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COMMITTEE ON SMALL BUSINESS

TOM STEED, Oklahoma JOHN D. DINGELL, Michigan NEAL SMITH, Iowa

JAMES C. CORMAN, California

JOE L. EVINS, Tennessee, Chairman

JOSEPH P. ADDABBO, New York
WILLIAM L. HUNGATE, Missouri
FERNAND J. ST GERMAIN, Rhode Island
CHARLES J. CARNEY, Ohio
BOB BERGLAND, Minnesota
HENRY B. GONZALEZ, Texas
JAMES M. HANLEY, New York
GUS YATRON, Pennsylvania

JOHN BRECKIN RIDGE, Kentucky
JOHN J. LAFALCE, New York

JOHN KREBS, California

BERKLEY BEDELL, Iowa

FREDERICK W. RICHMOND, New York

MARTIN A. RUSSO, Illinois

ALVIN BALDUS, Wisconsin

RICHARD NOLAN, Minnesota

HERMAN BADILLO, New York

JACK HIGHTOWER, Texas
THOMAS J. DOWNEY, New York
FLOYD J. FITHIAN, Indiana

SILVIO O. CONTE, Massachusetts
J. WILLIAM STANTON, Ohio
JOSEPH M. McDADE, Pennsylvania
JOHN Y. MCCOLLISTER, Nebraska
WM. S. BROOMFIELD, Michigan
TIM LEE CARTER, Kentucky
HAMILTON FISH, JR., New York
M. CALDWELL BUTLER, Virginia
WILLIAM S. COHEN, Maine
MILLICENT FENWICK, New Jersey
THOMAS N. KINDNESS, Ohio

WILLIAM F. GOODLING, Pennsylvania

KF27 56816 1775

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Kleppe, Hon. Thomas S., Administrator, Small Business Administra-
tion, accompanied by Greg Austin, general counsel..
Love, Tom, president, Musket Oil Co., and president, National Oil
Jobbers Council, accompanied by Robert Bassman, counsel_ _
McFall, Hon. John J., a Representative in Congress from the State
of California _ _

Mazotti, Arnold F., senior research officer, Bank of America National
Trust & Savings Association, San Francisco, Calif., accompanied by
Robert H. Aldrich, L. F. Rothschild & Co., New York, N.Y............

Powell, Robert S., Jr., executive director, Economic Development

Authority, State of New Jersey___

Unruh, Hon. Jesse, treasurer, State of California-

Correspondence and material submitted for the record-

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Correspondence and material submitted for the record—Continued
Fenwick, Hon. Millicent, a Representative in Congress from the State
of New Jersey: May 28, 1975, letter from Robert S. Powell, Jr.,
executive director, New Jersey Economic Development Authority..
Gelfand, Norman, chairperson, Illinois Industrial Pollution Control
Financing Authority: Prepared statement with attachments__
Kleppe, Hon. Thomas S., Administrator, Small Business Administra-
tion: Prepared statement__

Love, Tom, president, Musket Oil Co., and president, National Oil
Jobbers Council: Appendixes A and B accompanying testimony--
Mazotti, Arnold F., senior research officer, Bank of America National
Trust & Savings Association, San Francisco, Calif.: Various charts
and tables relative to the hearings..

Patman, Hon. Wright, a Representative in Congress from the State
of Texas: Prepared statement-
Powell, Robert S., Jr., executive director, Economic Development
Authority, State of New Jersey: Table-New Jersey manufacturing
firms by employment-size class, 1973 and other attachments____
Roe, Hon. Robert A., a Representative in Congress from the State of
New Jersey: Prepared statement.

Smith, Hon. Neal, a Representative in Congress from the State of
Iowa, and chairman of the Subcommittee on Small Business Admin-
istration and Small Business Investment Company Legislation:
June 16, 1975, telegram from Jesse Unruh, treasurer, State of
California; Randolph Collier, member, California State Senate;
and John Knox, member, California State Assembly, to Congress-
man John J. McFall

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66

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343

95

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48

315

49

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Unruh, Hon. Jesse, treasurer, State of California: Pollution control financing in California__

330

APPENDIXES

Appendix A-Internal Revenue Code, 26 U.S.C. § 103

359

Appendix B-Miscellaneous legislation to establish a pollution control financing program for small business-

363

Appendix C-Miscellaneous legislation to expand the definition of small business concern to include agribusinesses_.

383

Appendix D-Miscellaneous legislation to clarify the eligibility of dairy farmers for water pollution control loans..

385

Appendix E-Legislation to clarify the eligibility of certain small busi-
nesses for SBA loans (and for other purposes)
Appendix F-Letter from Robert G. Ryan, director, Office of Legisla-
tion, Environmental Protection Agency, regarding impact of environ-
mental legislation on selected small businesses-

389

396

SBA ASSISTANCE FOR AGRICULTURAL CONCERNS AND TO MEET POLLUTION STANDARDS

TUESDAY, MAY 20, 1975

HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON SMALL BUSINESS

ADMINISTRATION AND SMALL BUSINESS INVESTMENT

COMPANY LEGISLATION OF THE
COMMITTEE ON SMALL BUSINESS,
Washington, D.C.

The subcommittee met, pursuant to notice, at 10 a.m., in room 2359, Rayburn House Office Building, Hon. Neal Smith (chairman of the subcommittee) presiding.

OPENING STATEMENT OF CHAIRMAN SMITH

Mr. SMITH. The subcommittee will come to order.

This morning's hearing represents the beginning of an extensive study and investigation of small business problems which are being conducted for the first time by a small business subcommittee with jurisdiction to consider and report legislation. As part of this broad overview of small business problems, we will be looking at the effectiveness of small business legislation, primarily that contained in the Small Business Act.

The first bill to be considered and reported by this subcommittee, and subsequently by the full Small Business Committee, was one to authorize the granting of relief to small businesses involved in fixedprice contracts with the Federal Government, who suffered substantial economic loss due to inflation.

This legislation was unanimously reported by the subcommittee and subsequently accepted by the entire House of Representatives which, on April 22, 1975, passed H.R. 5541 by a vote of 402 to 0.

Other legislation pending before the subcommittee which we intend to examine and consider during the next several months concerns small business loans to comply with pollution control standards, loans to agribusiness, and protection against manipulation in livestock marketing.

Also, we will be examining SBA programs and restrictions such as loan ceilings and limitations, disaster loans, displaced business loans, the effectiveness of SBA certification of competency of small business contractors, the effectiveness of SBA assistance reaching the "mom and pop" operations, and a host of others.

I am hopeful that we can, and will, consider these matters as completely and effectively as the emergency relief bill passed by the House, and that we can achieve the same legislative results.

This morning's hearings are primarily concerned with problems of small businesses which are required to make substantial investments in equipment to meet water and air pollution standards mandated by Federal, State, and local governments. These standards must be met by a vast array of businesses ranging from farmers and ranchers to heavy industry.

The Small Business Act, as implemented by SBA regulations, provides specific assistance under two programs. Section 7(b)(5) authorizes loans to meet requirements imposed by State or Federal laws such as the Clean Air Act. Section 7 (g) authorizes loans to meet water pollution control requirements mandated by the Federal Water Pollution Control Act.

It has been estimated that the cost to small business of meeting these pollution requirements will be in the range of $7 to $10 billion over the next 10 years. It has also been estimated that big business will need some $20 billion to meet these requirements, and thus, it is highly unlikely that the private sector will, under the existing circumstances, choose to also provide the capital needed by small business. We have received information that the SBA, under current SBA programs, is not supplying the needed capital. These specific loans for water and air pollution equipment could be funded by SBA as a part of the nonphysical disaster loan program which also encompasses other loan programs such as product disaster loans, strategic arms limitation loans, and energy loans. The minor role to date of these pollution loans is shown by the fact that during fiscal year 1975, SBA programed only $110 million to cover the entire nonphysical disaster loan program, and to date, this fiscal year, has made only 12 loans for water pollution equipment totaling $5.4 million.

This morning we are pleased to receive testimony about the needs of small business, and the effectiveness of existing programs in this area, and on proposals as to how the Federal Government may provide needed assistance in order to permit these concerns to comply with the required pollution standards.

Our first witness will be Hon. John J. McFall. Mr. McFall is very familiar with problems facing small business in meeting pollution requirements, and has introduced legislation to provide additional Federal assistance.

We are very, very happy to have Mr. McFall here. He has long been interested in small business problems.

Before calling upon Mr. McFall, we will call upon the ranking minority member, Mr. Conte.

OPENING STATEMENT OF HON. SILVIO O. CONTE

Mr. CONTE. I want to commend you, Mr. Chairman, for calling these hearings. I am pleased to be able to participate in the hearings. As a longtime advocate of both the small business community and a cleaner environment, I wholeheartedly endorse and support the efforts of this subcommittee to find a way to help our hard-pressed small firms to carry their share of the burden of cleaning up the air and water.

The Congress mandated that the cleanup take place as rapidly as possible. Unfortunately, the combination of inflation and recession has made the cost of a cleanup much greater and much more difficult to bear than was originally anticipated.

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