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"19. The ton-mile rates estimated for contract carriers on the Ohio, Mississippi, and Illinois Rivers, and used to compute prospective savings creditable to these waterways, are as follows:

Catlettburg to Cairo

Cairo to Alton (through Chain of Rocks) –

Up Illinois River to Chicago (above Chain of Rocks). Up Mississippi River (above Chain of Rocks) to head slack water__

1.2 mills per ton-mile

2.4 mills per ton-mile

1.8 mills per ton-mile

1.8 mills per ton-mile"

To these estimated "ton mile rates" which appear to cover loaded barge movements and ignore empty return hauls, there seem to have been added the estimated average cost for the water haul from assumed barge loading tipples to the mouth of the Big Sandy at Catlettsburg of 33¢ per ton and certain amountsgenerally inadequate for unloading barges and delivering the coal to ultimate consignees. The identities of the contract carriers handling coal on the rivers at the estimated ton-mile rates stated or what, if any, tonnage they move are not divulged in the report, nor does it appear that any reliable contract carrier has offered to move traffic at such low earnings. Based on information that comes to me from time to time concerning contract carrier rates, I am confident a barge line would accept revenues at such levels only when they were in dire need of traffic or wanted to pick up business for return barge loads.

Using these estimated ton-mile rates and the estimated Big Sandy cost of 33¢, I have computed that the Big Sandy transportation costs on Table E include the following illustrative gross realizations of the barge lines f. a. s. docks at the destinations named:

Minneapolis___
Chicago

$2.787 St. Louis-
2. 233 Cincinnati___.

$1.555 .514

It will of course be necessary to return the barges to the Big Sandy empty be cause there can be no possibility of return loads for any appreciable number of the barges in which the predicted 15,000,000 tons per year will move out of the Big Sandy, and I cannot find that this cost factor has been given any consideration in the estimate.

Contract barge rates are of course trade secrets, and it is not therefore possible for me to give actual figures indicating what consignees may pay for moving coal for comparable distances such as, for example, from Huntington or from Kanawha River mines. In the course of my dealings with railroad rates, however, I have often been told by informed persons that the normal contract rates to Cincinnati from Huntington are from 50 to 60¢ per ton, and I learned from Mr. J. A. Maher, whom I have previously identified, that the small tonnages of barge coal which have moved from Huntington, W. Va., to the Twin Cities paid a contract barge rate of $3.25 net ton.

Because of the difficulty or impossibility of ascertaining actual contract carrier rates and the fact that there is no general holding out to the public by any barge line that it will protect any specific level of contract rates, it would seem that the District Engineer should have accepted the common carrier rates which have been filed by various barge lines with the Interstate Commerce Commission and which are in fact the only rates upon which the public can rely, as the proper basis for estimating water costs to consumers. These rates are filed with the I. I. C. under requirements of law and have the same effect as statutes. The publishers cannot deviate from the provisions of their tariffs and must apply them on all traffic offered. Moreover, since the common carrier barge lines publishing the rates are also contract carriers, it must be assumed that they will assess the published rates whenever and wherever they can and it is thus quite certain that some consumers must and do pay them. The following are representative common carrier rates on coal as published in the American Barge Line's Tariff 1. C. C. 57:

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It is clear that had the District Engineer used the published barge rates, of which the foregoing are but a few examples, the so-called transportation savings computed in Table E of Appendix C would have been greatly reduced and in many cases entirely eliminated with the result that much of the estimated tonnage would have had to be excluded from the estimate of prospective Big Sandy traffic.

In my comments on specific questionnaires allocating tonnages to the Big Sandy, I repeatedly said that there are sufficient high-volatile coals similar to and just as good as those of the Big Sandy basin, which are available in the Valley of the navigable Kanawha River to supply now and for unnumbered years to come the requirements of all consumers in a position to use water transportation. Since this fact seems to have been ignored by the Division and District Engineers, notwithstanding its controlling importance in any fair, reliable and apperceptive study of prospective Big Sandy coal traffic, it is necessary that I show authority for my statements and beliefs. This is found in the Kanawha River reports of the Huntington District Engineer, Major Fred W. Herman, dated Aug. 15, 1932, and Major E. D. Ardery, dated May 18, 1928, and the various reports on the Kanawha River by the Division Engineer at St. Louis, by this Board, and by the Chief Engineer, all of which are published in House Document No. 31, 73d Congress, 1st Session. As a result of those reports the Kanawha was improved in 1937 so as to provide, in aid of navigation, a 9-foot stage and a reduction in the number of locks and dams from 10 to 3. Some of the statements in this House Document, upon which I rely, follow:

(1) Page 2—Report of the Chief of Engineers, Maj. Gen. Lytle Brown, dated April 20, 1933:

"It is estimated that the coal reserves immediately adjacent to the river amount to about 1,000,000,000 tons, and that 3,000,000,000 tons of coal are available within 5 miles of the banks."

(2) Page 5-Report of the Board of Engineers for Rivers and Harbors to the Chief of Engineers, U. S. Army, dated Jan. 30, 1933, signed by Col. W. J. Barden, Senior member:

"The principal industries along the river are coal mining, the manufacture of chemicals and ferro alloys, and oil refining. From the head of the river to St. Albans the valley is highly industrialized and within the region there is an abundance of high grade coal."

(3) Page 16-Report of the District Engineer, Huntington, W. Va., Maj. E. D. Ardery, dated May 18, 1928:

"There is an almost inexhaustible supply of coal in the valley within shipping distance by river. The probable future traffic in coal is therefore not a question of available supply but one of markets, which in turn are dependent on general demand and competition with other fields."

(4) Page 36-Report of Division Engineer, Upper Mississippi Valley Division, St. Louis, Mo., Col. Geo. R. Spalding, dated Sept. 30, 1932:

"Numerous strata of high-grade bituminous coal underlie the basin (see exhibit No. 7 of report of district engineer) particularly that part adjacent to the main stream. Because of the thickness of these coal veins and the favorable topographic conditions that exist, mining is most economical. The total coal reserve in the Kanawha watershed has been estimated roughly at about 18,000,000,000 tons, of which 1,000,000,000 tons is adjacent to the river proper and 3,000,000,000 tons is within 5 miles thereof."

(5) Page 53-Report of the District Engineer, Huntington, W. Va., Maj. Fred W. Herman, dated Aug. 15, 1932:

"The second source of commerce is the large coal area that exists in this valley. This coal is of a high grade and is useful not only for fuel but for by-product and metallurgical purposes, and a modern navigation system would certainly carry a great deal of coal, not only to the markets which are now served by the coal trade but to the other markets where local supplies are becoming exhausted.” In this connection it is worthy to note also that in a publication by the Huntington District Engineer's Office, dated Dec. 15, 1938, entitled "Navigation on Kanawha River" it is stated on page 1:

"By far the most important natural resource is coal. It is mined in large quantities over the entire valley, and it has been estimated that 18 billion tons remain available."

Thus it is that everything said in the Big Sandy reports concerning the kinds, qualities, potential productivity and reserves of Big Sandy high volatile coals and of the uses to which they may be put are matched by the statements in the 87050-46-21

reports of the Engineers preliminary to and after the latest improvements in the Kanawha River. It cannot therefore be doubted that the volume of coal traffic on the Kanawha, which is scarcely a fourth of the forecast of Big Sandy tonnage, is not limited by coal reserves which according to the statements cited have as yet hardly been scratched. My repeated assertions that anyone wanting river coal shou d find no difficulty in obtaining it on the Kanawha River are thus entirely consistent with findings and conclusions of the Army Engineers, including this Board. The ideas underlying the Big Sandy recommendation, i. e. that there is a deficiency of coal tributary to navigable waterways comprising the Mississippi River System, and that because of the deficiency there would be developed, overnight as it were, a demand for 15,000,000 or more tons of coal precisely the same in quality and characteristics as exist in abundance in the Valley of the Kanawha have utterly no basis in fact.

While I am confident the Board will agree that the Big Sandy tonnage estimates are unconscionably high and not likely ever to be realized, I would like to supplement the facts I have offered by calling attention to a feature of the District and Division Engineers' Big Sandy reports which has no counterpart in any similar reports of Army Engineers I have had occasion to examine. I allude to the fact that the field engineers and the compilers of Table E of Appendix C accepted practically all of the tonnage estimates of consumers, even cases where retail dealers or water-front property owners whose returns denoted ambitious schemes to monopolize the coal business of an entire city or more as in the case of Stillwater, Minn. Only the most far-fetched and impossible consumers' estimates were rejected. And after accepting the many high volatile coal estimates of consumers and others whose plans or hopes are to sell or consume many times the coal they have formerly handled, the total tons of high volatile coal amounted only to 9,760,900 tons, and the District Engineer, on the theory that the waterway would be able to handle more than that and that the total consumption of coal in the markets claimed for Big Sandy coal aggregated something over 80,000,000 tons, arbitrarily added about 51⁄2 million tons so as to produce the large round figure of 15,000,000 tons. In every other report on prospective waterways, with which I am familiar the authors have greatly discounted claims of parties who might benefit by government subsidy and even then the resulting tonnage estimates seldom materialize when the improvement is completed and put in operation. A few examples will prove my point.

(1) The Kanawha River.-The reports of the Engineers in House Document No. 31, mentioned above, as to tonnage increases that were expected to 'result from the improvements of the Kanawha River then under consideration, are extremely well-guarded, probably because the authors realized the high percentage of error in prognostications of that kind. In paragraph 23 of the report of the District Engineer at Huntington, dated Aug. 15, 1932, on pages 53 and 54 of the House Document, it is stated: "All parties interested in the improvement of the Kanawha River were requested to furnish information as to the benefits that might be expected to accrue if a dependable 9-foot navigation depth were assured in the Kanawha River. The data furnished are appended to this report as Exhibit 36 and the data below is a summary of these reports." The table shows a total estimated traffic of 12,155,820 tons, of which 11,540,000 tons is coal. Thereafter the District Engineer stated: "The predicted traffic and the estimated savings furnished by the river interests and shown in the preceding table are undoubtedly optimistic * * * They are given mainly as information and are not depended on solely for justifying the improvements presented later." Experience has demonstrated the wisdom of Major Herman's conclusion because the greatest annual coal tonnage yet handled on the Kanawha was 4,741,353 tons in 1942, which is only 2 million tons more than in 1937 when the improvements upon which the estimates made by "all parties interested" were completed, leaving some 6,000,000 of the predicted increased traffic yet to be accounted for. the consumers' estimates of Big Sandy tonnage are no more accurate than the Kanawha River estimates, the 15,000,000 tons will shrink to something like 3,000,000 tons.

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(2) The Upper Allegheny River.-House Document No. 1136, 73rd Congress, 2nd Session, is the report of the Committee on Rivers and Harbors concerning a then-pending rivers and harbors bill which included a project to extend the 9-ft. stage in the Allegheny River to East Brady, Pa. This project is dealt with on

page 92 of the document and it is there stated: "The District Engineer has made a thorough study of traffic to be anticipated from an extension of the 9-foot project" to East Brady, "a distance of 12 miles," which "would reach extensive limestone deposits of value to the smelting industry and would develop an estimated increase of 550,000 tons of water-borne commerce." Altho the 9-foot stage was provided for the limestone quarries on the Allegheny River, the 550,000 tons of traffic never materialized. According to the figures compiled by the Office of the District Engineer at Pittsburgh, the movement of limestone on the Allegheny River in recent years dwindled from 105,000 tons in 1935 to a mere 10,000 tons in 1943, and since, the District Engineer hasn't considered the tonnage important enough to classify it separately. It is indeed common knowledge that Allegheny River locks 6, 7, 8, and 9 serve no purpose than to let pleasure boats, and a few sand and gravel tows, up and down the stream, but they cost the public about $8,700,000 which doesn't include the channel work.

* * *

(3) The Green River and Barren River and Bear Creek.-While traffic on the Green River and its tributaries, notwithstanding improvements made at Federal expense, has never amounted to very much, it will serve to illustrate the difficulties of predicting traffic accurately. House Document No. 2, 71st Congress, 2nd Session, contains a report by the Board of Engineers for Rivers and Harbors, which at pages 6 and 7 of the document, states: "A commerce amounting to some 300,000 tons now moves through Lock #5 and Lock #1, Barren River. This is largely asphalt taken from points on the Upper Green River to the railroad at Bowling Green on Barren River. the commerce already moving over the two rivers and that in prospect are sufficient to justify the provision of adequate facilities". At page 11 of the document, in the report of the District Engineer at Louisville, it is shown that the 300,000 tons of then-existing commerce referred to the year 1927 and was made up of 51.7% asphalt and 25.3% coal, the balance being miscellaneous commodities. Then the report sets forth that with the improvements under consideration "it is believed that within the next few years the total shipment of asphalt will exceed 500,000 tons annually". I wrote the District Engineer at Louisville, Col. Doyle Hammer, to find out how accurate this forecast might have been, and he responded with a statement of the tonnages handled on the Green and Barren Rivers in the years 1935 through 1943, classified by commodities. As to asphalt rock, of which 500,000 tons were predicted, the largest movement was in 1936 and amounted to 148,050 tons, and the smallest was in 1943, just 67,000 tons. District Engineer's report in House Document No. 2 did not, it is true, mention the future of the coal traffic; neither did it say that the 76,000 tons which had moved on these rivers in 1927 would dry up following the improvements he advocated. The fact is, however, that in 1943 the coal tonnage was but 2,870 tons; in 1942, 1,000 tons; and in 1941 nil.

In considering this total failure of the improved Green and Barren Rivers to attract coal tonnage or even to retain the tonnages which moved on those streams before the most recent improvements, it should be borne in mind that they extend thru the important coal-producing fields of West Kentucky, which in 1943 produced over 15,000,000 tons of which 14,350,000 tons were mined in counties thru which the Green and Barren Rivers flow or on which they border. I could of course extend this discussion indefinitely by citing many additional instances where prospective tonnage estimates relied upon for large Federal expenditures to canalize inland waterways have never been realized, and they would include such important projects as the Illinois River, Missouri River, and Upper Missouri River. The three cases specifically mentioned, however, will serve to show that there is no such thing as certainty in the forecasting of the extent to which a waterway project may be utilized. When, therefore, as in the case of the Big Sandy estimates, it clearly appears that the tonnages are highly ́ exaggerated and ferequently imaginary, the Board should exercise extreme caution before endorsing them. The need for caution and conservation is further emphasized by the fact that on Dec. 13, 1941, Colonel C. L. Hall, who as Division Engineer at Columbus, Ohio, approved the Huntington District Engineer's favorable report, advised the Chief of Engineers at Washington that "The District Engineer, after exhaustive studies of coal reserves, consumer demand, and transportation charges, has found that an average of 7,500,000 tons of coal may be expected to move annually on the proposed 9' navigation project, on Big Sandy and Tug River and Levisa Fork, with resultant savings

directly creditable to the improvements of $3,270,000 annually"; that "It is doubtful whether a balance of cost against benefits could be made now, which would have any validity after the war" and that "In the variable economics of a huge national war effort any economic forecast of conditions after the war, which is what this survey would in part be, has too high a factor of uncertainty to be reliable." Colonel Hall then recommended that the entire matter be deferred until the postwar period.

I submit the Big Sandy report, especially the prospective tonnage estimates in it, is subject to all of the defects that Colonel Hall prophesied and that it is therefore valueless in this, the postwar period.

V. PREDICTED SO-CALLED PUBLIC SAVINGS FROM THE BIG SANDY PROJECT ARE EXCESSIVE DUE TO INFLATED ESTIMATED TONNAGES AND TO IMPROPER METHODS OF CALCULATION

In the preceding section I have shown about as completely as possible from fragmentary information made available by the District Engineer that the prospective Big Sandy coal tonnage of 15,000,000 tons is a gross exaggeration and will not bear close scrutiny and analysis. I now desire to discuss critically and to demonstrate the fallacy of the assumption by both the District and Division Engineers that the public would be benefited directly through canalization of the Big Sandy and its Forks to the extent of 29¢ for every ton of coal that might be transported on the waterway. These so-called direct savings result from the simple process of deducting the estimated average cost for transporting the coal from assumed shipping points on the Big Sandy River and Tug and Levisa Forks to the mouth of the Ohio River at Catlettsburg, Ky., of 33¢ net ton as computed on Table D to Appendix C, from an estimated present transportation cost of 62¢, which consists of the present transshipping rate of the C. & O. Ry. to Catlettsburg of 55¢ plus an assumed car-to-barge transfer expense of 7¢. While I have previously shown that the Big Sandy barge cost is inadequate because it takes no cognizance of the expense of getting the coal to river tipples from mines some distances therefrom, which more often than not would exceed the cost of loading railroad cars at mine tipples by more than the assumed cost of transferring coal from cars to barges at Catlettsburg, and in many cases would be greater than the alleged public saving of 29¢, I shall for present purposes accept, without conceding the correctness of, the so-called direct saving as set up in the report.

By using the total railroad rate and hence the gross revenue that would accrue to the railroad on a movement from the Big Sandy fields to Catlettsburg for furtherance by barge as the basis for the so-called "public savings," it necessarily follows that the railroad rate and revenues have been considered as a complete economic loss or a public waste in the sense that it benefits no one except perhaps the railroad. This conclusion is not only logical but is inescapable if the district engineer's formula for computing public savings has any merit whatever; because, unless one assumes that money paid to a railroad is a total public and economic waste, then a difference between a railroad rate and a water transportation cost should not be labeled and could not result in a 100% saving to the public. In order to demonstrate the point I want to stress, it is necessary to tear the railroad rate apart so as to find out what happens to it after it gets into the coffers of the railroad company. This is done in Exhibit A attached, consisting of four pages. Item 1 on page 1 of the exhibit shows the total operating revenues of all Class I railroads in the United States and in the Eastern District, including Pocahontas Region, for 1940 and 1944; in Items 2 to 8, the expenses and taxes paid by the same groups of railroads in the same years which are totaled in Item 9; and Item 10 states the net railway operating income, which is the difference between the total expenses and taxes in Item 9 and the total operating revenues in Item 1. It therefore represents what might better be termed as the railroads' gross profit, out of which they must pay fixed charges incident to indebtedness and dividends to stockholders, if any. The second set of figures on page 1, headed "Distribution expressed in cents per dollar of gross revenue," shows the portions of the railroads' gross revenue dollar required to pay the expenses and taxes, and what is left over as operating income or gross profit after such are paid. Page 2 of the exhibit

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