[House Hearing, 105 Congress]
[From the U.S. Government Publishing Office]



 
                      ENERGY AND WATER DEVELOPMENT
                        APPROPRIATIONS FOR 1998

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

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                       ONE HUNDRED FIFTH CONGRESS

                              FIRST SESSION
                                ________

              SUBCOMMITTEE ON ENERGY AND WATER DEVELOPMENT

                JOSEPH M. McDADE, Pennsylvania, Chairman

 HAROLD ROGERS, Kentucky              VIC FAZIO, California
 JOE KNOLLENBERG, Michigan            PETER J. VISCLOSKY, Indiana
 RODNEY P. FRELINGHUYSEN, New Jersey  CHET EDWARDS, Texas
 MIKE PARKER, Mississippi             ED PASTOR, Arizona
 SONNY CALLAHAN, Alabama              
 JAY DICKEY, Arkansas                 

 NOTE: Under Committee Rules, Mr. Livingston, as Chairman of the Full 
Committee, and Mr. Obey, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.

 James D. Ogsbury, Bob Schmidt, Jeanne Wilson, and Donald M. McKinnon, 
                            Staff Assistants
                                ________

                                 PART 3
                                                                   Page
 Bureau of Reclamation............................................    1
 Testimony of the Secretary of the Interior.......................    1
 Tennessee Valley Authority.......................................  607
 Appalachian Regional Commission..................................  835

                              

                                ________

         Printed for the use of the Committee on Appropriations
                                ________

                     U.S. GOVERNMENT PRINTING OFFICE
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                       COMMITTEE ON APPROPRIATIONS                      

                   BOB LIVINGSTON, Louisiana, Chairman                  

JOSEPH M. McDADE, Pennsylvania         DAVID R. OBEY, Wisconsin            
C. W. BILL YOUNG, Florida              SIDNEY R. YATES, Illinois           
RALPH REGULA, Ohio                     LOUIS STOKES, Ohio                  
JERRY LEWIS, California                JOHN P. MURTHA, Pennsylvania        
JOHN EDWARD PORTER, Illinois           NORMAN D. DICKS, Washington         
HAROLD ROGERS, Kentucky                MARTIN OLAV SABO, Minnesota         
JOE SKEEN, New Mexico                  JULIAN C. DIXON, California         
FRANK R. WOLF, Virginia                VIC FAZIO, California               
TOM DeLAY, Texas                       W. G. (BILL) HEFNER, North Carolina 
JIM KOLBE, Arizona                     STENY H. HOYER, Maryland            
RON PACKARD, California                ALAN B. MOLLOHAN, West Virginia     
SONNY CALLAHAN, Alabama                MARCY KAPTUR, Ohio                  
JAMES T. WALSH, New York               DAVID E. SKAGGS, Colorado           
CHARLES H. TAYLOR, North Carolina      NANCY PELOSI, California            
DAVID L. HOBSON, Ohio                  PETER J. VISCLOSKY, Indiana         
ERNEST J. ISTOOK, Jr., Oklahoma        THOMAS M. FOGLIETTA, Pennsylvania   
HENRY BONILLA, Texas                   ESTEBAN EDWARD TORRES, California   
JOE KNOLLENBERG, Michigan              NITA M. LOWEY, New York             
DAN MILLER, Florida                    JOSE E. SERRANO, New York           
JAY DICKEY, Arkansas                   ROSA L. DeLAURO, Connecticut        
JACK KINGSTON, Georgia                 JAMES P. MORAN, Virginia            
MIKE PARKER, Mississippi               JOHN W. OLVER, Massachusetts        
RODNEY P. FRELINGHUYSEN, New Jersey    ED PASTOR, Arizona                  
ROGER F. WICKER, Mississippi           CARRIE P. MEEK, Florida             
MICHAEL P. FORBES, New York            DAVID E. PRICE, North Carolina      
GEORGE R. NETHERCUTT, Jr., Washington  CHET EDWARDS, Texas                 
MARK W. NEUMANN, Wisconsin             
RANDY ``DUKE'' CUNNINGHAM, California  
TODD TIAHRT, Kansas                    
ZACH WAMP, Tennessee                   
TOM LATHAM, Iowa                       
ANNE M. NORTHUP, Kentucky              
ROBERT B. ADERHOLT, Alabama            

                 James W. Dyer, Clerk and Staff Director







          ENERGY AND WATER DEVELOPMENT APPROPRIATIONS FOR 1998

                              ----------                              

                                          Wednesday, March 5, 1997.

                       DEPARTMENT OF THE INTERIOR

                         BUREAU OF RECLAMATION

                               WITNESSES

HON. BRUCE BABBITT, SECRETARY, DEPARTMENT OF THE INTERIOR
PATRICIA J. BENEKE, ASSISTANT SECRETARY FOR WATER AND SCIENCE, 
    DEPARTMENT OF THE INTERIOR
ELUID L. MARTINEZ, COMMISSIONER, BUREAU OF RECLAMATION
MARY ANN LAWLER, DIRECTOR OF BUDGET, DEPARTMENT OF THE INTERIOR

                      Mr. McDade's Opening Remarks

    Mr. McDade. The meeting will come to order.
    We are very pleased this morning to have Secretary of the 
Interior Bruce Babbitt with us, accompanied by some folks from 
his agency; and, of course, Commissioner Martinez, we are 
delighted to have you here representing the Bureau's 
activities.
    May I suggest to you, Mr. Secretary, that, as usual, you 
file your detailed statement with the committee; and we will 
assiduously study it. And if you can informalize your remarks 
and proceed in an informal fashion, we would appreciate it.

                  Secretary Babbitt's Opening Remarks

    Secretary Babbitt. Mr. Chairman, I will do just that.
    It is a pleasure to be back and to testify before this 
subcommittee under your chairmanship.
    I have been coming before this subcommittee in various 
capacities for nearly 20 years now, and I have learned a number 
of things. One is that this committee expects the Secretary of 
the Interior to be brief and succinct and then to pass the 
testimonial burden on to the people who really know what is 
going on. I do that with great confidence today because Patty 
Beneke, the Assistant Secretary for Water and Science, is here 
to my left and Eluid Martinez, who has done a truly outstanding 
job at the Bureau of Reclamation, is to her immediate left. I 
am absolutely confident of their capacity to carry the burden 
of explaining what we are doing.
    I also have a number of other Bureau of Reclamation people 
here today, including Mr. Keys, the Regional Director from the 
Pacific Northwest; and Roger Patterson, the Regional Director 
from California.
    The Bureau is doing an outstanding job. I just would point 
to one example. The recent floods in the West absolutely 
devastated the Central Valley of California and parts of Oregon 
and Washington as well. I think everyone in California took 
note of the way in which the Bureau of Reclamation responded by 
operating the water system in the Central Valley to minimize 
flood damage and to protect the levees, the urban areas and the 
farmlands. They really performed in magnificent fashion.
    Mr. Chairman, the Bureau continues along a track of 
reinventing itself in accordance with the demands of the times. 
It is a smaller bureau. We have reduced the staff of this 
organization by 20 percent over the last 4 years. At the same 
time, the Bureau is gradually evolving from a construction 
company to a water management organization charged with 
managing these enormous river basin systems that have been 
built over the last 50 years. You will see that reflected in 
the budget.
    There is emphasis on the management and the reuse of water. 
There is significant emphasis on dam safety. That reflects the 
fact that much of our infrastructure is now a half-century old 
and more, and it is critically important to maintain the 
highest levels of technical and safety standards out in these 
basins.
    There is a great deal going on in the Colorado River basin 
that I will flag for the attention of the committee. We have 
had negotiations under way now in all seven basin States in the 
Colorado River system, attempting to move toward more reuse of 
water; toward transferring through voluntary market transfers 
water from agricultural to urban uses in southern California; 
and to settle a series of issues between Arizona and Nevada. I 
think we are making outstanding progress.
    Mr. Keys is here from the Pacific Northwest, where the 
Bureau is a major participant in the ongoing reconfiguration of 
the Columbia River system.
    Ms. Beneke has been the lead player in an ongoing set of 
interstate negotiations on the Platte River basin involving 
Colorado and Nebraska.
    Mr. McDade. She is ready for a diplomatic career at any 
time she wants to, I am sure.
    Secretary Babbitt. Anybody who can settle these water wars 
is fully qualified to go to the Middle East or Bosnia.
    Mr. McDade. Just about anyplace.

               california bay-delta ecosystem restoration

    Secretary Babbitt. Absolutely. No question about that.
    Mr. Chairman, I would like to touch on one issue and then 
sort of pass the baton.
    The major new request in the Reclamation budget this year 
relates to California. What I would like do is very briefly 
summarize how it is that we happen to have this request in the 
President's budget.
    The Central Valley Project, which is the core water system 
in California was constructed back in the 1930s. The major 
components of that project are now a half-century old, and 
extend the entire length of California, from Shasta Dam up on 
the Oregon border all the way down to water transfer facilities 
which take water from the Bay-Delta system outside of San 
Francisco and actually move that water clear down to San Diego 
on the Mexican border.
    Now, when that project was built and conceived in the 
1930s, there were maybe a quarter of the number of people in 
California that there are today. As that system has aged and as 
California's population has skyrocketed to more than 30 million 
people, the system is faltering. It really is not up to meeting 
the demands of agricultural areas that produce half the produce 
grown in the United States, and a population of 30 million 
people. The stress is showing up in potential water shortages 
in the urban areas, uncertain supplies for agriculture, and a 
big ecological crisis in the San Francisco Bay and the 
surrounding delta system, which is becoming quite urgent.
    The levee system was constructed below all of these great 
dams, which are in the foothills of the Sierra Nevada. The 
levee systems are plainly inadequate to what we now know about 
the hydrologic and flood cycles in that part of the West.
    Now, against that background, when I came to office in 
1993, I sent Ms. Beneke's predecessor--her name was Betsy 
Reike--to California. I said, your job is to pitch your tent 
and to bring the warring factions together and see if we can 
get started on a new chapter of California history.
    Mr. McDade. Did you give her combat pay when she went up 
there, Mr. Secretary?
    Secretary Babbitt. Mr. Chairman, I will tell you one thing. 
She came back two years later and tendered her resignation.
    But, prior to tendering her resignation, she produced an 
agreement known as the Bay-Delta Accord, which is now the basis 
of everything that is happening in California. She actually 
succeeded in bringing all these folks together and laying the 
groundwork for reconfiguring all of this stuff against modern 
reality.
    Now, out of the Bay-Delta Accord we established a group 
called CALFED, which, again, is an amazing organization. This 
group includes the Federal agencies and the California players. 
They are meeting regularly now, planning the restoration of 
this Bay-Delta system.
    The next thing that happened, quite extraordinary, occurred 
last November when the people of California voted 
overwhelmingly for a bond issue of $1 billion--to be precise, 
$995 million--to get at this restoration. They did that because 
we advised them that the days of a hundred cents on the dollar 
coming from Washington were over; and if they were serious 
about reconfiguring this water system, they were going to have 
to put up approximately half the money. And that is just what 
they did in November.
    Now, finally, last year this Congress, at about the same 
time, passed the California Bay-Delta Environmental Enhancement 
and Water Security Act, authorizing the expenditure of up to 
$143 million per year against this matching commitment from the 
State of California.
    That is the background to the request for $143 million 
which would be devoted to preparatory work for the Bay-Delta 
reconfiguration. It would be used principally for land 
acquisition, habitat improvement, a variety of issues relating 
to protection of the migratory fish populations, and work on 
the levee systems and floodways.
    Mr. Chairman, I think I will stop there. I am prepared to 
answer questions about--let's see--Central Arizona projects on 
my far left, a premier Bureau of Reclamation issue known as the 
Sterling Forest in New Jersey on my right; and, Mr. Dickey, 
well, he is from Arkansas, so I will be especially attentive to 
whatever request he makes, Mr. Chairman.
    Mr. McDade. Indeed.
    [The prepared statement of Mr. Babbitt follows:]

[Pages 5 - 10--The official Committee record contains additional material here.]


    Mr. McDade. Mr. Commissioner--excuse me, Ms. Beneke, we 
appreciate very much your attendance; and we would be delighted 
to have your statement. If you would again file it, the 
detailed statement, and inform us as you wish, we would be 
grateful.

              Assistant Secretary Beneke's Opening Remarks

    Ms. Beneke. I will be very pleased to. I just want to 
express that I am very pleased to be here this morning before 
the subcommittee again this year to testify on the President's 
fiscal year 1998 budget submission for the Bureau of 
Reclamation.
    In helping to formulate the budget of the Department, one 
of my highest priorities was ensuring adequate funding for 
operation and maintenance of our facilities and for our 
continuing program relating to dam safety work.
    I think our budget also reflects a commitment to the types 
of geographically based projects that the Secretary refers to, 
such as the California Bay-Delta work that we are doing; and he 
also referred to my efforts, along with many other folks, in 
the Platte River, which have been challenging.
    In addition, by statute, the work on completing the Central 
Utah project has been vested in the Office of the Secretary. 
That responsibility has been delegated directly to my office. I 
am here today to answer any questions you may have with respect 
to the Central Utah project or other questions relating to the 
Bureau's budget.
    Again, thank you very much. I am delighted to be here.
    Mr. McDade. We are very pleased to have you. Thank you for 
being here.
    [The prepared statement of Ms. Beneke and the Central Utah 
Project budget justification material follow:]

[Pages 12 - 23--The official Committee record contains additional material here.]


    Mr. McDade. Mr. Commissioner, would you like to file your 
statement for the record? Proceed as you wish, please.

                Commissioner Martinez's Opening Remarks

    Mr. Martinez. Mr. Chairman, first of all, I appreciate the 
opportunity to be here today and the opportunity I had to 
discuss these issues with you a couple of days ago.
    Mr. McDade. I enjoyed learning, among other things, that 
you are an artist.
    Mr. Martinez. I have been involved in the area of water 
administration for almost 30 years. I think what I would like 
to leave with you this morning is that the Bureau of 
Reclamation has a major impact on the western United States. We 
developed projects in the early 1900s that basically enabled 
the West to be settled, from a water delivery standpoint.
    Today, our projects deliver water to more than 31 million 
people in the West for municipal and industrial uses; and we 
irrigate some 10 million acres of land, impacting about 140,000 
contractors. So the decisions that are made with respect to 
Bureau of Reclamation activities have a major impact in the 
West.
    The mission of this agency has evolved from constructing 
facilities to managing water. And having been in this business 
long enough, that is where the complications arise. It is 
always easier to develop than it is to manage, especially when 
you have a limited resource. We are now moving into the arena 
and we are facing issues and complexities that, when you have a 
limited resource, get somewhat emotional; but we have to deal 
with those issues.
    Our infrastructure is aging. We have to continue to 
maintain it adequately. Most of these facilities are reaching 
40, 50 years in age and we have to make sure that they are 
adequately maintained. Our budget reflects that need.
    I am concerned about dam safety. I think in a lot of areas 
our dams hold back the waters that are now threatening 
inundation of parts of the American West. I want to make sure 
that those structures are adequately maintained and if, in 
fact, a problem arises we respond to those concerns. Our budget 
reflects our needs in terms of maintaining that infrastructure 
from a dam safety standpoint.
    Our documents detail our request, but I will highlight some 
specific requests that might be of interest. They include $61 
million for the Central Arizona Project; and, as we discussed, 
there is some concern with respect to the amount of money that 
is being requested.
    We do request $6 million for the continuation of our 
efforts on the Animas-La Plata project.
    With respect to wastewater reuse and reclamation projects, 
our budget includes $32 million for ongoing projects, 
specifically in California. And, as we discussed, Congress 
authorized 16 new projects for which funding is not included in 
our budget request. This is primarily because that legislation 
was enacted too late in our budget formulation process last 
year.
    We are working on a white paper to address how we will 
engage and recommend to Congress how these projects should be 
funded. We have engaged with water users out West, specifically 
the project sponsors, and will be providing that information to 
you as we formulate our 1999 budget. We will address the needs 
of those projects at that time.
    With respect to dam safety, at the time I became 
Commissioner I convened an outside group of experts to look at 
our dam safety program to make sure that if we had weaknesses, 
we identified them, and if strengths existed, we would try to 
reinforce those strengths. That report is completed and we will 
be transmitting it to Congress. I am glad to say that the 
outside group of experts found our program to be efficient and 
effective. The issue of funding for continued maintenance on 
these structures was discussed and we will be transmitting that 
report to Congress.
    With respect to the amount of money that we are requesting 
for our agency administration and policy formulation, that is 
basically flat. We are asking for $48 million for fiscal year 
1998, compared to $48 million for 1996 and $46 million for 
1997.
    The last thing I would like to draw to your attention is 
the fact that Reclamation has been effective, I believe, in 
reducing our workforce and making our efforts more efficient. 
We have reduced FTEs by 1,400 in the last 5 years.
    That is the conclusion of my summary statement, Mr. 
Chairman. I appreciate the opportunity, and I will be happy to 
respond to any questions.
    Mr. McDade. We are delighted to have you here, and I am 
sure we will have some questions for you.
    [The prepared statement of Mr. Martinez and the Bureau of 
Reclamation justification material follow:]

[Pages 26 - 471--The official Committee record contains additional material here.]


               california bay-delta ecosystem restoration

    Mr. McDade. Mr. Secretary, let me direct my first inquiry 
to you, if I may. We were somewhat taken aback with respect to 
the California Bay-Delta ecosystem project, a single page of 
justification for $143 million.
    As I am sure you know, there is no detail provided in the 
justification sheets as to how that money would be expended. So 
we are kind of sitting here, from our perspective, looking at 
what is asked for to be a kind of blank check, because we do 
not know where the money is going to go. Do you have any 
additional information you can provide the committee about 
where that $143 million would be spent and how it would be 
spent?
    Secretary Babbitt. Mr. Chairman, we do; and I would be 
happy to provide that to the committee.
    Let me just say that the reason we have been a little bit 
slow is because this new way of doing business, the CALFED 
process, is pretty cumbersome. It requires unanimity among 
about six Federal agencies and half a dozen State agencies.
    Mr. McDade. How many people in that process, Mr. Secretary?
    Secretary Babbitt. How many people?
    Mr. McDade. Yes, how many individuals in the CALFED 
process? You make it sound like a mini-U.N. and we know how 
hard they are to deal with, and I would not be surprised to 
hear that it is. How many people have to sign off before you 
get a decision?
    Secretary Babbitt. Well, on the Federal side I believe 
there are four principal agencies the Environmental Protection 
Agency, the Department of Commerce, and there are also four 
Interior agencies. I must tell you, sometimes the hardest part 
is getting agreement among the Interior agencies. I preside 
over sort of a confederation of independent players--including 
the Bureau of Reclamation, Fish and Wildlife Service, 
Geological Survey, and Bureau of Land Management.
    Who else is involved out there? The Corps of Engineers and 
the Department of Agriculture are the other major Federal 
players.
    Mr. McDade. And all with the veto power, if they don't 
agree, is that back to the drawing board?
    Secretary Babbitt. Well, nobody has a veto power; but we 
have agreed from the very beginning that we should proceed by 
consensus, and it is actually working. We have really been very 
successful. It does tend to move things slowly.
    Now, we will have the staff provide you a significant 
amount of detail. The whole wrap-up for fiscal year 1998, both 
for the California agencies and the Federal agencies, will be 
available by June 1st.
    Is that right, Patty? She says, July. They just slipped us 
a month between the first and second drafts of my testimony.
    Mr. McDade. And I would not be surprised, experience would 
tell you, if it slips another month.
    Secretary Babbitt. Mr. Chairman, it ain't slipping no more 
on my watch, because I understand that unless we have this 
material sitting before this subcommittee in time for you to 
deliberate that we cannot expect to get a positive response.
    Mr. McDade. If it is July, you know, the appropriation 
season. If we are lucky around here it would be the May, June 
time frame. That is traditionally when we try to get it done 
and then get it over to the Senate by July so they can act by 
September. So I think that is something you need to take into 
consideration.
    I don't know how you can move all the opinions you have to 
move more concisely and more expeditiously; but I think if it 
comes in July we will probably have marked up, Mr. Secretary.
    Secretary Babbitt. Mr. Chairman, I understand your concern. 
We do have a CALFED proposal, which I would like to submit for 
the record, and we will have the back-up material by June 1st.
    [The information follows:]

[Pages 474 - 492--The official Committee record contains additional material here.]


    Mr. McDade. Are there as many as 10 Federal agencies 
involved is this? You mentioned a couple of them. Are there as 
many as 10 involved? This is what we have heard from some 
sources, that there may be 10 Federal agencies involved. This 
is on the Federal side of this process. Maybe Ms. Beneke would 
like to respond.
    Secretary Babbitt. Mr. Chairman, that is pretty close, 
actually, if you include the four big players from Interior. 
There are four or five other Federal agencies--EPA, National 
Marine Fisheries, the Corps of Engineers. The Department of 
Agriculture is a player, too.
    Mr. McDade. And another concern we have is that you intend 
to pass the $140-some million to those agencies, as we 
understand it.
    Secretary Babbitt. That is correct.

                     transfer of bay-delta funding

    Mr. McDade. It may be wrong, because the justification is 
not totally clear to me, that you intend to pass through money, 
which is kind of the reverse of the normal process where the 
agencies all come up individually and describe their level of 
work effort to the committee and what money they need to carry 
it out. You are going to do that? Is that your plan?
    Secretary Babbitt. Mr. Chairman, we evolved this model on 
the other side of the Interior budget in the Florida 
Everglades, where money destined for other agencies is 
appropriated to the National Park Service. The reason we did 
that is to keep really careful accountability for the effort. 
It has worked very well in Florida.
    The Bureau of Reclamation is the 800-pound gorilla in the 
Central Valley of California; and it is our belief, based on 
our experience in Florida, that we actually run a tighter ship 
by disbursing the money from what would be, in the private 
sector, a project manager.
    Mr. McDade. Well, will you know in that same time frame 
what kind of money you expect to disburse to the 10 Federal 
agencies--if there are 10?
    Secretary Babbitt. Absolutely. The major ones are, in fact, 
in the document that I have submitted for the record.
    Mr. McDade. Okay. We need the same kind of detail, as you 
know, Mr. Secretary, in order to make appropriate judgments 
with respect to the money we are going to appropriate--the tax 
money we are going to appropriate for the project.
    Secretary Babbitt. Mr. Chairman, I appreciate your concerns 
and will respond.

                    bay-delta cost sharing agreement

    Mr. McDade. Let me bring another one to you now. The budget 
states that Federal funds are available after a cost-sharing 
agreement with the State is signed. What is the operative date 
for that?
    Secretary Babbitt. The target date for the cost-sharing 
agreement is the beginning of the coming fiscal year.
    Mr. McDade. Which is?
    Secretary Babbitt. October 1st.
    Mr. McDade. Well----
    Secretary Babbitt. Now, I think we can----
    Mr. McDade. Again, it is going to be an impediment to us, 
respecting the fact that we are supposed to have a cost-sharing 
agreement before the project begins.
    Secretary Babbitt. Mr. Chairman, I believe we can be 
responsive to that.
    Mr. McDade. Let me underline these things to you, because 
they are important.
    Secretary Babbitt. Absolutely.
    Mr. McDade. You know, it is a very large amount of money. 
There are a lot of open questions, and we recognize the 
difficulties that you face in negotiating this kind of 
difficult problem with a lot of different people and lot of 
different agencies. From our perspective, we need to get some 
additional details from you. Is there anything that you can 
tell us about what that cost-sharing agreement is going to look 
like?
    Secretary Babbitt. Mr. Chairman, I can. The operative 
framework has been that we should shoot for cost sharing which 
is in the 50/50 range, but there is nothing magic about that 
percentage. The statute does not have a cost sharing ratio in 
it.
    Mr. McDade. No specific number in it.
    Secretary Babbitt. It is not specifically required.
    Our position has been that there should be a presumptive 
50/50 cost sharing between the public agencies, not counting 
the private sector funds that will go into it.
    Mr. McDade. Well, California is way out front with about a 
billion dollars.
    Secretary Babbitt. They certainly are.
    Mr. McDade. Another 3 years would be about, let's say, $430 
million.
    Secretary Babbitt. Well, Mr. Chairman, about half of 
California's billion is earmarked specifically within the area 
of this project. Their bill also includes some projects, 
particularly in southern California, that are not in the ambit 
of this particular project.
    Mr. McDade. Does the agreement require approval by the 
legislature as well as the governor or does the governor have 
the authority to sign off on it?
    Secretary Babbitt. I believe the governor now has 
authority. It will require a programmatic environmental impact 
statement for many of the expenditures. That environmental 
impact statement is now underway.
    The expenditures that we have identified in this request 
are ones that all parties agree would be made under any of the 
alternatives in the programmatic environmental impact 
statement. That impact statement is required both under Federal 
and State law.
    Mr. McDade. You feel you have a pretty good handle in terms 
of this agreement that you have been negotiating?
    Secretary Babbitt. Yes, I think that is an important 
distinction. This project has been under way now conceptually 
for the entire 4-year period that I have been here. The nature 
of this beast makes it a little cumbersome, but the great 
strength of this is reflected in the cost sharing and in the 
unanimity of support that we have in California.
    Mr. McDade. What have they done in California about 
appropriating--actually appropriating their part of the money?
    Secretary Babbitt. Mr. Chairman, I cannot answer that. But 
the bond issue has been approved. It is only a question now of 
drawing down the funds, is my understanding. But I would be 
happy to provide a written answer to that.
    Mr. McDade. We would appreciate it; and we want to just, 
you know, once again express concern that we see this thing 
coming together. We need to know that California has not just 
done the bond issue but is appropriating the dollars to meet 
their match as we go along.
    [The information follows:]

                       California Appropriations

    With passage of Proposition 204, the State of California is 
authorized to provide $60 million, immediately without the need 
for further legislative action, for non-flow related ecosystem 
restoration projects, known as Category III projects. Those 
funds are currently available. When CALFED completes the 
programmatic EIS/EIR process, currently scheduled for late 
1998, an additional $390 million will be available for 
ecosystem restoration projects.
    In addition to those funding sources, Proposition 204 also 
authorized $170 million in funds for watershed management, 
conjunctive use projects, agricultural drainage management, 
water recycling, water conservation, water transfers, and other 
projects which are directly related to the CALFED Bay-Delta 
Program. While CALFED does not have direct control over these 
funds, member State agencies do control them. The Secretary of 
Resources, through the Water Policy Council has indicated that 
CALFED will exert a large influence over the disposition of 
those funds, thereby directing a large portion towards CALFED 
Bay-Delta Program elements.

    Secretary Babbitt. Mr. Chairman, I have just been informed 
by the people with the facts--this is always the case--that the 
cost-sharing agreement will be done in August rather than 
October.
    Mr. McDade. Done in August.
    Secretary Babbitt. Yes.

                           bay-delta spending

    Mr. McDade. This is probably a number cruncher question--
assuming you got the $143 million, how much would you actually 
anticipate spending and how much carrying over into the next 
fiscal year?
    Secretary Babbitt. We would anticipate spending that in 
1998.
    Mr. McDade. All of it, Mr. Secretary?
    Secretary Babbitt. That is correct.
    Mr. McDade. Because you are obligating it, you mean?
    Secretary Babbitt. That is correct.
    Mr. McDade. But how much would you expend? The best 
estimate that I know----
    Secretary Babbitt. $50 million.
    Mr. McDade. About $50 million of the total?
    Secretary Babbitt. Yes, we would commit the rest, according 
to the outline that is in the document that I have just 
offered.
    Mr. McDade. I think the budget assumes $50 million of 
outlay, does it not? So you are constrained by that number, as 
I understand it. I hear from number crunchers all the time. We 
would be delighted to hear from you.
    Secretary Babbitt. Mary Ann, would you like to respond?
    Ms. Lawler. Certainly. We intend to obligate the money, 
which means sign the contracts. The outlays occur when the 
payment goes out after the work is done.
    Mr. McDade. You intend to commit, if it goes your way and 
everything dishes out, the entire amount of the project or $143 
million?
    Ms. Lawler. We would hope to obligate the entire amount for 
the project. $50 million in outlays is associated with that the 
first year, the actual payments to the contractors.
    Mr. McDade. But you hope to obligate all the money by what 
date?
    Ms. Lawler. By the end of the fiscal year.
    Mr. McDade. The October date again? Or is that the August 
date?
    Secretary Babbitt. That would be by October of 1998.
    Ms. Lawler. We will not have the money until it is 
appropriated.

                        animas-la plata projects

    Mr. McDade. Let's talk a little bit, if we can, Mr. 
Secretary, about the Animas-La Plata project, which is one we 
hear a lot about--you hear a lot about.
    As I understand, there is $6 million in the budget request 
for the project. And you indicate there is a process ongoing 
led by Governor Romer of Colorado, and that will play a great 
part in the decision that may come down from the Department 
about how to handle this project.
    Secretary Babbitt. Mr. Chairman, that is essentially 
correct. This project has been discussed from time immemorial, 
and it has only gotten more controversial and more divisive.
    I talked with Governor Romer last summer, and he suggested 
that we try. We had had a previous consensus-building process 
in Colorado that we ran in 1994, and it worked out very well. 
We solved some really contentious issues together by bringing 
everybody into the Governor's office.
    Mr. McDade. Would you kind of flush out who is in that 
process? Who are the parties?
    Secretary Babbitt. The chair of the group is Gail 
Schoettler, who is the Lieutenant Governor of Colorado. The 
principal parties to it are the agriculture and irrigation 
districts in southern Colorado, who would be beneficiaries; the 
two Ute tribes who are involved; the various environmental 
groups; Colorado State agencies; the Environmental Protection 
Agency, which has a major statutory role in this; and then the 
usual collection of Interior agencies, with me kind of holding 
the reins, trying to keep them moving the same way.
    In this case, Interior agencies are principally Reclamation 
and the Fish and Wildlife Service.
    Mr. McDade. Again, the usual complex negotiations that are 
in this project, as so many water projects, that you have to 
face. Do you have an idea--can you enlighten us as to the time 
frame with respect to this one? When do you expect the process 
to conclude?
    Secretary Babbitt. The stated time frame when the Governor 
and I convened this group last fall was that we would finish up 
by March or no later than April. The pace of these discussions 
is pretty intense right now, and I think that we are either 
going to find something everybody can live with by sometime in 
April or, basically, I don't think it will go anywhere.
    Mr. McDade. We are going to have to change a lot of minds 
up on the Hill if it is going to go anywhere, as you know.
    Secretary Babbitt. I understand.

                     indian trust responsibilities

    Mr. McDade. Let me ask you this question about our trust 
responsibilities with respect to Indians. I know that that is a 
major concern here, and it is a major concern of yours. What 
are the range of options, bearing in mind this is a trust 
responsibility we have to present to the Indian tribes?
    Secretary Babbitt. I think the particular tribes here are 
an interesting example of our trust responsibility. There are 
about four options. I will state the full range without 
endorsing or commenting on any of them.
    Mr. McDade. Yes.
    Secretary Babbitt. The first one would be to cashier all of 
this and let everybody go back to court, because the courts are 
the ultimate guarantor of Indian reserve water rights claims.
    The second alternative would be to build the project in its 
original proposed form.
    The third way to do it would be to find some modified 
structural approach still involving these inter-basin water 
transfers.
    The fourth way to do it would be to go back to the ground 
out there and see if it were possible to buy, retire or 
transfer existing water rights to the tribes through a new 
distribution system in satisfaction of their rights.
    I guess the fifth one would be to cash out the tribes, 
simply to say, will you take money for water?
    Now, having said that, I don't want to comment on any of 
them. I would say what I have said to the tribes, that I 
believe they are entitled to wet water, if that is their 
desire; and they seem to say, we don't want money; we want 
water.
    Mr. McDade. Is it the Department's unequivocal position 
that if all parties, including the Indians, don't reach a 
unanimous agreement, the Department will not support the 
project?
    Secretary Babbitt. Mr. Chairman, we have not taken that 
position. I have come up here for 4 years and said that my job, 
as I perceive it at this time, is to follow the will of this 
Congress, number one; number two, to search relentlessly for 
consensus; and, number three, to say to the Indians, I respect 
and support your desire to get wet water out of the other end 
of this process. Now that leaves a wide range of possibilities; 
and, obviously, it will be a call by the Administration, not by 
me personally.
    Mr. McDade. Okay, well, we will watch it together with you, 
and I appreciate your answers.
    I am delighted to yield to Mr. Fazio at this time.

                      Mr. Fazio's Opening Remarks

    Mr. Fazio. I thank you, Mr. Chairman.

                        animas-la plata project

    As you know, this has been a real problem for this 
committee. In fact, it became one of the major problems we had 
on the Floor last year with this bill. I know your desire is to 
make this as easy a process as possible, and so I thought I 
would see if I could refine the Secretary's answer a little 
further in this regard.
    I know the proponents believe that you have indicated in 
the past that you think, in order to get out of the box that we 
are all in, a structural solution is going to be required. I 
think they believe they heard that in a conversation they had 
with you last year.
    I wonder if you still think at the end of the day, when all 
of these negotiations have, hopefully, arrived at some 
conclusion before we have to go to mark up or certainly to the 
Floor, that you think that that will be a component of the 
solution. I realize that we are all in this together, and we 
have been there for a long time, and we would like to get out.
    I know there are people who think that their best position 
is to come to no resolution; and that then, ultimately, since 
this climbs on the environmental taxpayer hit list every year, 
now at the top, it is inevitably going to die; and there is no 
reason to compromise, no reason to reach any agreement or even 
to find a structural solution when we can simply cash out the 
tribe's rights.
    Would you try to refine a little more carefully what they 
think you said?
    Secretary Babbitt. I think it is very important, the he 
said, she said, they said.
    Mr. Fazio. In this case, it is you.
    Secretary Babbitt. That discussion derives out of a meeting 
that I had with all of the native American groups at the 
Colorado River water users in Las Vegas just before Christmas.
    Now what I intended to say and what I believe I said was I 
respect and advocate your desire to have wet water on the land. 
I do not believe that that absolutely requires a structural 
solution.
    There are some other alternatives, the kind of 
nonstructural transfer and augmentation arrangements that you 
are familiar with in California. Those alternatives have not 
achieved any kind of consensus, but they are available in 
theory. I mean, they are there, and I have not lined up behind 
any of those alternatives or certainly did not intend to do so, 
and I don't think I have.
    Mr. Fazio. Well, I guess the real equality point is whether 
these negotiations will come to any resolution. I think that 
the people who are negotiating would feel that they might be on 
a more level playing field with each other if there was a clear 
commitment from the administration that we are going to respond 
to the 1986 and 1988 enactments that guarantee these tribes 
their water rights. And you have indicated that you think wet 
water is a component, so you are talking about delivering 
water, not cash in lieu of water rights?
    Secretary Babbitt. Yes, I think we have to respect the 
tribes's desires.
    Mr. Fazio. And it may be required to build some sort of 
conveyance to get them wet water, whether or not we call it the 
Animas-La Plata?
    Secretary Babbitt. Well, the real question is whether you 
can provide wet water without an upstream, inter-basin transfer 
from the Animas River to the La Plata River. I believe there 
are scenarios in which that can be done. I am not endorsing 
those, but I acknowledge that they exist.
    Mr. Fazio. Okay. Thank you, Mr. Chairman.
    Mr. McDade. Gentleman from New Jersey.

                  Mr. Frelinghuysen's Opening Remarks

    Mr. Frelinghuysen. Thank you, Mr. Chairman.
    The Secretary's presence today has jump-started the 
building staff. We have a new clock on the wall. Yesterday, the 
clock was paralyzed at 9:00.
    Secretary Babbitt. Maybe you could move it forward today.
    Mr. Frelinghuysen. We could. I will do my best to do that 
right now.

                            sterling forest

    Leaving the water wars and rights issue for a few minutes, 
and you were good enough to embrace it in your opening 
comments, I would like to talk about and get your reaction to a 
number of land preservation and watershed protection issues in 
the Northeast. At the top of the list is the Sterling Forest 
area in both New York and New Jersey. Congress provided $9 
million to begin the process of purchasing that very important 
piece of watershed protection property.
    Can you tell me how we are proceeding in the second phase 
of that appropriation?
    Secretary Babbitt. Congressman, the President's budget 
request includes $8.5 million, which is the second and final 
installment of the $17 million Federal commitment which is 
embodied in the Omnibus Parks Bill from last year. We obviously 
support that and believe that this is coming to a happy 
conclusion with roughly equal support from both New York and 
New Jersey.
    Mr. Frelinghuysen. It will be a happy solution. I was just 
wondering if you could comment on how fast this acquisition can 
be accomplished; and, hopefully, we will provide the 
resources--certainly on this committee we will be working 
towards that goal, but do you see any stumbling blocks along 
the way?
    Secretary Babbitt. Congressman, I do not. There is a 
negotiated agreement in place, and I believe that it can be 
closed at the purchase price of approximately $52 million. I am 
not entirely up to date on the intricacies of the New York 
commitment, but I believe it is there. And, obviously, the 
Federal contribution is contingent upon closing at the agreed-
upon purchase price.
    Mr. Frelinghuysen. We thank you for that information and 
your continued support of that moving ahead with that purchase 
and those dollars.
    About 2 years ago, you were good enough to visit the Great 
Swamp Wildlife Refuge in my district in northern New Jersey. I 
understand that the Watershed Association has invited you back 
for a return visit sometime this fall. I hope that you will 
favorably consider their request.

                       land aquisition priorities

    I just wanted to ask a question relative to your budget 
submittal for land acquisition. Can you tell the committee or 
can you provide the committee at some point with the 
methodology in terms of how you chose which land acquisition 
projects were to be included in your budget proposal?
    Secretary Babbitt. I would be happy to do that. There are 
three separate sets, and they are prioritized internally 
according to criteria which I can provide you--the Bureau Land 
Management, Park Service and, in this case, Fish and Wildlife 
Service.
    Mr. Frelinghuysen. Thank you.
    [The information follows:]

         Methodology for Prioritizing Land Acquisition Projects

    The National Park Service, the Fish and Wildlife Service, 
and the Bureau of Land Management each have their own methods 
for selecting the land acquisition projects for which funds 
will be requested. In particular, the Fish and Wildlife Service 
(FWS) maintains a data base known as the Land Acquisition 
Priority System (LAPS) whose purpose is to provide a biological 
basis for ranking projects and directing acquisition efforts 
toward those projects having the highest overall national 
value.
    Projects are nominated for inclusion on the list of 
potential acquisitions according to a broader set of FWS goals, 
and then are ranked using biological criteria. The six FWS 
categories that are used to provide a biological basis for 
ranking projects are Endangered Species, Migratory Bird, 
wetlands, nationally significant wildlife habitat, biodiversity 
and fishery resources. Each of these categories has a 
distinctive set of criteria that provides every project with a 
score within a list. Then common factors such as degree of 
threat, multiple FWS goals and objectives, public use, and 
operation and maintenance needs are applied to all projects. 
The highest ranking projects on the LAPS list provide the basis 
for developing the budget list which is submitted through the 
Department of Congress.

                 national fish and wildlife foundation

    Mr. Frelinghuysen. Lastly, within the subject area of 
today's hearing, relative to the National Fish and Wildlife 
Foundation, what is your budget request for the Fish and 
Wildlife Foundation? What do you plan to use those dollars for? 
Can you just make some general comments about the benefits of 
that investment?
    Secretary Babbitt. I believe the request in the Bureau of 
Reclamation budget is $1.5 million--and I believe that is about 
the same level as last year.
    Now there are roughly similar amounts in our budget on the 
other side from the Fish and Wildlife Service. Actually, it is 
$5 million from the Fish and Wildlife Service. This money, I 
believe, is one of the best ideas that has ever come out of 
this Congress, because the National Fish and Wildlife 
Foundation is now operating on an annual budget of about $40 
million. They have several other sources of Federal 
appropriations, maybe including Agriculture's budget. I am just 
not sure. It can't be more than $10 million in Federal 
approptiations, and they are running on a $40 million budget 
right now.
    Mr. Frelinghuysen. It is pretty remarkable.
    I want to thank you for your participation, for the 
committee's information and enlightenment. If you could provide 
a record of the list of projects the Department and Fish and 
Wildlife Foundation have worked on over the last 3 years, I 
think the committee members would find how amazing it is that a 
relatively small investment has reaped incredible benefits--if 
you would be kind enough to provide that.
    Secretary Babbitt. I would be happy to.
    [The information follows:]

[Pages 502 - 533--The official Committee record contains additional material here.]


    Mr. McDade. Thank you.
    The Chair recognizes the gentleman from Arizona.

                      Mr. Pastor's Opening Remarks

    Mr. Pastor. Thank you, Mr. Chairman.
    Good morning Mr. Secretary, Ms. Beneke and Commissioner 
Martinez.

                 tres rios wetland restoration project

    Going back to the water issues, Commissioner Martinez in 
his testimony talked about projects that deal with reclaimed 
wastewater. In Arizona, we had authorized the Tres Rios wetland 
restoration project that is outside of Phoenix; and we are 
ready to move forward with the project in Phoenix and other 
communities. I was wondering, does the Bureau anticipate 
continuing this effort in the project in fiscal year 1998?
    Mr. Martinez. Mr. Chairman, Mr. Pastor was in Phoenix just 
a month ago. I committed to continue to work with the City of 
Phoenix.
    As you are aware, the issue there is that Congress 
appropriated money for us to allow to continue working with 
Phoenix. But, in the language, the attorneys tell me there is a 
little quirk. The language says, the Bureau of Reclamation 
shall work with Phoenix in constructing the project. Our 
attorneys interpret that to mean that that language requires a 
repayment on the part of Phoenix.
    The language for the other waste water use projects does 
not use the language ``the Bureau shall construct''. It says, 
the Bureau shall participate in construction, which allows a 
grant to occur. So, we have to work through that language. Once 
that language is corrected, we will work through that process. 
We have committed to work with the city on building the 
project.
    Mr. Pastor. Do you have any recommendations for me in how 
we could take that particular language and assure that we go 
forward with the project? Do we need to amend?
    Mr. Martinez. Yes. My understanding was that the 
representatives of the city were going to meet with our 
attorneys here in Washington to see if we could come up with 
some resolution on that.
    Mr. Pastor. Thank you.

                        central arizona project

    Another issue that you spoke about this morning was the 
Central Arizona project. We have been involved with lawsuits 
concerning the construction, the repayment, maintenance and 
operation, etc. I know that there have been attempts to, 
hopefully, bring some settlement to it. What is the latest 
progress in the discussions with the CAWCD and the Department 
of Interior to come to some kind of settlement over those 
lawsuits?
    Secretary Babbitt. Congressman, there is a very tangled web 
here, because the settlement of those claims has inevitably 
broadened into a discussion of related issues such as the role 
of the tribes in the policy setting and the board of the 
Central Arizona Water Conservancy District. We have had 
discussions with the State, and the CAWCD board. I guess I am 
always optimistic but in this case, I cannot cite any new facts 
that suggest that we are close.
    The litigation is continuing; and I believe the discovery 
schedule now calls for document closure in the spring and the 
closure of discovery this summer for trial this fall.
    The reason I lay that out is because we find again and 
again and again that, once the discovery has been done, all 
parties tend to be more realistic about their positions, so 
that may provide an opening. It is going to be linked to this 
issue of the role of the Indian beneficiaries in governance, 
and we have not resolved that.
    Mr. Pastor. I know several years ago the native Americans 
complained that they were not part of the process, and we 
talked about possible inclusion. But one of the barriers, I 
guess, that was always presented to me was that the members of 
the district are elected and they could not place native 
Americans on the board, etc. And I wonder, is that still a 
problem that you are encountering?
    Secretary Babbitt. Well, it certainly is the case that, 
were a settlement process to conclude that the tribes should be 
represented on the board of CAWCD, that that would require a 
statutory change from Arizona legislature.
    Mr. Pastor. I see. In the fiscal year 1997 appropriations 
conference report, there are certain Bureau programs for 
specified reduction or termination. Other than those specified 
in the fiscal year 1997 Appropriations Act, were there any 
programs or projects canceled or delayed?
    Secretary Babbitt. Let me take a first crack at that, and 
then I will refer it to the Commissioner and Ms. Beneke.
    We have had some choppy water over the language in the 1997 
appropriations bill, because some of the language which cut out 
particular appropriations conflicts with other Federal statutes 
and our obligation under general law. I suppose the most 
important one is the litigation over the siphons. We have an 
absolute obligation under Federal law to pursue those claims. 
We must do that.
    What I hope we can do is get back with the Arizona 
delegation and work some of those issues out. There are a 
couple of other ones that relate to contract administration and 
some other things. We cannot quarrel over these items. We are 
in this together, and I think we can get them sorted out.
    Now--so whether or not there are any specific 
cancellations, I refer you to those who know.
    Mr. Martinez. I am not aware of any specific cuts, but I 
will get back to you on that issue.
    Mr. Pastor. Okay. Thank you very much.
    I will submit other questions for the record, Mr. Chairman. 
Thank you very much.
    [The information follows:]

[Page 536--The official Committee record contains additional material here.]


    Mr. McDade. Thank you.
    Mr. Secretary, I want to announce to you and your 
colleagues that Congressman Edwards is not with us this morning 
because he is attending a memorial service for his colleague 
from Texas who died. He has a lot of interest in the bill and 
the subject matter. Were it not for that, the memorial service, 
he would be here.
    I am pleased at this time to recognize my friend from 
Alabama, Mr. Callahan.

                     Mr. Callahan's Opening Remarks

    Mr. Callahan. Thank you, Mr. Chairman.
    Just an observation: Most of the requests for these 
reclamation projects, I guess rightfully so, are west of the 
Rockies. While I want to do everything I can to facilitate 
Congressman Fazio and Congressman Pastor and will do that, the 
observation is that I read in Parade magazine where that area 
is going to crack and fall off into the Pacific. That is a lot 
of money to be spending.
    Mr. Pastor. Would the gentleman yield? That is California 
that is projected to go in the ocean.
    Mr. Callahan. I have no questions, Mr. Chairman.
    Mr. McDade. We are delighted to recognize our friend from 
Arkansas, who is just back from inspecting disasters in that 
area. Welcome back.

                      Mr. Dickey's Opening Remarks

    Mr. Dickey. Thank you, Mr. Chairman; and I want to thank 
you for the opportunity to be on this subcommittee. It is 
something that I wanted to happen, and I am thankful that it 
did. I am also thankful for the Chairman's leadership and how 
much experience you bring to this process and how much you are 
going to be leading us in the ways of trying to help people 
with the little bit of money we have.
    I am sorry I could not be here yesterday. I would like to 
assume that you all would like to know something about what is 
going on in Arkansas. And it is not good, because the tornado--
there was just devastation 20 miles in length. Probably 10 to 
11 tornadoes touched down, and we have got now 25 people who 
have died.
    The President, Mr. James Lee Witt, the Secretary of 
Transportation, the director of the SBA all were on the ground.
    We are going to be spending a lot of money, and I have been 
asking about where it is coming from, and I am sure it is going 
to have to come from our committee in some fashion. But I think 
it is just amazing, the resiliency of the people. I don't think 
it is just Arkansas. But, as the President said, he saw the 
light in their eyes, that we will recover.
    Of course, there are some 25 people who will not have a 
chance to be back. But I am glad to be back; and I am sorry, 
after all the work I did to get on this committee, I missed the 
very first subcommittee meaning. So forgive me for that.
    Mr. McDade. Well, we can give you an instant replay.
    Mr. Dickey. All right.

                    irrigation projects in arkansas

    I think my first question is probably directed to the 
Commissioner. I am not going to let you off, Mr. Secretary; but 
I want it start with him.
    We have had talks with the Corps of Engineers officials 
about the construction of large irrigation projects in Arkansas 
to conserve water. The response we get from them is that it is 
the administration's policy for the Corps not to get involved 
in this type of construction project.
    The Congress would have to provide specific tasking and 
legislation to get the Corps involved. The question is, would 
the construction of irrigation projects in Arkansas reside 
within the mission and capabilities of the Bureau of 
Reclamation? And, if not, why not?
    Mr. Martinez. Mr. Chairman, Congressman Dickey, there is no 
question the Bureau of Reclamation has the expertise in these 
kinds of activities. However, we do not have the authority to 
spend our appropriations on projects or activities outside of 
the body of ``Reclamation law.'' Reclamation law has 
historically limited Reclamation projects to the seventeen 
Western States.
    Mr. Dickey. Well, that answers that. You don't care about 
Alabama and Arkansas?
    Mr. Martinez. We have worked in the eastern States under 
reimbursable arrangements with other Federal agencies. We work 
a lot with FEMA.
    Mr. Dickey. Well, is there any cooperation that we can get? 
I mean, do you all loan services and loan expertise?
    Mr. Martinez. Yes. Like I said, we have worked in other 
States under cooperative agreement with other agencies; and I 
would like to visit with you and see what we can do.
    Mr. Dickey. Good. Thank you, sir.

                        hot springs bath houses

    Mr. Secretary, this is a stretch now. Do you follow me? I 
don't want you to bring exception to this too soon. We have 140 
degree water that comes out of our thermal baths in Hot 
Springs, and we have bathhouses that were built at the turn of 
the century that are deteriorating. Mr. Chairman, this is not 
within the jurisdiction of this subcommittee, but I just can't 
help but ask it. The President is from Hot Springs. He grew up 
in Hot Springs. Can you help?
    Secretary Babbitt. Mr. Dickey, recognizing the facts that 
you have just lined up, acknowledging that against that 
background--I have been to Hot Springs and carefully examined 
all of this because of the President's personal interest in Hot 
Springs. I have learned some interesting facts; and I must tell 
you, your question is not as far afield as you might imply.
    Number one, Hot Springs is the site of the first and 
original unit in the National Park System. The mother park of 
the National Park Service is not Yellowstone, it is Hot 
Springs.
    Mr. Dickey. Thank you.
    Secretary Babbitt. Hot Springs was established in 1832. I 
have done my homework. Would you like to know more about that?
    Mr. McDade. How are the baths?
    Secretary Babbitt. The baths are--well, if you like Hot 
Springs. In fact, the National Park Service has a significant 
role in the administration of the park and the protection of 
this historic district. So I would be happy to follow-up with 
your specific thoughts.
    Mr. Dickey. You will be hearing from us. And with regard to 
that visit, I would like to ask you not to come back for the 
same purposes you came the last time.
    Secretary Babbitt. Mr. Dickey, I will try to refrain from 
coming in the second half of even numbered years.
    Mr. Dickey. You got the message. Thank you. Thank you, sir. 
Thank you.

                     programmatic budget structure

    Mr. McDade. Mr. Commissioner, let me ask you a couple 
questions, please. We have a new budget form that percolated up 
to the committee this year. Is that your initiative?
    Mr. Martinez. No.
    Mr. McDade. Tell us the history on it, will you?
    Mr. Martinez. I will not take the credit on that, but I 
think I will let you know its background. It was initiated by 
the previous commissioner. As we moved from a construction to a 
water management agency, it was thought we could restructure 
our budget in order to give a better picture to the committees 
as to what our activities are.
    My understanding is that we have worked with the staffs of 
the committees and with OMB to come up with the structure; and, 
hopefully, it will be a structure that will be more responsive 
and provide more information to the committees.
    During the transition period it might be more difficult, 
but that is my understanding of that.
    Mr. McDade. We will stay in close contact with you if we 
need additional information, and we hope it moves in the 
direction that you want it to.

                     bureau of reclamation mission

    What do you say to people--I will meet a colleague now and 
again who will say, the Bureau of Reclamation says that its 
major mission is over; it has done its development; why should 
it continue to exist? What is your response to that?
    Mr. Martinez. Well, I will address that from two 
perspectives. One, we have a large infrastructure out West, a 
big Federal investment. As long as the Bureau of Reclamation is 
responsible for maintaining those facilities, we have a charge 
that we have to undertake.
    On the other hand, the Bureau of Reclamation is the 
permittee for water rights under State law for all these 
projects. It has to carry out its role under State law.
    Mr. McDade. How many people function in that section in 
permitting?
    Mr. Martinez. Well, probably not that many. But what I am 
trying to get at is that, in most States out West, most of the 
water that is developed for either agricultural purposes or for 
municipal and industrial purposes, comes from Bureau of 
Reclamation projects. So as long as the Bureau of Reclamation 
holds title to those water rights, we, by necessity, have to be 
an engaged party in how that water is managed and how that 
water is used.
    So in order for this agency to go away, from my 
perspective, one is, you have got to transfer title to all the 
facilities and let somebody else be responsible for them and 
get us out of the ownership of the water rights developed out 
West and how that should be managed and so forth.
    Also--and I will be quite frank with you because I think I 
need to--coming from a State perspective, there are some 
Federal laws that the Bureau of Reclamation is charged with 
addressing that might not necessarily be addressed the same way 
from a State perspective. So as long as there is a Federal 
interest in these projects and Federal interest in how water is 
managed, I think you have to have some kind of Federal agency 
having some oversight.
    Mr. McDade. Mr. Secretary, do you want to comment on that?
    Secretary Babbitt. Mr. Chairman, I do.
    I cut my teeth in public service as the attorney general 
and the governor of Arizona. Arizona's entire future, and 
present, for that matter, is linked to the Colorado River.
    The Colorado River flows through seven States and into 
Mexico. It is governed by delivery obligations to Mexico, by an 
act which was signed in 1923, and by an infrastructure system 
which includes Hoover Dam. One side of Hoover Dam is anchored 
in Arizona, the other in Nevada. The Dam stores 20 million acre 
feet of water. Upstream from the Grand Canyon, Glen Canyon dam 
backs up a lake 200 miles long. It runs through two States.
    There isn't any way that that river basin could be 
disaggregated. Believe me, I was a states' rights governor. I 
would have loved to take the whole system over, but it will 
never happen.
    Mr. McDade. I don't think anybody would suggest to separate 
it. Maybe some do. I don't know. You know the West better than 
I do.
    Secretary Babbitt. Well, we are sort of a rebellious lot 
out there; and I am no stranger to the states' rights sort of 
theory. I was sort of one of the leading theoreticians of that 
movement in my earlier days. I still think it is an important 
concept, but it simply does not lead to disaggregating these 
enormous river basin systems with all these human, interstate 
and international implications.
    Mr. McDade. Suppose you had had a consolidation. Let's 
speculate. Let's say the Corps of Engineers had some experience 
in handling water and maintaining levees and dams etc. Did you 
ever look at that? Would there be any potential savings or is 
there any efficiencies to be had from a suggestion like that?
    Secretary Babbitt. Mr. Chairman, in my younger days I used 
to advocate that all the time, that we merge the Forest Service 
into the Department of the Interior, so you had one land 
management agency, and that you merge the Bureau and the Corps 
of Engineers, sort of put east and west together.
    I will tell you, in the fullness of my years, I no longer 
come from the school which says it gets more efficient and 
better when it gets bigger. I come out on the opposite side of 
that.
    I have worked with the Corps of Engineers a lot more 
intensively than I ever dreamed I would, particularly in 
Florida where we are working very closely. I have spent a lot 
of time working in the Forest Service, and I have got to tell 
you I don't want the Forest Service.
    I think I am the first Secretary of the Interior in history 
who has ever said that. I believe that a little bit of 
competition and having a couple of agencies on the same turf 
tends to keep them honest; and both benefit from, you know, 
innovating and using new approaches to things.
    Mr. McDade. We appreciate your answer. You may very well be 
right.

                 government performance and results act

    Mr. Commissioner, you are required under the Government 
Performance and Results Act of 1993 to develop a strategic plan 
and to share the results and consult with the Congress. What 
can we expect to see out of that act?
    Mr. Martinez. Mr. Chairman, the Strategic Plan is 
undergoing final review in the Bureau of Reclamation. As a 
matter of fact, we are going to distribute it amongst employees 
for input. Our intent is to have that very plan finalized for 
submission to the Secretary by June 1st. During that time 
period, we plan to engage our stakeholders and water users out 
West and the Congress.

                          cost benefit ratios

    Mr. McDade. Will you indicate to us how many of the 
projects that you will do have a cost-benefit ratio connected 
with them? We know it is part of the conversation about the 
California project that there is not a cost-benefit ratio. Do 
most of your projects have cost-benefit ratios?
    Mr. Martinez.  If you look at the last few pages the budget 
justification will deal with those issues. Most of the 
construction projects have a cost-benefit ratio assigned to 
them, although some of the ones have been ongoing for so many 
years, the justification says it has gotten to the point where 
you cannot calculate it.
    With respect to expenditures dealing with fish and wildlife 
and other environmental issues, the justification will say it 
is difficult on those issues, but will have that on a project 
by project basis.

                      impact of acts of terrorism

    Mr. McDade. Okay. Your budget singles out continuing 
efforts to make sure that acts of terrorism do not in some way 
impact on the infrastructure of the Bureau and I guess on the 
facilities that the Department has. What is the total amount of 
money that you think will be committed to that act?
    Mr. Martinez. We plan to spend this year around $5 million 
in fiscal year 1997, and I believe we have asked for an 
additional $5 million for fiscal year 1998.
    Like I said, we do have a large infrastructure. Some of 
these facilities sit upstream from large populated areas and 
other ones are instrumental in providing hydroelectric power 
out west. We want to make sure these facilities are safe and 
sound.
    Mr. McDade. Can you do that with existing people? Do you 
have the people on board that have the background and 
technology requirements to do that, or do you have to go out 
and hire new people?
    Mr. Martinez. Our intent is to hire one person that will 
come in with the expertise to provide us direction.
    Mr. McDade. Train other individuals?
    Mr. Martinez. And then utilize as best we can with our 
existing workforce.
    Mr. McDade. Is that meant to be a cadre of permanent 
people?
    Mr. Martinez.  I would hope that would be the case. I mean, 
this is an issue that is going to be with us.
    Secretary Babbitt. Mr. Chairman, if I might interrupt, I 
appreciate your line of questioning on this. I think it is a 
really serious subject, and I want to say I appreciate your 
attention to it. We have not paid adequate attention to it.
    Mr. McDade. Well, I hear about things like Anthrax, et 
cetera, and you think of the water supplies of major population 
areas of the West in particular, and you wonder if anybody is 
looking at that. So I am glad to see that you have taken an 
initiative and you are trying to keep some kind of interest.
    Mr. Fazio.

                             calfed process

    Mr. Fazio. Thank you, Mr. Chairman. And let me first of all 
properly express my appreciation for the work that all three of 
you do and Roger Patterson, additionally, in the front row, the 
regional director of the Bureau who has been such an integral 
part of making the CALFED process work, and Under Secretary 
Garamendi, who, as a Californian, still enjoys helping us fight 
through some of the continuing problems we have with water in 
California.
    I was not here to hear your comments. I have read them, and 
I particularly want it thank you, Mr. Secretary, for the 
forthright approach you have taken to funding CALFED in this 
budget and defending that budget, because I think it is a major 
move forward for California and I think for the Federal 
interest in the State's water development. And I realize from 
the Secretary's responses to the chairman that we are going to 
have to work together to make sure that we can sustain this 
budget request.
    There are clearly some very difficult questions that our 
colleagues are going to ask and need answers to as to how we 
are going to go about and implement this process, and we are 
going to be working closely with this committee, Mr. Chairman, 
to make sure you get the answers you need in time to meet our 
markup date and obviously our conference at the end of the 
summer.
    I wanted to ask particularly if you thought, Mr. Secretary, 
that we would be at any point perhaps out of sync with the 
stakeholders, as we call them, with the Bay-Delta Accord, with 
any of the agencies that are going to be sitting as part of 
this CALFED process?
    You have language included this year that says, ``use for 
purposes that the Secretary finds are of sufficiently high 
priority to warrant such expenditure.'' In effect, it gives you 
some discretion.
    How would the Federal interest be handling some of these 
tougher issues? How would the various agencies that you 
represent, let alone some of the others that are not under your 
purview, implement the Federal interest and the way we go about 
putting funds to bear on projects?
    Secretary Babbitt. Mr. Fazio, let me answer that by 
underlining one other factor here that I think is important, 
and that is, there is a convergence point here. Precisely 
because of all of the flooding that took place in California, 
there is going to be a supplemental coming up very shortly.
    Mr. Fazio. You anticipated my next question.
    Secretary Babbitt. Well, it is really relevant, because 
what we must do is go back out and handle the reconstruction or 
relocation of those levees in a way that feeds into this. We 
have got to get those levee systems back up. But it would be a 
terrible waste--it will have to be up before the next flood 
system--if we simply go out there and repair them where they 
are. We are going to have to relocate them all as the entire 
restoration program plays out. So that provides a lot of 
impetus to sort of converge and get this stuff settled quickly 
so that money is used appropriately and so people do not go 
without protection but it lays and it feeds into this.
    The way we have designed this appropriation request, the 
money would be appropriated to the Interior Department. There 
is a preliminary sort of partitioning of this money in the 
document, which I will put into the record, showing the 
apportionment among agencies and how it matches against 
Proposition 204 money and how it is allocated by function.
    Now, the important thing, I think, is this is being done by 
consensus among what used to be known as Club Fed. Before it 
became CALFED, it was just the Federal agencies. We have 
operated on a rule of consensus, and it is remarkable it is 
actually working.
    Mr. Fazio. Well, I think it is important for the chairman 
and other members of the committee to know that to make that 
consensus work, the Federal agencies have to be parts of it, we 
have to sign off on it, and therefore I think the Federal 
interest in how we go about not only appropriating but 
obligating and outlaying the money is all going to be 
maintained, and there will be opportunities obviously for 
compromise and cooperation but also for the Secretary and 
others to say the Federal interest is not being upheld here and 
therefore we would withhold.
    So I want my colleagues to realize that we are not simply 
giving the Californians a lot of money to play with.
    I think this is a process that really will involve ongoing 
involvement of not only your agencies but Corps of Engineers, 
now NMFS, a number of other players who bring not only money 
but expertise to the table, and I think that should be somewhat 
reassuring to people who are perhaps concerned that there is 
not enough Federal control of the dollars that we put up.

                           california floods

    The floods, as you mention, have impacted us all, and I 
want to thank the Bureau for the help it has provided in the 
short term even to the point of helping farmers pump out their 
flooded fields, something that has gotten you and Mr. Patterson 
some kudos out there.
    I am wondering if you could explain to us how you feel the 
Department's operations through the Bureau have fared during 
this flooding. I mean, we have obviously seen a tremendous 
trade-off behind dams in terms of water supply, irrigation for 
environmental enhancements, and the need at the same time to 
protect life and limb by holding back floodwater. We have got 
the constant trade-off. I wonder if you would comment as to how 
you believe the Bureau has performed.
    Secretary Babbitt. Well, in my introductory remarks I 
touched on it very briefly. I think the employees in California 
did a genuinely outstanding job. Now, the Bureau operates, 
obviously, pursuant to an operations plan which addresses the 
costs and benefits, the risks, in a classic ongoing trade-off.
    What you really want to do is have the dams full for the 
coming irrigation season. You want to fill the dams up, looking 
over your shoulder at the sky, and draw them down so that there 
is enough storage left if you have a bad season. It is a very 
complex, basin-wide, modeled program. It worked very, very 
well.
    An extraordinary amount of water came down, and we really 
did take the crest off all of those floods very effectively. We 
learned a lot, I think, as did the Corps of Engineers, who is 
also a player here, particularly in the downstream levees; we 
learned a lot about the design of levee systems.
    We had just a few years ago redesigned some of these levee 
systems along the Sacramento River to provide wider space in 
the flood plain and to provide floodways or actual bypasses in 
selected areas outside the main river channel.
    What we learned is, these things really work and that in 
many, if not most, areas, the most important thing we can do in 
the near term is, as part of this, to move the levees back and 
provide more channel space. When these levees were designed, 
the hydrologists thought a 100-year storm was a lot smaller 
than what we now seem to have every 5 or 10 years.
    Mr. McDade. Would it be on the adjacent land, most of those 
levees?
    Secretary Babbitt. Yes, correct.
    Mr. McDade. No land acquisition problem?
    Mr. Fazio. In some cases we will have to make purchases.
    Secretary Babbitt. I'm sorry, I didn't understand your 
question. Yes, there will be land acquisition.
    Mr. Fazio. In fact, that may become the major cost with the 
so-called meander belt approach, and that is at least easement, 
if not land acquisition.
    Secretary Babbitt. It is a major cost on the front end 
certainly. Because a lot of this work has already been done we 
can specify what it is we need in those floodplains.
    Mr. Fazio. There are certain areas that are particularly, I 
think, conducive to this approach, and we can talk about those.
    Is it your opinion that if we are to change the way we 
manage these reservoirs to make flood control more important 
than perhaps it was in the original enactment to the 
authorization, that it would require an Act of Congress to 
reconfigure the benefits behind these reservoirs, water supply 
versus flood reservation?
    Secretary Babbitt. Mr. Fazio, I am no expert on the law, 
but I don't think that is going to require much statutory 
change. I think we have got the leeway.
    Mr. Fazio. Do you think this is something you and the Corps 
can negotiate without coming to Congress?
    Secretary Babbitt. In terms of the operation of the system, 
yes, I do. You may be ready to sandbag me with some statute I 
have never heard.
    Mr. Fazio. No, I won't. But I would appreciate if you would 
respond for the record and perhaps respond to this.
    Mr. Martinez. There are some reservoirs out west under 
specific legislation that set forth how much flood pools shall 
be in the reservoir by congressional authorization, but for the 
most part we have flexibility.
    Mr. Fazio. Could you submit for the record the status that 
we have in each one of our Bureau-Corps projects, because I 
think these issues are going to come to the Floor and we all 
will need to know the specific answer here.
    [The information follows:]

                    Status of Bureau-Corps Projects

    The Central Valley Project is authorized for flood control 
purposes. Reclamation believes it has the operational 
flexibility to manage CVP facilities to minimize flood damage. 
Reclamation utilized this flexibility in the spring of 1997 to 
successfully avoid more damage in the CVP operating area.

                flooding and the endangered species act

    Mr. Fazio. Could I ask Patty Beneke perhaps a question 
related to the Endangered Species Act. We have had a lot of 
rhetoric--she is ready for this; I am not sandbagging here--
about the Endangered Species Act becoming an issue that may be 
causing some hesitancy in terms of levees. The giant garter 
snake listing that comes to mind is perhaps one of the factors 
that come into play here.
    Would you speak to the issue of how the Bureau and other 
wildlife-related agencies are handling the ESA in the emergency 
flood fighting environment and, in addition, when we talk about 
repair at any point of a flood control system.
    Ms. Beneke. Well, as I understand it, the acting head of 
the Fish and Wildlife Service has put out a policy specifically 
addressing the issue that you raise, and that is that in these 
emergency flood response situations we are doing everything 
that we can to ensure that there are no problems in terms of 
Endangered Species Act compliance standing in the way of our 
Bureaus taking the steps they need to take to address the 
emergency situation.
    I also am aware of your concerns and questions with respect 
to the giant garter snake. I have lodged an inquiry with the 
folks, the Biological Resources Division of the USGS, and am 
expecting to get a report from them on the work they will have 
done in this area. I would be pleased to share it with you and 
see if there is further work that we need to do in that area.
    Mr. Fazio. I appreciate that. Let me just be a little more 
explicit though. We still have mitigation requirements, I am 
told, even if we waive in the short term requirements of ESA in 
a flood fighting environment; is that correct? Or are there no 
further mitigation requirements that might cause an agency to 
be somewhat reticent?
    Secretary Babbitt. Mr. Fazio, we have thrashed this out 
endlessly, and I have been keelhauled by the California 
delegation regularly.
    Mr. Fazio. Most of us were keelhauled first and then passed 
it on to you.
    Secretary Babbitt. I think we are now clear that if it is 
about the emergency repair of existing levees to get through 
this flood season, the answer is, go out and repair them, 
period.
    Mr. Fazio. And don't worry about having someone come and 
post a notice on your door next spring saying that, by the way, 
you have got to mitigate what you did last winter when you were 
fighting floods?
    Secretary Babbitt. No, they don't even have to call us. All 
they do is go out and repair the levee.
    Mr. Fazio. Now, if somebody next August was traveling along 
and noticed a boil that needed repair for purposes of making 
sure the system was ready for the next winter, what would the 
situation be?
    Secretary Babbitt. Well, I think my instructions to my 
faithful employees would be that August is still a part of this 
flood season, and if it is repairing levees, that comes within 
the policy. I think the policy says within 6 months.
    Mr. Fazio. In other words, if you are repairing the flood 
system, we do not have a lot of time to go through hoops?
    Secretary Babbitt. Yes. And I think the flood season is 
basically limited by the snow on the crest of the Sierra 
Nevada.
    Mr. Fazio. This year it should last year round. So if we 
see flow in the Sierra, the ESA is waived and you are going to 
declare your candidacy again.
    Thank you, I appreciate that. We may have really something 
out of this session, and that may be very useful.
    I have been so pleased with your response there that I 
think I will put the rest of my questions in the record before 
we set some more precedent.
    There are a number of other issues, as you can imagine, and 
I will not take the time of my colleagues here, and since Mr. 
Knollenberg may have some questions anyway, I want to thank you 
for the way you have worked with our delegation on a daily 
basis to struggle with all these issues that are of little 
value to most of our colleagues here.
    Thank you. And, Commissioner, thank you very much for your 
help, particularly on the issues related to water storage and 
ways that may play into the delta solutions that you alluded to 
earlier.
    Commissioner Martinez has been very helpful in looking at 
some off-stream storage in the Sacramento Valley which we hope 
may some day contribute to our delta solution.
    Thank you all.
    Mr. McDade. The gentleman from Michigan is recognized.

                   Mr. Knollenberg's Opening Remarks

    Mr. Knollenberg. I am just about on time, aren't I? This is 
the morning when I had three of these hearings, and I am sorry 
I was absent for the bigger part of this one. And I thank you, 
Mr. Chairman, for recognizing me for just a minute or two.
    I think most of my questions were answered last year. You 
know, we had a dialogue, you and I, that went into the whole 
business of the variety of Federal agencies that are ostensibly 
all doing the same thing, and you were quick to recount some 
history and give me some facts about things going back to the 
early 1900s. I think Teddy Roosevelt was a part of that.
    So I have been through, to name just a few of those 
agencies, Bureau of Reclamation, Corps of Engineers, Bureau of 
Land Management, U.S. Fish and Wildlife Service, Bureau of 
Indian Affairs, Forest Service, USDA, Department of Energy--and 
it goes on--U.S. Geological Survey--better mention them all--
Power Marketing Administration, National Park Service, National 
Biological Service. All of those, it seems to me, in some ways 
must stumble over each other.
    But you were good enough to give me much background and 
history, and of course, to not certify but certainly I think to 
say in pretty concrete terms they are all necessary, and we 
will keep observing and watching.
    I think most of the problems that confront this committee 
in regard to your area of oversight and involvement tend to be 
in the West, and I believe that Mr. Fazio and some others have 
already maybe covered most of that, so I am going to at this 
point just thank you for being here again and refer back to the 
chairman.
    Mr. Chairman.
    Mr. McDade. Joe, we are delighted you found time to come 
in. We know you had a busy day, and we are glad you are here.
    The gentleman from Arizona.
    Mr. Pastor. No more questions.
    Mr. McDade. The gentleman from New Jersey.
    Mr. Frelinghuysen. Just a couple of brief questions. I know 
you want to get on, Mr. Chairman.

                           taxpayer hostility

    A couple of years ago you expressed some concern about in 
some parts of your operation some general hostility on the part 
of some of the taxpayers, and I just wondered whether there has 
been an improvement.
    I know we invoke such words as ``stakeholders,'' things of 
this nature, but in reality are your employees in parts of the 
country being better treated, and what have you done to make 
sure that they are perhaps greeted with more civility, 
acceptance, respect?
    If you don't mind making some brief comment on that issue, 
I think it is important. I was shocked to hear some of the 
things that you relayed to us.
    Secretary Babbitt. Congressman Frelinghuysen, I appreciate 
that question, and I am pleased to tell you that I think we are 
making a lot of progress.
    The problems out West are in some measure understandable, 
and it is not the first time this has happened. There has been 
a long history of feeling in the West that too much of their 
future was being decided in Washington as a result of the 
predominant Federal landowning and water-managing presence 
through all of the Federal agencies.
    What I have tried to do over the last 4 years is to say 
let's not quarrel about abstractions, about who owns title to 
the land, because the American people, I think, every time this 
comes up have resoundingly said we believe that our land under 
the stewardship of the National Park Service, the Forest 
Service, the BLM, is part of our national heritage. So let's 
talk instead about how we make decisions out there, because I 
understand your concerns about the day-to-day management of 
these lands and the need for local communities to feel that 
they have a role in it.
    And that is why this word ``stakeholder'' has become so 
important, because we have set up a remarkable number of these 
groups where we said to our land managers, you have got to 
create a table and you have got to get resource extraction 
industries, the environmentalists, and the local officials 
together; and if you can collectively find a consensus 
solution, we will sign off. And not 100 percent.
    I think the concept is here to stay, and it is working in a 
large number of different situations--grazing in Colorado, 
forest management in other Western states, recreational issues 
in gateway communities outside national parks, game management 
in some of the national parks--a whole variety of different 
issues.

                  computer modifications for year 2000

    Mr. Frelinghuysen. Lastly, unrelated, I have asked this of 
the committees I serve: Have you budgeted in the costs of 
whatever you have in terms of your computers' recalibration 
that relates to the year 2000?
    It appears, at least from comments I read in the newspaper, 
some departments are totally out to lunch on this issue and 
others are really up to speed. I just wondered if you had 
measured the costs associated with this situation.
    Secretary Babbitt. We are, in fact, working very 
intensively on this. I don't know whether we have a cost 
estimate, but we are pursuing it relentlessly.
    Mr. Frelinghuysen. If you would be good enough to share 
with the committee at the appropriate time what the costs might 
be.
    Secretary Babbitt. Sure, I will.
    Mr. Frelinghuysen. Thank you very much, Mr. Chairman.
    [The information follows:]

               Department of the Interior Year 2000 Costs

    Since early 1996, the Department of the Interior has been 
proceeding in a systematic and comprehensive way to identify 
and correct problems associated with the Year 2000 issue. The 
Awareness Phase, during which information was provided to all 
levels of Department management on the nature of the problem 
and potential approaches to its correction, has been completed. 
The Assessment Phase, which is providing a better estimate of 
the tasks ahead, is scheduled to be completed in June. The 
current estimate of the cost for correcting Year 2000 problems 
in the Department is $25 million over the next four years (FY 
1997 to FY 2000), but this estimate will change as we complete 
the Assessment Phase. At this time the Department intends to 
meet its Year 2000 costs through the use of available resources 
and, if necessary, future budget requests.

    Mr. McDade. The gentleman from Arkansas.
    Mr. Dickey. No, thank you.
    Mr. McDade. Thank you.
    Mr. Secretary, we have some additional--you won't be 
surprised to hear--some detailed questions that we will submit 
to you to request your answers for the record. If you have any 
additional need to elaborate on the questions, feel free to 
contact us. Thank you all for your appearances here. We look 
forward to working with you.
    Secretary Babbitt. Mr. Chairman, thank you very much.

[Pages 550 - 606--The official Committee record contains additional material here.]


                                           Thursday, March 6, 1997.

                       TENNESSEE VALLEY AUTHORITY

                               WITNESSES

CRAVEN CROWELL, CHAIRMAN
JOHNNY H. HAYES, DIRECTOR
WILLIAM H. KENNOY, DIRECTOR

                  Opening Comments of Chairman McDade

    Mr. McDade. The committee will come to order.
    We are very pleased to have TVA with us this morning and in 
particular to see Chairman Crowell here. You have been making 
some headlines, and we want you to know that we are grateful 
for the courage you are showing in difficult times and for the 
leadership you are showing in trying to deal with this enormous 
problem we have involving the Federal budget. So I want to 
commend you for your activities and that of your associates. We 
appreciate what you are doing.
    Mr. Crowell. I appreciate that very much, Mr. Chairman.
    Mr. McDade. It is our pleasure.
    May I say to you, sir, we will proceed informally. We would 
be pleased if you would file your statement for the record so 
that we can have an opportunity to read it closely and then if 
you would summarize and proceed in your own way. Tell us what 
you want us to hear.
    Mr. Crowell. I must say, Mr. Chairman, that--you mention 
about making headlines--we certainly were pleased that Peyton 
Manning decided to stay at UT yesterday, because that certainly 
has created more interest in that than it has in our proposal 
the last few days. So everybody back home is excited about 
that.
    Mr. McDade. You ought to fill the stadium, too.
    Mr. Crowell. We thought we maybe could take credit for it 
as an economic development opportunity for Tennessee.
    Mr. McDade. I think it might be.

                 Opening Statement of Chairman Crowell

    Mr. Crowell. Thank you very much, Mr. Chairman, for those 
kind remarks.
    My colleagues, Johnny Hayes and Bill Kennoy, and I are 
pleased, as always, to appear before this subcommittee. This is 
the first time we have been before you as Chairman; but, as you 
know, we have been before the committee each year to present 
our budget request for next year. We certainly look forward to 
working with the staff and members of this committee.
    As you requested, I have complete testimony I would like to 
submit for the record. Then I will take a few minutes, as you 
suggested in a way to expedite the proceedings, to summarize.
    Mr. McDade. Proceed in any way you wish, and your testimony 
will be filed.
    Mr. Crowell. Great, thank you. Thank you.
    Before I discuss TVA's appropriated programs, I would like 
to just take a brief moment to update the committee on the 
status of TVA's power system.
    Mr. Chairman, in fiscal year 1996, TVA earned revenues of 
$5.7 billion from the sale of electricity. This was an all-time 
record for revenue, as well as all-time record for generation.
    Overall, TVA's power system is performing better than at 
any time since the 1960s. This fiscal year, for the first time 
in 35 years, we will not increase our debt; and we are 
currently developing a plan to reduce the debt. In preparation 
for deregulation, we have cut costs, become more efficient and 
improved our productivity.
    Now, in our appropriated programs, we are proposing a 
budget of $106 million for fiscal year 1998. This is the same 
level as fiscal year 1997, and it breaks down as follows: $81.5 
million is for TVA stewardship of dams, navigation channels and 
public lands in the Tennessee River Basin. This recommends an 
increase of $8.3 million for this category from fiscal year 
1997.
    Now, I might mention that almost the entire requested 
increase in this particular category is for resurfacing the 
bridge over Pickwick Dam where the bridge deck has deteriorated 
and created a safety concern for us there.
    $7.9 million is for Land Between the Lakes National 
Recreation Area. This represents a $1.9 million increase for 
infrastructure repairs and maintenance, including repair and 
paving of major roadways.
    $6.6 million is to begin engineering and relocation 
planning to replace the failing navigation lock at Chickamauga 
Dam, directly upriver from Chattanooga. Since the lock was 
built, deterioration of the lock has caused serious operational 
problems; and each year the risk of lock failure increases. We 
estimate a life expectancy of only 8 years for the lock.
    $6 million is for the Environmental Research Center in 
Muscle Shoals, Alabama. The ERC is in the second year of a 
transition to self-sufficiency. The $6 million requested will 
permit it to continue on our plan submitted last year to 
becoming a self-supporting business.
    Finally, $4 million is for economic development, which is 
also in the midst of a transition away from Federal dollars. 
The $4 million proposed in this budget would complete the 
phaseout program by 1999, 1 year earlier and $12 million less 
than the plan submitted to this committee last year.
    Mr. Chairman, that is our appropriations request for fiscal 
year 1998. As you know, as you have mentioned in your opening 
comments, we have proposed a plan to make fiscal year 1998 the 
last year that TVA receives Federal appropriations. This 
proposal would help TVA focus on our core business of 
generating and selling electricity.
    As I mentioned earlier, TVA's 1996 fiscal year power sales 
were $5.7 billion, or 98.2 percent of our total budget at TVA. 
On the other hand, our appropriated funding is 1.8 percent of 
our budget.
    The proposal would also eliminate once and for all the 
misimpression that the TVA power system is subsidized by tax 
dollars. This is the doorway that some have used to criticize 
us, and we would certainly like to close it.
    There are still many details to be worked out in this 
proposal, and a task force headed by Kate Jackson, the 
Executive Vice President in charge of TVA's resource group, has 
begun working out those details.
    Now, in order for our proposal to succeed, we will need 
your assistance in several areas.
    First, TVA and the Army Corps of Engineers are jointly 
studying ways that our respective operations of the Tennessee 
and Cumberland River systems could be integrated and improved. 
Your support of this study is critical to the success of our 
proposal.
    Second, we need your assistance in implementing the task 
force recommendations for the future of the Land Between the 
Lakes.
    Third, it is important that we obtain language in the 
appropriations bill to permit us to transfer funds from one 
year to the next. We would need this authority to give the task 
force maximum flexibility in developing options.
    Fourth, the total funding for this year's budget request is 
needed to give the task force time to study options and 
recommend what implementation, if any, is needed.
    Finally, we need your support for our task force's work in 
gathering input from the communities and from the various other 
constituency groups in our area. It is our desire that everyone 
understand the steps that we are taking and supports the 
changes that will be required to implement them.
    We are asking for your active support in resolving the 
issues I have described. What we are proposing is certainly 
consistent with TVA's history. Many times in the past, TVA has 
created innovative programs that matured and were eventually 
transferred to other entities.
    TVA's appropriated programs include some of our Federal 
government's greatest success stories. Now, we are studying how 
these success stories can best be managed in the 21st century. 
With your help, we can impact spare funding of TVA's 
appropriated programs and begin a new era for TVA.
    I want to thank you for this opportunity to present our 
budget request, Mr. Chairman; and we are certainly available 
here for questioning as long as the committee wishes us to be 
here.
    Mr. McDade. We thank you for a fine statement which hit a 
lot of high points that we are very interested in hearing.
    [The prepared statement of Mr. Crowell and the TVA budget 
justification materials follow:]

[Pages 610 - 712--The official Committee record contains additional material here.]


                  elimination of appropriated programs

    Mr. McDade. My first question is, can you give the 
committee some kind of a feel, Mr. Chairman, for the kind of 
reactions that you have received from the various TVA 
stakeholder groups?
    Mr. Crowell. Well, as you can imagine, there has been quite 
a bit of reaction to this proposal.
    Mr. McDade. I have seen a good bit of it in the press.
    Mr. Crowell. That is right. So have I, as a matter of fact. 
And sometimes for the first time, I see us in the press.
    To answer your question this way, many of the constituent 
groups do not have enough information yet or do not really see 
how this is going to be implemented at this point because the 
task force has not made any recommendations yet. Some of the 
anxiety by the constituencies is that they just don't know what 
it means to them now, but they certainly expect some impact.
    I have received very strong support from the business 
communities in the Tennessee Valley; and certainly one group 
that has supported this proposal is our Retirees Association, 
which is made up of the people who have retired from TVA, some 
nearly 20,000 members. They are the people who spent their 
careers at TVA, and they think the proposal deserves merit and 
we should take a good hard look at it.
    So it has been mixed--to answer your question, it has been 
mixed, but I feel like it is going to take a little time before 
people really understand the impact.
    Mr. McDade. Interesting response from your former 
employees.
    Mr. Crowell. Yes, it is.

                             tva task force

    Mr. McDade. You mentioned the task force; and, of course, 
we are very much interested in its efforts to study the future 
of appropriated TVA activities. Will you identify for us, 
please, its membership and elaborate on what its activities 
have been to date?
    Mr. Crowell. Right now, the person that is the chairman of 
the committee and its 19 members, Kate Jackson. We started out 
with 17 members. We added two members from Alabama to make sure 
we had every area covered.
    They are made up of TVA professionals who are on the 
committee and chaired by the person responsible for the 
appropriated programs. The committee has not produced a request 
for any additional funding or anything at this point, but we 
certainly expect the committee to be very active in the near 
future and involving our constituency. That is one of the 
things that we have asked the group to do, is to make sure that 
there is a public process so people can have a say; and this, 
hopefully, will alleviate some concerns out there.
    Mr. McDade. I would think so.
    Have you got both public power and investor-owned utilities 
on the committee?
    Mr. Crowell. No, we do not.
    Mr. McDade. Is there some reason that we should not have 
such a group like that as part of this panel?
    Mr. Crowell. I am not sure how that would function. To me, 
this is a business decision that needs to be made----
    Mr. McDade. An internal business decision.
    Mr. Crowell [continuing]. An internal business decision. 
Because we are the ones most familiar with the programs. And I 
would think if you had outside groups, then you end up with 
people having their own agenda to work on, and what I am 
interested in is making sure that TVA's agenda is put forward.
    I have said this before time and time again, that we 
certainly need the help of Congress, certainly need the help of 
this committee; and I would want to keep this committee fully 
informed as we go along because that is important to the 
process.
    But outside groups, when you start putting them on a task 
force like this, then you get all kinds of interests that maybe 
are not consistent.
    Mr. McDade. And your primary focus is the internal 
organization and how you reach a business decision.
    Mr. Crowell. Absolutely.
    Mr. McDade. And from that perspective, you are bringing in 
your own stockholders, so to speak, and the people who are in 
the organization to make that decision.
    Mr. Crowell. The people that know the most about them, yes.
    Mr. McDade. I do want to say to you, as I had the pleasure 
talking with you the other day, we do want to stay very much in 
conversation with you as we go through this process.
    I want to take just a second to welcome Mike Parker to the 
committee from the great State of Mississippi. Mike is a valued 
member of the committee; and we welcome you here, my friend.
    Mr. Parker. Thank you, Mr. Chairman.

                  elimination of appropriated programs

    Mr. McDade. Mr. Chairman, for each of the four principal 
appropriated programs--and I am referring to stewardship, Land 
Between the Lakes, etc.--please discuss, will you, the latest 
thinking that exists within your organization as to their 
ultimate disposition. Are they being considered for 
termination? For transfer? What kinds of options are you 
looking at within your own organization with respect to those 
particular activities?
    Mr. Crowell. Mr. Chairman, we have been very careful as a 
board here to ask the task force to take a look at all options, 
to give them the time to do that and to ask them to get public 
involvement and make sure that everybody is kept advised of it.
    This board will make the decisions ultimately on what we 
think should be recommended to this committee or to others, but 
we have tried very hard to not prejudge decisions that they can 
make because, otherwise, we start taking things off the table 
that they might or might not consider.
    So, to answer your question, we certainly would like for 
the task force process to continue in a way which everybody who 
is involved feels like they had a say in it before we make 
decisions as to what we ultimately do.
    Mr. McDade. Those issues are wide open?
    Mr. Crowell. Those issues are wide open, yes, sir.
    Mr. McDade. Is the task force also considering the 
disposition of physical assets that were purchased or supported 
with Federal taxpayer dollars?
    Mr. Crowell. Yes, they will consider all of that. We have 
given them no instructions otherwise.
    Mr. McDade. Is there a future role, in the opinion of TVA, 
for appropriated dollars from the Congress of the United 
States?
    Mr. Crowell. What we are trying to do is get in a position 
here in preparation for deregulation to not have any tax 
dollars converted to TVA, so the proposal at this point is 
based on having no tax dollars at TVA.
    Mr. McDade. That is a key question for you, isn't it?
    Mr. Crowell. Yes, it is.

                             power program

    Mr. McDade. That segues into a question I want to ask you. 
You mention you just want to concentrate on your core 
activities, generating and selling electricity. There is a GAO 
report, which I am sure you have seen, that says that there is 
not sufficient financial stability within TVA to compete in a 
deregulated industry. Do you think that is an accurate 
assessment of where you are?
    Mr. Crowell. No, I do not; and the facts would support my 
conclusion that that is not a valid comment. Of course, we are 
familiar with the GAO report; and we have comments to make on 
it. But if you look at our cost-producing power, we are 
competitive in our area with all the surrounding utilities; and 
we are certainly in better shape than most of the other 
utilities in other parts of the country.
    So just from a cost standpoint and cost of producing 
electricity, in fact we have been ranked among the dozen or so 
top utilities in the country from a standpoint of independent 
sources.
    Mr. McDade. And, based on sources we discussed yesterday, 
it sure looks like you are competitive.
    Mr. Crowell. Yes, we are very competitive. I think if you 
looked at some utilities in your home state you might want to 
have TVA power there, Mr. Chairman.
    Mr. McDade. We might invite you in.
    There are investor-owned utilities who argue that TVA 
appropriations indirectly subsidize the power program. 
Hydropower producers who are private, for example, may have to 
absorb, they claim, more than their share of reservoir 
shoreline and dam maintenance as a condition of their FERC 
license.
    Some other utilities argue that they have to provide that 
economic development services without any taxpayers assistance; 
and indeed we see utilities, as you know, being good public 
citizens all over the country.
    What about those arguments, Mr. Chairman? Would you respond 
to them, please?
    Mr. Crowell. Well, I will respond this way, Mr. Chairman.
    I am very familiar with those arguments. They are made on a 
regular basis. And our proposal, as I said in my summary of the 
testimony, is targeted toward eliminating those arguments in 
the future because there would not be any tax funds coming in.
    Mr. McDade. Excuse me. I have to interrupt you. I have to 
go vote. I think we are down to two minutes. Have you voted, 
Mike?
    Mr. Parker. No.
    Mr. McDade. We have two minutes. We will be back in two 
minutes.
    Mr. Crowell. Okay. Thank you.
    [Recess.]
    Mr. Frelinghuysen [presiding]. Chairman Crowell, if we can 
begin again. Congressman McDade has gone to vote.
    Mr. Fazio, would you like to make any opening comments?

                      Opening Remarks of Mr. Fazio

    Mr. Fazio. Thank you, Mr. Chairman.
    I really don't have any great comments to make except to 
say that--I think it has probably been stated so far, but if it 
hasn't been, let me say, with the new team here, perhaps we are 
going to look at TVA and ARC a little more closely than was the 
case in the past.
    We obviously had strong supporters of both agencies in 
prior time frames, and that is all well and good. In fact, I 
must say I think change can be healthy.
    Just from the very objective standpoint of attempting to 
review the agency's budget, I guess one of the questions I 
would ask, and I direct to you, is why should the TVA be 
treated differently than perhaps power marketing 
administrations--which we deal with before this committee--
which have a different background and history but which, for 
many members, might seem on the surface to be analogous to TVA?
    Mr. Crowell. To answer that, you have to look at the TVA 
Act and the responsibility given to TVA by the Congress and our 
mission. We have the responsibility for the fifth largest river 
system in the country. We also are the largest generator of 
electricity. We are an asset for the government.
    So if you look at the basic mission, there is nothing else 
like us in the country; and we cannot be compared directly with 
any other public power entity just simply based on 
responsibilities given to us by Congress.
    Mr. Fazio. So the history is what created a separate 
entity?
    Mr. Crowell. Yes.
    Mr. Fazio. And we ought to revere and, of course, 
appreciate that history, given the background, the relative 
success you have had in economic development and power 
generation in the region.
    Mr. Crowell. Yes. We would like to see that happen, 
Congressman; but it doesn't happen as often as we would like, 
obviously.

                competition in the electricity industry

    Mr. Fazio. Well, apparently, there has been a good deal of 
contention these days that goes to, really, the question of 
competition.
    Mr. Crowell. Yes.
    Mr. Fazio. You are providing competition to other 
utilities, some stockholder-owned utilities in the region. Why 
has TVA become a competitor and why have some of those you 
compete with in the region become less supportive than maybe 
historically was the case?
    Mr. Crowell. Let me say this: We do not compete with other 
utilities now, because we are not permitted by law to do so. We 
have a territorial restriction that restricts us inside our 
service area. We do serve some 14 utilities with an interchange 
agreement. We buy from them and they buy power from us. But 
that was all part of the 1959 amendment to the TVA Act; and we 
are not in direct competition with customers of other 
utilities.
    Mr. Fazio. Have you been thinking of making acquisitions 
that bring about a competitive atmosphere? What are the issues 
that have brought other utilities into the discussion?
    Mr. Crowell. I think the issues that really have brought 
other utilities into it is really the issue of deregulation 
where territorial restrictions do not make any sense. So then 
what do you do with TVA when you have no territorial 
restrictions? It is the anticipation of deregulation and 
competition that has the private power companies somewhat 
concerned about us. It is not the reality of the time today, 
but it is the expectation I think that is of concern to them.
    Mr. Fazio. Would TVA be seeking a carve-out in any national 
effort, maybe one that Mr. Schaefer over on the Commerce 
Committee would pursue, that would provide for us a national 
framework of deregulation?
    Mr. Crowell. Yes, we need to look at that from this 
standpoint. The TVA is an asset for the nation. It belongs to 
the government of the United States, and it deserves to be 
successful in the future. So whatever we need to do and is 
consistent with deregulation to be successful is what we think 
we ought to be permitted to do.
    You have a very large asset in the Tennessee Valley that 
can help the country and help the region in the future. 
Deregulation is going to change some things, but the changes 
that occur should be consistent with permitting TVA to be 
successful.
    Mr. Fazio. When you say permitting TVA to be successful, 
what would your desire be in terms of your ability under this 
new deregulatory atmosphere to pursue other opportunities?
    Mr. Crowell. What we need to be able to do, obviously, is 
to sell the power we generate and----
    Mr. Fazio. To wherever and whoever?
    Mr. Crowell. To whatever the Congress decides is 
appropriate for us. Because the Congress will be the ultimate 
decision-maker in the process. But if you have a situation that 
develops in which our customers can be taken by other utilities 
and you start losing customers, then you start losing revenue 
and you start losing your ability to succeed. So it really 
boils down to a matter of being able to sell our power that we 
generate every day to produce revenue as necessary to keep us a 
financially sound company.
    Mr. Fazio. So you would argue that the taxpayers of the 
U.S., the original investor of the TVA, would suffer if people 
could come into your area but you could not go into theirs?
    Mr. Crowell. Absolutely.
    Mr. Fazio. So TVA is expecting the deregulatory approach to 
provide a kind of reciprocity?
    Mr. Crowell. Something that permits us to sell the power. 
Absolutely.
    Mr. Fazio. What kind of atmosphere exists, do you think, 
among those few cognoscente in the Congress who have looked at 
this issue, which we don't all understand?
    Mr. Rogers. The what?
    Mr. Fazio. The smart guys.
    Mr. Crowell. Well, I am pleased that your comment that we 
all don't understand--because I am in that category, too. It is 
because there is a very dynamic process that is taking place, 
as you know; and it is yet to be determined how it is all going 
to come out.
    I do think what is sort of driving all of this for the 
private power companies, quite frankly, is the anticipation 
that somehow they will be disadvantaged, because TVA is a very 
well-run organization and has very low cost. But I think it is 
more of a defensive posture at this point, not knowing what the 
outcome is going to be but expecting the outcome to be damaging 
to them, I would suppose.
    Mr. Fazio. Well, I would think they would assume that a 
subsidized rate of power that you would be able to make would 
be always very, very competitive with whatever they may be able 
to make, given their costs and what they would be able to 
charge.
    What is interesting, we spent some time answering questions 
about subsidies that we allegedly have; but nobody ever spends 
any time talking about the subsidies of the private power 
companies, which are very large. I think it is just a matter of 
posturing, and I would certainly expect in deregulation that 
there is a place for TVA and there is a place for TVA to be 
successful consistent with the comfort of the private power 
companies.
    I think we need to find that place. I think we need to get 
to a place where everybody realizes there is a comfort level 
that everybody can enjoy. I think, right now, the dynamics of 
it are creating an atmosphere where there is distrust and 
concern in competing with TVA.
    This will be my last question, and I may be taking too much 
time, but please tell the committee where your most efficient 
systems lie, what the percentage of the power you generate is, 
and identify some of the least cost beneficial. I guess I am 
looking for the distinction between the hydro facilities and 
nuclear facilities and an analysis of what TVA brings to the 
table, so to speak.
    Mr. Crowell. Okay, I can do that. The hydro facility is, 
obviously, our lowest cost producer of electricity. We think we 
do a good job for them but primarily because we get free fuel, 
because the water is free as a power source. Twenty percent of 
our power comes from the nuclear program, which also is a very 
inexpensive form of electricity.
    However, the capital investment is what really causes the 
concern with the nuclear. We have too much money tied up in the 
nuclear program, which makes it difficult for us in the long 
term to continue to lower our costs. But the majority of our 
generation is from fossil power; and we have some very, very 
efficient plants there that score very high nationally when 
compared to others. But about 70 percent--a little less than 70 
percent comes from fossil production.
    Mr. Fazio. So if we wanted to, theoretically, sell assets 
of TVA--and I am not advocating to dismember TVA--it would be 
in the fossil plants and in the hydro projects; and the 
government might well be left with nuclear plants because there 
is no market for that.
    Mr. Crowell. Absolutely. We could sell the hydro and fossil 
plants very easily, and then Congress would be left with 
ownership of--the country would be left with ownership of the 
nuclear plants which have a lot of imbedded costs down there 
associated with them. That is a very accurate statement.
    Mr. Fazio. Thank you.

                     Opening Remarks of Mr. Rogers

    Mr. Rogers. Now, the Cumberland River and the dams of the 
Corps of Engineers on that river in Kentucky and in Tennessee 
form a major part of my district and the central part of the 
economy of all of southern Kentucky. And I read in the 
newspaper that you were talking about taking over those dams. 
That is the first I knew about it. Tell me about that proposal.

                        cumberland river system

    Mr. Crowell. Okay. We are not talking about taking over the 
dams. We are talking about operating the generating facilities 
and the dams along the Cumberland River. There are nine dams on 
the Cumberland River. But the whole idea behind TVA getting 
involved really came from the Department of Army. There was a 
1990 study done by the Department of Army----
    Mr. Rogers. My question is, why did I read this in the 
newspaper for the first time? You did not understand my 
question, did you?
    Mr. Crowell. I understood your question. The point is that 
we made a proposal on two occasions that was consistent with--
it was not our idea to start with. The idea came up from the 
Department of Army.
    Mr. Rogers. My question is, why did I read this in the 
newspaper?
    Mr. Crowell. I don't know how to answer that question, 
Congressman. I don't control the newspapers.
    Mr. Rogers. Why didn't you tell me first and all of us in 
the Congress? To my knowledge, you didn't brief a single Member 
of Congress on this grab of a river in my district.
    Mr. Crowell. It came from Department of the Army, 
Congressman. The original proposal came from there, not from 
us. That report has been around for some seven or eight years. 
This is not a new subject to the Department of Army.
    Mr. Rogers. Well, as far as I am concerned, it is an old 
subject and it is over with. Maybe next time you will learn to 
talk with the Members of Congress that control the fate of 
flood control in these parts of our states. There is more here 
involved than electricity. There is flood control, and there is 
recreation, and there is tourism, and there is economic 
development. Keep your hands off my river.
    That is all I have.
    Mr. McDade [presiding]. Are you sure you don't want to add 
anything?
    Mr. Rogers. That is all.

                         joint tva/corps study

    Mr. McDade. Mr. Chairman, let me go back to some of these 
questions we were asking you before.
    Do you anticipate the joint study that we were talking 
about will fully evaluate the benefits of having the Corps 
assume control of the power assets of the Tennessee River? Do 
you have any preliminary thoughts with respect to that option?
    Mr. Crowell. No. We have been asked by the President in his 
budget to conduct a joint study. Again, we should let the study 
go forward and not prejudge anything or take anything off the 
table. We have had a meeting with the Department of Army 
already to look at this, and we have been involved in exchange 
of information.
    Mr. McDade. It is wide open as far as you are concerned?
    Mr. Crowell. It is wide open, yes.

                              bonus awards

    Mr. McDade. We have had critics tell us there are excessive 
bonuses awarded in TVA. How many bonuses did you award to 
employees in 1996?
    Mr. Crowell. Let me, first of all, say the board does not 
get any bonuses. We do not. There is sometimes confusion about 
that. Our salary is controlled by Congress, and we do not get 
any bonuses. We do have a policy at TVA that pays every 
employee from top to bottom what we consider to be the market 
conditions, the market demands for those particular positions.
    So we do have a bonus plan in some and some other 
compensation available to us in order to meet the market 
conditions. I would be very happy, if you would like, Mr. 
Chairman, to supply that for the record.
    Mr. McDade. Yes, we will have to have it.
    [The information follows:]

    TVA's 200 executives earned salaries/wages during FY 1996 
ranging from $97,504 to $262,000. This compensation consisted 
of base salaries ranging from $97,504 to $115,000 and 
individual payments ranging from zero to $147,000. TVA conducts 
industry analyses and surveys to determine the market-based 
salaries/wages for top managers and executives. TVA is 
committed to attracting and retaining top industry personnel 
and its compensation plans are designed around this objective.
    Payments as part of the TVA-wide Performance Incentive Plan 
were made to non-management and managers below the senior level 
based on the accomplishment of TVA-wide goals. Payments to 
officers and senior management were based upon each 
individual's performance and their contribution to meeting 
their respective part of the TVA-wide goals.
    All TVA employees are paid on a bi-weekly basis for base 
salary and overtime. Bonus payments are made at the end of the 
fiscal year after TVA-wide performance and individual 
performance is evaluated. Such payments usually occur in the 
November to December time frame.

    Mr. McDade. You know, critics have told us that one percent 
of the people who work for you got most of the bonuses. Is that 
pretty much accurate?
    Mr. Crowell. No, sir. We give bonuses to almost every 
employee.
    Mr. McDade. It is not just top managers?
    Mr. Crowell. Not the top managers.
    Mr. McDade. And how do you select the people who are going 
to get bonuses?
    Mr. Crowell. We have performance goals each year, and the 
payouts are based on performance of those goals, and all of our 
employees participate in that process. But there is a different 
compensation package for the executives.
    I don't want the committee to misunderstand what I am 
saying. We do give performance incentives to all our employees 
who are there, but the executives are on a different program 
than regular employees.
    Mr. McDade. I guess it ranges from $27,000 to a high of 
$147,000.
    Mr. Crowell. Keep in mind that we have a nuclear chief 
there that gets one of the largest bonuses. We simply cannot go 
out and recruit somebody to run the nuclear program on $115,000 
a year. Although that is a lot of money, it is not enough to 
compete in the marketplace for somebody to run five nuclear 
plants.
    Mr. McDade. I like your suggestion about detailing it in 
the record for us, and furnish it to the committee and the 
membership of the committee well before markup so we can take a 
look at that.
    Mr. Crowell. I would certainly be happy to do that.
    As I say, we make it public every year that they are 
awarded. It is public record, and we make it public and would 
be happy to supply that to you.
    Mr. McDade. Some people are suggesting that you should not 
award bonuses until the debt gets reduced. Do you have any 
thought about reducing debts as a precondition to awarding 
bonuses?
    Mr. Crowell. I would hate to be in that position, because 
we have a very sophisticated and very large system to operate, 
irrespective of the size of the debt; and I don't think we 
should throw operational excellence out the window in order to 
hamstring our executives based on that debt. The debt was 
created over a number of years. But as a board, we have got to 
make sure that we fulfill our responsibility to operate that 
system in a sound manner; and we need help to do that.
    Mr. McDade. You are looking at efficiency, rather than the 
reduction of the debt, in the operational program?
    Mr. Crowell. We should look at everything, the operational 
program should be looked at first.

                           chinese conference

    Mr. McDade. We also heard from some critics about the 
conference that was held in Beijing with the Chinese. Were 
power dollars used or appropriated funds from Congress; and, if 
so, how many?
    Mr. Crowell. No power dollars were used, but we did this as 
a joint--we co-hosted that with the State of Tennessee, and 
Governor Sunquist co-hosted it with us and was there in 
Beijing. We had 65 companies that went with us on that trip.
    We think it was a very big economic development opportunity 
for those companies. We got great feedback from the companies 
that went, and we certainly thought it was money well spent to 
try to create economic development opportunities in the valley.
    Mr. McDade. Could you be kind enough to elaborate a little 
bit on the specific benefits that accrued from the conference? 
What would you advise me to tell a critic who asks me, ``What 
is TVA doing over in Beijing spending my tax dollars?''
    Mr. Crowell. Sure, I would be happy to respond to that.
    Here is what I have told people. I have been asked by the 
media and others in the past. The TVA nameplate is very 
important in China and opens a lot of doors for us. The process 
of doing a conference was quite appealing to, as I said, to the 
State of Tennessee because the governor co-hosted the 
conference.
    The nine States paid money to finance the conference, along 
with TVA; and the whole purpose was to use that opportunity to 
get the business leaders and the companies in the Tennessee 
Valley who want to do business with China to get them in the 
door, so to speak, with some of the Chinese officials and 
business leaders so they could have an opportunity to not only 
do business with the Chinese but to buy goods and services from 
the Chinese to be sold back in the valley or back in the 
perspective businesses where the people came from.
    What I might mention is we have three very large banks in 
the Tennessee Valley headquarters. All three of them sent 
representatives on this. So it was viewed by the people who 
went as a very significant event. We had Saturn people. We had 
Westinghouse people. It was really very well attended by a very 
large group of people. Federal Express. These companies saw 
enough value that they paid the way for these people to go over 
and participate.
    Mr. McDade. Potentially quite a market.
    Mr. Crowell. Yes, it is.
    Mr. McDade. Are you statutorily barred from any speculative 
interests in China?
    Mr. Crowell. We do not plan to do any, so I don't know if 
we are barred or not.
    Mr. McDade. Is it statutorily prohibited or not, do you 
know? Could you furnish that for the record?
    Mr. Crowell. We don't plan to do that, but we would 
certainly supply it for the record.
    [The information follows:]

    The services being performed by TVA for the Chinese are 
consistent with TVA's statutory purposes as provided in the TVA 
Act. These activities are intended to help provide Tennessee 
Valley businesses with opportunities for growth and foster 
economic development in the Valley region. In addition, TVA's 
activities in China will increase the knowledge and experience 
of TVA personnel and help fully utilize the resources and 
expertise which TVA has developed.
    There is no legal prohibition on the activities TVA is 
conducting in China. Also, TVA is not making any capital 
investments of its funds in China. TVA has signed Memoranda of 
Understanding with the Chinese Ministry of Electric Power, the 
Ministry of Water Resources, and the Lishui Hydro & Power 
Corp., under which TVA may provide consulting, training, and 
technical services to the Chinese in such areas as electric 
power production and river basin/water resource management. TVA 
is having discussions with the Chinese regarding specific 
activities in which it can assist in these areas, such as in 
reviewing a master plan for development of the Han River and 
providing technical information regarding modernization of 
hydroelectric plants. TVA will consider involvement in other 
projects where its expertise can be of benefit and 
appropriately utilized. If any of the projects being considered 
by TVA are implemented, we expect that TVA's costs to perform 
them would be fully recovered.

    Mr. McDade. There are some reports that appeared in the 
press--and, as you said, you got a lot of press--that you 
agreed to develop hydro power in China and train Chinese 
managers at hydro plants in the United States. Is that true?
    Mr. Crowell. We signed a memorandum of understanding with 
the Water Resources Ministry to provide training for people and 
to become involved in the planning phases along two of the 
rivers in China. This was part of the outcome of the conference 
that we had. And we have had some Chinese come to Tennessee 
since then to be trained on the integrated resource management 
of the river system like the Tennessee River and have been very 
successful with that program.
    But there has been no proposal of us building anything over 
there. It has been a consulting----
    Mr. McDade. At this point, it is training?
    Mr. Crowell. Training-consulting arrangement, yes, sir.
    Mr. McDade. How many people have you put through the 
training exercises? Is there a number that you can give us?
    Mr. Crowell. Yes. The last group had 30 engineers in it, 
and that was in January.
    Mr. McDade. Who is bearing the cost?
    Mr. Crowell. Chinese are paying for the cost.
    Mr. McDade. So zero cost to TVA?
    Mr. Crowell. Yes.
    Mr. McDade. Okay. That is helpful.
    I am going to yield at this time to my friend Mr. Fazio.
    Mr. Fazio. I have taken my time, Mr. Chairman; so I guess 
we can go to Mr. Visclosky.
    Mr. McDade. The gentleman from Indiana.

                    Opening Remarks of Mr. Visclosky

    Mr. Visclosky. Mr. Chairman, thank you very much.
    Mr. Chairman, am I correct in understanding that you have 
recommended that we discontinue direct appropriations after 
fiscal year 1998?

                   elimination of tva appropriations

    Mr. Crowell. Yes, that is correct.
    Mr. Visclosky. Would that be for the power and nonpower 
programs? Is there a combination of our appropriations that go 
to both of these?
    Mr. Crowell. No. The appropriations is $106 million being 
appropriated by this committee. The power program, the $5.7 
billion is not appropriated by this committee. It comes from 
the power sales of the TVA.
    Mr. Visclosky. So the $106 million would be considered 
nonpower related?
    Mr. Crowell. That is--the amount we are talking about is 
$106 million.

                             tva task force

    Mr. Visclosky. And there is also a task force that has now 
been created to study how the responsibilities----
    Mr. Crowell. The task force has been created to determine 
how to implement the proposal and what needs to be done to 
implement it, and that is why the task force was formed. It is 
the implementation phase of it. Our goal is to eliminate all 
tax funds to TVA appropriated programs.
    Mr. Visclosky. After 1998, after the next fiscal year.
    Mr. Crowell. Now that you mention it, I might say at this 
point that I have been receiving some feedback that perhaps 
that goal is too ambitious. And I don't know that yet. I am not 
here to say that it is too ambitious. I am just simply saying 
that I received feedback that it was too ambitious, and that 
working with the committee over the next few months we can 
determine whether or not it is too ambitious.

                   elimination of tva appropriations

    Mr. Visclosky. Mr. Chairman, I assume that is a pretty 
serious statement for you to have made, whether it should be 
exactly a $106 million reduction or $100 million or $90 
million. You must have had something to base that on. My 
question would be, what is your position before us today as to 
how this should be handled? I understand you have a task force 
but something must have led you to that original conclusion in 
the first place.
    Mr. Crowell. The original conclusion to make a proposal was 
certainly worked out very carefully over several weeks, perhaps 
a few months with OMB. There were a lot of discussions with OMB 
about it. So it was not something that we proposed without 
consultation with OMB about.
    We have made it very clear from the very beginning that we 
cannot do this without the assistance of Congress. It is not 
something that we can unilaterally do. We wanted to get a 
project proposal before Congress and before the different 
constituent groups in the Tennessee Valley and then, through 
that process, the task force determine whether or not it is, in 
fact, a doable proposal. I certainly feel confident that we can 
do it, and it was something we gave a lot of thought to before 
we recommended it.

                    fiscal year 1998 budget request

    Mr. Visclosky. Mr. Chairman, I would assume, although it 
would not have to hold true in each instance, that if you are 
looking to phase out an appropriation over the next 18 months, 
that the appropriation for the coming year would not 
necessarily have to be equal to the one in the current fiscal 
year.
    While the mix is changed between the four major categories, 
I find it interesting that somehow the budget request still 
came out to be exactly the $106 million current level--that if 
we are looking to go from the $106 million in 1997 to zero in 
1999 that it is still $106 million in 1998. Even though the mix 
within that changed: each one of the figures in stewardship in 
land and water; Land Between the Lakes; economic development; 
and Environmental Research Center, are all different numbers. 
They happen to each add up to $106 million. There is no room 
for a reduction here in 1998?
    Mr. Crowell. The one reason we are not proposing a 
reduction is what we are talking about doing here involves some 
very sophisticated activities by TVA.
    Certainly flood control, navigation and dam safety and 
management of the reservoir system is a very sophisticated, 
very complicated matter; but we felt like we needed to keep the 
funding level the same--although it is not the same, because 
there is some reduction because we added some activities to it 
in our request that would give us the time necessary to make 
the adjustments and do them in an orderly manner, not get 
ourselves in a situation by which the public health could be at 
risk by coming down too fast.
    Mr. Visclosky. We did not come down at all.
    Mr. Crowell. That is right.
    Mr. Visclosky. So you do not feel there is any room in your 
budget to come down at all in 1998?
    Mr. Crowell. There is always room to do something, as you 
know; and that is why we are here presenting our budget to the 
committee. But it has been my experience in time past that the 
committee has the final decision on what gets marked up. I am 
just simply trying to make the case to you today that we are 
trying to eliminate all Federal funding, all tax funds to TVA. 
We need your assistance on it, and we think keeping the same 
level is certainly a reasonable request.
    Mr. Visclosky. If we had to make a reduction you would not 
have a position today at the hearing where those reductions 
might be able to take place?
    Mr. Crowell. I would hate to be put in that position, 
Congressman, at this point.

                         competitiveness of tva

    Mr. Visclosky. Mr. Chairman, one last question if I could. 
Apparently, there is a GAO report that indicates that TVA does 
not have sufficient financial stability to compete in a 
deregulated industry. Would you agree with that assertion or 
not? Would you comment?
    Mr. Crowell. That came up earlier, and we certainly 
disagree with that. We are very competitive now. We are a very 
low-cost producer of electricity if you look at our costs 
compared to other utilities and other communities in the 
country. So we certainly take exception to that in the GAO 
report.
    Mr. Visclosky. Mr. Chairman, thank you very much for the 
time.
    Mr. McDade. You bet.
    The gentleman from Michigan.

                   Opening Remarks of Mr. Knollenberg

    Mr. Knollenberg. Thank you, Mr. Chairman.
    Chairman Crowell and panel, good to see you this morning.
    A year ago, I think, when you testified before this 
subcommittee, you were saying some things on which you have 
apparently changed direction. I remember that you said 
something like the TVA operates more efficiently than other 
people do, and I suspect you were referring to some of the 
other agencies. And you went on to caution Congress and this 
subcommittee to make sure that we are getting the most 
efficient operation that we can get.
    Then I think, finally, you said that TVA is the best. And 
you probably heard this from someone previously, and I am 
assuming from some more recent remarks that TVA has become 
apparently less able to deliver on those excellent standards in 
dam management.
    Is TVA still the best, as you said on the 28th of March of 
1996? And, if so, would you still caution Congress in the 
fashion that you did the last time?
    Mr. Crowell. No. I believe we still are the best. The 
proposal that we have before the committee has nothing to do 
with performance of TVA, it has to do with the deregulations 
coming into the electric utility business, positions TVA for 
the future, dealing with the uncertainties of deregulation. It 
is a strategy to get us----
    Mr. Knollenberg. Pardon me. You went out of the business of 
stewardship. I think that is the direction you want, isn't it?
    Mr. Crowell. I don't think we can necessarily get out of 
the business of stewardship, but that someone else could 
perform those duties for TVA. I mean, from the standpoint of 
changing the TVA Act, we cannot do that, obviously.
    But sometimes when we make a proposal, well, let's 
eliminate tax funds, we are saying we are not doing a good job. 
That is not the issue at all in my mind by any stretch of the 
imagination. We think we are the best and still doing the best, 
but I think there is a larger issue here that we are dealing 
with and not just dealing with specifics on how we operate the 
dam.

                                tva debt

    Mr. Knollenberg. Let me talk about some debt-related 
matters, and let me just clarify a couple things, and you can 
respond very quickly I think. What is the total debt of TVA?
    Mr. Crowell. Just a little over $27 billion.
    Mr. Knollenberg. How much is owed the Federal government 
for the initial installment--initial investment?
    Mr. Crowell. We are paying $60 million on that, and I think 
it is a little over a billion dollars.
    Mr. Knollenberg. Total is a billion?
    Mr. Crowell. Yes.
    Mr. Knollenberg. I heard it was higher, as high as three or 
four billion.
    Mr. Crowell. Why don't you let me check the record and make 
sure it is accurate?
    Mr. Knollenberg. But maybe I misunderstood what you were 
saying. I was talking about the original investment of TVA 
which we are paying down. But $3.2 billion is owed to the 
Federal financing bank. So if we subtract these numbers, we 
come up with what is owed to the bondholders, which is 
approximately what?
    Mr. Crowell. $27 billion, because the $3.2 billion for the 
Federal funding is included in the number.
    Mr. Knollenberg. It would be about $23 billion, then?
    Mr. Crowell. If you deduct that from our number, you get 
what is on the public bond market.
    Mr. Knollenberg. About $23 billion then, isn't it?
    Mr. Crowell. On the public bond market, right.

                              air support

    Mr. Knollenberg. We heard about the TVA Air Force--I don't 
want to classify it as an air force. Including helicopters, you 
have 11 planes, fixed wings and otherwise. And, of course, we 
all heard the story about the Citation Ultra, Citation 5, which 
costs in the range of what?
    Mr. Crowell. I don't remember the exact figure, but it is 
substantial.
    Mr. Knollenberg. I can tell you it is substantial. It is 
probably in the range of $5 million. That is a pretty hefty 
chunk of money to be spent for what? I guess that is my 
question. What are you going to use it for if you get it?
    Mr. Crowell. We have not gotten it yet. What we have right 
now, we are flying a turboprop King aircraft.
    Mr. Knollenberg. That lease will continue, is that right?
    Mr. Crowell. I believe so, yes. But you have to keep in 
mind the helicopters we have are used for flying power lines, 
and that is part of every operational business. We have eight 
or nine helicopters, and we certainly need those on a day-to-
day basis. We only have one character that is an executive 
aircraft.
    Mr. Knollenberg. How many times a year do you fly that 
executive aircraft, the one you have now, the King Air, which 
is considerably less expensive than the Citation 5?
    Mr. Crowell. I don't know. I can get that for the record. I 
don't know off the top of my head.
    [The information follows:]

    The TVA King Air 350 leased in FY 1995 flew 220 hours; 372 
hours in FY 1996.
    TVA owns and operates one single-engine plane for 
photography and eight helicopters primarily engaged in 
transmission line patrol/construction and spraying (two other 
inoperable helicopters are used for parts). One helicopter is 
estimated at $1.3 million. The estimated value of the remaining 
operable aircraft is from $150,000 to $700,000 each.

    Mr. Knollenberg. The reason I bring the question up is that 
if a company can't get a minimum 400 to 600 hours a year from 
its average corporate aircraft, then it is probably wasting its 
money. They have to hire a pilot along with that. Do you have 
your own pilots?
    Mr. Crowell. Yes, we have pilots.
    Mr. Knollenberg. Are these private pilots?
    Mr. Crowell. These are TVA employees. If they are not 
flying King Air, they are flying the helicopters to look at the 
power lines to make sure they are operating.
    Mr. Knollenberg. So they are multi-licensed? They can fly 
helicopters and the Citation?
    Mr. Crowell. I don't think we have anybody--we have not 
taken any of those pilots and put them in any sort of Citation 
training, because I don't have that aircraft.
    Mr. Knollenberg. How many helicopters do you have?
    Mr. Crowell. I think nine.
    Mr. Knollenberg. You have got nine helicopters. You have 
got a fixed-wing aircraft. You have two fixed wing?
    Mr. Crowell. There is a fixed wing that does some other 
chores that are not involved in carrying people from one place 
to the other.

                               tva police

    Mr. Knollenberg. I understand also that there is--and I 
will use the words that were presented to me--a TVA horse 
cavalry. I don't know if you would call it that or not, but it 
was an expenditure that caught my attention--involving several 
horses, trailers, riding equipment and what have you. And I 
suspect there is reason for them. Tell me what it is.
    Mr. Crowell. We have what we call the TVA police at TVA 
which guards our property. We have some 265,000 acres of 
property, plus 170,000 acres of Land Between the Lakes, so we 
have a lot of buildings that need security. We have TVA police 
that do that. We patrol the recreation areas at reservoirs, and 
we do have a mounted patrol that is parts of that.
    Mr. Knollenberg. Is this a brand new thing?
    Mr. Crowell. No. It came in existence within the past year 
or so as a way to help patrol some of our reservoirs.
    Mr. Knollenberg. What were you doing before?
    Mr. Crowell. Just doing it in cars, which we still do.
    Mr. Knollenberg. Is this cheaper?
    Mr. Crowell. We believe it is cheaper. It is certainly cost 
effective. The officers who ride the horses also patrol in cars 
certain times of the year, so we do not need extra people to do 
this.
    Mr. Knollenberg. I think there are some questions raised 
about that.

                              air support

    I will come right back just for a moment to this plane 
situation. Will you keep the King Air if you get the Citation?
    Mr. Crowell. I would expect so, yes.
    Mr. Knollenberg. What are you going to do with that plane? 
If you are keeping them both, what is the reason for the 
additional one?
    Mr. Crowell. Let me answer it this way. We are a $5.7 
billion operation. We are the largest utility in the country. 
There is no utility I am aware of that does not have a fleet of 
aircraft to get around to see their customers and to perform 
certain responsibilities that they need to perform. If 
anything, we are behind everybody else in the aircraft we do 
have. These aircraft are--the one aircraft we use to fly 
passengers is very important to our work to get around to see 
our customers. We have a very large service area.
    Mr. Knollenberg. Is it possibly in anticipation of your 
widening circle of customers that you are anticipating the need 
for greater air utilization?
    Mr. Crowell. No.
    Mr. Knollenberg. Nothing to do with the future?
    Mr. Crowell. That has never come up, no.
    Mr. Knollenberg. All right. I believe that takes care of my 
questions.
    I just note that there seems to have been a dramatic 
turnaround in your attitude in just the past year, and it is 
interesting that there is such a contrast, such a dramatic 
shift in thinking during that short period of time.
    So it caught most of us by surprise; and it, obviously, 
must have, at some point, occurred to you that it would 
surprise the Members of Congress who have oversight on this and 
heard what you told us last year and what you are telling us 
this year. So I marvel at how quickly that changed within your 
perspective.
    Mr. Crowell. I certainly would apologize for surprising any 
Member of Congress. That certainly is not in our interest to do 
that, certainly something we do not want to do.
    You have to look--when you start looking at change, there 
is dramatic change occurring in the electric utility industry 
that is moving very fast. If you see in your own home states 
what is going on with wheeling, what is going on with FERC 
regulation power marketers. There is a dynamic change occurring 
in the electric power industry in this country; and we have to 
be flexible enough to change and to change quickly if we mean 
to succeed in the long term. And I have always looked at change 
as an opportunity, not change as a problem. To me, it is an 
opportunity.
    So you are going to see not only us changing very quickly 
but the private companies in your district changing very 
quickly, too, to meet the conditions. A lot of it is really 
sort of an acceptance of realities to what is going on out in 
there that does not have anything to do with what we are 
driving but what is being driven by the industry.
    Mr. Knollenberg. I thank you for your comments.
    Mr. Chairman, I yield back.
    Mr. McDade. Before I yield to the gentleman from Texas, I 
want to acknowledge the presence in the room of our colleague, 
Congressman Zach Wamp, who has obviously a very deep interest 
in the proceedings; and we welcome you, Zach.
    Mr. Wamp. Thank you, Mr. Chairman.
    Mr. McDade. I now yield to the gentleman from Texas.

                     Opening Remarks of Mr. Edwards

    Mr. Edwards. Thank you, Mr. Chairman. Because of the 
interest of other colleagues, I will only ask one question and 
submit any others for the record with your approval, Mr. 
Chairman.

                     competitive advantages of tva

    As a person who is attending his first meeting regarding 
the TVA, Mr. Chairman, I would like to ask you, when you say 
you are a low-cost producer of electricity compared to 
investor-owned utilities, are you comparing apples to apples? 
Have you factored in other disadvantages where it deals with 
local property taxes or other regulatory costs that investor-
owned utilities have to incur? Is that statement still true 
after factoring in all of those considerations?
    Mr. Crowell. Yes. What I was referring to was, we are at 
about four cents. We sell power for about four cents, and there 
are some utilities around us that are a little higher. Some are 
a little lower, and certainly there are others in the country 
that are higher. I am talking about the cost of what we sell 
power for with all costs included in it.
    Mr. Edwards. When you say all costs, you do have a number 
of advantages that an investor-owned utility does not have. The 
point I am getting to is, if you were in my shoes trying to 
objectively determine how well you are doing your job, how 
efficiently you are producing energy, would you not want to 
consider certain cost advantages you have to make that 
determination?
    Mr. Crowell. What we found among the people that buy power, 
certainly 14 utilities that buy electricity from us on a 
regular basis, they are just interested in what the bottom line 
cost is, and that is what I was referring to.
    Now, the issue that comes up from time to time with the 
private power companies about so-called subsidies at TVA, I 
disagree with many of the assertions that are made by them 
because they also have advantages. But what I was trying to 
refer to when I said we are very competitive was the cost we 
could sell you if you were a customer based on what somebody 
else could sell it for.
    Mr. Edwards. Thank you.
    Thank you, Mr. Chairman.
    Mr. McDade. I recognize the gentleman from New Jersey.

                  Opening Remarks of Mr. Frelinghuysen

    Mr. Frelinghuysen. Thank you, Mr. Chairman.
    Chairman Crowell, why do we need to wait until 1999 to 
implement this program? Why can't we do it by the end of the 
fiscal year?

                   elimination of tva appropriations

    Mr. Crowell. As I said earlier, this is a very 
sophisticated system that we operate for flood control and for 
navigation and for dam safety and for recreational purposes and 
for everything else that goes on on the Tennessee River. I 
certainly would not advise anyone to try to make changes that 
are dramatic, like the ones that are being proposed in too 
short a time frame.
    Mr. Frelinghuysen. But it is true that Congress has been 
trying to move you in that direction for a number of years in 
this committee.
    Mr. Crowell. Yes.
    Mr. Frelinghuysen. So it may be a sophisticated situation 
but, in reality, the handwriting has been on the wall that we 
have been pushing towards the elimination of the subsidy for 
some time. Isn't that correct?
    Mr. Crowell. Our proposal is reasonable. I just--I could 
not sit here and advise this committee that we could do this 
sooner than what we are proposing.
    In fact, as I said earlier, I am getting some feedback that 
it is perhaps too ambitious to do it in one year. So I 
certainly could not advise the committee to----
    Mr. Frelinghuysen. I am sure you are getting some feedback, 
and I can understand that. With your way of looking at it, 
removal of this subsidy will eliminate the possibility of your 
having to come before this committee again. So if there is heat 
in the kitchen, maybe the best way to get the heat turned off 
is for you to eliminate this subsidy sooner rather than later.
    Mr. Crowell. Congressman, I am not sure I should touch 
that. I am just simply saying that I couldn't--I would not feel 
comfortable recommending that we cut off too soon because of 
the impact----
    Mr. Frelinghuysen. Does this truly mean the elimination of 
programs, as your pamphlet says, or do you mean transferring 
these functions to other areas of the Federal government?
    Mr. Crowell. Well, in----
    Mr. Frelinghuysen. Because a lot of what we are interested 
in here and what you are touting in this program is smaller and 
smarter government. What are we doing here? Are we transferring 
or are we actually eliminating?
    Mr. Crowell. To answer your question, I know we are trying 
to do both. I never said--and I certainly hope I was not 
misunderstood--that we were going to save exactly $106 million 
by doing this. Because, obviously, a lot of these activities 
need to be continued because of the responsibility that the 
country has to the fifth largest river system that we have.
    I do believe and I am firmly convinced that we can save a 
substantial amount of money but certainly not the whole $106 
million.
    Mr. Frelinghuysen. But the number one priority you list 
here--by your own admission, the reason you are taking this 
action--the number one priority, and I quote, is to ``take 
strong action to reduce the size of government as expressed by 
congressional leadership.''
    So I think you are indicating that as you are moving ahead 
with this proposal, you want to do it in two years. Some of us 
would like to see it done in one year. You want to actually 
reduce the size of government, not necessarily transfer 
functions to other agencies and therefore add to their budgets.
    Mr. Crowell. I certainly appreciate your encouragement that 
you have been consistently giving us over the past couple years 
about trying to eliminate the funds that come to us from this 
committee; and the only thing that I am saying, I would not 
feel comfortable.
    Mr. Frelinghuysen. Let me give you another area of 
encouragement.

                        recruitment of industry

    Recently, I learned that the TVA is running television 
advertisements and even approaching companies in the 
Northeast--in my area, the Chairman's area--to relocate to the 
Tennessee Valley to take advantage of cheap power. One such 
company is Accupower located in Union County, New Jersey. It 
employees over 500 people.
    What business does the TVA have in approaching companies 
and urging them to relocate to your region when the American 
taxpayer is subsidizing the TVA?
    Mr. Crowell. I am not familiar with that. Are you familiar 
with that?
    Mr. Hayes. I am not familiar with that.
    Mr. Crowell. I am not familiar with that case at all.
    Mr. Frelinghuysen. I will enter that question into the 
record. Because I find it, quite honestly, offensive no matter 
who is doing this soliciting in my backyard. It is somewhat 
akin to Mr. Rogers' question. I am angry at the thought that 
somebody is out there using a subsidized power base to pull 
businesses out of the Northeast when we have enough problem 
with unemployment.
    Mr. Crowell. I would like to, Mr. Chairman, if I could, 
supply a good answer to that question for the record.
    Mr. McDade. You can provide it.
    Mr. Crowell. I am not familiar with it personally at this 
point.
    Mr. McDade. Take a good, hard look. We would be delighted 
to have a complete answer for the record.
    Mr. Crowell. Okay, great.
    [The information follows:]

    TVA has not recruited Accupower of Union County, New 
Jersey. TVA assists the Tennessee Valley Industrial Development 
Association (TVIDA), a group sponsored by distributors of TVA 
power through their regional industrial development 
associations. Neither TVA or TVIDA has any record of an inquiry 
or contact with Accupower of Union County, New Jersey.
    The Tennessee Valley Industrial Development Association 
does purchase advertising in regional, national and 
international trade journals and publications. These ads are 
intended to inform readers of the benefits and advantages 
enjoyed by firms located in the Tennessee Valley.

    Mr. Frelinghuysen. Do I have a little more time?
    Mr. McDade. Yes, go ahead.

                                tva debt

    Mr. Frelinghuysen. The TVA's debt is nearly $28 billion. Is 
it true that residential rates for customers of the TVA 
distribution utilities have remained about a third below the 
national average?
    Mr. Crowell. That sounds accurate, but----

                                 rates

    Mr. Frelinghuysen. Well, I think you know where I am going 
with this line of questioning. Is it true that wholesale prices 
for TVA electricity are about half the national average?
    Mr. Crowell. I would have to check. I don't think it is 
quite that much.
    Mr. Frelinghuysen. You are the chairman, by your own 
admission, of the nation's largest electric utility; and surely 
you must know where you stand relative to other competitors in 
the marketplace.
    Mr. Crowell. I do know that we are among the lowest in the 
country. We are in the top twelve in the country from the 
lowest producers--lowest-cost producer of electricity. But I am 
just not sure that I can answer your question about where--you 
know, at some 50 percent level or whatever. I do know we are a 
low-cost producer.
    Mr. Frelinghuysen. If you could, answer for the record at 
some point in time where you stand relative to wholesale prices 
and redemption rates for your customers as opposed to people I 
represent.
    Mr. Crowell. Okay. I will be pleased to do so.
    [The information follows:]

    The Edison Electric Institute publishes the national 
average price of electricity for residential consumers. In 
1995, that average was 8.38 cents/kWh. The average price paid 
by residential consumers of TVA power for 1995 was 5.94 cents/
kWh, or about 70% of the national average. There is no 
equivalent statistic for wholesale prices since wholesale 
arrangements vary widely. However, TVA conducts a survey of 58 
utilities offering similar arrangements as TVA's wholesale 
product. The average wholesale price of those utilities was 
4.40 cents/kWh in 1995. TVA's average wholesale price for that 
period was 4.27 cents/kWh.

    Mr. Frelinghuysen. And let me just ask a general question. 
Why hasn't the Authority, the TVA, permitted rate increases to 
help contain the growth of debt in the last ten years? Your 
debt has increased considerably, and the people that I 
represent get nailed every year with increases, and you tout in 
your materials here that you have not had a rate increase for 
ten years. The taxpayers that I represent have rate increases 
just about every time they pay their bills.
    Can you tell me why you haven't permitted rate increases, 
and are you planning in any way to announce a rate adjustment 
or increase, given some of the things that you are laying out 
here in terms of taking on new responsibilities?
    Mr. Crowell. Let me start this way. We felt that, economic 
development, supply and low-cost power for our region was the 
number one priority that we had, and so we have not raised 
rates to pay on the debt because we have been able to manage 
the debt very effectively and give low-cost interest. Our 
interest is somewhere around 7 and a half percent on average, 
which is very good.
    We felt like the economic development aspect of our mission 
was more important at this particular point in time than to 
raise rates to pay on the debt because we were being 
competitive otherwise. If we were in a competitive situation, 
our strategy might, in fact, have been different.
    As far as any rate increases are concerned, we have not 
undertaken our business planning for next year yet, so we don't 
know what the rate situation is going to be like next year 
because we have not gone through that process, and we will be 
going through that process in the spring and summer.
    Mr. Frelinghuysen. With the Chair's permission, the 
gentleman from Kentucky wanted me to yield.
    Mr. Rogers. Briefly yield.
    Mr. Frelinghuysen. Yes, please.

                         joint tva/corps study

    Mr. Rogers. And I will be brief.
    Do I understand that the TVA and the Corps have been 
directed by OMB to conduct a study of your proposal to take 
over the Cumberland River facilities?
    Mr. Crowell. The OMB has directed us to conduct a joint 
study, but as I recall from the language, it directs us to look 
at better coordination between the two rivers, it doesn't--I 
don't believe it is specific on what OMB wants us to do.
    Mr. Rogers. Are you going to conduct that study?
    Mr. Crowell. Yes, we have to do it.
    Mr. Rogers. How are you going to pay for it?
    Mr. Crowell. We are going to have to pay for it with the 
money already in the budget. We are not proposing any 
additional funds to pay for it. If there is any reprogramming, 
if it becomes necessary to pay for it, we certainly will advise 
the committee in advance.
    Mr. Rogers. You are going to let us know that you are going 
to reprogram some money? You will let us know about that?
    Mr. Crowell. Absolutely. Absolutely.
    Mr. Rogers. Mighty kind of you. I appreciate that very 
much.
    Mr. Crowell. The staff is very insistent that we keep them 
fully advised of reprogramming. We understand why, and we 
certainly have been cooperative, I believe, Mr. Chairman, in 
the past in making sure that we supply that information. We 
would not expect to change that.
    Mr. Rogers. Mighty kind. Mighty kind of you.
    Now, are you going to do this study with your own money, or 
are you going to ask us to reprogram some of your money?
    Mr. Crowell. I don't know at this point because we don't 
have a budget that has been submitted to us by the task force 
yet. We certainly expect to get that.
    Certainly the study will cost money. We are convinced at 
this point that we have adequate funding to conduct the study, 
and, as I said, if any reprogramming is necessary, we will 
notify the committee in advance.
    Mr. Rogers. Will you be doing that study on your part with 
public funds, appropriated funds, or otherwise?
    Mr. Crowell. In this case we would anticipate doing it with 
appropriated funds, which is the same funds the Corps would use 
to do it.
    Mr. Rogers. If you propose to use appropriated funds for 
this purpose, would you advise this committee well in advance 
of that plan?
    Mr. Crowell. Absolutely. Absolutely.
    Mr. Rogers. Now, the Corps would have to reprogram their 
portion, would they not, of that study?
    Mr. Crowell. I am not familiar with that, how they plan to 
finance the study, Congressman. So I just don't know.
    Mr. Rogers. Thank you.
    Mr. McDade. The gentleman from New Jersey's time has 
expired.
    Mr. Frelinghuysen. Thank you, Mr. Chairman.
    Mr. McDade. The gentleman from Mississippi is recognized.

                     Opening Remarks of Mr. Parker

    Mr. Parker. Thank you, Mr. Chairman.
    Welcome, gentlemen.
    I am new to the committee, and I keep hearing this figure 
of $106 million. Now, I think the average person who listened 
to this discussion that we have had this morning would come to 
the conclusion that $106 million is all the money that you get 
from the Federal Government, and I don't think that is quite 
the truth. I would think that there is some more out there that 
maybe is not appropriated in exactly the same way.
    Do you get more money from the Federal Government than the 
$106 million?
    Mr. Crowell. The $106 million is all we get.
    Mr. Parker. You get no more, no other money?
    Mr. Crowell. All the other revenue we have is generated 
through the sale of power to our customers in the service area. 
There is no other funding stream other than sale of power and 
the $106 million we get from Congress.
    Mr. Parker. I am going to have some questions submitted to 
you; then I would like an answer to some things.
    Mr. Crowell. Okay. Sure. Certainly.

                                tva debt

    Mr. Parker. You have got a debt out there of $27 billion. 
You have got total revenue of how much, Mr. Chairman?
    Mr. Crowell. $5.7 billion.
    Mr. Parker. You know, we are talking about big business 
here. Would that be a normal debt ratio for a major business 
out there to have $27 billion worth of debts with income of 
$5.7 billion?
    Mr. Crowell. You have to look at how TVA can obtain money 
for capital. If you are a private power company, you would sell 
stock to raise money and you would borrow money to raise 
capital.
    In our case, we cannot sell equity in the corporation, so 
the only funds available to us for capital are through bond 
issues, not through the sale of stock. But if you look at the 
amount of stock outstanding and the debt that is incurred by 
some of our neighbors, you will find that that is how you can 
really compare apples to apples, is look at the total of the 
two.

                              bond ratings

    Mr. Parker. Well, let's talk about apples to apples. 
Moody's Investor Service gives you an AAA rating as far as your 
bonds.
    Mr. Crowell. Yes.
    Mr. Parker. If you did not have the U.S. Government backing 
those bonds, what kind of rating do you think you would get?
    Mr. Crowell. Well, first of all, the Federal Government 
does not back the bonds. But I certainly--in the spirit of 
trying to respond to your question, certainly will tell you 
that being owned by the Federal Government is an advantage to 
us, obviously. I mean, it certainly is helpful, and I mean, I 
would not be candid if I didn't tell you that, if I told you 
otherwise.
    Mr. Parker. I think it is everything. My personal view is, 
I don't think it gives you an advantage; I think it is 
everything. I mean, you could not operate the way that you 
operate if you did not have the backing of the Federal 
Government.
    Mr. Crowell. Congressman, sometimes people ask me, they 
say, why is the Government in the power business? Why does the 
Government own the big utility, to start with, like TVA? What I 
try to say is that is reality, the Government does own us, the 
Government does have a large power company.
    We could look back and say, maybe we should have done 
something differently in 1933. In my position here, I am trying 
to deal with reality and trying to prepare TVA to be successful 
in the long term and remain a valuable asset to the Government, 
because the Government does own TVA at this point.

                     electric industry competition

    Mr. Parker. Mr. Chairman, what I have found in business is, 
what I own I can sell. Now, my view is that this 
reorganization--and this will be my last question--is happening 
so that you get rid of some of the responsibilities that you 
have been assigned. The power generation was not in your 
original charter, but it is something that has come about. It 
seems to me that you want to be competitive but you want to 
restrict your competition.
    Now, am I looking at that right?
    Mr. Crowell. Let me tell you the way I am looking at it.
    Mr. Parker. Because I would like to know. I mean, you keep 
telling this committee how competitive you are and how well you 
run this place and how proud you are of TVA and how you can 
provide services on an open market.
    I mean, you compare yourself to everybody in the country. 
But it seems to me that if that is the case, I want you to do 
that. I want you to compete. I want you to get out there and 
mix it up and let the consumer be the one to really benefit 
from this.
    It just seems to me that you want the advantages but you 
don't want to compete in the real marketplace. I would like a 
response.
    Mr. Crowell. Let me tell you as to where I am coming from, 
and I think I can speak for my two colleagues here, that we 
view ourselves as temporary stewards of TVA for a certain 
period of time that we have been asked to serve, and what we 
are trying to do is make TVA successful for the future and make 
it something that you and other Members of the Congress can be 
proud of since it is owned by the Federal Government.
    We are down there doing our very best every day to try to 
make TVA succeed. We know we have a large debt, and we know we 
have other things that need to be dealt with, but what is 
depriving us is the effort to be a good steward of the 
corporation.
    Our salary does not change at all based on our performance, 
but we are there trying to be good stewards every day, and we 
are trying to make TVA successful. And what I am trying to say 
to the committee is, we need help from Congress to make sure 
TVA remains an asset to the Government for the long term.
    Mr. Parker. You have not answered my question. I want to 
know, what about competition? What about you getting out and 
competing? It seems to me you want to protect yourself where 
you are providing this power. I want you to compete. Why do you 
need that protection if you are doing such a good job?
    Mr. Crowell. We would not even be having this discussion if 
deregulation of the utility industry was not imminent. That is 
what is driving all this. It is not something we went out and 
asked for, but we are trying to react and respond appropriately 
to deregulation. That is why we are having this conversation.
    If we were back in the old way where everybody had their 
own service territory and deregulation and monopolies existed 
with defined regions to serve customers, this discussion would 
not be necessary, we would not be proposing a lot of these 
things.
    Mr. Parker. So, you don't want a defined region; you want 
to be able to compete in the open market everywhere.
    Mr. Crowell. If the utility companies can come in and take 
the customers of TVA and we were not able to replace those 
customers, we end up in financial distress over the long term 
and cannot be successful.
    Mr. Parker. But what you want to do ultimately--maybe I am 
putting words in your mouth--you want to compete on the open 
market. You have a free market that you want to compete in, and 
anybody can compete with you, and you can compete with anybody 
else; is that correct?
    Mr. Crowell. We are not saying that at this point because 
we don't know how deregulation is going to unfold and how this 
is all going to happen. I have not found anybody else that I 
know of who knows how deregulation is going to impact their own 
companies if they are private companies at this point. But we 
know impacts are going to be there, and we need to remain 
flexible. What we need to do to remain flexible is continue to 
do a good job and try to maintain the costs we have.
    Mr. Parker. Thank you, Mr. Chairman.

                  elimination of appropriated programs

    Mr. McDade. There is a lot of confusion on this side of the 
dais on the elimination of the Federal funds, and there have 
been several questions put to you about what the real savings 
are. I mean, I know you look at that fund and you take it down 
to zero and you can calculate it that way, but you are going to 
be transferring other obligations.
    What is the real net savings of the elimination of that 
appropriation, and what might you be transferring? Please put 
numbers on it. We would like to know the numbers.
    Mr. Crowell. I just don't know at this point. It is 
something--
    Mr. McDade. You don't know the net savings?
    Mr. Crowell. No, I do not.
    Mr. McDade. Do you have an estimate?
    Mr. Crowell. No, I do not.
    Mr. McDade. What kind of transfers are you contemplating as 
a business practice?
    Mr. Crowell. We don't know at this point until the task 
force takes a look at it. But there are obviously some entities 
out there that can do the job and are very limited, like the 
Corps of Engineers.
    Mr. McDade. Some of the things that you want to do, some of 
those actions might be quite clear, I would assume.
    Mr. Crowell. Yes, I understand what you are saying, Mr. 
Chairman. If I start saying here is what we need to do, do this 
and this, we don't need to get a task force to go out and get 
public input to make sure we are doing it right. If I sit down 
and tell the public, here's how I want to do this, then I am 
going to get a reaction from the public by saying, you did not 
give us a chance to see if there is a better way to do it or 
another alternative that we have. So I am trying deliberately 
to keep the process open.
    Mr. McDade. Tell me when that number will be nailed down.
    Mr. Crowell. It will be between now and September.
    Mr. McDade. Between now and September?
    Mr. Crowell. Yes, sir.
    Mr. McDade. I am delighted to recognize my friend from 
Arkansas. And let me advise the committee that we have two 
votes coming, a fifteen-minute and a five-minute vote, and we 
are about at the ten-minute mark. So after we have recognized 
Mr. Dickey, we will adjourn and go and vote.

                     Opening Remarks of Mr. Dickey

    Mr. Dickey. I appreciate you recognizing me, but that is 
all I want. Thank you.
    Mr. McDade. Thank you. Enough said. The committee will 
stand in recess for ten minutes.
    [Recess.]
    Mr. Frelinghuysen [presiding]. I would like to begin the 
hearing again.
    The Chair recognizes the gentleman from Alabama for some 
questioning.

                    Opening Remarks of Mr. Callahan

    Mr. Callahan. Thank you, Mr. Chairman. And I apologize for 
not being here Mr. Chairman, for part of the hearing; and if I 
am repetitious, forgive me.
    I have two areas of concern. One of them regards the 
fencing problems that you have experienced and the suit that 
TVA lost.
    Mr. Crowell. Yes.

                               tva fence

    Mr. Callahan. We would like for you to explain what you are 
going to do in the future to make certain that you do not 
violate the boundaries of the law as I see it, which prevents 
you from extending services outside certain designated areas.
    Mr. Crowell. The lawsuit that you are speaking about, we 
obviously did not take any actions that we thought were illegal 
or inappropriate. The judge did rule against us in that, but we 
felt that we had good sound policy to undertake the contract 
that we did in that particular circumstance.
    We obviously sought advice from our counsel before we 
entered into that contract, to start with, so that was a ruling 
that went against us.
    To answer your question, we certainly seek legal advice 
before we take any actions at all to make sure that we are 
doing the proper things.
    Mr. Callahan. Well, while I have tremendous respect for the 
legal profession, I am not a lawyer. I don't apologize for that 
fact. I have said it publicly in the past: having met some 
lawyers since I have grown to adulthood, had I known how little 
sense it took to get one of those degrees, I would have gone 
ahead and got me one.
    I don't mean that as a blanket statement on the legal 
profession. My son-in-law is a lawyer now, and since he has 
presented me with a granddaughter, I have a great respect for 
the legal profession.
    But I am concerned. I know that the law tells you where 
your boundaries are, and I know that it does not take a legal 
mind to look at a map and to look at the fencing restrictions 
that you have. And I guess what I want is your assurance that 
you do not intend to violate the boundaries of the restrictions 
you have.
    Mr. Crowell. You have my assurance of that, Congressman.
    Mr. Callahan. Well, that is good.
    Secondly, I know that Congressman Rogers talked about his 
river in Kentucky, and I think that he has established an area 
that he is interested in, and certainly I do not think that you 
are going to do too much now as a result of Congressman Rogers' 
statements without notifying him.

                     environmental research center

    And we all have to carve out niches. I don't want to run 
the TVA; I am not qualified. I do not want to. TVA contributes 
greatly to the power needs of a lot of people in Alabama, 
though none in my district. But still I want to represent those 
people who are served by the TVA.
    Mr. Crowell. Certainly.
    Mr. Callahan. But in your statement you mentioned the 
Environmental Research Center, and I am just going to have to 
adopt that as a little project of my own. It is a very minor 
part of your operations. But the proposal that is under 
consideration now for the Environmental Research Center seems 
unique.
    Do you want to explain to me briefly what you are doing 
with the environmental research center and explain how this is 
not in competition with the free enterprise system or the 
academic system of the United States.
    Mr. Crowell. Certainly, I would be happy to comment on 
that. First of all, let me just note that the Environmental 
Research Center phaseout was not part of the current proposal 
that we have before the committee on phasing out the entire 
appropriated programs. This is something we proposed a couple 
of years ago to do, and we are on track to make it self-
supporting, and we are about 60 percent of the way there now.
    Now, to answer your question about competing with others, 
this is a unique facility that offers services to others that 
are not readily available among private companies, and there is 
not the expertise there to do some of the things that we do.
    Last year we did about $11 million worth of work for other 
Government agencies, and they have come to us because there is 
no other realistic way to get the work done. So I don't see a 
circumstance here in which we are going to be competing with 
private enterprise because some of the services do not exist 
elsewhere.
    Mr. Callahan. Well, don't universities and private research 
centers already do some of the things that are being proposed 
by the Environmental Research Center? And doesn't the 
University of North Alabama or some entity within the 
educational world already do that? Aren't some private 
companies already doing some of this?
    Mr. Crowell. Take an example of wetlands research which 
universities and others do work on, which we do at the 
Environmental Research Center, there is a difference in the way 
we do it than anybody else. Nobody else offers the integrated 
approach we do to wetlands management when it comes to 
specifically designing a wetlands for a specific industry.
    There is no other place, that I am aware of, where somebody 
can get that kind of expertise. There is wetlands research, 
obviously, at other places, but there is a uniqueness about the 
Environmental Research Center in this particular area.
    There are some other areas that are the same way, but that 
is one example. In trying to be responsive to your question, we 
don't see other organizations providing the same kind of 
research that we do at the ERC, although there may be some in 
the same category.
    Mr. Callahan. There could be. Correct me since I am such a 
novice on this subcommittee but weren't you designed to provide 
power for rural areas? Isn't that your primary charge? Is that 
what you are supposed to do?
    Mr. Crowell. Our primary charge was to be a resource 
development agency for a certain part of the country, which is 
the Tennessee Valley, and that involves not only power 
production but it involves navigation, flood control, and at 
the time we were created, we took over some of the Department 
of Army functions in Muscle Shoals, Alabama. That is how we 
came to have the Environmental Research Center to start with, 
because that whole facility, the reservation in Muscle Shoals, 
was previously owned and operated by Department of Army.
    Mr. Callahan. Well, now you are asking for $6 million this 
year to enhance the Environmental Research Center, and then you 
are going to spin it off into a private subsidiary or a private 
organization. But if you spend $6 million on top of the 
accumulated millions of dollars that you spent establishing 
this, and then you spin it off into a private company without 
affording everyone the opportunity to bid on it, then it 
creates heartburn for some of us in government. And I just want 
to tell you that I would like for you to keep me posted on the 
direction you take.
    I don't want to read in the newspaper what you did; I would 
like to know what you are going to do, and I want to ensure 
that private industry has the same opportunity to bid on this 
asset if it is going to be sold rather than spun off with some 
favoritism or priority going to some agency or some quasi-
agency that may be proposed or that may have already been 
proposed.
    So I am concerned about that, and I would appreciate you 
keeping me posted in advance on any change or any contractual 
arrangement you are going to make with respect to an asset that 
the United States has paid for. We have paid with taxpayers' 
money a great many millions of dollars to create, and now it 
appears--and keep in mind that it just appears--that there 
could be some favoritism shown with respect to spinning off to 
a potential profit-making company. It appears as if you are 
selling an asset of the United States without the worry of 
competitive bidding or without giving the opportunity for 
others to take a look at it in advance.
    Mr. Crowell. Sir, certainly your comments are noted by us, 
and we certainly will keep you informed. And I might even 
suggest that, as a first thing, that we arrange a briefing for 
your staff on what is exactly going on there and what we are 
doing as just an initial approach, and we can do that 
relatively quickly, I believe; and then certainly I will be 
available personally to talk to you about anything we do at 
ERC.
    Mr. Callahan. Thank you, Mr. Chairman.

                         land between the lakes

    Mr. McDade [presiding]. Mr. Chairman, let me direct your 
attention to one of your great assets, the Land Between the 
Lakes. It is now about 34 years old since it was established as 
a demonstration project. What have we learned at Land Between 
the Lakes and its demonstration that we have not learned in 
other areas?
    Mr. Crowell. What we have learned in Land Between the Lakes 
is how you can take a recreation area and have multiple 
constituencies that are able to take advantage of the 
opportunities of Land Between the Lakes. We manage it in a 
different way than most other entities of government that have 
that kind of responsibility do.
    But I might make a point here----
    Mr. McDade. Please.
    Mr. Crowell. I am sorry. Go ahead, Mr. Chairman.
    Mr. McDade. Go ahead.
    Mr. Crowell. I might make a point that the original mandate 
to TVA-owned Land Between the Lakes was for us to turn it over 
to someone else after 10 years, and we did not do that. This 
proposal to do it is certainly consistent with the original 
mandate.
    Mr. McDade. Have you had an opportunity to look at whom you 
would give it to? Have you talked about it?
    Mr. Crowell. The task force will be looking at that to 
determine what recommendations will be made.
    Mr. McDade. Same task force?
    Mr. Crowell. Same task force as the others, yes.
    Mr. McDade. How do you calculate visitor days? Do you do it 
the same way as Park Service, Forest Service, Corps of 
Engineers et cetera? Do you use the same calculation for 
visitor days?
    Mr. Crowell. Bill has been our lead on Land Between the 
Lakes, Mr. Chairman.
    Mr. Kennoy. We have about 2 million visitors a year, and 
that is done by counting the cars and multiplying that by 2.6, 
and that is the way, as I understand it, that other 
recreational areas do count the visitors.
    Mr. McDade. So you think it is consistent with all other 
federal park procedures?
    Mr. Kennoy. Yes, I do.
    Mr. McDade. Okay. Would you put into the record for us, 
please, a 5-year sweep of the visitor days?
    Mr. Crowell. Certainly, I would be happy to do so, Mr. 
Chairman.
    [The information follows:]

    LBL records annual visits rather than visitor days. LBL's 
visitation is shown below.

------------------------------------------------------------------------
                                                   visits               
                                   -------------------------------------
                                     3 people/vehicle                   
           Calendar year              (Sept.-May)  4      2.6 people/   
                                      people/vehicle     vehicle  (all  
                                       (June-Aug.)           year)      
------------------------------------------------------------------------
1992..............................          2,312,209  .................
1993..............................          2,203,173  .................
1994..............................          2,495,159          1,889,736
                                                                        
------------------------------------------------------------------------
1995 \1\..........................  .................          2,049,302
1996..............................  .................          1,962,745
------------------------------------------------------------------------
\1\ Note in 1995, the formula for calculating visits was changed based  
  on new LBL visitor Survey data. 1995 visits cannot be compared to     
  previous year's numbers. 1994 visits are shown using the original and 
  new formulas for comparison purposes.                                 

    Mr. McDade. Last year we appropriated some money for you 
for Land Between the Lakes, and as we went through the process, 
the money was cut by $600,000, you will recall. Prior to the 
cut, TVA said it had all the money it needs to run the 
organization. Then you got a $600,000 cut in the budget. What 
did do you to make up for the shortfall?
    Mr. Kennoy. Some things have been neglected and have been 
neglected over the years.
    Mr. McDade. I am talking about one fiscal year now.
    Mr. Kennoy. Right, it was a shortfall. I did an analysis in 
June of the infrastructure to see what was really needed down 
there. That has been completed now, and there is a big 
shortfall. Today we had an $800,000 loss just due to flooding 
down there at Land Between the Lakes.
    Mr. McDade. Disaster flooding?
    Mr. Kennoy. Yes, sir.
    Mr. McDade. But I am kind of zeroing in on the fact that 
you folks said you had plenty of money to run it. You were cut 
$600,000; you didn't seem to bat an eye; it didn't seem to 
bother you a bit. I am trying to figure out what you did.
    Mr. Crowell. I might mention here, Mr. Chairman, that about 
36 percent of the revenue at LBL comes through fees and through 
sources other than the appropriations from Congress, and we 
were on a path to increase those.
    So I think the answer to your question is that we felt 
comfortable we could make up the difference and continue to 
operate Land Between the Lakes because we were charging fees 
for other activities.
    Mr. McDade. Amplify that for the record, would you please? 
How much did you increase the fees, do you recollect?
    Mr. Crowell. Not right offhand. I don't think the fees were 
increased. The revenue from the fees were increased. I would 
certainly be happy to provide that for the record.
    [The information follows:]

    For FY96, revenue was earned in the following categories.

Full Service Camping..............................................$1,175
Basic Service Camping.............................................   161
Hunting...........................................................   298
Wildlife Viewing..................................................    21
Interpretive Facilities...........................................   305
Environmental Ed Resident Cntr....................................   561
Timber and Open Land Management...................................   812
                        -----------------------------------------------------------------
                        ________________________________________________
  Total LBL revenue............................................... 3,452

    Mr. McDade. Last fall you were reportedly conducting an 
inventory of infrastructure needs at Land Between the Lakes. 
Have you completed that inventory yet?
    Mr. Kennoy. Yes, we have.
    Mr. McDade. What are the total costs associated with the 
identified infrastructure needs?
    Mr. Kennoy. I believe we need about $17 million to restore 
the roads, the system of trails.
    Mr. McDade. Now this is exclusive of any flooding or 
disaster needs?
    Mr. Kennoy. Yes, that is right. We have 400 miles of road. 
We have got 221 cemeteries that we have to provide access to at 
Land Between the Lakes. There are about 30,000--I will furnish 
you the number of miles of trails we have down there. But it is 
an enormous area.
    Mr. McDade. What is the bottom line on infrastructure 
needs?
    Mr. Kennoy. We need about $17 million for exterior, and 
there is another $8 million we need to take a look at how to 
help the areas provide infrastructure for those cities and 
communities around it.
    Mr. McDade. So you think you are down about $25 million; is 
that right?
    Mr. Crowell. Actually about $17 million on the interior. 
But we feel if you really want it to be self-sufficient, we 
need to have money for infrastructure for the gateway cities 
and the entryway cities for LBL.
    Mr. McDade. Is any of that need reflected in the budget for 
this fiscal year?
    Mr. Kennoy. We are getting about $1.9 million more than the 
$6 million we had last year. That is about the average 
shortfall we had over the last 20 years too. But that will be 
used to pave the main trails, about 16 miles of main trails, to 
help some of the infrastructure at the different facilities we 
have at LBL. Those are the primary things we need to do now. So 
we will use that $1.9 million dollars to do that initially.
    Mr. McDade. One of the items that appears in the 
justification is an apparent increase of 370 percent for 
personal service contracts in fiscal year 1998. What is all 
that about?
    Mr. Kennoy. We have a lot--we do a lot by permanent 
contracts. We have a contract model that we follow throughout 
TVA.
    Mr. McDade. The question is, why this huge increase?
    Mr. Crowell. I might interject here. We have taken the 
manpower at LBL down from around 250 down to just over 100 
people, FTEs, at Land Between the Lakes. So we have to make up 
for some of the work load that is involved there, and what we 
have done is rely more on contractors, as opposed to adding 
FTEs at Land Between the Lakes. But we have had a fairly 
dramatic decrease in FTEs at LBL over the past few years.
    Mr. McDade. Do you know offhand, anybody at the table, what 
the beginning of the year and end of year employment levels 
were for fiscal year 1997 and fiscal year 1998?
    Mr. Kennoy. Right now--I think about 109 employees right 
now.
    Mr. McDade. Where were you at the beginning of last year 
and end of last year?
    Mr. Kennoy. It was the year before last that we made the 
big cuts, and that was part of an overall downsizing by TVA.
    Mr. McDade. I will tell you what I want you to do, please. 
Furnish to the staff of the committee and insert into the 
record the total employment at the beginning of the year and 
total employment at the end of the year for 1996, 1997, and 
1998, please.
    Mr. Crowell. We will be pleased to do so.
    [The information follows:]

------------------------------------------------------------------------
                                                    Beginning    End of 
              Fiscal year                 Budgeted   of year      year  
------------------------------------------------------------------------
1996...................................        114    \1\ 118    \1\ 110
1997...................................        114    \1\ 109        114
1998...................................        114        114        114
------------------------------------------------------------------------
\1\ Actual.                                                             
                                                                        
Note: Budget projections were developed prior to Chairman Crowell's     
  proposal to eliminate federal funding for LBL by 1999. Where possible,
  vacancies will not be filled; instead work will contracted for the    
  remainder of 1997 and 1998.                                           

    Mr. McDade. I am delighted to yield to my friend from 
Kentucky.
    Mr. Rogers. Briefly, on the Land Between the Lakes, most of 
it, of course, in Kentucky. There was a proposal that you had 
for a while to commercially develop a portion of LBL; is that 
not correct?
    Mr. Crowell. Yes.
    Mr. Rogers. You have abandoned that proposal, have you not?
    Mr. Crowell. Yes, that is correct.
    Mr. Rogers. And so you will not allow any of LBL to be 
commercially developed, will you?
    Mr. Crowell. What do you mean by that? I guess the general 
answer to your question is, that is correct, we will not. But 
we do sell soft drinks and supplies, but the development is off 
the table.
    Mr. Kennoy. The development should be just to support that 
on the outside--should be minimal.
    Mr. Rogers. You are fully appreciative of the fact that the 
people who formerly lived there, whose land was condemned and 
taken from them, and who were moved out have a great deal of 
resentment when you talk about selling that property to 
commercial interests for commercial development inside what is 
considered to be----
    Mr. Crowell. Right, we got that message, Congressman.
    Mr. Kennoy. 788 families that were moved, and their 
interests should be protected.
    Mr. McDade. Our colleague, Zach Wamp, is here, and he has 
to chair another committee, so we are going to break 
precedence. Usually we require a member to wait until all the 
questions are asked, but because he has this other committee 
obligation, we are going to yield a minute to Zach.

                      Opening Remarks of Mr. Wamp

    Mr. Wamp. Thank you Mr. Chairman, very much for your 
indulgence. As a new member of the full committee, I must say 
it is an honor to be at this subcommittee.
    Certainly there are no new members of this full committee 
on this subcommittee on our side of the aisle; otherwise, I 
would hope to be sitting here on a more permanent basis. But it 
is a real privilege to be here.
    I want to make three quick points because I sat back and 
forth between the Interior subcommittee this morning and here 
to address Mr. Visclosky's concern with the $106 million 
request versus $106 million last year and why the number is 
inflated in certain areas.
    Let me make a point that is extremely critical for our 
national interest. We have two major construction projects in 
the Tennessee Valley region. One is the Kentucky Lock 
replacement, which is now a Corps of Engineers project. One is 
the Chickamauga Lock replacement, which is still a TVA project, 
it is not yet a Corps project. The funding request for that in 
last fiscal year was denied; It came away from the conference 
with a zero.
    We are now one year behind. It is a major safety and 
commerce issue on the Tennessee River, the Chickamauga Lock; 
$6.6 million of this request, this increase, is for that 
particular issue, replacing the Chickamauga Lock. That is why 
it is an increase. I would hope that it would not have been an 
increase, but, frankly, that is part of the increase in this 
stewardship ticket. I will tell you, there is consensus around 
the Chickamauga Lock being replaced on the Tennessee River. 
There is not yet consensus on the chairman's proposal in the 
Tennessee region, but there is on that.
    I would also like to ask the chairman to--at least for the 
record for the Members, to express his desire to refinance that 
FFB debt and what that would do to the bottom line at the 
Tennessee Valley Authority, because that is also a significant 
long-term issue, I think, for Mr. Frelinghuysen's concern about 
the debt.
    Then lastly, I would just point out that, as a former 
member of the Transportation Committee, the State of Tennessee, 
as with many other southeastern States, is a donor State on 
transportation issues, and the entire Tennessee Valley region 
is still 10 percent behind the rest of the nation in the amount 
of Federal dollars per capita that flow into our region.
    So before we get into too many parochial battles here, we 
are way behind, all the way back to the Great Depression, the 
reason FDR did this. It is not cured yet, and we will take this 
debate to the Floor and to the full committee, but I want those 
issues pointed out today as we talk about parochial interest.
    I don't know, Mr. Frelinghuysen, whether the State of New 
Jersey is a donor State on transportation, but I know our State 
sure is. We get back less money than we pay in.
    Mr. McDade. Let me say to my friend, we recognize your 
comments.
    Mr. Wamp. Thank you, Mr. Chairman.
    Mr. McDade. I recognize the gentleman from California.
    Mr. Kennoy. Could I clarify one question?
    Mr. McDade. Yes.
    Mr. Kennoy. The TVA's request to OMB over the last--in 1996 
and 1997 were about $183 million, and the President's budget 
request to Congress was $134 million. So Congress did fund what 
we asked for during that period of time.
    Mr. McDade. We appreciate your suggestion.

                            automobile fleet

    Mr. Knollenberg. I will be fairly brief. I did raise the 
question about the air force and the cavalry in the last round. 
While we are at that, let's take a look at the auto fleet, and 
I know you have one. Do you have among those automobiles any 
luxury cars?
    Mr. Crowell. I do not. I am not aware--when you say 
``luxury cars,'' do you mean something like Town Cars or 
Cadillacs?
    Mr. Knollenberg. Yes, Mercedes or limos.
    Mr. Crowell. We have no limos, if that is what you are 
asking.
    Mr. Knollenberg. What is the size your auto fleet?
    Mr. Crowell. I don't know offhand. We supply cars from a 
motor pool that our employees use when they are on business. So 
I don't recall right off the top of my head. I am not aware of 
any luxury cars, period. And I just want to be absolutely sure 
that there is not something that you would think is a luxury 
car. I would be happy to look at it.

                              patrol boats

    Mr. Knollenberg. You have got a navy of some size. I 
understand that you have some 12 high-tech patrol boats that I 
have been told are seldom, if ever, put in the water. And I 
also note that your spokesman, Mr. Francis, Gil Francis, 
defends this practice of not using this fleet because, as he 
puts it, the mere presence of these boats has a calming 
influence.
    I don't know what the total cost of that combination of 
those 12 boats is, but it does raise the question if they are 
not being used, what is the justification for them? And 
further, the press accounts have indicated that the TVA has 
said that the boats have been used to protect the President, 
Vice President, and their families while they are in the area.
    What other functions aside from being, quote, a calming 
influence in some fashion--to whom, I am not really sure, but I 
am just quoting from sources--do these boats have?
    First of all, what is the cost of the entire----
    Mr. Crowell. I don't remember the exact cost. There are 
11,000 miles of shoreline that we are responsible for. We are 
responsible for the safety of people who use those facilities 
for the boaters, and we are concerned about the number of 
drownings that occur in our lakes every year, and we work 
jointly with State agencies to do that.
    What Mr. Francis was trying to say was that we don't see 
our role as trying to issue citations all the time to our 
citizens, we see it as a way to try to make boating more safe 
and to protect the property and people that use it. He was 
trying to say we don't see it as a unit that is trying to get 
more citations issued and therefore success is based on number 
of citations issued, we want success based on fewer number of 
boating accidents.
    Mr. Knollenberg. That was new acquisition, wasn't it?
    Mr. Crowell. This was part of the TVA that was created by 
Act of Congress in 1994.
    Mr. Knollenberg. I understand that, but--by the way, if you 
lost LBL as part of your oversight responsibility, wouldn't 
that cut down some of the need?
    Mr. Crowell. It certainly would, yes.
    Mr. Knollenberg. You are actually expanding now in this 
arena that you are proposing to shrink in size.
    Again, I go back to the statement that says the boats are 
not being used, they are just a calming influence; they hardly 
get in the water.
    Mr. Crowell. They are in the water quite often, I am 
confident. If you look at TVA, as I said earlier, we are 
required to protect our property. The security force is used to 
protecting the property and the public uses it. We can't 
operate a system like we do without having any protection 
supplied to the public out there.
    Mr. Knollenberg. I don't question the need for it. I am 
just curious why there seems to be a greater need now when in 
fact your requirement and your oversight responsibilities have 
been diminished.
    You know, all of these questions have nothing to do with 
anything except your debt. I am concerned about that $27 
billion and if we are moving in a direction of expending money 
for the kind of things we have talked about, like the so-called 
air force and that one plane that seems to be a substantial 
jump from what you have been used to. And you have got an auto 
fleet and navy and what have you. It is a concern to me, and I 
think this committee, that you move in a direction of doing 
something about lowering the debt. It occurs to me that maybe 
you are raising some of those debt columns, and that is of 
major concern to us.
    That is why those questions are being generated. And they 
are coming from your own sources, not from anything that we 
have dug up on our own. They are out there.
    Mr. Crowell. What I need to really clarify here, which I 
think is important when you talk about these patrol boats and 
security, we have undertaken a plan in the creation of these 
activities. We are looking at contracting out some of the 
activities. We believe we can save $3 million a year on 
security at TVA by the way we have reconfigured and the way we 
are doing this. So this is not an addition to the cost of TVA; 
this is all a part of the plan to reduce expenditures for 
security. And I would like to, if I could----
    Mr. Knollenberg. This is some of your hometown papers that 
are talking about that.
    Mr. Crowell. I understand. And I have seen those stories, 
but I have never been in a limo when I am up here. A limo to me 
is something that has more than four doors on it, and that is 
not what we use. So sometimes there are misunderstandings that 
somehow there are luxury cars here that do not exist.
    Mr. Knollenberg. We would appreciate the information I 
requested.
    Mr. Chairman, that concludes my questions. Thank you.
    Mr. Crowell. Yes, certainly.
    [The information follows:]

    TVA currently has 1,306 sedans operating; none of these are 
luxury vehicles. There are 671 sedans assigned to the 
individuals or organizations who require them for frequent, 
ongoing business travel. The remaining 635 sedans are assigned 
to a network of motor pools and are available to all TVA 
organizations for occasional or short-term travel needs. TVA's 
sedan fleet has been the subject of a recent internal study; 
recommendations resulting from this study are expected by the 
end of March and could reduce the size of the sedan fleet.
    The boat patrol budget for FY97 is $37,000. Year-to-date 
(through February 97) expenditure $15,292.
    Throughout the Tennessee Valley, a total of 24 TVA lakes 
cover more than 1,000 square miles of water surface and have 
11,000 miles of shoreline. As more people use the lakes, there 
are more lake mishaps, including drownings as well as improper 
activities. The primary function of the patrol boats is to help 
improve and promote water safety. Additionally, they are 
utilized in search and rescue and flooding operations. The 
patrol boats duties include:
    1. Enhance public relations.
    2. Provide boater assistance.
    3. Advise and protect public users of the Tennessee River 
and TVA lakes.
    4. Protect and inspect TVA properties and natural 
resources.
    5. Enforce federal and state boating laws.
    TVA boats are strategically located throughout the 
Tennessee Valley service area to provide more efficient 
response to normal patrol activities and waterway emergencies. 
Officers working as boat patrol officers do so as a collateral 
duty. No additional personnel were employed for the boat patrol 
operations.

    Mr. McDade. The gentleman from Indiana.

                         land between the lakes

    Mr. Visclosky. Thank you, Mr. Chairman.
    In response earlier to the Chairman's question, about 
whether or not TVA had ever considered alternative arrangements 
for the permanent administration of the Land Between the Lakes, 
what was your answer?
    Mr. Crowell. We have not done so.
    Mr. Visclosky. So, in all of that time subsequent to its 
creation as a temporary demonstration authority, the 
administration never considered any alternative?
    Mr. Crowell. No. As I recall, historically what happened in 
1964, Land Between the Lakes was created to be put together as 
a demonstration project for five years and then held by TVA for 
ten years and then turned over to some other entity.
    At the end of that ten-year period, the TVA board at the 
time conducted a study and decided to retain the management and 
ownership of Land Between the Lakes. That was not a decision 
that was required by Congress, as I understand it, or by the 
administration. It was a decision made by TVA. And the only 
point I was making when I was addressing the Chairman's 
comments is our proposal to now turn TVA to another entity is 
not inconsistent at all with the original mandate given to Land 
Between the Lakes.
    Mr. Visclosky. The Chairman also asked about the 370 
percent increase in the personal service contracts, and your 
response was essentially that because you have had a 
significant reduction in your FTEs there is some necessity to 
enter into these contracts.
    I am also confused, then, about when the significant 
reduction in FTEs occurred. And you had indicated you would 
answer that for the record. You don't have your FTEs with you 
here?
    Mr. Crowell. I don't think we have them.
    Mr. Kennoy. We have 106 people there now.
    Mr. Crowell. The reduction occurred about two years ago.
    Mr. Visclosky. So the reduction occurred two years ago. The 
370 percent increase is this year, not over two years ago?
    Mr. Crowell. I am not certain about that. I will have to 
supply that for the record, if I may.
    Mr. Visclosky. Well, my understanding is the 370 percent 
increase in personal service contracts of Land Between the 
Lakes is an increase for fiscal year 1998 over fiscal year 
1997.
    Mr. Crowell. 1997 and 1998.
    Mr. McDade. 1997 and the following fiscal year.
    Mr. Crowell. I am sorry, I don't have an explanation that I 
can give you right now on that.
    Mr. Visclosky. And the FTEs were constant, from your 
testimony here, between fiscal year 1996 and 1997?
    Mr. Crowell. I believe that is the case.
    Mr. Visclosky. Okay. Assuming that is the case, then that 
wouldn't explain why you have a 370 percent increase proposed 
for next year if your decrease, in fact, took place two years 
ago.
    Mr. Crowell. The decrease in Land Between the Lakes next 
year, almost all of that----
    Mr. Visclosky. I am asking about the 370 percent in 
personal service contracts.
    Mr. Crowell. I am sorry, Congressman, I can't recall that 
information out of my head at this point and I just am not able 
to answer your question.
    Mr. Kennoy. It would be helpful if I had a dollar amount to 
compare it to rather than percentage.
    Mr. Visclosky. I will be happy to give you a dollar amount. 
My understanding is that your budget for personal service 
contracts for 1997 is $41,000, if I am correct, and that your 
estimate for 1998 is $193,000.
    I might point out, and depending again when you saw your 
FTE reductions, that your personal service contract amounts in 
1996 were $53,000, and in fact for the current fiscal year your 
personal service contracts went down from the year before, when 
you are telling me your FTEs collapsed. Certainly they are 
going up----
    Mr. Crowell. I know the FTEs are about the same and I know 
it is a reduction over 2 years ago, but I just don't know the 
answer to your question right now about the contractors but I 
certainly can obtain that information and get it to you 
promptly.
    [The information follows:]

    The increase of $152,000 in TVA's request for LBL will be 
used for backlogged infrastructure repairs. TVA will contract 
out most of this work. Some of these contract costs were 
inadvertently placed in the personal serivces category in the 
budget rollup. LBL's personal services contracts will be 
approximately the same as for the previous two years.

                         competitive advantages

    Mr. Visclosky. If I could ask a couple other questions, Mr. 
Chairman. Are you exempt from Federal income tax?
    Mr. Crowell. Yes, we are.
    Mr. Visclosky. Are you exempt from State income tax?
    Mr. Crowell. Yes.
    Mr. Visclosky. Are you exempt from State ad valorem taxes?
    Mr. Crowell. Yes.
    Mr. Visclosky. Are you exempt from local ad valorem taxes?
    Mr. Crowell. Yes.
    Mr. Visclosky. Do you have access to preference power at 
prices below market?
    Mr. Crowell. We are not.
    Mr. Visclosky. You do not?
    Mr. Crowell. No.
    Mr. Visclosky. Okay. Would you argue that these 
characteristics do not operate to allow you a competitive 
advantage in a deregulated industry?
    Mr. Crowell. I can make a very strong argument here on the 
tax situation from this standpoint. We make tax equivalent 
payments of 5 percent of our sales, and this past year along 
with our distributors we paid about 5.7 percent.
    Mr. Visclosky. To whom?
    Mr. Crowell. To the States.
    Mr. Visclosky. What about the Federal Government?
    Mr. Crowell. Not to the Federal Government.
    But let me make my point here. The people that hold our 
bond, for example, pay something like $400 million a year in 
taxes. We do not have any tax-exempt bonds, whereas private 
power companies have both State and Federal.
    The point I was trying to make is simply this, we paid 
about 5.7 percent this year in tax equivalent payments and the 
average utility in our area paid about 5 percent of Federal 
income taxes, so if I think there is any advantage at all, it 
goes to the private power companies not to us on the taxes 
required for us to pay, and we paid about 5.7 percent compared 
to an average of 5 elsewhere. So I don't see that as an 
advantage to us at all.
    Mr. Visclosky. Those payments are not made to the Federal 
Government. Are they made to local agencies of government?
    Mr. Crowell. That is correct. That is correct.
    Mr. Visclosky. Local agencies.
    Mr. Crowell. State governments. The States apportion it out 
to the local governments. We don't do that. It is paid directly 
to the States.
    Mr. Visclosky. Do you know if the States reimburse the 
locals for their lost ad valorem taxes that you might not be 
paying or are the States simply distributing what you are 
paying to the States?
    Mr. Crowell. They are distributing that. We have no control 
over what they pay to the States.
    Mr. Visclosky. I didn't ask you that.
    Mr. Crowell. I don't know the answer to that.
    Mr. Visclosky. Could you respond to that in writing for the 
record?
    Mr. Crowell. Yes. The States, as I recall, have their own 
formulas that they set for distributing this revenue, which 
last year was $250 million in TVA. I am not familiar a lot of 
times with each State's formula on how they distribute it. But 
I can certainly get that for the record.
    [The information follows:]

    Section 13 of the TVA Act directs TVA to pay five percent 
of its gross revenue from the sale of power for the preceding 
fiscal year (excluding sales to federal agencies) to states and 
counties in which the power operations of the agency are 
carried on and in which TVA has acquired properties previously 
subject to state and local taxation.
    The states' payments are determined as follows: one-half on 
the basis of the ratio of TVA power revenues attributable to 
each state to total power revenues to all states, and one-half 
on the basis of the ratio of book value of power property 
within each state to total book value of TVA power property. 
The Act also specifies that the minimum annual payment to each 
state (including payments to its counties) in which the agency 
owns and operates power property shall not be less than 
$10,000.
    All states, under applicable state laws, redistribute a 
portion of their TVA tax-equivalent payment to their local 
governments. The formulas for allocating the payments differ 
from state to state and are based on individual state statutes.
    Payments to counties are equivalent to the average annual 
ad valorem county and district property taxes paid for the two 
tax years immediately preceeding acquisition on power property 
purchased and operated by TVA and on the portion of land 
acquired for reservoir purposes.

----------------------------------------------------------------------------------------------------------------
                                          Fiscal year 1995                          Fiscal year 1996            
                             -----------------------------------------------------------------------------------
            State                 Total      Payment to    Payments to      Total      Payments to   Payments to
                                payments        State       counties      payments        State       counties  
----------------------------------------------------------------------------------------------------------------
Alabama.....................   $62,445,162   $62,406,924       $38,238   $63,462,453   $63,462,463       $37,990
Georgia.....................     3,197,459     3,143,294        54,165     3,358,529     3,304,364        54,165
Illinois....................       227,158       169,148        58,010       224,720       166,710        58,010
Kentucky....................    14,725,404    14,688,246        37,158    14,705,870    14,668,712        37,158
Mississippi.................    12,308,589    12,275,294        33,295    13,030,184    12,996,896        33,288
North Carolina..............       850,114       842,902         7,212       839,568       832,356         7,212
South Dakota................        26,110         7,540        18,570        26,110         7,540        18,570
Tennessee...................   157,385,558   156,115,112     1,270,446   159,484,004   158,214,111     1,269,893
Virginia....................       557,136       555,845         1,291       546,461       545,170         1,291
                             -----------------------------------------------------------------------------------
      Total.................   251,722,690   250,204,305     1,518,385   255,677,899   254,160,322     1,517,577
----------------------------------------------------------------------------------------------------------------

    Mr. Visclosky. I want to know how much of that 5.7 percent 
you are paying back to whom. Would the TVA be willing to forego 
these advantages if it were permitted to compete outside its 
traditional service territory?
    Mr. Crowell. I have not been able to find all these 
advantages we are supposed to have. In fact, I remember some 
allegation we had $1.2 billion in subsidies and there was a 
cartoonist----
    Mr. Visclosky. I pay Federal taxes. I think it is an 
advantage.
    Mr. Crowell. There was a cartoonist at a newspaper in 
Knoxville that did a cartoon of everybody looking for these so-
called advantages. If I could find it, I would certainly like 
to have it. I just have not been able to find it myself.
    Mr. Visclosky. You would suggest that nonpayment of taxes 
is not an advantage to you?
    Mr. Crowell. In lieu of taxes, we are paying tax subsidies 
to the State government.
    Mr. Visclosky. The Federal Government, I am saying.
    Mr. Crowell. I understand that, but it still is an 
operational advantage for some and a disadvantage for others 
depending how much taxes they pay. Regardless where the taxes 
go, that does come out of your revenue.
    Mr. Visclosky. Thank you, Mr. Chairman.
    Mr. McDade. The gentleman from New Jersey.

                           salaries and wages

    Mr. Frelinghuysen. Thank you, Mr. Chairman.
    For the record, and I know that you offered to provide the 
Chair with some particular information, I would like the salary 
and wages figures for you as Chair and your organization, the 
top 200 salaried executive and management leaders of TVA.
    Mr. Crowell. Certainly.
    [The information follows:]

    TVA's 200 executives earned salaries/wages during FY 1996 
ranging from $97,504 to $262,000. This compensation consisted 
of base salaries ranging from $97,504 to $115,000 and 
individual payments ranging from zero to $147,000. TVA conducts 
industry analyses and surveys to determine the market-based 
salaries/wages for top managers and executives. TVA is 
committed to attracting and retaining top industry personnel 
and its compensation plans are designed around this objective.
    Payments as part of the TVA-wide Performance Incentive Plan 
were made to non-management and managers below the senior level 
based on the accomplishment of TVA-wide goals. Payments to 
officers and senior management were based upon each 
individual's performance and their contribution to meeting 
their respective part of the TVA-wide goals.
    All TVA employees are paid on a bi-weekly basis for base 
salary and overtime. Bonus payments are made at the end of the 
fiscal year after TVA-wide performance and individual 
performance is evaluated. Such payments usually occur in the 
November to December time frame.

                                bonuses

    Mr. Frelinghuysen. I would like also with that the list of 
bonuses for 1995 and 1996. From what I can gather from the 
materials I have reviewed, while the salaries and wages are 
published, there does not seem to be any disclosure, unless you 
have some information to the contrary, as to what the bonuses 
are for the employees.
    Would you like to shed a little light on that? First of 
all, I would like to request that information, and would you 
shed some light on the whole issue of disclosure?
    Mr. Crowell. Certainly. What I would like to do is supply 
you with the newspaper clippings that show that we disclose 
this information on an annual basis on bonuses and also any 
other payments paid to employees other than salary. We are 
required by OMB to make this public anyway and so we do make it 
public.
    I would certainly be happy not only to supply you with 
information you requested but also perhaps give you some flavor 
of the amounts of attention that is paid to the Tennessee 
Valley when we do issue these things publicly.
    Mr. Frelinghuysen. I will take whatever flavors you are 
prepared to give, and better to have something under your pen 
than something from the local newspapers.
    Mr. Frelinghuysen. And for the record, I would like to 
comment on my good friend from Tennessee's remarks relative to 
contributions to the bottom line.
    Just for the record, the State of New Jersey is 49th out of 
50 in terms of what we get back from our income tax 
contributions to Washington. So when I asked the question 
relative to New Jerseyans and other States and the Northeast 
subsidizing the TVA, I have in mind quite honestly that most of 
my constituents are fed up with the situation.

                            industrial rates

    So getting back to a few other questions. The press has 
been informed that the TVA provides electricity to some 
industrial customers at rates as low as one cent per kilowatt-
hour. This appears to be an extremely low price even in today's 
competitive market.
    Do rates that low exist and does this rate represent the 
marginal cost of production?
    Mr. Crowell. The one-cent number I don't understand where 
that came from. We supply firm power to some of our customers. 
But depending on the margin that we have in any particular 
hour, any particular time during the day, there is great 
fluctuation between interruptible power and firm power, but 
that just helps our system. As long as we make a margin on it, 
we are very pleased to sell it, obviously. So I don't know, I 
am not sure I know exactly where the one cent came from unless 
some given day interruptible power.
    Mr. Frelinghuysen. So it is within the realm of possibility 
that the TVA is providing electricity to some industrial 
customers at that low rate?
    Mr. Crowell. I can't believe we sell it at one cent to 
anybody.
    Mr. Frelinghuysen. What worries me is we are not getting 
the information. You seem to be quite conversant on the tax 
issue, but I am worried that we are not getting the type of 
specific response like the ones I asked earlier on wholesale 
prices and the residential rates for customers in your region 
being a third below the national average. You can't seem to 
respond to those types of issues but you are quite conversant 
on the tax components.
    Mr. Crowell. I try to do my homework and stay conversant on 
most issues of TVA, although I am not conversant on everything 
I would like to be conversant on. But it can fluctuate so much 
that it is not possible for me to give you a good answer to a 
question about interruptible rates because the prices change on 
an hourly basis depending on what our generation capacity is at 
the time and what our demand is, so those prices do change.
    And so the only thing I am saying to you is I am not aware 
of any circumstance where we are selling power for a penny 
kilowatt-hour, but what I am saying is they can fluctuate 
greatly depending on circumstances.
    Mr. Frelinghuysen. When you head back, could you look into 
that matter for me and for the committee?
    Mr. Crowell. Certainly.
    [The information follows:]

    TVA does not sell power for one cent per kilowatt-hour.

                            asset valuation

    Mr. Frelinghuysen. What is the current book value of TVA's 
power production assets, including generation and transmission? 
And how many of those assets are recoverable? How many nuclear 
plants do you have?
    Mr. Crowell. We have five.
    Mr. Frelinghuysen. And in reality you started down the path 
of having how many?
    Mr. Crowell. Seventeen originally.
    Mr. Frelinghuysen. And is it fair to say you started down 
that path and you did expend some money?
    Mr. Crowell. Yes.
    Mr. Frelinghuysen. And how much money was expended where 
you literally had nothing in the way of any return, and what 
percentage of the $28 billion of debt can be associated with 
those types of assets that were never completed?
    Mr. Crowell. We have five operating units and we have a 
total investment of just under $20 billion for our nuclear 
program, so those plants end up being very costly to us and so 
that is the numbers I think you asked for.
    Mr. Frelinghuysen. Actually, I asked about you having 
started down the road looking toward possibly 17 nuclear 
plants; is that correct?
    Mr. Crowell. Yes.
    Mr. Frelinghuysen. And you actually started work. You 
completed five and you started work on twelve?
    Mr. Crowell. Some of the plants were never in--active 
construction was not undertaken on some of the 17, but there 
was some expenditure of money in planning for some of them.
    Mr. Frelinghuysen. Well, on how many of the twelve (or 17 
other than the 5 that were completed) was construction started?
    Mr. Kennoy. Those are units instead of plants.
    Mr. Crowell. About a dozen.
    Mr. Frelinghuysen. Well, I would like to know how much of 
the $28 billion is associated with those that never went 
anywhere.
    Mr. Crowell. A lot of it, and I will be happy to supply the 
number to you. This happened in the 1970s. All these decisions 
were made some twenty years ago. And what I am saying is that, 
you know, I am not conversant with when some of the plants were 
terminated. They were terminated before I came to TVA.
    We can get that information for you, but what we are 
interested in is trying to operate the five plants that we 
have.
    Mr. Frelinghuysen. I think you should be commended for 
operating five plants successfully. I am interested with the 
costs associated with the $28 billion of your debt. If you 
would be good enough to maybe provide those figures.
    Thank you, Mr. Chairman.
    [The information follows:]

    At the end of FY 1996, the book value of TVA's assets 
totaled $34,029 million, of which $6.293 million was associated 
with TVA's deferred nuclear units.
    At the end of FY 1996, TVA's assets and debt were as 
follows:

                                                                Millions
Total Assets..................................................   $34,029
Deferred Nuclear Units........................................     6.293
Total Debt Outstanding........................................    27,727
Construction (work in progress)...............................       744

    Mr. McDade. The Chair wants to announce that after we 
finish the next two Members, we are going to recess for a half 
hour and this hearing will conclude with the next two Members. 
We would like to bring the next group in one half hour after we 
have the recess. This room has to be swept for a classified 
briefing, and we are going to have to adjourn around 3:00. So I 
want to recognize my friend from Texas.

                             studies of tva

    Mr. Edwards. Chairman Crowell, do you know, is any 
objective group--either GAO or some other entity or someone not 
associated with TVA or an investor-owned utility--trying to 
analyze your costs of production, trying to make an equivalent 
comparison as if you were a privately owned utility? Is anyone 
trying to put that type of study together, to your knowledge?
    Mr. Crowell. Well, to my knowledge, GAO has a study that 
they are doing now on all the public power companies that 
generate electricity. I don't know where that study is at this 
point, although I am cooperating with them.
    There may be one going on that may be directed to some of 
the things you mentioned. I just don't know.
    Mr. Edwards. But nothing, to your knowledge, like that has 
been done in the past?
    Mr. Crowell. Not that I am aware of.
    Mr. McDade. The gentleman from Mississippi is recognized.
    Mr. Parker. Chairman Crowell, I was a funeral director 
before I came to Congress. One time I had a man die, and the 
next morning his wife, she was an older woman, she came to make 
arrangements, and halfway between the arrangements she stopped 
me and said, you know, Mike, you know, this morning I dropped 
my teeth in the hen house and they just don't taste right.
    I am going to tell you, some of your answers do not taste 
right to me. And let me find $1.2 billion for you, because it 
really irritates me when I asked you a while ago what kind of 
subsidies do you get from the Federal Government, and you said 
$106 million, that is it, nothing else.
    When my colleague from Indiana asked you about all of these 
things that you get, whether exemptions from Federal tax, 
exemptions from ad valorem tax, and you said, well, we give 
five percent to the State. All of a sudden that five percent 
was supposed to solve everything.

                            preference power

    Now, I want to ask you a question: Is it true that there is 
a practice of the Federal Southeastern Power Marketing 
Administration to sell power from the facilities that it 
controls on the Cumberland River system to the TVA at a price 
well below market value? Is that true or not?
    Mr. Crowell. Well, we don't set those prices. As you know, 
we pay whatever we are required to pay. The administration does 
that.
    Mr. Parker. I know. But they are required to sell to you 
below market value.
    Mr. Crowell. Well, there are some other entities that get 
at that power, also.
    [The information follows:]

    TVA receives and utilizes SEPA power from the Cumberland 
Projects on behalf of the 160 municipal and cooperative 
distributors of TVA power which are SEPA preference customers 
located within the TVA service area. The amount of energy 
received by TVA each year for the benefit of those customers is 
limited to the energy that remains from SEPA's Cumberland 
Projects generation after SEPA's other preference customers 
first receive their respective fixed allocations, which those 
other customers may and often do use as peaking power. 
Consequently, the annual amount of energy received by TVA in 
this manner from the Cumberland Projects can and does vary 
significantly from year to year, depending on hydrological 
conditions. With limited storage at the Cumberland Projects, a 
large portion of the remaining energy available to TVA must be 
taken and used when it is available. This could be at virtually 
any hour of a day and at times during the year, such as spring 
or fall, when there is less public demand for electricity, 
which can make the energy provided to TVA less valuable than 
the peaking power taken and utilized by the other Cumberland 
customers. In 1997, TVA expects to purchase 405 MW and 2.7 
billion kWh from SEPA for $23.7 million.

    Mr. Parker. That is not the point. When my colleague from 
Indiana asked you the question, do you receive preference 
power, you said, no, we do not do that. You get preference 
power; and let me tell you how much it amounts to: around $93.6 
million every year.
    Now, that is something that somebody in a private power 
company doesn't get. Private power companies, they pay taxes.
    You can't have it both ways. You turn around and look at us 
and you say to us, I hear about all these things. We pay--we 
are in a situation where we are having to pay. I mean, if you 
want to talk about the private power companies, they have got 
it better than we have got.
    I want to tell you my position. I am going to put you in 
that position. I want you to be private. If they have got it so 
good, I want you to be in that system. I am just agreeing with 
you. I am not disagreeing at all. I want you in the system--you 
said that they were doing so much better, they had so many more 
advantages than you. I want you sitting right in the middle of 
them, and I want you competing in our free enterprise system, 
and I want you to either rise or fall, according to how well 
you do business.
    I have been very much disturbed today over these evasive 
answers. We got a saying back home, "Pigs get fat, and hogs get 
slaughtered." And I am almost of the opinion that TVA has 
gotten mighty hoggish through the last few years.
    Thank you, Mr. Chairman.
    Mr. McDade. I thank the gentleman from Mississippi.
    We are going to, as I indicated, give you a series of 
additional questions for the record. Give them your undivided 
attention and full responses.
    We thank all of you for being here. It has been a good, 
open hearing, lots of questions back and forth; and we 
appreciate it.
    The committee is going to stand in recess until 1:15.
    [Questions and answers for the record follow:]

[Pages 757 - 834--The official Committee record contains additional material here.]


                                           Thursday, March 6, 1997.

                    APPALACHIAN REGIONAL COMMISSION

                               WITNESSES

HON. KIRK FORDICE, GOVERNOR, STATE OF MISSISSIPPI; STATES' CO-CHAIRMAN
HON. JESSE WHITE, FEDERAL CO-CHAIRMAN
    Mr. McDade. The committee will come to order.
    We are pleased to have the Appalachian Regional Commission 
here today and the Federal Co-chairman, Jesse White. Jesse, we 
are delighted to have you here.
    Mr. White. Thank you, Mr. Chairman.
    Mr. McDade. We would like to see you with your Co-chair. 
You probably want to introduce him.
    Mr. White. Thank you very much, Mr. Chairman. We are 
delighted to be here to present the administration's budget for 
fiscal year 1998.
    As you know, under our unique structure at the Appalachian 
Regional Commission there is not only a Federal Co-chairman but 
there is a States' Co-chairman, which is one of the governors 
of our thirteen States every year. It is a coincidence that 
this year we were both Mississippians, so one could accuse us 
of a cabal here. But the governor for Mississippi, now in his 
second term, is our States' Co-chairman.
    With the Chair's indulgence--even though it is customary 
for the Federal Co-chairman to present the budget first, with 
your indulgence, the Governor has a flight to catch, and if it 
would be okay with you, I would like to call on our States' Co-
chairman to go first.
    Mr. McDade. Absolutely.
    Governor Fordice. I want to thank you, Mr. Chairman, for 
the opportunity to come here and testify in support of an 
adequate fiscal year 1998 appropriation for the Appalachian 
Regional Commission. And we thank you and Mr. Rogers, who is 
not here I notice, and other members of the subcommittee for 
your strong support for the commission. I know Mr. Rogers has 
been a great supporter over the years.
    Mr. McDade. He would be here, but he has another hearing.
    Governor Fordice. Yes, sir.
    We thank you, Mr. Chairman. Your commitment has been 
largely responsible for the survival of this unique partnership 
in these fiscally challenging times.
    I am Kirk Fordice, Governor of the State of Mississippi. I 
am proud to serve as Appalachian Regional Commission States' 
Co-chairman, as Jesse White just stated, and to represent the 
thirteen governors who are members of the Commission.
    On behalf of these governors, I am pleased to report to you 
today that a fiscal year 1998 appropriation of $165 million for 
the Appalachian Regional Commission, with $75 million for non-
highway programs and $90 million for highway construction, will 
enable us to continue progress toward our vision of a self-
sufficient Appalachian region, enabling this region to take its 
place in the mainstream of the American economy.
    In a sense, my position regarding Appalachian Regional 
Commission may appear to conflict with my principles. As some 
of you may know, I am not a big supporter of big Federal 
spending programs. I fervently believe that the best economic 
and community development occurs when we keep our money at home 
and take care of our own needs. Too often, Washington thinks 
that throwing more money at a problem solves the problem and 
that those in Washington know better than the local people what 
is needed to meet a challenge.
    However, the Appalachian Regional Commission is different. 
As the Federal Co-chairman has said and as all of you know, the 
Commission is a true partnership. The governors share authority 
equally with the Federal Co-chairman, and we share the 
responsibility as well.
    The best example of the manner in which we work together is 
the way we developed our strategic plan for the region. We went 
into the Region and talked to the people who live in the 
Appalachian Region. Then we got together--the Federal partners 
and State partners--and digested the information that had been 
gleaned, discussed and debated its implications and determined 
what we needed to do. From that discussion and debate came our 
five goals and 21 objectives that, if achieved, would transform 
the Appalachian Region. This was not a plan handed down from 
Washington but a plan that originated on the grass-roots level.
    But we did not stop there. To ensure that this plan does 
not die on a shelf, we now have five task forces, one for each 
of the goals. These task forces are chaired by a State 
alternate and consist of Federal, State and local people. The 
primary responsibility for each task force is to point us in 
the right direction to achieve our goals.
    Now, we are developing baseline data and performance 
measurement procedures to ensure we are accountable to what we 
say we will do. Again, this is not Washington handing down 
these procedures. Just last week, our State people met here to 
work on the performance measurement procedures to prepare them. 
We know that we must work together--the Federal, State and 
local officials--to make a difference in the region.
    The Appalachian Regional Commission has never been about 
throwing money at a problem. We have never had much money to 
throw in the first place. The Commission has been about solving 
problems by building partnerships in the public and private 
sectors and by being advocates for our region.
    When local officials develop projects, they try to get as 
many groups, or partners, involved as possible. On most 
projects, Appalachian Regional Commission money is only a part 
of the picture, sometimes a rather small part. Usually, there 
are funds from other agencies; there are local funds; and, 
often, there are private funds.
    Mr. Rogers, before you got here, I was complimenting you on 
your support of the ARC over the years. I would like to 
reiterate that.
    So the ARC money then is the glue, the final piece of the 
puzzle that allows the project to go forward. And I have 
personally seen that many times where, with the ARC portion, 
the projects usually result in private-sector investments, 
which are many times greater than the public money that is 
invested, and in the creation of private-sector jobs which 
return far more in tax dollars than the ARC investment in the 
first place.
    I firmly believe that the best social program ever devised 
by man is a good job; and in this job of being Governor of our 
State, I spend most of my time outside of the legislative 
session on just that objective, economic development, and 
trying to bring more jobs to our state. Give a person a job at 
a living wage, and most of the other problems will soon fade 
away. That has been our philosophy in the utilization of ARC 
money in Mississippi.
    Allow me to give you some examples of how ARC funds are 
currently working in some of our twenty-one Appalachian 
counties in Northeast Mississippi.
    For instance, Three Rivers Planning and Development 
District, Inc., through its ARC Revolving Loan Fund, has funded 
thirty-five loans totaling $2.5 million. These ARC projects 
have leveraged $8.8 million in private funds and have created 
1,223 new jobs and retained twenty-four existing jobs. Of the 
thirty-five loan projects, eighteen have been new business 
startups, fourteen existing business expansions, and three are 
business retentions. A breakdown of the type of businesses 
financed is as follows: fifteen industrial, three commercial 
and seventeen service.
    In Oktibbeha County, the Economic Development Authority is 
building the infrastructure for a Research and Technology Park, 
which is one of the prides of our state, by the way. It is 
located right outside of Mississippi State University, and it 
is already up and running. This is a $755,000 project. It 
includes $200,000 in ARC funds, $217,000 in other Federal funds 
and $338,000 in state and local funds. This project is not 
finished yet but is already responsible for one-hundred jobs 
and $8 million in private investment. There are many other 
examples.
    This kind of flexibility is one key to the success of ARC. 
Other governors can tell stories of investment of ARC money 
based on what they and their local officials decided as well.
    For example, in Pennsylvania, my colleague and good friend 
Governor Tom Ridge has invested funds in enterprise development 
and business incubators.
    Another colleague in Kentucky, Governor Patton, has 
invested in education and leadership development and in the 
basic infrastructure in many of his distressed counties.
    The key fact is that the governors and their local 
officials are making the decisions, not folks in Washington, 
and they are using their ARC funds to leverage private sector 
investments, Mr. Chairman, and to create private sector jobs to 
give people a hand up rather than a handout.
    Nowhere is this more evident than in our Distressed 
Counties Program, because we recognize that a region is only as 
strong as its weakest link. We set aside money off the top for 
our most distressed counties. In these counties, we are 
providing basic services like running water which many families 
in these counties have lacked.
    You know as well as I do, I think, that it is very 
difficult to create good jobs for people when even the most 
basic services are lacking. We are giving people in our most 
severely distressed counties a hand up, and because of this 
investment, we have lower unemployment and decreased poverty, 
and the past three years we have reduced the number of 
distressed counties in Mississippi from twelve to six, and I 
believe throughout region we have gone from 115 to----
    Mr. White. Ninety-four.
    Governor Fordice. Ninety-four. So we are making progress. 
We are not yet where we want to be, but we are getting there.
    As you know, a key element of our plan for achieving 
economic self-sufficiency for the region is the timely 
completion of the Appalachian Development Highway System.
    In Mississippi, our portion of the system is more than 
seventy percent complete. Corridor V is our primary corridor 
and, when complete, will open much of northeast Mississippi for 
new economic development. It will also provide us direct access 
to Huntsville, Alabama, and to Chattanooga, Tennessee--I am 
sorry the gentleman from Chattanooga is not here.
    The regional nature of the highway system is critical. To 
me, finishing Corridor X in Alabama may be just as important. 
When both Corridor V in Mississippi and Corridor X in Alabama 
are completed, they will give us a straight shot between 
Tupelo, Mississippi, and Birmingham, Alabama, and will be of 
enormous economic benefit to distressed areas in both states.
    For all these reasons, Mr. Chairman, my fellow governors 
and I support the recommendations for a fiscal year 1998 
appropriation to the Appalachian Regional Commission of at 
least $165 million allocated in the manner set forth in the 
President's budget. This will enable us to make progress in 
bringing this region to parity of economic opportunity with the 
rest of the nation.
    In particular, added funding for area development will 
enable us to move more quickly to address the basic service 
needs of our most severely distressed counties, to continue our 
efforts to bring private sector jobs to our poorest rural 
areas, and to make all of our citizens self-sufficient.
    Once again, Mr. Chairman, allow me to thank you for the 
opportunity to testify and especially for your continued strong 
support for this unique partnership and for our region. We, the 
governors of this region, are very grateful, and we will 
continue to work toward that day when this region enjoys parity 
of economic opportunity with the rest of the nation and we can 
state that the region no longer needs special assistance.
    Thank you, sir. And I would be glad to try to answer any 
questions.
    [The prepared statement of Governor Fordice follows:]

[Pages 839 - 843--The official Committee record contains additional material here.]


    Mr. McDade. Governor, thank you for an excellent statement.
    I talked to Governor Ridge on the telephone this morning. 
He sends his regards. He said he would be here sitting with you 
if he were not otherwise occupied. He is a fine gentleman.
    Let me ask you one question. Some people say there is too 
much road money and not enough development money. How do you 
feel about that?
    Governor Fordice. I think it is a fair balance, Mr. 
Chairman.
    As I mentioned before, my primary thing in our state is 
economic development, and I have seen these ARC funds, as small 
as they may be, be the key so many times in needed 
infrastructure to get an industry off the ground. Of course, 
that industry probably would not be there in the first place if 
the road net was insufficient. So I think the balance that is 
being struck in this budget is about right, actually.
    Mr. McDade. The local initiative, in defining the problem, 
is a pretty important part of this package, isn't it?
    Governor Fordice. That is why I am so enthusiastic about 
it. As I said, I am no fan of big government, but this is not 
your typical Washington program, it is strictly oriented to the 
region, and it is bottom up, it is developed from a grass-roots 
type approach, and I think that is a key to its success.
    Mr. McDade. Thank you, Governor.
    We would be glad to hear from Mr. White.
    You can put your statement in the record if you would and 
proceed informally. We are delighted to hear from you.
    Mr. White. Thank you very much, Mr. Chairman. Once again, I 
am pleased to be here with you. We are, of course, very pleased 
that somebody from Appalachia is chairing the committee.
    As I mentioned to you in our ``get acquainted'' meeting, my 
first trip was to Scranton. You can tell from my accent I don't 
come from northern Appalachia. And I felt obliged to get up and 
learn your neck of the woods, which I did, and was just back 
before Christmas.
    Of course, Congressman Rogers comes from the real heart of 
Appalachia--why the ARC was created. We have started a process 
of trying to carry at least one Commission meeting out into the 
region every year, and Kentucky was kind enough to host that 
this year, and we went to the Congressman's hometown of 
Somerset, had a great meeting.
    Governor Patton was there, in the Regional Economic 
Development Center, which was really the vision of Congressman 
Rogers; and is making a big difference. And then we took a bus 
tour the next day of some eastern Kentucky, really hard-
scrabble areas, and some of our other States really got an 
insight into what severe underdevelopment was in that part.
    So, to all of you on the committee, we thank you for your 
support and are pleased to be here.
    Let me just start off with the overall numbers of the 
President's budget submission, which the governor rehearsed in 
a general way with you. The budget request is for $165 million, 
which is $5 million below our request last year and $5 million 
above the actual appropriated amount. Ninety million of this we 
are asking for our highway program; $66 million we are asking 
for our area development program, $5.3 million to support our 
local planning and development districts and for technical 
assistance and research, and $3.65 million for administration.
    Let me mention while we are talking about the 
administration of the Commission, we of course continue to be 
proud of the fact that the historic administrative overhead of 
the ARC is between three and four percent of our appropriated 
dollars. We only have about sixty people under roof in 
Washington.
    The states help us a lot with the administration of these 
programs, and under our roof here there is the Federal staff, 
which I head, of only ten people, including three in the 
Inspector General's Office; a State's office funded purely with 
state money that is a day-to-day presence representing the 
governors; that is headed by Mike Wenger, who represents the 
governors on a daily basis. That is paid for, as I say, by 
state money. Then there is the Commission staff, headed by an 
executive director, of about fifty people, headed by Tom 
Hunter, sitting to my right; and they are paid by half the 
state money and half the Federal money.
    So poor Tom has to please me and thirteen governors, which 
is why his hairline is receding probably. But it is a very 
ingenious model of accountability when you think about it, that 
this staff in Washington is not only having to please me but 
having to please the thirteen governors on a daily basis.
    So Tom is here to answer any questions that might come up 
about the Commission staff budget.
    Let me start off with the highways. The highway system of 
Appalachia of course has always been central to our program. 
When President Kennedy appointed the President's Appalachian 
Regional Commission, the so-called PARC Report, in 1963, that 
report started off with a haunting sentence. It said, ``We find 
that Appalachia is a region apart, both geographically and 
statistically.'' It found out really that the interstate system 
had bypassed the mountains.
    So Congress, when it enacted the Appalachian Regional 
Development Act, authorized a 3,025-mile system to basically 
connect Appalachia into the interstate grid. That highway 
program has sort of remained at the heart of the ARC strategy 
in the ARC program. Study after study shows the wisdom of this 
strategy and the importance of Congress keeping faith with that 
commitment.
    In 1993, for example, a study done by the National Science 
Foundation that looked at twenty-seven years of ARC investment 
found that in the 110 counties within ARC that have either an 
Appalachian development corridor or interstate, these counties 
grew sixty-nine percent faster in terms of income, six percent 
faster in terms of population, and forty-nine percent faster in 
terms of earnings than did counties without the highway 
corridor.
    Studies done by the ARC consistently have also shown a high 
correlation between highways and business creation and job 
development.
    As a matter of fact, Congressman, we had a meeting in the 
Commission Tuesday, and we had a presentation that looked just 
at Kentucky. Ron Eller has broken down Appalachian Kentucky by 
census tracts, which goes below our normal county analysis in 
showing the degree of distress, and then he overlaid our 
highway grid in Kentucky on top of that and the visual 
correlation is astounding between those areas that are still 
the most distressed and those do not yet have a corridor.
    Also, on an anecdotal level, last year, for the first time 
in the history of the ARC, a Federal highway administrator, 
Rodney Slater and I, Federal co-chairman, traveled some of our 
roads. We started in West Virginia, went through Kentucky, went 
through Ohio, ended up in Pennsylvania. And I will never 
forget, we were on Corridor--what is the one coming out of 
Charleston? Is that G? We were coming down G, a wonderful 
highway, and suddenly the construction ended and we got on a 
typical mountain winding road, and a big crowd was waiting for 
lunch.
    A big crowd was gathering for lunch. It was ten minutes to 
twelve o'clock. We hit a railroad crossing. Here comes a coal 
train. So we sat there nervously for about twenty minutes and 
knew the crowd was waiting for us, and we pulled across the 
railroad tracks and the guy that was driving said, ``I 
certainly hope we beat it at the next crossing.'' And it was 
just lunch, but it dawned on us, what if that were a pregnant 
mother or a sick farmer trying to get to the hospital?
    Or think about the economic competitiveness of firms trying 
to deal with that antiquated system. The interstate system is 
about ninety-nine percent complete and our system is about 
seventy-six complete. So we think the sooner we can get this 
highway system built, the better.
    As a matter of fact, there is now being developed--the 
details are not finalized--a proposal for the ISTEA 
reauthorization, that in addition to the appropriated dollars 
that would come through this committee, would look for funding 
out of the highway trust fund that would accelerate the 
completion of this system over the next five years.
    The essential handmaiden, of course, of our highway system 
is what the Governor was talking about, which is our area 
development program. That PARC Commission report also said that 
highways are a necessary but not sufficient condition to 
economic development. Just putting a road through a community 
that doesn't have basic water and sewer, doesn't have 
industrial parks, doesn't have training programs, doesn't have 
an adequate education system, and doesn't have the resources to 
fund those, doesn't really get you development. You have to 
work on the community and economic development side of the 
equation as well, and that is what our area development program 
works on.
    About one-third of the appropriated money in the history of 
the ARC has been spent on the community and economic 
development work. The way that works is the Commission--me and 
the Governors--allocates that money on a state-by-state basis 
every year, and within that allocation, each Governor has wide 
latitude on how that money is spent. And we now structure those 
investments around this new strategic plan that the Governor 
mentioned, which is five goals and twenty-one objectives which 
the region is working on. Every year a state submits to the 
Commission a strategy statement which says how during that year 
they are going to use our money to work on those goals and 
objectives, and of course it varies from state to state.
    And just from this year's investment strategy statements, I 
thought I might just share a few highlights to give you a 
flavor of the richness of how states use our money. During this 
year, for example, eight states will invest in various types of 
enterprise development programs that provide business 
assistance to new and existing firms that provide targeted 
industry assistance or establish business incubators or 
industrial parks. Eight states will concentrate on starting or 
enhancing local programs to provide leadership development and 
civic infrastructure. Four states plan to develop televillages 
in which ARC funds will provide hands-on training on Internet 
technologies to teachers, businesses, libraries, local 
governments, and citizens. Four states will emphasize programs 
to reduce school drop out and adult literacy rates. Three 
states will emphasize preschool programs that ensure that 
children arrive at school ready to learn, and seven states will 
work toward building the capacity of their training 
institutions to upgrade work force skills and increase 
productivity. So a governor can use our money to enhance his or 
her economic development program. As Governor Fordice said, it 
can be tailored on a state-by-state basis.
    And we are seeing, now at the end of the first year of our 
strategic plan, some impressive results. In fiscal year 1996 
under goal 1, which is education and training, our money helped 
provide educational activities for over forty thousand 
participants and job skill training to over ten thousand 
participants. Goal 2 which deals with infrastructure, we saw 
twenty-six miles of our highway system open. Our grants helped 
provide water and sewer services to almost 16,000 households, 
and we helped support the construction of 190 low to moderate 
income houses.
    Goal 3, which is leadership and civic capacity, our money 
helped provide leadership programs to almost 7,500 Appalachian 
participants. Goal 4, which is creating a dynamic 
entrepreneurial economy, our programs helped create some 15,600 
jobs, retain some 17,600 jobs, and attracted over $1 billion in 
private investment into our projects. Goal 5, which is health, 
we placed 146 doctors in medically underserved areas through 
our J-1 visa program, and we provided health services, dental 
care to over 9,000 children, primary care to 1,250 children, 
prenatal care to 1,100 women and other services as well.
    The Governor mentioned our goals task forces, in each case 
chaired by a state working on each of our five goals to make 
sure the Commission maintains progress toward our stated 
objectives.
    The Governor also mentioned our distressed counties 
program. We are proud of our results in that. We have 399 
counties in the ARC. Three years ago, when I was sworn in as 
Federal cochairman, 115 of those counties were described as 
distressed. These are counties in which the per capita income 
rate is no more than two-thirds of the national average and the 
poverty rates and unemployment rates are at least 150 percent 
of the national average.
    The Commission, in what I consider an extraordinary act for 
any political body, votes every year to take a percentage of 
the money off of the top of the area development allocation and 
devote to those distressed counties. This year, for example, we 
are devoting about $16 million just to work in the distressed 
counties. In taking this vote, four of our states stand aside 
and actually give up money from their allocation to work on 
these most distressed areas. And that is one reason we took the 
bus tour through eastern Kentucky, so that our states that 
actually give up money can see the need and see how their money 
is going to help the neediest of the needy. We call this an 
intensive care model of economic development, and it is 
interesting to note that in the history of this agency no state 
has ever voted against that special allocation. I am very proud 
of that fact at the Commission.
    And this intensive care model has worked. As the Governor 
said, we have had a twenty percent reduction in the past years, 
from 115 to 94. His State cut in half their number of 
distressed counties, and we hope to continue to make progress 
in our distressed counties program.
    This committee and our authorizing committee has encouraged 
us to do this sort of targeting. That support has helped us 
carry that policy forward at the Commission and we appreciate 
your help. It is more important than ever, now. On top of 
everything else is the welfare reform and the need to create 
jobs. In 74 of these 94 counties, the percentage of population 
on welfare is at least twenty-five percent higher than the 
national average. So we need to create even more jobs in these 
areas.
    Let me just end by saying that we have also been working on 
some regional initiatives for the last three years. We have 
allocated $16 million to work on initiatives in export 
promotion among small- and medium-size businesses on leadership 
and civic development, and on telecommunications. We have 
funded some 112 projects in these areas.
    The relationship of these initiatives to the new strategic 
plan will be reevaluated during this year. But we are also in 
the process of launching a regional initiative that is close to 
my heart, which is an initiative in entrepreneurship.
    I am a firm believer that in rural development we have to 
get beyond the old industrial recruitment model, the buffalo 
hunt model--the idea that somebody else has created the jobs 
and we have to go get them and bring them to our people. 
Instead we should look at what it takes for our communities to 
build their businesses at home. All the Fortune 500s started 
somewhere, and in many cases in garages and often in rural and 
small town areas. We have not looked enough yet at the 
infrastructure for small business creation and entrepreneurship 
in rural America. So we have voted $2.1 million. I am hoping I 
can convince the table to vote another three or four million to 
launch a serious initiative in creating entrepreneurial 
opportunities in Appalachia and we will keep the committee 
posted on that.
    Let me close by saying, Mr. Chairman, and members of the 
committee, that this very special model continues to work. It 
was described eloquently by the State's cochairman. I just 
brought along two quotes from our Governors' Quorum Meeting 
held about a month ago here in Washington, one from a moderate 
Democrat, Jim Hunt from North Carolina, who said, ``I was here 
when they tried to kill the Appalachia Regional Commission. 
Along with a lot of other folks, I fought hard to keep it.'' 
And by conservative Republican Governor George Allen from 
Virginia, who said, ``The Appalachian Regional Commission 
clearly is a model, as I said in my first year or two in this. 
It is too bad all Federal programs don't run this way. We would 
have a lot better relationship with the Federal Government if 
all programs ran the way the Appalachian Regional Commission 
does.'' And of course Governor Fordice echoed that today.
    Our support has always been bipartisan, both at the 
gubernatorial and the congressional level. I think Congress has 
been brave in maintaining its commitment to this special region 
of America. We only have sixty Congressmen and twenty-six 
Senators, but there was a commitment made to bring this region 
into the mainstream of the American economy so we can be 
contributors to the national wealth, rather than drains on it, 
and we plan to keep faith with that commitment, Mr. Chairman, 
and I hope this committee will look favorably on our budget.
    Mr. McDade. Thank you for a very detailed and excellent 
statement. We appreciate it very much.
    [The prepared statement of Mr. White and the ARC budget 
justification materials follow:]

[Pages 850 - 911--The official Committee record contains additional material here.]


    Mr. McDade. My colleague, Chairman Rogers, has a speech to 
make in just a few minutes, so if my friends don't mind, I am 
going to yield to him.
    Mr. Rogers. Thank you very much. I wanted to very briefly 
and quickly commend Jesse White for the great work he is doing 
at the ARC, and of course Governor Fordice for his work as 
Chairman of the Governors Group.
    This organization I think is a model for the way other 
agencies ought to operate. It is grass-roots driven at the 
outset, projects work their way up from the grass roots to a 
regional level, then to the Governor's office, usually, and 
then on to the national office here, and there are Federal 
monies, there are state monies, and then there are other types 
of monies that go into these projects. So we all leverage each 
other.
    But the point is it is grass-roots driven and would that 
other agencies had that kind of mechanism involved. So the 
Federal dollar that we spend is multiplied many times as it 
goes to work on a project that is desperately needed in the 
poverty stricken areas of the country.
    I am very happy that Jesse brought one of the annual 
meetings to Somerset, to my hometown. We enjoyed having you 
there, and you had a chance to see abject poverty in the 
eastern part of my district, eastern part of the state. A lot 
of people don't know what poverty is until they have traveled 
to some of those counties.
    But you are exactly right on, Jesse; roads are the 
lifeblood of development in those regions. We have seen it time 
and again and I think everyone knows that. It is like the Nile 
in the desert; where that river flows you can begin to see the 
green develop along its ways. And the key to development in our 
region is the lifeblood brought by roads.
    And number two, the nonhighway programs are absolutely 
essential now that welfare reform is here and we are asking 
people who were formerly drawing welfare to find a job; that 
has brought a new urgency to the Appalachian regions. We have 
almost a desperate situation brewing where we are requiring 
people to find a job and there aren't any jobs. So the 
nonhighway portions of your work, I believe, are going to 
receive additional strain because of welfare reform, and that 
is urgent.
    Your reform of ARC enabled us last year to convince a 
majority in the Congress that this program had been 
rejuvenated, and I think in fact it has. The refocusing on the 
more distressed counties, the sort of graduation of certain 
counties originally in Appalachia that have now found a little 
bit of prosperity and are beginning to move up, thanks in large 
measure to ARC, you are graduating into another category, as we 
should. We should always begin to focus more and more on the 
counties most desperate in need as our funds dwindle. So I 
congratulate you on your reform of ARC and your focus of 
rejuvenating ARC and keeping it in focus, and we are proud of 
what you are doing.
    We didn't get enough money to do what needs to be done last 
year. We haven't for several years. I am hoping, Mr. Chairman, 
that we can hopefully find a few more dollars because these 
dollars go so much further than the average dollar does. But we 
will take what we can get. As one comedian once said, bad 
breath is better than no breath at all.
    Mr. Dickey. If you would, don't look this way when you 
talk.
    Mr. Rogers. I thank you, Mr. Chairman, for allowing me this 
time.
    Mr. McDade. I am pleased to recognize the gentleman from 
California.
    Mr. Fazio. Thank you. I am reminded to say, Mr. Rogers, 
even your best friends won't tell you, and I am about to tell 
you.
    I, first of all, want to put on the record that I have 
supported the ARC from the very first year I came to Congress. 
That is eighteen now, and seventeen years on this committee. 
And I have done so in great measure because I respect the 
Members from the region who have always fought valiantly for 
the program. In fact, I think I have had to go back to a 
district that would normally be skeptical of support for any 
regional development that has a lot of rural poverty in it 
itself, and certainly we in the nonmetropolitan part of 
northern California fall in that category, as I am sure many 
other Members of Congress do in their own states.
    It is important, and we have to carry a variety of economic 
development burdens around the country. One of the things that 
sticks in my craw, and you touched on it with the buffalo hunt 
model you referred to, was when Wofford College got funded for 
a football stadium to provide the Carolina Panthers with a 
practice field in an area where people were fighting tooth and 
tong to take a team from Houston to Nashville, or from 
Cleveland to Baltimore, and the NBA franchises go to the 
highest bidder (including the San Francisco Kings recently to 
Nashville, although we stopped that).
    The point is that when we all are contributing financially 
to economic development, Charlotte, North Carolina, doesn't 
come high up on my list as a city in decline. It is probably at 
the other end of the list. How can we allow that kind of 
judgment call to be made, in a sense undermining broader 
support for the program?
    Mr. White. We always need to be extremely vigilant about 
those sorts of projects that become lightning rods of 
criticism. That project I am very familiar with. It was fully 
in the city of Spartanburg, and although that part of--
Charlotte, of course, is not in ARC.
    Mr. Fazio. I know that, right across the state line: the 
automobile manufacturer, Spartanburg, South Carolina.
    Mr. White. It is a fairly prosperous region. Spartanburg 
County is fairly well off. Spartanburg city is fairly 
distressed. It has got a high minority population in the center 
city, had unemployment of about, I have forgotten, fifteen 
percent. It was very high. This was a high priority of the 
Republican Governor of the State, and of course we are, have a 
State-driven model to a large degree. It was to help build a 
practice field for the college that the Panthers rented during 
the summer at market rates, and it was--the pledges were to 
create several hundred jobs for low-income people in inner city 
Spartanburg. It did attract a lot of attention and it has 
renewed our vigilance for not only the substance of projects, 
but the appearance of projects.
    Mr. Fazio. Well, I would hope we wouldn't make that kind of 
choice again. I know it is never popular to tell a Governor 
that he can't use his money as he wishes, but there has to be a 
broader understanding of the context in which you are all 
operating, and that kind of decision can poison the well for a 
lot of people in a lot of places who need the assistance.
    In that context, I would say concentrating on that 94 or 
115 counties is really where I think most of Congress wants you 
to go. I notice that only twenty percent of the funding, the 
$66 million, is allocated to those additional distressed 
counties. I guess that is thirteen of the sixty-six; isn't that 
correct? If I am wrong, correct me.
    Mr. White. The percentage allocation off of the top of area 
development is thirty percent. It was twenty percent and we 
raised it this year to thirty percent.
    Mr. Fazio. I would encourage you to keep raising it, 
because really what we want to concentrate on are those 
counties and not the rest, because the National Science 
Foundation study has said that the poverty rate is lower now in 
the Appalachian regions on the average and that growth and 
overpopulation is better than in counties in comparable areas.
    So not all of the Appalachian district is in as much need 
as this one-third of the counties that are most distressed. I 
realize you can't operate in a vacuum. They are adjacent to 
each other and projects do benefit across county lines. But the 
more you can emphasize the neediest, the more I think you will 
find support will continue here, not only to keep the 
Commission alive but to fund the kind of budget you think you 
need.
    Mr. Chairman, that is all I have to say.
    Mr. McDade. The gentleman from Arkansas is recognized.
    Mr. Dickey. No questions.
    Mr. McDade. You are my favorite Member.
    Mr. Dickey. You are my favorite Chairman.
    Mr. McDade. The gentleman from Texas.
    Mr. Edwards. Thank you. I will just associate myself with 
the comments made by Mr. Fazio.
    With the limited funds, I think it is important to try to 
focus resources where they are most needed. As a new member of 
the committee, this sounds like the kind of cooperative grass-
roots organization and model that we need more of rather than 
less of in our government.
    Thank you, Mr. Chairman.
    Mr. White. Could I add something, Mr. Chairman, and I wish 
Mr. Fazio were here to hear this, because it is sort of the 
other end of the distressed county spectrum.
    We have also adopted policies that restrict funding at the 
other end of the spectrum to counties. If, for example, a 
county has reached the national norm on unemployment, poverty 
and per capita income, they are not eligible to receive ARC 
money except for highways, because we have to complete the 
grid, and our local development planning districts. I think 
there are about ten counties in that category.
    If a county is at the national average on unemployment, at 
the national average on poverty and at least eighty percent of 
U.S. per capita income, they are only eligible for thirty 
percent funding on ARC grants. So we have got another twenty-
some-odd counties in that category. So we do have these four 
categories of counties and do try to target our resources to 
the areas of greatest need.
    Mr. McDade. Thank you for your testimony. We are going to 
give you, you won't be surprised to hear, a detailed list of 
questions for you to answer for the record. Thank you for your 
testimony.
    The committee will stand adjourned until Wednesday at ten 
o'clock.
    Mr. White. Thank you.
    [The questions and answers for the record follow:]

[Pages 916 - 953--The official Committee record contains additional material here.]




                           W I T N E S S E S

                              ----------                              
                                                                   Page
Babbitt, Hon. Bruce..............................................     1
Beneke, P.J......................................................     1
Crowell, Craven..................................................   607
Fordice, Kirk....................................................   835
Hayes, J.H.......................................................   607
Kennoy, W.H......................................................   607
Lawler M.A.......................................................     1
Martinez, E.L....................................................     1
White, Jesse.....................................................   835


                               I N D E X

                              ----------                              

                         BUREAU OF RECLAMATION

Anadromous Fish Screen Program...................................   590
Animas La-Plata Project............................. 496, 498, 553, 561
Auburn-Folsom South Unit of the Central Valley Project...........   565
Babbitt, Secretary Bruce.........................................  1, 5
Bay-Delta--See California Bay-Delta Ecosystem Restoration
Beneke, Assistant Secretary Patricia.............................    11
Bonneville Power Administration..................................   553
Bostwick Park Project............................................   571
Brackish Water Reclamation Demonstration Facility................   598
Brantley Project.................................................   571
Budget Justification for FY 1998 for Bureau of Reclamation.......    32
CALFED--See California Bay-Delta Ecosystem Restoration
California Appropriations........................................   495
California Bay-Delta Ecosystem Restoration.....2, 8, 31, 472, 474, 493,
                                                     495, 542, 550, 560
Callahan, Honorable Sonny........................................   537
Central Valley Project Restoration Fund........................ 30, 579
Central Arizona Project....................................... 534, 536
Central Utah Project.............................................10, 14
Central Valley Project...........................................   567
Chandler Powerplant Electrification..............................   564
Cheyenne Bottoms Wildlife Area...................................   572
Coho Salmon and Spring Run Chinook Salmon Restoration Projects...   605
Collbran Project.................................................   571
Colorado River Front Work and Levee System.......................   570
Colorado River Basin Salinity Control Project (Title II).........   571
Columbia Basin Project--Unauthorized Use of Water................   563
Computer Modifications for Year 2000.............................   548
Concessionaires..................................................   604
Construction Activities for FY 98................................   559
Contra Costa Canal Intake at Rock Slough.........................   566
Contract Renewal Negotiations....................................   587
Cost Benefit Ratios..............................................   541
CVP, O&M, San Luis Unit..........................................   589
CVP, American River Division.....................................   589
CVPIA Implementation (General)...................................   592
Del Norte County and Fort Bragg..................................   602
Delta Division of the Central Valley Project.....................   565
Dickey, Honorable Jay............................................   537
Efficiency Incentives Program................................. 560, 574
Endangered Species Act...........................................   545
Fazio, Honorable Vic.......................................... 497, 542
Federal Acquisition Reform Act of 1994...........................   500
Fish Screen Projects.............................................   600
Flooding.................................................. 27, 543, 545
Folsom Floodgate.................................................   599
Freeze-Thaw Desalination Project.................................   572
Frelinghuysen, Honorable Rodney................................ 499,547
Gila River Basin.................................................   568
Glenn Colusa Irrigation District's Hamilton City Pumping Plant...   566
Government Performance and Results Act (GPRA)............. 27, 541, 582
Hot Springs Bath Houses..........................................   538
In Situ Copper Mining Research Project...........................   558
Incremental Funding..............................................   561
Indian Water Rights Claims.......................................   497
Investigations Completed in FY 97................................   557
Irrigation Projects in Arkansas..................................   538
Knollenberg, Honorable Joe.......................................   546
Land Acquisition Methodology.....................................   500
Land Resources Management Program Finances.......................   575
Little Colorado River Settlement Negotiations....................   536
Mammoth Lakes Water Optimization Study...........................   570
Martinez, Commissioner Eluid..................... 24, 26, 534, 538, 539
McDade, Chairman Joseph...................... 1, 11, 472, 493, 534, 538
Milk River Project...............................................   573
Minidoka Area Projects...........................................   563
Mission of Bureau of Reclamation.................................   539
Mni Wiconi Project...............................................   573
National Fish and Wildlife Foundation.................... 500, 502, 575
Native American Affairs Program..................................   576
Native Fish Protection Program...................................   569
Negotiation and Administration of Water Marketing................   577
New Investigations...............................................   556
Newlands Project.................................................   567
Northwest El Paso Wastewater Refuse Project......................   558
Oregon Stream Restoration Planning...............................   563
Oregon Subbasin Conservation Planning Effort.....................   563
Parker-Davis Project.............................................   570
Partnerships.....................................................    27
Pastor, Honorable Ed.............................................   534
Performance Measurement..........................................    27
Policy and Administration........................................   579
Portable Global Positioning System...............................   563
Port Hueneme Brackish Water Project..............................   558
Power Program Services...........................................   577
Programmatic Budget Structure....................................   539
Public Relations.................................................   547
Rainwater Basin Area of Nebraska.................................   574
Reclamation Reform Act of 1982...................................   536
Recreation and Fish and Wildlife Program Administration..........   577
Red Bluff Diversion Dam Research Pumping Plant...................   599
Sacramento Wildlife Refuge Water Supply..........................   591
Sacramento-San Joaquin Delta.....................................   561
Salmon Recovery Program..........................................   562
Salmon Stamp Program.............................................   606
San Jose Area Water Reclamation and Reuse Program................   567
Science and Technology Program...................................    28
Snake River Storage System.......................................   561
Site Security....................................................   578
Southern Oregon Coastal River Basins Project.....................   563
Sterling Forest..................................................   499
Terrorism and Sabotage........................................ 541, 558
Training.........................................................   559
Tres Rios Wetlands Restoration Project...........................   534
Trinity River Restoration Act....................................   602
Tucson Reliability Division......................................   569
Umatilla Project.................................................   564
Upper John Day River Demonstration Project.......................   562
Upper Salmon River Optimization Study............................   564
Wallowa River Demonstration Project..............................   562
Western Water Policy Review......................................   575
Wetlands Development Program.....................................   578
Winter Run Chinook Salmon Capitve Broodstock Program.............   605
Write-Ins........................................................   558
Yakima River.................................................. 562, 564
Yakima River Basin Water Enhancement Project.....................   565
Tennessee Valley Authority.......................................   607
    Air Support........................................... 726-727, 728
    Annealing Program............................................   810
    Answers to Questions from Chairman McDade.................. 757-819
    Answers to Questions from Mr. Callahan..................... 829-834
    Answers to Questions from Mr. Knollenberg.................. 825-826
    Answers to Questions from Mr. Parker....................... 827-828
    Answers to Questions from Mr. Rogers....................... 820-824
    Appropriated Debt..................................... 767-768, 806
    Appropriated Programs................................. 611-612, 758
    Appropriations Task Force................................. 757, 758
    Asset Valuation........................................... 753, 807
    Automated Land Information System............................   772
    Automobile Fleet.............................................   745
    Boat Purchases...............................................   773
    Bond Ratings.............................................. 735, 807
    Bonus Awards.................................................   720
    Bonuses................................................... 752, 760
    Bristol Virginia Utilities...................................   813
    Budget Summary...............................................   612
    Mr. Callahan's Opening Remarks...............................   738
    Chairman Craven Crowell:
        Opening Statement...................................... 607-609
        Testimony.............................................. 610-617
    Chickamauga Lock.......................................... 614, 770
    China Programs and International Ventures.................. 762-763
    Chinese Conference...........................................   721
    Competition in the Electricity Industry......................   716
    Competitive Advantages of TVA.................... 729, 749, 802-803
    Competitiveness of TVA.......................................   725
    Cost of Service..............................................   806
    Cumberland River System................................... 719, 815
    Cumberland River System Study.............................. 820-825
    Mr. Dickey's Opening Remarks.................................   738
    Duck River Project...........................................   774
    Economic Development...................................... 614, 782
    Economic Development Contracts............................. 784-788
    Mr. Edwards' Opening Remarks.................................   729
    Electric Industry Competition................................   735
    Elimination of Appropriated Programs................. 713, 714, 737
    Elimination of TVA Appropriations............... 723, 724, 730, 757
    Environmental Research Center............... 614, 739, 792-800, 829
    Mr. Fazio's Opening Remarks..................................   716
    Fiscal Year 1998 Budget Request..............................   724
    Fiscal Year 1998 Program................................... 618-712
    Mr. Frelinghuysen's Opening Remarks..........................   730
    Government Performance and Results Act..................... 816-819
    Hazardous Waste..............................................   772
    Hydropower Development.......................................   814
    Industrial Rates.............................................   752
    Investments..................................................   767
    Joint TVA/Corps Study................................ 720, 733, 760
    Mr. Knollenberg's Opening Remarks............................   725
    Land Between the Lakes.............. 613, 740-744, 748-749, 774-781
    Chairman McDade:
        Opening Comments.........................................   607
        Closing Statement........................................   756
    Mr. Parker's Opening Remarks.................................   734
    Nuclear Waste................................................   810
    Patrol Boats.................................................   746
    Pension Plan.................................................   809
    Plant Management.............................................   771
    Power and Nonpower Proceeds..................................   764
    Power Program............................... 715, 759, 801-802, 815
    Power Purchase Agreements....................................   811
    Preference Power.............................................   755
    Proposal to End All Federal Funding..........................   615
    Rates..................................................... 732, 805
    Recruitment of Industry......................................   731
    Reducing TVA Debt............................................   825
    Regulation...................................................   803
    Reservoir Release Improvements...............................   770
    Retained Earnings............................................   806
    Mr. Roger's Opening Remarks..................................   719
    Salaries and Wages...........................................   751
    Shoreline Management...................................... 771, 773
    Stewardship.......................................... 768, 770, 773
    Strategic Plan Implementation......................... 847, 851-852
    Studies of TVA...............................................   754
    Tritium Production...........................................   813
    TVA Debt........................................ 726, 732, 735, 808
    TVA Fence................................................. 738, 812
    TVA Needs....................................................   615
    TVA Police...................................................   728
    TVA Task Force............................................ 713, 723
    TVA Tax Structure.......................................... 827-828
    TVA University...............................................   767
    Mr. Visclosky's Opening Remarks..............................   723
    Mr. Wamp's Opening Remarks...................................   744
    Water and Land Management.................................. 612-613
    Update on Power Program.................................... 610-611
    Witnesses....................................................   607
Appalachian Regional Commission..................................   835
    Answers to Questions from Chairman McDade.................. 916-952
    Answers to Questions from Mr. Knollenberg.................. 952-953
    ARC's Mission Statement and Goals............................   948
    Area Development........................................... 920-929
    Area Development Projects Approved for FY 1996............. 930-937
    1998 Budget Request....................................... 836, 844
    Budget Summary...............................................   850
    Commission Staff...................................... 845, 946-947
    Competitive Counties......................... 916, 919-920, 924-925
    Mr. Dickey's Remarks....................................... 913-914
    Distressed Counties......................... 837, 855-856, 898, 914
    Distressed Counties Map, FY 1996.............................   899
    Mr. Edwards' Remarks.........................................   914
    Entrepreneurship and Regional Initiatives........ 856, 921-922, 924
    Mr. Fazio's Remarks........................................ 913-914
    Fiscal Year 1997 Allocations.................................   923
    Fiscal Year 1998 Program................................... 859-911
    Fordice, Kirk, Governor of Mississippi; States' Co-Chairman:
        Opening Statement...................................... 835-838
        Testimony.............................................. 839-843
    General Questions.......................................... 916-920
    Government Performance and Results Act..................... 948-952
    Highway Development........................................ 938-942
    Highway Program............................................ 852-855
    Highway System Status........................................   882
    Interagency Agreements.......................................   926
    ISTEA Reauthorization............................ 846, 852-853, 917
    Local Development Districts....................... 857-858, 942-943
    Chairman McDade:
        Opening Statement........................................   835
        Closing Statement........................................   915
    Non-Highway Programs.........................................   855
    Regional Initiatives...................................... 848, 924
    Revolving Loan Funds....................................... 841-842
    Mr. Rogers' Remarks........................................ 912-913
    Salaries and Expenses........................................   858
    States' Co-Chairman..........................................   835
    Strategic Plan Implementation......................... 847, 851-852
    Targeting of Resources................. 848, 851, 856, 890, 914-915
    Tennessee Valley Authority:
        Memorandum of Understanding Between ARC and TVA....... 926, 953
        Approved Projects 1995-1996..............................   928
    White, Jesse L., Jr. Federal Co-Chairman:
        Opening Statement...................................... 844-849
        Testimony.............................................. 850-858
    Witnesses....................................................   835