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mission. Presently I am engaged in the general practice of law in Detroit, Mich.

From January 1951 to May 1954 I was a member of the Michigan Public Service Commission which under Michigan law regulates the rates and service of all public utilities in the State and during my tenure I served as chairman of the subcommittee on uniform regulation of motor carriers of the National Association of Railroad and Utilities Commissioners.

I appear here today as counsel to present the views of Michigan Consolidated Gas Co. with respect to the proposal that the cost of relocating public utility facilities occasioned by Federal-aid highway projects be considered a part of the cost of the highway project and the law amended so as to relieve the utility user of the burden of such

cost.

Th present law has now been expanded to include the concept that the cost of relocating railroad facilities involved in Federal-aid railroad grade crossing elimination projects is a proper cost of highway construction. Section 5 (a) of the 1944 act-58 Statutes 842, chapter 626-provided:

That the entire construction cost of projects for the elimination of hazards of railway-highway crossings, including the separation or protection of grades at crossings, the reconstruction of existing railroad grade crossings structures, and the relocation of highways to eliminate grade crossings may be paid from Federal funds

Senator CASE. Mr. Chairman, might I interrupt?

Senator MCNAMARA. Yes.

Senator CASE. The language that you have cited of course almost makes the case for the law. The elimination of grade crossings was for the purpose of highway safety. The language you have cited really makes the argument on which that was based at that time. It is the elimination of grade crossings which was the elimination of a highway hazard. It wasn't done as a matter of convenience to the railroads.

I think in actual practice I believe the Bureau generally expects the railroad to contribute 10 percent of the cost even so. I think that is the way the law has been administered. There was a grade crossing elimination program that was inaugurated at the time that this law was passed. In fact, a special appropriation was authorized to take care of it and it was put on as a safety program.

The practice has been continued even though there is no longer any specific appropriation for it. That is my understanding of it.

Senator HRUSKA. Is it your thought, Senator, that the existence of the railroad on the surface would make that situation different from the necessity of relocating a pipeline or a cable underneath the surface for the building of a road which likewise results in greater safety for

the motorists?

Senator CASE. I think it was primarily the thought, at that time, that we had a lot of accidents at railroad crossings, and if you were building a modern highway you wanted to eliminate those surface crossings.

Senator HRUSKA. Surely if a road is not sufficiently wide now, in the interest of building a road which is safe, the road is widened, necessitating the relocation of utilities, you are also imparting a

factor of safety which wasn't there before. Yet you visit upon the utility which is underneath the ground the same necessity to change its course as was visited upon the railroad to change the surface of its installation.

I cannot quite see the difference in that situation.

Senator CASE. I think that historically we had this grade crossing separation primarily as a safety matter. As I said earlier, the law says now that if the State says this is the cost of the project, the Federal Government stands ready to pay its 50 percent of the cost. I have no objection to your presenting the case as strongly as you want, and we did go through this under the last two highway acts.

I remember sitting through the hearings where there was extensive presentation. I personally felt there was enough merit to it to say that I thought the Federal Government should go this much further, that we will allow up to 3 percent of the total cost for this purpose. That was presented in the committee and I argued in the executive hearings last year on it, and was not able to persuade more than one or two to say even that. They said that the real remedy was with the State legislatures because any State today can correct the situation if it feels there is merit.

Today if Nebraska, Michigan, South Dakota, Florida, or any other State says this is a proper part of the cost of construction, the Federal Government shares the cost and pays its part of it.

Mr. VEALE. I think your statement about the practice with respect to railroads is substantially correct. However, I think we should note that no hazard is occasioned by the railroad occupying the highway right-of-way, and yet the railroad is compensated for the elimination of that hazard. In the balance of my statement I will touch on some of the other matters that you have raised, Senator. Senator MCNAMARA. Without objection, you may proceed with your statement.

Are you satisfied?

Senator CASE. Go ahead.

Mr. VEALE. The existing law, however, has not yet progressed to a point of recognizing that the cost of relocating utility facilities is properly a construction cost when such relocation is required as a result of the Federal-aid highway program.

The various presently effective Federal-aid highway acts contain no provisions with respect to the payment of relocation costs of nonrailroad utilities. Section 1.10 (J) of the regulations issued by the Bureau of Public Roads pursuant to the Federal-Aid Road Act, provides with respect to utility facilities occupying a public right-of

way:

The State highway department shall make a formal finding as to the extent that such utility is required to move, adjust, or change its facilities at its own expense, or is relieved of that obligation by law or otherwise. The Commissioner will determine in all such cases whether reimbursement from Federal funds may be made

General Administrative Memorandum No. 300 of the Bureau of Public Roads, dated May 1, 1946, provides in section IIIB:

If the State should determine in conformity herewith that a utility company is not under obligation, and may not be required to move or to change its facilities at its own expense, reimbursement may be made.

Reimbursement of nonrailroad utilities for the cost of relocating facilities is thus conditioned upon a requirement that they cannot be compelled to move at their own expense. On the other hand, a different rule has been adopted with respect to railroads which are reimbursed even though State laws require them to bear all or a portion of the costs of relocating their facilities. Section 1.14 (b) of the regulations adopted by the Bureau of Public Roads provides that:

State laws pursuant to which contributions are imposed upon railroads for the elimination of hazards at railway-highway crossings shall be held not to apply to Federal-aid projects.

Reimbursement for railroads was supported upon the theory that if the expense had to be borne by the railroad it would be passed on to the public as a part of the charge for rail service. (See testimony of Hon. Thomas H. MacDonald, Commissioner of Public Roads, before the Committee on Roads, House of Representatives, 78th Cong., 2d sess., on H. R. 2426, vol. 2, 968.) The same reasoning is applicable to the imposition of such an expense on a nonrailroad utility because their rates are likewise based upon costs of service.

The report of the Secretary of Commerce, submitted pursuant to section 11 of the Federal-Aid Highway Act of 1954, contains in appendixes D and E an excellent and exhaustive recitation of State law relating to public-utility relocation necessitated by highway construction. There is no quarrel with the fact that the law, developed in the States, followed the general principle that public utilities could be compelled, through the exercise of the State police power, to relocate facilities at their own expense. In fact, it is the ever-growing exercise of this local police power by the States to expand the National Highway System which gives rise to the problem by imposing a continually expanding burden upon local utility users.

The statement therefore of what the State law is does not determine what the Federal law should be. As above indicated, Congress and the Bureau of Public Roads have discarded principles of State law as a basis for determining compensation for railroad relocations required by Federal-aid highway construction. The same changed circumstances and reasoning which led to this changed philosophy with respect to railroads are applicable to nonrailroad utilities.

In analyzing this problem we should note that the use by public utilities of highways for the purpose of locating their facilities antedates the passage of the Federal-aid highway bill of 1916. The right to use such public highways was granted at an early date by the States either in their constitutions or statutes, generally dependent upon the consent of local municipalities involved. Such use was not permitted on any legal theory of subsidizing the utility but rather as governmental action encouraging the general welfare. As stated by one

court:

The dedication of property for the purpose of a highway carries the right to public travel and also the use for all present and future agencies commonly adopted by public authority for the benefit of the people, such as sewer, water, gas, lighting, and telephone systems (Grosse Pointe Shores v. Ayres, 254 Mich. 58).

At the initiation then of the Federal-aid highway program use of public highways for the location of utility facilities had become legally

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accepted as a matter of right to be exercised for the benefit of the general public.

In this connection I think it is important to note that the law in this matter simply reflects the facts. Highways today no longer serve exclusively for vehicular travel as they did in the period when the common law set forth in appendixes D and E of the Secretary's report was developing. The right-of-way now also serves as a means of reaching the public with utility services such as gas, water, electricity, telephone and sewage without which modern communities could not exist.

In most areas of the United States it would be impossible, or financially prohibitive, to provide the public these essential services without the use of public rights-of-way. As a result utilities have been invited by legislative enactments to locate their facilities in public rights-of-way in order to stimulate community development. Any other policy, requiring acquisition of private rights-of-way, would have increased the cost of utility services-without decreasing the cost of highway construction-and thereby retarded community and industrial development.

Having so located their facilities at the invitation of the public, for the benefit of the public, the rational rule should be that where relocation is required account of vehicle use it be considered a cost of highway construction; and that where it is required account of utility use it be borne by the utility user.

A review of highway aid legislation indicates that in its initial efforts in the roadbuilding field the Federal Government experienced no difficulty in classifying those activities which were a part of the construction of the highway. The original act provided-39 Statutes 355, chapter 241, July 11, 1916, section 2:

The term "construction" shall be construed to include reconstruction and improvement of roads.

A broader meaning was given the term "construction" in the Federal Highway Act of 1921-42 Statutes, 212, chapter 119:

The term "construction" means the supervising, inspecting, actual building, and all expenses incidental to the construction of a highway, except locating, surveying, mapping, and costs of rights-of-way,

Rights-of-way were included as a cost of construction in 1943-57 Statutes 560, chapter 236:

The term "construction" means the supervising, inspecting, actual building, and all expenses, including the costs of rights-of-way, incidental to the construction of a highway, excepting locating, surveying, and mapping.

The activities included within the term "construction" were again expanded in the Federal-Aid Highway Act of 1944-58 Statutes, 942, chapter 626:

When used in this Act, unless the context indicates otherwise, the term "construction" means the supervising, inspecting, actual building, and all expenses, incidental to the construction or reconstruction of a highway, including locating. surveying, and mapping, costs of rights-of-way, hazards of railway-grade crossings.

From this legislative history it clearly appears that the concept of activities properly includible within the costs of constructing a high

way has expanded to reflect the greater physical complexity of highway construction. I am certain that when you gentlemen have reexamined the problem in the light of the present character of road building, you will agree that the legal definition given the term "construction" costs requires further expansion.

The Federal Government's first efforts in the field of roadbuilding were intended, according to the 1916 act, to aid States in the construction of "rural post roads." It is clear that the act contemplated the construction of highways in more or less virgin areas where there were no existing utility facilities. Under such circumstances, the relocation of utility facilities need not be considered a construction cost because no such relocation was necessary in order to construct the highways contemplated by the act. Accordingly the original definition given the term "construction" was in accord with the facts and entirely proper.

As the areas of the United States, however, came to be linked together by our present network of highways, the proportion of pioneer construction declined and the proportion of construction devoted to reconstructing existing highways increased. Much of today's expenditures, and the great bulk of future expenditures, will be for construction designed to improve and modernize existing highways. Present single-lane highways will be divided into double lanes, existing intersections will be separated with overpasses and underpasses, other intersections will be reconstructed as cloverleafs, grades will be altered and curves will be straightened to accommodate the high speeds of present and future automotive travel.

All such construction has one thing in common. It amounts to an alteration of an existing highway which in the great majority of instances is occupied by existing utility facilities. This presents an entirely different picture from the factual standpoint which pertained at the adoption of the Federal-aid highway program in 1916. Presentday highway construction will require greatly widened rights-of-way and extensive removal and relocation of existing utility facilities. Such removals and relocations result not from any operational requirement for providing utility service but by virtue of the character of present-day highway design which is required to accommodate the volume, speed, and characteristics of present and future vehicular traffic.

As such highway construction progresses increased relocation costs will inevitably lead to increased rates to utility users. It is an established principle in utility regulation that rates to the user of the service must include an allowance for operating costs. Any increase in operating costs therefor experienced by the utility will ultimately be reflected in rates charged the users of the service.

Utility management today is deeply concerned with continually increasing operating costs and the necessity of continually seeking rate relief from the various State commissions. The management of Michigan Consolidated Gas Co. feels that it has a duty to its rate payers to point out to you gentlemen the character of the operating expense which must be borne by such rate payers, that is, facility

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