water carriers were destroyed, and the benefits of one of our greatest natural resources (the inland waterways) lost. Much of the testimony given before this committee on these two bills has pointed an accusing finger at the exempt carrier as the one at fault in our present transportation difficulties. I think you are probably aware that there are three types of carriers of exempt goods in water transportation. First, there are the carriers, such as myself, that hold themselves out to the general public as engaging in the transportation, by water, of bulk, exempt commodities and one not permitted by law to handle anything but exempt commodities. Sec ondly, there is the regulated carrier which is permitted to handle bulk cargoes on an exempt basis when that carrier handles them in the same manner as the true exempt carriers. Third, there is the private carrier that handles bulk commodities on the exempt basis as a byproduct to its main operation, which is the transportation of goods owned by it or an affiliate. I want to make it very clear at this point that the exempt water carrier, as that word is literally interpreted, individually and as a group have never in the history of American transportation engaged in destructive rate practices. There is a very solid reason for this which is so obvious it needs no supporting proof. In destructive rate wars the exempt water carrier would be the first to fall by the wayside. It has neither the high-rated regulated cargoes, nor the owned and controlled cargoes to subsidize the movement of the low-rated bulk commodities. I will summarize briefly the thinking which I have presented in this testimony for the consideration of this committee: (1) The regulation suggested for bulk commodities in H.R. 11583 will grant a segment of the industry an absolute control which can only result in destructive and discriminatory rate practices; (2) the present exemption available to water carriers has not been harmful to the transportation industry and should be continued; (3) the true exempt carrier, as distinguished from regulated and private carriers, has not and would not indulge in destructive rate practices. STATEMENT OF THE NATIONAL COAL ASSOCIATION SUBMITTED BY MYLES E. ROBINSON, DIRECTOR, ECONOMICS AND TRANSPORTATION This statement is filed in support of H.R. 11583, a bill "To exempt certain carriers from minimum rate regulation in the transportation of bulk commodities, agricultural and fishery products, and passengers, and for other purposes." The National Coal Association is the official trade association of the bituminous coal industry, with offices at 1130 17th Street NW., Washington, D.C. Its members include producers and distributors of two-thirds of the commercially mined coal in the United States. This statement is concurred in by the Mid-West Coal Producers Institute and the Coal Traffic Bureau of Northern West Virginia, Ohio, and Western Pennsylvania. The bituminous coal and railroad industries have very strong mutual ties. Coal is the most important commodity handled by the railroads, both as to traffic and revenue generated. In 1960, the latest year for which complete data are available, coal accounted for 24.5 percent of all railroad carload traffic and 12.5 percent of all rail revenues from freight transportation. Not only is a healthy bituminous coal industry vital to the railroads, but without a strong railroad industry the coal industry would suffer numerous handicaps, some of these insurmountable. In 1961, for example, 75.3 percent of all bituminous coal movements were by rail, with trucks and barges furnishing 13.1 and 11.6 percent, respectively. Also, while a substantial volume of coal moves under conditions where there are other available means of transportation, many coal operations are conducted where the only practicable means of transportation is by rail. Here the two industries are closely interdependent. We strongly urge that H.R. 11583 be recommended favorably by the committee. Our support of this proposed legislation is based on the long-established policy of the National Coal Association to oppose all measures which will cause erosion in our markets and to lend our backing to those measures which will expand these markets. We believe the proposed legislation is sound and that its enactment will greatly benefit the bituminous coal industry, the railroads' largest shipper, and the railroads, coal's chief means of transporting our product to the market. We believe this legislation will benefit the railroads, the coal industry, and the general public for these three reasons: (1) It will make it possible for the railroads to reduce rates for coal without the necessity for time-consuming ICC delays in granting the relief applied for; (2) it will expedite rate adjustments generally by removing the large number of minimum rate cases from the jurisdiction of the Commission; and (3) it will permit the railroads to improve their financial position and strengthen their ability to maintain adequate equipment and service to meet coal's transport needs. Like the Nation's railroads, we are engaged in a struggle for survival. Penetration of our markets by natural gas and residual oil has increased in intensity in the postwar period. Halfway measures are not enough. Interfuel competition is heavily keyed to price. Only by a hard-hitting approach to the real issue of high transportation charges for coal can this competition be met effectively. In 1961, railroad freight charges were 73.1 percent of the average value of bituminous coal at the mine. Imported residual oil, long a serious problem in coal's marketing along the eastern seaboard, is now moving inland. The chief way to retain coal's competitive position in eastern markets is to give the railroads greater flexibility in pricing freight services. An ever-growing problem in the marketing of coal, particularly in the Midwest, is that of interruptible gas. Here, again, pricing is the major key to our ability to compete. We believe this proposed legislation is the proper vehicle through which to provide effective competition. In recent years through increased mechanization and greater efficiency in the use of equipment, the bituminous coal industry has actually succeeded in reducing the price of coal at the mine. During the decade 1952-61, the f.o.b. price for bituminous declined from $4.90 to $4.65 a ton, a decrease of 5.1 percent. While mechanization undoubtedly will continue to be a factor in enabling the coal industry to maintain its mine-price line, high transportation costs could easily result in counteraction. Rail transportation costs, as we have repeatedly pointed out in numerous ex parte rate cases, must come down or one of two things will happen-coal will be driven to the use of other means of transport than rail, or the coal industry will withdraw from competition with other fuels where transport cost is a major factor in price. Both the coal and railroad industries, faced with a loss of utility markets, have cooperated in establishing lower rates on coal movements to the east coast. Again, through the initiative of progressive management, major coal-carrying roads are developing the "unit" or "integral” train, a trainload of coal from a very limited number of points of origin to a single destination. This development and that of the coal pipeline are drastic steps to reduce transport costs for coal. Such steps are in the right direction. But without freedom from minimum rate controls, the railroads will be unable to aid coal in its struggle to meet the competition of imported residual oil and below-cost interruptible gas. Further, both the coal pipeline and unit train are limited to heavy, relatively longdistance hauls from a few origin points to a single destination. Most coal movement takes place under other circumstances. In this larger number of cases the only means of relief is the minimum rate. Not only will enactment of H.R. 11583 permit the railroads greater flexibility in ratemaking for bulky commodities but, relieved of its time-consuming regulation of minimum rates, the Interstate Commerce Commission will be better able to deal with other rate matters within its jurisdiction. We are well aware of the Nation's need for a strong and economically healthy railroad industry. Removal of minimum rate controls on items highly sensitive to competitive pricing is essential to preserve the railroads as an important factor in the Nation's transportation complex. Equipment is the likelihood of the railroad industry and for the coal industry. Without adequate hopper cars, for example, our markets would soon be lost to oil and gas. The railroads are feeling the impacts, as are many other industries, of the postwar trend in the Nation's economy away from service competition to price competition. In many areas profit margins are small and cost savings are carefully investigated. Where transportation costs can be pared, this is done. This bill also provides for the removal of minimum rate controls for passenger service. We recommend that this provision be left in the bill. The National Coal Association, in frequent ex parte hearings, has contended that coal freight rates are too high because freight traffic generally is subsidizing passenger serv ice losses. We are completely in support of anything which will help the railroads regain traffic lost to the private automobile and competing common carriers. We have certain reservations about some of the provisions of H.R. 11583 as the bill now stands. The first of these refers to the proposed amendment to section 5a of the Interstate Commerce Act which would abolish the right of railroads to make rates through the conference method, rate bureaus, etc. This right to establish rates by agreement and not in a vacuum, is granted by the terms of the Reed-Bulwinkle Act. We are convinced that removal of the legal basis for such activities in the rate establishment field could contribute to delay in rate adjustments and inflexibility in competitive pricing which H.R. 11583 seeks to avoid. Because of the departure in rate controls incorporated in this bill, it is necessary, in our opinion, that periodic reviews be made of the results of this legislation to all parties, including the general public. These should be reported to the Congress. Such a review would assess the value of this legislation to the railroads, shippers, and impact on the general public. Such a review is advisable because this is the first major change in railroad regulation since 1920. It is also our recommendation that the committee weigh most carefully the protection of shippers, carriers, and the general public from rate adjustments not based on the need to meet market competition. While the bill does provide for such protection through the Department of Justice, inordinate administrative or judicial delays in taking final action on such rates would well nullify the benefits of eliminating minimum rate regulation from bulk commodities. The Congress should weigh carefully whether the 30-day waiting requirement may not defeat the desirable end of flexibility. In any event, this factor should certainly be reviewed after experience under a change in the law, if the waiting requirement is not modified. We are pleased to place these conclusions of the bituminous coal industry in support of H.R. 11583 before the House Interstate and Foreign Commerce Committee and urge that consideration be given to the early enactment of this legislation to grant the railroads the greater flexibility essential to efficient and profitable operations. [Telegram] Hon. OREN HARRIS, WASHINGTON, D.C., July 24, 1962. Chairman, House Interstate and Foreign Commerce Committee, National Farmers Union is supporting President Kennedy's recommendations in regard to the Nation's transportation policy. Greater competitive freedom would benefit immeasurably farmers, consumers, and would permit the common carrier industry which has been declining, to become a greater dynamic force in the Nation's growth and economy. We support particularly your bill, H.R. 11583, which would in part achieve these goals. Users of common carrier transportation should benefit from modernization and greater efficiency of railroads. The railroads should have power to reduce rates on bulk and agricultural commodities where practicable. Respectfully request that you read this message into record of hearings. JAMES G. PATTON, President, National Farmers Union. CONGRESS OF THE UNITED STATES, Mr. W. E. WILLIAMSON, HOUSE OF REPRESENTATIVES, Washington, D.C., August 1, 1962. Clerk, Interstate and Foreign Commerce Committee of the House, DEAR ED: Mr. Richard M. Boyd, of the Pittsburgh Plate Glass Co., would like very much to have his talk made a part of the record in the hearings on H.R. 11583. I think this is an excellent summary of the transportation problem and would be of value in the hearings. Cordially yours, J. ARTHUR YOUNGER, Member of Congress, Ninth District, California. Enclosure. WILL THERE BE A CHANGE IN THE REGULATORY CONCEPT? An Address by Richard M. Boyd, Director of Traffic and Transportation, Pittsburgh Plate Glass Co., at the Tenth Annual Meeting of the Railroad Public Relations Association, White Sulphur Springs, W. Va., June 14, 1962 The Presidential message on transportation gave indication that less regulation of transportation is a possibility. But even in the Presidential message either/or language is used. In advocating extension to the railroads of the exemption from approval or prescription of minimum rates, the message indicates that "while this would be the preferable way to eliminate the existing inequality” Congress could elect to extend regulation to areas which are exempt for transportation by water and by motor today. In his message, the President appropriately stated: "A chaotic patchwork of inconsistent and often obsolete legislation and regulation has evolved from a history of specific action addressed to specific problems of specific industries at specific times." A review of transportation regulation offers ample substantiation of this statement in that law has been piled upon law without repeal of any existing statutes. The original concept of regulation was to control monopoly-it was essential in the public interest to prevent preference and prejudice. There was only one form of public transportation, the railroads, and the flagrant abuses of the public interest which had arisen in the operation of this single form of transportation made regulation necessary. The original Interstate Commerce Act of 1887 was followed by various implementing legislation which strengthened the original act and occasioned more regulation-statutes such as the Hepburn Act, the Elkins Act, and the Mann-Elkins Act. By the time the motor truck began to become a factor in moving the Nation's commerce, the public had become so accustomed to regulation that it seemed logical to regulate this new form. But even though, because of years of railroad regulation, the way had been paved for enactment of legislation which would provide regulation of the motor truck, there was little demand for such regulation as far as the shipping public was concerned. The demand arose primarily from those in the trucking business who had made sizable investments and felt there should be some protection of such investment and some in railroad management who thought the answer to meeting this new form of competition lay in placing it under regulation. But in railroad quarters there were many who did not consider the motor truck an important threat-they dismissed motor transportation by saying, "Let them have the LCL business-we don't want it anyway." As the truck became increasingly important, there came the first major change in the regulatory concept. Regulation of motor carriers was not necessary on the grounds of controlling a monopoly; anyone could buy a truck and go into the trucking business. Nor was it necessary on the basis of providing exclusive franchise. Railroads have large fixed or constant expenses so that they must have some assurance of exclusive franchise. On the other hand, fixed expenses of motor carriers constiute a much smaller element of their total cost primarily because they do not build or maintain the highways over which they travel. Furthermore, they contribute to maintenance of such highways only when they use them. In the absence of justification on the grounds of controlling a monopoly or the need for exclusive franchise, various reasons were advanced for regulation of the motor truck, most of which have not been justified by experience. Among the reasons advanced were: (1) Regulation of motor carriers is desirable to prevent discrimination : Although section 216 of part II of the Interstate Commerce Act provides that undue preference and discrimination are unlawful, action is rarely brought against a carrier under this section and instances wherein the Commission has sustained a complaint under this section are even more rare. (2) Regulation is necessary to insure financial responsibility of common carriers by truck: The Interstate Commerce Act and various State laws provide for the establishment of regulations for protection of the public with respect to damage or loss of cargo. However, the shipper must prove the carrier is legally responsible and, in the face of increasing costs of litigation, it is seldom worthwhile to take claims into court for collection. The carriers are well aware of this and many of them use every conceivable excuse for not paying claims or delaying payment as long as possible. (3) Regulation is necessary to assure dependable service: If our present regulatory system would assure dependable service, shippers would be all for it, but filing a complaint with an office of the Interstate Commerce Commission or a State regulatory body doesn't get the load moved today and if it is not moved today and delivered to the customer tomorrow the sale may be lost. (4) Regulation is necessary to achieve just and reasonable rates: Within an industry that is not monopolistic by nature, this requirement of the Interstate Commerce Act has become almost meaningless. The competition of other forms of transportation, or the cost of service by private transportation today sets the peg. (5) Regulation is necessary in order to bring about a coordination of rail and motor transportation: In an obvious attempt to encourage such coordination, the Congress has made coordination of modes permissible under the Interstate Commerce Act but it has had little effect-only a minimum amount of coordination has resulted. Shippers are told that coordination can be achieved only through common ownership, and we are reluctantly beginning to think that this is the only possible means of achieving it. Certainly we have been given no grounds for thinking that it could be forced by legislation which would require separately owned properties to provide coordinated service. These were the primary reasons advanced for the new concept of regulation embracing the for hire motor carrier industry. Part II of the Interstate Commerce Act was patterned after part I, but regulation was not on the same basis. There was one big exception: the produce of agriculture was completely exempt from regulation when transported by truck. It was difficult to argue with the right of the farmer to haul his products by truck-after all he had always hauled it to market in a wagon and the motor truck was simply replacing the wagon. This formed the basis for what has proved to be a most important exception being made in enactment of part II. As water transportation for hire again became important, cries for regulation arose. Rail transportation is regulated; motor transportation is regulated; why not water? And so part III of the Interstate Commerce Act was enacted. But here again the concept changed-bulk commodities were not to be regulated. The exemption from regulation, when transported by water, of all bulk liquids and dry bulk when not more than three commodities are included in the same tow set up another exempt area of major importance. As the freight forwarder became more important in the transportation picture, a demand for regulation arose. Here again the concept was somewhat different, in that prior to enactment of this section of the Interstate Commerce Act regulation had been set up only for modes of transportation. The freight forwarder did not constitute a mode: he was an entrepreneur, utilizing the various modes for movement of smaller quantities on which he performed the function of consolidating. And here again what has proved to be an important exemption from regulation was inserted into law: shipper cooperatives are not subject to regulation under part IV of the act. While all this regulation of surface transportation was occurring, air transportation had come into being, and the Congress decided that regulation was necessary and desirable in the public interest. However, a new concept was followed, in that a separate law was enacted to regulate air transportation and a new agency was created to administer such regulation. No provision for coordination or tie-in with surface transportation was provided. Similarly, in setting up regulation of ocean transportation, the Congress provided a different concept in the form of a separate law and a separate agency, the Federal Maritime Commission, to administer it. Here again no provision for coordinating regulation of maritime transportation with the regulation of other forms of transportation was provided. Each session of Congress since the war has brought forth a host of transportation bills which essentially would provide for more regulation of the various forms of transportation. Only one of any consequence has been passed-the so-called Transportation Act of 1958, which purportedly provided for greater freedom in ratemaking. It is significant that, in attempting to provide greater freedom, the Congress did not repeal any existing regulatory laws: it added to the existing statute a new section. Section 15a provided opportunities for varying interpretation as to what was meant by Congress and the Interstate Commerce Commission has added to the doubt by a series of decisions in which it is often difficult to find the thread of consistency. 91497-62- 44 |