Message to the Congress Transmitting Report on the Transportation Question in the Territory of Alaska, Etc.

To the Senate and House of Representatives:

In accordance with the provisions of section 18 of an act of Congress approved August 24, 1912, I appointed a commission—

to conduct an examination into the transportation question in the Territory of Alaska; to examine railroad routes from the seaboard to the coal fields and to the interior and navigable waterways; to secure surveys and other information with respect to railroads, including cost of construction and operation: to obtain information in respect to the coal fields and their proximity to railroad routes; and to make report of the facts to Congress on or before the first day of December, nineteen hundred and twelve, or as soon thereafter as may be practicable, together with their conclusions and recommendations in respect to the best and most available routes for railroads in Alaska which will develop the country and the resources thereof for the use of the people of the United States.

Under the requirements of the act, this commission consisted of—

an officer of the Engineer Corps of the United States Army, a geologist in charge of Alaska surveys, an officer in the Engineer Corps of the United States Navy, and a civil engineer who has had practical experience in railroad construction and has not been connected with any railroad enterprise in said Territory.

The date when the act was passed was late in the summer season, thus allowing a very limited time for the preparation of a report for presentation at the present session of Congress. Nevertheless, within a week after the act was approved the commission had been appointed, as follows: Maj. Jay J. Morrow, Corps of Engineers, United States Army, chairman; Alfred H. Brooks, geologist in charge of Division of Alaskan Mineral Resources, Geological Survey, vice chairman; Civil Engineer Leonard M. Cox, United States Navy. Colin M. Ingersoll, consulting railroad engineer, New York City. This commission has transmitted to me a report, which is herewith submitted to Congress in accordance with the provisions of the act. An examination of this report discloses that the following are among the more important of the findings of the commission:

The Territory of Alaska contains large undeveloped mineral resources, extensive tracts of agricultural and grazing lands, and the climate of a large part of the Territory is favorable to permanent settlement and industrial development. The report contains much specific information and many interesting details with regard to these resources. It finds that they can be developed and utilized only by the construction of railways which shall connect tidewater on the Pacific Ocean with the two great inland waterways, the Yukon and the Kuskokwim Rivers. The resources of the inland region and especially of these great river basins are almost undeveloped because of lack of transportation facilities. The Yukon and Kuskokwim Rivers system include some 5,000 miles of navigable water, but these are open to commerce only about three months in the year. Moreover, the mouths of these two rivers on Bering Sea lie some 2,500 miles from Puget Sound, thus involving a long and circuitous route from the Pacific Coast States. The transportation of freight to the mouths of these rivers and thence upstream will always be so expensive and confined to so limited a season as to forbid any large industrial advancement for the great inland region now entirely dependent on these circuitous avenues of approach.

From these considerations the commission finds that railway connections with open ports on the Pacific are not only justified, but imperative if the fertile regions of inland Alaska and its mineral resources are to be utilized; but that with such railway connections a large region will be opened up to the homesteader, the prospector, and the miner. So far as the limited time available has permitted the commission has investigated, and in its report describes all of the railway routes which have been suggested for reaching the interior, including the ocean terminals of these routes. The relative advantages and disadvantages of these routes are compared. The principal result of this comparison may be stated to be that railroad development in Alaska should proceed first by means of two independent railroad systems, hereafter to be connected and supplemented as may be justified by future development. One of these lines should connect the valley of the Yukon and its tributary, the Tanana, with tidewater; and the other should be devoted to the development and needs of the Kuskokwim and the Susitna.

The best available route for the first railway system is that which leads from Cordova by way of Chitina to Fairbanks; and the best available route for the second is that which leads from Seward around Cook Inlet to the Iditarod. The first should be connected with the Bering coal field and the second with the Matanuska coal field. Other routes and terminals are discussed, but are found not to have the importance or availability for the development of the Territory possessed by the two mentioned. Thus, the route extending inland from Haines, in southeastern Alaska, has value for local development, though chiefly on the Canadian side of the boundary, but the distance to Fairbanks is found to be too great to permit of its being used as a trunk line to the Yukon waters. The route from Iliamna Bay also has value for local use, but is too far to the southwest to permit of its use as a trunk line into the interior. The proposed terminals at Katalla and Controller Bay are found to be very expensive both as to construction and maintenance, besides furnishing very inferior harbors. The route inland from Valdez is at a disadvantage because it would not serve any of the coal fields, although as hereafter noted Valdez is regarded by the commission as an important alternative terminal in the possible future development of the Chitina-Fairbanks route.

The investigations of the commission indicate that the route from Cordova by way of Chitina to Fairbanks would furnish the best trunk line to the Yukon and Tanana waters: (1) Because Cordova has distinct advantages as a harbor; (2) because this route requires the shortest actual amount of construction, but chiefly (3) because the better grades possible on this route should give the lowest freight rates into the Tanana Valley. The Copper River & Northwestern Railroad is now constructed from Cordova to Chitina and thence up the Chitina River. The commission recommends the building of a railway from Chitina to Fairbanks, 313 miles, estimated to cost $13,971,000, with the provision that if this railway is built by other interests than those controlling the Copper River & Northwestern Railroad, and if an equitable traffic arrangement can not be made with it, connection should be made with Valdez by the Thompson Pass route, 101 miles, estimated to cost $6,101,479.

The commission finds that Cordova offers the best present ocean terminal for the Bering River coal. The commission also points out that it would not be economical to haul the Matanuska coal to either Valdez or Cordova, and that therefore the logical outlet for that field is Seward. If commercial development of these two fields should disclose that the quality of the coal is the same in both, the Bering River field would have the advantage of greater proximity to open tidewater. A branch line from the Copper River Railway to the Bering River field, a distance of 38 miles, at an estimated cost of $2,054,000, is recommended to afford an outlet for the coal on Prince William Sound and into the Copper River Valley and the region where there is at present the largest market for Alaska coal.

The commission finds that a railway from Chitina to Fairbanks will not solve the transportation problem of Alaska, because it will not give access to the Matanuska coal field, the fertile lands and mineral wealth of the lower Susitna, or the great Kuskokwim basin. This province properly belongs to an independent railway system based on the harbor at Seward. The commission recommends a railway from Kern Creek, the present inland terminal of the Alaska Northern Railway, to the Susitna River (distance, 115 miles; estimated cost, $5,209,000), with a branch line to the Matanuska coal field (distance, 38 miles; estimated cost, $1,618,000); and an extension of the main line through the Alaska Range to the Kuskokwim River (distance, 229 miles; estimated cost, $12,760,000).

The entire railways thus recommended will constitute two independent systems involving 733 miles of new construction at a cost of $35,000,000. Eventually these systems will be tied together and there will be earlier demands for branch and local lines as the country develops. One of these systems will find an outlet to the coast over the Copper River & Northwestern Railroad; the other over the Alaska Northern. If these new lines are constructed by others than those financially interested in these two railroads respectively, satisfactory traffic arrangements would have to be made with them. If the new railways recommended should be constructed by the Government, the question is necessarily presented as to whether the Government should acquire the whole or any part of the existing lines, or either of them, or should endeavor to make appropriate traffic agreements. Much would depend upon whether the Government would operate its own railroads or would make operating agreements with those operating existing lines. The commission has not discussed these questions for the reason pointed out in its report that the act of Congress omits questions of this sort from those upon which the commission was instructed to report:

The report of the commission contains the following statement:

Its instructions from Congress do not contemplate that any recommendation should be made as to how railroads in Alaska should be constructed, i.e., by private corporate ownership or by one of the many forms in use whereby Government assistance is rendered. The commission disavows any intention of making such recommendations, believing that Congress, in its wisdom, desired to reserve to itself the solution of that problem; but it has been impossible to form any estimates of costs of operation without some assumption as to the interest rate on the capital required for construction. This interest rate would obviously differ in two cases—construction by Government or bond guaranty, and construction by private capital. Moreover, were construction carried on by private capital unassisted, the necessity of earning sufficient income to pay operating expenses and interest on bonded indebtedness might make it the duty of the directors of the corporation to impose rates on traffic that would seriously retard the development which the Territory so greatly needs.

The commission has therefore been forced to base its studies upon two hypotheses, viz.: That the capital necessary for construction is obtained at 6 per cent interest, assumed as possible if construction is carried out by private corporate ownership unassisted; and that capital is obtained at 3 per cent interest, assumed as possible if the construction is done either by the Government itself or by private capital with bonded indebtedness guaranteed both as to principal and interest.

On similar grounds the commission did not feel justified in discussing the use of the Panama Canal machinery and equipment or in including in its estimates the effect of such use; but a list of the machinery and equipment available at Panama is given in an appendix.

Upon the assumption that the railroad from Chitina to Fairbanks is built by private capital, eliminating promotion profit, but assuming the necessity of earning 6 per cent on the capital invested, it is the judgment of the commission that on estimated available traffic the road could be operated from Cordova to Fairbanks without loss at a passenger rate of 7 cents per mile and an average freight rate of 8 cents per ton-mile. This would mean a through freight rate of $36.94 per ton from Cordova to Fairbanks and a through passenger rate of $31.15. It is the opinion of the commission that—

an average freight rate exceeding 5 cents per ton-mile and passenger rate in excess of 6 cents per mile would defeat the immediate object of the railroad, namely, the expeditious development of the interior of Alaska, and, furthermore, would introduce the question as to whether or not the Seattle-Cordova-Fairbanks freight route would be able to compete with the present all-water route via the Yukon River system, except on shipments in which the time element is of such importance as to warrant the payment of a higher freight rate.

To meet the requirements of expeditious development and water competition the estimate of the commission involves a through freight rate from Cordova to Fairbanks at $22.25 per ton, and a through passenger rate of $26.70. The report further says:

Were the road to be constructed by the Government, or by private corporate ownership with a Government guaranty of principal and interest on bonded indebtedness, the capital required should be obtained at a much lower rate of interest, thus materially reducing the annual expenditures.

Using 3 per cent on the investment as fixed charges, and omitting mileage tax of $100, on the assumption that this tax would not be levied in the case of a Government owned or aided road, the commission estimates that the road would pay on the basis of a passenger rate of 6 cents per mile, and a freight rate of 5.49 cents per ton-mile, making the average through freight rate from Cordova to Fairbanks $24.43 per ton and the through passenger rate $26.70. I give these figures as illustrations. The report contains similar estimates of freight and passenger rates and traffic for the road recommended from Seward to the Kuskokwim.

After recommending the construction of the two principal systems and their extensions already mentioned, the commission states, in conclusion that it—

is unanimously of the opinion that this development should be undertaken at once, and prosecuted with vigor; that it can not be accomplished without providing the railroads herein recommended under some system which will insure low transportation charges and the consequent rapid settlement of this new land and the utilization of its great resources.

The necessary inference from the entire report is that in the judgment of the commission its recommendations can certainly be carried out only if the Government builds or guarantees the construction costs of the railroads recommended. If the Government is to guarantee the principal and interest of the construction bonds, it seems clear that it should own the roads, the cost of which it really pays. This is true whether the Government itself should operate the roads or should provide for their operation by lease or operating agreement. I am very much opposed to Government operation, but I believe that Government ownership with private operation under lease is the proper solution of the difficulties here presented.

I urge the prompt and earnest consideration of this report and its recommendations.

WM. H. TAFT.

The White House, February 6, 1913.