10 years; Sweden, 10.3 years; Norway, 8.8 years; Japan, 8.5 years: West Germany, 9.5 years; and the Netherlands, 9.5 years.

In 1964 less than 9 percent of a total of about 340 million tons of import and export cargo was carried in U.S.-flag ships. By type of service, the U.S. fleet carried approximately 30 percent of our break bulk cargo, less than 4 percent of our liquid bulk and approximately 6 percent of our dry bulk cargo.

During the past several years, there has been a continuing reduction in the total percentage of export-import cargo carried by U.S.-flag ships. This trend will inevitably continue, unless the United States can develop more efficient and productive ships as part of integrated transportation systems.

Reference is made to the President's March 2, 1966, message on transportation, which places special emphasis on the importance of research and development for transportation in competition for international trade. While private enterprise bears the primary responsi bility for such research, the message stated that the Government can help in areas beyond the responsibility or capability of private industry. In addition, the President has requested a study of advanced vessel concepts, to include:

Research, development and planning of high-speed, large-capacity ships, de voted primarily to transporting preloaded containers of varying types between the major ports in the world.

Research on an oceangoing surface effects vessel capable of skimming over the water at speeds more than 100 knots.

Continued exploration of the application of nuclear propulsion to merchant marine ships.

With the increasing size, speed and hence power requirements of all types of ships, the advent of containerization or prepackaging concepts in the general cargo trade, and the apparent reduction in nuclear powerplant costs since the Savannah, it is appropriate that the Maritime Administration and the Atomic Energy Commission continue to explore the feasibility of both long- and short-term use of nuclear power in the U.S.-flag merchant marine.

RECOMMENDATIONS

1. The Federal Government should take an active role in a development program leading to economically competitive nuclear-powered merchant ships.

2. The Department of Commerce and the Atomic Energy Commission assisted by the Department of Defense and the President's scientific adviser, should cooperate in the establishment of a construction and research and development program to implement the following policy:

(a) The Department of Commerce and industry, with Atomic Energy Commission support, should proceed immediately with the construction of two to four large, high-speed (27 to 30 knots) fast turnaround nuclear-powered ships utilizing commercially available nuclear powerplant technology in an integrated transportation system to be privately owned and in operation by 1972.

(b) The Department of Commerce and the Atomic Energy Commission should proceed in an orderly fashion with a research and development program including a Government-owned, land-based test

ility for an advanced reactor for nuclear-powered merchant ships. 6. For the recommended nuclear fleet, legislation should be proed to permit the Federal Government to pay the excess design, elopment, construction, and operating costs due to this initial apcation of nuclear reactor propulsion plants.

CONCLUSIONS

. NS Savannah has proved the technical feasibility of nuclear ver for merchant ships.

. The NS Savannah has made a beginning but has not lead to the ation of a number of economic and other important problems, such ndemnity and labor.

. The trends in ocean commerce and in ship design point to larger more powerful ships in the future.

. The best light water reactor plant designs currently available for chant ships is not likely to prove economically competitive with fired boilers. Industry estimates are somewhat more favorable than ernment estimates.

. There is good reason to believe that a reactor for merchant ships be developed which will be equal to or superior to any oil-fired

nt.

An economically competitive reactor will require an extensive arch and development program by the Atomic Energy Commis, utilizing a land-based reactor test facility to minimize the costs maximize the results achieved.

Based upon commercially available nuclear plant technology, an rim program for limited nuclear ship construction (two-four) ld be undertaken promptly for three basic reasons: (a) to provide rating ship experience which will provide an incentive for clearing legal, institutional, and labor problems which stand in the way of e-scale routine use of economically competitive nuclear powered s in worldwide international trade, (b) to provide further cone experience in nuclear powered ship construction and operation; limited to the NS Savannah, and (c) to create industry interest e development of more economical nuclear reactors.

A parallel interim shipbuilding program and advanced light er reactor research program could provide the United States with ptimum nuclear ship program providing maximum benefits and imum assurance of continued U.S. lead in nuclear merchant ship -lopment.

In combination with other nonnuclear innovations, long-range fits which may accrue to the United States are:

) a restructuring of economic factor inputs (increasing capital management inputs and decreasing labor inputs) into the merat marine to favor U.S. operators at the expense of their foreign petitors;

) a restructuring of the whole transocean shipping system to favor operators and U.S. exporters in foreign competitive markets, thus gthening the foreign trade and hence the balance-of-payments ion of the United States;

) improvement in military value of merchant ships;

development of economical medium powered nuclear reactors.

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10. The experience since the NS Savannah project shows clearly the unwillingness of private industry to proceed with further nuclear ship construction without Government help. The developments since the NS Savannah in trade and ocean shipping technology show clearly that trends are moving in the direction which promise to make nuclear power economically attractive. The Federal Government must take a leading role in the further development of nuclear power for merchant ships.

11. This report has developed a projection into the future which portends nuclear powered civilian maritime ships economically equal to or superior to oil-fired ships. These projections have been based on many assumptions as to vessel size and characteristics, reactor cost, nuclear fuel cost, and operating cost, which are reasonably foreseeable today.

The value of the relative operating cost estimates in this report is to establish a point of departure into a future which may promise progressively greater economical advantage of nuclear power over fossil fuel as time and science advance.

If the past can be used as a barometer for the future, today's predic tions of future scientific accomplishments will in all probability be exceeded. With the proposed research and development program nuclear power, as applied to merchant ships, has the potential for becoming equal or superior to fossil fueled powerplants. Favorable accom plishment or technological breakthrough will enhance its economic advantage.

SUMMARY

I. TRENDS IN OCEANBORNE TRADE

1. World oceanborne trade more than doubled in volume between 1952 and 1964 and is expected to continue to grow rapidly. The large volume growth will require more or larger (or both) ships in the future than exist at present.

2. There has been a spectacular increase in the size of tanker and dry bulk carriers and an increase in both the size and speed of general cargo vessels since World War II. The increase in size and/or speed of vessels since World War II has required an increase in the size of powerplants from 6,000 shaft horsepower to about 30,000 shaft horsepower, with current shipbuilding proposals up to 105,000 shaft horse

power.

3. The high costs of loading and unloading ships in the United States (three to 10 times foreign costs) and the progress in container technology are causing a revolution in handling of general cargo. This revolution in cargo handling will permit faster turnaround of ships and permit an increase in ship time at sea from less than 50 percent currently to 80 percent or more in the future.

4. These trends in world trade, ship size and speed, and general cargo handling developments indicate that in the 1970-90 period a large share of general cargo can be expected to move in an integrated land-ocean transportation system with the ocean portion moving in large high-speed container or unit loading ships on fast turnaround schedules.

II. TRENDS ARE IMPORTANT TO UNITED STATES

A fast turnaround transportation system employing large highI container ships will change the economic input factor structure quiring relatively higher inputs of capital, management, and fuel elatively less labor input.

This restructuring of economic input factors will reduce or elimithe disadvantages now suffered by the U.S.-flag merchant marine ternational competition because economic factors in which the ed States has an advantage or equality with competitive nations bstituted for labor where the U.S. factor cost is four to five times of competitive nations.

III. NUCLEAR POWER HAS POTENTIAL APPLICATIONS

From 25 to 64 large (1,500,000 cubic feet) and giant (3 million feet) container ships requiring powerplants of 50,000 shaft power and above can easily be accommodated in the U.S. foreign fleet from 1970 to 1990. A large fast turnaround container ship equire high horsepower output, at a high percentage of utiliza-f plant potential (50,000 to 140,000 shaft horsepower). Such facesulting in increased power requirements can make nuclear power attractive.

A. NS "SAVANNAH" EXPERIENCE

The NS Savannah total program costs through August 20, 1965, about $97 million. These include costs of design development, uction of the ship and servicing facilities, and a 3-year testing emonstration program. The NS Savannah has accomplished its ives.

The NS Savannah propulsion plant has proved to be extremely e in commercial service.

The NS Savannah gained public acceptance in 28 domestic and eign ports during its demonstration program.

B. PRESENT NUCLEAR CAPABILITIES

This report includes brief descriptions of the NS Savannah nulant and other concepts offered by reactor plant manufacturers. merican Export Isbrandsten Lines, Inc. has prepared and suban application for a construction differential subsidy to be apo three large (813 feet), high-speed (29 to 30 knots) container This proposal reflects estimated prices for 105,000-shaft-horsemarine reactor powerplants.

he AEC estimates that a commercially available nuclear powerFor three ships of the same characteristics as the AEIL proposal be provided by an experienced reactor plant contractor-ship- team for about $82 million. Based on this estimate and ecolly satisfactory resolution of certain labor, licensing, indemni1. and safety problems, the Maritime Administration estimates ital entry cost of three nuclear ships-that is, the difference in tween nuclear power and conventional power container ships same characteristics as the AEIL proposal-will be approxi$54 million. The corresponding AEIL estimate is approxi

mately $32 million. Government estimates for a two- and four-ship fleet are approximately $34 and $72 million, respectively.

4. Based on MARAD estimates of present technology, the annual cost of operating three nuclear ships proposed by AEIL over a 25-year period will be approximately $1 million per year greater than operat ing three similar conventionally powered ships. The corresponding AEIL estimate is $1,500,000 per year less than the operating cost of || equivalent oil-fired ships. Regular operating differential subsidy payments are not included in developing these estimates.

5. There are questions of third-party liability coverage and the degree of Government and industry participation. The prospects of such coverage should be further explored and an examination should be made of possible continuing need for some form of complete Government third-party liability coverage.

C. FUTURE PWR MARITIME PROJECTIONS

1. There is a likelihood that a second-generation fleet of large, highpowered nuclear ships, beginning operations 10 to 15 years hence and using advanced reactors developed through the proposed R. & D. program will be economic provided nuclear third-party liability to the vessel operator is not excessive or is provided by the Government.

2. This prediction is sensitive to many factors such as small variations in capital costs, fuel costs, M. & R. costs, et cetera, and cannot be accurately predicted over a 25-year period beginning 10 to 15 years from now. For example, a 10-percent reduction in estimated nuclear fuel costs would save $100,000 a year in operating costs for each ship. 3. The trends in world trade and technology indicate a reasonable chance for the recovery of the total Government nuclear investment provided the reduced fuel, construction, and operating costs can be realized, and future ship power requirements and world trade trends follow present predictions. Any other cost reduction breakthroughs that the advanced reactor test program or integrated transportation system might develop would materially enhance the benefits to the Government of a nuclear program beyond present estimates.

V. U.S. GOVERNMENT ROLE

1. The research and development interest by the maritime industry since the Savannah project has been largely limited to exploratory studies except for a proposal by American Export Isbrandtsen Lines to build and operate a three-ship nuclear-powered container ship fleet on trade route 12. A Maritime Administration letter of solicitation of interest to shipping operators in April 1966 evoked interest in nuclear power only after it had proved economically competitive.

2. The Federal Government must take a leading role in the further development of nuclear power for merchant ships because significant advances in the technology are required and financial risks in nuclear powerplant and ship construction are too large and uncertain to be undertaken by the private sector alone.

3. The Atomic Energy Commission and Maritime Administration must work closely together and in cooperation with interested seg ments of industry to attempt to achieve the most commercially competitive nuclear merchant marine. Encouragement of cooperative ar