are entirely adequate for the normal case handled by the Commission. However, he referred to some possible situation with which the Commission might be confronted at some future time as the justification for these particular amendments. No real justification was offered for a general extension of time, as would be provided by S. 3861. The then Chairman did say that the Commission, of course, would not necessarily take the entire extended period of time to dispose of the normal case but the general experience of the railroads has been that the time available is the time that will be used. In any event, if more time is to be granted the Commission such grant should be confined entirely to the unusual case envisioned by the Commission and the additional time should be available only upon an express finding by the Commission of necessity and a statement of its reasons therefor.

Another amendment that would be made by S. 3861 is that there would be imposed upon the carrier the burden of proof and the findings required to be made by the Commission would be changed accordingly. Here, it seems to me, we are back on the old merry-go-round. A similar provision with respect to the burden of proof was contained in S. 1175 and was the subject matter of considerable testimony. Former Commissioner Tucker, then Chairman of the Interstate Commerce Commission, testified that the matter of burden of proof had presented no real problem in the Commission's administration of Section 13a and that the carriers had offered and made available any and all factual material which the Commission deemed necessary and which lay within the possession or control of the carriers. Statements to similar effect are contained in formal reports of the Interstate Commerce Commission in train discontinuance cases. Indeed, subsequent to his testimony before the House Subcommittee on H.R. 7004, then Chairman Tucker addressed a letter to the Chairman of that Subcommittee advising that the Commission would have no objection to the deletion of the burden-of-proof and Commission-finding language in that bill. Nothing has transpired since that time that in any way presents a case for the renewal of this proposal by the Interstate Commerce Commission.

Imposition of such a burden upon the carrier would represent a radical departure from the regulatory scheme adopted by the Congress in the present provisions of Section 13a (1) of the Interstate Commerce Act. By the terms of that section, Congress confirmed the right of management to make initial decision that a particular passenger train should be discontinued. The equivalent of a veto power, however, was placed in the hands of the Commission, so that after investigation and upon proper finding, the Commission can direct management to continue to operate the train for a period of one year. After the expiration of that year the jurisdiction of the State commissions again attaches to any discontinuance of the train, subject only to preemption by again following the provisions of Section 13a (1). The present regulatory scheme enacted by the Congress has worked well and no justification exists for the radical departure from that scheme that would be made by S. 3861.

S. 3861 contains a special provision that, for two years following its enactment, would apply to the discontinuance of the last passenger train operated in either direction between certain points.

First, the jurisdiction of State regulatory commissions would be preempted for two years and the Interstate Commerce Commission would be vested with exclusive jurisdiction over the discontinuance of such trains.

Second, the Commission would be required to order the continued operation of the train for one year from the date of its order unless it found that public convenience and necessity did not require its continuance or that continuance of the train would impair the ability of the carrier to meet its common carrier responsibilities, considering the over-all financial condition of the carrier or carriers in question.

Third, the Commission could attach to its order requiring continued operation such conditions as it may presume to be just and reasonable to assure the preservation of a seasonable level of service for the train required to be continued. The end result of these provisions with respect to last train operations would be to make it more difficult to remove such unneeded and losing train, to authorize the Commission to impose upon the carrier what might prove to be burdensome conditions and to require the Commission to order the train continued in operation for one year rather than leaving the duration of operation to the discretion of the Commission based upon the facts and circumstances of the case. We do not think that the fact that the train in question is the last train in any way justifies the imposition of these burdens of law. On the contrary, where the passenger service cannot be made to pay its own way because of lack of patron

age at reasonable rates, discontinuance seems called for and we think that such should be the case whether or not the train that cannot be made to pay its own way because of lack of patronage at reasonable rates is or is not the last train. If the train cannot be made to pay its own way because of lack of patronage at reasonable rates there should be no sanctity in the last train situation.

S. 3861, by its amendment of Section 13a (2), would extend the present fourmonths provision to seven months. In other words, the State authority would be granted an additional three months before the carrier could file notice with the Interstate Commerce Commission. No case has been presented to you for this provision and it simply represents further delay in the elimination of unneeded and losing passenger train operations.

Moreover, S. 3861 would provide that, upon the filing with the Interstate Commerce Commission of a petition under Section 13a (2), the discontinuance of such passenger train would be subject to all of the provisions of Section 13a (1). We have extreme difficulty in interpreting this provision of S. 3861, since a petition filed under Section 13a (2) does not in any way lend itself to handling under the provisions of Section 13a (1). Nor is there any necessity for the provisions of Paragraph (1) to apply to such proceeding for the reason that the carrier cannot, under Section 13a (2), discontinue the involved train until the Commission has disposed of the case. However, if the purpose of this provision of S. 3861 is to place a time limitation under which the Commission must act on petitions filed under Section 13a (2), we would have no fundamental objection. I should point out that if the Interstate Commerce Commission's jurisdiction over the last train is to be exclusive, as I have stated, there would be no proceedings before that Commission with respect to such train under Section 13a (2).

S. 3861 will add a new Section 13a (3), providing that any person adversely affected or aggrieved by an order of the Commission entered after hearing pursuant to subparagraphs (1) or (2) of that Section might bring suit to obtain judicial review. Under such a provision it can be safely assumed that in every instance where a train would be discontinued under this section of the Interstate Commerce Act, and notwithstanding the unneeded and losing nature of the particular service being performed, the matter will be taken to court and it is most likely that the train will continue to operate indefinitely while the judicial processes are exhausted. Such an amendment is not designed, as is the present statute, to exert pressures upon public authorities to find solutions for the problem posed by a service allegedly needed by the public but which cannot be made to pay its way. Indeed, I have the feeling that public authorities, knowing they could through judicial processes keep the train in operation for an indefinite period of time, would be much less likely to exert themselves in an effort to find the needed solution.

S. 3861 would also provide that the notice of a proposed discontinuance by a particular carrier must be posted in every station, depot or other facility served by the train, including stations, depots or facilities on the property of other carriers which share in the operation of said train. While we appreciate the purpose of this provision in attempting to give more widespread notice of the proposed discontinuance, it does raise serious problems and difficulties. The noticing carrier has no control over the property of another carrier even though the latter carrier does share in the operation of the train. If such posting requirement is to be seriously considered it should not be an absolute requirement insofar as the noticing carrier is concerned and terms qualifying this posting requirement should be included.

S. 3861 would make two further amendments to Section 13a. The first would amend the section so as to cover a train operating to or from a point in a foreign country. Assuming that the jurisdiction of the Interstate Commerce Commission would apply only to that portion of the operation of the train conducted within this country, there would appear no particular objection to applying present provisions of law to such a situation.

The other and last mentioned amendment would provide that if a carrier, during the notice period, discontinued the train the Commission would retain jurisdiction to enter upon an investigation and to require the immediate restoration or the continuance of operation until expiration of the notice period. We believe the Commission has today, under the existing law, the authority that would be provided by this amendment and we deem the amendment wholly unnecessary. The present law provides that, upon the filing of a notice and during the notice period, the Commission shall have jurisdiction to enter upon an investigation and, having done so, to require the continued operation of the train for a period of four months. It is the duration of the notice period that

governs the jurisdiction of the Commission and not the existence of the train operation.

Summarizing with respect to S. 3861, we submit that no substantial case has been made to your committee justifying the amendments such bill would make to the present law. The end result of the bill would be to make it more difficult and costly to eliminate unneeded and losing passenger train service and to certainly prolong for an indefinite period of time the continuation of such service. In the meantime, the financial burden upon the railroads would continue and, in all likelihood, will mount. The railroad industry is strongly opposed to section (1) of S. 3861 and, for the reasons I have stated, we urge this committee to take no action on those proposals.

Section (2) of S. 3861 would authorize and direct the Secretary of Transportation, acting in cooperation with the Interstate Commerce Commission and other interested Federal agencies and departments, to undertake and submit, within 1 year after the date of enactment of the bill, a study of the existing and future potential for intercity railroad passenger service in the United States to the Committee on Commerce of the Senate and to the Committee on Interstate and Foreign Commerce of the House of Representatives. The bill enumerates six particular matters that the Secretary shall consider, among other things, in making such study. We have no particular objection to such a study and note that it would include all passenger transportation needs by all modes of passenger transportation. We think that those conducting the study should not be limited to Federal agencies and departments but should include all modes engaging in the intercity transportation of passengers. If such study should be undertaken it would be our intent and purpose to fully cooperate. However, I must emphasize, as did Mr. Goodfellow, that the proposal of such a study or even the conducting of such a study should not be made the occasion or the vehicle for restrictive or burdensome statutory provisions that would make it more difficult or costly to eliminate unneeded and losing passenger train services.

Mr. MOLONEY. As you recall, Senator, I appeared before your subcommittee in May and July and August of last year when your committee was holding hearings on a number of bills to amend section 13a of the Interstate Commerce Act. At that time I expressed our industry's opposition to those bills and stated the reasons for our opposition. I sincerely ask that the members of this committee keep that testimony in mind in considering the bill that you have before you today, S. 3861.

I also think it is very important that the committee not lose sight of the situation as it existed in 1958 when section 13a was placed on the statute books by the Congress.

Now, at that time, that is in 1958, this very committee and the Congress were both greatly disturbed over the economic position of the railroad industry. When you look at that economic position in 1958 and then look at the economic position of the railroad industry today, there appears to be no reason on earth to change or drastically modify the statute that Congress passed in 1958.

In 1958 the net railway operating income of class I railroads was $762 million. In 1967 that net railway operating income had dropped to $677 million or a decrease of 11 percent, 1967 as against 1958.

In 1958 the net income of the class I railroads was $601 million and in 1967 it had dropped to $554 million, or a decrease of 8 percent. In 1958 the railroad industry's rate of return on average net property investment was 2.76 percent and in 1967 that rate of return fell

to 2.45.

In 1958 the net working capital of class I railroads was $806 million. In 1967 it had fallen to $276 million, which latter amount represents only enough money to meet cash requirements for operating expenses and taxes for 11 days.

Senator LAUSCHE. Will you pause at that point?

Mr. MOLONEY. Yes, sir.

Senator LAUSCHE. What do you ascribe as the cause of this situation where class I railroads in 1958 had net working capital of $806,537,000, and now in 1967 that figure had fallen to $276,143,000?

Mr. MOLONEY. To a large extent that decrease is represented by the pressures of capital needs. So far as the industry is concerned and to the extent that the industry has found it necessary to do so they have in effect reduced the working capital in order to add to the amount of capital investments that they were making.

Senator LAUSCHE. What do the new capital investments consist of mainly?

Mr. MOLONEY. Oh, practically everything that covers the whole scope of railroading, yards, signaling, communication, computer operations, rolling stock, locomotives-in other words, this capital demand exists and the carriers tried to fill it and it covers the entire spectrum of the railroad.

I think in my previous testimony you will find that I explained the capital expenditures year by year that the railroads have made and revealed the source of the moneys which the railroads had spent on those capital programs. I did not include that in the testimony here. I didn't want to be too repetitious.

We have appeared rather frequently on this subject and for that reason I urge the committee to review the testimony that I gave at the previous hearings.

Senator PEARSON. May I interrupt, also, Mr. Chairman?

Senator LAUSCHE. Yes.

Senator PEARSON. I was shocked the other day coming from the Midwest and hearing constantly about boxcar shortages, to see the great decrease in the amount of orders in a relatively short period of time, when the condition itself is becoming more aggravated, none of that capital investment apparently went into boxcar orders. Did it, or do you know?

Mr. MOLONEY. Yes, some of it did, Senator. As to the exact amount I cannot tell you at the present time. The boxcar situation is a somewhat unusual one in this respect. That our railroad freight car fleet has been, for the last few years and as we see it in the future will continue to be, going through a transition period; that is, where new types of equipment have come along that are replacing the old standard 40foot, narrow-door boxcar.

Senator PEARSON. I am aware of that. On the Santa Fe they have made tremendous new orders in the last 2 years. I remember a notice of a great order from Santa Fe just at the time we were meeting with the ICC one day, but the problem is still the eastern roads and the

western roads and the per diem rates. But we won't get into that. I just once again want to express some concern and do so publicly about that chart that was presented the other day which came as quite a surprise to me and great disappointment to me, I might say.

Mr. MOLONEY. I think the dropoff in the backlog of freight car orders is a disappointment to everyone, the car builders and the railroad industry itself, but the fact remains that when you have the rate of return and earnings that an industry like ours has you just can stretch it so far and that's about all.

Senator PEARSON. That is right.

Mr. MOLONEY. I think it is significant, for instance, that on this economic condition of the railroad industry-and I was reviewing just before you came in the 1958 situation, which disturbed Congress and the committee and which led to section 13a, and comparing that with the situation we have today. If anything, the situation today is worse than it was in 1958 and there is really no room for serious consideration of any legislation that would make it more difficult, more costly, if indeed not impossible to eliminate the unneeded and losing passenger train service.

In my statement, I set out the passenger service deficit and pointed again to the fact that in 1957, the year before Congress passed the Transportation Act of 1958, that passenger service deficit was $723 million and consumed 44 percent of the net railway operating income from freight service.

In 1967, last year, the passenger deficit was $485 million and consumed 42 percent of the net railway operating income from freight service. I also point out that the passenger train service deficit since 1946, post-World War II period, has totaled the staggering sum of $11.5 billion.

During the last 9 years; that is, since section 13a was placed on the books, the passenger train service deficit has totaled $3.9 billion and has consumed 36 percent of the net railway operating income from freight service.

Since 1962 the passenger service deficit has increased sharply. It is continuing on the rise and we estimate that on the present level, today's present level of passenger train service, that the deficit for 1968 will again approach or exceed $600 million.

Not being an alarmist not wanting to be, I did feel that it was essential that this committee keep in mind the economic situation, past and present, because as I said we feel that the present economic situation and the deficit that we are incurring is such that would lead the committee to conclude that as much reason exists today for the preservation of section 13a as existed in 1958 for the enactment of section 13a.

I think, Mr. Chairman, you asked Mr. Goodfellow when he was on the stand, what the railroads had done since World War II to improve and try to make a go of passenger service. In my previous testimony before this committee, I pointed out that through the years 1946 to and including 1965, while the passenger business was rapidly declining and the passenger train service deficit totaled in excess of $10 billion, the class I railroads and the Pullman Co. made capital expenditures for additions and betterments to the passenger train car fleet totaling $1,800 million for the period of time 1946 through 1965. And I stated that we considered that a rather large expenditure for the