COMMISSION ON ORGANIZATION OF THE EXECUTIVE BRANCH OF THE GOVERNMENT (Water Resources and Power Report) Part 5-Muscle Shoals, Ala. WEDNESDAY, NOVEMBER 2, 1955 HOUSE OF REPRESENTATIVES, SPECIAL SUBCOMMITTEE ON WATER RESOURCES AND POWER The special subcommittee met, pursuant to adjournment, in the Chemical Engineering Building, Tennessee Valley Authority, Muscle Shoals, Ala., at 9:30 a. m., Hon. Robert E. Jones, Jr. (chairman of the special subcommittee), presiding. Members present: Representatives Robert E. Jones, Jr., Martha W. Griffiths, Henry S. Reuss, and Glenard P. Lipscomb. Also present: William C. Wise, staff director; William L. Sturdevant, professional staff member; Robert Morris and Orville S. Poland, general counsel, Committee on Government Operations. Mr. JONES. The subcommittee will come to order. Our first witness will be former Governor Keen Johnson, who is from Louisville, Ky., and a vice president of Reynolds Metals Co. Mr. Johnson. STATEMENT OF KEEN JOHNSON, LOUISVILLE, KY., VICE PRESIDENT OF REYNOLDS METALS CO., APPEARING ON BEHALF OF OHIO VALLEY IMPROVEMENT ASSOCIATION Mr. JOHNSON. Thank you, Mr. Chairman. Lovely lady and members of the committee, my name is Keen Johnson. My residence is Louisville, Ky., and I am vice president of Reynolds Metals Co., which has its principal office at Richmond, Va. I appear before your subcommittee today on behalf of the Ohio Valley Improvement Association, a nonprofit corporation of the State of Ohio which is devoted to the improvement and development of water resources in the Ohio River Basin for navigation, flood control, and water supply. The association is broadly representative of industry, waterway operators, civic groups and private citizens throughout the valley who support its work and program. In recent years the Ohio Valley has witnessed a greatly accelerated economic growth. During the past 5 years alone over $8 billion. worth of new plant construction has been announced for the Ohio Valley-$212 billion is for additions to existing plants in the valley and $52 billion is for completely new plants and industries which are being established in the valley to take advantage of the abundant natural resources, the favorable climate, the labor supply, the adequate water supply and the economies of mass transportation by water offered in this great industrial area. This dynamic growth is not limited to any single locality in the valley. It spreads from the steel-producing centers-Pittsburgh, Youngstown, and Wheeling through the booming chemical industries located in the Kanawha Valley and the Ohio all the way to Cairo, Ill. And Mr. R. S. Reynolds, Jr., president of Reynolds Metals Co., recently announced that our company plans to build its next aluminum-reduction plant in the Ohio River Valley at a point not yet definitely determined. This plant will cost about $168 million and will produce 200 million pounds of aluminum pig a year. Location of atomic energy and power plants along the river and its tributaries provides evidence that our Government recognizes the region as an advantageous location. Naturally, this expansion is of vital importance to every one of the 20 million Americans who live in the 204,000 square miles which comprise the Ohio Valley. There are few people in the Ohio Valley whose jobs and daily lives are not influenced in some measure by the economic growth which has been stimulated by the availability of low-cost mass transportation provided on the river. The riverborne prosperity contributes to the wealth and economic progress of every section of the Nation. The automobiles from Ford's new $60 million plant at Louisville and the appliances from General Electric's new $100 million plant will serve millions of families outside the Ohio Valley. The economies that will be achieved with the new Reynolds Metals aluminum-reduction plant and the savings made by new aluminum plants on the upper Ohio River will make more of this great lightweight metal available for all American homes and industry. The auto and truck owner in northern Minnesota will safeguard his radiator with antifreeze made by chemical plants in the valley. These chemical plants produce the materials that will go into toys, housewares, flooring, upholstery, coated fabrics, melamine dinnerware, and to mold parts of autos, trucks, vacuum cleaners, telephones, pencils, and a thousand other items in everyday use. And there seems to be no end to what the new chemical industry will provide. They tell me that two companies now are making disposable diapers manufactured from polyethylene-coated paper and nonwoven fabric. It has been well said that chemical industries and the Ohio River Valley go together as naturally as bacon and eggs. The Ohio River provides cheap transportation for raw materials and finished products, supplies water for chemical processes, flows through a region rich in fuel, minerals, and other raw materials, and is right in the center of America's rapidly expanding Middle West. On top of all this, the valley has an abundance of electric power. It should be noted that electric power in the valley is dependent on water transportation. For example, the new $175-million powerplant going up at Madison, Ind.-built by private capital-will consume 4 million tons of coal per year that will be delivered by_river barge. Another powerplant is being built at New Albany. Riverborne coal makes ample electric power available, and at low cost, throughout the Ohio Valley. But the tremendous movements of coal on the river are not limited to deliveries to powerplants. The steel producing areas on the upper rivers are large consumers of river-transported coals. Last year a million and a half tons of West Virginia coal found its way to steel plants in the Chicago area. It moved to Evansville, Ind., by barge and was handled from there by the Chicago & Eastern Illinois Railroad. The Ohio River system is an important key to the prosperity of the coal industry in this area where three-quarters of the bituminous coal in the country is produced. Today coal shipments make up over half the tonnage on the Ohio. The robust growth of industry in the Ohio River Basin over the years since the early days of settlement and the phenomenal growth during the war and in the postwar years are in large measure due to the favorable water-resource balance found in many portions of this basin. The availability of water supplies and water transportation have greatly accelerated the industrial expansion from Pittsburgh to Cairo and in many of the tributary valleys. The Ohio Valley is close to important markets and essential raw materials are near at hand here. By themselves, these two factors would not have developed the resources of this area to their present high point. Had it not been possible to take advantage of mass transportation of basic materials by water, the benefits of these resources would never have been distributed throughout the country. River transportation on the Ohio River has been a lifeline of agriculture, for industry and the national defense. Today this chief artery of commerce is approaching its load-carrying limit. In the past 5 years traffic on the Ohio River has increased by over 40 percent. In another 5 years the Ohio River may be carrying as much coal for power generation alone as it now carries for all purposes. That is the best estimate of electric utility men. The locks and dams that were planned to carry 13 million tons of freight a year, when new, in older, smaller equipment are now called on to handle 5 times that load, carried by modern diesel-powered tows that are twice as long as the original lock structures. Industry in the Ohio Valley and all those who depend on the products of that industry are paying a penalty in added transportation costs and time lost in getting through the antiquated locks. Operation and maintenance costs on the existing structures increase as the load gets heavier. Work has been started on the New Cumberland Dam, which was deteriorating to the point of collapse. Construction of new locks and a dam at Greenup to replace five obsolete structures (including lock No. 1 on the Big Sandy River) has been started. This will relieve the traffic delays and congestion on one of the busiest stretches on the entire inland waterways system. It will reduce locking time for modern transportation equipment by 80 percent, and provide annual savings of $600,000 in operating and maintenance costs. The new Markland locks and dam will replace obsolete locks and dams that are from 29 to 43 years old. The planned modernization for the Ohio River system will replace 46 antiquated locks and dams with 21 modern structures with longer and deeper pools. The new locks will be long enough to handle modern tows with one locking and the deeper, more stable pools will make an adequate water supply certain. With the work authorized on the New Cumberland, Greenup, and Markland dams, we have just made a beginning on the entire project. The $8 billion in new industry in the Ohio Valley will increase the transportation load on the rivers. Should the burden of another major war be placed on river transportation, as it was in World War II, we would find the system inadequate to meet defense needs. It would be folly for the Nation to let the rivers become a bottleneck to our industrial progress. The navigation works on the Ohio completed in 1929 provided the foundation for the tremendous industrial expansion of the past quarter century. For an original investment of about $150 million and annual maintenance costs averaging about $11 million, the Nation obtained a great highway of commerce which has been a key factor in the building of this vast industrial empire. In revenues to Federal, State, and local governments alone, the returns from that investment have surpassed all the highest hopes of the builders. When all the benefits are counted, in terms of industrial growth, and increased employment and general prosperity, it is clear that these facilities have been among the most profitable public investments in our Nation's history. Now, of course, the time has come to replace them with new facilities adequate for the expanded commerce and industry which the old facilities themselves have done so much to create. The people of this valley are united in their efforts to modernize our greatest highway for the benefit of the Nation. I have attempted to make clear the vital relationship of improved navigation facilities and adequate water supply with industrial development and general prosperity and welfare. In my opinion there is no work of internal improvement comparable in its national importance to the provision of facilities for efficient utilization of our water resources. Throughout our history wise statesmen, from George Washington to this vital hour, have given their fullest support to programs for comprehensive development of these resources in the national interest. Only those who lacked vision and boldness of imagination, or those with selfish interests to promote, have argued for restrictions and limitations upon the development of our great rivers and waterways. The Hoover Commission now repudiates the wisdom of the Founding Fathers, the established policy of the Congress of the United States, the soleum covenants of our earliest treaties, and the cumulative experience of more than 150 years, as it recommends imposition of tolls or user charges on the inland waterways. The Commission and its task force condemn the entire Federal program of waterway navigation as a "subsidy" or "special privilege" for the few at the expense of the many. Ignoring all the great public benefits which have accrued from the improvement of our waterways, they would saddle on those actually using the waterways the full burden of operating and maintenance costs. They would make the "willingness of promoters to pay" for such improvements "the decisive criterion of feasibility." If adopted, their recommendation would have disastrous consequences for the Ohio Valley and the Nation. Preliminary studies by the Ohio River Division of the Corps of Engineers indicate that user charges of the magnitude required to recover all costs of operation and maintenance of Ohio River navigation facilities would amount to about .8 mills per ton-mile. This closely approximates the estimate of the Hoover Commission that the cost of maintenance and operation of the navigation works on the intracoastal waterways and the inland rivers is about 74 cents per thousand ton-miles, or .74 mills per tonmile. Such user charges would increase the costs of water transport for many shippers by as much as 50 percent. This assumes that present traffic volume would not be reduced by user charges. The fact is, of course, that tolls would drive a large part of the traffic from the rivers, increasing the burden on what remained. In the case of petroleum and petroleum products, for example, which now account for almost one-third of ton-mileage on the Ohio River, shippers now moving these commodities by water in competition with companies relying on pipeline transportation would be forced by such user charges to shift to pipelines or lose the business now dependent on water transport. Similarly, as water rates increased, a substantial volume of river traffic would become available to capture by competing railroads empowered to charge below cost rates. This would, of course, add still further to the user charges on remaining volumes of river traffic. These drastic increases in water transportation costs would have most serious dislocating effects on the economy of the Ohio Valley and throughout the basin of the Mississippi and its great tributaries. The first casualty would be the modern barge fleet which in recent years has developed to a high peak of efficiency, with high-powered diesel tows pushing 20,000 tons of coal or 175,000 barrels of oil in single cargoes and with the aid of radar and electronic depth recorders operating under all weather conditions. For barge operators confronted with such sizable cost increases could not survive the competition of railroads permitted to charge below-cost rates to meet or undercut competition and make up the losses of noncompetitive traffic. Thus a great national asset would be sacrificed-one on which the Nation is dependent for important services in peace and war. These massive rate increases would also exercise a serious depressing influence on industrial plants dependent on low-cost transportation. As the general level of transportation costs rose in response to tolls, the competitive range of such plants would be severely contracted. A steel mill at Wheeling, W. Va., or Pittsburgh, for example, now able to ship steel economically as far as Houston, Tex., might well find its economic radius cut back hundreds of miles, foreclosing to our valley mills the growing markets of the Southwest. Those markets are of increasing importance to our valley mills. Petroleum, chemical, metallurgical, and other industries dependent on the waterways are in much the same position. They are in competition over wide areas with plants located in many different parts of the country. A major increase in water transportation costs would gravely weaken the competitive position of these valley industries as against suppliers not similarly affected. If goods from valley plants are excluded by the economic barrier of tolls from important markets, production at many plants will be reduced and the level of employment will drop, to the grave impairment of the whole economy. It should never be forgotten that waterway tolls are of the same economic nature as internal tariff barriers. Their necessary consequence will be to regionalize our trade and industry, to diminish competition and increase the ultimate cost of goods to the public. |