SURFACE TRANSPORTATION LEGISLATION FRIDAY, JUNE 28, 1974 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON TRANSPORTATION AND AERONAUTICS, Washington, D.C. The subcommittee met at 10 a.m., pursuant to notice, in room 2123, Rayburn House Office Building, Hon. John Jarman, chairman, presiding. Mr. JARMAN. The subcommittee will please be in order. We continue the hearings on bills dealing with the Transportation Improvement Act of 1974, Rolling Stock Utilization and Financing Act of 1973, the Surface Transportation Act of 1973, the Rail Freight Transportation Improvement Act of 1974, and all similar or identical bills. Our intention is to hear a brief statement from each of the witnesses before questioning the panel as a group or individually. Our witnesses this morning represent a major spectrum of the shippers of the country. Gentlemen, we are very pleased to have you. I would add this, that any statements that you have the committee will be glad to receive in full and then would hope that you will touch on the highlights that you feel the committee should consider. Our first witness from the panel is Mr. Stanton P. Sender, transportation counsel, Sears, Roebuck Co., with offices here in Washington, accompanied, I understand, by Mr. John Donelan, counsel, National Industrial Traffic League, also with offices here in Washington. Mr. Sender, you may proceed in your own way. (551) STATEMENTS OF STANTON P. SENDER, ON BEHALF OF NATIONAL INDUSTRIAL TRAFFIC LEAGUE, ACCOMPANIED BY JOHN DONELAN, COUNSEL; JACK PEARCE, COUNSEL, COMMITTEE ON MODERN EFFICIENT TRANSPORTATION (COMET); SAM H. FLINT, VICE PRESIDENT, QUAKER OATS CO.; JOHN E. GROSS, CHAIRMAN, TRAFFIC COMMITTEE, AMERICAN IRON & STEEL CO., ACCOMPANIED BY PAUL V. MILLER; JOSEPH B. McGRATH, COUNSEL, TRANSPORTATION COMMITTEE, FOREST INDUSTRIES COUNCIL, ACCOMPANIED BY ROY E. OLSON, TRANSPORTATION EXECUTIVE; FRANCIS P. DALEIDEN, CHAIRMAN, TRAFFIC AND TRANSPORTATION COMMITTEE, NATIONAL ASSOCIATION OF FOOD CHAINS, ACCOMPANIED BY RONALD K. KOLINS, COUNSEL; AND CHARLES A. WASHER, TRANSPORTATION COUNSEL, AMERICAN RETAIL FEDERATION Mr. SENDER. Thank you. Mr. Chairman and members, I am appearing here today as the chairman of the NIT League, Legislative Committee. I ask that our statement be put in the record and I have a brief summary in accordance with the chairman's request. [See p. 554.] The National Industrial Traffic League is a voluntary organization of shippers, shippers' associations, boards of trade, chambers of commerce and other entities concerned with rates, traffic and transportation services of all carrier modes. It is the only shipper organization which is both nationwide and consisting of all types of shippers geographically; by commodity; and large, medium and small, using all modes of transportation. Two years ago the league presented testimony on omnibus bills and financial assistance and freight car bills which are similar to, or the predecessor of, bills now before this subcommittee. The president of the league concluded his testimony with the statement that change is overdue and that less regulation and the promotion of greater competi tion is in the best interests of the carriers as well as the public. I will summarize the seven points in the league's testimony today. 1. The league considers it absolutely essential that rail carriers be permitted to rationalize, consolidate and relocate their operations without regulatory lag. We oppose proposals to place a moratorium on abandonments. The league supports section 2 of H.R. 12891, and similar provisions in other bills, with the qualification that the ICC determine interim and final regulatory standards and the DOT's role be limited to providing technical assistance to the Commission. 2. The league opposes those provisions which would require carriers to raise all rates to an arbitrary formula determined "variable cost." Our statement on page 4 lists six reasons why we strongly oppose. In brief, such a provision would necessarily peg rates at an industry-wide level including the costs of the least efficient or bankrupt carriers and thus unnecessarily raise rates causing an embargo of traffic and imposing a staggering burden on shippers, carriers and the ICC. The League does favor a carrier charging compensatory rates but not this unworkable shift of responsibility from carrier management to a government agency. 3. The league supports the objectives of section 2 of H.R. 12891 to forbid requiring a carrier to raise its rates above the reasonable minimum solely to protect the traffic of another mode of transportation because it is against the best interests of the public and the broad interests of the carriers to allow the ICC to allocate traffic among the different modes of transportation. That is the Ingot Mold case section. 4. The league opposes as unnecessary section 6 of H.R. 12891 and section 403 of H.R. 5385 to provide for the Commission to establish uniform methods and criteria in determining the carriers' adequacy of revenues and to base its estimates on certain specified additional matters. 5. As to the amendments in H.R. 12891 to the suspension provisions of section 15(7) of the Interstate Commerce Act, the league supports the objectives of encouragement of carrier innovation and experimentation in new methods and techniques of rate making and the reduction of unnecessary regulatory delay-time lag-for both increases and decreases. To accomplish those objectives the league supports the proposed time limitation on state regulatory agency consideration of intrastate rates and ICC consideration of abandonments and suggests that the time limit for both be 180 days. The league also supports that portion of section 5 providing for the implementation of a new tariff requiring a total capital investment of $500,000 or more. League policies support reducing economic regulation and making certain changes in section 15(7) but the particular provisions to eliminate suspension within a certain zone in H.R. 12891 have not been considered by the league members at an annual meeting, which is held yearly in November. At a special meeting of the league's Legislative Committee to recommend a position to league officers in the absence of definitive membership action, there was a split in views; however, there was certainly more support for the phasing-in of any such suspension changes by certain percentages per year, with an eventual "lid" below the class ceiling, than there was for such a change without such "cushioning" provisions. 6. Allied to pricing flexibility is the issue of rate collective activity. The majority of league members who were present and voting at the annual meeting 2 years ago on the rate bureau changes contained in the prior administration bill supported those proposals as retaining section 5a but with substantive amendments so that it can no longer be applied to inhibit competition and retard the establishment of rate and service improvements which individual carriers may consider appropriate. Applying these principles to the provisions of section 3 of H.R. 12891, the league supports as "preventive requirements" to insure an individual carrier's right of independent action free of rate bureau harassment or interference the provisions of section 3 of H. R. 12891 applied to all rate bureaus and not just rail. 7. The league supports the provisions in the various bills before you to provide financial assistance for railroad equipment financing, rolling stock scheduling, and plant facilities and operations necessary to improve rail service. The league strongly recommends that any financial assistance be temporary in nature, that it be part of a package which would include regulatory reform (though we accept DOT's 36-300-74- -36 decision to first take up rail regulatory reform issues and later motor carrier changes), and that financial assistance be of a guarantee nature rather than direct loans. As to certain other proposed regulatory changes in various bills, the league position is summarized on page 12 of our testimony. We thank you and appreciate this opportunity to present our views. [Testimony resumes on p. 560.] [Mr. Sender's prepared statement follows:] STATEMENT OF Stanton P. Sender, in Behalf of the NATIONAL INDUSTRIAL TRAFFIC LEAGUE THE NATIONAL INDUSTRIAL TRAFFIC LEAGUE: SPOKESMAN FOR THE NATION'S SHIPPERS Mr. Chairman, and Members of the Subcommittee: The League is a voluntary organization of shippers, shippers' associations, boards of trade, chambers of commerce and other entities concerned with rates, traffic and transportation services of all carrier modes. It is the only shipper organization which is both nationwide and consisting of all types of shippers geographically, by commodity, and large, medium and small, using all modes of transportation. The League is not a panel or committee or a trade group, or a spokesman for a particular commodity or transportation point of view, and does not permit carrier membership. The League's primary concern is to provide for the nation and all its shippers, a sound, efficient, well-managed transportation system, privately owned and operated. To arrive at positions reflective of the broad range of shipper interests within the League, the League membership, at its annual and special meetings, considers, debates, and votes on actions to be taken. During its more than sixty years of existence, the League has frequently been the spokesman for the nation's shippers before Congress on proposed transportation legislation. LEGISLATIVE PROPOSALS HERE UNDER CONSIDERATION As shippers we are concerned in considering the various measures before you today with whether or not they will provide better, more efficient, productive service to the public of which we are a part. We believe that it is absolutely essential that federal regulatory laws must serve to advance and not to obstruct efficient transportation service at the lowest cost to the nation. Two years ago, the League presented testimony on omnibus bills, and financial assistance and freight car bills, which were similar to, or the predecessor of, bills now before this Subcommittee. The President of the League testified in support of provisions which would provide a viable and profitable national transportation system, privately owned and operated, and subject to a minimum of economic regulation. He stated that the League also seeks and supports the free play of competition, not only between railroad, truck and barge companies, but also among the carriers within each mode. He concluded his testimony with the statement that change is overdue and that less regulation and the promotion of greater competition is in the best interests of the carriers as well as the public. Two years later, the League continues to urge these policies, and our statement today will again apply the policies of the League to the various provisions of the bills before you. We would prefer that our statement be brief, but the two omnibus bills before this Subcommittee consist of nearly 100 pages in total, and approximately a dozen provisions each, requiring a discussion of the key provisions and our position as to each such provision. RATIONALIZATION, CONSOLIDATION, AND RELOCATION OF RAILROAD SERVICE Section 2 of H.R. 12891 and Title III of H.R. 5385 contain provisions relating to obtaining what under the Interstate Commerce Act is referred to as a certificate of public convenience and necessity to abandon all or any portion of a line of Tailroad. H.R. 12891, in Section 2, also contains provisions for substitute service. This legal terminology carries with it the unfortunate connotation that shippers or communities are about to be abandoned, and with a stamp of approval as in the public convenience and necessity. No one wants to be abandoned, and it is extremely difficult to establish equitable guidelines that would adequately protect the interests of all shippers, receivers, and communities. The League considers it absolutely essential that rail carriers be permitted to rationalize, consolidate and relocate their operations without regulatory lag. We oppose proposals to place a moratorium on abandonments. If a river overflows its banks and floods out a railroad line, the rail carrier should be able, without regulatory lag, to continue to provide service to the public. So too, if the stream of commerce changes its course, the railroad should be able to modify its plant to better and more efficiently serve the public. We do not believe that the best means to accomplish this purpose is eliminating completely ICC regulation of rail carrier plant changes, but rather, by limiting regulation to that reasonably necessary in the public interest, and without regulatory lag. There is no magic formula that will accomplish this result. We believe, as presently drafted, Section 2 of H.R. 12891 meets this objective, except that the League favors determination by the ICC of the interim and final regulatory standards for the "cost of operating the line", and the "revenue attributable to the line", with the DOT's role limited to providing technical assistance to the Commission. Shippers, receivers and communities would be provided with advance notice and a yardstick schedule of density as to forthcoming rail plant changes. At that time, they can meet with the rail carrier to discuss alternate service plans, including containerized or piggyback service which the railroad may be proposing to offer, to continue to provide them with service and also to give consideration to subsidy from states, communities or shippers for unprofitable rail plant operations. Finally, a shipper would be given adequate notice, and ICC consideration of his case, without undue regulatory lag. Thus, the League supports these provisions as an improvement over the present 50-year old provisions, and which would provide more efficient, low-cost service to the public. Substituted service provisions are a necessary part of these proceedings, because without them a shipper cannot be assured that the transportation carrier on whom he depends will continue to provide him with the service he requires. No other carrier under the Interstate Commerce Act is required to obtain a certificate of public convenience and necessity to "abandon"-not motor, water, or freight forwarder. We do not believe rail carriers should be denied the right to continue to serve, and the public denied the benefit of such service, because the rail carrier is substituting service over a public right-of-way rather than a private line for part of its movement of traffic. RAISING ALL RATES TO VARIABLE COST Section 10 of H.R. 12891 and Section 402 of H.R. 5385 would require that all rates of all carriers be raised to a variable cost floor, which is not defined under either proposal. The League opposes these provisions: First, the variable cost of handling specific traffic will vary by definition with changes in capacity, seasonal demands, costs of material, wages, and changes in capital costs. There is no single cost formula that will automatically be appropriate, and the result will likely be the application of an arbitrary formula. Second, these provisions would require that the rates of a low cost, efficient carrier be brought up to an industry-wide level, including the costs of the least efficient carriers ("the variable cost of handling the traffic to which the rate applies"), rather than giving consideration to the facts and circumstances attending the moving of traffic by the carrier to which the rate is applicable. Third, the League agrees with the amendment, which we are advised that Secretary Brinegar supports, to provide that any raising of rates to variable costs under Section 10, would not occur until the ascertainment of variable costs under Section 9 has been completed within "two years of the effective date" of the Act; and the League believes that ascertainment should be made by the ICC, with DOT providing technical assistance. Fourth, as applied to rail carriers, the least effective way of coping with unutilized rail capacity would be to use an arbitrary formula yet to be determined in rate floors for pricing, thus, discouraging utilization and aggravating the problem. Fifth, if this provision is enacted, an arbitrary formula will embargo industrial and agricultural commodities from being carried at rates low enough to make it economically feasible to ship them in interstate commerce. |