Senator BARTLETT. What company is that?

Mr. WALLACE. The company that I hauled for the last 7 years, Alaska Distributors. It says:

Attached are two bills which I found on Bill Montpetit's clipboard and which are apparently the ones you are missing. We are sure unhappy about losing your service on both beer and liquor as everything considered, your service worked out much better than the railroads. However, it is a fact that this market has gotten so competitive, with at least two distributors out working the trade on the basis of the lower Alaska Railroad freight being passed on to retail customers, that we have no choice but to do likewise.

I have certainly appreciated the fine cooperation that you and Jack and of course Loren, who is simply the "greatest" as far as truckers are concerned in my book, have given us these past few years. I am sure hoping that the situation may change so that we can someday go back to our former methods of shipping.

Janet and the boys are fine and send their best "hello."

This is another one here:

Fairbanks competition has become so keen that we find it necessary to reduce our freight costs of merchandise going into our Fairbanks warehouse to the lowest we can.

Naturally, this means that we will have to start shipping via Seward, in care of the Alaska Railroad.

Please accept our thanks for the wonderful cooperation you have always given us.

Senator BARTLETT. Is that from the same company?

Mr. WALLACE. Yes.

Senator BARTLETT. Those letters are signed by whom?

Mr. WALLACE. By Stanley Gottstein. He is vice president of Alaska Distributors, and this other is from the man in charge at Fairbanks, Bob Cowgill.

Senator BARTLETT. Is this your own company! ?

Mr. WALLACE. No, I have been hauling for them.

Senator BARTLETT. I know Alaska Distributors is not yours, but is the trucking firm yours?

Mr. WALLACE. Yes.

Senator BARTLETT. And were they your biggest customer?

Mr. WALLACE. They were our biggest customer.

Senator BARTLETT. And when were these letters written?

Mr. WALLACE. This is October 19 and the other is the 11th.
Senator BARTLETT. Of this year, 1959?

Mr. WALLACE. Yes.

Senator BARTLETT. And so from now on you will not be hauling goods for that company?

Mr. WALLACE. That is, until they can get the rate back where a fellow can at least make a living.

Senator BARTLETT. Well, tell me this. Do you do most of your hauling for this one company?

Mr. WALLACE. Yes.

Senator BARTLETT. Where does this leave you?

Mr. WALLACE. Well, I still have oil tankers and I haul to the interior gas and oil. But as far as my Fairbanks freight is concerned, why I just can't afford to run them there for as cheap as the railroad hauls this.

Senator BARTLETT. How many trucks do you have?
Mr. WALLACE. Three.

Senator BARTLETT. And what part of your business did the trucking service constitute? What percentage, would you say, compared with the oil?

Mr. WALLACE. I would say about 75 percent of it was the main Fairbanks haul.

Senator BARTLETT. In service for this particular company?
Mr. WALLACE. Yes.

Senator BARTLETT. Twenty-five percent in oil?

Mr. WALLACE. Yes.

Senator BARTLETT. Well, then, 75 percent of your business is going out from under you?

Mr. WALLACE. The railroad has it.

Senator BARTLETT. Why is this? Did the Alaska Railroad recently lower its rate on beer and other liquors?

Mr. WALLACE. The first letter we had from the company they asked if I could reduce the rates and then they asked if it would be possible that we could deliver free all over town, which the railroad promised to do. They deliver for them anywhere they want in town, and so actually that would have cost me quite a bit extra and we held tough as long as we could and, as it was, we figured we were hauling as reasonably as we could. But this last jolt, why the railroad has the rate so low that, like he says here, they couldn't keep up with competition.

Senator BARTLETT. Aside from the free delivery offered by the Alaska Railroad, has the railroad lowered its rates on these products? Mr. WALLACE. Yes.

Senator BARTLETT. And formerly they were at a point where you could be competitive. When was this change made?

Mr. WALLACE. I don't know just when-just about a month agobut the company has stayed with us just about as long as they possibly could, as they liked our service, but they would-this has been going on, the railroad has had this rate lowered for quite a long while, but then just recently they put on this free delivery and pickup, in the last 3 or 4 months.

Senator BARTLETT. And, in addition to that, lowered their rates? Mr. WALLACE. Yes.

Senator BARTLETT. How many people are you going to have to discharge by reason of your loss of this segment of business?

Mr. WALLACE. Well, I just had the one driver driving back and forth up there and I have enough work to keep him going yet, and then I was working myself.

Senator BARTLETT. You have enough for this fall, but how about next year?

Mr. WALLACE. I don't know until next year. If we get more business some way or other we will be able to hold tough, but

Senator BARTLETT. Well, you mean, Mr. Wallace, that the Alaska Railroad now offers what are called unlimited dropoffs to retailers in Fairbanks?

Mr. WALLACE. Yes.

Senator BARTLETT. And you say this started recently?

Mr. WALLACE. Yes. In the past 3 or 4 months, anyway.
Senator BARTLETT. Mr. Barton?

Mr. BARTON. What was your rate to Fairbanks from here on liquor and beer?

Mr. WALLACE. Beer was $30 a ton and whisky-
Mr. BARTON. How much a hundred is it, sir?
Mr. WALLACE. $1.50 for beer and $2 for liquor.
Mr. BARTON. What did the railroad have?

Mr. WALLACE. I don't know. I never was quoted their rate. Mr. BARTON. You don't know the rate, or what it was reduced to later?

Mr. WALLACE. I have heard a rumor that it is below $17 a ton.

Senator BARTLETT. Mr. Wallace, I will intervene here just to say that in Fairbanks we shall seek from the Alaska Railroad testimony on their charges now and previously.

Mr. BARTON. Mr. Wallace, have you ever tried to get deck space on Alaska Steamship Lines?

Mr. WALLACE. No; I never had that type of freight. Our freight has come by West Coast Distributors-I mean, coastwise-and they have these box containers, but now the railroad ships these box containers right to the brewery in San Francisco and they are loaded in railroad boxes and shipped right straight through.

Mr. BARTON. Thank you, sir.

Mr. WALLACE. And another thing, we have all heard it here, but we have found that they ship those trailers through from Seward to Fairbanks for what it would cost us to hire a union driver just to drive the truck, and they were hauling those vans back to Seward for a very small fee, I don't know just what it was, but-$1. I was ashamed to say it, but I knew it was a dollar.

Mr. BARTON. That is all the questions I have, Senator.

Senator BARTLETT. Does that conclude your statement, Mr. Wallace?

Mr. WALLACE. I think that's about it. Tom has covered the deal quite thoroughly, I think.

Senator BARTLETT. Well, you both have, and both of you have given the committee some, shall I say leads, which we will inquire into further. Thank you, sir.

Now we will hear John T. Kelsey.

STATEMENT OF JOHN T. KELSEY, PARTNER, VALDEZ DOCK CO., VALDEZ, ALASKA

Mr. KELSEY. Mr. Chairman, my name is John Kelsey. I am a partner in the Valdez Dock Co. and my address is care of the Valdez Dock Co., Valdez.

I would like to say a few words in behalf of my company in the matter concerning the incorporation of the Alaska Railroad and the possibility that it be brought under the control of the Interstate Commerce Commission. I understand that that may not be a step in that direction, but I would like to say that I am in favor of it and I would like to state our position as the Valdez Dock Co., a private enterprise business in Valdez.

Over the past years we have enjoyed, at various times, considerable freight tonnage moving into the interior of Alaska. However, the

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policies of the Alaska Railroad have been such that it becomes very difficult to hold this tonnage, due to the fact that the railroad has reduced its rates to a point which makes competition by the trucking industry through Valdez virtually impossible on many commodities. Because the Alaska Railroad is a Government-owned and -operated as well as a -subsidized facility, this is possible there being no necessity to make a profit as in the case of its private enterprise competition. This being the case, it is a very unhappy situation indeed which presents itself to each of us Valdez taxpayers when we make our payments to the Internal Revenue and know that a part of each dollar which we remit will be used to force us out of business.

In the case of the Valdez Dock Co., we have made every effort to help the trucking industry compete with the Alaska Railroad-to the point where we have lost money for the past 3 years. Accordingly, we wish to advise that between the years 1952 and 1958 we reduced our wharfage and handling rates on most commodities from 7 to 41 percent. Yet during that time we were forced to absorb nine pay raises to our longshoremen, amounting to an increase from $2.375 an hour straight time on April 1, 1952, to $3.67 an hour straight time on June 1, 1958. In addition, we are now faced with another increase of 31 cents an hour straight time which was negotiated during September of this year. This now brings our straight-time rate to $3.98 an hour-in an industry which, by contract, there can be possible only 6 straight-time hours in any one day, or a total of only 30 hours in any one week.

We find that because of our increase in costs of operation, as heretofore mentioned, as well as like increases in cost of maintenance that we are faced with an inevitable raise in rates, although such a raise may very well cause a further reduced tonnage through this port.

It is interesting to note the trend as shown by the dry cargo tonnages over the past few years which were handled through this port and which I quote as follows:

In 1953 we had over 50,000 tons. In 1954 we had over 84,000 tons; in 1955 we had over 68,000 tons; in 1956 it dropped to just over or just slightly under 38,000 tons: in 1957 we had over 38,000 tons; in 1958 we had slightly over 35,000 tons; and in 1959, as of this date, we have only 17,180 tons.

Based on these figures, our experience, as well as a study of the problem, we feel that in order to maintain a proper terminal service in this port we must have a minimum of 40,000 tons of dry cargo each year.

We would like to bring out that at this point the fact that the military has stated it considers Valdez and the Richardson Highway as important to its transportation needs to the interior. Accordingly, if we do not have sufficient tonnage to justify year-round maintenance of the Richardson Highway and which will enable us to provide a proper terminal, then the military may very possibly be deprived of this route to the interior.

In conclusion, it is our opinion that unless some regulatory body is empowered to properly control the Alaska Railroad so that it cannot adjust rates and discriminate in any way against its competitors transportation within our State has little or no future. Therefore, we

respectfully request that you exert every effort to make it possible for the Interstate Commerce Commission to bring the Alaska Railroad under its jurisdiction the same as on other forms of transportation and as it does in the other 48 States.

Senator BARTLETT. Mr. Kelsey, would you be good enough to read those annual tonnage figures again?

Mr. KELSEY. I can quote the exact figures if you would like.

In 1953 we had 50,503 tons. In 1954 we had 84,618 tons. In 1955 we had 68,314 tons. In 1956 we had 37,998 tons. In 1957 we had 38,164 tons. In 1958 brings about that period that the other men have testified where the railroad reduced their rates and it dropped to 35,189 tons. Then in 1959 we find ourselves with a total of 17,180 tons as of today.

Senator BARTLETT. Mr. Kelsey, there was a very radical drop between 1955 and 1956; is that right?

Mr. KELSEY. That is correct.

Senator BARTLETT. And you attribute that to a rate decrease on the part of the Alaska Railroad, do you?

Mr. KELSEY. I would say for the most part, yes.

Senator BARTLETT. Is that a general decease or decreases on specific items?

Mr. KELSEY. Well, there again I am not in a position-I do not have the information as to what their reductions in tariffs have been, but I am of the impression that they did; yes.

Senator BARTLETT. They did have a general rate decrease?
Mr. KELSEY. That is my opinion; yes.

Senator BARTLETT. How do you account for the radical and disturbing drop between this year and last?

Mr. KELSEY. Well, partly because of the increased effort on the part of the railroad and its connecting carriers in the use of containers and their exerting a great deal more effort in the direction of corraling that tonnage. I feel that the Interior Department has probably informed the Alaska Railroad people that they must place their facility on somewhat of a paying basis, they no longer have very little surplus that they can sell and therefore their rate structure or their rates on their commodities probably will have to bring in the necessary funds for operation. That is my opinion.

Senator BARTLETT. What do you mean, very little surplus remaining they can sell. We have heard that once or twice, but the committee has had no information on this subject.

Mr. KELSEY. There again we lack figures, but it is common knowledge or common conversation that in the past few years the Alaska Railroad has sold obsolete locomotives and many, many items of equipment as surplus, both for, as I understand it, for scrap metals and to, let us say, other railroads.

Senator BARTLETT. It is your understanding that these sales have brought very considerable money to the Alaska Railroad?

Mr. KELSEY. It is my understanding it has brought a very considerable amount.

Senator BARTLETT. What does this surplus consist of insofar as you know, in addition to locomotives?

Mr. KELSEY. Equipment such as cranes, trucks, railroad steel. I understand in the reconditioning of the railroad that they have replaced many of the rails and have sold those for scrap metal.