coal field. For a considerable distance it is paralleled on its south bank by the Chesapeake & Ohio Railway and on its north bank by the New York Central Railway. In 1937 the channel of the Kanawha was deepened to 9 feet and three new and modern dams were constructed, all of which produce water power for the generation of electric current. The Annual Report of the Chief of Engineers of the United States Army for 1944 shows that only 2,612,244 tons of coal moved through the Winfield Dam downward on the Kanawha River in 1943. The largest coal tonnage that was ever moved down the Kanawha into the Ohio in the 8 years since the deepending of its channel was 3,109,652 tons in 1942. Principal coalproducing counties served by the Kanawha waterway are Fayette and Kanawha. According to reports issued by the United States Bureau of Mines and the United States Geological Survey, the present estimated recoverable coal reserve of Fayette County is upward of 2,000,000,000 tons, and the like reserve for Kanawha County is approximately 31⁄2 billion tons. The actual production of coal for the year 1943 in Fayette County was approximately 14,000,000,000 tons and in Kanawha County 84 million tons, a total of approximately 224 million tons, of which, as stated, only 2,612,244 tons, or slightly more than 10 percent, moved over the canalized Kanawha into the Ohio.

Brief reference to the comparative cost of improving the Kanwaha to provide a 9-foot stage and of canalizing Big Sandy to the same depth, is of interest. The total cost of constructing the new w infield, Marmet, and London Dams on the Kanawha, which raised its stage to 9 feet, was $14,000,000. If, in addition to the cost of these three dams in the Kanawha, we include that of Gallipolis Dam in the Ohio, located 8 miles below the mouth of the Kanawha, an additional $10,000,000 will be added, making the total cost of the recent Kanawha improvement (including the Gallipolis Dam) $24,000,000, or about 29 percent of the Big Sandy estimate, of $82,300,000. Furthermore, economic justification for the recent Kanawha project rested to some extent upon the hydroelectric_installations in the three dams in the Kanawha which produce revenue to the Federal Government amounting to $72,000 annually. This has no counterpart in the Big Sandy proposal. It may also appropriately be noted that 1943 maintenance and operating costs on the Kanawha were $177,000, from which must be deducted the $72,000 received from license fees for power, leaving a net cost of $105,000. Compare this with the estimated annual cost of $600,000 for maintenance and operation on the Big Sandy.

Specific objections to the proposed canalization of Big Sandy and its Tug and Levisa Forks

1. In view of the present enormous public debt, the large excess of Federal expenditures over Federal revenues, and existing high taxes, expenditure of public funds to provide unnecessary transportation facilities is economically unsound and unjustifiable.

2. The loss of revenue to the State of West Virginia and to the West Virginia counties bordering upon the proposed canal, including boards of education and municipalities of these counties, which would result from the canalization project (if successful) is a vital item to them, as witness the protests filed by these bodies. Inevitably the amount of State and county taxes (as well as Federal taxes), payable by the railroads now serving the Big Sandy Basin, will be substantially diminished if the revenue from transporting 8.3 million tons of coal annually, be diverted from them to a federally subsi ized canal.

3. The physical difficulties attendant upon shipment over the proposed canal seem prohibitive. It is understood that the total length of the canal will be 190.5 miles and that all but 27 miles of its entire length, that is to say 163.5 miles, will be upon the Tug and Levisa Forks. Both forks are narrow and tortuous. Their narrowness and extreme curvature necessarily will make the canal dangerous, difficult and expensive for navigation by the proposed tow of 450 feet in length. It is believed that the Big Sandy project has no counterpart in the United States in respect to these physical conditions.

4. It is understood that the normal flow of water in both the Tug and Levisa Forks is so low that storage dams, however, costly, will not impound a sufficient supply of water to support year-around navigation. To meet this condition, it is planned to install pumps to force water upstread from the Ohio River from pool to pool, for a maximum distance of 111 miles on the Levisa and 85 miles on the Tug.

5. It has been suggested, the West Virginia Chamber of Commerce understands, that the canalization project will attract to West Virginia along the east bank of Tug Fork industries requiring the use of large quantities of water in their

manufacturing processes. The reports of the United States Geological Survey show that the average annual discharge of water from the Tug Fork at Kermit, 22 miles below Williamson, is only 1,203 second-feet. For this reason it cannot be expected that many industries requiring the use of large quantities of water could or would be located along Tug Fork.

6. The same idea has heretofore been weighed in the balance and found wanting. It is understood that prior to 1945 Army engineers have made numerous reports on the canalization of Big Sandy and its forks, but never until the present time has an engineer claimed economic justification. In 1933, the district engineer reported:

"The physical characteristics of the river and its forks are unfavorable to the development of a modern waterway and it is not believed that the improvements as proposed would attract sufficient traffic to justify its high cost." This report was approved by the Board of Engineers.

7. The railroads serving the Big Sandy area are capable of handling all available traffic. They have extended their lines as development has reached new areas, in order to serve new mines. The canal is not needed and is a mere duplication at public expense of a transportation facility. The Federal Government, now proposes to make a capital investment of more than $82,000,000 of taxpayers' money for the construction of an unnecessary additional means of transportation of highly speculative value.

8. Reduction of the burden of Federal taxes requires economy instead of waste or extravagance in the expenditure of Federal funds created by taxation. For these reasons, the project appears to be economically unsound. Respectfully submitted.

THE WEST VIRGINIA CHAMBER OF COMMERCE. By HOMER A. HOLT, President.

H. A. STANSBURY, Managing Director.

Mr. LAWSON. Mr. Chairman, may I request that we be granted not less than 10 more minutes? We have one other important witness, a man formerly on the Board of Army Engineers.

Mr. RANKIN. Let him file his statement, insert his statement in the record.

Mr. LAWSON. Would it be possible to give him at least 5 minutes? Mr. RANKIN. We have only four or five members here, and you have repeated the same material, practically, all day. Mr. LAWSON. This is not repetition at all.

Mr. PETERSON of Georgia. All right, proceed 4 or 5 minutes. Mr. LAWSON. I will introduce Colonel Bain, Jarvis J. Bain, former member of the Board of Army Engineers.

STATEMENT OF JARVIS J. BAIN, MARTINSVILLE, IND.

Mr. BAIN. Mr. Chairman and gentlemen, my name is Jarvis J. Bain, residence 510 East Washington Street, Martinsville, Ind. I had 39 years' active duty as an Army engineer officer. I served as district engineer in five districts. I served as division engineer in prewar days in the South Atlantic Division, and have served as a member of the Board of Engineers for Rivers and Harbors. In presenting some idea of the report which I prepared for the Norfolk & Western and the Chesapeake & Ohio Railroad Cos.

Mr. DONDERO (interposing). How long were you an Army engineer, Mr. Bain?

Mr. BAIN. Over 39 years; in the military service over 43 years.
Mr. RANKIN. How long have you been with the railroads?
Mr. BAIN. About 7 months.

Mr. PETERSON of Georgia. Certainly the gentleman has been with one of the finest engineering organizations the world has ever had: the United States Army engineers. They made a very fine selection, I

am sure.

Mr. BAIN. I will mention just a few of the things that I have found by my investigation. The reports submitted by the Board of Engineers very much underestimate the cost of this project. They figure a cost of $87,000,000, and I get $122,000,000. I include what they added to the district report, and also what I claim they omitted from the report which should be in there, besides the underestimation. Their estimates are based on 1940 prices, which were 331⁄2 percent lower than present prices.

Mr. DONDERO. I asked that question yesterday, I think, of one of the Army engineers. because it had been called to my attention, and I think he did say that they based their figures on 1945 prices. Mr. RANKIN. He did.

Mr. BAIN. I can't reconcile that at all. He admits that the district engineer used 1940 prices. His report adds approximately $17,000,000 to the cost of this project. It was 1940 conditions that the district engineer used as a basis for his estimates. However, the Board has increased the allowance for engineering and contingencies from 25 percent used by the district engineer to 35 percent, increasing the contingency item from 25 to 35 percent actually increased the cost 8 percent, as against a real increase in cost of 33% percent. The rest of his addition was for additional and new works, $12,000,000. And there is nothing to show the break-down of that estimate, but if it is not based on the same unit prices, then he has got a hybrid estimate mixed between present-day prices and the other, the district engineer's report and the figures that he gave here, which bring it exactly to the 1941 price. 1941 was the best he would do in adding to the district report,

The physical conditions of that valley cannot be shown on a map with such a small scale as that. I have had some exhibits prepared, some charts, which I hoped to pass around to the members of the committee, but time will not permit it.

I thank you.

Mr. LAWSON. Thank you very much, Colonel Bain.

Mr. DONDERO. Why don't you leave the exhibits with us?

Mr. BAIN. Yes; I will do that.

Mr. LAWSON. At this time I desire to file a statement by Mr. R. E. Petterson of Roanoke, Va., general accountant of the Norfolk & Western Railway Co., and request that it be made a part of the record. Mr. PETERSON of Georgia. It may be filed. (The statement of R. E. Petterson follows:)

TO COMMITTEE ON RIVERS AND HARBORS,

House of Representatives:

MAY 7, 1946.

My name is R. E. Petterson. I am general accountant of the Norfolk & Western Railway Co. at Roanoke, Va., and have been employed by it for 25 years. My position requires a general knowledge of accounting and income-tax problems. In collaboration with representatives of the Chesapeake & Ohio Railway Co. I have prepared a statement and supporting exhibit which shows that if under the proposed waterway project 8,300,000 tons of coal were diverted from rail to water movement that the United States Treasury Department would suffer an estimated annual loss of $4,530,000 in income taxes.

This estimate is predicated upon the effect that the diversion would have upon the railroads which participate in transporting the coal from origin to destination. The coal would originate on the Norfolk & Western and Chesapeake & Ohio, and the principal connecting carriers are Pennsylvania, New York Central, and Baltimore & Ohio. These five railroads are used as typical in computing the loss of net revenue to all railroads by reason of such diversion.

The exhibit and explanatory notes show the basis upon which the tax loss is computed, and as I believe the exhibit is self-explanatory, I will not consume further time by going into details.

This $4,530,000 in taxes constitutes public moneys for the benefit of all the people of the country and the loss thereof to the Federal Government is a loss to the public that will exceed any alleged savings from the construction of the canal. I might add that this $4,530,000 loss is on the basis of 38-percent normal tax and surtax, the effective rate for 1946, and does not include any excess-profits taxes.

Finally, it should be observed that this tax loss is necessarily an estimate; however, I believe that the figure is a close-enough approximation for practical

purposes.

I wish to file the exhibit herewith.
Respectfully submitted.

R. E. PETTERSON.

Statement of estimated annual income-tax loss to the U. S. Treasury Department that would result from diverting 8,300,000 tons of coal from rail to water

2 On p. 59 of exhibit entitled "Territorial rail costs based on a separation of out-of-pocket and constant expenses, 1939", dated September 1942, presented by Dr. Ford K. Edwards, head cost analyst, Bureau of Statistics, Interstate Commerce Commission, in ICC 28300-Class Rate Investigation, the out-of-pocket ratio is shown as ranging from 70 to 80 percent of the total expenses, rents, and taxes. In estimating out-ofpocket expenses, 75 percent has been used as representing out-of-pocket ratio.

APPENDIX A.-Statement showing average results, distances and rates, on coal from Big Sandy fields to destinations to which U. S. Engineering Department has estimated prospective tonnage on which there would be a saving in freight charges by the proposed canalization versus present shipping route (Table E, Appendix C of district engineer's report as amended to include adjustment shown in engineering board's report increasing towage on Ohio River from 1.2 mills to 1.6 mills per ton-mile and eliminate all tonnage on which recomputed estimated savings amounted to 20 cents or less per ton)

[Straight average: Total average distances and total rate in cents per net ton divided by total destinations. Tonnage average: Total ton-miles divided by total net tons and total revenue divided by total net tons]

Source: Office of General Coal Freight Agent, Norfolk & Western Ry.

Mr. LAWSON. Will Mr. Roger Earl, Cleveland, Ohio, representing the Ohio Coal, Association, come forward and file his statement? Also Mr. John Marr, St. Paul, Minn.

Mr. PETERSON of Georgia. Without objection both of these gentlemen may file their statements.

Mr. LAWSON. One question, Mr. Chairman. We wish to file copies of our brief here. I wonder how many copies we should file? Mr. PETERSON of Georgia. Leave whatever you can spare. Mr. LAWSON. I will leave 26 copies, enough for each member. Mr. Chairman, we have now concluded our side of the case, and in behalf of those whom I have been calling up here this afternoon I want to say we thank you very much for your kind consideration.