No. W-103 (SUB-No. 1)1

CALLANAN ROAD IMPROVEMENT COMPANY

EXTENSION-TOWAGE

Submitted February 15, 1952. Decided May 9, 1952

1. Application for a certificate of public convenience and necessity authorizing operation as a common carrier by towing vessels in the performance of general towage between points in the New York Harbor area and points along the Hudson River below and including Waterford, N. Y., denied. 2. Application of The Callanan Road Improvement Company for authority to purchase a portion of the water-carrier operating rights of L. B. Shaw, Inc., denied.

3. Supplemental application of Keith M. Callanan and others to acquire control of said operating rights, through the proposed purchase, dismissed. James E. Wilson and Robert G. Howell for applicants.

R. Granville Curry, Frederick M. Dolan, Paul L. Clugston, Reginald G. Narelle, Gerard M. McAllister, and Howard B. Harte for protestants and interveners in opposition.

REPORT OF THE COMMISSION

DIVISION 4, COMMISSIONERS MAHAFFIE, JOHNSON, AND MITCHELL BY DIVISION 4:

Exceptions to the report proposed by the examiners were filed by applicants, and one protestant replied thereto. Exceptions and requested findings not specifically discussed in this report nor reflected in our findings or conclusions have been considered and found not justified.

By application No. W-103 (Sub-No. 1), filed January 5, 1951, under section 309 (c) of the Interstate Commerce Act, The Callanan Road Improvement Company, a corporation, of South Bethlehem, N. Y., hereinafter called Callanan, seeks a revised certificate of public convenience and necessity authorizing extension of its operation as a common carrier by water to include the operation of towing vessels in the performance of general towage between points in the New York Harbor area and points along the Hudson River below and including Waterford, N. Y.

1 This report embraces also Finance Docket No. 17202, Callanan Road Improvement Company Purchase, Etc.

By another application, Finance Docket No. 17202, filed January 5, 1951, as amended, Callanan and L. B. Shaw, Inc., referred to hereinafter as Shaw, applied jointly for authority to the former under section 5(2) of the act to purchase that portion of the amended certificate issued March 18, 1944, in No. W-493, to Shaw, which authorizes operation as a common carrier by towing vessels in the performance of general towage, and by non-self-propelled vessels with the use of separate towing vessels in the transportation of commodities generally, between points on the Hudson River (not including points on the New York State Canal system), but including points in the New York Harbor area. Shaw is authorized by that certificate to engage in such described operations between ports and points along the Atlantic coast and tributary waterways (not including the New York State Canal system) from Boston, Mass., to Pamlico Sound and the Neuse River, N. C., inclusive. By supplemental application, filed March 12, 1951, Keith M. Callanan and others, described as the controlling stockholders of Callanan, seek authority under section 5(2) of the act to acquire control through The Callanan Road Improvement Company of the operating rights sought to be acquired from Shaw.

No representations have been made by any State authority. A hearing was held at which the several applications were heard on a consolidated record. Cornell Steamboat Company, a certificated common carrier by towing vessels, hereinafter referred to as Cornell; Moran Towing & Transportation Co., Inc.; McAllister Lighterage Line, Inc.; Card Towing Line, Inc.; and Canal Lakes Towing and Northeastern Inland Waterways Association oppose granting the applications. Of these protestants, only Cornell submitted evidence at the hearing.

Callanan was authorized by order of August 18, 1947, in Finance Docket No. 15669, to acquire a portion of the certificate of public convenience and necessity issued in No. W-103 to Joseph R. Hutton, authorizing operation as a common carrier, in interstate or foreign commerce, by self-propelled vessels and by non-self-propelled vessels with the use of separate towing vessels in the transportation of commodities generally between the same points it here seeks authority to serve in the performance of general towage. An amended certificate and order was issued February 5, 1948, to Callanan authorizing that operation. If the approval sought in F. D. No. 17202 is granted, the Hudson River freighting rights of Shaw would be merged with those now held by Callanan.

In 1950, under the rights acquired pursuant to the approval granted in F. D. No. 15669, applicant instituted service on the Hudson River. Upon being notified by the Commission's Bureau of Water Carriers

2 Brayton R. Babcock, Jr., Harry E. Battin, Jr., Hannah C. Callanan, J. R. Callanan Marian Callanan, and Edna M. Callanan.

and Freight Forwarders that certain operations under "allowance" provisions of its tariff appeared to constitute towage for which it held no rights and that such unauthorized operations should be discontinued, Callanan petitioned the Commission under date of January 5, 1951, for a clarification and determination of its status as a common carrier on the Hudson River and for clarification of its activities in the publication of tariff allowances. A hearing was held. By its report and order of October 18, 1951, in No. W-103, Hutton Contract Carrier Application, 285 I. C. C. 75, division 4 found Callanan to be engaged in the performance of towage service without appropriate authority. The rates, charges, and allowances made to shippers for the use of their own scows in the performance of towage were found unlawful and required to be cancelled. As indicated, Callanan here seeks authority under which it may operate on the Hudson River in the performance of general towage.

Callanan is engaged in the production of crushed stone, asphaltic concrete, and agricultural limestone, and in the slag business, and general construction business. Because of dissatisfaction with the transportation service afforded by Cornell, Callanan in the summer of 1946 purchased a tugboat which it operated in the transportation of its crushed stone from Rondout Creek, a tributary of the Hudson River south of Kingston, N. Y., to various points on the Hudson River and in New York Harbor. Later, Callanan obtained the Joseph R. Hutton operating rights hereinbefore described. Although holding authority to operate as a common carrier, no goods were freighted under such rights during 1948 and 1949. The company's annual report to the Commission for the year 1949 stated "negotiations under way for work in 1950." Callanan's present vessel property consists of the original tug of approximately 700 horsepower and a tug of about 150 horsepower which was acquired in 1948. Another tug of 805 horsepower was under charter to Callanan for the 1951 season. Callanan owns no scows or barges but charters any that are required.

Callanan's balance sheet as of August 31, 1950, shows current assets of $741,619.77; real estate and equipment et cetera, $620,444.37; deferred assets $15,850.17; other assets $75,000; current liabilities $483,971.20; capital stock $72,105; and earned surplus (before taxes) $896,838.11. Its income statements for the years 1945 through 1949 show net profits of $4,551.03, $33,492.56, $51,335.57, $125,378.55, and $130,156.83, respectively. For the 8 months ended August 31, 1950, the net profit before depreciation, depletion and taxes was $251,197.19. The results of Callanan's water-transportation activities for the year 1950 were: operating revenue $523,726, operating expenses

Before the order became effective Callanan filed a court action to set it aside, whereupon the effective date of the order was postponed to June 21, 1952.

$432,783, net revenue $90,943, water-line tax accruals $45,744, net revenue, less taxes $45,199. Of the 1950 total revenue from waterline operations, common-carrier services in the movement of brick produced $235,402. The balance, $288,324, from all unregulated traffic was from the transportation of crushed stone for its own account and represents the difference between the plant price and the selling price of the stone. Net operating profits after depreciation but before taxes, from water-line operations in prior years were $41,062.64 in 1949; $42,578.46 in 1948; and $38,712.50 in 1947. A net loss of $24,914.59 was sustained in 1946.

Noncarrier operations in 1950 show earned income of $2,363,727, expenses of $2,189,187, net income of $174,610 before provision for income taxes of $87,949, and net income balance of $86,661.

Pursuant to an agreement of August 30, 1950, as amended, Shaw agreed to sell the described portion of its certificate to Callanan for $2,250. One hundred dollars was paid at the time the contract was executed and the balance is to be paid within 60 days from the date of approval of the application. No physical property is included in the transaction.

L. B. Shaw, Inc., was incorporated under the laws of Delaware, on December 1, 1927, since which time it has continued the marine transportation business established about 1820 by the Shaw family. Since about 1940 Shaw has operated two Diesel tugs, one of 300 horsepower and one of 160 horsepower, owned by affiliated companies. A third and larger tug had been operated until taken over by the Government early in 1943. During the same period, since 1940, affiliated interests owned eight coastwise barges ranging from 800 to 1,800 tons' capacity. At present these affiliated interests have five such barges. For the past 6 or 7 years practically all of Shaw's business has been the transportation of silica of soda, in bulk, from Chester, Pa., to Paulsboro, N. J., with occasional towing from Philadelphia to Baltimore. Shaw is interested in selling its rights to operate on the Hudson River because they are seldom used. When one of the barges being towed east along the coast was to be delivered to a point on the Hudson River, Shaw turned it over to another carrier for towage up the river because "While we have the towing rights * the Hudson, we don't think that is a paying proposition." In those instances where Shaw's barges destined to points up the river were delayed at Red Hook Flats because the flotilla tows of Cornell, in which such barges were moved about a dozen times a year, were not ready for movement, Shaw towed them to destination to avoid greater expense of employing Cornell or another towing company for a special tow of the particular barge. Those were the only circumstances under

Below Governors Island in New York Harbor.

up

which Shaw performed towage on the river since the Government took its largest tug, in 1943.

Shaw publishes no rates for transportation via tug and barge as a unit between points on the Hudson River. Its single rate of $145 per tug per day for towage of all vessels (loaded or light) and floating objects, not otherwise specified, between any points on the Atlantic coast (including all tributary waterways except the New York State Canal system), from Boston to Pamlico Sound and the Neuse River, inclusive, has continued in effect without change since May 1944 The president regards this as merely a "paper" rate "because nobody will give us any business." Shaw avers that consistent with such limitations as were placed on it during the war it is holding itself out to fully exercise all of the rights under its certificate; that it is ready, willing, and able and has the financial ability and the equipment to do so; that there has been no abandonment of service; and that it has never refused to perform any transportation service within the scope of its authority.

Fifteen companies manufacture brick at points on the Hudson River and all compete in the New York market. Representatives of three of such manufacturers at Kingston and three at Coeymans, N. Y., approximately 90 miles and 130 miles, respectively, north of New York City, presented testimony to show that the proposed acquisition by Callanan of a portion of Shaw's operating rights would be consistent with the public interest as well as to demonstrate in support of the extension application that the proposed additional service is or will be required by the present or future public convenience and necessity.

From March to December of each year the East Kingston Brick Company and the Brigham Brick Company at Kingston together ship from 45 to 50 million brick, averaging from 90 to 100 bargeloads, in their own or chartered barges to destinations in the New York Harbor area. Cornell moved the barges during the period 1916-1949, inclusive. Throughout that period no other carrier solicited the transportation of their brick, nor did the shippers ask any of the other known towing companies to perform towage service for them. These shippers felt that the stability of Cornell was declining; the schedules were not definite, and they were not assured of reliable service. Generally there were three tows a week in each direction, leaving New York on Monday, Wednesday, and Friday, and south-bound leaving Kingston Tuesday, Thursday, and Saturday. At times there would be second-morning arrivals at New York Harbor destinations but on many occasions arrivals were delayed until the second afternoon or third morning. In recent years these shippers have conferred several times with Cornell's representative urging that the service be improved and recorded their willingness to pay an increased

285 I. C. C.