county industrial pollution control financing authorities. These authorities possess the power to finance pollution control facilities for private industries through the issuance of tax-free bonds and to otherwise finance these facilities. The authority and the county bear no liability for payment of these bonds, the particular industry being directly and solely responsible to the bondholders.

(b) The responsibilities of the Department of Environmental Protection under the law are several. DEP must:

1. Certify "that the proposed undertaking of the authority is the proper method of solving the problem under consideration" [Sec. 4(a)];

2. Approve the location and manager of construction of pollution control facilities to be financed under this Act if and when an authority wishes to exercise its power to determine such location and manner of construction [Sec. 5(g)}; 3. Certify "that the facilities to be financed are, or when constructed, will be pollution control facilities as defined in this Act"1 before any authority adopts a resolution authorizing the issuance of bonds and as a condition precedent to any such authority issuing such bonds (Sec. 11); and

4. Certify that "any such facility does not conflict with, overlap or duplicate any other planned or existing pollution control facilities undertaken or planned by another public agency or authority." (Sec. 3)

7:15-1.2 Statements of policy

(a) The following are statements of policy:

1. Certification that the undertaking is "the proper method of solving the problem under consideration.": It is the policy of the Department that the term "the proper method of solving the problem" be interpreted to mean the application of that technology which will enable the subject facility to meet, at a minimum, all standards, guidelines and criteria of this Department and of the United States Environmental Protection Agency applicable to the reduction, abatement or prevention of the pollution for which the facility is to be constructed. The problem is deemed to be determining the method which will enable a facility to comply with the regulations which govern its activities. For example, the problem is not water pollution as a general proposition for which arguably the proper method of solving the problem is universally a zero discharge system. Rather, the problem is complying with the applicable effluent and water quality standards for which the proper method of solving the problem may or may not be a zero discharge system.

2. Certification that the facility is a pollution control facility as defined in the Act: This certification involves a statement by the DEP that the facility is "designed and utilized for the purpose of reducing, abating or preventing pollution" and that the facility does not conflict with, overlap or duplicate any other planned or existing pollution control facilities undertaken or planned by another public agency or authority.

i. The Department does not anticipate much difficulty in determining whether a particular project is "designed and utilized for the purpose of reducing, abating or preventing pollution". In view of the extensive Federal involvement in determining what can and cannot be financed through municipal bonds, the Department will not be immediately concerned with the effect of the pollution control facility on increases in productivity, profit and the like. The analysis will be made solely on the basis of whether or not it is "designed and utilized for the control of pollution".

ii. The DEP certification that the project will not conflict with, overlap or duplicate facilities undertaken or planned by another public agency or authority will be of primary importance in water pollution abatement projects. This analysis will be made in light of existing and planned municipal, State and regional sewage collection and treatment systems and how those systems relate to the effluent from the industrial point source and to the proposed wastewater treatment plant.

1 "Pollution control facilities means any structures, facilities, systems, fixtures, lands and rights in lands, improvements, appurtenances, machinery, equipment or any combination thereof designed and utilized for the purpose of reducing, abating or preventing pollution, deriving from the operation of public utility. industrial manufacturing, warehousing, commercial, office or research facilities and provided that the State Department of Environmental Protection and the board of freeholders certify that any such facility does not conflict with, overlap or duplicate any other planned or existing pollution control facilities undertaken or planned by another public agency or authority.

iii. The Department anticipates that the majority of projects will involve air and water pollution abatement, although the statute does not limit the kinds of pollution for which control facilities may be financed. A small percentage of projects may involve noise or solid waste pollution control facilities.

7:15-1.3 Procedure for applying for certification

(a) The applicant must submit to DEP an application by letter containing the following information:

1. Indication that the pertinent county pollution control financing authority has determined to proceed with the facility in issue;

2. A detailed statement of the facts involved;

3. Indication of awareness of Federal, State and local permit requirements and any other Departmental requirements necessary to proceed with the project;

4. Sufficient information and data as to satisfy the Department that the proposed facility is a pollution control facility as defined in the Act;

5. Sufficient information and data as to satisfy the Department that the proposed facility does not conflict with, overlap or duplicate any other planned or existing pollution control facilities undertaken or planned by another public agency or authority;

6. Request for certification,

(b) After receipt, review and approval of the above, the Commissioner will issue a certification based upon the facts submitted to him and for the purposes of the New Jersey Pollution Control Financing Law only. Certification in no way is to be interpreted as any form of Departmental guarantee as to the capabilities or capacities of the certified facilities. The Department at all times has the right and the duty to enforce any and all laws and regulations applicable to such facilities.

(c) Applications should be submitted to Steven Corwin, Division of Water Resources, P.O. Box 2809, Trenton, New Jersey.

An order adopting these rules and guidelines was filed and effective September 25, 1974, as R. 1974 d.268 (Exempt, Procedure Rule).

Mrs. FENWICK. The thing that worried me when I telephoned the Department of Agriculture was that they said that they would not loan to anybody unless their credit position was so bad that they could not get credit anywhere else. I think that is a terrible attitude, when you are thinking about small business. We ought not to have people pushed down to where they are practically bankrupt, where nobody will loan before we loan. I mean, is that not the whole purpose of having a Small Business Administration, with money at its disposal to loan; that we should loan it at a somewhat more reasonable rate than, perhaps, the going rate, and that we should not force them down into some unfortunate position where nobody else will consider them? I do not think that is right.

Now, maybe the Department of Agriculture has to do that. But certainly, we do not have to do it in the Small Business Administration, and I do not think we should. I think that the whole philosophy is wrong, if that is what we are doing.

Mr. BERGLAND. Would the lady yield on that point?

Mrs. FENWICK. You bet.

Mr. BERGLAND. The Farmers Home Administration generally has two authorities; one in which they can participate with a bank or provide credit as a guaranteeing agency, and second, in those instances where there is no credit elsewhere. However, the rate of interest is the commercial rate appropriate to the circumstances. In those authorities where there is an interest subsidy payment, for example, farm ownership loans, the interest rate is 5 percent. Where we are talking about some tax money that goes into the making and processing of these loans, there we do have the credit elsewhere requirement to avoid hav

ing some well-to-do persons availing themselves of 5-percent interest. We just felt it was inappropriate to have persons with resources in their own right get the advantage of the 5-percent interest rate.

Mrs. FENWICK. I agree, because you are dealing, in many cases, with agribusiness; and there is absolutely no reason to give a tax subsidy to large agribusiness firms. But we are talking now here about small farms and small businesses; and I think that they are not in the same position as the large agribusiness, and we should not force them, by encouraging this kind of thing, to get on their knees, so to speak, and are in a situation where nobody else will give them credit of any kind. You see what I mean? It is a different philosophy, and I can see that you have to protect the taxpayer, because you are dealing with a different group of people.

Mr. BURTON. I think if I could just at least in closing, Mr. Chairman, that I believe that as the SBA works, say, that if I were Bobby Giacomini, I would go to the bank and say I want a loan for this purpose. And they say, we cannot give it to you, and that is a turndown. That, I believe, with a letter of a turndown-let us assume that you are opening up an ice cream plant, as opposed to keeping a dairy operation that would be sufficent for SBA's purposes. I think you just need a letter of turndown from a bank as such, and I do not know the administrative burdens in one trying to make a loan as such. But I just believe that clearly, under the law, they are eligible. I think, clearly, that the work that Chairman Smith and Chairman Slack on the Appropriations Subcommittee will be beneficial in providing more funds, but also a statement of what the congressional intent is; that clearly, under the provisions of the law as it is presently written, that these people, not having been helped by FHA, would be eligible for SBA loans. But again, my basic concern is that the people that I represent—and I am sure others have this, a time problem. I mean, they have got 3 months to do something. If they do not get an extension

Mr. SMITH. I believe that you can see that everybody on this subcommittee wants to do something about this problem. But it does encompass more than just dairy farmers, and I think the entire subcommittee would hope that if an extension were to be given, we would like to show to the local people out there that they ought not to expect necessarily that we could complete action fast enough to take care of your problem in the best way possible. But will do the best we can.

Mr. BURTON. I appreciate that very much, Mr. Chairman. As I say, I believe that the action taken by the Appropriations Subcommittee is a good first step, and I think good direction to small business. And again, the problem is beyond just dairy farmers. But they happen to be the people that I represent that I do believe that any small agricultural business that has to meet a federally mandated standard on EPA should have loans made available, whether they are dairy farmers, feedlots-you know, hog farmers. Even, as I said, there are row crop people that have to keep the pesticides out, although I think their problems are a little bit less than those of the dairy farmers, with the waste and storage and things of this sort. Mr. SMITH. Thank you very much.

Mr. BURTON. Thank you very much, Mr. Chairman.

Mr. SMITH. The next witness is Mr. Robert Aldrich of L. F. Rothschild & Co.

We are pleased to have you appear and make a contribution. I think you heard the testimony of the previous hearing where we had the Bank of America and I am sure that you can help with this problem.

TESTIMONY OF ROBERT HART ALDRICH, L. F. ROTHSCHILD & CO.; ACCOMPANIED BY NEIL A. EISNER

Mr. ALDRICH. This is Mr. Eisner, also of L. F. Rothschild & Co. We will try to make it very brief today. The last time I was here I had a chance to participate with the Bank of America and a number of questions arose relative to the cost per unit of pollution controls. for various industries. We have prepared a report that we will submit to your staff, but I would like to review very briefly what the elements of this type of approach are.

The most critical item besides the cost per cow, which turns out to be under some modern systems, about $200 a cow, by the way, so we really have not gotten into that. We have been working with industry. But if you talk to some key industries, this is a McGrawHill survey, an interpretation of the McGraw-Hill survey, which was turned out in May 1975. This is their 8th annual survey. The survey shows that all business, to bring their existing facilities up to meet existing environmental standards, must spend some $34.1 billion. This is for air and water pollution control. A substantial part of this, of course, is the power companies electric utilities with $11 billion, which they must spend mainly on air and water pollution. But you can see I took out some examples of industries which have representatives within the small business sector, and this will give you a feelingfor instance, the iron industry. One must spend $4.06 billion. They have got 768,000 employees. The dollars per employee is roughly $5,286. Now this last column is interesting, and this is in 1975 the percent of their new capital expenditures that was totally for pollution control, air or water. You notice that the iron industry spent 15.8 percent of their total new capital dollars just on pollution control. And you go down to nonferrous metals and you have $2,650, to stone, clay, et cetera, $977; the chemical industry, $2,532 per employee; the paper industries, you see, spent 17 percent, but the paper industry, the last, as you know, up in your area, Mr. Conte, the last 5 years they have been spending 20 to 25 percent of their total new capital dollars for pollution control equipment, and yet they cannot catch up, and we still estimate they still have to spend $1.35 billion. And when we made the estimate 3 years ago, we estimated they still have to spend $1.3 billion. In the meantime they spent $1.3 billion, and this is the problem of the moving target in pollution control expenditures, plus the rate of inflation catching up with these businesses.

The rubber industry, $1,000; petroleum, of course you have very few employees per a large problem, so you have $13,000 per employee, and it becomes a false look at that. You think they have got more problems than, for instance, the stone guy, but he has got a problem because of low investment per employee. Food, $410 per employee. This is in the food packaging area and really does not get into the dairy farmer problem which you were talking about, and when you

heard $20,000, $30,000, divide that by three employees, you are seeing the extent of the cost per unit and the need to combine facilities in that kind of concept. And the textiles, $187.

For all manufacturing the total needs are roughly $16 billion to $18 billion just for existing equipment, which is roughly $1,000 per employee and roughly 9.3 percent of all our expenditures, all capital expenditures being directed toward pollution control.

Now these figures, as you look at them, are just merely averages, and they are the averages for the average industry for this particular time period. But when you look at any individual industry or any individual company, you must take into account the cost variables associated that is, the type of activity like in the paper industry. Is it a pulp mill? What type of pulping do they do? What are the available water streams, et cetera, within that particular area? Of course the size of the facility, the smaller the facility, the higher the per unit cost or the higher the cost per employee to solve the pollution control problems. The age of the facility, of course the older the facility, the higher the cost of cleaning and to meet environmental conditions. Past environmental practice-again, if a facility has not cleaned up in the past or has not solved its environmental problems in the past, it faces a higher cost. If it has expended nothing to this point, then it must in the future. Municipal services available, that is in some areas small business can take advantage of municipal services available for pollution control, and then of course the standards, depending upon the State and the region.

The small businesses impacted you see listed here, mainly as you might suspect, those industries that have a great deal of smoke or those industries that have a great deal of odor problems or those industries that have a lot of water outflow, such as the paper and the leather industries. You see the gray iron metal plates, leather tanners, nonferrous mineral, paper, chemicals. Interestingly enough, the number of small chemical companies that do indeed have problems both in the air pollution and in the water pollution areas of cement, plastics, mining, particularly in the coal mining area, agriculture.

We were just talking about the dairy farmers and that is a problem we hear about all over the country today, and a big problem, both east and west, and the petroleum industry and the furniture business because of the solvents and the paints necessary.

We took typical costs per employee now for the small business, and these are not small businesses. These in many of your towns would be the major business, but they are the small business relative to the top 500 corporations in the United States. These are manufacturers with perhaps 250 to 500 employees at a single location site that are in the business and are known as a big employer within their communities. This is what their costs look like for the paper industry. Their costs now run roughly $8,000 an employee to clean up. For the nonferrous metal it runs $14,000 per employee to clean up. These are all small businesses, versus the numbers you saw before relative to the $2,000 and $3,000 per employee. Leather industry, $5,000; metal plating, $4,000 per employee; the cement industry, and again, it depends upon the conditions of the particular mill, but it can run as high in one case that we did, $14,000; chemical business, another case we did running $10,000; and agriculture, here we are talking canning and processing of roughly $6,000 per employee.