Under the above plan for towboat operation, a tow unit consisting of a towboat and four barges could make the round trip from the mouth of Big Sandy to the head of navigation on Levisa Fork, distance of 126 miles, round trip 252 miles, at most in 5 days; to the head of navigation on Tug Fork, distance 92 miles, round trip 184 miles, at most in 4 days.

However, present undeveloped coal lands bordering the two forks, located on the banks opposite present railroads, will allow production and loading direct from mine to barges from any point on each fork. These undeveloped coal lands begin about 40 miles from the mouth of the river and extend up to the head of navigation. It is logical to figure that, with completion of the proposed channel improvement, coal mines will be opened and placed in operation for barge loading over the entire 86 miles of undeveloped coal territory on Levisa Fork, located on pools 3, 4, 5, and 6; and the entire additional 52 miles on Tug Fork, located on pools 7, 8, 9, and 10. It is also reasonable to anticipate this development of coal mines because there is no other way at present to get this coal to market.

If and when the channel improvement is completed, and these anticipated coal mines get into production, it is reasonable to say that coal will be loaded and shipped by barge from points all along this total of 138 miles of undeveloped territory bordering the two forks. Granting that this development will follow the channel improvement, it is further logical to figure that the average river mileage haul from the entire coal producing section of the two forks will be a distance of 84 miles; round trip 168 miles, and should be made in not to exceed 3 days.

Applying the above mileage and boat round-trip analysis to determine the amount of tonnage that each towboat could move per year, one gets the following answers:

(1) On the 5-day round-trip operation basis to and from the head of navigation on Levisa Fork, each towboat will deliver to the mouth of the river 300,000 tons per year.

(2) On the 4-day round-trip operation basis to and from the head of navigation on Tug Fork, each towboat will deliver to the mouth of the river 375,000 tons per year.

(3) On the average 3-day round-trip operation basis to and from the entire coal production area, each towboat will deliver to the mouth of the river 500,000 tons per year.

In order to move 15,000,000 tons per year on the operating schedule listed above, the following towboats and barges would be required:

(1) For 5-day round-trip operation from the head of navigation on Levisa Fork, 70 towboats and 320 barges.

(2) For 4-day round-trip operation from the head of navigation of Tug Fork, 60 towboats and 280 barges.

(4) For average 3-day round-trip operation from the entire coal-producing area, 50 towboats and 240 barges.

Under this proposed schedule of towboat operation, it should be perfectly clear to any practical river operating man that the number of tow units that will be required to move a minimum of 15,000,000 tons per year, is not large enough to cause a congestion of traffic on the proposed improved river. The heaviest daily movement would be on the stretch of river in pools 1 and 2, extending from 10 miles up Levisa and Tug Forks to the mouth of the river, a distance of about 40 miles. Pool No. 2 will extend about 10 miles up each fork. In pools 1 and 2 there would be an average movement of one boat every 2.4 hours. Assuming that above the forks the boats would be about evenly divided between the two forks, there would be one boat passing through each pool every 4.8 hours.

It is further perfectly clear from a sound business operating viewpoint that, with completion of the proposed channel improvement, coal production and its loading into barges will become active over the entire stretch of improved waterway. On this basis, there is but one conclusion can result-the average mileage movement will prevail. This gives the average 3-day round-trip basis as the logical one for use to determine what the cost per ton will be for delivery of coal to an Ohio River assembly terminal that can be located at the confluence of the Big Sandy and the Ohio.

In my calculation to determine the delivered cost, I have taken into consideration all cost factors which enter into conservative operational cost figures. I have figured the boat movement at 21⁄2 miles per hour land speed during actual running time for an average round trip, and have allowed 1 hour locking time at each lock. In this way, my delivered cost figure represents the maximum cost per ton.

Under this sound, logical, conservative basis of calculation, it is my firm conviction that coal can be delivered to the mouth of Big Sandy River, if and when the proposed channel improvement is completed, at a maximum cost in round figures of 24 cents per net ton. If, as I have previously stated, the round trip running time should be less than I have set up, the tonnage delivered per tow unit operated will be increased, the cost of boat operation will be the same, and the river transportation cost decreased, resulting in a lower cost per net ton.

It is my further opinion that, if Big Sandy is improved and a permanent channel made available as previously stated, that the 15,000,000 tons annual movement can be made. In fact, because of the natural wider channel conditions which exist between the mouth of the river up to Tug and Levisa Forks, a permanent channel that would carry all the tonnage that the two forks would carry without any serious congestion could be made available. With such a channel established for this lower stretch of the Big Sandy River, there is no doubt on my part but that an annual tonnage movement in excess of 15,000,000 tons can be moved over the Big Sandy, its Levisa and Tug Forks, if the proposed channel improvement is made.

In closing, may I again emphasize that this statement is based upon facts and conclusions arrived at from years of practical experience, and the knowledge gained therefrom. I am convinced that a tonnage movement in excess of the required tonnage to justify the improvement, as set forth in the district engineer's report, can be successfully transported over the proposed improved channel. I am also positive that the per-ton cost for the tonnage moved will not exceed my estimated cost of 24 cents per net ton previously stated herein and, in all probability may be less than 24 cents per net ton. Finally, I wish to again emphasize my previous statement to the effect that the single locking tow units, consisting of a towboat capable of developing 600 delivered horsepower, and four standard 195 by 35 by 11-foot barges, or their equivalent, can be safely and effectively handled upon the proposed improved channel.

Added to these closing conclusions, I respectfully submit to your honorable Board, from the viewpoint of a practical towboat operator, one who has had the benefit of practical boat operation experience on the Big Sandy River, that, from the viewpoint of towboat operation and added thereto the economic benefits that would naturally follow, volume tonnage that could be moved, and for the commercial welfare of the Big Sandy Valley, plus the national benefit that will be accorded therefrom, the proposed channel improvement should be approved and authorized.

Respectfully submitted.

"Capt. THOMAS VAUGHAN.

Mr. GARVEY. The Mississippi Valley is in dire need of lower transportation rates on high-grade bituminous coal, generally referred to by them as being eastern coals for the purpose of not only retaining their present factories and established business but for the expansion of industry in the Mississippi Valley.

Under date of April 15, 1946, all class I railroads joined in a petition filed before the Interstate Commerce Commission asking for authority to increase freight rates and charges and further requested that they be allowed to maintain present passenger fares and charges.

With reference to freight rates on bituminous coal in carloads, the railroads in their petition have set up specific freight-rate increases as follows:

(1) The freight rates on bituminous coal from all mines located on the C. & O. and N. & W. Railways to all destinations located on the Ohio River and the Upper Mississippi River as far north as Burlington, Iowa, are under the proposal submitted to be increased 15 cents per net ton.

(2) The freight rates on bituminous coal to all destinations on the Upper Mississippi River territory from Burlington, Iowa, to Minneapolis and St. Paul, would under the proposal submitted be increased a minimum of 30 cents per net ton.

On lake cargo bituminous coal, rates to lower lake ports will be increased 15 cents per net ton, and rates from United States Lake Superior and west bank Lake Michigan ports will be increased 15 cents per net ton, a total increase of 30 cents per net ton.

With further reference to the increases proposed by the railroads, the Interstate Commerce Commission has been asked to grant permission that these proposed increases in rates and charges be allowed to go into effect on May 15, 1946, upon 1 day's notice in advance of hearing and final disposition of the petition. If this request is granted by the Interstate Commerce Commission, and if, after hearing on the proposed increases has been held, the proposed increased rates should be given final approval by the Interstate Commerce Commission, the serious freight-rate handicap under which coal production in the Big Sandy Valley is now operating, will be substantially increased.

I would like to submit for the consideration of the Board a copy of the petition of railroads for authority to increase freight rates and charges and to maintain present passenger fares and charges. Mr. PETERSON of Georgia. Without objection it will be received. (The document is as follows:)

BEFORE THE INTERSTATE COMMERCE COMMISSION

PETITION OF RAILROADS FOR AUTHORITY TO INCREASE FREIGHT RATES AND CHARGES AND TO MAINTAIN PRESENT PASSENGER FARES AND CHARGES

The railroads listed in Appendix I hereto, hereinafter sometimes referred to as Petitioners, being substantially all the Class I railroads in the United States and some railroads of other classifications, respectfully petition the Commission to institute an investigation into the level of railway rates, fares and charges and to authorize Petitioners (1) to continue in effect, without expiration date, the increase of 10 per cent in basic passenger fares and charges authorized in Ex Parte No. 148; and (2) to increase their freight rates and charges in the amount of 25 percent, with certain exceptions, all as hereinafter set forth with greater particularity in Appendix II hereto, with permission to make such increased rates and charges effective May 15, 1946, upon one day's notice, in advanced of hearing and final disposition of this petition. In support thereof Petitioners respectfully show:

I

The situation of the railroads has now become critical and their need for a substantially higher level of freight rates has become imperative. This is the result of an extraordinary combination of war and postwar conditions with which the railroads are confronted, and more particularly the result of three factors of recent development: (1) the increase in wages of railroad employees of 16 cents per hour determined under the procedures of the Railway Labor Act in April 1946 retroactive to January 1, 1946; (2) large increases, both present and prospective, in the prices of railway materials and supplies; and (3) a sharp decline in volume of railway traffic and an even greater decline in railway

revenue.

Based upon the level of employment in 1945, this latest wage increase would result in an increase in the labor costs of Class I railroads of $707,000,000 per year, including pay-roll taxes.1 It will add approximately $619,000,000 to the labor costs in 1946 on the basis of the volume of employment now anticipated. It is conservatively estimated that, because of price increases already made and in prospect, Class I railroads will be required to pay for materials and supplies (which include fuel) purchased by them in 1946 at least $167,000,000 more than they would have had to pay for the same quantities at 1945 prices.

1 All figures and statistics set forth in this Petition are for Class I railroads.

The volume of freight and passenger traffic is falling continuously, and it is anticipated that the downward rate will accelerate in the months to come. The revenues will be reduced by reason both of the decline in volume and a return to a more nearly normal composition of traffic. It is estimated that the operating revenues of Class I railroads for 1946, on the basis of the present rates, fares and charges, would be approximately $6,800,000,000, or 23.5 percent less than they were in 1945.

The increases in wages and in the prices of materials and supplies thus far referred to are in addition to heavy increases in both items of cost that had already occurred since the beginning of the war. In 1945, the rates of pay for railroad labor were 26.1 percent higher, and the prices of materials and supplies 33.3 percent higher, than those in effect in 1939.

In contrast with the enormous increases in operating costs to which the railroads have been subjected since the beginning of the war, their freight rates and charges are still practically on the prewar level. Their basic passenger fares, while 10 percent higher than those in effect immediately prior to the war, are substantially below the level existing prior to 1935.

This

During the war, railroad freight traffic rose to unprecedented volume. was accompanied by an increase in the proportion of "higher-rated" freight. The increase in passenger traffic was even more marked, and was of much greater significance for another reason. Whereas, for many years prior to 1942 passenger operations had been conducted at a tremendous loss, according to calculations based upon the Commission's formula, during the period 1942-1945 the passenger service, in sharp contrast, yielded very large net railway operating income.

Except for the abnormal increases in both freight and passenger traffic during the war, the railroads would unquestionably have required large increases in rates to enable them to withstand the enormous increases in costs which were in effect in 1945. That is obvious when consideration is given to the effect of such increased costs on the operating results in a year of more normal traffic. In 1941, for example, Class I railroads, operating on the present level of freight rates and with passenger fares as they stood before the 10 percent increase, had a net railway operating income of $998,256,000 and a net income of $499,765,000. Had the 1945 level of wages, prices of materials and supplies and passenger fares been in effect in 1941, the operations otherwise remaining the same, the net railway operating income for that year would have been reduced to $187,000,000 and there would have been a deficit in net income of $209,000,000.

Freight and passenger traffic reached their peaks in 1944. But net railway operating income and net income began to diminish in 1943 on account of rising costs of operation. In the face of increasing traffic through 1944, both net railway operating income and net income moved steadily downward after reaching their peak in 1942. With the cessation of hostilities in 1945 there began to be a decline also in gross revenues which is expected to become more pronounced as the abnormal war conditions disappear, disabilities of highway carriers and other agencies of transportation are removed, and the prewar pattern of railway traffic is resumed.

The year 1945 is one of great significance. In that year traffic not only ceased its upward trend for the first time since the beginning of the war, but began to decline. While for the year as a whole traffic was approximately at the wartime level, during the last half of the year freight traffic showed a marked decline. It was thus in that year that the one factor which had carried the railroads through the war years on practically their prewar level of rates began to fail them.

It was possible for the railroads in the year 1945 to meet the increased expenses then in effect by reason of the abnormal volume and composition of their traffic, both freight and passenger, during that year. However, despite this abnormal volume and composition of traffic, the net railway operating income and the net income for 1945 were no greater than the minima necessary to enable the railroads to provide adequate and efficient service to the public in accordance with the National Transportation Policy declared by Congress.

It is clear, therefore, that the combination of the three additional adverse conditions with which the railroads are squarely faced in 1946, namely, new wage increases, further increases in the prices of materials and supplies and a severe and accelerating decline in traffic and revenues, has brought about a serious emergency and, in the absence of a higher level of freight rates and

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charges, will result in almost wiping out net railway operating income for the year 1946 and producing an enormous deficit in net income.

In short, with costs going up and volume of traffic and revenues going down, the railroads have passed the point where it is possible to continue to meet the need for adequate and efficient transportation with rates at present prewar levels. With returning normal conditions there emerges the naked fact that railroad rates are out of line with other elements of our economy and that something approaching prewar relationships must be restored if Petitioners are to continue to provide the public with the adequate transportation contemplated by the law. It has been obvious for some time that a substantial increase in freight rates and charges would be necessary at the close of the war. The need for such increase became immediate and of primary public importance with the granting of the 1946 wage increases.

What is said above will be elaborated in subsequent paragraphs. Appropriate references will be made in this petition to supporting data in an accompanying statistical exhibit Appendix III hereto. As a matter of convenience, Appendix III is bound separately.

II

There has been no increase in the general level of railroad rates, fares, and charges, since 1938, except (a) the 10 percent increase in basic passenger fares authorized in Ex Parte No. 148, for the duration of the war and six months thereafter, which has been in effect since February 10, 1942, and (b) the temporary increases in freight rates and charges, averaging about 4.7 percent, authorized in the same proceeding, effective generally on March 18, 1942, but which have been under suspension since May 15, 1943.

III

Wage increases made in 1941 and 1943 pursuant to procedures under the Railway Labor Act resulted in increasing the rates of pay of railroad employees prior to 1946 by 26.1 percent. This resulted in Class I railroads paying about $850,000,000 more in wages and pay-roll taxes in 1945 than they would have paid if the 1939 wage scales had been in effect during that year. Vacations with pay also were granted in connection with the wage settlements mentioned above, and added approximately $50,000,000 to the labor cost in 1945. Thus, the aggregate increase in labor cost for 1945 was $900,000,000.

In April 1946, under procedures provided in the Railway Labor Act, large increases in wage rates, retroactive to January 1, 1916, were awarded. As the result of these increases, it is estimated that the labor costs of Class I rai!roads in 1946 will be approximately $619,000,000 more than they would have been at 1945 wage rates.

The three wage changes above referred to, taken together, have resulted in a 47.7 percent increase in the prewar level of wage rates. It is estimated that th labor bill of Class I railroads for 1946 will be approximately $1,355,000,000 more than it would be if based upon prewar wage rates.

None of these added expenses has been reflected in the rate structure, excpt for the moderate increase in basic passenger fares mentioned earlier herein.

IV

Prices for materials and supplies in 1945 were 33.3 percent higher than prices paid in 1939. As a result the cost of materials and supplies was $393,000,000 more than it would have been if 1939 prices had prevailed in 1945.

There have been large additional increases thus far during 1946 in the prices of materials and supplies. Further increases in such prices are in prospect. It is conservatively estimated that materials and supplies required in 1946 will cost not less than $167,000,000 more than they would cost on the basis of the 1945 prices. It is further estimated that materials and supplies in 1946 will cost $500,000,000 more than they would cost on the basis of the 1939 prices.

As with wage increases, none of this increased cost is reflected in the rate structure, except for the 10-percent increase in passenger fares, referred to above.