AVIATION

TUESDAY, APRIL 6, 1937

HOUSE OF REPRESENTATIVES,

COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,

Washington, D. C.

The committee reconvened, pursuant to adjournment, at 10 a. m., Hon. Clarence Lea (chairman) presiding.

The CHAIRMAN. The committee will come to order, please.

I have a communication dated April 3, 1937, from Hon. Harry H. Woodring, Secretary of War, which will be inserted in the record at this time.

(The letter above referred to is as follows:)

Hon. CLARENCE F. LEA,

WAR DEPARTMENT, Washington, April 3, 1937.

Chairman, Committee on Interstate and Foreign Commerce,

House of Representatives, Washington, D. C. DEAR MR. LEA: The Governor of the Panama Canal has called my attention to bill H. R. 5234, "To amend the Interstate Commerce Act, as amended, by providing for the regulation of the transportation of passengers and property by air carriers in interstate, overseas, and foreign commerce, and for other purposes."

This bill, which is so worded that if enacted into law its provisions will extend to the Canal Zone, does not adequately provide for the special conditions which exist there. In order to obviate the enactment of legislation which does not take such conditions into consideration, the Governor of the Panama Canal has recommended that, if the bill is to be considered, it be amended as follows: On page 6, lines 7 and 8, strike out the last clause of section 303 (L), which reads: "including, for the purposes of this part, the Canal Zone.", and in lieu thereof insert the following:

"Provided, however, That nothing herein contained shall be construed in any way to impair or affect the jurisdiction which has heretofore been, or may hereafter be, granted to the President to regulate air navigation in the Canal Zone."

The Governor has also recommended that, if any similar bill is to be considered by the Congress, it contain the provision recommended for inclusion in this bill.

The following is quoted from the statement of the Governor relative to the proposed amendment:

"The proposed proviso parallels the provisions of section 320 of the bill. Its purpose is to save to the President the necessary authority to regulate or restrict air navigation in the Canal Zone consistently with the character and purposes of, and treaty obligations affecting, the Canal Zone; at the same time permitting application of the act to the Canal Zone to the extent permitted by the President. It is contemplated, for example, that certificates to air carriers involving the Canal Zone will be subject to approval by the President or by his authority."

I concur in the recommendations of the Governor.

You are advised that there are no objections on the part of the Bureau of the Budget to the submission of this letter.

Sincerely yours,

The CHAIRMAN. Mr. Benton.

HARRY H. WOODRING,
Secretary of War.

STATEMENT OF JOHN E. BENTON, GENERAL SOLICITOR, NATIONAL ASSOCIATION OF RAILROAD AND UTILITIES COMMISSIONERS, WASHINGTON, D. C.

Mr. BENTON. Mr. Chairman and gentlemen of the committee, my name is John E. Benton. My office is in the Earle Building, in this city. I am general solicitor of the National Association of Railroad and Utilities Commissioners; and I appear here by direction of the exective and legislative committees of that association.

I may say that the association represents, in its membership, the regulatory commissions of the several States of the United States, except the State of Delaware, which has no commission, and the State of New York, the commissions of which are not actively affiliated with the association. The association also embraces in its membership the members of the Federal regulatory commissions, but the association is an agency of the State commissions, maintained by them, and on matters of legislation the Federal commissions never assume to take any part in determining what the position of the association shall be, and the association never attempts, in any way, to reflect the position of the Federal commissions. If they have any recommendations to make to the Congress it is their duty to make those recommendations directly. The association undertakes merely to reflect the recommendations and the attitude of the State commissions on legislative matters.

On the 26th of March the executive committee of the association and the committee on legislation held a joint meeting here in Washington for the purpose of considering various pending matters of legislation. Among other matters discussed was the matter of aviation legislation, and after discussion a resolution was adopted which I ask permission to read, and have inserted in the record.

The CHAIRMAN. Very well.

Mr. BULWINKLE. I would like for you to tell us just what the resolution is.

Mr. BENTON. It is a short resolution, and with your permission I will read it.

Resolved, That the National Association of Railroad and Utilities Commissioners favors the enactment of Federal legislation vesting jurisdiction in the Interstate Commerce Commission to regulate transportation of passengers and property by aircraft in interstate and foreign commerce, including the granting of certificates of convenience and necessity to carriers engaged in such transportation, and the regulation of their accounts, rates, service, and issuance of securities.

Resolved further, That said association endorses H. R. 5234 provided that the same be so amended that the powers of the States to regulate intrastate transportation of passengers and property by aircraft, whenever such regulation shall be necessary in the public interest, shall not be impaired.

For the purpose of meeting the last provision of the resolution certain amendments have been prepared. I will present them, and ask leave to have them inserted in the record at this point, if I may. Later I will refer to them. May they be inserted?

The CHAIRMAN. Very well.

(The amendments above referred to are as follows:)

AMENDMENTS TO H. R. 5234 REQUESTED BY THE NATIONAL ASSOCIATION OF RAILROAD AND UTILITIES COMMISSIONERS

Amend section 302, at page 3, by adding thereto, following line 4, a new paragraph, as follows:

"(c) Nothing in this part shall be construed to affect the powers of taxation of the several States, or to authorize any air carrier to engage in the transportation of persons or property in intrastate commerce in any State in contravention of the laws of such State, nor to give to the Commission any jurisdiction to control such transportation or the rates applicable thereto."

NOTE. This paragraph corresponds to paragraph (c) of section 202 of the Motor Carrier Act, 1935.

Amend section 304, at page 9, by adding thereto, following line 20, a new paragraph, as follows:

"(f) The Commission is authorized to confer with or to hold joint hearings with any authorities of any State in connection with any matter arising in any proceedings under this part. The Commission is also authorized to avail itself of the cooperation, services, records, and facilities of such State authorities as fully as may be practicable in the enforcement or administration of any provision of this part."

NOTE. This language is taken without change from section 205 (g) of the Motor Carrier Act, 1935.

Amend section 309 (a), at page 26, by inserting, after the word "effective", in line 5, the following proviso:

"Provided, however, That nothing in this part shall empower the Commission to prescribe or in any manner regulate the rate, fare, or charge for intrastate transportation, or for any service connected therewith, for the purpose of removing discrimination against interstate commerce or for any other purpose whatever."

NOTE. This language is taken from section 216 (e) of the Motor Carrier Act, 1935, without change.

Amend paragraphs (b) and (c) of said section 309, on pages 26 and 27, by renumbering the same as paragraphs (c) and (d).

Mr. BENTON. Before I proceed to the discussion of the amendments, let me say that the view entertained by the association is this, with respect to the desirability of the enactment of legislation at this time providing for the regulation of interstate and foreign commerce by aircraft through a Federal commission: The aviation industry seems certain to have a large development in the future. It is desirable that it shall have such development and that the public of the United States shall be afforded the benefits of its service as early as may be, and that the service shall be safe and well regulated.

It is the view of our association that any important public-utility industry requires regulation in the public interest and will be regulated sooner or later, and that the full purpose of regulation can be accomplished only by regulation from the beginning of the development of the industry.

It is not a question of reasonable rates at this time. It is rather a question of establishing such conditions that there may be an encouraged development of the aircraft business, wherever conditions would support aircraft operation, with opportunities for the investing public to invest their money under conditions affording a maximum degree of safety, taking into account the character of the business and the general situation; and of establishing conditions-and this is of paramount importance-which will avoid the wastes and losses which will be inevitable if the business is left to struggle to establish itself in open competition. Such losses and wastes, if there be no regulation of consolidations and securities issues, will be transformed into securities of one sort or another which will be distributed to the public

and will constitute a load upon the industry hereafter-a load which the public will be asked to bear by rates upon the business, after it shall have developed in the future, to enable the payment of returns in the form of interest and dividends.

This sort of thing can be avoided if the Congress shall at this time provide for the character of regulation which is now being given to other public-utility enterprises.

Now, taking up the matter of amendments, which will safeguard State power of regulation whenever that power is needed to be exercised, we wish to say this: Some of the State commissions now have jurisdiction over aircraft, as common carriers, and many of them have duties with respect to licensing or inspecting aircraft. The regulation of aircraft by the State authorities, however, is very slight at this time. Congress in legislating will, however, of course, look to the future and to a future large development of the aircraft industry. While transportation by aircraft may now be principally for long distances passing over State lines, and hence interstate in character, yet when the industry is fully developed, it may very well be that in the larger States there will be a substantial intrastate commerce by aircraft, not primarily subject to the jurisdiction or regulation by the Federal Government, which will need to be regulated by the States.

Accordingly, whenever you shall come to enact a statute for the regulation of the aviation industry, we assume and ask that you will include in the bill provisions which will recognize that the States have the power to establish, and will establish regulations with respect to intrastate transportation by air, and that the same occasion which exists now for the correlation of State regulation with interstate regulation of railroads and other public-utility industries will then exist as to the aviation industry.

Beginning in 1920 the Congress inserted in the Transportation Act provisions for cooperation between the Interstate Commerce Commission and the State commissions in the regulation of railroads, in the way of joint conferences and in the way of joint hearings which have been very much used with the Interstate Commerce Commission.

Congress, later, when it came to provide for regulation of communications companies, inserted corresponding provisions in the Communications Act. Those have been used less, because very few rate matters have come before the Communications Commission, which, so far as telephone companies are concerned, has been giving its attention to the investigation which was directed by Congress. And yet, in a very important way, the provisions have been used with the Communications Commission. The accounting system, which was prescribed by the Communications Commission, was worked out through weeks of work by the accountants of the Communications Commission and of the State commissions. And the national association, in its convention of 1935, recommended the adoption of the identical system by the State commissions, which had been prescribed by the Communications Commission. It would not have been possible to have obtained any such action as that without those cooperative provisions in the act.

I may also say that the association participated in the defense of the Communications Commission order in the courts, in the United States District Court in New York and in the Supreme Court of the

United States. This participation is spoken of by both courts, as you will note, if you come to read the opinions.

When, in 1935, the Congress enacted the Federal Power Act, you included similar provisions in that act, and they have been used in the same way. The accounting system prescribed by the Federal Power Commission was not prepared by that Commission alone. The standing Committee on Utility Accounts of the National Association, composed of leading accountants from different State commissions, for many months-really for a period of more than 2 years-worked with the Federal Commission in preparing the accounting system which was finally promulgated by the Federal Power Commission.

Then, at its annual convention at Atlantic City this last fall, the National Association recommended to all State commissions that they adopt the system which the Federal commission has prescribed. In the Motor Carrier Act, of course, you not only included the cooperative provisions which were in the Transportation Act of 1920, but you included a mandatory joint board provision. Under that Commissioner Caskie was telling me last night that they are getting a tremendous amount of work out of the State commission representatives on the joint boards. He was also kind enough to speak in a most complimentary way of the character of work that is being done by those representatives.

Mr. COLE. May I ask a question?

The CHAIRMAN. Mr. Cole.

Mr. COLE. How many States now have laws vesting in the commissions forming the association you represent any jurisdiction over aviation?

Mr. BENTON. I regret that I cannot tell you accurately, for I do not have the information in my office, but I understand that in the States of Nevada, Arizona, Colorado, Illinois, North Dakota, Tennessee, and Wyoming air carriers are classed as common carriers if they engage in general transportation, and the commissions have the same jurisdiction that they exercise over other classes of common carriers.

Other State commissions—and I cannot name them at this timehave some jurisdiction over certificates and licenses.

Mr. COLE. Do you know whether or not most of the State laws today set up aviation commissions independent of the public service commissions of the State? Some of the States do and I was wondering if that was the general practice throughout the country. Mr. BENTON. In some States that has been done. I think that the more common practice has been to vest the jurisdiction in the public service commission or other regulatory board.

Mr. COLE. You think that is the general practice?

Mr. BENTON. I think that has been the more general practice, although, let me say, Mr. Congressman, that I think the vesting of jurisdiction anywhere actually to regulate air carriers, as utilities or as common carriers, has not been carried very far. The purpose, as I have sought to make clear, of our recommendations to the committee at that time, is that the congressional act, whenever you pass any, shall be so drawn that the States may accommodate themselves to the situation in the future, and provide for active State regulation, whenever need may arise for the exercise of their regulatory