"RESOLUTION OPPOSING EXTENSION OF SECTION 13 OF THE INTERSTATE COMMERCE

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"Whereas there has been introduced in the Congress S. 3778, a bill to amend the Interstate Commerce Act; and

"Whereas S. 3778 proposes to extend section 13 of the act so as to make more complete the Interstate Commerce Commission's authority over intrastate rates and to broaden section 13 to give the ICC jurisdiction over intrastate passenger train service; and

"Whereas these proposed amendments relate to matters primarily of local interest and concern which should be left with the State regulatory commissions; and

"Whereas the State commissions over the country have been alert and active to discontinue unneeded and unused services and have, in the period 1951-56, inclusive, approved 86.6 percent of the railroad applications for reductions in passenger trains service and 86.9 percent of the applications for station agency discontinuances: Now, therefore, be it

"Resolved, That the Midwest Association of Railroad and Utilities Commissioners commends the Committees on Interstate and Foreign Commerce of the Senate and House for their prompt and thorough study of the current railroad situation and further commends the committee for aggressively seeking legislative assistance to remedy the problems facing the railroads; but "Resolved further, That the Midwest Association feels the committees have overlooked the record of the State commissions on train and station discontinuances and therefore the association opposes the enactment of sections 3 and 4 of S. 3778, or similar provisions of any like bill, which would further usurp and invade the jurisdiction of the State commissions by extending the provisions of section 13 of the Interstate Commerce Act; and

"Resolved further, That the secretary of the Midwest Association is hereby authorized and directed to send a copy of this resolution to the chairman of the Senate and House Committees on Interstate and Foreign Commerce, to the president and general solicitor of the National Association of Railroad and Utilities Commissioners, and otherwise to transmit to Congress the intent of this resolution."

Mr. ROBERTS. The next witness is Mr. A. C. Ingersoll, Jr., American Waterways Operators, Inc.

Mr. Ingersoll?

Mr. INGERSOLL. Thank you, Mr. Chairman.

Mr. ROBERTS. You may proceed, sir.

STATEMENT OF A. C. INGERSOLL, JR., CHAIRMAN OF THE BOARD, THE AMERICAN WATERWAYS OPERATORS, INC., WASHINGTON, D. C.

Mr. INGERSOLL. Mr. Chairman, my name is A. C. Ingersoll, Jr. I am appearing here today as chairman of the board of directors of the American Waterways Operators, Inc., an educational nonprofit trade association representing operators of barges and towboats, tugs and shallow-draft tankers, on the rivers, canals, intracoastal waterways, and in the harbors of the United States, the builders and repairers of this equipment, and terminal operators along the inland waterways. More than 200 companies have membership in the association, which has its principal offices located at 1025 Connecticut Avenue in Washington, D. C., and which has field offices in New York and New Orleans.

I would like to submit my statement for the record, if I may, and with the chairman's permission, try my hand at summarizing verbally the current issues in transportation affecting our organization.

Mr. ROBERTS. The Chair would be very grateful to you, Mr. Ingersoll, for handling your presentation in this manner. Your statement will be incorporated in the record.

(The statement is as follows:)

STATEMENT OF A. C. INGERSOLL, JR., CHAIRMAN OF THE BOARD, THE AMERICAN WATERWAYS OPERATORS, INC., WASHINGTON, D. C., ON COMPETITIVE RATE

MAKING

My name is A. C. Ingersoll, Jr. I am chairman of the board of directors of the American Waterways Operators, Inc., which is an educational, nonprofit trade association representing operators of barges and towboats, tugs and shallow-draft tankers on the rivers, canals, intracoastal waterways, and in the harbors of the United States, the builders and repairers of this equipment, and terminal operators along the inland waterways. More than 200 companies have membership in the association, which has its principal offices located at 1025 Connecticut Avenue in Washington, D. C., and which has field offices in New York and New Orleans. (For full statement on my qualifications and a background statement on the inland waterways industry see appendix A.)

Transportation rates are now regulated within the framework of the Interstate Commerce Act, which is administered with a view to carrying out the national transportation policy, written into the law in 1940. As a standard of Government policy, this language could hardly be improved upon. Any proper complaint or criticism of the regulation of competitive ratemaking should be directed at the administration of the law, the way it works out in practice, rather than at the congressional purposes set forth in the national transportation policy.

The railroad industry has complained that it is unduly restrained in its ratemaking by the Interstate Commerce Commission and that such restraint is largely responsible for its being in financial difficulties. The railroads propose that the statutes be amended to end any consideration of the effect of their ratemaking on other forms of transportation.

At this point let me say that we in the barge industry sympathize with the plight of the railroad industry, confronted as they are with the terrific problems of reduced passenger service, and carrying a tax burden so heavy as to make almost insoluble their problems of equipment replacement. We hope they may

be afforded constructive assistance.

I should like to point out to this subcommittee that right now our industry is probably suffering more acutely from the business recession than any other form of transportation. Made up as it is generally of small, individual operating units which compete aggressively among themselves for business, a dropoff in our business is more quickly reflected in our industry with more drastic financial effect than in other transportation forms which carry more diversified cargoes than we do. We are quite restricted in our cargoes which are limited to only a relatively few commodities that can be moved in bulk by our inferior type service. To add to our industry's problems, our operators have small reserve funds to cushion them in a recession such as we now have. Actually, some of our operators are threatened-not with bankruptcy alone-but with actual extinction if this recession continues. Their trouble is that they are small businesss and cannot command or demand congressional relief as the railroads are doing. But I suggest to this subcommittee that these barge operators deserve enough attention from this Congress to spare them from cutthroat competitive practices the same as other small businesss are so protected under the antitrust laws.

We do not, however, believe that constructive assistance for the railroads should include a license to engage in destructive competition, and this, we fear, is exactly what the railroads want.

Small business in other industries today is protected by the antitrust laws from the misuse of economic power by their bigger competitors. In the transportation industry, this protection has been provided instead by the Interstate Commerce Act. The repeated railroad proposal is to emasculate the Interstate Commerce Act so that railroads may engage in destructive competition with other forms of transportation at their option and without restraint. In such a contest between the railroad industry and the barge industry, the latter enjoying revenues about 3 percent as great as the former, can anyone doubt the ability of the railroad industry to wipe out whole segments of the barge industry?

If this were accomplished by across-the-board price competition from which the railroads still earned full cost, perhaps we could not complain. But we believe it would be accomplished-in fact could only be accomplished-by selective price cutting, by using depressed and unremunerative rates to beat us to our knees while placing the burden of railroad overhead and profit on noncompetitive traffic.

What other industry enjoys this predatory privilege? We might properly also ask, what circumstances warrant extending this unique privilege to the rail industry? Would the tactics permitted by such a license produce long-term benefits to the rail industry, or would the exercise of such cupidity merely destroy small healthy carriers, now performing at a profit a type of service the railroads can only perform at something less than full cost?

Having recited these various criticisms of railroad proposals, I think we should go on to some exploration as to why these complaints arise. The railroads are not alone in feeling sometimes that they are treated unfairly by the Interstate Commerce Commission, that the barge lines and truck lines frequently feel that justice has miscarried. I think a more proper summary of the reasons for occasional miscarriage of justice by the Commission is made by Commissioner Freas in the first paragraph, page 35, of his testimony to the Senate Surface Transportation Subcommittee on March 28 wherein he blames an inadequate record for a great deal of the inconsistency in ICC decisions. This is an explanation that goes far toward throwing a spotlight on the root of the troubles that have led to some of the proposals for railroad aid. However, to correct this situation by a repeal of the appropriate statute provisions which regulate competitive rates would be a return to the law of the jungle and not a constructive or progressive move. Particularly this would not be constructive help to the railroads to permit them to exhause themselves financially and aggravate their equipment situation in an effort to kill off the water carriers with rates depressed even further than their water competitive rates are now depressed. This could not significantly help the railroads considering not only the low level of the revenue this water traffic commands but also the relatively small volume of the traffic.

It would be more constructive to improve the standards of regulation by clarification so as to simplify and make more consistent the Commission's procedures and decisions in these competitive rate cases. Authorities on every hand agree that the administration of transportation competition should be such as to bring about the movement of traffic by the carrier who is best fitted to handle it.

The Surface Transportation Subcommittee of the Senate Interstate and Foreign Commerce Committee in its report of April 30, 1958, said: "It is a policy of this subcommittee, and it is believed to be the policy of the Congress, that each form of transportation should have the opportunity to make rates reflecting the different inherent advantages each has to offer so that in every case the public may exercise its choice, cost and service both considered, in the light of the particular transportation task to be performed." We find no difficulty in agreeing with that statement. The various provisions of the act are now written with that purpose in mind and if we maintain that purpose in the act and in the interpretaion and administration of the act, the transportation policy provisions will be preserved and the growth of a sound national transportation system promoted further as it has already been promoted under the act. In the case of water carriers, the act provides for rates that reflect the inherent advantage of this mode of transportation and at the same time acknowledges an inherent disadvantage in the natural limits of routes over which it operates and can operate, in the slowness of its service in relation to other modes of transportation which is inherent in its operating capabilities, and in the further disadvantage it has inherently in the nature and size of the cargoes it must carry in the type of equipment employed. With all the factors taken into consideration, the finding that carriers should have the opportunity to make rates reflecting their different inherent advantages, with the further understanding which the act now takes into consideration that there are also inherent disadvantages, is a sound doctrine.

The Senate subcommittee further found that "the national transportation policy is clear, however, that such ratemaking should be regulated by the Commission to prevent unfair destructive practices on the part of any carrier or group of carriers." There is no question of the fairness and accuracy of that statement. But any amendment designed to relieve the act of the safeguards against unfair destructive ratemaking practices and imposed upon the Commis28621-58-13

sion in its administration of the act a prohibition against the exercise of its authority to intervene when the one carrier proposes minimum rates that would be destructive of competition is in our opinion unsound. Since the Interstate Commerce Act is the only protection that carriers have against such misuse of economic power by businesses with superior financial resources, the barge industry then would be at the mercy of this more powerful and bigger competitor. The theory of protecting smaller businesses from larger businesses who have greater financial resources is recognized as a good American practice, inasmuch as the Sherman, Clayton, and Robinson-Patman Acts all have been enacted into law and are enforced for that purpose. That the barge industry, an admittedly small-business operation as compared to the railroad industry, enjoys a measure of such protection under the ratemaking rule of the Interstate Commerce Act is being made to appear to be an unusual practice, one that should be condemned and discontinued, and one that should be destroyed in order to allow the railroads to employ the advantage of superior financial resources to take unto themselves business which is now handled by barges because of an inherent cost advantage in barge transportation which has nothing to do with the financial resources of the barge industry itself.

We are not necessarily in disagreement with the proposition that has been advanced to have the Commission consistently follow the principle of allowing each mode of transportation to assert its inherent advantages whether they be of service or of cost. Actually, we believe that to be the intent of the law as now written. In the exercise of its authority in the thousands of cases which come before it every year, the Commission may have erred from time to time in administering the law in this respect, but if that is the point in controversy then the rule of ratemaking is not the culprit.

Of the various modes of transportation, only the railroads are seeking a change in competitive ratemaking. I respectfully suggest to this subcommittee that the only basis the railroads might have for disagreement with the rule of ratemaking is in its interpretation and administration rather than in its purpose. The railroads have contended that they need greater freedom of ratemaking in order to exploit their inherent advantage of cost and service. I respectfully suggest further to the subcommittee that the rule of ratemaking as written gives the railroads an opportunity to exploit to the fullest their inherent advantage of cost and service. The only thing that might be added which would be helpful to the railroads and which at the same time would not open the door for the railroads from their position of inherent advantage with respect to superior financial resources to employ these resources in selective rate cutting wars designed to destroy their competition, the only thing that might be helpful and which would not permit this would be to add to the rule of ratemaking for the guidance of the Interstate Commerce Commission in administering the law some definition of what constitutes the inherent advantage in any competitive situation. I think such definitive language designed as a directive to the Commission might be agreed upon by the various modes.

APPENDIX A

In addition to being chairman of the board of the American Waterways Operators, Inc., I am president of Federal Barge Lines, Inc., a privately owned operator of towing vessels and barges with operating rights on the Mississippi River system, the Missouri River, the Illinois Waterway, portions of the Gulf Intracoastal Waterway, and the Warrior-Tombigbee Waterway. The principal offices of Federal Barges Lines, Inc., are located at 611 East Marceau Street, St. Louis, Mo.

I am a graduate of the New York State Merchant Marine Academy and have been associated with transportation on the inland waterways for almost all of my business life, having served in the operation of the vessels themselves as well as in executive positions. My experience includes a 5-year period when I was President of Federal Barge Lines at the time it was a part of the Inland Waterways Corporation operating as an enterprise of the Federal Government. I was Chairman of the Manpower Subcommittee of the Inland Waterways Advisory Committee to the Office of Defense Transportation in 1944–45; director of the inland waterways section of the transportation division of the United States strategic bombing survey in Germany for a period during World War II: and deputy director of the transportation division of the United States strategic bombing survey in Japan in 1945-46. I have also served in the capacity of

general traffic manager for barge and towboat operating companies. My experience in waterway transportation covers work with companies operating on the Ohio, Mississippi, Illinois, Missouri, Tennessee, Kanawha, and Monongahela Rivers.

I am appearing before this committee in my capacity as chairman of the board of directors of the American Waterways Operators, Inc., which I shall refer to hereafter as AWO or the association.

I would like to present to the committee a brief background statement on the inland waterways industry in order to qualify a spokesman of the American Waterways Operators, Inc., as a witness for an industry deserving of consideration at this hearing.

The United States has a network of approximately 29,000 miles of navigable inland river, canal, and intracoastal waterway channels, exclusive of the Great Lakes. About half of these channels have an operating depth of 9 feet or more, which is considered standard in this country for the movement of commerce in barges and shallow-draft tankers. There are approximately 1,700 operators of towboats, barges, tugs, and shallow-draft tankers. These companies operate 4,312 towing vessels, 12,545 dry-cargo barges and scows, and 2,212 tank barges with an aggregate cargo carrying capacity of approximately 12,996,564 tons. They employ some 65,000 operating personnel. From these figures we can readily ascertain that the barge and towing vessel industry is largely made up of small-business men, inasmuch as each of the 1,700 operators of equipment has an average of slightly less than 11 pieces of equipment, not enough per operator to make up one of the standard large tows operating in daily service on the principal waterways.

In spite of the fact that our industry is made up of small, highly diversified operators whose operations are individualistic in nature, the industry as a whole has proven itself to be a reliable, safe, economical mode of transportation which in 1956 attracted 8.1 percent of the total intercity freight traffic in the United States. When we compare that with the 3.5 percent of the total intercity freight traffic which the barges, towboats, and shallow-draft tankers handled in 1947, we get an idea of the attraction which the waterways industry has shown for commerce in the last 10 years.

Actually, the inland waterways transportation industry in its present form first demonstrated its ability as the low-cost carrier of bulk commodities during World War II when it rendered outstanding service particularly in the carriage of petroleum products over the protected inland waterways when Nazi submarines were throttling our domestic lifeline by sinking our offshore tankers. In the war years from December 1941 to August 15, 1945, barges carried 1,731,030,485 barrels of petroleum products in addition to handling large quantities of coal, ores, iron, and steel products. During the war years the shipyards which had been built along the inland waterways to serve water carrier operations turned their facilities and their talents to the building of war vessels and produced 3,945 vessels, 146 drydocks, 43,744 tons of sections of ships, and 500 tons of prefabricated sectional bulkheads. These inland-built war vessels, including submarines, went to sea over the inland channels, propelled by the same towboats that now move our domestic commerce. Many of the vessel sections which were built inland were to our coastal shipyards aboard barges propelled by these same towing vessels.

The record established by the inland waterways transportation industry during the war years has been translated in the 10-year postwar period into providing a transportation industry geared specifically to hauling the raw materials of industry at the most economical price afforded by any mode of transportation in the United States.

Our cargoes are made up principally of coal, petroleum and petroleum products, grain and grain products, building materials, ores, iron and steel products, and chemicals. Our cargoes are the essential raw materials of industry, essential to our manufacturing processes. But they are of low value within themselves, mostly move in bulk, and, therefore, they command the lowest transportation rates of any group of commodities moving within this country. The barge and towing-vessel industry has demonstrated its ability to handle these cargoes efficiently and economically and, consequently, was attracting an increasing share of this portion of the transportation load until the current recession.

This is a very brief recital of the background of the industry that I represent in my testimony before this committee. It may be of interest to the committee for me to add one other facet of the story. The towing vessels employed on the inland waterways are almost all diesel powered. They range from vessels with