242 about how much North Slope oil will be shipped through the Canal, each case was calculated first with the current estimate of potential North Slope oil shipments through the Canal and then again with a 75 percent reduction of that estimate after 1980. All estimates include current Panama Canal Company estimates of operating costs. It is important to note that none of the figures shown below include the $10 imillion annual contingent payment to Panama, the $20 million annual interest payment to the U.S. Treasury, possible recovery of U.S. capital investment in the Canal or other costs described in other sections of this study. If these costs were included in the figures shown below, they would add to the potential losses: ILLUSTRATIONS OF POTFNTIAL PANAMA CANAL OPERATING DEFICITS (CUMULATIVE THROUGH 1999 A.D.ASSUMING 6 PERCENT ANNUAL INFLATION) [in billions] 75-percent With full loss of North North Slope Slope oil oil after 1980 If tolls are not increased above current rates (loss) ----------------- 35 35 If tolls are raised only 75 percent (the total currently available increase estimated to $.7$.5 produce maximum revenue was 75 to 100 percent) (loss)-------------------------- $10. 99 $1. 16 Cumulative toll increase needed to fully offset deficits (assuming no toll-caused traffic loss after 1st 20-percent toll increase) (percent)-------------------------------- +149 +1E8 Who pays for toll increasesF It is well to keep in mind that toll increases over the life of the Treaties wil mean additional costs to be paid by shippers and consumers around the world. How large will such a burden be? In relative terms, as Mr. Staats pointed out in testimony, not large. But the amounts are still substantial in dollar terms. Using figures provided by the Panama Canal Company, and assuming G%1 inflation, substantial North Slope oil traffic after 1980, and no surplus or interest payment, the additional toll revenue the Canal would have to bring in during the life of the treaty (assuming now that tolls could be raised by these levels) would, be $3.57 billion. If tolls could be increased that much, the Company estimates that approximately one-third of this increased charge would be borne by U.S. shippers and consumers in the form of higher costs. That amounts to an additional cost of $1.2 billion. ESTIMATED VALUE OF ASSETS TRANSFERRED TO PANAMA One aspect of the costs of the Treaties is the value of the property given to Panama over the life of the treaty. The testimony and other information provided by the executive branch indicates two types of estimates of this value. Governor Parfitt, Mr. Staats and the Defense Department put the net book value of all assets in the Canal Zone at $920 million. Mr. Staats suggested that the Congress consider whether some of the book value of these assets shold be recovered through accelerated depreciation charges against Canal operations over the life of the treaty. The witnesses also presented estimates of the current value or replacement cost of the assets in the Canal Zone-though it is not a very precise figure. The State Department's composite estimate of replacement value is $9.8 billion, including the Canal itself, the Company, and military assets. POTENTIAL COST TO U.S. FOR ITEMS NOT COVERED BY TOLLS A second aspect of the cost of the treaties is the total cost to be paid directly by the U.S. as a result of the treaty and over the life of the treaty. These items are not now costs of the Panama Canal Commission, and therefore would not be recovered through higher tolls. Any effort to recover them through higher tolls would, of course, increase the estimates of deficits outlined in the first section of this study. 1. Military Plant Relocation Cost-General McAuliffe -testified that the various transfers and changes in facilities necessitated by the Treaties would involve substantial costs for relocating military unit-, and building new quarters as needed. He estimated these costs at $43 million.