is correct, they have issued certificates and permits to something in the neighborhood of 1,100.

However, in my experience with it, I would say that perhaps 400 would be tops of those who are now operating. The others have ceased operation for one reason or another. As a matter of fact, I think there is pending-and perhaps it is before this committee; I do not know-a bill sponsored by the Interstate Commerce Commission authorizing it to withdraw from a carrier its operating right for nonuse under certain conditions.

Mr. HARRIS. Yes.

Mr. EISENHART. It is to meet that situation. A great many carriers by water received grandfather certificates or permits under the 1940 act because of past performance and what they happened to be doing on a specified day in 1940. When the war came along, many of them went out of existence for one reason or another, and they have not reinstated their operation.

Mr. HARRIS. How many of the so-called small, unregulated water carriers, most of whom are barges, I imagine, are there?

Mr. EISENHART. I would have to hazard a guess, and I do not think it would be very helpful. There are substantially more unregulated carriers, I would think, than there are regulated. The relationship, percentagewise, I could not give you.

Mr. HARRIS. I seem to recall that Mr. Wright, or one of the other witnesses this morning, had something to say about that.

Mr. EISENHART. My recollection of Mr. Wright's testimony was to this effect, that there were 160 members of his organization, some of which were terminal operators, shippers, and so forth, and that a substantial number of those were in that category.

And Mr. Thompson's organization as a base, and they have 208 carriers now, I believe, there are perhaps 160 of those, not all of whom are in Mr. Wright's organization, who would be unregulated. I think the higher percentage is unregulated.

But, Mr. Chairman, when you are talking about an unregulated transportation system of the water carriers, it must be kept in mind. that there are several types of unregulated transportation by water coming under various sections of the act. I specifically refer to the fact that petroleum, for example, is exempt by name under conditions, namely, that it moves in barges certificated for operation pursuant to acts and regulations of the Coast Guard. So when you speak of unregulated water carriers, and you seem to get this big picture, I think to get the picture in which you are interested you have to subtract from that those that are exempt for reasons other than the so-called bulk exemptions.

Mr. HARRIS. With reference to your opposition to the Commissionsponsored bill, H. R. 6208, I have just obtained a copy of the justification which the Commission filed with their request for this proposed legislation.

Mr. EISENHART. May I ask, is that the one dated May 3, 1955, sir? Mr. HARRIS. Yes. I am not sure that this statement of the Commission has been included in the record.

The CLERK. I just inquired about that, and we think it is, sir. But that is in the Printing Office now.

Mr. HARRIS. I wish you would have that checked, to be sure that it is in there. If not, I want it to be included in the record along with

78450-56-pt. 3-22

the report on the bill. I have a feeling that at the time we just had the letter and not the justification.

I think the record would not be complete unless the Commission's justification of its requested proposal was included with the letter. I just noticed that little matter a moment ago.

(The letter referred to appears on p. 286.)

Mr. HARRIS. In other words, on that particular problem, you simply disagree with the Commission's views altogether?

Mr. EISENHART. Mr. Chairman, I do, about 100 percent.

However, I do not disagree with their objectives, and I do not disagree on the first page and part of the second page of their statement, where they refer to two cases that they just handled, which had the circuitous problem confronting them.

That does give them lot of concern.

However, it has grown up as a matter of Commission policy that, a a general rule, they do not grant circuitous routes running over, let us say, 80 percent. But it is something that they have created themselves.

I think that the Commission felt, if they felt they had too much work within the circuitous route problem, they have it within their own hands to cure it under the present fourth section, or to cure it by amending the present act by a separate section which leaves the fourth section alone.

You see, there are two things that are really bad about this, and that is taking out the words "reasonably compensatory." They mean something. Really, a fourth-section rate is a great concession to a party seeking it. It is so difficult, and I found it so many times in trying cases, to convince a businessman that there is anything right

about a fourth-section rate.

I had a very, very large case in Minneapolis, involving molasses. Two or three of the farmers and small feed people up there pretty nearly created a riot when the thing came out on the record. They saw, daily, a railroad car go through their yards, two of them go through their property on the edge of it, and go a hundred miles beyond at about 25 cents a hundredweight, I think it was, under what they had to pay for their molasses.

That is what the fourth section will let the railroads do. But they have to justify it. If you take out the requirement of the "reasonably compensatory" feature, then I do not know where we are going to end up.

some.

Mr. HARRIS. According to the Commission report, the Transportation Act of 1920 added what they referred to as two refinements; that is, reasonably compensatory and the so-called equidistant provision. Mr. EISENHART. That is right. They are not concerned with here. Mr. HARRIS. The Commission says that both proved to be troubleThe equidistant provision was repealed in the Transportation Act of 1940, when the "reasonably compensatory" provision did not appear quite so objectionable by comparison. In retrospect, however, it is now equally clear, the Commission said, that the carriers should not be required to secure our permission for the publication of rates over circuitous routes equivalent to the going rate over direct routes when, in their managerial discretion, such rates are necessary because of competitive factors.

That seems to be a rather interesting statement of the Commission on it. Mr. EISEN HART. Yes, sir; it is interesting, but I cannot agree with it. Here is a situation. It may be-and as I pointed out, it can befor example, from New Orleans to Chicago, that the direct route, and, therefore, the direct-line rate, is via water carrier or barge line. A barge-line rate, f. i. o., which is from inbarge to inbarge, and does not include the terminaling charges, would in all instances be substantially below a railroad rate between the same termini which would cover all services. But, under this bill as it is now written, the competing rail lines could reduce to meet that water carrier f. i. o. rate.

It means they are out of business.

Mr. HARRIS. I am glad to have your emphasis on this point, because I do not recall that any other witnesses have made such an issue out of this particular provision. On the other hand, there have been a great many that have complained rather loudly about the circuitous requirements.

Mr. EISENHART. I think something must be done about

Mr. HARRIS. Excuse me. And particularly the Quaker Oats representative, and the representative of General Foods.

Mr. EISENHART. I think the intention is all right. I do not quarrel about that.

Mr. HARRIS. They seem to think that it was seriously interfering with their company business, that it was a real handicap to them. Here is what the Commission says about that, too:

We wish to point out that under other sections of the act

and I suppose there they are referring to other provisions of the fourth section as well as other sections in the Interstate Commerce Act

the Commission is constantly seeking assurance that all rates subject to its jurisdiction, including those published under section 4 are not unjust or unreasonable, unjustly discriminatory, nor unduly prejudicial. For this reason we do not believe that the proposed amendment would detract substantially from our jurisdiction but

and this is an interesting statement of the Commission

on the other hand allow us greater discretion in the administration of this section which should inure to the benefit of the carriers as well as the public.

That is a pretty definite statement on the subject.

Mr. EISENHART. I agree, it is very definite. But I think there is some confusion. Referring to the proponent that you mentioned, and I think it was Quaker Oats, I did not hear their testimony, but I think I can understand, perhaps, what they were referring to, and this happens quite often. A group of carriers come in, 8 or 10 of them, perhaps, and ask for section 4 relief, of the direct lines and perhaps some circuitous lines. A hearing is held, the rate is found justified, and goes in. But at the time, some other lines which were 60-percent circuitous or 70-percent circuitous did not see fit to come in and do it. They were not interested in the traffic. But all of a sudden they are.

Under that situation, under the present law, they would have to come in and start all over again. They could not be covered by section 4 relief given to the first group. That, I think, is what bothers the Quaker Oats people and I think that is what bothers the Commission. Something should be done, perhaps, to cure that. But this

bill goes further than that. This permits, and it can be used, the 2 horrible examples I gave you, one of meeting the water carrier rates on the nose, and the other where a single group comes in, the absolute short line, and no other rail carrier comes in, they all sit back, and the other 150, or however many lines are interested over another 125 routes do not apply, and they let the one who can make the best showing appear.

For example, from New Orleans to Chicago, probably the IC is the direct line by rail, and they let the IC justify it. They probably could show ton-mile earnings of maybe 10 mills. But if they put the route of the Southern in there, through Atlanta and into Chicago, and there is a route that way, they would probably show earnings of 2 mills, which would not be compensatory.

Thus, the Commission could readily find that the rate for all would not be justified since they came in as a group. But under this procedure, that could not happen to railroads.

Mr. HARRIS. I think they showed us a tariff one day several inches thick, which resulted from the tariffs requirements for the publication of circuitous routes. They were complaining very bitterly about the difficulty of looking into all of them. You can find out how many complicated circuitous routes exist from Kansas City to Mobile Ala., and I have forgotten the exact illustration, but it is fantastic, frankly. We could hardly understand such a requirement.

Mr. EISENHART. It is absolutely amazing and baffling. I have been in probably as many water carrier cases during the time I have been practicing as anyone. It is just incomprehensible. If you will permit me, I will give you one little example to take a second on the record, to show you what bad situation the tariffs are in.

In the sulfur situation, which I talked about at length, along with the general case which broke in 1950, when the railroads were permitted to reduce the rates half way, it was set down for hearing with 2 or 3 other cases, with one little complaint involving a rate to Minneapolis, as I recollect.

It was rather insignificant except to one little complainant. Everybody had gone home from the hearing. The railroads left one counsel there to kind of lock up, and so had the water carriers. The gentleman who had made the complaint took the stand and made the statement that the railroads were trying to put in 42 cents to Detroit, and that we, the water carriers, were insisting that they maintain their rate of 48 cents, where, as a matter of fact, the rate was 41 cents and had been for 6 years.

Well, absolute chaos resulted. Everyone went upstairs and got the books out that you referred to, and over the circuitous routes, back up through Chicago and coming back over to Detroit, here was a 41-cent rate. It does need fixing, but I do not think this will do it.

Mr. HARRIS. Thank you very much. I appreciate your appearance today.

Mr. EISENHART. I appreciate the opportunity, and thank you, sir. Mr. HARRIS. That concludes the witnesses scheduled to appear this

afternoon.

I have a statement from Mr. Kenneth C. Baker, president of J. D. Streett & Co., Inc., St. Louis, Mo. Mr. Baker requests permission that the statement be inserted into the record. That may be done.

(Statement referred to follows:)

STATEMENT OF KENNETH C. BAKER, PRESIDENT OF J. D. STREETT & CO., INC., ST. LOUIS, Mo.

My name is Kenneth C. Baker. I am president of J. D. Streett & Co., Inc., of St. Louis, Mo., wholesale marketers and distributors of petroleum products. We are an absolutely independent company and have been in business since 1884. Since the provisions of bill S. 1920 and bill H. R. 6141 are identical, our references herein are made to S. 1920. Our particular objections are to section 14, which would repeal the bulk commodity exemption, which appears in subsection (b) of section 303 of the Interstate Commerce Act (49 U. S. C. A., sec. 903), and section 13 of S. 1920, which redefines "common carriers by water and contract carriers by water."

Our objections to the proposed changes in these two sections are prompted by the fact that we have invested somewhat over $3 million in towboats and petroleum barges which operate on the Mississippi River inland waterway system. Our start in the transportation of refined petroleum products by barge was some 15 years ago and was occasioned of necessity. Being independent marketers and distributors of petroleum products, we found at that time that unless we could enjoy some cost advantages in 1 of the 3 ways open to such a company as our own, we would soon be eliminated from business by the pressure of lower cost competition. The three ways open to us were production of crude oil, refining, or transportation. Both production and refining were out of our financial reach. Pipeline transportation of petroleum products was also out of our reach, so that the only way left open to us was to transport our products by water.

Our first movements of petroleum products by water were made by independent carriers. However, we soon found that in order to assure ourselves of the movement as and when needed, it would be necessary for us to purchase our own equipment. In doing this we encountered a further problem. In order to have sufficient equipment to meet our peak periods, we found that we had surplus equipment during other periods of the year. Petroleum products are consumed seasonably and as an example, in the spring of the year when farmwork is being done, consumption is substantially higher than at other periods of the year. It was not possible for us to charter other equipment during the peak season as it was also the peak season for other marketers and all available petroleum barging equipment was being worked to the limit. Our solution, therefore, was to acquire enough of our own equipment to meet the peak period and to move material for other companies during such periods as all of our equipment was not required in our own service. This arrangement has worked very satisfactorily over the years and has enabled us to remain in a strong competitive position and, in addition, has enable us to supply needed services to other distributors of petroleum products. It has also resulted in a saving to the consuming public. This saving is described in the following excerpt from one of our advertising pieces.

The present system has worked well for many years and we do not believe that the removal of the bulk carrier provisions would return any worthwhile volume to the rails. A situation which the bulk carriers of petroleum on the Mississippi River system will probably soon have to face is the conversion of the Little Inch pipeline from natural gas to petroleum products. The Texas Eastern Transportation Corp., owners and operators of the line, propose to carry refined petroleum products through this line from the gulf coast and intermediate points to the Pittsburgh area at Moundsville, W. Va. A takeoff terminal would be built at Cape Girardeau, Mo., where petroleum barges would be loaded for movement up the Mississippi River. The line parallels the north bank of the Ohio River for its entire length and spur takeoffs are contemplated for such points as Louisville, Ky., and Cincinnati, Ohio, and in addition the plans include the building of a pipeline from Seymour, Ind., to Chicago, Ill. It is doubtful that petroleum carriers will be able to compete costwise with this pipeline system but unless flexibility of rates is possible, their continued existence is doomed. While it is our understanding that petroleum is not included at this time in the products that it is proposed be excluded from the bulk carrier exemption, we feel it is only reasonable to assume that it will be a short while before petroleum would be added to the list of products to be excluded.

The constantly increasing demands of the unions operating on the river for higher wages and more time off is increasing the cost of water transportation materially and should further restrictions and regulations be imposed upon this