buildings, bunkering and lighterage are performed in several ports. Crowley's Delta Steamship Lines using LASH container ships, passenger cargo liners, and freight bulk container ships serve all three U.S. companies and destinations in the Caribbean, Mexico, Central and South America, and West Africa.

The drafts of our barges are normally less than 20 feet, although they will occasionally excess that by 1 foot. The drafts of Delta's liners range from about 27 feet to 38 feet. Almost lost in the shuffle of the current debate on deep draft dredges is that portion of the maritime industry which is not dependent on additional dredging but relies on maintenance dredging to varying degrees depending upon the drafts of vessels and the ports serviced.

Thank you for now offering that portion of the industry this opportunity to be heard. Before discussing specific legislation, let me first say that as a general philosophy we don't feel that user fees for port dredging, operations, maintenance, or improvements are appropriate. The Federal Governmemt should continue to fund such costs as an incentive for America's trade for the enhanced value of the ports in the national defense and because of the problems in assessing user taxes equitably, a user fee, which ad valorem or tonnage is not representative of the benefits received. A barge for example requires no dredging yet the rate of taxation is the same as for deep draft ships.

This discriminates against the oceangoing tug and barge companies industry that has shown such a technological advance in the past several decades. Shippers are consignees and will really be the payers of the tax. Industry such as agriculture, which are already struggling and many of which are receiving Government subsidies will have an additional cost to pay. Either prices will rise or alternatively our products will become less competitive in the world market.

The proposed dredger user fee is one of four users fees now being considered or in existence affecting vessels. Coast Guard user fees, shallow draft user fees, and the inland waterways fuel tax scheduled to rise in October 1983 and October 1984. The aggregate of the several taxes could be especially harmful. It is conceivable for example that certain barges could be subject to all four taxes. Concerning S. 865 specifically several questions on potential problems are raised. First, an ad valorem basis for fees is an inappropriate assessment basis since weight of the vessel and its cargo and vessel design are determinants of draft, not the value of goods carried. Liner vessels would be penalized disproportionatele because the high value of commodities which they carry.

Second, determination of value of a vessel's cargo would be difficult, untimely and in some cases nearly impossible. In international trade value is normally reported only on shippers' export declarations submitted frequently by the shippers after the vessel sales. In the domestic trade, the value is not usually reported at all. Third, it is improbable that the tax could be computed and paid before a ship sails because of data collection problems and because ships sail at all hours of the day and night.

Fourth, whether a barge with a draft less than 20 feet competes with a deep draft vessel as prescribed in the bill is subject to interpretation and would require a route-by-route port-by-port and even

a voyage-by-voyage determination by someone in Government as to whether it competes with the deep draft vessel. S. 970 has the assessment, but it is silent regarding the fee collection system which creates a void. The fee assessed is per ton but the kind of ton is not specified. Several kinds of tonnage measures are used in the. trade. It would be feasible to compute tonnage before sailing but it is improbable that the payment could be made before sailing without delaying the vessel.

Regarding improvements in new construction, both bills provide for fast tracking, a real plus. The quid pro quo, however, is nonFederal funding to different but significant degrees in each bill and under different dredging depth scales. The use of customs revenues proposed in S. 865 is a good idea. But they should pay the nonFederal share not the Federal share. Both bills are too vague about how and in what amounts the nonFederal share for new construction is to be computed and assessed. Will these bills increase the probability that deeper draft ports will be built?

Perhaps but the combined agreement of the Congress and nonFederal agencies will still be required in each case and Congress will still need to appropriate funds. The choice of ports to be developed may not be best but may instead represent the economic and political strength of the winning port areas.

Thank you for this opportunity. I will be pleased to try to answer questions.

Senator ABDNOR. I think we will go right ahead with the testimony and then ask questions.

STATEMENT OF STEPHEN A. VAN DYCK, PRESIDENT, SONAT

MARINE, INC.

Mr. Van Dyck. Mr. Chairman, I am Stephan Van Dyck, and I am president of the Sonat Marine, headquartered in Philadelphia, and my company is the largest independent transporter of petroleum and petroleum products along the coast of the United States.

In the year just finished we carried about 235 million barrels of petroleum products for American consumers and customers. The legislation which is before this committee could have a very substantial potential impact on our company. I feel a little bit today like the fellow who got invited to lunch. When it was time to leave, they handed him the check! The way things are going with this legislation it looks like a lot of people would like to see us pay the bill. Maybe I can give you and your members a little feel for what the impact is going to be.

We have two basic philosophical views which are set forth in our written testimony which you have. In summary, they are simply this. We feel strongly that existing O&M should be paid for out of customs receipts. The many years that we have in the successful operation of the waterway system should not be disrupted by a user tax which we will demonstrate shortly is quite significant.

Second with regard to deepening, we feel port deepening should be the responsibility of the Federal Government, because the identification of beneficiaries in these particular projects is very difficult to asses. Should such user fees be essential to those projects we feel very strongly that they be assigned to the true beneficiaries of

those projects and not to coastal operators who receive no benefits whatsoever.

Let me make a couple of points, if I might, for the benefit of you and your colleagues. The legislation which is being considered has been based I believe on a false premise. We hear over and over again, in conversations we have with staff mambers and other people surrounding these issues that these user costs are something that we can passthrough. That somewhere down the line the true beneficiaries of these costs will pay the freight. Our industry now and almost always has operated under an extremely competitive environment. We find it difficult always and sometimes impossible to pass along increased costs. Because all operators are paying the increased costs does not imply the system can afford it. I was quite interested in Senator Proxmire when he made his comment about what happened when user fees where applied to the Great Lakes. Maybe in that case they were higher in terms of value of cargo than some of the fees we are talking about, but the result is very clear. Great Lakes tonnage has shrunk sharply!

Maybe my own company is a good illustration of the impact of these fees. Our company last year had revenues of about $130 million. We had after tax profits of $22 million. The year before we lost money. We have assets of over $235 million which we used to generate this $21⁄2 million worth of profit. If you carefully calculate, which we have done under S. 970, the cost to our company would be $4.6 million. That is O&M cost recovery only. That assums that we share none of the increased cost assigned to port deepening. You don't have to think too long about this to figure out that $42 million wipes out our profit. We are, I think, recognized in the industry as one of the most profitable and most successful companies in our industry.

We have many smaller competitors who will not be able to absorb these costs as well as we will. I think it will have a devastating impact on our industry. What this fee does in my mind is place a 32-percent tax on the revenues of our company. We are considering on the House side of the Congress presently legislation which is designed to improve the status of the American merchant marine. I think it is generally recognized that American merchant marine is in serious financial trouble and our national_security goals are in serious question. Passage of this legislation flys right in the face of these concerns. I don't see anyway in my view that this industry will be able to survive in the long term without sharply reduced tonnage capacity with the kind of users fees which are being considered.

Let's talk about the mechanical problems. We get assurances when we appear before committees and talk to staffs in private, "don't worry, we will take care of the mechanical problems of this legislation at the regulation writing stage." Let me illustrate the difficulty this legislation creates. We talk about fairness among ports. To implement this a straight tonnage fee has been proposed. This does not anticipate the fact that many cargoes are handled many times and may make many voyages.

Eighty-five percent of all coastal tonnage in this country happens to be oil. Oil is perhaps the best example. Oil of course is our specific commodity. Crude oil comes in by ship, or comes out of the

ground in Texas and other States. So it is not necessarily possible to collect the fee when the oil first comes into the country or out of the ground. It then gets refined and distributed. In Philadelphia alone it is not uncommon for us to move the same barrel of oilalthough we don't know it is the same oil-four or five times. We may load at two different ports within the Philadelphia area. Our vessel may sail to Providence, Boston, Portland, discharging along the way.

We make over 9,500 loadings and discharges a year. So there is a mechanical problem of collecting this tax that we think is administratively not only burdensome, we think it is maybe impossible to collect only once on each barrel. And yet this is the largest single commodity which will be subject to the tax in question.

Third, with regard to user fees and beneficiaries, our view is that we are not talking about a beneficiary fee here, we are talking about a user fee. I have already mentioned the difficulty in passing through the cost to the market, the cost of user fee to the real beneficiaries.

When we talk about port deepening I think it is essential that we look to the beneficiaries. The Jones Act trade, which is about onethird total U.S. port tonnage, will derive no benefits whatsoever from the port deepening projects. We don't have, and I wouldn't expect that we would have, a Jones Act fleet that would in any way benefit from 55-foot drafts.

The beneficiaries of this system, if you study them carefully, I think can be identified and value received assigned. Coal companies, especially the American railroads, coal exporters, foreign flag vessel operators, and receivers of the cargoes. I can see no way that either Sonat Marine, Crowley Maritime, SeaLand, or any other American company operate or benefits in any way from this deepening of our ports. Yet all of these pieces of legislation anticipate charging companies like ours, who don't require the draft, to bear a substantial burden.

Your committee has raised several questions, one of which is the ad valorem concept. It is interesting to me that this method has suddenly come before the committee and everybody is so enthusiastic about it. Interestingly enough we operate 25,000 ton oil barges up and down the coast. It is a pretty cost effective way of delivering oil. Our barge with 25,000 tons of unleaded gasoline will pay under the anticipated ad valorem concept the same port fee, the same user fee, that will two 125,000-ton coal ships. Our barge doesn't require port deepening or a lot of maintenance.

Those two coal ships are each almost 900 feet long. Each draws 55 feet and requires port deepening. So it would seem to me that the ad valorem concept creates some very substantial distortions in the marketplace. I don't see why the American consumer or Jones Act operators should be bearing a burden of a higher costs so as to ship coal to foreign countries. These projects will benefit the railroads and coal companies, not Jones Act operators.

Second, with regard to the need for the ability to develop a 55foot port, most of the conversations talked about east coast development and perhaps gulf coast. At this time as the gentleman from Philadelphia correctly pointed out, there is a 55-foot port on the east coast. That is in the lower Delaware Bay. We have examined

and spent over $1 million trying to develop a coal loading system in the lower Delaware Bay to take advantage of the existing 55-foot draft. We have written off our investment in that project because we have found that we were unable to complete the project.

We found that for a $75 million investment we could load deep draft ships to their full load lines and we could economically compete. The problem was not the economics. The problem was the railroads would not cooperate with us in the loading these vessels and we couldn't get long-term contracts from coal customers. So it seems to me that those who are interested in port deepening are passing the buck to us. Instead of the real beneficiaries assuming the responsibility and risk appropriate to the benefit they will receive, they are trying to pass the burden to Congress and nonbenefiting users like ourselves.

We appreciate the opportunity to put our views before you today. This is a difficult subject. We recognize the difficulties you face. We do feel you should hear from us who may have to pay the bill.

Senator ABDNOR. Thank you, Mr. Van Dyck. I appreciate your testimony.

STATEMENT OF GEORGE J. RYAN, PRESIDENT, LAKE CARRIERS ASSOCIATION

Mr. RYAN. Thank you. I am George Ryan, president of Lake Carriers Association, and I represent the service industry, the domestic water carriers, who carry the cargo for the midwest steel industry, our coal mines up there, grain farmers, and shippers in the construction trade.

Senator, I believe that this is absolutely the worst time for Congress to be considering increased taxes in the form of port user fees. The 1982 recession year gave particular severe hardship in the Midwest. 1983 is not showing major signs of improvement. Mining towns, particularly up in Minnesota, in the Mesabi Range had unemployment up to 50 percent and most of our urban steel cities had unemployment up to 20 percent. Today it is still at about the 17-percent level. Less than 50 percent of the Great Lakes fleet was employed last year. We are only up to about 60 percent now. The seven large steel companies, many of them in the Midwest, lost over $3 billion last year. It is important to control every cost and these user taxes are another cost burden being placed on this industry, not only in the Midwest but throughout the Nation.

Our association therefore firmly believes that no user tax legislation for O&M for deep water ports should be enacted until a congressionally sponsored economic impact study be conducted. This study must establish the level of impact on the regional and national levels, particularly on the mining, steelmaking, manufacturing, and construction industries. By so doing it will also show what impact it will have on the services industry, the carriers. Further, we say that this impact study should consider the impact of the removal of the U.S. component of the seaway tolls; that should be fully reviewed before those tolls are removed. It is very clear that removal of those tolls will have an impact on American mining and American steelmaking. Concerning the construction of new harbors and channels our members are supportive of Congress and the ad