Senator PROUTY. Perhaps I might say at this time, by way of explanation to the witnesses who were here this morning expecting to testify, that the chairman of the Committee, Senator Magnuson, was unable to be present because of illness. Senator Thurmond and I were both tied up with other commitments, so we could not be present. We do apologize and are sorry for the delay.

STATEMENT OF HON. ROMAN L. HRUSKA, A U.S. SENATOR FROM THE STATE OF NEBRASKA

Senator HRUSKA. Mr. Chairman, I have a prepared statement which I should like to have inserted in the record at the conclusion of my remarks.

Senator PROUTY. Without objection, that will be done.

Senator HRUSKA. I shall make only two observations on two very important points.

One is that during the testimony here there will be references made to the fact that if this very important national resource of railroad service and boxcars is not made available in timely and in adequate fashion, resort will have to be had to other modes of transportation. That has already happened in some respects.

It can be done in one of two ways: there can either be purchases of fleets of trucks by elevators and warehouses or by contracting with those who own such fleets of trucks for the purpose of transporting the grain in question.

It is not my purpose to get into any discussion of the relative merits of different modes of transportation. I would like to make this point. however, that there is available now-there is existent in this Nation a mode of transportation which is more economical than alternate modes of transportation and that mode that is more economical is the railroads with their boxcars.

If other modes, if alternate modes of transportation are resorted to, it will be at the expense of the farmer who raises that grain.

I submit, Mr. Chairman, that the farmer these days is suffering sufficiently by way of handicap, and by way of obstacles, to surviving without having man-invited additional obstacles and hinderances put in his way. The economic lot of the farmer is sorry enough without having piled on to it the burden of having his income decreased by having him pay the additional transportation costs.

He pays for it in the form of a lesser price for the grain which he produces. That is how he pays.

The second point is this: Traditionally grain grown in our area has always been stored in nearby local elevators and storage facilities and increasingly now we find this being discussed and this being contemplated in this field; that there are those who are making plans, or at least considering plans, to build storage facilities and mills at the ports from which the grain is shipped or in the locality where the grain is used or being milled.

Again we come to this basic proposition: Here are facilities constructed and owned and operated by those who have invested their money in them pursuant to this traditional and historical way of handling grain produced in the Middle West. They have enough trouble without having their share of troubles compounded and increased

by a man-invited situation which might result in the relocation of those facilities to other parts of the country which would be a duplication of effort and the cost of which would be invited upon people upon whom they should not be invited.

Those points are developed somewhat in my statement, Mr. Chairman. I do feel that I wanted to make them here by way of emphasis and by way of detail as I have, and as I have just completed.

Senator PROUTY. Thank you very much, Senator Hruska. We appreciate your taking the time to come here. I am sure that your testimony will be very helpful to the subcommittee.

Senator HRUSKA. I thank the chairman.

(The prepared statement of Senator Hruska follows:)

Mr. Chairman, my appearance here today is in support of S. 1063. As a cosponsor of that legislation, I am vitally interested in its enactment. This is a measure which is long overdue, and simple justice requires that most careful attention be given to this problem, which it will solve.

Those of us representing States in the Midwest have constantly faced a reducing shortage of boxcars to move our agricultural products during the harvest period, and, more recently, at other times throughout the year. During my service in the House and in the Senate, there has never been a year when this problem of shortage of cars did not occur.

Earlier this year, during the first few months, shippers of grain from Nebraska, Kansas, and Colorado were having difficulty in obtaining an adequate number of usable grain cars to market their product. During April plans were made for a meeting attended by interested Congressmen and Senators and grain shippers with the Chairman of the Interstate Commerce Commission and other representatives of his staff. The meeting was held on May 2.

Earlier, the shippers had met with the Chairman of the Interstate Commerce Commission and discussed the shortage of cars. As a result of the second meeting, the Interstate Commerce Commission issued its service order No. 943 that same afternoon.

The ICC order applied to plain type boxcars with doors less than 8 feet wide belonging to the following railroads: Santa Fe, Burlington Lines, M.K.T., Missouri Pacific, Rock Island, S.L.S.F., and the Union Pacific. The Commission required that cars belonging to those railroads had to be loaded for delivery on the line of the owning carrier or should be moved to the owners empty. Service order No. 943 was revised after consultation with the railroads named therein, and all carriers except the Union Pacific and the Chicago, Burlington & Quincy were removed from the order. Those ownerships had advised the Interstate Commerce Commission that the supply of cars on their lines had increased to the extent that they could be excluded from the revised order, which became effective on June 6, 1963.

With respect to the C.B. & Q. and the U.P., I am informed that cars became more readily available, however, due to the progress of the harvest and the increased demand for cars on those two lines, it was anticipated that they would need the protection of the revised order to secure prompt return of their own boxcars.

The revised order will expire on July 7, 1963, unless otherwise modified, changed, suspended, or annulled by order of the ICC.

The Interstate Commerce Commission acted promptly and surprising results were obtained. The Commission order brought into effect penalties of up to $500 per car for failure to comply with the order. The Commission has policed other orders and at present there are prosecutions pending in the Federal courts against railroads for violations of similar orders.

When there is sanction involved, railroads are inclined to comply more readily than under the terms of the usual Association of American Railroads car service orders which are voluntary.

It was necessary that the Commission find an emergency existed during the period of acute car shortage. Gentlemen, I suggest that this is an extreme measure. In order to get adequate cars for distribution it is imperative that an incentive must be found for the railroads to increase their car fleets.

All that any service order does is to redistribute the Nation's car fleet so that a larger percentage of ownership is available on line for use in the area suffering the shortage. What is needed is a program which will produce more cars.

Enactment of S. 1063 will give the Interstate Commerce Commission authority to make necessary findings of fact and regulations to put into effect per diem rates which will recognize that part of the compensation paid to the owning road will 'be a profit over and above the "bare bones" cost of ownership.

Under conditions existing in the railroad industry today, there is little incentive to put any portion of the railroad's retained earnings into a construction program for new cars, when the railroad knows that it will not retain the use of its own property for any long period of time, and further, that the per diem rate is such that the profit motive behind ownership is excluded.

In recent months, because of the failure to get a suffient number of cars, many Commodity Credit Corporation contracts have had to be modified because the grain could not be moved on time. In such instances there is a direct loss to the owner. There is a further loss to the U.S. Government because storage costs, although sometimes reduced, continue.

There have been instances where cargoes could not be shipped because the grain was not available at the port. If adequate cars were available to the farmer and to others in this chain of movement of the grain to markets, both in the United States and abroad, the grain could be marketed in a more orderly fashion without the constant threat of a potential loss to almost all who participate in the movement at one stage or another.

Traditionally, grain grown in our area has always been stored in the nearby local elevators and storage facilities. Increasingly we now find that plans are being made to build storage facilities and mills at the ports from which the grain is shipped and in the locality where the grain is used or milled.

Gentlemen, I am concerned that this eventually should not take place. It would mean a severe economic loss in terms of dollars, jobs, and the loss of future economic development in the areas of my State and others where these storage facilities now exist.

It would be sheer economic waste to duplicate facilities at other locations. It would be disastrous to the people in the rural areas of my State who are dependent upon the employment opportunities available at the mills and elevators of the local area.

I am hopeful that under the leadership of the chairman of this committee that prompt action will be taken by the committee to report S. 1063 to the Senate for early action.

It is needed legislation. It will solve a longstanding problem. It will give progressive railroads an incentive for sound investment. It will help provide an adequate number of cars which will alleviate the constant threat of car shortages which our Nation has faced continuously for many years.

STATEMENT OF HON. CARL T. CURTIS, A U.S. SENATOR FROM THE STATE OF NEBRASKA

Senator CURTIS. I thank you for your courtesy, and I shall be very brief. My statement is brief.

Mr. Chairman, I am pleased to come before your committee in support of the bill, S. 1063, introduced by Chairman Magnuson and in which I joined as one of its cosponsors. This, as you know, is not my first appearance before the committee on the subject matter of a reasonable per diem rate for railroad equipment. The matter of getting rolling stock back on line of the western roads becomes more acute each year and the logical way to avoid this annual catastrophe is the enactment of the legislation now before your committee.

The problem must be resolved once and for all if we are to avoid a continuing situation of expropriation of property without adequate compensation.

About a month ago I met with a group of midwestern Members of Congress and members of the Interstate Commerce Commission

because of the terrific shortage of boxcars needed to move grain in Midwestern States. We were gratified by the issuance of an order from the Interstate Commerce Commission which got us over that hurdle.

As the Commission of course recognizes, this was "stop gap" help, and we can avoid the recurrence of trouble only by enactment of this bill now before your committee.

We all know the many facets of the railroad car supply problem, and we know that many roads prefer to pay the current per diem rate than repair their own rolling stock.

Enactment of this legislation will afford an equitable distribution of our railroad car supply. It will encourage the repair of rolling stock now in use and it should encourage the construction of an adequate supply for all our railroads in all sections of the country.

I hope most earnestly that this bill can be reported from your committee and enacted during the present session of the Congress. If we fail to meet the problem at this time we will be plagued each year by increasingly acute periods of car shortages.

I must say the situation is most acute in my State and has been for many years. We need this legislation. I thank the committee very much.

Senator PROUTY. Thank you very much, Senator Curtis. We appreciate your taking the time to come here. Your statement is very helpful.

STATEMENT OF HON. LAURENCE K. WALRATH, CHAIRMAN, INTERSTATE COMMERCE COMMISSION, WASHINGTON, D.C.; ACCOMPANIED BY ABE MCGREGOR GOFF, VICE CHAIRMAN; COMMISSIONER KENNETH H. TUGGLE; CHARLES W. TAYLOR, JR., DIRECTOR, BUREAU OF SAFETY AND SERVICE; PAUL J. REIDER, ASSISTANT DIRECTOR, BUREAU OF SAFETY AND SERVICE, AND CHIEF OF THE SECTION OF CAR SERVICE; MARCUS L. MEYER, ASSISTANT DIRECTOR, BUREAU OF INQUIRY AND COMPLIANCE; ROBERT T. WALLACE, LEGISLATIVE COUNSEL; HIRAM SPICER, CONGRESSIONAL LIAISON OFFICER; EDWARD F. CONWAY, LEGISLATIVE ATTORNEY; AND WALTER BAUMGARTNER, HEARING EXAMINER, BUREAU OF RATES AND PRACTICES

Mr. WALRATH. Mr. Chairman, with your permission, I would like to identify on the record the personnel from the Commission who are present with me today.

Senator PROUTY. That is perfectly all right.

Mr. WALRATH. Our Vice Chairman Abe McGregor Goff; Commissioner Kenneth Tuggle; Director Charles W. Taylor, of the Bureau of Safety and Service; Paul J. Reider, Assistant Director, Bureau of Safety and Service, and Chief of the Section of Car Service; Marcus L. Meyer, who is Assistant Director of the Bureau of Inquiry and Compliance, and also Chief of the Section of Rail, Water, and Forwarding Enforcement; Robert T. Wallace, who sits on my right, as our Legislative Counsel; Hiram H. Spicer, Congressional Liaison Officer; and Edward F. Conway, Legislative Attorney. Also, Mr. Chairman, in the hearing room, and I want to make this quite clear on the record, is Walter L. Baumgartner, who is a hearing

examiner in the Bureau of Rates and Practices. One phase of the per diem situation is pending before him as hearing officer. We asked that he be here in case questions of the status of that proceeding should come up. We are not directly relating our testimony to it, but he is aware of the status of that proceeding. If he is permitted to remain, we will assure the committee that he will also be here at any subsequent hearings.

Senator PROUTY. We will be very glad to have him participate.
Mr. WALRATH. All right, sir.

To begin with, I might say that the prepared statement which we have presented for the record is very similar both in form and in substance to that which we presented in 1961 and in preceding hearings on this same general subject, although the bill numbers are different.

Mr. Chairman and members of the subcommittee, my name is Laurence K. Walrath. I am the present Chairman of the Interstate Commerce Commission and have served in that capacity since January 1 of this year. I am appearing today to testify on the Commission's behalf on S. 1063, a bill which was introduced by the chairman of the committee for himself and 34 other Senators and which would give effect to legislative recommendation No. 2 in our 76th Annual Report to the Congress.

First, and on behalf of the Commission, I wish to express appreciation for the opportunity to appear here today to urge approval of S. 1063.

The purpose of this bill is to grant the Interstate Commerce Commission authority to prescribe per diem charges for the use of railroad freight cars on a basis that will provide an economic incentive to the deficit owning railroads of our Nation to acquire and maintain their proportionate supply of freight cars adequate to meet the needs of commerce and the national defense.

As you are aware, the diminishing supply of railroad freight cars has been a matter of considerable concern to the Commission for many years. Despite the generally expanding economy of the country, the ownership of freight cars is now less than it was during World War II. That is correct not only in numbers but in capacity. As a result, critical shortages of varying duration and severity have occurred in almost every year during periods of peak loadings and in about every producing area of the country-it is not a parochial problem. Nor is it confined only to agricultural production, in terms of which we have heretofore thought of it generally. We ordinarily felt it had to do with the recurring harvest seasons and particular

areas.

As late as last Friday, Mr. Chairman, there was an article appearing in the Wall Street Journal on the front page. I call it to the committee's attention because it indicates that shorages are beginning to occur in areas other than those where we normally expected them. This article, which I will identify and read only a small portion of, was in the June 14, 1963 edition. It starts off in this fashion: While the Nation's railroads are fretting over the outcome of their current labor dispute, their customers are more concerned about a spreading freight car shortage.

The shortage has developed slowly in recent weeks because of a rising level of business activity, combined with 5 years of inadequate expenditures for new equipment by most of the Nation's railroads. Shippers and railmen agree that