Again, Congress felt that since many carriers on the waterways were small organizations, family setups, little carriers serving one or two shippers, they neither needed or required rate regulation.

As found by the ICC in a recent case involving the attempt of two railroads to acquire a bargeline:

“During the developmental stages of modern barge operations, most carriers commenced as independent small business enterprises, and of the presently active operators many still occupy that status. Some of the larger bargeline carriers represent combinations of small carriers acquired by and merged into, or otherwise corporately unified, with a stronger carrier. As in the earlier days some carriers are owned entirely by an individual or by members of the same family. Several now operating were started as bargelines or packet lines in the era prior to railroads and have passed from generation to generation in the same family. Others came into being during the depression period of the 1930's. Probably most of the lines, including some of the most successful, were founded since World War II by individuals who made small capital investments in secondhand vessels which they personally converted for use as towboats and continued to maintain and improve until business permitted acquiring additional equipment. Often traffic was transported by use of leased barges or barges owned by the shippers, and involved short hauls or purely local service. As the carriers developed, the owners succeeded in attracting more traffic, and additional towboat and barge equipment was constructed, purchased, and leased. Expansion of the fleets, and the lengthening of the distance which traffic moved required the carriers to solicit traffic to transport in the direction which the equipment otherwise would be returned unloaded. The carriers thus attacted types of traffic which previously has not been handled by water carriers. In so doing, some of the carriers specialized in the operation of a particular type of equipment and provided a service tailored to suit the shippers. Among the smaller carriers, many restrict their operation to the transportation of only one or two exempted bulk commodities such as liquid petroleum, ores, coal, sulfur, and sand and gravel." (ICC Finance Docket No. 20940.)

It was also true in 1940 as now that the operations and traffic of inland water carriers cannot withstand ruinous competitive rate practices. The costs of inland water carriers are largely direct costs which vary with the amount of traffic handled. There is, therefore, little incentive to charge less-than-cost rates in order to obtain traffic. Nor is there any possiblity of profitably doing so because of the absence of other noncompetitive traffic which can be made to bear high rates to make up losses. There was found by the Congress at that time no need, therefore, to have minimum rate power over these particular carriers to keep them from destroying themselves or other carriers by selective rate cutting or by maintaining unreasonably low rates.

There have been no changes in rail-water competition for traffic that would warrant such a dislocating change in congressional policy as proposed in H.R. 11583. It is implicit in railroad testimony in support of the bill that they intend to take traffic from the water carriers wherever and however they can get it. This is a philosophy that the water carriers know and understand, having risen from the graveyard where exercise of the philosophy put them at the turn of the century. It is a philosophy that the Congress should understand and know that it must be controlled if the water carriers are to live. More than 60 years of water carrier struggle to achieve status under congressional policy would be nullified almost overnight by such a departure in basic policy as here proposed.

Why should this be so? For the principal reason that the railroads, the chief proponents of the legislation under consideration, have not changed their stripes. They are still tigers in the arena of rate and traffic competition. They can be stopped short of destructive practices only under regulation.

The Commission itself has found this assertion to be substantially true in the recent John I. Hay case which we have referred to. The Commission found that given an opportunity to own ships and compete with water carriers the rail competition would be "overbearing." The Commission was, in part, led to this conclusion by factual reference to the ratemaking practices of the railroads. The Commission found in a restrained statement of fact that:

"28. In attempts to recover traffic diverted by the water carrier level of rates, the railroads reduced all rail rates on particular articles between specific water terminal points; published rates and accorded transit privileges and switching service more favorable in regard to movements solely by railroad than movements partly by railroad and partly by water carrier; and in revising effective

rates pursuant to Commission approval of general rate increases, invoked 'holddowns' as to rates affected by competitive water carrier service.

"29. To combat rate and service adjustments by railroads seeking to recover traffic formerly handled, water carriers reduced rates practically to the level of their out-of-pocket costs, thus providing substantial savings to the users of water carrier service." (ICC Finance Docket No. 20940.)

Certainly, if the railroads would, as found, again use the "fighting ship" means of destruction of water carriers they would also use their freedom from control under minimum rate powers to do the same thing.

As a matter of fact, in the presence of such powers, they are attempting to sink the water carriers by rate reductions. There are a number of cases now pending before the ICC in which the railroads have reduced their rates on important bulk-loading commodities to a level barely covering out-of-pocket costs and in certain instances, according to some cost findings referred to the Commission, below out-of-pocket costs. It would not be appropriate for me to refer specifically to pending cases here. Suffice it to say, however, that in the light of such cases, and there have been a number of them in the last few years, all dealing with bulk commodities, without the availability of minimum rate powers the Commission would have been helpless to prevent destructive rate practices, unless it were done solely under the terms of the national transportation policy, which, absent the minimum rate power, would be ineffective. The proposed legislation would nullify even that policy.

Why are the railroads able to undertake rate cutting and other campaigns against the water carriers and with a substantial degree of success?

The answer is in part because of the relative financial size of the water carrier community as compared to the railroad community. No precise figures are available on the water carriers, but in a recent proceeding we surveyed the members of AWO to determine their investment in carrier properties. Using the basic figures obtained in this survey and extending the averages to all water carriers, we estimate that the inland water carrier community has a total capital investment of $1.6 billion in vessel equipment. Class I railroads, according to part I, Transport Statistics in the United States, December 31, 1960, issued by Interstate Commerce Commission, have a total capital investment of $32 billion. The Illinois Central Railway System, which closely parallels the Mississippi River System, alone has a capital investment in excess of $839 million, equal to onehalf of the total equipment investment of all inland water carriers of the United States.

The economic power of the railroads to destroy water carriers if H.R. 11583 is enacted will be aided and abetted by the fact that the water carriers handle principally bulk-loading commodities as the following table based on 1960 traffic shows:

Ten principal commodities carried on the inland waterways of the United States

It is apparent in the light of these figures that the legislation proposed strikes at the heart of water transportation. The railroads haul thousands of commodities. The water carriers transport about 30. Take any representative number of this 30 away and there remains no water carriage. It is that simple. Could this be done by the railroads in the absence of minimum rate controls? The answer is "Yes."

Many water carriers handle only one, two, or three of these commodities. Although others handle more, most water carriers rely on one, two, or three of these bulk-loading commodities to sustain their going operations.

One respected Mississippi River carrier recently testified before ICC in the course of a rate case that if it lost either its southbound grain traffic or its northbound phosphate hauls (both bulk-loading commodities), its operating ratio would go above 100 percent. This would mean either that the company would have to cease operations entirely or fall back into the category of a sand and gravel carrier hauling commodities in local traffic that the railroads did not want to haul.

If minimum rates on grain and phosphate cannot be controlled, the inevitable fate of this water carrier, judged by past actions of the railroads, will be written upon the legislative wall as an epitaph-and the same can be said of many other water carriers. There has been a considerable amount of speculation in the questioning by members of the committee of witnesses as to what constitutes bulk commodities. For the information of the committee, I offer the table on the following page which shows the principal commodities carried on the inland waterways, the overwhelming majority of which are bulk-loading:

Principal commodities carried on the inland waterways of the United States (exclusive of the Great Lakes) in net tons of 2,000 pounds, for the calendar years 1955, 1959, and 1960

Note that the percentage of growth in bulk commodity loadings by water carriers is no more than the growth of the national economy.

These are the commodities that the rails will go after on a rate war basis if the means of stopping such a war are taken away from the Interstate Commerce Commission. They are already in control of the majority of some of this traffic even in the presence of the minimum rate powers of ICC. In this connection, I refer to such commodities as grain, asphalt, residual fuel oil, industrial chemicals, and coal.

On behalf of the railroads, it has been represented that they are in perilous plight because they cannot now compete for this bulk-loading traffic ratewise. This is sheer bunkum. They can and do successfully compete for this traffic. Were it not for the fact that most of the barge line customers are located on navigable waterways, where they can be served on a port-to-port basis, the rails would be even more successful in their rate campaigns even under minimum rate regulation.

There is a popular idea to the effect that inland waterways transport facilities are making steady and sensational gains in their traffic movements. This, too, is an overdrawn contention. The facts are set forth in the following table:

Traffic transported on inland waterways of United States (exclusive of Great Lakes), for calendar years shown

1 Known duplications resulting from reporting of identical shipments over two or more waterways have been eliminated except that the figures for 1947 and subsequent years represent originated traffic.

2 Figures for 1947 and subsequent years appear low as compared with those of previous years for the reason that the traffic for 1947 and subsequent years was compiled by the Corps of Engineers for Rivers and Harbors under a new statistical system with mechanical tabulating processes which analyzed the traffic and eliminated duplications more thoroughly than in the years prior to 1947.

3 This is an estimated figure from the Army Corps of Engineers. The final figure will not be available until later this year.

4 Not available.

You will note that there has been reasonably steady increases in tonnages, about equal to the rate of national economic growth. The ton-mileage increases are somewhat higher. This simply reflects longer hauls over better water channels by more efficient equipment; and to some extent reflects changing marketing and production patterns which affect all modes of transportation.

The inland water carrier community is presently in a fairly healthy state. This can be attributed in part to the efficiency, ingenuity, energy, and perserverence of management as well as to cost of service factors. But it is in large part due to the continuing location of many industries along the Nation's waterways which use or produce bulk commodities and who want the competitive advantages offered by low-cost water transportation.

One of the major keys to production industry's ability to compete in our intensely competitive economy is the availability of transportation suited to all of the variety of needs for bringing together raw materials and for shipping out finished or semifinished products. This is recognized. And industry looks to barge transportation to fill a major need for moving bulk raw materials in mass quantity at low rates.

This need has generated a massive industrial development at waterside sites on rivers and canals which make up the principal routes of the barge and towing vessel industry throughout the United States. Not only is industry putting a large share of its capital investment dollar into new plants along these water routes, but industry is also expanding existing plant facilities along the water routes at an accelerated rate.

Admittedly other factors influence plant location. Admittedly the availability of adequate industrial water supply itself in our navigable streams is an attraction for certain industries. Nevertheless, the availability of low-cost water transportation increasingly has become a recognized major ingredient in the attraction of industrial production facilities to specific locations. So much so that since 1952, when the American Waterways Operators, Inc., first began keeping records on waterside site plant locations and expansions, literally thousands of industries have put their facilities on such sites.

Today industries feed approximately 400 million tons of freight into river and canal traffic.

The barge and towing vessel industry in handling this tonnage produces almost 120 billion ton-miles of service, more than 9 percent of the total intercity freight service of the United States.

Average cost of this service to the shipper is about 4 mills per ton-mile. The growth of commerce on the inland waterways of the United States in the period 1947-61, when it rose from 3.5 percent of total intercity freight movements to 9.4 percent, indicates the value which shippers have put on this mode of transportation. Very simply, more and more shippers have discovered that the floated ton is the most economical ton of transportation and are taking advantage of safe, efficient, low-cost barge transportation for their bulk commodity movements.

This approach to the problem, to wit, the commodities hauled by water carriers and the public served by them gives rise to another pertinent question in which members of this committee have already shown an interest-that is the possible effects of unrestrained or uncontrolled rate cutting on the public interest. The present situation is fairly well stabilized. Plants on waterside sites have sought water locations for economic reasons and are being served by water carriers toward that end. They are in competition with interior plants in many instances, that is to say, plants not located on waterways. If the railroads were to cut rail rates on bulk-loading commodities to or from interior plants, the watersite plants would suffer intense market competition. The ICC takes market competition into account in determining the legality of rates. If the ICC is stripped of its minimum rate control power as provided in H.R. 11583, the shipping public will suffer. It will suffer not from the immediate lower rates that the railroads will put into effect on competitive traffic, but from the elimination of an alternative method of transportation and from the serious dislocation of industry that will occur. We do not believe that the residual powers of the ICC under section 3 relating to preference and prejudice and section 2 relating to discrimination can overcome these results.

Waterside shippers

The dislocative effect on industry merits consideration. have made substantial investments in shore facilities to accommodate their water transportation needs. These investments would be imperiled if H.R. 11583 is enacted. These waterside shippers and receivers, of course, can be and are served also by the railroads. However, it has always been and still is the case that the freight rates on the commodities that water-oriented shippers move in or out are controlled by the water carrier rate. This has been one of the major public benefits of water transportation. If the rail rates can be lowered without minimum rate restraints so as to capture the traffic and drive the water carriers out of business, the rails can then as they have done so often in the past, raise their rates afterward to the detriment of the shipper. I know of nothing in the Clayton Act that would stop the chain of events. The rails undoubtedly want this traffic and are prepared to go after it. And when they do it, we believe it will be on a below out-of-pocket cost basis. They will imperil their own fiscal integrity and stability, imperil the water carrier community, and in the long run imperil the public interest.

It is submitted that the public has a valid interest in the continued welfare (maintenance and development) of waterways and that this interest would be stifled if the navigational use of such waterways were substantially impaired as it could be if H.R. 11583 passes. Let me be more specific: According to findings made by the Select Committee on National Water Resources, U.S. Senate (Committee Print No. 11, 86th Cong., 2d sess.):

"In 1824 the Corps of Engineers received its first appropriation for river improvement work. Appropriations of Federal funds for the construction, operation, and maintenance of navigation works during the 135-year period ending June 30, 1959, have amounted to approximately $5.5 billion, of which about $0.6 billion was spent for navigation works no longer in use. The distribution of the remaining $4.9 billion is indicated by the following tabulation: