HOUSE

[June 28, 1977]

THE WATERWAYS CHARGE, A TOOL OF DESTRUCTION

Mr. GAYDOS. Mr. Speaker, the Carter administration has made it known it favors imposing an additional tax, charge, fee-call it by whatever name you will-upon users of the Nation's inland waterways system.

I want it known I will oppose this tax in every way possible. I believe it to be a tool of destruction. A measure which will destroy the economic base of many communities which contributed substantially to the development of this Nation. It will create havoc among industries which use the rivers and despair among thousands of families employed by those industries.

The 20th Congressional District of Pennsylvania, which I represent, is highly dependent upon river transportation. One river alone, the Monongahela, carries more than 24 million tons of coal a year to mills and powerplants along its banks. Nearly 80,000 jobs are keyed to shipments of products by river. Land transportation is not available. And, if it were, it is not feasible.

One plant, Clairton Works of United States Steel Corp., requires 25-27 barges to satisfy its daily need for coal. In comparison, it would take if they were available-385 railroad cars or more than 1,000 trucks to do the same job.

It has been estimated that waterway shipping rates would increase 50 percent if a user charge were enacted. Unquestionably, that would boost the cost of doing business for our industries and the cost of living for our people.

Mr. Speaker, William H. Wylie, business editor for the Pittsburgh Press. recently wrote an article about the importance of the water ways to western Pennsylvania. I would like to insert his article into the Record and urge my colleagues to read it and judge for themselves if the Carter administration's proposed waterways tax is not, in reality, a tool of destruction.

'MON IS CLAIRTON WORKS' LIFELINE; WATER USER CHARGE CALLED THREAT

(By William Wylie)

About a mile above the Elizabeth Bridge across the Monongahela River there's a stretch of eroding concrete and machinery that dramatizes Pittsburgh's stake in the water user tax debate.

Better known as Lock No. 3, this vital passageway permits 24 million tons of coal to move up and down the river annually to district mills and power plants. King of all coal customers is U.S. Steel's Clairton Works, which stretches about 21⁄2 miles along the banks of the Mon some distance below Lock 3. Robert E. Scatterday, president of the Waterways Association of Pittsburgh, said the cokemaking complex is the biggest coal user on American rivers.

Robert L. Walls, Clairton Works general superintendent, told a reporter the plant consumes 27,000 tons of coal a day, or about 9.5 million tons a year. Roughly half is shipped through Lock 3 from mines upriver, he said.

Also dependent on Lock 3 for 5 million to 6 million tons of coal a year are -Jones & Laughlin Steel Corp. plants at Hazelwood and Aliquippa.

Other big users of the lock are Consolidation Coal Co. and Weirton Steel division of National Steel Corp. George Douglas, manager of Consol's barge operations, said his company moves 5 million tons of coal through the locks to market each year. It is estimated Weirton Steel gets about 2 million tons from mines upriver.

Industry cites these statistics to argue that a water user charge would boost shipping costs and put the region's steel industry at a competitive disadvantage. Arthur Brosius, vice president of Union Mechling Co., the barge line owned by Dravo Corp., predicted waterway shipping rates would increase 50 percent if a user charge were enacted.

Clairton Works Chief Walls pointed out that his plant receives all of its coal by barge. There are no provisions for shipping it in by rail or truck.

Even if land transportation were available, it's doubtful if it would be feasible, he said. While between 25 and 27 barges satisfy the plant's daily appetite for coal, 385 railroad cars or more than 1,000 trucks would be required to do the job, he explained.

"About 9 million tons of annual steel production depends on coke and gas from Clairton," Walls said. Or, looking at it another way, about 58,000 jobs at U.S. Steel hang in the balance, he continued.

That doesn't include 14,000 jobs at J&L plants and 5,000 jobs at Weirton whose existence is keyed to coal that moves through Lock No. 3.

Support for the user tax, which has been discussed since the Franklin D. Roosevelt administration, seems to center around railroads and environmentalists.

Railroads support the measure for the obvious reason that they are competing carriers. "Free use of the expensive waterway system is unfair to a majority of shippers dependent upon other transportation modes," a spokesman for the Western Railroad Association said.

He estimated the Army Corps of Engineers spends at least $400 million a year to maintain the inland waterways system. Other sources put the total federal outlay at a billion dollars annually.

The railroads say the $400 million proposed expansion of the dam and locks at Alton, Ill., whose antiquated facilities bottleneck river traffic, would cost railroads $383 million in annual revenue.

The railroads argue that there is nothing free about barge transportation, that rates are cheap because the public subsidizes them.

"The result is that railroads pay 30 times more state and local taxes than barges do for every ton-mile of cargo moved," the rail spokesman declared.

Some environmentalists would like to see the user charge enacted because they believe it would provide revenue for badly needed water projects, mainly in the West.

Pittsburgh has its own version of the Alton problem at Lock 3 where the Army Engineers are spending $900,000 to patch it up. But Col. Max Janairo, Pittsburgh district, said the repairs are only temporary, that a $13 million replacement is needed.

Money-about $2 million-to get the job started is tied up in the congressional debate over waterways projects that President Carter has threatened to veto, Janairo said. The outcome is still uncertain. In the meantime, Janairo said he is hoping the patchup lasts until permanent improvements are made.

Before the debate ends, a water user tax of some kind stands a good chance of being passed, river industrialists say. This would impair Mr. Carter's plan to make coal the linchpin in the energy solution, they argue.

Incidentally, there are 22 power plants along the Ohio River between Pittsburgh and Cincinnati that use 11,000 tons of coal an hour. Virtually all of this fuel moves by water.

Whether a water user tax is right or wrong, its passage would boost the cost of doing business in the Pittsburgh region which is so heavily dependent on the rivers for transportation.

Arguing that the timing is very bad, foes of the tax contend it would have an adverse effect on the steel industry-the area's leading employer-which already has been stung by imports.

SENATE

[Sept. 21, 1977]

THE PRICE OF DAM 26

Mr. HUDDLESTON. Mr. President, maintenance of a healthy transportation system is vital to the economy of the Nation. This means that all modes must function to their maximum efficiency, competing against each other for the ultimate benefit of the consumer.

The issue of whether or not those who use the public waterways should pay for that privilege has been debated for years and is reaching a climax in this Congress. In an editorial which appeared yesterday in the Journal of Commerce the issue is discussed. I recommend it and ask unanimous consent that it be printed in the Record.

There being no objection, the editorial was ordered to be printed in the Record, as follows:

THE PRICE OF DAM 26

It now seems highly likely that waterways operators will have to begin paying user charges two years hence to defray some of the costs incurred by the Corps of Engineers in maintaining and improving inland navigation systems. Although they have long fought successfully against efforts to impose such charges, those involved in for-hire transportation (represented largely by the Water Transportation Association) appear to have recognized the difficulty of persuading Congress to fund any more important navigation projects along the inland rivers unless they accept what they so long rejected.

The urgent need for new locks at a particular bottleneck on the Mississippi, a facility at Alton, Ill., doubtless spurred their willingness to accept a compromise. Some members of Congress have said they will not vote for the Ralton project, which also includes a dam, and President Carter has indicated he won't sign a bill funding it unless it contains some user charge provision. The railroads have been insisting on the charge for many years and have found a staunch ally in the Department of Transportation. In the face of such formidable pressure from the White House, Capitol Hill, DOT and their principal competitors, the waterways operators had little option but to retreat or face defeat.

What waterways operators have agreed to accept is a fuel tax of four cents per gallon on commercial traffic using 26 inland water routes beginning Oct. 1, 1979. This tax rate, about equal to other federal taxes on fuel used in transportation, would increase to six cents a gallon four years hence. It is, naturally enough, more than WTA members want to pay, but considerably less than the railroads think they should pay.

Barge lines will probably have to raise their rates if the bill (H.R. 8309) passes the House and Senate. This will be good news to the railroads long vexed by waterway competition, though not to industrial consumers of the bulk commodities traditionally moved by barge. As it stands the bill wouldn't greatly upset the existing relationships between rail and barge rates on bulk commodities. The real question is how long it will be allowed to stand in its present form. After 1981 that will depend on the pressure that can be brought to bear on Capitol Hill by the railroads, on one hand, and, on the other, by the waterways operators and the industries depending upon the waterways for their raw materials. For the former, disappointed as they may be in the initial tax rates specified in HR 8309, the most important thing is that its enactment would provide a hole in which a powerful lever could be inserted.

This is doubtless recognized by such waterways spokesmen as John A. Creedy. president of the WTA, and J. W. Hershey, president of American Commercial Lines, both of whom endorsed the compromise in addresses before the National Waterways Conference in Kansas City last week. Both know that the price of the locks and Dam 26 at Alton will be the establishment of a precedent that may cause them much trouble in the future.

The precedent, as noted above, involves the concept that commercial users of waterways should bear a share of the cost of maintaining and improving waterways that serve a number of different purposes, not all commercial, such as flood control, recreation and the like. How much of that share should they, and their industrial shippers, be required to bear?

Our guess would be that they will be bearing a fair share of it if HR 8309 is enacted and signed by the President in its present form. What bothers us is the question of what will happen on Capitol Hill after the four cents per gallon tax is raised to six cents in 1981. Will the new fuel taxes (or user taxes) be held to these rather moderate levels for long? Or will the big lever be employed to pry them up to much higher levels? These are questions the shippers will have to bear in mind.

We recognize, as do all parties having a direct interest in HR 8309, that it is more difficult to get Congress to establish a precedent than it is to expand on that precedent, once established. A case in point is the Social Security System, which started modestly as an actuarily-based retirement program managed by the government, but which has been vastly expanded in terms of rates, benefits and coverage for the better part of 40 years.

Another is the minimum wage law. Under the relentless pressure of the labor unions the minimum has been forced upward, step by step, for many years and is apparently to be levered up once again to $2.65 an hour, regardless of indications that one consequence of this will be to close off employment possibilities to teen-agers and unskilled minority workers.

Once the concept of special taxes on users of inland waterways gets on the statute books, it will be relatively easy for Congress to vote increases in the tax rates; much easier than getting the precedent established. So if the barge lines and their customers are a bit uneasy over the price they are paying for Dam 26 and the new locks at Alton, we think they have reason to be. Once Congress gets accustomed to the idea that it can legislate barge rates up to almost any levels, it is any man's guess what it will do.

HOUSE

[Sept. 22, 1977]

RIVER BARGE TRAFFIC

Mr. VAN DEERLIN. Mr. Speaker, perhaps as early as next week we will be asked to consider measures which could seriously affect the future of a transportation industry with an unusually low profile, that of our shallow draft river barges.

Although I do not personally subscribe to all of the contentions presented in a recent speech by Mr. John Creedy, president of the Water Transportation Association, I nevertheless found it particularly enlightening with respect to the importance of the river barges role in intercity commerce, and the remarkable efficiency and energy conservation of river barge transport.

Accordingly, I recommend highly Mr. Creedy's remarks to my colleagues, for their consideration prior to next week's votes on H.R. 8309.

THE WATERWAY FUEL TAX COMPROMISE: SOME BASIC QUESTIONS

(Remarks of John A. Creedy)

It is difficult to praise any increase in taxation or the imposition of new taxes anywhere, but it is possible to praise the art of compromise.

There is today a lineup of the major waterway organizations in support of a bill designed as a compromise of two major issues, the much-needed reconstruction of Lock and Dam 26 on the Mississippi and the imposition of a tax on the inland waterways. The bill would impose a 4 cents a gallon fuel tax on commercial traffic, rising to 6 cents in 1981 and would require a very thorough study

of impact. The 4 cents is the same as other federal taxes on fuel used in transportation.

In the same measure is a commitment to go ahead with the reconstruction of Lock and Dam 26, a notorious obsolete bottleneck on the Mississippi at Alton, Illinois which is long overdue for replacement.

The present deadlock over this facility would be broken. A compromise would be accomplished.

It may have seemed logical to separate the issue of taxation and a badly needed lock. It may have seemed desirable to get a handle on the answers to some of the basic questions raised by this change of policy before the change is made and not afterwards as is now proposed.

But that is not the present course and, whatever the misgivings, and the logical anomalies, for example, why water transport and not railroads, why shallow draft and not deep draft, the spirit of compromise in support of the recommendation of the House Public Works and Ways and Means Committees' joint bill, H.R. 8309, is prevailing.

But the questions remain.

The first basic question is one of objective.

There are two over-riding goals of current national policy. The first is the conservation of energy. The second is control of inflation. And barging makes a major constructive contribution to both national problems and the objective of a new tax program should be to keep that contribution unimpaired.

Barging produces transportation at less expenditure of energy than any overland mode by quite a wide margin. At the same time it produces about 17 per cent of the inter-city ton-miles and receives in revenues less than 2 per cent of the total expended, a substantial contribution in the fight against inflation, if there ever was one.

But in addition to the savings directly achieved by those who ship by barge, the barges have a remarkable effect on rates competing modes charge the public. The railroads themselves have testified that their rates on water competitive commodities are "less than they would otherwise be" by $500,000,000 to $750,000,000 a year because of water competition. So, in only 10 years, water competition saves the public in rates paid to the railroads, by their own testimony, the entire $5 billion that the government has spent on the shallow draft navigation since 1824.

And these profitable water-competitive rates, which do so much good in the fight against inflation, help promote improved rail efficiency-the introduction of unit trains, multiple car and other more efficient services-a classic case of lower rates leading to higher volume and higher profits.

The railroads try to persuade everyone that the vast 25,000 mile inland navigation system was constructed solely for the profit of a few barge lines. But everyone knows better than that. Low cost transport of coal for utilities is reflected in the consumers' light bill. Low cost transport of fuel oil contributes to holding down the price of fuel. Low cost transport of raw materials going into the manufacture of aluminum or steel spreads its benefit throughout the whole country. Low cost transport of grain and farm supplies such as fertilizers directly benefits the farmers.

The present system of financing waterways requires a cost-benefit analysis. If the analysis shows the public benefits are in excess of the costs, the project is approved. Navigation projects return $6 or $7 for every dollar expended and the Gulf Intracoastal Canal returns $27 for every $1 spent. The multi-purpose hydronavigation project on the Columbia, in addition to its favorable cost-benefit, has one extra dimension. It relieves the Pacific Northwest of dependence on fossil fuels, a benefit certainly not foreseen in the 1930's when the projects were first authorized.

The multi-purpose projects have been highly successful in returning their costs to the public through savings. The justification for the use of public funds in these projects is that benefits to the public exceed the cost to the public. To state it differently, when the benefit to the public clearly exceeds the cost to the public, it is appropriate that the project be financed from general tax revenues provided by the public.

Now both Senator Peter V. Domenici of New Mexico and the Department of Transportation, disregarding the basic fact that the benefits accrue to the public generally and not to some special group, want a system of special taxation that could make some waterways, where the benefit to cost ratio is favorable, un