Many voices have been recently raised asking for more even-handed regulation and government policies between the various transport modes.

All transport modes are essential to our country and its commerce.

All segments of transportation should remain within the private sector. All transport modes should be able to, and encouraged, to compete for their share of the shipper's transportation dollar that they are best equipped to handle.

Few people favor the granting of multi-million dollar grants to railroads as outright gifts with no repayment provisions.

If such grants were made, however, for the purpose of building and maintaining railroad right-of-way and equipment, railroad costs would be reduced and railroad management could reduce rates to a level that would make it difficult for any of the other transport modes to compete. If this was done, many industries would benefit through lower rates. The cost savings impact would also be shared by many times more people than now benefit from waterway subsidies.

The logic of one-sided subsidies for one transport mode, therefore, fails to make any sense from the standpoint of even treatment or overall public benefit.

TYPE OF USER CHARGES

My previous testimony before the Senate included the fact that I favor the imposition of a segmented type of user charge.

I am definitely opposed to fuel tax charges or other charges based on any system-wide type of assessment.

My position in favor of the imposition of inland waterway user charges is largely motivated by my conviction that inland waterway facilities should be constructed only when their cost can be offset by real benefits to the public as a whole. Imposition of fuel tax charges or system-wide charges will not result in the same type of effective restraint against wasteful and unnecessary facilities, as will charges based on cost keyed to the particular waterway segment or facility involved. In addition, it is not equitable or just for inland waterway users to share in costs for facilities where they obtain little, if any, benefit.

SUMMARY

In summary I would like to quickly restate my positions:

1. User charges.-They should be reasonable and assessed against those that directly benefit from the inland waterways.

2. Segmented user charges.-Charges should be assessed for each waterway segment whenever new expenditures are required. They should not be assessed on the basis of a fuel tax or other form of system wide expenses.

3. Separation of issues.-The Locks and Dam 26 repair or replacement issue and the user charge issues should remain joined. Neither issue can be fairly resolved without consideration of the other.

4. Need for prompt congressional action.-Both issues should be promptly resolved through appropriate legislation.

Finally, I endorse Senator Domenici's bill S.1729 which was transmitted to the House as H.R. 5885. I believe that this bill will resolve the issues and will result in the greatest overall benefit to the public and most of the country's shippers.

Mr. BURLESON. Thank you.

Mr. Lederer, do you have questions?

Mr. LEDERER. I don't have questions, Mr. Chairman, but I thank the gentleman for his paper and his dissertation.

Mr. BURLESON. Mr. Frenzel.

Mr. FRENZEL. I thank the gentleman, too, and I have no questions. Mr. BURLESON. Mr. Gradison.

Mr. GRADISON. Mr. Chairman, I just want to draw the gentleman out very briefly on the question of segmented charges. I was around working for the Treasury at the time that the financing was worked out for the interstate highway program. The initial suggestion was

in effect that the interstate highway system be made a series of toll roads which would have permitted segmented charges, recognizing the higher cost of certain parts of the interstate system as against others and it also would have assured that the financing of interstate systems would have rested on its own bottom, that the revenues from the use of that particular set of highways would have financed that particular set of highways.

There was a Presidential commission that made that recommendation, and Congress in its wisdom took a different approach, set up a trust fund, and used a tax which is based upon a simple gallonage tax.

I recognize, of course, it brings in revenues; every time you drive off an interstate highway you pay something towards interstate highways. That was the way it was set up.

Now, that isn't being suggested here. Of course, suggested users of waterways should pay their fair charges or fair share, whatever that should be. But I wonder how far it makes sense to segment these charges? If you segment it too far, there may be certain links which really aren't justified on an economic basis on their own, but may be necessary in order to have a total system and which is true of highways as well. I just wonder.

Let me put it this way. I was glad to hear your final comment where you found possible middle ground, segment with some gallonage because I can really see some problems on a segmented basis.

Mr. GOBRECHT. In answer to your question, I live in the Chicago area, and I have frequently driven on the tollway system in the Chicago area. It seems that every 5 minutes of driving you have to put another 30 cents in the pot.

I, too, would shudder to think of having that type of a system in trying to drive across the country. It is not practical and I don't think it is necessarily practical to that extreme on the waterways.

I think the important thing that Congress certainly must keep in mind is first of all to establish a goal. What are we trying to accomplish? Do we want to obtain these moneys from the users in one way or another? Then I believe that the question certainly must be answered on how much of the total waterway expenses over a period of time must be recovered.

This should be in the form of a long-range goal. Then someone, I certainly am not qualified to recommend the exact type of charge, preferably a study commission, should determine and recommend a plan for assessment of charges. I believe that the DOT approach is probably proper; they should consider all the factors, the environmental factors, the effect on particular segments of the country, the effect on particular individuals. All other factors involved should be considered in determining the final amount of the toll, as well as the exact method in which it is going to be assessed. But I don't believe anyone really is perfectly qualified to say the exact way it should be done today.

Mr. GRADISON. Thank you very much for your helpful testimony. Thank you, Mr. Chairman.

Mr. BURLESON. Thank you very much, Mr. Gobrecht.

Our next witness is Lewis T. Hardy, executive vice president of the Hardy Salt Co., St. Louis, Mo.

Glad to have you, Mr. Hardy.

You do have a statement before us which is fairly short. If you wish to summarize it, it will be placed fully in the record.

STATEMENT OF LEWIS T. HARDY, EXECUTIVE VICE PRESIDENT, HARDY SALT CO., ST. LOUIS, MO.

Mr. HARDY. Thank you, sir, I would.

I have provided copies of my prepared statement. I would like to take a few minutes to briefly summarize and make a few comments, Our company's headquarters are in St. Louis, Mo. We have salt plants in Michigan, Utah, and North Dakota. We regularly ship by rail and truck to about 25 States. We support the proposal for imposition of user charges before any additional funds are appropri ated for commercial purposes. We support this for two reasons.

First, it affects our own business and, second, as a matter of national policy.

Our largest plant is located in Michigan, which was the largest salt-producing State in the Union, but over the last 20 years its share of the market has dropped in half, while Louisiana's producers' share has doubled. The reason for this is our competitors have made increasing use of free waterways to transport salt from Louisiana mines up into our normal marketing area.

In recent years, since 1974, imported solar salt produced in the Dutch West Indies started coming into our market via barges subsidized by the American taxpayer and even by our own employees and others working in U.S. salt plants whose jobs are being threatened. Overall, U.S. imports have increased from less than 2 percent in 1955 to about 15 percent in 1974 of the total U.S. dry salt market, There is no duty on plain salt either coming into this country or going out.

We are not against free trade for we believe we can compete in the free marketplace. However, it is very difficult when our competitors, both domestic and foreign, are allowed to move their product by 100 percent subsidized water transportation.

We believe now is the time for the adoption of proper, adequate and equitable charges on the inland waterway system as a matter of national transportation policy and principle. It would tend to temper demands by special interest groups for large federally financed projects for commercial waterway transportation. If the benefactors know ahead of time that they are going to have to eventually pay for these installations, then their demands would subside and they would only be requesting those that are absolutely necessary and efficient. Whereas, under the present system, the demands will continue to escalate.

Certainly each commercial transportation facility should be paid for out of the profits of those waterway carriers who use it. The latest figures I have seen indicate the waterway carriers are running about 10 percent return on investment, to about 3 percent for rail. With the growing national debt, every effort must be made to recover future capital investments by the Federal Government.

The U.S. Chamber of Commerce has adopted a formal policy supporting user charges for commercial waterway facilities.

The Missouri Chamber of Commerce and the Minneapolis Chamber of Commerce saw fit to adopt formal policies verifying that support of user charges. Obviously somebody has to pay for these expensive projects such as lock and dam 26, and they support a program wherein those who benefit directly reimburse the Government for moneys expended.

Also as a previous witness stated, the National Industrial Traffic League is on record as supporting segmented waterway user feel. The fairest method would seem to be a combination of segmented user fees to recover O. & M. costs and lockage fees to recover hopefully 100 percent, but perhaps to start with only 50 percent of the cost of new construction.

It has been estimated that in the current year about $280 million will be spent on O. & M. costs throughout the system. However, these costs vary greatly on various sections of the river. For example, the cost per thousand-ton miles on the upper Mississippi is about 29 times more than it is on the lower Mississippi. This is because the cost of operating and maintaining some 27 locks.

Some would have proposed a fuel tax be authorized, but it would take about 25 or even up to 30 cents per gallon to cover current O. & M. costs alone. And this would be a fuel tax which would hit all whether they operated on the upper or on the lower Mississippi.

So I can't see how it would be justified to require operators from St. Louis south to help operators use rather expensive routes north of St. Louis. This is why user charges are being considered, it is an attempt to bring about better and fairer treatment. Thus, it seems logical to me to have user taxes on a segment basis and let each segment carry its own load.

For example, on a 1,400-ton barge of salt moving from Louisiana to Minneapolis, on the first segment from Louisiana to St. Louis, it would only require $6.45 per barge to recover the O. & M. costs, a distance of 1,151 miles. However, on the upper, from St. Louis to Minneapolis, a distance of only 680 miles, it would cost $95.55 per barge to recover the O. & M. costs.

One might ask why should those operators operating below St. Louis pay the same fuel tax as those operating north of St. Louis. A fuel tax by itself would be grossly unfair. It would evercharge those on the lower segment in this case by $45, to subsidize one on the upper.

As to recovering Federal funds to be spent in the future on new construction, the Senate-passed bill, H.R. 5855, provides for eventual recovery of only 50 percent. Although this would be a strong step in the right direction, we believe this should eventually be 100 percent with possibly a 5- or 10-year phase-in period.

As I have testified before the Senate Public Works Committee last year, we believe that all Government subsidy to all modes of transportation should be held at an absolute minimum.

At the end of the phase-in period if you are going to get a 100percent recovery of costs of construction, and if it was determined that $400 million would be spent on a project such as locks and dam 26, this could be amortized on a 50-year basis, with 8 percent interest rate, and this would come out to about $32 million per year.

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If we projected that 80 million tons would move through the facility annually, this would amount to about 40 cents per ton-or a little over a cent a bushel on wheat. We feel this fee could easily be assessed at the lock and should be assessed from the time the new facility is completed until it is completely paid off. But if it turns out that the facility can be built for half the amount, or $200 million, the lockage fee would be 20 cents per ton. If the tonnage through the locks increased beyond the estimates, then the lock would be paid off that much sooner.

To use a fuel tax to recover cost of new construction would even be more unfair than improper in our opinion than for the O. & M. costs. I can't imagine why all users of all inland waterway systems in the South and in the Gulf should have to bear the cost for repairing or building new facilities in the North.

Thus, in conclusion we are opposed to the fuel tax method as being grossly unfair and discriminatory. We do support the concept of 100 percent recovery of O. & M. costs embodied in H.R. 5855 and believe O. & M. costs should be collected on a segmented charge basis.

We object to the 1-percent cap as unwise and counterproductive, particularly if applied to the capital improvements section. Perhaps as a compromise, however, the 1 percent cap could be made to apply on the segment charges to recover O. & M. costs, but not on a lockage fee to recover capital investment.

In this way you would lessen the impact on the small operators on less efficient segments of the river, but at the same time not encourage massive new expenditures on unwise projects.

As I mention in my prepared statement the Carey Salt Co. of Hutchinson, Kans., the American Salt Co. and the Morton Salt Co. support our position on user charges and have authorized me to speak for them. Also Snyder Molasses Co. of Chicago.

I will be glad to answer any questions the best I can. [The prepared statement follows:]

STATEMENT OF LEWIS T. HARDY, EXECUTIVE VICE PRESIDENT, HARDY SALT Co., ST. LOUIS, MO.

Our company's headquarters are in St. Louis, Missouri. We have salt plants in Michigan, Utah and North Dakota. We regularly ship by rail and truck to about 25 states, but primarily to seven states in the upper Midwest.

We are firmly convinced that no additional funds should be appropriated for commercial purposes on the inland waterway system until appropriate fair and equitable user charges are legislated. Although it may be wise to have a phase in period, eventually these charges should do the following.

First, recoup all operating and maintenance expenses annually. Secondly, recover all amortized costs of new capital expenditures over the estimated life span of the new facility.

We are not opposed to major repairs or even replacement of Locks & Dam 26, depending on the most desirable solution after all alternatives have been carefully reviewed, provided that the costs will eventually be borne by those who benefit.

We favor user charges on the inland waterway system for two reasons, First, it affects our business directly. Our taxes and those of our employees are being used to subsidize our competitors' barge transportation of salt. In our industry transportation costs amount to about 25% of the total sales dollar. Our largest plant is located in Michigan, which for many years was the largest salt producing state in the Union. Over the past 20 years, however, its share of market has been slashed by more than 50 percent-from 22 percent to 9.8 percent of the total domestic salt market. During this same period, Louisiana salt