REPORT OF THE COMMISSION

DIVISION 2, COMMISSIONERS MAHAFFIE, MILLER, AND SPLAWN

BY DIVISION 2:

Exceptions were filed by applicant to the report proposed by the examiner. Replies thereto were filed by various parties of record, and the case was argued orally.

By application, as amended, the Illinois Central Railroad Company and the Yazoo and Mississippi Valley Railroad Company, comprising the major part of the Illinois Central system, hereinafter called the applicant, apply for authority to establish and maintain reduced local rates on grain, exclusive of grain products, in carloads, minimum 80,000 pounds, from Dubuque, Iowa, Chicago, Peoria, Havana, East St. Louis, and Cairo, Ill., St. Louis, Mo., Memphis, Tenn., Helena, Ark., and Vicksburg, Miss., as origins, to Dubuque, Chicago, Peoria, Havana, East St. Louis, Cairo, St. Louis, Memphis, Helena, Vicksburg, Baton Rouge, and New Orleans, La., as destinations, hereinafter called the river ports, without observing the longand-short-haul provision of section 4 of the Interstate Commerce Act. In addition, the same relief is sought from and to points on the applicant's lines beyond the ports from and to which the proposed rates between the ports, if established, incidentally would become factors in combination rates. Generally, the trend of the rates is southward; however, the application also proposes rates between Chicago and Dubuque, from Peoria and Havana to Dubuque, and from Peoria, Havana, St. Louis, East St. Louis, and Cairo to Chicago, which contemplate eastbound, westbound, and northbound movements. The purpose of the relief is to meet competition of the all-water route operated by the Inland Waterways Corporation, hereinafter called the barge line, on the Mississippi River, Illinois River, and Chicago Drainage Canal, which form a continuous navigable waterway between the specified river ports situated on the lines of the applicant. As used hereinafter, St. Louis includes East St. Louis. Rates and charges will be stated in cents per 100 pounds, unless otherwise noted.

The Helena Traffic Bureau, Helena, Ark., intervened in support of the application. The Memphis Merchants Exchange, Memphis, Tenn., intervened in partial support of the application and only to the extent of the proposed reduction in rates to Memphis. All other interveners are opposed to the application in its entirety.

The comparatively close proximity of the applicant's lines to the described waterway for the entire distance between Chicago and New Orleans, with many of its principal stations being also river ports, makes it peculiarly susceptible to the competition of the barge

line, especially in the movement of grain from the important producing section of central Illinois to the milling and consuming centers located in southeastern Carolina, and Mississippi Valley territories. The tendency is also toward greater competition between water and rail transportation, due to the increases and improvements being made in the facilities for handling grain by water. This, with the present relatively low rates of the barge line, and their trend being downward, together with the fact that usually time is not an element in the movement of grain, has influenced the applicant to seek this relief as the only means by which it can continue to compete with the barge line.

The position of the applicant is unique among the rail carriers serving the territory in question. Its main lines form one of the few direct north-and-south trunk lines, and, among them, it is the only single carrier which essentially parallels the entire navigable waterway of the Mississippi River, Illinois River, and Chicago Drainage Canal from Chicago and Dubuque south to New Orleans. As the waterway described and the applicant's lines traverse the grain-production area of Illinois and are contiguous to a large portion of the grain produced in Iowa, they are common practical routes for the same grain traffic from origin to the lower Mississippi River gateways, including St. Louis and points south thereof, which they also serve in common.

Due to its singular position, the applicant urges that its request for relief should be given very liberal consideration, and not only because of existing conditions, but principally because of the potential ability of the barge line to attract an increasing volume of this grain traffic from the rail lines, resulting in an irreparable loss of much needed revenue. Applicant regards the major portion of the grain tonnage borne by the barge line in the past as an unavoidable loss to its own tonnage and revenues, because of its inability to cope with an unregulated carrier, such as the barge line, in the reduction of rates as a means of retaining this traffic.

Applicant submitted much data relative to the capacity of its present facilities to handle efficiently approximately all of the comparable water-borne grain at a disproportionate added cost, in addition to like traffic which moves all rail over its route. This involves the volume, direction, and density of the grain traffic, capacity of equipment, train schedules, cost of service, and revenues. The record shows that the grain traffic which originates in Illinois and is hauled by the applicant to lower Mississippi River gateways, for which the barge line principally competes, does not reflect any relationship to the production within the State or to the total amount of grain shipped. Applicant's tonnage has fluctuated conversely to the in

creases and decreases in both production and total tons shipped, except for the year 1933. In that year the applicant carried a greater percentage of the production, despite the competition of the barge line. On the other hand, it is shown that the total tons shipped does fluctuate in harmony with the production.

Applicant emphasized the directness of its routes, its ability to handle additional traffic in regular trains, and the fact that the trend of empty-car movement was in the direction of the grain traffic in question. It showed that many box cars, suitable for loading grain, move empty over its lines. Extensive tables, designed to show costs of handling additional grain traffic, together with constructive revenue to be gained therefrom, were introduced by applicant. These premises were discussed in the proposed report of the examiner, and have been considered, but they are of little probative value when considered with the low earnings yielded by the proposed rates. The Commission quite generally has denied fourth-section relief where the proposed rates yielded less than 5 mills per ton per mile. Grain and Grain Products to Florida, 197 I. C. C. 441.

The proposed rates, from Chicago, Peoria, Havana, St. Louis, Cairo, and Memphis as origins to St. Louis, Cairo, Memphis, and New Orleans as destinations, are not compensatory. The revenue yield of 23 rates considered as typical would range from 3.43 to 6.8 mills per net-ton-mile. This range embraces 13 rates which would yield under 4 mills per net-ton-mile, 6 rates that would yield from 4.02 to 4.76 mills, and only 4 rates that would yield in excess of 5 mills, or from 5.64 to 6.8 mills.

Applicant would not cancel the present rates. Their continuance is principally to preserve the existing transit privileges which have grown up during the years the present relations have applied. No transit is contemplated in connection with the proposed rates. Under such an adjustment two concurrent sets of rates on grain would be in effect between the same points and their alternative application would depend upon whether a shipment required transit. Transit is not accorded under the competitive water rates to which the proposed rates would be related. Applicant, however, does not commit itself definitely to this plan, being mindful of the fact that unforeseen circumstances may arise to necessitate transit in connection with the proposed rates if they were established.

A restriction considered necessary by the protestants to place the application of the proposed rates on a parallel basis with the bargeline rates, would be to provide against the use of the former in combination with the proportional rates to interior points beyond the Mississippi River crossings. The Commission found the discontinuance of those proportionals justified on ex-river grain in

I. and S. No. 3928, Ex-river Grain from St. Louis to the South, 203 I. C. C. 385, decided subsequent to the hearing in the instant case. The purpose of the restriction here, as in that case, would be to minimize the equally disruptive effect which the low proposed rates would have on the present equalized grain-rate structure, and to confine the preference created under them so far as possible to local points. The unregulated water carrier in each instance published very low rates. In this case applicant urges that rates yielding slightly more than 3 mills per ton-mile are necessary to meet the competition of the water carrier.

If we had jurisdiction over minimum rates of water carriers we could require a reasonably compensatory adjustment of rates and prevent such situations as here are presented. We have sought that authority at the hands of Congress, but the act has not been amended in that respect. Therefore, as was said by the Supreme Court in United States v. Missouri Pac. R. Co., 278 U. S. 269, "Inconvenience or hardships, if any, that result from following the statute as written must be relieved by legislation ".

While the applicant expressed a willingness at the hearing to restrict the rates to interior points on its own lines, some doubt was raised as to the adoption of similar restrictions by its connecting lines. Without identical action being taken by all connections beyond the various Mississippi River gateways, the opportunity would exist for one or more connections serving a particular gateway to apply their proportional rates in combination with the proposed rates. This would give added preference to a favored gateway and extend that preference to points beyond served by those connections.

The foregoing is illustrated by a comparison of the present and proposed all-rail rates on grain from Peoria to key points shown in the following table.