TABLE I.-Employment changes in Appalachia, by major industry groups, 1950-601 1 Based on tables C-8 and C-9, Report of the President's Appalachian Regional Commission, 1964. TABLE II.-Distribution of employment in major industry groups, Appalachia, 1 Based on tables C-9 and C-11, report of the President's Appalachian Regional Commission, 1964. Senator RANDOLPH. I wish to thank you, especially Senator Cooper, as well as all members of this committee, for sharing in these productive hearings. We have had information and we have received recommendations which will be helpful when the committee goes into executive session on January 27. Thank you very, very much, those of you who have shared as our listeners. This hearing stands adjourned. (Whereupon, at 1:15 p.m., the hearing was adjourned.) STATEMENT OF HON. CHARLES MCC. MATHIAS, JR., A REPRESENTATIVE IN Maryland's Sixth Congressional District is particularly proud of its heritage of local and individual initiative. Three of our five counties fall within the Appalachian region. For the last decade, this section of western Maryland has been plagued with the reality that they were experiencing deficient economic expansion. Many of the industries in the area were slowing down or shutting down. Unemployment was high and the people were struggling to make ends meet. In 1961, it was determined that the people had to take a stand and begin a program to bolster the economy of the region. In January of that year I proposed a western Maryland economic conference to draw together representatives from the various interest groups involved in the problem, for the purpose of study and discussion in the hope that the exchange of ideas would bind these groups together and yield a fuller understanding of how to combat depressed industry and unemployment. The results of this conference, above all, showed the need to retain and emphasize local initiative. As I said at the time, "We are going to do this job right in our hometowns." But, in addition to this, it demonstrated the need for a program such as is proposed here today, to coordinate the various local efforts with State and Federal programs. Through this conference, we were able to establish a liaison between the counties concerned and to make a united effort. It is now necessary to establish a program to mold local, State, and Federal efforts into a regional drive to uplift the economy of an entire section of our country. I think it would be wise at this point to insert a note of caution. This program, if enacted, will be of such broad scope that it will include 11 States and more than 15 million people. Projects will be proposed based on abstract economic theories, which is necessary when you are considering people by the millions and localities by the thousands. But when proposing solutions in this manner, there is always the tendency to forget that we are dealing with individuals whose most immediate concern is their own community interests. This program cannot possibly succeed unless those individual and local interests can be preserved to the highest degree. If the time should come when personal and community initiative is transferred to the State or Federal Government, the most vital resource of the area will have been destroyed. "Favorable economic climate" can never be properly applied to a region of the country or even to a State. It is nothing more than an aggregate of personal achievement translated into the fulfillment of local economic potential. It is still individuals that need employment and it is still individuals who will be increasing their talents and skills in order to accept new jobs. It is still the towns and villages that will provide the sites for new industry, and they will do this by proper utilization of resources and by installation of all the facilities that will help business expand. STATEMENT OF HON. CLAIBORNE PELL, A U.S. SENATOR FROM THE STATE OF RHODE ISLAND Mr. Chairman, I appreciate the opportunity to submit my views regarding S. 3, the Appalachian regional development bill. My cosponsorship of this legislation derives from a longstanding interest in the philosophy underlying regional development planning. Too often we think in terms of direct Federal-State efforts, ignoring many times the artificial nature of boundary lines. Regional planning, with its emphasis on developing areas with common problems and overlapping needs, must eventually replace outmoded concepts of isolated efforts. Cooperative ventures joined in by the States and, where necessary, the Federal Government, can solve important problems that need an integrated effort. My interest in the Appalachian bill is to see a well-conceived and vitally necessary program put into effect. This plan hopefully will set the framework for other necessary regional development plans-and one need only glance at the national problems of unemployment and economic distress, of dwindling natural resources and unconserved lands, to recognize the task that lies ahead. New England, which for generations had enjoyed a high climate of prosperous industrial advance, widespread trade, important commercial fisheries, and specialized agricultural activities, has been experiencing, in more recent years, serious economic problems which are regional in nature. Because of this, a wellstructured regional development plan could aid New England in regaining the levels of prosperity of the past, and in forging ahead to new levels in the future. Enactment and implementation of the Appalachian program will certainly set valuable guidelines for these future efforts. STATEMENT Of Maj. Gen. LOUIS W. PRENTISS, U.S. ARMY (RETIRED), EXECUTIVE VICE PRESIDENT, AMERICAN ROAD BUILDERS' ASSOCIATION Mr. Chairman and members of the committee, on June 23, 1964, I testified before this committee on behalf of the American Road Builders' Association to present our views in support of the construction of modern primary highways as a means of advancing the economic and social progress of the Appalachian region. Little needs to be added to the testimony presented on that date. We pointed out that highway building will not, in itself, remove the economic troubles of the Appalachian region. But, we added, modern highways are the essential catalyst without which no comprehensive program of economic aid can fully succeed. We noted that the State highway departments, under existing programs, properly give priority attention to building roads in the areas where the immediate demands of traffic exceed the capacity of existing highways. Thus, special programs are needed to provide highways in those areas which, because of the lack of economic growth, cannot meet the traffic criteria to justify new highway construction to meet traffic demand. We amplified these statements by citing supporting studies and statistics which demonstrate the role of highways as economic catalysts. We further pointed out that the proposed highway program not only will contribute substantially to the permanent economic betterment of the region but also will provide an immediate economic tonic through the employment generated by the highway construction itself. According to a study by the Bureau of Labor Statistics, highway construction generates 216 man-hours of employment per $1,000 of construction contract value. The highway industry is ready to move into this new program without delay. The accelerated national highway program begun in 1956 has reached its approximate peak level of construction activity, but the industry has ample reserve resources in manpower and equipment to undertake the new program efficiently and immediately. Highway contractors are working at levels substantially below their capacity. The construction equipment industry can fill orders for new equipment with no delay. Materials producers stand ready to do their part. Thanks to great technological advances in the last decade, the highway industry has a greater capability for efficient and economical production than at any other time in history. So we welcome the diligence with which this committee is advancing this legislation and pledge our cooperation in making the program effective. Mr. Chairman, we are again most appreciative for the opportunity to present the views of the American Road Builders' Association. Hon. PAT MCNAMARA, NATIONAL RURAL ELECTRIC COOPERATIVE ASSOCIATION, Chairman, Committee on Public Works, DEAR SENATOR MCNAMARA: As we read the above-mentioned legislation, it would authorize expenditure by the Federal Government of $840 million for highway improvement in the Appalachian States plus an additional $237.2 million for sewage treatment plants, vocational schools, water resources studies, hospital and health centers, land improvement, timber development, and mining area restoration. Why, one might ask, in a bill to aid Appalachia, is there no reference to the one natural resource which constitutes Appalachia's largest source of wealth— coal It almost appears as though there had been, in drafting S. 3, a conscious effort to omit all mention of coal; the one element from which could be derived some dollars to help repay the Federal grants authorized by the legislation. Of the need and desirability for a Federal program to combat the deplorable conditions under which so many thousands of American citizens exist in the several Appalachian States, there can be no question. There are, however, two tests which, in our opinion, should be met by any legislation which involves the expenditure of more than a billion dollars to redevelop a particular geographical area of the country. These tests are: (1) Is the legislation formulated to assure that the Federal investment will result in a sustained economic improvement in the area through the stimulation of business and industrial enterprise; and (2) Does the legislation assure that to the maximum extent possible, the works to be constructed with Federal funds will be self-liquidating? Will they generate a cash-flow to repay the Federal investment? It is our opinion that the subject legislation, though desirable in its objectives, would better serve the public interest if modified to more closely meet the above tests, which are usually applied to public works undertakings. In truth, S. 3 completely ignores the most abundant and the most valuable natural resource which the Appalachian area possesses-coal. The bill provides for the spending of Federal funds to build highways, sewage treatment plants, vocational education facilities, hospital and health centers. It authorizes additional money for land improvement, timber development, and water resources studies. It even authorizes the spending of $21.5 million to restore lands which have been rendered desolate through the failure of private entrepreneurs to repair the ravages of their own strip-mine exploitation. As to authorizing expenditures for increasing utilization of the coal resources of the region, however, the bill is anomalously silent. Yet, it is by helping to increase coal utilization that this legislation could provide the basis for sustained growth of the area's economy, and render self-liquidating all the projects for which Federal grants are provided. It is the cash register of Appalachia which this bill wholly ignores. Every authority who has studied the problems of Appalachia during recent years has recognized the dominant role which the area's coal resources could play in its redevelopment. Your committee, in favorably reporting S. 2782 on August 13, 1964, stated: "As earlier noted, however, coal remains the single largest resource of the region, and it is of the utmost importance to the development of the area that there be opened new markets for coal. It is the intent of the committee that the Commission should include within its efforts the study of the development of such new markets. "The committee is also in agreement with the finding of the President's Appalachian Regional Commission which declared in its 1964 report that 'Developments in the field of power could have a marked impact upon the future economic situation in the Appalachian region' and stated that study of the potential benefits of using coal and hydro resources for this purpose should be 'among the early concerns' of a regional organization." The use of Appalachian coal to provide low-cost electricity for use in the region, and for export from the region, is widely recognized as a desirable major element in rebuilding the economy of Appalachia. The President of the United States has mentioned the concept favorably. It has received support from the Secretary of the Interior, the Pennsylvania Governor's Council of Science and Tech nology, a panel of experts on Appalachian problems convened by Princeton University, the Eastern Kentucky Redevelopment Commission, and the American Electric Power Corp., the subsidiary operating companies of which are pledged to expand by 5 million kilowatts their generating facilities in Appalachia over the next 7 years. In short, Appalachia is a vast coal reserve. Coal in large quantities is lowcost electricity. And low-cost electricity in large quantities is dollars. So good are the economics of large-scale coal-fired steam electric stations in Appalachia that the "National Power Survey," recently published by the Federal Power Commission, recommends large-scale mine-mouth plants in Appalachia, with 500-kilovolt transmission to New York and New England, as one of the preferred means of serving 1980 electric loads in the latter areas. Already, the major privately owned power companies, and their parent holding companies, have recognized the benefits available. The Keystone plant, consisting initially of two 800,000-kilowatt units, near Johnstown, Pa., will be owned jointly by General Public Utilities Corp., a holding company for five operating companies, Pennsylvania Power & Light Co., and Philadelphia Electric Co. Allegheny Power System, a holding company for seven operating companies, is building a 500,000-kilowatt plant at Morgantown, W. Va. A 500-kilovolt alternating-current transmission system will link these two plants with the Mount Storm, W. Va., 1,140,000-kilowatt plant of Virginia Electric & Power Co. and with the 500-kilovolt network of the American Electric Power Co. The power companies in Appalachia will thereby be delivering high voltage electricity from Appalachia to Richmond, Va., Washington, D.C., Philadelphia, Pa., and the New York City metropolitan area. The evidence is irrefutable that Appalachia can be established as a center of steam electric generation from which power can be delivered widely throughout the eastern part of the United States at a cost lower than it can be developed from any alternative source. This result is being achieved by privately owned power companies paying all taxes, local and Federal, and capital costs of 14 to 15 percent. It is, therefore, obvious that a Federal corporation, operating in similar fashion, could also sell enormous quantities of electric energy from steam stations in Appalachia, and utilize the surplus revenue arising from the difference between Federal financing and private financing to establish and fund an Appalachian development assistance fund. The latter fund could then be used to liquidate projects for which Federal grants are authorized in S. 3. Assuming that the differential between the cost of producing electricity in a federally financed steamplant and a privately owned steamplant is approximately one-half mill per kilowatt-hour, more than $3.5 million per year in surplus revenue would be available from every million kilowatts of Federal stream generating capacity that is installed in Appalachia. In effect, one such plant would, during its 30-year lifetime, generate surplus revenues of over $100 million to help pay off the Federal investment in highways, sewage treatment plants, hospitals, health centers, vocational schools, and similar undertakings. In the light of forecasts by the Federal Power Commission's "National Power Survey" that by 1980 the cost of mine-mouth generation plus transmission to load center will be generally competitive with load center generation; that 80 million kilowatts of new capacity added by 1980 will be of mine-mouth variety, and that 40 million kilowatts of mine-mouth capacity will be developed in the Appalachian area; the potential for generating a cash flow to fund the above suggested Appalachian development assistance fund is enormous. The opportunities for coal mine employment, for power system construction and operation payrolls, and the availability of low-cost power to stimulate industrial and commercial enterprise would be equally large. These facts emphasize the desirability for including in any Appalachian redevelopment legislation provisions for a Federal corporation empowered to finance and operate coal-burning steam electric stations and to market the power from them. To ignore the potential of this suggestion is to almost completely reject the concept that a program of the type embodied in S. 3 should, to the maximum extent possible, reimburse the Federal Treasury for the expenditures involved and should, rather than constituting an extended dole, be designed to stimulate nongovernmental business activity. Based on all of the foregoing considerations, we strongly urge that S. 3 be amended to provide for the establishment of a Federal corporation authorized to finance and construct coal-fired steam electric stations in Appalachia, and |