treatment facilities. At the present time, substantial Federal participation in financing of waste treatment plant construction still is essential. In recognition of that central fact, our legislative proposal, S. 1013, was structured as a solution to the problem presented by these key questions: What is the cost of waste treatment facilities needed by municipalities through fiscal year 1974 if water quality standards are to be met? What was the cost of needed facilities constructed by States and municipalities since 1966 without the benefit of the full Federal share? How can Federal-grant moneys be most expeditiously and effectively distributed to the States and municipalities? How can we prevent a backlog of needed construction from recurring; that is, how can we best assure that plants will be enlarged, improved, replaced and new plants built as needed? We realize that there are various possible answers to some of these questions. Our bill represents our answer. It is our best answer. It represents exhaustive study and analysis. It represents our experience in coping with the problem. It reflects our close and continuing consultation with the States and municipalities. Any answer to the first question-what is the cost of needed waste treatment facilities-is subject to change because of a series of variables which preclude any completely sure answer. Inaccuracies in assessments of needs reported by States and municipalities; inflation; refinements in cost determinations for particular projects as they proceed from planning through construction; reassessments of needs by States and municipalities in the light of changing Federal, State, or local regulatory requirements and changing levels of Federal support; rescheduling of construction starts-all of these factors singly and in combination affect our estimates of needs and costs. However, we must make an assessment-and we have made the best assessment we can, realizing that we are aiming at an elusive and moving target. Our best estimate of the Federal funds needed for the construction program through fiscal year 1974 to meet water quality standards is $6 billion. I would like to explain that figure with the aid of a table. (The table referred to follows:) Estimate of Federal fund needs Total construction needs, December 1, 1970, to June 30, 1974___ Federal share (estimated 47.5 percent of $12.56 billion) Net Federal fund needs (Dec. 1, 1970, to June 30, 1974) Federal share Billion $12. 56 5. 97 1. 46 7.43 .317 .945 1. 26 6. 17 6 Mr. RUCKELSHAUS. The first element is the assessment of municipal waste treatment needs through fiscal year 1974. That need has been determined to be $12.56 billion. We arrived at that figure through a detailed reassessment of needs, which included information furnished by all of the States, through direct contact with most of the major cities, and through our own studies and statistical analyses. Senator MUSKIE. May I ask one or two questions at this point? You say that this is the estimate of the need. What is meant by need? Does it mean the amount that can be spent in that time, or does it mean the amount of work the States and municipalities think they can schedule within that time? What relation does your figure bear to the cost of eliminating the backlog? Mr. RUCKELSHAUS. Mr. Chairman, I think we can answer all of these problems. At the end of my statement, I propose to have Mr. Dominick go through a detailed description of how we arrived at that figure and the basis of this figure in terms of need, so you can have all of the information before the committee on exactly how we arrived at that figure. Senator MUSKIE. All right. Mr. RUCKELSHAUS. The second element taken into account is the so-called reimbursable balance. The total amount of that balance for all underfunded and unfunded projects is $1.46 billion. The third element to be considered in the calculation is the Federal share. The range of Federal participation in a project varies between 30 and 50 percent of the cost of construction depending on a number of factors, such as State matching, adoption of water quality standards, and consistency with comprehensive planning. The eligibility for increased Federal shares has been going up steadily. The average eligibility is now at approximately 47.5 percent. The fourth element to be considered is the amount of Federal funds. from previous appropriations which are as yet unobligated. That figure is $1.26 billion. On the basis of the foregoing, we reach a figure of $6.17 billion. The last consideration that must be taken into account is the necessity to make the program as cost effective as possible. We endeavor to achieve cost effectiveness to the fullest extent possible by requiring that projects be included in river basin and regional or metropolitan plans. These are essentially waste treatment cost-effectiveness plans. We have also developed treatment facility design, operation, and maintenance criteria and intensive review procedures to achieve the maximum benefit for our investment and to preclude construction of excess capacity. Through these cost-saving practices, required by good administration, we believe we can reduce further the Federal investment as well as offset inflationary increases. We have concluded that $6 billion in Federal funds will be needed over the next 3 years to support the program of needed construction and to deal with reimbursables. S. 1013, which calls for $2 billion for each of the next 3 fiscal years, is our best estimate of what is needed to do the job. As to that troublesome question of "reimbursables," we propose a straightforward solution: All will be honored and receive their full Federal share. This is what we propose in S. 1013. In our assessment of needs, we studied the problem of storm-water and combined sewers. We concluded that in most instances munici palities have a long way to go in assessing their storm-water and combined sewer problems and in devising practical solutions. The technology needed to deal with this problem is only now emerging, largely as a result of research and demonstrations supported by the Water Quality Office. The adaptation of that new technology to individual municipal situations requires a great deal of study, planning, and preparation. In most cases this has yet to be accomplished. One significant difficulty that we have experienced with the program stems from the fact that under our present authority, Federal funds are initially distributed among the States according to population, a factor that does not, when taken alone, adequately reflect the true needs of the various States. This occasions a delay of 18 months before unused funds can be redistributed to areas that have immediate needs. To remedy this situation, we propose in S. 1013 to revise the allocation formula as follows: Forty-five percent on the basis of population; Up to 20 percent to States that provide adequate "matching" funds; Up to 25 percent on the basis of outstanding "reimbursables"; and Ten percent on the basis of the severity of the pollution problem, in the discretion of the Administrator. We have studied many variations and alternatives to the allocation formula and have determined that the formula we propose in S. 1013 provides for the most effective distribution of funds. The new formula provides for a close correlation between the amount of funds distributed and the need for and ability to use such funds. Our purpose is to maximize the effectiveness of the initial allocation, thereby minimizing the need for reallocation, with the result that delays are eliminated and the funds are put to work where they are most needed. To enable municipalities which would otherwise be unable to participate in the construction grants program because of an inability to market their bonds on reasonable terms, the administration proposes, in S. 1015, an Environmental Financing Authority. The Environmental Financing Authority would be authorized to purchase municipal bonds and to issue its own obligations to finance such purchases. We understand that Secretary Connally will appear before this committee at a later date to testify concerning this proposal. Mr. Chairman, you can see that we have endeavored, as you and other members of the committee have endeavored in other proposals, to improve and refine our existing mechanisms to support the construction of needed facilities. We believe this to be necessary to meet and deal with immediate needs. Those needs include a backlog of unconstructed and unfunded projects which evidence a fundamental inadequacy of the present system. We believe a much more efficient and workable system should be developed. We believe that we should now begin to structure into the law and into the life and pattern of this program the concept and the realization of "self-sufficiency." By "self-sufficiency,' we mean the ability of a community to manage and pay for the operation, maintenance, and replacement of its waste treatment facilities and to meet the future treatment needs of the community. We believe strongly that all communities should operate waste treatment systems on a "utility" basis with each user paying a fair share of the cost. We have addressed this concept in a number of ways in our proposal, S. 1013. We would require every grantee as a condition of receiving a grant to assure that it is taking measures to establish or acquire adequate legal, institutional, managerial, and financial capability for meeting foreseeable future needs with respect to operation, maintenance, expansion, and replacement of the treatment works. The grant would support community efforts to acquire such capability. The possession of such capability including a user charge system. would be an acceptable alternative to a State matching program as the basis for eligibility for increased Federal support. EPA would be obliged to administer its authorities so as to encourage such community self-sufficiency. As a further assist toward the realization of self-sufficiency, grantees would be obliged to recover from industrial users of a waste treatment plant that portion of the total cost of the plant attributable to industrial waste treatment. Retention of the Federal portion of the amount so recovered would be permitted to communities establishing self-sufficient systems with user charges. If communities were self-sufficient in this regard-and clearly they can be with some initial assistance they would recognize needs as they grow, make plans to deal with them and construct new facilities as needed. We would then never again have to be faced with the backlog of needed construction we now face with all the pollution and water degradation it represents. Mr. Chairman, let me again emphasize that we recognize that we are dealing here with a vast problem, the complexities of which increase constantly. We continue to reassess the situation, to keep abreast and endeavor to project and anticipate the growing scope of the problem. We know that this is an area where reasonable men may differ. Hopefully, we will agree. My staff and I stand ready to work with you and the committee. STATE PROGRAM GRANTS Another proposal, S. 1012, would, over a 4-year period, triple the authorizations for Federal grants to support State and interstate water pollution prevention and control programs. Increased support of these programs is essential if State and interstate agencies are to meet increased responsibilities under our water quality standards and enforcement proposal, our waste treatment facilities construction program, and the Refuse Act permit program. A phased increase from the $10 million authorized for fiscal year 1971 to $30 million for fiscal year 1975-for a total of $90 million in new authorizations over a 4-year period-will provide funds to enable the administrator to award grants for specific program improvements and to sustain such improvements. New Federal funds will be directed to programs with demonstrated effectiveness. This is a different and, in our view, a superior approach to the usual one of simply increasing support for the same old programs. We would continue to support the basic programs at the current $10 million level. Amounts in excess of the $10 million each year would be used for specific program improvements. As such improvements are achieved, bonus grants would be authorized. These improvements fall into five categories: (1) A mandatory permit program; (2) A sewage treatment facilities program; (3) A program for the training and development of personnel; (4) A State recruitment and personnel system; and (5) A water quality planning capability. We believe the approach taken in S. 1012, which provides flexibility through the use of incentives and bonuses in the awarding of grants to State and interstate agencies for developing elements of a superior program, will channel the increased funding to those agencies demonstrating a capability to use the funds effectively. At the same time, those agencies with inadequate basic programs will continue to receive funding at levels presently authorized. OCEAN DUMPING Our proposal, entitled the "Marine Protection Act of 1971", would put an end to unregulated dumping of materials in ocean waters, and establish a permit system designed to prevent or seriously limit the dumping of materials into ocean waters which could adversely affect human health or welfare or the environmnet. Last year the Council on Environmental Quality, at the request of the President, investigated the problem of ocean pollution and concluded that there is a critical need for a national policy on ocean dumping. Ocean-dumped wastes are heavily concentrated and often contain materials that have a number of adverse effects. Many are toxic to human and marine life, deplete oxygen necessary to maintain the marine ecological system, reduce populations of fish and other economic resources, and damage esthetic values. The CEQ report indicates that the volume of waste materials dumped in the ocean is growing rapidly. Because the capacity of land-based waste disposal sites is becoming exhausted in some coastal cities, communities increasingly are looking to the ocean as a dumping ground for their wastes. Faced with higher water quality standards, industries may also look to the ocean for disposal. The result, without controls, could be a massive increase in the already growing level of ocean dumping. If this occurs, environmental deterioration will become widespread. In most cases, feasible and economic land-based disposal methods are available for wastes currently being dumped in the ocean. In many cases, alternatives to ocean dumping can be applied positively for purposes such as land reclamation and recycling to recover valuable waste components. Current regulatory activities and authorities are not adequate to handle the problem of ocean dumping. States have not exercised extensive regulatory authority. Furthermore, their authority extends only within the 3-mile territorial sea, and most ocean dumping occurs outside of these waters. The Corps of Engineers has some regulatory authority over ocean dumping, but such authority is subject to severe limitations. EPA has |