EFFECT OF DOD DECISION

On October 7, I wired President Ford and requested his intervention in the Department of Defense decision to use military and civilian aircraft to deliver cargo from Anchorage and Fairbanks into remote Arctic sites. I will not renew that request to you for obvious reasons.

I would ask, however, that you consider the adverse effect that such decisions have on the economic viability of Alaskan air carriers and the ultimate impact on the traveling and shipping public who in many areas of the State are totally dependent on air transportation.

You will be hearing_testimony from Alaska's carriers regarding specifics in this matter. I urge you, upon consideration of this information, to take whatever remedial action is in your power to restore the Alaska air carriers' right to operate without Federal interference in the transportation of goods within Alaska's boundaries.

Thank you.

I will be pleased to expand on any questions you might have.

GOVERNOR HAMMOND'S BACKGROUND

Mr. Chairman, for your information, I have been in the air transportation business myself for approximately 30 years, on and off. I am no longer so engaged, I might add.

Chairman MCCLELLAN. You are not presently engaged in that business?

Governor HAMMOND. That is correct. I sold my operations. Chairman MCCLELLAN. But your experience there still lingers with you. You feel you have some expertise that might be valuable? Governor HAMMOND. Let me say, I should have, after that period of time.

EXPLANATION OF EVENTS

Chairman MCCLELLAN. Governor, I am not altogether familiar with what is involved here. Could you tell me briefly what is going

on?

Governor HAMMOND. It is the shipment of cargo that was consigned to remote Arctic outposts, in the main, that was unable to get there because of the ice conditions.

Chairman MCCLELLAN. Does this pertain primarily to pipeline materials and supplies?

Governor HAMMOND. Not pipeline materials and supplies but materials, as I say, consigned to such military outposts in the Arctic as PET-4. I would defer to Senator Stevens.

Senator STEVENS. When we were up there and we considered flying over to see the barges that were stuck in the ice that could not get around-some of those barges turned back and went to Anchorage because they could not get through the ice.

USE OF MILITARY AIRLIFT

Now, the military airlift is taking the goods that were on those barges up to military areas in northern Alaska, including the area

in the Naval Petroleum Reserve No. 4, where the operations are being conducted by Husky Oil, by civilian contractors. The problem is that the military aircraft are taking that cargo, with the exception of 26 flights, to the exclusion of civilian aircraft capability, air carrier capability in Alaska, what that cargo was, in fact, being taken in the first instance by civilian barges and it is destined primarily for civilian contractors who are working for military operations in the northern area.

NATURE OF THE CARGO

Our problem is that it is totally intrastate Alaska and normally those movements of cargo would be subject to the administration under Governor Hammond through our Air Transportation Commission, but through an exception issued by the CAB, these intrastate Alaskan movements are being conducted under authority from the Civil Aeronautics Board and by military aircraft in Alaska.

Chairman MCCLELLAN. Is this cargo civilian goods or military supplies?

Governor HAMMOND. Again, some of the PET-4 supplies are for the private sector, Husky Öil, but most of them are military supplies. Senator STEVENS. They are for both, but a great portion of it is fuel. We will spell that out later in the testimony here, Mr. Chairman, but these are civilian contractors operating on military areas in northern Alaska, so that the cargo, while they are destined for civilian contractors, would ultimately be paid for by the Department of Defense.

It is going from Elmendorf, where you stayed, Mr. Chairman, up north of where we were when we were at Dead Horse.

Chairman MCCLELLAN. So we're speaking strictly of an airlift operation then?

Governor HAMMOND. Right.

Chairman MCCLELLAN. The bulk of the cargo in transit is Government property?

"SATURN" AS A NONCERTIFICATED ALASKA CARRIER

Governor HAMMOND. That is my understanding, but there are, as well, civilian supplies, and one of the major offenses from the standpoint of the carriers in Alaska is that "Saturn" has been a noncertificated carrier in the State of Alaska and is being used as a private carrier to haul some of these supplies rather than Alaskan certificated carriers. That is one of the major offenses.

Chairman MCCLELLAN. Would you consider this an emergency situation?

DEGREE OF EMERGENCY

Governor HAMMOND. There is certainly an emergency from the standpoint of getting those supplies ultimately to their destination. But it is not an obligation to use military aircraft.

There are available in the sector civilian aircraft capable of providing this service.

Chairman MCCLELLAN. I am trying to determine if use of the military transport is justified because of an emergency situation.

Governor HAMMOND. I am advised these are primarily goods going to civilian contractors on military sites but ordered by the civilian contractors.

Chairman MCCLELLAN. The materials are to be used in connection with contractors who are working for the Government?

Governor HAMMOND. That is my understanding; that they are being used by the civilian contractor primarily.

Senator STEVENS. Part of it is oil and gas exploration within the Naval Petroleum Reserve No. 4, which is 25 million acres to the east of where you were this summer when we were at the Alyeska Camp on the North Slope.

NORMAL METHOD OF OPERATION

Chairman MCCLELLAN. How is this a departure from previous experiences? Has the military engaged in this activity or comparable activity in the past?

Governor HAMMOND. Not to my knowledge. The barges hauling the supplies were civilian or private sector barges. They were not military barges being utilized in that service.

Chairman MCCLELLAN. I am trying to ascertain how the problem would be handled if it occurred on the mainland. You call us the mainland?

Senator STEVENS. South 48.

Governor HAMMOND. Lower 48.

Chairman MCCLELLAN. Suppose this happened in the Lower 48, that supplies needed in the Midwest were ordered in the East, but then something happened to the normal transportation system. Would it be a comparable situation if the military Air Force undertook to lift those supplies from here, out to Arizona, or somewhere?

Governor HAMMOND. It would depend on the emergency nature of the moving of those goods. If the time element required use of military aircraft that would be an obligation to use it; but in this instance we are not faced with that type of time constraint. We have available in the private sector the capability to move those goods. They were moved by civilian-operated barges.

Chairman MCCLELLAN. They are consigned now to civilian transportation?

Governor HAMMOND. They had been.

TRANSPORTATION BY CIVILIAN CARRIERS

Chairman McCLELLAN. They were in process of being delivered by civilian transportation when the obstruction arose that prevented them from being carried to their destination?

Are they still on the ships now? They have to be moved from the ships-the ships can't get to the destination so you have to substitute other means of transportation to move that cargo.

Governor HAMMOND. Right.

Chairman MCCLELLAN. And the issue is whether the Government should do it with its own planes, or whether it should again resort to civilian carriers to complete the transportation of the goods.

Am I getting the picture of it?

Governor HAMMOND. That is correct-with the additional factor that the military has utilized a private carrier in Saturn to move part of those goods which is noncertificated in Alaska.

Chairman MCCLELLAN. All right.

Governor HAMMOND. I am not sure if Saturn has already made trips or not.

Chairman MCCLELLAN. But they are using some private carriers now?

Senator STEVENS. For only some 26 trips out of 300. We will get the statistics, Mr. Chairman.

Chairman MCCLELLAN. So the military does not propose to transport the entire shipment?

Governor HAMMOND. That's right.

ECONOMICS

Chairman MCCLELLAN. I'd like to know whether it would be more economical for the Government to transport these goods, or if private carriers could do it at less expense. I don't know how important the economic factor is in this situation, but I do think it is pertinent and should be included in the record.

Can you comment on that?

Governor HAMMOND. Subsequent testimony will relate directly to that.

Chairman MCCLELLAN. You would prefer someone else to speak to that?

Governor HAMMOND. I Would.

Chairman MCCLELLAN. Is there anything further, Senator Stevens? Senator STEVENS. No, Governor. I am pleased you have taken the time to come before the committee and assist us in developing a record so the committee can understand the problem.

FEDERAL LAND JURISDICTION

I think as it develops, Mr. Chairman, that you will see that the bulk of the commodities we were talking about were destined for a civilian contractor exploring for oil and gas in an area that is under management by the Navy.

Now, we have other areas under management by the Secretary of Interior. When he runs into problems they don't use Interior planes to fly to the drilling rigs for the civilians who are drilling on Federal lands.

These are just Federal lands under the jurisdiction of the Navy and I do not believe we should use military aircraft nor the power of the Federal Government to assist those who are exploring on that Naval Petroleum Reserve No. 4 if they run into an emergency because the precedent is fantastic.

There is going to be substantial exploration in that area in the years to come and to use military aircraft in conjunction with those in civilian operation-they are exploring for oil and gas just the same as anywhere else in the world.

The only difference is there is a line drawn on the map that says that is naval property.

Senator Young, this is Governor Hammond of our State. He must testify before the National Security Advisory Commission on the law of the sea. The Governor has been pointing out the problem, Senator Young, about our military airlift that is going on in Alaska to haul intrastate movement cargo that was on barges that were headed for the North Slope and they could not get through and they have come back to the Anchorage area and they are being moved primarily by military aircraft.

EXPLANATION OF SITUATION

There are some 26 flights that will be continued by a civilian carrier but it is not a civilian carrier that is licensed to operate in Alaska except for an exception that was granted by CAB for them to do that in spite of the fact there are carriers in Alaska that are capable.

Primarily these goods were destined for the civilian companies, particularly one company that is operating on the Naval Petroleum Reserve No. 4, exploring for oil and gas, and we are using military aircraft and we think this improper.

Do you have any questions before the Governor leaves, Senator Young? He has to testify before the National Security Advisory Committee.

Senator YOUNG. I have no questions.

Chairman MCCLELLAN. Governor, thank you very much for your testimony. We appreciate your presence.

STATEMENT OF NEIL BERGT, PRESIDENT, ALASKA INTERNATIONAL INDUSTRIES (AII)

INTRODUCTION

Chairman MCCLELLAN. Our next witness is Mr. Neil Bergt. Mr. Bergt is president of the Alaska International Air. Is that correct?

Mr. BERGT. Senator, Mr. Chairman, I am president of Alaska International Industries which is a holding company that owns Alaska Air. The president of International Air will testify also this morning. Chairman MCCLELLAN. All right, Mr. Bergt, do you have a prepared statement?

Mr. BERGT. Yes, I do, and I have submitted it.

Chairman MCCLELLAN. Do you wish to read your statement?
Mr. BERGT. Thank you.

Alaskans sometimes feel alienated by the distance that separates our State from the locus of policymaking in Washington, D.C. Consequently, we are particularly grateful that this committee has invited us here today.

My name is Neil Bergt. I am the president of Alaska International Industries (AII), a holding company with operating subsidiaries in the transportation and construction businesses in Alaska.

AII is the largest Alaska-owned and operated corporation, employing in excess of 1,000 people. I have served as president since 1971 and prior to that was employed in the aviation industry as both a pilot and in various managerial capacities since 1957. I have lived in Alaska for 39 years.