not only to tankers, but to all vessels-passenger, dry cargo, bulk carriers, tramp, as well as tankers.

If it did not, we would have failed in our intent. But let me say this: that Mr. Miller testified, and I quote:

With regard to dry cargo vessels, the estimated costing purposes, one could assume that the cost would be 25 percent of the above rates.

So that although it applies to all vessels, the cost of insurance is going to vary, depending upon the kind of vessel that is involved.

Mr. REYNOLDS. That is quite correct, Mr. Chairman, and this is what has prompted our support of legislation which would call for a $100 a ton and $10 million limit. Indeed, I would hope that as time went on, the experience with the dry cargo vessels, the freighters, and the bulk carriers, and so forth, that do not carry petroleum, would be so advantageous, possibly, that that rate would drop still further, but we cannot be sure, and certainly if absolute liability is going to apply, then I would assume that if there is an incident at sea in which a dry cargo vessel collides with a tanker, and the fault is established under admiralty law as being that of the private dry cargo vessel, that the tanker is going to try to recover some of that cost of the cleaning up the oil spill from the dry cargo vessel.

Senator MUSKIE. The other point I would want to make is this: You discussed the question of absolute liability as involving only innocent shipowners as against the Government. Well, if we were convinced of that, we would not be concerned, but we are concerned about the damage attributable to a negligent shipowner whose negligence cannot be proven. Now, I take it you think that in those instances the Government ought to bear the burden.

Mr. REYNOLDS. Well, I would think with the burden of proof on the vessel owner and operator to maintain the case that he was not at fault, and that he was not negligent, that you are pretty well along the road to

Senator MUSKIE. But there must be a difference, or you would not be insisting on it.

Mr. REYNOLDS. Yes, indeed. I think the difference can be drawn from the analogy that you suggested earlier, as to automobile insurance, when you speak in terms of the deductible, but there is no absolute liability in automobile insurance. There is also proven negligence or fault on the part of one party or another.

Senator MUSKIE. I implied the analogy not with respect to that problem.

Mr. REYNOLDS. I know you did not.

Senator MUSKIE. But with respect to bearing the cost.

Mr. REYNOLDS. Yes.

Costs double with absolute liability

I cannot give the answer to that, Mr. Chairman. I don't know why the cost should be double for less insurance when there is absolute liability.

Senator MUSKIE. But you see, this is the only thing that troubles us. We are not interested in a test of absolute liability as against negligence and a reversible burden of proof, except that we are concerned

about damage attributable to negligence which cannot be proven, and we are concerned that proof of negligence in this kind of thing is a very difficult matter.

Mr. REYNOLDS. Yes.

Senator MUSKIE. Or could be, because the facts that bear upon the question of negligence are peculiarly within the possession of the agents or the instruments owned by the alleged tort feasor.

Mr. REYNOLDS. I think it brings into the whole field of admiralty law, and the way of the sea, a new concept, which would have most dangerous implications.

As I suggested before, I think it would encourage the view that there should be absolute liability for everything that happens at sea.

Senator MUSKIE. That is to suggest that we have no capacity for making distinctions. We are talking here about oil spills, and this is a new kind of danger, a new kind of risk, far different than other kinds of risks. I think we are capable of making the distinction.

But in any case, I think this point has been covered enough now. I only wanted to emphasize again, without belaboring it, that the only reason we are considering absolute liability, if it is a feasible concept, is this whole question of the proof.

If we were satisfied that the loophole that might be left was not big enough to be of consequence, we would have no difficulty buying your position.

Mr. REYNOLDS. Mr. Chairman, I have the utmost respect for the problem you people have before you. You have an awesome responsibility, here, in this area, to determine whether you are going to absolute liability in this field.

From the point of view of the U.S. shipowner, I would urge that not be done. I think that to impose the burden of proof on him, that he was not at fault, or not negligent, would, with a maximum of $10 million of insurance be something we should try.

Possibly, if we do have a major oil spill in the next few years, under such a statutory scheme, we would find out whether or not absolute liability would have to be engrafted into the statute at that time. I don't think so.

TOVALOP

I think you would find that under the TOVALOP scheme, and the whole concept of public consciousness which has come into being since the Torrey Canyon and other incidents, in the work of this committee, you will find the shipowners meeting their responsibilities.

Senator MUSKIE. Well, let me ask you this: You confess that you are as puzzled as I that the cost of absolute liability should be so much greater than for negligent liability.

Mr. REYNOLds. Yes.

Senator MUSKIE. Then you accept the proposition, apparently, that experience in the cost of oil spills is such that those costs in excess of the limits which we have been discussing and which TOVALOP sets would be negligible.

If that is so, why does not TOVALOP go the whole way, as suggested by Senator Baker's questions? Why does it not go the whole way and put together the resources necessary to cover those relatively

rare instances in which the costs might exceed the $10 million, or the $100 per ton?

Go the whole way and cover those instances in which negligence cannot be proven, but in which, nevertheless, there is a cost of premium. Why does not TOVALOP do that?

It may be burdensome for the American shipping industry to pay insurance premiums, but if the risks are this minimal-that is, if the risks of the excess are this minimal-why does not TOVALOP go the whole way?

Mr. REYNOLDS. Well, without the slightest suggestion of disrespect, sir, I think that question should be addressed to Mr. Checket. He is deeply involved in TOVALOP. I am not.

Senator MUSKIE. I was hoping my addressing it to you that you could encourage Mr. Checket to take a more favorable view of the possibilities.

Mr. REYNOLDS. We represent 539 ships, but only 142 of them are tankers.

I think Mr. Casey would add something.

Mr. CASEY. I just had in mind that I was impressed by the answer that Mr. Miller tried to give to this general subject, as to the question of the distinction between absolute liability and liability with a presumption of negligence, and the only answer that he gave-I think he gave it twice-was that the underwriters view with absolute horror the doctrine of absolute liability, which I am sure was not a convincing answer to the committee, but nevertheless the shipowners are faced with the fact that the underwriters view this concept with absolute horror, and of course you must, even if there was

Senator MUSKIE. It was the first time that I had ever heard a sug gestion that insurance rates are based upon the subjective factor of horror.

Mr. CASEY. Well, that is the only answer that he gave to the question that you asked him.

Senator MUSKIE. Yes, I agree with you.

Mr. CASEY. Of course, we do want to point out, however, that we feel that the committee should confine itself to those limits which are insurable, and if you do so, you must choose between a limit of $5 million and a limit of $10 million, with the idea that you have not yet tried the reversal of the burden of proof as an effective means of subjecting to shipowners to clean up their spills.

Senator MUSKIE. Senator Randolph.

Senator RANDOLPH. No questions.

Senator MUSKIE. Well, I guess we have come to the end of this road. Mr. Checket, how long do you think it will take to get the answers to Senator Baker's questions?

Mr. CHECKET. Oh, we can have those responses within a matter

Senator MUSKIE. Say by June 10?

Mr. CHECKET. Oh, yes, sir; easily.

Senator MUSKIE. All right. We would like to get on with this.

Thank you very much, gentlemen.

Mr. REYNOLDS. Thank you very much, Mr. Chairman.
(Whereupon, at 1:05 p.m., the subcommittee adjourned.)

(Subsequent to the hearings the following statements were received and ordered to be included in the record:)

STATEMENTS OF SENATOR GAYLORD NELSON, AND GOVERNOR WARREN KNOWLES, STATE OF WISCONSIN

U.S. SENATE,

Washington, D.C., May 5, 1969.

Hon. JENNINGS RANDOLPH,

Chairman,

Senate Public Works Committee,
Washington, D.C.

DEAR MR. CHAIRMAN: Governor Knowles of Wisconsin has written me regarding the pending legislation (S. 7, S. 544) to amend the Federal Water Pollution Control Act. I enclose the governor's comments and suggestions here for the consideration of the Public Works Committee during its markup of the legislation. Additionally, Governor Knowles points out in his letter that although the Federal act as it is now on the books provides for up to 50 per cent Federal assistance in certain individual projects if the state provides matching funds, this Federal incentive is, in effect, voided for Wisconsin.

What Wisconsin does instead is distribute the very limited Federal monies ($4 million to the state this year) under the standard 30 per cent formula, and provide state funds to match. That $4 million would be used up on a very few projects if Wisconsin distributed it where possible on the 50 per cent basis, and many more projects than is now the case would be left waiting for assistance.

Also, though the act provides the incentive provision for individual projects, the basic formula for allotment of Federal sewage treatment plant construction monies to the states does not in any way recognize a state matching aid program. Thus, Wisconsin's overall Federal allotment is not increased at all because of the commitment in funds the state itself has made.

I share Governor Knowles' concern about present ineffectiveness of the incentive provision and the lack of Federal recognition in the basic allotment formula of state efforts.

Just recently, Wisconsin voters again made clear their commitment to clean water by voting their approval in an advisory referendum of a proposed $200 million state bonding program, $144 million of which would go to water pollution control.

I believe it is important as well that steps be taken to meet and improve the Federal commitment to the critical problem of water pollution control.

I am sure this is not just a Wisconsin concern. I understand that at least 15 other states have committed matching funds for sewage treatment plant construction. Probably they face similar difficulties in trying to use the incentive provision, and of course, they also do not receive any increase in the overall Federal allotment because of their efforts.

The solution, especially in the present situation where Federal funds are not sufficient to make the 50 per cent incentive provision meaningful, could be a change in the basic allotment formula to the states. A two-thirds increase in Wisconsin's share-which, for instance, would have raised Federal aid to the state this year from $4 million to $6.6 million-would mean that the state could authorize up to the 50 per cent Federal share for appropriate projects. In addition, the whole Wisconsin pollution control effort would be speeded up.

I suggest adding such a provision to the Federal Water Pollution Control Act by adding a subsection (3) to Section 8(c) which would read as follows: "For those states that have acted to qualify communities for increased grants as provided in Section 8(b) (7) of this act, the allotment shall be increased by 66.66 per cent." I intend to introduce legislation to this effect.

The reasoning would be similar to a number of tax sharing proposals presently before Congress in which recognition is given to states which have levied higher rates of taxation under their authorities.

I understand that the chances are good that in the near future the Senate Public Works Committee and the Federal Water Pollution Control Administration will devote special attention to the whole area of construction grant financing. I would like to request that when the committee reviews this area, it consider such an amendment to the financing formula.

The ultimate solution, of course, is going to have to involve a great deal more Federal funding than is presently going to the states for pollution control.

Sincerely yours,

GAYLORD NELSON, U.S. Senator.
THE STATE OF WISCONSIN,
Madison, April 3, 1969.

Hon. GAYLORD NELSON,
Senate Office Building,
Washington, D.C.

DEAR SENATOR NELSON: I am enclosing comments on amendments to the Federal Water Pollution Control Act and urge that you give serious consideration to the recommendations made with reference to the maintenance of state authority and its support through federal legislation.

Your attention is particularly called to the recommendation for amendment of the formula for distribution of construction grant allotments to states so that states participating in construction grants will not have their pollution abatement programs slowed down because current federal allotment will limit and in effect reduce the number of project starts in participating states. Sincerely,

WARREN P. KNOWLES, Governor.

[Enclosure]

COMMENTS ON AMENDMENTS TO FEDERAL WATER POLLUTION CONTROL ACT

Bills S. 7, S. 544 and H.R. 2184 all propose amendments to the Federal Water Pollution Control Act and cover basically the same subjects.

Control of sewage from vessels.-Included in all three bills in about the same form are provisions for adoption of Federal Standards and Regulations applying to nearly all vessels operating on navigable waters of the United States and cover marine sanitation devices.

H.R. 2184 would eliminate all State controls.

S. 7 would allow States with present regulations to continue to enforce same; provided State regulation is not in conflict with Federal regulations or standards. S. 544 would permit States to prohibit discharges of sewage (treated or otherwise) to the waters of such State.

Problems could be created by the fact that the Federal government does not take over the jurisdiction over existing vessels for up to five years. States taking jurisdiction may encounter legal conflicts.

We would recommend that Federal regulation be limited to vessels engaged in interstate and international commerce.

Control of oil discharges.-All three bills prohibit the discharge of oil from all vessels on navigable waters of the United States and adjoining shorelines. S-7 and S-544, in addition, include provision for control of discharge of oil and other matter from any source as well as vessels.

Since "matter" is defined to include industrial waste, the word "matter" should be deleted from this section of the bill as industrial wastes are well covered in other sections of the water pollution control act.

It is recommended that the Federal effort to control and reduce oil pollution be in addition to what is now being done by the States.

Acids and other mine water pollution control demonstrations.-All three bills contain provisions for area acid and other mine water pollution control demontrations. All provide that individual projects be jointly financed by States and Federal government. All contain authorization for appropriation of funds.

Though we approve research, we must observe that the Federal government has been woefully short on appropriation of money to meet construction grant authorizations. Low appropriations for construction are drastically curtailing State efforts to abate pollution which we already know how to remove. Appropriations for financing treatment works should not be sacrificed to finance research.

Construction grant financing.-The basic act and the proposed amendment for alternate financing are still based on the old formula for distribution of allotments to States. As a result, those States which provide State assistance to qualify their projects for FWPCA grants of up to 50 percent of the cost of the project will have their pollution control programs slowed down by 40 percent.