(a) What is meant therein by the phrase "local interests" (i. e., does it comprise both local political subdivisions and individual persons or companies, or is it limited to one or the other)?' (b) What is the character of the agreement that "local interests" make for the establishment of terminals, maintenance facilities, etc. (i. e., is it a legally enforceable agreement in the event of nonperformance, with whom is it made, who can enforce it, and are such agreements in practice actually enforced)? (c) Are the terminals referred to private or public? (d) Will any public terminals be required on each fork, if so, where, and their capacities? (e) Would agreements be required for terminals on each fork having sufficient capacity in the aggregate to handle at least the amount of tonnage that the Board estimates would move over each fork; and (f) Does the Board have any estimate as to the amount of expense or cost that under the conditions local interests would have to assume and, if so, what is the amount thereof? I understand that the "conditions", above referred to are standard ones but I have never fully understood just how they were in practice actually applied. (2) What is the amount of coal tonnage that the Board estimates would move over each the Levisa and Tug Forks, respectively? The Board has reduced the tonnage estimated by the district engineer from 15,000,000 tons to 8,300,000 tons but does not in its report apportion (as the district engineer did) it between the two forks. (3) What is the estimated cost of the portoin of the canal in each the Big Sandy, the Tug Fork, and the Levisa Fork, respectively? The report gives the total estimated construction cost as $82,300,000, but does not break this down so as to reflect how much cost will be incurred on the respetcive forks or on the Big Sandy itself. (4) Does the total estimated cost ($82,300,000) include interest during construction, and how much will such interest amount to? (5) Is there a break-down in the $4,190,000 annual charges, such as there was in the district engineer's report, and if so, what are the amounts thereof? (6) The Board attributes to the project the entire water-rate savings from point of origin on the canal to destination, Chicago for example-even though the traffic would travel over other waterways for which large Federal expenditures have been or will have to be made. Has this method of computing "benefits" or freight savings been used by the Board as the basis for justifying other projects, and, if so, can you give me the names of some of them? If you can supply me with the information in answer to the above questions I would appreciate it very much. DEAR SENATOR BYRD: Further reference to your letter of March 11, 1946, concerning the Department's report on the proposed improvement of the Big Sandy River and its forks, Virginia, West Virginia, and Kentucky. I am pleased to furnish in the following paragraphs information and data submitted by the Board of Engineers for Rivers and Harbors relating to the several questions listed in your letter. It may serve to clarify the matters in question to point out that the Board's report is in the nature of a review and not in any sense a repudiation of the district engineer's report. The Board has verified and accepted the basic facts developed by the district engineer and predicated its report upon them but has preferred to make a more conservative estimate especially as to the prospective consumer demand for coal produced in the Big Sandy Valley. The detailed answers to your questions follow, enumerated to correspond with the paragraphing used in your letter. (Par. 1a) Local interests.-There is no legal definition of "local intere sts" as applied to river and harbor improvement projects. In general the term embraces any and all interests concerned with the project, including official and unofficial groups and individuals, such as State departments and bureaus, boards of county commissioners, port authorities, navigation, irrigation and drainage districts, associations for general or particular civic betterments, labor unions, boards of trade, farm and business organizations, and interested private citizens. Any one or group of such interests could meet the conditions of local cooperation prescribed in the report provided, of course, they furnish assurances satisfactory to the Department that they have the legal and financial ability to meet the responsibility assumed. (Par. 1b) Enforceability of agreements.-Local organizations which enter into contracts to perform certain acts or assume certain liabilities in connection with river and harbor improvements may be held legally responsible. In the case of terminals to take care of a contemplated gradual and progressive development of tributary areas over a considerable period of years it is considered sufficient that the Department assure itself of the availability of adequate sites and of the financial responsibility and sincerity of purpose of those who assume the obligation to provide the facilities at the proper time. In the event of noncompliance with the terms of agreement, the Department has recourse to the withholding of future maintenance and operating services. Agreements of the type contemplated have formed a successful part of waterway development for many years, without the necessity of recourse to the courts for enforcement. (Par. 1 c) Private or public terminals.-Most of the terminal-loading facilities referred to in the Big Sandy report would be private. (Par. 1 d) Requirements for terminals.-Although public terminals will not be required for the bulk of the traffic, it is expected that under certain possible conditions they may become necessary. (Par. 1 e) Necessity for agreements.—Experience with waterways tapping the sources of heavy, low-grade bulk materials, such as coal, oil, and sulfur, indicates that the industries concerned may be relied upon readily and willingly to furnish barge-loading facilities to take advantage of the economies afforded by water transportation. Specific agreements as to the location and capacity of terminal-loading facilities will not be necessary, provided that the Department receives satisfactory assurances of the good faith and responsibility of the local interests to provide terminal capacity sufficient, on the whole, to handle the volume of traffic required to justify the project. (Par. 1 f) Cost of terminal facilities.—The Board has not estimated the cost of each separate terminal that might be provided on the proposed waterway throughout its useful life to handle the estimated volume of annual commerce. The type of barge-loading facility suited to the class of traffic contemplated will vary from the simplest tackle to highly elaborate, electrically-operated tipples, trams, cableways, and conveyor belts in accordance with the preference of the shippers and the tonnage to be handled. The coal will come for the most part from properties now but little exploited because of unfavorable location of the seams on the streams opposite existing transportation facilities. Equipment to load this tonnage, whether simple and inexpensive or elaborate and costly, can be erected more economically on the near bank of the waterways for barge loading than across the streams and on the far bank at rail sidings for loading into cars. The Board has accumulated an extensive file of reliable and representative cost records covering the full expense, including overhead, of handling coal between tipples, cars, barges, and stock piles, under a wide range of conditions. The standard practice of the Army engineers in survey reports of this kind is to compute the appropriate unit terminal handling cost differential per ton and to add it to the estimated barge rate in all comparisons to determine unit savings under existing freight rates. If the capital cost of providing the terminals were added to the estimated first cost of the project, there would be a duplication in the annual charges. In those cases where comparison of future river terminal handling with handling over existing rail terminals is involved, the differential has been taken into consideration in deriving the savings. The loading differential for the bulk of the estimated barge traffic will, however, for the reasons stated, be in favor of, rather than against, the waterway. The net annual expense to local interests for loading facilities, whatever it may amount to, will not be deductible from the savings estimated in the Board's report. (Par. 2) Allocation of tonnage reductions.-The relative amount of prospective traffic to move out of each fork is expected to fluctuate from year to year in accordance with the consumer demand on the respective producers. As there are ample reserves and adequate facilities to be provided on the respective branches, the average output of each fork over the useful life of the project should be approximately equal. (Par. 3) Allocation of construction costs between the forks and the main stem.-In order to serve its intended purpose the improvement must extend well into the coal fields above the head of Big Sandy River. Large amounts of coal are available along each fork. One lock is proposed at each dam on the forks and two locks at each dam in Big Sandy River where the improvement is designed to handle the coal from both forks. Improvement of both forks will enable maximum use to be made of the Big Sandy and will avoid any claim that operators along either of the forks are discriminated against. Since the Big Sandy locks and dams and channel will serve both forks, the plan including the three streams is regarded as a unit in the report. Also the costs for the three streams are not separable precisely since, for example, the upper lock and dam on Big Sandy River will provide slack water up each fork for several miles. In view of these circumstances the report presents the costs for the improvement as a whole without break-down for the separate streams. (Par. 4) Interest during construction.—The standard practice adopted by the Army engineers for survey reports is to state first the capital' expenditures required to be appropriated for construction of the project, and second, the economic cost in terms of annual charges. The first does not include interest on construction since no specific appropriation is required for that item. The second includes not only interest on the capital invested during and after construction but also amortization charges and the estimated annual costs of maintenance and operation. The sum of these annual charges is compared with estimated net annual benefits to determine the degree of justification for the proposed improvement. In the Board's report on the Big Sandy project, interest during construction is not included in the $82,300,000 first-cost figure, but $4,940,000 for interest during construction and $100,000 for establishing aids to navigation, such as channel markers, has been included in the estimated Federal investment. Since it is this Federal investment figure that is used in computing the annual cost, interest during construction has been taken into account in determining the economic justification. (Par. 5) Break-down of annual charges.-The following is a break-down of the annual charges as estimated by the Board: Interest, at 3 percent on $87,340,000_ Amortization___ Maintenance and operation (Engineer Department). Total annual charges__ (Par. 6) Basis of estimating savings.-The policy of the Chief of Engineers which has been followed for many years prescribes that if the proposed improvement will develop new waterway movements that extend to existing waterways, the estimated saving for the complete water movement will be included as a benefit, and no part of such saving should be deducted on the theory that it should be assigned to the connecting waterway. The basis of the above principle is that waterways should be credited with the full transportation savings they make available. Among existing projects in which this principle was recognized are the Allegheny River project (H. Doc. No. 356, 71st Cong., 2d sess.) justified because it would form "an economical route for the movement of the natural resources of the valley to the Pittsburgh district and to points reached by the Ohio River." The Kanawha River canalization improvement was specifically described as "an important feeder to the Ohio River," in the project report advocating its authorization (H. Doc. No. 31, 73d Cong., 1st sess.). The Illinois waterway project was recommended on the basis of total transportation savings, including savings from movements on both the Great Lakes and the Mississippi River (S. Doc. No. 126, 71st Cong., 2d sess). I trust that the foregoing analysis of the proposed project satisfactorily answers the questions raised in your letter. Should additional data be desired, I shall gladly furnish any available information upon receipt of your request. Sincerely yours, R. A. WHEELER, Chief of Engineers. Mr. LAWSON. I should also like to insert in the record a letter of opposition from J. Lindsay Almond, Jr., Member of Congress, Sixth District of Virginia. Mr. PETERSON of Georgia. Without objection, the letter will be included in the record. (The letter referred to is follows:) STATEMENT OF J. LINDSAY ALMOND, JR., M. C., SIXTH DISTRICT, VIRGINIA, RE CANALIZATION OF BIG SANDY RIVER AND ITS TUG AND LEVISA FORKS HOUSE OF REPRESENTATIVES, The COMMITTEE ON RIVERS AND HARBORS, House of Representatives: While this proposed canalization is located some distance from my congressional district, the people of my district are vitally interested in it for the following reasons: (1) As taxpayers they are concerned with any Federal project which involves, as this one does, an expenditure of public funds of about $100,000,000 or more. (2) The main lines of both the Chesapeake & Ohio and Norfolk & Western Railroads are located in my congressional district. The headquarters, principal shops, yards, and offices of the Norfolk & Western are in my home town of Roanoke. The Chesapeake & Ohio has sizable yards at Clifton Forge in my district. These railroads afford employment for a large number of my constituents. If this canal handles the large tonnages of coal-and that is the only commodity which it is claimed will move over it in appreciable tonnages-estimated by the Board of Engineers, or even enough to permit it to operate on a solvent basis, it will necessarily divert coal from these railroads. This diversion will mean less traffic, and that will result in fewer trains with less men manning them. In short, the canal is bound to produce loss of employment to railroad employees. And this loss will not stop with men who actually man the trains, but will extend down the line to yard employees, repairmen, inspectors, clerks, etc. Diversion of so vast an amount of traffic from the railroads will cause many of my constituents to lose their jobs. Unless there is some urgent economic necessity for this waterway, public funds should not be used for that purpose. (3) It has not been shown that there is any economic necessity for this waterway. No one denies that the territory is adequately served by these two railroads. Nor do the coal producers in this area need subsidized transportation. The evidence before the Board of Engineers shows that coal production in the Big Sandy territory has for the past 20 years maintained a relatively higher rate of production than in the country in general. (4) In view of our large national debt, this is not the time for the Federal Government to expend approximately $100,000,000 or more to provide an unnecessary duplicating transportation facility. For these reasons I desire to register with this honorable committee my objections to this project, and to express the wish that it will disapprove the proposed project. J. LINDSAY ALMOND, Jr., M. C. Mr. LAWSON. I should also like to insert in the record a letter of opposition from William E. Hess, Member of Congress, Second District, Ohio, which is a letter being directed to the Committee on Rivers and Harbors, House of Representatives, dated May 6, 1946. He happens to live in Cincinnati. Mr. PETERSON of Georgia. Without objection, the letter will be included in the record. (The letter referred to is as follows:) STATEMENT OF WILLIAM E. HESS, M. C., SECOND DISTRICT OF OHIO, RECANALIZATION OF BIG SANDY RIVER AND ITS TUG AND LEVISA FORKS CONGRESS OF THE UNITED STATES, House of Representatives, Washington, D. C., May 6, 1946. To the Committee on Rivers and Harbors, House of Representatives: The Chief of Engineers, War Department, has recommended canalization of the Big Sandy River and a substantial portion of its Tug and Levisa Forks at an estimated cost of $82,300,000, exclusive of interest during construction, and annual carrying charge of $4,190,000. I am informed that the estimates of the Army engineers for the construction costs of this canal are in the main based upon 1940 prices. It is a well-known fact that construction costs have risen greatly over 1940 prices; thus it is obvious that if the canal were constructed today or at any time when present-day prices prevail, its cost would be greatly in excess of $100,000,000. The people of my district are vitally interested in any project that involves so large an expenditure of public funds. I understand that the territory directly involved is already adequately served by two railroads, the Norfolk & Western and the Chesapeake & Ohio, which have established over a period of many years a high standard of transportation service. The proposed waterway will only be an unneeded and duplicating transportation facility. Considering the fact that we now have a surplus of many means of transportation, especially with regard to railroads, due to vast expansion to meet war needs, I do not believe this is the time to spend large sums of taxpayers' money which will further complicate that problem. Finally, many of my constituents are railroad employees. If this canal transports the large tonnage which would be required to make it a financial success, such traffic will necessarily be diverted from the railroads. That will mean fewer trains and fewer employees. Thus there is a real prospect that a substantial number of my constituents will be faced with loss of their railroad jobs if the canal is constructed. I respectfully ask, therefore, that your committee disapprove of this project. WILLIAM E. HESS, M. C., Second District of Ohio. Mr. LAWSON. I should like also at this time to insert in the record a letter from the Honorable William M. Tuck, Governor of Virginia, a letter being in opposition and dated April 19, 1946. Mr. PETERSON of Georgia. Without objection, the letter will be inIcluded in the record. (The letter referred to is as follows:) CHIEF OF ENGINEERS, Washington, D. C. RICHMOND, VA., April 19, 1946. DEAR SIR: Replying to your invitation of January 16 for comments and recommendations from Virginia on the proposed canalization of the Big Sandy River and Tug and Levisa Forks, it appears the benefits so far as Virginia is concerned would not justify the cost involved. I, therefore, recommend against the project. Some of the reasons for my recommendation against this project are: (1) The territory involved now has adequate transportation facilities for handling the expectable future traffic. If the existing freight rates should be, modified, it appears there should be facilities and means of bringing this about rather than through the huge expenditure involved in establishing competitive and cheaper means of transportation. (2) The benefits which might result in savings to the consumer through such reduction in rates would not likely reach the public in general. (3) Should the project be constructed it would result in diverting some tonnage from the railroads now paying taxes on these revenues to the State of Virginia. Such loss of business would mean loss of State revenue from this source. |