Recognizing these problems and the impact they would have upon the well-being of rural America, the rural electric cooperatives at their annual meeting in Dallas recently adopted the following resolution with regard to Appalachia:

APPALACHIA DEVELOPMENT PROGRAM

Whereas the people of Appalachia have not shared in the general prosperity of this country, nor have relief and welfare programs served to substantially cure the region's ailing economy; and

Whereas President Johnson has put forth a program to combat poverty with considerable emphasis upon this region; and

Whereas Appalachia possesses some 39 percent of the Nation's recoverable bituminous coal, which could be well used toward the production of the 19 trillion kilowatt-hours of electricity this Nation will consume in the next 10 years; and

Whereas the entire eastern one-half of the United States is within economic transmission distance of Appalachia, and most major electric load centers therein could benefit from the low-cost energy which could be produced at mine-mouth plants in Appalachia and transmitted via extra high voltage to such load centers; and

Whereas it is recognized that only a massive, self-sustaining economic undertaking, which would reinvest the revenues realized from utilization of Appalachia's resources back into the region itself, holds promise of revitalizing the economy of this deprived area: Now, therefore, be it

Resolved, That we advocate the creation of a Federal Government corporation with power to issue bonds for the construction of large steam-electric generating stations, a portion of the revenues from which would go into an Appalachia development assistance fund to be used in constructing educational facilities, roads, public works, and community facilities.

We feel the Appalachian Regional Development Act is a significant step in the direction of solving the desperate needs of the area. However, it is our opinion that it lacks an important element that is essential to its success.

While providing for education, roads, the development of physical resources, and facilities to create a healthy economic climate, the proposed legislation neglects to fully utilize the opportunity that exists to build the broad economic base from which a permanent new economy could be launched. It is our position that this base could be supplied by the development of an industry ideally suited to the area, the coal industry.

Mr. Joseph E. Moody, president of the National Policy Conference, said in a recent statement before this committee:

I hope members of this committee will recognize that without expanded coal production, the hopes for the full economic development of Appalachia will be difficult indeed.

We are of the strong opinion that utilization of the region's historically basic resource, coal, in very large size steam-electric generating stations, would tend to reestablish mining payrolls, add powerplant construction and operation payrolls, attract new industry, and substantially lower power costs. Couple this with a complete multipurpose development of the water resources in the region, for flood control, water supply, and purification, recreation, and hydroelectric power production for peaking needs and a tremendous new industry would be created. It would provide the base from which the area could grow and move forward.

While we have not made a detailed study of the region, the facts seem to indicate that this can be the broad base necessary for success of the program that the legislation before you envisions.

These are those, I know, who haxe expressed questions about this approach. However, if this type of utilization of coal for generation is bad, why have large mine-mouth plants, like Mount Storm in West Virginia and Keystone in Pennsylvania, been planned by power companies? These facilities seem to prove the value of such a plan. If there is no market for the power that might be produced in the region, why is Consolidated Edison Co. at this time engaged in negotiations with a foreign country for the purchase of power 1,100 miles from New York? If the electric industry in this part of the country is operating efficiently and economically, why are the highest consumer costs for electricity currently within the transmission distance of Appalachia?

These questions seem to indicate to us the vital need for a study such as suggested by the President's Appalachia Regional Commission in the report issued earlier this year.

I quote from page 45 of that report:

The future comparative costs of natural gas, fuel oil, and nuclear energy may be such that the coal of Appalachia will continue to be the major source of thermal power production for the Appalachian region and the surrounding area for the foreseeable future. The potential power market in the surrounding area is approximately three times the presently anticipated growth in Appalachia itself.

Under these circumstances, a situation could develop where low-cost fuel and other minimum transmission costs would provide the major economies necessary for substantial development of mine-mouth power. Such low-cost power, in addition to its export from the region, could be sufficient, given Appalachia's strategic location, to attract to the region additional industry strongly dependent upon low-power costs and also to encourage the extensive development of related small-scale industry.

These coal-based power possibilities could be enhanced still further by the development of water installations designed to produce peaking power, operating in conjunction with low-cost baseload thermal plants. Such developments would not reduce requirements for coal, but would increase them.

Among the early concerns of the proposed regional organization should be initiation of studies looking toward these possibilities.

These studies should be conducted with the assistance and counsel of an advisory committee which includes representatives of private utilities, electric cooperatives, municipal systems, Federal and State agencies, and the public, and should be coordinated with the present Federal Power Commission survey of national power requirements.

This study should be instituted at once, and a report of the findings presented to Congress at the earliest possible date.

In summary, Mr. Chairman, it is our opinion that the Appalachian program is good, and is necessary for this stricken region. But we are convinced that wtihout a basic new economy built on the natural resource of the area, coal, supplemented by multipurpose development of the water resources, including hydropower for peaking demand, this program will fall short of its goal, the rebuilding of the economy and the prosperity of Appalachia.

We, therefore, not only urge approval of legislation such as you have under consideration, but that you include in the bill provision for a study such as is recommended by the President's Commission and referred to above.

Mr. DAVIS. Thank you, Mr. Kiley.

The purpose of these hearings has been to hear from all sorts of citizens, their position, and to give us the benefit of their judgment. I am not speaking for the rest of the committee, but personally I cannot go along with you on some of your thinking. I certainly would not suggest that the Government build, with Government money, plants for the generation of electric power in this particular area, certainly not at this point.

Mr. Watts, of Kentucky, a very valued Member of Congress, stated the other day before the committee that the relief of the coal miners, per se, would not be the final answer to lifting up the standard of living, giving employment in this particular area.

I think all of us have a very fine conception of power needs in these sections of the country, power demand, and so on. But your statement has been provocative and will help us as we try to determine a very sound, practical, long-range approach for this area.

Mr. Fallon?

Mr. FALLON. I think I join with you, Mr. Chairman. We had another witness before us who I think is one of the most intelligent and energetic Members of Congress, Mr. Flood, who testified almost the same as Mr. Watts, that the basic recovery of this area is not dependent on coal.

Mr. DAVIS. Mr. Cramer?

Mr. CRAMER. I just have a couple of questions. With regard to coal mining at the present time, a good portion of that coal is now shipped from the Appalachian region to other parts of the country, is it not?

Mr. KILEY. Yes.

Mr. CRAMER. For power generation and other purposes?

Mr. KILEY. Yes.

Mr. CRAMER. What happens to that phase of the industry then, and the railroad workers and others involved, if they start generating all their power needs in the area itself?

Mr. KILEY. First of all, this plan that we are discussing is a plan for the future. It does not replace any existing plants. It does not replace anything that is currently being done. I think in the vast need for power, and the power industry, as you probably know, has an average growth factor of doubling about every 10 years, I think you have plenty of room for growth in this area of this type of basic industry right along with the growth in other areas.

Mr. CRAMER. On page 3 of your statement you said that you think a portion of the revenues of the Appalachian development assistance fund could be used for construction of educational facilities, roads, public works, and community facilities. That goes TVA a step better, does it not? TVA cannot do that, is that not right?

Mr. KILEY. That is right.

Mr. CRAMER. So this is a super-TVA. This is a TVA with community facilities added, so, in effect, this proposal for a Federal Government corporation would take over the function of community facilities construction in the area, using its revenues and profits for that purpose. That goes TVA a step further, does it not?

Mr. KILEY. The point that we were making in this resolution on page 3 of the statement was that not only could the power be com

petitive, it could be competitive even while retaining some of the money in the area to do the work which is planned generally by this Appalachian program. Some of the fund could come via this type of approach.

Mr. CRAMER. That is consistent also with the recommendations made to the Department of the Interior by one of its own employees-made to the NEFC from the regional coordinator on the Appalachian subject by Mr. Mark Abelson-you are familiar with that report-relating to this establishment of a Federal corporation, the very thing you testified to.

Mr. KILEY. You are talking about the PARC report.

Mr. CRAMER. Yes; it proposes on behalf of the Department of Interior, exactly what you are proposing; is that right?

Mr. KILEY. Similar; yes.

Mr. CRAMER. This is a Government employee making the same proposal. I would like to have a copy of that proposal made a part of the record, Mr. Chairman.

Mr. DAVIS. Without objection, it is so ordered. (Document referred to follows:)

U.S. DEPARTMENT OF THE INTERIOR,
Boston, Mass., March 16, 1964.

To: Members of NEFC.

From: Regional coordinator.

Subject: Appalachia.

For your information, there is enclosed a copy of a report on a program for development of the Appalachian region.

MARK ABELSON.

A DYNAMIC PROGRAM FOR ECONOMIC DEVELOPMENT OF THE APPALACHIAN REGION

Today one of the most significant challenges which confronts America is: Can this Nation fulfill its responsibilities with a fifth of the Nation's population impoverished? One of the areas where this problem is most acute is the Appalachian region, which has suffered serious economic decline since the end of World War II. Unemployment has reached as high as 30 percent in some labor market areas in Appalachia. This is a black mark on our economic system.

In the 1930's, when a similar situation existed in the valley of the Tennessee River, Franklin D. Roosevelt moved to eradicate a needless waste of human and physical resources by pressing for the creation of the Tennessee Valley Authority. When F.D.R. sent the TVA Act to Congress he said: "This in a true sense is a return to the spirit and vision of the pioneer. If we are successful here we can march on, step by step, in a like development of other great natural territorial units within our borders."

For 30 years the TVA has been functioning in that area, and though by no means finished with the job it set out to do, the TVA speaks for itself in its record of accomplishments.

In 1933, the year TVA was established, the per capita income in the Tennessee Valley area was 45 percent of the national average; by 1962 it had risen to 66 percent of the national average. The steady increase in per capita income in the valley has, among other things, resulted in $20 billion in added Federal income tax payments from individuals in the valley in the period 1933-1963.

Now, President Johnson has declared war on poverty and has singled out Appalachia as one region that demands immediate action. Because of the attention which has been focused on the economic ills of Appalachia, the eyes of the Nation and the world will watch the program for this region with keen interest. Success or failure here will be an indicator of whether or not the American economic system has the ability to cure its ills as well as provide a pattern for meeting similar problems in other parts of the world.

If the Federal Government is to assume a proper role in bolstering the unsteady and uncertain economy of Appalachia it must assure a sizable expansion

of investments in wealth-producing functions of that region. Presently over one-quarter billion dollars per year are being poured into Appalachia in various forms of the dole, creating no new wealth, fostering a welfare society, and breaking down the basic human values of the people.

The dole cannot continue. Unless the Federal Government can come up with a program of resource development, human and physical, which will bring permanent benefit to the region through creation of a sound base for economic growth, failure is unavoidable.

We propose a program which will shift the balance in Appalachia from exploitation to conservation, from unemployment to economic development, from poverty to prosperity. This program will not be a panacea, but a long-term expanding investment in and for the people of Appalachia and for the people of the United States.

FEDERAL APPALACHIAN DEVELOPMENT CORPORATION

An effective program for the Appalachian region must envision at least two objectives: (1) stimulation of non-Government industrial and commerical enterprise to build payroll capability, and (2) establishment of a self-sustaining source of cash flow to finance capital improvements in the broadest sense of the term; i.e., public works, community facilities, industrial and municipal water supply, and sewage treatment facilities, and, of prime importance, educational facilities and financial support of their utilization at all levels of attainment. Because of the relatively large number of States and localities involved, we believe that this total marshaling of the natural and human resources of the Appalachian region can best be achieved by an idependent, Federal Government corporation with broad authority in the field of resource development and with independent financing powers based on self-liquidaing bonds.

The mountainous terrain of Appalachia, and its proximity to eastern population centers, indicates good prospects for water and land resource development oriented toward recreation and electric power development, but with substantial emphasis also placed on impoundments for industrial and municipal water supply. Sewage treatment facilities and water distribution and sewage collection systems for the smaller communities are also needed. These are the kinds of projects that, in part at least, will be paid for by user charges over a period of years, assuming a simultaneous accelerated economic growth.

The sale of hydroelectricity from multiple-purpose reservoirs will supply some cash flow but statistics indicate that by 1980 only 9 percent of the region's electric energy will be derived from water power. Nonetheless, such projects do not substantially reduce the demand for fuel, and constitute valuable peaking capability to complement and assure the most efficient opertion of fuel-fired steam stations.

The construction and operation of educational facilities, and the subsidization of their use-apparently the most critical need of Appalachia-are not a selfliquidating program and must be financed from other sources, but of course would be aided by a broadening of the industrial base.

We are of the strong opinion that utilization of the region's historically basic resource coal-in very large-size steam electric generating stations, with the payment of a part of the power sales revenue into an Appalachian Development Assistance Fund, would tend to reestablish mining payrolls, add powerplant construction and operation payrolls, attract new industries and create a self-sustaining cash flow to fund land and water resource development and the construction and operation of needed educational facilities-all to be programed in close cooperation with the State and local governments.

Preferably, the development corporation would generate the power and transmit it over Federal transmission lines to major load centers for delivery at wholesale. The power could be sold to all types of utilities-privately, publicly, and cooperatively owned. Financing of generation and transmission facilities by a public corporation through the issuance of bonds sold in the private money market would provide these advantages, among others: (1) Power would be produced at the lowest possible cost; (2) funds could be made available to the development corporation for other regional development programs; (3) power could be sold to all utilities, public and private; and (4) thermal power could best be integrated with publicly developed hydro resources. Although construction of some transmission lines would be needed to deliver power to load centers, existing lines also could be used to "wheel" power, where feasible.