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78–065 CC 2002

S. HRG. 107–314

ARMY CORPS OF ENGINEERS:

MANAGEMENT OF FEASIBILITY STUDIES

HEARING

BEFORE THE

SUBCOMMITTEE ON

TRANSPORTATION AND INFRASTRUCTURE

OF THE

COMMITTEE ON

ENVIRONMENT AND PUBLIC WORKS

UNITED STATES SENATE

ONE HUNDRED SEVENTH CONGRESS

FIRST SESSION

ON

MANAGEMENT PRACTICES OF THE CORPS IN CONDUCTING STUDIES OF

NEW PROJECTS, ESPECIALLY THE UPPER MISSISSIPPI RIVER-ILLINOIS

RIVER WATERWAY FEASIBILITY STUDY

MARCH 15, 2001

Printed for the use of the Committee on Environment and Public Works

(

COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

ONE HUNDRED SEVENTH CONGRESS

FIRST SESSION

BOB SMITH, New Hampshire, Chairman

HARRY REID, Nevada, Ranking Democratic Member

JOHN W. WARNER, Virginia

JAMES M. INHOFE, Oklahoma

CHRISTOPHER S. BOND, Missouri

GEORGE V. VOINOVICH, Ohio

MICHAEL D. CRAPO, Idaho

LINCOLN CHAFEE, Rhode Island

ROBERT F. BENNETT, Utah

BEN NIGHTHORSE CAMPBELL, Colorado

MAX BAUCUS, Montana

BOB GRAHAM, Florida

JOSEPH I. LIEBERMAN, Connecticut

BARBARA BOXER, California

RON WYDEN, Oregon

THOMAS R. CARPER, Delaware

HILLARY RODHAM CLINTON, New York

JON S. CORZINE, New Jersey

DAVE CONOVER, Republican Staff Director

ERIC WASHBURN, Democratic Staff Director

SUBCOMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

JAMES M. INHOFE, Oklahoma, Chairman

JOHN W. WARNER, Wyoming

CHRISTOPHER S. BOND, Missouri

GEORGE V. VOINOVICH Ohio

LINCOLN CHAFEE, Rhode Island

MAX BAUCUS, Montana

BOB GRAHAM, Florida

JOSEPH I. LIEBERMAN, Connecticut

BARBARA BOXER, California

RON WYDEN, Oregon

(II)

CONTENTS

Page

MARCH 15, 2001

OPENING STATEMENTS

Baucus, Hon. Max, U.S. Senator from the State of Montana .............................. 19

Bond, Hon. Christopher S., U.S. Senator from the State of Missouri ................. 2

Statement, James V. Mudd to Congressional Mississippi River Caucus ..... 4

Graham, Hon. Bob, U.S. Senator from the State of Florida ................................ 20

Letter, from Assistant Secretary of the Army (Civil Works) Joseph

Westphal ........................................................................................................ 21

Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma .................... 1

Smith, Hon. Bob, U.S. Senator from the State of New Hampshire ..................... 38

Vonovich, Hon. George V., U.S. Senator from the State of Ohio ......................... 25

WITNESS

Flowers, Lt. Gen. Robert B., Chief of Engineers, U.S. Army Corps of Engineers ...................................................................................................................... 14

Prepared statement .......................................................................................... 38

Responses to additional questions from:

Senator Baucus .......................................................................................... 50

Senator Bond ............................................................................................. 53

Senator Boxer ............................................................................................ 56

Senator Inhofe ........................................................................................... 47

Senator Smith ............................................................................................ 45

ADDITIONAL MATERIAL

Letter, from Assistant Secretary of the Army (Civil Works) Joseph Westphal .. 21

Statement, James V. Mudd, to Congressional Mississippi River Caucus ........... 4

(III)

(1)

ARMY CORPS OF ENGINEERS CONDUCTS

FEASIBILITY STUDIES

THURSDAY, MARCH 15, 2001

U.S. SENATE,

COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS,

SUBCOMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE,

Washington, DC.

The committee met, pursuant to notice, at 9:32 a.m. in room 406,

Senate Dirksen Building, the Hon. James M. Inhofe [chairman of

the subcommittee] presiding.

Present: Senators Inhofe, Bond, Baucus, Graham, and Voinovich.

OPENING STATEMENT OF HON. JAMES M. INHOFE,

U.S. SENATOR FROM THE STATE OF OKLAHOMA

Senator INHOFE. The committee will come to order.

Today the subcommittee will receive testimony from General

Robert B. Flowers, Chief of Engineers, U.S. Army Corps of Engineers regarding how the U.S. Corps manages projects and, more

specifically, how project management should be changed to ensure

that the U.S. taxpayers receive the greatest amount of benefit for

their investment.

Over the past several months, a reoccurring theme has emerged

from those critical of the Corps. Specifically, it is alleged that the

Corps has a pro-construction mentality, which has resulted in

Corps officers seeking out opportunities to quote ‘‘grow the Corps,’’ which presumably means, the bigger the construction project, the

better; even though a nonstructural option maybe a better alternative.

It is my hope that today’s hearing will begin to address these

concerns. Recently, much of the attention has been directed at the

Upper Mississippi River and Illinois Waterway Feasibility Study.

In February of 2000, Dr. Donald Sweeney, a Corps of Engineer

economist, working on the Upper Mississippi River and Illinois Waterway Feasibility Study, filed a disclosure with the Office of the

Special Council alleging senior Corps officials manipulated the

study to produce results favorable to large scale construction.

As a result, the U.S. Army Inspector General did an investigation, which found evidence to suggest that there is an inherent

preference by Corps senior officers for large scale construction.

Furthermore, the Army Inspector General concluded that many

in the Corps felt an obligation to work for the interest of the navigational industry, as opposed to being an honest broker for the national benefit for waterway development.

2

The subcommittee will be holding a separate hearing concerning

this subject later on this year. However, I hope that the Chief will

touch briefly on what he believes can be done to reverse this negative public perception of the Corps, following the Army Inspector

General’s investigation.

We have with us Senator Kip Bond, who also has an intense interest in that same subject, so we will recognize him for his opening statement at this time.

OPENING STATEMENT OF HON. CHRISTOPHER S. BOND,

U.S. SENATOR FROM THE STATE OF MISSOURI

Senator BOND. Thank very much, Mr. Chairman.

Like many of my colleagues, I have a full schedule today. I would

like to be able to stay here for the whole preceding. I am not sure

that I can. However, I do have some comments and very strong

views, as some of you may know, that I wish to convey today.

If the purpose of reform is to get better data, sooner and in a less

expensive way, then I am absolutely for it. If the purpose of socalled reform is simply to raise the bar and make it harder to approve projects, then I oppose it.

Clearly, if you do not like the Corps, if you do not like flood protection, and you do not like river transportation, and you do like

railroad monopolies, then reform could be used in a way to paralyze any movement toward construction. That is not reform. That

is obstruction. That is bureaucracy, and it is also expensive.

It threatens to cost our farmers in the agriculture heartland of

America their access to the world markets. We are the most efficient producers of food in the world. We need an efficient transportation system. If we do not have that efficiency transportation system, we are going to lose those markets; the countries in Latin

America, where they are building waterway infrastructure.

They are applauding and cheering all of the opposition to modernizing our waterways. There is nothing that would make them

happier than to follow the editorial reviews in the Washington

Post, and fail to modernize our river infrastructure.

I had some African American constituents come to Washington

last September for a meeting that I arranged to plead with EPA

to let the Corps provide them flood protection. These people come

from minority farming communities in Southeast Missouri, a part

of what President Clinton designated as rural enterprise community.

Mr. RUSH AND MR. Kasell outlined to officials at EPA that when

they experience backwater flooding, they have to load up children

in livestock trailers to haul them to school. The contamination from

the flood waters has lead to sickness and death. These people have

been promised flood control since 1976. After 24 years of study and

restudy and delay, they know that further review is the code word

for ‘‘the wealthy get flood protection and the poor get flood water.’’

Then there is the matter of the river study. I am pleased that

we will have a hearing in April that will focus on whether we will

have a modern waterway system or whether we will not.

For the benefit of my colleagues, who I hope will be joining us

today, I want to stress the one thing for you to comprehend as you

consider the Upper Mississippi River Feasibility Study.

3

We spent 12 years and $60 million trying to do a 50 year projection. Hear me please. The Corps of Engineers is attempting to predict demand for water transportation between now and the year

2050, and calculate 50 years of environmental benefits and costs.

We have members of this body who are quite skeptical that the

Nation’s forecasters can predict the GNP over the next 10 year period, because that is the basis on which people are objecting to tax

reductions.

Hey, they want us to do a 50 year projection of economic benefits.

We are asking the Corps to tell us how many metric terms of

beans, corn, coal, gravel, and petrochemicals we will transport in

the year 2040, and at what price.

Following is the national NAS conclusion that was not reported

in the media. This is what the National Academy of Science said.

‘‘No one can predict with confidence the demand for water transport, or almost anything else, 50 or more years in the future.’’ The National Academy of Sciences noted that the economists, not

the uniformed Corps officials, while well intentioned, produced

models that were flawed and not based on realistic assumptions.

I could tell you today that if we are waiting for the economists

to agree on a 50 year forecast, then the forecast will be complete

in roughly 50 years. Unfortunately, we do not have what President

Truman always asked for, which is a one-handed economist, so he

could not say on one hand this, and on the one hand, the other.

The economists are never going to agree on where we are going

to be in 50 years. It is tough enough to get them to agree on where

we are this year and next year. In the meantime, to the delight of

our foreign competitors, we have spent $60 million, and our aging

system is 12 years older.

Furthermore, if we have inadequate capacity, we will place a limiting ceiling on exports, and assure that a negative 50 year projection is correct.

I continue to believe that Congress may have to do what we are

paid to do, and that is to decide if we are going to modernize our

heartland’s principal artery to the world, or if we are going to disarm unilaterally, because we cannot agree on a 50-year projection.

In closing, General Flowers, I think it is easy for us to be abstract around here. As you and I know, Colonel Jim Mudd took the

fall for this study, and I think you know what happened in the

process. Jim Mudd was an essential part of the Schwartzkopf effort

in Dessert Storm; a man of great integrity and ability.

I do not know what your commanders permit you to say here

today, and I do not want to get you into trouble for telling the

truth. But I certainly hope that you are at liberty to add enough

to paint the big picture here. I am convinced, as opponents to modernization are, that the Inspector General report is ready to be incorporated into a New Testament.

Mr. Chairman, Colonel Jim Mudd is now a civilian. He served in

General Schwartzkopf’s office, and helped plan the Gulf War. He

is getting the opportunity to tell the second side of the story before

House Caucus Hearing. We have a copy of the statement that I

would like to place in the record here today.

Just to give you an excerpt, he discusses the things that have

been said about him and the charges that have been raised. He reVerDate 11-MAY-2000 13:26 Mar 18, 2002 Jkt 071526 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 78065 SENENV1 PsN: SENENV1
4

fers to the person who is the centerpiece of the attacks on the

Corps, Dr. Sweeney. He was the guest of honor at the Office of Special Counsel’s press conference on December 6. He was asked, ‘‘At

the time you were removed from the head of Economic Study Team

for the Upper Mississippi Project, was the model in any shape to

be used to compute any de-benefits?’’ Donald Sweeney responded, ‘‘No, with respect to the demand

curves, an incorrect functional form was developed to allow for

rapid evaluation to see how the various components worked together.’’ What he just admitted was that the model which Dr. Sweeney

had been responsible to produce, and which was several months behind schedule when Dr. Sweeney was replaced as manager of the

economical panel, was not adequate to the task at hand. That is

also what the National Academy of Sciences found to be the case.

Senator INHOFE. Without objection, that will be entered in the

record.

Senator BOND. Thank you. I appreciate that.

[The prepared statement of Sen. Bond and the referenced document follow:]

TESTIMONY OF JAMES V. MUDD CONGRESSIONAL MISSISSIPPI RIVER CAUCUS MARCH

15, 2001

Co-Chairmen Hulshof and Boswell, members of the Caucus, my name is James

V. Mudd. I appear here today as a private citizen. A year has past since the last

time I have spoken to this Caucus, then as District Engineer from Rock Island with

responsibility for the Upper Mississippi Navigation study.

Since that time a lot has happened to us in regard to the Upper Mississippi Navigation Study.

I have been questioned by the DAIG, the congressional S&I staff and numerous

other people, citizens and reporters alike. We have seen the release of the DAIG investigation, we watched three honorable officers get letters of admonishment from

the VCSA for their part in the Navigation Study and mast recently we have seen

the NAS interim report on their investigation. All three of these actions sent mixed

signals to the public.

I would like to talk about all three of these actions.

To say that I am disappointed with the DAIG report on the Upper Mississippi and

Illinois Waterway Navigation Study would be an understatement. A travesty of justice is more appropriate. I have read the letter of admonishment that the VCSA

issued me several times.

I have reflected on my actions during the time that I was the District Commander

of the Rhode Island District and I wouldn’t change a thing. I would not make any

decisions differently under the same circumstances.

I would like to thank the VCSA for his reasoned actions in this case.

I think he saw the folly in all of this and the political motivation for the DAIG

outcome. For that reason, he took the least possible disciplinary action that would

protect his wronged officers and still bring the investigation to a close. The VCSA

said in my case, ‘‘The reason I am not officially reprimanding you for your conduct

is because I believe your decision to change certain values in the study was based

on your own methodology which you believed was more appropriate and reasonable

in accounting for certain variables in the study.’’

I have also read the DAIG report many times and I find the written product

wrought with misinformation, hearsay, and paraphrasing. There was an extreme

lack of crosschecking of the facts from testimony given and the overwhelming paper

trail surrounding the decisions over a 2-year period was seemingly neglected.

I find this almost criminal in itself. I have seen the words the ’preponderance of

the evidence indicated that’ . . . throughout the DAIG report. Last time I looked

in the dictionary evidence has a truth part to it and I find the search for it in this

investigation to be seriously lacking.

The Office of Special Counsel’s press conference on 6 December 2000, when the

DAIG investigation went public is quite telling. Dr. Sweeney was a guest of honor

at the proceedings. The question and answer period was most revealing. Dr.

5

1See page 3 of executive summary of NAS report ‘‘Inland Navigation System Planning: The

Upper Mississippi River-Illinois Waterway,’’ released 28 February 2001.

Sweeney was asked, ‘‘At the time you were removed from the head of the economics

study team for the Upper Mississippi project, was the model in any shape to be used

to compute NED benefits.’’ Sweeney responded, ‘‘No. With respect to the demand

curves, an incorrect functional form was developed to allow for a rapid evaluation

to see how the various components worked together.’’ What he just admitted, Congressmen, was that the model, which Dr. Sweeney had been responsible to produce,

and which was several months behind schedule when Dr. Sweeney was replaced as

manager of the economics panel, was not adequate to the task at hand.

This is also what the National Academy of Sciences (NAS) found to be the case.

The NAS was complimentary, as were many other qualified reviewers, of the spatial

equilibrium model (SEM) theory, which was espoused by Dr. Sweeney. The SEM

served as the theoretical basis far what was to follow as an analytical tool. The detailed work was to be done with what Dr. Sweeney called the Essence model. The

NAS found that ‘‘The Essence model does not, however, adequately use the most important concepts of the spatial equilibrium model....’’1 The NAS discovered, in its

review, just as I and my subordinate managers had discovered in 1998, that the Es- sence model was not capable of using variables as input, rather it was hard wired

to produce a do-nothing solution on the Mississippi and Illinois Rivers.

The inherently flawed output of this flawed model is the same information that

the Environmental Groups took as gospel in early 1998. Why didn’t the DAIG find

that little tidbit during their investigation? If they would have, the whole investigation and the allegations brought by Dr. Sweeney would have been dismissed.

For your information, the DAIG did have this information, reference page 83 (4),

Mr. Marmorstein (Dr. Sweeney’s right hand man), admits that he invented N-value

to quantify the elasticity of demand. The DATG team did nothing with that information.

But the press conference provides even more revealing information. Dr. Sweeney

was asked another very provocative question, ‘‘Given that even at this late date,

there still remains no empirical validation of any of the Corps ‘‘N’’ values for agricultural products, would you be comfortable with an NED benefit calculation from

the Corps’ model using any of the ‘‘N’’ values that have been discussed, 1.2, 1.5, 2.0?

Sweeney’s reply, ‘‘No. If I could start all over from a blank piece of paper and

begin from scratch, I would not use ‘‘N’’ values at all but a different functional form

altogether.’’ There it is. Dr. Sweeney developed a model that didn’t have data to make it work

but he spent millions of taxpayer dollars developing it and then he convinced everyone inside and outside of the Corps of Engineers that it was reliable, predictive and

better than any model that the Corps had in its inventory. Through his own words,

he lied to us all.

Why didn’t the DAIG discover these facts? If they did, there would be no investigation, it would have been thrown out. It is puzzling to me that the VCSA would

send the letters of admonishment to the officers in question after these statements

were made in public.

As you know, I was the District Commander of the Rock Island District from 1997

to 2000. I watched a very dedicated group of public servants (minus a few on the

economics team) work on one of the most challenging civil works studies in US history. Nobody deliberately tried to ‘‘cook the books’’ (except perhaps Dr. Sweeney) as

has been claimed. What I observed was a bunch of great human beings trying to

wrestle with a very hard problem/task. Predict the future for the next 50 years with

a reasonable level of certainty? I’m not sure it can be done.

And with the NAS release of their interim review of the Navigation Study this

week, I know and so do you that we can’t do it with the Sweeney economic model.

As head of the Navigation study’s economics study team prior to 1998, Dr. Sweeney

was responsible for the development of the model’s traffic forecasts.

He also oversaw and supervised the development of the transportation rate data

prepared for the model by the Tennessee Valley Authority. Finally, Sweeney was

the primary author of the Essence model and its controversial demand curve assumptions and ’N’ values.

The NAS found all of these elements to be seriously flawed to the point where

the entire model is analytically useless. This brings me to the point at hand. Much

has been said about the ‘‘N’’ value for grain currently in use in the study. I have

been accused by the DATG of improperly taking or directing actions, which I knew,

or reasonably should have known, would contribute to the production of a feasibility

study that failed to meet standards established in law and regulation. In the letter

of admonishment to me, the VCSA went on to say that, ‘‘by improperly directing

6

that certain feasibility study data be altered, you directly influenced the outcome

of the study pertaining to the Upper Mississippi. River and Illinois Waterway’’. I made a decision in June 1999 to use an ‘‘N’’ value of 1.2 for Grain in the Essence

model. I listened to all the proponents of the Essence model, the critics, my economists and staff. My economists had previously stated to several working groups and

the public that the value of ‘‘N’’ was 1.5. I questioned that value and how they came

up with it. I was told that they selected it because it was the median number of

the expert elicitation panel’s range of ‘‘N’’ values, it produced believable results, and

the economic study team was comfortable with it. That rationale was, and is, weak

and insufficient for an important and far reaching study. It didn’t work then and

it doesn’t work now. I asked them to use the information that we had available (primarily the Iowa Grain Flow Survey) and try to at least develop a reasoned methodology for the selection of an ‘‘N’’ value for grain. Using this reasoned methodology,

the ‘‘N’’ value for grain was calculated to be 1.2.

Many have stated their opinion that we overlooked Illinois. Illinois is pivotal in

the navigation study because it exports more than the other states in the upper

mid-west (Illinois ships by water more tonnage than any of the other four states

and its total is almost half of all the five states combined). If we would have had

Illinois Grain Flow Data, it probably would have shown the dependency of this State

on waterborne transportation and therefore the N value of grain for this State

would be mare inelastic than the rest. We didn’t have that data, however, so we

didn’t fabricate a solution.

We did the best we could with the information and data that we had at the time.

In that regard, I have provided you with an attached document prepared by Mr.

Rayford Wilbanks, a recently hired senior economist for the Mississippi Valley Division (MVD) of the Corps of Engineers. His report was generated for MG Phillip Anderson, then commander of the MVD, after the Department of the Army Inspector

General (DAIG) interviewed the General. MG Anderson was concerned because it

seemed as if the DAIG was questioning the mathematical accuracy of the N value

of 1.2. Mr. Wilbanks’ report to General Anderson is attached as Exhibit l.

After consulting with other economists and mathematicians, Mr. Wilbanks concluded that his ′′...professional opinion is that there is no mathematical ‘error’, i.e.,

you can apply a linear ’N’ value to a nonlinear equation. Secondly, I believe the real

concern or issue is what is the so-called ‘correct’ ‘N’ value and how should it be derived? The utilization of a weighted average of ‘N’ does have economic merit in that

it was derived from actual available data that logically weights the grain distance

from the waterway. I do not see a flaw in this approach.′′ At the time of Mr. Wilbanks’ opinion, he had no exposure to the navigation study.

Yes, it would have been nice to have commodity flow data, especially grain, from

all five states for multiple years. This would have provided us with better information from which to derive expected values for ‘‘N’’ for each State to be used in the

model. That luxury didn’t exist then and it doesn’t exist now. We did the best we

could with the one data set (the Iowa grain data). I did ask the grain grower organizations in the five State area if much had changed in the way grain is shipped and/

or used in the Midwest since the 1994 Iowa Grain Flow Survey, Their answer was

an emphatic, N0! They also said they were probably more dependent upon cheap

water transportation which helps offset lower than normal commodity prices. This

review contradicts the DAIG finding that the mathematical methodology used to estimate the ‘‘N’’ Value of 1.2 was flawed. There is no similar scientific investigation

in the DAIG report, just conclusions totally based on hearsay and false testimony.

As a further validation of the uncertainties surrounding the N-value, I submit a

direct quotation from Mr. Manguno’s affidavit, dated 1 April 2000, before the U.S.

Senate Committee on Environment and Public Works;

‘‘7. Given the current state of the Study’s investigation into the subject of waterway demand elasticities, I cannot conclude that the waterway demand elasticity

that corresponds to an ‘N’ of 1.2 for grain falls outside of my notion of the uncertainty bounds surrounding the actual elasticity values.’’

Although this is a somewhat obtuse way of saying it, I believe Mr. Manguno

states in the above quotation that an ‘‘N’’ of 1.2 is within the range of uncertainty

bounds, and thus may be the right answer. I find it to be very strange that the news

media, and apparently the DAIG, concluded that Mr. Manguno’s affidavit supported

Dr. Sweeney’s allegations completely. I believe that Mr. Manguno’s statement refutes Dr. Sweeney’s allegations, and supports my decisions concerning the derivation of an ‘‘N’’ of 1.2. Either the DAIG ignored paragraph 7, quoted above, or they

did not understand it.

I would also like to point out that the NAS on page 40 of their report state that

the ‘‘N’’ value of grain that Dr. Sweeney espoused is not equal to 2.0 but is equal

to a lower value of N. (Exhibit 2) They also state that the supply of grain is not

7

uniform across all farms, and that farms face somewhat different local alternatives.

Congressmen, what the NAS just told you is the ‘‘N’’ value is not 2, which Dr.

Sweeney adamantly supported, and it is not 1.5, which is the mean of the uniform

distribution used by Mr. Manguno. They go on to say that we should have based

the ‘‘N’’ on actual historical data and actual shipper behavior—that is what I told

my team to do when we calculated ‘‘N’’ equal to 1.2

In hindsight, the selection of a value of ‘‘N’’ of 1.2 is probably too high/-too elastic.

On that note, T would also like to provide you a letter from Dr. Hauser from the

University of Illinois (Exhibit 3), who did a study with one of the members of the

National Academy of Science team investigating the study also, Dr. Baumel. Although this study s dated, he indicates that the value of ‘‘N’’ of 1.2 is at the upper

bound of the feasible range of legitimate ‘‘N’’ values. He also indicates that the

movement of grain has gotten mare inelastic since the time of his report. Why Dr.

Baumel (Chief economic spokesperson for the Upper Mississippi environmental

movement and now member of the NAS review team), who has been an active member of the navigation, study economic team/advisors, didn’t provide this information

to Dr. Sweeney in the early stages of his model development is still puzzling. Or,

if he did, why Dr. Sweeney didn’t use it is puzzling to me. To the best of my knowledge, the Hauser, Beaulieu and Baumel (HBB) report is the only totally empirically

based grain elasticity information the Study team has to date. The DAIG investigators had this letter and the HBB original study. With this information in hand, I

question haw the DAIG could conclude that I directed actions which I knew, or reasonably should have known, would contribute to the production of a feasibility study

failing to meet standards . . . If anything, my direction got the study into a range

of the plausible ‘‘N’’ values for grain.

My directions were not only appropriate but based on a solid mathematical foundation, using the only available empirical data available and the result was closer

than any other to grain’s true demand elasticity.

My direction was on the mark.

As to the insinuation that I knew what the outcome would be is anything farther

than the truth.

In this regard, I submit an E-mail sent by my head economist, Mr. Manguno,

written right after the decision to use an ‘‘N’’ Value of 1.2. (Exhibit 4) Mr. Manguno

clearly states that any previous model runs are subject to change because the system environmental impacts (costs) had to be incorporated in the model and the optimal timing of benefits to costs had to be determined.

These two facts did have a large impact on the outcome. There was no way for

me to have known any of this before Mr. Manguno ran the models.

The DATG had this information and the E-mail and did nothing with these facts

either.

On another note, the Navigation Industry folks were telling my economists verbally and in several written reviews that the model they were using was severely

flawed. The Corps economists chase to ignore these critics.

MG Anderson was found by the DAIG to have let the industry folks get too close

to the study.

The NAS interim report finds the same things wrong with the Navigation economic model that the Navigation Industry was trying to point out. To MG Anderson’s credit, he has a good eye for the truth. How the DAIG could find something

inappropriate in this regard is totally wrong. And to top it off the Corps regulations

tell its planners to seek out the knowledgeable judgment of navigation economists

and industry experts. (Exhibit 5) I find the DAIG findings in this regard truly appalling.

I have tried to figure out how the DAIG could come up with the conclusions it

did. I am always left with three outcomes, they were politically coerced by the last

administration, they were duped by Dr. Sweeney’s affidavit, his quasi-expert testimony and that of the other questionable Corps economists, or the IG investigators

were in a highly technical investigation that put them at severe disadvantage—they

were quite inept for the task.

All three speak to a sad day for the Army. Not only is this report an embarrassment for the Army but also it could be divisive to our soldier’s confidence in the

IG process.

These are my conclusions: I find the DATG report nothing more than slanderous

drivel;

I find the VCSA actions against the only people in the Corps asking the hard

questions of Corps economists, who were totally wrong, unconscionable; and I find

the NAS findings totally enlightening but almost lost by the public, press and Office

of Special Counsel.

8

It’s not every day that a whistleblower blows the whistle on his own incompetence. How ironic.

I still wonder how the congressional S&I investigation turned out but it wouldn’t

surprise me if they find Dr. Sweeney lacking in good management traits. Rather

than supporting Sweeney’s allegations and the resulting report prepared by the

DAIG, the NAS findings seriously question Dr. Sweeney’s professional credibility

and his integrity. I feel that Dr. Sweeney owes the American taxpayer a huge apology for wasting more than fours years of effort and millions of dollars in taxpayer

funds developing a useless model, not to mention the recent three plus years and

millions of dollars that it took us to find out it was useless.

I don’t know how this injustice can be corrected. I respectfully request your

thoughtful consideration of any options you may have to help correct them. I thank

you for your attention to all I’ve said today, and for any actions that you may undertake as a result.

Subject to your questions this completes my testimony.

EXHIBIT 1

To: Anderson, Phillip, R MG MVD

’subject: ‘‘N’’ Values Issues

Sir, Attached is my assessment of subject issues per your request. I stopped short

of contacting economists from universities in the Upper Mississippi region due to

the sensitivity of the project and not knowing if it could be getting unbiased opinions. I would welcome a short meeting to relay additional insight after you have had

a chance to review.

Upper Mississippi River-Illinois Waterway System Navigation Study

METHODOLOGY FOR COMPUTATION OF ‘‘N’’ VALUE

Task

Is there a mathematical ‘‘error’’ in the Upper Mississippi River-Illinois Waterway

System Navigation Study Economic Study Panel’s application of the derived ‘‘N’’ value? Would the economic community have contradictory views concerning the

methodology, procedures, and application of the Study Panel’s derived ‘‘N’’ value to

estimate the demand for waterway transportation?

Background

In June 1999 Dr. Donald Sweeney expressed concern to the Economic Study Panel

for the Upper Mississippi River-Illinois Waterway System Navigation Study regarding the computation of the ‘‘N’’ value being used in the formula for the demand

curve in the Essence model. The following paragraph, which explains Dr. Sweeney’s concerns, is taken from an E-mail message dated June 29, 1999, from Dr. Sweeney

to members of the Economic panel. Dr. Sweeney alleges that the method of computing the ‘‘N’’ value was erroneous in the concluding sentences of the paragraph.

The methodology adopted by the study team for estimating farm product, origindestination specific, ‘‘N’’ values in the Essence spreadsheet is inappropriate for three

reasons. As I understand the methodology, information from the expert elicitation

panel for farm products movements regarding reasonable upper and lower bounds

for possible ‘‘N’’ values (determined by the panel to be 2 and 1, respectively), along

with that panel ’s conclusion that agricultural producers located nearer the river are

more likely to be inelastic than producers distant from the river with respect to

their demand for water transportation, and information regarding aggregated commodity flow data from the report entitled ‘‘The Iowa Grain Flow Survey ‘‘, 1996, are

used to compute an ‘‘expected value’’ of ‘‘N’’ for all farm product movements. The

weights used in estimating the expected value for ‘‘N’’ are derived from the proportion of total tonnage of movements of corn and soybeans to the river for the entire

State of Iowa from an eastern band (near the river, N=1), a band for central Iowa

(further from the river, N=1.5) and a band for western Iowa (distant from the river,

N=2). Following this procedure yields an estimate of 1.2 for ‘‘N’’ for all movements

of farm products. The first problem with this procedure is that it completely ignores

the critical role that the end users of the product have in determining the derived

demand for water transportation. It is the interplay of the willingness of producers

to supply product to the river and the willingness of end users to pay that determines the characteristics of the demand for water transportation. The other problems with this procedure are immediately evident when the existing flows of grain

from Iowa origins to other areas is examined. Most pools on the Upper Mississippi

River and Illinois Waterway originate relatively small quantities of grain water

movements. These pools do not ‘‘draw’’ grain from western Iowa or anywhere relVerDate 11-MAY-2000 13:26 Mar 18, 2002 Jkt 071526 PO 00000 Frm 00012 Fmt 6633 Sfmt 6621 78065 SENENV1 PsN: SENENV1
9

atively distant from the terminals located in the pool. A few pools (with rail access

to the river) originate relatively large volumes of water grain movements and draw

a large proportion of their volume from relatively distant ultimate sources. Consequently, the larger volume movements should have higher ‘‘N’’ values and the

more numerous smaller movements should have lower ‘‘N’’ values. If the study team

wants to adopt some similar methodology, then it should apply the suggested methodology to specific origin, destination, and commodity movements. In other words,

each farm product movement should have its own ‘‘N’’ value estimated as a function

of the distribution of the ultimate origins of grain and destination for that movement. The final problem with computing the ‘‘expected value’’ of ‘‘N’’ in the manner

adopted by the study team mathematical. Computing the weighted average of ‘‘N’’

values and then inserting that average into the non-linear functional form in the

spreadsheet does not produce a weighted ‘‘average’’ demand curve due to the nonlinearity of the functional form in the spreadsheet.

Methodology

The ‘‘N’’ value of 1.2 for grain is a weighted average that incorporates information

from the August 1998 expert elicitation panel and the 1994 Iowa Grain Flow Survey. Info from the panel was used to identify a range of ‘‘N’’ values. Data from the

Iowa Grain Flow Survey was used to develop the weights that were applied to the

specific ‘‘N’’ values. The weighted average that resulted from this calculation was

applied to all grain movements shipped from all origins.

The conclusion of the expert panel was that the ‘‘N’’ value for grain ranged between limit values of 1.0 and 2.0. These limit values were used in conjunction with

the three Iowa east-to-west crop reporting regions. The panel had concluded that

grain originating closer to the river was relatively more inelastic as compared to

grain originating farther from the river. Consequently the limit ‘‘N’’ value of 1.0 was

assigned to eastern region and the limit ‘‘N’’ value of 2.0 was assigned to the western region. The mid-point of the ‘‘N’’ value range, 1.5, was assigned to the central

region.

Weights were assigned to the three crop reporting regions in Iowa. This was accomplished by using the Iowa data, which described the proportion of each region’s

corn production that moved to the river. These proportions were converted to

weights and assigned to the appropriate region. With assigned ‘‘N’’ values and

weights for each region, the overall weighted average of 1.2 was applied to all grain

movement shipped from all origins.

Research/Contacts

• Dr. Darren Hudson, Assistant Professor of Agricultural Economics, Mississippi

State University

• Dr. Richard Kasul, Statistician Environmental Lad, ERDC

• Mr. Jerry Ballard, Mathematician/Computer Scientist Environmental Lab,

ERDC

• Mr. Rich Manguno, Chief Economic and Social Analysis Branch, New Orleans

District

Dr. Hudson indicated the methodology utilized does not derive a weighted demand

function, but is a demand function with a weighted constant ‘‘N’’ value, i.e., assumes

the ‘‘N’’ is constant across the demand function. Dr. Hudson said the methodology

utilized of assuming a constant ‘‘N’’ value or elasticity is the standard method to

estimate a demand function, a constant ‘‘N’’ is all right to use, and the method utilized has derived an approximation of the effect distance from the waterway has on

grain movement.

Dr. Hudson said that with the lack of historical data and time for detailed analysis the weighted average ‘‘N’’ value is a good approximation. He said if you had

20 years of data on grain origins and movements you could run a least squares regression on the log of the quantity using barges and might be able to derive an approximation of N. Until the historical data and analysis is analyzed one cannot tell

if the elasticity is higher or lower, although Dr. Hudson said an ‘‘N’’ of 1.2 seems

too high. He said you could argue that grain along the waterway is more inelastic

(<1) because the facilities for river transportation are readily available, the cost of

river transportation is lower than other transportation forms, and there are no real

substitutes for river transportation available to grain along the river. He indicated

barge and rail are not perfect substitutes, therefore, barge transportation should be

less than 1.2. He said that dividing the area into more segments (smaller areas)

would most likely result in smaller ‘‘N’’ values because it would more precisely

measure the effects of distance. Dr. Hudson said the lack of data and resources dictates the utilization of economic methodology and although you give up some precision the analysis becomes manageable.

10

Mr. Jerry Ballard, Mathematician, ERDC, indicated the equation utilized is mathematically correct. Also, the application of the linear ‘‘N’’ value is fine for the nonlinear equation for Q. Mr. Ballard indicated that his assessment of the question

raised has to do more with doing something other than banding the region.

Dr. Richard Kasul indicated there was nothing wrong with the mathematical application. He said that when you run something through a non-linear equation the

expectation may be different than the total, i.e., non-linear equations cannot with

certainty be mapped from one non-linear relationship to another therefore, expected

results may differ. Dr. Kasul said that two questions are raised, 1) what is the correct ‘‘N’’ value? 2) was the correct application methodology utilized? The first is

what the expert panel determined. The methodology and application of a weighted

‘‘average’’ ‘‘N’’ value should yield a better estimation of ‘‘N’’ and therefore should be

better than using the mean or midpoint between 1 and 2.

Mr. Rich Manguno said it is recognized the process utilized did not produce a

weighted composite demand curve reflecting the distribution and weights indicated.

However, the process did incorporate the concept of a distribution of ‘‘N’’ values and

was based on the only empirical data available at the time. The process recognized

the significant degree of uncertainty that surrounds the estimation of grain demand

curves. This uncertainty includes not only the appropriate range of N-values but

also the weights that would apply to the N-values. While the weights are known

with reasonable certainty for the State of Iowa, the same cannot be said for grain

produced in other locations of the study area. For example, most of the grain

shipped from the State of Illinois is within 90 miles of a navigable waterway, therefore, strict adherence to a mathematically precise aggregate demand function was

not deemed to be critical.

Observations Regarding Methodology

My answer to the question of a mathematical ‘‘error’’ is, NO, there is no mathematical ‘‘error’’. The application of the linear ‘‘N’’ value is fine for the nonlinear

equation for Q. It is mathematically proper to utilize the weighted average of ‘‘N’’

in a demand function that is nonlinear. The method to derive the weighted average

of ‘‘N’’ produces a good approximation of the effect distance from the waterway has

on grain movement.

My assessment of the economic communities’ views concerning the methodology,

procedures, and application of the derived weighted ‘‘average’’ ‘‘N’’ value utilized in

the demand equation is not as clear cut. I do believe most will agree that the methodology utilized was appropriate to estimate the ‘‘N’’ value and capture the effect

distance from the waterway has on grain movements. Some will say that defining

an ‘‘N’’ value for all segmented locations along the waterway if possible would yield

a better estimate of Q. The question is would the estimate of ‘‘N’’ change? Just how

precise does the estimate need to be? The precision utilized is dictated by the sensitivity of the answer; data available, time required for analysis, and funding for analysis. The method to derive the weighted ‘‘average’’ ‘‘N’’ produces a better approximation of the effect distance from the waterway has on grain movements than arbitrarily selecting the midpoint between 1 and 2. Some of the uncertainty is handled

by utilizing the expert panel to establish the appropriate range of ‘‘N’’ values and

further by applying the weights to determine the ‘‘N’’ value. Bottom line, yes there

will most likely be conflicting views on subject methodology, but the conflicts will

focus more on what are the ‘‘N’’ values all along the waterway, different areas with

their own particular ‘‘N’’ values, and request for more detail analysis to determine

‘‘N’’ values.

My personal professional opinion is that there is no mathematical ‘‘error’’, i.e., you

can apply a, linear ‘‘N’’ value to a nonlinear equation. Second, I believe the real concern or issue is what is the so-called ‘‘correct’’ ‘‘N’’ value and how should it be derived? The utilization of a weighted average of ‘‘N’’ does have economic merit in that

it was derived from actual available data that logically weights the grain distance

from the waterway. I do not see a flaw in this approach. However, due to the sensitivity of the ‘‘N’’ value on the quantity of grain movements more in-depth analysis

to estimate the ‘‘N’’ value and/or estimation and utilization of different ‘‘N’’ values

along the waterway may be warranted. Yes, conflicting views will prevail in the economic community, that is the nature of making projections.

11

EXHIBIT 2

INLAND NAVIGATION SYSTEM PLANNING

Sensitivity of Waterway Tonnage to Barge Tariffs

Another serious problem is that there is little empirical basis for the Corps’ estimate of how much of the grain will moved by barge, and how this will be affected

by waterway congestion and the consequently higher shipping costs. The Corps’ calculation is based on the ES SENCE model, which assumes an unusual functional

form to forecast demand for barge transportation, as shown in Equation 4.I. The

form) is not necessarily wrong, but because it is unusual, it is harder to compare

it to more conventional formulations and to understand the implications of different

values of its parameters.

Corps economists originally argued that ‘‘N’’ in equation (4.1) was likely to be

equal to 2, based on elegant but simple reasoning about the spatial distribution of

commodity prices near a waterway. The economists hypothesized that agricultural

products are loaded at a point an the waterway and that the point is surrounded

by farmland producing a constant yield per acre. Each farmer has a choice between

shipping the crop to export from the waterway port and selling it for local uses. If

the costs of transporting the product to the port are proportional to the distance between the farm and the part and all farmers have the same alternatives, then the

area shipping to the port will be a circle centered on the port. The size of the circle

will expand or contract as barge rates at the shipping point fall or rise. Because

the amount shipped on the waterway is proportional to the area of the circle, this

implies that ‘‘N’’ is 2.

Although the reasoning is elegant, some of the assumptions used are not realistic.

If loading points are close, for example, then the drawing area (the trade area in

which transportation costs to a given loading paint are lower than those to any

other loading point) for each river port cannot be a circle, because the drawing areas

will overlap-which implies a lower value of N. Similarly, the costs of transporting

the grain to the loading point are not proportional to distance, because the loadingunloading charge is fixed. Finally, the supply of grain is not uniform across all

farms, and the farmers face somewhat different local alternatives. Theoretical issues

aside, the important issue is that the Corps made no effort to assure that its assumptions about ‘‘N’’ were consistent with historical data an shipper behavior. Studies based on actual shipper behavior suggest that, contrary to the Essence model,

price responsiveness of freight demand varies greatly by commodity and by location

(Small and Winston, 1999).

The Essence model implies that farmers that will choose to ship by barge lie within a circle centered on the loading port, As relative barge rates decline, the radius

of the circle expands, since farmers further from the part can afford the shipping

costs to the port, and vice versa. Essence also implies that ;farmers close to the part

(well inside the radius of the circle) are insensitive to price, since it is cheaper far

them to ship by barge. Similarly, farms far away from a port (well outside the radius) are insensitive to price since they will almost never ship by barge. However,

farmers that fad that the cost of shipping by barge is almost identical to shipping

by a different mode (or selling the corn for a purpose other than export) are extremely sensitive to small changes in price, such as that from 1 month to another.

EXHIBIT 3

STATEMENT ON BARGE DEMAND ELASTICITIES FOR GRAIN

ROBERT J. HAUSER, PROFESSOR AND HEAD DEPARTMENT OF AGRICULTURAL AND

CONSUMER ECONOMICS UNIVERSITY OF ILLINOIS, URBANA-CHAMPAIGN

JULY 22,1999

This statement concerns the estimate for the barge-rate elasticity of demand for

grain shipments on the Upper Mississippi and Illinois Rivers used by the Corps of

Engineers in its evaluation of various navigation-related projects. My understanding

is that the most recent estimate of elasticity used by the Corps is approximately

three. (Demand elasticities referred to in this statement will be in absolute (positive)

terms.)

Since farm products account for the majority of the traffic on the Upper Mississippi and Illinois Rivers, assessments of navigation benefits and costs rely heavily

on the underlying barge demand elasticities for corn and soybean shipments. In

analyses conducted by the Corps, if the estimated demand elasticity is too high, waVerDate 11-MAY-2000 13:26 Mar 18, 2002 Jkt 071526 PO 00000 Frm 00015 Fmt 6633 Sfmt 6621 78065 SENENV1 PsN: SENENV1
12

terway navigation benefits will be understated; if too low, the resulting benefits will

be overstated. Thus it is important that (1) the general level of the elasticity be considered carefully, (2) differences in elasticities between river segments be considered, (3) a reasonable range of potential elasticities be considered, and (4) the sensitivity of the project-evaluation results to changes in the elasticity be measured. ,I

will.address points 1 through 3, based on a study conducted during the 1980’s by

Hawser, Beaulieu, and Baumel (HBB).1

1 Hauser, Robert.J., Jeffrey Beaulieu, and C. Phillip Baumel. ‘‘Impacts of Waterway User Fees on Grain Transportation and Implied Barge Rate Elasticities,’’ Logistics and Transportation Review, 21(1985), pp 37–55. Funded by U.S. Dept. of Transportation, Contract DTRS–57–80-C–00133.

HBB measured impacts of alternative waterway user fees. The 1980 transportation rate structure for rail, barge and truck was used to estimate user-fee impacts

given forecasts of 1985 supply/demand conditions for grain. The HBB grain-flow projections were found with an optimization model containing over 11,000 alternatives

for shipments of corn, soybeans, and wheat in the U.S., expressed in over 3,000

equations. A base line solution (in terms of grain flows and attendant transportation

costs) was found under the 1980 rate structure. The impacts of user fees were then

assessed by measuring changes in grain flows and costs caused by imposing user

fees (i.e., changing barge rates.) An important output of the analysis are estimates

of own-price elasticities for grain barge shipments since the change in barge rate

causes a measurable change in barge shipments, enabling the calculation of elasticity estimates. Resulting estimates are presented in Table 1.

Table 1. Estimated Barge Demand Elasticities for Grains (HBB)1

Barge Demand Elasticity

Fuel Tax Segment Tax

Upper Mississippi River ................................................................................................................... 2.09 2.10

Illinois River ..................................................................................................................................... 1.07 0.92

All River Segments .......................................................................................................................... l.62 1.48$

As indicated in Table 1, the barge demand elasticities for grain (corn, soybeans

and wheat) found by HBB for the Illinois River, the Upper Mississippi River, and

the entire system are well below the demand elasticity of 3.0 currently implied by

the Corps shipment demand function for grains. Moreover, the degree of difference

depends on the river segment. Because of its location relative to other rivers and

to production, the Illinois River’s elasticity is approximately half that for the Upper

Mississippi River. Consequently, the HBB analysis suggests that using a single

transportation demand elasticity for all waterways is not appropriate.

HBB note that their analysis is a ‘‘snapshot’’ of demand characteristics that

change from year to year, if not from day to day. In general, the barge rates used

in the HBB analysis are higher than those which have existed since the study was

conducted, implying that, under a stationary and linear demand, elasticities have

fallen since the early 1980’s and that the HBB estimates are probably biased upwards, indicating further that the Corps estimate is relatively high.

Given the HBB analysis, the Corps’ elasticity estimate should be considered, at

best, an upper bound for analysis. Lower bounds could reasonably be defined well

below one. Given this type of range, an important question becomes: how sensitive

are the Corps’ findings to changes in. elasticity estimates from, say, 0.5 to 3.0? Consideration of this question by river segment is critical to providing a sound assessment of the benefits and costs associated with new projects on the inland waterway

system.

Your consideration of this statement is appreciated.

EXHIBIT 4

Mudd, James V MVR

From: Manguno, Richard J MVN

’sent: Friday, June 11, 1999 8:52 AM

To: Mudd, James V MVR; Loss, Gary L MVR; Tipple, David A MVR; Thompson,

Bradley E MVR; Carr, John P MVR; Barr, Kenneth A MVR; Marmorstein, Jeffrey

G MVS; Astrack, Richard F MVS; Stuart, Richard E MVD

’subject: Model Results/BCRs

The attached file summarizes the evaluations completed to date. Several points

must be noted. 1) These evaluations do not include system environmental costs. 2)

13

The list of investment measures is not necessarily a complete list. 3) We have not

yet addressed the optimal timing of these measures. 4) If any of the Without Project

rehab costs avoided are scheduled during the navigation season there is an additional benefit category to consider Navigation Impacts Avoided. 5) Investment measures that include lock extensions reflect slightly adjusted service times compared to

the times most recently used (approximately 1–4 minutes slower for locks 20–25).

We expect to complete the evaluations for the all the measures identified on the

attachment by early next week.

RICH

EXHIBIT 5

ER 1105–2–100 28 Dec 90 6–68. Evaluation Procedure: Step 7—Determine Future

Cost of Alternative Modes.

a. Future cost per unit of each commodity will normally be the same as current

cost. As stated in paragraph 6–60a(5), the without-project condition normally assumes that the alternative modes have sufficient capacity to move traffic at current

rates unless there is specific evidence to the contrary.

This step combined with step 6 provides a time series of demand schedules specific to a particular commodity origin-destination pattern. Address the projection of

any change in future prices as indicated below.

b. A future rate is a prevailing rate as defined in step 5.

It reflects exclusively a shift in rates because of projected changes in the volume

of shipments on a given mode or a shift from one mode to another (e.g., from rail

to pipeline). To support such a shift, show that the increase in volume is likely to

lead to a change in rate; do not assume, for example, that an increase in volume

of traffic of a commodity from one area to another will automatically ensure a more

favorable high-volume rate.

6–69. Evaluation Procedure: Step 8—Determine Future Cost of Waterway Use.

Two separate analyses make up this step. First, analyze the possibility of changes

in the costs of the waterway mode for future years for individual origin destination

commodity combinations. Second, analyze the relationship between waterway traffic

volume and system delay. Do this second analysis in the context of the total volume

of traffic on the waterway segments being studied for with and without project conditions. This analysis will generate data on the relationship between total traffic

volume. and delay patterns as functions of the mix of traffic on the waterway; it

may be undertaken iteratively with step 9 to produce a ‘‘best estimate.’’

6–70. Evaluation Procedure: Step 9—Determine Waterway Use, With and Without

Project. At this point the analyst will have a list of commodities that potentially

might use the waterway segment under study, the tonnages associated with each

commodity, and the costs of using alternate modes and the waterway, including system delay functions with and without the project over time.’ Use this information

to determine waterway use over time with and without the project based upon:

a. A comparison of costs for movements by the waterway and by the alternative

mode, as modified by paragraph 6–69b.

b. Any changes in the cost functions and demand schedules comparing (1) the current and future without project conditions and (2) the current and future with

project condition.

Conceptually, this step should include all factors that might influence a demand

schedule; e.g., impact of uncertainty in the use of the waterway; ownership of barges

and special equipment; level of service; inventory and production processes; and the

like. As a practical matter, the actual use of a waterway without a cost savings or

nonuse of a waterway with a cost savings depends on the knowledgeable judgment

of navigation economists and industry experts.

Senator BOND. General Flowers, you have come far in your distinguished career. But in the time ahead, I advise that you measure your job performance. It will be determined by many important

things, but mandatory endorsement of the Washington Post is not

something you should count on.

[Laughter.]

Senator INHOFE. For clarifications purposes, Senator Bond, let

me just state that I had talked to General Flowers about all these

things that have appeared in various publications. I think that we

14

all agreed that a hearing is necessary to give him the opportunity

to respond, and to respond on the record. It was certainly not in

the form of attack on him or the Corps.

Senator BOND. Oh, no, I wanted to make sure, because I have

some colleagues that I wish were here today, and I may send them

autographed copies of my statement, to share with them.

Senator INHOFE. We will certainly do that. You mentioned the

big picture. People forget that my hometown of Tulsa, Oklahoma

is navigable. We are on that thing. It does not stop in Missouri. It

comes on to Oklahoma.

Senator BOND. We are happy to have you here, coming by.

Senator INHOFE. We have concerns with Montgomery Point Lock

and Dam, for example. If we had not attended that, there would

be no way to predict the future of navigability into Oklahoma, so

we are very much interested.

In fact, I would further say, to make sure it gets on the record,

that it was my father-in-law, who worked with Bob Curr and Senator McClellan, that started this whole thing that came all the way

there into Oklahoma. So this is deeply in our family.

Senator Baucus, would you like to have an opening statement?

Senator BAUCUS. At a later moment; not at this moment, thank

you.

Senator INHOFE. This is your last chance.

[Laughter.]

Senator INHOFE. No, any time you want.

Senator BAUCUS. I will find another chance.

Senator INHOFE. General Flowers, it is nice to have you here.

Normally, we have opening statements confined to 5 minutes; but

you are the only witness here. Take as long as you want, but try

to keep it within 15 minutes at the most. Your entire statement

will be placed in the record.

STATEMENT OF LT. GEN. ROBERT B. FLOWERS, CHIEF OF

ENGINEERS, U.S. ARMY CORPS OF ENGINEERS

General FLOWERS. Thank you, Sir, I appreciate the opportunity

to be here. I have prepared a statement that we have furnished,

and I would like to ask that it be made part of the record.

Senator INHOFE. Without objection.

General FLOWERS. In my remarks this morning, I intend to

speak out in defense of the U.S. Army Corps of Engineers, with its

35,000 dedicated military and civilian public servants.

They are deeply concerned about what they read in the newspapers, and the reason is that they do not recognize their Army

Corps of Engineers in the words that they read; and sir, neither do

I.

The Army Corps of Engineers is charged in the press as a rogue

agency, out of control, too cozy with Congress; and living by its own

rules.

Those allegations are absolutely false. The Army Corps of Engineers has been publicly labeled that it cannot be trusted to do an

objective study. The facts do not bear that out. It is simply not

true.

15

We have been painted as being insensitive to the environment,

when the fact is that 20 percent of the our civil works program is

dedicated to the environment. This percentage is growing.

The language in the President’s budget speaks to serious questions that have been raised about the quality, objectivity, and

credibility of Corps reports on economic and environmental feasibility of proposed water projects. We welcome the opportunity to

address these questions and to take action to address any and all

findings of merit.

In the case of Upper Mississippi and Illinois Navigation Study,

we are responsible to forecast economic activity 50 years into the

future. It is very, very difficult to try to model this far ahead. I am

not convinced that anyone has the tools to do this. I take very seriously both the results of the of the Army Inspector General’s report

on the Upper Mississippi and the report of National Academy of

Sciences.

Having said that, the public needs to be better informed about

the circumstances surrounding this study. I am making substantive changes to the procedures used for the study. I must ensure the integrity of our study process. There were no findings of

fraud or waste. Good and decent Americans are involved on all

sides of this issue.

The study, as indicated on this chart, when interrupted by whistle blower allegations, was far from complete and had yet to undergo several serious reviews.

Senator BAUCUS. General, do we have a copy of that somewhere?

General FLOWERS. Senator, we will furnish you a copy.

Senator BAUCUS. Thank you.

General FLOWERS. We were still in the study phase when whistle

blower allegations were made. The National Academy of Sciences

found that the model for economic analysis was flawed. In fact, the

Academy’s report said that the shortcomings were so serious, that

the model should not have been used. Dr. Sweeney, the lead core

economist on the study, developed this model.

It was this emerging realization that caused much of the tension

between the parties involved in the allegations. Despite the enormous complexity, the goal of our study process is to produce the

best economic and scientific analysis available for the management

of our Nation’s water resources.

Let me tell you the situation I found when I took over as Chief

last October. I found a fundamentally sound organization, whose

people possess an amazing breath and depth of professional and

technical capability, and who continue to persevere in providing

sound solutions to the Nation’s water resources problems, despite

being surrounded by controversy.

Over the past year, we have been maligned in the press. Congressional committees, our own Army Inspector General, and the

National Academy of Sciences have investigated us. We have had

our credibility assailed and integrity questioned. Morale is suffering as a result of these circumstances.

For over 200 years, the Congress and the American people have

put their faith and confidence in the ability of our agency to respond and to solve some of our most complex National problems.

16

Today, I assure you, the Army Corps of Engineers is an agency

of integrity, with people of high character, who return real value

to the Nation. The Corps has sound, systematic processes, that consistently provide decisionmakers, the Congress, the Administration

and the American people, with solid recommendations based on

sound engineering, scientific fact, and objectivity.

Our processes are not just Corps processes; they are Federal

processes that are used throughout the Government in the water

resources arena. We work in an open atmosphere and collaborate

with many stakeholders. We have been and remain willing to incorporate improvements to get better answers. Our intent is to

achieve a synergy between economic objectives and environmental

values.

Toward this end, in April of last year, we improved our planning

guidance, and this has clarified our ability to develop projects for

environmental restoration. I pledge that we will continue to improve this process.

Let me now address more specifically some of the questions that

have been raised by two investigations of our study of the Upper

Mississippi River and the Illinois Waterway.

I believe many of the problems occurred for one simple reason.

People were trying to do the right thing, their duty. I think that

is an important point to remember, as we look at three of the more

important findings and recommendations.

The National Academy identified the economic model that we

were using in the study as a problem. We agree. Within the Corps,

we saw that this model was not working and needed change. The

internal processes within Corps were in place, and the Crops leadership intervened.

That intervention, however, has been characterized as an attempt to manipulate the outcome of the study. I do not believe it

was. The Academy’s report now confirms that the model was

flawed.

The Academy also found that despite the nearly $25 million that

we spent on environmental studies, we must do more to integrate

this information into the project decisionmaking process. We accept

that judgment. I have already talked about the changes that we

have made in our process to incorporate environmental values in

our projects.

In partnership with the States and other Federal agencies, we

have made great strides in understanding the ecology of the Upper

Mississippi, and in restoring its environmental resources; but we

can and will do more. We also pledge to more thoroughly examine

nonstructural alternatives.

I am also taking the following additional actions. We will go forward with this complex study, after assessing the findings in the

Inspector General’s report and the National Academy of Sciences’

report, and refocusing and restructuring the team. I am also establishing a Washington-level principles group, composed of senior

people from other key Federal agencies.

The Corps will continue to lead the study that this group will

provide national level balance and guidance on important economic

and environmental issues. The principles group met for the first

time yesterday.

17

We are also convening a similar group at the regional level, composed of our own Corps professionals, those from other agencies,

the States, and non-governmental organizations such as industry

and environmental groups.

Finally, given the regional and controversial nature of the study,

I am placing the study team under the direct supervision of the

Commander of the Mississippi Valley Division, a general officer.

Let me get back to the findings. One that I want to address specifically is that the Corps provided inappropriate information to the

barge industry. The facts do not bare this out.

Public involvement began early in the study. There have been 34

public meetings, with over 2,400 attendees and 2,500 comments.

Mailings went out to almost 10,000 individuals, agencies, and

stakeholders, and there is still more to come.

It is important to remember that the users, and the barge industry in particular, will be paying for half of the construction of any

possible solutions; and the improvements, or lack thereof, that will

ultimately have a great impact on their cost of doing business. It

is incumbent upon us to provide them access to the study and to

consider their input. We also provided access to environmental

groups and other stakeholders throughout the process. We welcome

and we use the input we receive from all interest groups and individuals. The Corps takes the findings of the two reports very seriously. We clearly understand our responsibility for providing you

with the best environmentally sustainable alternatives, and we will

do so.

Let me move to the broader issue. During the review of the

Upper Mississippi study, sweeping generalizations unfairly characterized the entire Corps study process. Two facts are important

here. First, the conclusions reached were based on one study in one

division. It is one of the largest and most complex studies we have

ever undertaken; but it is still only one study. We have done thousands of important studies over the years.

Second, a 1999 National Academy of Sciences’ report found our

study process to be fundamentally sound. One of my major objectives is to guarantee you that you can continue to have confidence

in my organization and our products.

It is critical that we continue to provide valuable services for the

American people. Therefore, I am proposing as soon as possible the

establishment of an independent review panel for large, complex,

or controversial studies.

We are still working on the details of this initiative. It will be

a mixed group of Corps senior leaders and outside independent experts. They will provide me with a separate assessment, before I

forward my report to the Office of the Assistant Secretary.

This proposal would be an interim step while we await results

from the WRDA 2000 mandated National Academy of Sciences review.

Additionally, I am reinstituting the Chief’s Environmental Advisory Board next month. In the past, this group of experts helped

move Corps thinking and processes to achieve a more environmentally sustainable philosophy. They will again play a key role,

and I look forward to hearing from them.

18

Before concluding, I want to briefly return to the charges that

have been leveled at the Corps. Are we a ‘‘rogue agency,’’ outside

effective executive branch control, and ‘‘too cozy with Congress’’?

We are absolutely not.

We are a military organization, under the civilian leadership of

the Assistant Secretary of the Army for Civil Works, and the military supervision of the Chief of Staff of the Army.

When I came on board last year, I co-signed a letter with the Assistant Secretary, that reiterated this relationship and our individual roles and responsibilities. I would submit that the entire

Corps program is subject to a higher level of executive branch and

congressional oversight than any other form of Federal activity.

Corps projects are separately authorized, and the bill is passed

by Congress and signed into law by the President. Every project is

reviewed annually by both the Administration and the Congress as

part of the Appropriations process, before it can progress. Each is

also subjected to a benefit cost analysis that is unique among Federal agencies.

The second charge is that the Corps cannot be trusted to do an

objective study and has a bias for construction. The facts tell a different story.

This is what we know is true. We know that of every 100 reconnaissance studies undertaken, only 16 result in actual construction,

and five of six are weeded out. This is a pretty tough wicket to get

through.

We examined 15 cases where we have projected usage on the inland waterway system. The overwhelming majority shows actual

traffic was close to or exceeded the projections. Only in four cases

was traffic significantly below projections. Keep in mind, we are attempting to predict conditions well into the future.

Another charge is that our projects benefit a few well connected

beneficiaries, such as large agricultural interests, large companies,

and foreign ship owners. The facts do not support the charge.

In all of our major mission areas, the benefits that the Corps program provides are widespread. For example, 98 percent of the Nation’s international trade comes through Corps-maintained channels at the Nation’s ports. This provides jobs for 13 million Americans.

Since 1959, Corps projects have prevented nearly $500 billion in

flood damages across the country, returning nearly $6 in benefits

for every $1 invested.

The Corps hosts 380 million visitors a year at recreation sites,

providing boating, swimming, and fishing. We produced 24 percent

of the Nation’s hydropower. This power has a very high demand

today.

Your investment in the U.S. Army Corps of Engineers produces

a 26 percent annual rate of return, and put $30 billion in tax revenues and savings in the Treasury.

Finally, we are accused of continuing insensitivity to the environment. This is absolutely unfounded. Again, our environmental program now constitutes 20 percent of our overall civil works program,

and is growing.

19

Projects with environmental benefits as the principal output now

compromise the largest number of study new starts; more than

navigation and flood control.

Over the many years that the Corps had been working in our

country, society’s needs and values have changed, and we have, too.

We have fully integrated environmental values into every phase of

our program. We routinely solve problems in ways that also benefit

the environment.

My view, from 5 months on the job, is that Corps continues to

be an organization with the highest integrity and remains a critical

part of solving our country’s problems, today and in the future. It

is an organization that has changed in the past and is willing to

again, provided that the change will result in improvement.

We do not work alone. You in the Congress, the Administration,

interest groups, and citizens, all are important to solutions.

As our critics have chided us in the past, I would ask that they

work with us in the future, for the well being of our citizens and

the environment in which we live.

Mr. Chairman, that concludes my remarks. I am prepared to respond to your questions.

Senator INHOFE. That was an excellent statement, General Flowers.

We have been joined by two Senators. I would like to give Senator Baucus and Senator Graham an opportunity for an opening

statement, if they choose to do so.

OPENING STATEMENT OF HON. MAX BAUCUS,

U.S. SENATOR FROM THE STATE OF MONTANA

Senator BAUCUS. Thank you, Mr. Chairman. I will be very brief.

General I appreciate your statement and presence here, and your

ongoing efforts to improve not only the relationship with the Corps,

but the operations of the Corps, basically for the American people.

I appreciate that very much.

When we get to the time to ask questions, I would like to explore

with you a little about the Upper Mississippi, and its relation to

our State, and the master manual, and how all that is put together.

As you well know, we are a State where it does not rain. The

precipitation west of about the 100th meridian is about 14 or 15

inches, and that is about it.

In western Montana and eastern Montana water is everything.

To Oklahoma, it might be oil and gas, and water is probably important, too; but in Montana, it is primarily water. We do not have

a lot oil and gas. It is extremely critical, with the levels of pools

and so forth.

Second, I want to explore a little bit the communication between

local Corps officials, and Omaha and the rest of the Corps.

People in Montana have great relationships with local management there. It is wonderful. There is a lot of trust. However, there

is some feeling that when you go further up the chain, the communication is not very good. It is not what it could and should be.

Beyond that, I have a couple of questions about the President’s

proposal to cut the Corps budget, and cut it considerably, and what

20

impact that might have on your operations. I will get to that later.

Thank you.

[The prepared statement of Senator Baucus follows:]

STATEMENT OF HON. MAX BAUCUS, U.S. SENATOR FROM THE STATE OF MONTANA

Thank you Mr. Chairman. I would like to thank General Flowers for testifying

here today. I look forward to hearing your testimony today. There has been a lot

of focus on Corps management activities in recent years. There has also been a

great deal of criticism leveled at the Corps. Some of this criticism has amounted to

serious accusations of misconduct by senior officials.

To the Corps’ credit, it has made some effort to respond to these criticisms about

its management practices and its alleged bias toward large construction projects. I

hope to learn more fully from General Flowers how his agency plans to institute

reforms. I am encouraged by General Flowers’ testimony, that he would like to

make the changes necessary to ensure the continued integrity of the Civil Works

planning process.

I also look forward to discussing with General Flowers some of the Corps activities that are very important to my State.

Actions taken by the Army Corps of Engineers can have an enormous impact in

Montana. For example, the Missouri flows into Fort Peck Reservoir in Montana.

Every year, throughout the year, we sit and watch water flow out of our State for

a multitude of downstream uses. Many of those uses are important to other States,

and I appreciate that. However, that water is vital to recreation in our State, to our

farmers and ranchers and to our economy.

Our local communities around Fort Peck have a good relationship with the local

Corps officers. I think that’s great. It’s a model of cooperation that should be encouraged in the Corps because, too often, decisions are made in Omaha or in Washington DC that just don’t work for Montana. I am interested in discussing with General Flowers how to improve the lines of communication between States like Montana and the Omaha District.

I understand that the President proposes to reduce the Corps’ budget considerably. I realize that this could pose some problems for the Corps as far as instituting

reforms or prioritizing projects is concerned. I would like to hear General Flowers’

thoughts on this issue.

Again, I would like to thank General Flowers for being here and I look forward

to discussing with him ways to make the Army Corps of Engineers a more effective,

efficient and responsive government agency.

Senator INHOFE. Senator Graham?

OPENING STATEMENT OF HON. BOB GRAHAM,

U.S. SENATOR FROM THE STATE OF FLORIDA

Senator GRAHAM. Thank you very much, Mr. Chairman, and

thank you for calling this hearing.

I have had the privilege of working closely with the Corps of Engineers on many important and successful projects over the years.

This committee, in the last several years, has paid a lot of attention to the American Everglades.

In my opinion, this is an outstanding example of the new modern

Corps of Engineers, in its commitment to professionalism and the

quality of its plan for environmental restoration of this important

Nation treasure.

I appreciate the comments that have been made by General

Flowers. I believe that he represents the spirit of the new Corps,

and will be a leader who will help to take the culture that I think

that is illustrated in the Everglades on a nationwide basis.

I would, however, like to bring to the committee’s attention a

specific Corps project, which I think raises some of the concerns

that have lead to this hearing, and that is the project of dredging

in the Apalachicola River.

21

This river, which is one of the largest in the Eastern United

States in terms of annual water flow, has for a century and half

been a major transportation artery in the south, with its two extensions the Chattahoochie and the Flint River. It has been a significant transportation corridor.

Approximately, a half century ago, Congress directed the Corps

of Engineers to enhance the ability of the Apalachicola to serve as

a transportation system by requiring that it maintain a channel

nine feet deep and 100 feet wide, sufficient to float barges on the

Apalachicola. This project has been under the jurisdiction of the

Mobile Office of Corps of Engineers.

I believe the time has come for this project to be reexamined in

terms of modern realities. With other Members of the Congress, 18

months ago, a request was made of the Corps to examine the Apalachicola. I would like to ask that a letter and accompanying materials be submitted for the record, Mr. Chairman.

Senator INHOFE. Without objection.

[The referenced document follows:]

OFFICE OF THE ASSISTANT SECRETARY FOR CIVIL WORKS

Pentagon, Washington DC 20370–0108

Honorable BOB GRAHAM,

U.S. Senate,

Washington, DC. 20510–0903.

DEAR SENATOR GRAHAM: I am writing to you regarding the Apalachicola-Chattahoochee-Flint (ACF) navigation project, Alabama, Florida, and Georgia. Specifically; I

am responding to your letters of July 19 and 28, and November 9, 1999, wherein

you asked me to provide additional information regarding the ACF navigation

project.

Over the past 12 months we have discussed the ACF on numerous occasions and

our respective staff have exchanged information. I apologize for the delay in sending

you a final written reply. However, this office has been working diligently with the

Army Corps of Engineers to compile, evaluate, and discuss the volumes of material

on file regarding the ACF. Last month, 1 was provided a comprehensive briefing on

the ACF and related matters during a visit to the Corps South Atlantic Division

in Atlanta, Georgia: Enclosure 1 is a short 3=page summary of the extensive information we have compiled in an ACF reference notebook, a copy of which is provided

at enclosure 2. Enclosure 3 contains additional information and clarifications in response to your specific questions regarding shipping costs, maintenance casts, flow

requirements and ACF Compact negotiations, alternative dredged material management plans, and water quality certification from the Florida Department of Environmental Protection.

Based upon our review and conversations with the Corps, I believe that maintaining navigation on the ACF is not economically justified as environmentally defensible. With an economic return that has been estimated at less than 40 cents far

each dollar spent, it is difficult to continue to invest nearly $3 million each year on

this project in light of the Corps overall backlog for operation and maintenance: Further, the deauthorization of navigation would provide the Carps greater flexibility

to address important environmental issues along the river.

Again, I apologize for the delay in responding to your letters. As always, I look

forward to working with you, other Members of Congress, the Corps, and interested

parties to discuss the future of navigation on the ACF and the potential for further

exploring how to meet environmental restoration and protection, and recreation

challenges, especially in the Florida panhandle area. Please do not hesitate to contact me if you have any questions.

JOSEPH W. WESTPHAL, Assistant Secretary of the Army (Civil Works)

22

APALACHICOLA-CHATTAHOOCHEE-FLINT NAVIGATION PROJECT (ACF)

MAJOR CONCLUSIONS

• A draft analysis for the Comprehensive Study of the ACT/ACF River Basins— NED benefits from transportation savings are about $2.7 million/year, while O&M

casts are about $7 million/year, for a BCR of $0.4. • Past, current, and potential future environmental impacts, and related impacts

on recreational uses are significant enough to warrant thinking about the sustainability of commercial navigation on the ACF system. It is anticipated that the benefits of restoring and protecting environmental resources and functions would far outweigh economic benefits associated with dredging and disposal practices and future

requirements. • The authorization for the ACF does not establish priorities for authorized purposes (flood damage reduction, navigation, hydropower, recreation, fish and wildlife,

water quality). Thus, the Corps, in partnership with the three States, has tried valiantly to balance or maximize operations for all purposes. • Dredging/disposal, navigation windows, hydropower infrastructure operations,

recreation, water flows/allocations; fish and wildlife should be considered concurrently • The Army has a tremendous opportunity to assume a leadership role under the

auspices of the existing ACF project, the ongoing ACT-ACF Basinwide Comprehensive Study, and in accordance with the principles of cooperation outlined in an interagency Memorandum of Understanding executed on May 5, 1999.

ENVIRONMENTAL INFORMATION

• Apalachicala River is an Outstanding Florida Water, and Florida’s largest

river • Dredging/disposal practices, and bed degradation have adversely affected

riverine and flood plain habitat, the riverbed, and water quality along 50 miles of

river • USFWS concerned about potential impacts to federally listed fish (1) and mussels

FUTURE ISSUES

• Expensive structural options for increasing channel reliability would have serious environmental effects

• FDEP 5-year water quality certification has rigorous conditions to protect

water quality (e.g., prohibits mechanical redistribution and with bank disposal; extensive mitigation requirements may be biologically unachievable and cost prohibitive)

• No approved disposal areas are available for Spring 2000 dredging

RECREATION CONSIDERATIONS

• ACF Lakes in GA have combined annual economic impacts of over $300 million

• ‘‘Navigation Window’’ releases strand recreation facilities, create aesthetic and

water quality problems, and affect adversely aquatic habitat and species

• Significant recreation related benefits are foregone

ACF ACTION FRAMEWORK STRATEGY:

• Federal/State agencies, local governments, interested parties must collaborate

• OASA(CW) should work with the ACF Compact Commission through the ACF

Compact Commission (Mr. Lindsay Thomas)

The Comprehensive Study could be refocused to:

• Update NEPA

• Revise Regulation, Dredged Material, and Navigation Management Plans

• More extensively involve water agencies and stakeholders

• Address ESA issues

• Explore opportunities for environmental restoration and projection

• Consider a basinwide ecosystem management approach

• Evaluate hydropower equipment and operational needs

• Consider fish passage structures at dams

• Consider making environmental restoration and protection a primary purpose

• Explore partnerships with organizations like NFWF and TNC

• Consideration an ACF-specific program like UMRS-EMP or MMREP

• Address long-term monitoring (biological, physical, chemical, hydrological)

• Reevaluate the status of two Section 1135 Projects w/NWFINMD as sponsor

23

• Estimate habitat loss by quantity/type to guide restoration/protection goals • Consider WES & TNC studies and modeling on alternative operational schemes

DEAUTHORIZATION OF THE COMMERCIAL NAVIGATION PURPOSE.

The economic benefits associated with recreation and environmental restoration

and protection clearly outweigh the benefits of commercial navigation. A smaller

navigation channel could be achieved, either as an interim or permanent measure,

by not dredging as much or by restricting the navigation season. However, it makes

sense to consider deauthorization of the commercial navigation purpose because:

(1) Historically, the Corps has not been able to maintain the channel at authorized depths more than about 56 percent of the time. Poor economic performance

(traffic) has resulted, along with the need to implement extraordinary O&M measures that are expensive and result in adverse environmental impacts.

(2) Since about 1990, it has cost the Federal Government about $30,000/barge to

dredge the channel for the 100–145/barges per year that use the ACF, some of

which only travel a few miles, and traffic has declined about 10 percent annually.

(3) The Corps. would avoid causing significant environmental impacts as a result

of dredging and use of navigation windows, and thereby avoid the costs to comply

with the stringent mitigation requirements under the new FDEP permit.

(4) The BCR for commercial navigation on the ACF is estimated, unofficially; at

about 0.4, which, if verified, violates Principles and Guidelines for water resources

projects.

(5) There are no approved disposal areas available for use in the spring of 2000

and beyond, and because based upon information provided by-the Corps, State, and

the USFWS, it will be difficult and expensive find alternative disposal areas or implement structural measures to reduce dredging requirements (presuming these

measures are environmentally acceptable, which they are not).

(6) Current O&M practices and the 1976 E1S are very susceptible to legal action,

and an acceptable cumulative impact analysis has never been done.

(7) The Corps currently pays for 100 percent of the 0&M for a project which, by

law, is supposed to be cast shared (sponsors responsible for LERD). Lack of willingness to meet local sponsorship says something about affordability and acceptability.

(8) Water allocation is a complex and controversial issue currently being addressed by the three States. Taking commercial navigation off the table for water

allocation purposes would increase the flexibility of the Federal Government and the

States when dealing with water demand and availability issues.

Senator GRAHAM. If I could just read one paragraph of the letter

from Joseph W. Westphal, Assistant Secretary of the Army for

Civil Works, dated August 9, 2000.

‘‘Based upon our review and conversations with the Corps, I believe that maintaining navigation on the Apalachicola,

Chattahoochie, Flint is not economically justified or environmental

defensible.

With an economic return that has been estimated at less than 40

cents for each dollar spent, it is difficult to continue to invest nearly $3 million each year on the project, in light of the Corps overall

backlog for operations and maintenance.

Further, the de-authorization navigation would provide the Corps

greater flexibility to address important environmental issues along

the river.’’

I believe that summary statement poses a challenge not only for

the Apalachicola, but for the Corps. How do we go back and review

projects, in this case, that have been in operation for more than 50

years, in terms of their current economics and environmental consequences?

If I could I would like to just give a depiction of the economics

of this project. The Congressional Budget Office has done a cost

analysis of 26 Corps navigation projects, based on the cost per ton

mile.

You can see that the range is from a minuscule cost to a cost of

over 15 cents per ton mile. The Apalachicola is the second most exVerDate 11-MAY-2000 13:26 Mar 18, 2002 Jkt 071526 PO 00000 Frm 00027 Fmt 6633 Sfmt 6601 78065 SENENV1 PsN: SENENV1
24

pensive of the 26 projects, which were analyzed with a cost of 14

cents per ton mile of traffic. What are we getting for this very expensive project?

This is what is required along the banks of this magnificent river

in order to keep this nine foot, 100 foot wide channel operational,

so that we spend 14 cents per ton mile of barge traffic, and have

a recovery rate of less than 40 cents per dollar spent.

It is necessary to pile the sand which comes out of the river

along the banks of the river, and now some 50 miles of valuable

habitat has been destroyed. We are now, with General Flowers’

leadership, beginning a process of environmental restoration of

some of this, which will have significant additional cost.

Maybe some of you saw the movie ‘‘Yulee’s Gold,’’ which was

about the production of what we consider to be the best honey in

the world, Tupelo honey. The area where that motion picture was

made is just in back of that sand pile. That is where the Tupelo

honey comes from, an industry which is now threatened by the destruction of the habitat along the Apalachicola.

Mr. Chairman, I bring this example to your attention as a case

study of what I think is the challenge to the modern Corps and to

the Congress, and that is a process of looking at these projects; not

just accepting tomorrow what we did yesterday, because it is the

easy thing to do; but to challenge whether these projects can stand

the test of economics and environmental consequences today.

My opinion is that the Apalachicola River Project clearly cannot.

I hope that this committee will soon give its attention to the recommendation of the Corps, which is that be de-authorized for the

navigation purposes.

Thank you, Mr. Chairman.

[The information referred to follows:]

25

Senator INHOFE. Thank you, Senator Graham.

Senator Voinovich, did you have an opening statement that you

want to share?

OPENING STATEMENT OF HON. GEORGE V. VOINOVICH,

U.S. SENATOR FROM THE STATE OF OHIO

Senator VOINOVICH. I am going to take a couple of excerpts from

it. I will not get into the whole thing. I apologize that I was not

here to hear your testimony, and to the members of the committee.

26

You and I have had a chance to talk in my office. I have something that we have all heard: fool me once, shame on you; fool me

twice, shame on me.

I must say that although we have had a very good discussion, I

think that what I perceived, not so much from you but from your

predecessors, was a lot of this business about Dr. Sweeney, and

about the methodology you used for doing your feasibility studies,

and the criticisms were exaggerated.

The National Research Council said that it was flawed. I was

told that now that we pulled this guy off the job because he was

not doing it the right way, and we have a better way of doing it.

Then an objective group came in and said no, that was not the

case, so that needs to be taken care of.

I think that the Corps needs to ensure that its process of planning and recommending projects is open, objective, and inclusive,

and each project evaluation meets the highest standards of professionalism and quality.

Further, we must be able to continue to rely on the Corps to recommend to Congress for authorization and funding only projects

that make maximum net contributions to economic development

and environmental quality, and that is not easy.

You have pressure from the Administration and you have pressure from members of this body for you to do some things that

maybe you do not want to do. I am telling you to stand up and do

what you think is right based on the facts, regardless of what the

circumstances are.

In addition to that and in addition to restoring Congress’ and the

general public’s confidence in the Corps, the Corps faces other challenges. Key among these challenges is the relationship between the

Chief of Engineers and the Assistant Secretary of the Army and

Civil Works.

Last year, that relationship was public and acrimonious about

who is in charge and who was co-opted into the other and so on.

I know that you have clarified that, I guess, with the memorandum

that was signed by the Chief of Engineers and the Assistant Secretary of the Army on November 28, 2000.

I just want you to know that this Senator is going to be watching

to ensure the Chief and the new Assistant Secretary, whoever he

or she may be, follows through on the agreements laid out in that

memorandum.

If it is not, we are going to the another look at some of the legislation that Senator Daschle was trying to get through the Congress

last time to clarify that relationship.

The other thing is that we have a backlog of projects. You have

a backlog in terms of your maintenance and operations budgets. I

think that it is incumbent on you to stand up and talk about that.

We cut the money available for these projects in half, and increased your responsibilities dramatically during the last 8 years.

Something has got to give.

I think that it is your job to stand up for the Corps and to the

Secretary, right along the line, and just call them as it is; and

when you come to Congress, lay it out. You cannot make a silk

purse out of a sow’s ear. I think that it is really important that you

do that.

27

As I just pointed out, you have a problem. The President’s blueprint budget proffers a strategy for addressing some of the backlog

and for giving a high priority to projects and programs in the Corps

principal mission areas. Overall, the Corps civil works budget is

being reduced by 14 percent in fiscal year 2002. That is ridiculous.

You cannot do that. We need more money. I believe that we need

to address higher levels of both funding for operation, maintenance,

and construction functions.

That is about it. But I just want you to know that I am no longer

Chairman of this committee. I spent a lot of time on the Corps last

time. Mr. Chairman, because I spent as much time as I did on this,

I am going to stay on this, and work with the Chairman. I am not

letting go of this. Do you hear me?

I have got my teeth into this thing, and I will not let it go. I am

going to watch it carefully and make sure that it gets done.

I know from talking to you, that you are sincere about what you

are doing. Your job is to restore the respect for the U.S. Army

Corps of Engineers, with the Congress, with Administration, and

more importantly with the people of this country, and I want to

work with you. Thank you.

[The prepared statement of Senator Voinovich follows:]

STATEMENT OF HON. GEORGE V. VOINOVOICH, U.S. SENATOR FROM THE STATE OF

OHIO

Thank you, Mr. Chairman. Welcome, General Flowers.

In the short time I have been in the Senate, I have taken an active interest in

the civil works mission of the Army Corps of Engineers. As the former Chairman

of this subcommittee, I have worked on both Water Resources Development Act bills

that were considered in the 106th Congress. I am proud to have been the sponsor

of WRDA 2000, which Congress passed last November and was signed into law in

December.

The year 2000 was a difficult one for the Corps. A series of articles in the Washington Post headlined increasing criticism about the objectivity of the Corps’ project

evaluation process of significant water development projects across the country, including the Upper Mississippi River Illinois Waterway navigation project.

Last December, both the findings of the Special Counsel and the report of the

Army Inspector General were released, substantiating earlier allegations that Corps

officials exerted improper influence and manipulated a cost-benefit analysis in order

to justify lock extensions on the Upper Mississippi River Illinois Waterway.

These findings raise doubts about the integrity of the Corps’s project evaluation

and development processes. Quite frankly, there are many in Congress who have

lost faith in the Corps.

Candidly, I am upset that the Corps patently dismissed as ‘‘exaggerations’’ the allegations made public by whistleblower Dr. Donald Sweeny who said that senior

Corps officials manipulated the Upper Mississippi study to produce results favoring

large scale construction. These ‘‘exaggerations’’ that the Corps dismissed were later

substantiated by the Army’s own Inspector General. In addition, the Corps’ economic analysis that was part of the Upper Mississippi study was verified to be

‘‘flawed’’ by the independent National Academy of Sciences’ National Research

Council.

However, I believe the Corps plays a vital role in navigation and storm-damage

mitigation throughout the United States and should be given the opportunity to redeem itself.

The Corps needs to ensure that its process of planning and recommending projects

is open, objective, and inclusive and that each project evaluation meets the highest

standards of professionalism and quality. Further, we must be able to continue to

rely on the Corps to recommend to Congress for authorization and funding only

projects that make maximum net contributions to economic development and environmental quality.

To that end, I supported a provision in WRDA 2000 that directs the National

Academy of Sciences to conduct a study of independent peer review of Corps projects

and a study of Corps methods of conducting economic and environmental analysis

28

or projects. In fact, the National Research Council recently recommended that Congress direct the Corps to have its feasibility study of the Upper Mississippi River

project reviewed by an outside interdisciplinary group of experts.

I believe the Secretary of the Army took the appropriate action in directing the

Chief of Engineers to review the Inspector General’s report and the recently released National Research Council’s evaluation report on the Upper Mississippi Illinois River feasibility study to determine what changes should be undertaken in the

Corps’ conduct of its studies. I look forward to hearing from General Flowers this

morning about the status and preliminary findings of this review process.

In addition to restoring Congress’ and the general public’s confidence in the

Corps, the Corps faces other major challenges. Key among these challenges is the

relationship between the Chief of Engineers and the Assistant Secretary of the

Army for Civil Works. Last year there was a very public and acrimonious argument

about the respective roles of the Chief and the Assistant Secretary in the supervision of the Corps civil works program.

These roles were to have been clarified in the memorandum that was signed by

the Chief of Engineers and the Secretary of the Army for Civil Works on November

28, 2000, and I would appreciate hearing General Flowers’ comments on how this

memorandum will improve and strengthen their working relationship. Congress will

be watching to ensure that the Chief and the new Assistant Secretary, whomever

he or she may be, follow through on the agreements laid out in the memorandum.

This Senator stands ready to ‘‘take another look’’ at the implementation of this

memorandum, and, if need be, make recommendations that additional management

reforms be made.

The backlog for construction and operation and maintenance projects is another

important and daunting challenge the Corps faces. As my colleagues may well know,

there is currently a backlog of $38 billion in active water resources projects awaiting

Federal funding and a backlog of $450 million in critical maintenance. We need to

develop a strategy to address the backlog. Whether it comes from Congress or the

Corps or some other outside source, whatever strategy must consider management

of the backlog to assure that it only includes needed projects that are economically

justified, environmentally acceptable, and supported by willing and financially capable non-Federal sponsors.

In constant dollar terms, our Federal investment in water resources development

is less than one-half of the levels spent in the 1960’s. At the same time, we are asking the Corps to do more particularly in the area of environmental restoration.

Although President Bush’s ‘‘Blueprint Budget’’ proffers a strategy for addressing

some of the backlog, and for giving a high priority to projects and programs in the

Corps’ principal mission areas, the overall Corps civil works budget is being reduced

by 14 percent in fiscal year 2002. I believe we need to address higher levels of funding for both operation and maintenance and construction functions. However given

the Administration’s approach, I am concerned that the Corps will not be able to

adequately meet its current responsibilities. I would be interested to hear if today’s

witness could possibly shed some light on how the Corps can address its backlog

while simultaneously absorbing such a reduction.

Again, I look forward to hearing from General Flowers on all of the challenges

facing the Corps and what management reforms are necessary to restore confidence

and integrity in the Corps’ ability to meet these needs.

Although I am no longer Chairman of the Transportation and Infrastructure Subcommittee, I intend to be quite an active member. I am not going to let up on my

call for reforms at the Corps, nor will I let this issue ‘‘fall by the wayside.’’ I will

ask the Chairman for another hearing later this year to make sure that the Corps

is doing what they say they are going to do.

Thank you, Mr. Chairman.

Senator INHOFE. Well, the Chair appreciates your enthusiastic

involvement in this committee. Thank you very much, Senator

Voinovich.

We are going to go ahead now to adhere to the early bird rule.

We will ask questions in accordance with the time that each Senator arrived. We would like to confine these to 5 minutes. We will

keep going, just as long as everyone gets a chance to ask questions.

General Flowers, first just for clarification, did you say that the

economic model developed by the whistle blower was flawed, and

would you like to elaborate on that?

29

General FLOWERS. Sir, I did not say that. The National Academy

of Sciences said that. I said we agreed with the assessment.

Senator INHOFE. Then last year, the Corps announced a series of

listening sessions. What did you learn from your listening sessions?

Tell us what those are.

General FLOWERS. Sir, we did 12 regional and two national listening sessions, where we invited interest groups and others to

come in and talk to us.

We heard quite a bit. We set it down in a document so that we

could show everybody what we heard them say. This is available.

We have also published a summary on our website. We intend to

incorporate the comments that we have received, as we move forward.

Senator INHOFE. Last week, the Society of Civil Engineers issued

a report card on America’s infrastructure. It was not a very good

grade, in my opinion. It was a ‘‘D+.’’ Do you have any comments

as to why this grade was so low?

General FLOWERS. Sir, this is a copy of that report card, pulled

down off the Internet.

As Senator Voinovich pointed out, we have really under-invested

in our infrastructure, in waterways alone. In last year 30 years,

our population has grown about 40 percent. Our GNP has gone

from $2.5 trillion to $7.5 trillion dollars.

In that same time, our investment in our water infrastructure

has declined 70 percent. I have got half of my locks in the navigation system that are over 50 years old. So those are the things that

are contributing to that very low grade in water resources. The

other thing I would point out is that we have an over $400 million

backlog in critical maintenance to perform on that infrastructure.

Senator INHOFE. General Flowers, a lot of statements were made

during the opening statements. Is there anything that you would

like do to respond to any of the parts of the statements that were

made?

General FLOWERS. As Senator Graham pointed out, challenges

also present opportunities to the Corps. On the rivers, we are very

willing to re-examine among all uses; particularly, on the waterways were we have relatively low use.

Where the opportunity presents itself, we can develop a great

synergy between what we do and the environment. I think the restoration work that is going on and will go on is a very big key to

that. My pledge is to lend my shoulder to help that process along.

Senator Baucus talked about the Missouri and the Missouri

River Master Manual. The Corps is involved in tough controversial

issues very, very often, and the Missouri is a classic one; a debate

between upstream and downstream uses.

What we have to do is go forward, using the best engineering

and science available, to make a recommendation to the Administration, through the Administration, to all of you. You have got my

pledge to do that. We are working that piece very hard. It is not

easy.

Senator INHOFE. Senator Bond?

Senator BOND. Thank you very, much Mr. Chairman.

Thank you, General, for your willingness to rely on sound

science. That is something that is long overdue in the area. I hope,

30

after your very forceful statement today, that this hearing will get

the same kind of coverage in the media that the attacks received.

I will be waiting with great interest, but not with great optimism.

I trust that I may be wrong and that they will cover your statements. I will send thank you notes to anybody who does.

[Laughter.]

Senator BOND. You mentioned the sensitivity to the environment.

It was the St. Louis district modifications in the structures on the

river that really lead us to an understanding of how innovative

Corps approaches can enhance the environmental restoration, conservation, and preservation of endangered species. The re-engineering of controlling structures such as wing dikes to create bars and

islands and back channels have great promise.

That is why I join with my good friend from Montana, with

whom I do not always see eye to eye on Missouri River issues, to

enact the Missouri/Middle Mississippi Habitat program.

This, to me, is something that we are very interested in. How is

the funding for that? Are you proceeding with that program; is that

under-funded? Is it making progress?

General FLOWERS. Sir, we are proceeding with the program. I

would never classify anything as over-funded.

As pointed out, I am very proud of the innovations that have

been made, particularly in the environmental area by our districts.

St. Louis is a great example. I think it again points out the willingness of the agency to change and adapt to the needs of the Nation.

So as environmental concerns grow, our mission set in that area

grows. We develop the expertise and tap the expertise that exists

in academia and the private community to help further that. I

think that this is a great example.

Senator BOND. We were talking about environmental benefits. I

keep going back to the point that is extremely important to us, particularly in St. Louis, because there is a real controversy over

whether St. Louis ought to be raised to a serious non-attainment

air quality issue.

Right now, we have barges carrying our great agricultural products, going through St. Louis. One medium tow of barges carries

the same amount of the commodities or amount of product as 870

trucks.

I think that anybody who is concerned about the quality of the

air will recognize that one tow boat generates a lot of less pollution

than 870 trucks. Given the importance of air quality issues in St.

Louis, do you calculate clean air benefits when you evaluate the

benefits that barge traffic provides?

General FLOWERS. The short answer to you question is, yes, sir.

We have to take a look, as we evaluate the concerns for that factor.

I need to speak directly to the Upper Mississippi, and how complex

that study is, just to give you all a feel for what we are involved

with.

The Upper Mississippi River handles about 48 percent of the ton

miles on our inland waterways; 37 locks and dams on the Upper

Mississippi River and Illinois Waterway. It is a very environmentally sensitive area.

As we work the economics piece and the environmental piece of

the Upper Mississippi study, what we are dealing with is an area

31

that we have not dealt with before in the Corps of Engineers. That

is getting into the area of macro economics and a very holistic approach of how you incorporate environmental values, when you

look at alternatives and make recommendations. That is a big piece

of it, sir.

We are also looking at international trade, You mentioned the

growing competition from South America. We look at water policy

and agricultural policy. That is why we need the other Federal

agencies to come into this study with us, so that we can make use

of their expertise.

Senator BOND. I am glad you do. I will have more questions. I

want to sneak in one before the light turns red. I will leave a few

for you to answer for the record.

When water transportation is at capacity, or we do not have

water transportation, do you have any evidence that the rates

charged to agricultural shippers, for example, other shippers, are

raised by railroads?

General FLOWERS. Sir, I do not have that with me. I will take

that one for the record.

Senator BOND. Do you have the TVA study perhaps, that said

something about that?

General FLOWERS. There probably is one. I do not have it at my

fingertips. I will take that one for the record, if I might.

Senator BOND. There maybe something in your records.

Thank you, Mr. Chairman.

Senator INHOFE. Thank you, Senator Bond.

I believe that we have selected a date of April 26 to have the

hearing of the Upper Mississippi River.

Senator Baucus?

Senator BAUCUS. Thank you, Mr Chairman.

General Flowers, as we go into this difficult season of low snow

pack in the West, and as you mentioned, one of the most vexing

issues has been in the Missouri River, given all the pulls, tugs, and

demands.

One of the concerns that I am running up against, is the Corps’

apparent either lack of communication or insufficient communications with public power agencies. I am talking about WAPA right

now, because I have got the water and power problems, that we all

are facing in this country.

Could you tell me what degree to which the Corps is working

with WAPA and communicating with WAPA, because they are

going to have real power needs, as this year progresses.

General FLOWERS. Sir, the Division Engineer in our Northwest

Division, Brigadier General Carl Strock, and his staff are activity

engaged working with WAPA and all of the other agencies in the

region. We have an acute power crisis, not only in California, but

also in the northwest and in your area of the country.

We are working very hard to do what we can do to help that situation; spilling more water when we can for power generation in the

northwest to improve the power situation, keeping in mind the responsibilities that we have to the fish and wildlife and the environment, and doing our best to inform everyone and work with everyone as we go through this. It troubles me to hear that we may have

32

some communications problems, but sir, we will redouble our efforts.

Senator BAUCUS. If you can look at that and get back to me

about that, too, on what you are doing, I would appreciate that

very much.

General FLOWERS. Sir, I will do that.

Senator BAUCUS. Second, this is a general problem that occurs in

my State and in a lot of States, because we are not a large State,

and do not have large firms. It is the difficultly that small contracting firms have been getting contracts with he Corps.

There is a general bias, and I found this over and over again, for

the Federal Government, whether it is DOD or whether it is Energy or what not, to go to the big contractors. They know them,

they know the personnel, and they are good friends, all those kinds

of things.

There is an assumption that a smaller contractor out in the

inner-lands just does inferior work. That is an assumption that because it is not big or not well known, that it must be inferior.

I am here to tell you that almost the opposite is true. I can give

you countless of examples of small firms that do better work, subcontracting work, than other firms that are better known. I find

this problem in Montana, as well.

I would like you to do a little assessment also of the degree to

which the Corps is not getting contracts to smaller firms in my

part of the country. I find this problem constantly; again, not only

with the Corps, but with a lot of agencies.

General FLOWERS. Yes, sir, the Corps leads the Federal Government right now in its small business contracting program. Small

business is good for our country. We work very hard to ensure that

a number of the contracts that we let, are let to small and disadvantaged businesses.

Senator BAUCUS. If you could get back to me on that, too, with

respect to Montana, I would very much appreciate that.

General FLOWERS. Yes, sir.

Senator BAUCUS. I thank you.

Third, I worked hard on the WRDA bill on the last authorization,

for $5 million for three watershed cleanups in Montana. One is in

Yellowstone Park, the other is Soda Butte Creek, and the other is

McLaren Tayleens. We just do not see the money. We do not see

that happening.

In some respects, maybe it is the lack of appropriations, but I

think there is more to it than that. I can get more details to you,

and I will.

But there are several sites, Corps priority sites, that for some

reason are just not getting funded. Again, I will give you the information, but I would appreciate it if you could get back to me on

those issues.

General FLOWERS. Yes, sir, I will do that.

Senator BAUCUS. I have another question, and this gets to the

basic question that we have all on all these tradeoffs. Right now,

the flows are discharged at about 500 cubic feet at Fort Pack. During the winter months, it was 10,000 a second. I guess the plans

are to increase those flows in June.

33

I know that you have been up there. You have been to Fort Peck,

and you know just how extremely important recreation is to that

part of that State. In fact, it is everything. It is the walleye tournament of the world. Those folks up there live for that lake.

There is already one boat ramp that is exposed high and dry. If

the flows are increased to help maybe somebody downstream or

what not, those folks are going to be hurting, because about the

only thing that they have is the lake.

I would like you to specifically, and again, this is another area

to get back to me, on what the Corps’ plans are with respect to the

pool levels there, and when, and why.

If I might, Mr. Chairman, all this comes down to something else,

and I think it is pretty fundamental. Ignorance breeds fear. If people do not know the reasons for a decision, they get fearful.

When there is not transparency, people conjure up all kinds of

reasons why that decision was made for some nefarious reason. It

is difficult for the Corps, because you are, in one sense a military

agency, and in another sense, you are kind of a civilian agency;

that is, you are doing civilian work.

My honest opinion is that the institution and the culture of the

Corps is too military, because it does civilian work. Every civilian

agency, and I do not care if it is EPA or BLM or whatever, is under

a lot more focus and a lot more public scrutiny, and those agencies

are forced to give a lot more information as to why they reach the

decisions they are reaching.

So I am encouraging you, when you go through your reform, to

open up, and tell us how you got those conclusions and why;

whether is the master manual, and why it is what it is, in much

more detail, and much more honestly.

There is a tendency to kind of clam up. Well, we are the Corps.

We know what is right. We are doing this right. How dare they

challenge us?

Again, ignorance breeds fear. What you say may be true, why

people do not believe it as much as they should. They do not believe it as much as they should, in my judgment, because there is

just not much openness as there should be, in term of public hearings, data, and all kinds of things.

So I urge you to just go through a whole mind set, culture

change, top, down, bottom, up, and give more reasons, and detailed

reasons, of why you are reaching those conclusions that you do

reach. Then I think that a lot of people will have a little more trust

in the conclusions that are reached.

Senator INHOFE. Thank you, Senator Baucus.

Senator Graham?

Senator GRAHAM. Thank you very much, Mr. Chairman.

I would like to go back to the issue that I raised in my opening

statement; and that is a process for evaluation of exiting Corps

projects.

I understand that currently a project which is authorized, but

has not received funds for a period of time, and I believe that is

7 years, is automatically surfaced. In the last Water Resource Develop Act several of those were de-authorized.

My question is, should there not be some analogous process for

projects that have been funded, so that they have to periodically be

34

subject to evaluation, as to their economic and environmental and

other relevant considerations, as they are functioning today; as opposed to when they may have been authorized several decades ago?

General FLOWERS. Yes, sir, I agree. I think that there should be

a process to re-examine and take into consideration all of the uses

and make a recommendation.

Senator GRAHAM. Could the Corps be of assistance to this committee and the Congress in suggesting what such a process should

look like, and what should be the standards for surfacing ongoing

projects, due to their economics or environmental consequences?

General FLOWERS. Yes, sir, we will take that on.

Senator GRAHAM. One issue that a project like the Apalachicola

has raised to me is when a project becomes so out of the norm in

its economics, should there be some point at which the taxpayers

can say, we have gone beyond the line of reasonableness in subsidization?

If you take the figures for the Apalachicola and divide them by

the number of barges which used it in recent years, the cost per

barge is in the range of $20,000 to $30,000. That is a very significant public subsidization, to one form of transportation.

I accept the fact that all forms of transportation, including river

transportation, do perform a public good, and up to a point should

be free.

For instance, in the area of surface transportation, we have recognized the fact that there are some components of that, such as

bridges and tunnels, which are unusually expensive, where you to

have to put a quarter or half dollar in the box every time you use

it, as well as the general public subsidy that goes toward those tunnels or bridges.

Is there a point in river traffic where there should be a requirement of a fee, or some other form of direct payment toward the cost

of operation and maintenance of the project, in order to keep the

total public subsidization within some limits of reasonability?

General FLOWERS. Sir, I will take on what the trigger should be,

and I will make a recommendation to all of you on when a project

should be re-reviewed.

The issue of charging fees for use of the Nation’s waterways is

probably beyond my realm to comment on. I have done a lot of combat engineering. I know when not to walk into a mine field.

So, sir, I would say that I think that we have to examine the economic viability of projects that have been appropriated. We owe

you some answers on what ought to trigger that look, and how we

ought to proceed.

Senator GRAHAM. Thank you, General, and I would like to conclude on a totally different topic.

That is, Mr. Chairman, with five of our colleagues last weekend,

I visited Columbia, and specifically the two principal training

bases, Mirandia and Traces Suskeenous. I had the opportunity to

meet an outstanding young captain in the Corps of Engineers who,

under about as adverse circumstances that you can imagine, is performing an outstanding service to the country. The success of our

war on drugs in Columbia will owe a special debt that young man,

Captain Al Perez.

35

I want to say to General Flowers, if he is typical of the young

officers who are coming up in the Corps, I have great confidence

in the future of this agency.

General FLOWERS. Thank you, sir.

I would just like to offer a partial answer to something Senator

Baucus brought up earlier in the questioning of maybe why the the

Office of Civil Works is in the Corps of Engineers.

This gives us the capability that no other country in the world

has. Captain Perez is an officer who has worked in the Office of

Civil Works, and we are able to transfer that expertise for the good

of the country. I think it is something that, before we can consider

before putting the Corps somewhere else, we should keep this in

mind

Senator INHOFE. Thank you, Senator Graham.

Senator Voinovich?

Senator VOINOVICH. I think that Senator Graham’s suggestion

about looking at the priority on projects is a good one.

We did try in the last WRDA bill to put some language in that

would give you the authority to evaluate objectively projects that

ought to be dropped from the list. Unfortunately, I do not think

that we were as successful as possible, because several members

were reluctant to have projects dropped.

It seems to me that in order to really get a handle on what your

real costs are, you really have to do an evaluation on the reality

of the projects that really need to be done, and some of those that

are on there, that ought to be taken off the list.

I would be very grateful to you if you would come back with some

language for this committee that you think would really give you

the authority to come back with some recommendations that would

eliminate some of those projects, so we can get a real handle on

how much is out there.

I have asked a GAO for a study on infrastructure need, and I do

not know whether we shared that with you or not. I am going to

ask my staff to send it over to you. If you have got any other ideas

on how we might add to it, so that when that study comes out that

it will really capture your particular areas are involved with, I

would welcome that.

General FLOWERS. Thank you, sir.

Senator VOINOVICH. In your testimony, you state that you are

evaluating a Corps review process for feasibility studies, to determine whether improvements including independent review are

needed.

I would like to know what is status of that review, and have you

made any preliminary findings? In particular, do you believe that

independent review is necessary; and do you think that there is a

role in this whole process for the Assistant Secretary of Army for

Civil Works?

General FLOWERS. Yes, sir, up until 1993, we had an organization known as the Board of Engineers for Rivers and Harbors. It

was an internal Corps Board, made up of our division engineers.

Every project that met a certain criteria had to appear before that

board.

They had to pass muster, justify their economic and environmental conclusions, before the Chief signed the Chief’s report. So

36

what you had was a pure form of peer review, where one division

engineer did not want their programs embarrassed, so they would

really prepare themselves and make sure that things were done

correctly, before it went before the board.

With the advent of cost sharing, there was a feeling that the

Board of Rivers and Harbors was a redundant review of projects,

and it was more expensive and took more time. Therefore, it was

done away with by legislation in 1992.

My read, sir, is in order to assure that we are leaving no stone

unturned, is that we probably should establish a review. As I mentioned in my remarks this morning, sir, I think it should be made

up of a mix of Corps officers and outside experts, not to add additional time onto a study, who would be involved with it, as the

study progresses

So as we go through our study process, gathering data, before we

publish an initial report, it would have some sort of a look, as its

going on, not to add time. Then when the final report is finished

and it is ready for the Chief of Engineers to sign, this board could

look at it again, and make any additional recommendations to the

Chief.

The integrity of the Chief’s report is one of the things that the

Secretary and I discussed and verified in the joint memo that we

signed last November to assure its integrity.

The Chief would sign the Chief’s report, and send to the Assistance Secretary of the Army for Civil Works. The Secretary could

then put comments on the Chief’s report, if he or she would wish

to do that, and forward the report.

I think that is the proper way to proceed, sir. So I am in favor

of reestablishing something like the Board of Engineers for Rivers

and Harbors, without adding the additional time, because I do realize that adding time and expense onto an already very lengthy

process, is not something desirable.

Senator VOINOVICH. Do you need legislation for that?

General FLOWERS. Sir, we will get back to you on that. I need

to go through that with the new Administration’s Assistant Secretary of Civil Works, when he or she is appointed. I owe them the

right to have an opportunity to review this before I provide it to

you, sir.

Senator VOINOVICH. I have got one more question. Is that OK?

Senator INHOFE. Go ahead.

Senator VOINOVICH. The National Academy of Sciences’ National

Research Council made several recommendations, and you stated

in your testimony that a draft Upper Mississippi River Feasibility

Study is scheduled to be ready for public review in September of

this year.

How will the Corps apply the Council’s recommendations, as it

revises that Upper Mississippi River Feasibility Study? Do you

think that it is important the Corps follow these recommendations

to ensure the credibility of the study?

General FLOWERS. Sir, we are going to use the results of both

IG’s report and the National Academy of Sciences report. The NRC

is an arm of the National Academy of Science. We will use that report as we move forward.

37

What we are doing now is rescoping and relooking at the Upper

Mississippi Study, using the results of the National Academy of

Sciences’ review. We intend to restart the study in May.

It may cause us to redo the schedule for the draft report, but we

are looking toward trying to complete the study, if it is at all possible, by July 2002. The reason that date is critical is because of

the WRDA 2002 bill that we would like to shoot for.

We are working with the interagency group now. We are

rescoping the study, and we intend to make use of everything that

we have done to this point. We are spending $25 million to do environmental studies. We

have learned a lot on how we incorporate that as we move forward.

One of the recommendations made by the Academy, sir, was to, of

course, get rid of the economic model that we were using, which

was trying to forecast based on what had happened before, to forecast 50 years into the future.

What they recommended is that we go to a range of scenarios or

develop a range of scenarios of what might be; a broad range of scenarios, and do an analysis of those scenarios, using a much more

holistic approach, environmental values, the economics that we

have used in the past, and then come back to the Congress with

a recommendation based on the range of scenarios.

This sounds to me to be the best way to approach a very, very

tough thing to do, and that is predicting what is going to happen

in 50 years into the future.

Senator VOINOVICH. That is part of the recommendation. So you

thought some of them were really good?

General FLOWERS. Yes, sir, and we do intend to incorporate

them.

Senator VOINOVICH. Thank you.

Senator INHOFE. Thank you, Senator Voinovich.

General Flowers, I am not going to use another round. I do want

to compliment you, first of all, on the progress at Montgomery

Point Lock and Dam; it is critical to us, and also for the way you

were able to respond to the Clinton/Sherman problem that we had

in Oklahoma. I appreciate that very much.

There will be some other questions that I will ask for the record.

Senator Voinovich, would you like to have another round of questions?

Senator VOINOVICH. All I would like to do is ask the Chairman

for permission to insert all of my opening statement.

Senator INHOFE. Certainly, without objection, so ordered.

[The prepared statement of Senator Voinovich follows:]

Senator VOINOVICH. And any other questions that I have, I would

like to have them answered.

Senator INHOFE. That is fine.

Senator VOINOVICH. General, again, you have a tough job, and I

know you are excited about it. We look forward to working with

you.

Senator INHOFE. Thank you very much. This will conclude our

hearing.

General FLOWERS. Thank you, sir.

[Whereupon, at 10:45 a.m., the committee was adjourned, to reconvene at the call of the Chair.]

38

[Additional statements, submitted for the record, follow:]

STATEMENT OF HON. BOB SMITH, U.S. SENATOR FROM THE STATE OF NEW

HAMPSHIRE

Good morning. I would like to thank Lt. General Flowers for appearing here

today.

At a hearing last year prior to General Flowers’ confirmation, I noted that legitimate policy issues had been raised on topics like the integrity of the Corps’ economic

analyses and the future role of the Corps. I told General Flowers, however, that I

believed he should be given the chance to settle into his new duties for a time before

being asked to decide whether or not any management reforms are necessary.

The purpose of today’s hearing is to find out what, if any, changes General Flowers thinks should be made. Some believe that the Corps is a rogue agency, out of

control. The integrity of the Corps’ analyses has been disputed. Others have alleged

that the Corps is a victim of inappropriate political pressures, with various federal

agencies meddling in the Corps’ professional judgements.

I have reviewed the Investigator General’s report that was released last December, and the National Research Council report released last February. Their findings were troubling. I look forward to hearing General Flowers recommendations for

Corps reforms now that he has been on the job for several months and has had the

opportunity to study these reports.

STATEMENT OF LIEUTENANT GENERAL ROBERT B. FLOWERS, COMMANDER, U.S. ARMY

CORPS OF ENGINEERS

Thank you Mr. Chairman, I am Lieutenant General Robert B. Flowers, Commander of the U.S. Army Corps of Engineers and Chief of Engineers. I am pleased

to appear before you today to discuss the service of the Army Corps of Engineers

to this Nation.

Introduction

The state of the Army Corps of Engineers is sound. We are prepared for the challenge of public service. Since 1775 the Army Corps of Engineers has honorably

served the Army and the Nation. During the 20th Century the Army Corps of Engineers experienced both resounding success and dramatic controversy. Today, at the

dawn of the 21st Century, we are called to respond to the scrutiny of the public we

serve. I welcome this challenge.

The Civil Works Program

The Army Corps of Engineers traces its origins to the construction of fortifications

at Bunker Hill in 1775. For more than 225 years, the Corps has responded to the

needs of the Army and the Nation.

Throughout this period, the mission of the Corps has evolved from ‘‘Builder’’ to

encompass ‘‘Developer/Manager’’ and ‘‘Protector’’ of water resources. What began as

a military engineering mission for nation building in the 18th century expanded into

a major peacetime mission in the 19th century. The Corps helped a young nation

map the frontier and expand westward by surveying roads and canals. The Corps

promoted economic development through a vast water resources infrastructure, initiated development of the first national parks, and tied an inland navigation system

together to move commerce across States and keep ports and harbors open, a role

critical for national defense. In the 20th century, Congress provided the Corps with

additional water resources development and management authorities, including

flood control, hydropower, water supply, and recreation. More recently shore protection, disaster relief, and environmental protection and restoration authorities were

added. As society’s needs and values have changed, the Civil Works program has

reflected changing national priorities for good water management. The Corps abilities to facilitate, advise, develop, operate, manage, and evaluate on a broad range

of water resource issues furnish a robust capability set for the Nation’s benefit.

Mr. Chairman, within your oversight, the Corps Civil Works Program is primarily

responsible for the development, management, protection, restoration and enhancement of our nation’s water and related land resources for commercial navigation,

flood damage reduction, and the environment. The program provides stewardship of

America’s water resources infrastructure and associated natural resources, and also

provides emergency services for disaster relief. It is my job, in concert with the Assistant Secretary of the Army (Civil Works), to provide advice to the executive

branch and Congress on these matters. The goal of our study process is to produce

the best economic and scientific analysis available.

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Water Resources Planning and the National Interest

We are proud of our disciplined water resources planning and our planning professionals who face the daunting challenges of solving real problems, balancing competing interests and forging consensus around solutions. They serve the public well

and very often in the midst of controversy and intense scrutiny. Their difficulties

make the discipline of the process of paramount importance. Today, we continue to

apply the Economic and Environmental Principles and Guidelines for Water and Related Land Resources Implementation Studies supplemented by Corps guidance that

strives for inclusion of all interests in the management and investment in our water

resources. When applied diligently, the Principles and Guidelines force all B the

Corps and its stakeholders B to recognize the tradeoffs and balance competing interests.

Our vision of planning is to meet national needs within the framework of current

law and policy. Our planners have operated responsibly over the last two decades

as priorities and concerns have shifted. The Water Resources Development Act of

1986 emphasized the National expectation that project partners be more involved

in the formulation and financing of solutions to water resources problems. Nearly

everyone believed that we could develop better projects more efficiently and effectively by recognizing that projects must both meet national needs and work viably

at the local level. We responded with vigor and enthusiasm. The attached map illustrates where cost shared feasibility studies have been conducted with non-Federal

partners since 1986.

Four years ago, the Army commissioned a National Academy of Sciences study to

determine whether Corps planning should be further streamlined. That study concluded that the process was about right in terms of length and resources. During

the last decade, interagency policy discussions increasingly have emphasized broader scale studies of entire watersheds with interagency collaboration and comprehensive, systemic solutions. An unintended effect of cost sharing has been the narrowing of focus of studies, as cost sharing partners are reluctant to finance studies

that are broader than their immediate concern. As a result, our planners are often

caught between the forces seeking comprehensive planning at one end of the spectrum and those who voice concerns for addressing needs on an expedited basis and

early screening of alternatives that have little chance of being implemented. We are

pledged to this service.

The Upper Mississippi and Illinois Navigation Study

Turning now to the Upper Mississippi and Illinois Navigation Study. This is a feasibility study of lock capacity and reliability. The study area extends from St. Louis

to Minneapolis-St. Paul on the Mississippi River and from the mouth to Chicago on

the Illinois River, a total of 1202 river miles encompassing 37 existing locks and

dams. This reach, 10 percent of the inland waterway system, provides the origin or

destination of 48 percent of the ton-miles of the total system. This study was started

in Fiscal Year 1993 to address limited lock capacity and reliability. Limited lock capacity leads to commercial tow delays, while reduced reliability of aging locks contributes to outages and higher maintenance costs. Both delays and outages can add

millions of dollars to the costs of transporting grain and other commodities carried

on the system. These costs in turn reduce the real incomes of farmers, other producers and consumers. While the Upper Mississippi River system is a vital transportation corridor it is also a nationally significant environmental resource. It contains a system of Federal and State wildlife refuges and parks that provide habitat

for migrating waterfowl and support fish and wildlife resources. Navigation development has had an adverse impact on these resources which must be carefully addressed and balanced in any study of improvements. This is a truly comprehensive

study of an entire navigation system. The estimated study cost is currently approximately $60 million. Our current schedule provides for release of a draft report for

public review in September of this year. In July 2002, I expect to make my final

report to the Secretary of the Army.

The Upper Mississippi and Illinois Study is very complex, involving engineering,

economic and environmental analyses of impacts and consequences of a wide variety

of possible future conditions on these rivers. A sound investment plan for the navigation system must be based on reasonable projections of future volumes, types and

destinations of commodities that will move on the waterway. Therefore, a key component of the study is a 50-year forecast of demand for water borne transportation

on the Mississippi and Illinois system including the response of barge operators and

shippers to congestion. The commodity movements on this system are largely agricultural. Volumes and destinations of these products are driven by world market

conditions and therefore, fluctuate with world economic conditions. Another key

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component is forecasting the schedules for major rehabilitation activities. In view

of these facts, projections are subject to significant uncertainty.

As part of the Study a group of Corps team members made economic projections

and built an economic model to provide a basis for study conclusions. This proved

to be a very difficult task. As you might expect, there were disagreements between

the many stakeholders, as well as team members, over the model and its projections. These disagreements ultimately led the Department of the Army to request

a review of the navigation study analyses by the National Academy of Sciences’ National Research Council. The Council released its final report on February 28, 2001.

The Council’s recommendations focused on four areas: economics; water resources

planning; environment; and engineering. Concerning our economic analysis, the

Council found that the Corps made a major improvement in our modeling by adopting a model that considers alternative modes of transportation and destinations for

goods shipped on the inland waterway. However, the Council found that improvements are needed in the application of the model to make the analysis more consistent with the underlying economic theory regarding the equilibrium of supply, demand, and the movement of commodities. Due to these modeling problems and

flawed assumptions and data, the Council recommended that our forecasts of barge

traffic and waterway congestion should not be used in the feasibility study. The

Council also recommended that we obtain more data for use in the model and that

we more fully explore inexpensive, nonstructural alternatives, such as traffic management.

Concerning inland waterway and water resources planning, the National Research Council recommended that we: (1) conduct a more comprehensive assessment

of the impacts of navigation options on the environment; (2) clarify the use of environmental studies in the decision process; (3) obtain a review of the final feasibility

report by an independent group of interdisciplinary experts; and (4) examine environmental improvements. Concerning our environmental analyses, the Council recommended as follows: (1) we should research the cumulative environmental impacts

of the existing navigation system and both recent and proposed improvements (including the resultant increased towboat usage); (2) Congress should improve and enhance existing ecosystem research efforts with more emphasis on measures to address cumulative impacts, and broadened to include studies of the impacts of barge

traffic on river ecology; and (3) we should conduct studies and make our mitigation

strategy consistent with adaptive management principles. The Council found that

our project rehabilitation and maintenance analyses were reasonable, but recommended that we reassess the contingencies that we assign to our construction

cost estimates.

What We Are Doing

First and foremost I take the issues surrounding the Army Corps of Engineers

and the Upper Mississippi and Illinois Study seriously. I must ensure the integrity

of the Corps of Engineers and its study process. In this regard there are several

actions underway:

While the National Academy of Sciences has completed a general review of the

Corps studies process and found it to be a sound process, I am evaluating our review

process for feasibility studies to determine whether improvements, including its recommendation for independent review, are needed.

I fully support the National Academy of Science study directed by the Congress

in the Water Resources Development Act of 2000 of the practicality and efficiency

of independent peer review of feasibility studies and methods for project analysis.

I am restructuring the management of the Upper Mississippi and Illinois Navigation Study.

I am placing renewed emphasis on my Environmental Advisory Board to insure

that I receive independent environmental advice.

The Assistant Secretary of the Army for Civil Works and I, on November 28,

2000, submitted a joint memorandum to the Secretary of the Army on Civil Works

Management and Communication Clarifications. In this memorandum, Dr.

Westphal and I agreed upon the responsibilities of both parties and committed to

sharing information, communicating effectively, and cooperating fully on all Civil

Works matters. The Secretary of the Army provided copies of this memorandum to

the Chairman and Ranking Member of this committee in his final update regarding

enhancement of the management procedures of the Civil Works program.

I am rewriting the vision statement of the U.S. Army Corps of Engineers to focus

on service to the Army and the Nation.

I have conducted extensive outreach sessions with a broad variety of interests, including meeting with a substantial number of Members of the House and Senate.

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Other Observations

There are many interested parties and many points of view in the Upper Mississippi and Illinois study area. The Corps team members have worked diligently

to give all an equal opportunity to be heard.

At any one time we have many feasibility studies underway. The attached map

illustrates where cost shared feasibility studies have been or are being conducted

with non-Federal partners since 1986. In any study, our challenge is to balance competing values and interests, develop alternative solutions that solve recognized problems and establish a broad consensus for the best solution. I’m proud of our record

on the many studies depicted on this map. We are especially proud that many of

these studies are resulting in projects that go beyond simply avoiding or mitigating

environmental impacts and make positive contributions to restoring the Nation’s environmental resources. We strongly believe our leadership, engineering and water

resources skills and disciplined planning are central to solving real problems and

serving the American people. We’ve served the Nation well and will continue to do

so.

Conclusion

Throughout my career I have been privileged to work with the outstanding men

and women who make up the Army Corps of Engineers. They fostered in me a desire to be a consensus builder, someone who does not necessarily compromise but

who seeks alternatives which uniquely combine individuals’ input into a solution

which is genuinely better than the sum of the parts. I view our current situation

as an opportunity. This is an opportunity for us to see ourselves anew and rededicate ourselves to our principles.

I take the issues surrounding the Army Corps of Engineers seriously, and I am

making the changes necessary to insure the continued integrity of the Civil Works

planning process, so that the Corps of Engineers can continue to fulfill its role in

addressing the many water resource needs of this great country. Mr. Chairman, this

completes my statement. I am prepared to answer your questions as well as those

of other members of the committee.

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RESPONSES BY LT. GEN. ROBERT FLOWERS TO ADDITIONAL QUESTIONS FROM

SENATOR SMITH

Question 1. In your written testimony, you state that the ‘‘goal of our study process is to produce the best economics and scientific analysis available.’’ You also indicate that you are reevaluating the review process for feasibility studies to determine

if any improvements are necessary.

In their report on the Upper Miss Feasibility Study, the National Academy of

Sciences recommended that the Principles and Guidelines, which were written in

1983, be updated to reflect changes in social values, as well as advances in analytical techniques and technologies.

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With that said, do you think it is necessary to revise the Principles and Guidelines, which have not been updated to reflect policy changes, such as the inclusion

of environmental restoration as a Federal purpose?

Response. We believe that the existing Principles and Guidelines provide enough

flexibility to fairly evaluate environmental values and to incorporate these considerations into the Corps planning process. Indeed, the Corps has already expanded and

revised its methods for evaluating environmental values during the formulation of

its projects. Further, the Corps has numerous initiatives underway which are looking at better defining and evaluating environmental benefits and incorporating environmental sustainability into Corps projects. We believe these efforts are not constrained by the existing Principles and Guidelines.

In addition, there are the two National Academy of Sciences studies directed by

Congress in WRDA 2000 that need to be completed as well as the Corps own internal review. When these efforts are complete, I will work closely with Congress to

address any legislative changes that are determined necessary.

Question 2. Your written testimony reads that ‘‘the state of the Corps is sound.’’

How do you reconcile this with both the IG’s report and the National Academy of

Sciences’ report, both of which conclude that there are serious flaws in the processes

of the Corps?

Response. I believe the state of the Corps is sound. Both reports focussed on a

single, very complex study that has yet to complete the normal planning analysis

and review process. They also assessed a draft document that had not yet been subjected to the initial public review step in the planning process. In 1999, the National

Academy of Sciences completed a comprehensive review of the Corps of Engineers

planning process, and determined that the complete process and its procedures were

just about right.

The scope and efforts involved in accomplishing this study recognized its complexities and the potential conflicting demands from the numerous constituencies involved. Some of the negative findings concerned new methodologies and models that

were developed specifically to enhance the analysis of the very complex issues associated with the potential project, specifically the economic and environmental models, that had not been fully reviewed within the Corps internal processes. And some

of the findings were based on the need for additional environmental data, even

though nearly $25 million has been spent on development of such data. We are not

going to use those models for completion of the study but will utilize the valid data

and information collected, and develop additional data where needed to provide decisionmakers a series of assessments that reflect the uncertainties associated with

this project and its alternative solutions.

The existing soundness of the Corps provides the basis for us to move forward

with this study as well as the hundreds of other studies and projects that are currently underway.

Question 3. Do you intend to incorporate recommendations made by the NRC on

the Upper Mississippi feasibility study as you prepare the draft for public review?

Response. We are following the NRC recommendations concerning the models and

assumptions used by not utilizing those models and developing a set of alternatives

scenarios and options with risk and uncertainty analyses of each that will allow decisionmakers to examine the full range of options and impacts. In addition I have

formed a national Level principals group to provide me advice and guidance as we

move forward on this study. The Corps planning process has an extensive review

element within it as well as multiple opportunities for public and impacted interests

to review alternatives and recommendations and provide input.

I would not hesitate to utilize independent peer review of complex studies such

as the Upper Mississippi River and Illinois Waterway study. I am recommending

the establishment of an independent review panel for large, complex or controversial

studies. We are still working on the details of this initiative, but it will be a mixed

group of Corps senior leaders and outside independent experts to provide me a separate assessment before I forward my report to the Assistant Secretary. This proposal

would be an interim step while we await results from the WRDA 2000 mandated

NAS review.

Question 4. I applaud the resolution that you and Dr. Westphal came to, culminating in the memorandum you and he signed in November of last year. Do you

anticipate that this agreement will carry over once the new Assistant Secretary of

Army for Civil Works is confirmed?

Response. Yes I do. The purpose of the memorandum was to establish clarity of

the responsibilities of both the Chief of Engineers, and the ASA(CW), and to improve communications on all Civil Works matters. I signed that memorandum with

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Dr. Westphal in November of last year, with every intention of carrying it out, not:

only with him, but also with his successor.

RESPONSES BY LT. GEN. ROBERT FLOWERS TO ADDITIONAL QUESTIONS FROM

SENATOR INHOFE

HOPPER DREDGING

Question. Recently, I asked MG Hans Van Winkle to ‘‘let me know what can be

done with, and without, legislation this year to advance’’ the cause of further reliance on the private sector in the provisions of hopper dredging services. Could you

please check on this matter and get back to me as soon as possible?

Response. We are currently seeking opportunities for increasing the workload of

the existing fleet of industry hopper dredges. We have considered placing an additional Corps hopper dredge, the MCFARLAND, in ready reserve and evaluate the

ability of the industry to perform the work normally scheduled for this dredge. However, we are concerned that the McFarland may not be able to sustain its ability

to rapidly respond to unforeseen time-sensitive or emergency work due to the condition of its operating machinery and engines. The hopper dredge was launched in

1967, and is in need of rehabilitation and modernization. We are concerned that

peak workload demands may require all available hopper dredge capability, including the McFarland, and without the needed modernization, the ability to ensure

that our deep-draft ports are maintained may not be possible. We have proposed

that, subsequent to the launching of the industry hopper dredge Liberty Island, currently under construction, the McFarland would undergo rehabilitation and modernization, and placed in ready reserve.

To ensure the needs of our ports and waterways are met under any dredging scenario, we must be able to evaluate the capability of the industry dredges to respond

during unforeseen peak workload events. Withdrawal of existing capability, realized

by the current Corps hopper dredges, prior to consistent demonstration of the industry capability to respond could be detrimental to our nation’s ports and waterways.

ENVIRONMENTAL MITIGATION

Question 1. In your written testimony you state that the Corps is proud of projects

that ‘‘go beyond simply avoiding or mitigating environmental impact and make positive contributions to restoring the Nation’s environmental resources.’’ Yet at a May

16, 2000 Subcommittee hearing on the Corps Mission, we heard testimony that in

some cases the Corps has failed to mitigate for the environmental impacts of levees

and dams, or mitigation has not produced expected benefits. As an example the witness cited, the Vicksburg District of the Corps backlog of more than 30,000 acres

of promised mitigation which h<?s not been completed. This witness further stated

that mitigation for Corps projects often replaces a fraction of the habitat destroyed.

Is this an accurate description of the Corps mitigation program and if not please

give example of successful Corps mitigation programs.

Response. You have asked several questions and let me take them one at a time.

First we must be careful not to judge yesterday’s projects by today’s values, There

are Corps projects, particularly those authorized and built before the Fish and Wildlife Coordination Act of 1958, where mitigation was inadequate when judged against

today’s environmental values and standards. In some specific cases Congress has

authorized modifications to these old completed project: to add mitigation measures

and has also provided some limited general authority for mitigation at existing

projects. Second let me clearly state the current law and policy concerning mitigation of adverse impacts. The Corps, in consultation with Federal and State fish and

wildlife resource agencies strives to fully mitigate for the impacts of projects on significant resources through avoidance, minimization, and last compensatory mitigation. The level of mitigation deemed to be appropriate, practicable and economically

acceptable may not always lead to ‘‘full’’ mitigation. Mitigation measures are implemented prior to or concurrent with project construction: Application of this current

policy would never lead to a circumstance where only a fraction of the habitat destroyed was replaced. Third on the subject of the mitigation backlog, there had been

an authorized mitigation backlog. Reasons were varied but primarily related to

delays in land acquisition. However, we have made great progress and the backlog

has been largely eliminated. Finally you asked for a mitigation success story. Let

me give you one. We are currently constructing the Houston Ship Channel Deepening Project. The project includes over 100 acres of: artificial oyster reefs in Galveston Bay to mitigate for adverse environmental impacts but, over and above the

mitigation requirements, includes the provision to use the material. dredged from

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the channel to recreate over 4000 acres of valuable tidal marsh. These are the kind

of projects we strive for that: go beyond simply compensating for environmental impacts but make positive contributions to environmental quality.

Question 2. In your testimony before the Appropriations Committee, Subcommittee on Energy and Water on February 27, 2001, you stated that the Corps

‘‘challenge is to balance competing values and interests, develop alternative solutions that solve the recognized problems and establish a broad consensus for the

best solution.’’ What exactly do you mean by establishing a broad consensus and

how do you reconcile reaching a consensus while still being an honest broker of waterway development decisions?

Response. The broad consensus we strive to achieve must be in context of the laws

and policies that govern the Nation’s water resources development program. In

other words consensus cannot be achieved by giving every interests exactly what

they want regardless of cost or benefits. Solutions must have National Economic Development benefits that exceed costs or ecosystem restoration benefits that exceed

costs and the Federal interest is usually defined by the plan which maximizes net

contributions to National Economic Development and National Environmental Restoration. Consensus in this context involves tradeoffs and reaching synergy between

economic and environmental considerations.

PROJECT EVALUATION

Question 1. Since becoming subcommittee chairman, I have heard from both

friends and critics of the Corps that often times flood control and navigation projects

have failed to produce predicted benefits. When asked to explain, a common thread

has been the fear that the Corps has a tendency to build projects to serve the needs

of a handful of special interests, and frequently treats local cost-sharing partners— rather than the American people—as their clients. How does the Corps balance the

needs of cost-sharing partners with the need to evaluate projects based on the national interest?

Response. I believe that it can be clearly demonstrated that Corps flood control

and navigation projects have widespread benefits. About 98 percent of the Nation’s trade comes through Corps maintained channels at the Nation’s ports and harbors.

Currently 20 percent of our Gross Domestic Product and nearly 20 percent of U.S.

employment depend on this trade. Corps flood and shore protection projects prevent,

on average, $22 billion annually in flood damages. These projects provide flood damage reduction to small towns, big cities, family farms, businesses, and industries all

around the Nation. Let me talk about the needs of our cost-sharing partners versus

the needs of the Nation. First let’s remind ourselves who our cost sharing partners

are. These partners are State and local governments and agencies or State and local

governments that represent the people of the United States. Second the Principles

and Guidelines require that our projects be justified based on National Economic

Development benefits. Benefit; that accrue not to a particular State or region at the

expense of another State of region but benefits that make a net contribution to the

National economy.

Question 2. In your estimation, what is the proper role for industry? Should they

be considered ‘‘full partners,’’ and what implications does this have for the final outcome?

Response. The navigation industry has an important role in any inland navigation

study. It is important to remember that the users pay for half of the construction

of possible solutions and that improvements on the inland navigation system have

a great impact on their cost of doing business.

Their input is very important and must be carefully considered. Having said that,

any water resources study has a broad range of affected interests—economic, environmental, social justice, concerned taxpayers, and many others. We give all these

interests the opportunity to provide their input into the study process. The final outcome of any study involves evaluating this input in the context of good science and

engineering and applying the laws and policies that govern the Nation’s water resources program. The outcome is never dictated by any interest group.

PROGRAM GROWTH

Question. Much attention has been given to the ‘‘Grow the Program’’ initiative

which I believe was a response to a challenge given to Senior Corps Leadership; but

has become the ‘‘smoking gun’’ so to speak for those who are most critical of how

the Corps evaluates projects. What is the ‘‘Grow the Program’’ initiative and, is it

a priority of the Corps?

Response. In my role as Chief of Engineers, it is incumbent upon me to advise

the Administration, the Congress and the American people of the state of water reVerDate 11-MAY-2000 13:26 Mar 18, 2002 Jkt 071526 PO 00000 Frm 00052 Fmt 6633 Sfmt 6621 78065 SENENV1 PsN: SENENV1
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sources infrastructure in this country. We in the Corps failed to discharge this responsibility fully over the recent past. Over the most recent year or so the Corps

has attempted to speak more vigorously about the condition of the nation’s infrastructure. For example, the value of the water resources infrastructure entrusted to

the Corps for operation and maintenance peaked at $150 billion in 1981. Since then

we have allowed the value of these assets to decline by 20 percent. Today we have

a backlog of critical maintenance that exceeds $400 million. And, it is not just the

Corps assets that have a maintenance deficit. Just last month, the American Society

of Civil Engineers released their report card on America’s infrastructure. Navigable

Waterways infrastructure received a D+. When we pointed out this failure to meet

the nation’s infrastructure needs and asked the Corps Divisions and Districts to do

some thinking about how we could better respond to the needs, our critics called

it a secret program to grow the Corps. I assure you I have no designs to grow the

Corps.

COST BENEFIT ANALYSIS

Question. Critics of the Corps believe that many Corps projects continue to be economically suspect, environmentally unacceptable, and serve primarily private interests. They attribute this to the Corps’ outdated methodology for predicting the benefits and costs of proposed projects>. Would you care to comment on this and what

is the Corps doing to ensure that your method of calculating cost/benefits accurately

reflects the benefits to the Nation as a whole.

Response. We continue to refine our benefit evaluation methodologies to keep up

with advances in economic evaluation and environmental science. We have placed

particular emphasis in our research program in looking at ways to measure and

value environmental outputs. We have refined our planning processes to achieve

better synergy between economic and environmental values. For example in April

of last year we improved our planning guidance to clarify our ability to develop

projects for environmental restoration.

POLITICAL CONSIDERATIONS

Question. What role, if any, do political considerations play in your decisionmaking process?

Response. Political considerations have no role in my decisionmaking process. The

decisionmaking process for my recommendations is spelled out in the ‘‘Economic and

Environmental Principles for Water and Related Land Resources Implementation

Studies.’’ Under these principles I evaluate and surface the plan with the greatest

net economic benefit consistent with protecting the nation’s environment. There can

be overriding concerns such as health, safety, economies of scale, or equity which

might cause me to recommend some other alternative but, by and large, the NED

plan is recommended. Political considerations do not enter into the decisionmaking.

Final exceptions and changes to such recommendations can be made only by the

elected and appointed officials above me.

CIVILIAN AND MILITARY LEADERSHIP

Question. What role does the civilian leadership (Assistant Secretary of the Army

for Civil Works) have in Corps decisionmaking and how does that differ from the

role of the military leadership?

Response. The Assistant Secretary of the Army for Civil Works (ASA(CW)) supervises the civil works functions of the Department of the Army and I as Chief of Engineers report directly to the ASA(CW) on all civil works functions. The ASA(CW)

establishes the Army position on any policy, programmatic, legislative, budgetary or

major organizational change involving or affecting the Army’s civil works functions.

The Corps provides necessary support for the ASA(CW) to arrive at such positions.

INLAND WATERWAY SYSTEM

Question. The inland waterway system has been described as ‘‘fragmented national network of channelized rivers and deepened ports, cobbled together by logrolling and deal cutting by individual lawmakers, instead of comprehensive planning by Federal officials.’’ Is that a fair description and if not, why not? (9/110/00,

Michael Grunwald ‘‘An Agency of Unchecked Clout; Water Projects Roll Post Economic, Environmental Concerns’’, Washington Post)

Response. It is true that the components of the inland waterway system have

been incrementally authorized and funded by Congress for development, with different segments constructed at intervals over the past century and half. But just

as the rail, highway and even telephone networks were built in pieces, once conVerDate 11-MAY-2000 13:26 Mar 18, 2002 Jkt 071526 PO 00000 Frm 00053 Fmt 6633 Sfmt 6621 78065 SENENV1 PsN: SENENV1
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nected they evolved into national systems. With the obvious exceptions of the Atlantic Intracoastal Waterway and the Columbia-Snake System, which due to geography

are physically separate and unique, other inland waterways have, over time, developed into a truly national system of commerce. Today America has an integrated

national system of inland and intracoastal waterways linking the industrial corridors of the Ohio Valley and the breadbasket of the Upper Midwest to deep draft

ports on the Gulf Coast, and thus to the world market. Because of the low cost of

inland waterway transportation, U.S. agriculture exports are more competitive. This

is why more than 65 percent of U.S. grain exports move on the inland waterways—

and why other nations are spending billions of dollars to improve their own inland

navigation systems.

The McClellan-Kerr Arkansas River Navigation System is an example of a recently improved waterway now integrated into the national network.

It was opened for inland waterway commerce in 1970. By 1975, traffic had grown

to over 5 million tons. Today about 11 million tons of commodities a year ply the

waterway, including coal, grain, petroleum products, chemicals, iron, steel and

more. Billions of dollars have been invested in counties along the waterway and

more than 50,000 jobs have been created’’ The waterway is highly integrated into

the national system: More than 2.2 million tons in commerce is shipped or received

at Tulsa, Port of Catoosa, at the head of navigation, 445 miles upriver from the confluence with the Mississippi. Tulsa is now competitive in world markets, and ships

nearly half a million tons of wheat for export through deepwater ports on the Lower

Mississippi River. In all, Oklahoma now trades with 17 other States via the inland

waterways, including such distant States as Pennsylvania, West Virginia, Ohio, Illinois, Wisconsin and Minnesota.

Oklahoma farmers, manufacturers and consumers save an estimated $75 million

annually in lower transportation costs by using the inland waterway system.

Inland waterways may be constructed for a variety of purposes, including navigation, hydropower, flood protection; water supply and recreation. The Corps of Engineers planning process assesses and ensures that a new waterway will be integrated

into the national system through the calculation of National. Economic Development

(NED) benefits. The aggregate NED benefits of all project purposes must exceed the

project cost in order to justify authorization and construction. So while individual

inland waterways were authorized and constructed in segments over time, each nevertheless demonstrated economic benefits that are national in scope. Navigation

clearly integrates these waterways into a national system. In fact, today nearly 98

percent of the ton-miles of inland waterway traffic on the tributaries originates or

terminates on another waterway. America’s inland waterways have evolved into a

single, unified network that is a vital component of the nation’s Marine Transportation System.

RESPONSES BY LT. GEN. ROBERT FLOWERS TO ADDITIONAL QUESTIONS FROM

SENATOR BAUCUS

COORDINATION WITH WESTERN AREA POWER ADMINISTRATION REGARDING MASTER

MANUAL UPDATE

Question. As I’m sure you know, the Corps is in the process of revising its Missouri River master manual. It is likely that any revision of the master manual will

change the way water is released from Missouri River mainstem dams, including

Fort Peck in Montana.

These dams generate affordable electricity sold through the Western Area Power

Administration to customers throughout eastern Montana and our region.

Given the dependence of these residents on Federal power, it is important for the

Corps to evaluate fully the impact that proposed changes in dam operations will

have on public power.

I understand that steps are being taken to do this. However, will you make sure

the officials involved to open the lines of communication with WAPA and concerned

residents, so that this issue is fully explored?

Response. By letter of 14 March 2001 the Regional Director of the Upper Great

Plains Region of the Western Area Power Administration (WAPA) requested that

WAPA be formally designated as a cooperating agency under the provisions of the

National Environmental Policy Act for the Missouri River Master Manual Review

and Update Process. Concurrent with the request from WAPA, in correspondence

of 16 March 2001 five upstream Senators (including Senator Baucus) requested that

the Corps more fully evaluate impacts of alternative flow management plans to

WAPA firm power users. Also concurrently, the Midwest Electrical Consumers AssoVerDate 11-MAY-2000 13:26 Mar 18, 2002 Jkt 071526 PO 00000 Frm 00054 Fmt 6633 Sfmt 6621 78065 SENENV1 PsN: SENENV1
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ciation requested that the Corps review it’s earlier hydropower analyses in light of

deregulation. Last week the NWD Commander granted formal cooperating agency

status to the WAPA. NWD and WAPA staffs have agreed that an expanded hydropower analyses will be conducted including: • Rate Impacts for representative WAPA firm power customers; • Regional power supply risk analysis; and • Review of existing hydropower National Economic Development NED) analysis

Review of existing thermal generation economic analysis.

MONTANA RESTORATION PROJECTS

Question. General Flowers, last year I worked very hard to secure authorization through section 502 of the Water Resources and Development bill for $5 million for

the Corps to clean up three Montana watersheds, including Soda Butte Creek near

Yellowstone National Park. The McLaren Tailings, which sit at the head of Soda

Butte Creek, have been and continue to be an ongoing source of pollution in that

watershed.

The tailings sit behind an impoundment near the Creek and are vulnerable to

flooding or other catastrophic events. The forest service has begun the process of

cleaning up historic mine waste in the larger area around this site. However, the

McLaren tailings have not been included in the larger cleanup operation, which is

why I pursued a different avenue by securing a funding authorization for the Corps

for this project.

I understand that, although authorized, this funding has not been appropriated

specifically for this project. I would like to know how you stand on working with

me to ensure that the spirit of the WRDA bill is carried out and that these mine

tailings, which sit so close to one of our national treasures, are cleaned up.

I look forward to hearing your thoughts on this issue, including any creative suggestions you may have. This site is a top priority for me.

Response. As you stated, there were no funds appropriated for Sec. 502; however,

the Consolidated Appropriations Act of 2001 provided appropriations for Sec. 560 of

WRDA 1999. Sec. 560 was entitled ‘‘Abandoned and Inactive Non-coal Mine Restoration Program’’ and allows for planning and design activities to address problems associated with abandoned mines. We have been working with the Montana Department of Environmental Quality (DEQ) concerning sites in Montana and they have

indicated that they are willing to cost share with us to address problems caused by

mining in the State. Soda Butte Creek is among the potential sites being considered

for studies.

Our intention is to show that the Corps can work effectively with our State and

Federal partners to execute this type of program in an efficient and timely fashion.

This will allow the stakeholders to gain confidence that we can execute as promised

and then work through the appropriate congressional channels to provide us with

the restoration authority that was intended in Sec 560.

PROPOSED RELEASES FROM FT. PECK RESERVOIR

Question. As you may be aware General Flowers, the Corps has proposed to institute a spring rise, or artificial spring flooding, from the Fort Peck reservoir. I supported the Corps’ decision on this issue.

However, due to low water levels, it is my understanding that the Corps does not

plan to test the effects of a spring rise this year.

Still, many residents along the Missouri, including the Assiniboine and Sioux

tribes, are concerned about the damage a spring rise could cause.

They would like to see the Corps do some studies about the impacts on downstream users, such as possible damage to irrigation pumps and water treatment facilities.

They would like to see plans in place for mitigation activities and funding for repair or replacement of damaged equipment and eroded banks.

There has been some talk that the Corps may release some funds for site assessment work on the Missouri. Could look into this situation for me and report back

to me on what the Corps has done, or plans to do, about this issue? Would you support efforts to study and mitigate the effects of a spring rise on Montana residents?

Response. The Omaha District is currently in the process of developing a Memorandum of Agreement (MOA) between the Corps and possibly a Conservation District (CD). This MOA would fund a portion, approximately $10,000; of the cost of

the irrigation pumps site assessment work. This site assessment plan was developed

from efforts of local interest groups and is anticipated to be accomplished by CD employees. The State Natural Resources Conservation Department, several CDs, local

U.S. Natural Resources Conservation Service, and Corp of Engineers are sharing

52

conceptual plans for the assessment and fully support it. The Corps will meet with

these groups in Montana the week of 30 April 2001 to work on the final details of

the site assessment work.

Regarding the effects of a spring rise on Montana residents, the Corps will assess

each situation, on a case-by-case basis.

POWER TRANSMISSION FROM FT. PECK

Question. Fort Peck sits on an East-West energy tie. I understand that the transmission system out there could possibly be upgraded to push some more power into

the West. This could be very important for the West, where we are experiencing an

energy shortage in many places. I would appreciate your assistance in this matter.

Could you look into this and get back to me?

Response. This is a question that may be better answered by Western Area Power

Administration. The Corps of Engineers and the Western Area Power Administration are reviewing the feasibility of reconfiguring the Fort Peck switchyard to allow

Units 4 and 5 to generate on the western interconnection. This would allow 80 MW

of electricity to be generated on the West system if needed.

The Fort Peck Power Plants serve load on both the western and eastern power

grids. Units 1, 2, and 3 can generate to either the East or West grid. Unit’s 4 &

5 have their only connection to a 230kV Line serving the East Grid.

The primary power line to move energy west is the Richardson-Coulee line. This

161kw line runs through Havre to Great Falls. Because of the total length of the

line there are stability limits to the amount of energy that can be transmitted.

The first portion of the Richardson-Coulee line is operated by Western Area Power

Administration and runs 28 miles from the Fort Peck switchyard to Montana Powers Richardson Coulee substation. Western has rebuilt this line allowing it to be operated at 230kV and eliminating the stability limit. To realize this Montana Power

must agree to upgrade their equipment.

MISSOURI RIVER SYSTEM FISH AND WILDLIFE IMPACTS

Question. I am interested in the Corps’ scientific data on how the current management of the Missouri river is affecting fish and wildlife.

Could you look into this and provide me with any information you have on this

issue?

Response. A significant amount of data exists concerning the impacts of the current operation of the Missouri River Mainstem Dam and Reservoir System and

Bank Stabilization and Navigation Project on fish and wildlife resources. There are

several technical appendices to the Missouri River Master Manual Review and Update Environmental Impact statement that we would be glad to provide to Senator

Baucus. Additionally, in conjunction with the recently completed Section 7 Endangered Species Act (ESA) consultation with the US Fish and Wildlife on current operations, a tremendous amount of scientific data relative to the listed birds and fish

was amassed. That information is also available. The NWD and US Environmental

Protection agency are currently funding a study of the Missouri River by the National Academy of Sciences, Water Science and Technology Board (WSTB). The

Board has been specifically tasked to identify gaps in the biological science regarding the Missouri River. They were also requested to develop adaptive management

strategies for the Missouri River, which would allow for changes in river management as better scientific information becomes available. The WSTB Report is due

in September 2001.

LAND TRANSFER, MCCONE COUNTY, MONTANA

Question. How is the land transfer proceeding with regards to section 22 land in

McCone County, Montana? (Section 22 contains a T-Rex skeleton).

Response. A meeting was held in Fort Peck, Montana, on April 4, 2001, with representatives from the Corps of Engineers and State, Regional, and National offices

of the Department of Agriculture to discuss the status of the Section 22 land in

McCone County, Montana. The Department of Agriculture is securing, from an adjacent property owner, a permanent easement to guarantee access to the land proposed for transfer.

Once easement is secured, USDA will transfer land to the Corps of Engineers. It

was indicated the transfer of lands could be completed within 6 months. However,

the Omaha district must still do a Real Estate Design Memorandum on the project

in order to get authority from HQ for ‘‘acquisition by transfer’’. This action will take

anywhere from 2 weeks to 2 months to accomplish. The Walton family no longer

has a legitimate Claim to the land.

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RESPONSES BY LT. GEN. ROBERT FLOWERS TO ADDITIONAL QUESTIONS FROM

SENATOR BOND

UPPER MISSISSIPPI RIVER AND ILLINOIS RIVER NAVIGATION STUDY

Question 1. Is the objective of the Upper Mississippi River and Illinois River Navigation study to forecast economic activity 50 years into the future?

Response. The objective of the Upper Mississippi River and Illinois River Navigation study is to address the problem of waterway congestion and to identify the most

appropriate solution. We use a 50-year period of analysis to compare the economic

costs and benefits of the various alternatives. As prescribed by Principles and

Guidelines for all Federal water resource studies, we use forecasts of future economic activity to characterize the most likely conditions that are expected to exist

in the future with and without the various alternative plans in place. The estimated

impacts of the alternatives under these expected future conditions provide the basis

far formulating, evaluating and comparing the alternatives.

Question 2. What is the freight traffic history on the mainstem Mississippi River

in 5-year increments over the last 50 years? It is my understanding that freight

traffic has increased from 59.3 million short tons in 1949 to 512.3 million short tons

in 1999. Is that correct?

Response. Freight traffic on the Mississippi River mainstem, Minneapolis, Minnesota, to Mouth of Passes, has increased from 59.3 million short tons in 1949 to

512.3 million short tons in 1999. These figures represent all traffic, both domestic

and foreign.

Mississippi River, Minneapolis, Minnesota, To Mouth of Passes (Consolidated Report)

Freight Traffic (thousands of short tons)

Year Tons

1949 ............................................................................................................................................................... 59,323

1954 ............................................................................................................................................................... 82,353

1959 ............................................................................................................................................................... 120,278

1964 ............................................................................................................................................................... 164,654

1969 ............................................................................................................................................................... 229,480

1974 ............................................................................................................................................................... 302,590

1979 ............................................................................................................................................................... 430,171

1984 ............................................................................................................................................................... 397,346

1989 ............................................................................................................................................................... 462,736

1994 ............................................................................................................................................................... 496,823

1999 ............................................................................................................................................................... 512,348

Question 3. When were locks 20–25 constructed and for what functional life expectancy?

Response. These projects were constructed between 1933 and 1940. It is difficult

to accurately estimate the life expectancy of the structures. Based on experience, we

expect that the longer projects remain in service, the greater will be the expenditures required for maintenance and rehabilitation to reliably extend their service

lives. The preliminary findings of the Navigation Study indicate that these lock and

dam structures could operate effectively and efficiently for an additional 50 years

if they are rehabilitated in conjunction with the construction of lock extensions.

Question 4. What are the principal commodities moved by water on the upper

Mississippi and Illinois waterways?

Response. Collectively, farm products (corn, soybeans, wheat, and prepared animal feed) represent the largest commodity group totaling almost 50 percent of all

traffic on the upper Mississippi and approximately 40 percent of all traffic on the

Illinois Waterway. On the upper Mississippi, other commodity groups, in order of

significance, are coal and coke, petroleum products, construction materials, iron and

steel, industrial chemicals, and fertilizers. On the Illinois Waterway, other commodity groups, in order of significance, are petroleum products, iron and steel, construction materials, industrial chemicals, coal and coke, and petroleum products.

Question 5. Roughly how many trucks does it take to haul the equivalent amount

of grain as a medium-sized 15-barge tow?

Response. One 15-barge tow carries approximately 22,500 tons or 787,500 bushels

of grain. This is equivalent to 2.25 100-car unit trains or 870 large semi-trucks.

Question 6. What is the relative fuel efficiency per unit hauled by water, rail and

truck?

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Response. Generally, barge transportation is more fuel-efficient than rail and

truck. Information from the Institute for Water Resources indicates that, on average, a gallon of fuel allows one ton of cargo to be shipped 59 miles by truck, 202

miles by rail, and 514 miles by barge.

In the upper Mississippi River regions involved in this study, the efficiency advantage enjoyed by barges is probably somewhat less than the average, because gains

in fuel efficiency for waterborne commerce have been limited in part due to the congestion and lock size constraints. It is currently estimated that 11 percent of the

fuel consumed on the Upper Mississippi River is used during lock delays and processing.

Question 7. What are the relative clean air values of water, rail and truck-born

transportation?

Response. Historical data indicates that barge transportation produces fewer

emissions due to its fuel-efficiency advantage.

Question 8. Under current law, would the Federal Government pay the entire cost

of construction necessary to increase lock capacity?

Response. The Inland Waterways Trust Fund was; established by the Inland Waterways Revenue Act of 1978, Public Law 95–502, as modified by Section 1405,

Water Resources Development Act of 1986, Public Law 99–662, for cost sharing for

rehabilitations of the existing system, and construction of new projects. Revenue for

the Trust Fund comes from a fuel tax imposed on the purchase of marine fuel by

barge operators, and is administered by the Federal Government as part of the fiscal year appropriations process. Section 102 of the Water Resources Development

Act of 1986 established a 50 percent cost share for inland waterway construction

to be provided by the Inland Waterways Trust Fund. Projects resulting from the

Navigation Study would be cost shared 50 percent from the Inland Waterways Trust

Fund and 50 percent from the General Fund of the Treasury.

Question 9. I know the locks are old and need maintenance. If we do not extend

locks, rehabilitation of the existing locks will be necessary. Is there an estimation

of the Federal cost to rehabilitate the existing locks absent new construction, extensions or other structural expansion?

Response. Preliminary study findings indicate that the locks should be rehabilitated on an approximately 25-to–30-year cycle. For each lock site, rehabilitation was

estimated to cost approximately $25–30 million per cycle. For example, Lock 22 is

estimated to need rehabilitation in 2015 and 2045 at a cost of $25–30 million for

each rehabilitation cycle. This issue will be reviewed and refined further as the

study proceeds.

Question 10. During the hearing I raised the issue about the value of water transportation in terms of being an insurance policy against higher-than-necessary railroad rates due to the competition water transport provides. Does the Mississippi

Valley Division, for example, have any data or can they site any examples whereby

rail rates fluctuate when navigation is unavailable due to maintenance, weather, or

season?

Response. Specific data is not available. However, anecdotal and empirical evidence suggests that the economic: impacts of upper Mississippi River navigation extend beyond those groups who directly provide or purchase barge transportation.

The continued availability of water transportation appears to have a significant impact on the pricing behavior of other surface modes—at least when these modes are

reasonably close to the river. In particular there is a large body of economic literature, which suggests that available barge transportation effectively constrains

railroad pricing. Intuitively, the existence of competition produces lower shipping

rates that benefit the consumer. There is no available data that correlates fluctuations of rail rates with closure of the navigation system.

Question 11. There has been some discussion about environmental impacts of lock

extensions. It is my understanding that most habitat modification affected by the

navigation infrastructure has been a result of the dams and their operation, not the

locks. If locks are extended from 600 feet to 1,200 feet, will that expansion, in and

of itself, require a modification of the dams or their operation or will the dam; and

operation remain essentially the same?

Response. Your understanding that most habitat modification affected by the existing navigation infrastructure has been a result of the dams and their operation

is correct. The dams and their operations will remain essentially the same with the

proposed improvements. There will be no modification of the dams or their operations as a result of the proposed improvements.

55

Question 12. Is the purpose of the study to discern the environmental impacts resulting from the existing system and/or is it to distinguish marginal environmental

impacts resulting from an alternative system?

Response. To comply with the National Environmental Policy Act, the navigation

study will assess the environmental impacts of various alternative plans by comparing the conditions that are expected to exist in the future with and without the

respective improvement plans. An Environmental Impact Statement will be prepared which will give appropriate consideration to past and present conditions but

will primarily focus on the effects of alternative plans to relieve lock congestion as

compared to the no-action alternative.

Question 13. Was there empirical data used by the study team to support the selection of N=1.5 or N=2?

Response. No empirical data was gathered during the feasibility study to support

the selection of N=1.5 or 2.0 for grain. These specific values were based on theory

and subjective assessment including input from Corps economists, Corps contractors, navigation users and shippers, and academic researchers. The review by the

National Research Council found that empirical data collection is recommended to

better support ‘‘N’’ values for grain.

Question 14. It was reported (River Transport 3/5/01) that, ‘‘Sweeney, rather than

refine the model further or wait for the completion of the technical review,

inexplicably presented the results of these preliminary runs at a public meeting in

early February 1998, before he had even briefed the Corps leadership.’’ Were preliminary model results released prior to technical review without briefing Corps

leadership?

Response. Preliminary results were presented at the Modeling Integration and

Simulation Team meeting held on 3–4 February 1998, prior to final technical approval and briefing of Corps leadership. The Modeling Integration and Simulation

Team is a working group for environmental analysis consisting of the Corps and

Fish and Wildlife Service. Non-governmental organizations also attended this meeting. To maximize public and agency input, study team members regularly share

work-in-progress with the understanding that such information is preliminary or

merely illustrative of ongoing modeling efforts. At the 1998 meeting, the preliminary

nature of the model was put in this context so that all parties would clearly understand that the analysis would be subject to continued refinement and agency technical and policy review. Apparently some participants misinterpreted these results

as final study findings, which was unfortunate since the model was still a work-inprogress.

Question 15. Who developed the model that the National Academy of Science’s National Research Council suggested should be abandoned?

Response. The Essence model was developed by Dr. Sweeney. The National Research Council review committee recommended the Essence model be revised to correct flawed assumptions and data.

Question 16. Did the NAS suggest the appropriate ‘‘N value?’’

Response. The National Academy of Science did not suggest an appropriate ‘‘N

value’’ for grain; however, they did suggest that data collection was required to provide an empirical rather than a theoretical basis for selection of demand elasticity

values for grain.

Question 17. Will the Corps endeavor to indicate in its final report estimates on

the cost of being wrong? Asked in another way, while you can estimate the cost of

construction, which would roughly approximate the cost of needless modernization,

can you and will you estimate the cost that failing to modernize may impose if capacity is insufficient, transportation costs are higher, and markets are lost?

Response. The costs associated with not modernizing the system would be reflected by the failure to realize transportation savings associated with each proposed

alternative. For example, the No-action alternative will result in some future cost

to the Nation. Alternatives are evaluated against the No-action plan. The transportation savings from the alternative are the benefits of that alternative. If the Noaction alternative is selected, the cost of being wrong are the foregone transportation savings or benefits associated with each alternative.

When the future is uncertain and a project involves significant complexity, there

is difficulty in deciding what is the best course of action. In order to derive the best

course of action, the Corps of Engineers has established a Federal Principals Task

Force that will coordinate the development of consistent policies, strategies, plans,

programs, and priorities for future economic development of the region and the Nation in terms of Agricultural and Trade. The Task Force will provide input into establishing parameters for additional assessment of risk and uncertainty.

56

Question 18. Has the Corps pursued any formal or informal analysis of water infrastructure initiatives undertaken by foreign competitors and, if so, what are the

summary findings?

Response. The Upper Mississippi River and Illinois Waterway Navigation Study

does not contain an explicit analysis of water infrastructure initiatives being undertaken by foreign countries. The revised forecasts of demand for United States grain

exports were made with knowledge of foreign initiatives.

RESPONSES BY LT. GEN. ROBERT FLOWERS TO ADDITIONAL QUESTIONS FROM

SENATOR BOXER

CORPS OF ENGINEERS REFORM

Question 1. Of the many recommendations in the various reports and studies critical of Corps projections and methodologies and disregard for the environment,

which are you most willing to implement?

Response. While I do not agree with the general characterizations of the Corps

processes, methodologies and leadership expressed in some of the reports, I take

specific allegations and recommendations seriously. The generalizations are based

not on a review of the Corps overall processes, procedures and methodologies, but

on a draft report on a very complex and controversial potential project that had not

been through the initial formal review called for in our process. In 1999, the National Academy of Sciences completed a formal review of our overall process and determined it to be just about right.

As recommended, we are not going to use the economics and environmental models that were found to be flawed. We will develop a series of options with analyses

of the uncertainties in each to reflect the suggestions raised in the National Research Council report. We will also collect additional data and undertake analyses

determined necessary for leadership to make informed decisions. I have formed a

national level principals group with representation from other affected and interested Federal agencies to provide me advice and insight on issues rind recommendations. There have been many and will be more opportunities for public and interest

groups to review, comment and provide input as we move forward with this study.

Question 2. Which do you intend to reject, and why?

Response. I reject any generalizations about the Corps processes, methodologies

and biases. We have ongoing programs to enhance and improve our processes and

procedures, particularly in the evaluation and formulation of environmental

projects. Over 20 percent of the current Civil Works funding is dedicated to environmental programs, and there are more new studies for environmental restoration

projects than for navigation and flood control projects. However, I do not reject any

specific recommendations that will ensure that this study moves forward to a final

decision in a timely manner.

I would not support any changes to the Principles and Guidelines at this time.

I believe they have proven to be flexible and allow changes in our specific procedures that reflect society’s priorities. In addition, Congress has directed and we are

pursuing two studies with the National’ Academy of Sciences (‘‘Independent Peer

Review of Projects’’ and ‘‘Review of Methods for Project Analysis’’) that need to be

completed before any changes are proposed. In addition, we are working with the

Office of the Assistant Secretary of Army for Civil Works to develop implementation

guidance for WRDA 2000 provisions concerning ‘‘Enhance Public Participation’’ in

the planning process and ‘‘Monitoring’’ of selected projects to verify economic and

environmental results of projects. Any changes without the results of these efforts

would be premature.

Question 3. In your prepared statement, the end of the last Paragraph under the

‘‘Water Resources Planning and the National Interest’’ heading discusses the competing forces that pressure the Corps on the one hand to conduct thorough planning

and, on the other, to expedite projects. The last two sentences read ‘‘As a result,

our planners are often caught between the forces seeking comprehensive planning

at one end of the spectrum and those who voice concerns for addressing needs on

an expedited basis and early screening of alternatives that have little chance of

being implemented. We are pledged to this service.’’ Please clarify what you mean

by the last sentence-you are committing to what service?

Response. My pledge is to address National, regional and local needs in the study

process in a comprehensive basin or watershed manner t:o the extent possible. This

focus can be difficult when viewed from the non-Federal sponsor’s perspective. They

are required to provide one-half of the costs and outside interests, who are not paying any of the costs, are demanding that issues broader than their specific needs

57

be addressed. One way we tried to address this problem was a proposal for WRDA

2000 to enhance our ability to do comprehensive watershed planning by increasing

the authorized funding and providing for a higher Federal share of such studies.

BUTTONWILLOW/SAFETY-KLEEN

Question. I understand that the Corps of Engineers has not made any progress

since last October on removing FUSRAP waste from the unlicensed Safety-Kleen facility at Buttonwillow, California, and that no further studies are being conducted.

I am deeply disappointed by this continued inaction, and that waste continues to

sit in an unlicensed California dump when other licensed facilities in other States

express willingness to accept it. Will you commit to working with me to remove that

waste from my State?

Response. I am aware of your concerns regarding our use of the Safety-Kleen facility at Buttonwillow, California, for the disposal of FUSRAP materials. The

Buttonwillow facility is permitted by California to accept radioactive materials with

low specific activity, including radioactive materials of the kind that the Corps

shipped to Safety-Kleen: The Army Audit Agency (AAA) has investigated Corps use

of the Safety-Kleen facility in California and has determined that ‘‘the Corps and

its supporting contractors took appropriate actions . . . to fully protect human

health, safety and the environment.’’ This finding is consistent with the’ conclusions

of an earlier study by California Environmental Protection Agency and the California Health and Human Services Agency. As stated in an August 25, 1999 letter

to California State Assemblyman Dean Floret, both agencies agreed that ‘‘there is

no known safety or health risk to the community.’’ AAA also determined that ‘‘Removal of the waste from Buttonwillow may result in unnecessary risks to workers

from potential construction accidents and risks to the facility’s protective liners.

More importantly, any removal action would have no effect on the overall waste contamination levels at the facility because it also stores wastes with similar levels of

radioactivity that aren’t related to the Corps’ disposal.’’

The Corps has already taken steps to improve its communications with the regulators of disposal facilities it utilizes by requesting written concurrence that disposal

of the specifics FUSRAP materials is consistent with the facility’s license or permit

prior to shipment of those materials. I will be happy to work with you to further

improve communications between the Corps and the States where possible FUSRAP

material disposal. sites are located.

DEER CREEK DEBRIS BASIN

Question. Independent review of the Corps’ work is of critical importance to the

local residents living below the Deer Creek Debris Basin and the Deer Creek levee.

The Corps has studied and recommended the removal of the Deer Creek levee. The

Corps says removal of the levee will not decrease the community’s flood protection,

The community funded their own study which raised substantial questions about

the Corps analysis of the debris basin’s integrity and the wisdom of removing the

levee. I believe that independent review in this case would ensure that mistakes are

not made that endanger the health and safety of the people or that lead to flood

damage. Will you work with me by committing to subjecting the Corps’ study in this

case to an independent review?

Response. First, let me clarify that the Corps of Engineers has not recommended

the removal of the Deer Creek Levee, which is also called the Deer Creek Reception

Levee. We have informed local residents that we do not have jurisdiction over that

levee, and that it is a local decision to remove or retain the levee. If the levee is

removed however, a storm drainage system meeting city and county requirements

would be put into place to intercept flood runoff formerly handled by the levee. We

have conducted a reanalysis of the Federal project features—the Deer Creek Debris

Basin, and Channel, and concluded that these project features still provide a high

degree of protection. At the request of the Assistant Secretary of the Army for Civil

Works, the Corps obtained an independent technical review in August 2000 by an

well qualified engineering firm specializing in flood and sedimentation problems.

The result of this review was concurrence with the Corps’ technical evaluation of

the Deer Creek Project that it affords protection equal to or greater that the FEMA

Base Flood (one-percent annual. chance of occurrence). Currently the Corps is actively participating in a follow up engineering review of the project with the State

of California, Federal Emergency Management Agency, city of Rancho Cucamonga,

San Bernardino County Flood Control District, and concerned local citizens. We believe these technical review efforts fully address the flood control concern: that led

to your request for an ‘‘independent review’’.

58

DEER CREEK BASIN

Question. What procedures are appropriate when the public and its elected representatives raise questions about the efficacy of a project previously completed by

the Corps of Engineers, such as what occurred with regard to the Deer Creek Debris

Basin in San Bernardino, California? Under what circumstances is it appropriate

to have these matters reviewed by an independent party such as the National Academy of Sciences, and has the Corps considered creating an Ombudsman program

such as what occurs in other Federal agencies to deal with the publics questions

and concerns?

Response. For completed projects, the Corps has a process by which projects are

reviewed for changed conditions under the Review of Completed projects authority.

In such a procedure a study is initiated either through the Operations and Maintenance or General Investigations account to review the situation and report recommendations. If a feasible Federal interest is found in pursuing solution through

such a cursory review, a detailed study is then pursued. The Corps has a very detailed review procedure that applies to its planning program with multiple levels

of review by its field offices, the Headquarters, Administration and Congress. Sponsors participate throughout the process as well as the States and other Federal

agencies. While we are not considering an Ombudsman program as you mentions=d,

we are looking into some form of Independent Review as suggested in the Water

Resources Development Act of 2000 through a contract with the National Academy

of Sciences.

SNAKE RIVER DAMS

Question 1. Do you plan to complete studies regarding the engineering necessities,

economic mitigation, and energy replacement possibilities for the potential removal

of the four lower Snake River dams? If so, when will those studies be completed and

are you planning to have those studies peer reviewed?

Response. The 2000 NMFS Biological Opinion (BiOp) does not require dam

breaching to avoid jeopardy. However, it indicates that breaching should be kept as

a future option, and establishes a schedule and triggers for determining whether to

pursue this option. The BiOp recognizes that breaching is a major action requiring

NEPA compliance and congressional authorizations. In addition, the BiOp lays out

an expedited schedule to allow for the quick implementation of breaching or other

more aggressive actions if necessary. It does not require advanced engineering analysis to meet this objective. The Corps is still. in the process of completing the Final

Feasibility Report and Environmental Impact Statement (FR/EIS), which will make

recommendations for future actions on the lower Snake River dams and reservoirs.

The FR/EIS will assess the engineering and construction requirements to determine

if it is implementable or technically feasible, but it will not address the advanced

engineering required to actually implement breaching. No recommendation on advanced engineering requirements for breaching will be made until the FR/EIS is

completed.

We have assessed economic costs and benefits associated with d<?m breaching. In

addition, we have conceptually identified possible compensation options for some

users that would be negatively impacted. This information was incorporated into the

Draft FR/EIS released in December 1999. The economic impacts are being refined

for the Final FR/EIS, which is due out later this year. Compensation plans for economic impacts are not typically included in the evaluation of water resource

projects. We have no plans to evaluate compensation plans; however, a more detailed investigation into this issue could be done.

The Draft FR/EIS did evaluate the possible replacement for hydropower foregone

associated with dam breaching. It identified that this energy could be replaced primarily by developing six 250 MW gas-fired turbine power plants. Further analysis

has indicated that it is also possible to replace this foregone energy through conservation and other alternative energy sources (i.e. wind, solar, etc.), but at a higher

cost than gas-fired turbines. This will be documented in the Final FR/EIS.

Question 2. As I understand it, the Federal agencies have put forth a draft river

operations plan which violates the spill and flow requirements of the Federal salmon recovery plan that was recently released in December. Can you explain why your

agency can support non-compliance with the Federal salmon recovery plan only 3

months after its release?

Response. The Biological Opinions issued in December 2000 on the operation of

the Federal Columbia River Power System contemplated that there could be potential power emergencies and low runoff years. The west coast is experiencing a critical power situation and the latest forecast for the Columbia-River basin runoff is

second lowest on record. With these difficult conditions, the Corps is working with

59

National Marine Fisheries Service, the US Fish and Wildlife Service, the Bonneville

Power Administration, the Bureau of Reclamation, and the States and tribes of the

Pacific Northwest on a weekly basis to determine river operations that provides for

survival of listed salmon as well as assures delivery of energy to the people of the

Northwest.

Question 3. A recent court decision makes it clear that the Corps must comply

with Federal law under the Clean Water Act and that the four lower Snake River

dams are currently violating the Clean Water Act. When and how is your agency

preparing to come into compliance with the Act’s requirements?

Response. The recent court decision on the Clean Water Act and the four lower

Snake River dams ordered the Corps to issue a new decision replacing the 1998

Record of Consultation and Summary of Decision on the operation of the Federal

Columbia River Power System to address compliance with its obligations under the

CWA. The Corps is currently completing that document and will be submitting it

to the Court by May 17, 2001.

Æ