During this period a total of 1,006 jumbo tank cars and 1,347 small tank cars was shifted. Since October 1974 all of the traffic has been moving in jumbo tank cars. In support of its complaint, Enterprise submitted a detailed cost analysis by Gilbert Parr and an exhibit showing comparative freight rates, revenues, and car-mile earnings from, Realitos and 15 other LPG origins to Laredo, Tex., which is reproduced infra as table 3.

357 I.C.C.

The Realitos to Laredo movement of 75 miles is the only LPG operation of TexMex. Car-mile earnings from Realitos are much higher than from any other shipping location and higher than those of competitive railroads. The average of 92 1/2 cents per car-mile for all nationwide carload freight in 1972 may be compared with the $6.38 revenue per car-mile derived from complainant. The $6.38 per car-mile revenue is also almost three times higher than the carload earnings from any of the other origins. Since Enterprise purchases the LPG on a take-or-pay basis and sells it f.o.b. border at Laredo, Tex., it must absorb all of the freight charges. There are no alternate barge on truck services available for export movements to Mexico City. Mr. Parr's study shows that Tex-Mex has in recent years had one of the lowest operating ratios, i.e., ratio of revenues to expenses of any railroad operating in the United States. In 1974, its operating ratio was 53.5 percent and for the first quarter of 1975, 54.2 percent. Shareholders' equity increased from a deficit in 1972 and 1973 to a plus of $2,577,000 in 1974. Net railway operating income in 1974 was $1,002,000 compared with a deficit of $8,000 in 1972 and an income of $293,000 in 1973. Rate of return on net investment was 10.50 percent in 1974 compared to a deficit of 0.01 percent in 1972 and a return of 3.26 percent in 1973. Rate of return on shareholders' equity in 1974 was 57.47 percent compared with debits in 1972 and 1973. The ratio of operating expenses, rents, and taxes other than Federal income tax, to operating revenue was 53.53 percent in 1974 compared with 75.91 percent in 1972 and 67.05 percent in 1973. In his study Mr. Parr determined that the total per car cost to TexMex of handling this traffic was $211.53, which compares with that initial revenue yield per car of $336 at the base 24-cent rate and $526 per ear at the 1975 36-cent

rate.

The defendant, Texas Mexican Railway Company, headquartered at Laredo, Tex., argues that the principal issue is whether the assailed rates have been shown to be in excess of a maximum reasonable level. It cites Iron Ore from Cleveland, Ohio to Ohio and Pennsylvania, 323 I.C.C. 746, 752-753 (1965), where the Commission said:

When rates are not above the reasonable maximum, nor below the reasonable minimum, a carrier is at liberty to adjust them within this range, although it cannot be required to do so by the Commission. United States v. Chicago, M. St. P. & P. R. Co., 294 U.S. 499, 506; Lynchburg Traffic Bureau v. United States, 225 F. Supp. 874, 876. The rates respondent proposes are within that zone of reasonableness, and the carrier may adopt such policy of ratemaking as to it seems best, absent a violation of some provision of the act. We do not sit in judgment of the wisdom of carriers' proposals, but only whether or not they would be lawful in terms of the regulatory statute.

The lower limit of the zone of reasonableness is the cost of performing the transportation, and its upper limit is the value of the service to the shipper. Bituminous Coal to C. F. A. Territory, 46 I.C.C. 66, 112 (1917). Although complainant endeavored to show that the assailed rates are in excess of the cost of performing the transportation, it presented no evidence to show that the rates are in excess of the zone of reasonableness, thereby according to Tex-Mex failing to discharge its burden of proof in this proceeding.

Also, there are other factors than costs which the Commission should consider in determining whether the assailed rates are within the zone of reasonableness. For instance, why does not complainant truck the LPG across the border to Nuevo Laredo for loading at that point into railcars, since the LPG is moved by truck into the Realitos facility anyway? What would the truck charges be for such a service?

Obviously, the existing railroad charges for an export shipment from Realitos to Laredo are less than charges for a competing mode of transportation or the complainant would presumably be using such competing modes.

Before relocating in 1973 at Realitos, Tex., complainant had its storage and terminal facility in the Tex-Mex yard in Laredo, and at that time was trucking its LPG to Laredo and transferring it to small tank cars at its Laredo facility for shipment to Mexico by an intracity switch. This operation was considered dangerous by local residents who complained several times to the Railroad Commission of Texas, which in turn requested complainant to upgrade its operation or remove its location from the Laredo city limits. Complainant moved its facility in 1973 from Laredo to Realitos because the Railroad Commission of Texas had told it that it must move the facility outside of the Laredo city limits or remedy certain dangerous conditions at the Laredo facility. Accordingly, it was cheaper for complainant to locate its facility at Realitos, knowing that it would have to pay existing freight charges from Realitos to Laredo, than it would have been for complainant to remain in Laredo and modify its facility to suit the Railroad Commission of Texas.

The rates now in effect for shipments of LPG from Realitos to Laredo are published on the same basis as existing export rates on LPG from other producing points to Laredo. Defendant submits that granting the rate reduction sought herein by complainant would trigger requests for comparable rate treatment from other shippers of LPG and disrupt competitive conditions regarding this traffic. Even if the Commission were to conclude that the existing rates are in excess of defendant's fully distributed costs of handling the traffic, such a conclusion would not dictate a finding that the rates are unlawful. Zonolite Co. v. Great Northern Ry., 315 I.C.C. 303, 307 (1961).

Complainant's cost study is not definitive. Witness Parr is not a "disinterested party," but a "hired gun" employed to produce a certain result. His cost study contains several erroneous assumptions and omissions, all of which would tend to increase the cost computations.

First, the cost computations ignore the cost of handling the empty cars from Realitos to Alice and Hebbronville and back to Realitos. The cost of this transportation was omitted because of complainant's belief that the cars were handled from Laredo through Realitos to Alice and Hebbronville and back to Realitos "for the convenience" of defendant. The cars are not handled in that fashion simply for the convenience of defendant. They are handled that way as a matter of operational necessity since the switch opens the wrong way for the cars to be dropped off at Realitos by the eastbound train in an economic fashion. Defendant submits that it is, of course, entitled to recover at the very least its fully allocated cost for handling this traffic. Such cost must be computed upon a consideration of the actual operations and handling of the cars, and, in this instance, not upon a hypothetical route of movement for the empty cars. Defendant submits that since it is necessary, from an operating standpoint, to transport the empty cars to Alice and Hebbronville, that it is entitled to have the cost attendant to such empty movement included in any cost computation regarding this traffic.

Secondly, complainant's cost study relates to variable costs only and not to fully allocated costs, apparently for the reason that the distance involved of 75 miles is a 357 I.C.C.

relatively short-haul movement. Defendant submits that it would be unsound for the Commission to ignore fully allocated costs of any movement, including a movement such as this one which happens to be comparatively short.

Thirdly, system-switching costs were employed in complainant's cost computation. Mr. Parr believed that the use of system-switching costs overstated the actual switching cost at Laredo. Defendant submits that this incorrect. Conditions in Laredo attendant to export shipments are quite complicated. The traffic is not as assumed by complainant delayed in Laredo less than 24 hours. Two-thirds of the traffic handled for complainant is delayed in Laredo more than 24 hours and the average delay of such cars is 53 hours.

Complainant's cost computations regarding switching at Realitos were premised upon its agent's testimony that the average length of time required to switch complainant's facility at Realitos is 20 to 30 minutes. Complainant's estimate of switching time failed to take into account the time required to check air hoses, build up air pressure, test brakes, and perform other required safety inspections after the cars have been picked up from complainant's Realitos facility and before departure on the main line for Laredo. Additionally, complainant did not take into account costs attributable to switching complaintant's facility at Realitos which arise from application of the "hog law."

Westbound trains are frequently delayed at Realitos switching empties and loads at complainant's facility. This causes westbound trains to be caught by the 12-hour hog law, tying up train crews before reaching Laredo. This happened 27 times from January 8, 1974 to December 15, 1974, costing defendant $300.49 each time for a total of $8,113.23 plus delays in arrival of cars in its Laredo yard. Delayed arrivals brought numerous complaints from brokers and shippers resulting in loss of traffic attributable to switching complainant's facility because complainant's facility at Realitos is the only point on the westbound route from Corpus Christi to Laredo where industrial switching is performed regularly. The majority of the expense attendant to the "hog law" is, therefore, properly assignable to switching for complainant's facility at Realitos.

Fourthly, in using system average switching costs for the cost of switching performed at Laredo, complainant seriously understated such costs by ignoring the substantial time required to sort cars in defendant's classification yard prior to the transfer of such cars to the yards adjacent to the International bridge. The switching operation at Laredo attendant upon the movement of complainant's cars for export is complex and costly.

When complainant states that its customs broker handles all paper work at Laredo, making the export documentation of LPG a simple matter, it must be understood that this statement is only partially true. Link Petroleum Company only makes the invoices for complainant on the LPG from Realitos. It delivers these invoices to Petroles Mexicanos, the broker and forwarder at Laredo, Tex., representing Petroleos Mexicanos, a part of the Mexican Government. This broker has the invoice certified by the Mexican Consul and then delivers it to Tex-Mex. The paper work required to accompany, each export shipment moved to the International railroad bridge for export and interchange with National Railways of Mexico includes the invoice, the switch order, the Shipper's Export Declaration, the Mexican Health Certificate (Inspeccion de Secretaria de Agricultura y Ganaderia), and Relacion de Entrada (Description of Merchandise with Certified Invoice attached).

These documents are forwarded to the International bridge for United States and Mexican customs clearance for exportation to Mexico when the cars are switched to