Cargo: Sheet, steel. Barge rate: Chicago to Pine Bluff, Ark... Rate in dollars per ton $8.31 14. 24 24.00 Mr. POTTS. We can continue with other members and take questions afterwards or we can pause here. The CHAIRMAN. I think we will proceed with the rest of the panelists. Mr. Carpenter. STATEMENT OF CLELL CARPENTER Mr. CARPENTER. Thank you very much, Mr. Chairman. I am Clell Carpenter, vice president of Mid-Continent Farmers Association, headquartered in Columbia, Mo. Our membership numbers over 163,000 members in the Mississippi Valley. I am also today privileged to speak for most other major farm groups who are members of the National Committee on Locks and Dam 26. I also speak on behalf of the National Farm Coalition, comprised of 36 farm organizations and commodity groups. Mr. Chairman, you are to be commended for the expeditious holding of these hearings. We strongly urge that a new locks and dam 26 be authorized. A recent letter from farm organization leaders of the national committee to Members of Congress stated very clearly: We may hold different views on some farm programs, but in this battle to replace Locks and Dam 26 near Alton, Illinois, we are unified in purpose. It must be replaced-and soon. I personally observed the conditions of the locks at Alton, and there is no question about the serious deterioration now occurring and the immediate need for replacement. To delay action could well lead to total failure, which would create an economic catastrophe of massive proportions. The fertile upper Mississippi Basin constitutes only one-tenth of the land area of the United States, but accounts for one-sixth of all farm products and one-third of our total grain production. The Mississippi River locks and dam system has done much to protect this valuable farmland from flooding, and provides a channel for sending farm products to market and receiving farm inputs back to the farm. Out of a total of 57,875,418 tons of cargo passing through locks 26 during the year 1976, grain shipments accounted for 30,472,198 tons, or 52.7 percent of the total. Add to this 5,242,938 tons of chemicals, mostly fertilizers, and we have a combined total of 35,715,136 tons of cargo relating directly to agriculture. This is 61.8 percent of the total tons moving through the Alton locks. I think this leaves no doubt in your mind as to the prime importance of this transportation system to the agricultural community of the Midwest. We realize the necessity for the inclusion of a provision relating to user fees, but honestly we feel that the authorization for locks and dam 26 and user charges are separate problems. In the past we have been opposed to a tax on inland waterways; however, the urgent necessity to replace locks and dam 26 causes us to retreat from this position, providing the Congress of the United States will establish a user charge not to exceed 4 cents per gallon fuel tax to be collected. Mr. Chairman and members of the committee, I believe all of us on the National Locks and Dam Committee, particularly the farm segment, oppose very strenuously the Domenici amendment which establishes a 1-percent maximum user fee based on the value of the cargo. This is unworkable, unfair, and far more burdensome than a 4-cent per gallon fuel tax. We also oppose the 64-cent per gallon fuel tax that the railroads advocated just recently at a Public Works Committee hearing. This action is not unexpected from the railroads, as they do indeed have their personal financial interests in mind. We are likewise opposed, and strenuously so, to the tax advocated by the Secretary of Transportation, Mr. Brock Adams. He advocated a 42-cent-per-gallon tax. I noticed he changed his position somewhat yesterday. Farmers consider user charges a tax by whatever name it is called. In my farm organization, as is true with most others, our system of manufacturing fertilizer and other agricultural inputs and our system of marketing grain and other farm outputs are strategically located to utilize river transportation. This is no accident. The determination was made in accordance with economic feasibility studies. To disrupt this by a failure of river transportation being available, of locks 26 were to become unusable, or by an excessive and unfair tax—which will be passed back to the farmer could well destroy this entire system. River transportation is essential to shipping grain to terminal markets for exports. These exports go far beyond serving the interests of farmers. Just last year, our farm exports were in the $22 billion range. This created a favorable balance of agricultural trade of over $12 billion-offsetting the nonagricultural trade deficit of $10 billion. Farm exports are more important today than ever to strengthen the American dollar in these times of ridiculously high prices on imported oil. The three proposals that I have mentioned above will all be passed back to the shipper. Our existing barge contracts contain 94-769 - 77 13 that provision. Every farm-barge shipment contract that I know of has this passthrough provision in it. The market price of wheat in country elevators in the Midwest approximates $1.75 per bushel which represents a figure far less than the cost of production. If the proposal by Senator Domenici were adopted, it could cost farmers an additional 15 cents per bushel. This would mean that farmers would be forced to produce wheat at $1.60 a bushel, 15 cents less than the $1.75 a bushel wheat which is already below production costs. Farmers are eager to produce food and fiber needed both in this country and abroad. But we can't go broke doing it. I visited a great number of farmers in the Midwest just recently and they are seriously concerned about low commodity prices and high input costs and don't know how long they can continue to be farmers. Mr. Chairman, we also commend you for including title 3, which provides for an extensive study of transportation charges. This study, however, must be inclusive of all modes of transportation— waterways should not be considered alone. Mr. Chairman, you note that we in the farm community have expressed no opposition to railroads, as we must use them extensively in our agribusiness transportation, but they are not capable of fulfilling all the transportation needs. Mr. Chairman, we have asked the Public Works Committee to refer this revenue bill to your committee which will hopefully establish a minimum fuel tax not in excess of 4 cents per gallon for fuel use. If there must be a fuel tax imposed, we strongly urge the Congress to make this determination, including the amount of the tax. You folks in Congress represent your constituents at home and we feel it would be far more appropriate for you to establish a tax than to leave it to the administrative decision of bureaucratic agencies. Mr. BURLESON [presiding]. Mr. Hershey, we will be glad to hear you. STATEMENT OF J. W. HERSHEY Mr. HERSHEY. Thank you very much. Members of the committee, I am J. W. Hershey, and I am president of the National Waterways Conference, Inc., a nonprofit organization founded in 1960 and devoted to promoting a greater public understanding of and appreciation for the American waterways system. I am also chairman of American Commercial Lines, Inc., which is engaged in barging, trucking, and vessel construction. During the course of my statement I refer to a number of exhibits I would like to offer at this time and ask permission that they be printed in full in the record of the hearing. Mr. BURLESON. Without objection. Mr. HERSHEY. The National Waterways Conference is comprised of some 500 waterway-related businesses, industries, and agencies consisting primarily of firms shipping or receiving grain, coal, fertilizer, chemicals, petroleum, cement, building materials, iron and steel, wood products, and other commodities as well as water carriers, waterway service firms, river valley associations, financial institutions, labor unions, agricultural organizations, and public members including port authorities, water management districts, State water boards, and other governmental entities. I am pleased to have this opportunity to represent the conference on this important matter. We are all conscious of the haste with which H.R. 8309 was drafted. Even as I prepare my testimony, I have no copy of the proposed title II of this bill and only know of its proposed contents from a committee press release. I would like to raise a number of questions which heretofore have not been spoken of by my associates at the table. I understand there will be some redundancy but I will attempt to keep it to a minimum. We come to the question of the constitutional aspect which is a subject of exhibit A. As you are aware, the Senate proposal for taxing inland waterways was stopped dead in its tracks after passage because it violated the basic constitutional instruction that tax measures must originate in the House and with this committee. I am attaching to my testimony a statement by the conference's constitutional counsel the Honorable Marlow W. Cook and Mr. James F. Falco. Mr. Falco is here-which raises important questions as to whether H.R. 8309 is constitutional. As drafted, this bill clearly discriminates against the inland ports. On that issue, it seem likely that it would be overturned in the courts. It discriminates between deepwater ports and ports on shallowdraft channels, but it also discriminates between some shallow-draft ports which are on shallow-draft channels which are not listed in title I, a form of port preference which will make the bill vulnerable to challenge. The bill also seeks to treat users of the waterways differently. Users of deep-draft channels are not taxed; users of shallow-draft channels and only some shallow-draft channels at that—are taxed. Commercial users are discriminated against versus other users. This raises due process issues. I now turn to the main argument of the proponents of this bill. Proponents of taxes for cost recovery on navigation argue two propositions, both of which are fallacious. The first is that Federal investment in navigation creates an unfair competitive imbalance between the rail and water modes. However, investigation reveals that on the rail side, Federal direct and indirect aids to railroads in fact dwarf Federal aids to navigation. There is no inequity against the railroad; rather, the balance favors the railroad against navigation. My exhibit F deals with this in considerable detail. I am attaching as my second exhibit this 18-page discussion of Federal aids. The second proposition is that there exists a general Government policy of cost recovery of all Federal investment. In fact, where benefits-as in the case of bargaining-permeate the entire economy, the reverse is the case. There is a consistent no recovery policy which applies to dozens of programs and regions of the Nation. Cost recovery is not expected from hundreds of millions spent on such programs as atomic energy and other projects, on the development costs of satellite communications, on vocational education, on mass transit, on soil conservation, rural telephones, college libraries, housing, and mineral exploration. The rationale for no recovery is that these programs benefit the entire economy. And since no inequity has been demonstrated in the use of Federal funds as between the rail and water modes, and indeed there is no inequity, the rationale for taxing barging to redress the balance so heavily depended on by the proponents of this measure does not exist. The arguments do not stand up. Now, certainly, if a tax is to be imposed, it should be imposed equally on both the rail and water mode to make certain that the competitive balance between the modes is not upset and there is no discrimination against the water mode. If a tax is to be imposed on the water mode and not upon the rail mode, the level must be adjusted to prevent catastrophic effects on industry and agriculture which are dependent on the availability of economic waterway service. Total revenues of shallow-draft navigation in 1975 were approximately $900 million. This is based on Army Corps of Engineers' reports of 174 billion ton-miles on the channels named in title I of H.R. 8309 multiplied by 5 mills per ton-mile average barge revenues. The Secretary of Transportation is talking about raising taxes on barging within 10 years by about $350 million a year. An increase in barging costs of more than one-third of the total will drive traffic off the waterways at a faster and faster rate as it is applied to a smaller and smaller traffic base and would within the 10-year period wipe out the barge lines and render useless the Federal investment in navigation. Imposition of a tax not to exceed, for example, the Federal tax on gasoline of 4 cents, or the diesel fuel tax which truckers pay of 4 cents or the 4-cent tax imposed on pleasure boaters with no commitment for further increases before a study has been made of the impact of the 4 cents would enable the Congress to proceed with reasonable caution. The multipurpose Federal water resource program is interrelated. Navigation benefits are commingled with flood control, maintenance of streamflow, irrigation, hydroelectricity, recreation and other benefits. The impact on other water resource programs of a tax on navigation should be carefully studied by this committee. Federal navigation policy has stimulated hundreds of millions of investment from municipalities and other local entities to provide harbor and other facilities. Many of these investments depend on bond issues which in turn are based on revenues from river traffic. What impact will navigation taxes have on the recovery of these bond issues? Delicate balances exist in competition among regions and between industries. For example, what will be the impact on competition of the steel industry in the upper Ohio with those in other sections of the country? How will a navigation tax affect competition between barging and oil pipelines? How will it affect the future plans of industry to locate plants-along with their payrolls and tax base on the inland waterway system? Any transportation tax on barges will come directly out of the pockets of farmers. The world market usually fixes the price paid |