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BLOW TO BARGES. For chemical firms with huge investments in barge facilities, tolls could be devastating

Chemical Industry Opposes Waterway Tolls National Plant Food Institute and MCA's traffic committee stand against user charges on barge shipping

The executive committee of the Na­tional Plant Food Institute last week voted unanimously to oppose imposi­tion of tolls on inland waterways. This was the first open stand on the ques­tion by a major group in the chemical industry. Hard on NPFI's heels, the traffic committee of the Manufacturing Chemists' Association, huddling in closed sessions in Atlantic City, also decided to oppose waterway tolls.

Two identical bills (H.R. 2963 and S. 78) now before Congress would, for the first time, levy tolls on users of U.S. inland waterways to recover federal outlays for the operation and upkeep of these waterways. Primarily railroad sponsored, these measures call for the creation of a federal inland navigation commission with power to assess charges on users of these im­proved waterways.

Tolls would be set high enough to recover all federal expenditures for operation and maintenance, as well as undepreciated values of existing waterway improvements and the costs of all future improvements. These user charges would be predominantly on a ton-mile basis. And to accom­plish the objectives of the legislative

proposals, the initial toll rate might run as high as two mills per ton-mile, according to Corps of Engineers' computations.

Rep. James E. Van Zandt (R.-Pa.) is sponsor of the proposal in the House, while Sen. J. Glenn Beall (R.-Md.) lends his name to the Sen­ate bill.

Destructive Effects. If enacted, this legislation would mean a 50 to 100% increase in water transportation charges, opponents say. And it would deal a death blow to a large segment of the U.S. water carrier industry.

In addition, they contend, once tolls are levied on inland waterways it will be just a matter of time until they are extended to ocean harbors and to such industrial waterways as the Great Lakes and the Houston Ship Channel. Thus the stage appears set for a clash when Congress holds hearings on the bills, probably next session.

Chemicals Could Be Hurt. The chemical industry has a big stake in the outcome. Chemicals rank among the seven commodities which together make up some 77% of all barge traffic. Latest complete tabulations show that 26.2 million tons of chemicals and re­

lated products were moved on U.S. inland waterways during 1959.

Waterborne chemical freight may account for more than 10 billion ton-miles a year, some industry transporta­tion men estimate. With barge owners already working on slim profit margins, user charges might sock the chemical industry with more than $20 million in added shipping costs on its waterborne freight right at the outset.

For many chemical companies— those with huge investments in barge facilities and waterside plant s i tes-imposition of waterway tolls could have devastating effects. The going barge rate for most large volume chemical commodities is roughly 2 mills per ton-mile—well out of range of the railroads, in most cases. But double the barge rate—as the suggested 2 mills per ton-mile toll would—and these companies likely would be forced to ship everything they produce by rail and truck.

Enactment of waterway toll legisla­tion, moreover, could cause the chemi­cal industry to overhaul its current thinking on expansion. Chemical growth along the Ohio River and the Gulf Coast are two cases in point.

OCT. 9f 1961 C & E N 31

One very important factor behind the big chemical investments in these areas is the waterways. Chemical compa­nies committed themselves heavily in these areas, counting on the continu­ance of a free waterways policy. It meant such attractions as low-cost shipping, access to waterborne raw materials, and low-cost power derived from barge deliveries of coal. Take away these enticements and the pres­ent geographical pattern of chemical development could be altered severely, many top industry officials believe.

Opposition's Stand. The opposi­tion's reasoning goes something like this: Petroleum and petroleum prod­ucts make up about 35% of all the traffic moving on the rivers and canals of the U.S. Much of this traffic now moves by barge at a cost of 2 mills or less per ton-mile, which is competitive with pipeline movements but too low for the railroads to meet.

Imposition of user charges would double these costs and force petro­leum off the water and into pipelines. Other big volume commodities for water carriers—chemicals, fertilizers, coal, iron ore, iron and steel, farm

products, and the like—would feel the added pinch of tolls on shipping costs.

But the problem doesn't end there, they say. The cost of operating and keeping up inland waterway facilities is pretty much fixed—it doesn't vary much with changes in the volume of traffic. Hence, as the initial toll rate drives some commodities off the water, the remaining traffic must be hit with higher tolls if the Government is to recover its fixed outlay. End result, they believe, would be the virtual de­struction of this country's inland waterway commerce.

The availability of low-cost water transportation has been instrumental in holding down the railroads' charges, they go on. But once tolls are im­posed, forcing barge owners to raise their rates, the railroads will follow suit. And railroads will have the ad­vantage of being able to level off their prices just under the waterways' best offer.

Battle Lines. Battle lines on the issue are clearly drawn. The rail­roads say, in effect:

"We have to pay for our rights of way; make our waterway competitors

do the same. As it stands now, water­way users pay nothing for their use of taxpayer-supported navigation facili­ties. But we must buy, build, and maintain our own rights of way and then pay heavy taxes on them to boot.

"In addition, we are hamstrung by federal regulations, many of which do not apply to the waterways. In short, we are beleaguered by govern­ment-subsidized competition. Let's make everyone pull his own weight; let's have a little equality in our free enterprise. If making the waterways pay their own way would mean the end of inland waterway commerce, which the barge owners contend and which we seriously doubt, this would be the most devastating self-indict­ment of the uneconomical nature of waterway commerce that has ever been uttered by anyone."

Name an industry that could with­stand the sudden imposition of a tax that doubles its transportation costs overnight, barge owners reply. They contend further that navigation im­provements, like all other water re­sources programs—flood control, water supply, hydroelectric power, recréa-

Freight on These Inland Waterways Would Be Affected by Proposed Tolls on Shipping

^ · Source: The American Waterways Operators, Inc.

32 C & E N OCT. 9, 1961

BUILDING OPPOSITION. Joseph J. Gannon, Jr., managing director of the National Waterways Conference, maps the conference's grass roots campaign to muster opposition to waterway toll legislation now before Congress. The conference will place initial emphasis on the Gulf Coast and its heavy waterborne traffic in chemi­cals and petroleum

tion, reclamation, and soil, fish, and wildlife conservation—benefit the pub­lic at large, not just barge owners. So why shouldn't, as the railroads put it, the public pick up the tab? The rail­roads have been making hay with this point—that the taxpayer finances' waterway improvements that benefit barge owners. But they neglect to point out that, if waterway tolls are imposed, the taxpayer will find himself ultimately paying the bill anyhow in the form of increased prices on con­sumer goods.

In addition, toll opponents argue, it has been the historic policy of the Government, dating back to the Northwest Ordinance of 1787, to give inland waterways the status of free, common highways without toll or tax. But their main point is that the water­ways toll issue is not merely a contest between two modes of transportation. Rather, the imposition of these tolls would involve a complete reshaping of this nation's economic map.

Administration Leans Toward Tolls. Be that as it may, the railroads, on the surface at least, have a strong case. They are making an all-out bid for user charges on all carriers which use facilities and services provided with federal money. And indications are that they may have the ear of the Administration. In the draft of the President's transportation message to Congress, Mr. Kennedy said:

"As1 more pressure is placed on the federal budget in the future, it is inevitable that user charges will be demanded. A program to achieve this end, realistic but not destructive, should be in the making

Although it was never forwarded to Congress (allegedly because of differences of opinion among the President's advisers and staff assist­ants), this message represents Mr. Kennedy's most recent thinking on the subject. Potentially it is the most serious threat posed to date for the continuance of a free waterway system, waterway interests believe.

Adding to their fears is the Presi­dent's recent decision to give the job of developing new transportation policies to the Department of Com­merce. In a letter to Secretary of Commerce Luther H. Hodges early in August, Mr. Kennedy ordered the Secretary to work up plans by Nov. 1 on how to deal with the nation's worsening transportation crisis—recom­mendations which could be presented to Congress in the next session. It

is almost certain that Commerce will plug for user charges on federally-improved inland waterways as part of any over-all transportation plan. An earlier Commerce report—its Federal Transportation Policy and Program report issued in March 1960—supports waterway user charges. This report, along with a subsequent comprehen­sive transportation study by a special task force of the Senate Interstate and Foreign Commerce Committee— the so-called Doyle Report, which also comes out in favor of a system of user charges on inland waterways (C&EN, Jan. 16, page 40 ) - i s pro­viding much ammunition for propo­nents of waterway toll legislation.

Opposition Builds. In light of these mounting odds, opponents are going all out to alert and strengthen their forces. In Washington this week, the National Waterways Conference— a standard-bearer for opponents of waterway toll legislation—is mapping the next phase of its grass roots campaign to muster and consolidate opposition forces. Through a series of regional meetings, the conference will bring together all groups in the water site localities which would be hurt by the legislation—shippers, carriers, waterway services, regional trade and

development groups alike. The pur­pose is to shore up opposition forces and to rally them, around a single banner.

The conference's initial target is the Gulf Coast, with its heavy waterborne traffic in petroleum and chemicals. The initial meeting was held in Hous­ton last month for affected industries in the Galveston-Corpus Christi-Hous-ton area. And chemical industry rep­resentation was high. Three more meetings are scheduled for this fal l -one in New Orleans, La., in early November, followed by meetings in Memphis, Tenn., and the Lake Charles-Beaumont, Tex., area.

In addition, the conference has slated subsequent meetings in other important areas dependent upon water transportation. Among prob­able future meeting sites are New York, Chicago, and Minneapolis-St. Paul.

The question of waterway tolls un­doubtedly will be considered by Con­gress next year. But it is unlikely that legislators will adopt in full user charge proposals of the sweeping na­ture and scope of those advanced to date. But the eventual outcome of the waterway toll issue still is any­body's guess.

OCT. 9, 1961 C&EN 33