Another type of discrimination and preference also should be mentioned as inherent in subsidized water transportation, including the proposed Big Sandy project. I allude to the prejudices and favoritism to places as distinguished from persons or industries in the same locality that are so pronounced in the case of traffic moving wholly or partly by water. This too is proved by the water cost estimates on Table E of Appendix C to the District Engineer's report. It shows, for example, that the present all-rai! coal rate from Big Sandy fields to Cincinnati is $1.89 and estimates that the costs of transportation upon completion of the Big Sandy waterway to Cincinnati will be as low as 66¢ per ton. The present all-rail rate from the Big Sandy field to Indianapolis is shown to be $2.62 net ton, and the estimated barge-rail cost from the Big Sandy field is $1.80. Thus, in the all-rail adjustment, Indianapolis pays transportation charges which are 73¢ per ton higher than Cincinnati, whereas upon completion of the proposed waterway the difference according to Table E will be $1.14, an increase in Indianapolis' disadvantage of 41¢. A similar computation comparing present allrail rates and estimated barge or barge-rail costs from the Big Sandy to Terre Haute, Ind., shows that the result will be an increase in Terre Haute's disadvantage as compared with Cincinnati by 77¢ per ton. Thus it is clear that one of the inescapable results of the Big Sandy improvement will be a substantial addition to the injury that existing waterways have done and are doing to interior communities, and this undoubtedly will hasten the day when it will become necessary for the government to consider seriously the question of subsidizing rail transportation as a means of offsetting the economic advantages which subsidized water transportation has given river ports to the detriment of interior communities. And in this connection the Board should bear in mind that the railroads are not advocating and do not want subsidization; but it does not require the gift of prophecy to foresee the time when there will be an irresistible public demand for some kind of public aid to railroads, so as to enable them to continue to provide the complete transportation service which they alone are capable of performing and to offset the advantages which subsidized water transportation has given to the few at the expense of the many. Rejection of the District and Division Engineers' recommendations of the Big Sandy project would be a step toward reversing the trend in the direction of general transportation subsidization, which is so repugnant to the American principle of free enterprise.

II. THE AREA ADJACENT TO THE BIG SANDY IS NOW ADEQUATELY SERVED BY EXISTING RAILROAD AND HIGHWAY FACILITIES AND THE WATERWAY WOULD THEREFORE CONSTITUTE AN UNNECESSARY DUPLICATION OF TRANSPORTATION FACILITIES NOT REQUIRED OR EVEN DESIRABLE IN THE PUBLIC INTEREST

It has always seemed to me elemental that the government should not undertake to provide additional transportation or a new mode of transportation in any area when it is not clearly shown that the existing facilities of the same or of some other kind in that area are inadequate or otherwise deficient. In the case of the Big Sandy project, there is no contention or even intimation that the agencies of transport along the banks of the three streams and throughout adjacent territory are unable to meet now or in the future every requirement of every shipper or receiver of freight. While of course motortrucks necessarily play a part in taking care of the transportation requirements, I speak particularly of the railroads. The valleys of the Big Sandy and its forks, as well as surrounding territory, are served by the Chesapeake & Ohio Ry., and Norfolk & Western Ry., two of the best equipped and most efficient railroads in this country, which have long maintained a standard of transportation service, particularly on coal, that has no supierior. These railroads connect directly or by means of others with every railroad in this country and Canada and provide thru routes and reasonable rates wherever they are found necessary and desirable in the public interest. Because it is the coal traffic from the mines in the Big Sandy area and elsewhere that has made possible the development of the C. & O. Ry., and N. & W. Ry. and has contributed largely to the development of railroads with which they connect, it necessarily follows that to divert from those companies and their connections a large part of that traffic will deprive them of the means by which to continue the present high standard of transportation service or of the incentive to improve their service to the public. Viewed in the light of such consequences, there are few who would contend that the Big Sandy waterway is necessary to, or even wanted by, the public.

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III. THE CONSTRUCION OF THE BIG SANDY WATERWAY IS INCONSISTENT WITH THE NATIONAL TRANSPORTATION POLICIES AS STATED IN THE TRANSPORTATION ACT OF 1940

One of the important things which the District and Division Engineers seem to have overlooked or disregarded is that Congress in the Transportation Act of 1940 adopted a national transportation policy designed to cover all forms of transportation. This policy can best be explained by quoting the language of the statute itself:

"It is hereby declared to be the national transportation policy of the Congress to provide for fair and impartial regulation of all modes of transportation subject to the provisions of this Act, so administered as to recognize and preserve the inherent advantages of each; to promote safe, adequate, economical, and efficient service and foster sound economic conditions in transportation and among the several carriers; to encourage the establishment and maintenance of reasonable charges for transportation services, without unjust discriminations, undue preferences or advantages, or unfair or destructive competitive practices; to cooperate with the several states and the duly-authorized officials thereof; and to encourage fair wages and equitable working conditions; all to the end of developing, coordinating, and preserving a national transportation system by water, highway, and rail, as well as other means, adequate to meet the needs of the commerce of the United States, of the Postal Service, and of the national defense. All of the provisions of this Act shall be administered and enforced with a view to carrying out the above declaration of policy."

While the extent to which the recommendation to canalize the Big Sandy and its forks does violence to the broad and wise principles in this national transportation policy is self-evident, I think it well to call the Board's attention to a few specific points:

(a) The statute provides that the inherent advantages of each form of transportation should be recognized and preserved. This certainly does not imply that a few favored coal companies or coal consumers or even water carriers should be given advantages at public expense with corresponding disadvantages to other forms of transportation and to competitors of the favored coal producers and consumers. Nor does it contemplate unnecessary duplication of transportation facilities such as would result from the Big Sandy waterway.

(b) The law proposes that sound economic conditions in transportation and among the several kinds of carriers be fostered. This laudable aim cannot be promoted by the construction of a waterway within an area now adequately served by railroads. Moreover, the subsidization of one form of transportation for the purpose of diverting traffic to another is the very antithesis of the idea of fostering sound economic conditions in transportation.

(c) The law seeks to prevent unfair or destructive competitive practices as between carriers. Certainly nothing can do more to promote practices thus condemned than for the government to set up thru subsidization one form of transportation to compete with the existing essential railroad systems which must maintain themselves in the same area without Federal aid of any kind. (d) The national transportation policy is "all to the end of developing, coordinating, and preserving a national transportation system by water, highway, and rail, as well as other means, adequate to meet the needs of the commerce of the United States, of the Postal Service, and of the national defense." Since it is freely admitted and may be readily demonstrated that the usefulness of rail- · roads exceeds all other forms of transportation, especially in times of war, and that no other agency of transportation can so completely satisfy the needs of the nation, it is manifest that the Congress' purpose cannot be promoted by weakening the railroads thru construction of a waterway not in itself essential "to meet the needs of the commerce."

It is earnestly hoped that the Board will give due consideration to the national transportation policy and the destructive effect upon it which the Big Sandy proposal would have. Nothing could be clearer than the fact that the diversion of traffic from railroads to the proposed subsidized waterway would do violence to and tend to defeat the underlying purpose for which Congress promulgated it, i. e. to bring about a well-rounded and complete system of transportation composed of all agencies capable of serving the transportation needs of the nation and its people.

IV. THE ESTIMATED TONNAGE OF COAL TO BE TRANSPORTED ON THE BIG SANDY PROJECT IS UNCONSCIONABLY HIGH

The most difficult and yet the most important elements in the study of any proposed transportation facility, especially a waterway, are the determination of the extent to which the facility will be used and whether the tonnage it will move is new traffic or merely a diversion of freight already moving freely and satisfactorily via established agencies of transportation. We in the railroad industry know from experience how hard it is to develop reliable information of this character and how unreliable and overly optimistic statements of prospective shippers frequently are. The fact is that those who might be expected to benefit by a contemplated project are as a rule unduly enthusiastic in their forecasts of what it might do for them and they for it. I suppose a psychologist would say that this is an indication of the human inclination to substitute hope for judgment, but it nevertheless presents problems requiring the most meticulous study and analysis to determine what estimates may be reasonable and sufficiently well-founded to be acceptable.

The estimate of the District and Division Engineers that the Big Sandy waterway will attract 15,000,000 tons of high volatile coal traffic, when viewed realistically in the light of facts, insofar as they have been made known, and of experience, is little short of fantastic and the idea that that great tonnage will be developed without impairing the tonnage now moving from mines in the Kanawha River Valley or via rail-river thru Huntington is preposterous. While I shall develop the reasons for these conclusions quite fully in a later part of this section of my statement, I desire now to show that the estimate is highly excessive because at least one of the field examiners who assembled the basic information stated in Table E of Appendix C of the report, and upon which the final estimate seems to have been predicated, is not sufficiently disinterested as to warrant the assumption that this work was coldly factual, unbiased and objective. Unless a traffic survey is made by wholly disinterested persons it is very likely to reflect wishful thinking rather than sound judgment.

Thru the courtesy of the office of the District Engineer at Huntington, W. Va., I was enabled to examine 66 of the 161 consumer returns tabulated in Table E of Appendix C of the report. The other 95 returns were not made available to me because the reporting coal consumers failed or refused to release the District Engineer from his promise to treat them confidentially.

One of the first things I observed when I inspected the 66 returns, and which I subsequently confirmed by contacting some of the consumers, was that they were not executed by the designated companies or their officers personally and unaided, because at the bottom of each appear the words "Interviewed by," which are followed by a line under which is written "Field Examiner, U. S. Engineer's Office." This, I learned, means that the information was received from the prospective coal consumers orally and reduced to writing by the field engineer, but the procedure is not explained clearly in the report, which gives one the impression that the questionnaires were sent to the consumers and the information obtained without the benefit of a "sales talk." That the Board should take into account this procedure in its consideration of the propriety and credibility of the estimated tonnages and the possibility that it was, in part, the cause of unsupportably high tonnage estimates is, I believe, demonstrated by the following:

Of the 66 completed questionnaires which I examined, 48 of them bore the name of one C. J. Neekamp as "field examiner" and the "U. S. E. D." tonnage estimates derived from those 48 reports total about 2 million tons of high volatile coal of the 3,190,000 tons covered by all the returns I saw. I have known Mr. Neekamp quite well for more than 20 years, during all of which he has been engaged in activities directly or closely associated with the promotion of the bituminous coal indusctry in Eastern Kentucky. He was Secretary of the Coal Operators Assn. of Northeast Kentucky, Secretary-Manager of the Ashland, Kentucky, Chamber of Commerce, Secretary of the Joint Transportation Committee of Southern Coal Fields, which included Eastern Kentucky, Managing Director of the Northeast Kentucky Coal Bureau and an associate in the Northeast Kentucky Tipple Co., organized to construct and operate a rail-barge coal transfer facility at Catlettsburg. He has appeared before the Interstate Commerce Commission on many occasions for and in behalf of East Kentucky coal producers. While Managing Director of the Northeast Kentucky Coal Bureau, he signed and verified the complaint to the Interstate Commerce Commission

of that Bureau against the C. & O. Ry. in Docket 26080, the decisions in which are reported in 201 ICC 165 (decided May 22, 1934), and 206 ICC 445 (decided Feb. 7, 1935). This is the proceeding which resulted in the establishment of the transshipping rate on coal from the Eastern Kentucky mines to Catlettsburg against which the computed water costs on the proposed Big Sandy project are compared for the purpose of determining so-called public savings. During all of my long acquaintance with Mr. Neekamp, he has been, and it was his job to be, an ardent booster for Eastern Kentucky coal. In his association work, he had a direct interest in the mining operations and in the distribution of coal produced in that field. As a witness for the complaining Northeast Kentucky Coal Bureau in Docket 26080, Mr. Neekamp testified that he and certain undisclosed associates, had organized the Northeast Kentucky Tipple Co., which, upon publication by the C. & O. of a proportional transshipping rate, intended to construct a facility at Catlettsburg for the transfer of coal from railroad cars to river barges. Mr. Neekamp outlined the nature of the facility his Tipple Co. planned to construct and, for the ostensible purpose of proving its alleged great capacity, likened it to facilities in operation at lower lake ports for the transfer of coal from cars to vessels.

He said it would have a capacity of 1,000 tons per hour or 8,000 tons per 8-hour day, and that solid trainloads of coal would be transported over the C. & O. Ry., to the tipple every day with such regularity that cars loaded at mines on one day would be unloaded into barges the next and that the railroad equipment could easily make a round trip every 48 hours. Mr. Neekamp stated that a permit had been issued by the U. S. War Department authorizing the construction of the tipple. He and other witnesses painted lurid word pictures of the prospective tonnages and foresaw movements to such far-off ports as Memphis, Tenn.; Helena, Ark.; and New Orleans, La., but did not predict specific average annual movements. The ICC in its report summarized that evidence by stating that "Complainant believes that if the rate of 50¢ as sought were established and transshipment facilities built, its members could sell considerable coal at river cities beyond Catlettsburg and at inland points reached via river landings in connection with railroads beyond, especially at points in Central Territory." The 50¢ rate referred to as desired by complainant was the same as then in effect from the Kanawha Field to Huntington, W. Va., and has since become 55¢. This brief outline of Mr. Neekamp's contentions and predictions with respect to potential traffic via rail to Catlettsburg thence barge is, I think, sufficient to show that his reports as a field examiner attached to the Huntington U. S. Engineer's Office are largely repetitions of his testimony to the ICC, which time has completely repudiated. In 1935 Mr. Neekamp got the, rate he wanted to Cattlettsburg, but neither his company nor anyone else has constructed a facility or moved as much as one ton of coal thru Catlettsburg. The record in Docket 26080 gives one the impression that a survey was made of consumers much like that of the War Department, altho perhaps less extensive. Representatives of Eastern Kentucky coal operators testified to substantiate Mr. Neekamp's contentions and they gave specific instances where the absence of a competitive transshipping rate had occasioned the loss of business to shippers thru Huntington. All insisted that what had been done with a transshipping rate from the Kanawha field to Huntington could be done from Eastern Kentucky to Catlettsburg, but the fact remains that altho ten years have elapsed since eastern Kentucky mines obtained the same transshipping rate as Kanawha District mines they have not done so.

It is of especial importance that the Board bear in mind that when Mr. Neekamp and his associates were before the ICC in Docket 26080 they did not contend as do the District and Division Engineers that the traffic to be shipped from the Big Sandy field to river coal markets would be additions to, rather than displacements of, similar coal traffic now reaching river markets via rail to Huntington thence river or via all-water routes from mines on the Kanawha River. They, on the contrary, indicated, in the main, that the transshipping rate sought to Catlettsburg was necessary to enable Big Sandy operators to secure a share of the business at river coal markets then, as now, served through Huntington or from Kanawha River mines. He said "The coals produced in both Logan (Kanawha) and Northeast Kentuck fields are identically the same as to classification and character, adaptable to the same uses, consequently keenly competitive in all consuming markets." The sole purpose for seeking the transshipping rate was therefore, according to Mr. Neckamp's sworn testimony, to enable Big Sandy operators to participate in the existing markets, and the only reference to new business was with respect to the lower Mississippi River ports, of which Mr.

Neekamp mentioned Memphis, Tenn.; Helena, Ark.; and New Orleans, La., but did not undertake to show why Big Sandy coals would there find markets when the similar Kanawha District coals did not. The Big Sandy tonnage estimates in Appendix C of the report do not include movements to these southern coal markets.

With this background of Mr. Neekamp's prior activities in mind, I would like to cite and comment on a few concrete examples of the lengths to which his zealousness in behalf of the waterway and perhaps some of his former employers has led him.

Questionnaire No. 18 on Table E of Appendix C is the return of University of Minnesota at Minneapolis for which there is included in the "U. S. E. D." estimate 50,000 tons of high volatile coal as prospective Big Sandy waterway traffic. "U. S. E. D." estimates are explained in footnote (a) of the table as "accepted tonnage where indicated savings appeared adequate to justify consumers' estimate of tonnage." 50,000 tons is the total consumption by the University of Illinois and Indiana coal. Based upon relative BTU values the use of the better Big Sandy coals would reduce this tonnage by at least 25%, but that is not the important point I want to make. Question 5 of the return shows that the present sources of supply are Illinois and Indiana mines and that 36,000 tons are shipped from Illinois via "all water" and 14,000 tons from Indiana "all rail." In Table E it is stated that the "Transportation Cost per ton via present shipping route" on the University's coal is $4.272. That figure was apparently computed by the field examiner and does not appear in the return. Nor, as Table E states or implies, is it the transportation cost paid by the University on the Indiana and Illinois coal it uses. All rail rates from Illinois mines to Minneapolis range from $2.46 net ton to $3.31 net ton, depending on the origin group, which are from $1.81% to $.961⁄2 less than the purely hypothetical present transportation cost figure in Table E of $4.272. On Indiana coal the rail rates range from $3.01 to $3.51 or from $1.26% to $.76% less than the Table E figure. But the return states the Illinois coal now moves to the University via "all water." The only mines in Illinois on a navigable waterway are in the Fulton-Peoria Group on the Illinois River, and in a proceeding before the Interstate Commerce Commission in 1941 it was shown that the Federal Barge Line Co. had quoted a rate of $1.70 from those mines to Minneapolis which is $2.571⁄2 less than the charge in Table E. Moreover, coal may be and is shipped to Minneapolis f. a. s. docks via rail to Alton and E. St. Louis at rates of 90¢ from Belleville, $1.00 from DuQuoin, and $1.15 from Southern Illinois Districts plus a Federal Barge Line rate of $1.50 which total $2.40, $2.50 and $2.65, respectively. should also be noted that many of the existing all-rail, rail-water and all-water rates from Illinois and Indiana fields are much less than the computed barge cost from the Big Sandy shown on Table E as $2.93. It is difficult to see how a transportation saving can be claimed when the actual result of a diversion of coal from midwestern districts to the Big Sandy would be to increase the transportation costs by as much as $1.23 per ton. A word now about the $4.271⁄2 present transportation cost shown on Table E. I don't know how this was obtained or where it came from, but if it was intended to reflect the transportation costs via rail-lake-and-rail from Eastern origins it is much too high. The rail rate to Lake Erie ports from Big Sandy, f. o. b. vessels is $1.972, the vessel rate to Duluth is 45¢ and the steam coal rail rate to Minneapolis $1.322, which aggregate $3.75. Other good Eastern high volatile steam coals can be so moved at total transportation charges depending on the origin district ranging from $3.08 to $3.60 net ton.

It

It seems probable that the $4.271⁄2 figure shown on Table E is the sum of the transportation charges from the Big Sandy field to Minneapolis via rail-lakeand-rail, and in addition an expense of 50¢ per ton, which is the generally accepted dockage and storage costs. This calculation, however, overlooks a refund of 21⁄2¢ which is made in the rail rate to Lake Erie ports when traffic is reshipped from the head of the lakes, and I should think the party responsible for the figure would desire to have it reduced to $4.25. In this connection, however, I would like to point out that so far as I can determine, there is not included in the estimated costs of transportation via barge to Minneapolis any factor at all comparable to the 50¢ item which was included in the raillake-rail cost. Because of this I consulted with Mr. J. A. Maher, of St. Paul, Minn., who is a representative of Lake Superior dock operators and a recognized authority on the handling and marketing of dock coal, and he gave me the following opinion: