Lakes), coal and oil marketing facilities in New England (which could be reached by a pipeline to the eastern seaboard, thence Hanna's own ships to New England).

Our efforts to continue operation, as the one true common carrier, ready to serve the largest as well as the smallest industry or shipper, is a constant struggle.

Since 1939 the costs to the railroads of fuel, labor, and material have been steadily rising. The extent of this rise is indicated in appendix K consisting of two pages.

On page 1, I have shown for the United States, for the years 1939 through 1961 the fuel, material and wage rates indexes based on average for the year 1947-49 equaling 100.

Also shown are the indexes for all materials and the combined indexes for material prices and wage rates. On page 2 similar information is shown for the eastern district.

Additionally, in the extreme right-hand column of page 1, I have shown a comparable index (1947-49-100) of the average revenue derived from bituminous coal originated by class I railroads to 1960. In 1948 the indexes for combined material prices and wage rates and also the index for average revenue were nearly equal; 101.6 for the former and 99.88 for the latter.

(App. K follows:)

APPENDIX K

Indexes of charge-out prices and wage rates, United States

NOTE.-Index of charge-out prices reflects original purchase price of materials consumed by railroads during the year. Index of wage rates reflects average rate of straight-time hourly pay of railroad employees. Source: Bureau of Railway Economics, Association of American Railroads.

Indexes of chargeout prices and wage rates, eastern district

NOTE.-Index of chargeout prices reflects original purchase price of materials consumed by railroads during the year. Index of wage rates reflects average rate of straight-time hourly pay of railroad employees Source: Bureau of Railway Economics, Association of American Railroads.

Mr. GILL. The statement indicates that by 1960 the index for material prices and wage rates had risen by 80 percent but the index for average revenue had risen by only 24 perecent. The result of these conditions is shown in my appendix D setting forth the deficits incurred.

This severe increase in the cost of material and labor in the face of a declining traffic pattern should be cause for alarm. Private carriage by various means has grown enormously as a result of Government expenditures for highways and waterways for which the user pays nothing in the case of waterways, and only inadequately in the case of highways.

The common carrier railroad, truck, or water carrier is indeed in serious straits because of our present overall transportation policies. I urge, strongly, that S. 3044 be given a long, deliberate examination that Congress may not add to the injustices and infirmities of the present transportation policy.

That completes my statement, Mr. Chairman, and I appreciate your listening to it.

Senator LAUSCHE. Now if this project as a public carrier can transport coal at a reduced rate, why should not it be permitted to do so? Mr. GILL. Well, I think, Mr. Chairman, that the railroads can supply the service and transport the coal, rather than have a private pipeline who is going to preserve to himself this important market. Now for us to lose that business that they are talking about as a start, and have it possibly grow, it could mean that the resulting, the

remaining revenue on the railroads, would have to be assessed higher freight rates for us to keep alive.

Senator LAUSCHE. I notice in your answer you have said that the railroads can do it, and a private carrier should not be permitted to displace the service that the railroads are rendering.

Do you make your differentiation on the basis that this will not be a public carrier but a private carrier?

Mr. GILL. I don't think in actual operation this will ever be a public carrier and I will tell you why.

You can call it a common carrier or contract carrier or anything you want to, but after 6 to 8 million tons of coal to the seaboard, that is the capacity of the pipeline; they have that coal and if they put their own coal in it, I can't conceive of them accepting anybody else's coal in it.

It would be the same as if I were a trucker and had common carrier operating rights from Chicago to New York, but I only had four trucks. I am a common carrier, but I can only take one man's business, which is four truckloads.

That is, I think, the significance of trying to discuss this as a common carrier operation. I don't believe it is a common carrier operation.

Senator LAUSCHE. That is, you are of the opinion that it will be a private carrier, carrying coal mined by that private carrier in its own proprietary holding?

Mr. GILL. That is correct.

Senator LAUSCHE. Are you a lawyer?

Mr. GILL. I am not, sir.

Senator LAUSCHE. All right, then, I will not ask you any legal questions.

Senator LAUSCHE. Mr. Martin P. Burks, Norfolk & Western Railway Co.

STATEMENT OF MARTIN P. BURKS, GENERAL COUNSEL, NORFOLK & WESTERN RAILWAY CO.; ACCOMPANIED BY WILLIAM L. BAILES, JR., COAL TRAFFIC DEPARTMENT, NORFOLK & WESTERN RAILWAY CO.

Mr. BURKS. Mr. Chairman, my name is Martin P. Burks. I am general counsel of the Norfolk & Western Railway Co., whose offices are in Roanoke, Va. I have with me Mr. William L. Bailes, Jr., of our coal traffic department, and I hope it will be permissible for him to sit at the table with me to answer any questions which may fall within his particular field.

Mr. Chairman, I have filed with the committee a statement, but in the interest of time and to be sure those who follow me will have ample time, I propose to summarize it briefly.

Senator LAUSCHE. The statement will be included in the record. (The prepared statement of Martin P. Burks follows:)

PREPARED STATEMENT OF MARTIN P. BURKS, GENERAL COUNSEL, NORFOLK & WESTERN RAILWAY CO.

My name is Martin P. Burks. I am general counsel of Norfolk & Western Railway Co., whose general office is located in Roanoke, Va., Norfolk & Western

84356-62- -13

for a number of years has been the largest originating carrier of coal in the United States. In 1961 it hauled about 1 out of every 7 tons of coal mined in the United States. Over 67 percent of its revenue is earned from the carriage of coal and coke. Nearly 20 percent of the coal originating on the Norfolk & Western is destined for the utility market. It is apparent, therefore, that Norfolk & Western has a vital interest in the bill which is the subject of this hearing.

Norfolk & Western as a common carrier by railroad has been delegated the power of eminent domain by the States in which it operates. Eminent domain for definition is the power to take private property for public use. The delegation of such power by a sovereignty accordingly requires a determination that the proposed use is a public one. It is not sufficient, however, that there be a mere proposal of public use; it is also necessary that safeguards be set up to insure that the proposed public use will become an actual public use. In every instance in which the Federal or a State Government has made a significant delegation of the power of eminent domain, elaborate systems have been established to regulate the companies enjoying such privilege. Such regulation is designed to insure that the property to be condemned will be operated for the public benefit.

As a common carrier by railroad, Norfolk & Western is subject to very strict and detailed regulation, both on the Federal and the State level. Under part I of the Interstate Commerce Act, it must obtain a certificate of public convenience and necessity in order to extend or abandon its lines. It must furnish transportation upon reasonable request at reasonable and nondiscriminatory rates. Moreover, it must provide facilities, including right-of-way, tracks, bridges, terminals, locomotives, and cars, necessary to provide such transportation.

The services offered by a railroad are not, therefore, subject to the whim of its management or stockholders. It must function as a common carrier, offering transportation services at reasonable rates upon reasonable request. Federal and State regulatory agencies are empowered to see that it carries out those duties.

The operation of an oil pipeline has also been generally considered an activity which is touched with a public interest, and oil pipeline companies have been given the power of eminent domain in a number of States. Such companies are also subject to detailed regulation by the States. For example, sections 6018 through 6049 of the Texas Railroad Statutes delegate extensive authority to the Texas Railroad Commission for the regulation of pipelines. That commission has, among others things, authority over rates, service, extensions, abandonments, and discrimination. Similar requirements may be found in title 51 of the Oklahoma Statutes as well as in other oil-producing States. Oil pipeline companies are further regulated to some extent under part I of the Interstate Commerce Act.

The electric utilities also have been delegated the power of eminent domain by the States but likewise are closely regulated by the Federal Power Commission and State public service commissions.

The only significant delegation of the power of eminent domain by the Federal Government in the transportation field has been for gas pipelines. Such delegation appears in the Natural Gas Act of 1938, as amended, where a gas pipeline company, if it has in force a certificate of public convenience and necessity, may acquire right-of-way and connected property in eminent domain proceedings before a State or Federal court. This agency, like the ICC, is a quasi-judicial body, composed of personnel charged by Congress with the responsibility for administering, through their specialized skills and experience, a comprehensive regulatory scheme for the entire natural gas industry.

We now have a new type of enterprise which claims to be touched with the public interest, and, therefore, entitled to exercise the power of eminent domain. Congress is asked to delegate the power of condemnation for the construction of a coal pipeline. The proposed bill confers a Federal right of eminent domain, subject only to a finding by the Secretary of Interior that a grant of this rather extraordinary power is in each case a matter of "public convenience and necessity." The anomalous use of the phrase "public convenience and necessity" in the proposed bill has already been ably pointed out to this committee by Chairman Rupert L. Murphy of the Interstate Commerce Commission.

The term "public convenience and necessity," through countless decisions by the courts and regulatory agencies, has been transformed into a phrase of art. A certificate of public convenience and necessity requires a finding by the body of

administrators charged with enforcement of the governing law that an applicant is fit, willing, and able to perform the proposed service, and to conform to the requirements of the relevant act and regulations promulgated thereunder. It must further be found that the present and future public convenience and necessity require operation by the particular applicant of such service. Before granting such a certificate, the Supreme Court has started that the Interstate Commerce Commission, for example, must bring to bear an experienced judgment based on its expertise as the foremost governmental agency charged with implementing the national transportation policy declared by Congress. One of the primary factors to be weighed by the Commission in granting such a certificate is the effect of the proposed construction, extension, or abandonment on the national transportation system as a whole, not merely whether the proposal promises to profit the applicant. Apparently, as pointed out by Chairman Murphy, no such determination by the Secretary of Interior is intended. the first place, that executive officer is not charged with the responsibility nor is he in a position to weigh all the factors ordinarily considered in such a determination. If, as is suggested by Mr. Murphy, the determination by the Secretary of Interior is merely that the property will be put to a public purpose, the bill's use of the term "public convenience and necessity" is a complete misnomer. That term carries with it the necessary concomitant of an adequate statute providing continuing assurance that a truly public service will be performed. Only then will it be certain that condemnation of private property will not result in what is actually a private use.

In

The bill before this committee is therefore defective. It delegates granting of the power of eminent domain to the wrong agency. Of even greater importance, it fails to provide an adequate regulatory system for insuring that the private property acquired under such power will actually be used for the public benefit. If this bill were adopted, coal pipelines would be unique in holding the power of eminent domain without being subject to significant regulation.

The authority to regulate a coal pipeline under part I of the Interstate Commerce Act would be completely inadequate. A coal pipeline company could build such lines to such mines and utilities as it selected. The authority to regulate its rates would have no significance under such circumstances. The willingness to carry coal for others also would have no significance. Such an offer would be small comfort to a mine operator who must transport his coal a considerable distance in order to reach the preparation plant, while his large competitor just happens to have his mine located at the preparation plant.

Railroad spurs have not been constructed to every mine, but even a quick glance at a railroad map of the coal-producing States will show the effort which has been made to make rail transportation reasonably available to all mine operators. For example, the Norfolk & Western serves over 215 mines. Only 11 of those mines produce as many as 100 cars per day, while 134 produce less than 25 cars per day. That rail system has been constructed at an expense which can only be described as enormous. The rail carriers not only stand ready, but are obligated, to enlarge further such system upon reasonable requests for transportation. There would be no similar obligation on a coal pipeline company. A coal pipeline would be constructed from one, or at most a few, of the large mines to one, or a few, of the large coal consumers. To call such a pipeline a common carrier is simply to ignore the meaning of the phrase.

The pipeline organization, certain of the coal producers and the utilities also contemplate entering into long-term supply contracts. Not only therefore would the large producers enjoy the benefit of being located at the pipeline, they would also have a guaranteed market for their product under a long-term contract. Any other producer would have to transport his coal to the pipeline, and then could market it only to the extent the utility happened to need coal in excess of that supplied under the contract. Railroads are not permitted to haul under contracts, rates, or charges of this nature.

The backers of this bill tell you that they can move coal cheaper than it is presently being moved by rail. I do not know whether or not that can be done. I doubt if they know, since the type of pipeline they envision exists only on paper. The only pipeline presently being operated differs significantly from a technological point of view from the one contemplated.

I am not surprised, however, at the pipeline people's claim that they can move coal cheaper. Allow me to take the cream of any market, and I will also be able to undersell other suppliers. If this Congress will permit the railroads to serve only the very large shippers and consumers of goods and to ignore all others, we will also lower our rates.