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INTERMODAL TRANSPORTATION—Continued 4. The Commission has the authority to require water-rail coordination in domestic transportation and such authority will be used when an appropriate record has been made to warrant it.

5. This is a pending case that I will have to vote on. Therefore, I think it is improper to give my views on such matters as raised by your questions other than to say, as I did above, that the Commission is seeking to provide cost criteria for use in intermodal rate controversies to ascertain the inherent advantage of the respective modes.

Commissioner Dale W. Hardin

1. It is true that generally rail rates on grain and other bulk commodities are higher in the midwest plains area than they are where water competition is present. It is an economic fact of life that where competition exists, such as where two or more modes compete for the same traffic, rates tend to gravi. tate to a lower level than where competition is not present. Such interplay of economic factors is specifically recognized, for example, in section 4(2) of the Interstate Commerce Act. Section 4(2) provides :

“Wherever a carrier by railroad shall in competition with a water route or routes reduce the rates on the carriage of any species of freight to or from competitive points it shall not be permitted to increase such rates unless after hearing by the Commission it shall be found that such proposed increase rests upon changed conditions other than the elimination of water competition.”

Basically, the proposed rulemaking proceeding (discussed on page 94 of the Commission's report of June 16, 1969, to the Surface Transportation Subcommittee), Docket No. 34013 (Sub-No. 1), Cost Standards in Intermodal Rate Proceedings, is addressed, as its title indicates, to cost elements in competitive intermodal rate situations and the prevention of destructive competitive practices rather than to the area of noncompetitive intramodal ratemaking. Thus, the proceedings would have little or no application to rate proposals where competition between the various modes is not present such as in the situation you describe.

The Sub No. 1 proceeding in Docket No. 34013 was instituted by Commission order dated February 5, 1969. It had its antecedent in lead Docket No. 34013, Rules to Govern the Assembling and Presenting of Cost Evidence, instituted on April 16, 1962, but was deemed to be susceptible to separate consideration as a refinement of the issues and as a convenience to all concerned. The proceeding is being handled under the Commissions expedited procedures. In my view, the consumer interest is being adequately represented through active participation by a large number of shipper groups such as the National Industrial Traffic League, the Central Territorial Conference, the National Small Shipments Traffic Conference, the National Sand and Gravel Association, and the Manufacturing Chemists Association, and by a number of individual shippers.

2. As indicated at the recent hearing before your Subcommittee on June 24 and 25, 1969, the Commission does utilize, and has done so for a long time, the same innovative approach as used in Ex Parte No. 230 in many areas. The most recent would be Ex Parte No. MC-19 (Sub-No. 9), Practices of Motor Common Carriers of Household Goods; Ex Parte No. MC-77, Restrictions on Service by Motor Common Carriers; and Ex Parte No. MC_37 (Sub-No. 13), Rio Grande Border Municipalities-Commercial Zones and Terminal Areas. Others would include:

Ex Parte No. MC-68, Removal of Truckload Lot Restrictions.
Ex Parte No. MC-72, Motor Service on Shipments of New Furniture.
Ex Parte No. MC-73, Transfer of Equipment or Traffic at or Near Ports of

Entry on the United States-Canadian and the United States-Mexican

International Boundary Lines.
Ex Parte No. MC-65, Motor Service on Interstate Highways.

Ex Parte No. 242, Express Company Terminal Areas. 3. Whether unrestricted common ownership is favored by one segment of the transportation industry and opposed by another is not, in my view, particularly relevant to a proper evaluation of this important and highly controversial issue. What is relevant and of primary importance, as I see it, is whether the overall public interest would best be served by the adoption of such a concept. History indicates that we should move cautiously in this area.

Basically involved, of course, is the best possible service to the public at the lowest possible cost. Whether this can best be achieved and maintained under INTERMODAL TRANSPORTATION—Continued the present concept of intermodal competition and coordination or under the concept of competitive total transportation companies, embracing all modes, is an extremely difficult and complex question. By and large, shipper needs are being, or can be, met by coordinated movements between and among the present independent modes with the attendant safeguards of competition. Even greater accomplishments in this area are possible, in my opinion, under present concepts if more intense and genuine efforts were made by carriers of the different modes to coordinate their movements by the establishment of through routes and joint rates. Enactment of the Commission's proposed through-route and joint-rate legislation should go a long way to prod the carriers into constructive action in this regard. Should all of these efforts to achieve a truly coordinated transportation system under independent modal ownership, control, and operation fail, consideration should be given to more drastic measures. However, until it can be clearly demonstrated that this goal cannot in fact be achieved under prevailing concepts, I am not inclined to favor common ownership of the various modes at this time. I feel this to be particularly true in view of the unsettled rail merger picture and the uncertainties arising out of the growing trend toward conglomerates.

4. The Commission has the authority to require water common carriers and railroads to enter into joint rates and through routes. The Commission prefers that carriers voluntarily enter into such arrangements rather than in the first instance compel their establishment. However, where the situation warrants, and the rail and water carriers have not taken the action voluntarily, the Commission has compelled the establishment of rail-water joint rates and through routes.

5. The intermodal cost finding case, Docket No. 34013 (Sub-No. 1), was instituted under the Administrative Procedure Act for the announced purpose of determining “(1) what inherent cost advantages of the respective modes are entitled to protection under section 15a (3) and the National Transportation Policy; and (2) under what circumstances and in what manner should particular costs be recognized in cost comparisons involving competition between various modes of transportation to protect and preserve those advantages.” (Emphasis supplied.) Hence, the very purpose of the proceeding is to develop cost standards to be applied in intermodal rate controversies in accordance with the national transportation policy. I am in agreement that such cost standards should be developed.

PASSENGER SERVICE Commissioner Kenneth H. Tuggle

Question. 1. The ICC now has underway a study which will determine the cost to the railroads of maintaining passenger service. When will this study be completed? Will the study develop a new formula which can be applied in future cases? Do you think it should ?

Answer. Within a matter of days the Commission will complete and forward to your Committee a report on the cost of intercity rail passenger service. It will cover our investigation into the intercity passenger service for the year 1968 by eight rail systems whose operations and accounts are susceptible of analysis of intercity service as distinct from suburban and corridor service. In terms of noncommuter passenger miles the eight study carriers provided more than 40 percent of the Nation's intercity service.

The investigation was undertaken primarily to determine what the eight systems would have saved had they not operated the amount of passenger service provided in 1968. While it was expected to provide insights into intercity passenger service in general, it was not intended to “develop a new formula” for future cases. Its relationship to train discontinuances under section 13a of the Interstate Commerce Act is rather remote. In the investigation we are dealing with the total intercity service of the eight sysems, encompassing all rains, certain overhead expenses, capital factors, etc. In a section 13a case we deal with individual trains and, costwise, are ordinarily concerned only with the above-the-rail, out-of-pocket expenses directly and clearly attributable to the individual trains. Consequently, a “new formula” for section 13a cases is not being developed in the "intercity" study.

PASSENGER SERVICE—Continued I do not believe decisions in train discontinuance cases can accurately be characterized as "formula” decisions. The statute (section 13a) prescribes two standards: (1) the requirements of the public convenience and necessity, and (2) undue burden on interstate commerce. In applying these standards to a particular case numerous factors are considered and the weight attributed to each is discretionary with the Commission, taking into consideration the attendant facts and circumstances. Among the factors are such things as the population in the service territory, the public's patronage of the train, the availability and adequacy of alternative transportation, the revenues and expenses of the train operation (past and as anticipated for the future and including existing subsidy support by local, state or Federal governments) the quality of the service in question and any purposeful downgrading by the carrier as opposed to bona fide economizing, the carrier's financial situation, and others. The United States Supreme Court has recognized the correctness of applying varying weight to the several factors, as deemed appropriate in the peculiar circumstances of the individual case. See Southern R. Co. v. United States, 376 U.S. 93, 104–105 (1964).

Question 2. Do you believe that small towns, private organizations or even states can effectively continue to do battle with railroads and all their legal resources on an annual sis where those rai roads year after year file for discontinuance of the same train? Doesn't this place a rather large burden on those who wish to keep trains in operation? In those cases where there is a question whether the public interest is being adequately represented couldn't the hearing officer conduct his own questioning to insure that pertinent facts are brought into the hearing record or in the alternative, why couldn't he direct the production of relevant evidence for the record ?

Answer. The Commission does not view a “train-off” case as a proceeding that merely pits the public interest against the private interest of the railroad. Rather, it views the railroad as a private agency imbued with a public interest, with definite obligations to serve the public as a common carrier; and in that light and assuming the wisdom of the Congressional policy reflected in section 13a, any train discontinuance effected under Commission procedures can be considered an act in the public interest. Along that line I wish to point out that, from time to time in train-discontinuance cases, private organizations and members of the public appear in support of the proposed discontinuance.

Your question is concerned with the ability of state and local governments and private organizations to oppose repeated efforts by a railroad to eliminate the same train.

In some cases protestants may have staff deficiencies in dealing with some of the technical matters involved. Part of the problem is a matter of emphasis. Some states maintain highly competent staffs, and others employ, on a case by case basis, competent legal and technical representatives. But this cannot be said for all protestants.

In a number of cases the Commission has ordered a continuance of a train for the statutory maximum period of a year, noting that within that period the public would have an opportunity to indicate by increased patronage its continuing need for the train, only to find that a year or so later the patronage has declined while costs have risen. It should be remembered that the Commission has before it in most of these cases detailed information about patronage, including data on ticket sales, conductor head-counts, boarding and deboarding statistics for every station served by the train, the number of passengers to and from connecting branches and lines, etc. This evidence gives us a clear picture of the actual use being made of the trains by the public.

Each time a train is posted for discontinuance the state and local interests concerned have an opportunity to improve their presentation. Apart from their opportunity to work toward increasing patronage and lightening the carrier's financial burden, they have the added advantage of increased familiarity with the train's situation and the carrier's case. They are also free to unite in a concerted opposition effort, and, on occasion, have done so. Since our proceedings are not governed by the strict rules of court procedure, protestants have a wide latitude to adduce evidence and conduct cross-examination—relevancy being the prime criterion.

In addition, the hearing examiner is under instructions to assist in the development of the record both by his own examination of witnesses and by directing the production of evidence. In case after case, the transcripts of hearings indicate that the hearing examiners have, in fact, been active in this function. For PASSENGER SERVICE—Continued example, the Commission wants to know in every case what the situation would be if the service were modified rather than wholly discontinued, and the hearing examiners therefore call upon the railroads for evidence bearing upon such things as service on alternate days rather than daily, or service over part rather than the whole of the route, or other forms of curtailed service.

Finally, in our analysis of the record we have our own technical staff for consultation on matters of costs, data sampling, accounts, economics, operations, etc.

Question. 3. An even more complicated situation arises where, as in the case of the California Zephyr, more than one of the connecting railroads files for discontinuance of that portion traveling over its tracks. This will necessitate the appearance of opponents in a number of different forums to discuss essentially the same issues. Could the ICC consolidate these cases to advantage-or at least combine the hearing records to ensure that each examiner has before him the same arguments ?

Answer. Cases like the California Zephyr are very few in number. They suffer the limitation of the statutory four-month period. Each of the connecting railroads traverses a considerable distance (570 miles for the Denver & Rio Grande Western) and passes through a number of populous cities, thus requiring the conduct of hearings at many places. As a practical matter, therefore, the time limitation precludes consolidation for hearing. Even beyond that, since the action is not initiated by the Commission, but by the individual carriers pursuant to their rights under section 13a, the time periods do not run concurrently (though they sometimes overlap), thus creating an obstacle to combining the hearing records for consolidated decision.

In past cases like this, the Commission has sought, within the time limitations, to consider the records at approximately the same time and, if possible, take in the one case official notice of its findings in the other.

Because of the four-month time period in section 13a (1) cases (interstate trains), the Commission as a matter of practice dispenses with the preliminary report of the examiner, and makes the initial decision itself either by Division 3 or the entire Commission. The arguments contained in briefs are therefore addressed to the Commission and not to the hearing examiner. If the four-month periods in the two cases have a sufficient overlap, the Commission members involved in the decision-making could well have the briefs from both before them at the same time.

Question 4. In chapter II of the Report it is indicated that the ICC admonishes carriers to refrain from practices which downgrade their passenger service. Suppose a railroad files for discontinuance one year and the ICC issues an admonishment in denying discontinuance and suppose the railroad refiles for discontinuance a year later, what independent investigation is made by the ICC to determine whether there has been compliance with the admonishment during the interim period? (This Committee has been advised that the ISS has in only one case, 333 ICC 783, undertaken such a follow-up). Shouldn't one be made?

Answer. Section 13a does not empower the Commission to impose conditions of performance upon the carriers or to condition its decisions in any way. There is a serious doubt as to whether the Commission has jurisdiction under any statute to exact of a carrier any particular quality of passenger service. Practically every state Commission in the Nation does have the power to order compliance with standards of adequacy and cleanliness for trains, service, stations and other passenger facilities. Some states have actively exercised such power.

When this Commission admonishes a carrier against downgrading purposefully contrived to discourage patronage, it is saying in effect that because of the downgrading and artificially manufactured decrease in patronage, the carrier has made it impossible for us to determine the normal patronage and the costrevenue picture it would produce, and that so long as the artificially created situation remains, the train probably cannot become a successful candidate for discontinuance.

In this regard a distinction should be made between downgrading for the purpose of discouraging patronage, and prudent economizing for the purpose of saving the train. Frequently during our administration of section 13a we have suggested to carriers in individual cases to eliminate heavily-deficit luxury service in order to preserve for the public a viable utilitarian train.

Question. 5. There is reason to believe that railroad announcements of intention to discontinue a train are taken by the public to mean the train will in fact be discontinued-what would you think of establishing standards for the content PASSENGER SERVICE-Continued

of these notices to ensure the public will not be misled? Are there any such standards now which are meaningful?

Answer. As enacted, section 13a empowers the carrier to discontinue the train pursuant to the posted notice. This power flows directly from the statute and not from the Commission. The only thing standing in the way of such discontinuance is a decision by the Commission to institute an investigation. We have 20 days in which to make that decision, and 15 of those days are allotted to the receipt of protests. If an investigation is decided upon, we order the carrier to post that information and data about the hearings in the same manner as it posted its notice of discontinuance.

I am in full agreement with you that the public should not be misled by the posting. I am forwarding to you herewith a sample copy of a discontinuance notice prepared under the standards we have set forth in 49 C.F.R. 1122.3 and 1122.4. Please note the last paragraph on the sample wherein the public is notified that it has a right to protest.

NOTICE OF PROPOSED DISCONTINUANCE OF SERVICE

Chicago, Milwaukee, St. Paul and Pacific Railroad Company, 516 West Jackson Boulevard, Chicago, Illinois 60606, hereby gives notice under Section 13a (1) of the Interstate Commerce Act that effective March 29, 1968, it will discontinue the operation of passenger trains Nos. 117 and 118, which operate between Chicago, Illinois and Madison, Wisconsin.

These trains serve the following stations:

Chicago, Glenview, Fox Lake, of Illinois; Walworth, Avalon, Janesville, Milton Junction, Edgerton, Stoughton, McFarland, Madison, of Wisconsin.

Persons desiring to object to the proposed discontinuance should notify the Interstate Commerce Commission, Washington, D.C., of such objection and the reasons therefor, at least fifteen days before the effective date of the proposed discontinuance.

February 26, 1968.

Question. 6. There is pending before the Commission a finding by a hearing examiner, Mr. Messer, in which the examiner concludes that the Commission does have jurisdiction over the quality of passenger service and that it should promulgate standards of national service. It is my understanding that there are a number of other adequacy petitions concerning railroad passenger service before the Commission. The case involved in the Messer decision has been before the ICC for nearly three years according to my information.

How much longer will it take before the ICC acts ?

Answer. Your reference in this question is to I.C.C. Docket No. 34733, Adequacies—Passenger Service Southern Pacific Company between California and Louisiana, a case in which five western and southwestern states filed a complaint alleging inadequate SP service and requesting relief of the Commission. The hearing exam ner recommended a multi-pronged solution, including:

Enactment of additional legislation by Congress and repeal of section 13a.
Federal subsidies through income tax relief.
Amendment of labor contracts and work rules so as to obtain more labor

productivity for the labor dollar. Commission orders directing the carrier to restore certain services and

upgrade others. Subsidy and other support of the carrier by state and local governments. As you can see the examiner's plan calls for action by Congress, labor, states and municipalities as well as the Commission. Except for this Commission, I am unaware that any of those upon whom the examiner calls has done anything to implement his recommendations. The Commission has the case under active consideration, but in view of the difficulties we have had with it so far, I cannot estimate when a decision will be achieved.

Question. 9. Mr. Messer has raised a very significant issue and if his recommendation is adopted it could revolutionize passenger service. Shouldn't this possibility have been evaluated previously by the ICC on its own motion?

Answer. If the examiner's package plan were accepted by all upon whom he calls, it is entirely possible that a revolution in passenger service (as you put it) might follow. As to how far Congress and labor could be persuaded to go, you are in a better position than we to estimate. You are also well aware of the problems involved in obtaining state and local aid.

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