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is a computation which distributes the 55¢ rate used as the basis for determining the so-called "public savings" in the same proportions as stated on page 1 of the exhibit. It shows, for example, that in 1944 all Class I railroads in the U. S. paid out for the itemized expenses and taxes 48.6¢ of every 55¢ in gross revenue received. In the case of the Eastern District, including Pocahontas Region, expenses and taxes made up 48.8¢ of a 55¢ rate, leaving only 6.2¢ as net railway operating income. Pages 3 and 4 of the exhibit contain corresponding data and computations for account of the C. & O. Ry. and N. & W. Ry., the railroads which would be most directly affected by the Big Sandy project. It is to be noted in the case of the C. & O. Ry., which publishes the 554 rate to Catlettsburg, that based on their 1944 disbursements 46.6¢ of every 55¢ rate collected by that railroad was required to pay expenses and taxes and that only 8.4¢ remains as net railway operating income. In the case of the N. & W. Ry., the expenses and taxes for each 55¢ rate amounted in 1944 to 46¢, and the net railway operating income was but 9¢.

Bearing in mind that in order to validate the method of computing public savings as employed in the Big Sandy report it is necessary to consider moneys paid to railroads as total waste resulting in an economic liability or a drain on society, I urge the Board to consider the formula in the light of the following questions:

1. Is the public injured because the C. & O. Ry. must pay out of every 55¢ rate it collects 13¢ in taxes for the cost of operating Federal, State and local governments, and their institutions?

2. Is it against public interest for the C. & O. Ry. to have paid 20.2¢ out of each 55¢ collected as wages and salary to its employees?

3. Does the payment by the C. & O. Ry. out of each 55¢ rate it collects of 2.6¢ for coal and 6.4¢ for other materials and supplies constitute waste from a public standpoint so that the public would be benefited were those purchases eliminated?

The answer to all of these questions is obvious because each of the expenditures I have enumerated constitutes a direct and valuable contribution to the public from both a social and an economic standpoint, but yet if there is any merit to the formula for figuring public savings all of the questions must be answered in the affirmative.

Proponents of the waterway will undoubtedly seek to reply to my contentions or to lessen the force of them by stating that there are included in the estimated barge costs items of expense which are also economically or socially desirable. That of course is true to a very small degree. This is demonstrated by the following tabulation prepared from Exhibit A attached, and from Table C of Appendix C to the Big Sandy report bearing the title "Estimated Cost and Annual Charges for Design Tow":

Distribution of rail rate of 55 cents compared with estimated Big Sandy barge cost of 33 cents (table C, appendix C)

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Thus it will be seen that although the difference between the rail rate of 55¢ and the computed barge cost of 33¢ is only 22¢, the railroads' return to the public in the form of taxes, wages and purchases of fuel and supplies is 32.5¢ more than would the barge line. From this it is clear that instead of saving the public 29¢ as the report seeks to prove, the actual result would be to take away from the

public and the Government 10.5¢, and in addition the Government would assume the perpetual burden of operating and maintaining the waterway at a cost based upon the District Engineer's greatly exaggerated estimate of 15,000,000 tons of prospective traffic of 22.9¢ per ton, which is about 23 times the amount of taxes included in the barge cost.

Notwithstanding these facts which the District Engineer completely ignored and which demonstrate conclusively that the estimated public savings are mythical, the report multiplies the exaggerated 15,000,000 ton estimate by 29¢ and says that the public will be benefited to the extent of $4,350,000 annually. It then says that because the annual Federal carrying charge, i. e. subsidy, on the proposed project is computed at $3,437,820, the ratio of economic cost to economic benefits is 1 to 1.27 and the proposal is therefore justified. Whether a ratio of costs to benefits so close as 1 to 1.27 justifies such a conclusion is a matter upon which reasonable men might differ, but if the factor of economic benefits included in that ratio is inflated by greatly exaggerated tonnages, it should be given the most careful study before it is accepted. In the final analysis, according to the mathematics of the District Engineer, whether the waterway is or is not justifiable depends upon the number of tons of coal that will move on it and the 15,000,000 need be reduced only to 11,854,500 tons in order to wipe out the public benefits completely. I am certain that my analysis of the prospective tonnage estimates in the report proves that they are inflated much more than that amount, but I shall now approach the question of the inflation of tonnages and its effect upon economic justification from a different viewpoint. I have shown from the findings and conclusions of the Army Engineers, including this Board, with respect to the availability of high grade coals in the Kanawha Valley, that if it is reasonable to believe that Big Sandy coal will move to destintions on the Mississippi River north of Cairo and on the Illinois River, then long since there would have been substantial movements of the same kinds of coal from the Kanawha Valley or via rail-river thru Huntington, W. Va. Moreover, if there is such a large potential market in those far-off river ports for Big Sandy coal at transportation savings approximating those stated on Table E of Appendix C, one would suppose that the mine operators in the Big Sandy field would have found a way to develop those markets via the C. & O. to Catlettsburg, thence river.

Exhibit B attached is a statement of one page, which classifies the entire 1944 movement of coal loaded into barges on the Kanawha River and at Huntington, W. Va., by destination areas. It will be noted that only 882 tons moved from the Kanawha River to Ohio River ports west of the Louisville, Ky., area and only 14,681 tons moved to ports beyond Cairo. From Huntington the movement west of Louisville was but 3,158 tons, none of which went beyond Cairo. These, I can state, are quite representative of the movement from the Kanawha River and Huntington during earlier years. Exhibit C attached is a statement of one page, which classifies the tonnage estimates on Table E, Appendix C, to the Big Sandy report by similar destination areas. For my present purpose, I wish only to direct attention to the fact that the U. S. E. D. estimate of coal that will move from the Big Sandy to ports beyond Cairo is 5,399,400 tons or more than 2 of the total U. S. E. D. estimate on Appendix C. The District Engineer, however, increased the Table E total estimate of 9,760,900 by more than 50% to 15,000,000 tons. A like increase in the Table E estimate for ports beyond Cairo would produce a figure of approximately 8,300,000 tons. For reasons which I have given, it would seem that the inclusion of any prospective tonnage from the Big Sandy to ports beyond Cairo is unreasonable, far-fetched, and unduly optimistic. If, therefore, the District Engineer had been guided by the past experiences with respect to distribution of the water movement of similar coals at probable transportation costs and under conditions equal to or even more favorable than on the proposed Big Sandy project, he would have excluded all the tonnage to ports beyond Cairo, which would have reduced the 15,000,000 ton estimate to about 7,000,000 tons, upon which the alleged benefits would have been $2,030,000, or $1,407,820 less than the government's annual carrying charges as stated in the report. The ratio of economic cost to economic benefits would then have been 1 to .59.

This illustration is given to demonstrate the controlling effect of the element of prospective tonnage upon the economic justification of the Big Sandy project and is not to be construed as an indication that I think there is a reasonable

expectation of a movement from Big Sandy mines by water of 7,000,000 tons, which exceeds substantially the total movement of river coal from both the Kanawha Valley and Huntington during 1944, the year of the greatest bituminous coal production in the history,of this country. I mention in passing that it is not to be expected that this wartime level of coal production will be maintained in the postwar period. Reliable, conservative estimates indicate that in postwar years the bituminous coal production will approximate % of the war years or about 400,000,000 tons. If this expected decrease be applied as it should be to the Big Sandy's prospective tonnage, the estimate would be cut from 15,000,000 to 10,000,000 tons, which is considerably less than the tonnage required to justify the waterway even under the District Engineer's formula.

VI. THE THEORY OF SO-CALLED FEEDER VALUE OF THE BIG SANDY IMPROVEMENT IS WITHOUT MERIT AND SHOULD NOT BE CONSIDERED

While the District and Division Engineers say in their reports on the Big Sandy that the improvements they propose are justified by the so-called direct benefits they also indicate that the waterway would have what is termed "feeder value", in the amount of $9,000,000 annually. Feeder value may be defined as the alleged contribution in terms of so-called public savings which coal originating on the Big Sandy would make toward the success of the entire Mississippi River System. This, I believe, is a new and novel idea which, when applied to the Big Sandy project, amounts to little more than an effort to bolster what has been shown to be unreasonably high and improper calculations of direct savings. Earlier in this statement, I have pointed out that a very substantial part of the tonnages claimed for the Big Sandy represents direct displacements of coals now moving on the Kanawha and Ohio Rivers and even on the Illinois and Mississippi Rivers. Certainly as to such tonnages the so-called feeder value of the Big Sandy is nonexistent because it is bound to be offset by traffic losses on the other rivers which the predicted diversions would occasion. But the theory of feeder value is unsound and economically fallacious on broader grounds. The report, by computing the so-called direct Big Sandy savings on basis of the difference between 62¢, which is the rail rate to Catlettsburg of 55¢ plus 7 for dumping, and the estimated Big Sandy transportation average cost of 33¢, necessarily and in specific terms assumes that the potentially available thru route involving the 62¢ to Huntington, f. o. b. barges plus river costs beyond is the cheapest route now from the Big Sandy basin coal mines. Since Catlettsburg is at the mouth of the Big Sandy, the traffic which according to the reasoning of the District and Division Engineers should move by the rail-water route, would utilize the Ohio and Mississippi River Systems to precisely the same extent as in the case of the proposed thru water route from the Big Sandy. Obviously, therefore, any value which the traffic might have to the Ohio River and connecting waterways when it moves to Catlettsburg via water would, however expressed, be identical to the value to those rivers of shipments that might move via rail to Catlettsburg thence barge.

Even beyond this, the idea is fallacious and dangerous because the only principle with any semblance of soundness upon which to justify the Big Sandy or any other waterway is that it will support itself. Every waterway project should be considered on its own individual merits from the standpoint of its costs and traffic potentialities and that traffic cannot logically be used a second time in an attempt to justify some other project.

These defects in the theory of feeder value are so obvious and fundamental that further comment is unnecessary. The Board should definitely and clearly find that the theory of feeder value is wholly fictitious and should constitute no part of the considerations of the Big Sandy project.

VII. THE BIG SANDY PROJECT WOULD HAVE NO ASCERTAINABLE MILITARY VALUE BUT MIGHT ACTUALLY IMPAIR NATIONAL DEFENSE IN TIMES OF WAR EMERGENCY

Paragraph 216 of the District Engineer's report contains this surprising and unsupported statement: "The waterway would be an important military asset during time of war as it would afford an additional avenue of transportation into one of the greatest coal deposits in the United States. A large additional

volume of coal needed during a war emergency could readily be carried on the waterway, and, thus relieve a part of the heavy burden carried by railroads. This would permit better utilization of the railroads for troop and supply movement and also alleviate the coal car supply problem." In the light of the experience in trnsportation during World War II, I am at a loss to understand how the District Engineer could have reached so erroneous a conclusion, and it is therefore perhaps significant that it appears in the report as a mere statement without factual support.

Waterway proponents have always assumed and argued that in times of national emergency the railroads would collapse or prove inadequate to meet the demands for transportation services and that navigable waterways would then save the situation by accepting an enormously increased volume of traffic. What actually happened when during the last few years the country experienced its greatest and most critical demand for transportation has definitely, and I hope for all time, exploded this idea. The railroads did not for a moment collapse or fail to meet the demands of wartime transportation and the barge line traffic actually fell off during the most critical years. I have prepared and attached Exhibit D which shows statistically the extent to which the railroads were called upon to meet the wartime transportation needs and the fact that water transportation, being less desirable and flexible, carried fewer tons of freight than before the war. For this purpose I have used the years 1941 and 1943, the latter being the latest for which complete figures are available, and have compared a number of the more important improved waterways with all Class I railroads in the United States, the Eastern District, the Pocahontas Region, the Southern Region, and the C. & O. Ry. and N. & W. Ry. The comparative tonnages and the index numbers show more forcefully than words the vast additional tonnages which the railroads were required to handle to meet war needs and the substantial diminution of barge traffic. Even the Monongahela River, flowing thru one of the largest industrial sections of the country and carrying traffic consisting very largely of coal, showed a reduction of 540,963 tons of traffic, 1943 under 1941, notwithstanding the constantly rising tempo of wartime industrial activity and coal consumption throughout the period.

It is from this experience in our nation's greatest war emergency that I draw the conclusion that the development of waterways impairs rather than aids national defense during critical times. The proposed Big Sandy waterway, in common with practically all waterway projects, was conceived and planned with the idea of diverting traffic from railroads and the economic justification of it founded upon a comparison of estimated water costs with published railroad rates and nothing else. Whenever, therefore, a waterway is improved for the purpose of navigation and causes a diversion of traffic from the railroads, the ultimate result is a weakening of the railroad transportation machine and its capacity to handle traffic. In other words, the railroads, as all other private enterprises, must maintain a reasonable ratio between capacity and utilization so that as the demands for rail transportation decrease, there eventually must be a corresponding reduction in the capacity of the railroad facilities. It, therefore, can be stated as axiomatic that when and to the extent railroads are deprived of traffic thru subsidized waterways, their ability to rise to meet great emergencies such as occurred in World War II will be lessened, and the country left worse off for having spent the taxpayers' money to provide an agency of transportation unnecessary for the needs of commerce.

The fact that the Big Sandy project was recommended by the District Engineer to handle coal traffic exclusively renders it all the more a menace to the railroad industry because the railroads are and ever will be dependent upon coal traffic to a greater extent that upon anything else for the traffic and revenues necessary to sustain them. To illustrate the importance of coal traffic to the railroad industry from both a tonnage and revenue standpoint, I have compiled and attach a statement of two pages, marked Exhibit E, which shows statistically and percentagewise the relationship of railroad coal traffic to all carload revenue traffic for the years 1939 and 1943. So as to present the broadest possible picture, this exhibit deals respectively with all Class I railroads in the United States, the Class I railroads of the Eastern District, the Pocahontas Region, the Southern Region, and then with twelve selected coal-carrying railroads of the East and South. It, I believe, shows convincingly that to deprive railroads of coal traffic is to deprive them of that which is most vital to their welfare and existence.

VIII. THE COAL IN OR NEAR THE VALLEYS OF THE BIG SANDY, TUG AND LEVISA FINDS RADY MARKETS IN ALL THE AREAS TO WHICH MOVEMENTS VIA WATER ARE PREDICTED AND ELSEWHERE, AND DOES NOT NEED SUBSIDIZED TRANSPORTATION

It should be a fundamental rule that no waterway ought to be constructed at Government expense when the area tributary to it does not need Federal assistance to insure development equal to that of other sections of the country endowed with similar natural resources. Such a consideration is especially pertinent in the case of the Big Sandy project, because it is proposed for the sole purpose of moving coal from already highly developed mining fields which are able to and do market their products throughout a very substantial part of the country and whose production trends over the years have been about as good as any coal field in the nation. For the purpose of proving these conclusions, I call attention to statements attached, viz:

Exhibit F shows the production of coal in Floyd, Johnson and Pike Counties, Kentucky, during the years 1937 through 1943, compared with the production in Boone, Clay, Kanawha and Logan Counties, West Virginia, and in the United States for the same years. Floyd, Johnson and Pike Counties, Kentucky, are those in which much of the coal proposed to be moved on the Big Sandy waterway will be produced, and Boone, Clay, Kanawha and Logan Counties comprise most of the Kanawha coal district, which ships coal by rail, by barge on the Kanawha River and via the rail-water route thru Huntington, W. Va. It is to be noted that the production experience of the Kentucky counties is considerably better than the West Virginia Counties, notwithstanding water transportation, and is very much better than the nation as a whole. This I believe warrants the assertion that if there are any coal fields in the U. S. which require subsidized transportation, those along the Big Sandy are not among them.

Exhibit G is a statement compiled from the records of the C. & O. Ry. and N. & W. Ry. showing the total coal produced on and shipped via their lines in the Eastern Kentucky, Thacker, and Kenova Districts, which are the fields adjacent to the Big Sandy and its forks, and the Kanawha District for the year 1930 through 1944. It also shows United States production for the same years. Attention is directed to the fact that the Eastern Kentucky, Thacker, and Kenova Districts rail shipments rose from an index of 100 in 1930 to an index of 143.6 in 1944, whereas Kanawha District shipments rose from 100 to 119.5, and United States coal production from 100 to 132.6 in the same period.

So as to avoid the possibility that the very great shipments of coal from the C. & O. Railway Eastern Kentucky Districts and the N. & W. Railway ThackerKenova Districts, leaving false implications, I would like to state that about one-half of this production is produced at mines in excess of 10 miles from the proposed waterway, and that it includes a substantial tonnage shipped to eastern markets and to many northern destinations in connection with which the proposed waterway would be of no use. Of the 1944 production of 25,558,000 tons, for example, 5,661,000 originated at mines within three miles from the waterway; 7,214,000 originated at mines from three to ten miles from the waterway; 5,287,000 tons moved to eastern markets, and at least 11,500,000 to northern markets, including Canada and the Lakes, which will be unaffected by the proposed waterway.

Exhibit H shows the distribution of C. & O. Ry. Eastern Kentucky and N. & W. Ry. Kenova-Thacker District coals in the year 1944, and also the movement of ex-river coal from Cincinnati, classified by destinations. The figures on this statement are from the reports of the Ohio Bureau of Coal Statistics. It is designed to and does demonstrate the very wide distribution of coals loaded on the C. & O. Ry. and N. & W. Ry. in the Big Sandy field throughout the area north of the Ohio River from Buffalo and Pittsburgh on the East to the Dakotas, Nebraska, and Kansas on the West, in all of which there was marketed in 1944 over 21 million tons of said Eastern Kentucky, Thacker, and Kenova Districts coal. These figures show the utter lack of any necessity for Federal aid to the coal industry to be served by the proposed Big Sandy waterway, especially with respect to the markets within the territory described which of course, includes that to which all of the prospective Big Sandy coal tonnages are expected to move via barge.

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