Mr. SWEENEY. Some of the $2,052,000 in this project, approximately $650,000, will be for utility replacement relocation and railroads; is that correct? Colonel PINNELL. Yes. Mr. SWEENEY. I have no further questions, Mr. Chairman. STATEMENT OF HON. ALBERT W. JOHNSON, MEMBER OF CONGRESS FROM Mr. Chairman, thank you for this opportunity you have given me to tell you how extremely important it is to authorize a flood control project on Sandy Lick Creek at DuBois, Pa., in my congressional district. Clearfield County, in which DuBois is located, is an area of persistent unemployment where industrial development needs to be encouraged and helped but this has been very seriously hampered by the lack of flood control. It is impossible to interest industry in investing many thousands of dollars in plant expansion or relocation when there is an ever-present threat of financial loss due to flooding. Of extreme economic importance to DuBois is the Jeffers Electronics plant, a division of the Speer Carbon Co. This company is prepared to spend $2.5 million to expand their plant to manufacture a new product and it is estimated that such expansion will create jobs for 200 to 225 people. But, some form of flood protection must be provided. During the last flood of record in March 1964, the present plant had 13 inches of water in it and had to be shut down. This creek also floods the business district of the city and the Baltimore & Ohio Railroad shop which furnishes substantial employment. No community, especially one located in an economically depressed area, can afford these yearly losses. To provide a desirable and feasible solution to the flood problem, the Corps of Engineers has found that the most suitable plan of improvement would consist of deepening, widening, and straightening the existing channel. While this proposed plan will not provide complete protection against floods, it will protect against floods with peak flows up to 3,800 cubic feet per second and reduce damages from larger floods. The Congress has enacted the Appalachia program to stimulate development of the entire area, and it seems to me only good sense to invest money in this small flood control project to protect not only the industrial plants and businesses now located there but to encourage the expansion of this industry and to interest new industry to come into the area. As flood control projects go, this is a very small one, but I think it would be a very wise investment of the taxpayers' money. I strongly urge the distinguished members of this committee to give favorable consideration to including the Sandy Lick Creek project in the omnibus flood control bill. Mr. JONES. The next project, Colonel Pinnell. WABASH RIVER BASIN, IND. Colonel PINNELL. At page 158 in the report is the Wabash River and Tributaries Interim Report No. 1. The Wabash River, a tributary of the Ohio River, rises in northern Ohio, flows southwesterly through Indiana, joins the Ohio River and forms the southern half of the Illinois-Indiana State lines. The Wabash River Basin is subject to frequent and destructive flooding. The Chief of Engineers recommends construction of Lafayette Reservoir and Big Pine Reservoir in the interest of flood control and related purposes at an estimated Federal cost of $44,800,000 subject to certain items of local cooperation, including bearing one-half the cost of separable costs allocated to recreation. The benefit-to-cost ratio for Lafayette Reservoir is 2.5 and for Big Pine Reservoir is 2.2. The State of Indiana and Federal agencies commented favorably. The Bureau of the Budget has no objection to submission of the report to Congress but expects after authorization that a reevaluation of the benefits and costs would be made prior to request for construction funds. Mr. JONES. This is like the other project we discussed. How many projects are in this category, where we have to go back to the Bureau of the Budget before they are authorized? Do you recall any others? Colonel PINNELL. Yes, sir; there are others. The Bureau of the Budget has indicated it would expect various degrees of economic reevaluation prior to requests for funds for construction in the cases of about 15 percent of the reports now pending before the Congress. Mr. JONES. It seems to me on these projects we might as well not hold hearings if we are going to await the pleasure of the Bureau of the Budget after we approve. Either we approve a project or we do not. Mr. HALLECK. I always understood if the Budget Bureau reported they had no objection to the submission of a favorable report, that was tantamount to approval. I may be in error about that. Mr. JONES. We have thought the same thing for years. We thought the Public Works Committee, having a proposal submitted to us and we approved the project, that was final and it was not a trespass upon the rights of the Congress to make that decision. Here the Bureau of the Budget is calculating us authorizing and having it brought back to them. That should be done prior to submission. Mr. HALLECK. I just assumed someone in the Budget Bureau has looked over the recommendation of the corps and come up with a conclusion there was no disapproval, which would be tantamount to approval. This is a little different. Mr. GRAY. Could we have Colonel Pinnell read the instructions again? I am referring to the Bureau of the Budget's instructions. about reevaluating a project. Colonel PINNELL. Perhaps it would be better if I read from the letter of the Director of the Budget. This is the letter dated May 4, 1965, addressed to the Secretary of the Army. In paragraph 2 it says: We note an increase of 300 percent in economic development is projected over the next 100 years in the flood plain. While we seriously question the derivation of the projected increase, particularly in view of the predominance of agricultural activity, we also note that both reservoirs are justified on the basis of present benefits assuming recreation development at Big Pine is undertaken roughly as need arises. In paragraph 3: In the event that Lafayette and Big Pine Reservoirs are authorized by the Congress, the Bureau of the Budget would expect a reevaluation of benefits and costs would be made before funds are requested for initiation of construction of the project. Mr. GRAY. What is the benefit-cost ratio on the project? Mr. GRAY. The gist of your comment is, there is some question by the Budget Bureau about the proposed economic benefits. I would think with the benefit-to-cost ratio of more than 2 to 1, you could eliminate the questionable benefits and there would still be a favorable benefit-to-cost ratio. Colonel PINNELL. That is correct. Mr. GRAY. For the project you were discussing a while ago there was a 1.1 benefit-to-cost ratio, but with 2.1, I cannot understand why there would be a restudy. We do not have to accept the Bureau of the Budget's language, do we, Mr. Chairman? Mr. JONES. If we accept the Bureau of the Budget's language, we are wasting our time. Mr. GRAY. I agree with the chairman. Mr. HALLECK. Did I understand you, in reading that letter from the Budget, to make some reference that this area was all rural? Colonel PINNELL. It stated the area was predominantly agricul tural. Mr. HALLECK. I am not too familiar with Big Pine, but Lafayette, Ind., is far from a rural area. Colonel PINNELL. The sentence reads: While we seriously question the derivation of the increase, particularly in view of the predominance of agricultural activity, we also note that both reservoirs are justified on the basis of present benefits, assuming that recreational development at Big Pine is understaken roughly as need arises. Mr. HALLECK. Of course, Lafayette is an industrial town. There is a great deal of industry there. Constantly it is developing new industry. On this project apparently the Budget Bureau has its fingers crossed. Mr. JONES. The benefit-to-cost ratio is meaningless as long as you have to go back to the Bureau of the Budget and justify it. Here is a project that comes up in the normal course with a 2.5 and 2.2 benefit-to-cost ratio as the gentleman from Illinois pointed out. Now you say if we authorize this project, the Bureau of the Budget will then entertain a further justification of the project. That does not make sense. Mr. JOHNSON. Is it not mandatory that the Corps of Engineers bring in this type of recommendation on future projects as the bill was signed dealing with the recreation aspects of this? Colonel PINNELL. Would you repeat your question? Mr. JOHNSON. Is it not mandatory on the part of the Corps of Engineers on any of these projects that you take into consideration the Federal Water Project Recreation Act? Colonel PINNELL. Yes. Mr. JOHNSON. If you were planning a new project, you would have to do that. Mr. JONES. I think the language in the letter from the Bureau of the Budget to the Corps of Engineers is the opposite to that. They contemplate there will be a diminishment of the benefits rather than an increase of the benefits, and therefore they question the justification of the project. That is the reason they call for a review, as I understand the language of the letter. Colonel PINNELL. I believe it covers both. They look askance at the economic projects Mr. JONES. If they did that, they would never agree to the benefit, or the arithmetic you submit to the Bureau of the Budget. They could not take any other view other than they question the economic benefits. Mr. BALDWIN. Colonel, if I understand this quotation in the Senate committee report where it says, "The Bureau of the Budget advises that the last increment of flood control storage in the proposed Lincoln Reservoir is not economically justified" Colonel PINNELL. Off the record. (Off the record.) Mr. GRAY. Colonel Pinnell, is it not true in the Wabash River Basin in Illinois and Indiana, that a comprehensive study is now going on and has been for some time, and as you develop the individual projects you come in with interim reports, and the first one is interim report No. 1, and you have these three reservoirs in interim report No. 2, and as your comprehensive study develops you will have further interim reports? Colonel PINNELL. That is correct. Mr. GRAY. It is a piecemeal proposition coming up with recommendations as you develop the plan? Colonel PINNELL. Yes. As you point out, the reason for this is that we would not want to delay recommending projects which we feel are favorable until completion of the overall report is made. So we are issuing interim reports as we go along. Mr. BALDWIN. I do not see what this argument under the Federal Water Projects Recreation Act is all about. The only thing that act does, as I understand it, is to specify in more detail the extent to which benefits for recreation can be considered. If I understand these benefit-to-cost ratios, they are so high that even if you lopped off all the recreation benefits, both these projects would still have a favorable benefit-cost ratio; is that not true? Mr. GRAY. That is the very point I was trying to make a while ago. Mr. BALDWIN. If you take off, under the actual benefits, the full amount for recreation, you would still have total annual benefits in excess of the total annual estimated cost? Colonel PINNELL. That is correct. Mr. BALDWIN. The Bureau of the Budget is prescribing that you go through a useless set of procedures because you would have a favorable benefit-cost ratio without any allocation to recreation. Do you not agree? Colonel PINNELL. It would appear so, sir. Mr. CRAMER. Would the valuation of the project under the Federal Water Recreation Act have any effect upon the appropriation that might be requested under the authorization? Colonel PINNELL. This project was currently formulated under the Federal Water Recreation Act of 1965, which does provide that local interests pay one-half of the separable costs attributable to the provision of recreational facilities. If for some reason this contribution is not forthcoming, then the scale of development of recreation facilities will be extremely austere and benefits will be less. Mr. CRAMER. Consistent with your project recreation features without this project recreation act affecting it, right? Colonel PINNELL. Yes, sir. Mr. CRAMER. Therefore, the question of whether the Federal Water Project Recreation Act might be brought into play and apply to addi tional facilities would affect what the Federal participation in that would be how much money it would take? Colonel PINNELL. Yes. Mr. CRAMER. Is it not logical that decision should be made before the project is started? Colonel PINNELL. Yes; It is required that prior to initiation of construction, the Corps of Engineers will go to the local cooperating agency and receive assurances of participation in the development of the recreation facilities. If these assurances are not forthcoming, then the recreation facilities will not be provided by the Federal Government at the scale which would really be of optimum value for recreation. You would have very limited and austere facilities. Mr. CRAMER. Would it not be correct to say then that that aspect of it should be considered at the time of appropriation consideration? Colonel PINNELL. It is, sir. It must be by law. Mr. BALDWIN. Did I not understand you to state that under local cooperation in the report as you submitted it to the Congress, you have proceeded on the basis of this new 50-50 arrangement for recreation as specified by the new act, and in computing the local contribution to be made you have done so on this new basis? Colonel PINNELL. Yes, sir. Mr. BALDWIN. What is the Bureau of the Budget arguing about? Colonel PINNELL. The Bureau of the Budget realizes that while all parties concerned may now agree as to the scale of probable development of recreational facilities, when it comes time to provide the cash contribution, local interests may not want to go through with it. At that time when we are seeking money for construction, we will have to take another look at the recreational facilities that will be provided dependent upon the reaction of the local interests. If they are willing to pay their share of the cost which is one-half the separable costs, then we would have the full scale of recreational facilities, half the separable costs at Federal expense and the other half at local expense. If at the time of construction local interests are unwilling to go through with this procedure, then we would not provide the full-scale recreational facilities that we anticipated when we presented the project here. Mr. BALDWIN. You would do that anyway under the Water Recreation Project Act even if the Bureau of the Budget never made any comment at all; am I correct? Colonel PINNELL. Yes. Mr. BALDWIN. So once again we have a superfluous set of Budget. Bureau comments, as I see it. Mr. WEINKAUFF. Perhaps I can throw a little light on this. Obviously, this Federal Water Recreation Act was just passed recently. These projects were initially formulated on the basis of the separable costs being a Federal cost. In view of the Water Recreation Act, you are correct, we would work with the State and if the State did not come in, we would only provide the austere health and safety facilities as provided for under the act. If the State came in, or the local subdivisions of the State, then of course we would contribute the 50 percent. But during this transition period we would require a restudy; this would not delay these reports for this can be done during |