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[Senate Hearing 106-809]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 106-809

       U.S. ARMY CORPS OF ENGINEERS' BUDGET FOR FISCAL YEAR 2001

=======================================================================

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON 
                   TRANSPORTATION AND INFRASTRUCTURE

                                 OF THE

                              COMMITTEE ON
                      ENVIRONMENT AND PUBLIC WORKS
                          UNITED STATES SENATE

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION

                               __________

                           FEBRUARY 24, 2000

                               __________

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

                    U.S. GOVERNMENT PRINTING OFFICE
66-379 cc                   WASHINGTON : 2001

_______________________________________________________________________
            For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 
                                 20402

               COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

                       one hundred sixth congress
                   BOB SMITH, New Hampshire, Chairman
JOHN W. WARNER, Virginia             MAX BAUCUS, Montana
JAMES M. INHOFE, Oklahoma            DANIEL PATRICK MOYNIHAN, New York
CRAIG THOMAS, Wyoming                FRANK R. LAUTENBERG, New Jersey
CHRISTOPHER S. BOND, Missouri        HARRY REID, Nevada
GEORGE V. VOINOVICH, Ohio            BOB GRAHAM, Florida
MICHAEL D. CRAPO, Idaho              JOSEPH I. LIEBERMAN, Connecticut
ROBERT F. BENNETT, Utah              BARBARA BOXER, California
KAY BAILEY HUTCHISON, Texas          RON WYDEN, Oregon
LINCOLN CHAFEE, Rhode Island
                      Dave Conover, Staff Director
                  Tom Sliter, Minority Staff Director
                                 ------                                

           Subcommittee on Transportation and Infrastructure

                  GEORGE V. VOINOVICH, Ohio, Chairman

JOHN W. WARNER, Wyoming              MAX BAUCUS, Montana
CHRISTOPHER S. BOND, Missouri        DANIEL PATRICK MOYNIHAN, New York
JAMES M. INHOFE, Oklahoma            HARRY REID, Nevada
CRAIG THOMAS, Wyoming                BOB GRAHAM, Florida
LINCOLN CHAFEE, Rhode Island         JOSEPH I. LIEBERMAN, Connecticut

                                  (ii)

  

                            C O N T E N T S

                              ----------                              
                                                                   Page

                           FEBRUARY 24, 2000
                           OPENING STATEMENTS

Bond, Hon. Christopher S., U.S. Senator from the State of 
  Missouri.......................................................    19
    Articles, Corps Projects..................................... 23-30
Chafee, Hon. Lincoln, U.S. Senator from the State of Rhode Island     4
Smith, Hon. Bob, U.S. Senator from the State of New Hampshire....     5
Voinovich, Hon. George V., U.S. Senator from the State of Ohio...     1
Warner, Hon. John W., U.S. Senator from the Commonwealth of 
  Virginia.......................................................     4
Wyden, Hon. Ron, U.S. Senator from the State of Oregon...........     8

                               WITNESSES

Ballard, Lt. Gen. Joe N., U.S. Army, Chief Engineer and 
  Commanding Officer, U.S. Army Corps of Engineers...............     8
    Prepared statement...........................................    73
Westphal, Hon. Joseph, Assistant Secretary of the Army (Civil 
  Works), U.S. Army Corps of Engineers...........................     6
    Prepared statement...........................................    34
    Responses to additional questions from:
        Senator Baucus...........................................    59
        Senator Boxer............................................    70
        Senator Graham...........................................    68
        Senator Moynihan.........................................    66
        Senator Smith............................................    41
        Senator Thomas...........................................    57
        Senator Voinovich........................................    36
        Senator Wyden............................................    72

                          ADDITIONAL MATERIAL

Affidavit, Donald C. Sweeney.....................................    74

                                 (iii)

  

 
       U.S. ARMY CORPS OF ENGINEERS' BUDGET FOR FISCAL YEAR 2001

                              ----------                              

                      THURSDAY, FEBRUARY 24, 2000

                               U.S. Senate,
         Committee on Environment and Public Works,
         Subcommittee on Transportation and Infrastructure,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:12 a.m. in 
room 406, Senate Dirksen Building, Hon. George V. Voinovich 
(chairman of the subcommittee) presiding.
    Present: Senators Voinovich, Chafee, Warner, Smith, Wyden 
and Bond.

        OPENING STATEMENT OF HON. GEORGE V. VOINOVICH, 
              U.S. SENATOR FROM THE STATE OF OHIO

    Senator Voinovich. Good morning.
    I'd like to welcome Lieutenant General Joseph N. Ballard, 
the Chief Engineer and Commanding Officer of the U.S. Army 
Corps of Engineers and the Honorable Joseph Westphal, Assistant 
Secretary of the Army who will comprise our panel this morning.
    Gentlemen, before we begin the hearing, I'd like to say 
that I'm pleased to be here today as the subcommittee chairman 
of the Subcommitte on Transportation and Infrastructure for my 
first Army Corps of Engineers budget hearing.
    As Governor of Ohio, I was impressed with the work of the 
Corps of Engineers. In my experience, it is an agency with a 
high degree of integrity that does its very best to meet the 
needs of local and State governments and the public that they 
serve.
    I was very pleased to work with my colleagues on the 
committee to seek the swift passage of the 1999 Water Resource 
Development Act during the last session of Congress and I'm 
committed to continuing the committee's efforts in this session 
to pass a 2000 Water Resource Development Act on time.
    Authorizations are a very important first part of the 
process of developing and maintaining our Nation's water 
resources infrastructure. The equally important second part is 
having an adequate appropriation of funding to not only 
construct but also operate and maintain the projects that we 
authorize.
    I note that the Corps has a backlog of deferred maintenance 
of about $450 million. This reflects and aging national water 
resources infrastructure and if we continue to ignore the 
deterioration of our locks, dams, flood control projects and 
parks and recreation areas, we risk destructions in waterborne 
commerce, lower levels of protection against floods, reduced 
service to the recreating public and environmental damage. We 
must assure that the operation and funding levels are adequate 
and efficiently allocated to priority needs.
    I applaud the inclusion in this year's budget of $27 
million to begin a modernization program for Corps of Engineers 
recreation areas. This is a good start in addressing serious 
problems.
    I'm also deeply concerned that the level of construction 
appropriations for the Corps of Engineers Water Resources 
Program is not sufficient to provide for the efficient 
development of worthy and needed projects this committee 
authorizes. National investment in water resources has not kept 
pace with our level of economic expansion.
    While some of the shortfall has been appropriately met by 
the States, there is also a role for the Federal Government. If 
the steep decline in Federal investment continues, our 
continued economic expansion and environmental improvement will 
be threatened. National public water resources infrastructure 
investments in 1960 amounted to 1.1 percent of our gross 
domestic product. Today, that figure is .2 of 1 percent of GNP.
    One of the results of this declining investment is that 
there are about 400 projects in various stages of 
implementation which were authorized in past WRDA bills and 
which have received either design or construction funding. This 
represents a $30 billion backlog in Federal funds needed to 
complete these projects. That figure doesn't include the 
Federal share of the $5.6 billion projects that we authorized 
in WRDA 1999. They haven't received any construction funding or 
design money and now we're now going to authorize WRDA 2000.
    I recognize that this backlog contains a few projects or 
increments of projects that are not needed at this time or 
which currently lack non-Federal sponsors. One of the things I 
have talked to Joe Westphal about is that we ought to go 
through and look at those projects and knock some of them off 
that list that don't belong there for one reason or another so 
we have a better handle on what is out there.
    The recent disclosures about segments of the inland 
navigation systems that are not achieving their projected 
benefits and allegations about less than objective analysis of 
the costs and benefits of the upper Mississippi River 
improvements highlights the need for critical review of 
authorized projects before any funding decisions are made.
    You're going to have a chance to comment on that but when 
the public reads about the Red River and the money that was put 
into that and the ostensible benefits from river casinos, it 
does a great deal of harm to the effort.
    Having said that, the majority of projects in the backlog 
competing for the limited Corps construction budget have 
recently been authorized based on recommendations of this 
committee. In other words, these projects come out of this 
committee.
    I'm not advocating increased levels of Federal spending as 
a general matter. The problem is spending our Federal resources 
on the right things. Among the right things that are not 
receiving adequate funding are many of the worthy projects 
authorized by this committee.
    We were down in Florida and talking about the Everglades 
and pointing out that they were very anxious to get going with 
the Everglades restoration. I think people were shocked when I 
said to them that the $30 billion for the project--$3 billion 
of which was to go in WRDA's budget for the State of Florida--
where is this money going to come from?
    A second area that concerns me about the Corps' budget is 
the seeming lack of regional and State equity in the 
distribution of projects. I'd like you to comment on that too. 
I recognize that this is a complex issue involving 
considerations of population, severity of water resource 
problems and non-Federal sponsorship. However, the State 
disparities are striking.
    For example, my State of Ohio has less than $100 million in 
Federal funding needed to complete ongoing projects, while the 
comparable figure for the State of Florida, as I mentioned, is 
almost $3 billion. That is before any consideration of 
proposals in WRDA 2000.
    I see that the Administration has once again proposed a new 
harbor services user fee and Harbor Users Fund to fund 
construction, operation and maintenance of our Nation's harbors 
and channels. The Harbor Service user's fee is proposed to 
replace the existing harbor maintenance tax, a portion of which 
the Supreme Court, as you know, has struck down, and recognizes 
the current tax on imports and domestic traffic is not 
sustainable.
    I applaud the Administration's effort to support the 
construction and operation maintenance of the Nation's ports 
and waterways but the development and maintenance of our ports 
is essential to our national economy, including the economy of 
the vitally important Great Lakes Region. However, in my view, 
the Administration's harbor services user fee proposal will 
destroy the very Great Lakes maritime commerce it seeks to 
promote and as you know, is strongly opposed by both Great 
Lakes port carriers and shipper interests. There is a similar 
national opposition to this proposal.
    I share these concerns and urge the Administration to 
withdraw this ill-advised proposal and to develop an acceptable 
replacement. I'd like to work with you on that. What are the 
options.
    I mentioned earlier the disclosures in the January 9 and 10 
articles in the Washington Post which highlighted a number of 
segments of the inland waterway system where barge traffic and 
navigation benefits have fallen far short of projections. This 
has been followed by allegations in a February 13 article in 
the Washington Post that the economic analysis of the upper 
Mississippi River Navigation Expansion Project has been 
distorted to favor a positive recommendation on lock expansion. 
I am very concerned about these disclosures.
    We have already spent about $2 billion in Federal funds to 
construct the Red River waterway and navigation benefits are a 
fraction of those projected. At the same time, worthy projects 
lack funding and are being constructed on inefficient schedules 
due to inadequate funding. We cannot afford anymore Red Rivers.
    In authorizing projects, it is absolutely essential that 
the Congress be able to rely on objective and high quality 
analysis of project costs and benefits by the Corps of 
Engineers. We just can't afford to have projects coming here 
after Corps analysis and not have them accurate because we rely 
on the Corps for information on the viability of these 
projects.
    One of the things I'm concerned about is the Everglades 
project. We mentioned in the hearings that the specificity that 
ordinarily accompanies reports from the Corps of Engineers is 
not there for almost every one of those projects. I think we 
need an explanation. Is that a premature presentation at this 
time?
    I want to make it clear that I'm all for the Everglades but 
the point is, if we we're going to get started with a massive 
project like that, it seems to me we need the specificity on 
those projects so that we can determine whether they are worthy 
or not to go forward.
    I have noticed that Senator Chafee is here this morning. 
Senator, would you like to make a statement?

           OPENING STATEMENT OF HON. LINCOLN CHAFEE, 
          U.S. SENATOR FROM THE STATE OF RHODE ISLAND

    Senator Chafee. Yes, thank you.
    I'd like to extend my appreciation to Secretary Westphal 
and General Ballard for being here to discuss their budget.
    I would agree with the chair, that in general, there are 
some concerns about the uncertainty within the Corps relating 
to future growth plans and the standards by which the Corps 
evaluates projects. I am concerned by these allegations and 
hope these uncertainties can be resolved expeditiously.
    In general, however, I think there is more work to be done 
and I am encouraged by the Corps' increased emphasis on 
environmental concerns. At one time, the Army Corps was 
perceived as an organization with little interest in 
environmental protection or restoration. In fact, the 
Everglades Project 40 years ago is what we are now undoing with 
the massive project before us.
    Along with Challenge 21 and the Everglades Project, that 
perception is changing. I believe this is an excellent step and 
I commend the Corps for its efforts to integrate environmental 
concerns into traditional flood control and navigation 
projects. I hope this work continues.
    Thank you, Mr. Chairman.
    Senator Voinovich. Senator Warner?

           OPENING STATEMENT OF HON. JOHN W. WARNER, 
         U.S. SENATOR FROM THE COMMONWEALTH OF VIRGINIA

    Senator Warner. Thank you, Mr. Chairman.
    I wonder if I might indulge in a little story that I think 
is appropriate to the occasion.
    I've been privileged to be on this committee many years and 
have been present when the Corps appeared. It is always a very 
special day and indeed a very special oversight responsibility 
of this committee. Now we have a new distinguished chairman to 
undertake this task.
    There were a few of us in the Library of Congress welcoming 
the King of Spain and James Billington, the head of the 
Library, was walking down showing the magnificence of this 
structure and he told us this little story.
    He said that Yeltsin came up to see it on his official 
visit and Yeltsin was overwhelmed at the magnificence of this 
building. Mr. Billington was explaining to him that it was 
built in 1897 and that the Corps of Engineers built the 
building and that it came in under budget. Yeltsin was 
overwhelmed. He said, you mean you built this building in this 
country without the power of a czar?
    That's why it's called the Library of Congress. We're not 
the tzar but we do work with the Corps and others to build 
these magnificent structures. I know of no traditional heritage 
in this country in the military that has greater pride than the 
Corps.
    Do you realize, Mr. Chairman, in the history of our 
country, the number one graduate of West Point has always gone 
into the Corps. General McArthur, when he graduated, went into 
the Corps. As a matter of fact, if I'm correct, you're wearing 
McArthur's badge of the Corps which he has given to the Corps.
    General Ballard. That's correct, sir.
    Senator Warner. The very one that he wore, so you have 
proud and long tradition and this committee under our new 
chairman and the chairman of the subcommittee are here to 
support you but to do it in a constructive way.
    I just want to bring up one subject if I may. Last year 
before this committee, several members, including myself, 
raised issues concerning the Corps mission to continue to 
participate in hurricane protection projects. This is very 
important to a number of us in the coastal areas.
    As you know, the Congress has opposed the Administration's 
policy to terminate Federal participation in these kinds of 
projects. In testimony and responses before this committee, I 
think Mr. Westphal, you made a commitment to resume funding for 
these projects if the Congress made changes to increase the 
non-Federal costs. I believe you also followed up in writing on 
this commitment.
    We made these changes in response to your direction in the 
WRDA Act of 1999. Yet, the President's fiscal year 2000 budget 
did not include funding for hurricane projects. I hope in the 
course of your statement, Mr. Westphal, you can give us 
clarification on that.
    I thank the distinguished chairman and thank you for the 
opportunity to tell you a little story.
    Senator Voinovich. Senator Smith, we are very pleased that 
you're here today, the chairman of our committee.

             OPENING STATEMENT OF HON. BOB SMITH, 
          U.S. SENATOR FROM THE STATE OF NEW HAMPSHIRE

    Senator Smith. Thank you, very much, Mr. Chairman, and 
thank you for holding this hearing this morning.
    I just want to say, gentlemen, I'm here to listen to your 
testimony but it is the kind of press that was in the paper 
this morning that is troubling. If there is this lack of 
communication between the civilian and the military leaders on 
the direction of the civil works program, then this obviously 
is unacceptable and we need to straighten it out. The trust of 
the Army Corps, as Senator Warner alluded to, and the 
accomplishments of the Army Corps are legendary. He mentioned 
General McArthur as one and I feel the same way.
    We want to make sure that we don't lose that trust that you 
have built up over the years with the public. So whatever this 
is, let's get on top of it and get it straightened out and 
quickly. I think that is very, very important because I, for 
one, know of the good works that have been done by the Corps 
over the years. We don't want to see any of that diminished by 
these problems.
    With that, Mr. Chairman, thank you again for holding the 
hearing and I'm here to listen to the witnesses.
    Senator Voinovich. Thank you, Mr. Chairman.
    Secretary Westphal?

 STATEMENT OF HON. JOSEPH WESTPHAL, ASSISTANT SECRETARY OF THE 
        ARMY, CIVIL WORKS, U.S. ARMY CORPS OF ENGINEERS

    Secretary Westphal. Thank you, Mr. Chairman, and 
distinguished members of the committee.
    I'm delighted to be here to talk about the President's 
budget priorities for 2001.
    The 2001 budget is very consistent with the funding levels 
that were enacted by Congress in recent years and it is also 
very consistent with the President's overall domestic 
priorities.
    We have come a long way in the past 2 years to reconcile 
these differences between the President's budget and the 
congressional appropriations. I believe this is a very positive 
step in continuing to form a good partnership on the priorities 
in this budget and in this program.
    The President is hopeful that the budget he presented 
earlier this month will provide Congress a well-balanced set of 
priorities that address a broad range of issues facing our 
Nation's infrastructure, our economy and the quality of life of 
our citizens.
    The President's budget for the Civil Works Program includes 
nearly $4.1 billion for discretionary programs which is 
comparable to the amount appropriated in the 2000 budget. It is 
about $160 million above what the President proposed last year 
and with the non-Federal contributions and other funding, the 
total funding for the Civil Works Program in 2001 will be 
approximately $4.5 billion.
    Like last year, a significant portion of the budget for the 
construction and maintenance of commercial channels and harbors 
is based on enactment of the harbor services user fee proposal. 
Last year, Congress appropriated about $750 million from the 
existing Harbor Maintenance Trust Fund just for the maintenance 
of channels and harbors. The new user fee proposal, if enacted, 
would make up to $950 million available in fiscal year 2001 for 
commercial harbor and channel work to procedure on an optimal 
schedule.
    I'm very pleased to also note that there are two very 
important initiatives in this budget. You mentioned one of 
those, Mr. Chairman. It's been about 20 years since the last 
major efforts were made to understand and assess the complex 
relationships among various and often competing water resource 
issues. On a river basinwide basis, the Federal Government and 
the States, I believe, the President believes, need a 
comprehensive and holistic approach that considers the 
multijurisdictional and transnational aspects of water 
resources to work effectively. In that vital partnership, 
requirements of today's complex issues--States, tribes, 
counties, river basin authorities, and other regional 
organizations, along with the Federal Government--can take a 
broad look at water resources needs.
    In short, we're proposing four studies, two of which will 
follow your guidelines under Section 729 of the Water Resources 
bill of 1986 asking us to study water resource needs and river 
basins. The President's fiscal year 2001 budget commits $2 
million to initiate these four broad river basin studies.
    Two of them, the Rio Grande Basin and the White River Basin 
in Arkansas, would be completed under Section 729 and the 
Yellowstone River Basin in Montana and Missouri, the middle 
Mississippi River Basin, would proceed under specific 
authorizations already granted in previous bills.
    The other initiative is the President is proposing that we 
make a long and serious effort to rehabilitate our recreation 
facilities around the country. What most people don't realize 
is that the Corps of Engineers is just about the largest 
provider of water-based recreation in the Nation. In fact, it 
is the largest provider.
    There are 4,340 recreation areas at more than 456 lakes in 
42 States. These recreation areas host 377 million visitors 
annually. So the combination of heavy use, lack of routine 
maintenance, and changes in visitor needs has caused 
significant deterioration of recreation facilities, most of 
which were constructed in the 1960's and 1970's and are, 
therefore, out of date today. Twenty-seven million dollars is 
included in our 2001 budget to initiate this recreation 
modernization program.
    We will replace or rehabilitate facilities at more than 
2,389 recreation areas that the Corps of Engineers manages 
directly. We hope to upgrade facilities and install more family 
oriented facilities, improve general access to water-related 
recreation opportunities over the next five to 10 years.
    Also in the President's budget is included a $20 million 
request to initiate Challenge 21, which is delivering ecosystem 
restoration and flood hazard mitigation programs authorized 
last year in WRDA 1999. This initiative expands the use of 
nonstructural flood hazard mitigation options and restoration 
of riverine ecosystems to allow a more natural recision of 
flood waters and provide other benefits to the communities and 
the environment. Challenge 21 will create partnerships with 
communities and establish a framework for more effective 
coordination with key Federal and State agencies.
    In fiscal year 2001, the President's proposed budget 
includes $82 million to initiate new investments for a total of 
$1.6 billion. Of the total, $410 million will be financed 
directly by non-Federal sponsors, including lands, easements, 
rights of way and relocations.
    In addition to the four comprehensive studies and two new 
programs that I noted earlier, the fiscal year 2001 budget will 
include four new surveys, one new special study, one new 
preconstruction engineering and design project and 12 new 
construction starts.
    The President is committed to the traditional missions of 
improving our navigation, our transportation system, protection 
of our local communities from floods and other disasters and 
maintaining and improving the hydropower facilities across the 
country.
    Like the Congress that in recent years has expanded the 
Corps' responsibilities to include restoration of aquatic and 
wetland ecosystems, the President is very supportive of all our 
efforts to move toward more significant environmental 
restoration efforts.
    In summary, Mr. Chairman, the President's budget for 2001 
for the civil works program I think is a good one. It 
demonstrates a commitment to civil works, a strong program of 
new construction, a plan to solve the constitutional problem 
with the existing harbor maintenance tax, a firm commitment to 
maintain our existing infrastructure, increased use of civil 
works environmental restoration expertise and authorities, and 
support for our ongoing missions.
    With that, Mr. Chairman, I will submit a more detailed 
statement for the record.
    Thank you for the opportunity to testify today.
    Senator Voinovich. Senator Wyden, would you like to make a 
statement before General Ballard testifies?

             OPENING STATEMENT OF HON. RON WYDEN, 
             U.S. SENATOR FROM THE STATE OF OREGON

    Senator Wyden. Just very briefly, and I appreciate it, Mr. 
Chairman. I have to be in two places at once today.
    It seems to me why your hearing is so important is that 
events of recent days suggest to me that Members of Congress 
now need to be willing to commit political heresy, and that is, 
there has to be opposition from each of us to projects in our 
area that aren't cost effective and don't meet tough 
environmental restoration standards.
    We've got a couple of projects in our area that are 
extremely important, the deepening of the Columbia Channel, the 
project in Astoria as well. I'm prepared to say that those 
projects, just like any others, have got to meet these tough 
standards with respect to the use of taxpayer money and with 
respect to environmental standards.
    I know that effort has been a priority of yours as well and 
I look forward to working with you on a bipartisan basis.
    Senator Voinovich. Thank you, Senator.
    General Ballard?

  STATEMENT OF LIEUTENANT GENERAL JOE N. BALLARD, U.S. ARMY, 
   CHIEF ENGINEER AND COMMANDING OFFICER, U.S. ARMY CORPS OF 
                           ENGINEERS

    General Ballard. Mr. Chairman, distinguished members of the 
subcommittee, as Mr. Westphal has fully addressed our budget 
issues, I will limit my comments to the recent media reports on 
the Corps.
    First of all, I want to thank you for the opportunity to 
comment on the recent allegations surrounding the upper 
Mississippi and Illinois River navigational study. These 
allegations are very troubling to me as they are to you. They 
are troubling to me because they challenge the very nature of 
the value of the Corps of Engineers to the Nation. That value 
is trust, a trust in our absolute integrity to provide to the 
Administration and to this Congress, water resource investment 
recommendations that are unbiased and technically sound.
    While the widely publicized allegations and media reports 
attempt to erode the foundation of that trust, I am certain 
beyond a doubt that your trust has not been misplaced. I 
therefore welcome and will fully support all independent, 
outside investigations of the allegations and any review of our 
process. I will take prompt corrective actions if wrongdoing is 
discovered and I stand ready to make improvements to our 
processes if it is warranted.
    I will assure you, however, that when all of the facts are 
in, the integrity of the Corps will be intact and you will know 
the trust you have traditionally placed in the Corps is well 
founded. Let me explain the reasons for my confidence.
    First of all, I believe in the professionalism and 
dedication of the Corps team and I have absolutely great trust 
in my leaders. Additionally, our process has a series of built-
in checks and multiple levels of review to ensure objectivity. 
These include independent technical reviews, a minimum of two 
formal public reviews, Washington level policy review, State 
and agency coordination requirements and finally, review by the 
executive branch in accordance with Executive Order 12322.
    It is important to note that all of these reviews are yet 
to be conducted in the case of the upper Mississippi River and 
Illinois River navigation study. It is also important to 
remember that there are no easy, clearcut answers to the 
complex issues we face in this particular study. Technical 
experts may, and they often do, honestly disagree on the 
specifics. The value that the Corps brings to the process is to 
ensure that both sides of any technical agreement are 
completely analyzed and receive proper peer review, proper 
public review and of course, policy review.
    In the particular study in question, the draft report has 
not yet been completed--a fact that is lost on a lot of folks--
much less than undergone these series of reviews. So any 
allegations in this regard may be, and probably are, a bit 
premature. Ultimately, after a full and open debate, balanced 
professional judgment must enter the process.
    Dealing with technical agreement is the role of our field 
commanders. That is what we pay them to do. They must make 
tough decisions often in the face of strongly held opposing 
views. The Corps' process ensures that all interests are heard, 
all interests are heard and that the final recommendations are 
unbiased and based on the best science available, and most 
importantly, in the public interest.
    In our business, there is almost always at least one 
interest group that is opposed to some specific findings, but 
when all of the facts are in, I'm confident, again, in the 
integrity of our process and the leaders who guide that 
process.
    In a broader perspective, we are seeking to identify unmet 
national water resource needs. These are based on published and 
documented information. Water resource development is too 
important to let the media set national priorities. Our role is 
to apply a structured, reasonable approach to identifying and 
quantifying the national water resource needs and through an 
extensive communication process with our partners, the 
stakeholders and other agencies and the general public, we 
recommend responsible alternatives for national investment that 
will meet economic development and environmental needs both 
today and in the future.
    Let me address the question of the growth of the Corps' 
program. It is absolutely not our intention to grow this 
organization in terms of manpower. In fact, over my tenure, we 
have consciously reduced the size of our work force, the number 
of offices in the Corps. What we are doing is seeking to 
increase our value and service to the Nation. We are 
identifying unmet national water resource needs that fall 
within the Corps mission. These needs are based on a wide 
variety of published and well documented information and input 
from the stakeholders across the Nation.
    In conclusion, Mr. Chairman, I am confident that our 
process, our execution and the judgment of our leaders is sound 
and yields balanced recommendations for wise water resource 
investment. Our screening process for potential projects is 
tough. Historically, only 16 percent of the studies we begin 
ultimately result in a construction start. In other words, 84 
percent of proposed projects are discarded by the Corps, they 
never make the cut.
    The projects that make it through the screening process are 
ultimately constructed and provide a positive return to the 
Nation's investment. Over the last 4 years, we have pursued our 
mission to address the Nation's current and emerging needs in 
an environment of deliberate downsizing of our organization. 
Again, I have reduced the size of the Corps of Engineers by 
nearly 10 percent, while streamlining and improving the 
efficiency of our business processes.
    I am confident that the U.S. Army Corps of Engineers is 
pursuing its mission with the utmost professionalism and 
integrity and will continue to serve this Nation well.
    Again, thank you, Mr. Chairman and members of the 
subcommittee. This concludes my statement and I will be happy 
to take your questions.
    Senator Voinovich. Thank you.
    As I mentioned in my statement, there is just a tremendous 
backlog of projects that need to be funded. When you think of 
the fact that each year our appropriations for energy and water 
are about $1.4 billion, those dollars are few and far between 
and we need to make sure they are being spent on projects that 
are worthy.
    I must say I was a little bit surprised when I read the 
Post this morning and Mr. Westphal indicated that he was not 
aware of the slide presentation about the growth of your 
organization. I'd like the two of you to comment on that.
    Secretary Westphal. Obviously, responding to the press over 
a telephone about alleged documents without seeing them was 
difficult. Let me just say this. The Corps has internal 
processes they go through to look at, and I'll let General 
Ballard address the specifics, which address the internal needs 
of the Corps. Those eventually come to my office and to the 
Secretary, and eventually the Congress.
    We have a very grassroots level for making policy. 
Generally speaking, as I prepare a budget, as I prepare a water 
resources bill, the information, the needs are addressed 
through the regional office of the Corps and is brought to our 
office. Then we make the policy decisions in our office as to 
what we think is appropriate and what we don't think is 
appropriate.
    I am not in a position at my office in the Pentagon to know 
everything going on in the field and to know what the needs of 
the country are everywhere. That has to filter up through your 
constituents that bring those matters to the Corps and then 
they filter to the Chief and to me. That is an appropriate way 
for things to happen.
    The people who work for the Corps, about 2 percent of the 
employees of the Corps of Engineers are at his headquarters. 
Most of them are your constituents, your citizens. They live in 
your communities and they have a sense of what is going on out 
there, what they needs are and those are filtered up through a 
process to me.
    On these particular allegations, we have been in sync on a 
very important principle. This is a great asset for the Nation. 
The U.S. Army Corps of Engineers, as Senator Warner pointed 
out, has been a great asset for this Nation for almost 150 
years or more. I believe that and I believe that the Nation 
also has great needs out there, many of which are not satisfied 
within the budget constraints that we are all working under and 
also within authorities that different agencies have for the 
needs of the States and various parts of the country.
    I believe that you have this asset, this resource and you 
have needs out there. To the extent that we in the 
Administration and you in the Congress can come together and 
determine whether or not those needs can be fulfilled by this 
institution, by this organization based on its capabilities and 
its expertise, I think we do that and we should continue to do 
that.
    So we are in that process. We prepare a water resources 
bill to you, as we are doing this year and as we did last year, 
that tells you what we think from a policy standpoint are the 
needs out there and where we think those needs can be 
fulfilled.
    Senator Voinovich. Let me ask you this, in terms of 
management, you are Assistant Secretary of Defense and you have 
responsibility. Is there a mission statement of the 
Administration or a policy statement as to the role of the Army 
Corps of Engineers and what the priorities are that kind of 
sends a signal to the Corps in terms of what it is they are 
supposed to be doing?
    Secretary Westphal. There's two things. There is the 
general orders of the Secretary of the Army which spell out my 
responsibilities in terms of oversight and leadership in the 
budget and policy area, say over the Corps of Engineers. That 
is one area.
    The other is that we do have developed over time jointly 
with the Corps, not necessarily in General Ballard's tenure but 
over the course of many years of work, a mission, an 
understanding of what the Corps' mission is for the Nation. 
That mission continues to develop as you have seen fit to 
develop it in water resources bills in recent years by 
expanding that mission say into the environmental restoration 
area.
    So when the Corps does a study on a project, when it does 
an environmental impact statement, a cost benefit study, a 
feasibility report, that report requires not only a technical 
analysis, but also a policy analysis. Does it fit the policy, 
does it fit the mission.
    Senator Voinovich. Do you review those as they come up? Do 
you have somebody in your staff that looks over these projects 
as they come in to kind of give them direction or react to 
them?
    Secretary Westphal. There is a review process. Before I 
came on board, my predecessors delegated some of that policy 
review to Headquarters, Corps of Engineers. That was a function 
of the tremendous size and number of these reviews, the 
expertise he has at headquarters, combined with our ability to 
participate in that process. That was delegated to 
Headquarters, Corps of Engineers.
    We do what we consider to be an ad hoc review of many of 
these documents, the ones that tend to be bigger and perhaps 
more controversial or more difficult to look at, or we have a 
specific interest because either a Member of Congress or 
someone has pointed out there are issues there. We elevate 
those to our office.
    I have a very small office and we do require more people. 
There was a delegation made before I came and I have been 
spending quite a bit of time reviewing whether that delegation 
needs to remain the way it is or whether it needs to be 
rescinded. I have been in discussions with the Chief of 
Engineers about that.
    There is a policy review that currently is being done at 
headquarters for us and then we work jointly with their people. 
The next step after that is that report goes to OMB, to the 
President. OMB then has a function of reviewing it. OMB also, 
in terms of staff size and ability to look at all of this, 
needs to get something they can have confidence in. They need 
to have a report reviewed by us they can be assured has all the 
quality checks done on it.
    We work very closely with OMB as they get it and before it 
comes to you for an authorization and approval.
    Senator Voinovich. I'd be interested if you have anything 
in writing about the process and what the procedure is in terms 
of how the system works.
    I have some other questions and other members of the 
committee. Senator Chafee?
    General Ballard. Mr. Chairman, I would like an opportunity, 
if I might, to talk about how I see the process, just to add to 
what the Secretary said.
    The Corps of Engineers is more than just civil works, as 
you know. We have a large mission not only to execute the civil 
works program for the Nation, but we also support the military 
program for DOD and we provide technical support to other 
agencies. So I have oversight responsibilities given to me by 
the full range of the Army Secretariat, not just civil works.
    When we develop any project, it is not done in the back of 
a room in secret. On any of the policies, this is done in a 
very open process so that everyone is aware of it.
    The allegations that appeared in the newspaper make it seem 
as if there is a bunch of rogue officers plotting to take over 
this program. That is simply not true. Everything that we do, 
every project that is developed, every program eventually feeds 
itself into a budget submission. Once that budget is approved, 
whether it is a series of studies or what have you, that is the 
way it works. It is bottom fed but it flows up through the 
district office, the division office, my office, eventually if 
it is a program initiative, to the Office of the Secretariat. 
If it is a new initiative that we are proposing to the 
Administration, it then goes from the Secretary's office 
through OMB, through this whole policy review and eventually 
makes it to the President's budget.
    The statements that are being played out in the newspaper 
that you and I read this morning, shows a general lack of 
understanding of how this process works. There is no way that 
me or any of my officers can generate a project or even a 
policy and execute it without the full authority of the 
Administration and this Congress. It just doesn't happen. I 
wanted to be very clear on that to sort of complete the 
statement if you will.
    Thank you for allowing me to interject.
    Senator Voinovich. Senator Chafee?
    Senator Chafee. As you said in your opening statement, 
there is a $30 billion backlog of projects before the Corps 
that haven't been appropriated. What are you doing to try and 
increase your revenues specifically with the Supreme Court 
setback? How are you going about addressing that?
    Secretary Westphal. The backlog is a function of both the 
Administration and the Congress being unable to put these 
projects on full funding, full capability funding. In other 
words, as the chairman mentioned, you have water resources 
bills that come every 2 years and they add more projects to the 
pot. The pot gets bigger but the budget is limited.
    For example, when I submit my budget to the Office of 
Management and Budget, my budget for civil works competes with 
EPA's budget, Ag's budget, Commerce's NOAA budget, a good part 
if not all of Interior. These are huge, huge areas in which it 
competes.
    In the past few years with the budget constraints and the 
budget agreements, they were working with similar caps as you 
here in the Congress. So everything gets slowed down. So that 
backlog begins to grow and grow and grow.
    I said it to the chairman at the previous hearing, I said 
it to the chairman of the Subcommittee on Transportation and 
Infrastructure in the House, this is the dreaded ``D'' word, 
the deauthorization word. I fully agree that I think we need to 
go back and look together with you at that backlog and examine 
which of those projects really are never going to get built. 
Many of those are getting a little bit of funding to carry them 
through. So I think they distort the picture a little bit.
    It isn't $30 billion worth of projects by any means but 
there is a lot we can do to clean up the book so to speak.
    Senator Chafee. Before my time runs out, can I just 
followup on the Supreme Court case. Do you have, a plan that 
would address the Supreme Court case? That would provide 
revenues.
    Secretary Westphal. It would continue to provide revenues 
to the Harbor Services Trust Fund. Right now that trust fund is 
growing. I don't know the exact number but I'm going to say we 
probably have somewhere around $1.5 billion in that fund. It 
may even be more than that. That fund can be tapped to do all 
of the navigation O&M work, plus in the proposal we've 
submitted, it would also be able to be used for some 
construction work, for the Federal portion of the construction 
work. So it does help to have that. It is almost $1 billion a 
year we spend in that work. That is an additional revenue 
source.
    I believe we have developed a proposal. There is opposition 
to it, there is no question about it. The issue you raised, Mr. 
Chairman, with respect to the impact of the Great Lakes, some 
of the development of this proposal is being left up to 
rulemaking. In rulemaking we will be able to make some 
adjustments I hope for some of the areas where this may 
actually cause an adverse effect.
    That is our proposal. We've laid it at the hands of the 
Congress. I think it is appropriate for you all to debate it, 
discuss it, talk to us about it, work with us on it. I will be 
glad to work with you, Mr. Chairman, on any changes you see 
necessary. If ultimately you and your constituents don't think 
that is the appropriate vehicle, then we have to go back and 
look at something else.
    Senator Voinovich. One of the things I'd be interested in 
following up on is what other alternatives were there other 
than what you're suggesting to us.
    Secretary Westphal. The only other alternative that has 
been mentioned is using just the general revenue fund, just 
putting it in to compete with everything else. Again, 
everything else competing, as we noted a minute ago, there's a 
backlog. Things are not getting the appropriate amount of 
funding because of the competition overall in the budget. We 
believe this is an important area.
    Senator Voinovich. The current situation is that you've got 
a lot of money in the fund but with the elimination of a 
portion of it, that fund will start to be depleted and if the 
other aspect of it is attacked, it could all be gone and you'll 
be faced with nothing.
    Secretary Westphal. That's possibly true. The fund is 
continuing to receive revenues from the import side of this.
    Senator Voinovich. I understand that.
    Secretary Westphal. So there will still be some money in 
the fund but not enough to fully fund all the navigation needs 
of the country. That is the other reason we propose this.
    We've proposed this because General Ballard can tell you, 
we get so many requests for more port deepening, deeper 
channels, bigger ships, more maintenance, more work around the 
country, so we see this as growing and very important to our 
trade posture.
    Senator Voinovich. You've got $1.8 billion proposed for 
deepening the harbor in New York and New Jersey.
    Secretary Westphal. Yes, sir.
    Senator Voinovich. I just want to make one comment. General 
Ballard, I'm aware of the fact that you have a defense side of 
this. I want to tell you that last week I was in Kosovo and I 
want you to know that Colonel McClure has done an outstanding 
job there of putting up that facility. The facility is just 
outstanding and is a reflection of the fact that the Army cares 
for their men and women. I don't know if you've seen it yet, 
but it's an outstanding piece of work. The Corps should be 
very, very proud of what they have done over there.
    General Ballard. Thank you very much, sir.
    Senator Voinovich. Senator Smith?
    Senator Smith. You can go ahead.
    Senator Voinovich. Senator Wyden?
    Senator Wyden. I just want to ask one question.
    Listening to both of you this morning suggests to me that 
the real key here is to come up with a better screen for 
determining what is a cost effective project. If you come up 
with a better screen for determining what is a cost effective 
project, then you respond to Senator Chafee's point about the 
backlog and also you respond to this public sense today that 
special interests are driving this process.
    General there is no question that there is a public 
process. Nobody is debating that but I can tell you a lot of 
people feel that the special interests are driving this public 
process. They look at these news stories and they say, these 
powerful special interests hotwire the agenda and they are able 
to work their will.
    It seems to me that if you all will go back to the drawing 
board and come up with a better screen for what constitutes a 
cost effective project, you really make a lot of headway in two 
areas--one, in terms of dealing with the backlog and two, in 
terms of dealing with this public sense that the special 
interests call the shots. There is no question in my mind that 
these stories of recent days have really taken a toll on your 
credibility. Why don't we get your responses to what I'm 
suggesting?
    Secretary Westphal. If you take the first story on the Red 
River, I think it's very unfair because this is a project that 
originated back in the 1960's, I believe, when the discount 
rates were considerably different, when the methodology was not 
as stringent and very different than what we're using today. So 
over the course of time from the initial studies done on the 
Red River project to today, the methodology is quite different, 
much stronger.
    I've not come across any of these studies that haven't been 
fully open, fully out there for people to review and look at. 
It's amazing to me how open the process is.
    Senator Wyden. You're convinced that these stories are 
based on outdated counts with respect to how you determine 
whether a project is cost effective?
    Secretary Westphal. I believe that particular story, that 
the whole development of the Red River project is an 
interesting study in politics. Congress was deeply involved in 
that, as you saw in the article; there were negotiations 
between Congress and the Presidents in the past administrations 
about what should fly and not fly. You mentioned in your 
opening Senator that there's a lot more to these things than 
simply a study made by the Corps. In the studies we're doing 
today, I think the methodologies are much stricter, much 
stronger, much more timely.
    The National Academy of Sciences did last year produce a 
report in which they made a series of suggestions for us to 
reexamine the principles and guidelines by which these studies 
are done. That is under review in my office. We're going to be 
looking at that, we're going to be working with the Corps to 
move that to the next level and try to address those 
recommendations which I think many were very valid.
    We have new dimensions we are adding to the look at these 
projects. The Corps is much more environmentally sensitive as a 
requirement, let alone the fact that the people that work on 
these projects are themselves interested in making sure they 
are environmentally sound. So that is built into the equation.
    Senator Wyden. General, do you want to respond?
    General Ballard. I most certainly do, sir. I want to take 
just a minute and show you the chart on the process but while 
they are putting that up, let me state that I think your 
concerns are well founded. We should continually look at our 
process. We are in the process of doing that.
    We had the National Academy of Science to come in and do a 
rather exhaustive look at our process. They came up with a 
couple of findings but overall, they said that our process was 
excellent. We also need to note that since we have put these 
changes into place, the majority of the projects we have 
constructed returned an annual return of about 26 percent on 
investment each year. So we're building better projects.
    The process but we are right here on the study phase. What 
we are doing, in spite of what you read in the newspapers, we 
are in the study phase of looking at a very complex system. 
We're trying to project what the needs for the Nation on the 
waterways are going to be in 2050, not an easy job. It's the 
first time we've ever tried to do this but there are checks and 
balances that go along the way.
    That red chart says that we are in the final study phase to 
come out with a draft report in December. We have yet to even 
address this report. The special interest groups that you speak 
of, I think have a role to play. I think it is very necessary 
for the five Governors of those States to interject their 
feelings and desires on what we produce. By the same token, the 
environmental folks will want to have something to say as will 
the public.
    What generated this was during the public review when we 
put out preliminary data a lot of folks didn't like it and a 
lot of folks did like it. One of the things we bring to the 
table is consensus building and we'll do that and produce a 
draft report and go through the other series of public reviews.
    Each one of those arrows means that someone, either at this 
headquarters, out in the field, public review, agency review, 
has a chance to validate and comment on what we're producing, 
so it is a very open process. I don't think we want to change 
that because whatever we produce, we're producing it for the 
public when it talks about civil works. We just need to speed 
up the process.
    The thing that bothers me is that we still take too long. I 
want to move that and I need to do that by working on our 
internal processes. This was projected to be a 10-year study 
and we'll probably get it done, but we're talking 2050, a long 
time out. So I share your concern, sir. I think they are on the 
mark and we need to take a close look and continually refine 
what we do but I still would like to say I think it is very 
necessary as we bring these projects to the Congress that we 
give the public an everyone a chance to comment on it. I don't 
back away from controversy.
    Senator Wyden. My only concern about your statement is when 
you talk about speeding up the process, it's also a process of 
speeding up rebuilding credibility because I think when I 
talked earlier about a Member of Congress committing political 
heresy which is what you do if you oppose a project in your 
area, and I think we need to do that if it's not cost 
effective, if it doesn't deal with environmental standards.
    You don't want it to reach that point. In effect, there's 
been a breakdown if all that work has been done and then a 
Member of Congress says that project doesn't meet those 
rigorous tests, I've got to oppose it. In order to have a more 
preventive oriented approach, I think you all are going to have 
to look at some new ways not just to speed up the process, 
which I support, but speed up the process of rebuilding 
credibility so that folks come away saying this really isn't 
something where a handful of special interests, the powerful, 
hotwire the projects but it's really something that serves all 
the public, the economic concerns, the environmental concerns, 
the taxpayer concerns.
    Mr. Chairman, I appreciate your giving me the time.
    Senator Voinovich. Thank you.
    Senator Smith?
    Senator Smith. Thank you, Mr. Chairman.
    In terms of the article in the Post this morning and the 
backlog, let me see if I can make a connection here and try to 
understand this.
    The current backlog is about $30 billion as I understand it 
of authorized projects which are not yet completed. Maybe they 
received the design approval or construction funding or a 
combination of both or either or. This does not include, 
however, $5.6 billion in new projects authorized in WRDA 1999, 
does not include in the WRDA 2000 bill about $1.5 billion for 
Everglades restoration, another $1.8 billion for deepening New 
York and New Jersey harbor. The President's budget this year 
proposes $1.3 billion.
    When you read the Post this morning and apparently the 
feeling within the agency that somehow we need to grow, it is 
amazing to me how anyone could propose growth--if the term 
growth means the growth of more projects or more work on our 
plate--or growth maybe to get these projects done but if this 
is growth to create more projects, that is a heck of a lot 
different than growth to get the backlog done. Which is it? 
General Ballard?
    General Ballard. I know it is exactly the first. The 
proposal there is to grow the budget, not necessarily the 
number of folks that I have. As I stated earlier, we have 
reduced 10 percent. If we're going to attack the backlog, we 
need the funding to address that.
    We're talking about deferred maintenance. Our backlog of 
deferred maintenance on the stuff we've already built is 
growing at the rate of $100 million a year. The value of our 
capital stock has declined by some $25 billion over the past 20 
years. What is also important is overall spending of the Corps' 
Civil Works Program has declined in real terms by one-third 
over the last 20 years.
    So when we're talking about increasing spending and 
investing, we're not talking new projects here; we're talking 
about working what we have currently there to do, that has been 
authorized by the Congress and what we know we have to do in 
order to protect the investment. Even if we were to increase by 
the 50 percent that was in the Washington Post this morning, we 
still would leave our investment level below 1970.
    Senator Smith. Let me ask you two questions on the backlog. 
Does each of the backlogged projects have a non-Federal sponsor 
to participate in the local share?
    General Ballard. Yes.
    Senator Smith. All of them do?
    General Ballard. Yes.
    Senator Smith. Are there any of those projects that, in the 
view of the Corps, should be deauthorized?
    General Ballard. We are currently reviewing that. We think 
there are some, as the Secretary mentioned earlier. We are 
currently screening that entire list of projects.
    Senator Smith. This is where I have trouble with what the 
report is in the Post. If there is a feeling in the agency that 
some of the projects should be deauthorized, which it seems 
apparent to me that would be the case if they've been 
backlogged that long, although I don't have the detail on that, 
I don't understand the movement among the so-called ``military 
officials'' of the Corps as quoted in the paper who feel 
otherwise, that we need to undertake new construction projects 
to grow. That's what the allegation says.
    Let me ask this specifically and then I'll yield to my 
colleagues. When the term military officials is used in there, 
I'm assuming you're not one of those military officials?
    General Ballard. Wrong. I am one of the military officials 
because we only have 500 military in all of the Corps of 
Engineers.
    Senator Smith. Are you one of the military officials they 
are referring to in the Post article?
    General Ballard. I have no idea what the writer of that 
article meant or who he talked to.
    Senator Smith. Are you aware of the slide show that is 
alleged here?
    General Ballard. I'm aware of the slide show. What the 
slide show talks about, and I'd be very happy to address that, 
is an internal working document. The thing that I'm hired to do 
as the civil engineer for the Nation, and that is what the 
Corps of Engineers really is, is to address and to bring to the 
attention of the Congress and the Administration needs out 
there that currently exists. That is what that document talks 
about.
    Let me tick off a couple of them. Fifty-percent of our lock 
chambers are over 50 years old and they have exceeded their 
economic life. We need to bring that to the attention of the 
Administration and the Congress and we need to address it. 
That's what this slide show talks about.
    Senator Smith. I understand that. I'm not being critical on 
that point. I guess my concern is, Mr. Westphal, you have no 
knowledge of the slide show. If you're the man in charge and 
you don't have knowledge of the fact that there are certain 
needs being addressed in certain presentations by the military 
officials, how can you run the agency? Were you aware of the 
slide show?
    Secretary Westphal. No.
    General Ballard. Sir, if I may, Secretary Westphal and I 
this past August, several months ago, and he will verify this, 
met at a meeting and we talked about these issues of backlog of 
maintenance, locks, et cetera. We were in preparation of 
preparing this when this document that we talk about, the slide 
show. In meeting with my commanders, we have yet to produce it 
and bring it to Secretary Westphal. So his not being aware of 
it is understandable, I had yet to present it to him. We've 
been working this for the last two, 3 months and had every 
intention of showing that to him and building the program.
    He also directed me to do an exhaustive review of our total 
maintenance and repair program. We addressed this concern last 
year to the committee. We spent a year doing that. He has yet 
to see that, but the way it would work is once we complete the 
plan, I then present it to the Secretary for his policy and his 
guidance on where we take it, how we build it into the 
budgetary process, how we present it to the Administration.
    He was absolutely right when he said he hadn't seen it 
because I hadn't presented it to him.
    Senator Voinovich. Senator Bond, do you have an opening 
statement?

        OPENING STATEMENT OF HON. CHRISTOPHER S. BOND, 
            U.S. SENATOR FROM THE STATE OF MISSOURI

    Senator Bond. Mr. Chairman, thank you very much. I 
apologize for coming late. I chaired a hearing of our Small 
Business Committee this morning, I was called to testify before 
another committee and I have yet to testify in one more 
committee, one more subject before lunchtime today, so I 
apologize for having to make a cameo appearance.
    I want to make one very important point before we begin. I 
have had the pleasure of working with Secretary Westphal and 
General Ballard and both of them have good Missouri ties, but I 
have worked with them and I know these men. I know their 
capability, their integrity, their honesty, their intelligence 
and their commitment to the national good.
    To the extent that somebody wants to challenge any of 
those, you can talk about the Corps program or argue with the 
Corps program, but if you take on the integrity of these 
gentlemen, you're going to have to fight me and I will do 
whatever is necessary to point out that these gentlemen and the 
men and women they represent are some of the finest public 
servants we have.
    Having said that, I do want to make a number of points that 
I think are extremely important. First, if I were asking 
questions, I'd ask the Corps if it could send out a search 
party to find the Northwest Division's preferred alternative 
for amending the Missouri River Master Manual since it arrived 
at the White House Council on Environmental Quality. We should 
have the CEQ and Fish and Wildlife quit hiding behind the Corps 
and do the public hearings themselves if they are going to be 
the ones choosing the alternatives. I just wish that CEQ was as 
interested and concerned about proposals at Devil's Lake and 
the Garrison diversion legislation as they are about 
maintaining what we already have on the Missouri and 
Mississippi Rivers.
    I do want to focus my remarks today on the importance of 
the Mississippi River to our region and our country's 
competitive position. I've worked with coastal State senators 
who are very, very concerned about, and rightfully so, their 
position with respect to coastal shipping because that is 
vitally important to them. River habitat, river commerce, river 
neighbors are vitally important to us.
    There have been suggestions about special interests. Yes, 
I've advocated a lot for the rivers. I've fought to get money 
for the environmental management program on the Mississippi 
River. I've fought to adopt, which this committee did last 
year, a water resources development bill which authorized the 
Mississippi and Mid-Mississippi River Habitat Restoration 
Program that Steven Ambrose complimented yesterday as one of 
the great steps forward. So there are a lot of interests we are 
representing. Those interests are the interests of the people 
of the heartland.
    The Mississippi River sees shipping in the magnitude of 
over 300 million tons annually. The locks on the upper 
Mississippi currently being studied were built during the 
Depression era with a 50-year design length. They're in poor 
condition because the 50 years is up. People in my region 
believe that as we modernize and improve the capacity for 
highways, we should do the same for our waterways. For the good 
of this Nation, I hope and I trust the Corps has the same view.
    The Washington Post February 13 story quote, ``How Corps 
Turned Doubt Into a Lock,'' continues the newspaper's campaign 
against the Corps of Engineers and its mission which is 
critical to the safety, environmental and economic health of my 
region. While it may be news to the Washington Post, between 
Washington, DC and California, there is a quiet, flat, 
productive region of the country we refer to as the midwest, 
where people rely on inland waterways for efficient 
transportation of goods and for recreational and other multiple 
benefits.
    There live the people who feed us, who provide this Nation 
over $50 billion a year in exports with nearly $20 billion in 
trade surplus. Last year, a relatively minor 30-day repair 
project on Locks 26 and 27 forced towers to use auxiliary 
chambers and pushed rates up 5 to 7 cents per bushel.
    While the Washington Post can dismiss this critical 
relationship, those of us who are interested in the future of 
our rural economy cannot and will not. The prosperity of the 
rural economy depends upon having safe and efficient, reliable 
transportation alternatives to help expand export markets.
    Two-thirds of the corn and bean exports travel down the 
Mississippi and the aging locks in question are creating 
bottlenecks because they are beyond their original design 
capacity. After $54 million in 7 years, shippers and carriers 
in the Mississippi River Basin want to see at least some of 
their barge fees put to work on the Mississippi.
    I want to provide just a hint of the context of this whole 
discussion about modeling and the economic analysis. I cannot 
and will not speak to matters internal to the Corps. I am 
willing to express some healthy skepticism that any economist 
can predict the next 50 years of benefits based on variables 
such as crop prices, crop uses, fuel prices, export demand and 
the availability and cost of shipping substitutes.
    Here in the District of Columbia, we watch OMB disagree 
with CBO on current year forecasts. When you try to forecast 
what is happening the agriculture community, I've seen those 
projections be dead wrong in 2 and even 1 year. In short, I 
don't trust anyone, even a proud economist at the Corps, to 
tell me what they think the price of a bushel of beans will be 
and who will want to buy them in the year 2050, but that is 
what apparently is being asked of the Corps when they are told 
to provide an estimate of the growth in demand for barge 
transportation through 2050.
    It should come as no surprise that there may be internal 
debate, a variety of outside views and a desire to err on the 
side of caution from leaders who have a responsibility to the 
people. Without taking issue with the competence of the Corps' 
economists, on behalf of the midwest, I am more interested in 
the cost of being wrong.
    If we neglect the system and fail to provide sufficient 
capacity, the cost of lost export markets will not be hundreds 
of millions of dollars but billions of dollars. Given historic 
growth, most anticipate further growth.
    Furthermore, capacity is provided not just to facilitate 
expected export growth, but to encourage export growth. As the 
Post noted, ``One of the many items that must be considered is 
transportation alternatives to barge transportation.'' As one 
medium-size barge can carry the grain of over 800 trucks, a 
model shift from barge to trucks is intuitively not safe, not 
efficient, and not good for the environment. Think of the 
pollution that 800 trucks going through St. Louis, Missouri 
would bring to the air quality of that region.
    That leaves rail. The Environmental Defense Fund and the 
Post may trust the tender mercy of those in the rail industry 
not to raise rates and delay shipments, but try suggesting that 
to my farmers who have had the experience showing that these 
giants sometimes act to the contrary.
    Mr. Chairman, our farmers cannot afford a railroad 
monopoly. We have seen it in areas of the midwest and west and 
it's reminiscent of the grain piled on the ground in the old 
Soviet Union.
    The post attacks a critical agency, its mission and the 
fine uniformed people who are conscientiously looking ahead to 
provide our region modern and efficient transportation 
alternatives that serve the best interests of this Nation. I 
know that General Anderson and Colonel Mudd care about process 
and our Nation and have the record to prove it.
    Meanwhile, our foreign competitors are not spending $54 
million on a 5-year study and debating about whether the value 
of n in an abstract formula equals 1.5 or 1.2. Our foreign 
competitors are pressing ahead with billions of dollars of 
exports to seize advantage by digging, building, plowing, 
planting and exporting. I am going to offer the clips for the 
information of this committee and others.
    The Post story on the economists attacked the reputation of 
honorable people in the Corps not for taking a narrow view, 
which is typically a fault of government servants, but for 
taking a broad one. While I understand that a review of 
economist complaints must take place in response to the 
complaint, we need to press ahead with the study. We've had 7 
years of study and $54 million and we do not yet have anything 
to show for it. It is time for the Corps to release the report 
and put it in the public domain and if they will not provide a 
forward-looking recommendation, then Congress will have to do 
it for them.
    Mr. Chairman, I appreciate the chance to share my views and 
I can assure you that there will be a strong letter to follow. 
I ask unanimous consent to submit these articles for the record 
detailing foreign activities in transportation.
    [The prepared statement of Senator Bond follows:]
 Statement of Hon. Christopher S. Bond, U.S. Senator from the State of 
                                Missouri
    Mr. Chairman, I am chairing a hearing myself this morning, and am 
to present formal testimony at another hearing so I regret that I 
cannot attend the entirety of this hearing.
    The budget for the Corps is not adequate to meet the Nation's needs 
and some of the ``interests'' that I have sought funding for are 
environmental interests.
    These environmental programs include the Environmental Management 
Program, the Missouri River Fish and Wildlife Mitigation Program and 
the new program included by the subcommittee in the last WRDA, the 
Missouri and Middle Mississippi Rivers Habitat Program.
    There are a number of issues I would like to raise.
    Among them include asking the Corps if they could send out a search 
party to find the Northwest Division's preferred alternative for 
amending the Missouri River Master Manuel since it arrived at the White 
House Council on Environmental Quality. We should have CEQ and Fish and 
Wildlife quit hiding behind the Corps and do the public hearings 
themselves if they are the ones choosing the alternatives. I wish CEQ 
were as interested in Devil's Lake and Garrison Diversion projects.
    However, I'll focus my brief remarks today on the importance of the 
Mississippi River to our region and our country's competitive position.
    The Mississippi River sees shipping in the magnitude of over 300 
million tons annually.
    The locks on the Upper Mississippi that are currently being studied 
were built during the Depression-era with a 50 year design length and 
are in poor condition.
    The people in my region believe that as we modernize and improve 
the capacity for highways, we should do the same for our waterways.
    For the good of this nation, I hope the Corps has the same view.
    The Washington Post 2/13/00 story ``How Corps Turned Doubt Into a 
Lock'' continues the newspaper's campaign against the Corps of 
Engineers and its mission which is critical to the safety and economic 
health of my region.
    While it may be news to the Post, between, Washington, DC and 
California, there is the quiet and flat region of the country we refer 
to as the Midwest where people rely on the inland waterways for 
efficient transportation of goods.
    There live the people who feed us and who provide this nation over 
$50 billion in exports with nearly $20 billion in trade surplus. Last 
year, a relatively minor 30-day repair project on Locks 26 and 27 
forced tows to use auxiliary chambers and pushed rates up 5-7 cents per 
bushel.
    While the Post can dismiss this critical relationship, those of us 
who are interested in the future of the rural economy cannot.
    The prosperity of the rural economy depends on having safe, 
efficient and reliable transportation alternatives to help expand 
export markets.
    Two-thirds of the corn and bean exports travel down the Mississippi 
and the aging locks in question are creating bottlenecks because they 
are beyond their original design capacity.
    After $54 million and 7 years, shippers and carriers in the 
Mississippi River basin want to see at least some of their barge fuels 
taxes put to work on the Mississippi.
    Mr. Chairman, I want to provide just a hint of context to this 
whole discussion about the modeling and the economic analysis.
    While I cannot speak to maters internal to the Corps, I am willing 
to express some healthy skepticism that any economist can predict the 
next 50 years of benefits based on variables such as crop prices, crop 
uses, fuel prices, export demand and the availability and cost of 
shipping substitutes.
    Here in the District of Columbia, we watch OMB disagree with CBO on 
current year forecasts.
    In short, I don't trust anyone, even a proud economist at the 
Corps, to tell me what they think the price of a bushel of beans will 
be and who will want to buy them in the year 2050 but that is what we 
ask the Corps to do when we ask them to ``provide an estimate of the 
growth in the demand for barge transportation through 2050.''
    It should come as no surprise that there may be internal debate, a 
variety of outside views, and a desire to err on the side of caution 
from leaders who have a responsibility to the people.
    Without taking issue with the competence of the Corps' economists, 
on behalf of the Midwest, I am more interested in the cost of being 
wrong.
    If we neglect the system and fail to provide sufficient capacity, 
the cost of lost export markets will not be hundreds of millions of 
dollars but billions of dollars.
    Given historic growth, most anticipate further growth.
    Furthermore, capacity is provided not just to facilitate expected 
export growth but to encourage export growth.
    As the Post noted, one of the many items that must be considered is 
the transportation alternatives to barge transportation.
    As one medium-sized barge tow can carry the grain of over 800 
trucks, a model shift from barge to truck is intuitively not efficient, 
safe, or good for the environment.
    That leaves rail. The Environmental Defense Fund and the Post may 
trust the tender mercies of those in the rail industry not to raise 
rates and delay shipments, but try suggesting that to farmers who have 
experience with these giants that speaks to the contrary.
    Mr. Chairman, our farmers cannot afford a railroad monopoly. We 
have seen it in areas of the Midwest and West and it is reminiscent of 
grain piled on the ground in the old Soviet Union.
    The Post attacks a critical agency, its mission, and the fine 
uniformed people who are conscientiously looking ahead to provide our 
region modern and efficient transportation alternatives that serve the 
best interests of this nation.
    I know General Anderson and Colonel Mudd and they care about 
process and they care about this nation and have a record to prove it.
    Meanwhile, our foreign competitors are not spending $54 million on 
a 5-year-study and debating about whether the value of ``n'' in an 
abstract formula equals 1.5 or 1.2.
    Our foreign competitors are pressing ahead with billions of dollars 
in investments to seize advantage by digging, building, plowing, 
planting, and exporting.
    The Post story and the economist attack the reputation of honorable 
people in the Corps not for taking a narrow view, which is typically 
the fault of government servants, but for taking a broad one.
    While I understand that a review of the economist's complaints must 
take place in response to the complaint, we need to press ahead with 
the study.
    We have had 7 years of study and $54 million and we do not have 
anything to show for it.
    Its time for the Corps to release it and put it in the public 
domain and if they will not provide a forward-looking recommendation, 
then Congress should do it for them.
                                 ______
                                 
             [From the Washington Post, February 13, 2000]
   How Corps Turned Doubt Into a Lock In Agency Where the Answer Is 
             ``Grow'' A Questionable Project Finds Support
                         (By Michael Grunwald)
    Seven years ago, the generals running the Army Corps of Engineers 
tapped Donald C. Sweeney II for a vital mission. The barge industry was 
clamoring for huge lock construction projects on the Mississippi and 
Illinois rivers, and Congress had put up $50 million for the most 
ambitious navigation study ever. Sweeney led the study's economics 
team, producing work the Corps' top economist hailed as ``the greatest 
advance we have made in . . . quite a few years.''
    But Sweeney didn't reach the conclusion the generals expected. 
After 5 years of analysis, he calculated that the costs of any major 
project would far outweigh the benefits.
    The Corps brass then took the study away from Sweeney, launching a 
determined campaign to justify a billion-dollar construction plan. An 
affidavit by Sweeney--backed up by several Corps witnesses, along with 
a revealing trail of internal e-mails and other documents--suggests 
that senior officials directly ordered the study team to figure out a 
way to make lock improvements seem cost-effective. Eventually, it did.
    Last week Sweeney filed a detailed request for an investigation 
with a Federal whistleblower agency, alleging that Corps leaders 
illegally manipulated the study's data to manufacture a rationale for 
construction. The officials deny the allegations; they say they did end 
up with different conclusions, but insist they only reassigned Sweeney 
because he was working too slowly.
    Still, at a time when pressure is building for the Corps to curtail 
its historic penchant for massive spending on environmentally 
insensitive projects, this dispute has cast new light on an apparent 
agencywide strategy to ``grow'' the Corps.
    From its modest origins as a Revolutionary War regiment, the Army 
Corps has expanded into a $12 billion Pentagon behemoth with 37,000 
employees. While it still handles engineering projects for the 
military, it is best known for reshaping the American landscape with 
locks, dams and other public works that the Corps itself acknowledges 
have damaged thousands of miles of rivers, many of them for barges that 
never arrived.
    These days the Corps is portraying itself as a reformed agency, 
``cleaner and greener,'' devoting more than one-fifth of its civil 
works budget to environmental restoration. But the paper trail of the 
Upper Mississippi study suggests the resilience of some agency 
traditions. Top officials ordered the study team ``to develop evidence 
or data to support a defensible set of . . . projects,'' and eventually 
rearranged the numbers so that they supported a case for construction. 
One memo candidly declared that if the economics did not ``capture the 
need for navigation improvements, then we have to find some other way 
to do it.''
    The agency is now poised to recommend doubling the size of five 
barge locks on the Mississippi above St. Louis, and maybe two more on 
the Illinois. Environmentalists believe the project could ravage one of 
America's most fragile ecosystems, including an Upper Mississippi 
wildlife refuge that attracts more visitors than Yellowstone Park. And 
the Corps, after conducting the analysis of the project, would get to 
build it as well.
    ``It's very sad that this study is becoming another 
embarrassment,'' says Corps research analyst Jeffrey Marmorstein, who 
worked on the study before and after it was taken away from Sweeney. 
``Unfortunately, the management of the Corps has lost all respect for 
unbiased analysis.''
    In fact, according to a memo summarizing a December meeting in 
Vicksburg, the agency's generals have announced a goal of ``growing the 
civil works program'' for the Mississippi Valley Division--the section 
in charge of the Upper Mississippi study--by $100 million a year for 5 
years. ``If that goal is met we are all going to be very busy,'' the 
memo said.
    ``To grow the civil works program, [headquarters] and the Division 
have agreed to get creative,'' the memo continued. ``They will be 
looking for ways to get [studies] to 'yes' as fast as possible. We have 
been encouraged to have our study managers not take 'no' for an answer. 
The push to grow the program is comma from the top down.
    ``That is the problem in black and white,'' said Tim Searchinger, 
an Environmental Defense Fund attorney who provided the memo, along 
with Sweeney's affidavit and other documentation of his complaints. 
``Planners at the Corps are told that no is not an acceptable answer.''
    Maj. Gen. Russell Fuhrman, the deputy commander of the Corps, said 
the agency's military leaders do consider themselves ``advocates'' for 
navigation projects that help move America's freight to market. In an 
era of budget surpluses, he said, the Nation should invest in water 
transportation just as it is investing in highways and airports. But he 
said the Vicksburg memo misinterpreted the leadership's goals: It wants 
to finish studies more quickly, not manipulate them to rubber-stamp 
construction projects.
    ``The longer it takes to get a project approved, the more it 
costs,'' Fuhrman said. ``So we want to cut through bureaucracy. But 
we're not talking about dummying up numbers.''
    But environmentalists say the Upper Mississippi study--which 
already has cost more than Kenneth W. Starr's investigations of 
President Clinton--is the best evidence yet that the Corps is still, at 
heart, a military-run engineering agency addicted to large projects. 
They say the study's fate recalls the famous 1889 advice by Mark Twain, 
the sage of the Mississippi, to the young Rudyard Kipling: ``Get your 
facts first, and then you can distort them as much as you please.''
``We'll Have to Work on a Story Line''
    Q=t*[(a-w)/(a-e)]n is a pretty complex equation. But the story of 
what happened to it is pretty simple.
    The story begins on the Mississippi and the Illinois, two of the 
once-rambling rivers the Corps has dammed, diked and dredged into 
placid barge canals over the last century. Unlike most of the 27 other 
Corps-constructed waterways, the Mississippi and Illinois are truly 
vibrant freight channels, floating tens of millions of tons of coal, 
oil and grain. In fact, barge tows sometimes encounter hour-long waits 
at the busiest locks, partly because standard 1,200-foot chains of 15 
barges must pass through the 600-foot locks in two shifts.
    In the transportation world, of course, time is money. So barge 
interests--including Washington-wired conglomerates such as ConAgra 
Inc., Cargill Inc. and Archer Daniels Midland Co.--helped persuade 
Congress to order a study of navigation improvements, hoping for locks 
that would accommodate 1,200-foot tows. Congress has always loved 
navigation projects, and the Mississippi--flowing through 10 states--
has a particularly mighty political base.
    To lead the federally mandated cost-benefit analysis, the Corps 
fumed to Sweeney, 48, an intense economist who joined the agency while 
still in graduate school in 1977. The bespectacled number-cruncher--and 
former college linebacker--has always received excellent job 
evaluations; despite his falling-out with Corps managers, his latest 
review calls him an ``exceptionally competent economist'' who is 
``highly committed to producing quality products.''
    That daunting equation is one of those products.
    Sweeney realized that the Corps' old economics models had glossed 
over the idea that when barge costs go up, shippers may not use barges 
as much. So Corps studies had consistently overestimated the barge 
traffic that lock-and-dam projects would attract, which had helped 
justify elaborate river-taming efforts that often seemed unnecessary in 
retrospect.
    Sweeney's more complex model avoided that problem, and it was 
heralded as a supermodel in reviews inside and outside the Corps. ``I 
tried as hard as I could to tear down Don's work, but it's brilliant,'' 
said Marshall University economist Mark Burton, who conducted one 
review.
    Sweeney concluded that for the next 50 years, most congestion could 
be relieved simply by building a few modest mooring facilities to 
promote ``industry self-help''--the already common practice of towboat 
operators helping each other pass through locks. He saw no need for 
major construction.
    In April 1998, Sweeney presented his preliminary results to Corps 
leaders such as Maj. Gen. Fuhrman then director of the civil works 
program, Maj. Gen. Phillip Anderson, Mississippi Valley division 
commander, and Col. James Mudd, Rock Island district commander. They 
were not pleased. In June just 3 months before the study's due date, 
Gen. Anderson transferred all economics questions to a new panel, 
demoting Sweeney to a mere ``adviser'' to the panel. Sweeney has not 
lost his job, but he has filed a whistleblower complaint with the 
Federal Office of Special Counsel, and recently was disciplined for 
insubordination.
    In an interview, Mudd described Sweeney as too much thought, not 
enough action. (Anderson was unavailable for comment.) ``He did good 
work, don't get me wrong,'' said Mudd, a firebrand of an officer who 
was a key planner for Gen. Norman Schwarzkopf during the Persian Gulf 
War. ``But there's a point where 'I'll-get-to-it-when-I-get-to-it' 
won't cut it. . . . We've been very careful to make sure we don't have 
a foregone conclusion, to make sure we're not cooking the books.''
    Pretty soon, though, the Corps' brass made it clear that those 
economics questions had a correct answer, and it wasn't the answer 
Sweeney had suggested. As Sweeney's boss in the St. Louis office 
pointed out in an e-mail: ``It's pretty clear to me where this is 
headed.''
    On Sept. 3, an official laid out the panel's new mission in an e-
mail: ``The team should determine an alternative . . . that appears to 
be the most likely to justify large-scale alternatives in the near-
term.'' And in a briefing on Sept. 23, Gen. Fuhrman declared even more 
forcefully that the ``well-being of the Midwest'' depended on new 
improvements.
    ``There is a need to improve the system,'' project manager Dudley 
Hanson wrote in a memo relaying Fuhrman's instructions to the panel. 
``If the demand curves, traffic growth projects and associated 
variables . . . do not capture the need for navigation improvements, 
then we have to figure out some other way to do it. . . . We need to 
develop a rationale for taking this relatively more subjective approach 
to our analytical process.''
    The memo's ``Guidance'' section was even more explicit about 
Fuhrman's call for preordained results: ``He directs that we develop 
evidence or data to support a defensible set of capacity enhancement 
projects. . .
``The rationale should err on the high side.''
    Fuhrman said in an interview that while he did have a ``gut 
instinct'' that improvements were necessary, he never ordered anyone to 
devise a rationale to build them. He said Hanson, who recently retired 
and could not be reached for comment, must have misunderstood him. But 
in another e-mail, Hanson had no doubt what Fuhrman meant: ``This overt 
advocacy role, to me, is a new departure. We'll have to work on a story 
line. . . . We will need corporate solidarity when we go back to our 
publics with this more aggressive advocacy position.''
    Mudd also insisted that the Corps has ``bent over backward to take 
a balanced approach,'' and noted that barge interests have complained 
furiously about the agency's deliberations. Christopher Brescia, 
director of MARC 2000, the main navigation lobby in the Midwest, 
agreed, describing the Corps as too slow and too conservative, although 
he did say the agency had ``come a long way since they got Sweeney off 
the economics team.''
    But Mudd added that he was ``very careful not to push anyone to do 
near-term improvements, large-scale improvements, whatever.'' In an 
Oct. 2 memo clarifying Fuhrman's commands to the economics panel--a 
memo Mudd now says he can't remember writing--he seemed to do just 
that.
    ``MG Fuhrman has clearly stated that the Corps has the 
responsibility as the Federal Government's advocate for the inland 
waterway system,'' he wrote. ``To help in the execution of this 
responsibility, you will develop the economic component of the case for 
a recommendation that includes near-term improvements, recognizing that 
the Nation is better served by improvements that err on the large-scale 
side than by actions that err on the underdeveloped side.''
In the ``N.'' a Way to Say ``Yes''
    Then it was just a matter of figuring out how to err. And it didn't 
take an economist to see that

    Q=t* [(a-w)/(a-e)]n was a good place to start.

    The key term in all that gobbledygook was ``n,'' the variable that 
Sweeney designed to account for alternatives to barge transportation. 
The higher the value of ``n,'' the lower the benefits of improvements. 
Sweeney computed the main n value at 2. Burton later concurred. Under 
pressure from above, Richard Manguno, the new economics team leader, 
reluctantly reduced n to 1.5. But that was still too high to justify 
lock expansions, and he refused to go lower without a command.
    Ultimately, according to Sweeney's affidavit and a source who was 
present, he got one.
    On May 5, 1999, Maj. Gen. Anderson and other Corps officials held a 
closed-door ``economics summit'' with Brescia and other industry 
leaders, including representatives from ConAgra, Cargill and American 
Commercial Barge Lines. ``I think we helped them understand the 
sensitivity of all this,'' Brescia recalled. Immediately after the 
meeting, an aide to Anderson asked Manguno what n would have to be to 
Justify lock expansions.
    I've already figured that out, interjected Mudd. It's 1.2.
    Three weeks later, Mudd called Manguno. N. he declared, was now 
1.2.
    The new n was apparently grounded in a basic math error, but that 
wasn't the only effort by the Corps to exaggerate benefits and 
understate costs, Sweeney charged. There were others, and all were 
needed for lock expansions to pass muster.
    In fact, the day after the metamorphosis of n, a Corps ``study 
update'' announced a sudden new benefit: Lock expansions would preempt 
the need for renovations in 201 5--even though an earlier Corps 
analysis had found there would be no need for renovations until at 
least 2033. The same update also included a sudden new cutback in 
costs: The estimate for overruns was chopped from 35 percent to 25 
percent. Earlier, Corps officials had inflated the benefits of lock 
expansions by assuming that tows would no longer use much self-help, 
Sweeney argued.
    Even these changes barely pushed the predicted benefits past the 
costs, according to Corps documents. And the Corps is still basing its 
entire case for improvements on an forecast of barge growth that has 
proven tremendously overoptimistic over the last several years.
    So on June 29 Sweeney sent out a detailed memo noting all these 
discrepancies, suggesting there might be ``an appearance of cooking the 
economic books.'' Another economics panel member, Wesley Walker, 
submitted several of his own objections the same day.
    On July 4, at Mudd's recommendation, Anderson disbanded the panel. 
``Thank You to everyone for helping to get the study to where it is 
today,'' his memo declared. ``The team effort has had support from many 
individuals. Your contributions are appreciated.''
Competing Visions of ``Green''
    Flash back a moment to 1929, long before Don Sweeney was born.
    Maj. Charles Hall, the chief Corps engineer in the Rock Island 
district, had conducted an exhaustive study of a plan to build new dams 
on the free-flowing Upper Mississippi, and had concluded it wouldn't 
justify the economic costs. His superiors had overruled him. So Hall 
raised a new issue in a speech at the American School of Wildlife, 
arguing that locks and dams would ``radically change'' the river's 
habitats. ``The public can properly demand that the biological effects 
of a proposed movement be stated before it was adopted,'' Hall said.
    At the time, that was a radical notion. The barge-friendly 
Minneapolis Journal denounced these ``gratuitous opinions,'' wondering 
``why Major Hall should worry about flora and fauna at all.'' A 
Minnesota senator fumed that ``it would be unfortunate and against 
public policy if collateral matters are permitted to interfere. `` Hall 
was quickly relieved of his duties on the study.
    Seventy years later, Sweeney suffered a similar fate. So has the 
Corps changed?
    Today no one dares to suggest publicly that nature should be a 
``collateral matter,'' and top Corps officials insist it is a high 
priority. The agency's spending on environmental projects has 
quadrupled since 1992, highlighted by a $33-million-a-year program to 
revive the Upper Mississippi's health. The Corps is pursuing several 
huge restoration projects, most notably a bold replumbing of the 
Florida Everglades.
    At the same time, though, critics say the agency continues to 
pursue huge, traditional projects that could endanger wetlands and 
wildlife, from a navigation canal in Louisiana to a pumping station in 
Mississippi to port-dredging efforts all along the Atlantic coast. A 
coalition of environmental groups along the Gulf of Mexico recently 
published a report titled ``Destruction by Design: The U.S. Army Corps 
of Engineers' Continuing Assault on America's Environment.'' Taxpayer 
groups continue to blast the agency as a money sinkhole.
    There is a battle raging for the soul of the Corps, in part pitting 
civilian leaders who want to nudge the Corps toward a more 
environmental outlook against military leaders who tend to respond to 
traditional constituencies in the barge, farm and construction 
industries. The agency is an odd hybrid in the Pentagon chain of 
command, staffed almost entirely by civilians, run predominantly by 
uniformed of ricers. A civilian assistant secretary of the Army is 
supposed to set civil works policy, but most of the actual engineering 
and analysis gets done in 49 division and district offices commanded by 
military personnel.
    Now the war is playing out on the Upper Mississippi. A top Corps 
general did order a review of the lock construction study last week, 
around the time Sweeney filed his affidavit. A decision is expected 
next month, and outside observers think it will say a lot about the 
future of the Corps.
    Environmental groups believe the extra barges lured by lock 
expansions would grind up more fish uproot more vegetation, silt in 
more side channels and further erode shorelines. They also warn that if 
the Corps builds these improvements, relieving congestion at some 
locks, it will create new bottlenecks at other locks, fueling demands 
for more improvements. But even though a 1996 Corps poll found that 
``environmental considerations are people's biggest concerns'' for the 
river, the agency has released preliminary dataJustifying seven lock 
expansions.
    ``This is a real test for the Corps: Are they going to rubber-stamp 
more corporate welfare, or are they going to look out for the river for 
a change?'' asked Dean Rebuffoni, a Sierra Club leader in Minneapolis. 
``I hear the green rhetoric, but I don't see the action.''
    Fuhrman insists the Corps is trying to strike a balance. He 
acknowledges that the Corps wants to support the navigation system, 
just like the Department of Transportation wants to support the 
transportation system. But he says the agency is committed to the 
environment as well, and recognizes its ``awesome responsibility'' to 
keep its analyses on the level.
    ``I would be the last person to advocate an increase in capacity 
for the sake of increasing capacity,'' he said. ``I think we've been an 
honest broker.''
Controlling the Flow
    Since March 1993, the Army Corps of Engineers has been studying 
proposed navigation improvements in the Upper Mississippi basin. The 
Corps is expected to recommend major expansions of five locks on the 
Mississippi, and perhaps the Peoria and LaGrange locks on the Illinois 
River. The improvements would ease barge congestion, but 
environmentalists fear they would damage one of America's most fragile 
ecosystems, including a host of wildlife refuges.
                                 ______
                                 
             [From Feedstuffs Newspaper, December 15, 1997]
                      South American to Push U.S.
                           (By Michael Howie)
    Improvements being made in the river transportation system in South 
America are expected to allow Brazil, Argentina and other countries in 
the region to reduce costs for exporting grains and other goods that 
compete with the U.S. In a teleconference Dec. 9, members from the 
transportation task force of the National Corn Growers Assn. (NCGA) 
said river transportation improvements being made on the Parana River 
in Argentina are going to allow the cost of corn exports from the 
country to be reduced significantly, and unless the U.S. improves its 
transportation system, particularly the Mississippi River, the 
competitive edge the U.S. has will be reduced or eliminated.
    The trip to Argentina was ``a real eyeopener. said Glen Moeller, 
chairman of the task force. Producers in Argentina are ``on par with us 
in terms of new technology,'' he said. adding that they ``are serious 
players in the world economy'' when it comes to grain exports.
    So far, Argentina has dredged more than 200 miles of the Parana in 
order to allow Panamax vessels, which can hold 50.000 metric tons of 
grain, to cruise up the Rio da la Plata (near Buenos Aires, Argentina) 
to the Parana River to reach Rosano and even further north to Santa Fe, 
Argentina. Improvements are also being made more than 1,500 miles 
upstream from there--through Paraguay and into Brazil--that will allow 
barge trafflC to move downstream to the ports and soybean crushing 
plants near Santa Fe and Rosario.
    Tim Tierney, director for international operations for Latin 
America with the U.S Feed Grains Council, said Panamax vessels cannot 
currently be filled completely at these ports became tbe depth of the 
river has only been dredged to 32 ft. (The ships are topped off further 
downstream.) Dredging is continuing, however, with plans to go to 36-38 
ft. which would allow the ships to be completely filled in Rosario or 
San Martin (near Sante Fe), saving $4-5 per metric ton in freight 
costs, said Tierney.
                                 ______
                                 
                      [From World Grain, May 1997]
                   Improving Brazil's Infrastructure
market liberalizations, economic stability foster port, transportation 
            projects to facilitate soybean movement, exports
    The Brazilian private-sector, in conjunction with Brazilian Federal 
and state governments. is pushing ahead to develop and complete a 
number of infrastructure projects that will generate major 
transportation cost efficiencies and make Brazilian soybeans and 
products more compelitive in international markets.
    The success of the Brazilian government's economic stabilization 
and liberalizMion plan, in place since 1994, has been a major factor 
behind the projects, In the past 2 years, sharply lower inflation 
increases in gross domestic product and privatization have encouraged 
large investments. If economic growth and stability continue, further 
investments. both national and foreign, are expected to result in 
additional improvements to railways, waterways and port facilicics.
    In the past year, World Grain has published several articles 
related to infrastructure developments in Brazil (see March 1996, page 
26; October 1996, page 46: and March 1997, pages 45 and 56). Recently, 
the U.S. agricultural attache's office in Sao Paulo released a report 
providing additional details on existing and planned infrastructure 
projects.
    The Northwestern Corridor project is spearheaded by Maggi Seeds and 
Hermasa Amazonia Navigation, S.A. This development enables soybeans 
grown principally in northern Mayo Grosso, especially in the Sapezal 
and Campos de Julho municipalities, to be exported via the Madeira and 
Amazon Rivers instead of through the Center-South ports of Paranagua 
and Santos.
    The attache report described the Northwest Corridor project, also 
known as Projeto Hermasa as ``extremely impressive in many different 
respects.'' Maggi Seeds estimates that savings on freight should be 
about U.S. $30 per tonne of soybeans via this new route (see adjacent 
article),
    This project involves investment in a road in northern Mato Grosso 
and in soybean silos and loading platforms an Porto Velho. Porto Velho, 
the capital of the state of Rondonla, is located on the Madeira River, 
one of Brazil's principal rivers.
    Soybeans grown in northern Mato Grosso will be trucked and loaded 
onto barges at the port.
    From there, soybeans will be shipped down the Madeira River to the 
port of Itacoatiara on the Amazon River. At Itacoatiara a floating port 
has been installed to receive both barge traffic and ocean-going 
vessels of 35,000 to 60,000 dwt capacity.
    Soybeans that are unloaded from barges will be stored in 90,000-
tonne silos until they are ready to be discharged for export. All 
equipment used in this project is top quality, according to the attache 
report.
    The building of barges and pushers that will be used along this 
waterway is almost completed. The barges and pushers have been adapted 
to the difficult navigational conditions of the Amazon and Madeira 
rivers.
    The Northwestern Corridor project was scheduled to become 
operational in March, and 300,000 tonnes of soybeans are expected to be 
shipped out through this walkway in the 1997 marketing year. As the 
barge and pusher fleet is expanded, Hemasa Navigation predicts that the 
volume of soybean exposes will increase rapidly, hitting 1 million 
tonnes by 1999.
    Outside of northern Mato Grosso, the project also will have an 
impact on soybean production in the states of Rondonia and Arnazonas. 
The government of Amazonas recently announced that it will invest more 
than U.S. $15 million to bolster agricultural development in the 
municipality of Humaitas in the southern part of Amazonas state.
    Agricultural officials already are carrying out field trials with 
soybean varieties that can adapt to tropical climates. According to 
press reports, the municipality of Humaita has 100,000 hectares of 
arable land, although some sources place the potential at higher 
levels.
    The Northwestern Corridor project also could enable viable soybean 
production in outlying Roraima, which borders Venezuela and Guyana to 
the north of Amazonas. Some successful soybean growers from northern 
Mato Grosso have visited Roraima and assert that the area contains 
plentiful savannah-like land.
    This land is within a reasonable distance from the port of 
Caracarai on Rio Branco, which feeds into the Amazon River. Soybeans 
then would be shipped to Itacoatiara for export. For production in 
Roraima to become viable, infrastructure investments at Caracarai will 
be required, the Rio Branco will need to be mapped, and the soils would 
need to be limed to enable soybean plantings. (According to news 
reports in late March, the Ministry of Agnculture received approval for 
a program that would encourage commnercial banks to finance the liming 
of agricultura land in exchange for certain concessions from the 
Central Bank.)
    Other future developments linked to the Northwestern Corridor 
project include the possible construction of soybean crushing 
facilities in Itacoatiara and a fertilizer mixing plant in Porto Velho, 
whose inputs would be transported to Porto Velho as part of return 
barge traffic.
    Given the efforts made by Maggi Seeds and Hermasa Navigation 
coupled with the apparent support trom the state governments of 
Amazonas and Rondonia, the Northwestern Conridor project should be 
successful and will have a significant impact on the agricultural 
economy of northern Brazil, the attache report said.
    Center Corridors. The Center-North transport corridor begins in 
western Mato Grosso and uses river, road, and railway systems to ship 
soybeans to Sao Luis, Maranhao, in the Brazilian Northeast. Soybeans 
first go up the Manso (Rio das Mortes) and Araguaia rivers to Xambioa 
in the state of Tocantins.
    From there, soybeans are transported by truck and rail to the ports 
of Ponta da Madeira and Itaqui in Sao Luis. Some soybeans have already 
been exported out of Mato Grosso via this transpotation route, and this 
route should stimulate further soybean production in western Mato 
Grosso, Tocantins and Maranhao.
    The Center East corridor links the savannah areas of the Center-
West with the ports of Vitoria and Tubarao. Investment needs to be made 
in the railway system to make this corridor viable, although a 
functioning railway already exists in part of this corridor between 
Tubarao and Belo Horizonte.
    According to some accounts, this corridor serves an area with a 
potential of 13 million hectares of arable land. Currently, only 1.5 
million hectares of this area are in production.
    Another project involves tbe Parana River. This waterway project 
would begin in Caceres, in southwestern Mato Grosso, and would go along 
the Parana River to the port of Nueva Palmira in Uruguay. The project 
reportedly has been on paper for 10 years, but recently, its first 
phase--the dredging of the river bottom in Santa Fe, Argentina--was 
initiated.
    The Patina River waterway, when it is completed, will benefit 
agricultural interests, especially soybean growers, in countries of the 
Mercosul trade pact. Some analysts believe that soybeans from the 
Center-West that are shipped via this waterway will benefit from 
transportation costs up to 30 percent less than those associated with 
trucking product to Paranagua.
    Improvements in railway systems also need be realized to make 
Brazilian soy beans more competetive in the international market. The 
privatization of the railways will lead to major cost efficiencies, 
some of which will be reaped this year.
    Investment in port infrastructure. especially that of Paranagua, is 
also critical in order to reduce the shipping delays that were so 
common during the 1996 season: reportedly, 30-da delays for Panamax 
vessels were not uncommon during May-July 1996. As more ``Out-post'' 
ports become operational, however, Paranagua and other major soybean 
exporting ports of the Center-South will feel less pressure.
    Senator Voinovich. Senator, you don't feel strongly about 
this issue?
    [Laughter.]
    Senator Bond. If I were to get worked up, Mr. Chairman, it 
would be more compelling.
    Senator Voinovich. Without objection, we will bring in your 
statement and also the newspaper articles that support it.
    We would also like to have your copies of your charts 
submitted also, General, if you will.
    I think that what we're talking about here is an issue of 
integrity of the Corps. I think the allegations that were made 
ought to be met specifically so that the public has an 
explanation. The memorandum, for example, that said we've got 
to get on this thing because certain shipping interests want it 
to get done, can be either an innocent or it can be something 
that people should be concerned about.
    I can tell you, for example, we want to go forward with the 
Sioux Locks in my neck of the woods. About 75 percent of all 
the goods that come into the Great Lakes ports comes through 
the Sioux. There might be a memorandum out there to the Corps 
saying the Great Lakes shippers want this thing going and 
they're hot on it and if you looked at that by itself, you'd 
say the reason they're doing this is because of the Great Lakes 
shippers. The fact is it is something that is very important to 
them.
    I think that you have to take some of these things in the 
context that you find them. I think it is also important that 
you need to be careful about some of those things that are in 
writing about why we're doing things and so forth so if 
somebody gets hold of it, then perhaps can take it out of 
context and make it into something conspiratorial rather than 
something that is rather innocent.
    I think it's also important that the issue of the 
methodology that you're using is cleared up. Secretary 
Westphal, you mentioned the Red River and so forth. The bottom 
line on the Red River is there was a Member of Congress who 
really wanted to get that thing through. I think the Army Corps 
of Engineers recommended that go through and in spite of the 
Corps of Engineers, it got through because of political clout, 
like a lot of things around here--pork barrel, or you want to 
say that. You guys get blamed for it or things change.
    Let's take the Everglades. Fifty years ago, the idea was to 
drain the swamp for development. Today, we realize how 
important the Everglades are to the ecology of Florida and now 
we're trying to make up for Corps projects in the past. No one 
was looking down the road to see how important this was. I 
think Senator Bond made the point, how do you look down the 
road 45 or 50 years on some of these things. It is hard to get 
real specific but you do the best that you can. What the public 
wants is to know that it is above board. You take the best 
information that you have and you try to do the best job you 
can and make sure nobody can say the system you're using is 
fixed.
    The other thing is that I don't object to your talking 
about the needs and I'd rather have it come from the bottom up, 
not from the top down, this is what we need. The need should 
come from these are the needs that need to be met. The public 
should know that.
    There are a lot of unmet needs in this country. We talk 
about this budget surplus and so forth. Through my auspices, 
I'm going to try to find a list of all the things we need to do 
in this country to meet the needs of our Nation. We're talking 
about surpluses, tax reductions and so forth. There's a 
tremendous backlog of things out there that we haven't touched 
and we ought to have them on the table when we're making these 
considerations in regard to whether we're going to use the 
surplus for this or that or reduce taxes, or what have you so 
that we can make an honest evaluation of what we ought to be 
doing for this great Nation of ours.
    The other thing is, Mr. Chairman--and you're the chairman 
of the main committee--I think we should set down some criteria 
in terms of these WRDA bills so that it doesn't become a 
gigantic pork barrel. This last WRDA bill, I'll tell you, it 
was loaded. Part of it, and I probably shouldn't say this, came 
from the House. Everybody wanted a project in there. We ought 
to have some criteria that says if it doesn't meet this 
criteria, we're not going to authorize it in the Senate. I 
don't care whether the House wants to do it or not. We'll hold 
up the whole thing but we can't do everything. That's part of 
the problem. We've got to get down to priorities.
    So I just want to say to you that you've got some serious 
allegations here. I expect you to get back to the subcommittee 
and main committee and explain what you're doing. I think 
you've done a fairly good job today to try and explain it but 
we need more information. We will be submitting questions in 
writing to you that we'd like to have responded to.
    Mr. Secretary?
    Secretary Westphal. Mr. Chairman, the Secretary also is 
very concerned about this, so he has ordered that there be an 
outside and independent review of the economics of this 
particular study on the upper Mississippi. Even before these 
articles, I think the Chief had already ordered a review of the 
study at headquarters and that's underway. He should have 
something on that fairly soon.
    The Secretary will announce probably in the next few days 
who will do that outside, independent review of this particular 
study, but the hope is that as we look at it, an outside, 
independent review will show the process that was used by the 
Corps and will determine that appropriate methods were used.
    As Senator Bond mentioned, we're not sure that economists 
will agree on economic assumptions about any model, but we'll 
get to the bottom of that. The Secretary is very concerned 
about it and has ordered that. He will be announcing that in 
the next few days I believe.
    Senator Voinovich. Senator Smith?
    Senator Smith. Mr. Chairman, first of all, let me associate 
myself with your remarks regarding any pork projects that may 
turn up in these WRDA or any other bills. We should look at 
each project carefully.
    The statement was made how do we look down the road 50 
years? My advice is very carefully and to have the opportunity 
to make adjustments. I think the proposal which you're aware 
of, General Ballard, on the Everglades is one that does take 
that precaution. It's a 35 or 36-year plan. We have the 
opportunity to look carefully at it. If something is not 
working, we can stop, we can adjust and I think that's the way 
we should do it.
    I also want to say that in response to some very direct 
questions, you answered them. I understand what work product is 
and I understand how memoranda are prepared and to me, you gave 
an acceptable answer to that. I just want you to know that. No 
one, certainly not me, is challenging your integrity. I've 
known you for a long time--nor your's either. I associate 
myself with Senator Bond's remarks on that.
    The only thing is as I see this, reading the article and 
hearing your testimony today, and looking at the backlog, let 
me make an observation and deal with it however you wish.
    I think when we know there is a backlog of projects and you 
hear terms about growth, there is justification for growth in 
certain areas. Senator Bond is correct. Some of the waterways 
and the problems we have, including the Everglades, there are 
problems out there and they are not in the backlog. They're in 
the front log, if you will. They've got to be dealt with in the 
future.
    I think the way to deal with them is to be realistic. Let's 
take a look at this backlog. My information--I'm not 
challenging you but you might want to take another look--is 
that we don't have non-Federal sponsors for every one of those 
backlogged projects. If you could provide me or the committee 
with a list of that, I'd appreciate it.
    Let's take a look at those because any of that $30 billion 
that we can get out of there that is not justified, gives us 
the opportunity to discuss openly and honestly new projects 
that are worthwhile, whether the Missouri or the Mississippi, 
the Mississippi Delta or the Everglades, whatever it is. We 
need that kind of information before we can proceed, Senator 
Voinovich, with WRDA and other new projects.
    You might be able to turn this into a positive. It's one 
news article but the way I view it, I don't think we should be 
afraid to say that there are new initiatives and new needs that 
the Army Corps might have to do. I'm sure that's true, but 
let's look at the old stuff that maybe is not worthwhile 
anymore and maybe we can get a balance in there and work this 
through. We'll work with you to do that.
    General Ballard. Thank you very much, sir.
    Senator Voinovich. I appreciate your being here today and 
look forward to the responses to our written questions.
    Mr. Chairman, I think perhaps in the next month or so it 
might be good to revisit this with a hearing but beyond just 
the issue of the credibility of the process, to get into some 
of the questions that we're talking about today. What's the 
methodology of building on what the chairman has said about 
determining the projects that are on the list that may not be 
real.
    I'd also be interested in your recommendations, both the 
Corps and the civilian side, on a criteria that ought to be 
used in judging WRDA projects. When we were in Florida and the 
recommendation of the Everglades plan is $800 million worth of 
sewage treatment facilities that were there. I said to the EPA 
Director, Carol Browner, ``That sounds to me like not WRDA 
money; it sounds more like money that would come from the State 
Revolving Loan Fund for sewage treatment facilities.'' She 
said, yes, that's the case. We need to differentiate some of 
these projects and not load them all into the WRDA bill.
    In addition, I think a candid presentation about what your 
unmet needs are so that we can identify what they are and 
you're not being asked to do the impossible, and to give us a 
better idea of what we're talking about--$1.3 billion a year 
out of energy and water. Your O&M money, I'd also like to know 
your thoughts about the earmarking of some of the O&M money 
that you use so that you don't have the discretion to do some 
of the things. I'd like a real candid presentation. We'll get 
into the process and so forth and give you a chance to talk 
about the allegations in the newspaper and so forth, but just 
as important is to really get a handle on what we're talking 
about here so that this committee and other Members of Congress 
understand just what we're confronted with in this very 
important area to our country.
    Secretary Westphal. Mr. Chairman, I couldn't agree with you 
more. You've hit upon a very important point and I think it's 
the point of all these articles, it's the reason why we have to 
do this independent assessment.
    I personally, and I think the Administration also, do not 
have much of a liking for projects that come to you that don't 
have a completed Chief's report, you don't have the study in 
front of you that you can determine whether or not that project 
meets the need for an authorization and appropriations.
    So I think the study process is critical to giving you the 
guidance, to giving the White House the guidance when it 
proposes something to you and in turn, give you the guidance 
that you need to make a decision on whether this project is 
really ready to go forward, ready to receive your authorization 
to go forward, ready to receive your appropriations.
    There is a growing interest out there. I know the 
appropriators get very upset about this. There is a growing 
interest in getting authorizations and appropriations before 
things have even been studied. I think what you're saying is 
exactly on the money.
    Making sure the integrity of the process is there, the 
study process, and that we can rely on these reports, both us 
in the policy world and you in the congressional world, is 
critical.
    Just a little technical correction. On the Everglades, the 
treatment, that's actually not a State Revolving Fund issue 
because that's the creation of wetlands to treat this water 
before it goes back into the Everglades. So it is really an 
environmental restoration of wetlands to use them as a filter 
for moving the water across. The State Revolving Fund wouldn't 
apply there.
    Senator Voinovich. Thank you.
    We're going to leave open the record for the next couple of 
days for other members of the committee to submit their 
statements and also their questions.
    We look forward to seeing you again.
    [Whereupon, at 11:40 a.m., the subcommittee was adjourned, 
to reconvene at the call of the chair.]
    [Additional statements submitted for the record follow:]
 Statement of Hon. Joseph W. Westphal, Assistant Secretary of the Army 
                             (Civil Works)
Introduction
    Mr. Chairman and members of the subcommittee: Good morning. Thank 
you for the opportunity to speak to you today on the fiscal year 2001 
Budget and priorities for the Army Civil Works program. I am pleased to 
come before you again and say that the President's fiscal year 2001 
Budget funds a strong program for Civil Works. The request is 
consistent with the funding levels enacted by the Congress in recent 
years and is consistent with the President's overall domestic 
priorities, his commitment to a balanced budget, and his goal of 
protecting Social Security and meeting the challenges of the 21st 
century.
    The President's Budget for the Army Civil Works for fiscal year 
2001 includes nearly $4.1 billion for the discretionary program, 
comparable to the amount appropriated for the Civil Works program in 
fiscal year 2000, and $160 million above last year's budget proposal.
    I must emphasize that the Administration appreciates the important 
commitments made by our non-Federal sponsors. The commitment to cost 
share Army Civil Works projects demonstrates the value of the Civil 
Works program to our local sponsors. With the non-Federal contributions 
& other funding, the total funding for the Army Civil Works program in 
the fiscal year 2001 Budget is nearly $4.5 billion.
Harbor Services User Fee
    Like last year, a significant portion of the Civil Works budget is 
based on enactment of the Harbor Services User Fee proposed legislation 
that was transmitted to Congress last year. This new user fee would 
replace the Harbor Maintenance Tax (HMT), a portion of which was found 
unconstitutional, and would collect about the same total amount of 
revenue as would have been collected under the HMT prior to the Supreme 
Court's decision.
    The new user fees would make up $950 million of the fiscal year 
2001 Budget ($700 million for maintenance and $250 million for 
construction) and would enable commercial harbor and channel work to 
proceed on optimal schedules.
New Initiatives and Water Resources Investments
    I am very pleased to announce two new Army Civil Works initiatives 
in the fiscal year 2001 Budget: watershed/river basin planning and 
recreation modernization.
Watershed/River Basin Planning
    It has been nearly 20 years since the last major effort was 
initiated to understand and assess the complex relationships among 
various water resources problems and opportunities. On a river-basin 
wide basis, the Federal Government needs a comprehensive approach to 
water resources to work effectively with States, counties, Tribes, and 
river basin authorities in assessing today's competing water uses.
    The Army's Civil Works fiscal year 2001 Budget commits $2 million 
to initiate four broad river basin studies. These studies, which the 
Corps will coordinate with other Federal agencies and regional 
stakeholders, will adopt a holistic approach and include multi-
jurisdictional and trans-national considerations in resolving water 
resources issues. Two of these, the Rio Grande River Basin and the 
White River Basin in Arkansas, would proceed under the authority of 
section 729 of the Water Resources Development Act (WRDA) of 1986. The 
other two, the Yellowstone River Basin, Montana, and the Missouri and 
Middle Mississippi River Basins, would proceed under specific 
authorizations.
Recreation Modernization
    The Corps of Engineers is responsible for 4,340 recreation areas at 
456 lakes in 42 States. These recreation areas host 377 million 
visitors annually.
    I am very pleased that $27 million is included in the Civil Works 
fiscal year 2001 Budget to initiate the Recreation Modernization 
Program, which will replace or rehabilitate facilities at some of the 
2,389 recreation areas that the Corps of Engineers manages directly. 
Most of the facilities at Corps managed recreation areas were 
constructed in the 1960's and 1970's. The combination of heavy use, 
lack of routine maintenance, and changes in visitor needs has caused 
significant deterioration of recreation facilities and the natural 
resource base at some of our lakes.
    The $27 million in the fiscal year 2001 Budget is to initiate 
implementation of this program. We hope to modernize about one half of 
the Corps managed recreation areas over the next 5 to 10 years. These 
improvements include upgrading facilities, installing more family 
oriented facilities, and improving general access to water-related 
recreation opportunities.
Challenge 21
    The fiscal year 2001 Budget includes $20 million to initiate the 
Challenge 21 Riverine Ecosystem Restoration and Flood Hazard Mitigation 
Program authorized in WRDA 1999. This initiative expands the use of 
nonstructural flood hazard mitigation options and restoration of 
riverine ecosystems to allow natural moderation of floods and provide 
other benefits to communities and the environment. Challenge 21 will 
create partnerships with communities and create a framework for more 
effective coordination with key agencies to develop comprehensive flood 
damage reduction solutions, while restoring natural values of flood 
plains and wetlands.
New Water Resources Investments
    The fiscal year 2001 Budget for the Army Civil Works includes $82 
million for new investments with a total cost of $1.6 billion. Of that, 
$410 million will be financed directly by non-Federal sponsors 
(including lands, easements, rights-of-way, and relocations). The 
Federal share is $1.2 billion.
    In addition to the four comprehensive studies and two new programs 
that I noted earlier, the fiscal year 2001 Budget includes four new 
surveys, one special study, one new PED start, and 12 new construction 
starts. The new construction starts include:
      2 environmental restoration projects;
      2 commercial navigation projects;
      4 flood damage reduction projects;
      1 shore protection of critical environmental resources;
      2 major rehabilitations, and
      1 deficiency correction.
Construction Program
    The fiscal year 2001 Budget for the Army Civil Works Construction 
General program is $1.35 billion. Of that, $250 million would be 
derived from the Harbor Services Fund, and would be used to construct 
port related projects. As I noted before, under the Administration's 
Harbor Services User Fee, these projects would proceed at optimal 
rates. This will enhance the competitiveness of our Nation's ports and 
harbors.
Operation and Maintenance
    Our overall funding for the Operation and Maintenance, General, 
account is very strong $1.85 billion. This demonstrates the 
Administration's commitment to maintaining our existing infrastructure, 
much of which is aging and requires greater upkeep. Of the $1.85 
billion, $700 million would be derived from the Harbor Services Fund. 
In addition to these funds, operation and maintenance of hydropower 
facilities in the Pacific Northwest will be directly financed by a 
transfer of approximately $108 million from Bonneville Power 
Administration revenues, pursuant to an agreement signed 3 years ago.
General Investigations Account
    The Budget for the Civil Works study program is $138 million. This 
is comparable to last year's request and is consistent with our plan to 
stabilize the Civil Works budget in the future. There is a large amount 
of construction work waiting for funding--more than the funds we can 
reasonably expect in the future. The study program feeds this pipeline 
of construction work. This budget keeps project study funding at a 
lower level, in order to reduce the backlog of potential construction 
projects that are beyond our capacity to budget within a reasonable 
timeframe. Once the backlog of costly projects is worked down somewhat, 
then we expect to resume funding for studies at a higher level.
    We believe that keeping study funding at this level is the right 
thing to do for our local sponsors, who expect timely construction of 
projects, once studies are completed and the projects are authorized.
Economy and the Environment
    The Administration is committed to the traditional program of 
missions of improving our navigation and transportation system, 
protection of our local communities from floods and other disasters, 
and maintaining and improving hydropower facilities across the country. 
In addition, in recent years, the Corps' responsibilities increasingly 
have expanded to include the restoration of aquatic and wetland 
ecosystems.
    Environmental programs make up about 22 percent of the fiscal year 
2001 Army Civil Works budget or more than $890 million. The 
environmental programs of note are in the following areas. There is $91 
million for the Columbia River Fish Mitigation program in the Pacific 
Northwest; $158 million for the ongoing effort in south Florida to 
restore, preserve and protect the Everglades; and $468 million for 
other ongoing environmental protection and restoration activities and 
projects. This includes $28 million to fund our ongoing environmental 
restoration continuing authorities programs (Section 204, the 
Beneficial Uses of Dredged Materials program, Section 206, the Aquatic 
Ecosystem Restoration program, and Section 1135 Project Modifications 
for Improvements of the Environment). This funding will allow us to 
implement projects to create and restore aquatic and wetland habitats 
and to modify Civil Works projects to reduce adverse impacts on the 
environment.
    FUSRAP, the Formerly Utilized Sites Remedial Action Program, is an 
environmental cleanup program that was transferred by Congress from the 
Department of Energy to the Army Civil Works program in the fiscal year 
98 Appropriations Act. We are continuing the implementation of needed 
clean-up of contaminated sites. This year's budget includes $140 
million for this program. This amount will be supplemented by the 
approximately $10 million that is expected in fiscal year 2001 from a 
Principal Responsible Party settlement reached at one site.
Regulatory Program
    The Army Civil Works Regulatory Program is funded at $125 million 
to ensure that we continue to provide effective and equitable 
regulation of the Nation's wetlands. Through the Regulatory Program, 
the Army Civil Works is committed to serving the public in a fair and 
reasonable manner while ensuring the protection of the aquatic 
environment required by laws and regulations. In fiscal year 1999, the 
Regulatory program authorized over 90,000 activities in writing, the 
most in any year, and over 90 percent of all actions were authorized in 
less than 60 days. The President's budget will ensure that this level 
of service is maintained. We will also continue to pursue important 
initiatives as part of the regulatory program. Our regional and 
nationwide general permits help streamline the regulatory process. We 
have established a full administrative appeals process that will allow 
the public to challenge permit decisions and jurisdiction 
determinations without costly, time-consuming litigation.
    Under the Regulatory program, we are also active in the preparation 
of Special Area Management Plans (``SAMPs'') to address development in 
environmentally sensitive areas. In particular, the Corps has been 
asked to chair a task force to work with the Environmental Protection 
Agency and Riverside County, California in the development, funding, 
and implementation of a SAMP for the Santa Margarita and San Jacinto 
watersheds.
    Again this year, we are proposing to undertake a revision to the 
Regulatory User Fee, which has not changed since 1977.
Conclusion
    In summary, the President's fiscal year 2001 budget for the Army 
Civil Works program is a good one. It demonstrates a commitment to 
Civil Works, with a strong program of new construction, a plan to solve 
the constitutional problem with the existing Harbor Maintenance Tax, a 
firm commitment to maintain our existing infrastructure, increased use 
of Civil Works' environmental restoration expertise, and support for 
our ongoing missions.
    Thank you.
                                 ______
                                 
 Responses by Dr. Joseph Westphal to Additional Questions from Senator 
                               Voinovich

    Question 1. There is a current backlog of $30 billion in Federal 
funds to complete authorized Corps projects which have received design 
or construction funding. This does not include the Federal share of the 
$5.6 billion in new projects authorized in WRDA 99 or the new projects 
we will be considering in WRDA 2000 which include a proposed 
authorization for $1.7 billion for Everglades restoration and $1.8 
billion for deepening New and New Jersey Harbor. Compared to this large 
inventory of needed projects awaiting funding, the President's proposed 
construction budget for the Corps program is only $1.346 billion. This 
disparity between the backlog of projects awaiting construction funding 
and the limited construction budget highlights the need for a Corps 
process that rigorously examines the costs and benefits of proposed 
projects and assures that an objective and complete analysis is 
undertaken before a project is recommended for authorization and 
funding. That is one key reason I am so concerned that complete 
feasibility studies on the projects in the Everglades Comprehensive 
Plan are completed before those projects are authorized. We cannot 
afford any more Red River navigation projects where billions are 
expended but project benefits don't materialize. On February 13, the 
Washington Post made some serious allegations regarding the way the 
Corps of Engineers has handled the Upper Mississippi Navigation Study. 
Most troubling to me is the suggestions that the Corps of Engineers may 
be investing money in unneeded projects. What assurances do we have 
that your study process leads to recommending only projects that are 
economically justified? Second, in light of the recent allegations, 
what actions do you intend to take? Finally, if investigations are 
planned, what does this do to the Upper Mississippi Navigation Study 
schedule?
    Response. We continue to review and improve our processes wherever 
we can. In 1999, the National Research Council of the National Academy 
of Sciences produced a report entitled ``New Directions in Water 
Resources Planning for the U.S. Army Corps of Engineers.'' We accept 
the findings in that report as an endorsement of where we are in terms 
of reviewing, updating, and improving our Corps planning processes. The 
NRC report recommends some steps to improve our process, and we are 
revising and clarifying our procedures to reflect many of those 
recommendations.
    It is important to keep in mind that of all the projects that the 
Corps studies, only about 16 percent ever make it to construction. In 
other words, our process weeds out 84 percent. Historically, all the 
projects that survived the rigorous process and were constructed, taken 
collectively have provided the Nation an average annual Return-on-
Investment of over 26 percent. That is impressive by any comparison, 
and should give the committee a strong assurance that the Corps is 
doing a good job of recommending projects that are of great benefit to 
the Nation.
    Not all of the Corps projects are justified on monetary 
considerations alone. Beginning with Section 1135 of the Water 
Resources Development Act of 1986, the Congress has given the Corps 
four generic authorities to plan, design, and construct ecosystem 
restoration projects. Those projects are justified not on economic 
benefits but on habitat outputs.
    Additionally, our policies permit us to undertake additional work 
on justified projects at the request of local interests who might want 
a different solution than the one we recommend--such ``locally 
preferred plans'' can be built only if we determine that the solution 
is sound, is justified, and, if applicable, the local interests agree 
to pay all incremental costs above the cost of the National Economic 
Development plan.
    The Corps study process is structured to encourage all stakeholders 
to provide input to our studies. I believe that the Corps does an 
excellent job of weighing the various--and often conflicting--inputs 
and arriving at appropriate recommendations. To paraphrase a 
Caterpillar ad from the 60's: There are no easy solutions-just 
intelligent choices.
    Concerning the allegations of wrong-doing, it is important to 
reserve judgment until all of the facts are in. The Corps has completed 
its own preliminary review and has conducted a 15-6 investigation of 
the most serious charge involving alleged threats to continued 
employment. In addition, we will cooperate fully with your committee 
and other committee. The Department of the Army inquiries into the 
matter are ongoing, and the Secretary of the Army has contracted with 
the National Academy of Sciences for an independent review of the Upper 
Mississippi Navigation study. As stated during testimony, if corrective 
action is warranted, it will be taken.
    The Corps' recommendation on this study is still almost a year 
away, and there is much outside input to be gathered, analyzed and 
incorporated into the decisionmaking process.
    We don't believe the investigations will have a significant impact 
on the study schedule. We still have a lot of work to do, and I expect 
the Division and District to continue toward completion. Of course, if 
personnel are pulled away from their duties for any appreciable time as 
a result of the investigations, the study could be affected. But for 
now I hope that we can get through all this relatively quickly, with 
minimal delays.

    Question 2. I note that the Administration has once again proposed 
a new Harbor Services User Fee to fund construction and operation and 
maintenance of the Nation's harbors and channels. I applaud the 
Administration's efforts to support the construction and operation and 
maintenance of the Nation's ports and waterways and am pleased with the 
levels of funding proposed for improvement of navigation channels and 
the operation and maintenance of ports and waterways proposed in the 
Administration's Fiscal Year 2001 budget. However, I am very concerned 
that the Administration's Harbor Services User Fee proposal will 
destroy the very Great Lakes Maritime commerce it seeks to promote. The 
Fee proposal will result in higher transportation costs for key Great 
Lakes commodities such as iron ore, coal, limestone and gypsum. This 
Harbor Services User Fee proposal is opposed by Great Lakes and 
national port and carrier interests. Does the Administration have any 
plans to withdrawal this very flawed proposal and replace it with 
something more workable?
    Response. An interagency working group convened by the Office of 
Management and Budget reviewed a wide range of financing options aimed 
at funding harbor operations and management and development. The 
proposed ``Harbor Services User Fee'' (HSUF), based on ship size (using 
the net or gross tonnage), the frequency of use, and the operational 
characteristics of various types of vessels, emerged from this 
interagency examination of financing alternatives. No other option 
based on the ``beneficiary pays'' principle could be identified that 
would:
       ensure an appropriate link between the fee paid by users 
and the services provided by the Government in accord with the Supreme 
Court Decision March 30, 1998 (U.S. Shoe);
      not significantly alter the competitive balance between 
U.S. ports;
      not significantly impact the competitiveness of U.S. 
products;
      generate the revenue needed for harbor services; and,
      be practical to administer.
    A summary of the alternatives considered and reasons for rejecting 
or incorporating them into the Harbor Services User Fee proposal 
follows below:
    A Fee Based on Ship Size. The concept of ship size was identified 
as a measure that reasonably approximates the use of Government 
services and, in conjunction with frequency of use and other vessel 
operational and service factors, would satisfy the constitutionality 
test in the U.S. Shoe decision. In concept, such a fee could be based 
on a variety of ship measurement factors, including vessel draft 
(design draft or sailing draft), weight tonnage measures (i.e., 
displacement tonnage, lightweight tonnage, deadweight tonnage) and 
volumetric tonnage measures (gross tonnage, net tonnage).
    Volumetric measures of ship tonnage (net and gross tonnages) were 
ultimately selected for incorporation into the HSUF proposal because 
these volumetric measures of vessel size have long been accepted at 
ports worldwide as a basis for fees and charges. Net and gross tonnages 
are known, fixed ship characteristics, which are assigned to each 
vessel via a Tonnage Certificate in accord with the International 
Convention of Tonnage Measurement of Ships. A vessel's net or gross 
tonnage does not change once the ship is built unless a structural 
modification is made, in which case the vessel is resurveyed and an 
amended Tonnage Certificate issued. The use of a published, fixed ship 
characteristic was considered important in establishing a user fee 
program that could be administered efficiently.
    A vessel's design draft does not share the features of uniformity, 
consistency and acceptance provided by net or gross tonnages. The use 
of actual draft would be far more difficult to measure and administer, 
since sailing draft is an operational factor affected by ship speed, 
place of measurement on the ship, season of the year, salinity of the 
water, etc. In addition, the use of any operational characteristic 
would require a large data collection effort that would be subject to 
human error upon measurement and/or verification.
    The various measures of a vessel's weight were rejected because 
they were either complicated by operational aspects of use (i.e., 
displacement tonnage, which consists of the sum of a ship's weight 
(lightweight) and its contents (deadweight), would also require the 
collection of operational data), and/or were not considered suitable 
for purposes of approximating the constitutional link required between 
benefits and use.
    A Single Fee based on Cargo Tonnage. Such a fee would be based on 
the commodity tonnage carried on a ship regardless of what type of 
commodity is involved. This fee would affect the competitiveness of 
various commodities differently, with lower value cargoes subjected to 
the most significantly adverse impacts. In particular, any fee level 
that would generate the amount of revenue needed to pay for harbor 
services (harbor operation and maintenance; or harbor operation and 
maintenance and harbor development) nationwide would severely impact 
key U.S. exports such as bulk grains and coal shipments. In addition, 
since the fee is independent of the size of the vessel carrying the 
cargo, there would not be a direct link between the primary user of the 
harbor services and the level of services provided.
    A Fee based on Cargo Tonnage by Commodity Type. Such a fee would be 
based on the commodity tonnage, with the fee rate varied by commodity 
type. Since the type of cargo carried on a vessel does not correlate 
with harbor service use, there is no way to formulate a fee schedule 
that provides a reasonable link between the fee and the level of 
service provided. In addition, the development of any commodity-based 
tonnage fee schedule that would raise sufficient revenue while 
minimizing adverse impacts to U.S. competitiveness would merely yield a 
tonnage-based version of the current ad valorem tax. Such an 
alternative is not consistent with the constitutionality test outlined 
in U.S. Shoe.
    A Combination Fee based on Vessel Size and Cargo Tonnage. The 
commodity-based portion of such a fee would not provide the link needed 
between the level of use and the services provided. However, vessel 
size proved to be a useful concept and was considered further in the 
formulation of the Harbor Services Fee Proposal.
    A Combination Fee based on Vessel Size and Cargo Tonnage by 
Commodity Type. Again, the commodity-based portion of such a fee would 
not provide the link needed between the level of use and the services 
provided. In addition, varying the fee's cargo tonnage portion by 
commodity type would merely result in a tonnage-based version of the 
HMT.
    Port Specific Fees. A fee schedule that varies by port or other 
geographic criteria would clearly upset the existing competitive 
balance between U.S. ports, and would also likely adversely impact the 
competitiveness of key U.S. exports. Such an approach was considered to 
violate the ``Port Preference'' clause of the U.S. Constitution 
(Article 1, Section 9, Clause 6).
    A Fee based on Vessel Type. It was recognized that different 
classes of vessels might have very different operating practices and 
service demands, and that such considerations were important in 
approximating the link between a user fee and the services provided by 
the Government. Therefore, this factor was incorporated into the 
formulation of the HSUF concept.
    A Tax on Transportation Fuels. A variety of fuel tax alternatives 
were considered under the rationale that the transportation system in 
part or as a whole benefits from the Government's harbor services. Fuel 
taxes are applied to transportation modes throughout the U.S., and the 
collection and administration of a fuel tax was considered feasible. 
The alternatives considered ranged from a fuel tax on marine vessels 
only to a fuel tax on intermodal freight transportation (including 
marine vessels, freight trains and trucks), and, ultimately a fuel tax 
on all transportation modes (including non-freight, i.e., passenger 
transport, including automobiles).
    The marine vessel only alternative was considered to provide the 
most direct link between the benefits and services harbor users 
receive, but the resulting tax level was considered significant enough 
to disrupt the U.S. bunker fuel industry. The tax levels of all of the 
other alternatives, except the ``across-the-board'' fuel tax, also 
proved to be significant in terms of the impact to U.S. 
competitiveness. Although an ``across-the-board'' fuel tax would result 
in the most modest tax level (less than 0.5 cents per gallon), the 
inclusive nature of a tax which would also be applied to fuels for 
passenger vehicles was not a viable alternative.
    Port Financing of Harbor Services. Alternatives whereby the Federal 
Government either reduces or eliminates its financing role for harbor 
services were also considered. Options ranged from complete divestment 
of harbor service financing to the various ports, to the cost-sharing 
of harbor operation and maintenance services between the Federal 
Government and the ports. The latter alternative could be based on 
cost-sharing formulas consistent with those enacted for harbor 
development projects.
    Inherent in such alternatives was the expectation that the 
individual ports who do not currently have the ability to pay for 
harbor services would have to enact their own set of port fees or 
harbor charges to finance harbor services. Ultimately, this would 
likely result in a vast range of different non-Federal port specific 
fees at ports across the nation. For that reason, this option was 
considered to be fraught with the many problems attributed to the 
``Port Specific Fees'' alternative discussed above: it would upset the 
existing competitive balance between U.S. ports, while also adversely 
impacting the flow of U.S. exports and imports.
    The Administration does not plan to withdraw the Harbor Services 
User Fee legislative proposal since it represents the best of all of 
the wide range of alternatives considered.
    With respect to your comments of the effects of the HSUF on Great 
Lakes navigation interests, our analysis of the Administration's 
proposal on the HSUF is as follows:
    With respect to domestic trade, Great Lakes voyages were examined 
for possible shifts of commodity flows to alternate modes of 
transportation such as rail because of increases in waterborne 
transportation costs from the HSUF. Overall, enactment of the proposed 
HSUF would increase the operating expenses of Great Lakes carriers with 
vessels larger than 3,000 gross tons (GT), or cause a small increase in 
costs to the shippers if passed on by the vessel operators. Vessels 
smaller than 3,000 GT and passenger ferries would benefit from the HSUF 
since their cargoes would no longer be subject to the Harbor 
Maintenance Tax (HMT).
    Any cost increases for the larger vessels (ranging from $0.01 to 
$0.04 per ton for dry bulk commodities) are very small compared to 
present Great Lakes shipping rates. Overall, such increases do not 
appear large enough to cause significant modal shifts from the current 
environment.
    Some movements of iron ore on the Great Lakes appears to be 
currently moving at negative transportation cost savings compared to 
rail. Although the replacement of the HMT with the HSUF would only 
increase the waterborne transportation cost of iron ore about a penny 
per ton, the portion of this trade already costing more than rail could 
be affected.

    Question 3. The National Association of Counties charges that the 
national wetlands permitting change proposed by the Army Corps of 
Engineers will undermine county government's ability to provide basic 
services and cost taxpayers an additional $300 million a year. They 
further add if implemented it would add layers of regulatory 
bureaucracy at significant costs to counties. Their analysis concludes 
that proposed changes to Nationwide Permit 26 (NWP 26) will increase 
the average time needed to obtain permits and cost the Corps about 
$100,000 per acre to protect wetlands. Would you please respond to this 
charge?
    Response. As required by the Energy and Water Development 
Appropriations Act, 2000, the Corps conducted a study of the workload 
and compliance costs of the NWPs proposed in the July 21, 1999, Federal 
Register notice. The report for this study was finalized in January 
2000. The Corps report indicates that the direct costs to the regulated 
public would be $46 million per year. This report also examined the 
workload and compliance costs of a \1/2\ acre alternate replacement NWP 
package that is similar to the new NWPs published in the March 9, 2000, 
Federal Register notice. The \1/2\ acre alternative replacement NWP 
package would result in direct compliance costs that are 30 percent 
less than the $46 million in direct compliance costs that would be 
incurred by permit applicants due to the July 21, 1999, proposal. 
Therefore, the alternate replacement NWP package would result in $34 
million in direct compliance costs incurred by permit applicants.
    The Corps has not done a detailed analysis of the differences 
between the Corps study and the study conducted by the National 
Association of Counties (NAC). However, one clear difference does stand 
out. The NAC report interviewed applicants for their study, while the 
Corps looked at actual data from fiscal year 98 and analyzed all the 
data, as well as interviews with the Corps field offices. One 
difference between these two approaches is that the Corps analysis 
includes consideration of ``mom and pop'' standard individual permit 
applicants, which typically take less time and cost less money for the 
applicant and the Corps to process. Thus, we would assert that the 
private sector report errors on the high side because of these 
different approaches.
    The Corps disagrees that the new and modified NWPs will add layers 
of regulatory bureaucracy that will impose significant costs to 
counties. The new and modified NWPs do not require additional reviews 
or approvals from other agencies. Only the Corps determines whether or 
not a particular activity qualifies for authorization by NWP. Although 
some activities that were previously authorized by NWPs may not qualify 
for authorization under the new and modified NWPs (and therefore 
require standard individual permits), there are likely to be additional 
costs imposed by counties to obtain standard individual permits. As 
indicated above, the Corps estimates that the additional costs incurred 
by permit applicants would be $34 million per year annually.

    Question 4. The fiscal year 2001 Corps budget contains construction 
funding for $135 million worth of Everglades restoration projects. On 
top of this ongoing program, we are going to be asked to consider 
approval of a Comprehensive Plan for Everglades restoration of almost 
$8 billion along with authorization of a first phase of projects to 
implement this plan of about $1.7 billion. How does the Administration 
intend to fund this massive undertaking without seriously impacting the 
implementation of other worthy Corps projects nationwide?
    Response. We believe that, with the authorization of this critical 
and necessary work to correct the problems found today in the 
Everglades, the Administration and Congress will provide the necessary 
funding level associated with this effort, so that we can move forward 
with the solution without seriously impacting on the implementation of 
the rest of the program.

    Question 5. Articles in the Washington Post and other newspapers 
imply that there is an apparent effort by the Corps of Engineers' 
leadership to ``grow'' your organization and it is this desire that 
leads to finding an economic justifiable rationale for projects at any 
cost. Will you comment on that?
    Response. Neither the Army nor its Corps of Engineers is 
entertaining any plans to increase the size of the Corps work force. 
However, there is much to be done and, because of its ability to vary 
the proportions of planning and design done in-house and by contract, 
respectively, and because all construction work is accomplished by 
contract, the Corps has the capability to expand its program somewhat 
without expanding its work force.
    Based on our assessment of the Nation's current water and related 
land resources needs, we feel strongly that the Nation faces 
significant and demanding challenges in dealing with those needs, 
particularly navigation, flood damage prevention and environmental 
restoration. We also know that the Corps has many unique assets from 
which to draft in tackling those challenges. Moreover, as mentioned 
elsewhere, we have a substantial backlog of construction, both ongoing 
and not yet started, a growing maintenance backlog.

    Question 6. Why is Assateague Island the only new Corps proposed 
shore protection project to be included in the Corps fiscal year 2001 
budget? Last year Dr. Westphal, when you appeared before this 
committee, you had indicated that if the WRDA 1999 bill changed the 
cost share for shore protection, then the budget would include 
additional projects. The cost sharing was changed in WRDA 1999 and yet 
new projects have not been included in the budget.
    Response. Assateague Island, Maryland is a construction new start 
in fiscal year 2001, bringing the total budgeted shore protection 
projects to 18 and $54.6 million. This project will protect the 
Assateague Island National Seashore, which is at risk of being breached 
due to the interruption of natural sand transport by the jetties at 
Ocean City Inlet. Construction of the navigation channel destabilized 
the natural transport of sand at Assateague Island, resulting in the 
degradation of 265 acres of benthic habitat. Subsequent construction of 
jetties to alleviate this problem resulted in starving the sand 
transport at the northern end of the island. The island is now at 
severe risk of breaching, which would result in adverse physical, 
biological and economic impacts in the area and threaten the habitat of 
several endangered species such as the piping plover. The 
Administration's policy on shore protection projects remains unchanged 
from prior years because WRDA 1999 did not go far enough in changing 
the cost sharing for periodic nourishment of shore protection projects.

    Question 7a. What is the total amount of contracts entered into by 
the U.S. Army Corps of Engineers on behalf of District of Columbia 
Public Schools?
    Response. The total amount of contracts entered into on behalf of 
the DC Public Schools is $48 million. In addition, the Corps has 
provided management assistance for $42 million in construction 
contracts awarded by the District of Columbia.

    Question 7b. How much has the Corps of Engineers been paid for the 
services associated with this contract amount?
    Response. The Corps of Engineers has received a total of $8.8 
million to date for the contract management services associated with 
the Capital Improvements Program. In addition, the Corps received 
$400,000 to assist the DC Public Schools Facilities Management Office 
in organizational development.

    Question 7c. Do you anticipate increasing involvement in public 
school construction management?
    Response. The Corps will evaluate future requests for assistance 
and will adhere to OMB Circular A-97 requirements in its 
recommendations to the Army on future requests for assistance of this 
kind.
                                 ______
                                 
 Responses by Dr. Joseph Westphal to Additional Questions from Senator 
                                 Smith
                             general policy

    Question 1. What are the Corps' ``Principles and Guidelines'' for 
feasibility study analysis?
    Response. The Principles and Guidelines provides the conceptual and 
procedural structure within which water resources projects (including 
environmental projects) are planned, evaluated, and recommended. They 
provide: a framework which overarches all planning-evaluation; formal 
planning steps (including those setting up objectives and those 
requiring alternative solutions); economic and environmental evaluation 
criteria; and, guidance for making decisions and recommendations. 
Principles and Guidelines also contains some evaluation procedures that 
could be called detailed, but most practitioner level detail (``how 
to'') is supplied in other documents, and by institutional experience.
    The Principles and Guidelines represents a half century's planning 
experience and development. It continues and refines that which was 
best and permanent in the ``Green Book'' (1940's and 1950's), Senate 
Document No. 97 (1960's), and the Principles and Standards (1970's). 
The Principles and Guidelines and the prior documents differ mainly in 
their evaluation procedures detail and in their planning process 
detail, and only secondarily in their philosophy or in their planning-
evaluation framework.

    Question 2. How could these principles and guidelines be amended to 
reflect the modernization of the Army Corps' mission?
    Response. The fundamentals of the Principles and Guidelines remain 
valid; perceived methodological advances, perceived societal changes, 
or other perceived changes do not necessarily all require Principles 
and Guidelines changes. Mission modernization can and does take place 
outside formal Principles and Guidelines changes. Since that guidance 
was published in 1983, missions have been changed both by legislation 
(e.g., cost sharing legislation, environmental activities legislation; 
and by the Administration directing, and working in concert with, the 
Agency (e.g., priority for environmental projects, tradeoffs of 
development for environmental benefits). Historically, most 
``modernizations'' and changes in Corps missions come through means 
other than guidance changes at the level of the Principles and 
Guidelines.
    It is likely, also, that some, and possibly most, 
``modernizations'' amount really to revisiting, relearning, or 
elaborating upon procedures already in the Principles and Guidelines, 
or to adopting procedures which are includable in it upon a valid 
inference. The main thing strictly prescribed in the Principles and 
Guidelines is that analyses are to be documented, objective and 
conceptually valid. One frequently cited change would be to return to 
the dual planning objectives of national economic development and 
environmental quality that were in effect prior to 1983.

    Question 3. How does the Corps intend to manage the Challenge 21 
application process? Will the priority sites listed in WRDA 99 be given 
the highest consideration? How many different projects do you envision 
funding with the $20 million requested?
    Response. We are still in the process of developing the procedural 
guidelines for implementing the Flood Mitigation and Riverine 
Restoration Program or Challenge 21. However, we would expect Districts 
to work with local sponsors to develop proposals. Proposals received 
from the priority areas listed in WRDA 99 will be ranked using the 
required rating criteria. Since all of the studies and projects must be 
fully funded within the authorized appropriation limit, the final 
selections for funding will be made at the Washington level. The number 
of studies which we may fund in fiscal year 2001 will depend on the 
potential Federal share of the proposed projects due to the requirement 
to fully fund the studies and projects within the authorized program 
funding levels. Interest in the program is high and we would expect to 
use the requested funds fully.

    Question 4. Why did you decrease the request for Section 1135 
funding from the authorized $25 million to $14 million?
    Response. The Administration's budget included $8,500,000 for 
Section 1135 for fiscal year 2000. During the fiscal year 2000 
Conference, this was increased to $10,000,000. The Administration's 
request of $14,000,000 for this effort in fiscal year 2001 represents a 
modest increase over the fiscal year 2000 funding.

    Question 5. Can you provide the committee with a list of the 
facilities expected to be priorities under the Recreation Modernization 
Program?
    Response. Seventeen recreation sites have been identified to date 
for modernization in Fiscal Year 2001, as shown on the following table:

------------------------------------------------------------------------
                                                               Estimate
             Project                    Recreation Area          ($)
------------------------------------------------------------------------
Greers Ferry Lake, AR............  Dam Site Park...........    3,800,000
Lake Ouachita, AR................  Joplin Recreation Area..    1,380,000
Lake Mendocino, CA...............  Bushay Recreation Area..    1,940,000
Lake Okeechobee, FL..............  St. Lucie Recreation        1,597,000
                                    Area.
Mississippi River Project, IL....  Thomson Causeway Area...    2,310,000
Perry Lake, KS...................  Rock Creek Park*........    1,555,000
Carr Creek Lake, KY..............  Littcarr Recreation Area      676,000
Abiquiu Dam, NM..................  Cerrito Recreation Area.    1,094,700
Berlin Lake, OH..................  Mill Creek Recreation       1,855,000
                                    Area.
Lake Texoma, OK..................  Burns Run Park..........    2,015,000
John Day Project, OR.............  Giles French Park*......    1,200,000
Cowanesque Lake, PA..............  Tompkins Recreation Area      500,000
J. Percy Priest Lake, TN.........  Poole Knobs Recreation        656,995
                                    Area.
Philpott Lake, VA................  Goose Point Park........    1,386,000
Ball Mountain Dam, VT............  Winhall Brook Camping         833,000
                                    Area.
McNary L&D, WA...................  Hood Park Recreation        3,300,000
                                    Area *.
Summersville Lake, WV............  Battle Run Recreation         745,000
                                    Area.
------------------------------------------------------------------------
* Sites along the Lewis and Clark expedition route.

    Question 6. In his oral testimony, Dr. Westphal said, ``we make the 
policy decisions in our office as to what we think is appropriate and 
what we don't think is appropriate.'' How can it be then that the 
Assistant Secretary was not informed of this ``Program Growth 
Initiative'' which proposes a vast expansion of the Corps' budget?
    It is incredulous that Dr. Westphal would not be aware of such a 
sweeping policy initiative when the agency is in the midst of preparing 
WRDA 2000. Why wouldn't a major policy initiative, as the ``Program 
Growth Initiative'' is portrayed to be, first be shared with the 
Assistant Secretary to see that it was in alignment with agency policy 
and position?
    Response. The slides referred to by the Washington Post as a 
``Program Growth Initiative'' were a work in progress developed for the 
purpose of conducting a discussion between the Chief of Engineers and 
his subordinate commanders over what more the Corps could do to satisfy 
the Nation's needs for solutions to water resource problems.
    I challenged the Corps to assess the Nation's water resources needs 
in my speech to the Corps leadership at its national meeting in San 
Francisco last August. I also challenged the Corps' collective 
leadership to work harder at solving the Nation's water resource 
problems.
    Following this challenge, the Corps embarked on developing a new 
draft Strategic Plan for the Civil Works program that would set forth 
the water resource needs of the Nation, as best they could be 
identified, and a plan for addressing the needs in an orderly manner. 
Dr. Westphal had not been specifically briefed on the discussion 
between the Chief of Engineers and his commanders.

    Question 7. I understand that the National Academy of Sciences will 
conduct a review of the Upper Miss and Illinois Navigation Study. When 
do you expect their review will be complete? Does the Department of 
Defense have any intentions of asking the IG to investigate alleged 
wrongdoings?
    Response. The Secretary of the Army has asked the National Academy 
of Sciences to review the economic assumptions and approach that the 
Corps is using, and he has asked the Army Investigator General to 
investigate allegations of wrongdoing by Corps officials. I have no 
information at this time about how long the investigations will take.
                                backlog

    Question 8. Regarding the $30 billion backlog, General Ballard 
testified that you still have non-Federal partners for ALL the projects 
calculated into this figure. If that is the case, and the committee 
believes it is not, can you provide the committee with a list of: each 
project in the backlog; when the project was authorized; which 
member(s) originally requested it; whether a willing non-Federal 
sponsor still exists; whether the project meets the Corps mission; when 
the first and last appropriation was made; and how much remains to be 
funded before the project is complete? Also, the Corps recommendation 
on which of these projects in the backlog warrant deauthorization.
    Response. In order to adequately respond to your question, the 
Corps of Engineers is undertaking an extensive data search and review. 
The Army will provide a response when that effort is complete.

    Question 9. Is the mission of the Corps Civil Works being 
adequately met with the appropriation levels enacted over the past five 
fiscal years? If not, what needs are not being met?
    Response. Ultimately, the President and the Congress must decide 
what is adequate, given the wide array of programs competing for 
limited resources. There are, however, additional investments that 
could be made in water resources. For example, the backlog of 
maintenance and repair on the existing water resources infrastructure 
for which the Corps is responsible continues to grow. Also, the 
implementation schedules allowed by appropriation levels cause some 
inefficiencies in construction, and benefits that could be realized 
earlier are foregone.

    Question 10. How would authorization of the Comprehensive 
Everglades Restoration Plan impact this backlog?
    Response. We believe that, with the authorization of this critical 
and necessary work to correct the problems found today in the 
Everglades, the Office of Management and Budget, together with 
Congress, would provide the necessary funding level associated with 
this effort, so that we can proceed forward with the solution, and do 
so without seriously impacting on the implementation of the rest of the 
program.

    Question 11. What does the Corps recommend as a means of dealing 
with this extensive backlog while still meeting the needs of the 
nation?
    Response. The Army will continue to advocate within the 
Administration for the allocation of additional resources to the Civil 
Works program to the extent consistent with the President's overall 
program. In addition, we will review the construction backlog to 
identify work that could and should be deauthorized.
                               everglades

    Question 12. What percentage of the fiscal year 2001 construction 
account is devoted to the Everglades? Can you compare this to other 
ecosystem-wide projects being undertaken by the Corps.
    Response. The Administration's proposed fiscal year 2001 funding 
for the Everglades includes $90,087,000 for Central and Southern 
Florida, FL; $20,000,000 for Kissimmee River, FL; $4,562,000 for 
Hillsboro and Okeechobee aquifer, FL; and $20,525,000 for the 
Everglades and South Florida Ecosystem Restoration, FL, for a total of 
$135,174,000, or 8.9 percent of the total Construction, General budget. 
It is the only ecosystem-wide project currently being undertaken by the 
Corps.

    Question 13. Please give a detailed justification for why each of 
the 10 CERP construction projects slated for initial authorization must 
be authorized in WRDA 2000 and not WRDA 2002. In this explanation, 
please include what specific stage in the process each project stands, 
level of detail know about each component, what more needs to be done 
before feasibility-level analysis is complete.
    Response. The features of the Comprehensive Everglades Restoration 
Plan (CERP) which are recommended for initial authorization in WRDA 
2000 include projects that are necessary to expedite ecological 
restoration of the Everglades and other south Florida ecosystems. 
Authorization of these features in WRDA 2000 will ensure maximum 
integration with ongoing Federal, State, and local ecological 
restoration efforts and water quality improvement programs.
    The immediacy for authorization of these select features involves 
four factors: (1) providing immediate system-wide water quality and 
flow distribution benefits to the ecosystem; (2) utilizing lands 
already purchased; (3) efficiency with ongoing projects; and (4) 
realizing the benefits of Federal investments already undertaken. This 
authorization will allow for detailed development of future projects 
under the CERP while maximizing the opportunity to integrate those 
features with other ongoing Federal and State programs, including the 
Modified Water Deliveries to Everglades National park Project, the C-
111 Project and the State of Florida's Everglades Construction Project. 
This integration will allow development of comprehensive solutions to 
ongoing Federal projects, such as the Modified Water Deliveries 
Project, that could otherwise not be pursued under existing 
authorities. It is anticipated that this would ultimately result in 
substantial cost savings to the Federal Government. Furthermore, the 
South Florida Water Management District and the U.S. Department of the 
Interior have purchased almost \2/3\ of the lands required for 
construction of these initial components in the CERP, including nearly 
51,000 acres of land as a result of the purchase and exchange of the 
Talisman property in the Everglades Agricultural Area (EAA) for water 
storage. Immediate authorization of the components that use these lands 
will ensure that these lands will be utilized and the benefits accrued 
as soon as possible.
    While the Comprehensive Plan report was written at a level of 
detail that is less specific in nature than recent projects recommended 
for congressional authorization, the feasibility report has been 
completed in accordance with legislation and Army policy and guidance. 
Further, the Programmatic Environmental Impact Statement (EIS) 
addresses the potential environmental effects of the actions proposed 
in the CERP. The Programmatic EIS addresses, at a general level, the 
alternatives and environmental effects of the overall project. The 
Comprehensive Plan presented in the feasibility report is similar in 
scope to the 1948 Comprehensive Report for the Central and Southern 
Florida Project. The original plan provided a framework from which all 
subsequent planning and design could follow. Due to the reduced level 
of detail, prior to initiation of detailed design and construction, 
Project Implementation Reports (PIRs) will be completed for each 
project(s) proposed for authorization in WRDA 2000 to address the 
projects(s) cost effectiveness, engineering feasibility, and 
environmental acceptability, including National Environmental Policy 
Act compliance. During development, these reports will be coordinated 
with appropriate Federal, tribal, State and local governments. These 
reports, which will be completed within 18 to 36 months, will be 
approved by the Secretary of the Army and will document advanced 
planning, engineering and design, real estate analysis, and 
supplemental requirements under the National Environmental Policy Act.
    From a overall system-wide prospective, these initial authorization 
projects, shown in the table below, will produce major environmental 
benefits to critical areas of the ecosystem. The C-44, Everglades 
Agricultural Area (EAA)--Phase 1, and Taylor Creek / Nubbin Slough 
water storage projects provide significant environmental benefits to 
Lake Okeechobee, the Water Conservation Areas (WCAs), and the St. Lucie 
and Caloosahatchee estuaries. The Taylor Creek / Nubbin Slough, C-44, 
C-11, WCA 3A/3B Levee Seepage Management, and the C-9 projects provide 
significant water quality improvements to Lake Okeechobee, St. Lucie 
Estuary, and the Water Conservation Areas. The Tamiami Trail 
Modifications and Fill Miami Canal and North New River Improvements 
projects reduce fragmentation and restore connectivity between the 
Water Conservation Areas and Everglades National Park. The Everglades 
Agricultural Area--Phase 1, C-11, WCA 3A/3B Levee Seepage Management, 
C-9, Tamiami Trail Modifications, Fill Miami Canal, and the C-111N 
Spreader Canal projects are linked to the ongoing Modified Water 
Deliveries and C-111 projects and the State Everglades Forever Act 
projects.
    Additional information on the initial 10 projects is provided in 
the following table.

                                CONSTRUCTION FEATURES FOR WRDA 2000 AUTHORIZATION
----------------------------------------------------------------------------------------------------------------
                                                                                                    Construction
                    Item                               Project Component             Project Cost       Dates
----------------------------------------------------------------------------------------------------------------
1...........................................  C-44 Basin Storage Reservoir.......     $112,562,000    6/04--6/07
2...........................................  Everglades Agricultural Area            $233,408,000    9/05--9/09
                                               Storage Reservoirs--Phase 1.
3...........................................  ite 1 Impoundment2 (Phase 1).......      $38,535,000    9/04--9/07
4...........................................  WCA 3A/3B Levee Seepage                 $100,335,000    9/04--9/08
                                               Management\1\.
5...........................................  C-11 Impoundment & Stormwater           $124,837,000     9/04-9/08
                                               Treatment Area\1\.
6...........................................  C-9 Impoundment/Stormwater               $89,146,000     9/04-9/07
                                               Treatment Area.
7...........................................  Taylor Creek/Nubbin Slough Storage      $104,027,000     1/05-1/09
                                               and Treatment Area.
8...........................................  Raise and Bridge East Portion of         $26,946,000     1/05-1/10
                                               Tamiami Trail and Fill Miami Canal
                                               within WCA 3\1\  \2\ (Phase 1).
9...........................................  North New River Improvements\1\....      $77,087,000    1/05--1/09
10..........................................  C-111 N Spreader Canal.............      $94,035,000    7/05--7/08
11..........................................  Adaptive Assessment and Monitoring.     $100,000,000
    TOTAL...................................                                        $1,100,918,000
----------------------------------------------------------------------------------------------------------------
\1\ Project components are dependent upon each other and would be implemented as a single project.
\2\ Although the initial phase of this project component is within the cost limits of the proposed Programmatic
  Authority, the total cost for the component exceeds that authority and therefore is included with these
  recommended construction projects.

    Provided below is a more detailed description of the components, 
the criticality to the CERP, the benefits produced, and design 
information on each project component recommended for initial 
authorization is provided below:
C-44 Basin Storage Reservoir
    This project is located in the Upper East Coast region of south 
Florida in southern Martin County. The proposed storage reservoir will 
be constructed in close proximity to the C-44 Canal with the C-44 
Basin. The exact location of the reservoir has not been identified at 
this time. Alternative locations for the reservoir are currently being 
evaluated as part of the ongoing Indian River Lagoon Feasibility Study. 
The purpose of this project is to capture and store local runoff from 
the C-44 Basin, then return the stored water to the C-44 Canal when 
there is a water supply demand. The reservoir is designed for flood 
flow attenuation to the estuary, water supply benefits including 
environmental water supply deliveries to the estuary, and water quality 
benefits to reduce salinity and nutrient impacts of runoff to the 
estuary.
    This project is included in the initial authorization for a number 
of reasons. Preliminary analyses has shown that the majority of the 
benefits to the natural areas will not be realized until most of the 
major storage features, such as reservoirs like this, are in place. 
Early authorization of this component is expected to provide 
significant regional water quality benefits, specifically to the St. 
Lucie River and Estuary and the Indian River Lagoon, in the form of 
nutrient reduction. In addition, early authorization will provide the 
opportunity to moderate damaging ecological releases to St. Lucie 
Estuary from Lake Okeechobee and the surrounding basin as soon as 
possible. The Indian River Lagoon and the St. Lucie Estuary experienced 
significant impact as a result of releases made from the Lake during 
the spring of 1998. In addition, residents of Martin County strongly 
support the CERP and in late 1998, a 1-percent sales surtax referendum 
was passed to generate a funding source for land acquisition for 
environmental restoration in the county.
    This project includes an above ground reservoir with a total 
storage capacity of approximately 40,000 acre-feet located in the C-44 
Basin in Martin County. The initial design of the reservoir assumes 
10,000 acres with water levels fluctuating up to 4 feet above grade. 
The initial design includes inflow pump capacity of 1,000 cubic feet 
per second (CFS) and an outflow structure capacity of 800 cfs. Inflows 
to the storage facility include local basin runoff and releases from 
Lake Okeechobee when the lake stage is greater than 14.5 feet NGVD.
    During the wet season, this large storage component will aid in the 
prevention of damaging regulatory releases to the estuary while 
reducing basin flooding by capturing and storing excess storm water 
runoff. Subsequently, during the dry season, water, including water 
supply to the estuary, will be enhanced, as stored water is metered out 
of the system as needed.
    Regulatory releases were made from Lake Okeechobee through the C-44 
Canal from December 1997 until late 1998. These regulatory releases 
ranged from 2,500 cubic feet per second (CFS) to 7,000 cfs for most of 
the duration. The St. Lucie River and Estuary and the Indian River 
Lagoon experienced reduced salinity concentrations outside the range of 
the established minimums for a healthy ecosystem. During this release 
event, approximately 33 species of lesioned fish were discovered by 
local fisherman, 450 individual lesioned fish were sent to the Florida 
Marine Research Institute for analysis, local citizens became concerned 
for human health related to water quality in surrounding waters, and in 
addition, silting of the offshore reef system was discovered. The 
actual cause of the epidemic of lesioned fish is still unknown, but 
scientists are working from the theory that the heavy freshwater 
discharges from Lake Okeechobee and the associated water quality are 
connected. By capturing excess storm water runoff and storing it, 
harmful wet season regulatory releases will be reduced, protecting 
oysters, seagrasses and other estuarine organisms. Water quality 
benefits include protecting the estuary from excessive freshwater 
pulses that drastically reduce salinity, and protecting the estuary 
from the nutrients inherent in storm water runoff. Controlled releases 
of the stored water during the dry season will protect and restore more 
natural estuarine conditions. The stored water will also be returned to 
the C-44 Canal when needed to meet agricultural water supply demands.
    The final location, size, depth and configuration of this facility 
will be determined through more detailed analysis to be completed as 
part of the ongoing Indian River Lagoon feasibility study scheduled for 
completion in September 2001. This project is currently scheduled for 
construction initiation in June 2004 with completion in June 2007. Of 
the 10,000 acres needed for this project, no land has been acquired to 
date.
Everglades Agricultural Area Storage Reservoirs Phase-1
    This project is located in the Everglades Agricultural Area in 
western Palm Beach County on lands purchased with Department of 
Interior Farm Bill funds, with South Florida Water Management District 
funds, and through a series of exchanges for lands being purchased with 
these funds. The area presently consists of land that is mostly under 
sugar cane cultivation. This project will be implemented consistent 
with the Farm Bill land acquisition agreements. This project will 
improve timing of environmental deliveries to the Water Conservation 
Areas including reducing damaging flood releases from the Everglades 
Agricultural Area to the Water Conservation Areas, reduce Lake 
Okeechobee regulatory releases to estuaries, meet supplemental 
agricultural irrigation demands, and increase flood protection within 
the Everglades Agricultural Area.
    This project is included in the initial authorization for three 
reasons: (1) lands needed for the project have been acquired by the 
U.S. Department of Interior and the South Florida Water Management 
District; (2) it provides the opportunity to construct the facility in 
a manner that is mutually beneficial for the CERP and the Everglades 
Construction Project, including over 40,000 acres of stormwater 
treatment areas (STAs)) being implemented by the SFWMD under the 
Everglades Forever Act of 1994; and (3) expedites construction of this 
facility which provides multiple environmental, water supply, and flood 
protection benefits.
    This project includes above ground reservoir(s) with a total 
storage capacity of approximately 240,000 acre-feet located on land 
associated with the Talisman Land purchase in the Everglades 
Agricultural Area. Conveyance capacity increases for the Miami, North 
New River, Bolles and Cross Canals are also included in the design of 
this project. The initial design for the reservoir(s) assumed 40,000 
acres, divided into two, equally sized compartments with the water 
level fluctuating up to 6 feet above grade in each compartment. 
However, actual design and construction of this first phase will 
maximize the use of the land acquired through the Farm Bill land 
acquisition agreements which may be as much as 50,000 acres.
    Compartment 1 would be approximately 20,000-acre reservoir at 6 
feet maximum depth with inflow pumps with a capacity of 2,700 cfs from 
the Miami Canal Basin and 2,300 cfs from the North New River Canal 
Basin for diversion of Everglades Agricultural Area runoff. Outflow to 
the Everglades Agricultural Area would be through a 3,000 cfs structure 
to Miami Canal Basin and a 4,400 cfs structure to North New River and 
Hillsboro Basins. Compartment 2 would be approximately 20,000-acre 
reservoir at 6 feet maximum depth with inflow pumps with a capacity of 
4,500 cfs from the Miami Canal Basin and 3,000 cfs from the North New 
River Canal Basin for diversion of Lake Okeechobee regulatory releases. 
Outflow to the Everglades Construction Project's Stormwater Treatment 
Areas 3 and 4 would be through a 3,600 cubic foot per second structure.
    Canal conveyance capacities would be increased by 200 percent for 
the Miami, North New River and Bolles and Cross Canal in order to 
direct Lake Okeechobee regulatory releases to the reservoir. The 
Project Implementation Report for the project will address the specific 
location and sizing of the facility as well as more site-specific 
design of levees and pump stations. In addition, the extent of 
conveyance improvements for the North New River Canal, the Miami Canal, 
and the Bolles and Cross Canal will be identified.
    The benefits from this project include improved storage and 
conveyance that will enhance the water supply to the natural areas and 
support better timing of water deliveries to the Water Conservation 
Areas by capturing and managing flood releases from the Everglades 
Agricultural Area to the Water Conservation Areas. This component will 
reduce the need to make damaging regulatory releases from Lake 
Okeechobee to the St. Lucie and Caloosahatchee estuaries and will help 
meet Everglades Agricultural Area irrigation needs while increasing 
flood protection in the area.
    Compartment 1 of the reservoir would be used to meet Everglades 
Agricultural Area irrigation demands. The source of water is excess 
Everglades Agricultural Area runoff. Overflows to Compartment 2 could 
occur when Compartment 1 reaches capacity and Lake Okeechobee 
regulatory discharges are not occurring or impending. Compartment 2 
would be used to meet environmental demands as a priority, but could 
supply a portion of Everglades Agricultural Area irrigation demands if 
environmental demands equal zero. Flows will be delivered to the Water 
Conservation Areas through Stormwater Treatment Areas 3 and 4. The 
sources of water are overflow from Compartment 1 and Lake Okeechobee 
regulatory releases. Compartment 2 will be operated as a dry storage 
reservoir and discharges made down to 18 inches below ground level.
    This project is currently scheduled for construction initiation in 
September 2005 with completion in September 2009. The scheduled 
construction start is based on the existing lease agreements that were 
part of the Farm Bill land acquisition agreement. Further, based on 
these lease agreements the use of Talisman site requires 30 months 
advance notification to lease holders before construction can begin.
Site 1 Impoundment
    This water storage project has been sited and is located in 
southern Palm Beach County adjacent to the Hillsboro Canal and 
Loxahatchee National Wildlife Refuge and Water Conservation Area 2A. 
The purpose of this project is to supplement water deliveries to the 
Hillsboro Canal during dry periods thereby reducing demands on Lake 
Okeechobee and Loxahatchee National Wildlife Refuge.
    This project is included in the initial authorization for several 
reasons: 1) a large portion of the lands required for the project have 
already been acquired by the sponsor, 2) benefits to the ecosystem will 
be gained from this project by capturing water that is normally sent to 
tide and returning it to the system early in the process, and 3) 
uncertainty in constructing this project is minimized by phasing the 
project and postponing the aquifer storage and recovery portion of the 
component until the ASR pilot project is completed.
    This project includes an above ground reservoir with a total 
storage capacity of approximately 15,000 acre-feet. The initial design 
of the reservoir assumed 2,460 acres with water levels fluctuating up 
to 6 feet above grade. An inflow pump station with a capacity of 700 
cfs, an outflow structure with a capacity of 200 cfs and an emergency 
outflow structure with a capacity of 700 cfs are proposed. The final 
depth and configuration of these facilities will be determined through 
more detailed planning and design to be completed as a part of the 
ongoing Water Preserve Areas Feasibility Study.
    The reservoir will be filled during the wet-season from excess 
water pumped from the Hillsboro Canal. Water will be released back to 
the Hillsboro Canal to help maintain canal stages during the dry-
season. If water is not available in the reservoir, existing rules for 
water delivery to this region will be applied.
    The benefits to the project will be a reduction in demands on the 
Loxahatchee National Wildlife Refuge and Lake Okeechobee during the 
early dry season as well as a reduction in the amount of water 
discharged to tide. By reducing the demands on Lake Okeechobee the 
littoral zone of the Lake and the marshes in the Refuge will suffer 
fewer damaging low levels.
    The project is currently scheduled for construction initiation in 
September 2004 with completion in September 2007. Of the 2,458 acres 
needed for this project, 1.658 acres have been acquired by SFWMD to 
date.
Western C-11 Impoundment and Diversion Canal
    This project has been sited in western Broward County east of Water 
Conservation Area 3A and 3B. The diversion canal is located west of US-
27 between C-11 and C-9 Canals. The C-11 stormwater treatment area/
impoundment is located northeast of the intersection of U.S. Highway 27 
and C-11 Canal. The purpose of these projects is to divert runoff from 
the western C-11 Canal Basin that is presently backpumped into Water 
Conservation Area 3A through the S-9 pump station and divert it into 
the C-11 Stormwater Treatment Area/Impoundment and then into the C-9 
Stormwater Treatment Area/Impoundment or Water Conservation Area 3A 
after treatment depending on conditions. Ultimately, the C-11 flows 
will be diverted to North Lake Belt Storage Area (once it is 
operational). Due to dependencies, this project would be implemented in 
combination with the Water Conservation Area 3A and 3B Levee Seepage 
Management and the C-9 Impoundment projects.
    Initial authorization is necessary due to the existing operation of 
the S-9 pump station. The original C&SF Project design provides for 
Western C-11 Basin drainage to be pumped into Water Conservation Area 
3. This project will provide the necessary facilities to maintain flood 
protection within the basin, while reducing flows through the S-9 pump 
station to Water Conservation Area 3. Other factors supporting initial 
authorization include: 1) lands were identified as suitable by both the 
East Coast Buffer Feasibility Analysis and the Water Preserve Areas 
Land Suitability Analysis; 2) lands are being actively acquired by 
sponsor; 3) this project is consistent with ongoing programs such as 
the Water Preserve Areas Feasibility Study and the Everglades 
Stormwater Program; and 4) acquisition and utilization of land which is 
suitable for storage and water quality treatment are rapidly being lost 
to urbanization.
    This project includes canals, levees, water control structures, and 
a stormwater treatment area/impoundment with a total storage capacity 
of 6,400 acre-feet. The initial design of the stormwater treatment 
area/impoundment assumed 1,600 acres with the water level fluctuating 
up to 4 feet above grade. The initial design of the diversion canal 
west of U.S. Highway 27 is for a conveyance capacity of 2,500 cfs. A 
2,500 cfs conveyance capacity improvement is envisioned to the C-9 
canal between S-30 and the C-9 Impoundment. An intermediate 2,500 cfs 
pump station in the C-11 canal will be used to direct runoff to the C-
11 stormwater treatment area/impoundment. A seepage collection canal 
and inflow pump station will also be used on the C-11 stormwater 
treatment area/impoundment. A 2,200 cfs outflow structure is envisioned 
to discharge from the impoundment to C-11 west of U.S. 27 to the 
diversion canal. The final size, depth and configuration of these 
facilities will be determined through the ongoing Water Preserve Areas 
Feasibility Study.
    The benefit from this project is that Water Conservation Area 3A 
water quality will improve when the poor quality runoff from the 
western C-11 Canal basin is no longer being backpumped into it through 
the S-9 pump station. This component diverts that water into the C-11 
Stormwater Treatment Area/Impoundment where it then becomes available 
for either the C-9 Stormwater Treatment Area/Impoundment, the North 
Lake Belt Storage Area after it is operational or Water Conservation 
Area 3A after treatment.
    The C-11 Impoundment and Canal features are currently scheduled for 
construction initiation in September 2004 with completion in September 
2008. Of the 2,535 acres needed for this project, the SFMD has acquired 
531 acres to date.
Water Conservation Areas 3A and 3B Levee Seepage Management
    This project has been sited in western Broward County east of Water 
Conservation Area 3A and 3B. This project will reduce seepage loss from 
these WCAs to improve hydropatterns within the Conservation Areas by 
allowing higher water levels in the borrow canals and longer inundation 
within the marsh areas that are located east of the WCAs and west of US 
Highway 27. Seepage from the WCAs and marshes will be collected and 
returned to the Water Conservation Areas via the C-11 Impoundment 
features or stored in either the C-9 or C-11 Impoundment. Due to 
dependencies, this project would be implemented in combination with the 
C-11 and C-9 Impoundment projects.
    Millions of gallons of groundwater are lost each year as it seeps 
away from the Everglades toward the East Coast. This project is the 
first increment to control these losses and improve hydroperiods within 
the Water Conservation Areas. Other factors supporting initial 
authorization include: (1) lands were identified as suitable by both 
the East Coast Buffer Feasibility Analysis and the Water Preserve Areas 
Land Suitability Analysis; (2) lands are being actively acquired by 
sponsor; (3) this project is consistent with ongoing programs such as 
the Water Preserve Areas Feasibility Study and the Everglades 
Stormwater Program; and (4) acquisition and utilization of land are 
rapidly being lost to urbanization.
    New levees will be constructed west of US Highway 27 from the North 
New River Canal to the Miami (C-6) Canal to separate seepage water from 
the urban runoff in the C-11 diversion canal (Component Q). The L-37 
and L-33 borrow canals will be controlled at higher stages as will the 
marshes located east of the WCAs. A divide structure will be added to 
the C-11 Canal west of US Highway 27 to maintain the separation of 
seepage water from urban runoff. Water from C-11 west will be stored in 
the C-11 Impoundment or diverted to the C-9 Impoundment. Ultimately, 
the water will be diverted to the North Lake Belt Storage Area once it 
is on line. The final size, depth and configuration of these facilities 
will be determined through the ongoing Water Preserve Areas Feasibility 
Study.
    The ability to control seepage from the natural system is the most 
cost-effective increment of restoring water levels in the Everglades. 
This project will make significant improvement toward restoring the 
natural conditions in the Everglades. This project will control seepage 
from Water Conservation Areas 3A and 3B by increasing groundwater 
elevations adjacent to the WCAs. Water levels in the adjacent marsh 
areas will provide a hydrologic buffer between the Everglades and the 
developed areas of Broward County.
    The Water Conservation Areas 3A and 3B Levee Seepage Management 
project is currently scheduled for construction initiation in September 
2004 with completion in September 2008. Of the 6,542 acres needed for 
these projects, the SFWMD has acquired 5,796 acres to date. This 
project would be implemented with the C-11 Impoundment and Canal 
features.
C-9 Stormwater Treatment Area/Impoundment
    This project has been sited in the western C-9 Basin in Broward 
County. The purpose of this project is to capture excess stormwater 
runoff from the C-11 Basin and Western C-9 Basin in a 2,500 acre 
Stormwater Treatment Area/Impoundment adjacent to C-9 for storage and 
water quality treatment. This project is needed to realize the benefits 
of C-11 Stormwater Treatment Area and Impoundment.
    There are a number of factors supporting initial authorization of 
this project including: 1) lands were identified as suitable by both 
the East Coast Buffer Feasibility Analysis and the Water Preserve Areas 
Land Suitability Analysis; 2) lands are being actively acquired by 
sponsor; 3) this project is consistent with ongoing programs such as 
the Water Preserve Areas Feasibility Study and the Everglades 
Stormwater Program; and 4) acquisition and utilization of land which is 
suitable for storage and water quality treatment are rapidly being lost 
to urbanization; 5) this area is necessary for diversion of C-11 Basin 
flows prior to the completion of the North Lake Belt Storage Area which 
is scheduled later in the implementation plan; 6) improved flood 
protection in the Western C-9 Basin.
    This project includes canals, levees, water control structures and 
a stormwater treatment area/impoundment with a total capacity of 
approximately 10,000 acre-feet. The initial design of the stormwater 
treatment area/impoundment assumed 2,500 acres with the water level 
fluctuating up to 4 feet above grade. An inflow pump station with a 
capacity of 1,000 cfs and an outflow gravity structure with a capacity 
of 1,000 cfs are also envisioned for the impoundment. A seepage 
collection canal and pump station with a capacity of 200 cfs are needed 
to prevent impact to private adjacent land. The final size, depth and 
configuration of these facilities will be determined through the 
ongoing Water Preserve Areas Feasibility Study.
    Operationally, excess stormwater runoff from the C-11 Basin and 
Western C-9 Basin will be pumped into the C-9 Stormwater Treatment 
Area/Impoundment for storage and water quality treatment prior to 
making water supply deliveries to the C-9, or C-6/C-7 Canals. Seepage 
from C-9 Stormwater Treatment Area/Impoundment will be collected and 
returned to the impoundment.
    The benefits from this project will include enhancing groundwater 
recharge within the basin, provide seepage control for Water 
Conservation Area 3 and buffer areas to the west thereby keeping more 
of the natural system's water in the natural system. In addition flood 
protection for the western C-9 Basin will be enhanced.
    This project is currently scheduled for construction initiation in 
September 2004 with completion in September 2007. Of the 2,500 acres 
needed for this project, the SFWMD has acquired 531 acres to date.
Taylor Creek/Nubbin Slough Storage and Treatment Area
    This project is located northeast of Lake Okeechobee in the Taylor 
Creek/Nubbin Slough (S-191) Basin. This basin is located in Okeechobee, 
St. Lucie and Martin Counties. This project has not yet been sited but 
an initial site for a portion of the facilities which is being pursued 
under the Critical Project authority is located near the northeastern 
shores of Lake Okeechobee and at the base of Nubbin Slough. The site 
consists of large areas of improved pasture and hayfields of an 
existing dairy operation.
    This project is included in the initial authorization for three 
reasons: 1) a portion of the lands needed for the project have been 
identified by the sponsor under the Critical Projects authority; 2) 
flows to Lake Okeechobee will be attenuated when lake levels are high 
or rising and 3) water quality treatment will be provided for flows 
from the Taylor Creek/Nubbin Slough basin which currently contribute 
the highest phosphorus inflow concentrations to Lake Okeechobee.
    This project includes an above-ground reservoir with a total 
storage capacity of approximately 50,000 acre-feet and a stormwater 
treatment area with a capacity of approximately 20,000 acre-feet in the 
Taylor Creek/Nubbin Slough Basin. The initial design of this project 
assumed a reservoir of 5,000 acres with water levels fluctuating up to 
10 feet above grade and a stormwater treatment facility of 
approximately 5,000 acres. It is anticipated that there will be a 
series of reservoir and stormwater treatment facilities located 
throughout the basin. The Project Implementation Report will address 
the location and sizing of the facilities as well as the design of 
levees and pump stations for the reservoirs and stormwater treatment 
areas.
    Local runoff from the Taylor Creek/Nubbin Slough Basin will be 
pumped into the reservoir then into an adjacent stormwater treatment 
area. The stormwater treatment area will reduce phosphorus 
concentrations in the runoff from approximately 0.58 mg/l to 0.117 mg/
l. Treated water will be pumped into Lake Okeechobee when the lake 
stage is falling and is at least 0.5 feet below the bottom pulse 
release zone.
    This project will benefit the project by protecting Lake Okeechobee 
from excessive high levels that impact the littoral zone as well help 
reduce regulatory releases from the lake to the St. Lucie and 
Caloosahatchee estuaries. Lake Okeechobee will also benefit from 
receiving the water when lake levels decline, providing protection from 
damaging low levels. Water quality treatment will reduce the nutrient 
load on the lake to the benefit of all of the Lake's native organisms 
including the substantial fishery.
    This project is currently scheduled for construction initiation in 
January 2005 with completion in January 2009. Of the 10,000 acres 
needed for this project, 8, 710 acres must still be sited and acquired.
Water Conservation Area 3 Decompartmentalization (Phase 1)
    The purpose of this project feature is to restore sheet flow and 
reduce unnatural discontinuities in the Everglades landscape. The 
project includes raising and bridging portions of Tamiami Trail and 
filling in portions of the Miami Canal within Water Conservation Area 
3. Due to the dependencies of components, this project would be 
implemented with the North New River Improvement project which would 
create a bypass for water supply deliveries using the North New River 
Canal.
    This project is included in the initial authorization for two 
reasons; 1) to provide immediate opportunities for enhanced sheetflow 
within Water Conservation Area 3 and between Water Conservation Area 3 
and Everglades National Park and 2) to integrate with ongoing 
modifications that are being made in the detailed design and 
construction of the Modified Water Deliveries to Everglades National 
Park project.
    This project includes backfilling the Miami Canal in Water 
Conservation Area 3 from one to two miles south of the S-8 pump station 
down to east coast protective levee. To make up for the loss of water 
supply conveyance to the Lower East Coast urban areas from the Miami 
Canal, the capacity of the North New River Canal south of the proposed 
Everglades Agricultural Area Storage Reservoir will be doubled under a 
separate component to convey additional water supply deliveries to 
Miami-Dade County as necessary. Modifications will also be made to the 
eastern section of Tamiami Trail which includes elevating the roadway 
through the installation of a series of bridges between L-31N Levee and 
the L-67 Levees. The eastern portion of L-29 Levee and Canal will also 
be degraded in the same area as Tamiami Trail modifications.
    The Project Implementation Report will address the scope and method 
to be used for Miami Canal backfilling, conveyance improvements to the 
North New River Canal and, the bridging of Tamiami Trail, and L-29 
modifications that are necessary to enable unrestricted flow from Water 
Conservation Area 3 into Everglades National Park. The sequencing of 
these modifications will also be addressed in the Project 
Implementation Report. These project modifications will be coordinated 
with the existing Modified Water Deliveries to Everglades National Park 
Project as well as the development of rainfall driven operational 
schedules for Water Conservation Area 3 and Everglades National Park.
    The benefits of this project include restoring sheet flow and 
reducing the unnatural discontinuities in the landscape. The water 
depth patterns will be more gradual allowing aquatic organisms will be 
able to move more freely, exotic species will not have the advantage of 
deep water canals that provide thermal refuge or dry levees on which to 
grow. Normal proportions of predators/prey species in fish populations 
will be undisturbed. Natural interspersions of different marsh habitats 
will replace the current system of upstream pools and downstream dry 
area on either side of barriers. The result will be better quality and 
more easily accessible habitat for wading birds and other Everglades 
species.
    This project will provide the initial increment of more integrated 
passive management of Water Conservation Area 3 and Everglades National 
Park. It is anticipated that these modifications will be made in 
association with the implementation of a rainfall driven operational 
schedules for both Water Conservation Area 3 and Everglades National 
Park.
    The Miami Canal and the Tamiami Trail modifications are currently 
scheduled for construction initiation in January 2005 with completion 
in January 2010. Of the 255 acres needed for this project, none have 
been acquired.
North New River Improvements
    This project is limited to modifications to existing C&SF Project 
features. The purpose of this project is to create a bypass for water 
supply deliveries using the North New River Canal to mitigate for 
filling in portions of the Miami Canal within Water Conservation Area 
3. Due to the dependencies of these components, this project would be 
implemented with the component Water Conservation Area 3--Phase 1 
(Raise and Bridge East Portion of Tamiami Trial and Fill Miami Canal 
within WCA3).
    This project is included in the initial authorization for two 
reasons; 1) to provide immediate opportunities for enhanced sheetflow 
within Water Conservation Area 3 and between Water Conservation Area 3 
and Everglades National Park and 2) to integrate with ongoing 
modifications that are being made in the detailed design and 
construction of the Modified Water Deliveries to Everglades National 
Park project.
    This project includes mitigating lost water supply conveyance 
caused by backfilling the Miami Canal in Water Conservation Area 3. To 
make up for the loss of water supply conveyance to the Lower East Coast 
urban areas from the Miami Canal, the capacity of the North New River 
Canal south of the proposed Everglades Agricultural Area Storage 
Reservoir will be doubled to convey additional water supply deliveries 
to Miami-Dade County as necessary. The capacities of S-351 and S-150 to 
pass additional water supply deliveries down the North New River Canal 
to Miami-Dade County will be doubled. In addition, the conveyance of 
the L-33 and L-37 borrow canals on the west side of US 27 between L-38W 
and the Miami Canal will be increased as necessary to pass the 
additional flows.
    The Project Implementation Report will address the scope and method 
to be used for Miami Canal backfilling, conveyance improvements to the 
North New River Canal and, the bridging of Tamiami Trail, and L-29 
modifications that are necessary to enable unrestricted flow from Water 
Conservation Area 3 into Everglades National Park. The sequencing of 
these modifications will also be addressed in the Project 
Implementation Report. These project modifications will be coordinated 
with the existing Modified Water Deliveries to Everglades National Park 
Project as well as the development of rainfall driven operational 
schedules for Water Conservation Area 3 and Everglades National Park.
    The benefits of this project include maintaining a water delivery 
mechanism to the lower east coast while restoring sheet flow and 
reducing the unnatural discontinuities in the landscape. This project 
will allow for water depth patterns in the Water Conservation Area 3 to 
be more gradual allowing aquatic organisms to move more freely, exotic 
species will not have the advantage of deep water canals that provide 
thermal refuge or dry levees on which to grow. Normal proportions of 
predators/prey species in fish populations will be undisturbed. Natural 
interspersions of different marsh habitats will replace the current 
system of upstream pools and downstream dry area on either side of 
barriers. The result will be better quality and more easily accessible 
habitat for wading birds and other Everglades species.
    This project will allow for the initial increment of a more 
integrated passive management of Water Conservation Area 3 and 
Everglades National Park. It is anticipated that these modifications 
will be made in association with the implementation of a rainfall 
driven operational schedules for both Water Conservation Area 3 and 
Everglades National Park.
    These project modifications will be coordinated with the existing 
Modified Water Deliveries to Everglades National Park Project as well 
as the development of rainfall driven operational schedules for Water 
Conservation Area 3 and Everglades National Park.
    The North New River Canal improvements are scheduled for 
construction initiation in January 2005 with completion in January 
2009. Of the 200 acres needed for this project, none have been 
acquired.
C-111N Spreader Canal
    This project has been sited in south Miami-Dade County in the 
Southern Glades and Model Lands areas. The project includes 
modifications to the ongoing C-111 Project to improve water deliveries 
and enhance the connectivity and sheetflow in the Model Lands and 
Southern Glades area, and reduce damaging wet season flows in C-111 to 
Card Sound and Florida Bay. These modifications include expanding the 
proposed C-111N spreader canal and filling the lower end of the C-111 
canal.
    This project is included in the initial authorization for several 
reasons: 1) early authorization will allow for inclusion into the 
ongoing detailed design and construction of the C-111 project, and 2) 
inclusion of a stormwater treatment area to provide water quality 
treatment of agricultural runoff prior to distributing water through 
the C-111N spreader canal. This project will improve deliveries and 
enhance the connectivity and sheetflow in the Model Lands and Southern 
Glades areas, reduce wet season flows in C-111, and decrease potential 
flood risk in the lower south Miami-Dade County area.
    This project includes construction, modification or removal of 
levees, canals, pumps, water control structures, culverts and a 
stormwater treatment area. This project enhances the C-111 Project 
design for the C-111N Spreader Canal with: the construction of a 3,200 
acre stormwater treatment area; the enlarging of pump station S-332E 
from 50 cfs to 500 cfs; increasing the capacity of C-111N for the 
higher capacity of flow and the extension of the canal approximately 
two miles under U.S. Highway 1 and Card Sound Road into the Model 
Lands; and culverts under U.S. Highway 1 and Card Sound Road. The 
initial design of this project pumps water from the C-111 and the C-
111E Canals through two 250 cfs pump stations into a stormwater 
treatment area prior to discharging through S-332E to the Southern 
Glades and the Model Lands through the C-111N Canal. This project also 
fills in the southern reach of the C-111 Canal below C-111N to S-197; 
removal of structures S-18C and S-197; completely backfilling C-110; 
and removal of adjacent levees and roads. The final size, depth, 
location and configuration of this project will be determined through 
more detailed planning and design.
    This project improves deliveries and enhances the connectivity and 
sheetflow in the Model Lands and Southern Glades areas, reduces wet 
season flows in C-111, and decreases potential flood risk in the lower 
south Miami-Dade County area while improving the quality of water 
discharged into the Model Lands and Southern Glades areas.
    This project is currently scheduled for construction initiation in 
July 2005 with completion in July 2007. Of the 12,415 acres needed for 
this project, the SFMWD, Miami-Dade County and the State have acquired 
6,231 acres to date.
    Shown in the table below are the real estate requirements and 
status for each of the initial components recommended for 
authorization:.

                                         Initial Authorization Projects
                                       Real Estate Requirements and Status
----------------------------------------------------------------------------------------------------------------
                                                       Estimated Acreage
         Project Component            Project Cost        Requirement                Acquisition Status
----------------------------------------------------------------------------------------------------------------
C-44 Basin Storage Reservoir......     $112,562,000  10,000...............  Not sited or acquired. Martin County
                                                                             tax enacted in 1998 for land
                                                                             acquisition needed for
                                                                             Comprehensive Plan implementation.
Everglades Agricultural Area           $233,408,000  -50,000 (Talisman      All lands for project already
 Storage Reservoirs--Phase I.                         purchase).             acquired by DOI and SFWMD.
Site 1 Impoundment................      $38,535,000  2,458................  SFWMD East Coast Buffer Project.
                                                                             1,658 acres acquired by SFWMD. 800
                                                                             acres remaining to be acquired.
WCA 3A/3B Levee Seepage Management     $100,335,000  6,542................  SFWMD East Coast Buffer Project.
                                                                             5,796 acres acquired by SFWMD
                                                                             (includes 3,190 previously
                                                                             certified for C&SF Project). . 746
                                                                             acres remaining to be acquired.
C-11 Impoundment & Stormwater          $124,837,000  2,535................  SFWMD East Coast Buffer Project. 531
 Treatment Area.                                                             acres acquired by SFWMD. 2004 acres
                                                                             remaining to be acquired.
C-9 Impoundment/Stormwater              $89,146,000  2,500................  SFWMD East Coast Buffer Project.
 Treatment Area.                                                             1,515 acres acquired by SFWMD. 985
                                                                             acres remaining to be acquired.
Taylor Creek/Nubbin Slough Storage     $104,027,000  10,000...............  1,290 acres sited under Critical
 and Treatment Area.                                                         Project. Remaining acres not sited.
                                                                             8,710 acres remaining to be
                                                                             acquired.
Raise and Bridge East Portion of        $26,946,000  55...................  Not acquired.
 Tamiami Trail and Fill Miami
 Canal within WCA 3.
North New River Improvements......      $77,087,000  200..................  Not acquired.
C-111 N Spreader Canal............      $94,035,000  12,415...............  Ongoing program by State and local
                                                                             agencies. 2,451 acquired by SFWMD,
                                                                             3,780 acquired by Miami-Dade
                                                                             County, 495 acres acquired by the
                                                                             State, for a total of 6,231. 6,184
                                                                             acres remaining to be acquired.
Adaptive Assessment and Monitoring     $100,000,000  NA...................  NA
 Program (10 years).
    TOTAL.........................   $1,100,918,000  85,905...............  Remaining Acreage Requirement 29,684
----------------------------------------------------------------------------------------------------------------

Adaptive Assessment and Monitoring
    An extensive Adaptive Assessment Program, which includes a system-
wide monitoring program will be conducted to support the system-wide 
ecosystem restoration objectives of the CERP. This program will provide 
an opportunity to continue investigating concepts and issues relative 
to the overall CERP while implementation of the initial project 
features are underway. The Adaptive Assessment Program will include 
continued system-wide evaluation and analysis among other planning 
activities. The construction and regional monitoring program will have 
a dual focus on the biological and hydrological restoration objectives 
in the natural system and the water supply and flood protection 
objectives in the urban and agricultural regions. The total annual cost 
of the program is $10,000,000 and the Corps has recommended a 10-year 
period for this program.

    Question 14a. What is the process that occurs between the time when 
a feasibility-level report (PIR, in the case of CERP) is issued and 
construction is initiated?
    Response. The CERP presents the conceptual overview of project 
implementation. Project Implementation Reports (PIRs) are documents 
that provide the additional plan formulation, engineering and design, 
economic analysis, environmental analysis (including supplemental NEPA 
analyze), and real estate analysis for specific components or a series 
of components. All PIRs will be submitted to the Corps headquarters and 
the Office of the Assistant Secretary of the Army for Civil Works for 
review and approval. As proposed in the Administration's draft WRDA 
2000 bill, the PIRs for the 10 projects proposed for initial 
authorization will not require further authorization, whereas PIRs for 
subsequent project components will be presented to Congress in future 
WRDA bills for authorization.

    Question 14b. What is the average length of time that passes 
between these two steps (feasibility finalization and construction 
initiation)?
    Response. PIRs will require 18 to 36 months to complete. Detailed 
design and plans and specifications are expected to require an 
additional 3 years to complete, although some of the simpler project 
components may be completed in less time. Upon completion of plans and 
specifications and execution of a Project Cooperation Agreement with 
the local project sponsor, construction contracts may be advertised and 
construction initiated.
                     harbor services users fee/fund

    Question 15. How do you respond to allegations that the Harbor 
Services Users Fee would divert traffic away from U.S. ports?
    Response. The following is the Administration's analysis of the 
diversions question:
    Increases in waterborne transportation costs represented by the 
user fee are expected to cause vessel operators to react in various 
ways. One concern is that some vessel operators could seek to avoid 
paying the fee by changing ports-of-call. Under the HMT, it is the 
shippers who pay the tax and are motivated to transship higher value 
cargoes through Canada to avoid the HMT. Under the HSUF the incentive 
for vessel operators paying the fee would be to have as much cargo 
delivered to the U.S. per voyage in order to be able to pass along the 
HSUF onto the maximum number of shipments possible. In cases where the 
HSUF is less than the HMT, some U.S. cargo that was previously shipped 
through Canada could be expected to flow back to U.S. ports.
    The only way to avoid paying the HSUF would be for a vessel 
operator to completely stop calling on U.S. ports during voyages to 
North America (i.e., not use any part of the U.S. harbor system). The 
complete avoidance of U.S. ports on a significant number of existing 
North American voyages is considered highly unlikely due to the massive 
size of the U.S. market and the great demand for access to U.S. 
consumers.
    Vessels and voyages that could be expected to be impacted by the 
HSUF would be those that would pay a relatively high user fee in 
comparison to total ocean voyage costs and have the greatest degree of 
flexibility in selecting ports-of-call. Based on 1996 data, voyages to 
the Pacific Northwest that could be impacted if carriers cannot pass on 
the fee in the form of higher rates involved approximately $1 billion 
of containership cargo carried in 43,000 TEUs and about 1.4 million 
metric tons of dry bulk cargo valued at $110 million. This would be 
equivalent to about 1 percent of the value, 2 percent of the cargo 
tonnage and 3 percent of the TEUs moving through the ports in 
Washington and Oregon (which in 1996 had approximately 68 million 
metric tons of foreign trade valued at $89 billion, some of which was 
carried in the 1.7 million TEUs imported and exported in these States). 
On a national perspective, it represents 0.1 percent of the 1.1 billion 
metric tons of the waterborne foreign trade in the U.S. and 0.2 percent 
of the total value of $627 billion in 1996. It's also 0.3 percent of 
the national total of the cargo carried in 13 million loaded TEUs. A 
similar analysis was done on the Atlantic Northeast with respect to the 
Ports of NY/NJ and the Port of Halifax, Canada. The amount of cargo 
potentially impacted was very small and not significant at the port or 
national levels.

    Question 16. How can you justify $950 million in offsetting 
collections based on a program that, frankly, lacks support in the 
Congress and has little chance of being enacted? Is the Corps looking 
to alternative means other than the HSF proposal?
    Response. The Administration's proposal of the HSUF represents the 
best of all alternatives considered. Therefore, the Administration 
stands behind the HSUF and the $950 million in offsetting collections. 
The Administration's analysis of alternatives considered before 
recommending the HSUF to the Congress is given below:
    An interagency working group convened by the Office of Management 
and Budget reviewed a wide range of financing options aimed at funding 
harbor operations and management and development. The proposed ``Harbor 
Services User Fee'' (HSUF), based on ship size (using the net or gross 
tonnage), the frequency of use, and the operational characteristics of 
various types of vessels, emerged from this interagency examination of 
financing alternatives. No other option based on the ``beneficiary 
pays'' principle could be identified that would:
      ensure an appropriate link between the fee paid by users 
and the services provided by the Government in accord with the Supreme 
Court Decision March 30, 1998 (U.S. Shoe);
      not significantly alter the competitive balance between 
U.S. ports;
      not significantly impact the competitiveness of U.S. 
products;
      generate the revenue needed for harbor services; and,
      be practical to administer.
    A summary of the alternatives considered and reasons for rejecting 
or incorporating them into the Harbor Services User Fee proposal 
follows below:
    A Fee Based on Ship Size. The concept of ship size was identified 
as a measure that reasonably approximates the use of Government 
services and, in conjunction with frequency of use and other vessel 
operational and service factors, would satisfy the constitutionality 
test in the U.S. Shoe decision. In concept, such a fee could be based 
on a variety of ship measurement factors, including vessel draft 
(design draft or sailing draft), weight tonnage measures (i.e., 
displacement tonnage, lightweight tonnage, deadweight tonnage) and 
volumetric tonnage measures (gross tonnage, net tonnage).
    Volumetric measures of ship tonnage (net and gross tonnages) were 
ultimately selected for incorporation into the HSUF proposal because 
these volumetric measures of vessel size have long been accepted at 
ports worldwide as a basis for fees and charges. Net and gross tonnages 
are known, fixed ship characteristics, which are assigned to each 
vessel via a Tonnage Certificate in accord with the International 
Convention of Tonnage Measurement of Ships. A vessel's net or gross 
tonnage does not change once the ship is built unless a structural 
modification is made, in which case the vessel is resurveyed and an 
amended Tonnage Certificate issued. The use of a published, fixed ship 
characteristic was considered important in establishing a user fee 
program that could be administered efficiently.
    A vessel's design draft does not share the features of uniformity, 
consistency and acceptance provided by net or gross tonnages. The use 
of actual draft would be far more difficult to measure and administer, 
since sailing draft is an operational factor affected by ship speed, 
place of measurement on the ship, season of the year, salinity of the 
water, etc. In addition, the use of any operational characteristic 
would require a large data collection effort that would be subject to 
human error upon measurement and/or verification.
    The various measures of a vessel's weight were rejected because 
they were either complicated by operational aspects of use (i.e., 
displacement tonnage, which consists of the sum of a ship's weight 
(lightweight) and its contents (deadweight), would also require the 
collection of operational data), and/or were not considered suitable 
for purposes of approximating the constitutional link required between 
benefits and use.
    A Single Fee based on Cargo Tonnage. Such a fee would be based on 
the commodity tonnage carried on a ship regardless of what type of 
commodity is involved. This fee would affect the competitiveness of 
various commodities differently, with lower value cargoes subjected to 
the most significantly adverse impacts. In particular, any fee level 
that would generate the amount of revenue needed to pay for harbor 
services (harbor operation and maintenance; or harbor operation and 
maintenance and harbor development) nationwide would severely impact 
key U.S. exports such as bulk grains and coal shipments. In addition, 
since the fee is independent of the size of the vessel carrying the 
cargo, there would not be a direct link between the primary user of the 
harbor services and the level of services provided.
    A Fee based on Cargo Tonnage by Commodity Type. Such a fee would be 
based on the commodity tonnage, with the fee rate varied by commodity 
type. Since the type of cargo carried on a vessel does not correlate 
with harbor service use, there is no way to formulate a fee schedule 
that provides a reasonable link between the fee and the level of 
service provided. In addition, the development of any commodity-based 
tonnage fee schedule that would raise sufficient revenue while 
minimizing adverse impacts to U.S. competitiveness would merely yield a 
tonnage-based version of the current ad valorem tax. Such an 
alternative is not consistent with the constitutionality test outlined 
in U.S. Shoe.
    A Combination Fee based on Vessel Size and Cargo Tonnage. The 
commodity-based portion of such a fee would not provide the link needed 
between the level of use and the services provided. However, vessel 
size proved to be a useful concept and was considered further in the 
formulation of the Harbor Services Fee Proposal.
    A Combination Fee based on Vessel Size and Cargo Tonnage by 
Commodity Type. Again, the commodity-based portion of such a fee would 
not provide the link needed between the level of use and the services 
provided. In addition, varying the fee's cargo tonnage portion by 
commodity type would merely result in a tonnage-based version of the 
HMT.
    Port Specific Fees. A fee schedule that varies by port or other 
geographic criteria would clearly upset the existing competitive 
balance between U.S. ports, and would also likely adversely impact the 
competitiveness of key U.S. exports. Such an approach was considered to 
violate the ``Port Preference'' clause of the U.S. Constitution 
(Article 1, Section 9, Clause 6).
    A Fee based on Vessel Type. It was recognized that different 
classes of vessels might have very different operating practices and 
service demands, and that such considerations were important in 
approximating the link between a user fee and the services provided by 
the Government. Therefore, this factor was incorporated into the 
formulation of the HSUF concept.
    A Tax on Transportation Fuels. A variety of fuel tax alternatives 
were considered under the rationale that the transportation system in 
part or as a whole benefits from the Government's harbor services. Fuel 
taxes are applied to transportation modes throughout the U.S., and the 
collection and administration of a fuel tax was considered feasible. 
The alternatives considered ranged from a fuel tax on marine vessels 
only to a fuel tax on intermodal freight transportation (including 
marine vessels, freight trains and trucks), and, ultimately a fuel tax 
on all transportation modes (including non-freight, i.e., passenger 
transport, including automobiles).
    The marine vessel only alternative was considered to provide the 
most direct link between the benefits and services harbor users 
receive, but the resulting tax level was considered significant enough 
to disrupt the U.S. bunker fuel industry. The tax levels of all of the 
other alternatives, except the ``across-the-board'' fuel tax, also 
proved to be significant in terms of the impact to U.S. 
competitiveness. Although an ``across-the-board'' fuel tax would result 
in the most modest tax level (less than 0.5 cents per gallon), the 
inclusive nature of a tax which would also be applied to fuels for 
passenger vehicles was not a viable alternative.
    Port Financing of Harbor Services. Alternatives whereby the Federal 
Government either reduces or eliminates its financing role for harbor 
services were also considered. Options ranged from complete divestment 
of harbor service financing to the various ports, to the cost-sharing 
of harbor operation and maintenance services between the Federal 
Government and the ports. The latter alternative could be based on 
cost-sharing formulas consistent with those enacted for harbor 
development projects.
    Inherent in such alternatives was the expectation that the 
individual ports who do not currently have the ability to pay for 
harbor services would have to enact their own set of port fees or 
harbor charges to finance harbor services. Ultimately, this would 
likely result in a vast range of different non-Federal port specific 
fees at ports across the nation. For that reason, this option was 
considered to be fraught with the many problems attributed to the 
``Port Specific Fees'' alternative discussed above: it would upset the 
existing competitive balance between U.S. ports, while also adversely 
impacting the flow of U.S. exports and imports.
                              devil's lake

    Question 17. Do you have a completed feasibility study and 
favorable report from the Chief of Engineers on the Devil's Lake 
Emergency Outlet?
    Response. No, we have not completed the feasibility study. The 
problem at Devils Lake has worsened, and we have an on-going flood-
fight and an impending Natural Disaster that is requiring the 
expenditure of hundreds of millions of Federal dollars. Our efforts 
have been to focus on an emergency response and to proceed immediately 
to the environmental studies and design activities that we believe can 
best resolve the situation. To this end, we developed an Emergency 
Response Plan to concentrate on developing an emergency outlet from the 
west end of Devils Lake. We believe that the approach proposed in that 
plan is the most reasonable approach which bears the most potential to 
provide relief from the increasing lake levels.

    Question 18. Have all the NEPA requirements been met?
    Response. Not yet. We are proposing the NEPA investigations as part 
of the Emergency Response Plan. Funding to allow us to proceed with the 
Emergency Response Plan has been requested as part of the Fiscal Year 
2000 Supplemental request that was included with the President's 
budget.

    Question 19. If NEPA and the feasibility reports are complete, 
could you see that the committee gets a copy?
    Response. The reports are not complete, but when they are we will 
forward copies to the committee.

    Question 20. Has the ``emergency'' designation required and defined 
by the fiscal year 99 Energy and Water Appropriations Act been met?
    Response. Yes, Senator. One of my predecessors sent a letter to the 
Speaker of the House and President of the Senate on October 15, 1997, 
that provided a determination that an emergency, as defined by Stafford 
Act, exists at Devils Lake.

    Question 21. Why does the proposal suggest removing the standard 
``economically justified'' as it applies to the Devil's Lake outlet? Is 
this standard Corps procedure?
    Response. Arriving at the economics for this emergency project 
would be practically impossible using standard a Corps approach. 
Expected damages are based on probabilities, which are, in turn, based 
on extrapolations from observed data. The potential B/C ratio for this 
project could be anywhere from as low as about 0.2 up to as high as 
nearly 4.0. If the lake stops rising and never spills over into the 
Sheyenne River, the expected damages are considerably lower and the 
project would not be economically justified. On the other hand, if the 
lake continues to rise and is allowed to spill naturally into the 
Sheyenne River,Senator the damages would be much greater, and a B/C 
ratio greater than one would result. The experts differ on how to 
interpret the probabilities involved, but some climatologists tell us 
that the current ``wet cycle'' will continue for another 10 years of 
so, which could result in an overflowing scenario.
    We do know that the lake has risen much faster in recent years than 
the probabilities would have predicted. We also know that the Federal 
Government has spent more than $300 million in emergency responses to 
this situation, which could have been largely avoided by construction 
of a $110 million--$130 million outlet.

    Question 22. What is the cost-benefit ratio for construction of 
this outlet?
    Response. The potential cost-benefit ratio of an outlet could be 
anywhere from as low as 0.2 up to nearly 4.0. However, we have not 
calculated it exactly. Because the range of probabilities is so great, 
we cannot reliably predict what will happen. That is one of the reasons 
why our Emergency Response Plan is built around the need to forge ahead 
with design and environmental investigations. If the lake then reverses 
its trends, then we have only lost a relatively minor amount of effort. 
If, on the other hand, the lake continues to rise, as some predict, and 
we have not done the necessary design efforts and environmental 
studies, we will be faced with a disaster of major proportions and it 
will probably be too late to prevent that from happening. Some 
predictions indicate that we could be in ``trouble'' in just a few 
years from now.

    Question 23. Do you recall at what point it was that the call in 
North Dakota shifted from that of an ``inlet'' to that of an 
``outlet?''
    Response. Not specifically. We do know that back in the 1940's, the 
lake had shrunk down to a very small area, and that at times in the 
geological record, the lake has dried up completely. It would seem that 
the local people were very concerned with the possibility of the lake 
drying up. Through the 70's the lake rebounded slightly and regained 
it's ``normal'' size. In fact, we constructed some small levees to 
protect the City of Devils Lake in 1986. It is only in the mid-to-late 
1990's that we witnessed the huge rises in the lake, making an outlet 
seem reasonable. There has been a range of voices on the issues, some 
calling for stabilization of the lake's level by means of both inlet 
and outlet controls. In the Energy and Water Development Appropriations 
Act of 1998, Congress specifically enjoined the Corps from studying 
inlet controls and directed that our efforts be applied to an outlet 
only.
                                 ______
                                 
 Responses by Dr. Joseph Westphal to Additional Questions from Senator 
                                 Thomas

    Question 1. The Corps lumped virtually all their Federal Activities 
Inventory Reform (FAIR) Act inventory items into two categories. Please 
provide more detailed information as to what those activities are, 
where they are located and how many FTEs are involved, e.g., 
engineering, mapping, campground management, dredging, etc?
    Response. The Corps' Fair Inventory was submitted to higher 
headquarters in the format, including the categories, required by the 
Defense Reform Initiative Directive (DRID) 20. The DRID 20 categories 
were primarily designed to classify activities in support of military 
missions and, as a result, do not differentiate activities in support 
of the Corps Civil Works mission. It is our understanding is that the 
Corps DRID 20 inventory was aggregated and reconfigured by higher 
headquarters to meet FAIR Act guidance. The Office of Management and 
Budget further redefined the data by applying OMB's FAIR coding before 
returning it to the Department of Defense (DoD) for release to the 
public. Given the revisions made to the DRID 20 inventory that the 
Corps submitted, it is no longer possible to identify the Corps data 
within the published DoD FAIR inventory in order to provide the 
specific information requested. However, I have asked the Corps to 
provide you an extract of the data that went into the initial Civil 
Works submission for this inventory. This extract will include the 
information you requested.

    Question 2. Other Federal agencies, as well as government at other 
levels and private owners consider ``program management'' and 
``construction management'' to be commercial activities. Numerous 
private firms provide these services. Does the Corps consider these 
activities ``commercial'' or ``inherently governmental''? Please 
explain the Corps' classification of these activities.
    Response. The Corps considers both its ``program management'' and 
``construction management'' functions as inherently governmental. This 
is consistent with definitions in the Office of Federal Procurement 
Policy (OFPP) Policy Letter 92-1. Office of Management and Budget (OMB) 
Circular A-76 relies on OFPP Policy Letter 92-1 to provide a definition 
of ``inherently governmental.'' Appendix A of Policy Letter 92-1 cites 
both ``the determination of Federal program priorities or budget 
requests'' and ``administering contracts (including ordering changes in 
contract performance or contract quantities, taking action based on the 
evaluations of contractor performance, and accepting or rejecting 
contractor products or services)'' as inherently governmental-the 
former defines ``program management,'' the latter defines 
``construction management'' within the Corps.

    Question 3. The Intergovernmental Cooperation Act permits Federal 
agencies to provide certain services to State and local government, 
provided such services cannot be reasonably and expeditiously be 
acquired from the private sector. OMB Circular A-97 requires a 
certification that such services cannot be obtained from the private 
sector before a Federal agency can provide such services. With regard 
to the Corps' work for the Los Angeles School District, was such a 
certification was made and what type of private sector market study did 
the Corps or LA Schools conduct prior to making that determination? 
Please provide a copy of any such certification for the record.
    Response. The Los Angeles School District made a certification that 
the requested services ``are services which cannot be procured 
reasonably and expeditiously by the LAUSD through ordinary business 
channels.'' The OMB Circular A-97 does not have a requirement for a 
private sector market study and no such study was conducted.

    Question 4. Has the Corps ever subjected its program management and 
construction management activities to an OMB Circular A-76 commercial 
activities cost comparison to justify in-house performance and to 
determine that Corps performance is more cost effective than 
contracting out?
    Response. Since the Corps regards both its program management and 
construction management activities as inherently governmental, it has 
done no OMB Circular A-76 commercial activities cost comparisons with 
regard to these functions.

    Question 5. How is USACE provision of program management and 
construction management services for the LA School District considered 
a part of the statutory mission (civil works or military) of the Corps?
    Response. There are two laws that provide authority for the Corps 
to support State and local governments. 10 USC 3036(d) authorizes the 
U.S. Army Corps of Engineers to provide reimbursable services to a 
State or political subdivision of a State if there is Federal 
assistance involved and the agency providing Federal assistance does 
not object. 31 USC 6505, the Intergovernmental Cooperation Act, 
authorizes executive agencies to provide certain reimbursable services 
to a State or local government when requested.

    Question 6. The Corps has a policy of not even giving the 
appearance of competing with the private sector. How has the Corps 
justified its work for the LA School District in view of this policy?
    Response. The Intergovernmental Cooperation Act provides authority 
for Federal agencies to support State and local governments when they 
make a request for assistance. The Corps role in such an endeavor does 
not preclude participation of private industry. The vast majority of 
the work for the Los Angeles School District will be contracted to the 
private sector.

    Question 7. For the past 3 years, please provide a description of 
requests for ``support for others'' the Corps has declined due to the 
fact that such activities would be in competition with the private 
sector, including he identity of the requesting entity and a 
description of the requested services.
    Response. We do not collect or keep records of requests that have 
been declined. Our regulations require that requests from State and 
local governments be accompanied by a certification from the requesting 
government that it cannot obtain the services reasonably and 
expeditiously through ordinary business channels. This precludes 
competition with the private sector. Our district commanders are 
required to concur with that certification. Support to Federal agencies 
falls under the provisions of the Economy in Government Act. In all of 
our Support for Others work, we stress augmenting the in-house 
resources of the requesting government or agency providing those 
services the requestor believes should be done by a government agency.

    Question 8. For each of the past 3 years, how much did the Corps 
receive in reimbursable income for ``support for others''?
    Response. For the previous 3 years the Corps has accomplished the 
following amounts of reimbursable work under the Support for Others 
program (all non-DOD reimbursable work):

    Fiscal year 1999--$717M (Total Support for Others Program)
    Fiscal year 1998--$695M (Total Support for Others Program)
    Fiscal year 1997--$756M (Total Support for Others Program)

    Question 9. If the Corps did not receive reimbursable income form 
other entities, and relied solely on its appropriated funds, would the 
Corps have to implement a reduction in force? If so, how many FTEs 
would be eliminated?
    Response. We have about 1,100 FTEs doing Support for Others (SFO) 
work or about 5 percent of the civil work force. The actual impact 
would be based on how quickly the reimbursable funding is eliminated, 
and whether the reduction is total or partial. If the Corps civil 
program were required to stop all reimbursable work at the end of the 
current Fiscal Year, the problem of placing its employees then working 
on SFO projects would be exacerbated. Under such a scenario, there is 
some potential for utilizing RIF procedures. We probably would not be 
able to absorb all of them into our appropriated work in all locations 
and, even if we could, this would lower the amount of engineering work 
contracted to private firms. We would probably incur RIFs in districts 
that have a high SFO workload and those with specialized skills such as 
required in Superfund work. On the other hand, if the Corps were to 
complete the current reimbursable projects over the next three to 5 
years, the personnel associated with those projects might be redirected 
to other Corps programs.

    Question 10. With regard to ``support for others'' activities, what 
functions does the Corps perform in-house because it considers these 
functions inherently governmental and what functions does the Corps 
consider ``commercial'' and contract to the private sector from 
reimbursable income?
    Response. The Corps functions related to ``support for others'' 
activities includes scoping, negotiating, awarding, administering, 
terminating contracts. There is a limited amount of in-house design 
work when such assistance is not readily available in the private 
sector or to keep our expertise current. Over seventy-five percent of 
the ``support for others'' program is contracted to the private sector.
                                 ______
                                 
 Responses by Dr. Joseph Westphal to Additional Questions from Senator 
                                 Baucus

    Question 1. Did the Corps Missouri River Region, Northwestern 
Division consult with the U.S. Fish and Wildlife Service prior to 
releasing its draft Preferred Alternative for the Missouri River Master 
Manual? If so, please provide details (date[s] and substance) of any 
such consultations. If not, please explain why the U.S. Fish and 
Wildlife Service was not consulted prior to releasing the District's 
draft Preferred Alternative.
    Response. Yes, the Corps' Missouri River Region consulted with the 
U. S. Fish and Wildlife Service on this subject on many occasions. A 
chronology of events is provided below.

      April 8, 1986. Corps initiated consultation with the 
USFWS on the effects of Missouri River Reservoir Operations
      Oct. 19, 1987. Corps transmitted a Biological Assessment 
outlying how Missouri reservoir operations may affect the federally 
listed interior least tern, piping plover, bald eagle, and peregrine 
falcon.
      May 18, 1990. Service letter initiated informal 
consultation on the Master Manual Review and Update study.
      Nov 14, 1990. USFWS provided the Corps a Biological 
Opinion concluding the operations may jeopardize the interior least 
tern and piping plover. The opinion outlined reasonable and prudent 
alternatives and reasonable and prudent measures, which if implemented 
would preclude jeopardy to both species. The opinion also outlined 
measures to help conserve the bald eagle.
      April 3, 1991. USFWS letter to the Corps asking the Corps 
to re-initiate consultation on water operations and indicating a 
biological assessment would not be needed.
      June 10, 1991. Letter to the Service from the Corps 
indicating an assessment would be prepared using the tools and data 
generated from the Master Manual Review process.
      September to December 1992. The Corps, Service, and basin 
States coordinated endangered species inputs and analysis of 
environmental alternatives for the Master Manual Review.
      Nov. 19,1993, Service and Corps meet to discuss 
alternative strategies for Endangered species act consultation.
      Nov. 24, 1993. Missouri River Division Engineer and USFWS 
Region 6 Regional Director meet and agree on a strategy to initiate 
formal Sec. 7 consultation prior to identification of a preferred 
alternative.
      Dec. 8, 1993. Corps requested initiation of formal 
consultation on Master Manual and requested the biological significance 
of the alternatives under study to prevent jeopardy.
      Dec. 28, 1993. Service acknowledged Corps request by 
letter.
      Jan. 24, 1994. Service letter to the Corps requesting 
additional information.
      Feb. 9, 1994. Meeting between the Corps and Service to 
address additional information needs.
      Feb. 16, 1994. Service letter to the Corps concurring 
with the Dec 8, 1994 Corps letter requesting consultation and 
requesting an extension of time to complete the draft biological 
opinion.
      April 12, 1994. Per Corps Dec 8 letter, Service provides 
views on biological significance to threatened and endangered species 
of the alternatives under study.
      May 9, 1994. Corps advised Service and publicly announced 
the selection of a preferred alternative.
      May 20, 1994. Service letter requests an extension to 
August 9, 1994 to produce a draft biological opinion.
      June 13, 1994. Corps letter to the Service concurred with 
Service request for an extension.
      July 1994. Corps releases Draft Environmental Impact 
Statement on the Master Water Control Manual
      August 1994. Service completes draft biological opinion. 
Draft biological opinion states the Service will produce a final 
biological opinion when the Corps completes a final EIS.
      1994--1998. Corps takes comment on draft EIS and 
reformulates alternatives.
      August 1998. Corps releases preliminary revised draft EIS 
describing a range of possible alternatives.
      Dec 4, 1998. Corps submit BA on current Missouri River 
water control plan to USFWS
      January 12-13, 1999. Consultation on the current water 
control plan.
      February 18-19, 1999. Consultation on the current water 
control plan.
      March 24-25, 1999. Consultation on the current water 
control plan.
      April 19,1999. Submit Biological Assessment on the 
Missouri River Bank Stabilization and Navigation Project (BSNP)
      April 19, 1999. Amended proposed action to include all 
Kansas River projects
      April 29-30, 1999. Consultation on the current water 
control plan, BSNP, and Kansas River projects.
      May 20-21, 1999. Consultation on the current water 
control plan, BSNP, and Kansas River projects.
      July 7-8, 1999. Consultation on the current water control 
plan, BSNP, and Kansas River projects.
      September 28-29, 1999. Consultation on the current water 
control plan, BSNP, and Kansas River projects.
      November 16-17, 1999. Consultation on the current water 
control plan, BSNP, and Kansas River projects.
      December 15-16, 1999. Consultation on the current water 
control plan, BSNP, and Kansas River projects.
      January 25-26, 2000. Consultation on the current water 
control plan, BSNP, and Kansas River projects.
      Feb 4, 2000. USFWS Region 6 and 3 Regional Directors and 
staff meet with NWD Commander and staff for briefing on the status of 
consultation on current operations and the NWD preferred alternative.
      Since February 4, there has been a mixture of calls/
meetings, which have been partly Section 7 consultation on existing 
operations and partly master manual related. They are:
      February 18, 2000--conference call with Wash DC, regional 
and field staff of USFWS and Corps on NWD PA for Master Manual.
      February 25, 2000. Conference call with USFWS regional 
and field staff on NWD PA for Master Manual. Service staff informs NWD 
staff the NWD preferred alternative does not have flow releases from 
Gavins Point dam needed to preclude jeopardy to threatened and 
endangered species.
      March 2 & 3, 2000. Consultation meeting on both existing 
operations and NWD PA. Service staff provides Corps staff draft 
magnitude, duration and frequency of flow volumes needed from Gavins 
Point Dam to prevent jeopardy in river reaches below Gavins Point Dam 
to federally listed species.

    Question 2. Does the Corps believe that the Northwestern Division's 
draft Preferred Alternative for the Missouri River Master Manual will 
avoid a jeopardy opinion by the U.S. Fish and Wildlife Service related 
to the least tern, piping plover, and pallid sturgeon? If so, please 
describe what measures are proposed in the District's draft Preferred 
Alternative that the Corps believes will avoid a jeopardy opinion. If 
not, what are the Corps plans for avoiding such an opinion?
    Response. The Corps is currently in informal consultation with the 
U.S. Fish and Wildlife Service discussing the elements of the NWD 
preferred alternative for the RDEIS, the effects on the listed species, 
and other potential actions the Service may request to avoid jeopardy. 
The Corps and Service are also in consultation on the existing 
operation of the main stem Missouri River Project under the current 
water control manual, the operation of the Bank Stabilization and 
Navigation Project, and existing operation of the Kansas River 
projects. Until the consultation process is completed and a Biological 
Opinion issued, it is not known whether the NWD preferred alternative 
in combination with other actions will avoid jeopardizing the listed 
tern, piping plover, and pallid sturgeon.

    Question 3a. Please describe how the recreational benefits have 
been assessed and quantified for the purpose of comparing different 
alternatives.
    Response. Several different sources of information were used to 
identify existing recreation visitation and uses for the six mainstem 
lakes and the intervening and Lower River reaches. The Corps has 
existing data on the lakes, and two States have data on their Lower 
River reaches. Several different methodologies were examined before the 
travel-cost methodology was selected for use in the model. Discussions 
of the sources of information and the methodology were discussed with 
the Economic Subcommittee that was formed by the Governors' Oversight 
Committee that was established at the onset of the Master Manual study. 
The existing visitation participated in a variety of activities, and 
each activity had a value associated with it, some with relative high 
values (e.g., boating, water skiing) and others had relatively low 
values (e.g., picnicking, sight seeing). Estimates were then made as to 
how visitation would be affected by changing levels in the lakes and 
river flows such that an annual value for the visitation and associated 
activities could be computed. For example, as the lakes decline during 
droughts, the visitation and economic value will drop. As the lake 
recovers after the drought, the visitation will eventually return to 
pre-drought levels, only at a slower rate than it declined (people may 
participate in other forms of recreation in other areas and not go back 
to the lakes immediately on recover of the lake levels).

    Question 3b. How have recreational benefits not associated with 
Corps recreational areas be accounted for?
    Response. The Lower River reach of the Missouri River was covered 
by two recreation surveys. The Nebraska reach was surveyed in 1992 by 
the Nebraska Game and Parks Commission. A preliminary report of the 
survey findings was provided to the Corps in October 1992 (finalized in 
March 1993) for use in the Master Manual study. Similarly, the Missouri 
Department of Conservation had a survey conducted and a report 
completed in September 1989 entitled ``Recreational Use Survey of the 
Missouri River''. Additionally, oxbow lakes in close proximity to the 
Missouri River were also surveyed in January 1993 by The Gallup 
Organization, and these recreation activities were added to the 
recreation value in the Sioux City to Rulo reach.

    Question 3c. How do the benefits of recreational activities such as 
fishing, camping, canoeing, and waterfowl hunting between Gavins Point 
and St. Louis compare for the Northwestern District's draft preferred 
alternative and the Missouri River Natural Resources Committee (MRNRC) 
spring rise/split season alternative?
    Response. The Corps analyzed potential impacts over a 100-year 
period of analysis, the 1898 to 1997 period on which flow data are 
available. The average annual recreation benefits for that period are 
estimated to be $19.6 million per year for the NWD preferred 
alternative and $18.3 million per year for the MRNRC alternative, a 
reduction of $1 .3 million per year. This is a loss of almost 7 percent 
of the benefits of the NWD preferred alternative.

    Question 3d. How do the benefits of recreational activities such as 
fishing, camping, canoeing, and waterfowl hunting above Gavins Point to 
Fort Peak compare for the Northwestern District's draft preferred 
alternative and the Missouri River Natural Resources Committee (MRNRC) 
spring rise/split season alternative?
    Response. For the 100-year period of analysis, the average annual 
recreational benefits are $68.3 million for the NWD preferred 
alternative and $68.8 million for the MRNRC alternative. This 
difference represents a gain in benefits for the MRNRC alternative 
relative to the NWD alternative of $0.5 million, or a gain in benefits 
of 0.7 percent relative to the NWD alternative's benefits. This gain is 
due primarily to the greater conservation measures included in the 
MRNRC alternative. (Relative minimum storage levels in the 30's/50's/
80's droughts of 27/42/43 MAF for the NWD preferred alternative and 31/
46/45 MAF for the MRNRC alternative.)

    Question 4. Particularly as it relates to the biological and 
economic elements of the alternative, please describe the independent 
peer review (i.e., external to the Corps) that has been conducted on 
the data, methods, assumptions, and conclusions related to the 
Northwestern Division's draft preferred alternative.
    Response. At the onset of the study, the basin Governors 
established the Governor's Oversight Committee to track the Corps' 
analyses. This committee recognized the need to involve their technical 
experts, and this committee established four technical subcommittees to 
work with Corps staff as the technical analyses were developed, 
required data acquired, and the resulting models implemented. These 
four technical subcommittees were as follows: Hydrology and Modeling 
Subcommittee, Water Quality Subcommittee, Economics Subcommittee, and 
Environmental Subcommittee. These technical subcommittees were 
comprised of staff from appropriate State agencies, and various Federal 
agencies also participated in the review. For example, the 
Environmental Protection Agency participated in the Water Quality and 
Environmental Subcommittees efforts, and the U.S. Fish and Wildlife 
Service participated in the Environmental Subcommittee efforts. These 
technical subcommittees were active in the 1991 through 1994 timeframe.
    Some of the technical analyses were developed following the review 
and comment period for the July 1994 Draft EIS. Specifically, the flood 
control model was converted to a daily time step, the navigation model 
was revisited and revised, a portion of the native river fish physical 
habitat model was revised, and interior drainage and groundwater models 
were developed. There was no peer review of the flood control and 
navigation National Economic Development modeling efforts. The 
Environmental Defense Fund had a peer review conducted of the water 
compelled rate analysis that was conducted for the navigation analyses; 
however, this analysis was not included in the modeling effort that led 
to the selected of the NWD's preferred alternative. The revision of a 
portion of the physical habitat model was not reviewed; however, the 
revision was done to make the modeling procedure consistent with the 
upper river reaches (Lower River (downstream from Gavins Point to the 
mouth) reaches were revised). Mr. Lanny Meng from Oregon, Missouri, 
conducted a peer review of the interior drainage model. He is an 
engineering graduate from the University of Missouri, and a farmer in 
one of the levee units that were modeled. He was unable to find 
anything that would significantly change the model or its results. The 
results of this model were not a factor in the selection of the NWD 
preferred alternative as these results were not available at the time 
the alternative was selected. The U.S. Geological Survey and the Food 
and Agricultural Policy Research Institute were hired by the Missouri 
Levee and Drainage District Association and Missouri Farm Bureau to 
conduct a groundwater modeling and economic impact analysis of a levee 
district in Missouri. The results of this independent analysis were 
very similar to those of the Corps for three other levee districts. 
Results from this model were also not a factor in the selection of the 
NWD preferred alternative as the results were not available at the time 
the alternative was selected.

    Question 5. Please discuss the basis for the Northwestern 
Division's assertion that its draft Preferred Alternative will provide 
43 percent more least tern and piping plover habitat than the 
alternative supported by the MRNRC. In your response, please specify:
      the river reaches in which the new or expanded nesting 
habitat would be created under the Northwestern Division and MRNRC 
alternatives;
      the current distribution of current tern and plover 
nesting along the Missouri River; and
      the river reaches considered by State and Federal 
wildlife experts to be priority nesting areas for recovery of these two 
species.
    If there are differences in the location of habitats created by the 
two alternatives, please describe the independent scientific support 
(e.g., evaluations by non-Corps affiliated biologists) for concluding 
that the habitat to be created by the Division's preferred alternative 
would be of equal or greater benefit to tern and plover recovery than 
that to be created by the MRNRC alternative.
    Response. The NWD preferred alternative provides 43 percent more 
habitat on an average annual basis than the current water control plan. 
The NWD preferred alternative would provide better habitat than the 
current water control plan in all four river reaches that currently 
have nesting-downstream from Fort Peck, Garrison, Fort Randall, and 
Gavins Point. The MRNRC alternative provides a 37 percent overall 
increase in habitat, with this improvement in habitat occurring in 
three of the four reaches (decreases in the Fort Peck reach). In the 
last month, the U.S. Fish and Wildlife Service has stated for the first 
time that the Fort Peck reach is a low priority reach. This is, 
however, the first that the Corps has been informed that one should 
discount habitat improvement in this reach. In fact, the Environmental 
Subcommittee insisted that one reach should not be given more 
importance than the other three. The model, therefore, treats all four 
reaches equally. The results of this analysis are included in table 1:

                                                     Table 1
                       Tern and Plover Habitat Values Computed for the Master Manual Study
                                           (Acres of habitat per year)
----------------------------------------------------------------------------------------------------------------
                                                                                                 Ft.     Gavins
                                                                  Total   Ft. Peck  Garrison   Randall    Point
----------------------------------------------------------------------------------------------------------------

CWCP..........................................................     220.5      50.3      97.9      32.7      39.5
MRNRC.........................................................     302.2      22.3      36.4      74.3      69.3
NWD PA........................................................     315.6      81.3     152.1      38.7      43.4

                               Percent Change from the Current Water Control Plan

MRNRC.........................................................        37       -56        39       127        75
NWD PA........................................................        43        61        55        18        10
----------------------------------------------------------------------------------------------------------------

    Question 6. What affect do Corps studies indicate that a 15,000 cfs 
or less spring rise at the Gavins Point dam would have on interior 
drainage of floodplain farm fields below the dam? How does this compare 
to the expected affect that the Northwestern Division's draft Preferred 
Alternative would have on drainage of these farm fields? What affect do 
Corps studies indicate that a 15,000 cfs or less spring rise would have 
on summer interior drainage of floodplain farm fields when it is 
coupled with the low summer flow regime recommended in the MRNRC's 
split season alternative? How does this compare to the expected affect 
that the District's draft preferred alternative would have on summer 
farm field drainage?
    Response. The Corps' analysis of interior drainage damages is based 
on crop production throughout the entire year. A breakdown of the lost 
production in the various seasons is not conducted. For example crop 
planting could be delayed or the first planting may be lost in the 
spring, but an alternative crop could be planted in the early summer 
and be harvested. Conversely, a crop could be planted and growing 
without any impediments when a summer runoff event impedes drainage to 
the extent that crop damage occurs. The model tracks the costs incurred 
to plant, nurture, and harvest a crop and the potential yield of that 
crop on an annual basis to come up with an annual interior drainage 
damage value. This analysis of seven representative levee units was 
completed on Friday, March 10, and the results are summarized in Table 
2. The levee units are at river miles 575, 536, 497, 488, 351, 248, and 
100. The first six units have Federal levees, and the last unit has 
private levees.
    Table 2 shows these damages on an annual basis. The fourth column 
is the difference between the damages of the two alternatives in each 
year. If that number is positive, a 1 is put into the last column. This 
means that the greater damages may be attributable to the spring rise 
as this would be the primary time of the year that flows would be 
greater under the MRNRC alternative. Conversely, if the number is 
negative in the fourth column, a zero is put in the last column. This 
means that the lower damages for the MRNRC alternative may be 
attributable to the split season as this is the primary time of the 
crop season that the flows will be lower for this alternative. The last 
column is summed at the bottom, and the number in that cell identifies 
the number of years that the spring rise may be the cause of the 
increased damages. In summary, the spring rise may have been the cause 
of increased interior drainage damages in 25 of the 45 years modeled, 
or 56 percent of the years. Damages may have been reduced by the split 
season in 19 of the 45 years, or 42 percent of the years. In 1956 there 
was no difference.
    The average annual damages for the 7 modeled levee units are 
computed at the bottom of columns 2 and 3 and the difference is 
computed at the bottom of column 4. There is a difference of $22,000 
between the two alternatives, with the MRNRC alternative having the 
greatest damages:

                                 Table 2
          Total Interior Drainage Damages for Seven Levee Units
------------------------------------------------------------------------
                                 MRNRC    NWD PA               Potential
                                 Total     Total   Difference  SR Impact
------------------------------------------------------------------------
1950.........................     1.094     0.909      0.186           1
1951.........................     2.547     2.368      0.179           1
1952.........................     1.095     0.952      0.143           1
1953.........................     0.622     0.419      0.204           1
1954.........................     0.593     0.699     -0.106           0
1955.........................     0.331     0.330      0.001           1
1956.........................     0.027     0.027      0.000           0
1957.........................     0.426     0.540     -0.114           0
1958.........................     1.685     2.052     -0.366           0
1959.........................     0.361     0.483     -0.121           0
1960.........................     0.698     0.477      0.221           1
1961.........................     0.628     0.655     -0.027           0
1962.........................     0.693     0.684      0.009           1
1963.........................     0.224     0.190      0.034           1
1964.........................     0.971     1.029     -0.058           0
1965.........................     2.591     2.504      0.088           1
1966.........................     0.531     0.269      0.262           1
1967.........................     2.508     2.536     -0.028           0
1968.........................     0.518     0.286      0.233           1
1969.........................     2.254     2.288     -0.034           0
1970.........................     1.395     1.064      0.331           1
1971.........................     0.796     0.490      0.307           1
1972.........................     0.886     0.644      0.242           1
1973.........................     1.716     1.592      0.125           1
1974.........................     1.286     1.112      0.174           1
1975.........................     1.365     1.422     -0.057           0
1976.........................     0.339     0.084      0.255           1
1977.........................     0.864     0.850      0.014           1
1978.........................     1.253     1.623     -0.370           0
1979.........................     0.708     0.468      0.240           1
1980.........................     0.479     0.384      0.095           1
1981.........................     1.261     1.360     -0.099           0
1982.........................     2.451     2.257      0.195           1
1983.........................     1.915     2.345     -0.430           0
1984.........................     4.985     5.424     -0.439           0
1985.........................     0.985     0.611      0.374           1
1986.........................     3.037     3.368     -0.331           0
1987.........................     0.941     0.881      0.060           1
1988.........................     0.101     0.083      0.018           1
1989.........................     1.468     1.528     -0.060           0
1990.........................     1.359     1.503     -0.144           0
1991.........................     0.570     0.607     -0.037           0
1992.........................     0.397     0.491     -0.094           0
1993.........................    11.190    11.304     -0.114           0
1994.........................     0.937     0.900      0.037           1
Ave. Ann.....................     1.402     1.380      0.022
    Total....................                                         25
------------------------------------------------------------------------

    Question 7. How would system lake levels in June and July compare 
between the Northwestern District's draft preferred alternative and the 
MRNRC alternative, if a spring rise/split season (such as proposed by 
the MRNRC) were not implemented during droughts or floods?
    Response. In a year that the spring rise were to occur as scheduled 
(not shut off due to downstream flooding), approximately 770,000 acre-
feet of water would be required above that required to make the flat 
release for the current water control plan or the NWD preferred 
alternative. Having a split in the navigation season where 18,000 cfs 
is the target flow would save approximately 2,000,000 acre-feet, or 
about 35,000 acre-feet per day. At the rate of 35,000 acre-feet per 
day, the 770,000 acre-feet of water would be made up in 22 days. Since 
the savings in water would begin on about June 18 (June 15 plus 3 days 
to reduce the flows from the spring rise value), the date on which 
water use would be the same in a spring rise/split season year would be 
July 10. There are factors that would affect these computations. For 
example, if the spring rise were reduced on some days because of 
downstream flooding, the amount of extra water used would be reduced 
and the ``break-even point'' would be earlier than July 10. If the rate 
required for the flat release were less than an extra 5,000 cfs, which 
was used in the computations, the ``break-even date would move out 
further than July 10.
    Another, not so apparent, factor comes into play in determining 
what storage levels, and subsequently lake levels, would be. This 
factor is the service level computation that is made periodically to 
determine if the releases need to be increased to ensure that the flood 
control storage zones are emptied by the following March 1st. For 
example, this check determined that release rates should be about 
30,000 cfs over ``normal'' levels in 1997 in the spring months to 
address the significant amount of water in storage and the snow pack on 
the plains and in the mountains. Ultimately, the service level that 
year increased to even higher levels as the fall months approached and 
the forecast for runoff became higher than forecasted earlier in the 
year. With about 2 months removed from the evacuation period (about 
July 1st to August 20) the model responds by moving more water earlier 
in many years to begin the evacuation process earlier. This would 
result in an increase of water moved prior to the spring rise and the 
split season, which means that the ``break-even point would move out 
beyond the July 10 date. There will always be a ``break-even point'' if 
there is not enough water saved by the split season because subsequent 
evacuation rates will be less for the non-MRNRC alternatives.
    Total storage levels on June 30 were compared for NWD's preferred 
alternative and the MRNRC alternative. In 52 of the years the storage 
level of the MRNRC alternative was lower than NWD's preferred 
alternative. In many of the drought years, the storage level was higher 
for the MRNRC alternative because of the increased conservation that 
alternative provides in droughts. When one considers this factor, the 
NWD preferred alternative has higher lake levels than the MRNRC 
alternative on June 30 about two-thirds of the time. When July 31st 
storage levels were compared, the NWD preferred alternative had higher 
lake levels in 21 years, or more than one-quarter of the time, when the 
higher conservation factored years are removed.

    Question 8. Please provide data on the percentages of agricultural 
commodities moved by Missouri River navigators in July and August over 
the period of 1990 to 1998.
    Response. The requested tonnages and percentage of annual total is 
provided in Table 3.

                                                     Table 3
                              Missouri River Navigation--Agricultural Tonnages \1\
----------------------------------------------------------------------------------------------------------------
                       Year                          July     August      Total      % July   % August  Sum of %
----------------------------------------------------------------------------------------------------------------
1990.............................................   108,783   110,858      743,488      14.6      14.9      29.5
1991.............................................   166,389   122,628    1,059,414      15.7      11.6      27.3
1992.............................................    92,107   155,921      910,272      10.1      17.1      27.2
1993\2\..........................................    20,869    67,231    1,024,632       2.0       6.6       8.6
1994.............................................    77,240   108,069    1,117,637       6.9       9.7      16.6
1995.............................................    92,700    66,720      864,594      10.7       7.7      18.4
1996.............................................    63,086   133,257    1,019,521       6.2      13.1      19.3
1997.............................................   123,924   108,170    1,115,604      11.1       9.7      20.8
1998.............................................   127,449    95,875    1,161,268      11.0       8.3      19.2
Average all 9 Yrs................................    96,950   107,637    1,001,826       9.7      10.7      20.4
Average w/o 1993.................................   106,460   112,687      998,975      10.7      11.3      21.9
----------------------------------------------------------------------------------------------------------------
\1\Agricultural tonnage includes farm, food, and fertilizer products.
\2\Missouri River closed to navigation during much of July and August 1993.

                                 ______
                                 
 Responses by Dr. Joseph Westphal to Additional Questions from Senator 
                                Moynihan

    Question 1. Dr. Westphal, the New York and New Jersey Harbor 
project is immensely important to the future of the Port of New York 
and New Jersey. If we do not deepen these navigation channels, the 
Nation's largest Eastern Seaboard port will decline rapidly to the 
primary benefit of Halifax, Nova Scotia. Such a development would not 
serve the National interest. I understand that the New York District of 
the Army Corps of Engineers has completed its review of the project and 
that the project is before Army Corps headquarters. I am concerned, 
however, that the Administration will not act soon enough to ensure 
that the project is included its draft water resources development 
(WRDA) legislation. Yesterday 15 of my colleagues and I wrote to Jacob 
J. Lew, Director of the Office of Management and Budget, to convey this 
concern. Will the New York and New Jersey Harbor project be included in 
the Administration's draft WRDA bill?
    Response. We have recommended to OMB that authorization of this 
project be included in the Army's WRDA 2000 proposal, and we also 
recommended the project for construction in the Chief of Engineers 
Report completed in May 2000.

    Question 2. Dr. Westphal, the Water Resources Development Act of 
1986 (WRDA 86) established Federal/non-Federal cost-shares for 
navigation projects. WRDA 86 stipulated 65 percent of the cost of 
projects that deepen channels to 45 feet should be covered by the 
Federal Government and 35 percent of the cost should be borne by the 
non-Federal sponsor. At the time, the 45-foot depth was adequate to 
meet the needs of the vast majority of commercial shipping vessels and 
fulfill the Federal Government's responsibilities concerning 
interstate, and indeed international, commerce. Over the past 14 years 
shipping vessel design has undergone almost revolutionary change. The 
result of this change is that 45 feet of draft will no longer 
accommodate most newer container ships. Times have changed, the demands 
on our Nation's ports have changed, and I believe that this provision 
of law must be changed. Will the Administration propose, in its draft 
WRDA legislation, extending the 65 percent Federal/35 percent non-
Federal cost-share to navigation projects designed to provide 50-foot 
or 55-foot drafts?
    Response. We have been considering proposing a change in how the 
cost sharing for deep draft navigation projects is computed. However, 
we will make no specific recommendations until we have completed the 
study authorized in Section 401 of the Water Resources Development Act 
of 1999. This study is currently underway at our Institute for Water 
Resources and is expected to be completed sometime this summer.

    Question 3. Last summer we included a provision in the Water 
Resources Development Act that turned the responsibility for managing 
the cleanup of Onondaga Lake over to the Corps of Engineers. Onondaga 
is the most polluted lake in the country. Its cleanup has been long in 
coming and should proceed to the next stage as soon as possible. We are 
confident in the Corps' ability to carry out this task but are 
concerned about the pace of the initial steps being taken. I would like 
to know what roles the office of the Assistant Secretary, Corps 
Headquarters, and the Buffalo District office will play in the day-to-
day operations of the cleanup. In addition, I would like to know what 
the Corps' timeline is for providing guidance implementation of the 
Onondaga cleanup. We simply must move this project forward.
    Response. The Buffalo District will have day-to-day operating 
responsibilities for the Onondaga Lake project and its commander will 
represent the Army in the new Onondaga Lake Partnership. The Army Corps 
of Engineers Great Lakes and Ohio River Division will provide oversight 
and the Army Corps of Engineers Headquarters will provide the 
implementation guidance. A senior official at Headquarters will be 
responsible for approving changes to the Onondaga Lake Management Plan 
and extensions to the Partnership beyond 15 years. The implementation 
guidance was finalized and issued in April 2000.

    Question 4. Before management of the FUSRAP cleanup sites was 
transferred to the Corps, the Department of Energy required that the 
radioactive waste evacuated from FUSRAP sites (including the Tonawanda 
sites in New York) be disposed at facilities licensed by the Nuclear 
Regulatory Commission (NRC). Why does the Corps now permit these 
radioactive wastes to be disposed at sites not licensed by NRC, 
including RCRA landfills in California and Idaho?
    Response. Following transfer of program execution responsibilities, 
the Corps sought guidance from the Nuclear Regulatory Commission (NRC) 
and other regulators regarding the regulatory status of FUSRAP 
materials. Unlike Department of Energy (DOE), the Corps is not self-
regulating with respect to radioactive materials. DOE policy for 
disposal of low-level radioactive waste is to use DOE-owned facilities, 
with use of commercial facilities as the exception and not the rule. 
However, DOE, like the Corps, is subject to Resource Conservation and 
Recovery Act (RCRA) and uses RCRA disposal facilities where 
appropriate, in addition to their own and NRC licensed facilities. We 
are aware of two instances in which DOE used a RCRA facility for the 
disposal of FUSRAP material that was similar to the material the Corps 
sent to California.
    Based on guidance from the NRC, the Corps has identified a range of 
commercial disposal options that provide for the safe disposal of 
FUSRAP materials. The NCR guidance critical to an expanded use of RCRA 
disposal facilities was their determination that residual materials 
from ore processed prior to the passage of Uranium Mill Tailings 
Recovery and Conservation Act (UMTRCA) and not pursuant to a license in 
effect at the time of UMTRCA's enactment or thereafter are not subject 
to regulation under the Atomic Energy Act. In addition, the NRC has 
stated that both RCRA and NRC-regulated disposal facilities are 
protective, and that public health and the environment benefit from an 
increase in the disposal options which are available.
    Having a greater number of options for the disposal of the FUSRAP 
material has reduced the potential for impacts resulting from capacity 
limitations, weather delays, permit or license violations, and court 
injunctions, and has greatly reduced disposal costs by increasing 
competition.

    Question 5. As a public health, safety and worker protection 
matter, shouldn't the nuclear wastes from FUSRAP sites be disposed in 
facilities licensed by NRC that are specially designed and constructed 
to handle radioactive materials?
    Response. Nuclear Regulatory Commission (NRC) licensed facilities 
are not the only disposal facilities that can safely contain 
radioactive material. While radionuclides are not listed or 
characteristic wastes under RCRA, the statute allows a State to 
regulate the disposal of certain radioactive materials in conjunction 
with its RCRA program. Through their permitting process, the State 
regulating agencies can and do impose the additional requirements 
needed to protect public health and the environment. There are a number 
of RCRA disposal facilities nationwide that were designed and 
constructed to provide for safe and protective disposal of hazardous 
wastes and radioactive materials.
    RCRA disposal facilities must meet the worker protection 
requirements of the Occupational Safety and Health Act (OSHA) in 29 CFR 
1910.120 (p) for hazardous waste operations and in 29 CFR 1910.1096 for 
ionizing radiation. As with public health and safety issues, the 
disposal facility's permit may include requirements for worker safety 
that are more stringent than the Federal standards.
    The Corps is committed to handling and disposing all hazardous 
materials in a manner that provides for worker safety, protects public 
health and the environment, and complies with applicable regulatory 
guidance. The FUSRAP materials being disposed by the Corps in RCRA 
hazardous waste facilities are primarily residuals from the processing 
of ore. The radionuclides in the residuals originated from the 
naturally occurring uranium and thorium decay series in the ore 
material. In many cases, FUSRAP sites were remediated when operations 
were completed in accordance with the standards applicable at the time, 
so the average concentrations of radionuclides remaining at these sites 
is generally very low. So low in fact, that most of these materials do 
not meet the Department of Transportation's definition of radioactive 
material.

    Question 6. Has the Corps determined a permissible dose to an 
individual for the disposal of FUSRAP materials at a RCRA Subtitle C or 
other non-radioactive > material licensed disposal facility? If so, 
what is the permissible dose to an individual? Are there different 
permissible doses, or concentrations, depending upon the classification 
of the FUSRAP material?
    Response. The Occupational Safety and Health Administration (OSHA) 
and the facility's permitting agency, not the Corps, determine 
permissible doses at RCRA facilities. RCRA disposal facilities must 
meet the worker protection requirements of the Occupational Safety and 
Health Act (OSHA) in 29 CFR 1910.120 (p) for hazardous waste operations 
at disposal facilities and in 29 CFR 1910.1096 for ionizing radiation. 
The OSHA standard sets a maximum permissible dose that is equivalent to 
the NRC permissible dose, but does not explicitly require that doses be 
kept as low as reasonably allowable (ALARA) as does the NRC. Though not 
required by the OSHA regulations, we have reviewed contractor prepared 
dose estimates for RCRA Subtitle C facility workers who could be 
handling the FUSRAP ore processing residuals. These conservative 
estimates reveal that such workers would receive less than the dose 
allowed for members of the public by the NRC.
    Classification of the FUSRAP material has no impact upon the 
permissible dose allowed by the regulations, and no impact on the dose 
received by the worker. It is the concentration of the particular 
material being received at the disposal facility that determines the 
dose received by the worker.

    Question 7. Has the Corps identified minimum radiation protection 
and environmental protection standards that are to be applied to a RCRA 
Subtitle C or other non-radioactive material licensed disposal facility 
that disposes of unimportant quantities of radioactive material or 
disposes of non-NRC licensed uranium mill tailings?
    Response. The minimum worker protection standards at RCRA disposal 
facilities are the OSHA regulations. The minimum public health and 
environmental protection standards at RCRA disposal facilities are 
established by the facility's permitting agency, consistent with the 
requirements of RCRA. The Corps restricts its disposal of FUSRAP 
materials to RCRA disposal facilities which have permit language 
specifically addressing the receipt of low concentrations of 
radioactive material. Further, prior to disposal of the residuals at a 
RCRA facility, it is Corps policy to obtain the written concurrence of 
the facility's regulatory agency relative to the acceptability of the 
residuals at the facility.
    RCRA workers are protected from on the job hazards via applicable 
OSHA general industry and construction standards and corresponding 
implementing programs.
    The Corps believes that appropriately permitted facilities that 
allow the acceptance of limited concentrations of radioactive material 
are protective. The Corps will not allow disposal of radioactive 
materials in any facility whose permit does not address acceptance of 
radioactive materials.
                                 ______
                                 
 Responses by Dr. Joseph Westphal to Additional Questions from Senator 
                                 Graham

    Question 1. Can you describe the peer review process used in 
developing the Restudy?
    Response. Peer review has been an integral part of the 
Comprehensive Everglades Restoration Plan. At the heart of preserving 
the integrity of the science, peer review is used to provide 
independent review of the science being applied and to solicit advice 
on difficult issues. In past years, independent panels have been formed 
to: (a) provide annual reviews of the overall Florida Bay science 
program (the Boesch panel); (b) review and advise on specific issues, 
such as the perceived conflict among endangered species restoration 
objectives (kites vs. storks), the overall high water research program, 
and the Cape Sable seaside sparrow research program; and (c) provide 
guidance and review for the Kissimmee River restoration program's 
ecological objectives and research and monitoring protocols. These 
efforts were used as a basis for much of the science used by the 
Restudy.
    Fundamental documents used by the Restudy (CERP) have also received 
independent review. For example, the 31 chapters in Everglades: The 
Ecosystem and Its Restoration (Davis & Ogden, 1994) are a primary 
source for the basic hypotheses and technical understandings of the 
Everglades system. Each of the 31 chapters was anonymously refereed by 
three or more outside reviewers. Additionally, much of the natural 
systems research conducted by the State and Federal land management 
agencies is published in peer-reviewed journals.
    For the CERP, the process for developing conceptual ecological 
models and the models themselves have been reviewed. A team of 
scientists from the Restudy's participating agencies and the University 
of Miami's Rosenstiel School for Marine and Atmospheric Science jointly 
developed and managed the process of organizing existing facts and 
hypotheses into a format that would support the planning and evaluation 
of the restoration programs. The process was designed specifically to 
support the development of performance measures and restoration targets 
to guide the Everglades restoration program. The Restudy's Alternative 
Evaluation Team used these conceptual ecological models as a basis for 
developing conceptual hydrologic and biological performance measures 
and targets during the plan formulation and selection process. The 
University of Miami scientists provided the initial training and review 
for the conceptual models. The conceptual models were fully reported in 
an invited session of the 1997 annual Conference of the Society for 
Ecological Restoration.
    The South Florida Water Management District has an ``Expert 
Assistance'' program for bringing outside experts to advise and review 
the scientific work of District staff. This process was used to review 
the River of Grass Evaluation Methodology (ROGEM). ROGEM was used 
during the plan formulation, evaluation, and selection process to 
determine the relative ecological value of different alternative plans.
    The models used in the conceptual planning stage have been reviewed 
both to certify their integrity and to determine if they are being used 
appropriately. The South Florida Water Management Model has been 
documented and the documentation peer reviewed (Loucks et al., 1998.). 
Likewise, the Natural Systems Model, Version 4.3 was reviewed by the 
Department of Interior, U. S. Geological Survey (Bales et al., 1997). 
Modifications to the Natural System Model recommended as a result of 
the U.S. Geological Survey review were incorporated in the version of 
the model that the Comprehensive Plan development process used.
    In subsequent phases of the CERP, an adaptive assessment protocol 
will be used for evaluating ecosystem responses during implementation 
of the restoration program. The program will include a team of senior 
Everglades and wetland ecologists and hydrologists, charged with the 
responsibility of reviewing and interpreting system responses, revising 
conceptual models and working hypotheses, and recommending plan 
modifications. The products of this process will be reviewed using peer 
review protocols.

    Question 2. Can you describe the process used to develop the 
scientific and engineering aspects of the Restudy, including who was at 
the table making technical decisions?
    Response. The CERP was formulated and evaluated by two Restudy sub-
teams, the Alternative Development Team (ADT) and the Alternative 
Evaluation Team (AET). Each of these teams had a specific planning 
purpose. The Alternative Development Team, lead by a senior hydrologist 
from the Corps of Engineers, was responsible for designing each 
alternative plan in response to the Alternative Evaluation Team's 
evaluations of the previous plan iteration. The designs of these 
alternative plans were built into the South Florida Water Management 
Model, a regional-scale hydrologic model, to identify plan effects. The 
Alternative Evaluation Team, lead by a senior ecologist from the South 
Florida Water Management District, was responsible for evaluating each 
plan's strengths and weaknesses, and describing plan shortfalls to the 
Alternative Development Team. This repetitive formulation and 
evaluation process progressively refined and improved the performance 
of subsequent alternative plans.
    Because of the large and geographically dispersed number of people 
involved and interested in the Restudy, the Internet was used to 
communicate formulation and evaluation results. This allowed the 
Restudy Team to solicit comments from a broad base of the public and 
permitted people to participate as team decisions were being made.
    The Alternative Development Team was a multi-agency team of about 
30 planners, engineers and scientists. The team identified and designed 
specific components to be simulated in the South Florida Water 
Management Model with the intent to improve the performance of each 
alternative plan and to test different strategies for component 
modification identified by the Alternative Evaluation Team.
    The Alternative Evaluation Team was also a multi-agency team of 
about 50 biological and physical resource specialists, planners, and 
engineers. The Alternative Evaluation Team used multiple analytical 
tools to accomplish the alternative plan evaluations: performance 
measures from the South Florida Water Management Model computer 
simulations, the Across-Trophic-Level System Simulation (ATLSS) model, 
and water quality models.

    Question 3. Were these people interest group scientists or 
government agency scientists?
    Response. Accomplishment of the feasibility study was primarily the 
responsibility of the Corps of Engineers, Jacksonville District, and 
the non-Federal cost sharing partner, the South Florida Water 
Management District. However, due to the complexity of the problems to 
be considered and the desire to utilize the skills of specialists in 
other agencies an interdisciplinary/interagency approach was used. 
Interagency staffing was essential to facilitate the flow of needed 
information among agencies, and, more importantly, to achieve approval 
by the key public agency stakeholders.
    The diversity of interests with strongly held ideas made it 
necessary to involve all of them early in defining the problems and 
opportunities at the first steps of planning. Failure to at least offer 
all interests the opportunity to participate from the very beginning 
would have eventually led to the need to retrace many steps to account 
for their concerns. As a result, a variety of agencies signed up for 
the Restudy team at the start. Further, the technical complexity of the 
Everglades problems and opportunities required an array of professional 
disciplines to understand the many factors and interrelationships 
involved. No one technical discipline possessed all of the knowledge, 
skills and abilities needed to address the situation. Technical problem 
solving could only proceed when the views of all disciplines were 
brought to bear through cooperative teamwork.
    With over 150 active team members, the study team included State 
and Federal agencies, two tribal governments, and local governments. 
These agencies included the National Park Service, the U.S. Fish and 
Wildlife Service, the National Marine Fisheries Service, the United 
States Geologic Survey, the Natural Resources Conservation Service, and 
the U.S. Environmental Protection Agency. Tribal participation included 
the Seminole and Miccosukee Tribes. State agency participation included 
the Florida Fish and Wildlife Commission, the Florida Department of 
Environmental Protection, and the Florida Department of Agriculture and 
Consumer Services. Local governments including Miami-Dade County, 
Broward County, Palm Beach County, Martin County and Lee County also 
participated.
    Although the team makeup was restricted to representatives from 
governmental agencies, the Restudy solicited views and comments from 
other non-governmental groups. Besides having an extensive public 
outreach program, the Restudy team allowed the public to attend its 
meetings, review interim products, and provide comment throughout the 
study process. Most notably, the Restudy team developed a web page that 
encouraged the public to comment on alternatives during the plan 
formulation phase. This extremely open process ensured issues were 
evaluated and addressed by the scientists and engineers responsible for 
technical aspects of the study.

    Question 4. Something that members of this committee may not be 
aware of are Florida Sunshine laws. Can you explain how Florida 
Sunshine laws impacted the Restudy development process?
    Response. The Florida Sunshine laws establish a basic right of 
access to most meetings of boards, commissions and other governing 
bodies of State and local governmental agencies or authorities and 
access to documents. Although the Corps of Engineers is not bound by 
State requirements, the CERP was developed in an extremely open and 
inclusive manner consistent with the objective of these laws.

    Question 5. Are cost-benefit analyses required by law for 
environmental restoration projects?
    Response. The Corps of Engineers has many authorities that relate 
to environmental restoration. Generally, these provisions require that 
any projects implemented under these authorities be ``justified'' or 
cost-effective. For example, Section 204 of the Water Resources 
Development Act of 1992, Beneficial Uses of Dredged Material, requires 
that ``the environmental, economic, and social benefits of the project, 
both monetary and non-monetary, justify the cost thereof''. Section 
1135 of the Water Resources Development Act of 1986, Project 
Modifications for the Improvement of the Environment'', requires that 
these modifications be ``feasible'' and improve the quality of the 
environment in the public interest''. One other example is Section 206 
of the Water Resources Development Act of 1996, Aquatic Ecosystem 
Restoration, requires that aquatic ecosystem restoration and protection 
projects be ``cost-effective'' and ``improve the quality of the 
environment and is in the public interest''.
    Although these provisions vary in their requirements, as a matter 
of policy the Corps requires that environmental restoration projects be 
``justified''. Since most environmental restoration projects provide 
benefits that are non-monetary, cost effectiveness and incremental cost 
analyses have been developed to evaluate potential projects. The cost 
effective analysis ensures that the least cost solution is identified 
for each possible level of environmental output and the incremental 
cost analysis of the least cost solutions shows changes in costs for 
increasing levels of environmental outputs.

    Question 6. Can you explain the cost-sharing proposal in the 
Restudy between the Federal Government and the State? Are there any 
other water resource projects shared completely on a 50-50 basis?
    Response. The cost sharing of the Comprehensive Everglades 
Restoration Plan (CERP) is in accord with Section 528 of the Water 
Resources Development Act of 1996. This legislation specified that the 
non-Federal share of restoration features shall be 50 percent. There 
are no other Corps water resources and ecosystem restoration projects 
that are cost shared 50-50 with non-Federal interests.
                                 ______
                                 
 Responses by Dr. Joseph Westphal to Additional Questions from Senator 
                                 Boxer

    Question 1. When the President's fiscal year 1901 Budget Request 
was unveiled, I had mixed feelings on the Corps' budget request. While 
I applaud the Administration's overall emphasis on environmental 
restoration, I was disappointed to see that the Corps had not budgeted 
for two very important projects in Northern California. As you know, a 
tremendous partnership has been forged in the San Francisco Bay Area 
between environmental, business, and labor interests, working in 
concert with local and Federal regulatory agencies, to address both 
economic and environmental needs. This partnership began in the early 
1990's, and has enabled Bay Area ports to meet the needs of dredging 
their channels to accommodate increasing trade demands, while at the 
same time, fostered the recognition among all interests that dredge 
material should be treated as a resource, not a waste. To that end, in 
1992, dredge material from a project at the Port of Oakland was used to 
construct a ``beneficial use'' site at the Sonoma Baylands Wetland 
Demonstration Project. Sonoma Baylands proved to be a highly successful 
project, and is a shining example that economic and environmental 
interests are indeed not mutually exclusive. Following the path 
established by the Sonoma Baylands project, the Port of Oakland, the 
California Coastal Conservancy, and other Bay Area interests, working 
on a near-daily basis with the Corps, fashioned a similar project which 
is to begin this year. The Port of Oakland must dredge its channels to 
a depth of 50 feet, to accommodate the newest generation of container 
vessels, and to meet the demands of ever-increasing international 
trade. The Port's project would dredge approximately 13 million cubic 
yards of dredge material, and I am truly pleased to say that nearly 100 
percent of that material will be used for environmental restoration 
purposes. One of the sites which would utilize the Oakland material is 
at the former Hamilton Army Airfield. This project, which was 
authorized in WRDA 1999, would restore grades appropriate for various 
wetlands habitats at the site. The importance of Hamilton extends 
beyond the restoration project itself. It is the cornerstone for 
establishing a long-term dredge material management strategy that 
includes beneficial use options as a primary component.
    Despite the involvement of the Corps and other Federal agencies, 
and notwithstanding the broad level of support that these two projects 
enjoy, I am disappointed that funding was not requested for them. 
Nevertheless, it is my full intent to seek funding for both projects in 
this year's Energy and Water Development appropriations legislation. My 
question to you is, assuming that appropriations are obtained this 
year, is the Corps fully ready, willing and able to begin work on both 
projects, in a timely manner, in Fiscal Year 2001?
    Response. Yes, the Army Corps of Engineers plans to be ready to 
begin work on both projects if funds are appropriated in Fiscal Year 
2001. The Corps has a capability of $3 million for Hamilton, and $20 
million for Oakland in Fiscal Year 2001. Although project and study 
capabilities reflect the readiness of the work for accomplishment, they 
are in competition for available funds and manpower Army-wide. In this 
context, the fiscal year 2001 capability amounts shown consider each 
project or study by itself without reference to the rest of the 
program. However, it is emphasized that the total amount proposed for 
the Army's Civil Works Program in the President's budget for fiscal 
year 2001 is the appropriate amount consistent with the 
Administration's assessment of national priorities for Federal 
investments. In addition, the total amount proposed for the Army's 
Civil Works Program in the President's Budget is the maximum that can 
be efficiently and effectively used. Therefore, while we could utilize 
additional funds on individual projects and studies, offsetting 
reductions would be required in order to maintain our overall budgetary 
objectives.

    Question 2a. I have written to you three times since November 1999 
regarding my concerns about the proposed removal of the Deer Creek 
Retention Levee in San Bernardino, California. I have not received a 
written response to my letters. As you may recall, a member of my 
staff, Senator Feinstein's staff, and concerned residents from Rancho 
Cucamonga met with you and other Corps staff on December 8, 1999 at the 
Pentagon. At that meeting, the Corps agreed to study the adequacy of 
the debris basin if funding could be found. The study was estimated to 
cost between $150,000 to $200,000. However, I have received a copy of a 
letter written by Corps Headquarters staff in January 2000 to the City 
of Rancho Cucamonga stating confidence in the district office's earlier 
belief that the debris basin is adequate to withstand a 100-year flood. 
Once again, I ask you to explain what occurred subsequent to the 
December meeting that caused the Corps to change its view. I am 
concerned about whether the Corps has provided adequate review of the 
removal of a Federal project designed to protect public health and 
safety.
    Response. By letter dated March 6, 2000, I responded to your 
letters, Senator Boxer. I delayed my response until I was able to 
consider the results of the reanalysis of the Deer Creek issue 
accomplished by the Army Corps of Engineers. In conducting the 
reanalysis, the Corps used the latest standard and criteria, and used 
actual data from nearby watersheds. The reanalysis confirmed that the 
debris basin will accommodate a 111-year debris event, and that the 
downstream channel will accommodate about a 500-year flood event.

    Question 2b. Moreover, it is my understanding that Congress, in the 
1968 Flood Control Act, authorized the Corps to construct the Deer 
Creek Debris Basin in San Bernardino, California to capture debris and 
water flows for a 200-year event. The Corps' November 1999 review 
indicates that the basin--even if it were maintained to its original 
310 acre feet capacity--would only provide for an 111-year event, but 
would be reached or exceeded by a larger event. As the basin does not 
provide the storage capacity intended and authorized by the Congress to 
protect the health and safety of the residents, how does the Corps 
intend to address that inadequacy?
    Response. The Corps could conduct further studies if a project 
sponsor, willing to cost share the study, came forward with such a 
request, and if funds to do so were appropriated.
                                 ______
                                 
 Responses by Dr. Joseph Westphal to Additional Questions from Senator 
                                 Wyden

    Question 1. The Corps of Engineers issued a favorable Chief's 
Report for the Columbia Channel Deepening project in late December. 
Pre-construction Engineering and Design and land acquisition are 
underway and will be completed during fiscal year 2001. Some 
environmental restoration work included as part of the project 
authorization, which is very important to its success in my part of the 
country, will be ready for construction in fiscal year 2001. 
Unfortunately, because the Chief's Report was completed so late in the 
budget preparation cycle, construction funds for the Columbia River 
project could not be included in the President's budget request. If 
Congress were to appropriate a portion of the amount authorized for 
environmental restoration work connected with the project for fiscal 
year 2001, would the Corps be capable of beginning this environmental 
restoration work during fiscal year 2001?
    Response. The Corps has a capability of $4.5 M in the Construction 
General appropriation to begin habitat restoration work in fiscal year 
2001. Although project and study capabilities reflect the readiness of 
the work for accomplishment, they are in competition for available 
funds and manpower Army-wide. In this context, the fiscal year 2001 
capability amount shown consider each project or study by itself 
without reference to the rest of the program. However, it is emphasized 
that the total amount proposed for the Army's Civil Works Program in 
the President's budget for fiscal year 2001 is the appropriate amount 
consistent with the Administration's assessment of national priorities 
for Federal investments. In addition, the total amount proposed for the 
Army's Civil Works Program in the President's Budget is the maximum 
that can be efficiently and effectively used. Therefore, while we could 
utilize additional funds on individual projects and studies, offsetting 
reductions would be required in order to maintain our overall budgetary 
objectives.

    Question 2. In 1988, the Port of Astoria entered into a local 
cooperation agreement with the Corps of Engineers to restore the 
deteriorating breakwater that protects the fishing fleet. Under the 
terms of the agreement, the Port was supposed to remove or relocate 
floats, pilings, the causeway and whatever other fixtures were needed 
for the Corps' contractor to do the renovation work. The Port also has 
made a number of improvements to its Boat Basin, including 30 new 
slips, a new parking lot, and resurfaced the roadway. All these 
improvements were done with the Corps' approval. To date, the Port has 
spent $1.3 million in improvements since the agreement with the Corps 
as the local share of the project. The Corps began restoring the 
breakwater and will have completed 1000 feet of the 2350 foot 
breakwater by June. However, the Corps has since told the Port that it 
cannot complete the restoration of the remaining 1350 feet unless the 
Port removes all the pilings and floats and roadway that the Port 
previously installed as improvements. Given that the Corps had 
originally approved the installation of all of these improvements, how 
can the Corps now insist that the Port pay for removing them as a 
condition of having the breakwater fully restored?
    Response. The Corps previously issued regulatory permits to the 
Port of Astoria for their work involved in installation of the 
improvements but when these permits were issued no one knew if or when 
repairs to the north breakwater would be made. Under terms of a 1989 
Local Cooperation Agreement, the Port of Astoria is responsible for 
relocations in support of the breakwater repair.

    Question 3. I understand the Corps is currently re-evaluating its 
ability-to-pay criteria. What has prompted this action? What is the 
Corps looking at with respect to better accommodating lower income 
communities if they want to participate in one of these studies/
projects? What tools does the Corps have to meet the needs of lower 
income communities other than an ability to waive local cost shares 
outright?
    Response. The Corps is re-evaluating its ability-to-pay criteria in 
response to section 202(b) of the Water Resources Development Act of 
1996. As required by the legislation, our current draft ability-to-pay 
proposal eliminates the benefits based floor test in the 1995 rule. The 
benefits based floor test set a percentage floor for non-Federal cost 
share reductions on a project by project basis. The higher the benefit-
cost ratio for the project, the higher the percentage floor for non-
Federal cost sharing purposes. Our draft proposal also eliminates State 
per capita income as a qualification criterion in identifying lower 
income areas. Low-income areas will now be identified using county per 
capita income and per capita non-Federal construction cost as 
qualification criteria. Besides waiving a portion or all of the non-
Federal cash requirements, the Corps also has the ability to meet the 
needs of lower income communities by deferring payments, for up to 30 
years, on the non-Federal cost share under section 103(k) of the Water 
Resources Development Act of 1986. In addition, the Administration's 
proposed Water Resources Development Act of 2000 includes a provision 
to develop ability-to-pay criteria for environmental protection and 
restoration projects and for feasibility studies of flood damage 
reduction and environmental protection and restoration projects.

    Question 4. WRDA of 1986 significantly altered the Corps mandate 
from simply implementing flood damage reduction and agricultural water 
supply projects to incorporate ecosystem restoration as well. Although 
Congress would need to amend current law, does the Corps feel that 
ability-to-pay criteria should include ecosystem restoration projects 
as well as flood damage reduction projects?
    Response. Yes, we do support the application of ability-to-pay 
criteria to ecosystem restoration projects. In fact, the 
Administration's proposed Water Resources Development Act of 2000 
includes a provision to develop ability-to-pay criteria for 
environmental protection and restoration projects.

    Question 5. Under WRDA 1999, Section 212 (Challenge 21), Congress 
has asked that the Corps establish policies and procedures for carrying 
out the selected studies and projects and develop a rating criteria for 
projects to be implemented. What has the Corps come up with thus far?
    Response. We are developing a draft list of rating criteria that 
will be coordinated with State and local agencies and tribes prior to 
submission to the committees. This coordination should take place 
within the next few months.
                               __________
  Statement of Lt. Gen. Joe N. Ballard, Chief of Engineers, U.S. Army 
               Corps of Engineers, Department of the Army
Introduction
    Mr. Chairman and members of the subcommittee, as Dr. Westphal has 
fully addressed our budget issues, I will limit my comments to recent 
media reports on the Corps' work. I thank you for the opportunity to 
comment on the recent allegations surrounding the Upper Mississippi and 
Illinois River Navigation Study.
    These allegations are very troubling to me as they challenge the 
very value of the Corps of Engineers to the Nation. That value is 
trust--a trust in our absolute integrity in providing to the 
Administration and this Congress, water resource investment 
recommendations that are unbiased and technically sound. While the 
widely published allegations and media reports attempt to erode the 
foundation of that trust, I am certain beyond doubt, that your trust 
has not been misplaced. I therefore welcome, and will fully support, 
all independent outside investigations of the allegations and any 
review of our processes. I will take prompt corrective action if 
wrongdoing is discovered, and stand ready to make improvements to our 
processes if warranted. I assure you that when all the facts are in, 
the integrity of the Corps will be intact, and you will know that the 
trust you have traditionally placed in the Corps is well founded.
    Let me explain the reason for my confidence. First, I believe in 
the professionalism and dedication of the Corps team, and I have great 
trust in my leaders. Additionally, our process has a series of built-in 
checks and multiple levels of review to ensure objectivity. These 
include independent technical review, a minimum of two formal public 
reviews, Washington level policy review, State and Agency coordination 
requirements, and final review by the executive branch under E.O. 
12322. It is important to note that all of these reviews are yet to be 
conducted in the case of the Upper Mississippi and Illinois River 
Navigation Study.
      It is important to remember that there are often no easy, 
clear-cut answers to the complex issues we face. Technical experts may, 
and often do, honestly disagree on specifics. The value that the Corps 
brings to the process is to ensure that both sides of any technical 
disagreement are competently analyzed and receive proper peer review, 
public review, and policy review. In the particular study in question, 
the draft report has not yet been completed, much less undergone these 
reviews--so any allegations in this regard may be a bit premature. 
Ultimately, after full and open debate, balanced professional judgment 
must enter the process. Dealing with technical disagreements is the 
role of our field commanders--they must make tough decisions, often in 
the face of strongly held opposing views. The Corps' process ensures 
that all interests are heard and that final recommendations are 
unbiased, based on the best science available, and in the public's 
interest. In our business, there is almost always at least one interest 
group that is opposed to some specific finding. But, when all the facts 
are in, I am confident in the integrity of our process and the leaders 
who guide that process.
    On a broader perspective, we are seeking to identify unmet National 
water resource needs that fall within the Corps' mission areas. These 
needs are based on published and documented information.
    Our role is to apply a structured, reasoned approach to identifying 
and quantifying the Nation's water resource needs. Through an extensive 
communication process with our partners, stakeholders, other agencies 
and the general public, we recommend responsible alternatives for 
National investments that will meet economic development and 
environmental needs both today and in the future.
Conclusion
    In conclusion, I am confident that our process, our execution, and 
the judgment of our leaders are sound, and yield balanced 
recommendations for wise water resource investments. Our screening 
process for potential projects is very tough. Historically, only 16 
percent of the studies that we begin ultimately result in a 
construction start. In other words, most project proposals are 
discarded by the Corps. Those projects that make it through the 
screening process and are ultimately constructed provide a positive 
return on the Nation's investment.
    Over the past 4 years, we have pursued our mission to address the 
Nation's current and emerging needs in an environment of deliberate 
downsizing. I have reduced the size of the Corps of Engineers by nearly 
10 percent, while streamlining and improving the efficiency of our 
business processes. I am confident that the U.S. Army Corps of 
Engineers is pursuing its mission with the utmost professionalism and 
integrity, and will continue to serve this Nation well.
    Thank you, Mr. Chairman and members of the committee. This 
concludes my statement.
                               __________
                     Affidavit of Donald C. Sweeney
    For privacy purposes, this affidavit has been slightly modified 
from the affidavit filed with the Office of Special Counsel. Thirteen 
words have been deleted and two words have been replaced for 
grammatical consistency. These changes have no material affect on the 
content.
    This affidavit was filed with the Office of Special Counsel, an 
office that takes disclosures of serious wrongoing from Federal 
employees and is required to assure that agency heads, in this case the 
Secretary of Defense William Cohen, conducts a thorough investigation.
    I, Donald C. Sweeney II, under oath, state as follows:
    1. I hold a Ph.D. in economics from Washington University of St. 
Louis, MO and have been employed as a regional economist with the U.S. 
Army Corps of Engineers since February 1978. During this time, I 
received annual performance evaluations, all of which have been 
excellent, including the most recent performance evaluation covering 
the rating period ending October 1999. I am providing copies of all 
those performance evaluations that I currently have in my possession in 
Appendix 1. I have served as a supervisory economist in the St. Louis 
District of the Army Corps of Engineers overseeing the work products of 
other Corps economists. I have received numerous awards for public 
service during my 22-year career including awards for excellence in 
navigation system planning and awards for sustained superior 
performance.
    2. From March 1993 until June 1998, I served as the technical 
manager of the economics work group of the Upper Mississippi River, 
Illinois Waterway Navigation System Feasibility Study. This study is a 
6-year, more than $50 million investigation of the feasibility of 
making up to $4 billion of improvements to this navigation system that 
was originally scheduled to complete in 1999 but which will now be 
complete in 2000. Other members of the work group I directed included 
economists from three Corps of Engineers District offices and two Corps 
of Engineers Division offices. From June 1998 until June 1999, I served 
as the advisor to an ``economics'' panel created by General Phillip 
Anderson, Commander of the Mississippi River Division, that was 
subsequently made responsible for the economic analysis in the study 
although this panel largely ceased to function in October 1998.
    3. Under the Federal statutes, regulations, and policies that apply 
to the planning of all Army Corps of Engineers water resource projects, 
the Federal objective ``to contribute to the national economic 
development consistent with protecting the Nation's environment, 
pursuant to national environmental statutes, applicable executive 
orders, and other Federal planning requirements.'' This means that for 
the Corps of Engineers to recommend a project its estimated national 
economic development benefits must exceed the estimated costs of 
building and operating the project and the project must be consistent 
with protecting the Nation's environment. The benefit and cost analysis 
is a primary responsibility of the economics team and manager on a 
study. At the time I was removed from responsibility for the economic 
work products of the study, the study schedule called for the Corps of 
Engineers to release to the public in September 1998 its recommended 
plan. At that time, the benefit and cost analysis of the economists 
working on the study indicated that major, expensive, large-scale, 
structural changes to the navigation system were not warranted for the 
foreseeable future. Rather, the benefit and cost analysis indicated 
that measures the navigation industry could undertake itself or 
relatively inexpensive small-scale Federal measures were the only 
measures economically warranted.
    4. The September 1998 date for release of the Corps' recommended 
plan and economic and environmental analyses was postponed. 
Subsequently, in July 1999, the Corps of Engineers at a series of 
public workshops announced that a ``new'' economic benefit and cost 
analysis showed that immediate, expensive, major structural changes to 
the navigation system were now justified.
    5. This affidavit describes how the benefit and cost analysis has 
been intentionally and deliberately altered to produce a seemingly 
favorable recommendation for immediate large-scale expensive 
improvements (essentially doubling the length of seven system locks) as 
a result of the instructions of top Army Corps of Engineers officials. 
It discusses how new personnel were put in charge of the benefit and 
cost analysis and explicitly instructed not to produce their best 
unbiased analysis or, for that matter, any analysis they actually 
believed to be valid or in compliance with Corps of Engineers 
regulations, but instead to produce an ``analysis'' that immediately 
``justified'' large-scale, expensive structural improvements. At first 
this effort attempted to find a justification for the project that was 
at least plausible. This attempt is itself contrary to Corps of 
Engineers Regulation ER 1105-2-100 which requires planning studies to 
evaluate all Federal water resource projects based on the most likely 
future project parameters. Eventually, even the self-serving standard 
of plausibility was abandoned when it failed to support the directed 
study results, and key inputs to the benefit and cost analysis were 
arbitrarily altered by top Army Corps of Engineers management to 
finally produce a seemingly favorable benefit to cost analysis for 
immediate, expensive, large-scale system investments. These altered 
benefit and cost numbers had no meaningful professional analysis 
backing them and were at least in many cases based on clearly erroneous 
rationales provided or directed by senior management.
    6. To produce this favorable benefit to cost finding, top Army 
Corps of Engineers officials directed four key changes to the existing 
study analysis. First, top Corps officials arbitrarily directed the 
principal economist to ignore most of the potential for towboats to 
help each other to move through locks more rapidly during periods of 
high congestion, a practice that is currently used and that can 
dramatically reduce congestion at minimal increased public cost. 
Second, a top Corps official directed the principal economist to alter 
a key term used in estimating the real economic value of reducing barge 
congestion. Third, a top Corps official directed that an analysis be 
altered to state that immediate lock extensions would save millions of 
dollars that would otherwise have to be spent simply rehabilitating the 
existing locks. These three changes, separately and together, resulted 
in dramatically increased estimates for the estimated economic benefits 
of lock extensions. Finally, a top Corps official directed that 
engineers arbitrarily reduce the estimated construction costs of 
extending the length of existing locks despite the fact that the 
original construction cost estimates were approved by an Independent 
Technical Review of Corps and other experts. This change significantly 
reduced the estimated cost of lock extensions. In the final analysis, 
it appears that all four changes are necessary to produce a seemingly 
favorable benefit to cost ratio for immediately extending the length of 
existing locks. This affidavit provides a detailed chronology of how 
these changes were made and provides many supporting documents.
    i. background on the upper mississippi river, illinois waterway 
                  navigation system feasibility study
    7. The Upper Mississippi River and Illinois Waterway Navigation 
System Feasibility Study area encompasses a navigation system that 
includes 43 locks located at 37dams (some dams have more than one lock) 
stretching from Minneapolis and St. Paul MN at the northernmost extent 
to the confluence of the Mississippi and Ohio Rivers near Cairo, IL at 
the southernmost extent. The study area itself covers regions of the 
States of Minnesota, Wisconsin, Iowa, Illinois, and Missouri. The dams 
create pools in the rivers with sufficient depths to permit navigation 
to authorized draughts of nine feet. The locks allow transit between 
the pools created by the dams. All but four of the locks in this 
navigation system are 600 or less feet long, while most modern towboats 
push 15 barges at a time in a tow that extends nearly 1200 feet long. 
As a result, many tows in the system must routinely break apart into 
two smaller units to move through the locks in a time-consuming two-
step process, adding roughly 45 minutes to an hour for each tow that 
must undergo this two-step lockage process. At certain times of the 
year with heavy barge traffic, this results in some traffic congestion 
at certain locks, with the delays in processing tows increasing the 
unit costs of water transportation.
    8. The primary reason for undertaking the UMR-IW navigation system 
study was to investigate the feasibility of Federal and non-Federal 
measures designed to speed tow traffic through the locks reducing the 
time needed to process tows, decreasing the levels of congestion in the 
system, and, therefore, decreasing the unit costs of water 
transportation. Time currently wasted by tows waiting for service at 
congested system locks could then be freed up for other productive uses 
of these expensive assets. For example, a ``typical'' movement of a 
barge from an origin in the Upper Mississippi River system to a 
southern Louisiana destination and back again currently requires 
approximately a month for the roundtrip. This typical barge roundtrip 
had approximately a $9.00 per ton cost measured in the 1994 price 
levels originally used in the study. Some of this roundtrip time is 
spent waiting for service at system locks due to congestion at the 
locks. If the congestion could be reduced and barges processed more 
quickly through the locks then the roundtrip time could be reduced, 
thereby freeing the barge to produce more movements of goods.
    9. For example, Lock and Dam 25 near Winfield, MO on the Upper 
Mississippi River system is often a congested lock. In 1999 
approximately 35 million tons of traffic passed through this congested 
lock. Suppose a measure existed that could reduce the congestion at 
that lock by an average of 5 hours per tow. If everything else in the 
system remained the same then the typical roundtrip would now require 
10 less hours on average. This represents approximately a 1.5 percent 
decrease in the time required to move a typical barge from origin to 
destination and back again or equivalently about a 1.5 percent increase 
in the productivity of tows and barges.
    10. The fundamental economic question is what value is associated 
with this increased productivity? A very rough estimate of the value 
can be generated directly from the existing data. If there are other 
potential barge users willing to consume this increased productivity at 
roughly the going rate of $9.00 per ton, then this increased 
productivity permits the movement of an additional 500 thousand tons 
through Lock 25 on this system. This would yield an annual economic 
benefit of approximately $4.5 million computed as the product of the 
observed willingness to pay, $9.00 per ton, and the increased 
productivity of the system, 500 thousand tons. If this hypothetical 
measure cost less than $4.5 million annually then this measure would 
increase the net economic benefits of the navigation system. These are 
rough numbers used for example only and do not reflect the actual more 
sophisticated analysis in the model, but they provide a good starting 
point for understanding the economic evaluation of potential system 
measures.
    11. At current traffic levels evidenced on the UMR-IW navigation 
system, there is broad agreement among economists that expensive, 
large-scale measures like providing larger locks to process tows are 
not economically justified. The rationale for the navigation study was 
the expectation that the demand for barge transportation would grow 
over time, leading to increased system congestion and increasing barge 
transportation costs. Consequently, at some time in the future either 
large-scale or small-scale measures may increase the economic 
efficiency of the system by reducing the anticipated growing levels of 
congestion.
    12. The study was and is required by Corps of Engineers regulation 
to evaluate a full range of alternatives for decreasing system 
congestion and improving the efficiency of barge transportation. The 
full range of alternatives to be investigated encompasses Federal and 
non-Federal measures. In general, the investigated alternatives are 
grouped into three broad categories: relatively inexpensive small-scale 
structural measures, such as providing mooring buoys at the locks or 
extending guidewalls along the lock approaches that only somewhat 
improve the efficiency of moving barges through a lock; relatively 
expensive large-scale structural measures, such as doubling the length 
of some of the 600 foot long locks thereby eliminating the need for 
two-step lockages; and very low cost operational changes to the 
existing system, such as scheduling tows to reduce congestion. As the 
study progressed, the focus of the study narrowed to congestion at the 
600 foot long locks in the system closest to St. Louis because traffic 
levels are greatest in the southern portion of the study area, making 
these locks most likely to experience increasing delays and congestion.
                     ii. traffic growth projections
    13. The economic benefits of navigation improvements designed to 
reduce future congestion depend, of course, on the future levels of 
congestion without these improvements. The future levels of congestion, 
in turn, depend on the future growth in demand for barge 
transportation, so estimating this growth in demand is fundamental to 
the economic analysis.
    14. As one of my very first duties as technical manager, I 
contracted with independent, private sector consultants to provide an 
estimate of the growth in the demand for barge transportation on the 
Upper Mississippi and Illinois Rivers through the year 2050. These 
forecasts were deliberately based on the assumption that future 
congestion was not a problem and that traffic could grow without 
increasing costs. The goal, in other words, was to estimate traffic 
growth if the price of barge transportation remained at today's real 
level. This forecast of future demand at existing real transportation 
prices provides a reference point to begin the estimation of the 
national economic development benefits of potential measures designed 
to reduce system congestion and decrease future water transportation 
costs.
    15. Of course, the future is uncertain and I requested the 
contractor to prepare these forecasts in probabilistic terms. The 
forecasts were completed by Jack Faucett and Associates and were based 
on detailed historic data of traffic flows provided to them for 1991 
and 1992. The forecasts predicted the most likely growth rate for 
future traffic in the absence of increased congestion over the 56 year 
planning horizon would average approximately 1.1 percent per year, with 
higher growth rates in the early years and lower growth rates in the 
later years. Most of this predicted traffic growth would result from an 
increase in grain exports delivered to southern Louisiana ports by 
barge.
    16. Unlike other parts of the economic analysis, I do not believe 
any part of this analysis was based on pressure or failed to represent 
the best judgment of those doing the work. The forecasts were the 
subject of an intensive technical review conducted by myself, other 
members of the study team, the North Central Division office of the 
Corps of Engineers, the Lower Mississippi River Division office of the 
Corps of Engineers, and the Headquarters office of the Corps of 
Engineers. The projections of future traffic demands produced by Jack 
Faucett and Associates were adopted for use by the study without 
alteration of any kind.
    17. So far, these most likely forecasts of demand for water 
transportation have proven to be optimistic. Comparing recent observed 
traffic levels in the UMR-IW navigation system to the most likely 
traffic forecasts evidences this optimism. For example, Locks and Dam 
27 near St. Louis, Missouri is the southernmost lock location on the 
Upper Mississippi River. Most traffic entering or exiting the Upper 
Mississippi River goes through these locks. In 1992 Locks 27 processed 
a total of 81.5 million tons of traffic. By 1999, traffic through this 
lock assuming continued status quo operation of the system was forecast 
to grow to approximately 92.0 million tons. This represents a forecast 
growth of 10.5 million tons in annual traffic. Preliminary Corps of 
Engineers Lock Performance Monitoring System data indicate that 
approximately 83.4 million tons of traffic actually passed through 
Locks 27 in 1999. This represents a real growth of approximately 1.9 
million tons during the 1992 through 1999 period. The real observed 
growth is less than 19 percent of the most likely growth forecast used 
in the study. Moreover, 1999 was a strong year as traffic levels for 
the Upper Mississippi River as a whole since 1992 have averaged 
significantly below 1992 levels. This is evidenced in a graph of 
historical traffic levels presented by the Army Corps of Engineers 
study team presented at a meeting of the Governors Liaison Committee to 
the study on November 18, 1999, which is attached as Appendix 2. This 
observed low growth relative to the most likely forecast of the study 
is apparent at all Upper Mississippi River locks and to a lesser extent 
at the Illinois Waterway locks.
    18. This experience is important because potential water 
transportation cost savings realized in the near term have a much 
greater economic value now than potential transportation cost savings 
realized far off in the future. Low or non-existent traffic growth in 
the early years relative to the forecast traffic growth used in the 
study makes the real immediate national economic development value of 
potential navigation improvements much lower than the values estimated 
in the study.
    19. Despite this fact, all economic analyses of system 
improvements, including my own completed in early 1998, use these 
``most likely'' forecast levels of traffic demands. It is important to 
recognize, therefore, that even the earlier unbiased analyses of the 
economics work group probably overestimate the real economic benefits 
of navigation improvements because they use traffic growth projections 
that, at least so far, appear to be, at best, optimistic. 20. Further, 
although this now very likely overestimate of ``most likely'' traffic 
growth was unintentional, the interim real observed traffic data should 
normally result in a revision to these, now optimistic, growth 
forecasts. This revision has not occurred.
 iii. brief description of key factors that ultimately were changed to 
                   make longer locks appear justified
A. The Willingness to Pay for More Efficient Barge Transportation
    21. The ultimate objective of the national economic development 
benefit analysis is to estimate the willingness to pay of users for the 
economic value of reducing the congestion of barge transportation. This 
willingness to pay for incremental changes in project outputs is the 
measure of national economic development benefit mandated by Corps of 
Engineers Regulation 1105-2-100. This Corps of Engineers regulation is 
itself based on regulations and guidance issued by the Water Resource 
Council on February 3 and March 10, 1983 signed by President Reagan for 
all Federal agencies that conduct water and related resource planning.
    22. The relationship between the different quantities of barge 
transportation, or any other good or service, that consumers are 
willing to pay for as prices rise or fall is represented by economists 
as a demand curve. The willingness to pay for any good or service, 
whether barge transportation or lawnmowers for another example, depends 
in large part on the alternatives available to potential users of the 
good or service. When the price of barging, lawnmowers, or any good or 
service rises, some consumers will continue to purchase as before, 
other consumers will adjust the quantity they purchase, and still other 
consumers will take advantage of alternative goods or services.
    23. This demand curve for barge transportation is therefore 
critical to evaluating the economic benefit of lock improvements 
designed to reduce future congestion. As system congestion increases, 
and therefore the price of barge transportation goes up, those who are 
desirous of moving grain and other goods on the river at existing 
prices do not have to continue barging the same quantities and can take 
advantage of other lower cost alternatives available to them. For 
example, the best analysis of grain markets in Iowa indicates that 
approximately 17 percent of Iowa grain is transported on the 
Mississippi River, primarily for export. If barge prices rise in the 
future, grain merchants and farmers could send more of their grain by 
railroad to New Orleans for export. They could export larger amounts 
via rail through the Pacific Northwest. More likely, they could decide 
not to export as much grain but instead send a little more to local 
processors, such as ethanol plants or hog feedlots. How much would 
these consumers of barge transportation be willing to pay for 
navigation improvements to lower the price of barging? The answer is 
the difference between that price and their next best alternative, and 
this difference is the economic value of navigation improvements to 
them.
    24. Another consequence of the existence of alternatives to barging 
is that the river will become less congested than otherwise predicted 
by the most likely traffic growth estimates developed for the UMR-IW 
study. These forecasts predict the most likely barge traffic growth 
based on transportation costs and prices remaining constant at existing 
real levels. But if congestion makes barging more expensive, some of 
the goods that would otherwise move by barge will go to other 
destinations or use alternative modes of transportation such as rail or 
truck and therefore will not contribute to traffic delays. For this 
reason, even those who continue to use barge transportation despite the 
higher costs will, in fact, have to face less congestion than implied 
by the traffic forecasts. In effect, they benefit from the fact that 
others will decrease their use of the river. This means that 
determining how much commerce will shift away from the river as barge 
costs increase is critical to predicting how much congestion will truly 
develop on the river and therefore how expensive barging will become in 
the absence of navigation improvements.
    25. A Corps of Engineer Regulation, ER 1105-2-100, and the 
``Economic and Environmental Guidelines for Water and Related Land 
Resources Implementation Studies'' both require in identical language 
that all planning studies use the willingness to pay of potential 
consumers as embodied in a demand curve as the measure of national 
economic development benefits. In estimating how much additional barge 
traffic will use a river as a result of a project and how much that 
increased level of use contributes to the national economic development 
objective, these regulations require that planners consider all the 
different alternatives available to those who want to move goods in the 
absence of the project.
    26. Economists call this analysis of ``how much'' goods will shift 
away from the river in response to a price change a question of the 
elasticity of demand for barge transportation. The more readily grain 
and other goods will find an alternative to using the Upper Mississippi 
River as the river becomes more congested and barge prices rise the 
more elastic is the demand for barge transportation. The less readily 
grain and other goods will find an alternative to using the Upper 
Mississippi River as the river becomes more congested and barge prices 
rise the more inelastic is the demand for barge transportation.
    27. Elasticity depends on the availability of substitutes for water 
transportation as well as the amount of time producers and consumers of 
barge transportation have to respond to market changes. Generally, the 
more close substitutes or alternatives available to consumers and 
producers the less the willingness to pay for increased levels of barge 
transportation. Similarly, the more time available to seek alternatives 
and substitutes the lesser the willingness to pay for increases levels 
of barge transportation.
    28. Prior to this study, despite the planning regulations, Army 
Corps of Engineers analyses of inland navigation projects had ignored 
this fundamental point that those who use water transportation have 
other alternatives and will adjust their desired level of usage if the 
price of barge transportation rises. They in effect assumed a perfectly 
inelastic demand of system users for barge transportation. This 
assumption violates fundamental principles of economic analysis and can 
result in an order of magnitude overestimate of the national economic 
development benefits of a navigation project.
    29. As part of the economic analysis for this project, the 
economics work team and I developed a model that incorporated for the 
first time the elasticity of demand for barge transportation in a 
system model to be used to estimate the navigation-related national 
economic development benefits of potential system changes to reduce 
congestion. In the various documents cited later in this affidavit or 
provided as Appendices, this model is referred to as SEM, ESSENCE, or 
the St. Louis model. SEM refers to the conceptual economic model. 
ESSENCE refers to the computer model implementing the SEM. The St. 
Louis model denotes the SEM, ESSENCE, or both. In the ESSENCE, a 
parameter termed ``N'' or sometimes the ``N value'' technically defines 
the ``shape of the demand curve for individual origin, destination, and 
commodity specific potential system movements'' and plays an important 
role in estimating economic benefits. The N value for a potential 
system movement is directly related to the absolute value of the 
elasticity of demand for that movement. The greater N for a given 
potential movement, the more elastic is the demand for barge 
transportation, the better the alternatives to barge transportation 
appear, and the lower the likely real growth in future barge traffic 
without system improvements. In other words, the higher the N values 
for movements, the lower the national economic development benefits of 
potential expensive, large-scale, navigation system improvements.
    30. In the original ESSENCE model, we estimated the N value for 
grain and other raw agricultural products, which are by far the most 
important commodities by volume, to be equal 2.0. All other commodities 
were given an N value of 1.0. Even assuming the optimistic most likely 
demand predictions by Jack Faucett and Associates, with these N values, 
the estimated costs of doubling the length of any subset of system 
locks or constructing new 1200 foot long chambers any time in the 
foreseeable future exceeded the estimated benefits substantially. There 
is legitimate uncertainty regarding the appropriate values of N for 
agricultural and other products, but as I discuss below, even much 
lower N values led to the same conclusion.
    31. As described below, this model was subject to repeated 
independent technical review both within and without the Army Corps of 
Engineers and was strongly affirmed by each review. In the course of 
finding a way to justify doubling of the lengths of locks in 1998 and 
1999, the N values were one of the key factors subject to manipulation 
by senior Corps of Engineers officials.
B. Rehabilitation Cost Savings
    32. Another source of national economic development benefits that 
can be the result of potential structural projects to improve water 
resource facilities is the postponement or avoidance of rehabilitating 
or replacing existing components of facilities that would otherwise 
need rehabilitation or replacement. In this event, these rehabilitation 
cost savings, if real, are a national economic development benefit of 
the potential project as those resources that would have been consumed 
by the rehabilitation are freed up for other productive uses.
    33. As part of navigation study, the engineering and economics work 
groups evaluated whether there would be rehabilitation cost savings as 
a result of implementing any of the alternatives to decrease congestion 
at the locks. Throughout 1997 and early 1998, Jeff Marmorstein and I 
and others participated in a series of meetings with the engineering 
work group, including Dennis Lundberg and Bob Hughey and others, that 
examined in detail the construction cost elements of the extended lock 
alternatives. At these meetings we were informed that no rehabilitation 
costs for components of the existing locks were included in the 
construction cost estimates for the extended locks. For this reason, 
regardless of what future rehabilitation costs proved to be, there 
could be no immediate rehabilitation cost savings as a consequence of 
extending existing locks.
    34. Subsequent to these meetings, Jeff McGrath, an economist in the 
St. Paul District at my direction, working with members of the 
engineering work group, completed a detailed analysis of the need for 
future rehabilitation for the without project condition. The principal 
reason for this analysis was guidance from Corps of Engineers 
Headquarters that major rehabilitation expenditures on the Upper 
Mississippi River must be identified as an integral part of the 
evaluation of any potential investments on the navigation system. Mr. 
McGrath's analysis focused on 17 major components of the all the 
existing locks in the navigation system study and concluded that no 
rehabilitation costs for these components would be necessary with or 
without extended locks for 35 to 40 years, i.e., until at least 2033. 
These conclusions were embodied in a report prepared by McGrath in 
early 1998 and are reflected in the public minutes of an Economic 
Coordinating Committee meeting on May 11 and 12, 1998 which are 
attached as Appendix 3.
    35. This analysis is important because it shows that potential 
rehabilitation cost savings from extending locks would be small even if 
the costs of extending locks did include significant rehabilitation of 
existing locks (in contrast to what we were told above). At best, 
extending the existing locks in the near future would postpone future 
rehabilitation costs from around 2035 to some period thereafter. The 
present value of these foregone rehabilitation costs so far off in the 
future would be very small.
    36. Mr. Lundberg noted correctly at a meeting in early 1998 in the 
Rock Island District office that I attended that some potential 
rehabilitation expenses had not been examined by Mr. McGrath's report. 
However, Mr. Lundberg also noted these other rehabilitation costs were 
not expected to change with or without the lock extensions. For that 
reason any such rehabilitation costs were irrelevant to whether 
extended locks could save future rehabilitation costs.
    37. The conclusion that there was no real potential rehabilitation 
cost savings was documented to the economics team in a statement 
contained in the document entitled ``Engineering Hand-off to 
Economics'' dated March 18, 1998. Key pages from this document are 
attached as Appendix 4. This document contained performance and cost 
data compiled by the engineering work group for large-scale measures 
including lock extensions that had undergone extensive Independent 
Technical Review in late 1997.
    38. As described below, a major change was made to this analysis in 
May and June 1999 in an effort to attempt to justify immediate large-
scale measures.
C. Industry Self-help
    39. One of the means by which tows can themselves reduce the time 
it takes to proceed through a lock is to receive help from other tows 
also waiting for lockage. This practice is termed industry self-help. 
Basically, another line haul towboat waiting at the lock disengages 
from its barges and assists in removing the first half (called the 
first ``cut'') of a locking tow and then removes this first cut to a 
remote location to await the second cut to remake the original tow. 
Historical experience developed by the study has shown that tow 
operators will do this when traffic builds up at locks. The engineering 
team estimated that ``industry self-help'' would reduce the time it 
takes to transit a lock by an average of 18 minutes for up-bound tows 
and 23 minutes for down-bound tows, or roughly 20 minutes average 
overall. This conclusion was summarized in the Study's December, 1997 
newsletter, attached as Appendix 5. The March 18, 1998 revised 
Engineering Hand-Off to Economics (attached previously as Appendix 4) 
reduced slightly the estimate of the time savings from increased usage 
of industry self-help and increased the costs by requiring that DeLong 
Piers be installed to extend the existing upstream guidewalls of the 
locks for safety reasons.
    40. This practice has important consequences for estimating the 
benefits of larger locks. Corps of Engineers regulation ER-1105-2-100 
requires this practice to be explicitly included in the without project 
condition. This practice helps insure the most efficient use of the 
existing system. Larger locks, according to the engineering team, 
reduce transit times per lock by approximately 55 minutes (depending on 
the lock). But when tow operators can themselves significantly reduce 
transit times by up to 23 minutes under certain conditions, the net 
reduction in lockage time attributable to longer locks is reduced when 
measured against the without project condition.
    41. Although industry self-help occurs today, the addition of 
nearby mooring cells would further facilitate the practice. As the 1997 
newsletter reveals, one possibility considered was to construct six 
mooring cells at each lock at an estimated cost of $1.1 million per 
lock. However implemented, Army Corps of Engineer regulations and the 
Principles and Guidelines require that self-help be treated as an 
alternative to extended locks.
    42. The ESSENCE model therefore incorporated a technique for 
estimating when tows would provide each other self-help based upon 
whenever the congestion at a lock reached a certain level, 12 tows 
waiting for lockage. The model then reduced the lockage time for those 
double lockages that could benefit from self-help in the without 
project condition.
    43. The model, depending on the precise lock in question, indicated 
that the tow industry could use self-help at the locks in the future 
for the majority of double lockages. Because each use would reduce 
transit time by roughly 20 minutes even without extended locks, this 
estimate of real world conditions significantly and dramatically 
reduced the estimated economic benefit of extended locks. As described 
below, as late as November 1998, the economic analysis indicated that 
self-help alone would fully address the future transportation needs of 
the system.
    44. As described below on January 14, 1999, at a navigation team 
leaders meeting in the Rock Island District office it was announced 
that officials ordered an important restriction to be used in the model 
limiting the percentage of time barge companies would use industry 
self-help.
D. Cost Estimates for Extended Locks
    45. In any benefit and cost analysis, the estimated costs of a 
project obviously play a critical role. In the course of the economics 
study while I was still leading the economics work group, cost 
estimates for all the large-scale lock expansions dramatically 
decreased. Original cost estimates using traditional lock construction 
techniques put the cost at approximately $380 million per lock or $1.9 
billion for five locks. These original cost estimates re produced for 
an earlier study and just served as a starting point for the 
investigation of this study.
    46. The engineering work group recognized early that such a high 
construction cost was likely not to be cost-effective for addressing 
future congestion. It therefore investigated and developed an 
innovative construction technique that would keep the existing locks in 
place and simply extend them using a great deal of pre-fabricated 
construction. For example, unlike traditional Army Corps construction 
techniques, the proposed new lock extension construction would not 
require the construction of a costly temporary (coffer) dam. These new 
techniques, reflected in engineering alternative 2R reduced the 
construction cost estimates roughly in half.
    47. One part of any Corps of Engineers cost estimate includes a 
``contingency'' factor for potential cost overruns related to 
unforeseen nditions encountered during construction. This contingency 
is included because of experience that costs rarely turn out to be 
lower than predicted and often turn out to be higher. Typically Corps 
projects include contingency factors of 25 percent. That typical 25 
percent contingency cost was increased in this study to 35 percent in 
response to the Independent Technical Review of the Engineering 
Appendix to the study and expert comments received by the engineering 
work group because the lower construction cost estimates relied on 
novel construction techniques. This 35 percent contingency cost was 
reflected in all large-scale cost estimates transmitted to the 
economics work group for use in the benefit/cost analysis as documented 
in the Engineering Hand-Off to Economics revised March 18, 1998 
(previously attached as Appendix 4).
    48. As described below, this contingency factor was suddenly 
reduced to 25 percent in late May and early June 1999.
                  iv. description of events since 1997
A. October 1997 through May 1998
    49. On October 29, 1997, in response to my earlier request, I 
briefed the economic methodology the economic study team had developed 
for the study to a large group of invited Corps economists and planners 
in St. Louis. All Corps economists and planners with an interest in 
navigation studies were invited and asked to comment and to review on 
the UMR-IW economic methodology and model.
    50. Oral feedback from the briefing was extremely positive. On 
December 5, 1997 I also received an email from Jesse McDonald, an 
economist at the Mississippi River Division, including copies of the 
comments of several participants. These comments are attached as 
Appendix 6. The comments of Robert Daniels, then the chief economist of 
the Army Corps of Engineers at Headquarters, stated: ``My simple answer 
is that it looks like the greatest advance we have made in moving 
theory to practice in quite a few years. What does it mean to the 
future analysis? Well, I'd say it means that we will have more correct 
and therefore more supportable results.'' Steve Cone, another economist 
in Headquarters, described it this way: ``An appropriate move toward 
what has been viewed as theoretical (but only because models have not 
been developed to measure what we know is true). I hope we continue to 
move toward models that better measure willingness to pay.''
    51. In November and December 1997, Jeff Marmorstein and I used the 
model to generate preliminary estimates of the economic benefits of 
various alternative improvements for the Upper Mississippi navigation 
system. These preliminary analyses concluded that industry self-help 
alone might fully address future transportation needs and at most only 
small-scale, low cost system improvements appeared justified for the 
foreseeable future. The estimates of the economic benefits also 
indicated that large-scale improvements would not be justified at any 
time in the 50-year study period.
    52. At my request in late 1997, Mr. Richard Manguno an economist of 
the New Orleans District office was designated as the independent 
technical review manager for the products of the economics study work 
group. Army Corps of Engineers regulations require an independent 
technical review of the work products of feasibility studies.
    53. On February 3-4, 1998, in Vicksburg MS, I first described the 
preliminary results of the economic benefit and cost analysis at a 
public meeting of the environmental work group of the UMR-IW study. I 
presented the results as subject to change and preliminary, however, I 
did communicate that only small-scale measures appeared warranted for 
the foreseeable future.
    54. These preliminary working results generated a few newspaper 
articles stating that the ``Corps of Engineers rejects rebuilding lock 
system.'' An article appeared in a newsletter put out by American 
Rivers, an environmental group, and I believe later some other 
newspapers carried the story, including perhaps the St. Louis Post 
Dispatch and the Des Moines Register.
    55. On March 11, 1998, I formally forwarded to Rich Manguno of the 
New Orleans District office documentation to begin the required 
Independent Technical Review (ITR) of the work products of the 
economics work group. As part of the ITR, Mr. Manguno would pick a 
number of economists, both within and outside the Army Corps of 
Engineers, to evaluate the work products. The St. Louis District is 
under the command and control of the Mississippi River Valley Division 
(MVD), which has its headquarters in Vicksburg, Mississippi. As part of 
its command and control duties the MVD is required by regulation to 
assure the ITR of all work products used in feasibility studies under 
its command and control.
    56. In early April 1998, the entire study team and I briefed the 
MVD commander and his staff on the ITR process for the entire study and 
other issues. At this briefing I formally told the commander and his 
staff that this study would likely not produce economic justification 
for large-scale measures at any time in the foreseeable future. I 
explained how previous Corps of Engineers economic evaluations of 
navigation system improvements had overstated project benefits. The 
commander and his staff, including Don Herndon and George ``Dusty'' 
Rhodes, expressed concern with our conclusions.
    57. Minutes of an April 7, 1998 Navigation Study Team meeting 
(Appendix 7) indicate that the schedule at that time called for 
releasing the initial NED analysis, i.e., the benefit/cost analysis, in 
April and presenting the NED and alternative plans in July. These 
minutes also note, ``Based on the preliminary, initial NED analysis and 
its assumptions, industry self help appears to be able to meet the need 
for system transportation improvements within the study horizon.'' 
There was also discussion of the estimates of rehabilitation costs, and 
the minutes include my uncontradicted statement ``that this analysis 
should not significantly effect the outcome of the study, since it 
essentially impacts the with and without project condition in the same 
way.''
    58. On April 23, 1998 at Fort Leonard Wood, Missouri, in response 
to these concerns, I briefed General Fuhrman (the Director of Civil 
Works for the Corps of Engineers), General Van Winkle (the Commander of 
the Lakes and Rivers Division (LRD)), General Anderson (the Commander 
of the MVD), Colonel Mudd (the Commander of the Rock Island District), 
and Colonel Hodgini (the Commander of the St. Louis District. Other 
staff and study team members were present at the briefing. In the 
course of doing so, I addressed why this analysis differed from 
previous Corps of Engineers navigation analyses. I explained how the 
information we had developed on the origins and prices paid to 
producers of Iowa grain that currently moved on the Mississippi River 
showed that farmers utilized abundant alternative destinations for 
their grain, which meant that they must be responsive to price changes 
in barge transportation. (Overheads from this presentation are also 
included in Appendix 7.)
    59. None of the participants expressed any objections to the 
analysis. General Fuhrman decided to undertake a process to evaluate 
the potential implications of the UMR-IW results and models. He stated 
that he did not want to revisit the economics of past projects, but 
wanted to ensure consistency in evaluation of future projects among all 
Corps offices undertaking such studies. The meeting concluded with an 
understanding that General Fuhrman's staff would undertake an 
investigation to assure the consistency of economic analyses amongst 
all divisions and districts conducting these analyses. Steve Stockton, 
Chief of Planning at Corps Headquarters, was assigned to this task 
initially, but to my knowledge this investigation was never completed.
    60. On May 27, 1998, I attended a meeting in Huntington, WV to 
discuss comments received from economists at LRD as part of the 
Independent Technical Review regarding the economic model and data used 
in the study. The feedback from this meeting was positive although the 
economists at LRD withheld judgment on some of the details of the model 
pending further review. This outcome was described by Dudley Hanson, at 
that time the overall project manager of the study in a June 2, 3, 1998 
meeting of all the technical managers of the study in Bettendorf, Iowa, 
which is recorded in a memorandum dated June 4, 1998 from Bradley 
Thompson to the participants in that meeting (Appendix 8). As this 
memorandum describes, the LRD economists wanted a users manual for the 
model to explore some of its details.
    61. The minutes of the June 2,3, 1998 technical managers meeting 
also provide some discussion of self-help. Denny Lundberg, an engineer 
in the Rock Island District, stated that the navigation industry had 
just ``come to understand the importance of this measure,'' opposed it, 
and was ``not willing to talk about this measure any further.'' But 
Lundberg also reported that the self-help analysis of the engineering 
work group had already passed Independent Technical Review.
    62. To further explain the details of the economics model, a 
followup workshop was conducted in St. Louis on June 10, 1998 for 
economists participating in the ongoing ITR and others. Jeff 
Marmorstein led the workshop. The conclusions and recommendations of 
the workshop were that the concepts underlying the model were sound. 
The workshop participants recommended that it might be necessary to do 
more work to estimate the ``elasticity of demand'' for barge 
transportation, i.e., to determine the appropriate N values for use in 
the ESSENCE model. I agreed with that recommendation. A memorandum from 
me to the members of the ITR economics team summarizing these 
conclusions dated June 16, 1998 is attached as Appendix 9.
    63. In short, as of June 10, 1998, the economic analysis that 
showed that immediate lock extensions and other large-scale measures 
were not justified had undergone both informal and formal review, and 
the only recommendation was the possible need for further data checking 
of the N values. I agreed with that recommendation.
B. June 11 1998 through April 1999
    64. On June 13, 1998, General Anderson received a briefing in St. 
Louis on the status of the ITR of the economic analysis. Col. Hodgini, 
Dudley Hanson, George ``Dusty'' Rhodes (Chief of Planning Directorate 
at MVD), Dean Caldwell (Executive Assistant to the MVD Commander) and 
Rich Manguno were present at the briefing. I was originally supposed to 
attend the meeting but was told shortly prior to the meeting by Owen 
Dutt, my supervisor, that he and I should not attend the briefing. My 
understanding of the meeting is based on descriptions given to me by 
Colonel Hodgini and Mr. Manguno orally and on a memorandum dated June 
15, 1998 (Appendix 10).
    65. Mr. Manguno had pre-briefed Mr. Rhodes that the ITR was going 
to conclude that the model was correct and suitable for use in 
evaluating the economic impacts of alternative changes to the UMR-IW 
navigation system. Mr. Rhodes stated that he would challenge the 
conclusion of the ITR. He directed prior to the briefing of General 
Anderson that alternatives be developed to alter the management 
structure of the study team. He directed that these alternatives 
include the replacement of me by a panel of MVD economists chaired by 
the project manager Dudley Hanson, an engineer, and he stated he was 
going to recommend this alternative to General Anderson.
    66. At the briefing for General Anderson, Mr. Manguno reported the 
status and likely conclusions of the ITR. Mr. Rhodes, who is not an 
economist, presented his recommendation to transfer control of the 
economics work by stating that I was on a mission ``out to shut down 
the Corps.'' The briefing concluded with the understanding that General 
Anderson would consult with General Furman and make a command decision 
on what to do.
    67. On June 17, 1998, General Anderson sent a memorandum to the 
Commanders of three of his districts. This memorandum (Appendix 11) 
instructed the following:
      Dudley Hanson would be appointed the project manager for 
the overall study as his sole responsibility. Previously, Mr. Hanson 
acted as the supervisor for the project manager of the time, Mark 
Gmitro.
      Control over all economic analysis was transferred to the 
newly created panel consisting of the Chiefs of Economics in three MVD 
Districts, Mr. Rich Manguno, Diane Karnish, Paul Soyke, and a 
representative from the Navigation Studies Center in LRD, Wes Walker, 
who was already participating in the ongoing ITR of the economics work 
products.
      The panel was directed to produce all necessary economic 
analyses and to identify the alternative that maximized the net 
economic benefits within 90 days.
      I was named an advisor to the panel. Later, the Corps of 
Engineers Headquarters office also appointed an observer to the panel, 
Mr. Ron Conner.
    68. On June 22, Paul Soyke sent a memorandum, at the ``direction of 
the Project Manager,'' Dudley Hanson, describing the panel's roles 
(Appendix 12). It stated that Dudley Hanson is the chairman of the 
panel. Dudley Hanson is not an economist. It also instructs the panel 
members that there are 17 key assumptions described in my write-up of 
the SEM economics model that the panel will review.
    69. The economics panel held its first face-to-face meeting July 1-
2, 1998 in New Orleans. I did not attend this meeting. A CEMVR-PD-C 
memorandum dated July 6, 1998 (Appendix 13) documents this meeting. The 
panel evaluated the 17 assumptions underlying the economics model and 
concluded, ``there were no major problems or issues with the 
assumptions.''
    70. At this meeting, Dudley Hanson also directed that the panel 
contract with Dr. Mike Bronzini of Oak Ridge National Laboratories, to 
evaluate the ESSENCE economic model using another model to determine if 
both models arrived at the same results under the same assumptions.
    71. On July 23, 1998, the economics panel met for a second time. 
Its proceedings are reflected in a memorandum prepared by Ron Conner 
dated July 25, 1998 (Appendix 14). Dr. Bronzini discussed his progress. 
I urged that the panel devote its full energy to improving information 
about the likely shape of demand curves. The panel agreed to organize 
an ``expert elicitation panel'' of outside agricultural economists to 
provide advice on the elasticity of demand for water transportation for 
agricultural products.
    72. On August 6 and 7, 1998, the expert elicitation panel of 
outside experts met to help the economics panel determine the 
characteristics of the demand for water transportation of agricultural 
products. The meeting was held in Chicago, IL with the following 
experts in attendance: Harold Hommes, Iowa Dept. of Agriculture; Brad 
Clow, Sparks Companies Inc.; John Bitzan, North Dakota State 
University; Steve Fuller, Texas A&M University; and Jerry Fruin, 
University of Minnesota. Corps of Engineer attendees included Paul 
Soyke, Ron Conner, Mark Hammond, and myself. The meeting is documented 
in two memorandums, CECW-PD (Conner) dated August 10, 1999 and CELRH-NC 
also dated August 10, 1998, both of which are attached as Appendix 15.
    73. As these memoranda indicate, the panel agreed with the basic 
(downward sloping) shape of the demand curve in the ESSENCE economic 
model. It recommended that more data be gathered to determine the 
precise shape of the curve for various origins and destinations for 
grain products, but it believed that the appropriate N value for the 
demand curves for raw agricultural products was probably somewhere 
between 1 and 2.
    74. On August 14, 1998, the Independent Technical Review of the 
economic model and other work products was finalized in a memorandum 
(Appendix 16) transmitted through Owen Dutt (Chief of the Planning 
Division in the St. Louis District) to Dudley Hanson. It stated that 
the ``economic concepts underlying'' the economic analysis are sound. 
It recommended additional efforts to define the shape of the demand 
curves for water transportation, i.e., to determine the elasticity of 
demand for water transportation.
    75. On August 22-23, 1998, the economic panel met for the third and 
final time in Rock Island. The meeting is documented in a memorandum 
from CECW-PD (Conner) dated August 26, 1998 (Appendix 17). In this 
meeting the economics panel recommended continuing with the model 
developed for the study by the study team with a ``compromise'' demand 
curve for water transportation of all raw agricultural products 
movements characterized with an N value of 1.5. For non-agricultural 
products the economics panel recommended an N value of 1.0.
    76. The memorandum from General Anderson had assigned the economic 
panel the responsibility of producing a preliminary NED plan by 
September 17, 1998. I do not know precisely who made the decision, but 
at some point in September, Dudley Hanson directed Rich Manguno to 
analyze various selected alternatives (combinations of small and large 
scale measures at selected system locks) through the model using 
different selected values for N and different growth predictions for 
future traffic. (As discussed above, the Jack Faucett analysis had 
provided a high, medium and low estimate for future traffic growth.) I 
have an email dated September 3, 1998 from Paul Soyke to the economics 
panel members and others indicating that there had been a 
teleconference the previous day, the outcome of which appears from this 
email to have been a decision not to produce a single recommended 
alternative. Instead, a range of alternative scenarios would be 
analyzed. ``The team should then determine an alternative, based on 
these results, that appears to be the most likely to justify large 
scale improvements in the near future.'' (Appendix 18).
    77. Rich Manguno came to the St. Louis District on September 
14,1998 and stayed through September 18, 1998 to run the various 
alternatives through the model using various different assumptions for 
N and growth predictions. He had been instructed by Dudley Hanson to 
examine how these different assumptions affected the results. Jeff 
Marmorstein and I assisted him. We concluded that any reasonable values 
for either the N parameters or the growth rates left unaltered the 
conclusion that no large-scale improvements were justified for at least 
a long period.
    78. On September 18, 1998, I was called to a private one on one 
meeting with the St. Louis District's Deputy for Project Management, 
Mr. Gerald Barnes. He informed me he had had conversations with MVD 
staff, specifically Dusty Rhodes and Don Herndon. He told me to find a 
way to justify large-scale measures in the near term for the UMR-IW 
navigation system or the MVD office would find an economist who would 
and I would be out of my job as technical manager of the economics work 
group. As I remember, he asked if I had a family to support or words to 
that effect. I told him I could not find such a justification because 
it was beyond the bounds of reasonableness given the economic data and 
model runs to date. I described this meeting to Mr. Manguno immediately 
on walking out of the meeting.
    79. On September 23, 1998, General Anderson, Colonel Mudd and 
members of their staffs briefed General Furman and key members of his 
staff. I do not know who attended this briefing, as I was not invited 
to attend.
    80. On the same day, there was an exchange of emails between 
William Arnold, a planner with the MVD, and Dusty Rhodes, the Chief of 
Planning of MVD (Appendix 19). In these emails, Mr. Arnold communicates 
that they have been trying to choose scenarios out of the variety that 
could be picked to justify the project that are ``reasonably 
plausible,'' but warns that they could end up, without care, putting 
together assumptions that together could not meet this standard. Rhodes 
writes back that they should stick ``with the concept of scenarios that 
are reasonably plausible.'' Army Corps of Engineers regulation ER 1105-
2-100 and the Principles and Guidelines require that scenarios be 
chosen that are the ``most likely condition expected to exist in the 
future.''
    81. On September 25, 1998, Dudley Hanson sent an email to Mr. 
Manguno with copies to many individuals involved in the study including 
myself (Appendix 20). This memorandum instructed Rich on the ``task 
that you, as leader of the economics work group . . . have before 
you.'' The memorandum includes a description ``Briefing of MG Fuhrman 
and staff: Guidance Received'' and states in part as follows: ``We, the 
Corps, are the Federal Government's advocates for inland waterways. 
There is a need to improve the system. The well being of the Midwest 
depends on agricultural exports. We need to figure out what the demand 
curves mean. If the demand curves, traffic growth projections, and 
associated variables that the economics model can consider, do not 
capture the need for navigation improvements, then we have to figure 
out some other way to do it . . . . MG Fuhrman will approve a schedule 
change. By the end of 3 weeks . . . he directs that we develop evidence 
or data to support a defensible set of capacity enhancement projects. 
We need to know what the mechanism is that drives the benefits up. The 
rationale should err on the high side.'' If there is any ambiguity as 
to the meaning of this instruction, Dudley Hanson includes the 
instruction: ``In anticipation of the need [for additional help for 
Manguno] I have asked folks to work on the rationale that relates 
directed enhancements to plausible world conditions that will underlie 
the need for these enhancements, to be developed qualitatively and then 
quantitatively using our analytical tools.''
    82. On the same day, Dudley Hanson also sent a memorandum to a 
large number of people involved in the study (Appendix 21), including 
myself stating: ``MG Fuhrman now tells us that we are the advocates for 
inland navigation, which sounds to me to be a distinctly more proactive 
posture than what I've always pictured our role. I've thought of us as 
``stewards'' of inland navigation, i.e., we execute public policy 
regarding improvements and level of service, and we grease the 
machinery and repair it. This overt advocacy role, to me, is a new 
departure. We'll have to work on a story line, and in fact, that's one 
of the things we'll be doing over the next few weeks. I, for one, have 
no problem with this, provided our chain of command supports, and helps 
explain, this new view when the heat comes up. It's pretty clear to me 
from Wednesday's meeting in Washington that the support will be there 
when it's needed.''
    83. Mr. Manguno has informed me that he expressed concerns with 
this instruction in writing to Dudley Hanson.
    84. On October 2, 1998, in response to these concerns, Colonel Mudd 
sent Mr. Manguno an additional memorandum (Appendix 22). Among other 
things, this memorandum states: ``MG Fuhrman has clearly stated that 
the Corps has the responsibility as the Federal Government's advocate 
for the inland waterway system. To help in the execution of this 
responsibility, you will develop the economic component of the case for 
a recommendation that includes near term improvements, recognizing that 
the Nation is better served by improvements that err on the large-scale 
side than by actions that err on the underdeveloped side. The case will 
be based on explicit considerations of our position in the world with 
respect to competitiveness and reliability. Considerations may also 
such include [sic] items as national policy regarding grain exports, 
balance of trade considerations, and risk and uncertainty. Making this 
case will be the responsibility of the PM/Formulation group, with the 
help and input of the Economics Panel.''
    85. Also on September 25, 1998, Gerald Barnes sent an email to 
Colonel Hodgini, Diane Karnish and myself reiterating some remarks by 
General Fuhrman to the navigation industry stating, among other things, 
that, ``HQ will be `decisively engaged' in the results of the 
Navigation Study.'' He ends the memo with the line, ``It's pretty clear 
to me where this is heading.'' (Appendix 23)
    86. In a memorandum dated September 27, 1998, Major General 
Anderson extended the Economics Panel for the duration of the 
feasibility study (Appendix 24). The panel was made responsible for all 
the economics work products in the study. Rich Manguno replaced Dudley 
Hanson as panel chair. Col. Mudd was given ultimate control of the 
panel. The panel was made responsible for production of all economic 
products for the navigation study.
    87. Despite the above instruction, the panel never met again nor 
was consulted with in any way until I sent a memorandum by e-mail to 
Col. Mudd in June 1999 reminding him of the panel's responsibilities. 
These events are described below.
    88. On November 24, 1998 a document entitled Upper-Mississippi 
River-Illinois Waterway System Navigation Study: Preliminary Economics 
Findings Released to the Public was distributed to the public (Appendix 
25). The preliminary findings set forth the benefits and costs of 
various alternatives under selected alternative assumptions for traffic 
growth and N values. This analysis left undetermined the system 
environmental costs to be included in the benefit and cost analysis. No 
scenario was analyzed using an N of 2.0 for grain. The highest assumed 
N value estimate employed in this analysis was N of 1.5 for grain. This 
was the N value recommended for use by the economics panel. Assuming 
that N value, even without including system wide environmental costs, 
the analysis showed that extending locks was not justified at any time 
over the next 50 years.
    89. Subsequent to this public release of preliminary findings in 
November 1998, Mr. Manguno contracted with Dr. Mark Burton, an 
economist at Marshall University, to produce additional analysis of the 
elasticity of demand of commodities that move on the river and to 
further examine the methodology utilized by the system economic model. 
Dr. Burton is a recognized expert in the field of transportation 
economics.
    90. At a January 14-15, 1999 Navigation Study Team meeting in Rock 
Island, Richard Manguno is told to restrict the model to assume that 
industry self-help can only be used a maximum of 5 percent of the 
lockages, compared to a more than 50 percent use at congested locks 
predicted by the model itself. According to the minutes of this meeting 
(Appendix 26), because concerns have been raised that self-help might 
impact the environment without additional facilities (presumably 
mooring buoys), self-help should actually be considered a ``with 
project'' option. That change by itself would still preserve self-help 
as a cost-effective option to extended locks. But, the minutes then 
state, ``Bob Hughey and Brad Thompson highlighted that in detailed 
coordination with the industry and Corps operations and engineering 
staff that remote remake facilities will not be provided as a Federal 
action.'' Bob Hughey is an engineer in the St. Louis District and Brad 
Thompson is a planner in the Rock Island District.
    91. No other rationale has ever been provided to the economists for 
this arbitrary restriction on the use of self-help. Currently, tows do 
in fact use self-help when congestion is significant and it is in the 
tow operators' interests to do so.
    92. On March 3, 1999, Dr. Mark Burton submitted his report 
(excerpts are attached as Appendix 41). His independent assessment 
reviewed the overall economic model and supported it. He did some 
empirical analysis, using railroad transportation price and quantity 
data, to estimate the short-run elasticity of demand for rail 
transportation of goods other than grain. These estimates of short-run 
rail price elasticity could legitimately be used to determine the most 
inelastic limit for these goods, but his report cautions that these are 
short-run elasticity estimates and they likely understate the real, 
long run values. The reason is that in the very short-run, those who 
use the river to transport goods have relatively fewer alternatives, 
but in the long run, they have more opportunity to find alternatives 
for water transportation. Dr. Burton also concludes that the best 
estimate of N for grain is 2.0, rather than the 1.5 that had been 
recommended by the economics panel.
    93. Chris Brescia was and is the Executive Director of MARC 2000, 
an association formed by large water transportation companies and 
others interested in the navigation system to push for large-scale 
structural improvements on the Upper Mississippi River system. Email 
documents indicate that there was some discussion in March between Mr. 
Brescia and at least Colonel Mudd about possibly recommending to 
Congress major structural improvements even though they did not pass an 
economic benefit and cost analysis. In an e-mail dated March 11, 1999 
from Brescia to Colonel Mudd, Mr. Brescia rejects this idea because he 
quotes a Corps of Engineers guidance document stating that potential 
projects without a positive benefit to cost ratio will not receive 
Federal funding (Appendix 27). Brescia concludes in his message, ``We 
will lose on all counts.''
    94. By April 1999, Rich Manguno had performed many additional model 
runs to evaluate the different alternative improvements to the 
navigation system. As Mr. Manguno had been instructed to do in January 
1999, these analyses arbitrarily restricted the use of industry self-
help in the without project condition to 5 percent of the total 
lockages at each system lock. These analyses also employed lower N 
values for commodities other than grain computed from Dr. Burton's 
short-run rail elasticity limiting values even though Mr. Manguno knew 
and agreed with Dr. Burton that these were short-term and therefore 
likely underestimates. These analyses did not incorporate any system-
wide environmental mitigation costs. These analyses also used the N 
value of 1.5 for grain movements recommended by the economic panel even 
though Dr. Burton had recommended 2.0. Despite all these changes 
designed to produce the most favorable benefit to cost analysis 
possible for large-scale navigation improvements, the analyses still 
indicated that large-scale structural measures, such as extensions of 
the existing locks, were not justified for any locks in the foreseeable 
future. Only small-scale measures appeared to be justified. Mr. Manguno 
took this as strong evidence of the robustness of the earlier 
conclusions that large-scale measures where not economically warranted 
in the foreseeable future.
    95. Mr. Manguno reported these results at a meeting of navigation 
study team leaders on April 19, 1999 in Rosemont, Illinois, which is 
summarized in draft minutes sent out by Bradley Thompson on April 20, 
1999 (Appendix 28). The minutes state: ``Rich stated that based on 
available data the Preliminary NED plan [most economically favorable 
plan] appears to be five mooring buoys/cells followed by guidewall 
extensions with powered kevels at UMR locks 20-25.'' The minutes also 
note his statement that no improvements ``appear justified'' at all any 
locks on the Illinois Waterway.
    96. In short, between June 10, 1998 and through April 1999, all or 
parts of the economic analysis had been subjected to further review by 
an economic panel, an independent modeling effort, an expert 
elicitation panel, an outside economist and a new principal economist. 
The economist had been instructed by the highest Army Corps authorities 
to find a rationale for the project. The most cost-effective means of 
reducing congestion, industry self-help, had been largely eliminated 
from the study without supporting technical analysis. And Mr. Manguno, 
the new principal economist, had used N values to run the analyses that 
were the most favorable for large-scale improvements for which he could 
find a rationale despite his own reservations. Even so, lock extensions 
and other large-scale improvements continued to remain unjustified.
C. Developments from May 1999 through the Summer
    97. As part of the study, the Governors of the five States in the 
study area had each appointed a representative to the Governors Liaison 
Committee. At the time, a GLC meeting was scheduled for May 18, 1999 in 
Minneapolis-St. Paul MN at which the study team was to report the 
preliminary NED plan. The NED plan is that plan that reasonably 
maximizes the net contributions to the Nation's economy of all 
potential plans for system improvements, i.e., it is the plan with the 
highest net economic benefits. It is a special plan required by Corps 
of Engineers regulation ER 1105-2-100.
    98. A meeting of the Economic Coordinating Committee was also 
scheduled for May 5-6, 1999. The ECC was formed at the request of the 
GLC to facilitate the exchange of information regarding the economic 
aspects of the study. Each State appointed a member to this committee 
and there were other committee members including Mr. Brescia, a 
representative from the U.S. Department of Agriculture, and a 
representative form the Maritime Administration. The ECC held meetings 
open to the public usually in conjunction with scheduled GLC meetings. 
The study team expected to use this meeting to explain the economic and 
other analyses to these representatives so that they could better 
explain them to their representatives to the GLC.
    99. Around mid-April 1999, Chris Brescia requested a so-called 
``Economic Summit'' that would include top Army Corps officials, some 
members of the economic study team, and a range of industry 
representatives to discuss the preliminary results. He requested that 
this meeting occur on May 5 or 6, 1999. This request is reflected in a 
memorandum from Dudley Hanson to various team members dated April 14, 
1999 (Appendix 29) in which he states: `` I think that if MG Anderson 
grants Chris' request, it would automatically postpone the ECC. I 
believe that's probably one of Chris' purposes.''
    100. On April 15, 1999, in a conference call between team leaders, 
Dusty Rhodes directed the study team to postpone the ECC meeting and 
not to make any ``additional data releases'' prior to the summit. This 
phone call is documented in a memorandum from Bradley Thompson to many 
study team participants dated that April 15, 1999. (Appendix 29)
    101. The so-called Economic Summit occurred on May 5, 1999. The 
meeting included the following representatives from the navigation 
industry: Norb Whitlock, the head of American Commercial Barge Lines 
(one of the largest barging companies); Stephen Sheridan from ConAgra/
Peavey, one of the largest grain shippers and barge operators, Gerry 
Brown, head of barging for Cargill; Chris Brescia, Harry Cook, head of 
the National Waterways Conference, an association of waterway 
interests, Barry Palmer, Executive Director of DINAMO, Chris Brescia, 
Executive Director of MARC 2000, and Paul Bertels, with the National 
Corn Growers Association. The meeting also included several consultants 
hired by Mr. Brescia, Mr. Sandor Toth and Dr. Jake Haulk. From the Army 
Corps of Engineers, the meeting included members of the study team, 
General Anderson, and Colonel Mudd. It also included representatives 
from LRD and Army Corps headquarters. The meeting was not open to the 
public, and I am not aware of any communications to the public prior to 
the meeting indicating it was going to take place. My understanding of 
the meeting and pre-meeting among Corps staff only is based on 
conversations with Mr. Jeff Marmorstein, who attended the meeting, as 
well as some memos I have reviewed describing the meeting (Appendix 
30).
    102. The Corps' pre-meeting meeting was opened by Mr. Don Herndon, 
Chief of Programs and Project management at MVD, when he informed the 
Corps' attendees that their job was to find a way to justify large-
scale projects for the UMR-IW navigation system.
    103. Much of the pre-meeting and meeting focused on the central 
question of the estimates of demand elasticity and appropriate N 
values. During the post-meeting, Mr. Manguno was asked repeatedly by 
Dusty Rhodes to identify the N value for grain that would be necessary 
to show that extending locks was justified in the near term. Rich did 
not reveal the value, but Colonel Mudd stated that he himself had 
figured out it would take an n value of about 1.2.
    104. The central outcome of this meeting with industry 
representatives was that a smaller meeting would be held in Chicago, IL 
on May 11-12, 1999 between selected representatives of industry, 
selected members of the study team, and selected LRD representatives. 
The purpose of this meeting was to come to a meeting of the minds 
between Corps of Engineers management, analysts, and barge industry 
representatives. This meeting was also not open to the public.
    105. On May 11 and 12, 1999, the followup meeting between industry 
and the Army Corps of Engineers occurred in Chicago. The meeting 
included Mr. Brescia, Mr. Sandor Toth, a consultant hired by Mr. 
Brescia, Dr. Jake Haulk, another consultant for Mr. Brescia, Colonel 
Mudd, project manager Gary Loss, economist Rich Manguno, and operations 
research analyst Jeff Marmorstein. It also included Ron Keeney, the 
Chief of Programs and Project Management of the Huntington District 
office, from LRD, who was brought in to facilitate and Paul Hanley, an 
LRD economist. My understanding of this meeting is based on 
conversations with Mr. Marmorstein and on two summaries of the meeting: 
a summary by Gary Loss dated June 1, 1999 and a memorandum from Colonel 
Mudd to General Anderson, which was subsequently forwarded to General 
Fuhrman with copies to several other participants (Appendix 31).
    106. After Mr. Loss briefed the meeting participants with the 
current estimates of benefits and costs Mr. Ron Keeney opened the 
meeting by stating that the study only needed to close the ``small'' 
gap between benefits and costs to justify the desired large-scale 
projects. A small tweak in the benefit estimate and small decrease in 
the cost estimate would accomplish the closing of the gap. In 
particular, Ron Keeney stated that an important category of project 
benefits in LRD is large cost savings from avoiding extensive 
rehabilitation of old projects. Mr. Keeney noted that the study 
analysis to date indicated that there would not be any of these 
rehabilitation cost savings as the engineering work group had indicated 
that scheduled rehabilitations would be the same with and without 
potential projects. Mr. Keeney indicated that a reanalysis of this 
benefit category could be useful in closing the benefit to cost gap.
    107. Colonel Mudd sent a memorandum to General Anderson dated May 
14, 1999 (Appendix 31) describing the meeting and its results, which 
General Anderson forwarded to General Fuhrman. Colonel Mudd stated that 
``[t]he meeting outcome was a lot better than I had expected.'' The 
memorandum states that MVD had agreed to ``re-look and adjust were 
appropriate'' the following items. They included cutting the 
contingency cost estimate from 35 percent back to 25 to reduce the 
estimated costs of the lock extensions and to reevaluate rehabilitation 
cost savings.
    108. The minutes of this meeting also describe an agreement that 
Jeff Marmorstein would do some analysis with Sandor Toth, MARC 2000's 
consultant, to determine if Mr. Toth's analysis could produce an 
acceptable, lower estimate of the N value for grain. But, as a June 2, 
1999 memorandum from Gary Loss to General Anderson, an industry 
representative and other top Corps officials stated, the ``study team 
indicates that they do not see a defensable (sic) rationale for 
``Toth'' approach (Appendix 32).
    109. In a May 28, 1999 Study Update authored by Gary Loss, then the 
project manager, and broadly distributed, he states that engineering 
review has resulted in cutting the contingency cost percentage from 35 
percent to 25 percent and has found substantial rehabilitation cost 
savings (Appendix 33). This memorandum indicates that the many years of 
independently technically reviewed prior analysis on both these issues 
was overruled by a new re-look within 2 weeks of the Chicago meeting 
with MARC 2000 representatives and LRD representatives. To my 
knowledge, no significant documentation of this new ``analysis'' has 
ever been disseminated within the navigation study team or made 
available to the public, and none of this reanalysis has ever been 
subjected to Independent Technical Review as required by Corps of 
Engineers regulations.
    110. I have since seen a three page document that I understand was 
provided to the public explaining this new major rehabilitation 
conclusion (Appendix 34). It provides no indication of the prior 
different conclusion. Its rationale appears to be that a document has 
``defined'' major rehabilitation as something that occurs ``with an 
expected extended life of 25 years.'' Because some locks at issue were 
last rehabilitated in 1990, this means that major rehabilitation would 
have to occur in 2015 (in contradiction of Mr. McGrath's detailed 
analysis). It further asserts, in contrast to what I was repeatedly 
told in 1997 and 1998, that the cost of the major rehabilitation items 
to make the existing locks an integral part of the proposed lock 
extensions ``is included in the estimates for the lock extension 
alternatives,'' and thus would result in rehabilitation cost savings in 
the future.
    111. On May 19, 1999, study team leaders met in Minneapolis, St. 
Paul MN after the May 18, 1999 GLC meeting at which the Corps was 
scheduled to release the preliminary economic findings but did not. At 
this meeting, Rich Manguno was urged one last time to reevaluate the 
1.5 N value that he recommended for grain products. He again stated 
that 1.5 was as far as he could go.
    112. On May 27, 1999, Colonel Mudd called Mr. Manguno. Gary Loss, 
who had by now replaced Dudley Hanson as the overall study manager, was 
also on the call. In this phone call, Colonel Mudd instructed Mr. 
Manguno that he should use an N value for grain of 1.2. He further 
stated that he had developed a rationale for how it could be 1.2. He 
explained the rationale (later repeated publicly) as follows. The 
origins of Iowa grain that comes to the Mississippi River can be 
separated into three regions: a region near the river, a middle region 
of Iowa, and a farthest from the river region. The expert elicitation 
panel suggested that grain produced near the river had a relatively 
lower N value and grain farthest away a relatively higher N value. Col. 
Mudd stated that an N value of 1.2 could be justified by taking a 
weighted average of 1.0, 1.5, and 2.0 using as weights the proportion 
of grain delivered to the river from these three bands. Since most 
grain comes to the river from the easternmost band, this weighting 
would yield an N value of 1.2. Col. Mudd directed that this value be 
applied to all agricultural products demands for barge transportation 
for all origin and destination pairs.
    113. Colonel Mudd is not an economist and no economist involved in 
the study was involved in generating this N of 1.2 or has ever endorsed 
this number.
    114. There are many flaws with this rationale, which I set forth in 
a telephone conference call with Col. Mudd, Rich Manguno, Gary Loss and 
others on June 22, 1999 and subsequent memorandum (Appendix 35). The 
most basic flaw is that this rationale is, among other things, based on 
an obvious mathematical error. The N value appears in the functions in 
the ESSENCE model as an exponent. Taking the linearly weighted average 
of exponents to three (or any number of) functions (the functions for 
three separate grain regions) does not yield the correctly weighted 
average of these combined functions.
    115. On June 10, 1999, I sent a memorandum by email to Colonel 
Mudd, Gary Loss, Richard Manguno and Diane Karnish noting that General 
Anderson's September 1998 directive extending the economics panel for 
the duration of the study had made the economics panel ``responsible 
for'' all economic products but the panel had not met for more than 6 
months (Appendix 35). I asked Colonel Mudd whether he intended to call 
a meeting prior to public meetings on the navigation study scheduled 
for July 1999.
    116. In response to this email, the first economic panel meeting 
since September 1998 was held via a teleconference on June 22, 1999 
with all available panel members. Not all panel members were available 
on that date and I recall the participants were Col. Mudd, Rich 
Manguno, Wes Walker, Gary Loss, and I. On this call, Mr. Manguno 
briefed the panel members on the changes made to the N values and the 
theory behind the changes. During this call, Gary Loss also described 
the changes made to the major rehabilitation analysis and project cost 
estimates.
    117. During the call, I explained to Colonel Mudd several reasons 
why his methodology for arriving at an N value of 1.2 was flawed, 
including most of the reasons set forth later by me in a memorandum 
dated June 29, 1999 (Appendix 35). Wes Walker expressed concern 
regarding all the changes that had taken place since the panel last met 
and requested more detail and time to examine the changes. The 
economics panel also questioned the use of short run rail elasticities 
in the model for goods other than grain as a substitute for long run 
water elasticities.
    118. The panel requested details and explanations for why the 
already reviewed cost estimates for project construction had decreased 
and for why rehabilitation costs avoided had increased so dramatically 
over the levels the panel had been previously briefed. Col. Mudd 
requested written comments and recommended solutions be immediately 
forwarded to him and the project manager Gary Loss.
    119. On June 23, Gary Loss provided panel members with a file 
setting forth the changes to the major rehabilitation numbers.
    120. On June 24, I sent Gary Loss a memorandum, with copies to 
other economists and Colonel Mudd, requesting further explanation of 
the new numbers. On the same day, Gary Loss forwarded to me an email 
response from Roger Less, an engineer in the Rock Island District 
office, that provided only the most cursory explanation of the changes 
and that made no reference to any documented technical analysis. Copies 
of this correspondence are attached as Appendix 36. Wes Walker and I 
were the only panel members to send written comments. I sent my 
comments in a memo dated June 29, 1999. Wes Walker sent his comments on 
also on June 29, 1999. Our comments raised a number of objections to 
the changes and are attached as Appendix 35.
    121. Three days later, on July 2, 1999, Colonel Mudd emailed Gen. 
Anderson recommending disbanding the economics panel for the UMR-IW 
system study. In an email dated July 4, 1999, Gen. Anderson so ordered. 
These emails are attached as Appendix 37.
    122. In a June 1999 newsletter, the Army Corps presented its new 
preliminary benefit/cost analysis of the various project alternatives 
in a series of public meetings. This analysis for the first time now 
indicated that a project involving the immediate extension of seven 
locks now provided benefits greater than their costs. Copies of this 
presentation, which is publicly available, are attached as Appendix 38.
D. Developments Since the Summer of 1999
    123. In July 1999 and through the summer, the Army Corps presented 
its new preliminary benefit and cost analysis of the various project 
alternatives in a series of public meetings.
    124. There were relatively minor changes to the inputs and 
therefore economic analysis of project alternatives over the summer and 
early fall of 1999, which modestly changed the benefit/cost analysis of 
the various alternatives. At a November 18, 1999 meeting of the 
Governor's Liaison Committee, Rich Manguno presented the analysis of 
benefits and costs at that time. This presentation shows that an 
analysis of extending five locks had a net positive economic benefit of 
$8.686 million per year, but of this $7.122 million were rehabilitation 
cost savings.
    125. Despite all the changes directed by top Army Corps of 
Engineers officials, this analysis also showed that the alternatives 
that had the highest net positive benefits still involved postponing 
the start of construction of lock extensions until 2011. This is 
because, even under the Faucett traffic projections, the modest traffic 
congestion in the early years does not warrant the cost of lock 
extensions at that time and so drags down the overall benefit/cost 
analysis. A copy of Mr. Manguno's ``overheads'' presented to this 
meeting is attached as Appendix 2.
    126. The November 1999 GLC meeting was also the first time at which 
the study team provided an estimate of system wide environmental costs. 
The study team had early decided to separate the environmental analysis 
of the direct impact of extending locks, which could immediately 
displace some wildlife habitat, with the so-called system wide impacts 
of the overall project. These system wide impacts involved such impacts 
as mortality from increased barge traffic of fish. Their costs had to 
be added to the financial costs of any project. None of the benefit-
cost analyses described so far, including the presentation made by Mr. 
Manguno at the November, 1999 GLC meeting, incorporated these system 
wide environmental costs.
    127. On January 12, 2000, Dave Tipple sent out by email a slightly 
revised optimization study provided him 2 days earlier by Rich Manguno 
which still indicated that the alternatives with the highest economic 
benefits all involved postponing the start of lock construction until 
at least 2011. This analysis still does not account for system wide 
environmental costs, which would further postpone the time at which 
lock extensions were justified. And during this period, of course, 
traffic forecast projections could be verified. (Copies of this 
analysis are attached as Appendix 39.)
    128. None of the benefit cost analyses described in this affidavit 
incorporated most environmental costs. The study team had early decided 
to separate the environmental analysis of the site-specific impact of 
extending locks, which could immediately displace some wildlife 
habitat, with the so-called system wide impacts of the overall project. 
These system wide impacts involved such effects as fish mortality from 
increased barge traffic. These system costs, which have been estimated 
to be far greater than the site-specific costs, must be added to the 
financial costs of any project, thus reducing the net economic 
benefits.
    129. At a January Navigation Environmental Coordinating Committee 
meeting, Ken Barr presented what was then described as the preliminary 
estimate of system wide environmental costs for alternative J. This 
alternative involved the extension of 5 Mississippi River locks and the 
two Illinois River locks. This estimate put system environmental costs 
at $10.5 million per year. I have seen a copy of the handout listing 
this figure, and it is attached as Appendix 40). Mr. Manguno's benefit 
and cost analyses set forth at the GLC meeting in November (Appendix 2) 
and identically in Appendix 39 indicate that the total net economic 
benefits for this alternative, not counting these environmental costs, 
is $11.026 million. In other words, at least as of January, 2000 the 
total average annual benefits for extension of seven locks was 
estimated to be $526,000.
                               v. summary
    130. This section of my affidavit summarizes the above discussion.
    131. The events show that top Army Corps of Engineer officials, 
including Major General Fuhrman, Major General Anderson, and Colonel 
Mudd, repeatedly rejected the advice of a broad range of Corps 
economists, and continually attempted to transfer management, 
production and review of economic products in an effort to find 
economists who could or would justify large-scale improvements. The 
events show that the model developed by the study team was first 
presented to a broad range of Army Corps of Engineers economists in 
October 1997, who responded enthusiastically. It was then subjected to 
an Independent Technical Review, which had resulted by June 1998 in 
endorsement of the model while raising a few areas for added work. 
Despite this review, because of concerns that I was ``out to shutdown 
the Corps,'' General Anderson established a new panel to completely 
review again the economic products and to oversee the future production 
of economic products. By August 1998, this new economic panel had 
endorsed the study and recommended an N value of 1.5 for grain (the key 
N value). Also at the direction of the study manager, a second model 
was used to verify the UMR-IW economic model under the direction of Dr. 
Mike Bronzini, which yielded similar results. In September 1998, the 
panel was essentially shelved and management given to Mr. Manguno under 
instructions to produce an analysis to justify large-scale 
improvements. Despite this instruction, Mr. Manguno continued to insist 
that he could not justify using an N value of less than 1.5 for grain 
in the model. He was directed to use an N value of 1.2 for grain. Then, 
when the economics panel reengaged, because it had not yet been 
formally abolished previously, and expressed disagreement with this 
direction, it was abolished. In short, all Army Corps economists 
involved in the study ultimately supported the ultimate analytic 
method, and none supported use of an N value less than 1.5 for grain.
    132. The evidence also shows that public presentations or release 
of the preliminary economic analysis were scheduled as early as April 
1998 and were repeatedly postponed when the economic analysis at that 
time showed that large-scale measures were not justified. Even in 
November 1998, when results were released, only a range of alternatives 
was presented. Moreover, such a range should presumably have 
encompassed a range around the most likely alternatives. Because the 
economic panel had recommended the use of an N for grain of 1.5, N 
values of 2.0 should presumably have been shown. But the highest N 
value represented was the 1.5. Again, when results were to be provided 
to the Economic Coordinating Committee and to the GLC in May 1999, the 
presentations were postponed. Only after the analysis had been altered 
in May and June 1999, were preliminary results released to the public.
    133. In addition to critical changes to the N value, the events 
show deliberate efforts to distort the analysis of rehabilitation cost 
savings. An original engineering analysis reported no saved 
rehabilitation cost savings from expanded locks and this was reflected 
in the engineering handoff to economics in March 1988, which followed 
an Independent Technical Review. This conclusion remained in place 
despite frequent discussion of the topic by study managers until May 
1999. The evidence shows that the idea for changing this analysis was 
then introduced at a meeting with industry in May 1999 by Ron Keeney, 
the Chief of Programs and Project management in the Huntington 
District, who acknowledged that the analysis to date showed no savings 
but who noted that his Division frequently found such savings helped to 
justify new projects. New information describing such savings was then 
provided to Mr. Manguno within days. No detailed documentation of the 
new analysis has ever been provided to the study team leaders or to the 
public and it has undergone no independent technical review. The public 
explanation of this change contradicts information provided to Mr. 
Marmorstein and me that the cost estimates of lock extensions included 
no rehabilitation costs. In contrast to the extensive engineering and 
economic analyses that indicated that no major rehabilitation for major 
components would be required until at least 2033, this recent public 
explanation also stated that rehabilitation would be required on many 
locks in 2015 based on the definition of rehabilitation as something 
that occurs every 25 years. In the economic analysis presented at the 
GLC in November 1999, the rehabilitation cost savings represented 
roughly \7/8\ths of the net benefits of extending locks.
    134. The evidence also shows that in the original economic 
analysis, industry would and could use self-help much of the time to 
reduce the congestion costs even without any new construction. The 
evidence shows that Mr. Manguno was instructed in January 1999 to 
restrict the model to allow self-help only 5 percent of the time. No 
documentation of any analysis has ever been made to support this 
arbitrary restriction.
    135. The evidence also shows that the original costs for the 
expanded locks included a 35 percent contingency cost because of the 
innovative nature of the construction techniques. The Independent 
Technical Review of the work products of the engineering work group 
required that the contingency cost estimate be set at this level 
because of the untried new construction techniques and engineering 
plan. The evidence shows that this contingency cost estimate was 
arbitrarily lowered without any documented or independently reviewed 
additional analysis within 16 days following a meeting with navigation 
industry representatives on May 12, 1999.
    136. The evidence also shows that despite all these changes, and 
despite the use of projected increases in traffic demand that real 
world experience has shown to be greatly overestimated so far, the 
total net economic benefits are vanishingly small. For an alternative 
that involves immediate extension of seven locks, they amount to only 
around $500,000 per year. Other alternatives may have slightly higher 
or lower numbers. This means that if any of the directed changes had 
not been made (changes to the elasticity of demand for barging, i.e., 
the N values, changes to the rehabilitation cost savings, changes to 
the self-help analysis, changes to the contingency costs), expansion of 
locks would not have a positive benefit/cost analysis for the 
foreseeable future.
    137. Finally, the evidence shows that even with all these changes, 
the alternative that would maximize net economic benefits would still 
be to postpone the start of lock expansion until at least 2011. That 
alternative would also allow experience to verify if traffic is in fact 
growing sufficient to justify lock extension at that time.

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