Appendix — Ramsey v. United Mine Workers

7” ee ALOR ah Dad

Nos. 17.878 and 17,879

AN THE

United States Court of Appeals

FOR THE SIXTH CIRCUIT

No. 17,878

(irorce Ramsey; Leon Nunwey, d/b/a Leon NUNLEY COAL

Company; Pau Gipss, d/b/a Pave Gisps Coat Company;

Lois Haut Travis, Administratrix of the Estate of W. J.

Travis and J. H. Grawam, d/b/a Nixtu Wesr Coat Com-

paxy; A & R Coat Company, Ixc.: W. T. Morrison and

JH. Granam, d/b/a M & G Coat Company; J. H. GranaM

Coa Company, Inc.; W. T. Morrison and Lots Haut Travis,

\dministratrix of the Estate of W. J. Travis, d/b/a M & T

Coan CoMPANY ; STEPHENSON BroTHers Coat Company, INc.;

Epwarp Nun ey, d/b/a Epwarp Nunxiey Coat CoMPany;

Kast Vatiey Coat Company, Ixc.; Exiuirs Warp and Lon L.

Varne.y, d/b/a Tracy Crry Coat Company; Henry WILLIS

Fiyxyx, d/b/a Wiis Fryxn Coat Company; H. W. Fryx»x

Coa, Company, Inc.; Howarp Hicerns, d/b/a Howarp

Hiccrxs Coat. Company; Howanp Higcins Coat CoMPany,

Ixc.: MarsHaLt MEEKsS,

Plaintiffs-Appellants,

v.

Uxirep Mine Workers or AMERICA,

Defendant-Appellee.

No. 17,879

TENNESSEE Propucts aNbD CHEMICAL CORPORATION,

Plaintiff-Appellant.

v.

Uxirep Mine Workers or AMERICA,

Defendant-A ppellee.

Appeals from Final Judgments of the United States District

Court for the Eastern District of Tennessee, Southern Division

APPENDIX FOR DEFENDANT- APPELLEE

— READ ETP LE OILED EAN

TABLE OF CONTENTS OF APPENDIX

Excerpts From Transcript of Proceedings

Volume |

Wilwesses for Plaintiffs

Page

Paul Gibbs

Direct examination ~~ ———— - !h

Cross examination 12b

Leon Nunley

Direct examination 2Y))

Cross examination 33h

Kdward Nunley

Direct examination — vt 38h

Proceedings ~-------- 39b

Edward Nunley:

Cross examination Fes eas le 40b

John Stephenson

Direct examination ——~ 46)

(ross examination ...------------ - Hob

Recross examination ———-—- aarp ee

JH. Graham-

Direct examination —_------------ : 72b

Coons Gunmeimetion ...-..-....-..-----~------- Tib

W. T. Morrison—

Direct examination —_------------- jing tle ve he

(a ee — 96b

Dossees Quemnetion .........-..----~.--«------- 122b

Howard Higgins—

DISGAEA 125)

ec 134b

Howard Higgins—

A awentowewarane ns 135b

(SEES A 136b

DESL SESS EAE 162b

Willis Flynn—

DE _ENS EES LAST SOL TOE TT 162b

op enu ee memceae 169b

a eabeseravannes 185b

il Table of Contents of Appendix Continued

Herschel A. Daffron

Direct examination

Cross examination

Recross examination

Redireet examination __

Walter Frizzell

Cross examination

John Waller

Direet examination

Cross examination

John TL. Basham

Direct examination

Clarence MeGowan

Direct examination

Mrnest Campbell

Direct examination

Tommy Cates

Direct examination

Cross examination _

Redirect examination

Proceedings

Virgil C. Thomas

Direct examination

Proceedings

Virgil C. Thomas

Direct examination —____

(ross exarmination

Max Condra-

Direct examination

Murphy Whited, Jr

Direct examination

(ross examination

Proceedings

Cyrus S. Katon—

Direct examination

~~ 6 SAAR ESPNU Y/N MI EEE PEE NIST EO OILS HANI 8

Table of Contents of Appendix Continued iil

Mark Kastin—

Direct examination ~~~. 972)

(‘ross examination ---------------------- Mb

Merle C. KNelee-

Direct examination ~~------~- aa eR S eae TS)

Cross examination ~------------- cate 27T9b

Proceedings ~---------- ae 7 ye ies YROD

John L. Lewis—

Direct examination ——- eee ae 987)

J.C, Kelley-—

Direct examination —-~--------- ee

(‘ross examination ----------------------------- PQ? ])

Thomas L. Meazell—

Direct examination —--~------------------------- 294)

Carl MeFarlin, Jr.—

Direct examination —-------------- PAP 2, Vere ea

Herman I. Allen—

(‘ross examination _---------------------------- 322)

Carl McFarlin, Jr.—

Pies GROEN Won cc wee ncnnssawonwnnee _ 334b

Di eeek GSERMMIOR .. 0. - o-oo ewww eenewe 375b

Rolland O. Baum—-

a Ea a a een 376b

Proceedings ...---------------------------------- 388b

Rolland O. Baum—

itt Re i. nw nceweneennmnnnenens 390b

it SE onan cwenedennawecowerss 399b

le A. enw onciomnadewenees 420b

Paul V. Callis—

ee Ee . nuewtereewennmnedios 421h

ee a eT 427b

Paul V. Callis—

SAREE PAE IEG OTT 429b

ay

iv Table of Contents of Appendix Continued

Volume II

Paul Vo Callis

Direct examination (continued)

Cross examination

Houston Beaumont

Direct examination

(ross examination

William Bo Allison

Direet examination

Cross examination

William vou Meding

Direct examination

Cross examination

Recross examination

Perseival Heury Fitzgerald

Direct examination

(Cross examination

Marshall Meeks

Cross examination

Redirect examination

Lon Shelton Varnell

Direct examination

Cross examination

Max Condra

Redirect examination

Joseph Howard Graham

Reeross examination

George Ramsey

Direct examination

Cross examination

Defendant's Motions: Proceedings

440)

407)

ti}

Dh)

it)

aT)

Defendant's Motions te Strike Evidence, and for

Judgment; Proceedings 9.

Witnesses for Defendant

W. A. Boyle—

Direct examination

Fa |

bboh

RARE RRS I ES RB ONAN Les Delle = - =

. eae ee

Table of Contents of Appendix Continued Vv

John Owens

Direct examination ———- Bonuses ——

Cross NE SGOT REAR scone ame

John L. Lewis

Direct examination ——— ~~~ as 247

Cross examination f ; 74)

Josephine Roche

Direct examination TO)

Proceedings 2 T3G)

Josephine Roche

Direct examination

Val J. Mitch

~)

“3

x

=

3

Direct examination a - T45b

George TH. Love

Cross examination vA _. $aan

P. B.C. Smith-

Direct examination ——- ; : TO4h

B.C. Hill

Direct examination - Soh Pa

Cross examination ro - Sa

Direct examination A Viaaae a

Cross examination ——— MSE Es ee ee

Redirect examination —- Le Mee en ee

Howard Ceeil Human

Direet examination i= Se ig ie Oe ae 819)

Roland A. Kampmeier—

Direct examination ~~ --------------- |

Cross examination —..——- cemicte agile tackle ae

Redireet examination ete a Md eR _.. 92th

L. C. Goering

Direct examination __--------------- eo

Cn CURRIE ts a sees ane

(.M. Hieks—

Direct examination ~~~ ------------ DD ts DE O35b

Aare Sen wae NH6h

nn ee ne ewwecnun G66b

d. W. MeMahon—

Direct examination __....-_---------- yo Sereda oonabaten _ &71b

—

vi Table of Contents of Appendix Continued

Volume III

J. W. MeMahon—

Direet examination | ee 897}

T. J. Hotfman—

Direct examination _.....--....... ____ ORY),

Mark EF. Kastin—

Direct examination ------------- 1011)

T. J. Hoffman—

Direct examination —------- — |

Mark Eastin, Jr.—

Direct examination ------------ _- 1041)

S. L. Jewell—

i 1044)

T. Reed Seollon—

it eb no ipa, 106?)

(. Kdwin Ross—

Direct examination _--------- __ 1088),

Allen Condra—

Direet examination -.......................__ 1095},

George Gilbert—

apace Le teg ee ec, fe EELS: 1100),

Se ee ee: 1127)

Howard Madewell—

Direct emmmination ......................... 1150)

Albert Pass—

ata ea ee seygs, e 1170h

one teats ogo, hn NE ET e 1210h

William J. Turnblazer—

tytn vce ree ong, Sot ROD he, See Lay Ae 1224)

wang afb mess occ, Oe ETE 1282))

en eeeOR ............. 5... 1284h

Mark Fastin, Jr.—

ces etree, ss... A ae ee eRe ea 1285)

Excerpts From Annual Reports of TVA ____________ 1286h

Louis FE. Wolfson—

ecegpy fies, ICMR MRE DS TORE hell ae 1292b

Table of Contents of Appendix Continued Vil

Excerpts From Minutes of Tennessee

(Consolidated Coal Company — ~~~ --. 21th

Edward Nunley—

i AD nnn cman esate san nese 1214)

Se pe eee eee 1314

William Turnblazer—

Direct examination ~~~ ~~ se yee i 11Ddb

Defendant’s Motions to Strike Evidence,

| and for Judgment; Proceedings ——-~- 121Gb

Proceedings .------------- 5: aah ew 4217

IX HIBITS

Number Deseription Page

Excerpts from:

D2 Proceedings of Conventions of the United Mine

Workers of America, Year 19934 Le 1321b

D126 Proceedings of Conventions of the United Mine

Workers of America, Year 1956 —_- P noc taee

D129 Proceedings of Conventions of the United Mine

Workers of America, Year 1942 ~--_---------1330b

D130, Proceedings of Conventions of the United Mine

Workers of America, Year 1944 —-------------1931b

D121 Proceedings of Conventions of the United Mine

Workers of America —--------- et en en

D132. Proceedings of Conventions of the United Mine

Workers of America, Year 1948 __----------- 1332h

D133 Proceedings of Conventions of the United Mine

Workers of America, Year 1952 _-------------1594b

D135. Proceedings of Conventions of the United Mine

Workers of America, Year 1960 —~_._-_-_-_-----1s

L'

a

D375, Report on the Work of the National Defense

Mediation Board, March 19, 1941—Jannary 12.

1942 .

—

aS)

om,

~

illite ines: Hindi

"

897)

Testimouy of Roland A, Kampmeter Direct

Mr. Rowntree: | think we object to this as a presentation

of the market price of coal at Widows Creek for each of

these vears. Apparently this is a cost of burned tonnage,

which may go back for several vears on a term contract.

The cost of the thing would relate back to a period

gas oof vears before, as | understand the witness.

Mr. Rayson: Your Honor, we are introducing it

or We propose to introduee this exhibit to show the changes

vear by year in the cost of coal burned by power systems.

That is our purpose. We want to show what variations

there were from year to year, [presume we can never obtain

comething that would show that exactly because they don't

buy coal today and burn it tomorrow. There is always that

element of storage involved, but T think that certainly what

over merit this objection has, and T don't think that it has

auy, that if could only go to the weight of the exhibit.

Mr. Rowntree: Well, may Task, is it offered to show the

price that producers of coal were receiving at the particular

award made in those various years?

The Court: It could only show relatively.

Mr. Rayvson: It would have some bearing on that, | would

think. beeause, as I understand the proof in the record

already shows there was a stockpile from 90 to 120 days

at these plants, so it would have some bearing on the price

as it varied over the years, however, the exhibit precisely

stated goes to show the variation in the price of the coal

burned.

Mr. Rowntree: For instance, 1956, T think it is conceded

isa high vear on the market at Widows Creek, it does not

reflect on that sheet because the coal bought that vear

4330 was burned in future vears under term contracts and

that high cost reflected itself in the later vears, as 1

understand the computation of the thing.

The Court: I think that would go to what. if anv, weight

should be given to the exhibit, recognizing that criticism.

Mr. Rayson: T may say that the TVA reports for most

vears show the slight distinction in the cost of coal as well

898}

Testimony of Roland A. Kampmeier Direct

as the cost of coal burned and if it will make counsel happy

we will put those figures in.

The Witness: [think | perhaps could throw some ligh:

on this aspect of the point, if it would be helpful. Tf on

examines the figures in the TVA Annual Reports, the Vears

Where figures are shown both for cost of coal received and

cost of coal burned, you will find that there is Only a smal!

difference and the difference is pretty consistent. The di

ference accounts for the facet that — it is aceounted for hy

the fact that the cost of coal burned includes one or two

minor items on cost of handling and so on that are dot

included in the figures of cost of coal received and as fay

as the effeet on prices from year to Year, as Taras carry

over and storage is concerned, this is Clearly very minor

from the relative changes that one sees and MY Purpose

here was to get as nearly comparable figures as [could and

the way to get the most comparable figures were to

45400 take the published information for the power indus

try and the figures for coal burned by TV.A,

If Thad taken figures for coal received by TVA, the pic

ture would not have been significantly different.

By Mr. Rayson:

(). Well, will vou explain to us, Mr. Kampmeier, what

this exhibit shows?

A. Yes, In the first place, it covers a period from 1954

to 1962, and Td like to explain why that is the period that

it covers,

1904 was the first vear in which we were coming up to

a fairly large quantity of coal used on the TVA. system,

The first year in which the system as a whole burned more

than 5 million tons of eoal. It was the first vear in whieh

Widows Creek burned more than one million fons of eoal.

Then T eontinued it through 1962 heeause that was the

last vear that T felt that T was in position to sneak with

any competence as to any reasons that mieht lie behind

any of the variations, beeause that was the last vear in

which T was still very closely familiar with the facts that

WR AR AEE AL eR NIE DAL DIRE el ETL

899)

Testimony of Rtoland A, Kampmeier- Direct

entered into the cost cof coal on the TVA system and at

Widows Creek.

Now, as to what it sshows, | think that one of the most

significant things that it shows is that the pattern of price,

and this is the total price paid for the coal at the

$341 plant, including: the transportation, as well as the

cost at the mine,, that the well, first that the varia-

tions up and down from an average are rather small, and

this applies directly two your question that you had asked

me as to Whether costss had varied widely or not at Widows

Creek.

It will be seen not only for Widows Creek, but for the

United States, that the high and the low during this period

of nine years, yes, nime years, is 9 per cent up and down

from the norm for the period, the average for the period.

For the TVA system it is only 3 per cent up and down.

So the variation up and down from high to low is small,

is modest.

Now, I grant that T am not talking here about individual

contracts, of course. The individual contract may be higher.

A particular purchase: may he higher or lower than this, but

in terms of throwing together all of the coal received ina

given year, burned in a given year, rather, whether hbonght,

whether contracted for that vear or the year before, that

the average variatioms in price in these annual averages

from the average for nine years is rather small.

Secondly, T think perhaps more interesting to me, at

least, is the fact that the pattern of variations is so nearly

the same in alll three columns.

4342 The price, IT don’t think, is surprising at all, but

I think it’s noteworthy that the price went up for

TVA and for Widows Creek when it went up for the United

States generally and when it went down in the United States

generally, it went down for TVA and the variations from

the pattern for the United States, the variations from that

pattern, when you look at the other two columns, are never

more than two percentage points, except in the first vear

EDO AEP ran ili

ay

900b

Testimony of Roland A. Kampmeier—Dirert

for the TVA system as a whole, other than that Vear the

TVA index was four points above the United States, in gi

other cases the figure for the TVA system or for Widoy,

Creek in any given year is within two points of that sany

level on the pattern that shows up for the United States

and which would be, you might say, a yardstick for con.

parison.

(J. What is the two points in cost per ton of coal?

A. Well, two points would be 2 per cent of the cost of

coal or roughly 10 cents a ton at Widows Creek,

(). Now, as for the national pattern of price variations.

can you identify factors which influenced that pattern, ear

account for its variation?

A. Yes. I think that there are about four things thar

ought to be said about that pattern of variation in prices

paid throughout the country by power systems, and befor:

trying to explain any of them let me identify them.

One would be the effect of temporary changes jn

$345 demand, temporary fluctuations in demand.

Second would be changing freight rates.

The third would be changes in the value of the dollar,

And the fourth would be improving productivity in coal

mining.

. What do vou mean by ‘*temporary variation in de-

mand’’? Explain that factor.

A. Well, this is a case of the law of supply and demand

being at work. Over a long term if demand is expanded

greatly then this permits more efficient production and lower

costs, so the long-term effect is one thing and that is, I

think, the point T mentioned last, and T want to eome to

last, but in the short term it doesn’t work that way. Tn the

short term if there is a sudden surge in demand, then you

have what is generally called a seller’s market and prices

tend to go up, or if vou have a temporary drop in demand

then the prices tend temporarily to go down.

Now, this doesn’t persist forever, but the immediate ef.

fect, the short-term effect for a year or two, can be quite

MRA RI IRN AL be IS RR 0 9s IE BYE EIEN SEEN RAB OE TORREY EAS EL BNET AO

901b

Testimony of Roland A, Kampmerer— Direct

pronounced and we see it, of course, in prices of almost

anything.

Q. What about the second factor you mentioned, the

changing freight rates?

A. Well, the effect of changing freight rates, of

$344 course, has to be taken into account because these are

delivered costs of coal, so that when freight rates go

up the delivered cost of coal goes up. When freight rates

go down, the delivered cost goes down and the point about

each of these factors is that not only do T refer to them as

a matter of theory, but I can refer to them as a matter of

practical effeet.

Let me go back a moment to the effeet of the temporary

changes in demand. In 1954 there was a rather sharp drop

in the total U.S. sales of coal to a point about 15 per cent

lower than it had been the year before or than it was again

the year later and this was about the lowest point that the

coal sales added up to since the depression of the thirties,

Now, allowing for the fact that there is a time lag in the

effect of this kind of a change in demand on price, that it

takes a while for — of course, the effect on spot contracts

may be immediate, tend to be, but the effect on term con-

tracts is a little slower, you do have the time lag of some

slight averaging effect here. If you allow approximately

a year as to the average effect of the time lag of the effect

on the market changes on new contracts and of new con-

tracts on the average delivered prices, then it would be

uatural that one might expect that a low point temporary

short drop in demand in “54 would be followed by a

$345 low price in °55, which they are. Now, it takes more

than one swallow to make a summer.

If this were the only one instance it wonldn‘t prove much

to me, but if we follow on through we find in “56 we had

a temporary peak in demand, which was noticeable as com-

pared to preceding and following years and in ‘57, in

allowing a year’s lag, we have a high price for coal. By 58

we had a rather definite drop again in total U.S. coal sales

902b

. ¥ of Roland A. Kampmeier—Direct

Testimon

then tended to persist for the next sever)

id the price in °59 dropped to a level tha

. . So this pattern followed very close gor.

tended to persis , Ree’

; changes in demand and changes in price,

relation between. , ; , ,

: reight raise during this period, there was

Now, on the f |! er ;

‘ . Which there were general freight rate jp.

one interval in : Mae e

» noticeably significant, and that was from

creases that wer ; . ae ;

ee oie re, too, this was a period in which average

do to *O7, and th ,

: . _of coal to power systems went up.

delivered prices - m :

: {o8 or “9 there was a slight down trend jy

After about 1! I ; ;

; i ‘ates, and this again tends to be consisten

average freight ad

‘ : of prices.

with this patter: I , ,

. -ik those two factors are reflected, T think

So I say I thi : Saat

an be said about the others. T mentioned

to a level which

years. So you fi

the same thing «

the third, T think :

Q. The Value of the dollar,

2.

4246 A. Aq ight. The value of the dollar, During this

period the wholesale price index for all commodities,

and it is shown /@ this chart which we were looking on

little while ago, for instance, didn’t change very great)

but what change here was was concentrated almost entirely

tn thoae Ceabe from 7°59 to 57. The rise in the solid line on

that chart in the Wholesale price index took place in that

2-vear period, so that this was not just a rise in coal prices,

this was a rise if prices generally. This was a brief flurry

of inflation, von Might say, from °55 to °57, so that also is

consistent with this pattern,

Then finally T mentioned the effeet of the increase in

coal productivity and this, T think, is an important element

in this picture because if it were not for that then the prices

should be higher by the end of the period than at the be-

ginning of the period because the wholesale price index was

somewhat higher. There was a decline in the value of the

dollar which, theugh not large, was several per cent and.

therefore, if coal costs just as much to prodnee in terms

of constant cost in dollars, the real cost at the end of the

period as at the beginning, then in terms of actual prices,

-

903)

Testimony of Roland A. Kampmeier— Direct

actual dollars, the changing value of the dollar, the coal

prices would be higher at the end of the period, But they

weren't, they were no higher, they were a little lower, and

this reflects the fact that with the shift to more and more

sales of coal to the power systems — we are talking

4347 here only about sales to power systems —that the

market that these power systems provided was in-

creasingly a bulk market, which allowed the producers to

supply coal in bulk and at a reduced cost, and this meant

that the price of coal went down or, at best, didn’t go up.

Actually it went down a little bit even though prices gener-

ally were going up. Kven though coal prices generally, if

you take the index of all coal produced instead of coal used

by power systems, coal prices went up somewhat in this

period and the coal prices to power systems did not, and

particularly in the case of TVA system you had a distinet

downward trend during this period because of the impact

of this TVA market on the ability of its suppliers to supply

coal in bulk and at a low cost.

So I think each of these factors can be traced in this

picture. My work causes me to deal a lot with economic

questions of this sort and this to me is a very interesting

picture and T think it shows that the price patterns here

are entirely logical, consistent patterns that fit in with

the changing economic conditions that were affecting the

picture.

Mr. Rayson: Your Honor, we offer the chart entitled

“Changes in Cost of Coal Burned by Power Systems’’ as

an exhibit to Mr. Kampmeier’s testimony.

The Court: Exhibit 580.

(The chart referred to above was marked

D380 and received in evidence.)

4348 By Mr. Rayson:

Q. Mr. Kampmeier, did you participate in the de-

velopment of the contract under which Peabody Coal Com-

pany supplies coal for the Paradise Steam Plant?

A. Yes, yes.

a. '

;

—

04D

Testimony of Roland A. NKampmeier Direct

(. Can you tell us whether that contract was made

a result of a TVA bid invitation?

A. Yes, it was. There were bids invited, and the Pe,

body Company submitted a bid in response to that invity

tion. The terms of that bid were not, however, Wholly sap.

isfactory to the TVA and the contract developed out oy

negotiations that followed the submission of that.

. What was TVA’s purpose in issuing that InVitation’

A. Well, we had been asking ourselves questions for

long time, several years, as to when the time might con,

when it would be the economi ‘ally desirable thing to do.

build one of the TVA steam plants or more at a place wher

it could be right at the coal and where we could keep trans

portation costs as low as possible or eliminate them entirely,

and we had been a little by little over the vears obtaining

information from the various suppliers as to the available

reserves. We had been making studies in connection with

the States of Tennessee and Kentucky with the Burean of

Mines as to the reserves, We satisfied ourselves there wer

places, particularly in western Kentucky, where there

4349 were reserves available in such large quantities and

within a limited area, T don't mean the reserves are

limited in a small area but within any small area voy

could have enough coal available so that it would be possi.

ble if one could locate a plant there ¢o minimize transpor.

tation costs, and we had been interested, we had come to

the conclusion that it was the time te make a serions

exploration of this sort of possibility.

We had inquired of all those companies who were known

to have very large reserves as to their interest in offering

a large quantity of coal and, therefore, in connection with

one of our bid invitations we invited people to submit bids

in very large quantities of coal they might have available

for very long term in the hopes that out of this might come

an opportunity to build a plant at such a mine.

Q. Did you receive many bids in response fo that invi-

tation?

ays

——__ oa

905b

Testimony of Roland A, Kampmeier Direct

A. No, it was disappointing in that sense. The only

bid that was of the size and the term that we thought would

be big enough to justify this kind of a plant was the offer

by Peabody and it was not as— it presented a very attrae-

tive offer, but it was the only — the best one we had and

prov ided at least a vehicle for exploring what can be done

and finally did turn out to be quite satisfactory.

Q. Did you find yourself and TVA in the position of

being able to negotiate with Peabody Coal Company

4350 after that bid was made?

A. Yes, because the ‘vooWwere the low bidder, vou

might say, or the sole responsible bidder. We were in posi-

tion to see Whether it would be possible to agree on the

modifications in their offer whieh would make it a mutually

acceptable and mutually desirable basis for proceeding,

Q. Did you, in the course of your negotiations, did vou

agree upon something that was more attractive to TVA

than the bid originally submitted by Peabody?

A. Yes; yes. Maybe the easiest way to indicate that is,

as I recall, they offered coal at $5.80 a ton, which was

to be a washed coal, and indicated in the bid that if it didn't

need to be washed maybe some arrangements could be

worked out in lieu of that and what we ended up buying

was unwashed coal at $2.90 a ton, of course, very substan-

tially less per ton. It was not as much less per million BTU

as the price per ton might sound like, but it was a substan-

tially more favorable price per million BTU than the origi-

ual offer, and we also arrived at some different escalation

provisions and some different quantities and schedules of

quantities, as T reeall. No, 1 guess the quantity wasn’t par-

ticularly different, but the scheduling of the quantity at

least was different.

Q. What did you say was the price at which you nego-

tiated that contract finally?

4351 A. T think T said $2.90, but T think T misspoke, T

think it was $2.95 per ton.

5a ee

V06b

Testimony of Roland A. NRampmeicr Direct

Q. All right, sir. Do you know what kind of coal thy

was?

A. Yes. That was a raw coal, a mixture of three differey

seams, as [ remember it, at least two principally, it was

relatively low quality unwashed west Kentucky coal,

(). When you offered that invitation had you already

determined where you were going to build this plant! —

A. No, we couldn't because we didn't know what kind

of offers we might get. We had to, of course, explore varioys

possibilities. We identified at least three rivers where wo

might locate the plant in order to have an adequate cooling

water supply, anywhere up and down these rivers, Wp

had in mind the relative attractiveness of various alterny

tive locations for transportation but then we had to wai

to see what kind of coal might be offered and what com

panies might offer coal, out of what reserves and wha

locations and what quantities, in order to be able to judge

Whether we would have a feasible basis for proceeding

or not.

(). Well, did you award the contract to Peabody, did

you finally negotiate before vou decided where vou were

going to locate the Paradise plant?

A. No, both decisions were made simultaneously, that

is to say, we worked out with Peabody what could

4252 be done if the TVA Board were willing to vo ahead

and loeate a plant there at their coal to use it, and

we were meanwhile having our engineers developing further

details before they knew where the coal might be, before

they knew whether the coal might be available, what the

construction problems and opportunities might be, and then

we went to the Board with our recommendation that the

contraet be made and the plant be built and both decisions

were made concurrently.

(). Now, upon the construetion of that plant, the eon-

struction of the Paradise plant, is there any transportation

cost from the mine to the plant?

_ :

VOTb

testimony of Roland A, Kampmeier Direct

A. No, TVA has no transportation cost. The company

has an average haul of maybe five miles, but that has to

be included in the cost of them of delivering the coal to us,

but the price that | mentioned, whieh | think was later

reduced somewhat under the esealation provisions of the

contract, that price is a delivered price into the hoppers,

coal hoppers, at TVA’s plant, so there is ne transportation

cost at all there, of course, whieh makes it rather attractive,

Q. Do you know whether any of that coal, that is, the

coal from the mine serving the Paradise plant has moved

to Widow’s Creck?

A. My understanding was that for some temporary

period some of it did while TVA was having diffi

$953 eulty with the equipment at Paradise and couldn't

use the coal there and rather than refuse to take it, which

I think under the terms of its contract we could, PE think

rather than refuse the coal we moved some to, 1 shonledn’t

say ‘we,”’ beeause this is after [ left TVA, but TVA, I

understand, did move the eoal te Widows Creek for a tem

porary period, | don’t know how long that was.

(). One question, Mr. Kampmeier, [think it is exhibit

174 that you were looking at, the one in front of vou, if

vou will he good enough to look at the number, please, sir,

the very first page of that exhibit.

A. All right.

Q). Is that Exhibit No. 174?

A, 175.

(). 175, Is this a published publication of TVA, is that

their analysis of all bids received by TVA on the term

contracts?

A. No, T think not. TVA prepared sueh an analysis

following each bid opening, and I think that a summary was

prepared of the bids that were accepted, and T think that

was given some general distribution, but T think that this

analysis of all bids opened was not what one would eall a

published document.

Mr. Rayson: That is all.

908b

Testimony of Roland A. Kampmeier— Cross

4554 CROSS EXAMINATION

By Mr. Rowntree:

. * * * * * . » * e

4572 (). (Interposing) Are you familiar with th

amount that Tennessee Consolidated expended oy

mechanizing or the amount that Tennessee Products guar.

anteed on loans to the small mechanized mines?

A. | have no recollection of the figures, but T way fairly

familiar at the time with the statements that the companies

made to us as to the various steps that they had taken ay

were taking and were prepared to take and what was

involved in them in terms of cost.

{). But there would be a limit as to how far a company

of modest sums and means could go in expending money

or guaranteeing funds on a mechanized project?

A. Well, there would be a limit. The limit would be

quite a long ways beyond the numbers that were being talked

about.

(). Well, would you say that a million dollars is

4378 not the limit for a company the size of Tennessee

Consolidated ?

A. Well, sir, I think that the only way that T could

answer that, and IT will do my best to be as responsive as

I can, is that these companies were not content, nor did we

want them to be content, with the present size of their

deliveries to TVA. They Were talking in terms of expansion

and we were anticipating that the field might, that these

principal producers in the field at least might be producing

two or three times as much coal as they were and for opera-

tions geared to that kind of an output T would say a million

dollars would be a rather small amount of money.

(). What was the problem after the Seetion 22 rail rate

from west Kentucky to Widows Creek, was it the rail rate

or was it some other problem that was the main concern

of this coalfield?

A. Oh, the rail rate was one of a number of elements

909)

Testimony of Roland A. Kampmeicr Cross

of an overall problem of their not competing sneeessfully

oras successfully as they might or we thought or hoped they

would in the total TVA market.

The problem was that as conditions changed and other

suppliers became more and more competitive relatively this

field became less and less competitive.

Q. Well, I believe it was your position in the LOC case

in which TVA intervened on the Section 22 rate from West

Kentucky to Widows Creek that the Section 22 rate

4374 was really beneficial to the southeastern field, ts that

not true?

A. Yes, not directly but indirectly in the sense that if

there had been no such rate from Western Kentueky to

southern Tennessee there would have been no expansion

of the Widows Creek plant and without an expansion of

the Widows Creek plant the opportunities of the southern

Tennessee field would have been less than they were with

the expansion of the plant. It all comes back to the propo

sition that I referred to much earlier in the ease that TVA

created a market which grew to %”) million tons a year

when it might otherwise have been only a couple of million

tons a year and a substantial part of that growth to 20 mil

lion tons Was the growth that was taking place at Widows

Crock, and I think it is very obvious, or at Jeast it always

womed so to me, that the southern Tennessee field, or any

other element in the TVA eoal supplying picture, is much

better off with a 20-million-ton-a-year market than with a

.million-ton-a-year market, even though they might wish

that the prices in the 20-million-ton-a-year market were

the prices that would exist if it were a 2-million-ton-a-year

market, so my point here, the point I was trying to make

before the ICC, is that the expansion of the market is the

important thing, after all, to folks like the southern Ten

nessee coal producers and there could not have been that

expansion at the time of that freight rate without the freight

rate,

oe he 4

a

910b

Testimony of Roland A. Kampmeier—C ross

4375 Q. The problem is the competitive position with

respect to the west Kentucky field?

A. With respect to the west Kentueky field, the Horther:

Tennessee field, the Virginia field, the east Kentucky tied

because they are all competing in the TVA coa! supply

picture,

(). But on this immediate market, the Widows Creek

plant, it was the west Kentucky field that was the source,

main source of competition after that Seetion 22 rate?

A. Right. It has been interesting, though, to me that,

for instance, the closer mines to the plant than souther

Tennessee, in northeast Alabama, have begun, since [ wre,

the letter to Senator Kefauver in which I said if anybods

ought to have a preference maybe it is the nearest mins

the Alabama mines, that since that time they have begy

to supply increasing quantities of coal to Widows Cree}

also, so it isn’t just a partieular competitor, it’s the whol

competitive pieture.

(). Would vou say that the main problem of the sont!

eastern Tennessee field is the failure to reduce its labor

cost?

A. Yes, if you will allow me to make it very clear that

I don’t mean that reducing labor cost means reducing wages

I think that the main difference which may be just what

You were saying, but I want to be sure that Tam we

4376 misunderstood, that the main difference bet ween that

field and most of the suppliers in TVA in their com.

petitive positions and their cost position is that Wage costs

per ton are higher in that field than for most suppliers be

cause their productivity per man is lower.

* . * * . * * * . ‘

——-~4 381 By M r. Rowntree:

(). WE Rampmeier, IT show you Exhibit P3si,

$382 would you look on page 89 amd st-ef that exhibit with

respect to the southeast, the east south central dra

and T will ask you, does that show the cost per ton at the

911b

Testimony of Roland A, Kampmeier—C ross

steam plants, the utility plants for the States of Kentucky,

Tennessee, Alabama, and Mississippi?

4. Yes, it does on page 89 and 90.

Q. Would you look on page 90 for the year 1958 for the

area as a Whole?

A. Yes.

QW. Do you find a figure there for the cost per ton at

the plant in that area for the year 1998?

A. Yes, if you are referring to the figure in column 9,

wst of coal per ton, total, east south central states,

Q. That is right, correct.

A. $4.61.

(). Now, outside of the State of Mississippi are not those

states that have the TVA steam plants situated in them?

A. Yes, that is correct.

(). And is Mississippi a substantial user of steam utility

coal?

A. Not very substantial. No, the figures would appear

here it is not very large.

(). Is it about 4,000 tons a year or something like

that?

$283 A. Right, 4,000 tons per vear.

(). Now —

A. (Interposing) That is in 1958, which more or less is

a typical vear also,

(). Would vou look at pages 81 and 82 of that exhibit for

the area of east north central and would you state what

states that area covers?

A. East north central includes — what I am looking at

the page starts with the word ‘*continued,”* but T don't

think it is continued, so ignoring that for the moment, it

would include Ohio, Indiana, IHlinois, Michigan, and Wis-

consin.

Q. Would you look on the total for that area for the

year 1958 and see what the price per ton was in that area

at the plant2—

SBS. 4

12h

Testimony of Roland A. Kampmeier Cross

A. Yes, 1958 total east north central states delivered ens

per ton of coal, $6.00.

(). Now, it is true that transportation does enter som

What into this picture, is that not right?

A. Yes, rather considerably, | would say.

Q. But is it not true that the States of Hlinois, Ohio,

and Indiana that are considerably ahead of the State o

Tennessee in the production of coal, the availability of

mine sources?

A. Yes, Illinois and Indiana produce more. coal thar

Tennessee, is that your question?

4584 Q. What about Ohio? :

A. Ohio also. Ohio, Indiana, and HHlinois always

produce more coal than Tennessee, | think that is corre

(J. In your direct testimony — I beg your pardon.

A. Because | am not quite sure T understand what Vor

may be intending to bring out there, perhaps [T should nov

that if you are comparing east north central with the oth=

area, east south central, that, of course, the principal pro

ducing state in east south central area is not Tennessee bur

Kentueky.

(). Kentucky. Now, of course, these figures are the eos!

to the utility at the plant?

A. Right.

Q). And really the production sources would eo to th

problem of transportation availability of coal in the areas

of the plants?

A. Yes, if you would like to try to make comparativ

costs of the coal, exeluding transportation, this is a rathe

clumsy way to try to get at it, unfortunately.

(). Yes, but it is the best way we have.

A. No, it isn’t; no, it isn’t actually.

(). What do you have in mind?

A. Well, I, of course, have been interested for a long

time in comparative costs of coal and one of the things tha’

recently beeame available directly from the Federal

385 Power Commission which I think is much more help-

—— RI 1 NR, RINNE OM

Gib

Testimony of Roland A, KRampmeter —Cross

ful in this regard, is this data based on figures sub

mitted to the Federal Power Commission, the Federal

Power Commission itself recently put out a report called

“The National Power Survey”

this is the second volume, a monumental report which com

piles more basic data With regard to the electric power

industry than has ever been done before.

In that report, among other things, is a tabulation of

in two volumes, of which

typical coal prices f.e.b. mine for electric utilities, and I

think this gives us a much more refined approach to the

problem and still leaves some difficulties, but it eliminates

not most, at least the sreater ones, and if vou would like to

pursue this point slig ily further, | could do it.

(). What sort of prices do they have on there, utility

prices or What?

A. Yes. Let me just quote from the report this para-

graph, ‘‘In order to determine the f.o.b. mine price of coal

the cooperation of a umber of major coal consuming utili

ties in different areas of the country was requested. This

report is compiled fom the answers of twenty selected

electric utility systens which purchased approximately &5

million tons of coal curing 1961 or more thin 45 per cent

of all coal burned by electric utilities.”

And they fdlow then with a tabulation of 1961

4386 average price |.0.b. mine and cents per million BTU

by coal producng distriets and Distriet 8, for exam.

ple.

(). What is Distrid 8?

A. This would be astern Kentucky, northern Tennessee,

and small parts of Virginia and West Virginia.

Q. All right, sir.

A. 14.34 cents per million BTU for District 9, which is

western Kentucky, v.56 cents per million BTU for Dis-

trict 10, which is sonhern Tllinois, which is Tlinois, totaled

15.03 cents per millin BTU, and then the only other dis-

trict that T think w are particularly concerned with is

District 13, which # southern Tennessee, Alabama, and

—

914b

Testimony of Roland A. Kam pmeter—Cross

perhaps a county or two in Georgia, 15.82 cents per million

BTU,

(). Does it have Indiana or Ohio?

A. Yes. Ohio is District 4 and the average is 15.20 copys

per million BTU,

Q. What about Indiana?

A. Indiana, I don’t remember What district that is, lor

see, District 11, 15.56 cents per million BTU.

Q). Ohio, Indiana, and Ilinois are roughly equivaley;

to the price in this district right here?

A. No, no, I would say not, Ohio and Indiana are liz

and 15.56, respectively, and I computed an average for this

district based on proportioning this area, the TY,

4387 area, based on proportioning a weighted average,

the prices for the district involved in proportion

to the total amount of coal TVA gets from each and came

out with 13.7 as being the figure here that would be the price

that you might say that TVA would have paid in 1961 if

it had paid the same price that the other, that the utilities

reporting here paid for those districts.

In other words, using the proportion of TVA’s purchases

by districts, but using these folks’ data rather than our

cost, you would get 13.7, which was wh: it the alternative

cost to TVA would have been had they paid the same price.

The Court: Your cost is not included in that, TVA’s

cost is not a part of that compilation ?

The Witness: Yes, I assume that TVA’s costs are a part

of this. This would be comparing TVA with an average

for all of the systems, including TV A, and that figure for

the average of all of the reporting systems which account

for 45 per cent of all coal burned by electric utilities, accord-

ing to this report, is the figure that I arrived at.

By Mr. Rowntree:

Q. What about Illinois, IT didn’t get that?

A. Illinois was 15.03, and that was included in my

weighted average of 13.7.

PLIAGE EM PELE TIES PTS yA AST VTA OES BTN aed

915b

Testimony of Roland A, Kampmeier—Cross

yxs ss Q.sT didn’t quite understand. I thought the 13.07

was the southeastern Tennessee.

A. No, the 15-—

Mr, Owens: (Interposing) Your Honor, I can’t hear

either Mr. Rowntree or the witness.

By Mr. Rowntree:

(). [am still not clear on the 13.07.

A. Well, Lam sorry that [ wasn’t more explicit. Let me

be more explicit.

Q. Do you have a figure for the southeastern and Ala-

hama area, southeastern Tennessee and Alabama?

A. For District 13, which is southeastern ‘Tennessee and

Alabama, and T think a bit of Georgia, let me just be sure

that ] am not misstating, yes, Dade and Walker County,

there’s practically no coal production there, but, anyway,

they are included, the average is 15.82. Now, my figure

of 13.7, let me be sure L haven't misled you with regard to

that, what [ did was say that TVA gets or did get in 1961

certain proportion of its coal from western Kentucky, about

47 per cent, and a certain proportion of its coal from Tli-

nois, about 16 per cent, and a certain proportion from Dis-

trict Sand a certain proportion from District 13, and taking

those proportions as the basis for weighting and arriving

at an average price from these four distriets weighted by

supply produeed the figure of 13.7, so T think if vou

4389 are looking for, as I gather you must be, a figure of

average prices paid by all power systems and not

just TVA, drawing from the area that TVA draws from

and proportioning the way TVA draws from those areas,

you would get a figure of 13.7, and T think this is a much

more reliable figure than one could derive from these de-

livered cost figures or any other source that T know of.

(). Was the one you have given f.o.b, mine?

A. Right.

Mr. Combs: Counsel, pardon me. Did he say what the

> Mend

national average was? I got the 13.7, but what is the other?

—

916b

Pestimony of Roland A, Kampmeicr— Cross

Wy * mS . . . ° *

pa Phe W Itness ; No, I did not, Lam sorry, f think it is hep

Che national av. na 1h (?

‘ erage Was 10.02.

By Mr. Rowntr

\. Now, let The have the west Kentucky figure once mor

A. Yes, 12.5¢.

. im

Q. Mr. Kam ie oh na

char tae: _pmeier, have you ever seen a sheet like |

am handing yo

- l1now?

A. | don’t P ,

“o-, ecall ever seeing a sheet exactly like thic

although if it sl cord

: hows what [take it it does, Pam sure Tsay

the equivalent o. 2”. : ;

, faitin various forms,

I don’t reeall : get ge he

» oy ever having seen exactly this list, this king

of a list. ’

$390 QQ. Lo

ports to b

the date there i es : ;

into the TVA st! 1996 for the middle western coals coming

a Pe

iwi’. me

November 1. 193 '8 listed “TVA Contracts in Effect as of

king at that, ean vou tell whether that pur

0a summation of the existing contracts an’

and apparently 26," and it lists quite a number of contracts

perhaps HlinoisOMly contracts in the western Kentucky and

list of those cor fields, so it may purport to be a compler

QO. It gives qptraects or it may not, it doesn’t say,

her week the pre contract number and the mumber of tors

A. Yes. Tdotice?

any more as to w't recognize the sheet and T could not sa

I have said tt apvhether it is a correct and complete list and

many of them Joopears to be a listing of such contracts and

panies and mineok familiar to me by name and so on, con:

saving whether ¢ Sources and so on, but T have no way o!

Q). You wouldthis is a correct list or not.

determine the ael have to look at the TVA award sheets to

A. Well, everrcuracy of that sheet, T suppose?

to not only look 2 more than that, T suppose T would have

have to verify w at the suecessive awards but T wonld also

been cancelled oxhether or not any of those contraets have

Q. Coulr amended or otherwise modified.

4591 Kentueky (ld you say whether or not in 1956 West

Coal Company and Nashville Coal Con-

_— , ——

917h

Testimony of Roland A, KRampmeier Cross

pany combined was the principal shipper of coal from

the middle western field to the TVA?

A. Well, | would say that probably they were, af least

they were among the two or three Jargest, and PT would

sav that in *56 they probably accounted toge ther for more

than any other supplier, Tam not completely positive,

though.

(). All right, sir. Now, | believe on your direct testimony

you pointed out that

The Court: (Interposing) That was West Kentueky and

who?

Mr. Rowntree: Nashville Coal Company combined,

By Mr. Rowntree:

Q. That the Peabody Coal Company represe ‘fed about

one-sixth of the coal supply to TVA?

A. Yes, roughly. Twas pulling a figure out of my mind

by doing some mental arithmetic, it might be one seventh

or one-eighth, but if is in that general order.

(). Was Peabody shipping on other contracts besides the

Paradise contract?

A. Yes. You say was it?

(). Yes.

A. You mean when?

(). Well, now, whatever time you were talking

4392 about on your direct testimony, [have forgotten what

period that was.

A. What [ said, | think, or intended to say at any rate,

was that the Paradise contract was one that was made late

in the period that I was referring to as the period which

was namely up through °62 and that it was made rather

late in that period. Shipment did not aetnally begin on it

until after the period so that T was not actually talking

about any deliveries on that contract during that period,

I was only noting the fact that after that period there were

deliveries on that contract which would now amonnt to, say,

one-sixth or one-seventh of the total amount. There were

deliveries on other contracts throughont much or all of

it

IISh

Testimony of Roland A. Nampmeier Cross

that period and those amounted to, L think | festitied, pro)

ably around 5 per cent in the early years and around 0 por

cent in the later years of the total TVA receipts,

Q). So that would be 10 per eent plus one seventh, sav,

or one-sixth? .

A. Yes, something like that, T don know that those ear

be added directly, because | don't know well CHOU why:

the percentages were of other deliveries by Peabody hy 4}

time the Paradise contract came into effect. Tf ONO ASSIMes

that they were continuing at about the same rate that the

Were in the lite fifties, then you could have those, but thi

would be an assumption on my part, TP don't know.

4893 Tam not that familiar with how the varions Suppliers

shared in the market after about "62.

. Then T believe you attributed about 5 per cent ty

Pittston?

A. Yes, up to 5, T would sav for 5,

Q). And that would be the Clinehfield mine at Monterey

and the Virginia mines in Moss No. ? or Moss No, 3?

A. Well, total deliveries from Clinehfield, Virginia,

‘Nines, there were some others besides the Moss mine, but

that was the principal supplier,

Q. About 2 per cent from Pittsburgh Midway?

A. Yes,

Q. About one per cent from Consol?

A. Yes.

(). Now, we will have to adjust our Western Kentueky

figure, West Kentucky coal figure upward, would we not,

after these last two contracts, sinee they are now shipping

about 4 million tons a Year to the TVA system, according

to their recent figures?

A. IT eouldn’t say Yes or no to that. [did say, and this

is as far as my recollection carries me, that there was an

increase in shipment by West Kentucky as a result of those

contracts that are made in °6] and then later they exer-

cised that option in ’61 or °62 and they brought the ship-

we

N19b

Testimony of Roland A. KRampmeier Cross

ments from West Kentucky up, but this happened

4904 after the period we are moving out of,

Q). Hf they were shipping 4 million ton a year

to the TVA system, that would be roughly 20 per cent?

A. Well, it would be, it would be roughly 17 per cent,

something like that.

Mr. Rowntree: That is all.

The Court: Mr. Kampmeier, in quoting from the hed

eral Power Commission report on Distriet 9, for example,

west Kentucky, you gave a cost of 12.56 per million BTU.

In District 13, southern Tennessee, vou gave a cost of 1582

cents per million BTU.

Could vou approximate what that would mean in cost

per ton, difference in cost per ton?

The Witness: Yes. [f the eoal were of the same quality,

which of course it is not, then the difference between those

two numbers, which is 3.26 cents, would be roughly 85

conts a ton, but the difference in price per ton is actually

considerably more than that because of the fact that one

isa different quality than the other,

Now, here Lhave to doa little guessing, if vou don’t mind,

because T don’t know what the average BTU content would

be of either of the coal bought by all utilities, west) Wen

tucky, or the coal bought by all utilities in southern Ten

nessee, but if one were to assume, for example, a figure of,

say, 11,800 BTU per pound as being more or less

$395 typieal of west Kentucky, To think that wonld be

for west Kentucky, that wouldn't be too bad, then

that would mean that the cost per ton for western NKentneky

coal would be an average of about, oh, 2.95 a ton, say, whieh

doesn’t sound too bad, | mean it seems to cheek ont reason

ably. T would say that maybe, | would have thought the

cost per ton might have come out slightly lower than that,

if so, that would mean that the BTU may be a little lower,

but this is about as close as T would venture to a guess.

Then on southern Tennessee if one assumes that the

9.”

average was 13,200 BTU per pound, which T think was about

a ~™

ee

90h

Testimony of Roland A. Kam yucier-C ross

. /

What most of the deliveries on Palmer and Whitwell pay,

than that 15.82 cents per million BTU, that would be abou:

$4.20 roughly per ton, so that is the difference there, migh:

be a dollar twenty-five cents or something like that.

The Court: One other question. Karlier in vour dipo:

testimony you were testifying as to the percentage, approy,

mate percentage of the market that various coal Operators

supplied to the TVA market, and you indicated that a

proximately 50 per cent of the market was supplied by 4

number of coal operators that Mr. Rayson named as being

supposedly some of the larger coal COMPANY Operators, voy

named 25 per cent. What | want is what period of tiny

were you talking about?

The Witness: I was talking about the mental hic.

$596 ture that Thad in my mind of the period of the total

coal purchases that TVA made for "32 to “62, whieh

add up to probably 350 million tons of coal, more or jess.

and that 150 million tons of coal more or Jess | divided then

out that way. Now, Iam not quite sure Whether, as | under.

stood your question correctly, but 1 think T said that the

companies that he had asked me about specifically accounted

for 25 per cent.

The Court: 25 per cent, that is correct.

The Witness: Then T named some others that might ae

count for roughly another 25 per cent, and then the other

20 per cent would be by unnamed companies,

The Court: Yes.

The Witness: The proportion actually of 25 per cont,

I think, would not only be pretty close to right for the U-

year period, but T would say it probably didn't change

greatly during that 10-vear period, it: might have heen

gradually increasing during that period bet pot ereatly,

The Court: This other 50 per cout that eame from other

companies, what geographical distribution wonld vom sav

that came from?

The Witness: Well, T would say that 40 per cont may

he out of western Kentueky and Hlinois. maybe 30 per

v21b

Testimony of Roland A. Kampmeicr Redirect

cont out of eastern Kentucky, eastern Tennessee, and the

other 30 per cent, well, maybe half of that was sold

4307 in Virginia and the other half from southern Ten

nessee and Alabama,

The Court: All right.

REDIRECT EXAMINATION

By Mr. Rayson:

(). Mr. Kampmeier, it would be helpful if you would

explain to us how you arrived at the 15 to 20 cents per ton

differential that you estimate the TVA enjoys over the

other utilities ?

A. Well, L have said that 1 think my own statement, just

judging from all of the various cases where we had had

opportunity to make comparisons, and on that it led me to

the judgment that the figure might be about 15 cents, and

| said that some consideration of the available data ineli-

eated it might be a little more, and T was referring there

largely to these that I was just quoting which arrived at

this figure of 15.7 cents, the figure for cost of coal received

by TVA in 1961, and that was, I am speaking of fiseal “61,

this was probably calendar *61, but this is cost, and figures

fortunately werent changing too fast right along in there,

in TVA’s Annual Report it shows the figure of cost of coal

at the plant of 18.58. Now, that includes transportation and

includes TVA’s receiving costs, and transportation T esti-

mated to be about 4.9 cents per million BTU or maybe 5,

depending, | would be inelined to round it off to 5, although

my estimate Was as near as I could figure was a little

42398 Jess than that.

The handling costs are in the order of <ix-tenths

of a cent, that’s the cost of unloading the coal from the

cars, or barges, and simply putting if inte stockpile and se

on, so you might say 5'% cents ont of the 18.38, other than

the cost of the coal at the mine, so this would get you down

to about 12.8 maybe, and it is foolish te talk about

ae

2b

Testimony of Roland A. Rampmeicr—Redirect

SS, it’s not accurate, but 12.8 or 9 or thereabouts

being the average cost at the mine for TVA as ayaine

|

13.7 for the total of all systems buying from those grey

including TVA. This is a difference of about cight-ten).

of a cent per million BTU, which would be equivalent :

about 17 cents or so per ton and considering that the TY)

figures is ineluded in that, the difference between TY)

and the others would be bigger than 17, and EP don't kyo

how much bigger, but maybe 20, 21 or 2, and se 1 say thy:

the 15-cent estimate that TL made, the nearest [can eo

to proving it out with figures comes toa little higher figy:

(). All right, sir.

A. But, frankly, | don't think that either the 15 or ¢

20 or 21 or 2 is quite that aceurate, T think all one es

say is that that is in the ball park and it ought to hy

reasonably good estimate.

(). Now, Mr. Kampmeier, about the freight rate aga)

Did TVA obtain a Seetion 22 rate from west Ke

4599 tucky to Colbert in 1960?

A. Yes, at the same time that we obtained the ra:

to Widows Creek.

Q. All right. My final question. You mentioned Georg

Gilbert and stated that he was involved in) some manne:

in 1955 in connection with some coal going to Widows Creek

Do you know of vour own knowledge whether George

bert was involved in that?

A. Well, if vou are asking me did T ever meet him.

see him or whatever, no.

The Court: Are you fearful of being sued by West Ke

,

tucky? Do vou think you want to develop that point!

Mr. Rayson: It was West Kentueky Coal. Oh, all righ,

Western Kentueky. U think that concludes my question

The Court: All right. Anything further of Mir. Kamp

meier?

( Witness excused,

. . * . . . . ’ .

O23h

Testimony of LC. Goerug Direct

L. C. GORRING,

a witness called at the instanee of the defendant, heimy first

duly sworn, Was examined and testified as follows:

DIRECT EXAMINATION

400 By Mr. Owens:

Q. Will you state your name and address, please?

4 4, 4. Goering; 700 Indian Ridge Road, Louisville,

Kentucky.

Q. Are you retired, Mr. Goering?

A. Yes, sit, as of January Ist, this year.

Q. Who did you work for?

A. Louisville and Nashville Railroad.

Q. And what was your position with the L&N!?

\. When I retired I was assistant to the vice-president

of trafic. Before that coal traffie manager from 1947, be-

fore that chief clerk in the coal department, from 739, and

before that in Various capacities in the traffie department

of the L&N back to 1921.

Q. As assistant to the vice-president in charge of traffie,

what were your duties?

A. Thad charge of coal traffic rates and development of

coal traffie and various matters relating to coal trafic of

the L&N Railroad.

Q. And you had had that position since when?

A. From 1947. L was coal traffie manager, had similar

duties and then as my retirement approached other men

were brought in to succeed me and I took over as assistant

to the viee-president in charge of traftie while they were

more or less learning.

440] (). In that position did vou enter inte negotiations

with the TVA regarding rates from western Ken-

tucky coalfields to Widows Creek Steam Plant?

A. Yes, sir.

Q. Will you describe, starting from the beginning, how

that oceurred?

A. Well, I think perhaps that it) wasn't quite proper

924b

Testimony of L. C. Goering—Direct

to say from west Kentucky to Widows Creek, because whey

Widows Creek came into the picture we were thinking

hoth southern Tennessee and western Kentucky.

It came about like this: We had not been handling a

traffic to the Widows Creek plant out of west Ke nitucky

had been handling some of the traflie from southern Ten.

nessee. Other traffic to Widows Creek moved by truck, |

believe, and some by truck and barge, but TVA was consi.

ering some changes in the channel at Sheffield, near Sher.

field, Florence, Alabama, and there is a bridge across {ly

river which the L&N used that is owned by the Souther,

L&N uses it to reach Sheffield, Alabama, on the south side.

and in the negotiations concerning that channel change

developed something might be done which would make the:

bridge have to be changed in such a way that the cost would

be almost prohibitive, and the Southern Railway, who owned

it, Were giving some consideration to just doing away with

the bridge if that came to pass. That would hav

4402. meant that the L&N had no entrance into Sheffield

Alabama, where we had tracks but used the bridge

to get there, so in looking around for ways and means to

see what we could do about that situation in ease the bridge

was not available to us we conceived the idea of using ar

old ear ferry which we inherited from the NC and St.1. after

they merged into the L&N. That ear ferry was a steam

vessel, it was used for hauling ears across the river at Gu-

tersville, Alabama. The NC and St.l. had tracks on both

sides of the river at that time and even later, but that branch

became expensive to operate, didn“t pay its way, and the

ear ferry service was discontinued by proper authority.

and we had a beat sitting down there, nothing to do with

it, and apparently it was a fairly old beat and not easily

sailable, so we had the boat and this situation came up at

Sheffield and we conceived the idea of staying in Shefticll

by taking ears down over our rails to Florence, using their

var ferry to get them over to Sheffield and then putting them

925b

Testimony of L. C. Goering—Divrect

k over on the rails on that side, thinking that, we looked

vn the river and here was the Colbert plant of TVA using

lions of tons of coal and only 11 miles from Florence,

we thought, ‘‘ Well, if it’s workable to take cars across

river to Sheflield, it might be we can work out something

the Colbert plant, the steam plant, and handle some coal

it way.”

Now, that plant was on the Tennessee River and

3 it was also on the Southern Railway but we had not

been able to make rates, all rail using the 2-line haul,

get to handle any coal in this plant anywhere and they

ve getting all their coal by river barge.

The tail sort of ran away with the dog there beeause the

idge situation cleared up and it beeame apparent that

e bridge would be continued and that we would not need

use the ear ferry and so then we began to seriously think

out the Colbert plant and handling coal down there.

So we initiated conferences with the TVA with the view

‘seeing what we could do about getting into the Colbert

ant, and those conferences were along for some time.

Q. Who did you talk to?

A. Mr. Kampmeier, mostly, and his associates, must

ave been 10 or 12 people in TVA altogether that we talked

ith, but Mr. Kampmeier was the leader of the group in

ll instances when T was negotiating.

We got TVA interested because they were building some,

oing to build some new capacity at the Colbert plant, and

e got them interested, and the L&N handled some coal

own there by rail and water if it could be worked out and

rom there on we worked on, worked out a rate to Florence

or barge movement beyond but instead of using the ear

erry, which proved to be an expensive vessel, which we

assumed that or rather it was figured out would he

404 too expensive to operate, being an old one, we finally

evolved down to using regular barge lines and getting

1 quotation from them and letting the regular barge line

‘company do the barging.

926b

Testimony of L. C. Goering—Direct

Now, in the course of these negotiations, TVA brougly

up the situation at Widows Creek, said they were not happy

with their coal costs down there and why didn’t we jus

work out something to both plants at the same time, and «

from there on, and I can’t say exactly when the one cany

in, When Widows Creek came into the picture, that's th

discussion about Widows Creek, but from there on out, ther

the discussions that we had were to both plants, Colbor

plant and Widows Creek.

And we finally, and we had to depend upon, of cours.

TVA, as a matter of fact, when we were negotiating rates

with power companies we have got to, we have got to discuss

the matter with them and they tell us what the situatioy

is and we have to accept what they say as being facts and

as I say, they asked, they were dissatisfied with the situatioy

at the Widows Creek plant that had become one of the mos

expensive power producers on their system.

Now, here was a thing that had a bearing on that, that

plant was served by the rails of the L&N Railroad. T was

the only plant that we reached with our own rails, outside

of Gallatin, which was a relatively new plant, whieh was

put in some few years ago, but a relatively new plan,

4405 and the other plants of TVA, and there must have

been seven of them altogether were on another rail-

road, and beyond our reach mostly.

Well, one, Johnsonville was on the L&N and on the river

but we were never able to do any good down there because

all of that coal gets closer to Gilbertsville where the IC

reaches the river and all of that coal had moved by rail

and water on very low rail rates for proportionate rates and

a very low barge rate, so when the Widows Creek thing

came up TVA told us they were dissatisfied and that if ther

couldn't do something better down there with their power

costs, not despite the fact that they had recently completed

a new 900,000-kw unit, that that market for coal was going

to start down and inevitably in the long run as the newer

_o~”~ ik EAE SAIN ASS RENE LOIRE EIEN ILL, NRE LAS ENCE LELEL LIEB LA

927b

Testimony of L. C. Goering—Direct

plants came in other places that probably that market would

wease to exist for coal.

Now, that is steam, but we have seen other plants go out

completely when newer plants come in at diferent locations

and naturally if the plant that is on your line goes out of

business and the plant that is on somebody else’s line stays

in business then the railroad itself loses the business along

with a coalfield, if that coalfield can only serve one plant.

So we were Vitally interested then when TVA brought it

up in doing something that would maintain Widows

4406 Creek as a market for coal and they, the TVA, told

us that not only could that become a growing market

again but that they would put another 500,000-kw unit down

there if they could get the proper coal costs.

So they finally told us what the proper coal costs — what

the freight rate from western Kentucky would have to be

and we concurred in and we agreed with them to establish

those rates, at the same time hooking them up in such a way

that we would not cause TVA to buy coal in either south-

ern Tennessee or western Kentucky except as the economics

dictated. So that resulted —

Q. (Interposing) What—excuse me a minute — what

factors play a part in the determination by the railroad

of whether they will accept the decrease in the freight rates?

A. You have to, you have to figure whether or not you

are getting the facts and if you want the business you are

going to have to meet the purchaser's views and so then,

of course, we have general judgment, we have negotiated

alot of rates down through the years and we have judgment

that we apply to these things.

Q. Volume of traffic have anything to do with it?

A. The volume then, of course, and at this particular time

it was the beginning of the time when we hegan to make

volume rates. Now, we had a sliding seale of rates to

Gallatin, which started at some figure around 500,-

4407 000 tons and went up to two million tons and as the

tonnage goes up the rates go down.

VA aE a

i a a

928b

Testimony of L. C. Goering—Direct

Now, we had conceived that, we didn’t necessarily this

that up, I think maybe Mr. Kampmeier may have originate

it, but we accepted it as being a good plan because thi

railroad is a volume mover, it has to have volume, and qj,

more volume it gets the more the unit cost goes down, thy

is to say, the railroad has a lot of fixed costs that go oy

whether you are handling a little traffic or a lot of tray.

and so if you can up your traffic then you can afford to tak

less revenue in it and still make money on it and so the

these larger movements lend themselves to a cheaper wa

of handling, like putting them in trainloads, and you eq:

bypass yards with them and save switching expense in Yaris

and those kind of things, so that when TVA began to tals

volume, then we were in position to talk lower rates, by

in the final analysis, after working something out like thy.

we have to satisfy the buyers or we are not going tod.

any business with him at all.

Q. Well, did you know how much coal that would tak:

at Widows Creek in various coalfields or how much coal

was available?

A. No, we know what TVA proposed to us at that plant,

if they got the coal cost to a point where they were satis

factory, and it went above two million tons a year,

4408 and even more was in prospect, and T don’t know

what it is right now, it may be more than two million

tons a year right now, but they had instead of that being

a place where such tonnage as we were handling by rail from

southern Tennessee would begin to disappear, instead of

that we had an opportunity to build up the traffic from either

southern Tennessee or western Kentucky and it really didn't

make any difference to us which one it came from, but we had

to get a situation that would satisfy TVA so that they would

continue, so that that plant would continue to work out on

an economic basis so that would be a large coal consumption

and that they would put the additional unit there or even

more units later on, we hoped.

929b

Testimony of L. C. Goering—Divrect

y. Did the United Mine Workers or did any coal com-

pany have to initiate these negotiations -

A. No.

Q. Did they play any part in the negotiations?

A. No, sir.

Q. Did you have discussion with any coal company about

the availability of coal?

A. Yes. I knew West Kentucky Coal Company had one

mine, Kast Diamond, which had operated in the No. 11 seam

and which was considered the better seam of coal at that

time, the more acceptable seam on the market, at least, and

most of that coal had gone north, but the No. 11 seam

4409 worked out at Kast Diamond, and it’s a big mine,

and they knew this, and they had told me that the

Xo. 9 seam was underneath and that they could go on down

tothe No. 9 seam by just extending their shaft further down

and they had all the tipple facilities and our tracks were

in there and everything and they said that if they could find

a market for some No. 9 coal they would go down to that

Xo. 9 coal and reopen that mine.

So I was concerned with the availability of the coal be-

cause we had, when we got into the Gallatin plant with

them, and then we started talking about Colbert, then

Widows Creek, we know, and it was my responsibility to

beable to develop enough coal traffic on the L&N or eapacity

on the L&N so that TVA would feel confident in tying up

with us on large tonnages, and so IT was anxious to see West

Kentueky Coal Company, or any other coal company, open

up a mine so as to increase its capacity on the L&N, and

so I did talk to West Kentucky about the possibilities of

reopening their mine so that we could have additional ¢a-

pacities, so that when TVA said anything to us about,

“Well, maybe there’s not enough coul on the L&N,’? we

would be able to assure them that there was enough coal

on the L&N and they have said that to me.

930h

Testimony of L. C. Goering—Direct

Q. Well, did you discuss the rate with West Key.

4410 tucky Coal Company?

A. No, sir; no, sir.

Q). Did you have discussions with Tennessee (Consol;

dated Coal Company and Tennessee Products and ( ‘hen.

cal Company ?

A. I had discussions, if you want to call it that, T thin

perhaps it was a meeting more than anything else, in whic,

they had learned, maybe I told them, I am nos sure, the:

we were talking with TVA about rates out of west Ke tuck

to Colbert and Widows Creek, and I think they saw ow

president after that and were perturbed that we were talk

ing about rates from some other section and he told me

that before we made any final decision we would get })

touch with them and tell them what we were — to do

and so when the rates were finally arranged or agres!

upon between TVA and the L&N I immediately ¢: alle Mr

Widell, Mr. Glenn and Mr. Stanlee Hampton and Mr

Callis, went down to Nashville and met with them and told

them what the rates were going to be.

(). Did you then make a rate, a lower rate, for the Col

bert plant also?

A. Yes, sir.

Q. T hand vou a document and ask you if vou recogni

this?

A. Yes, sir, I do.

(). What is that?

4411 A. That is the decision of the Interstate Commerc:

Commission in the Section 22 ease whieh has beer

mentioned here today, Document 33768.

Mr. Owens: I'd like to have that marked and made an

exhibit.

The Court: Exhibit No. 384

(The document referred to above was marked

D384 and received in evidence.)

Mr. Owens: T want to read from page 507 of the Inter-

state Commerce Commission decision.

—a————_ ee

931b

Testimony of L. C. Goering—Cross

Mr. Rowntree: May Lask counsel the pertinency of this?

Mr, Owens: We want to show that this rate was approved

py the ICC and that it was not a detriment as complained

about hy the Tennessee Consolidated and ‘Tennessee Prod-

ucts.

‘Here, the expansion of Widows Creek coal market was

based, in large measure, on the availability of coal from

west Kentucky. The defendant’s inclusion of southern

Tennessee coal in the volume which controls the progressive

reductions available to west Kentucky origins was to insure

the participation of complainants in this market. The evi-

dence tends to show that this result materialized. Com-

plainants’ insistence that the assailed rates work to their

detriment is not borne out by the facts.

4412 “Tn our judgment, it is not the presence of a slid-

ing scale but the level of the rates that is controlling.

Here, for example, the lowest rate available to western Ken-

tucky producers is substantially higher, in either absolute

or relative terms, than the rates available to complainants.

Complainants’ opportunities to compete are not impeded

by discriminatory freight rates. For admittedly, the rate

relationship is not the source of the alleged injury to com-

plainants. It thus seems clear that the complainants’ diffi-

culties, if any, stem from geographical and physical prop-

erty handicaps rather than from transportation charges.

As the Supreme Court said in Interstate Commeree Com-

mission versus Diffenvaugh, 222 U. 8. 42, 46 (1911), the

Interstate Commerce Act ‘does not attempt 10 equalize for-

tune, opportunities or abilities.’ Accordingly, assuming

jurisdiction to lie, arguendo, we find that the assailed See-

tion 22 quotation is not shown to be unduly prejudicial or

preferential.”’ Your witness.

CROSS EXAMINATION

By Mr. Rowntree:

Q. Mr. Goering, with whom did you talk about this rate

in the West Kentucky Coal Company?

Diiiiniax.:

—

932b

Testimony of L. C. Goering—Cross

A. About the rate?

Q. Yes.

A. I didn’t talk to anyone about the rate.

4413 Q. Who did you talk with in West Kentue ky

Company after you became interested in pogong:

arate with TVA for Widows Creek and west k tie

A. 1 don’t think that was quite the prope

it. We were dealing with Colbert and Widhes «|

Q. All right, sir.

A. And I was much more or more int:

about the tonnage we could produee in tras

please, to go to Colbert plant, beeauss thas

be a combination rail and barge movement ara

have, we wanted to move it in trainloads aid we bool eos

barges on a specified time basis so that we eould eet me

mum use out of them, and we were trying toe wet a qui

turnaround on the equipment, so I was primarily coneery

in talking to him about whether or not he would have eo:

which he could load quickly and in such qantities to go dow

to Colbert, is what T really had in the back of my mind, by

you didn’t tell him that, I just simply asked him what ly

could load and how fast he could load it and whether or yo:

if he could find a market for that No. 9 coal at East Diamon’

if he would reopen the mine.

Q). You talked to Mr. Bowden, who is vice- president?

A. I talked to Mr. Bowden mostly.

(). Vice-president in charge of sales?

4414 A. Vice-president in charge of sales.

(). He was indicating that they would go down to

the No. 9 seam in the East Diamond mine?

A. If they could find a market for it.

(). Well, didn’t Mr. Kampmeier advise vou that during

that period of time that West Kentue ky Coal Company was

secking a market for the rest of their produetion from the

Pleasantview mine in amounts of 34,000 tons a week?

A. T don’t know that Mr. Kampmeier told me anything

about it. I got those bids that were put out by the TVA

Aor ees

933b

Testimony of L.C. Goering—Cross

together with the results lots of times, and | read them just

as a matter of information.

y. Well, didn’t Mr. Bowden advise you that they had

, certain surplus amount of coal at West Kentucky out of

‘he Pleasantview mine during that period of time?

\. [don’t know that he said that he had a surplus. He

as running the Pee Vee mine, is the one you may be talking

out, | thought that was running pretty good and I was

eaily surprised later when they turned out as mueh ton-

we from that mine as they did. Now, whether or not they

ai that eapacity all of the time 1 don’t know, but T was

: shooting for just one, | was trying to build up capacity,

f you please, because we were trying to go not only to

Colbert and Widows Creek, we had Gallatin coming up all

of the time.

415. Q. Well, Mr. Bowden didn’t indicate to yon during

that conversation he had any problem with surplus

tonnage laying around that he wanted to get on the market

some place?

A. No.

Q. And at that time he was talking about developing the

Fast Diamond mine, going down to the No. 9 seam?

A. Yes, yes.

(). What was the Gallatin rate that vou mentioned, was

that a Section 22 rate?

A. Yes, sir.

Q. And what was that rate from west Kentucky origin?

A. T think it was a sliding scale, fF am not sure whether

it started at $1.65 or $1.60 and went down to $1.40 in certain

tonnages.

(). $1.40?

A. Tn certain tonnages.

Q. And the rate from west Kentucky origins to Widows

Creek was how much?

A. $1.60 down to $1.40.

Q. Practically the same rate?

A. Yes, sir.

93+b

Testimony of L. C. Goering—Cross

Q. And those trains destined for Widows Creek go righ:

through Gallatin?

A. No, sir.

Q. Well, they go through a branch or they g

4416 pretty close to Gallatin, don’t they?

A. No, not necessarily. Gallatin is on the mai:

line north of Nashville, between Louisville and Nashville

and Widows Creek is on the line from Nashville down t

Chattanooga and it was an inter-divisional move. that is.

to Gallatin, had to go over two different divisions, whic)

meant changing crews and all of that, so did Widows Cree}

have to go over two divisions.

Q. The distanee to Gallatin is —

A. (Interposing) Shorter, yes, sir.

Q. How much?

A. I think it’s 118 versus 235,

Q. Gallatin is about half as far?

A. Yes.

Q). And they both ended up with about the same rate?

A. Yes, mileage is important in rate-making, but it isn’

all-important.

Q. Now, Mr. Goering, the coal under this rate that

‘ame into west Kentucky, when did you first start applying

this rate, do you reeall what contract?

A. No, I don’t know anything about the contracts, |

didn’t pay any attention to that, once T set up the rates it

was up to TVA and the coal companies to sell the coal.

Q. You didn’t follow it through?

A. No, sir.

4417 (). Do you know if the Pleasantview mine is in

operation today?

A. I think it is.

(). Where is the Cherry Hill mine?

A. Sir?

(). Where is the Cherry Till mine?

A. Cherry Hill, that’s on the Tllinois Central, belongs

to the Louisville Gas and Electrie Company.

935b

Testimony of C. M. Hicks—Direct

Q. How do they participate in this rate, Section 22 rate

to Widows Creek?

A. They don’t.

(Q. Where does that coal go to?

A. I don’t know. Some of it probably goes into the

Louisville Gas and Electrie Company, it’s their own mine

but they don’t use the coal if they ean sell it elsewhere, and

come of it has probably gone to TVA, but if it did it went

out through Gilbertsville and barge.

Mr. Rowntree: That's all.

The Court: All right.

(Witness excused.)

* s * * * * * *

4421 C. M. HICKS,

a witness called at the instance of the defendant,

being first duly sworn, was examined and testified as fol-

lows:

DIRECT EXAMINATION

By Mr. Rayson:

Q. Would you state your name, please?

A. C. M. Hicks.

Q. Where do you live, Mr. Hicks?

A. 485 North Main Street, Madisonville, Kentucky.

Q. Are you employed by the West Kentueky Coal Com-

pany?

A. Tam employed by Island Creek Coal Company, which

was formerly the West Kentucky Coal Company.

Q. What is your position?

A. Tam vice president and sales manager.

Q. How long were you employed by West Ken-

4422 tneky Coal Company prior to—

A. (Interposing) I came with West Kentucky

Coal Company in 1942.

Q. How long have you been in the coal business, sir?

A. Since 1921.

rT

936b

Testimony of C. M. Hicks—Direct

(). Would you give us your experience in the coal by

ness?

A. I was with Jewett, Bigelow and Brooks out of Doty

working in the Eastern Hazard field from °21 to '25 in:

office and then I was with Brier Hil] Collieries of Crawfor!

Tennessee, from °25 to °32, and I was salesman all of 4

time except for one year when I was with Stearns Coal a,

Lumber Company from °32 to 42.

(. With West Kentucky since that time?

A. That’s right.

(). Have you been in sales work with Wes} Kentucky:

during your entire period?

A. All of the time.

(). During the last ten years, we'll say, how many «

you were there in sales work for West Kentueky Coal Coy

pany?

A. In our Madisonville offices there has been two a

three,

(). Who were they?

A. They were R. H. Bowden, John Rich and mt

4423 self.

Q. Wasa Mr. Hoffman employed?

A. T. J. Hoffman.

(). Where was he located?

A. At Padneah, Padueah, Kentueky.

Do you now handle the sales work that West Ker

tueky has with respect to the TVA?

am

~—

A. Yes, I do.

(). Tow long has that been under your direction?

A. Since Mr. Hoffman’s death, May 4, 1964,

(). T beg your pardon, T didn't hear.

A. May 4, 1964.

Q. Was that the date of Mr. Hoffman's death?

A. Yes, sir, that’s right.

Q). Did vou work with Mr. Hoffman prior to that time

on any TVA eontract bids?

A. Yes, I helped prepare the bids, ves.

PU ee hn Oe wet Dae tLe ag

937b

Testimony of C. M. Hicks—Direct

(). Mr. Hicks, how old was Mr. Hoffman when he died,

do vou know?

A, Seventy-two, I believe.

Q. Do you know how long he had been with West Ken-

tucky Coal Company?

A. IT believe all of his adult life.

Q. Mr. Hicks, there has been filed in this exse as Plain-

“fts’ Exhibit 198 a great number of papers purporting to

be certain sales of coal made by West Kentucky Coal

424 Company six months before and six months after

April 3, 1961, the date of your so-called T24 TVA

eontract. Are you familiar with that exhibit?

A. Yes, I am.

(), Certain sales are not shown this. Do vou know what

they are?

A. That’s all sales of less than 10,000 tons dnring the

period.

Q. In other words, this includes only sales of 10,000 or

more?

A. That is cerrect.

The Court: Are you speaking about tons?

The Witness: Yes, sir, 10,000 tons.

Q. T believe this also excludes some domestic sales?

\. Yes. but there is several domestic sales in there by

reason of the fact that we were shipping to the same people

that we were shipping industrially and other eoals and

we conldn’t pull them out.

Q. All right, sir. Now, are the prices at which coal was

sold as shown in this exhibit, do those prices vary?

A. Yes, sir, they do.

Q. Do you happen to know to what extent they vary?

A. They vary from $2.90 to ¢5 and to $7.15.

Q. Now, were these coals that vou sald here all the

$425 same or were they different coals?

A. Oh, no, they differed very widely as fo quality

and sizes,

Q. How many different grades and types and qualities

I38b

Testimony of CM. Micks—Direct

of coal do you produce in this West Kentucky Coal Coy

pany?

A. We basically produce four seams of coal, No, 12, Xy

9, No. 11 and No, 6, but, of course, all of those sizes, there’

Just no end to the sizes that could be made by changing

sereens,

Q. Well, now, you say you produce four different oy

produce coal from four different seams. Is this coal, doves

this coal from the standpoint of its inherent quality: dither

very much?

A. Yes, it does, it differs very widely,

(). Would you explain briefly what those differences are!

A. Well, our No. 11 seam of coal is ouly sold as 4

washed product because in its raw state it is a very low

grade coal and it lends itself to Washing, thoneh, and i

becomes pretty good quality after it's washed, whereas No,

is a little bit better grade of coal in its raw state but it

doesn’t lend itself to washing. No. 6 is a very high quality

stoker coal after it’s washed and in its raw state it is avery

poor quality coal. No. 12 is a very low grade eoal

4426 (). T take it the price at which vou offer and sel

coal varies among oiher reasons for the quality of

the coal, is that right, its inherent quality?

-

A. That’s correct.

)

~

J. And also as to its quality after it’s washed?

A. When it is prepared, yes,

Q. Now, you mentioned sizes or types. Could you explain

how this affeets the priee of eoal?

A. When you make different size coal, of course, eoal

comes out of the mines as raw mine run coal. either has

to be washed or if it’s going to be sereened in its raw state

it has to be run over sereens and come up with double

sereened coal and you have resultant sized eoal.

Q). What is ‘‘resultant’’ coal?

A. Well, it’s that portion of the coal that is left after

you sereen something, like a quarter of an inch or inch and

ae—_ ner ie

9B39b

Testimony of C. M. Micks— Direct

a quarter by zero down to the bottom size, that’s what

vou have When you get through.

(). Is resultant coal always the same in size?

A. No, it could be different sizes.

(Q. Does it simply depend on how

A. (Interposing) What SIZC,

(). How fine you screen the coal?

A. Yes, on what size you are trying to get before you

get your resultant coal,

4427 (). How does the price of coal vary from the stand-

point of size?

A. Well, of course, your resultant sizes are your cheap-

ost coals and other than that it depends entirely on quality

and the size that you are making, the demand for the coal,

for one thing.

Q. Mr. Hicks, you might want to speak up a little louder,

I think some in the courtroom are having trouble hearing

vou with all the outside interferences,

Now, you mentioned washed coal. Will vou please tell

us what the washing of coal means?

A. Well, what you mean when you wash coal is that it

comes out of the mines and goes through a process of wash-

ing to eliminate the impurities that can be taken out by

washing and which, of course, increases the value of the

coal,

(Q. Does it cost money to wash coal?

A. Yes, indeed.

Q. Do you lose a part of the weight of coal in the process

of washing it?

A. Yes, we do. We lose in some coals much more than

others. No. 11 seam of coal, we lose about 25 per cent of

it goes out at loss.

Q. You mean if you sold it as an unwashed product

there would be by weight approximately 25 per cent

4428 more?

A. That’s correct.

940b

Testimony of C. M. HWicks—Direct

(. Does the availability of transportation have ay

» bearing on sales price? .

A. Yes. Your water borne coal normally moves at lowe

transportation and gives you an opportunity to piek »

more price I°.0.B. the mines.

(J. Do you have some river mines, so to speak?

A. Yes, we have one.

Q). Do transportation problems have any bearing on th

price with respect to railroad mines?

A. Yes, it does. We are given car ratings and When wi

get 00 per cent of our ear ‘atings of no bills, that is, unbilled

coal on the track, then they don’t furnish ns any mon

ears beyond 50 per cent, so, of course, we have to elos

down unless we move that coal.

Q. Is that a common experience?

A. Yes, it is.

(). In the coal business?

A. Yes,

2. To have unsold coal in ears?

A. Yes.

d. Tlow does that happen?

\. Well, when you are running the size eon) vou just

wind up with something normally that vou don’t lave»

market for for the prodnet. Of course, that’s not

4429 always true but it is at times, it’s very diffienlt to

keep your sales balanced as to Sizes,

(. You say that the railroad gives von so many ears

or an allotment of so many ears to each mine?

A. Yes. Yon are rated so many ears per each mine.

Q. You might explain to us what a *“no bill’? is.

A. That no bill is a bill, is a ear of eoal that is loaded

in which we have no orders for and it’s not billed, it's left

standing on our tracks.

(). And depending on your no bill situation the railread

will give von more coals or it won *t, is that it?

A. That is correct.

(). Do vou need railroad ears to operate a coal mine?

a— aes GaP R TPAD DOD PIE DELO NI NEE I Ne ae POTEET WRENE

941b

Testimony of C. M. Hicks—Direet

A. Yes, if we didn’t have railroad cars we couldn't

perate at all except on the coal that we have on the river.

Q. Can’t you put the coal on the ground?

A. No, it’s not practical,

Q. Why isn’t it practical?

A. Well, it costs you more to put it on the ground and

ick it up than we get for it when we sell it.

Q. All right, sir. Now, do all of those factors that we

ave been discussing have a bearing on the price at which

‘ou offer coal?

A. Yes, sir.

(). Have these factors had a bearing on the price

420 at which you offered coal in these offerings making

up Exhibit P198?

A. What exhibit is that, please?

(. That is the coal offerings six months before and after

i certain date.

A. Yes, sir, that has to some extent.

(Q). Mr. Hicks, I wonder if you could illustrate these prob-

loms for us by referring to some of the charts in that exhibit

and telling us what the prices were and what the sizes were

and that sort of thing. Incidentally, do you know how many

coal sales agreements there are in this package ?

A. No, sir, I do not.

Mr. Rayson: I think T might state accurately that there

is more thai 300 in there, your Honor, and if would be safe

to say we are not going through 300 of them.

A. Thave part of these orders listed here,

(Q). Well, let’s start at those af $2.90,

A. Well, I have one here at $2.90 and that is one-quarter

hy 28 mesh washed earbon coal.

Q. All right. Let’s talk about that for a minute now.

Do you sell some carbon sizes that are not washed?

A. No, we don’t.

(). In other words, all carbon coal is a washed

431 product?

pj

"

i. 8

—

942b

festimony of C.M. Hicks—Direct

A. Well, not from all mines but it is from oy

mines, it is from ours.

(). Now, one-quarter by 28 M, what does that mean?

A. That’s mesh, 28 mesh, that means 28 wires to a septa

inch,

(J. Is this the least size carbon that you produce?!

A. Well, the 28 mesh size of coal goes out in vour sly

pond that we couldn't recover it, it would not be a practic

thing, we just lose it.

Q. Is this a going market place for that coal at that tim:

A. Yes, sir, that’s the top price, | would say,

(). What is that?

A. T would say that wa. the top price at that time.

(). Where did this coal go?

A. It went to Fort Edwards, Wisconsin.

Jd. Does this coal have a wide market, this type coal’

A. No, sir, it does not, not that size,

(). What sort of people ean use that eoal?

A. The only people that ean use that size coal are peopl

that have large generating plants and ean burn carbar eval,

(). All right, sir. Do you find any other in the $2.96 eate.

gory?

4452 A. No, sir. That seems the only one T have listed

in that.

Q). Do you know if there were more than one shipment

sent to that particular destination?

A. Yes, sir, there were over 10,000 tons or it wouldn't

have been listed during that period,

(). All right. What about the $2.95?

A. $2.95 coal is Cherry Till 2-by-0, that’s unwashed eoal.

(). Is that coal produced by West Kentucky Coal Com-

pany from its mine?

A. No, sir, it’s produced by Louisville Gas and Electric

at their Cherry Hill mine,

(). How did you come to be selling that?

A. We are sales agents through our contract with the

Louisville Gas and Electric,

—— DLR GARE AEE LEED YALSSEOTCR GOLDS IONE

943b

Testimony of C. M. Hicks—Direct

Q. Does this coal have a very wide market?

A. No, sir, it does not.

yy. If you will, explain why or what its marketing prob-

Jems are.

A. Well, it is an unwashed coal and it just would be on

the same basis as all No. 9 unwashed coal is, there’s a very

limited market for the coal as to the plants that would

burn it.

(). I didn’t get the last.

y33000CO AL SOT said as to plants, steam plants, that would

burn the coal in that size or that quality.

(). Incidentally, is that the coal that vou are sales agent

for by reason of your contract?

Yes, we were at that time.

). You were at that time?

A. Yes, sir.

The contract with Louisville Gas and Electrie?

»

_

)

\. That’s correct, yes, sir.

(Q). Is that the company that owns that mine?

\. Yes, sir.

). Do they also operate that mine?

A. Yes, sir, they do,

Do you know how much you paid Louisville Gas and

Electric for that coal at that time?

| A. Well. at the end of the contract, and TP don’t know,

of course, the price changes on that coal every time that we

had any change in our wage scales, but $3.60 would have

been the price, $3.59, | guess,

(). So just taking into consideration that what vou paid

for it and that particular seale, there was a loss difference?

A. Yes, that is correct.

(). Where did that coal go?

A. Went to Louisville, Kentucky.

H34. . T take it it did not go to TVX?

A. No, sir, it did not.

(). What size was it?

A. That was 2-by-0.

944b

Testimony of C. M. Hicks—Direct

Q. What does that mean?

A. That means from two inches down to the smallest si

particle.

(). Is that the size at which all of the coal is sold fro,

that mine, as far as you know?

A. No, it was not. You could make different size eo,

you could make lump coal, egg coal, and then you had 2-by4

or you could ship as mine run or crushed mine run dow

to any size.

(). All right. You have an item in the $3 to $3.25 ea

gory. Would you tell us about some of the sales made i:

that category, Mr. Hicks?

A. Well, we have one there $3, it’s the same size, quar-

ter, | mean one and a quarter by 28 mesh, that was $3.

(). That is the same size as the first coal vou referred to

A. Yes, sir.

Q. Is it the same coal?

A. Same coal.

(). Where did that coal go?

A. Went to Mogg (spelling) M-o-g-g, Kentucky

1435 (). You say you sold that for $3?

A. Yes, sir.

(). Did this not go to TVA?

A. No, it did not.

(). Is that a washed coal, you say?

A. Yes, it was.

(). No. 11 washed coal. Now, did that go to a utility?

A. Yes, it did.

Q). All right. What kind of, what other coals do vou find

in this $3 to $3.25?

A. Well, in the $3.20 bracket there T have one and 3

quarter by 28 mesh No. 12 seam coal.

(). Tell us about that.

A. Well, that coal is washed and, incidentally, it was

coal that came from White City, Kentueky, and screened

into that size and we shipped to a customer we have at

Johnsonville, Tennessee.

AREER Bled ABE ESSE NSLS ara ENS Ete OE BRNO Ee eee OIE.

945b

Testimony of C. M. Hicks—Direct

Q. Is that the standard market price for that coal?

A. Yes, about it.

Q. All right. Now, I notice you have one in the $3, also

at $3.20 that was shipped to Milwaukee, Wisconsin?

A. Yes, sir, that is correct.

y. What size coal was that?

A. That’s one-quarter by 28 mesh size, same size,

4436 but it was heat-dried coal.

Q. All right. Tell us what that process is.

A. Well, heat-dried, we have a heat drier at one of our

mines where the coal is run through a heating system and

it dries the moisture out of it which, of course, increases

the as received BTU on it.

(. Increases the quality?

A. Yes, it does.

(). Does it cost money to run coal through a drier

A. Yes, sir, it does.

(). What was your price for that coal?

A. $3.20.

(). All right. I notice you have one at $5.25 that wa

shipped to Louisville, Kentucky. Would you tell us eve

that one?

A. That is the same coal identically, heat-dried coal.

(). Same size?

A. Same size.

Q. You got a slightly better price for it there?

A. Yes, sir.

(). How did you do that?

\. Five cents? Well, we were just able to get it.

Q. What went into that consideration that you were

able to get a nickel more here?

4437 A. Well, this particular firm used very low mois-

ture coal and by running it through this drier, of

course, we could reduce the moisture in it.

Q. Incidentally, do you know if we talked abont the

No. 11 dried that went to Milwaukee, do you know what the

freight on that coal was?

RT ROR

—

946b

Testimony of C. M. Hicks—Direct

A. Four dollars, I believe it was $4.45, 1 believe,

I an,

not sure about that.

Q. What would the freight on the coal be to Louisviljy.

A.

Freight on the coal to Louisville would be a dolly:

and seventy cents.

(). Those difference in freight have any be

you can charge the customer for coal?

A. Well, ves.

(J. Will you explain that, please?

A. Well, of course, the farther you get aw

mine where your higher freight rates are the cost of th

coal is increased directly in proportion to the

the freight rate.

ATINg on why

ay from Vou

amount 7

Q). All right. Now, sir, IT notice you have one at $3.30

A. Yes, sir,

(). Shipped to Milwaukee, Wisconsin, now what kind «i

coal was that?

4438 A. $3.30 to where?

Q. To Milwaukee, Wisconsin, | believe it is the

third item on the list,

A. Oh, yes. That is the same thing, No. 9 dried carbo

Q). No. 9 dried carbon?

A. Yes, sir, the same size except the No. 9 seam.

(). Incidentally, is the No. 9 seam the coal that vou

now shipping to the TVA plant?

A. Yes, it is,

are

(). Is that a dried coal?

A. No, it is not.

(). You have an item here of $3.30 to Louisville, Ken.

tucky, Will vou explain what that is?

A. Well, that is coal of various sizes but that particular

size happens to be a coal where we mix about, as T reall.

about 75 or 80 per cent of carbon to one and a half inch coal.

Q. Is that the market for that sort of coal at the time!

A. Yes, that would be for that type of coal.

(J. All right. Well, let’s move on here to some of these

vem am AONE LPT EAE LED BAPE DOLE, BO PPR IL INANE CDRA ETO

947)

Testimony of C. M. Hicks—Direet

others, getting up into the higher prices. I see a sale at

$3.85 to a destination at Upjohn, Michigan.

A. Yes, sir, that’s coal that has been modified, in

$439 other words, we take out a portion of the fines.

Q. What size does that leave you?

A. Well, what coal comes out of there, of course, leaves

a quarter by 28 mesh coal.

Q. What do you mean by ‘ttaking out the fines’

A. Well, in our mine plants we have gauges in the system

that move the coal around so that we can open those gates

99

and take a portion of any size out.

(). Now, is thet prepared in any other way ;

A. Well, yes, it had already been screened to a one-inch

by 28 mesh coal, you see, then we run it over, when we

opened the gate on the 28 mesh coal before it’s mixed back

together and take part of it out.

(Q). All right, sir. Is there such a thing as an oil treated

coal?

A. Yes, there is.

Q. Do you have with you there any of those?

A. Yes, there’s some, yes, down at the bottom there.

(). What is that?

A. You have a one and a half by a three-quarter inch

oil treated, $5.

(). What does ‘oil treated’? mean ?

A. That's to allay the dust.

(). To what?

A. To keep the dust down on it,

440 =. You put oil on the coal?

A, Yes, sir.

Q. Let’s get on up to the top price you got here, $7.15.

A. That is coal coming from our No, 6 seam coal, Wil-

liams Mines, a very high grade stoker coal used strietly for

domestie use, that is, home stoker or small plants.

Q. Do you sell very much of that coal?

A. Yes, we do, T say ‘‘much’’, not by a comparison with

948b

Testimony of C. M. Hicks—Direct

your other mines, it’s a small mine, but we sell the outpy

from that one mine.

Q. All right. Now, are these sales that we have bee

discussing specifically illustrative of all of the Various sali.

in this P198 file?

A. Yes, I think they are.

Q. And is it your testimony that the various sizes and

the preparation processes that you go through, do thos

account for the differences in these sales?

A. Beg your pardon?

(). I say, do the various qualities that are involved gy:

the sizes and the preparation processes that vou go throug

account for the differences in these sales prices?

A. Yes, sir.

Q). What about your utility sales, are these higher priced

coals going to your utilities?

4441 A. No, sir, not as a rule. Some few utilities buy, not

your double-sereened coal, no, gene ‘ally speaking, thy

utilities use as low a price coal as they can get. Now, there's

some plants that use washed coals, however, and it goo

down to your bottom sizes, though.

(). All right, sir. Incidentally, has vour experience ip.

cluded experiences with utilities?

A. Beg your pardon?

(). I say, has your sales experience with West Kentucky

included experiences with utilities?

A. Yes, it has, that is mostly what T do. T work the

utilities in the South and Southeast.

(). Has that been your .Ssignment for some years?

A. Well, ves, it has for some good many years,

Q. Did you do that even while Mr. Hoffman was looking

after the TVA?

A. Yes, sir. Thad nothing to do with the TVA during his

life,

(). Did Mr. Hoffman look after any other sales problems

for the company?

A. No, that was the only sales. He had a fow other

949b

Testimony of C. M. Hicks—-Direct

duties, he looked after part of our marine setup, but that

was all ef the sales that he had, was TVA.

Q. Now, this other man you mentioned, Mr. Bowden,

what did he do?

y42 A. Mr. Bowden is the head of our sales depart-

ment and he is vice president in charge of sales, he

worked, is responsible for the Northern territory.

(). 1 believe you mentioned still another man who name

escapes me,

A. Mr. Rich.

Q. Mr, Rich?

A. Yes, John Rich is a young man that we brought in

as kind of an understudy to kind of relief us.

Mr. Rayson: Your Honor, I have asked the witness a

number of questions about some of these sales in H!xhibit

D198. I have a list of these that IT have asked him from

and | have not mentioned the particular customers in-

volved at the request of the witness. Tam going to tender

Mr. Rowntree the list of those that T have questioned from

so if he wants to question him about them le may, but I

would ask him not to discuss the names of the enstomers

unless he feels that it is necessary.

That list, of course, does not have all of the sales agree-

ments in the exhibit, it is merely for illustrative purposes,

(). Now, will you tell us the kind of coal, first of all,

let me ask you this: How many contracts do you now have

with TVA?

A. We have five.

443. Did one of those contracts come to TVA upon

TVA’s acquisition of some other power plant?

A. Yes, the acquisition of the Memphis Power Plant.

(). Had vou obtained your contract there prior to TVA’s

interest in that utility?

A. Yes, we had.

(). So that leaves you —

A. (Interposing) Four.

(). Four contracts with the TVA?

950b

Testimony of C. M. Wicks—Direct

A. That’s correct.

(). Did you, that is, did West Kentucky obtain thos.

contracts, those four, by reason of bids made to TVA?

A. Yes, sir.

(). Now, are those contracts what are commonly»,

ferred to as the T3, T24, T18 and T6 contracts?

A. That is correct.

(). What is the total coal that is being shipped unde

those contraets?

A. Three million eight hundred fifty thousand. toy

exclusive of the Memphis contract, with it it would be aboy

4,240,000 tons.

(). What about these contracts, when were they obtained:

A. They were obtained at different dates. We begy

shipping on the T3 contract in October l4th of ‘59

4444 and the T24 the first part of the first million tons op

April the 10th of °61 and the second million tons op

January 6, °63, and the T18 on April the Ist of ‘63 and

T6 on January the 6th of 64, on the Memphis contract

October Ist of 1958,

(). What is the contraet price under these four contracts:

A. $2.89 on one of them and $2.90 on the balance of them.

(). What kind of coal is shipped on those contracts?

A. That’s mine run coal, No. 9 seam mine run coal.

Q. Now, tell us something about the No. 9 seam miw

run coal from the standpoint of its quality and so forth.

A. Well, the quality of our bid is based on 15 per cent

dry ash and 4% dry sulfur and 11,400 BTU as received.

(). Is that a standard price, as far as you are concerned,

for that coal?

A. Beg your pardon?

(). Tsay, is that a standard price, as far as you are con-

cerned, for that coal?

A. Yes, sir.

(). Have you offered that to others at that price?

A. Yes, we have.

a — NAICS MO NES AGS RRP S IIL E A INTIS ART ATTEN NORE

951b

Testimony of C. M. Hicks—Direct

Q. What types of consumer have you offered that coal

to at that price?

y45.0 OA. We offered it to the utility customers for steam

generation just similar to TVA.

Q. All right, sir. Where does that coal come from gen-

erally?

A. Generally from our Pleasant View Mine and our East

Diamond Mine, Madisonville, Kentucky.

Q. Where did it come from when you first obtained the

1959 contract?

A. It came from our Pleasant View Mine.

(). What was the situation at the Pleasant View Mine

at that time?

\. We had worked out in the No, 11 seam of coal, which

we were operating in, and we had to drive our slope on

down 90 feet and we went in on the No, 9 seam.

(). Is it an advantage or disadvantage for a company,

as far as production is concerned, to be able to go down

from one seam to another?

A. Well, of course, it is much cheaper, you already have

all of your plant, your preparation plant and your plant

for loading, you have all your tracks, all you do is just drive

the slope down and develop your mine.

(). Do you reeall when you had worked out of the No.

11 at Pleasant View?

A. Thave that. In February 19, 1959, we still had a little

Xo. 11 coal coming in after that but for all practical

446 purposes we worked both seams of coal for a few

months and mixed them together, On October the 14th, 1959,

we went into the 9 altogether.

Q. All right, sir. Does No. 9 have a market other than

the utility market?

A. Not in that type of preparation, no, sir,

(). Does it have a volume market with preparation?

A. Beg your pardon?

(). Does it have a volume market with preparation?

A. No, it hasn’t with us. We had tried to sell it as washed

aia peers. |

952b

Testimony of C. M. Wicks—Direct

coal and the preference was for No. 11 coal because it wa

the lowest ash coal and a different type coal.

Q. How did you arrive at that price?

A. Well, we arrived at that price by coming in With ony

operating people and our sales people and our accountir:

people and management and we decided that we could pros:

ably mine the coal at that price if that’s what it would taki

to get business with the TVA, at least we thought that is

what it would take.

Q. All right, sir. Was it your intent to depress the TV4

market by offering that at $2.90?

A. No, sir.

Q. Do you know, as a matter of fact. how that offering

compared with other offerings being-made to TVA at the

time?

4447 A. Yes, I do. When we offered it on the first con-

tract we got on it there were four awards made and

we were next to the highest.

* * * * * * * * aa 4

Q. Which offering were you talking about?

A. That was on the T3 contract.

Q. Was that in 1959?

A. Yes, I think that was the Requisition No. 27, T believe.

(). While we are talking about the comparative advan-

tages of these bids on which awards were made, the $2.90

contracts, how did the others stand?

A. Well, on T24 there were 14 awards made, and T am

talking about only to the western plants now, T am not in-

eluding the other plants because we couldnt get into them.

Q. Yes.

4448 A. There were 14 awards made and we were the

highest of the 14.

Q. All right, sir.

A. In the T18 contract, which was the next one, there

were 10 awards made and we were the highest of those,

and in T6 there was 7 and our coal was priced the highest

in that case.

—_ —

4

953b

Testimony of C. M. Hicks—Direct

Q. All right, sir. Did you attempt to offer this coal after

cour 1959 award to TVA on bids that were not snecessful ?

"4. Yes, we did.

Q. Why were you trying to sell more of this $2.90 coal

to TVA?

A. Well, because we had a mine there that was capable

of producing much more coal than we were producing and

we wanted to get it up to its maximum production.

Q. All right, sir. Now, you mentioned the Mast Diamond

Mine, Did some of this coal eventually come from the Kast

Diamond Mine?

A. Yes, sir, we had the same thing at the East Diamond

that we had at the Pleasant View. We worked out the No.

1] seam and then we closed the mine down fora period and

then re-opened it, of course, on No. 9.

Q. When did you work ont of the No. 11 in Fast Dia-

mond?

449 A. On December the 23rd, 1960.

Q. You say you closed the mine at that time?

A. Yes, we did.

Q. Did you have any market for the No. 9 from Fast

Diamond at this time?

A. No, sir, we did not, except TVA, of course.

©. When did you re-open East Diamond?

A. July the 25th, 1962.

Q. Where did the coal go from Fast Diamond at that

time?

A. It went to TVA.

Q. Had you moved down from the No, 11 or puta slope

down, or whatever you do from the No, 11 to the No. 9 prior

to the time you got the TVA contract?

A. No, sir, we did not.

Q. Is it good mining for a coal company to have to shut

down a mine, Mr. Hicks?

A. No, sir.

Q. Why isn’t it?

4b

Testimony of C.M. Wicks Direct

A. Well, when you shut it down you just have th

less coal to spread your overhead costs over.

Q. When you shut down Kast Diamond, did vou hay

pretty good investment there in improvements?

A. Yes, we did.

at mine!

(). What sort of improvements have Vou got, why:

4450 sort of construction do you have around the mine:

A. Around the mine you have vour plant, all v

your sizing equipment which, of course, we do not use int]

TVA except to trace coal down, but we had the plant wher

all we had to do was just to get down to the coal and star

running the plant. We have allof our tracks that would hay,

to be built if we hadu’t have had it, whieh vou lave to hay

tracks to hold your empty ears and track to hold vour lo

cars and after they come through the plant.

ade

Q. What do you do when you shut down a mine, do yoy

Just walk off and leave it or is there anything that vou hay

to do while it is there?

A. Well, you have your choice of one or two things, vo

have either got to keep it pumped out and keep it in goo!

condition, if vou don't, of course, there will be nothing ther

When vou go baek to re-open, you have got to pull every

thing out of it if you are going to let it fill up with water,

(). T take it vou kept Kast Diamond pumped ont after

vou closed it?

A. Yes, sir, that’s right.

Q). Is that an expensive proposition?

A. Yes, it is.

(). What is involved in keeping a mine pumped out?

A. Well, it involves keeping a mine pumped ont,

4451) vou have got to have men, of course, to see that i

is kept pumped, vou have to have Inspections, mer

inspecting the mines to see all the time — vou have to have

electricity, you have to have pumps operating.

(). Do vou reeall when West Kentueky Coal Company

acquired the Nashville Coal Company?

A. We aequired them in September, we actually took

VO)

Testimony of C. M. Hicks Direct

arge of Nashville Coal Company in October the Ist, 1950.

(Q. How many mines did you aequire from that company?

A. We had five.

Q. Can you name them for us?

A. We had Uniontown, Stony Point, Mies, Crescent and

‘illiams.

Q. Did you have to close any of those mines?

A. Yes, we closed Stony Point.

(). Did you work it out?

A. No, we did not.

). Do you remember when you closed it out?

A. We closed it January the Sth, 1957.

). Why did you close it?

A. The cost of operating if was too high.

Q. Did you have to close any other mines?

A. Well, we closed at least three we didn’t own the

ine, Kirk Mine, that was the Nashville Coz! Company

mine that they had on a sales agreement, we had to

452 close it.

(). What for?

A. There was no market for the coal.

Q. Allright. Were you closing any West Kentucky mines

luring that period? Incidentally, how many coal mines did

Vest Kentueky Coal Company have at that time?

\. West Kentucky had, we had five.

»

(). Have any of those mines closed since 1959?

A. Yes, sir.

). Which ones?

\

(

A. Well, [have given you East Diamond we closed, which

was re-opened, we closed Heckler Mine in *54, we closed

Homestead Mine in 1958.

Q. Why did you close Homestead?

A. We closed Homestead, they worked out the coal in

that lease.

(). All right, sir.

A. Closed Pleasant View, we never closed it but we re-

ehh nesenivel

a

956b

Testimony of C. M. Hicks —Direct

opened it in the No. 9 coal, then we closed it down in \y

29 1965, this year. .

(). Why did vou do that?

A. We got into working conditions that were just so hiv

cost we didn’t feel that we could operate on it.

(J. Had something happened in the meantime?

A. Well, ves. We had a fire in the mine in the latter pay

of 1963 and then we had run into very unfavorab).

4453 working conditions in the mine, such as bad ton an]

looked like a losing Proposition, so we pulled ont

it.

(). I take it vou ceased then shipping any of this eq:

to TVA from that mine?

A. Well, the only coal we have, still have a little coal the:

is brought in there strip and carried through the plant, w

still ship that, some of it to TVA.

. But as far as the underground working mines?

A. Yes, sir, the underground was completely closed,

(). Had you worked that mine out there?

A. Beg your pardon?

(). Had you worked it out?

A. No.

(). Is there more coal there?

A. Yes, we still had some coal there.

(). Where is the bulk of the coal coming from then on

that?

A. Well, the bulk of the coal is coming now from East

Diamond and Shamrock and we have just recently on the

Kingston Mine that we had closed down in 1957, T believe.

(). All right. Did West Kentueky Coal Company acquire

many coal contracts from Nashville Coal Company?

A. Yes, we did.

. Do you know offhand whether it got any contraets

which had not been filled from TVA or with TVA?

4454 A. No, none that we hadn’t completed since that

time.

Q. Did it have some in effect at that time?

957b

Testimony of C. M. Micks-—Direct

A. Yes, it had, I believe it had one or two, | am not sure

about that.

Q. All right. Did it have any others?

A. Yes, it had other contracts.

Q. Did it have a contract with the Louisville Gas and

Electric Company?

A. Yes, it did.

Mr. Rayson: I believe that is Exhibit P190, vour Honor.

(Q). How much coal were you selling to Louisville Gas

and Electrie Company under that contract?

\. Oh, approximately a million tons a year, some years

it was a little better and one year a little less,

(). Now, this is the contract that you acquired from Nash-

ville?

A. Yes, sir.

(). What price were you getting for that coal?

A. Well, when the contract ended we were getting $8

and — what price were we getting for the coal?

(). Yes, sir.

A. $3.55 when the contract ended.

Q. Was that a fixed price throughout the term?

4455 A. Yes, it was a fixed price, it was changed from

time to time as we had wage changes, that was all.

(). Well, now, was the $3.55 what vou were getting for

the coal at the end of the contract?

A. Yes, sir.

Q. Do you know what it had been over the other years

that yon had been serving that contract?

A. Well, yes, the prices have changed on it several times.

When we took over the contract, we were getting $3.40

and it was changed to $3.20 and tlien to $5.53 and $3.40,

$3.50 and $3.55.

Q. Is that a pretty good price for that coal?

A. Yes, it was.

Q. I show you a chart purporting to show the amount

of coal shipped to Louisville under that contract after it

958b

Testimony of C. M. Wieks—Direct

was acquired by West Kentucky Coal Company. Does tly:

show the amount of coal sold?

A. Yes, according to our records that is correct,

(). Do you have an extra one of those charts, Mr, Hicks:

A. Yes, I do. I have that one. I don’t have but one,

(). Well, I wonder if we might borrow it for the tiy

being.

We offer this as an exhibit to Mr. Hicks’ testimony

4456 The Court: What is the exhibit? .

Mr. Rayson: That is an exhibit showing

shipped to the Louisville Gas and Eleetrie Company on

Nashville Coal, Inc., contract.

The Court: Exhibit 385.

The Witness: I have another one.

(The chart referred to above was marke!

D385 and received in evidence.)

Mr. Rayson: You may wish to look at this as we tal:

about it.

Q. Now, before we discussed this exhibit, Mr. Hicks, i

you, under this contract you acquired from Nashville, hav

any responsibility with respect to the Cherry Hill Mine’

A. Prior to this contract?

(). No, sir. After you acquired this contract.

A. Oh, yes, after we acquired this contract, that was i:

the contract, we were sales agent for the Cherry Hill Min.

we had to take a minimum tonnage under the contract.

(). Do you know what that was? ~

A. Two hundred thousand tons, which later was changed

to 400,000 tons.

Q. Do you know when that was changed?

A. No, sir, I don’t right offhand.

Q). Was it 1958? Would 1958 be approximately

4457 correct?

A. T believe that was right.

(). All right. Where did this Cherry Hill coal go by and

large?

A. To the Louisville Gas and Electrie Company.

959b

Testimony of C. M. Hicks—Direct

). Does this chart show the amount of that coal that was

shipped from the Cherry Hill Mine to Louisville Gas and

Electric Company?

A. Yes, it does.

(). Is that the figure in the first horizontal column?

A. That is correct, yes, sir.

(. Year by year. So you shipped, for example, 359,000

tons from Cherry Hill to Louisville Gas and Eleetri¢e in

1956?

A. That is correct.

Q. How much did you receive for that coal from Louis-

ville Gas and Electric?

4. You mean how much did they charge us for the coal?

Q. How much did they charge you for it?

A. $3.70 for the first 200,000 tons and then the price

went down five cents, which would have made it $3.60.

(). Now, was this 359,000 a part of the 1,186,000 tons

‘hat you shipped to Louisville Gas and Electric?

A. Yes, sir.

4458 Q. Is that shown in the third horizontal line from

the bottom on this chart?

A. That’s right.

Q. When you shipped this Cherry Hill coal to Louisville

Gas and Electric, how much did they pay you for it?

A. They paid us 15 cents less than we charged them up

{0 200,000 tons and then it was 10 cents less.

Q. Did West Kentucky operate that mine?

A. No, we did not.

Q. Did you actually do any of the physical work re-

quired in shipping the coal from the Cherry Hill Mine to

the Louisville Gas?

A. No, sir, we did nothing.

Q. You did bill them for it, I take it?

A. Just billed them for it, that’s correct.

Q. Now, I notice in the fourth horizontal line here on

this chart, Exhibit 385, you showed Cherry Hill coal shipped

t _—

Paes.

960b

Testimony of C. M. Hicks—Direct

to accounts, all accounts other than Louisville Gas aly

Klectric and TVA,

A. Yes, sir, that’s correct.

(J. I take it then you did sell some of this coal to oti:

people?

A. That’s right.

Q. Now, is one of such sales the sale that was made }

1961 that we discussed earlier this morning?

4459 A. That’s right, yes, sir.

(). Now, in connection with that sale You said the:

you sold that coal for $2.95?

A. Yes, sir.

(). How much did Louisville Gas and Electric charge v

for that?

A. That would be $3.55, no, it would be $3.65 or $3.70),

Q). Was there any compensating factor in that or we

that just a dead loss in that, Mr. Hicks?

A. Yes, we had the contract for the coal that we shipped

to them from our mines and other mines where we purehased

coal at a very attractive price and a portion of coal that is

being shipped to Cherry Hill was very small, well, it wasn’

small but it was enough, it was small enough that it wa:

very profitable to us.

(). Let me see if I understand you. Did you ship other

coal from your other mines?

A. Yes.

Q. To the Louisville Gas and Electrie Company?

A. Yes, we would ship it from any mine we had. We

shipped most of the Pleasant View, as much as we coull

from Pleasant View or from any mine that we wanted to

ship it from.

(). Well, when you sold coal from Cherry Hill to

4460 an account other than Louisville Gas and Electric

Company, would you ship more or less of your coal

from your other mines to Louisville Gas and Electric Com-

pany?

A. We would ship more because the more eoal you sold

_—

961b

Testimony of C. M. Hicks—Direet

from Cherry Hill to other places there would be more coal

going into Louisville Gas and Electric and we would ship

from our own mines,

Q. All right, sir. Did it make any difference financially

to West Kentucky Coal Company then whether you were

shipping Cherry Hill coal to Louisville Gas and Klectrie or

other customers ?

A. Well, no, it didn’t.

Q. Why did you sell the Cherry Hill coal to others when

you could?

"4. Well, because they wanted us to, mainly.

(. Who wanted you to?

A. Louisville Gas and Electric.

Q. Do you know why they wanted you to?

A. No, sir, I do not.

Q. Now, I notice that in 1960, according to Exhibit No.

9¢5 in the fifth column horizontally from the top, yeu sold

51.999 tons to TVA.

A. That is correct.

(). Now, what price did you receive from TVA for that

coal?

4461 A. We received $2.90 plus premium or penalty.

Mr. Rowntree: We object to that because the price

is in the exhibit, the supplement to the contract authorizing

application of the Cherry Till coal -—

Mr. Rayson: (Interposing) All right. If your Honor will

indulge me just a minute T will see if T ean find it among all

of these papers.

Mr. Rowntree: May | just ask the witness a couple of

questions?

Mr. Rayson: You may.

Mr. Rowntree: Mr. Tieks, do you reeall whether a sup-

plement was put out under the contract authorizing appli-

cation of Cherry Hill coal to the contract?

The Witness: Yes, sir, Lam sure of that.

Mr. Rowntree: Do you recall that the price was $2.85?

962b

Testimony of C. M. Micks-—Direct

The Witness: $2.85, yes, sir. T beg your pardon, did |

say $2.90?

Mr. Rowntree: $2.90,

The Witness: I am sorry, $2.85 is correct,

Mr. Rayson: I don’t know Whether that is in the recor!

or not, but | have found mine.

(). It was $2.85?

A. $2.85 was correct, | am SOrry,

(). Would there be a plus or minus or quali:

4462 adjustment on that? |

A. Yes.

(). In any event, that was the 1,999 tons?

A. Yes, sir, that’s right.

(). How much were you charged by Louisville Gas a,

Klectrie for that coal?

A. We were charged, we were charged on the basis oi

the $3.70 price, we would have been charged $3.55 or $3.60

after the 200,000 tons had been shipped from that mi»

that vear.

Q). All right. That is roughly a 75 cent difference j)

what you received, discounting whatever quality adjust.

ments there were, and what you paid for it. Now, did you

lose money on that transaction?

A. No, sir.

(). Will you explain to us why vou didn't lose money!

A. Well, beeause the coal that we shipped from Chern

Hill was going to Louisville Gias and Electric Company and

when we moved it to TVA then We took the eoal from

Pleasant View Mine, which would have gone to TVA. and

shipped it to the Louisville Gas and Kleetrie, so the dollars

and cents were the same thing.

(). The same thing. All right. Did the same thing hap

pen with respect to the tonnage that you shipped to Lonis-

Ville Gas and Electric in 1962, 137,063 tons?

4463 A. You mean to the TVA?

(). Yes,

A. Yes, sir.

——_— aie

963b

Testimony of C. M. Hicks—Direct

Q. Did you lose any money on that?

A. No, sir, the same thing.

Q. Well, is this your testimony, that you just shipped

more of your own coal to —

A. (Interposing) Louisville Gas,

(). Louisville Gas and Kleetric?

A. By exactly the same amount that we shipped to TVA.

Q. All right. Could you sell this Cherry Hill coal in

volume to anybody else?

A. No, sir.

(). I notice you didn’t sell any of the Cherry Hill coal

to TVA in 1961.

A. Yes, that is correct.

Q. Do you know why you didn’t?

A. They wouldn’t take it.

Q. When did your Cherry Hill contract expire, Mr.

Hicks?

A. Mareh 1, 1965.

Q. Were you interested, T don’t mean Cherry Hill, T

mean the Louisville Gas and Electric?

A. Louisville Gas and Electric, yes.

4464 Q. Were you interested in continuing to sell coal

to Louisville Gas and Electric Company?

A. Yes, we were.

). Did you make an effort to continue to sell them coal?

A. Yes, sir.

). Did you offer them coal at any particular price?

\. Yes, sir.

(). What offer did vou make them?

A. Well, we made them several offers, as T recall. We

made them an offer of about $3.40, T believe, and then $2.90,

Q. Did the $3.40 have any frills or any attachments

to it?

A. No, sir, it did not. Tt would be the same basis that

we had with the present contract except we would reduce

the price of that and, of course, Cherry Hill price would

be reduced to us accordingly.

964b

Testimony of C. M. Hicks—Direci

(. Well, was your offer to sell them coal at S340 bas.

on your willingness to take more of the Cherry Till eoa):

A. We would have taken all we could, we would hy

taken 400,000 tons of it, yes, We agreed to that.

4). Did you make them an offer to sell them, come yy).

an agreement by which you would be relieved oft)

#469 responsibility of taking Cherry Hill coal?

A. Yes, sir.

(). What was that offer?

A. $2.90.

(). What kind of coal was it?

A. It was the same coal that we was shipping to TY:

from Pleasant View and Kast Diamond. eXACTIY the say

(). Did you get the business?

A. No, sir, we did not.

Q. Do you know whether you were underbid?

A. Yes, | understand we were.

Q. Do you know who got the business?

A. Peabody Coal Company.

(). Are these prices that vou are referring to prices 9

your mine?

A. F.O.B. mine, ves, sir,

(). Mr. Hicks, I notice that in the last year or two vo

have bid suecessfully a number of times on the TVA spe

market.

A. Yes, sir, that is correct,

4). Will vou explain generally for ns what those bid

were?

A. Well, they were on earbon coal, resultant size cop

one-quarter by 28 mesh, mostly.

(). How did you come to have carbon coal?

4466 A. We were running double-sereened coal and th’s

is what we got as a result of that.

(). Is this something you have all of the vear aroun?

earbon coal?

A. Well, we have it more in the winter months than wi

do in the summer months,

_" SNC Ai a Ane SAN ABLE ie COLE ON M INEN BET gh FEL RT OLS TEN

965)

Testimony of C. M. Hicks-—Direct

(). Why is that?

A. Beeause we are running coal for domestic applica-

tion, for sale to dealers, of course, they buy no coal with

carbon in it, it’s all double-sereened coal generally.

(Q, Is this the bulk of the coal that is going to TVA on

this spot market?

A. Yes, sir.

(). How do you go about pricing that coal on the spot

market?

\. Well, the way we have gone about pricing the spot

coal to TVA, Tam safe in saying the latter vears we called

TVA and asked them what they paid for the coal the week

before,

(, Is this publie information?

A. Yes, sir.

(, What do you do with that information ?

\. Then, well, we take the highest price that they had

naid the week before in most instances, | think practically

all, and bid it on the coal,

407 Q. All right. Tlave you at any time, Mr. Ilieks.

discussed or collaborated with any other company in

determining what prices that you would sell your coal to

TVA?

A. No, sir.

(. In any of your bids have you sought to depress the

TVA market?

A. No, sir.

(). Have you ever discussed any sales matter with any

representative of the United Mine Workers?

A. No, sir, I have not.

Q. Do you have any knowledge that any official of West

Kentueky Coal Company ever discussed any of these mat-

ters with the United Mine Workers?

A. No, sir.

Mr. Rayson: Cross examine.

966b

Testimony of C. M. Hicks—Cross

Testimony of C. M. Hicks—Redirect

CROSS EXAMINATION

By Mr. Rowntree:

* * * * * * * * *

4481 Q. Well, let me ask you this: Did you, from 1s

on, receive any pressure from stockholders With re.

spect to the policies of the company on selling coal?

A. Never had a single one,

Q. Did Mr. Cyrus Eaton ever write any memos or giy

any lectures to the sales representatives of West Ky.

tucky after he became chairman of. the board?

A. No, sir. We, of course, talked with Mr. Cyrus Bato,

Mr. Cyrus Eaton has never gave us a single instruction oy

anything with reference to sales that I know anything

about.

(). So far as you know he was satisfied with the sales

policies of West Kentucky Coal Company?

A. Yes, sir.

(). During the period of the 1950s after he became chair.

man of the board?

A. Yes, sir.

Mr. Rowntree: That’s all.

REDIRECT EXAMINATION

By Mr. Rayson:

(). Mr. Hicks, do you know if West Kentucky Coal Com

pany coal is now going to Widows Creek Steam Plant?

A. Yes, it is now, yes,

(). Do you know when it started to go there?

4482 A. May 28, 1964.

Q). May 28, 1964?

A. Yes, sir.

Q. Do you know if any coal whatsoever of West Ken-

tucky Coal Company was ever shipped to Widows Creek

Steam Plant prior to that date?

A. I have looked diligently through our records and

RENAE PE BLID A IOELL DL EIEN CIT

967b

Testimony of C. M. Hicks—Redirect

asked everyone that would have known anything about it

and no one says that we have shipped any coal. | checked

with TVA and they say that none of our coal was shipped

during that period or any time.

Q. Does that inelude in the fall of 1955?

A. Yes, sir, that includes any time up to 1964.

Q). It was none of your coal shipped there in 1955?

A. No, sir.

Q. Did you handle this Memphis contract, by the way?

A. Yes, sir, I did, sir.

Q. When was that?

A. We got the contract in 1908, October, begin shipping

in Oetober.

. . W * * * * * . *

(). Were there many bidders on that contract?

A. There was, as I recall, this is just a guess, 10,

, * * * ” ” * * * *

4483 @. How many people got that?

A. Three.

Q. Do you know how you stood, how your bid stood in

relation to the others?

A. It was the highest one of the three.

(). How did you arrive at your price at that time?

A. We just used our regular price of Uniontown coal

plus the cost of transportation, which had been qnoted us,

and then we decided that everyone else knew, of course,

what our price probably would be and we reduced it two

cents from our F.O0.B. mine price.

Q. Did you diseuss that bid with any other bidder prior

to submitting that bid?

A. No, sir, I did not.

Q. Did you personally handle that, Mr. Hicks?

A. Yes, sir.

Q. Had you ever heard that there was a West Kentucky

tate. Ag titaice

968b

Testimony of C. M. Hicks—Redirect

Coal Company barge or something that came through ¢,

Tennessee River in 1955?

A. Yes, sir, I have heard that.

Q. Do you know whether or not that Was true?

A. It certainly was not true, not a barge owned hy 4

West Kentucky Coal Company at that time.

Q. Do you know if West Kentucky disposed of »

4484 barges? |

A. Yes, sir, we disposed of some smal] barges, y

sold them to the Union Electric Company and T understs»:

that they had sold them. but no barges of ours come doy

in 7°55.

Q. All right. Where is your magazine here, the jx

exhibit? Tam going to hand the witness Exhibit P2xs an

ask him if he will comment on the prices that Mr. Rownty

inquired about. What prices are shown on there, what typi

of coal is shown there?

A. This is all double-screened, except the screening:

it shows sereenines on here at a price of $4.50.

(). Is it your opinion that that is also washed eoal?

A. Yes, sir, it is,

Q. Do you know whether or not that represents 4]

arket for that type of size and washed coal?

A. Let me put it this way, we would be @lad to sell it 9

somewhat less than these prices,

(). In any market that you serve?

A. Yes, sir,

(). Does that compare with the No. 9 eoal that vou are

selling to TVA?

A. No, sir, it does not, the coal we are selling to TVA

is mine run coal, unwashed, has no preparation at

4485 all except to erush down to 6-inch top size or if we

wish, on some of our contracts we ean sereen it after

that and take certain sizes off of it.

Q. Approximately how many utilities do von serve?

A. T believe there is approximately 15, T think that is

correct, about that.

SONA OE RS alta BROT PRIS IO IM EP LIOR a ON OS

969b

Testimony of C. M. Hicks—KRedirect

y. Were all of those utilities offered that coal?

A. Well, L don’t know that all of them were, a good many

of them.

Q. At the same price?

\. Same price we asked TVA, ves, sir.

(). All right. Mr. Rowntree also asked you about your

price back in the early °50s. I wonder if you would briefly

Jeseribe to us any changes that oceurred in your business

during that period.

A. Well, during the early “50s and the late “49s, of course,

we had a tremendous amount of railroad fuel which repre-

cepted roughly 25 per cent or better of our total sales and

the retail dealer business about the same thing, which rep-

resented about 50 per cent of our entire prodnetion of coal,

which brought very good prices.

(). What happened to that business?

\. Well, the railroads all went to diesels and the retail

usiness gas and oil has replaced coal today.

Q. Go ahead.

4486 A. Today less than 7 per cent of our coal is going

for retail applications and Jess than 1 per cent for

railroads.

©. Do you know if your sales declined during that pe-

riod?

\. Yes, T would say it was declining some, Tam sure,

O. Mr. Rowntree asked you about some sales that were

made to TVA during the °50s and also whether or not you

were the largest or one of the largest shippers to TVA dur-

ing that period.

Do you know how your company ranked during the *50s

in sales to TVA?

A. Yes, sir, I do. Starting in 1954 we were 9.6, that was

our pereentage of the TVA purchases of coal that vear.

Q. Well, Mr. Hicks, rather than read those, T hand von

achart and ask vou if you ean identify that?

A. Yes, sir, that’s the same one T have here.

Q). What does that chart show?

a o

970b

Testimony of C. M. Hicks—Redirect

A. The chart shows we went from 9.6 down to 4.9 jn 19

and then in 1964 we were back up to 16.2.

(). Let me ask you this, does it show the total amoy

of coal purchased by TVA each year?

A. Yes, sir, each year and that part furnished}

4487 West Kentucky Coal Company.

(). In tons and in terms of percentage?

A. That’s right, ves, sir,

(). Would you introduce that as an exhibit to vour tes

mony?

The Court: Exhibit 387.

(The chart referred to above was marke

D387 and received in evidence.)

Mr. Rayson: Your Honor, this exhibit does show the tot,

TVA receipts beginning with 1952, the tonnages shipped hy

West Kentucky and Nashville Coal Company mine and tly

percentage that those shipments represent of the totg

TVA market.

The percentages, I might just read them in. They wer

9.6 per cent in 1954; 9 per cent in 55: 74 per cent in ‘5b:

4.9 per cent in °57; 6.4 per cent in D8; 7.5 per cent in “I:

8.3 per cent in ’60; 9 per cent in ’61: 104 per cent in ‘02:

15.3 per cent in ’63; and 16.2 per cent in ‘64.

The volume of tonnages ranges from a low of 963,000

tons, leaving off the odd tons, in 1957 to a high of thre:

million seven in 1964.

(). Mr. Rowntree also asked you about the sales made

by TVA or made by West Kentucky Coal Company to TVA

during the ’50s, Mr. Hicks.

4488 To the extent that you are familiar with those sales,

do you know whether or not West Kentueky was try-

ing to get the best price that it could from the TVA?

A. Yes, sir.

. * * * * * * * * .

SG DALIAN IL TPS ERNIE SUOBLE LI PES ET LOD NPR DE Ra ABE

871b

Testimony of J. W. McMahon—Direct

4490 J. W. MeMATION,

a witness called at the instance of the defendant,

being first duly sworn, was examined and testified as fol-

lows:

DIRECT EXAMINATION

By Mr. Rayson:

). Would you state your name, please?

A. J. W. MeMahon.

Q. Where do you live, Mr. MeMahon?

A. Madisonville, Kentucky.

(. Are you presently employed?

A. I am retired.

(). What was your position prior to your retire-

4491 ment?

A. Vice president and controller.

_ Of what company, sir?

. West Kentucky Coal Company.

Q. How long had you worked for West Kentucky Coal

Company?

A. Since 1926.

Q. During that period of time what has been the nature

of your work?

A. Thad come up through the accounting department as

general credit manager, controller, treasurer, on to vice

president and controller.

(). When did you retire, sir?

A. May 1 this year, 1965.

Q. Are you familiar with the operating experience of

West Kentucky Coal Company and its subsidiaries from

1950 to the time of your retirement?

A. As far as the accounting department is concerned,

yes.

Q. Mr. MeMahon, the annual reports of West Kentucky

Coal Company have been introduced in evidence as begin-

ning with the report for the year 1950, as Plaintiffs’ Exhibit

972b

Testimony of J. W. McMahon—Direct

179. All these appear to bear the number 179, all of thos:

annual reports through the year 1961.

It has been pointed out that West Kentucky Coal Coy.

pany had a profit of $5,645,000 in 1950 and that §:

4492 had a decline in profits during the several! Vears fo).

lowing. I wonder if you would explain what th:

situation was and how the decline came about?

A. Well, the decline came about principally by loss «

sales tonnage. The sales tonnage continued to decrease dy

principally to the fact that the railroads were eselizing

they had been taking as much as 25 per cent of our pr

duction, also gas and oil were making inroads on our bys

ness, they were taking over most of the retyil business

Both of these pieces of business were at fairly high pric,

a good realization in those years. That is one of the prin

cipal reasons for the decrease in the net income before taxes,

(). T have here a paper which purports to show by vear

beginning with 1950 and ending with 1964 the tons pro

dueed by West Kentucky Coal Company, tons of coal sol!

hy that company and its subsidiaries, its net ineome befor

income taxes, and also another column showine the nations]

production in terms of tons,

T hand you this paper and T will ask vou if von prepared

that paper and if it shows the information as «tated?

A. Yes, sir, it shows the information ven have stated

and T prepared it.

Q. All right, sir. Would vou introduee that as x

4493 exhibit to your testimony?

The Court: Exhibit 388,

(The chart referred to ahove was marked

D388 and received in evidence.)

Q. Mr. MeMahon, this shows that your profits declined

from $5,645,000 in 1950 down to $1,441,000 in 1955. Can you

tell us what your sales were in those years?

A. Yes, sir.

(). In dollars?

— Ie RNa ak AS PERI ANN DAISIES NTE TOL RN DALP

973b

Testimony of J. W. McMahon—Direct

A. Sales dollars?

Q. Yes.

A. 1950, $26,181,000; 1951, $22,090,000 ; 1952, $21,664,-

00: 1053, $18,683,000 ; 1954, $15,632,000 ; 1955, $17,781,000.

Q. All right, sir. Now, during those years, I believe this

exhibit shows your production in each year from 1950 to

1954 declined, is that correct?

A. No, sir. You will notice there in 1952 there was a

slight increase and then it continued on a decrease again.

Q. When did you acquire Nashville Coal Company ?

A. September 13, 1955.

Q. What mines did you aequire at that time?

A. Fies, Crescent, Williams, Stony Point and Union-

town.

494 Q. Are you familiar generally with the wage rate

paid under the United Mine Workers contract?

A. Yes, sir, T ecouldn’t quote them right here but T know

what they are.

Q. Do you know how the wage rates paid by the Nash-

ville Coal Company compared with the wage rates of the

United Mine Workers contract?

A. They were the same.

Q). Do you know whether — the day's work of the Nash-

ville Coal Company employees were the same as the day’s

work of employees under the United Mine Workers con-

tract?

A. Well, they were practically the same. The number

of days worked, of course, was in aceordance with how many

orders you had and whether you could operate the mines

or not.

Q. What about the hours in the day?

A. No.

Q. Will you explain the difference, if there was a dif-

ference?

A. Before West Kentucky Coal Company purchased

Nashville Coal Company, Nashville mines were working a

974b

Testimony of J. W. McMahon—Direct

full eight hours and they were not paying the travel tip,

After West Kentucky Coal Company purchased Nash,

it was necessary that we go on a travel time basis. Th

were being paid for their travel time, prior to thy

4495 they were not being paid for travel time.

(). Do you know under the United Mine Worker

agreement if travel time was part of the compensible tin,

A. That’s right.

(). Did you make a study to determine the amonyt if

cost that it cost West Kentucky to make that change?

A. I did.

(). Can you tell us what the difference in cost was }

terms of tonnage?

A. The difference in cost is 916, nineteen and sixtee.

hundredths cents per ton.

(). Nineteen plus cents per ton?

A. Yes, that’s right.

(). In making that computation, how much travel tim

did you consider?

A. We used one hour.

Q. Is that a conservative estimate of the amount of time’

A. That is a conservative estimate, it runs under thy

in some mines and runs over that in others, just an average:

we used one hour, that’s 30 minutes in the morning and 2

minutes in the afternoon.

(). Did you find the mines that you aequired from Nash.

ville Coal Company were profitable to operate?

A. No, sir.

44.6 (). Will you explain why?

A. Well, we found them in pretty poor shape, it

Was necessary that we spend quite a bit of time and money

in rehabilitating the mines,

(. Did West Kentucky Coal Company have any signifi

cant long-term debt prior to its acquisition of Nashville Coal

Company?

A. It had none.

— }» A RRA EERE BEIT ‘ Bet ie TBF

Testimony of J. W. McMahon—Direct

y. Now, you have already, you have told us what the

profits were prior to your acquisition of Nashville Coal

Company, that appears on the Exhibit 388, that is, the first

full year after your acquisition of Nashville that your net

income was $2,150,000. Do you know if that was the com-

bined income of Nashville?

A. No, sir, that was West Kentucky Coal Company only.

Q. Do you know what Nashville’s income was?

A. Nashville had a loss of $604,057.

Q. To what do you attribute that loss?

A. Well, one thing, of course, was high mine costs and

we had not been able to get the mine costs down.

Q. All right, sir. As a result of that did you take any

action, did you close any mines?

\. Yes, sir, we closed the Stony Point Mine on January

8, 1957. That was the only Nashville mine that we

H97 closed,

(). Why did you close that mine?

\. Beeause of high cost of production, we were unable

sy sell the coal and make any kind of profit and it didn’t

look as if we were going to be able to.

Q. Do you have any information showing the combined

income of Nashville and West Kentucky from the time of

the aequisition forward ?

A. Yes, sir.

Q. Wonld you state what it was in each year, please?

A. In 1956, $1,591,000.

Q. That is the combined income?

A. That’s the combined income.

The Court: Net?

The Witness: Yes, sir, that’s net before taxes.

(). All right. What about 1957?

1957, $1,376,000; 1958, a loss of $368,000.

All right.

1959, a profit of $456,000.

You are rounding these figures, T take it?

Yes, sir, I am rounding them.

.

— *

wor

().

A.

976b

Testimony of J. W. MceMahon—Direct

Q. All right.

A. 1960, a profit of $726,000; 1961, a profit of $2040

1962, a profit of $328,000; 1963, a profit of $532,000; Iwas

a profit of $2,147,000.

4498 (). Did you have interest payments following Vour

acquisition of the Nashville Coal Company, Mr, \b.

Mahon?

A. Yes, sir.

(). I hand you a paper and [ will ask vou if this paper

shows year-by-year the interest payments made on We

Kentucky’s long-term debt?

A. It does,

(). Are those the same figures shown in the aunw

reports?

A. Same figures that are shown in the annnal reports

Q). All right. Would you introduce that as an exhibit:

your testimony?

The Court: Three hundred eighty-nine.

(The chart referred to above was marke

D389 and received in evidence.)

(). What was the vear of your highest interest?

A. Our highest interest year was 195s,

(). What was the amount of the interest?

A. $1,027,532.

(). Was that the year in which vou show an operating

loss?

A. That’s right, yes, sir, that’s the vear we show »

operating loss of $367,000.

(). All right. Were you also during those vears mak

ing payments on the principal of that obligation?

44.99 A. Yes, sir.

(). Can you tell us how mueh was paid over tha!

year from 1955 through the early ‘fi0s?

A. I think I am going to have to dig a little deeper for

that. At the end of 1957 the indebtedness was a total o!

$21,601,333,

(). Is that all long-term debt?

ENE AERIAL SPL BE AIO ae He is PERN HEE OA: ofa, SP RRR E De TERR eR UT

977)

Testimony of J. W. McMahon Direct

That’s all long-term debt.

That’s all of the long-term debt that the company had?

_ That's all of the long-term debt that the company had.

Q, All right, sir.

\. During 1958) payments totaled $3,441,903; during

1259, payments totaled $5,648,801.

(). Is that the payment on principal?

\. That’s payment on principal. During 1960 payments

totaled $3,788,456; during 1961 payments totaled $2,481,-

a3: during 1962 payments totaled $2,560,620, however, dur-

\

).

A

-~

ing that year we borrowed an additional $5,006,000; net

payments during 1963 were $740,190. I don’t have the 1964

figure available.

Q. Now, with the exception —

A. (Interposing) Those accounts were taken to our Thunt-

ington office, Island Creek took them out of the Madi-

4500 sonville office. These figures are available right there

in the annual report, you call check them right through

there.

Q. With the exception of the $3,000,000 that vou bor-

rowed, were these payments made out of the income and

cash flow of the company?

A. They were made out of the income and cash flow of

the eompany with the exception of the $10,000,000 that was

borrowed from the Irving Trust Company and a group of

Yew York banks. Now, no, wait a minute, | said ‘*group of

Yew York banks’’, they were not New York banks, Irving

Trust is the only one in New York, the others are scattered

in Washington, D. C., Louisville, Kentucky, Evansville, In-

diana, and Nashville, Tennessee.

Q. The annual report would show but did you have any

interest payment of any significance during the first five

vears, Mr. MeMahon?

A. We had none.

(. Did West Kentueky Coal Company borrow any money

from the United Mine Workers at any time?

Y7TSh

Testimony of J. W. MeMahon—Direct

A. Yes, sir, we borrowed $900,000,

(). Will you explain when that was? Will you state when

that was?

A. That was in 1961,

(). What were the circumstances of the company

4501 at that time?

A. Well, we found ourselves badly in need of cas)

and had been talking to Irving Trust Company at the time

attempting to get our loan rescheduled in order that we

would have a sufficient amount of cash, particularly to pay

Potter as those payments were running over $2,000,000 4

vear.

(). All right, sir.

A. Irving Trust refused to go along with us.

(). Was the company threatened with serious litigatio

at this time?

A. What is that?

(). Was the company threatened with serious litigation

at that time, pending litigation?

A. Yes, we were in litigation with Tampa Electric.

Q). All right, sir. Did you then seek to borrow money

trom the United Mine Workers?

A. Wedid. We found ourselves short of eash and [ with-

held payment on the 10 cents a ton to the Welfare Fund

for a month or two, thinking that that would help us to

get by on what cash we needed,

After that it ran up to almost $900,000 that was withheld.

We immediately started paying them one month and drop-

ping a month and paying a month and dropping a month

until such time as they refused to go along with us

4502 any further.

At that time we went to Mr. Lewis and Mr. Owens,

of the United Mine Workers, and asked them to loan us a

sufficient amount of money to pay the Welfare Fund and

we borrowed $180,000 in May, 1961, we borrowed $360,000

in June, 1961, and then another $180,000 in July and another

97M

Testimony of J. W. McMahou- Direct

<180,000 in August. Ninety days after that we started pay-

ing this money back and it was all paid in full by Decem-

ber, 1965.

(). Was there an interest obligation on that loan?

A. Four per cent.

Q. Has that also been paid?

A. That has been paid.

(). Are you familiar with the contracts that West Ken-

tacky Coal has with the TVA at $2.89?

A. Well, only —

(). (Interposing ) And $2.90?

A. Only insofar as the accounting department is con-

cerned,

(). Do you know from which mines those contracts have

heen served by and large?

A. Yes, principally from Pleasant View and East Dia-

mond,

(). Have those contracts been loss contracts to the com-

pany?

A. No, sir.

, . * * * * * ¥ * *

$503 (). Would you state what your source of infor-

mation is, Mr. MeMahon?

A. The books of West Kentucky Coal Company.

(). All right, sir. What approximately were the costs

during the first year of operation under the 1959 contraet?

\. Before selling in administrative experience the cost

was $2.729,

4504 (). Now, is that the cost at the Pleasant View

Mine?

A. That is the cost at the Pleasant View Mine,

(). Was other coal shipped or was coal shipped to other

sonrees from that mine?

A. Yes.

(), So that just isn’t the cost on the Tennessee Valley

contract?

- v

- ve

a4

QSOb

Testimony of J. W. McMahon—Direct

A. No. There was other coal shipped from that mine,

(). Do you have any separate item showing the cost jus:

as it would relate to TVA?

A. There is no way ia the world of getting that, ther

is no accounting procedure that would give vou that infor.

mation unless you operated it for one month on TVA and

then another month on some other business. but as lone as

the coal is coming out of the mines there’s no way in the

world of separating the cost on sereenings and lump e¢oal,

you have an average cost per ton and that’s all vou ean got,

Q. Do vou know whether that mine was in a state of

development during that year, insofar as the No. 9 coal

Was concerned ?

A. No, by 1960 it was going pretty well.

(). IT mean 1959.

A. Opened up the 9 seam in 1959 and we were in develop-

ment of coal at that time.

(. Do you reeall during what period of the year

4505 that was?

A. Ibelieve we started about February, 1959, when

we got down into the 9 seam of coal, at that time we were

mining some 9 and some 11, we were mining in both seams.

Q. Do you know when this TVA contract started?

A. In October of 7°59.

(). Did the volume increase at that time?

A, Yes,

(). Does that figure which vou have stated inelnde your

general cost and selling expense?

A. No, sir.

Q. What?

A. General administrative and selling expense for the

year 1960 amounted to approximately 20 cents.

Mr. Rowntree: We are still talking about °59 or "60?

(). Fifty-nine is what I am talking about.

A. I don’t have it for the whole vear of °59, T have it

—_" - ee INPUT OAD BEE

981b

Testimony of J. W. MeMahon—Direct

by months, for the last three months of 50 while we were

shipping TVA coal.

Q. What are those?

A, October was £2.83, was mine cost, Go and A and sell-

ing expense was 18 cents, approximately TS_ cents. We

don't even have that for those three months but it was

approximately 18 cents, that was 2 total of $5.01 for

$506 October.

Q. All right.

A. It’s $3.05 for November.

(). Total?

A. And $2.90 for December, That's total. ves. That

includes the allocation of what part of the selling expense

and general administrative expense Was alloeated to that

mine on a tonnage basis.

Q. All right, sir. Were these seme expenses that the

taking on of this contract created for West Kentucky Coal

Company?

\. No, sir, no. Even if von had not had the contraet you

would still have had the same eeneral ndministrative ex-

pense and the same selling expense in dollars. net in eents

per ton but in dollars.

Q). All right. What was your experience in the following

vear?

A. 1960?

(). Yes.

A. The total, inelnding general ndministrative, Was

$2.925.

(). What was your realization under this contract?

A. Our realization on that contract that we were shipping

at this time and what we have been shipping since has aver-

aged about $3.04, it has gone all the way from $2.88 cents

up to $3.07 or 8 and 9 cents, but the average is $3.04.

4507 (). All right, sir. Would vou explain what you

mean by the ‘‘realization”’ and why it is more than

$2.90?

982b

Testimony of J. W. McMahon—Direct

A. Well, it is based on the analysis that were included

in the bid or on our guarantee and our coal has been rup.

ning in excess of the guarantee, we have been getting ,

premium.

Q. Do you know whether it is the poliey of the com.

pany to bid its quality conservatively?

A. Well, I would say yes. We are trying to bid to ge:

business, of course, at all times.

(). Well, with respect to the premium, have you ever

had a penalty on any of this coal?

A. Yes, there has been a penalty or two, but very fev.

Q. Has the normal case been that you have been t-

ceiving a premium?

A. Normally we get a premium on the coal.

(). And you say it has been averaging about $3?

A. $3.04.

Q. All right. Continuing then, how much of general over-

head and selling expense did you attribute to that 1960

figure?

A. 1960?

Q. Yes.

4508 A. 19.6 cents.

Q. What about ’61?

A. Sixty-one, after G and A expense, $2.697.

Q. All right.

A. Sixty-two, $2.71, 72 cents, make it.

(). Was your realization continuing at $3.04?

A. It was continuing at $3.04.

Q. Is that figure fairly steady throughout vour experi-

ence?

A. That’s right.

Q. What abont 1963?

A. 1963, that’s when we had the bad mine fire at Pleasant

View and the cost of operation for the year went up quite

a bit, our costs was 2.21.

Q. All right, sir.

———_—_—_—_—_ SR ir FASE pean . —

983b

Testimony of JW. McMahon—Direct

A. That included the mine fire and included all for the

whole year.

Q. All right. Did you thereafter close that mine?

A. No. We continued to operate it through 1964, trying

and thinking that at all times that we would be able to over-

come this very adverse mining condition that we had run

into.

Q). All right.

A. However, in 1965, in July, it just didn’t seem that

there was any possibility of bringing the mine back

4509 to where it should have been and we closed it.

(). All right, sir. What about East Diamond, when

did you open East Diamond?

A. Kast Diamond opened in 1963, is our first year of

accounting. Prior to that time there was sales of coal but

they were based on the entry coal which was a credit back

to the capital expenditure for sinking the slope and putting

in the No. 9 seam of coal mine.

(). Has your experience at East Diamond been more or

less satisfactory?

A. Well, it has been more satisfactory.

(). Would you state what it has been?

A. In 1963 our total was $2.55.

(). Is that before —

A. (Interposing) We were getting $5.04 for the coal,

so you can see where we were making about 71 cents a ton.

). Is that before your GA?

A. That’s after G and A, Gand A is in that figure.

). In the figure that you gave us?

A. That’s right.

). What year was that, please?

A. 1963.

Q). Is that for the whole vear?

A. That’s for the whole year.

$510 (). All right. Now, how much or during how much

of that vear were you shipping that coal?

984)

Testimony of T. J. Hoff man—Direct

A. The whole year.

(). The whole year you were shipping coal to TVA?

A. TVA, yes, sir.

(). What about 1964?

A. 1964 cost was $2.56, no, the cost was $2.723.

Q). All right. Mr. MeMahon, Exhibit 388 shows that th

company realized a net income before taxes in

This text is long and has been trimmed here. Open the source document for the complete record.