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The same result could occur if differentials were changed by action of carriers not serving our mines. Suppose they dropped their rates to meet truck or water transportation. Our carriers must make a similar reduction or force their coalmine shippers to absorb the reduction from their prices. The possibility of a constant shift in differentials between freight origin groups would indeed bring chaos and possibly disaster to many coal companies, and undoubtedly those having the highest freight rates to common markets, namely, those in the inner and outer crescents, including ours, would suffer the most.
Frankly, our interest lies in a continuation of the present provisions of the Interstate Commerce Act dealing with the regulation of the rates of rail carriers.
At this point, I would like to remind you that, in the parts of West Virginia, Virginia, and Kentucky where our mines are located, coal mining is the principal industry and directly or indirectly supports the great bulk of the population and of the public institutions and services. My company alone will distribute about $30 million in wages to coal miners this year. Any injury to the coal mines of these areas is an injury to all persons in them. We believe that we need the regulatory powers now vested in the Interstate Commerce Commission to protect us, and these areas, from economic strangulation by railroads.
I do not mean to say that we fear our rail carriers or that we are unfriendly with them. We think they realize that their prosperity and ours are linked together. But if this bill is passed they must meet the rate changes of competing rail carriers and may meet the rates of competing modes of transportation, and in the process my company and other coal companies served by these carriers can be badly hurt.
So much for the parts of the bill dealing with railroads. Now for the parts dealing with water carriers.
The bill proposed to repeal the exemption of dry bulk cargoes from regulation under the Water Carrier Act. I am told that sponsors of the bill are willing that the repeal apply only to dry bulk cargoes on inland waterways, so that the existing exemption would continue to apply to all cargoes on the Great Lakes and to liquid cargoes on inland waterways. For the life of me, I cannot understand the logic of this position. Either all bulk cargoes should be exempted on all waters or none should be exempted.
My company has for almost 50 years been engaged in transporting coal on the Ohio River. Until recently, the movement has been via rail from mines to port facilities at Huntington, W. Va., thence via barge on the Ohio River to points west of Huntington but chiefly to Cincinnati, where the coal is elevated from barge and either stored on the ground pending further shipment or loaded into railroad cars or trucks for movement to ex-river destinations. The company owns, and for many years has owned, a transfer facility at Huntington for transferring coal from railroad cars into barges, and an elevating facility at Cincinnati for elevating coal from barges to the yard, railroad cars, or trucks.
In the last few years, a market for our coal has been developed at the steel mills along the upper Ohio River between Wheeling and Pittsburgh. The premium coking coals of western Pennsylvania and northern West Virginia are getting scarce, and the mills along the upper Ohio River are taking larger quantities of coals from the southern districts 7 and 8 in which our mines are located. We are participating in this business and, to serve it, have recently constructed a new transfer facility at Kenova, W. Va., to transfer from railroad cars to barges coal originating on the Norfolk & Western Railroad and have enlarged our river fleet. We now operate 3 modern diesel towboats and about 120 steel barges of 1,000-ton capacity each. Our tows will handle from 10,000 to 20.000 tons of coal each, depending on a variety of factors. Presently we are handling more than a million tons per year of river coal. We look for a steady increase in the volume of upriver traffic in coal to supply coking coals to the steel mills, and we are shaping our sales program accordingly.
The transportation costs of bulk commodities on inland waterways are so much lower than those on railroads that there is actually no competition between the two forms of transporting such commodities. Speed is not an important item in water transportation of bulk commodities, the cargoes handled are assembled nsually at one point and move to a single, or to a very few, destinations, the tonnazes handled in each tow are tremendous. By comparison, many single cargoes of coal will contain twice the total tonnage of coal hauled by the longest train of coal ears.
All water carriers are now treated exactly alike. The bulk commodity exemp. tion applies to all, whether common carrier, contract carrier, or private carrier. They are free to compete with each other on exactly the same terms. There is no sound reason for changing this equality of competitive position.
My company does not desire to become a regulated common or contract carrier. In order to serve its customers, some of which are short of storage facilities and must therefore rely on regularity of deliveries of their coal supply, we must be in position to give preferential service. This we could not do if we were obligated by law to serve all customers alike without discrimination or favor.
When the Water Carrier Act was enacted several years ago we considered seriously the possibility of applying for a certificate as a common or contract earrier, and decided that since our river fleet is primarily an adjunct of our eoalmining business, we could not serve our own needs well if we assumed the status of a common or contract carrier. We felt that the bulk cargo exemptions were well-founded on both experience and reason, and hence decided to operate under the exemptions. We are still of that same opinion.
Actually, our river operations are handled by a wholly owned subsidiary, Island Creek Fuel & Transportation Co. If this bill becomes law, we will in all probability dissolve the transportation company, and Island Creek Coal Co. would itself handle all river operations as a private carrier transporting its own coal to market.
You may ask how, then, we are concerned with the proposal to repeal the bulk cargo exemption either in whole or in part. The answer is that repeal would drastically increase our cost of operations. Currently, we have spare capacity in parts of our facilities, and we dump, float, and elevate coal belonging to others, thereby keeping our river system fully occupied. Currently, also, we can erchange service with other carriers handling exempt tows, which again tends toward fuller utilization of our facilities as well as those of other river carriers. If the bill is enacted in its present form, we could not exchange services with other carriers, could not make use of our spare capacity by hauling for other carriers or cargo owners, and could not operate with existing flexibility. In short, as stated above, our costs of doing business would rise and our ability to serve our customers would decrease.
In my opinion, it is not possible to operate our river fleet without spare capacity to care for surges and emergencies. But I see no sound economie reason why we and other river carriers should be denied the right to make the most efficient use of our respective fleets.
I sincerely hope that this committee will work in harmony with other committees of Congress dealing with inland waterways. The Congress is now emharked upon a program of building a number of new high-level dams on the Ohio River which eventuallv will replace existing dams on the basis of about 5 existing dams per new high-level dam, and which will provide a minimum channel depth of 12 feet compared to the existing minimum depth of 9 feet, much longer distances between dams, and more and bigger lock chambers. The ultimate cost of this program will be hundreds of millions of dollars. When completed, it will vastly increase the capacity of the Ohio River to handle traffic and reduce the cost of river carriers. The Congress is thereby demonstrating a desire to lower still further the cost of water transportation on the Ohio River and to stimulate the volume of traffic on the river. But if this bill is enacted, it will end to slow down the expected growth of river traffic and raise both costs and prices of river carriers. The public would be denied the benefits of vast expenditures of public funds. The bill would be at cross purposes with a wellestablished existing public policy of Congress.
It is my sincere hope that H. R. 6141 will receive an unfavorable report by this committee.
I thank you very much for the opportunity to present my story in person.
Mr. CAMPBELL. In the first place, my name is Rolla D. Campbell. I live in Huntington, W. Va., and I appear here on behalf of Island Creek Coal Co., which is a producer of coal. I am general counsel of that company, and I appear in opposition to H. R. 6141.
Now, several organizations, of which this company is a member, have apneared here. I refer to the National Coal Association through Mr. F. F. Estes, the Property Owners Committee through William M. Maddox, and the Waterways Council, opposed to regulation extension
through Mr. David A. Wright, and his associated witnesses yesterday. We support the positions taken by those companies and I shall not take the time to duplicate the detailed reasons and analyses they gave as to the bill.
Beginning at the bottom of page 1 of my statement and running over to page 6, I outline the economic factors which affect the Island Creek Coal Co. and other companies similarly situated in marketing their coal, all of it moving to the markets by rail, and attempt to show from the facts there outlined, that we are interested not only in the level of rates which come about through the fixing of minimum and maximum prices, or rather, maximum rates, but also in the differentials maintained between the various competing coal fields. Those differentials are in terms of fixed cents per ton. And generally they have been worked out through long freight rate hearings before the Interstate Commerce Commission and their maintenance is absolutely vital to the ability of the companies in the various freight rate origin groups in reach the markets.
Beginning near the bottom of page 6, we set forth very briefly the reasons for our opposition to the proposal to repeal the present provisions of the Water Carrier Act, exempting bulk transportation from regulation. I shan't attempt to repeat what I have in those pages.
And then at the bottom of page 9 we call attention to the conflict in policy between that proposal to repeal the dry bulk exemption and the policy of the Congress in spending vast sums of money to increase the navigation facilities on the inland waterways. As you know the Congress now has the policy of replacing the low-level dams in the Ohio River with high-level dams. It will take hundreds of millions of dollars to complete that program. And, of course, the object of it is to provide more water transportation at lower cost. And we believe that the repeal of the dry bulk exemption would work in exactly the opposite direction. I thank you very much for permitting me to appear before you. Mr. HARRIS. We are glad to have your statement, Mr. Campbell. Mr. CAMPBELL. Thank you, Mr. Chairman.
Mr. Harris. Mr. Don Markham for the Air Transport Association. STATEMENT OF D. W. MARKHAM, ASSISTANT GENERAL COUNSEL,
AIR TRANSPORT ASSOCIATION OF AMERICA
Mr. MARKHAM. Mr. Chairman, in view of the limitations on your time, I would like permission to file my prepared statement which I have handed to the clerk and I will attempt to summarize it very briefly, if I may.
Mr. Harris. "Yes; you may do that, Mr. Markham.
(The statement referred to is as follows:) STATEMENT OF D. W. MARKHAM, ASSISTANT GENERAL COUNSEL OF THE AIR TRANS
PORT ASSOCIATION OF AMERICA Mr. Chairman and members of the committee, we have no desire to inject ourselves into the controversy provoked by the recommendations of the Presidential Advisory Committee on Transport Policy and Organization and we have do intention of doing so. The issues raised by the so-called Cabinet Committee report relate, for the most part, to matters which do not directly concern the air carriers. The statutory changes proposed by the Cabient Committee are
changes in the Interstate Commerce Act, under which various forms of surface transportation are regulated; the committee recommended no changes in the Civil Aeronautics Act under which air carriers are regulated.
The Cabinet Committee report does, however, contain one recommendation which is of direct concern to the air transport industry. That is the recomamendation appearing in section III of the report under the heading, "Special Governmental Rates." While the solution recommended by the Cabinet Committee is novel, the issue involved is not. The problem of special rate concessions on Government traffic has been discussed for a number of years. In fact, the problem had been pending before your committee for some time prior to the release of the Cabinet Committee report. Congressman Hinshaw introduced a bill, H. R. 8029, in the 83d Congress, which would have amended section 22 of the Interstate Commerce Act by striking out the references to free or reduced rates on Government traffic. He introduced an identical bill, H. R. 525, in the opening days of the present Congress and that bill has been pending before your committee since January of 1955. Consequently, as I stated earlier, the issue is not a new one, and the fact that the Cabinent Committee touched upon it in its report should not prevent its being treated as a separate issue by this committee.
Prior to the fall of 1953, the airlines had only an academic interest in section 22 of the Interstate Commerce Act. Even before it was used as a competitive weapon against us, however, we regarded the provision permitting free or reduced rates for the Government as an anachronism in the law. Reference to the legis. lative history of the Interstate Commerce Act and to the early judicial decisions interpreting it leaves no doubt that the primary purpose of the original act to regulate commerce was to eliminate the gross discriminations practiced by the railroads of that time. Large shippers could, by reason of their traffic volume, demand and obtain preferential treatment from the railroads of that era. Spe cial rates and secret rebates for favored customers and other less direct forms of discrimination became so common that Congress determined that Federal legislation was necessary to put a stop to the admittedly unhealthy practices. The original act to regulate commerce outlawed discrimination and required that all rates and practices be published in tariffs where they would be exposed to the public gaze. The light of publicity was thought to be one of the principal safeguards against the secret concessions and other discriminatory practices at which the act was aimed.
In spite of this basic purpose of the act, a provision was included in section 22 which permitted free or reduced-rate transportation for certain groups, including Federal, State, and local governments. Thus, while the basic purpose of the act was to outlaw discrimination, particularly for large and powerful customers of the public transportation system, preferential treatment was spe cifically authorized for the one which has become the largest and most powerful of all—the Government.
That provision, although completely inconsistent with the basic principles upon which transportation regulation has developed in this country, has persisted to the present day. Instead of requiring rates on Government traffic to be ex. posed to the public gaze by publication in tariffs, section 22 permits the private negotiation of rates between Government transportation officers and the carriers. With no regulatory control over such rates, the only law that governs is the law of the jungle. Government transportation officers may play off one carrier against another and can bring to bear upon the carriers, either singly or in groups, pressures which no private customer could possibly wield. Thus, all of the abuses which statutes like the Interstate Commerce Act were designed to abolish are not only permitted by section 22, but are actually encouraged when the carriers subject to that act are told that they may deal privately with the largest shipper in the world. It was for these reasons that we regarded section 22 as an anachronism in our law, even before we felt its competitive impact.
Beginning in the fall of 1953, we began to acquire a more practical knowledge of section 22 and what it can mean in a competitive transportation industry. We were "on the receiving end" of it, so to speak -and our experience has not changed our views concerning it.
For some years prior to 1953, both the railroads and the scheduled airlines had granted a standard discount of 10 percent below their regular passenger fares to the military agencies. By the fall of 1953, the competition for military passenger traffic had become so intense, particularly between the railroads and the nonscheduled airlines, that the railroads began to submit so-called section 22 bids,
offering discounts on military traffic which ranged up to 50 percent or more. The nonscheduled air carriers countered with measures which had the effect of reducing their rates and it was not long before a full-scale rate war had developed for that business.
The nonscheduled air carriers filed complaints, both with the Department of Defense and with the Interstate Commerce Commission. The railroads defended their use of section 22 bids, both legally and as an appropriate method of regaining the military passenger traffic which they had been losing to the air carriers. The Department of Defense rejected the complaints, and, after a formal proceeding, the Interstate Commerce Commission determined that the use of section 22 quotations by the railroads was permissible legally and in accordance with the various agreements filed by the carriers under section 5a of the Interstate Commerce Act.
This experience of the last 214 years has highlighted another feature of section 22: it provides an unbeatable competitive weapon against carriers which do not have similar freedom from regulatory control over their rates. The Civil Aeronautics Act contains no counterpart of section 22, with the result that the airlines must publish their rates on Government traffic in tariff form and must be prepared to defend them against suspension or investigation by the Civil Aeronautics Board. Yet, they are forced to compete for a large block of traffic with carriers who need not publish their rates and who are free to charge any rates they please in order to get the traffic. Our competitive position is much like that of the fighter who is put into the ring blindfolded and who is required to observe all of the rules, while his opponent not only wears no blindfold but is free to substitute brass knuckles for his boxing gloves whenever it pleases him to do so.
There have been a few public issues raised in recent years on which you will find the same amount of agreement that there is on this question. We have heard it discussed by transportation groups in the United States Chamber of Commerce, in the Transportation Association of America, and elsewhere for the past several years. Practically every form of transportation favors an amendment of section 22 which would eliminate the authority to grant free or reduced-rate transportation to the Government. Transportation-investor groups and transportation-user groups also vigorously support such an amendment.
In our view, the Government should be placed in the same position as any other user of the common-carrier system. It should not be discriminated against, but neither should it be entitled to any special concessions. Rates on Government traffic should be published in tariffs the same as rates on other traffic. And rates on Government traffic should be subject to the same regulatory controls as rates on other traffic. That principle, we believe, is obviously fair and sound and should be incorporated into the law.
The recommendation of the Cabinet Committee on this point does not satisfy that principle. It proposes a compromise solution which would subject rates on Government traffic to some regulatory controls but not others. Whether the exemptions proposed are intended to be for the benefit of the Government or for the benefit of particular types of carriers, we can see no justification for them. If the Government is placed in the same position as any other user of the commercial transportation system, neither it nor its citizens have any basis for complaint.
The Interstate Commerce Commission in its last annual report has suggested another compromise solution, and one with which we respectfully take issue. The Commission suggests that the Government should be placed in the same position as other users in peacetime, but in times of potential or actual emergencies, section 22 should be restored. We could agree that national security considerations might well dictate some relief from the filing and publication requirements in times of emergency-and perhaps even in peacetime-on certain types of Government traffic. We do not believe, however, that there is any justification for restoring the Government, in time of potential or actual emergencies, to a position where it can demand and obtain special rate concessions on all of its traffic, and where such rates are free of all regulatory control. In time of war, it is likely that virtually all traffic moving on the common-carrier system will be of some importance to the national defense. If that is so, there is no reason for relieving the rates on Government traffic from all regulatory controls, while leaving rates on other essential wartime traffic subject to control.
Consequently, it appears to us that the only national security exemption would be justified, on principle or as a practical matter, is an exemption from the filing and publication requirements which might otherwise endanger the secrecy which. must surround some traffic movements.