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Senator MORGAN. So you buy the coal under annual contracts, and you let out the transportation under annual contracts?

Mr. DRAKE. Yes, sir.
Senator MORGAN. And you do not carry any of it on your own ships?

Mr. DRAKE. No, sir. From these foreign lines we get very low rates, because the lines are engaged in bringing homeward to the United States ore, manganese ore from the south of Cuba; this gives them a cargo out, and the ore makes their cargo home; so that the Earn Line have that business to the exclusion of all others. They have a very large contract of that kind, and they are able to make us lower prices. For instance, last year they made a price of $1.45 a ton against other bids ranging as high as $2; and this year they have made a price so far of $1.65 against $1.90 to $2 with all the other lines. So we accepted a contract with them and have continued it.

Senator MORGAN. What did you pay the first year that the Commission was there for freights?

Mr. DRAKE. $1.45.
Senator MORGAN. Then the second year how much?
Mr. DRAKE. $1.60.
Senator Morgan. What are you going to pay next year?

Mr. DRAKE. I do not know yet, sir, until the bids are opened, until the awards are made. Ad interim, in the interval, we are paying $1.65. The price to Colon is very much higher in the open market, but we expect to be able to make a contract at $1.65. Senator MORGAN. With this same company? Mr. DRAKE. Yes, sir.

Senator MORGAN. You expect to make a contract with the Pocahontas Company on the same basis that you had last year, do you?

Mr. DRAKE. No, sir. I believe coal has advanced somewhat lately5 or 10 cents a ton.

Senator MORGAN. Yes. You expect that their bid will be the top of the market for their coal ?

Mr. DRAKE. Yes, sir-as low as to anybody. They make a uniform price to every body. They never vary it at all.

Senator Morgan. They sell to every comer at the same price?

Mr. DRAKE. Yes, sir. Our only advantage is in preference as to delivery and regular service, because we require so much.

Senator MORGAN. These coals are not delivered in New York, then, before they are shipped to Colon?

Mr. DRAKE. No, sir. We invite bids at all loading points—Mobile, or anywhere where coal could be delivered, at any Atlantic or Gulf ports. We require that they shall furnish an analysis of their coal, and give us the price and the option to take as much as we want of 125,000 tons, deliverable, as we call for it, to steamers that we send there for it.

Senator MORGAN. I suppose you know to-day that the Pocahontas Company will get the contract to-morrow?

Mr. DRAKE. No; I do not. I know this, that the Pocahontas coal is specified by the United States Navy. We have a contract with the United States Navy to supply the naval vessels with coal.

Senator MORGAN. And they specify Pocahontas coal?

Mr. DRAKE. And they specify Pocahontas coal, because 123 United States captains out of 127 reported that the tests of the Pocahontas coal showed the highest grade of efficiency, and for that reason it is

preferred as a naval coal. We prefer it for the same reason that the Navy Department prefers it. I am not advertising the coal; I am only justifying the use of it.

Senator MORGAN. What reason exists why this railroad company should buy coal for the Navy?

Mr. DRAKE. The Navy avail themselves of our having it there to supply their vessels. They make a contract with the railroad company, the same as they do at all coaling points all over the world; they publish them annually; it is a regular public document. They publish a notice to the United States naval officers that they can obtain coal at different points, under arrangements made by the Navy Department, of such a quality and at such a price, and that if that.quality of coal is sold at that point any cheaper during the year they must get it cheaper.

Senator MORGAN. About how many tons during each of these two years has the Navy taken from you?

Mr. DRAKE. Various amounts, sir; I do not know exactly. During troublous times down there they took a great deal. During the time of the strike, when the White Squadron went down to the Caribbean, they relied almost entirely upon our people. We had a very large supply on hand, and they went there because they could not get coal elsewhere. But we have a regular contract with the Government for supplying naval vessels, and we are expected to supply them all that they call for.

Senator MORGAN. Is the railroad company supplying coal to the steamers down there in the Caribbean, as well as at Colon?

Mr. DRAKE. Colon is on the Caribbean, sir.

Senator MORGAN. I know it is on the Caribbean; but I speak of the balance. Do they supply the fleet in the Caribbean?

Mr. DRAKE. Only when they go to Colon for it; that is all, sir.
Senator MORGAN. They supply the station at Colon?
Mr. DRAKE. That is all, sir.
Senator MORGAN. No more?
Mr. DRAKE. No more.

Senator MORGAN. But they supply the steamers that run under your traffic arrangements on the Pacific.

Mr. DRAKE. On the Pacific, if they call for it. If they call for it they get it, sir, but at a much higher price.

Senator MORGAN. You have an understanding with them that they will call for it?

Mr. DRAKE. Yes; that they may call for it.

Senator MORGAN. Have you any understanding with them that you will supply them?

Mr. DRAKE. Yes, sir.
Senator MORGAN. That they will take it?
Mr. DRAKE. Yes, sir.
Senator MORGAN. That is a contract, is it not?

Mr. DRAKE. No, sir; just an understanding. We are not obliged to supply them at all. When they call for the coal and we have it for them we give it to them. There is no obligation at all, but we do give it to them.

Senator MORGAN. You take pains to be always ready to supply the coal?

Mr. DRAKE. We try to.
Senator MORGAN. Yes. You make a profit out of it?

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Mr. DRAKE. Yes, sir.

Senator MORGAN. How much a ton do you charge them for that coal?

Mr. DRAKE. The coal on the Pacific is delivered into lighters, so there is an extra service performed, and we charge them $8.75 per ton.

Senator MORGAN. How much is that above the price for which you sell it to the canal ?

Mr. DRAKE. One dollar and seventy-five cents.
Senator MORGAN. $1.75 a ton?
Mr. DRAKE. Yes, sir.

Senator MORGAN. How much is it above the price that you sell it for to the citizens of Panama?

Mr. DRAKE. Oh, it is lower. We do not sell much to the citizens of Panama; just in small quantities.

Senator MORGAN. But you do sell it?
Mr. DRAKE. . We do sell it at various prices, up to $10.

Senator Morgan. Have you any competitors in the coal market at Colon?

Mr. DRAKE. No, sir; no one.
Senator MORGAN. You have the entire business?
Mr. Drake. Yes, sir.

Senator MORGAN. Both for citizens and Pacific steamers, and naval steamers, United States steamers, and the canal ?

Mr. DRAKE. Yes, sir.
Senator Morgan. It is all in the hands of this railroad corporation?
Mr. DRAKE. Yes, sir.
Senator MORGAN. And you manage the whole business?

Mr. DRAKE. Not selling down there; I do not have anything to do with the selling or delivery down there.

Senator MORGAN. But I mean you manage the purchasing of the whole business?

Mr. DRAKE. Oh, yes, sir.
Senator MORGAN. So you do the whole of it up here, virtually?

Mr. DRAKE. Yes, sir; that is, the railroad company does it up here. The railroad company does it. I do not do all of it.

I do not do all of it. I have control of it, though; I have charge of it. Senator MORGAN. Well, I mean, it is under your control? Mr. DRAKE. Yes, sir. Senator MORGAN. And your steamers never take any of it out? Mr. DRAKE. No, sir. Senator MORGAN. They always carry it on these hulks? Mr. DRAKE. These tramps; yes, sir. Senator MORGAN. Are they sailing ships, or not? Mr. DRAKE. They are steam vessels, sir.

Senator MORGAN. Who regulates the price of freights between New York and Colon on your steamers!

Mr. DRAKE. The traffic manager.
Senator MORGAN. The traffic manager?
Mr. DRAKE. Yes, sir.
Senator MORGAN. Are they always up with the market, or below?

Mr. DRAKE. They are always up with the market. We have a regular tariff that we charge for everybody.

Senator Morgan. But you modify that to suit the market, do you not?

Mr. DRAKE. It does not change. If there is competition, and it is necessary to make lower rates to get business, if we are short of business and he can get a cargo by making a lower rate, he would do it.

Senator MORGAN. He has done it, has he not?
Mr. DRAKE. Yes, sir.
Senator MORGAN. On frequent occasions ?

Mr. DRAKE. Well, I do not think it has been necessary to do it frequently, because the business is not large.

Senator MORGAN. Then your purchasing agent is in the market at New York for freights?

Mr. Drake. No, sir-the traffic manager, I said.
Senator MORGAN. I mean your traffic manager?
Mr. DRAKE. Oh, yes, sir.

Senator MORGAN. He is in the market for getting goods for shipment?

Mr. DRAKE. Yes, sir.
Senator Morgan. Do your steamers generally go out loaded ?
Mr. DRAKE. They go out full; yes, sir.
Senator MORGAN. How do they come back?

Mr. DRAKE. Recently they have been coming back very light, because the business has fallen off from the west coast, and because the business has been divided by these other lines that have been put in.

Senator MORGAN. Which lines--these lines that you mentioned a while ago?

Mr. DRAKE. The Hamburg-American and the Royal Mail Steam Packet Company.

Senator MORGAN. Those that have the right to transport freight at 25 per cent of the income charges?

Mr. DRAKE. Yes, sir.

Senator MORGAN. So those ships are in competition with those of the railroad now?

Mr. DRAKE. Yes, sir.

Senator MORGAN. And sometimes the market drops, the rate of freights?

Mr. DRAKE. No; sometimes—we can not control what they do, and they may offer indacements. They undertake to maintain rates; they undertake to charge the same rates that we do, but they can make concessions or allowances that we can not.

Senator MORGAN. And they do it?

Mr. DRAKE. They do it, in the shape--we imagine or understand that they do it by paying commissions.

Senator MORGAN. Those are rebates?

Mr. DRAKE. No; they are commissions to the agents to procure business for them. Very often the agents of the steamship lines are merchants themselves, and they are allowed a commission for getting the business for the other line. We can not do that.

Senator MORGAN. What kind of freight do you take out “rom New York to Colon?

Mr. DRAKE. All classes of freight, sir. We carry out all classes of material for the Isthmian Canal Commission; all of the supplies of the railroad company; all freight consigned to the Isthmus by the ship

ping public, and all freight shipped to the west coast of North and South America and to San Francisco.

Senator Morgan. You carry the material that is to be used, all of the supplies that are to be used, by the railway and also by the Canal Commission? You ship all of that on your own vessels?

Mr. DRAKE. Yes, sir; all except what is bought by the purchasing department of the Commission, delivered at the Isthmus in some other way.

Senator MORGAN. Yes.
Mr. DRAKE. We carry all that is consigned to our line.

Senator MORGAN. Yes. The railroad company has a pretty large income from this property in which the Government is not interested?

Mr. DRAKE. It did have; it has not had recently. The rates over the railroad and the rates over the steamship line for account of the Commission were reduced very materially by Mr. Wallace when he was the vice-president and general manager, at the same time that he was chief engineer of the canal, with a view to reducing the cost of canal construction; and that business was very unremunerative to the railroad and to the steamship line. The rates were cut very seriously, his idea being, as he expressed it, I believe he has expressed it herethat the railroad, in its operation now, should approximate as nearly as possible to the conditions that would prevail when the canal was finished. He said that he did not care whether the railroad made a profit or not. During the time that those reductions were in force the steamship line did not make money out of that business. Recently, because of the effect on the business, those rates have been restored.

Senator MORGAN. Then the other supplies besides the coal that was bought for the use of the railway company, and also for the use of the canal, are deliverable at New York?

Mr. DRAKE. Some of them are delivered at New York.
Senator Morgan. How about the great bulk of it?

Mr. DRAKE. You mean the bulk that is bought for the railroad for sale to the canal ?

Senator MORGAN. Yes.

Mr. DRAKE. The great bulk of it is bought delivered to our steamers here, bought f. o. b. New York-all perishable material and consumable stores.

Senator MORGAN. Does your purchasing agent there buy in any other market besides New York?

Mr. DRAKE. All over the United States and Europe-anywhere where he can buy the cheapest.

Senator MORGAN. Well, does he buy?

Mr. DRAKE. Yes, sir. He just bought, the other day, $10,000 worth of iron in Europe?

Senator MORGAN. In Europe?

Mr. DRAKE. Yes, sir; and just before I came away he was placing another contract abroad.

Senator MORGAN. What kind of iron was that?
Mr. DRAKE. Miscellaneous-all grades of iron.
Senator MORGAN. All grades?
Mr. DRAKE. Yes, sir; bar iron principally.
Senator MORGAN. Principally bar iron. What did it cost?
Mr. DRAKE. I do not know, sir.

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