The Caledonian Company was organized in 1888 to operate a coal mine at Gallup, N. M., on the Santa Fe.
The company sold large quantities of engine coal to the Santa Fe. The contract expired in 1898 or 1899, and was not renewed, the parties not being able to agree on the price; but the Santa Fe continued to buy more or less coal from the Caledonian till 1901. Some time previous to the expiration of the contract, the other mines at Gallup came under the control of the Colorado Fuel Company. An agent of the Colorado Company asked the Caledonian manager to name a price on his property, but he declined to do so. “Soon after the Colorado Company took possession of these mines, the Santa Fe system stopped receiving engine coal from the Caledonian Company.” The Caledonian had a contract for engine coal with another road, the majority of whose stock was owned by the Santa Fe. This contract was also terminated in 1903, the manager of the road stating that he did it, not because of any dissatisfaction, but by direction of the purchasing agent for the Atchison.[[181]]
The Caledonian sought other markets, but found itself handicapped by discriminating freight rates. Coal from the Colorado Fuel Company’s mines at Trinidad and at Gallup was being supplied at a price which just about equalled the freight rate alone from the point of production to destination. For example, the rate on lump coal from Gallup to Las Cruces was $5.65, and the coal was selling at the mine for $1.60 to $2.50 per ton; yet Gallup lump coal from the Colorado Fuel Company’s mines was being sold in Las Cruces for $5.65 a ton, exactly what the rival company, the Caledonian, would have to pay in freight. The Caledonian shipped coal to Silver City, N. M., paying the published rate, $5.90 a ton, while the Colorado Company was able to deliver Gallup coal at Silver City at $5.75 total for freight and cost of coal. This was in April, 1900. Later, the Caledonian shipped to Silver City at a rate of $5.75 per ton, just what the Colorado sold for, freight and all. As Gallup, Silver City, and Las Cruces are all in New Mexico, the Interstate Act does not apply to traffic between those points; but “Mr. Bowie (manager of the Caledonian) testified that he had made many shipments from Gallup to El Paso, Tex., upon which he paid the published rate, and that he found the same competitive conditions at El Paso and at points in Arizona and Mexico which existed at Silver City.”[[182]]
The result was that the Caledonian and other mines were practically driven from the market, their business brought to a standstill, and the Colorado Fuel Company obtained a virtual monopoly of the trade that should have been divided with these companies.
Before the Senate Committee, 1905, in answer to a question by Senator Kean about the so-called discriminations in the matter of the Colorado Fuel and Iron Company and the Santa Fe Railroad, Mr. Hearne of the Colorado Fuel Company said: “This matter has been brought about largely by sensational newspapers.... The coal produced by the Gallup people is inferior,[[183]] carrying not more than half the heating power of our high-grade bituminous. If the railroads have not extended to them the same rate they have extended to us, I presume it is because the people at Deming and El Paso, etc., do not want that fuel at any price.”[[184]] In other words, the Gallup coal was so poor that the people at Deming did not want it anyway, and so the railroad put a prohibitive rate on it to keep the people at Deming from buying it instead of the far superior Colorado coal which the people were determined to buy anyway.
The Santa Fe used to own and operate coal mines, but in 1896 leased them to the Colorado Fuel and Iron Company under a contract[[185]] supposed to cover the question of freight rates. Afterward a circular in reference to coal rates was issued from the central office of the Santa Fe in Topeka.[[186]] It stated that coal originating at certain points (where the Colorado Fuel and Iron Company had mines) would be delivered when consigned to certain specified industries or parties at prices covering both freight and cost of the coal, which total prices might be, as we have seen, no greater than the published freight rate alone. The circular was headed: “This publication is for the information of employees only, and copies must not be given to the public.”[[187]] And it gave notice to Santa Fe agents that the Colorado Company’s coal shipped to points on the Santa Fe was “to be billed at figures furnished by the Colorado Fuel and Iron Company which will include the freight rate and the price of coal.”[[188]]
The following questions of the I. C. C. counsel, Mr. Field, and answers by Mr. Biddle, the general traffic manager of the Santa Fe, are of interest in this connection:
“Mr. Field. You did not advise the Commission that the rate you made (on the Colorado Company’s coal) included the price of the commodity?
“Mr. Biddle. No.
“Mr. Field. Why didn’t you?