»"orcr^or JSosX-^OCDt^'^CO tOlOOCi-Hi— li-HUi CM'"»o'«-rCM'^ i^'^CM'i-r OS«CO»0 0>5COO i-Hirfxt^t-JCMOVXt-i CMO«X«Di-iCMX5- CO'^iOCMUOXXfetO •^CM ^H ■^ tH ^H t»cpX>Ct~-cOCOXCM l>-^co'^C5>— 1<— iQ>^ tDOOir^OtDi— iXiO ^"■^""x" o~co"~o" Tj<"icrt>r •^Qcr^tpt^CMO^ C0^'*'*'*«0si0'^O CM*"CM'^»c"t>^'X'ort»rt>rur OO'«*'tDCMC0CMr* a 2a >»2 ^-' >» © to cx 08 3 a^ ^;^ oi a; 2 • CO • ^a Oi >i -M 9} OT ^ — > S a M >, CO £ > :^« • +-> - S eu .goc^.ti'^l : >>© 3 tj > B'^ ■ to ^x rj- M 00 >. i^ a'rt ^^ j< WJtuC^ c© © © a>*m^ wjz;2;Z(aHCu,^ o Eh •0 V I a © a ♦^ 2^ ^- i CO CO 3-®a^ . '«a g?-^'32 S to ? © CO OT © CJ K-_ -H t3 -it*CM eo to CO Ost" «x not CM3« X9 C09 CM^cT s t^iOh-t^CO t»^ X ^ CM t^iOXf^^t* OS i-Heot*x»o •5 CM »H I CO t-- CD Q iQ X -$ ^ iS iN '♦' O CO 'ti -"If CO CO irro'co*~eM''ro~ eoco^CM «o — T-h'co'oo'cm'' S 8x»o?S i o t* X CO SB" OS CO X SJ 10 r-{ CO CM H I— I n w SSg?^' CDXOi'^< eOi-HCMi CM OSt- iSCM CMrH t*9Q COX r^co oTo ®s tat It* >eo CO •<* CM-»t<-M5»« t^ u; COCM OSCD 0000— < CD "S Si 8 CO OS X OS »-^ ^ CO OS t— 1—1 1- CO X<-i X CO—I coxX' iXrt" s i t*eox«o t* Tf CO "5 CO CM "•r os»dt*os xcocD'O'3! cmo2j— 'OS ort^ao''^'''0*' CO— 'co>o lO QC. •«♦< a6iO coco coos —I —I ■*cO I- CO t^X cc< 'a* CM OCD CD »^ ?SCM COCO oTcd" ■^os o Ti* x^inxeo r» CD t-os»o •* t-H ocMt*-*eo •^ , •^ -^ »* ^ — « t*— I t*cO -^ t* 10 X OX o tti — I ic CO oo-^ t£ ^-^coV-x-gf §8 ".rTco" or* OS 01 t-^-n" •oco 649 I I I I •a e Eh a 08 as o |o- ^ bC ^ OS fl.2 © © 08 CO CO 3 O 3 © o > 08 03 S'd2o 03 •> ■)r? -M ■!-> t— I -4J © -i -^ S -tf 3 l_l Ui © bi ^» 9 9 9 a> 3=3' -a 3 03 650 8 X INTERSTATE COMMERCE COMMISSION REPORTS. II jpHI £0 O J 1 M -I "3 fe|2 2 §2:22 I •2 3, I I 'I do 1-: SI Si i a Q 1. e II' J ' 1 13 >4 *^ "^ •^ •« «h ik s 53 , , «o Ofi ^f* «<^ IS I^M 9 A OD 9 1^ •?> a t^ » CO aS?5 g ^ at ^ eo S^ S2 w 00 SB is is "^ U3 05 1^ fc r^ oot*M»CQo25 ^ "* t- l/S ■'t'so" s is Si o 3 N 5 ft 10 ^ 8 S2S Ci 'f « O "O CO So o -^ ® « 3 10 'T ^H «C 55 O ^ 8 *« >^ -^ -s as •■ t^ O OS o> e«5 CO J(t «fi «? 2 "^ "5 C^ »0 1— 1 OS <-^ CD e2'«?*Tr't«.""co"'t>r I n 00 gi ^ §s ? «o «o CO 2-' s JO 00 ■* 1-4 '«« too 2 ?; 2 8 coi-ie<|>-4 J5g2^ :5: ow ^ i S S8 00 00 o oS«o i^odors:^-^ <-• CO -< r^ ,-1 .4 •• •-< i"4 s o^ f-4CO _ • • Id C4 §§ C4 i U3^ M o eo ^ CO ^ 8i Oi-< c« "*^OiO^O CO 09 1— I ^^ CO 3 iS ■«»« 0« t^ J'€ QCUi •HCO s M 000 r-oo o»oo 000 e« coco o« eo e^i r^'^jtco Qor^cfi oTci"©"'*" o '^ tc 00 vH on O c^ §^ otTop g CO i jeot>- >'H|^00 CO I-I CO r* CO §8 MMqOCO ooc<[f:^ 101-H ( )eo «COOC»-^ 03 H CO •< n P O CQ I n 1-4 CONSOLIDATION OF RAILROADS. Ot»t<. tti<6ei So Q Tt! »>• W 00 1^ '* * «C CO C< 0> 00 •* CO iC O CO CO CO kO hfi 0> CO ICU5000 oocot^ooa I-I OS 04 t^ ooi-co 00 ^ N m 0> CO oc N 1-H CO O t* ■T^ CO 1-H ^•^CO cS-*o O "5 06 "iS sK ^ r* !S g CO K T" S ^? t^ c^ lOSOOCOCO (N ^ _ 00 t-U5< .-«5 cS oo^< ?fss i eot»«o Si «OC0< OiO^OsiNcocO COM ©»-( »c>o cooc<«o>-i to «1-l 00 OSMO o5q-^ .-I O'-i irTpTco* -H(S»1-I oc s ■^OC^£Ji-lOO "5 ro ■>«• o CO w er -^oTccTco'co^®' So CD I— • 01 •— 1 CO Ci OS oc t^ cc Ost^OO C» Os^cOpQt^Q •<}(e4«o «o (N o< t^ CO «s 00 CO 1-4C><0 F-i CO CO 0»5 0CQCf^C^- CtOccccacocro 800 CO t^ocoo 00 CO r^ e^ »H Its c^ t- "s X' ic ri OC C'l O CO CO "ft "C HO »0( fo<_ . t^-^OS coSw i-it»«0 to CCDCO iXt^ eo C^ «0 >ft "Si C^ -^ ^H O ^ C OS i-ir^iOTH »o ijjiOcO g^ »o fOOOSCDOS^OSClXWX ooSf'iN'OcocO'^t^^co iiccoTji^ .-i-^e<>oo t>.>0<-i-*« •*t*(N»0'^ CO 00 " CO c^i X X "5 ao lO'Ot'-^'O CJccc^-^oo OXCO CO t r-c^OcOC COCO1-1 >-< ( -« «o Coeo O •* iOCOt»»^^OSOSC4ClX ■«li Tji CO OS c^ o o X CO 1-1 -H go iQ OS O OS C< 4ji 00 »o t* .-Ti-ri-i a f-> N Sio OS coxes cs osxopoo "^ «o •^ ^ « »-< 00 co" o" CO too (NCO o* t-OS ocseot^'itit-posiool 3^4'^COXXio6)iO«Dl o'^'^oxcocOf-ir^Xj ooe*o«pc^xose5 OS»-i-^COOCT>C-< rH eo'3j e^'* eo(N»o>Oi-«ocoeoxc»oo«o ^t^^^c-iosco »•:;£» C^iO^OSi-HTficOiOCOOO -JtOCS lOtOO S8: »o OS CO OCJcopax-* c3 CO OS o OS »-i CC t^ ^ t~- CO c4 IC CO Q -^OS O >-i i-i os'^ «» 1-1 .-4 .1-1 ^»o^t^»o I »oxoeob» eo C4 (N OS CO >o" 1-lOt* xt^o 1-1 •*t>. •k ak sv NOSO X CO OS v4 — ii*not^cpiOt>- N CO lO t^ -«*i 3 S ^ 1^ OS CS O 1-1 00 X «o to" act^aovin^r^ 4JI •^ ,-( ,H X QTf<00»OOSOSXXti5C ^i^XOOSCOO>OS»OQP C^>t»i-IO»HCOC^QO"co"ep'"'^^~"t^ ofM"^''co~o^r«o t»(S»QosiO'*ir~xt^coos »OOi-iM OSINCSO co" t» '^ ^HC»Oi-i>*xco>ot»-r»M oscooes'itiCNO'OOco g*Ol'cO^Ot^"^" ^a^tQccr^tntn'x f-To 10 cox 1-1 1-1 » eo ^ If g-^i-iptOOS i^eoocoeo as^c^t>co^'^ & t* t>. e< ^ 1-1 CO OS o t«" 1-4 w »— 1 1— I r^tdcTooto'tfrco' CO W 1-4 Q »0 p OSO ^ eocJ C^OSX rHWCO xosr^ ScD C0»o3c O )25x I-I »H C< ^H POStOt^i-iX c cr'^'o'"crc «o c CO cc e< .-4 < O^H 1-ICS 1-1 ( osoaio-^-^t* xo ooseo ■^x oscc CO >o ^06 ^ copcOrt ■^eop cc OS t* »H t>- of X •o'co^csT^O CO X CO ^ «o t^ «o r* ■* CO g CH eo X X »^ X ■<< CO ^ OS ^ lO 1— I «o o CO •^ OS •* (N <» -H '~ " 1 I-I X X >0 P p-H 52SZ 03 03 I- s '^'^03-4 63 1. C. C. o 1^ OS •a •3 c 00 O « o 55© CO >» en 4-> CO CO in •, CO 8! 4^ O ZZ: OS c5 Ojc C © F- —■ § 4>S OS >» CO a® ^ §5S i-T^ rHX XCO I-1 1^ 1-4 eo eo to X -4 Sei xt^ o O1-4 1-I-* cO^ co^i co'cJ' see OCCQ OS 25 CDOO xo -Hid coo oc^o" to to -!4}1 >cO CO 8? OSt^ 4»<0 CO -4 i-Tx^ CO 1-1 CO Os-^ coco 1-1 ■«»l CO § coo ot^ eo 1-H to OOi QCtO •OCO OSO TfX MX •O Cp I C«« CO i-i?5 •»f OS 00~Q OS o CM X' t-'* « s ^ So to to o^ too tdco -Hco toei too IS '38 pr«- pt» IOCS ^¥ to 06 as Ok ag ^•4 08 > 03 ^ at a 4^ CO C O Eh " oe,Q ©r o SPm' ,4J p-^ CQ 08 08 ^« ^iS 652 INTERSTATE COMMERCE COMMISSION REPORTS. CONSOLIDATION OF RAILROADS. 653 P O S O - c^ 3 © a> ««^ >*^ ^^ 08 O^ So s"e S I" I, 2 ■I 't I 9 i? Is St) 0.0 O CS o < Z » o o •XI z c 2 • C8 O |2 o fe ® 2 as w |_^ Urn t^ -*; Boa o ^ z 5* a 5i a •s> a ?? * .■50 a 3 O «" a o 3 ® ® B 3 cr 88 -• gw 3 O o 3 SI 9 » •g2 a,® C9 O • • ft • s >0«0i>« CO t>.eooo «!• 'j'e* eo u3 •o o»Hr* t* "5 ^H OS O O a ep t» •*e< ,.4^04 eo w ec t^ o* t>.7Hi «~o>or ^- 5is S? e^ PI CO eo s M«»o^ Sxeo 8 ico< Jj»^ ^-H >H ^ ^ 00 '^^S5^ ^3?1 9 t^-f CN| N ^ o 5D CO w r^ t- a» t^ f t^ceacS ^S« t^ ii.'^s^ i w •-< ^ c« "-^ S5 s eoccos a> oc »< r^ C5 '-H S j:^2 00 «o 8" • os< lUO a>( Sill eo'Q'c^^o■" «-" O t^N i-< ir3 ^H f- to * ao t» » eo 00 M »o «* »»• f cor^ ^ eof •«♦'« OOU2 -^ »co(5( OC. X! I CC o ^ 2§g § a (0< i52 'OX o» »-i t^ * "^ eo «o "C X _ S ^ :S c^ f^ 1—1 ii^ ^ ►^^ ^s* /^ i«^ hV oj ^ a P. o • 3 ■ 08 :a - e 2 S «9 3 3^ ^^>>- a J2au o 03 Oi O o ^^ Scum 0.2H CO o a V3 O 08 efl o^ "* »0 W OS 1— I o> w S eo ^ »H ri4 eo (14 1>4 ,ii4 9> eo Ui 00 5 !8I So«o eo "-< eo ^< ^ eoo'eT •* C>< eoo -wx P«"e«f«r t^tno o5 c5 ic ^ 'f — i > IC ^H ■.♦■ .< -H o X oio eoo o'r^eS'aS' o- t eo obeo eo'eo'aTcr — CJ Ol X Oi -f X iM co^od'oTt^ 8 »c CO r^ 0> eo c^ X eo e>< r« '^ t- ut ! OS eo !S S 1223: •-*a»Neo t>. Tf (» ■»♦• eoooob s eo-* eo xo> eox cod uses to ■^•SXX -< co-»xo«5 xwSeo icr> ^ ^ o X X 5 «o X c«o»e* §B5_^2 xeoS r^oseo Oeo lOt^ t f" t f^ 0» N oc w eo^ofo^Q^ M OJX X «0 r^ OS ci OS t 05 •a "3 a ■*^ sn so >. o 3 B >> :» 3 eS o O 3 o 08 o 6^ 11 1 Is X ii C: <- « s s o j!^ 3 *.^33 eoa<-4 . ^ t^ eo • t-0( 1? eieo w -« eoeO'^us •t a^ •> •« © r» ^ *5 'r h» OS . r>-x CI CI ©"cfcT-^j!' »OU5U}( •«t"0 ©< «OCM«0-H •CCOOt^ dOsSOiQ j2^og-eo~ ' ^ 3 w ico^ ox 25«o-* «o»-..-« lOOOW ^ ® eoog no OX f2gS2 ClOiOCO xeoos iQ OS CO coco r^deoMS cfeDi^Tcf SCO eo r* o6t>.C» ootrTiJ'^ s § §b 3 08 ^^CQ 08 028.30 ".iis^^'i^i OZ2o Q^ OS 3 u '"^ OS o 8 ^ V ki ^ oZ 00 be bfibo Ijll oooo 63LC.C. 3&S to 06^ xScO 04 CO R CO S8 eo d o r* i & CI t* 1-1 U3 gf ©-> S^8 t^CIO tocio THCieo C»»( ^ eo < eor«-< i-tCO< •i-ir-»o S (OX t^eo gR2 «OCI -f XOSQ ■^eo^ »or*i^ ^S8 CICIt-^ XkAQ eoci w eo'eo'io' • • • 3 ^~ oC ©IC •^ COCO ICO CI CO r^ 3 8 ««''' a" oT irT eo 1-1 §i^KS «( t ^ ■^ CO gxr^pt* CO >o» OS eot^ CO «o CO d eo lOeoocoo CO '^ OOSrHCOOS lOCO I r-^ CO CI CI CO •O'H Q cocTKfeooT «5 OS CI •* CO CI CI CO >o X « CI t* CI •^ s eo CI T(< © CO OS X X CO eo ■»f< eo -H CO © »^ eo ii« 1— I ^ CO •* r^coci eo^os So § CO t^ §8 CI 'S, OS X »hOCIOX CO -^ COCI OSXOS t» u5 eo-H .-n>. t» 1 s OS X 3 ^ d CO X cc »c ccci r^p CO OOiOi-iO'<* >-•«•'>< CI OS t>- •>«4ep«5»0«5 1-1 OS t-- ■* CI 00 eo eo •^ ^t^cp'J eo »J5 «2 os©deo«o eo © xcit^T-ici os-^ o«r eo ^ iQi-ir^a»Q g X SS^SdCI i-t^CI s eo OS eo • 06 «o 8 t CO eo CO CI eo CI S OS ^" eo- 10^ dCll-llCT)< ^©cocot^ OSi-l -• «o X OS X OS CIC0t>-pX t«. 00 1-H »25 OS th t>l'l5 I^® 06 •*" OSCI XOCO lO OO'* ic-i t>- iS h-Ta'co'crccr ■* «OOSCO COCI X d X r-i eoi-t^H coo CO x©oscoeo ^ «rH CO OS '-' d" cT^o'co'cf •^ dOs T-i OSiO d -HCO CO1-I d csT rCirT'^'C'co' ■JJ -^JtT-i CI CO lO 8^2 t» 1-1 -♦CO CO i-Ts-lcT ^^S CO ^co OS T-* 3o-*co e. osd-* 10 t^-»t< t-- 00 oot^ d ^gg d OOd d>-liC d eo 'ft^x 1-1 t^eoos §o6»oo6 t-xo Xdd s d §OSO coco «»-l S'^r^Tcf eo«o 1-iOd id^i-Tco" f-t eo apl CQ I CC 1 Oh -** CQ _1 « O CI4 c8 tso 1 o CQ ft? B o CQ S"9_w ®CQ - w,.H 83 a (U t» 'm O 3 g •3-"S C 3 3-^ ^ c»cqEhZ 63 1. C. C. "5 CO eo So eo eo CO X 8" 8 OS d OS d eo d-" 8 CO So US' o :3: CO X CO Z o I— I o a o I z P3 a CQ a M o 09 n »-4 w a -a o EH 08t»»OSCC050 -Ot- d i-teO'H eo '^1-1 ^ 8 -« oo■«^"■*x-HX«<^o»t^obco coeodi-iost^ost>.«oost^^H OS r>i cJ '«• »rf cp r>^ 12.06 ■•I" ^^ 00 -H -^ ^H ^ «2 ^ t^ ^«? X ~!HO ©CO C CO CO X °0,«« CO Co -1< eo" i-Tco" cf^eo" X©iCt»co— <©*j.-4t5cu;dcfco5^»?5*:'^ -1 CO X eo CO 80 r^ »o *j i-i m CO s^^ s^ Sxosdr-d-*osot-»Hp Tjtdxeoco©co»>oO"5 OS^Ot^OOS'^O-i OS "-I »-H qc ■ X t>. t^ cC Q h- c O O ^- ^H d OS( ■^COX o os'~'^ci"t^Tjrord"'co'~d'"r>-*d"'co' dr-0 3;3s©cc-<3;5S!2 lO^CC-^OSCOTf^XXCO cr>-rt-H^d~jo"eo^t^ i-i uo ift i-i f-« ' lOiO^^t^CCOXOSCOCQX COcCt^COCOCOXCOOsiflXO cico>oci»i.r*'^-*Xfoco t-T »-i »-( ^ ■>*■^^o^?X•-oeo-HX5D-«»35cbciosoosoosddX t^xeor^cocDO^p'5^'-|d« o»-»oc«ot^xeo«cD»t~»x -HC^— HCO"3©cO'0'*OSi— ii-t )dl I CO • XCDCOXOS©i-id-^< t>.'9l«OdtOXcrdC5i oco«?5xt^©»c^t»( cs'th'co' OS jH'cTeo'-H'ic'x^t'^'^ Osio^-^Xt^^t^oo^cDco CO .-(1-lOSOSOC '4-Icz!x'oicix't^di^;pco OSpi-l-'^'OS'OdOSCJOOCt^ cD'*iCd'5t^cooseocod ci X ic d »o d Xt-t- Xd " cccir^co OS i-ric't*^'"t^'c"co'"cr'^''Q^d''cr »C««©d-«fd?Ot>-t-»Xt-Hd OSOSO.-i'^cCOt'-rOd'^d dt^uS'^ COCO1-I .-> CO a CO 08 X 9 H o o II 00 cr. ^X3 .sZ'S-a R SI CO M ®°« 08 OS >»S 3 •3 m "" v« 08 o ^ ^ X 08 » «^ « a o . . 5fCQ li M 2 O O a 3 cr. u: t; 3 en M 3 ii a> &■ 2 t^ »^:35 ■sC2S^"g H C x1«> o 5 8J "W^Z « fc, !> ;» tB"^ a X5X3 bj=<3 3 == s"!^ £■» 08 (^ O OCQ^ • Wj OT tn (/2«c 33|3>w2 O O O O -u -^ CQCQCQ3Q H^ 8 lO d CO CO CO © §8 d" o 8 ■«1< d OS d" 1—1 10 o S8 o 654 INTEBSTATE COMMERCE COMMISSION EEPORTS. CONSOLIDATION OF RAILROADS. '!■ ei vitrei 'cic-t ''c6n^ ■f ¥ I'l I I 'I 1 rf C5 ■^ 52 p4 ?5 oi »^ U5 cJ rf § J5 3 1-1 o I § £ 3 1: ^ 5fi ^ ''' ?5 J •o s 3» fo '« o <«< eo'atei^ci'^n ^ 9 ^ e r» f»oc i^» « s t^ oj CO o "O * 52 25 t^o c^*'~^s'■*"tf^ f2 So {2 !;sssss;?8SSg S j2 S "2 £^ ■^ 2J c^' -^' «C r^ •O ?4 -^ rt C4 t^ CO C t>. a 9 I 00 So '•0^< M 5> O B *» S • eS o a^ o ©.S I- - CO/— » O CO ill © fl'2 tfsa §ji OCO 5Q it 1 C3 o * • • • • « lO 52 uitO >Qosc4a>'^ lOco e00«0 5S8sjgs: ■ * * * ^ •^ •» •» -^ ^ r«t«coco>o o> 1-4 le !N06 o »oo-< 00 e5 (Soooeo ^ »c fc r^ OS CO CC OS CO M< OS ^ CO 00 T-i e« wc^i-Hco C4 OS CO OS OS co>or*oc4 00 o6 CO c4os lO Tji 00® CO CD •*'-« OCO *k M •« a^ ■« CO CO CO CO CO St*i0 3oo CO to CO sf o -^o» y-» CC (NO «so ?ico 00 1— CQQ-1 CO (N CMOor* 06 O (NO-^ »» ?5oo»^Q «k ^ ^ *« «« Q •*«CCOCvi CO eoc^ CDC0©O« t^-^ti>o ACO 00 00 CO OS t* COOOCi-i'* cj^-TcsroT^ Nc^josco:* Mi-ii»- O -^ CO t^OS CO 1-H oso ^ 1-1 00 SOs-s CMCO t^r>.uoooco lO «0 »C Q t^ IC* C4 »C »0 (N't^oToTQC" OS ceo (N So S'^t^Te^Tco'os' t»-»P coco COIMNMrt OSi-i^>00 >CrH OS CO '^ CD 11" M ci c5 f^ f— t iC 1-H t^ P«i»»CMCDOO i-r»-j'o6'i^4-o> Soo t»co efeo" CO CO OS coo CO OOcO'^CO © OOO'^ op t-OOCOCO ^ iiCOCO t" ■'*' OS CO t^OSX iCt^ t>.«t-»COOS •w_ ^ •» ^^ •* OC>< OOSi-4 e5erco' N eo 1^ i of 00 CO 8S O tQTt;t«i^ 1-t «0 CO 1— I 1-1 i-T pfiiJ'ef ole«ico 00 1» ^ CO O CO O CO a»-H CC o eoi-icot»t* 1-1 1-1 O "5 ■'<• uii^kotcoo cDOO'^a-^ ^t-C>JOSi-i oTooco'in'co' coco CO CD '* CO 8 OS 1-5 1-5 53 cS CO «5-icp««< Cl OCCO>OCO ^ ^>o»oco & CO o >-i » CO coo«oe>i uf ooqo'•^r>^ r» OC 11 r- 00 )00 ICO •«»•< t-i*<-^oo»5 CO CO CO CO CO »ocoo CO «fl oCcOWQ^ «5i-i O CO »0 >coc90>u5 ooeoooco s i 1— I o oT CO CD >co 8?^ :55;*' CO ui ic( O OiO' )(N o SSB rCuf OSC4 Ml* iCt^t^CO »c X CO ^ t^owoo • (Ma»> I iOr-l ^^ ^H ^^ "W( ^f oo^cot^co ,* V ** J»» •^ ■* StoQoSoO -1 ^65 CO 1-1 cpcpr*< eo^-H < >co I i 9 ^2 is a ^ ^■"-'(so-g « 08 2 ®' il II CO o © © 08 C S a .2 £ Ss» eo » 4^ CO C3 .2 K "» O (3 32 Si ©^ © u eS o So OS o e o 8 o 03 CO © © ^^co il wg ^*- 03 g ©•^ rZ ^ IN* ."3-w "S 14J"5I ** .o «A o •>- ©*^ o Ia5 I ^ CO V ^®to tJ S2 11 655 812 coco »r>(N COl-H OO (N •* CO C4 s CO coco ^e<» "-4 C0 1* -1 -^ !-• CO OCO ® -^ XtJ* -^ o 1— 1 1— I ^ OCO (<« 00 >C 1-1 O i-< (£> csTco" CO 00 •Ot-^OSCO 04** C» C>»M 11 1-H 1-4 ^H S!5 OS OS -*00 I— 1 1—1 ««»o 1-4 00 r^Tod" 8 o 'I* 8 >< © — So-S^ '111 ess cc-< SCQP^ 63I.C.a 63 1. C. 0. d Sj3 £-5 ® ^ ^ ^ © fl«&3 oo;jc< g-S«^«8 2S^-8l PPQqqKoq s 2 H o o CO ::a -^ CO JS >. K w O o © 08 ^ « \ > s i ^1 } . I Y l\ INDEX TO RAILROADS. Akron, Canton & Youngstown, 500. Alabama & Vicksburg, 542, 626, 651. Alabama Great Southern, 541, 651. Ann Arbor, 503, 649. Arizona & New Mexico, 605. Atchison, Topeka & Santa Fe, 562, 563, 579, 592, 604, 605, 609, 612,^13, 620, SI, ,637j 640, 653, 655. Atlanta & West Point, 544, 651. Atlanta, Birmingham & Atlantic, 483, 542, 642. Atlantic Coast Line, 537, 538, ^53, 555, 640, 651, 655. Baltimore & Ohio, 486, 490, 492, 501, 502, 507, 516, 640, 648, 655. Bangor & Aroostook, 512, 516, 642, 649. Bessemer & Lake Erie, 496, 497. Boston & Albany, 510, 511, 512, 517, 523, 649. Boston & Maine, 510, 511, 512, 516, 522, 523, 642, 649. Brownwood North & South, 623. Buffalo, Rochester & Pittsburgh, 498, 500, 501, 520, 521. Burlington. See Chicago, Burlington & Quincy. Canada Southern, 505. Canadian Pacific, 511, 513, 524. CaroUna, Clinchfield & Ohio, 528, 538, 540, 541, 544, 550, 651. Central New England, 506, 650. Central of Georgia, 539, 543, 551, 642, 651. Central of New Jersey, 490, 491, 493, 506, 511, 648. Central Pacific, 564, 575, 579, 580, 652. Central Vermont, 512, 523, 642. Charleston' & Western Carolina, 544, 651. Chesapeake & Ohio, 526, 533, 534, 540, 552, 638, 640, 650, 655. Chicago & Alton, 563, 590, 606, 621, 627, 653. Chicago & Eastern Illinois, 599, 633, 642, 652, 654. Chicago & North Western, 567, 568, 573, 574, 612, 613, 652. Chicago, Burlington & Quincy, 539, 559, 561, 564, 565, 567, 571, 573, 574, 590, 592, 599, 603, 612, 613, 631, 640, 652, 655. Chicago Great Western, 482, 563, 567, 573, 574, 575, 593, 652. Chicago, Indianapolis & Louisville, 490, 545, 648. Chicago, Milwaukee & Gary, 599, 652. Chicago, Milwaukee & St. Paul, 564, 570, 571, 573, 574, 592, 594, 597, 605, 612, 613, 640, 652, 655. Chicago, Peoria & St. Louis, 482, 603. Chicago, Rock Island & Pacific, 559, 573, 574, 591, 592, 593, 600, 609, 613, 615, 620, 625, 627, 640, 642, 644, 653, 655. Chicago, St. Paul, Minneapolis & Omaha, 593. Chicago, Terre Haute & Southeastern, 573, 598, 652. Choctaw, Oklahoma & Gulf, 601. Cincinnati, Hamilton & Dayton, 490. Cincinnati, Indianapolis & Western, 490, 648. 657 r :ii „. mi ,.' ) 658 INTEBSTATE COMMERCE COMMISSION REPORTS. Cincinnati, New Orleans & Texas Pacific, 541, 660. Cincinnati Northern, 648. Cleveland, Cincinnati, Chicago & St. Louis, 643, 648. Clover Leaf. See Toledo, St. Louis & Western. Colorado & Southern, 589, 594, 607, 608, 626, 631, 654. Columbus, Sandusky & Hocking, 489, 531. Cumberland Valley, 492, 494. Delaware & Hudson, 495, 511, 413, 649. Delaware, Lackawanna & Western, 486, 499, 501, 506, 507, 515, 521, 638, 640, 04:^, ($55 Denver & Rio Grande, 561, 564, 591, 592, 631, 652. Denver A St. Lake, 591, 592, 652. Detroit & Mackinaw, 504, 649. Detroit & Toledo Shore Line, 499. Detroit, Grand Haven & Milwaukee, 649. Detroit, Toledo & Ironton, 505. Duluth & Iron Range, 596, 653. Duluth, Missabe & Northern, 596, 653. , Elgin, Joliet & Eastern, 599. El Paso & Southwestern, 600, 602, 609, 653. Erie Railroad, 486, 487, 495, 506, 507, 514, 517, 640, 649, 655. Florida Eaf»t (bast, 555, 6-40, 042, 651, 655. Fort Smith & Western, 616, 617, 630, 653. Fort Worth .V Denver TRUNK LINE TERRITORY 63763—21 . (To face page 660. ) No. 1. 63783—21. (To face page 660.) No. 2. T V-, '-^'^^.y '^ Oo / ,/ O«h-o«t J^ X? lis > t I i \ \ \ \S2> u/e^ V »,^t*v»or9 \ • \ V'' ) v.- />y LC»nc« inn«i*i K / /v/ rst-Looia >^*' ^4^^ lLDOta>'> r.We \ / / y KEY \^V,..^ / — New York Cen^-roU '. \j/ — «- LQkcErie8«Wes^rn.(0m«««d) \ X^ —I— ToUdo8i0hioCcnHTal(0m»^*«l) ••••« Kanowho 8e Michigan^pmitted) ■ Cirvcinno^i Nor+hcm. PhnQdelphio8fRcadin3g£Sli Trackage ^•— ^ Rot\and mn Michigan Ccntrol MAP 3 THE NEW YORK CENTRAL SYSTEM Excludtn^^Hft L.«k6Evi«A>V«sUrn ToUdo aiOhio Cerrtral and Konoi*»ho mMichigon Rij. 7' iiro r — \ IL .y J (•.;W>3~21. (To face page 660.) No. 3. KEY Baltimore &Ohio. - Ph.U&Reod.-CcntotNJ— ► Wesi^ern Mart^land. Chiclnd. & ljoui5viUe(Monon) Cin.jnd.&( Western Lehigh & New E-n^land Lehigh & Hud son. N.Y.N. H.&H MAP 4 THE BALTO. a. OHIO — RtA0lN6 SYS. Including TV«e Ctn+r^l R.R. OftNtwOerse*^ and The Monon . 63763 — 21. (To face page 6C0.) No. 4. 6376a— 21. (To face page 660.) No. 6. 63763 — 21. (To face page 660.) No. 6. 63763—21. (To face page 660.) No. 7. ManistiQUC. V \ \ V V \ \ \ / / / % ^^^ ^ ^^tV^L^^ .^^PVt \ \ \a / / tr/ / /. / \ \ / /**' Manitovroc / I; / Ludin< / /. /, / I / / /^ / y> inoj •'A [Milwaukee W^"= / / ^<^; / A »(/^ NiagartjRjlls •RortHoron Buffalo )KtSfanleu rV^ o<^ Kalamozj * / VT « ^ 4««- « ••'S 'liar Chico( Jplict \ -i-##^" ^^nir-\---^^"'^^^ Fort Wayne' Cleveland -^ •' MAP 7A MICHIGAN RAILROADS KEY Michigan Central (NYCSys+em) **♦*»• IfereManaoctte. -*-*- Grand Trunk. ==== Ann Arbor. "=* Grand RGpid5&lnd.(f%rin.Syslcm). ; -•-^ Detroit 8»MQclimac. • _ — New York Central Si^stem. i Ferries and Boat Lines. I 63763—21. (To face page 660.) No. 7a. 63763 — 21. (To face page 660.) No. 8. KEY Chesa. & Ohia Norfolk &Weatern. ••••• Virginian. Corolina.Clinch. tiOhio. RsnnsylvdnJo. Tolcdo&Ohio Cen+ra! KoMotuha ft Michigan MAP 9 TKC (:kesapeake group IncIwdtnjHie Norfolk aiW«5ttrp,Ch%wp*oke & Ohio, Vtryniwn R«j.,TeUdo h Ohio Cenfrat/ and Kanawho &Michi9an Raitraad. !i I 63763—21. (To face page 660.) No. 9. MAP 10 SOUTHERN RAIIWAY STSTEM KEY Souihetn RaUwa(|. Mobile & Ohio. ** Aloboma ft Vicksborg. Nev^ Orleans ft Nor+heoafern. — * — New Orleans Great Northern. eeorgia Soofhem ft Flol'ida. Cqrolina^CUnchfield ft Ohio. I 63703—21. (To face page 660.) No. 10. [St. Louis \ \ Cincinnoti Corbi*^ \ :iiWp^*^' 2 n5h*.-So\em »hvi)le ^fknoxvnley -.^V ( • l^'-^- "to^ \ ^tlonVo — SanfUro,LosAn9eies8i5aHLxik« fVoposed Hxjckoge. St.Joaeph & Grond Island. 63763—21. (To face page 660.) No. 15. M rw9fw!aRr ; *-•• --■•-f V v^i/ v.. K Spokone J< ,'»6reat?alU »Bcnd SterlinjCitv^] \ \ 8on fVtancbcof \ \ \ \ \ \ \^7>4?r^^ ^ — '1 I i L <^ VwteiTONvn "^fc I / .X— v...-- >0,^^ Ohnwlct irshal) Pe^ Moines lit Lake Ci^ I -<^ffr^^^ K*Rtoria Qofsero 11 lR>eljl< iKonaos Cii «Ji >' v.^- KEY Chlco90, Burlington flrCKiin^ Northern Pacitic. Denver fit Rio Grande. Weatem Racitic. Chicago Great Western. Minneapolie 8r St. Louts CWico^e^Rocklolond StRacifie Denver fir Salt Lake. Colorado ftSouthernf — Rirtof St^stem omitted.) Minn.. St. Paul aS.S.Morie. ./' X y^fbrtWbr+K ...j» I N Galveston MAP 16 BURLIN6T0N-N0RTHERN PACIFIC SYSTEM ^ 63763 — 21. (To face page 660.) No. 16. I i ( I 63763 — 21. (To face page 660.) No. 17. KEY Union fbcitic. Chieo^o.MiK fl(5t. foot. Chica90,Burlin3ton flrQutncvj. Great Northern. Chicogo & Nerthwesten^. Northern Ascitic. 63763—21. (To face page 660.) No. 17a. 63763—21. (To face page 660.) No. 10. g3763 — 21. (To face page 660.) No. 21. ■" ira —liB 63763 — 21. (To face page 660.) No. 22. KEY ChfcC090,Rock Island fiiRicitic. - SoM^hcrn Pacific - El Paso & Soothwca^-em » 5t Louis Sooth wea+ern •- Son Antonio BiAranaosRass. - Vickaborg^Shrcvcport&Rjcific »• Texas- Mexi con. - Midland Valley. -• Missouri Racific. «— Texos Midland- 03763 — 21. (To face page 660.) No. 23. 63763—21. (To face page 660.) No. 24. i Chicc KEY St. Louis & 5an Froncisco t M » » St. Louis Southwestern. Mi9aoori,Kon»os8i Texas. —It— KonsosCity^MejiicoJf Orient = Chica9o8iAlton. o t 9 . Looisiona Ry.&Navi potion Co. iiinmitiii Trinitu&i Brazos Vo I Icvj. •*■•*'■*' Vicksbut-9,5hrevepor+6fFbcific mm bol Higbee- Kansas CitiL^^j^^ss^^y- rFronklii#-v lew I .IW-.^'' t. Louis / '^iou '' Jii jN^**" Forgon •^*% /initi Guthrie •- >;l„o- lueKogeel Tort Smith / BrinkleijJ^'^ ' ^ ^Memphis LIHleRocV ^. /^iV'*' Vyfchito Foils k^ -^O^r''^^*!!^^^^^^^^^^ ?f^ Fort Worth DqUqs ^ »Sinnin9hqa y 7r-'^- /oco 51 LOUIS «iSAN FRANCISCO SYSTEM COMPRISING FRISCO(PART);3TLOUIS-50UTHWE5TCRN (PART)M-^^^NAV.CO.;CHICA60 arALTON M.K.&T.;AND K.CM.&OXPART) / "'^ • — —ICHouston •Son Antonio X\«?^ 0< \eP^ Galveston g3763__2l. (To face page 660.) No. 25. 63763—21. (To face page 660.) No. 26. (53763—21. (To face page 660. ) No. 26a. Q+tle ^ Por^'lond Spokone st^S^i^SilS::^^*' y\^o BoHe ■•..---1 Z''^ ST) ^^7siiz~Ji%'^^''i^^^ ,0-^.>4 .o^o- J^^. ^M ^ot^htirn H 'n, ''^a Ada '« 3t. Paul V / ■"'"=<> >* I — /-. On :^n Pocjf, I I '^ e/-/7 i/ [Sal^LokeCiti) Lbo 'O— O'li o— O^o^ But f alo^fe^r^fe*^ x&^'V c5/»/?^ .'^'"V, 0^ ot>w7X:!rbr^ - No*^ Dc '«^^//A7j^Sn »<»o «Qj o ucnver Boston ^ & /^P^' • D^«^"^';s^ \ \ San FrcnciSCO \ \ \ L.J^^-.— I 7^':5-: ^"^^^af^s: • ^^^v VbrA Central. —^-^^^Lackaiyanna-Nick/c Piafc. —••••• Pcnnsyl^^onia. ■ ■ ■ ■ Ba/timote S/ Ohio. Chesapeake, Sijstems. San An+onio 'New Orleans 6alves+on '"^^^^Ilhnois Cenira/. —•^^tLoui^- Frisco. Soufhern. oococo Minsouri Fhcific. •♦■*^-** L.Br H- ACL. Seaboard Air Line. Iliiiniuinll - MAP Zl - MAIN STEMS OF PROPOSED RAILWAY SYSTEMS v\At>niNu'ro.\ : guvernmsnt pbinxino onicm : i92i 63763—21. (To face page 660.) No. 27. u Tr % mm \ /nsH fJULlim NEH .. p . Date Due -Q?Hh 3^t ^^VWi^ 4- 1 y\ fiV'i"^ u^ 72^ ^ RPR 6 1964 J L • • • ^ Jl JTSO \irn 33d /I ^"^ ■U*33^ COLUMBIA UNIVERSITY LIBRARIES 0041408209 **^ ' 7 1928 '* ■"'^^'l^sft: ^^.fsf • J- .4.A "Jg-: t... t i. *• • -,-#,, END OF TITLE