pital, on longer terms, at lower rates of interest to ventures backed a large stable U.S. corporation than comparable foreign banks can for similar foreign ventures. Except for U.S.-flag shipping, transrtation enterprises financed in the United States (e.g. airlines) have out 20 percent equity capital and about 80 percent borrowed capital. ny of the large tanker operators who have financed their foreigng tankers in the United States have been able to get 75-80 percent ortgages for up to 20 years when backed by whole life charters from ge international oil companies. In contrast to these examples, U.S.subsidized companies operate with only 40-60 percent borrowed pital. This may be due both to conservative financing policies of these ns and to the applicable statutory provisions of the subsidy laws verning them. In any case such conservative financing patterns have effect of lowering the rate of return possible on equity capital and sing the required rate of return on total capital invested in U.S.-flag sidized shipping firms.

.S.-flag firms which assemble the capital required for a large scale, h speed, express container ship system will presumably want to unce their operations on something like the airline pattern of about percent debt obligations. A high level of debt at low average interest es would put U.S. firms so financed in a better position to compete ocean-freight rates than their less favorably situated foreign petitors.

FUEL

Except for the NS Savannah the merchant ships of the world are on oil. Oil is readily available all over the world at standard prices all customers. U.S.-flag ships should operate at higher speeds than ir foreign competitors because with very high wage rates overall ts are minimized at higher speeds for U.S.-flag ships than for their eign competitors who have lower paid crews. The current operating erential subsidy tends to distort this relationship and induce U.S.operators to prefer about the same speed as their competitors. .S.-flag ships should be faster and use more fuel regardless of ether it is oil or nuclear material. There would probably be an itional economic advantage to the United States if nuclear power me economically competitive for some of the larger and faster s. The United States is a net importer of oil but could possibly one of the principal world suppliers of nuclear fuel material. Nur fuel obtained solely from a domestic source would replace oil e of which is purchased abroad with dollars thus aiding the bale of international payments.

SUMMARY

ontainerized handling systems, regardless of the kind of fuel used e ships in the system, will be advantageous for the United States use a large amount of capital must be assembled to substitute for hand labor now used in break bulk shipping systems. Such subtion will be more beneficial to U.S. shippers and shipping firms to their foreign counterparts because U.S. labor costs are from to five times equivalent foreign labor costs. The net result should e U.S. exports more competitive in third country markets by reng the substantial ocean freight rate differentials that now exists

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for many products. Increased export sales because of lower ocean freight rates will help to maintain and improve the U.S. internation balance-of-payments position.

G. INDUSTRY RESEARCH AND INTEREST IN NUCLEAR POWER SINCE TEE "SAVANNAH" PROJECT

All segments of the marine transportation industry have expressed some interest in nuclear-powered merchant ships. These include shipping companies, nuclear reactor manufacturers, design firms and shipyards.

OPERATOR INTEREST

American Export Isbrandtsen Lines, Inc. (AEIL) has shown the greatest interest in nuclear power beginning with their contract to operate the NS Savannah during the second round of demonstration voyages. This interest has continued with their current operation of the NS Savannah commercial operation through a subsidiary known as First Atomic Ship Transport, Inc.

AEIL expressed further interest in the operation of a commercial nuclear cargo fleet in a joint letter to Dr. Glenn T. Seaborg, Chairman, U.S. Atomic Energy Commission, and Mr. Nicholas Johnson, Martime Administrator, on October 30, 1964. This expression of interest was general in nature but it advised that AEIL had an active interest in cooperating with the Commission and other Government agencies to design, construct, and commercially operate a group of nuclear-propelled vessels for the offshore trades of the United States at the earliest possible date. This commercial interest in the maritime application of nuclear power formed the basis for further research studies on the subject.

AEIL has followed through on its original interest by filing with the Maritime Administration on January 26, 1966, an application for construction differential subsidy (CDS) for three high-speed cellular container vessels, with either nuclear or conventional powerplants, for operation on Trade Route No. 12, United States to the Far East. (See ch. II.) This application outlines the ship, the trade, and the AEIL estimate of cost to themselves and the Government if the ships were to be constructed with nuclear power under certain assumed provisions of the proposed Garmatz bill (H.R. 766) and Cotton bill (S. 2949), or constructed with conventional power under the subsidy provisions of the Merchant Marine Act of 1936.1

Other shipping companies in the United States are aware of the technical feasibility of nuclear power. American President Lines, American Mail Line, and Moore-McCormack Lines have cooperated with two naval architectural firms in undertaking trade route studies for the Maritime Administration on the economic feasibility of nuclear power for ships. In addition, it is understood that one unsubsidized operator is considering nuclear power as a possible alternative source of power for new proposed high-speed ships

AEIL is continuing to refine the design and develop further detalls which will be submitted to the Maritime Administration in support of the application. The Maritime Administration has reviewed all information currently available and has suggested that AEIL develop and submit additional supporting information.

MARITIME ADMINISTRATION SOLICITATION OF INDUSTRY INTEREST

The Maritime Administration sent a letter soliciting industry inrest in nuclear powered merchant ships to 56 U.S.-flag ship operators April 25, 1966. As of May 17, 1966, 31 operators had replied. The erators are in general interested. However, few are in any position make independent evaluations of the economic competitiveness of clear power. The gist of the replies to date is that they will be inested only when the economic competitiveness of nuclear power has en proved.

REACTOR MANUFACTURER INTEREST

Private industrial reactor manufacturers have made several unlicited proposals for marine nuclear reactors. The Babcock & Wilcox rp., Combustion Engineering Corp., Westinghouse Electric Co., neral Electric Corp., and United Nuclear are known to have made dies relating to reactors for ships. (See ch. IV.)

Babcock & Wilcox' interest in merchant ship reactors began with eir work on the NS Savannah for which they supplied the reactor d associated equipment. This company has continued its interest by veloping advanced designs and doing additional research to improve eir pressurized water reactor (PWR) concept. Babcock & Wilcox, rough their foreign affiliates, have been working with other countries d have done much of the engineering and design work on the Gerin bulk carrier, Otto Hahn, which is scheduled for trials during the st half of 1967. (See ch. IX.)

SHIPYARD INTEREST

The interest of shipyards toward nuclear power in merchant ships s been limited; however, several who have built nuclear vessels for e Navy have expressed interest in a nuclear merchant ship program.

NAVAL ARCHITECTURE FIRM INTEREST

In conjunction with the interest expressed by AEIL, other operators d the reactor manufacturers, three naval architectural firms have en most active. They are J. J. McMullen Associates, Inc., G. G. arp, Inc., and J. J. Henry Co., Inc., who are currently under conet with the Maritime Administration for ocean shipping system dies including an evaluation of the use of nuclear power.

SUMMARY

The results of industry research and interest of the letter solicitation the industry indicate that leadership and substantial financial supt for the next generation of nuclear ships will depend upon the deral Government because of the uncertainties and costs involved a technology in its early stages of development.

POSSIBLE PROGRAMS FOR FURTHER NUCLEAR POWER APPLICATIONS IN THE MERCHANT MARINE

The trends in trade and development of maritime transportation tems are of advantage to the United States. Both our merchant ma

rine and our position in international trade are likely to gain by these changes.

Nuclear power offers the United States the opportunity to increas this gain and to further the goals of our national policy. The economies of scale in nuclear powerplant costs can be utilized as horsepower requirements increase in maritime application. The following program is presented as the Government action required. It suggests both longrange and near-term goals.

INTERIM PROGRAM

Purpose. An interim program or programs should be undertaker to: (1) gain further experience with crew assignments, pay, and nunber of billets required; (2) resolve liability, insurance, and port safety problems left outstanding by the Savannah project; (3) provide a new base point for AEC and MarAd economic and cost calculations.

Construction of the first nuclear-powered ship was approved by Congress nearly 10 years ago (July 30, 1956). The ship has been in operation for over 4 years. The Savannah is now a one-of-a-kind spe cial ship which has been very successful in many ways. Some unre solved problems remain however with respect to the operation of nuclear-powered ships which cannot be, or at least are highly unlikely to be, resolved without some additional merchant ships powered with nuclear reactors (see chapter V).

A number of Navy ships and stationary electric powerplants have been equipped with nuclear reactors since the Savannah project. There has been no opportunity to apply any advancements or refinements in nuclear reactor design to merchant ships since the Savannah. Engineering calculations for the next ships thus rests on the Savannah experi ence and Navy and electric powerplants built since the Savannah. A new fleet of nuclear ships would provide an opportunity to check the validity of the engineering extrapolations and calculations being used for the next nuclear ships.

Possible scope.-The interim program would include from two to four ships built for a high-speed, express service, containerized ship ping system. The program would award all these nuclear ships to a single bidder.

Benefits. The interim program would provide a continuing method for resolving or working toward the resolution of the problems which stand in the way of widespread use of nuclear power for merchant ships if and when it becomes economically competitive with fossil fuel. It would provide some additional experience with pressurized water reactors although benefits in this area may be limited.

It would provide a wider base for the nuclear reactor industry in the United States. It should aid the industry in maintaining world lead ership in the nuclear reactor technology.

LONG-RANGE PROGRAM

Purpose.-A long-range objective of the civilian maritime program would be the development of nuclear propulsion systems that, together with improved cargo handling and other nonnuclear innovations, can contribute to increased productivity and commercial competitiveness of the U.S. merchant marine.

Fossible scope.—The scope of the program would be determined on ooperative basis by AEC and the Department of Commerce. Based current knowledge it appears that plants in the range of 50,000 to 0.000 shaft horsepower will be required. After the criteria for nuar power has been established, the AEC anticipates that the most nomical way to achieve the objectives will be through a land-based t facility. The determination of whether to proceed with a test faity would in part depend upon the expected benefits from such a

gram.

Benefits.-The benefits from the long-range program will depend on the results which can be obtained from the cooperative venture he AEC and MarAd.

The program would be set up in stages so that planning, programing 1 budgeting techniques can be used to obtain the optimum results n the money spent and the programs can be altered as experience rrants. Assuming that nuclear power for civilian maritime applicaas does prove to be economic, numerous long-range benefits may alt:

The international merchant marine economic competition will ome less sensitive to labor costs where the United States is at a advantage and more sensitive to the availability and cost of capital re the United States has an advantage.

. Nuclear reactor industry may be able to extend their competitive antages by providing reactors not only for U.S. maritime applicabut possibly for export on the world market.

A successful program utilizing nuclear reactors in a containerized sportation system which reduces real costs of exporting U.S. prod= will improve the U.S. position in world markets and re the overall balance of international payments position.