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I don't know how far this can go. But certainly it is not right for the privately owned, privately operated motor common carriers, air carriers, water carriers, you name it, to pay taxes, city Federal, State, and to contend with and compete with a tax-free federally owned transportation agency, and it is not any more fair that they should be freed of applying these other increments.
Senator BARTLETT. Have you made an estimate as to the percentage increase in the aggregate which would be involved if your suggestions took effect?
Mr. SANDERS. Senator, I couldn't give it to you factually. I will say that I thought about it much, and for a long period. It would probably amount to 12 or 15 percent. But that is only my personal opinion, not based on too much fact.
Senator BARTLETT. Are the rates of motor carriers between here and Seward, for example, and the rates of the Alaska Railroad between the same points now competitive?
Mr. SANDERS. I would have to compare commodity by commodity and one weight amount with another to give you a sensible answer. I will say that on certain commodities; yes. On others, nobody could handle freight as cheaply as the railroad is charging for its handling today. I defy them or anybody else to handle freight for the rates they are charging.
Senator BARTLETT. The motor carriers can't be charging much more between these two points, or they wouldn't get any business; is that right?
Mr. SANDERS. That is correct, with the exception that the services given by motor carriers have a greater value on many movements and on many commodities, because of their greater flexibility, their ability to pick up promptly, to move straight through and to make immediate delivery.
Also, there are many instances in which the motor carriers pick up at origin and deliver at destination occurring at points far removed from the rail yards. Motor carriers' charges include, without additional charge, that pick-up and that delivery. If the same shipment would move by rail, it would involve, in many instances, a drayage charge to the railroad at origin and a drayage charge away from the railroad at destination to bring about complete movement.
But to answer you more specifically, there are many commodity movements between Seward and Anchorage on which the line haul effect is highly competitive without throwing into being this drayage effect.
We are, with the exception of one or two of our member carriers, completely isolated from participation in many traffic movements by the fact that no through rates exist; that the bulk of our carriers can participate in and share in the traffic through the participation therein. They are forced to apply to the total through movement the combination or aggregate of the local rates plus the dock charges. Senator BARTLETT. Assuming, as you said was the case, that at least some of the rates between here and Seward-Seward and here, whichever-charged by the motor carriers are competitive with those of the Alaska Railroad, would you say in those cases this is a deficit operation on the part of the motor carriers?
Mr. SANDERS. On the part of the motor carriers?
Mr. SANDERS. In some cases it definitely is; in others, no. The motor carriers have sliced the pie pretty thin in order to obtain some bulk tonnage to keep equipment moving, thinking that there will be enough profitable business to add to that and come out with a lessthan-desirable net revenue. If they get too much of the depressedrate tonnage, then that picture will not materialize.
Senator BARTLETT. If these increments which you enumerated were to be applied to the Alaska Railroad, and if as a consequence the railroad rate were to be upped from 12 to 15 percent, as you said might be the case, is it not natural to assume that the motor carriers' rates would rise accordingly?
Mr. SANDERS. Senator, they would rise only to the extent that they would need to rise.
Beginning in January of this year the motor carriers have had a standard rate committee composed of eight members working an average, until the last 6 weeks, twice a week, and sometimes as much as 3 solid straight days in a row, trying to determine exactly what they needed in rates per 100 pounds on given amounts of given commodities between given points. They have attempted to ascertain their exact operating cost and to reflect that cost offset need in their rates. They have been unable to do so.
There are many rates that we can't possibly meet, even figured on the basis of our own cost needs.
Senator BARTLETT. This troubles me, Mr. Sanders. If the Alaska Railroad were obliged to fix its rate structure according to these additional factors, not now taken into account, and as a consequence had to raise rates 15 percent, don't you think there would be a very great public outcry, and if it were said that this had been done primarily so that a free enterprise system of transportation could be made more competitive, competitive vis-a-vis the Alaska Railroad, that the consuming public would revert to the purposes for which the Alaska Railroad was founded and would cite the organic act in an effort to demonstrate that the railroad isn't here to make business, that the railroad is not here to operate as a privately owned enterprise, but that the railroad is chiefly here or was placed here chiefly to develop the country, and now, of course, it has the additional military requirements imposed upon it? I should like your comments upon those points.
Mr. SANDERS. In the beginning, I believe, the Alaska Railroad was placed here for developmental purposes, and rightly so. It still serves the function in that respect. But we are emerging from, and have long ago begun the emergence from the condition that caused the Federal Government to place the Alaska Railroad here in the first place.
Private enterprise is the only way of life that can succeed.
If there isn't a phasing out of competitive effect, not discontinuance of physical operations but a phasing out of the competitive effect, then the beginning of effective exercise of private enterprise can't come about. I don't know where the answer is, but there must be a lessening of governmental transportation competition with privately owned competition in some satisfactory manner. I realize the far-reaching effects of what I am saying, but a wise and sensible answer must be found. The present situation is intolerable and can't long be left to continue.
If it is left to continue, then the decision to leave it to continue must take into consideration the effects. We must say to ourselves that we don't want, in the State of Alaska, development of private enterprise. It is that simple.
Senator BARTLETT. Mr. Sanders, what if, in the opinion of the management of the Alaska Railroad, and in your opinion, the Congress became contrary, stubborn, bullheaded, and arbitrary and refused to accept the suggestions made this morning by Mr. Smith for amendments to S. 2413, and your suggestions, and passed the bill just in the form it is now printed, would you say that would be desirable as compared with no regulation at all by the Interstate Commerce Commission?
Mr. SANDERS. I would definitely say yes, Senator. A bone is better than nothing. We shouldn't try less than our maximum to get something that is an answer.
To talk a little further on that question, we would obtain certain advantages from the passage of the act as written. The railroad would be permitted to let our carrier members, for instance, publish through rates in connection with themselves. They could join, if the water carriers are under another act placed under the ICC, they could join in through rates between other States and here. Many advantages would spring from it. I would consider that a weak effort to solve the problem that exists in large measure.
Senator BARTLETT. Mr. Grinstein, do you have any questions to put to Mr. Sanders on this bill?
Mr. GRINSTEIN. The amendment that you would like made to S. 2413 would add a certain weighting factor to the Interstate Commerce Commission's cost computations in a competitive rate proceeding; is that correct?
Mr. SANDERS. Yes,
Mr. GRINSTEIN. The primary addition would be certain factors that ordinarily privately owned railroads pay, but the Government railroad, the Alaska Railroad, does not pay?
Mr. SANDERS. Right.
Mr. GRINSTEIN. In its rate proceeding the Interstate Commerce Commission testified at some length before the committee in the last Congress that they will let rates go above out-of-pocket costs but below fully distributed costs. Are you familiar with that?
Mr. SANDERS. I read the report. I believe you refer to the report to Senator Magnuson by Chairman Hutchinson, who is also the chairman of the Committee on Legislation of the Interstate Commerce Commission.
Mr. GRINSTEIN. That is correct.
Mr. SANDERS. I think in that report, the stand taken by the ICC, as expressed in that letter dated September 25th, is completely inadequate. It is a compromise measure. It, to a certain extent, shows a lack of willingness to be forthright in speaking what must be their convictions, and I think it should be viewed by the Congress as just that, and to seek the basic cause for correction that we have here a need for, and to enact a law that will bring that about.
Mr. GRINSTEIN. If we could assume that the situation will not change in the immediate future, would it still be the position of your association that you think it would improve competition in Alaska
and improve the transportation system in Alaska to have the Alaska Railroad subject to ICC regulation?
Mr. SANDERS. Definitely. Even in the watered-down versions that have been submitted to this moment.
Mr. GRINSTEIN. I have no further questions, Mr. Chairman. (Whereupon, at 4:50 p.m., the committee was recessed.)
Senator BARTLETT. Do you desire to make a statement in reference to S. 1839, which is identical with the two House bills?
Mr. SANDERS. Yes, and then I would like to say something about S. 1725.
With relation to S. 1839 and the companion House bills, H.R. 7297 and H.R. 7343, which are bills to place the regulatory control of through routes and joint rates under the jurisdiction of the Interstate Commerce Commission, I would like to say that there exists today no uniform regulatory control of common carriage continuing throughout the route of movement used to transport goods and property between points in the States of the Union other than Alaska on the one hand and, on the other, points in Alaska when such routes involve carriage, for a portion of the route, over water via water carriers operating in the coast wise traffic lanes.
The greatest amount of tonnage moving to and from points in Alaska when from or to points in the other States of the Union moves via water carrier over a large portion of the routes.
There is no legally permissible way to publish and file single factor joint through rates and routes that include the water carriers' and motor carriers' joint handling of such through shipments.
The Federal Maritime Commission regulates the water carriers in their handling of traffic moving in the Alaskan coastwise trade and the Interstate Commerce Commission regulates the motor carriers handling interstate shipments moving on land in Alaska. There is no way available to the carriers, at this time, to publish through rates over the total routes.
In the original States of the Union, before Alaska and Hawaii were admitted, coastwise traffic by water is, and has been for a long time, regulated by the ICC.
Water carriers, operating between Alaska on the one hand and ports in the other States of the Union-other than Hawaii-need the protection commonly granted common carriers via other modes of travel, i.e., certificated operating rights, in order that a satisfactory level of stability can be obtained that would permit the water carrier owners to make a commitment of sufficient operating capital, number and proper type of vessels as well as supporting facilities and personnel to perform the degree of service that the public welfare demands.
The public interest demands that the present publications of through rates and joint routes be under the regulatory control of a single regulatory body due to their continuous uninterrupted routing via predetermined participant carriers-water and motor or water and rail or water-rail-motor. Since it is true that the Interstate Commerce Commission exercises regulatory control in all other geographical areas of the Union, other than to or from Alaska, it follows that it, the Interstate Commerce Commission, should exercise such control also of the traffic via water carriers to or from ports in Alaska and/or thence via motor common carriers to or from the inland points and places in
Alaska. Freight tariffs containing such joint single factor rates (and routes) should be filed with and subject to the regulatory control of the Interstate Commerce Commission.
The Alaska Statehood Act, section 27(a), gives to the Federal Maritime Board the regulatory control of water carrier rates and routes when in connection with traffic moving in coastwise movements to or from Alaska but does not provide for through movement to or from inland points in Alaska served only by land carriers. This action was wrongful in that it prevents the people of Alaska from availing themselves of the benefits of single factor through rates and routes.
If section 27(b) of the Alaska Statehood Act were to be changed to provide that regulatory control of coastwise traffic would be exercised by the Interstate Commerce Commission, the result would be that
(a) Direct (local) coastwise traffic handled by water carriers operating in such coastwise movements to and/or from Alaska would be required to publish and file the necessary tariffs with the Interstate Commerce Commission;
(b) Such water carriers would be placed under part 3 of the Interstate Commerce Act and joint through rates and routes involving land and Alaskan River carriers would be permissible under part 2 of the Interstate Commerce Act;
(c) Regulatory control under parts 2 and 3 of the Interstate Commerce Act would place both common and contract carriage by water under regulatory control of the Interstate Commerce Commission;
(d) Regulatory control of single line and joint carriage by water and/or by water and land carriers would provide protection of the public interest and safeguard the economic welfare of the carriers by controlling both the maximum and minimum rate and charge levels. At present only the maximum rate and charge levels, of water carriers subject to the regulatory control of the Federal Maritime Commission, is controlled. Such inadequate control could lead to an unstable, inadequate carrier capability and this would not be in the public interest, which requires fullest capability, and would certainly not be in the interest of the carriers offering service to the public. Certain water carriers formerly serving Alaska have already been forced to abandon service to Alaska on account of these disadvantageous conditions. It is conceivable that present water carriers will, without the above suggested protective action, follow this course and have to abandon service to and from Alaska.
Water carriers operating in the coast wise traffic between ports in the continental United States-other than Alaska-on the one hand and ports in Alaska on the other hand must be granted operating rights and those operating rights must be granted on the same sound thinking that led the Congress to establish "grandfather" provisions in the act setting forth conditions under which such operating rights were to be fairly granted to those having provided service to the public in preceding times.
Summed up, it is strongly recommended that
(1) Through routes and rates covering movement of persons and property between points in the United States-other than Alaska and Hawaii on the one hand and Alaska on the other hand be placed under the regulatory control of the Interstate Commerce Commission when portions of the routes are over water.