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INVESTIGATION AND SUSPENSION DOCKET No. 11.
THE TAP LINE CASE.
Submitted April 15, 1911. Decided April 23, 1912.
The common ownership of an industry and a short line serving it is not in itself sufficient to divest the railroad of its status as a common carrier. On the other hand the fact that the rails, locomotives, and cars of an industry have been turned over to an incorporated railroad company owned and operated by the industry or in its interest does not divest those appliances of their character as a plant facility if such in fact is the case. A line must be drawn at some point between what is transportation and what is industry and between a facility of transportation and a plant facility or tool of the industry. Each case, however, must stand on its own facts. On the facts shown of record; Held, that the service performed for the proprietary lumber companies by certain tap lines described in the report is not a service of transportation by a common carrier.
John H. Marble for Interstate Commerce Commission. S. H. Cowan, Frank Andrews, and Andrews, Ball & Streetman for interveners. Walter Guion, attorney general, Ruffin G. Pleasant, and Wylie M. Barrow, assistant attorneys general, for Railroad Commission of Louisiana.
R. P. Allen for Railroad Commission of Arkansas. Robert Dunlap, T. J. Norton, and James L. Coleman for Atchison, Topeka & Santa Fe Railway System. William A. Northcutt, Nelson W. Proctor, and Albert S. Brandeis for Louisville & Nashville Railroad Company. James C. Jeffery for Missouri Pacific Railway Company and St. Louis, Iron Mountain & Southern Railway Company. E. B. Peirce for Chicago, Rock Island & Pacific Railway Company. Fred H. Wood for St. Louis & San Francisco Railroad Company. S. H. West for St. Louis Southwestern Railway Company. S. W. Moore for Kansas City Southern Railway Company. H. M. Garwood, Luther M. Walter, N. S. Brown, Sidney F. Andrews, A. Cochran, E. J. Mantooth, McRae & Tompkins, Gaughan & Sifford, Rodgers & Dorough, Julian C. Wilson, W. C. Gilbert, Charles T. Coleman, W. M. Lewis, James M. Beck, William A. Glasgow, jr., Saner d Saner, Hill, Brizzolara & Fitzhugh, Edgar A. Bancroft, Samuel D. Snow, John S. Kirkpatrick, W. L. Stocking, Marcellus Green, Garner Wynn Green, Frank P. Leffingwell, Walter H. Saunders, T. Brady, jr., Mixon & Cassidy, Mehaffy, Reid & Mehaffy, Thurmond & Farrar, J. W. Bishop, D. B. Holmes, Ashley Cockrill, Henry M. Armistead, J. F. Gautney, John B. Jones, C. F. Ziebold, Stubbs, Russell & Theus, J. D. Riddell, Bradley & McKay, Leon Sugar, Greer & Minor, Blair, Drayton & Hillyer, Charles H. Bates, Dean, Humphrey & Powell, Joe R. Lane, Joseph C. Rich, J. Gaillard Hamilton, and Coleman & Lewis for individual tap lines.
REPORT OF THE COMMISSION.
HARLAN, Commissioner:
An industrial railroad, as that phrase is now commonly used, is a short line constructed primarily to serve the particular plant or industry in the general interest of which it is owned and operated. It consists of the tracks connecting the various factories, warehouses, and other buildings of the industry with one another, and ordinarily has a connection with one or more adjacent trunk lines by means of a track leading from the plant to their rights of way. It serves the industry by receiving its inbound shipments of raw materials from the trunk lines at agreed interchange points, distributing them among the various buildings according to the requirements of the manufacturing operations, and by taking its finished products from the plant to the trunk lines; it is also often in a position to effect all the necessary movements of materials and partially finished products from building to building within the plant. The rails, tracks, and locomotives are more frequently operated as a bureau of the industry and no pretense is made of serving outside interests. In recent years, however, a practice has grown up under which the rails, tracks, and locomotives operated and used in and around an industrial plant, when set over to a small incorporated railroad company, organized for the purpose and owned by the industry or in its interest, are there-afterward dealt with by the regular lines as something wholly apart from the industry and as if they constituted a common carrier in the service of the general public, participating on an equal basis with other carriers in the transportation of the traffic of the country. On this theory of their status many industrial lines receive allowances out of the rates both on the traffic of the controlling industry and upon such traffic of outside interests as they may handle.
The aggregate amount so paid by the regular lines to industrial lines throughout the country is not known. It has been estimated at not less than $100,000,000 a year. On the basis of such investigations as we have been able to make it seems entirely conservative to say that they amount, for the whole country, to not less than $50,000,000 or $60,000,000 a year. In many cases the allowances so received out of the rate are sufficient, and are intended both by the carrier and the industry owning the industrial line to be sufficient, to cover the cost not only of the movement of materials and finished products between the plant and the adjacent trunk lines but the cost of all the operations of the industrial lines for the industry within its plant. In no small number of cases the allowances are sufficient to meet all these costs and to return handsome dividends on the entire investment of the industry in its tracks and equipment. In some cases the amount thus received by a particular industry is so large as to contribute materially to its prosperity as compared with the prosperity of a competitor in the same line of business receiving no such aid. To a concern whose manufacturing operations are large, a contribution of this kind from the public carriers may be relatively unimportant, but similar aid to a competitor that is not so strong might readily determine in some cases whether it is to survive in the struggle or go out of existence.
The importance of the question and the numerous informal complaints of discrimination arising out of these relations between public carriers and industrial lines led the Commission several years ago to enter upon an extensive general examination of industrial lines of all classes. The investigation was closed, for the purpose of compilation, on June 30, 1909, upon a record embracing 2,208 cases where tracks and locomotives were owned and controlled and used by industries in active operation. Of that number it appeared that 1,748 were owned by affiliated industries directly or through the direct ownership of all the stock of an incorporated industrial line. In 264 cases the stockholders of the industrial line were identical with the stockholders of the controlling company. In 164 cases the industrial company, on the face of its records, owned a majority of the stock of the industrial line. Of the 2,208 industrial lines then in operation, but 611 were incorporated as railroad companies. The remaining 1,597 lines were being operated directly by the owning industrial companies. Out of the whole number, incorporated and unincorporated, only 450 were receiving divisions or allowances from the public carriers. Some 363 derived some revenues under local rates, while 1,395 derived no revenue at all from operation. Out of the whole number, but 135 were receiving, according to their own claims, as much as 20 per cent of their traffic from the general public; and there is reason to think that a careful analysis of the figures would materially modify the extent of this outside traffic. In the case of 2,073 lines 80 per cent or more of the traffic was supplied by the controlling industrial company. Of the whole number, only 441 had filed tariffs or concurrences with the Commission, as required by law, and but 345 had filed annual and monthly reports.
In the operations of manufacture and production it was first the practice to use horses and wagons for handling materials in and about the industrial plant, and in the same way to haul the raw material from the tracks of the public carrier to the plant, and to haul the manufactured product from the plant to the carrier's receiving station. Later pushcarts and handcars, sometimes moving on rails, cranes, conveyers, and other appliances were brought into use. These facilities are still to be found in many of the smaller industries. But with the combinations of capital and the concentration of manufacturing operations into large plants, railroad tracks, cars, and locomotives have become necessary to avoid delay and expense in handling the raw material into and in and about the plant, and in order to deliver the manufactured products as cheaply as possible from. the plant to the carriers that move them to the markets. It can not be doubted that large economies in the cost of manufacture and production have been effected in that way. When the service is performed on rails by a bureau of the industry and with locomotives that it owns and with crews that it employs, this change in method was manifestly not a change in the thing done but simply a change in the facility used for doing the same thing. Whether the service, so far as the controlling industry is concerned, takes on another aspect when the rails and locomotives have been set over to an incorporated railroad company owned by or in the interest of the industry, and ceases to be a part of the industrial operation as was the service performed by the horses and carts and other appliances formerly used by industrial companies and still used by the smaller concerns, is a question that manifestly must depend upon the facts in each case. In a formal investigation we are now looking into the relations between the public carriers and the industrial lines affiliated with iron and steel industries, and with other manufacturing concerns located in the territory east of Chicago. A number of particular instances are also before us upon formal complaint. All these cases will be considered in due time. We propose here to examine only industrial lines affiliated with lumber companies, limiting our observations to lumbering operations in the southwest, and more particularly to those in the states of Arkansas, Missouri, Louisiana, and Texas. These small railroads, owned by or affiliated with lumber companies and commonly referred to as tap lines, although different from other lines in many respects, are generally classified as industrial railroads. The tapline question, therefore, is simply a phase of the larger question which we have endeavored to outline in the foregoing pages. So far as it affects the lumber interests in that territory, it has been considered in a general form in Central Yellow Pine Asso. v. V.S. & P. R.R. Co., 10 I. C. C., 193; Central Yellow Pine Asso. v. I. C. R. R. Co., 10 I. C. C., 505; and Star Grain Lumber Co. v. A. T. & S. F. Ry. Co., 14 T. C. C., 364 17 I.C.C., 338. It was also considered on the special facts of the case in Kaul Lumber Co. v. C. of G. fly. Co., 20 I. C. C., 450, where the haul of logs to the mill was held to be a plant service. The matter is again before us upon further complaint and upon a voluminous record, in which the relations between the so-called tap lines and the respective lumber companies, in the interests of which they are owned and operated, were exhaustively examined. All that is here said must therefore be understood to relate to the conditions disclosed upon this record and as having relation only to industrial lines that are owned by or affiliated with lumber companies in that particular territory.
The lumber traffic of the country in the aggregate is enormous. Allowances, however, are not universally made to the tap lines of lumber companies. Taking the industry as a whole throughout the country an allowance by a public carrier to a lumber road or tap line is the exception rather than the rule. Even in the yellow-pine forests west of the Mississippi River, which is the territory more particularly involved on the record before us, there are more tap lines receiving no allowances than there are tap lines to which such allowances are paid. To some extent the practice of making such concessions out of the rate has spread to the yellow-pine districts east of the Mississippi River and allowances are now paid to a few of those mills. The rest of the mills east of the river enjoy no allowances and formerly none were paid at all. This difference in conditions east and west of the river is doubtless reflected to some extent in the current rate of 16 cents on lumber from mills west of the river as compared with a 14-cent rate on lumber from mills east of the river to such points, for example, as Cairo; generally speaking, the rates from points west of the river seem to be higher than the rates east of the river for hauls of equal distances. In the statement of facts preceding the opinion of the court in Illinois Central R. R. v. I. C. C., 206 U. S., 441, 444, the difference in the practice on the two sides of the river was explained in the following language:
The railroads west of the Mississippi make a certain allowance to the mills which have "logging roads", that is, roads by which logs are hauled from the timber to the mills. This is called "tap-line allowance or division." *
The mills east of the river have logging roads also, but appellants make no allowance to them. * * * There does not appear to be any reason for such allowance west of the Mississippi which does not apply east of that river, and it amounts to a rebate or reduction from the regularly published rate, and gives an advantage to the mills west of the Mississippi over those east, although the published rates from both are the same.
While it is said that the allowances paid west of the river enter into and affect the general rate structure from those producing points, an examination of the tariffs does not show that the rates for hauls from mills west of the river are uniformly higher than rates for hauls of equal distances from mills east of the river. Such discriminations as may exist, as between mills east and west of the river, do not arise so much out of the rate schedules as out of the fact, just mentioned, that a large number of the mills west of the river enjoy allowances from the trunk lines while those east of the river and the majority of those west of the river have the benefit of no such aid from the carriers.
Of the 2,208 industrial lines of all classes that were examined in the course of the general investigation referred to, it was found that some 1,251, incorporated and unincorporated, were tap lines owned by or closely affiliated with companies engaged in different parts of the country in the manufacture of lumber and forest products. Of these so-called railroads only 243 were found to be receiving allowances from the public carriers. On the other hand 1,008 were receiving no allowances of any kind. The 243 lumber companies that were beneficiaries of such contributions from the public carriers were operating, through their tap lines, 5,787 miles of track, while the tap lines of the 1,008 other mills receiving no aid from the public carriers were operating 12,358 miles of track. These figures fairly lead to the inference that it is the larger lumber companies with their larger traffic that receive allowances, while the smaller concerns are compelled to get along without such contributions from the public carriers.
These 1,251 lumber mills in different parts of the country are operated under different conditions and manufacture lumber of different kinds and classes. It must be remembered, nevertheless, that they are all in competition with one another in the general lumber markets of the country. But limiting our comments to the conditions that exist west of the Mississippi River in the three states of Arkansas, Texas, and Louisiana, where the lumber industry is confined largely to yellow pine, we find that the public carriers, at the time our investigations were brought to a conclusion, were making allowances out of the rates to 112 tap lines, while 143 tap lines were receiving no such contributions. Later in this report we shall analyze the conditions under which many of these lumber industries were conducting their operations, and shall examine into the mileage, tonnage, and motive power of their respective tap lines, and the conditions under which they were being used in the process of turning their logs into lumber. At this point it will suffice to say that 11 of the tap lines receiving no allowances had been incorporated; on the other hand 6 unincorporated tap lines were receiving allowances. The general rule, however, as heretofore stated, was to pay allowances only to the incorporated tap lines. Nevertheless, taken as a whole, the tap lines receiving no allowances are shown by the investigation to have been operated, so far as the lumber traffic is concerned, under conditions that were substantially similar to the conditions surrounding the operation of most of the tap lines that were enjoying allowances from the public carriers. The yellow-pine lumber companies in those states compete with one another in the same general markets and under conditions that would be equal, so far as can be ascertained from the record, were it not for the fact that the carriers aid some of them with contributions out of the rates, while the majority of them bear their own burdens in conducting their lumber operations. |
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