(The witnesses were duly sworn by Mr. Kerr.)

ENGINEERS' COMPUTATIONS OF PREDICTED BARGE RATES

General PICK. Mr. Faison, you made a statement that you thought that the profits in this water operation amounted to 4.75 percent, but you did not know definitely whether that was the figure or not. Mr. FAISON. That is the basis on which we figured in 1947.

General PICK. Is it definite in your mind that it is 4.75 percent?
Mr. FAISON. No; I would like to establish that.

General PICK. You want to establish it by Mr. Betzler?

Mr. FAISON. Yes.

Mr. BETZLER. The margin between bare costs and the rate elements that we use was based on 4 percent, which was considered to be the average earned by the railroads in 1939. That is taken from Senate Document 63 of the study by Dr. Ford Edwards of the Interstate Commerce Commission, Bureau of Transport Economics.

Mr. DONNELLY. Does that mean, Mr. Betzler, that the margin of profit which was included in the assumption of barge charges for the proposed Tennessee-Tombigbee was to be the same, 4 percent, as the profits shown by the railroads in 1939?

Mr. BETZLER. That is correct.

Mr. DONNELLY. Did you make the computations that we are now speaking of?

Mr. BETZLER. I did.

Mr. DONNELLY. You are just the man, then, to answer the next question.

Mr. BETZLER. Excuse me, please; do you mean in 1947 or do you mean in the basic study?

Mr. DONNELLY. Did you do it either time?

Mr. BETZLER. I did it in the basic study.

Mr. DONNELLY. In so doing, did you compare barge costs with rail rates or barge charges with rail rates?

Mr. BETZLER. Barge charges.

Mr. DONNELLY. Did you at any time use this table which is identified as being from the files of the Corps of Engineers, April 21, 1950— M. W. F.-is that Mr. Faison?

Mr. FAISON. My initials are H. R. F.

Mr. DONNELLY. Did you at any time use this table which is identified here as

Assumed variations in savings per ton-mile based on record of fluctuation in spread between average rail rates and barge costs 1929 to 1948, inclusive.

Mr. BETZLER. No, sir.

Mr. DONNELLY. When you worked in 1945, did you use any of those figures for your construction of the barge charges?

Mr. BETZLER. No, sir.

Mr. DONNELLY. Or the comparisons between the constructed barge charges and rail rates?

Mr. BETZLER. No, sir.

Mr. DONNELLY. Who in 1947 made the recomputation for the engineers?

Mr. BETZLER. I think Mr. Thompson did.

Mr. DONNELLY. Mr. Thompson has just been sworn.

Mr. Thompson, in 1947, when you recomputed the transportation benefits for this project, did you use actual rail rates and constructed barge charges or did you use what is shown in this table?

Mr. THOMPSON. We used the rail rates that were in effect in 1947 with the barge charges that were constructed, and were adjusted from 1945 to 1947.

Mr. DONNELLY. In so doing, in 1947, did you use the computations of typical movements, 154 typical movements?

Mr. THOMPSON. I do not recall the precise number, but it was a sampling process.

Mr. DONNELLY. You are certain in all the computations shown in the work you did in 1947, which you will find on that table, you used actual rail rates in existence?

Mr. THOMPSON. In adjusting from 1945 to 1947; that is correct.
Mr. DONNELLY. Did you use class rates or commodity rates?

Mr. THOMPSON. We used the applicable rate on the commodity, and the rule is in the absence of a specific commodity rate we will take the class rate, or a percentage of the class rate provided by the exceptions to the classification.

Mr. DONNELLY. Mr. Thompson, is it not a fact that the predominant part of the commodities that move by barge are bulk commodities? Mr. THOMPSON. Substantially so.

Mr. DONNELLY. And the railroad freight cars carry about 50 tons; do they not?

Mr. THOMPSON. That is correct.

Mr. DONNELLY. An average barge will run from 300 to 500 tons; is that not correct?

Mr. THOMPSON. And in some instances greater than that.

Mr. DONNELLY. So when you compare a bargeload, using a barge rate with a rail rate, would you not have to use the commodity rail rate rather than the class rail rate to get a true comparison?

Mr. THOMPSON. That is precisely what I said we did. We used the commodity rate.

Mr. DONNELLY. Were there commodity rates in effect for the six commodities used there on that table?

Mr. THOMPSON. There are commodity rates from and to various points on these commodities. Now, as to what extent on the samples we used, I would not be able to tell you without looking at the tariffs on file with the Commission.

Mr. DONNELLY. As a matter of information for the committee, in rail freight rates the commodity rate is much cheaper than the class rate; is it not?

Mr. THOMPSON. It is presumed to be; yes.

Mr. DONNELLY. So, when you speak of 10 carloads of freight, they might move at a commodity rate, which is much cheaper than a class rate; is that not so?

Mr. THOMPSON. That is correct.

Mr. DONNELLY. And these computations are pretty close, since this ratio is only 1.13 to 1, so can you tell us generally whether there were commodity rates available for each of those six principal commodities listed on that table when you, in 1947, made your recomputations? Mr. THOMPSON. I could not tell you that without checking the working sheets and the tariffs on these commodities. As I said before, there are commodity rates from and to the various points throughout the country on these commodities that are listed. I could not say in every instance that there were commodity rates from and to the points that were involved in the sampling.

ENGINEERS' USE OF 154 TYPICAL MOVEMENTS

Mr. DONNELLY. I have a question that I would like to ask you with respect to your use of typical commodity movements in 1947. Now, in 1947 you made your recomputation on the basis of several different factors, and correct me if I am not accurate, and did you not consider the 154 typical movements?

Mr. THOMPSON. Whatever the number was, that was shown on the analysis sheets.

Mr. DONNELLY. Did you not reconsider the 1939 waybills?

Mr. THOMPSON. Only to the extent of developing the sample commodities.

Mr. DONNELLY. Did you not consider the testimony in the Mobile hearing held by the Corps of Engineers?

Mr. THOMPSON. Well, I cannot say that I considered the testimony in the hearing and the adjustment of the benefits from 1945 to 1947 because I was interested in the tonnages which were basically from the waybills.

Mr. DONNELLY. Now, we have here an analysis by the staff of the Corps of Engineers, 154 typical movements used by the engineers to

increase the savings from the 1945 to 1947 base, and you will see, gentlemen, that this is 1945 and they increased in every case from 1945 to 1947, and this is the gentleman who made those increases.

Now, Mr. Thompson, the detailed analysis sheet for the 7,000 potential shipments was based upon the 1939 waybills; was it not? Mr. THOMPSON. That is right.

Mr. DONNELLY. And the work sheets were destroyed by the engineers in the course of their regular practice, some time prior to the time the investigating staff began its studies; is that not correct? Mr. THOMPSON. That is my understanding.

Mr. DONNELLY. Now, prior to the time those records were so destroyed, the 7,000 records, the engineers chose from those sheets the 154 movements which were considered typical; is that not correct?

Mr. THOMPSON. I do not recall any time when there were any particular shipments chosen whatsoever.

Mr. DONNELLY. That is the information that the Corps of Engineers furnished to the committee. The committee staff has analyzed the 154 typical movements which account for those increases in tonnages, from 1945 to 1947, in part, if not wholly, and in analyzing those movements we found 27 of the movements show very little or no cost differential in favor of water transportation, or the transportation cost by the alternate Mississippi route lower than by the proposed route. In the 27 cases no savings were computed by the engineers. Is that correct?

Mr. THOMPSON. That is the statement that you are making. I would not say that because I cannot talk on a subject like this when I do not have the files before me. The investigating committee had full access to the files.

Mr. DONNELLY. Mr. Faison, are you able to answer the question? Mr. FAISON. There were a number, twenty-odd, that showed no savings, and they were thrown out of the 1947 estimate, although they were taken just as typical movements to show how eliminations were made, but, Mr. Chairman, I want to make this point clear-I do not believe counsel is clear on this-that the 1945, 7,000 files, were not papers. They were three or four papers thick, each one, the detailed analysis of each movement that we used in making up the 1945 report and they were destroyed before the 1947 estimate was called for, and I believe Mr. Thompson will corroborate me in saying these 154 or 157 typical movements were selected from the way bills study of 1939 which was not ours, as typical, and were not picked out of the 1945, 7,000 analysis sheets, because they were not in existence in 1947.

Mr. DONNELLY. Where did the 154 typical movements come from in 1947?

Mr. FAISON. Mr. Thompson, you can answer that.

Mr. THOMPSON. I can answer that. The IBM sheets from which the original 7,000 analyses were taken are still available and on file with the Interstate Commerce Commission, and it was from those, or a review of those, that the samples were developed. I might state in connection with this adjustment in 1945 to 1947 that the investigative staff had access to the specific adjustments on each separate commodity that was involved. And in adjusting from 1945 to 1947 there were decreases as well as increases in benefits.

Mr. DONNELLY. I have furnished each member of the committee here with an analysis of these typical movements. I can go through them