interwoven nature of railroad services and facilities throughout areas, territories and regions of varying geographical conditions, population density and industrial development; the magnitude of the service, involving thousands of passenger trains daily; the unique nature of commutation service; the transportation revolution that has taken place; the various governmental levels-Federal, State and local— subjecting the service and facilities to regulation, taxation and public policy-all these play almost inseparable parts in creating the shape and scope of the problem.

The agenda adopted by the Interstate Commerce Commission for its investigation indicates that all those factors will be fully and carefully explored, considered and weighed. It is the intention of the railroads to cooperate to the fullest extent in enabling the Commission to so conduct its investigation.

Immediately upon institution of the investigation by the Commission, the railroads throughout the United States set up a complete organization of cost and accounting, traffic and legal personnel to handle and participate in the investigation and with full authority upon any individual railroad, association, or bureau for such assistance as might be needed. This organization is preparing for submission to the Interstate Commerce Commission not only such showings as the railroads are called upon to make, but also to develop and submit any and all information and data which in its view may be helpful to an intelligent understanding of the problem and which might be developed within reasonable bounds of expense and time. Numerous meetings and conferences have been held and each subject on the Commission's agenda has been specifically assigned for development and handling. The work is progressing at a satisfactory pace and four of the items on the Commission's agenda have been set for initial hearing beginning on June 18, 1957.

We believe that as a result of this fact-finding investigation on the part of the Commission much misunderstanding and confusion will be wiped out, a clearer understanding of the problem and the extent of the passenger train service deficit will be had and recommendations may be forthcoming that would lead to alleviation or solution of the problem.

This, then, is the attitude and spirit with which we have responded and are participating in the Commission's investigation. We sincerely believe that the importance, magnitude and complexity of the problem requires careful and deliberate analysis and handling and the wholehearted cooperation of all interested parties if the desired public good is to come from the Commission's investigation.

We do not at this time have any definitive or concrete suggestions to submit to your committee for the substantial reduction or elimination of the passenger train service deficit. We are hopeful that, as a result of the Interstate Commerce Commission's investigation, not only the railroads but the Commission itself and other interested parties may reach conclusions that will result in such suggestions. We are, therefore, awaiting the results of the Commission's investigation before formulating a definite position with respect to the many and complicated aspects of the passenger deficit problem.

That completes my statement.

Senator LAUSCHE. Senator Purtell.

Senator PURTELL. Well, I am glad to know when we had information before that the railroads were cooperating, you recognize it as being one of the very very perplexing problems confronting us and confronting the railroads and confronting the Interstate Commerce Commission. I am very happy to know that they are getting this cooperation.

Senator LAUSCHE. Doesn't your association have any opinion to express about the proposed bill that would require the Federal Government to pay equal rates with those paid by commercial shippers? Mr. MOLONEY. I think there will be other spokesmen following me to discuss the legislative proposals pending before the committee. Senator LAUSCHE. Good enough.

That is all. You may be excused.
Mr. Hood.

STATEMENT OF J. M. HOOD, PRESIDENT, THE AMERICAN SHORT LINE RAILROAD ASSOCIATION

Mr. HOOD. Mr. Chairman, my name is J. M. Hood. I am president of the American Short Line Railroad Association.

My statement is very brief, but I will summarize it further, in the interest of saving the time of the committee and avoiding cumulative and repetitious testimony.

The method by which the 283 common carrier short-line railroads arrived at their position with respect to three bills on which I will testify is described in the statement.

Very briefly, the members of the Short Line Association favor the enactment of S. 377 to bring about finality of section 22 rates upon which traffic is moved.

They also favor that part of S. 939 looking to the same purpose. They take no position with respect to section 1 of S. 939, which would repeal the section 22 provisions of the Interstate Commerce

Act.

The association favors the enactment of S. 937, the bill to amend section 4 of the act, so as to permit the publication without prior approval of the Commission of a type of fourth section circuitous route rates merely meeting rates already in effect via other routes. That is the essence of the statement.

I see no reason for repeating any further part of it.

Senator LAUSCHE. Senator Purtell.

Senator PURTELL. Just one question.

In your remarks on S. 377, having to do with section 22, in the lower part of page 2, Mr. Hood, you say—

and results in the movement of persons or property at a rate lower than that published and available to the general public.

Do you feel that they are not available by negotiation?

Again, the question arises, the same quantity, the same commodity and the same point of origin and the same destination.

You say they are not available to the general public by negotiation? Mr. HOOD. Senator Purtell, I have been in the railroad business about 40 years, and it has been my experience-not too direct, because I have always been an operating man and an administrative man and never in the traffic department-that the Government continu

ously on many commodities enjoys section 22 rates below those made available either voluntarily or by Commission order to the general public.

Else, whence would come these estimates of additional amounts to be paid? If they are not getting any benefits, then they would pay no additional amounts.

Senator PURTELL. Well, I am glad to get your statement on this as to the availability to the general public because

Mr. HOOD. Right on that line, Senator, they talk about additional time necessary to achieve these commodity or classification exception rates which would provide rates the Government would consider more reasonable. It is true that the rate-making bases are somewhat cumbersome. It is necessarily so. The Congress itself has protected all of the areas of the country and the competitive shippers so they may know what is going on in the shops of their competitors.

However, the Government always has the opportunity to move its shipments today on the prevailing rate and then seeking a retroactive adjustment, which is not difficult. In theory at least, and I am quite sure in practice, they would achieve ultimately the same rate they would have gotten through the section 22 quotation.

Senator PURTELL. They would get the same rates ultimately as they get through the application of section 22.

Mr. HOOD. That I am certain is correct.

Senator PURTELL. I have no other questions.

Senator LAUSCHE. There is, then, disagreement between yourself and what others have testified here today?

Mr. HOOD. Well, there is definitely disagreement between me and what Mr. Smith testified to for the Department of Defense.

Senator PURTELL. I am beginning to suspect there might be. [Laughter.]

Senator LAUSCHE. Now, do I have your testimony properly summarized, that you favor S. 377 in so far as it makes final the rates which have been agreed upon?

Mr. HOOD. If I understand the bill correctly, Senator, that is all the bill purports to do.

Senator LAUSCHE. Yes.

Mr. Hood. It is the other bill, S. 939, which in addition to providing for finality, actually provides for repeal in other than wartime emergencies.

Senator LAUSCHE. Yes. You take no position regarding section 1 of 939?

Mr. HOOD. That is correct. Our membership is divided and weSenator LAUSCHE. That is, that section would deprive the Government of its right to negotiate under section 22?

Mr. HOOD. Except in times of emergency or war.

Senator LAUSCHE. Now, would you mind telling me what were some of the reasons which prompted your association to take a neu tral position on that?

Mr. HOOD. The membership divides about 50 percent in favor of repeal. If I were stating my personal opinion, I would agree with that group.

The other 50 percent feel that until legislation putting the rail roads in a better competitive position with respect to contract car riers by water, contract carriers by highway and exempt carriers

has been achieved, they would tend to lose a vast volume of additional business which they now are able to get through section 22 rates which can be made available immediately.

Senator LAUSCHE. To the Government?

Mr. HOOD. To the Government.

Senator LAUSCHE. Would you say you are about equally divided on this proposition?

Mr. HOOD. Approximately 50 percent of the 283 lines are on each

side.

Senator LAUSCHE. I realize I am just summarizing, but I want to do so.

Those who are against the repeal of section 22 use as their reason that until something is done to strengthen the fiscal position of the railroads, this section should not be repealed because if it is, it will further jeopardize the position of the railroads?

Mr. Hoop. That is correct, except that I would state the fiscal position slightly differently and put it this way:

The opportunity to enjoy a haul on the traffic, specifically, if the Government today offers a movement, we will say, for example, that is import ore from a point heretofore not used and a water contract carrier can come in and make a contract and move that ore inland, however circuitous the waterway may be

Senator LAUSCHE. Yes.

Mr. HOOD. It can make a firm rate as of now, and the Government may accept it and start discharging cargo from the ocean vessel into the barge or other vessel which is going to move the ore inland.

The carrier, however, the rail carrier, never having been confronted with an ore shipment from that particular port before, to the inland destinations, is unable to process such a rate in any other manner excepting through section 22.

Now, you can apply that same thing to contract motor carriers. You can apply it to a vast number of exempt commodities and exempt carriers. That is their sole reason. Once those difficulties have been removed, there will be no disagreement among the short line rail carriers as to the repeal of section 22.

Senator PURTELL. It is a question of competition rather than your fiscal situation?

Mr. HOOD. That is correct, opportunity to enjoy the Government traffic.

Senator LAUSCHE. All right.

Thank you very much.

Mr. Hood.

(The complete statement of Mr. Hood follows:)

Mr. HOOD. Mr. Chairman and gentlemen of the committee, my name is J. M. Hood. I am president of the American Short Line Railroad Association, 2000 Massachusetts Avenue NW., Washington 6, D. C.

The association is a nonprofit organization of 283 common carriers by rail, which are in general the smaller carriers. During 1955, in the aggregate, member lines operated 16,550 miles of first main track and employed 60,638 persons. They had invested in their properties at the end of 1955 in excess of $1 billion. During that year they paid taxes approximating $71 million. Representatives of member lines held their 43d annual meeting in Denver, Colo., during September 1956, and on September 26 adopted legislative policies. In furtherance of these policies and by instruction of the member lines, I appear here today urging the enactment of legislation such as is proposed for

the amendment of the 4th and 22d sections of the Interstate Commerce Act. The exact proposals of these bills are to some extent at variance with the desires of short line railroads members of the association, which will be pointed out herein.

S. 377

Stated briefly, the objective of S. 377 is to prevent subsequent litigation by the Government in connection with charges made for the movement of persons and property under section 22 rates.

The members of the Short Line Association have for a long time believed that when a section 22 quotation is tendered by a rail carrier, accepted by a representative of the Government, and results in the movement of persons or property at a rate lower than that published and available to the general public, rail carriers should not subsequently be called upon to defend a proceeding wherein reparations are claimed on the basis that the rate applied to the movement of the traffic was in excess of reasonableness.

The representatives of the Government are always at liberty to reject any section 22 quotation by any form of carrier and to move the traffic at the published rate, relying upon the belief of those representatives that the resulting charge will be unreasonable and that reparations should and will be awarded. Members of the American Short Line Railroad Association are in favor of the enactment of S. 377.

S. 937

The change in section 4 of the Interstate Commerce Act, as proposed in the bill, is procedural. It will have no substantial effect with respect to the carrying out of the provisions of the present law embodying long and short haul limitations.

The sole result would be a considerable reduction in the amount of detailed work necessary by rail carriers and the resultant load upon the Interstate Commerce Commission in the processing of section 4 applications.

The rates that could be published without a section 4 application, should S. 937 become law, would still be subject to suspension and to test as to their reasonableness.

The members of this association believe that section 4 should be repealed in its entirety. Obviously, the enactment of S. 937 would be in the interest of rail carriers and shippers and receivers of freight, as well as of the Government, through the reduction in administrative costs that would follow, and we believe the bill should receive favorable consideration by this subcommittee.

S. 939

To the extent outlined in my discussion of S. 377, the members of the Short Line Association are in favor of the enactment of S. 939. They take no position with reference to the proposed new paragraph (a) of section 22 of S. 939, which would confine provisions of section 22, insofar as it concerns the traffic of the United States Government, to periods of war or national emergency. There is a substantial difference of opinion among them as to the desirability of this change.

The members are, however, agreed, as I stated earlier, that there should be finality as to charges made under section 22, and, further, that such charges should be published. Accordingly, the members of the Short Line Association urge the enactment of S. 939 if amended by eliminating the proposal in section (a), and take no position with respect to the bill if section (a) is included. Senator LAUSCHE. Mr. Rothschild.

STATEMENT OF LOUIS S. ROTHSCHILD, UNDER SECRETARY FOR TRANSPORTATION, DEPARTMENT OF COMMERCE

Mr. ROTHSCHILD. Mr. Chairman, my name is Louis S. Rothschild. I am the Under Secretary of Commerce for Transportation. With me this morning is Mr. Margolin of my staff and Mr. Krebs of our General Counsel's staff.