On some three occasions, in 1934, in 1935, and in 1937, the Congress has passed legislation to provide for retirement benefits for retired railroad employees, with taxes to be levied upon the wages of the employees of the railroads and upon the railroads, each party paying equal taxes, for the purpose of providing funds to pay the entire costs of the benefits provided and for the costs of the administration and entire operation of the present Carriers' Taxing Act and the Railroad Retirement Act.

All costs of the Railroad Unemployment Insurance Act are paid from taxes levied upon the railroads.

Any and all diversions of business from the railroads to some governmental subsidized transportation agency must, naturally, result in a reduction of the business which the railroads might continue to have if the governmental subsidizations had not been provided; any such reductions must result in reduced employment; any such reduced employment must result in reduced wages paid the railroad employees; any such reductions in the wages paid railroad employees must result in reductions of twice the amounts of taxes levied-as there must be the reduction in the taxes paid by the employees and an equal amount of reductions of the taxes paid by the railroads.

There are present recommendations, which have been made by actuaries to the House Committee on Interstate and Foreign Commerce, under which the present taxes of 32 percent levied upon the wages of railroad employees, not exceeding $300 per month, shall be immediately increased to 62 percent, to be paid by both the employees of the railroads and by the railroads, or a total of some 13 percent, and that there shall be a further increase to some 131⁄2 percent by the first of 1949.

Any and all proposals to provide authority for further governmental subsidizations of transportation agencies which are to be in competition with the railroads must be properly considered as proposals to reduce employment upon those railroads; to reduce the wages paid the employees of those railroads; and to reduce, doubly, the taxes paid upon the wages of the railroad employees for the support of the funds required to cover the costs of the retirement benefits provided for retired railroad employees.

We protest such proposals. We challenge the proponents of this kind of legislation to show any similar socialistic proposal against the interests of any other business or industry.

Up to the end of February 1946 the railroads and their employees had paid some $1,594,719,591 in taxes for the funds of the Railroad Retirement Act, and benefits of some $1,065 863,440 had been paid as benefits to former railroad employees and their families as pensions, annuities, survivor annuities, death-benefit annuities, and lump-sum death benefits.

Those benefits have been paid former railroad employees and their families in every State in the Nation.

In addition, some $49,898,549 had been paid for unemployment relief to railroad employees under the provisions of the Railroad Unemployment Insurance Act, from funds of some $772,529,462, which had been paid by taxes levied upon the railroads under the provisions of that act.

Those many hundreds of millions of dollars in taxes which the Government bas levied upon the wages of railroad employees and upon the railroads of the Nation must be secured from the rates which the Government of the United States authorizes the railroads to provide for their services in the handling of passengers and freight.

I believe it especially unfair to require the railroads and their employees to pay taxes for the subsidization of such transportation agencies as the Big Sandy, Levisa and Tug River Forks project, and, later, require that the railroads and their employees shall pay increased tax percentages for the relief of former railroad employees and for such unemployment benefits as may be created as the result of the construction of these, or similar, projects.

We respectfully request that no favorable consideration shall be given this proposed project.

Mr. LAWSON. I will now present Roy S. Kern, Pittsburgh, Pa., chairman of the coal, coke, and iron committee of the Central Freight Association. By the way, if you have any question on rates, coal rates, which I could not answer this morning, I know he can answer them, and will you kindly propound those questions to him.

Mr. PETERSON of Georgia. At this time I would like to ask Colonel Feringa: This pumping water up hill, that applies to both branches of the river?

Colonel FERINGA. Yes, sir.

Mr. ANGELL. How far do you pump it from the Ohio River?

Colonel FERINGA. It depends a whole lot on the period of drought. We have made a study of every lock and dam that is shown on that map. We have actually figured the amount of water and the days of pumping that would be required, based upon the maximum amount of coal that will be transported.

The district engineer, figuring 20,000,000 tons of coal, finds that in the year 1942 there would be no pumping required. That is figured on actual rainfall. He finds that in the worst year, which would be the year 1930, there would be 59 days of pumping required in one of the better locks, and 198 days in the worst lock. That is based upon lockages requiring the transportation, or providing for the transportion of 20,000,000 tons, which the Board, based on assured demand, has cut to 8,300,000 tons. It is my opinion that there will be many years, based upon a tonnage of 8,300,000 tons, where there would be no pumping required. However, our costs contemplate that there would be full pumping facilities placed in the locks for the maximum provision of tonnage, and we have a cost of $43,340 per year included, which would take care of investment, amortization, operating costs, and everything else. It should be noted that the estimated days of pumping are not consecutive.

Mr. DONDERO. Would the canal be open 12 months in the year? Colonel FERINGA. The canal would be open 12 months in the year, but we have set aside a period of 60 days when it might be inoperative. Those are not consecutive day. The interruption might be due to heavy ice conditions, although we believe that by releasing water in successive pools the ice will be broken up. That include fogs. It includes possible accidents and repairs. We have been liberal in that allowance.

Mr. RANKIN. How far would you have to pump the water? How much elevation?

Colonel FERINGA. I would like to look that up. I cannot answer offhand.

Mr. PETERSON of Georgia. Are there any projects like that in the country now?

Colonel FERINGA. I do not believe we have any in the country like that right now. It has been done successfully in the C. & D. Canal before it was made a sea-level canal. It has also been done, I believe, in what is now the Chicago drainage canal, where it is no longer necessary because it has been deepened. It is being done successfully in Europe.

Mr. MAY. Inside the seawalls up and down the Ohio River.

Colonel FERINGA. Yes; we use the pumps at the flood walls to take care of the interior drainage of the smaller streams which would be blocked by the flood wall.

Mr. RANKIN. The pumping elevation would only be a few feet? Colonel FERINGA. The maximum lift between one lock to the other would be about 20 to 30 feet. To my mind it offers no real obstacles. I do believe we would have been wrong unless we had considered the most severe conditions and allowed therefor in our costs.

STATEMENT OF ROY S. KERN, CHAIRMAN, COAL, COKE, AND IRON COMMITTEE, CENTRAL FREIGHT ASSOCIATION, PITTSBURGH,

PA.

Mr. KERN. Mr. Chairman and gentlemen, my name is Roy S. Kern and I am a railroad traffic man from Pittsburgh. I have prepared a statement that will require about 20 minutes to present, but due to the press of time I am going to ask leave to file that staement and also the statement which I introduced at the hearing before the Board of Engineers for Rivers and Harbors, and to make two or three brief comments on the estimated prospective commerce on the Big Sandy waterway from a destination or a consumer's standpoint.

Mr. RANKIN. You say you are from Pittsburgh?

Mr. KERN. I am from Pittsburgh, and I am employed by the Association of Railroads. I have been in traffic work for 28 years.

Mr. RANKIN. So the people that you represent do not use the Ohio River, do not navigate the Ohio River? You represent railroads entirely?

Mr. KERN. That is true. As a matter of law, the railroads are not allowed to use the river.

Mr. RANKIN. But you represent the railroads and not the barge companies?

Mr. KERN. That is correct. Now, gentlemen, I want to impress upon you first that neither yesterday nor today did this committee, nor did the Board of Army Engineers at its hearing, nor did the district engineer at his hearing, nor did the division engineer, have before them one single, solitary, bona fide burner of coal. The engineers employed a group of so-called field examiners and they traveled all the way up to the Twin Cities and to Chicago, out through the West. I don't know how far down the Mississippi they went, interviewing people, trying to stimulate interest.

They made what they called a return, which were not returns at all, they were instruments that were made up by the field examiners. I myself have conferred with a number of the people whose names were on those questionnaires and they said they did not make them up-"If anybody put our tonnage on this waterway, they did it on their own initiative and not on ours."

That, originally, is the consumer's estimate that the Army engineers have used to predicate this tonnage, and perhaps it is the reason why one group of engineers said 15,000,000 tons and another group with the self-same documents said 8,300,000 tons, and while they are considered, I want you to know, secret documents in the files of the Army engineers, the Army engineers did get some 61 of the 161 of these consumers to let me look at these returns. The balance of them are still secret in the files of the Army engineers. So, while we know the numbers, we do not know who it is that is claiming traffic for this waterway. Now I would like to classify in three or four general categories what is in these things.

First. They include tonnages which are the result of the ambitious schemes of individuals not now in the coal business in a substantial way, but who, upon completion of the Big Sandy, are credited with the ability to develop a business of many thousands or hundreds of thousands of tons a year. These parties are not coal consumers and do not hope to be. They merely expect or surmise that, with the

aid of the proposed Big Sandy waterway, to develop a business of distributing in retail or commercial markets tonnages entirely out of proportion to the size or the nature of their present establishments in the communities in which they reside.

Second. There are a great many cases included in the estimate where the consumers expect to use Big Sandy coal in place of the coal they are now receiving from a much nearer field-Illinois, Indiana, and western Kentucky-frequently at transportation costs considerably less than even the estimated cost of barge coal from the Big Sandy. In most all of these instances and in many more the coal is proposed to be diverted from midwestern fields to the Big Sandy field, the transportation costs increased and the report then increased to indicate that the public will save, that is, reduce its transportation costs. This, indeed, is a new brand of transportation economics.

Third. There are a very large number of items included in the estimate which the returns themselves show represent substantial direct diversions of coal from the Kanawha, Ohio, Illinois, and Mississippi Rivers and the Great Lakes to the Big Sandy waterway. Despite this direct proof of diversion from the Kenawha and other fields the report is premised upon the assumption that the estimated Big Sandy commerce will be entirely new waterway coal traffic.

Fourth. There are included in the estimate instances where water transportation from coal-loading facilities on the Big Sandy could not possibly provide lower transportation cost than those now available for the movement of the traffic.

Those, generally, are the four categories into which these so-called consumer's estimates are placed.

Now, by way of rebuttal I would like to state something by way of clarifying the record with respect to the pricing of coal shipped by water in comparison with coal shipments by rail. The Bituminous Coal Act of 1937 required, among other things, that the minimum coal prices fixed by the Commission reflect prior practices in the distribution of coal, and as a result of that the basic coal prices on barge coal were the f. o. b. mine prices of the coal, plus the railroad freight. rate to the destination. In other words, whatever economies might have attended the movement of barge coal were retained by the producer. Exceptions were made in a very few cases to that principle, such as, for example, the Procter & Gamble Co. at Cincinnati. They showed that before the act they received special prices on slack coal, distress coal, when shipped by barge. They were given what they called f. a. s., free alongside, prices of coal which were lower than the rail coal delivered prices. But those were few and far between, and they applied only in the case of large corporations. Procter & Gamble is the one that comes to my mind. Another one was the Cincinnati power plant. The retail dealers in Cincinnati, the small coal consumers, did not get any prices like that. When they got coal by river they paid exactly the same amount delivered as the man who got it in railroad cars.

Mr. DONDERO. That question was raised here yesterday, whether or not the price of coal from the mine to the consumer was the rail rate or the water rate. Now, what can you say, Mr. Kern, on that?

Mr. KERN. The price to the seller of the coal?

Mr. DONDERO. No; the price of coal to the consumer was based principally upon the rail rate from the mine to the dealer in a little village, no matter where he is.

Mr. KERN. Where the coal is distributed by the dealer he pays the price based upon the rail rate, and the only exceptions were relatively few that were given special consideration due to the past practices of the coal industry. And I might state that at the time the Coal Division went out of existence there was in progress a hearing at Cincinnati, Ohio, where that was the one and only issue. The small dealers in coal in Cincinnati got together and brought a proceeding before the Coal Division, claiming that they were not being given the same treatment under the pricing system as were the one or two large consumers. Mr. DONDERO. Suppose we leave Cincinnati out of it. Suppose I buy coal from a dealer up the Ohio River. Is it the practice in the coal business that the price I pay is not what it cost to bring the coal to my coalyard by water, but what it cost to bring it by rail?

Mr. KERN. That is precisely the situation, and under the OPA maximum prices, which superseded the Coal Division minimum prices, that still exists.

Now, there is one other feature that I would like to discuss briefly, and that is this matter of metallurgical and special-purpose coal. You have heard a lot of talk yesterday which gave me the impression, if I didn't know any better, that this Big Sandy Valley was blessed with coal the like of which was not found anywhere else. That definitely is not true. The same type of coal is produced in the Kanawha district generally in Kentucky, a little bit west of Big Sandy.

The famous Connellsville field of Pennsylvania, for example, was the outstanding, and in many respects still is the outstanding, metallurgical coal of the United States. But admitting that the Big Sandy is a good metallurgical coal-and it is-there is very little metallurgical coal in the so-called consumer's estimate used by the Army engineers. The only one of the 61 questionnaire returns that I examined, that had metallurgical coal in it, was one for the Terre Haute coke plant at Terre Haute, Ind., and I interviewed the president of that company and he said, "The idea of putting our coal on the Big Sandy is preposterous. If we could save any money by water transportation we would be buying it on Kanawha."

On the other hand, here is what is in that list: Northern States Power Co., ordinary steam coal; University of Minnesota, ordinary steam coal; two or three prisons in Minnesota, ordinary steam coal; public schools of the city of St. Louis, steam or domestic coal. They have got Procter & Gamble in there too, and they have got the Wright plant at Cincinnati in there, although they are now getting river coal from Huntington and Kanawha.

So that while they talk about the need for metallurgical coal, throughout this river valley more than 90 percent of their own estimates are not for metallurgical coal but for ordinary steam and domestic coal.

One of the big domestic-coal users is the Scotch Wollen Co. which is in here, and which they specifically told me should not be put in, because they are not concerned with that.

We heard yesterday from the gentleman from Dubuque. That gentleman's organization about 4 years ago appeared before our coal