[Senate Hearing 107-314]
[From the U.S. Government Printing Office]



                                                        S. Hrg. 107-314

                        ARMY CORPS OF ENGINEERS: 
                   MANAGEMENT OF FEASIBILITY STUDIES

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON 
                   TRANSPORTATION AND INFRASTRUCTURE

                                 OF THE

                              COMMITTEE ON
                      ENVIRONMENT AND PUBLIC WORKS
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                                   ON

    MANAGEMENT PRACTICES OF THE CORPS IN CONDUCTING STUDIES OF NEW 
    PROJECTS, ESPECIALLY THE UPPER MISSISSIPPI RIVER-ILLINOIS RIVER 
                       WATERWAY FEASIBILITY STUDY

                               __________

                             MARCH 15, 2001


                               __________


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

                                _______

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               COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

                      one hundred seventh congress
                             first session
                   BOB SMITH, New Hampshire, Chairman
             HARRY REID, Nevada, Ranking Democratic Member
JOHN W. WARNER, Virginia             MAX BAUCUS, Montana
JAMES M. INHOFE, Oklahoma            BOB GRAHAM, Florida
CHRISTOPHER S. BOND, Missouri        JOSEPH I. LIEBERMAN, Connecticut
GEORGE V. VOINOVICH, Ohio            BARBARA BOXER, California
MICHAEL D. CRAPO, Idaho              RON WYDEN, Oregon
LINCOLN CHAFEE, Rhode Island         THOMAS R. CARPER, Delaware
ROBERT F. BENNETT, Utah              HILLARY RODHAM CLINTON, New York
BEN NIGHTHORSE CAMPBELL, Colorado    JON S. CORZINE, New Jersey
                Dave Conover, Republican Staff Director
                Eric Washburn, Democratic Staff Director
                                 ------                                

           Subcommittee on Transportation and Infrastructure

                  JAMES M. INHOFE, Oklahoma, Chairman

JOHN W. WARNER, Wyoming              MAX BAUCUS, Montana
CHRISTOPHER S. BOND, Missouri        BOB GRAHAM, Florida
GEORGE V. VOINOVICH Ohio             JOSEPH I. LIEBERMAN, Connecticut
LINCOLN CHAFEE, Rhode Island         BARBARA BOXER, California
                                     RON WYDEN, Oregon

                                  (ii)

  




                            C O N T E N T S

                              ----------                              
                                                                   Page

                             MARCH 15, 2001
                           OPENING STATEMENTS

Baucus, Hon. Max, U.S. Senator from the State of Montana.........    19
Bond, Hon. Christopher S., U.S. Senator from the State of 
  Missouri.......................................................     2
    Statement, James V. Mudd to Congressional Mississippi River 
      Caucus.....................................................     4
Graham, Hon. Bob, U.S. Senator from the State of Florida.........    20
    Letter, from Assistant Secretary of the Army (Civil Works) 
      Joseph Westphal............................................    21
Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma...     1
Smith, Hon. Bob, U.S. Senator from the State of New Hampshire....    38
Vonovich, Hon. George V., U.S. Senator from the State of Ohio....    25

                                WITNESS

Flowers, Lt. Gen. Robert B., Chief of Engineers, U.S. Army Corps 
  of Engineers...................................................    14
    Prepared statement...........................................    38
    Responses to additional questions from:
        Senator Baucus...........................................    50
        Senator Bond.............................................    53
        Senator Boxer............................................    56
        Senator Inhofe...........................................    47
        Senator Smith............................................    45

                          ADDITIONAL MATERIAL

Letter, from Assistant Secretary of the Army (Civil Works) Joseph 
  Westphal.......................................................    21
Statement, James V. Mudd, to Congressional Mississippi River 
  Caucus.........................................................     4

                                 (iii)

  

 
          ARMY CORPS OF ENGINEERS CONDUCTS FEASIBILITY STUDIES

                              ----------                              


                        THURSDAY, MARCH 15, 2001

                                       U.S. Senate,
                 Committee on Environment and Public Works,
         Subcommittee on Transportation and Infrastructure,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 9:32 a.m. in room 
406, Senate Dirksen Building, the Hon. James M. Inhofe 
[chairman of the subcommittee] presiding.
    Present: Senators Inhofe, Bond, Baucus, Graham, and 
Voinovich.

          OPENING STATEMENT OF HON. JAMES M. INHOFE, 
            U.S. SENATOR FROM THE STATE OF OKLAHOMA

    Senator Inhofe. The committee will come to order.
    Today the subcommittee will receive testimony from General 
Robert B. Flowers, Chief of Engineers, U.S. Army Corps of 
Engineers regarding how the U.S. Corps manages projects and, 
more specifically, how project management should be changed to 
ensure that the U.S. taxpayers receive the greatest amount of 
benefit for their investment.
    Over the past several months, a reoccurring theme has 
emerged from those critical of the Corps. Specifically, it is 
alleged that the Corps has a pro-construction mentality, which 
has resulted in Corps officers seeking out opportunities to 
quote ``grow the Corps,'' which presumably means, the bigger 
the construction project, the better; even though a 
nonstructural option maybe a better alternative.
    It is my hope that today's hearing will begin to address 
these concerns. Recently, much of the attention has been 
directed at the Upper Mississippi River and Illinois Waterway 
Feasibility Study.
    In February of 2000, Dr. Donald Sweeney, a Corps of 
Engineer economist, working on the Upper Mississippi River and 
Illinois Waterway Feasibility Study, filed a disclosure with 
the Office of the Special Council alleging senior Corps 
officials manipulated the study to produce results favorable to 
large scale construction.
    As a result, the U.S. Army Inspector General did an 
investigation, which found evidence to suggest that there is an 
inherent preference by Corps senior officers for large scale 
construction.
    Furthermore, the Army Inspector General concluded that many 
in the Corps felt an obligation to work for the interest of the 
navigational industry, as opposed to being an honest broker for 
the national benefit for waterway development.
    The subcommittee will be holding a separate hearing 
concerning this subject later on this year. However, I hope 
that the Chief will touch briefly on what he believes can be 
done to reverse this negative public perception of the Corps, 
following the Army Inspector General's investigation.
    We have with us Senator Kip Bond, who also has an intense 
interest in that same subject, so we will recognize him for his 
opening statement at this time.

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

    Senator Bond. Thank very much, Mr. Chairman.
    Like many of my colleagues, I have a full schedule today. I 
would like to be able to stay here for the whole preceding. I 
am not sure that I can. However, I do have some comments and 
very strong views, as some of you may know, that I wish to 
convey today.
    If the purpose of reform is to get better data, sooner and 
in a less expensive way, then I am absolutely for it. If the 
purpose of so-called reform is simply to raise the bar and make 
it harder to approve projects, then I oppose it.
    Clearly, if you do not like the Corps, if you do not like 
flood protection, and you do not like river transportation, and 
you do like railroad monopolies, then reform could be used in a 
way to paralyze any movement toward construction. That is not 
reform. That is obstruction. That is bureaucracy, and it is 
also expensive.
    It threatens to cost our farmers in the agriculture 
heartland of America their access to the world markets. We are 
the most efficient producers of food in the world. We need an 
efficient transportation system. If we do not have that 
efficiency transportation system, we are going to lose those 
markets; the countries in Latin America, where they are 
building waterway infrastructure.
    They are applauding and cheering all of the opposition to 
modernizing our waterways. There is nothing that would make 
them happier than to follow the editorial reviews in the 
Washington Post, and fail to modernize our river 
infrastructure.
    I had some African American constituents come to Washington 
last September for a meeting that I arranged to plead with EPA 
to let the Corps provide them flood protection. These people 
come from minority farming communities in Southeast Missouri, a 
part of what President Clinton designated as rural enterprise 
community.
    Mr. Rush and Mr. Kasell outlined to officials at EPA that 
when they experience backwater flooding, they have to load up 
children in livestock trailers to haul them to school. The 
contamination from the flood waters has lead to sickness and 
death. These people have been promised flood control since 
1976. After 24 years of study and restudy and delay, they know 
that further review is the code word for ``the wealthy get 
flood protection and the poor get flood water.''
    Then there is the matter of the river study. I am pleased 
that we will have a hearing in April that will focus on whether 
we will have a modern waterway system or whether we will not.
    For the benefit of my colleagues, who I hope will be 
joining us today, I want to stress the one thing for you to 
comprehend as you consider the Upper Mississippi River 
Feasibility Study.
    We spent 12 years and $60 million trying to do a 50 year 
projection. Hear me please. The Corps of Engineers is 
attempting to predict demand for water transportation between 
now and the year 2050, and calculate 50 years of environmental 
benefits and costs.
    We have members of this body who are quite skeptical that 
the Nation's forecasters can predict the GNP over the next 10 
year period, because that is the basis on which people are 
objecting to tax reductions.
    Hey, they want us to do a 50 year projection of economic 
benefits. We are asking the Corps to tell us how many metric 
terms of beans, corn, coal, gravel, and petrochemicals we will 
transport in the year 2040, and at what price.
    Following is the national NAS conclusion that was not 
reported in the media. This is what the National Academy of 
Science said. ``No one can predict with confidence the demand 
for water transport, or almost anything else, 50 or more years 
in the future.''
    The National Academy of Sciences noted that the economists, 
not the uniformed Corps officials, while well intentioned, 
produced models that were flawed and not based on realistic 
assumptions.
    I could tell you today that if we are waiting for the 
economists to agree on a 50 year forecast, then the forecast 
will be complete in roughly 50 years. Unfortunately, we do not 
have what President Truman always asked for, which is a one-
handed economist, so he could not say on one hand this, and on 
the one hand, the other.
    The economists are never going to agree on where we are 
going to be in 50 years. It is tough enough to get them to 
agree on where we are this year and next year. In the meantime, 
to the delight of our foreign competitors, we have spent $60 
million, and our aging system is 12 years older.
    Furthermore, if we have inadequate capacity, we will place 
a limiting ceiling on exports, and assure that a negative 50 
year projection is correct.
    I continue to believe that Congress may have to do what we 
are paid to do, and that is to decide if we are going to 
modernize our heartland's principal artery to the world, or if 
we are going to disarm unilaterally, because we cannot agree on 
a 50-year projection.
    In closing, General Flowers, I think it is easy for us to 
be abstract around here. As you and I know, Colonel Jim Mudd 
took the fall for this study, and I think you know what 
happened in the process. Jim Mudd was an essential part of the 
Schwartzkopf effort in Dessert Storm; a man of great integrity 
and ability.
    I do not know what your commanders permit you to say here 
today, and I do not want to get you into trouble for telling 
the truth. But I certainly hope that you are at liberty to add 
enough to paint the big picture here. I am convinced, as 
opponents to modernization are, that the Inspector General 
report is ready to be incorporated into a New Testament.
    Mr. Chairman, Colonel Jim Mudd is now a civilian. He served 
in General Schwartzkopf's office, and helped plan the Gulf War. 
He is getting the opportunity to tell the second side of the 
story before House Caucus Hearing. We have a copy of the 
statement that I would like to place in the record here today.
    Just to give you an excerpt, he discusses the things that 
have been said about him and the charges that have been raised. 
He refers to the person who is the centerpiece of the attacks 
on the Corps, Dr. Sweeney. He was the guest of honor at the 
Office of Special Counsel's press conference on December 6. He 
was asked, ``At the time you were removed from the head of 
Economic Study Team for the Upper Mississippi Project, was the 
model in any shape to be used to compute any de-benefits?''
    Donald Sweeney responded, ``No, with respect to the demand 
curves, an incorrect functional form was developed to allow for 
rapid evaluation to see how the various components worked 
together.''
    What he just admitted was that the model which Dr. Sweeney 
had been responsible to produce, and which was several months 
behind schedule when Dr. Sweeney was replaced as manager of the 
economical panel, was not adequate to the task at hand. That is 
also what the National Academy of Sciences found to be the 
case.
    Senator Inhofe. Without objection, that will be entered in 
the record.
    Senator Bond. Thank you. I appreciate that.
    [The prepared statement of Sen. Bond and the referenced 
document follow:]

Testimony of James V. Mudd congressional Mississippi River Caucus March 
                                15, 2001

    Co-Chairmen Hulshof and Boswell, members of the Caucus, my name is 
James V. Mudd. I appear here today as a private citizen. A year has 
past since the last time I have spoken to this Caucus, then as District 
Engineer from Rock Island with responsibility for the Upper Mississippi 
Navigation study.
    Since that time a lot has happened to us in regard to the Upper 
Mississippi Navigation Study.
    I have been questioned by the DAIG, the congressional S&I staff and 
numerous other people, citizens and reporters alike. We have seen the 
release of the DAIG investigation, we watched three honorable officers 
get letters of admonishment from the VCSA for their part in the 
Navigation Study and mast recently we have seen the NAS interim report 
on their investigation. All three of these actions sent mixed signals 
to the public.
    I would like to talk about all three of these actions.
    To say that I am disappointed with the DAIG report on the Upper 
Mississippi and Illinois Waterway Navigation Study would be an 
understatement. A travesty of justice is more appropriate. I have read 
the letter of admonishment that the VCSA issued me several times.
    I have reflected on my actions during the time that I was the 
District Commander of the Rhode Island District and I wouldn't change a 
thing. I would not make any decisions differently under the same 
circumstances.
    I would like to thank the VCSA for his reasoned actions in this 
case.
    I think he saw the folly in all of this and the political 
motivation for the DAIG outcome. For that reason, he took the least 
possible disciplinary action that would protect his wronged officers 
and still bring the investigation to a close. The VCSA said in my case, 
``The reason I am not officially reprimanding you for your conduct is 
because I believe your decision to change certain values in the study 
was based on your own methodology which you believed was more 
appropriate and reasonable in accounting for certain variables in the 
study.''
    I have also read the DAIG report many times and I find the written 
product wrought with misinformation, hearsay, and paraphrasing. There 
was an extreme lack of crosschecking of the facts from testimony given 
and the overwhelming paper trail surrounding the decisions over a 2-
year period was seemingly neglected.
    I find this almost criminal in itself. I have seen the words the 
'preponderance of the evidence indicated that' . . . throughout the 
DAIG report. Last time I looked in the dictionary evidence has a truth 
part to it and I find the search for it in this investigation to be 
seriously lacking.
    The Office of Special Counsel's press conference on 6 December 
2000, when the DAIG investigation went public is quite telling. Dr. 
Sweeney was a guest of honor at the proceedings. The question and 
answer period was most revealing. Dr. Sweeney was asked, ``At the time 
you were removed from the head of the economics study team for the 
Upper Mississippi project, was the model in any shape to be used to 
compute NED benefits.'' Sweeney responded, ``No. With respect to the 
demand curves, an incorrect functional form was developed to allow for 
a rapid evaluation to see how the various components worked together.'' 
What he just admitted, Congressmen, was that the model, which Dr. 
Sweeney had been responsible to produce, and which was several months 
behind schedule when Dr. Sweeney was replaced as manager of the 
economics panel, was not adequate to the task at hand.
    This is also what the National Academy of Sciences (NAS) found to 
be the case. The NAS was complimentary, as were many other qualified 
reviewers, of the spatial equilibrium model (SEM) theory, which was 
espoused by Dr. Sweeney. The SEM served as the theoretical basis far 
what was to follow as an analytical tool. The detailed work was to be 
done with what Dr. Sweeney called the Essence model. The NAS found that 
``The Essence model does not, however, adequately use the most 
important concepts of the spatial equilibrium model. . . .''\1\ The NAS 
discovered, in its review, just as I and my subordinate managers had 
discovered in 1998, that the Essence model was not capable of using 
variables as input, rather it was hard wired to produce a do-nothing 
solution on the Mississippi and Illinois Rivers.
---------------------------------------------------------------------------
    \1\ See page 3 of executive summary of NAS report ``Inland 
Navigation System Planning: The Upper Mississippi River-Illinois 
Waterway,'' released 28 February 2001.
---------------------------------------------------------------------------
    The inherently flawed output of this flawed model is the same 
information that the Environmental Groups took as gospel in early 1998. 
Why didn't the DAIG find that little tidbit during their investigation? 
If they would have, the whole investigation and the allegations brought 
by Dr. Sweeney would have been dismissed.
    For your information, the DAIG did have this information, reference 
page 83 (4), Mr. Marmorstein (Dr. Sweeney's right hand man), admits 
that he invented N-value to quantify the elasticity of demand. The DATG 
team did nothing with that information.
    But the press conference provides even more revealing information. 
Dr. Sweeney was asked another very provocative question, ``Given that 
even at this late date, there still remains no empirical validation of 
any of the Corps ``N'' values for agricultural products, would you be 
comfortable with an NED benefit calculation from the Corps' model using 
any of the ``N'' values that have been discussed, 1.2, 1.5, 2.0?
    Sweeney's reply, ``No. If I could start all over from a blank piece 
of paper and begin from scratch, I would not use ``N'' values at all 
but a different functional form altogether.''
    There it is. Dr. Sweeney developed a model that didn't have data to 
make it work but he spent millions of taxpayer dollars developing it 
and then he convinced everyone inside and outside of the Corps of 
Engineers that it was reliable, predictive and better than any model 
that the Corps had in its inventory. Through his own words, he lied to 
us all.
    Why didn't the DAIG discover these facts? If they did, there would 
be no investigation, it would have been thrown out. It is puzzling to 
me that the VCSA would send the letters of admonishment to the officers 
in question after these statements were made in public.
    As you know, I was the District Commander of the Rock Island 
District from 1997 to 2000. I watched a very dedicated group of public 
servants (minus a few on the economics team) work on one of the most 
challenging civil works studies in US history. Nobody deliberately 
tried to ``cook the books'' (except perhaps Dr. Sweeney) as has been 
claimed. What I observed was a bunch of great human beings trying to 
wrestle with a very hard problem/task. Predict the future for the next 
50 years with a reasonable level of certainty? I'm not sure it can be 
done.
    And with the NAS release of their interim review of the Navigation 
Study this week, I know and so do you that we can't do it with the 
Sweeney economic model. As head of the Navigation study's economics 
study team prior to 1998, Dr. Sweeney was responsible for the 
development of the model's traffic forecasts.
    He also oversaw and supervised the development of the 
transportation rate data prepared for the model by the Tennessee Valley 
Authority. Finally, Sweeney was the primary author of the Essence model 
and its controversial demand curve assumptions and 'N' values.
    The NAS found all of these elements to be seriously flawed to the 
point where the entire model is analytically useless. This brings me to 
the point at hand. Much has been said about the ``N'' value for grain 
currently in use in the study. I have been accused by the DATG of 
improperly taking or directing actions, which I knew, or reasonably 
should have known, would contribute to the production of a feasibility 
study that failed to meet standards established in law and regulation. 
In the letter of admonishment to me, the VCSA went on to say that, ``by 
improperly directing that certain feasibility study data be altered, 
you directly influenced the outcome of the study pertaining to the 
Upper Mississippi. River and Illinois Waterway''.
    I made a decision in June 1999 to use an ``N'' value of 1.2 for 
Grain in the Essence model. I listened to all the proponents of the 
Essence model, the critics, my economists and staff. My economists had 
previously stated to several working groups and the public that the 
value of ``N'' was 1.5. I questioned that value and how they came up 
with it. I was told that they selected it because it was the median 
number of the expert elicitation panel's range of ``N'' values, it 
produced believable results, and the economic study team was 
comfortable with it. That rationale was, and is, weak and insufficient 
for an important and far reaching study. It didn't work then and it 
doesn't work now. I asked them to use the information that we had 
available (primarily the Iowa Grain Flow Survey) and try to at least 
develop a reasoned methodology for the selection of an ``N'' value for 
grain. Using this reasoned methodology, the ``N'' value for grain was 
calculated to be 1.2.
    Many have stated their opinion that we overlooked Illinois. 
Illinois is pivotal in the navigation study because it exports more 
than the other states in the upper mid-west (Illinois ships by water 
more tonnage than any of the other four states and its total is almost 
half of all the five states combined). If we would have had Illinois 
Grain Flow Data, it probably would have shown the dependency of this 
State on waterborne transportation and therefore the N value of grain 
for this State would be mare inelastic than the rest. We didn't have 
that data, however, so we didn't fabricate a solution.
    We did the best we could with the information and data that we had 
at the time. In that regard, I have provided you with an attached 
document prepared by Mr. Rayford Wilbanks, a recently hired senior 
economist for the Mississippi Valley Division (MVD) of the Corps of 
Engineers. His report was generated for MG Phillip Anderson, then 
commander of the MVD, after the Department of the Army Inspector 
General (DAIG) interviewed the General. MG Anderson was concerned 
because it seemed as if the DAIG was questioning the mathematical 
accuracy of the N value of 1.2. Mr. Wilbanks' report to General 
Anderson is attached as Exhibit l.
    After consulting with other economists and mathematicians, Mr. 
Wilbanks concluded that his "...professional opinion is that there is 
no mathematical `error', i.e., you can apply a linear 'N' value to a 
nonlinear equation. Secondly, I believe the real concern or issue is 
what is the so-called `correct' `N' value and how should it be derived? 
The utilization of a weighted average of `N' does have economic merit 
in that it was derived from actual available data that logically 
weights the grain distance from the waterway. I do not see a flaw in 
this approach."
    At the time of Mr. Wilbanks' opinion, he had no exposure to the 
navigation study. Yes, it would have been nice to have commodity flow 
data, especially grain, from all five states for multiple years. This 
would have provided us with better information from which to derive 
expected values for ``N'' for each State to be used in the model. That 
luxury didn't exist then and it doesn't exist now. We did the best we 
could with the one data set (the Iowa grain data). I did ask the grain 
grower organizations in the five State area if much had changed in the 
way grain is shipped and/or used in the Midwest since the 1994 Iowa 
Grain Flow Survey, Their answer was an emphatic, N0! They also said 
they were probably more dependent upon cheap water transportation which 
helps offset lower than normal commodity prices. This review 
contradicts the DAIG finding that the mathematical methodology used to 
estimate the ``N'' Value of 1.2 was flawed. There is no similar 
scientific investigation in the DAIG report, just conclusions totally 
based on hearsay and false testimony.
    As a further validation of the uncertainties surrounding the N-
value, I submit a direct quotation from Mr. Manguno's affidavit, dated 
1 April 2000, before the U.S. Senate Committee on Environment and 
Public Works;
    ``7. Given the current state of the Study's investigation into the 
subject of waterway demand elasticities, I cannot conclude that the 
waterway demand elasticity that corresponds to an `N' of 1.2 for grain 
falls outside of my notion of the uncertainty bounds surrounding the 
actual elasticity values.''
    Although this is a somewhat obtuse way of saying it, I believe Mr. 
Manguno states in the above quotation that an ``N'' of 1.2 is within 
the range of uncertainty bounds, and thus may be the right answer. I 
find it to be very strange that the news media, and apparently the 
DAIG, concluded that Mr. Manguno's affidavit supported Dr. Sweeney's 
allegations completely. I believe that Mr. Manguno's statement refutes 
Dr. Sweeney's allegations, and supports my decisions concerning the 
derivation of an ``N'' of 1.2. Either the DAIG ignored paragraph 7, 
quoted above, or they did not understand it.
    I would also like to point out that the NAS on page 40 of their 
report state that the ``N'' value of grain that Dr. Sweeney espoused is 
not equal to 2.0 but is equal to a lower value of N. (Exhibit 2) They 
also state that the supply of grain is not uniform across all farms, 
and that farms face somewhat different local alternatives. Congressmen, 
what the NAS just told you is the ``N'' value is not 2, which Dr. 
Sweeney adamantly supported, and it is not 1.5, which is the mean of 
the uniform distribution used by Mr. Manguno. They go on to say that we 
should have based the ``N'' on actual historical data and actual 
shipper behavior--that is what I told my team to do when we calculated 
``N'' equal to 1.2
    In hindsight, the selection of a value of ``N'' of 1.2 is probably 
too high/-too elastic. On that note, T would also like to provide you a 
letter from Dr. Hauser from the University of Illinois (Exhibit 3), who 
did a study with one of the members of the National Academy of Science 
team investigating the study also, Dr. Baumel. Although this study s 
dated, he indicates that the value of ``N'' of 1.2 is at the upper 
bound of the feasible range of legitimate ``N'' values. He also 
indicates that the movement of grain has gotten mare inelastic since 
the time of his report. Why Dr. Baumel (Chief economic spokesperson for 
the Upper Mississippi environmental movement and now member of the NAS 
review team), who has been an active member of the navigation, study 
economic team/advisors, didn't provide this information to Dr. Sweeney 
in the early stages of his model development is still puzzling. Or, if 
he did, why Dr. Sweeney didn't use it is puzzling to me. To the best of 
my knowledge, the Hauser, Beaulieu and Baumel (HBB) report is the only 
totally empirically based grain elasticity information the Study team 
has to date. The DAIG investigators had this letter and the HBB 
original study. With this information in hand, I question haw the DAIG 
could conclude that I directed actions which I knew, or reasonably 
should have known, would contribute to the production of a feasibility 
study failing to meet standards . . . If anything, my direction got the 
study into a range of the plausible ``N'' values for grain.
    My directions were not only appropriate but based on a solid 
mathematical foundation, using the only available empirical data 
available and the result was closer than any other to grain's true 
demand elasticity.
    My direction was on the mark.
    As to the insinuation that I knew what the outcome would be is 
anything farther than the truth.
    In this regard, I submit an E-mail sent by my head economist, Mr. 
Manguno, written right after the decision to use an ``N'' Value of 1.2. 
(Exhibit 4) Mr. Manguno clearly states that any previous model runs are 
subject to change because the system environmental impacts (costs) had 
to be incorporated in the model and the optimal timing of benefits to 
costs had to be determined.
    These two facts did have a large impact on the outcome. There was 
no way for me to have known any of this before Mr. Manguno ran the 
models.
    The DATG had this information and the E-mail and did nothing with 
these facts either.
    On another note, the Navigation Industry folks were telling my 
economists verbally and in several written reviews that the model they 
were using was severely flawed. The Corps economists chase to ignore 
these critics.
    MG Anderson was found by the DAIG to have let the industry folks 
get too close to the study.
    The NAS interim report finds the same things wrong with the 
Navigation economic model that the Navigation Industry was trying to 
point out. To MG Anderson's credit, he has a good eye for the truth. 
How the DAIG could find something inappropriate in this regard is 
totally wrong. And to top it off the Corps regulations tell its 
planners to seek out the knowledgeable judgment of navigation 
economists and industry experts. (Exhibit 5) I find the DAIG findings 
in this regard truly appalling.
    I have tried to figure out how the DAIG could come up with the 
conclusions it did. I am always left with three outcomes, they were 
politically coerced by the last administration, they were duped by Dr. 
Sweeney's affidavit, his quasi-expert testimony and that of the other 
questionable Corps economists, or the IG investigators were in a highly 
technical investigation that put them at severe disadvantage--they were 
quite inept for the task.
    All three speak to a sad day for the Army. Not only is this report 
an embarrassment for the Army but also it could be divisive to our 
soldier's confidence in the IG process.
    These are my conclusions: I find the DATG report nothing more than 
slanderous drivel;
    I find the VCSA actions against the only people in the Corps asking 
the hard questions of Corps economists, who were totally wrong, 
unconscionable; and I find the NAS findings totally enlightening but 
almost lost by the public, press and Office of Special Counsel.
    It's not every day that a whistleblower blows the whistle on his 
own incompetence. How ironic.
    I still wonder how the congressional S&I investigation turned out 
but it wouldn't surprise me if they find Dr. Sweeney lacking in good 
management traits. Rather than supporting Sweeney's allegations and the 
resulting report prepared by the DAIG, the NAS findings seriously 
question Dr. Sweeney's professional credibility and his integrity. I 
feel that Dr. Sweeney owes the American taxpayer a huge apology for 
wasting more than fours years of effort and millions of dollars in 
taxpayer funds developing a useless model, not to mention the recent 
three plus years and millions of dollars that it took us to find out it 
was useless.
    I don't know how this injustice can be corrected. I respectfully 
request your thoughtful consideration of any options you may have to 
help correct them. I thank you for your attention to all I've said 
today, and for any actions that you may undertake as a result.
    Subject to your questions this completes my testimony.
                                 ______
                                 

                               EXHIBIT 1

To: Anderson, Phillip, R MG MVD
'subject: ``N'' Values Issues
    Sir, Attached is my assessment of subject issues per your request. 
I stopped short of contacting economists from universities in the Upper 
Mississippi region due to the sensitivity of the project and not 
knowing if it could be getting unbiased opinions. I would welcome a 
short meeting to relay additional insight after you have had a chance 
to review.

    Upper Mississippi River-Illinois Waterway System Navigation Study
               methodology for computation of ``n'' value

Task
    Is there a mathematical ``error'' in the Upper Mississippi River-
Illinois Waterway System Navigation Study Economic Study Panel's 
application of the derived ``N'' value? Would the economic community 
have contradictory views concerning the methodology, procedures, and 
application of the Study Panel's derived ``N'' value to estimate the 
demand for waterway transportation?
Background
    In June 1999 Dr. Donald Sweeney expressed concern to the Economic 
Study Panel for the Upper Mississippi River-Illinois Waterway System 
Navigation Study regarding the computation of the ``N'' value being 
used in the formula for the demand curve in the Essence model. The 
following paragraph, which explains Dr. Sweeney's concerns, is taken 
from an E-mail message dated June 29, 1999, from Dr. Sweeney to members 
of the Economic panel. Dr. Sweeney alleges that the method of computing 
the ``N'' value was erroneous in the concluding sentences of the 
paragraph.
    The methodology adopted by the study team for estimating farm 
product, origin-destination specific, ``N'' values in the Essence 
spreadsheet is inappropriate for three reasons. As I understand the 
methodology, information from the expert elicitation panel for farm 
products movements regarding reasonable upper and lower bounds for 
possible ``N'' values (determined by the panel to be 2 and 1, 
respectively), along with that panel 's conclusion that agricultural 
producers located nearer the river are more likely to be inelastic than 
producers distant from the river with respect to their demand for water 
transportation, and information regarding aggregated commodity flow 
data from the report entitled ``The Iowa Grain Flow Survey ``, 1996, 
are used to compute an ``expected value'' of ``N'' for all farm product 
movements. The weights used in estimating the expected value for ``N'' 
are derived from the proportion of total tonnage of movements of corn 
and soybeans to the river for the entire State of Iowa from an eastern 
band (near the river, N=1), a band for central Iowa (further from the 
river, N=1.5) and a band for western Iowa (distant from the river, 
N=2). Following this procedure yields an estimate of 1.2 for ``N'' for 
all movements of farm products. The first problem with this procedure 
is that it completely ignores the critical role that the end users of 
the product have in determining the derived demand for water 
transportation. It is the interplay of the willingness of producers to 
supply product to the river and the willingness of end users to pay 
that determines the characteristics of the demand for water 
transportation. The other problems with this procedure are immediately 
evident when the existing flows of grain from Iowa origins to other 
areas is examined. Most pools on the Upper Mississippi River and 
Illinois Waterway originate relatively small quantities of grain water 
movements. These pools do not ``draw'' grain from western Iowa or 
anywhere relatively distant from the terminals located in the pool. A 
few pools (with rail access to the river) originate relatively large 
volumes of water grain movements and draw a large proportion of their 
volume from relatively distant ultimate sources. Consequently, the 
larger volume movements should have higher ``N'' values and the more 
numerous smaller movements should have lower ``N'' values. If the study 
team wants to adopt some similar methodology, then it should apply the 
suggested methodology to specific origin, destination, and commodity 
movements. In other words, each farm product movement should have its 
own ``N'' value estimated as a function of the distribution of the 
ultimate origins of grain and destination for that movement. The final 
problem with computing the ``expected value'' of ``N'' in the manner 
adopted by the study team mathematical. Computing the weighted average 
of ``N'' values and then inserting that average into the non-linear 
functional form in the spreadsheet does not produce a weighted 
``average'' demand curve due to the non-linearity of the functional 
form in the spreadsheet.

Methodology
    The ``N'' value of 1.2 for grain is a weighted average that 
incorporates information from the August 1998 expert elicitation panel 
and the 1994 Iowa Grain Flow Survey. Info from the panel was used to 
identify a range of ``N'' values. Data from the Iowa Grain Flow Survey 
was used to develop the weights that were applied to the specific ``N'' 
values. The weighted average that resulted from this calculation was 
applied to all grain movements shipped from all origins.
    The conclusion of the expert panel was that the ``N'' value for 
grain ranged between limit values of 1.0 and 2.0. These limit values 
were used in conjunction with the three Iowa east-to-west crop 
reporting regions. The panel had concluded that grain originating 
closer to the river was relatively more inelastic as compared to grain 
originating farther from the river. Consequently the limit ``N'' value 
of 1.0 was assigned to eastern region and the limit ``N'' value of 2.0 
was assigned to the western region. The mid-point of the ``N'' value 
range, 1.5, was assigned to the central region.
    Weights were assigned to the three crop reporting regions in Iowa. 
This was accomplished by using the Iowa data, which described the 
proportion of each region's corn production that moved to the river. 
These proportions were converted to weights and assigned to the 
appropriate region. With assigned ``N'' values and weights for each 
region, the overall weighted average of 1.2 was applied to all grain 
movement shipped from all origins.

Research/Contacts
      Dr. Darren Hudson, Assistant Professor of Agricultural 
Economics, Mississippi State University
      Dr. Richard Kasul, Statistician Environmental Lad, ERDC
      Mr. Jerry Ballard, Mathematician/Computer Scientist 
Environmental Lab, ERDC
      Mr. Rich Manguno, Chief Economic and Social Analysis 
Branch, New Orleans District
    Dr. Hudson indicated the methodology utilized does not derive a 
weighted demand function, but is a demand function with a weighted 
constant ``N'' value, i.e., assumes the ``N'' is constant across the 
demand function. Dr. Hudson said the methodology utilized of assuming a 
constant ``N'' value or elasticity is the standard method to estimate a 
demand function, a constant ``N'' is all right to use, and the method 
utilized has derived an approximation of the effect distance from the 
waterway has on grain movement.
    Dr. Hudson said that with the lack of historical data and time for 
detailed analysis the weighted average ``N'' value is a good 
approximation. He said if you had 20 years of data on grain origins and 
movements you could run a least squares regression on the log of the 
quantity using barges and might be able to derive an approximation of 
N. Until the historical data and analysis is analyzed one cannot tell 
if the elasticity is higher or lower, although Dr. Hudson said an ``N'' 
of 1.2 seems too high. He said you could argue that grain along the 
waterway is more inelastic (<1) because the facilities for river 
transportation are readily available, the cost of river transportation 
is lower than other transportation forms, and there are no real 
substitutes for river transportation available to grain along the 
river. He indicated barge and rail are not perfect substitutes, 
therefore, barge transportation should be less than 1.2. He said that 
dividing the area into more segments (smaller areas) would most likely 
result in smaller ``N'' values because it would more precisely measure 
the effects of distance. Dr. Hudson said the lack of data and resources 
dictates the utilization of economic methodology and although you give 
up some precision the analysis becomes manageable.
    Mr. Jerry Ballard, Mathematician, ERDC, indicated the equation 
utilized is mathematically correct. Also, the application of the linear 
``N'' value is fine for the nonlinear equation for Q. Mr. Ballard 
indicated that his assessment of the question raised has to do more 
with doing something other than banding the region.
    Dr. Richard Kasul indicated there was nothing wrong with the 
mathematical application. He said that when you run something through a 
non-linear equation the expectation may be different than the total, 
i.e., non-linear equations cannot with certainty be mapped from one 
non-linear relationship to another therefore, expected results may 
differ. Dr. Kasul said that two questions are raised, 1) what is the 
correct ``N'' value? 2) was the correct application methodology 
utilized? The first is what the expert panel determined. The 
methodology and application of a weighted ``average'' ``N'' value 
should yield a better estimation of ``N'' and therefore should be 
better than using the mean or midpoint between 1 and 2.
    Mr. Rich Manguno said it is recognized the process utilized did not 
produce a weighted composite demand curve reflecting the distribution 
and weights indicated. However, the process did incorporate the concept 
of a distribution of ``N'' values and was based on the only empirical 
data available at the time. The process recognized the significant 
degree of uncertainty that surrounds the estimation of grain demand 
curves. This uncertainty includes not only the appropriate range of N-
values but also the weights that would apply to the N-values. While the 
weights are known with reasonable certainty for the State of Iowa, the 
same cannot be said for grain produced in other locations of the study 
area. For example, most of the grain shipped from the State of Illinois 
is within 90 miles of a navigable waterway, therefore, strict adherence 
to a mathematically precise aggregate demand function was not deemed to 
be critical.

Observations Regarding Methodology
    My answer to the question of a mathematical ``error'' is, NO, there 
is no mathematical ``error''. The application of the linear ``N'' value 
is fine for the nonlinear equation for Q. It is mathematically proper 
to utilize the weighted average of ``N'' in a demand function that is 
nonlinear. The method to derive the weighted average of ``N'' produces 
a good approximation of the effect distance from the waterway has on 
grain movement.
    My assessment of the economic communities' views concerning the 
methodology, procedures, and application of the derived weighted 
``average'' ``N'' value utilized in the demand equation is not as clear 
cut. I do believe most will agree that the methodology utilized was 
appropriate to estimate the ``N'' value and capture the effect distance 
from the waterway has on grain movements. Some will say that defining 
an ``N'' value for all segmented locations along the waterway if 
possible would yield a better estimate of Q. The question is would the 
estimate of ``N'' change? Just how precise does the estimate need to 
be? The precision utilized is dictated by the sensitivity of the 
answer; data available, time required for analysis, and funding for 
analysis. The method to derive the weighted ``average'' ``N'' produces 
a better approximation of the effect distance from the waterway has on 
grain movements than arbitrarily selecting the midpoint between 1 and 
2. Some of the uncertainty is handled by utilizing the expert panel to 
establish the appropriate range of ``N'' values and further by applying 
the weights to determine the ``N'' value. Bottom line, yes there will 
most likely be conflicting views on subject methodology, but the 
conflicts will focus more on what are the ``N'' values all along the 
waterway, different areas with their own particular ``N'' values, and 
request for more detail analysis to determine ``N'' values.
    My personal professional opinion is that there is no mathematical 
``error'', i.e., you can apply a, linear ``N'' value to a nonlinear 
equation. Second, I believe the real concern or issue is what is the 
so-called ``correct'' ``N'' value and how should it be derived? The 
utilization of a weighted average of ``N'' does have economic merit in 
that it was derived from actual available data that logically weights 
the grain distance from the waterway. I do not see a flaw in this 
approach. However, due to the sensitivity of the ``N'' value on the 
quantity of grain movements more in-depth analysis to estimate the 
``N'' value and/or estimation and utilization of different ``N'' values 
along the waterway may be warranted. Yes, conflicting views will 
prevail in the economic community, that is the nature of making 
projections.
                                 ______
                                 
                               EXHIBIT 2

                   INLAND NAVIGATION SYSTEM PLANNING

Sensitivity of Waterway Tonnage to Barge Tariffs
    Another serious problem is that there is little empirical basis for 
the Corps' estimate of how much of the grain will moved by barge, and 
how this will be affected by waterway congestion and the consequently 
higher shipping costs. The Corps' calculation is based on the ES SENCE 
model, which assumes an unusual functional form to forecast demand for 
barge transportation, as shown in Equation 4.I. The form) is not 
necessarily wrong, but because it is unusual, it is harder to compare 
it to more conventional formulations and to understand the implications 
of different values of its parameters.
    Corps economists originally argued that ``N'' in equation (4.1) was 
likely to be equal to 2, based on elegant but simple reasoning about 
the spatial distribution of commodity prices near a waterway. The 
economists hypothesized that agricultural products are loaded at a 
point an the waterway and that the point is surrounded by farmland 
producing a constant yield per acre. Each farmer has a choice between 
shipping the crop to export from the waterway port and selling it for 
local uses. If the costs of transporting the product to the port are 
proportional to the distance between the farm and the part and all 
farmers have the same alternatives, then the area shipping to the port 
will be a circle centered on the port. The size of the circle will 
expand or contract as barge rates at the shipping point fall or rise. 
Because the amount shipped on the waterway is proportional to the area 
of the circle, this implies that ``N'' is 2.
    Although the reasoning is elegant, some of the assumptions used are 
not realistic.
    If loading points are close, for example, then the drawing area 
(the trade area in which transportation costs to a given loading paint 
are lower than those to any other loading point) for each river port 
cannot be a circle, because the drawing areas will overlap-which 
implies a lower value of N. Similarly, the costs of transporting the 
grain to the loading point are not proportional to distance, because 
the loading-unloading charge is fixed. Finally, the supply of grain is 
not uniform across all farms, and the farmers face somewhat different 
local alternatives. Theoretical issues aside, the important issue is 
that the Corps made no effort to assure that its assumptions about 
``N'' were consistent with historical data an shipper behavior. Studies 
based on actual shipper behavior suggest that, contrary to the Essence 
model, price responsiveness of freight demand varies greatly by 
commodity and by location (Small and Winston, 1999).
    The Essence model implies that farmers that will choose to ship by 
barge lie within a circle centered on the loading port, As relative 
barge rates decline, the radius of the circle expands, since farmers 
further from the part can afford the shipping costs to the port, and 
vice versa. Essence also implies that ;farmers close to the part (well 
inside the radius of the circle) are insensitive to price, since it is 
cheaper far them to ship by barge. Similarly, farms far away from a 
port (well outside the radius) are insensitive to price since they will 
almost never ship by barge. However, farmers that fad that the cost of 
shipping by barge is almost identical to shipping by a different mode 
(or selling the corn for a purpose other than export) are extremely 
sensitive to small changes in price, such as that from 1 month to 
another.
                                 ______
                                 
                               EXHIBIT 3

            STATEMENT ON BARGE DEMAND ELASTICITIES FOR GRAIN
  ROBERT J. HAUSER, PROFESSOR AND HEAD DEPARTMENT OF AGRICULTURAL AND 
      CONSUMER ECONOMICS UNIVERSITY OF ILLINOIS, URBANA-CHAMPAIGN
                              JULY 22,1999

    This statement concerns the estimate for the barge-rate elasticity 
of demand for grain shipments on the Upper Mississippi and Illinois 
Rivers used by the Corps of Engineers in its evaluation of various 
navigation-related projects. My understanding is that the most recent 
estimate of elasticity used by the Corps is approximately three. 
(Demand elasticities referred to in this statement will be in absolute 
(positive) terms.)
    Since farm products account for the majority of the traffic on the 
Upper Mississippi and Illinois Rivers, assessments of navigation 
benefits and costs rely heavily on the underlying barge demand 
elasticities for corn and soybean shipments. In analyses conducted by 
the Corps, if the estimated demand elasticity is too high, waterway 
navigation benefits will be understated; if too low, the resulting 
benefits will be overstated. Thus it is important that (1) the general 
level of the elasticity be considered carefully, (2) differences in 
elasticities between river segments be considered, (3) a reasonable 
range of potential elasticities be considered, and (4) the sensitivity 
of the project-evaluation results to changes in the elasticity be 
measured. ,I will.address points 1 through 3, based on a study 
conducted during the 1980's by Hawser, Beaulieu, and Baumel (HBB).\1\
    \1\ Hauser, Robert.J., Jeffrey Beaulieu, and C. Phillip Baumel. 
``Impacts of Waterway User Fees on Grain Transportation and Implied 
Barge Rate Elasticities,'' Logistics and Transportation Review, 
21(1985), pp 37-55. Funded by U.S. Dept. of Transportation, Contract 
DTRS-57-80-C-00133.
    HBB measured impacts of alternative waterway user fees. The 1980 
transportation rate structure for rail, barge and truck was used to 
estimate user-fee impacts given forecasts of 1985 supply/demand 
conditions for grain. The HBB grain-flow projections were found with an 
optimization model containing over 11,000 alternatives for shipments of 
corn, soybeans, and wheat in the U.S., expressed in over 3,000 
equations. A base line solution (in terms of grain flows and attendant 
transportation costs) was found under the 1980 rate structure. The 
impacts of user fees were then assessed by measuring changes in grain 
flows and costs caused by imposing user fees (i.e., changing barge 
rates.) An important output of the analysis are estimates of own-price 
elasticities for grain barge shipments since the change in barge rate 
causes a measurable change in barge shipments, enabling the calculation 
of elasticity estimates. Resulting estimates are presented in Table 1.

     Table 1. Estimated Barge Demand Elasticities for Grains (HBB)1
                         Barge Demand Elasticity
------------------------------------------------------------------------
                                                  Fuel Tax   Segment Tax
------------------------------------------------------------------------
Upper Mississippi River.......................         2.09         2.10
Illinois River................................         1.07         0.92
All River Segments............................         l.62        1.48$
------------------------------------------------------------------------

    As indicated in Table 1, the barge demand elasticities for grain 
(corn, soybeans and wheat) found by HBB for the Illinois River, the 
Upper Mississippi River, and the entire system are well below the 
demand elasticity of 3.0 currently implied by the Corps shipment demand 
function for grains. Moreover, the degree of difference depends on the 
river segment. Because of its location relative to other rivers and to 
production, the Illinois River's elasticity is approximately half that 
for the Upper Mississippi River. Consequently, the HBB analysis 
suggests that using a single transportation demand elasticity for all 
waterways is not appropriate.
    HBB note that their analysis is a ``snapshot'' of demand 
characteristics that change from year to year, if not from day to day. 
In general, the barge rates used in the HBB analysis are higher than 
those which have existed since the study was conducted, implying that, 
under a stationary and linear demand, elasticities have fallen since 
the early 1980's and that the HBB estimates are probably biased 
upwards, indicating further that the Corps estimate is relatively high.
    Given the HBB analysis, the Corps' elasticity estimate should be 
considered, at best, an upper bound for analysis. Lower bounds could 
reasonably be defined well below one. Given this type of range, an 
important question becomes: how sensitive are the Corps' findings to 
changes in. elasticity estimates from, say, 0.5 to 3.0? Consideration 
of this question by river segment is critical to providing a sound 
assessment of the benefits and costs associated with new projects on 
the inland waterway system.
    Your consideration of this statement is appreciated.
                                 ______
                                 
                               EXHIBIT 4

Mudd, James V MVR
From: Manguno, Richard J MVN
'sent: Friday, June 11, 1999 8:52 AM
To: Mudd, James V MVR; Loss, Gary L MVR; Tipple, David A MVR; Thompson, 
Bradley E MVR; Carr, John P MVR; Barr, Kenneth A MVR; Marmorstein, 
Jeffrey G MVS; Astrack, Richard F MVS; Stuart, Richard E MVD
'subject: Model Results/BCRs
    The attached file summarizes the evaluations completed to date. 
Several points must be noted. 1) These evaluations do not include 
system environmental costs. 2) The list of investment measures is not 
necessarily a complete list. 3) We have not yet addressed the optimal 
timing of these measures. 4) If any of the Without Project rehab costs 
avoided are scheduled during the navigation season there is an 
additional benefit category to consider Navigation Impacts Avoided. 5) 
Investment measures that include lock extensions reflect slightly 
adjusted service times compared to the times most recently used 
(approximately 1-4 minutes slower for locks 20-25).
    We expect to complete the evaluations for the all the measures 
identified on the attachment by early next week.
                                                       Rich
                                 ______
                                 

                               EXHIBIT 5

 ER 1105-2-100 28 Dec 90 6-68. Evaluation Procedure: Step 7--Determine 
                   Future Cost of Alternative Modes.

    a. Future cost per unit of each commodity will normally be the same 
as current cost. As stated in paragraph 6-60a(5), the without-project 
condition normally assumes that the alternative modes have sufficient 
capacity to move traffic at current rates unless there is specific 
evidence to the contrary.
    This step combined with step 6 provides a time series of demand 
schedules specific to a particular commodity origin-destination 
pattern. Address the projection of any change in future prices as 
indicated below.

    b. A future rate is a prevailing rate as defined in step 5.
    It reflects exclusively a shift in rates because of projected 
changes in the volume of shipments on a given mode or a shift from one 
mode to another (e.g., from rail to pipeline). To support such a shift, 
show that the increase in volume is likely to lead to a change in rate; 
do not assume, for example, that an increase in volume of traffic of a 
commodity from one area to another will automatically ensure a more 
favorable high-volume rate.

    6-69. Evaluation Procedure: Step 8--Determine Future Cost of 
Waterway Use. Two separate analyses make up this step. First, analyze 
the possibility of changes in the costs of the waterway mode for future 
years for individual origin destination commodity combinations. Second, 
analyze the relationship between waterway traffic volume and system 
delay. Do this second analysis in the context of the total volume of 
traffic on the waterway segments being studied for with and without 
project conditions. This analysis will generate data on the 
relationship between total traffic volume. and delay patterns as 
functions of the mix of traffic on the waterway; it may be undertaken 
iteratively with step 9 to produce a ``best estimate.''

    6-70. Evaluation Procedure: Step 9--Determine Waterway Use, With 
and Without Project. At this point the analyst will have a list of 
commodities that potentially might use the waterway segment under 
study, the tonnages associated with each commodity, and the costs of 
using alternate modes and the waterway, including system delay 
functions with and without the project over time.' Use this information 
to determine waterway use over time with and without the project based 
upon:

    a. A comparison of costs for movements by the waterway and by the 
alternative mode, as modified by paragraph 6-69b.

    b. Any changes in the cost functions and demand schedules comparing 
(1) the current and future without project conditions and (2) the 
current and future with project condition.
    Conceptually, this step should include all factors that might 
influence a demand schedule; e.g., impact of uncertainty in the use of 
the waterway; ownership of barges and special equipment; level of 
service; inventory and production processes; and the like. As a 
practical matter, the actual use of a waterway without a cost savings 
or nonuse of a waterway with a cost savings depends on the 
knowledgeable judgment of navigation economists and industry experts.
    Senator Bond. General Flowers, you have come far in your 
distinguished career. But in the time ahead, I advise that you 
measure your job performance. It will be determined by many 
important things, but mandatory endorsement of the Washington 
Post is not something you should count on.
    [Laughter.]
    Senator Inhofe. For clarifications purposes, Senator Bond, 
let me just state that I had talked to General Flowers about 
all these things that have appeared in various publications. I 
think that we all agreed that a hearing is necessary to give 
him the opportunity to respond, and to respond on the record. 
It was certainly not in the form of attack on him or the Corps.
    Senator Bond. Oh, no, I wanted to make sure, because I have 
some colleagues that I wish were here today, and I may send 
them autographed copies of my statement, to share with them.
    Senator Inhofe. We will certainly do that. You mentioned 
the big picture. People forget that my hometown of Tulsa, 
Oklahoma is navigable. We are on that thing. It does not stop 
in Missouri. It comes on to Oklahoma.
    Senator Bond. We are happy to have you here, coming by.
    Senator Inhofe. We have concerns with Montgomery Point Lock 
and Dam, for example. If we had not attended that, there would 
be no way to predict the future of navigability into Oklahoma, 
so we are very much interested.
    In fact, I would further say, to make sure it gets on the 
record, that it was my father-in-law, who worked with Bob Curr 
and Senator McClellan, that started this whole thing that came 
all the way there into Oklahoma. So this is deeply in our 
family.
    Senator Baucus, would you like to have an opening 
statement?
    Senator Baucus. At a later moment; not at this moment, 
thank you.
    Senator Inhofe. This is your last chance.
    [Laughter.]
    Senator Inhofe. No, any time you want.
    Senator Baucus. I will find another chance.
    Senator Inhofe. General Flowers, it is nice to have you 
here. Normally, we have opening statements confined to 5 
minutes; but you are the only witness here. Take as long as you 
want, but try to keep it within 15 minutes at the most. Your 
entire statement will be placed in the record.

 STATEMENT OF LT. GEN. ROBERT B. FLOWERS, CHIEF OF ENGINEERS, 
                  U.S. ARMY CORPS OF ENGINEERS

     General Flowers. Thank you, Sir, I appreciate the 
opportunity to be here. I have prepared a statement that we 
have furnished, and I would like to ask that it be made part of 
the record.
    Senator Inhofe. Without objection.
    General Flowers. In my remarks this morning, I intend to 
speak out in defense of the U.S. Army Corps of Engineers, with 
its 35,000 dedicated military and civilian public servants.
    They are deeply concerned about what they read in the 
newspapers, and the reason is that they do not recognize their 
Army Corps of Engineers in the words that they read; and sir, 
neither do I.
    The Army Corps of Engineers is charged in the press as a 
rogue agency, out of control, too cozy with Congress; and 
living by its own rules.
    Those allegations are absolutely false. The Army Corps of 
Engineers has been publicly labeled that it cannot be trusted 
to do an objective study. The facts do not bear that out. It is 
simply not true.
    We have been painted as being insensitive to the 
environment, when the fact is that 20 percent of the our civil 
works program is dedicated to the environment. This percentage 
is growing.
    The language in the President's budget speaks to serious 
questions that have been raised about the quality, objectivity, 
and credibility of Corps reports on economic and environmental 
feasibility of proposed water projects. We welcome the 
opportunity to address these questions and to take action to 
address any and all findings of merit.
    In the case of Upper Mississippi and Illinois Navigation 
Study, we are responsible to forecast economic activity 50 
years into the future. It is very, very difficult to try to 
model this far ahead. I am not convinced that anyone has the 
tools to do this. I take very seriously both the results of the 
of the Army Inspector General's report on the Upper Mississippi 
and the report of National Academy of Sciences.
    Having said that, the public needs to be better informed 
about the circumstances surrounding this study. I am making 
substantive changes to the procedures used for the study. I 
must ensure the integrity of our study process. There were no 
findings of fraud or waste. Good and decent Americans are 
involved on all sides of this issue.
    The study, as indicated on this chart, when interrupted by 
whistle blower allegations, was far from complete and had yet 
to undergo several serious reviews.
    Senator Baucus. General, do we have a copy of that 
somewhere?
    General Flowers. Senator, we will furnish you a copy.
    Senator Baucus. Thank you.
    General Flowers. We were still in the study phase when 
whistle blower allegations were made. The National Academy of 
Sciences found that the model for economic analysis was flawed. 
In fact, the Academy's report said that the shortcomings were 
so serious, that the model should not have been used. Dr. 
Sweeney, the lead core economist on the study, developed this 
model.
    It was this emerging realization that caused much of the 
tension between the parties involved in the allegations. 
Despite the enormous complexity, the goal of our study process 
is to produce the best economic and scientific analysis 
available for the management of our Nation's water resources.
    Let me tell you the situation I found when I took over as 
Chief last October. I found a fundamentally sound organization, 
whose people possess an amazing breath and depth of 
professional and technical capability, and who continue to 
persevere in providing sound solutions to the Nation's water 
resources problems, despite being surrounded by controversy.
    Over the past year, we have been maligned in the press. 
Congressional committees, our own Army Inspector General, and 
the National Academy of Sciences have investigated us. We have 
had our credibility assailed and integrity questioned. Morale 
is suffering as a result of these circumstances.
    For over 200 years, the Congress and the American people 
have put their faith and confidence in the ability of our 
agency to respond and to solve some of our most complex 
National problems.
    Today, I assure you, the Army Corps of Engineers is an 
agency of integrity, with people of high character, who return 
real value to the Nation. The Corps has sound, systematic 
processes, that consistently provide decisionmakers, the 
Congress, the Administration and the American people, with 
solid recommendations based on sound engineering, scientific 
fact, and objectivity.
    Our processes are not just Corps processes; they are 
Federal processes that are used throughout the Government in 
the water resources arena. We work in an open atmosphere and 
collaborate with many stakeholders. We have been and remain 
willing to incorporate improvements to get better answers. Our 
intent is to achieve a synergy between economic objectives and 
environmental values.
    Toward this end, in April of last year, we improved our 
planning guidance, and this has clarified our ability to 
develop projects for environmental restoration. I pledge that 
we will continue to improve this process.
    Let me now address more specifically some of the questions 
that have been raised by two investigations of our study of the 
Upper Mississippi River and the Illinois Waterway.
    I believe many of the problems occurred for one simple 
reason. People were trying to do the right thing, their duty. I 
think that is an important point to remember, as we look at 
three of the more important findings and recommendations.
    The National Academy identified the economic model that we 
were using in the study as a problem. We agree. Within the 
Corps, we saw that this model was not working and needed 
change. The internal processes within Corps were in place, and 
the Crops leadership intervened.
    That intervention, however, has been characterized as an 
attempt to manipulate the outcome of the study. I do not 
believe it was. The Academy's report now confirms that the 
model was flawed.
    The Academy also found that despite the nearly $25 million 
that we spent on environmental studies, we must do more to 
integrate this information into the project decisionmaking 
process. We accept that judgment. I have already talked about 
the changes that we have made in our process to incorporate 
environmental values in our projects.
    In partnership with the States and other Federal agencies, 
we have made great strides in understanding the ecology of the 
Upper Mississippi, and in restoring its environmental 
resources; but we can and will do more. We also pledge to more 
thoroughly examine nonstructural alternatives.
    I am also taking the following additional actions. We will 
go forward with this complex study, after assessing the 
findings in the Inspector General's report and the National 
Academy of Sciences' report, and refocusing and restructuring 
the team. I am also establishing a Washington-level principles 
group, composed of senior people from other key Federal 
agencies.
    The Corps will continue to lead the study that this group 
will provide national level balance and guidance on important 
economic and environmental issues. The principles group met for 
the first time yesterday.
    We are also convening a similar group at the regional 
level, composed of our own Corps professionals, those from 
other agencies, the States, and non-governmental organizations 
such as industry and environmental groups.
    Finally, given the regional and controversial nature of the 
study, I am placing the study team under the direct supervision 
of the Commander of the Mississippi Valley Division, a general 
officer.
    Let me get back to the findings. One that I want to address 
specifically is that the Corps provided inappropriate 
information to the barge industry. The facts do not bare this 
out.
    Public involvement began early in the study. There have 
been 34 public meetings, with over 2,400 attendees and 2,500 
comments. Mailings went out to almost 10,000 individuals, 
agencies, and stakeholders, and there is still more to come.
    It is important to remember that the users, and the barge 
industry in particular, will be paying for half of the 
construction of any possible solutions; and the improvements, 
or lack thereof, that will ultimately have a great impact on 
their cost of doing business. It is incumbent upon us to 
provide them access to the study and to consider their input. 
We also provided access to environmental groups and other 
stakeholders throughout the process. We welcome and we use the 
input we receive from all interest groups and individuals. The 
Corps takes the findings of the two reports very seriously. We 
clearly understand our responsibility for providing you with 
the best environmentally sustainable alternatives, and we will 
do so.
    Let me move to the broader issue. During the review of the 
Upper Mississippi study, sweeping generalizations unfairly 
characterized the entire Corps study process. Two facts are 
important here. First, the conclusions reached were based on 
one study in one division. It is one of the largest and most 
complex studies we have ever undertaken; but it is still only 
one study. We have done thousands of important studies over the 
years.
    Second, a 1999 National Academy of Sciences' report found 
our study process to be fundamentally sound. One of my major 
objectives is to guarantee you that you can continue to have 
confidence in my organization and our products.
    It is critical that we continue to provide valuable 
services for the American people. Therefore, I am proposing as 
soon as possible the establishment of an independent review 
panel for large, complex, or controversial studies.
    We are still working on the details of this initiative. It 
will be a mixed group of Corps senior leaders and outside 
independent experts. They will provide me with a separate 
assessment, before I forward my report to the Office of the 
Assistant Secretary.
    This proposal would be an interim step while we await 
results from the WRDA 2000 mandated National Academy of 
Sciences review.
    Additionally, I am reinstituting the Chief's Environmental 
Advisory Board next month. In the past, this group of experts 
helped move Corps thinking and processes to achieve a more 
environmentally sustainable philosophy. They will again play a 
key role, and I look forward to hearing from them.
    Before concluding, I want to briefly return to the charges 
that have been leveled at the Corps. Are we a ``rogue agency,'' 
outside effective executive branch control, and ``too cozy with 
Congress''? We are absolutely not.
    We are a military organization, under the civilian 
leadership of the Assistant Secretary of the Army for Civil 
Works, and the military supervision of the Chief of Staff of 
the Army.
    When I came on board last year, I co-signed a letter with 
the Assistant Secretary, that reiterated this relationship and 
our individual roles and responsibilities. I would submit that 
the entire Corps program is subject to a higher level of 
executive branch and congressional oversight than any other 
form of Federal activity.
    Corps projects are separately authorized, and the bill is 
passed by Congress and signed into law by the President. Every 
project is reviewed annually by both the Administration and the 
Congress as part of the Appropriations process, before it can 
progress. Each is also subjected to a benefit cost analysis 
that is unique among Federal agencies.
    The second charge is that the Corps cannot be trusted to do 
an objective study and has a bias for construction. The facts 
tell a different story.
    This is what we know is true. We know that of every 100 
reconnaissance studies undertaken, only 16 result in actual 
construction, and five of six are weeded out. This is a pretty 
tough wicket to get through.
    We examined 15 cases where we have projected usage on the 
inland waterway system. The overwhelming majority shows actual 
traffic was close to or exceeded the projections. Only in four 
cases was traffic significantly below projections. Keep in 
mind, we are attempting to predict conditions well into the 
future.
    Another charge is that our projects benefit a few well 
connected beneficiaries, such as large agricultural interests, 
large companies, and foreign ship owners. The facts do not 
support the charge.
    In all of our major mission areas, the benefits that the 
Corps program provides are widespread. For example, 98 percent 
of the Nation's international trade comes through Corps-
maintained channels at the Nation's ports. This provides jobs 
for 13 million Americans.
    Since 1959, Corps projects have prevented nearly $500 
billion in flood damages across the country, returning nearly 
$6 in benefits for every $1 invested.
    The Corps hosts 380 million visitors a year at recreation 
sites, providing boating, swimming, and fishing. We produced 24 
percent of the Nation's hydropower. This power has a very high 
demand today.
    Your investment in the U.S. Army Corps of Engineers 
produces a 26 percent annual rate of return, and put $30 
billion in tax revenues and savings in the Treasury.
    Finally, we are accused of continuing insensitivity to the 
environment. This is absolutely unfounded. Again, our 
environmental program now constitutes 20 percent of our overall 
civil works program, and is growing.
    Projects with environmental benefits as the principal 
output now compromise the largest number of study new starts; 
more than navigation and flood control.
    Over the many years that the Corps had been working in our 
country, society's needs and values have changed, and we have, 
too. We have fully integrated environmental values into every 
phase of our program. We routinely solve problems in ways that 
also benefit the environment.
    My view, from 5 months on the job, is that Corps continues 
to be an organization with the highest integrity and remains a 
critical part of solving our country's problems, today and in 
the future. It is an organization that has changed in the past 
and is willing to again, provided that the change will result 
in improvement.
    We do not work alone. You in the Congress, the 
Administration, interest groups, and citizens, all are 
important to solutions.
    As our critics have chided us in the past, I would ask that 
they work with us in the future, for the well being of our 
citizens and the environment in which we live.
    Mr. Chairman, that concludes my remarks. I am prepared to 
respond to your questions.
    Senator Inhofe. That was an excellent statement, General 
Flowers.
    We have been joined by two Senators. I would like to give 
Senator Baucus and Senator Graham an opportunity for an opening 
statement, if they choose to do so.

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

    Senator Baucus. Thank you, Mr. Chairman. I will be very 
brief.
    General I appreciate your statement and presence here, and 
your ongoing efforts to improve not only the relationship with 
the Corps, but the operations of the Corps, basically for the 
American people. I appreciate that very much.
    When we get to the time to ask questions, I would like to 
explore with you a little about the Upper Mississippi, and its 
relation to our State, and the master manual, and how all that 
is put together.
    As you well know, we are a State where it does not rain. 
The precipitation west of about the 100th meridian is about 14 
or 15 inches, and that is about it.
    In western Montana and eastern Montana water is everything. 
To Oklahoma, it might be oil and gas, and water is probably 
important, too; but in Montana, it is primarily water. We do 
not have a lot oil and gas. It is extremely critical, with the 
levels of pools and so forth.
    Second, I want to explore a little bit the communication 
between local Corps officials, and Omaha and the rest of the 
Corps.
    People in Montana have great relationships with local 
management there. It is wonderful. There is a lot of trust. 
However, there is some feeling that when you go further up the 
chain, the communication is not very good. It is not what it 
could and should be.
    Beyond that, I have a couple of questions about the 
President's proposal to cut the Corps budget, and cut it 
considerably, and what impact that might have on your 
operations. I will get to that later. Thank you.
    [The prepared statement of Senator Baucus follows:]
  Statement of Hon. Max Baucus, U.S. Senator from the State of Montana
    Thank you Mr. Chairman. I would like to thank General Flowers for 
testifying here today. I look forward to hearing your testimony today. 
There has been a lot of focus on Corps management activities in recent 
years. There has also been a great deal of criticism leveled at the 
Corps. Some of this criticism has amounted to serious accusations of 
misconduct by senior officials.
    To the Corps' credit, it has made some effort to respond to these 
criticisms about its management practices and its alleged bias toward 
large construction projects. I hope to learn more fully from General 
Flowers how his agency plans to institute reforms. I am encouraged by 
General Flowers' testimony, that he would like to make the changes 
necessary to ensure the continued integrity of the Civil Works planning 
process.
    I also look forward to discussing with General Flowers some of the 
Corps activities that are very important to my State.
    Actions taken by the Army Corps of Engineers can have an enormous 
impact in Montana. For example, the Missouri flows into Fort Peck 
Reservoir in Montana. Every year, throughout the year, we sit and watch 
water flow out of our State for a multitude of downstream uses. Many of 
those uses are important to other States, and I appreciate that. 
However, that water is vital to recreation in our State, to our farmers 
and ranchers and to our economy.
    Our local communities around Fort Peck have a good relationship 
with the local Corps officers. I think that's great. It's a model of 
cooperation that should be encouraged in the Corps because, too often, 
decisions are made in Omaha or in Washington DC that just don't work 
for Montana. I am interested in discussing with General Flowers how to 
improve the lines of communication between States like Montana and the 
Omaha District.
    I understand that the President proposes to reduce the Corps' 
budget considerably. I realize that this could pose some problems for 
the Corps as far as instituting reforms or prioritizing projects is 
concerned. I would like to hear General Flowers' thoughts on this 
issue.
    Again, I would like to thank General Flowers for being here and I 
look forward to discussing with him ways to make the Army Corps of 
Engineers a more effective, efficient and responsive government agency.
    Senator Inhofe. Senator Graham?

             OPENING STATEMENT OF HON. BOB GRAHAM, 
             U.S. SENATOR FROM THE STATE OF FLORIDA

    Senator Graham. Thank you very much, Mr. Chairman, and 
thank you for calling this hearing.
    I have had the privilege of working closely with the Corps 
of Engineers on many important and successful projects over the 
years. This committee, in the last several years, has paid a 
lot of attention to the American Everglades.
    In my opinion, this is an outstanding example of the new 
modern Corps of Engineers, in its commitment to professionalism 
and the quality of its plan for environmental restoration of 
this important Nation treasure.
    I appreciate the comments that have been made by General 
Flowers. I believe that he represents the spirit of the new 
Corps, and will be a leader who will help to take the culture 
that I think that is illustrated in the Everglades on a 
nationwide basis.
    I would, however, like to bring to the committee's 
attention a specific Corps project, which I think raises some 
of the concerns that have lead to this hearing, and that is the 
project of dredging in the Apalachicola River.
    This river, which is one of the largest in the Eastern 
United States in terms of annual water flow, has for a century 
and half been a major transportation artery in the south, with 
its two extensions the Chattahoochie and the Flint River. It 
has been a significant transportation corridor.
    Approximately, a half century ago, Congress directed the 
Corps of Engineers to enhance the ability of the Apalachicola 
to serve as a transportation system by requiring that it 
maintain a channel nine feet deep and 100 feet wide, sufficient 
to float barges on the Apalachicola. This project has been 
under the jurisdiction of the Mobile Office of Corps of 
Engineers.
    I believe the time has come for this project to be 
reexamined in terms of modern realities. With other Members of 
the Congress, 18 months ago, a request was made of the Corps to 
examine the Apalachicola. I would like to ask that a letter and 
accompanying materials be submitted for the record, Mr. 
Chairman.
    Senator Inhofe. Without objection.
    [The referenced document follows:]

          Office of the Assistant Secretary for Civil Works
                                 Pentagon, Washington DC 20370-0108

Honorable Bob Graham,
U.S. Senate,
Washington, DC. 20510-0903.

Dear Senator Graham: I am writing to you regarding the Apalachicola-
Chattahoochee-Flint (ACF) navigation project, Alabama, Florida, and 
Georgia. Specifically; I am responding to your letters of July 19 and 
28, and November 9, 1999, wherein you asked me to provide additional 
information regarding the ACF navigation project.
    Over the past 12 months we have discussed the ACF on numerous 
occasions and our respective staff have exchanged information. I 
apologize for the delay in sending you a final written reply. However, 
this office has been working diligently with the Army Corps of 
Engineers to compile, evaluate, and discuss the volumes of material on 
file regarding the ACF. Last month, 1 was provided a comprehensive 
briefing on the ACF and related matters during a visit to the Corps 
South Atlantic Division in Atlanta, Georgia: Enclosure 1 is a short 
3=page summary of the extensive information we have compiled in an ACF 
reference notebook, a copy of which is provided at enclosure 2. 
Enclosure 3 contains additional information and clarifications in 
response to your specific questions regarding shipping costs, 
maintenance casts, flow requirements and ACF Compact negotiations, 
alternative dredged material management plans, and water quality 
certification from the Florida Department of Environmental Protection.
    Based upon our review and conversations with the Corps, I believe 
that maintaining navigation on the ACF is not economically justified as 
environmentally defensible. With an economic return that has been 
estimated at less than 40 cents far each dollar spent, it is difficult 
to continue to invest nearly $3 million each year on this project in 
light of the Corps overall backlog for operation and maintenance: 
Further, the deauthorization of navigation would provide the Carps 
greater flexibility to address important environmental issues along the 
river.
    Again, I apologize for the delay in responding to your letters. As 
always, I look forward to working with you, other Members of Congress, 
the Corps, and interested parties to discuss the future of navigation 
on the ACF and the potential for further exploring how to meet 
environmental restoration and protection, and recreation challenges, 
especially in the Florida panhandle area. Please do not hesitate to 
contact me if you have any questions.
Joseph W. Westphal, Assistant Secretary of the Army (Civil 
                                                     Works)
                                 ______
                                 
       Apalachicola-Chattahoochee-Flint Navigation Project (ACF)

                           MAJOR CONCLUSIONS

      A draft analysis for the Comprehensive Study of the ACT/
ACF River Basins--NED benefits from transportation savings are about 
$2.7 million/year, while O&M casts are about $7 million/year, for a BCR 
of $0.4.
      Past, current, and potential future environmental 
impacts, and related impacts on recreational uses are significant 
enough to warrant thinking about the sustainability of commercial 
navigation on the ACF system. It is anticipated that the benefits of 
restoring and protecting environmental resources and functions would 
far outweigh economic benefits associated with dredging and disposal 
practices and future requirements.
      The authorization for the ACF does not establish 
priorities for authorized purposes (flood damage reduction, navigation, 
hydropower, recreation, fish and wildlife, water quality). Thus, the 
Corps, in partnership with the three States, has tried valiantly to 
balance or maximize operations for all purposes.
      Dredging/disposal, navigation windows, hydropower 
infrastructure operations, recreation, water flows/allocations; fish 
and wildlife should be considered concurrently
      The Army has a tremendous opportunity to assume a 
leadership role under the auspices of the existing ACF project, the 
ongoing ACT-ACF Basinwide Comprehensive Study, and in accordance with 
the principles of cooperation outlined in an interagency Memorandum of 
Understanding executed on May 5, 1999.

                       ENVIRONMENTAL INFORMATION

      Apalachicala River is an Outstanding Florida Water, and 
Florida's largest river
      Dredging/disposal practices, and bed degradation have 
adversely affected riverine and flood plain habitat, the riverbed, and 
water quality along 50 miles of river
      USFWS concerned about potential impacts to federally 
listed fish (1) and mussels

                             FUTURE ISSUES

      Expensive structural options for increasing channel 
reliability would have serious environmental effects
      FDEP 5-year water quality certification has rigorous 
conditions to protect water quality (e.g., prohibits mechanical 
redistribution and with bank disposal; extensive mitigation 
requirements may be biologically unachievable and cost prohibitive)
      No approved disposal areas are available for Spring 2000 
dredging

                       RECREATION CONSIDERATIONS

      ACF Lakes in GA have combined annual economic impacts of 
over $300 million
      ``Navigation Window'' releases strand recreation 
facilities, create aesthetic and water quality problems, and affect 
adversely aquatic habitat and species
      Significant recreation related benefits are foregone

                     ACF ACTION FRAMEWORK STRATEGY:

      Federal/State agencies, local governments, interested 
parties must collaborate
      OASA(CW) should work with the ACF Compact Commission 
through the ACF Compact Commission (Mr. Lindsay Thomas)
    The Comprehensive Study could be refocused to:
  Update NEPA
  Revise Regulation, Dredged Material, and Navigation 
    Management Plans
  More extensively involve water agencies and stakeholders
  Address ESA issues
  Explore opportunities for environmental restoration and 
    projection
  Consider a basinwide ecosystem management approach
  Evaluate hydropower equipment and operational needs
  Consider fish passage structures at dams
  Consider making environmental restoration and protection a 
    primary purpose
  Explore partnerships with organizations like NFWF and TNC
  Consideration an ACF-specific program like UMRS-EMP or MMREP
  Address long-term monitoring (biological, physical, chemical, 
    hydrological)
  Reevaluate the status of two Section 1135 Projects w/NWFINMD 
    as sponsor
  Estimate habitat loss by quantity/type to guide restoration/
    protection goals
  Consider WES & TNC studies and modeling on alternative 
    operational schemes
         deauthorization of the commercial navigation purpose.
    The economic benefits associated with recreation and environmental 
restoration and protection clearly outweigh the benefits of commercial 
navigation. A smaller navigation channel could be achieved, either as 
an interim or permanent measure, by not dredging as much or by 
restricting the navigation season. However, it makes sense to consider 
deauthorization of the commercial navigation purpose because:
    (1) Historically, the Corps has not been able to maintain the 
channel at authorized depths more than about 56 percent of the time. 
Poor economic performance (traffic) has resulted, along with the need 
to implement extraordinary O&M measures that are expensive and result 
in adverse environmental impacts.
    (2) Since about 1990, it has cost the Federal Government about 
$30,000/barge to dredge the channel for the 100-145/barges per year 
that use the ACF, some of which only travel a few miles, and traffic 
has declined about 10 percent annually.
    (3) The Corps. would avoid causing significant environmental 
impacts as a result of dredging and use of navigation windows, and 
thereby avoid the costs to comply with the stringent mitigation 
requirements under the new FDEP permit.
    (4) The BCR for commercial navigation on the ACF is estimated, 
unofficially; at about 0.4, which, if verified, violates Principles and 
Guidelines for water resources projects.
    (5) There are no approved disposal areas available for use in the 
spring of 2000 and beyond, and because based upon information provided 
by-the Corps, State, and the USFWS, it will be difficult and expensive 
find alternative disposal areas or implement structural measures to 
reduce dredging requirements (presuming these measures are 
environmentally acceptable, which they are not).
    (6) Current O&M practices and the 1976 E1S are very susceptible to 
legal action, and an acceptable cumulative impact analysis has never 
been done.
    (7) The Corps currently pays for 100 percent of the 0&M for a 
project which, by law, is supposed to be cast shared (sponsors 
responsible for LERD). Lack of willingness to meet local sponsorship 
says something about affordability and acceptability.
    (8) Water allocation is a complex and controversial issue currently 
being addressed by the three States. Taking commercial navigation off 
the table for water allocation purposes would increase the flexibility 
of the Federal Government and the States when dealing with water demand 
and availability issues.
    Senator Graham. If I could just read one paragraph of the 
letter from Joseph W. Westphal, Assistant Secretary of the Army 
for Civil Works, dated August 9, 2000.
    ``Based upon our review and conversations with the Corps, I 
believe that maintaining navigation on the Apalachicola, 
Chattahoochie, Flint is not economically justified or 
environmental defensible.
    With an economic return that has been estimated at less 
than 40 cents for each dollar spent, it is difficult to 
continue to invest nearly $3 million each year on the project, 
in light of the Corps overall backlog for operations and 
maintenance.
    Further, the de-authorization navigation would provide the 
Corps greater flexibility to address important environmental 
issues along the river.''
    I believe that summary statement poses a challenge not only 
for the Apalachicola, but for the Corps. How do we go back and 
review projects, in this case, that have been in operation for 
more than 50 years, in terms of their current economics and 
environmental consequences?
    If I could I would like to just give a depiction of the 
economics of this project. The Congressional Budget Office has 
done a cost analysis of 26 Corps navigation projects, based on 
the cost per ton mile.
    You can see that the range is from a minuscule cost to a 
cost of over 15 cents per ton mile. The Apalachicola is the 
second most expensive of the 26 projects, which were analyzed 
with a cost of 14 cents per ton mile of traffic. What are we 
getting for this very expensive project?
    This is what is required along the banks of this 
magnificent river in order to keep this nine foot, 100 foot 
wide channel operational, so that we spend 14 cents per ton 
mile of barge traffic, and have a recovery rate of less than 40 
cents per dollar spent.
    It is necessary to pile the sand which comes out of the 
river along the banks of the river, and now some 50 miles of 
valuable habitat has been destroyed. We are now, with General 
Flowers' leadership, beginning a process of environmental 
restoration of some of this, which will have significant 
additional cost.
    Maybe some of you saw the movie ``Yulee's Gold,'' which was 
about the production of what we consider to be the best honey 
in the world, Tupelo honey. The area where that motion picture 
was made is just in back of that sand pile. That is where the 
Tupelo honey comes from, an industry which is now threatened by 
the destruction of the habitat along the Apalachicola.
    Mr. Chairman, I bring this example to your attention as a 
case study of what I think is the challenge to the modern Corps 
and to the Congress, and that is a process of looking at these 
projects; not just accepting tomorrow what we did yesterday, 
because it is the easy thing to do; but to challenge whether 
these projects can stand the test of economics and 
environmental consequences today.
    My opinion is that the Apalachicola River Project clearly 
cannot. I hope that this committee will soon give its attention 
to the recommendation of the Corps, which is that be de-
authorized for the navigation purposes.
    Thank you, Mr. Chairman.
    [The information referred to follows:]

    
    
    Senator Inhofe. Thank you, Senator Graham.
    Senator Voinovich, did you have an opening statement that 
you want to share?

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

    Senator Voinovich. I am going to take a couple of excerpts 
from it. I will not get into the whole thing. I apologize that 
I was not here to hear your testimony, and to the members of 
the committee.
    You and I have had a chance to talk in my office. I have 
something that we have all heard: fool me once, shame on you; 
fool me twice, shame on me.
    I must say that although we have had a very good 
discussion, I think that what I perceived, not so much from you 
but from your predecessors, was a lot of this business about 
Dr. Sweeney, and about the methodology you used for doing your 
feasibility studies, and the criticisms were exaggerated.
    The National Research Council said that it was flawed. I 
was told that now that we pulled this guy off the job because 
he was not doing it the right way, and we have a better way of 
doing it. Then an objective group came in and said no, that was 
not the case, so that needs to be taken care of.
    I think that the Corps needs to ensure that its process of 
planning and recommending projects is open, objective, and 
inclusive, and each project evaluation meets the highest 
standards of professionalism and quality.
    Further, we must be able to continue to rely on the Corps 
to recommend to Congress for authorization and funding only 
projects that make maximum net contributions to economic 
development and environmental quality, and that is not easy.
    You have pressure from the Administration and you have 
pressure from members of this body for you to do some things 
that maybe you do not want to do. I am telling you to stand up 
and do what you think is right based on the facts, regardless 
of what the circumstances are.
    In addition to that and in addition to restoring Congress' 
and the general public's confidence in the Corps, the Corps 
faces other challenges. Key among these challenges is the 
relationship between the Chief of Engineers and the Assistant 
Secretary of the Army and Civil Works.
    Last year, that relationship was public and acrimonious 
about who is in charge and who was co-opted into the other and 
so on. I know that you have clarified that, I guess, with the 
memorandum that was signed by the Chief of Engineers and the 
Assistant Secretary of the Army on November 28, 2000.
    I just want you to know that this Senator is going to be 
watching to ensure the Chief and the new Assistant Secretary, 
whoever he or she may be, follows through on the agreements 
laid out in that memorandum.
    If it is not, we are going to the another look at some of 
the legislation that Senator Daschle was trying to get through 
the Congress last time to clarify that relationship.
    The other thing is that we have a backlog of projects. You 
have a backlog in terms of your maintenance and operations 
budgets. I think that it is incumbent on you to stand up and 
talk about that.
    We cut the money available for these projects in half, and 
increased your responsibilities dramatically during the last 8 
years. Something has got to give.
    I think that it is your job to stand up for the Corps and 
to the Secretary, right along the line, and just call them as 
it is; and when you come to Congress, lay it out. You cannot 
make a silk purse out of a sow's ear. I think that it is really 
important that you do that.
    As I just pointed out, you have a problem. The President's 
blueprint budget proffers a strategy for addressing some of the 
backlog and for giving a high priority to projects and programs 
in the Corps principal mission areas. Overall, the Corps civil 
works budget is being reduced by 14 percent in fiscal year 
2002. That is ridiculous. You cannot do that. We need more 
money. I believe that we need to address higher levels of both 
funding for operation, maintenance, and construction functions.
     That is about it. But I just want you to know that I am no 
longer Chairman of this committee. I spent a lot of time on the 
Corps last time. Mr. Chairman, because I spent as much time as 
I did on this, I am going to stay on this, and work with the 
Chairman. I am not letting go of this. Do you hear me?
    I have got my teeth into this thing, and I will not let it 
go. I am going to watch it carefully and make sure that it gets 
done.
    I know from talking to you, that you are sincere about what 
you are doing. Your job is to restore the respect for the U.S. 
Army Corps of Engineers, with the Congress, with 
Administration, and more importantly with the people of this 
country, and I want to work with you. Thank you.
    [The prepared statement of Senator Voinovich follows:]

Statement of Hon. George V. Voinovoich, U.S. Senator from the State of 
                                  Ohio

    Thank you, Mr. Chairman. Welcome, General Flowers.
    In the short time I have been in the Senate, I have taken an active 
interest in the civil works mission of the Army Corps of Engineers. As 
the former Chairman of this subcommittee, I have worked on both Water 
Resources Development Act bills that were considered in the 106th 
Congress. I am proud to have been the sponsor of WRDA 2000, which 
Congress passed last November and was signed into law in December.
    The year 2000 was a difficult one for the Corps. A series of 
articles in the Washington Post headlined increasing criticism about 
the objectivity of the Corps' project evaluation process of significant 
water development projects across the country, including the Upper 
Mississippi River Illinois Waterway navigation project.
    Last December, both the findings of the Special Counsel and the 
report of the Army Inspector General were released, substantiating 
earlier allegations that Corps officials exerted improper influence and 
manipulated a cost-benefit analysis in order to justify lock extensions 
on the Upper Mississippi River Illinois Waterway.
    These findings raise doubts about the integrity of the Corps's 
project evaluation and development processes. Quite frankly, there are 
many in Congress who have lost faith in the Corps.
    Candidly, I am upset that the Corps patently dismissed as 
``exaggerations'' the allegations made public by whistleblower Dr. 
Donald Sweeny who said that senior Corps officials manipulated the 
Upper Mississippi study to produce results favoring large scale 
construction. These ``exaggerations'' that the Corps dismissed were 
later substantiated by the Army's own Inspector General. In addition, 
the Corps' economic analysis that was part of the Upper Mississippi 
study was verified to be ``flawed'' by the independent National Academy 
of Sciences' National Research Council.
    However, I believe the Corps plays a vital role in navigation and 
storm-damage mitigation throughout the United States and should be 
given the opportunity to redeem itself.
    The Corps needs to ensure that its process of planning and 
recommending projects is open, objective, and inclusive and that each 
project evaluation meets the highest standards of professionalism and 
quality. Further, we must be able to continue to rely on the Corps to 
recommend to Congress for authorization and funding only projects that 
make maximum net contributions to economic development and 
environmental quality.
    To that end, I supported a provision in WRDA 2000 that directs the 
National Academy of Sciences to conduct a study of independent peer 
review of Corps projects and a study of Corps methods of conducting 
economic and environmental analysis or projects. In fact, the National 
Research Council recently recommended that Congress direct the Corps to 
have its feasibility study of the Upper Mississippi River project 
reviewed by an outside interdisciplinary group of experts.
    I believe the Secretary of the Army took the appropriate action in 
directing the Chief of Engineers to review the Inspector General's 
report and the recently released National Research Council's evaluation 
report on the Upper Mississippi Illinois River feasibility study to 
determine what changes should be undertaken in the Corps' conduct of 
its studies. I look forward to hearing from General Flowers this 
morning about the status and preliminary findings of this review 
process.
    In addition to restoring Congress' and the general public's 
confidence in the Corps, the Corps faces other major challenges. Key 
among these challenges is the relationship between the Chief of 
Engineers and the Assistant Secretary of the Army for Civil Works. Last 
year there was a very public and acrimonious argument about the 
respective roles of the Chief and the Assistant Secretary in the 
supervision of the Corps civil works program.
    These roles were to have been clarified in the memorandum that was 
signed by the Chief of Engineers and the Secretary of the Army for 
Civil Works on November 28, 2000, and I would appreciate hearing 
General Flowers' comments on how this memorandum will improve and 
strengthen their working relationship. Congress will be watching to 
ensure that the Chief and the new Assistant Secretary, whomever he or 
she may be, follow through on the agreements laid out in the 
memorandum. This Senator stands ready to ``take another look'' at the 
implementation of this memorandum, and, if need be, make 
recommendations that additional management reforms be made.
    The backlog for construction and operation and maintenance projects 
is another important and daunting challenge the Corps faces. As my 
colleagues may well know, there is currently a backlog of $38 billion 
in active water resources projects awaiting Federal funding and a 
backlog of $450 million in critical maintenance. We need to develop a 
strategy to address the backlog. Whether it comes from Congress or the 
Corps or some other outside source, whatever strategy must consider 
management of the backlog to assure that it only includes needed 
projects that are economically justified, environmentally acceptable, 
and supported by willing and financially capable non-Federal sponsors.
    In constant dollar terms, our Federal investment in water resources 
development is less than one-half of the levels spent in the 1960's. At 
the same time, we are asking the Corps to do more particularly in the 
area of environmental restoration.
    Although President Bush's ``Blueprint Budget'' proffers a strategy 
for addressing some of the backlog, and for giving a high priority to 
projects and programs in the Corps' principal mission areas, the 
overall Corps civil works budget is being reduced by 14 percent in 
fiscal year 2002. I believe we need to address higher levels of funding 
for both operation and maintenance and construction functions. However 
given the Administration's approach, I am concerned that the Corps will 
not be able to adequately meet its current responsibilities. I would be 
interested to hear if today's witness could possibly shed some light on 
how the Corps can address its backlog while simultaneously absorbing 
such a reduction.
    Again, I look forward to hearing from General Flowers on all of the 
challenges facing the Corps and what management reforms are necessary 
to restore confidence and integrity in the Corps' ability to meet these 
needs.
    Although I am no longer Chairman of the Transportation and 
Infrastructure Subcommittee, I intend to be quite an active member. I 
am not going to let up on my call for reforms at the Corps, nor will I 
let this issue ``fall by the wayside.'' I will ask the Chairman for 
another hearing later this year to make sure that the Corps is doing 
what they say they are going to do.
    Thank you, Mr. Chairman.
    Senator Inhofe. Well, the Chair appreciates your 
enthusiastic involvement in this committee. Thank you very 
much, Senator Voinovich.
    We are going to go ahead now to adhere to the early bird 
rule. We will ask questions in accordance with the time that 
each Senator arrived. We would like to confine these to 5 
minutes. We will keep going, just as long as everyone gets a 
chance to ask questions.
    General Flowers, first just for clarification, did you say 
that the economic model developed by the whistle blower was 
flawed, and would you like to elaborate on that?
    General Flowers. Sir, I did not say that. The National 
Academy of Sciences said that. I said we agreed with the 
assessment.
    Senator Inhofe. Then last year, the Corps announced a 
series of listening sessions. What did you learn from your 
listening sessions? Tell us what those are.
    General Flowers. Sir, we did 12 regional and two national 
listening sessions, where we invited interest groups and others 
to come in and talk to us.
    We heard quite a bit. We set it down in a document so that 
we could show everybody what we heard them say. This is 
available. We have also published a summary on our website. We 
intend to incorporate the comments that we have received, as we 
move forward.
    Senator Inhofe. Last week, the Society of Civil Engineers 
issued a report card on America's infrastructure. It was not a 
very good grade, in my opinion. It was a ``D+.'' Do you have 
any comments as to why this grade was so low?
    General Flowers. Sir, this is a copy of that report card, 
pulled down off the Internet.
    As Senator Voinovich pointed out, we have really under-
invested in our infrastructure, in waterways alone. In last 
year 30 years, our population has grown about 40 percent. Our 
GNP has gone from $2.5 trillion to $7.5 trillion dollars.
    In that same time, our investment in our water 
infrastructure has declined 70 percent. I have got half of my 
locks in the navigation system that are over 50 years old. So 
those are the things that are contributing to that very low 
grade in water resources. The other thing I would point out is 
that we have an over $400 million backlog in critical 
maintenance to perform on that infrastructure.
    Senator Inhofe. General Flowers, a lot of statements were 
made during the opening statements. Is there anything that you 
would like do to respond to any of the parts of the statements 
that were made?
    General Flowers. As Senator Graham pointed out, challenges 
also present opportunities to the Corps. On the rivers, we are 
very willing to re-examine among all uses; particularly, on the 
waterways were we have relatively low use.
    Where the opportunity presents itself, we can develop a 
great synergy between what we do and the environment. I think 
the restoration work that is going on and will go on is a very 
big key to that. My pledge is to lend my shoulder to help that 
process along.
    Senator Baucus talked about the Missouri and the Missouri 
River Master Manual. The Corps is involved in tough 
controversial issues very, very often, and the Missouri is a 
classic one; a debate between upstream and downstream uses.
    What we have to do is go forward, using the best 
engineering and science available, to make a recommendation to 
the Administration, through the Administration, to all of you. 
You have got my pledge to do that. We are working that piece 
very hard. It is not easy.
    Senator Inhofe. Senator Bond?
    Senator Bond. Thank you very, much Mr. Chairman.
    Thank you, General, for your willingness to rely on sound 
science. That is something that is long overdue in the area. I 
hope, after your very forceful statement today, that this 
hearing will get the same kind of coverage in the media that 
the attacks received. I will be waiting with great interest, 
but not with great optimism. I trust that I may be wrong and 
that they will cover your statements. I will send thank you 
notes to anybody who does.
    [Laughter.]
    Senator Bond. You mentioned the sensitivity to the 
environment. It was the St. Louis district modifications in the 
structures on the river that really lead us to an understanding 
of how innovative Corps approaches can enhance the 
environmental restoration, conservation, and preservation of 
endangered species. The re-engineering of controlling 
structures such as wing dikes to create bars and islands and 
back channels have great promise.
    That is why I join with my good friend from Montana, with 
whom I do not always see eye to eye on Missouri River issues, 
to enact the Missouri/Middle Mississippi Habitat program.
    This, to me, is something that we are very interested in. 
How is the funding for that? Are you proceeding with that 
program; is that under-funded? Is it making progress?
    General Flowers. Sir, we are proceeding with the program. I 
would never classify anything as over-funded.
    As pointed out, I am very proud of the innovations that 
have been made, particularly in the environmental area by our 
districts. St. Louis is a great example. I think it again 
points out the willingness of the agency to change and adapt to 
the needs of the Nation.
    So as environmental concerns grow, our mission set in that 
area grows. We develop the expertise and tap the expertise that 
exists in academia and the private community to help further 
that. I think that this is a great example.
    Senator Bond. We were talking about environmental benefits. 
I keep going back to the point that is extremely important to 
us, particularly in St. Louis, because there is a real 
controversy over whether St. Louis ought to be raised to a 
serious non-attainment air quality issue.
    Right now, we have barges carrying our great agricultural 
products, going through St. Louis. One medium tow of barges 
carries the same amount of the commodities or amount of product 
as 870 trucks.
    I think that anybody who is concerned about the quality of 
the air will recognize that one tow boat generates a lot of 
less pollution than 870 trucks. Given the importance of air 
quality issues in St. Louis, do you calculate clean air 
benefits when you evaluate the benefits that barge traffic 
provides?
    General Flowers. The short answer to you question is, yes, 
sir. We have to take a look, as we evaluate the concerns for 
that factor. I need to speak directly to the Upper Mississippi, 
and how complex that study is, just to give you all a feel for 
what we are involved with.
    The Upper Mississippi River handles about 48 percent of the 
ton miles on our inland waterways; 37 locks and dams on the 
Upper Mississippi River and Illinois Waterway. It is a very 
environmentally sensitive area.
    As we work the economics piece and the environmental piece 
of the Upper Mississippi study, what we are dealing with is an 
area that we have not dealt with before in the Corps of 
Engineers. That is getting into the area of macro economics and 
a very holistic approach of how you incorporate environmental 
values, when you look at alternatives and make recommendations. 
That is a big piece of it, sir.
    We are also looking at international trade, You mentioned 
the growing competition from South America. We look at water 
policy and agricultural policy. That is why we need the other 
Federal agencies to come into this study with us, so that we 
can make use of their expertise.
    Senator Bond. I am glad you do. I will have more questions. 
I want to sneak in one before the light turns red. I will leave 
a few for you to answer for the record.
    When water transportation is at capacity, or we do not have 
water transportation, do you have any evidence that the rates 
charged to agricultural shippers, for example, other shippers, 
are raised by railroads?
    General Flowers. Sir, I do not have that with me. I will 
take that one for the record.
    Senator Bond. Do you have the TVA study perhaps, that said 
something about that?
    General Flowers. There probably is one. I do not have it at 
my fingertips. I will take that one for the record, if I might.
    Senator Bond. There maybe something in your records.
    Thank you, Mr. Chairman.
    Senator Inhofe. Thank you, Senator Bond.
    I believe that we have selected a date of April 26 to have 
the hearing of the Upper Mississippi River.
    Senator Baucus?
    Senator Baucus. Thank you, Mr Chairman.
    General Flowers, as we go into this difficult season of low 
snow pack in the West, and as you mentioned, one of the most 
vexing issues has been in the Missouri River, given all the 
pulls, tugs, and demands.
     One of the concerns that I am running up against, is the 
Corps' apparent either lack of communication or insufficient 
communications with public power agencies. I am talking about 
WAPA right now, because I have got the water and power 
problems, that we all are facing in this country.
    Could you tell me what degree to which the Corps is working 
with WAPA and communicating with WAPA, because they are going 
to have real power needs, as this year progresses.
    General Flowers. Sir, the Division Engineer in our 
Northwest Division, Brigadier General Carl Strock, and his 
staff are activity engaged working with WAPA and all of the 
other agencies in the region. We have an acute power crisis, 
not only in California, but also in the northwest and in your 
area of the country.
    We are working very hard to do what we can do to help that 
situation; spilling more water when we can for power generation 
in the northwest to improve the power situation, keeping in 
mind the responsibilities that we have to the fish and wildlife 
and the environment, and doing our best to inform everyone and 
work with everyone as we go through this. It troubles me to 
hear that we may have some communications problems, but sir, we 
will redouble our efforts.
    Senator Baucus. If you can look at that and get back to me 
about that, too, on what you are doing, I would appreciate that 
very much.
    General Flowers. Sir, I will do that.
    Senator Baucus. Second, this is a general problem that 
occurs in my State and in a lot of States, because we are not a 
large State, and do not have large firms. It is the difficultly 
that small contracting firms have been getting contracts with 
he Corps.
    There is a general bias, and I found this over and over 
again, for the Federal Government, whether it is DOD or whether 
it is Energy or what not, to go to the big contractors. They 
know them, they know the personnel, and they are good friends, 
all those kinds of things.
    There is an assumption that a smaller contractor out in the 
inner-lands just does inferior work. That is an assumption that 
because it is not big or not well known, that it must be 
inferior.
    I am here to tell you that almost the opposite is true. I 
can give you countless of examples of small firms that do 
better work, subcontracting work, than other firms that are 
better known. I find this problem in Montana, as well.
    I would like you to do a little assessment also of the 
degree to which the Corps is not getting contracts to smaller 
firms in my part of the country. I find this problem 
constantly; again, not only with the Corps, but with a lot of 
agencies.
    General Flowers. Yes, sir, the Corps leads the Federal 
Government right now in its small business contracting program. 
Small business is good for our country. We work very hard to 
ensure that a number of the contracts that we let, are let to 
small and disadvantaged businesses.
    Senator Baucus. If you could get back to me on that, too, 
with respect to Montana, I would very much appreciate that.
    General Flowers. Yes, sir.
    Senator Baucus. I thank you.
    Third, I worked hard on the WRDA bill on the last 
authorization, for $5 million for three watershed cleanups in 
Montana. One is in Yellowstone Park, the other is Soda Butte 
Creek, and the other is McLaren Tayleens. We just do not see 
the money. We do not see that happening.
    In some respects, maybe it is the lack of appropriations, 
but I think there is more to it than that. I can get more 
details to you, and I will.
    But there are several sites, Corps priority sites, that for 
some reason are just not getting funded. Again, I will give you 
the information, but I would appreciate it if you could get 
back to me on those issues.
    General Flowers. Yes, sir, I will do that.
    Senator Baucus. I have another question, and this gets to 
the basic question that we have all on all these tradeoffs. 
Right now, the flows are discharged at about 500 cubic feet at 
Fort Pack. During the winter months, it was 10,000 a second. I 
guess the plans are to increase those flows in June.
    I know that you have been up there. You have been to Fort 
Peck, and you know just how extremely important recreation is 
to that part of that State. In fact, it is everything. It is 
the walleye tournament of the world. Those folks up there live 
for that lake.
    There is already one boat ramp that is exposed high and 
dry. If the flows are increased to help maybe somebody 
downstream or what not, those folks are going to be hurting, 
because about the only thing that they have is the lake.
    I would like you to specifically, and again, this is 
another area to get back to me, on what the Corps' plans are 
with respect to the pool levels there, and when, and why.
    If I might, Mr. Chairman, all this comes down to something 
else, and I think it is pretty fundamental. Ignorance breeds 
fear. If people do not know the reasons for a decision, they 
get fearful.
    When there is not transparency, people conjure up all kinds 
of reasons why that decision was made for some nefarious 
reason. It is difficult for the Corps, because you are, in one 
sense a military agency, and in another sense, you are kind of 
a civilian agency; that is, you are doing civilian work.
    My honest opinion is that the institution and the culture 
of the Corps is too military, because it does civilian work. 
Every civilian agency, and I do not care if it is EPA or BLM or 
whatever, is under a lot more focus and a lot more public 
scrutiny, and those agencies are forced to give a lot more 
information as to why they reach the decisions they are 
reaching.
    So I am encouraging you, when you go through your reform, 
to open up, and tell us how you got those conclusions and why; 
whether is the master manual, and why it is what it is, in much 
more detail, and much more honestly.
    There is a tendency to kind of clam up. Well, we are the 
Corps. We know what is right. We are doing this right. How dare 
they challenge us?
    Again, ignorance breeds fear. What you say may be true, why 
people do not believe it as much as they should. They do not 
believe it as much as they should, in my judgment, because 
there is just not much openness as there should be, in term of 
public hearings, data, and all kinds of things.
    So I urge you to just go through a whole mind set, culture 
change, top, down, bottom, up, and give more reasons, and 
detailed reasons, of why you are reaching those conclusions 
that you do reach. Then I think that a lot of people will have 
a little more trust in the conclusions that are reached.
    Senator Inhofe. Thank you, Senator Baucus.
    Senator Graham?
    Senator Graham. Thank you very much, Mr. Chairman.
    I would like to go back to the issue that I raised in my 
opening statement; and that is a process for evaluation of 
exiting Corps projects.
    I understand that currently a project which is authorized, 
but has not received funds for a period of time, and I believe 
that is 7 years, is automatically surfaced. In the last Water 
Resource Develop Act several of those were de-authorized.
    My question is, should there not be some analogous process 
for projects that have been funded, so that they have to 
periodically be subject to evaluation, as to their economic and 
environmental and other relevant considerations, as they are 
functioning today; as opposed to when they may have been 
authorized several decades ago?
    General Flowers. Yes, sir, I agree. I think that there 
should be a process to re-examine and take into consideration 
all of the uses and make a recommendation.
    Senator Graham. Could the Corps be of assistance to this 
committee and the Congress in suggesting what such a process 
should look like, and what should be the standards for 
surfacing ongoing projects, due to their economics or 
environmental consequences?
    General Flowers. Yes, sir, we will take that on.
    Senator Graham. One issue that a project like the 
Apalachicola has raised to me is when a project becomes so out 
of the norm in its economics, should there be some point at 
which the taxpayers can say, we have gone beyond the line of 
reasonableness in subsidization?
    If you take the figures for the Apalachicola and divide 
them by the number of barges which used it in recent years, the 
cost per barge is in the range of $20,000 to $30,000. That is a 
very significant public subsidization, to one form of 
transportation.
    I accept the fact that all forms of transportation, 
including river transportation, do perform a public good, and 
up to a point should be free.
    For instance, in the area of surface transportation, we 
have recognized the fact that there are some components of 
that, such as bridges and tunnels, which are unusually 
expensive, where you to have to put a quarter or half dollar in 
the box every time you use it, as well as the general public 
subsidy that goes toward those tunnels or bridges.
    Is there a point in river traffic where there should be a 
requirement of a fee, or some other form of direct payment 
toward the cost of operation and maintenance of the project, in 
order to keep the total public subsidization within some limits 
of reasonability?
    General Flowers. Sir, I will take on what the trigger 
should be, and I will make a recommendation to all of you on 
when a project should be re-reviewed.
    The issue of charging fees for use of the Nation's 
waterways is probably beyond my realm to comment on. I have 
done a lot of combat engineering. I know when not to walk into 
a mine field.
    So, sir, I would say that I think that we have to examine 
the economic viability of projects that have been appropriated. 
We owe you some answers on what ought to trigger that look, and 
how we ought to proceed.
    Senator Graham. Thank you, General, and I would like to 
conclude on a totally different topic.
    That is, Mr. Chairman, with five of our colleagues last 
weekend, I visited Columbia, and specifically the two principal 
training bases, Mirandia and Traces Suskeenous. I had the 
opportunity to meet an outstanding young captain in the Corps 
of Engineers who, under about as adverse circumstances that you 
can imagine, is performing an outstanding service to the 
country. The success of our war on drugs in Columbia will owe a 
special debt that young man, Captain Al Perez.
     I want to say to General Flowers, if he is typical of the 
young officers who are coming up in the Corps, I have great 
confidence in the future of this agency.
    General Flowers. Thank you, sir.
    I would just like to offer a partial answer to something 
Senator Baucus brought up earlier in the questioning of maybe 
why the the Office of Civil Works is in the Corps of Engineers.
    This gives us the capability that no other country in the 
world has. Captain Perez is an officer who has worked in the 
Office of Civil Works, and we are able to transfer that 
expertise for the good of the country. I think it is something 
that, before we can consider before putting the Corps somewhere 
else, we should keep this in mind
    Senator Inhofe. Thank you, Senator Graham.
    Senator Voinovich?
    Senator Voinovich. I think that Senator Graham's suggestion 
about looking at the priority on projects is a good one.
    We did try in the last WRDA bill to put some language in 
that would give you the authority to evaluate objectively 
projects that ought to be dropped from the list. Unfortunately, 
I do not think that we were as successful as possible, because 
several members were reluctant to have projects dropped.
    It seems to me that in order to really get a handle on what 
your real costs are, you really have to do an evaluation on the 
reality of the projects that really need to be done, and some 
of those that are on there, that ought to be taken off the 
list.
    I would be very grateful to you if you would come back with 
some language for this committee that you think would really 
give you the authority to come back with some recommendations 
that would eliminate some of those projects, so we can get a 
real handle on how much is out there.
    I have asked a GAO for a study on infrastructure need, and 
I do not know whether we shared that with you or not. I am 
going to ask my staff to send it over to you. If you have got 
any other ideas on how we might add to it, so that when that 
study comes out that it will really capture your particular 
areas are involved with, I would welcome that.
    General Flowers. Thank you, sir.
    Senator Voinovich. In your testimony, you state that you 
are evaluating a Corps review process for feasibility studies, 
to determine whether improvements including independent review 
are needed.
    I would like to know what is status of that review, and 
have you made any preliminary findings? In particular, do you 
believe that independent review is necessary; and do you think 
that there is a role in this whole process for the Assistant 
Secretary of Army for Civil Works?
    General Flowers. Yes, sir, up until 1993, we had an 
organization known as the Board of Engineers for Rivers and 
Harbors. It was an internal Corps Board, made up of our 
division engineers. Every project that met a certain criteria 
had to appear before that board.
    They had to pass muster, justify their economic and 
environmental conclusions, before the Chief signed the Chief's 
report. So what you had was a pure form of peer review, where 
one division engineer did not want their programs embarrassed, 
so they would really prepare themselves and make sure that 
things were done correctly, before it went before the board.
    With the advent of cost sharing, there was a feeling that 
the Board of Rivers and Harbors was a redundant review of 
projects, and it was more expensive and took more time. 
Therefore, it was done away with by legislation in 1992.
    My read, sir, is in order to assure that we are leaving no 
stone unturned, is that we probably should establish a review. 
As I mentioned in my remarks this morning, sir, I think it 
should be made up of a mix of Corps officers and outside 
experts, not to add additional time onto a study, who would be 
involved with it, as the study progresses
    So as we go through our study process, gathering data, 
before we publish an initial report, it would have some sort of 
a look, as its going on, not to add time. Then when the final 
report is finished and it is ready for the Chief of Engineers 
to sign, this board could look at it again, and make any 
additional recommendations to the Chief.
    The integrity of the Chief's report is one of the things 
that the Secretary and I discussed and verified in the joint 
memo that we signed last November to assure its integrity.
    The Chief would sign the Chief's report, and send to the 
Assistance Secretary of the Army for Civil Works. The Secretary 
could then put comments on the Chief's report, if he or she 
would wish to do that, and forward the report.
    I think that is the proper way to proceed, sir. So I am in 
favor of reestablishing something like the Board of Engineers 
for Rivers and Harbors, without adding the additional time, 
because I do realize that adding time and expense onto an 
already very lengthy process, is not something desirable.
    Senator Voinovich. Do you need legislation for that?
    General Flowers. Sir, we will get back to you on that. I 
need to go through that with the new Administration's Assistant 
Secretary of Civil Works, when he or she is appointed. I owe 
them the right to have an opportunity to review this before I 
provide it to you, sir.
    Senator Voinovich. I have got one more question. Is that 
OK?
    Senator Inhofe. Go ahead.
    Senator Voinovich. The National Academy of Sciences' 
National Research Council made several recommendations, and you 
stated in your testimony that a draft Upper Mississippi River 
Feasibility Study is scheduled to be ready for public review in 
September of this year.
    How will the Corps apply the Council's recommendations, as 
it revises that Upper Mississippi River Feasibility Study? Do 
you think that it is important the Corps follow these 
recommendations to ensure the credibility of the study?
    General Flowers. Sir, we are going to use the results of 
both IG's report and the National Academy of Sciences report. 
The NRC is an arm of the National Academy of Science. We will 
use that report as we move forward.
    What we are doing now is rescoping and relooking at the 
Upper Mississippi Study, using the results of the National 
Academy of Sciences' review. We intend to restart the study in 
May.
    It may cause us to redo the schedule for the draft report, 
but we are looking toward trying to complete the study, if it 
is at all possible, by July 2002. The reason that date is 
critical is because of the WRDA 2002 bill that we would like to 
shoot for.
    We are working with the interagency group now. We are 
rescoping the study, and we intend to make use of everything 
that we have done to this point.
    We are spending $25 million to do environmental studies. We 
have learned a lot on how we incorporate that as we move 
forward. One of the recommendations made by the Academy, sir, 
was to, of course, get rid of the economic model that we were 
using, which was trying to forecast based on what had happened 
before, to forecast 50 years into the future.
    What they recommended is that we go to a range of scenarios 
or develop a range of scenarios of what might be; a broad range 
of scenarios, and do an analysis of those scenarios, using a 
much more holistic approach, environmental values, the 
economics that we have used in the past, and then come back to 
the Congress with a recommendation based on the range of 
scenarios.
    This sounds to me to be the best way to approach a very, 
very tough thing to do, and that is predicting what is going to 
happen in 50 years into the future.
    Senator Voinovich. That is part of the recommendation. So 
you thought some of them were really good?
    General Flowers. Yes, sir, and we do intend to incorporate 
them.
    Senator Voinovich. Thank you.
    Senator Inhofe. Thank you, Senator Voinovich.
    General Flowers, I am not going to use another round. I do 
want to compliment you, first of all, on the progress at 
Montgomery Point Lock and Dam; it is critical to us, and also 
for the way you were able to respond to the Clinton/Sherman 
problem that we had in Oklahoma. I appreciate that very much.
    There will be some other questions that I will ask for the 
record.
    Senator Voinovich, would you like to have another round of 
questions?
    Senator Voinovich. All I would like to do is ask the 
Chairman for permission to insert all of my opening statement.
    Senator Inhofe. Certainly, without objection, so ordered.
    [The prepared statement of Senator Voinovich follows:]
    Senator Voinovich. And any other questions that I have, I 
would like to have them answered.
    Senator Inhofe. That is fine.
    Senator Voinovich. General, again, you have a tough job, 
and I know you are excited about it. We look forward to working 
with you.
    Senator Inhofe. Thank you very much. This will conclude our 
hearing.
    General Flowers. Thank you, sir.
    [Whereupon, at 10:45 a.m., the committee was adjourned, to 
reconvene at the call of the Chair.]
    [Additional statements, submitted for the record, follow:]

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

    Good morning. I would like to thank Lt. General Flowers for 
appearing here today.
    At a hearing last year prior to General Flowers' confirmation, I 
noted that legitimate policy issues had been raised on topics like the 
integrity of the Corps' economic analyses and the future role of the 
Corps. I told General Flowers, however, that I believed he should be 
given the chance to settle into his new duties for a time before being 
asked to decide whether or not any management reforms are necessary.
    The purpose of today's hearing is to find out what, if any, changes 
General Flowers thinks should be made. Some believe that the Corps is a 
rogue agency, out of control. The integrity of the Corps' analyses has 
been disputed. Others have alleged that the Corps is a victim of 
inappropriate political pressures, with various federal agencies 
meddling in the Corps' professional judgements.
    I have reviewed the Investigator General's report that was released 
last December, and the National Research Council report released last 
February. Their findings were troubling. I look forward to hearing 
General Flowers recommendations for Corps reforms now that he has been 
on the job for several months and has had the opportunity to study 
these reports.
                               __________

Statement of Lieutenant General Robert B. Flowers, Commander, U.S. Army 
                           Corps of Engineers

    Thank you Mr. Chairman, I am Lieutenant General Robert B. Flowers, 
Commander of the U.S. Army Corps of Engineers and Chief of Engineers. I 
am pleased to appear before you today to discuss the service of the 
Army Corps of Engineers to this Nation.

Introduction
    The state of the Army Corps of Engineers is sound. We are prepared 
for the challenge of public service. Since 1775 the Army Corps of 
Engineers has honorably served the Army and the Nation. During the 20th 
Century the Army Corps of Engineers experienced both resounding success 
and dramatic controversy. Today, at the dawn of the 21st Century, we 
are called to respond to the scrutiny of the public we serve. I welcome 
this challenge.

The Civil Works Program
    The Army Corps of Engineers traces its origins to the construction 
of fortifications at Bunker Hill in 1775. For more than 225 years, the 
Corps has responded to the needs of the Army and the Nation.
    Throughout this period, the mission of the Corps has evolved from 
``Builder'' to encompass ``Developer/Manager'' and ``Protector'' of 
water resources. What began as a military engineering mission for 
nation building in the 18th century expanded into a major peacetime 
mission in the 19th century. The Corps helped a young nation map the 
frontier and expand westward by surveying roads and canals. The Corps 
promoted economic development through a vast water resources 
infrastructure, initiated development of the first national parks, and 
tied an inland navigation system together to move commerce across 
States and keep ports and harbors open, a role critical for national 
defense. In the 20th century, Congress provided the Corps with 
additional water resources development and management authorities, 
including flood control, hydropower, water supply, and recreation. More 
recently shore protection, disaster relief, and environmental 
protection and restoration authorities were added. As society's needs 
and values have changed, the Civil Works program has reflected changing 
national priorities for good water management. The Corps abilities to 
facilitate, advise, develop, operate, manage, and evaluate on a broad 
range of water resource issues furnish a robust capability set for the 
Nation's benefit.
    Mr. Chairman, within your oversight, the Corps Civil Works Program 
is primarily responsible for the development, management, protection, 
restoration and enhancement of our nation's water and related land 
resources for commercial navigation, flood damage reduction, and the 
environment. The program provides stewardship of America's water 
resources infrastructure and associated natural resources, and also 
provides emergency services for disaster relief. It is my job, in 
concert with the Assistant Secretary of the Army (Civil Works), to 
provide advice to the executive branch and Congress on these matters. 
The goal of our study process is to produce the best economic and 
scientific analysis available.

Water Resources Planning and the National Interest
    We are proud of our disciplined water resources planning and our 
planning professionals who face the daunting challenges of solving real 
problems, balancing competing interests and forging consensus around 
solutions. They serve the public well and very often in the midst of 
controversy and intense scrutiny. Their difficulties make the 
discipline of the process of paramount importance. Today, we continue 
to apply the Economic and Environmental Principles and Guidelines for 
Water and Related Land Resources Implementation Studies supplemented by 
Corps guidance that strives for inclusion of all interests in the 
management and investment in our water resources. When applied 
diligently, the Principles and Guidelines force all B the Corps and its 
stakeholders B to recognize the tradeoffs and balance competing 
interests.
    Our vision of planning is to meet national needs within the 
framework of current law and policy. Our planners have operated 
responsibly over the last two decades as priorities and concerns have 
shifted. The Water Resources Development Act of 1986 emphasized the 
National expectation that project partners be more involved in the 
formulation and financing of solutions to water resources problems. 
Nearly everyone believed that we could develop better projects more 
efficiently and effectively by recognizing that projects must both meet 
national needs and work viably at the local level. We responded with 
vigor and enthusiasm. The attached map illustrates where cost shared 
feasibility studies have been conducted with non-Federal partners since 
1986.
    Four years ago, the Army commissioned a National Academy of 
Sciences study to determine whether Corps planning should be further 
streamlined. That study concluded that the process was about right in 
terms of length and resources. During the last decade, interagency 
policy discussions increasingly have emphasized broader scale studies 
of entire watersheds with interagency collaboration and comprehensive, 
systemic solutions. An unintended effect of cost sharing has been the 
narrowing of focus of studies, as cost sharing partners are reluctant 
to finance studies that are broader than their immediate concern. As a 
result, our planners are often caught between the forces seeking 
comprehensive planning at one end of the spectrum and those who voice 
concerns for addressing needs on an expedited basis and early screening 
of alternatives that have little chance of being implemented. We are 
pledged to this service.

The Upper Mississippi and Illinois Navigation Study
    Turning now to the Upper Mississippi and Illinois Navigation Study. 
This is a feasibility study of lock capacity and reliability. The study 
area extends from St. Louis to Minneapolis-St. Paul on the Mississippi 
River and from the mouth to Chicago on the Illinois River, a total of 
1202 river miles encompassing 37 existing locks and dams. This reach, 
10 percent of the inland waterway system, provides the origin or 
destination of 48 percent of the ton-miles of the total system. This 
study was started in Fiscal Year 1993 to address limited lock capacity 
and reliability. Limited lock capacity leads to commercial tow delays, 
while reduced reliability of aging locks contributes to outages and 
higher maintenance costs. Both delays and outages can add millions of 
dollars to the costs of transporting grain and other commodities 
carried on the system. These costs in turn reduce the real incomes of 
farmers, other producers and consumers. While the Upper Mississippi 
River system is a vital transportation corridor it is also a nationally 
significant environmental resource. It contains a system of Federal and 
State wildlife refuges and parks that provide habitat for migrating 
waterfowl and support fish and wildlife resources. Navigation 
development has had an adverse impact on these resources which must be 
carefully addressed and balanced in any study of improvements. This is 
a truly comprehensive study of an entire navigation system. The 
estimated study cost is currently approximately $60 million. Our 
current schedule provides for release of a draft report for public 
review in September of this year. In July 2002, I expect to make my 
final report to the Secretary of the Army.
    The Upper Mississippi and Illinois Study is very complex, involving 
engineering, economic and environmental analyses of impacts and 
consequences of a wide variety of possible future conditions on these 
rivers. A sound investment plan for the navigation system must be based 
on reasonable projections of future volumes, types and destinations of 
commodities that will move on the waterway. Therefore, a key component 
of the study is a 50-year forecast of demand for water borne 
transportation on the Mississippi and Illinois system including the 
response of barge operators and shippers to congestion. The commodity 
movements on this system are largely agricultural. Volumes and 
destinations of these products are driven by world market conditions 
and therefore, fluctuate with world economic conditions. Another key 
component is forecasting the schedules for major rehabilitation 
activities. In view of these facts, projections are subject to 
significant uncertainty.
    As part of the Study a group of Corps team members made economic 
projections and built an economic model to provide a basis for study 
conclusions. This proved to be a very difficult task. As you might 
expect, there were disagreements between the many stakeholders, as well 
as team members, over the model and its projections. These 
disagreements ultimately led the Department of the Army to request a 
review of the navigation study analyses by the National Academy of 
Sciences' National Research Council. The Council released its final 
report on February 28, 2001. The Council's recommendations focused on 
four areas: economics; water resources planning; environment; and 
engineering. Concerning our economic analysis, the Council found that 
the Corps made a major improvement in our modeling by adopting a model 
that considers alternative modes of transportation and destinations for 
goods shipped on the inland waterway. However, the Council found that 
improvements are needed in the application of the model to make the 
analysis more consistent with the underlying economic theory regarding 
the equilibrium of supply, demand, and the movement of commodities. Due 
to these modeling problems and flawed assumptions and data, the Council 
recommended that our forecasts of barge traffic and waterway congestion 
should not be used in the feasibility study. The Council also 
recommended that we obtain more data for use in the model and that we 
more fully explore inexpensive, nonstructural alternatives, such as 
traffic management.
    Concerning inland waterway and water resources planning, the 
National Research Council recommended that we: (1) conduct a more 
comprehensive assessment of the impacts of navigation options on the 
environment; (2) clarify the use of environmental studies in the 
decision process; (3) obtain a review of the final feasibility report 
by an independent group of interdisciplinary experts; and (4) examine 
environmental improvements. Concerning our environmental analyses, the 
Council recommended as follows: (1) we should research the cumulative 
environmental impacts of the existing navigation system and both recent 
and proposed improvements (including the resultant increased towboat 
usage); (2) Congress should improve and enhance existing ecosystem 
research efforts with more emphasis on measures to address cumulative 
impacts, and broadened to include studies of the impacts of barge 
traffic on river ecology; and (3) we should conduct studies and make 
our mitigation strategy consistent with adaptive management principles. 
The Council found that our project rehabilitation and maintenance 
analyses were reasonable, but recommended that we reassess the 
contingencies that we assign to our construction cost estimates.

What We Are Doing
    First and foremost I take the issues surrounding the Army Corps of 
Engineers and the Upper Mississippi and Illinois Study seriously. I 
must ensure the integrity of the Corps of Engineers and its study 
process. In this regard there are several actions underway:
    While the National Academy of Sciences has completed a general 
review of the Corps studies process and found it to be a sound process, 
I am evaluating our review process for feasibility studies to determine 
whether improvements, including its recommendation for independent 
review, are needed.
    I fully support the National Academy of Science study directed by 
the Congress in the Water Resources Development Act of 2000 of the 
practicality and efficiency of independent peer review of feasibility 
studies and methods for project analysis.
    I am restructuring the management of the Upper Mississippi and 
Illinois Navigation Study.
    I am placing renewed emphasis on my Environmental Advisory Board to 
insure that I receive independent environmental advice.
    The Assistant Secretary of the Army for Civil Works and I, on 
November 28, 2000, submitted a joint memorandum to the Secretary of the 
Army on Civil Works Management and Communication Clarifications. In 
this memorandum, Dr. Westphal and I agreed upon the responsibilities of 
both parties and committed to sharing information, communicating 
effectively, and cooperating fully on all Civil Works matters. The 
Secretary of the Army provided copies of this memorandum to the 
Chairman and Ranking Member of this committee in his final update 
regarding enhancement of the management procedures of the Civil Works 
program.
    I am rewriting the vision statement of the U.S. Army Corps of 
Engineers to focus on service to the Army and the Nation.
    I have conducted extensive outreach sessions with a broad variety 
of interests, including meeting with a substantial number of Members of 
the House and Senate.

Other Observations
    There are many interested parties and many points of view in the 
Upper Mississippi and Illinois study area. The Corps team members have 
worked diligently to give all an equal opportunity to be heard.
    At any one time we have many feasibility studies underway. The 
attached map illustrates where cost shared feasibility studies have 
been or are being conducted with non-Federal partners since 1986. In 
any study, our challenge is to balance competing values and interests, 
develop alternative solutions that solve recognized problems and 
establish a broad consensus for the best solution. I'm proud of our 
record on the many studies depicted on this map. We are especially 
proud that many of these studies are resulting in projects that go 
beyond simply avoiding or mitigating environmental impacts and make 
positive contributions to restoring the Nation's environmental 
resources. We strongly believe our leadership, engineering and water 
resources skills and disciplined planning are central to solving real 
problems and serving the American people. We've served the Nation well 
and will continue to do so.

Conclusion
    Throughout my career I have been privileged to work with the 
outstanding men and women who make up the Army Corps of Engineers. They 
fostered in me a desire to be a consensus builder, someone who does not 
necessarily compromise but who seeks alternatives which uniquely 
combine individuals' input into a solution which is genuinely better 
than the sum of the parts. I view our current situation as an 
opportunity. This is an opportunity for us to see ourselves anew and 
rededicate ourselves to our principles.
    I take the issues surrounding the Army Corps of Engineers 
seriously, and I am making the changes necessary to insure the 
continued integrity of the Civil Works planning process, so that the 
Corps of Engineers can continue to fulfill its role in addressing the 
many water resource needs of this great country. Mr. Chairman, this 
completes my statement. I am prepared to answer your questions as well 
as those of other members of the committee.









                                 ______
                                 
   Responses by Lt. Gen. Robert Flowers to Additional Questions from 
                             Senator Smith

    Question 1. In your written testimony, you state that the ``goal of 
our study process is to produce the best economics and scientific 
analysis available.'' You also indicate that you are reevaluating the 
review process for feasibility studies to determine if any improvements 
are necessary.
    In their report on the Upper Miss Feasibility Study, the National 
Academy of Sciences recommended that the Principles and Guidelines, 
which were written in 1983, be updated to reflect changes in social 
values, as well as advances in analytical techniques and technologies.
    With that said, do you think it is necessary to revise the 
Principles and Guidelines, which have not been updated to reflect 
policy changes, such as the inclusion of environmental restoration as a 

Federal purpose?
    Response. We believe that the existing Principles and Guidelines 
provide enough flexibility to fairly evaluate environmental values and 
to incorporate these considerations into the Corps planning process. 
Indeed, the Corps has already expanded and revised its methods for 
evaluating environmental values during the formulation of its projects. 
Further, the Corps has numerous initiatives underway which are looking 
at better defining and evaluating environmental benefits and 
incorporating environmental sustainability into Corps projects. We 
believe these efforts are not constrained by the existing Principles 
and Guidelines.
    In addition, there are the two National Academy of Sciences studies 
directed by Congress in WRDA 2000 that need to be completed as well as 
the Corps own internal review. When these efforts are complete, I will 
work closely with Congress to address any legislative changes that are 
determined necessary.

    Question 2. Your written testimony reads that ``the state of the 
Corps is sound.'' How do you reconcile this with both the IG's report 
and the National Academy of Sciences' report, both of which conclude 
that there are serious flaws in the processes of the Corps?
    Response. I believe the state of the Corps is sound. Both reports 
focussed on a single, very complex study that has yet to complete the 
normal planning analysis and review process. They also assessed a draft 
document that had not yet been subjected to the initial public review 
step in the planning process. In 1999, the National Academy of Sciences 
completed a comprehensive review of the Corps of Engineers planning 
process, and determined that the complete process and its procedures 
were just about right.
    The scope and efforts involved in accomplishing this study 
recognized its complexities and the potential conflicting demands from 
the numerous constituencies involved. Some of the negative findings 
concerned new methodologies and models that were developed specifically 
to enhance the analysis of the very complex issues associated with the 
potential project, specifically the economic and environmental models, 
that had not been fully reviewed within the Corps internal processes. 
And some of the findings were based on the need for additional 
environmental data, even though nearly $25 million has been spent on 
development of such data. We are not going to use those models for 
completion of the study but will utilize the valid data and information 
collected, and develop additional data where needed to provide 
decisionmakers a series of assessments that reflect the uncertainties 
associated with this project and its alternative solutions.
    The existing soundness of the Corps provides the basis for us to 
move forward with this study as well as the hundreds of other studies 
and projects that are currently underway.

    Question 3. Do you intend to incorporate recommendations made by 
the NRC on the Upper Mississippi feasibility study as you prepare the 
draft for public review?
    Response. We are following the NRC recommendations concerning the 
models and assumptions used by not utilizing those models and 
developing a set of alternatives scenarios and options with risk and 
uncertainty analyses of each that will allow decisionmakers to examine 
the full range of options and impacts. In addition I have formed a 
national Level principals group to provide me advice and guidance as we 
move forward on this study. The Corps planning process has an extensive 
review element within it as well as multiple opportunities for public 
and impacted interests to review alternatives and recommendations and 
provide input.
    I would not hesitate to utilize independent peer review of complex 
studies such as the Upper Mississippi River and Illinois Waterway 
study. I am recommending the establishment of an independent review 
panel for large, complex or controversial studies. We are still working 
on the details of this initiative, but it will be a mixed group of 
Corps senior leaders and outside independent experts to provide me a 
separate assessment before I forward my report to the Assistant 
Secretary. This proposal would be an interim step while we await 
results from the WRDA 2000 mandated NAS review.

    Question 4. I applaud the resolution that you and Dr. Westphal came 
to, culminating in the memorandum you and he signed in November of last 
year. Do you anticipate that this agreement will carry over once the 
new Assistant Secretary of Army for Civil Works is confirmed?
    Response. Yes I do. The purpose of the memorandum was to establish 
clarity of the responsibilities of both the Chief of Engineers, and the 
ASA(CW), and to improve communications on all Civil Works matters. I 
signed that memorandum with Dr. Westphal in November of last year, with 
every intention of carrying it out, not: only with him, but also with 
his successor.
                                 ______
                                 
   Responses by Lt. Gen. Robert Flowers to Additional Questions from 
                             Senator Inhofe

                            HOPPER DREDGING

    Question. Recently, I asked MG Hans Van Winkle to ``let me know 
what can be done with, and without, legislation this year to advance'' 
the cause of further reliance on the private sector in the provisions 
of hopper dredging services. Could you please check on this matter and 
get back to me as soon as possible?
    Response. We are currently seeking opportunities for increasing the 
workload of the existing fleet of industry hopper dredges. We have 
considered placing an additional Corps hopper dredge, the MCFARLAND, in 
ready reserve and evaluate the ability of the industry to perform the 
work normally scheduled for this dredge. However, we are concerned that 
the McFarland may not be able to sustain its ability to rapidly respond 
to unforeseen time-sensitive or emergency work due to the condition of 
its operating machinery and engines. The hopper dredge was launched in 
1967, and is in need of rehabilitation and modernization. We are 
concerned that peak workload demands may require all available hopper 
dredge capability, including the McFarland, and without the needed 
modernization, the ability to ensure that our deep-draft ports are 
maintained may not be possible. We have proposed that, subsequent to 
the launching of the industry hopper dredge Liberty Island, currently 
under construction, the McFarland would undergo rehabilitation and 
modernization, and placed in ready reserve.
    To ensure the needs of our ports and waterways are met under any 
dredging scenario, we must be able to evaluate the capability of the 
industry dredges to respond during unforeseen peak workload events. 
Withdrawal of existing capability, realized by the current Corps hopper 
dredges, prior to consistent demonstration of the industry capability 
to respond could be detrimental to our nation's ports and waterways.

                        ENVIRONMENTAL MITIGATION

    Question 1. In your written testimony you state that the Corps is 
proud of projects that ``go beyond simply avoiding or mitigating 
environmental impact and make positive contributions to restoring the 
Nation's environmental resources.'' Yet at a May 16, 2000 Subcommittee 
hearing on the Corps Mission, we heard testimony that in some cases the 
Corps has failed to mitigate for the environmental impacts of levees 
and dams, or mitigation has not produced expected benefits. As an 
example the witness cited, the Vicksburg District of the Corps backlog 
of more than 30,000 acres of promised mitigation which h. Would you care to comment on this and what is the Corps 
doing to ensure that your method of calculating cost/benefits 
accurately reflects the benefits to the Nation as a whole.
    Response. We continue to refine our benefit evaluation 
methodologies to keep up with advances in economic evaluation and 
environmental science. We have placed particular emphasis in our 
research program in looking at ways to measure and value environmental 
outputs. We have refined our planning processes to achieve better 
synergy between economic and environmental values. For example in April 
of last year we improved our planning guidance to clarify our ability 
to develop projects for environmental restoration.

                        POLITICAL CONSIDERATIONS

    Question. What role, if any, do political considerations play in 
your decisionmaking process?
    Response. Political considerations have no role in my 
decisionmaking process. The decisionmaking process for my 
recommendations is spelled out in the ``Economic and Environmental 
Principles for Water and Related Land Resources Implementation 
Studies.'' Under these principles I evaluate and surface the plan with 
the greatest net economic benefit consistent with protecting the 
nation's environment. There can be overriding concerns such as health, 
safety, economies of scale, or equity which might cause me to recommend 
some other alternative but, by and large, the NED plan is recommended. 
Political considerations do not enter into the decisionmaking. Final 
exceptions and changes to such recommendations can be made only by the 
elected and appointed officials above me.

                    CIVILIAN AND MILITARY LEADERSHIP

    Question. What role does the civilian leadership (Assistant 
Secretary of the Army for Civil Works) have in Corps decisionmaking and 
how does that differ from the role of the military leadership?
    Response. The Assistant Secretary of the Army for Civil Works 
(ASA(CW)) supervises the civil works functions of the Department of the 
Army and I as Chief of Engineers report directly to the ASA(CW) on all 
civil works functions. The ASA(CW) establishes the Army position on any 
policy, programmatic, legislative, budgetary or major organizational 
change involving or affecting the Army's civil works functions. The 
Corps provides necessary support for the ASA(CW) to arrive at such 
positions.

                         INLAND WATERWAY SYSTEM

    Question. The inland waterway system has been described as 
``fragmented national network of channelized rivers and deepened ports, 
cobbled together by log-rolling and deal cutting by individual 
lawmakers, instead of comprehensive planning by Federal officials.'' Is 
that a fair description and if not, why not? (9/110/00, Michael 
Grunwald ``An Agency of Unchecked Clout; Water Projects Roll Post 
Economic, Environmental Concerns'', Washington Post)
    Response. It is true that the components of the inland waterway 
system have been incrementally authorized and funded by Congress for 
development, with different segments constructed at intervals over the 
past century and half. But just as the rail, highway and even telephone 
networks were built in pieces, once connected they evolved into 
national systems. With the obvious exceptions of the Atlantic 
Intracoastal Waterway and the Columbia-Snake System, which due to 
geography are physically separate and unique, other inland waterways 
have, over time, developed into a truly national system of commerce. 
Today America has an integrated national system of inland and 
intracoastal waterways linking the industrial corridors of the Ohio 
Valley and the breadbasket of the Upper Midwest to deep draft ports on 
the Gulf Coast, and thus to the world market. Because of the low cost 
of inland waterway transportation, U.S. agriculture exports are more 
competitive. This is why more than 65 percent of U.S. grain exports 
move on the inland waterways--and why other nations are spending 
billions of dollars to improve their own inland navigation systems.
    The McClellan-Kerr Arkansas River Navigation System is an example 
of a recently improved waterway now integrated into the national 
network.
    It was opened for inland waterway commerce in 1970. By 1975, 
traffic had grown to over 5 million tons. Today about 11 million tons 
of commodities a year ply the waterway, including coal, grain, 
petroleum products, chemicals, iron, steel and more. Billions of 
dollars have been invested in counties along the waterway and more than 
50,000 jobs have been created'' The waterway is highly integrated into 
the national system: More than 2.2 million tons in commerce is shipped 
or received at Tulsa, Port of Catoosa, at the head of navigation, 445 
miles upriver from the confluence with the Mississippi. Tulsa is now 
competitive in world markets, and ships nearly half a million tons of 
wheat for export through deepwater ports on the Lower Mississippi 
River. In all, Oklahoma now trades with 17 other States via the inland 
waterways, including such distant States as Pennsylvania, West 
Virginia, Ohio, Illinois, Wisconsin and Minnesota.
    Oklahoma farmers, manufacturers and consumers save an estimated $75 
million annually in lower transportation costs by using the inland 
waterway system.
    Inland waterways may be constructed for a variety of purposes, 
including navigation, hydropower, flood protection; water supply and 
recreation. The Corps of Engineers planning process assesses and 
ensures that a new waterway will be integrated into the national system 
through the calculation of National. Economic Development (NED) 
benefits. The aggregate NED benefits of all project purposes must 
exceed the project cost in order to justify authorization and 
construction. So while individual inland waterways were authorized and 
constructed in segments over time, each nevertheless demonstrated 
economic benefits that are national in scope. Navigation clearly 
integrates these waterways into a national system. In fact, today 
nearly 98 percent of the ton-miles of inland waterway traffic on the 
tributaries originates or terminates on another waterway. America's 
inland waterways have evolved into a single, unified network that is a 
vital component of the nation's Marine Transportation System.
                                 ______
                                 
   Responses by Lt. Gen. Robert Flowers to Additional Questions from 
                             Senator Baucus

 COORDINATION WITH WESTERN AREA POWER ADMINISTRATION REGARDING MASTER 
                             MANUAL UPDATE

    Question. As I'm sure you know, the Corps is in the process of 
revising its Missouri River master manual. It is likely that any 
revision of the master manual will change the way water is released 
from Missouri River mainstem dams, including Fort Peck in Montana.
    These dams generate affordable electricity sold through the Western 
Area Power Administration to customers throughout eastern Montana and 
our region.
    Given the dependence of these residents on Federal power, it is 
important for the Corps to evaluate fully the impact that proposed 
changes in dam operations will have on public power.
    I understand that steps are being taken to do this. However, will 
you make sure the officials involved to open the lines of communication 
with WAPA and concerned residents, so that this issue is fully 
explored?
    Response. By letter of 14 March 2001 the Regional Director of the 
Upper Great Plains Region of the Western Area Power Administration 
(WAPA) requested that WAPA be formally designated as a cooperating 
agency under the provisions of the National Environmental Policy Act 
for the Missouri River Master Manual Review and Update Process. 
Concurrent with the request from WAPA, in correspondence of 16 March 
2001 five upstream Senators (including Senator Baucus) requested that 
the Corps more fully evaluate impacts of alternative flow management 
plans to WAPA firm power users. Also concurrently, the Midwest 
Electrical Consumers Association requested that the Corps review it's 
earlier hydropower analyses in light of deregulation. Last week the NWD 
Commander granted formal cooperating agency status to the WAPA. NWD and 
WAPA staffs have agreed that an expanded hydropower analyses will be 
conducted including:
      Rate Impacts for representative WAPA firm power 
customers;
      Regional power supply risk analysis; and
      Review of existing hydropower National Economic 
Development NED) analysis
    Review of existing thermal generation economic analysis.

                      MONTANA RESTORATION PROJECTS

    Question. General Flowers, last year I worked very hard to secure 
authorization through section 502 of the Water Resources and 
Development bill for $5 million for the Corps to clean up three Montana 
watersheds, including Soda Butte Creek near Yellowstone National Park. 
The McLaren Tailings, which sit at the head of Soda Butte Creek, have 
been and continue to be an ongoing source of pollution in that 
watershed.
    The tailings sit behind an impoundment near the Creek and are 
vulnerable to flooding or other catastrophic events. The forest service 
has begun the process of cleaning up historic mine waste in the larger 
area around this site. However, the McLaren tailings have not been 
included in the larger cleanup operation, which is why I pursued a 
different avenue by securing a funding authorization for the Corps for 
this project.
    I understand that, although authorized, this funding has not been 
appropriated specifically for this project. I would like to know how 
you stand on working with me to ensure that the spirit of the WRDA bill 
is carried out and that these mine tailings, which sit so close to one 
of our national treasures, are cleaned up.
    I look forward to hearing your thoughts on this issue, including 
any creative suggestions you may have. This site is a top priority for 
me.
    Response. As you stated, there were no funds appropriated for Sec. 
502; however, the Consolidated Appropriations Act of 2001 provided 
appropriations for Sec. 560 of WRDA 1999. Sec. 560 was entitled 
``Abandoned and Inactive Non-coal Mine Restoration Program'' and allows 
for planning and design activities to address problems associated with 
abandoned mines. We have been working with the Montana Department of 
Environmental Quality (DEQ) concerning sites in Montana and they have 
indicated that they are willing to cost share with us to address 
problems caused by mining in the State. Soda Butte Creek is among the 
potential sites being considered for studies.
    Our intention is to show that the Corps can work effectively with 
our State and Federal partners to execute this type of program in an 
efficient and timely fashion. This will allow the stakeholders to gain 
confidence that we can execute as promised and then work through the 
appropriate congressional channels to provide us with the restoration 
authority that was intended in Sec 560.

               PROPOSED RELEASES FROM FT. PECK RESERVOIR

    Question. As you may be aware General Flowers, the Corps has 
proposed to institute a spring rise, or artificial spring flooding, 
from the Fort Peck reservoir. I supported the Corps' decision on this 
issue.
    However, due to low water levels, it is my understanding that the 
Corps does not plan to test the effects of a spring rise this year.
    Still, many residents along the Missouri, including the Assiniboine 
and Sioux tribes, are concerned about the damage a spring rise could 
cause.
    They would like to see the Corps do some studies about the impacts 
on downstream users, such as possible damage to irrigation pumps and 
water treatment facilities.
    They would like to see plans in place for mitigation activities and 
funding for repair or replacement of damaged equipment and eroded 
banks.
    There has been some talk that the Corps may release some funds for 
site assessment work on the Missouri. Could look into this situation 
for me and report back to me on what the Corps has done, or plans to 
do, about this issue? Would you support efforts to study and mitigate 
the effects of a spring rise on Montana residents?
    Response. The Omaha District is currently in the process of 
developing a Memorandum of Agreement (MOA) between the Corps and 
possibly a Conservation District (CD). This MOA would fund a portion, 
approximately $10,000; of the cost of the irrigation pumps site 
assessment work. This site assessment plan was developed from efforts 
of local interest groups and is anticipated to be accomplished by CD 
employees. The State Natural Resources Conservation Department, several 
CDs, local U.S. Natural Resources Conservation Service, and Corp of 
Engineers are sharing conceptual plans for the assessment and fully 
support it. The Corps will meet with these groups in Montana the week 
of 30 April 2001 to work on the final details of the site assessment 
work.
    Regarding the effects of a spring rise on Montana residents, the 
Corps will assess each situation, on a case-by-case basis.

                    POWER TRANSMISSION FROM FT. PECK

    Question. Fort Peck sits on an East-West energy tie. I understand 
that the transmission system out there could possibly be upgraded to 
push some more power into the West. This could be very important for 
the West, where we are experiencing an energy shortage in many places. 
I would appreciate your assistance in this matter. Could you look into 
this and get back to me?
    Response. This is a question that may be better answered by Western 
Area Power Administration. The Corps of Engineers and the Western Area 
Power Administration are reviewing the feasibility of reconfiguring the 
Fort Peck switchyard to allow Units 4 and 5 to generate on the western 
interconnection. This would allow 80 MW of electricity to be generated 
on the West system if needed.
    The Fort Peck Power Plants serve load on both the western and 
eastern power grids. Units 1, 2, and 3 can generate to either the East 
or West grid. Unit's 4 & 5 have their only connection to a 230kV Line 
serving the East Grid.
    The primary power line to move energy west is the Richardson-Coulee 
line. This 161kw line runs through Havre to Great Falls. Because of the 
total length of the line there are stability limits to the amount of 
energy that can be transmitted.
    The first portion of the Richardson-Coulee line is operated by 
Western Area Power Administration and runs 28 miles from the Fort Peck 
switchyard to Montana Powers Richardson Coulee substation. Western has 
rebuilt this line allowing it to be operated at 230kV and eliminating 
the stability limit. To realize this Montana Power must agree to 
upgrade their equipment.

            MISSOURI RIVER SYSTEM FISH AND WILDLIFE IMPACTS

    Question. I am interested in the Corps' scientific data on how the 
current management of the Missouri river is affecting fish and 
wildlife.
    Could you look into this and provide me with any information you 
have on this issue?
    Response. A significant amount of data exists concerning the 
impacts of the current operation of the Missouri River Mainstem Dam and 
Reservoir System and Bank Stabilization and Navigation Project on fish 
and wildlife resources. There are several technical appendices to the 
Missouri River Master Manual Review and Update Environmental Impact 
statement that we would be glad to provide to Senator Baucus. 
Additionally, in conjunction with the recently completed Section 7 
Endangered Species Act (ESA) consultation with the US Fish and Wildlife 
on current operations, a tremendous amount of scientific data relative 
to the listed birds and fish was amassed. That information is also 
available. The NWD and US Environmental Protection agency are currently 
funding a study of the Missouri River by the National Academy of 
Sciences, Water Science and Technology Board (WSTB). The Board has been 
specifically tasked to identify gaps in the biological science 
regarding the Missouri River. They were also requested to develop 
adaptive management strategies for the Missouri River, which would 
allow for changes in river management as better scientific information 
becomes available. The WSTB Report is due in September 2001.
                 land transfer, mccone county, montana
    Question. How is the land transfer proceeding with regards to 
section 22 land in McCone County, Montana? (Section 22 contains a T-Rex 
skeleton).
    Response. A meeting was held in Fort Peck, Montana, on April 4, 
2001, with representatives from the Corps of Engineers and State, 
Regional, and National offices of the Department of Agriculture to 
discuss the status of the Section 22 land in McCone County, Montana. 
The Department of Agriculture is securing, from an adjacent property 
owner, a permanent easement to guarantee access to the land proposed 
for transfer.
    Once easement is secured, USDA will transfer land to the Corps of 
Engineers. It was indicated the transfer of lands could be completed 
within 6 months. However, the Omaha district must still do a Real 
Estate Design Memorandum on the project in order to get authority from 
HQ for ``acquisition by transfer''. This action will take anywhere from 
2 weeks to 2 months to accomplish. The Walton family no longer has a 
legitimate Claim to the land.
                                 ______
                                 
   Responses by Lt. Gen. Robert Flowers to Additional Questions from 
                              Senator Bond

      UPPER MISSISSIPPI RIVER AND ILLINOIS RIVER NAVIGATION STUDY

    Question 1. Is the objective of the Upper Mississippi River and 
Illinois River Navigation study to forecast economic activity 50 years 
into the future?
    Response. The objective of the Upper Mississippi River and Illinois 
River Navigation study is to address the problem of waterway congestion 
and to identify the most appropriate solution. We use a 50-year period 
of analysis to compare the economic costs and benefits of the various 
alternatives. As prescribed by Principles and Guidelines for all 
Federal water resource studies, we use forecasts of future economic 
activity to characterize the most likely conditions that are expected 
to exist in the future with and without the various alternative plans 
in place. The estimated impacts of the alternatives under these 
expected future conditions provide the basis far formulating, 
evaluating and comparing the alternatives.

    Question 2. What is the freight traffic history on the mainstem 
Mississippi River in 5-year increments over the last 50 years? It is my 
understanding that freight traffic has increased from 59.3 million 
short tons in 1949 to 512.3 million short tons in 1999. Is that 
correct?
    Response. Freight traffic on the Mississippi River mainstem, 
Minneapolis, Minnesota, to Mouth of Passes, has increased from 59.3 
million short tons in 1949 to 512.3 million short tons in 1999. These 
figures represent all traffic, both domestic and foreign.

      Mississippi River, Minneapolis, Minnesota, To Mouth of Passes
                          (Consolidated Report)
                Freight Traffic (thousands of short tons)
------------------------------------------------------------------------
                         Year                                 Tons
------------------------------------------------------------------------
1949.................................................             59,323
1954.................................................             82,353
1959.................................................            120,278
1964.................................................            164,654
1969.................................................            229,480
1974.................................................            302,590
1979.................................................            430,171
1984.................................................            397,346
1989.................................................            462,736
1994.................................................            496,823
1999.................................................            512,348
------------------------------------------------------------------------


    Question 3. When were locks 20-25 constructed and for what 
functional life expectancy?
    Response. These projects were constructed between 1933 and 1940. It 
is difficult to accurately estimate the life expectancy of the 
structures. Based on experience, we expect that the longer projects 
remain in service, the greater will be the expenditures required for 
maintenance and rehabilitation to reliably extend their service lives. 
The preliminary findings of the Navigation Study indicate that these 
lock and dam structures could operate effectively and efficiently for 
an additional 50 years if they are rehabilitated in conjunction with 
the construction of lock extensions.

    Question 4. What are the principal commodities moved by water on 
the upper Mississippi and Illinois waterways?
    Response. Collectively, farm products (corn, soybeans, wheat, and 
prepared animal feed) represent the largest commodity group totaling 
almost 50 percent of all traffic on the upper Mississippi and 
approximately 40 percent of all traffic on the Illinois Waterway. On 
the upper Mississippi, other commodity groups, in order of 
significance, are coal and coke, petroleum products, construction 
materials, iron and steel, industrial chemicals, and fertilizers. On 
the Illinois Waterway, other commodity groups, in order of 
significance, are petroleum products, iron and steel, construction 
materials, industrial chemicals, coal and coke, and petroleum products.

    Question 5. Roughly how many trucks does it take to haul the 
equivalent amount of grain as a medium-sized 15-barge tow?
    Response. One 15-barge tow carries approximately 22,500 tons or 
787,500 bushels of grain. This is equivalent to 2.25 100-car unit 
trains or 870 large semi-trucks.

    Question 6. What is the relative fuel efficiency per unit hauled by 
water, rail and truck?
    Response. Generally, barge transportation is more fuel-efficient 
than rail and truck. Information from the Institute for Water Resources 
indicates that, on average, a gallon of fuel allows one ton of cargo to 
be shipped 59 miles by truck, 202 miles by rail, and 514 miles by 
barge.
    In the upper Mississippi River regions involved in this study, the 
efficiency advantage enjoyed by barges is probably somewhat less than 
the average, because gains in fuel efficiency for waterborne commerce 
have been limited in part due to the congestion and lock size 
constraints. It is currently estimated that 11 percent of the fuel 
consumed on the Upper Mississippi River is used during lock delays and 
processing.

    Question 7. What are the relative clean air values of water, rail 
and truck-born transportation?
    Response. Historical data indicates that barge transportation 
produces fewer emissions due to its fuel-efficiency advantage.

    Question 8. Under current law, would the Federal Government pay the 
entire cost of construction necessary to increase lock capacity?
    Response. The Inland Waterways Trust Fund was; established by the 
Inland Waterways Revenue Act of 1978, Public Law 95-502, as modified by 
Section 1405, Water Resources Development Act of 1986, Public Law 99-
662, for cost sharing for rehabilitations of the existing system, and 
construction of new projects. Revenue for the Trust Fund comes from a 
fuel tax imposed on the purchase of marine fuel by barge operators, and 
is administered by the Federal Government as part of the fiscal year 
appropriations process. Section 102 of the Water Resources Development 
Act of 1986 established a 50 percent cost share for inland waterway 
construction to be provided by the Inland Waterways Trust Fund. 
Projects resulting from the Navigation Study would be cost shared 50 
percent from the Inland Waterways Trust Fund and 50 percent from the 
General Fund of the Treasury.

    Question 9. I know the locks are old and need maintenance. If we do 
not extend locks, rehabilitation of the existing locks will be 
necessary. Is there an estimation of the Federal cost to rehabilitate 
the existing locks absent new construction, extensions or other 
structural expansion?
    Response. Preliminary study findings indicate that the locks should 
be rehabilitated on an approximately 25-to-30-year cycle. For each lock 
site, rehabilitation was estimated to cost approximately $25-30 million 
per cycle. For example, Lock 22 is estimated to need rehabilitation in 
2015 and 2045 at a cost of $25-30 million for each rehabilitation 
cycle. This issue will be reviewed and refined further as the study 
proceeds.

    Question 10. During the hearing I raised the issue about the value 
of water transportation in terms of being an insurance policy against 
higher-than-necessary railroad rates due to the competition water 
transport provides. Does the Mississippi Valley Division, for example, 
have any data or can they site any examples whereby rail rates 
fluctuate when navigation is unavailable due to maintenance, weather, 
or season?
    Response. Specific data is not available. However, anecdotal and 
empirical evidence suggests that the economic: impacts of upper 
Mississippi River navigation extend beyond those groups who directly 
provide or purchase barge transportation. The continued availability of 
water transportation appears to have a significant impact on the 
pricing behavior of other surface modes--at least when these modes are 
reasonably close to the river. In particular there is a large body of 
economic literature, which suggests that available barge transportation 
effectively constrains railroad pricing. Intuitively, the existence of 
competition produces lower shipping rates that benefit the consumer. 
There is no available data that correlates fluctuations of rail rates 
with closure of the navigation system.

    Question 11. There has been some discussion about environmental 
impacts of lock extensions. It is my understanding that most habitat 
modification affected by the navigation infrastructure has been a 
result of the dams and their operation, not the locks. If locks are 
extended from 600 feet to 1,200 feet, will that expansion, in and of 
itself, require a modification of the dams or their operation or will 
the dam; and operation remain essentially the same?
    Response. Your understanding that most habitat modification 
affected by the existing navigation infrastructure has been a result of 
the dams and their operation is correct. The dams and their operations 
will remain essentially the same with the proposed improvements. There 
will be no modification of the dams or their operations as a result of 
the proposed improvements.

    Question 12. Is the purpose of the study to discern the 
environmental impacts resulting from the existing system and/or is it 
to distinguish marginal environmental impacts resulting from an 
alternative system?
    Response. To comply with the National Environmental Policy Act, the 
navigation study will assess the environmental impacts of various 
alternative plans by comparing the conditions that are expected to 
exist in the future with and without the respective improvement plans. 
An Environmental Impact Statement will be prepared which will give 
appropriate consideration to past and present conditions but will 
primarily focus on the effects of alternative plans to relieve lock 
congestion as compared to the no-action alternative.

    Question 13. Was there empirical data used by the study team to 
support the selection of N=1.5 or N=2?
    Response. No empirical data was gathered during the feasibility 
study to support the selection of N=1.5 or 2.0 for grain. These 
specific values were based on theory and subjective assessment 
including input from Corps economists, Corps contractors, navigation 
users and shippers, and academic researchers. The review by the 
National Research Council found that empirical data collection is 
recommended to better support ``N'' values for grain.

    Question 14. It was reported (River Transport 3/5/01) that, 
``Sweeney, rather than refine the model further or wait for the 
completion of the technical review, inexplicably presented the results 
of these preliminary runs at a public meeting in early February 1998, 
before he had even briefed the Corps leadership.'' Were preliminary 
model results released prior to technical review without briefing Corps 
leadership?
    Response. Preliminary results were presented at the Modeling 
Integration and Simulation Team meeting held on 3-4 February 1998, 
prior to final technical approval and briefing of Corps leadership. The 
Modeling Integration and Simulation Team is a working group for 
environmental analysis consisting of the Corps and Fish and Wildlife 
Service. Non-governmental organizations also attended this meeting. To 
maximize public and agency input, study team members regularly share 
work-in-progress with the understanding that such information is 
preliminary or merely illustrative of ongoing modeling efforts. At the 
1998 meeting, the preliminary nature of the model was put in this 
context so that all parties would clearly understand that the analysis 
would be subject to continued refinement and agency technical and 
policy review. Apparently some participants misinterpreted these 
results as final study findings, which was unfortunate since the model 
was still a work-in-progress.

    Question 15. Who developed the model that the National Academy of 
Science's National Research Council suggested should be abandoned?
    Response. The Essence model was developed by Dr. Sweeney. The 
National Research Council review committee recommended the Essence 
model be revised to correct flawed assumptions and data.

    Question 16. Did the NAS suggest the appropriate ``N value?''
    Response. The National Academy of Science did not suggest an 
appropriate ``N value'' for grain; however, they did suggest that data 
collection was required to provide an empirical rather than a 
theoretical basis for selection of demand elasticity values for grain.

    Question 17. Will the Corps endeavor to indicate in its final 
report estimates on the cost of being wrong? Asked in another way, 
while you can estimate the cost of construction, which would roughly 
approximate the cost of needless modernization, can you and will you 
estimate the cost that failing to modernize may impose if capacity is 
insufficient, transportation costs are higher, and markets are lost?
    Response. The costs associated with not modernizing the system 
would be reflected by the failure to realize transportation savings 
associated with each proposed alternative. For example, the No-action 
alternative will result in some future cost to the Nation. Alternatives 
are evaluated against the No-action plan. The transportation savings 
from the alternative are the benefits of that alternative. If the No-
action alternative is selected, the cost of being wrong are the 
foregone transportation savings or benefits associated with each 
alternative.
    When the future is uncertain and a project involves significant 
complexity, there is difficulty in deciding what is the best course of 
action. In order to derive the best course of action, the Corps of 
Engineers has established a Federal Principals Task Force that will 
coordinate the development of consistent policies, strategies, plans, 
programs, and priorities for future economic development of the region 
and the Nation in terms of Agricultural and Trade. The Task Force will 
provide input into establishing parameters for additional assessment of 
risk and uncertainty.

    Question 18. Has the Corps pursued any formal or informal analysis 
of water infrastructure initiatives undertaken by foreign competitors 
and, if so, what are the summary findings?
    Response. The Upper Mississippi River and Illinois Waterway 
Navigation Study does not contain an explicit analysis of water 
infrastructure initiatives being undertaken by foreign countries. The 
revised forecasts of demand for United States grain exports were made 
with knowledge of foreign initiatives.
                                 ______
                                 
   Responses by Lt. Gen. Robert Flowers to Additional Questions from 
                             Senator Boxer

                       CORPS OF ENGINEERS REFORM

    Question 1. Of the many recommendations in the various reports and 
studies critical of Corps projections and methodologies and disregard 
for the environment, which are you most willing to implement?
    Response. While I do not agree with the general characterizations 
of the Corps processes, methodologies and leadership expressed in some 
of the reports, I take specific allegations and recommendations 
seriously. The generalizations are based not on a review of the Corps 
overall processes, procedures and methodologies, but on a draft report 
on a very complex and controversial potential project that had not been 
through the initial formal review called for in our process. In 1999, 
the National Academy of Sciences completed a formal review of our 
overall process and determined it to be just about right.
    As recommended, we are not going to use the economics and 
environmental models that were found to be flawed. We will develop a 
series of options with analyses of the uncertainties in each to reflect 
the suggestions raised in the National Research Council report. We will 
also collect additional data and undertake analyses determined 
necessary for leadership to make informed decisions. I have formed a 
national level principals group with representation from other affected 
and interested Federal agencies to provide me advice and insight on 
issues rind recommendations. There have been many and will be more 
opportunities for public and interest groups to review, comment and 
provide input as we move forward with this study.

    Question 2. Which do you intend to reject, and why?
    Response. I reject any generalizations about the Corps processes, 
methodologies and biases. We have ongoing programs to enhance and 
improve our processes and procedures, particularly in the evaluation 
and formulation of environmental projects. Over 20 percent of the 
current Civil Works funding is dedicated to environmental programs, and 
there are more new studies for environmental restoration projects than 
for navigation and flood control projects. However, I do not reject any 
specific recommendations that will ensure that this study moves forward 
to a final decision in a timely manner.
    I would not support any changes to the Principles and Guidelines at 
this time. I believe they have proven to be flexible and allow changes 
in our specific procedures that reflect society's priorities. In 
addition, Congress has directed and we are pursuing two studies with 
the National' Academy of Sciences (``Independent Peer Review of 
Projects'' and ``Review of Methods for Project Analysis'') that need to 
be completed before any changes are proposed. In addition, we are 
working with the Office of the Assistant Secretary of Army for Civil 
Works to develop implementation guidance for WRDA 2000 provisions 
concerning ``Enhance Public Participation'' in the planning process and 
``Monitoring'' of selected projects to verify economic and 
environmental results of projects. Any changes without the results of 
these efforts would be premature.

    Question 3. In your prepared statement, the end of the last 
Paragraph under the ``Water Resources Planning and the National 
Interest'' heading discusses the competing forces that pressure the 
Corps on the one hand to conduct thorough planning and, on the other, 
to expedite projects. The last two sentences read ``As a result, our 
planners are often caught between the forces seeking comprehensive 
planning at one end of the spectrum and those who voice concerns for 
addressing needs on an expedited basis and early screening of 
alternatives that have little chance of being implemented. We are 
pledged to this service.'' Please clarify what you mean by the last 
sentence-you are committing to what service?
    Response. My pledge is to address National, regional and local 
needs in the study process in a comprehensive basin or watershed manner 
t:o the extent possible. This focus can be difficult when viewed from 
the non-Federal sponsor's perspective. They are required to provide 
one-half of the costs and outside interests, who are not paying any of 
the costs, are demanding that issues broader than their specific needs 
be addressed. One way we tried to address this problem was a proposal 
for WRDA 2000 to enhance our ability to do comprehensive watershed 
planning by increasing the authorized funding and providing for a 
higher Federal share of such studies.

                       BUTTONWILLOW/SAFETY-KLEEN

    Question. I understand that the Corps of Engineers has not made any 
progress since last October on removing FUSRAP waste from the 
unlicensed Safety-Kleen facility at Buttonwillow, California, and that 
no further studies are being conducted. I am deeply disappointed by 
this continued inaction, and that waste continues to sit in an 
unlicensed California dump when other licensed facilities in other 
States express willingness to accept it. Will you commit to working 
with me to remove that waste from my State?
    Response. I am aware of your concerns regarding our use of the 
Safety-Kleen facility at Buttonwillow, California, for the disposal of 
FUSRAP materials. The Buttonwillow facility is permitted by California 
to accept radioactive materials with low specific activity, including 
radioactive materials of the kind that the Corps shipped to Safety-
Kleen: The Army Audit Agency (AAA) has investigated Corps use of the 
Safety-Kleen facility in California and has determined that ``the Corps 
and its supporting contractors took appropriate actions . . . to fully 
protect human health, safety and the environment.'' This finding is 
consistent with the' conclusions of an earlier study by California 
Environmental Protection Agency and the California Health and Human 
Services Agency. As stated in an August 25, 1999 letter to California 
State Assemblyman Dean Floret, both agencies agreed that ``there is no 
known safety or health risk to the community.'' AAA also determined 
that ``Removal of the waste from Buttonwillow may result in unnecessary 
risks to workers from potential construction accidents and risks to the 
facility's protective liners. More importantly, any removal action 
would have no effect on the overall waste contamination levels at the 
facility because it also stores wastes with similar levels of 
radioactivity that aren't related to the Corps' disposal.''
    The Corps has already taken steps to improve its communications 
with the regulators of disposal facilities it utilizes by requesting 
written concurrence that disposal of the specifics FUSRAP materials is 
consistent with the facility's license or permit prior to shipment of 
those materials. I will be happy to work with you to further improve 
communications between the Corps and the States where possible FUSRAP 
material disposal. sites are located.

                        DEER CREEK DEBRIS BASIN

    Question. Independent review of the Corps' work is of critical 
importance to the local residents living below the Deer Creek Debris 
Basin and the Deer Creek levee. The Corps has studied and recommended 
the removal of the Deer Creek levee. The Corps says removal of the 
levee will not decrease the community's flood protection, The community 
funded their own study which raised substantial questions about the 
Corps analysis of the debris basin's integrity and the wisdom of 
removing the levee. I believe that independent review in this case 
would ensure that mistakes are not made that endanger the health and 
safety of the people or that lead to flood damage. Will you work with 
me by committing to subjecting the Corps' study in this case to an 
independent review?
    Response. First, let me clarify that the Corps of Engineers has not 
recommended the removal of the Deer Creek Levee, which is also called 
the Deer Creek Reception Levee. We have informed local residents that 
we do not have jurisdiction over that levee, and that it is a local 
decision to remove or retain the levee. If the levee is removed 
however, a storm drainage system meeting city and county requirements 
would be put into place to intercept flood runoff formerly handled by 
the levee. We have conducted a reanalysis of the Federal project 
features--the Deer Creek Debris Basin, and Channel, and concluded that 
these project features still provide a high degree of protection. At 
the request of the Assistant Secretary of the Army for Civil Works, the 
Corps obtained an independent technical review in August 2000 by an 
well qualified engineering firm specializing in flood and sedimentation 
problems. The result of this review was concurrence with the Corps' 
technical evaluation of the Deer Creek Project that it affords 
protection equal to or greater that the FEMA Base Flood (one-percent 
annual. chance of occurrence). Currently the Corps is actively 
participating in a follow up engineering review of the project with the 
State of California, Federal Emergency Management Agency, city of 
Rancho Cucamonga, San Bernardino County Flood Control District, and 
concerned local citizens. We believe these technical review efforts 
fully address the flood control concern: that led to your request for 
an ``independent review''.

                            DEER CREEK BASIN

    Question. What procedures are appropriate when the public and its 
elected representatives raise questions about the efficacy of a project 
previously completed by the Corps of Engineers, such as what occurred 
with regard to the Deer Creek Debris Basin in San Bernardino, 
California? Under what circumstances is it appropriate to have these 
matters reviewed by an independent party such as the National Academy 
of Sciences, and has the Corps considered creating an Ombudsman program 
such as what occurs in other Federal agencies to deal with the publics 
questions and concerns?
    Response. For completed projects, the Corps has a process by which 
projects are reviewed for changed conditions under the Review of 
Completed projects authority. In such a procedure a study is initiated 
either through the Operations and Maintenance or General Investigations 
account to review the situation and report recommendations. If a 
feasible Federal interest is found in pursuing solution through such a 
cursory review, a detailed study is then pursued. The Corps has a very 
detailed review procedure that applies to its planning program with 
multiple levels of review by its field offices, the Headquarters, 
Administration and Congress. Sponsors participate throughout the 
process as well as the States and other Federal agencies. While we are 
not considering an Ombudsman program as you mentions=d, we are looking 
into some form of Independent Review as suggested in the Water 
Resources Development Act of 2000 through a contract with the National 
Academy of Sciences.

                            SNAKE RIVER DAMS

    Question 1. Do you plan to complete studies regarding the 
engineering necessities, economic mitigation, and energy replacement 
possibilities for the potential removal of the four lower Snake River 
dams? If so, when will those studies be completed and are you planning 
to have those studies peer reviewed?
    Response. The 2000 NMFS Biological Opinion (BiOp) does not require 
dam breaching to avoid jeopardy. However, it indicates that breaching 
should be kept as a future option, and establishes a schedule and 
triggers for determining whether to pursue this option. The BiOp 
recognizes that breaching is a major action requiring NEPA compliance 
and congressional authorizations. In addition, the BiOp lays out an 
expedited schedule to allow for the quick implementation of breaching 
or other more aggressive actions if necessary. It does not require 
advanced engineering analysis to meet this objective. The Corps is 
still. in the process of completing the Final Feasibility Report and 
Environmental Impact Statement (FR/EIS), which will make 
recommendations for future actions on the lower Snake River dams and 
reservoirs. The FR/EIS will assess the engineering and construction 
requirements to determine if it is implementable or technically 
feasible, but it will not address the advanced engineering required to 
actually implement breaching. No recommendation on advanced engineering 
requirements for breaching will be made until the FR/EIS is completed.
    We have assessed economic costs and benefits associated with d