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ments of the two States and of the Commonwealth and members of the congressional delegations-seeking to halt the almost runaway inflation in maritime freight rates through Government assistance of one kind or another. Our difficulty is that we have not yet found just what direction that assistance should take.
I for one am more firmly convinced than ever than something needs to be done, that there is an imperative requirement because as it is now we find that people of these three areas support in their small numbers independent measures, and this isn't duplicated anywhere else in the Nation.
Have you any views on this general situation?
Mr. ROLOFF. Only from the point of view of general principles, Senator. After all, Puerto Rico, Hawaii, and Alaska, have, since the end of World War II, evolved into unique situations insofar as existing regulatory law is concerned. Of course, there has been a great economic and population development in Hawaii. We all know what is happening in Puerto Rico, where industries are moving in under tax-exempt situations. And we have Alaska which we are trying to develop on a comparable level.
In general we have to find some type of equalized regulatory control over the two States and the one Commonwealth that remain and are served by both the FMC and ICC requirements.
Although I didn't indicate it in my testimony, there is another valid argument for a unified control under the ICC, and it is a projected situation which might occur within the next 5 or 10 years, conceivably.
There has been some research and some study and some talk about connecting a rail link between the south 48 States and Alaska via Canada. There has also been some conversation and conceivably this could come to pass with an agreement between the United States and Canada, that interstate commerce could move over the highway through Canada into Alaska.
If these things should come to pass, obviously the Interstate Commerce Commission should be the governing agency, whether it is a rail link or a highway link.
Hence if they have unified control over the water link now and these other two situations do evolve into possibilities, it should be apparent that the ICC should control all methods of transportation to and from Alaska.
Senator BARTLETT. Do you have anything else you would care to add, Mr. Roloff?
Mr. ROLOFF. No, sir; I believe I have stated almost too much.
Senator BARTLETT. Not at all. We have been most interested in your testimony, and you have made an extremely useful statement. I am sure that committee counsel will have questions to add to those which I projected.
Mr. MCELROY. I would like to go back to this matter of the "joint" rates as opposed to the "through" rates.
I think it would help clarify the record if you would give a concrete example of the harm you think might flow from the use of joint rates without publication of division or proportional shares.
Mr. ROLOFF. I believe I stated, Mr. McElroy, that we have a situation here where we have nonvessel water carriers serving Alaska and they do it under an agreement with underlying ocean carriers and the Alaska Railroad. It would point along the rail belt only. This is a unique situation.
As was indicated in the factfinding hearing of the Federal Maritime Board, these are contractual arrangements under existing law between the ocean carriers and the Railroad.
Mr. MCELROY. These are the barge operators and the Railroad, is that right?
Mr. ROLOFF. These are nonvessel water carriers. In essence they are both truckers.
But they are contractual agreements.
There was some evidence introduced in the testimony before the FMB which indicated in some small way the essence of these contracts, but I don't think the total story has been told yet. That is only an opinion of mine. It may not be true.
But if we got into a situation whereby legislation was created which would legalize what we believe now to be an illegal operation under FMB law, but if legislation was introduced which would legalize this situation under existing Interstate Commerce Act provisions, then joint rates could be a matter of agreement between underlying and connecting carriers which would not be subject to scrutiny except, in the case of one bill, by the joint board.
Mr. MCELROY. How, specifically, would that hurt the port of Anchorage?
Mr. ROLOFF. Because it has been pointed out that terminal charges as such are not broken out in contractual agreements between the Railroad, the ocean carriers, and the nonvessel water carriers. The Railroad states that they have an increment in their rate which is alleged to be a terminal charge.
Mr. MCELROY. You think that is inadequate?
Mr. ROLOFF. But whether it is a compensatory increment or not is a subject of debate.
The port of Anchorage, of course, must amortize its investment of $8 million of public funds. And the tariff is set up to be compensatory.
If a joint rate were set up whereby terminal charges at Seward were only an increment, let us say, they may or may not be compensatory, which in essence would put the port of Anchorage in a noncompetitive position, and this would be unfair to the people and the citizens of Anchorage who financed this $8 million facility.
Mr. MCELROY. Do you think that the rail portion of the haul is charged for at a compensatory rate under these agreements?
Mr. ROLOFF. As was indicated by Mr. Sanders in his testimony for the Alaska Carriers Association, it has been alleged by both the Alaska Carriers and the port commission resolution that some commodity rates appear to be noncompensatory. They are designed to control a flow of cargo and a volume via rail. No one can say whether or not these rates are compensatory until an analysis would be made. As I have stated, they appear to be noncompensatory because, as I stated
in my statement today, we have no desire to raise the total freight rate from the south 48 to Alaska because we maintain that an ocean carrier, serving directly from a port in Washington or California direct to this port, must, of necessity, be a cheaper way to route the cargo than a connecting rail haul of 125 miles with terminal charges in between, handling, loading, and unloading charges in between, and if these charges were to be compensatory then the direct water route would have to be cheaper.
Do I make myself clear?
Mr. MCELROY. Yes, indeed.
It leaves some other problems, but none that we can handle.
Senator BARTLETT. Mr. Grinstein, do you have any questions?
If I understand you correctly, you would like to have the Interstate Commerce Commission assume regulatory jurisdiction over all the modes of transportation serving within and to and from Alaska? Mr. ROLOFF. That was my position, Mr. Grinstein.
Mr. GRINSTEIN. And you would like, in the case of joint rates, that all the divisions of a joint rate be published? Mr. ROLOFF. Be published divisions; yes.
Mr. GRINSTEIN. Including the terminal charge?
Mr. ROLOFF. Yes, sir.
Mr. GRINSTEIN. You are concerned, I gather, that in the case of the terminal charge, there might be two separate agencies judging the reasonableness of the terminal charge, or one might be regulated while the other is not and what you would prefer to have is both subject to the regulatory jurisdiction of the same agency?
Mr. ROLOFF. In other words, to state it another way, the port commission has recommended Interstate Commerce Commission control of the Railroad. It was my position that the Interstate Commerce Commission should control all cargo moving over routes originating in the south 48 destined for points in Alaska.
However, I pointed out that the ICC should have control only of the cargo and the rates affecting the cargo. But furthermore, that the Railroad still owns the port of Seward and its terminal facilities, and terminal services should be separate from control of the cargo and should probably remain under the FMC unless, of course, as the Senator asked me, provisions are made in the Interstate Commerce Act to control the terminal services also.
Mr. GRINSTEIN. Basically what concerns you then is unreasonable or preferential rates as between ports or unreasonable or preferential rates as between carriers which would affect ports?
Mr. ROLOFF. Exactly.
Senator BARTLETT. Thank you very much, Mr. Roloff.
Mr. ROLOFF. Thank you, Senator.
Senator BARTLETT. Is there any other witness in the room who desires to testify on the subject of transportation?
Mr. John Smith for a return engagement.
FURTHER STATEMENT OF D. J. SMITH, GENERAL MANAGER, THE ALASKA RAILROAD
Mr. SMITH. I believe that to rehash the entire factfinding hearing at this time would only take up a lot of time. I notice Mr. Roloff has submitted the resolution of the port commission. I would like to submit our rebuttal statement which appears in that hearing that we will send you a copy of.
Senator BARTLETT. That will be received and incorporated in the record following your testimony now.
Mr. SMITH. I do feel, however, that there are a few matters here which should come out, particularly for the benefit of those in the room who were not here Saturday, or who were not at the FMB hearings.
First of all, I believe that the Railroad's position is quite clear that we, too, agree to ICC control as stated in my testimony.
Secondly, regarding the feasibility of the Anchorage port, I can only say that I believe the worries should have been recognized before the port was ever built, and I particularly refer to page 30 of the 1958 Coverdale and Colpitts reports in which it is stated that 216,000 tons at $5.82 a ton terminal charge is needed to make the port pay off.
Senator BARTLETT. This is an annual tonnage?
Mr. SMITH. Yes, sir.
I think it is also a fact that the port tariff of the Anchorage port is more closely set at $2 a ton.
Apparently it is for competitive reasons only.
There is one other point in Mr. Roloff's statement and that is the fact that the port of Anchorage is under an undue competitive position because it reports to and is controlled by the FMC. It is our position that no port is under the FMC.
We base this on two things. First of all, there are 9 out of 11 port tariffs in the State of Alaska that are issued without FMC numbers.
Secondly, we have a letter as late as 1961 from Mr. Stigler, of the Federal Maritime Board, in which it is our interpretation that he stated that he accepts terminal tariffs only as a matter of courtesy.
Senator BARTLETT. Won't he speak plainly?
Mr. SMITH. We think it is plain. But I wish not to definitely say that this was the purpose of the letter.
Furthermore, insofar as divisions are concerned, also our agreement with our substituted service truck carriers, these are on file as a matter of courtesy with the ICC.
Our terminal tariff at Seward is also on file as a matter of courtesy with the FMB.
That is all that I have to say.
Senator BARTLETT. Thank you, Mr. Smith.
Mr. GRINSTEIN. When was the Anchorage port built? When did construction finish?
Mr. SMITH. It was opened this spring. I believe the opening date was April. The first cargo was handled in April I am advised.
Mr. GRINSTEIN. Since the opening of the Anchorage port and the filing of the Anchorage port tariffs, has the Seward port adjusted its tariffs downward to meet the competition from the Anchorage port?
Mr. SMITH. No; the fact is, even with the port of Anchorage going to be built, we adjusted it upward in February 1960.
Mr. GRINSTEIN. Could the Alaska Railroad seen any objection to placing both previously unregulated ports, we will say, Seward and Anchorage, under the regulatory jurisdiction of either the ICC or the Federal Maritime Commission?
Mr. SMITH. Of course, the Alaska Railroad in its position that there is nothing wrong with ICC control of that Railroad under the conditions we spoke of, we feel that the ICC would probably be examining our port increment fairly closely.
Senator BARTLETT. Mr. McElroy?
Mr. MCELROY. You gave a figure as to the volume of traffic projected as needed to move through the port of Anchorage in order to amortize the costs. If that volume actually materialized, what would happen to the Alaska Railroad line between Seward and Anchorage?
Mr. SMITH. Let me explain this to you first. There are two Coverdale and Colpitts reports, 1956 and 1958. Very definitely the reports made a definite error in what the combination water and rail rate actually was.
Furthermore, the ports were built at a time when military construction at that time was at a high level, and therefore, it was projected that the annual tonnage would be great.
Actually the annual dry cargo tonnage coming into the rail belt area has, let's say, leveled off. Actually it has dropped from 1956 to 1960 a total, offhand, of 25 percent.
To answer your question more specifically, freight is going to move by the cheapest and most consistent means. If the port of Anchorage was cheaper, we would be out of business up to 4 months a year. Of course, then the taxpayers of the entire United States would have to standardize the line so there would be a way of getting business in here during the frozen months. But I am proud to say that we have not asked for an operating appropriation at all in the last, I believe, 23 years.
Mr. MCELROY. That answers it.
Mr. GRINSTEIN. You anticipate, then, that whatever scheme of regulation is developed for Alaska that there would be some provision or coverage for undue or unreasonable preferences as between carriers or as between ports?
Mr. SMITH. Yes. I think it will sober itself up. (The statement referred to follows:)
STATEMENT IN BEHALF OF THE ALASKA RAILROAD JUNE 23, 1961, AT AN INVESTIGATION CONDUCTED BY THE FEDERAL MARITIME BOARD, BY J. GLEN CASSIDY, DEPARTMENT OF INTERIOR FIELD SOLICITOR FOR THE ALASKA RAILROAD, APPROVED BY D. J. SMITH, GENERAL MANAGER, THE ALASKA RAILROAD
The Alaska Railroad functions under its Enabling Act, 48 USC 301-308, and is not subject to the Shipping Act of 1916. The Alaska Railroad is in attendance at this investigation as a courtesy to the Federal Maritime Board, and to supply information to the public. A condition to its appearance here today is the stipulation by the Federal Maritime Board that this appearance shall not in any way be interpreted to be a jurisdictional concession by the railroad, or a jurisdictional assumption by the Board.
It should be pointed out that the Alaska Railroad is subject to the strict regulation of its Enabling Act, which requires equal rates and tariffs be extended to any and all carriers or shippers within any particular class, and is further subject to the regulation of the Secretary of the Interior and the regulation of public