to the U.S. Senate by the Senate Interstate and Foreign Commerce Committee.

It is said here that the Chairman of the Interstate Commerce Commission stated, and I quote:

In our opinion, economic regulation would not be a success if 50 percent or more of the traffic is to be exempt.

That's the end of the quotation, and then the editorial goes on to say,

The committee report brings out that,

and this is a quotation from that report the minority report, I might add, although the editorial does not so state:

66* ** only 10 to 20 percent of the traffic of the railroad is 'interstate' within the meaning of the Interstate Commerce Act."

In other words, the Chairman of the ICC is quoted as having said that 50 percent-that economic regulation would not be successful if 50 percent or more of the traffic is exempt, and the committee report contends that 70 or 80 percent is exempt.

Do you have a comment on that?

Mr. WALRATH. Yes, sir; I had just become a member of the Commission when that earlier report was made in behalf of our 11-man Commission, and at that time we had every reason to believe, and I think it was accurate then to say that more than 50 percent of the freight traffic then moving was military in nature.

That's changing rapidly, Mr. Chairman. You may recall that General Manager Anderson on Saturday last in Anchorage even so testified, that a greater proportion now of commercial traffic is beginning to move, and less and less of the military.

According to our information, based on reports of the Alaska Railroad, the first 9 months, was it, of 1959, there was a very definite shift where the majority of the freight tonnage now moving is commercial as distinguished from military. I think it's now somewhere maybe in the neighborhood of 50 percent commercial, 45 percent military, but the trend had started some 2 or 3 years ago, apparently. That's my first comment.

I might say that 95 percent of the 1.c.l. traffic presently moving on the Alaska Railroad, if our information is correct, is now civilian or commercial traffic, with only 5 percent or less of the 1.c.l. or less than carload traffic of a military nature. It's beginning more and more to serve the people of Alaska as distinguished from national defense needs.

As to the latter part of it, where there's reference to the interstate and the intrastate character of the traffic, the railroad officials themselves would know better than I probably as to just what extent that is in error, but I believe they would agree that it is not an accurate statement, for this reason: Just because something begins at Seward and moves to destination at Fairbanks, which is wholly within the State of Alaska, does not mean that that is intrastate in character; it is part of a through movement from another State.

And I think the majority of the traffic, I should say substantially 100 percent of the traffic coming into Seward and then moving to Fairbanks is interstate in character, very obviously, I think. Very little

originates in another port of Alaska and comes up over the railroad that way.

While it appears to be a movement by rail within the boundaries of the State, it actually, in most instances, is interstate in character.

Now there is another factor that we have learned since 1957, when I believe Chairman Clark was reporting to your committee or to Senator Jackson's committee, and that is that by virtue of our visit in this beautiful and wonderful State last year, just a little over a year ago, we found this to be true, which we did not know before: We found that the military leaders in Alaska at the time it was a territory, and I think still, have taken a very broad view of the necessity of transportation and of the necessity of keeping it sound, and they have not tried to depress rates under their privileges of section 22, if it were in effect. In other words, they have not tried to play one carrier against another in order to get reduced rates, but instead we found that the military people have tended to set the rate level up here, that they were willing to pay sufficient for transportation to make it possible for carriers to serve, and that was true, I think, not only of the railroad, but certainly was true of the motor carriers. They told us right here in this very room in Fairbanks last September that they were not complaining about low rates from military traffic.

So that changes our view somewhat, of that. We had had the feeling in 1957 at the time our Commission recommended to the Congress repeal of section 22 back in the other States, we had had the feeling that military rates were playing one carrier against another and depressing the rate level, which caused increases in the civilian rate level, and we felt that that was not proper.

But that apparently has not been your situation in Alaska, either as a territory or since as a State.

Senator BARTLETT. Mr. Walrath, would you quarrel with this editorial conclusion-I don't think I would-I think it's about the only one in the whole editorial that I wouldn't quarrel with. It says:

If the railroad were required to return a fair profit on the capital investment (which we understand is prevailing practice on all carriers under ICC jurisdiction) it is apparent a rate increase of at least 20 percent would be necessary.

Mr. WALRATH. That might very well be a sound conclusion, Mr. Chairman. I don't know the percentage, but certainly if we took all the money that's been invested in the Alaska Railroad to develop the country and to serve our defense needs, and if we considered that as a proper rate base, and made the matter of profit on that or return on investment, then an increase in rates might have to be made, but as

I

Mr. MOULDER. Does it say "If”?

Mr. WALRATH. Yes

Senator BARTLETT. It says "If."
Mr. MOULDER. "If" is a big word.

Mr. WALRATH. I don't know if I've completely answered it, Mr. Chairman, but, as I said earlier, I think it would be very unrealistic of the Interstate Commerce Commission or any other regulatory body to say that all of that money must be accounted for as a rate base.

Senator BARTLETT. Well, Mr. Walrath, you have previously expressed the opinion that the ICC wouldn't take into account the

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capital investment, but instead would regard the organic act of the Alaska Railroad as a statement of principle which ought to bind the ICC in its determinations.

However, we must agree that any such supposition on the part of you or any other individual cannot be considered binding, and even if it were to apply to the existing membership of the ICC, it might

not to a later.

I shall ask you, then, Commissioner Walrath, and will quite understand if you do not care to answer this, if the Commission has not considered it or you're not in a position to make a statement.

I shall ask you if the Commission would have any objection to the addition of an amendment to S. 1508 spelling out plainly that the Interstate Commerce Commission in determining rates for the Alaska Railroad should take into account the military role played by that Railroad and the function of the Railroad as described in its organic act for the economic development of Alaska?

Mr. WALRATH. Well, Mr. Chairman, I don't think that I need an expression from the Commission to tell you that that's consistent with what we have said on your record in Washington, and certainly we'd have no objection to it; we'd welcome it, because we take the declaration of policies from the Congress and that would certainly clarify it for us and for all future Commissions.

Senator BARTLETT. All right, and if that were done, you wouldn't take into account the capital investment in setting rates, would you?

Mr. WALRATH. We would certainly have to give consideration to the very factors you are mentioning in the amendment as part of our rule of ratemaking for that purpose.

Senator BARTLETT. You'd say the fear expressed in this editorial and especially that paragraph I have just quoted, would have no foundation in fact?

Mr. WALRATH. No, sir.

Senator BARTLETT. I very much hate to leave that editorial, which has some fascinating paragraphs remaining, but I must turn to another, which appeared in the Anchorage Daily Times on the same subject, for July 8, 1959.

(Editorial in the Fairbanks Daily News-Miner, referred to in discussion above, set out in full for the record as follows:)

[From the Daily News-Miner, Fairbanks, Alaska, July 15, 1959]

ANOTHER BUREAUCRATIC MONSTER?

We suggest Fairbanks businessmen, and every citizen who purchases food, clothing, and other necessities in our city, take a good close look at Senate bill 1508. This bill has been favorably reported by Alaska's Senator E. L. (Bob) Bartlett from his position on the Senate Interstate and Foreign Commerce Committee, and may appear on the Senate floor for action any day.

With Senator Bartlett advocating passage there appears to be good reason to believe the bill may be enacted into law.

From where we sit there appears to be a definite possibility that a practical result of this measure becoming law will be a prompt increase in railroad freight rates of at least 20 percent; likely more like 30 percent.

Who will pay for this increase if it comes about?

The answer is both simple and obvious: Alaskans who live along the railbelt, particularly here in Fairbanks at the northern terminus of the Railroad. We would all be affected: Increased freight costs would be added to coal, gasoline, fuel oil, foodstuffs, furniture, appliances, machinery-virtually everything except airmail postage.

The purpose of S. 1508 "is to provide for the economic regulation of the Alaska Railroad under the Interstate Commerce Act, and for other purposes." That "and for other purposes" phrase intrigues us. After careful reading of Report 435 (committee report on the bill) it strikes us this phraseology could very well mean, "*** and guaranteed to completely confuse and confound management personnel charged with efficient operation of the Alaska Railroad."

We are not transportation experts. Neither can we enumerate among our attributes that we are statesmen, bureaucrats, or even plain old politicians. However, after studying this bill and accompanying report our opinion is that all of the foregoing have had their respective fingers in this gooey pie, called upon a junior high school civics class to contribute to the concoction, then shoveled the resulting mixture into the typewriter which spewed forth the unfinished product.

If the objective had been to create something unworkable, it appears to us the objective will be obtained with enactment of this bill. A few points:

Chairman of the Interstate Commerce Commission states: "In our opinion, economic regulation would not be a success if 50 percent or more of the traffic is to be exempt."

The committee report brings out that, “*** only 10 to 20 percent of the traffic of the Railroad is 'interstate' within the meaning of the Interstate Commerce Act."

As originally introduced in the Senate the bill would have provided for regulation of interstate traffic by the Interstate Commerce Commission. The committee amended the bill so that it would also impose the State regulation over intrastate traffic.

The railroad is operated by the Federal Government under the Department of the Interior. This new legislation, if enacted, will provide that one branch of the Federal Government will be regulated by another branch of the Federal Government and also by the State government. We'll wager there is no precedent for such involved waste of taxpayers' money as this unworkable situation would result in.

The Alaska Railroad now operates virtually on a "breakeven basis." Revenues just barely pay operating expenses and no amortization of capital investment is taken into consideration when setting rates. The purpose is to provide a public service and aid in the development of Alaska.

If the railroad were required to return a fair profit on the capital investment (which we understand is prevailing practice on all carriers under ICC jurisdiction) it is apparent a rate increase of at least 20 percent would be necessary. Who would gain from such an increase? Certainly not residents of Fairbanks and surrounding area. We would merely have the honor of paying the highest freight bills.

The only possible beneficiaries who come to mind at the moment are the trucking firms. We can see merit to their expressed viewpoint they desire Alaska Railroad freight rates to be regulated, preferably by the same agency which approves truck tariffs.

It appears obvious truckers favor S. 1508. No doubt the larger trucking companies operating in Alaska have worked for its passage, and probably will continue to do so.

We believe the truckers have a problem which deserves consideration by our lawmakers. We also believe the proposed Senate bill 1508 in its present form very definitely is not the answer.

Enactment of this piece of hodgepodge legislation creating a bureaucratic monster will accomplish little other than wasting an enormous amount of taxpayers' money in delving into the redtape thicket created surrounding the management offices of the railroad. In addition, it might very well saddle us with substantial freight rate increases.

If the railroad were sloppily run, with inefficient operating practices squandering public funds, there might be need for immediate regulatory action. But this is not the case. Ever since the Eisenhower administration came into office and adopted a policy of "borrowing" a top railroad executive from a private railroad as Alaska Railroad general manager our railroad has been efficiently operated. (A sharp contrast to the manner in which the previous Democratic administration ran the railroad. The railroad manager when Ernest Gruening was Governor of Alaska is still under indictment but has taken refuge in South America.)

A concluding paragraph in the minority report on this bill sums up the existing situation well:

"No urgency has been established for the imposition of regulation by an outside agency upon the Railroad at this time. A study under impartial auspices of the rate policies in effect, and of the present transportation pattern of Alaska, might give the answers."

In other words, let's look before we leap. There must be a better answer than the bureaucratic boondoggle S. 1508 would lead us into.

Senator BARTLETT. This editorial in the Anchorage Daily Times of July 8, 1959, was also very strongly against S. 1508.

(Editorial in Anchorage Daily Times, July 8, 1959, referred to above, set out in full for the record as follows:)

[From the Anchorage Daily Times, Anchorage, Alaska, July 8, 1959]

ACTION IN SENATE MAY UP FREIGHT COSTS

Anything that tends to bring higher freight rates to Alaska draws immediate and vociferous opposition from Alaskans. High freight charges are one of the bugaboos of life in the northland.

This is a reflex action on the part of Alaskans. The opposition comes spontaneoussly and without regard to explanations, justifications, or causes.

Inasmuch as Congress now has a measure pending that may cause freight rate increases, it is natural to expect Alaskans to take an active interest in it, and to oppose it with all the resources at their command.

The measure has won a recommendation for enactment from the Senate Interstate and Foreign Commerce Committee and is now awaiting action in the Upper House. It would place the Alaska Railroad under jurisdiction of the Interstate Commerce Commission.

The Commission would be the boss of the Railroad insofar as freight rates, and certain other matters, are concerned. This Federal agency would be required to apply to the Railroad the same policies used in establishing the tariffs of privately owned railroads throughout the Nation.

This would be a drastic change of policy for the Alaska Railroad. The rates here have always been based on operating expenses and depreciation. Never has the Railroad set rates high enough to yield a profit. The Federal Government has never had a return on its heavy investment in the transportation facility.

Under the proposed ICC rule, a profit would be required.

Although the committee voted to approve the bill and seek enactment of it, four members took the opposite view. The four filed a minority report pointing out that enactment would mean freight rates be increased 20 percent or more. They are already the highest in the world.

It is the minority report that will be of most interest to Alaskans. The majority dwelled on the need for regulation of the railroad rates because motortrucks and other transportation in Alaska will be regulated. It would be impractical to have the railroad unregulated while its competitors are, according to the majority.

Even though that may be true, Alaskans are not going to like the idea. They have always turned a deaf ear toward any agency that sought to justify higher freight rates.

As far as Alaskans are concerned, they will see it this way:

If the railroad rates are boosted by order of the ICC, the truckers will boost their rates too. Thus freight costs will undergo a general increase, and living costs will spiral because the consumers always pay the bills in the end.

The railroad presently is the backbone of the freight structure in Alaska. It is because it holds rates to the lowest point possible that other carriers must hold theirs down.

The minority Senators pointed out that the bill before Congress was supported by the motortruck operators.

In addition to subjecting the railroad to ICC regulation on interstate traffic, the measure would place the railroad under State regulation for intrastate traffic. If the bill is approved by Congress, the next logical move of the truckers is to go to the State legislature for action that would create a regulatory body to control the intrastate rates.