GULF & SABINE RIVER RAILROAD. We gather from the record that the Gulf & Sabine River Railroad Company is controlled, through the ownership of its capital stock and bonds, by the Gulf Lumber Company, which is a subsidiary corporation or closely allied in interest with the Chicago Lumber & Coal Company, which has mills elsewhere and acts as sales agent for the Gulf Lumber Company.

The Gulf & Sabine River Railroad Company was incorporated in 1906 and is capitalized at $100,000 with a bonded indebtedness of $300,000. It consists of two separate tap lines, not physically connected, one known as the Stables division, connecting with the Kansas City Southern at Stables and extending about 8-1/2 miles into the timber with logging spurs aggregating about 8 miles in length; the other known as the Fullerton division, comprising 10 miles of track, connecting with the rails of the Santa Fe at Nitram and extending to and beyond Fullerton, La. Since the hearing we are advised that active progress has been made on an extension of the Fullerton division to Leesville, a point not far from Stables, where a connection apparently will be effected with the Kansas City South-ern. The Lake Charles & Northern, a part of the Southern Pacific system, also connects with the Fullerton division at Nitram by means of trackage rights over the rails of the Santa Fe. In addition to the tracks already described, the lumber company has many miles of logging spurs which connect with the tap line at various points and which the lumber company maintains and operates, using for that purpose one or more locomotives leased from the tap line at a charge of $10 per day. The entire equipment of the Gulf & Sabine consists of 7 locomotives, 2 passenger cars, 95 logging cars, and 10 other cars. The lumber company has no rolling stock of its own.

The so-called Stables division is purely a logging road and has no outside traffic. Curiously enough there is no mention on the record of the mill on this portion of the tap line, but we understand from other sources that the controlling interests have two mills at Stables, one of which is within 150 yards of and is reached by a spur track from the Kansas City Southern. While the record is deficient in this respect, it is clearly indicated that on the Stables division, its only service is in the movement of logs to the mill and the switching of lumber from one of the mills to the Kansas City Southern. It charges the lumber company for the log movement $2.50 per car, and receives from the Kansas City Southern divisions of from three-fourths of a cent to 1 cent per 100 pounds. We hold this to be unlawful, and that no allowance may be paid to the tap line or to the controlling company on products of its mills on this division.

The construction of the tracks known as the Fullerton division was begun in 1907, before the mill of the lumber company was opened for operation at Fullerton, and before the line of the Santa Fe was built into Nitram. The tracks on this line are of unusually substantial construction, being laid with 56 and 60 pound rail, well ballasted, with a maximum grade of six-tenths of 1 per cent. It has a roundhouse, track scale, and telephone and telegraph wires for dispatching trains and other purposes. The record indicates that the Santa Fe offered to build into Fullerton, but the lumber company preferred to construct a tap line. Two trains are operated daily in each direction on a regular schedule for the transportation of passengers, express matter, and the mails, as well as for the transportation of lumber between the mill at Fullerton and the connection with the trunk lines at Nitram. The mill has a capacity of from 35 to 50 carloads of lumber per day, and its actual shipments are said to average 25 car-loads. In a broad sense Fullerton is a company town, with a population of about 1,800 and a number of stores. The supplies needed for a community of that size furnish more or less traffic for the tap line; its miscellaneous freight during the year 1910 amounted to nearly 10,000 tons. The passenger earnings of that year were $3,809.25, and the express and mail revenues amounted to $956.48. The lumber and logs of the controlling interests, however, amounted to 370,164 tons during the same year, or in excess of 90 per cent of the total traffic. It receives on this lumber an allowance from the Lake Charles & Northern of 25 per cent of the proportions accruing up to Lake Charles, La., or from 1 to 4 cents per 100 pounds. No allowance is made by the Santa Fe. The tap line also charges the lumber company a flat rate of $2.50 per car for the movement of logs from the connection between the logging spurs and the incorporated track to the mill. There are also said to be several small mills in the territory traversed by the Gulf & Sabine River Railroad, which cut hardwood lumber chiefly from logs taken from lands of the Gulf Lumber Company.

The total operating revenue of the Gulf & Sabine in the year 1910 was $116,359.74, its operating expenses aggregating $76,067.43, leaving a net operating revenue of $40,292.31. While it has paid no dividends on its capital stock it had an accumulated surplus on June 30, 1910, of $34,969.16.

On this division of the tap line we think any allowance out of the rate in excess of 1 cent a 100 pounds on the products of the mill of the controlling company is unlawful. We fix that as a maximum.