PROVIDING FOR OCEAN TRANSPORTATION SERVICE TO AND FROM ALASKA UNTIL MARCH 1, 1949

JUNE 17 (legislative day JUNE 15), 1948.-Ordered to be printed

Mr. CAPEHART, from the Committee on Interstate and Foreign Commerce, submitted the following

REPORT

To accompany S. J. Res. 219]

The Committee on Interstate and Foreign Commerce, to whom was referred the joint resolution (S. J. Res. 219) to continue until December 31, 1949, the authority of the United States Maritime Commission to make provision for certain ocean transportation service to, from, and within Alaska, having considered the same, report favorably thereon with amendments and recommend that the joint resolution as amended do pass.

The purpose of this resolution is to assist in providing, for a temporary period only, essential water transportation service to, from. and within the Territory of Alaska. As amended by your committee. the resolution authorizes the United States Maritime Commission to make provision for such transportation only until March 1, 1949. In the light of the testimony offered at the public hearings on this legislation and on the basis of the facts and information now before it, your committee is strongly of the opinion that this legislation should not be extended beyond March 1, 1949.

BACKGROUND

Prior to the recent war, ocean transportation to, from, and within Alaska was furnished by privately owned and operated American-flag vessels without Government assistance. These vessels were owned by four common carriers, as follows: Alaska Steamship Co., 17 vessels, supplemented by from 2 to 6 vessels chartered to help carry the peak trade during the summer months; Alaska Transportation Co., 3 vessels; Northland Transportation Co., 5 vessels; Santa Ana Steamship Co., 1 vessel; making a total of 26 vessels owned by the 4 lines.

During the war all of these vessels were requisitioned, and the operators acted as general agents for the Government. The testi

S. Repts., 80–2, vol. 4- -92

mony indicates that during this period the relative competitive position of the companies was maintained. These operations by the United States Maritime Commission under general agency agreements continued until March 1947 at which time there was enacted Public Law 12 which set up a new program designed to insure transportation service to, from, and within Alaska. Public Law 12, which expires on July 1, 1948, was emergency stopgap legislation, and it was made necessary by reason of the fact that at the time the legislation which became Public Law 12 was under consideration by the Congress there was no assurance that the Maritime Commission's over-all authority to charter and operate under general agency agreement, which was about to expire, would be continued, hence some emergency measure was required to avoid a complete break-down in ocean transportation service to Alaska. At that time the fleets of the four carriers had dwindled to seven vessels, having been heavily depleted as a result of war casualties, requisition for transfer to Russia under lend-lease, and sale by the owners as a result of their heavy war usage and obsolescence. Thus the fleets of the respective operators early in 1947 were made up as follows: Alaska Steamship_Co., five vessels; Alaska Transportation Co., one vessel; Northland Transpor tation Co., one vessel; Santa Ana Steamship Co., none.

The record indicates that in the spring of 1947, the private operators were extremely reluctant to return to the Alaska trade unless they were granted heavy increases in freight rates. A representative of one of the lines testified at the recent hearing before your committee that in considering the return to private operation all of the carriers were prepared and were financially able to purchase or charter the necessary vessels in accordance with the terms of the Ship Sales Act of 1946, but that to do so would have involved increasing the then existing rates approximately 85 percent. Representatives of the Territory of Alaska, on the other hand, contended at the time that any substantial increases in rates would result in retarding the development of the Territory, and they were much opposed to any such increase. Faced with this dilemma, Congress enacted Public Law 12 as a temporary expedient until a permanent solution could be worked out. It was felt then that 1 year's operation would afford sufficient time to determine the postwar transportation needs of Alaska and the revenues required to maintain adequate service under the private free-enterprise system.

Public Law 12 authorized the Maritime Commission to make surplus vessels available to the operators at a nominal charter hire and to assume the hull and marine insurance not only on the Government vessels furnished but upon the remaining privately owned vessels operating in the Alaska service. Pursuant to Public Law 12, a contract was entered into with the prewar operators under which vessels were allocated to the several operators with reasonable relationship to the number of vessels each operator had in its prewar fleet. At the present time there are 29 ships in operation in the Alaskan trade; only 7 of them are owned by the three companies mentioned; 22 of them are under charter from the Maritime Commission, at charter rate of $1 per year per ship.

Since the enactment of Public Law 12 a barge-line service to Alaska has been initiated, but has been faced with serious problems because of the difficulty of competing on an unsubsidized basis with steamship

operators receiving subsidy under that statute. Amendments have therefore been made to this bill which are designed to give barge. operations assistance similar and equal to that given to ship operations. Your committee desires and intends that the Maritime Commission give all possible help and protection to barge operations to Alaska under this bill and that in giving such assistance allowance be made for the fact that barge operations can give only freight service. and can only serve parts of the Territory. In accordance with the views of the Governor of Alaska and the Delegate from Alaska, your committee desires the Maritime Commission to take all possible steps to insure both the continuance and the expansion of barge operation to the Territory.

Public Law 12 was conceived and has been administered as a temporary interim expedient in order to assure adequate ocean transportation service to, from, and within Alaska at rates substantially lower than was thought possible under orthodox rate-making principles. The other principal purpose of that statute was to give a 15-month period in which to adjust from wartime governmental operations of ships in the Alaska trades to private operation. However, the law has been in operation for more than a year and it appears that we are very little, if any, nearer to a permanent solution of the Territory's shipping problems. Because Public Law 12 expires shortly there is now not sufficient time under that act to change over from the present interim Government-aided program to a purely private operation. For that reason your committee recommends the enactment of Senate Joint Resolution 219, but with the hope that this is to be the final extension of this interim program and that prior to March 1, 1949. Alaska shipping operations will be returned to private operation on an unsubsidized free-enterprise basis. As amended by your committee, Senate Joint Resolution 219 will expire on March 1, 1949, which is the date on which the Maritime Commission's authority to sell, charter, and operate vessels expires. The Maritime Commission itself has recommended that the authority under Senate Joint Resolution 219 not continue beyond March 1, 1949.

ANALYSIS OF THE AMENDED RESOLUTION

Section 1 states that it is the intention of the Congress to assist in providing essential water transportation service for the Territory of Alaska pending the determination of a long-range policy.

Section 2 (a) authorizes the United States Maritime Commission, by contract, charter, or other arrangement with American citizens to supply ocean transportation service with American-flag vessels to, from, and within Alaska for voyages commencing not later than March 1, 1949. The Commission is authorized to make available Government-owned vessels and vessels under its control or jurisdiction at nominal rates of charter hire; to provide at Government expense such marine insurance as it deems necessary or appropriate not only on the Government-owned and controlled vessels but also on the privately owned vessels operated in the Alaska service; to require that the operators shall operate such vessels so as to secure the most economical transportation adequate for the Alaska service; and to make such other requirements, terms, and conditions as the Commission deems appropriate.

Subsection (b) of section 2 provides that the cumulative gross profit, before overhead expenses, from the operation of vessels, shall be allocated in the following order:

(1) To provide for each operator's share of maintaining a survey of Alaska ocean transportation services and costs and methods of operation under a program approved by the Commission;

(2) To compensate the operator for the use of his working-capital facilities other than operator-owned vessels, and overhead expenses, on bases to be determined by the Commission; such bases may be fixed in terms of a percentage or percentages of vessel-operating

revenues;

(3) To allow the operator a return at the rate of 10 percent per annum, before Federal income taxes, on the fair value of operatorowned vessels used in the Alaska service.

(4) Any profit remaining at the end of each accounting period to be held in a special account and to be available for payment of any cumulative deficiency with respect to amounts which, if earned, would have been allocated as provided in paragraphs (1), (2), and (3) of this subsection; and

(5) At the conclusion of operations under any contract, charter, or other arrangement, any balance in the special account shall be divided and paid 75 percent to the Commission and 25 percent to the operator.

Subsection (c) of section 2 of the resolution as amended by your committee provides that the Commission may incorporate in each agreement definitions and formulas for determination of vessel-operaing revenues, gross profit before overhead expenses, overhead expenses, accounting periods, fair value and depreciation, as it may deem appropriate to carry out the provisions of the resolution. The Commission's determination of the value of operator-owned vessels for the purposes of the resolution shall not be relevant evidence in any regulatory proceeding before the Commission.

Section 3 expressly reserves to the Commission, under every agreement, the right to cancel the same, upon reasonable notice and an opportunity for hearing if the Commission determines that a hearing is necessary in the public interest. Such notice shall not be less than 90 days. Each agreement shall also reserve to the operator the right to modify or cancel the same for good cause shown, and such modification or cancellation shall be effective at such time thereafter as the Commission determines to be reasonable but not more than 90 days after such determination.

Subsection (b) of section 3 provides that the Commission may ter minate any contract, charter, or arrangement hereunder, without cost to the United States and upon such notice to the operator as the Presi dent shall determine, in the event of a Presidential proclamation that the security of the national defense makes it advisable or during any national emergency proclaimed by the President.

Subsection (c) makes plain and explicit the purpose and intent of Congress that nothing in this joint resolution is to be construed to limit the right of the Commission to enter into contracts, charters, or other arrangements, with new or other operators upon a determination that such action is in the interest of the economy of the Territory of

Alaska or of the national defense.

Section (4) of the amended joint resolution defines the word "vessels" to include such passenger vessels, freight vessels, combination