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There also should be considered the capital investment of the railroad, the manner in which it came about. Certainly they shouldn't be required to earn profits that would offset the cost of these capital improvements because many of them were made, and we all recognize this, during times of national emergency and a lot of money was spent that probably a private concern never would consider spending under normal conditions.

I would like to get across the impression that my understanding of the Carriers Association is not to feel that we are a special group, that we should be given any special consideration, but certainly what is fair for us is fair for any other agency or party that is competing with us, and we should all be operating under the same conditions. And until such a time, I do not think that you are going to have successful regulation here in the State of Alaska.

I might say that regulation without being properly enforced is worse than having no regulation at all.

Mr. GRINSTEIN. One of the problems that is current in the Senate, as Senator Bartlett well knows, is that of competitive ratemaking between trucks and railroads.

Is it your idea that if the Alaska Railroad were brought under regulation, that some recognition should be given to the fact that they are largely tax free, that they have a large amount of Government investment in the railroad? In other words, this should be computed in figuring their rates?

Mr. CHAPADOS. Not necessarily.

Mr. GRINSTEIN. Or it should be weighted?

Mr. CHAPADOS. I think it should be looked upon just like any other business concern. Certainly if a private concern were to buy the Alaska Railroad and then operate in competition and come under the regulations of the Interstate Commerce Commission, it would be almost unfair to them to expect them to earn profits that would take into consideration the huge improvement that exists there. I don't see how they could operate. They just couldn't make it. If they were going to start a new railroad you would probably approach it from the standpoint of the actual needs in order to meet current conditions, and perhaps we ought to look at the Alaska Railroad from that standpoint at this time.

On the other hand, if they are permitted to operate in competition with regulated carriers in the State, and are allowed to compete directly without the payment of taxes, motor fuel taxes, licenses, and all that sort of thing in a motor operation, I think those things should be taken into consideration and that their rates should take into consideration the cost of doing business on that basis. But whatever is fair, I think we should give them fair consideration. On the other hand, once that has been determined then they should be regulated on that basis.

If the railroad then is not able to make a profit, or to continue operations on its own earnings, then I think we should go and think in terms of the need of the railroad and the support that it provides to military institutions here in Alaska, and so on, and perhaps under those conditions a subsidy might be in order in order to maintain it in operation. But I don't think that Alaska carriers who are citizens of the State or trying to operate a business up here should be the

ones who should have to pay for this subsidy. I think it should be one that is supported by the American people.

Mr. GRINSTEIN. In Alaska you have exactly the reverse of the historical situation in the original 48 States. The railroads have historically charged the trucks with being largely subsidized by the taxpayer and almost wholly unregulated. Here you are 180 degrees the other way.

Mr. CHAPADOS. Perhaps these are considerations that should be taken into consideration in Alaska. I think that motor carriers have no right to ask for any special consideration, just an opportunity to do business on an equitable basis.

I think that these things should be resolved. If they were gone into by responsible agencies and worked out, we would then have to compete on service and other considerations. If we can't compete, then we had better look for some other line of business. Certainly, Alaska needs a transportation system as much as any country in the world today. We have a responsibility as carriers, and the regulatory bodies have the same responsibility to make every effort to try and produce the conditions that will provide Alaska with a good transportation system, and straighten out what appears to be a situation now where no one knows what the answer is.

I want to comment briefly on a couple of subjects that are not necessarily related to any bills before the committee, but they are on transportation, if I might be permitted to do that.

Senator BARTLETT. Surely.

Mr. CHAPADOSs. First, I am under the impression, or I have been informed, that there is a bill in Congress that will provide for a new approach to the section 22 quotation situation that we find with the U.S. Government and the military especially here in Alaska. This is probably a statement on my own, and I have never contacted any of the carriers about this. But I believe that if the U.S. Government is going to have the responsibility of enforcing the national transportation policy, that they should apply the same rules to themselves, and I see no reason why the Federal Government should receive rates far below what the general public is paying and be in a position to get carriers to bid against each other to get these rates even lower.

If there is such a bill before Congress, I wholeheartedly support it, and I hope that something will be done to clear up this particular point.

Mr. GRINSTEIN. The bill is S. 1145 to repeal section 22, except in the case of national emergency.

Mr. CHAPADOS. On another subject I would urge that if any legislation relative to unregulated freight forwarders in the movement of household goods comes before Congress, that every effort be made to place these particular carriers under regulation also. Once more, I believe that carriers that are unregulated and are permitted to compete with regulated carriers is a poor thing and that certainly if they are going to do business they should meet the same conditions as anyone else.

Mr. GRINSTEIN. That is S. 2560.

Mr. CHAPADOS. That is all that I have to say, Senator Bartlett. Mr. GRINSTEIN. In looking toward an overall transportation policy for the State of Alaska, would the Alaska Carriers Association look

favorably upon the idea that it is becoming increasingly more talked about, and that is, placing all modes-water, between Seattle and Alaska, for example; highway in Alaska and to Alaska; and the railroad-under the economic regulation of the ICC?

Mr. CHAPADOS. Would we favor that?

Mr. GRINSTEIN. Yes.

Mr. CHAPADOS. I am sure that that would be desirable and would be looked upon with favor by the Carriers Association; it would appear to me that the simpler we can make the approach that we take, the better off we will be in the long run, and you will receive better enforcement and probably much earlier action perhaps than any matter that might come before you by having just one group.

Certainly, the Interstate Commerce Commission is capable of doing this. They have this responsibility as I understand it in the United States between ports and inland waters. I see no reason why this shouldn't exist in Alaska. I think it would be beneficial.

Senator BARTLETT. Mr. Chapados, you referred to truck operations being conducted by the Alaska Railroad. How extensive are these?

Mr. CHAPADOS. I am in no position to give you any specific information, Senator. However, they have in recent years operated fleets of delivery trucks in Fairbanks and Anchorage areas, and I believe enter into participating agreements with Alaska carriers to move to points beyond perhaps the recognized delivery areas in the various localities. But they do have quite a large fleet of trucks and they are in competition with regulated carriers in that sense.

Senator BARTLETT. Chiefly within municipal boundaries?

Mr. CHAPADOS. To be safe I would say that is true, or within certain areas defined within their tariffs as free delivery zones. As a rule in the Fairbanks area they don't extend beyond what we consider the normal delivery areas.

Senator BAR LETT. It seems to me that this subcommittee was told in 1959, while conducting hearings here and elsewhere in Alaska, that the trucking operations extended out from Fairbanks as far south as Delta.

Mr. CHAPADOS. In their tariffs as I recall there is information indicating that they can provide that service. But I am sure that it is a substituted service or with motor carriers who are presently under regulation in the State.

Senator BARTLETT. Returning to the proposal to impose ICC economic regulation over the Alaska Railroad, do you believe it is possible to have a rounded transportation policy for Alaska without doing this?

Mr. CHAPADOS. No, sir.

Senator BARTLETT. I think it is a matter of gratification that the management of the Alaska Railroad is not opposing this legislation, that it is agreeable to the general principle. Naturally I can't speak for the management and I don't know whether that management agrees with all the particulars of the bill before us or not. But I think it is a great advance that the railroad and the Department of the Interior is not only acquiescing in the proposition but willing to make its contribution to enactment. It represents a right-about-face from the original situation and I think we are going to be able to

come up with something. It probably won't be satisfactory altogether to the carriers or to the railroad. Legislation is generally a matter of compromise.

Of course, the railroad has its problems. For example, right now there is under consideration by the Department of Defense a proposal to substitute natural gas for coal at Elmendorf and Fort Richardson. If this is done, one of the economic effects would be to deny the railroad something on the order of $628,000 annually in gross revenue which it now obtains from transporting coal from the Matanuska Valley to the military installations.

In any case the Interior Department is not fighting the bill.

Mr. Chapados, do you know how it is that the Alaska Carriers Association came to the conclusion that instead of advocating the joint board proposal it would be better to urge single regulatory control through the ICC over both water and land carriers? What brought about the change in attitude?

Mr. CHAPADOS. Basically I am sure that the carriers always did want a situation whereby the Interstate Commerce Commission would have control of the water carrier movement, and that recognizing several years ago that considerable opposition existed, and feeling that perhaps any measure that would bring about some measure of control that would permit the filing of joint tariffs, they supported what appeared at that time to be the best approach to this problem, and that was the bill which you introduced in the 86th Congress, I believe, and then reintroduced in this last Congress.

As I have already stated, they had supported this approach. I have no specific information, but it is my understanding that there has been a considerable change in thinking on the part of persons or companies that may have at one time opposed the approach of having a single agency.

Senator BARTLETT. What do you mean when you say "companies"? Mr. CHAPADOS. I have been under the understanding that many of the water carriers, for instance, were in opposition to control by the Interstate Commerce Commission. But now that that is my understanding that has occurred-hearsay-this is not necessarily true. Certainly the carriers, recognizing and desiring all along that we have a single agency control, and certainly in favor of the Interstate Commerce Commission being the regulator agency, they have reversed their position now and would support an approach that would provide for regulation by the Interstate Commerce Commission.

Senator BARTLETT. This hasn't been publicly stated by any of the water carriers concerned, has it?

Mr. CHAPADOS. No, sir, not that I know. In speaking and talking with people in the industry, I have come to that conclusion. I hear no strong opposition to the introduction of S. 1839 except, of course, the carriers association feels it is not quite a strong enough bill at this point and that it should be amended to provide certain features that have already been gone into.

The bill, S. 1725, was supported by the carriers and the carriers association appreciates and recognizes the work that went into the development of this particular bill and the efforts that have been made, and is in no way a discredit to those supporting the bill, or to your efforts whatsoever whenever they change their approach. It is just a matter of a new look at things. I think it goes back to the remark

you made just a few minutes ago concerning the Alaska Railroad and their attitude toward economic regulation by the Interstate Commerce Commission. There is a general change taking place on this question of transportation in Alaska, and we are beginning to get together, we are going toward a point perhaps where we can all sit down around a table and solve these problems amicably without a lot of difficulty.

Senator BARTLETT. It does seem we are at an impasse here, perhaps a double one. As I mentioned earlier, twice the Senate Commerce Committee has reported out, and twice the Senate has passed the joint board bill. On each occasion the House Committee on Interstate and Foreign Commerce has shown less than notable enthusiasm. In fact, it has shown no enthusiasm at all. And failure to hear the bill even on the House side gives at least a clue that the Senate may continue to pass this bill time after time without any action in the House. So we go through this exercise annually without any benefits to anyone.

For my own part, I am inclined to favor ICC control over all of these elements of transportation. In fact, that was my position and a very strong position when the statehood bill was under consideration. You may recall, Mr. Chapados, that at that time the carriers serving Hawaii were adamant in their position that Federal Maritime Board control must be maintained. And so far as Hawaii was concerned in the Hawaii statehood bill there was no considerable argument about that. My recollection is that the Alaska carriers favored the Federal Maritime Board but didn't take nearly so strong a position.

This came to issue in the committee and I sought to have the ICC placed in control. Their vote held in committee, and my proposition was rejected.

Subsequently I renewed it, and it was accepted. It was just about that time, Mr. Chaffee, that the ICC ruled against Alaska in the socalled Rail Export case. My reaction then was a plague on both your houses. When the Federal Maritime Board people renewed their contention within the committee and called up that amendment again I did not oppose it.

It seems to me, as time goes on, that it becomes clearer and clearer that for orderly regulation, for proper regulation, we are probably going to gain by placing the ICC in a position of supervision. However, after saying that I must add, and you indicated by your remarks that you know something about this, that we had some very stormy sessions here some years ago before the Commerce Committee when the whole subject of ICC jurisdiction over waterborne commerce was explored.

Industry came in, and labor came in, and there was hollering, shouting, roaring, and screaming, and the net of the testimony, and all of the testimony, was that the ICC wasn't concerned with water carriers, that they didn't care about water transportation, and that they were a railroad-oriented board. In proof, witnesses disclosed to the committee that after the ICC had taken control, I believe in 1940, the then prosperous water industry, intercoastal and coast wise, consisting of a very large fleet, had shrunk to almost nothing. This was proof that the ICC should be restricted rather than expanded in its activities relating to maritime transportation.

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