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opinion. The railroad is generally consistent with the policy determined by tariff and rate decisions and practices of the railroad industry throughout the United States, as varied by Alaska development.

Because the railroad is not subject to the Shipping Act of 1916, the allegations made against the Alaska Railroad by the Anchorage Port Commission, that it has violated this act, appear to be merely for the purpose of publicity; particularly in view of the fact that it does not appear that the railroad's actions would violate the said act even if the railroad were subject to it. The tenor of the port's allegations set forth accusations which, while as Shakespeare said, "are full of sound and fury," they signify nothing.

To explain this statement, the Alaska Railroad is at a loss to know what the Anchorage port would have the Railroad do. On one hand, the port seems to say that the great resources of Alaska must be developed by lower shipping costs, and in the next breath the port, although it does not say so directly, seems to demand that the Railroad increase its rates so that the Anchorage port can, as it states in the body of its confidential memorandum, carry out its "duty to do all things necessary to protect the interests of the holders of certain bonds***"

The Alaska Railroad sympathetically recognizes that Anchorage port has a serious problem.

On page 1 of the resolution of the port commission it is stated that "the port commissioner is gravely concerned in the respect of such matters, as it affects all present and future conduct of their (the port commission) responsibilities and duties".

I wish to state only in passing, because it is not at issue in this investigation, that in reviewing the records of the Alaska Railroad, it appears that the concern of the port commission in this matter is somewhat belated, inasmuch as most of the factors which have caused the port commission's concern which has led to the allegations made in appendix A to its resolution, are a result of matters which were in existence or should have been foreseen prior to the construction of the Anchorage municipal port and, in fact, prior to the issuance of bonds to finance the port.

The Alaska Railroad has a mandate from Congress to assist in the development of Alaska. Certainly the railroad has no objection to increasing its freight rates as the Anchorage port in effect demands, if such would, in fact, develop Alaska. The railroad is not convinced that it would; nor is the railroad sure that this increase of rates is what the Congress or the Alaskan public wants. The railroad is somewhat aghast at the amount of incorrect information which is contained in appendix A to the Anchorage port resolution. Assuming that these allegations were based upon misinformation or a misunderstanding of the facts at hand, the railroad should like to avail itself of the opportunity to present the facts as they are.

It would be improper to comment on the body of resolution 1, of the Anchorage Port Commission and the general statements contained therein, since this should properly be answered by the Federal Maritime Board or some other Federal Government body other than the Alaska Railroad, I shall therefore pass on to the specific allegations and charges leveled against the Alaska Railroad in appendix A of the Anchorage Port Commission's Resolution No. 1.

(1) Allegation of Anchorage Port: The Alaska Railroad is a "corporation" and is under the Shipping Act of 1916.

Answer: The Alaska Railroad is not a Government Corporation as charged, but is an integral arm of the Federal Government, as was decided by the court case of Berger v. Olson (120 F. 2d 56), and other opinions and decisions. It should be noted that many of the allegations of the Anchorage port against the railroad immediately fail due to this false premise:

(a) Whether or not the railroad has filed its tariffs with the Federal Maritime Board becomes inconsequential in view of the foregoing.

(b) We wonder why the port commission has even raised the question that the Alaska Railroad does not file its terminal tariffs at Seward with the Maritime Board, in view of the fact that there is no statute requiring any terminal facility to file with the Federal Maritime Board, insofar as we are aware. It should be noted that 9 out of 11 ports in Alaska have issued tariffs containing no Federal Maritime Board numbers, including the Anchorage port. It might be further noted that the Alaska Railroad has, as a matter of courtesy, sent to the Federal Maritime Board, copies of its Seward terminal tariffs.

(2) Allegation: That the Railroad operated at a loss last year. Answer: The Railroad has consistently operated on a self-sustaining basis over the last 82 years and is presently operating on a self-sustaining basis.

(3) Allegation: The Railroad is monopolizing and destructive to other modes of transportation competing with the Railroad.

Answer: The fact is obvious that the Railroad has not destroyed competing forms of transportation. Most notable example is the Alaska Freight Lines which has been barging direct to Anchorage since 1953. Thus, there has been competition from the port of Anchorage long before the construction of the city dock. The Railroad has no desire to unfairly limit or impede other port facilities or competing modes of transportation under private ownership. At the same time, the Railroad would be remiss in attempting to penalize the public by increasing its rates or provide an artificial ceiling merely to allow competitive port operations or means of transportation to profit excessively at the expense of the public.

(4) Allegation: That the Railroad, through its tariffs, endeavors to aggregate connecting carriers' rates with its own to arrive at through rates named therein, and charges as misleading the statement in the tariff that rates named "are published for information purposes only and solely for the convenience of the public. The rates and changes named herein are not intended to supersede or otherwise effect the rates and changes lawfully published and filed with the Federal Maritime Board by Alaska Steamship Co.".

Answer: It is obvious that the Anchorage port does not understand the reason for this statement. The statement is not misleading. The Federal Maritime Board required the water carriers to publish their own tariffs from ships tackle to ships tackle on the water leg of transportation connecting with the Alaska Railroad. The Alaska Railroad has combined these rates in its tariff for the convenience of the Alaska public in reading the tariff to avoid confusion. The public is not in the habit of having to compute the rail transportation and then compute and add to it the water transportation in order to know what its cost will be to transport goods from Seattle to inland Alaska.

(5) Allegation: That the Alaska Railroad charges the shipper no terminal increment for work performed at the Seward dock on shipments coming to Alaska on through rates if the movement continues from Seward on the Alaska Railroad line.

Answer: This information is not true and, while we assume that there is a misunderstanding, it is difficult to under stand why the Anchorage port is not thoroughly familiar with the facts because on February 24, 1960, a hearing was held in Anchorage after publication in newspapers, at which hearing, the Alaska Railroad asked for an increase to the terminal increment of its Tariff 5-N, Docket No. ARR 144. This hearing, at which all citizens of Alaska had an opportunity to appear, both in Anchorage and Fairbanks, and protest the increase to Alaska Railroad's terminal increment, was held before a retired Interstate Commerce Commission Hearing Examiner at the specified request of the Secretary of the Interior. Notices of this hearing were published February 10 through February 16, 1960, and the newspapers gave ample coverage. I refer, specifically, among others, to the Anchorage Daily Times of February 17, 1960, February 24, 1960, and February 25, 1960. A quote from the advertisement reads as follows: "The rate increase in question would have the effect, generally, of adding to the Seward terminal increment in said Tariff (5-N) 5 cents per hundred pounds on carload traffic moving over the Seward dock at Seward, Alaska, for a line haul via the Alaska Railroad beyond, and 10 cents per hundred pounds on less than carload traffic of the same type."

At the hearing itself, the Alaska Railroad pointed out that it felt it needed to achieve, as nearly as possible, a charge of $6 per ton of 2,000 pounds for the provision of necessary handling and carloading costs at the Seward terminal. (6) Allegation: That the Railroad gives unjust and unreasonable preference to those whose shipments are routed by rail.

Answer: This charge becomes pointless in view of No. 5 above. Even if the Railroad were giving preference to customers who use the Railroad, it would not conflict with Interstate Commerce Commission's rulings on the matter, and I point out the case of Rukert Terminal Corp. v. Baltimore & Ohio Railroad Co., 286 I.C.C. 485, which held that undue prejudice does not exist merely because a line haul railroad who can adequately handle all water-borne traffic at their piers absorb handling charges at such piers, but not at privately owned piers in the port of Baltimore.

(7) Allegation: The port of Anchorage alleges that the Alaska Railroad is subsidizing its connecting carriers, Alaska Steamship Co. and others, at the expense of the United States by absorbing terminal charges and that such subsidy is both unlawful and unauthorized.

Answer: This is not true. We fail to understand the meaning or significance of this allegation, since the dockside operations of a terminal are not ordinarily for the account of the water carrier in the Alaska trade.

Historically, this practice in the Alaska trade has existed since 1937 insofar

as we are aware.

We know of no case in the trade any place in the United States where the water carrier does pay terminal costs beyond placing the cargo at first place of rest on the dock.

(8) Allegation: The port of Anchorage alleges that the Railroad is subsidizing ocean carriers by allowing "certain water carriers serving the port of Seward an unauthorized and unlawful operating subsidy at the expense of the United States of America, its owner, by furnishing equipment for use in certain privately owned carrier operations, reducing the cost of such privately owned carriers, and the capital requirement for and the cost of such containers by such privately owned carriers."

Answer: This statement is not true. The Railroad, for example, charges these carriers a use charge per ton of freight for the use of its unit rail boxes. (9) Allegation: That the Railroad gives unjust and unreasonable preference to shipments and shippers whose shipments arrive by the port of Seward to points along the Railroad, to the prejudice and disadvantage of shipments and shippers who route via the port of Anchorage.

Answer: Statistics indicate that not less than 60 percent of the tonnage inbound to railbelt points has as its destination Anchorage. If this tonnage were to come over the Anchorage dock, the Railroad would perform no service and its rates would be meaningless insofar as this tonnage is concerned. Therefore, the only inference that can be drawn is that the port director would have the Railroad raise its existing rates, Seward to Anchorage, in order to force routing of this tonnage via the Anchorage dock. We do not believe this was the intent of those who conceived the dock.

Insofar as Railroad rates Anchorage to points north are concerned, existing rates suffice for existing traffic. If justification for some joint rate arrangement develops, the Railroad will accord such request every consideration on the same basis as such rates are developed from and to other points on the Railroad. Only a week prior to the issuance of the confidential resolution becoming known, the Railroad notified the port of a substantial reduction in a rate from Anchorage to the interior on a commodity which in all probability will move through the port of Anchorage.

The port of Anchorage has even suggested privately that the Railroad absorb Anchorage port terminal charges in the Railroad's tariff for rail hauls from the Anchorage port. This the Railroad cannot legally do.

(10) Allegation: That the Alaska Railroad competes in the open transportation market against carrier services financed by private enterprise and advertises "One package transportation via Alaska Railroad Containers" in connection with Alaska Steamship Co. and Puget Sound-Alaska Van Lines. Further, the port alleges that "Again, the Railroad allows certain water carriers serving the port of Seward an unauthorized and unlawful subsidy at the expense of the United States of America, its owner, by furnishing equipment for use in certain privately owned carrier operations, reducing the cost of such privately owned carriers in the capital requirement for and cost of such containers by such privately owned carriers."

Answer: The subsidy question is answered above. Competition in any business or trade is healthy. The Alaska Railroad is proud of its unit rail box program and feels that it has done much to upgrade the transportation picture in Alaska. Further, it is proud to be associated with the other carriers that have adopted this modern means of cargo handling. The Railroad would be remiss, however, in taking full credit for this development inasmuch as the other carriers named with the Alaska Railroad have furnished similar containers of their own in the trade.

(11) Allegation; That Mr. John Manley, Assistant General Manager of the Railroad, was publicly quoted as stating that, should the port of Anchorage be able to offer a rate from Seattle to Anchorage lower than the present combined ocean-rail rate, "We would have to attempt to meet it."

Answer: Mr. Manley is quoted out of context. From that newspaper release the quote was as follows: "Commenting on possible competition between the Anchorage port and the Railroad in serving the Anchorage area, Manley said: "The Railroad is going to continue its policy of compensatory rates which aid in the development of Alaska,' as provided in the Presidential Enabling Act which created the rail carrier. 'We have to have rates that pay their way,' he added. But should the port be able to offer a rate from Seattle to Anchorage lower than a present ocean-rail rate, 'We would have to attempt to meet it,' Manley said.”

(12) Allegation: That the Railroad is violating the Interstate Commerce Act by its "piggyback" hauling of motor truck trailers.

Answer: "Piggyback" operation is perfectly legal and regular practice of outside railroads under the ICC. The Alaska Railroad has a division sheet and offers the service to all truckers under equal conditions. With regard to the particular case citation of Stone's Express, Inc., 32 MC 525; 3 CCH Fed. Car. Cases 30,199 quoted by plaintiff, we fail to see where the case is germane to the issues. This was a motor carrier case and appears to have no application to the rights or lack of rights of a rail carrier in performing substitute service with which we are concerned here.

(13) Allegation: That each listed private terminal operator in Anchorage is in violation of law and that the Railroad leases land to these individuals operating docks in its Anchorage Terminal Reserve and that the Railroad receives a pecentage of the terminal revenues of these operators. Therefore, the port alleges the Railroad "is a party to each of the violations of each terminal operator."

Answer: The Alaska Railroad does lease portions of its terminal reserve to the parties named. These leases are now being used for different purposes than the original leases. Under terms of these leases the rental payments to the Railroad have increased equitably where the leases utilize the grounds for purposes other than, and more profitable than, those outlined in the scope of the original lease in order to give the Federal Government a fair return. The Railroad exercises no control whatever over the operations or tariffs or policy of these private dock operators. To do so would be improper.


The railroad is charged by Congress with the responsibility of operating as a self-sustaining unit and to aid in the development of Alaska. The railroad is not ashamed of its record in doing both.

Cargo is and has been coming into the docks operated by private operators at Anchorage in the neighborhood of 30 years. In recent years this has developed into volume handling of freight. The railroad's existence has not diverted or precluded this Anchorage business.

Since the Anchorage City port is new upon the scene the railroad recognizes that the port must deal with many new and complex problems without much Alaskan port operation experience. The railroad has made much information available to the port commission to aid it in getting started. It is ready to give additional help in any way possible consistent with the practices of good economics, sound business, and the railroad's congressional mandate.

Senator BARTLETT. Mr. Strandberg?
Will you identify yourself?


Mr. STRANDBERG. I am Harold Strandberg, chairman of the port commission. I just want to correct

Senator BARTLETT. And your mailing address?
Mr. STRANDBERG. Box 2099, Anchorage.

I want to correct a couple of errors in Mr. Smith's testimony. One was that the revenue being derived from the port is now set at somewhere around $2, I believe you said, which indicated that the port was cutting its rates below that of the recommendations in the Clover

dale and Colpitts report. It is true there is an adjustment downward slightly in the rates as represented in the Cloverdale reports.

There is a lot of misconception on this Cloverdale report, and believe me it has given us a lot of trouble, the least of which is the tonnage forecast.

Unwittingly, the whole port revenue was tied to what we believe and in my conversations direct with the engineers I know they were setting a general and an average figure of all revenue. At times, I think this is true, Hank, we have had difficulty in putting this across to the bondholders.

What we charge at the port is all determined by the trustees for the bondholders under a trust indenture.

I agree with Mr. Smith that there are many things which have changed in the picture since the Cloverdale people have put out their report. It was the belief of the engineers whom we hired that there would be a diversion of cargo. It was not our belief that this cargo diversion would happen overnight.

I do believe that the competition has increased and is a lot for cargo on the railroad. I might say that the attitude of the railroad in general and the attitude of the Department of Interior regarding the port has definitely changed since the bonds were floated.

Senator BARTLETT. In what way?

Mr. STRANDBERG. We had the assurance in this regard, the assurance and cooperation of the previous managers of the railroad in the development of the port. We had the assurance of previous Secretaries of the Interior in the development of the port.

I don't think that anybody is naive enough to believe that Mr. Smith and his organization aren't real rough competition. We are not objecting to that. I want to make that clear. The only thing is that we feel that the port of Anchorage, the investment by the people of that area, by bondholders in the States, that we are entitled to play this game under exactly the same rules. And I think that that, in essence, is the request that we made to the FMB.

If we are wrong, let them state so.

We want to cooperate with the railroad, and I have told Mr. Smith on many occasions I hope that we can isolate this area that we are going to fight about in this corner and get together in other areas where we can cooperate. And I have Mr. Smith's assurance that we will be able to do that.

I think that we are always going to be fighting for freight with the Alaska Railroad, and I think that that is the way it should be.

I think that it is competition, and if he can haul freight cheaper from Seward into Anchorage than we can bring it in here by water, then there is something wrong.

Either this area is getting a very good thing out of subsidies for the railroad or we are not doing our job.

We most assuredly, speaking for the port commission, have no intention of doing anything which we feel would raise the rates to Alaska.

We are all skirting around one of the main points as to why we are having difficulty in diverting cargo, and that is that we do not as yet have a major carrier who has filed a tariff into Anchorage. We have had promises on the filing of these tariffs last April. We have

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