The venture did not pay, and it was dropped before I left there. Whether they ever tried it again or not I do not know; but I have understood that there has been some coal shipped to Cuba through Mobile. I do not see any reason why, if there is any demand for coal there, they should not ship the Alabama coal to Cuba over the Mobile and Ohio, because the Mobile and Ohio is a very low-grade road and ought to be able to haul coal cheaply if the volume of it is sufficient.

Q. (By Mr. CLARKE,) How long hauls do they have to make?-A. The haul through Alabama was something like 230 miles.

Q. (By Mr. FARQUHAR.) Was Pensacola a competing point with Mobile while you were trying to build up the coal business?-A. No; not in coal at that time, only in lumber.

Q. And has the lumber business developed in Mobile? Is it still the largest market on the Gulf?—A. I have not noticed it recently, but a few years ago, when I had access to information, it had continued to develop. I should have mentioned that one of the efforts we made in order to make freight was to develop the lumber trade, and in doing so we utilized the timber lands belonging to the Mobile and Ohio Company, acquired by land grant.

Q. Something has been said before the commission here about the competition of the Southern rivers. While you were connected with the Mobile and Ohio did you notice how much there was of competition in Arkansas or Alabama in these small independent boats and the effect they have on the rates?-A. One of the river boats could run as far up as Columbus, which was on a branch line (it is now on the Montgomery extension of the Mobile and Ohio), and also occasionally, I think, it used to come up as far as Aberdeen, which was the terminus of the Illinois Central line running into that territory; but it was only for a short time during the cotton season. Some seasons there was hardly water enough for them to come there at all. And I can not recollect that I ever paid much attention to that competition. Maybe the competition with the Illinois Central kept me so busy that I did not notice the boats. Now, as regards the Alabama River, at the time that I was on the Mobile and Ohio there was a regular line established, a line which the Mobile and Ohio recognized as a connection to Montgomery. It was established some months, perhaps a year, before I severed my connection with the Mobile and Ohio, and, so far as I can remember now, it was still in operation at that time, but what became of it afterwards I do not know.

Q. (By Professor RIPLEY.) Was the basing-point system of rate making in the Southern States in force at the time that you were directly connected with affairs there?-A. Not in the sense in which that word is used now. When the Green Line was opened from the West into the South in competition with the lines I have spoken of, through the south Atlantic ports in connection with the coastwise steamships and trunk lines, the basis adopted was to make all rates from the Ohio and Mississippi rivers to interior points the same; and that was on an understanding with the roads north of the river that they would make their rates the same to all river points, no matter by what lines. That was the principle that prevailed all through the life of the Southern Railway and Steamship Association up to the time that I severed my connection with it.

Q. Will you specify by way of illustration what you mean?-A. I mean this, that the rate from Chicago to Cairo, to Henderson, to Evansville, to Cincinnati, and to any other point on the Ohio or to Memphis would be the same; through those points, I should have said, the rate to Atlanta would be made by the combination of rates to those points from Chicago and from those points to Atlanta, and that the proportions were the same north of the river and south of the river, no matter what river point freight came through. Do I make myself clear?

Q. What was the basis of that division then?-A. It was not a pro rata division at all; it was an arbitrary division. In other words, the lines north of the river named the rates to the river, and the lines south of the river named the rates to each point south, and the combination of these two made the through rate. That was the basis of rates at that time.

Q. But there was not the element which you find in the present basing-point system whereby certain towns, by reason of their size or the existence of so-called water competition, got peculiarly low rates and the rates to all the suburban places were made by adding a high local to that rate?-A. That was not exactly the basis of rates. Certain important distributing points, such as Atlanta and Augusta and Macon were afforded rates which had certain relations, either the same or a certain differential. As far as practicable the most important distributing points were given the same rate, so as to enable them to develop equally. Q. The number of subordinate rates below those which have through rates was not great?—A. The rates were generally made from those distributing points by adding the local tariff of the road over which the freight went.

Q. It was the same principle which you have in the present basing-point system, but not developed to so extreme a degree?-A. The same general principle, yes. Subsequently, during my administration as commissioner, it became desirable to have uniform rates to what are known as the Georgia and Carolina points. I was coming to that as a modification of what I have stated before. And the commissioner made up and issued a tariff of rates from all points West to what are known as Georgia and Carolina points, taking in all the principal stations, which were to be the same, and agreed upon as the same, whether via the Western lines coming across the Ohio, by the Chesapeake and Ohio, coming through Richmond, or by any other route that could be made available, such as the Norfolk and Western, running down into Virginia, and then shipping south in connection with other lines. That was the basis that was adopted a few months before I dissolved my connection with the association, and it remains in effect; or at least so I have understood. I heard from our traffic manage" the other day that these rates are practically in effect now, with some modifications.

Q. Are you aware that the long and short haul clause of the interstate-commerce act is inoperative in a large part of the Southern territory?-A. Yes; it always has been to some extent. For instance, the rates from Chicago to Atlanta are higher than the rates from Chicago to Savannah or Charleston, although the freight goes through Atlanta to reach those points.

Q. Is that condition caused by actual water competition down the river to the ocean?-A. By actual competition. The whole question of discrimination was raised by the merchants of Atlanta, who demanded lower rates, and was argued before the Interstate Commerce Commission when I was commissioner of the association; and I suppose, if I had known it was a matter of any interest, I could have brought the record up here. It is easily accessible.

Q. Does it seem to you that the conditions, competitive and others, in the Southe.n States justify the setting aside of this long and short haul clause as it is at present?-A. I do not know to what extent it is set aside at present. I will say, however, what my own judgment in that matter has been. Long before the interstate commerce law was passed my own practice was in every way possible to do away with such discrimination.

Q. Would you describe it as a discrimination?-A. I do not say that it is necessarily an unjust discrimination, but it is a discrimination; and I did away with it at that time on the ground that the losses in revenue were not large enough to justify my company in putting itself in a position to be attacked all the time for discriminating, believing that it was better to forego some little extra earnings than to be put in the position of having to defend such rates as just and reasonable. Q. You would acknowledge, then, that distance is an element in making rates?— A. Yes; I do.

Q. Will you specify in what way it becomes a factor or to what degree?-A. In my early experience in making rates I was called upon to make local tariffs very largely, and the question of what the relative charge should be in proportion to distance necessarily had to be considered. I informed myself. Fortunately I was helped by some publication in a magazine where somebody had done a great deal of work which I would have had to do myself; that there was a general concensus of opinion apparently among railroads that the charges per ton per mile for short hauls should be higher than for long hauls; and I endeavored to find out some scale which would be convenient for use. As an engineer and mathematician I wanted some mathematical scale, and I discovered that the nearest scale to it-that is the nearest scale to fit the actual conditions of tariffs-was not in proportion to the distance, but in proportion to the square root of the distance: that is to say, double the charge for four times the haul. The rate for 25 miles would be just one-half of that for 100 miles. That, you can see, was a very easily remembered rule, and I have used it a great deal. Mr. Markham alluded to the Mobile and Ohio tariffs, which were made on that basis, this morning in conversation with me; he remembered them. I had occasion to examine the official tariff of the present commissioners of the State of North Carolina, and I discovered that it was based on the same scale, taken from one of my own old tariffs. It was in connection with my report that I made to the court on the Cape Fear and Yadkin Valley road for the receiver of the road. It became necessary under an order of the court to divide the earnings between different sections of the road that were covered by different mortgages, and give each section of road proper credit for gross earnings and to make this division for 5 years. I was called on as an expert to divide between the long and short hauls-where it was 10 miles on one section of the road and 50 miles on another to say how the earnings should be divided between them. I thought the proper way to do would be to make the divisions on the scale of the approved tariff of the North Carolina commission, which was done, and subsequently, in the examination before the master, the

chairman of the commission was put on the witness stand and stated that the division was, in his opinion, just and fair, for he had found by comparing that it fitted exactly the scale on which their tariffs were made. So that it is in evidence that my scale is in use to-day.

Q. Is it in use in any other States, so far as you know?-A. I do not know; I have had no occasion to investigate. It is used on the Southern Railway, I know. In other words, the scale that I established as the general manager of the old part of the Southern is still maintained there and probably on the Mobile and Ohio. Whether anybody else has adopted it or not I can not say. I have frequently had requests for a little diagram that I made to show it so that you could see by the lines what the relative rates would be.

ure.

Q. Will you submit one of those diagrams for us?-A. I will do it with pleasIt simply shows the rate line as a curve. Others have also used the scale I introduced a good many years ago. The first was Mr. Henry Fink, now president of the Norfolk and Western road, when he was first on that road; but it was not then the Norfolk and Western-it was the Atlantic, Mississippi and Ohio before it was reorganized. Under the law it was required that the cities of Richmond and Petersburg should have the same rates to points on our two roads, which crossed at Burkeville, 53 or 54 miles from the two cities of Richmond and Petersburg. In making tariffs to local stations beyond the question came up of the proper division for the relative hauls, and my scale was adopted as fair by Mr. Fink for the Atlantic, Mississippi and Ohio. Of course I thought that if it was a proper scale at all it would be fair for the division of rates, and subsequently I got out a table of percentages known as "Talcott's Table of Percentages for Division of Rates." I have been called on by Mr. Culp, of the Southern road, and others time and again for copies of it. Mr. Fink adopted it also for the division of rates between the Shenandoah Valley and the Norfolk and Western, which I think is another indorsement of the scale as a fair one.

Q. What other basis of making the local tariffs by State commissions would be adopted usually-the proportion of mileage directly?—A. No; never directly; but the allowance for long and short hauls does not agree with my scale. Sometimes it does not differ very much from it on one class, while on another class it would be entirely different.

Q. Is the long and short haul clause enforced, or was it enforced by the State commissions within the several Southern States?-A. Generally, yes; I think. It was not enforced in Virginia. I ought to amend that. I happened to be on a road the charter of which exempted it for a long time during my management from any State interference with the rates. There was only one condition upon which the State could interfere, and that was that we should not pay more than 15 per cent in dividends; but as they had kindly increased the capital stock we had no show of paying 15 per cent dividends, and we did not come under that law at all. Although I did not study very closely the requirement of the law. I do not recollect any enforcement in Virginia whatever of the long and short haul provision. We adopted it in Virginia, and all our tariffs on the Richmond and Danville road were made on that basis-no more for a shorter than a longer haul. For instance, starting out I would make rates in classes on my scale from Richmond to Burkeville-about 50 miles south of Richmond, where we were crossed by the Norfolk and Western-with lower rates from Petersburg, and as the law required they should be the same to that station my rates would drop there, and with the lower rate I would just simply go back to a station nearer Richmond and carry that on. After passing this competitive point we could gradually work up to the scale again. In other words, in one class I recollect there used to be two intermediate stations that would have the same rate as Burkeville.

Q. It would not seem to you justifiable that there should be a direct drop?—A. No; not on the Richmond and Danville. There was one direct drop there; but I preferred to do away with it and reduced the rate to the stations between the competitive point and the terminal point so as to do away with it-so as to make rates equal but not have a higher rate for the shorter haul.

Q. In your judgment, then, the long and short haul clause is a proper and reasonable regulation in the making of rates?-A. Provided it does not exclude competition by forcing a reduction of rates at the intermediate points that the railroad can not submit to. For instance, I do not think it makes so much difference whether it is a water competition or a competition from any other source, if it is legitimate and proper and revenue can be made by meeting competition. On account of the highly competitive conditions at some points I do not think it is always just to forbid the meeting of that competition, even if it does make a discrimination at intermediate points.

Q. An elastic prohibition allowing for modification in intermediate cases would seem to you to be justifiable?—A. Yes; I have always thought so, and I think

so now.