could well pose an obligation on the Interstate Commerce Commission to find our tariffs unreasonable, upon protest, because such tariffs do not provide a fair rate of return on investment. In such an instance, consistency would require that the Interstate Commerce Commission direct the Alaska Railroad to increase its rates to provide for a fair

return.

The Organic Act of the Alaska Railroad declares that the Alaska Railroad be operated in order to develop the Territory of Alaska (now the State of Alaska) and to support the Military Establishment. We wish that we could do this and still meet commercial standards of profitable enterprise. At some time in the future this may well be possible. The economy of Alaska has not yet developed to a point where the Alaska Railroad can justify the furnishing of mass transportation only where interest and profits can be earned.

Senator Bartlett, you will recall that I testified at great length on this bill before your committee in Washington. I have copies of that testimony with me, and will supply them to the committee. I will be happy to read my previous testimony into the record of this hearing if the chairman so desires and that is made as an attachment to this testimony, Mr. Senator.

Senator BARTLETT. Very good, and that will be received. The Chair will infer that you are in good voice, Mr. Anderson, and are able to read that length statement without a pause, so we won't require you to do it now.

Mr. ANDERSON. Thank you, sir.

I also have with me Mr. Elbert Kunz, general traffic manager, Mr. Fred Hoefler, traffic agent, and Mr. Edwin M. Fitch, the Washington representative of the general manager. They will be available to assist in answering any questions which you may wish to ask in regard to the railroad and our views on this bill.

At this time, I will be happy to abide by the wishes of the committee by myself in Washington.

Senator BARTLETT. Does the Enabling Act set forth language re ratemaking?

Mr. ANDERSON. Yes. I will furnish it for the record. (The matter referred to follows:)

ALASKA RAILROAD ENABLING ACT

United States Code, Title 48

SEC. 301. Railroads; location, construction, and operation; passes

The President of the United States is empowered, authorized, and directed to adopt and use a name by which to designate the railroad or railroads and properties to be located, owned, acquired, or operated under the authority of sections 301, 302, and 303-308 of this title; to employ such officers, agents, or agencies, in his discretion, as may be necessary to enable him to carry out the purposes of said sections; to authorize and require such officers, agents, or agencies to perform any or all of the duties imposed upon him by the terms of said sections; to detail and require any officer or officers in the Engineer Corps in the Army or Navy to perform service under said sections; to fix the compensation of all offices, agents, or employees appointed or designated by him; to designate and cause to be located a route or routes for a line or lines of railroad in the Territory of Alaska not to exceed in the aggregate one thousand miles, to be so located as to connect one or more of the open Pacific Ocean harbors on the southern coast of Alaska with the navigable waters in the interior of Alaska, and with a coal field or fields so as best to aid in the development of the agricultural and mineral or other resources of Alaska, and the settlement

of the public land therein, and so as to provide transportation of coal for the Army and Navy, transportation of troops, arms, munitions of war, the mails, and for other governmental and public uses and for the transportation of passengers and property; to construct and build a railroad or railroads along such route or routes as he may so designate and locate, with the necessary branch lines, feeders, siding, switches, and spurs; to purchase or otherwise acquire all real and personal property necessary to carry out the purposes of said sections; to exercise the power of eminent domain in acquiring property for such use which use is declared to be a public use, by condemnation in the courts of Alaska in accordance with the laws now or hereafter in force there; to acquire rights-of-way, terminal grounds, and all other rights; to purchase or othewise acquire all necessary equipment for the construction and operation of such railroad or railroads; to build or otherwise acquire docks, wharves, terminal facilities, and all structures needed for the equipment and operation of such railroad or railroads; to fix, change, or modify rates for the transportation of passengers and property, which rates shall be equal and uniform, but no free transportation or passes shall be permitted except that the provisions of the interstate commerce laws relating to the transportation of employees and their families shall be in force as to the lines constructed under said sections; and except also that the issuance of passes to ministers of religion, traveling secretaries of Railroad Young Men's Christian Associations, and persons exclusively engaged in charitable and eleemosynary work when engaged in their work in Alaska; to indigent, destitute, and homeless persons inmates of hospitals and charitable and eleemosynary institutions, and to such persons when transported by charitable societies or hospitals and the necessary agents employed in such transportation; to newsboys on trains, persons injured in wrecks, and physicians and nurses attending such persons; the interchange of passes for the officers, agents, and employees of common carriers, and their families; and the carrying of passengers free with the object of providing relief in cases of general epidemic, pestilence, or other calamitous visitation is permitted; to receive compensation for the transportation of passengers and property, and to perform generally all the usual duties of a common carrier by railroad; to make and establish rules and regulations for the control and operation of said railroad or railroads; in his discretion, to lease the said railroad or railroads, or any portion thereof, including telegraph and telephone lines, after completion under such terms as he may deem proper, but no lease of such railroad or railroads shall be for a longer period than twenty years and no other lease authorized in this Act shall be for a longer period than fifty-five years, or in the event of failure to lease, to operate the same until the further action of Congress. If said railroad or railroads, including telegraph and telephone lines, are leased under the authority given under said sections, then and in that event they shall be operated under the jurisdiction and control of the provisions of the interstate commerce laws; to purchase, condemn, or otherwise acquire upon such terms as he may deem proper, any other line or lines of railroad in Alaska which may be necessary to complete the construction of the line or lines of railroad in Alaska which may be necessary to complete the construction of the line or lines of railroad designated or located by him. The price to be paid in case of purchase shall in no case exceed the actual physical value of the railroads; to make contracts or agreements with any railroad or steamship company or vessel owner for joint transportation of passengers or property over the road or roads herein provided for, and such railroad or steamship line or by such vessel, and to make such other contracts as may be necessary to carry out any of the purposes of said sections; to utilize in carrying on the work herein provided for any and all machinery, equipment, instruments, material, and other property of any sort whatsoever used or acquired in connection with the construction of the Panama Canal, so far and as rapidly as the same is no longer needed at Panama, and the successors to the Isthmian Canal Commission are authorized to deliver said property to such officers or persons as the President may designate, and to take credit therefor at such percentage of its original cost as the President may approve, but this amount shall not be charged against the fund provided for in said sections. (Mar. 12, 1914, ch. 37, sec. 1, 38 Stat. 305; Apr. 10, 1926, ch. 114. 44 Stat. 239. and Public Law 232, Aug. 4, 1955.)

SEC. 302. Telegraph and telephone lines

The authority granted under section 301 of this title shall include the power to construct, maintain, and operate telegraph and telephone lines so far as they

may be necessary or convenient in the construction and operation of the railroad or railroads as herein authorized, and they shall perform generally all the usual duties of telegraph and telephone lines for hire. (Mar. 12, 1914, ch. 37, sec. 1, 38 Stat. 305.)

SEC. 302a. Establishment of telegraph or cable lines by foreigners prohibited

No telegraph or cable lines owned or operated or controlled by persons not citizens of the United States, or by any foreign corporation or government, shall be established in or permitted to enter Alaska. (May 26, 1900, ch. 586, 31 Stat. 206.)

SEC. 303. Town sites

The President is authorized to withdraw, locate, and dispose of, under such rules and regulations as he may prescribe, such area or areas of the public domain along the line or lines of such proposed railroad or railroads for townsite purposes as he may from time to time designate. (Mar. 12, 1914, ch. 37, sec. 1, 38 Stat. 305.)

SEC. 304. Terminals, stations, and rights-of-way

Terminal and station grounds and rights-of-way through the lands of the United States in the Territory of Alaska are granted for the construction of railroads, telegraph, and telephone lines authorized by sections 301, 302, and 303-308 of this title, and the President may, in such manner as he deems advisable, make reservation of such lands as are or may be useful for furnishing materials for construction and for stations, terminals, docks, and for such other purposes in connection with the construction and operation of such railroad lines as he may deem necessary and desirable. (Mar. 12, 1914, ch. 37, sec. 1, 38 Stat. 305.)

SEC. 305. Patents to contain reserve for right-of-way

In all patents for lands taken up, entered, or located in Alaska after March 12, 1914, there shall be expressed that there is reserved to the United States a rightof-way for the construction of railroads, telegraph and telephone lines to the extent of 100 feet on either side of the center line of any such road and 25 feet on either side of the center line of any such telegraph or telephone lines. Mar. 12, 1914, ch. 37, sec. 1, 38 Stat. 305.)

SEC. 306. Disposition of proceeds of lease or sale of public lands

All moneys derived from the lease, sale, or disposal of any of the public lands, including townsites, in Alaska, or the coal or mineral therein contained, or the timber thereon, and the earnings of said railroad or railroads, together with the earnings of the telegraph and telephone lines constructed under authority of sections 301, 302, and 303-308 of this title, above maintenance charges and operating expenses, shall be paid into the Treasury of the United States as other miscellaneous receipts are paid, and a separate account thereof shall be kept and annually reported to Congress. (Mar. 12, 1914, ch. 37, sec. 3, 38 Stat. 307.)

SEC. 307. Authority of President

It is the intent and purpose of Congress through the provisions of sections 301, 302, and 303-308 of this title to authorize and empower the President of the United States, and he is fully authorized and empowered, through such officers, agents, or agencies as he may appoint or employ, to do all necessary acts and things in addition to those specially authorized in said sections to enable him to accomplish the purposes and objects of said sections. (Mar. 12, 1914, ch. 37, sec. 1, 38 Stat. 305.)

SEC. 308. Officers, agents, etc., to make annual report to President; transmission to Congress

The officers, agents, or agencies placed in charge of the work by the President shall make to the President annually, and at such other periods as may be required by the President or by either House or Congress, full and complete reports of all their acts and doings and of all moneys received and expended in the construction of said work and in the operation of said work or works and in the performance of their duties in connection therewith. The annual reports provided for in this section shall be by the President transmitted to Congress. (Mar. 12, 1914, ch. 37, sec. 4, 38 Stat. 307.)

STATEMENT OF R. H. ANDERSON, GENERAL MANAGER OF THE ALASKA RAILROAD BEFORE THE COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE, U.S. SENATE, MAY 6, 1959

Mr. Chairman, I would like to thank this committee for the privilege of appearing before it to present the views of the Alaska Railroad on the proposed legislation entitled "S. 1508-A bill to provide for economic regulation of the Alaska Railroad under the I.C.C. Act and for other purposes."

As this committee knows, section 301 of the United States Code, title 48, known as the Alaska Railroad Enabling Act, grants the Alaska Railroad the authority to fix, change or modify rates for the transportation of passengers and property and to perform generally all of the usual duties of common carrier by railroad, and to make and establish rules and regulations for the control and operation of the railroad. It is under this law that the Alaska Railroad publishes its tariffs.

Starting in 1915, the Alaska Engineering Commission published the first tariffs and such tariffs were published with an I.C.C. number on them. This practice continued until 1923, at which time the Alaska Railroad commenced publishing tariffs in the name of the Alaska Railroad. From 1923, and for the

next 30 years, the Alaska Railroad tariffs were published with an I.C.C. number on them. In 1953, the Interstate Commerce Commission advised the Alaska Railroad that it should discontinue using I.C.C. numbers on its tariffs, in view of the fact that the Alaska Railroad was not regulated by the Interstate Commerce Commission. Subsequent issues and reissues of tariffs did not carry the I.C.C. numbers but were accorded a number with the prefix ARR. However, the Alaska Railroad asked permission to continue filing its tariffs with the Interstate Commerce Commission. Such permission was granted. During the period that our tariffs were filed with the Interstate Commerce Commission as 1.C.C. numbered tariffs, the Commission offered advice to the Alaska Railroad when we strayed from the technical provisions of tariff publications. Such advice we were happy to receive inasmuch as any deviation from the written word was from ignorance and not from design.

We have continued to file all tariffs with the Interstate Commerce Commission to assure ourselves that such tariffs would be on record with the Commission. Under the provisions of Tariff Circular 20, the Commission's rules governing the construction and filing of freight rate publications, rule 62 states that rates on freight traffic from a point in the Territory of Alaska to another point in the Territory of Alaska may be changed upon notice of 10 days as to reductions in rates. Increases in rates must contain the full statutory provisions of 30 days' publication time unless shorter time is allowed by special permission. During that period of time, when our tariffs contained an I.C.C. prefix to the tariff number, we applied for special permission in such instances and were advised by the Commission to the effect that the Commission did not have authority to rule on this matter.

All tariffs and nearly all supplements of such Alaska Railroad tariffs are published on a 30-day statutory notice. In those instances where reductions only are involved, we sometimes publish on 10 days' notice as allowed by the Commission. In rare instances, in cases of rule, not rate publication, we have published on 1 day's notice. In these instances, the Alaska Railroad has followed what was felt would be allowed by the Commission under special permission. I have been advised by Mr. E. J. Kunz, our general traffic manager, that, to Mr. Kunz' knowledge, there have been no deviations in this policy. In the case of section 22 quotation to the Military, no specific statutory time limits are provided.

I am not in favor of the enactment of S. 1508, not because I am fearful of regulation as such, but because I am apprehensive about applying a complicated law which is surrounded by hundred of administrative rules and decisions that have been built up in the light of private carier relationships without due regard to the unusual circumstances surrounding the operation, by the Federal Government, of a railroad in the new State of Alaska.

I think it will be admitted that the regulation of one agency of the Federal Government by another agency of the Federal Government creates problems quite different from those occasioned by the public regulation of private transportation companies. I am aware of the fact that this was done in the case

of the Inland Waterways Corp., but I do not think this example sheds much light on the Alaska situation.

The policy of the Alaska Railroad is determined first, in terms of the authority granted by an act of Congress and second, by congressional appropriation committees who carefully review our annual budgets. If we should be placed under the Interstate Commerce Commission. I find it difficult to imagine who will arbitrate the dispute in case the congressional committees and the Interstate Commerce Commission do not quite see eye to eye as to the handling of a particular problem.

Apart from general considerations, I have several specific objections to the bill, several of which stem from the fact that the Alaska Railroad is a governmental and not a private enterprise :

1. The proposed bill as it now stands appears to give no consideration to agency relationships. If the railroad should become subject to part 1 of the act, presumably the railroad would be expected to conform to I.C.C. requirements regarding accounting and reporting. It is assumed that the railroad would also be required to conform to requirements of the Bureau of the Budget, the U.S. Treasury, the General Accounting Office, etc. In the face of such apparent contradictions, it would be well for the proposed bill to set forth the governing agency in case of conflict to avoid duplications. Further, the proposed draft specifically exempts the railroad from securing Commission approval as regards any possible extension of service, but is completely silent as regards any curtailment of service. It would appear that the Department of the Interior could be placed in the untenable position of running a deficit operation while being without the authority to affect cutbacks necessary to eliminate such deficit.

2. The determination as to the propriety of the railroad rates would be a difficult one. It would appear certain that any determination as to whether rates were compensatory would require consideration of interest on the investment. It is a known fact that the Alaska Railroad has a plant in excess of what would be judged adequate if determined by economic necessity alone. It is also a matter of record that some portion of this excess capacity was dictated by military rather than economic considerations. The question as to whether interest costs should be considered when appraising the propriety of a rate, would be difficult to resolve.

A unique circumstance peculiar to the Alaska transportation picture is the operation of the Army pipeline to Fairbanks. It would appear that this facility could be considered a private carrier as well as a military facility. Yet, to the extent that this facility operates, it affects the transportation picture in Alaska to a substantial degree. Obviously, if this facility ceased to operate and diverted its tonnage to the railroad, the railroad would feel impelled to reexamine its rate structure on petroleum products because of the volume movement involved. Conversely, expanded operation of this facility could further decrease operating revenues of the Alaska Railroad to some extent. Thus, the operation of private and/or other Government facilities can have a direct effect on operating revenues on the Alaska Railroad, as well as other common carriers, to the extent that changes in rates are well justified.

3. It is doubtful whether the proposed bill will have what appears to be the desired result insofar as the Alaska Railroad is concerned. Approximately 90 percent tonnagewise (80 percent revenuewise) of the traffic of the Alaska Railroad moves on local billing. There appears little doubt that the coal moving in Alaska is intrastate in nature. It has apparently been established that the bulk petroleum movement as it exists in Alaska is intrastate in nature. The MSTS handles a substantial portion of the military tonnage to Alaska and discharges it at Whittier. This tonnage, to a degree, is warehoused in Whittier and is subsequently shipped out of Whittier as a local shipment on a Government bill of lading and the status of this tonnage would probably be controversial. Even if this traffic were considered in interstate commerce it would still be exempt under section 22. In the absence of a State regulatory body with authority over all carriers, it would appear that regulation would be far from complete.

4. It can be said that, generally, the proposed bill does not take into account a condition which, among the States, seems to be peculiar to Alaska, namely,