[Senate Hearing 107-1001]
[From the U.S. Government Printing Office]



                                                       S. Hrg. 107-1001

          WATER RESOURCES DEVELOPMENT ISSUES AND CORPS REFORMS

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

                                HEARING

                               BEFORE THE

                              COMMITTEE ON
                      ENVIRONMENT AND PUBLIC WORKS
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                                   ON

ISSUES PERTAINING TO WATER RESOURCES DEVELOPMENT PROGRAMS WITH THE U.S. 
                        ARMY CORPS OF ENGINEERS

                               __________

                             JUNE 18, 2002

                               __________


  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
                             second session

                  JAMES M. JEFFORDS, Vermont, Chairman
MAX BAUCUS, Montana                  BOB SMITH, New Hampshire
HARRY REID, Nevada                   JOHN W. WARNER, Virginia
BOB GRAHAM, Florida                  JAMES M. INHOFE, Oklahoma
JOSEPH I. LIEBERMAN, Connecticut     CHRISTOPHER S. BOND, Missouri
BARBARA BOXER, California            GEORGE V. VOINOVICH, Ohio
RON WYDEN, Oregon                    MICHAEL D. CRAPO, Idaho
THOMAS R. CARPER, Delaware           LINCOLN CHAFEE, Rhode Island
HILLARY RODHAM CLINTON, New York     ARLEN SPECTER, Pennsylvania
JON S. CORZINE, New Jersey           PETE V. DOMENICI, New Mexico

                 Ken Connolly, Majority Staff Director
                 Dave Conover, Minority Staff Director

                                  (ii)

  


                            C O N T E N T S

                              ----------                              
                                                                   Page

                             JUNE 18, 2002
                           OPENING STATEMENTS

Bond, Hon. Christopher S., U.S. Senator from the State of 
  Missouri.......................................................     5
    Letter, Corps of Engineers reforms...........................     6
Chafee, Hon. Lincoln, U.S. Senator from the State of Rhode Island    18
Corzine, Hon. Jon S., U.S. Senator from the State of New Jersey..    13
Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma...    10
Jeffords, Hon. James M., U.S. Senator from the State of Vermont..     1
Reid, Hon. Harry, U.S. Senator from the State of Nevada..........     8
Smith, Hon. Bob, U.S. Senator from the State of New Hampshire....     2
Voinovich, Hon. George V., U.S. Senator from the State of Ohio...    14
Warner, Hon. John W., U.S. Senator from the Commonwealth of 
  Virginia.......................................................    19

                               WITNESSES

Brescia, Christopher, president, MARC 2000.......................    47
    Prepared statement...........................................   122
Brownlee, Hon. R.L., Acting Assistant Secretary of the Army 
  (Civil Works), Department of the Army..........................    22
    Prepared statement...........................................    60
Chase, Tom, director of environmental affairs, American 
  Association of Port Authorities................................    38
    Prepared statement...........................................    63
    Responses to additional questions from:
        Senator Jeffords.........................................    82
        Senator Smith............................................    84
Dickey, Ph.D., Edward............................................    44
    Prepared statement...........................................   112
    Responses to additional questions from:
        Senator Jeffords.........................................   118
        Senator Smith............................................   117
Ellis, Steve, director of water resources, Taxpayers for Common 
  Sense..........................................................    42
    Article, Taxpayers for Common Sense, The Construction Backlog   109
    Prepared statement...........................................   100
    Report, The Distribution of Shore Protection Benefits, Draft 
      Army Corps of Engineers, November 2001, Comments of the 
      Office of Management and Budget............................   110
Feingold, Hon. Russell D., U.S. Senator from the State of 
  Wisconsin......................................................    19
    Prepared statement...........................................    58
Fischer, Montgomery, director of water policy, National Wildlife 
  Federation.....................................................    40
    Letter from several organizations to the chair, Council on 
      Environmental Quality and Director, Office of Management 
      and Budget.................................................    96
    Prepared statement...........................................    85
    Responses to additional questions from Senator Smith.........    98
    Summary, The State of the Nation's Aquatic Resources.........    94
Flowers, Lieutenant General Robert B., Chief of Engineers, U.S. 
  Army Corps of Engineers........................................    23
    Prepared statement...........................................    61

                                 (iii)

  
Holland, Lisa, state coordinator, Flood Mitigation Programs, 
  South Carolina Department of Natural Resources.................    45
    Prepared statement...........................................   119
MacDonald, Tony, executive director, Coastal States Organization.    49
    Prepared statement...........................................   128
Robinson, Jr., Jim, Pinhook, MO..................................    51
    Prepared statement...........................................   134

                          ADDITIONAL MATERIAL

Letters from:
    Blehm, Kathleen K., project liaison officer, Yellowstone 
      River Conservation Forum to Senator Jeffords dated July 28, 
      2002.......................................................   154
    Yoder, Barbara, coordinator, Yellowstone River Conservation 
      District Council to Senator Jeffords dated July 26, 2002...   153
Statements:
    Daschle, Hon. Tom, U.S. Senator from the State of South 
      Dakota.....................................................    56
    Draper, Eric, director of policy, Audubon of Florida.........   136
    National Association of Flood and Stormwater Management 
      Agencies...................................................   150
    Perciasepe, Bob, senior vice president for policy, National 
      Audubon Society............................................   138
    Samet, Melissa, senior director of water resources, American 
      Rivers.....................................................   141
    Sepp, Peter J., vice president for Communications, National 
      Taxpayer Union.............................................   135

 
          WATER RESOURCES DEVELOPMENT ISSUES AND CORPS REFORMS

                              ----------                              


                         TUESDAY, JUNE 18, 2002

                                       U.S. Senate,
                 Committee on Environment and Public Works,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 2:30 p.m. in room 
406, Senate Dirksen Building, Hon. James Jeffords (chairman of 
the committee) presiding.
    Present: Senators Jeffords, Bond, Chafee, Corzine, Inhofe, 
Reid, Smith, Voinovich, and Warner.
    Also present: Senator Feingold.

OPENING STATEMENT OF HON. JAMES M. JEFFORDS, U.S. SENATOR FROM 
                      THE STATE OF VERMONT

    Senator Jeffords. The committee will come to order. Good 
afternoon and welcome. I would like to thank our witnesses for 
being here. Today, we are going to hear from the Administration 
and a panel of witnesses on the Army Corps of Engineers Water 
Resource Program.
    Since the passage of the Water Resources Development Act of 
1986, every Administration has submitted a biennial legislative 
proposal to the Congress containing project authorizations and 
policy initiatives. I understand a proposal from the Acting 
Assistant Secretary is at the Office of Management and Budget. 
However, we have not received a proposal yet. There is very 
little time remaining in this legislative session, and if we 
want to act this year we are going to have to have something to 
move on.
    Working with Senator Smith and members of this committee, I 
hope to introduce a legislative proposal before the July 4 work 
period. Many want the legislative proposal that this committee 
considers to include what is being referred to as Corps reform. 
There have been press reports and GAO reports suggesting that 
the Corps needs and overhaul. One of the reasons we are here 
today is to get input from other witnesses on possible changes 
to the Corps Water Resources Programs--how the Corps could be 
more effective and efficient.
    Senator Smith and Senator Feingold, who is joining us this 
afternoon and is here, have introduced legislation that would 
make several changes in the way the Corps does business. I 
intend to consider all views and work to develop legislation 
that will keep the Corps on its biennial planning schedule and 
help the Corps deliver their much-needed services of storm 
damage reduction, navigation and environmental restoration.
    [The prepared statement of Senator Jeffords follows.]
 Statement of Hon. Jim Jeffords, U.S. Senator from the State of Vermont
    Today we are going to hear from the Administration and a panel of 
witnesses on the Army Corps of Engineers water resources programs. 
Since the passage of the Water Resources Development Act of 1986, every 
Administration has submitted a biennial legislative proposal to the 
Congress, containing project authorizations and policy initiatives. I 
understand a proposal from the Acting Assistant Secretary is at the 
Office of Management and Budget. However, we have not received a 
proposal yet.
    There is very little time remaining in this legislative session. If 
we want to act this year, we are going to have to move forward.
    Working with Senator Smith and members of this committee, I hope to 
introduce a legislative proposal before the July 4th work period.
    Many want the legislative proposal that this committee considers to 
include what is being referred to as Corps reform. There have been 
press reports and GAO reports suggesting that the Corps needs an 
overhaul.
    One of the reasons we are here today is to get input from our 
witnesses on possible changes to the Corps' water resources programs--
how the Corps could be more effective and efficient.
    Senator Smith and Senator Feingold, who is joining us this 
afternoon, have introduced legislation that would make several changes 
in the way the Corps does business.
    I intend to consider all views and work to develop legislation that 
will keep the Corps on its biennial planning schedule and help the 
Corps deliver their much needed services of storm damage reduction, 
navigation and environmental restoration.

    Senator Smith.

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

    Senator Smith. Thank you, Mr. Chairman, and thank you for 
convening this very important hearing to discuss issues that 
pertain to water resources development--the program within the 
Corps. Obviously, Corps reform will and should be a very 
integral part of WRDA 2002, or the Water Resources Development 
Act. I want to make it very clear, I respect the Army Corps. I 
have been a supporter of the Army Corps for a number of years 
and seen first-hand the work that they have done. I am not 
opposed to the Corps. They have an important historical role to 
play. They have played it in the past and will play it again in 
the future, for national security, for mission areas of 
navigation, flood damage and environmental restoration.
    So initially in drafting this legislation, which is 
really--I have worked on it now for almost 2 years--was to give 
the benefit of the doubt to the Corps at every step of the way. 
But it seemed to me, as I began to move through this that 
incident after incident of flawed analysis and in many cases 
overstatement of benefits, flat-out miscalculations, whether 
they were accidental or intentional, it still is difficult to 
ignore. In some cases, the misinformation, erroneous 
information is just outfight intolerable.
    Last week's GAO report on the Delaware River deepening 
project, which concluded that benefits were overstated by more 
than 300 percent demonstrates why independent peer review of 
certain project is in fact warranted. Numerous changes have 
been given to the Corps to take meaningful checks internally to 
address the concerns. I just want to make it very clear to the 
Corps, this is does not have to be, this is not meant to be, 
nor should it have to be a hostile takeover or in any way a 
confrontational matter. I think we can work together to correct 
these concerns. But we have had numerous opportunities to do 
it, and it still has not happened. The Corps had a chance last 
month to redeem itself with the announcement that it was going 
to review the economic analysis of more than 170 projects. 
Three weeks later, the Corps determined that only eight of 
those projects would be subject to new analysis. Folks who had 
put faith in the exercise were frankly disappointed. How can 
you overlook reports in 1999, 2000, and 2001, and most recently 
last week issued by a lot of impartial, nonpartisan 
institutions such as the National Academy of Sciences, Army 
Inspector General and the GAO? All contained the same message--
something is wrong. It is that simple.
    We have a unique opportunity to help the Corps address some 
of its internal problems that have resulted in a loss of 
confidence, and that is exactly what I want to do--make 
everybody look good if we can correct the problems. We will 
save taxpayer money and we will I think save a lot of 
environmental damage.
    In March, I introduced S. 1987, the Corps Modernization 
Improvement Act, with my colleagues Senator Feingold and 
Senator McCain. This is not a hearing on my legislation. I know 
that Senator Jeffords has an open mind on that. It is a hearing 
on the Corps and how we might address some of the needed 
reforms.
    We have a lot of support building on this legislation. The 
Administration, though, has not endorsed the bill. It has 
endorsed the concept of reform. Senator Daschle announced this 
afternoon that he was joining Senator Feingold and Senator 
McCain and myself as cosponsors on this particular piece of 
legislation, which does get at reforms.
    Briefly, S. 1987, and I will not go into the whole thing, 
which we have introduced and which Senator Feingold will be 
testifying on--he will get into the details--we assess the 
cost-benefit ratio, we assess cost-sharing, the inequities 
there. As an example, we might want to re-think how the O&M is 
funded for inland waterway systems. The Appalachicola-
Chattahoochee-Flint Waterway in Alabama, Georgia and Florida, 
for example, consumes 30 percent of the O&M budget, but only 
sees 3 percent of the national waterway traffic. That just does 
not make sense. Why should the taxpayers pay to maintain a 
deadbeat waterway that barely sees any traffic? I know Senator 
Graham of Florida has a stake in this issue and supports the 
authorization of at least the Florida segment of the waterway. 
I would like to work with him on that.
    There is also a $52 billion backlog--$52 billion backlog 
over the last 25 or 30 years. We have talked about this in this 
committee now for a number of years, but we never seem to get 
to addressing that backlog. Frankly, the process has grown 
ugly, and I think Senator Voinovich when he stood firm with me 
on WRDA 2000 deliberations to keep environmental infrastructure 
out of the bill and Conference Report, saw first-hand how ugly 
it really was. I may need his help again as we look to do some 
of these reforms.
    But I want to work with the Administration. I want to work 
with my colleagues on the committee. I want to work with the 
Corps to negotiate something meaningful. That is the spirit 
with which I address my criticisms today. I want to thank my 
colleague and cosponsor, Senator Feingold, for joining us here 
today. He has worked a long time on this issue, and we were 
able to join forces and I am pleased that we were able to do 
that. I know he will be instrumental in helping us to usher 
Corps reform through, whatever the vehicle might be ultimately.
    Finally, Mr. Chairman, one theme repeated in the written 
testimony of those opposed to Corps reform is that independent 
review will delay the study process. I would like to just say 
for the record, peer review would apply to every project, only 
a handful that merit such review. The review would be conducted 
concurrently with headquarters review, not in any other 
methodology. It is ridiculous to think that a 180-day 
concurrent review is going to add years to a study process. 
That is not going to be the case. How is it going to add any 
more years than the 30 years we have been sitting watching 
projects lay on the books accumulating $52 billion in back 
dollars?
    Some have said, why haven't you waited for the 
recommendations of the National Academy of Science, which is 
due to issue its report this summer? I understand enough about 
the issue to formulate a meaningful procedure. If NAS comes out 
with a dramatically different recommendation, then it will have 
my serious consideration. Finally, this issue is important 
enough to move forward immediately.
    In closing, again, I really feel strongly that there should 
be no WRDA bill in 2002 without Corps reform. Let's not add 
insult to injury. But I look forward to what the witnesses have 
to say, and thank you, Mr. Chairman.
    [The prepared statement of Senator Smith follows.]

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

    Good afternoon. I would like to thank everyone for coming today to 
discuss issues pertaining to the water resources development program 
within the Corps of Engineers. Specifically, I hope to see this hearing 
highlight an issue of great importance to me: Corps Reform. I expect 
Corps Reform to be an integral component of the Water Resources 
Development Act of 2002.
    I would like to take a moment to state for the record: contrary to 
what has been said about me, I am not opposed to the Corps of 
Engineers. The Corps certainly has an important role to play in both 
the national security of our country and in its mission areas of 
navigation, flood damage reduction, and environmental restoration. 
However, I think we have a unique opportunity to help the Corps address 
some of its internal problems that have resulted in a loss of 
confidence in this agency. Incident after incident of flawed analyses, 
overstatement of benefits, flat out miscalculations whether intentional 
or accidental are not only difficult to ignore, but outright 
intolerable.
    Initially, I wanted to give the benefit of the doubt to the Corps. 
I'd like to quote my friend Senator Voinovich, who at a Corps budget 
hearing last year said, ``fool me once, shame on you. Fool me twice, 
shame on me.'' Enough chances have been given to the Corps to take 
meaningful steps internally to address concerns.
    One cannot overlook reports in 1999, 2000, 2001, and most recently, 
last week, issued by such impartial, non-partisan institutions such as 
the National Academy of Sciences, the General Accounting Office, the 
Army Inspector General, all of which contain the same message: 
something is not right in the Corps. Something is broken. And it needs 
fixing.
    It is clear to me now that legislation is necessary to help the 
Corps fix what's broken. I want to work with the Administration and my 
colleagues on the Committee to negotiate something meaningful, yet 
effective. I am sure you all know by now that I introduced legislation, 
``the Corps Modernization and Improvement Act'' to reform the Corps. In 
fact, I would like to thank my colleague and co-sponsor, Senator 
Feingold, for joining us here today to give his views on the issue. I 
have to credit him with first bringing the issue to my attention 2 
years ago when we were on the Senate floor considering the 2000 WRDA 
bill. I look forward to working with him to usher Corps Reform through 
this committee and the Senate.
    One theme repeated in the written testimony of those who are 
opposed to reforming the Corps is that the Independent Peer Review 
process will unnecessarily delay the study process and will raise 
project costs. I would like to quickly address those concerns.
    First of all, Peer Review would not apply to each and every project 
that the Corps constructs. I view this as only applying to a small 
handful of projects that for some reason or another merit further 
external review. Also, the way the provision is structured in my bill, 
the review would be conducted concurrently with headquarters review. It 
is ridiculous to think that a 180-day concurrent review is going to add 
years to the study process. Unless of course, that review reveals major 
flaws in the project analysis, in which case, the project should not go 
forward until the study is revised anyway.
    Many have asked me why I am not waiting for recommendations from 
the National Academy of Sciences, which is due to issue a report this 
summer on Independent Review. For one, I think I understand enough 
about the issue to formulate a meaningful procedure. Second, if the 
Academy comes out with a recommendation that is dramatically different 
than what I have in my bill, I will look at revising my provision as 
the WRDA bill moves through the legislative process. Finally, I think 
this issue is important enough that it is worth moving forward now.
    In closing, let me make my intentions clear: there will be no WRDA 
2002 without Corps Reform. In case you didn't hear that, I repeat: NO 
WRDA WITHOUT CORPS REFORM. With that said, for those who are opposed, 
instead of issuing threats to hold up any WRDA bill that includes 
reform, work with me, and work with the community that supports Corps 
Reform to resolve our issues so that we can attempt to reach a workable 
compromise.
    With that said, I look forward to the discourse we are about to 
hear.

    Senator Jeffords. Senator Bond.

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

    Senator Bond. Thank you very much, Mr. Chairman, for 
calling this hearing. Secretary Brownlee, General Flowers, 
without taking the matter lightly, the last time I saw you here 
we had a good man who had to resign from office. So let me say 
from the outset that I think very highly of the Office of 
Management and Budget. I am here not to bury them, but to 
praise them faintly, and I am sure that no one other than 
Senators Reid and Domenici could write a better budget for the 
Corps. Having said that, we intend to help Senator Reid and 
Senator Domenici.
    Mr. Chairman, you and Senator Smith, along with Senators 
Inhofe and Reid, received a letter sent to the committee 
recently saying that any legislation that would make a costly, 
lengthy and bureaucratic process more costly, more lengthy, and 
more bureaucratic, we will object to on any water resources 
bill that includes those provisions, and we will use whatever 
tools are necessary to prevent it from becoming law. That was 
signed by myself, Senator Lott, Senator Lincoln, Senator 
Carnahan, Senator Warner, Senator Cochran. I would like 
unanimous consent to add this to the record of the hearing.
    Senator Jeffords. Without objection, it will be entered.
    [The referenced document follows:]
                                               U.S. Senate,
                                      Washington, DC, May 13, 2002.
Hon. James M. Jeffords,
Chairman, Committee on Environment and Public Works,
Washington, DC.
Hon. Bob Smith,
Ranking Member, Committee on Environment and Public Works,
Washington, DC.
    Dear Chairman Jeffords and Senator Smith: Legislation was 
introduced recently for the ``modernization and improvement'' of 
critical programs administered by the U.S. Army Corps of Engineers. 
While we do not question the intentions of the bill sponsors, we 
believe this legislation would make a costly, lengthy, and bureaucratic 
process more costly, more lengthy, and more bureaucratic. Our 
constituents cannot tolerate this event. As the Subcommittee and 
Committee begin to formulate a Water Resources Development Act, we 
alert you that we will object to any water resources bill that includes 
provisions that make it more difficult for our citizens, particularly 
poor citizens, to get flood control, navigation, recreation and 
environmental projects approved.
    As you know, projects administered by the U.S. Army Corps of 
Engineers are critical to the safety, economic health and environmental 
protection of many regions of the country. Water transportation is low 
cost, safe, relieves highway congestion, requires less fuel, and causes 
less air pollution than alternatives. Flood control projects have 
prevented nearly $500 billion in flood damage since 1959 returning $6 
for every $1 invested which does not factor in the value generated by 
economic activity such projects permit. For many rural and urban 
communities, flood protection is essential to their safety and economic 
opportunity.
    As citizens who live in states that rely on Corps projects 
understand firsthand, the existing process is immensely cumbersome. 
Multi agency review, analysis and consultation takes not days or months 
but years and in some cases, decades. There are extensive and repeated 
opportunities for review and extended public comment as well as 
increasingly difficult environmental and local cost share requirements. 
Benefit cost and local cost share requirements, in effect, typically 
mean that the Federal Government may help provide flood protection to 
wealthy communities but will rarely, if ever, protect poor communities 
no matter the personal risk and economic hardship they face. After all 
these hurdles are met, there must be specific congressional 
authorization and multi-year appropriations and oversight. The effect 
of so-called ``reform'' legislation is to make an excruciatingly 
difficult process more difficult.
    Additionally, Section 216 of the P.L. 106-541 requires the National 
Academy of Sciences to make recommendations regarding independent peer 
review of feasibility reports and a review of methods of project 
analysis. Prior to recommendations from the Administration and 
completion of the NAS recommendations, it would be premature to 
legislate prescriptive mandates.
    We understand that many members of the Senate desire projects in 
WRDA, but the cost of raising the bar for the most needy in our regions 
compels us to use all the tools of the Senate to prevent it from 
becoming law. We believe it is important that you understand the extent 
of our opposition at this early opportunity.
            Sincerely,
                                   Christopher S. Bond.
                                   Trent Lott.
                                   Blanche L. Lincoln.
                                   Thad Cochran.
                                   John W. Warner.
                                   Jean Carnahan.

    Senator Bond. Thank you.
    Mr. Chairman, I would agree with the Senator from New 
Hampshire that the delays in approving Corps projects are 
intolerable. If there is some way we can speed up the process 
and make sure we get a judgment one way or the other so they do 
not languish for years, as you will hear from one of the 
witnesses before us today on the next panel, I think we might 
be able to do something. But if my sense is right, if this 
political process is going down the line of making it more 
bureaucratic and stifling even more the ability to develop 
needed flood control and other Corps projects, making it more 
expensive and problematic for communities to get flood 
protection, then we probably just won't have a WRDA bill this 
year. I think I have bipartisan support from many regions to 
resolve this on the floor if necessary. I do not intend to pick 
this fight, but I respectfully advise that I am ready, anxious 
and with energy and enthusiasm will join it.
    Secretary Brownlee and General Flowers, we have a 
referendum here in the Senate on the Corps. It is called the 
Energy and Water Appropriations bill. As you know, on a 
bicameral, bipartisan basis, Congress rejects the inadequate 
budgets sent up by Democrat and Republican Presidents--oh, 
excuse me--I forgot that about OMB. But this year, there are 
currently hundreds of adds in that bill. As I looked at the 
bill, I saw adds for projects in Nevada, New Hampshire, New 
Mexico, Ohio, New York, California, Montana, Delaware, 
Pennsylvania, Idaho, Virginia and Missouri--just to name some 
random States. I am sure that Chairman Reid could tell us how 
many more requests they had than they were able to fund.
    Now, we see a strong editorial opposition to the Corps. 
Well, Washington, DC. and New York City and St. Louis, MO 
filled in their abundant wetlands over the previous century. So 
it is no surprise that newspapers in those regions want to pull 
up the ladder now that they are protected, and their economies 
are prosperous and people protected. But I hope you understand 
your job is to bear in mind that some people have been left 
behind. Mr. Robinson of Pinhook is just one of those people, 
and the people he represents. I hope you will listen to him.
    We are at war and experiencing an economic slow-down, 
facing more trade competition, looking for more opportunities 
to increase family income and improve our communities. I think 
that is why Congress authorizes then funds studies, authorizes 
then funds design, authorizes then funds construction, and then 
funds O&M. Some do not like the way the benefit-cost ratio is 
calculated. I don't either, because it is far too stingy, takes 
far too much time and it is rigged to protect the haves and 
leave behind the have-nots. The day that Congress does not want 
water projects is the day that we do not need to do an Energy 
and Water bill. If someone would like me to take that 
suggestion and share it with Chairman Byrd, I would be happy to 
do so.
    I thank the Chair.
    [The prepared statement of Senator Bond follow.]

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

    Mr. Chairman, Secretary Brownlee, General Flowers, without taking 
the matter lightly, the last time I saw you we had a good man resign 
from office so I say from the outset that I think very highly of the 
Office of Management and Budget and I am sure that no one other than 
Senator Reid could write a better budget for the Corps.
    Mr. Chairman, a letter was sent to the committee several weeks ago 
signed by Senators Lott, Cochran, Warner, Lincoln, Carnahan and myself. 
Mr. Chairman I ask UC to enter the letter into the Record.
    Mr. Chairman, I think I can see where this political process is 
going and I predict that if the WRDA bill includes legislation to make 
it harder and more expensive and problematic for communities to get 
flood protection, then we will not have a WRDA bill this year. I 
believe I will have bipartisan support from many regions to resolve 
this on the floor, if necessary. I didn't pick this fight but I am 
ready, respectfully and enthusiastically, to join it.
    Secretary Brownlee and General Flowers, every year there is a 
referendum on the Corps and it is reflected in the Energy and Water 
Appropriations Bill. There, as you know, on a bicameral and bipartisan 
basis, the Congress rejects inadequate budgets sent up by Democrat and 
Republican Presidents. This current fiscal year, there are hundreds of 
``adds.''
    I see adds for projects in Nevada, New Hampshire, New Mexico, Ohio, 
New York, California, Montana, Delaware, Pennsylvania, Idaho, Virginia 
and Missouri--just to name some random states. Washington, DC and New 
York, City and St. Louis, MO filled in their abundant wetlands over the 
previous centuries so it is no surprise that their newspapers want to 
pull up the ladder now that their regions are developed and their 
economies are prosperous and people protected, but your job is to bear 
in mind that some people have been left behind such as Mr. Robinson who 
we will hear from later.
    We are at war and experiencing an economic slow down and facing 
more trade competition and looking for more opportunities to increase 
family incomes and improve our communities. That is why Congress 
authorizes then funds studies; authorizes then funds design; authorizes 
then funds construction and then funds O&M. I know that some don't like 
the way the Benefit/Cost Ratio is calculated. I don't either because it 
is far too stingy and it is rigged to protect the haves and leave the 
have-nots behind. The day that Congress doesn't want projects is the 
day we don't do an Energy and Water bill and if someone would like me 
to take that suggestion to Chairman Byrd, I can do so.
    On behalf of mayors and farmers and shippers and communities, I 
will continue to press the bipartisan support for modernizing our water 
infrastructure.

    Senator Jeffords. Senator Reid.

  OPENING STATEMENT OF HON. HARRY REID, U.S. SENATOR FROM THE 
                        STATE OF NEVADA

    Senator Reid. Thank you very much, Mr. Chairman, Senator 
Smith.
    I look forward to working with you both and the entire 
subcommittee, including Ranking Member Inhofe, as we set about 
writing a WRDA bill this year. Traditionally, this committee 
works off the Administration's WRDA proposal, putting its 
imprint on that proposal. We have not received that proposal as 
of yet, and we plan to move forward in writing a bill 
regardless. I am happy to know you are going to do that, Mr. 
Chairman. The WRDA bill is very important, and especially 
important to me and I think the Western Senators generally. 
Large Corps projects tend to get attention when we write our 
WRDA bill, but some of the relatively small Corps projects can 
have a big impact in Nevada and in other places.
    I am happy to see Senator Feingold here. I am happy--I am 
impressed that he would take the time to come into the 
committee about which he does not serve to give us his input. I 
think we need to do more of this in the Senate. I have often 
felt that if we had more non-agriculture Senators involved in 
writing the agriculture bill, we would have a much better 
agriculture bill. But the fact is that people attend who tend 
to be involved in agriculture on that committee, even though it 
affects all the States. The same applies here. We tend to get a 
lot of people who are involved in these water projects from 
States where it matters more, and we do not get enough input 
from other Senators who are not. So anyway, Senator Feingold, I 
am glad you are here.
    One program we authorized in the last WRDA bill has been 
tremendously important to my State. Section 595 of that bill 
authorized design and construction systems for water-related 
environmental infrastructure and resource protection in rural 
communities. We have helped a number of small communities meet 
their water resource needs through this program. Another 
program of interest to me is the Restoration of Abandoned Mine 
Sites Program. It is difficult for people to imagine this, but 
in the town where I was born and raised and still have my home, 
Searchlight, we have thousands of holes around. Some of them 
are very dangerous. This program, the Corps helps address this 
with hard-rock mines.
    Fortunately, in Southern Nevada where my home is, we have 
all these abandoned mines, it is very rare that there is water 
in any of them. There is just so little water there. But where 
this works so well, this RAMS Program, Restoration of Abandoned 
Mine Sites, is where there is water, so that we can help with 
areas that the mines have polluted the water.
    The hearing today will touch upon measures to ensure that 
the Corps engages in its traditional work of navigation flood 
control. I am glad to see that they do that and do it so well. 
The two programs I mentioned above do not necessarily fall 
within the original mission of the Corps, yet the Corps has 
provided valuable assistance to Nevada through these programs. 
We should be mindful that the so-called mission creep to one 
Senator may be a very important, well-run program to another 
Senator.
    Other measures proposed for consideration include those 
that would help ensure that Army Corps projects are 
economically and environmentally sound. The Army's own 
Inspector General, two National Academy of Science panels, and 
the General Accounting Office have offered constructive 
criticism on the economic and environmental performance of the 
Corps. I think we have to underline and underscore what I have 
said. Constructive criticism--it has come from the Army's own 
Inspector General, two National Academy of Science panels, and 
the General Accounting Office. I think we should take a look at 
where this constructive criticism has been offered. One example 
is one of the NAS panels recommended that some Corps projects 
would benefit from independent review. I think we have to take 
a look at that.
    So I look forward to hearing testimony on these and related 
issues today as we move forward with the WRDA 2002 Program. I 
would say, Mr. Chairman, members of the Corps of Engineers are 
very proud people. They are proud of the work they do, as they 
should be. I have found them to be some of the most patriotic 
citizens that I have come in contact with back here, and that 
says a lot. So I appreciate the work they do and look forward 
to doing even better work in the future.
    [The prepared statement of Senator Reid follows.]

  Statement of Hon. Harry Reid, U.S. Senator from the State of Nevada

    Thank you, Mr. Chairman.
    I look forward to working with you and ranking member Smith and the 
subcommittee ranking member Inhofe as we set about writing a WRDA bill 
this year.
    Traditionally, this committee works off of the Administration's 
WRDA proposal, putting its imprint on that proposal. We haven't 
received that proposal as of yet and we plan to move forward in writing 
a bill regardless.
    The WRDA bill is important to every member of the Senate. Large 
Corps projects tend to get all the attention when we write our WRDA 
bill. But some of the relatively small Corps projects can have a big 
impact in Nevada.
    One program we authorized in the last WRDA bill has been 
tremendously important to my state. Section 595 of that bill authorized 
design and construction assistance for water related environmental 
infrastructure and resource protection in rural communities. We have 
helped a number of small communities meet their water resource needs 
through this program.
    Another program of interest to me is the Restoration of Abandoned 
Mine Sites (RAMS) program. Through this program, the Corps helps 
address water quality problems associated with hardrock mines.
    This hearing will also touch upon measures to ensure that the Corps 
engages in its traditional work of navigation and flood control. The 
two programs I mentioned above don't necessary fall within the original 
mission of the Corps, yet the Corps has provided valuable assistance to 
Nevada through those programs. We should be mindful that so-called 
``mission creep'' to one Senator may be a very important, well-run 
program to another.
    Other measures proposed for consideration include those that would 
help ensure that Army Corps projects are economically and 
environmentally sound. The Army's own Inspector General, two National 
Academy of Sciences panels and the General Accounting Office have 
offered constructive criticism on the economic and environmental 
performance of the Corps. For example, one of those NAS panels 
recommended that some Corps projects would benefit from independent 
review. (NAS, Inland Navigation System Planning, 2001.)
    I look forward to hearing testimony on these and related issues 
today as we move forward with WRDA 2002.

    Senator Jeffords. Senator Inhofe.

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

    Senator Inhofe. Thank you, Mr. Chairman. I appreciate the 
opportunity to hear from our witnesses on our country's water 
resources needs, as well as comments on Corps reform.
    However, I will have to admit some disappointment that 
instead of addressing what our water resource development 
objectives should be, we are instead discussing how to reform 
the Corps of Engineers. I seriously question whether this 
effort will yield the results proponents envision because in 
truth, much of what the Corps of Engineers does or does not do 
is ultimately decided by Congress, and not by the Corps. I find 
it also a little bit amusing right now that those very 
individuals who are trying to introduce more deliberation, more 
reports and more bureaucracy into this are the same ones who 
are supporting the Everglades Restoration Act, which was I 
guess one of the very largest Acts that we have ever 
considered--68 water projects in one Act with not one report 
from the Corps of Engineers.
    This Nation is involved in a struggle for water resources. 
We need to decide what our national priorities are. Do we 
continue to use our national waterways for navigation and 
economic development? Or do we focus our efforts exclusively on 
environmental restoration? It seems to me the latter is the 
direction some would have us move. Neither economic development 
nor environmental restoration should automatically have a 
preference.
    I assure you, Mr. Chairman, that the citizens of my State 
want both. We in Oklahoma, and you will have to listen to this 
because I think maybe even Senator Corzine does not know this, 
we are the Nation's most inland port, in my city of Tulsa, 
Oklahoma. Did you know that? Yes, yes we are. So we are very 
much concerned about it. It means hundreds of millions of 
dollars of economic development.
    We in Oklahoma were recently reminded of how much economic 
activity the waterway in my State generates in terms of 
commerce on the Arkansas River. It was shut down for 2 weeks 
after this disastrous collapse of the I-40 bridge, and we all 
were saddened at the loss of lives. In just that short period 
of time, the Port of Catoosa, which is right outside of Tulsa, 
lost over $4.2 million. That means $4.2 million that would have 
been pumped into the Oklahoma economy--creating jobs, providing 
economic opportunity, and for thousands it just did not happen. 
I would have to say, Senator Smith, that is no deadbeat 
waterway.
    Senator Smith. I do not believe I called it a deadbeat 
waterway.
    [Laughter.]
    Senator Inhofe. I know. It is very rarely that I disagree 
with my good friend, Senator Smith. I do in this case.
    Unfortunately, I get the sense that many see the Corps 
reform as an opportunity to shift the Corps' traditional role 
of waterway development, enhanced construction, to solely 
environmental restoration. Mr. Chairman, I appreciate the need 
to achieve balance between these two equally important goals. I 
certainly hope that we as we move forward, we still strive for 
that balance.
    With that in mind, let me just quickly, rather than go over 
these projects, I am going to name these projects and then 
enter into the record the description that I have, if that is 
all right. I make that request.
    Senator Jeffords. Without objection.
    First, the reconnaissance study of Sand Lake in Oklahoma; 
second, the technical change to the land transfer authorized by 
WRDA 1999; third, codification of the consent decree between 
the Corps of Engineers and the city of Edmond regarding Arcadia 
Lake; fourth, technical corrections to the definition of Indian 
lands; fifth, the transfer of flow easements on Grand Lake, 
Oklahoma to GRDA authority--by the way, that is a very large 
lake and is not a Corps lake, never has been a Corps lake; and 
last, authorization of the 12-foot depth channel in place of 
what is currently a 9-foot channel. It would be very, very 
meaningful.
    So with that, I thank the Chairman.
    [The prepared statement of Senator Inhofe follows.]

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

    Thank you Mr. Chairman. I appreciate the opportunity to hear from 
witnesses on the country's water resources needs as well as comments on 
the Corps Reform. However, I will admit some disappointment that 
instead of addressing what our water resource development objectives 
should be, we are instead discussing how to reform the Corps of 
Engineers. I seriously question whether this effort will yield the 
results proponents envision because in truth much of what the Corps of 
Engineers does or does not do is ultimately decided by Congress, not 
the Corps.
    This Nation is involved in a struggle for water resources. We need 
to decide what our national priorities are . . . do we continue to use 
our national waterways for navigation and economic development; or do 
we focus our efforts exclusively on environmental restoration. It seems 
to me, the latter is the direction some would have us move. Neither 
economic development nor environmental restoration should automatically 
have a preference.
    I assure you, Mr. Chairman, that the citizens of my state want 
both. Oklahoma has the most inland port which has provided literally 
hundreds of millions of economic benefits to the state. We in Oklahoma 
were recently reminded how much economic activity the waterway in the 
state generates. Commerce on the Arkansas River was shut down for 2 
weeks following the collapse of the I-40 bridge. In just that short 
time, the Port of Catoosa, outside of Tulsa, lost over $4.2 million. 
That means that $4.2 million that would have been pumped into the 
Oklahoma economy, creating jobs and providing economic opportunity for 
thousands did not happen. Clearly, my state cannot afford to lose the 
value of the waterway.
    Unfortunately, I get the sense that many see Corps Reform as an 
opportunity to shift Corps traditional role of waterway development and 
hence construction to solely environmental restoration. Mr. Chairman, I 
appreciate the need to achieve balance between these two equally 
important goals. I certainly hope that as we move forward we will 
strive for balance.
    With that in mind, I would to quickly highlight some needs of my 
state that I hope to have included in the Water Resources Development 
Act of 2002.

               RECONNAISSANCE STUDY SAND LAKE IN OKLAHOMA

    Sand Lake, OK was studied in 1950's and 1960's and found to be in 
the Federal interest. A proposed dam would have been located at the 
river mile 19.1 on Sand Creek near Bartlesville, Oklahoma. The project 
was authorized by the Flood Control Act of 1962 for flood control, 
water supply, water quality control, recreation and fish and wildlife. 
However the project was place in deferred status in 1984 pending 
resolution of conflict with the Osage Indian Nation regarding mineral 
rights subordination. The project was eventually deauthorized in 1999.
    Since then, it has become clear that the city of Bartlesville must 
find a second water source. Currently the City gets all of its water 
out of Lake Hulah which became dangerously low this past spring. The 
community is interested in exploring again the feasibility of Sand 
Lake. Preliminary discussions with the Osage tribe indicate the tribe 
is willing to negotiate on the mineral rights.

        TECHNICAL CHANGE TO A LAND TRANSFER AUTHORIZED IN WRDA99

    WRDA99 (section 563) authorized the transfer of Corps property in 
Marshall County, Oklahoma to the State of Oklahoma. The property 
includes Lake Texoma and Denison Dam and is approximately 1.580 acres. 
The property has been and continued to be leased to the state for 
public park and recreation. As such, the state was made more 
improvements, not the least of which is a public golf course.
    In determining the ``fair market value'' of the land, the state is 
requesting that the value of their improvements not be included in the 
fair mark value calculations. The initial cost of the improvements were 
borne by the state, the existing authorization to convey the property 
would require the state to pay for those improvements again because 
they greatly enhanced the value of land.
    I do not believe that state should not have to pay twice and will 
be requesting that a technical change be made to the WRDA99 language 
that would give the state credit for investment already made in the 
property.

  CODIFICATION OF A CONSENT DECREE BETWEEN CORPS OF ENGINEERS AND THE 
                 CITY OF EDMOND REGARDING ARCADIA LAKE

    The city of Edmond became a cost share partner with the Corps in 
1979 for recreational development and water storage facilities on 
Arcadia Lake. In 1987 a dispute arose with the Corps over cost overruns 
on the recreation facilities. That dispute was settled in 1992 through 
a Consent Decree. Included in that Consent Decree was a provision that 
the city of Edmond thought would clarify a potential future dispute 
regarding the requirement to pay storage on future water use. Per the 
terms of the Consent Decree, the City was not liable for payment of 
future use water until such time that City decided to actually use the 
water. The cost of the future use water was set at $27 million, which 
the City paid in October 1999.
    In November 1996, the City was notified by the Corps that they had 
to beginning paying interest on the future use water storage because 
the 10-year interest free period following the project's completion had 
expired (projected was completed in 1986). However, the City believes 
that the Consent Decree clearly stated that they were not liable for 
the future water until such time as they made use of it which occurred 
in 1999 when the City paid $27 million. The Corps continues to charge 
the City interest from November 1996 to present. I will be requesting 
WRDA02 clarify that City is not liable for the interest from November 
1996 to October 1999.

       TECHNICAL CORRECTION TO THE DEFINITION OF ``INDIAN LANDS''

    Because Oklahoma does not have any Indian reservations, we need to 
make a clarification in the law with the respect to the definition of 
Indian lands. I will propose that the definition of Indian lands in 
Oklahoma for Corps of Engineers purposes be modified to be consistent 
that the definition for Indian lands in the Highway program.

 TRANSFER OF FLOW EASEMENTS ON GRAND LAKE, OKLAHOMA TO GRAND RIVER DAM 
                               AUTHORITY

    I am working with both the Tulsa District Corps office and the 
Grand River Dam Authority (GRDA) to transfer Flow Easements on Grand 
Lake to the GRDA. Grand Lake is not a Corps lake and there is no 
logical reason for the Corps to be involved in the lake. Both parties 
are interested in seeing this transfer accomplished.
authorization of 12-foot depth on the arkansas river navigation channel
    Currently the Arkansas River is authorized at 9 feet; however a 
majority of the system is greater than 12 feet because the natural 
scouring of the river. I will be proposing to make the channel a 
uniform 12 feet (minimum) to assist in navigation. This is an 
opportunity to enter into a private/public partnership because a 
company along the system is willing to put some of their own money into 
this project.
    I think this could be used as a model for future projects and hope 
the Committee will give serious consideration to this proposal.
    Thank you Mr. Chairman.

    Senator Jeffords. Senator Corzine.

OPENING STATEMENT OF HON. JON S. CORZINE, U.S. SENATOR FROM THE 
                      STATE OF NEW JERSEY

    Senator Corzine. Thank you, Mr. Chairman. I appreciate your 
holding the hearing on the Army Corps' Water Resource 
Development Program. Senator Smith's proposals are worthy of 
much discussion. It is good to see my friend, Senator Feingold, 
taking deep interest in this issue as well.
    This is one of those things where I come actually without 
strong opinion from experience. I have seen the work of the 
Corps on projects such as beach replenishment and dredging of 
the New York-New Jersey harbor, as critically important vital 
projects that the Corps has extraordinarily good work. I look 
forward to working with them in the future on important 
projects.
    At the same time, I have seen cases like the Delaware River 
dredging project where I think frankly the analysis is not up 
to the standards of some of the other work that I have seen the 
Corps do. I want to clearly identify and echo Senator Reid's 
comments about the people I have met in the Corps and their 
commitment to patriotic duty and work to support us. But I 
would say that my own experience with this one particular 
project where the GAO reviewed a $311 million Delaware River 
deepening project, there were serious questions about the cost-
benefit analysis that went through. Certainly, if I had looked 
at that in the world that I came from, I would have been quite 
frustrated with the conclusions relative to the facts that at 
least were provided by the independent review.
    So there is a lot of work to do here, and I think that 
independent review was critical, and I think the review of the 
committee is a sound process to make sure that dollars spent 
are consistent with good cost-benefit analysis moving forward.
    I am open to many of the ideas that Senator Smith's reform 
bill proposes, such as increased public participation and 
increased agency accountability. There is one particular 
provisions that does in fact trouble me, and that is the cost 
share flip on beach projects. Local governments simply, in my 
view, cannot shoulder the cost share flip. So I would like to 
see good healthy debate with regard to that topic.
    Overall, I am glad we are having this hearing. I am glad we 
are studying this process and the cost-benefit analysis, 
business-like approach to this I think is terrific. We have got 
very good professionals in the Corps and I look forward to 
working with them in many years ahead.
    [The prepared statement of Senator Corzine follows.]

        Statement of Hon. Jon S. Corzine, U.S. Senator from the 
                          State of New Jersey

    Thank you Mr. Chairman for holding today's hearing on the Army 
Corps' water resource development programs.
    In New Jersey, I have seen how the work of the Corps on projects 
such as beach replenishment and the New York-New Jersey harbor are 
critically important to the state. And I'll be working with my 
colleagues on this committee to authorize several of those projects in 
this year's Water Resources Development Act.
    At the same time, I have seen cases like the Delaware dredging 
project, where the analysis that the Corps has used to support its 
projects is severely flawed.
    So while I support the Corps, I believe that we need to take a hard 
look at reforms that may be needed. In particular, I am concerned about 
the process by which the Corps analyzes project costs and benefits. I 
say that because of my experience with the proposed $311 million 
Delaware River Deepening Project, which would involve deepening 108 
miles of the Delaware River from the mouth of the river at the Delaware 
Bay north to the Ports of Camden and Philadelphia. In February 2001, I 
asked the General Accounting Office to take a look at the project 
especially the Corps' cost-benefit and environmental analysis. The 
report, just released this month, confirmed our suspicion that the 
Corps' economic analysis was flawed and ``. . . does not provide a 
reliable basis for deciding whether to proceed with the project.'' 
(GAO-02-604 Report p. 2)
    This independent review was critical, and I think we ought to 
examine how we might systematically do independent review of the 
economics of large projects.
    While I am open to many of the ideas put forth in the various 
reform proposals, such as increased public participation and increased 
agency accountability, there is one particular provision of the bill 
that troubles me the cost-share flip on beach projects. Local 
governments simply can't shoulder the cost share flip, and I don't 
think they should have to.
    In conclusion, I look forward to hearing from our witnesses, and 
working with my to move a WRDA bill this year.

    Senator Jeffords. Thank you.
    Senator Voinovich.

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

    Senator Voinovich. Thank you, Mr. Chairman.
    I think that this hearing is one of the most important 
responsibilities of this committee--the biannual Water Resource 
Development Act. As Chairman of the Transportation and 
Infrastructure Subcommittee during the 106th Congress, I had an 
opportunity to work on this Act in 1999 and then again in 2000. 
Congressional authorization is an important step in the process 
to develop and carry out projects that will protect our 
Nation's water resources infrastructure. Equally important is 
having an adequate level of funding to build, operate and 
maintain these projects.
    As we on this committee know, this Nation has an aging 
national water resource infrastructure. If we are to continue 
to ignore the upkeep, what will result is deterioration of our 
locks, dams, flood control projects that are not started or not 
sufficient to get the job done, and navigation channels that 
are inadequate to meet the needs of modern waterway traffic.
    The risk of insufficient funding is clear--disruptions in 
waterborne commerce, decreased protection against floods and 
damage to the environment. Simply put, we need more money.
    Mr. Chairman, since this committee did not conduct a 
hearing on the Corps of Engineers budget for 2003, I would like 
to say a few words about it. In the Administration's fiscal 
year 2003 budget, the Corps of Engineers faces overall 
reductions of 4 percent over fiscal year 2002. In addition, 30 
percent cuts for investigations and planning; 16 percent cuts 
for construction, with virtually no starts in these two 
accounts.
    We have asked the Corps to do an impossible job. The 2003 
funding levels are hardly adequate to make a dent in the Corps' 
construction backlog, let alone address our first priority, 
which is maintenance. The Administration's budget for 
construction is $1.4 billion, and the backlog of construction 
projects is $44 billion. That is a difference of almost $43 
billion. In other words, the Administration's budget only 
covers 3 percent of the construction projects that we need.
    In Ohio a number of important projects are underfunded. For 
example, the West Columbus flood wall, and I will not go into 
the details, and I am going for this statement to be put in the 
record; or the Mill Creek flood damage reduction project in 
Hamilton and Butler County--others.
    Senator Voinovich. Maintenance of our critical water 
infrastructure should be our first priority, yet this is not 
reflected in the funding. The Administration-proposed 
maintenance budget for the Corps is $1.9 billion, and there is 
already a backlog of over $700 million in maintenance projects 
nationwide. Under the Administration's budget, the projected 
backlog would total $884 million. So in other words, with this 
budget we are going to end up the year with a larger backlog of 
maintenance projects that need to be undertaken.
    The impact of insufficient maintenance funds for Ohio, 
which is the Great Lakes and the Ohio River Division of the 
Corps, would exceed $100 million. The average lock chambers on 
the Ohio River, for example, are well over 60 years old and 
require regular maintenance.
    In short, this committee has authorized a number of 
environmental restoration programs for the Great Lakes and the 
Ohio River which have not been included in the Administration's 
budget request. One of the most significant reasons that the 
Corps has such wide funding gaps between what is needed and 
what is budgeted is the decreasing Federal investment in water 
resource infrastructure over the last several decades. 
Nevertheless, the Corps' mission has continued to expand in new 
areas.
    While I do not rule out and generally support increased 
funding, as Senator Feingold knows, I do favor spending our 
limited Federal resources on the right things. We do not 
prioritize. We do not make tough decisions around here. 
Moreover, I believe our infrastructure is vitally important to 
our domestic security. I look forward to hearing from our 
witnesses to learn how Corps projects fit into Homeland 
Security and about their financial challenges.
    All you have got to do is look at this chart right here and 
you can see what I am talking about. This is what we spent in 
1932. These are 1999--it's an old chart I used a couple of 
years ago. But you can see that up in 1966, 1976, we were 
spending about $5 billion. Here we are in 2000, we are talking 
about $1.4 billion. If you would put up the first chart--this 
is what they were supposed to be doing back in 1965. You can 
see how the responsibilities are--this is flood control, 
hydropower and navigation.
    Put up the next chart. Now, we have got flood control, 
navigation; we've got shore protection; hydropower was down. 
We've got environmental infrastructure; we've got recreation; 
we've got the environment; we've got FSRAP--all these new 
responsibilities that are being given to the Army Corps of 
Engineers, and a lot less money than they had when they began 
with a whole lot less responsibilities when they were first 
asked to get involved in this.
    Everybody is talking about their new homeland security 
issues, and yet we are already at a disadvantage in terms of 
our infrastructure. What if our bridges and dams go out? We do 
not need Osama bin Laden to destroy our assets in interstate 
commerce or travel. We are doing it for ourselves. We are 
hurting our own national security because we have not put the 
resources into the things that are essential to keeping this 
country going.
    Today, we are also going to be hearing about legislative 
proposals to reform the Corps and how they do business. I 
believe that Congress and the Administration need to develop a 
strategy to address the Corps' backlog and improve the 
effectiveness of investments in our Nation's water resources 
infrastructure. The strategy should as its priority address 
projects that are economically justified, environmentally 
acceptable, and supported by willing and financially capable 
non-Federal sponsors.
    The Corps needs to ensure that its planning process is 
open, objective and inclusive, and that each project evaluation 
meets the highest standards of professionalism and quality. 
Furthermore, we in Congress must be able to rely on the Corps 
to recommend for authorization, and funding only projects that 
provide a high return on investment of taxpayer dollars for 
economic development and environmental quality.
    To that end, Mr. Chairman, we supported a provision in the 
WRDA Act of 2000. We have asked the National Academy of Science 
to conduct two crucial studies--one, an independent peer review 
of Corps projects; and No. 2, a study of Corps methods for 
conducting economic and environmental analysis of projects. 
These results are going to be due this summer. This is what we 
asked them to do. It really gets to the problem that Senator 
Smith talks about.
    So I think this is an important issue. I look forward to 
hearing from our witnesses this afternoon about how they are 
going to face up to their challenges and restore people's 
confidence in the integrity of the Army Corps of Engineers.
    Thank you, Mr. Chairman.
    [The prepared statement of Senator Voinovich follows.]

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

    Thank you, Mr. Chairman.
    As Chairman of the Transportation and Infrastructure Subcommittee 
during the 106th Congress, I am proud to have had the opportunity to 
help develop the Water Resources Development Act of 1999 and to use 
that experience in drafting and sponsoring WRDA 2000.
    Congressional authorization is an important first step in the 
process to develop and carry out projects that will protect our 
nation's water resources infrastructure. Equally important is having an 
adequate level of funding to build, operate and maintain these 
projects.
    As we on this committee know, this Nation has an aging national 
water resources infrastructure. If we continue to ignore the upkeep, 
what will result is deterioration of our locks and dams, flood control 
projects that are not started or not sufficient to get the job done, 
and navigation channels that are inadequate to meet the needs of modern 
waterway traffic. The risk of insufficient funding is clear: 
disruptions in waterborne commerce, decreased protection against floods 
and damage to the environment. Simply put, we desperately need more 
money.
    Mr. Chairman, since this committee did not conduct a hearing on the 
Corps of Engineers' fiscal year 2003 budget, I would like to say a few 
words about it. In the Administration's fiscal year 2003 budget, the 
Corps of Engineers faces overall reductions of 4 percent over fiscal 
year 2002, and in addition, 30 percent cuts for investigations and 
planning, and 16 percent cuts for construction with virtually no ``new 
starts'' in these two accounts.
    We have asked the Corps to do the impossible. The proposed 2003 
funding levels are hardly adequate to make a dent in the Corps' 
construction backlog, let alone to address our first priority, 
maintenance. The Administration budget for construction is $1.4 billion 
and the backlog of construction projects totals $44 billion. That is a 
difference of $42.6 billion. In other words, the Administration's 
budget covers only 3 percent of the construction projects needed.
    In Ohio, a number of important projects are under-funded. For 
example, the West Columbus Floodwall, which would provide flood 
protection to the downtown area of Columbus, would receive only one-
third of the required $7.4 million needed to complete the project in 
fiscal year 2003. The Corps has been involved with the construction of 
this project since 1989. The project is a wise investment that will 
prevent lost of life and property for approximately 17,000 residents 
and more than 6,000 homes and businesses located in the current flood 
plain. Most of these homes and businesses remain at risk until 
floodwall construction is completed.
    In addition, the Mill Creek Flood Damage Reduction project in 
Hamilton and Butler Counties, Ohio needs $9.4 million this year to 
protect a priority flood control area, but the President's budget only 
includes 11 percent of what is needed (only $1.1 million) to fund the 
Corps' portion of next year's scheduled activities.
    Maintenance of our critical water infrastructure should be our 
first priority, yet that is not reflected in the funding. The 
Administration's proposed maintenance budget for the Corps is $1.9 
billion and there is already a backlog of over $700 million in 
maintenance projects nationwide. Under the Administrations' budget, the 
projected backlog would total $884 million. So instead of reducing the 
maintenance backlog, we are adding to it.
    The impact of insufficient maintenance funding for Ohio, which is 
in the Great Lakes and Ohio River Division of the Corps, would exceed 
$100--million or 11 percent of the total backlog. This is a serious 
problem. The average lock chambers on the Ohio River, for example, are 
well over 60 years old and require regular maintenance.
    In short, this committee has authorized a number of environmental 
restoration programs for the Great Lakes and the Ohio River which have 
not been included in the Administration's budget requests. Fortunately, 
Congress has appropriated small amounts of funding for these worthy 
programs. Still, I believe Congress and the Administration can do more 
to fund these programs to protect and restore the ecosystems of the 
Great Lakes and Ohio River and to protect our domestic infrastructure.
    One of the most significant reasons that the Corps has such wide 
funding gaps between what is needed and what is budgeted is the 
decreasing Federal investment in water resources infrastructure over 
the last several decades. Nonetheless, the Corps' mission has continued 
to expand into new areas. While I do not, as a general rule, advocate 
increased levels of Federal spending, I do favor spending our limited 
Federal resources on the right things.
    Moreover, I believe our infrastructure is vitally important to our 
domestic security. I look forward to hearing from our witnesses this 
afternoon to learn how Corps projects fit in with homeland security and 
about their financial challenges.
    But all we need to do is compare recent funding levels. [CHART: 
Here is a familiar chart and one I've used before.] Our capital 
investment in the Corps of Engineers has dropped dramatically over the 
years. In 1966 at its peak, the appropriation was $5 billion and by the 
1990's it averaged only $1.6 billion. For fiscal year 2003, the 
administration's construction request is $1.4 billion. So we're 
spending less even less than we were a few years ago, and we're asking 
the Corps to do more things. We've expanded the mission for the Corps 
of Engineers substantially and given them less money. No wonder they 
have serious problems.
    Everybody's talking about their new homeland security issues and 
yet we're already at a disadvantage in terms of our infrastructure. 
What if our bridges and dams go out? We don't need Usama bin Laden to 
destroy our assets and interstate commerce or travel--we're doing it to 
ourselves!
    Today we are also going to hear about legislative proposals to 
reform the Corps of Engineers and how they do business. I believe that 
Congress and the Administration need to develop a strategy to address 
the Corps' backlog and improve the effectiveness of investments in our 
nation's water resources infrastructure. This strategy should as its 
priority address projects that are economically justified, 
environmentally acceptable, and supported by willing and financially 
capable non-Federal sponsors.
    As the former Chairman of the subcommittee with jurisdiction over 
the civil works of the Corps, I know very well how the Corps has been 
scrutinized and criticized over the last couple of years. At the same 
time, the Army Inspector General has substantiated allegations that 
officials of the Corps 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' 
project evaluation and development processes. Quite frankly, there are 
many in Congress who have lost faith in the Corps. I believe, however, 
that the Corps plays a vital role in navigation, storm-damage 
mitigation, and environmental restoration throughout the United States 
and that we should assess the situation thoroughly and fairly before we 
insist on sweeping reform.
    The Corps needs to ensure that its planning process is open, 
objective, and inclusive, and that each project evaluation meets the 
highest standards of professionalism and quality. Furthermore, we in 
Congress must be able to rely on the Corps to recommend for 
authorization and funding only projects that provide a high return on 
investment of taxpayers' dollars for economic development and 
environmental quality.
    To that end, I supported a provision in WRDA 2000 directing the 
National Academy of Sciences to conduct two critical studies: (1) an 
independent peer review of Corps projects and (2) a study of Corps 
methods for conducting economic and environmental analyses of projects. 
These results are due this summer and I look forward reviewing the 
reports.
    Mr. Chairman, this is an important issue and I look forward to 
hearing from our witnesses this afternoon on all of the challenges 
facing the Corps of Engineers and the reforms they believe are 
necessary to restore confidence and integrity in the Corps' ability to 
meet our nation's water resources needs. Once we have all the facts, we 
will be able to determine whether it is advisable to incorporate any 
reforms in the legislation for management of the Corps.
    Thank you, Mr. Chairman.

    Senator Jeffords. Senator Chafee.

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

    Senator Chafee. Thank you, Mr. Chairman, for holding the 
hearing.
    I tend to believe that the Corps can make the reforms 
internally, as opposed to legislatively. My experience in Rhode 
Island has been that the change of the Corps over the years 
that Senator Voinovich's charts showed is that they are 
changing into being a more environmentally responsible entity. 
It used to be in days gone by that to an environmentalist to 
say the Army Corps of Engineers is coming was about the 
scariest thing you could say.
    Just yesterday in Rhode Island we were at a 25-acre former 
drive-in movie site that at one time was a marsh and had been 
filled in to become a drive-in movie theater. Now, the Corps 
is--we raised the money through various entities and the Corps 
is the major entity responsible for restoring that to a marsh--
a 25-acre site.
    So I do think a lot of positive things are happening with 
the Corps from my experience. I know there has been some 
criticism on the large-scale projects, but in general I think 
that they can make the reforms internally, but I am willing to 
listen to the testimony this afternoon.

    Senator Jeffords. Senator Warner.

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

    Senator Warner. Sorry to be just a little late, Mr. 
Chairman. We were trying to get the Defense bill up. That is a 
matter which Secretary Brownlee is familiar with.
    Listening to the discussion of my colleagues and so forth, 
I think we will have to call on General MacArthur to come back. 
He started his career as a second lieutenant in the Corps. Am I 
not correct on that, General? You proudly wear his emblems that 
were once owned by General MacArthur. Well, Secretary Brownlee, 
you spent a lot of time in the Senate of the United States as 
Staff Director of the Armed Services Committee. You are 
prepared to solve it. Go do it. Thank you very much.
    [Laughter.]
    Senator Jeffords. Senator Reid.
    Senator Reid. Mr. Chairman, could I submit questions to 
General Flowers and Secretary Brownlee, and have them respond 
in writing?
    Senator Jeffords. That is allowable.
    Now we are ready to hear from our first witness. Senator 
Feingold, please proceed and welcome to the committee. I know 
you spent a lot of time in preparation, and we look forward to 
hearing your testimony.

 STATEMENT OF HON. RUSSELL D. FEINGOLD, U.S. SENATOR FROM THE 
                       STATE OF WISCONSIN

    Senator Feingold. Thank you very much, Mr. Chairman. I am 
delighted and honored to appear before the Environment and 
Public Works Committee today. I want to thank you, Mr. 
Chairman, for honoring the commitment to a hearing on the Corps 
Water Program and the need for reform of the Corps that was 
made to me by the former Ranking Member, Senator Baucus and 
Senator Smith during the floor debate over the Water Resources 
Development Act of 2000. I am very pleased to be working with 
Senators Smith and McCain on this issue. I certainly admire 
Senator Smith's dedication in particular to the fiscal 
responsibility, as being a driving force in his desire for 
Corps reform.
    As many of the statements today indicated, Corps reform is 
a work in progress. Reforming the Corps of Engineers will be a 
difficult task for Congress. It involves restoring credibility 
and accountability to a Federal agency that frankly has been 
rocked by scandals. It has been struggling to reform itself 
over the last year, and in many ways is constrained by 
endlessly growing authorizations and of course our rather 
gloomy Federal fiscal picture.
    But this is an agency that Wisconsin and many other States 
across the country have come to rely upon. From the Great Lakes 
to the mighty Mississippi, the Corps is involved in providing 
aids to navigation, environmental remediation, water control 
and a variety of other services to my State. My office does 
have a strong working relationship with the Detroit, Rock 
Island and St. Paul District Offices that service Wisconsin. So 
let me be clear, as many of the members of the committee have, 
I want the fiscal and management cloud over the Corps to 
dissipate so that the Corps can continue to contribute to our 
environment and our economy.
    The two reforms bills now before the committee grew in part 
from my experience in two legislative efforts. First, as the 
committee knows, I sought to offer an amendment to the Water 
Resources Development Act of 2000 to create an independent 
review of Army Corps of Engineers projects. In response to the 
initiative, the bill's managers adopted an amendment as part of 
their managers' package that should help this committee the 
additional information it needs to develop and refine 
legislation in this issue through a study on peer review by the 
National Academy of Sciences.
    Second, I also learned of the need for additional technical 
input into the Corps' projects through my efforts in working 
with Senator Bond on the reauthorization of the Environmental 
Management Program in the Upper Mississippi, which was the only 
permanent authorization in WRDA 1999. Included in the final EMP 
provisions is a requirement that the Corps create an 
independent Technical Advisory Committee to review EMP 
projects, monitoring plans and habitat and natural resource 
needs assessments.
    Mr. Chairman, I have been deeply concerned that this 
provision has not been fully implemented by the Corps and I 
feel that as this committee has been historically concerned 
about the need to secure outside technical advice in Corps 
habitat restoration programs like the EMP, it should also be 
concerned about getting similar input for other Corps 
construction activities.
    Early this Congress, I introduced the Corps of Engineers 
Reform Act of 2001, S. 646, and then as Senator Smith 
indicated, I joined with him and Senator McCain and introduced 
the Corps of Engineers Modernization and Improvement Act of 
2002, S. 1987. S. 1987 includes many provisions that were 
included in my original bill, and it codifies the idea of 
independent review of the Corps, about which Senator Smith and 
I agreed in the 2000 Water Resources bill.
    It also provides a mechanism to speed up completion of 
construction for good Corps projects with large public benefits 
by deauthorizing low-priority and economically wasteful 
projects. Further, it streamlines the existing WRDA 8060 
authorization process. Under Senate bill 1987, a project 
authorized for construction but never started is deauthorized 
if it is denied appropriations funds toward completion of 
construction for five straight years. In addition, a project 
that has begun construction, but denied appropriation funds 
toward completion for three straight years, is also 
deauthorized.
    The bill also preserves congressional prerogatives over 
setting the Corps' construction priorities by allowing Congress 
the chance to reauthorize any of these projects before they are 
automatically deauthorized. This process will then be 
transparent to all interests, because the bill requires the 
Corps to make an annual list of projects in the construction 
backlog available to Congress and the public at large via the 
Internet. The bill also allows a point of order to be raised in 
the Senate against projects included in legislation for which 
the Corps has not completed necessary studies that would 
determine that a project is economically justified and in the 
Federal interest.
    It is a comprehensive revision of the project review and 
authorization procedure of the U.S. Corps of Engineers. Our 
joint goal is to cause the Corps to increase transparency and 
accountability, to ensure fiscal responsibility, and to allow 
greater stakeholder involvement in their projects. We are 
committed to that goal and to seeing Corps reform enacted as a 
part of this year's Water Resources bill.
    Mr. Chairman, I hope that as the committee examines this 
issue, it also reviews my original bill, S. 646, which is 
sponsored in the House of Representatives by my colleague from 
Wisconsin, Representative Kind. S. 646 includes a number of 
important concepts that I think are central to environmental 
protection and it should be part of Corps reform. The Corps is 
required to mitigate the environmental impacts of its projects 
in a variety of ways, including by avoiding damaging wetlands 
in the first place, and either holding other lands or 
constructing wetlands elsewhere when it cannot avoid destroying 
them. The Corps requires private developers to meet this 
standard when they construct projects as a condition of 
receiving a Federal permit. I think the Federal Government 
should live up to the same standards.
    Too often, and others on the second panel will perhaps 
testify to this in greater detail, the Corps does not complete 
required mitigation and enhances environmental risks. I feel 
very strongly that mitigation must be completed; that the true 
costs of mitigation should be accounted for in Corps projects; 
and that the public should be able to track the progress of 
mitigation projects. In addition, the concurrent mitigation 
requirements of S. 646 would actually reduce the total 
mitigation costs by ensuring the purchase of mitigation lands 
as soon as possible.
    Mr. Chairman, I feel that we need legislation to ensure a 
reformed Corps of Engineers. The Corps' recently released list 
of projects that it intends to review have been confusing and 
the review criteria remain unclear. I think we need a clearly 
articulated framework to catch mistakes by Corps planners, 
deter any potential bad behavior by Corps officials to justify 
questionable projects, and old unjustified projects, and 
provide planners a desperately needed support against the 
never-ending pressure of project boosters. Those boosters, Mr. 
Chairman, include congressional interests, which is why I 
believe that this committee which has sought so hard to stick 
to its criteria in project authorization, and has done the 
better job in holding the line in conference needs to champion 
reform so that we can end the perception that Corps projects 
are all pork and no substance.
    I wish it were the case, Mr. Chairman, and I know that 
Senators Smith and McCain share my view, that I could argue 
that the changes we are proposing today were not needed, but 
unfortunately, I see that there is need for Corps reform 
legislation. I want to make sure that future Corps projects no 
longer fail to produce predicted benefits, stop costing the 
taxpayers more than the Corps estimated, do not have 
unanticipated environmental impacts, and are built in an 
environmentally compatible way.
    I hope this committee will seek to ensure that the Corps 
does a better job, which is what the taxpayers and the 
environment deserve. I am pleased to have this chance to meet 
with this committee and to testify, and I thank you for this 
opportunity to share my view with you today.
    Senator Jeffords. Thank you very much, Senator.
    I have to leave now to establish a quorum in the Finance 
Committee. As soon as I am not necessary for the Finance 
Committee's quorum, I shall return. In the interim, Senator 
Corzine will take charge.
    Senator Corzine. Are there any questions from my colleagues 
of Senator Feingold?
    [No response.]
    Senator Corzine. If not, thank you very much. I appreciate 
your testimony and consideration.
    We ask the next panel to please come up. Assistant 
Secretary Brownlee to start, thank you.

STATEMENT OF HON. R.L. BROWNLEE, ACTING ASSISTANT SECRETARY OF 
                     THE ARMY, CIVIL WORKS

    Mr. Brownlee. Mr. Chairman, I have a prepared statement 
which I would ask be entered into the record, and with your 
permission I will briefly summarize that statement.
    Senator Corzine. Without objection.
    Mr. Brownlee. Thank you, Mr. Chairman. This is only the 
second time since I left the Senate Armed Services Committee 
staff last November that I have been invited to return to 
testify before a committee of the Senate, an institution which 
I have loved and which I so proudly served as a member of the 
staff for almost 18 years.
    I am privileged to appear before you today on behalf of the 
Administration to talk with you about the Army Corps of 
Engineers, our Nation's water resources, and charting a path 
toward continued modernization of both. I have learned a lot 
about the Corps of Engineers since I assumed more direct 
management responsibilities for Civil Works in mid-March. Among 
the things I have learned is that the distinguished history of 
the Army Corps of Engineers is the history of our Nation. As 
the Nation has changed its priorities and values, the Corps has 
also changed as it brought these priorities to reality.
    It is with this history, tradition and spirit that I 
address the subject of today's hearing, Corps reform. This 
Administration supports the goals of Corps reform and will work 
with this committee and other interested members to ensure that 
the most needed and most worthy projects are implemented, and 
to improve the ways in which we formulate projects and fund 
them.
    I would also propose that we focus our attention on the 
question that perhaps lies on a higher strategic plane. What 
should our national policy for water resources be in the 
future? Our continued understanding of this question is 
critical to setting the future direction of the Corps. The 
debate over water resources typically centers around a more 
specific question. Where should we give priority to the 
development of water resources for social and economic benefit, 
and where should we give priority to the restoration of these 
resources to their natural state? Sometimes we must choose one 
over the other. Sometimes we struggle to do both. As science 
and engineering evolve, we can enhance our opportunities to 
find more balance between these options, and working together 
make the right choices for the Nation.
    We all agree that the Corps can and should modernize. But 
modernization of the Corps needs to be in accordance with the 
future direction of our national policy. While advances in 
science and technology can move us toward a new era of more 
environmentally sustainable projects and integrated water 
resources management, we must develop more effective public 
policies built on a new public consensus. In terms of our 
Nation's priorities, the war on terrorism is and should be our 
main focus. We must prioritize our national resources to ensure 
that we win this war.
    At the same time, we also need to protect and sustain our 
Nation's natural resources. Our financial resources are not 
unlimited and decisions about the most important priorities 
must be made. This Administration has insisted on much stronger 
coordination and cooperation among agencies within the 
executive branch and wants to work more closely and effectively 
with you in the Congress on the plans and policies to address 
these long-term needs.
    Corps reform is important. General Flowers and I agree that 
the Corps of Engineers should be changed and transformed to 
better serve the evolving needs of the Nation. However, reform 
of the Corps will follow in a more natural and logical way if 
we better define our policies and reach agreement on the right 
balance on the critical priorities.
    I appreciate the opportunity you have given me to testify 
before this distinguished committee, recognizing that your 
knowledge of these subjects far exceeds what I have been able 
to learn in these past few months. I believe we have an 
opportunity working together to shape the Nation's future. As 
you know better than I, these are serious times and it is often 
hard to concentrate on the long term when the more immediate 
becomes urgent. I pledge to work with you on these important 
issues to achieve a national water policy that serves the best 
interests of all our citizens.
    Mr. Chairman, this concludes my statement. General Flowers 
and I would be pleased to address any questions that you on the 
committee might have.
    Senator Corzine. Thank you, Mr. Brownlee.
    General Flowers.

  STATEMENT OF LIEUTENANT GENERAL ROBERT B. FLOWERS, CHIEF OF 
            ENGINEERS, U.S. ARMY CORPS OF ENGINEERS

    General Flowers. Yes, sir. I also have a statement that I 
would submit for the record and would summarize orally if 
permitted.
    Senator Corzine. We will include it.
    General Flowers. Mr. Chairman, members of the committee, it 
is an honor to be before you today. I would like to state 
categorically that the Corps must change. Mr. Brownlee has 
articulated what I believe to be the heart of the issue. It 
will be more beneficial for the country in the long run if the 
transformation of the Corps is consistent with changes that 
have been occurring in the Nation's priorities and values 
regarding water resources.
    The Corps can change, but we need your help and that of the 
Administration to transform today's Corps. In previous 
hearings, we have talked about too many projects on the books, 
some of which do not address solutions in a contemporary way. 
We need to solve this. We have, and I will bring forward for 
immediate deauthorization, about $5 billion worth of inactive 
projects that technically remain on our books whose designs 
will not solve the original problem for which there is no 
longer support. We also have some ideas on other ways to clear 
some other unbuilt projects off the books.
    We are also working to change the organization's internal 
process and procedures. We certainly must address concerns 
about economic analyses. We have had a couple of high-profile 
failures recently. That is unacceptable. During the past year, 
we have focused on revitalizing our planning capability within 
the Corps. Our ability to systematically analyze alternatives 
and make sound investment recommendations was once a major 
strength. I think it is still pretty good, but not as good as 
it once was and not as good as it needs to be.
    The other part of this is independent review. It is 
possible, in my view, to have such a review without adding 
unacceptably to time and cost if that review is designed 
properly. We are eagerly awaiting the study findings this 
summer from the National Academy of Science that were directed 
in WRDA 2000. I am optimistic that the recommendations will 
provide us with a road ahead on this issue.
    We are also looking forward to the second phase of the 
study that will look at the state-of-the-art of the Corps 
planning process. We also need to refocus the Corps with your 
help and that of the Administration so that we are approaching 
problems and opportunities on a watershed basis. For example, I 
have restructured the controversial Upper Mississippi 
Navigation Study to consider a wide range of options, from 
construction of new locks to non-construction alternatives such 
as system-wide environmental restoration.
    We also need to ensure that the economic analyses used in 
the study is current and beyond reproach. The process is being 
overseen by an interagency national principles group, and so 
far it is working well.
    I have revitalized the Environmental Advisory Board, a 
board of independent external advisers that will help us 
evaluate our processes. I have established a set of 
environmental operating principles that reiterates our 
commitment to approach our work in a more environmentally 
sustainable way. This will refocus our professionals on the 
long-term goal.
    Quite frankly, though, we need to do more and we need the 
Congress' help if we are to truly take a watershed approach. 
Right now, existing laws and policies drive us to single focus, 
geographically limited projects where we have sponsors willing 
and able to share in the cost of the project. The current 
approach narrows our ability to look comprehensively and sets 
up inter-basin disputes. It also leads to projects that solve 
one problem, but may inadvertently create others. Frequently, 
we are choosing the economic solution over the environmental, 
when we can actually have both.
    I believe the future is to look at watersheds first, then 
design projects consistent with the more comprehensive 
approach. We know that that will require collaboration early 
and continuously, but we believe it will minimize disputes 
later. So together, we need to develop and agree on criteria. 
Transformation of the Corps will not be easy, but we stand 
ready to work with you to address these issues.
    Thank you, sir. This concludes my statement. I look forward 
to your questions.
    Senator Corzine. Thank you.
    We will have a round of questions, 5 minutes each. I will 
begin off the Chairman's inquiries that he left.
    Gentlemen, in your testimony, you both indicate the Corps 
must adapt to new conditions and change, and that you are 
anxious to work with Congress to do so. You cast our challenge 
in that regard broadly, indicating that we have to have a broad 
review of our Nation's water policy before settling on agency-
level change. Why do you think this type of debate is necessary 
before moving forward with changing some ways the Corps does 
business? Is there something deficient in the Water Resource 
Planning Act which already requires the Corps to balance 
economic and environmental considerations that stands in the 
way of change?
    General Flowers. Sir, it is an excellent question. I think 
the water basin or watershed approach will help do just exactly 
what you are leading toward--by taking a more holistic 
approach, by having the ability to look at all of the interests 
in a basin you have a better opportunity to provide the type of 
solutions that I think will be in keeping with the values of 
this Nation.
    In history, we have periodically done this in our country. 
Comprehensive looks at the Mississippi authorized decades ago, 
but it appears today that we are now being driven to and have 
been on a more project-specific approach. When you are that 
way, you have the tendency then to build a project that solves 
one purpose and solves one problem, and may inadvertently 
create another.
    So having authority to work on a watershed basis would 
provide us an opportunity to do better.
    Senator Corzine. If there anything that exists in the Water 
Resource Planning Act that stands in the way of that change 
that you are suggesting?
    General Flowers. No, sir, but to my knowledge we do not 
have authority to conduct--we would require specific authority 
to conduct water basin-wide studies.
    Senator Corzine. The Corps has a growing backlog of 
environmental mitigation and incomplete mitigation projects, as 
documented by the General Accounting Office. This is 
problematic because the Corps is the chief regulator of 
wetlands under the 404 Program, and is also in charge of 
ensuring that private parties mitigate wetland losses. How can 
you ensure that the Corps holds itself to at least a high a 
standard as it holds private parties?
    General Flowers. Sir, we are working very hard in our 
regulatory arena. We have asked and have been granted in the 
fiscal year 2003 budget additional funds for regulatory. Our 
regulators have the hardest job in the Corps. They are the face 
that the public sees most often, and they are probably some of 
the best environmental specialists in the business. Having said 
that, we agree with findings that were made that the Corps has 
not done a very good job in following up on mitigation. We 
think that the additional funds provided in the fiscal year 
2003 budget will help us in that area. We have committed to 
holding people accountable for being in compliance with Corps 
permits that are issued.
    Senator Corzine. Both the 1999 and 2000 National Academy of 
Sciences reports on the Corps criticized Corps planning models 
and their focus on maximizing national economic benefits, 
without balancing those benefits against environmental 
considerations. How could you modify Corps practices to account 
for the concerns of the NAS?
    General Flowers. Sir, we are looking at--we are looking 
forward very much to the reports that were directed in WRDA 
2000 from the National Academy of Science that basically asked 
them to take a very hard look at the Corps and that specific 
issue. We will get the first of the reports, that on 
independent review, later this summer, and the second next year 
on a very holistic look at Corps processes. We are looking very 
much forward to those.
    In the interim, what we are doing is, we are working at an 
internal look at the Corps and how we do our planning. I 
mention in my testimony that it is a core competency that has 
eroded some over time. So we have a task force that has been 
appointed to help reestablish that core competency within the 
Corps, revitalizing the training for our planners, centralizing 
that planning capability so that we can have the best minds 
working on all of the analysis when they are required.
    I think we directed as a result of the Delaware deepening 
project that you mentioned, the IG to take a very hard look at 
that, and we will continue to work that in the interim.
    Senator Corzine. Just one follow on--is that one of the 
projects that you were referencing when you said major projects 
that you were concerned about the flawed analysis?
    General Flowers. Yes, sir.
    Senator Corzine. Senator Smith.
    Senator Smith. Thank you, Mr. Chairman.
    Secretary Brownlee, welcome back in the harness.
    Mr. Brownlee. Thank you, sir.
    Senator Smith. It's unusual to see you sitting across the 
table from me there, and not advising me on some matter that 
Senator Warner is asking about.
    Senator Warner. I think he prefers to ask questions rather 
than answer them. Have you noticed that?
    [Laughter.]
    Senator Smith. General Flowers, I appreciated the spirit of 
your remarks and your candor, and I take them that way. I look 
forward to working with you, not against you, as we try to 
address some of the problems. My objective here is not to be 
out there banging away, highlighting necessarily problems, as 
much as it is to discuss and to try to make them better and to 
correct them.
    Let me ask you, either one of you, but probably General 
Flowers, a most specific question. Somebody brought up on the 
panel here, it might have been Senator Bond, I am not sure, 
that there is a lot of I think political pressure, at least if 
it is not exerted, it would feel--you may feel that it is in 
the sense of who it might be, whose district it is, whose State 
it is, or whatever. If we had independent review, and I would 
say to you that my objective on any kind of independent review 
is not to add another level of bureaucracy. On the contrary, it 
would be to expedite, rather than delay. But if we had some 
type of independent review, if it would be done in a way that 
did not lengthen the process, perhaps maybe, say, 6 months 
while the draft feasibility is being prepared, something along 
those lines. Would that remove some of the political concerns 
that you might feel in addressing a problem in somebody's State 
or district?
    General Flowers. Sir, I do not know if it would remove 
political concerns. I think the Corps is not afraid of 
independent review. I testified last year that any type of 
external review or independent review that might be done, as 
long as it did not appreciably add time or expense to a 
project, would be welcomed by the Corps. We have had a number 
of our projects reviewed.
    But I must state that as an organization, what we do is try 
to provide the best engineering and science that is available, 
and base our commendations on that. I was questioned in 
testimony last year--you know, General, did you receive 
political pressure when you put this budget together? The 
answer is yes. But if the question is, did it cause you to 
change any of your recommendations, the answer is absolutely 
not. They must be based on the best engineering and science 
available. That is why some of the things that have come up are 
so troubling, and I understand. We need to work together to get 
that fixed.
    What I am saying, sir, I think is, I will make sure that 
the things we do are done right, but I need some help in making 
sure that we are working on the right things.
    Senator Smith. At least if there is independent review, you 
have got a little cover if they tend to agree with you. Right?
    Let me ask you this, and maybe Secretary Brownlee could 
answer this, in the situation where you have very little 
traffic on a waterway, and then you see proposals to dredge it 
deeper or to do more with that waterway, is it unfair to ask 
those who use that waterway, that very limited waterway, is it 
unfair to ask them to increase their burden for the usage of 
it?
    Mr. Brownlee. Senator, the decision on those kinds of 
projects of course are made here. Generally, the projects get 
authorized and appropriated and then the Corps ends up doing 
them. The issue of fairness with respect to the expenditure of 
Federal funds is one that is probably a lot bigger than I am, 
but I do not know and I listened very intently to your example. 
I also listened very intently when Senator Voinovich made some 
of the points he made, to make a note to go back and look into 
those things. Senator, the fairness of that, I do not know. We 
spend a lot of money on a lot of things in this country--on 
national security and economic development. As I indicated, 
those decisions are usually made here by committees like this 
and on the floor of the Congress. The responsibility does lie 
here.
    Senator Smith. General Flowers, I mentioned it, and I think 
somebody else mentioned it in their remarks, the example of the 
118 projects, the economic analysis that came back. Some have 
said it was 80, not 118--but whether it is 80 or 118, came back 
in 17 days. Can you just shed some light on that? Is there a 
reason why it was only 17 days? Could you enlighten the 
committee a little bit on that?
    General Flowers. Yes, sir. As a result of an out-briefing 
we received from the Government Accounting Office, it indicated 
to me that for good governance, I needed to initiate a stop on 
any projects that had economics over 5 years old, because 
essentially what was found was economics that had been done 
over 10 years ago and had not been properly validated or 
updated. I wanted to make sure, very embarrassing, but 
essentially there was no audit trail to the original benefits 
that were derived for this project. So I wanted to make sure 
that we did not have same situation occurring in projects where 
we had done economics that were over 5 years old. There were 
some 171 projects that were reviewed. Of those 171, there were 
eight projects that were going to require some additional 
analysis. In other words, those remaining projects, the 
economics did have an audit trail and were verifiable by the 
people who had done the work.
    Senator Smith. Is it possible for you to provide the 
committee with the economic analyses on those projects? How 
much of an effort does that require?
    General Flowers. Sir, yes, sir. In fact, the economic 
analyses on all of those projects is public record. So 
absolutely.
    Senator Smith. It would be helpful to me just to see the 
process, to see if we are being unfair in terms of saying you 
came back in 17 days with 80 or 118 or somewhere between number 
of projects. I would like to just have the opportunity just to 
review that to see what your process is so that I can 
understand it better. So I would appreciate it if you could 
provide that for the record at some point.
    General Flowers. Yes, sir.
    Senator Smith. Thank you, Mr. Chairman.
    Mr. Brownlee. If I could just add, sir. When this 
information came to light, I would just like to point out to 
the committee that General Flowers and his people came to see 
me on this. They were extremely embarrassed and frustrated by 
this kind of a report. Certainly, in the discussions I have had 
with them they are extremely conscientious about this sort of 
thing and it is horribly embarrassing to them that this 
happened. But they have already taken steps to consolidate some 
of their expertise in these areas to help improve. As has been 
indicated before, hopefully the recommendations of the National 
Academy of Sciences that this committee put in motion will help 
also.
    Senator Smith. Thank you very much.
    Senator Jeffords. Senator Bond.
    Senator Bond. Thank you, Mr. Chairman.
    General Flowers, you have a lot of projects on your plate. 
These are not projects you stay up late at night and dream up. 
They are local and regional projects. Who brings these ideas to 
you and where do you get them from?
    General Flowers. Sir, you are making a great point, and 
that is the Corps does not dream up any of its projects on our 
own. All of these projects come forward based on some public 
request, either from elected officials, local entities. Many of 
them come about as a result of studies that are conducted into 
the feasibility of accomplishing some goal like flood control 
or environmental restoration. That is the way they come about.
    Senator Bond. How many of the projects you undertake that 
are not authorized by Congress, appropriated for by Congress, 
are signed-off on by the President?
    General Flowers. Zero.
    Senator Bond. Zero--about zero--between zero and none.
    General Flowers. Yes, sir.
    [Laughter.]
    Senator Bond. You know, there is a lot of talk about the 
huge expenditures of your agency. Current expenditure for 
construction is about $1.4 billion. If you look in constant 
1999 dollars, back in the 1960's and 1970's we were spending 
about $4 billion. In other words, this is down to just a little 
over 30 percent of what it was. Senator Voinovich has noted 
previously that in the last 30 years our population has grown 
40 percent. Our GNP has grown by a factor of four and our water 
infrastructure investment has declined by 70 percent. Now, out 
of that figure, how much of the current budget, which has 
already been diminished by two-thirds, is for environmental 
work?
    General Flowers. Sir, about 20 percent.
    Senator Bond. About 20 percent. Thank you.
    If government were to reduce water transportation options, 
is it not obvious to say that this would be bad for shippers 
such as farmers; good for our foreign competitors; and, say, 
good for railroads, who also carry goods?
    General Flowers. Sir, potentially.
    Senator Bond. The National Academy of Science has said that 
the market for American grain over the next 5 years is highly 
uncertain. The market over the next century is unknowable. They 
also said no one can know or predict with confidence the demand 
for water transport or almost anything else 50 or more years in 
the future. Are they wrong?
    General Flowers. No, sir.
    Senator Bond. It seems that we are being held to a standard 
of what the shipments are going to be 50 years from now, and I 
believe the National Academy of Sciences said what common sense 
would tell us, that you cannot know and the actions we take now 
are going to make a major impact on those shipments.
    I am concerned about the process. Cost-benefit analysis--
almost nobody else does them. We in Congress still want to have 
projects. Everybody is pushing for projects. We try to 
substitute your forecasts for our judgment. It is simple for us 
to tell you just to go and stack up the pennies and if there is 
more in one pile than in the other, then it is deauthorized. 
But it seems to me that we would be better off--you and we and 
the public we serve would be better off--if the Administration 
issued projected ranges of costs and benefits and options, and 
laid out environmental issues, and included separate analysis 
from resource agencies, and then had the Administration give 
their political go or no-go recommendation, and let Congress 
earn the money we are paid by determining if the projects are 
or not priorities worth authorizing and appropriating, and stop 
trying to determine with the false security of a mathematical 
formula what should and should not be authorized.
    These are judgment issues and we value your expertise. Is 
there any sense in doing something like that?
    General Flowers. Yes, sir. I think again working on a much 
more regionalized-type approach would help us. One of the 
things, for example, that we are doing on the Upper Mississippi 
study is were are examining a very wide range of alternatives 
with maximum input possible, running a series of scenarios. 
Then we are working with a very large group to try and narrow 
this group of scenarios down to as narrow a band as possible, 
and then base recommendations on that, rather than on one 
finite prediction on what might happen.
    Senator Bond. Let me just ask one final question. Despite 
the apparent holiness of a full report and benefit cost 
analysis, a good number of environmental projects, many of 
which I support very strongly, have no cost-benefit report. I 
see the budget requests a whopping $98 million for a Columbia 
River project. There are individual earmarks from members on 
this committee and the Energy and Water Appropriations bill 
which have none of the sacred cost-benefit analysis. We also 
see the occasional combined sewer operation funding pop into 
legislation. Do you see this happening? Are many of these 
projects authorized, particularly in the environmental area, 
without the same cost-benefit analysis that are required for 
the water transportation or levee protection projects?
    General Flowers. Sir, yes they are. Environmental 
restoration projects do not necessarily need a positive 
benefit-cost ratio to be brought forward.
    Senator Bond. I thank you, General, and thank the Chair.
    Senator Jeffords. Senator Corzine.
    Senator Corzine. Thank you, Mr. Chairman.
    Can I go back to the Delaware River dredging project, but 
more in the context of how we sort through to deal with this. I 
am a little troubled in what I thought I heard in response to 
the last question. You are not arguing that we should not do 
cost-benefit analysis, whether it is against a given project or 
whether it is a broader base in our watershed proposal--or am I 
hearing you say that you think those are not effective elements 
of proposal evaluation?
    General Flowers. It is our current evaluation process that 
we use the benefit-cost analysis. I am not arguing against 
using benefit-cost analysis because I think it can prove 
valuable. What I was arguing for was authority to do a more 
comprehensive watershed or water basin approach so that you can 
lay out all of the interests and make smart decisions and lay 
out priorities.
    Senator Corzine. As you know, in the Delaware River 
dredging project there was a 108-mile basin study, so it was 
fairly comprehensive in the context of how you are describing 
the situation. I am in no way saying that there are not 
judgments that need to come into play. But one of those 
elements that one ought to evaluate, at least in my view, in 
looking at returns on dollar invested is whether the balance is 
in play on the cost-benefits.
    But that aside, I am troubled. How do you think we got into 
the situation we did with regard to this Delaware project that 
saw a flip of the benefits almost 100 percent. It was pretty 
remarkable, and it is easy with 20-20 hindsight to go after 
analysis. But was there interference on the political side from 
those of us who sit on this side of the microphone? How did we 
get into such a situation?
    General Flowers. Sir, I think it is really tough to answer 
that question with great knowledge and finality because the 
real answer is, I am not sure, but we are working to try and 
make sure that we do not have this happen again.
    What you have is across the Corps right now, each one of 
our districts has a planning capability and does the analyses 
for projects within their district. Some of our districts have 
projects frequently and large projects and are very practiced 
in doing these analyses. Other districts only do them rarely, 
so they may not have all of the expertise that is necessary to 
do a good initial analysis. Whether that happened in this case 
or not, I do not know. My suspicion is that that was a factor.
    What is embarrassing is that subsequent required re-
analyses which are required by our regulations, were not 
properly accomplished. I suspect what happened was there was an 
initial report done more than 10 years ago and the economic 
analysis was in that report. When subsequent updates were done, 
they never went back and questioned those original values and 
simply updated the values in the original report. So now when 
we go back and try and reconstruct where those initial benefits 
come from, there is no employee any longer working in that 
section that did the original analyses. Very tough. So what you 
try to do in the future is set it up so you never have that 
happen again.
    Our intent is to take a look at our planning capability, 
make sure we have the best minds looking at these projects, 
incorporate reviews and that is what we will do for this 
particular project.
    Senator Corzine. It does argue for that third party 
oversight--not oversight per se, but peer review of the 
analysis to make sure that it is squaring with facts and 
circumstances and can be challenged, I presume, particularly on 
these mega-projects.
    General Flowers. Yes, sir. We have the capability, I think, 
to do much of that internally--in other words, to have a review 
by a body independent within the organization. Then if some 
other review is deemed necessary, that is all right as well.
    Senator Corzine. Thank you, General.
    Senator Jeffords. Senator Inhofe.
    Senator Inhofe. Thank you, Mr. Chairman.
    I think that the charts that Senator Voinovich held up I 
had forgotten. I had seen those before, but I had forgotten the 
history of this and the funding problems. I think each one of 
us up here could tell you a story about, well I would use the 
Montgomery Point Lock and Dam, which is actually in Arkansas, 
but it affects everything forward on up toward upstream.
    I was elected to the House 16 years ago. We were talking 
about it back then. Then we started in the engineering--we 
started in as it progressed along. We got a little bit of 
funding and then a third of the funding and then a fourth of 
the funding the next time. This thing could have been done, it 
is estimated, by less than one-half of what the total cost 
would be today, because we just never get these things done. 
That is something that if you don't do, there is no way to 
predict in advance whether to the wheat farmers going one way 
or the oil people going the other way, whether or not they are 
going to be able to get all the way down to the Mississippi.
    These things are just--we have to get some way we can get 
these things done. I know that is not the purpose of this 
hearing, but it is one that I hope that the general public can 
look at the charts that Senator Voinovich held up and be 
concerned with them.
    Now, General Flowers, we are really dealing here with three 
things. You have got your national security. You've got 
economic development and environmental protection--three 
things. How do you do all three things?
    General Flowers. Sir, I think the Corps is a great 
contributor in all three areas. National security--many of the 
ports that we maintain are our strategic deployable ports for 
this country. I think the inland waterway system gives us an 
agility to move within our borders that is the envy of most of 
the rest of the world.
    Senator Inhofe. I might add in moving our National Guard 
around from place to place, that has ended up being the most 
cost-effective way of doing it, and has saved a lot of money to 
other areas of defense, hasn't it, Secretary Brownlee?
    Secretary Brownlee. Yes, sir.
    General Flowers. We have been able to use the expertise we 
have gained. We have set up an infrastructure security 
partnership. It is an association of associations, several 
Federal agencies, many national associations such as the 
American Society of Civil Engineers, the architects, the 
contractors, to come together and share information on how to 
better protect the Nation's built environment. So we are making 
a contribution there.
    I think when you look at the economy, money that is put 
into infrastructure that has a positive benefit-cost ratio does 
in two ways--short-term, there is an infusion of money into the 
local economies through the contracts that are done; and then 
longer term to the treasury in terms of benefits realized. So I 
think we contribute that way economically. So national defense 
and the economy are two things that I think the Corps is a 
great contributor in.
    Senator Inhofe. There is a phrase that I had not seen 
before, but I saw in your written statement. You said, 
scenario-based comprehensive planning. So I will go ahead and 
add that to a question I am going to ask. What legislative 
tools and financing changes do you need to pursue this 
scenario-based comprehensive planning, enhance public 
participation, increase roles for peers and technical experts 
in streamlining of your economic planning and engineering 
processes?
    General Flowers. Sir, I think what we would ask for would 
be the authority to do comprehensive basin-wide studies, using 
an interagency process and apply more macroeconomic and larger-
scale scenarios to take a look at outcomes. I think the 
engineering and science is good enough today, sir, to do very 
models that have great fidelity, using the automation, the 
digital terrain data and so forth that we have, and to provide 
better options to the decisionmakers for prioritizing and 
making sure that we are in fact accomplishing the right work.
    Senator Inhofe. Mr. Chairman, I heard Senator Corzine talk 
about oversight, and I kind of whispered to Senator Smith, 
isn't that what we are supposed to be doing here in this 
committee--providing the oversight? I would just like to ask 
you, General Flowers, what more can we do that is going to 
resolve some of the problems, answer some of the objections 
that are out there right now, that is precipitating the 
legislation?
    General Flowers. Sir, I think the committee already acted 
through WRDA 2000 when it directed the National Academy of 
Sciences to take a look at the Corps, to one, independent 
review; and second, to take a look at the core process and make 
recommendations. That is ongoing right now. So I think we are 
looking forward to the results of that, and we intend to 
incorporate them as we move into the future.
    I think as I indicated, the Corps does need changing. We do 
need transforming. I think working together, we will do that, 
to make ourselves better servants of the public for the future.
    Senator Inhofe. All right. Thank you.
    Senator Jeffords. Senator Voinovich.
    Senator Voinovich. In my statement, I noted the fact that 
your budget is $1.9 billion for maintenance. It is only a 
couple of years ago that we had a $454 million backlog. Now, 
even with this budget it is going to be $884 million. Is that 
adequate to get the job done, General? Secretary Brownlee, is 
that adequate to get the job done?
    Mr. Brownlee. Senator, as you well know, we have backlogs 
in almost every maintenance program we have in the military, 
and certainly we have maintenance backlogs in the Corps of 
Engineers projects. These are a matter of priorities. As I 
indicated earlier, our resources are not unlimited and we are 
prioritizing on the margin in many cases.
    Senator Voinovich. Well, the President's priorities are the 
war on terrorism, homeland security, economic security, with 
emphasis on jobs. I just wonder, have either one of you or both 
of you sat down and laid out specifically for somebody over at 
OMB how this maintenance budget impacts on our homeland 
security, on our economic security, on jobs?
    General Flowers. The answer is yes, sir. I think some 
really tough calls have to be made. My job is to make sure and 
articulate to the leadership what the status of the systems are 
and what the requirements are, and then articulate the best 
case I can, and then make sure that whatever money we are 
given, we apply in the best way we can to satisfy the needs of 
the American people. That is the commitment.
    Senator Voinovich. Well, the fact of the matter is that, 
are you going to be able to maintain the commitment? You are 
talking about some strategic things that are needed here in 
this country, and that are in pretty bad shape and could go 
down and impact on us negatively in terms of our security and 
in terms of our economic security.
    Mr. Brownlee. Senator, I might add that in too many cases, 
decisions are made on the margin not between things that are 
not needed or not wanted, but in many cases between things that 
are both needed and both wanted. As you know, decisions have to 
be made here on this committee and as well as within the 
Administration. I know we are doing the best we can.
    Senator Voinovich. The thing that really bothers me is that 
we are increasing the Defense budget 14.5 percent, domestic 
budget 2 percent. I know full well that is not going to be the 
case. We will add on to it. We had a budget surplus of $313 
billion, now we are borrowing over $300 billion to take care of 
2002, and it will be more in 2003. Somebody has got to sit down 
and start looking at this. The Administration has to look at 
their Defense budget. If this maintenance is very important to 
you, then they may have to nick that Defense budget to put some 
more money into the domestic side of this thing to deal with 
the problems that you have. It is really disturbing to me that 
nobody wants to do that.
    Everybody wants to do everything. The Administration knows 
dog-gone well that we are probably going to come up with some 
more money. We are going to add to the debt and down the road 
undermine our national economy. It may not happen right away, 
but it is going to happen sooner or later. Son of a gun, 
somebody has got to start talking about doing some of these 
tough things around this country.
    General, you know, his successor quit or got fired. I 
understand part of it was is he told them that he did not have 
enough money. I told him when he came to see me that he ought 
not to take the job unless he told them, I am not taking it 
unless I have the money to run the operation. It is get-down 
time. I am going to be talking to Daniels about some of this 
stuff in terms of these budgets.
    The other thing is this $5 billion that you are talking 
about. How are you going to get away with knocking off $5 
billion with all the politics involved and all these people 
here at this table and over in the House and Senate?
    Mr. Brownlee. We didn't say we would get away with it, sir. 
We said we would just . . .
    [Laughter.]
    General Flowers. We were asked by the committee last year, 
and I think it was you and Senator Graham that basically said, 
we really want you to come take a look at the projects out 
there and come back to us with ones that you think. So, we have 
identified $5 billion so far in projects that we do not think 
meet their intended purposes any longer, and we would like to 
bring them forward and have them deauthorized. We will follow 
the procedure to do that, and we are prepared to do that very 
soon.
    Then there are some other projects that we would like to 
pull together an interagency panel and have another look taken 
at as to whether or not we should move these projects along or 
also look at them for possible deauthorization. We would like 
to work within the Administration and with the other Federal 
agencies to pull together a proposal, and then vet that. But I 
think that is the proper way to proceed.
    Senator Voinovich. Well, I want to tell you, I am going to 
help you knock off that $5 billion, even if some of them have 
got to do with the State of Ohio. I was thinking, Mr. Chairman, 
that maybe if we have the BRAC process where we go through an 
independent group and then give them a bunch of them and say, 
here, here it is, and you cannot nitpick it and choose, and you 
have got to go with it.
    But I think it is incumbent on us to really look at this 
big backlog of the capital projects and deal with them. The 
other thing is this, is that if you have got to choose between 
money for maintenance and for these capital projects, I think 
the maintenance has got to come No. 1. That is your everyday 
stuff. If you do not take care of that, then you cannot keep 
going.
    So I just think that we really need to have more dialog 
here, Mr. Chairman, in terms of where you are going with this 
budget, because that is the most important thing, and how we 
can help you with that issue.
    Senator Jeffords. Thank you, Senator.
    Senator Chafee.
    Senator Chafee. Thank you, Mr. Chairman.
    Secretary Brownlee, did you comment at all on Senator 
Feingold's testimony?
    Secretary Brownlee. Senator, as I said initially, we 
certainly support changes within the Corps to improve their 
processes and how things are done. It has been my observation 
since the few months that I have been having these direct 
management responsibilities and looking back over what the 
Corps has done and not done in the past, the Corps pretty much 
does what it is told to do. The Corps does what it is directed 
to do.
    The Corps has changed over time. Looking back, in fact, I 
found a copy of a Miami Herald, December, 1947 which describes 
the horrible floods in Florida--2,000 people homeless in Dade 
County. Almost the whole southern part of Florida was flooded. 
The national consensus was and the elected representatives 
decided that there should be flood projects down there to 
prevent that in the future. The Corps was given that mission 
and they did that very effectively. They redirected that water 
to the ocean, both the Gulf and the Atlantic Ocean.
    Now, we find ourselves, and I just came back from there 
last week. I spent Thursday and Friday both flying over the 
Everglades and going up the river in one of these propeller-
driven boats. Now you find the Corps very deeply involved in 
projects to restore the Everglades as near as possible to its 
original state. The Corps did not dream these projects up on 
its own. The Corps was directed to do this.
    So I guess the message is that I find the Corps to be made 
up, just like I found the people in the Senate when I worked 
here, to be made up of good, honest, hard-working, dedicated 
Americans trying to do the right thing. We are all working, as 
I found over the years, with limited budgets. Everybody has 
unfunded requirements and priorities. As you work with some of 
these transformation projects in the Department of Defense, it 
is the same thing. Everybody wants to go to heaven and nobody 
wants to die.
    [Laughter.]
    Mr. Brownlee. So here we are. I was privileged--General 
Flowers asked me out to speak to the Corps. I did not want to 
do it until I had had the job for about a month, and I do have 
another job. But what I told them was, I want you to do your 
job professionally and quietly. I want you to know that we are 
not trying to be a growth industry and we are not seeking new 
business, but what we do, we want to be known for the 
excellence and the professionalism of it. All of the people 
that I have met within the Corps of Engineers, I believe, are 
striving for that.
    So certainly we want to improve the methods by which the 
Corps does its business. I also believe, as I indicated in my 
statement, that we need to work hard to try to develop a 
national consensus on what our policies ought to be with 
respect to our water resources. I think we are beginning to 
realize that these water resources that we may have taken for 
granted over the years are not infinite.
    So anyway, I know this committee knows a lot more about 
these matters than I do, but I do have to say that I have been 
impressed by the efforts I have seen in the Corps thus far, and 
their ability to do what they do with what they have.
    Senator Chafee. Thank you, Mr. Secretary.
    General Flowers, Senator Feingold was, I believe, talking 
about specific legislation that he and Senator McCain are 
introducing relevant to the Corps. Do you have a position on 
that legislation?
    Senator Jeffords. Are you aware of the legislation? Have 
you seen it?
    General Flowers. Sir, I have not reviewed in detail the 
legislation. I am aware of some of the provisions.
    Senator Chafee. That is fair enough.
    Senator Jeffords. Can we ask you to take a look and give us 
your recommendations or any comments that you have? We would 
appreciate that.
    General Flowers. Yes, sir.
    Mr. Brownlee. Senator, I did read through the side-by-sides 
of the legislation as near as I could, and those of you who 
have done that know that is kind of an agonizing process, but I 
forced myself to do it. The last thing I would want to do is be 
critical of somebody's efforts to make something better, 
because I know Senator Smith and I worked for him many years on 
Armed Services Committee, and everything I saw him do was 
characterized by his dedication and desire to make things 
better, and tireless efforts in that regard, I might add.
    But as I looked at this legislation, I just kind of jotted 
down some questions that came to my mind. I might just kind of 
track through those questions, if you would like, for the 
committee's benefit. The first one was, how will the National 
Academy of Science's recommendations on independent review, 
which is expected to be received later this summer, be factored 
into this bill? I know Senator Smith said he was certainly 
willing to consider that, and I sure he will. I just do not 
know how that would be factored in.
    Are the bill's current provisions expected to be consistent 
with the Academy's recommendations? I am not sure if any of us 
know that at this point in time. How do provisions of the bill 
directly contribute to improving the technical capability and 
competence of the Corps of Engineers? Is the primary goal of 
the bill to shift the emphasis of the Corps away from economic 
development and more toward environmental restoration, or at 
least to make it more difficult to justify economic development 
projects? What would be the effect of the bill on the Nation's 
marine transportation system and the resulting impact on 
international trade and competitiveness? In general, how does 
this legislation equip the Nation to better deal with growing 
water resources challenges of all kinds?
    I just submit those, not to anybody specifically, just--I 
think that . . .
    Senator Chafee. You do not have a firm position on the 
bill--just some questions?
    Mr. Brownlee. As I indicated, Senator, the Administration, 
the Corps, myself--we are all willing to work--I have talked to 
Senator Smith's staff--to work with the members of this 
committee, the interested members. Senator Bond mentioned a 
letter that had been signed which I have seen. I would 
certainly expect that we work with a group, that it could 
include members of that group. If there is a way to do a Corps 
reform bill in that regard, we are certainly willing to pitch 
in and help.
    Senator Jeffords. Thank you very much, and thank you for 
very, very excellent testimony. It gives us confidence when we 
listen to you that we will be able to make some improvements 
and have it work a little bit better.
    Senator Smith. I might just say, Mr. Chairman, while they 
are getting prepared to leave the table, that I take those 
questions in the spirit they are intended. The objective is to 
work together to hear your input, and we will go back and 
review those topics that you brought up. It is also obvious 
that you are not quite ready to go to heaven yet.
    [Laughter.]
    Senator Jeffords. Thank you very much.
    We do have another panel. Obviously, we have a number of 
people here--all very good, excellent witnesses. But if you 
want to impress the members that are left, if you can keep your 
statements to around 3 minutes, that would be appreciated. 
Under the rules, you are allowed five, so I will not interrupt 
you, but we would be grateful if you can do that.
    Senator Smith. We will just ask you nasty questions after 
it is over.
    [Laughter.]
    Senator Jeffords. We will start with Mr. Chase.
    Senator Bond. Mr. Chairman, as I mentioned to you, I was 
ready to make a Faustian bargain with you to give up my right 
to ask questions if you would let me give a very brief 
introduction to two good friends who are here. I have a 
longstanding appointment that I have to make.
    Senator Jeffords. You have a deal. You have a deal.
    Senator Bond. I figured that this would be a good deal. 
This would save you about three and a half minutes.
    Senator Jeffords. That is right.
    Senator Bond. Chris Brescia has been an expert on river 
transportation issues. I hope that you will read very carefully 
his very thoughtful statement. I have read it, and it will be 
submitted in full for the record. It really gives an idea of 
the importance of this water transportation issue.
    My second friend is Mr. Jim Robinson of Pinhook, MO. He has 
been working on closing a hole in a levee for 26 years. They 
first testified before this body, the first testimony was by 
Senator Eagleton. He has come up here time and time again. Back 
in 1999, 2000, he came up after the President flew into the 
delta and said we were going to protect the delta. The Vice 
President's office came out, look at it--Alvin Brown of the 
USDA came out and look at it. They were assured by the Council 
of Environmental Quality that they were going to get it done. 
After the election, it was sent back to the Corps for its 
supplemental, supplemental, supplemental, supplemental study.
    Mr. Robinson, it is a real pleasure to welcome you and Mrs. 
Aretha Robinson. When you testify, I hope you will tell us why 
your family settled where you did and why you stay. Tell us why 
you, your families and your neighbors do not just do what all 
the smart people have done and move to Washington, DC. to get a 
job where the wetlands are already permanently destroyed, and 
you do not have to worry about little issues like stopping 
floods. I think that the testimony that you have given will be 
very, very compelling. If anybody misses it, I will be 
repeating it frequently.
    I thank you, Mr. Chairman, and Senator Smith, and I thank 
all of our witnesses.
    Senator Jeffords. The first witness is Mr. Chase.

  STATEMENT OF TOM CHASE, DIRECTOR OF ENVIRONMENTAL AFFAIRS, 
            AMERICAN ASSOCIATION OF PORT AUTHORITIES

    Mr. Chase. Thank you, Mr. Chairman.
    I have been going through my testimony trying to cut it 
back, and I will do my best.
    On behalf of the 85 public seaport members of the American 
Association of Port Authorities, we thank the committee for the 
opportunity to discuss the importance of the Corps of 
Engineers' programs.
    There are two points I want to leave with the committee 
today. First, the Nation's marine transportation system is 
highly decentralized, market-driven, and returns untold 
benefits to U.S. businesses and consumers. Second, the Congress 
needs to fully fund the Corps of Engineers' Civil Works Program 
and authorize new navigation projects and policies that meet 
the needs of the Nation's businesses and consumers. We urge the 
Congress to seriously review the impacts of any proposed 
changes to the procedures used to evaluate navigation projects 
to avoid needlessly increasing the cost or further delaying the 
construction of deep-draft navigation projects.
    The deep-draft commercial ports of the United States handle 
over 95 percent of the volume and 75 percent of the value of 
cargo moving into and out of the Nation. All commercial ports 
and navigation channels serve multistate needs. On average, 
each State relies on between 13 to 15 ports to handle its 
imports and exports. For example, 14 ports handle more than 1 
percent of Vermont's foreign trade. Four ports are on the West 
Coast, four ports are on the Gulf Coast, and six are on the 
Atlantic Coast.
    Between 1993 and 1997, U.S.-foreign waterborne grade grew 
by 4.6 percent per year to over one billion metric tons, and 
now accounts for about 20 percent of global waterborne trade 
and almost 30 percent of U.S. gross domestic product. The 
number of containers moving through U.S. ports doubled between 
1990 and 2000, from 15.3 to 30.4 million TEUs--the unit of a 
20-foot equivalent unit container. The volume is expected to 
double again over the current decade.
    Because of the increased efficiency provided by 
containerization and the substantial investments that have been 
made in new and larger vessels, ports and navigation panels, 
freight rates have declined by between 52 and 72 percent in 
real terms during the period of 1978 and 1998. The U.S. marine 
transportation system, including its deep-draft navigation 
channels, provides over 13 million jobs and $200 billion in 
taxes to all levels of government.
    In every sense, the Nation's public ports are partners with 
the Federal Government in making these benefits happen. With 
the passage of the Water Resource Development Act of 1986, 
there was a dramatic change in the relationship between the 
U.S. port industry and the Federal Government. For almost 200 
years, the Federal Government had the sole responsibility for 
maintaining and improving the Nation's navigation channels. 
State and local port agencies and the private sector have 
always been and continue to be fully responsible for building 
and maintaining land-side facilities. In 2000, the cumulative 
local investment by just public ports in facilities and 
navigation channels was nearly $1.1 billion.
    However, in 1986 for the first time, the ports themselves, 
as local sponsors, began to pay for Federal navigation 
channels. Now, ports are being called upon to invest hundreds 
of millions of dollars in the development of these navigation 
channels--channels that by definition benefit the entire 
Nation. Despite Congress' intent that Federal water resource 
projects should take into account regional economic development 
benefits, the principles and guidelines for water resource 
projects established in 1983 sets the maximization of national 
economic developments as the definitive threshold for Federal 
involvement in such projects. This policy continues even after 
non-Federal interests became responsible for cost-sharing 
projects. Thus, non-Federal interests are required to pay up to 
60 percent of the cost of Federal navigation projects, but any 
regional benefits derived from these projects may not be 
included in justifying the project.
    Notwithstanding the increasing financial burden ports are 
carrying, we have discovered after 15 years of working with the 
policies established in WRDA 1986 that there are inherent flaws 
in the relationship between the local sponsor and the Army 
Corps. For example, local sponsors are required to provide 
assurances that legally cannot be given under State 
constitutions, such as open-ended indemnification of the 
Federal Government. In other cases, local sponsors are called 
upon to arrange for the relocation of certain utilities which 
puts this law in conflict with the 1899 statute that would 
require the utilities to relocate their own facilities when 
they would hinder or obstruct navigation.
    In our written testimony, we provide additional specific 
areas of concern with the provisions of WRDA 1986 and recommend 
specific amendments that will correct these problems.
    Finally, we are greatly concerned by proposals to alter the 
procedures the Corps of Engineers uses to evaluate water 
resource projects. We believe many of these proposals will add 
to the complexity in evaluating projects and increase the cost 
and time needed to study and build these projects. The Federal 
Government has always built navigation projects in an effort to 
spur economic development for the benefit of the whole Nation. 
Congress should not abandon this principle now when the world's 
markets have never been more open and the promise of global 
trade has never been brighter for bringing prosperity and 
freedom to all corners of the world.
    Thank you, Mr. Chairman. That concludes my remarks.
    Senator Jeffords. Thank you for an excellent statement.
    Now, we turn to Montgomery Fischer. Monty, how are you? 
Glad to have you here--the Director of Water Policy for the 
National Wildlife Federation. Good to have you with us, and 
please proceed.

  STATEMENT OF MONTGOMERY FISCHER, DIRECTOR OF WATER POLICY, 
                  NATIONAL WILDLIFE FEDERATION

    Mr. Chase. Thank you, Mr. Chairman.
    Chairman Jeffords, Senator Smith, members of the committee, 
thank you for the opportunity to present the National Wildlife 
Federation's views on proposals for a Water Resources 
Development Act. As the Chairman has just noted, I am 
Montgomery Fischer, Policy Director for Water Resources at NWF. 
I have 30 years of experience working on water resources 
protection. After graduating from the University of New 
Hampshire, I worked as a commercial fisherman, as well as in 
government, academia, and the nonprofit sector.
    Mr. Chairman, the Corps has a vital role to play in 
managing our Nation's water resources. However, much of our 
Nation's wildlife are suffering as a result of artificially 
altering critical aquatic habitat. Through its Civil Works and 
regulatory programs, the Corps has often had devastating 
impacts on the health of aquatic ecosystems. In my written 
testimony, I have described our serious concerns about a large 
number of Corps projects that could result in unacceptable 
environmental damage and unnecessary costs to taxpayers.
    There is a serious and growing crisis in public confidence 
in the projects and programs of the Corps. Any new WRDA bill 
must address this issue to restore the public's confidence and 
trust. With the right direction from Congress, the 21st century 
Corps can become the Nation's premier environmental restoration 
and protection agency. The National Wildlife Federation 
congratulates Senator Smith, Senator Feingold and Senator 
McCain, who have cosponsored Corps reform legislation, 
particularly S. 1987, the Corps of Engineers Modernization and 
Improvement Act, and S. 646, the Corps of Engineers Reform Act.
    Mr. Chairman, these bills contain critically needed common 
sense reforms that improve and modernize the way the Corps 
responds to the Nation's water resources needs. The bills 
improve the Corps' accountability, modernize its principles and 
practices, improve mitigation of wetlands, and improve the 
Corps' overall fiscal responsibility. No WRDA should move 
forward without incorporating these basic, common sense 
reforms.
    I will now make five brief points highlighting some of the 
key reforms that we are urging Congress to incorporate in the 
next WRDA. First, Mr. Chairman, over the past decade, the 
Corps' own internal review process has been significantly 
weakened from what was already a weak and inadequate process. 
Without a strong Washington-level technical and policy review 
of Corps documents and plans, there is too much potential for 
the national interest to get lost along the way, as evidenced 
by the Upper Mississippi navigation expansion, the Delaware 
River Deepening Project, and a number of others.
    Mr. Chairman, the Delaware Deepening Project represents not 
only an appalling failure by the district to apply the Corps' 
current planning requirements, but also a complete failure on 
multiple occasions by the division headquarters to catch gross 
abuses, basic errors and a 300 percent overstatement of Project 
benefits. Something is terribly wrong. A system of independent 
project review, a critical element in both S. 1987 and S. 646, 
would greatly strengthen the Corps' programs. It can take place 
without delaying the overall planning process and would help to 
restore confidence in the agency.
    The second issue is the need to update the Corps' planning 
guidelines. The 1983 principles and guidelines have been frozen 
in time for almost 20 years. At the same time, economic and 
environmental sciences have evolved in response to changing 
public needs and attitudes toward the environment and natural 
resources. The National Wildlife Federation urges the committee 
to incorporate the recommendations contained in the 1999 
National Academy of Science's New Directions Report, in 
particular establishing ecosystem protection and restoration as 
co-equal goals with economic development. S. 1987 and S. 646 
include important provisions that respond to these 
recommendations.
    Third, the National Wildlife Federation urges the committee 
to adopt the wetlands mitigation provisions of S. 646, which 
would clarify the definition of ``concurrent mitigation'' and 
improve standards for mitigation. We also support proposals in 
both bills that would redirect the Corps' from claiming 
benefits derived from draining wetlands. Current Corps projects 
threaten to destroy hundreds of thousands of wetland acres. The 
Yazoo Pump alone puts over 200,000 acres at risk.
    Fourth, Mr. Chairman, in addition to independent project 
review, updating the Corps' principles and guidelines, and 
improving wetlands mitigation, the National Wildlife Federation 
urges the committee to reduce the backlog of incomplete 
projects through expedited deauthorization and prioritization, 
as well as to require regional port planning to help ensure 
that U.S. ports can meet national transportation needs 
consistent with protecting the environment.
    Finally, the National Wildlife Federation appreciates the 
substantial efforts made by this committee and Congress in past 
WRDAs to authorize environmental projects and programs, 
particularly restoration of the Florida Everglades. We thank 
Senator Smith and Senator Graham especially their leadership on 
this project, and we look forward to continuing to work with 
them and with you, Chairman Jeffords, to save this endangered 
ecosystem. Without a focused and highly disciplined Corps 
program, however, there may be insufficient resources available 
for successful implementation.
    Mr. Chairman, I am happy to answer any questions that you 
and other members of the committee may have for me at this 
time.
    Senator Jeffords. Thank you again. That was an excellent 
statement.
    Mr. Ellis.

    STATEMENT OF STEVE ELLIS, DIRECTOR OF WATER RESOURCES, 
                   TAXPAYERS FOR COMMON SENSE

    Mr. Ellis. Thank you.
    Good afternoon, Chairman Jeffords, Senator Smith, Senator 
Chafee. I am Steve Ellis, Senior Director of Water Resources at 
Taxpayers for Common Sense, a national nonpartisan budget 
watchdog group. I would like to thank you for inviting me to 
testify today on behalf of two of the Nation's leading taxpayer 
groups--Taxpayers for Common Sense and Citizens Against 
Government Waste. I also have a supportive statement from 
National Taxpayers Union, which I would like to submit for the 
record, along with my full testimony.
    The United States has gone virtually overnight from budget 
surpluses to deficits. We are engaged in a costly and lengthy 
war against terrorism. In this context, fiscal restraint is 
more important now than ever before. Undoubtedly, the Corps has 
faced some of the sharpest criticism in its history over the 
last 2\1/2\ years, stemming from revelations that the Corps 
committed serious mistakes or manipulated project evaluation 
studies that could waste billions of taxpayer dollars.
    Back in 1836, the House Ways and Means Committee chastised 
the Agency for bungling 25 projects that were over-budget, 
behind schedule and not performing as planned--and I did say 
1836. As Yogi Berra put it, ``It is deja vu all over again.''
    We applaud General Flowers and the Acting Assistant 
Secretary's recognition that the Corps is in need of reform. 
The second step in the Corps reform twelve-step program is to 
allow and encourage intervention. We stand ready to work with 
the Corps, Congress and the Administration. However, 
credibility in the Corps can only be restored through credible 
reform in the 2002 Water Resources Development Act that 
achieves these four fundamental goals: make the Corps more 
accountable; set clear priorities for the Corps; modernize the 
project planning process; and ensure everyone pays a fair 
share.
    In March, Senators Smith, Feingold and McCain introduced 
the previously discussed S. 1987. This comprehensive reform 
proposal meets each of these four goals in a serious and 
effective manner. We urge the committee to adopt S. 1987 as the 
basis for reform in WRDA. The need for more accountability in 
the Corps becomes more apparent by the month, as a growing list 
of project studies have been found to have been manipulated or 
to contain egregious errors. As an example, the GAO report on 
the Delaware River Deepening Project found that the Corps had 
made an appalling series of, quote, ``material errors,'' and 
repeatedly cited, quote, ``miscalculations, invalid 
assumptions, and reliance upon outdated information,'' that the 
Corps used to overestimate benefits by more than 200 percent.
    A key way to restore credibility to the Corps' project 
planning process is to implement independent peer review for 
costly and controversial projects, including the following 
elements: independent outside review panels; integrating the 
review into the existing public comment period; and capped 
review costs.
    There is an obvious need for Congress to set clear 
priorities for an agency saddled with a $52 billion 
construction backlog. Increasing the Corps budget is not a 
solution to this problem, which would be like trying to bail 
water out of a sinking boat with a huge hole. The system needs 
to be fixed first and foremost through common sense reforms 
such as a project-blind process for deauthorizing outdated, 
marginal and unnecessary projects that have yet to be 
constructed.
    Recently, Taxpayers for Common Sense conducted an analysis 
of the backlog, which found that the median project was only 24 
percent constructed. The backlog slows down the construction of 
all projects, whether they are good or bad. Following up on a 
1999 National Academy of Sciences recommendation, S. 1987 would 
also require the Corps to work with the National Academy of 
Sciences in modernizing the 1983-vintage planning guidelines to 
include common sense concepts like regional port planning.
    Our Nation and its thinking certainly have changed since 
the New Deal era, but the Corps still relies on the 1936 Flood 
Control Act standards to call a billion dollar project 
economically justified if the benefits outweigh the costs by 
just even one dollar. Just as you would never make an 
investment knowing you would get no return on your dollar, 
taxpayers deserve no less.
    Cost-sharing is another tool for breaking the backlog and 
saving taxpayers billions. A 1995 Wharton School of Business 
study found that the market-based economics and cost-sharing 
rules championed by President Reagan in WRDA 1986 saved Federal 
taxpayers 50 percent or more than $3 billion. The financial 
effect on local communities was marginal--a 12 percent 
increase--even though they were paying a significantly greater 
share of the cost.
    In conclusion, we recognize the Corps of Engineers' work 
affects millions of Americans. Many projects have had a 
positive effect, protecting countless lives from floods and 
bringing the fruits of Midwestern farmers' labor to the rest of 
the world. But there are also many projects that have had a 
negative effect on people's lives, have harmed other industries 
and users of the Nation's waters who are not the Corps' 
traditional clients, and most outrageously squandered taxpayer 
dollars on these activities.
    The Corps must be accountable to the taxpayer. Therefore, 
it is imperative that Congress enacts real Corps reform this 
year. No Water Resources Development Act should pass without 
reform. At risk is the public's confidence in the Army Corps of 
Engineers and any hope that Congress can restrain itself from 
ever-escalating pork barrel spending, even in the midst of a 
very expensive and vital war on terrorism.
    Thank you.
    Senator Jeffords. Thank you, Mr. Ellis. We will take into 
consideration obviously your comments and appreciate the work 
you have done.
    Dr. Dickey.

               STATEMENT OF EDWARD DICKEY, Ph.D.

    Mr. Dickey. Thank you very much, Mr. Chairman.
    I speak today based on my two decades of experience in the 
Office of the Assistant Secretary of the Army for Civil Works 
and my years as Chief of Planning for the Corps of Engineers, 
and my education as an economist.
    Why has it become increasingly difficult for the Civil 
Works Program to compete for budgetary resources? In my view, 
the answer is simple. Past policies and practices have not 
resulted in a uniform inventory of compelling investments and 
available funds are often not applied to the best projects. 
Congress needs to provide a consistent and unambiguous policy 
framework and allow the executive branch to develop 
recommendations to Congress within that framework. Authorizing 
legislation is also the opportunity for Congress to eliminate 
earlier accommodations of special interests which have so 
powerfully shaped the program in the past and which now limit 
its ability to compete for budgetary resources.
    Looking first at the planning framework, Congress assigned 
responsibility for the Corps' planning framework to the 
President and the U.S. Water Resources Council in the Water 
Resources Planning Act of 1965. I believe that the present 
principles are carefully crafted and collectively define a 
planning framework that is both powerful and simple. The 
principles should be left unchanged and moreover, for reasons 
that I have outlined in my written testimony, no additional 
planning objectives should be specified.
    Instead, Congress should direct the U.S. Water Resources 
Council to review its guidelines and update them to reflect the 
improvements in the economic and other evaluation techniques 
and changes in law and policy that have occurred in the last 
two decades.
    One area in which Congress apparently is concerned is the 
issue of productivity, and S. 1987 would address it through the 
1.5 requirement. I think that is better addressed through 
addressing the issue of the discount rate directly. The 
discount rate used in the evaluation of water projects is 
specified in law, section 80 of the Water Resources Development 
Act of 1974. It is not based on any economic theory and it 
grandfathers the discount rate for certain projects, thus 
creating false expectations about the project's prospects for 
future funding.
    In some instances, Congress has legislated how the Corps of 
Engineers is to measure certain economic benefits. Again, my 
written testimony lays those out. S. 1987 would go further 
toward legislating benefit procedures. Congress, in my view, 
should affirm its commitment to using the best available 
analytical techniques in every civil works project by 
abrogating past benefit-defining provisions and by avoiding new 
constraints on objective benefit-cost analysis.
    One reason for the decline in the quality of executive 
branch project review is that Congress has authorized dozens of 
projects without waiting for completion of the report 
development and review process. Except in the most 
extraordinary circumstances, Congress should authorize only 
those projects that have completed executive branch review.
    Since the reforms of 1986, Congress has exempted particular 
projects from cost-sharing, and in other cases eroded cost-
sharing formulas by requiring consideration of ability to pay 
in establishing financing requirements. Congress should apply 
the project-specific cost-sharing formulas to all projects 
without exception or exemption.
    Finally, it needs to look at the issue of demand management 
to ensure that the Corps has the necessary authority to make 
demand management an integral part of its management of the 
Nation's inland waterway system. The Corps also needs to be 
supported. We heard the Chief and the Acting Assistant 
Secretary talk about reorganization. The Corps desperately 
needs to reorganize its planning capability. It has tried that 
in the past. It has failed because Congress has opposed it. 
Congress needs to make clear that it supports that.
    Finally, it needs to make clear that it supports the Corps' 
own internal efforts at review reform. There is no substitute 
for high quality Corps of Engineers' studies that are reviewed 
through the many Federal Agency experts, and that review occurs 
in the normal course of project development if Congress allows 
it to work.
    Mr. Chairman, that concludes my statement.
    Senator Jeffords. Thank you very much, Doctor--very 
helpful.
    Ms. Holland.

STATEMENT OF LISA HOLLAND, STATE COORDINATOR, FLOOD MITIGATION 
    PROGRAMS, SOUTH CAROLINA DEPARTMENT OF NATURAL RESOURCES

    Ms. Holland. Good afternoon, Chairman Jeffords and 
distinguished committee members. Thank you for the opportunity 
to testify before your panel today.
    My comments today will focus on the areas the Association 
of State Floodplain Managers believe should be considered in 
the text of a reform act.
    My name is Lisa Holland, and I am the Federal liaison for 
the Association of State Floodplain Managers, as well as the 
Manager for the floor Mitigation Programs within the State of 
South Carolina's Department of Natural Resources.
    The Association of State Floodplain Managers and its State 
chapters represent over 4,500 State, local and private sector 
officials, as well as other professionals who are engaged in 
all aspects of floodplain management and hazard mitigation. All 
are concerned with reducing our Nation's flood-related losses. 
I will summarize our written statement, which has been 
submitted for the record.
    The U.S. Army Corps of Engineers is an institution with a 
long, proud history. Over the years, they have been lauded and 
they have been bashed. Currently, the entire agency is under 
scrutiny because of some ill-advised approaches to the project 
planning process. The Association of State Floodplain Managers 
is neither surprised nor dismayed by what has come to light. We 
have been predicting this outcome for years.
    The planning process of the U.S. Army Corps of Engineers 
was developed for a different era. In reality, it is premised 
on a rather short-sighted expression of Federal interest, has 
helped to create an unmanageable backlog of projects, and in 
spite of well-laid intentions, the process inherently cannot 
avoid bias and predetermined outcomes.
    Reformers of the Army Corps of Engineers have come out with 
proposals, some of which have merit and some which raise 
concerns. One such proposal that raises concerns are proposals 
associated with the independent peer review of Corps projects. 
This well-intentioned, but misdirected, investment does little 
more than create another layer of government with questionable 
added value. In general, the types of problems the Corps faces 
are either associated with bad practices, bad methods or bad 
management--none of which can be fixed with an independent 
review. The Association of State Floodplain Managers does not 
believe that bad management is an endemic issue. However, where 
it is found, the Administration and Congress should move 
swiftly to restore balance to the process. What is more likely 
driving the process relates to quality control and methods.
    We believe that both these problems can be managed through 
increased emphasis on the execution of quality control plans or 
through the use of independent scientific panels to evaluate 
methods. While occasional audit of Corps projects would be a 
good practice, the Association of State Floodplain Managers 
believes that this practice can be carried out through GAO. 
Adding an independent or peer review of the Corps projects 
again adds an unnecessary step in an already-cumbersome 
process.
    An area of positive reform is the area of cost-sharing. It 
is important to understand that current Federal policy rewards 
those communities and States which do the least to prevent and 
solve their flooding problems. Those rewards come in the form 
of Federal disaster assistance, Federal flood control projects, 
and favorable cost-sharing for these actions. What this means 
is current policy enables communities to do nothing but wait 
for the Federal bailout or the project. This is bad policy and 
is a disincentive for communities that have taken 
responsibility for dealing with their own flooding problems.
    The Association of State Floodplain Managers strongly urges 
the incorporation of a sliding cost-share that rewards those 
communities and States that actually take responsibility for 
managing their own flooding problems. This concept is fair and 
need not be complex. Corps staff has previously developed an 
implementation strategy for a sliding cost-share, and FEMA has 
over a decade of experience in a similar measure called the 
Community Rating System.
    The final area of reform which we wish to speak relates to 
the project justification criteria, most notably the Corps' 
planning principles and guidelines. Currently, the principles 
and guidelines tend to be our only measure of Federal interest 
in a project, and the sum total of that interest is expressed 
by the national economic development benefits. An economist 
will tell us that this is a perfectly rational decisionmaking 
model. However, the reality is this model is too simple to 
capture real-world realities.
    The realities of today's national economic development 
model is the least-cost solution to a problem, and generally is 
not the NED alternative. The opportunity cost of Federal 
investment is an inherently risky area, as opposed to less-
hazardous areas, is not considered. The model does not consider 
the impact that long-term damages will have on the Federal 
budget as it is related to disaster payments. NED has a role in 
the decisionmaking process, but it needs to be balanced with 
other planning objectives. The complexities of this problem 
cannot be solved in a limited testimony and should not be 
crafted on the fly through the legislative process.
    What should be done, however, is to direct the 
Administration to develop revisions to P&G to reflect the 
current realities, broaden the approach such as the NED as part 
of the decisionmaking process, and finally, directs the 
Administration to consider the project formulation and delivery 
process.
    In closing, the Association of State Floodplain Managers 
urges you to act swiftly and judiciously in modernizing the 
policies of the U.S. Army Corps of Engineers in the areas of 
cost-sharing and revising the outdated principles and 
guidelines.
    Thank you, Mr. Chairman.
    Senator Jeffords. Thank you. Very good work.
    Mr. Brescia.

         STATEMENT OF CHRISTOPHER BRESCIA, PRESIDENT, 
                           MARC 2000

    Mr. Brescia. Thank you, Chairman Jeffords, members of the 
committee. My name is Chris Brescia. I am President of MARC 
2000. MARC 2000 is composed of leading agricultural, industrial 
and labor groups in the Midwest, and I am pleased to appear 
here to address Water Resource Development Act of 2002 
proposals.
    We have a proposal of our own that we are putting forward 
that urges Congress to support the authorization and 
construction of an initial group of seven new 1,200-foot 
locks--five on the Upper Mississippi, two on the Illinois--
guidewall extensions and appropriate mooring cells. That 
proposal is in more detail in my written text.
    However, I want to emphasize that this proposal is limited 
to the placement of new locks at only 7 out of 37 possible 
locations at the lower portion of the river system just north 
of the confluence of the Upper Mississippi and the Illinois 
Rivers. We are not advocating new locks on the entire 1,202 
miles of the basin system.
    We also strongly support an enhanced environmental 
restoration effort for our basin, with a reliable and 
consistent funding mechanism. Our proposal's third element 
calls for timely completion of a WRDA 1999-authorized 
comprehensive plan designed to develop an integrated flood 
control system in our basin. According to the U.S. Department 
of Transportation, maritime trade is expected to double in less 
than 25 years. Freight in the United States is expected to clog 
the Nation's highways and our rails. Experts project grain 
trade will increase two-thirds or more by 2020.
    The Corps of Engineers has documented an anticipated 60 
percent increase in likely tonnage movements on the Upper 
Mississippi and Illinois Rivers. Our waterway system is a 
logical means by which we can accommodate growth, reduce 
incidence of spills, air pollution accidents, and deaths to our 
population. Water traffic options save more than $700 million a 
year to our Nation directly, and another $900 million in our 
basin alone.
    But today's river system is operating at 75 percent 
capacity, with antiquated infrastructure. There is no way to 
meet these future demands if we do not start modernizing our 
locks immediately. Our Nation relies on this outdated system to 
move over 60 percent of our export grain crop, Mr. Chairman. 
Grain exports still account for a trade surplus in our balance 
of payments--one of the top areas that does so.
    However, a report issued by the National Corn Growers 
Association on the impact of this outdated system is very 
sobering. The staggering expected loss of $562 million a year 
in income to farmers if we do not modernize is significant. The 
loss of 30,000 jobs nationally and the increase of the Federal 
deficit by $1.5 billion a year are sufficient cost-benefit 
analysis for congressional action. In the words of a noted 
legislator, we understand enough about this issue to move 
forward, and these are extraordinary circumstances that demand 
some action in this basin.
    This is a basin that supports over 400,000 jobs on this 
waterway system, 90,000 in the manufacturing sector. This 
waterway system is critical to our future competitiveness with 
the Midwestern agricultural economy. Without efficient waterway 
transportation, Midwest grain exports will be lost at 
considerable expense. Second, with continued increased 
congestion, shippers will have to find alternatives, which 
means we are going to have to move these goods via other modes, 
which means that there will be higher environmental costs, 
social benefits of keeping freight on the waterway will be 
lost. There will be higher cost structures, lost economic 
activity, increased air emissions, increased fuel consumption, 
increased accidents. This is not what we in the basin want and 
this is not the direction that we believe we should be burdened 
with.
    The indecisiveness of modernizing the Upper Mississippi 
will continue to embolden our global competitors to increase 
placing virgin lands into production and work to capture the 
growing share of the world food market. The environmental 
benefits of the waterway system, those initially created with 
the construction of the lock and dam system, are declining. We 
need to move very deliberately in this area in WRDA 2002 if we 
are to try to reduce the reduction of lost islands, support 
important backwaters and other ecosystem elements.
    Mr. Chairman, there is strong support in our basin for 
this. Resolutions have been passed in the five States in our 
basin overwhelmingly on a bipartisan basis because they 
recognize that our five States are connected to 17 others in 
this Nation through this waterway system, and to the world 
market. Some of the proposals that are on the table to do this 
through other means than 1,200-foot locks do not meet the test 
of long-term sustainability. We need to have environmental 
priorities addressed in this region in connection with the 
economic needs. We need your help in doing that, and doing that 
now rather than waiting.
    Mr. Chairman, thank you very much for listening.
    Senator Jeffords. Thank you again. The work you all have 
put into your statements for us really gives us confidence that 
we have got some very good things to work with.
    Mr. MacDonald.

STATEMENT OF TONY MacDONALD, EXECUTIVE DIRECTOR, COASTAL STATES 
                          ORGANIZATION

    Mr. MacDonald. Thank you very much, Senator. Good 
afternoon.
    Thank you for the opportunity to testify today, and a 
special thanks to the hardy group of New England Senators who 
were patient enough to sit around and listen to these remarks 
this afternoon.
    Since 1970, the Coastal States Organization has represented 
the Governors of the Nation's coastal and Great Lakes States, 
Commonwealth and territories on issues relating to improved 
management of coastal development and the protection of coastal 
resources.
    As I listened to the testimony today and review my written 
statement, it really comes down to I think three basic things 
that we need to do for the Corps Water Resources Programs. One 
is we need a much clearer national water resources and 
shoreline policy. Although I do not ever deign to disagree with 
Dr. Dickey on the details, I think part of the problem with 
regard to these programs and the failure of support for them 
and increased funding for them is that it is a bit of a black 
box. All of the Water Resources Development Act and the cost-
benefit analysis, there is no clear identification of what the 
Nation's water resources commitment is. I think as several of 
the Senators indicated, it is too important not to have a clear 
national policy and a clear commitment to these programs for 
the future. So that is one thing I think you need to do a 
little work on.
    Second, and I think this is more basic, but as important, 
is we need efficient project review and approval processes so 
that Mr. Robinson never has to come back and visit you again, 
except on vacation.
    Third, I think we need a commitment to a much more 
dependable and sustained funding source. I think that is 
clearly the problem. It seems that we are arguing about 
priorities among priorities and we are not really stepping back 
and saying, what is our long-term commitment to the Nation's 
water resources infrastructure, including all of the Corps 
traditional missions of flood control, storm water protection, 
shore protection, hazards protection, as well as navigation and 
safety.
    I also need to state, and I think this builds on something 
that General Flowers said, that it is very important when you 
look at these policies, these efficiencies and this commitment 
to funding, that you transcend what is a current sort of 
endemic limitation to the Corps' current single-purpose, 
project-by-project approach to managing the Nation's water 
resources. Even many of the reform efforts still seem to take a 
single sort of stovepipe approach to try to reform the various 
Corps missions.
    Do not look to a more comprehensive commitment to 
maximizing the Nation's both environment and economic benefits 
from these projects. As I have said often to the Corps folks 
that I work with, every Corps project is an environmental 
project. They are fundamentally altering the resources, whether 
it is for economic or other purposes. We just need to find a 
way that we serve the economic needs of this country and the 
coastal States, as well as the environmental baseline on which 
we must rely.
    But policy--I think I was very encouraged to hear General 
Flowers' remarks regarding broader regional and watershed 
planning. That is something the States strongly support. 
However, I have to say that the policy must be supported by 
enhanced partnerships with the States and a greater reliance on 
the expertise of States and other local project sponsors and 
coastal, watershed, and basin-wide management. This committee 
has a lot of experience with those things, I think, and the 
expertise of other parties, and I think the Corps could benefit 
from sharing some of its expertise with us, and us with them.
    There needs to be in any effort for reform for the Corps 
must take into account these multi-purpose, multi-stakeholder 
efforts that get beyond rigid national economic benefits 
formulae and include the value of economic, cultural and social 
inputs.
    You have already heard a lot today about the significant 
economic and environmental importance of the Corps water 
resources mission, as well as the substantial economic return 
to the Federal treasury that results from Corps projects. That 
is all true and we strongly support that. As recently observed 
by a 2001 Federal Reserve Bank of Kansas City report, the 
United States is a coastal nation. It says, quote, ``The 
coastal concentration of U.S. economic activity reflects a 
productivity effect of access to navigable waters.'' That has 
been true historically. That is true today. I think it will be 
true for our future as well, so that is why this is important.
    However, controversy over port development projects in 
places like the Delaware River, Charleston, South Carolina, and 
the Columbia River clearly demonstrate the importance of 
incorporating more local and regional concerns into the Corps 
planning processes, along with the consideration of national 
benefits and the Federal standard of the least-cost 
environmentally acceptable alternative. As has been mentioned 
many times, historically Corps projects, some of them, have 
undermined the integrity and function of natural littoral 
systems, and the natural flow of sand and other sediment 
material, resulting in sediment starvation and erosions along 
the shoreline. Shoreline erosion and sea-level rise and lake-
level change will pose increasing challenges for States and the 
Nation in the years ahead. It is very important that we 
consider these things now.
    Coastal States strongly support continuation of the 
Federal-State partnership in coastal storm protection and beach 
nourishment projects. Beaches are magnets for international as 
well as domestic tourism and provide readily accessible 
recreation and respite for millions of families from very 
diverse urban and rural areas that may not have other options. 
The same beaches serve, as previously alluded to, as natural 
barriers for flooding, waves, and storm surges and provide 
cost-efficient and environmentally preferable alternatives for 
protection of life and property. A recent Corps of Engineers 
study of six coastal communities in North Carolina show that 
the communities with shore protection projects suffered 
significantly less from Hurricane Fran. Shore protection 
projects can protect lives and save money in the long run.
    Very briefly to summarize, three of the specific 
recommendations that CSO has made in some detail in our written 
statement, I would say there need to be three changes in the 
Water Resources Development Act. First, there is a need for 
improved dredge material management of natural resources. 
Second, there needs to be increased support for regional 
sediment management planning. Last, there needs to be support 
for a national shoreline study and a consistent national policy 
for managing the Nation's shoreline.
    Thank you very much.
    Senator Jeffords. Thank you, Mr. MacDonald.
    Mr. Robinson, please proceed. We have a vote on, as I said. 
We still have not started the vote, so we will just keep on 
rolling here. OK, Mr. Robinson, please proceed.

          STATEMENT OF JIM ROBINSON, JR., PINHOOK, MO

    Mr. Robinson. Chairman Jeffords and Senator Bond in his 
absence, and members of the committee, again for the record my 
name is Jim Robinson.
    I am here on behalf of the people of Pinhook, MO. Pinhook 
is located in the southeastern corner of Missouri and the 
Bird's Point/New Madrid Floodway, about halfway between 
Memphis, Tennessee and St. Louis, MO, just a few miles from the 
Mississippi River. I have lived there most of my life. The land 
that I farm was purchased by my father. When we moved from 
Tennessee, my people were not allowed to own certain lands and 
live in town. We were only able to purchase the land that the 
Mississippi River flooded. We cleared the land with our hands 
and with axes and mules. We built up our own communities, and 
are proud of what we have done. Pinhook is our home and it is 
what we want to pass along to my children and grandchildren.
    My entire life, I have lived with floods on the Mississippi 
River, destroying what I have worked for. Where we live, the 
Mississippi River backs up through a 1,500 foot hole in the 
levee that was left there when the levee was build in the 
1930's. So every few years, the river comes up and backs 
through that hole and we get flooded. I do not know how many of 
you have ever been through a flood and know what it is like to 
have raw sewage in your home, and what it is like when you get 
out of bed in the morning to have to wade through the mess; to 
have your children live in it; for them to have to ride in a 
tractor-drawn open wagon through the waters just to get to the 
school bus. My people should not have to live that way year 
after year.
    If I go north to St. Louis, I see the fine home surrounded 
by big levees, or if I go south to Memphis, I see that same 
thing. Those people have been able to build their levees and 
protect their homes. I do not want to take away from them. I 
just want some of the same thing.
    There has been a project on the list for years that would 
close our levee and give us some relief. We thought we were 
close to ending the problem, but then in 1986 Congress raised 
the local cost-share and we were told that we had to come up to 
35 percent of a multi-million dollar project. We farm. Some of 
our children work in small factories. We pay taxes, but we 
cannot afford $20 million.
    Finally, in 1993, through the Enterprise Community Program, 
we were able to get some help and the local share reduced back 
down to 5 percent. I thought we were going to get to close that 
hole, the 1,500-foot hole. The Corps of Engineers went to work 
and we were on our way. That was 9 years ago and we are still 
getting flooded.
    I have met with people here in Washington and they all seem 
like they want to help, like they understand what we are up 
against. But every time we get close, somebody from EPA, Fish 
and Wildlife Services says the Corps has to go study some more. 
I am tired of studying the same old mud.
    [Laughter.]
    Mr. Robinson. I have heard what some of you want to do to 
the Corps of Engineers. All of the technical stuff is for 
someone else to comment on. I want to talk to you a little 
about the people that this will affect. I have lived along the 
Mississippi River my whole life. I helped evacuate homes in the 
flood of 1937. We worked day and night. Over the years, the 
Corps has built the levees for the city areas, and has slowly 
worked down to us. It has taken most of my life for them to 
finally get to us. Now, after all of that work has been done, 
you want to say to us that it is no more unless we pay for half 
of it. You did not say that to the city folks, but after all 
these years, when we finally are going to get our share you 
want to cut our piece of the pie in half.
    You and I both know that there is no way a farming 
community in the Mississippi Delta is going to be able to pay 
for half of any water project. This is not reforming the Corps 
of Engineers. This is just a nice way of saying you people are 
not going to get any help. It looks better in the newspaper to 
say you are reforming something.
    I was here in Washington over 2 years ago for a meeting 
with the EPA, Fish and Wildlife, the Council on Environmental 
Quality and the Corps. I was told then that the problems that 
were delaying our project would be fixed. Since then, the only 
ones that have not dragged their feet have been the Corps. 
Every time someone comes down to look at the project, they 
promise me that they are going back and find a solution, and I 
never see them again. I see someone else who tells me the same 
thing. But I always see the same faces from the Corps and they 
come back and tell me that they are ready to build, but they 
cannot because the other agencies hold them up. From where I 
sit, it looks like you are trying to reform the wrong group.
    [Laughter.]
    Mr. Johnson. Another point that I understand that is being 
considered is how the Corps figures its benefits. Some people 
do not want them to use increased crop production as a benefit. 
Is there something wrong with trying to make a living farming 
now? I farmed all last week when the water went down, and if I 
can increase how many bushels of soybeans I harvest this fall, 
I think that this is good. It is good for me. It is good for my 
family and it is good for the country. Farmers grow food and 
pay taxes, and that has to benefit everybody.
    That concludes my prepared remarks. If there are any 
questions, and sorry for taking too much time. Thank you, Mr. 
Chairman.
    Senator Smith. Thank you very much, Mr. Robinson. As you 
can see, the Chairman had to leave to go vote, and he is going 
to come back and then I will leave. Senator Chafee, do you want 
to ask a quick question? We apologize to the witnesses for 
that, but we are trying to keep from inconveniencing you so we 
can keep things flowing.
    Let me just ask a quick question. Mr. Dickey, on the 
legislative benefits, and we accept your comments in the spirit 
they were intended and we will try to see if we can improve 
what we are trying to do as a result of your expertise, but you 
use the term legislative benefits. Were you referring 
specifically to us saying that it ought to be 1.5 as opposed to 
1.1 return for the dollar? Is that where you were coming from? 
What specifically were you . . .
    Mr. Dickey. Senator, I have in mind that the supervision, 
and I do not remember the exact language, but to the effect it 
says that, you know, you cannot count any benefit that somehow 
is a private versus a private benefit. As an economist, I have 
a hard time understanding what that means, since benefits are 
based on the willingness of individuals to pay. The situation--
there is another example, too, of where, say, don't count any 
benefits if they result from draining or altering a wetland. To 
me, that says, gee, they have said wetlands are infinitely 
valuable. They do not care, you know, what the tradeoff is. The 
essence of good water planning is to have tradeoffs and 
tradeoffs that are informed on the basis of analysis. So that 
is why I really want the analysis.
    Senator Smith. I think that is right. I would also say, 
too, there could be benefits derived from something that are 
not necessarily monetary. There may be a national security 
benefit. There may be an environmental benefit. There may be 
some other benefit. That is not necessarily to say we have to 
get 1.5 dollars back for every dollar invested. Let me, Mr. 
Fischer, on the--if I asked you to just give me one location 
anywhere in the country that would have the lowest economic 
priority and the greatest negative environmental impact--in 
other words, someplace we ought to fix, where would that be in 
all of the waterways that we have?
    Mr. Fischer. The lowest economic priority, if you are 
talking about a Corps project?
    Senator Smith. Yes. A project out there that does not yield 
very much economically in return for the dollar, but impacts 
negatively on the environment.
    Mr. Fischer. I would say the Yazoo Pump Project would be 
the ones that we have focused on over the years as having 
probably--if you measure the environmental impact on that, 
along with the economic cost-benefits, that is one that we have 
targeted for years as being one that just absolutely is at the 
top of our list of ones that we would prefer to have just go 
away.
    Senator Smith. Any others? I did not mean to put you on the 
spot, but any others?
    Mr. Fischer. There is a whole list of them in the Troubled 
Waters Report that we did over the recent years, and that 
American Rivers has come out with as well. I would think that 
the situation in the Missouri River also, where we are trying 
to go through with a suggestion of having a better flow regime 
to more adequately address natural conditions, rather than a 
more limited situation there over the years, would provide 
tremendous impacts. On the positive side, if I can give a 
positive example, those are the sorts of examples that we look 
for on both sides of the equation.
    Senator Smith. Mr. Ellis, from a taxpayer's point of view, 
do you accept the premise that there may be projects out there 
that would not necessarily yield the dollar-plus return that we 
should return, but would be acceptable because of perhaps a 
national security or an environmental gain?
    Mr. Ellis. I do not think you can limit it to just a dollar 
for dollar return. We have to look at it in the context of the 
whole project. But I do think that contrary to some comments 
earlier by your fellow committee members, the benefit-to-cost 
ratio is an extremely important element of any decisionmaking 
process, and it informs the decisionmaking process in that even 
today, you could have a project that has less than a one-to-one 
B-C and still authorize it. There is nothing that precludes 
that. That is just a guidance and that is a piece that is 
there. We need that information. I have not necessarily seen 
the case yet, but I am willing to agree that it exists and that 
there may be a case. You mentioned national security, and I 
think that is absolutely a potential.
    Senator Smith. Ms. Holland, I am going to I think have to 
recess here. I will not make the vote, and Senator Jeffords 
will be back in a moment, but I was going to ask you, and maybe 
you could respond when Senator Jeffords comes back. I would 
like to keep it so Mr. Robinson does not have to keep coming 
back here. How might a community such as Mr. Robinson's 
community best take steps to combat future flooding, given the 
limited financial resources that they have and live in the area 
where he lives?
    If I have to walk out in the middle of your answer, I 
apologize.
    Ms. Holland. That is OK.
    Representing the State and local programs, we are the end-
users that try to tie all of the Federal and State programs 
together to help the Mr. Robinsons of our States. Having 
flexibility in the program so that we can combine Federal 
programs to assist with Mr. Robinson's dilemma--more tools in 
the toolbox. Some of the things we have talked about here today 
is providing Corps reform or modernization to put more tools in 
the toolbox; and the flexibility to deal with projects that may 
not--that may be excluded under the current guidelines; and 
looking at just having that opportunity to evaluate the 
environmental impacts, along with the benefits.
    Senator Smith. Thank you.
    Senator Jeffords is returning and I will go ahead and go 
vote. Thank you for your answer.
    Ms. Holland. Thank you.
    Senator Jeffords. We get pretty good at our timing after a 
while.
    [Laughter.]
    Senator Jeffords. We have heard many recommendations today 
for what is needed to reform the Corps. In your opinion--this 
is for all of you--in your opinion, what is the one most 
important reform that should be undertaken? We will start with 
Mr. Chase.
    Mr. Chase. Well, sir, respectfully, I think what the Corps 
needs is more resources, more money. I think the biggest 
problem the Corps has had is the downsizing in their 
headquarters, which has not allowed them to do the internal 
scrubbing of these projects that they need to do, and to 
maintain the expertise within their districts, or to 
potentially reform internally their processes so they can 
concentrate their expertise. As General Flowers said, right now 
each district has to have its own capability to handle all 
these kinds of projects, and then they do their own reviews on 
the technical adequacy, and then the higher reviews are more 
policy-level reviews. I think that was largely driven by 
resource constraints. So I really do not see anything in these 
reforms. I am happy to talk about some of the problems we see 
there, but really that will make the process work better.
    Senator Jeffords. Monty.
    Mr. Fischer. Mr. Chairman, I think that independent project 
review. Those three words say what many of us have said here 
today, and that we have heard from other panels and in other 
comments. There is no question that the opportunity for 
additional review and looking at the projects that are on the 
books for consideration by the Corps will not necessarily hold 
up, delay. But they will in fact, if done properly, may in fact 
allow for better consideration and ultimately more support of 
projects that are under consideration by the Corps--so 
independent project review.
    Senator Jeffords. OK.
    Mr. Ellis.
    Mr. Ellis. I would like to just reiterate what Mr. Fischer 
said about independent peer review. Rather than just saying 
exactly that, but put another spin on it as well, and that is 
that it is not just a simple matter of the Corps having more 
resources at headquarters to look at these projects. For 
example, one of your predecessors so to speak, Senator Baucus, 
also asked the GAO to do a review of the Oregon Inlet Jetties 
Project, which should be coming out very soon. That project was 
authorized in 1970 and has been defended by the Corps all this 
time. I am quite confident that it will come back--I am 
relatively confident that it will come back looking fairly 
similar to their criticisms of the Delaware River Deepening 
Project.
    So I do not think that just stacking more review elements 
in the Corps is the answer. I do think that there needs to be 
an independent entity to look at these projects on a consistent 
basis for certain types of projects that are costly or 
controversial, if we are going to guarantee the taxpayers a 
return on their investment and also restore some of the 
integrity to the Corps' planning process.
    Senator Jeffords. Dr. Dickey.
    Mr. Dickey. Mr. Chairman, from my perspective, there is no 
substitute for an initial high-quality Corps of Engineers 
report. I think we have heard today, and these audits have 
shown, that the Corps is now organized to produce those 
reports. I think that is the most important thing I would do. 
Then, I would combine that with allowing the executive branch 
to do its review process--go through the whole process that 
culminates in the Secretary transmitting a report to the 
Congress. Then you have the full benefit of the whole process.
    Senator Jeffords. Ms. Holland.
    Ms. Holland. Modernizing the Corps' planning process, 
principles and guidelines to enable more flexibility and 
provide them more tools and resources that are not necessarily 
financial, but just options to the local governments and 
States.
    Senator Jeffords. Mr. Brescia.
    Mr. Brescia. Mr. Chairman, we think that many of the 
concerns that have been articulated over project purpose, 
benefit-cost analysis, cost-sharing are really reflective of 
the lack of a national consensus about water resource 
development priorities. I think the single-most thing that 
Congress can do and this committee can take leadership in is 
defining that, clarifying that, to really bring into clarity 
the Corps' job and what their roles are and what their 
objectives are. I think that the rest will follow.
    Senator Jeffords. Mr. MacDonald.
    Mr. MacDonald. I think making the individual purpose 
projects, put them in the broader context of regional sediment 
planning and regional management planning. So how does your 
navigation project fit your use of dredge material and 
beneficial use and flood control for the watershed? So I think 
getting beyond the single-purpose projects to broader regional 
and watershed planning.
    Senator Jeffords. Mr. Robinson.
    Mr. Robinson. Mr. Chairman, after being in this thing as 
long as I have, I think they need to be let to do the things 
that they have on-line to do all along, not just bypass a 
certain area like my Pinhook that I speak about, for some 
unknown reason.
    Senator Jeffords. Thank you all. We, of course, always 
leave the record open and allow ourselves time to bludgeon you 
by more questions through the mail or otherwise. I want to warn 
you about that, and for other members. But with that, I just 
want to thank you, for I know all the work that went into 
preparing your testimony, and I deeply appreciate it.
    But I would say right now, we are adjourned.
    [Whereupon, at 5:15 p.m., the committee was adjourned, to 
reconvene at the call of the chair.]
    [Additional statements submitted for the record follow.]

         Statement of Hon. Tom Daschle, U.S. Senator from the 
                         State of South Dakota

    Mr. Chairman, thank you for inviting me to testify today at 
this hearing. I am here to express my strong belief that 
fundamental reform of the Corps of Engineers is necessary not 
only to protect the nation's environment, but also to protect 
the integrity of the process by which Congress authorizes Corps 
projects and to restore the severely damaged credibility of the 
Corps itself.
    In that regard, I want to commend the Committee for taking 
up the Water Resources Development Act, and for recognizing 
that passage of any new authorizing legislation for the Corps 
of Engineers should be accompanied by meaningful reform 
legislation. I also want to encourage the Committee to include 
many of the provisions of S. 1987 in the next Water Resources 
Development Act. This bill is a thoughtful and justifiable 
response to the ongoing problems associated with the Corps of 
Engineers, and I will cosponsor it today.
    My one reservation about the bill is the establishment of a 
benefit-to-cost ratio of 1.5. It has been my experience that 
some projects with lesser benefit-to-cost ratios are 
defensible, while some with higher benefit-to-cost ratios may 
not be justified. I think it is important that Congress 
establish a more sensitive metric for evaluating projects than 
simply increasing the minimum benefit-to-cost ratio, and I 
would like to explore this issue further with the Committee.
    Mr. Chairman, I have advocated reform of the Corps of 
Engineers for years. In fact, in March of 2000, I introduced S. 
2309, the Corps of Engineers Civil Works Independent 
Investigation and Review Act, calling for an independent review 
of the Corps of Engineers. That bill established an independent 
commission to take a hard look at the Corps.
    At the time, I was extremely concerned by evidence that the 
Corps was neglecting its responsibilities to comply with the 
nation's environmental laws and was systematically engaged in 
producing fraudulent analyses of proposed projects to 
manufacture economic justifications in cases where factual 
analyses could not have supported their authorization by 
Congress.
    Two years ago the Washington Post published a number of 
very troubling articles about the operations of the U.S. Army 
Corps of Engineers. Those stories exposed the existence of 
independent agendas within the Corps. They suggested cost-
benefit analyses rigged to justify billion dollar projects, 
disregard for environmental laws, and a pattern of catering to 
special interests.
    The actions described in the Post articles raise serious 
questions about the accountability of the Corps and present a 
compelling case for a thorough review of the agency's 
operations and management. And it is not only the Post articles 
that cause me to believe this.
    The Corps' current effort to update the Missouri River 
Master Control Manual--the policy document that governs the 
Corps' management of the river from Montana to Missouri--
illustrates not only that the Corps can be indifferent to the 
environment. It also demonstrates that the close relationship 
of the Corps to the barge industry often drives the Corps' 
willingness to manipulate and falsify data and analyses to 
protect those special interests and justify the work of the 
Corps in supporting those activities.
    On the Missouri River, for example, the Corps has taken 
pains to protect the $7 million barge industry at the expense 
of public recreational opportunities and fish and wildlife. One 
important factor that motivates the Corps' actions is its 
ongoing program to maintain the barge channel--a Corps jobs 
program that costs taxpayers over $7 million per year--more 
than the value of the barge industry itself.
    This example ought to be a concern to all Americans. It is 
a deep concern to South Dakotans. The Missouri runs down the 
center of our state and is a major source of income, recreation 
and pride for us. More than 40 years ago, the Corps built dams 
up and down the Missouri River in order to harness 
hydroelectric power. In return, it was expected to manage the 
river wisely, and in compliance with the nation's laws.
    The Corps has not kept that trust. The Missouri river is 
dying a slow death. And the Corps continues to bend over 
backward to ensure that the management changes necessary to 
meet the requirements of the Endangered Species Act and recover 
the health of the river are not made.
    In recent years, studies have been done to determine how to 
restore the river to health. An overwhelming amount of 
scientific and technical data all point to the same conclusion. 
The flow of the river needs to more closely mimic nature. Flows 
should be higher in the spring, and lower in the summer--just 
as they are in nature.
    Yet, if and when the Corps ever releases its plan for 
managing the river--and after 12 years of study, that is still 
in doubt--observers expect that it will propose to continue 
doing largely what it has been doing all these years. That is 
what most expect, despite knowing exactly what the practices 
have produced now for the last 40-plus years. The agency's 
refusal to change will further jeopardize endangered species. 
And, it will continue to erode the natural beauty and 
recreational value of the river.
    The Washington Post series suggested that the Corps' 
handling of the Missouri River Master Manual is not an isolated 
case. The Post articles contained allegations by a Corps 
whistleblower who says that a study of proposed upper-
Mississippi lock expansions was rigged to provide an economic 
justification for that billion-dollar project. In response to 
these allegations, the Corps' own Office of Special Counsel 
concluded that the agency ``probably broke laws and engaged in 
a gross waste of funds.''
    In my own dealings with the Corps of Engineers, I, too, 
have experienced the institutional problems recorded so starkly 
in the Post series. In South Dakota, where the Corps operates 
four hydroelectric dams, we have fought for more than 40 years 
to force the agency to meet its responsibilities under the 1958 
Fish and Wildlife Coordination Act and mitigate the loss of 
wildlife habitat resulting from the construction of those dams.
    For 40 years, the Corps has failed to meet those 
responsibilities. That is why I have worked closely with the 
Governor of my state, Bill Janklow, and with many other South 
Dakotans, to come up with a plan to transfer Corps lands back 
to the state of South Dakota and two Indian tribes. 
Unfortunately, instead of attempting to work with us, the Corps 
fought us for years--hoping to prevent us from reinforcing the 
precedent that the Corps is responsible for mitigating the 
environmental damage caused by its projects.
    Just last week, the Post described a new General Accounting 
Office report on a project in Delaware, where once again 
fraudulent analysis was performed to justify moving forward 
when it appears an objective analysis would have concluded the 
opposite. When considered in the context of the litany of 
problems that have come to light in the Post, Congress has no 
choice but to enact serious reforms prior to providing the 
agency with any new authority.
    In a democracy, institutions of government must be held 
accountable by representatives of the people. That is the job 
of Congress--to hold that agency responsible and make sure it 
follows the nation's laws and provides lawmakers with accurate 
information upon which million- and billion-dollar decisions 
are made.
    Contempt for environmental laws and self-serving economic 
analyses simply cannot be tolerated if Congress is to make 
well-informed decisions regarding the authorization of 
expensive projects, and if the American taxpayer is to be 
assured that Federal moneys are being spent wisely.
    The Corps of Engineers provides a valuable national 
service. It constructs and manages needed projects throughout 
the country. The size and scope of the biannual Water Resources 
Development Act is clear evidence of the importance of the 
Corps' civil works mission. Because the Corps' work is so 
critical, it is essential that steps be taken immediately to 
determine the extent of the problems within the agency--and to 
design meaningful and lasting reforms to correct them. Our 
Nation needs a civil works program we can depend on. We need a 
Corps of Engineers that conducts credible analysis.
    We need a Corps that balances economic development and 
environmental protection as required by its mandate--not one 
that ignores environmental laws as it chooses. History does not 
offer much room for confidence that the Army Corps of Engineers 
can meet these standards under its current management system.
    Consequently, I urge this committee to take a hard and 
systematic look at the Corps and include reforms in the next 
Water Resources Development Act to address these obvious 
problems. In particular, I hope the Committee will look at the 
Corps' compliance with environmental laws, the quality and 
objectivity of the agency's scientific and economic analysis, 
the extent to which the Corps coordinates and cooperates with 
other state and Federal agencies in designing and implementing 
projects, and the appropriateness of the agency's size, budget 
and personnel.
    It is my hope that all those who care about the integrity 
of the Army Corps of Engineers and its mission will support an 
effort by this committee to identify and implement whatever 
reforms are necessary to rebuild public support for its work. I 
look forward to working with all members of the Committee to 
help craft responsible reform legislation, and I encourage you 
to look to the provisions of S. 1987 as a basis for needed 
reform in this year's Water Resources Development Act.
                              ----------                              


     Statement of Hon. Russell D. Feingold, U.S. Senator from the 
                           State of Wisconsin

    Mr. Chairman, I am delighted to appear before the 
Environment and Public Works Committee today. I thank the 
Chairman for honoring the commitment to a hearing on the Corps' 
Water Program and the need for reform of the Corps made to me 
by the former Ranking Member, Senator Baucus, and Senator Smith 
during floor debate over the Water Resources Development Act of 
2000. I am very pleased to be working with Senators Smith and 
McCain on this issue, and admire their dedication to fiscal 
responsibility as a driving force in their desire for Corps 
Reform.
    Corps Reform is a work in progress. Reforming the Corps of 
Engineers will be a difficult task for Congress. It involves 
restoring credibility and accountability to a Federal agency 
rocked by scandals, struggling to reform itself over the last 
year, and constrained by endlessly growing authorizations and a 
gloomy Federal fiscal picture. But, this is an agency that 
Wisconsin, and many other states across the country, have come 
to rely upon. From the Great Lakes to the mighty Mississippi, 
the Corps is involved in providing aids to navigation, 
environmental remediation, water control and a variety of other 
services to my state. My office has strong working 
relationships with the Detroit, Rock Island, and St. Paul 
District Offices that service Wisconsin, and, let me be very 
clear Mr. Chairman, I want the fiscal and management cloud over 
the Corps to dissipate so that the Corps can continue to 
contribute to our environment and our economy.
    The two reform bills now before the committee grew from my 
experience in two legislative efforts. First, as the committee 
knows, I sought to offer an amendment to the Water Resources 
Development Act of 2000 to create independent review of Army 
Corps of Engineers' projects. In response to my initiative, the 
bill's managers adopted an amendment as part of their Manager's 
Package that should help get this Committee the additional 
information it needs to develop and refine legislation on this 
issue through a study on peer review by the National Academy of 
Sciences.
    Second, I also learned of the need for additional technical 
input into Corps projects through my efforts working with 
Senator Bond on the reauthorization of the Environmental 
Management Program in the Upper Mississippi, which was the only 
permanent authorization in WRDA 99. Included in the final EMP 
provisions is a requirement that the Corps create an 
independent technical advisory committee to review EMP 
projects, monitoring plans, and habitat and natural resource 
needs assessments. I have been deeply concerned that this 
provision has not been fully implemented by the Corps, and I 
feel that as this Committee has been historically concerned 
about the need to secure outside technical advice in Corps' 
habitat restoration programs, like the EMP, it should also be 
concerned about getting similar input for other Corps 
construction activities.
    Earlier this Congress, I introduced the Corps of Engineers 
Reform Act of 2001 (S. 646). This year, I joined with Senators 
Smith and McCain in introducing the Corps of Engineers 
Modernization and Improvement Act of 2002, S. 1987. S. 1987 
includes many provisions that were included in my original 
bill, and codifies the idea of independent review of the Corps 
about which Senator Smith and I agreed in the 2000 Water 
Resources bill. It also provides a mechanism to speed up 
completion of construction for good Corps projects with large 
public benefits by deauthorizing low priority and economically 
wasteful projects. Further, it streamlines the existing WRDA 86 
deauthorization process. Under S. 1987, a project authorized 
for construction, but never started, is deauthorized if it is 
denied appropriations funds toward completion of construction 
for five straight years. In addition, a project that has begun 
construction but denied appropriations funds toward completion 
for three straight years is also deauthorized.
    The bill also preserves congressional prerogatives over 
setting the Corps= construction priorities by allowing Congress 
a chance to reauthorize any of these projects before they are 
automatically deauthorized. This process will be transparent to 
all interests, because the bill requires the Corps to make an 
annual list of projects in the construction backlog available 
to Congress and the public at large via the Internet. The bill 
also allows a point of order to be raised in the Senate against 
projects included in legislation for which the Corps has not 
completed necessary studies determining that a project is 
economically justified and in the Federal interest.
    It is a comprehensive revision of the project review and 
authorization procedures at the U.S. Army Corps of Engineers. 
Our joint goal is to cause the Corps to increase transparency 
and accountability, to ensure fiscal responsibility, and to 
allow greater stakeholder involvement in their projects. We are 
committed to that goal, and to seeing Corps Reform enacted as 
part of this year's Water Resources bill.
    I would hope, Mr. Chairman, that as the Committee examines 
the issue of Corps Reform, it also reviews my original bill, S. 
646, which is sponsored in the House of Representatives by my 
colleague from Wisconsin, Representative Kind. S. 646 includes 
a number of important concepts that are central to 
environmental protection and that should be part of Corps 
Reform.
    The Corps is required to mitigate the environmental impacts 
of its projects in a variety of ways, including by avoiding 
damaging wetlands in the first place and either holding other 
lands or constructing wetlands elsewhere when it cannot avoid 
destroying them. The Corps requires private developers to meet 
this standard when they construct projects as a condition of 
receiving a Federal permit, and I think the Federal Government 
should live up to the same standards. Too often, and others on 
the second panel can testify to this in greater detail, the 
Corps does not complete required mitigation and enhances 
environmental risks. I feel very strongly that mitigation must 
be completed, that the true costs of mitigation should be 
accounted for in Corps projects, and that the public should be 
able to track the progress of mitigation projects. In addition, 
the concurrent mitigation requirements of S. 646 would actually 
reduce the total mitigation costs by ensuring the purchase of 
mitigation lands as soon as possible.
    Mr. President, I feel that we need legislation to ensure a 
reformed Corps of Engineers. The Corps' recently--released 
lists of projects that it intends to review have been confusing 
and the review criteria remain unclear. We need a clearly--
articulated framework to catch mistakes by Corps planners, 
deter any potential bad behavior by Corps officials to justify 
questionable projects, end old unjustified projects, and 
provide planners desperately needed support against the never 
ending pressure of project boosters. Those boosters, Mr. 
Chairman, include congressional interests, which is why I 
believe that this Committee, which has sought so hard to stick 
to its criteria in project authorization and has done a better 
job in holding the line in Conference, needs to champion 
reform--to end the perception that Corps projects are all pork 
and no substance.
    I wish it were the case, Mr. Chairman, and I know that 
Senators Smith and McCain share my view, that I could argue 
that the changes we are proposing today were not needed, but 
unfortunately, I see that there is need for Corps Reform 
legislation. I want to make sure that future Corps projects no 
longer fail to produce predicted benefits, stop costing the 
taxpayers more than the Corps estimated, do not have 
unanticipated environmental impacts, and are built in an 
environmentally compatible way. This Committee should seek to 
ensure that the Corps does a better job, which is what the 
taxpayers and the environment deserve. I thank you for this 
opportunity to share my views with you today.
                              ----------                              


  Statement of R.L. Brownlee, Acting Assistant Secretary of the Army 
                 (Civil Works), Department of the Army

    Mr. Chairman and Members of the Committee. I am Les 
Brownlee, the Acting Assistant Secretary of the Army for Civil 
Works. Thank you for inviting me here today. I'm privileged to 
appear before you on behalf of the Administration to talk with 
you about the Army Corps of Engineers, our Nation's water 
resources, and charting a path toward continued modernization 
of both.
    I've learned a lot about the Corps since I assumed more 
direct management responsibilities for civil works in March. A 
piece of history that was interesting to me is how the Army got 
into civil works and water. After the War of 1812, both 
commercial development and national defense in the country 
required more reliable transportation arteries. Federal 
assistance, however, was slow in coming and was a ``product of 
contentious congressional factions'' and an Administration that 
did not want to meddle in the states' affairs. In the 1824 case 
of Gibbons vs. Ogden, however, the Supreme Court ruled that 
Federal authority covered interstate commerce including 
riverine navigation. Shortly thereafter, the General Survey Act 
authorized the President to conduct a survey of nationally 
important roads and canals from a commercial, military or mail 
transportation point of view. The President gave that 
responsibility to the Army Corps of Engineers. About a month 
later, a second act appropriated $75,000 for improving 
navigation along the Ohio and Mississippi Rivers by removing 
sandbars, snags and other obstacles. The Corps was also tasked 
with that work, and so began the Corps of Engineers' continuous 
involvement in civil works and our Nation's water resources.
    Since that time, the Corps has always been a dedicated 
servant of the American people. For 200 years, the Nation has 
relied on the Corps to help resolve some of our difficult 
problems. In addition to its water resources responsibilities, 
the Corps has supported our military forces in time of war. The 
Corps provided the technical expertise for the Manhattan 
Project. Army engineers oversaw the building of the Panama 
Canal. The Kennedy Space Center and the Johnson Manned 
Spacecraft Center in Houston are products of Corps efforts. 
When a disaster strikes, Corps personnel in red jackets are 
there to help. Research work by the Corps resulted in building 
designs that saved lives in the Pentagon on September 11th. 
Today, 35,000 Corps employees work around the world to help 
improve the quality of life for people at home and abroad. We 
also want to ensure, as I'm sure you do, that this country can 
continue to rely on the capability, expertise and leadership of 
the Corps now, and in the future.
    The distinguished history of the Army Corps of Engineers is 
the history of our Nation. As the Nation has changed its 
priorities and values, the Corps has also changed as it brought 
these priorities to reality.
    It is with this history, tradition and spirit that I 
address the subject of today's hearing--Corps reform.
    This Administration supports the goals of Corps reform and 
is willing to work with the Committee to eliminate unneeded 
water projects to pursue only those that are worthy; and to 
improve the ways in which we formulate projects and fund them. 
I therefore would propose that we focus our attention on the 
question that lies perhaps on a higher strategic plane: Where 
is our national policy regarding water resources heading next? 
Our continued understanding of this question is critical to 
setting the future direction of the Corps.
    The people of America increasingly understand that our 
Nation's water resources are finite. The debate over its use 
classically centers around this question: Where should we give 
priority to the development of water resources for social and 
economic benefit and where should we give priority to the 
restoration of these resources to their natural state. 
Sometimes we must choose one over the other. Sometimes we 
struggle to do both. As science and engineering evolve, we can 
enhance our opportunity to find more balance between these 
options and, working together, make the right choices for the 
Nation.
    We all agree that the Corps can and should modernize. But 
modernization of the Corps needs to be in accordance with the 
future direction of our national policy.
    With your permission, I would like to give you my 
perspective on the water policy issue. Here are just a few of 
the facets of the issue.
    Our society is growing more complex. We have competing 
interests and disputes in many watersheds--in the Everglades, 
along the Missouri River, the Mississippi River, the Columbia 
River, and many others. These interests and disputes are 
intensified when we experience drought conditions as severe as 
we have now over much of the country.
    As members of this important committee, you are more aware 
than most that many Corps navigation projects have extensive 
maintenance and repair backlogs.
    While advances in science and technology can move us toward 
a new paradigm of more environmentally sustainable projects and 
integrated water resources management, we must develop more 
effective public policies built on a new public consensus.
    In terms of our Nation's priorities, the war on terrorism 
is, and should be, our main focus. We must prioritize our 
resources to ensure that we win this war. We must also ensure 
that we are looking out for the Nation's long term future and 
ensure that our country's economy remains strong. At the same 
time, we also need to protect and sustain our Nation's natural 
resources. Our financial resources are not unlimited. We 
therefore must address the following questions: What water 
resources investments do we most need to make now? To what 
extent should these be a Federal responsibility? To what extent 
should the Corps have this responsibility? Which investments 
should we not undertake until later? What can we do without? 
Should we continue all ongoing construction projects? Can we 
afford to build them all simultaneously? Should we continue to 
operate, maintain, and rehabilitate every investment that we 
have made in navigation?
    This Administration has insisted on much stronger 
coordination, collaboration, and cooperation among agencies 
within the executive branch and wants to work more closely with 
you to collaborate more effectively on the plans and policies 
we should put in place to address these long-term needs.
    I believe that it is important to focus our time and effort 
on such a debate at the national level. Corps reform is 
important. General Flowers and I agree that the Corps of 
Engineers should be changed and transformed to meet and better 
serve the evolving needs of the Nation, and General Flowers 
will address this in more detail. However, reform of the Corps 
will follow in a more natural and logical way if we better 
define our policies and reach agreement on the right balance on 
the critical priorities.
    The Corps professionals' body of knowledge on water 
resources is unparalleled, and we must exploit that knowledge 
and associated skills to ensure that the Federal Government can 
continue to meet the needs of its citizens.
    I appreciate the opportunity you have given me to testify 
before this distinguished committee, recognizing that your 
knowledge of these subjects far exceeds what I have been able 
to learn in these past few months. I believe we have an 
opportunity, working together, to shape the Nation's future. As 
you know better than I, these are serious times and it is often 
hard to concentrate on the long term when the more immediate 
becomes urgent. I pledge to work with you on these important 
issues to achieve a national water policy that serves the best 
interest of all our citizens.
    Mr. Chairman, this concludes my statement, and I would be 
pleased to address any questions that you or the committee may 
have.
                              ----------                              


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

    Mr. Chairman, and Members of the Committee. I am honored to 
be testifying before your committee today, along with the 
Acting Assistant Secretary of the Army (Civil Works), the 
Honorable Les Brownlee, on two things we share a deep concern 
for the U.S. Army Corps of Engineers and the management of our 
nation's precious water resources.
    I'm willing to state categorically that the Corps must 
change. Mr. Brownlee has articulated what I believe to be the 
heart of the issue about changing the Corps. It will be more 
beneficial for the country in the long run if this 
transformation is consistent with the changes that have been 
occurring in the Nation's priorities and values regarding water 
resources. The Corps can change, we have before at critical 
turning points and are certainly at a turning point right now.
    There are some basic questions about how the Nation will 
use and protect water in the future, some of which may have 
implications for future Corps activities. For instance, in the 
future, to what extent will water be a mode of transportation? 
To what extent will it be open for recreation? Will there be 
enough clean water to drink? Where do we place priority when it 
comes to water animals, farmers, ecosystems, plants, people? 
Our future depends on gaining some direction and focus on our 
priorities. This direction will also profoundly affect the way 
we do business in the Corps. Together we need to craft the 21st 
Century Corps of Engineers, an organization based on 
contemporary values and future needs. The needs that the Corps 
addresses--water resources and support to the war fighter--are 
as critical today as at any moment in history.
    Today I'd like to talk about what I'm doing to transform 
into the 21st Century Corps. I'd also like to talk about three 
particular areas in which we know we need to make some changes: 
reducing the backlog of projects, improving our internal 
processes and working toward watershed approaches. I'm 
optimistic that we will see improvement in all three of these 
areas as we address the national water policy issue. But in the 
interim, while I'm working on some solutions for these areas, 
we need to work with you in Congress, as well as the 
Administration, and our partners, stakeholders and critics to 
figure out what changes should be made and get them 
implemented.
    Let's talk first about how we reduce the backlog. Frankly, 
we have too many projects on the books, and some do not address 
solutions in a contemporary way. This has been the center of 
discussions at previous hearings of this Committee.
    We are looking for opportunities to reduce the number of 
projects that we are authorized to address. For some projects, 
considerable time elapses between when a problem is studied and 
the project to fix it is built. During that lapse we may see 
scientific progress that could better address the problem, and 
we may see shifts in public policy. We have about $5 billion 
worth of inactive projects that technically remain on our 
books, whose designs won't solve the original problems or for 
which there is no longer support.
    Then there are projects that could solve real problems but 
are unpopular for any number of reasons. Most were authorized 
years ago, but haven't been built. They show up on the hit 
lists of some of our most vocal critics. Sometimes the critics 
are right. And the challenge is how to ultimately decide 
whether we even should be trying to solve the problems for 
which these projects were designed. In many cases, I believe 
that it would be helpful for an interagency task force composed 
of all interested Federal agencies to take a fresh look at 
these projects.
    Let me tell you what we are doing to improve our internal 
processes.
    During the past year, we have focused on our planning and 
review capability within the Corps. We have identified the most 
critical capability deficiencies and are reemphasizing such 
basics as formulation, environmental science, economics, public 
involvement, and internal review. We are also looking at how we 
consolidate our planning and review capability for some high 
priority, but not high volume activities, so that our best 
people can be assigned to the most complex projects.
    The other part of this is independent review. We're eagerly 
awaiting the study findings this summer from the National 
Academy of Sciences. I'm optimistic that the recommendations 
will provide us with a road ahead on this issue. We are also 
looking forward to the second phase of the study that will look 
at the state-of-the-art of Corps planning processes and 
procedures.
    In the interim we are using various new forms of review, 
from the internal and external standpoints, to improve and 
validate our studies and projects. We are taking advantage of 
our value engineering expertise, our cross-district review 
capability and using outside experts to increase the validity 
of our recommendations and findings.
    As an aside, it is a test of the adage that the pendulum 
swings both ways that we are looking at our review function 
within the Corps again. As you probably remember we had an 
internal review board, called the Board of Engineers for Rivers 
and Harbors for the majority of the 20th century, just 
disbanded in 1993. With that step, and reorganizing our 
internal structure, we streamlined the process but at a cost. I 
believe its quite possible to improve the process but continue 
to move the studies and recommendations forward at a fairly 
quick pace.
    In some instances where the independent review has included 
getting other Federal agencies to the table, we have reaped 
immense benefits from the increased collaboration and 
partnership within the Federal family. These partnerships will 
serve us well as we move toward a watershed approach, the last 
topic I want to address. Here are a few things I've done:
    I've restructured the controversial Upper Mississippi 
Navigation Study to consider a wide range of options from 
construction of new locks to non-construction alternatives such 
as system-wide environmental restoration. We also will need to 
ensure that the economic analysis used in this study is current 
and beyond reproach.
    I have also revitalized the Environmental Advisory Board, a 
board of independent, external environmental advisers that will 
help us evaluate our process. They have advised us on our Upper 
Miss River Navigation study and will also be looking at peer 
review, cost sharing, breadth of authority and reviewing our 
work in the Everglades in the upcoming sessions.
    To refocus Corps professionals on the long-term sustainable 
goal, I have established a set of environmental operating 
principles that reiterates our commitment to approach our work 
in a more environmentally sustainable manner and challenged our 
people to make them real.
    Quite frankly though, we need to do more and we need the 
Congress's help if we are truly to take a watershed approach.
    Right now, existing laws and policies drive us to single 
focus, geographically limited projects where we have sponsors 
sharing in the cost of the study. The current approach narrows 
our ability to look comprehensively and sets up inter-basin 
disputes. It also leads to projects that solve one problem, but 
may inadvertently create others. Frequently we are choosing the 
economic solution over the environmental, when we can actually 
have both. I believe the future is to look at watersheds first; 
then design projects consistent with the more comprehensive 
approach. We know that will require collaboration early and 
continuously but we believe it will prevent lawsuits later. So 
together, we need to develop and agree on 21st Century 
criteria.
    Transformation of the Corps won't be easy, but we stand 
ready to work with you to address these issues. As our critics 
continue to chide us, I would ask that they work with us, as 
well with you in the Congress, the Administration, interest 
groups, our partners and stakeholders, for the well being of 
the American people and the environment in which we live.
    Thank you Mr. Chairman and members of the committee. This 
concludes my statement.
                              ----------                              

   Statement of Thomas J. Chase, Director of Environmental Affairs, 
                American Association of Port Authorities

                              INTRODUCTION

    Good morning. I am Thomas J. Chase, Director of Environmental 
Affairs at the American Association of Port Authorities (AAPA). Founded 
in 1912, AAPA represents virtually every U.S. public port agency, as 
well as the major port agencies in Canada, Latin America and the 
Caribbean. AAPA members are public entities mandated by law to serve 
public purposes, primarily the facilitation of waterborne commerce and 
the generation of local and regional economic growth. I am testifying 
today on behalf of the 86 U.S. public port members of the American 
Association of Port Authorities.
    Mr. Chairman, AAPA commends you for calling this hearing on the 
Water Resources Development Act of 2002. We appreciate the opportunity 
to testify on behalf of the U.S. members of AAPA.
    The Corps of Engineers, in partnership with the nation's public 
ports, plays a vital role in ensuring the nation's marine 
transportation system (MTS) meets the needs of the nation's businesses 
and consumers. The MTS is a complex, market-driven system that provides 
many benefits to the Nation. Federal investment in one part of this 
system--navigation channels--is critically important to the success of 
the system and produces benefits to the Nation far in excess of the 
investment.
    AAPA and the public port authorities of our country, the agencies 
on whom the responsibility for the development and operation of our 
nation's ports rests, urge the Congress to keep these essential 
arteries of international commerce open in an efficient, cost-effective 
and environmentally protective manner by providing the Corps of 
Engineers with the resources and authorities it needs to get the job 
done. To that end, we urge the Congress to fully fund the Corps of 
Engineers civil works program, to maintain a biennial cycle in enacting 
Water Resources Development Acts, to consider carefully any changes to 
Corps of Engineers project authorities, and to seriously review the 
impact of any proposed changes to avoid needlessly increasing the cost, 
or further delay the construction, of needed deep-draft navigation 
projects.
    In my testimony today, I will discuss the following four points:
     Importance of the Corps deep-draft navigation mission;
     The need to enact a Water Resources Development Act of 
2002; and,
      The potential impact on the MTS of S. 1987, the Corps of 
Engineers Modernization and Improvement Act.

         IMPORTANCE OF THE CORPS DEEP-DRAFT NAVIGATION MISSION

    Our water highways are national assets that serve a broad range of 
economic and strategic interests. The United States has the most 
extensive, complex and decentralized marine transportation system in 
the world; it is an appropriate asset for the world's largest trading 
country and sole superpower. A large measure of this country's 
unprecedented economic growth is due to the increased productivity of 
the American economy and foreign trade. To remain competitive in the 
global marketplace, U.S. businesses must have an efficient and reliable 
transportation system.
    This section of my testimony discusses the many benefits provided 
by the nation's system of deep-draft navigation channels. The structure 
of the broader marine transportation system and its relation ship to 
deep-draft navigation channels is also discussed. Finally, a number of 
challenges facing the Corps of Engineers and its non-Federal partners 
on deep-draft navigation projects--the nation's public port 
authorities--are also highlighted.
Benefits of Deep-Draft Navigation Projects
    Economic Benefits: Ports' activities link every community in our 
Nation to the world marketplace, enabling us to create export 
opportunities and to deliver imported goods more inexpensively to 
consumers across the Nation. The deep-draft commercial ports of the 
U.S. handle over 95 percent of the volume and 75 percent of the value 
of cargo moving in and out of the Nation.
    The marine transportation system has helped American exporters from 
every state develop and maintain markets around the world for a variety 
of commodities, ranging from paper, forest and agricultural products, 
to plastics, chemicals and pharmaceuticals; from fruits and vegetables 
to poultry, beef and cotton; and, from machinery and automobile parts 
to frozen fish.
    The industry has also provided American consumers and businesses 
with inexpensive access to a vast array of goods from around the world, 
including more than half of the petroleum used, 75 percent of the 
apparel and 95 percent of the footwear worn in this country, food 
products, beverages such as coffee and beer from around the world, 
flowers, kitchenware, household appliances, furniture and bicycles, 
marble and tile, automobiles, auto parts and tires, machinery and 
tools, electronic goods, computer equipment and copiers, manufacturing 
components and supplies, and thousands of other goods.
    All ports serve multi-state needs. The foreign trade activities of 
each state are supported by a variety of ports both within and, more 
often, outside the state. On average, each state relies on between 13 
to 15 ports to handle 95 percent of its imports and exports. The goods 
from 27 states leave the country through the ports in Louisiana alone. 
Midwestern grain supplies the Pacific rim market through ports in the 
Pacific Northwest. Imported crude oil refined in New Jersey and 
Pennsylvania reaches consumers on the entire East Coast, from Maine to 
Florida. Steel that travels to major Midwestern industrial centers is 
delivered cheaply and efficiently through Great Lakes ports. Ports on 
the West Coast handle goods such as cars, computers, and clothing, 
which are destined for consumers throughout the country.
    World trade increased by 3.8 percent annually (on a tonnage basis) 
between 1993 and 1997 to a total of 5.3 billion metric tons. In that 
same period, U.S. foreign waterborne trade grew by 4.6 percent per year 
to 1,071 million metric tons and accounted for about 20 percent of 
global waterborne trade and almost 30 percent of U.S. Gross Domestic 
Product.3 By 2020, U.S. foreign maritime trade is expected to more than 
double over 1996 tonnage levels, with total tonnage projected to grow 
3.5 percent annually. Figures 1 and 2 illustrate the range and scope of 
import and export cargos, respectively, moving through U.S. ports in 
2000.

[GRAPHIC] [TIFF OMITTED] T3967.001


    The nation's system of ports and harbors provides the nation's 
shippers--importers and exporters--with a range of choices that allow 
them to minimize transportation costs, and, thus, deliver goods to the 
consumer more cheaply and compete more effectively in international 
markets. As a result of the proliferation of just-in-time manufacturing 
practices, time definite delivery, and vendor managed inventory in our 
manufacturing and retail sectors, an interruption of only four to five 
business days can have devastating consequences for our global supply 
chain, as evidenced by the impact of September 11 on our land border 
crossings.
    These global business trends are interrelated to the demand of 
cargo shippers for increasing reliability, reduced damage, and 
decreasing cost. All of these demands drive the transportation provider 
to improve service and find efficiencies at each link in the 
transportation chain. This is especially true for the ocean carrier who 
transports large volumes of cargo over relatively long distances. The 
drive to satisfy cargo shippers in ocean transportation has led to the 
building of larger ships and to the increasing containerization of 
cargo. Figure 3 illustrates the trend in the containerized cargo 
segment of U.S. foreign trade. The number of containers moving though 
U.S. ports doubled between 1990 and 2000, from 15.3 to 30.4 million 20-
foot equivalent units (TEUs) and the volume is expected to double again 
over the current decade. Relative increases were consistent on the 
Atlantic, Gulf and Pacific Coasts with volumes in 2000 of 13, 1.7, and 
15.7 million TEUs, respectively.

[GRAPHIC] [TIFF OMITTED] T3967.002


    Recent testimony by the World Shipping Council discusses trends in 
freight rates for containerized cargo moving in U.S. international 
trade.\1\ Table 1 summarizes the changes in average rates for moving 
containerized cargo in the major U.S. foreign trade routes from 1978 
through 1998. Significantly, rates in real terms have declined by 
between 52 and 72 percent, during this period of rapid expansion in the 
use of containers for shipping cargo. It has been an unrecognized 
success that all segments of the maritime transportation system have 
made the investments necessary to sustain, and in turn foster, the 
explosive growth in global trade.
---------------------------------------------------------------------------
    \1\ Testimony of Christopher Koch, President & CEO of the World 
Shipping Council Before the House Committee on the Judiciary Hearing on 
International Liner Shipping Regulatory Policy, June 5, 2002.
---------------------------------------------------------------------------
    According to a semi-annual survey conducted by the U.S. Department 
of Agriculture, American shippers of containerized agricultural goods 
have reported that they are able to obtain cost-efficient ocean 
transportation. Specifically, the USDA's December 2001 report on 
Agricultural Ocean Transportation Trends states that:
    The rates for U.S. outbound dry containers, particularly westbound 
transpacific rates, are approaching historically low levels. Virtually 
all U.S. agricultural exporters are paying less for transportation than 
they were in early 2001 when rates were already perceived to be 
extraordinarily low . . . It is remarkable that commodities are 
reportedly moving in certain transpacific, westbound trades at $225 per 
40-foot equivalent unit . . . Rates are so uniformly low, they are no 
longer the primary determining factor for carrier selection. There is a 
presumption that rates will hit ``rock bottom,'' so, while agricultural 
shippers continue to keep an eye on the overall rates (the base rate 
plus the surcharges), carriers are now primarily selected according to 
service capabilities.\2\
---------------------------------------------------------------------------
    \2\ Agricultural Marketing Service, ``Agricultural Ocean 
Transportation Trends,'' December 2001, at www.ams.usda.gov/tmd/AgOTT/
December%202001/Dec2001--content.htm.

  Table 1.--Changes In Average Freight Rates In U.S. East-West Trades,
                                1978-1998
------------------------------------------------------------------------
                                    Current Dollars     Real Terms  [In
                                     [In Percent]          Percent]
------------------------------------------------------------------------
Trans-Pacific
 
  Eastbound.....................              -32.1               -72.1
  Westbound.....................              -20.8               -67.5
Trans-Atlantic
 
  Eastbound.....................               -4.6               -60.9
  Westbound.....................               18.2               -51.5
------------------------------------------------------------------------

    Besides providing cost savings to the country's businesses and 
consumers through more efficient transportation, the U.S. marine 
transportation system, including the nation's deep-draft navigation 
channels, creates substantial economic and trade benefits for the 
Nation, as well as for the local port community and regional economies. 
The following statistics highlight how critical ports are in 
facilitating national economic activity:\3\
---------------------------------------------------------------------------
    \3\ Source: U.S. Maritime Administration.
---------------------------------------------------------------------------
     U.S. Customs duty revenues totaling approximately $15.6 
billion were paid into the general treasury in fiscal year 1996 on 
cargo moved through ports.
     Our nation's commercial deep draft ports annually handle 
in excess of $600 billion in inter national trade.
     Foreign trade is an increasingly important part of the 
U.S. economy, currently accounting for almost 30 percent of our Gross 
Domestic Product. U.S. exports and imports are projected to increase in 
value from $454 billion in 1990 to $1.6 trillion in 2010. The volume of 
cargo is projected to increase from 875 million to 1.5 billion metric 
tons in 2010.
     The overall national economic impact of port activities in 
1996 generated:

         3 million jobs;
         $743 billion to the Gross Domestic Product; and
         $200 billion in taxes at all levels of government.

    National Defense Benefits: We should also not lose sight of the 
fact that the ports continue to play a very critical role in our 
nation's defense. That role has never been more apparent than during 
the loadouts of military cargo and personnel during Operation Desert 
Shield/Desert Storm. The huge buildup of U.S. forces in and around the 
Persian Gulf would have been impossible without the modern facilities 
and strong support provided by America's ports. According to the U.S. 
Military Traffic Management Command (MTMC), between August 1990 and 
March 1991, MTMC loaded 312 vessels and more than 4.2 million 
measurement tons of cargo in 18 U.S. ports for delivery to the Persian 
Gulf in support of Desert Shield/Desert Storm. More than 50 ports have 
agreements with the Federal Government to provide ready access for 
national emergency purposes.
    Environmental Benefits: Several navigation projects that have 
substantial environmental features, including the creation of thousands 
of acres of wildlife habitat using dredged material, would not proceed 
under the proposed funding levels. For example, the Port of Oakland is 
currently building a project to expand its container handling 
capability that will redevelop a former military facility, create 120 
acres of shallow-water habitat, restore 3200 acres of wetlands, provide 
30 acres of new public parkland, and reduce vehicle emissions by 40 
tons per year. In addition, the larger, more efficient ships that will 
be able to call at the port will result in reduced volumes of ballast 
water discharged and air pollutants emitted. Similar multi-objective 
projects are the hallmark of local public port development projects 
throughout the country.

Structure of the MTS
    The U.S. Marine Transportation System (MTS) consists of ports and 
their inland connections, vessels, and navigation channels. Each 
component is a complex system within itself and is closely linked with 
the other components. The first two components are primarily an 
aggregation of State, local, or privately owned facilities and private 
companies; navigation channels are primarily Federal assets. As with 
the U.S. economy as a whole, decisionmaking and investment are 
primarily driven by the marketplace. In addition, Federal, state, and 
local governments participate in the management, financing, operation 
and regulation of the MTS.
    The MTS is subject to an almost infinite variety of economic, 
political and market conditions and forces which affect the need for 
and types of investment in MTS facilities and services (i.e., ports, 
vessels, and navigation channels). These factors include:
     Demand for MTS services has been, and is expected to 
continue, growing at a rate significantly greater the rest of the 
economy, and prediction of the exact need for and locations of new MTS 
facilities is extremely complex;
     Short term demand for MTS services can be highly variable 
and is related to, among other things, global economic conditions, 
evolving trading patterns, changing consumer preferences, and seasonal 
fluctuations.
     Investments in MTS facilities are capital intensive and--

         take long lead times to bring into the market,
         must be sufficient to meet peak demand,
          are not easily transformed to meet changes in demand 
        because of large fixed costs and the need to maintain minimal 
        levels of service,
         can only be delivered in ``lumps'' or relatively large 
        units of capacity and,
         have a relatively long lifetime (often on the order of 
        25 years).

    Because of these factors, the addition of new MTS facilities cannot 
be precisely coordinated with increase in demand. Also, in the presence 
of the vigorous competition inherent in the port and ocean carrier 
segments of the MTS, there is a potential for some excess capacity to 
exist at any given point in time. However, quantifying the level or 
cost of excess capacity is extremely complex and may not be relevant in 
investment decisionmaking. In addition to providing an ability to 
handle peak demand, excess capacity also ensures competition among the 
various ports and vessels to the advantage of the nation's business and 
consumers.
    Another important benefit of excess capacity is demonstrated when 
there are interruptions in certain segments of the MTS. For example, 
following the September 11 attacks on the World Trade Center, the Port 
of New York and New Jersey was closed to all vessels for several days. 
Cruise ships were rerouted to the ports in Baltimore, Boston, and 
Philadelphia; cargo ships were also diverted to other ports. In 1997, 
problems with rail service in the Southwest U.S. caused cargo 
diversions to ports in the North west. A westward shift in 
manufacturing patterns in Asia has resulted in more consumer goods from 
that region being delivered to the U.S. through East Coast ports, via 
the Suez Canal. The excess capacity also serves the country well during 
times of crisis when the military needs to quickly move troops and 
materiel.
    Ports: The majority of port terminals, 87 percent on the inland 
waterways and 66 percent in deep-draft harbors, are privately owned.\4\ 
Public port authorities are creations of state governments and are 
generally set up as semi-autonomous authorities with their own elected 
or appointed governing boards. Local, state-wide or regional ports are 
responsible for investment, development and operation of public marine 
terminal facilities. Ports and other marine terminals, both public and 
private, are responsible for dredging of berthing areas and access 
channels connecting the port facilities to Federal navigation channels. 
The U.S. Maritime Administration reports that in 2000 alone, the 
cumulative local investment in public port facilities was nearly $1.1 
billion.\5\
---------------------------------------------------------------------------
    \4\ An Assessment of the U.S. Marine Transportation System--A 
Report to Congress. U.S. Department of Transportation, Washington, DC 
104 pp., September 1999 (www.dot.gov/mts/report/).
    \5\ United States Port Development Expenditure Report, December 
2001, U.S. Department of Transportation Maritime Administration, Office 
of Ports and Domestic Shipping, Washington, DC.
---------------------------------------------------------------------------
    Table 2 provides a break down of capital expenditures by type of 
facility as well as a projection of capital spending for the 5-year 
period 2001 to 2005. Each of the five cargo type categories includes 
expenditures for pier or wharf structures, storage facilities, and 
handling equipment. Infrastructure expenditures cover improvements, 
such as roadways, rail, and utilities that are located on or off 
terminal property. Dredging consists of local port expenditures 
associated with the dredging deepening and/or maintenance of Federal 
and non-Federal channels and berths as well as the local costs for 
land, easements, rights-of-way, and disposal areas. The ``other'' 
category includes those structures and fixtures not directly related to 
the movement of cargo, such as maintenance and administrative 
facilities.

         Table 2.--Comparison of Annual Capital Expenditures by Type of Facility for 1992-2000 and Projected Capital Expenditures for 2001-2005
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                General                          Liquid                           On        Off                 Total
                                                 Cargo   Specialized  Dry Bulk    Bulk    Passenger    Other   Terminal  Terminal  Dredging  Expenditure
                     Year                         [In     Cargo  [In     [In       [In        [In       [In       [In       [In       [In      [millions
                                               Percent]    Percent]   Percent]  Percent]   Percent]  Percent]  Percent]  Percent]  Percent]  of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
2001-2005....................................       9.8        44.4        1.5       0.6        4.3       8.0       8.5       6.3      16.6      $9,434
2000.........................................      22.8        31.2        3.5       0.8        5.7       8.2       8.0       8.7      11.1       1,058
1999.........................................      11.5        39.2        5.2       1.4        6.4       9.0       8.8       8.6       9.9       1,116
1998.........................................      10.9        35.8        8.3       0.2        1.9       8.5       7.1      11.2      10.8       1,414
1997.........................................      14.8        35.5        8.3       0.1        3.8       8.5      14.0       6.7       8.3       1,542
1996.........................................      14.7        41.0        5.9       0.5        2.7       4.8      10.7       8.8      10.9       1,301
1995.........................................      22.2        28.8        3.0       0.9        4.7       8.2      18.0       3.1      11.1       1,203
1994.........................................      22.8        34.8        5.6       0.3        4.7       7.3      15.1       6.0       3.4         687
1993.........................................      24.5        27.6        4.5       1.7        5.6      11.9      11.6       3.6       9.0         654
1992.........................................      23.9        31.8        4.8       0.2        7.5       9.5       9.0       3.8       9.5         680
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Table 3 presents information on the methods used by the U.S. public 
port authorities to finance their capital expenditure programs. The 
table identifies six funding categories to classify the financing 
sources: port revenues, general obligation bonds (GO bonds), revenue 
bonds, loans, grants, and other. The ``other'' funding category 
includes all financing sources that were not described above, such as 
state transportation trust funds, state and local appropriations, taxes 
(property, sales), and lease revenue. As the table illustrates, public 
ports are relying on either direct revenue or revenue-backed bonds for 
a greater percentage of the financing needs, and this trend is expected 
to continue with revenue-based financing expected to reach almost 78 
percent of capital financing needs in 2001-2005. (Note: Total financing 
and total expenditure levels from Table 2 may not agree because of 
incomplete survey responses.).

  Table 3.--Comparison of Annual Capital Financing by Method for 1996-2000 and Projected Capital Financing for
                                                    2001-2005
----------------------------------------------------------------------------------------------------------------
                                                                                                      2001-2005
              Method                  1996 [In     1997 [In     1998 [In     1999 [In     2000 [In       [In
                                      Percent]     Percent]     Percent]     Percent]     Percent]     Percent]
----------------------------------------------------------------------------------------------------------------
Port Revenues.....................         31.7         30.4         33.8         44.4         48.1         46.5
GO Bonds..........................          9.4         10.0          6.6          7.8          9.1          7.1
Revenue Bonds.....................         42.6         47.1         40.9         21.4         10.9         31.1
Loans.............................          1.1          0.5          1.1          6.6          3.8          2.9
Grants............................          2.5          8.1         10.4         14.0         16.0          7.8
Other.............................         12.7          3.9          7.2          5.8         12.1          4.6
Total (millions)..................       $1,240       $1,478       $1,355       $1,066         $898       $7,457
----------------------------------------------------------------------------------------------------------------

    Vessels: The world's ocean cargo vessels enter the market offering 
a wide variety of shipping services and trade routes from a variety of 
ownership patterns representing large global integrated logistics 
companies to national entities to niche carriers. Because the majority 
of ocean carriers are non-U.S. owned, some critics of Federal 
investment in navigation channels have charged that the benefits of 
such investments only accrue to ``foreigners'' and, therefore, such 
investments are somehow defective. There are several reasons why this 
is otherwise.
    First, the ocean carrier industry is highly competitive. There are 
no barriers to entry in international shipping as there are in other 
industries, such as international commercial aviation. In the liner 
industry, which is often the focus of this criticism, the shipping 
public has a wide array of carriers and variety of shipping services 
from which to choose. For example, as illustrated in Table 4, only one 
carrier has a market share above 10 percent, and the top ten carriers 
combined account for only 57.5 percent of the total containerized cargo 
carried (exports and imports combined) in U.S. trades.
    Second, as discussed above, freight rates for the shipment of 
containers in the liner industry have declined substantially over the 
last 15 years due to, among other reasons, the increased efficiencies 
resulting from larger vessels and deeper navigation channels.

  Table 4.--Market Share In U.S. Liner Trade in the First Quarter 2002
                           (Source: JoC/PIERS)
------------------------------------------------------------------------
                                                 Jan.-March    Combined
                                       TEUs     2002 Market     Market
              Lines                  Carried     Share  [In   Share  [In
                                                  Percent]     Percent]
------------------------------------------------------------------------
1. Maersk-Sealand................      572,106         13.2         13.2
2. Evergreen.....................      307,382          7.1         20.3
3. APL...........................      280,932          6.5         26.8
4. Hanjin........................      264,420          6.1         32.9
5. Cosco.........................      217,990          5.0         37.9
6. P&O Nedlloyd..................      186,405          4.3         42.2
7. Hyundai.......................      171,274          3.9         46.1
8. OOCL..........................      166,379          3.8         49.9
9. Yang Ming.....................      164,828          3.8         53.7
10. MSC..........................      164,382          3.8         57.5
All Lines (over 100).............    4,340,611          100          100
------------------------------------------------------------------------

    Third, vessel owners have made huge investments in new equipment, 
information technology, and larger vessels to achieve economies of 
scale, developed alliances with other vessel owners to take advantage 
of these economies of scale and scope that made possible significant 
cost savings. To keep pace with the expected doubling of trade by 2020, 
the liner industry expects that it will need to invest an estimated 
$100 billion in new vessels and containers alone. Those efficiency 
gains and cost reductions resulting from these investments are passed 
on to shippers in lower rates and improved service.
    Some critics have pointed out that the liner industry enjoys anti-
trust immunity as proof that these foreign companies enjoy a benefit 
that is detrimental to U.S. businesses, consumers and, in the case of 
Federal investments in navigation channels, to the American taxpayer. 
Again, a closer examination of this issue demonstrates that this is not 
the case.
    The anti-trust immunity provided to the liner industry is limited 
and highly regulated. The protection to the industry was established by 
the U.S. Congress, not some foreign, unaccountable entity. In fact, 
Congress most recently reviewed and reauthorized this protection in 
1998 with passage of the Ocean Shipping Reform Act of 1998. Carriers 
may operate under agreements filed with and overseen by the Federal 
Maritime Commission that promote and enable operational cooperation and 
efficiencies. Under this system, carriers, among other things:
     May not operate under an agreement that unreasonably 
increases rates or decreases service;
     May not engage in unjust or unfair or predatory practices;
     May not retaliate against any shipper;
     May not drive competitors out of a trade; and,
      May not impose any unreasonable prejudice or disadvantage 
with respect to any port.
    Given the highly competitive marketplace for transporting U.S. 
foreign trade evidenced by the large number of companies engaged in 
this business and the dramatic reduction in rates that have occurred 
over the last 15 years, it is clear that there is no monolithic 
``foreigner'' dictating the terms of the trade to U.S. businesses and 
consumers. Instead, these companies are continually making investments 
in their operations to reduce costs and provide better service to users 
of the nation's marine transportation system U.S. businesses and 
consumers.
    Navigation Channels: Since its beginning, the U.S. Congress has 
authorized and funded activities to ensure free and open access of the 
nation's waterways to navigation. The General Survey Act of 1824 
established the U.S. Army Corps of Engineers (USACE) as the agency 
responsible for the nation's navigation system.1 Since that time, the 
Federal Government has consistently exercised its power to develop and 
maintain a navigation system for the benefit of the whole nation. 
Today, there are approximately 1,000 Federal navigation channel 
projects spanning over 25,000 miles of inland, intracoastal, and 
coastal waterways.\6\
---------------------------------------------------------------------------
    \6\ Civil Works Program--1998. U.S. Army Corps of Engineers, 
Washington, DC, 54 pp., 1998.
---------------------------------------------------------------------------
    Prior to the Water Resources Development Act of 1986, the Federal 
Government paid 100 percent of ``general navigation features'' (GNFs) 
of harbor projects that consisted primarily of harbor dredging.\7\ 
Lands, easements, rights of way and relocations (LERRs), and dredging 
for berthing areas were a local or private responsibility, as were all 
landside improvements including terminals and equipment. All 
maintenance dredging was federally funded out of general revenue. With 
the passage of WRDA 1986, cost-sharing for general navigation features 
changed to include a local or non-Federal share as shown in Table 5. 
Maintenance dredging remained 100 percent federally funded; however, 
today Federal costs may be recovered 100 percent from deposits of the 
Harbor Maintenance Tax to the Harbor Maintenance Trust Fund.
---------------------------------------------------------------------------
    \7\ Cost sharing requirements are contained in Section 101 of the 
Water Resources Development Act of 1986, Public Law 99-662, November 
17, 1986, 33 U.S.C. 2211.

        Table 5.--Navigation Cost-Sharing Formula From WRDA 1986
------------------------------------------------------------------------
                                  Federal Share  [In   Non-Federal Share
          Channel Depth                Percent]          [In Percent]
------------------------------------------------------------------------
20 feet or less.................  80................  20
20 to 45 feet...................  65................  35
Over 45 feet....................  40................  60
------------------------------------------------------------------------
Note: Non Federal shares include 10 percent cash contribution
  requirement for all depths. The 10 percent cash contribution may be
  offset by a credit for lands, easements, rights of way and
  relocations, which are still a non-Federal responsibility. To the
  extent not offset, this 10 percent can be repaid over period not to
  exceed 30 years.

    Figure 4 illustrates the volume of material dredged and the cost of 
dredging for new work and maintenance dredging from Federal navigation 
channels between 1965 and 1999.\8\ Annual construction costs have 
averaged about $125 million for the period between 1977-1996 and 
average annual maintenance costs have averaged about $450 million. 
Average Federal investment in new channels increased since 1996 to a 
level $271.4 million in fiscal year 2002. Maintenance dredging volumes 
range annually between 250 and 300 million cubic yards.
---------------------------------------------------------------------------
    \8\ Actual Dredging Cost Data for 1963-1999, Long-Term Continuing 
Cost Analysis data. U.S. Army Corps of Engineers Dredging Program. 
Navigation Data Center, U.S. Army Corps of Engineers, Fort Belvoir, VA 
(www.wrsc.usace.army.mil/ndc/ddhisbth.htm).
---------------------------------------------------------------------------
    Individual navigation channel improvements must be demonstrated to 
be in the Federal interest before becoming eligible for Federal 
funding. Congress established that the Federal interests in water 
resources projects are as follows:

          It is the intent of Congress that the objectives of enhancing 
        regional economic development, the quality of the total 
        environment, including its protection and improvement, the 
        well-being of the people of the United States, and the national 
        economic development are the objectives to be included in 
        federally financed water resource projects (including shore 
        protection projects such as projects for beach nourishment, 
        including the replacement of sand), and in the evaluation of 
        benefits and cost attributable thereto, giving due 
        consideration to the most feasible alternative means of 
        accomplishing these objectives.(42USCj 1962-2)

    Congress also authorized the establishment of a Water Resources 
Council composed of the Secretaries of the Interior, Agriculture, Army, 
Commerce, Housing and Urban Development, and Transportation and the 
Administrator of EPA. In 1983, the Council adopted The Federal 
Principles and Guidelines for Water and Related Land Resources 
Implementation Studies, which continues today as the benchmark against 
which Federal water resources projects are measured. The P&G, as the 
policy document is informally called, applies to all water and land-
related resources projects undertaken by the Federal Government, 
including projects by the Corps of Engineers, the Bureau of 
Reclamation, and the Department of Agriculture. Despite Congress' 
intent that Federal water resources should also take into account 
regional economic development benefits, the P&G sets the maximization 
of national economic development (NED) benefits as the definitive 
threshold for Federal involvement in such projects.\9\ This policy 
continues even after non-Federal interests became responsible for cost-
sharing projects. Thus, non-Federal interests are required to share up 
to 60 percent of the cost of Federal navigation projects, but any 
regional benefits derived from these projects may not be included in 
justifying the project.
---------------------------------------------------------------------------
    \9\ Principles and Guidelines for Water and Related Land Resources 
Implementation Studies. U.S. Army Corps of Engineers, Washington, DC, 
1983. (www.wrsc.usace.army.mil/iwr/pdf/p&g.pdf)
[GRAPHIC] [TIFF OMITTED] T3967.003


    The Corps of Engineers project planning process is divided into two 
stages, a reconnaissance study and feasibility study, which together 
require an average of 5.6 years to complete. Corps reconnaissance 
studies, which are conducted by the Corps' district offices, are today 
required to be completed with 12 months. There is then often a lag 
between the end of reconnaissance and the start of feasibility. Between 
1985 and 1996, the average length of this gap was roughly 1 year. 
Feasibility studies during the same period averaged 3.6 years.\10\
---------------------------------------------------------------------------
    \10\ New Directions in Water Resources Planning for the U.S. Army 
Corps of Engineers. National Academy of Sciences, Washington, DC, 120 
pp., 1999.
---------------------------------------------------------------------------
    The basic economic benefits from navigation plans are the reduction 
in the value of resources required to transport commodities and the 
increase in the value of output for goods and services. Specific 
transportation savings may result from the use of larger vessels, more 
efficient use of large vessels, more efficient use of existing vessels, 
reductions in transit time, lower cargo handling and tug assistance 
costs, reduced interest and storage costs such as from an extended 
navigation season, and the use of water transportation rather than an 
alternative land mode.
    Corps of Engineers' navigation improvement studies examine the 
transportation costs of an identified set of commodity flows both with 
and without the proposed project over the planning period, usually 50 
years. Elements of analysis of current tonnage include: size and type 
of vessel, annual volume of movements, frequency of movements, volume 
of individual shipments, adequacy of existing harbor and transportation 
facilities, rail and truck connections, and service considerations. 
Generally this prospective traffic is the aggregate of a large number 
of movements (origin-destination pairs) of many commodities; the 
benefit from the navigation project is the savings on the aggregate of 
these prospective movements.
    Next, the analysis evaluates the vessel fleet composition and cost. 
Key components in the study are the size and characteristics of the 
current and future fleet that would use the harbor both with and 
without the proposed improvement. Vessel characteristics are often 
dependent on trade route, type of commodity, volume of traffic, 
waterway restrictions, foreign port depths, and lengths of haul. Vessel 
costs include the full origin-to-destination cost, including necessary 
handling, transfer, storage, and other accessory charges. The without-
project condition is based on costs and conditions prevailing at the 
time of the study. Transportation costs with a plan reflect any 
efficiencies that can be reasonably expected, such as use of larger 
vessels, increased loads, reduction in transit time and delays (tides), 
etc. In evaluating these cargo flow assessments, the Corps conducts a 
systematic determination of alternative routing possibilities, regional 
port analyses, and intermodal networks. Benefits may not be claimed for 
cargo that may be diverted from another port because of a Federal 
navigation project.
Challenges
    There are a variety of challenges that threaten the ability of the 
MTS to meet the growing demands of the nation's businesses and 
consumers for transportation services. These challenges include:
     Growing Levels of Demand.--As discussed above, the volume 
of trade is expected to double over the next 20 years and the movement 
of cargo in containers is expected to double in the next 10 years. The 
business environment in which American companies must operate has 
become more competitive. They must be lean and capable of effectively 
serving larger, more demanding markets. Ports and other MTS service 
providers must meet increasingly stringent requirements to successfully 
meet the needs of American business and consumers. Everything must be 
accomplished faster and less expensively, while maintaining dependable, 
secure, and safe movement of goods. Consequently, the need to provide 
investment in improved MTS facilities and services is great.
     Increasing National Security Needs.--The attacks of 
September 11 have dramatically heightened everyone's awareness of the 
threat to the U.S. from rogue states and terrorists. Ports and other 
MTS service providers are, and will continue, spending substantial 
resources to improve the security at their facilities. These resources, 
however, are being diverted from other investments that would have been 
made in improving the efficiency of the system.
     Minimizing conflicts among land uses along the waterfront 
and intermodal connections.--Many of our nation's port cities are 
trying to revitalize their communities through waterfront re 
development that has focused on residential, commercial, and tourist-
related uses, leaving less land available for port development. 
Intermodal connections at ports, such as roads and railroads, also 
experience land constraints because of zoning and environmental 
regulations that restrict expansion, particularly in densely populated 
areas. Proposals for port expansion, largely for projects handling 
cargo that will move far outside the local port area, are facing 
increasing public opposition due to concerns about local environmental 
impact. Many port communities are reluctant to bear the environmental 
and social costs for projects that largely benefit people outside of 
their region.
     Ensuring Adequate Navigation Channels.--Larger vessels are 
increasingly carrying the cargos of U.S. international trade because 
they provide the cost efficiency and level of service that U.S. 
businesses and consumers are demanding. These larger vessels require 
deeper waterways. The nation's public port authorities are working 
closely with the Corps of Engineers and the Congress to ensure that 
appropriate investment in the nation's system of navigation channels is 
made. In addition to the need for adequate Federal funding of studies 
and construction of navigation improvement projects, we have also 
identified several areas in the partnership between the Federal 
Government and non-Federal sponsors of navigation projects that should 
be improved so we can improve the timeliness and cost effective 
delivery of these projects. A summary of these recommended improvements 
are discussed in the next section.

                        NEED TO ENACT WRDA 2002

    Regular and dependable enactment of Water Resources Development 
Acts and Federal investment in navigation is of critical importance to 
the nation's economy. The local non-Federal project sponsor must be 
able to rely on a dependable biennial WRDA authorization, as well as 
annual appropriations. Delays in authorizing vital navigation and water 
resource projects result in increased costs and reduced benefits from 
substantial Federal, local and private investment in port facilities 
and navigation channels. AAPA urges Congress to enact a Water Resources 
Development Act of 2002 that authorizes needed deep-draft improvement 
projects and refines several provisions of WRDA' 86 relating to the 
Federal-local partnership to make project formulation more efficient 
and cost effective as discussed below.
    In enacting the Water Resources Development Act of 1986 (WRDA 
1986), after 200 years of solely Federal responsibility, Congress for 
the first time imposed mandatory cost-sharing of navigation projects 
(aside from previous ad hoc requirements for local contribution of 
lands, easements and rights of way) under which non-Federal interests 
acting as local sponsors were required to contribute to the cost of 
planning, constructing and maintaining navigation projects on a sliding 
scale based upon project depth. The elements of what, at that time, was 
portrayed as the ``quid pro quo'' in consideration of mandatory cost 
sharing were: (1) greater local latitude in partnering in project 
construction; (2) environmental and planning streamlining to reduce 
project planning and construction time and cost; and, (3) local user 
fee authority to recover local expenditures for project construction.
    Port authorities have greatly increased their ability to plan, 
design, and resolve complex environ mental, social and economic 
conflicts since WRDA 1986 was enacted. After more than 15 years of 
experience in working as non-Federal sponsors under the framework 
provided in WRDA 1986, the nation's public ports have identified a 
number of policy and legal changes that are needed to improve the 
collaborative partnership envisioned in 1986.
    AAPA established a special Task Force in 2000 to review the 
existing authorities for project partnership and to make 
recommendations on policy changes that should be included in a WRDA 
2002 authorization. Each member of the Task Force has been intimately 
involved in the navigation project partnership process, with most 
members having experience spanning over 20 years involving projects 
with total values in the hundreds of millions, if not billions, of 
dollars.
    The Task Force identified changes in seven policy areas that would 
significantly improve the partnership between non-Federal sponsors and 
the Federal Government and would improve the ability of local sponsors 
to participate in Federal navigation projects. These proposals include 
the following subjects:
     Improvements to the Local-Federal Partnership in 
Navigation Projects

          Project Cooperation Agreements
          Indemnification
          Relocations

    Other Improvements to Help Local Sponsors Participate in Navigation 
Projects

          Credit for In-Kind Services During Construction
          Deep-Draft Cost Sharing
          Port and Harbor Dues
          Non-Federal Sponsor Led Projects

    Further detail on these proposals, including a discussion of the 
purpose and need for the proposal and specific legislative language for 
each proposal, is included below.
Improvements to the Local-Federal Partnership in Navigation Projects
    Project Cooperation Agreements: As part of the cost-sharing 
provisions included in WRDA 1986, Congress directed that non-Federal 
sponsors and the Secretary of the Army enter into a cooperative 
agreement before initiating construction of the project (Section 
101(e)). The law directs that such agreements shall be in accordance 
with the Flood Control Act of 1970.
    Many ports are frustrated by the rigid approach the Corps of 
Engineers takes in negotiating project cooperation agreements (PCA). 
While there was an assumption in 1986 that a Federal-local sponsor 
partnership would be formed, ports believe the current approach does 
not represent a true partnership between the Federal Government and 
non-Federal sponsors. PCA negotiations often take 6 months or more to 
complete. Delays often result from the need to accommodate special 
local circumstances which were not envisioned in the model agreements 
developed promulgated by the Corps of Engineers.
    For all the discussion by both Congress and the Corps of Engineers 
concerning the need for ``partnering'' during and since enactment of 
WRDA 1986, there is no legislative embodiment of such a policy nor, 
unfortunately, any great incentive for the Corps to follow such a 
policy. In fact, by expressly incorporating the requirement for a 
cooperative agreement between the U.S. Government and a non-Federal 
interest under Section 221 of the Flood Control Act of 1970 and 
concurrently enacting Section 912 of WRDA 1986 to impose substantial 
civil penalties upon a non-Federal interest for non-compliance and 
conferring jurisdiction upon U.S. District Courts for that purpose, 
Congress arguably did precisely the opposite by substituting a 
``contract of adhesion'' one-sided, one-size-fits-all arrangement for a 
cooperative agreement. The negative connotation attributable to civil 
penalties, reinforced through the mandatory attorney's certificate 
(required by the Corps, not by statute) as to the ability of the local 
sponsor to respond in damages, is the antithesis of the nature of a 
cooperative agreement.
    AAPA believes there is a better model for conducting cooperative 
agreements within the existing body of Federal law. The Federal Grants 
and Cooperative Agreements Act was enacted in 1986 and defines and 
distinguishes cooperative agreements from grants and contracts as a 
procurement device. This law provides the means to better define the 
relationship that should exist between the Government and the Local 
Sponsor.
    Section 6305 of Title 31, United States Code prescribes the use of 
such cooperative agreements as follows:

          An executive agency shall use a cooperative agreement as the 
        legal instrument reflecting a relationship between the U.S. 
        Government and a State, a local government, or other recipient 
        when

           (1) the principal purpose of the relationship is to transfer 
        a thing of value to the State, local government or other 
        recipient to carry out a public purpose of support or 
        stimulation authorized by a law of the United States instead of 
        acquiring (by purchase, lease, or barter) property or services 
        for the direct benefit or use of the United States Government; 
        and

           (2) substantial involvement is expected between the 
        executive agency and the State, local government, or other 
        recipient when carrying out the activity con templated in the 
        agreement.

    A cooperative agreement entered into pursuant to the Federal Grants 
and Cooperative Agreements Act carries certain advantages not realized 
by the current WRDA. A true cooperative agreement is the nearest thing 
to a private sector partnership agreement that exists under Federal 
law. It reflects the fact that two independent sovereign entities come 
together on an equal footing to accomplish a common purpose in which 
each brings competence, expertise and a commitment of resources to that 
end. While the Corps of Engineers may have led the way back in the days 
of Section 221 Agreements under the Flood Control Act of 1970, since 
then more than 30 agencies--including the Department of Defense 
routinely use true cooperative agreements for everything from 
cooperative research, to sharing law enforcement responsibilities, to 
infrastructure improvements.
    AAPA requests that the Committee consider language such as the 
following:

          SEC.----. COOPERATIVE AGREEMENTS
          (a) Section 2211(e) of Title 33, United States Code is 
        amended by inserting after the words ``cooperative agreement'' 
        the words ``under Section 6305 of Title 31, United States Code 
        and incorporating the alternative dispute resolution procedures 
        under Section 575 of Title 5, United States Code and''
          (b) Section 1962-5b of Title 42, United States Code is 
        amended in subsection (b) by striking the words ``pay damages'' 
        and insert in lieu thereof the words ``collect any amounts due 
        in the event of a payment default and subject to the march in 
        rights of the Chief of Engineers under subsection (f) of this 
        section in the event of a performance default''
          (c) Section 912(b) of Public Law 99-662 (42 U.S.C. 1962-5b 
        Footnote; 100 Stat. 4190) is amended as follows:

                (1) In subsection (b) by striking paragraph (2) in its 
                entirety and redesignating paragraphs (3), (4), and (5) 
                as paragraphs (2), (3) and (4) accordingly; and
                (2) In redesignated paragraph (3) by striking the words 
                ``to collect a civil penalty imposed under this 
                section,''.

    Indemnification: Section 101(e) of WRDA 1986 refers to Section 221 
of the Flood Control Act of 1970 and in paragraph (e)(2) requires that 
a Project Cooperation Agreement provide that the local sponsor hold and 
save the United States free from damages due to the construction or 
operation and maintenance of the project, except for damages due to the 
fault or negligence of the United States or its contractors. As a 
matter of policy, the Corps has expanded this requirement and has 
demanded in its ``model'' agreement that the local sponsor also hold 
and save the Government free from damages due to the construction, 
operation and maintenance of local service facilities and berths 
adjacent to local service facilities as well as betterments, even 
though these provisions are not specifically required by statute.
    Many local sponsors find that they have a legal impediment to 
agreeing to the indemnification that is now required by statute and 
demanded by the Corps. The ``hold and save'' provision creates an open-
ended liability that may not be supported by an appropriation, thus 
creating a problem under a many state constitutions. Essentially, many 
state agencies have a legal problem not unlike the one claimed by the 
Corps under the Anti-Deficiency Act. The normal reaction of most local 
sponsors when confronted with this provision is to insist on a cross-
indemnification. The Corps takes the position that it cannot provide 
the local sponsor with a cross-indemnification providing similar 
protection because of the Anti-Deficiency Act. Essentially, it demands 
to be indemnified but will provide no indemnification to a local 
sponsor, notwithstanding the fact that the design and implementation of 
the project is controlled by the Corps.
    AAPA believes a possible remedy to the problem is to authorize the 
Corps to require its contractors to carry insurance that protects both 
the contractor, the non-Federal sponsor and the Federal Government. The 
cost of such insurance should be included in the total project cost and 
shared accordingly between the Federal Government and the non-Federal 
sponsor. This, we believe, not only addresses the indemnity problem but 
provides protection to the public.
    AAPA requests that the Committee consider language such as the 
following:
          SEC.----. INDEMNIFICATION
          Section 101 of the Water Resources Development Act of 1986, 
        as amended, is modified as follows:

                (1) Paragraph (e)(2) is deleted;
                (2) Paragraph (e)(3) is renamed ``(e)(2);'' and,
                (3) The following new section is appended at the end of 
                the section:
                        ``(f) Indemnification Costs of insuring the 
                        Federal Government and non-Federal sponsor 
                        against damages due to the construction or 
                        operation and maintenance of the project shall 
                        be shared in the same proportion as the sharing 
                        provisions applicable to the project.''

    Relocations: Section 101 of WRDA 86 requires the non-Federal 
sponsor to provide the lands, easements, rights-of-way, relocations 
(other than utility relocations) necessary for the Federal project. The 
non-Federal sponsor also is to perform or assure the performance of all 
relocations of utilities necessary to carry out the project. Under 
Section 101 of WRDA 86, the value of lands, easements, rights-of-way, 
relocations and the costs of utility relocations borne by the sponsor 
shall be credited to the non-Federal sponsor's share of project costs.
    In practice, non-Federal sponsors do not have sufficient authority 
to compel owners of property needing to be relocated from within a 
navigation channel to remove their property. In most cases, such 
property was placed under the navigation channel pursuant to a Section 
10 permit issued by the Corps of Engineers under the Rivers and Harbors 
Act of 1899. This has resulted in numerous lawsuits and counter-suits 
as non-Federal sponsors seek to compel relocations by private entities, 
and private entities seek to have the non-Federal sponsors pay the cost 
of the relocations.
    AAPA believes it is appropriate for the Federal Government, acting 
through the Corps of Engineers, to compel property owners to remove or 
relocate all obstructions to navigation improvement projects which are 
located within the navigable waters of the United States. In fact, 
Section 10 permits, which authorized the placement of the property in 
navigable waters originally, contain conditions requiring such removals 
when directed by the Corps. The utilities were installed with the 
assumption that they would be subject to those conditions. Property 
owners have argued that the WRDA 1986 language supersedes the permit 
condition, and the Corps has been reluctant to enforce the permits 
until the non-Federal sponsor has exhausted all efforts to compel the 
removal or relocation.
    The ability of the Corps to permit the placement of property in 
navigable waters and to compel its removal stems from the concept of 
``navigation servitude.'' The navigation servitude stems from the 
Commerce Clause of the U.S. Constitution. The case law is very solid 
that against the U.S., there is no right to compensation when a Federal 
project requires use of submerged lands. In U.S. v. 597.75 acres of 
land, U.S. District Court, Western District of Louisiana in 1965, the 
court stated, ``There is nothing novel or unconstitutional in the 
requirement that the defendants relocate pipelines they constructed in 
and across the bed of a navigable river. The right of free unobstructed 
navigation is of paramount interest to the welfare of the citizens of 
the United States.'' 241 F. Supp. 798, at 799.
    This should not be confused as exercising a right for a non-Federal 
sponsor. These are still Federal projects, authorized by Congress. In 
fact, it is the U.S. who determines what interests need to be acquired 
to meet the requirements of the Fifth Amendment. If the Federal 
Government already has a power, it does not need to and should not ask 
the non-Federal sponsor to provide the for the removal or relocation.
    AAPA's proposal would ensure the transfer of all costs for removals 
and relocations in navigable waters from the public sector to the 
owners (private sector), who in fact installed their utilities assuming 
that they would have that responsibility. These costs are estimated to 
be millions of dollars per year for Corps projects. It would relieve 
some pressure on the Federal budget and allow these dollars to be 
redirected to other urgent infrastructure needs. This change will also 
reduce delays in projects caused by litigation.
    AAPA requests that the Committee consider language such as the 
following:
          SEC.----. RELOCATIONS AND REMOVALS IN NAVIGABLE WATERS
          Section 101 of the Water Resources Development Act of 1986, 
        as amended, is modified as follows:
          (1) Paragraph (a)(2) following the word ``relocation'' is 
        modified by inserting the phrase ``(except for those 
        relocations located within navigable waters of the United 
        States)''.
          (2) Paragraph(a)(4) is modified as follows:

                ``(4) UTILITY RELOCATIONS. The non-Federal interests 
                for a project to which paragraph (1) applies shall 
                perform or assure the performance of all relocation of 
                utilities necessary to carry out the project, except 
                that the cost of each such relocation within navigable 
                waters of the United States shall be borne by the owner 
                of the facility utility being relocated.''
Other Improvements to Help Local Sponsors Participate in Navigation 
        Projects
    Credit For In-Kind Services During Construction: While WRDA 1986 
allows local sponsors to receive credit for in-kind services during 
feasibility studies, current law does not allow for such credit during 
preliminary engineering and design or construction. AAPA is seeking 
authorization to allow credit for in-kind services during design and 
construction of specifically authorized harbor projects. This 
authorization should also allow local sponsors to be given credit for 
design and construction work carried out before a cooperation agreement 
is signed between the local sponsor and the Corps of Engineers if the 
work done is integral to the project. This proposal would not increase 
Federal costs. This proposal provides an opportunity to better use the 
capabilities of local sponsors in collaborative ways that will promote 
a more efficient and timely project implementation process while 
maintaining a strong Corps engineering, design and construction 
management role.
    AAPA requests that the Committee consider language such as the 
following:

          SEC.----. CREDIT FOR IN-KIND SERVICES
          Section 101(d) of Public Law 99-662 (33 U.S.C. 2211(d)) is 
        amended to read as follows:
           ``(d) Non-Federal Payments of amounts incurred under Pre-
        construction engineering and design and during construction-The 
        amount of any non-Federal share of the cost of any navigation 
        project for a harbor or inland harbor incurred under pre-
        construction engineering and design and during construction 
        shall be paid to the Secretary on an annual basis during the 
        period of construction beginning not later than 1 year after 
        construction is initiated. [Larry: Can we add a sentence saying 
        non-feds can accelerate payment if they choose to?] The non-
        Federal interest may accelerate payment of the non-Federal 
        share, advance funds subject to credit or reimbursement, or 
        make in kind contributions at any time after a Pre-Construction 
        Engineering and Design Agreement for the project is executed. 
        The non-Federal share of the costs of the project incurred 
        under pre-construction engineering and design and during 
        construction may be provided in cash or in the form of in-kind 
        services or materials. [Larry: I suggest adding the following 
        sentence to make clear credit can be made for non-fed work 
        before PCA is signed: The Secretary shall allow credit toward 
        the non-Federal share the cost of design and construction work 
        carried out by the non-Federal interest before the date of 
        execution of a project cooperation agreement]''. The Secretary 
        shall allow credit toward the non-Federal share of project 
        cost: (1) before, during, and after construction for planning, 
        engineering, and design and construction management work that 
        is performed by the non-Federal interest and that the Secretary 
        determines is necessary to implement the project; and (2) 
        during and after construction for the costs of construction 
        that the non-Federal interest carry out on behalf of the 
        Secretary and that the Secretary determines is necessary to 
        implement the project.
    Deep-Draft Cost Sharing: A 1998 report prepared by the U.S. 
Maritime Administration documents the status and trends of general 
cargo ship design and its impact on transportation infrastructure\11\. 
The report finds that the rate of growth in containerized cargo in the 
U.S. is at 6 percent per year, and predicts that by 2010 nearly 90 
percent of general cargo will be shipped in containers and that nearly 
33 percent of those containers will be transported on vessels carrying 
more than 4,000 20-foot equivalent container units (TEUs). Such 
vessels, commonly referred to as ``megaships,'' are a key element in 
the strategies of the world's leading steamship carriers as they seek 
to meet growing trade requirements and optimize operations through 
global alliances. These large vessels obviously pose major challenges 
to ports because of their size and the potentially large number of 
containers they could discharge or load during any one port call. Key 
requirements will include suitable terminal facilities, container 
yards, rail and highway access, as well as deeper channels and berths. 
Simply put, the standards have changed and what was once the exception 
has become the norm.
---------------------------------------------------------------------------
    \11\ The Impacts of Changes in Ship Design on Transportation 
Infrastructure and Operations, U.S. Maritime Administration, February 
1998.
---------------------------------------------------------------------------
    Prior to 1986, a channel depth of 45 feet would accommodate almost 
all of the container ships in the world's fleets. The Clarkson 
Containership Register indicates that most of the container ships in 
1986 had maximum capacities of less than 3,000 TEUs of containerized 
cargo with average drafts of about 38 feet. There were only a few 
larger container vessels with capacities over 3,000 TEUs which were 
built to the maximum size that could be handled by the Panama Canal. 
Most of these panamax vessels had drafts of 41.6 feet or greater. 
Vessels with these drafts cannot use a 45-foot deep channel when fully 
loaded.
    In the years since 1986, the containership fleet has undergone a 
major evolution. The world's major ocean carriers have greatly 
increased the size of the ships and the number of large ships they use. 
Today there are over 200 ships classified in the panamax sector of the 
fleet. These are vessels that carry between 3,000 and 4,500 TEUs and 
are built to the maximum size of the Panama Canal. As stated above, 
most panamax vessels cannot use a 45-foot deep channel when fully 
loaded.
    Furthermore, in 1996, a new class of post-panamax ship was 
introduced into the world's container shipping fleet. Today there are 
over 150 of these large ships in service. There are currently 68 post-
panamax ships, with a capacity of in excess of 6,000 TEUs, in service 
with an additional 59 being built or on order. These vessels are 
generally wider than can be handled in the Panama Canal. They also have 
deeper drafts. The average draft of the current post-panamax ships is 
42.9 feet. The largest ships have drafts of about 45.5 feet, which 
require channels that are at least 50 feet deep. An analysis contained 
in the Maritime Administration report cited earlier suggests naval 
architecture constraints on ships as large as 15,000 TEUs would not 
result in drafts much greater than 46 feet. Thus, with allowances for 
under-keel clearance, vertical ship movement (squat), and uncertainty 
in predictions of future ship design, AAPA believes the norm for 
general cargo navigation channels will be as great as 55 feet.
    As I described earlier, in WRDA 1986, Congress created a cost-
sharing formula for navigation improvement projects based on the needs 
of the general cargo fleet at that time. Specifically, a cost-sharing 
transition was set at 45 feet, above which (i.e., shallower) local 
sponsors would pay a 35 percent (25 percent plus 10 percent over 30 
years) cost-share and below which (i.e., deeper) would be cost shared 
at 60 percent (50 percent plus 10 percent over 30 years) local. 
According to the legislative history for WRDA 1986, the rationale for 
setting 45 feet as the transition to significantly greater local 
participation was that,

          The Committee has surveyed the manner of financing navigation 
        projects in most developed countries. Based upon this survey 
        the committee found that most of the national Governments in 
        those countries financed general navigation improvements, 
        including main and entrance channels to a depth of 45 feet to 
        accommodate general cargo vessels (emphasis added). This 
        assistance is normally justified on the basis of national and 
        regional economic development. At the same time, most of these 
        countries require local contribution to the cost of 
        construction and maintenance of navigation projects in excess 
        of that depth to accommodate larger, specialized vessels 
        increasingly operating in liquid and dry bulk trades.
          The bill, as reported, applies this experience by reconciling 
        national investment policy toward future port development with 
        prevailing international practice. This is accomplished through 
        the establishment of 45 feet as the maximum standard depth for 
        ports not designed to accommodate deep draft vessels, and the 
        declaration of channel depths in excess of 45 feet as ``deep 
        draft ports.'' A graduated scale for the local contribution to 
        the cost of project construction depending upon depth 
        culminates in a 50:50 Federal/local cost-sharing formula for 
        deep-draft navigation projects.

    While Congress intended for non-Federal sponsors to pay a greater 
share for projects used by ``specialized vessels increasingly operating 
in liquid and dry bulk trades,'' it intended for more moderate cost-
sharing for ports handling generalized cargo. As discussed above, 
because of the country's explosion in international trade, greater 
numbers of general cargo vessels are large containerships requiring 
depths greater than 45 feet. In addition, many of the benefits of the 
cargo moving through these ports are accrued outside of the port area, 
while a greater share of the cost of building these facilities are 
borne within the port area. The justification for setting a punitive 
cost-sharing rate for projects greater than 45 feet is no longer 
justified. For these reasons, AAPA believes Congress should revise the 
definition of deep-draft harbor and the cost-sharing formula to reflect 
the changes that have occurred in the general cargo fleet. AAPA 
requests that the Committee consider language such as the following:

          SEC.----. DEEP DRAFT COST SHARING
          (a) Section 101 of Public Law 99-662 [100 Stat. 4082-4084] 
        and is amended by striking ``45'' wherever it appears in that 
        section and inserting ``55'' in lieu thereof.
          (b) Section 214(1) of Public Law 99-662 [100 Stat. 4108] is 
        amended by striking ``45'' and inserting ``55'' in lieu 
        thereof.

    Port And Harbor Dues: As a means of cost recovery of the required 
non-Federal share of a navigation project, WRDA 1986 included a 
provision that authorized a non-Federal interest to levy port or harbor 
dues in the form of tonnage duties or fees to help finance the local 
share of project construction cost. During the course of the 
legislative process, conditions, criteria and limitations were added 
that effectively impeded their use by non-Federal interests. The 
conditions imposed so limited the use of the provision that over the 
past 15 years, ports have found it to be virtually unusable.
    The statutory authorization to collect port dues or fees was 
considered to be in addition to any legal authority already held by 
ports. There are relatively few reported cases on the subject, but the 
existence of limited legal authority for the establishment of harbor 
user fees is well settled law.
    The key case describing existing authority is Clyde Mallory Lines 
v. State of Alabama State Docks Commission, 296 U.S. 261 (1935) in 
which the U.S. Supreme Court reaffirmed the authority of a State 
created port authority authorized to ``conduct the operation of . . . 
harbors and seaports within the State'' and ``to adopt rules . . . for 
the purpose of regulating, controlling, and conducting the said 
operation: and with power ``to fix from time to time reasonable rates 
or charges for all services and for the use of all improvements and 
facilities provided under the authority'' as sufficient authority to 
levy a ``harbor fee'' for the privilege of mooring a vessel in a harbor 
separate from wharfage or fees for other services. Implicit recognition 
of the improved harbor itself as a facility underlies the Court's 
reasoning. The charge was upheld as a valid charge incident to the 
exercise of the police power to ensure the safety and facility of 
movement of vessels in the harbor.
    Clyde Mallory is the most recent embodiment of a long line of U.S. 
Supreme Court pronouncements upholding the authority of a State, or a 
political subdivision of a State, under its regulatory authority to 
levy a toll or fee as compensation for navigation improvements or other 
services. This should be distinguished from (a) a duty of tonnage based 
exclusively on navigation, or entry upon State waters, subject to 
constitutional challenges as violative of the interstate commerce 
clause of 3 of Section 8, or tonnage duties clause 3 of Section 10 of 
Article 1 of the United States Constitution, or (b) a fee for specific 
services rendered such as wharfage or dockage.
    The legislative history of Section 208 appears to reflect an intent 
of Congress to supplement common law authority emphasizing the 
existence of both direct and indirect benefits to be exercised by ports 
in the case of a navigation project in particular. The section by 
section analysis of the predecessor bill, the Port Development and 
Navigation Improvement Act of 1981 (incorporated into WRDA 1986 
substantially without legislative change) explained that it was the 
intention of the drafter that a mechanism be provided to permit the 
local share to be borne in whole or in part, on a self-sustaining basis 
by public ports, agencies or municipalities. Originally, the mechanism 
was an extension of the consent of Congress to local agencies to levy 
an appropriate duty of tonnage on U.S. and foreign flag vessels, and 
the import and export cargo loaded or discharged by those vessels.
    The need for legislation to implement the original concept to 
expand common law authority was required because of Article I, Section 
10, Clause 3 of the United States Constitution, which provides that a 
state may not impose a ``duty of tonnage'' upon ships without the 
consent of Congress. The clear legislative intent was to supplement the 
aforementioned Clyde Mallory decision that distinguished and permitted 
a state to impose a harbor fee used for harbor policing under a theory 
that it represented a fee for services to and enjoyed by the vessel and 
not a ``duty of tonnage.'' This concept that the payments must be 
related to the benefits received to avoid being a duty of tonnage was 
incorporated in the harbor dues safe harbor provision of WRDA 1986 
based upon the District of Columbia 1985 Circuit decision in the 
National Cable Television Association case.
    Ironically, while legislation was considered necessary because the 
fees levied might ultimately extend beyond common law authority, i.e., 
those related to benefits received, the final legislation became overly 
restricted by conditions ostensibly relating to benefits but more 
intended to provide redundant protection to classes of vessel owners at 
ports' expense. In the process, the final legislation lost sight of the 
principal purpose of the legislation to finance navigation project 
construction while expanding the role of local ports as non-Federal 
interests in planning, financing, and constructing those improvements 
through being given delegated Federal authority to do so. Thus, the 
legislation did little to expand already existing authority. 
Significantly, only one AAPA member port has successfully invoked 
Section 208 authority since enactment of WRDA 1986.
    Section 208 (a)(1) imposes restrictions on the purposes for which 
dues may be levied. They may be levied only in conjunction with a 
harbor navigation project, or separable element, whose construction is 
complete. The dues must be used to finance the non-Federal share of 
construction and O&M (up to 100 percent of project cost). There are 
also limitations on the type of vessel that may be subject to a levy. 
Port or harbor dues may not be levied in conjunction with a deepening 
feature of a navigation improvement project on any vessel if that 
vessel, based on its design draft, could have utilized the project at 
mean low water before construction. Section 208 (a)(4) dealing with the 
formulation of Port or Harbor Dues requires that they be levied only 
``on a fair and equitable basis'' without clarifying what is fair and 
equitable. At first glance, this may be perceived as fertile ground for 
statutory challenge, although Federal courts (including the U.S. 
Supreme Court) have had little difficulty in upholding Federal user 
fees established by agencies in a different context.
    The levy of dues only when a project is complete may make it 
difficult to generate a revenue stream to support funding when the 
local sponsor must pay for the project through the use of revenue 
bonds. Local shares typically are paid for out of the proceeds from the 
sale of state or local bonds supported by the taxpayers rather than 
port revenues or port dues. The limitation imposed on the type of 
vessels that may be subjected to harbor dues may leave a pool of 
available vessels so small that recovery of a non-Federal interest's 
share of project costs would result in exceedingly high rates that 
would drive those ships away to another port. Port diversion is a 
concern that would trouble any port authority but should be a concern 
to be dealt with locally rather than have options taken from it.
    While the Act provides a theoretical tool for ports to use to 
recover their huge contributions to the cost of port navigation 
projects, the imposition of conditions, restrictions and criteria on 
the right of a port to levy dues has resulted in the use of the right 
to be difficult if not impossible. AAPA believes a revision to Section 
208 can make it more usable to a greater number of ports, while 
protecting shallow draft vessels from being subject to any port and 
harbor fees established under this section. At a minimum, restrictions 
and conditions on the use of Port and Harbor dues should be eliminated 
and local sponsors given the greatest flexibility possible to recover 
the huge investment they must now make to preserve our nation's ports. 
The AAPA hopes to present a separate specific proposal relating to that 
funding.
    AAPA proposes the following recommended bill text:

          SEC.--. PORT OR HARBOR DUES
    Port-Led Projects: In WRDA 1986, Congress included several 
provisions that attempted to fashion a fast-track mechanism for the 
planning and construction of navigation projects. These provisions were 
intended to provide flexibility to non-Federal sponsors where the 
traditional Corps of Engineers-led planning and construction processes 
were not adequate to deliver a needed navigation improvement in a 
timely manner or for other reasons.
    Section 203 authorized non-Federal sponsors to conduct feasibility 
studies of potential navigation improvement projects. Section 204 
authorized non-Federal sponsors to construct navigation projects and 
provided for the reimbursement to the non-Federal sponsors of the 
Federal share of the project and for the assumption of maintenance 
responsibility of the project by the Federal Government under specified 
conditions. Section 205 established procedures for a non-Federal 
sponsor to seek the streamlined processing of Federal permits for the 
construction of navigation improvement projects solely under the 
planning, construction and funding of the non-Federal sponsor. under a 
permit regime prior to project authorization.
    While Section 203 has been used by several ports to accelerate the 
development of navigation projects, Sections 204 and 205 have not been 
as widely used. In most instances, a non-Federal sponsor seeking 
reimbursement and Federal maintenance under Section 204 will enter into 
a reimbursement agreement analogous to a project cooperation agreement, 
but based upon experience may not be given credit for certain 
expenditures or obligations incurred either prior to authorization or 
date of agreement (although in some instances for certain projects 
exceptions have been made both administratively and legislatively).
    In other instances, a non-Federal sponsor may undertake a project 
exclusively under Section 205 in order to initiate the project in the 
most expeditious manner using port-generated funds. However, Section 
205 does not authorize reimbursement of the Federal share or assumption 
of maintenance under this provision.
    Under current law in order for a non-Federal Sponsor to take full 
advantage of Sections 204 and 205 as enacted, the Sponsor must execute 
a Reimbursement Agreement before undertaking any work--including work 
done under permit with Corps approval. Based upon experience, if the 
Corps approves a project applying the trilogy of requirements-
economically viable, engineeringly feasible and environmentally 
acceptable even if additional mitigation measures are subsequently 
required, there is no reason why a project may not be approved as-built 
and a favorable Chief of Engineer's report being the vehicle for 
subsequent congressional authorization for reimbursement subject to 
availability of appropriations and future Federal maintenance.
    For these reasons, Sections 204 and 205 should be revised and 
updated in light of project experience and increased local sponsor 
capabilities that were largely non-existent in 1986. More options can 
be created to effect a seamless transition toward project authorization 
with proper credit given for prior work by the project sponsor, as well 
as to address under the project definitional umbrella elements that are 
becoming increasingly commonplace today such as the need to consider 
all available dredged material disposal options including confined 
upland disposal early in project planning.
    AAPA requests that the Committee consider language such as the 
following:

          SEC.--. CONSTRUCTION OF PROJECTS BY NON-FEDERAL INTERESTS
          Section 2232 of Title 33, United States Code is amended as 
        follows:
          (a) In subsection (a) by inserting adding after the words 
        ``subject to'' the words ``entering into to a cooperative 
        agreement with the Secretary under subsection (e) of this 
        Section or under Section 2233 subject to'';
          (b) Paragraph (e)(1) is amended:
          (1) By inserting after the word ``Acts'' the words for the 
        liquidation of contract authority,''
          (2) By amending subparagraph (A) to read as follows:
          ``(A) Before authorization of the project----
          (i) The Secretary approves the plans of construction of the 
        project by the non-Federal interest or approves the project, or 
        separable element, as built; and
          (ii) The Secretary finds before approval of the plans of 
        construction of the project that the project, or separable 
        element, is economically justified and environmentally 
        acceptable, or as built that the project, or separable element 
        is complete and substantially in compliance with appropriate 
        engineering and design standards and applicable environmental 
        standards; and''; and
          (3) By amending subparagraph (B) to read as follows''
                  ``(B) The non-Federal interest and the Secretary 
                enter into a cooperative agreement under this Section 
                and obligate themselves to pay their respective shares 
                of the cost of construction and maintenance of the 
                project under this chapter.''
          (c) Paragraph (e)(1) is amended by striking the word 
        ``construction'' and inserting the words ``undertaking any 
        operation and maintenance,''
          SEC.--. COORDINATION AND SCHEDULING OF FEDERAL, STATE AND 
        LOCAL ACTIONS
          Section 2233 of Title 33, United States Code is amended:
          (a) In subsection (a) by inserting a comma after the word 
        ``project'' followed by the words ``or separable element 
        (including a project constructed under Section 107 of the River 
        and Harbor Act of 1960 ((33 U.S.C. 577)),'' and
          (b) By redesignating subsection (g) as subsection (h) and 
        inserting the following new material in redesignated subsection 
        (g), and by redesignating subsections (h) and (i) as (i) and 
        (j) accordingly as follows:
          ``(g) Reimbursement--Subject to the enactment of 
        Appropriations Acts for the liquidation of contract authority, 
        the Secretary may reimburse any non-Federal interest an amount 
        equal to the estimate of Federal share, without interest, of 
        the cost of construction of any authorized harbor or inland 
        project, or separable element thereof, or separable element 
        (including a project constructed under Section 107 of the River 
        and Harbor Act of 1960 (33 U.S.C. 577),'' constructed under 
        this section in the same manner and under the same terms and 
        conditions as under Section 2232 of this chapter.''

                                S. 1987
    AAPA does not have a formal position on S. 1987, the Corps of 
Engineers Modernization and Improvement Act. Corps of Engineers 
projects focus on diverse social, economic development and 
environmental protection needs of the Nation. This bill as crafted, 
however, could have a significant impact on the marine transportation 
system in the U.S., and the ability of the Corps of Engineers to 
undertake vital water resources projects. Therefore, AAPA strongly 
encourages the Committee to carefully consider all negative 
ramifications of this proposal.
    Issues to consider when reviewing this legislation include:
     Directly and indirectly increasing the cost of projects;
     Directly and indirectly constraining the benefits 
attributable to projects;
     Directly and indirectly extending the time to complete 
projects; and,
      Setting stricter economic performance criteria and 
deadlines by which projects are automatically deauthorized, which may 
impact some current projects.
    At the same time, the bill would impose substantial restudying of 
authorized projects, the promulgation of numerous new regulations, and 
the generation and reporting of vast amounts of project data that would 
involve a significant diversion of Corps resources. Many of the 
provisions do not recognize existing project formulation policies and 
processes by requiring activities that duplicate existing Corps 
practices or misstating the nature of existing policies.
    Virtually no other Federal public works program is subject to this 
level of regulation from Washington. The national highway programs, the 
airport improvement programs, drinking water and waste water treatment 
programs are all highly decentralized and decisions about the 
formulation and selection projects are done at the state and local 
levels following broad guidelines related to the ability to receive 
Federal funding. In addition, the Corps of Engineers programs are rare 
among other Federal public works program in using benefit-cost 
evaluations in formulating projects.
    Like most major development projects, both public and private, the 
Corps of Engineers' water resources projects often generate significant 
public controversy about the appropriate use of public resources and 
the potential adverse effects of the project. The Corps of Engineers 
process for formulating water resources has developed over the last 35 
years and includes numerous requirements for detailed alternative 
evaluations, multi-objective planning, impact assessment, public 
involvement, and regulatory compliance. Sometimes, in the successful 
cases, this process leads to timely, cost effective and socially 
beneficial projects. In too many cases, this process leads to 
protracted conflict, lost social opportunities, and wasted resources.
    While the congressionally crafted process vests in the Corps of 
Engineers the central role of balancing all of the competing demands 
and interests related to water resource projects, the agency by no 
means has the final say in selecting projects. Several Federal agencies 
must approve aspects of the process and the Administration and Congress 
have numerous opportunities to review, approve and fund individual 
projects. S. 1987 would remove this broad discretion from the Corps of 
Engineers in conducting the balancing needed to formulate successful 
public projects and would replace it with narrowly focused, stricter 
project standards and ``independent review'' of the agency's 
decisionmaking that would strip away any agency discretion afforded in 
judicial proceedings.
    Under the current system, it often takes between five and 10 years 
or more to move a project from problem identification to the start of 
construction. S. 1987 would create a process that is even less 
efficient than the current system. In the Water Resources Development 
Act of 2000, the Congress directed the National Academy of Sciences to 
study the need for improvements to several areas of the Corps of 
Engineers process. Congress should not undertake any significant 
changes to the process for formulating and authorizing Corps of 
Engineers projects until it thoroughly reviews the existing process, 
clearly identifies the sources of problems with the process, and fully 
understands the likely consequence of its intended solutions. We urge 
the Congress to defer action on attempts to fundamentally alter the 
process for formulating and authorizing Corps of Engineers projects 
until the NAS' studies are completed and Congress has had an 
opportunity to gather sufficient information about the issues through 
hearings or other appropriate means.

                               Conclusion

    Thank you for the opportunity to testify today. As I hope we have 
made clear in this testimony, the Corps of Engineers plays a vital role 
in ensuring the nation's marine transportation system (MTS) meets the 
needs of the nation's businesses and consumers. The MTS is a complex, 
market-driven system that provides many benefits to the Nation. Federal 
investment in one part of this system navigation channels is critically 
important to the success of the system and produces benefits to the 
Nation far in excess of the investment.
    AAPA and the public port authorities of our country, the agencies 
on whom the responsibility for the development and operation of our 
nation's ports rests, will continue to work with the Corps and Congress 
to keep these essential arteries of international commerce open in an 
efficient, cost effective and environmentally protective manner. To 
ensure our nation's continued international competitiveness, it is now 
more important than ever for Congress to continue to invest in an 
improved and efficient water transportation system.
                                 ______
                                 
         Responses by Thomas J. Chase to Additional Questions 
                         from Senator Jeffords

    Question 1. What is your association's position on regional port 
analysis?
    Response. A number of questions must be clearly thought through 
related to the issue of regional port analysis, including who does the 
analysis (e.g., Federal, regional, state, local), what is the size of 
the region, what factors are analyzed, what are the goals of the 
analysis, and how is the analysis used in decisionmaking about 
improvements to the port system.
    There is no doubt that the structure of the nation's ports system 
has transformed over the last 50 years from being a collection of 
discrete ports primarily serving local markets and discrete 
hinterlands. More recently, in addition to serving local markets, a 
greater number of ports now have the ability to expand, and are 
expanding, their hinterlands to include much of the nation. This 
blending of hinterlands has been driven by improvements in the nation's 
surface transportation system, the integration and expansion of the 
nation's railroad system, and deregulation of transportation services 
in these two modes.
    This transformation of the port system has occurred at the same 
time as the Nation has seen an explosive growth in its demand for 
maritime transportation services and as technological changes have 
transformed the way goods are transported around the world. The 
flexibility inherent in the current governance structure of the 
nation's port system has allowed port communities to develop facilities 
and services to meet these market-driven demands. The evidence is quite 
clear that the nation's port communities, in partnership with the 
Federal and state governments and the private sector, have adapted to 
these unprecedented demands by expanding the nation's capacity to 
transport its foreign trade efficiently, cost-effectively, and with due 
care for the environment. The challenge before us now is whether we 
will continue to meet growing demand in the future.
    Throughout this period, though, concerns have been raised about, 
among other things, whether public resources are being allocated 
efficiently in port development; whether we have too many ports; and, 
whether these ports are focused on the right activities. In 1976, the 
National Academy of Sciences published a report concerning these 
issues.\1\ The report provides a comprehensive assessment of the issues 
related to port development. The committee directly examined the port 
development decisionmaking structure and concluded:
---------------------------------------------------------------------------
    \1\ Port Development in the United States, Panel on Future Port 
Requirements of the United States, Marine Transportation Research 
Board, National Research Council, National Academy of Science, 
Washington, DC, 1976.
---------------------------------------------------------------------------
    A basic conclusion of the Panel on Future Port Requirements of the 
United States is that centralization of planning for U.S. ports is 
neither desirable nor practicable. It appears not feasible to determine 
in a centralized approach, either for the short-run or for the long-
term, the optimum amount or character of port development that will be 
required for the Nation as a whole, for individual coastal ranges, or 
for local areas. (p.126)
    In addition, the NAS report endorsed the multi-objective planning 
approach adopted by the Water Resources Council (in the then existent 
``Principles and Standards''), which sought to quantify the benefits 
and costs of development alternatives in monetary terms. The report 
also recommended that ``the Corps of Engineers should conduct regional 
as well as specific cost-benefit analyses to be certain that benefits 
are not overestimated when evaluating port improvement projects (p. 
149).''
    While we do not believe the current set of ``Principles and 
Guidelines'' (P&G), which was adopted by the Water Resources Council in 
1983, is perfect, it does provide for the Corps of Engineers to assess 
the impact of a specific port project on other ports through a 
procedure called ``multi-port analysis.'' According to the P&G, 
multiport analysis is ``a systematic determination of alternative 
routing possibilities, regional port analyses, and intermodal networks 
that may require the use of computer modeling techniques. The data 
needed for such a determination are often difficult to obtain; 
therefore, interviews with knowledgeable experts will often have to be 
relied upon. (p. 65)''
    In practice, because of the complexity of conducting these studies, 
the Corps of Engineers often limits the types of potential benefits it 
considers for a navigation project to only those which are unlikely to 
induce cargo diversions from other ports in order to avoid the need for 
a comprehensive multiport analysis. Provided these benefits are 
sufficient to justify a project, most local sponsors agree to this 
approach to avoid the expense and delays resulting from such a study, 
even though it may seriously understate the actual benefits of the 
project.
    With regard to the specific proposal for regional port analysis 
contained in S. 1987 (Section 5(b)), AAPA has a number of concerns. 
This section establishes a requirement for the ``detailed and thorough 
consideration'' of three highly complex assessments of potential 
regional effects of individual navigation improvement projects. Because 
of their complexity, these assessments will almost always be expensive 
to undertake and contain substantial uncertainty. Ultimately, these 
assessments are unlikely to provide additional value to the 
decisionmaking process, will likely increase the cost and time to 
formulate projects, and do little to reduce the level of controversy 
around projects because of the additional complicated and uncertain 
studies that will be produced.
    We also have the following concerns with each of the three 
assessments called for in S. 1987. First, the requirement for an 
assessment of the economic impacts of a project on other ports within a 
region appears to be unnecessary in light of the current requirement 
for multiport analysis under the P&G. Second, we are unclear about what 
would be required for a ``detailed and thorough consideration of 
cumulative environmental impacts of a project within the region.'' 
Given the expansive definition of a region within this section, would a 
port in Florida, for example, be required to consider the environmental 
effects of its project in addition to the effects of all activities on 
the entire U.S. Atlantic seaboard.
    Finally, we are concerned with the requirement for an assessment of 
the cumulative impacts of the project on overcapacity in the region. 
The NAS report reviewed the issue of over capacity, and found:
    The panel has concluded that it cannot quantitatively determine the 
existence of redundancy. Redundancy implies excess capacity, and it is 
impossible to provide an adequate measure for the capacity of a port. 
There are many reasons for this measurement problem: One is that the 
nature of cargo ships and productivity of facilities will vary greatly 
through time. Cargoes are not uniform. Peaking--the concentration of 
demand during limited periods of time--occurs in port operations as in 
all other aspects of transportation. It is economical [sic] and, in 
some instances, physically impossible to provide for the maximum peaks. 
At the same time, it is undesirable that undue waiting time, leading to 
costly delays to vessels and cargo, occur because of failure to provide 
for periodic peaks. Such delays, in common, would result in traffic 
being diverted to competing ports or, in some instances, not moving at 
all.
    Excess capacity, in one sense, does not exist even though a port or 
terminal may have 100 per cent utilization of its capacity for only 
short periods of time, if ever. Consideration of peak activities, other 
than for very infrequent occasions, is an important element of port 
planning. Capacity must be supplied in order to provide adequate 
service to the shipping public as well as to anticipate possible 
national emergencies, when even the largest ports may be crowded.
    Another important reason, in the judgment of the panel, for 
providing capacity in excess of normal demand is to create competition 
among various ports and port services to the advantage of the shipping 
public. That is, the public can be reasonably assured not only of 
continued availability of port services in the event of accidents or 
other closures or reductions but also of competitive rates and 
services. Thus, the shipper receives a series of options that would not 
be available unless interport competition continued (p. 128).
    We believe that assessments of overcapacity are unlikely to provide 
additional value to the decisionmaking process for navigation projects, 
will likely increase the cost and time to formulate projects, and do 
little to reduce the level of controversy around projects because of 
the additional complicated and uncertain studies that will be produced.

    Question 2. Do you believe that such analyses could significantly 
improve the planning of navigation in the United States port system and 
result in more economic and financial efficiencies in port development 
for the country?
    Response. For the reasons stated in response to Question 1., above, 
we are concerned that the complexity and uncertainty inherent in such 
analyses are unlikely to provide additional value to the decisionmaking 
process for navigation projects, will likely increase the cost and time 
to formulate projects, and do little to reduce the level of controversy 
around projects because of the additional complicated and uncertain 
studies that will be produced.
    AAPA again agrees with the observation made in the NAS report that 
``the future port requirements of the United States are subject to an 
almost infinite variety of conditions and forces, many of which are 
nonquantifiable and unpredictable'' (p. 125). We believe the current 
decentralized, market-driven approach to port development has, and can 
continue, to serve the country well.

                                 ______
                                 
Responses by Thomas J. Chase to Additional Questions from Senator Smith

    Question 1. I recognize the importance of our nation's ports, both 
to national security and international commerce. My concern though is 
this ``race to the bottom'' that we see occurring. In your written 
testimony, you ask this committee to consider a provision to ease the 
non-Federal cost-share for deepening projects, yet in my mind, this 
will serve only to encourage more ports to pursue deeper drafts than 
they will ever realistically be able to attract. In light of this 
problem and the reality of limited Federal resources, would you be 
supportive of a regional port planning mechanism?
    Response. With regard to whether AAPA would be supportive of a 
regional port planning mechanism, please see our response to the 
questions of Chairman Jeffords.
    I would also like to respond to your concern about a ``race to the 
bottom'' and the potential that changes in the cost-sharing formula for 
deep-draft harbors will ``serve only to encourage more ports to pursue 
deeper drafts than they will ever realistically be able to attract.''
    First, nothing in our proposal would alter the requirements for the 
Corps of Engineers to justify each navigation project in accordance 
with the ``Principles and Guidelines,'' as discussed in my response to 
Chairman Jeffords' question on regional port analysis. These procedures 
ensure that speculative development of navigation channels is not 
undertaken.
    Second, the reason AAPA is recommending this change is to re-
balance the Federal-local partnership in port and harbor development 
that was established in 1986, after over 200 years of the Federal 
Government paying the full cost of harbor dredging. Local ports are 
investing billions of dollars each year, without Federal assistance, to 
build the landside facilities that handle the nation's waterborne 
trade. It is the unbridled growth in this trade that has driven vessels 
to get much larger, requiring deeper navigation channels. In setting 
the cost sharing formula in 1986, Congress established a threshold to 
much higher local cost-sharing at the maximum depth needed for general 
cargo vessels (see AAPA's testimony for a summary of the legislative 
history). Today, the maximum depth needed for general cargo vessels is 
much greater. We believe this change is needed so local port 
authorities can devote a greater proportion of their limited resources 
to constructing landside facilities rather than paying a high cost-
share for Federal navigation channels.
    Finally, we are uncertain about the source of the perception that 
there is a ``race to the bottom'' for navigation projects. We are aware 
of a total of 14 ports that are studying channels deeper than 45 feet 
or have authorized projects deeper than 45 feet that contain 
unconstructed features (a list of these projects is appended to the end 
of these comments). Of the 300 Corps of Engineers deep-draft harbor 
projects in the U.S., this is a very small number seeking projects 
deeper than 45 feet.
    Question 2. In your opinion, what steps can be taken to ensure that 
navigation projects maximize both economic and environmental benefits?
    There is not currently a requirement that navigation projects 
maximize both economic and environmental benefits. The Congressional 
objective for such projects is ``enhancing regional economic 
development, the quality of the total environment, including its 
protection and improvement, the well being of the people of the United 
States, and the national economic development (42 USC Section 1962-
2).'' In establishing the ``Principles and Guidelines,'' the Water 
Resources Council identified the maximization of national economic 
development benefits as the primary Federal objective.
    Consequently, local sponsors of navigation projects are sharing the 
cost of projects that only maximize national economic development 
benefits. Because the Corps analysis does not consider regional 
economic development benefits, local sponsors have a difficult time 
explaining to their communities why they should pay for projects that 
only have national benefits. Indeed, this controversy has become 
especially acute in some areas where local communities perceive that 
they are carrying all of the negative effects, such as traffic 
congestion and pollution, for projects that only benefit the nation.
    Under existing Corps authorities, features can be added to projects 
that provide environmental benefits. These project features are cost-
shared separately from the navigation feature, and are common on many 
navigation projects. We believe the Corps has sufficient authority to 
continue formulating projects with environmentally beneficial features. 
Significant obstacles to this approach are finding cost-sharing 
partners for the environmentally beneficial features and ensuring the 
Corps receive adequate funding.
    We do not believe it would be appropriate for the Congress or the 
Administration to change the existing policy to require all navigation 
projects to maximize both economic and environmental benefits. Local 
sponsors of navigation projects are cost sharing the navigation 
benefits. Local sponsors are also sharing the cost to ensure that these 
projects mitigate their impact on the environment. We are not opposed 
to the formulation of multi-objective projects that include navigation 
and environmental enhancement features, but we believe the 
environmental enhancement features should continue to be cost shared 
separately.

   Authorized Projects Deeper Than 45-Feet With Unconstructed Features
------------------------------------------------------------------------
                   Port                                 Notes
------------------------------------------------------------------------
New York Harbor Channels..................  Authorized in WRDA 2000. No
                                             Contracts Have Been Awarded
                                             to date.
Norfolk, VA...............................  WRDA 86 authorized a 50-foot
                                             project; to date, the out-
                                             bound lane has been
                                             constructed.
Mobile, AL................................  WRDA 86 authorized a 55-foot
                                             project; to date, a portion
                                             of the project has been
                                             deepened to 45-feet.
Mississippi River, LA.....................  WRDA 86 authorized a 55-foot
                                             project; to date, the
                                             project has been deepened
                                             to 45-feet.
Savannah, GA..............................  Authorized in WRDA 1999. No
                                             Contracts Have Been Awarded
                                             to date.
Los Angeles, CA...........................  Authorized in WRDA 2000. No
                                             Contracts Awarded to Date.
Oakland, CA...............................  Authorized in WRDA 1999.
                                             First Contract Awarded: ???
------------------------------------------------------------------------


                   On-Going Studes Deeper Than 45-Foot
------------------------------------------------------------------------
                   Port                                 Notes
------------------------------------------------------------------------
New York Harbor Anchorages................  Feasibility Study (Auth
                                             2004?)
Charleston, SC............................  Reconnaissance Study (Auth
                                             2010?)
Corpus Christi, TX........................  Feasibility Study (Auth
                                             2002)
Port Everglades, FL.......................  Feasibility Study (Auth
                                             2002)
Miami, FL.................................  General Reevaluation Report
                                             (Auth 2002)
Freeport, TX..............................  Reconnaissance Study (Auth
                                             2012?)
Sabine--Neches Waterway, TX...............  Feasibility Study (Auth
                                             2006?)
------------------------------------------------------------------------

                               __________
 Statement of Montgomery Fischer, Policy Director for Water Resources, 
                      National Wildlife Federation

    On behalf of the National Wildlife Federation (NWF), I would like 
to thank the Chairman, Ranking Member and the members of the Committee 
for the opportunity to present the Federation's views on issues 
pertaining to water resources development programs of the U.S. Army 
Corps of Engineers.
    I am Montgomery Fischer, Policy Director for Water Resources at the 
National Wildlife Federation. We are the nation's largest not-for-
profit conservation, education, and advocacy organization with more 
than four million members and supporters and nine natural resource 
centers throughout the United States. The National Wildlife 
Federation's family also includes forty-six state and territorial 
affiliate conservation organizations. Founded in 1936, the National 
Wildlife Federation works for the protection of wildlife species and 
their habitat, and for the conservation of our natural resources. With 
a graduate degree in Soil and Water Science from the University of New 
Hampshire in Durham, my personal work with water resources protection 
spans three decades, including working as a commercial fisherman as 
well as in the government, academic, and non-profit sectors.
    The National Wildlife Federation and our affiliates have a long 
history of interest and involvement with the development of our 
nation's water resources, particularly as it relates to projects and 
programs of the U.S. Army Corps of Engineers.
    Much of our nation's wildlife is dependent on critical aquatic 
habitat, which includes rivers, streams, bays, estuaries, wetlands and 
coastlines. But, our wildlife resources are hurting. Artificially 
altering waterways--along with water pollution and introduction of 
foreign species--have been identified by the scientific community as 
the principal causes of the shocking state of decline of aquatic 
ecosystems and wildlife that has been experienced in many regions 
across the country. Through its Civil Works and regulatory programs, 
the U.S. Army Corps of Engineers has a profound impact on the health of 
aquatic ecosystems. While much of the Corps' work in the 20th Century 
has had devastating impacts on the natural environment, NWF believes 
that with the right direction from Congress, the 21st Century Corps can 
become the premier Federal agency for restoring and protecting our 
nation's aquatic ecosystems and the species that depend on them. The 
Corps' efforts to restore the Florida Everglades is a prime example of 
the type of restoration work the Corps should focus on during this 
Century.
    As this Committee considers proposals for a Water Resources 
Development Act (WRDA), a fundamental goal must be to address the 
serious and growing crisis in confidence that much of the American 
public has about the Corps of Engineers. A series of recent reports and 
investigations over the past several years by policy experts and 
scientists have found that the Corps' planning process for major water 
resource projects is failing in fundamental ways to address 
contemporary needs of communities and regions in an environmentally 
sound and cost effective manner. A Water Resources Development Act 
presents Congress with a critical opportunity to provide the Corps 
greater oversight and clearer direction to meet the nation's water 
resource needs and to restore confidence in this agency.
    NWF congratulates the Ranking Member of this Committee and other 
Senators who have sponsored legislation that would make critical, 
common sense reforms in Corps programs--particularly, S. 1987, the 
Corps of Engineers Modernization and Improvement Act of 2002, and S. 
646, the Corps of Engineers Reform Act of 2001.

           WRDA SHOULD NOT MOVE FORWARD WITHOUT CORPS REFORM

    The National Wildlife Federation strongly supports both S. 1987 and 
S. 646 because these bills contain critically needed reforms to improve 
and modernize the way the Corps responds to the nation's water 
resources development needs and to ensure every project the Corps 
undertakes represents a sound, environmentally sustainable investment. 
The bills improve the Corps' accountability, modernize its principles 
and practices, improve mitigation of wetlands, pull the plug on 
projects that no longer make sense, keep Federal costs down, and stop 
the ``race to the bottom'' among ports and harbors.
    Improve Accountability. S. 1987 and S. 646 would make the Corps 
more accountable to help restore the public's confidence in this agency 
by:
     requiring independent peer review for costly projects and 
controversial projects;
     enhancing the public's ability to participate in the 
Corps' planning process; and
     increasing the public's access to information.
    Modernize the Corps. S. 1987 and S. 646 would modernize the Corps' 
basic approach to developing and planning water resources projects by:
     directing that the Principles & Guidelines be revised and 
updated to define environmental protection and restoration as a co-
equal goal with economic development, and to incorporate other changes 
that ensure this goal is carried out; and
     modernizing the basic criteria used by the Corps to 
justify moving forward with a project.
    Wetlands Mitigation Improvement.
     S. 646 would improve the way the Corps mitigates for 
wetlands impacted by Corps projects; and
     both S. 646 and S. 1987 would exclude from economic 
justification analyses benefits derived from draining wetlands.
    Pull the Plug on Outdated Projects. S. 1987 would help prioritize 
the Corps' efforts by:
     expediting the automatic deauthorization process to reduce 
the Corps' burgeoning backlog; and
     updating the Corps' benefit-to-cost ratios to ensure 
taxpayers get a better return on their investment.
    Keep Federal Costs Down. S. 1987 would reduce the Federal 
Government's burden for sand pumping projects.
    Stop the Race to the Bottom. S. 1987 would improve the way the 
Corps plans to deepen ports and harbors by requiring regional port 
planning.
    Given the record of problems that has amassed over the past several 
years, the Corps should not be allowed to continue with business as 
usual. The problems are so grave, a WRDA should not move forward 
without these reforms. I will now spend a few minutes discussing some 
of the problems that have plagued the Corps and that the bills seek to 
address.

                   CORPS CRISIS IN PUBLIC CONFIDENCE

There Is No Effective, Independent Technical and Policy Review of Corps 
        Projects
    Mr. Chairman, among the most critical issues that must be addressed 
in any potential WRDA is the establishment of an effective, independent 
system of technical and policy review by outside experts for Corps of 
Engineers projects. For years, the public, other Federal and state 
agencies, academicians and scientists, government auditors, and many 
Members of Congress have questioned the accuracy of Corps planning 
documents, and, in some cases, whether under the present system, the 
Corps is capable of being truly objective in planning its projects. In 
the 1980's, the General Accounting Office identified numerous serious 
issues in this regard. A critical means to help ensure objectivity in 
the planning process is to formally engage outside experts to conduct 
public reviews of Corps plans and their underlying studies and 
assumptions.
    In recent years, the number of major concerns regarding the quality 
and accuracy of Corps plans has increased in both seriousness and 
number, and the need for independent review has become increasingly 
clear. During the 1990's, several factors converged to bring about this 
situation.
            Changes in the Review Process
    Since the early 1990's, the level of effective project review has 
dramatically decreased within the Corps. In part, this is in response 
to continuing calls for ``streamlining'' the planning process and 
changes in the general focus of the Corps to operate more as a service 
agent, particularly to local project sponsors.
    Over the past decade, the Corps has instituted substantial changes 
that have greatly weakened what was already a weak and inadequate 
review process. Up to the early 1990's, the primary mechanism for 
independent review was the congressionally established Board of 
Engineers for Rivers and Harbors. This Board, consisting primarily of 
Division Engineers, and supported by a staff of 30 to 40 professional 
project reviewers, was independent of Corps Headquarters management, 
and had the job of top-to-bottom review of all new Corps project 
proposals. In WRDA 1992, however, in an effort to cut expenses and 
improve efficiency, the Board was abolished, and the professional staff 
was reorganized into a Washington Level Review Center, still 
organizationally outside the Headquarters Division of Civil Works. In 
1995, in another reorganization, the Review Center became a Review 
Branch within the Headquarters Division of Civil Works. The staff was 
cut from 35 to about 24, and their responsibilities were substantially 
expanded to include other duties.
    In a series of steps, the responsibility for project technical 
reviews was devolved to the Corps Districts themselves, and the 
Washington level review became focused on policy compliance only. The 
District-level technical reviews are generally conducted by peer staff 
or are focused on reviewing the work of Corps contractors. Two years 
ago, in yet another reorganization, the Project Review Branch became 
the Policy Compliance Support Branch and the Washington level review 
staff was cut back to a dozen.
    Timeframes for review have been cut to a minimum with final reviews 
by other Federal agencies and states running concurrently with that of 
Corps headquarters. In recent years, many Corps Districts rush to 
complete project plans in order to seek ``contingent authorization'' in 
even-years for inclusion in WRDA bills, which puts immense and 
inordinate pressure on the Corps to approve projects while deferring 
many studies and often deferring serious unresolved issues until after 
construction authorization.
    The result of all this reorganization has been a substantial 
reduction in resources and emphasis on critical review of projects 
within the Corps. The devolution of much oversight to the local 
District level--where the greatest pressures exist to justify the 
projects sought by local sponsors and promoters--often comes at a far 
greater ultimate cost to the taxpayers and the environment than it 
should.
            Lessons From the Upper Mississippi River
    The case of the potential $1.2 billion Upper Mississippi River 
Navigation Expansion project illustrates the strong need for a system 
of truly independent review, outside of the agency. The $56 million 
study to expand a system of locks and dams on the Upper Mississippi 
River was among the most expensive in Corps history. It became the 
subject of an Army Inspector General investigation after a Corps 
economist alleged that the books had been cooked in order to justify 
the project. In addition, the Department of Defense requested that the 
National Academy of Sciences (NAS) review the economic analysis in the 
Corps' feasibility report. The Army Inspector General and the NAS found 
evidence of bias in the planning process, utter failure by the Corps to 
evaluate alternatives to large-scale construction that would be less 
expensive and less environmentally damaging, such as scheduling and 
tolls, and flawed economic analysis.
    The Army Inspector General's November 2000 investigation found: 
``Nearly all the economists expressed a view that the Corps (or 
individuals within the Corps) held an inherent preference for large 
scale construction.'' The Inspector General made clear that problems 
were not limited to a single project, but in fact, agency-wide: 
``Although this investigation focused on one study, the testimony and 
evidence presented strong indications that institutional bias might 
extend throughout the Corps. Advocacy, growth, the customer service 
model, and the Corps reliance on external funding combined to create an 
atmosphere where objectivity in its analyses was placed in jeopardy.'' 
In addition, the report concluded, ``The overall impression conveyed by 
testimony of Corps employees was that some of them had no confidence in 
the integrity of the Corps study process.''
    In the followup February 2001 report of the National Academy of 
Sciences, Inland Navigation System Planning: The Upper Mississippi 
River--Illinois Waterway, the NAS recommended: ``The feasibility study 
would benefit from a second opinion from an independent, expert, and 
interdisciplinary body from outside the Corps of Engineers and 
Department of Defense. Congress should thus direct the Corps to have 
the waterway system management and lock extension feasibility study 
reviewed by an interdisciplinary group of experts--including 
environmental and social scientists--from outside the Corps of 
Engineers.''
    The Corps has attempted to diffuse the significance of the 
Inspector General and NAS findings in the Upper Mississippi River 
Navigation Expansion case by stating that the feasibility study was in 
draft form. This argument may have carried some credibility if there 
were a strong independent review process in place. But as just 
explained, that process has been weakened severely--without the 
Inspector General or the NAS, there is no guarantee that anyone would 
have checked the Corps' math. Since then, the Corps has rescoped the 
Upper Mississippi Navigation study and is now engaged in a 
collaborative process with other state and Federal resource agencies 
and stakeholders to identify a comprehensive range of issues and 
potential solutions that address navigation and the environment. NWF 
would strongly oppose any attempts to prematurely authorize 
construction of the expansion project before the Corps submits a 
completed report to Congress. A comprehensive approach must not focus 
solely on the transportation issues without addressing the very serious 
environmental impacts associated with the project. An authorization 
request at this time is nothing more than an attempt to once again 
short-circuit the planning process.

            GAO Report on Delaware River Main Channel Deepening

    Mr. Chairman, the findings of the General Accounting Office's (GAO) 
report, Delaware River Deepening Project--Comprehensive Reanalysis 
Needed, (GAO-02-604, June 2002), released last week, demonstrate a 
fundamental breakdown of the Corps' internal project review process. In 
the case of this $420 million navigation dredging proposal, the GAO 
concluded that Corps review was ``ineffective'' and ``does not provide 
a reliable basis for deciding whether to proceed with the project.'' In 
March of 2000, the National Wildlife Federation and Taxpayers for 
Common Sense identified this project as the No. 2 worst Corps project 
in our report, Troubled Waters, because of extremely questionable 
economic justification and potential environmental threats to the 
Delaware Bay region, yet the Corps continued to claim the project was 
completely and properly justified.
    The GAO found that despite the Corps' claims of $40.1 million in 
annual benefits from the project (largely from transportation savings 
to shippers), only $13.3 million in annual benefits had ``credible 
support.'' The Corps' economic justification was fraught with 
``miscalculations, invalid assumptions, and the use of significantly 
outdated information.'' The Corps greatly overstated benefits based 
upon improperly double-counted time savings for shippers in both the 
Delaware Bay and in foreign ports, ``miscalculated trade route 
distances,'' blamed certain unjustified benefits on ``computer error'', 
hugely overestimated crude oil and scrap metal traffic projections, and 
utterly failed to make the required adjustments in benefit projections 
during the 1990's to reflect shipping realities, among many other 
fundamental errors.
    No stronger case could be made for the need for basic reform of the 
project review process.

            Other Examples of Projects Under Investigation

    As documented by the Inspector General, NAS and GAO reports, 
problems within the Corps' planning process are not limited to a single 
project study. Other examples of where the Corps' planning process has 
failed or is currently under serious investigation include:
     The Oregon Inlet Jetties Project in North Carolina is also 
the subject of a General Accounting Office investigation. There, the 
Corps has continually refused to consider alternatives to constructing 
stone jetties on environmentally significant public lands on North 
Carolina's Outer Banks, despite more than two decades of objections 
from other responsible Federal agencies and independent economists, who 
believe the Corps economic justification is false. This project is also 
subject to a referral to the President's Council on Environmental 
Quality.
     Savannah Harbor Expansion Project in Georgia received 
contingent authorization for $230 million of construction in 1999. The 
Chief of Engineers approved the project despite numerous basic 
environmental and economic issues that were left unresolved over the 
objections of other Federal and state agencies and the State of South 
Carolina to post-construction authorization. The project is now a 
subject of litigation and the Corps is undertaking a major new planning 
study.
     Dallas Floodway Extension Project in Texas is yet another 
example of where the Corps has refused to give serious consideration to 
a less costly and more environmentally friendly alternative, involving 
buy-outs and voluntary relocations being sought by a lower income 
community in south Dallas. Last year, the Office of Management and 
Budget concluded that the Corps had failed to follow its own planning 
guidelines and rules in designing the $140 million (2001 dollars) 
project by not identifying the most cost-effective alternative 
consistent with protecting the environment. This spring, a U.S. 
District Court ruled that the Corps' environmental analysis failed to 
comply with the National Environmental Policy Act because the Corps did 
not analyze the cumulative effects of the project with other activities 
planned in the area. The Administration has refused to budget this 
project and the Court ordered the Corps to cease work until it has 
completed evaluating the cumulative environmental impacts.
     Projects in the Lower Mississippi River Basin, such as the 
Yazoo Pumps and the Big Sunflower River Dredging Project in the State 
of Mississippi would cost more than $200 million and threaten to 
destroy hundreds of thousands of wetlands acres, even though less 
costly and more environmentally sound options exist to reduce flood 
damage risks in the region. An independent economic analysis of the 
Corps' Yazoo Backwater pumping plant in Mississippi, revealed that the 
Corps overestimated just the agricultural benefits of that project by 
$144 million, and that even if all of the remaining benefit 
calculations were correct, it could not justify construction of the 
project. For the Big Sunflower Project, the U.S. Fish and Wildlife 
Service found that the Corps significantly overestimated the costs of 
purchasing easements, which could achieve the project objectives 
without dredging.
     Columbia River Deepening Project was recently the subject 
of a 6-month investigation by a Portland newspaper, which found that 
the Corps had overestimated project benefits by 140 percent, and that 
the benefits only amount to 88 cents on the dollar. The proposed 
dredging of 103 miles of the lower Columbia has also raised huge 
questions about the Corps' proposed mitigation for water quality and 
wetlands impacts, and impacts to salmon and other sport and commercial 
fisheries habitats. After the newspaper stories ran the Corps agreed to 
review its economic analysis.
Independent Project Review Would Strengthen the Corps' Program
    At a minimum, Congress should require that studies of all Corps 
projects representing a significant investment of taxpayer dollars, and 
studies of all projects that generate controversy because of threats 
posed to the environment be reviewed by a panel of qualified and 
independent experts in various fields, such as economics, engineering, 
biology, geology and hydrology. This type of review can take place 
without delaying the overall planning process for justified projects, 
and would help to restore confidence in the process. Perhaps most 
importantly, a system of independent project review would provide the 
Corps' own study preparers with a strong incentive to resist pressures 
to ``cook the books.'' It would help to ensure that the Corps projects 
that do proceed to construction are the best they can be. NWF strongly 
supports implementing a system of independent project review, which is 
a critical element in each of the Corps reform bills, S. 646 and S. 
1987.
Corps' Approach to Planning and Developing Water Resource Projects 
        Gives Short Shrift to the Environment
    Among the key findings of recent National Academy of Sciences 
reports are the need for the Corps' planning process to be updated to 
reflect current economic and environmental procedures and approaches to 
water resources development and management. The 1999 report, New 
Directions in Water Resources Planning for the U.S. Army Corps of 
Engineers, points out that the 1983 Principles and Guidelines for Water 
and Related Land Resources Implementation Studies (``P&G'') have been 
frozen in time for almost 20 years. At the same time, economic and 
environmental sciences have increasingly evolved sophisticated 
methodologies to evaluate benefits and costs of structural and 
nonstructural approaches in response to changing public needs and 
attitudes toward the environment and natural resources.
    The need to amend the P&G to require that national economic 
development and environmental protection and restoration be afforded 
co-equal status in the formulation of Corps of Engineers projects is 
even more relevant today than it was when the NAS made the 
recommendation 3 years ago. This is a fundamental change that is needed 
in the Corps' project planning that must be included in any future 
Water Resources Development Act.
Update the P&G to Reflect 21st Century Principles and Practices
    The NAS 1999 New Directions report recommended updating the P&G, 
including these specific examples:
    (1) Movement away from consideration of the National Economic 
Development (NED) account as the most important concern in order to 
encourage consideration of innovative and nonstructural approaches to 
water resource planning, which can often better address ecological and 
social concerns.
    (2) Many aspects of the Corps' environmental programs are not 
reflected in the P&G requirements because they were enacted after the 
P&G was approved in 1983. The P&G needs to be updated to reflect these 
new and important Corps programs.
    (3) The P&G should be updated to reflect new advances and 
techniques for risk and uncertainty analysis.
    (4) The P&G should be updated to eliminate biases or disincentives 
that work against nonstructural approaches, and to ensure that the 
benefits of flood damages avoided by nonstructural projects are 
consistently and uniformly considered.
    The P&G were written by the Water Resources Council (WRC), which 
was created in the 1960's to coordinate the formulation and execution 
of Federal water policies. The WRC is dormant today because of lack of 
funding. The lack of procedural clarity for how to update the P&G 
should be eliminated by identifying a clear mechanism for review.
    The Corps' customer-service model, aimed at providing services to 
local communities that are sharing the cost of a project, is 
undermining the Corps' responsibility to promote the national interest 
in its water planning activities. To promote efficient plans and 
projects across the nation's river basin systems, the Corps should use 
the watershed or river basin, estuarial region, and coastal unit as the 
basic spatial units in water project planning, when and where it is 
appropriate and circumstances allow. The use of such hydrologic units 
for planning can help account for downstream effects of flood damage 
reduction projects, for example, or provide a system to account for 
cumulative effects of Corps projects. Most of the nation's large river 
basins cross state lines, which requires Federal involvement to store 
and manage data, model hydrology and analyze system-wide impacts.
    The 1999 New Directions report strongly recommends modernizing and 
revising the P&G, and requiring that ecosystem protection and 
restoration be established as co-equal goals with economic development. 
The report also recommends that Corps planning be more oriented to 
watershed and regional perspectives, particularly where projects have 
significant upstream and downstream impacts, or for functions that 
serve or impact regions, such as ports and harbors. Advances in 
scientific knowledge, ecological sciences, and economic analytic 
techniques should be further incorporated in Corps planning procedures. 
A growing cry of support for these changes is coming from states and 
professional societies as among the greatest failings of Corps water 
resources development programs.
    Several of these key elements are included in S. 646 and S. 1987, 
and we strongly urge that these provisions be incorporated into WRDA 
legislation.
Corps Projects Continue to Threaten Enormous Amounts of the Nation's 
        Critical Wetland Resources and the Corps Fails to Mitigate 
        Losses
    The National Wildlife Federation is very concerned about the Corps' 
growing backlog of mitigation for Civil Works projects. Although the 
Corps is required to mitigate for wetlands lost as a result of a Civil 
Works project, the existence of a growing mitigation backlog means that 
the mitigation is not being done and the environment is suffering.
    Despite requirements that mitigation occur concurrently with Civil 
Works projects, the Corps has failed to follow through on significant 
amounts of acres of mitigation required for projects that are well 
underway, or for all practical purposes, completed. For example, in the 
Lower Mississippi River Valley, the Corps has been authorized to 
purchase tens of thousands of acres of mitigation land that have not 
been purchased. The mitigation backlog in the Vicksburg District alone 
currently exceeds 28,000 acres. The time lag in completing mitigation 
for water resources projects is resulting in an enormous temporal loss 
of wetland functions and values in many valuable and vulnerable 
watersheds.
    Ironically, the Corps reports that permits issued under the entire 
Section 404 dredge and fill permit program of the Clean Water Act 
account for 24,000 acres of direct wetlands loss per year. The U.S. 
Fish and Wildlife Service estimates that on average just under 30,000 
acres of wetlands were lost each year between 1987 and 1997 from urban 
and rural development. Yet the Corps Civil Works program currently 
threatens 300,000 acres of critical bottomland hardwood losses from 
just a handful of projects that are among the most controversial in the 
Nation to reduce flooding in what are often low-lying areas in 2-year 
floodplains to promote marginal soy bean production. We urge the 
Committee to help redirect the Corps away from such activities that are 
environmentally damaging to wetlands and toward programs that would 
help rural economies benefit from restoring wetland resources and 
develop sound, sustainable economies that benefit from these special 
resources.
Improvements in Wetlands Mitigation
    NWF strongly supports the wetland mitigation provisions of S. 646, 
which would clarify the definition of concurrent mitigation and improve 
the standards for mitigation, including improving the probability of 
cost-effectively and successfully mitigating habitat losses. In 
addition, S. 646 would address the mitigation backlog by requiring the 
Corps to establish a tracking system to identify the status of 
mitigation.
    We further recommend that the Corps prepare a Mitigation Backlog 
Management Plan that is updated each year and will enable the Corps to 
eliminate its backlog of mitigation by seeking to have lands in place 
by fiscal year 2005, and future schedules for initiating and completing 
mitigation activities in a timely fashion. Further, as proposed in S. 
646, new requirements should be placed upon mitigation for Corps Civil 
Works projects to ensure that at least 50 percent of mitigation is 
completed in advance of the start of construction, with mitigation to 
be completed by the time construction is complete. All mitigation 
should be, in addition, initiated and completed at least within 2 years 
of a resource impact due to a Civil Works project. NWF also supports 
proposals in S. 646 and S. 1987 that would disallow benefits for 
increased private property and service values derived from draining 
wetlands. Corps projects that would destroy hundreds of thousands of 
wetland acres should not be authorized because the extent of 
environmental destruction could never be fully mitigated.
    Last month, the GAO issued a report assessing the Corps' fish and 
wildlife mitigation guidance, U.S. Army Corps of Engineers: Scientific 
Panel's Assessment of Fish and Wildlife Mitigation Guidance (GAO-02-
574, May 15, 2002). The GAO found that in a majority of the projects 
authorized since WRDA 1986 that required a fish and wildlife mitigation 
plan and that received construction appropriations, the Corps completed 
less than 50 percent of the required mitigation before project 
construction started. According to the GAO, the Corps has completed at 
least 50 percent of the mitigation before project construction in just 
a few cases. This report documents that while it is feasible for the 
Corps to complete half of the mitigation before starting project 
construction, the Corps' mitigation work has been shoddy and 
inconsistent.
    Additionally, NWF objects to the Corps' reliance upon preservation 
or enhancement of existing lands or wetlands as the sole mitigation for 
destruction of natural habitats. When mitigation is limited to 
protecting or enhancing existing habitats, a net loss of habitat 
occurs. The Corps has further entrenched this concept in its Regulatory 
Guidance Letter [RGL 01-01] on wetlands compensatory mitigation, 
allowing unlimited use of preservation of existing wetlands, and even 
upland areas as mitigation for the loss of natural wetlands. NWF calls 
on the Committee to substantially elevate mitigation requirements, 
evaluation and monitoring for Civil Works projects, using the 
recommendations of the National Academy of Sciences report on 
Compensating for Wetlands Losses Under the Clean Water Act (National 
Research Council, 2001) to ensure that no net loss of ecosystem 
functions or values occur in the construction of Civil Works projects, 
as required by the 1990 WRDA ``no net loss of wetlands'' policy.
Corps' Construction Backlog Is Out of Control
    Mr. Chairman, the Corps has a huge construction backlog with some 
estimates as high as $52 billion dollars worth of projects. This 
enormous stockpile of uncompleted projects serves no one well. With 
hundreds of projects in various stages of construction and hundreds 
more having passed through the authorization process, the backlog can 
only be expected to increase. It prevents the Corps from completing a 
smaller number of projects sooner, which in turns adds to the ultimate 
cost of all projects. Congress authorizes new projects faster than the 
Corps can reasonably complete them. Unfortunately, this means that many 
new projects that would address contemporary needs, including critical 
environmental restoration projects, cannot be completed efficiently. 
The Corps continues to assume an optimal construction schedule in its 
cost-benefit analysis, even though the optimal schedule is not at all 
realistic because of the project backlog, which has the effect of 
artificially understating project costs and overstating project 
benefits.
Expedite Deauthorization for Outdated, Unconstructed Projects and 
        Prioritize
    Throwing more money at the Corps' construction backlog without 
prioritizing and focusing the Corps' work only perpetuates the problem. 
In order to effectively address the ever-mounting project backlog, we 
urge the Committee to adopt a mechanism that identifies the projects 
that no longer make economic or environmental sense in light of current 
circumstances, and to impose some discipline on the new projects that 
are authorized. NWF urges the Committee to include provisions from S. 
1987 that would expedite the current deauthorization process.
    In addition, Congress could insure that high priority projects are 
completed in a timely manner by deauthorizing those projects that are 
no longer economically beneficial or that are proven to be 
environmentally destructive. Wasteful Corps projects can be replaced 
with positive developments by submitting them to rigorous economic 
analyses and environmental impact reviews. S. 1987 proposes updating 
the current 1.0 to 1.0 benefit-to-cost ratio, which was originally 
established in the 1930's, with a more modern 1.5 to 1.0 ratio. We urge 
the Committee to include such a provision in a WRDA to help prioritize 
among the nation's water resource investments. Finally, NWF strongly 
supports President Bush's policy decision in the fiscal year 2003 
budget to focus the Corps on its traditional mission areas of flood 
damage reduction, navigation and environmental protection.
Beach Sand Pumping Projects Are Exploding
    Funding for beach sand pumping projects is consuming increasingly 
larger portions of the Corps' budget. Currently, the Federal Government 
pays 65 percent of the cost of construction and periodic renourishment 
of beach projects authorized before 2000. Beginning in 2003, the 
Federal portion will be 65 percent for construction and 50 percent for 
renourishment of new beach projects authorized after 2000. For 
currently authorized beach projects, it could easily cost Federal 
taxpayers more than $10 billion in the next several decades to continue 
to put sand on beaches that is literally washed away to sea. In many 
cases, these projects tend to promote high-risk development along 
coastlines. The Corps is currently pumping sand onto the beaches of 18 
of America's 200 richest towns listed in Worth Magazine, including Gulf 
Stream, Florida, where the typical home sells for $1.5 million.
    While sand pumping activities have existed in certain locations for 
decades, America's coastlines have never been subject to the magnitude 
of sand pumping activity that would be represented if Congress stays on 
the present course of authorizing large numbers of new projects in each 
WRDA bill. For instance, virtually the entire Atlantic shoreline in New 
Jersey and half of North Carolina's shoreline is authorized for beach 
sand pumping. NWF is extremely concerned about the long-term ecological 
effects that are likely to accompany such massive and expensive 
shoreline dredging and pumping activities. Sand pumping projects, which 
generally involve dredging sand from one location and dumping it on 
another, put aquatic wildlife and their habitat at great risk. Among 
the most immediate effects of beach projects is the burial of habitats 
and organisms living in these zones. Sand pumping projects also pose a 
problem to the nesting patterns of both sea turtles and bird species. 
Nesting turtles and birds can be easily deterred by the pipelines, 
lights and noise that accompany beach projects. In addition, the 
success of hatching eggs is affected by changes in the incubating 
environment, such as density, color, moisture content, compaction, and 
gas exchange of the beach sands. The dredged material used for the 
beaches often contains a different composite than the natural sands.
    If sea levels rise as predicted--the predictions range from two 
feet per century for the next few hundred years to as much as 15 feet 
by the year 2200\1\--erosion pressures will accelerate and the current 
response is unsustainable. We urge oversight and a much more 
thoughtful, scientifically based response than we have seen to date to 
help guide a rational approach to erosion.
---------------------------------------------------------------------------
    \1\ See Working Group 1, Intergovernmental Panel on Climate Change, 
Climate Change 1995: The Science of Climate Change, at 6 (estimating 
that IPCC's best estimate is that global sea level will rise 49 cm from 
1990-2100). See also James G. Titus & Vijay K. Narayanan, U.S. 
Environmental Protection Agency, The Probability of Sea Level Rise iii, 
145-46 (1995)(explaining that along much of the U.S. coast sea level is 
likely to rise about 10 cm more than the global average).
---------------------------------------------------------------------------
Reduce the Federal Government's Burden for Sand Pumping Projects
    While there are instances where sand pumping may be either 
economically justified or can serve as temporary measures to allow 
communities that face erosion problems to make permanent adjustments, 
such as relocating at-risk buildings, a fundamental concern is that 
many believe this should not be largely a Federal responsibility, given 
the range of demands on the Federal budget. NWF strongly urges the 
Committee to seriously consider supporting a substantial reduction in 
the Federal cost-share for beach nourishment activities, such as 
proposed by S. 1987 and the President's fiscal year 2002 budget 
recommendation. In addition, we urge the Committee to resist attempts 
to allow more of these types of projects that are primarily for 
recreation rather than storm damage prevention. Until a much clearer 
picture can be gained of the ecological impacts that may be represented 
by expanding Federal beach nourishment activities, the Committee should 
resist new authorizations.
A Race To The Bottom Among Ports and Harbors Is Bad for Taxpayers and 
        the Environment
    Our nation's ports and harbors are critically valuable resources 
for our economy and our environment and they must be managed in a 
manner that continues to support both. NWF has previously expressed our 
severe concern to the Committee that a number of ports and harbors are 
engaged in a race to deepen their channels in order to accommodate many 
of the largest and deepest draft ships operating on the trans-oceanic 
routes. At the same time, port authorities have sought to increase 
Federal subsidies for deep draft harbor dredging by modifying current 
cost-share formulas to treat ports from 45 to 55 feet in depth the same 
as 45-foot depth or less general cargo ports. This would amount to a 25 
percent increase in Federal costs for deep draft dredging. The Corps is 
not currently dredging any commercial U.S. port deeper than 55 feet.
    We also caution the Committee about relying on generalized future 
growth in trade predictions as a rationale for an across the board 
effort to deepen our ports. For instance, just 2 years ago at the time 
predictions were made that trade would double over the next 20 years, 
eastbound trans-Pacific trade grew at very high rates of 12 percent to 
14 percent per year. Since then, trade traffic has seen far less 
significant growth. According to recent reports in the Journal of 
Commerce, cargo volumes in the eastbound Pacific increased by only 2 
percent last year, and despite the nation's recovering economy, volumes 
are expected to grow by single digit rates through next year. See, 
e.g., Bill Mongelluzzo, The Dire TransPacific, Journal of Commerce, 
March 18, 2002. The uncertainties associated with port and harbor needs 
argue even more strongly for the development of regional port planning 
to integrate the Corps program with national transportation policy.
The Corps Should Strive to Focus Deep Draft Port Dredging Activities to 
        the Most Efficient, Environmentally Sound Ports
    We must invest in our ports wisely. Growth tends to be concentrated 
in a few major U.S. ports. More than half is concentrated in 20 ports 
and more than a quarter is handled by just five ports. In 1997, 25 
ports handled 98 percent of the foreign container cargo, and the 
leading 10 ports accounted for 80 percent with the Los-Angeles-Long 
Beach port complex responsible for one-third of all container traffic. 
The 50 leading U.S. ports handle nearly 90 percent of all waterborne 
commerce. (NAS, Applying Information Systems to Ports and Waterways 
Management, 1999).
    NWF supports provisions from S. 1987 that would require the Corps 
to conduct comprehensive coordinated planning to look regionally at 
shipping needs and the economic and environmental cumulative impacts of 
deepening ports and harbors. In WRDA 1986, Congress wisely established 
a cost sharing formula requiring that the very deepest ports--those 
with channels dredged deeper than 45 feet--pay a higher share of the 
costs for dredging than those below 45 feet. We believe any decision to 
increase the Federal subsidy, such as the proposal sought by the port 
authorities to increase the subsidy by 25 percent, would unnecessarily 
fuel major expansions of capacity at too many locations that would have 
dire long-term environmental consequences. There is no reason to 
believe that the current formula will not allow the necessary capacity 
to meet the nation's transportation needs where the business exists. We 
strongly oppose this cost-sharing change because it will undoubtedly 
fuel the race to the bottom, thereby unnecessarily wasting taxpayer 
resources and threatening further harm to the nation's bays, rivers and 
estuaries. Instead, we urge the Committee to require regional port 
planning as an element of helping to guide the Federal interest in 
ensuring U.S. ports can meet national transportation needs, consistent 
with protecting the environment.

 21ST CENTURY VISION FOR THE CORPS: THE PREMIER ECOSYSTEM RESTORATION 
                         AND PROTECTION AGENCY

    The National Wildlife Federation is greatly encouraged by the 
substantial efforts made by the Committee and Congress in past WRDAs to 
authorize environmental programs, such as Section 1135 Project 
Modifications for Improvement of the Environment, Section 206 Aquatic 
Ecosystem Restoration, Floodplain Management Services, the 
Comprehensive Everglades Restoration Plan, the Upper Mississippi River 
Environmental Management Program, and numerous others. We remain 
concerned, however, that without a focused and highly disciplined Corps 
program, there will be, in fact, insufficient resources available for 
the Corps' environmental programs to make the critical contributions 
that the public seeks. We support adjustments to Corps flood damage 
reduction cost-sharing requirements that would increase the level of 
responsibility taken by local and state governments in managing flood 
risk. Among the ideas that have significant merit is to establish a 
sliding cost-share formula that gives communities incentives to reduce 
and manage their flood risk.
    We are also especially concerned, for instance, that the Corps has 
received no funding to date for the landmark Challenge 21 program, 
which provides the Corps with substantial opportunities to add 
nonstructural approaches to its flood damage reduction programs. These 
are areas where the need for priority-setting becomes of paramount 
importance.

                               CONCLUSION

    In sum, the Corps of Engineers has a vital role to play in managing 
the nation's water resources. Continuing business as usual, however, is 
not acceptable. Several new reports by the National Academy of Sciences 
and others, the results of extensive audits and investigations, as well 
as much thoughtful legislation, have provided critically important 
recommendations for long-needed reforms. We applaud the Corps of 
Engineers for taking a first step in signaling its commitment to a 
sustainable environment by formalizing a set of ``Environmental 
Operating Principles'' applicable to its decisionmaking and programs. 
These principles were recently articulated by the Chief of Engineers, 
Lt. General Flowers, at the dedication of the Davis Pond Fresh Water 
Diversion Project in Louisiana. We urge the Environment and Public 
Works Committee to directly address the Corps' crisis in confidence by 
including important legislative reforms in the next WRDA. These reforms 
would provide critical direction for all Corps programs, including 
direction for what may be among the Corps' most important functions in 
the twenty-first century--ecosystem restoration and protection.
    Chairman Jeffords and Ranking Member Smith, once again, thank you 
for the opportunity to present our views. We look forward to working 
with you and the other members of the Committee to help bring the Corps 
into the 21st Century by incorporating critically needed reforms in the 
next WRDA legislation. I am happy to respond to any questions the 
Committee Members may have.
                                 ______
                                 
                                APPENDIX
              The State of the Nation's Aquatic Resources

    The U.S. leads the world in species number for many freshwater 
organisms including insects, snails, salamanders, turtles, and mussels. 
It also ranks high for subterranean invertebrates and freshwater 
fishes. This vast array of diversity is primarily the result of the 
unparalleled system of watersheds that filter through the country. It 
is no coincidence that the greatest species loss has occurred in the 
precise regions where large water projects have rearranged the natural 
landscape. The impacts of water development affect 30 percent of the 
listed endangered species, ranking behind only agriculture and 
commercial development. According to the Association for Biodiversity 
Information, ``Species that depend on freshwater ecosystems are, as a 
whole, faring the worst of any group of U.S. organisms.'' The 
deteriorating conditions are undeniable with the list of extinct/
imperiled species growing every year. Modern science has concluded that 
the three leading threats to aquatic species are agricultural non-point 
pollution, alien species, and altered hydraulic regimes due to dams and 
impoundments. Many Corps projects and programs are directly involved in 
exacerbating these threats.

   Global Significance of Select U.S. Plant and Animal Groups/Species:
------------------------------------------------------------------------
                                                 [In percent of Total]
 
------------------------------------------------------------------------
Mammal.......................  416 in U.S. out                         9
                                of 4600
                                globally.
Bird.........................  768 in U.S. out                         8
                                of 9700
                                globally.
Reptile......................  283 in U.S. out                         4
                                of 6600
                                globally.
Freshwater Fish..............  799 in U.S. out                        10
                                of 8400
                                globally.
Amphibian....................  231 in U.S. out                         5
                                of 4400
                                globally.
Salamander...................  140 in U.S. out                        40
                                of 350 globally.
Freshwater Mussel............  292 in U.S. out                        29
                                of 1,000
                                globally.
Freshwater Snails............  661 in U.S. out                         7
                                of 4,000
                                globally.
Crayfishes...................  322 in U.S. out                        61
                                of 525 globally.
 
Freshwater insects:
Caddisfly....................  1400 in U.S. out                       13
                                of 10769
                                globally.
Mayfly.......................  590 in U.S. out                        30
                                of 1967
                                globally.
Stonefly.....................  610 in U.S. out                       40
                                of 1525
                                globally.
------------------------------------------------------------------------
All information in this Appendix is from Precious Heritage: The Status
  of Biodiversity in the United States. The Nature Conservancy &
  Association for Biodiversity Information. Oxford University Press
  (2000).

  [GRAPHIC] [TIFF OMITTED] T3967.004
  

                                                           Sources of Harm For at Risk Species
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                 Insect  Mussel
                                                        Overall  Vertebrates  Invertebrate   Bird   Reptile  Amphibian    Fish                   Mollusk
                                                       (n=1207)     (n=329)      (n=155)    (n=91)   (n=39)    (n=16)   (n=116)  (n=39)  (n=69)   (n=23)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Agriculture..........................................       38         40            57         42      33        63        45       56      64      35
Commercial Development...............................       35         30            42         33      56        44        16       67      29      13
Water Development....................................       30         47            66         22      28        63        91       21      99      48
Outdoor Recreation...................................       27         16            19         15      31        25         9       41       4      26
Livestock Grazing....................................       22         17            10         20       8        19        16       15       1       9
Pollutants...........................................       20         27            66         10      21        25        55       26      97      48
Infrastructure Development...........................       17         16            12          8      28        38        17       23       6       9
--------------------------------------------------------------------------------------------------------------------------------------------------------
Percentage of Federal endangered, threatened, and proposed species harmed by types of habitat destruction and degradation.

                                                     June 12, 2002.
Hon. James Connaughton,
Chair, Council on Environmental Quality
Washington, DC.

Hon. Mitchell E. Daniels, Jr.,
Director, Office of Management and Budget,
Washington, DC.
Subject: U.S. Army Corps of Engineers
    Dear Messrs. Connaughton and Daniels: We are writing to urge the 
Administration to work with Members of Congress and with our 
conservation, taxpayer, and professional organizations to support 
legislation that will reform the way the Corps of Engineers (Corps) 
plans, evaluates, and implements water resources projects. The Corps' 
failure to address the contemporary needs of communities in an 
environmentally sound and cost-efficient manner is taking a tremendous 
toll on the nation's natural and financial resources. Your leadership 
in this effort is critical.
    The Corps' implementation of its much touted nationwide project 
``pause'' starkly underscores the need for the Bush Administration and 
Congress to act now to reform the Corps. We had hoped that the project 
``pause'' was a genuine sign of the Corps' interest in ensuring that 
its water resource projects were economically and environmentally 
sound. Unfortunately, the review appears to have been little more than 
a charade, and the Corps has made it abundantly clear that it is either 
unwilling or unable to reform itself.
    First, less than 3 weeks after announcing the ``pause,'' the Corps 
announced that it had reviewed 172 projects and cleared 118 to move 
forward. Only eight projects were flagged for additional review as a 
result of this process (with the remainder already undergoing 
reevaluation due to previously identified problems). That timeline made 
it abundantly clear that General Griffin's direction to conduct a new 
economic analysis for projects approved prior to fiscal year 99 was not 
followed.
    Second, just a few days later, the Corps released a ``corrected'' 
list that deviated in significant ways from the first list. The second 
list identifies only 164 projects as having been reviewed, clearing 80 
to proceed (with the remainder already undergoing reevaluation due to 
previously identified problems). Again, only eight projects were said 
to require additional review as a result of the project pause 
directive.
    With no explanation, the Corps completely removed from the second 
list some of the worst projects that were identified on the original 
list with the nomenclature ``review complete.'' These projects include 
the Grand Prairie Irrigation Demonstration Project in Arkansas, the 
Yazoo Pumps Project in Mississippi, St. John's Bayou Project in 
Missouri and the Inner Harbor Navigation Canal (Industrial Canal) 
Project in Louisiana. In addition to being costly, these projects are 
highly controversial and would destroy some of America's most valuable 
wetlands and aquatic habitat. Because the Corps has left the public 
completely in the dark on the process used in its review, the only 
conclusion we can reach is that although the Corps originally announced 
to Congress and the public that these projects had in fact been 
reviewed, the reviews never occurred. If the Corps' review and 
reevaluation process is to have any credibility, these projects must be 
fully and openly re-evaluated.
    Third, in addition to the Corps' apparent inability to be able to 
accurately identify projects that were reviewed, the list contains 
glaring omissions of projects that most certainly should have been 
reevaluated. For example, the list does not include the Dallas Floodway 
Extension project in Texas an authorized project for which construction 
has not begun. Not only did the Office of Management and Budget inform 
the Corps that they had failed to comply with their own planning 
guidance for this project, but a U.S. District Court also ordered the 
Corps to reevaluate the project's cumulative environmental impacts.
    Finally, the project reevaluation was conducted behind closed doors 
with no involvement from the public, other Federal and state agencies, 
or apparently the Administration. The Corps has not identified or 
described the information reviewed, the results of each review, or the 
documentation supporting its conclusions. The fact that the Corps 
originally cleared more than 100 projects in less than 3 weeks 
including some of the most highly questionable and controversial Corps 
projects and then substantially revised the list of projects reviewed 
and their status (once again all behind closed doors), gives the public 
no confidence that the ``cleared'' projects represent a sound and 
environmentally sustainable investment.
    Instead, the Corps' actions have increased the public's lack of 
confidence in the Corps' ability to plan water resource projects in an 
objective and reliable manner. Now more than ever, Congress must enact 
meaningful Corps reforms to improve the broken process and help restore 
faith in this scandal-plagued agency. The Corps reform bills introduced 
in the Senate and House (S. 1987, S. 646, H.R. 1310 and H.R. 2353) 
contain crucial reforms that cannot be postponed. We urge the 
Administration to actively support these legislative proposals as 
Congress considers authorizing even more water resource projects during 
debate over the Water Resource Development Act.
    We very much appreciate the leadership of the Bush Administration 
in proposing a more environmentally responsible budget for the Corps of 
Engineers for fiscal year 03, and hope that you will fight to keep this 
year's budget from growing as it moves through Congress. We also hope 
that the Administration will work to make the Corps' entire program 
more environmentally and fiscally responsible by actively supporting 
the important legislative proposals directed at reforming the Corps of 
Engineers.
            Sincerely,
                    Bradford T. McLane, Executive Director, Alabama 
                            Rivers Alliance; Kathy Andria, President, 
                            American Bottom Conservancy; S. Elizabeth 
                            Birnbaum, Director of Government Affairs, 
                            American Rivers; David McLain, Executive 
                            Director, Apalachicola Bay and Riverkeeper; 
                            David Gowdey, Executive Director, Arizona 
                            Wildlife Federation; Daniel DeVun, Vice 
                            President, Arkansas Nature Alliance; Jim 
                            Wood, Representative, Arkansas Wildlife 
                            Federation; Rob Fisher, Conservation 
                            Director, Audubon Arkansas; Sidney Maddock, 
                            Environmental Analyst, Biodiversity Legal 
                            Foundation; John Koeferl, Founding Board 
                            Member, Citizens Against Widening the 
                            Industrial Canal; Jamie Matera, Outreach 
                            Coordinator, Coast Alliance; Peter Huhtala, 
                            Executive Director, Columbia Deepening 
                            Opposition Group; Matthew Van Ess, 
                            Director, Columbia River Estuary Study 
                            Taskforce; Patricia A. Pendergrast, 
                            President, Connecticut Ornithological 
                            Association; Karen Blue, Executive 
                            Director, Conservation Council for Hawaii; 
                            Michael E. Riska, Executive Director, 
                            Delaware Nature Society; Maya K. van 
                            Rossum, Delaware Riverkeeper, Delaware 
                            Riverkeeper Network; Val Washington, 
                            Executive Director, Environmental Advocates 
                            of New York; Mona Shoup, Chair, Friends of 
                            Clear Creek; Erich Pica, Director, Green 
                            Scissors Campaign, Friends of the Earth; 
                            Manley K. Fuller III, President, Florida 
                            Wildlife Federation; Jim Blackburn, Chair, 
                            Galveston Bay Conservation and Preservation 
                            Association; Jerry L. McCollum, President 
                            and CEO, Georgia Wildlife Federation; 
                            Margaret Wooster, Executive Director, Great 
                            Lakes United; Cyn Sarthou, Executive 
                            Director, Gulf Restoration Network; Marilyn 
                            Blackwell, President, Help Save The 
                            Apalachicola River Group; Pamela Dashiell, 
                            President, Holy Cross Neighborhood 
                            Association; Steven G. Sorensen, Past 
                            President, Kansas Wildlife Federation; Tom 
                            Fitzgerald, Director, Kentucky Resources 
                            Council, Inc.; Judy Petersen, Executive 
                            Director, Kentucky Waterways Alliance, 
                            Inc.; Cam Davis, Executive Director, Lake 
                            Michigan Federation; Larry Mitchell, 
                            President, League of Ohio Sportsmen; Mark 
                            F. Ten Eyck, Advocacy Director, Minnesota 
                            Center for Environmental Advocacy; Kenneth 
                            Hiemenz, President, Minnesota Conservation 
                            Federation; Tim Sullivan, Executive 
                            Director, Mississippi River Basin Alliance; 
                            Bea Covington, Executive Director, Missouri 
                            Coalition for the Environment; Perry 
                            Plumart, Director of Government Relations, 
                            National Audubon Society; Jamie Rappaport 
                            Clark, Senior Vice President, National 
                            Wildlife Federation; Marian Maas, Ph.D., 
                            Conservation Programs Chair, Nebraska 
                            Wildlife Federation; Jim Stephenson, 
                            Program Analyst, North Carolina Coastal 
                            Federation; Chuck Rice, Executive Director, 
                            North Carolina Wildlife Federation; Nina 
                            Bell, J.D., Executive Director, Northwest 
                            Environmental Advocates; Vicki Deisner, 
                            Executive Director, Ohio Environmental 
                            Council; Ella F. Filippone, Executive 
                            Administrator, Passaic River Coalition; Jim 
                            Stevens, President, People to Save the 
                            Sheyenne; Gerald H. Meral, Ph.D., Executive 
                            Director, Planning and Conservation League; 
                            Clark Bullard, Member of the Board, Prairie 
                            Rivers Network; Magi Shapiro, Member of the 
                            Board, Public Employees for Environmental 
                            Responsibility; Todd Ambs, Executive 
                            Director, River Alliance of Wisconsin; Mike 
                            Fremont, President, Rivers Unlimited; 
                            Angela Viney, Executive Director, South 
                            Carolina Wildlife Federation; Chris Hesla, 
                            Executive Director, South Dakota Wildlife 
                            Federation; Gwen Griffith, DVM, MS, Program 
                            Director, Tennessee Environmental Council; 
                            Michael Utt, President, The Ohio Smallmouth 
                            Alliance; Melanie Winter, Director, The 
                            River Project; Wilfred Cwikiel, Water 
                            Resource Program Director, Tip of the Mitt 
                            Watershed Council; Kelly D. Lowry, Esq., 
                            General Counsel and Water Program Director, 
                            Vermont Natural Resources Council; Larry 
                            Baesler, Executive Director, Wyoming 
                            Wildlife Federation
                                 ______
                                 
 Responses by Montgomery Fischer to Additional Questions from Bob Smith
    Question 1. Can you give some specific examples of how the Corps 
project planning process needs to be modernized?
    Responses. The National Academy of Sciences' 1999 report, New 
Directions in Water Resources Planning for the U.S. Army Corps of 
Engineers, documents several examples of how the planning process needs 
to be brought up to date to reflect 21st Century water management 
principles and practices. As explained in the National Wildlife 
Federation's written testimony and the New Directions report, the 
Corps' planning process is based upon the Principles and Guidelines for 
Water and Related Land Resources Implementation Studies (``Principles 
and Guidelines''), which were set in 1983 (when the preceding 
Principles and Standards were revised) and these guidelines have 
remained unchanged since then. The Principles and Guidelines direct 
water resources to be developed to promote national economic 
development, but assumes that all projects are to be developed for 
economic reasons. Since 1983, the Corps has been given important 
authorities to develop environmental protection and restoration 
projects, yet the Principles and Guidelines provide no guidance for 
developing such projects.
    One of the most basic reforms identified by the NAS New Directions 
report that would help modernize Corps procedures is to modify the 
statement of objectives to make clear that environmental protection and 
restoration is as equally important as national economic development in 
order to encourage more innovative and creative approaches that benefit 
not only the economy, but also the environment. This recommendation is 
reflected in both reform bills, S. 1987 and S. 646.
    Chapter 5 of the New Directions report discusses how the Principles 
and Guidelines lack guidance for environmental protection and 
restoration projects. While the Principles and Guidelines direct the 
Corps to evaluate environmental impacts of water resource development 
projects, it lacks guidance on evaluating the outcomes of environmental 
restoration projects. Presently, only conceptual models and general 
principles guide ecological system planning. There is a lack of 
instruction for assigning project benefits and costs for ecosystem 
restoration projects, which is emerging as an important mission area 
for the Corps.
    In addition, the New Directions report explains that since 1983 
substantial advances have been made in economic and environmental 
sciences in developing procedures for evaluating consequences of water 
resource projects, and for assessing risk and uncertainty. As a result, 
the Corps is either using or refraining from using such analytical 
tools without the benefit of policy review by the nation's water 
resources planning community.
    The 1999 NAS report also documents how the Corps' customer-service 
model is undermining the Corps' responsibility to promote the national 
interest in water resources planning. The Army Inspector General (IG) 
supported this conclusion when the IG investigated allegations of 
economic manipulation for the Upper Mississippi Navigation Expansion 
project. The IG found: ``The Corps' employment of the customer service 
model also created a conflict with the Corps' role as honest broker. 
Because of the taxes it paid into the Inland Waterway Trust Fund, the 
barge industry was viewed as a partner during the study. This view led 
the Corps leadership to involve the industry to a far greater extent 
than other interest groups.'' The planning process needs to be revised 
to move away from a strictly customer service approach and to be more 
inclusive of a variety of stakeholders.
    Finally, the Corps' planning process needs to be updated to be more 
oriented to watershed and broader regional perspectives. Even the Corps 
acknowledges that sometimes projects developed to address one problem 
in a watershed, create new problems for others downstream or elsewhere. 
The Corps' guidance should direct that the watershed or river basin, 
estuarial region, coastal unit or key ecosystem components be used as 
the basic spatial units in water project planning, when and where it is 
appropriate. The January 2002 National Academy of Sciences report, The 
Missouri River Ecosystem: Exploring the Prospects for Recovery, 
documents the devastating impact the Corps has had on the Missouri 
River by planning water development projects without consideration of 
the watershed-wide effects.

    Question 2. In his testimony, the Chief of Engineers pointed to the 
use of ``value engineering'' to lend credibility to the Corps review 
process. Can you comment on whether you think this is an effective 
means of review that will have a meaningful impact on how the Corps 
conducts its studies and reviews?
    Response. The National Wildlife Federation understands ``value 
engineering'' to mean a methodology for analyzing systems down to the 
subsystems and component levels of a design or product, and 
consequently to its value. Rather than reviewing existing documents to 
check for safety, accuracy and workability of the design, value 
engineering can occur at various stages of project planning. Value 
engineering seeks to determine whether true value has been attained 
through the design and can generate alternatives that will achieve the 
desired results at the lowest possible cost.
    While this is a valuable tool, it cannot substitute for appropriate 
policy guidance, and a vigorous quality control system. The benefit of 
establishing a system independent project review, for instance, extends 
beyond checking the justification of particular project elements. It 
provides greater support for the public and the Congress to trust Corps 
studies that have been reviewed. A system for independent project 
review also provides the Corps strong incentives to get the studies 
right the first time. At present, there is no indication that an 
internal review process would provide that type of incentive to the 
districts.

    Question 3. What steps can be taken to improve the credibility of 
Corps studies?
    The most important step that would improve the credibility and 
reliability of Corps studies is implementing a system of independent 
project review. As explained in detail in NWF's written testimony (pp. 
3-4), in recent years there has been major erosion in the extent, 
scope, quality and staffing of project reviews within the Corps. The 
failure to establish a truly independent system of review has been a 
significant hindrance to ensuring that the Corps will consistently 
develop high quality projects. As evidenced by cases like the Delaware 
River Main Channel Deepening Project, the Upper Mississippi River 
Expansion Project, and numerous others highlighted in the Federation's 
written testimony, the current process is producing studies with 
questionable economic justifications and unresolved or completely 
ignored environmental issues.

    Question 4. Are there additional reforms, not included in either my 
legislation or other legislative proposals out there (e.g. S. 646), 
that you would like to see enacted?
    Response. There are several additional potential areas for reform 
that we urge the Committee to consider that are not included in either 
S. 1987 or S. 646.
    First, the National Wildlife Federation is concerned about 
impediments that continue to hamper the Corps' ability to develop and 
implement nonstructural approaches to reduce flood damages. In Section 
219(a) of WRDA 1999, Congress directed changes in the way economic 
benefits are calculated for nonstructural flood damage reduction 
projects in response to reports documenting impediments, including the 
1994 Sharing the Challenge report of the Interagency Floodplain 
Management Review Committee, the Corps' 1995 Floodplain Management 
Assessment report on the Upper Mississippi Floods, the National Academy 
of Sciences' 1999 New Directions report, and a series of studies and 
reports by the Corps' Institute for Water Resources (IWR). Due to 
ambiguities in the final version of the bill, however, critical 
impediments to nonstructural approaches have not been eliminated.
    On January 22, 2002, the Corps issued guidance implementing Section 
219. In essence, while the language allows Corps to consider benefits 
for nonstructural projects, the process is extremely cumbersome and 
impractical. The guidance ignores the findings of the IWR economists 
that clarified the need for a simple declaration that primary flood 
damages avoided should be counted as benefits of evacuation-type 
projects without requiring expensive econometric studies. Thus, we 
believe the Corps guidance fails to capture the spirit of the 
Conference agreement. We urge the Committee to include in the 2002 
WRDA, the original 1999 Senate-passed language as a replacement for the 
current Section 219(a). The Senate version directly addressed these 
findings and greatly simplified the calculation of benefits consistent 
with current economic science. Such a change would help remove a 
significant and unjustified impediment to nonstructural flood damage 
reduction projects.
    The National Wildlife Federation also believes that there is 
considerable merit to the idea of establishing a sliding cost-share 
formula for flood damage reduction projects. Such an approach would 
reward local communities and states that take increased responsibility 
for managing and reducing flood risk. In 1998, the Federation released 
a report, Higher Ground, which documented the rising cost of flood 
damages that has accompanied increasing investments made in strategies 
dominated by structural projects, rather than wise floodplain 
management. We note that the testimony of the Association of State 
Floodplain Managers identifies a significant concern that the current 
static cost-sharing policy often rewards communities that do the least 
to manage flood risks. It also fails to give communities an incentive 
to use their own authorities to manage and reduce their flood risks. We 
would strongly support including measures in WRDA that would use 
thoughtfully crafted cost-sharing incentives to reward communities that 
engage in wise floodplain management.
    Next, the Federation urges the Committee to continue to support 
current Corps programs that encourage environmental protection and 
restoration and wise floodplain management. Specifically, we urge the 
Committee to consider increasing the authorization ceilings for the 
Section 1135 and Section 206 programs, as well as the Corps' Floodplain 
Management Services and Planning Assistance to States programs. The 
Committee should consider ways to encourage more activity under these 
programs through modifying local cost-sharing requirements to allow a 
broader range of potential funding sources. This is particularly 
relevant to restoration projects where, because the benefits are often 
non-monetary and tend to be more widely distributed over larger 
geographic regions and over longer periods of time, it has been 
difficult to find local cost-sharing partners that are capable of 
financing the non-Federal share alone.
    Finally, despite requirements that mitigation occur concurrently 
with Civil Works projects, the Corps has failed to follow through on 
significant amounts of mitigation required for projects that are well 
underway. In order to reduce the backlog of mitigation, in addition to 
the mitigation provisions contained in S. 646, we recommend requiring 
the Corps to prepare a Mitigation Backlog Management Plan that is 
updated each year and seeks by fiscal year 2005 to have the necessary 
lands purchased to eliminate the current backlog, as well as schedules 
for initiating and completing mitigation activities in a timely 
fashion. We also urge the Committee to adopt recommendations from the 
National Academy of Sciences' 2001 report, Compensating for Wetland 
Losses Under the Clean Water Act to substantially elevate mitigation 
requirements in order to ensure that no net loss of ecosystem functions 
or values occur in the construction of Civil Works projects, as 
required by the 1990 WRDA ``no net loss of wetlands'' policy.
    We would be happy to discuss further details regarding these 
recommendations, if you are interested in any or all of these ideas and 
concepts.

    Question 5. What step can be taken to ensure that Corps projects 
maximize both economic and environmental benefits?
    Response. As discussed above, in order to ensure that Corps 
projects maximize both economic and environmental benefits, the 
Principles and Guidelines should be revised to establish environmental 
protection and restoration as co-equal goals with economic development. 
In addition, the Corps should be directed to include all environmental 
costs and benefits of a project in the benefit-cost analyses. Because 
environmental costs and benefits can be difficult to quantify, it is 
important that the Principles and Guidelines be revised and updated to 
provide guidance on how to capture those values in a meaningful way. 
The Principles and Guidelines should, in fact, be revised periodically 
to reflect modern economic and scientific understanding.

                               __________
Statement of Steve Ellis, Senior Director of Water Resources, Taxpayers

    Good afternoon, Chairman Jeffords, Senator Smith and other 
distinguished members of this Committee. I'm Steve Ellis, the Senior 
Director of Water Resources at Taxpayers for Common Sense, a national, 
non-partisan budget watchdog group. I'd like to thank you for inviting 
me to testify on behalf of two of the nation's leading taxpayer 
advocacy groups--Taxpayers for Common Sense and the Council for 
Citizens Against Government Waste--at this hearing on the Water 
Resources Development Act of 2002 and reforming the Army Corps of 
Engineers. The National Taxpayers Union (NTU) is also concerned with 
the Army Corps of Engineers and advocates reform of the agency. I would 
like to submit for the record a statement from the NTU.
    The last time there was significant reform of the Corps of 
Engineers and the United State's approach to water resources 
development was in 1986 with the approval of cost sharing reforms 
championed by President Reagan.
    Virtually overnight we have gone from budget surpluses to deficits. 
We are engaged in a costly and lengthy war against terrorism. In this 
context, fiscal restraint is more important now more than ever to get 
to a balanced budget.
    Wasteful spending through the Army Corps is symbolic of everything 
that is wrong with Inside the Beltway politics, where Members of 
Congress abandon their duty to promote the best interests of the Nation 
in order to help a handful of special interests.
    In this election year, the temptation will be great to focus on 
just bringing more projects home to please special interests. But 
enacting true, meaningful reform of the Corps of Engineers this year 
will be an indication of whether Congress has the will to make the hard 
decisions necessary to achieve fiscal responsibility.
    Undoubtedly, the Corps of Engineers has faced some of the sharpest 
criticism in its history over the last two and half years. However, 
concern over the Corps and the way it conducts business is not new. For 
example, more than 150 years ago in 1836 the House Ways and Means 
Committee chastised the agency for bungling 25 projects that were over-
budget, behind schedule, and not performing as planned.
    Similarly, the criticism in recent years is the result of 
revelations that the Corps manipulated or committed serious mistakes in 
project evaluation studies that could waste billions of taxpayer 
dollars.
    This series of scandals has severely eroded public trust in the 
Corps. To restore the agency's credibility, it is critical that the 
20002 Water Resources Development Act address the problems that led to 
these scandals. The Corps needs to be reformed, and it needs it now. It 
is vital that we define what exactly is meant by Corps reform? Real 
reform will achieve these four fundamental goals:
     Make the Corps more accountable;
     Set clear priorities;
     Modernize the project planning process; and
     Ensure that everyone pays a fair share
    In March, Senators Bob Smith, Russ Feingold, and John McCain 
introduced S. 1987, the Corps of Engineers Modernization and 
Improvement Act. This comprehensive reform proposal addresses each of 
the four key reform areas in a serious and effective manner. We urge 
the Committee to adopt S. 1987 as the basis for reform in the Water 
Resources Development Act.
    I would like to outline each of these tenets of reform and provide 
a few examples of why reform is essential.

                             ACCOUNTABILITY

    The need for more accountability in the Corps becomes more apparent 
by the month, as a growing list of project studies have been found to 
have been manipulated or contain egregious errors:
     In December 2000, the Army Inspector General reprimanded 
three senior Corps officials--including the second-ranking general in 
the agency--for manipulating studies of a billion dollar expansion of 
seven locks on the Upper Mississippi and Illinois River.
     In January 2001, the Corps suspended all work on the $90 
million Chesapeake and Delaware Canal deepening project after four 
Eastern Maryland retirees demonstrated basic math errors and 
fundamentally flawed assumptions that erroneously showed the project to 
be justified.
     In March 2002, the Portland Oregonian concluded an 
extensive investigation that found the Corps had overstated the 
benefits of a $190 million deepening project for the Columbia River by 
more than 125 percent, and that in fact there was no economic 
justification for proceeding with the project.
     A few days later a National Academy of Sciences panel 
harshly criticized a Corps of Engineers model of the carrying capacity 
of the Florida Keys to accommodate future development: ``Incomplete and 
outdated information, coupled with inaccurate assumptions, makes the 
model--as it stands now--inappropriate for drawing conclusions about 
the impact of future development.''
     Also in March, a U.S. District Court judge in Ft. Worth, 
Texas issued an injunction against proceeding with the $127 million 
Dallas Floodway Extension project. The judge ruled the Corps had failed 
to consider smaller-scale alternatives--such as a simple levee raise--
to re-engineering the whole Trinity River. Most of the benefits of the 
re-engineering project could be achieved through the smaller project at 
less than one-third of the cost.
     And just last week, the General Accounting Office issued a 
scathing report on the lack of economic justification for the $420 
million Delaware River deepening project. The report found that the 
Corps had made an appalling series of ``material errors'' citing 
``miscalculations, invalid assumptions, and reliance upon outdated 
information'' that led the Corps to overestimate benefits by more than 
200 percent.
    Dozens of other examples of problematic and controversial projects 
could also be cited that together account for billions more dollars in 
wasteful spending.
    A key way to restore some credibility to the Corps' project 
planning process is to implement a system of independent peer review 
for costly and controversial projects. A workable and faithful 
independent peer review process should include the following elements:
     True independence from the Corps we suggest locating the 
Director of Independent Review in the Office of the Army Inspector 
General.
     Integration into the existing public comment period so as 
not to unnecessarily delay completion of project studies.
     Capped review costs at $250,000 or no more than half of 1 
percent of total project costs for more expensive projects.
    The need for independent review has now been endorsed by the 
National Academy of Sciences, the General Accounting Office, President 
Bush and many Members of Congress, and dozens of public interest groups 
across the Nation.

            RESTORING INTEGRITY TO THE AUTHORIZATION PROCESS

    There are growing external pressures placed on the Corps to green-
light projects lacking true economic justification. Congress will 
``contingently authorize'' a project based upon a favorable finding by 
the Corps prior to the necessary feasibility studies being completed. 
There is a correlation between contingent authorizations and later 
findings that a project study had been poorly conducted on an 
unjustified project. For example, two of the projects listed earlier in 
this testimony, the Columbia River deepening project and C&D Canal 
deepening project in Eastern Maryland, were both contingent 
authorizations.
    The Smith-Feingold-McCain reform bill would address this problem by 
allowing Senators to raise a point of order when controversial projects 
are included in authorizing legislation without the Corps first 
completing the mandatory feasibility studies and approval from the 
Chief of Engineers. S. 1987 would take significant steps toward 
restoring integrity to the authorization process.
    We are also very concerned that there are efforts underway to seek 
a contingent authorization of the billion-dollar Upper Mississippi and 
Illinois Rivers lock expansion project in the hopes of beginning Pre-
construction, Engineering, and Design. The Corps has only prepared an 
Interim Report introducing various scenarios, but has still not done 
any in-depth re-evaluation of alternatives that would lead to a 
recommendation to Congress.
    One of the best arguments for not proceeding with authorization of 
any Upper Mississippi navigation project in this WRDA comes from the 
Inland Waterways Users Board themselves, an industry advisory committee 
for the Army Corps of Engineers. A construction schedule for inland 
waterways projects posted on its website lists the Upper Mississippi 
lock expansion as not being able to start construction until 2020--and 
this is the optimistic scenario. A limiting factor is that despite a 
current surplus in the Inland Waterways Trust Fund, so many waterways 
expansion projects are being sought by the navigation industry that the 
pace of construction will be limited by the availability of money from 
this fund, which is generated from a tax on diesel fuel used for 
barges.

                       NEED FOR CLEAR PRIORITIES

    Contingent authorizations have contributed to a ballooning 
construction backlog that is now $52 billion. Even with increased 
construction budgets, it will still take the Corps more than 25 years 
to build all of these projects.
    Each year when the President's budget is introduced, Senators 
inevitably complain that projects in their state did not receive 
``full'' funding and consequently benefits are delayed and project 
completion costs increase. This is a result of too many projects 
competing for a limited amount of resources. Under the current funding 
process, bad projects are just as likely to receive funding as good 
projects.
    This enormous backlog is partly due to the Corps having provided 
bad information to Congress upon which it authorized a project, as well 
as Members of Congress seeking authorization despite Corps data 
pointing out serious problems with the project.
    Recently, Taxpayers for Common Sense conducted an analysis of the 
backlog that has made available to the public. Detailed information is 
easily accessible to the public on the 285 projects, for which the 
President has requested funding and submitted a Budget Justification 
Statement to Congress. This amounts to only $28 billion worth of the 
construction backlog. We urge Congress in this year's WRDA to require 
the Corps to make the full backlog available to the public, accompanied 
by, at a minimum, the same detailed information included in Budget 
Justification Statements.
    TCS' analysis found that the median project was only 24 percent 
constructed. In fact, 25 projects authorized in 1986 are still less 
than half-complete. These alone account for $2.4 billion of the 
backlog. An additional 39 projects representing $4.3 billion of the 
backlog have benefit-to-cost ratios of less than 1.5, and are less than 
half-complete.
    The backlog slows down the construction of all projects, whether 
they are good or bad. Just as the Base Realignment and Closure (BRAC) 
process was a tough pill to swallow but nonetheless one that will 
improve the health of our nation's military forces, Congress needs to 
institute a project-blind process for deauthorizing outdated, marginal, 
and unnecessary projects that have yet to be constructed. Deauthorizing 
these low-priority projects will enable funds to be focused on 
legitimate projects that provide large benefits to the public at a low 
relative cost.
    The Smith-Feingold-McCain bill proposes two simple improvements to 
an existing automatic deauthorization process that would significantly 
help break the backlog. First, S. 1987 would shorten the amount of time 
in which a project must receive funds for construction in order to 
continue to be authorized. Currently, a project must receive funds at 
least once every nine and a half years. S. 1987 would reduce the 
timeline to 5 years for newly authorized projects and 3 years to 
projects that have already received some construction funds.
    Second, S. 1987 would require that construction funds actually be 
used on physical construction to re-set the clock, as opposed to 
planning, design, or re-evaluation studies. There are dozens of 
projects that have been kept on life support while tens of millions of 
taxpayer dollars are wasted having the Corps perform repetitive studies 
in a futile attempt to resolve major controversies.
    In the case of the $108 million Oregon Inlet Jetties proposed for 
the Outer Banks, the Corps has been continuously ``studying'' the 
viability of the project for more than 30 years. Yet through all those 
years, a half dozen separate independent reviews by notable economists 
and scientists have determined the Corps is incapable of finding a way 
to design a cost-effective and scientifically sound project. In the 
coming months, we believe a forthcoming General Accounting Office 
report will add to the already overwhelming evidence supporting the 
case that the Oregon Inlet Jetties are an immense boondoggle.
    These two simple reforms would put more pressure on Congress to 
weed out bad projects and speed up construction of good projects. In 
fact, President Bush's proposed FY03 budget request follows this same 
logic by focusing much of the Corps construction budget on completing 
30 major projects. While certainly not a perfect budget, the Bush 
Administration has recognized the need for priorities and reining in 
the Corps much more seriously to date than Congress.

                             MISSION CREEP

    A more recent, but growing, pressure on the backlog is ``mission 
creep'' within the Corps of Engineers. The Corps has three 
congressionally mandated primary missions: navigation, flood damage 
reduction, and environmental protection. Other activities such as 
hydropower, recreation management, and water supply are permitted when 
associated with a multi-purpose project. However, the Corps has sought 
and Congress has authorized to extend its tentacles into irrigation, 
municipal water supply, wastewater treatment, and even construction of 
public schools. Each of these areas has traditionally been carried out 
by the private sector or through other government programs.
    The Corps does not have extensive experience in cross-basin water 
transfer projects, for example, but is seeking to build more than a 
billion dollars worth of pump and distribution infrastructure in 
Eastern Arkansas to assist rice irrigation. A lack of experience led 
the Corps to only look at structural solutions to long-term groundwater 
depletion concerns. After the release of the Corps' initial design for 
the $319 million Grand Prairie Area demonstration plan, hundreds of 
farmers--the very people the Corps was trying to help withheld support 
for the project because they prefer cheaper and more effective non-
structural conservation alternatives that would minimize water taxes 
slated to be assessed on them to pay for the project.
    In the case of municipal water supply and wastewater treatment, or 
what has also been called ``environmental infrastructure'', Corps 
involvement in these projects is a redundant--and wasteful--substitute 
for the Environmental Protection Agency's Drinking Water and Clean 
Water State Revolving Funds. The only difference is that projects 
obtained through the Corps effectively receive grants as opposed to 
loans, and the allocation of funds to projects under the Corps budget 
is driven almost exclusively by politics.
    In Los Angeles and Washington, DC, the Corps has entered into 
billion dollar and hundred million dollar contracts, respectively, to 
build and renovate public schools. But they have done a poor job at 
that too, while at the same time crowding out construction management 
firms in the private sector that could have performed the work faster 
and at less cost.
    President Bush has sought to limit mission creep by not requesting 
funds for these types of projects. His fiscal 2003 budget request 
outlines the impacts of ``mission creep'':

          Congress periodically directs the Corps to work in other 
        areas that duplicate existing Federal programs or are 
        activities that should be carried out by non-Federal interests. 
        This ``mission creep'' diverts the Corps from its primary 
        business lines, slows down completion of higher priority 
        construction projects, and postpones the benefits that 
        completing these projects would bring.

    The reform to check mission creep is simple: deauthorize all of the 
unconstructed irrigation, municipal water supply and wastewater 
projects, and stop the Corps from entering into contracts with local 
school districts to build schools.

                           OUTDATED PROJECTS

    The Corps of Engineers' recently announced that it would pause more 
than 150 authorized projects in order to ``resolve questions'' over the 
``accuracy and currency of economic analyses, the validity of plan 
formulation decisions, and the rigor of the review process.'' This was 
a significant acknowledgement that the agency too often relies upon 
outdated economic information, as well as other problems with the 
project planning process.
    For example, the Delaware River deepening project was justified in 
1992 primarily upon projections of increased oil imports and scrap 
metal exports. However, we now have the benefit of 10 years of actual 
data, which reveals that the Corps predictions were overly optimistic. 
None of the area refineries have significantly increased their oil 
imports, mostly because they have not, nor plan to, make any expansion 
of plant capacity in order to avoid having to install expensive 
pollution control technology if they did expand. By 2000, scrap metal 
was no longer being exported from the Port of Philadelphia because the 
former Soviet states replaced the U.S. as the main provider of scrap to 
Turkey.
    Both of these trends were apparent during the early and mid-1990's, 
but the Corps never updated its project studies to reflect these real 
world market changes, even though they did revise cost estimates 
downward during that time. In fact, the Corps continually denied the 
economic reality of the project and continually sought construction 
funds for this project despite knowing its benefits analysis was 
woefully out of date. Only after the General Accounting Office examined 
the project has the Corps acknowledged these errors and sought to 
update their feasibility report.
    Although we hoped the Corps ``pause'' represented a real effort to 
change the way the agency did business, the Corps did not follow 
through with an honest evaluation of the 150 projects. In fact, only 
eight projects will be subjected to further analysis. Although the 
Corps cited that dozens of projects were already undergoing further re-
evaluation before the launch of the nationwide review, the Corps failed 
to correct its studies on dozens of other boondoggle projects like the 
Dallas Floodway and Grand Prairie irrigation projects.
    The Corps' review fiasco is yet another indication the agency is 
incapable of reforming itself and that real reform must be passed into 
law this year by Congress.

                MODERNIZING THE PROJECT PLANNING PROCESS

    The Smith-Feingold-McCain bill would also require the Corps to work 
with the National Academy of Sciences in modernizing the planning 
guidelines. For example, the guidelines should be updated to ensure 
full accounting of costs of projects--including adverse economic 
impacts to other interests--incorporating new techniques in risk and 
uncertainty analysis, eliminating biases and disincentives for 
nonstructural flood damage reduction projects, incorporate new 
analytical techniques, and ensuring projects are justified upon 
benefits to the public interest rather than a few private firms or 
individuals.
    A full revision of the Corps planning guidelines was recommended by 
the National Academy of Sciences itself in a 1999 report on the Corps' 
project planning process. The Principles and Guidelines, the Corps 
planning documents, was last updated in 1983, and with the exception of 
a few minor revisions, has basically been frozen in time for nearly two 
decades.
    Many of the Corps' problems stem from an increasingly obsolete 
planning process that was developed at a time when water projects were 
seen as more of a job creation program than a national investment.
    Our Nation and thinking certainly have changed since the New Deal 
Era, but the Corps still relies on the 1936 Flood Control Act's 
standards to call a billion dollar project economically justified if 
the benefits outweigh the costs by even one dollar. No business would 
ever make an investment knowing that they would get no return on their 
dollar, and we deserve no less from our investment of tax dollars.
    The Smith-Feingold-McCain bill's proposal to require project 
benefits be 1.5 times the total estimated costs in order to qualify as 
economically justified makes strong fiscal sense, by ensuring at least 
a modicum of a return to the Federal taxpayer. An additional benefit is 
that this reform will help break the backlog by deauthorizing marginal 
projects that have yet to start construction.
    Another problem with the Corps is that it studies and plans 
projects in a vacuum. The Corps assumes there are no budget or other 
constraints when developing a construction schedule. For example, the 
Corps benefit-cost analysis for the $420 million Delaware River 
deepening project, anticipated construction over a 4-year period. There 
was virtually no chance of this ever happening, as the project would 
have to receive more than $90 million--5 percent of the agency's 
overall construction budget--each year for four straight years. The 
actual construction appropriations for the project have not exceeded 
$20 million--with none of those funds ever being spent on actual 
construction--but by optimistically scheduling construction over only 4 
years, the Corps was able to reduce estimated costs by maximizing 
scales of efficiency. In fact, this problem was cited by the General 
Accounting Office as another factor that led the Corps to overestimate 
the true benefits of the project.
    Although being able to construct large-scale projects quickly is 
ideal and preferred because it minimizes construction costs while 
quickly returning benefits to taxpayers. However, such scheduling does 
not reflect the harsh reality of a massive backlog and growing budget 
constraints. S. 1987 requires the Corps to devise more realistic 
construction schedules for projects and reflect the impacts on project 
costs.
    The Corps' tunnel vision is also apparent in its planning of port 
development projects. Currently, there is a ``race to the bottom'' 
amongst major U.S. ports, including 12 major Corps deepening projects 
along the East Coast that together will cost taxpayers $2.4 billion to 
complete. This phenomenon is stoked by a shift amongst the shipping 
lines to larger and deeper-draft container ships and a fear among ports 
that they may be left behind.
    The problem is that few of these ports will be successful in 
alluring these larger ships to their docks. With significant 
deregulation of the shipping industry in the 1990's and other factors, 
shipping lines have consolidated and begun to rely more heavily upon 
hub ports like New York/New Jersey Harbor and the Ports of Los Angeles 
and Long Beach. The result is these larger ships will carry more cargo, 
but to fewer ports. Medium-sized ports are poised to become feeder 
ports in this system, similar to the way the airport network has 
evolved. These ports will also find advantages in specializing in niche 
cargos, like the Port of Wilmington, Delaware's successful makeover 
into one of the nation's premier ports for refrigerated produce.
    Certain ports like those in New York and Los Angeles are logical 
choices for hubs due to the tens of millions of consumers within a 
relatively few miles of the piers. Other ports have natural advantages 
like the Port of Seattle that requires very little dredging to maintain 
its deep berths, or Hampton Roads, Virginia, which already is 
maintained at a deep draft and is well positioned only a few miles from 
the Atlantic Ocean.
    On the other hand, the Ports of Philadelphia and Portland, Oregon 
are more than 100 miles inland, and the cost of maintaining deep access 
channels is inherently expensive. Furthermore, it is more difficult and 
much slower to navigate up 100 hundred miles of a restricted channel, 
consequently it takes much longer for ships to traverse those rivers to 
deliver their goods than it would to a port near the open ocean.
    The Corps continues to pursue many more deepening projects than the 
Nation needs. This is because the Corps evaluates a particular 
deepening project without any consideration of potential adverse 
economic affect upon its competitor ports. These studies do not take 
into account the potential impacts of other nearby port development 
projects in the works, but not yet completed, that can affect the 
ability of the port under study to ultimately attract more ships.
    Also, the Corps expertise and mandate generally limit it to only 
consider deepening a port's access channels when studying port 
improvements. However, a port's depth is only one of many factors that 
determine its competitiveness. The amount of dockside land available to 
store containers, intermodal connections to rail and highways, crane 
equipment, labor conditions, geography and many other factors are just 
as important.
    On April 15, the Alameda Corridor project opened, connecting the 
Ports of Los Angeles and Long Beach to downtown L.A.'s rail and highway 
nexus, 20 miles inland. The $2.4 billion collaborative project was on 
time, on budget, had almost no public opposition, and used only a 
moderate amount of Federal funds--22 percent of the total cost plus a 
$400 million loan. The loan and the rest of the costs of the project 
are being borne by the ports, Los Angeles County, and revenue bonds to 
be paid off over time by a $15 user fee on each loaded container that 
uses the corridor.
    Port experts are predicting that the efficiencies gained from the 
corridor by facilitating the quick transfer of containers from ships to 
the highways and rail lines leading out of L.A. will solidify Los 
Angeles and Long Beach's position as the Nation top two ports for 
decades to come. Transportation Secretary Norman Mineta at the corridor 
dedication ceremony called the project, ``a powerful example of what we 
want to encourage'' throughout the country.
    We urge Congress to require the Corps to institute rational port 
planning to consider what investments are in the best national interest 
on a regional basis. In fact, the Department of Transportation is 
already ahead of the Corps on this issue, and is currently funding a 
project at the University of Rhode Island Transportation Center to 
develop a comprehensive framework for sustainable container port 
development.
    S. 1987 would require the Corps to work with the National Academy 
of Sciences in revising its project planning guidelines include 
rational port planning. Unfortunately, in recent years some port 
interests have pushed for increasing the Federal subsidy of dredging 
ports deeper than 45-feet from 40 percent to 65 percent. If such a 
change were applied to the New York/New Jersey Harbor project to deepen 
to 50-feet, taxpayers would be fleeced for more than $375 million. 
There is no need for the U.S. to subsidize port overcapacity through 
the dredging of dozens of ports past 45-feet. A few select ports with 
depths of 45-feet or more can serve the whole Nation well as hubs.
    We strongly urge Congress to reject any attempt this year to 
increase the Federal subsidy for dredging deep draft ports past 45-
feet.

                ENSURING EVERYONE PAYS THEIR FAIR SHARE

    Weeding out wasteful water projects through a streamlined 
deauthorization process, holding the Corps more accountable and 
modernizing the planning process are all effective ways to ensure the 
best water projects get built. Cost sharing is another tool for 
breaking the backlog. Forcing beneficiaries to pay their fair share, 
can be used to reduce the budget, freeing up Federal resources to speed 
up construction of good projects, and provides incentives for good 
local policies that also further reduce Federal disaster bailouts.
    In 1995, Dr. Robert P. Inman of the Wharton School of Business 
published a study on the effects of cost sharing for Corps of Engineers 
water projects, ``Changing the Price of Pork.'' The study examined the 
Water Resources Development Act of 1986 and the unique situation where 
Members of Congress and their constituents had an opportunity to seek 
smaller-scale, more efficient projects once it became apparent that 
cost-sharing rules were going to be adopted in the legislation. The 
Inman study found that the cost-sharing rules of 1986 saved Federal 
taxpayers more than $3 billion, or a 48 percent savings of what 
taxpayers would have otherwise paid for projects in the bill. The 
financial effect on local communities was marginal, a 12 percent 
increase of what they otherwise would have paid, even though they were 
paying a significantly greater share of the cost. The reason the 
increased costs for local communities was minimal is that they chose 
smarter and more efficient projects that met only their true water 
resource development needs.
    The cost sharing reforms of WRDA 1986, championed by President 
Reagan, ushered in a new era that sought to instill market-based 
economics into water development project planning. It marked a 
significant evolution from the New Deal era thinking of building 
projects to simply put people to work regardless of whether the project 
had any lasting benefits.
    The cost sharing reforms of the Smith-Feingold-McCain bill seeks to 
buildupon the Reagan reforms. The guiding principle behind S. 1987's 
cost share formula changes is that the greater the proportion of 
benefits that are local in nature the greater the financial 
responsibility of the local sponsor. The Inman study also endorsed this 
principle.
    Specifically, S. 1987 implements tiered cost sharing for operations 
and maintenance of inland waterways, reduces the Federal subsidy for 
flood damage reduction projects to 50 percent, and reduces the Federal 
subsidy for beach building projects to 35 percent.
    According to the Corps of Engineers, the Inland Waterways System 
currently has a maintenance backlog of $350 million. However, each year 
30 percent of the inland waterways maintenance budget is spent on 
underused waterways that carry only 2.3 percent of the system's cargo. 
Eliminating the huge Federal subsidy of the most wasteful waterways and 
requiring a 25 percent cost share contribution from non-Federal 
interests for other low use waterways could free up tens of millions of 
dollars each year to reduce the maintenance backlog on the nation's 
workhorse rivers, like the Ohio and Mississippi.
    The effect of eliminating subsidies for the handful of waterways 
would be minimal. For example, if the Corps were to stop dredging the 
Apalachicola River in Florida's Panhandle, only three-dozen barges a 
year would be affected. On average only one barge every 10 days floats 
down the Apalachicola at more than the river's natural depth. Yet, 
recent annual Federal appropriations for this waterway have been $12 
million.
    Despite the Corps of Engineers having spent more than $120 billion 
on flood control projects over the last five decades, annual flood 
damages continue to increase. This trend was cited in the Interagency 
Floodplain Management Review Committee or Galloway Report on the 
Midwest floods of 1993, which recommended a new course for the Nation 
to implement policies that discourage further or more intensive 
development within floodplains. A 1998 report by the National Wildlife 
Federation, Higher Ground, illustrates the double, triple, and even 
quadruple subsidies from the Federal Government as a result of a series 
of uncoordinated policies.
    Corps of Engineers subsidized construction of large structural 
projects encourages further development of floodplains by making people 
feel safe to live closer to the river. Inevitably, there will be the 
big flood, which then usually brings flood insurance claims and Federal 
Emergency Management Agency disaster assistance. And as Higher Ground 
documented, there are tens of thousands of homes that have repeatedly 
flooded and received checks from the Federal Government to rebuild 
within the floodplain.
    Reducing the Federal subsidy of Corps of Engineers flood damage 
reduction projects from 65 percent to 50 percent can help break this 
cycle of subsidies and encourage smarter flood damage reduction options 
like non-structural flood-proofing of moderate risk homes and voluntary 
buyouts of homes located within high risk flood zones.
    Beach building projects are another example where the beneficiaries 
are easily identified and are very local in nature, the people who 
visit the beach, the people who live along the beach, and the people 
who own second homes along the beach and rent them out. In fact, 
beneficiaries of beach projects tend to be the most affluent 
beneficiaries of any Corps subsidy.
    For example, roughly one-third of America's 74 wealthiest beach 
towns are beneficiaries of a Corps beach building project. Palm Beach 
County, Florida is receiving a $2 million reimbursement from Federal 
taxpayers this year for sand that was pumped in front of very wealthy 
homes, including those in Gulf Stream where the median home value is 
$1.5 million. All the beaches in the Hamptons of New York have been 
maintained by Federal sand subsidies.
    During the 106th Congress, a provision was snuck into WRDA 2000 
approving the world's most expensive beach project, $1.8 billion for 
Nags Head, Kitty Hawk, and Kill Devil Hills in North Carolina's Outer 
Banks. This 15-mile stretch of beach is one of the most highly eroding 
beaches along all of the Atlantic Coast. To compensate, the Corps will 
have to rebuild one-third of the beach every year repeatedly for the 
next 50 years. A cursory glance at any of the websites for the many 
real estate brokers in this booming county will turn up a half-dozen or 
more listings for $1 million beachfront homes for sale. The going rate 
for beach house rentals during the peak summer season is $4,000 to 
$8,000 a week. Obviously, these towns are not poor by any means.
    Federal subsidy for beach projects is a relatively recent 
phenomenon. Federal subsidies for sand pumping projects were not very 
common before the 1980's, but in the last 3 years these projects have 
been consuming a rapidly increasing amount of the Corps' construction 
budget. Many towns nourish beaches on their own without Federal 
assistance, using hotel occupancy taxes or property taxes assessed on a 
home's proximity to the beach. The State of Florida recently 
established an annual beach building fund.
    Between the wealth of the beneficiaries and the proven alternative 
local revenue raising mechanisms, reducing the Federal beach subsidy to 
35 percent is common sense. Such a policy change will also discourage 
the more intensive development of high-risk coastal areas, which would 
in turn reduce Federal flood insurance bailouts following hurricanes. 
Some states have sought to limit development of high-risk areas with 
only limited success. Despite zoning regulations in Florida that 
establish a ``line of control'' beyond which developers cannot build 
seaward, the state has issued developers more than 400 permit waivers 
in the last several years.
    Many of these same points are made in a White House Office of 
Management and Budget memo to the Corps, which is very critical of a 
draft agency report that attempts to determine an optimal cost sharing 
formula for beach projects. We have included this OMB memo as an 
attachment this testimony.
    Ultimately, beach erosion only becomes a problem when there are 
homes on the beach. Beaches naturally migrate, and they will always 
exist. It is just a matter of where the beach is and if it is in front 
of your house or rental house. Federal policies, including cost sharing 
for beach nourishment, ought to discourage irresponsible development in 
high-risk zones.

                  EFFECT ON DISADVANTAGED COMMUNITIES

    Some have concerns over whether cost sharing and even other reforms 
could negatively affect underprivileged communities. However, most 
likely the reforms in the Smith-Feingold-McCain bill would be a net 
benefit to poor and minority communities.
    In the case of cost sharing reforms, Section 103(m) of the Water 
Resources Development Act of 1986 allows for cost sharing reductions on 
flood damage reduction projects down to as little as 5 percent for 
qualifying poor communities. In WRDA 2000, Congress extended the 
ability to pay rules to all Corps projects and directed the Corps to 
rewrite the qualifying rules and formulas. The Corps has not completed 
revision of these rules, and concerns regarding the impact of cost 
sharing upon financially strapped communities are best addressed 
through that process.
    A significant benefit to disadvantaged communities and all 
stakeholders are the reforms in S. 1987 that call for greater public 
involvement in the project planning process, inclusion of adverse 
economic impacts of a project on a community in the benefit-to-cost 
analysis. Additionally, independent peer review would ensure that the 
voices of all communities are better heard and listened to by the 
Corps.
    One of the worst cases of the Corps failing to take into account a 
project's effect on a poor, minority community is the $715 million 
Inner Harbor Navigation Canal in New Orleans. This project lacks 
economic justification. In addition, there is evidence that the Corps 
used Enron-style accounting and cost-apportionment to add-on a hundreds 
of million dollar deepening element of the project, to benefit just one 
shipyard.
    This lock replacement and canal-deepening project was first 
authorized in 1956 and has been vigorously fought by the surrounding 
poor African-American neighborhoods ever since. Concern over the Corps' 
ignorance of the local residents in planning the project came to a head 
in 1991, when Congress directed the Corps to create a stakeholder 
advisory committee composed of local citizens from affected 
neighborhoods and to establish a mitigation fund to compensate those in 
the neighborhood who would have to suffer the extremely disruptive 
effects of seven straight years of construction.
    However, despite this congressional directive, the Corps has in 
many ways treated the local residents even worse by hiding critical 
facts from them about various aspects of the project.
    In an off-hand remark to residents at a public meeting about the 
project, a Corps engineer mentioned that the canal was going to be 
dredged to 40-ft. The plan Congress approved only included designs for 
a 36-ft deep lock. Testing has shown that between 36 and 40-ft levels 
there are tons of toxic sediments, which now will be flushed out to 
Lake Pontchartrain, a popular swimming area for the children of the 
nearby neighborhoods. This additional dredging would also add tens of 
millions or more costs to the project to only accommodate a handful of 
additional ships.
    The Corps also claimed for years that the project would actually 
reduce traffic congestion at the bridges that cross the canal because 
barges and ships would be able to move through the new lock faster. 
After close examination of the Corps' plans, a local retired engineer 
discovered that the construction process would frequently cause several 
mile long backups for 45 minutes or more each day, creating a traffic 
nightmare for thousands of commuters trying to get to their jobs in the 
heart of New Orleans. Only recently at a public meeting did the Corps 
acknowledge that these traffic problems would be created and now pledge 
to investigate solutions. New solutions that could add another hundred 
million dollars or more to the cost of this already unjustified, over-
budget project.
    There are dozens of other cases where the Corps has ill-treated or 
just flat out ignored citizens who are not considered their project 
``clients'' such as:
     The poor African-American Cadillac Heights neighborhood of 
Dallas, which prefers a non-structural flood control alternative. The 
Corps' plan is designed specifically to accommodate new toll highways 
inside existing levees that would actually reduce the flood capacity of 
the river channel;
     Rice farmers on the Grand Prairie of Arkansas who are 
being forced to swallow higher taxes and a gold-plated project just to 
get the smaller-scale on farm assistance that they really desire;
     Crab fishermen who are the greatest economic engine of 
struggling Clatsop County, Oregon and Pacific County, Washington whose 
fishery will be at risk from the Corps' plan to dump tens of millions 
tons of dredged material onto their fishing grounds.

                            TIME FOR CHANGE

    The Corps of Engineers has a vast influence over our nation's 
waters, and its work affects millions of Americans. Many projects have 
had a positive effect, protecting countless lives from floods and 
bringing the fruits of midwestern farmers' labor to the rest of the 
world. But there are also many projects that have had a significant 
negative effect on people's lives, have harmed other industries and 
users of the nation's waters who are not the Corps' traditional 
``clients'', and most outrageously squandered taxpayer dollars on these 
activities.
    At the root of so many of the agency's problems is the belief that 
the local sponsor of a project is Corps' sole client. What agency 
officials lose sight of when they promote a wasteful project is that 
the Federal taxpayer is the primary client, and the majority 
shareholder of virtually all Corps projects.
    The Army Inspector General went out of his way to highlight these 
concerns in his December 2000 report on the Upper Mississippi River 
project scandal:

        Although this investigation focused on one study, the testimony 
        and evidence presented strong indications that institutional 
        bias might extend throughout the Corps. Advocacy, growth, the 
        customer service model, and the Corps reliance on external 
        funding combined to create an atmosphere where objectivity in 
        its analysis was placed in jeopardy The overall impression 
        conveyed by testimony of Corps employees was that some of them 
        had no confidence in the integrity of the Corps study process.

    The Corps has certain expertise and resources that can greatly 
assist local communities in building something they would not be able 
to do on their own. But the agency is accountable to the Nation as a 
whole, and its mandate is to pursue a civil works program that will 
benefit the overall national economy and welfare of its citizens.
    Unfortunately, the Corps has failed to remember that it serves the 
American taxpayer. Therefore, it is imperative upon Congress to enact 
real Corps reform this year. In fact, no Water Resources Development 
Act should pass without reform. At risk is the public's confidence in 
the Army Corps of Engineers and any hope that Congress can restrain 
itself from ever-escalating pork barrel spending, even in the midst of 
the a very expensive and important war on terrorism.
                                 ______
                                 
                       Taxpayers for Common Sense
                        The Construction Backlog

    Taxpayers for Common Sense performed a detailed analysis of 285 
projects in the U.S. Army Corps of Engineers' ``Known Active 
Construction Backlog'' based upon a review of the FY02 Budget 
Justification Statements submitted to Congress by the Corps in support 
of the President's budget request.\1\ The full construction backlog is 
currently $52 billion.\2\
---------------------------------------------------------------------------
    \1\ Projects by the Corps' Northwestern Division were not included 
in this analysis because Budget Justification Statements for this 
division were not available on the Internet.
    \2\ Based upon $28 billion of the known active construction backlog 
(those projects listed in the Corps' FY02 Budget Justification 
Statements, not including the Northwestern Division), $8 billion of 
inactive projects (those that even the Corps has determined are no 
longer economically justified, are no longer in the Federal interest, 
or are no longer supported by a local sponsor), approximately $16 
billion in additional projects that have been authorized by Congress 
and projects in the Pre-construction Engineering and Design (PED) 
phase.
---------------------------------------------------------------------------
                           CONSTRUCTION DELAY

     There are 285 projects in the known active construction 
backlog--those projects that are funded in the Construction General 
account of the President's budget request--which still require $28.1 
billion to complete.
     The typical project in the known active construction 
backlog is only 24 percent complete (based on median rate of 
completion).
     190 projects in the known active construction backlog are 
less than 50 percent complete and will require $22.3 billion more of 
taxpayer funds to complete.
     projects with a benefit-to-cost ratio of less than 1.5 to 1.0
     60 projects--representing $4.6 billion of the known active 
construction backlog--provide a low economic return compared to 
taxpayer investment.
     39 of these projects ($4.3 billion remaining balance) are 
less than 50 percent completed, with the typical project being 24 
percent complete (based on median rate of completion).
     The Dare County Beach replacement project will cost $1.8 
billion to maintain 15 miles of wide beach in front of four booming 
beach towns for the next 50 years. The Corps has estimated only a 27 
percent return in net benefits (1.27 to 1.0 benefit-to-cost ratio), 
despite much uncertainty about the cost and ability of the beach to 
hold the sand for very long.

                PROJECTS WITH OUTDATED ECONOMIC ANALYSES

     61 projects--representing $8.1 billion of the known active 
construction backlog--whose most recent economic analyses upon which 
the project was approved is ten or more years old.
     30 of these projects ($4.4 billion remaining balance) are 
less than 50 percent completed
     The Corps has been relying upon a 1974 economic analysis 
as the basis for claiming justification for the $207 million Yazoo 
Backwater Pumping Plant, which is still only 5 percent constructed.
   status of projects authorized in the water resources development 

                              ACT OF 1986

     44 projects--representing $4 billion of the known active 
construction backlog--were authorized 16 years ago, however, the 
typical project is still only 39 percent completed.
     25 of these projects ($2.4 billion remaining balance) are 
less than 50 percent completed.

                        INLAND WATERWAYS BACKLOG

     Completing the 25 high-priority projects as identified by 
the 2001 Inland Waterways Users Board Annual Report plus an estimated 
$60 million in annual major rehabilitation costs for renovating the 37 
locks and dams on the Upper Mississippi and Illinois Rivers will cost 
$7 billion over the next 20 years.
     With annual revenues of only $100 million and a current 
$400 million surplus, there still will be a $1.1 billion shortfall for 
the Inland Waterways Trust Fund's (generated from a $0.20 per gallon 
barge fuel tax) share of the inland waterways backlog.

                       BEACH REPLACEMENT PROJECTS

     In recent years the Administration has budgeted a modest 
amount for sand pumping projects only to see Congress dramatically 
increase funding for beaches. In the last 3 years, beach funding has 
increased 60 percent while the overall Corps budget increased 9 
percent.
     35 projects--representing $6.3 billion of the known active 
construction backlog--were budgeted for in President Bush's Fiscal Year 
2002 Budget.
     Congress subsequently funded a total of 58 beach projects 
for construction and 48 studies of new beach projects, which if all are 
continued through to completion over the next several decades would 
cost taxpayers well over $10 billion.
                                 ______
                                 
  The Distribution of Shore Protection Benefits, Draft Army Corps of 
 Engineers Report, November 2001, Comments of the Office of Management 
                               and Budget

                           BASIC ASSUMPTIONS

    The analysis of the hypothetical scenario in the draft report 
relies upon two key assumptions that lead to a substantial 
understatement of the benefits that accrue locally.

          It uses an inappropriate measure--the place of principal 
        residence of the people who own local property or who use the 
        beach--to allocate the benefits of a project to the ``beach 
        region'' (local) or to the ``rest of the nation'' (national). 
        The issue here is not who benefits, but whether the way in 
        which the benefits accrue enable the State or local authorities 
        to support a non-Federal cost-share. That depends largely upon 
        where the benefits will occur, not on where the people who 
        receive the benefits reside most of the year.

          Although the report views some national and some regional 
        economic development benefits as local, it limits the local 
        area to the county or counties in which the shore protection 
        project physically is located. Coastal States typically pay 
        much of the non-Federal costs of these projects. e.g., between 
        50 percent and 100 percent in the five States that the Corps 
        surveyed. Therefore, we believe the report should have viewed 
        as local all benefits that flow to any resident or business in 
        the State or should have attempted, at a minimum, to estimate 
        the benefits that accrue in-State beyond the county line. 
        Instead, it simply includes them on the national side of the 
        ledger.

                         STORM DAMAGE REDUCTION

    All storm damage reduction effects redound to the benefit of the 
local community. By reducing damages to structures and their contents 
and to local infrastructure, a shore protection project raises local 
property values compared to the ``without project'' condition. Since 
real property is a fixed asset, most of this added value remains within 
the reach of local authorities and augments their ability to contribute 
towards the project's construction costs, for example, through property 
or occupancy taxes. It does not matter that some property owners may 
reside elsewhere. The project reduces storm damages only locally, for 
those who live elsewhere, it reduces damages to their second home, 
rental property, or business; its contents; and the surrounding land.

                               RECREATION

    Shore protection projects that support recreation can add 
significantly to the ability of the State and local sponsor to 
contribute to the costs of construction. The analysis of the 
hypothetical scenario in the report underestimates these local benefits 
in several ways:
    In limiting the beach region to the county, the report understates 
the local component of the regional economic development benefits. The 
people who travel farther to reach the beach are more likely to stay 
overnight nearby in a hotel or rental unit and to spend money when they 
get there. Their beach-trip spending beyond the county line is likely 
to occur mostly in-State, but the report allocates the associated 
benefits to the ``rest of the nation.''
    Although spending by foreign tourists in the coastal State is new 
spending from a national perspective, the added value that it 
contributes to the national economy primarily benefits the local 
coastal community and the State.
    The intangibles, subjective value of the beach experience generally 
exceeds the financial costs that beach users incur. For beach users who 
live within the State either part-time or full-time, all of this 
consumer surplus is local.
    The State or local authorities can access only a part of this 
consumer surplus via a user fee without significantly affecting overall 
tourist spending. Since the amount that they could so collect from out-
of-State and foreign visitors is potentially available to help pay for 
the project, it is a local benefit as well.
    The report treats the Federal tax revenue from spending in the 
beach region as a benefit that occurs outside the beach region. 
However, the net effect of a project on Treasury receipts probably is 
insignificant. In the absence of the project, it is likely that: (1) 
spending by recreation users (perhaps elsewhere) would generate a 
similar level of tax revenue and (2) the alternative Federal investment 
(same amount spent elsewhere) would produce a comparable level of tax 
revenue.

                      PUBLIC FINANCE CAPABILITIES

    The draft report does not sufficiently explore a complex question 
that is central to determining an appropriate non-Federal coat-share. 
To what extent will the predicted benefits of a shore protection 
project occur within the reach of local or State authorities and 
therefore potentially be available to support a non-Federal cost-share?
    The draft report assumes that local authorities can support a 
portion of the project's costs only through belt tightening or by 
developing an additional source of recreation-based revenue. However, a 
shore protection project chiefly benefits homes and businesses in the 
local coastal community. By preserving existing property value and 
facilitating further coastal development in that community, a project 
in affect augments the long-term local tax base. The draft report did 
not examine the extent to which this effect of a project on private 
property values, under a range of property tax rates that now prevail, 
contributes to the revenues that coastal communities now are 
collecting.
    The report also should have examined the option of charging 
existing users of the beach a fee or a higher fee. It focuses only on 
the ability of local authorities to raise additional funds from new 
visitors or a sales tax increase.
    In calculating the fiscal capability of State and local interests, 
the report also makes two significant computational errors:
    It does not represent the stream of payments property. Beach 
replenishment occurs periodically over a project's lifetime. The report 
assumes the local sponsor would issue a bond at the outset of a project 
that is large enough to pay all future costs up front, years and 
decades before much of the work actually will occur.
    It also overestimates the up-front gum that non-Federal interests 
would need to borrow when it multiplies average annual costs by 50. The 
amount that a local sponsor would borrow is equivalent to the principal 
of the loan; average annual costs include both the principal and a 
substantial interest component.

                         ENVIRONMENTAL IMPACTS

    According to the draft report, shore protection projects can 
benefit species that use the beach such as shorebirds, but cause short-
term damage to habitat in the marine subtidal zone. The draft report 
does not try to assess the relevance, if any, of these benefits to 
possible changes to the cost-sharing formula.
    Project opponents claim that shore protection projects also can 
lead to more serious long-term impacts, e.g., to fishery habitat areas 
of particular concern, new estuaries, and in shallow areas that are 
less subject to littoral drift such as a bay. By facilitating the 
further development of certain coastal communities and adjacent areas, 
projects may have other adverse environmental impacts as well. Since 
the early 1970s, the Corps has recommended dozens of projects that 
involve periodic beach replenishment, covering major stretches of the 
New Jersey, Florida, and North Carolina coastlines and significant 
segments in a few other States. It is involved in a multi-year effort 
to monitor the biological impact of six projects in New Jersey, but has 
not examined the cumulative environmental impacts of: (1) the Corps 
program as a whole; (2) the many other such projects that local 
authorities and States now fund on their own; and (3) related Federal 
disaster relief and Federal flood insurance efforts that affect coastal 
development. The draft report does not address such concerns.
                               __________
                  Statement of G. Edward Dickey, Ph.D.

    Mr. Chairman, members of the Committee, I appreciate this 
opportunity to present my views on how Congress can improve the Army's 
Civil Works Program executed by the Corps of Engineers. My remarks draw 
upon my two decades of experience in policy development and 
implementation in the Office of Assistant Secretary for Civil Works, my 
years as Chief of Planning for the Corps of Engineers, and my education 
as an economist. Having worked many years with many fine professional 
and dedicated people in the Corps, both civilian and military, I know 
first hand of their capabilities and their desire to be responsive to 
the values and priorities of the public as expressed in law and 
executive branch policy.
    Water resources are indeed precious and warrant careful management. 
Water is not only a vital factor in human activities, it obviously also 
profoundly influences the environment. These influences are realized 
though complex physical, chemical and biological processes that also 
support our economic well being. The Civil Works Program is the major 
mechanism for the Federal Government to make investment and management 
decisions regarding use of the Nation's water resources. As a result of 
past investments, we have a valuable legacy of facilities that allows 
us to manage and redirect those resources in the interest of human 
welfare. These facilities must be periodically modernized and their 
operations modified to respond more fully to current demands including 
those of natural ecological systems. In addition, construction of new 
facilities can both add to our nation's productivity and restore 
damaged natural ecosystems.
    If Civil Works projects are a vital governmental responsibility, 
why has it been increasingly difficult for the program to compete for 
budgetary resources? In my view, the answer is simple; not all proposed 
projects are equally meritorious. Some are unproductive; that is, they 
would not produce benefits commensurate with their economic and 
environmental costs. Past policies and practices have not resulted in a 
uniform inventory of compelling investments, and available funds are 
not always applied to the best projects. The tools are available to 
change the situation. Congress and the Nation can have the full benefit 
of the Army Corps of Engineers unique and indispensable ability to plan 
and implement the development, management and restoration of our 
nation's water resources.
    Congress needs to provide a consistent and unambiguous policy 
framework and allow the executive branch to develop recommendations to 
Congress within that framework. The Corps is a highly responsive 
agency; it will bring the full power of its expertise to solve problems 
in a more productive way if that is what the Congress directs. New 
authorizing legislation is the means for Congress to provide a new and 
clear direction and to remove the vestiges of earlier generic and 
project-specific accommodations of special interests which have so 
powerfully shaped the program in the past and which now limit its 
ability to compete for budgetary resources.
    My statement addresses three policy elements, which, if 
incorporated into legislation, would produce a total package of changes 
necessary for the effective redirection of the program. They are (1) 
the project planning and decisionmaking process; (2) project cost 
sharing; and (3) Corps organization to maximize professional 
capabilities. Congress and the President must work together to achieve 
success in modernizing Civil Works. Congress can provide clear 
direction in each of these areas; however, the executive branch has an 
essential role to play in modernizing the program as well.

                  PROJECT PLANNING AND DECISION MAKING

The need to update planning guidelines
    Congress assigned responsibility for Corps of Engineers planning 
framework to the President and the U. S. Water Resources Council in the 
Water Resources Planning Act of 1965 (P. L. 89-80, as amended). 
Pursuant to this authority, President Reagan issued the present 
statement of Economic and Environmental Principles for Water and 
Related Land Resources Implementation Studies in 1983, and the Council 
issued its Economic and Environmental Guidelines for Water and Related 
Land Resources Implementation Studies that same year. These Guidelines 
are composed of ``Standards'' and ``Procedures,'' which are more 
specific guidance to the Corps (as well as the Bureau of Reclamation 
and the Natural Resources Conservation Service) on the conduct and 
content of water project implementation studies.
    These Principles and Guidelines direct the Corps to develop 
systematically cost-effective plans that also address all Federal 
concerns, as expressed though environmental and other laws and 
executive branch policy, as well as state and local concerns. The 
present Principles and Guidelines are the third version of Water 
Resource Council planning guidance issued since 1973. I believe the 
current Principles are carefully crafted and, collectively, define a 
planning framework that is both powerful and simple. They essentially 
direct agencies to weigh the economic and other benefits and costs for 
every reasonable alternative and to recommend the best plan considering 
all benefits and costs. As a planning model, they are far superior to 
other decision frameworks that govern other Federal programs that are 
based on standards, such as in the case of the water quality program.
    Congress should direct the U.S. Water Resources Council to review 
its Economic and Environmental Guidelines for Water and Related Land 
Resources Implementation Studies and to update them to reflect the 
improvements in economic and other evaluation techniques and the 
changes in law and policy that have occurred in the last two decades. 
In this regard, the reports of the National Research Council's 
Committee reviewing Corps procedures pursuant to Section 216 of Water 
Resources Development Act (WRDA) of 2000 will provide valuable 
information to the executive branch concerning the most appropriate 
evaluation techniques.

The lack of value in additional objectives
    I do not believe water project planning would be in any way 
improved by specifying additional generic planning objectives such as 
``environmental enhancement'' beyond the single objective now stated in 
the Principles. Section 2(a) of the Principles states: 'The Federal 
objective of water and related land resources planning is to contribute 
to national economic development consistent with protecting the 
Nation's environment, pursuant to national environmental statutes, 
applicable executive orders, and other Federal planning requirements.'' 
The Principles and the Guidelines (P&G) clearly provide for 
accommodation of other Federal, state and local and international 
concerns in the context of a specific study. The flexibility of the 
present P&G was amply demonstrated by the ability of the Corps to 
develop the Comprehensive Everglades Restoration Project, which was 
authorized in WRDA 2000.
    The present Federal objective is well defined and made 
operationally meaningful in each individual project study by a broadly 
accepted body of economic theory. This theory also provides clear and 
objective standards for measuring economic benefits and costs. 
Virtually all controversies over Corps of Engineers studies involve 
challenges to either (1) the quality of Corps' estimates of economic 
benefits and costs, or (2) the subjective tradeoffs between economic 
benefits and other values reflected in the Corps' recommended plan. 
Much can be done to improve the analysis of economic and environmental 
impacts, but difficult choices between economic and non-monetized 
values will remain subjective and controversial no matter how well they 
are analyzed.
    In contrast to economic benefits and costs, there are no generally 
accepted theories of environmental, ecological or social value that 
allow the executive branch to develop objective, operationally 
meaningful evaluation standards. Specification of additional objectives 
will not lead to better analysis or more effective consideration of 
these kinds of impacts in planning individual Civil Works projects. 
Moreover, as demonstrated by the 1980 version of the Principles, adding 
additional planning objectives will only result in unproductive 
complexity and ambiguity in the planning process, which already is 
criticized as being overly complex and lengthy.

Improving project productivity
    One area in which there is apparent congressional concern is the 
economic productivity of Civil Works projects. The Corps of Engineers 
Modernization and Improvement Act of 2002 (S. 1987) would require 
future projects to have a 1.5 to 1 ratio of benefits to costs at the 
current discount rate. The issue of project productivity can be best 
addressed by directly considering the discount rate, which governs the 
formulation of projects. The discount rate, which is used to convert 
future benefits and costs to present value equivalents, is an important 
public policy choice. The present discount rate is based on a formula 
established by Section 80 of the WRDA 1974 (P.L. 93-251). This law 
bases the discount rate on the current cost of long-term Federal 
borrowing and also ``grandfathers'' certain old (now at least over 30 
years) projects at a lower discount rate (3.5 percent or less).
    In considering the policy regarding the discount rate, it is 
important to know that the discount rate used in water project 
evaluation is a ``real'' or inflation-free rate since all benefit and 
cost estimates are in constant dollars. Thus, a study being conducted 
today would project future costs and benefits in 2002 dollars. However, 
benefits and costs occurring in the future would then be reduced by the 
discount rate because we place a higher significance (economic value) 
on benefits and costs when they occur today rather than in the future. 
The higher the discount rate, the less important we consider a benefit 
or cost that would accrue in the future. Choice of a discount rate 
affects not only the number of projects having benefits greater than 
costs, it also affects the scale of projects and their design. As the 
discount rate is increased, fewer projects will have benefits greater 
than costs, and the best projects will be smaller and more capital 
intensive. Most of the completed Corps projects that are now criticized 
as ``unproductive'' were based on low discount rates. The choice of a 
discount rate has important consequences for our future infrastructure.
    The discount rate formula in Section 80 of the WRDA'74 (P.L. 93-
251) is not based on economic theory. Furthermore, annual 
recalculations of the benefits and costs of uninitiated construction 
projects are generally required because the rate usually changes based 
on the required yearly application of the formula. Finally, 
grandfathered discount rates for certain projects create false 
expectations about those projects' prospects for future funding. No 
Administration that I worked for made new construction start 
recommendations on the basis of any rate lower than the current 
discount rate.
    The Office of Management and Budget (OMB) presently establishes the 
discount rate to be used in the evaluation of other public investments. 
OMB Circular A-94 directs the use of 7 percent real discount rate for 
these projects. According to the circular, ``This rate approximates the 
marginal pretax rate of return on an average investment in the private 
sector in recent years.''\1\ Congress should either establish a 
discount rate based on sound economic theory or allow the Corps to 
apply the rate used to evaluate other Federal investments.
---------------------------------------------------------------------------
    \1\ Circular A-94, Guidelines and Discount Rates for Benefit-Cost 
Analysis of Federal Programs, page 7.
---------------------------------------------------------------------------
Allowing the executive branch to fulfill its responsibilities for good 
        analysis
    In my view, Congress should have the executive branch's best 
analysis and recommendation before it considers a project. Congress may 
reject that analysis, evaluate the information in the analysis 
differently, or make its decision based on other considerations; that 
is Congress' prerogative. However, in some instances Congress has 
legislated how the Corps of Engineers is to measure certain economic 
benefits. I am aware of at least two cases where legislation specifies 
a particular way of measuring benefits that cannot be supported by 
commonly accepted economic theory. In Section 7(a) of the Department of 
Transportation Act (P.L. 89-670), Congress defines the primary 
navigation benefits in terms of rate savings to shippers rather than 
resource cost savings. In Section 219 of WRDA 1999 (P.L 106-53), 
Congress requires to Corps to ``. . . calculate the benefits of the 
nonstructural project using methods similar to those used for 
calculating the benefits of structural projects, including similar 
treatment in calculating the benefits from losses avoided.''--despite 
the fact that the economic impacts of structural and non-structural 
alternatives are quite different.
    The executive branch develops implementation guidance that allows 
the best estimate of economic benefits within the constraints imposed 
by law, but benefit-defining legislation signals that Congress seeks 
outcomes different from those that would be produced by objective 
economic analysis. Unfortunately, S. 1987 would move further toward 
legislating benefit procedures for the executive branch. Congress 
should affirm its commitment to using the best analytical techniques in 
every Civil Works project study by abrogating past benefit-defining 
provisions and by avoiding new constraints on objective benefit and 
cost measurements.

Review is an essential part of the recommendation development process
    Sound water project planning requires not only a clear policy 
framework in which to conduct analyses, it requires time--time to 
develop a plan and time for review of the plan so that national as a 
well as local perspectives can be brought to the attention of 
decisionmakers. During the last decade, the quality of the internal 
executive branch review processes has declined; one major reason for 
this decline is that Congress has authorized many projects that had not 
received the full benefit of executive branch review. The executive 
branch project review culminates when the Secretary of the Army 
transmits a report of the Chief of Engineers to Congress. In the last 
decade, Congress has authorized dozens of projects without waiting for 
completion of the report development and review process. Many of these 
authorizations were conditioned on favorable report of the Chief of 
Engineers by a future specific date.
    Conditional authorizations create enormous pressures on the Corps' 
review staff. In the interest of time and to avoid disappointing 
Members of Congress who supported conditional congressional approval, 
problems are glossed over and reviewers' concerns are ignored. In any 
case, even if the Chief of Engineers' report is completed by the 
deadline, the Secretary and the other Departments of Government may not 
have even initiated their final policy-level review.
    It is not surprising that projects that have been found deficient 
in one way or another in recent times Delaware River Deepening, The 
Chesapeake and Delaware Canal and the Dallas Floodway Project were 
authorized without a report transmitted by the Secretary of the Army. 
In the case of the Upper Mississippi River Navigation study, Congress 
specifically authorized the Corps to proceed with engineering and 
design on expanded locks before even a draft report was released. Is it 
surprising that the Corps was eager to find expansion projects 
justified? Except in the most extraordinary circumstances, Congress 
should authorize only those projects that have completed the executive 
branch review process.

             COST SHARING AND IMPROVED RESOURCE ALLOCATION

    Appropriately structured non-Federal financial participation and 
pricing for project services contribute to at least three important 
objectives: increased project credibility, increased returns on scarce 
Federal funds, and better utilization and greater benefits from 
existing project capacity.

Project cost sharing
    The first two objectives can be realized by non-Federal 
participation in the financing of water project construction. Whenever 
a non-Federal sponsor is willing to pay for a major portion of the cost 
of a project, added credibility is given to any analytical 
justification for the project. The absence of a non-Federal public 
entity willing to pay the non-Federal share suggests the project is not 
being given a priority by that entity's constituents, who normally are 
also the project's beneficiaries. Second, non-Federal financing allows 
limited Federal funds to be spread over a greater number of projects 
resulting in a greater total investment. The effective constraint in 
the rate of water resource investment is the availability of Federal 
funding. By requiring every project to have a significant amount of 
non-Federal financing, unproductive, low priority projects would be set 
aside, and productive projects could move ahead more quickly. Congress 
has not been consistent in its approach to project cost sharing. Since 
the major reforms of WRDA 1986, Congress has exempted particular 
projects from cost-sharing and, in other cases, eroded cost sharing 
though requiring consideration of ``ability to pay'' in establishing 
financing requirements. As an economist, I see a glaring inconsistency 
between project advocacy based on the importance of project benefits 
and a plea that the beneficiaries, or their governmental proxies, 
cannot possibly pay their share of project costs. Congress should apply 
the purpose-specific cost-sharing formulas to all projects serving 
those purposes. There should be no exceptions or exemptions.
Demand management as an essential management tool
    The third objective of financial participation is obtained by 
improved use of existing project capacity. Efficient management of 
existing projects requires use of appropriate pricing or other demand 
management strategies whenever public use begins to exceed their 
capacity. As consumers, we expect demand management to be an essential 
part of the normal course of business in the management of utilities 
water, electricity, telephone service and natural gas. Airlines and 
railroads are becoming increasingly sophisticated in this arena as 
well.
    No more compelling case can be made for demand management than in 
the case of congested inland waterway locks. The Federal Government, as 
the sole manager of the greatest inland waterway system in the world, 
should be enthusiastic about adopting congestion management to increase 
the benefits of important, highly valuable waterway facilities. The 
National Research Council's Committee to Review the Upper Mississippi 
River Illinois Waterway Study recommended: ``The benefits and costs of 
lock extensions should not be calculated until nonstructural measures 
for waterway traffic management have been carefully assessed.'' 
Congress should ensure that the Corps has the necessary authority to 
make demand management an integral part of continued modernization of 
our nation's inland waterways.

Study scope and cost sharing
    Finally, the Congress should review cost sharing for feasibility 
studies. Cost sharing by non-Federal sponsors has greatly reduced the 
total cost of Civil Works project feasibility studies and substantially 
reduced the time to complete them. In cases where a project is likely 
to emerge from the study process, study sponsors are anxious to get on 
with it. When the prospects for a project are slim or non-existent, 
sponsors have better uses for their resources.
    There is a downside to study cost sharing, however. The non-Federal 
sponsor may have preconceived ideas as to the desired solution and may 
resist expending funds on alternatives that it believes would be 
inferior or beyond its capability or authority to implement. For 
problems warranting comprehensive basin studies, states or regional 
bodies should be required to be the sponsor, or other mechanisms should 
be found to limit study cost and time. For studies of deep-draft ship 
channel improvements, which are often rightly criticized for their 
naivete and lack of regional perspective, Congress should require 
regional analysis of improvements and adjust study cost-sharing 
requirements accordingly. Unless the present requirement for 
feasibility study cost sharing for deep draft navigation channel 
improvements is altered, unbiased regional port planning will not be 
done--regardless of the existing requirements for regional studies in 
the current Water Resources Council Guidelines and the continuing 
complaints of watch-dog groups and independent project reviewers.
Improving Corps Analytical Capabilities and Products
    To be able to meet the challenges of modern analysis, the Corps 
must reorganize and concentrate its professional planning resources 
into centers of expertise. Reorganization would have many benefits: (1) 
Professionals in the major planning disciplines would be able to share 
knowledge and experience face-to-face. (2) Enhanced opportunities for 
professional growth and advancement within a given discipline would be 
created. And, (3) pressures to ``justify'' a questionable project would 
be reduced. Such changes in Corps planning were last proposed at the 
end of the Administration of George Bush in 1992. Like earlier attempts 
at reorganization, this last attempt was abandoned in the face of 
powerful congressional opposition.
    The Army and the Corps are taking steps to reestablish an effective 
internal review process after a decade of decentralization and 
denigration of the review function. While consultation with outside 
experts and independent review of planning documents is appropriate for 
large, controversial or highly risky projects such as the Comprehensive 
Everglades Restoration Project and the Missouri River operating plan, 
it should not become a routine requirement. Such reviews are expensive, 
time consuming and unlikely to produce a definitive conclusion 
regarding the best investment or management decision. Moreover, for 
such outside consultation to be effective, the outside experts must 
have a clear charter and understanding of the policy context in which 
their help is being solicited. In short, I believe there is no 
substitute for an initial high quality Corps of Engineers study that is 
reviewed thoroughly by the many Federal agency experts in the normal 
course of development of a final Administration recommendation.
    Congress should direct the Secretary of the Army to reorganize the 
Corps in the interest of improving its analytic capabilities and to 
ensure effective internal reviews for Civil Works projects. Congress 
should authorize the Secretary to utilize the services of outside 
experts at the beginning of studies likely to lead to large and 
controversial projects and to provide for independent review of those 
projects prior to their transmittal to Congress. It should also provide 
criteria for the types of studies for which outside consultation and 
review is required.

                        SUMMARY AND CONCLUSIONS

    The Corps of Engineers is uniquely qualified by its professional 
resources and its adherence to the Principles and Guidelines to address 
the full spectrum of the nation's water problems. I believe that the 
best opportunity for the Nation to integrate the management of all 
water quality and quantity problems is through the Civil Works planning 
process under the existing Principles and up-dated Guidelines.
    Congress and the President must work together to take full 
advantage of the Corps' potential to develop solutions to the nation's 
water and related land resource problems and to recommend productive, 
cost-effective public investments. Congress can best ensure that the 
Corps consistently pursues sound water resources development and 
management by taking these actions: (1) direct the U.S. Water Resource 
Council to review and update executive branch planning guidance, (2) 
remove obstacles to unbiased analysis created by past legislation, (3) 
authorize only those projects that have completed the executive branch 
study and review process, (4) re-institute substantial cost sharing for 
all projects without exception, (5) clarify the kinds of studies it 
expects and modify study cost sharing to support those studies, and (6) 
require demand management be an integral part of the delivery of 
project services when it can increase project benefits. Finally 
Congress should support the Department of the Army and Corps in 
strengthening the Civil Works planning and review capabilities and 
require use of outside experts to guide and review important studies.
                                 ______
                                 
  Responses of G. Edward Dickey to Additional Questions from Senator 
                                 Smith

    Question 1. I am particularly interested in your suggestion in your 
written testimony that the Corps reorganize to concentrate its 
professional planning resources into ``centers of expertise.'' Can you 
comment in more depth how you would envisions these ``centers of 
expertise'' working, describe the 1992 proposal, and what the specific 
opposition was to this attempted reorganization?
    Response. ``Centers of expertise,'' in my view, are offices where 
there is a concentration of experts in a particular area of economic or 
environmental analysis. These experts would be called upon to perform 
all benefit or impact analyses of a particular type for Corps studies. 
For example, one or two districts or the Corps' Institute for Water 
Resources could house all the deep-draft navigation benefit estimation 
experts. This organizational structure would allow the staff who are 
most knowledgeable in a given subject area to routinely interact, to 
keep abreast of the latest analytic developments, and to continually 
apply their detailed and specific knowledge to concurrent and 
successive studies. In addition, the potential for bias toward 
favorable study outcomes is reduced. The analysts' future employment 
and that of their fellow workers would not be tied to a favorable study 
outcome, and the lack of proximity to the sponsor may reduce untoward 
pressures for the outcome sought by the non-Federal sponsor.
    The 1992 study called for this kind of organization. Under that 
plan, the project manager for the study would remain in the geographic 
district where the project would be located; he would then contract 
with other Corps offices to do study tasks just as he presently does 
with private contractors. Another objective of the 1992 plan was to 
promote competition among districts with the goal of improving cost and 
schedule performance as well as study quality.
    Congressional opposition to the 1992 plan came from two sources: 
The first was the loss of employment in and diminution of the stature 
of specific districts that would not become centers of expertise. The 
second, I believe, was a fear that the Corps would not be as responsive 
to local desires as they are under the present organizational 
structure.

    Question 2. Can you give some specific examples of how the Corps 
project planning process needs to be modernized?
    Response. Two obvious and compelling examples are the integration 
of demand management into inland navigation studies and adoption of 
regional port analysis for deep draft navigation studies. The Corps, 
reflecting the concerns of its traditional constituencies as well as 
its own proclivities for structural solutions, has resisted evaluating 
demand management despite the large economic costs to shippers 
associated with congested locks. In similar fashion, the Corps 
continues to justify coastal navigation improvements based on the 
assumption that the port's volume of commerce will be the same without 
the improvement being in place as with the project. This assumption can 
result in a serious distortion in the estimate of project benefits and 
is contrary to existing guidance in the Water Resource Council's 
Guidelines. The reason Corps continues to conduct these naive analyses 
is that neither the executive branch nor Congress has raised serious 
objection. Project advocates are content with the present approach 
because I believe they recognize that a more defensible analysis may 
reduce their prospects for getting a project.

    Question 3. What steps can be taken to improve the credibility of 
Corps studies?
    Response. Good water resources planning is ultimately an art 
requiring professional judgments and policy direction to determine 
``how much study is enough.?'' There are several elements to producing 
a credible project recommendation. The first is to insist that 
competent analysts carry out every project study. Second, the analytic 
techniques must be appropriate to the size of the expected project and 
the character of the alternatives. When it comes to techniques, one 
size does not fit all. In some cases, state-of-the-art analytic 
techniques may be much too expensive for the decision to be made. 
Third, studies must be thoroughly and effectively reviewed for their 
technical soundness and compliance with law and policy. A complete 
executive branch review should be the norm, and Congress should have 
the benefit of the Administration's recommendation not simply that of 
the Corps. Fourth, the Corps needs to also consult with outside experts 
in the case of especially complex studies with exceptional risks and 
uncertainties. My own experience with the Comprehensive Everglades 
Restoration Projects, shows that large ecosystem restoration projects 
should routinely rely upon input from outside experts including those 
from other Federal and state agencies.

    Question 4. In your opinion, what steps can be taken to ensure that 
Corps projects maximize both economic and environmental benefits?
    Response. Unfortunately economic and environmental ``goods'' are 
seldom coincident; it is rarely possible to maximize both in the same 
project. Water projects typically involve manipulation of the natural 
environment in the interest of some economic benefit. If the preserving 
and protecting natural ecosystems is an environmental ``good,'' then a 
development project will have some adverse consequences. While such 
consequences may be reduced or mitigated at no economic cost, not all 
of the adverse environmental impacts can be avoided through refinement 
of the plan. Choices made between competing values must be made. In my 
view, the proper role of the Corps is to analyze the choices and to 
make a recommendation as to the most appropriate balance between 
economic, environmental and other considerations. Since such choices 
are ultimately subjective, we can expect controversy. The Corps should 
not be blamed for showing that there are tough choices to be made. 
However, it should be held responsible for the quality of the analysis 
that describes the public's choices.

    Responses of Edward Dickey to Additional Questions from Senator 
                                Jeffords

    Question 1. You stated that independent review may be appropriate 
for some, large controversial projects, but not for all. In your 
opinion, should the Corps reestablish a more independent, internal 
organization to review all other projects?
    Response. I think there should be a review organization that 
reports to the Secretary of the Army. In 1992, the Administration did 
not object to Congress' elimination of the Corps' own review body, the 
Board of Engineers for Rivers and Harbors. The Board had become 
redundant in light of the more complete review function then being 
performed by the Office of the Assistant Secretary (Civil Works) in 
close cooperation with review staff in the Corps Headquarters. These 
review activities were largely eliminated during the eight years of the 
Clinton Administration. In my opinion, the downgrading of the 
Washington level review function accounts for much of the present lack 
of credibility in Corps planning reports. It is my understanding that 
the Office of the Assistant Secretary is rebuilding its review 
capabilities. I believe Congress should review the Secretary's actions 
and either support the reestablishment of the Secretary's review 
function in its present form or further strengthen it by providing a 
clear charter and policy direction in legislation.

    Question 2. You indicated that the available procedures for the 
evaluation of the environmental potentials of Corps projects are 
limited. Do you believe that most Corps projects adequately consider 
the environmental opportunities or impacts? If not, what would you 
recommend to improve this?
    Response. I believe the Corps has all the authority to evaluate the 
environmental potential and impacts of its projects that is necessary 
or appropriate. Moreover, the Corps has been a leader in developing 
analytic techniques to measure and evaluate environmental impacts. 
Unfortunately, in some (rather than most) situations, Corps districts 
have not chosen to apply all of the agency's expertise or comply with 
existing policy guidance. In some cases, the study sponsor, who must 
pay half the cost of a project study, may have no appreciation for or 
interest in such values and thus resists such analyses. In other cases, 
the district itself may not have an appropriate appreciation of the 
need to study and consider environmental consequences. These twin 
forces result in Corps districts avoiding studies that explore the full 
range of choices or which indicate the importance to both the economy 
and the environment of the choices to be made. The way to fix these 
serious problems is first through reestablishment of effective 
Washington level review that will assure that: (1) More than local 
perspectives are reflected in the scope of district project studies and 
in the range of alternatives considered, and (2) the districts' 
evaluation techniques are appropriate and correctly applied. The second 
step would be to allow the Corps to move its experts, who should be 
responsible for important environmental evaluations, into centers of 
expertise. As I stated in my prepared statement, there is no substitute 
for an initial high quality Corps study that has been reviewed 
thoroughly in the course of developing a final Administration 
recommendation.

                               __________
    Statement of Lisa Holland on behalf of The Association of State 
                       Floodplain Managers, Inc.

                              INTRODUCTION

    The Association of State Floodplain Managers, Inc. (ASFPM) is 
pleased to share comments on issues related to Authorization programs 
of the Corps of Engineers. These include the 2002 Water Resources 
Development Act (WRDA), and proposed bills S. 1987 and S. 646.
    The Association of State Floodplain Managers, Inc. and its state 
chapters represent over 4,500 state, local and private sector officials 
as well as other professionals who are engaged in all aspects of 
floodplain management and hazard mitigation. All are concerned with 
reducing our Nation's flood-related losses and many have worked with 
Corps Staff on the implementation of flood control and restoration 
projects in their community or state.
    The ASFPM chooses not to comment on specific water resource 
projects, rather we choose to focus on policies that drive project 
formulation and implementation.

                              THE PROBLEM

    In general the ASFPM believes that the US Army Corps of Engineers 
has a long proud tradition of providing water resource projects to the 
Nation. However, we also believe that the model being used today best 
served the Nation in a past era, and that it is time reshape the Corps 
based on modern domestic policies.
    Current policy and process have resulted in disagreement over the 
economic and environmental viability of many projects; a huge backlog 
of controversial projects; division among the nation's policymakers on 
how to invest in projects; and a situation where the cost of operating 
and maintaining existing projects is becoming excessive.
    The policy and process model that we are currently working under:
    1. Assumes that national return on investment (NED) is our focus 
for water resources, yet we never consider the opportunity cost of this 
investment.
    2. Assumes that environmental or social benefits are of a lesser 
value than economic benefits, in spite of congressional actions to the 
contrary.
    3. Has led to many non-Federal sponsors wasting time and money on 
projects that are not justified, or will not be funded.
    4. Has attempted to meet national objectives through an altruistic 
planning process that is prone to manipulation to meet pre-conceived 
project outcomes.
    5. Has failed to expand from a Federal investment mentality to one 
that embraces and supports a broader array of domestic policies, most 
notably the lack of focus on actions that reduce future disaster 
expenditures.
    In order to address these issues and others, we will focus our 
testimony on the following areas:
Trends in Flood damages--Growing disaster expenditures
    Despite the expenditure of over 100 billion dollars and years of 
efforts in Federal programs to reduce flood damages and encourage sound 
floodplain management flooding costs are now approaching $5-$8 billion 
per year. On one hand this may be surprising, but on the other hand it 
was predictable. Our policies and practices have tended to encourage 
people to occupy areas that are marginally protected from flooding, or 
to take actions in the floodplain that have transferred their problem 
onto others. The economist would suggest that these occasional damages 
are reflected in the economic models, and as long as benefits exceed 
cost, that escalating flood damages is a rational outcome. For this 
model to work however, based on current policies, it would needs to 
assume that there is virtually an unlimited supply of money to pay for 
the disaster costs, and that other programs of domestic policy would 
not suffer because of the transfer of dollars to pay for disasters.
    The fact is that there is not an unlimited supply of cash, and that 
other domestic programs do suffer from escalating disaster costs. To 
break this cycle the Corps must begin to modify its model such that it 
leads to solutions that provide permanent flood protection with an eye 
toward reducing disaster costs. Many times these solutions may be the 
least cost solution, but may not satisfy the NED criteria. Recognizing 
the regional economic development goals of many local sponsors, we 
would suggest that Congress encourage the ability to link Corps 
projects with other programs of economic development outside of flood 
hazard areas.

Principles and Guidelines (P&G)
    The P&G have been used since 1983, when they replaced the 
Principles and Standards. In spite of their shortcomings, in theory 
they provide a reasonable approach to justify an investment mentality 
for project alternatives. In reality, they are a maze which both 
Federal and non-Federal sponsors navigate to justify a pre-conceived 
outcome. The P&G alone fall short of supporting the domestic policies 
of the Nation. At a minimum the P&G need to be reissued with the 
environmental quality account being a required input to the process.
    For P&G to be effective, the Congress must mandate the Corps to 
develop and adopt methods for quantifying the economic value of 
environmental, cultural, and social inputs. For the expenditures of the 
Corps to be effective, the P&G must be augmented with decisionmaking 
criteria that reflect current domestic policies and programs. In 
essence they need more than tweaking. The P&G do not reflect the way 
planning is done today, by any level of government, let alone the 
Corps. Forcing Corps staff to use these guidelines sets up an instant 
conflict in the project alternatives. The Principles and Guidelines 
need to reflect a collaborative, multi-objective approach in the 
beginning, rather than attempting that collaboration at the end of the 
process. The list of Environmental operating principles put forth by 
General Flowers provides some excellent ideas for incorporation.
    We would urge that the Principles and Guidelines be revised in 
collaboration with a group of Corps ``partners'', who work with the 
Corps and other programs in developing projects for flood loss 
reduction and environmental restoration. Incorporating the ability to 
coordinate project implementation with other programs will provide an 
opportunity to leverage dollars.
    Benefit/Cost analysis.--There is broad support of the need for 
modifications in the approach for determining the cost effectiveness of 
projects. Much of this focus is misplaced due to the emphasis in the 
process that results in selection of the NED plan. Better to spend our 
efforts re-thinking the process to select the alternative, so we end up 
with a project appropriate to the multiple needs of the local partner.
Incentives in cost sharing
    There has been considerable discussion about the Federal/non-
Federal cost share formula. We offer no preference on a specific cost 
share, and suggest that formula is a policy decision of Congress. We 
urge Congress to base their decisions on independent studies, which 
carefully assess where the true interests of the nation's taxpayers 
lies.
    What we do urge is a sliding cost share for non-Federal partners, 
which would provide incentives for those partners to take 
responsibility for reducing flood risk in their community.
    There are communities in the Nation that are aggressively 
implementing programs that reduce the need for Federal project 
expenditures or for disaster relief. Yet, we have likewise heard 
concerns from our members as to why should they continue to proactively 
fight future flood damages, when they can take the easy political 
route, do nothing and simply wait for Federal projects and disaster 
relief. The current system makes no sense, and does nothing to 
encourage local accountability and responsibility for combating 
disaster expenditures.
    It is time to Congress to communicate to those States and 
Communities that are taking proactive steps to combat future flood 
losses, that they are doing the right thing for their community and for 
the Nation. We would argue that by providing a more favorable cost 
share to those communities that are proactively dealing with future 
losses, that in the long run Federal expenditures for projects and 
disasters will decrease.
    Some might argue that this may be quite complex, but we would like 
to remind these individuals that in the mid-90's Corps Staff had 
developed the details for implementing a similar plan, and that FEMA 
has over a decade of experience in a similar program called the 
Community Rating System. These positive actions would demonstrate a 
commitment that will save the Federal taxpayers money on disaster 
relief, thus justifying the investment in the sliding cost share. A 
list of low cost incentives is attached.

The Federal role
    The Federal Government has a key role to play in helping to reduce 
flood damage, but that role has changed and evolved from what it was 30 
to 60 years ago. It has become apparent that federally developed 
solutions often yield single purpose projects which tend to address 
specific flooding problems, but may pay insufficient attention to other 
critical local considerations such as economic development, housing, 
water quality, watershed planning, natural resources, recreation and 
quality of life. Without those considerations, local buy-in is often 
razor thin.
    We have learned that some structural solutions to specific flooding 
problems can inadvertently create new flooding problems downstream. 
Some generate higher operation and maintenance costs than can 
realistically be supported by the local sponsor. Current programs tend 
to promote that flooding and flood protection is a Federal and not a 
local issue. Local governments and citizens grow to believe the Federal 
Government will bail them out if flooded or if the problem gets worse.
    Structural flood control projects are necessary in many instances 
and are often advocated by our members. Unfortunately, without the 
ability to offer various solutions or a mix of approaches, structural 
policies and programs can provide incentives to pursue solutions, which 
may not be the best choice for building hazard resistance in some 
communities. It is important to recognize that current Federal flood 
policy rewards those communities and states, which do the least to 
prevent and solve their flooding problems. Those rewards come in the 
form of Federal disaster assistance, Federal flood control projects and 
cost sharing for these actions. The Corps cost-sharing formula needs to 
evolve in order to be consistent with the evolution to new approaches 
in flood loss reduction in the Nation.

Independent Peer Review
    The ASFPM understands the cry for independent review, in light of 
the revelations during recent years. The problem with the independent 
peer review proposal is that peer review is necessary for two reasons. 
The first is to introduce a level of quality control, the second is to 
safeguard against what some might see as abuses to the process. If the 
peer review is meant to implement a level of quality control, than one 
needs to question why this is not already being accounted for within 
the planning and design process. If it is to safeguard against abuses, 
than one needs to question whether the problem is so severe within the 
Corps that the entire program needs to be reorganized with new 
management. While clearly there is always room for improved quality, 
the evidence would suggest that ``cleaning house'' is NOT necessary.
    What we do believe is necessary however is the following:
    1. A renewed commitment by the Corps to quality Control measures 
and plans.
    2. Occasional GAO audits of projects.
    3. A zero tolerance policy for those found to be directing the 
manipulation of project results.
    4. Independent peer groups that are formed to evaluate the 
assumptions used in the planning guidance.
    While some direct abuses have been alleged, for the most part what 
we have heard about tends to indicate planning guidance that is out of 
touch with real world situations and current domestic policy. If 
independent project review comes about, we suggest a streamlined 
process and a logical funding threshold is considered. Surely a $25 
million project is not reasonable. We see some individual homes being 
built in the Nation with costs approaching that. Perhaps something 8 to 
10 times that amount might make more sense.
Backlog and de-authorization
    There is a need to address review of the huge backlog of projects, 
with an eye toward either re-authorizing or de-authorizing the 
projects. The experience of our members suggests this backlog creates 
many problems. A common example occurs immediately after a flood 
disaster. The community wants to do something because of the damages it 
received, and the first thing they think of is some Corps project that 
was looked at in the past, which sits on the shelf now, in an inactive 
state. It may be there for a number of reasons, including being not 
cost effective, major environmental harm, controversy, etc. In most 
instances, the project would probably not be viable under today's 
circumstances, if it ever was. But the community sees it as a quick 
solution and spends lots of effort and time trying to make the project 
work, rather than looking at their problems and needs today, and 
working with all the interests in community to identify viable and 
implementable solutions.

                               __________
  Statement of Christopher J. Brescia, President, Midwest Area River 
                             Coalition 2000

    Chairman Jeffords and members of the Committee, my name is 
Christopher Brescia, President of the Midwest Area River Coalition 
2000. MARC 2000 is composed of leading agricultural producer groups, 
grain and industrial shippers, cement manufacturers, utilities, 
waterway transportation companies, labor unions, rail feeder systems, 
concerned individuals, economic development entities and many more 
facets of the Midwest community. Our coalition members generate over 
$125 Billion in economic activity from the Midwest and conservatively 
employ or self-employ more than 130,000 people in 24 states. These 
activities principally span the length of the Mississippi, Missouri, 
and Illinois Rivers. I am pleased to appear today to address proposals 
for a Water Resources Development Act of 2002, especially as it relates 
to the Upper Mississippi River Basin.
    MARC 2000's Upper Miss Basin proposal includes support for the 
authorization and construction of an initial group of seven new 1200-
foot locks, five on the Upper Mississippi (locks 20-25) and two on the 
Illinois River (LaGrange and Peoria), five guidewall extensions (locks 
14-18) and appropriate mooring cells. This proposal is limited to the 
placement of new 1200-foot locks at 7 out of a possible 37 locking 
locations, clustered at the lower portion of the river system just 
north of the confluence of the Upper Mississippi and Illinois Rivers. 
We are not advocating new locks on the entire 1202 miles of the basin 
system.
    We also strongly support an enhanced environmental restoration 
effort for our basin, beyond those identified as mitigation for 
navigation impacts, with a reliable and consistent funding mechanism. 
Our proposal's third element calls for timely completion of the 
WRDA'99-authorized Comprehensive Plan, designed to develop an 
integrated flood-control system for the Upper Basin.

              WORLD CLASS TRANSPORTATION & ECONOMIC SYSTEM

    According to the U.S. Department of Transportation, U.S. maritime 
trade is expected to double in less than 25 years. Freight in the U.S. 
is expected to clog the nation's highways and rails. Our waterway 
system is a logical means by which we can accommodate growth and reduce 
incidents of spills, air pollution, accidents and deaths to our 
population. But while our markets experience increased congestion, the 
world does not stay still. K. Kiplinger, author of ``World Boom 
Ahead,'' notes that, ``World agriculture trade will blossom in the next 
two decades. Grain trade will increase two-thirds or more by 2020. 
Imports and exports of soybeans will double. Livestock trade will 
triple.'' Does any casual observer of these trends believe the Midwest, 
the center of our productive capability can respond to these 
developments?
    The Upper Mississippi Basin covers a total area of 1202 river 
miles, which was 10 percent of the inland waterway system, but which 
provides 48 percent of the ton-miles of the total inland waterway 
system. In the Upper Midwest, between 100-120 million tons of traffic 
moves through an antiquated lock and dam system, operating well beyond 
the 50-year design life. The Upper Miss navigation traffic data 
connected to likely future scenarios project a 60-70 percent increase 
in this traffic over the next 50 years. Today, the typical 15-barge tow 
(1100 feet long) must break in two parts in order to transit locks 
designed for paddlewheel ships of another era. With the advent of 
towboat power and stronger engines in the 1940's, the 600-foot lock 
system built in the Upper Mississippi has rapidly become obsolete. 
Major rehabilitation efforts have been underway for over 20 years to 
shore up crumbling concrete, outdated electrical systems and many 
moving parts. But none of these actions have addressed the issue of 
increasing the locking capacity of the Upper Miss system.
    Our Nation relies on this outdated transportation system for the 
movement of our corn, soybean and wheat exports into the world market. 
Over 60 percent of all grain exports move through the Upper 
Mississippi, en route to New Orleans. Grain exports still account for a 
trade surplus in our balance of payments account, but at a considerable 
cost to our producing community. The report issued by the National Corn 
Growers Association last month on the impact of this outdated system to 
the nation's economy is very sobering. The staggering expected loss of 
farmer income, grain exports and the resulting increase of the Federal 
deficit by $1.5 Billion dollars per year should be sufficient cost/
benefit analysis for congressional action.
    It's important to view the investment of our navigation 
infrastructure within the context of a global economy, just as American 
companies view their competitive position. Over the last 10 years, the 
U.S. has worked hard to open world markets through World Trade 
Organization negotiations and other regional multilateral agreements. 
U.S. agricultural trade policy supports active programs encouraging 
corn and soybean exports. Our transportation infrastructure, however, 
is not keeping up with these developments, nor is it positioning U.S. 
producers to capture future growth. Rather, inaction has fueled foreign 
competition with increased virgin lands put into production and a 
juggernaut in the making.
    Over the last 10 years, our South American competitors have visited 
our country, learned from our past investments and are duplicating the 
vision of our forefathers by creating a state-of-the-art transportation 
infrastructure. While they have invested in their future, we have 
``studied the problem.'' While we determine the best forecasting tool 
and argue whether exports will grow at 1.5 percent average annual 
growth or 2 percent average annual growth, they seize on our nation's 
indecision by taking away market share growth from our farm community. 
Brazil has doubled their share of soybean exports over the last 5 
years. U.S. soybean exports have fallen 27 percent.
    About 18 percent of U.S. annual GDP goes to private investment 
money spent by individuals and businesses for goods and services, which 
will endure and produce future value. Foreign trade's share of total 
economic activity nearly doubled, from 13.8 percent in 1986 to 26 
percent in 1996. Looking forward, there is no reason to suggest that 
the trade share of total economic activity will not continue to grow 
dramatically.
    As our economy becomes more dependent upon exports, our ability to 
access and compete for world markets will become more critical. Many 
believe that the world stands on the threshold of a long, strong surge 
in economic growth and subsequent higher living standards. Those 
nations who will share in that growth will be those who have the most 
efficient export-oriented infrastructures in place to compete in the 
marketplace.
    All the major U.S. grain companies agree that 60-65 percent of 
future grain exports will travel down the Mississippi River. Ocean 
freight rates will determine whether, on an annual basis, about 5 
percent of movements might shift from the Mississippi River to the 
Pacific Northwest or vice versa. Well-established shipping patterns of 
the last 30 years are expected to be replicated in the next 30 years. 
Private sector investments in the infrastructure have already been made 
and now we are waiting for the Federal Government to make 
infrastructure investment in the Upper Basin a priority.
    Currently, about 10 percent of world food production enters 
international trade. Most scenarios have the volume of trade doubling 
by 2010 and doubling again by 2025. The most environmentally benign 
transportation system our inland waterways--is physically incapable of 
handling this surge in demand. We don't rely on 1940's vintage roads 
and air transportation to meet our needs, neither should we expect 
modern tows to rely on steamboat era locks.
    U.S. investment to reverse the years of neglect and restore our 
inland waterway system into a world-class transportation system is 
critical to merely keep pace with other nations and supporting our 
economy. According to independent studies conducted by Price Waterhouse 
and Mercer Management Consultants, the Upper Miss provides benefits to 
a wide range of employment groups. More than 400,000 jobs are supported 
from traffic that originates and terminates in the Upper Mississippi 
River Basin. Of those, 90,000 are in the manufacturing sector. Those 
jobs are estimated to generate $4 Billion in income and between $11-$15 
billion in business revenue.
    Equally important to the modernization decision in the Midwest is 
the fact that an efficient waterway transportation system is integrally 
connected to the sustainability of agriculture in general. The food and 
fiber industries are our nation's largest sector contributing 
approximately 13.1 percent of total GDP, 17 percent of the value-added, 
16.0 percent of the total labor force, and 10 percent of the total 
income. It also accounts for about 23 million jobs.
    The efficiencies and economies of scale created by agricultural 
exports are what keep our consumer prices the lowest in the world, 
about 10.7 percent of disposable personal income. If exports fall, the 
production base contracts and consumer food prices rise. If exports 
rise, further efficiencies are created to keep consumer food cost 
prices low. Over 30 percent of U.S. crop acreage can be considered 
produced for export. As world demand rises, simply maintaining current 
market share would require an inland waterway system capable of 
handling twice the tonnage by year 2025.

     UPPER MISSISSIPPI/ILLINOIS RIVERS NAVIGATION FEASIBILITY STUDY

    Mr. Chairman, MARC 2000 has been involved in the Upper Miss 
navigation study since the inception of the feasibility study in 1993. 
Ten years later, we are on the edge of our seats as the Corps of 
Engineers is poised to issue an Interim Report on July 1 of this year. 
We believe there will be sufficient information in that report for 
Congress to initiate a balanced modernization program in the Upper 
Mississippi Basin that includes lock modernization and enhanced 
environmental restoration programs.
    This study has taken many turns and permutations over the last 10 
years. One of the most important developments in the past year has been 
the Chief of Engineers' decision to restart and restructure this study 
with the assistance of other Federal and state agencies and stakeholder 
groups in the basin.
    This Interim report should provide a fresh look at the risks we 
take in not modernizing the lock system in the Upper Miss Basin. It 
should also provide important guidance on the risks we take as a Nation 
if we don't address pressing environmental declines in the river. 
Private stakeholder groups have met and continue to meet to find the 
right balance toward sustaining economic growth and protecting the 
environment. The discussion has shifted from one of mutual exclusivity 
in investment to how we manage the future of the river for all uses 
without jeopardizing the uses of future generations.
    The following is clear and irrefutable:
    First, this waterway system is critical to the future 
competitiveness of the Midwest agricultural economy. Without efficient 
waterway transportation, Midwest grain exports will be lost at 
considerable expense to producers and the national treasury;
    Second, with continued and increased congestion costs on the 
waterway, shippers will have to find alternatives to ship their goods 
or lose sales. Every modal shift study concludes considerable economic, 
environmental and social benefits to keeping freight on the waterway. 
Creating higher cost structures on the water through investment 
inaction will lead to lost economic activity, increased air emissions, 
increased fuel consumption, increased accidents and increased 
fatalities in our communities.
    Third, continuing to show indecisiveness in modernizing the 
waterway infrastructure in the Midwest will continue to embolden our 
global competitors to increase placing virgin lands into production and 
work to capture the growing share of a world food market that will 
double in the next 10 years. Our inactivity is ensuring that the U.S. 
may not be in a position to capitalize on these new markets.
    Fourth, the environmental benefits of the waterway system, 
including those initially created with the construction of the lock and 
dam system, are declining. Without a high priority commitment to 
redressing that decline, we will continue to lose islands, important 
backwaters, and other ecosystem elements critical to this recreational 
Mecca and national flyway.

                          STRONG BASIN SUPPORT

    Equally clear and irrefutable are the thousands of private citizens 
who have expressed their support for modernization of the lock system 
over the last 10 years, either through direct communications to 
Congress, at Corps of Engineers-sponsored public meetings and 
information sessions and most recently through statewide-elected 
officials.
    The MARC 2000 coalition includes a multitude of industries, 
individuals, labor groups, trade associations and community economic 
development groups. These constituent groups know that as a region, 
over 151 million tons of commodities moved on the 2,000 navigable miles 
of the Upper Mississippi, Illinois, and Missouri River System in 1999. 
The combined value of these commodities totaled approximately $24 
billion. For the same year, 92.5 billion tons of commodities were 
shipped out of our region \2/3\rds of which consisted of corn, 
soybeans, wheat and other grains. Louisiana receives 54 million tons of 
this grain for export to world markets, while 3 million tons went to 
processing facilities on the Tennessee River.
    Our region's docks received more than 28 million tons from outside 
the system, most of which were fertilizers and other chemicals. Another 
30 million tons moved within the basin in 1999, more than half of which 
consisted of gravel, sand, and other aggregates.
    A 39 percent majority of the shipments out of our region consisted 
of grain, but many other commodities travel our river system. The Corps 
of Engineers figures reveal impressive statistics for total traffic in 
1999 on the UMRS: almost 28 million tons of coal ($1.1 B), over 10 
million tons of petroleum ($1.6 B) 27 million tons of aggregates ($943 
million) over 59 million tons of grain ($8.7 B) over 9 million tons of 
chemicals ($4.3 B) over 3 million tons of ores and minerals 
($453million) over 6 million tons of iron and steel ($4.2 B) and over 8 
million tons of other products ($2.3 B) moved on our waterways in 1999.
    On a state level, shipments to and from Illinois totaled 92.3 
million tons, worth over $15 B. Shipments to and from Missouri totaled 
46.1 million tons, worth over $3.8 B. Shipments to and from Minnesota 
totaled over 20.2 million tons, worth over $3.3 B. Shipments to and 
from Iowa totaled 18.4 million tons, worth over $2.7 B. Shipments to 
and from Wisconsin totaled over 4.5 million tons, worth over $340 
million. These shipments of goods connected our five states with 17 
other states in the Nation (TX, OK, KS, NE, MI, IN, OH, KY, WV, PA, AR, 
MS, AL, TN, LA, FL and GA), not to mention world markets. Copies of our 
state profiles can be accessed on our web site at www.marc2000.org.
    The importance of the waterway to this region has not been lost on 
witnesses over the years. Our stakeholder groups have spent the last 10 
years waiting for the Federal study process to produce an assessment of 
the navigation and environmental needs. While the restructured study 
may achieve that goal, the economic and environmental imperatives 
dictate action necessary this year to launch a lock modernization and 
enhanced restoration initiative.
    Last year, the State of Minnesota started a process that has 
mushroomed in the basin. Acting on its own initiative and encouraged by 
Rep. Jim Oberstar, the state legislature passed House Resolution 208 
and Senate Resolution 551 overwhelmingly, expressing support for lock 
modernization and environmental restoration. Minnesota rejected 
suggestions that they could not offer direction just because the Corps 
study was not completed. Minnesota legislators recognized the economic 
and environmental value of moving bulk commodities on the inland 
system--as most Americans do when offered the choice--and chose to 
forge ahead with their expression of support.
    This year, the Iowa, Missouri, Illinois and Wisconsin legislatures 
went a step further, passing their own resolutions recognizing that:
     Efficient operations of the inland system is critical to 
their economy and environment;
     Modern 1200-foot locks have a proven track record of 
alleviating congestion on the inland waterway system; and among other 
things,
     It's time to get on with this program and authorize 
funding to construct 1200-foot locks.
    Mr. Chairman, I would ask that copies of Minnesota House Resolution 
208, Illinois Joint Resolution 54, Iowa House Concurrent resolution 109 
and Senate Concurrent Resolution 104, Missouri Senate Concurrent 
Resolution 44 and House Concurrent Resolution 11, and Wisconsin 
Assembly Resolution 56 be included in the record with my testimony. 
These resolutions passed with broad bi-partisan support and call on 
Congress to authorize and fund the construction of 1200-foot locks on 
the Upper Mississippi and Illinois Rivers.
    Testimonies at the most recent round of public meetings made it 
clear that the labor community joins our industrial, agricultural, and 
economic development communities in expressing strong support for the 
authorization and construction of new locks on our inland waterway 
system. These projects provide a double investment to the economic 
security of our region and country. First, good family wage jobs in our 
Nation are supported by the efficient functioning of our transportation 
system and the construction of modern locks. Second, infrastructure 
renewal has a proven record of stimulating additional economic activity 
and more jobs. Historically, navigation water project investments have 
returned to the national economy benefits many times over the original 
dollar investment.

                          SMALL SCALE OPTIONS

    Smaller scale investments are certainly part of the study's area of 
concentration. Industry representatives have spent countless hours with 
engineering contractors and the Corps of Engineers reviewing over 100 
different proposals. It appears we are revisiting some of the same 
alternatives, such as industry self-help and now scheduling.
    The theoretical underpinnings of scheduling promise to reduce lock 
congestion, reduce barge rates to shippers, improve equipment 
utilization for barge operators and reduce operating costs for barge 
operators. In reality, all it will likely accomplish is another layer 
of bureaucracy and delay solving the problem with the most efficiently 
recognized alternative, 1200-foot locks.
    Lock delays and resulting high barge rates are symptoms of a 
seasonal river system that primarily operates 9 months, and inadequate 
lock infrastructure incapable of meeting shipper demand. Congestion is 
a function of the timing of market demand with the ability to move 
carrying capacity to the areas of the system to meet that demand.
    Scheduling will not allow the industry to increase barge supply in 
the spring, will not result in increased barge supply in the fall, will 
not reduce shipper rates in the spring, nor in the fall. It might 
minimize some lock delay costs. But, in order to reduce carrier 
operating costs, equipment that otherwise would be waiting in queues 
must be productively and economically employed in alternative income 
producing uses. On the Upper Mississippi River system, equipment either 
waits in queue or waits at an alternate location until scheduled 
lockage time is allocated. Mr. Chairman, I would like to introduce into 
the record a report issued by the Inland Waterway Users Board to the 
Chief of Engineers outlining these key reasons why scheduling is not 
the answer to our problems on the inland waterway system.
    Finally, some have suggested that small-scale measures, though not 
the long-term solution to address a 60 percent growth in traffic, might 
be a short-term solution. Regrettably, this thinking is what got us 
behind the eight ball today. History has proven that average annual 
growth is not how the real world works, but only how models can operate 
to project future needs. The reality of surges in grain exports means 
that if we build infrastructure solely to meet average annual growth, 
rather than capturing peak movements, we will continue to lose growth 
opportunities.

                        ENVIRONMENTAL PRIORITIES

    This Feasibility study has already spent over $26 million reviewing 
biological impacts of increased traffic and the cumulative impacts of 
navigation on the Upper Basin system. In addition, we have invested $76 
million more creating a monitoring system under the Environmental 
Management Program (EMP), which has proven invaluable in providing us 
with better information about the environmental status of the river's 
ecology.
    In addition, the Upper Mississippi River Conservation Committee has 
issued a document entitled ``A River that Works and a Working River,'' 
chronicling the evolution of the Mississippi River sustaining multiple 
uses, but one whose environmental values provide a mixed report. 
Through the EMP, our region has also produced a Habitat Needs 
Assessment outlining initial ideas on activities to restore lost 
habitat to the river's ecosystem. These combined efforts have helped 
scope a range of opportunities for an enhanced restoration effort in 
the Upper Mississippi River Basin.
    The solutions to site-specific navigation improvements are well 
documented. Agreement on how best to achieve environmental 
sustainability is still very much the focus of our collaborative 
effort. MARC 2000 would urge the Committee to give careful 
consideration to evaluating WRDA 2002 proposals to address the 
following concerns:
     The Corps' traditional approach and funding of Operation 
and Maintenance needs to be re-evaluated to address both the navigation 
system and the ecosystem. O&M costs have been increasing as the 
navigation infrastructure ages and the challenge of finding 
environmentally acceptable approaches increases pressure on a budget 
item unable to meet current needs;
     Setting aside the traditional approach of addressing 
environmental restoration in the Upper Miss Basin primarily through 
mitigation by exploring means by which the full range of actions 
required for future environmental sustainability can be implemented;
     Establishing a viable approach for funding environmental 
improvements. While the Inland Waterway Trust Fund provides cost-
sharing dollars for navigation improvements, there is considerable 
question on how to finance environmental restoration efforts largely 
needed to balance the creation of a Federal locking river whose 
benefits are enjoyed by multiple users.

                               CONCLUSION

    Mr. Chairman, our Basin is prepared to work with Congress to find a 
reasonable approach to lock modernization and environmental 
restoration. In addition to working as part of the collaborative 
process with the Corps of Engineers and other Federal agencies and the 
Governors' representatives, we are engaged in dialogs with leading 
environmental groups in the Basin. We sincerely seek a balanced 
approach to the Basin's needs.
    Unfortunately, the lack of resource commitment to completing 
navigation projects of national significance is sapping our Nation of 
vital economic benefits associated with responsible water resource 
development.
    Lock modernization on the Upper Miss and Illinois must begin this 
year with authorization language and pre-construction and design work 
if we have any hope of staying competitive in world grain trade. It 
will take at least 2 years or more for the PED process to be completed 
prior to construction. We believe the Interim Report will provide 
sufficient guidance for Committee action. In order for the benefits of 
U.S. Trade, Agriculture and Transportation policy to be realized in our 
part of the country, we must move rapidly to protect our Achilles heel: 
the aging, antiquated, trade-limiting inland waterway system.
    Many different products are transported on our waterway system. 
However, I would like to close with another agricultural example of why 
this investment decision should be acted on immediately. In the 1999/
2000 farm production year, over 270 million bushels of soybeans and 
1.214 Billion bushels of corn were loaded on barges for export from the 
Upper Miss Basin. Those exports were valued at over $4 Billion. 
According to USDA multipliers, these exports generated a gross economic 
output of over $22 Billion, personal income of over $6 Billion and 
supported gross employment of over 230,000. This activity would have 
generated $776 million to the U.S. treasury, or almost 60 percent of 
the total cost of lock modernization on the Upper Mississippi and 
Illinois Rivers.
    By any other standards, this investment would be a given, 
especially when half the cost of modernization is paid for out of the 
Inland Waterway Users Trust Fund, which is currently running a surplus 
of over $400 million. Modernization helps redress the extensive 
rehabilitation costs of old structures and reduces the backlog. The 
economy wins with stronger farm economies, efficient transportation 
systems and a reinforced jobs base. The environment wins with slower 
growth of alternative modes that consume more fuel and emit more 
pollutants, such as hydrocarbons, carbon monoxide, and nitrogen oxides 
into the air. Societies win with sustained quality of life, fewer 
accidents and transportation-related fatalities.
    It is far more likely that export growth will surge prior to 
completion of new locks than construction of new locks being built 
prior to the next wave of export growth. The risk to the Nation is 
greater if we can't meet that surge of demand than if we're meeting it 
head on or waiting for it to develop as food experts predict it 
inevitably will.

                    CORPS OF ENGINEERS STUDY PROCESS

    Mr. Chairman, I would like to express a few words about the Corps' 
Feasibility study process.
    The picture of the Corps painted by certain elements of the press 
along with the glib commentaries of selected opponents to water 
resource development are very different from the Corps of Engineers we 
work with and, yes, argue with over technical analyses and how best to 
achieve congressionally authorized purposes for projects and programs 
throughout this Nation. The Corps is made up of a unique blend of 
civilians and military personnel who serve their Nation well. This 
agency was recently voted as one of the two best government agencies in 
value produced for taxpayer dollar received.
    The people in our basin worked side-by-side with Corps personnel in 
1993, 1995, and 1997 and most recently during the 2002 floods that have 
resulted in minimum loss of life and in protection of the environment. 
Before the long-standing policies and procedures of the Corps of 
Engineers are too quickly attacked, let's reflect on the fact that 
we're dealing with an organization that has an unprecedented record of 
civil works and emergency response accomplishments. The last thing in 
the world that we need is change which makes the Corps study process 
more costly, time-consuming and burdensome.
    The Upper Miss study is an example of an extremely open 
participative process. The public has been involved in this study at 
every step of the way. There have been over 80 ``open'' technical 
meetings at each step of the way. There have been over 41 public 
meetings between 1993-2000. Some might even argue this has been too 
much public participation and has perpetuated the problem of paralysis 
by analysis.
    This study is a compilation of countless other smaller studies that 
have been scoped out, conducted collaboratively with resource managers 
and economists throughout the basin, and then reviewed by expert 
elicitations and peer reviews. The direction of the study has evolved 
over these years. Additional sub-studies have been commissioned. I 
can't imagine how many PhDs this study has produced over the last 10 
years. There has never been any problem with the public's access to 
information. If anything, this open, collaborative process has miscued 
over one important promise and congressional desire--to be expeditious, 
deliberative and conclusive within a 6-year timeframe.
    We agree with the National Academy of Sciences (NAS) that certain 
expectations placed on this study, such as 50-year projections, are 
unrealistic. In addition, we believe the process is overwhelmed because 
there is a crisis of clarity over what this nation's priorities should 
be. Any attempts to change technical assumptions without clear policy 
agreement, at this time, would be premature and likely harm and confuse 
the Corps' ability to meet congressional objectives.
    Many of the concerns articulated over project purposes, benefit 
cost analysis and cost sharing are reflective of a lack of National 
consensus about water resource development priorities. In our basin, 
the citizens overwhelmingly would prefer that barge transportation move 
bulk commodities on the inland waterway system, rather than further 
overburdening the highways and rails that move through our communities. 
The national benefits of the waterways have been recognized since the 
inception of our Nation, and need to be re-emphasized. Water resource 
projects built our basin and now support an economic structure that 
competes in a global marketplace. Our investment in modernizing 
navigation lock infrastructure and improving the ecosystem must begin 
in earnest if we are to continue to provide family wage jobs in our 
basin.
    Thank you for the opportunity to present MARC 2000's views on WRDA 
2002 lock modernization opportunities and the Corps of Engineers study 
process. I would be pleased to answer any questions.

                               __________
    Statement of Tony MacDonald, Executive Director, Coastal State 
                           Organization, Inc.

    Mr. Chairman and Members of the Committee: Good afternoon. I am 
Tony MacDonald, Executive Director of the Coastal States Organization 
(CSO). On behalf of CSO, I want to thank Chairman Jeffords and the 
Members of the Committee for the opportunity to present testimony on 
the U.S. Army Corps of Engineers water resources programs and Water 
Resources Development Act of 2002 (WRDA). Since 1970, the Coastal 
States Organization (CSO) has represented the Governors of the nation's 
coastal and Great Lakes states, Commonwealths and Territories on issues 
relating to the improved management of coastal development and the 
protection of coastal resources.
    My comments today focus primarily on the need to get beyond the 
criticism of the implementation of the Corps of Engineer's current 
limited single-purpose, project approach to water resources management 
to building support for an affirmative national policy that encourages 
efficient and sustained investment in the nation's water resources and 
port infrastructure. This must include investment in the nation's 
``green'' infrastructure including wetlands, critical habitats, 
nonstructural and natural flood and storm protection features, and the 
beneficial use of dredged material. In CSO's view, this can best be 
achieved by making individual Corps projects accountable to a 
consistent national policy to manage the nation's shoreline and 
navigable waterways. This policy should be supported by an enhanced 
partnership with the states that builds upon the expertise of states 
and other local project sponsors in coastal, watershed and basin-wide 
management.
    Pursuant to the Coastal Zone Management Act of 1972 (CZMA), states 
develop programs for the management of rapidly developing coastal 
areas, and protection of water dependent uses and coastal resources. 
Under the CZMA, States must develop a planning process for assessing 
the effects and ways to control or lessen the impact of improper 
development in flood prone, storm surge and shoreline erosion prone 
areas, and to restore areas adversely affected by coastal hazards. 
Corps and other Federal activities are required to be consistent to the 
maximum extent practicable with federally approved coastal zone 
management plans.
    Under WRDA 1986, States share in the cost of Corps Civil Works 
projects. States also serve as local project sponsors, or work with 
port authorities and local governments that serve as local project 
sponsors. States have a public trust responsibility to their citizens 
to protect coastal resources including navigation, fishing and public 
access. Increasingly, states and local governments are also embracing 
initiatives to manage coastal sprawl and collaborative community-based 
planning and management models such as the National Estuary Programs. 
Effort to ``reform'' the Corps must take into account these 
multipurpose, multi-stakeholder efforts that go beyond traditional 
economic benefit analysis to take into consideration the value of 
environmental, cultural and social inputs, as well as so-called 
national economic development benefits.
    Recent conflicts over significant port expansion projects in 
Delaware River and Charleston, SC and challenges posed by port 
expansion in places like the Columbia River, Houston and New York 
demonstrate the importance of a broader incorporation of local and 
regional concerns into national port planning. A closer look at port 
project success stories such as Oakland and Houston reveal that port 
and transportation benefits can and must be matched with environmental 
restoration and enhancement efforts.

    THE NATIONAL INTEREST IN THE COASTAL WATER AND NATURAL RESOURCE 
                             INFRASTRUCTURE

    The critical importance of the Corps' Civil Works programs to the 
Nation should not be lost amidst the often legitimate criticism. More 
than half of the nation's population lives within 50 miles of the 
shore. Our ports and harbors are the nation's interface with the global 
economy. Ports are connected by inland waterways and other 
transportation access to every state. Ninety-five percent of 
international trade by volume passes through U.S. ports. In 1996, U.S. 
Customs revenues totaled $15.6 billion. A recent report by the Federal 
Reserve Bank of Kansas City, The U.S. as a Coastal Nation, observed: 
``. . . the coastal concentration of U.S. economic activity reflects a 
productivity effect of access to navigable water.'' In addition, the 
report examined the significant historical and cultural importance, as 
well as quality of life factors that draw people to live, work and 
recreate along the nation's coasts and beaches.
    The coast provides a staging area for fishing fleets, seafood 
processing, and offshore oil and gas production, as well as supports 
critical habitats for spawning fish, shellfish and threatened and 
endangered species. Any visit to the beach confirms that they are the 
nation's premier recreation areas. Their beauty and accessibility 
provide a magnet not only for international visitors, but also provide 
readily accessible recreation and respite for millions families from 
diverse urban and rural areas that may not have other options. Travel 
and tourism is the nation's largest industry with more than 85 percent 
of industry revenues being generated in coastal areas. Federal tax 
revenues from beach tourism activity has been estimated to generate $14 
billion in California alone. Most importantly, these same beaches 
provide protection of life and property as natural barriers to 
flooding, waves and storm surges. A recent Corps of Engineers study of 
six coastal communities in North Carolina showed that communities with 
shore protection projects suffered significantly less from Hurricane 
Fran.
    Arcane cost-benefit ratios and budgeting exercises obscure the full 
range of benefits--the economic stimulus, tax revenues, environmental 
protection, and life and property protection--derived from our nation's 
coastal infrastructure. For example, we spend billions on constructing 
highways and transportation corridors to enable people to get to 
coastal areas and the beach. Yet, to spend several million on ensuring 
that the beach exists protecting the natural and economic resource 
which justifies the transit project is characterized by some as 
extravagant. The entire national budget for beach nourishment 
projects--approximately $135 million in fiscal year 2002--would be a 
virtual rounding error on most significant transportation projects.
    I want to dispel several myths which too often distort the debate 
over shore protection projects.
     Shore protection projects do not simply wash away into the 
sea. They absorb wave energies that typically save millions of dollars 
in property damages. Although the sand is lost temporarily from the 
beach, many times the majority of the sand remains in the littoral 
system and is either returned to the beach or deposited on downstream 
beaches.
     Nourishment projects are typically less expensive in 
current dollars than structural solutions as much of the costs are 
deferred well into the future while structures must be paid for at the 
time of initial construction.
     In addition, nourishment projects are preferable to hard 
structures which would undermine the natural protective features of the 
shoreline and would be less environmentally acceptable and adversely 
impact downdrift beaches.
     Finally, the Federal investment is justified based on 
formulating a project for hurricane/storm damage protection and not 
recreation. In addition, for Federal participation, all shore 
protection projects must have a benefit / cost ratio of greater than 
1.0 and more than 50 percent of that justification must be based on 
storm damage reduction benefits.
    In addition to the clear national interest and economic return of 
investment in the coastal water resource infrastructure, many Corps 
Civil Works projects have historically had, and continue to have, 
adverse effects upon the proper functioning of littoral system. Dams, 
channelization and improvements to navigation including navigational 
dredging and jetties often disrupt the natural flow of sand and other 
sediment material resulting in sediment starvation and erosion. While 
it is a Federal responsibility to mitigate damages resulting from these 
Civil Works projects, current Corps policies only support mitigation of 
damages directly induced by the project and do not give priority to a 
comprehensive solution to overall shore protection problems. While it 
is important to remedy past errors, it is even more important to 
provide a framework for planning and implementing Corps projects that 
encourages not simply mitigation but the maximization of economic and 
environment benefits.

            PROBLEMS IDENTIFIED WITH THE CIVIL WORKS PROGRAM

    There are significant opportunities for project savings by 
simplifying Corps project reviews and allowing local sponsors, working 
with private sector partners, to take the lead more often in planning 
and implementing water resource projects. However, given the Corps 
continued insistence in controlling the planning process and the 
uncertainties in obtaining sufficient funding to reimburse project 
sponsors, there is no incentive for the Corps to take advantages of the 
efficiencies that could be generated by implementing these changes.
    There is a catch-22, which is common among all Corps project types, 
that results from the gap between construction authorizations under 
WRDA and annual congressional appropriations for the Civil Works 
Program. With huge project backlog within the Civil Works Program, the 
Corps has allocated funding among as many projects as it can keep 
going. By allocating less funding per project to sustain a greater 
number of projects, the Corps has lengthened the completion times and 
costs for projects, and consequently for local project sponsors. 
Timelier project completion is one of the primary means of reducing 
costs within the Civil Works Program and reducing the project backlog.
    There are fundamental problems with the Civil Works Program which 
should be addressed in the Water Resources Development Act of 2002.
    1. The project by project approach to project planning and 
authorization does not take into account how projects affect each 
other, including opportunities for achieving efficiencies among 
projects or limiting cross-project impacts.
    2. It simply takes too long to complete a project. If greater local 
participation in projects is sought, projects, particularly project 
studies, needs to be simplified and streamlined.
    3. The Corps Districts and Divisions are effectively discouraged 
from finding creative ways for the beneficial uses of dredged material. 
The so-called ``Federal standard,'' least-cost environmentally 
acceptable alternative requirement, favoring open water disposal of 
clean dredged material, thwarts the long-term cost savings to the 
Federal Government and resource benefits resulting from keeping sand 
within littoral systems. The effect of the least-cost alternative 
policy is to miss opportunities for environmental restoration and shift 
costs from the Corps budget to other Federal accounts such as disaster 
assistance due to the lack of protection that would otherwise have been 
available from sand starved beaches.
    4. The full range of benefits resulting from projects, both 
economic and environmental, are not being credited. For example, states 
with comprehensive planning in place which limits development along the 
shore and bans sea walls have difficulty meeting the benefit thresholds 
for renourishment assistance, thereby penalizing states for good 
coastal planning. Without the availability of renourishment assistance, 
the pressure to allow sea walls or other shore protection structures 
can be overwhelming. The effect of hard structures is increased erosion 
as wave energy is focused at the point of impact with the wall. With 
the loss of the beach, the associated recreational, economic and 
environmental benefits are also lost.
    5. The increasing pressure to reduce spending is impairing the 
ability of the Corps to fulfill its service functions to support state 
and local efforts. In addition to assistance for project planning and 
construction, the Corps provides much needed services to states and 
coastal communities, such as technical advice and data for flood plain 
management, planning assistance for state constructed projects, and 
research for improved understanding of coastal littoral systems and 
project designs.

                       WRDA 2002: AN OPPORTUNITY

    WRDA 2002 presents the opportunity to improve the Army Corps of 
Engineers Civil Works Program through requiring more comprehensive and 
strategic planning, rational project selection, effective project 
design, and enhancement of the cost effectiveness of Civil Works 
projects. Making these improvements will require institutional and 
legal changes, as well as changes in the overall approach to managing 
the nation's coastal infrastructure.
    There are lessons to be learned by passage of laws like the Estuary 
Habitat Restoration Partnership Act, which was championed by this 
Committee. That law not only set out a clear national policy goal of 
restoring one million acres of estuarine habitat, but also called for 
the Corps to take the lead in development of a multi-agency national 
restoration strategy to guide selection of the Corps projects funded 
under the Act and to serve as guidance other Federal, state and local 
investment in estuarine restoration.
    In changing the overall approach to managing coastal water 
resources infrastructure, we recommend that Congress incorporate the 
following basic premises:
    Our management of coastal infrastructure needs to take a systems-
based approach.--The entry and movement of the sediment which forms our 
shoreline is a dynamic system. Man has made many alterations to the 
system through the erection of dams, navigational dredging, jetties and 
groins. While man has altered the system in many ways, we cannot stop 
it. We can work with the system or against it. The difference is found 
mostly in long-term project effectiveness and overall costs.
    Working within the littoral system, we need to develop a strategy 
for meeting regional and state needs.--We need to move away from taking 
a project by project approach to the coast and develop a framework that 
addresses crosscutting coastal shoreline issues along with setting 
priorities and strategies for meeting our Nation's coastal 
infrastructure protection needs including targeted needs for specific 
inlet and regional management plans.

                          CSO RECOMMENDATIONS

    (1) Use of Dredged Material

          (a) Congress should declare sand within littoral systems a 
        natural resource which is in need of management and 
        conservation.
          (b) The Federal standard should include a presumption that 
        favors retaining sand within the littoral system.
          (c) The authorization for beneficial uses of dredged material 
        under section 204 should be expanded to include beneficial uses 
        in addition to ecosystem restoration but with ecosystem 
        restoration being the priority use of available funds.

    Congress should establish a national policy which mandates a 
preferred alternative to keep sand and sediment within the littoral 
system. In some cases, the difference between the preferred beneficial 
use alternative and open water disposal is less than 5 percent of 
project costs. The Corps is locked into rigid cost-benefit analyses 
that do not take into account the long-term cost of traditional 
disposal. If a beneficial use is reasonably available, it should be 
incorporated into the project design and cost. There should be 
incentives provided for Districts and Divisions to include 
environmental restoration and beneficial use into planning and design 
navigation and other Corps projects. Currently, local projects sponsors 
are left to patch together a quilt of disparate Corps authorities into 
a project that meet restoration, protection and water resource goals.
    When it is determined through sampling and testing that dredged 
material from a project or portion of a project, contains predominantly 
sand or other coarse grained material, the Corps of Engineers, and 
other agents of the Federal Government, should be required to look to 
the beneficial use of dredged material as the first option for dredged 
material. The Corps should work with the states and other local 
partners to provide guidance to the Districts and Divisions on the 
implementation of best management practices in beneficial use to plan 
and implement the onshore or near-shore disposal of the dredged 
material
    Congress should remove the institutional and legal constraints 
which deter better management, e.g., the Corps' least cost alternative 
policy which is limited to assessing what is the least costly option to 
the Corps rather than the least cost.
    (2) Regional Sediment Management Planning

          (a) Direct the Assistant Secretary of the Army for Civil 
        Works to study and prepare recommendations including projected 
        resources to carry out a comprehensive program for regional 
        sediment management studies.
          (b) Authorize the Corps to amend existing project authorities 
        and expand the construction and maintenance of navigation 
        projects that promote the natural movement of sediments.

    With the objective of improved information-based decisionmaking, 
increased project coordination and more cost effective management, 
Congress should direct the Corps to develop a plan to undertake 
regional sediment management. The plan should include estimates of 
baseline data requirements and their maintenance, and cost-savings from 
implementation.
    The project-by-project approach to responding to shoreline change 
is costly, inefficient and sometimes inconsistent. The nation's water 
resources policy long ago recognized that in order to manage rivers 
effectively, the entirety of the river and its surrounding watershed 
needs to be considered. The same needs to be done for managing the 
nation's shoreline. Shoreline management requires an understanding of 
the littoral processes and systems occurring along the shore, sediment 
sources and their movement within the system.
    The goal of regional sediment management (RSM) is to manage sand 
for coastal projects on a regional scale. RSM recognizes that the 
dynamics of littoral systems extend beyond individual, local-scale 
projects. Regional sediment management planning will provide an 
inventory and strategic vision of regional coastal sediment management 
needs. RSM planning will identify, evaluate and prioritize sediment 
management approaches in a Geographic Information System framework that 
coordinates existing information into one body of knowledge that can be 
applied to efficient implementation of sediment management projects. By 
synthesizing data from past and current projects on a regional basis, 
opportunities to address multiple sediment-related problems can be 
developed and redundant studies avoided.
    In addition to providing a better understanding of littoral 
systems, regional sediment management can provide improved information 
on the environmental, economic and social consequences of proposed 
actions and potential tradeoffs associated with management decisions. 
RSM can improve planning, development, damage reduction, and resource 
management in coastal regions resulting in reduced Federal and local 
sponsor expenditures for channel maintenance and nourishment of storm-
damage reduction projects.
    Among leading experts in the field of coastal processes and 
shoreline management, there is already strong support for the RSM 
concept. The Strategic Plan for the Corps of Engineers Coastal 
Engineering program produced by the congressionally chartered Coastal 
Engineering Research Board (CERB) has recommended the adoption of a 
systems approach to coastal sediment management.
    The objectives of RSM are within reach with new monitoring, 
modeling, and information management capabilities. Several RSM 
demonstration projects are already underway--
    Northern Gulf of Mexico Regional Sediment Management (RSM) 
Demonstration Program covers the shorline of Mississippi, Alabama and 
the northern Gulf coast of Florida. The product of the demonstration 
program will be a Regional Sediment Management Plan consisting of a 
calibrated regional sediment budget, a calibrated numerical regional 
prediction system, and a regional data management and Geographic 
Information System. These tools will assist in making management 
decisions and will increase benefits resulting from improved sand 
management throughout the region.
    California Coastal Sediment Management Master Plan--is a 
collaborative effort between Federal, state, and local agencies and 
non-governmental organizations to evaluate California's coastal 
sediment management needs on a regional, system-wide basis.
    Great Lakes Regional Sediment Management--The Great Lakes region 
has been designated as one of the demonstration sites for regional 
sediment management. The region being studied is from Ludington, 
Michigan at the north end, to Michigan City, Indiana at the south. This 
172-mile region contains 11 Federal structures, several of which have 
Section 111 beach nourishment programs in place. The goals of the Great 
Lakes demonstration project are: to identify key stakeholders who have 
a role in sediment management for the Southeast Lake Michigan Region; 
collect available coastal data and develop a centralized web page and 
GIS data base for use by all regional stakeholders; improve current 
coastal programs and Corps operations and maintenance performance by 
linking navigation, dredging, disposal, and beach nourishment projects; 
and, to implement regional sediment management practices for the 
southeast region of Lake Michigan. These results will have direct ties 
to the operation of the Section 111 program, the National Shoreline 
Management Study, the Lake Michigan Potential Damages Study, and the 
National Erosion Control Development and Demonstration Program.
    Additional demonstration sites are planned for the New York/New 
Jersey, New England, North Carolina/Virginia, and the Pacific 
Northwest.
    The Corps also should be authorized to expand the design and 
maintenance of navigation projects to promote the natural movement of 
sediments to benefit adjacent shorelines and beaches. Small amounts of 
additional spending for activities like advanced maintenance, sand 
bypassing, berm building and catchment basin pump-out can enhance the 
movement of sand to produce environmental and economic benefits. The 
Corps presently has some authority to promote better sediments 
management. For example, the Corps can protect, restore or create 
aquatic habitat using dredged material (Section 204 of WRDA 92) and 
place suitable material on adjacent beaches (Section 145 of WRDA 76). 
But these authorities are difficult to apply to sediment management 
measures with indirect, delayed or cumulative benefits, and activities 
with widespread beneficiaries across multiple communities or states. 
These authorities should be supplemented by authorizing the Corps to 
undertake additional Federal expenditures to promote proper sediment 
management.
    (3) Amend the Authorization for the National Shoreline Study

          (a) Congress should amend the authorization for the National 
        Shoreline Study (Section 215, WRDA 99) to require that it be 
        conducted by an independent body under a set timeframe and 
        budget,
          (b) The study reauthorization should also include a specific 
        directive for state and Federal interagency participation 
        including but not limited to the Corps. NOAA, USGS, and FEMA;
          (c) The study authorization should include a directive that 
        the study be conducted using and analyzing existing information 
        and studies.

    Section 215(c) of the Water Resources Development Act of 1999 
requires the Corps to prepare a report describing the--
     Extent of erosion and accretion along the shores of the 
U.S.;
     Economic and environmental effects of shoreline change;
     Systematic movement of sand along the shores of the U.S.; 
and
     Resources committed by Federal, state and local 
governments to restore and renourish beaches.
    The report is to include recommendations on the--
     Use of a systems based approach to sand management; and
     Appropriate levels of Federal and non-Federal 
participation in shore protection.
    The study will bring into full view the geophysical, anthropogenic, 
economic and environmental factors needed to be assessed in order to 
improve the nation's policy to manage the shoreline in a manner which 
fulfills multiple objectives.
    Much of the data and information required for the completion of 
this study has already been developed. The Corps has a wealth of 
project specific data including information being developed by on-going 
regional sediment management demonstration projects. FEMA, through the 
John H. Heinz Center, recently completed a congressionally mandated 
study of erosion and its economic impacts, The Hidden Costs of Coastal 
Hazards. NOAA, through the use of LIDAR laser technology, employed by 
the Coastal Services Center (CSC), has remapped the shoreline of most 
of the continental U.S. CSC is also converting analog data contained on 
over 14,000 T-sheets to a GIS format. This will provide an electronic 
record of shoreline change for much of the coast. The USGS Coastal and 
Marine Geology Program has already compiled excellent regional and 
local studies of the coastal geologic framework of the U.S. Much of the 
most comprehensive information about shoreline change and related 
economic and environmental impacts has been developed by states.
    The National Shoreline Study is particularly timely in two 
respects. First, it has been nearly 30 years since the first National 
Shoreline Study was completed in 1971. The new study will provide an 
opportunity to re-examine the critical erosion areas identified in the 
original study to determine what has happened in those areas in terms 
of geophysical processes and the responses to shoreline change. The new 
study will determine whether the number of critical erosion areas has 
increased and, more importantly, whether the vulnerability in those 
areas has increased. The new Study is also warranted and particularly 
timely given recent leaps in technology and methodology. In just the 
last few years, a technology threshold has been crossed which has 
provided the opportunity to examine shoreline process utilizing complex 
modeling like never before. It is expected that an ancillary benefit of 
the National Shoreline Study, which may even exceed the prescribed 
outcomes for the study, will be improved interagency cooperation and 
data integration.
    The National Shoreline Study is a necessary step toward examining 
and reassessing Federal and state programs and policies responding to 
shoreline change. It is hoped that the study will provide a stimulus 
and objective basis for--
     Recognizing a shared national interest in responding to 
shoreline change;
     Developing a systems based approach to responding to 
shoreline change through a better understanding of shoreline processes; 
and
     Integrating Federal agency policies and processes, 
including data and information sharing, to tailor shoreline change 
response decisions to littoral systems and regional objectives.
    Completion of the study has been hampered by an oversight in the 
authorization for the study. Without an express authorization of 
funding, it has been difficult for the Corps, Office of Management and 
Budget, and congressional appropriators to have a sense of the scale 
and funding parameters of the study and we request that Congress 
included a specific funding authorization and completion date based on 
the date when appropriations are made available.
    To this end, we also request that Congress amend the study 
authorization with a specific directive that the study is to be 
conducted using and analyzing existing data and information. Congress 
should also specify that the study is to be conducted making use of 
information to be made available from the United States Geological 
Survey, National Oceanic and Atmospheric Administration and Federal 
Emergency Management Agency, and close cooperation with the states.
    Thank you for the opportunity to testify before you. I am pleased 
to answer any questions.

                               __________
              Statement of Jim Robinson, Jr., Pinhook, MO

    Chairman Jeffords, Senator Smith, Senator Bond and Members of the 
Committee.
    Again for the record, my name is Jim Robinson and I am here on 
behalf of the people of Pinhook, Missouri. Pinhook is located in the 
Southeastern corner of Missouri in the Bird's Point/New Madrid Floodway 
about half-way between Memphis, Tennessee and St. Louis just a few 
miles from the Mississippi River. I have lived there most of my life. 
The land that I farm was purchased by my father when we moved from 
Tennessee. My people were not allowed to own certain lands or live in 
town. We were only able to purchase the land that the Mississippi River 
flooded. We cleared the land with our own hands with axes and mules. We 
built up our own community and are proud of what we have and what we 
have done. Pinhook is our home and it is what I want to pass along to 
my children and grandchildren.
    My entire life I have lived with floods on the Mississippi River 
destroying what I have worked for. Where we live the Mississippi River 
backs up through a 1500-foot hole in the levee that was left there when 
the levees were built in the 30's. So every few years the river comes 
up and backs through that hole and we get flooded.
    I don't know how many of you have ever been through a flood and 
know what it is like to have raw sewage in your home. What it is like 
when you get out of bed in the morning to have to wade through that 
mess. To have your children live in it. For them to have to ride in a 
tractor drawn open-wagon through the water just to get to a school bus. 
My people should not have to live that way year after year.
    If I go north to St. Louis I see fine homes surrounded by big 
levees, or if I go south to Memphis I see that same thing. Those people 
have been able to build their levees and protect their homes. I don't 
want to take that away from them, I just want the same thing for us.
    There has been a project on the list for years that would close our 
levee and give us some relief. And we thought we were close to ending 
the problem. But then in 1986, Congress raised the local cost share and 
we were told that we had to come up with 35 percent of a multi-million 
dollar project. We farm some, our children work in small factories, we 
pay taxes, but we cannot afford $20 million.
    Finally in 1993 through the Enterprise Community program we were 
able to get some help and the local share was reduced back down to 5 
percent. I thought we were going to get to close that hole. The Corps 
of Engineers went to work and we were on our way. That was 9 years ago 
and we had a flood again this year.
    I have met with people here in Washington and they all seem like 
they want to help, like they understand what we are up against. But 
every time we get close, somebody from the EPA or Fish and Wildlife 
Service says the Corps has to go study some more. I am tired of 
studying the same old mud.
    I have heard about what some of you want to do to the Corps of 
Engineers. All of the technical stuff is for someone else to comment 
on. I want to talk to you a little about the people that this will 
effect. I have lived along the Mississippi River my whole life, I 
helped evacuate homes in the Flood of 1937, we worked day and night. 
Over the years the Corps has built levees for the city areas and has 
slowly worked down to us it has taken most of my life for them to 
finally get to us. Now, after all of that work has been done you want 
to say to us that is it, no more unless you pay for half of it. You did 
not say that to the city folks, but after all these years when we 
finally are going to get our share you want to cut our piece in half.
    And you and I both know that there is no way a farming community in 
the Mississippi Delta is going to be able to pay for half of any water 
project. This is not reforming the Corps of Engineers, that is just a 
nice way of saying you people are not going to get any help. It looks 
better in the newspapers to say you are reforming something.
    I was here in Washington over 2 years ago for a meeting with the 
EPA, Fish & Wildlife, the Council on Environmental Quality and the 
Corps. I was told then that the problems that were delaying our project 
would be fixed. Since then the only ones that have not drug their feet 
have been the Corps. Everytime someone comes down to look at the 
project they promise me that they are going back and find a solution 
and I never see them again, I see someone else who tells me the same 
thing. But I always see the same faces from the Corps and they come 
back and tell me that they are ready to build, but they can't because 
the other agencies hold them up. From where I sit it looks like you are 
trying to reform the wrong group.
    Another point that I understand that is being considered is how the 
Corps figures its benefits. Some people don't want them to use 
increased crop production as a benefit. Is there something wrong with 
trying to make a living farming now? I farmed all last week and if I 
can increase how many bushels of soybeans I harvest this fall I think 
that is good. It is good for me, it is good for my family and it is 
good for this country. Farmers grow food and pay taxes and that has to 
benefit everybody.
    That concludes my prepared remarks. I will be glad to answer any 
questions that you have.

                               __________
Statement of Peter J. Sepp, Vice President for Communications, National 
                            Taxpayers Union

    Mr. Chairman and Members of the Committee, on behalf of the 
335,000-member National Taxpayers Union (NTU), I am pleased to offer 
our support for S. 1987, the ``Corps of Engineers Modernization and 
Improvement Act of 2002.'' Although I am unable to attend these 
important hearings in person, and am aware that several colleague 
organizations will be providing testimony on this legislation, I am 
pleased to offer NTU's own brief views on S. 1987.
    Over the past several decades, taxpayers have witnessed a sharp 
decline in discipline as well as accountability in virtually every 
component of the Federal budget process. Federal taxes are hovering at 
a postwar high in terms of their burden on the nation's economic 
output, and thereby inflict huge ``deadweight losses'' on a private 
sector that is currently struggling its way out of an economic 
downturn. In the past 10 years alone, Federal spending has grown nearly 
twice as fast as the rate of inflation.
    Meanwhile, agencies continue to mismanage these funds with an 
astounding level of indifference. This year the Office of Management 
and Budget (OMB) gave ``red lights'' for fiscal recklessness to over 
half of the 26 Federal departments in each one of the five categories 
used to evaluate them. For its part, Congress often shuns a more 
methodical merit-based appropriations process in favor of a politically 
tilted patchwork of earmarks and open-ended authorizations. Last year, 
the Washington Post reported that House Members alone had requested 
nearly 19,000 earmarks totaling $279 billion in the spending bills 
before Congress, marking a threefold escalation of the practice since 
1995.
    Few areas of Federal spending seem more impacted by these trends 
than public works projects, many of which are undertaken by the Army 
Corps of Engineers. Members of the Committee and their staff, led by 
Senator Smith, are to be commended for taking such a systematic 
approach to addressing the accumulated defects of the water resources 
development spending process, through the Corps of Engineers 
Modernization and Improvement Act. Although this legislation cannot 
erase the fiscal perils of the past overnight, it could, if properly 
implemented and vigorously enforced, provide measurable and significant 
benefits to taxpayers.
    Among the advantages we find most attractive are:
     A more vigorous cost-benefit analysis.--A recent study by 
Congress's Joint Economic Committee found that the cost to the economy 
of raising $1 in additional taxes for new Federal programs is $1.40--
after factoring in the deadweight loss of consumer substitution, 
reduced private-sector activity, compliance costs, and government 
enforcement costs. Conversely, reducing government spending by $1 and 
returning that money to taxpayers will eventually yield $1.40 in 
overall economic benefits. Thus, the bill's provision to ``require 
Corps projects to meet benefits at least 1.5 times as great as the 
estimated total cost of the project,'' is far more justified than the 
current ``1:1'' requirement. Indeed, the proposed ``1.5:1'' ratio ought 
to be the absolute minimum taxpayers expect for the dollars they send 
to Washington.
     A more rational review process.--As the National Endowment 
for the Arts and the National Science Foundation have both 
demonstrated, a review process for federally supported projects is no 
guarantee that tax dollars will be spent wisely. However, this 
legislation holds a better promise of success, by creating an 
Independent Review Board overseen by the Director of OMB, and operating 
within the Army Inspector General's office. Equally important to 
avoiding past mistakes is the bill's requirement for a ``balance of 
expertise'' among Board members, which will include economists and 
engineers.
    A push toward self-sufficiency.--Federal taxpayers have long been 
threatened with spiraling costs associated with flood control and beach 
re-nourishment projects of parochial rather than national benefit. The 
legislation would encourage more state, local, and possibly private 
involvement in these particular projects--and perhaps lead to the 
termination of economically unsustainable projects--by reducing the 
Federal cost ``share'' among them.
    A more visible ``sunset.''--Far too many Federal construction 
programs take on a life of their own, especially when their systematic 
growth escapes the attention of Congress until billions of dollars are 
at risk. S. 1987 would help to address this problem in several manners, 
by de-authorizing projects that fail cost-benefit analyses, by 
restricting mission creep into areas such as school construction, and 
by encouraging de-commission of underused waterways. Obviously, de-
authorizing a project does not ensure that it will be denied funding, 
but such a mechanism is helpful in highlighting expenditures of a lower 
priority.
    No statutory legislation can promise to completely overhaul a 
fundamentally flawed budget process. In an ideal world, constitutional 
restraints on tax and spending increases, merit-and performance-based 
budgeting, more state and local responsibility for their own programs, 
and regulatory reform to promote privately built and--maintained public 
works projects, would all be part of a comprehensive solution. However, 
the Corps of Engineers Modernization and Improvement Act of 2002 could 
serve as a solid bridge to take our Nation toward this more fiscally 
responsible destination. Equally important, this bill could serve as a 
guide for policymakers seeking reform in other capital spending-
intensive areas, such as transportation or Federal office space.
    For these reasons, the National Taxpayers Union strongly urges 
Members of the Committee and your colleagues in the Senate to support 
the Corps of Engineers Modernization and Improvement Act of 2002, and 
NTU looks forward to working with you toward the enactment of this 
critical legislation. Once again, I appreciate the opportunity to 
present our perspective on an issue that deserves a rightful place on 
Congress's agenda.

                               __________
    Statement of Eric Draper, Director of Policy, Audubon of Florida

    Mr. Chairman, Senator Smith, and members of the Committee, on 
behalf of Audubon of Florida, a strategic alliance of the National 
Audubon Society, Florida Audubon Society and 43 chapters and 40,000 
members in the State of Florida, thank you for the opportunity to 
present our views regarding proposals for the Water Resources 
Development Act (WRDA) of 2002. The purpose of our testimony is to 
recommend that consideration be given to the authorization of three 
urgent and crucial Everglades restoration projects and deauthorization 
of the Apalachicola-Chattahoochee-Flint River Project, as well as much 
needed comprehensive reforms to the U.S. Army Corps of Engineers 
(Corps).
    Audubon of Florida recognizes the Chairman Jeffords' support for 
Everglades restoration, a cause of utmost importance to Florida. We 
also recognize the contribution of past Chairman and Ranking Minority 
Senator Bob Smith for his vision, courage and determination in 
championing the historic legislation designed to restore the Everglades 
and return the abundance of birds and wildlife to its world-renowned 
ecosystem. We also thank the other members of the committee and the 
staff for their role in the passage of the Restoring the Everglades, an 
American Legacy Act in WRDA 2000, and for their continued support for 
Everglades restoration. We especially thank Florida's senior senator, 
who has provided steadfast and effective leadership on the Everglades 
and other Florida issues.

       EVERGLADES RESTORATION: EVERGLADES AUTHORIZATIONS FOR 2002

    The Everglades is a model for future Corps environmental 
restoration projects. The Comprehensive Everglades Restoration Plan 
(CERP) is an outstanding example of how a reformed Corps would repair 
damage from previous water resource projects, while functioning in a 
manner that is responsive, accountable, and fiscally responsible. 
Again, we thank the Committee for its long-standing support for 
Everglades restoration and urge your continued support for the 
restoration of America's Everglades.
    Audubon strongly urges the Committee to include in WRDA three 
critical Everglades restoration projects that are scheduled for 
authorization by Congress this year and contain more than half of the 
total land area of the Comprehensive Everglades Restoration Plan 
(CERP). These projects will deliver enormous benefits to the Everglades 
natural system. Like other parts of the Everglades ecosystem, these 
projects are largely an attempt to repair previous damage by Federal 
and state projects. The partnership between America and Florida on 
these three projects will contribute significant improvements to the 
Everglades and our nation's natural resources.
    The proposed 2002 Water Resources Development Act (WRDA) must 
include authorization for the Water Preserve Areas (WPAs), the Indian 
River Lagoon (IRL), and the Southern Golden Gates Estates (SGGE) 
Hydrologic Restoration Project in order to accomplish significant early 
restoration. The three projects also provide the earliest ecological 
and economic value for the investment that Florida's and America's 
taxpayers are making in this historic restoration effort.
    The Indian River Lagoon Project will reverse the deterioration and 
restore a nationally significant and unique system connecting Lake 
Okeechobee to the most diverse estuary in North America. The project 
restores, protects and utilizes 92,900 acres of water storage and water 
quality treatment areas. Restoring, cleaning up and enhancing the 
area's wetlands and waterways increases the extent of natural storage 
and limits the dumping of harmful stormwater into Lake Okeechobee, the 
Indian River Lagoon and the St. Lucie Estuary. These water bodies will 
benefit enormously from land acquisition and improvements for 
stormwater retention and water storage and by changing the current 
project's drainage patterns.
    The Southern Golden Gates Estates Hydrologic Restoration Project 
will restore to its previous natural condition 113 square miles (72,320 
acres) of Southwest Florida that was ditched and drained for a 
sprawling development. Efforts to restore this area's unique ecology of 
cypress, wet prairie, pine, hardwood hammock and swamp have been 
underway for decades. The project is connected to the Florida Panther 
National Wildlife Refuge, the Belle Meade State Conservation and 
Recreation Lands Project Area, the Fakahatchee Strand State Preserve, 
and will restore flows to the Ten Thousand Island Estuaries and Aquatic 
Preserve through sheetflow and flowways rerouting approximately 185,000 
acre-feet of water currently discharged as point source to the Faka 
Union Bay. Immediate benefits for the booming adjacent urban area 
include water supply through aquifer recharge and the prevention of 
saltwater intrusion while maintaining current authorized levels of 
flood protection for developed areas. The State of Florida has already 
acquired more than 90 percent of the 60,000 acres needed for the 
project. The restoration benefits of this project are critically needed 
and too long overdue.
    The Water Preserve Areas (WPAs) Project, (including the Bird Drive 
Recharge Area and the Southern Compartment of the Hillsboro 
Impoundment), an integral part of the Everglades restoration plan, is 
located within Palm Beach, Broward, and Miami-Dade Counties east of the 
Everglades and west of existing development, creating a 13,600 acre 
buffer area (Recommended Plan of the Draft WPA Feasibility Study). The 
WPAs are designed to increase the spatial extent of wetlands acres, 
improve habitat in the Everglades Protection Area, enhance the 
Loxahatchee National Wildlife Refuge, as well as store water, and 
safeguard urban wellfields. WPAs provide a critical source of water 
storage for restoration by reducing undesirable losses from the natural 
system through seepage and providing a means of capturing stormwater 
runoff that was previously wasted to tide. Further, development 
continues to encroach on the remaining natural areas adjacent to the 
Everglades, which serve a critical role in the restoration of the 
Everglades by maintaining wetland spatial extent. The WPAs also provide 
a mechanism for increased aquifer recharge and surface water storage 
capacity to enhance regional water supplies for the lower east coast 
urban areas, thereby reducing demands on an already degraded natural 
system.
    These three projects demonstrate large-scale ecosystem restoration, 
while maintaining or improving water supply and flood protection. The 
success of these projects hinges on timely authorization. These 
projects require intensive and significant acquisition of land under 
significant development pressure delay could result in failure. If 
authorized in 2002, these projects will result in significant ecosystem 
restoration early in CERP implementation the kind of early success that 
will be essential to maintaining the broad support CERP now enjoys from 
both the public and private sectors.

                              CORPS REFORM

    The Army Corps of Engineers, through its authorized projects, has 
contributed to the nation's prosperity, saved lives and improved living 
conditions for millions of Americans. Many of these projects have also 
had serious negative environmental consequences. In Florida alone, 
billions of dollars are being spent to correct damage from Corps 
projects.
    It is time to reform the role and activities of the Army Corps of 
Engineers and strongly supports legislation such as S. 1987, S. 646, 
H.R. 1310 and H.R. 2353 to accomplish reforms. We specifically urge the 
passage of legislation with the following elements:
     New tests and rules for fiscal responsibility, public 
accountability and environmentally sustainable projects.
     Full mitigation of environmental damages incurred by 
project construction.
     Increased public participation and input at the outset of 
every proposed project.
     Deauthorization of those projects that are shown to be 
economically unjustified.
     New rules to prevent the Corps from basing any of a 
project's benefits upon any economic value resulting from the 
destruction of wetlands.
     Requirements that the Corps to count the cost of 
destroying natural resources when calculating the economic costs and 
benefits of projects
     Independent peer review of large and controversial 
projects concurrent with the Corps' current project planning process.
     Increased fiscal responsibility and public accountability 
of the Corp activities and projects.

             APALACHICOLA-CHATTAHOOCHEE-FLINT RIVER PROJECT

    In addition to the specific reforms noted above, Audubon of Florida 
supports deauthorization of the nine by 100 foot channel of the 
Apalachicola-Chattahoochee-Flint River Project between the Gulf 
Intracoastal Waterway near Apalachicola, Florida to Jim Woodruff dam 
near Chattahoochee, Florida as supported by the Governor and Cabinet of 
the State of Florida. The maintenance dredging of this section of the 
Apalachicola River, which is little used for commercial navigation, has 
had enormous negative environmental impacts. Remarkably, this river 
project accounts for 30 percent of the Inland Waterways operations and 
maintenance budget, although the project only amounts to 3 percent of 
all navigation in the Inland Waterways. Dredging of the Apalachicola-
Chattahoochee-Flint River Project is both environmentally and 
economically irresponsible. By ending the dredging of this waterway, 
the Apalachicola River may repair itself and once more become home to 
abundant fish and wildlife.
    Congress should enact meaningful Corps reforms to help restore 
faith in an agency that has suffered a significant loss of credibility. 
However, Congress should also act to authorized the three 
aforementioned Everglades projects and deauthorize the harmful 
operation of the Apalachicola River. We ask Congress to direct the 
Corps to manage ecosystems in an environmentally sustainable manner and 
to provide equal consideration and resources to environmental 
restoration as to flood control and navigation. Audubon of Florida will 
continue to support efforts to reform the U.S. Army Corps of Engineers 
and we look forward to working with you to ensure that the next WRDA 
contains comprehensive and much-needed reforms.
    We greatly appreciate this opportunity to provide the Committee 
with our views for WRDA.

                               __________
Statement of Bob Perciasepe, Senior Vice President for Policy, National 
                            Audubon Society

    Mr. Chairman, Senator Smith, and members of the Committee, on 
behalf of Audubon's more than one million members and supporters, thank 
you for the opportunity to present our views regarding proposals for 
the Water Resources Development Act (WRDA) of 2002. The purpose of our 
testimony is to recommend for inclusion in WRDA 2002 much needed 
comprehensive reforms to the U.S. Army Corps of Engineers (Corps), as 
well as three projects, that are vital to the continued restoration of 
the Everglades. Audubon's mission is to conserve and restore natural 
ecosystems, focusing on birds and other wildlife for the benefit of 
humanity and the earth's biological diversity.
    Audubon thanks the Chairman for his long-standing support for our 
nation's precious natural resources and for his recent actions to 
protect our environment since assuming the Chairmanship of the 
Environment and Public Works Committee. Audubon also recognizes the 
past Chairman and Ranking Member for his vision, courage and 
determination in championing historic legislation designed to restore 
the Everglades and return the abundance of wading birds and rich 
diversity of life to the unique and globally significant River of 
Grass. We also thank the other members of the committee and the staff 
for their role in the passage of the Restoring the Everglades, an 
American Legacy Act in WRDA 2000, and for their continued support for 
Everglades restoration.

                              CORPS REFORM

    Before discussing specific proposals of Corps Reform legislation, 
Audubon would like to acknowledge the vital role that the Corps has 
played in helping to increase commerce and strengthen our economy and 
especially for its role in protecting American lives and safeguarding 
communities during natural disasters. The Corps has done an able job 
constructing congressionally authorized projects for over 220 years.
    Unfortunately, 220 years of water resource projects have also left 
a legacy of environmental destruction and billions of taxpayer dollars 
wasted on projects that are often without merit. Water resource 
projects have been identified by the scientific community to be a 
leading cause of dramatic population declines in a large percentage of 
our wading birds, native fish and other freshwater species that are 
threatened with extinction.
    Mitigation plans to repair the environmental damage for water 
resource projects often do not address the full impacts of the projects 
and in some instances are never undertaken. Several major Corps 
environmental restoration projects, such as Everglades restoration, are 
now directed at undoing the damage of previous Corps projects, yet 
additional projects that cause the same kind of environmental 
devastation continue to be constructed. Several currently authorized 
projects would destroy hundreds of thousands of acres of wetlands and 
threaten our environmentally sensitive floodplains, rivers and other 
critical aquatic habitat that so many species of wildlife depend on.
    More than half of our country's original wetlands have already been 
lost, and we continue to destroy wetlands at a rate of approximately 
60,000 acres per year. In addition to their enormous ecological 
benefits, wetlands also benefit society by filtering pollutants out of 
our water, providing flood control, recreational opportunities, and 
economic benefits. We can no longer subsidize the destruction of 
wetlands and other critical aquatic habitat through wasteful Corps 
water resource projects.
    The need for comprehensive reform of the Corps and the water 
resources development process has become increasingly clear. Several 
Corps projects have recently been shown by government reports and 
scientific reviews to be wasteful, economically unjustified, and 
devastating to our nation's natural resources. The Corps has been shown 
by the Army Inspector General and the National Academy of Sciences to 
have used flawed economic models and intentionally manipulated data in 
order to justify expanding locks and dams on the Upper Mississippi 
River. The General Accounting Office has found the Delaware River 
Deepening project to be similarly unjustified. Government reports have 
also corroborated internal revelations that the Corps has an 
institutional bias toward large projects that are often without merit 
and result in grave environmental consequences for our environment and 
especially for our remaining wetlands.
    Audubon strongly supports proposed reforms to the Corps that 
emphasize fiscal responsibility, public accountability and 
environmentally sustainable projects. The Corps reform bills introduced 
in the Senate and House (S. 1987, S. 646, H.R. 1310 and H.R. 2353) 
contain crucial reforms that cannot be postponed.
    Audubon strongly urges the Committee to adopt reforms proposed in 
S. 646 and H.R. 1310 to ensure that environmental damages incurred by 
project construction are fully mitigated. This will require the Corps 
to acquire and restore an acre of similar habitat to replace each acre 
of habitat negatively impacted by a project. Seeking a balance between 
the economic developments of a project with other social priorities, 
and mitigating the environmental damages will positively impact all of 
the Corps water projects, while ensuring safer and healthier habitats 
for people, birds, and wildlife.
    Audubon strongly supports reforms proposed in S. 1987, which aim to 
address the enormous $52 billion construction backlog of Corps projects 
by deauthorizing those projects that are shown to be economically 
unjustified. We especially endorse the provision to prevent the Corps 
from basing any of a project's benefits upon any economic value 
resulting from the destruction of wetlands. We also back the proposal 
to deauthorize low-benefit projects that have a benefit-to-cost ratio 
of less than 1.5 and are less than one-third completed, if Congress 
chooses not to reauthorize this project within a 3-year period. A 
critical element of S. 1987 is its direction to the Corps to define 
economic development and environmental protection as co-equal goals of 
water resources planning and development.
    Both S. 1987 and H.R. 2353 rightfully require the Corps to count 
the cost of destroying natural resources when calculating the economic 
costs and benefits of projects. Both bills also require the Corps to 
give taxpayers a better return on their investment by raising the cost-
benefit ratio from 1:1 to 1:1.5, which will eliminate many unjustified 
projects.
    Audubon also endorses reforms proposed in S. 646 and H.R. 1310 to 
increase public participation and input at the outset of every proposed 
project. The bills create new advisory and review procedures for the 
Corps and require that information on water resource project analyses 
be made available for review by the public throughout the planning 
process, thereby improving the public accountability of the Corps.
    All of the proposed Corps Reform bills, S. 1987, S. 646, H.R. 1310 
and H.R. 2353, contain provisions to improve the Corps' accountability 
by instituting a system of independent peer review for large and 
controversial projects. Audubon supports independent peer review that 
is concurrent with the Corps' current project planning process. 
Similarly, Audubon strongly endorses reforms proposed in all of these 
bills that will increase the fiscal responsibility and public 
accountability of the Corps.
    Now more than ever, Congress must enact meaningful Corps reforms to 
improve the broken water resources development process and help restore 
faith in an agency which has suffered a significant loss of 
credibility. We ask Congress to direct the Corps to manage ecosystems 
in an environmentally sustainable manner and to provide equal 
consideration and resources to environmental restoration as to flood 
control and navigation. Audubon will continue to support efforts to 
reform the U.S. Army Corps of Engineers and we look forward to working 
with you to ensure that the next WRDA contains comprehensive and much-
needed reforms.

       EVERGLADES RESTORATION: EVERGLADES AUTHORIZATIONS FOR 2002

    Again, we thank the Committee for its long-standing support for 
Everglades restoration and urge your continued support for the 
restoration of America's Everglades. The Everglades is a model for 
future Corps environmental restoration projects. The Comprehensive 
Everglades Restoration Plan (CERP) is an outstanding example of how a 
reformed Corps would repair damage from previous water resource 
projects while functioning in a manner that is responsive, accountable, 
and fiscally responsible.
    Everglades restoration embodies Corps Reform. The Corps has set 
about to undo the damage wrought by a half-century of civil works 
projects that diked and drained the Everglades and each day divert up 
to 2 billion gallons of life-giving water away from the Everglades and 
out to sea. In Everglades restoration, the Corps has demonstrated 
public accountability by conducting extensive public outreach and 
remaining extremely open and accessible throughout the process. In some 
ways the Corps is already operating the largest restoration project 
ever attempted in human history in the manner that the proposed reforms 
intend. Everglades restoration amounts to Corps Reform in action, on-
the-ground, righting the wrongs of the past by restoring one of the 
world's most unique and diverse ecosystems.Audubon strongly urges the 
Committee to include in WRDA three vital Everglades restoration 
projects that are scheduled for authorization by Congress this year and 
contain more than half of the total land area of the Comprehensive 
Everglades Restoration Plan (CERP). These projects will deliver 
enormous benefits to the Everglades natural system. Like other parts of 
the Everglades ecosystem, these projects are largely an attempt to 
repair previous damage by Federal and state projects. The partnership 
between America and Florida on these projects will contribute 
significant improvements to the Everglades and our nation's natural 
resources.
    The proposed 2002 Water Resources Development Act (WRDA) must 
include authorization for the Water Preserve Areas (WPAs), the Indian 
River Lagoon (IRL), and the Southern Golden Gates Estates (SGGE) 
Hydrologic Restoration Projects in order to accomplish significant 
early restoration. These projects also provide the earliest ecological 
and economic value for the investment that Florida's and America's 
taxpayers are making in this historic restoration effort.
    The Indian River Lagoon Project will reverse the deterioration and 
restore a nationally significant and unique system connecting Lake 
Okeechobee to one of the most diverse estuaries in North America. The 
project restores, protects and utilizes 92,900 acres of water storage 
and water quality treatment areas. Restoring, cleaning up and enhancing 
the area's wetlands and waterways increases the extent of natural 
storage and limits the dumping of harmful stormwater into Lake 
Okeechobee, the Indian River Lagoon and the St. Lucie Estuary. These 
water bodies will benefit enormously by land acquisition and 
improvements for stormwater retention and water storage and by changing 
the current project's drainage patterns.
    The Southern Golden Gates Estates Hydrologic Restoration Project 
will restore to its previous natural condition 113 square miles (72,320 
acres) of Southwest Florida that was ditched and drained for a 
sprawling development. Efforts to restore this area's unique ecology of 
cypress, wet prairie, pine, hardwood hammock and swamp have been 
underway for decades. The project is connected to the Florida Panther 
National Wildlife Refuge, the Belle Meade State Conservation and 
Recreation Lands Project Area, the Fakahatchee Strand State Preserve, 
and will restore flows to the Ten Thousand Island Estuaries and Aquatic 
Preserve through sheetflow and flowways rerouting approximately 185,000 
acre-feet of water currently discharged as point source to the Faka 
Union Bay. Immediate benefits for the booming adjacent urban area 
include water supply through aquifer recharge and the prevention of 
saltwater intrusion while maintaining current authorized levels of 
flood protection for developed areas. The State of Florida has already 
acquired more than 90 percent of the 60,000 acres needed for the 
project. The restoration benefits of this project are critically needed 
and too long overdue.
    The Water Preserve Areas (WPAs) Project, (including the Bird Drive 
Recharge Area and the Southern Compartment of the Hillsboro 
Impoundment), an integral part of the Everglades restoration plan, is 
located within Palm Beach, Broward, and Miami-Dade Counties east of the 
Everglades and west of existing development, creating a 13,600 acre 
buffer area (Recommended Plan of the Draft WPA Feasibility Study). The 
WPAs are designed to increase the spatial extent of wetlands acres, 
improve habitat in the Everglades Protection Area, enhance the 
Loxahatchee National Wildlife Refuge, as well as store water, and 
safeguard wellfields. WPAs provide a critical source of water storage 
for restoration by reducing undesirable losses from the natural system 
through seepage and providing a means of capturing stormwater runoff 
that was previously wasted to tide. Further, development continues to 
encroach on the remaining natural areas adjacent to the Everglades. 
These remaining wetlands serve a critical role in the restoration of 
the Everglades by maintaining wetland spatial extent. The WPAs also 
provide a mechanism for increased aquifer recharge and surface water 
storage capacity to enhance regional water supplies for the lower east 
coast urban areas, thereby reducing demands on an already degraded 
natural system.
    These three projects demonstrate large-scale ecosystem restoration, 
while maintaining or improving water supply and flood protection. The 
success of these projects hinges on timely authorization. These 
projects require intensive and significant acquisition of land under 
significant development pressure delay could result in failure. If 
authorized in 2002, these projects will result in significant ecosystem 
restoration early in CERP implementation the kind of early success that 
will be essential to maintaining the broad support CERP now enjoys from 
both the public and private sectors.
    Chairman Jeffords and Ranking Member Smith, thank you for the 
opportunity to present our views to the Committee. We look forward to 
working with you and the other members of the Committee to ensure that 
the next WRDA includes comprehensive Corps Reform along with vital 
Everglades restoration projects that are a model for future Corps 
restoration projects.

                               __________
     Statement Melissa Samet, Senior Director of Water Resources, 
                            American Rivers

    Mr. Chairman, Senator Smith and members of the Committee, thank you 
for the opportunity to present testimony on the Water Resources 
Development Programs within the U.S. Army Corps of Engineers. I am 
Melissa Samet, Senior Director of Water Resources at American Rivers, a 
national conservation organization dedicated to protecting and 
restoring the nation's rivers. American Rivers has, over 33,000 members 
across the country, and works in partnership with over 4,000 river and 
conservation organizations. American Rivers also works closely with a 
growing network of organizations working to reform the way the Army 
Corps of Engineers does business.

                THE CORPS OF ENGINEERS MUST BE REFORMED

    During the past few years, increased scrutiny of U.S. Army Corps of 
Engineers (Corps) projects has revealed a disturbing pattern of flawed 
economic and environmental analyses, biased and insupportable 
decisionmaking, and failed mitigation. These problems have been 
identified by the Army Inspector General, the National Academy of 
Sciences, the General Accounting Office, the Environmental Protection 
Agency, the U.S. Fish and Wildlife Service, the media, environmental 
and taxpayer organizations, and citizen activists.
    Projects based on flawed analyses damage the nation's rivers and 
wetlands, wreak havoc on recreation, tourism, and other businesses that 
rely on healthy rivers, and squander agency resources and tax dollars. 
When tax dollars and Corps resources are spent on planning, defending, 
or constructing such projects, the Corps has less ability to carry out 
environmental protection and restoration projects, or more deserving 
flood control and navigation projects.
    To ensure that the Corps provides true benefits to the Nation, and 
does not cause unnecessary and entirely avoidable environmental harm, 
Congress should reform the way the Corps plans and constructs water 
resources projects. Importantly, these same reforms also will save 
taxpayer dollars.
    American Rivers opposes the passage of another Water Resources, 
Development Act without these reforms. More potentially wasteful and 
environmentally damaging Corps activities should not be authorized 
without substantially changing the way the Corps plans, evaluates, and 
constructs its civil works projects.
    American Rivers strongly supports congressional proposals that 
would change the way the Corps does business. We believe that reforms 
contained in S. 646 (Corps of Engineers Reform Act of 2001), and S. 
1987 (Corps of Engineers Modernization and Improvement Act of 2002), 
H.R. 1310 (Corps of Engineers Reform Act of 2001), and H.R. 2353 (Army 
Corps of Engineers Reform and Community Relations Improvement Act of 
2001), are essential to bringing about this change. In this testimony I 
would like to highlight three critical reforms: requiring independent 
peer review of costly or controversial Corps projects; requiring full 
and concurrent mitigation, and prohibiting the Corps from claiming 
project benefits for draining wetlands in cost-benefit ratios.

   CORPS STUDIES MUST BE REVIEWED BY AN INDEPENDENT PANEL OF EXPERTS

    Study after study has shown that the Corps' economic and 
environmental analyses cannot be trusted. Indeed, the Army's own 
Inspector General found that many Corps employees have no confidence in 
the integrity of the Corps' planning process.\1\ Unfortunately, the 
impacts of flawed analyses go far beyond issues of trust and integrity. 
All too often, they are used to justify the construction of projects 
that unnecessarily harm the environment, and that divert tax dollars 
away from serving the real needs of the Nation.\2\
---------------------------------------------------------------------------
    \1\ U.S. Army Inspector General, Report of Investigation, Case 00-
019, 2000, at 8.
    \2\ The National Academy of Sciences has also found that the Corps 
is making unsupportable decisions in its Clean Water Act Section 404 
regulatory program through which the Corps is responsible for 
protecting the nation's rivers, streams, and wetlands. National 
Research Council, Compensating for Wetland Losses Under the Clean Water 
Act at 6, 2001, ``Conclusion 4: Support for regulatory decisionmaking 
is inadequate''); at 6. The General Accounting Office has similarly 
concluded that many Corps districts have touted the success of wetlands 
mitigation required under the Corps' regulatory program without having 
any data to support those claims and without having bothered to assess 
whether the mitigation efforts have been ecologically successful. 
General Accounting Office, Wetlands Protection, Assessments Needed to 
Determine Effectiveness of In-Lieu-Fee Mitigation, 2001, at 3.
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    The transformation of the nation's rivers brought about by Corps 
levees, dams and dredging projects are among the leading reasons that 
North America's freshwater species are disasppearing five times faster 
than land based species, and as quickly as rainforest species.\3\ The 
widespread damage has led the National Research Council to call for the 
establishment of a national goal to restore riparian functions along 
America's rivers. The National Research Council has concluded that 
protecting and restoring riparian areas will have a ``major influence 
on achieving the goals of the Clean Water Act, the Endangered Species 
Act, and flood damage control programs.''\4\
---------------------------------------------------------------------------
    \3\ Ricciardi, Anthony and Rasmussen, Joseph B., ``Extinction Rates 
of North American Freshwater Fauna''; Conservation Biology; 13 (5), 
October 1999, at 1220.
    \4\ National Research Council, Riparian Areas: Functions and 
Strategies for Management, 2002, at 2.
---------------------------------------------------------------------------
    Despite an explicit environmental protection mission, and specific 
environmental restoration programs and projects, the Corps' traditional 
flood control and navigation projects do not appear to be doing any 
better for the environment. To the contrary, agency-wide biases, 
institutional barriers, and faulty analyses are all contributing to the 
continued degradation of the nation's rivers and wetlands.
    Two National Academy of Sciences panels and the Army Inspector 
General have concluded that the Corps has an institutional bias for 
approving large and environmentally damaging structural projects, and 
that its planning process lacks adequate environmental safeguards.\5\ 
Less environmentally damaging, less costly, nonstructural measures that 
would result in the same or better outcomes are routinely ignored or 
given short shrift.
---------------------------------------------------------------------------
    \5\ National Research Council, New Directions in Water Resources 
Planning for the U.S. Army Corps of Engineers, 1999, at 4, 21, 61-63; 
National Research Council, Inland Navigation System Planning: The Upper 
Mississippi River-Illinois Waterway, 2001, at 25-28; 53-54; U.S. Army 
Inspector General, Report of Investigation, Case 00-019, 2000, at 7-8.
---------------------------------------------------------------------------
    The National Academy of Sciences, the Army Inspector General, the 
General Accounting Office and numerous other independent reviews also 
have revealed fundamental and critical technical flaws in the Corps' 
analyses of highly, controversial and expensive projects.

               EXAMPLES OF THE FLAWS ARE QUITE SHOCKING:

     Just last week, the General Accounting Office reported 
that the Corps had overestimated the benefits of the $311 million 
Delaware River Deepening Project by an incredible 300 percent. The 
General Accounting Office concluded that the ``Corps' analysis of 
project benefits contained or was based on miscalculations, invalid 
assumptions, and outdated information.''\6\ The Corps said the project 
would produce $40.1 million in annual benefits. The General Accounting 
Office found that the project benefits could be no more than $13.3 
million a year. Unable to explain its own analysis, the Corps blamed 
$4.7 million of that discrepancy on, a computer error.\7\ The Corps 
suspended work on this project in late April 2002 when the General 
Accounting Office advised the Corps of its preliminary findings.
---------------------------------------------------------------------------
    \6\ General Accounting Office, Delaware River Deepening Protect 
Comprehensive Reanalysis Needed, GAO-02-604, June 2002 at 5.
    \7\ Id.
---------------------------------------------------------------------------
     In one of the Corps' more notorious episodes, the Army 
Inspector General concluded that the Corps had deceptively and 
intentionally manipulated data in an attempt to justify a $1.2 billion 
expansion of locks on the Upper Mississippi River.\8\ In short, the 
Corps had ``cooked the books.''
---------------------------------------------------------------------------
    \8\ U.S. Army Inspector General, Report of Investigation; Case 00-
019, 2000, at 8.
---------------------------------------------------------------------------
     An independent economic analysis of the Corps' proposal to 
construct the $181 million Yazoo Backwater pumping plant in 
Mississippi, clearly demonstrates that the Corps overestimated just the 
agricultural benefits of that project by $144 million.\9\ hat study 
also concludes that even if all the remaining benefit calculations were 
correct, those benefits could not justify construction of the project.
---------------------------------------------------------------------------
    \9\ Leonard Shabman & Laura Zepp, ``An Approach for Evaluating 
Nonstructural Actions with Application to the Yazoo River (Mississippi) 
Backwater Area''; February 7, 2000 (Prepared in cooperation.with the 
U.S. Environmental Protection Agency, Region 4); Shabman and Zepp 
Review Comments on ``Yazoo Backwater Reformulation'' dated September 
24, 2000. Dr. Shabman has participated in a number of National Academy 
of Sciences panels reviewing Corps activities.
---------------------------------------------------------------------------
     The U.S. Environmental Protection Agency (EPA) working 
with the U.S. Geological Survey also demonstrated that the Corps had 
grossly underestimated the wetland impacts of the Yazoo Pumps project. 
EPA has concluded that the Yazoo Pumps will drain and damage more than 
200,000 acres of ecologically significant wetlands--10 times more 
wetlands than are destroyed in an entire year by private developers. 
The Corps claims that ``only'' 23,200 acres of wetlands will be 
affected.\10\
---------------------------------------------------------------------------
    \10\ The Corps also claims that all of the wetland impacts of the 
Yazoo Pumps could somehow be mitigated by the purchase of 17,028 acres 
of conservation easements. However, the Corps is not proposed any 
mitigation for the project. Instead it has proposed a goal of 
purchasing conservation easements that, as discussed in the mitigation 
section below, cannot be met.
---------------------------------------------------------------------------
     The U.S. Fish and Wildlife Service (the Service) also 
conducted an extensive analysis of the Yazoo Pumps and concluded that 
the Corps was claiming environmental benefits that were physically 
impossible to obtain. The Corps told that public that this agricultural 
drainage project would benefit the environment through attempts to 
purchase conservation easements on 62,500 acres of privately owned 
agricultural land located below the 87-foot elevation and within the 
project area. The Service documented, however, that in the project 
area, there are fewer than 9,100 acres of agricultural land in private 
ownership below 87 feet. In short, the Corps claimed environmental and 
economic benefits for reforesting 53,400 acres of privately owned 
agricultural lands that do not exist.
     The U.S. Fish and Wildlife Service also conducted a 
detailed investigation of the methodology used by the Corps to evaluate 
the relative costs of purchasing flowage easements for the $62 million 
Big Sunflower River dredging project. The Service found that the Corps 
significantly overestimated the costs of utilizing nonstructural 
alternatives to meet the objectives of the Big Sunflower project.\11\ 
The Corps' failings on this project continue. After EPA advised the 
Corps that it should prepare a supplemental environmental impact 
statement to evaluate, in part, the human health risks associated with 
dredging DDT and toxaphene contaminated sediments from 104 miles of the 
river bottom, the Corps issued an inadequate environmental assessment 
that does not even acknowledge the existence of the toxaphene 
contamination, let alone evaluate the impacts of dredging the toxaphene 
contaminated sediments.
---------------------------------------------------------------------------
    \11\ U.S. Fish and Wildlife Service, Considerations in the Pricing 
of Flowage Easements: A Case Study of Non-Structural Flood Control in 
the Big Sunflower River Basin (October 1997).
---------------------------------------------------------------------------
     A newspaper's 6-month review of the economics of the $188 
million Columbia River channel deepening project revealed that the 
Corps had overestimated the project's benefits by 140 percent. The 
Corps told the public that the project would return $2.10 for each 
dollar of public money invested. The Oregonian found that the project 
would return just 88 cents for each tax dollar spent. The newspaper 
identified six key areas where the Corps had relied on outdated or 
faulty data, or left out important factors. Lester Lave, the chairman 
of the National Research Council panel that investigated the Upper 
Mississippi River lock expansion project, endorsed the paper's analysis 
as fair and reasonable.\12\ In just a few days before the Oregonian 
series ran--and after the Oregonian had shared its findings with the 
Corps--the Corps advised the paper that it would be reexamining the 
cost-benefit analysis.\13\
---------------------------------------------------------------------------
    \12\ The Oregonian, ``Key parts of corps analysis don't hold 
water'', March 3, 2002.
    \13\ The Oregonian, ```Digging deeper' in Columbia'', March 10, 
2002. The Corps noticed the new study on March 19, 2002 (67 Fed. Reg. 
1246).
---------------------------------------------------------------------------
     Four retirees with engineering and other technical 
backgrounds from Cecil County, Maryland devoted an extraordinary amount 
of time and energy to document dozens of flaws in the Corps' economic 
analysis of the $90 million Chesapeake & Delaware Canal deepening 
project. One of these flaws was a ``basic math error that boosted the 
benefit-cost ratio from a failing 0.65 to a passing 1.21.''\14\ In 
January 2001, the Corps finally acknowledged that the project was not 
economically justified and suspended work.
---------------------------------------------------------------------------
    \14\ Michael Grunwald, ``A Race to the Bottom'', The Washington 
Post, September 12, 2000, at A 15.
---------------------------------------------------------------------------
    As evidenced by the range of projects discussed in this testimony, 
the Corps' inability to properly analyze costly or controversial 
projects is widespread. Unfortunately for the taxpayers and the 
environment, this is just a sampling of Corps projects with significant 
analytical problems.\15\
---------------------------------------------------------------------------
    \15\ For example, the General Accounting Office is currently 
investigating the Corps' analysis of the $108 million Oregon Inlet 
Jetties project.
---------------------------------------------------------------------------
    Flawed Corps studies also are a long-standing problem. For example, 
in 1987, the Washington Post editorialized that the Tennessee-Tombigbee 
Waterway ``was justified over the years by egregiously skewed cost-
benefit estimates--what you would call lies if your children told them 
instead of the-Corps of Engineers.''\16\
---------------------------------------------------------------------------
    \16\ Editorial, ``Wet Elephant'', The Washington Post, January 5, 
1987, at A16.
---------------------------------------------------------------------------
    The Corps Is Unable Or Unwilling To Police Its Own Planning 
Process.--During the past few years, a steady stream of studies 
exposing fundamental and critical errors in Corps planning documents 
has driven the public to call for substantial reforms of the agency. 
Unfortunately, during this same time, the Corps has amply demonstrated 
that it is either unwilling or unable to reform itself--and it has 
continued to use egregiously flawed studies to support its 
recommendation of costly and highly destructive projects.
    The Corps' unwillingness to reform itself is perhaps best 
exemplified by one of the Corps' most recent attempts to quell 
criticism of its planning process. After being forced to suspend two 
major projects in just 2 months--the $311 million Delaware River 
Deepening project and the $188 million Columbia River Channel Deepening 
project--when independent reviews revealed dramatic flaws in the Corps' 
economic analyses, the Corps announced an agency-wide ``pause'' of 
approximately 150 water resources projects.
    This much-touted ``pause'' was ordered to address the ``serious 
questions'' that had been raised regarding the accuracy of the Corps' 
planning process. Corps Districts were ordered to ``have a new economic 
analysis (not an update) completed before [projects with an economic 
analysis approved prior to fiscal year 1999 would be] allowed to 
proceed.''\17\
---------------------------------------------------------------------------
    \17\ Memorandum from Robert H. Griffin, Major General, U.S. Army, 
Director of Civil Works, April 30, 2002.
---------------------------------------------------------------------------
    The Corps quickly dashed any hopes that this was a serious attempt 
at reform. Just 17 days after it announced the project ``pause'' and 
review to the public, the Corps claimed that it had reviewed 171 
projects, clearing 118 to proceed. Only eight projects were flagged for 
additional review as a result of the project ``pause'' directive.\18\ 
The remaining projects were already being reviewed before the Corps' 
announcement. A legitimate economic analysis for a Corps project 
requires the gathering of data, selection and justification of models 
and assumptions, and careful review and evaluation. Claims that the 
economic analyses for 118 projects can be redone in just 17 days is 
simply not believable.
---------------------------------------------------------------------------
    \18\ The Corps' already battered credibility took yet another hit 
when just a few days later it released a ``corrected'' list under the 
project ``pause'' directive that deviated in significant ways from the 
first list. The second list identifies only 164 projects as having been 
reviewed, clearing 80 to proceed (with the remainder already undergoing 
reevaluation due to previously identified problems). Again only eight 
projects were said to require additional review as a result of the 
review process. With no explanation, the Corps completely removed from 
the second list some of the worst projects that were identified on the 
original list with the nomenclature ``review complete,'' including the 
Grand Prairie Irrigation Demonstration Project in Arkansas, the Yazoo 
Pumps Project in Mississippi, and the St. John's Bayou Project in 
Missouri. In addition to being costly, each of these projects is highly 
controversial and would destroy some of America's most valuable 
wetlands and aquatic habitat. Because the Corps has left the public 
completely in the dark on the process used in its review, we can only 
conclude that although the Corps originally announced to Congress and 
the public that these projects had in fact been reviewed, the reviews 
never occurred.
---------------------------------------------------------------------------
    As the St. Louis Post-Dispatch so aptly editorialized when the 
Corps announced its agency-wide project review:
    Critics still worry, and rightly so, that the Corps may be trying 
to preempt true reform by making a show of falling on its sword. 
Congress must see to it that doesn't happen. For years the Corps has 
downplayed the costs of its projects to the environment and the 
taxpayers and overstated their benefits to agriculture and the barge 
industry.\19\
---------------------------------------------------------------------------
    \19\ Editorial, ``Backpaddling'', St. Louis Post-Dispatch, May 6, 
2002.
---------------------------------------------------------------------------
    Congress should stop these abuses, and restore credibility to the 
Corps' planning and decisionmaking process.
    American Rivers urges Congress to require independent peer review 
as set forth in S. 1987 and S. 646. These provisions would require 
independent peer review for projects whose total costs exceed $25 
million, or for projects that. are deemed to be controversial. These 
provisions ensure that the review is truly independent by placing the 
review office outside of the Corps, and that each review is carried out 
by a panel that represents a balance of expertise in the areas of 
biology, economics, and engineering.
    Importantly, independent review will not delay planning for 
projects of concern--unless, of course the review finds fundamental 
flaws or dishonesty, in which case delays would be inevitable but would 
serve the public interest. The Corps' review of costly or controversial 
projects typically takes approximately 1 year from the date the draft 
report is released for public comment until a final report is issued, 
and can take much longer. For example:
     A draft reformulation report/environmental impact 
statement for the Yazoo Pumps project discussed in this testimony was 
issued in September 2000, and 21 months later a final study still has 
not been released.
     A draft feasibility report for the $311 million Delaware 
River Deepening Project discussed above, was issued in June 1990, and 
the final feasibility report was not issued until February 1992, 20 
months later.\20\
---------------------------------------------------------------------------
    \20\ Environmental threats from this project include severely 
damage to the banks of the Delaware River, its wildlife, and nearby 
drinking water wells and aquifers.
---------------------------------------------------------------------------
     A draft feasibility report/environmental impact statement 
for the $390 million Lower Snake River Juvenile Salmon Migration 
project was issued in December 1999, and a final study was not issued 
until February 2002, 26 months-later.\21\
---------------------------------------------------------------------------
    \21\ This study was prompted by National Marine Fisheries Service 
and U.S. Fish and Wildlife Service Biological Opinions on the impacts 
of operation of the navigation dams on four federally endangered salmon 
stocks.
---------------------------------------------------------------------------
    The 180-day independent review period required under S. 1987 and S. 
646 could easily have been carried out during these time periods.
    Independent review also will decrease wasteful spending by ensuring 
that analytical flaws are brought to light before a project is built or 
becomes entangled in protracted litigation. Independent review will 
ensure that the Corps plans, recommends, designs, and builds projects 
that are based on sound science and economics. Most importantly, 
independent review will help ensure that environmental.impacts have 
been adequately addressed, that less environmentally damaging 
alternatives have been fully evaluated, and that Corps projects are 
economically justified.
    Independent peer review is a common sense solution, and a practice 
used routinely in the scientific community. 'It is a practice that is 
sorely needed to help restore the Corps' battered credibility.
congress should require the corps to fully mitigate for the harm caused 
 by corps projects and to implement that mitigation in a timely manner
    The Corps has abjectly failed to plan and implement ecologically 
successful mitigation for the significant damage caused to rivers and 
wetlands by Corps projects. The Corps generally does not even attempt 
to mitigate hydrologic impacts to rivers and streams, and undertakes 
only limited efforts to mitigate for wetland impacts.
    There are many reasons for the Corps' lack of mitigation success. 
The Corps' civil works mitigation is not properly planned, and 
typically calls for the creation of non-wetland habitat to ``replace'' 
wetlands harmed by Corps projects. It does not reflect contemporary 
science and the importance of natural systems, often is riot 
implemented in anything remotely approaching a timely manner, and is 
not effectively tracked or monitored.
    In reality, the Corps imposes far more stringent mitigation 
requirements on private developers than it imposes on itself And, 
unfortunately, even the more stringent mitigation requirements under 
the Corps' regulatory program are alarmingly far from achieving the 
goal of no net loss of wetlands.\22\ The ``actual amount of wetland 
impacts offset is only about 20 percent, meaning that the section 404 
permitting program has been fostering an 80 percent net loss of 
wetlands.''\23\
---------------------------------------------------------------------------
    \22\ National Research Council, Compensating for Wetland Losses 
Under the Clean Water Act 2001, at 2.
    \23\ R. Eugene Turner, et al., ``Count It by Acre or Function--
Mitigation Adds Up to Net Loss of Wetlands'', National Wetlands 
Newsletter, November-December 2001.
---------------------------------------------------------------------------
    Poor Planning.--When selecting a preferred project alternative for 
its own civil works projects, the Corps frequently provides little more 
than a vague indication of its intent to mitigate. Typically the Corps 
does not provide: (1) a detailed mitigation plan that identifies 
specific mitigation sites; (2) evidence that proposed mitigation will 
produce the promised ecological benefits; (3) evidence that the 
proposed mitigation can actually be implemented; (4) evidence that the 
proposed mitigation is ecologically appropriate with respect to 
mitigating project impacts; or (5) a detailed monitoring plan to ensure 
that the mitigation produces the promised ecological results.
    The lack of detailed planning leads to a variety of problems. In 
the case of the Yazoo Pumps; project discussed earlier in this 
testimony, lack of a detailed plan led the Corps to claim that it could 
implement mitigation on lands that do not exist. Specifically, the 
Corps said it could purchase conservation easements on 62,500 acres of 
private agricultural land within the affected area to offset the 
project's impacts, when only 9,100 acres of privately owned 
agricultural land exist in that area.
    Where the details of mitigation are not carefully planned, the 
Corps has no ability to effectively evaluate the potential for 
mitigation success. This leads to unsupportable claims--made routinely 
by the Corps--that a project should proceed because mitigation will 
alleviate the harms caused.
    Just as importantly, where the details of a mitigation plan are not 
established, the costs of mitigation also cannot be realistically 
established. Since the costs of mitigation are a project cost, failure 
to have--a detailed and realistic mitigation plan can seriously skew 
the cost benefit analysis.
    Out-of-Kind Mitigation--The mitigation that is proposed by the 
Corps frequently ignores its ``interim goal of no overall net loss of 
the Nation's remaining wetlands base, as defined by acreage and 
function'' that was established by the Water Resources Development Act 
of 1990.\24\
---------------------------------------------------------------------------
    \24\ 33 U.S.C. Sec. 2317(a)(1).
---------------------------------------------------------------------------
    The Corps ignores the functional replacement element of this goal 
by frequently replacing rare aquatic and riparian habitat with more 
common terrestrial habitat. This out-of-kind mitigation by definition 
cannot replace lost wetland functions. The Corps has completely 
abandoned the mandate to ensure ``no net loss of wetland acres'' by 
consistently requiring far less than one-to-one wetland replacement.
    For example, though the Corps' plan to dredge over 100 miles of the 
Big Sunflower River will adversely impact 3,631 acres of wetlands, the 
Corps has limited its mitigation to planting tree seedlings on 1,912 
acres of frequently flooded agricultural lands.\25\ This is not 
wetlands mitigation and will not replace the wetland functions that 
will be lost through the project. Even if this mitigation somehow 
miraculously created 1,912 acres of wetlands, it would still result in 
a 47 percent loss of wetlands.
---------------------------------------------------------------------------
    \25\ Final Project Report and Supplement No. 2 to the Final 
Environmental Impact Statement, Flood Control, Mississippi River and 
Tributaries, Yazoo Basin, Mississippi, Big Sunflower River Maintenance 
Project, Volume 1, Project Report, Supplemental Environmental Impact 
Statement, and Appendices A-C, July 1996, at Appendix B, U.S. Fish & 
Wildlife Coordination Act Report at i. At least 443 acres of bottomland 
hardwood wetlands and 476 acres of farmed wetlands will be destroyed, 
and an additional 2,712 acres of wetlands will be severely impacted. 
Id.
---------------------------------------------------------------------------
    Not Implemented In A Timely Manner.--Though existing law requires 
the Corps to implement mitigation prior to or concurrently with, 
project construction; the Corps has exploited the somewhat vague 
definition of ``concurrent'' to allow decades-long delays in the 
implementation of mitigation. For example, the Corps currently is 
scheduled to complete the enlargement of the Mississippi River Mainline 
levees in the year 2030. That project consists of hundreds of 
individual and completely separable construction projects (for example, 
some sections of levees will be raised in Louisiana while others will 
be raised in northern Mississippi) each with separate mitigation 
requirements. The Corps nevertheless asserts that all mitigation will 
have occurred ``concurrently'' as long as it is completed when the very 
last portion of levee is raised in 2030 or later, even though 
construction of most of the separate components will have been 
completed decades earlier.
    This can lead to wholesale failures in the Corps' mitigation 
program. For example, by its own admission, the Vicksburg District of 
the Corps has a mitigation backlog of almost 30,000 acres that it is 
legally obligated to implement.\26\ Despite the fact that much of this 
mitigation was to have been undertaken years ago, the Vicksburg 
District has not even purchased the vast majority of the land needed to 
start these efforts.
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    \26\ As of June 24, 1999, the Corps' Vicksburg District was legally 
obligated to implement compensatory mitigation on well over 25,000 
acres that had yet to be purchased. That backlog did not include the 
mitigation required in the Vicksburg District for the Mississippi River 
Mainline Levee Project that includes the purchase and reforestation of 
an additional 5,200 acres of frequently flooded agricultural lands. 
Letter and Attachments from Joseph W. Westphal, Assistant Secretary of 
the Army (Civil Works) to Melissa A. Samet, Attorney, Earthjustice 
Legal Defense Fund (August 9, 1999).
---------------------------------------------------------------------------
    Not Tracked or Monitored.--As importantly, the Corps makes little 
effort to track or evaluate the ecological success of mitigation 
efforts for either its own civil works program or the Clean Water Act 
Section 404 program. For example, it took the Corps almost 5 months to 
identify the promised mitigation--and the mitigation backlog--in just 
one of the Corps' 38 domestic Districts. And despite a specific 
request, the Corps did not provide any data evaluating whether any 
mitigation that was attempted in that District has been ecologically 
successful. The Corps did not provide that information because it had 
none to provide--a response to a later Freedom of Information Act 
request revealed that no ecological monitoring had been carried 
out.\27\
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    \27\ Response to September 25, 2000 Freedom of Information Act 
Request submitted by Melissa Samet, Earthjustice, requesting 
information and data on the Corps' wetlands monitoring program in the 
Vicksburg District.
---------------------------------------------------------------------------
    In another telling admission, the Corps has advised the General 
Accounting Office that the Corps bases its evaluation of whether or not 
mitigation is complete on the amount of money spent. ``According to the 
Corps, the point at which 50 percent of mitigation is completed occurs 
in the fiscal year in which the Corps district office's cumulative 
expenditures toward the mitigation plan total at least 50 percent. of 
the estimated cost of these activities.''\28\ Mitigation monitoring and 
ecological success apparently do not come into play in the Corps' 
determination.
---------------------------------------------------------------------------
    \28\ General Accounting Office, U.S. Army Corps of Engineers 
Scientific Panel's Assessment of Fish and Wildlife Mitigation Guidance, 
GAO-02-574, May 2002 at 4 n.2.
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    The Corps also does not track implementation of mitigation required 
under the Clean Water Act Section 404 regulatory program. The General 
Accounting Office has concluded that many Corps districts have touted 
the success of wetlands mitigation required under the Corps' regulatory 
program without having any data to support those claims and without 
having bothered to assess whether the mitigation efforts have been 
ecologically successful.\29\ The National Academy of Sciences also has 
found that the Corps is making unsupportable decisions in its Clean 
Water Act Section 404 regulatory program, which are causing profound 
impacts on the nation's rivers, streams, and wetlands.\30\
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    \29\ General Accounting Office, Wetlands Protection, Assessments 
Needed to Determine Effectiveness of In-Lieu-Fee Mitigation, 2001, at 
3.
    \30\ National Research Council, Compensating for Wetland Losses 
Under the Clean Water Act at 6, 2001, (``Conclusion 4: Support for 
regulatory decisionmaking is inadequate''); at 6.
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    Even though the Corps apparently has little idea of whether 
promised mitigation is successful or even attempted, it continues to 
build projects and to issue Section 404 permits based on the premise 
that mitigation will correct all environmental damage. To make sound 
decisions, both the Corps and the public must have ready access to 
mitigation data.
    Congress also recognized that it needed ready access to mitigation 
information in the Water Resources Development Act of 1986. That Act 
requires the Corps to include a specific fish and wildlife mitigation 
plan for any project proposal submitted to Congress for authorization 
after 1986, or provide Congress with a determination that the project 
will have negligible adverse impacts on fish and wildlife.\31\ However, 
the Corps often does not provide accurate mitigation information to 
Congress, preventing Congress from honestly assessing a. project's 
impacts prior to authorization.
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    \31\ 33 U.S.C. Sec. 2283(d).
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    Between 1986 and 2001, the Corps advised Congress that only 47 of 
150 projects required. a fish and wildlife mitigation plan.\32\ It 
strains credulity to suggest that only 31 percent of Corps projects 
require mitigation. This is particularly true when one examines some of 
the projects that did not include mitigation plans when proposed to 
Congress.\33\
---------------------------------------------------------------------------
    \32\ General Accounting Office, U.S. Army Corps of Engineers 
Scientific Panel's Assessment of Fish and Wildlife Mitigation Guidance, 
GAO-02-574, May 2002 at 4. The Corps provided the mitigation planning 
information for 150 projects that it says were authorized between the 
Water Resources Development Act of 1986 and September 30, 2001 that 
received construction appropriations. Id.
    \33\ Information supporting the GAO's May 2002 Study entitled U.S. 
Army Corps of Engineers Scientific Panel's Assessment of Fish and 
Wildlife Mitigation Guidance. The list of projects was provided to 
American Rivers by the U.S. Army Corps of Engineers upon request.
---------------------------------------------------------------------------
    For example, the Corps did not present a fish and wildlife 
mitigation plan to Congress for the American River Watershed Flood 
Plain Protection Project, which the Environmental Protection Agency has 
determined will have ``adverse environmental impacts that are of 
sufficient magnitude that EPA believes the proposed action must riot 
proceed as proposed.''\34\ The Corps also did not provide fish and 
wildlife mitigation plans to Congress for the Boston Harbor Navigation 
Improvements and Berth Dredging Project or the John T. Myers and 
Greenup Lock Improvements, each of which the Environmental Protection 
Agency has said will have ``significant environmental impacts that 
should be avoided in order to adequately protect the environment.''\35\
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    \34\ The Environmental Protection Agency gave the Corps' 
environmental impact statement for this project a rating of EU2. The 
criteria for that rating, which includes the quote above, is described 
at http://www.epa.gov/compliance/nepa/comments/ratings.html.
    \35\ The Environmental Protection Agency gave the Corps' 
environmental impact statements for each of these projects a rating of 
E02. The criteria for that rating, which includes the quote above, is 
described at http://www.epa.gov/compliance/nepa/comments/ratings.html.
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    The Corps should be required to mitigate for all unavoidable harm 
caused by its projects and to carry out its mitigation in a timely and 
ecologically sound manner. American Rivers urges Congress to pass into 
law each of the mitigation provisions in S. 646, which we believe would 
significantly improve the Corps' mitigation success rate.
    Among other things, S. 646 would require the Corps to mitigate 
fully for the adverse environmental harm caused by its projects, 
including adverse hydrologic impacts. It would require the Corps to--at 
an absolute minimum--implement one acre of mitigation for each acre of 
habitat harmed by a Corps project, and to ensure that each mitigation 
plan reflects contemporary science and the importance of natural 
systems. It would require the Corps to develop a specific mitigation 
plan flat includes monitoring for each project.
    S. 646 also would require the Secretary of the Army to determine 
that the mitigation plan has the greatest possibility of cost-
effectively and successfully mitigating' the adverse impacts of a 
project, before the Corps can proceed with that project.
    To ensure timely implementation of mitigation, S. 646 also 
clarifies the definition of ``concurrent'' mitigation to require that 
50 percent of mitigation be completed before project construction 
begins.
    S. 646 further requires the Corps to set up a publicly accessible 
system to track promised and implemented mitigation, both for the 
Corps' civil works program and its regulatory program.
    Each of these mitigation reforms is critical for ensuring the 
protection and restoration of the nation's rivers, streams, and 
wetlands. Without these provisions, the Corps will have no hope of 
meeting its statutorily established goal of ensuring no net loss of 
wetlands as defined by acreage and function. And the Nation will 
continue to lose key resources necessary to protect water quality, 
provide habitat for fish and wildlife, and provide protection from 
flooding.

  CONGRESS SHOULD ENSURE THAT THE CORPS' COST BENEFIT CRITERIA COMPLY 
            WITH FEDERAL LAW AND LONGSTANDING FEDERAL POLICY

    The Corps currently can, and does, claim project benefits for 
draining wetlands--an activity that undeniably harms the environment 
and that requires mitigation. For example, over 83 percent of the 
benefits of the Yazoo Pumps project are derived from draining wetlands 
to promote increased agricultural production on marginal lands that 
have always flooded. As I discussed earlier, EPA has concluded that the 
Yazoo Pumps will drain and damage more than 200,000 acres of 
ecologically significant wetlands. Approximately 150,000 of those 
wetland acres are located within the 2-year floodplain.
    Claiming project benefits from the draining of wetlands is directly 
at odds with the mandates of the Clean Water Act Section 404(b)(1) 
Guidelines (which apply to Corps projects), the implementing 
regulations of the National Environmental Policy Act, and long-standing 
national wetlands protection policies, national farm policies, and 
national floodplain policies. It also is wholly inconsistent with the 
Corps' environmental protection mission and with the Corps' statutorily 
mandated goal of no net loss of the nation's wetlands. Specifically:
     This practice is at odds with the implementing regulations 
of the National Environmental Policy Act, and the Section 404(b)(1) 
Guidelines, both of which require mitigation for wetland impacts that 
cannot be avoided. 40 C.F.R. Sec. 1508.20; 40 C.F.R. Sec. 230.10(d).
     This practice is at odds with Executive Order 11990, which 
since 1977 has directed every Federal agency to provide leadership and 
take action to minimize the destruction, loss, or degradation of 
wetlands, and to preserve and enhance the natural and beneficial values 
in carrying; out agency responsibilities. Indeed, this Executive Order 
specifically compels the Corps to avoid draining, dredging, and filling 
wetlands.\36\ The courts have held that Executive Order 11990 is 
judicially enforceable and should be given the full force and effect of 
law.\37\
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    \36\ Protection of Wetlands Executive Order (Executive Order 
11990), reprinted in 42 U.S.C. Sec. 4321. As importantly, Executive 
Order 11990 provides that each Federal agency: ``shall avoid 
undertaking or providing assistance for new construction located in 
wetlands unless the head of the agency finds (1) that there is no 
practicable alternative to such construction, and (2) that the proposed 
action includes all practicable measures to minimize-harm to wetlands 
which may result from such use.'' Id. at Section 2(a). The term ``new 
construction'' is defined to include ``draining, dredging, 
channelizing, filling, diking, impounding and related and any 
structures or facilities begun or authorized after the effective date'' 
of the Executive Order. Id. at Section 7(b).
    \37\ City of Carmel By-the-Sea v. United States Dep't of 
Transportation, 123 F.3d 1142, 1166 (9th Cir. 1997); City of Waltham v. 
United States Postal Service, 786 F. Supp. 105, 131 (D. Mass. 1992). 
The courts also have found that this Executive Order imposes duties on 
Federal agencies beyond those of NEPA. It requires a specific finding 
that no practicable alternative to the proposed action exists. City of 
Carmel, 123 F.3d at 1167.
---------------------------------------------------------------------------
    This practice is at odds with national farm policy and the Federal 
Government's significant efforts to take excess and environmentally 
sensitive croplands out of production, and to remove incentives for 
draining wetlands to enhance crop production.\38\
---------------------------------------------------------------------------
    \38\ The Food Security Act of 1985 and the Erodible Land and 
Wetland Conservation Program, 16 U.S.C. Sec. 3801 et seq., encourage 
the removal of fragile lands from production and provide various 
opportunities for wetland habitat protection and restoration. A special 
conservation provision in this Act, known as ``Swampbuster,'' removes 
incentives for draining wetlands by eliminating most agricultural 
subsidies to farmers who drain wetlands to enhance crop production, or 
who produce commodities on wetlands converted after 1985.
---------------------------------------------------------------------------
    For floodplain wetlands, this practice is at odds with Executive 
Order 11988, which since 1977 has directed all Federal agencies to take 
action to ``restore and preserve the natural and beneficial values 
served by floodplains'' in carrying out their water resources 
activities. This Executive Order was passed to help reduce flood 
damages by protecting the natural values of floodplains and reducing 
unwise land use practices in the nation's floodplains.
    This practice is at odds with the long-standing bipartisan national 
policy of no net loss of wetlands which was established under the first 
Bush Administration, and which was codified as to the Corps in the 
Water Resources Development Act of 1990.
    Congress should put a stop to this outdated practice. American 
Rivers strongly urges Congress to prohibit the Corps from claiming 
project benefits for increased value of privately owned property and 
services, or increases in the quantity of privately owned property, 
derived from draining wetlands, as provided in S. 1987 and S. 646.

                               CONCLUSION

    American Rivers respectfully urges Congress to act quickly and 
decisively to restore credibility to the Corps' civil works program. 
The absence of meaningful review, the absence; of clear requirements to 
ensure full and ecologically sound mitigation, and outdated methods of 
predicting project benefits, have created a climate where abuse has 
flourished. Without these long overdue reforms, these abuses will 
continue and the environment and the taxpayers will continue to suffer. 
'We urge you not to pass another Water Resources Development Act unless 
these reforms are included. American Rivers would like to work with the 
Committee to make these reforms a reality.
     
     
     Statement of the National Association of Flood and Stormwater 
                          Management Agencies

    The National Association of Flood and Stormwater Management 
Agencies is very pleased to have the opportunity to submit this 
testimony to the committee for consideration on an issue of importance 
to the NAFSMA membership.

                          BACKGROUND ON NAFSMA

    NAFSMA represents more than 100 local and state flood control and 
stormwater management agencies serving a total of more than 76 million 
citizens and has a strong interest in this important legislation.
    NAFSMA's members are public agencies whose function is the 
protection of lives, property and economic activity from the adverse 
impacts of storm and flood waters. NAFSMA member activities are also 
focused on the improvement of the health and quality of our nation's 
waters.
    The mission of the association is to advocate public policy, 
encourage technologies and conduct education programs to facilitate and 
enhance the achievement of the public service functions of its members. 
Many of NAFSMA's members are currently involved in ongoing water 
resources projects with the Corps of Engineers, including flood 
management and environmental restoration projects.
    Since the organization was formed in 1979, NAFSMA has worked 
closely with the U.S. Army Corps of Engineers and other Federal 
agencies, including the U.S. Environmental Protection Agency and the 
Federal Emergency Management Agency in numerous efforts. Our members 
have supported the concept of cost sharing as first authorized in WRDA 
86 and a group of our members worked closely with the Corps to redesign 
what is now the Project Cooperation Agreement in the early 1990's.
    We have supported new initiatives such as the Corps Challenge 21 
riverine restoration and other environmental restorations initiatives 
as a necessary complement and vital tool to add to the Corps ability to 
meet environmental challenges in their traditional water resource 
projects.
    NAFSMA very much appreciates the Committee's commitment to hold 
hearings to keep WRDA on its biennial renewal process. NAFSMA members 
are on the front line protecting their communities from loss of life 
and property and therefore the organization is keenly aware that flood 
management measures are a necessary investment required to prevent loss 
of life and damages to people's homes and businesses. Flood management 
is a wise investment that will pay for itself by preserving life and 
property and reducing the probability of repeatedly asking the Federal 
Government for disaster assistance.

                   NAFSMA RELATIONSHIP WITH THE CORPS

    Over the past twenty years of NAFSMA's existence, our relationship 
and the role of our agencies and the Corps of Engineers has changed. 
Our members are dedicated to looking at both non-structural and 
structural approaches to flood management. Environmental restoration is 
a key focus of our member agency missions as well as the Corps. Urban 
stream restoration and other similar projects have been undertaken and 
have been quite successful.
    We are proud of the commitment of our member agencies to protect 
and restore the environment. The Corps is an important partner to state 
and local agencies in carrying out these environmental restoration 
initiatives.
    NAFSMA firmly believes that the Corps has the technical 
capabilities and expertise to carry out its stated missions. The Corps 
must have the funding resources to maximize the public benefits that 
can be obtained from the Corps capabilities and expertise.
    The Corps has strengthened and improved its partnership with the 
non-Federal sponsors over recent years. This partnership can continue 
to be strengthened and improved with some new policy initiatives. 
Changes in the Water Resources Development Act this year will help our 
member agencies better carry out their evolving missions and 
responsibilities. I would like to describe some of those issues for you 
today.

                    POLICY INITIATIVES FOR WRDA 2002

    It is important to preface comments about WRDA with NAFSMA's 
position that the organization encourages Congress to make sufficient 
annual appropriations that support those projects and programs 
previously authorized and those yet to be authorized. As non-Federal 
sponsors, it is often difficult to keep project costs down and ensure 
the continuation of the local cost share funding while project costs 
escalate due to lack of matching Federal appropriations.

      COST SHARING FOR FEDERALLY PARTNERED FLOOD CONTROL PROJECTS

    NAFSMA supports the current Federal project cost sharing for flood 
control activities of 65 percent Federal/35 percent non-Federal. We 
also support the development of incentives to implement floodplain 
management measures above the minimum measures, allowing the project 
cost sharing to be modified upwards to 75 percent Federal/25 percent 
local. Decisions as to whether local communities would qualify for 
improved cost sharing could be based on the community's rating under 
the National Flood Insurance Program Community Rating System or 
submission of a floodplain management plan that substantially exceeds 
minimum requirements.
    Such an approach has already been passed by the California state 
legislature and is currently implemented at the State level for State 
participation with local agencies in Corps-partnered projects.
    We know that in the past, a number of interests have proposed that 
this cost sharing be reduced to a 50/50 Federal/non-Federal approach. 
NAFSMA is strongly opposed to such a move. This type of change would 
keep critical public safety projects from moving forward.

                      CREDIT FOR IN-KIND SERVICES

    NAFSMA supports that local cost sharing requirements be allowed to 
be met in its entirety by local in-kind services. We also urge that 
credit toward the non-Federal share of the cost of authorized flood 
control, ecosystem restoration projects, or other Corps-partnered 
projects include all work that is determined to be an integral part of 
the project (such as the cost of design and construction) for work 
undertaken before the signing of the Project Cooperation Agreement 
(PCA).

           ENCOURAGE MULTI-OBJECTIVE INITIATIVES WITHIN WRDA

    Within the Water Resources Development Act, NAFSMA urges the 
Committee to include language that would encourage multi-objective 
efforts, to include flood management, river restoration, recreation, 
environmental preservation and enhancements. Such an approach would 
produce long-lasting multiple benefit projects for communities 
throughout the nation.
    Although we can currently do combined flood damage reduction and 
environmental restoration, with some difficulty, under the Corps 
General Investigation Program, multiple objective projects cannot be 
done through the more efficient Continuing Authorities Program for 
small projects, such as flood control projects (Section 205), 
environmental restoration (Section 1135.) or, aquatic restoration 
(Section 206).
    NAFSMA recommends combining all the continuing authority programs 
into a single program that allows inclusion of any of the benefits 
presently provided for in the individual continuing authority programs, 
or establishing anew continuing authority program for multi-objective 
projects. We are learning that single purpose projects do not meet the 
demands of today's society and are less efficient to implement.

                    REVISION OF CURRENT NED POLICIES

    NAFSMA recommends the review and revision of current National 
Economic Development (NED) policies to encourage more environmentally 
sensitive, multi-objective flood management projects.
    NAFSMA supports the Corps movement in this direction through their 
development and use of the National Ecosystem Restoration (NER) plan 
process for project formulation of ecosystem restoration projects. 
NAFSMA encourages the melding of NED and NER approaches to achieve 
multi-objective projects.

             CONTINUED SUPPORT FOR SECTION 211 INITIATIVES

    NAFSMA supports policies and programs, such as Section 211 of WRDA 
1996, that allow local implementation of Federal projects where 
advantages and effectiveness can be demonstrated and provide for 
reimbursement.

            MAXIMIZE THE BENEFIT OF THE USE OF FEDERAL FUNDS

    NAFSMA is concerned about some of the approaches suggested for 
Corps reform. NAFSMA encourages a process and funding mechanism to 
maximize the benefit of the use of Federal funds for federally 
authorized projects. The following items address this issue.

Independent Peer Review
    NAFSMA opposes efforts to add external independent peer review to 
the approval process for federally partnered flood control or 
environmental restoration projects. Corps projects presently go through 
an extensive review process that includes review and involvement by the 
U.S. Environmental Protection Agency, Fish and Wildlife and others. 
While there are constituencies promoting such reviews under the 
umbrella of cost savings and better use of Federal tax dollars, the 
addition of such a review process would only serve to slow down the 
process for much-needed flood management projects and increase the cost 
of such projects at both the non-Federal and Federal levels.
    A logical sequence of events is to consider this issue after a 
thorough review of the congressionally requested National Academy of 
Sciences study on the feasibility of independent review panel. The 
study is expected to be released in July.
    We understand that independent review panels are being recommended 
because the Corps feasibility study and project authorization process 
is believed by some not to fulfill the program's intent. That being the 
situation, NAFSMA suggests that first consideration be given to a 
review and correction of the existing feasibility and authorization 
process before adding an additional process such as independent review.
    NAFSMA would be supportive of language to encourage partnerships 
that are formed early and amongst all parties, including the regulatory 
agencies, whose goal is to seek participant consensus on the 
recommended flood management and watershed enhancement projects.

Benefit Cost Ratio
    NAFSMA opposes increasing the current benefit cost ratio for water 
resources projects subject to benefit cost analyses. The benefit cost 
ratio should not be the sole criteria for project screening. Non-
Federal sponsors and the Corps are moving toward multi objective 
environmentally sensitive projects to better address public needs and 
maximize the use of Federal funds. Increasing the benefit cost would 
hinder that approach. We are also concerned that disadvantaged areas 
would be discriminated against with this higher benefit cost ratio. 
Non-Federal sponsors need to be involved in any effort to examine 
changes to the current benefit cost ratios.
    NAFSMA supports review of all laws, regulations, policies, 
procedures, and guidance to determine what changes are required to 
expedite implementation of flood management and/or watershed 
enhancement projects, without the project suffering in quality. An 
example would be the elimination of the Preconstruction, Engineering 
and Design (PED) agreement.
    NAFSMA urges Congress to authorize a process and Federal funding 
mechanism for nonfederal sponsor developed projects to maximize the 
benefit of the use of Federal funds for federally authorized projects. 
This would include local sponsors taking the lead in design and/or 
construction in partnership with the Corps on federally authorized 
projects.

Deauthorization of Backlogged Projects
    Deauthorization of projects in the backlog should occur only where 
the Non-Federal sponsor no longer expresses desire to participate. 
NAFSMA believes that revocation of an authorization or commitment to 
the public without public support would be inappropriate. 
Deauthorization efforts shouldn't apply to projects.where non-Federal 
sponsors have expressed a desire to participate, such as having 
executed Preconstruction, Engineering and Design (PED) agreements, 
Project Cooperation Agreements (PCA's) or initiated actions on Lands, 
Easements, Rights-of-way, Relocations, Disposal Areas (LERRDS).

Review Of Corps Projects That Have Exhausted Their Project Life
    NAFSMA encourages Congress to authorize the Corps to develop 
Guidance and Policy for reevaluation of Corps-constructed or federally 
authorized flood control projects that have reached or surpassed their 
project life.
    The guidance and policy should include at a minimum, an option for 
de-authorizing all or portions of the project, cost shared 
implementation of alternatives, such as nonstructural approaches that 
provide the same benefits, or cost shared reconstruction without going 
through the rigors required of new projects. NAFSMA is prepared to 
assist in developing such guidance.

Early Attention to Environmental Issues and Potential Benefits and 
        Impacts
    NAFSMA supports and encourages the Corps of Engineers to make 
personnel available to participate early and throughout the planning, 
design and permitting phases of new civil works projects to address all 
environmental issues and regulations in order to obtain the necessary 
permitting in a timely and uncontested manner.

Assessment of ``True Costs'' During Feasibility
    NAFSMA advocates the Federal Government to assure the true costs 
and benefits incurred by the local sponsor for Lands, Easements, 
Rights-of-way, Relocations, Disposal Areas, construction, environmental 
mitigation, operation and maintenance are considered during the 
feasibility phase of the project. The true costs include those costs 
mandated by laws, rules, and regulations of local, state, and Federal 
Governments.

Full-Credit for Project Related Expenses, Including CERCLA
    NAFSMA supports non-Federal sponsors receiving full credit for all 
legitimate project related expenses, similar to credit received by the 
Corps for project related expenses. NAFSMA members also urge Congress 
to make Comprehensive Environmental Response, Compensation, and 
Liability Act (CERCLA) activities necessary for project execution 
eligible for cost-sharing credit.

                              CONCLUSIONS

    In closing, NAFSMA very much appreciates the technical 
capabilities, expertise and the commitment of the Corps representatives 
that we work with at the District, Division and Headquarters. We also 
appreciate the Committee's commitment to move forward with a WRDA bill 
this year. We pledge to work with you and the Corps to improve the 
project review process, to use a multi-objective approach to the 
nation's water resources activities, to keep the costs of projects down 
and maximize the benefits of Federal, state and local tax dollars.
                               __________
           Yellowstone River Conservation District Council,
                                      Billings, MT., July 26, 2002.
Hon. James Jeffords,
Chair, Environment and Public Works Committee,
U.S. Senate,
Washington, DC.
    Dear Senator Jeffords: Since 2000, the Yellowstone River 
Conservation District Council has been engaged as the local partner in 
a study authorized by section 431 of the Water Resources Development 
Act of 1999. This legislation directed the Army Corps of Engineers to 
conduct a comprehensive study of the Yellowstone River to determine the 
hydrologic, biological, and socioeconomic cumulative impacts on the 
river.
    The Council would like to take this opportunity to enter comments 
related to the Yellowstone River Study into public comment record of 
the WRDA 2002 legislation.
    We would first like to call attention to the efforts of the 
principal Corps representatives, Mr. Don Becker and Mr. Ralph Roza, 
Omaha District of the Corps, for their hard work in accommodating our 
exhaustive public involvement process and their efforts on behalf of 
the Study. They have been very responsive and helpful as the Council 
has sought to understand and participate in the process that will lead 
to the successful Implementation of the Study. The Council acknowledges 
that taking on such a wide-ranging study rather than a proposed water 
project is new territory and is hence a unique effort for the Corps, 
and we appreciate their hard work.
    Our other reason for writing is to offer a few observations based 
on our own experience to date, which may offer insight on how to help 
ensure the success of this and other such projects in the future. In 
the spirit of constructive cooperation, the Council offers these 
observations:
    Allow sufficient time to establish local buy-in.--The Council 
recognizes that the process we are going through is valuable, albeit 
lengthy and difficult given the complex nature of public involvement. 
In particular, while the Council, its Resource and Technical Advisory 
Committees, and its active partner the Yellowstone Conservation Forum 
make up a very diverse group, its members are committed to working 
together to find the areas on which we can agree and support each 
other.
    One of the Council's fundamental goals for this study is to create 
information and tools that have practical application for the local and 
regional users of the river, This means that adequate time needs to be 
given to building the local buy-in that is crucial in order for such 
studies to enjoy support and success over the life of the study. This 
is critical and time-consuming since the study covers eleven counties 
and six hundred miles.
    Provide a flexible framework for proceeding.--The Corps currently 
uses a process designed to investigate and engineer proposed water 
projects as the framework for defining how to proceed with this study. 
This type of procedure seems to work well for water development 
projects, but it is cumbersome for a cumulative effects study such as 
ours:
     The collaborative nature of the Study, combined with 
stringent contractual commitments for cost sharing means that the local 
partners and their constituents must thoroughly understand a process 
whose structure has little to do with the study. This is time-consuming 
and expends resources that could be spent elsewhere, such focusing 
specifically on the design and execution of the study. Because legal 
requirements for entering cost share agreements can vary across 
potential sponsors, the required use of institutional `boilerplate' 
legal language without a means for tailoring it can present a 
substantial roadblock for local entities attempting to enter into such 
cooperative agreements. While such a mechanism works well for water 
projects, studies can have considerably more flexibility and offer more 
ways for partners to share the cost of the Study through their own 
contracting or in-kind assistance.
    Strengthen the Corps' ability to enter into cooperative agreements 
with local partners.--Many Federal agencies successfully use such 
agreements. For example, the Conservation Districts in this area have a 
history of entering into flexible and creative agreements with the 
NRCS. This develops sound participation with local sponsors and 
promotes local buy-in, contributing to the overall success of such 
studies.
    Increase flexibility of funding.--An effort such as the current 
study can and should draw on local expertise and past work performed by 
local entities. However, there is little procedural room to assign a 
monetary value on past work, even if that work is integral to and will 
be included as part of the ongoing study. If these efforts could be 
included in the local cost share, this would foster more local 
participation, because they share the costs of the work. In addition, 
the crucial local acceptance and buy-in is much greater if the work of 
the community is not only used in the study, but it is valued in a 
tangible--i.e., available for cost-sharing--way as well.
    One of the outcomes we hope will result from these collaborative 
efforts are recommendations for best management practices that will 
stand up under rigorous challenges. We are looking forward to working 
with the Corps on these goals, and making the study a success.
    Thank you for the opportunity to submit these comments.
            Respectfully and on behalf of the Yellowstone River 
            Conservation District Council,
                                             Barbara Yoder,
                                                 YRCDC Coordinator.
                                 ______
                                 
             Yellowstone River Conservation District Forum,
                                      Billings, MT., July 28, 2002.
Hon. James Jeffords,
Chair, Environment and Public Works Committee,
U.S. Senate,
Washington, DC.
    Dear Senator Jeffords: This is letter to in support of the 
Yellowstone River Conservation Districts Council's (YRCDC) letter, 
dated June 26, 2002, explaining the process the stakeholders along the 
Yellowstone River have been involved in as a result of the Water 
Resource Recovery Act of 1999's mandate for the Army Corps of Engineers 
(Corps) to complete a cumulative impacts study for the 692-mile long 
Yellowstone River. This mandate also required that the public be 
included in this process which takes time. For the record, the 
Yellowstone River Conservation Forum (Forum) was in support of the 
mandate.
    To date, the Corps has been determining Federal involvement through 
their Reconnaissance Phase at the cost of $100,000; whereas, their 
potential cost-share partners have been doing actual research for the 
studies to be done during the Feasibility Phase and working to ensure 
public involvement. The potential partners did this work prior to the 
25 percent to 75 percent Cost-Share Agreement (CSA) being signed. As an 
active partner with the YRCDC, who is one of the proposed signers of 
the CSA, the Forum, comprised of 22 cooperating conservation groups, 
believes that the Federal interest came from the Congressional mandate.
    Because the process has been unwieldy, the Forum believes that 
language should be prepared that will:
     Have the Corps come up with a process for cumulative 
impact studies to include all the stakeholders and governmental 
regulatory and management agencies in a public process that will 
identify the needed studies, implementation of the studies and a draft 
of results and recommendations for future river use. This process would 
not include the current reconnaissance and feasibility steps used for 
decisions for a project.
     Allow partners in the CSA to use funds they have expended 
for research done primarily for the project studies prior to the 
signing of the CSA as part of their in-kind services.
    With the Corps working toward consensus on reform, the Forum 
believes this would be an ideal opportunity for a different process to 
be implemented.
    Thank you for your consideration in this matter.
            Sincerely,
                                         Kathleen K. Blehm,
                                           Project Liaison Officer.