Mr. QUARLES. Let me respond to that. If the justification is sketchy, then that is clearly our failure to really lay out the story to you, because there isn't any question at all that funding at this general level is justified, at this time. I think what you have to do is go back to the basic policy decision which the Congress made in 1972, which was to put the Federal Government into the posture of providing funds for construction of these local or municipal sewage treatment plants with a long-term program, in which funding would be available and the community could count on it.

That is why the $18 billion was put in, in one plug, originally. The original intent that lay behind that part of the 1972 Water Pollution Control Act has been eroded away by subsequent circumstances, on the one hand the level of work to be done has gone up, and on the other hand the money that is available to do the work that needs to be done has been used up.

So that now we have reached a situation where rather than being able to plan ahead and know that the money would be there, it has once again reestablished a kind of a hand-to-mouth situation that existed before the 1972 act was passed.

Mr. COUGHLIN. The outlays, I see from your justification on page 4, would not really start to have an impact until fiscal year 1981.

Mr. QUARLES. That is the usual pattern of the outlays, yes. But the point on this is, there is a history of probably 6 or 7 years of activity associated with a given construction project, beginning with the time when the initial preliminary planning is done, which we call Step 1 grant, and then when it goes into development of the specific plans and specifics which we call step 2 grant, then when we receive an approved step 3 grant for the construction money.

After we obligate that money with the approval of the step 3 grant, it will typically take a couple of years before the construction occurs to the stage where we pay out the funds and thereby impact the outlay.

But if the money is not available in the program so that it can be seen and can be counted upon for that last step in the process, at the time when the first step is taking place then the program operates at a severe handicap.

Right now, the program is operating at a very severe handicap, because in a great many States, communities can't even look 3 months ahead and see that the money will be there.

That's the situation in New Jersey and other States.

CONSTRUCTION GRANTS- -OBLIGATIONS AND OUTLAYS

Mr. RHETT. If I can make a general statement. Obligations will normally peak not in the year in which you have the authorization, but in the next year.

On the other hand. outlays start to peak in the third and fourth year, because it just takes that long to get a project under construction. Outlays have to last in the neighborhood of 10 years. Of course, at the end they are very small and at the beginning they are very small, so for example, the outlays on the $4.5 billion we are talking about, there will be only about $50 million the first year. But then

it goes to $300 million the next year and then a billion dollars in the third and fourth years, and then $1.5 billion in the fifth year. Obligations resulting from this $4.5 billion would be $400 million the first year, $3.5 billion the second year and then about $600 million the third year.

That will happen for each appropriation.

In other words, if we get $4.5 billion in 1978, that same type pattern will occur. There is a delayed reaction. That, I think, is fairly standard in any construction program.

Mr. QUARLES. This is what you look at from the national viewpoint, as we all are looking at it. The picture is more confused by virtue of the fact that there is a different program in every state. In some States, the program is much more advanced than it is in other States. There are a number of States where they have got a surplus of money.

Mr. COUGHLIN. Do you have a good project you have evaluated that is on hand and ready to use these funds, or do you just have to have the funds there to get someone to propose the project?

Mr. QUARLES. Well, I guess the answer is a little of both. We know that there is work out there that needs to be done, for which this money has to be available.

In some cases, the projects are clearly good projects that we have evaluated-we may have evaluated the step 2 project and approved that, but it is going to be another year or two, before they complete the step 3 application, for our evaluation.

So that I think the answer is, yes, we do know there are good projects out there that need to be done.

Mr. RHETT. In fact, I can give you an idea of the figures. In step 1 and 2 planning grants and in unfunded extensions for step 3 grants, we already have built-in needs in the neighborhood of $10 to $15 billion.

So the $4.5 billion will not even cover what is coming through the pipeline.

Mr. QUARLES. This really should be the authorization committee's responsibility. I think you might feel that way. To some extent we are coming to you in the nature of an emergency.

Mr. COUGHLIN. I think that is perhaps the problem we are having, or at least I am having.

Mr. TRAXLER. We are very sensitive to our brethren on the authorization committees.

CONSTRUCTION GRANT APPLICATIONS

Mr. COUGHLIN. The $69 million for section 208, that would take a waiver of points of order or not?

Mr. BECK. We do not now have authorization for such an appropriation.

I would like to get back to one point that you raised about the problem

Mr. QUARLES. Is that a sufficient answer to your question?

Mr. COUGHLIN. There is one further part to it. Do you have grant applications that are in hand and that you consider to be good grant applications for which you are going to apply the money?

Mr. BECK. I was anticipating that question, and a point I raised earlier. The perception of this program is not too good by a lot of individuals.

One of the reasons for that is, there was a court order requiring the States to do planning in the nondesignated areas, areas where we didn't have areawide or regional programs undertaking that effort. We were unable to give them adequate funds. All of them have submitted work plans, but we were unable to give them the Federal funds necessary to accomplish what the act requires. So, yes, there are projects available right now for funding.

A good deal of the perceptual problems about the lack of quality in this program will be dealt with by this money being made available to the States to undertake an adequate program.

Mr. QUARLES. Let me just say that I think possibly there is some confusion here on this question of whether we would need the waiver in regard to the $69 million.

Some think we do need that waiver. Perhaps we should explore that more and try to give you a more specific answer.

NEED FOR ADDITIONAL POSITIONS

Mr. COUGHLIN. On the 600 additional positions, I guess it is hard for me to rationalize your statement saying they are sorely needed, but not knowing what they are needed for.

Mr. QUARLES. Let me respond to that. I believe on previous occasions this committee has recommended that a considerable number of additional positions be made available to EPA. EPA has by and large been functioning, subject to general restraint on the number of employees available to it

Mr. COUGHLIN. How many do you have now ?

Mr. QUARLES. We now have 9,550 permanent authorized positions. That number reflects an increase of 250 positions that were made available about 11 years ago for the construction grant program and, previously, roughly 97 positions that were made available when the 1974 drinking water law was passed. We have been operating at a level of 9.203 authorized permanent positions for about 3 or 4 years.

Now, within that period of time we have seen enacted the 1974 drinking water statute which we have put into operation on a shoestring, because there were no positions anywhere near what was needed, made available to the Agency for that.

We have seen several of our programs move into a state of implementation where the need for manpower to actually carry them out was far beyond our ability to meet that need.

Now most recently we have two major verv important and very difficult new programs added to EPA, by the Resource Conservation and Recovery Act of 1976, and the Toxic Substance Control Act of 1976.

I am not even mentioning additional needs such as the wetlands. program which came along under section 404 in response to actions

by the Corps of Engineers and a loan guarantee program for municipal treatment plants.

I mean many additional needs have come along, and we have reprogramed and reprogramed in trying to meet these needs, so the Agency is under tremendous pressure.

Last year when we tried to submit our proposal to OMB for the manpower that we felt we needed, we recommended approximately 1,900 additional positions for the continuing programs of the Agency, and then approximately 800 additional positions for these two new laws, so that added up to roughly 2,700 additional positions which we felt we needed.

And I personally feel that all of those positions are needed.

Within the general Federal Government picture, however, those were not available to us and I can understand the problem that the President has. But the only problem we have now, is, how do we use those 600 positions in the most efficient manner to meet the needs which we recognize far surpass those 600 positions.

Mr. COUGHLIN. I guess my problem is, normally when an agency comes to us, they have a request on how many positions they want, for what GS level, and in what areas they are needed.

Mr. QUARLES. I do admit that, and I do have to apologize for that. Mr. TRAXLER. That isn't your problem, though. You were only a few days ago advised of the 600-position figure.

Mr. QUARLES. Yes; but we would want to work with you as we develop the details and how those positions would be allotted within the Agency, to the extent you would want to maintain some supervision over that.

Mr. TRAXLER. I think the committee is aware of the staffing problems you have had over the years and your difficulties with OMB. We have had those difficulties with that, too

Mr. QUARLES. We appreciate the support from this committee very much.

Mr. COUGHLIN. Thank you very much, Mr. Chairman.
Mr. TRAXLER. Mrs. Boggs?

Mrs. BOGGS. No questions.

Mr. TRAXLER. We extend our deep appreciation to you?

We have enjoyed our relationship with all of you very much. Particularly, Mr. Train.

We have some questions from Mr. Alexander which we would like you to answer for the record. We also have some correspondence from Congressman James Santini's office which we will insert into the record.

[The material follows:]

COMMENT

I was encouraged to learn last month that the Environmental Protection Agency is becoming more aware of the financial problems facing small towns and communities in providing federally-approved sewage treatment facilities. And, further that you intend to begin next month holding a series of meetings across the country to exchange ideas and information about these problems. This raises again some old questions I have and brings up some new ones. Question 1. A number of us who have been concerned with the quality of life in nonmetropolitan areas have tried, unsuccessfully, to determine how much of its construction grant money EPA is spending in communities in these areas. The most recent effort I have made in this search has been made this month. I find

84-206 O 77 pt. 49

that even though EPA is changing the way in which it keeps its data, you still are not including a coding system which will allow the separation of the metropolitan and nonmetropolitan grant receipient information. Why?

Answer. The information currently in the EPA Construction Grants Management Information system includes: (a) the design population, (b) the county name of applicant, (c) the address of the applicant, and (d) the size of the grant. We routinely publish information on number and value of grants made to various size communities, which gives a close approximation to urban versus nonurban areas. Any information on our data base can be summarized by community size. We also routinely summarize information by city and county of applicant, which can be matched against existing city-county master files to provide a compilation of grants previously made to urban versus rural counties. (This last analysis has not been done yet by EPA.)

Although current data does not directly provide a metropolitan versus nonmetropolitan split, the existing data on counties, size of community, and grant size could provide a close approximation.

Question 2. Analysis of data made available to me by EPA shows that 76 percent of the total number of grants made between July 1, 1972, and December 31, 1976, went to communities under 50,000 persons in population. But, these grants totaled only 39.3 percent of the dollars spent or obligated by EPA. While many of the communities, possibly most of them, under 50,000 population are in nonmetropolitan areas certainly all of them are not. Given that background would you please tell the subcommittee how you would rate the kind of response EPA is making to nonmetropolitan area needs for assistance with wastewater treatment projects and give in detail the basis for your evaluation?

Answer. Based on the program and legislative considerations I will outline below, I feel that EPA is making a more than adequate effort to support nonmetropolitan area needs vis-a-vis the total program requirements. It must be remembered that 70 percent of the total population (and most of the municipal pollutant discharges) reside in the 263 standard metropolitan statistical areas (SMSA's), a factor that explains why most of the funds and a proportionate share of EPA efforts has been directed there. It must also be noted that the States determine funding priorities under EPA regulations regarding water pollution abatement. Discretion to go outside these strict criteria is somewhat limited if we wish to abate the most pollution with the limited funds available.

However, we have recognized the problem of nonmetropolitan pollution and the competition that exists for capital funds between urban and rural communities. Accordingly we have taken a number of steps to insure maximum small community participation in the grant program while emphasizing those treatment alternatives appropriate to their situation.

(a) As noted in your question, over 76 percent of all awards nationwide have gone to communities under 50,000 population, representing 39 percent of the dollars obligated. The low percentage of total funds obligated for smaller communities represents the smaller facilities being built and in no way indicates lower priority for grant participation.

(b) EPA has provided guidance to allow optional dual priority list development-one list for large metro areas, the other for small towns--to insure that a portion of every allotment can be set aside for nonmetro capital needs. It was determined that no violation of funding priority occurs under such conditions as long as extent of pollution is the major criteria for priority within each list. So far only a few States are using this approach.

(c) In efforts to lower operating costs to small communities, EPA has addressed the use of ponds and lagoons as a satisfactory solution to the secondary treatment requirement. Through the upcoming series of meetings on small town treatment needs, EPA will continue to examine nonplant related alternatives to control sewer discharges. These efforts are aimed at minimizing user costs to smaller communities while at the same time insuring full compliance with all requirements of the law.

Question 3. In EPA's January 6, 1976, news release announcing the series of conferences it plans on small town sewage treatment problems, emphasis is given to EPA's interests in such communities exploring alternatives to central sewer systems. Would you say that this represents a policy change within EPA? How does EPA intend to actively encourage small towns and cities to choose to employ a waste disposal alternative other than central sewer systems? What impact will selecting a central system over one of the available alternative systems have on a small town's chances for getting an EPA construction grant?