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In determining the total value base for each of the groupings of cars, for the purpose of calculating annual capital costs under their proposed formula, respondents considered $25,000 as the maximum value for any tank car in the group. Respondents' rationale is that that figure is the top limit beyond which the excess car value cannot be related to the transportation function of the car. The relevant "guideline" of the Commission in the prior case was that it would not be unreasonable to impose a value limitation of this type, and that, although the $25,000 limit proposed for the 1964 trilevel allowance structure did not appear unreasonable, a higher ceiling might be justified for the future "depending upon changed conditions and the number and range of future value groupings".

Protestants point out that respondents have made no attempt to ascertain the extent car values have risen since 1964, and they take the position that the ceiling should at least be raised to $35,000, although they do not concede that any maximum value is proper. In support of this position, protestants aver generally that tank cars costing far in excess of $25,000 are being purchased and put into transportation service. They maintain that even a $35,000 ceiling would be conservative, since some cars being constructed to transport products such as methane and ethylene cost in excess of $80,000. Apart from such generalized evidence, there is no specific dáta presented and analyzed on this record to support our prescription of a higher ceiling than $25,000. Even if the examiners were to take official notice of some specific indices reflecting the inflationary fact effective in the national economy in the years since 1964, or of general increases in the costs of selected manufactured goods, there is no reliable method apparent to the examiners to convert such data into a credible valuation ceiling. Respondents proposed ceiling is consistent with the Commission's guideline and, in the absence of some firm evidence to support a contrary conclusion, it should not now be found an unreasonable factor in respondents' cost formulation. Moreover, as will be discussed below, respondents are correct in their contention that all private tank car costs are not necessarily fairly attributable to the provision of railroad transportation. Some upper limit on tank car values in the considered cost formula is an appropriate factor. It would not be supportable therefore for the examiners merely to pull out of the air a new arbitrary ceiling on tank car values, either in the $35,000 range suggested by protestants, or at any other level.

Once having computed the total average annual capital costs and operating costs for each value {roup, respondents proceeded to select a relevant mileage divisor to convert the total costs to costs per operating mile in each group. The results of the 1964 AAR study of 154,695 private tank cars showed that the 61,497 cars 30 years old or more actually averaged 4,876 Íoaded miles per year. The 93,198 cars less than 30 years old averaged 6 397 loaded miles per year.

W

Respondents concluded that these averages of actual miles
even when stated in the six value groupings, did not
properly represent the averages these cars should have
registered had they been used continuously in transpor-
tation service alone. 20 Respondents therefore proceeded
to construct their "inflated" mileage divisors in order
to discount the nontransportation use accountable to
shippers and other car owners. The table below compares
the use of respondents' selected "inflated" mileage
divisors with use of the 1964 study's averages of actual
mileage for divisors.

[blocks in formation]

Inflated Mileage. 6,000 8,000 9,000 10,000 11,000 12,000 Divisor

Costs Per
Inflated Mile

8.43 12.20 14.23
cents cents cents

15.51
cents

17.59
cents

19.15 cents

The inflated mileage divisors were developed by the AAR's Committee on Car Ownership Costs. The committee concluded that private tank cars should average about the same mileage as railroad-owned freight cars. Since the per diem fleet averaged about 16,200 loaded and empty miles during 1964, the cost committee concluded that tank cars should have registered an average of approximately 8,100 loaded miles. The committee's divisors, accordingly, represent a weighted average of 8,202 miles. It was the committee's judgment that more valuable cars generate more mileage than lesser value cars, and the scale of progression shown in the above tabular comparison of divisors closely parallels the rising "angle" of the scale of ownership values and costs. Respondents concede that the inflated mileage divisors are largely supported by committee-formed judgments and comparisons, rather than an exact study of

20The 1964 study showed that 6,893 cars more than 30 years old registered less than 1,000 loaded miles, and 2,238 such cars made no loaded mileage during the test year. of the cars less than 30 years old, 8,828 cars registered less than 1,000 loaded miles, and 3,036 cars made no loaded mileage in the test year. There is no data of record to show responsibility or control for these cars among shippers, lessors, and carriers.

empirical data, but they argue that no better basis
for a judgment on divisors will be available until the
"utilization study" is completed.

The utilization study is being conducted by the AAR Committee on Car Ownership Costs to determine nontransportation use of tank cars, and thus a statistical basis for future mileage divisors. The study includes an analysis of car movements based on a sampling technique which was developed in conjunction with, and approved by, the tank car owners and users. It involves a 3,387 car sample, for which car owners have furnished data to the AAR. An audit of these returns by the car owners disclosed a substantial number of errors, which caused considerable delay in processing the study. The corrected data was then transmitted to the various railroads over which the sample cars ran during the study period so that they could furnish the carrier portion of the information required. At the time of the hearing, October 1968, respondents expected that processing of this study would be completed by the end of 1969. There is no evidence that either the car owners, car users, or carriers had caused any undue delay in processing this study.

While the utilization study is designed to determine nontransportation use on a statistical basis, a number of protestants herein argue vigorously that for the purposes of this proceeding respondents have neither put forward an acceptable definition of that term nor presented any relevant means of measuring its influence. They maintain, therefore, that no discounting of tank car ownership costs is warranted in the determination of mileage allowances.

In support of their contention that tank cars spend a substantial amount of time in a "nontransportation capacity, respondents introduced into evidence a special "terminal study" to show comparative average numbers of days that tank cars are held under the control of the railroads and the shipper-consignees at origin and destination terminals. The study concluded that an average of 6.8 days was spent by tank cars in origin and destination terminals prior and subsequent to line haul transportation, but that only 1.7 average days of that total represented time for railroad handling, compared with 5.1 average days under consignee or consignor control. By comparing these results with such standards as the 2-day "free time" detention allowed by most demurrage tariffs and the 2-day detention factor in the Commission's Rail Form A cost formula, respondents concluded that tank cars spend "considerable time in a nontransportation status. Protestants contend that the study should be given little weight in this proceeding as tending to reflect "transportation" as compared with "nontransportation" utilization of tank cars. The examiners agree. No exact comparisons are obtainable from this data which would tend to provide a reliable estimate of nontransportation use. For the study respondents examined the

operations of the Southern Railway System for a l-week period in May 1968. The examination included approximately 3,000 originated and terminated tank car shipments. The study is essentially a one-dimensional view, especially in that it does not relate the time factors of the study itself to the time tank cars are held in the control of carriers for line baul movement. Moreover, in certain recurring situations the demurrage rules make it possible for shippers to have the use of railroad freight cars for longer periods than the 2-day free time, such as when weekend detention is involved or when cars are placed at the industry location prior to 7:00 a.m. on the day of placement. These factors were not adequately accounted for in respondents' generalized comparisons of transportation and nontransportation uses.

Respondents also express their concern over the present size of the private tank car fleet in relation to its productivity, and conclude that the present fleet may be twice as large as would be reeded under efficient management of that fleet. They make the point that there is a substantial usage of tank cars for storage and other purposes not directly related to transportation.

Chown as appendix B to this report is a table showing the number of tank cars in general use nationally between 1946 and 1967. The table reflects a steady rise in the total of privately owned tank cars - averaging a total of 168,980 during 1967 -- compared with a somewhat stabilized, slightly declining level of railroad ownership which totalled 5,351 tank cars as of December 31, 1967. Appendix C is a tabulation of tank rar loadings between 1947 and 1967, showing a decline in the absolute totals of such loadings, together with a substantial decline in the number of loadings per tank car. Appendix D shows similar trends in private tank car mileage, as abstracted from the mileage payment records reported for privately owned tank cars. Respondents assert that assuming no variables other than these given statistics, the 1967 total of 1,765 million tank car miles could have been produced by about 54 percent of the 1967 average tank car fleet at the 1948 ratio of miles per car.

While appendices B through D, which are drawn from respondents' evidence, are useful statistical compilations showing relevant trends in the acquisition and use of tank cars, that data does not support any realistic conclusions about the required size of the national tank car fleet under "efficient management". And that is only part of the picture. Much of the growth of the tank car fleet has been in response to particular demands for transportation of new products developed since World War II, which have required new and specialized tank cars.

To a great degree not analyzed in the respondents' statistical tabulations, tank cars designed, equipped, and used for particular bulk liquid products may not economically be

used interchangeably with other cars for other products. See the discussion of shipper use of tank cars which appears in appendix A to this report.

At this point in the Commission's history of consideration of the capacity of the privately owned tank car fleet, it would seem to be clear that if the Nation's railroads' themselves were pro iding tank cars, as they do boxcars, hoppers, flatcars, etc., they too would face to a substantial extent the same kinds of fleet administration problems that shipper-lessees and shipper-owners face, in meeting nationwide transportation requirements adequately and efficiently. In the absence of a careful analysis of those problems in relation to the basic statistical tabulations presented by respondents, it cannot be concluded that nationally the private tank car fleet operates at any specific level or' ratio of efficiency.

On review of the evidence of record as a whole, however, the examiners do conclude that tank cars are used, to some extent not now calculable, by their owners or léssees in capacities or functions for which the railroads should not be accounted responsible, and for which the railroads should not be required to provide reimbursement. Although the statistical comparisons which respondents have proffered as evidence for that basic proposition are inconclusive other evidence amply confirms it.

Privately owned tank cars are used in some undetermined measure for static storage by some shippers and receivers of bulk liquid commodities. Other shippers acquire and hold tank cars as standby equipment for peak seasonal shipping. This feature may be an inducement to ship by rail, and thus have a value for the railroads, but it is probable that some of the ownership cost burden for cars so used should be borne directly by owners and shippers. While the railroads do benefit through increased traffic volume attainable by a car fleet so structured, the managerial discretion to determine the proper level of standby car ownership lies with the car owners or lessees, not the railroads. No data is available to measure the extent of such standby car ownership, but it may not reasonably be disregarded in this proceeding: it probably includes a number of tank cars the costs of which should not be considered the responsibility of the carriers. Railroads are not necessarily required to acquire and furnish cars needed only to meet peak seasonal requirements. See Martin Bros. Box, Co. v. Southern Pac. Co., 280 I.C.C.

395. Some tank cars are used for intraplant shipments, rather than line haul transportation, and on the surface of things at least this use would appear not to warrant cost reimbursement by the railroads. To some extent tank cars are detained for loading or unloading for periods. of time in excess of the usual transportation practices. It seems probable at this point that some portion of this

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