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+
+ - ENERGY AND WATER DEVELOPMENT APPROPRIATIONS FOR 1998
+
+[House Hearing, 105 Congress]
+[From the U.S. Government Publishing Office]
+
+
+
+
+ ENERGY AND WATER DEVELOPMENT
+ APPROPRIATIONS FOR 1998
+
+========================================================================
+
+ HEARINGS
+
+ BEFORE A
+
+ SUBCOMMITTEE OF THE
+
+ COMMITTEE ON APPROPRIATIONS
+
+ HOUSE OF REPRESENTATIVES
+
+ ONE HUNDRED FIFTH CONGRESS
+
+ FIRST SESSION
+ ________
+
+ SUBCOMMITTEE ON ENERGY AND WATER DEVELOPMENT
+
+ JOSEPH M. McDADE, Pennsylvania, Chairman
+
+ HAROLD ROGERS, Kentucky VIC FAZIO, California
+ JOE KNOLLENBERG, Michigan PETER J. VISCLOSKY, Indiana
+ RODNEY P. FRELINGHUYSEN, New Jersey CHET EDWARDS, Texas
+ MIKE PARKER, Mississippi ED PASTOR, Arizona
+ SONNY CALLAHAN, Alabama
+ JAY DICKEY, Arkansas
+
+ NOTE: Under Committee Rules, Mr. Livingston, as Chairman of the Full
+Committee, and Mr. Obey, as Ranking Minority Member of the Full
+Committee, are authorized to sit as Members of all Subcommittees.
+
+ James D. Ogsbury, Bob Schmidt, Jeanne Wilson, and Donald M. McKinnon,
+ Staff Assistants
+ ________
+
+ PART 3
+ Page
+ Bureau of Reclamation............................................ 1
+ Testimony of the Secretary of the Interior....................... 1
+ Tennessee Valley Authority....................................... 607
+ Appalachian Regional Commission.................................. 835
+
+
+
+ ________
+
+ Printed for the use of the Committee on Appropriations
+ ________
+
+ U.S. GOVERNMENT PRINTING OFFICE
+ 39-555 O WASHINGTON : 1997
+
+------------------------------------------------------------------------
+
+ For sale by the U.S. Government Printing Office
+ Superintendent of Documents, Congressional Sales Office,
+ Washington, DC 20402
+
+
+
+ COMMITTEE ON APPROPRIATIONS
+
+ BOB LIVINGSTON, Louisiana, Chairman
+
+JOSEPH M. McDADE, Pennsylvania DAVID R. OBEY, Wisconsin
+C. W. BILL YOUNG, Florida SIDNEY R. YATES, Illinois
+RALPH REGULA, Ohio LOUIS STOKES, Ohio
+JERRY LEWIS, California JOHN P. MURTHA, Pennsylvania
+JOHN EDWARD PORTER, Illinois NORMAN D. DICKS, Washington
+HAROLD ROGERS, Kentucky MARTIN OLAV SABO, Minnesota
+JOE SKEEN, New Mexico JULIAN C. DIXON, California
+FRANK R. WOLF, Virginia VIC FAZIO, California
+TOM DeLAY, Texas W. G. (BILL) HEFNER, North Carolina
+JIM KOLBE, Arizona STENY H. HOYER, Maryland
+RON PACKARD, California ALAN B. MOLLOHAN, West Virginia
+SONNY CALLAHAN, Alabama MARCY KAPTUR, Ohio
+JAMES T. WALSH, New York DAVID E. SKAGGS, Colorado
+CHARLES H. TAYLOR, North Carolina NANCY PELOSI, California
+DAVID L. HOBSON, Ohio PETER J. VISCLOSKY, Indiana
+ERNEST J. ISTOOK, Jr., Oklahoma THOMAS M. FOGLIETTA, Pennsylvania
+HENRY BONILLA, Texas ESTEBAN EDWARD TORRES, California
+JOE KNOLLENBERG, Michigan NITA M. LOWEY, New York
+DAN MILLER, Florida JOSE E. SERRANO, New York
+JAY DICKEY, Arkansas ROSA L. DeLAURO, Connecticut
+JACK KINGSTON, Georgia JAMES P. MORAN, Virginia
+MIKE PARKER, Mississippi JOHN W. OLVER, Massachusetts
+RODNEY P. FRELINGHUYSEN, New Jersey ED PASTOR, Arizona
+ROGER F. WICKER, Mississippi CARRIE P. MEEK, Florida
+MICHAEL P. FORBES, New York DAVID E. PRICE, North Carolina
+GEORGE R. NETHERCUTT, Jr., Washington CHET EDWARDS, Texas
+MARK W. NEUMANN, Wisconsin
+RANDY ``DUKE'' CUNNINGHAM, California
+TODD TIAHRT, Kansas
+ZACH WAMP, Tennessee
+TOM LATHAM, Iowa
+ANNE M. NORTHUP, Kentucky
+ROBERT B. ADERHOLT, Alabama
+
+ James W. Dyer, Clerk and Staff Director
+
+
+
+
+
+
+
+ ENERGY AND WATER DEVELOPMENT APPROPRIATIONS FOR 1998
+
+ ----------
+
+ Wednesday, March 5, 1997.
+
+ DEPARTMENT OF THE INTERIOR
+
+ BUREAU OF RECLAMATION
+
+ WITNESSES
+
+HON. BRUCE BABBITT, SECRETARY, DEPARTMENT OF THE INTERIOR
+PATRICIA J. BENEKE, ASSISTANT SECRETARY FOR WATER AND SCIENCE,
+ DEPARTMENT OF THE INTERIOR
+ELUID L. MARTINEZ, COMMISSIONER, BUREAU OF RECLAMATION
+MARY ANN LAWLER, DIRECTOR OF BUDGET, DEPARTMENT OF THE INTERIOR
+
+ Mr. McDade's Opening Remarks
+
+ Mr. McDade. The meeting will come to order.
+ We are very pleased this morning to have Secretary of the
+Interior Bruce Babbitt with us, accompanied by some folks from
+his agency; and, of course, Commissioner Martinez, we are
+delighted to have you here representing the Bureau's
+activities.
+ May I suggest to you, Mr. Secretary, that, as usual, you
+file your detailed statement with the committee; and we will
+assiduously study it. And if you can informalize your remarks
+and proceed in an informal fashion, we would appreciate it.
+
+ Secretary Babbitt's Opening Remarks
+
+ Secretary Babbitt. Mr. Chairman, I will do just that.
+ It is a pleasure to be back and to testify before this
+subcommittee under your chairmanship.
+ I have been coming before this subcommittee in various
+capacities for nearly 20 years now, and I have learned a number
+of things. One is that this committee expects the Secretary of
+the Interior to be brief and succinct and then to pass the
+testimonial burden on to the people who really know what is
+going on. I do that with great confidence today because Patty
+Beneke, the Assistant Secretary for Water and Science, is here
+to my left and Eluid Martinez, who has done a truly outstanding
+job at the Bureau of Reclamation, is to her immediate left. I
+am absolutely confident of their capacity to carry the burden
+of explaining what we are doing.
+ I also have a number of other Bureau of Reclamation people
+here today, including Mr. Keys, the Regional Director from the
+Pacific Northwest; and Roger Patterson, the Regional Director
+from California.
+ The Bureau is doing an outstanding job. I just would point
+to one example. The recent floods in the West absolutely
+devastated the Central Valley of California and parts of Oregon
+and Washington as well. I think everyone in California took
+note of the way in which the Bureau of Reclamation responded by
+operating the water system in the Central Valley to minimize
+flood damage and to protect the levees, the urban areas and the
+farmlands. They really performed in magnificent fashion.
+ Mr. Chairman, the Bureau continues along a track of
+reinventing itself in accordance with the demands of the times.
+It is a smaller bureau. We have reduced the staff of this
+organization by 20 percent over the last 4 years. At the same
+time, the Bureau is gradually evolving from a construction
+company to a water management organization charged with
+managing these enormous river basin systems that have been
+built over the last 50 years. You will see that reflected in
+the budget.
+ There is emphasis on the management and the reuse of water.
+There is significant emphasis on dam safety. That reflects the
+fact that much of our infrastructure is now a half-century old
+and more, and it is critically important to maintain the
+highest levels of technical and safety standards out in these
+basins.
+ There is a great deal going on in the Colorado River basin
+that I will flag for the attention of the committee. We have
+had negotiations under way now in all seven basin States in the
+Colorado River system, attempting to move toward more reuse of
+water; toward transferring through voluntary market transfers
+water from agricultural to urban uses in southern California;
+and to settle a series of issues between Arizona and Nevada. I
+think we are making outstanding progress.
+ Mr. Keys is here from the Pacific Northwest, where the
+Bureau is a major participant in the ongoing reconfiguration of
+the Columbia River system.
+ Ms. Beneke has been the lead player in an ongoing set of
+interstate negotiations on the Platte River basin involving
+Colorado and Nebraska.
+ Mr. McDade. She is ready for a diplomatic career at any
+time she wants to, I am sure.
+ Secretary Babbitt. Anybody who can settle these water wars
+is fully qualified to go to the Middle East or Bosnia.
+ Mr. McDade. Just about anyplace.
+
+ california bay-delta ecosystem restoration
+
+ Secretary Babbitt. Absolutely. No question about that.
+ Mr. Chairman, I would like to touch on one issue and then
+sort of pass the baton.
+ The major new request in the Reclamation budget this year
+relates to California. What I would like do is very briefly
+summarize how it is that we happen to have this request in the
+President's budget.
+ The Central Valley Project, which is the core water system
+in California was constructed back in the 1930s. The major
+components of that project are now a half-century old, and
+extend the entire length of California, from Shasta Dam up on
+the Oregon border all the way down to water transfer facilities
+which take water from the Bay-Delta system outside of San
+Francisco and actually move that water clear down to San Diego
+on the Mexican border.
+ Now, when that project was built and conceived in the
+1930s, there were maybe a quarter of the number of people in
+California that there are today. As that system has aged and as
+California's population has skyrocketed to more than 30 million
+people, the system is faltering. It really is not up to meeting
+the demands of agricultural areas that produce half the produce
+grown in the United States, and a population of 30 million
+people. The stress is showing up in potential water shortages
+in the urban areas, uncertain supplies for agriculture, and a
+big ecological crisis in the San Francisco Bay and the
+surrounding delta system, which is becoming quite urgent.
+ The levee system was constructed below all of these great
+dams, which are in the foothills of the Sierra Nevada. The
+levee systems are plainly inadequate to what we now know about
+the hydrologic and flood cycles in that part of the West.
+ Now, against that background, when I came to office in
+1993, I sent Ms. Beneke's predecessor--her name was Betsy
+Reike--to California. I said, your job is to pitch your tent
+and to bring the warring factions together and see if we can
+get started on a new chapter of California history.
+ Mr. McDade. Did you give her combat pay when she went up
+there, Mr. Secretary?
+ Secretary Babbitt. Mr. Chairman, I will tell you one thing.
+She came back two years later and tendered her resignation.
+ But, prior to tendering her resignation, she produced an
+agreement known as the Bay-Delta Accord, which is now the basis
+of everything that is happening in California. She actually
+succeeded in bringing all these folks together and laying the
+groundwork for reconfiguring all of this stuff against modern
+reality.
+ Now, out of the Bay-Delta Accord we established a group
+called CALFED, which, again, is an amazing organization. This
+group includes the Federal agencies and the California players.
+They are meeting regularly now, planning the restoration of
+this Bay-Delta system.
+ The next thing that happened, quite extraordinary, occurred
+last November when the people of California voted
+overwhelmingly for a bond issue of $1 billion--to be precise,
+$995 million--to get at this restoration. They did that because
+we advised them that the days of a hundred cents on the dollar
+coming from Washington were over; and if they were serious
+about reconfiguring this water system, they were going to have
+to put up approximately half the money. And that is just what
+they did in November.
+ Now, finally, last year this Congress, at about the same
+time, passed the California Bay-Delta Environmental Enhancement
+and Water Security Act, authorizing the expenditure of up to
+$143 million per year against this matching commitment from the
+State of California.
+ That is the background to the request for $143 million
+which would be devoted to preparatory work for the Bay-Delta
+reconfiguration. It would be used principally for land
+acquisition, habitat improvement, a variety of issues relating
+to protection of the migratory fish populations, and work on
+the levee systems and floodways.
+ Mr. Chairman, I think I will stop there. I am prepared to
+answer questions about--let's see--Central Arizona projects on
+my far left, a premier Bureau of Reclamation issue known as the
+Sterling Forest in New Jersey on my right; and, Mr. Dickey,
+well, he is from Arkansas, so I will be especially attentive to
+whatever request he makes, Mr. Chairman.
+ Mr. McDade. Indeed.
+ [The prepared statement of Mr. Babbitt follows:]
+
+[Pages 5 - 10--The official Committee record contains additional material here.]
+
+
+ Mr. McDade. Mr. Commissioner--excuse me, Ms. Beneke, we
+appreciate very much your attendance; and we would be delighted
+to have your statement. If you would again file it, the
+detailed statement, and inform us as you wish, we would be
+grateful.
+
+ Assistant Secretary Beneke's Opening Remarks
+
+ Ms. Beneke. I will be very pleased to. I just want to
+express that I am very pleased to be here this morning before
+the subcommittee again this year to testify on the President's
+fiscal year 1998 budget submission for the Bureau of
+Reclamation.
+ In helping to formulate the budget of the Department, one
+of my highest priorities was ensuring adequate funding for
+operation and maintenance of our facilities and for our
+continuing program relating to dam safety work.
+ I think our budget also reflects a commitment to the types
+of geographically based projects that the Secretary refers to,
+such as the California Bay-Delta work that we are doing; and he
+also referred to my efforts, along with many other folks, in
+the Platte River, which have been challenging.
+ In addition, by statute, the work on completing the Central
+Utah project has been vested in the Office of the Secretary.
+That responsibility has been delegated directly to my office. I
+am here today to answer any questions you may have with respect
+to the Central Utah project or other questions relating to the
+Bureau's budget.
+ Again, thank you very much. I am delighted to be here.
+ Mr. McDade. We are very pleased to have you. Thank you for
+being here.
+ [The prepared statement of Ms. Beneke and the Central Utah
+Project budget justification material follow:]
+
+[Pages 12 - 23--The official Committee record contains additional material here.]
+
+
+ Mr. McDade. Mr. Commissioner, would you like to file your
+statement for the record? Proceed as you wish, please.
+
+ Commissioner Martinez's Opening Remarks
+
+ Mr. Martinez. Mr. Chairman, first of all, I appreciate the
+opportunity to be here today and the opportunity I had to
+discuss these issues with you a couple of days ago.
+ Mr. McDade. I enjoyed learning, among other things, that
+you are an artist.
+ Mr. Martinez. I have been involved in the area of water
+administration for almost 30 years. I think what I would like
+to leave with you this morning is that the Bureau of
+Reclamation has a major impact on the western United States. We
+developed projects in the early 1900s that basically enabled
+the West to be settled, from a water delivery standpoint.
+ Today, our projects deliver water to more than 31 million
+people in the West for municipal and industrial uses; and we
+irrigate some 10 million acres of land, impacting about 140,000
+contractors. So the decisions that are made with respect to
+Bureau of Reclamation activities have a major impact in the
+West.
+ The mission of this agency has evolved from constructing
+facilities to managing water. And having been in this business
+long enough, that is where the complications arise. It is
+always easier to develop than it is to manage, especially when
+you have a limited resource. We are now moving into the arena
+and we are facing issues and complexities that, when you have a
+limited resource, get somewhat emotional; but we have to deal
+with those issues.
+ Our infrastructure is aging. We have to continue to
+maintain it adequately. Most of these facilities are reaching
+40, 50 years in age and we have to make sure that they are
+adequately maintained. Our budget reflects that need.
+ I am concerned about dam safety. I think in a lot of areas
+our dams hold back the waters that are now threatening
+inundation of parts of the American West. I want to make sure
+that those structures are adequately maintained and if, in
+fact, a problem arises we respond to those concerns. Our budget
+reflects our needs in terms of maintaining that infrastructure
+from a dam safety standpoint.
+ Our documents detail our request, but I will highlight some
+specific requests that might be of interest. They include $61
+million for the Central Arizona Project; and, as we discussed,
+there is some concern with respect to the amount of money that
+is being requested.
+ We do request $6 million for the continuation of our
+efforts on the Animas-La Plata project.
+ With respect to wastewater reuse and reclamation projects,
+our budget includes $32 million for ongoing projects,
+specifically in California. And, as we discussed, Congress
+authorized 16 new projects for which funding is not included in
+our budget request. This is primarily because that legislation
+was enacted too late in our budget formulation process last
+year.
+ We are working on a white paper to address how we will
+engage and recommend to Congress how these projects should be
+funded. We have engaged with water users out West, specifically
+the project sponsors, and will be providing that information to
+you as we formulate our 1999 budget. We will address the needs
+of those projects at that time.
+ With respect to dam safety, at the time I became
+Commissioner I convened an outside group of experts to look at
+our dam safety program to make sure that if we had weaknesses,
+we identified them, and if strengths existed, we would try to
+reinforce those strengths. That report is completed and we will
+be transmitting it to Congress. I am glad to say that the
+outside group of experts found our program to be efficient and
+effective. The issue of funding for continued maintenance on
+these structures was discussed and we will be transmitting that
+report to Congress.
+ With respect to the amount of money that we are requesting
+for our agency administration and policy formulation, that is
+basically flat. We are asking for $48 million for fiscal year
+1998, compared to $48 million for 1996 and $46 million for
+1997.
+ The last thing I would like to draw to your attention is
+the fact that Reclamation has been effective, I believe, in
+reducing our workforce and making our efforts more efficient.
+We have reduced FTEs by 1,400 in the last 5 years.
+ That is the conclusion of my summary statement, Mr.
+Chairman. I appreciate the opportunity, and I will be happy to
+respond to any questions.
+ Mr. McDade. We are delighted to have you here, and I am
+sure we will have some questions for you.
+ [The prepared statement of Mr. Martinez and the Bureau of
+Reclamation justification material follow:]
+
+[Pages 26 - 471--The official Committee record contains additional material here.]
+
+
+ california bay-delta ecosystem restoration
+
+ Mr. McDade. Mr. Secretary, let me direct my first inquiry
+to you, if I may. We were somewhat taken aback with respect to
+the California Bay-Delta ecosystem project, a single page of
+justification for $143 million.
+ As I am sure you know, there is no detail provided in the
+justification sheets as to how that money would be expended. So
+we are kind of sitting here, from our perspective, looking at
+what is asked for to be a kind of blank check, because we do
+not know where the money is going to go. Do you have any
+additional information you can provide the committee about
+where that $143 million would be spent and how it would be
+spent?
+ Secretary Babbitt. Mr. Chairman, we do; and I would be
+happy to provide that to the committee.
+ Let me just say that the reason we have been a little bit
+slow is because this new way of doing business, the CALFED
+process, is pretty cumbersome. It requires unanimity among
+about six Federal agencies and half a dozen State agencies.
+ Mr. McDade. How many people in that process, Mr. Secretary?
+ Secretary Babbitt. How many people?
+ Mr. McDade. Yes, how many individuals in the CALFED
+process? You make it sound like a mini-U.N. and we know how
+hard they are to deal with, and I would not be surprised to
+hear that it is. How many people have to sign off before you
+get a decision?
+ Secretary Babbitt. Well, on the Federal side I believe
+there are four principal agencies the Environmental Protection
+Agency, the Department of Commerce, and there are also four
+Interior agencies. I must tell you, sometimes the hardest part
+is getting agreement among the Interior agencies. I preside
+over sort of a confederation of independent players--including
+the Bureau of Reclamation, Fish and Wildlife Service,
+Geological Survey, and Bureau of Land Management.
+ Who else is involved out there? The Corps of Engineers and
+the Department of Agriculture are the other major Federal
+players.
+ Mr. McDade. And all with the veto power, if they don't
+agree, is that back to the drawing board?
+ Secretary Babbitt. Well, nobody has a veto power; but we
+have agreed from the very beginning that we should proceed by
+consensus, and it is actually working. We have really been very
+successful. It does tend to move things slowly.
+ Now, we will have the staff provide you a significant
+amount of detail. The whole wrap-up for fiscal year 1998, both
+for the California agencies and the Federal agencies, will be
+available by June 1st.
+ Is that right, Patty? She says, July. They just slipped us
+a month between the first and second drafts of my testimony.
+ Mr. McDade. And I would not be surprised, experience would
+tell you, if it slips another month.
+ Secretary Babbitt. Mr. Chairman, it ain't slipping no more
+on my watch, because I understand that unless we have this
+material sitting before this subcommittee in time for you to
+deliberate that we cannot expect to get a positive response.
+ Mr. McDade. If it is July, you know, the appropriation
+season. If we are lucky around here it would be the May, June
+time frame. That is traditionally when we try to get it done
+and then get it over to the Senate by July so they can act by
+September. So I think that is something you need to take into
+consideration.
+ I don't know how you can move all the opinions you have to
+move more concisely and more expeditiously; but I think if it
+comes in July we will probably have marked up, Mr. Secretary.
+ Secretary Babbitt. Mr. Chairman, I understand your concern.
+We do have a CALFED proposal, which I would like to submit for
+the record, and we will have the back-up material by June 1st.
+ [The information follows:]
+
+[Pages 474 - 492--The official Committee record contains additional material here.]
+
+
+ Mr. McDade. Are there as many as 10 Federal agencies
+involved is this? You mentioned a couple of them. Are there as
+many as 10 involved? This is what we have heard from some
+sources, that there may be 10 Federal agencies involved. This
+is on the Federal side of this process. Maybe Ms. Beneke would
+like to respond.
+ Secretary Babbitt. Mr. Chairman, that is pretty close,
+actually, if you include the four big players from Interior.
+There are four or five other Federal agencies--EPA, National
+Marine Fisheries, the Corps of Engineers. The Department of
+Agriculture is a player, too.
+ Mr. McDade. And another concern we have is that you intend
+to pass the $140-some million to those agencies, as we
+understand it.
+ Secretary Babbitt. That is correct.
+
+ transfer of bay-delta funding
+
+ Mr. McDade. It may be wrong, because the justification is
+not totally clear to me, that you intend to pass through money,
+which is kind of the reverse of the normal process where the
+agencies all come up individually and describe their level of
+work effort to the committee and what money they need to carry
+it out. You are going to do that? Is that your plan?
+ Secretary Babbitt. Mr. Chairman, we evolved this model on
+the other side of the Interior budget in the Florida
+Everglades, where money destined for other agencies is
+appropriated to the National Park Service. The reason we did
+that is to keep really careful accountability for the effort.
+It has worked very well in Florida.
+ The Bureau of Reclamation is the 800-pound gorilla in the
+Central Valley of California; and it is our belief, based on
+our experience in Florida, that we actually run a tighter ship
+by disbursing the money from what would be, in the private
+sector, a project manager.
+ Mr. McDade. Well, will you know in that same time frame
+what kind of money you expect to disburse to the 10 Federal
+agencies--if there are 10?
+ Secretary Babbitt. Absolutely. The major ones are, in fact,
+in the document that I have submitted for the record.
+ Mr. McDade. Okay. We need the same kind of detail, as you
+know, Mr. Secretary, in order to make appropriate judgments
+with respect to the money we are going to appropriate--the tax
+money we are going to appropriate for the project.
+ Secretary Babbitt. Mr. Chairman, I appreciate your concerns
+and will respond.
+
+ bay-delta cost sharing agreement
+
+ Mr. McDade. Let me bring another one to you now. The budget
+states that Federal funds are available after a cost-sharing
+agreement with the State is signed. What is the operative date
+for that?
+ Secretary Babbitt. The target date for the cost-sharing
+agreement is the beginning of the coming fiscal year.
+ Mr. McDade. Which is?
+ Secretary Babbitt. October 1st.
+ Mr. McDade. Well----
+ Secretary Babbitt. Now, I think we can----
+ Mr. McDade. Again, it is going to be an impediment to us,
+respecting the fact that we are supposed to have a cost-sharing
+agreement before the project begins.
+ Secretary Babbitt. Mr. Chairman, I believe we can be
+responsive to that.
+ Mr. McDade. Let me underline these things to you, because
+they are important.
+ Secretary Babbitt. Absolutely.
+ Mr. McDade. You know, it is a very large amount of money.
+There are a lot of open questions, and we recognize the
+difficulties that you face in negotiating this kind of
+difficult problem with a lot of different people and lot of
+different agencies. From our perspective, we need to get some
+additional details from you. Is there anything that you can
+tell us about what that cost-sharing agreement is going to look
+like?
+ Secretary Babbitt. Mr. Chairman, I can. The operative
+framework has been that we should shoot for cost sharing which
+is in the 50/50 range, but there is nothing magic about that
+percentage. The statute does not have a cost sharing ratio in
+it.
+ Mr. McDade. No specific number in it.
+ Secretary Babbitt. It is not specifically required.
+ Our position has been that there should be a presumptive
+50/50 cost sharing between the public agencies, not counting
+the private sector funds that will go into it.
+ Mr. McDade. Well, California is way out front with about a
+billion dollars.
+ Secretary Babbitt. They certainly are.
+ Mr. McDade. Another 3 years would be about, let's say, $430
+million.
+ Secretary Babbitt. Well, Mr. Chairman, about half of
+California's billion is earmarked specifically within the area
+of this project. Their bill also includes some projects,
+particularly in southern California, that are not in the ambit
+of this particular project.
+ Mr. McDade. Does the agreement require approval by the
+legislature as well as the governor or does the governor have
+the authority to sign off on it?
+ Secretary Babbitt. I believe the governor now has
+authority. It will require a programmatic environmental impact
+statement for many of the expenditures. That environmental
+impact statement is now underway.
+ The expenditures that we have identified in this request
+are ones that all parties agree would be made under any of the
+alternatives in the programmatic environmental impact
+statement. That impact statement is required both under Federal
+and State law.
+ Mr. McDade. You feel you have a pretty good handle in terms
+of this agreement that you have been negotiating?
+ Secretary Babbitt. Yes, I think that is an important
+distinction. This project has been under way now conceptually
+for the entire 4-year period that I have been here. The nature
+of this beast makes it a little cumbersome, but the great
+strength of this is reflected in the cost sharing and in the
+unanimity of support that we have in California.
+ Mr. McDade. What have they done in California about
+appropriating--actually appropriating their part of the money?
+ Secretary Babbitt. Mr. Chairman, I cannot answer that. But
+the bond issue has been approved. It is only a question now of
+drawing down the funds, is my understanding. But I would be
+happy to provide a written answer to that.
+ Mr. McDade. We would appreciate it; and we want to just,
+you know, once again express concern that we see this thing
+coming together. We need to know that California has not just
+done the bond issue but is appropriating the dollars to meet
+their match as we go along.
+ [The information follows:]
+
+ California Appropriations
+
+ With passage of Proposition 204, the State of California is
+authorized to provide $60 million, immediately without the need
+for further legislative action, for non-flow related ecosystem
+restoration projects, known as Category III projects. Those
+funds are currently available. When CALFED completes the
+programmatic EIS/EIR process, currently scheduled for late
+1998, an additional $390 million will be available for
+ecosystem restoration projects.
+ In addition to those funding sources, Proposition 204 also
+authorized $170 million in funds for watershed management,
+conjunctive use projects, agricultural drainage management,
+water recycling, water conservation, water transfers, and other
+projects which are directly related to the CALFED Bay-Delta
+Program. While CALFED does not have direct control over these
+funds, member State agencies do control them. The Secretary of
+Resources, through the Water Policy Council has indicated that
+CALFED will exert a large influence over the disposition of
+those funds, thereby directing a large portion towards CALFED
+Bay-Delta Program elements.
+
+ Secretary Babbitt. Mr. Chairman, I have just been informed
+by the people with the facts--this is always the case--that the
+cost-sharing agreement will be done in August rather than
+October.
+ Mr. McDade. Done in August.
+ Secretary Babbitt. Yes.
+
+ bay-delta spending
+
+ Mr. McDade. This is probably a number cruncher question--
+assuming you got the $143 million, how much would you actually
+anticipate spending and how much carrying over into the next
+fiscal year?
+ Secretary Babbitt. We would anticipate spending that in
+1998.
+ Mr. McDade. All of it, Mr. Secretary?
+ Secretary Babbitt. That is correct.
+ Mr. McDade. Because you are obligating it, you mean?
+ Secretary Babbitt. That is correct.
+ Mr. McDade. But how much would you expend? The best
+estimate that I know----
+ Secretary Babbitt. $50 million.
+ Mr. McDade. About $50 million of the total?
+ Secretary Babbitt. Yes, we would commit the rest, according
+to the outline that is in the document that I have just
+offered.
+ Mr. McDade. I think the budget assumes $50 million of
+outlay, does it not? So you are constrained by that number, as
+I understand it. I hear from number crunchers all the time. We
+would be delighted to hear from you.
+ Secretary Babbitt. Mary Ann, would you like to respond?
+ Ms. Lawler. Certainly. We intend to obligate the money,
+which means sign the contracts. The outlays occur when the
+payment goes out after the work is done.
+ Mr. McDade. You intend to commit, if it goes your way and
+everything dishes out, the entire amount of the project or $143
+million?
+ Ms. Lawler. We would hope to obligate the entire amount for
+the project. $50 million in outlays is associated with that the
+first year, the actual payments to the contractors.
+ Mr. McDade. But you hope to obligate all the money by what
+date?
+ Ms. Lawler. By the end of the fiscal year.
+ Mr. McDade. The October date again? Or is that the August
+date?
+ Secretary Babbitt. That would be by October of 1998.
+ Ms. Lawler. We will not have the money until it is
+appropriated.
+
+ animas-la plata projects
+
+ Mr. McDade. Let's talk a little bit, if we can, Mr.
+Secretary, about the Animas-La Plata project, which is one we
+hear a lot about--you hear a lot about.
+ As I understand, there is $6 million in the budget request
+for the project. And you indicate there is a process ongoing
+led by Governor Romer of Colorado, and that will play a great
+part in the decision that may come down from the Department
+about how to handle this project.
+ Secretary Babbitt. Mr. Chairman, that is essentially
+correct. This project has been discussed from time immemorial,
+and it has only gotten more controversial and more divisive.
+ I talked with Governor Romer last summer, and he suggested
+that we try. We had had a previous consensus-building process
+in Colorado that we ran in 1994, and it worked out very well.
+We solved some really contentious issues together by bringing
+everybody into the Governor's office.
+ Mr. McDade. Would you kind of flush out who is in that
+process? Who are the parties?
+ Secretary Babbitt. The chair of the group is Gail
+Schoettler, who is the Lieutenant Governor of Colorado. The
+principal parties to it are the agriculture and irrigation
+districts in southern Colorado, who would be beneficiaries; the
+two Ute tribes who are involved; the various environmental
+groups; Colorado State agencies; the Environmental Protection
+Agency, which has a major statutory role in this; and then the
+usual collection of Interior agencies, with me kind of holding
+the reins, trying to keep them moving the same way.
+ In this case, Interior agencies are principally Reclamation
+and the Fish and Wildlife Service.
+ Mr. McDade. Again, the usual complex negotiations that are
+in this project, as so many water projects, that you have to
+face. Do you have an idea--can you enlighten us as to the time
+frame with respect to this one? When do you expect the process
+to conclude?
+ Secretary Babbitt. The stated time frame when the Governor
+and I convened this group last fall was that we would finish up
+by March or no later than April. The pace of these discussions
+is pretty intense right now, and I think that we are either
+going to find something everybody can live with by sometime in
+April or, basically, I don't think it will go anywhere.
+ Mr. McDade. We are going to have to change a lot of minds
+up on the Hill if it is going to go anywhere, as you know.
+ Secretary Babbitt. I understand.
+
+ indian trust responsibilities
+
+ Mr. McDade. Let me ask you this question about our trust
+responsibilities with respect to Indians. I know that that is a
+major concern here, and it is a major concern of yours. What
+are the range of options, bearing in mind this is a trust
+responsibility we have to present to the Indian tribes?
+ Secretary Babbitt. I think the particular tribes here are
+an interesting example of our trust responsibility. There are
+about four options. I will state the full range without
+endorsing or commenting on any of them.
+ Mr. McDade. Yes.
+ Secretary Babbitt. The first one would be to cashier all of
+this and let everybody go back to court, because the courts are
+the ultimate guarantor of Indian reserve water rights claims.
+ The second alternative would be to build the project in its
+original proposed form.
+ The third way to do it would be to find some modified
+structural approach still involving these inter-basin water
+transfers.
+ The fourth way to do it would be to go back to the ground
+out there and see if it were possible to buy, retire or
+transfer existing water rights to the tribes through a new
+distribution system in satisfaction of their rights.
+ I guess the fifth one would be to cash out the tribes,
+simply to say, will you take money for water?
+ Now, having said that, I don't want to comment on any of
+them. I would say what I have said to the tribes, that I
+believe they are entitled to wet water, if that is their
+desire; and they seem to say, we don't want money; we want
+water.
+ Mr. McDade. Is it the Department's unequivocal position
+that if all parties, including the Indians, don't reach a
+unanimous agreement, the Department will not support the
+project?
+ Secretary Babbitt. Mr. Chairman, we have not taken that
+position. I have come up here for 4 years and said that my job,
+as I perceive it at this time, is to follow the will of this
+Congress, number one; number two, to search relentlessly for
+consensus; and, number three, to say to the Indians, I respect
+and support your desire to get wet water out of the other end
+of this process. Now that leaves a wide range of possibilities;
+and, obviously, it will be a call by the Administration, not by
+me personally.
+ Mr. McDade. Okay, well, we will watch it together with you,
+and I appreciate your answers.
+ I am delighted to yield to Mr. Fazio at this time.
+
+ Mr. Fazio's Opening Remarks
+
+ Mr. Fazio. I thank you, Mr. Chairman.
+
+ animas-la plata project
+
+ As you know, this has been a real problem for this
+committee. In fact, it became one of the major problems we had
+on the Floor last year with this bill. I know your desire is to
+make this as easy a process as possible, and so I thought I
+would see if I could refine the Secretary's answer a little
+further in this regard.
+ I know the proponents believe that you have indicated in
+the past that you think, in order to get out of the box that we
+are all in, a structural solution is going to be required. I
+think they believe they heard that in a conversation they had
+with you last year.
+ I wonder if you still think at the end of the day, when all
+of these negotiations have, hopefully, arrived at some
+conclusion before we have to go to mark up or certainly to the
+Floor, that you think that that will be a component of the
+solution. I realize that we are all in this together, and we
+have been there for a long time, and we would like to get out.
+ I know there are people who think that their best position
+is to come to no resolution; and that then, ultimately, since
+this climbs on the environmental taxpayer hit list every year,
+now at the top, it is inevitably going to die; and there is no
+reason to compromise, no reason to reach any agreement or even
+to find a structural solution when we can simply cash out the
+tribe's rights.
+ Would you try to refine a little more carefully what they
+think you said?
+ Secretary Babbitt. I think it is very important, the he
+said, she said, they said.
+ Mr. Fazio. In this case, it is you.
+ Secretary Babbitt. That discussion derives out of a meeting
+that I had with all of the native American groups at the
+Colorado River water users in Las Vegas just before Christmas.
+ Now what I intended to say and what I believe I said was I
+respect and advocate your desire to have wet water on the land.
+I do not believe that that absolutely requires a structural
+solution.
+ There are some other alternatives, the kind of
+nonstructural transfer and augmentation arrangements that you
+are familiar with in California. Those alternatives have not
+achieved any kind of consensus, but they are available in
+theory. I mean, they are there, and I have not lined up behind
+any of those alternatives or certainly did not intend to do so,
+and I don't think I have.
+ Mr. Fazio. Well, I guess the real equality point is whether
+these negotiations will come to any resolution. I think that
+the people who are negotiating would feel that they might be on
+a more level playing field with each other if there was a clear
+commitment from the administration that we are going to respond
+to the 1986 and 1988 enactments that guarantee these tribes
+their water rights. And you have indicated that you think wet
+water is a component, so you are talking about delivering
+water, not cash in lieu of water rights?
+ Secretary Babbitt. Yes, I think we have to respect the
+tribes's desires.
+ Mr. Fazio. And it may be required to build some sort of
+conveyance to get them wet water, whether or not we call it the
+Animas-La Plata?
+ Secretary Babbitt. Well, the real question is whether you
+can provide wet water without an upstream, inter-basin transfer
+from the Animas River to the La Plata River. I believe there
+are scenarios in which that can be done. I am not endorsing
+those, but I acknowledge that they exist.
+ Mr. Fazio. Okay. Thank you, Mr. Chairman.
+ Mr. McDade. Gentleman from New Jersey.
+
+ Mr. Frelinghuysen's Opening Remarks
+
+ Mr. Frelinghuysen. Thank you, Mr. Chairman.
+ The Secretary's presence today has jump-started the
+building staff. We have a new clock on the wall. Yesterday, the
+clock was paralyzed at 9:00.
+ Secretary Babbitt. Maybe you could move it forward today.
+ Mr. Frelinghuysen. We could. I will do my best to do that
+right now.
+
+ sterling forest
+
+ Leaving the water wars and rights issue for a few minutes,
+and you were good enough to embrace it in your opening
+comments, I would like to talk about and get your reaction to a
+number of land preservation and watershed protection issues in
+the Northeast. At the top of the list is the Sterling Forest
+area in both New York and New Jersey. Congress provided $9
+million to begin the process of purchasing that very important
+piece of watershed protection property.
+ Can you tell me how we are proceeding in the second phase
+of that appropriation?
+ Secretary Babbitt. Congressman, the President's budget
+request includes $8.5 million, which is the second and final
+installment of the $17 million Federal commitment which is
+embodied in the Omnibus Parks Bill from last year. We obviously
+support that and believe that this is coming to a happy
+conclusion with roughly equal support from both New York and
+New Jersey.
+ Mr. Frelinghuysen. It will be a happy solution. I was just
+wondering if you could comment on how fast this acquisition can
+be accomplished; and, hopefully, we will provide the
+resources--certainly on this committee we will be working
+towards that goal, but do you see any stumbling blocks along
+the way?
+ Secretary Babbitt. Congressman, I do not. There is a
+negotiated agreement in place, and I believe that it can be
+closed at the purchase price of approximately $52 million. I am
+not entirely up to date on the intricacies of the New York
+commitment, but I believe it is there. And, obviously, the
+Federal contribution is contingent upon closing at the agreed-
+upon purchase price.
+ Mr. Frelinghuysen. We thank you for that information and
+your continued support of that moving ahead with that purchase
+and those dollars.
+ About 2 years ago, you were good enough to visit the Great
+Swamp Wildlife Refuge in my district in northern New Jersey. I
+understand that the Watershed Association has invited you back
+for a return visit sometime this fall. I hope that you will
+favorably consider their request.
+
+ land aquisition priorities
+
+ I just wanted to ask a question relative to your budget
+submittal for land acquisition. Can you tell the committee or
+can you provide the committee at some point with the
+methodology in terms of how you chose which land acquisition
+projects were to be included in your budget proposal?
+ Secretary Babbitt. I would be happy to do that. There are
+three separate sets, and they are prioritized internally
+according to criteria which I can provide you--the Bureau Land
+Management, Park Service and, in this case, Fish and Wildlife
+Service.
+ Mr. Frelinghuysen. Thank you.
+ [The information follows:]
+
+ Methodology for Prioritizing Land Acquisition Projects
+
+ The National Park Service, the Fish and Wildlife Service,
+and the Bureau of Land Management each have their own methods
+for selecting the land acquisition projects for which funds
+will be requested. In particular, the Fish and Wildlife Service
+(FWS) maintains a data base known as the Land Acquisition
+Priority System (LAPS) whose purpose is to provide a biological
+basis for ranking projects and directing acquisition efforts
+toward those projects having the highest overall national
+value.
+ Projects are nominated for inclusion on the list of
+potential acquisitions according to a broader set of FWS goals,
+and then are ranked using biological criteria. The six FWS
+categories that are used to provide a biological basis for
+ranking projects are Endangered Species, Migratory Bird,
+wetlands, nationally significant wildlife habitat, biodiversity
+and fishery resources. Each of these categories has a
+distinctive set of criteria that provides every project with a
+score within a list. Then common factors such as degree of
+threat, multiple FWS goals and objectives, public use, and
+operation and maintenance needs are applied to all projects.
+The highest ranking projects on the LAPS list provide the basis
+for developing the budget list which is submitted through the
+Department of Congress.
+
+ national fish and wildlife foundation
+
+ Mr. Frelinghuysen. Lastly, within the subject area of
+today's hearing, relative to the National Fish and Wildlife
+Foundation, what is your budget request for the Fish and
+Wildlife Foundation? What do you plan to use those dollars for?
+Can you just make some general comments about the benefits of
+that investment?
+ Secretary Babbitt. I believe the request in the Bureau of
+Reclamation budget is $1.5 million--and I believe that is about
+the same level as last year.
+ Now there are roughly similar amounts in our budget on the
+other side from the Fish and Wildlife Service. Actually, it is
+$5 million from the Fish and Wildlife Service. This money, I
+believe, is one of the best ideas that has ever come out of
+this Congress, because the National Fish and Wildlife
+Foundation is now operating on an annual budget of about $40
+million. They have several other sources of Federal
+appropriations, maybe including Agriculture's budget. I am just
+not sure. It can't be more than $10 million in Federal
+approptiations, and they are running on a $40 million budget
+right now.
+ Mr. Frelinghuysen. It is pretty remarkable.
+ I want to thank you for your participation, for the
+committee's information and enlightenment. If you could provide
+a record of the list of projects the Department and Fish and
+Wildlife Foundation have worked on over the last 3 years, I
+think the committee members would find how amazing it is that a
+relatively small investment has reaped incredible benefits--if
+you would be kind enough to provide that.
+ Secretary Babbitt. I would be happy to.
+ [The information follows:]
+
+[Pages 502 - 533--The official Committee record contains additional material here.]
+
+
+ Mr. McDade. Thank you.
+ The Chair recognizes the gentleman from Arizona.
+
+ Mr. Pastor's Opening Remarks
+
+ Mr. Pastor. Thank you, Mr. Chairman.
+ Good morning Mr. Secretary, Ms. Beneke and Commissioner
+Martinez.
+
+ tres rios wetland restoration project
+
+ Going back to the water issues, Commissioner Martinez in
+his testimony talked about projects that deal with reclaimed
+wastewater. In Arizona, we had authorized the Tres Rios wetland
+restoration project that is outside of Phoenix; and we are
+ready to move forward with the project in Phoenix and other
+communities. I was wondering, does the Bureau anticipate
+continuing this effort in the project in fiscal year 1998?
+ Mr. Martinez. Mr. Chairman, Mr. Pastor was in Phoenix just
+a month ago. I committed to continue to work with the City of
+Phoenix.
+ As you are aware, the issue there is that Congress
+appropriated money for us to allow to continue working with
+Phoenix. But, in the language, the attorneys tell me there is a
+little quirk. The language says, the Bureau of Reclamation
+shall work with Phoenix in constructing the project. Our
+attorneys interpret that to mean that that language requires a
+repayment on the part of Phoenix.
+ The language for the other waste water use projects does
+not use the language ``the Bureau shall construct''. It says,
+the Bureau shall participate in construction, which allows a
+grant to occur. So, we have to work through that language. Once
+that language is corrected, we will work through that process.
+We have committed to work with the city on building the
+project.
+ Mr. Pastor. Do you have any recommendations for me in how
+we could take that particular language and assure that we go
+forward with the project? Do we need to amend?
+ Mr. Martinez. Yes. My understanding was that the
+representatives of the city were going to meet with our
+attorneys here in Washington to see if we could come up with
+some resolution on that.
+ Mr. Pastor. Thank you.
+
+ central arizona project
+
+ Another issue that you spoke about this morning was the
+Central Arizona project. We have been involved with lawsuits
+concerning the construction, the repayment, maintenance and
+operation, etc. I know that there have been attempts to,
+hopefully, bring some settlement to it. What is the latest
+progress in the discussions with the CAWCD and the Department
+of Interior to come to some kind of settlement over those
+lawsuits?
+ Secretary Babbitt. Congressman, there is a very tangled web
+here, because the settlement of those claims has inevitably
+broadened into a discussion of related issues such as the role
+of the tribes in the policy setting and the board of the
+Central Arizona Water Conservancy District. We have had
+discussions with the State, and the CAWCD board. I guess I am
+always optimistic but in this case, I cannot cite any new facts
+that suggest that we are close.
+ The litigation is continuing; and I believe the discovery
+schedule now calls for document closure in the spring and the
+closure of discovery this summer for trial this fall.
+ The reason I lay that out is because we find again and
+again and again that, once the discovery has been done, all
+parties tend to be more realistic about their positions, so
+that may provide an opening. It is going to be linked to this
+issue of the role of the Indian beneficiaries in governance,
+and we have not resolved that.
+ Mr. Pastor. I know several years ago the native Americans
+complained that they were not part of the process, and we
+talked about possible inclusion. But one of the barriers, I
+guess, that was always presented to me was that the members of
+the district are elected and they could not place native
+Americans on the board, etc. And I wonder, is that still a
+problem that you are encountering?
+ Secretary Babbitt. Well, it certainly is the case that,
+were a settlement process to conclude that the tribes should be
+represented on the board of CAWCD, that that would require a
+statutory change from Arizona legislature.
+ Mr. Pastor. I see. In the fiscal year 1997 appropriations
+conference report, there are certain Bureau programs for
+specified reduction or termination. Other than those specified
+in the fiscal year 1997 Appropriations Act, were there any
+programs or projects canceled or delayed?
+ Secretary Babbitt. Let me take a first crack at that, and
+then I will refer it to the Commissioner and Ms. Beneke.
+ We have had some choppy water over the language in the 1997
+appropriations bill, because some of the language which cut out
+particular appropriations conflicts with other Federal statutes
+and our obligation under general law. I suppose the most
+important one is the litigation over the siphons. We have an
+absolute obligation under Federal law to pursue those claims.
+We must do that.
+ What I hope we can do is get back with the Arizona
+delegation and work some of those issues out. There are a
+couple of other ones that relate to contract administration and
+some other things. We cannot quarrel over these items. We are
+in this together, and I think we can get them sorted out.
+ Now--so whether or not there are any specific
+cancellations, I refer you to those who know.
+ Mr. Martinez. I am not aware of any specific cuts, but I
+will get back to you on that issue.
+ Mr. Pastor. Okay. Thank you very much.
+ I will submit other questions for the record, Mr. Chairman.
+Thank you very much.
+ [The information follows:]
+
+[Page 536--The official Committee record contains additional material here.]
+
+
+ Mr. McDade. Thank you.
+ Mr. Secretary, I want to announce to you and your
+colleagues that Congressman Edwards is not with us this morning
+because he is attending a memorial service for his colleague
+from Texas who died. He has a lot of interest in the bill and
+the subject matter. Were it not for that, the memorial service,
+he would be here.
+ I am pleased at this time to recognize my friend from
+Alabama, Mr. Callahan.
+
+ Mr. Callahan's Opening Remarks
+
+ Mr. Callahan. Thank you, Mr. Chairman.
+ Just an observation: Most of the requests for these
+reclamation projects, I guess rightfully so, are west of the
+Rockies. While I want to do everything I can to facilitate
+Congressman Fazio and Congressman Pastor and will do that, the
+observation is that I read in Parade magazine where that area
+is going to crack and fall off into the Pacific. That is a lot
+of money to be spending.
+ Mr. Pastor. Would the gentleman yield? That is California
+that is projected to go in the ocean.
+ Mr. Callahan. I have no questions, Mr. Chairman.
+ Mr. McDade. We are delighted to recognize our friend from
+Arkansas, who is just back from inspecting disasters in that
+area. Welcome back.
+
+ Mr. Dickey's Opening Remarks
+
+ Mr. Dickey. Thank you, Mr. Chairman; and I want to thank
+you for the opportunity to be on this subcommittee. It is
+something that I wanted to happen, and I am thankful that it
+did. I am also thankful for the Chairman's leadership and how
+much experience you bring to this process and how much you are
+going to be leading us in the ways of trying to help people
+with the little bit of money we have.
+ I am sorry I could not be here yesterday. I would like to
+assume that you all would like to know something about what is
+going on in Arkansas. And it is not good, because the tornado--
+there was just devastation 20 miles in length. Probably 10 to
+11 tornadoes touched down, and we have got now 25 people who
+have died.
+ The President, Mr. James Lee Witt, the Secretary of
+Transportation, the director of the SBA all were on the ground.
+ We are going to be spending a lot of money, and I have been
+asking about where it is coming from, and I am sure it is going
+to have to come from our committee in some fashion. But I think
+it is just amazing, the resiliency of the people. I don't think
+it is just Arkansas. But, as the President said, he saw the
+light in their eyes, that we will recover.
+ Of course, there are some 25 people who will not have a
+chance to be back. But I am glad to be back; and I am sorry,
+after all the work I did to get on this committee, I missed the
+very first subcommittee meaning. So forgive me for that.
+ Mr. McDade. Well, we can give you an instant replay.
+ Mr. Dickey. All right.
+
+ irrigation projects in arkansas
+
+ I think my first question is probably directed to the
+Commissioner. I am not going to let you off, Mr. Secretary; but
+I want it start with him.
+ We have had talks with the Corps of Engineers officials
+about the construction of large irrigation projects in Arkansas
+to conserve water. The response we get from them is that it is
+the administration's policy for the Corps not to get involved
+in this type of construction project.
+ The Congress would have to provide specific tasking and
+legislation to get the Corps involved. The question is, would
+the construction of irrigation projects in Arkansas reside
+within the mission and capabilities of the Bureau of
+Reclamation? And, if not, why not?
+ Mr. Martinez. Mr. Chairman, Congressman Dickey, there is no
+question the Bureau of Reclamation has the expertise in these
+kinds of activities. However, we do not have the authority to
+spend our appropriations on projects or activities outside of
+the body of ``Reclamation law.'' Reclamation law has
+historically limited Reclamation projects to the seventeen
+Western States.
+ Mr. Dickey. Well, that answers that. You don't care about
+Alabama and Arkansas?
+ Mr. Martinez. We have worked in the eastern States under
+reimbursable arrangements with other Federal agencies. We work
+a lot with FEMA.
+ Mr. Dickey. Well, is there any cooperation that we can get?
+I mean, do you all loan services and loan expertise?
+ Mr. Martinez. Yes. Like I said, we have worked in other
+States under cooperative agreement with other agencies; and I
+would like to visit with you and see what we can do.
+ Mr. Dickey. Good. Thank you, sir.
+
+ hot springs bath houses
+
+ Mr. Secretary, this is a stretch now. Do you follow me? I
+don't want you to bring exception to this too soon. We have 140
+degree water that comes out of our thermal baths in Hot
+Springs, and we have bathhouses that were built at the turn of
+the century that are deteriorating. Mr. Chairman, this is not
+within the jurisdiction of this subcommittee, but I just can't
+help but ask it. The President is from Hot Springs. He grew up
+in Hot Springs. Can you help?
+ Secretary Babbitt. Mr. Dickey, recognizing the facts that
+you have just lined up, acknowledging that against that
+background--I have been to Hot Springs and carefully examined
+all of this because of the President's personal interest in Hot
+Springs. I have learned some interesting facts; and I must tell
+you, your question is not as far afield as you might imply.
+ Number one, Hot Springs is the site of the first and
+original unit in the National Park System. The mother park of
+the National Park Service is not Yellowstone, it is Hot
+Springs.
+ Mr. Dickey. Thank you.
+ Secretary Babbitt. Hot Springs was established in 1832. I
+have done my homework. Would you like to know more about that?
+ Mr. McDade. How are the baths?
+ Secretary Babbitt. The baths are--well, if you like Hot
+Springs. In fact, the National Park Service has a significant
+role in the administration of the park and the protection of
+this historic district. So I would be happy to follow-up with
+your specific thoughts.
+ Mr. Dickey. You will be hearing from us. And with regard to
+that visit, I would like to ask you not to come back for the
+same purposes you came the last time.
+ Secretary Babbitt. Mr. Dickey, I will try to refrain from
+coming in the second half of even numbered years.
+ Mr. Dickey. You got the message. Thank you. Thank you, sir.
+Thank you.
+
+ programmatic budget structure
+
+ Mr. McDade. Mr. Commissioner, let me ask you a couple
+questions, please. We have a new budget form that percolated up
+to the committee this year. Is that your initiative?
+ Mr. Martinez. No.
+ Mr. McDade. Tell us the history on it, will you?
+ Mr. Martinez. I will not take the credit on that, but I
+think I will let you know its background. It was initiated by
+the previous commissioner. As we moved from a construction to a
+water management agency, it was thought we could restructure
+our budget in order to give a better picture to the committees
+as to what our activities are.
+ My understanding is that we have worked with the staffs of
+the committees and with OMB to come up with the structure; and,
+hopefully, it will be a structure that will be more responsive
+and provide more information to the committees.
+ During the transition period it might be more difficult,
+but that is my understanding of that.
+ Mr. McDade. We will stay in close contact with you if we
+need additional information, and we hope it moves in the
+direction that you want it to.
+
+ bureau of reclamation mission
+
+ What do you say to people--I will meet a colleague now and
+again who will say, the Bureau of Reclamation says that its
+major mission is over; it has done its development; why should
+it continue to exist? What is your response to that?
+ Mr. Martinez. Well, I will address that from two
+perspectives. One, we have a large infrastructure out West, a
+big Federal investment. As long as the Bureau of Reclamation is
+responsible for maintaining those facilities, we have a charge
+that we have to undertake.
+ On the other hand, the Bureau of Reclamation is the
+permittee for water rights under State law for all these
+projects. It has to carry out its role under State law.
+ Mr. McDade. How many people function in that section in
+permitting?
+ Mr. Martinez. Well, probably not that many. But what I am
+trying to get at is that, in most States out West, most of the
+water that is developed for either agricultural purposes or for
+municipal and industrial purposes, comes from Bureau of
+Reclamation projects. So as long as the Bureau of Reclamation
+holds title to those water rights, we, by necessity, have to be
+an engaged party in how that water is managed and how that
+water is used.
+ So in order for this agency to go away, from my
+perspective, one is, you have got to transfer title to all the
+facilities and let somebody else be responsible for them and
+get us out of the ownership of the water rights developed out
+West and how that should be managed and so forth.
+ Also--and I will be quite frank with you because I think I
+need to--coming from a State perspective, there are some
+Federal laws that the Bureau of Reclamation is charged with
+addressing that might not necessarily be addressed the same way
+from a State perspective. So as long as there is a Federal
+interest in these projects and Federal interest in how water is
+managed, I think you have to have some kind of Federal agency
+having some oversight.
+ Mr. McDade. Mr. Secretary, do you want to comment on that?
+ Secretary Babbitt. Mr. Chairman, I do.
+ I cut my teeth in public service as the attorney general
+and the governor of Arizona. Arizona's entire future, and
+present, for that matter, is linked to the Colorado River.
+ The Colorado River flows through seven States and into
+Mexico. It is governed by delivery obligations to Mexico, by an
+act which was signed in 1923, and by an infrastructure system
+which includes Hoover Dam. One side of Hoover Dam is anchored
+in Arizona, the other in Nevada. The Dam stores 20 million acre
+feet of water. Upstream from the Grand Canyon, Glen Canyon dam
+backs up a lake 200 miles long. It runs through two States.
+ There isn't any way that that river basin could be
+disaggregated. Believe me, I was a states' rights governor. I
+would have loved to take the whole system over, but it will
+never happen.
+ Mr. McDade. I don't think anybody would suggest to separate
+it. Maybe some do. I don't know. You know the West better than
+I do.
+ Secretary Babbitt. Well, we are sort of a rebellious lot
+out there; and I am no stranger to the states' rights sort of
+theory. I was sort of one of the leading theoreticians of that
+movement in my earlier days. I still think it is an important
+concept, but it simply does not lead to disaggregating these
+enormous river basin systems with all these human, interstate
+and international implications.
+ Mr. McDade. Suppose you had had a consolidation. Let's
+speculate. Let's say the Corps of Engineers had some experience
+in handling water and maintaining levees and dams etc. Did you
+ever look at that? Would there be any potential savings or is
+there any efficiencies to be had from a suggestion like that?
+ Secretary Babbitt. Mr. Chairman, in my younger days I used
+to advocate that all the time, that we merge the Forest Service
+into the Department of the Interior, so you had one land
+management agency, and that you merge the Bureau and the Corps
+of Engineers, sort of put east and west together.
+ I will tell you, in the fullness of my years, I no longer
+come from the school which says it gets more efficient and
+better when it gets bigger. I come out on the opposite side of
+that.
+ I have worked with the Corps of Engineers a lot more
+intensively than I ever dreamed I would, particularly in
+Florida where we are working very closely. I have spent a lot
+of time working in the Forest Service, and I have got to tell
+you I don't want the Forest Service.
+ I think I am the first Secretary of the Interior in history
+who has ever said that. I believe that a little bit of
+competition and having a couple of agencies on the same turf
+tends to keep them honest; and both benefit from, you know,
+innovating and using new approaches to things.
+ Mr. McDade. We appreciate your answer. You may very well be
+right.
+
+ government performance and results act
+
+ Mr. Commissioner, you are required under the Government
+Performance and Results Act of 1993 to develop a strategic plan
+and to share the results and consult with the Congress. What
+can we expect to see out of that act?
+ Mr. Martinez. Mr. Chairman, the Strategic Plan is
+undergoing final review in the Bureau of Reclamation. As a
+matter of fact, we are going to distribute it amongst employees
+for input. Our intent is to have that very plan finalized for
+submission to the Secretary by June 1st. During that time
+period, we plan to engage our stakeholders and water users out
+West and the Congress.
+
+ cost benefit ratios
+
+ Mr. McDade. Will you indicate to us how many of the
+projects that you will do have a cost-benefit ratio connected
+with them? We know it is part of the conversation about the
+California project that there is not a cost-benefit ratio. Do
+most of your projects have cost-benefit ratios?
+ Mr. Martinez. If you look at the last few pages the budget
+justification will deal with those issues. Most of the
+construction projects have a cost-benefit ratio assigned to
+them, although some of the ones have been ongoing for so many
+years, the justification says it has gotten to the point where
+you cannot calculate it.
+ With respect to expenditures dealing with fish and wildlife
+and other environmental issues, the justification will say it
+is difficult on those issues, but will have that on a project
+by project basis.
+
+ impact of acts of terrorism
+
+ Mr. McDade. Okay. Your budget singles out continuing
+efforts to make sure that acts of terrorism do not in some way
+impact on the infrastructure of the Bureau and I guess on the
+facilities that the Department has. What is the total amount of
+money that you think will be committed to that act?
+ Mr. Martinez. We plan to spend this year around $5 million
+in fiscal year 1997, and I believe we have asked for an
+additional $5 million for fiscal year 1998.
+ Like I said, we do have a large infrastructure. Some of
+these facilities sit upstream from large populated areas and
+other ones are instrumental in providing hydroelectric power
+out west. We want to make sure these facilities are safe and
+sound.
+ Mr. McDade. Can you do that with existing people? Do you
+have the people on board that have the background and
+technology requirements to do that, or do you have to go out
+and hire new people?
+ Mr. Martinez. Our intent is to hire one person that will
+come in with the expertise to provide us direction.
+ Mr. McDade. Train other individuals?
+ Mr. Martinez. And then utilize as best we can with our
+existing workforce.
+ Mr. McDade. Is that meant to be a cadre of permanent
+people?
+ Mr. Martinez. I would hope that would be the case. I mean,
+this is an issue that is going to be with us.
+ Secretary Babbitt. Mr. Chairman, if I might interrupt, I
+appreciate your line of questioning on this. I think it is a
+really serious subject, and I want to say I appreciate your
+attention to it. We have not paid adequate attention to it.
+ Mr. McDade. Well, I hear about things like Anthrax, et
+cetera, and you think of the water supplies of major population
+areas of the West in particular, and you wonder if anybody is
+looking at that. So I am glad to see that you have taken an
+initiative and you are trying to keep some kind of interest.
+ Mr. Fazio.
+
+ calfed process
+
+ Mr. Fazio. Thank you, Mr. Chairman. And let me first of all
+properly express my appreciation for the work that all three of
+you do and Roger Patterson, additionally, in the front row, the
+regional director of the Bureau who has been such an integral
+part of making the CALFED process work, and Under Secretary
+Garamendi, who, as a Californian, still enjoys helping us fight
+through some of the continuing problems we have with water in
+California.
+ I was not here to hear your comments. I have read them, and
+I particularly want it thank you, Mr. Secretary, for the
+forthright approach you have taken to funding CALFED in this
+budget and defending that budget, because I think it is a major
+move forward for California and I think for the Federal
+interest in the State's water development. And I realize from
+the Secretary's responses to the chairman that we are going to
+have to work together to make sure that we can sustain this
+budget request.
+ There are clearly some very difficult questions that our
+colleagues are going to ask and need answers to as to how we
+are going to go about and implement this process, and we are
+going to be working closely with this committee, Mr. Chairman,
+to make sure you get the answers you need in time to meet our
+markup date and obviously our conference at the end of the
+summer.
+ I wanted to ask particularly if you thought, Mr. Secretary,
+that we would be at any point perhaps out of sync with the
+stakeholders, as we call them, with the Bay-Delta Accord, with
+any of the agencies that are going to be sitting as part of
+this CALFED process?
+ You have language included this year that says, ``use for
+purposes that the Secretary finds are of sufficiently high
+priority to warrant such expenditure.'' In effect, it gives you
+some discretion.
+ How would the Federal interest be handling some of these
+tougher issues? How would the various agencies that you
+represent, let alone some of the others that are not under your
+purview, implement the Federal interest and the way we go about
+putting funds to bear on projects?
+ Secretary Babbitt. Mr. Fazio, let me answer that by
+underlining one other factor here that I think is important,
+and that is, there is a convergence point here. Precisely
+because of all of the flooding that took place in California,
+there is going to be a supplemental coming up very shortly.
+ Mr. Fazio. You anticipated my next question.
+ Secretary Babbitt. Well, it is really relevant, because
+what we must do is go back out and handle the reconstruction or
+relocation of those levees in a way that feeds into this. We
+have got to get those levee systems back up. But it would be a
+terrible waste--it will have to be up before the next flood
+system--if we simply go out there and repair them where they
+are. We are going to have to relocate them all as the entire
+restoration program plays out. So that provides a lot of
+impetus to sort of converge and get this stuff settled quickly
+so that money is used appropriately and so people do not go
+without protection but it lays and it feeds into this.
+ The way we have designed this appropriation request, the
+money would be appropriated to the Interior Department. There
+is a preliminary sort of partitioning of this money in the
+document, which I will put into the record, showing the
+apportionment among agencies and how it matches against
+Proposition 204 money and how it is allocated by function.
+ Now, the important thing, I think, is this is being done by
+consensus among what used to be known as Club Fed. Before it
+became CALFED, it was just the Federal agencies. We have
+operated on a rule of consensus, and it is remarkable it is
+actually working.
+ Mr. Fazio. Well, I think it is important for the chairman
+and other members of the committee to know that to make that
+consensus work, the Federal agencies have to be parts of it, we
+have to sign off on it, and therefore I think the Federal
+interest in how we go about not only appropriating but
+obligating and outlaying the money is all going to be
+maintained, and there will be opportunities obviously for
+compromise and cooperation but also for the Secretary and
+others to say the Federal interest is not being upheld here and
+therefore we would withhold.
+ So I want my colleagues to realize that we are not simply
+giving the Californians a lot of money to play with.
+ I think this is a process that really will involve ongoing
+involvement of not only your agencies but Corps of Engineers,
+now NMFS, a number of other players who bring not only money
+but expertise to the table, and I think that should be somewhat
+reassuring to people who are perhaps concerned that there is
+not enough Federal control of the dollars that we put up.
+
+ california floods
+
+ The floods, as you mention, have impacted us all, and I
+want to thank the Bureau for the help it has provided in the
+short term even to the point of helping farmers pump out their
+flooded fields, something that has gotten you and Mr. Patterson
+some kudos out there.
+ I am wondering if you could explain to us how you feel the
+Department's operations through the Bureau have fared during
+this flooding. I mean, we have obviously seen a tremendous
+trade-off behind dams in terms of water supply, irrigation for
+environmental enhancements, and the need at the same time to
+protect life and limb by holding back floodwater. We have got
+the constant trade-off. I wonder if you would comment as to how
+you believe the Bureau has performed.
+ Secretary Babbitt. Well, in my introductory remarks I
+touched on it very briefly. I think the employees in California
+did a genuinely outstanding job. Now, the Bureau operates,
+obviously, pursuant to an operations plan which addresses the
+costs and benefits, the risks, in a classic ongoing trade-off.
+ What you really want to do is have the dams full for the
+coming irrigation season. You want to fill the dams up, looking
+over your shoulder at the sky, and draw them down so that there
+is enough storage left if you have a bad season. It is a very
+complex, basin-wide, modeled program. It worked very, very
+well.
+ An extraordinary amount of water came down, and we really
+did take the crest off all of those floods very effectively. We
+learned a lot, I think, as did the Corps of Engineers, who is
+also a player here, particularly in the downstream levees; we
+learned a lot about the design of levee systems.
+ We had just a few years ago redesigned some of these levee
+systems along the Sacramento River to provide wider space in
+the flood plain and to provide floodways or actual bypasses in
+selected areas outside the main river channel.
+ What we learned is, these things really work and that in
+many, if not most, areas, the most important thing we can do in
+the near term is, as part of this, to move the levees back and
+provide more channel space. When these levees were designed,
+the hydrologists thought a 100-year storm was a lot smaller
+than what we now seem to have every 5 or 10 years.
+ Mr. McDade. Would it be on the adjacent land, most of those
+levees?
+ Secretary Babbitt. Yes, correct.
+ Mr. McDade. No land acquisition problem?
+ Mr. Fazio. In some cases we will have to make purchases.
+ Secretary Babbitt. I'm sorry, I didn't understand your
+question. Yes, there will be land acquisition.
+ Mr. Fazio. In fact, that may become the major cost with the
+so-called meander belt approach, and that is at least easement,
+if not land acquisition.
+ Secretary Babbitt. It is a major cost on the front end
+certainly. Because a lot of this work has already been done we
+can specify what it is we need in those floodplains.
+ Mr. Fazio. There are certain areas that are particularly, I
+think, conducive to this approach, and we can talk about those.
+ Is it your opinion that if we are to change the way we
+manage these reservoirs to make flood control more important
+than perhaps it was in the original enactment to the
+authorization, that it would require an Act of Congress to
+reconfigure the benefits behind these reservoirs, water supply
+versus flood reservation?
+ Secretary Babbitt. Mr. Fazio, I am no expert on the law,
+but I don't think that is going to require much statutory
+change. I think we have got the leeway.
+ Mr. Fazio. Do you think this is something you and the Corps
+can negotiate without coming to Congress?
+ Secretary Babbitt. In terms of the operation of the system,
+yes, I do. You may be ready to sandbag me with some statute I
+have never heard.
+ Mr. Fazio. No, I won't. But I would appreciate if you would
+respond for the record and perhaps respond to this.
+ Mr. Martinez. There are some reservoirs out west under
+specific legislation that set forth how much flood pools shall
+be in the reservoir by congressional authorization, but for the
+most part we have flexibility.
+ Mr. Fazio. Could you submit for the record the status that
+we have in each one of our Bureau-Corps projects, because I
+think these issues are going to come to the Floor and we all
+will need to know the specific answer here.
+ [The information follows:]
+
+ Status of Bureau-Corps Projects
+
+ The Central Valley Project is authorized for flood control
+purposes. Reclamation believes it has the operational
+flexibility to manage CVP facilities to minimize flood damage.
+Reclamation utilized this flexibility in the spring of 1997 to
+successfully avoid more damage in the CVP operating area.
+
+ flooding and the endangered species act
+
+ Mr. Fazio. Could I ask Patty Beneke perhaps a question
+related to the Endangered Species Act. We have had a lot of
+rhetoric--she is ready for this; I am not sandbagging here--
+about the Endangered Species Act becoming an issue that may be
+causing some hesitancy in terms of levees. The giant garter
+snake listing that comes to mind is perhaps one of the factors
+that come into play here.
+ Would you speak to the issue of how the Bureau and other
+wildlife-related agencies are handling the ESA in the emergency
+flood fighting environment and, in addition, when we talk about
+repair at any point of a flood control system.
+ Ms. Beneke. Well, as I understand it, the acting head of
+the Fish and Wildlife Service has put out a policy specifically
+addressing the issue that you raise, and that is that in these
+emergency flood response situations we are doing everything
+that we can to ensure that there are no problems in terms of
+Endangered Species Act compliance standing in the way of our
+Bureaus taking the steps they need to take to address the
+emergency situation.
+ I also am aware of your concerns and questions with respect
+to the giant garter snake. I have lodged an inquiry with the
+folks, the Biological Resources Division of the USGS, and am
+expecting to get a report from them on the work they will have
+done in this area. I would be pleased to share it with you and
+see if there is further work that we need to do in that area.
+ Mr. Fazio. I appreciate that. Let me just be a little more
+explicit though. We still have mitigation requirements, I am
+told, even if we waive in the short term requirements of ESA in
+a flood fighting environment; is that correct? Or are there no
+further mitigation requirements that might cause an agency to
+be somewhat reticent?
+ Secretary Babbitt. Mr. Fazio, we have thrashed this out
+endlessly, and I have been keelhauled by the California
+delegation regularly.
+ Mr. Fazio. Most of us were keelhauled first and then passed
+it on to you.
+ Secretary Babbitt. I think we are now clear that if it is
+about the emergency repair of existing levees to get through
+this flood season, the answer is, go out and repair them,
+period.
+ Mr. Fazio. And don't worry about having someone come and
+post a notice on your door next spring saying that, by the way,
+you have got to mitigate what you did last winter when you were
+fighting floods?
+ Secretary Babbitt. No, they don't even have to call us. All
+they do is go out and repair the levee.
+ Mr. Fazio. Now, if somebody next August was traveling along
+and noticed a boil that needed repair for purposes of making
+sure the system was ready for the next winter, what would the
+situation be?
+ Secretary Babbitt. Well, I think my instructions to my
+faithful employees would be that August is still a part of this
+flood season, and if it is repairing levees, that comes within
+the policy. I think the policy says within 6 months.
+ Mr. Fazio. In other words, if you are repairing the flood
+system, we do not have a lot of time to go through hoops?
+ Secretary Babbitt. Yes. And I think the flood season is
+basically limited by the snow on the crest of the Sierra
+Nevada.
+ Mr. Fazio. This year it should last year round. So if we
+see flow in the Sierra, the ESA is waived and you are going to
+declare your candidacy again.
+ Thank you, I appreciate that. We may have really something
+out of this session, and that may be very useful.
+ I have been so pleased with your response there that I
+think I will put the rest of my questions in the record before
+we set some more precedent.
+ There are a number of other issues, as you can imagine, and
+I will not take the time of my colleagues here, and since Mr.
+Knollenberg may have some questions anyway, I want to thank you
+for the way you have worked with our delegation on a daily
+basis to struggle with all these issues that are of little
+value to most of our colleagues here.
+ Thank you. And, Commissioner, thank you very much for your
+help, particularly on the issues related to water storage and
+ways that may play into the delta solutions that you alluded to
+earlier.
+ Commissioner Martinez has been very helpful in looking at
+some off-stream storage in the Sacramento Valley which we hope
+may some day contribute to our delta solution.
+ Thank you all.
+ Mr. McDade. The gentleman from Michigan is recognized.
+
+ Mr. Knollenberg's Opening Remarks
+
+ Mr. Knollenberg. I am just about on time, aren't I? This is
+the morning when I had three of these hearings, and I am sorry
+I was absent for the bigger part of this one. And I thank you,
+Mr. Chairman, for recognizing me for just a minute or two.
+ I think most of my questions were answered last year. You
+know, we had a dialogue, you and I, that went into the whole
+business of the variety of Federal agencies that are ostensibly
+all doing the same thing, and you were quick to recount some
+history and give me some facts about things going back to the
+early 1900s. I think Teddy Roosevelt was a part of that.
+ So I have been through, to name just a few of those
+agencies, Bureau of Reclamation, Corps of Engineers, Bureau of
+Land Management, U.S. Fish and Wildlife Service, Bureau of
+Indian Affairs, Forest Service, USDA, Department of Energy--and
+it goes on--U.S. Geological Survey--better mention them all--
+Power Marketing Administration, National Park Service, National
+Biological Service. All of those, it seems to me, in some ways
+must stumble over each other.
+ But you were good enough to give me much background and
+history, and of course, to not certify but certainly I think to
+say in pretty concrete terms they are all necessary, and we
+will keep observing and watching.
+ I think most of the problems that confront this committee
+in regard to your area of oversight and involvement tend to be
+in the West, and I believe that Mr. Fazio and some others have
+already maybe covered most of that, so I am going to at this
+point just thank you for being here again and refer back to the
+chairman.
+ Mr. Chairman.
+ Mr. McDade. Joe, we are delighted you found time to come
+in. We know you had a busy day, and we are glad you are here.
+ The gentleman from Arizona.
+ Mr. Pastor. No more questions.
+ Mr. McDade. The gentleman from New Jersey.
+ Mr. Frelinghuysen. Just a couple of brief questions. I know
+you want to get on, Mr. Chairman.
+
+ taxpayer hostility
+
+ A couple of years ago you expressed some concern about in
+some parts of your operation some general hostility on the part
+of some of the taxpayers, and I just wondered whether there has
+been an improvement.
+ I know we invoke such words as ``stakeholders,'' things of
+this nature, but in reality are your employees in parts of the
+country being better treated, and what have you done to make
+sure that they are perhaps greeted with more civility,
+acceptance, respect?
+ If you don't mind making some brief comment on that issue,
+I think it is important. I was shocked to hear some of the
+things that you relayed to us.
+ Secretary Babbitt. Congressman Frelinghuysen, I appreciate
+that question, and I am pleased to tell you that I think we are
+making a lot of progress.
+ The problems out West are in some measure understandable,
+and it is not the first time this has happened. There has been
+a long history of feeling in the West that too much of their
+future was being decided in Washington as a result of the
+predominant Federal landowning and water-managing presence
+through all of the Federal agencies.
+ What I have tried to do over the last 4 years is to say
+let's not quarrel about abstractions, about who owns title to
+the land, because the American people, I think, every time this
+comes up have resoundingly said we believe that our land under
+the stewardship of the National Park Service, the Forest
+Service, the BLM, is part of our national heritage. So let's
+talk instead about how we make decisions out there, because I
+understand your concerns about the day-to-day management of
+these lands and the need for local communities to feel that
+they have a role in it.
+ And that is why this word ``stakeholder'' has become so
+important, because we have set up a remarkable number of these
+groups where we said to our land managers, you have got to
+create a table and you have got to get resource extraction
+industries, the environmentalists, and the local officials
+together; and if you can collectively find a consensus
+solution, we will sign off. And not 100 percent.
+ I think the concept is here to stay, and it is working in a
+large number of different situations--grazing in Colorado,
+forest management in other Western states, recreational issues
+in gateway communities outside national parks, game management
+in some of the national parks--a whole variety of different
+issues.
+
+ computer modifications for year 2000
+
+ Mr. Frelinghuysen. Lastly, unrelated, I have asked this of
+the committees I serve: Have you budgeted in the costs of
+whatever you have in terms of your computers' recalibration
+that relates to the year 2000?
+ It appears, at least from comments I read in the newspaper,
+some departments are totally out to lunch on this issue and
+others are really up to speed. I just wondered if you had
+measured the costs associated with this situation.
+ Secretary Babbitt. We are, in fact, working very
+intensively on this. I don't know whether we have a cost
+estimate, but we are pursuing it relentlessly.
+ Mr. Frelinghuysen. If you would be good enough to share
+with the committee at the appropriate time what the costs might
+be.
+ Secretary Babbitt. Sure, I will.
+ Mr. Frelinghuysen. Thank you very much, Mr. Chairman.
+ [The information follows:]
+
+ Department of the Interior Year 2000 Costs
+
+ Since early 1996, the Department of the Interior has been
+proceeding in a systematic and comprehensive way to identify
+and correct problems associated with the Year 2000 issue. The
+Awareness Phase, during which information was provided to all
+levels of Department management on the nature of the problem
+and potential approaches to its correction, has been completed.
+The Assessment Phase, which is providing a better estimate of
+the tasks ahead, is scheduled to be completed in June. The
+current estimate of the cost for correcting Year 2000 problems
+in the Department is $25 million over the next four years (FY
+1997 to FY 2000), but this estimate will change as we complete
+the Assessment Phase. At this time the Department intends to
+meet its Year 2000 costs through the use of available resources
+and, if necessary, future budget requests.
+
+ Mr. McDade. The gentleman from Arkansas.
+ Mr. Dickey. No, thank you.
+ Mr. McDade. Thank you.
+ Mr. Secretary, we have some additional--you won't be
+surprised to hear--some detailed questions that we will submit
+to you to request your answers for the record. If you have any
+additional need to elaborate on the questions, feel free to
+contact us. Thank you all for your appearances here. We look
+forward to working with you.
+ Secretary Babbitt. Mr. Chairman, thank you very much.
+
+[Pages 550 - 606--The official Committee record contains additional material here.]
+
+
+ Thursday, March 6, 1997.
+
+ TENNESSEE VALLEY AUTHORITY
+
+ WITNESSES
+
+CRAVEN CROWELL, CHAIRMAN
+JOHNNY H. HAYES, DIRECTOR
+WILLIAM H. KENNOY, DIRECTOR
+
+ Opening Comments of Chairman McDade
+
+ Mr. McDade. The committee will come to order.
+ We are very pleased to have TVA with us this morning and in
+particular to see Chairman Crowell here. You have been making
+some headlines, and we want you to know that we are grateful
+for the courage you are showing in difficult times and for the
+leadership you are showing in trying to deal with this enormous
+problem we have involving the Federal budget. So I want to
+commend you for your activities and that of your associates. We
+appreciate what you are doing.
+ Mr. Crowell. I appreciate that very much, Mr. Chairman.
+ Mr. McDade. It is our pleasure.
+ May I say to you, sir, we will proceed informally. We would
+be pleased if you would file your statement for the record so
+that we can have an opportunity to read it closely and then if
+you would summarize and proceed in your own way. Tell us what
+you want us to hear.
+ Mr. Crowell. I must say, Mr. Chairman, that--you mention
+about making headlines--we certainly were pleased that Peyton
+Manning decided to stay at UT yesterday, because that certainly
+has created more interest in that than it has in our proposal
+the last few days. So everybody back home is excited about
+that.
+ Mr. McDade. You ought to fill the stadium, too.
+ Mr. Crowell. We thought we maybe could take credit for it
+as an economic development opportunity for Tennessee.
+ Mr. McDade. I think it might be.
+
+ Opening Statement of Chairman Crowell
+
+ Mr. Crowell. Thank you very much, Mr. Chairman, for those
+kind remarks.
+ My colleagues, Johnny Hayes and Bill Kennoy, and I are
+pleased, as always, to appear before this subcommittee. This is
+the first time we have been before you as Chairman; but, as you
+know, we have been before the committee each year to present
+our budget request for next year. We certainly look forward to
+working with the staff and members of this committee.
+ As you requested, I have complete testimony I would like to
+submit for the record. Then I will take a few minutes, as you
+suggested in a way to expedite the proceedings, to summarize.
+ Mr. McDade. Proceed in any way you wish, and your testimony
+will be filed.
+ Mr. Crowell. Great, thank you. Thank you.
+ Before I discuss TVA's appropriated programs, I would like
+to just take a brief moment to update the committee on the
+status of TVA's power system.
+ Mr. Chairman, in fiscal year 1996, TVA earned revenues of
+$5.7 billion from the sale of electricity. This was an all-time
+record for revenue, as well as all-time record for generation.
+ Overall, TVA's power system is performing better than at
+any time since the 1960s. This fiscal year, for the first time
+in 35 years, we will not increase our debt; and we are
+currently developing a plan to reduce the debt. In preparation
+for deregulation, we have cut costs, become more efficient and
+improved our productivity.
+ Now, in our appropriated programs, we are proposing a
+budget of $106 million for fiscal year 1998. This is the same
+level as fiscal year 1997, and it breaks down as follows: $81.5
+million is for TVA stewardship of dams, navigation channels and
+public lands in the Tennessee River Basin. This recommends an
+increase of $8.3 million for this category from fiscal year
+1997.
+ Now, I might mention that almost the entire requested
+increase in this particular category is for resurfacing the
+bridge over Pickwick Dam where the bridge deck has deteriorated
+and created a safety concern for us there.
+ $7.9 million is for Land Between the Lakes National
+Recreation Area. This represents a $1.9 million increase for
+infrastructure repairs and maintenance, including repair and
+paving of major roadways.
+ $6.6 million is to begin engineering and relocation
+planning to replace the failing navigation lock at Chickamauga
+Dam, directly upriver from Chattanooga. Since the lock was
+built, deterioration of the lock has caused serious operational
+problems; and each year the risk of lock failure increases. We
+estimate a life expectancy of only 8 years for the lock.
+ $6 million is for the Environmental Research Center in
+Muscle Shoals, Alabama. The ERC is in the second year of a
+transition to self-sufficiency. The $6 million requested will
+permit it to continue on our plan submitted last year to
+becoming a self-supporting business.
+ Finally, $4 million is for economic development, which is
+also in the midst of a transition away from Federal dollars.
+The $4 million proposed in this budget would complete the
+phaseout program by 1999, 1 year earlier and $12 million less
+than the plan submitted to this committee last year.
+ Mr. Chairman, that is our appropriations request for fiscal
+year 1998. As you know, as you have mentioned in your opening
+comments, we have proposed a plan to make fiscal year 1998 the
+last year that TVA receives Federal appropriations. This
+proposal would help TVA focus on our core business of
+generating and selling electricity.
+ As I mentioned earlier, TVA's 1996 fiscal year power sales
+were $5.7 billion, or 98.2 percent of our total budget at TVA.
+On the other hand, our appropriated funding is 1.8 percent of
+our budget.
+ The proposal would also eliminate once and for all the
+misimpression that the TVA power system is subsidized by tax
+dollars. This is the doorway that some have used to criticize
+us, and we would certainly like to close it.
+ There are still many details to be worked out in this
+proposal, and a task force headed by Kate Jackson, the
+Executive Vice President in charge of TVA's resource group, has
+begun working out those details.
+ Now, in order for our proposal to succeed, we will need
+your assistance in several areas.
+ First, TVA and the Army Corps of Engineers are jointly
+studying ways that our respective operations of the Tennessee
+and Cumberland River systems could be integrated and improved.
+Your support of this study is critical to the success of our
+proposal.
+ Second, we need your assistance in implementing the task
+force recommendations for the future of the Land Between the
+Lakes.
+ Third, it is important that we obtain language in the
+appropriations bill to permit us to transfer funds from one
+year to the next. We would need this authority to give the task
+force maximum flexibility in developing options.
+ Fourth, the total funding for this year's budget request is
+needed to give the task force time to study options and
+recommend what implementation, if any, is needed.
+ Finally, we need your support for our task force's work in
+gathering input from the communities and from the various other
+constituency groups in our area. It is our desire that everyone
+understand the steps that we are taking and supports the
+changes that will be required to implement them.
+ We are asking for your active support in resolving the
+issues I have described. What we are proposing is certainly
+consistent with TVA's history. Many times in the past, TVA has
+created innovative programs that matured and were eventually
+transferred to other entities.
+ TVA's appropriated programs include some of our Federal
+government's greatest success stories. Now, we are studying how
+these success stories can best be managed in the 21st century.
+With your help, we can impact spare funding of TVA's
+appropriated programs and begin a new era for TVA.
+ I want to thank you for this opportunity to present our
+budget request, Mr. Chairman; and we are certainly available
+here for questioning as long as the committee wishes us to be
+here.
+ Mr. McDade. We thank you for a fine statement which hit a
+lot of high points that we are very interested in hearing.
+ [The prepared statement of Mr. Crowell and the TVA budget
+justification materials follow:]
+
+[Pages 610 - 712--The official Committee record contains additional material here.]
+
+
+ elimination of appropriated programs
+
+ Mr. McDade. My first question is, can you give the
+committee some kind of a feel, Mr. Chairman, for the kind of
+reactions that you have received from the various TVA
+stakeholder groups?
+ Mr. Crowell. Well, as you can imagine, there has been quite
+a bit of reaction to this proposal.
+ Mr. McDade. I have seen a good bit of it in the press.
+ Mr. Crowell. That is right. So have I, as a matter of fact.
+And sometimes for the first time, I see us in the press.
+ To answer your question this way, many of the constituent
+groups do not have enough information yet or do not really see
+how this is going to be implemented at this point because the
+task force has not made any recommendations yet. Some of the
+anxiety by the constituencies is that they just don't know what
+it means to them now, but they certainly expect some impact.
+ I have received very strong support from the business
+communities in the Tennessee Valley; and certainly one group
+that has supported this proposal is our Retirees Association,
+which is made up of the people who have retired from TVA, some
+nearly 20,000 members. They are the people who spent their
+careers at TVA, and they think the proposal deserves merit and
+we should take a good hard look at it.
+ So it has been mixed--to answer your question, it has been
+mixed, but I feel like it is going to take a little time before
+people really understand the impact.
+ Mr. McDade. Interesting response from your former
+employees.
+ Mr. Crowell. Yes, it is.
+
+ tva task force
+
+ Mr. McDade. You mentioned the task force; and, of course,
+we are very much interested in its efforts to study the future
+of appropriated TVA activities. Will you identify for us,
+please, its membership and elaborate on what its activities
+have been to date?
+ Mr. Crowell. Right now, the person that is the chairman of
+the committee and its 19 members, Kate Jackson. We started out
+with 17 members. We added two members from Alabama to make sure
+we had every area covered.
+ They are made up of TVA professionals who are on the
+committee and chaired by the person responsible for the
+appropriated programs. The committee has not produced a request
+for any additional funding or anything at this point, but we
+certainly expect the committee to be very active in the near
+future and involving our constituency. That is one of the
+things that we have asked the group to do, is to make sure that
+there is a public process so people can have a say; and this,
+hopefully, will alleviate some concerns out there.
+ Mr. McDade. I would think so.
+ Have you got both public power and investor-owned utilities
+on the committee?
+ Mr. Crowell. No, we do not.
+ Mr. McDade. Is there some reason that we should not have
+such a group like that as part of this panel?
+ Mr. Crowell. I am not sure how that would function. To me,
+this is a business decision that needs to be made----
+ Mr. McDade. An internal business decision.
+ Mr. Crowell [continuing]. An internal business decision.
+Because we are the ones most familiar with the programs. And I
+would think if you had outside groups, then you end up with
+people having their own agenda to work on, and what I am
+interested in is making sure that TVA's agenda is put forward.
+ I have said this before time and time again, that we
+certainly need the help of Congress, certainly need the help of
+this committee; and I would want to keep this committee fully
+informed as we go along because that is important to the
+process.
+ But outside groups, when you start putting them on a task
+force like this, then you get all kinds of interests that maybe
+are not consistent.
+ Mr. McDade. And your primary focus is the internal
+organization and how you reach a business decision.
+ Mr. Crowell. Absolutely.
+ Mr. McDade. And from that perspective, you are bringing in
+your own stockholders, so to speak, and the people who are in
+the organization to make that decision.
+ Mr. Crowell. The people that know the most about them, yes.
+ Mr. McDade. I do want to say to you, as I had the pleasure
+talking with you the other day, we do want to stay very much in
+conversation with you as we go through this process.
+ I want to take just a second to welcome Mike Parker to the
+committee from the great State of Mississippi. Mike is a valued
+member of the committee; and we welcome you here, my friend.
+ Mr. Parker. Thank you, Mr. Chairman.
+
+ elimination of appropriated programs
+
+ Mr. McDade. Mr. Chairman, for each of the four principal
+appropriated programs--and I am referring to stewardship, Land
+Between the Lakes, etc.--please discuss, will you, the latest
+thinking that exists within your organization as to their
+ultimate disposition. Are they being considered for
+termination? For transfer? What kinds of options are you
+looking at within your own organization with respect to those
+particular activities?
+ Mr. Crowell. Mr. Chairman, we have been very careful as a
+board here to ask the task force to take a look at all options,
+to give them the time to do that and to ask them to get public
+involvement and make sure that everybody is kept advised of it.
+ This board will make the decisions ultimately on what we
+think should be recommended to this committee or to others, but
+we have tried very hard to not prejudge decisions that they can
+make because, otherwise, we start taking things off the table
+that they might or might not consider.
+ So, to answer your question, we certainly would like for
+the task force process to continue in a way which everybody who
+is involved feels like they had a say in it before we make
+decisions as to what we ultimately do.
+ Mr. McDade. Those issues are wide open?
+ Mr. Crowell. Those issues are wide open, yes, sir.
+ Mr. McDade. Is the task force also considering the
+disposition of physical assets that were purchased or supported
+with Federal taxpayer dollars?
+ Mr. Crowell. Yes, they will consider all of that. We have
+given them no instructions otherwise.
+ Mr. McDade. Is there a future role, in the opinion of TVA,
+for appropriated dollars from the Congress of the United
+States?
+ Mr. Crowell. What we are trying to do is get in a position
+here in preparation for deregulation to not have any tax
+dollars converted to TVA, so the proposal at this point is
+based on having no tax dollars at TVA.
+ Mr. McDade. That is a key question for you, isn't it?
+ Mr. Crowell. Yes, it is.
+
+ power program
+
+ Mr. McDade. That segues into a question I want to ask you.
+You mention you just want to concentrate on your core
+activities, generating and selling electricity. There is a GAO
+report, which I am sure you have seen, that says that there is
+not sufficient financial stability within TVA to compete in a
+deregulated industry. Do you think that is an accurate
+assessment of where you are?
+ Mr. Crowell. No, I do not; and the facts would support my
+conclusion that that is not a valid comment. Of course, we are
+familiar with the GAO report; and we have comments to make on
+it. But if you look at our cost-producing power, we are
+competitive in our area with all the surrounding utilities; and
+we are certainly in better shape than most of the other
+utilities in other parts of the country.
+ So just from a cost standpoint and cost of producing
+electricity, in fact we have been ranked among the dozen or so
+top utilities in the country from a standpoint of independent
+sources.
+ Mr. McDade. And, based on sources we discussed yesterday,
+it sure looks like you are competitive.
+ Mr. Crowell. Yes, we are very competitive. I think if you
+looked at some utilities in your home state you might want to
+have TVA power there, Mr. Chairman.
+ Mr. McDade. We might invite you in.
+ There are investor-owned utilities who argue that TVA
+appropriations indirectly subsidize the power program.
+Hydropower producers who are private, for example, may have to
+absorb, they claim, more than their share of reservoir
+shoreline and dam maintenance as a condition of their FERC
+license.
+ Some other utilities argue that they have to provide that
+economic development services without any taxpayers assistance;
+and indeed we see utilities, as you know, being good public
+citizens all over the country.
+ What about those arguments, Mr. Chairman? Would you respond
+to them, please?
+ Mr. Crowell. Well, I will respond this way, Mr. Chairman.
+ I am very familiar with those arguments. They are made on a
+regular basis. And our proposal, as I said in my summary of the
+testimony, is targeted toward eliminating those arguments in
+the future because there would not be any tax funds coming in.
+ Mr. McDade. Excuse me. I have to interrupt you. I have to
+go vote. I think we are down to two minutes. Have you voted,
+Mike?
+ Mr. Parker. No.
+ Mr. McDade. We have two minutes. We will be back in two
+minutes.
+ Mr. Crowell. Okay. Thank you.
+ [Recess.]
+ Mr. Frelinghuysen [presiding]. Chairman Crowell, if we can
+begin again. Congressman McDade has gone to vote.
+ Mr. Fazio, would you like to make any opening comments?
+
+ Opening Remarks of Mr. Fazio
+
+ Mr. Fazio. Thank you, Mr. Chairman.
+ I really don't have any great comments to make except to
+say that--I think it has probably been stated so far, but if it
+hasn't been, let me say, with the new team here, perhaps we are
+going to look at TVA and ARC a little more closely than was the
+case in the past.
+ We obviously had strong supporters of both agencies in
+prior time frames, and that is all well and good. In fact, I
+must say I think change can be healthy.
+ Just from the very objective standpoint of attempting to
+review the agency's budget, I guess one of the questions I
+would ask, and I direct to you, is why should the TVA be
+treated differently than perhaps power marketing
+administrations--which we deal with before this committee--
+which have a different background and history but which, for
+many members, might seem on the surface to be analogous to TVA?
+ Mr. Crowell. To answer that, you have to look at the TVA
+Act and the responsibility given to TVA by the Congress and our
+mission. We have the responsibility for the fifth largest river
+system in the country. We also are the largest generator of
+electricity. We are an asset for the government.
+ So if you look at the basic mission, there is nothing else
+like us in the country; and we cannot be compared directly with
+any other public power entity just simply based on
+responsibilities given to us by Congress.
+ Mr. Fazio. So the history is what created a separate
+entity?
+ Mr. Crowell. Yes.
+ Mr. Fazio. And we ought to revere and, of course,
+appreciate that history, given the background, the relative
+success you have had in economic development and power
+generation in the region.
+ Mr. Crowell. Yes. We would like to see that happen,
+Congressman; but it doesn't happen as often as we would like,
+obviously.
+
+ competition in the electricity industry
+
+ Mr. Fazio. Well, apparently, there has been a good deal of
+contention these days that goes to, really, the question of
+competition.
+ Mr. Crowell. Yes.
+ Mr. Fazio. You are providing competition to other
+utilities, some stockholder-owned utilities in the region. Why
+has TVA become a competitor and why have some of those you
+compete with in the region become less supportive than maybe
+historically was the case?
+ Mr. Crowell. Let me say this: We do not compete with other
+utilities now, because we are not permitted by law to do so. We
+have a territorial restriction that restricts us inside our
+service area. We do serve some 14 utilities with an interchange
+agreement. We buy from them and they buy power from us. But
+that was all part of the 1959 amendment to the TVA Act; and we
+are not in direct competition with customers of other
+utilities.
+ Mr. Fazio. Have you been thinking of making acquisitions
+that bring about a competitive atmosphere? What are the issues
+that have brought other utilities into the discussion?
+ Mr. Crowell. I think the issues that really have brought
+other utilities into it is really the issue of deregulation
+where territorial restrictions do not make any sense. So then
+what do you do with TVA when you have no territorial
+restrictions? It is the anticipation of deregulation and
+competition that has the private power companies somewhat
+concerned about us. It is not the reality of the time today,
+but it is the expectation I think that is of concern to them.
+ Mr. Fazio. Would TVA be seeking a carve-out in any national
+effort, maybe one that Mr. Schaefer over on the Commerce
+Committee would pursue, that would provide for us a national
+framework of deregulation?
+ Mr. Crowell. Yes, we need to look at that from this
+standpoint. The TVA is an asset for the nation. It belongs to
+the government of the United States, and it deserves to be
+successful in the future. So whatever we need to do and is
+consistent with deregulation to be successful is what we think
+we ought to be permitted to do.
+ You have a very large asset in the Tennessee Valley that
+can help the country and help the region in the future.
+Deregulation is going to change some things, but the changes
+that occur should be consistent with permitting TVA to be
+successful.
+ Mr. Fazio. When you say permitting TVA to be successful,
+what would your desire be in terms of your ability under this
+new deregulatory atmosphere to pursue other opportunities?
+ Mr. Crowell. What we need to be able to do, obviously, is
+to sell the power we generate and----
+ Mr. Fazio. To wherever and whoever?
+ Mr. Crowell. To whatever the Congress decides is
+appropriate for us. Because the Congress will be the ultimate
+decision-maker in the process. But if you have a situation that
+develops in which our customers can be taken by other utilities
+and you start losing customers, then you start losing revenue
+and you start losing your ability to succeed. So it really
+boils down to a matter of being able to sell our power that we
+generate every day to produce revenue as necessary to keep us a
+financially sound company.
+ Mr. Fazio. So you would argue that the taxpayers of the
+U.S., the original investor of the TVA, would suffer if people
+could come into your area but you could not go into theirs?
+ Mr. Crowell. Absolutely.
+ Mr. Fazio. So TVA is expecting the deregulatory approach to
+provide a kind of reciprocity?
+ Mr. Crowell. Something that permits us to sell the power.
+Absolutely.
+ Mr. Fazio. What kind of atmosphere exists, do you think,
+among those few cognoscente in the Congress who have looked at
+this issue, which we don't all understand?
+ Mr. Rogers. The what?
+ Mr. Fazio. The smart guys.
+ Mr. Crowell. Well, I am pleased that your comment that we
+all don't understand--because I am in that category, too. It is
+because there is a very dynamic process that is taking place,
+as you know; and it is yet to be determined how it is all going
+to come out.
+ I do think what is sort of driving all of this for the
+private power companies, quite frankly, is the anticipation
+that somehow they will be disadvantaged, because TVA is a very
+well-run organization and has very low cost. But I think it is
+more of a defensive posture at this point, not knowing what the
+outcome is going to be but expecting the outcome to be damaging
+to them, I would suppose.
+ Mr. Fazio. Well, I would think they would assume that a
+subsidized rate of power that you would be able to make would
+be always very, very competitive with whatever they may be able
+to make, given their costs and what they would be able to
+charge.
+ What is interesting, we spent some time answering questions
+about subsidies that we allegedly have; but nobody ever spends
+any time talking about the subsidies of the private power
+companies, which are very large. I think it is just a matter of
+posturing, and I would certainly expect in deregulation that
+there is a place for TVA and there is a place for TVA to be
+successful consistent with the comfort of the private power
+companies.
+ I think we need to find that place. I think we need to get
+to a place where everybody realizes there is a comfort level
+that everybody can enjoy. I think, right now, the dynamics of
+it are creating an atmosphere where there is distrust and
+concern in competing with TVA.
+ This will be my last question, and I may be taking too much
+time, but please tell the committee where your most efficient
+systems lie, what the percentage of the power you generate is,
+and identify some of the least cost beneficial. I guess I am
+looking for the distinction between the hydro facilities and
+nuclear facilities and an analysis of what TVA brings to the
+table, so to speak.
+ Mr. Crowell. Okay, I can do that. The hydro facility is,
+obviously, our lowest cost producer of electricity. We think we
+do a good job for them but primarily because we get free fuel,
+because the water is free as a power source. Twenty percent of
+our power comes from the nuclear program, which also is a very
+inexpensive form of electricity.
+ However, the capital investment is what really causes the
+concern with the nuclear. We have too much money tied up in the
+nuclear program, which makes it difficult for us in the long
+term to continue to lower our costs. But the majority of our
+generation is from fossil power; and we have some very, very
+efficient plants there that score very high nationally when
+compared to others. But about 70 percent--a little less than 70
+percent comes from fossil production.
+ Mr. Fazio. So if we wanted to, theoretically, sell assets
+of TVA--and I am not advocating to dismember TVA--it would be
+in the fossil plants and in the hydro projects; and the
+government might well be left with nuclear plants because there
+is no market for that.
+ Mr. Crowell. Absolutely. We could sell the hydro and fossil
+plants very easily, and then Congress would be left with
+ownership of--the country would be left with ownership of the
+nuclear plants which have a lot of imbedded costs down there
+associated with them. That is a very accurate statement.
+ Mr. Fazio. Thank you.
+
+ Opening Remarks of Mr. Rogers
+
+ Mr. Rogers. Now, the Cumberland River and the dams of the
+Corps of Engineers on that river in Kentucky and in Tennessee
+form a major part of my district and the central part of the
+economy of all of southern Kentucky. And I read in the
+newspaper that you were talking about taking over those dams.
+That is the first I knew about it. Tell me about that proposal.
+
+ cumberland river system
+
+ Mr. Crowell. Okay. We are not talking about taking over the
+dams. We are talking about operating the generating facilities
+and the dams along the Cumberland River. There are nine dams on
+the Cumberland River. But the whole idea behind TVA getting
+involved really came from the Department of Army. There was a
+1990 study done by the Department of Army----
+ Mr. Rogers. My question is, why did I read this in the
+newspaper for the first time? You did not understand my
+question, did you?
+ Mr. Crowell. I understood your question. The point is that
+we made a proposal on two occasions that was consistent with--
+it was not our idea to start with. The idea came up from the
+Department of Army.
+ Mr. Rogers. My question is, why did I read this in the
+newspaper?
+ Mr. Crowell. I don't know how to answer that question,
+Congressman. I don't control the newspapers.
+ Mr. Rogers. Why didn't you tell me first and all of us in
+the Congress? To my knowledge, you didn't brief a single Member
+of Congress on this grab of a river in my district.
+ Mr. Crowell. It came from Department of the Army,
+Congressman. The original proposal came from there, not from
+us. That report has been around for some seven or eight years.
+This is not a new subject to the Department of Army.
+ Mr. Rogers. Well, as far as I am concerned, it is an old
+subject and it is over with. Maybe next time you will learn to
+talk with the Members of Congress that control the fate of
+flood control in these parts of our states. There is more here
+involved than electricity. There is flood control, and there is
+recreation, and there is tourism, and there is economic
+development. Keep your hands off my river.
+ That is all I have.
+ Mr. McDade [presiding]. Are you sure you don't want to add
+anything?
+ Mr. Rogers. That is all.
+
+ joint tva/corps study
+
+ Mr. McDade. Mr. Chairman, let me go back to some of these
+questions we were asking you before.
+ Do you anticipate the joint study that we were talking
+about will fully evaluate the benefits of having the Corps
+assume control of the power assets of the Tennessee River? Do
+you have any preliminary thoughts with respect to that option?
+ Mr. Crowell. No. We have been asked by the President in his
+budget to conduct a joint study. Again, we should let the study
+go forward and not prejudge anything or take anything off the
+table. We have had a meeting with the Department of Army
+already to look at this, and we have been involved in exchange
+of information.
+ Mr. McDade. It is wide open as far as you are concerned?
+ Mr. Crowell. It is wide open, yes.
+
+ bonus awards
+
+ Mr. McDade. We have had critics tell us there are excessive
+bonuses awarded in TVA. How many bonuses did you award to
+employees in 1996?
+ Mr. Crowell. Let me, first of all, say the board does not
+get any bonuses. We do not. There is sometimes confusion about
+that. Our salary is controlled by Congress, and we do not get
+any bonuses. We do have a policy at TVA that pays every
+employee from top to bottom what we consider to be the market
+conditions, the market demands for those particular positions.
+ So we do have a bonus plan in some and some other
+compensation available to us in order to meet the market
+conditions. I would be very happy, if you would like, Mr.
+Chairman, to supply that for the record.
+ Mr. McDade. Yes, we will have to have it.
+ [The information follows:]
+
+ TVA's 200 executives earned salaries/wages during FY 1996
+ranging from $97,504 to $262,000. This compensation consisted
+of base salaries ranging from $97,504 to $115,000 and
+individual payments ranging from zero to $147,000. TVA conducts
+industry analyses and surveys to determine the market-based
+salaries/wages for top managers and executives. TVA is
+committed to attracting and retaining top industry personnel
+and its compensation plans are designed around this objective.
+ Payments as part of the TVA-wide Performance Incentive Plan
+were made to non-management and managers below the senior level
+based on the accomplishment of TVA-wide goals. Payments to
+officers and senior management were based upon each
+individual's performance and their contribution to meeting
+their respective part of the TVA-wide goals.
+ All TVA employees are paid on a bi-weekly basis for base
+salary and overtime. Bonus payments are made at the end of the
+fiscal year after TVA-wide performance and individual
+performance is evaluated. Such payments usually occur in the
+November to December time frame.
+
+ Mr. McDade. You know, critics have told us that one percent
+of the people who work for you got most of the bonuses. Is that
+pretty much accurate?
+ Mr. Crowell. No, sir. We give bonuses to almost every
+employee.
+ Mr. McDade. It is not just top managers?
+ Mr. Crowell. Not the top managers.
+ Mr. McDade. And how do you select the people who are going
+to get bonuses?
+ Mr. Crowell. We have performance goals each year, and the
+payouts are based on performance of those goals, and all of our
+employees participate in that process. But there is a different
+compensation package for the executives.
+ I don't want the committee to misunderstand what I am
+saying. We do give performance incentives to all our employees
+who are there, but the executives are on a different program
+than regular employees.
+ Mr. McDade. I guess it ranges from $27,000 to a high of
+$147,000.
+ Mr. Crowell. Keep in mind that we have a nuclear chief
+there that gets one of the largest bonuses. We simply cannot go
+out and recruit somebody to run the nuclear program on $115,000
+a year. Although that is a lot of money, it is not enough to
+compete in the marketplace for somebody to run five nuclear
+plants.
+ Mr. McDade. I like your suggestion about detailing it in
+the record for us, and furnish it to the committee and the
+membership of the committee well before markup so we can take a
+look at that.
+ Mr. Crowell. I would certainly be happy to do that.
+ As I say, we make it public every year that they are
+awarded. It is public record, and we make it public and would
+be happy to supply that to you.
+ Mr. McDade. Some people are suggesting that you should not
+award bonuses until the debt gets reduced. Do you have any
+thought about reducing debts as a precondition to awarding
+bonuses?
+ Mr. Crowell. I would hate to be in that position, because
+we have a very sophisticated and very large system to operate,
+irrespective of the size of the debt; and I don't think we
+should throw operational excellence out the window in order to
+hamstring our executives based on that debt. The debt was
+created over a number of years. But as a board, we have got to
+make sure that we fulfill our responsibility to operate that
+system in a sound manner; and we need help to do that.
+ Mr. McDade. You are looking at efficiency, rather than the
+reduction of the debt, in the operational program?
+ Mr. Crowell. We should look at everything, the operational
+program should be looked at first.
+
+ chinese conference
+
+ Mr. McDade. We also heard from some critics about the
+conference that was held in Beijing with the Chinese. Were
+power dollars used or appropriated funds from Congress; and, if
+so, how many?
+ Mr. Crowell. No power dollars were used, but we did this as
+a joint--we co-hosted that with the State of Tennessee, and
+Governor Sunquist co-hosted it with us and was there in
+Beijing. We had 65 companies that went with us on that trip.
+ We think it was a very big economic development opportunity
+for those companies. We got great feedback from the companies
+that went, and we certainly thought it was money well spent to
+try to create economic development opportunities in the valley.
+ Mr. McDade. Could you be kind enough to elaborate a little
+bit on the specific benefits that accrued from the conference?
+What would you advise me to tell a critic who asks me, ``What
+is TVA doing over in Beijing spending my tax dollars?''
+ Mr. Crowell. Sure, I would be happy to respond to that.
+ Here is what I have told people. I have been asked by the
+media and others in the past. The TVA nameplate is very
+important in China and opens a lot of doors for us. The process
+of doing a conference was quite appealing to, as I said, to the
+State of Tennessee because the governor co-hosted the
+conference.
+ The nine States paid money to finance the conference, along
+with TVA; and the whole purpose was to use that opportunity to
+get the business leaders and the companies in the Tennessee
+Valley who want to do business with China to get them in the
+door, so to speak, with some of the Chinese officials and
+business leaders so they could have an opportunity to not only
+do business with the Chinese but to buy goods and services from
+the Chinese to be sold back in the valley or back in the
+perspective businesses where the people came from.
+ What I might mention is we have three very large banks in
+the Tennessee Valley headquarters. All three of them sent
+representatives on this. So it was viewed by the people who
+went as a very significant event. We had Saturn people. We had
+Westinghouse people. It was really very well attended by a very
+large group of people. Federal Express. These companies saw
+enough value that they paid the way for these people to go over
+and participate.
+ Mr. McDade. Potentially quite a market.
+ Mr. Crowell. Yes, it is.
+ Mr. McDade. Are you statutorily barred from any speculative
+interests in China?
+ Mr. Crowell. We do not plan to do any, so I don't know if
+we are barred or not.
+ Mr. McDade. Is it statutorily prohibited or not, do you
+know? Could you furnish that for the record?
+ Mr. Crowell. We don't plan to do that, but we would
+certainly supply it for the record.
+ [The information follows:]
+
+ The services being performed by TVA for the Chinese are
+consistent with TVA's statutory purposes as provided in the TVA
+Act. These activities are intended to help provide Tennessee
+Valley businesses with opportunities for growth and foster
+economic development in the Valley region. In addition, TVA's
+activities in China will increase the knowledge and experience
+of TVA personnel and help fully utilize the resources and
+expertise which TVA has developed.
+ There is no legal prohibition on the activities TVA is
+conducting in China. Also, TVA is not making any capital
+investments of its funds in China. TVA has signed Memoranda of
+Understanding with the Chinese Ministry of Electric Power, the
+Ministry of Water Resources, and the Lishui Hydro & Power
+Corp., under which TVA may provide consulting, training, and
+technical services to the Chinese in such areas as electric
+power production and river basin/water resource management. TVA
+is having discussions with the Chinese regarding specific
+activities in which it can assist in these areas, such as in
+reviewing a master plan for development of the Han River and
+providing technical information regarding modernization of
+hydroelectric plants. TVA will consider involvement in other
+projects where its expertise can be of benefit and
+appropriately utilized. If any of the projects being considered
+by TVA are implemented, we expect that TVA's costs to perform
+them would be fully recovered.
+
+ Mr. McDade. There are some reports that appeared in the
+press--and, as you said, you got a lot of press--that you
+agreed to develop hydro power in China and train Chinese
+managers at hydro plants in the United States. Is that true?
+ Mr. Crowell. We signed a memorandum of understanding with
+the Water Resources Ministry to provide training for people and
+to become involved in the planning phases along two of the
+rivers in China. This was part of the outcome of the conference
+that we had. And we have had some Chinese come to Tennessee
+since then to be trained on the integrated resource management
+of the river system like the Tennessee River and have been very
+successful with that program.
+ But there has been no proposal of us building anything over
+there. It has been a consulting----
+ Mr. McDade. At this point, it is training?
+ Mr. Crowell. Training-consulting arrangement, yes, sir.
+ Mr. McDade. How many people have you put through the
+training exercises? Is there a number that you can give us?
+ Mr. Crowell. Yes. The last group had 30 engineers in it,
+and that was in January.
+ Mr. McDade. Who is bearing the cost?
+ Mr. Crowell. Chinese are paying for the cost.
+ Mr. McDade. So zero cost to TVA?
+ Mr. Crowell. Yes.
+ Mr. McDade. Okay. That is helpful.
+ I am going to yield at this time to my friend Mr. Fazio.
+ Mr. Fazio. I have taken my time, Mr. Chairman; so I guess
+we can go to Mr. Visclosky.
+ Mr. McDade. The gentleman from Indiana.
+
+ Opening Remarks of Mr. Visclosky
+
+ Mr. Visclosky. Mr. Chairman, thank you very much.
+ Mr. Chairman, am I correct in understanding that you have
+recommended that we discontinue direct appropriations after
+fiscal year 1998?
+
+ elimination of tva appropriations
+
+ Mr. Crowell. Yes, that is correct.
+ Mr. Visclosky. Would that be for the power and nonpower
+programs? Is there a combination of our appropriations that go
+to both of these?
+ Mr. Crowell. No. The appropriations is $106 million being
+appropriated by this committee. The power program, the $5.7
+billion is not appropriated by this committee. It comes from
+the power sales of the TVA.
+ Mr. Visclosky. So the $106 million would be considered
+nonpower related?
+ Mr. Crowell. That is--the amount we are talking about is
+$106 million.
+
+ tva task force
+
+ Mr. Visclosky. And there is also a task force that has now
+been created to study how the responsibilities----
+ Mr. Crowell. The task force has been created to determine
+how to implement the proposal and what needs to be done to
+implement it, and that is why the task force was formed. It is
+the implementation phase of it. Our goal is to eliminate all
+tax funds to TVA appropriated programs.
+ Mr. Visclosky. After 1998, after the next fiscal year.
+ Mr. Crowell. Now that you mention it, I might say at this
+point that I have been receiving some feedback that perhaps
+that goal is too ambitious. And I don't know that yet. I am not
+here to say that it is too ambitious. I am just simply saying
+that I received feedback that it was too ambitious, and that
+working with the committee over the next few months we can
+determine whether or not it is too ambitious.
+
+ elimination of tva appropriations
+
+ Mr. Visclosky. Mr. Chairman, I assume that is a pretty
+serious statement for you to have made, whether it should be
+exactly a $106 million reduction or $100 million or $90
+million. You must have had something to base that on. My
+question would be, what is your position before us today as to
+how this should be handled? I understand you have a task force
+but something must have led you to that original conclusion in
+the first place.
+ Mr. Crowell. The original conclusion to make a proposal was
+certainly worked out very carefully over several weeks, perhaps
+a few months with OMB. There were a lot of discussions with OMB
+about it. So it was not something that we proposed without
+consultation with OMB about.
+ We have made it very clear from the very beginning that we
+cannot do this without the assistance of Congress. It is not
+something that we can unilaterally do. We wanted to get a
+project proposal before Congress and before the different
+constituent groups in the Tennessee Valley and then, through
+that process, the task force determine whether or not it is, in
+fact, a doable proposal. I certainly feel confident that we can
+do it, and it was something we gave a lot of thought to before
+we recommended it.
+
+ fiscal year 1998 budget request
+
+ Mr. Visclosky. Mr. Chairman, I would assume, although it
+would not have to hold true in each instance, that if you are
+looking to phase out an appropriation over the next 18 months,
+that the appropriation for the coming year would not
+necessarily have to be equal to the one in the current fiscal
+year.
+ While the mix is changed between the four major categories,
+I find it interesting that somehow the budget request still
+came out to be exactly the $106 million current level--that if
+we are looking to go from the $106 million in 1997 to zero in
+1999 that it is still $106 million in 1998. Even though the mix
+within that changed: each one of the figures in stewardship in
+land and water; Land Between the Lakes; economic development;
+and Environmental Research Center, are all different numbers.
+They happen to each add up to $106 million. There is no room
+for a reduction here in 1998?
+ Mr. Crowell. The one reason we are not proposing a
+reduction is what we are talking about doing here involves some
+very sophisticated activities by TVA.
+ Certainly flood control, navigation and dam safety and
+management of the reservoir system is a very sophisticated,
+very complicated matter; but we felt like we needed to keep the
+funding level the same--although it is not the same, because
+there is some reduction because we added some activities to it
+in our request that would give us the time necessary to make
+the adjustments and do them in an orderly manner, not get
+ourselves in a situation by which the public health could be at
+risk by coming down too fast.
+ Mr. Visclosky. We did not come down at all.
+ Mr. Crowell. That is right.
+ Mr. Visclosky. So you do not feel there is any room in your
+budget to come down at all in 1998?
+ Mr. Crowell. There is always room to do something, as you
+know; and that is why we are here presenting our budget to the
+committee. But it has been my experience in time past that the
+committee has the final decision on what gets marked up. I am
+just simply trying to make the case to you today that we are
+trying to eliminate all Federal funding, all tax funds to TVA.
+We need your assistance on it, and we think keeping the same
+level is certainly a reasonable request.
+ Mr. Visclosky. If we had to make a reduction you would not
+have a position today at the hearing where those reductions
+might be able to take place?
+ Mr. Crowell. I would hate to be put in that position,
+Congressman, at this point.
+
+ competitiveness of tva
+
+ Mr. Visclosky. Mr. Chairman, one last question if I could.
+Apparently, there is a GAO report that indicates that TVA does
+not have sufficient financial stability to compete in a
+deregulated industry. Would you agree with that assertion or
+not? Would you comment?
+ Mr. Crowell. That came up earlier, and we certainly
+disagree with that. We are very competitive now. We are a very
+low-cost producer of electricity if you look at our costs
+compared to other utilities and other communities in the
+country. So we certainly take exception to that in the GAO
+report.
+ Mr. Visclosky. Mr. Chairman, thank you very much for the
+time.
+ Mr. McDade. You bet.
+ The gentleman from Michigan.
+
+ Opening Remarks of Mr. Knollenberg
+
+ Mr. Knollenberg. Thank you, Mr. Chairman.
+ Chairman Crowell and panel, good to see you this morning.
+ A year ago, I think, when you testified before this
+subcommittee, you were saying some things on which you have
+apparently changed direction. I remember that you said
+something like the TVA operates more efficiently than other
+people do, and I suspect you were referring to some of the
+other agencies. And you went on to caution Congress and this
+subcommittee to make sure that we are getting the most
+efficient operation that we can get.
+ Then I think, finally, you said that TVA is the best. And
+you probably heard this from someone previously, and I am
+assuming from some more recent remarks that TVA has become
+apparently less able to deliver on those excellent standards in
+dam management.
+ Is TVA still the best, as you said on the 28th of March of
+1996? And, if so, would you still caution Congress in the
+fashion that you did the last time?
+ Mr. Crowell. No. I believe we still are the best. The
+proposal that we have before the committee has nothing to do
+with performance of TVA, it has to do with the deregulations
+coming into the electric utility business, positions TVA for
+the future, dealing with the uncertainties of deregulation. It
+is a strategy to get us----
+ Mr. Knollenberg. Pardon me. You went out of the business of
+stewardship. I think that is the direction you want, isn't it?
+ Mr. Crowell. I don't think we can necessarily get out of
+the business of stewardship, but that someone else could
+perform those duties for TVA. I mean, from the standpoint of
+changing the TVA Act, we cannot do that, obviously.
+ But sometimes when we make a proposal, well, let's
+eliminate tax funds, we are saying we are not doing a good job.
+That is not the issue at all in my mind by any stretch of the
+imagination. We think we are the best and still doing the best,
+but I think there is a larger issue here that we are dealing
+with and not just dealing with specifics on how we operate the
+dam.
+
+ tva debt
+
+ Mr. Knollenberg. Let me talk about some debt-related
+matters, and let me just clarify a couple things, and you can
+respond very quickly I think. What is the total debt of TVA?
+ Mr. Crowell. Just a little over $27 billion.
+ Mr. Knollenberg. How much is owed the Federal government
+for the initial installment--initial investment?
+ Mr. Crowell. We are paying $60 million on that, and I think
+it is a little over a billion dollars.
+ Mr. Knollenberg. Total is a billion?
+ Mr. Crowell. Yes.
+ Mr. Knollenberg. I heard it was higher, as high as three or
+four billion.
+ Mr. Crowell. Why don't you let me check the record and make
+sure it is accurate?
+ Mr. Knollenberg. But maybe I misunderstood what you were
+saying. I was talking about the original investment of TVA
+which we are paying down. But $3.2 billion is owed to the
+Federal financing bank. So if we subtract these numbers, we
+come up with what is owed to the bondholders, which is
+approximately what?
+ Mr. Crowell. $27 billion, because the $3.2 billion for the
+Federal funding is included in the number.
+ Mr. Knollenberg. It would be about $23 billion, then?
+ Mr. Crowell. If you deduct that from our number, you get
+what is on the public bond market.
+ Mr. Knollenberg. About $23 billion then, isn't it?
+ Mr. Crowell. On the public bond market, right.
+
+ air support
+
+ Mr. Knollenberg. We heard about the TVA Air Force--I don't
+want to classify it as an air force. Including helicopters, you
+have 11 planes, fixed wings and otherwise. And, of course, we
+all heard the story about the Citation Ultra, Citation 5, which
+costs in the range of what?
+ Mr. Crowell. I don't remember the exact figure, but it is
+substantial.
+ Mr. Knollenberg. I can tell you it is substantial. It is
+probably in the range of $5 million. That is a pretty hefty
+chunk of money to be spent for what? I guess that is my
+question. What are you going to use it for if you get it?
+ Mr. Crowell. We have not gotten it yet. What we have right
+now, we are flying a turboprop King aircraft.
+ Mr. Knollenberg. That lease will continue, is that right?
+ Mr. Crowell. I believe so, yes. But you have to keep in
+mind the helicopters we have are used for flying power lines,
+and that is part of every operational business. We have eight
+or nine helicopters, and we certainly need those on a day-to-
+day basis. We only have one character that is an executive
+aircraft.
+ Mr. Knollenberg. How many times a year do you fly that
+executive aircraft, the one you have now, the King Air, which
+is considerably less expensive than the Citation 5?
+ Mr. Crowell. I don't know. I can get that for the record. I
+don't know off the top of my head.
+ [The information follows:]
+
+ The TVA King Air 350 leased in FY 1995 flew 220 hours; 372
+hours in FY 1996.
+ TVA owns and operates one single-engine plane for
+photography and eight helicopters primarily engaged in
+transmission line patrol/construction and spraying (two other
+inoperable helicopters are used for parts). One helicopter is
+estimated at $1.3 million. The estimated value of the remaining
+operable aircraft is from $150,000 to $700,000 each.
+
+ Mr. Knollenberg. The reason I bring the question up is that
+if a company can't get a minimum 400 to 600 hours a year from
+its average corporate aircraft, then it is probably wasting its
+money. They have to hire a pilot along with that. Do you have
+your own pilots?
+ Mr. Crowell. Yes, we have pilots.
+ Mr. Knollenberg. Are these private pilots?
+ Mr. Crowell. These are TVA employees. If they are not
+flying King Air, they are flying the helicopters to look at the
+power lines to make sure they are operating.
+ Mr. Knollenberg. So they are multi-licensed? They can fly
+helicopters and the Citation?
+ Mr. Crowell. I don't think we have anybody--we have not
+taken any of those pilots and put them in any sort of Citation
+training, because I don't have that aircraft.
+ Mr. Knollenberg. How many helicopters do you have?
+ Mr. Crowell. I think nine.
+ Mr. Knollenberg. You have got nine helicopters. You have
+got a fixed-wing aircraft. You have two fixed wing?
+ Mr. Crowell. There is a fixed wing that does some other
+chores that are not involved in carrying people from one place
+to the other.
+
+ tva police
+
+ Mr. Knollenberg. I understand also that there is--and I
+will use the words that were presented to me--a TVA horse
+cavalry. I don't know if you would call it that or not, but it
+was an expenditure that caught my attention--involving several
+horses, trailers, riding equipment and what have you. And I
+suspect there is reason for them. Tell me what it is.
+ Mr. Crowell. We have what we call the TVA police at TVA
+which guards our property. We have some 265,000 acres of
+property, plus 170,000 acres of Land Between the Lakes, so we
+have a lot of buildings that need security. We have TVA police
+that do that. We patrol the recreation areas at reservoirs, and
+we do have a mounted patrol that is parts of that.
+ Mr. Knollenberg. Is this a brand new thing?
+ Mr. Crowell. No. It came in existence within the past year
+or so as a way to help patrol some of our reservoirs.
+ Mr. Knollenberg. What were you doing before?
+ Mr. Crowell. Just doing it in cars, which we still do.
+ Mr. Knollenberg. Is this cheaper?
+ Mr. Crowell. We believe it is cheaper. It is certainly cost
+effective. The officers who ride the horses also patrol in cars
+certain times of the year, so we do not need extra people to do
+this.
+ Mr. Knollenberg. I think there are some questions raised
+about that.
+
+ air support
+
+ I will come right back just for a moment to this plane
+situation. Will you keep the King Air if you get the Citation?
+ Mr. Crowell. I would expect so, yes.
+ Mr. Knollenberg. What are you going to do with that plane?
+If you are keeping them both, what is the reason for the
+additional one?
+ Mr. Crowell. Let me answer it this way. We are a $5.7
+billion operation. We are the largest utility in the country.
+There is no utility I am aware of that does not have a fleet of
+aircraft to get around to see their customers and to perform
+certain responsibilities that they need to perform. If
+anything, we are behind everybody else in the aircraft we do
+have. These aircraft are--the one aircraft we use to fly
+passengers is very important to our work to get around to see
+our customers. We have a very large service area.
+ Mr. Knollenberg. Is it possibly in anticipation of your
+widening circle of customers that you are anticipating the need
+for greater air utilization?
+ Mr. Crowell. No.
+ Mr. Knollenberg. Nothing to do with the future?
+ Mr. Crowell. That has never come up, no.
+ Mr. Knollenberg. All right. I believe that takes care of my
+questions.
+ I just note that there seems to have been a dramatic
+turnaround in your attitude in just the past year, and it is
+interesting that there is such a contrast, such a dramatic
+shift in thinking during that short period of time.
+ So it caught most of us by surprise; and it, obviously,
+must have, at some point, occurred to you that it would
+surprise the Members of Congress who have oversight on this and
+heard what you told us last year and what you are telling us
+this year. So I marvel at how quickly that changed within your
+perspective.
+ Mr. Crowell. I certainly would apologize for surprising any
+Member of Congress. That certainly is not in our interest to do
+that, certainly something we do not want to do.
+ You have to look--when you start looking at change, there
+is dramatic change occurring in the electric utility industry
+that is moving very fast. If you see in your own home states
+what is going on with wheeling, what is going on with FERC
+regulation power marketers. There is a dynamic change occurring
+in the electric power industry in this country; and we have to
+be flexible enough to change and to change quickly if we mean
+to succeed in the long term. And I have always looked at change
+as an opportunity, not change as a problem. To me, it is an
+opportunity.
+ So you are going to see not only us changing very quickly
+but the private companies in your district changing very
+quickly, too, to meet the conditions. A lot of it is really
+sort of an acceptance of realities to what is going on out in
+there that does not have anything to do with what we are
+driving but what is being driven by the industry.
+ Mr. Knollenberg. I thank you for your comments.
+ Mr. Chairman, I yield back.
+ Mr. McDade. Before I yield to the gentleman from Texas, I
+want to acknowledge the presence in the room of our colleague,
+Congressman Zach Wamp, who has obviously a very deep interest
+in the proceedings; and we welcome you, Zach.
+ Mr. Wamp. Thank you, Mr. Chairman.
+ Mr. McDade. I now yield to the gentleman from Texas.
+
+ Opening Remarks of Mr. Edwards
+
+ Mr. Edwards. Thank you, Mr. Chairman. Because of the
+interest of other colleagues, I will only ask one question and
+submit any others for the record with your approval, Mr.
+Chairman.
+
+ competitive advantages of tva
+
+ As a person who is attending his first meeting regarding
+the TVA, Mr. Chairman, I would like to ask you, when you say
+you are a low-cost producer of electricity compared to
+investor-owned utilities, are you comparing apples to apples?
+Have you factored in other disadvantages where it deals with
+local property taxes or other regulatory costs that investor-
+owned utilities have to incur? Is that statement still true
+after factoring in all of those considerations?
+ Mr. Crowell. Yes. What I was referring to was, we are at
+about four cents. We sell power for about four cents, and there
+are some utilities around us that are a little higher. Some are
+a little lower, and certainly there are others in the country
+that are higher. I am talking about the cost of what we sell
+power for with all costs included in it.
+ Mr. Edwards. When you say all costs, you do have a number
+of advantages that an investor-owned utility does not have. The
+point I am getting to is, if you were in my shoes trying to
+objectively determine how well you are doing your job, how
+efficiently you are producing energy, would you not want to
+consider certain cost advantages you have to make that
+determination?
+ Mr. Crowell. What we found among the people that buy power,
+certainly 14 utilities that buy electricity from us on a
+regular basis, they are just interested in what the bottom line
+cost is, and that is what I was referring to.
+ Now, the issue that comes up from time to time with the
+private power companies about so-called subsidies at TVA, I
+disagree with many of the assertions that are made by them
+because they also have advantages. But what I was trying to
+refer to when I said we are very competitive was the cost we
+could sell you if you were a customer based on what somebody
+else could sell it for.
+ Mr. Edwards. Thank you.
+ Thank you, Mr. Chairman.
+ Mr. McDade. I recognize the gentleman from New Jersey.
+
+ Opening Remarks of Mr. Frelinghuysen
+
+ Mr. Frelinghuysen. Thank you, Mr. Chairman.
+ Chairman Crowell, why do we need to wait until 1999 to
+implement this program? Why can't we do it by the end of the
+fiscal year?
+
+ elimination of tva appropriations
+
+ Mr. Crowell. As I said earlier, this is a very
+sophisticated system that we operate for flood control and for
+navigation and for dam safety and for recreational purposes and
+for everything else that goes on on the Tennessee River. I
+certainly would not advise anyone to try to make changes that
+are dramatic, like the ones that are being proposed in too
+short a time frame.
+ Mr. Frelinghuysen. But it is true that Congress has been
+trying to move you in that direction for a number of years in
+this committee.
+ Mr. Crowell. Yes.
+ Mr. Frelinghuysen. So it may be a sophisticated situation
+but, in reality, the handwriting has been on the wall that we
+have been pushing towards the elimination of the subsidy for
+some time. Isn't that correct?
+ Mr. Crowell. Our proposal is reasonable. I just--I could
+not sit here and advise this committee that we could do this
+sooner than what we are proposing.
+ In fact, as I said earlier, I am getting some feedback that
+it is perhaps too ambitious to do it in one year. So I
+certainly could not advise the committee to----
+ Mr. Frelinghuysen. I am sure you are getting some feedback,
+and I can understand that. With your way of looking at it,
+removal of this subsidy will eliminate the possibility of your
+having to come before this committee again. So if there is heat
+in the kitchen, maybe the best way to get the heat turned off
+is for you to eliminate this subsidy sooner rather than later.
+ Mr. Crowell. Congressman, I am not sure I should touch
+that. I am just simply saying that I couldn't--I would not feel
+comfortable recommending that we cut off too soon because of
+the impact----
+ Mr. Frelinghuysen. Does this truly mean the elimination of
+programs, as your pamphlet says, or do you mean transferring
+these functions to other areas of the Federal government?
+ Mr. Crowell. Well, in----
+ Mr. Frelinghuysen. Because a lot of what we are interested
+in here and what you are touting in this program is smaller and
+smarter government. What are we doing here? Are we transferring
+or are we actually eliminating?
+ Mr. Crowell. To answer your question, I know we are trying
+to do both. I never said--and I certainly hope I was not
+misunderstood--that we were going to save exactly $106 million
+by doing this. Because, obviously, a lot of these activities
+need to be continued because of the responsibility that the
+country has to the fifth largest river system that we have.
+ I do believe and I am firmly convinced that we can save a
+substantial amount of money but certainly not the whole $106
+million.
+ Mr. Frelinghuysen. But the number one priority you list
+here--by your own admission, the reason you are taking this
+action--the number one priority, and I quote, is to ``take
+strong action to reduce the size of government as expressed by
+congressional leadership.''
+ So I think you are indicating that as you are moving ahead
+with this proposal, you want to do it in two years. Some of us
+would like to see it done in one year. You want to actually
+reduce the size of government, not necessarily transfer
+functions to other agencies and therefore add to their budgets.
+ Mr. Crowell. I certainly appreciate your encouragement that
+you have been consistently giving us over the past couple years
+about trying to eliminate the funds that come to us from this
+committee; and the only thing that I am saying, I would not
+feel comfortable.
+ Mr. Frelinghuysen. Let me give you another area of
+encouragement.
+
+ recruitment of industry
+
+ Recently, I learned that the TVA is running television
+advertisements and even approaching companies in the
+Northeast--in my area, the Chairman's area--to relocate to the
+Tennessee Valley to take advantage of cheap power. One such
+company is Accupower located in Union County, New Jersey. It
+employees over 500 people.
+ What business does the TVA have in approaching companies
+and urging them to relocate to your region when the American
+taxpayer is subsidizing the TVA?
+ Mr. Crowell. I am not familiar with that. Are you familiar
+with that?
+ Mr. Hayes. I am not familiar with that.
+ Mr. Crowell. I am not familiar with that case at all.
+ Mr. Frelinghuysen. I will enter that question into the
+record. Because I find it, quite honestly, offensive no matter
+who is doing this soliciting in my backyard. It is somewhat
+akin to Mr. Rogers' question. I am angry at the thought that
+somebody is out there using a subsidized power base to pull
+businesses out of the Northeast when we have enough problem
+with unemployment.
+ Mr. Crowell. I would like to, Mr. Chairman, if I could,
+supply a good answer to that question for the record.
+ Mr. McDade. You can provide it.
+ Mr. Crowell. I am not familiar with it personally at this
+point.
+ Mr. McDade. Take a good, hard look. We would be delighted
+to have a complete answer for the record.
+ Mr. Crowell. Okay, great.
+ [The information follows:]
+
+ TVA has not recruited Accupower of Union County, New
+Jersey. TVA assists the Tennessee Valley Industrial Development
+Association (TVIDA), a group sponsored by distributors of TVA
+power through their regional industrial development
+associations. Neither TVA or TVIDA has any record of an inquiry
+or contact with Accupower of Union County, New Jersey.
+ The Tennessee Valley Industrial Development Association
+does purchase advertising in regional, national and
+international trade journals and publications. These ads are
+intended to inform readers of the benefits and advantages
+enjoyed by firms located in the Tennessee Valley.
+
+ Mr. Frelinghuysen. Do I have a little more time?
+ Mr. McDade. Yes, go ahead.
+
+ tva debt
+
+ Mr. Frelinghuysen. The TVA's debt is nearly $28 billion. Is
+it true that residential rates for customers of the TVA
+distribution utilities have remained about a third below the
+national average?
+ Mr. Crowell. That sounds accurate, but----
+
+ rates
+
+ Mr. Frelinghuysen. Well, I think you know where I am going
+with this line of questioning. Is it true that wholesale prices
+for TVA electricity are about half the national average?
+ Mr. Crowell. I would have to check. I don't think it is
+quite that much.
+ Mr. Frelinghuysen. You are the chairman, by your own
+admission, of the nation's largest electric utility; and surely
+you must know where you stand relative to other competitors in
+the marketplace.
+ Mr. Crowell. I do know that we are among the lowest in the
+country. We are in the top twelve in the country from the
+lowest producers--lowest-cost producer of electricity. But I am
+just not sure that I can answer your question about where--you
+know, at some 50 percent level or whatever. I do know we are a
+low-cost producer.
+ Mr. Frelinghuysen. If you could, answer for the record at
+some point in time where you stand relative to wholesale prices
+and redemption rates for your customers as opposed to people I
+represent.
+ Mr. Crowell. Okay. I will be pleased to do so.
+ [The information follows:]
+
+ The Edison Electric Institute publishes the national
+average price of electricity for residential consumers. In
+1995, that average was 8.38 cents/kWh. The average price paid
+by residential consumers of TVA power for 1995 was 5.94 cents/
+kWh, or about 70% of the national average. There is no
+equivalent statistic for wholesale prices since wholesale
+arrangements vary widely. However, TVA conducts a survey of 58
+utilities offering similar arrangements as TVA's wholesale
+product. The average wholesale price of those utilities was
+4.40 cents/kWh in 1995. TVA's average wholesale price for that
+period was 4.27 cents/kWh.
+
+ Mr. Frelinghuysen. And let me just ask a general question.
+Why hasn't the Authority, the TVA, permitted rate increases to
+help contain the growth of debt in the last ten years? Your
+debt has increased considerably, and the people that I
+represent get nailed every year with increases, and you tout in
+your materials here that you have not had a rate increase for
+ten years. The taxpayers that I represent have rate increases
+just about every time they pay their bills.
+ Can you tell me why you haven't permitted rate increases,
+and are you planning in any way to announce a rate adjustment
+or increase, given some of the things that you are laying out
+here in terms of taking on new responsibilities?
+ Mr. Crowell. Let me start this way. We felt that, economic
+development, supply and low-cost power for our region was the
+number one priority that we had, and so we have not raised
+rates to pay on the debt because we have been able to manage
+the debt very effectively and give low-cost interest. Our
+interest is somewhere around 7 and a half percent on average,
+which is very good.
+ We felt like the economic development aspect of our mission
+was more important at this particular point in time than to
+raise rates to pay on the debt because we were being
+competitive otherwise. If we were in a competitive situation,
+our strategy might, in fact, have been different.
+ As far as any rate increases are concerned, we have not
+undertaken our business planning for next year yet, so we don't
+know what the rate situation is going to be like next year
+because we have not gone through that process, and we will be
+going through that process in the spring and summer.
+ Mr. Frelinghuysen. With the Chair's permission, the
+gentleman from Kentucky wanted me to yield.
+ Mr. Rogers. Briefly yield.
+ Mr. Frelinghuysen. Yes, please.
+
+ joint tva/corps study
+
+ Mr. Rogers. And I will be brief.
+ Do I understand that the TVA and the Corps have been
+directed by OMB to conduct a study of your proposal to take
+over the Cumberland River facilities?
+ Mr. Crowell. The OMB has directed us to conduct a joint
+study, but as I recall from the language, it directs us to look
+at better coordination between the two rivers, it doesn't--I
+don't believe it is specific on what OMB wants us to do.
+ Mr. Rogers. Are you going to conduct that study?
+ Mr. Crowell. Yes, we have to do it.
+ Mr. Rogers. How are you going to pay for it?
+ Mr. Crowell. We are going to have to pay for it with the
+money already in the budget. We are not proposing any
+additional funds to pay for it. If there is any reprogramming,
+if it becomes necessary to pay for it, we certainly will advise
+the committee in advance.
+ Mr. Rogers. You are going to let us know that you are going
+to reprogram some money? You will let us know about that?
+ Mr. Crowell. Absolutely. Absolutely.
+ Mr. Rogers. Mighty kind of you. I appreciate that very
+much.
+ Mr. Crowell. The staff is very insistent that we keep them
+fully advised of reprogramming. We understand why, and we
+certainly have been cooperative, I believe, Mr. Chairman, in
+the past in making sure that we supply that information. We
+would not expect to change that.
+ Mr. Rogers. Mighty kind. Mighty kind of you.
+ Now, are you going to do this study with your own money, or
+are you going to ask us to reprogram some of your money?
+ Mr. Crowell. I don't know at this point because we don't
+have a budget that has been submitted to us by the task force
+yet. We certainly expect to get that.
+ Certainly the study will cost money. We are convinced at
+this point that we have adequate funding to conduct the study,
+and, as I said, if any reprogramming is necessary, we will
+notify the committee in advance.
+ Mr. Rogers. Will you be doing that study on your part with
+public funds, appropriated funds, or otherwise?
+ Mr. Crowell. In this case we would anticipate doing it with
+appropriated funds, which is the same funds the Corps would use
+to do it.
+ Mr. Rogers. If you propose to use appropriated funds for
+this purpose, would you advise this committee well in advance
+of that plan?
+ Mr. Crowell. Absolutely. Absolutely.
+ Mr. Rogers. Now, the Corps would have to reprogram their
+portion, would they not, of that study?
+ Mr. Crowell. I am not familiar with that, how they plan to
+finance the study, Congressman. So I just don't know.
+ Mr. Rogers. Thank you.
+ Mr. McDade. The gentleman from New Jersey's time has
+expired.
+ Mr. Frelinghuysen. Thank you, Mr. Chairman.
+ Mr. McDade. The gentleman from Mississippi is recognized.
+
+ Opening Remarks of Mr. Parker
+
+ Mr. Parker. Thank you, Mr. Chairman.
+ Welcome, gentlemen.
+ I am new to the committee, and I keep hearing this figure
+of $106 million. Now, I think the average person who listened
+to this discussion that we have had this morning would come to
+the conclusion that $106 million is all the money that you get
+from the Federal Government, and I don't think that is quite
+the truth. I would think that there is some more out there that
+maybe is not appropriated in exactly the same way.
+ Do you get more money from the Federal Government than the
+$106 million?
+ Mr. Crowell. The $106 million is all we get.
+ Mr. Parker. You get no more, no other money?
+ Mr. Crowell. All the other revenue we have is generated
+through the sale of power to our customers in the service area.
+There is no other funding stream other than sale of power and
+the $106 million we get from Congress.
+ Mr. Parker. I am going to have some questions submitted to
+you; then I would like an answer to some things.
+ Mr. Crowell. Okay. Sure. Certainly.
+
+ tva debt
+
+ Mr. Parker. You have got a debt out there of $27 billion.
+You have got total revenue of how much, Mr. Chairman?
+ Mr. Crowell. $5.7 billion.
+ Mr. Parker. You know, we are talking about big business
+here. Would that be a normal debt ratio for a major business
+out there to have $27 billion worth of debts with income of
+$5.7 billion?
+ Mr. Crowell. You have to look at how TVA can obtain money
+for capital. If you are a private power company, you would sell
+stock to raise money and you would borrow money to raise
+capital.
+ In our case, we cannot sell equity in the corporation, so
+the only funds available to us for capital are through bond
+issues, not through the sale of stock. But if you look at the
+amount of stock outstanding and the debt that is incurred by
+some of our neighbors, you will find that that is how you can
+really compare apples to apples, is look at the total of the
+two.
+
+ bond ratings
+
+ Mr. Parker. Well, let's talk about apples to apples.
+Moody's Investor Service gives you an AAA rating as far as your
+bonds.
+ Mr. Crowell. Yes.
+ Mr. Parker. If you did not have the U.S. Government backing
+those bonds, what kind of rating do you think you would get?
+ Mr. Crowell. Well, first of all, the Federal Government
+does not back the bonds. But I certainly--in the spirit of
+trying to respond to your question, certainly will tell you
+that being owned by the Federal Government is an advantage to
+us, obviously. I mean, it certainly is helpful, and I mean, I
+would not be candid if I didn't tell you that, if I told you
+otherwise.
+ Mr. Parker. I think it is everything. My personal view is,
+I don't think it gives you an advantage; I think it is
+everything. I mean, you could not operate the way that you
+operate if you did not have the backing of the Federal
+Government.
+ Mr. Crowell. Congressman, sometimes people ask me, they
+say, why is the Government in the power business? Why does the
+Government own the big utility, to start with, like TVA? What I
+try to say is that is reality, the Government does own us, the
+Government does have a large power company.
+ We could look back and say, maybe we should have done
+something differently in 1933. In my position here, I am trying
+to deal with reality and trying to prepare TVA to be successful
+in the long term and remain a valuable asset to the Government,
+because the Government does own TVA at this point.
+
+ electric industry competition
+
+ Mr. Parker. Mr. Chairman, what I have found in business is,
+what I own I can sell. Now, my view is that this
+reorganization--and this will be my last question--is happening
+so that you get rid of some of the responsibilities that you
+have been assigned. The power generation was not in your
+original charter, but it is something that has come about. It
+seems to me that you want to be competitive but you want to
+restrict your competition.
+ Now, am I looking at that right?
+ Mr. Crowell. Let me tell you the way I am looking at it.
+ Mr. Parker. Because I would like to know. I mean, you keep
+telling this committee how competitive you are and how well you
+run this place and how proud you are of TVA and how you can
+provide services on an open market.
+ I mean, you compare yourself to everybody in the country.
+But it seems to me that if that is the case, I want you to do
+that. I want you to compete. I want you to get out there and
+mix it up and let the consumer be the one to really benefit
+from this.
+ It just seems to me that you want the advantages but you
+don't want to compete in the real marketplace. I would like a
+response.
+ Mr. Crowell. Let me tell you as to where I am coming from,
+and I think I can speak for my two colleagues here, that we
+view ourselves as temporary stewards of TVA for a certain
+period of time that we have been asked to serve, and what we
+are trying to do is make TVA successful for the future and make
+it something that you and other Members of the Congress can be
+proud of since it is owned by the Federal Government.
+ We are down there doing our very best every day to try to
+make TVA succeed. We know we have a large debt, and we know we
+have other things that need to be dealt with, but what is
+depriving us is the effort to be a good steward of the
+corporation.
+ Our salary does not change at all based on our performance,
+but we are there trying to be good stewards every day, and we
+are trying to make TVA successful. And what I am trying to say
+to the committee is, we need help from Congress to make sure
+TVA remains an asset to the Government for the long term.
+ Mr. Parker. You have not answered my question. I want to
+know, what about competition? What about you getting out and
+competing? It seems to me you want to protect yourself where
+you are providing this power. I want you to compete. Why do you
+need that protection if you are doing such a good job?
+ Mr. Crowell. We would not even be having this discussion if
+deregulation of the utility industry was not imminent. That is
+what is driving all this. It is not something we went out and
+asked for, but we are trying to react and respond appropriately
+to deregulation. That is why we are having this conversation.
+ If we were back in the old way where everybody had their
+own service territory and deregulation and monopolies existed
+with defined regions to serve customers, this discussion would
+not be necessary, we would not be proposing a lot of these
+things.
+ Mr. Parker. So, you don't want a defined region; you want
+to be able to compete in the open market everywhere.
+ Mr. Crowell. If the utility companies can come in and take
+the customers of TVA and we were not able to replace those
+customers, we end up in financial distress over the long term
+and cannot be successful.
+ Mr. Parker. But what you want to do ultimately--maybe I am
+putting words in your mouth--you want to compete on the open
+market. You have a free market that you want to compete in, and
+anybody can compete with you, and you can compete with anybody
+else; is that correct?
+ Mr. Crowell. We are not saying that at this point because
+we don't know how deregulation is going to unfold and how this
+is all going to happen. I have not found anybody else that I
+know of who knows how deregulation is going to impact their own
+companies if they are private companies at this point. But we
+know impacts are going to be there, and we need to remain
+flexible. What we need to do to remain flexible is continue to
+do a good job and try to maintain the costs we have.
+ Mr. Parker. Thank you, Mr. Chairman.
+
+ elimination of appropriated programs
+
+ Mr. McDade. There is a lot of confusion on this side of the
+dais on the elimination of the Federal funds, and there have
+been several questions put to you about what the real savings
+are. I mean, I know you look at that fund and you take it down
+to zero and you can calculate it that way, but you are going to
+be transferring other obligations.
+ What is the real net savings of the elimination of that
+appropriation, and what might you be transferring? Please put
+numbers on it. We would like to know the numbers.
+ Mr. Crowell. I just don't know at this point. It is
+something--
+ Mr. McDade. You don't know the net savings?
+ Mr. Crowell. No, I do not.
+ Mr. McDade. Do you have an estimate?
+ Mr. Crowell. No, I do not.
+ Mr. McDade. What kind of transfers are you contemplating as
+a business practice?
+ Mr. Crowell. We don't know at this point until the task
+force takes a look at it. But there are obviously some entities
+out there that can do the job and are very limited, like the
+Corps of Engineers.
+ Mr. McDade. Some of the things that you want to do, some of
+those actions might be quite clear, I would assume.
+ Mr. Crowell. Yes, I understand what you are saying, Mr.
+Chairman. If I start saying here is what we need to do, do this
+and this, we don't need to get a task force to go out and get
+public input to make sure we are doing it right. If I sit down
+and tell the public, here's how I want to do this, then I am
+going to get a reaction from the public by saying, you did not
+give us a chance to see if there is a better way to do it or
+another alternative that we have. So I am trying deliberately
+to keep the process open.
+ Mr. McDade. Tell me when that number will be nailed down.
+ Mr. Crowell. It will be between now and September.
+ Mr. McDade. Between now and September?
+ Mr. Crowell. Yes, sir.
+ Mr. McDade. I am delighted to recognize my friend from
+Arkansas. And let me advise the committee that we have two
+votes coming, a fifteen-minute and a five-minute vote, and we
+are about at the ten-minute mark. So after we have recognized
+Mr. Dickey, we will adjourn and go and vote.
+
+ Opening Remarks of Mr. Dickey
+
+ Mr. Dickey. I appreciate you recognizing me, but that is
+all I want. Thank you.
+ Mr. McDade. Thank you. Enough said. The committee will
+stand in recess for ten minutes.
+ [Recess.]
+ Mr. Frelinghuysen [presiding]. I would like to begin the
+hearing again.
+ The Chair recognizes the gentleman from Alabama for some
+questioning.
+
+ Opening Remarks of Mr. Callahan
+
+ Mr. Callahan. Thank you, Mr. Chairman. And I apologize for
+not being here Mr. Chairman, for part of the hearing; and if I
+am repetitious, forgive me.
+ I have two areas of concern. One of them regards the
+fencing problems that you have experienced and the suit that
+TVA lost.
+ Mr. Crowell. Yes.
+
+ tva fence
+
+ Mr. Callahan. We would like for you to explain what you are
+going to do in the future to make certain that you do not
+violate the boundaries of the law as I see it, which prevents
+you from extending services outside certain designated areas.
+ Mr. Crowell. The lawsuit that you are speaking about, we
+obviously did not take any actions that we thought were illegal
+or inappropriate. The judge did rule against us in that, but we
+felt that we had good sound policy to undertake the contract
+that we did in that particular circumstance.
+ We obviously sought advice from our counsel before we
+entered into that contract, to start with, so that was a ruling
+that went against us.
+ To answer your question, we certainly seek legal advice
+before we take any actions at all to make sure that we are
+doing the proper things.
+ Mr. Callahan. Well, while I have tremendous respect for the
+legal profession, I am not a lawyer. I don't apologize for that
+fact. I have said it publicly in the past: having met some
+lawyers since I have grown to adulthood, had I known how little
+sense it took to get one of those degrees, I would have gone
+ahead and got me one.
+ I don't mean that as a blanket statement on the legal
+profession. My son-in-law is a lawyer now, and since he has
+presented me with a granddaughter, I have a great respect for
+the legal profession.
+ But I am concerned. I know that the law tells you where
+your boundaries are, and I know that it does not take a legal
+mind to look at a map and to look at the fencing restrictions
+that you have. And I guess what I want is your assurance that
+you do not intend to violate the boundaries of the restrictions
+you have.
+ Mr. Crowell. You have my assurance of that, Congressman.
+ Mr. Callahan. Well, that is good.
+ Secondly, I know that Congressman Rogers talked about his
+river in Kentucky, and I think that he has established an area
+that he is interested in, and certainly I do not think that you
+are going to do too much now as a result of Congressman Rogers'
+statements without notifying him.
+
+ environmental research center
+
+ And we all have to carve out niches. I don't want to run
+the TVA; I am not qualified. I do not want to. TVA contributes
+greatly to the power needs of a lot of people in Alabama,
+though none in my district. But still I want to represent those
+people who are served by the TVA.
+ Mr. Crowell. Certainly.
+ Mr. Callahan. But in your statement you mentioned the
+Environmental Research Center, and I am just going to have to
+adopt that as a little project of my own. It is a very minor
+part of your operations. But the proposal that is under
+consideration now for the Environmental Research Center seems
+unique.
+ Do you want to explain to me briefly what you are doing
+with the environmental research center and explain how this is
+not in competition with the free enterprise system or the
+academic system of the United States.
+ Mr. Crowell. Certainly, I would be happy to comment on
+that. First of all, let me just note that the Environmental
+Research Center phaseout was not part of the current proposal
+that we have before the committee on phasing out the entire
+appropriated programs. This is something we proposed a couple
+of years ago to do, and we are on track to make it self-
+supporting, and we are about 60 percent of the way there now.
+ Now, to answer your question about competing with others,
+this is a unique facility that offers services to others that
+are not readily available among private companies, and there is
+not the expertise there to do some of the things that we do.
+ Last year we did about $11 million worth of work for other
+Government agencies, and they have come to us because there is
+no other realistic way to get the work done. So I don't see a
+circumstance here in which we are going to be competing with
+private enterprise because some of the services do not exist
+elsewhere.
+ Mr. Callahan. Well, don't universities and private research
+centers already do some of the things that are being proposed
+by the Environmental Research Center? And doesn't the
+University of North Alabama or some entity within the
+educational world already do that? Aren't some private
+companies already doing some of this?
+ Mr. Crowell. Take an example of wetlands research which
+universities and others do work on, which we do at the
+Environmental Research Center, there is a difference in the way
+we do it than anybody else. Nobody else offers the integrated
+approach we do to wetlands management when it comes to
+specifically designing a wetlands for a specific industry.
+ There is no other place, that I am aware of, where somebody
+can get that kind of expertise. There is wetlands research,
+obviously, at other places, but there is a uniqueness about the
+Environmental Research Center in this particular area.
+ There are some other areas that are the same way, but that
+is one example. In trying to be responsive to your question, we
+don't see other organizations providing the same kind of
+research that we do at the ERC, although there may be some in
+the same category.
+ Mr. Callahan. There could be. Correct me since I am such a
+novice on this subcommittee but weren't you designed to provide
+power for rural areas? Isn't that your primary charge? Is that
+what you are supposed to do?
+ Mr. Crowell. Our primary charge was to be a resource
+development agency for a certain part of the country, which is
+the Tennessee Valley, and that involves not only power
+production but it involves navigation, flood control, and at
+the time we were created, we took over some of the Department
+of Army functions in Muscle Shoals, Alabama. That is how we
+came to have the Environmental Research Center to start with,
+because that whole facility, the reservation in Muscle Shoals,
+was previously owned and operated by Department of Army.
+ Mr. Callahan. Well, now you are asking for $6 million this
+year to enhance the Environmental Research Center, and then you
+are going to spin it off into a private subsidiary or a private
+organization. But if you spend $6 million on top of the
+accumulated millions of dollars that you spent establishing
+this, and then you spin it off into a private company without
+affording everyone the opportunity to bid on it, then it
+creates heartburn for some of us in government. And I just want
+to tell you that I would like for you to keep me posted on the
+direction you take.
+ I don't want to read in the newspaper what you did; I would
+like to know what you are going to do, and I want to ensure
+that private industry has the same opportunity to bid on this
+asset if it is going to be sold rather than spun off with some
+favoritism or priority going to some agency or some quasi-
+agency that may be proposed or that may have already been
+proposed.
+ So I am concerned about that, and I would appreciate you
+keeping me posted in advance on any change or any contractual
+arrangement you are going to make with respect to an asset that
+the United States has paid for. We have paid with taxpayers'
+money a great many millions of dollars to create, and now it
+appears--and keep in mind that it just appears--that there
+could be some favoritism shown with respect to spinning off to
+a potential profit-making company. It appears as if you are
+selling an asset of the United States without the worry of
+competitive bidding or without giving the opportunity for
+others to take a look at it in advance.
+ Mr. Crowell. Sir, certainly your comments are noted by us,
+and we certainly will keep you informed. And I might even
+suggest that, as a first thing, that we arrange a briefing for
+your staff on what is exactly going on there and what we are
+doing as just an initial approach, and we can do that
+relatively quickly, I believe; and then certainly I will be
+available personally to talk to you about anything we do at
+ERC.
+ Mr. Callahan. Thank you, Mr. Chairman.
+
+ land between the lakes
+
+ Mr. McDade [presiding]. Mr. Chairman, let me direct your
+attention to one of your great assets, the Land Between the
+Lakes. It is now about 34 years old since it was established as
+a demonstration project. What have we learned at Land Between
+the Lakes and its demonstration that we have not learned in
+other areas?
+ Mr. Crowell. What we have learned in Land Between the Lakes
+is how you can take a recreation area and have multiple
+constituencies that are able to take advantage of the
+opportunities of Land Between the Lakes. We manage it in a
+different way than most other entities of government that have
+that kind of responsibility do.
+ But I might make a point here----
+ Mr. McDade. Please.
+ Mr. Crowell. I am sorry. Go ahead, Mr. Chairman.
+ Mr. McDade. Go ahead.
+ Mr. Crowell. I might make a point that the original mandate
+to TVA-owned Land Between the Lakes was for us to turn it over
+to someone else after 10 years, and we did not do that. This
+proposal to do it is certainly consistent with the original
+mandate.
+ Mr. McDade. Have you had an opportunity to look at whom you
+would give it to? Have you talked about it?
+ Mr. Crowell. The task force will be looking at that to
+determine what recommendations will be made.
+ Mr. McDade. Same task force?
+ Mr. Crowell. Same task force as the others, yes.
+ Mr. McDade. How do you calculate visitor days? Do you do it
+the same way as Park Service, Forest Service, Corps of
+Engineers et cetera? Do you use the same calculation for
+visitor days?
+ Mr. Crowell. Bill has been our lead on Land Between the
+Lakes, Mr. Chairman.
+ Mr. Kennoy. We have about 2 million visitors a year, and
+that is done by counting the cars and multiplying that by 2.6,
+and that is the way, as I understand it, that other
+recreational areas do count the visitors.
+ Mr. McDade. So you think it is consistent with all other
+federal park procedures?
+ Mr. Kennoy. Yes, I do.
+ Mr. McDade. Okay. Would you put into the record for us,
+please, a 5-year sweep of the visitor days?
+ Mr. Crowell. Certainly, I would be happy to do so, Mr.
+Chairman.
+ [The information follows:]
+
+ LBL records annual visits rather than visitor days. LBL's
+visitation is shown below.
+
+------------------------------------------------------------------------
+ visits
+ -------------------------------------
+ 3 people/vehicle
+ Calendar year (Sept.-May) 4 2.6 people/
+ people/vehicle vehicle (all
+ (June-Aug.) year)
+------------------------------------------------------------------------
+1992.............................. 2,312,209 .................
+1993.............................. 2,203,173 .................
+1994.............................. 2,495,159 1,889,736
+
+------------------------------------------------------------------------
+1995 \1\.......................... ................. 2,049,302
+1996.............................. ................. 1,962,745
+------------------------------------------------------------------------
+\1\ Note in 1995, the formula for calculating visits was changed based
+ on new LBL visitor Survey data. 1995 visits cannot be compared to
+ previous year's numbers. 1994 visits are shown using the original and
+ new formulas for comparison purposes.
+
+ Mr. McDade. Last year we appropriated some money for you
+for Land Between the Lakes, and as we went through the process,
+the money was cut by $600,000, you will recall. Prior to the
+cut, TVA said it had all the money it needs to run the
+organization. Then you got a $600,000 cut in the budget. What
+did do you to make up for the shortfall?
+ Mr. Kennoy. Some things have been neglected and have been
+neglected over the years.
+ Mr. McDade. I am talking about one fiscal year now.
+ Mr. Kennoy. Right, it was a shortfall. I did an analysis in
+June of the infrastructure to see what was really needed down
+there. That has been completed now, and there is a big
+shortfall. Today we had an $800,000 loss just due to flooding
+down there at Land Between the Lakes.
+ Mr. McDade. Disaster flooding?
+ Mr. Kennoy. Yes, sir.
+ Mr. McDade. But I am kind of zeroing in on the fact that
+you folks said you had plenty of money to run it. You were cut
+$600,000; you didn't seem to bat an eye; it didn't seem to
+bother you a bit. I am trying to figure out what you did.
+ Mr. Crowell. I might mention here, Mr. Chairman, that about
+36 percent of the revenue at LBL comes through fees and through
+sources other than the appropriations from Congress, and we
+were on a path to increase those.
+ So I think the answer to your question is that we felt
+comfortable we could make up the difference and continue to
+operate Land Between the Lakes because we were charging fees
+for other activities.
+ Mr. McDade. Amplify that for the record, would you please?
+How much did you increase the fees, do you recollect?
+ Mr. Crowell. Not right offhand. I don't think the fees were
+increased. The revenue from the fees were increased. I would
+certainly be happy to provide that for the record.
+ [The information follows:]
+
+ For FY96, revenue was earned in the following categories.
+
+Full Service Camping..............................................$1,175
+Basic Service Camping............................................. 161
+Hunting........................................................... 298
+Wildlife Viewing.................................................. 21
+Interpretive Facilities........................................... 305
+Environmental Ed Resident Cntr.................................... 561
+Timber and Open Land Management................................... 812
+ -----------------------------------------------------------------
+ ________________________________________________
+ Total LBL revenue............................................... 3,452
+
+ Mr. McDade. Last fall you were reportedly conducting an
+inventory of infrastructure needs at Land Between the Lakes.
+Have you completed that inventory yet?
+ Mr. Kennoy. Yes, we have.
+ Mr. McDade. What are the total costs associated with the
+identified infrastructure needs?
+ Mr. Kennoy. I believe we need about $17 million to restore
+the roads, the system of trails.
+ Mr. McDade. Now this is exclusive of any flooding or
+disaster needs?
+ Mr. Kennoy. Yes, that is right. We have 400 miles of road.
+We have got 221 cemeteries that we have to provide access to at
+Land Between the Lakes. There are about 30,000--I will furnish
+you the number of miles of trails we have down there. But it is
+an enormous area.
+ Mr. McDade. What is the bottom line on infrastructure
+needs?
+ Mr. Kennoy. We need about $17 million for exterior, and
+there is another $8 million we need to take a look at how to
+help the areas provide infrastructure for those cities and
+communities around it.
+ Mr. McDade. So you think you are down about $25 million; is
+that right?
+ Mr. Crowell. Actually about $17 million on the interior.
+But we feel if you really want it to be self-sufficient, we
+need to have money for infrastructure for the gateway cities
+and the entryway cities for LBL.
+ Mr. McDade. Is any of that need reflected in the budget for
+this fiscal year?
+ Mr. Kennoy. We are getting about $1.9 million more than the
+$6 million we had last year. That is about the average
+shortfall we had over the last 20 years too. But that will be
+used to pave the main trails, about 16 miles of main trails, to
+help some of the infrastructure at the different facilities we
+have at LBL. Those are the primary things we need to do now. So
+we will use that $1.9 million dollars to do that initially.
+ Mr. McDade. One of the items that appears in the
+justification is an apparent increase of 370 percent for
+personal service contracts in fiscal year 1998. What is all
+that about?
+ Mr. Kennoy. We have a lot--we do a lot by permanent
+contracts. We have a contract model that we follow throughout
+TVA.
+ Mr. McDade. The question is, why this huge increase?
+ Mr. Crowell. I might interject here. We have taken the
+manpower at LBL down from around 250 down to just over 100
+people, FTEs, at Land Between the Lakes. So we have to make up
+for some of the work load that is involved there, and what we
+have done is rely more on contractors, as opposed to adding
+FTEs at Land Between the Lakes. But we have had a fairly
+dramatic decrease in FTEs at LBL over the past few years.
+ Mr. McDade. Do you know offhand, anybody at the table, what
+the beginning of the year and end of year employment levels
+were for fiscal year 1997 and fiscal year 1998?
+ Mr. Kennoy. Right now--I think about 109 employees right
+now.
+ Mr. McDade. Where were you at the beginning of last year
+and end of last year?
+ Mr. Kennoy. It was the year before last that we made the
+big cuts, and that was part of an overall downsizing by TVA.
+ Mr. McDade. I will tell you what I want you to do, please.
+Furnish to the staff of the committee and insert into the
+record the total employment at the beginning of the year and
+total employment at the end of the year for 1996, 1997, and
+1998, please.
+ Mr. Crowell. We will be pleased to do so.
+ [The information follows:]
+
+------------------------------------------------------------------------
+ Beginning End of
+ Fiscal year Budgeted of year year
+------------------------------------------------------------------------
+1996................................... 114 \1\ 118 \1\ 110
+1997................................... 114 \1\ 109 114
+1998................................... 114 114 114
+------------------------------------------------------------------------
+\1\ Actual.
+
+Note: Budget projections were developed prior to Chairman Crowell's
+ proposal to eliminate federal funding for LBL by 1999. Where possible,
+ vacancies will not be filled; instead work will contracted for the
+ remainder of 1997 and 1998.
+
+ Mr. McDade. I am delighted to yield to my friend from
+Kentucky.
+ Mr. Rogers. Briefly, on the Land Between the Lakes, most of
+it, of course, in Kentucky. There was a proposal that you had
+for a while to commercially develop a portion of LBL; is that
+not correct?
+ Mr. Crowell. Yes.
+ Mr. Rogers. You have abandoned that proposal, have you not?
+ Mr. Crowell. Yes, that is correct.
+ Mr. Rogers. And so you will not allow any of LBL to be
+commercially developed, will you?
+ Mr. Crowell. What do you mean by that? I guess the general
+answer to your question is, that is correct, we will not. But
+we do sell soft drinks and supplies, but the development is off
+the table.
+ Mr. Kennoy. The development should be just to support that
+on the outside--should be minimal.
+ Mr. Rogers. You are fully appreciative of the fact that the
+people who formerly lived there, whose land was condemned and
+taken from them, and who were moved out have a great deal of
+resentment when you talk about selling that property to
+commercial interests for commercial development inside what is
+considered to be----
+ Mr. Crowell. Right, we got that message, Congressman.
+ Mr. Kennoy. 788 families that were moved, and their
+interests should be protected.
+ Mr. McDade. Our colleague, Zach Wamp, is here, and he has
+to chair another committee, so we are going to break
+precedence. Usually we require a member to wait until all the
+questions are asked, but because he has this other committee
+obligation, we are going to yield a minute to Zach.
+
+ Opening Remarks of Mr. Wamp
+
+ Mr. Wamp. Thank you Mr. Chairman, very much for your
+indulgence. As a new member of the full committee, I must say
+it is an honor to be at this subcommittee.
+ Certainly there are no new members of this full committee
+on this subcommittee on our side of the aisle; otherwise, I
+would hope to be sitting here on a more permanent basis. But it
+is a real privilege to be here.
+ I want to make three quick points because I sat back and
+forth between the Interior subcommittee this morning and here
+to address Mr. Visclosky's concern with the $106 million
+request versus $106 million last year and why the number is
+inflated in certain areas.
+ Let me make a point that is extremely critical for our
+national interest. We have two major construction projects in
+the Tennessee Valley region. One is the Kentucky Lock
+replacement, which is now a Corps of Engineers project. One is
+the Chickamauga Lock replacement, which is still a TVA project,
+it is not yet a Corps project. The funding request for that in
+last fiscal year was denied; It came away from the conference
+with a zero.
+ We are now one year behind. It is a major safety and
+commerce issue on the Tennessee River, the Chickamauga Lock;
+$6.6 million of this request, this increase, is for that
+particular issue, replacing the Chickamauga Lock. That is why
+it is an increase. I would hope that it would not have been an
+increase, but, frankly, that is part of the increase in this
+stewardship ticket. I will tell you, there is consensus around
+the Chickamauga Lock being replaced on the Tennessee River.
+There is not yet consensus on the chairman's proposal in the
+Tennessee region, but there is on that.
+ I would also like to ask the chairman to--at least for the
+record for the Members, to express his desire to refinance that
+FFB debt and what that would do to the bottom line at the
+Tennessee Valley Authority, because that is also a significant
+long-term issue, I think, for Mr. Frelinghuysen's concern about
+the debt.
+ Then lastly, I would just point out that, as a former
+member of the Transportation Committee, the State of Tennessee,
+as with many other southeastern States, is a donor State on
+transportation issues, and the entire Tennessee Valley region
+is still 10 percent behind the rest of the nation in the amount
+of Federal dollars per capita that flow into our region.
+ So before we get into too many parochial battles here, we
+are way behind, all the way back to the Great Depression, the
+reason FDR did this. It is not cured yet, and we will take this
+debate to the Floor and to the full committee, but I want those
+issues pointed out today as we talk about parochial interest.
+ I don't know, Mr. Frelinghuysen, whether the State of New
+Jersey is a donor State on transportation, but I know our State
+sure is. We get back less money than we pay in.
+ Mr. McDade. Let me say to my friend, we recognize your
+comments.
+ Mr. Wamp. Thank you, Mr. Chairman.
+ Mr. McDade. I recognize the gentleman from California.
+ Mr. Kennoy. Could I clarify one question?
+ Mr. McDade. Yes.
+ Mr. Kennoy. The TVA's request to OMB over the last--in 1996
+and 1997 were about $183 million, and the President's budget
+request to Congress was $134 million. So Congress did fund what
+we asked for during that period of time.
+ Mr. McDade. We appreciate your suggestion.
+
+ automobile fleet
+
+ Mr. Knollenberg. I will be fairly brief. I did raise the
+question about the air force and the cavalry in the last round.
+While we are at that, let's take a look at the auto fleet, and
+I know you have one. Do you have among those automobiles any
+luxury cars?
+ Mr. Crowell. I do not. I am not aware--when you say
+``luxury cars,'' do you mean something like Town Cars or
+Cadillacs?
+ Mr. Knollenberg. Yes, Mercedes or limos.
+ Mr. Crowell. We have no limos, if that is what you are
+asking.
+ Mr. Knollenberg. What is the size your auto fleet?
+ Mr. Crowell. I don't know offhand. We supply cars from a
+motor pool that our employees use when they are on business. So
+I don't recall right off the top of my head. I am not aware of
+any luxury cars, period. And I just want to be absolutely sure
+that there is not something that you would think is a luxury
+car. I would be happy to look at it.
+
+ patrol boats
+
+ Mr. Knollenberg. You have got a navy of some size. I
+understand that you have some 12 high-tech patrol boats that I
+have been told are seldom, if ever, put in the water. And I
+also note that your spokesman, Mr. Francis, Gil Francis,
+defends this practice of not using this fleet because, as he
+puts it, the mere presence of these boats has a calming
+influence.
+ I don't know what the total cost of that combination of
+those 12 boats is, but it does raise the question if they are
+not being used, what is the justification for them? And
+further, the press accounts have indicated that the TVA has
+said that the boats have been used to protect the President,
+Vice President, and their families while they are in the area.
+ What other functions aside from being, quote, a calming
+influence in some fashion--to whom, I am not really sure, but I
+am just quoting from sources--do these boats have?
+ First of all, what is the cost of the entire----
+ Mr. Crowell. I don't remember the exact cost. There are
+11,000 miles of shoreline that we are responsible for. We are
+responsible for the safety of people who use those facilities
+for the boaters, and we are concerned about the number of
+drownings that occur in our lakes every year, and we work
+jointly with State agencies to do that.
+ What Mr. Francis was trying to say was that we don't see
+our role as trying to issue citations all the time to our
+citizens, we see it as a way to try to make boating more safe
+and to protect the property and people that use it. He was
+trying to say we don't see it as a unit that is trying to get
+more citations issued and therefore success is based on number
+of citations issued, we want success based on fewer number of
+boating accidents.
+ Mr. Knollenberg. That was new acquisition, wasn't it?
+ Mr. Crowell. This was part of the TVA that was created by
+Act of Congress in 1994.
+ Mr. Knollenberg. I understand that, but--by the way, if you
+lost LBL as part of your oversight responsibility, wouldn't
+that cut down some of the need?
+ Mr. Crowell. It certainly would, yes.
+ Mr. Knollenberg. You are actually expanding now in this
+arena that you are proposing to shrink in size.
+ Again, I go back to the statement that says the boats are
+not being used, they are just a calming influence; they hardly
+get in the water.
+ Mr. Crowell. They are in the water quite often, I am
+confident. If you look at TVA, as I said earlier, we are
+required to protect our property. The security force is used to
+protecting the property and the public uses it. We can't
+operate a system like we do without having any protection
+supplied to the public out there.
+ Mr. Knollenberg. I don't question the need for it. I am
+just curious why there seems to be a greater need now when in
+fact your requirement and your oversight responsibilities have
+been diminished.
+ You know, all of these questions have nothing to do with
+anything except your debt. I am concerned about that $27
+billion and if we are moving in a direction of expending money
+for the kind of things we have talked about, like the so-called
+air force and that one plane that seems to be a substantial
+jump from what you have been used to. And you have got an auto
+fleet and navy and what have you. It is a concern to me, and I
+think this committee, that you move in a direction of doing
+something about lowering the debt. It occurs to me that maybe
+you are raising some of those debt columns, and that is of
+major concern to us.
+ That is why those questions are being generated. And they
+are coming from your own sources, not from anything that we
+have dug up on our own. They are out there.
+ Mr. Crowell. What I need to really clarify here, which I
+think is important when you talk about these patrol boats and
+security, we have undertaken a plan in the creation of these
+activities. We are looking at contracting out some of the
+activities. We believe we can save $3 million a year on
+security at TVA by the way we have reconfigured and the way we
+are doing this. So this is not an addition to the cost of TVA;
+this is all a part of the plan to reduce expenditures for
+security. And I would like to, if I could----
+ Mr. Knollenberg. This is some of your hometown papers that
+are talking about that.
+ Mr. Crowell. I understand. And I have seen those stories,
+but I have never been in a limo when I am up here. A limo to me
+is something that has more than four doors on it, and that is
+not what we use. So sometimes there are misunderstandings that
+somehow there are luxury cars here that do not exist.
+ Mr. Knollenberg. We would appreciate the information I
+requested.
+ Mr. Chairman, that concludes my questions. Thank you.
+ Mr. Crowell. Yes, certainly.
+ [The information follows:]
+
+ TVA currently has 1,306 sedans operating; none of these are
+luxury vehicles. There are 671 sedans assigned to the
+individuals or organizations who require them for frequent,
+ongoing business travel. The remaining 635 sedans are assigned
+to a network of motor pools and are available to all TVA
+organizations for occasional or short-term travel needs. TVA's
+sedan fleet has been the subject of a recent internal study;
+recommendations resulting from this study are expected by the
+end of March and could reduce the size of the sedan fleet.
+ The boat patrol budget for FY97 is $37,000. Year-to-date
+(through February 97) expenditure $15,292.
+ Throughout the Tennessee Valley, a total of 24 TVA lakes
+cover more than 1,000 square miles of water surface and have
+11,000 miles of shoreline. As more people use the lakes, there
+are more lake mishaps, including drownings as well as improper
+activities. The primary function of the patrol boats is to help
+improve and promote water safety. Additionally, they are
+utilized in search and rescue and flooding operations. The
+patrol boats duties include:
+ 1. Enhance public relations.
+ 2. Provide boater assistance.
+ 3. Advise and protect public users of the Tennessee River
+and TVA lakes.
+ 4. Protect and inspect TVA properties and natural
+resources.
+ 5. Enforce federal and state boating laws.
+ TVA boats are strategically located throughout the
+Tennessee Valley service area to provide more efficient
+response to normal patrol activities and waterway emergencies.
+Officers working as boat patrol officers do so as a collateral
+duty. No additional personnel were employed for the boat patrol
+operations.
+
+ Mr. McDade. The gentleman from Indiana.
+
+ land between the lakes
+
+ Mr. Visclosky. Thank you, Mr. Chairman.
+ In response earlier to the Chairman's question, about
+whether or not TVA had ever considered alternative arrangements
+for the permanent administration of the Land Between the Lakes,
+what was your answer?
+ Mr. Crowell. We have not done so.
+ Mr. Visclosky. So, in all of that time subsequent to its
+creation as a temporary demonstration authority, the
+administration never considered any alternative?
+ Mr. Crowell. No. As I recall, historically what happened in
+1964, Land Between the Lakes was created to be put together as
+a demonstration project for five years and then held by TVA for
+ten years and then turned over to some other entity.
+ At the end of that ten-year period, the TVA board at the
+time conducted a study and decided to retain the management and
+ownership of Land Between the Lakes. That was not a decision
+that was required by Congress, as I understand it, or by the
+administration. It was a decision made by TVA. And the only
+point I was making when I was addressing the Chairman's
+comments is our proposal to now turn TVA to another entity is
+not inconsistent at all with the original mandate given to Land
+Between the Lakes.
+ Mr. Visclosky. The Chairman also asked about the 370
+percent increase in the personal service contracts, and your
+response was essentially that because you have had a
+significant reduction in your FTEs there is some necessity to
+enter into these contracts.
+ I am also confused, then, about when the significant
+reduction in FTEs occurred. And you had indicated you would
+answer that for the record. You don't have your FTEs with you
+here?
+ Mr. Crowell. I don't think we have them.
+ Mr. Kennoy. We have 106 people there now.
+ Mr. Crowell. The reduction occurred about two years ago.
+ Mr. Visclosky. So the reduction occurred two years ago. The
+370 percent increase is this year, not over two years ago?
+ Mr. Crowell. I am not certain about that. I will have to
+supply that for the record, if I may.
+ Mr. Visclosky. Well, my understanding is the 370 percent
+increase in personal service contracts of Land Between the
+Lakes is an increase for fiscal year 1998 over fiscal year
+1997.
+ Mr. Crowell. 1997 and 1998.
+ Mr. McDade. 1997 and the following fiscal year.
+ Mr. Crowell. I am sorry, I don't have an explanation that I
+can give you right now on that.
+ Mr. Visclosky. And the FTEs were constant, from your
+testimony here, between fiscal year 1996 and 1997?
+ Mr. Crowell. I believe that is the case.
+ Mr. Visclosky. Okay. Assuming that is the case, then that
+wouldn't explain why you have a 370 percent increase proposed
+for next year if your decrease, in fact, took place two years
+ago.
+ Mr. Crowell. The decrease in Land Between the Lakes next
+year, almost all of that----
+ Mr. Visclosky. I am asking about the 370 percent in
+personal service contracts.
+ Mr. Crowell. I am sorry, Congressman, I can't recall that
+information out of my head at this point and I just am not able
+to answer your question.
+ Mr. Kennoy. It would be helpful if I had a dollar amount to
+compare it to rather than percentage.
+ Mr. Visclosky. I will be happy to give you a dollar amount.
+My understanding is that your budget for personal service
+contracts for 1997 is $41,000, if I am correct, and that your
+estimate for 1998 is $193,000.
+ I might point out, and depending again when you saw your
+FTE reductions, that your personal service contract amounts in
+1996 were $53,000, and in fact for the current fiscal year your
+personal service contracts went down from the year before, when
+you are telling me your FTEs collapsed. Certainly they are
+going up----
+ Mr. Crowell. I know the FTEs are about the same and I know
+it is a reduction over 2 years ago, but I just don't know the
+answer to your question right now about the contractors but I
+certainly can obtain that information and get it to you
+promptly.
+ [The information follows:]
+
+ The increase of $152,000 in TVA's request for LBL will be
+used for backlogged infrastructure repairs. TVA will contract
+out most of this work. Some of these contract costs were
+inadvertently placed in the personal serivces category in the
+budget rollup. LBL's personal services contracts will be
+approximately the same as for the previous two years.
+
+ competitive advantages
+
+ Mr. Visclosky. If I could ask a couple other questions, Mr.
+Chairman. Are you exempt from Federal income tax?
+ Mr. Crowell. Yes, we are.
+ Mr. Visclosky. Are you exempt from State income tax?
+ Mr. Crowell. Yes.
+ Mr. Visclosky. Are you exempt from State ad valorem taxes?
+ Mr. Crowell. Yes.
+ Mr. Visclosky. Are you exempt from local ad valorem taxes?
+ Mr. Crowell. Yes.
+ Mr. Visclosky. Do you have access to preference power at
+prices below market?
+ Mr. Crowell. We are not.
+ Mr. Visclosky. You do not?
+ Mr. Crowell. No.
+ Mr. Visclosky. Okay. Would you argue that these
+characteristics do not operate to allow you a competitive
+advantage in a deregulated industry?
+ Mr. Crowell. I can make a very strong argument here on the
+tax situation from this standpoint. We make tax equivalent
+payments of 5 percent of our sales, and this past year along
+with our distributors we paid about 5.7 percent.
+ Mr. Visclosky. To whom?
+ Mr. Crowell. To the States.
+ Mr. Visclosky. What about the Federal Government?
+ Mr. Crowell. Not to the Federal Government.
+ But let me make my point here. The people that hold our
+bond, for example, pay something like $400 million a year in
+taxes. We do not have any tax-exempt bonds, whereas private
+power companies have both State and Federal.
+ The point I was trying to make is simply this, we paid
+about 5.7 percent this year in tax equivalent payments and the
+average utility in our area paid about 5 percent of Federal
+income taxes, so if I think there is any advantage at all, it
+goes to the private power companies not to us on the taxes
+required for us to pay, and we paid about 5.7 percent compared
+to an average of 5 elsewhere. So I don't see that as an
+advantage to us at all.
+ Mr. Visclosky. Those payments are not made to the Federal
+Government. Are they made to local agencies of government?
+ Mr. Crowell. That is correct. That is correct.
+ Mr. Visclosky. Local agencies.
+ Mr. Crowell. State governments. The States apportion it out
+to the local governments. We don't do that. It is paid directly
+to the States.
+ Mr. Visclosky. Do you know if the States reimburse the
+locals for their lost ad valorem taxes that you might not be
+paying or are the States simply distributing what you are
+paying to the States?
+ Mr. Crowell. They are distributing that. We have no control
+over what they pay to the States.
+ Mr. Visclosky. I didn't ask you that.
+ Mr. Crowell. I don't know the answer to that.
+ Mr. Visclosky. Could you respond to that in writing for the
+record?
+ Mr. Crowell. Yes. The States, as I recall, have their own
+formulas that they set for distributing this revenue, which
+last year was $250 million in TVA. I am not familiar a lot of
+times with each State's formula on how they distribute it. But
+I can certainly get that for the record.
+ [The information follows:]
+
+ Section 13 of the TVA Act directs TVA to pay five percent
+of its gross revenue from the sale of power for the preceding
+fiscal year (excluding sales to federal agencies) to states and
+counties in which the power operations of the agency are
+carried on and in which TVA has acquired properties previously
+subject to state and local taxation.
+ The states' payments are determined as follows: one-half on
+the basis of the ratio of TVA power revenues attributable to
+each state to total power revenues to all states, and one-half
+on the basis of the ratio of book value of power property
+within each state to total book value of TVA power property.
+The Act also specifies that the minimum annual payment to each
+state (including payments to its counties) in which the agency
+owns and operates power property shall not be less than
+$10,000.
+ All states, under applicable state laws, redistribute a
+portion of their TVA tax-equivalent payment to their local
+governments. The formulas for allocating the payments differ
+from state to state and are based on individual state statutes.
+ Payments to counties are equivalent to the average annual
+ad valorem county and district property taxes paid for the two
+tax years immediately preceeding acquisition on power property
+purchased and operated by TVA and on the portion of land
+acquired for reservoir purposes.
+
+----------------------------------------------------------------------------------------------------------------
+ Fiscal year 1995 Fiscal year 1996
+ -----------------------------------------------------------------------------------
+ State Total Payment to Payments to Total Payments to Payments to
+ payments State counties payments State counties
+----------------------------------------------------------------------------------------------------------------
+Alabama..................... $62,445,162 $62,406,924 $38,238 $63,462,453 $63,462,463 $37,990
+Georgia..................... 3,197,459 3,143,294 54,165 3,358,529 3,304,364 54,165
+Illinois.................... 227,158 169,148 58,010 224,720 166,710 58,010
+Kentucky.................... 14,725,404 14,688,246 37,158 14,705,870 14,668,712 37,158
+Mississippi................. 12,308,589 12,275,294 33,295 13,030,184 12,996,896 33,288
+North Carolina.............. 850,114 842,902 7,212 839,568 832,356 7,212
+South Dakota................ 26,110 7,540 18,570 26,110 7,540 18,570
+Tennessee................... 157,385,558 156,115,112 1,270,446 159,484,004 158,214,111 1,269,893
+Virginia.................... 557,136 555,845 1,291 546,461 545,170 1,291
+ -----------------------------------------------------------------------------------
+ Total................. 251,722,690 250,204,305 1,518,385 255,677,899 254,160,322 1,517,577
+----------------------------------------------------------------------------------------------------------------
+
+ Mr. Visclosky. I want to know how much of that 5.7 percent
+you are paying back to whom. Would the TVA be willing to forego
+these advantages if it were permitted to compete outside its
+traditional service territory?
+ Mr. Crowell. I have not been able to find all these
+advantages we are supposed to have. In fact, I remember some
+allegation we had $1.2 billion in subsidies and there was a
+cartoonist----
+ Mr. Visclosky. I pay Federal taxes. I think it is an
+advantage.
+ Mr. Crowell. There was a cartoonist at a newspaper in
+Knoxville that did a cartoon of everybody looking for these so-
+called advantages. If I could find it, I would certainly like
+to have it. I just have not been able to find it myself.
+ Mr. Visclosky. You would suggest that nonpayment of taxes
+is not an advantage to you?
+ Mr. Crowell. In lieu of taxes, we are paying tax subsidies
+to the State government.
+ Mr. Visclosky. The Federal Government, I am saying.
+ Mr. Crowell. I understand that, but it still is an
+operational advantage for some and a disadvantage for others
+depending how much taxes they pay. Regardless where the taxes
+go, that does come out of your revenue.
+ Mr. Visclosky. Thank you, Mr. Chairman.
+ Mr. McDade. The gentleman from New Jersey.
+
+ salaries and wages
+
+ Mr. Frelinghuysen. Thank you, Mr. Chairman.
+ For the record, and I know that you offered to provide the
+Chair with some particular information, I would like the salary
+and wages figures for you as Chair and your organization, the
+top 200 salaried executive and management leaders of TVA.
+ Mr. Crowell. Certainly.
+ [The information follows:]
+
+ TVA's 200 executives earned salaries/wages during FY 1996
+ranging from $97,504 to $262,000. This compensation consisted
+of base salaries ranging from $97,504 to $115,000 and
+individual payments ranging from zero to $147,000. TVA conducts
+industry analyses and surveys to determine the market-based
+salaries/wages for top managers and executives. TVA is
+committed to attracting and retaining top industry personnel
+and its compensation plans are designed around this objective.
+ Payments as part of the TVA-wide Performance Incentive Plan
+were made to non-management and managers below the senior level
+based on the accomplishment of TVA-wide goals. Payments to
+officers and senior management were based upon each
+individual's performance and their contribution to meeting
+their respective part of the TVA-wide goals.
+ All TVA employees are paid on a bi-weekly basis for base
+salary and overtime. Bonus payments are made at the end of the
+fiscal year after TVA-wide performance and individual
+performance is evaluated. Such payments usually occur in the
+November to December time frame.
+
+ bonuses
+
+ Mr. Frelinghuysen. I would like also with that the list of
+bonuses for 1995 and 1996. From what I can gather from the
+materials I have reviewed, while the salaries and wages are
+published, there does not seem to be any disclosure, unless you
+have some information to the contrary, as to what the bonuses
+are for the employees.
+ Would you like to shed a little light on that? First of
+all, I would like to request that information, and would you
+shed some light on the whole issue of disclosure?
+ Mr. Crowell. Certainly. What I would like to do is supply
+you with the newspaper clippings that show that we disclose
+this information on an annual basis on bonuses and also any
+other payments paid to employees other than salary. We are
+required by OMB to make this public anyway and so we do make it
+public.
+ I would certainly be happy not only to supply you with
+information you requested but also perhaps give you some flavor
+of the amounts of attention that is paid to the Tennessee
+Valley when we do issue these things publicly.
+ Mr. Frelinghuysen. I will take whatever flavors you are
+prepared to give, and better to have something under your pen
+than something from the local newspapers.
+ Mr. Frelinghuysen. And for the record, I would like to
+comment on my good friend from Tennessee's remarks relative to
+contributions to the bottom line.
+ Just for the record, the State of New Jersey is 49th out of
+50 in terms of what we get back from our income tax
+contributions to Washington. So when I asked the question
+relative to New Jerseyans and other States and the Northeast
+subsidizing the TVA, I have in mind quite honestly that most of
+my constituents are fed up with the situation.
+
+ industrial rates
+
+ So getting back to a few other questions. The press has
+been informed that the TVA provides electricity to some
+industrial customers at rates as low as one cent per kilowatt-
+hour. This appears to be an extremely low price even in today's
+competitive market.
+ Do rates that low exist and does this rate represent the
+marginal cost of production?
+ Mr. Crowell. The one-cent number I don't understand where
+that came from. We supply firm power to some of our customers.
+But depending on the margin that we have in any particular
+hour, any particular time during the day, there is great
+fluctuation between interruptible power and firm power, but
+that just helps our system. As long as we make a margin on it,
+we are very pleased to sell it, obviously. So I don't know, I
+am not sure I know exactly where the one cent came from unless
+some given day interruptible power.
+ Mr. Frelinghuysen. So it is within the realm of possibility
+that the TVA is providing electricity to some industrial
+customers at that low rate?
+ Mr. Crowell. I can't believe we sell it at one cent to
+anybody.
+ Mr. Frelinghuysen. What worries me is we are not getting
+the information. You seem to be quite conversant on the tax
+issue, but I am worried that we are not getting the type of
+specific response like the ones I asked earlier on wholesale
+prices and the residential rates for customers in your region
+being a third below the national average. You can't seem to
+respond to those types of issues but you are quite conversant
+on the tax components.
+ Mr. Crowell. I try to do my homework and stay conversant on
+most issues of TVA, although I am not conversant on everything
+I would like to be conversant on. But it can fluctuate so much
+that it is not possible for me to give you a good answer to a
+question about interruptible rates because the prices change on
+an hourly basis depending on what our generation capacity is at
+the time and what our demand is, so those prices do change.
+ And so the only thing I am saying to you is I am not aware
+of any circumstance where we are selling power for a penny
+kilowatt-hour, but what I am saying is they can fluctuate
+greatly depending on circumstances.
+ Mr. Frelinghuysen. When you head back, could you look into
+that matter for me and for the committee?
+ Mr. Crowell. Certainly.
+ [The information follows:]
+
+ TVA does not sell power for one cent per kilowatt-hour.
+
+ asset valuation
+
+ Mr. Frelinghuysen. What is the current book value of TVA's
+power production assets, including generation and transmission?
+And how many of those assets are recoverable? How many nuclear
+plants do you have?
+ Mr. Crowell. We have five.
+ Mr. Frelinghuysen. And in reality you started down the path
+of having how many?
+ Mr. Crowell. Seventeen originally.
+ Mr. Frelinghuysen. And is it fair to say you started down
+that path and you did expend some money?
+ Mr. Crowell. Yes.
+ Mr. Frelinghuysen. And how much money was expended where
+you literally had nothing in the way of any return, and what
+percentage of the $28 billion of debt can be associated with
+those types of assets that were never completed?
+ Mr. Crowell. We have five operating units and we have a
+total investment of just under $20 billion for our nuclear
+program, so those plants end up being very costly to us and so
+that is the numbers I think you asked for.
+ Mr. Frelinghuysen. Actually, I asked about you having
+started down the road looking toward possibly 17 nuclear
+plants; is that correct?
+ Mr. Crowell. Yes.
+ Mr. Frelinghuysen. And you actually started work. You
+completed five and you started work on twelve?
+ Mr. Crowell. Some of the plants were never in--active
+construction was not undertaken on some of the 17, but there
+was some expenditure of money in planning for some of them.
+ Mr. Frelinghuysen. Well, on how many of the twelve (or 17
+other than the 5 that were completed) was construction started?
+ Mr. Kennoy. Those are units instead of plants.
+ Mr. Crowell. About a dozen.
+ Mr. Frelinghuysen. Well, I would like to know how much of
+the $28 billion is associated with those that never went
+anywhere.
+ Mr. Crowell. A lot of it, and I will be happy to supply the
+number to you. This happened in the 1970s. All these decisions
+were made some twenty years ago. And what I am saying is that,
+you know, I am not conversant with when some of the plants were
+terminated. They were terminated before I came to TVA.
+ We can get that information for you, but what we are
+interested in is trying to operate the five plants that we
+have.
+ Mr. Frelinghuysen. I think you should be commended for
+operating five plants successfully. I am interested with the
+costs associated with the $28 billion of your debt. If you
+would be good enough to maybe provide those figures.
+ Thank you, Mr. Chairman.
+ [The information follows:]
+
+ At the end of FY 1996, the book value of TVA's assets
+totaled $34,029 million, of which $6.293 million was associated
+with TVA's deferred nuclear units.
+ At the end of FY 1996, TVA's assets and debt were as
+follows:
+
+ Millions
+Total Assets.................................................. $34,029
+Deferred Nuclear Units........................................ 6.293
+Total Debt Outstanding........................................ 27,727
+Construction (work in progress)............................... 744
+
+ Mr. McDade. The Chair wants to announce that after we
+finish the next two Members, we are going to recess for a half
+hour and this hearing will conclude with the next two Members.
+We would like to bring the next group in one half hour after we
+have the recess. This room has to be swept for a classified
+briefing, and we are going to have to adjourn around 3:00. So I
+want to recognize my friend from Texas.
+
+ studies of tva
+
+ Mr. Edwards. Chairman Crowell, do you know, is any
+objective group--either GAO or some other entity or someone not
+associated with TVA or an investor-owned utility--trying to
+analyze your costs of production, trying to make an equivalent
+comparison as if you were a privately owned utility? Is anyone
+trying to put that type of study together, to your knowledge?
+ Mr. Crowell. Well, to my knowledge, GAO has a study that
+they are doing now on all the public power companies that
+generate electricity. I don't know where that study is at this
+point, although I am cooperating with them.
+ There may be one going on that may be directed to some of
+the things you mentioned. I just don't know.
+ Mr. Edwards. But nothing, to your knowledge, like that has
+been done in the past?
+ Mr. Crowell. Not that I am aware of.
+ Mr. McDade. The gentleman from Mississippi is recognized.
+ Mr. Parker. Chairman Crowell, I was a funeral director
+before I came to Congress. One time I had a man die, and the
+next morning his wife, she was an older woman, she came to make
+arrangements, and halfway between the arrangements she stopped
+me and said, you know, Mike, you know, this morning I dropped
+my teeth in the hen house and they just don't taste right.
+ I am going to tell you, some of your answers do not taste
+right to me. And let me find $1.2 billion for you, because it
+really irritates me when I asked you a while ago what kind of
+subsidies do you get from the Federal Government, and you said
+$106 million, that is it, nothing else.
+ When my colleague from Indiana asked you about all of these
+things that you get, whether exemptions from Federal tax,
+exemptions from ad valorem tax, and you said, well, we give
+five percent to the State. All of a sudden that five percent
+was supposed to solve everything.
+
+ preference power
+
+ Now, I want to ask you a question: Is it true that there is
+a practice of the Federal Southeastern Power Marketing
+Administration to sell power from the facilities that it
+controls on the Cumberland River system to the TVA at a price
+well below market value? Is that true or not?
+ Mr. Crowell. Well, we don't set those prices. As you know,
+we pay whatever we are required to pay. The administration does
+that.
+ Mr. Parker. I know. But they are required to sell to you
+below market value.
+ Mr. Crowell. Well, there are some other entities that get
+at that power, also.
+ [The information follows:]
+
+ TVA receives and utilizes SEPA power from the Cumberland
+Projects on behalf of the 160 municipal and cooperative
+distributors of TVA power which are SEPA preference customers
+located within the TVA service area. The amount of energy
+received by TVA each year for the benefit of those customers is
+limited to the energy that remains from SEPA's Cumberland
+Projects generation after SEPA's other preference customers
+first receive their respective fixed allocations, which those
+other customers may and often do use as peaking power.
+Consequently, the annual amount of energy received by TVA in
+this manner from the Cumberland Projects can and does vary
+significantly from year to year, depending on hydrological
+conditions. With limited storage at the Cumberland Projects, a
+large portion of the remaining energy available to TVA must be
+taken and used when it is available. This could be at virtually
+any hour of a day and at times during the year, such as spring
+or fall, when there is less public demand for electricity,
+which can make the energy provided to TVA less valuable than
+the peaking power taken and utilized by the other Cumberland
+customers. In 1997, TVA expects to purchase 405 MW and 2.7
+billion kWh from SEPA for $23.7 million.
+
+ Mr. Parker. That is not the point. When my colleague from
+Indiana asked you the question, do you receive preference
+power, you said, no, we do not do that. You get preference
+power; and let me tell you how much it amounts to: around $93.6
+million every year.
+ Now, that is something that somebody in a private power
+company doesn't get. Private power companies, they pay taxes.
+ You can't have it both ways. You turn around and look at us
+and you say to us, I hear about all these things. We pay--we
+are in a situation where we are having to pay. I mean, if you
+want to talk about the private power companies, they have got
+it better than we have got.
+ I want to tell you my position. I am going to put you in
+that position. I want you to be private. If they have got it so
+good, I want you to be in that system. I am just agreeing with
+you. I am not disagreeing at all. I want you in the system--you
+said that they were doing so much better, they had so many more
+advantages than you. I want you sitting right in the middle of
+them, and I want you competing in our free enterprise system,
+and I want you to either rise or fall, according to how well
+you do business.
+ I have been very much disturbed today over these evasive
+answers. We got a saying back home, "Pigs get fat, and hogs get
+slaughtered." And I am almost of the opinion that TVA has
+gotten mighty hoggish through the last few years.
+ Thank you, Mr. Chairman.
+ Mr. McDade. I thank the gentleman from Mississippi.
+ We are going to, as I indicated, give you a series of
+additional questions for the record. Give them your undivided
+attention and full responses.
+ We thank all of you for being here. It has been a good,
+open hearing, lots of questions back and forth; and we
+appreciate it.
+ The committee is going to stand in recess until 1:15.
+ [Questions and answers for the record follow:]
+
+[Pages 757 - 834--The official Committee record contains additional material here.]
+
+
+ Thursday, March 6, 1997.
+
+ APPALACHIAN REGIONAL COMMISSION
+
+ WITNESSES
+
+HON. KIRK FORDICE, GOVERNOR, STATE OF MISSISSIPPI; STATES' CO-CHAIRMAN
+HON. JESSE WHITE, FEDERAL CO-CHAIRMAN
+ Mr. McDade. The committee will come to order.
+ We are pleased to have the Appalachian Regional Commission
+here today and the Federal Co-chairman, Jesse White. Jesse, we
+are delighted to have you here.
+ Mr. White. Thank you, Mr. Chairman.
+ Mr. McDade. We would like to see you with your Co-chair.
+You probably want to introduce him.
+ Mr. White. Thank you very much, Mr. Chairman. We are
+delighted to be here to present the administration's budget for
+fiscal year 1998.
+ As you know, under our unique structure at the Appalachian
+Regional Commission there is not only a Federal Co-chairman but
+there is a States' Co-chairman, which is one of the governors
+of our thirteen States every year. It is a coincidence that
+this year we were both Mississippians, so one could accuse us
+of a cabal here. But the governor for Mississippi, now in his
+second term, is our States' Co-chairman.
+ With the Chair's indulgence--even though it is customary
+for the Federal Co-chairman to present the budget first, with
+your indulgence, the Governor has a flight to catch, and if it
+would be okay with you, I would like to call on our States' Co-
+chairman to go first.
+ Mr. McDade. Absolutely.
+ Governor Fordice. I want to thank you, Mr. Chairman, for
+the opportunity to come here and testify in support of an
+adequate fiscal year 1998 appropriation for the Appalachian
+Regional Commission. And we thank you and Mr. Rogers, who is
+not here I notice, and other members of the subcommittee for
+your strong support for the commission. I know Mr. Rogers has
+been a great supporter over the years.
+ Mr. McDade. He would be here, but he has another hearing.
+ Governor Fordice. Yes, sir.
+ We thank you, Mr. Chairman. Your commitment has been
+largely responsible for the survival of this unique partnership
+in these fiscally challenging times.
+ I am Kirk Fordice, Governor of the State of Mississippi. I
+am proud to serve as Appalachian Regional Commission States'
+Co-chairman, as Jesse White just stated, and to represent the
+thirteen governors who are members of the Commission.
+ On behalf of these governors, I am pleased to report to you
+today that a fiscal year 1998 appropriation of $165 million for
+the Appalachian Regional Commission, with $75 million for non-
+highway programs and $90 million for highway construction, will
+enable us to continue progress toward our vision of a self-
+sufficient Appalachian region, enabling this region to take its
+place in the mainstream of the American economy.
+ In a sense, my position regarding Appalachian Regional
+Commission may appear to conflict with my principles. As some
+of you may know, I am not a big supporter of big Federal
+spending programs. I fervently believe that the best economic
+and community development occurs when we keep our money at home
+and take care of our own needs. Too often, Washington thinks
+that throwing more money at a problem solves the problem and
+that those in Washington know better than the local people what
+is needed to meet a challenge.
+ However, the Appalachian Regional Commission is different.
+As the Federal Co-chairman has said and as all of you know, the
+Commission is a true partnership. The governors share authority
+equally with the Federal Co-chairman, and we share the
+responsibility as well.
+ The best example of the manner in which we work together is
+the way we developed our strategic plan for the region. We went
+into the Region and talked to the people who live in the
+Appalachian Region. Then we got together--the Federal partners
+and State partners--and digested the information that had been
+gleaned, discussed and debated its implications and determined
+what we needed to do. From that discussion and debate came our
+five goals and 21 objectives that, if achieved, would transform
+the Appalachian Region. This was not a plan handed down from
+Washington but a plan that originated on the grass-roots level.
+ But we did not stop there. To ensure that this plan does
+not die on a shelf, we now have five task forces, one for each
+of the goals. These task forces are chaired by a State
+alternate and consist of Federal, State and local people. The
+primary responsibility for each task force is to point us in
+the right direction to achieve our goals.
+ Now, we are developing baseline data and performance
+measurement procedures to ensure we are accountable to what we
+say we will do. Again, this is not Washington handing down
+these procedures. Just last week, our State people met here to
+work on the performance measurement procedures to prepare them.
+We know that we must work together--the Federal, State and
+local officials--to make a difference in the region.
+ The Appalachian Regional Commission has never been about
+throwing money at a problem. We have never had much money to
+throw in the first place. The Commission has been about solving
+problems by building partnerships in the public and private
+sectors and by being advocates for our region.
+ When local officials develop projects, they try to get as
+many groups, or partners, involved as possible. On most
+projects, Appalachian Regional Commission money is only a part
+of the picture, sometimes a rather small part. Usually, there
+are funds from other agencies; there are local funds; and,
+often, there are private funds.
+ Mr. Rogers, before you got here, I was complimenting you on
+your support of the ARC over the years. I would like to
+reiterate that.
+ So the ARC money then is the glue, the final piece of the
+puzzle that allows the project to go forward. And I have
+personally seen that many times where, with the ARC portion,
+the projects usually result in private-sector investments,
+which are many times greater than the public money that is
+invested, and in the creation of private-sector jobs which
+return far more in tax dollars than the ARC investment in the
+first place.
+ I firmly believe that the best social program ever devised
+by man is a good job; and in this job of being Governor of our
+State, I spend most of my time outside of the legislative
+session on just that objective, economic development, and
+trying to bring more jobs to our state. Give a person a job at
+a living wage, and most of the other problems will soon fade
+away. That has been our philosophy in the utilization of ARC
+money in Mississippi.
+ Allow me to give you some examples of how ARC funds are
+currently working in some of our twenty-one Appalachian
+counties in Northeast Mississippi.
+ For instance, Three Rivers Planning and Development
+District, Inc., through its ARC Revolving Loan Fund, has funded
+thirty-five loans totaling $2.5 million. These ARC projects
+have leveraged $8.8 million in private funds and have created
+1,223 new jobs and retained twenty-four existing jobs. Of the
+thirty-five loan projects, eighteen have been new business
+startups, fourteen existing business expansions, and three are
+business retentions. A breakdown of the type of businesses
+financed is as follows: fifteen industrial, three commercial
+and seventeen service.
+ In Oktibbeha County, the Economic Development Authority is
+building the infrastructure for a Research and Technology Park,
+which is one of the prides of our state, by the way. It is
+located right outside of Mississippi State University, and it
+is already up and running. This is a $755,000 project. It
+includes $200,000 in ARC funds, $217,000 in other Federal funds
+and $338,000 in state and local funds. This project is not
+finished yet but is already responsible for one-hundred jobs
+and $8 million in private investment. There are many other
+examples.
+ This kind of flexibility is one key to the success of ARC.
+Other governors can tell stories of investment of ARC money
+based on what they and their local officials decided as well.
+ For example, in Pennsylvania, my colleague and good friend
+Governor Tom Ridge has invested funds in enterprise development
+and business incubators.
+ Another colleague in Kentucky, Governor Patton, has
+invested in education and leadership development and in the
+basic infrastructure in many of his distressed counties.
+ The key fact is that the governors and their local
+officials are making the decisions, not folks in Washington,
+and they are using their ARC funds to leverage private sector
+investments, Mr. Chairman, and to create private sector jobs to
+give people a hand up rather than a handout.
+ Nowhere is this more evident than in our Distressed
+Counties Program, because we recognize that a region is only as
+strong as its weakest link. We set aside money off the top for
+our most distressed counties. In these counties, we are
+providing basic services like running water which many families
+in these counties have lacked.
+ You know as well as I do, I think, that it is very
+difficult to create good jobs for people when even the most
+basic services are lacking. We are giving people in our most
+severely distressed counties a hand up, and because of this
+investment, we have lower unemployment and decreased poverty,
+and the past three years we have reduced the number of
+distressed counties in Mississippi from twelve to six, and I
+believe throughout region we have gone from 115 to----
+ Mr. White. Ninety-four.
+ Governor Fordice. Ninety-four. So we are making progress.
+We are not yet where we want to be, but we are getting there.
+ As you know, a key element of our plan for achieving
+economic self-sufficiency for the region is the timely
+completion of the Appalachian Development Highway System.
+ In Mississippi, our portion of the system is more than
+seventy percent complete. Corridor V is our primary corridor
+and, when complete, will open much of northeast Mississippi for
+new economic development. It will also provide us direct access
+to Huntsville, Alabama, and to Chattanooga, Tennessee--I am
+sorry the gentleman from Chattanooga is not here.
+ The regional nature of the highway system is critical. To
+me, finishing Corridor X in Alabama may be just as important.
+When both Corridor V in Mississippi and Corridor X in Alabama
+are completed, they will give us a straight shot between
+Tupelo, Mississippi, and Birmingham, Alabama, and will be of
+enormous economic benefit to distressed areas in both states.
+ For all these reasons, Mr. Chairman, my fellow governors
+and I support the recommendations for a fiscal year 1998
+appropriation to the Appalachian Regional Commission of at
+least $165 million allocated in the manner set forth in the
+President's budget. This will enable us to make progress in
+bringing this region to parity of economic opportunity with the
+rest of the nation.
+ In particular, added funding for area development will
+enable us to move more quickly to address the basic service
+needs of our most severely distressed counties, to continue our
+efforts to bring private sector jobs to our poorest rural
+areas, and to make all of our citizens self-sufficient.
+ Once again, Mr. Chairman, allow me to thank you for the
+opportunity to testify and especially for your continued strong
+support for this unique partnership and for our region. We, the
+governors of this region, are very grateful, and we will
+continue to work toward that day when this region enjoys parity
+of economic opportunity with the rest of the nation and we can
+state that the region no longer needs special assistance.
+ Thank you, sir. And I would be glad to try to answer any
+questions.
+ [The prepared statement of Governor Fordice follows:]
+
+[Pages 839 - 843--The official Committee record contains additional material here.]
+
+
+ Mr. McDade. Governor, thank you for an excellent statement.
+ I talked to Governor Ridge on the telephone this morning.
+He sends his regards. He said he would be here sitting with you
+if he were not otherwise occupied. He is a fine gentleman.
+ Let me ask you one question. Some people say there is too
+much road money and not enough development money. How do you
+feel about that?
+ Governor Fordice. I think it is a fair balance, Mr.
+Chairman.
+ As I mentioned before, my primary thing in our state is
+economic development, and I have seen these ARC funds, as small
+as they may be, be the key so many times in needed
+infrastructure to get an industry off the ground. Of course,
+that industry probably would not be there in the first place if
+the road net was insufficient. So I think the balance that is
+being struck in this budget is about right, actually.
+ Mr. McDade. The local initiative, in defining the problem,
+is a pretty important part of this package, isn't it?
+ Governor Fordice. That is why I am so enthusiastic about
+it. As I said, I am no fan of big government, but this is not
+your typical Washington program, it is strictly oriented to the
+region, and it is bottom up, it is developed from a grass-roots
+type approach, and I think that is a key to its success.
+ Mr. McDade. Thank you, Governor.
+ We would be glad to hear from Mr. White.
+ You can put your statement in the record if you would and
+proceed informally. We are delighted to hear from you.
+ Mr. White. Thank you very much, Mr. Chairman. Once again, I
+am pleased to be here with you. We are, of course, very pleased
+that somebody from Appalachia is chairing the committee.
+ As I mentioned to you in our ``get acquainted'' meeting, my
+first trip was to Scranton. You can tell from my accent I don't
+come from northern Appalachia. And I felt obliged to get up and
+learn your neck of the woods, which I did, and was just back
+before Christmas.
+ Of course, Congressman Rogers comes from the real heart of
+Appalachia--why the ARC was created. We have started a process
+of trying to carry at least one Commission meeting out into the
+region every year, and Kentucky was kind enough to host that
+this year, and we went to the Congressman's hometown of
+Somerset, had a great meeting.
+ Governor Patton was there, in the Regional Economic
+Development Center, which was really the vision of Congressman
+Rogers; and is making a big difference. And then we took a bus
+tour the next day of some eastern Kentucky, really hard-
+scrabble areas, and some of our other States really got an
+insight into what severe underdevelopment was in that part.
+ So, to all of you on the committee, we thank you for your
+support and are pleased to be here.
+ Let me just start off with the overall numbers of the
+President's budget submission, which the governor rehearsed in
+a general way with you. The budget request is for $165 million,
+which is $5 million below our request last year and $5 million
+above the actual appropriated amount. Ninety million of this we
+are asking for our highway program; $66 million we are asking
+for our area development program, $5.3 million to support our
+local planning and development districts and for technical
+assistance and research, and $3.65 million for administration.
+ Let me mention while we are talking about the
+administration of the Commission, we of course continue to be
+proud of the fact that the historic administrative overhead of
+the ARC is between three and four percent of our appropriated
+dollars. We only have about sixty people under roof in
+Washington.
+ The states help us a lot with the administration of these
+programs, and under our roof here there is the Federal staff,
+which I head, of only ten people, including three in the
+Inspector General's Office; a State's office funded purely with
+state money that is a day-to-day presence representing the
+governors; that is headed by Mike Wenger, who represents the
+governors on a daily basis. That is paid for, as I say, by
+state money. Then there is the Commission staff, headed by an
+executive director, of about fifty people, headed by Tom
+Hunter, sitting to my right; and they are paid by half the
+state money and half the Federal money.
+ So poor Tom has to please me and thirteen governors, which
+is why his hairline is receding probably. But it is a very
+ingenious model of accountability when you think about it, that
+this staff in Washington is not only having to please me but
+having to please the thirteen governors on a daily basis.
+ So Tom is here to answer any questions that might come up
+about the Commission staff budget.
+ Let me start off with the highways. The highway system of
+Appalachia of course has always been central to our program.
+When President Kennedy appointed the President's Appalachian
+Regional Commission, the so-called PARC Report, in 1963, that
+report started off with a haunting sentence. It said, ``We find
+that Appalachia is a region apart, both geographically and
+statistically.'' It found out really that the interstate system
+had bypassed the mountains.
+ So Congress, when it enacted the Appalachian Regional
+Development Act, authorized a 3,025-mile system to basically
+connect Appalachia into the interstate grid. That highway
+program has sort of remained at the heart of the ARC strategy
+in the ARC program. Study after study shows the wisdom of this
+strategy and the importance of Congress keeping faith with that
+commitment.
+ In 1993, for example, a study done by the National Science
+Foundation that looked at twenty-seven years of ARC investment
+found that in the 110 counties within ARC that have either an
+Appalachian development corridor or interstate, these counties
+grew sixty-nine percent faster in terms of income, six percent
+faster in terms of population, and forty-nine percent faster in
+terms of earnings than did counties without the highway
+corridor.
+ Studies done by the ARC consistently have also shown a high
+correlation between highways and business creation and job
+development.
+ As a matter of fact, Congressman, we had a meeting in the
+Commission Tuesday, and we had a presentation that looked just
+at Kentucky. Ron Eller has broken down Appalachian Kentucky by
+census tracts, which goes below our normal county analysis in
+showing the degree of distress, and then he overlaid our
+highway grid in Kentucky on top of that and the visual
+correlation is astounding between those areas that are still
+the most distressed and those do not yet have a corridor.
+ Also, on an anecdotal level, last year, for the first time
+in the history of the ARC, a Federal highway administrator,
+Rodney Slater and I, Federal co-chairman, traveled some of our
+roads. We started in West Virginia, went through Kentucky, went
+through Ohio, ended up in Pennsylvania. And I will never
+forget, we were on Corridor--what is the one coming out of
+Charleston? Is that G? We were coming down G, a wonderful
+highway, and suddenly the construction ended and we got on a
+typical mountain winding road, and a big crowd was waiting for
+lunch.
+ A big crowd was gathering for lunch. It was ten minutes to
+twelve o'clock. We hit a railroad crossing. Here comes a coal
+train. So we sat there nervously for about twenty minutes and
+knew the crowd was waiting for us, and we pulled across the
+railroad tracks and the guy that was driving said, ``I
+certainly hope we beat it at the next crossing.'' And it was
+just lunch, but it dawned on us, what if that were a pregnant
+mother or a sick farmer trying to get to the hospital?
+ Or think about the economic competitiveness of firms trying
+to deal with that antiquated system. The interstate system is
+about ninety-nine percent complete and our system is about
+seventy-six complete. So we think the sooner we can get this
+highway system built, the better.
+ As a matter of fact, there is now being developed--the
+details are not finalized--a proposal for the ISTEA
+reauthorization, that in addition to the appropriated dollars
+that would come through this committee, would look for funding
+out of the highway trust fund that would accelerate the
+completion of this system over the next five years.
+ The essential handmaiden, of course, of our highway system
+is what the Governor was talking about, which is our area
+development program. That PARC Commission report also said that
+highways are a necessary but not sufficient condition to
+economic development. Just putting a road through a community
+that doesn't have basic water and sewer, doesn't have
+industrial parks, doesn't have training programs, doesn't have
+an adequate education system, and doesn't have the resources to
+fund those, doesn't really get you development. You have to
+work on the community and economic development side of the
+equation as well, and that is what our area development program
+works on.
+ About one-third of the appropriated money in the history of
+the ARC has been spent on the community and economic
+development work. The way that works is the Commission--me and
+the Governors--allocates that money on a state-by-state basis
+every year, and within that allocation, each Governor has wide
+latitude on how that money is spent. And we now structure those
+investments around this new strategic plan that the Governor
+mentioned, which is five goals and twenty-one objectives which
+the region is working on. Every year a state submits to the
+Commission a strategy statement which says how during that year
+they are going to use our money to work on those goals and
+objectives, and of course it varies from state to state.
+ And just from this year's investment strategy statements, I
+thought I might just share a few highlights to give you a
+flavor of the richness of how states use our money. During this
+year, for example, eight states will invest in various types of
+enterprise development programs that provide business
+assistance to new and existing firms that provide targeted
+industry assistance or establish business incubators or
+industrial parks. Eight states will concentrate on starting or
+enhancing local programs to provide leadership development and
+civic infrastructure. Four states plan to develop televillages
+in which ARC funds will provide hands-on training on Internet
+technologies to teachers, businesses, libraries, local
+governments, and citizens. Four states will emphasize programs
+to reduce school drop out and adult literacy rates. Three
+states will emphasize preschool programs that ensure that
+children arrive at school ready to learn, and seven states will
+work toward building the capacity of their training
+institutions to upgrade work force skills and increase
+productivity. So a governor can use our money to enhance his or
+her economic development program. As Governor Fordice said, it
+can be tailored on a state-by-state basis.
+ And we are seeing, now at the end of the first year of our
+strategic plan, some impressive results. In fiscal year 1996
+under goal 1, which is education and training, our money helped
+provide educational activities for over forty thousand
+participants and job skill training to over ten thousand
+participants. Goal 2 which deals with infrastructure, we saw
+twenty-six miles of our highway system open. Our grants helped
+provide water and sewer services to almost 16,000 households,
+and we helped support the construction of 190 low to moderate
+income houses.
+ Goal 3, which is leadership and civic capacity, our money
+helped provide leadership programs to almost 7,500 Appalachian
+participants. Goal 4, which is creating a dynamic
+entrepreneurial economy, our programs helped create some 15,600
+jobs, retain some 17,600 jobs, and attracted over $1 billion in
+private investment into our projects. Goal 5, which is health,
+we placed 146 doctors in medically underserved areas through
+our J-1 visa program, and we provided health services, dental
+care to over 9,000 children, primary care to 1,250 children,
+prenatal care to 1,100 women and other services as well.
+ The Governor mentioned our goals task forces, in each case
+chaired by a state working on each of our five goals to make
+sure the Commission maintains progress toward our stated
+objectives.
+ The Governor also mentioned our distressed counties
+program. We are proud of our results in that. We have 399
+counties in the ARC. Three years ago, when I was sworn in as
+Federal cochairman, 115 of those counties were described as
+distressed. These are counties in which the per capita income
+rate is no more than two-thirds of the national average and the
+poverty rates and unemployment rates are at least 150 percent
+of the national average.
+ The Commission, in what I consider an extraordinary act for
+any political body, votes every year to take a percentage of
+the money off of the top of the area development allocation and
+devote to those distressed counties. This year, for example, we
+are devoting about $16 million just to work in the distressed
+counties. In taking this vote, four of our states stand aside
+and actually give up money from their allocation to work on
+these most distressed areas. And that is one reason we took the
+bus tour through eastern Kentucky, so that our states that
+actually give up money can see the need and see how their money
+is going to help the neediest of the needy. We call this an
+intensive care model of economic development, and it is
+interesting to note that in the history of this agency no state
+has ever voted against that special allocation. I am very proud
+of that fact at the Commission.
+ And this intensive care model has worked. As the Governor
+said, we have had a twenty percent reduction in the past years,
+from 115 to 94. His State cut in half their number of
+distressed counties, and we hope to continue to make progress
+in our distressed counties program.
+ This committee and our authorizing committee has encouraged
+us to do this sort of targeting. That support has helped us
+carry that policy forward at the Commission and we appreciate
+your help. It is more important than ever, now. On top of
+everything else is the welfare reform and the need to create
+jobs. In 74 of these 94 counties, the percentage of population
+on welfare is at least twenty-five percent higher than the
+national average. So we need to create even more jobs in these
+areas.
+ Let me just end by saying that we have also been working on
+some regional initiatives for the last three years. We have
+allocated $16 million to work on initiatives in export
+promotion among small- and medium-size businesses on leadership
+and civic development, and on telecommunications. We have
+funded some 112 projects in these areas.
+ The relationship of these initiatives to the new strategic
+plan will be reevaluated during this year. But we are also in
+the process of launching a regional initiative that is close to
+my heart, which is an initiative in entrepreneurship.
+ I am a firm believer that in rural development we have to
+get beyond the old industrial recruitment model, the buffalo
+hunt model--the idea that somebody else has created the jobs
+and we have to go get them and bring them to our people.
+Instead we should look at what it takes for our communities to
+build their businesses at home. All the Fortune 500s started
+somewhere, and in many cases in garages and often in rural and
+small town areas. We have not looked enough yet at the
+infrastructure for small business creation and entrepreneurship
+in rural America. So we have voted $2.1 million. I am hoping I
+can convince the table to vote another three or four million to
+launch a serious initiative in creating entrepreneurial
+opportunities in Appalachia and we will keep the committee
+posted on that.
+ Let me close by saying, Mr. Chairman, and members of the
+committee, that this very special model continues to work. It
+was described eloquently by the State's cochairman. I just
+brought along two quotes from our Governors' Quorum Meeting
+held about a month ago here in Washington, one from a moderate
+Democrat, Jim Hunt from North Carolina, who said, ``I was here
+when they tried to kill the Appalachia Regional Commission.
+Along with a lot of other folks, I fought hard to keep it.''
+And by conservative Republican Governor George Allen from
+Virginia, who said, ``The Appalachian Regional Commission
+clearly is a model, as I said in my first year or two in this.
+It is too bad all Federal programs don't run this way. We would
+have a lot better relationship with the Federal Government if
+all programs ran the way the Appalachian Regional Commission
+does.'' And of course Governor Fordice echoed that today.
+ Our support has always been bipartisan, both at the
+gubernatorial and the congressional level. I think Congress has
+been brave in maintaining its commitment to this special region
+of America. We only have sixty Congressmen and twenty-six
+Senators, but there was a commitment made to bring this region
+into the mainstream of the American economy so we can be
+contributors to the national wealth, rather than drains on it,
+and we plan to keep faith with that commitment, Mr. Chairman,
+and I hope this committee will look favorably on our budget.
+ Mr. McDade. Thank you for a very detailed and excellent
+statement. We appreciate it very much.
+ [The prepared statement of Mr. White and the ARC budget
+justification materials follow:]
+
+[Pages 850 - 911--The official Committee record contains additional material here.]
+
+
+ Mr. McDade. My colleague, Chairman Rogers, has a speech to
+make in just a few minutes, so if my friends don't mind, I am
+going to yield to him.
+ Mr. Rogers. Thank you very much. I wanted to very briefly
+and quickly commend Jesse White for the great work he is doing
+at the ARC, and of course Governor Fordice for his work as
+Chairman of the Governors Group.
+ This organization I think is a model for the way other
+agencies ought to operate. It is grass-roots driven at the
+outset, projects work their way up from the grass roots to a
+regional level, then to the Governor's office, usually, and
+then on to the national office here, and there are Federal
+monies, there are state monies, and then there are other types
+of monies that go into these projects. So we all leverage each
+other.
+ But the point is it is grass-roots driven and would that
+other agencies had that kind of mechanism involved. So the
+Federal dollar that we spend is multiplied many times as it
+goes to work on a project that is desperately needed in the
+poverty stricken areas of the country.
+ I am very happy that Jesse brought one of the annual
+meetings to Somerset, to my hometown. We enjoyed having you
+there, and you had a chance to see abject poverty in the
+eastern part of my district, eastern part of the state. A lot
+of people don't know what poverty is until they have traveled
+to some of those counties.
+ But you are exactly right on, Jesse; roads are the
+lifeblood of development in those regions. We have seen it time
+and again and I think everyone knows that. It is like the Nile
+in the desert; where that river flows you can begin to see the
+green develop along its ways. And the key to development in our
+region is the lifeblood brought by roads.
+ And number two, the nonhighway programs are absolutely
+essential now that welfare reform is here and we are asking
+people who were formerly drawing welfare to find a job; that
+has brought a new urgency to the Appalachian regions. We have
+almost a desperate situation brewing where we are requiring
+people to find a job and there aren't any jobs. So the
+nonhighway portions of your work, I believe, are going to
+receive additional strain because of welfare reform, and that
+is urgent.
+ Your reform of ARC enabled us last year to convince a
+majority in the Congress that this program had been
+rejuvenated, and I think in fact it has. The refocusing on the
+more distressed counties, the sort of graduation of certain
+counties originally in Appalachia that have now found a little
+bit of prosperity and are beginning to move up, thanks in large
+measure to ARC, you are graduating into another category, as we
+should. We should always begin to focus more and more on the
+counties most desperate in need as our funds dwindle. So I
+congratulate you on your reform of ARC and your focus of
+rejuvenating ARC and keeping it in focus, and we are proud of
+what you are doing.
+ We didn't get enough money to do what needs to be done last
+year. We haven't for several years. I am hoping, Mr. Chairman,
+that we can hopefully find a few more dollars because these
+dollars go so much further than the average dollar does. But we
+will take what we can get. As one comedian once said, bad
+breath is better than no breath at all.
+ Mr. Dickey. If you would, don't look this way when you
+talk.
+ Mr. Rogers. I thank you, Mr. Chairman, for allowing me this
+time.
+ Mr. McDade. I am pleased to recognize the gentleman from
+California.
+ Mr. Fazio. Thank you. I am reminded to say, Mr. Rogers,
+even your best friends won't tell you, and I am about to tell
+you.
+ I, first of all, want to put on the record that I have
+supported the ARC from the very first year I came to Congress.
+That is eighteen now, and seventeen years on this committee.
+And I have done so in great measure because I respect the
+Members from the region who have always fought valiantly for
+the program. In fact, I think I have had to go back to a
+district that would normally be skeptical of support for any
+regional development that has a lot of rural poverty in it
+itself, and certainly we in the nonmetropolitan part of
+northern California fall in that category, as I am sure many
+other Members of Congress do in their own states.
+ It is important, and we have to carry a variety of economic
+development burdens around the country. One of the things that
+sticks in my craw, and you touched on it with the buffalo hunt
+model you referred to, was when Wofford College got funded for
+a football stadium to provide the Carolina Panthers with a
+practice field in an area where people were fighting tooth and
+tong to take a team from Houston to Nashville, or from
+Cleveland to Baltimore, and the NBA franchises go to the
+highest bidder (including the San Francisco Kings recently to
+Nashville, although we stopped that).
+ The point is that when we all are contributing financially
+to economic development, Charlotte, North Carolina, doesn't
+come high up on my list as a city in decline. It is probably at
+the other end of the list. How can we allow that kind of
+judgment call to be made, in a sense undermining broader
+support for the program?
+ Mr. White. We always need to be extremely vigilant about
+those sorts of projects that become lightning rods of
+criticism. That project I am very familiar with. It was fully
+in the city of Spartanburg, and although that part of--
+Charlotte, of course, is not in ARC.
+ Mr. Fazio. I know that, right across the state line: the
+automobile manufacturer, Spartanburg, South Carolina.
+ Mr. White. It is a fairly prosperous region. Spartanburg
+County is fairly well off. Spartanburg city is fairly
+distressed. It has got a high minority population in the center
+city, had unemployment of about, I have forgotten, fifteen
+percent. It was very high. This was a high priority of the
+Republican Governor of the State, and of course we are, have a
+State-driven model to a large degree. It was to help build a
+practice field for the college that the Panthers rented during
+the summer at market rates, and it was--the pledges were to
+create several hundred jobs for low-income people in inner city
+Spartanburg. It did attract a lot of attention and it has
+renewed our vigilance for not only the substance of projects,
+but the appearance of projects.
+ Mr. Fazio. Well, I would hope we wouldn't make that kind of
+choice again. I know it is never popular to tell a Governor
+that he can't use his money as he wishes, but there has to be a
+broader understanding of the context in which you are all
+operating, and that kind of decision can poison the well for a
+lot of people in a lot of places who need the assistance.
+ In that context, I would say concentrating on that 94 or
+115 counties is really where I think most of Congress wants you
+to go. I notice that only twenty percent of the funding, the
+$66 million, is allocated to those additional distressed
+counties. I guess that is thirteen of the sixty-six; isn't that
+correct? If I am wrong, correct me.
+ Mr. White. The percentage allocation off of the top of area
+development is thirty percent. It was twenty percent and we
+raised it this year to thirty percent.
+ Mr. Fazio. I would encourage you to keep raising it,
+because really what we want to concentrate on are those
+counties and not the rest, because the National Science
+Foundation study has said that the poverty rate is lower now in
+the Appalachian regions on the average and that growth and
+overpopulation is better than in counties in comparable areas.
+ So not all of the Appalachian district is in as much need
+as this one-third of the counties that are most distressed. I
+realize you can't operate in a vacuum. They are adjacent to
+each other and projects do benefit across county lines. But the
+more you can emphasize the neediest, the more I think you will
+find support will continue here, not only to keep the
+Commission alive but to fund the kind of budget you think you
+need.
+ Mr. Chairman, that is all I have to say.
+ Mr. McDade. The gentleman from Arkansas is recognized.
+ Mr. Dickey. No questions.
+ Mr. McDade. You are my favorite Member.
+ Mr. Dickey. You are my favorite Chairman.
+ Mr. McDade. The gentleman from Texas.
+ Mr. Edwards. Thank you. I will just associate myself with
+the comments made by Mr. Fazio.
+ With the limited funds, I think it is important to try to
+focus resources where they are most needed. As a new member of
+the committee, this sounds like the kind of cooperative grass-
+roots organization and model that we need more of rather than
+less of in our government.
+ Thank you, Mr. Chairman.
+ Mr. White. Could I add something, Mr. Chairman, and I wish
+Mr. Fazio were here to hear this, because it is sort of the
+other end of the distressed county spectrum.
+ We have also adopted policies that restrict funding at the
+other end of the spectrum to counties. If, for example, a
+county has reached the national norm on unemployment, poverty
+and per capita income, they are not eligible to receive ARC
+money except for highways, because we have to complete the
+grid, and our local development planning districts. I think
+there are about ten counties in that category.
+ If a county is at the national average on unemployment, at
+the national average on poverty and at least eighty percent of
+U.S. per capita income, they are only eligible for thirty
+percent funding on ARC grants. So we have got another twenty-
+some-odd counties in that category. So we do have these four
+categories of counties and do try to target our resources to
+the areas of greatest need.
+ Mr. McDade. Thank you for your testimony. We are going to
+give you, you won't be surprised to hear, a detailed list of
+questions for you to answer for the record. Thank you for your
+testimony.
+ The committee will stand adjourned until Wednesday at ten
+o'clock.
+ Mr. White. Thank you.
+ [The questions and answers for the record follow:]
+
+[Pages 916 - 953--The official Committee record contains additional material here.]
+
+
+
+
+ W I T N E S S E S
+
+ ----------
+ Page
+Babbitt, Hon. Bruce.............................................. 1
+Beneke, P.J...................................................... 1
+Crowell, Craven.................................................. 607
+Fordice, Kirk.................................................... 835
+Hayes, J.H....................................................... 607
+Kennoy, W.H...................................................... 607
+Lawler M.A....................................................... 1
+Martinez, E.L.................................................... 1
+White, Jesse..................................................... 835
+
+
+ I N D E X
+
+ ----------
+
+ BUREAU OF RECLAMATION
+
+Anadromous Fish Screen Program................................... 590
+Animas La-Plata Project............................. 496, 498, 553, 561
+Auburn-Folsom South Unit of the Central Valley Project........... 565
+Babbitt, Secretary Bruce......................................... 1, 5
+Bay-Delta--See California Bay-Delta Ecosystem Restoration
+Beneke, Assistant Secretary Patricia............................. 11
+Bonneville Power Administration.................................. 553
+Bostwick Park Project............................................ 571
+Brackish Water Reclamation Demonstration Facility................ 598
+Brantley Project................................................. 571
+Budget Justification for FY 1998 for Bureau of Reclamation....... 32
+CALFED--See California Bay-Delta Ecosystem Restoration
+California Appropriations........................................ 495
+California Bay-Delta Ecosystem Restoration.....2, 8, 31, 472, 474, 493,
+ 495, 542, 550, 560
+Callahan, Honorable Sonny........................................ 537
+Central Valley Project Restoration Fund........................ 30, 579
+Central Arizona Project....................................... 534, 536
+Central Utah Project.............................................10, 14
+Central Valley Project........................................... 567
+Chandler Powerplant Electrification.............................. 564
+Cheyenne Bottoms Wildlife Area................................... 572
+Coho Salmon and Spring Run Chinook Salmon Restoration Projects... 605
+Collbran Project................................................. 571
+Colorado River Front Work and Levee System....................... 570
+Colorado River Basin Salinity Control Project (Title II)......... 571
+Columbia Basin Project--Unauthorized Use of Water................ 563
+Computer Modifications for Year 2000............................. 548
+Concessionaires.................................................. 604
+Construction Activities for FY 98................................ 559
+Contra Costa Canal Intake at Rock Slough......................... 566
+Contract Renewal Negotiations.................................... 587
+Cost Benefit Ratios.............................................. 541
+CVP, O&M, San Luis Unit.......................................... 589
+CVP, American River Division..................................... 589
+CVPIA Implementation (General)................................... 592
+Del Norte County and Fort Bragg.................................. 602
+Delta Division of the Central Valley Project..................... 565
+Dickey, Honorable Jay............................................ 537
+Efficiency Incentives Program................................. 560, 574
+Endangered Species Act........................................... 545
+Fazio, Honorable Vic.......................................... 497, 542
+Federal Acquisition Reform Act of 1994........................... 500
+Fish Screen Projects............................................. 600
+Flooding.................................................. 27, 543, 545
+Folsom Floodgate................................................. 599
+Freeze-Thaw Desalination Project................................. 572
+Frelinghuysen, Honorable Rodney................................ 499,547
+Gila River Basin................................................. 568
+Glenn Colusa Irrigation District's Hamilton City Pumping Plant... 566
+Government Performance and Results Act (GPRA)............. 27, 541, 582
+Hot Springs Bath Houses.......................................... 538
+In Situ Copper Mining Research Project........................... 558
+Incremental Funding.............................................. 561
+Indian Water Rights Claims....................................... 497
+Investigations Completed in FY 97................................ 557
+Irrigation Projects in Arkansas.................................. 538
+Knollenberg, Honorable Joe....................................... 546
+Land Acquisition Methodology..................................... 500
+Land Resources Management Program Finances....................... 575
+Little Colorado River Settlement Negotiations.................... 536
+Mammoth Lakes Water Optimization Study........................... 570
+Martinez, Commissioner Eluid..................... 24, 26, 534, 538, 539
+McDade, Chairman Joseph...................... 1, 11, 472, 493, 534, 538
+Milk River Project............................................... 573
+Minidoka Area Projects........................................... 563
+Mission of Bureau of Reclamation................................. 539
+Mni Wiconi Project............................................... 573
+National Fish and Wildlife Foundation.................... 500, 502, 575
+Native American Affairs Program.................................. 576
+Native Fish Protection Program................................... 569
+Negotiation and Administration of Water Marketing................ 577
+New Investigations............................................... 556
+Newlands Project................................................. 567
+Northwest El Paso Wastewater Refuse Project...................... 558
+Oregon Stream Restoration Planning............................... 563
+Oregon Subbasin Conservation Planning Effort..................... 563
+Parker-Davis Project............................................. 570
+Partnerships..................................................... 27
+Pastor, Honorable Ed............................................. 534
+Performance Measurement.......................................... 27
+Policy and Administration........................................ 579
+Portable Global Positioning System............................... 563
+Port Hueneme Brackish Water Project.............................. 558
+Power Program Services........................................... 577
+Programmatic Budget Structure.................................... 539
+Public Relations................................................. 547
+Rainwater Basin Area of Nebraska................................. 574
+Reclamation Reform Act of 1982................................... 536
+Recreation and Fish and Wildlife Program Administration.......... 577
+Red Bluff Diversion Dam Research Pumping Plant................... 599
+Sacramento Wildlife Refuge Water Supply.......................... 591
+Sacramento-San Joaquin Delta..................................... 561
+Salmon Recovery Program.......................................... 562
+Salmon Stamp Program............................................. 606
+San Jose Area Water Reclamation and Reuse Program................ 567
+Science and Technology Program................................... 28
+Snake River Storage System....................................... 561
+Site Security.................................................... 578
+Southern Oregon Coastal River Basins Project..................... 563
+Sterling Forest.................................................. 499
+Terrorism and Sabotage........................................ 541, 558
+Training......................................................... 559
+Tres Rios Wetlands Restoration Project........................... 534
+Trinity River Restoration Act.................................... 602
+Tucson Reliability Division...................................... 569
+Umatilla Project................................................. 564
+Upper John Day River Demonstration Project....................... 562
+Upper Salmon River Optimization Study............................ 564
+Wallowa River Demonstration Project.............................. 562
+Western Water Policy Review...................................... 575
+Wetlands Development Program..................................... 578
+Winter Run Chinook Salmon Capitve Broodstock Program............. 605
+Write-Ins........................................................ 558
+Yakima River.................................................. 562, 564
+Yakima River Basin Water Enhancement Project..................... 565
+Tennessee Valley Authority....................................... 607
+ Air Support........................................... 726-727, 728
+ Annealing Program............................................ 810
+ Answers to Questions from Chairman McDade.................. 757-819
+ Answers to Questions from Mr. Callahan..................... 829-834
+ Answers to Questions from Mr. Knollenberg.................. 825-826
+ Answers to Questions from Mr. Parker....................... 827-828
+ Answers to Questions from Mr. Rogers....................... 820-824
+ Appropriated Debt..................................... 767-768, 806
+ Appropriated Programs................................. 611-612, 758
+ Appropriations Task Force................................. 757, 758
+ Asset Valuation........................................... 753, 807
+ Automated Land Information System............................ 772
+ Automobile Fleet............................................. 745
+ Boat Purchases............................................... 773
+ Bond Ratings.............................................. 735, 807
+ Bonus Awards................................................. 720
+ Bonuses................................................... 752, 760
+ Bristol Virginia Utilities................................... 813
+ Budget Summary............................................... 612
+ Mr. Callahan's Opening Remarks............................... 738
+ Chairman Craven Crowell:
+ Opening Statement...................................... 607-609
+ Testimony.............................................. 610-617
+ Chickamauga Lock.......................................... 614, 770
+ China Programs and International Ventures.................. 762-763
+ Chinese Conference........................................... 721
+ Competition in the Electricity Industry...................... 716
+ Competitive Advantages of TVA.................... 729, 749, 802-803
+ Competitiveness of TVA....................................... 725
+ Cost of Service.............................................. 806
+ Cumberland River System................................... 719, 815
+ Cumberland River System Study.............................. 820-825
+ Mr. Dickey's Opening Remarks................................. 738
+ Duck River Project........................................... 774
+ Economic Development...................................... 614, 782
+ Economic Development Contracts............................. 784-788
+ Mr. Edwards' Opening Remarks................................. 729
+ Electric Industry Competition................................ 735
+ Elimination of Appropriated Programs................. 713, 714, 737
+ Elimination of TVA Appropriations............... 723, 724, 730, 757
+ Environmental Research Center............... 614, 739, 792-800, 829
+ Mr. Fazio's Opening Remarks.................................. 716
+ Fiscal Year 1998 Budget Request.............................. 724
+ Fiscal Year 1998 Program................................... 618-712
+ Mr. Frelinghuysen's Opening Remarks.......................... 730
+ Government Performance and Results Act..................... 816-819
+ Hazardous Waste.............................................. 772
+ Hydropower Development....................................... 814
+ Industrial Rates............................................. 752
+ Investments.................................................. 767
+ Joint TVA/Corps Study................................ 720, 733, 760
+ Mr. Knollenberg's Opening Remarks............................ 725
+ Land Between the Lakes.............. 613, 740-744, 748-749, 774-781
+ Chairman McDade:
+ Opening Comments......................................... 607
+ Closing Statement........................................ 756
+ Mr. Parker's Opening Remarks................................. 734
+ Nuclear Waste................................................ 810
+ Patrol Boats................................................. 746
+ Pension Plan................................................. 809
+ Plant Management............................................. 771
+ Power and Nonpower Proceeds.................................. 764
+ Power Program............................... 715, 759, 801-802, 815
+ Power Purchase Agreements.................................... 811
+ Preference Power............................................. 755
+ Proposal to End All Federal Funding.......................... 615
+ Rates..................................................... 732, 805
+ Recruitment of Industry...................................... 731
+ Reducing TVA Debt............................................ 825
+ Regulation................................................... 803
+ Reservoir Release Improvements............................... 770
+ Retained Earnings............................................ 806
+ Mr. Roger's Opening Remarks.................................. 719
+ Salaries and Wages........................................... 751
+ Shoreline Management...................................... 771, 773
+ Stewardship.......................................... 768, 770, 773
+ Strategic Plan Implementation......................... 847, 851-852
+ Studies of TVA............................................... 754
+ Tritium Production........................................... 813
+ TVA Debt........................................ 726, 732, 735, 808
+ TVA Fence................................................. 738, 812
+ TVA Needs.................................................... 615
+ TVA Police................................................... 728
+ TVA Task Force............................................ 713, 723
+ TVA Tax Structure.......................................... 827-828
+ TVA University............................................... 767
+ Mr. Visclosky's Opening Remarks.............................. 723
+ Mr. Wamp's Opening Remarks................................... 744
+ Water and Land Management.................................. 612-613
+ Update on Power Program.................................... 610-611
+ Witnesses.................................................... 607
+Appalachian Regional Commission.................................. 835
+ Answers to Questions from Chairman McDade.................. 916-952
+ Answers to Questions from Mr. Knollenberg.................. 952-953
+ ARC's Mission Statement and Goals............................ 948
+ Area Development........................................... 920-929
+ Area Development Projects Approved for FY 1996............. 930-937
+ 1998 Budget Request....................................... 836, 844
+ Budget Summary............................................... 850
+ Commission Staff...................................... 845, 946-947
+ Competitive Counties......................... 916, 919-920, 924-925
+ Mr. Dickey's Remarks....................................... 913-914
+ Distressed Counties......................... 837, 855-856, 898, 914
+ Distressed Counties Map, FY 1996............................. 899
+ Mr. Edwards' Remarks......................................... 914
+ Entrepreneurship and Regional Initiatives........ 856, 921-922, 924
+ Mr. Fazio's Remarks........................................ 913-914
+ Fiscal Year 1997 Allocations................................. 923
+ Fiscal Year 1998 Program................................... 859-911
+ Fordice, Kirk, Governor of Mississippi; States' Co-Chairman:
+ Opening Statement...................................... 835-838
+ Testimony.............................................. 839-843
+ General Questions.......................................... 916-920
+ Government Performance and Results Act..................... 948-952
+ Highway Development........................................ 938-942
+ Highway Program............................................ 852-855
+ Highway System Status........................................ 882
+ Interagency Agreements....................................... 926
+ ISTEA Reauthorization............................ 846, 852-853, 917
+ Local Development Districts....................... 857-858, 942-943
+ Chairman McDade:
+ Opening Statement........................................ 835
+ Closing Statement........................................ 915
+ Non-Highway Programs......................................... 855
+ Regional Initiatives...................................... 848, 924
+ Revolving Loan Funds....................................... 841-842
+ Mr. Rogers' Remarks........................................ 912-913
+ Salaries and Expenses........................................ 858
+ States' Co-Chairman.......................................... 835
+ Strategic Plan Implementation......................... 847, 851-852
+ Targeting of Resources................. 848, 851, 856, 890, 914-915
+ Tennessee Valley Authority:
+ Memorandum of Understanding Between ARC and TVA....... 926, 953
+ Approved Projects 1995-1996.............................. 928
+ White, Jesse L., Jr. Federal Co-Chairman:
+ Opening Statement...................................... 844-849
+ Testimony.............................................. 850-858
+ Witnesses.................................................... 835
+
+
+