favor of the automobile. Such trains can be viewed as the cancerous parts of the total passenger operation. Without the ability to promptly terminate their operations, these trains, operating with little patronage and revenue to support them, serve only to incur deficits of such magnitude that the economic viability of the entire passenger operation, including its profitable parts, is threatened. It would be tragic if the entire passenger service were destroyed simply because of an inability to eliminate its cancerous parts, an inability caused by radical changes in the present provisions of Section 13a. It is hardly necessary to dwell upon the importance of the benefits that have inured to the general public as a result of the application of the present provisions of Section 13a. If the railroads had not been able to eliminate the number of deficit ridden passenger trains that have, to date, been eliminated by use of Section 13a, the present level of freight rates would have had to be substantially higher to support such deficits, and the recent increases in freight rates would have been much greater. However, if there were such a very much higher level of freight rates, a vast amount of competitive freight traffic would have been lost to motor carriers and water carriers, carriers which are not in the position of being required to support huge passenger deficits. But as the vicious cycle would continue, the remaining freight traffic, not lost to competitive carriers, would have had to be charged an even higher level of rates to support the fixed costs of operating the railroads. And then most of this traffic would probably have been driven away by the then unbearably high rates. The end result, and I submit that it is not a far-fetched end result if such events had occurred, is that those railroads with significant passenger operations would have been forced into bankruptcy. Such a result did not occur simply because it was possible to eliminate the deficit ridden trains, through the application of the provisions of Section 13a. However, if the provisions of this section are changed so that it will no longer be possible to quickly remove such trains, the above described vicious circle could well come into operation. This is the case even though the present passenger deficit may not, in itself, be sufficient to cause such a result. Yet as present trends of sharply declining revenue and sharply escalating costs continue, and there is no reason to believe they will not do so, present deficits will climb sharply— from their already high level-if it is impossible to eliminate trains which operate at a substantial loss. Accordingly, I urge that extreme caution be exercised in the revision of Section 13a of the Interstate Commerce Act, lest it become most difficult, if not impossible, to utilize its provisions for the implementation of changes designed to improve service, as well as to eliminate those cancerous trains whose deficits sap the economic viability of the passenger operation as well as jeopardize the economic stability of the railroad system as a whole. Sincerely yours, WILLIAM B. JOHNSON, President. CHICAGO & NORTH WESTERN RAILWAY CO., Hon. WARREN G. MAGNUSON, Chairman, Committee on Commerce, DEAR SENATOR MAGNUSON: In my letter to you of July 9, 1968, I expressed North Western's opposition to the proposed revision of Section 13a of the Interstate Commerce Act to revise procedures and standards for passenger train discontinuances as contained in the ICC's recommended bill, H.R. 18212. That revision is now also proposed in S. 3861, and for the reasons stated in my letter of July 9th, a copy of which is attached, we oppose S. 3861. Particularly objectionable are the special standards for discontinuance of last trains during a two year period. Unless Congress sees fit to subsidize the losses on last trains which might otherwise be discontinued, there will be an excessive burden placed on the railroads in continuing unnecessary service. I respectfully urge that S. 3861 be amended to exclude any provisions as to last trains. North Western stands willing, of course, to participate fully in any study of the passenger problem conducted by the Department of Transportation as proposed in S. 3861. However, we see no useful purpose in revising the existing train discontinuance standards or procedures. Sincerely yours, BEN W. HEINEMAN, Chairman. Hon. WARREN G. MAGNUSON, CHICAGO & NORTH WESTERN RAILWAY CO., Chairman, Committee on Commerce, DEAR SENATOR MAGNUSON: I would like to take the opportunity to express this Company's opposition to S. 1175, S.J. Res. 52, S. Con. Res. 25, and to H.R. 18212, which are various proposed revisions of Section 13a of the Interstate Commerce Act dealing with train discontinuances. We are opposed to what are unnecessarily drastic revisions of the train discontinuance statute because such legislation would inevitably result in a severe imposition of continued very large losses in operating relatively unused passenger services. Section 13a has remained unchanged since its passage in 1958 and has been effective in alleviating serious burdens in providing passenger service between intercity markets. In the case of North Western we experienced intercity passenger deficits from 1958 through 1967 as included in the passenger deficits reported to the I.C.C. in our annual Report Form A as follow: We had made steady progress in reducing the intercity passenger deficit from 1958 to 1966 despite large increases in operating costs and a continuing decline in passenger revenue. The reduction has been almost entirely through removal of intercity passenger trains under Section 13a. If the huge deficit level of 1958 had continued from 1958 through 1967, we would have experienced a cumulative intercity passenger deficit of $147,280,000 instead of $78,054,000. In fact, the cumulative deficits would have been much, much greater than $147 million due to increased operating costs which would have been applicable to the trains which were removed and due to a probable severe decline in revenue on the trains had they been operated. North Western's intercity passenger deficits have been a significant factor in causing a meager rate of return and inadequate or nonexistent net railway operating income. From 1962 through 1967 North Western had the following rates of return and net railway operating income: The losses from intercity passenger service are still with us, however, and they are increasing. From 1966 to 1967 North Western's intercity passenger deficit increased by $809,000 due primarily to increased operating costs including large increases in wages and fringe benefits. Confronted with an increasing intercity passenger deficit, North Western in an effort to preserve as much intercity passenger service as possible will raise its intercity passenger fares by 25% on July 10, 1968, and is seeking to curtail portions of loss-producing service north of Green Bay, Wisconsin. The intercity passenger losses are very real indeed. The 1967 loss of $4,841,000 almost equaled our net railway operating deficit from all other operations. While the passenger deficit reported to the I.C.C. is on a fully distributed basis, the direct out-of-pocket above-the-rail losses have been unduly burdensome as well. For example, the direct loss from intercity passenger service in 1967 was over $1,992,000. Continued losses from intercity passenger service put an unwarranted strain upon our ability to provide essential freight service to freight shippers. We cannot proceed with modernization of the railroad plant and purchase of needed equipment as rapidly as required when faced with the drain of large passenger deficits. For example, the 1967 direct losses of over $1,992,000 if eliminated would have provided savings for purchase of 133 boxcars for freight service in one year alone. Revision of Section 13a as contained in S. 1175, S.J. Res. 52, S. Con. Res. 25, and H.R. 18212 will impede modernization of freight service to the detriment of the public. Section 13a has prevented the collapse of several railroads from the sheer economic waste of unneeded passenger service. The serious economic plight of the railroads in 1958 has not improved markedly by 1968. In terms of a revival of passenger rider volume on intercity passenger trains, the prospects are as dim as in 1958 except perhaps in the North East corridor where the costly high speed passenger service experiment remains untested. The purport of S. 1175 combined with S.J. Res. 52 and S. Con. Res. 25 and of H.R. 18212 appears to be to preserve passenger service by lengthening procedures, imposing a moratorium, or imposing special standards until Congress or some government agency can yet again study the problem and recommend some form of relief. A great burden would be placed on the railroads during the study period of one year and sixty days under S. 1175 combined with S.J. Res. 52 and S. Con. Res. 25 through imposition of a moratorium on train discontinuances. A similarly excessive burden would be placed upon the railroads during a study period of at least two years under H.R. 18212 through imposition of special standards as to discontinuance of last trains between interstate points. There is no useful purpose in imposing a moratorium on discontinuances for any period of time. If a discontinuance is warranted, the carrier should be permitted to effect the savings from discontinuance without delay. The railroads simply cannot afford the continuing losses which will mount if a moratorium occurs. Nor can the railroads afford the continuing losses which would occur if the I.C.C.'s recently proposed revision of Section 13a is adopted. That proposal as introduced in the House in H.R. 18212 imposes special standards for two years for discontinuance of last trains. Last trains are particularly costly to operate since many direct costs are related only to the operation of the last train which would be spread among several trains if operated between the same points. This is quite apparent in the case of terminal costs. The costs per mile operated of last trains are normally much higher than other trains and the savings to be afforded by discontinuance are usually greater. The burden of operating last trains can be unusually severe. The special standards proposed by the I.C.C. in H.R. 18212 to be applied to last trains are unwarranted in that they ignore the financial burden of operating such trains except in the case of a failing carrier close to or in bankruptcy. Under Section 13a as now in effect there is a proper balancing of the factors of public convenience and necessity and the financial burden of continued operation of the trains. Under the I.C.C.'s proposal, the balancing of factors would be eliminated and, in effect, the sole test would be public convenience and necessity. This elusive standard as normally applied would result in the required continued operation of last trains in almost every case where some members of the public testified that they needed the service. The last train would probably have to be continued for two years despite any showing of large out-of-pocket losses. As a practical example, I would point to a case we now have before the Public Service Commission of Wisconsin involving discontinuance of last trains seasonally between Green Bay and Ashland, Wisconsin. We have proposed to discontinue these trains from Labor Day to Memorial Day each year and have arranged for a substitute bus service to be operated by a local bus carrier. The trains operate at an out-of-pocket loss of $240,000 during the period they are proposed to be discontinued and carry an average daily load of passengers of less than 40. If this case were before the I.C.C. under the proposed special standards for last trains contained in H.R. 18212, any proof of a $240,000 loss would not be considered and a showing of 40 riders per day could easily be interpreted as a public need for service by rail even though bus service would be more than adequate. In effect, we could be required to continue the service for two consecutive years while we await the solution, if any, to be provided by a special study-all at cumulative losses during the period of over $480,000. H.R. 18212 is particularly unfair in changing the standards in the middle of proceedings already in progress before the I.C.C. under Section 13a or before State regulatory agencies under State statutes. At a minimum H.R. 18212 should provide that proceedings already commenced before the I.C.C. or any state regulatory agency should be permitted to be completed. Again I would turn to our example of the case we now have before the Public Service Commission of Wisconsin on our Green Bay-Ashland service. This case originated in June, 1968 (with a proposal to discontinue the trains involved after Labor Day, 1968. The matter is now set for hearing in late July and we anticipate a ruling on the discontinuance by Labor Day. We have taken this case to the Wisconsin Commission even though an interstate train is involved between Chicago, Illinois, and Ashland, Wisconsin, because the service problem in volved is peculiarly a local one of the need for service in part of Wisconsin and the lack of a need for service in another part. Under H.R. 18212, this case would be superseded entirely, and we would have to start all over again with an entirely new proceeding under protracted time periods before the I.C.C. involving notices, hearings, reconsideration, etc., which could delay the case by one year beyond the date in September, 1968, when the case may be decided by the Public Service Commission of Wisconsin. Delay in this matter would be completely unjustified. We submit, therefore, that any revision of Section 13a should not supersede any state law and at a minimum should not supersede any state law already invoked by a carrier. In the event Section 13a is amended to provide for the I.C.C.'s proposed special standards for last trains, I can foresee an immediate reaction by passenger railroads to discontinue other trains which are not last trains which they otherwise would not have sought to discontinue. The carriers will have to seek some form of relief and other trains will quite suddenly become ripe for discontinuance. In the case of North Western if we are not permitted to remove last trains, we might very well have to turn to our Chicago-Milwaukee-Green Bay service where six to ten trains daily are operated. While the losses on those trains might not be as great as on last trains, they would be factors which could be considered under Section 13a which could result in a discontinuance. I believe, therefore, that it would be most unwise for Congress to set special standards for last trains because it would inevitably result in removal of trains for which there is a greater public need. Congress would have protected the public right out of more necessary services. The implicit suggestion in S. 1175, S.J. Res. 52, S. Con. Res. 25 and H.R. 18212 is that intercity passenger service may ultimately be subsidized by the Federal government after special studies and investigation are completed. In other words, let's preserve the service, regardless of use by the public, until we determine how it may be paid for. I do not believe that an uneconomic service should be continued unless there is a genuinely purposeful need for the service. In the case of our suburban service in the Chicago area we have converted what was a very uneconomical service which was needed by the public to get to and from work into a service which rather remarkably now earns over $2,000,000 per year. This was done, however, without subsidy by the government, primarily through a complete modernization of equipment, more efficient operating methods, vigorous promotion, and a realistic fare structure. I am not suggesting that such methods will work in the case of intercity passenger service where quite obviously the market is too limited and has been eroded by automobile and air transportation. I do not foresee how intercity passenger service in most areas can be operated without continuing large deficits. And when the time comes for replacement of existing equipment, most of the service may disappear completely as no prudent management will be able to make large investments in losing services. For the time being so long as existing equipment can be used, intercity service may continue except to the extent it is discontinued where it is an unnecessary burden. It is clearly in the public interest to remove those lightly patronized passenger trains not needed by the public and reduce the deficits so that the railroads may get about the business they are best able to perform for the public. The savings to be afforded from discontinuance of unnecessary service are essential to the continued modernization of the railroad plant and purchase of equipment needed by freight shippers. However, if intercity passenger service is desired by the public and efficient management cannot provide the service within its own financial capacity, we can only turn to government subsidy as the answer. I would, therefore, suggest that if any proposed revision of Section 13a is seriously designed to preserve service until a complete examination of the service needs are made, there should be an immediate subsidy from the Federal government of 90% of the savings which might otherwise be afforded by discontinuance of a train. If Congress desires to preserve passenger service, for example, no matter how much it is used by the public, then Congress should provide for the alleviation of the major part of the cost of providing such service. I do not believe it is useful to preserve all of the remaining intercity passenger service, but if this is a public policy which appears to be desired, then it should be paid for immediately as a public expense. I see no material justification for continued imposition of the burden upon the railroads. I suspect that Congress would not find it to be justified as a burden upon the public either in most instances. In summary, we are opposed to any revision of Section 13a which involves a lengthening of procedures before the I.C.C., which involves a moratorium on discontinuances, or which involves special standards as to last trains and supersession of State authority over cases already in progress. Finally, if Congress determines that a preservation of the existing level of passenger service is required, and we certainly do not believe it is, then a form of subsidy should be provided to a carrier equal to 90% of the savings which might otherwise be afforded if the carrier were to discontinue a train or trains pursuant to Section 13a as presently written. Sincerely, Hon. WARREN G. MAGNUSON, Chairman, Senate Committee on Commerce, Hon. HARLEY O. STAGGERS, BEN W. HEINEMAN, Chairman. SOUTHERN PACIFIC CO., San Francisco, Calif., July 5, 1968. Chairman, House Committee on Interstate and Foreign Commerce, GENTLEMEN: Upon careful analysis, Southern Pacific Company is strongly opposed to any of the proposed changes to the present provisions of Section 13a (1) of the Interstate Commerce Act. As enacted in 1958, this statute has been and is fair and equitable to not only the rail carriers but also railway labor and other members of the interested public. These provisions have permitted the discontinuance of passenger trains only when the Interstate Commerce Commission has satisfied itself that there is no public need for these trains and that their continued operation results in out-of-pocket losses. The law has not permitted wholesale abandonment, as is evidenced by the substantial number of I.C.C. decisions denying proposals to discontinue passenger-train service. Any of the proposed changes in the law would in effect require the freight shippers of this, and other railroads, to subsidize the waste of maintaining a passenger service which the traveling public has in most instances abandoned. So far as Southern Pacific Company is concerned, our passenger deficit in 1967 aggregated almost $20 million. I submit that no privately-owned company, even in the public utility field, should be asked to absorb such a deficit, which represents some 27 per cent of its earnings from freight service. Very truly yours, B. F. BIAGGINI, President. CHICAGO, MILWAUKEE, ST. PAUL & PACIFIC RAILROAD CO., Hon. WARREN G. MAGNUSON, MY DEAR SENATOR: I am opposed to the pending so-called Train-off Legislation, which will come up for consideration in your Committee soon. I feel that the Railroad Industry as a whole has been acting with restraint in discontinuing its passenger service under the existing law. I am not aware of any change in circumstances which make it necessary to place more restrictive conditions on the railroads in their attempt to rid themselves of unprofitable passenger service. The present law permits the handling of each case on its merits. The proposed law, which would include a general moratorium, could and undoubtedly would, |