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We will proceed to the Cumberland River and tributaries, Tennessee and Kentucky. This is in the House bill. We will hear from the opposition first on that.

CUMBERLAND RIVER AND TRIBUTARIES, KENTUCKY AND TENNESSEE

Who is the spokesman for the opposition on the Cumberland River project ?

Mr. HANES. I am, Mr. Chairman.

STATEMENT OF H. L. HANES, REPRESENTING THE NASHVILLE,

CHATTANOOGA & ST. LOUIS RAILWAY AND OTHER RAILROADS

Senator OVERTON. What railroad do you represent?

Mr. Hanes. My name is H. L. Hanes. I am with the Nashville, Chattanooga & St. Louis Railway. I am speaking for the other railroads interested in this project also.

Senator OVERTON. Have you a prepared statement !
Mr. HANES. Yes, sir.
Senator OVERTON. How long is it?
Mr. Hanes. It is not so very long.
Senator OVERTON. How many pages?
Mr. HANES. Twelve.

Senator OVERTON. Are you going to be the only witness in opposition?

Mr. Hanes. I do not know, sir. In order to conserve the time of the committee I have prepared a statement which I would like to file with the committee and be permitted to supplement it by calling attention to certain facts which I think should be emphasized.

Senator OVERTON. Do you have your statement now?
Mr. HANES. Yes, sir.
Senator OVERTON. Hand it to the reporter, please.

(The statement referred to and submitted by the witness is as follows:)

My name is H. L. Hanes, I reside at Nashville, Tenn., and am appearing for the Cincinnati, New Orleans & Texas Pacific Railway Co.; Gulf, Mobile & Ohio Railroad; Illinois Central Railroad Co.; Louisville & Nashville Railroad Co.; the Nashville, Chattanooga & St. Louis Railway; and Southern Railway Co.

In protest against the further expenditure of Federal funds for the improve ment of the Cumberland River.

In order to conserve time, I have prepared a statement which I would like to file with the committee and be permitted to supplement it by calling attention to certain features which I think should be emphasized and enlarged upon,

1. Protestants are common carriers by railroad doing business in Tennessee, Kentucky and other Southern States. They are large taxpayers to Tennessee, Kentucky, and other Southern States, and the political subdivisions thereof, and to the Federal Government. Two of these protestants, i, e., N. C. & St. L. Railway and L. & N. Railroad Co., serve, directly, the principal cities-Nashville and Clarksville, Tenn.-in the area for which the improvement of the Cumberland River is recommended and all of them serve this area in conjunction with the railroads which have lines in the territory immediately tributary to the section of the Cumberland for which the improvement is recommended. Thus, all of these protestants have a dual interest in the proposed expenditure of $20,730,000, with annual carrying charges of approximately $720,000, recommended for the improvement between Nashville, Tenn., and the mouth of the Cumberland, i. e., (1) as taxpayers who contribute to the public funds to be expended under the plan of improvement recommended and (2) as citizens of the affected area whose businesses may be seriously affected by the proposed improvement.

2. The grounds for the protest of these railroads against the adoption of the recommendation for the improvement of the Cumberland River between Nashville and its mouth may be stated in general terms as follows:

First, as large taxpayers they object to what they consider a wholly unwarranted expenditure of public funds, particularly at a time when the Nation is straining every effort to meet the huge burden placed upon it by the recent war. Surely, with the conditions now confronting the Nation, a better use can be found for public funds.

This statement needs little discussion or elaboration. It is, however, fundamental and should have the most careful consideration by the committee in its appraisal of the recommendation which has been made.

The financial burden placed upon the Nation by the war through which we have just passed is well known to this committee and protestants deem it unnecessary to do more than point to the fact that the proposed improvement would, according to the report, require an expenditure of the large sum of approximately $20,730,000, at a time when the Congress and the Nation should bend every effort to alleviate the burden placed on every phase of our national economy resulting from the Second World War.

Second, they object to the Federal Government, directly or indirectly, going any further into business in competition with its own citizens who support it with their tax payments.

This is also fundamental. Not only is the successful operation of the business of these protestants and other established transportation agencies threatened, but the preservation of the American system of private enterprise, as well.

The Federal funds thus far expended for the improvement of the Cumberland have, in practical effect, created a subsidy for a few large users of the river, particularly the petroleum industry, with little, if any benefit to the general public who, through tax payments, footed the bill for the improvements. On this point we quote from House Document 159, Seventy-ninth Congress, first session, page 73, the expression of the Board of Investigation and Research :

“On many waterways, moreover, the traffic consists predominantly of commodities transported by private and contract carriers for large industrial concerns, which derive substantial advantages from these aids without being under any compulsion to transmit the benefits received to the general public, except insofar as the forces of competition may be sufficiently strong to bring about that result. In the light of these circumstances, existing waterway-aid policies should be thoroughly reexamined by the Congress.”

Protestants believe, that the additional expenditure of $20,730,000 recommended in the report would have the effect of further subsidizing the private water transportation of certain large shippers and thus, in effect, place the Federal Government in further indirect competition with other citizens, including these protestants, who are likewise engaged in the transportation of property in the affected

area.

The report the district engineer predicts that five commodities will account for 63.2 percent of the total tonnage and 54.4 percent of the total savings, i. e.,

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It follows from the report of the district engineer itself that the predominant effect of the improvement, if all of the estimates should prove to be correct, would be to further subsidize those businesses, few in number, which either perform their own transportation or contract with others to do it, and it is this type of waterway user which the Board of Investigation and Research refers to in their comment earlier quoted herein.

In concluding this phase of the discussion of the report protestants respectfuly submit that

(a) Economic justification must rest upon the basic principle that the one who pays is the one who receives and the one who receives is the one who pays. By

no method of economic justification can individual advantage be balanced against costs to the public to determine economic justification.

(0) Expenditures of Government funds to subsidize waterways for the advantage of individuals can be supported only by the principles of state socialism, and to be justified at all state socialism must occupy the whole field.

Third, as citizens engaged in commercial transportation they object to the expenditure of any more of the taxpayers' money in an effort to create transportation facilities for which there is no real public need and which, if successful in procuring the “prospective” traffic estimated by the Board of Engineers, could only do so at the expense of these protestants and other established transportation agencies, and

Fourth, they object to the expenditure of any more of the taxpayers' money to improve a waterway which now provides water transportation in the area of the proposed improvement that is entirely adequate to the actual needs of that area.

These protests are rested upon two grounds, i. e., the absence of a real public necessity for the improvement of the waterway between Nashville and the mouth of the Cumberland and the fact that, if any additional traffic should find its way to the improved waterway, as the Board assumes it would, such traffic could only be procured for the waterway at the expense of these protestants and other established transportation agencies.

The fact that year-around navigation is now provided on the Cumberland between Nashville and its mouth and the further fact that the petroleum industry and the large shippers of grain, scrap iron, iron and steel articles, sulfur, and sugar found it possible to use the waterway for the transportation of large quantities of their products during recent years, and are continuing to do so at the present time, constitute convincing evidence that the waterway is now entirely adequate to the needs of the affected area. The waterway between Nashville and the mouth of the river was improved about 10 years ago by repairing dams A to F, inclusive and surmounting them with movable crests. These improvements, protestants have understood, were designed to provide this section of the river with a 9-foot channel. In any event, year-around navigation, with a channel in excess of the present 6-foot project depth, has been provided by these improvements and it has not been shown that any traffic has been prevented from using this section of the river through the lack of adequate navigation facilities.

In these circumstances protestants firmly believe that no increase in traffic will result and that they are fully justified in protesting against the expenditure of an additional sum of $20,730,000 upon this section of the Cumberland.

While protestants believe that the prospective commerce estimated by the Board for the improved waterway is greatly overstated, one thing at least is certain. Practically every ton of additional traffic that might be procured for the waterway must come from the tonnage of these protestants or other established transportation agencies. Indeed, the district engineer's report makes it clear that the prospecture tonnage estimated for the waterway is not tonnage that would be created by the proposed improvement, but is, instead, tonnage that now moves to and from the affected area largely by rail. For example, he says:

“For many years Nashville has been an important milling center for grain and grain products. It is only within the last few years that these products, forced by lower transportation rates to other competing carriers, have begun to move in quantity over the Cumberland River."

Again, he says:

“The principal markets from which iron and steel products are at present obtained are the Birmingham and Pittsburg areas. Some traffic has moved by water into the Cumberland River from the latter area during 1939 and 1940 at considerable saving under transportation rates, but no similar movements have taken place from the Birmingham area owing to circuity of the water route.” and

"Normally, about 1,000,000 tons of coal is consumed annually within the Nashville area alone. The principal industrial users are located in this area, and at Old Hickory, a few miles upstream. The main sources of the present supply are the east Tennessee mines on the Tennessee Central Railway, and the western Kentucky mines on the L. & N. and llinois Central Railroads, with lesser amounts obtained from the mines in southeast Tennessee on the N. C. & St. L. Ry., and from the northern Alabama mines."

What all of this means, in the finality, is that the Federal Government is asked to expend $20,730,000 for the purpose of diverting, if possible, some 900,000 tons of freight from the railroads and other established transportation agencies to the waterway. If this diversion should be accomplished the effect would not be a reduction in the transportation costs to the general public but, in essence, merely a shifting of the cost of the transportation from the users of the waterway to the general taxpayer.

Fifth, they object to the expenditure of any more of the taxpayers' money for an improvement which, in reality, would not result in any material savings to the general public but would, instead, only have the effect of reducing the transportation costs of a few large industries at the expense of the general public, thereby constituting a direct and actual subsidy to these large users of the waterway.

The principle underlying this objection has been discussed at some length in connection with their first and second objections, and it would serve no useful purpose to repeat the discussion here.

Sixth, they object to the proposed improvement because the results of the amounts already expended for the improvement and maintenance of the Cumberland River do not, in their opinion, justify the assumption that a further expenditure of approximately $20,730,000 for the improvement of the river between Nashville and its mouth, would create the additional traffic estimated by the Board, particularly when consideration is given the fact that because of the improvements made in 1935 (repairing dams A to F, inclusive, and surmounting same with movable crests) this section of the river now has a navigable depth in excess of the project depth and is, navigable throughout the entire year, and

Seventh, they object to the proposed improvement because they believe that the "prospective" commerce estimated for the waterway in the event the improvement is made, is greatly overstated and that consequently the economic justification advanced in support of the improvement is wholly illusory.

These two objections to the proposed improvement rest upon the conviction that the prospective tonnage estimated by the Board for the improved waterway is greatly overstated and that, therefore, the “economic justification” advanced in support of the $20,730,000 expenditure recommended in the report is without a sound foundation.

The district engineer's report shows (table 14) that the major portion of the estimated tonnage and savings is derived from the potential movement of grain and grain products, phosphate rock, fertilizer, petroleum products, and coal, the tonnage ant savings on these five commodities representing 63.2 percent of the total estimated tonnage and 54.4 percent of the total estimated savings. Specifically, the report shows that the estimated potential tonnage for the improved waterway includes:

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24.6 18.8 7.8 6.7 5. 3 4.5 3.0 2.6 2. 2 2. 2 2.0 1.9 1.6 1.5 1.1

i

Coal.

Iron and steel articles.
7 Sulfur
8 Scrap iron
9 Sugar

10 Paper and paper articles Le 11 Tobacco, leaf

Salt.
13 Lumber
14 Sirup and molasses.
15
Composition board and roofing

Subtotal..
All others (less than 1 percent each).
Total

So 12

85.8 14.2

932, 140

100.0

These estimates of prospective tonnage will be discussed, briefly, in the following, with a view to pointing out what these protestants believe to be overstatements, and the reasons for their belief that such potential tonnage has been overstated in the report of the district engineer:

Grain and grain products, 229,842 tons: The estimated potential tonnage is 624 percent of the tonnage which actually moved on the Cumberland in 1940 and 1,232 percent of the 1943 tonnage. The report indicates that Nashville, which is an important milling center for grain and grain products, is the point to which it is expected that this potential tonnage will move. It is also stated in the report that most of the potential tonnage moving by water into the

Cumberland River area will be for local distribution “as the milling-in-transit privilege accorded rail traffic will cause distant distribution points to continue to be served by the railroads." Notwithstanding this, the report includes as additional potential traffic 6,739 more tons of grain and grain products than was actually shipped into Nashville by both rail and water routes during the year 1940 for local distribution and for movement beyond Nashville by rail under transit privileges.

This is tantamount to saying that materially more grain would move over the improved waterway for local distribution in the affected area than now moves to Nashville by both rail and water for both local consumption and movement beyond Nashville under transit. To state this, protestants believe, is to show the utter fallacy of the estimate.

The fallacy of this estimate can also be shown, protestants believe, by comparing it with the movement of grain and grain products on the Tennessee, Warrior, and Ohio Rivers. In 1940 the movement on the Tennessee River, which reaches Florence-Sheffield, Ala., Decatur, Ala., Guntersville, Ala., and Chattanooga, Tenn., amounted to 43,140 tons and in 1943, 123,365 tons. The Chief of Engineers, United States Army, for 1940, shows that the movement of grain and grain products on the Warrior River, which reaches the important Birmingham, Ala., district, amounted to 256 tons, while the movement on the Ohio River, extending from Pittsburgh, Pa., to Cairo, Ill., amounted to 47,524 tons.

In view of all of these facts, the estimated potential movement of 229,842 tons of grain and grain products, with estimated savings of $462,084, appears to be fantastic, and protestants confidently submit that this estimate should be disregarded by the committee.

Phosphate rock, 175,000 tons: It is estimated that this large tonnage would use the waterway with a saving of $170,681, because, apparently, there was produced in 1938 in the Columbia-Mount Pleasant, Tenn., field, 50 or 60 miles south of Nashville, about 1,000,000 tons of phosphate rock and “it is believed that with improved navigation a considerable waterway movement of this commodity will develop to the consuming markets in the North and West."

The district engineer's report concedes that "no shipments of phosphate have as yet been made by water from the Nashville area, owing principally to the necessity of an intermediate haul by rail from the mine areas to Nashville," although the Mount Pleasant-Columbia field has been in operation for many years and year-around navigation has been available on the Cumberland since about 1923, and that “since the phosphate fields are almost as close to the nearest transfer point on the Tennessee River as they are to Nashville, there might be some possibility that the tonnage would be diverted to and retained by that waterway.”

Improving the Cumberland River would not eliminate the haul from the mines to the river. The failure of the phosphate producers to use the waterway today coupled with the possibility of the Tennessee River being used instead of the Cumberland if water transportation were sought by the producers of phosphate are sufficient, protestants submit, to make the use of this estimated tonnage in evaluating the proposed improvement wholly improper.

The report apparently assumes that rail-water transportation from the Columbia-Mount Pleasant field to the area north of the Ohio and along the Mississippi River is necessary to enable the Tennessee product to meet the competition of Florida rock in this area. But, in point of fact, the railroads serving the Columbia-Mount Pleasant field have long recognized this competition in adjusting their rates with the result that the movement by rail in 1940 from shipping points on the L. & N. Railroad, alone, to the territory in question amounted to 410,744 tons. This clearly indicates, it is submitted, that the need for a rail-water or rail-water-rail route from the Tennessee field to the area north of the Ohio to meet the competition of Florida rock is more apparent than real.

Fertilizer, 73,030 tons : It is estimated that this tonnage would use the improved waterway with a saving of $77,071.

Fertilizer is a commodity which moves freely in the South, but it moves for short distances, and, by reason of that fact, instances are few where water transportation is employed.

That can be understood when the fact is known that the greatest production of commercial or mixed fertilizer--about 70 percent of the total production of the United States-occurs in the South Atlantic States and the South Central States of Tennessee, Alabama, Mississippi, and Louisiana ; and, further, that about the same relative proportion-around 72 percent–is consumed in those very same

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