9-foot channel with good shipping points, is evidence that if this Corporation is liquidated no private carrier is going to fill the need.

Senator HILL. I think the whole record will show, Senator, that if we liquidate these barge lines that it will certainly be at a great loss to the shippers and consumers, particularly in the southeast area, and will be a loss, as I have said, to the economy of the whole Nation.

Senator MYERS. Thank you ever so much, Senator. We are very happy now to hear from Mr. Wagner.

STATEMENT OF A. J. WAGNER, CHIEF OF NAVIGATION AND TRANSPORTATION BRANCH, TVA

Mr. WAGNER. Thank you, Mr. Chairman. I am glad for an opportunity to discuss this problem with your committee.

My name is A. J. Wagner, and I am Chief of the Navigation and Transportation Branch of the Tennessee Valley Authority. I would like to address myself solely to that part of the pending legislation contained in the amendment introduced by Senators Hill, Kefauver and Sparkman, which would enable the Federal Barge Lines to operate on the Tennessee River.

At present, as Senator Hill has said, there is no less-than-bargeload service on the Tennessee, and there are no joint barge-rail rates published. The shippers in that area need both. The privately owned lines who serve the area are not providing this service or these rates, and we believe that Federal Barge Lines should be authorized to do this job on the Tennessee River as it is doing it on other rivers.

The dams, locks, and reservoirs that have been recently completed on the Tennessee River now provide an efficient and thoroughly dependable 9-foot channel which is open for use by shippers the year around. This new channel, 630 miles long, is a part of our whole inland waterways system, tying in with the Ohio, the Mississippi, the Missouri, the Illinois, the lower Mississippi Rivers, and with ports on the Gulf. Public terminals are already available at the major ports on the Tennessee River, and there is a very considerable number of private terminals that have been built largely for the handling of bargeload bulk traffic.

The Tennessee River channel, I would like to point out, has been available for modern water transportation only a relatively short time. The Kentucky Reservoir, the final one in the chain which completely canalized the river, was filled only in 1945, and in 1939, for the first time, a channel as much as 6 feet deep became available up to Chattanooga. Prior to the construction program of the Tennessee Valley Authority depths at many points on the river were limited to 1 foot or 12 feet during the low water seasons. The traffic which moved was basically local traffic. Most of it was sand and gravel dredged from the river bed and taken a few miles to plants ashore. There was some traffic in ties and forest products from the lower reaches of the river to the Ohio River at Paducah.

Being a new channel, the Tennessee River obviously requires a great deal of developmental work to obtain its full usefulness for shippers. Traffic is growing rapidly, as Senator Hill pointed out. In 1948 there were about 3,000,000 tons of traffic on the river. Something over 1,000,000 tons of this traffic was higher-value commodities-gasoline,

grain, automobiles, iron and steel, and such traffic. The remainder of it was still sand and gravel.

This 1,000,000 tons represents about nine times the volume of comparable traffic that was moving in 1933. Now, that was in 1948. In the first 4 months of 1949, the traffic in ton-miles on the river is in the neighborhood of 30 percent ahead of 1948, so that the traffic is continuing to grow.

Senator MYERS. In 1949 the traffic is 30 percent over 1948?

Mr. WAGNER. Yes, sir; over the comparable period. That is the traffic in higher-value commodities and in ton-miles.

The major part of this new freight is bulk traffic. It is coal, gasoline, and grain mostly, and it moves not only in whole bargeloads but in whole towloads.

I would like to say that the privately owned barge lines serving the river have done and are doing a very excellent job of developing this kind of traffic. They have been aggressive in digging it out, and in general they have done just a fine job in getting it moving. The volume of this kind of traffic, this bulk traffic, is about up to what we thought it should be at this point in the development.

The package freight is developing considerably slower, and perhaps the present volume is not over about one-fifth of what we think is should be. Package freight is not a major part of the traffic which normally moves on waterways, but it is an extremely important part. The primary reason, we think, that this traffic is developing so slowly is because there is no less-than-bargeload service; there is no barge line actively soliciting this kind of traffic. Most of the package freight which would move as less-than-bargeload freight

Senator MYERS. Is it profitable, that type of business?

Mr. WAGNER. In the beginning stages that type of operation is normally not profitable. It takes a long time to build up the accounts in small shipments to a point where the volume is sufficient to produce a profit. And I think that accounts for the fact that the privately owned lines have not undertaken the job. There are about 18 barge lines operating on the river intermittently or who have been operating there intermittently for the past few years. Six of them are authorized as common carriers of general commodities by the Interstate Commerce Commission. Four of them could provide this complete service the full length of the river.

None of these barge lines operates on a regular schedule. That is, if a shipper wants to have a shipment of steel moved, let us say, in the first place it has to be a whole bargeload, normally 300 tons or more, or he cannot move it at all. If it is a bargeload, he must make separate arrangements with a barge line for each shipment. After one shipment is completed, if he wants to ship another bargeload, he has to start all over from scratch again. He cannot go ahead on the assumption that some barge line will call at his port on next Tuesday or, say, once each week or once every 2 weeks and pick up his traffic. We just do not have that kind of service yet.

I think from this it is reasonably clear that the privately owned lines serving the river, while they are doing a good job on some kinds of freight, are simply not providing all of the service that all of the shippers in the Tennessee Valley need.

In spite of the fact that this less-than-bargeload service is not being provided, the best factual data we have been able to put together

indicates that about 90 percent of the shippers who could economically use the Tennessee River need less-than-bargeload service. This statement is based on a survey that we made several years ago in which we interviewed some 3,700 shippers. We analyzed the traffic which they said they were moving at the time, made comparisons between the barge rates which would be available, assuming that we had regular service and assuming that we had joint rates as they are published on other rivers.

We compared these barge rates with the transportation rates by other forms of transportation. On the basis of that survey, we found that a majority of the tonnage which would move on the Tennessee River would be bulk traffic in bargeload lots, but 90 percent of the number of shippers who could save money shipping on the Tennessee River need less-than-bargeload service. That is, their shipments were less than 300 tons in any one lot. In fact, about 75 percent of them were less than 100 tons in any one lot.

Now, none of these shippers is now getting any good out of the Tennessee River because he does not have the kind of service needed. Only the large shippers are going to be able to use the Tennessee River until someone provides this less-than-bargeload service. These small shipments, when they are developed, will add up to a considerable volume. Perhaps the aggregate available for economical movement right now would amount to 125,000 tons per year. Now, that is just less-than-bargeload stuff.

We believe that as the service is provided and the traffic grows, as industry develops, that this should go perhaps to a half million tons

a year.

A few years back the Knoxville Chamber of Commerce made a survey of the shippers at Knoxville, Tenn., to determine how many of them would use a public terminal if it were provided at Knoxville. They received responses from 52 shippers who indicated they would ship through this terminal, and the traffic volume which they indicated as available for movement was about 100,000 tons per year. It consisted of about 37 different commodities, and it ranged all the way from steel and automobiles to canned goods and salt, and that sort of thing. Now, only 4 or 5 of these 52 shippers have been able to use the river yet, and these 4 or 5 are all bargeload shippers.

For a period of about 9 months in 1941 and 1942 one of the privately owned lines serving the Tennessee River did offer less-than-bargeload service through the port of Guntersville, Ala. They did not offer complete service for the whole river, but simply through one port. During this 9-month period about 90 shippers and consignees used the service. This barge line moved about 9,000 tons of less-than-bargeload traffic in 14 different commodities. Incidentally, it included macaroni, catsup, lead, paint, glassware and even a very substantial tonnage of whisky. This service was discontinued

Senator MYERS. Not from Alabama? [Laughter.]
Mr. WAGNER. This was to Alabama.

Senator HILL. From Kentucky, I suppose. [Laughter.]
Mr. WAGNER. Well, I believe you are right, Senator.

This service was discontinued because of the war and has not been resumed. I think, however, that it shows that shippers will use the service if it is provided and if traffic is actively solicited.

I would not like to leave the impression that the volume that was developed up to that point was profitable for this barge line. I am not sure of the situation. But I believe that during that period they recognized that they were doing development work and they lost money on it. They had to give up before the traffic could be developed to a profitable volume.

The TVA continues to receive inquiries from many shippers concerning many kinds of traffic. Not so long ago I had a call, for example, from a wholesale hardware dealer in Knoxville who wanted to ship farm machinery in. I found that he thought 60 or 75 tons of farm machinery, which was a lot to him, would make a bargeload. I had to tell him that it would not, and that none of the barge lines now serving the river offer less-than-bargeload service. So, his machinery is not moving by barge. There have been many other cases like that. As I said in answer to your question a while ago, Mr. Chairman, it takes time to develop these small shipments to a point of profit. The operation of a towboat and barges is an extremely expensive proposition, and I think that before the traffic can be developed some barge line has to start operating over the whole length of the river, calling at all the ports on a schedule.

Now, it costs almost as much to operate that towboat and those barges empty as loaded. And so, for a period of perhaps as much as several years when traffic is being solicited, and accounts are being built up, this operation, if only less-than-bargeload service is offered, cannot be profitable, I think. However, if it is satisfactory and if it saves the shippers money, they will continue to use it. And ultimately it should provide for profitable operation of a barge line.

One of the major tasks which I understand is assigned to Federal Barge Lines is building up this kind of traffic. They are doing this job on other rivers which they serve, and I believe that shipper interests from those rivers have been very eloquent in describing the high value which they place on the service. We think that someone ought to do the same kind of job on the Tennessee.

In the past there have been some indications that the privately owned lines would do it. We very sincerely hoped that they would and urged them to. As a matter of fact, we would be very glad if they still would do it. But, at the present time the indications are that they cannot and will not do it any time soon. Consequently, we think that the Federal Barge Lines should be authorized to do this job, at least until private enterprise can and will take it over.

Now, in the field of less-than-bargeload service there would be no element of competition with the privately owned lines, because, there is no less-than-bargeload service provided by the privately owned lines.

I have talked mainly about the need for less-than-bargeload service. There is another important job that Federal Barge Lines has done, and it is related to the need for joint rates. Much of the traffic that moves by river either originates or finally ends at an inland point away from the river. Our surveys show that about 80 percent of the prospective shippers on the Tennessee River-that is, those who could ship their goods at a saving in transportation costs-need joint service. That is, 80 percent of these shippers are either off the waterway at the origin end or at the destination end. Many of them have

have joint rates-that is, joint rates arranged between the land carrier and the barge line-in order to have a transportation saving so that they can use the waterway to advantage. Even those who might have a saving without joint rates would be helped, because if a joint rate is available to a shipper he needs to deal only with the barge line or the land carrier to arrange for carrying his shipment to its final destination. If no joint rates are available, he must deal separately with two or more carriers.

We do not have a single barge-rail ratę to my knowledge published through any Tennessee River port at the present time. Federal Barge Lines has been instrumental in securing the publication of thousands of these rates on the rivers which they serve, and practically the whole interior United States is reached by their system of joint rates published through the ports which they serve.

It is a big job to get these rates established, and we think that Federal could get it done for the Tennessee River.

In summary, I think it is clear that there is a substantial volume of important traffic that is now denied the opportunity to move on the Tennessee River because we do not have barge service for small shipments, and we do not have joint rates. I think the evidence is fairly clear that it would be used if it were offered, and that it could be developed to a point of profitable operation for the barge line. If it is not provided, only a relatively few very large shippers are going to be able to directly get transportation benefits from the Tennessee River Channel.

As I said, we would be very glad to see the privately owned lines do this job, but if they are not going to do it the same service that Federal Barge Lines gives shippers elsewhere should be made available to shippers in the Tennessee Valley. I believe that the Tennessee River was perhaps left out of Federal Barge Lines' orbit of operations without any direct intent at the time the Inland Waterways Corporation was created. The Tennessee River then was essentially not navigable for modern water transportation and through traffic. If Federal's job is to develop traffic on newly improved rivers, certainly the Tennessee River qualifies as one of our newly improved major navigable channels.

If this service is not made available to our small shippers, the full benefits which would otherwise flow from the navigation improvement of the Tennessee and other rivers will not develop.

Senator MYERS. Well, thank you, Mr. Wagner. Of course, you know the purpose of the original bill is the increase in the capital stock by $18,000,000. An amendment has been offered which provides that the Corporation shall not substantially expand its bargeload traffic where privately owned barge lines and terminals are ready, willing, and able to provide adequate service.

Do you believe any such prohibition should be included if the service is extended to these other two rivers, the Tennessee and the Cumberland?

Mr. WAGNER. Mr. Chairman, I am not familiar with the needs or operating conditions on the Cumberland River. I think that the officials of Federal Barge Lines have pointed out that they need enough bargeload traffic along with the small shipments to build_a backlog if they are to operate at a profit in the initial stages. It