bore to the 1925 costs for Minnesota and Wisconsin, for the selected years of 1930, 1936, 1939 to 1941, and 1944 to 1946.

4. Costs were also developed for the Great Northern based on Minnesota and Wisconsin freight operating expenses, rents, taxes, passenger deficits, and an allowance for return, with transportation expenses adjusted to reflect the added costs during the ore season, for the years of 1940, 1941, 1945, and 1946.

5. Great Northern costs given for the year 1946 are based on freight operating expenses for the Mesabi division and on rents, taxes, and passenger deficits, and return on the cost of property for Minnesota and Wisconsin.

In addition, complainant introduced the out-of-pocket and fully distributed costs, excluding allowance for return but including dock cost, for the handling of iron ore by the Duluth Missabe.

A brief explanation of the procedures used in the development of costs under each basis follows:

1. Cost of Duluth Missabe based on system expenses.-The operating expenses for each general account (maintenance of way, maintenance of equipment, transportation, etc.) for the years 1922-47 were divided by the system revenue ton-miles to obtain the unit cost per revenue ton-mile for each account for each year. Similarly the unit cost per revenue ton-mile was computed for railway tax accruals and net rents, passenger deficits, and an allowance for return on the cost of property. The return on the cost of property for all years prior to and excepting 1939 was computed by adding to the value shown in Valuation Docket No. 369 (26 Val. Rep. 387) the additions for each year and deducting the accrued depreciation shown by the carriers. The figure for the year 1939 was obtained from Statement 4142 issued by the Bureau of Transport Economics and Statistics and represented the recommended value furnished by the Commission's Bureau of Valuation. The cost of property for the year 1940 and subsequent years was computed by adding to this recommended value subsequent additions and deducting accrued depreciation. The return was based on a rate of 5.75 percent for the years 1922-37, inclusive, and a rate of 4.75 percent for 1938 and subsequent years.

The unit costs described above were then multiplied by the iron ore ton-miles and the products aggregated to obtain the total cost of handling the iron ore traffic. This total cost was then divided by the total long tons of iron ore to obtain the cost per long ton.

In computing an allowance for return, complainant first used the freight portion of the cost of the property, based on an operating expense apportionment of the total cost of the property. In a later study, complainant assigned the total cost of return to freight service. This latter study showed a cost for the movement of the iron ore of 81.3 cents per long ton for the year 1946 and 81.2 cents per long ton for the year 1947.

2. Great Northern costs based on system expenses adjusted to reflect the difference in system costs and the Mesabi division costs.-Complainant developed the costs as follows:

a. The Mesabi division costs per revenue ton-mile for the year 1925 were computed by dividing the total freight operating expenses shown in defendants' exhibit submitted in Docket 17,000, Part VII, Grain and Grain Products Within Western District and for Export, by the revenue ton-miles from that exhibit.

b. The cost per net ton-mile, thus computed, was divided by the Great Northern's 1925 system cost per net ton-mile to obtain the ratio of the 1925 Mesabi division costs to the system costs.

c. This ratio was then multiplied by the system cost per net ton-mile computed for each of the years 1930, 1936, 1939 to 1941, and 1944 to 1946 to obtain the socalled Mesabi division costs.

d. The so-called Mesabi division costs were then multiplied by the long tons of iron ore handled in each year to obtain the aggregate costs.

e. An allowance for passenger deficits was computed by dividing the passenger deficits (obtained by subtracting from the system passenger revenue, the passenger expenses, rents, and taxes) by the net ton-miles and multiplying the resultant unit cost by the ton-miles of iron ore.

f. An allowance for return on the cost of property was computed based on a rate of 5.75 percent for the years 1922 to 1937, inclusive, and on a rate of 4.75 percent for 1938 and subsequent years. The return was computed in the same manner as described above for the Duluth Missabe costs.

The costs developed under this basis for the year 1946 were 59.4 cents per long ton.

3. Costs for Great Northern based on computations for lines in Minnesota and Wisconsin adjusted by the ratio that the net ton-mile costs for the Mesabi division for the year 1925 bore to the net ton-miles for Minnesota and Wisconsin.-The cost was computed in the same manner as described in section 2 above, except that the figures reported by the Great Northern to the States of Minnesota and Wisconsin were used instead of the system costs. The cost of property in Minnesota and Wisconsin was computed from the records of the two State commissions by adding to the values as of I. C. C. valuation date, the additions reported by the carriers, minus the depreciation for each of the years 1922-38, inclusive. The value for the year 1939 was obtained by multiplying the cost of property thus computed by the ratio of the system costs of reproduction new, less depreciation, from exhibit 11, in Ex Parte 148, to the total system cost of property as of December 31, 1939. The figures for the subsequent years were obtained by adding the additions reported by the carrier in each year and deducting the accrued depreciation as reported to the State commissions.

4. Cost for Great Northern, based on operating expenses, rents, taxes, passenger deficits, and return for lines in Minnesota and Wisconsin with transportation expenses adjusted to reflect added expenses of handling iron ore.-Complainant computed the cost by first determining the unit cost per net ton-mile for all operating expenses, rents, and taxes, except transportation expenses, for lines in Minnesota and Wisconsin. The unit cost per revenue ton-mile for the transportation expenses was computed as follows:

a. The Great Northern system transportation expenses, for the month of April, which was considered by complainant as reflecting the normal cost for the movement of traffic other than iron ore, were divided by the days in the month to obtain the daily average expense.

b. The average cost, thus computed, was then multiplied by the total days in the months of May to November, inclusive, to obtain the expenses for the handling of the so-called "basic traffic" in the iron ore shipping season.

c. The expenses for the so-called "basic traffic" were subtracted from the actual system transportation expenses for the months of May to November, inclusive, to obtain the added transportation costs (i. e., the costs excluding expenses of handling the basic traffic) incurred during the ore shipping season.

d. The added ton-miles (i. e., the difference between the actual ton-miles and the ton-miles applicable to the so-called "basic traffic" for the months of May to November, inclusive) for the ore season were similarly computed.

e. The added transportation expenses for the ore shipping season (item (c) above) were divided by the added ton-miles for the corresponding period (item (d) above) to obtain the system unit cost per ton-mile.

f. The system unit cost per ton-mile for transportation expenses, thus computed, was then substituted for the actual unit cost per ton-mile for transportation expenses computed for the Great Northern operations in Minnesota and Wisconsin.

The costs included passenger deficits and an allowance for return at 4.75 percent of the recommended value for property in Minnesota and Wisconsin, computed as described above. The 1946 costs of handling iron ore computed on this basis were 82.5 cents per long ton.

In addition, estimated costs for the year 1947 were computed, based on the 1946 expenses adjusted to reflect 1947 increased costs and 1947 ton-miles. The adjusted costs were computed as follows:

a. The increased costs for the year 1947 over 1946 for the Great Northern were obtained from an exhibit in Ex Parte No. 166, general rate increases, 1947. Similarly, the added ton-miles, i. e., the increase in ton-miles 1947 over 1946, were obtained from the same exhibit.

b. The increased costs were divided by the added ton-miles to obtain the unit cost per ton-mile for the added traffic in the year 1947 compared with 1946. c. The 1946 total iron ore shipments were subtracted from the 1947 total iron ore shipments to obtain the increased iron ore tons for the year 1947 over 1946. The latter figure was multiplied by the average haul for iron ore shipments in the year 1946, to obtain the increased ton-miles for the iron ore traffic 1947 Over 1946.

d. The increased ton-miles of iron ore thus computed were multiplied by the unit cost per ton-mile for the added traffic (item (b) above) to obtain the estimated aggregate added costs applicable to the iron ore traffic for the year 1947. e. The estimated added cost of iron ore for the year 1947 computed as described In item (d) above, was added to the 1946 actual costs and the sum of these costs was divided by the sum of the 1946 tons and the estimated added tons to be handled in the year 1947 to obtain the estimated costs for the year 1947.

The costs of handling iron ore computed on this basis were 81.1 cents per long ton.

5. Costs for the Great Northern for the year 1946 based on freight operating expenses for the Mesabi division and based on rents, taxes, passenger deficits, and return on the cost of property in Minnesota and Wisconsin.-Complainant computed the cost by determining the unit cost per net ton-mile for each general account based on the freight operating expenses for the Mesabi division which were furnished by the defendant. The Mesabi division costs were then multiplied by the actual net ton-miles of iron ore handled in the year 1946 to obtain the aggregate costs. The latter costs were divided by the total long tons of iron ore to obtain the cost per long ton. The cost for rents, taxes, passenger deficits, and allowance for return on the cost of property were computed in the same manner, with the exception that the figures were based on the data reported by the Great Northern to the States of Minnesota and Wisconsin. The cost of property was computed as described in section 3 above.

The total costs computed on this basis, for the year 1946, were 83 cents per long ton.

Mr. WARD S. BOWMAN,

EXHIBIT S-43A

THE LAKE SUPERIOR IRON ORE ASSOCIATION,
Cleveland, Ohio, April 20, 1950.

Room 345 B, Old House Office Building,

Washington, D. C.

DEAR MR. BOWMAN: In response to your request for data on the shipments of iron ore by Butler Bros. and by Evergreen Mines Co. in the period shown by the tabulation I submitted on April 18, the figures are as follows (gross tons. in thousands):

These were included in my tabulation as "Other Ore Companies" for those years, as the list of companies included only those which were the principal producers last year.

Sincerely yours,

Order No. 45344.

EXHIBIT S-45

REPUBLIC IRON & STEEL COMPANY

SOUTHERN DISTRICT

PURCHASING DEPARTMENT

Woodward Building

M. D. HARBAUGH.

Birmingham, Ala., January 4, 1923. 32

Mr. JOHN W. HENDRY,

Cartersville, Ga.

Please ship us via

to Thomas, Ala., the following goods:

QUANTITY AND DESCRIPTION

Three cars of manganiferous ore per week.

Order to be canceled by either party on 30 days' written notice.

Shipments to start at once from Cartersville, Ga., same to be billed to Mr. John W. Hendry, Thomas, Ala.

All ore received and analyzed at Thomas Furnace between 1st and 15th of each month to be paid for on the 20th of that month, and all ore received and analyzed No at Thomas Furnace between the 15th and last day of that month to be paid for on the 5th of the following month.

Cartersville Railroad weights and Thomas Furnace analyses to govern settlement.

It is contemplated that the ore will run between 10% and 20% in manganese, and for ore analyzing between these points we are to pay at the rate of 25¢ per unit for the manganese, and it is contemplated that the iron will run around 25%, and for the ore so analyzing we are to pay 5¢ per unit, per ton of 2,240#, plus freight f. o. b. cars Thomas Furnace, Alabama, but in case the ore received runs higher than 20% in manganese, the maximum amount to be paid per ton of 2,240# f. o. b. cars Thomas Furnace shall not exceed $6.25, plus freight.

Under this contract it is contemplated that no ore running less than 10% in manganese will be shipped, and we may reject any such ore running less than 10% in manganese, but with the option to accept same and make settlement at 15¢ per unit down to 8% for the manganese, and 4¢ per unit for the iron per ton of 2,240#, plus freight f. o. b. cars Thomas Furnace.