The Corps of Engineers has, in the last 10 years, appropriated, through Congress, $27,000,000 to make a deep waterway from the Great Lakes to the Hudson River.

Oswego is the farthest east deep-water port on the Great Lakes; and with the opening of the new Welland Canal, Oswego started to get what it normally would have got if there had not been the construction at Niagara Falls and so on, previously, the longest water hauls and largest carriers. That accounts for that increased tonnage from 57,000 up to the present tonnage in excess of 3,000,000.

Over to the west there has been constructed there a steam station developing in excess, when the present project has been completed, which is now being worked at an expenditure of about $50,000,000, utilizing a million tons of coal a year-all of which comes in by water-bituminous coal.

We are anxious for our project now and commerce needs it.

As to the east, that portion that is in red or pink, involving construction of a breakwater for the protection of the hinterland, I might say that inshore from the arrowhead is Fort Ontario. That is all high, precipitous bluff. It is a Government reservation which is now being turned back to the State of New York under the Department of Army policy of eliminating a lot of these small posts around the country. But that is at the present time not susceptible of development. That does not show elevations.

In order adequately to serve the industry being built up in Oswego, it is necessary, and the engineers so hold in that report which you have, after serious exhaustive commodity and economic surveys, that this east breakwater is highly essential if these industries are going to live. Competition is rife now.

I will not go into that phase of it, because Mr. Ferguson, of the St. Regis Paper Co., the largest industry interested in this development, is here to talk about what this means in dollars and cents to the people of the United States and New York State industry.

New York State, through its Governor, through the New York State Department of Public Works, all are interested in this develop

ment.

We regard it as highly essential. And when I say "we," I talk officially for the city of Oswego, as far as any one man can.

We have closely cooperated with the engineers. Our engineers and our Commission worked with the Corps of Engineers to put this on a factual basis. And that is what it is. If it was not worth while doing, we would not feel that we wanted to go ahead with it.

The justification for all of the expenditures of the past has been more than met, of the engineering forecasts. I believe that is right, Colonel Jewett?

Colonel JEWETT. Yes, sir.

Mr. GILL. And the economic savings represented here have been enhanced since that report was prepared through the increase in railroad freight rates which make every pound of freight that is moved by water as compared with that moved over internal communication lines very, very much more emphasized.

Oswego, it might interest you, just in passing, has a part to do with this, because it is tied in with the seaside breakwater modification of the project in general to meet the changed and increased commercial

condition, the fact that Oswego is the only lake port through which foreign grain is passing for export abroad.

That is due not only to the harbor but the accessibility through the barge canal.

I am talking about water-borne grain now.

We have handled 27,000,000 bushels a year, now down to about nineteen or twenty due to war conditions that removed a great many of the carriers from the inland waterways for use elsewhere.

I will not go into this as far as the engineering phases are concerned, because that report of the Corps of Engineers carries in it great detail as well as the economic aspects.

But, with your permission, Senator, I would like to present Mr. Roy K. Ferguson, president of the St. Regis Paper Co., who will be able to discuss that phase far better than I can.

Senator MALONE. Mr. Ferguson, identify yourself for the record, and proceed with your statement.

STATEMENT OF ROY K. FERGUSON, PRESIDENT, ST. REGIS PAPER CO., OSWEGO, N. Y.

Mr. FERGUSON. Thank you, Mr. Chairman and members of the committee.

I am Roy K. Ferguson, president of the St. Regis Paper Co. This is a New York State corporation organized in 1899. We own and operate nine plants in northern New York, three of which are located in the city of Oswego.

In addition, we have 29 other plants located throughout the United States.

The company employs in the city of Oswego approximately 1,350 people. The annual pay roll there is in excess of $3,500,000.

Those plants are chiefly the converters of wood pulp into paper and into bags. The company is one of the largest users of wood pulp in the United States.

Senator MALONE. Where does your wood pulp come from?

Mr. FERGUSON. Important supplies are obtained from Scandinavia, west coast of the United States, and southern United States and Canada.

Senator MALONE. In the Northwest?

Mr. FERGUSON. In the Northwest. The company owns a pulp mill at Tacoma, Wash.

Senator MALONE. What percentage do you get from the Scandinavian countries?

Mr. FERGUSON. The amount from Scandinavia ranges from sixty to one hundred thousand tons a year, depending upon its availability. Senator MALONE. What is your total requirement?

Mr. FERGUSON. Total requirements are in excess of 125,000 tons a year in that area.

Senator MALONE. Go ahead. I just wanted to see how important it was.

Mr. FERGUSON. It is important in that location, Mr. Chairman, because of the active competition between the integrated mills of the United States and the converting mills. And those mills of this company at Oswego, N. Y., are in the converting class.

So that every saving must be utilized in order to continue this industry at that point, and the emergency is extremely great at this particular time because of the high cost of Scandinavian pulp which has been imposed on the buyers in this country by reason of excise taxes in Sweden, and also the unusual prices imposed in England by reason of the Soviet reparations, which they endeavor to balance off by prices to this country.

Senator CHAVEZ. Mr. Ferguson, outside of the general welfare that the country would have on a project such as you are outlining, what would be the governmental responsibility, in your opinion, to get into this matter, as you understand it?

Mr. FERGUSON. I think the importance from the Federal standpoint is the possible destruction, Senator, of the earnings of this company and the loss of taxes which could be substantial if this industry in that area was destroyed, and the thirteen-hundred-odd people who are employed at that location.

There is no way in which those facilities can be employed in some other line. They are singularly useful only for the pulp and paper industry; as for instance, when some plants were closed in the emergency during the war, there was no way in which those plants could be utilized except for storage.

We are prepared as part of the subsequent action under this project to expend at the company's own expense such money to build an 800foot dock for the utilization of shipping from these various points to those plants, or we will join with others in the erection of a larger wharfage if other industries locally are prepared to defray their portion of the expense.

But the company itself is ready to put in over half a million dollars, which I believe was the estimate made by the engineers during the earlier testimony as to the cost of such dockage. That would pay for itself over a reasonable period of time.

At the time the testimony was taken in 1945, it was computed that about $305,000 a year could be saved by reason of this project in the transportation of wood pulp and coal by boat rather than by barge canal, rail, and so forth.

Since then, with the increase in freight rates, that savings has risen to something approaching $600,000.

Senator MALONE. The nature of the emergency in this case would be the emergency due to the slowly pressing down of the industry in the area; that is to say, through the higher costs, and improved through the lower costs afforded by reason of this improvement. That is the emergency that exists?

Mr. FERGUSON. Quite right, Senator. The importance to this company and the local industries of this project cannot be overstated, because we are trying to survive. And in the forthcoming competitive period with the competition of integrated mills versus converting mills, we will have to utilize every saving in order to be able to keep this industry going in that area.

Mr. GILL. If I may interrupt at this point, it is proposed to bring cargoes direct from Scandinavia through the St. Lawrence into Oswego. That is where the saving results.

There is also the savings, I must point out, that the Government has utilized this route in export of grain for ERP or whatever it is, at a considerable saving.

Senator MALONE. Mr. Ferguson, where is your chief competition? You speak of competition which would slowly stifle your industry there. Where is the competition?

Mr. FERGUSON. The chief competition arises from the integrated mills of the South with the availability of lower cost wood, labor, and the complete manufacture of pulp by those companies and its conversion into the end products.

It

Senator MALONE. Is there any competition in the Northwest? Mr. FERGUSON. The competition in the Northwest is less severe. is competitive, but the longer haul to the larger markets makes it less than that in the South.

Senator MALONE. You mean the southern mills can manufacture the product in the South and ship into the northeastern markets and compete with you there at the present moment?

Mr. FERGUSON. It is possible to manufacture the paper, Senator, for less than we are obliged to pay for the pulp.

Senator MALONE. And they are doing it now in the South?

Mr. FERGUSON. Yes.

Senator MALONE. There is a considerable shortage of paper now; is there not?

Mr. FERGUSON. In the past 2 years, while the inventories were being replenished, it has not been the severe problem, and immediately ahead, we see that inventories and demand and supply are coming into balance.

Senator MALONE. How long would it be, in your judgment, until inventories had increased to the point where there is no serious shortage of paper?

Mr. FERGUSON. In some lines, it already exists; that is, some paper lines. But in kraft, it seems to be the general consensus of the industry that balance, by the end of the year, should be accomplished.

Senator MALONE. Any questions, Senator Chavez?

Senator CHAvez. No.

Senator MALONE. Senator McClellan?

Senator McCLELLAN. No.

Senator MALONE. Do you have other witnesses?

Mr. FERGUSON. Mr. Quinlan has been working with the Army engineers and local officials, Senator.

Senator MALONE. Mr. Quinlan, would you like to make a statement? STATEMENT OF JOSEPH A. QUINLAN, VICE PRESIDENT, ST. REGIS PAPER CO., OSWEGO, N. Y.

Mr. QUINLAN. Senator, I do not want to repeat anything, of course, that has been said.

I have cooperated with the Army engineers throughout the previous hearings, and I would like to emphasize, however, if I may, the emergency really that exists at this time from a transportation standpoint, because of the conditions that have arisen of late.

In other words, today you have a 55-percent increase in rail rates over that which was presented when the Army engineers held their hearings of 2 years ago, and that is still in the interim stage in the hands of the Interstate Commerce Commission. So you do not know how much more it is going to be.

Senator MALONE. It is what you call an economic emergency?
Mr. QUINLAN. That is right.

Senator MALONE. Operating in that area.

Mr. QUINLAN. I do not know that there is anything I need to add to what has been said except we still stand ready to cooperate with Government agencies in any way to give any information needed because, in our opinion, if we are to remain-you understand, the lack of materials in the Northern States which are available elsewhere. So we cannot make paper like it is done elsewhere in New York State, because of the old saying, "You do not have paper mills on Broadway." You have got to bring the pulp, and for years the pulp has been known to be desirable from Sweden, and here it can come from Sweden right to our door, providing that red area there is developed.

Mr. Ferguson, our president, has just told you we stand ready to spend the money to provide ourselves with the docks and facilities, and to me it is an economic monstrosity that we are not able to bring it there.

Senator MALONE. Do I understand that the first cost is the only cost to the Government and that would be the dredging of the canal and the breakwater protection?

Mr. GILL. Yes.

Senator MALONE. And then you build the dock facilities?

Mr. GILL. And do accessory dredging.

Senator MALONE. And maintain the harbor?

Mr. GILL. That is the Government.

Colonel JEWETT. The local interests will maintain from the channel to their wharf.

Senator MALONE. Colonel Jewett, perhaps you had better complete the evidence by whatever factual material you may have.

Mr. FERGUSON. May I make one further point?

Senator MALONE. Mr. Ferguson.

Mr. FERGUSON. That is in connection with the statement Mr. Gill made about pulp coming from the Scandinavian countries.

To utilize these facilities, we can use pulp from the Pacific Northwest and the South by boat, and Canada, as well. I want to make clear we are not completely dependent upon Scandinavian pulp to utilize these facilities, and there is the same saving that would be derived from Scandinavia.

Senator MALONE. Do they ship any pulp from the South to your area, or do they manufacture into paper all of it they produce in the South?

Mr. FERGUSON. It is customary, when liner board is operating at capacity, that southern plants ship no pulp. But the pulp market is an open door for those mills when and as demand for liner board is not 100 percent.

Senator MALONE. Colonel Jewett, you may proceed with your factual information.

STATEMENT OF LT. COL. RICHARD L. JEWETT, DEPUTY CHIEF OF CIVIL WORKS FOR RIVERS AND HARBORS, OFFICE, CHIEF OF ENGINEERS, DEPARTMENT OF THE ARMY-Resumed

Colonel JEWETT. Mr. Chairman, as you know the comments of the Bureau of the Budget on the proposed report of the Chief of Engineers on Oswego Harbor, N. Y., have not as yet been received.