that advocated by my colleagues and myself this morning, it deserves in every respect equal and fair consideration I am sure it will receive.

If I might return to Mr. Hatfield's statement, he addresses this point, having spoken to the ad valorem charge he states:

This approach has numerous advantages over a tonnage approach. First it can be uniformly applied to all cargoes by a simply millage rate formula, bulk and container alike. It is a market sense of moving up or down as the value of cargo changes. The tonnage approach advocated by some belies reality of commercial margins, especially bulk commodities which are the main stay of our export market.

Tonnage-based fees would be arbitrary and dramatically affect our ability to trade in these goods. On the other hand, our approach understands the conmercial market and provides for a charge that applies to all commodities that will be uniform, fair and does not interfere with commerce.

It will be a lively debate, Senator. I might at this point, Mr. Chairman, members of the committee, pay special respect to the staffs that each of us have. They have done a marvellous job and in my brief tenure in the Senate, I have not witnessed a more professional contribution to their respective members and to the Senate as a whole with their work product.

They have been joined, indeed, by, I think, a very commendable resource from the trade associations and the various ports and harbors who have expended a lot of time and energy to resolve this problem.

You, sir, Mr. Moynihan, put your finger on it. I think you said 160 or 162 years it has been.

Senator MOYNIHAN. 160 years we have had one arrangement and that arrangement, if I may say, stopped working about two decades ago. In 1954 in constant dollars, the Corps of Engineers spent $492 million on deep harbor construction. This year, sir, they are spending $75 million, constant dollars.

We are facing 20 years, it didn't work, and we have stopped working. The system is not working. That is why we are looking at it.

Senator WARNER. They are not working abroad as you point out. Senator MOYNIHAN. There is a possibility of obviously a split fee arrangement that is neither ad valorem nor tonnage but a combination of both. I think we want to get something done this year. Senator ABDNOR. With that, I think-

Senator RANDOLPH. I would like to question Mr. Warner.
Is that agreeable?

Senator ABDNOR. Fine, except I will point out that we must move along. We have another Senator waiting.

Senator RANDOLPH. I will just take a couple of minutes.

Senator Warner, you know that there has been congestion at the Port of Norfolk. No one knows that better than you. That, of course, means that considerable waiting time results. That demonstrates clearly the need for dredging to accommodate these larger ships so as to move cargo more efficiently. I know, Senator Warner, that you understand the problems at the Port of Norfolk.

Would you want to comment on that?

Senator WARNER. The Senator is quite correct. On the number of occasions, I personally flew over the harbor witnessing anywhere from 50 to 75, 80, 100 ships as we say in the Navy swinging on the hook idly waiting to go dockside and load.

The U.S. experienced an extraordinary demand for its coal. We were not able to meet that demand in an expeditious manner. And the world markets have not forgotten that experience. They do not wish to return to that experience again.

It is for that reason that we are gathered here today and others to put our best minds to work to work this situation out because those world markets, as Senator Moynihan said, deal in 10-, 20-, 30, 40-year contracts which can be an enormous stabilizing benefit to our economy.

Senator RANDOLPH. I thank you, very much.

I have seen 120 vessels backed up. Have you seen that many?
Senator WARNER. Senator, I have seen all kinds of numbers.
Senator RANDOLPH. Thank you.

Senator ABDNOR. Thank you, Senator Randolph and Senator Warner for your input today. We appreciate it very much. We are especially happy to give Senator Proxmire, who has been very patient, an opportunity to talk on, I assure, harbors in a little different vein. I think it pertains to the Great Lakes. It is a very important part of this country. We are anxiously awaiting to hear from you, Senator. You may proceed in any manner you care to.

STATEMENT OF HON. WILLIAM PROXMIRE, U.S. SENATOR FROM THE STATE OF WISCONSIN

Senator PROXMIRE. Thank you, very much, Mr. Chairman. I am speaking today on behalf of myself and Senators Kasten, Percy, Levin, Riegle, Dixon, and Lugar in order to bring the special needs of the Great Lakes before this committee.

The views I am presenting are in agreement with the positions adopted by the Western Great Lakes Port Association and the International Association of Great Lake Ports and four Great Lakes Governors.

The problems of the Great Lakes and St. Lawrence Seaway are unique in the U.S. navigation system. Since its opening in 1959, the seaway, unlike other parts of the U.S. navigation system has been required to pay user-fees for its construction costs, including debt service and all operation and maintenance costs.

In order to explain this anomaly, I would like to briefly outline the history of the seaway in order to show how we arrived in this inequitable position.

Although the modern St. Lawrence Seaway dates back to 1959, the first major part of the regional navigation system, the all-Canadian Welland Canal, which connects Lake Erie and Ontario, was completed in 1829.

Since then the Welland has been rebuilt three times, the present canal being completed in 1932. It cost Canada $249 million to erect this 26-mile long canal which includes eight locks that are capable of handling vessels with a maximum beam of 76 feet and length of 730 feet. These dimensions set the standard for the seaway locks later built on the St. Lawrence River.

The second major navigation project that today is part of the 2,342-mile great Lakes seaway system is concentrated in the St. Marys River, connecting Lakes Superior and Huron. The first lock

there was built by the State of Michigan in 1855 and later donated to the United States.

In 1885, Canada constructed a lock for $6 million which remained in operation until 1978. Between 1914 and 1969, the U.S. Army Corps of Engineers built four more locks at the Soo at a total construction cost of $53.9 million. However, unlike the locks on the St. Lawrence River, tolls have never been charged for use of these four locks at the Soo.

The first official attempt to produce a deep-draft all-water route from the head of the lakes to the Atlantic Ocean dates back to 1892, when Minnesota Congressman John Lind sponsored a congressional resolution to provide for a joint U.S.-Canadian investigation into such a project.

After protracted negotiations in 1932, the Hoover-Bennett Treaty was signed by the United States and Canada to build a seaway to a depth of 27 feet. The United States would be responsible for completing work in its national section near Niagara Falls, and the Nations would share the work and cost for the international rapids section of the St. Lawrence River. However, in 1934, when the treaty came up for a vote in the Senate, it was defeated.

Opposition to the treaty was strong, particularly from competing railroads, private utilities, the coal mining industry and east coast and gulf coast ports and it was not until 1954, that legislation introduced by my colleagues Senator Alexander Wiley, and Congressman George A. Dondero, and supported by President Eisenhower was enacted allowing the United States to share in the construction of the international section of the seaway.

The legislation included a provision that the seaway would pay its own way through joint U.S.-Canadian tolls for transit of the seaway-obviously a politically-driven concession. To date, the St. Lawrence Seaway Development Corp. has paid back nearly $65 million to the U.S. Treasury, including $37.6 million in interest and $26.8 million in bonded debt.

The approximate cost of the navigation project was just over $470 million, of which Canada paid $336.5 million and the U.S. about $133.8 million. In January 1955, the Corps of Engineers began construction of the U.S. project. In 1956, Congress approved $256.9 million for the corps to deepen Great Lakes connecting channels to 27 feet, thereby opening the port cities of the Great Lakes to deep-draft ocean commerce, turning them into true world ports.

The first joint agreement on tolls was entered into in 1954. The tolls remained at this level until 1978 when the U.S.-Canada agreement for the years 1978-81 increased the tolls by 100 percent. The tolls have been increased by another 28 percent since then.

Canadian tolls account for 71 percent of the total. Toll increases instituted since 1978 have had a major negative impact on the number of overseas vessels calling at Great Lakes ports. For example, in 1977, Milwaukee had 200 overseas vessel calls, but by 1982, only 96 international vessels called at the Port of Milwaukee. Similar declines have been experienced at other Great Lakes ports.

These large toll increases occurred, even after the Merchant Marine Act of 1970 relieved the Seaway Corp. of the requirement that it pay interest on its construction debt. Although this act also

established seacoast status for the entire Great Lakes/St. Lawrence Seaway System, it fell far short of the goal of putting the Great Lakes on an equal footing with the three tidewater coasts. The seaway continued to be the only waterway in American history compelled to pay its own way, including the cost of construction. These tolls are much higher than most of my colleagues realize. For example, we are currently paying total United States and Canadian tolls of $0.83 per metric ton on grain and $2.56 per metric ton on general cargo, whereas the approximate U.S. rate under the ad valorem fee proposed in S. 865 would be $0.04 per ton for grain and $0.85 per ton for general cargo. The U.S. share of the joint toll structure on the seaway is approximately 29 percent. Even with an ad valorem tax we would still pay Canadian tolls. Furthermore, the seaway tolls mentioned above are only tolls on cargo. Ships on the Great Lakes must also pay vessel tolls and lockage fees.

Although Congress forgave the remaining construction debt for the St. Lawrence Seaway Development Corporation in 1982, the U.S. General Accounting Office has determined that the Corporation needs a 1983 toll increase to finance deferred and planned projects.

Despite the debt forgiveness and the toll increase, the Corporation's fiscal year 1983 budgeted expenses exceed its currently projected revenue by $600,000. This deficit has caused additional deferrals of planned 1983 maintenance projects. Thus it appears we have reached the point of diminishing returns. We have increased tolls by 128 percent without any appreciable increase in revenues. I repeat, we have increased tolls but the revenues have gone down. So it has been counter productive. Further increases will produce further declines in traffic.

Since implementation of major improvements in 1978 on the navigational control lock at Alton, Ill., the users of the Mississippi River system pay a fuel tax, but these fees are nowhere near the size of seaway tolls, nor do they cover 100 percent of operation and maintenance. Depending on Midwest origins and commodity shipped, the fuel tax paid on the Mississippi River system averages only about 15 percent of the tolls presently imposed on the seaway. The Deep-Draft Navigation Act of 1983, S. 865, goes a long way toward upgrading the stepchild status of the Great Lakes system. S. 865 gives substantial support for the three crucial objectives to any cost recovery program acceptable to Great Lakes ports and other maritime interests, that is:

One, Federal control of waterways;

Two, a value-based, national uniform user fee; and

Three, elimination of U.S. tolls on the St. Lawrence Seaway and integration of the tolls into the nationwide system.

The bill achieves the first two objectives. It recognizes that the U.S. deep-draft navigation system did not come about by chance, but rather as a clear-cut objective to satisfy basic national economic and military needs.

The Federal interest extends not only to improving our balance of trade, but also to serving the trade needs of land-locked States and the national defense. These interests require that the Federal Government remain a viable partner in the creation of the port system.

S. 865 institutes a cost recovery system that would assist the Federal Government in funding deep-draft navigation maintenance and development. The bill does this by instituting:

One, a value-based, nationally uniform user-fee system to recover operation and maintenance costs and;

Two, a graduated local Federal matching fund for new construction projects.

The uniform aspect of O&M user charges is important to Great Lakes ports. If the charges were port specific, cost disparities could cause cargo diversions and create regional economic disruptions and even the closing of high-cost ports.

Basing the uniform fee on the value of the cargo is also a very important aspect of S. 865. The value of Great Lakes cargo varies from a few dollars a ton, for commodities such as sand, cement, coal, and iron ore, to many thousands of dollars for very high-value cargoes such as machinery, chemicals and cargoes that are moved in containers.

The higher the cargo value, the less sensitive it is to user charges. Even more importantly, in many cases, the lower value cargoes are the raw materials used by U.S. industry to manufacture finished and semifinished goods. These materials generate far greater tonnage than the high-value products, especially on the Great Lakes. A large majority of our products fall into the low volume/high weight category.

I would like to cite an example to further emphasize the importance of the ad valorem concept to the Great Lakes/St. Lawrence Seaway System. Iron ore, coal, and limestone, three relatively lowvalued bulk commodities which go into steel production, make up over 77 percent of all tonnage moved on the Great Lakes/St. Lawrence Seaway System. Comparing the 16-cents tonnage charge originally suggested by a draft administration cost recovery bill to the maximum ad valorem rate proposed in S. 865 demonstrates that the flat tonnage charge would have over eight times the impact on total transportation costs of these three major Great Lakes commodities. Implementation of a user fee based strictly on tonnage would be catastrophic to all domestic and international bulk commerce.

At the Great Lakes Governors Economic Summit on May 2S, 1983, four of the six Governors signed a draft policy position on deep-draft navigation user charges. These Governors unanimously support the concept of a federally controlled uniform deep-draft user fee system for O&M contingent on concurrent elimination of seaway tolls.

S. 865, as drafted, fails to fully attain the objective contained in title I of the bill which is to

Integrate the operations, maintenance and improvement of the St. Lawrence Seaway and Great Lakes ports into the nationally uniform system of financing deepdraft navigation improvement projects and deep-draft commercial channel and harbor operations and maintenance cost.

Our simplified objective is "one system-one fee." However, under S. 865, the fact remains that the St. Lawrence toll system would remain intact, thereby continuing the unique status of the U.S. St. Lawrence Seaway. It would not be fully integrated into one system and, once more, the lakes would be greated differently.