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for the performance of such transportation, whether or not owning or controlling the means by which such transportation is effected, is a common carrier by water as defined in the Shipping Act, 1916."
Since S. 1978 makes clear the Commission's authority to determine, for the purposes of section 202(c), the terminal area limits of water common carriers subject to the shipping acts, we have no objection to its enactment.
Editorially, it appears that the section reference in line 14, page 3, of the bill should be "202(c)" instead of "202(2)." Respectfully submitted.
Chairman, Committee on Commerce, U.S. Senate.
DEAR MR. CHAIRMAN: Further reference is made to your letter of August 15, 1961, in which you requested our comments on S. 2413.
The purpose of this bill is to subject the interstate operations of the Alaska Railroad to regulation by the Interstate Commerce Commission, pursuant to part I of the Interstate Commerce Act, as amended, 49 U.S.C. 1-27. In this respect it is identical to S. 1508, 86th Congress, 2d session, on which we furnished you our comments in a letter of April 16, 1959, B-124195, copy enclosed. S. 1508, as amended, was passed by the Congress but was vetoed by President Eisenhower on July 6, 1960, because of its repugnancy to the constitutional separation of powers in subordinating the Executive power of the President under the original act of March 12, 1914, 38 Stat. 305, as amended, 48 U.S.C. 301, to legislative powers delegated to the Interstate Commerce Commission; because part I of the Interstate Commerce Act, designed for application to privately owned and operated railroads, is inappropriate to apply to a Government agency established to effectuate a public purpose; and because it would subject an agency of the Federal Government to State regulation.
S. 2413 does not contain a provision for subjecting the intrastate operations of the Alaska Railroad to regulation by the State of Alaska. However, it fails to meet the other two objections which occasioned the President's veto.
From our standpoint this legislative proposal is objectionable because of the potential adverse effect it would have on the functions and operations devolving upon our Office under the Accounting and Auditing Act of 1950. The Alaska Railroad, wholly owned by the Federal Government, is presently a bureau of the Department of the Interior, reporting directly to the Assistant Secretary-Public Land Management. Its current accounting system was devised jointly by representatives of the railroad, the Department of the Interior, and our Office, and was approved by us on September 25, 1957. This system was designed to include, as one of its integral parts, the accounting, financial reporting, and budgetary needs of the Secretary of the Treasury and the Director of the Bureau of the Budget required by 31 U.S.C. 66 (a). The Interstate Commerce Commission was established to regulate privately owned common carriers and the discharge of its duties under section 20 of the Interstate Commerce Act has involved the formulation of broad general principles of accounting and financial reporting for privately owned, operated, and financed carriers; seemingly the Commission lacks the experience with, and the technical knowledge and appreciation of, the specialized requirements of the accounting, auditing, and financial reporting systems necessary to maintain adequate controls over Federal funds used to finance federally owned and operated entities. Although S. 2413 requires the Commission, in the exercise of its responsibilities under section 20, to "consider" our needs and those of other interested agencies, we do not think this requirement is a clear mandate which would compel the Commission to familiarize itself with those needs and to require that they be met. Neither does S. 2413 expressly pro
vide for the relief of our Office from its responsibilities under the Budget and Accounting Act of 1921, as amended, and the Accounting and Auditing Act of 1950, as amended, relative to the Alaska Railroad.
Accordingly, we do not recommend favorable consideration of S. 2413 in its present form.
FRANK H. WEITZEL, Assistant Comptroller General of the United States.
GENERAL SERVICES ADMINISTRATION,
Hon. WARREN G. MAGNUSON,
DEAR MR. CHAIRMAN: Your letter of August 15, 1961, requests comments on S. 2413, a bill to provide for economic regulation of the Alaska Railroad under the Interstate Commerce Act, and for other purposes.
This bill would place the regulation of the Government-owned Alaska Railroad, now operated by the Secretary of the Interior on behalf of the President, under regulation by the Interstate Commerce Commission in the same manner as if it were privately owned and operated.
Under its statute (63 Stat. 383; 40 U.S.C. 481), GSA is interested in transportation and traffic management as a user of transportation services and in representing executive agencies in proceedings before State and Federal regulatory bodies. As a user of transportation services, GSA considers that the proposed regulation by the Interstate Commerce Commission would not affect its usage of rail facilities of the Alaska Railroad. The mission of GSA, however, is not sufficiently affected to warrant an expression of opinion on the merits of this bill.
The Bureau of the Budget has advised that, from the standpoint of the Administration's program, there is no objection to the submission of this report to your committee.
JOHN L. MOORE, Administrator.
THE GENERAL COUNSEL OF THE TREASURY,
Hon. WARREN G. MAGNUSON,
MY DEAR MR. CHAIRMAN: Reference is made to your request for the views of this Department on S. 2413, to provide for economic regulation of the Alaska Railroad under the Interstate Commerce Act, and for other purposes.
The proposed legislation would amend the act of March 12, 1914, as amended (48 U.S.C. 301), to place the Alaska Railroad under the jurisdiction of the Intertate Commerce Commission in the same manner and to the same extent as if such was privately owned and operated.
The primary interest of the Treasury Department is limited to the effect the proposed legislation, if enacted, would have on the responsibility of the Secretary of the Treasury for accounting and financial reporting as set forth under the Budget and Accounting Procedures Act of 1950 (31 U.S.C. 66b). Section 20 of the Interstate Commerce Act, as amended (49 U.S.C. 20(1)-(7)), gives authority to the Interstate Commerce Commission to prescribe and regulate the accounting and financial reporting systems of rail common carriers, and while S. 2413 would provide that the Interstate Commerce Commission would consider the needs of the Comptroller General of the United States, the Secretary of the Treasury, the Director of the Bureau of the Budget, and the Secretary of the Interior with respect to the Alaska Railroad's accounting, auditing, financial reporting and budgetary requirements, the Department feels that there would be created a conflicting situation with respect to this area of jurisdiction.
Accordingly, the Treasury Department would be opposed to enactment of S. 2413 in its present form.
The Department has been advised by the Bureau of the Budget that there is no objection from the standpoint of the administration's program to the submission of this report to your committee.
Hon. WARREN G. MAGNUSON,
ROBERT H. KNIGHT,
INTERSTATE COMMERCE COMMISSION,
DEAR CHAIRMAN MAGNUSON: Your letter of August 15, 1961, addressed to the Chairman of the Commission and requesting comments on a bill, S. 2413 introduced by Senator Bartlett, "to provide for economic regulation of the Alaska Railroad under the Interstate Commerce Act, and for other purposes, has been referred to our Committee on Legislation. After consideration by that committee, I am authorized to submit the following comments in its hehalf:
By virtue of statehood, all forms of surface transportation operating in interstate or foreign commerce to, from, and within Alaska, except for the Government owned and operated Alaska Railroad and such water transportation as was excluded by section 27(b) of the Statehood Act, became subject to regulation under the Interstate Commerce Act, and related acts, to the same extent that similar transportation within and between all of the other contiguous States its subject to regulation. The Government-owned and operated Alaska Railroad, the principal transportation facility in Alaska, was not prior to statehood subject to regulation by any regulatory agency, nor did it become subject to the Commission's jurisdiction upon the admission of Alaska as a State.
With the competitive struggle between the Alaska Railroad and the motor carriers for the limited amount of traffic moving in Alaska, the Commission is firmly of the view that there can be no effective or equitable regulation of surface transportation in interstate commerce within that State as long as one of the major competitive modes is subject to a full measure of regulation while its chief competitor remains completely free from regulatory control. In this connection, your committee stated in its report dated July 25, 1956 (S. Rept. 2802, 84th Cong., 2d sess.):
"The committee realizes that Alaska is beset by a number of chronic transportation problems that will require the attention of Congress and of the people of Alaska for many years if solutions are to be achieved. There is likewise an acute transportation problem which needs immediate attention and action: That of regulation of competition among carriers serving Alaska. According to the testimony, this situation is particularly unhealthy as between motor carriers on one hand and the Alaska Railroad on the other. At the present time, this competition is unrestricted by regulatory statute; consequently, there is neither restriction of discrimination against shippers and communities, nor provisions of law forbidding unfair diminution of carrier revenues. Such a state of affairs mitigates against the orderly economic development of Alaska.
"The committee believes that transportation within Alaska and between Alaska and the United States should be subjected in the public interest to a reasonable measure of clearly drawn regulations which will allow carriers a fair return for their efforts and insure the shippers and communities in Alaska reasonable and nondiscriminatory rates."
The State of Alaska also recognized this problem in a memorial, House Joint Memorial No. 13, in which it urged the Congress to give due and immediate consideration to proper amendments to laws governing interstate commerce affecting broad problems of transportation to, from, and within Alaska. The memorial reads in pertinent parts as follows:
"Whereas, certain of the transportation facilities are now operating under the Federal statutes regulating transportation and subject to the jurisdiction of the Interstate Commerce Commission; and
"Whereas the Interstate Commerce Commission in its report to the Senate of the United States has recommended that the Alaska Railroad, a Government corporation, should be subject to the rate and service regulations of the Commission; and
"Whereas other transportation facilities in Alaska are not now subject to the same or similar regulatory procedures and control; and
"Whereas this lack of uniformity of regulation has permitted inequitable and discriminatory rate practices to the detriment of the shippers and receivers of freight in Alaska and such inequities and lack of uniformity will continue to exist until proper amendments to the Interstate Commerce Act have been promulgated by Congress: Now, therefore, be it
S. 2413 would go a long way toward remedying this situation by amending the Alaska Railroad Act to provide that, with certain exceptions, the provisions of part I of the Interstate Commerce Act, shall be applicable to the Alaska Railroad. The excepted provisions include those relating to the abandonment or extension of lines, discontinuance of service, issuance of securities, safety of operations and equipment, and penalties and forfeitures. In lieu of its present provisions relating to the issuance of free passes, the organic act would also be amended to incorporate, by reference, the provisions of part I of the Interstate Commerce Act (secs. 1(17) and 22) respecting the furnishing of transportation free or at reduced rates.
S. 2413 also directs the Commission in carrying out its duties under section 20 of the Interstate Commerce Act to consider the needs of the Comptroller General, the Secretary of the Treasury, the Bureau of the Budget, and the Secretary of the Interior pursuant to law respecting the accounting, auditing, financial reporting, and budgetary requirements of the Alaska Railroad. While the needs of these departments and agencies in this respect could, in our opinion, be accommodated, under the present provisions of the Interstate Commerce Act, we have no objection to this provision of the bill. Even in the absence of such a statutory admonition, the Commission would, of course, stand ready to cooperate to the fullest extent in this area with the other departments and agencies concerned.
S. 2413 further provides that in passing on the lawfulness of rates or charges of the Alaska Railroad, the Commission shall give due consideration, among other things, to the carrier's national defense and developmental purposes, and to the extent warranted by the facts, recognize for valuation and cost-finding purposes, a segregation of both capital investment and operating expenses found to be solely attributable to such national purposes as distinguished from normal railroad common carrier investment and operating expenses. It also provides that such rates and charges shall not be deemed to be unlawful solely because they fail to yield sufficient revenues to provide a return on capital investment or to cover taxes not actually required by law to be paid. The Alaska Railroad is not now required to show a return on investment, and it is our understanding that it pays no property or income taxes.
These provisions are apparently intended to clarify the question of whether the Commission, if it is to regulate the Alaska Railroad as a privately owned carrier, would have no alternative but to require its rates, if challenged to be increased to a level sufficiently high to provide a return on its entire capital investment, notwithstanding the fact that a very large part thereof was occasioned by national defense and developmental considerations.
Under the Interstate Commerce Act, carriers historically initiate their own rates. In determining the justness and reasonableness of any challenged rate or rates of the Alaska Railroad, the Commission, even in the absence of these provisions, would be required to observe the customary rule of ratemaking in the light of the national transportation policy, including national defense considerations as set forth therein, and the provisions of the Alaska Railroad Act relating to the carrier's development and defense purposes, which would remain unchanged. In the usual competitive situations, a reasonable rate should be compensatory, i.e., it should at least cover direct costs and make some contribution to depreciation, return, and taxes. The Alaska Railroad, however, pays no property or income taxes and there is no present requirement, nor is there any requirement in the bill, that it show a return on investment. While we are of the view that these provisions are unnecessary, we have no objection to their inclusion in the bill.
S. 2413 would also specifically repeal the act of April 10, 1926, which added certain free pass provisions to the Alaska Railroad Act. While enactment of this bill without these provisions would probably have the effect of repealing the 1926 act, specific repeal seems desirable since it would preclude the possibility of any confusion arising between the 1926 act and the proposed incorporation by refer
ence in the Alaska Railroad Act of the free or reduced rate provisions of part I of the Interstate Commerce Act.
The bulk of freight traffic moving to and from Alaska is shipped by water. For a considerable number of years the Alaska Railroad maintained with water carriers joint rates between interior points in Alaska and Pacific coast ports. Such rates are of vital importance to shippers. However, the filing and maintaining of such rates with a regulatory agency is not authorized by statute. S. 2413 would resolve this problem by making the provisions of section 1(1)(a) of the Interstate Commerce Act applicable to the Alaska Railroad. Under this section joint rates are authorized between rail carriers subject to the Commission's jurisdiction and all water carriers engaged in interstate commerce, whether or not such water carriers are subject to the Commission's jurisdiction. Moreover, section 305(b) of the act not only authorizes, but gives the Commission the power to direct the establishment of joint rates with water carriers subject to its jurisdiction. Under section 261 (c), motor carriers could also enter into through route and joint rate arrangements with the Alaska Railroad. Thus, S. 2413 would not only provide more uniform and equitable regulation of the different modes of transportation serving Alaska, but would also encourage the establishment of fair and reasonable through routes and joint rates between Alaska and the other States.
Enactment of S. 2413 is, in our opinion, most desirable, and we therefore urge that it be given your early and favorable consideration. Respectfully submitted.
Chairman, Committee on Legislation.
HOWARD G. FREAS.
FEDERAL COMMUNICATIONS COMMISSION,
Hon. WARREN G. MAGNUSON,
DEAR SENATOR MAGNUSON: This will acknowledge receipt of S. 2413, 87th Congress, a bill to provide for economic regulation of the Alaska Railroad under the Interstate Commerce Act, and for other purposes. The Commission has examined the enclosed bill. respect to S. 2413, since it does not appear that functions.
We have no comments with this bill would involve our
ROBERT T. BARTLEY,
DEPARTMENT OF AGRICULTURE, Washington, D.C., January 22, 1962.
Chairman, Committee on Interstate and Foreign Commerce,
DEAR SENATOR MAGNUSON: This is in response to your request for the Department's comments on S. 2484, a bill to provide for establishing and operating a foreign trade zone, a Hall of States, and an international reception and information center at the Anchorage International Airport, Anchorage, Alaska, and for other purposes. This bill would, under the Foreign Trade Zone Act of 1934, provide for the appropriation of Federal funds for the establishment of an international reception and information center at the Anchorage International Airport, Anchorage, Alaska and for the exhibition and retail sale of both domestic and foreign merchandise to foreign travelers.
Section 15(d) of the Foreign Trade Zone Act of 1934 states that no retail trade shall be conducted within the zone except under permits issued by the grantee and approved by a board composed of the Secretaries of Commerce, Treasury, and Army. In addition, under these permits, permittees shall sell no goods except such domestic or duty paid, or duty free goods as are brought into the zone from customs territory.