Part 11, Review of National Energy Policy, Backlog Maintenance for Land Managing Agencies, Backlog Maintenance for Cultural Agencies

SPEAKERS       CONTENTS       INSERTS

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DEPARTMENT OF THE INTERIOR AND RELATED APPROPRIATIONS FOR 1999

TESTIMONY OF MEMBERS OF CONGRESS AND OTHER INTERESTED INDIVIDUALS AND ORGANIZATIONS

WEDNESDAY, JANUARY 28, 1998.

REVIEW OF NATIONAL ENERGY POLICY

WITNESS

HON. CECIL H. UNDERWOOD, GOVERNOR, WEST VIRGINIA

    Mr. REGULA [presiding]. I call the Interior Appropriations Committee to order. I'll have a brief opening statement. We have other members coming. We unfortunately ran into some time problems. They're having a memorial service for Sonny Bono that was scheduled at this time, so we did move it an hour, but nevertheless, we want to go ahead with the hearing. As you can see from the numbers of people here, there's a lot of interest in this hearing.

    What I plan to do with the panels is to have all three panels on, and then we'll do questions after we finish hearing from the three panels, and the members can direct them to whomever they choose.

    All of the members have their staff people here to report back to them. Also, we'll send copies of all the testimony to our colleagues on the committee, and we'll summarize it for them, so that the members are aware of what you bring to us today.

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ENERGY ISSUES

    I think it's an important hearing. I think that with the global warming issue and many others that affect energy, this is something we need to address. One of the areas of concern that I have, is that we've had a proliferation of studies. We just have a few of them back here, and we probably have three times as many as studies in the office.

    Well, it's nice to study, but let's get down to it; let's get some results. And we have calculated that on fossil energy research, we've spent $8 billion in the last 20 years since the Department was established. We've spent $10 billion on energy efficiency, and about $2 billion on clean coal. So we have a total of $20 billion that we have spent in the last 20 years, through this subcommittee on energy efficiency, fossil energy, and coal, and we're interested in what the results are. What do we have to show for it? What has changed as a result of these expenditures? And I hope that this hearing today will give us some sense of direction for the future in the way in which we manage our stewardship for the monies that will be made available.

    The President talked about $6 billion last night for global warming, and obviously some of that has to be expended through this committee, since we have the responsibility for all of the expenditures on the fossil and efficiency side of the Department of Energy. And obviously, other committees will be impacted likewise.

    I think the President mentioned the balanced budget, and one of the contributing factors in reaching that, is to the fact that the American economy has been extremely productive in terms of tax dollars, a 40, almost a 50 percent increase in revenues over the last 5 years, with only a 14 percent increase in inflation.

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    So the real credit for the success of economy belongs with the people of America, the managers of the private sector industries, and the fact that Americans I think work hard and smart.

    But we're trying to determine what our national energy strategy is. The projects and technologies are financed in this committee, and are we getting good results for the foreseeable future? Even with major changes taking place in the structure of the U.S. utility industry, fossil fuels will continue to provide the vast majority of this Nation's electricity.

    I think it's inescapable that we're going to have to use fossil fuel to meet the Nation's needs for electricity well into the next century.

    We also have to recognize that our research budgets have been declining. One of the things we've tried to do is to get private sector contributions on energy research, and get the private sector involved in the development of programs that will work.

    I think our Nation's Achilles heel—good morning, David——

    Mr. SKAGGS. Good morning.

ENERGY POLICY OVERVIEW

    Mr. REGULA [continuing]. Glad you could be here—in energy policy remains our continued and growing reliance on cheap, imported oil. Today our oil imports hover at about 50 percent of our requirements, a substantial percentage which lies in countries with potentially unstable governments. The President alluded to that last night in the case of Iraq.

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    In 1992 we passed the Energy Policy Act. One provision calls for the Secretary of Energy to establish a program to promote the development and use of domestic replacement fuels for transportation, to ensure the reduction of oil imports and the reduction of greenhouse gas emissions. This is 1992.

    These goals include the replacement of at least 10 percent of petroleum fuels by the year 2000, and a 30 percent replacement by the year 2010. And one of the questions for the day is, are we actually going to reach those goals? Are we headed in that direction? And to what extent should the Federal government be involved? What is the role of the Federal appropriations process, and what administrative and other remedies are needed.

    The administration has undertaken an aggressive research program in conjunction with the ''big three'' auto makers to achieve the technology for producing an 80-mile per gallon automobile. It's called the Partnership for a New Generation of Vehicle, and we'll hear more about this program. But it's an example of the kind of approaches that DOE is trying as a means of addressing a major energy concern.

    When and if this technology does become market ready, will it be at a cost which is competitive in the marketplace? What role will natural gas, a domestic, environmentally clean, fossil fuel play in achieving our Nation's energy goals? And what are we doing to take advantage of this fuel's environmental benefits in the electric generation and transportation sectors?

    And I would say, Mr. Yates, as chairman of this committee for many years, has always had a deep commitment to dealing with our energy problems, and has been very supportive of these programs, as evidenced by the numbers here in expenditures. And we hope that we can determine what some of the good results of this has been. We of course had the Clean Coal program that Senator Byrd, and myself, and others pushed. I think it's beginning to yield exciting results.

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    Should we be focusing on major programs in cooperation with industry, along Clean Coal and PNGV lines or should we be exploring smaller efforts?

    Obviously, these issues are complex, and there are no doubt numerous ideas as how to address them. But as we are approaching a balance budget, we need to continue streamlining and eliminating federal agencies, or programs that do not work to reduce the size of our federal overhead costs. And despite the numerous demands being placed on us for increased achievements in energy technologies, the answer cannot be an increased bureaucracy in DOE.

    Likewise, as much as we might like it to be otherwise, this committee must operate within a constrained budget environment. For the past 3 years—and I don't agree with this, but we have been selling Strategic Petroleum Reserve oil to pay for SPR operations. Then Chairman Yates was a strong supporter of this program, because it did give us a degree of independence, but because we've had a tight constraint on our budget, we've been forced to do that. And I think we absolutely have to stop that, and maintain the integrity of the SPR Reserves.

    Today we've invited witnesses with diverse roles in our Nation's energy policy. We have the private sector and we have the states, and they have a very important role to play. And of course, DOE.

PARTNERSHIP

    I think by having the three panels each present their point of view, will give those of you who are representing the private sector, the states, and DOE, the opportunity to hear from others. Because this is really a partnership effort. If we're going to succeed, and have a strong energy policy that will serve our Nation well into the future, and give us the security we need, it's going to take a three-part partnership: states, federal, and private sector.

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    And so, by being here, all three of these facets of the responsibility, we certainly will have an opportunity to share, and then in the questions you'll have an opportunity to hear what others are saying, and to determine whether your programs, for example, at DOE are working well in conjunction with the state and local governments.

    Energy plays an enormous role. I don't think anybody thinks there would have been a Desert Storm war, had Kuwait had nothing but sand. And of course, we wouldn't have needed a Desert Storm if Kuwait were nothing but sand, because I don't think Saddam Hussein would have been very interested in having more sand.

    So energy policy cuts across defense; it cuts across foreign affairs. I believe that Secretary Albright's on her way to the Middle East today, and always in the background is energy. So establishing constructive policies for the upcoming century is extremely important. And that's the objective of this hearing, to find out what works, are we getting results, and what should we be doing as we make priority allocations.

    I've always said that policy follows the checkbook. And so the way in which we appropriate money has an important impact on policy. Therefore we need the best advice that all of you can offer to us.

    Mr. Yates?

    Mr. YATES. Thank you, Mr. Chairman. I thought you had an excellent statement, and I agree completely with the purpose of this hearing and with the goals that you established for the subcommittee. There are so many subjects in the grand field of energy now, that are changing and being changed.

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DEREGULATION

    One in which I'm particularly interested is the question of deregulation. When I got out of college, I got a job as a lawyer in the Office of the Commerce Commission, which had jurisdiction over the regulation of public utilities, and particularly the fights that took place over the rates that were charged, the increases in rates that were charged by the utilities. Now, the states have to wrestle with the problem as to whether to allow the deregulation of the utilities, and give up the overseeing of the—jurisdiction over the ratemaking.

    And, I don't know whether that's good or bad. I don't know if there was a question as to whether these were monopolies at that time. I don't know how much has changed since—well, now, this is—when did I graduate from college?

    This goes back to 1935. Time has gone on since then.

    Mr. REGULA. You've done very well at it. [Laughter.]

    Mr. YATES. And so perhaps we've had enough of the regulation of the utilities since that time.

    A further question that we've dealt with for some time, what to do with the federal power organizations, the Southwest Power Administration, TVA, Bonneville, and the others; should they be defederalized and turned over to private ownership.

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    I've always supported them, because—I've always of course been a devotee of lower rates for the ratepayers, and I don't know whether or not if you defederalized these huge energy-making organizations, that those who depend upon the electricity they provide will have to pay substantially increased rates.

    So those are some questions. Also, I saw on television a couple of nights ago that there was an electric automobile that somebody had bought in California, and was driving it around the streets.

    How long have we been trying to get an electric automobile on the streets. We can get the automobile on the streets, but we've got to find a battery. I don't know whether this new automobile had a marketable battery in it. At any rate, this person who drives it likes it very much.

    Mr. REGULA. I think Mr. Keese will be able to tell us about that.

    Mr. YATES. About the battery?

    Mr. REGULA. Yes.

    Mr. YATES. At any rate, it's a tremendously important subject that you have raised, Mr. Chairman, and I kept thinking as you talked about the fact that we have limited supplies of petroleum, and we continue to depend upon petroleum. Does this mean that one of these days our friends from California won't be as adamant about no offshore leasing? Will they be less adamant about not opening up ANWR? These are the things that are implicit in the problem you've raised.

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    So I look forward to the testimony of the witnesses with a great deal of anticipation, and I thank you for having me.

    Mr. REGULA. Thank you. Mr. Skaggs and Mr. Wamp, if you don't have any objection, we'll go ahead. And if you have something——

    Mr. SKAGGS. Two very quick points.

    Mr. REGULA. Okay.

NATIONAL ENERGY POLICY

    Mr. SKAGGS. A little bit of piling on. Thanks for doing this, Mr. Chairman; I agree with the importance of it.

    Two quick observations. One, I think we had an enormous missed opportunity at the time of the Persian Gulf war to really use that to leverage a coherent and comprehensive national energy policy. We picked at the edges a bit, but didn't get the core job done, I'm afraid.

    Secondly, to the extent that your opening statement has sort of set up a competition between fossil fuel and energy conservation, I just hope our witnesses will address themselves as is appropriate to the question or the proposition.

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    My assumption has been that an important part of the rationale for any government intervention in these areas, is the absence of sufficient market forces to address the needs. And my further supposition would be that there are probably more market reasons for private funding of research in the fossil fuels area perhaps, than in the other energy conservation areas, and I just hope we will engage on that. Thank you.

    Mr. REGULA. I think from looking at the panel of witnesses, we're going to get a lot of very useful information.

    Mr. Wamp?

    Mr. WAMP. Let's hear it, Mr. Chairman.

    Mr. YATES. Okay.

    Governor Underwood, we have place for you on this panel. In fact, you'll be our leadoff witness.

    Mr. REGULA. We're very pleased at the first panel to have Governor Underwood, from the State of West Virginia. The second witness will be Mr. William Keese, who's chairman of the California Energy Commission. Third, will be Sara Ward from the State of Ohio, the Office of Energy Efficiency. And last, Bill Valentino, president of the New York State Energy Research & Development Authority.

    Governor, we're pleased you're here, and we look forward to hearing from you.

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Introductory Statement of Governor Underwood

    Governor UNDERWOOD. Thank you, Mr. Chairman and members of the committee, for inviting me to participate in your hearing today. I certainly applaud you for your opening comments, and for—I want to confirm my views. This is a very important subject. Certainly, it is to me.

    Mr. YATES. Mr. Governor, would you please pull the microphone closer to you? You have a very gentle voice.

    Governor UNDERWOOD. Thank you. I also have a cold.

    Mr. YATES. How did you get elected? [Laughter.]

    Mr. REGULA. He had a very strong program. [Laughter.]

REGIONAL PERSPECTIVE

    Governor UNDERWOOD. I want to bring to you the perspective of an energy-producing state, which relies on energy-intensive industries for its economic foundation. I also bring to you a regional perspective, as I am currently serving as chair of the Southern States Energy Board. I also bring a perspective of being a strong advocate for the use of technology to move us into the 21st century. As a matter of fact, if we had videoconferencing capabilities, I could have been in Charleston, spent 5 minutes of my day, and not had to take a whole day to share my ideas with you.

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    I also come as advocate of recycling. I was governor, the first time elected in 1956, and I have two distinctions now. I'm the oldest in the history of the state, as well as the youngest in the history of the state. And for you Members of Congress, the only advantage I can think of is, that the political enemies I couldn't defeat, I've outlived. [Laughter.]

    Mr. SKEEN. That's the best way to get rid of them.

    Mr. YATES. Me too, Governor.

    Mr. SKEEN. Oh, to be 80 again.

    Mr. YATES. Oh, to be 85 again.

RESEARCH

    Governor UNDERWOOD. Well, an inspiration for me to come back was the Members of Congress, particularly in the Senate.

    I've been a strong advocate of research all my life. I, along with Senator Byrd, and a dozen other West Virginians. In 1985 I formed an organization called Software Valley, and this was an effort to establish a relationship between high technology, and its application to a basic industry state, particularly the fossil fuels industry. And since 1985 we've made tremendous progress, have had a great number of new companies come to the state in the field of technology, and many new, exciting things are happening in the coal, oil, and gas industry.

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    I sense the urgency more acutely perhaps, such as R&D, would be critical to efforts in three main areas: helping our domestic energy producers to meet the challenges of the new regulation of an economy in transition; to explore ways that energy-producing companies and traditional industries, which use significant amounts of energy, can become environmentally responsible, while maintaining economic vitality; and third, to develop new markets for traditional energy resources and applications to meet the changing market opportunities.

    We have laid out a long-range plan for the approach along these three lines. We are in the process now of considering from the state, revising a deregulation of the power industry. We see a great potential for a northeastern market that we could supply at very competitive rates.

    We also have two concerns about deregulation—One, we enjoy one of the lowest power rates in the country, and we're not quite sure if we can maintain those for our own people in industries under deregulation. Also, we have a concern that deregulation, with the competitive elements increasing and accelerating, that there will be less inclination on the part of the industry to devote funds to research.

    And so, those are our principal concerns. We've had extensive use of the Department of Energy's Industry of the Future program, and we're working in several different directions with our basic industries in the state, and we think that has great promise. It's been very successful. It's a partnership between government, between our universities, between the private sector, and the metals industry, the extractive industries, and glass.

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    In December we signed an agreement, or a memorandum of understanding, a working relationship with the National Laboratory in Idaho, and we're working with them on some air activities and desulfurization of coal, and metals—a new technology for the manufacture of metal products, and in the area of wood products. We think that has great potential.

BARRIERS TO GOALS

    I'm concerned about two very important barriers to the achievement of our long-range goals. We have serious concerns with the Environmental Protection Agency's emission standards for NOx, as proposed November 7. Likewise, our state is also concerned about how, as a result of the Kyoto Conference, new restrictions on greenhouse gases could have a devastating impact on the cost of energy production and the economy of our state.

    The EPA proposals would reduce 44 percent of our West Virginia sources. This would require power plants in the state to reduce NOx emissions by as much as 85 percent of 1990 levels, and other industrial manufacturing sectors by 25 to 70 percent. The impact on the State could be severe. It could wipe out much of our industrial base, and 12 to 15 percent of the workforce of our economy.

    During my first term as governor, we went through the giant step to full mechanization in the coal industry, and experienced a 25 percent displacement of the workforce in little over a year's time. And I know from my own experience the economic pain and shock that we suffered during that time. We think that the global agreement in Kyoto—it's totally impossible for us, and we think it's very unfair to the United States as an energy-producing nation.

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    And so, that summarizes the statement, which I'd like to leave with the Committee in more detail.

    Mr. REGULA. And without objection, your full statement will be made a part of the record. And I would say to all the witnesses, we'll put the complete statements in the record. As much as you can, summarize and make your points, because we want to move along, and give everybody an opportunity to be heard.

    Also, I want to say, we're going to go straight through until we finish the hearing, without breaking, because you're all busy people, and we want to complete as quickly as possible.

    Thank you, Governor. And I hope all of you can stay, so that we can ask questions at the completion of the panels.

    [The information follows:]

    "The Official Committee record contains additional material here."

WEDNESDAY, JANUARY 28, 1998.

NATIONAL ENERGY POLICY

WITNESS

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WILLIAM J. KEESE, CHAIRMAN, CALIFORNIA ENERGY COMMISSION

    Mr. REGULA. Our next witness is Mr. Keese, the chairman of California Energy Commission.

DEREGULATION AND CALIFORNIA

    Mr. KEESE. Mr. Chairman, Members, I'm pleased to be joining you here, and I'm pleased to be here with my fellow energy officers, all of whom belong to the organization, NACIO, and basically the organization's function is to

communicate and share information, and I will refer to that later. It's a very important role we seek with DOE in information exchange.

    The Energy Commission in California has been around for 23 years, and we're the largest state organization, and I speak from that perspective. I speak from the perspective that we are going to be deregulating imminently, and I bring to you our—figures.

    I have submitted my written statement and detailed all the issues in front of you, so I'm going to deal today with just three themes: the impacts of deregulation; the need for a broad-based collaboration, involving all sectors of the energy industry; and finally the need to stay connected to the marketplace, as we adopt funding priorities for our societal needs.

    Restructuring has drastically changed the industry in California. We introduced competition and the necessary adjunct of that, which was allowing utilities to recover their stranded costs. These had two very detrimental effects on research programs and energy efficiency programs.

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    Let me give you an example. And Governor, this will answer your question.

RESEARCH

    Private industry research in California three years ago, was $135 million a year. Prior to a reorganization, it was down to $60 million a year. This year the private electric industry is spending zero on research.

    As a result, our legislature stepped in and appropriated $62 million a year to the Energy Commission to do essential research. Sixty-two million is less than one-quarter of 1 percent of our $23 billion energy budget in California. It is critical in the short-term that research funds, other public funds, not go down. It is critical in the long-term that we figure out some way to make funding on a permanent basis.

    In the energy efficiency area the figure is—it went down from $450 million a year to $240 million a year, again, because the legislature mandated that number.

    Mr. YATES. Can I interrupt and ask you, why did the private industry stop their research?

    Mr. KEESE. The incentives created in the restructuring are such that they virtually must stop. Every dollar they do not spend, they can put in their pocket, and therefore, the reductions are brutal. I don't project what it's going to be after 4 years, when these costs are paid for, and this incentive does not exist. But the incentive under restructuring is so great. If this was in a social atmosphere, this would result in siblings knocking off siblings. I mean, the competition is terribly brutal.

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    Mr. YATES. War.

    Mr. KEESE. It would be. It would be. And so, that's the incentive.

    Electric industry restructuring is on its way in 15 states, and this will lead to restructuring of all energy programs. And this is my second point.

    Collaborative efforts among states, DOE, and the research community become essential. The research must involve all elements of the new energy industry, and must focus more on technologies, which will benefit society, and which will make it to the marketplace. Successful results must become the standard of activities.

    Mr. REGULA. That's what we're trying to find out today.

    Mr. KEESE. We're attempting to do that in California as we establish our research program. We are adopting goals and strategies. We intend to work with other states. We've signed an MOU with New York, The Electric Power Research Institute, The Gas Research Institute, University Laboratories, and National Laboratories. We want in particular to avoid duplicative efforts.

    We're prepared, and will sign shortly an MOU with the Department of Energy, to try to work collaboratively with them. We're optimistic about this. We believe that one of the principle roles of DOE in the new market will be to become the prime coordinator of energy research, a coordinator.

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TECHNOLOGY TRANSFER

    While I have stressed focused research here, I want to stress a second aspect, and that is, technology transfer, information transfer.

    We have done extensive work in California on alternative vehicle infrastructure as an example. There is no need to duplicate this work, but if other states aren't going to duplicate this work, they've got to find out about it. And we think that's another key role that DOE should play. When DOE joins us in funding infrastructure research, it must be passed on to the other states. We think that information transfer should become an integral aspect of collaborative research.

    My third theme is connection to the market. Energy policy initiatives should focus on meeting societal needs, where invested dollars have the highest return and the greatest likelihood of success. These attributes are also necessary, if you're going to have a successful collaboration, because it requires mutual interest by all the collaborators. So success, again, becomes the criteria.

FUNDING PRIORITIES

    You asked us about funding priorities. I'm going to give you a listing. We believe that the allocation should go in this order: end use efficiency, including transportation; renewable resources; environmental technologies, including global climate change science; advance clean power generation; distributed energy resources and grid interface technologies; and transmission and distribution reliability technologies.

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    We think that funding allocations should again be based, in large part, on proven track records and highest return for the invested dollar.

    I have further developed each of these issues, and given you examples in my written statement.

    At this point I'd like to emphasize a couple of other areas where we believe DOE should play a pivotal role.

    We believe energy policy and environmental policy must be linked. For example, biomass reduction is an environmental concern. Generation of electricity from biomass is an energy concern, and can assist in handling the environmental concern. Linkage is essential, if we're going to continue to deal with biomass. We cannot deal with biomass as a strict, new source, of electrical generation.

    Another example I will give. Global climate science must be developed at the federal level; we can't do it at the state's level. But it's both an energy and an environmental concern.

    In California, with our strategies that we've adopted, and we adopted a CO2 lowering strategy in 1991—we now produce 10 percent less CO2 per capita than the national average, and we do this because of our joint environmental energy strategy, our appliance standards, our building standards, and what we did in our business community. It is essential that DOE start linking environmental policy and energy policy.

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    My final point would be data collection. It becomes more critical in an unregulated, deregulated market. Command and control allowed the regulators to order things. Now that we're going to free everybody, we must have timely, accurate data, and we believe that that's a function of the Federal government, and it should be done by the Energy Information Agency.

    In summary, we believe that DOE must remain the leader in energy programs in the new environment, partnering with states, partnering with industry, and partnering with research facilities. We agree with you, this is an appropriate time for an expansive review of federal energy policy, and we're reviewing state energy policy at the same time. We'd be happy to work with you as you go forward, and deal with the specifics of the items I brought.

    [The information follows:]

    "The Official Committee record contains additional material here."

    Mr. REGULA. Thank you. And I know the members will have questions when they finish the panels. I appreciate your statement.



WEDNESDAY, JANUARY 28, 1998.

NATIONAL ENERGY POLICY

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WITNESS

SARA WARD, OFFICE OF ENERGY EFFICIENCY, OHIO

    Mr. REGULA. Our next witness is Sara Ward, the Office of Energy Efficiency, in Ohio.

    Ms. WARD. Thank you, Mr. Chairman and Members of the Committee. I appreciate the opportunity to be here today, and to speak to you.

DEPLOYMENT AND DEMONSTRATION

    The Office of Energy Efficiency is located in the Ohio Department of Development, and we administer both the Low Income Weatherization Assistance Program, as well as the State Energy Plan funding that this subcommittee oversees.

    The role that I would like to emphasize today is that of deployment and demonstration, and the important role that I think states play in that process. And I guess I'd like to respond to a couple of things that you also mentioned in your remarks, which I will do at the end of my testimony.

    The emphasis that I've mentioned I think is something that we've demonstrated very well, and you're looking for impact and success stories. In this packet that everyone has, there are 13 one-page success stories about the various programs that we have administered through the State Energy Plan and Weatherization. They deal with the residential sector, small businesses, the commercial sector, manufacturing. Also there are some cross-cutting efforts associated with the deregulation of the electric industry in Ohio.

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    And, as you know, Mr. Chairman, that's been going on in Ohio as well. We're not quite as far along as California, but I think you also know that utilities have been preparing for deregulation since the early 1990s, as they have downsized their companies, and restructured their companies. And DSM, and many of the programs, NRD, that were sponsored by those utilities are falling by the way-side as they've prepared to become very lean so they can be competitive.

    I think it's most critical to think about things like the residential sector in Ohio. In 1995 the combined electric and gas bill for residential consumers was over $5.3 billion. Ohio has 4.5 million households, and more than 80 percent of those were built prior to the 1980 implementation of the first model energy code in Ohio. At least one out of five Ohio households carries a higher than average energy cost burden for paying its utility bills because the household's income is at or below 150 percent of poverty.

    An additional problem is that a significant number of these households are some of the least and the most poorly maintained houses in the State. Approximately one-third of these households participate in some form of financial assistance, like the LIHE Program, Homeowners' Assistance Program, the senior energy program.

    The energy burden for the majority of these consumers ranges between 10 to 25 percent of their incomes. Ohio's residential consumers and the building industry and the housing industry that serves them have been a real high priority for our State.

    The subcommittee does not address the financial assistance side of this equation, but I think it's important to be aware that in Ohio alone in this year we will spend more than $165 million dealing with helping individuals pay their utility bills. So it's very critical that there be some assistance for households that need to save, and weatherization steps where we need to provide that need.

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STUDIES

    Now I know you've heard about the studies that have been done by Oakridge National Labs. Ohio has also done some recent studies and we have found that we have increased our savings by 5 or 6 percent per house because we have employed, through applied research, diagnostic technologies, and we have focused our resources in such a way that we are saving 23 to 24 percent on average per household.

    We are also doing an environmental impact study as a result of the weatherization work, and the results of that should be out in February, and I look forward to sharing that information with the committee, because I think there is something worth looking at with regard to the energy efficiency initiatives and emissions reductions.

STATE ENERGY PROGRAM

    I'd now like to jump quickly to the State energy program and talk a little bit about the other services that we focus on and provide in the residential, business, and commercial sector. We also have a very strong educational component, not only working with schools, but also working with consumers in general and working with the delivery network and the infrastructure for energy efficiency services.

    One of the things that we are trying to do is move the new technology into the broader marketplace by providing technical and financial assistance, when possible, to help establish best practices in the infrastructure, in particular, of the building industry, and I think one of the questions that I would add to this committee is, when the technology is ready for the marketplace, will the marketplace be prepared to accept and adopt that technology? Will consumers know how to discern and how to choose which is going to be the better technology for them to save them more money? Will the delivery network and the infrastructure, the vendors and the suppliers, the contractors that are supposed to deliver these services, know how to successfully do that? I submit that they may not know how unless there are States such as ourselves providing this kind of support to that infrastructure, providing them with training, providing them with opportunities to work and demonstrate these technologies.

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    I think that's one of the important roles that the State plays in this process, and I believe that it's something that we all do very differently. One of the nice things about the State energy plan is that it offers flexibility, so that each State can focus in those areas where their expertise is needed the most.

    I'm not going to go through the specific success stories because they're all in your packet, but we have worked with various levels of success with both delivery at the local level, the community level, and the State level. One example: you're familiar with the new Ohio School Facilities Commission that just started the end of last year. They have a new design manual that they've put in place for all new construction of new schools throughout the State. We were able to get involved in the middle of that process, take a look at their design specifications, and make sure that they are going to meet best practices and high-quality standards with regard to energy efficiency and durability of those school buildings, as well as health and safety.

    So those are the kinds of things that I think States are able to do. They can be at the right place at the right time and impact early on in the design stages and design processes to make sure that people do it right the first time, and you don't have to spend the money to go back and retrofit.

    I think it's important for the committee to realize that my testimony speaks to what I believe are market failures. Part of the role that States must adopt is to help address those market failures by preparing the infrastructure and customers both to be competitive in the electric industry and also to be able to provide these new services successfully.

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PARTNERSHIP

    Another point that I wanted to make, you talked about a partnership between the Federal, State, and private sector, and I would submit that there's a fourth partner, and that is local communities. And I think that that's another area where States have been very successful by working with local communities, their small businesses, their organizations that serve generations of industry, that have been in those communities for a long time. They are not quite sure how to deal with electric de-regulation and restructuring. They're not sure how they're going to compete, how they're going to choose, how they're going to be able to compare one versus the other type of service. They need education. They need support. They need good information to make those choices and those comparisons.

    One of the things that we're working with communities on is trying to help them understand how they can aggregate both residential, business, and industry to be more competitive and purchase in larger quantities in the marketplace.

RECOMMENDATIONS

    I guess, finally, I'd like to make a couple of recommendations that I think are important for your consideration as you go forward. The Department of Energy has taken, I think, an important step in their building technologies and use sector to begin to pull a large number of programs together into a more strategic, broad range approach, and I've been fortunate to serve on that process. As a member of the State Energy Advisory Board, I was invited to be a part of that strategic planning committee, and I think that this kind of work is important, and I think it's critical that States have a very strong role in that process, so that we can work with the Federal Government to determine how to best deploy these technologies. So I'd like to applaud both this committee for encouraging DOE to take that approach, as well as DOE for following through.

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    I guess in light of restructuring and the changing roles of the Federal and State government, as well as the energy industry, I think it requires that each of us focus on those things that are our strengths, those things that we can do the best, and I believe that States can best be the deployment mechanism for these programs, both educating their consumers and the infrastructure that is in place to deliver these services.

    Mr. REGULA. Thank you. Of course, your statement, full statement, will be made a part of the record.

    [The information follows:]

    "The Official Committee record contains additional material here."

WEDNESDAY, JANUARY 28, 1998.

NATIONAL ENERGY POLICY

WITNESS

BILL VALENTINO, PRESIDENT, NEW YORK STATE ENERGY RESEARCH AND DEVELOPMENT AUTHORITY

    Mr. REGULA. Our next witness is Bill Valentino, president, New York State Energy Research and Development Authority.

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    Mr. VALENTINO. Thank you, Mr. Chairman.

    Mr. REGULA. Thank you for coming.

    Mr. VALENTINO. Thank you.

    Distinguished members of the committee, I really appreciate the opportunity to be here, and I really applaud the committee for having the meeting right now. I don't think you could have picked a better time.

ENERGY RESEARCH

    NYSERDA, in all fairness to Bill Keese, NYSERDA has—it's not as big as California Energy Commission, but we have the largest energy research program. New York State is in the process of going through a painful restructuring process, and I'm also the chairman of the New York State Energy Planning Board.

    What I'm going to try to do is make three different points. My last name is Valentino; I'm used to being last and trying to fill in the blanks. [Laughter.]

    So I'm going to try to emphasize three different points in the time available to me. The points are that energy efficiency research is very important to the Nation in the context of restructuring, but particularly because of climate change.

    The second point is a little bit different. The States are very key energy research players, but particularly because they're the best bet for small business energy product development.

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    The last thing is, to be effective as a Nation, DOE has to do a better job of including all the energy research players in the implementation of a national energy research strategy.

    From the States' perspective, energy is one of the biggest calls on our economic resources, and it's probably the biggest polluter. While most States believe that utility restructuring will bring lower rates, those of us in New York State are not convinced, for instance, that it will reduce the air pollution entering into our State. We're at the tailend of the process, and no disrespect intended, but all your air seems to move into New York, and it's kind of stopped at the border. [Laughter.]

    The States are putting a lot of reliance on energy efficiency research, not just to save energy and reduce environmental emissions, but also to develop the type of high-value-added manufacturing-type products that will enable the Nation to compete in the global marketplace.

    For the second time, I left a few studies here, probably in that pile over there, but ACEEE did a study recently that's complimentary on State energy programs and probably would be good for the staff to provide detail.

    State research programs have traditionally operated by filling in the gap. If we can—we're opportunistic—get somebody else to do our research, we're going to do it. If there's a significant public need, we end up doing it, and I would argue that one of the reasons that State programs have grown is because the Federal programs haven't always been as responsive to what the States have needed.

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    We've been successful because of certain strengths. I think we know our energy demographics better than anybody. We know a lot about institutional barriers, and that was mentioned. But we're good at commercialization. I think our particular skill is our ability to work with small startup businesses, technology companies, where a large percentage of the new ideas and job growth occur. When I'm talking about small business, I'm not talking about the SBA definition of 500 employees. The types of folks we work with tend to be a dozen, half a dozen, or one woman working in her garage.

    At NYSERDA, over the last five years, we've successfully commercialized over 50 energy or environmental technology products. Just one example, we were talking about batteries and transportation; we brought into commercial revenue service to the Nation, North America's first hybrid electric transit bus. We also have a hybrid electric truck on the street, and our hybrid electric taxicab hit the streets in New York last year. And we have a lot of examples like that that, if I had time, I would get into it. Our hybrid electric program, for instance, started two years before DOE and the Federal Transit Administration started their hybrid electric program.

    One of the points I want to make is the national labs, with some of the best talent and resources, have a difficult time working with anything but the largest corporations or smaller companies in their immediate geographic areas. States really work best with small companies.

UTILITY RESTRUCTURING

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    With respect to utility restructuring, we believe restructuring will bring a lot of innovation and efficiency. I think early indications are that it won't be across the full range of needed research, as the various energy competitors look at the short-term advantage. It's hard to generalize where private sector research is going to end, but I would expect the national labs to have to pick up gaps in high-risk basic research. I think the States will pick up the slack in applied R&D.

    The whole R&D channel isn't just restructuring; it's climate change, and at NYSERDA we believe—we go along with the recommendations of PCAST, the President's Advisory Council on Science and Technology, and they say in their report that investments in energy efficiency R&D are the most cost-effective way to simultaneously reduce the risk of climate change, reduce oil import interruptions, reduce local air pollution, and the point I'm trying to make, and at the same time, improve the productivity of the United States economy. We feel that the Federal Government's funding priorities should reflect that.

    In respect to funding, with utility restructuring, the old paradigm is broken, and, frankly, I can't give you specificity as to what DOE's or the national lab, budget should be, or what the State's budget should be really. I do know that you can't shut off the spigot all of a sudden and expect to start it up later, when we find there's needs. It takes at least 10 years to develop a quality energy research program, I think we have to keep the energy R&D infrastructure intact, at least during the transition.

    Irrespective of what the budget numbers are, the way we're currently conducting or organizing energy research in this country isn't as good as we should be doing it. We're not all working together effectively. Again, to quote the recent PCAST report, ''The Federal Government will get the biggest bang for their buck by pursuing strategies that leverage work in the States and the private sector.'' And we talked about partnerships, Mr. Chairman. I think leveraging, collaboration, and partnerships are just not a matter of pooling dollars with co-funding. It also means to use the intellectual resources of the States and the private sector to validate some of these ideas and strategies that seem to come up from within the Beltway or from among the more remote national laboratories.

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    So I guess the States would like to see a DOE program that involves all research partners in a meaningful—I really want to emphasize ''meaningful''—way, and that really supports competitive selection of research projects, that supports efficiency in renewables, with also an eye on the potential for commercialization, working with small companies, where I think, at least in our State, most of the ideas come and at least two-thirds of our job growth comes. Without this integrated approach, I think the ratepayer cost would be significantly higher in the long run, our environment will deteriorate, and we may miss this opportunity to really be the global leaders in energy and environmental technology products.

    Thank you very much for this opportunity.

    Mr. REGULA. Thank you, and I would suggest that once we get the DOE budget, I would like to submit it to all of you and for your observations in writing, if nothing else, as to whether it accomplishes some of the things that you've all outlined in making the partnership effective. So I hope you can stay, and we'll have some questions.

    [The information follows:]

    "The Official Committee record contains additional material here."

WEDNESDAY, JANUARY 28, 1998.

NATIONAL ENERGY POLICY

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WITNESS

E. ALLEN WOMACK, JR., SENIOR VICE PRESIDENT AND CHIEF TECHNICAL OFFICER, INDUSTRIAL GROUP, McDERMOTT INTERNATIONAL, INC.

Introduction

    Mr. REGULA. We'll go on to our next panel for the moment. The second panel is industry witnesses: Mr. Womack of McDermott; Mr. Edelheit of General Electric; Mr. Sharkey, AISI, American Iron and Steel; Mr. Rosenfeld, Chrysler; and Mr. Moore, the Institute for the Study of Earth, Oceans, and Space at the University of New Hampshire.

    As was in the previous case, we hope you can summarize, and obviously the entire statement of each of you will be made a part of the record and will be summarized for the committee members.

    Our first witness will be Mr. Womack, a senior vice president and chief technical officer, Industrial Group of McDermott International. Mr. Womack.

    Mr. WOMACK. Thank you, Mr. Regula. I do appreciate the opportunity to be here this morning and talk about this subject. My company, McDermott International, is, with its subsidiary, Babcock and Wilcox, engaged in the supply of power generation and fuel production capital equipment worldwide, and much of this equipment goes into supporting the hydrocarbon-based energy economy that we presently have.

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NATIONAL ENERGY STRATEGY

    I've elected to use the testimony and the time that I have to try to focus on an aspect of this subject, which has been mentioned already a couple of times this morning. My focus is on the global challenge to reduce greenhouse gases, particularly CO2, which was alluded to in your opening statement, and by the President last night in his State of the Union message. It seems to me that this is a profound overhanging issue on the national energy strategy, and to reduce CO2 to pre-1990 levels is going to be an enormous and complex challenge scientifically, and perhaps even more economically, to achieve meaningful reductions with an acceptable level of economic impact. Because of the international and economic dimensions of the issue, I think government leadership and stimulations are appropriate and necessary.

    Fossil and hydrocarbon fuels today account for 84 percent of the energy we use in the economy for electricity, heating, transportation, and industry. A major benefit of the use and availability of these fuels is our high national standard of living and economic health. Economically viable replacements for these fuels and equipment are not readily available. It's important to note that hydrocarbon fuels will most likely satisfy the future growth in energy production in the economically-developing nations as well, including China. That's certainly what's happening now.

RENEWABLE ENERGY SOURCES

    Renewable sources of energy, while they're attractive, appear to be unlikely to contribute more than about 10 percent to energy production in the near term. The point of all this is that any approach to CO2 reduction in the foreseeable future, I think, has to recognize the continued extensive use of fossil fuels to meet our energy needs.

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    Now despite the recently increasing global concern, there is no specific economic motivation favoring low CO2 production, and more importantly, there hasn't been one specifically, historically to favor low CO2 production. This situation may change in the future, but we really don't know when or how. So as with earlier environmental issues, the government has an important opportunity to encourage development aimed at widening options and reducing economic impacts. We believe it's important for the U.S. Government, and especially the Department of Energy, to lead and stimulate the development of CO2-reducing energy technology programs through the investment of public funds.

DOE PRIORITIES

    I recommend that the DOE consider four priorities in realigning its technical development and budget to address this challenge.

    First, develop retrofittable CO2-reducing technologies which, by pursuing a program which develops and demonstrates CO2-reducing measures which can be used with the existing fossil fuel capital investment in the economy, which is quite large. This approach reduces the need for expensive replacement and minimizes economic impact, and the developments which are obtained in such a program would also be available for incorporation in the new fossil fuel equipment installed in developing nations.

    The program could be patterned after, or even added to, the DOE's clean coal technology program, which has already demonstrated a number of environmentally-responsive retrofit technologies. And in conjunction with that, Mr. Chairman, it's important to continue support of DOE's program for techniques to reduce NOx, which is already a part of the clean coal program because NOx is an important named greenhouse gas along with CO2 in the Kyoto Agreement, as you know.

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    Secondly, I suggest that we extend fossil fuel technology development to new approaches which will use fossil fuels in the future and produce less CO2 per unit of energy. We need significant increases in efficiency. We also need these new technologies to be economically-competitive, again, especially since their initial usage may be in developing nations.

    Development and commercial demonstration of energy-producing technologies that inherently emit less CO2 needs to be accelerated. Technologies including fuel cells and coal gasification hold promise. For example, while all fuel cells produce less CO2 per unit of energy output, plain or solid oxide fuel cell stacks have a unique ability to emit a concentrated stream of CO2 for easy capture. The current DOE fuel cell program does not include this technology. This example highlights the need to broaden that program quickly, to make results available sooner, and focus on options which provide advance hydrocarbon energy conversion process, that have features which will enable easier CO2 capture. Early results from that kind of a program could have global benefits.

    Thirdly, I recommend that we support CO2 mitigating technologies. Earning fossil fuels will inevitably result in CO2 production. Chemical engineering has methods which can extract CO2 from exhaust gases and put it in a form of storage or further processing, but their economics are very poor for capture of CO2 from flue gas.

    The DOE recently initiated a program which is an appropriate beginning toward the development of meaningful CO2-mitigating technologies based on capture and subsequent handling. This program should be expanded as rapidly as promising technologies emerge.

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    And, finally, I recommend that we continue the innovative development of end-use efficiency improvements. The facts of the situation, as has been mentioned before, suggest that many of the most economically-attractive short-term options to mitigate CO2 productions are end-use efficiency improvements. DOE's programs in this area deserve continued support, and these options are going to be needed to reach any of the large mitigation goals being discussed today.

    If we have a challenge to reduce CO2 levels globally in the energy economy, it's going to be a very daunting challenge. We have to be realistic about the importance of fossil fuels and the world energy economy, and especially in our own country. I don't think any single system or technology will magically yield significant reductions. There are, however, many promising technologies which, if developed, can help us get there.

    Because the economic benefits are uncertain at this time, we urge the U.S. Government to shoulder a major portion of the burden, working in collaboration with industry, with full recognition of commercial realities. If we undertake such programs aimed at demonstrating practical techniques, I think that initiative will give us the best chance of future success in reducing CO2 emissions worldwide, and in handling, within a tolerable economic framework, any mandate with regard to reducing CO2.

    Thank you, Mr. Chairman.

    Mr. REGULA. Thank you.

    [The information follows:]

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    "The Official Committee record contains additional material here."

WEDNESDAY, JANUARY 28, 1998.

NATIONAL ENERGY POLICY

WITNESS

LEWIS S. EDELHEIT, SENIOR VICE PRESIDENT, CORPORATE RESEARCH AND DEVELOPMENT, GENERAL ELECTRIC COMPANY

    Mr. REGULA. Mr. Edelheit.

PARTNERSHIP AND RESEARCH

    Mr. EDELHEIT. Thank you very much. I'm Lonnie Edelheit. I'm senior vice president of research and development for General Electric Company. As you know, GE has several large businesses which both generate power as well as sell products that use a lot of energy.

    And I'm here because I believe that partnership between DOE and industry working together can really make major changes to the issues that we're facing. In particular, DOE funding of industry can play a big difference to the country. And as an example, I'd use the advanced turbine system, the ATS program, which I believe in the end DOE is going to be able to say made a big difference in terms of efficiency on a big scale. I think they're going to be very pleased with that program.

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    Before I start talking about industrial research, let me just say that I think our primary priority should be funding of universities' basic research, in particular. Not only will that give us the basic ideas we need, but also train the engineers and scientists that we're going to need in the future to deal with these very large issues.

    I'd like to address two questions that we face every day in our large corporate research lab in GE which does research for all of our businesses, trying to be vital and relevant. And the two questions I'd like to talk about are, when should the Department of Energy fund industrial research and development, and also, what criterion they should consider on particular projects.

    First, I think it's appropriate for government to fund industry to address national priorities which have risks that are too high or, more particularly, don't meet the current requirements of the marketplace. I think that, for example, future R&D to take the cost out of fluorescent lamps, significantly compact fluorescent lamps could, in fact, change the energy use equation, but the market's not telling us that that's what they want right now. And so funding in those areas where there's a national need coupled with too high a risk for industry is a good place to be looking to put your money.

    Second of all, I think if the goal is to put products into the marketplace, in the end, it's only going to be industry that can do it. By not having industry involved right in the beginning at the R&D phase, we can have some wonderful R&D, but we won't get products in the marketplace. If the national need requires products in the marketplace, I think industry should be in it as early as possible. You know, you might think about low-cost variable speed electric drives, for instance, which could really lower the use of energy in homes and factories, and that's not going to happen without industry involvement.

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    Finally, or next, third, to speed up the introduction of technology—the ATS program, for example, where we're trying to take the energy efficiency from 55 all the way to 60 percent, it's a very big stretch for combined cycle turbines. I believe it would have taken decades without that money that you're putting into that program, and that's a place where you can really make a difference.

    Finally, I think that R&D and technology to minimize the regulatory issues that are going to be develop is maybe a better place to consider putting your money. We have to find very cost-effective solutions to these problems, and only with R&D are those solutions going to be developed. If regulations are made without really dealing with the research and development of products, we're going to have a lot of contention, a lot of fighting, and perhaps some very cost-ineffective solution to those problems. So I think that if you're considering regulations; you ought to consider R&D funding at the same time.

NATIONAL PRIORITIES

    Finally, let me recommend a couple of criterion on how you should determine which products to fund. I think we need roadmaps. We need visions. We've been working with things called multiple generations of products. You don't think about what the next product is you need; you think about what's happening into the future and think about multiple generations of product. We find that to be a very useful construct.

    I find in my company that cost-sharing is the best sign of commitment, and I think it works both ways. If industry is putting too much money into a project, they probably were going to do it themselves anyway. If, on the other hand, industry's not putting any money into it, I think there is a real indication that they're really not ready to commercialize it. I think the whole cost-sharing equation is something that's worth a lot of thought.

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    Finally, I think we need very open processes, open R&D processes, and competitive bidding. There's going to be winners and losers. We're used to that, but in the end, working with industry to set stretch goals, to really push us further than we think we can get now, and then watching industry compete for those and finding creative, innovative solutions to those problems, is a very good process to use.

    Those are a few thoughts. I've got a little more information than what I gave you, and I think government funding in the past has been very effective. If it's done right I think it can be effective in the future. I think we can make huge contributions to meeting these national priorities we've been talking about today.

    Thank you very much.

    Mr. REGULA. Thank you very much, and we want to make sure we do it right. That's why we're having this hearing.

    [The information follows:]

    "The Official Committee record contains additional material here."

WEDNESDAY, JANUARY 28, 1998.

NATIONAL ENERGY POLICY

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WITNESS

ANDREW G. SHARKEY, PRESIDENT AND CEO, AMERICAN IRON AND STEEL INSTITUTE

    Mr. REGULA. Mr. Sharkey, the president and CEO of the American Iron and Steel Institute. Thank you for coming.

    Mr. SHARKEY. Good afternoon. On behalf of the U.S. producer members of the American Iron and Steel Institute, thank you for this opportunity to appear before you and the committee.

ENERGY CONSERVATION

    I thought I would spend a short time this afternoon focusing on two sections of our statement. One, energy conservation that has been achieved through voluntary programs, and, two, some recommendations on designing new or enhanced R&D programs drawn from steel's record of successful collaborative research with the government on energy efficiency and energy conservation issues.

    Steelmaking is an energy-intensive process and relies heavily on coal. As you well know, Mr. Chairman, burning coal generates more than carbon dioxide per unit of energy than other fuels. So what have we tried to do to be part of the solution instead of part of the problem?

    First, we have reduced energy consumption per ton of steel and the corresponding carbon dioxide emissions by about 45 percent since 1975, largely through investments in new technologies. Improvements in energy efficiency are achieved principally through large capital investments which the steel industry has undertaken even in times of severely-restricted cash flow, and there are examples in our written statement.

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    We have also achieved energy reductions from process improvements to increase yield and decrease rejections, thereby reducing the amount of product that has to be put back through the steelmaking process. I hasten to add that the steel industry has established this remarkable record without government mandates or energy taxes.

    Second, we have worked with our major customer groups to find ways to reduce energy use and rehouse gas emissions in the manufacture and use of their products. Let me give you just one example in the automotive sector.

    At the moment, the auto project most important to us is PNGV, the Partnership for New Generation of Vehicles. I say this because we are just about to roll out steel's entry in the PNGV search for the material of choice for the body of the proposed new supercar. We call our entry the ultralight steel auto body. This is a project involving 35 steel companies from 18 nations around the world. So it is a truly collaborative international process. It is a prime example, I think, of how well-meaning industries and market conditions can and will drive energy efficiencies on a voluntary basis.

    While public funds collected under the PNGV banner were being awarded to researchers to find alternatives to steel, steel has been moving forward with its own money to be part of the solution. Phase one of the research cost $2 million and resulted in a successful design or computer simulations. The ULSAB Consortium then committed an additional $20 million for phase two to build an actual body in white or space frame to validate the design and manufacturability. Phase two was just completed successfully.

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    The ultralight steel autobody design offers a 25 percent savings in weight over the average of a typical 1998 four-door sedan. The car companies will be able to make it in production volumes and with current manufacturing systems. Crash simulations indicate that it will exceed current Federal safety standards and that stiffness, a measure of performance, will be improved significantly.

    Beginning on March 4 of this year, the North American members of the ULSAB Consortium will transfer this technology breakthrough for free to the automakers. This will include giving the Big Three car companies all the technical details of this project. We are bringing the demonstration structure to Washington in March to show and explain to those working on PNGV. We will be sure to invite you, so that you can see this example of what the steel industry is doing to contribute to the fuel-efficient car of the future.

    Third on the list of what we are doing to reduce our energy use and emissions. is to aggressively promote steel recycling. Steel is the most recycled material on earth. More steel is recycled than all other materials combined. Everything made from steel, from paperclips to battleships, is recyclable and is being recycled. Every ton of scrap that we put back in the furnace brings with it the energy used to make it in the first place. Recycling is something all of us can do to conserve energy, and the steel industry is the leading recycler.

    We intend to continue pushing hard on all of these and similar programs, and we don't need government mandates to make us do it. On the other hand, we would be happy to work with government, which brings me to steel's record of successful public-private partnerships on energy research and some recommendations for going forward.

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PARTNERSHIP RESEARCH

    In terms of collaborative research, a properly-constructed public-private collaborative research program could make a real contribution to the development of the technology necessary to reduce energy use in the future. This is a very relevant topic for the steel industry because it is related to work we are already doing with the DOE Office of Industrial Technology. In fact, we are one review away from publishing the environmental chapter of the steel industry technology roadmap. I have more about that technology roadmap in our written statement.

    Collaboration with DOE on the technology roadmap is a continuation of a series of projects made possible by the metals initiative which began as the steel initiative 12 years ago. The most recent success story from the metals initiative family of research is the advanced process control project. The APC program has yielded significant discoveries and the patents to go along with them, in the measurement and control of the steelmaking process. These inventions will increase yield and decrease rejections.

    The metals initiative is a good program, and we would like to thank you, Mr. Chairman and the subcommittee, for your support for it each year. It is also a good model for collaborative research programs for global climate technology breakthroughs.

RECOMMENDATIONS

    Finally, our recommendations: I would like to suggest four things that might be considered as you design a new or enhanced program. One, focus on eliminating waste, not treating it. We believe the program should focus on the elimination of waste streams and specifically not on end-of-pipe treatments.

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    Two, a preference for demonstration projects. Many processes which could either replace environmentally-risky operations or eliminate them altogether exist today at the pilot stage in steel and other energy-intensive industries. The next logical step is to take them to demonstration scale, but this can still be risky business. There remains a legitimate role for government to assume some of this pre-commercial risk. The government investment frequently draws in the rest.

    Demonstration projects are closest to success, and hence the benefits to the industry and the environment are closer at hand. These projects should be given priority over lab and pilot-scale work in any new or enhanced program.

    Third, investment in offshore research: any new program should not disqualify a proposed project because the research site is outside the United States. A good example from our industry is thin-slab casting. This technology was developed in Germany, but was first commercialized and is now widely adopted in the U.S. It promises to make a strong contribution to the continuing competitiveness in the American steel industry in a world of rapid technology advances. This is not the giveaway of U.S. know-how feared by some, although the results would, of course, be shared with others who accept a part of the risk. Rather, benefits of the commercial versions of these technologies will be reaped here in our plants, benefits which might never have become available if the U.S. standalone rule is imposed. We just don't have the luxury of trying to do everything stateside.

    And, finally, widening the partnership door: as is currently the practice in DOE-based research partnership, the emphasis in draft documents we have seen is on groups of collaborators, either ad hoc groups or pre-existing industry groups like the Institute. We're proud of the advances we've been able to make as a collaborative group working with the government, but at the same time we recognize there are occasions in which a partnership between the government and an individual company or facility makes sense as well. Any guidelines for additional sources of collaborative research should accommodate both collaborative and individual partners.

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    In summary, we believe a sound collaborative research policy can be built around three principles: one, aim high. Focus on new processes that eliminate waste streams and not on pollution control treatment and remediation. Two, aim smart. Focus on demonstration projects which, although still pre-competitive, are by definition closer to commercial readiness, and, therefore, more likely to be successful and return value. And, three, aim everywhere. Support U.S. investment in projects both here and overseas. The benefits are felt here no matter where the ideas originate.

    Again, on behalf of our U.S. member companies, thank you very much for this opportunity.

    Mr. REGULA. Thank you.

    [The information follows:]

    "The Official Committee record contains additional material here."

WEDNESDAY, JANUARY 28, 1998.

NATIONAL ENERGY POLICY

WITNESS

PETER M. ROSENFELD, DIRECTOR, NEW GENERATION VEHICLE PROGRAMS, CHRYSLER CORPORATION

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    Mr. REGULA. Our next witness, Peter Rosenfeld, director for the Partnership for a New Generation Vehicles, Chrysler.

    Mr. ROSENFELD. Mr. Chairman and members of the committee, I'm here today as the U.S. automotive industry's representative. I am Chrysler Corporation's director for the Partnership for a New Generation of Vehicles, otherwise known as PNGV. My comments today, as well as the submitted written testimony, represent the collaborative work of the Ford Motor Company, General Motors, and Chrysler Corporation.

VEHICLE ENERGY RESEARCH

    I appreciate the opportunity to speak with you today about the strategic long-range plan for fossil fuel energy research and development, as well as energy efficiency and conservation research. More specifically, I'm here today to address the most important vehicle energy research areas, to explore at the Federal level that which is best left to industry, and that which is of a lower priority.

PARTNERSHIP ROLE

    You've already mentioned your familiarity with the PNGV program, the partnership between the U.S. automakers and the Federal Government. One of our shared goals is to pursue research that will develop commercially-viable automobile technologies which can deliver up to three times today's fuel efficiency in a typical mid-size family sedan. This objective is founded in a common belief between our industry and government that we must address issues of national interest while at the same time recognize that we need to be responsive to the demands of our common constituent, the consumer citizen. By so doing, the partnership hopes to impact constructively energy security, environmental quality, and energy security in global economic competitiveness of the United States. We need to recognize these macroscopic matters with products that will offer all of the performance, utility, affordability, and safety of today's vehicles. We need to do so at a time when gasoline prices in the United States are cheaper than bottled water, and neither member of the partnership wishes to constrict the free demand market which exists here in the United States.

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    The partnership is founded on the premise that leveraging our combined resources is a more efficient and effective means of achieving our common goals. When we established the partnership four years ago, our joint declaration of intent stated, and I quote, ''It is envisioned that there will be a significant cost-sharing by industry and government. The proportion of Federal funding will be higher for high-risk projects where the outcome is uncertain, and that of industry funding will be higher for technologies with a clear, near-term market.''

    We all recognize that government would need to take the lead where private industry simply could not justify the investment to its second and third key constituents, its employees, and its shareholders. Industry is hesitant to commit to technologies which have a potential payoff beyond the planning horizon. Doing so jeopardizes jobs and investor return. On the other hand, integration of commercially-viable technologies into vehicles is clearly the responsibility of the automakers.

RESEARCH AREAS

    During the past four years, industry and government have spent some time getting used to working together. Like any partnership, we've had our ups and downs, but overall, industry is very pleased with the outcome. Up to this point, PNGV has been exploring the significant array of technological developments with its partners at the national labs, at universities, at automotive suppliers, with individual inventors and the automakers themselves. We have investigated, for example, numerous alternatives for energy conversion, energy storage, materials, propulsion systems, and electronic devices. Together, we are now ready to focus on our efforts on four key research areas which offer the most promise for achieving the PNGV objectives. These areas on which to concentrate to make a difference are: direct injection engines; low-cost, high-efficiency electric drives needed for hybrid propulsion; low-cost, low-mass vehicle materials, and fuel cells. The submitted written testimony provides details for each of these elements.

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    Our government partners share this recognition of the key technological challenges now facing the PNGV program. Our alignment is helping to keep the United States in the forefront of this competitive pursuit. On behalf of the U.S. automotive industry, I assure you that we intend to continue to provide focus to this effort. The result will be a more efficient use of Federal research, a more effective deployment of that technology into the vehicles of the American and global marketplace, and the achievement of our joint goals of national interest, including the 7 million workers that compose the automotive business in the United States.

    Thank you very much.

    Mr. REGULA. Thank you.

    [The information follows:]

    "The Official Committee record contains additional material here."

WEDNESDAY, JANUARY 28, 1998.

NATIONAL ENERGY POLICY

WITNESS

BERRIEN MOORE III, DIRECTOR, INSTITUTE FOR THE STUDY OF EARTH, OCEANS, AND SPACE, UNIVERSITY OF NEW HAMPSHIRE

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    Mr. REGULA. Our next witness—I'll preface this by saying Governor Underwood alluded to the fact that we need to look at all dimensions of this, environmental as well as energy, and so on. And I think that's very much in keeping with the next witness—Mr. Berrien Moore, who is the director of the Institute for the Study of Earth, Oceans, and Space at the University of New Hampshire, which encompasses many elements here that the governor was alluding to. We're pleased that you could be here.

CO2 PROBLEM

    Mr. MOORE. Congressman, I'm delighted to be here, and as you note, I am going to take a somewhat different tact on this problem, but I think it's particularly appropriate, given the wide scope of this subcommittee.

    It's also appropriate that we recognize the nature of the CO2 problem. Even if the U.S. fossil fuel emissions went to zero, carbon dioxide would continue to increase in the atmosphere. Therefore, I think we must continue to think afresh about this problem.

    My paper focuses on three aspects. The first is the role of terrestrial systems as a possibility for storage of carbon, and hence the reduction of atmospheric CO2.

    Second is the question of verification. It's very easy to verify fossil fuel emissions because we tax fossil fuel. It's much more difficult to verify small changes in large numbers, and that would be the nature of biotic storage. And certainly any trading scheme for carbon emissions would depend an adequate verification strategy.

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TERRESTRIAL

    And, finally, I have just a few comments about the protocol coming out of Kyoto, and particularly the role of terrestrial systems as recognized in that protocol. First, are terrestrial systems significant? Well, currently there's about 5 gigatons, billion metric tons, released per year due to fossil fuels, and from our studies from Kyoto, we see there's about a half a gigaton of this release retrieved back to the terrestrial system through photosynthetic processes. That's actually without even trying. That's just what is occurring today.

    We might ask ourselves, what could be done in this country if we actually tried to store carbon in terrestrial systems. The paper works through three simple examples. The first is to look at agricultural systems in the United States. There are roughly 2.5 million square kilometers in agriculture in the United States. There's between 3,000 and 6,000 grams carbon meter squared. Even if you could get a slight change, an additional 100 grams carbon per meter squared, you could sequester an additional quarter of a gigaton per year. Now that's rather significant. That's roughly a 50 percent increase in the net biotic storage going on globally today.

    It would also be a win-win strategy. In all likelihood you would make the soils more water efficient and you would perhaps prevent nutrient runoff, which is one of the problems that we appear to have been observing on the Eastern Shore last year.

RIPARIAN ZONES

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    That thought actually raises another issue. That is the question of riparian zones. In the United States there are roughly 3 million miles of rivers. Let me beg your forgiveness and convert that to metric, which is the only way I can think. However, also, as a mathematician, I discovered my paper has a mathematical error in it, and therefore, I'd like to collect them later and resubmit my test score. [Laughter.]

    Mr. DICKS. Correct it for the record.

    Mr. MOORE. I will certainly correct it for the record. I can't program a video machine either. [Laughter.]

    So you have roughly 5 million kilometers of rivers. Suppose 2 million of this 5 million could be planted in increased riparian zones; it's roughly 50 meters on either side. And that would constitute a net storage, if these areas grew up as forests, of 40 gigatons. This is a rather significant number. In fact, if you assume a net storage of 20 gigatons, and if you assumed that this took place over four years, you could store an additional half a gigaton per year, which is essentially the global sink in biotic terms just within the United States.

    I think I'll skip the last example. It just, once again, looks at the net forest soils of the world, and you'll notice, though, that in the protocols coming out of Kyoto, forest soils for some reason are not allowed to be included, though agricultural soils can be.

ATMOSPHERE ISSUES

    This brings me to a very important issue, and that is the issue of verification of sources and sinks. How are we going to actually document what countries are doing, particularly if we include, as Kyoto does, the question of biotic storage? This is a very complicated problem, and like most complicated problems, it's not going to be solved with a single silver bullet. It will require remote sensing, pilot plot studies, as well as an array of atmospheric measurements of carbon dioxide.

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    The issue of the atmosphere is extremely important. One of the ways it will perhaps verify sources and sinks, essentially measuring the concentration as it changes in the atmosphere and then try to back-calculate to the sources and sinks. As such, we must have a very good understanding of what the terrestrial and oceanic systems are doing. And in that regard, it's particularly unfortunate that the Department of Energy has essentially eliminated oceanic carbon cycle research, and I think that given that the oceans are the primary repository for atmosphere CO², that's really quite unacceptable.

    I'd also like to point out that there's a historical analogy on the issue of verification, and that's the Nuclear Test Bans Treaty, and I think verification will be central in subsequent negotiations.

    And, finally, my paper ends with a few comments on Kyoto. I think it was a rather remarkable achievement. At least, parties went away ready to work on hard issues. But on the issue of biotic storage there was a restriction which I find unfortunate, and that is it only considers biotic storage associated with human actions since 1990. This is going to make an already complicated topic almost impossible. How are we to determine whether the biotic storage that occurs in our national forests is because of actions that we took since 1990, or perhaps it's the actions that we took 20 or 30 years ago that are beginning to be reflected today.

    So I think that certainly this is something that needs to be addressed, and I look forward to working with this committee and others in doing so in the future.

    [The information follows:]

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    "The Official Committee record contains additional material here."

    Mr. REGULA. Thank you, and I think in light of what's prospectively developing on global warming and the President's statement that there will be $6 billion spent on it, that we have to assess all these things. Obviously, some of it's going to come in the direction of this subcommittee, which leads me to what I just said to the staff person here. When we get the DOE budget, which will be shortly, we're going to summarize it and send all of our witnesses a copy, both those of you here and to the State witnesses, and ask you for your reaction in light of your testimony this morning. We want to do a constructive job of making sure that, as we allocate these resources, we're doing it very well. And I've been extremely impressed with both panels, and I say this because our next panel will be DOE, and to alert you that your proposals will be subject to scrutiny. You've heard the panelists, so you'll have some idea of where they'll be coming from in responding to what you're proposing to us.

DOE/STATE PARTNERSHIPS

    Also, I note Governor Underwood has a time commitment, and I have just one question, Governor, before you have to leave, and that is, do you think in the past that DOE has been effective in developing the partnership with the States which you seem to indicate in your testimony is extremely important, given the fact that we have one set of taxpayers and one set of people that we serve? We're trying to determine what's the most effective way to serve this, the body politic.

    Governor UNDERWOOD. We have a good relationship with them. We have developed a good working relationship with them in West Virginia. They have an office in Morgantown, as well as one in nearby Pittsburgh. And the Industry-of-the Future Program I think holds a great deal of promise. We are happy with the working relationship.

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    Mr. REGULA. And you're anxious to even enhance that relationship, if I understand your testimony.

    Governor UNDERWOOD. Yes.

    Mr. REGULA. Well, we'll look forward to your response to their budget proposals, and again, thank you for coming, and I realize you have to get on your way.



WEDNESDAY, JANUARY 28, 1998.

NATIONAL ENERGY POLICY

WITNESSES

HON. ERNEST J. MONIZ, UNDER SECRETARY OF ENERGY,

PATRICIA F. GODLEY, ASSISTANT SECRETARY FOR FOSSIL ENERGY,

DAN W. REICHER, ASSISTANT SECRETARY FOR ENERGY EFFICIENCY AND RENEWABLE ENERGY

Introduction

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    Mr. REGULA. Our last panel is the Department of Energy, and you've heard a few challenges this morning, so you'll have an opportunity to respond. Our first witness will be the Honorable Ernest Moniz, the Under Secretary of Energy, who's relatively new to the job—what, two months?

    Mr. MONIZ. Going on three.

    Mr. REGULA. He came here from MIT, which is a rather respected institution in our society.

    And then we'll have the second witness who will be Pat Godley, Assistant Secretary for Fossil Energy, and lastly, Dan Reicher, Assistant Secretary for Energy Efficiency and Renewable Energy.

    We're pleased that you could be with us this morning, and share your observations on the future course of the DOE in meeting some of the challenges that you've heard from the other witnesses.

    So, Dr. Moniz, you're on.

    Mr. MONIZ. Thank you, Mr. Chairman, members of the subcommittee. I appreciate very much the opportunity to testify here and for your long-time support of the Department and its programs. This is my first opportunity to appear before you, and I look forward to a sustained and fruitful collaboration in advancing America's national interests.

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    As you said, I joined the Department less than three months ago, and at the Secretary's direction, have assumed broad responsibilities for science and technology programs across the full range of departmental missions. I confess to having felt somewhat like the proverbial dog that finally caught the car by the tailpipe. However, the proverbial response of ''now what?'' met with a clear answer from the Secretary: reduce tailpipe emissions. I guess that's PNGV.

    And that, in fact, takes us to the subject of this hearing. I know I'm carrying coals to Newcastle in emphasizing to this committee the importance of affordable and abundant supplies of energy to America's prosperity and environmental stewardship and national security. And we share both the opportunity and the responsibility to advance those interests.

WHY ENERGY MATTERS

    Energy is an economic driver. Americans spend more than $500 billion per year on energy. Yet many Americans do not appreciate the technology, the entrepreneurship, the can-do spirit that lies behind the energy sources that they so easily call into service with the turn of the ignition key or the flick of a switch. Energy offers economic opportunities. The global market for energy supply equipment alone is about $300 billion. This will grow proportionately as world energy capacity doubles over the next few decades, and of course if we include the value of products whose marketability depends on energy performance—cars, appliances, et cetera—the global market reaches to the trillions of dollars. Our Federal policies and programs should help Americans take advantage of that growing market.

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    Energy is a strategic global commodity. We have learned through harsh experience the price and availability of energy resources in one region can have global implications. Competition with and within the developing world for fossil fuel resources will become tense over the next decades.

    Energy affects the environment. Energy production and use are principal contributors to local, regional, and global environmental problems. Smog, acid rain, and particulates affect quality of life at local and regional levels. On global scale, there is little doubt that human activities associated with energy production and use have significantly altered the composition of atmospheric gases. The vast majority of engaged scientists anticipate that business as usual greenhouse gas emissions will in the next century seriously impact climate and human affairs. The risks are considerable. Prudence demands a measured, strong response to ensure that sustained technology innovation positions America for continued prosperity and quality of life.

    In fact, protecting and preserving the environment increasingly makes good business sense. I just returned from the North Slope of Alaska, in Anchorage, where John Brown, the very successful CEO of the BP group, noted, quote, ''I believe''—this was on Saturday, last week—''I believe we can and should be in a position where as an industry we are offering our customers choices and opportunities which will allow them to use the energy they need at an attractive price without damaging the environment. That's what people want, and one of the basic lessons of business is that you ignore your customer at your peril, and once again, I think we can do it.''

ENERGY RESEARCH AND DEVELOPMENT

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    Brown's optimism, which I share, is rooted in science and technology. The key role of energy research and development will be woven throughout the administration's forthcoming comprehensive energy strategy. A first draft will very soon be released for public comment. It's organized around common-sense, high-level goals: improve the efficiency of the energy system; ensure against energy disruptions; promote energy production and use in ways that reflect human health and environmental values; expand future energy choices; and cooperate internationally on energy issues. These goals will be backed up by more detailed objective strategies, and we look forward to a dialog with this committee as the final document takes shape.

    Mr. REGULA. Are you having dialog with the private sector and the States——

    Mr. MONIZ. Yes.

    Mr. REGULA [continuing]. In the process of developing this?

    Mr. MONIZ. Yes, we will. In fact, starting on February the 12th, and extending through about nine days, we will have four meetings throughout the country—the first is in Houston on the 12th, then Sacramento, then Detroit, and then back here in Washington, D.C. In addition, we will be soliciting written inputs over the Internet or any other form people desire. So we want a broad public dialog.

    Our success in reaching these goals tomorrow depends on our energy R&D plans today. Technology links to a ton of coal or a barrel of oil or a stiff breeze or the sun's warmth, to economic activity and to environmental stewardship. We are identifying a variety of energy technology pathways to help define the needed R&D portfolio. I will describe some of these very, very briefly. We will elaborate somewhat in the statements by Pat Godley and Dan Reicher.

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    I would stress that each demands a strong Federal role, particularly as the R&D headlights are lowered in the private sector, because of both restructuring and globalization processes. One pathway is increasing our domestic energy supply. We are developing technology pathways to increase access to such resources while minimizing environmental impacts.

    Again, if you will permit me an anecdote, on Friday on the North Slope I saw firsthand the impact that technology has and its potential. A new field there, the Alpine Field, is accessible to exploration only because of the new 3–D seismic and drilling technologies, and its development will impact only .2 percent of the surface area.

    Mr. REGULA. In the present, development has what percent?

    Mr. MONIZ. The Prudhoe Bay is about 2 percent. So it's a factor of 10 reduction in the footprint. So it's very impressive to see, as time goes on——

    Mr. REGULA. In less——

    Mr. MONIZ. Impact on the surface area.

    Mr. REGULA [continuing]. Square miles of the impact? Is that——

    Mr. MONIZ. Exactly, right.

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    Mr. REGULA. By the new technology?

    Mr. MONIZ. Correct.

    Mr. REGULA. That's an enormous breakthrough.

    Mr. MONIZ. Yes, it's a steady development coming from these new drilling technologies and the ability to use much better characterization of the reservoirs.

    Further, in terms of potential, there are huge natural gas resources, of course, there, largely untapped because of transportation issues. A DOE-industry cost-shared collaboration is developing the revolutionary ceramic membrane that will produce synthesis gas in one step, thereby perhaps dramatically reducing the cost for conversion to a liquid form, and adding significantly to our domestic energy supply.

ENVIRONMENTAL SECURITY

    Other pathways address environmental security. New technology is clearly key to long-term greenhouse gas emission reduction, although I stress that the goals served by this new technology include protecting the economy and promoting security.

    Relevant energy pathways roughly in a time ordering that reflects major contributions to emissions reductions can be grouped in three baskets: energy intensity, carbon intensity, sequestration. I'd say a few words about that.

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FOSSIL ENERGY

    Our energy intensity is about 50 percent higher here than in other industrialized countries, suggesting we have the potential for significant further gains. Also, 85 percent or 84 percent of America's energy use is derived from fossil energy, and since fossil fuels will continue to dominate energy use for many decades, efficiency of fossil use is a very high priority. Important examples include co-generation, intelligent building control systems, fuel cells joined with combined cycle plants, integrated gasification combined cycles, and of course the PNGV.

    Carbon intensity, again, many examples in the fossil area, including increased use of natural gas in advanced turbines in the near term, perhaps to methane hydrates in the long term. We want to extend the life cycles of existing nuclear reactors, and quite clearly, emphasize strongly development of new renewable energy sources, such as advanced wind turbines, onsite solar and photovoltaics, and co-firing of coal plants with forest and agricultural biomass.

    Carbon sequestration we mentioned earlier is an example of a high-risk, potentially very high-payoff research program, payoff many decades down the road presumably, but we will be more aggressively pursuing these, or proposing to do so, in the coming budget with examples including the capture of combustion gas, the use of microalgae to convert power plant CO2 to biomass, and the injection of CO2 into various subsurface——

    Mr. REGULA. You anticipate you're going to get a good chunk of the $6 billion that was talked about last night? [Laughter.]

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    Mr. MONIZ. We will be coming forward with, I would say, a strong initiative in terms of increased, and hopefully focused, R&D, yes.

BASIC RESEARCH

    Another pathway I'll just mention, of course, is basic research. Many areas of basic research underlay future energy capabilities: bioscience, its photoconversion, advanced materials, and understanding of the global carbon cycle, including, as was just discussed, for the issue of understanding both sources and sinks.

    And new tools, such as simulation capability, being developed in our weapons program, are going to bring new understanding to global systems, subsurface phenomena, and combustion science.

    All these pathways are part of our balanced energy R&D portfolio. Using the public funds for the public good, we have the responsibility to manage these funds effectively. Examples of management initiatives underway or poised for increased emphasis are stronger R&D integration through a reinvigorated R&D council, led by the Under Secretary; contract reform; updating R&D performer selection, and sharpening the framework of industrial partnership programs, and implementation of an aggressive R&D roadmapping strategy that will both sharpen missions and provide for more stringent program reviews.

    In conclusion, let me emphasize that although the R&D payoffs of individual programs are sometimes uncertain, and often long in gestation, as is appropriate to high-risk, high-potential research, we know from experience that science and technology have been at the core of American productivity gains. I would like to emphasize the need for investing now. Perhaps this point is best made by a story, the story of General Lyautey, a French general, who upon returning to his chateau following foreign services, asked that a certain tree be planted. The gardener protested that this tree would not bear fruit for 100 years. Lyautey's response was simple: then plant it this afternoon; we have no time to lose.

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    So if we're going to meet the Nation's crucial energy, environmental, and security needs of the next century, we have no time or energy to lose. My colleagues and I look forward to working with the committee, with the States, with industry, and with the public to shape and advance that portfolio. In fact, Mr. Chairman, your suggestion of soliciting the comments of these distinguished panelists on our forthcoming budget submission we view as very constructive, and we offer our services in helping you do that in any way we can.

    Thank you for your attention, and we will be happy to address questions.

    [The information follows:]



    "The Official Committee record contains additional material here."

    Mr. REGULA. Thank you.

    Pat Godley, the Assistant Secretary for Fossil Energy.

ENERGY STRATEGY

    Ms. GODLEY. Mr. Chairman, and other members of the subcommittee, my brief comments today will address R&D policy from the perspective of energy supply. Mr. Chairman, to put it in its simplest terms, no rational energy strategy can afford to overlook any affordable domestic energy resource, certainly not one that is rooted in economic reality. An effective energy strategy, if it is to make a discernible difference in our energy future, must recognize that every one of our domestic energy supply options must be part of a balanced portfolio.

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    The comprehensive energy strategy we will offer in coming weeks will be pragmatic. It will recognize that there's a critical role for renewable energy resources in our future, resources like solar, wind, and geothermal resources, just as there is for fossil fuels, coal, petroleum, and natural gas. It will also recognize that we must preserve the technological option of nuclear power and continue to pursue the long-range potential of fusion energy. It will recognize that the strength of our economy is founded on affordable energy, and that historically the root of every energy crisis we have sustained in this country has been an overreliance on a single form of energy. The strategy we are developing will emphasize that this is a mistake we must not repeat.

    Mr. Chairman, as you are well aware, the United States remains an energy-rich Nation. The vast wealth of our coal resources surpasses the entire energy content of all of the world's known producible oil. We have enough natural gas for decades for use in homes, power plants, and increasingly in our transportation fleet. The sunlight that falls on just 1,300 square miles, about one-tenth of the area of the site in Nevada where we used to test nuclear weapons, has enough potential energy to meet the Nation's total demand for electricity. Or consider that the wind that blows across just 1 percent of the land in the 48 contiguous states has enough energy to meet 20 percent of current U.S. power needs.

    Even large quantities of petroleum, arguably the fuel of most immediate concern to us, lie untapped within our borders. In fact, for every barrel of oil we have produced in the history of our domestic petroleum industry, we have left nearly 3 barrels in the ground. The collective wealth of these and other energy resources is the true measure of this Nation's energy potential. Mr. Chairman, as you are also well aware, potential is one thing; delivering on this potential is another. The key to changing potential into reality is technology and a national energy strategy that encourages the development, demonstration, and commercial deployment of new energy technology.

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    We face many challenges as we approach the coming new century: the need for a cleaner environment, the need to slow the buildup of greenhouse gases, the need to sustain economic growth, to continue to producing the high-quality jobs that are chiefly responsible, as you mentioned earlier today, for this year's historic balanced Federal budget, and the need to co-exist in a global community, where energy is an instrument for global peace and prosperity, rather than wedge that drives nations farther apart.

TECHNOLOGY NEEDS

    In each of these areas, Mr. Chairman, new and better technology can and must play definitive role. But in today's competitive economy, the bottom-line balance sheet often dictates near-term corporate priorities, as well as governmental priorities, and we heard that again from our earlier witnesses. In today's cost-cutting climate, the technologies that can achieve the full potential of our domestic energy wealth and convey the benefits of a cleaner environment and a more secure energy future will be developed only if we sustain a commitment to cost-shared public-private R&D partnerships.

PARTNERSHIPS

    In the coming weeks, Mr. Chairman, we will return before this committee to present our 1999 budget proposal, and as we make our case for the funding priorities of these programs, we will describe in more detail some of the significant results emerging from our government/industry/academic partnerships.

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    Let me give you just a couple of examples of what the combined talents and resources of government and industry can produce. With regard to electricity supply, as you are personally aware, Mr. Chairman, from your visit earlier last year to Tampa, Florida, our clean coal technology program now has in place the foundation for an entirely new approach for generating electricity from coal: gasification combined cycle technology. This is technology that rivals natural gas in terms of reducing smog and acid rain pollutants, and moreover, sets us on a new path toward unprecedented power-generating efficiencies and correspondingly lower greenhouse gas emissions.

    With regard to domestic oil supplies, travel to Utah or Michigan or Colorado, and you'll see oil fields operating today that, if it wasn't for the government/industry co-sponsored reservoir class program, would be sitting idle and abandoned.

    With regard to natural gas supply, travel to south Texas and you'll see a natural gas industry that has reserves valued at more than $1.4 billion because technology developed in our joint program with industry has identified gas that older exploration and production processes would have missed.

RENEWABLE ENERGY PARTNERSHIPS

    I also want to take just a couple of more minutes to impress on this committee the significant progress of our renewable energy partnerships. Consider that just a few years ago a kilowatt hour of electricity produced by photovoltaics cost 90 cents to generate. Today because of sustained commitment to joint government/industry R&D, that cost has dropped to as low as 18 cents, 90 cents to 18 cents.

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    Or consider that at the Geysers in California, because of better technology, the cost of geothermal energy has been cut almost in half, from 9 cents per kilowatt hour to 5 cents, or that wind energy, once 40 cents per kilowatt hour, today can be generated for only 5 cents a kilowatt hour, and as a result, wind is already producing enough electricity for 1 million Americans.

    We must continue this progress. We must recognize that support for one fuel resource does not mean opposition to another. For example, biomass can be co-fired with coal in an industrial boiler, and the combination reduces greenhouse gas emissions. That diversifies our energy options, promotes rural development in our farm communities, and helps keep coal in our energy mix.

    The advanced drilling systems we developed can be equally beneficial in extracting the energy potential of geothermal resources. One day, perhaps if we're truly successful and truly progressive, we might see hybrids of renewable and fossil fuel energy technologies linked together to form energy islands. The PCAST panel called them energy plexes.

    This is our vision of the optimal use of our energy resources, and this type of long-range thinking, planning outside of our traditional fuel stovepipes, we believe is the mark of a truly progressive energy strategy. But as you are well aware, Mr. Chairman, the success of these programs depends on far more than just coordinated planning and implementation within the Department of Energy. It will take a committed partnership of government, our national laboratories, universities, and industry, each doing what it does best, but each also knowing what the other is doing, to realize the full potential of energy resources that fuel the strength of this Nation.

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    Thank you, Mr. Chairman. At the appropriate time I'd be happy to answer your questions.

    Mr. REGULA. Thank you.

    Mr. Reicher, the Assistant Secretary for Energy Efficiency and Renewable Energy.

    Mr. REICHER. Mr. Chairman and members of the subcommittee, as the final witness, I will be brief, recalling Congressman Udall's frequent observation at the conclusion of opening statements: everything has been said, but not everyone has said it. [Laughter.]

ENERGY EFFICIENCY

    I appreciate this opportunity to present the Department's approach to energy efficiency. As Under Secretary Moniz and Assistant Secretary Godley noted, our emerging energy strategy strikes a careful balance between producing energy more effectively and using it more efficiently.

    Mr. Chairman, there is an unfortunate tendency to view energy efficiency as somehow different from our traditional energy investments, as some green alternative to the real business of energy. The plain fact is that about 93 percent of the energy we consume today comes from fossil and nuclear fuel. So in a very real sense, energy efficiency today is grounded in making better use of conventional energy sources. Most energy experts agree that we must make major investments to develop clean, renewable energy sources to ultimately replace conventional energy. In the meantime, however, conventional energy supplies are far too precious to waste.

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    The heart of our energy efficiency program centers on developing the technologies that enable us to get more service from every unit of energy, and from this flows a number of important benefits: extending the life of our domestic reserves, reducing our dependence on oil from potentially unstable regions, minimizing the adverse environmental and human health effects of energy use, including greenhouse gas emissions, and making our industries and economy more productive and more competitive. The investments we make in energy efficiency do not simply save energy; they represent one of the cheapest, least-intrusive ways of meeting requirements, and one of the best public investments we can make to ensure the productivity and competitiveness of our economy.

PARTNERSHIPS

    Let me share some examples with you. Our Office of Industrial Technologies has been working with the steel industry on advanced process controls as part of our Industries-of-the Future Program. You heard this referred to earlier by the representative of the steel industry. These process improvements and other advances will enable a growing steel industry to cut energy by 10 percent by 2010, reduce waste, and improve productivity substantially.

    At the recent Detroit auto show, Chrysler, Ford, and GM announced dramatic breakthroughs toward accomplishing the joint industry/government goal of developing a safe, clean, and affordable mid-sized family car that gets 80 miles per gallon and carries six passengers. Many of the technologies which enable these breakthroughs are a direct result of the Partnership for a New Generation of Vehicles, including hybrid electric drives, direct injection engines, fuel cells, and lightweight materials. PNGV brings the auto industry, government, and the national laboratories together to develop these critical technologies.

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    In the building area, just five building technologies supported by the Office of Energy Efficiency and Renewable Energy have saved U.S. consumers $33 billion in energy costs, more three times the entire R&D investment of the office for the past 20 years. It is worth noting these five same technologies cut carbon by some 19 million metric tons, illustrating how a well-defined energy technology strategy offers the key to addressing climate change cost-effectively.

    The Federal energy management program is helping us to capture energy savings in the Federal sector, where we spend about $8 billion on energy annually, approximately 2 percent of all U.S. energy use. We have recently announced agreements that will leverage billions in private sector investments to improve the Federal Government's energy efficiency. We will be able to pay this investment back and put billions back in the pockets of U.S. taxpayers just from the money we save on our national energy bill. Our cost is the administration of these programs, a price we can cover in part from the energy savings we realize.

    Mr. Chairman, I stated earlier that our strategy strikes a careful balance between supply and demand. It also is designed to encourage an integrated application of efficient supply systems, such as advanced turbines and fuel cells, with the efficient use of power, including waste heat. Such an approach is referred to as combined heat and power.

    Charles Bayless of Tucson Electric Power and Tom Casten of Tri-Gen Energy illustrated the potential of CHP systems in a recent editorial in The Washington Post. They said the following: ''The average American power plant burns three units of fuel to produce only one unit of electricity, venting the other two-thirds as heat. In effect, two-thirds of every coal mine is a wasted hole in the ground. It's as much wasted energy as Japan uses each year to fuel its entire economy.''

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ENERGY STRATEGY

    Our energy strategy will help us eliminate this waste by making the R&D investments needed to generate and use energy efficiently. Some U.S. companies have increased efficiencies to nearly 90 percent in some site-specific applications by combining efficient onsite generation with efficient use.

    Our technology strategy involves extensive work with private sector partners and the states to assure that our programs are relevant, the government's role is appropriate, and that payoff is in sight. By focusing our investments in areas where private resources are lacking and where there is a potential to realize substantial public benefits, we can better ensure that we are targeting our efforts appropriately and leveraging resources in the bargain.

WHEN TO TERMINATE SUPPORT

    As technologies approach commercial viability or as our partners signal that programs are not working, or that we should refocus, we can end public support or shift resources.

    As Chairman Keese stressed, States are important in these determinations. Let me give you two examples of where we have made these hard choices. In our Industries-of-the-Future Program, we have at least for the time being discontinued work with petroleum refiners because of a lack of progress, and we are moving forward to establish a new Industry-of-the-Future initiative with the mining industry.

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    In the PNGV program we cut investments in technologies that were not advancing as well as others and applied them in areas promising higher returns. Mr. Chairman, the process can work. In the coming weeks I will also return to talk to you about the Office of Energy Efficiencies and Renewable Energy's budgets and its programs. We have worked hard to make our budget more accessible and more transparent, and I want to thank your staff for the help with that.

    We are terminating programs that are not meeting our goals. I look forward to reporting to you on our budget and programs, and to working with you and your staff to develop a program that delivers the energy security, environmental benefits, and increased competitiveness that energy efficiency promises.

    Thank you.

    Mr. REGULA. Thank you.

    Now at this time we are going to have the questions for any of the panelists, and I want to start with Mr. Nethercutt because he has a speech commitment. Mr. Nethercutt?

STRATEGY TO TERMINATE SUPPORT

    Mr. NETHERCUTT. Thank you, Mr. Chairman, very much, and I want to thank all the witnesses. I've been listening attentively, and I've learned a lot from you all, and I think you're to be congratulated on presenting your positions very well.

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    I want to start with the agency witnesses and focus on the topic of balanced budgets, economizing, efficiency in government. My sense is that there are many, many small programs within the Department of Energy that sort of keep going. They're on and on and on every year, and perhaps you have some come to mind from the witnesses here, and perhaps from the other two panels of witnesses, especially related to energy efficiency.

    I think your challenge and ours—and I'm interested in learning what the industry and the state representatives here today have to say about it, too. What should be our strategy for determining how to terminate these endless programs sometimes, and maybe small ones that don't hold great promise, and having—if you all with, with all respect, the courage to say that this isn't working, it hasn't worked—talk about collaboration, collaborate with the industry and say that's a no winner. What is your strategy for doing that? Because I think this subcommittee is likely to say, among other things, this is what we charge you to do. And I'd be interested in knowing what the industry and the state representatives have to say as well. From a policy standpoint that's definable, that's clear to everybody, how do you do that and what's your recommendation for getting it done, so you save money and then put it into places where it can really do some good?

    Mr. REICHER. Mr. Nethercutt, we take that imperative very seriously, and I think it entails in the energy efficiency program a very careful review. I'm new to that office, only been there a few months, but I am looking very carefully at each part of the program and asking the very hard questions about the appropriateness of the government's role, whether we can expect to pay out in a fairly reasonable timeframe, what's the industry's——

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    Mr. NETHERCUTT. What would fairly reasonable be in your judgment, if you can say at this time, understanding you're new to the—

    Mr. REICHER. It depends on what you're funding, whether it's more of applied research versus basic research. So it's hard to give general timeframes, but in the applied area, where we're trying to move technologies, we've got to see payoffs in the five-to-ten-year perspective in many cases.

    Mr. NETHERCUTT. I don't mean to interrupt you. I notice in the testimony today there's reference that there are a wide range of improved clean energy options: renewable, fossil, and nuclear could be introduced and widely deployed within the next two decades. We just finished, 1979 to 1998 time period, we finished two decades at the Department of Energy. I guess I'm interested in knowing whether you think it might take another two decades to deploy some of these things, or is that an overstatement? Anyway, maybe incorporate it in your answer.

    Mr. REICHER. Yes, I will. I will do that. I mentioned two examples where fairly recently, we have made the hard decisions to terminate work in the Partnership for a New-Generation-of-Vehicles, again working very much with industry, with the automakers and their suppliers, made rather large decisions to, for example, no longer focus on gas turbine engines for automobiles, and we're going to take the money we save there and apply it into to more high-priority areas. So that, I think, gives you a sense that we're capable of doing it.

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    In the case of Industries-of-the-Future, as I mentioned, we tried, and frankly, did not succeed in our work on developing a technology plan with the oil refining industry. We've made the decision that that work is, at least for now, not going to go forward. By the same token, the mining industry has come to us and said, ''We like what you're doing in this program. Can we sign on?'' So, again, we made that hard decision and we're moving forward.

    Addressing your other question of the last 20 years, I guess what I'd say is I think too often we lose sight of the fact that over the past 20 years we've had a huge array of success with a number of these technologies, and you've heard, across the fossil area and into the energy efficiency and renewable energy area, and so I would stress that that's got to be looked at. I mentioned just five technologies alone where the savings are in the many billions of dollars as a result of the development with DOE support, and most importantly, as you've stressed, the actual deployment of those technologies in the public.

    Mr. NETHERCUTT. Yes, sir?

NEW EVALUATION APPROACHES

    Mr. MONIZ. May I just add that, briefly, just to indicate that while Dan has addressed some of the issues specifically in the program, to note that we are engaged in implementing some new processes which are somewhat broader. For example, I alluded briefly to the R&D council which will be—which is, I should say—is a council which I now chair and which is looking at integration of our R&D. That has the prospect of efficiencies. It has the prospect of increasing in general, the level of competitive grants in the programs, and Dan, for example, is working hard at that at EE.

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    We intend to invoke more peer review, and very importantly, it is a home for what I intend will be a pretty aggressive roadmapping strategy. For example, they are—and I might add that these two offices are collaborating very well—including on a roadmap for clean power.

    The importance of the roadmapping strategy, which is characterized in my view by having sort of—setting a goalpost and getting the relevant stakeholders involved in trying to reach something approaching at least a consensus view for getting there. It provides a framework for prioritization, for evaluating programs, and therefore, for advancing the process that you advocate.

COLLABORATION WITH EPA

    Mr. NETHERCUTT. Secretary, let me just sort of take time—I heard what you said, and I appreciate the collaboration. Have you thought of collaborating with EPA in making the approval process or the regulatory process less burdensome to industry in terms of advancing technologies? I mean, that seems to me to be a technology or I should say a collaboration that will enhance technology, enhance efficiency, cut down on bureaucracy and cost, and all those things that I think most of us want to avoid.

    Mr. MONIZ. Yes, in fact, I think that refers to the priorities which one of the panelists—I apologize for not recalling which one—indicated in terms of, for example, waste, in terms of having a focused technology development go from what do you do with the waste to how do you prevent the waste, and that's where certainly interactions also with regulators I think can be very important.

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    Mr. NETHERCUTT. Will you develop the strategy and a plan to deal with EPA or other regulatory agencies?

    Mr. MONIZ. Actually, Dan, why don't you respond to Mr. Nethercutt's question.

    Mr. REICHER. There are number of cases, and increasingly, where we are in fact working very closely with EPA. I mentioned in my testimony the issue of combined heat and power, both how you generate and use power more effectively and integrate them in industry, and we're working very closely with EPA because it turns out there are, in fact, regulatory barriers to the use of combined heat and power in industry and in other sectors, and that's just one of many, many examples where I think we are increasingly working, and quite effectively, with the regulators, and not just EPA, but with state regulators as well, because they often hold the keys to this process.

    Mr. MONIZ. A more regular process would be an interesting idea.

    Mr. NETHERCUTT. It will save a lot of stress in the real world, if that can be done, because talking about the mining industry, I went to a mining conference out west, and the wrath against EPA was, doggone it, you stay out of the permit process until the end, and then you come in and say you can't do it, and it drives them nuts, and it costs lots of money just in that one industry alone.

    Mr. MONIZ. That one area I wasn't raising because it's quite different, but given the general geography, I was at Hanford last week, for example, and there, of course, was a formal arrangement involving the State EPA and the Department in terms of how we go toward cleanup.

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    Mr. NETHERCUTT. I agree. Tri-party agreement is great.

TECHNOLOGY PERFORMANCE CRITERIA

    Ms. GODLEY. I think one last point to make, and it ties in with the roadmapping, technology roadmapping, effort that Dr. Moniz is leading within the Department, and that is one key way to know when to terminate a project is to have set ahead of time clear criteria for success for that project, along with timetables. This is something that Chairman Regula had a big role in designing in the clean coal technology program, and both participants from industry, as well as government, could have technological performance criteria to evaluate projects against. So there was no surprise and we would know what the status of projects were, and I think that's something we'll see more of in connection with our roadmapping efforts.

    Mr. NETHERCUTT. I wonder if I could solicit, Mr. Chairman, in the time remaining anybody from these other panels who may want to comment about this concept I have of trying to have efficiency.

PROJECT DETERMINATION

    Mr. EDELHEIT. I'm not sure I can answer your question completely, but talking about when you kill projects and how you kill projects. It's a big problem, and I'll give you one technique that we've used in GE. I run a large central research lab at General Electric, 1,500 people. We do the advanced development for all of GE's businesses, and we were almost killed by the company a few years ago because of that very issue. The idea was the scientists were just working on projects forever, and they always have a million reasons to keep going. And what we did was change the way the project was funded. We said now the businesses have to fund us directly, and now we're talking about real money as opposed to sort of corporate money or government money.

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    Mr. REGULA. Potential customers would have to be part of it, is that it?

    Mr. EDELHEIT. Yes, and so what happens is that now we don't get funded if the business no longer finds it real valid, and I talked about it in my testimony, this issue of cost-sharing. In principle, if you're really going to introduce this technology to the marketplace, eventually industry is going to have to put a lot more money in than the R&D funds, and that's what I would be watching. If industry isn't committing a large amount of its own funding over time, and perhaps with the performance goals, and also in some pre-arranged way, you can tell pretty quickly whether or not this is really going to be introduced in the marketplace, really going to make a difference, at least in that set of programs. That would be one technique I would use.

    Mr. NETHERCUTT. Okay. Mr. Valentino. Yes, sir?

COMPETITIVE SELECTION OF PROJECTS

    Mr. VALENTINO. First of all, I'd like to second what the gentleman from GE said about collaboration and co-funding. And, also, he made a point earlier about competitive selection of projects. I just wanted to comment about how do you terminate programs, and the corollary is how do you initiate programs, and just mention very briefly what I have to—what I'm faced with in my organization in New York.

    We have an annual plan that we update every year that gets widespread peer review and technical comment, and then when we go into a new area, we have kind of workshops where we get everybody in a room like an EST-seminar and nobody leaves for two or three days until we decide what are the research impediments in various areas, and then we have a competitive selection process to try to get the best ideas and we look at a focused program.

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    But the last thing I want to mention, and this really also talks to some of the comments that were made here today about public participation. For every one of my program areas I have an outside technical peer review panel which includes some of the clients we collaborate with. It includes stakeholders in general, and it includes technical experts. At the end of the year, they are asked whether they thought our program was successful, and they give us comments, but they also let us know whether they were actively—you know, the things they told us were considered, and that goes to my board of directors. Now to the extent that they would comment that something we did really wasn't effective, that would eliminate it, but I would also offer to Mr. Moniz, when he talked about having public hearings about some of their activities, I would argue that that really isn't enough. You have to be in the back side of the process and ask people, are you satisfied that you have been actively considered and that the work, the outcome of this work, is what the stakeholders ask for on the front end?

    Mr. NETHERCUTT. Thank you very much. Mr. Chairman, I do have to leave. I wish I could stay. I have a lot more questions.

    Mr. REGULA. We'll do as much as possible, and I think especially to our state and private industry witnesses we'll get the DOE budget to them, for their comments.

    Mr. NETHERCUTT. Great.

STATE RESEARCH

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    Mr. REGULA. Thank you. I might ask, do California and Ohio have a somewhat comparable peer review, and do you have success in getting rid of things that don't work? I know how bureaucracy is, not easy.

    Mr. KEESE. Mr. Chairman, I have to talk about the past and the future.

    Mr. REGULA. Right.

    Mr. KEESE. In the past we have had research and development programs that have generally hand in hand at a very low level in very targeted areas with a very limited budget. So I think that the result was that we were self-limiting. We had nowhere near what we felt was necessary.

    Under our new environment, which we now have, starting January 1st of this year, we have $62 million a year to put into research and development programs——

    Mr. REGULA. State money?

    Mr. KEESE. State money. We have $62 million a year. We are doing what we talked about. We are going to attempt to work with DOE and see if we can collaborate and maybe match some of those programs. We are looking for a program, and programs will rise to the top if they are outfunded by collaborators. We intend to leverage our money three, four, five times and get the other participants in to make sure that they're valid projects. And we have already set the goals and at the same time we set the goals we have defined how we're going to evaluate them down the line. So at the get-go, we are deciding how we will evaluate what we're doing here.

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ELECTRIC INDUSTRY DEREGULATION

    Mr. REGULA. And you're saying research, especially in electricity, becomes important because of the competitive environment that the electric industry is going to be in with deregulation. Then they can spend money.

    Mr. KEESE. They're spending none, and I would stress two words, I guess: technology is going to be the solution, and reliability is going to be the problem. In our case, we have mother utilities who were responsible to make sure there was enough generation that got transmitted, that got delivered, and distributed. Now that particularly the tie is cut from generation, the distribution utility is just going to take what they get. The transmission company, the ISO in our case, is going to take what they get and deliver it, but nobody is out there to assure that any particular generator will stay online, will be concerned about maintenance, will make the abrupt decision at some moment that it's no longer efficient to operate the plant, and will go out.

    So what we need is tremendous technological advances. The blackouts we had, the outages in California of 1996 were not caused in California. They were caused in Oregon, and they were caused because the system could not accommodate the small problem that started. So we need a lot of research, a lot of technological advances in how we handle the transmission system, so that we can assure the reliability.

    Mr. REGULA. How are you going to know if you're a producer how many people you're going to have as customers next year?

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    Mr. KEESE. It's the market.

    Mr. REGULA. Yes, I understand that.

    Mr. KEESE. In our case, everything the investor-owned utilities own, although they're divesting, must go into our stock market, what we call our power exchange. So they have to deliver it to the power exchange, and the power exchange makes it available.

PUBLIC UTILITY COMMISSION DECISIONS

    Mr. REGULA. So the State is going to monitor the consumer base that needs to be filled then. Is that correct?

    Mr. KEESE. The public utilities commission is going to regulate the distribution utilities only for how they distribute it. FERC and the ISO are going to regulate the transmission system. Nobody is going to regulate the generation side. Now we have in the West somewhat an overabundance of generation now——

    Mr. REGULA. That's what I understand.

    Mr. KEESE. At the Commission we're looking at, between January 1st and the end of summer, perhaps having six or seven new power plants for 3,500 to 4,000 megawatts in the pipeline. We've had two applications already; we've got another 10 people talking to us. So we may have that much going toward new generation.

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NUCLEAR ENERGY

    But the nuclear plants are set out there, and who knows how long they'll go after 2002. Things are going to change after 2002, but we're——

    Mr. REGULA. Why?

    Mr. KEESE. Well, because the payoff of the stranded assets uses perhaps 25 to 30 percent of the bill right now.

    Mr. REGULA. The nuclears are stranded?

    Mr. KEESE. The nuclears are stranded. They'll be paid off, and if they can't generate—all the new power plants are next generation natural gas; every one of them is combined cycle natural gas of some sort or other. And they're talking about coming in between 2.5 and 3 cents, where you may be talking about a dime or 13 cents for a nuclear plant. So there's going to be a dynamic that takes place in 2002. In the meantime, these are designated must-run and you buy it; you buy their production anyway. They're designated must-run.

OHIO'S EVALUATION PROCESS

    Mr. REGULA. Ohio, do you have a good peer review?

    Ms. WARD. We do. In the context of deployment programs, we are very deliberate in deciding how we want to evaluate the impact of these programs. So what we do, Mr. Chairman, is essentially decide what data we need to collect, and establish a mechanism for evaluating at the end of the process whether or not we achieve the result we were looking for.

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    In the case of the low-income weatherization program, because of the evaluation we've done, we have eliminated certain measures completely. We do not offer them because they do not save energy. In the case of home energy rating systems, in the State of Ohio we worked to try to get that into the marketplace using the same technology that has been so successful for low-income weatherization. We have just recently made the decision that the marketplace is not ready for this.

    The housing industry doesn't need the stretch in the mortgage right now, and unless we are prepared to subsidize the cost of providing those ratings, it's not going to work in the market. So we've made a decision to pull back the organization and kind of put it on a shelf and mothball it and tell them in the future, the marketplace is prepared and will be ready to react to it at that point. In the meantime, we'll be working on building the infrastructure, working with the housing industry and contractors, so that they can deliver the quality service that we know is needed to get the savings.

    In the evaluation process, we not only look at numbers and quantification, but we also take a look at quality. We talk to the end-users, the customers, the folks who had to deliver the service at the local level and find out from them, was this the most cost-effective process for you? Was this a cost-effective end result for you as a consumer? And we take all of that into consideration as we design our next set of deployment efforts.

STATES SHARING INFORMATION

    Mr. REGULA. Do the states have a mechanism of sharing? You know, the states have become the innovators in many respects in government programs. Do you have a way in which, if something works well in California, that other states can find out about it and replicate it?

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    Mr. KEESE. If there is, it is probably through the DOE. In the case of New York, specifically, we have signed a memorandum of understanding within the last week—actually, I guess it was about—you signed it a month ago, where we're going to attempt not to duplicate. So we're going to say, all right, you're doing that; we're not going to do it. We're doing this.

    Mr. REGULA. So experimentation might be taking place in New York that will be ultimately beneficial to all the states, but you're not going to do it, you'll let them do that one, and you'll do some other one?

ROLES FOR DOE

    Mr. KEESE. Right, and we, when we're talking about roles for the DOE——

    Mr. REGULA. Yes.

    Mr. KEESE [continuing]. What we're talking about, we think it is—this should be DOE's role. Now if DOE is going to fund an infrastructure program in California, and we're going to do it and come up with the records, maybe it should be our obligation to go out with DOE and spread it around the country, but we can't really convene a meeting of 50 states and say, ''Come; we're going to tell you about something.''

    Mr. REGULA. No, but DOE would seem to me to be the central repository of information where they could disseminate, and my question I guess—well, go ahead.

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STATE COORDINATION AND CO-FUNDING

    Mr. VALENTINO. Well, I want to comment exactly on what you're saying, Mr. Chairman. There's an organization that I might have mentioned earlier called Association of State Energy Research and Technology Transfer Institutes (ASERDI) where there's 19 state research organizations. I was the chair for the past four years, but it includes a number of organizations, elements of five national labs, and it includes EPA; it includes EPRI and GRI. This organization has been in existence for about six or seven years, and if DOE had a more active role in doing the coordination, this organization probably would not have been formed.

    Mr. REGULA. Do you think DOE should do this coordination?

    Mr. VALENTINO. I absolutely do, and I also want to mention the other thing in the front end in terms of looking at what should be funded. In New York we co-fund at least three to one right now, where we have about $15 million and it turns into a $60 million program, but 95 percent of our projects have co-funding not by DOE, but by the potential users of the technology. So you don't end up with an annual final report that sits on somebody's shelf. You end up with technology—yes.

    Mr. REGULA. You've got a new mission, I think.

    Mr. MONIZ. Would you repeat the name of the organization? I'm sorry.

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    Mr. VALENTINO. ASERTTI.

    Mr. REGULA. I'm hearing partnership is the way to do this—private, state, Federal.

    Mr. KEESE. That's the way you connect to the marketplace——

    Mr. REGULA. Right.

    Mr. KEESE [continuing]. Through the collaboration, through the partnership. And we really—a number—during the presentations here, the states have been involved in a lot of DOE activities, joint DOE activities. The states have really not been involved at the front end in prioritizing and get involved in project setting. We'll be happy to look at their budget and comment. Are states going to be involved in your council, the council structure you have set up? I thought you were going out to industry and——

    Mr. MONIZ. No, the directing council is an internal integrating mechanism. The national energy strategy process will be going out to the states in about two weeks. That is public comment in a few days, and then a meeting in Houston, for example, and Sacramento, the 13th.

    Mr. REGULA. Because we don't need another study to put on that pile. We want something that works and that the private sector is going to benefit from, and the states, and most importantly, the people of this country.

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    Mr. MONIZ. We are certainly hoping, as Pat Godley mentioned, that it will be a very pragmatic statement of what we need to do with our partners. It will be brief as well.

CO2 EMISSIONS

    Mr. REGULA. Dr. Moore, he is gone? I was interested in his comment that a great proportion of CO2s are not manmade. My question is, in this effort to get 7 percent below 1990 levels in the U.S.—of course, I was in Kyoto, and several of those countries we met with made it very clear they weren't going to do anything, particularly the Chinese. It was a very empathic no.

    But, in any event, can we impact on the non-manmade, which is apparently about 96 percent of CO2 emissions? Are we able to do something about that, since it's the largest portion of them?

    Mr. MONIZ. Well, I think we should separate the issues. First of all, there is, of course, a large carbon cycle involving——

    Mr. REGULA. Right.

    Mr. MONIZ [continuing]. As was discussed, the ocean, ecosystems, the atmosphere, et cetera. The issue which is behind the focus in Kyoto is the fact that manmade emissions coming from activities, particularly over the last 50 years, although going back to the end of the last century, in particular, have clearly impacted in changing, if you like the equilibrium level of carbon dioxide in the atmosphere; that is, it's roughly a 30 percent increase over the sort of steady-state, natural background level. So what we're addressing here is in some sense the increment of carbon dioxide over the natural level from human activities, and stabilizing that over the years.

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    Again, I would just stress that there is—first of all, no issue in terms of the increased CO2 levels versus pre-industrial levels. There's no issue about the science of the greenhouse gas effect. There is, as you know, debate about, for example, when you come down to various regional implications, we are going to be pushing the science very hard, as I mentioned, including some of our newest innovation tools over the next 10 years. We want to understand the global carbon cycle much better, for all kinds of reasons, including the kinds of verification tasks which Dr. Moore described.

    Mr. REGULA. Well, there's so much to cover here, and it's 1:30, so I think we're probably going to have to adjourn. I think this is—in the great long-term scheme of things developing a rational, pragmatic energy policy is extremely important, if future generations are going to enjoy the same quality of life we do. It seems to me, again, as I said before, partnership is the key. This has been excellent testimony, and we'll look forward to the private sector witnesses and the state reacting to your budget proposal. Is there something that will work?

    Well, thank you all for coming.

WEDNESDAY, FEBRUARY 4, 1998.

BACKLOG MAINTENANCE HEARING FOR LAND MANAGING AGENCIES

WITNESSES

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BARRY T. HILL, ASSOCIATE DIRECTOR FOR ENERGY, RESOURCES AND SCIENCE, GENERAL ACCOUNTING OFFICE

CLIFF FOWLER, ASSISTANT DIRECTOR, GENERAL ACCOUNTING OFFICE

ROBERT J. WILLIAMS, ACTING INSPECTOR GENERAL, U.S. DEPARTMENT OF THE INTERIOR, INSPECTOR GENERAL OFFICE

ROBERT YOUNG, DEPUTY ASSISTANT INSPECTOR GENERAL FOR AUDIT, U.S. DEPARTMENT OF AGRICULTURE, INSPECTOR GENERAL OFFICE

Opening Remarks—Mr. Regula.

    Mr. REGULA. The hearing will come to order.

    I'd like to get the hearing underway for the Department of Interior and Related Agencies. We have a very important hearing this morning. We're pleased to welcome all of you and take your testimony.

    What triggered this morning's hearing, in part, is what I have before me, a maintenance backlog set of numbers that add up in to $12.8 billion (in 1998). That's a lot of money. That's a lot of backlog. What we're trying to determine is whether this is really a credible set of numbers. If it is, we have to take that into account in prioritizing the monies that we distribute in this committee.

    I said at the outset as chairman of this committee that we really have three classes of projects—must do to maintain and protect our resources; secondly, need to do, things that we need to do if at all possible; and then nice to do programs. We're interested in sorting those out. I think the nice to dos have to have somewhat of a lower priority.

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    The other point that I've been interested in is the need to take care of what we have. It is always more interesting to go out and buy new lands and build new buildings and not take care of the facilities that we already have. Yet, that is an extremely important responsibility of the agencies supported by the committee budgets.

PURPOSE OF HEARING

    The purpose of this hearing is to ascertain what the real backlog maintenance is. What is the basis for $12.8 billion? Is that real or is that just one of those windshield surveys or off-the-cuff decisions? How do you get to these numbers and are the numbers credible? Do we have a system in place, and this is very important, to prioritize maintenance requirements? Is there a system in each of the agencies to ultimately meet those needs and are they planning to reduce the backlog? We have to put a high priority on maintenance and taking care of backlog needs.

    We have two opportunities to do that. One is, of course, that there are monies available in the FY 98 Land and Water Conservation Fund, a very substantial amount, and I am disappointed that the report I received on Monday indicates that the Administration is not putting a very high priority on that. Perhaps we can address some of those opportunities. The second, of course, is the Recreation Fee Demonstration Project which offers an opportunity to address backlog maintenance.

    This morning we will hear from the GAO and the Inspectors General from the Department of Interior and the Department of Agriculture on our first panel, and then we will hear from the new Assistant Secretary in the Department of the Interior and from the representatives of our land management agencies. What I plan to do this morning is to take questions from our colleagues on the subcommittee after each panel so we can move the hearing expeditiously.

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    Do either of you want to comment?

    Mr. SKEEN. I think you've about covered it. Let's get on with it.

    Mr. REGULA. OK. Our first witness this morning will be Barry Hill, the Associate Director for Energy, Resources, and Science, the General Accounting Office.

    We're pleased to have you here, Mr. Hill. Your entire statement, and that's true for all of you, will be placed in the record. If you could summarize, it would be helpful given our time frame.



WEDNESDAY, FEBRUARY 4, 1998.

UNITED STATES GENERAL ACCOUNTING OFFICE

WITNESS

BARRY T. HILL, ASSOCIATE DIRECTOR FOR ENERGY, RESOURCES AND SCIENCE, UNITED STATES GENERAL ACCOUNTING OFFICE

MAINTENCE BACKLOG IN PARKS

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    Mr. HILL. Thank you, Mr. Chairman, I will be brief. Thank you very much Mr. Chairman and members of the subcommittee. It is my pleasure to once again appear before this subcommittee and to have the opportunity today to address the maintenance backlog issue in our Nation's parks. Before I discuss this issue, I would like to first introduce my colleague. To my right is Cliff Fowler, who is our Assistant Director in charge of National Park issues.

    Before I start my summary, I would like to briefly comment on what you will be hearing from this panel. You asked each of us to address a number of points related to the maintenance backlog situation at each of the Federal land management agencies. Bob Williams, from the Interior IG Office, is going to discuss those issues relating to the Bureau of Land Management and Fish and Wildlife Service, and Bob Young, to his left, from the Agriculture IG Office, will do it for the Forest Service, and Cliff and I will discuss the National Park Service.

    Specifically, you asked us to address the following three issues: First, what is the composition of each agencies backlog estimate; second, what is the reliability of these estimates, and third, how are the agencies managing their backlogs? In addition, you also asked us to discuss any recent requirements that have been placed on these agencies that may have a positive impact on what is being done in this area.

COMMON THEMES AMONG AGENCIES

    While the specifics vary from agency to agency, our reviews show some common themes running throughout our respective analyses. Overall, you will hear that each agency has significant maintenance backlogs that they are trying to deal with, and that there are issues with each agency's approach to managing their maintenance backlogs that need to be addressed. Specifically, the agencies' maintenance backlog estimates do not accurately reflect their maintenance needs because they include activities and projects that go beyond what is normally considered maintenance, such as new construction and the expansion or enhancement of existing facilities.

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    In addition, the maintenance backlog data are not reliable. This is largely due to the absence of a common definition about what should be included in maintenance backlogs and because of outdated information.

    And finally, the agencies do not have a systematic way of identifying total maintenance needs and tracking progress against these needs.

    On a positive note, recent new accounting standards as well as management changes prompted by the Government Performance and Results Act could, if properly implemented, help the agencies develop more accurate data on their maintenance backlogs and track progress in addressing these needs.

NATIONAL PARK SERVICE BACKLOG

    Now I would like to summarize the results of the work that we did at the National Park Service. At the same time as new parks are being added to the national park system and existing parks are being further developed and improved, conditions in many parks are deteriorating. An indication of this deterioration has been the increasingly large maintenance backlogs cited by the National Park Service and others. The Park Service has reported that the maintenance backlog has more than tripled over the past ten years.

    For years, the Congress has been concerned about the growth of the maintenance backlog at the same time that hundreds of millions of dollars are being provided each year to deal with it. The Park Service estimated, as of January 1997, that its maintenance backlog was about $6.1 billion. Most of this amount, about $5.6 billion, or about 92 percent, were construction projects. The remaining 8 percent, or about $500 million, consists of smaller maintenance projects such as reroofing or repainting buildings.

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    Our analysis of this estimate shows that it does not accurately reflect the scope of the maintenance needs of the park system. We reviewed the Park Service's list of projects in the construction portion of the maintenance backlog and found that at least 21 percent, or $1.2 billion of the $5.6 billion, is not for maintenance but for new facilities. We visited four parks to review some of the projects listed in the Park Service's maintenance backlog estimates and found such things as the following:

    At Acadia National Park, we found a $16.6 million project to replace the visitor center and construct a park entrance. Colonial National Historical Park included $24 million to build a colonial parkway bicycle and walking trail. Delaware Water Gap National Recreation Area included $19.2 million to build a visitor center and rehabilitate facilities. And Rocky Mountain National Park included $2.4 million to upgrade entrance facilities.

BACKLOG MAINTENANCE DEFINITION PROBLEMS

    Mr. Chairman, I would like to make one thing very clear. We do not question the need for these facilities; however, including these kinds of new construction projects or projects that expand or upgrade park facilities in an estimate of the maintenance backlog is not appropriate because it goes beyond what could reasonably be viewed as maintenance. As a result, including these projects in the maintenance backlog only contributes to the confusion about the actual maintenance needs of the National Park System.

    We also found that the Park Service's estimate of its maintenance backlog is not reliable. The agency does not have a routine, systematic process for determining its maintenance backlog. Instead, its maintenance backlog estimates are complied on an ad hoc basis in response to requests from the Congress or others. The most recent estimate of $6.1 billion was based largely on information that was compiled by the Park Service over four years ago and has not been updated to reflect changing conditions in individual park units.

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    Officials from the individual parks that we visited said that they were not even asked to provide specific updated data to develop this latest estimate. In fact, some of these estimates had changed significantly since they had provided them four years ago. For example, Acadia National Park's estimate to replace the visitor center and construct a park entrance had been reduced from $16.6 million to $11.6 million; and Rocky Mountain's $2.4 million project to upgrade the entrance facility is no longer a funding need at all because it is being paid through private means. This fact, as well as the absence of a common definition of what should be included in the maintenance backlog, contributes to an estimate that is both inaccurate and out-of-date.

    We also found that the Park Service has not used the estimated backlog in managing park maintenance operations. Consequently, it has not specifically identified its total maintenance backlog. Accordingly, the agency cannot determine whether the conditions of park facilities are improving or worsening. Since the backlog far exceeds the funding resources being made available to address it, the Park Service has focused its efforts on identifying its highest priority maintenance needs.

    However, given that substantial additional funds from the Demonstration Fee Program are now available to address maintenance, over $100 million starting in fiscal year 1998, we believe that the Park Service needs to more accurately determine its total maintenance needs and track progress in meeting them so that it can determine the extent to which they are being met.

NEW FEDERAL ACCOUNTING STANDARDS

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    Recently, new Federal accounting standards, as well as the management changes prompted by the Results Act, are in effect for the Park Service and for other agencies. If properly implemented, these tools should help the agency to better address its maintenance backlog. The Federal accounting standards require Federal agencies to develop better data on their maintenance needs. The standards define deferred maintenance and require that it be disclosed in agencies' financial statements beginning with fiscal year 1998.

    In carrying our the Results Act, the Park Service is requiring its park managers to measure progress in meeting a number of key goals, including whether and to what degree the conditions of park facilities are being improved. When fully implemented, this requirement should make the Park Service as a whole, as well as individual park managers, more accountable for how it spends maintenance funds to improve the condition of park facilities.

    In summary, Mr. Chairman, in our view there should be no free lunch. While the Park Service will enjoy the benefits of over $100 million annually in increased funding, now more than ever, it must be prepared to demonstrate what is being accomplished with these resources. To do so will require the agency to develop more accurate data on its maintenance backlog and to track progress in achieving it. If implemented properly, the new accounting standards and the provisions of the Results Act should go a long way in addressing the concerns that have been expressed by Congress and others over the years.

    Mr. Chairman, that completes my statement. I would be happy to answer questions from you or any other member of the subcommittee.

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    [The information follows:]

    "The Official Committee record contains additional material here."

    Mr. REGULA. I think what we'll do is have the other two panel members present and then we'll have questions from our members.

    Our next witness is Inspector General Williams from the Department of the Interior. Mr. Williams?



WEDNESDAY, FEBRUARY 4, 1998.

OFFICE OF INSPECTOR GENERAL, UNITED STATES DEPARTMENT OF THE INTERIOR

WITNESS

ROBERT J. WILLIAMS, ACTING INSPECTOR GENERAL

    Mr. WILLIAMS. Mr. Chairman, members of the subcommittee, I am pleased to be here today to provide testimony on our review of the maintenance backlogs of the Bureau of Land Management and the U.S. Fish and Wildlife Service.

    Before discussing the results of our review, I would like to make a comment about our audit coverage. Because of time limitations, we did not have an opportunity to determine whether personnel complied with procedures for establishing and managing the maintenance backlogs on a bureauwide basis. However, to the extent that testing was performed, we will provide our comments on our findings.

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BUREAU OF LAND MANAGEMENT MAINTENANCE BACKLOG

    I will now discuss the results of our review. For the Bureau of Land Management, as of September 1997, the bureau reported a maintenance backlog of $220 million, which comprises the bureau's corrective maintenance needs. The backlog includes corrective maintenance projects such as replacing floors and repairing foundations and road and trails that had been degraded or damaged.

    The backlog also includes cyclic maintenance that is performed on a periodic basis, generally at more than five-year periods, such as replacing roofs or repainting bridges. The corrective maintenance backlog does not include equipment or facility replacement, land treatments, the cost of equipment repair, or routine maintenance such as road grading, janitorial services, and recreational site cleanup.

    The Bureau's maintenance management system was designed to provide an inventory of facilities and information on current and future maintenance needs and on the condition of facilities for field offices to use in setting their priorities. However, the system is not centralized, and bureauwide information is compiled from data provided by each of the field offices.

    The Bureau includes items in its system based on maintenance needs identified by the field personnel during the course of their daily activities. There is no guidance on performing condition assessment surveys and no requirement for higher level reviews or approval of any items added to the backlog.

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    The cost estimates for backlog projects are usually developed by the field personnel, with some oversight provided by the state office engineering staffs. The estimates are generally prepared using historical data, such as bid abstracts, or general industry guidelines.

COST ESTIMATE PROBLEMS

    In our September 1997 audit report entitled ''Recreation Management, Bureau of Land Management,'' we concluded that the cost estimates in the Bureau's maintenance management system did not accurately reflect funding needs and that the cost estimates were often significantly overstated, unsupported, or inaccurate. The report also said that the system did not provide the Bureau with reliable information that could be used to make management decisions on prioritizing maintenance needs.

INADEQUATE CONTROLS

    The Bureau has not implemented adequate controls to ensure that the data in its management system are reliable. We identified wide disparities in the scope of work and the cost estimates for similar projects, especially for road maintenance, which accounts for $160 million, or 73 percent, of the Bureau's $220 million corrective maintenance backlog. For example, the Nevada backlog of $62 million was based on bringing all roads up to standard regardless of use or demand for improvements, whereas California's backlog of $10.4 million was based on bringing up to standard only those roads that were heavily used or for which there was a public demand for improvements. We estimated that if Nevada had used California's method, the backlog would decrease by $40 million. Conversely, had California used Nevada's method, the backlog would increase by $20 million.

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DEFINITION ISSUES

    We also believe that planned cyclic maintenance projects, such as replacing roofs, should not be included in the Bureau's backlog because such projects represent future, not deferred, maintenance. The inclusion of cyclic maintenance is not consistent with the recent Federal Accounting Standard No. 6, which defines deferred maintenance as work that ''was not performed when it should have been or was scheduled to be and which, therefore, is put off or delayed for a future period.''

    In recent reviews, the Bureau has also identified inaccuracies in its maintenance backlog. For example, in December 1997, the Colorado State Engineer reduced the backlog estimate for recreation sites from $1.3 million to $420,000 to reflect adjustments for projects that were no longer needed or had been funded and for work that had been performed as far back as 1991.

BACKLOG MANAGEMENT

    In terms of managing the backlog, according to Bureau personnel, corrective maintenance projects are identified and prioritized at the field level as part of its annual workplan and budget process. Working committees consisting of field and state office personnel determine the priority of these projects, with the highest priority given to health and safety. Bureau personnel said that priorities are assigned to a limited number of projects based on anticipated funding levels and that priorities are not recorded in the Bureau's maintenance management system.

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    Although the Bureau has established priority categories for its projects, it has not assigned priorities to specific backlogged projects at the national level or established a formal plan to address the backlog. Bureau officials said that a formal, centralized priority system was not needed because the Bureau's maintenance needs far exceeded funds available for maintenance.

    According to Bureau headquarters personnel, funding for maintenance is distributed on the basis of historic allocations. If funds exceed the previous year's funding level, the increase is distributed to each state office based on that state's percentage of scheduled maintenance needs or its percentage of the backlog as reported in the system. In using this method, the Bureau has little assurance that funds are always provided for the highest priority projects.

    We also found that the Bureau does not have formal procedures for tracking corrective maintenance accomplishments or for recording the costs incurred on individual projects, other than construction projects, in either its maintenance management system or in its financial accounting system.

    This concludes my discussion of the maintenance backlog for the Bureau of Land Management.

FISH AND WILDLIFE SERVICE MAINTENANCE BACKLOG

    Mr. REGULA. Thank you very much. Wait a minute, you've got one more.

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    Mr. WILLIAMS. For the Fish and Wildlife Service, yes. I know you're on the edge of your seats, but——

    [Laughter.]

    Mr. WILLIAMS. As of December 1997, the U.S. Fish and Wildlife Service reported that the refuge system backlog was $599 million, and that the hatcheries and other facilities backlog was $118 million. According to the Service, the backlog includes equipment and facilities replacements, provided that the replaced items are of similar size and purpose. The backlog also includes maintenance that is needed to repair or rehabilitate facilities or equipment, including the modification of existing facilities for new or enhanced functions if the project does not increase the size of the building by more than 10 percent. The Service's backlog does not include routine operational maintenance or the construction of new facilities.

    The Service's backlog is based on information contained in two maintenance management systems: one for its refuge system and one for hatcheries. According to Service officials, station managers at field locations develop the backlog data by conducting inspections to identify maintenance needs and by developing cost estimates for items entered into their automated systems. Regional office engineering staff is responsible for reviewing these estimates on an as-requested basis.

BACKLOG DATA AVAILABILITY

    At the six sites we visited, we were unable to determine whether the backlog data were complete and accurate because only 5 of the 174 projects we reviewed had documentation to support the recorded cost estimates, and the Service did not require that the results of the annual inspections be documented in its files. Although we found documentation that reviews of the backlog were conducted, we did not find documentation on the contents of the reviews or the adjustments that may have been made to the backlog data as a result of these reviews.

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    The recently issued Financial Accounting Standard No. 6 states that deferred maintenance should include only those costs of replacing parts and structural components and exclude the cost of expanding the capacity of an asset or otherwise upgrading it to serve needs different from, or significantly greater than, those originally intended. As such, we believe that the inclusion of costs for totally replacing equipment or facilities and for expanding buildings for new or enhanced functions is inconsistent with the Standard.

    As of December 1997, the Service's recorded backlog of $599 million included costs of $140 million for equipment replacement and costs of $150 million for facilities construction. We could not readily determine what portion of the construction costs were for replacing or for expanding facilities to provide new or enhanced functions.

    The Service uses its backlog data to select projects for funding and for allocating funds. Station managers rank projects recorded in the maintenance management system and assign the highest priority to health and safety projects. Other projects are assigned rankings on a judgmental basis to address that station's mission-essential needs.

PROJECT RANKING

    According to the Service, the rankings assigned to projects by field office personnel are reviewed at the regional offices to validate the health and safety designations. At the six sites reviewed, we found that the projects which had been assigned the highest rankings had been funded.

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    The Service relies on its regional backlog list and rankings for allocating funds to the regions. For refuges, funds are allocated to the regions based on their percentage of the backlog. For hatcheries, one-third of the maintenance budget is retained by the headquarters and is assigned to field locations for projects that address national priorities such as tribal fishery or mitigation programs. The remaining two-thirds of the budget is allocated based on each region's percentage of the total maintenance backlog.

    As with the Bureau of Land Management, the Service has little assurance using this method of allocation that the highest priority projects on a Servicewide basis are always funded. The Service has the capability to report its progress in managing the backlog. Specifically, the Service has a separate account in its financial accounting system to record the cost of each funded project. However, the Service's maintenance management systems are not integrated with its financial accounting system.

    Overall, we concluded that the Service has the framework for an effective maintenance management system, provided that personnel comply with the procedures described in my statement. This concludes my prepared statement.

    [The information follows:]

    "The Official Committee record contains additional material here."

    Mr. REGULA. Thank you.

    Our next witness is Mr. Robert Young, the Deputy Assistant Inspector General for Audit, USDA Inspector General's Office. Thank you for coming.

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WEDNESDAY, FEBRUARY 4, 1998.

UNITED STATES DEPARTMENT OF AGRICULTURE

WITNESS

ROBERT YOUNG, DEPUTY ASSISTANT INSPECTOR GENERAL FOR AUDIT

FOREST SERVICE MAINTENANCE BACKLOG

    Mr. YOUNG. Thank you, Mr. Chairman and members of the committee. I am pleased to be here to provide testimony about the maintenance backlog on Forest Service property.

    In response to your request, we reviewed the Forest Service system for determining the maintenance backlog, assessed reliability of the backlog data reported, and determined how the agency managed the backlog. We obtained information and interviewed agency officials at the Washington office, two regional offices, and four national forests.

    The Forest Service manages over 191 million acres and has almost $8 billion in plant, property, and equipment. These assets are extremely varied and include roads, buildings, dams, trails, bridges, and equipment, each of which require unique maintenance applications. Because of the millions of people visiting the national forests each year and the intrinsic risk of some of the structures, like bridges, to public safety, the management of maintenance is a very demanding, complex, and critically important activity.

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    In a paper prepared by the Forest Service to support its fiscal year 1998 budget request, the Forest Service stated that funding for its infrastructure was not keeping pace with the growing needs and the condition of the infrastructure was declining. It cited a maintenance backlog of between $7.3 and $8.3 billion.

    The maintenance backlog information currently reported by the Forest Service, except for 1997 roads maintenance data, was actually compiled prior to 1994. In general, the methodology to gather this information was not documented and the maintenance backlog figures reported also included various non-maintenance activities such as upgrading, reconstructing, and adding capacity to existing property. In general, the maintenance backlog information reported by the Forest Service was outdated, inconsistent, inflated, and not readily supported.

MANAGEMENT OF MAINTENANCE

    The Forest Service's management of maintenance, because of the decentralized organizational structure of the agency, is largely performed at the local level. Forest Service budget requests cannot adequately address the maintenance backlog because the annual funding requirements are not known. The budget process itself to some extent exacerbates this problem. Maintenance is funded through several budget line items, only one of these, infrastructure management, includes an expanded budget line item which appears to specifically denote maintenance. Other related budget line items combine funding for activities in addition to maintenance. As a result, accountability over maintenance becomes lost in pools of funds which can be used for various non-maintenance activities.

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    Funds are appropriated along line items, such as National Forest Systems, and not by functional activity, like maintenance. As a result, the funding is subjected to absorbing overhead charges as the appropriations are reallocated down through the organizational framework. Our review of four national forests disclosed that the total salary and overhead allocations absorbed between 32 and 50 percent of the initial appropriation before the funding was made available to the districts for expenditure. This impact on available funding contributed to the maintenance backlog at the operational level.

    In a 1991 review, GAO identified that the Forest Service did not have a system in place to record recreation maintenance. GAO made a series of recommendations, to include (1) instituting a requirement that maintenance needs data be collected, and (2) installing internal controls to ensure that the accuracy of the reported maintenance data backlog.

NO COMMON DEFINITION

    In 1994, we followed up on these recommendations and found that, despite the general agreement of the Forest Service three years prior, little or no corrective action had been taken. We also found that the Forest Service had not established a comprehensive, systematic method to collect, verify, and report backlog information. In addition, the Forest Service had not established a common definition for maintenance backlog, thus impairing the accuracy of the reported data.

    We recommended that the Forest Service establish performance measurements and objective, quantifiable, and measurable goals over maintenance activities. Once again, the Forest Service generally agreed to implement our recommendations. The Forest Service pledged corrective action. Concern centered around the development of an initiative called ''Meaningful Measures,'' a process whereby operations and maintenance activities could be tracked. However, during our current review, we were informed that the deferred maintenance component of Meaningful Measures had only recently been completed and is only now being disseminated.

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DEVELOPMENT OF PROPERTY MANAGEMENT SYSTEM

    In addition to Meaningful Measures Initiative for recreation, the Forest Service has been developing an automated system since 1993 called INFRA, short for infrastructure, which will serve as the agency's property management system. This system does not yet have the capability, however, for recording and compiling maintenance backlog. A Forest Service official informed us that the definition and business rules to determine maintenance backlog have not yet been agreed upon. The Forest Service stated that the system should have the capability to quantify and track maintenance backlog data by the end of fiscal year 1999.

    In summary, it is our opinion that maintenance should be classified as an expanded budget line item. This would require separate budget formulation and require that records be maintained to control expenditures. It would also provide much greater visibility for this critical activity. Further, we recommend that the Forest Service broaden its strategic plan, issued pursuant to Government Performance Results Act of 1993, to include developing strategies to strengthen its management over maintenance.

    This concludes my statement. I would be pleased to answer any questions that you might have.

    [The information follows:]

    "The Official Committee record contains additional material here."

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    Mr. REGULA. Thank you very much.

NON-RELIABLE DATA

    It seems to me what we've heard is a serious indictment of the way in which maintenance is being handled by all of the agencies. It's not for not knowing what should be done, but it's a matter of acting on your recommendations which apparently have been given to them over a period of years, plus the fact that we've had the requirement with changes in the Federal Accounting Standards and the Government Performance and Results Act. It doesn't appear to me that they are being implemented. My impression is that the data we receive is not reliable.

    I think there's a high priority in talking about it because it's supposed to generate funding, but there is a low priority on acting on the information available and there's not a very reliable basis to make these estimates. We've heard all kinds of numbers and that's why we're having this hearing; what's the basis for saying there's $10 billion, $12 billion, $14 billion in backlog maintenance. There is no common definition of what is backlog maintenance. In the Park Service it's new construction. I find it hard to believe that new construction is backlog maintenance, yet that number is thrown into the mix. There is no priority system that I can ascertain, and no system for reporting progress. It seems to me that there's a dearth of good management in dealing with something that's critically important to safety, it's important to the enjoyment of the parks, it's important to preservation. The President in his State of the Union mentioned that we need to maintain our treasures, preserve them, but I don't see a lot of evidence of a commitment to accomplishing that objective.

QUESTIONS FROM THE COMMITTEE

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    I had a lot of questions which I'll submit largely for the record, and for all the other members who want to likewise submit questions for the record, I hope you will be prompt in responding because we want this information in developing the 1999 budget. I thought it was an interesting comment that there ought to be a specific line item, a way of making sure that these funds get used for taking care of backlog maintenance. But, again, we need to know what's reality and what's just talk.

    I'd be interested, and I'd like an answer from each of you, have you made these recommendations and expressed these concerns in the past to the agencies that you're responsible for so that they are aware of the very problems that you outline in your testimony? We'll start with you, Mr. Hill.

    Mr. HILL. Yes, Mr. Chairman, we have made recommendations. As far back as at least ten years ago, when we first started addressing the maintenance issue and the maintenance backlog was appearing to become a problem, we have repeatedly pointed out the need to get a handle on this maintenance issue in terms of having some type of a system for just accounting for what the maintenance needs are and having some type of prioritization system for determining just where we're going to be funneling those resources to deal with the most critical maintenance problems.

NEED MORE AGENCY ACCOUNTABILITY

    As you accurately pointed out, I think the current requirements with the accounting standards and the Government Performance and Results Act reinforces the concern that the Congress as a whole has towards a lot of the Federal agencies in terms of trying to get more management and accountability in the operations of these programs. You can't keep just dumping money year after year and not see results. I think that's what these initiatives are really pushing toward.

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    Mr. REGULA. That's our goal.

    Mr. Williams?

    Mr. WILLIAMS. In terms of the priority systems and some of the maintenance management systems, we have done reviews and identified improvements and made recommendations for those for BLM. Currently, we're doing a maintenance audit of Fish and Wildlife, so we hope to make recommendations to address the problems we've identified in that particular review.

    But in terms of doing this review and getting a cross-cutting perspective, I think we've identified some new requirements and additional recommendations that either the Congress and/or the bureaus could consider in developing a plan or addressing the concerns that we have here today, such as a common definition for deferred maintenance that is consistent with the new Federal Accounting Standard. Again, the standard doesn't have to be in place until the fiscal year 1998 financial statements, so there's some time to get this thing in place.

    Mr. REGULA. Do you sense there is a commitment to do something?

    Mr. WILLIAMS. In discussing both what we found here with the Department and in some of the new efforts that are ongoing within the Department, yes, I sense that there is a definite commitment, as well as a willingness to improve the process and get things corrected.

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    Mr. REGULA. Mr. Young.

INVENTORY OF PROPERTY

    Mr. YOUNG. I guess what we have done is taken a step back from maintenance. We've worked with the Forest Service and made recommendations along the lines, first of all, they have to identify what property they own. That's been a problem within the Forest Service. As of now, they are working very hard in trying to do an inventory to find out exactly what property and equipment they own, where it's located, and then, based upon that, they will be developing the information concerning maintenance.

    A lot of this has to do with the new accounting standard which has generated the effort to try to pull together accurate figures that pertain to maintenance and also accurate figures that pertain to what property they own. In doing the financial statements over the last several years, we've had to take issue with the fact that they couldn't substantiate the figures that they were using for plant, property, and equipment.

    Mr. REGULA. Is it your feeling they've tended to ignore the recommendations? I might say, tongue in cheek, they ought to put a farmer in charge because he knows what he owns. But have they tended to ignore your recommendations?

    Mr. YOUNG. When it comes to trying to get a handle on what inventory they have or what property they have, they really haven't. They've initiated an effort, starting about 18 months ago, to try to, first of all, correct their systems so they had systems in which to collect the information necessary to get a handle on their property. By doing that, they will also get a handle on what type of maintenance they need and where the property is across the country, where problems are that need to be corrected. So yes, they are working on it.

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    Mr. REGULA. Mr. Skeen.

DEFINITION OF BACKLOG MAINTENANCE

    Mr. SKEEN. I think the most pertinent part of this whole situation is having a definition of what you're talking about. Evidently you've had these inspections in the past. Have you not gone through this exercise before?

    Mr. YOUNG. Yes.

    Mr. SKEEN. What was the result of establishing definitions of what maintenance requirements are and so forth? None?

    Mr. YOUNG. As far as the Forest Service is concerned, there is a varied definition. It depends on where you go. It's a very decentralized organization and each regional forest had a little different perspective of what deferred maintenance was or was not. So that's a problem to begin with and that's what they are working on, trying to get a common definition that can be used throughout the agency.

    Mr. SKEEN. I think that's what we need to start with right now. We have no track record of having anything that is a standardized system pertaining to that kind of work and the appropriations needed to handle that kind of work. That's what is so amazing to us. We're lost. The Forest Service could take us out and lose us in the woods, and the Park Service over there is going to build customized outhouses. It's about time we settled down because getting this money is getting tougher and tougher.

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    Mr. HILL. Mr. Skeen, if I could respond to that.

    Mr. SKEEN. I'm waiting with baited ears.

    Mr. HILL. We found a similar situation in the Park Service in terms of inconsistencies in the understanding——

    Mr. SKEEN. Do all agencies resist that, with kind of attitude is there that they would like to describe their own work needs and so forth?

    Mr. HILL. I don't know what the motivation of the agencies are, but from what we see, factually speaking, they are doing it differently.

    Mr. SKEEN. Each one of them?

    Mr. HILL. Each agency across the agencies. The thing I really wanted to point out to you was I think a lot of this confusion would be clarified by the new standards. I would like to read the standard to you because it is a pretty good definition of maintenance. It talks in terms of maintenance being ''the act of keeping fixed assets in acceptable condition.'' It includes preventative maintenance and normal repairs, ''including the replacement of parts and structural components and other activities needed to preserve the asset so that it continues to provide acceptable service and achieve its expected life.'' It also says that ''modifications or upgrades that are intended to expand the capacity of an asset are specifically excluded from the definition.''

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    Now if each of these agencies would adopt that definition, which they're required to do, I think that would be a giant step forward in terms of clarifying the problem and getting them all on the same level.

    Mr. SKEEN. I think it is just primary to dealing with this problem. If you don't have a common definition of this thing, we're like Alice in Wonderland down here because they sit there and tell you what they need in the way of money but they can't tell you why they need it.

    Mr. HILL. That's exactly right.

    Mr. SKEEN. Thank you, Mr. Chairman.

    Mr. REGULA. Mr. Kolbe.

INTERIOR AGENCY COORDINATION

    Mr. KOLBE. Thank you, Mr. Chairman, for holding this hearing. I think it is certainly needed to deal with something that the subcommittee has been trying to get a handle on, and it is obvious the agencies aren't getting a very good handle on it.

    Just following up on one point that was brought out in a line of questioning by Mr. Skeen and each of you described the different systems there. Three of the agencies we're talking about come under the Interior Department, the other one under the Agriculture Department, but I'm not sure that makes any difference. I'm kind of curious as to why we should be talking about each of these developing their own system for tracking this backlog. Is the mission so fundamentally different that we can't have a common way of defining maintenance needs throughout the property of the Federal Government? Why should we have separate definitions for each agency? And why should we have separate tracking systems for each agency? Why isn't there a common tracking system for these? Is anybody talking to each other about this, about getting a common system here? I don't know which one of you wants to answer that.

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    Mr. HILL. Let me start on a positive note. There is discussion going on within the Department of the Interior at least. The agencies have formed a committee or commission that is currently working on starting with that accounting standard and clarifying it within Interior in terms of what that really means. I think starting with that accounting standard is a good basis. Obviously, there is going to have to be some guidance, some policy interpretations in terms of unique resources, unique missions, unique roles of the various units—parks versus fish and wildlife refuges. There is some uniqueness to their missions and to what they're managing and there may have to be some clarifications and minor modifications of this definition. But you would hope that when it is all said and done, it would be a pretty standard definition of what maintenance is, and it certainly would not include the umbrella of projects and activities that are currently being included in that maintenance definition.

    Mr. KOLBE. If I might, and then turn to Mr. Williams here, but in listening to these three statements today, the only one of these agencies that gets a passing grade is Fish and Wildlife. It's the only one that appears to have developed any kind of a system. Why can't we use that as a model?

    Mr. YOUNG. In terms of the system, we have to start with the definition. If the definition is consistent, what you're looking at in terms of divergence between the bureaus is that the types of projects that go into those different categories. For example, as Barry mentioned, Fish and Wildlife would have protected threatened and endangered species—that would probably not be in any other bureau—so they would have to have projects captured under that category. But, again, we would only be looking for those that meet the definition of deferred maintenance. So that may be a way to capture common data elements for maintenance backlog. But I think you're going to have to have some separation or different modules for each of the bureaus to address those different and distinct types of projects that they would have that would not be in the other bureaus.

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    Mr. KOLBE. Okay. Do you have any comment on that?

    Mr. WILLIAMS. No, sir.

ACCURACY OF DOLLAR ESTIMATES

    Mr. KOLBE. We've seen some different estimates. You used the figure $6.1 billion in talking about Park Service for its maintenance backlog, $5.6 billion of which were construction projects. But you testified that the number is neither accurate nor is it current. What are the more accurate figures, do we know? Do we have any idea of what we're talking about here?

    Mr. FOWLER. No, we do not know and I don't think the agency knows. That's the whole point.

    Mr. KOLBE. Who makes the decision that construction of a visitor center gets into the list of maintenance projects? Is that being made at that park, is it being made at the region, or is it being made here in Washington?

    Mr. FOWLER. It's made at the park. Each park, as I understand it——

    Mr. KOLBE. Feeds up its list of maintenance.

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    Mr. FOWLER. Its list. For the figures that you cite, the $6.1 total and $5.6 in construction, each park submits its total list of needs. Now the distinction we're trying to draw and I hope this is clear to everyone is that the list of needs, must be a component of maintenance. A new visitor center, for example, while that is in the total list of needs, is obviously not maintenance.

    Mr. KOLBE. But not every new construction project ends up getting listed as a maintenance project; is that right?

    Mr. FOWLER. The construction projects that have been identified as being unique at a park are on that list of needs that we talked about. Now that list, I think the Park Service would even agree, that list is not real accurate because they don't really use it in managing, they don't use it in the way they're collecting their data. Basically, they are ad hoc estimates that they come up with when they're asked questions by you guys and by others.

    Mr. KOLBE. So it is not—the final question, Mr. Chairman—it is not used really in preparing the budget estimates, is that right?

    Mr. FOWLER. No, that figure is not. Their budget estimates are prepared on a year-by-year basis, recognizing that there is not going to be enough money to address all their needs. Obviously, their highest priority needs are what they put in the budget.

    Mr. KOLBE. For that year?

    Mr. FOWLER. For that year.

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    Mr. KOLBE. I'm still not clear how it ends up getting used that way.

    Mr. FOWLER. Well, let me try again. As a management tool, that total number, the $6.1 million total, $5.6 million construction, is not used as a management tool by the Park Service. They prepare those numbers to answer questions——

    Mr. KOLBE. Respond to Congress, basically?

    Mr. FOWLER. Basically.

    Mr. KOLBE. Thanks, Mr. Chairman.

    Mr. REGULA. I think Mr. Kolbe has hit on something, and that is to use some common definitions and perhaps the accounting requirements and the Results Act we could achieve that goal. As one committee with many different agencies, it would make it much easier for us if there were a common definition. I think you've made that quite clear that there's a wide variety of definitions, probably one definition for putting out press releases and another definition for doing something about it.

    Mr. HILL. Could I just say one thing, I mentioned this in my summary statement. We do not question the need for any of these projects.

    Mr. KOLBE. I understand that.

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DEFINING NEEDS

    Mr. HILL. Let's understand that. It's just a question of when you sort out what are their maintenance needs versus what are their construction needs versus what are other needs, it is all lumped together.

    Mr. KOLBE. I understood you. You made it clear and I understood we're not talking about whether these projects are valid or not, the question is are we talking about maintenance or not? Apparently we haven't been talking about maintenance at all.

    Mr. HILL. That's what you can't tell based on the way they account for this.

    Mr. REGULA. Mr. Skaggs.

SOLUTIONS TO ACCOUNTING ISSUES

    Mr. SKAGGS. Thank you, Mr. Chairman. Good morning, gentlemen. I'm always struck by sort of the similarities between politics and sportscasting in which you've got to be able to say the obvious and make it sound profound. So I'm going to take a shot at that just to make sure I'm getting it.

    Basically, budgets depend on policy and policy depends on facts. What you're telling us is we're not getting the facts or we're not getting a coherent data set from these agencies about one of the things we're responsible for formulating budgets about. Mr. Chairman, we don't have jurisdiction over OMB, but it seems to me that they ought to be at the table because, correct me if I'm mistaken here, it is the responsibility of OMB to try to identify and impose some accounting standards on the executive branch of Government, is it not?

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    Mr. HILL. Yes, it is.

    Mr. SKAGGS. Have they made any effort that you all are aware of to deal with this problem?

    Mr. WILLIAMS. They are issuing guidance for the Standard No. 6 for the fiscal year 1998 financial statements.

    Mr. SKAGGS. The new Federal accounting standards you all referred to?

    Mr. WILLIAMS. Correct. The effective date is for the fiscal year 1998 financial statements, which will be audited during fiscal year 1998, and fiscal year 1999. So when the bureaus generate their financial statements for fiscal year 1998, they will have to comply with the new Standard No. 6. So there is guidance coming out.

    Mr. SKAGGS. Prior to the issuance of Standard No. 6, was there any general guidance to executive departments from OMB about how to work these numbers?

    Mr. YOUNG. Not that I'm aware of. And, again, there wasn't any requirement to specifically report deferred maintenance in the financial statement.

    Mr. SKAGGS. So it is correct that the buck stops at OMB in terms of trying to find consistency and coherence in Federal accounting?

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    Mr. HILL. Well, we're viewing it from the standpoint of Interior and Forest Service. We're certainly seeing that the buck should stop at the Interior level. Interior has got three of these agencies that we're aware of that are doing this differently and inconsistently. At a minimum, the buck should stop there with regard to the Interior agencies.

    Mr. SKAGGS. No, I don't mean to suggest that a good financial officer ought not to have figured this out already and done something about it. But I also want to see who else in the chain of command ought to have been attending to the issue.

    Prior to this new Standard No. 6, wasn't there something in just generally accepted accounting principles about definitions that could inform this exercise of what's maintenance, what's deferred maintenance, what's new construction, what's additions? This isn't rocket science, is it?

    Mr. WILLIAMS. To the best of my recollection, there is not any specific standard other than for us to audit the information that is provided by the bureaus to assess that it is accurate. If they were reporting either maintenance or construction incorrectly or inaccurately, we would identify that to the bureaus and then they should have made the adjustments to their statements to correct that specific problem. But there's no specific standard. It is kind of our general standards to ensure that the information provided is supported and is accurate.

    Mr. SKAGGS. There's nothing that makes this judgment call as to a Federal Government building any different than it is for somebody dealing with this judgment about plant and equipment at Coca Cola, right?

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    Mr. HILL. That's correct. I think what triggered all this——

    Mr. SKAGGS. If that's correct, why aren't we merely making reference to generally accepted accounting principles that any CPA would apply to this issue?

    Mr. HILL. I think the requirement from the CFO legislation that the agencies have consolidated financial statements, I think as that has been unfolding, they have been seeing that there have been some difficulties, inconsistencies in terms of how you treat certain Federal assets and things of that nature. I don't know for a fact, I can only guess, that it may have prompted someone to look at the standard and realize that maybe we need to clarify this further because it is not being handled consistently.

USE OF ACCOUNTING PRINCIPALS

    Mr. SKAGGS. Just two other quick points, if I may, Mr. Chairman. It does seem to me it gets to the question of intention, whether you discovered very much of a conscious effort to mislead as opposed to sloppiness and just incoherence because standards weren't very consistent. By way of example, it seems to me if, under generally accepted accounting principles, a capital asset has exhausted its useful life, then the replacement of that, while perhaps more accurately described as new construction, could also be legitimately thought of as deferred maintenance. I'm wondering whether that's a legitimate question to raise on some of these, case-by-case.

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    Mr. HILL. There are some gray areas here. The example I always like to use is if you've got a 40 year old visitor center that was built to accommodate so many people visiting a park. It's getting old, it's deteriorating, needs a new roof, needs new plumbing, and has lots of maintenance that needs to be done on it. There's a point in time at which you'd say what we need to do is replace that visitor facility and build a bigger one, a more modern one, one that can comply with the ADA requirements, one that can handle more visitors to the park. Yes, there are some prudent things that need to be done in terms of upgrading and modernizing the park system or any of these other agencies. But from an accountability and an accounting standpoint, you would think there is a better way to account for that on the books. I think that's what we're talking about.

    Mr. SKAGGS. Agreed. If I'm a park superintendent or a district ranger in the Forest Service dealing with a situation like that, to put it in the deferred maintenance category isn't a fundamentally deceptive thing to do, is it?

    Mr. HILL. I think that portion of the existing facility should be considered to be a deferred maintenance item. If you're going to replace the original item with a bigger one that does something different or upgrades it, that is something else other than maintenance. That's an improvement or an upgrade. When you finally go ahead and put that facility on line and take out the old one, then you're going to make an accounting adjustment to your books to wipe off that portion of the deferred maintenance.

    Mr. SKAGGS. Thank you, Mr. Chairman.

    Mr. REGULA. Yes, Mr. Kolbe, who has jurisdiction over OMB, wants to make a comment.

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    Mr. KOLBE. Mr. Skaggs raised a very good point about the OMB, and my subcommittee that I share, does have jurisdiction over OMB, so I can assure you we'll ask them some questions about these kinds of standards and what they do or don't do. I appreciate your bringing it up.

    Mr. REGULA. Mr. Wamp?

    Mr. WAMP. Thank you, mr. Chairman. If misery does love company, today is a happy day. [Laughter.]

ACCOUNTABILITY

    The last time we were here it was just the Park Service and now it has expanded in terms of a critical review. The woodshed is getting full here. But this hurts. What I want to repeat for those who weren't here during the Park Service presentation, this is like a married person finding out their spouse is bouncing checks all over town. You still love that person deeply, but you don't like it. That's the way I look at this. I've got posters in my office of Park Service and Forest Service assets. I am so proud of what we have. This subcommittee is a delight to serve on. But this is like major pain for us to see this lack of accountability.

    I totally agree we need systems, and this is an editorial comment, and then I've got a couple of specific questions, systems and definitions and we've got to start somewhere to build a fence around more accountability. But some of this, frankly, I think is just a question of good common sense and someone taking responsibility up and down the chain of command. One of the problems we found on the $100,000-plus toilet problem at the Park Service is no one could be identified as the responsible person. It was just like somewhere in this agency there's a problem and someone doesn't come back and take responsibility for it. I think some of that, frankly, transcends a system or a definition of maintenance backlog. It really strikes at the heart of you might fix the system and still be back here in two years if we don't put chain of command in place at these agencies where there is more accountability built in.

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    There are dozens of questions, many of them we will submit for the record, many of them you've already answered in your questions and in your testimony. All the questions need to be answered. But I also think that at the end of this day everyone that is listening is going to know what needs to be done. Go ahead and answer the questions because we need to hear it, we need it for the record, but then just do it. I see a lot of hearings where the questions are answered and you all get rid of us and then it just goes back to the way it was. This one hurts too deeply in my opinion.

PRIORITIZATION OF FUNDS

    One of my questions really for the GAO is how does this muddy the prioritization between new programs and backlogged maintenance when we don't have this kind of definition? The one who is going to suffer is the person that uses the Great Smokey Mountain National Park or the Cherokee National Forest where they're expecting new put-ins to be built and we can't tell the difference between what is a real live construction capital need, as Mr. Skaggs said, and what's backlogged maintenance. They send a fuzzy budget up here and we've got this kind of inefficiency and we don't fund it, then the users raise cane with us that we don't care about our forests and our park service. They lose. We lose. You lose. We've got to do better. That's the editorial comment.

    The second question for each of you is, what kind of written recommendation—I know the IG plays a different role than the GAO by statute, by definition—but what kind of written recommendations do you have that we can look at, that you've made to these agencies for changes? You talked about how you made some recommendations for changes with Agriculture, for instance, of how they need to change their practices. What can we take today and try to put into application from specific recommendations you made? And do you need to make further written recommendations? You're knowledgeable. Having done these studies, you are knowledgeable about what needs to be done. We need to see annually that these changes are being made.

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    The GAO first, please.

ACCOUNTABILITY PROBLEMS

    Mr. HILL. Let me address your first question which dealt with how they currently account for this clouds up the problem. It clouds it up a lot. I think you've hit the nail right on the head. You basically don't know what you're paying for. You don't know what you're getting when you're giving them all this money. If you don't have a good feel for what you're total maintenance needs are, and total construction needs, and total land acquisition needs, or any other major expenditures in terms of maintaining, upgrading, modernizing, expanding your existing facilities, whatever your goal or purpose is, the first thing you need is a good inventory of each of these categories. And then you, Congress, working with the agency, sets the policy in terms of what do we want to do here, what do we want to do for the future.

    Certainly, one would think that fulfilling basic yearly maintenance needs would have a very high priority. We want to maintain what we've already put in place. That should have a high priority. But, obviously, we also want to think of the future in terms of making the park system, the fish and wildlife refuges and so forth even better for the public, the ever-expanding public that is visiting those facilities. So I think it is very important. And when you don't have a clear delineation amongst these various categories, you're really not in a good policy position to fund this in an effective way.

    Then there is the second double-whammy. Not only are you in a poor position to effectively fund it and manage it, there's no accountability. After you've given all this money, if they come back next year and say the backlog has grown bigger, you don't know what they've done with this money. If you're giving them $300–$400 million to deal with their maintenance problem, you'd expect there to be some accountability—here's how we spent that $300 million, here's the park's portion of the maintenance backlog we were able to address, here's what else has been added to the maintenance backlog. You're in a better position then to know from a funding standpoint just what needs to be done there.

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IMPLEMENTING REQUIREMENTS

    Now to your second question dealing with the recommendations. I think there's enough in place right now from a requirement standpoint. What we need to do is to keep our eye on these agencies to make sure they implement what they are already being required to do. I think between the accounting standards that are going to be put into effect, that really should help clarify from a definitional purpose just what maintenance is, and from the Results Act standpoint in terms of them having to specify what their goals are for managing these units, setting up performance measures that they're going to try to achieve, and having baseline data that we can on a year by year basis see exactly how are they managing this particular agency and how effectively are they achieving their goals, I think that is all in place.

    What is needed now is to hold the agencies' feet to the fire in terms of implementing what is already on the books. I think adding new requirements at this point would only confuse and basically give them more cover to say it's going to take us five or ten years to do this new requirement.

ACCOUNTABILITY FOR MAINTENANCE

    Mr. WAMP. Should these IG offices then take current rules and law and make recommendations for changes? Or have they? Do they exist, or do you need to do more work on making recommendations for management practices within these respective agencies?

    Mr. WILLIAMS. In terms of the accountability, we have done audits of the National Park Service and the Bureau of Land Management, and we're currently doing an audit of the Fish and Wildlife Service. So we have addressed some of the problems we've identified in terms of accountability for maintenance: how the funds are being spent and how the maintenance management systems are not providing the information that would be used to make proper decisions.

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    In terms of doing this review and talking with GAO, as well as Agriculture, we found that there is probably a need to look at some new recommendations. For example, one that we have talked about extensively is to come up with a common definition of deferred maintenance, particularly as it relates to the Standard.

    Second, even though there may be some requirements on the books, there's probably a need to clarify those requirements, particularly as they relate to standard and consistent procedures for doing condition assessment surveys, which identify and estimate the cost of projects, and for identifying priority categories so that you understand what is being funded; for example health and safety or endangered species projects. You can understand what the priority is and why it has been assigned.

    There is also a need to establish consistent procedures to update the backlog and approve any new items added to the backlog or to validate the cost estimates.

    Then there probably has to be a long-term plan, whatever that may be, five years or seven years, to accomplish that maintenance backlog. Once you have it estimated, you need to come up with a plan to attack that backlog over a period of years, as well as have a tracking system so that you can measure accomplishments. Tied in with that would be goals and performance measures to hold people accountable for accomplishing that particular plan.

    Finally, I think there's a need to integrate the maintenance management systems with the financial accounting systems. You will find that generally they are not integrated. If you try to go to the accounting system or the maintenance management system, you generally cannot reconcile the two. So you may be able to get some information from the maintenance system, but it won't tie into the financial accounting systems, and vice versa.

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    I think that lays everything out and gives you a plan. One of the things we have thought about is, as a result of this testimony, we should provide this as a report and make some recommendations.

    Mr. WAMP. Very quickly, Mr. Chairman. On a scale of 1 to 10, what kind of cooperation do you get from these agencies when you have to conduct a review like this and make recommendations?

    Mr. WILLIAMS. In most cases, I find it's a 10. They've been very cooperative with us.

    Mr. REGULA. It's nice that they cooperate, but we want some action. We'll be interested in your recommendations what we can build into the bill by way of requirements to get some standardization.

    Mr. Nethercutt.

AGENCY ACCOUNTABILITY

    Mr. NETHERCUTT. Thank you, Mr. Chairman. Welcome, gentlemen. Thanks for your work. Interesting to listen to this today and the commentary and the exchange between members and you as witnesses. I know there are some fine people sitting behind you that at some point probably spent some time in private life, nongovernment service. It just strikes me that the performance and the information, and I guess the deficiencies that you have identified here today, would likely never be acceptable in the private sector.

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    There seems to be some disconnection, with all due respect to people who are serving Government, but there seems to be some disconnection in this accountability question when agencies are operated in this fashion. I guess I'm struggling to try to get through that and make sure there is this accountability. I don't question the motives of people who are going to testify here today, but there is this disconnection that seems to make all of us suffer and struggle for some accountability, some requirements that people do what they are supposed to do. In private life, your board of directors fires you if you don't do the job well.

FOREST SERVICE ROAD MAINTENANCE CONCERNS

    Having said that, Mr. Young, I want to just focus on a couple of questions with you relative to the backlog for road maintenance in the Forest Service. Last summer, the estimate that the Forest Service came up with was about $5 billion. Now I understand that it is $10 billion, at least based on the new roadless policy and the moratorium that has been established by the Forest Service which affects my part of the country and the western States. Mr. Skaggs said that the policy depends on facts. So I conclude that if the facts are wrong, the policy ought to be wrong. Do you have any explanation, sir? In your review, did you find any justification or any enhanced reliability for the $10 billion maintenance figure on roads that the Forest Service came up with relative to their $5 billion figure some months ago? Or is it all phoney? Is it all unreliable?

    My next question would be, if that's unreliable, is the policy unreliable with regard to the justification for having a moratorium on road construction?

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    Mr. YOUNG. We did not specifically look at road maintenance as a separate item. What we found was a lack of support for all numbers. In trying to take a number and tie it back from a bottom-up type approach, that's where we ran into problems. There was simply a lack of documentation to support the numbers that we reviewed.

    I guess, in answer to your question, one of the problems in getting these numbers is a more basic problem, and something that the Forest Service is currently working on, I think we addressed in 1995. In that year, we gave an adverse opinion to the financial statements. One of the primary reasons for that was the basis that they did not have a handle on plant, property, and equipment. They didn't have a reliable number. I think that stems back to some of the problems we have. They took our recommendations and are currently working on them to try to get a better inventory, a better handle on what they own and where it is located. In that process, I think they will also get a better handle on maintenance and what a good number is and have the support necessary that when they provide a number they have the support to justify that number is correct.

    Mr. NETHERCUTT. Do you have any idea how long it might take the Forest Service to come up with numbers that are reliable, that you could certify as being accurate and reflective of the maintenance requirements? What is the shortest time you think it could be done and you could get some reliable information?

    Mr. YOUNG. Right now they are projecting to have that work done at the end of this fiscal year. So starting in fiscal year 1999 they are projected to have a good number that we can deal with. We're trying to monitor that. They have a tremendous amount of work to do to accomplish that in the next eight or nine months.

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    Mr. NETHERCUTT. I'm informed that there's been discussion that there's been work on this for the last 18 months already. Is this then a two year project, thereabout, it should take to come up with this information?

    Mr. YOUNG. Yes. When we issued our financial statement, that was one of the reasons for the adverse opinion. At that point in time, they initiated a project to try to address all their accounting problems. One of the biggest problems is getting a handle on plant, property, and equipment—how much is it worth, where is it located, what do they own. They have been working on that essentially for the last 18 months. It's a huge undertaking by the Forest Service and it just takes time to do.

OBTAINING RELIABLE INFORMATION

    Mr. NETHERCUTT. How about you, Mr. Hill, Mr. Williams, what is your sense of how long it would take the agencies that are under your review to do their work to come up with some reliable information upon which we can judge whether the policies that they are implementing based on that information is good or bad?

    Mr. WILLIAMS. As I mentioned, Accounting Standard No. 6 is required for the 1998 financial statements. Today it doesn't appear that the Department of the Interior will have a problem in meeting that particular deadline. But until we audit those statements in support of those particular numbers, I really can't comment. But once we've completed the financial statement audit for 1998, we'll have a better handle on that. But right now, it looks as if they're on schedule.

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    Mr. NETHERCUTT. Any comment, Mr. Hill?

    Mr. HILL. I'm going to let Mr. Fowler answer that. He's probably has better information than I have.

    Mr. FOWLER. I would pretty much agree with what Bob just said. The only other point I would add is that to play all that out in a meaningful, accurate way, in the case of Park Service, doing that is going to require development of some good baseline data on what current conditions are in the park system. That's a core thing that needs to be done. I think that will take some time.

    Mr. NETHERCUTT. I've only been on this subcommittee for three years, and it's a wonderful opportunity, but I've heard this before. It has gone on every single year. It's ''We'll get the job done.'' It isn't done.

    Wouldn't it make sense, again, a little bit facetiously, but wouldn't it be a fair policy for the agency heads or those who have jurisdiction and responsibility, where the buck stops, to say if I don't get this job done, I'm out. Or is that too harsh?

    Mr. YOUNG. That's too drastic.

    Mr. NETHERCUTT. Okay. We politicians have to do it. People in public life many times have to do that. We have to say this is my commitment, if I don't get it done, hire somebody else. I don't know any other way. Maybe you have a suggestion.

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    Mr. YOUNG. I think you ought to ask the next group that question.

    Mr. NETHERCUTT. Not going to touch that one? Okay. Thank you all.

    Mr. REGULA. We're going to have two votes. Mr. Miller, would you like to ask your questions before the vote?

    Mr. MILLER. No, I'm not going to have any questions, Mr. Chairman.

CHANCE OF ACCIDENTS

    Mr. YATES. I just have one question, Mr. Chairman.

    You had talked about the backlog in maintenance that is estimated at $14 billion. To me, that raises the specter of danger, of the possibility that because of the great need of corrections to be made, it raises a greater possibility of accidents. Have you in your research encountered any connection?

    Mr. HILL. All I can say is the maintenance backlog problem is a real problem, there's no question about that. With regard to the National Park System, there are definite maintenance needs and needs that affect health and safety issues at the parks really need to be dealt with.

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    Mr. YATES. Forest Service has it too, hasn't it?

    Mr. HILL. And the Forest Service. I think in every agency there is a real maintenance backlog problem. What we're trying to talk about here is no one really knows the extent of this maintenance problem because, from an accounting/accountability standpoint, there's a lot of things lumped into what is currently referred to as a maintenance backlog.

    But there is no doubt about it that in each of these units there are definite serious maintenance problems that have to be dealt with.

    Mr. YATES. Are you redefining what maintenance is so that we do have some precision?

    Mr. HILL. The accounting standards are currently clarifying what is being defined as maintenance for the purposes of including them in the financial audit statements that will be required.

    Mr. YATES. So that you won't be able to make a statement like that next year, will you?

    Mr. HILL. I sincerely hope not. We'll see.

    Mr. YATES. Thank you, Mr. Chairman.

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    Mr. REGULA. We're going to recess. We have two votes and then we will come back. It is my intention to finish the hearing, to go straight through until we finish it.

    [The information follows:]

    "The Official Committee record contains additional material here."

WEDNESDAY, FEBRUARY 4, 1998.

UNITED STATES DEPARTMENT OF THE INTERIOR

WITNESS

JOHN BERRY, ASSISTANT SECRETARY FOR POLICY, MANAGEMENT AND BUDGET

    Mr. REGULA. We will reconvene.

    Our next witness is John Berry, Assistant Secretary for Policy, Management and Budget.

    Mr. Berry, I've been very aware that in the few months that you've been at Interior, you're trying to work in the same direction that we are. So we look forward to your testimony. As you heard this morning, there are obviously some problem areas that we need to try to address, working together. So we look forward to hearing from you.

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    Mr. YATES. Mr. Chairman, I understand the Smithsonian has just gone to pieces. [Laughter.]

    Mr. REGULA. Well, they'll probably come up and need a little money. [Laughter.]

    Mr. BERRY. Mr. Chairman, thank you. I very much appreciate it. I am especially pleased that the first testimony of my life is before this subcommittee and under your leadership, and Mr. Yates, Mr. Skaggs, and Mr. Nethercutt. Thank you for your support.

    Mr. Chairman, if it's okay with you, what I plan to do is submit my testimony for the record. I would like to go through six points.

    Mr. REGULA. Without objection, the entire statement will be a part of the record.

MANAGEMENT ISSUES

    Mr. BERRY. I'd like to touch on a couple of points. First, thank you for the focus and attention you have brought to this subcommittee. It is clear that you have identified the management problem,—and we are very grateful—and provided the resources to begin to move out on the solution. I think what we need, and what I hope to lay out for you today, is a management plan. The plan will show you that we can get you the information that you need to hold us accountable so that together we can resolve and get away from discussion of a backlog. I think more than a money issue, this is a management issue. We need to show you that we can spend those resources well to justify getting the additional money that might be needed.

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    I've been on the job now for 10 weeks. Before I was sworn in to this position I came to your last hearing and sat in the back of the room for the whole hearing. I was well aware of your attention to this. So from the day I walked in the door, this probably has been my number one priority.

    We have responded to the directive that you gave us in the Conference Report and have contracted with the National Academy of Public Administration to do a top-down review of the Denver Service Center, the National Park Service, and their construction management practices. Their midterm report is due April 1; their final report is due June 15th.

REVIEW BOARD AND PRIVATE SECTOR PRACTICES

    We have an eight member review board. In the contract I specifically made the point that we wanted a strong private sector and a State and local perspective on the board so that it would not just be a Federal perspective in looking at these construction practices. I know from some of my friends in the private sector community that construction management has gotten extraordinarily lean in the past 10 years. It has really gotten down to the bone. Most people are using management practices where they don't even have secretarial assistance anymore; that is, they are very efficient. The bottom line is if we can't be as efficient, then we ought to get out of the business.

    Mr. REGULA. You're saying the private sector?

    Mr. BERRY. The private sector practices in terms of construction management.

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    Mr. REGULA. Yes, right.

    Mr. BERRY. That ought to be the standard by which we are judged. So we have asked, and I have asked, and made clear to the National Academy that I want this to be a top-down, bottom-up review, no holds barred. They should feel free to come in with any recommendation, but the standard that I want to hold them to is the private sector. If we can't do it as well, then we ought to get out of the business.

    So we're going to be working on that, and we'll be sure to keep you in the loop as we get reports back from the Committee and make sure that the staff is well aware as we move forward with that study.

CONSTRUCTION LISTS FOR 1999

    Let me move in to more of the topic of today's hearing with you. My third day on the job I asked for the construction management list, and I received a number of them. They have been compiled over the years for a variety of different reasons. The total numbers go from $3 billion to $12 billion—it's all over the place. I realize this is a mess; it's a mess for us, and it's a mess for you. How do you get your hands around this chimera that keeps moving around?

    So what I did was throw them all out, and start over. We didn't have the time, because of the budget preparation for our 1999 budget that was coming to you, to do everything that I wanted to do. So I've developed a two-prong approach. The first approach is for the 1999 budget I've directed the Bureaus—and you have a copy of a memorandum in front of you, and we've submitted some other memoranda for the record along this regard—to develop a prioritization list that will have essentially three categories on it. The first is urgent, life, health and public safety projects—construction projects that are needed to protect either the public's life, health and safety, or our employees' life, health and safety. Those should be the first projects we look at in addressing the backlog.

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    Mr. REGULA. This is for all three?

    Mr. BERRY. This is for all of the Interior Bureaus.

    Mr. REGULA. All right.

    Mr. BERRY. The second category, Mr. Chairman, is ongoing construction. I was concerned, obviously, that if you had started construction projects, we didn't want to stop in midstream. It would be a waste of money to stop. If the Congress had already appropriated funds and something was under construction, we ought to continue or complete those projects. So there will be a second categorization listing so that you'll be aware of what those projects are.

    The third categorization is urgent natural and cultural resource issues. This is a category that we wanted to put in because neither of us want to be embarrassed if there is something there that you need to know about. If Lincoln's birth place home, for example, was going to collapse, or if there is an action that the Fish and Wildlife Service should take to protect an endangered species that might go extinct, you ought to know about that and we ought to know about that. Even though it may not affect life or health and safety, it is, obviously, critically important in a public policy sense, and we ought to make you aware of that. So we'll have those three categories.

    We have been working with the Bureaus to scrub the lists that they have submitted and make them fit into those three categories. As of this point, the only one that we're happy with and will be submitting to you in the green books is the Fish and Wildlife Service. In the green books that you'll be getting there will be an asterisk essentially saying that this list will be submitted at a later date. My target is that we will have those to you by the end of February in time for your hearings.

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    What I've told OMB, and I'll make the same commitment to you, is that we will give you these lists for review with a veto pen. We'll give you the rationale for why every project is in one of those three categories. If you don't think it passes the laugh test, we'll take it off the list. We'll just strike it. What I would like to do is build a consensus that among OMB and you and us that we will all agree that this is a pretty solid list, that these are good projects and we ought to move out on them, and we ought to identify the resources. What we ought to do is take all the different pots of money that you've given us—like that 20 percent fee money that is supposed to be distributed nationally—and apply them toward the list. Eighty percent is supposed to go back to the park, but the 20 percent nationally ought to go toward this list. If there are projects on the list that are in the park, their fee money ought to go toward these projects first, and then any of the repair and maintenance monies that you give us in the budget for 1999 would, again, be applied to this list. You would be able to check projects off the lists and hold us accountable. This is the list, this is what's done, and one by one they're coming down—in other words, we're addressing that need.

FIVE-YEAR CONSTRUCITON PLAN

    The second prong of this attack is more of a long-term strategy, and Mr. Nethercutt, this is where it gets to the point that you had raised. You were asking, can we get an idea of this number? Can we get another list?

    Respectfully, sir, I would say that would be a waste of time. We don't need to know—whether it's three, six, twelve, or ten billion. I don't care. What we need to do is give you a manageable plan that identifies the needs consistent with a prioritization system that to which you can evaluate and make changes. At the end of the day we'll agree that it's a good system. By the year 2000 budget, next year's budget—and we've already started working on this—we will submit a five-year construction plan for each of our Bureaus. It will be a five-year plan for repairs and rehabilitations, and it will be a five-year plan for our construction projects, and that will be an improvement. Once that plan is in front of you, that's the backlog. If it isn't on that list, it can wait until the sixth year. In other words, we will have prioritized it in such a way so as to make you aware of what the backlog is. You will have in front of you a plan. Rather than wasting a lot of time having people come up with the twelfth list, with a new twelfth total number which won't help us manage this, I would rather take that energy and put it toward a five-year construction plan that you can have in front of you to evaluate at next year's hearing. So that's the second prong in our attack.

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    I would stipulate to everything that was said this morning before. In other words, I agree with all of the things that were said this morning by the investigators. I found the same things and have the exact same concerns. What I would like to do is, knowing this, move forward with our game plan.

    The second thing that they've identified is there are different definitions across Bureaus—and I'll submit this for the record, Mr. Chairman—I credit the IG for bringing this to my attention. In addition, we also have a report—and I apologize because we just got clearance last night to give it to you, but we'll make copies available to the Committee—that has been worked on for the past year that essentially also backs up everything the investigators have said this morning. We've had our own Bureaus looking at it. This is a mess and we need to clean it up.

INTERIOR PLANNING DESIGN AND CONSTRUCTION COUNCIL

    What I have done to resolve that is yesterday, after the IG brought this to my attention on Friday, I appointed the Interior Planning Design and Construction Council. It will be chaired by Sky Lesher, the Deputy Chief Financial Officer, and Mike Koss, Director of the Office of Management Risk and Public Safety. There will be representatives from each of the eight Bureaus. I have given a directive with the following task: by the end of February I want common definitions and standards on what is repair, what is operations, what is maintenance, what is repair and rehabilitation, and what is construction. This isn't, as people have said over and over, rocket science. We ought to be able to say if we are replacing a visitor's center, for example, and that we're expanding it beyond 25 percent of its original size, then we can define that. It should be X percentage; if it's larger, it goes into a new construction category; if it's under that, it's replacement. We ought to be able to define that, and it ought to be standard. Those definitions ought to apply to all of our Bureaus consistently. The problem you have here is that one day you have the Park Service in front of you that has an operations and maintenance account that merges operations funding of the parks with maintenance funding. The next day you've got Fish and Wildlife in front of you that separates that, so they've got a maintenance account that is separate from operations. This needs to be consistent for your evaluation of us so that you can hold us accountable for how the money is being spent, and for our managers to know how the money is being spent.

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    So by the end of February the Council is supposed to come up with those definitions and standards. By the end of March they're supposed to come up with the procedures and processes for how the agencies can then manage those definitions, fitting them into each of their existing systems.

    Now, I don't think we need to waste a lot of money on buying new computer systems. We ought to not reinvent the wheel. I don't think every agency needs to have the same computer system or even the same software. As long as they can produce and make their system shape to the same definitions, I don't care what system they're using to get there, as long as what they get can be evaluated.

    By the end of April, they are supposed to have the guidance to the Bureaus on how to prepare the five-year plan for the year 2000 budget, so that we can submit that to you next year in a timely manner for your evaluation. That is one of my strong goals.

    Finally, and let me close with this, Mr. Chairman. In the budget that the President is submitting to you this year, we've got the message. OMB heard, we heard from you, and the priority that you have put on this is exactly right. I think the country owes you a debt of gratitude. You told me once when I was at the Smithsonian, that if you don't replace the roof of a barn, you will lose the walls within a year. It's that hole the size of a nickel in the roof that can lead to a hole the size of a couch in the wall and then the whole structure collapses. So if you can fix that nickel up front, it will cost you ten bucks. Later on it will cost you a lot more, and we need to get this together so that we can show you. We really appreciate the resources you've given us in the past.

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1999 BUDGET INCREASES

    In the budget this year we are requesting some significant increases along these lines. For the Park Service, we are going to be requesting a 115 percent increase over their baseline for the repair and rehabilitation account, and a 95 percent increase in the cyclic maintenance program. I'll be honest with you, if we didn't have that list that I was telling you about categorized and prioritized in terms of life, health and safety, urgent critical natural and cultural, and ongoing construction projects, I would be remiss to support an increase of this size. But I think you're going to be happy when you see this list, and when we come up with that list, you'll be able to see a direct correlation of where that money is going and what's getting fixed with it. That's my goal, and that's my hope and my pledge to work with you in that regard.

MANAGEMENT RESPONSIBILITY

    Finally, I think there's a lot of questions about where the buck stops. I don't think the buck stops at OMB. I think it stops right here with the guy right in front of you. OMB is super to work with. They were super in preparing this budget. They actually were absolutely a delight to work with. I think they are probably, among Federal agencies, the most unappreciated of Federal civil service but are among the most dedicated hardest working people. They really go the extra mile, and they worked with us and put together a plan that I think you're going to endorse when you look at the increases. We really got the message on this repair and rehabilitation thing.

    They have charged me with the management responsibility, and I have laid in front of you the plan of what I want to do. I hope it passes your muster and we can agree that if you'll endorse, we'll roll out on it and we'll work together on it. If a year from now, I can't put in front of you a five-year plan, you ought to ask for my resignation, period. Mr. Nethercutt, you're right—I'm the one who's accountable, and I serve at the pleasure of the President, but the reality is that Congress controls the purse, and I know that well. I've worked with the Appropriations Committee for 10 years. If we can't give you the information that you need to hold us accountable, you can't do your job, and, therefore, you ought to ask us to get the heck out of the way.

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    So I make you that pledge. If I can't live up to this in a year, you ought to ask for my resignation, and I think I would happily give it to you.

    [The information follows:]

    "The Official Committee record contains additional material here."

    Mr. REGULA. Thank you, good statement.

    Is the Forest Service working parallel with you? Are you communicating?

    Mr. BERRY. I've talked with Jim Lyons, and I believe they're going out at the same time. I can't really speak for them, Mr. Chairman. We are in communications.

    Mr. REGULA. Well, we'll have an opportunity to ask them in the future.

    Mr. Yates.

    Mr. YATES. I am very impressed with the statement you made and the procedures that you've outlined that you propose to pursue. I think there's something that makes me wonder, though, well, where have you been? [Laughter.]

    I had the impression that Bonnie was a pretty good Assistant Secretary. Why didn't she come before us? I don't remember her testifying as you are testifying, but she was there and she was the presence. For all the deficiencies that are present now and that you are seeking to correct, apparently, she wasn't as efficient as we had the impression that she was.

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    Is my impression wrong?

    Mr. REGULA. Take the Fifth. [Laughter.]

    Mr. YATES. Anyway, I think you outlined it well.

    What are your—what do you see as your principal problems?

    Mr. BERRY. I'll tell you, I think——

FUNDING NEEDS

    Mr. YATES. Is it lack of money?

    Mr. BERRY. Mr. Yates, we have more resources established in this year's budget, so, yes, there's more money that can be applied to this. The backlog clearly exceeds the monies that we've been getting.

    Mr. YATES. Do you need more money?

    Mr. BERRY. In the budget there is a request for increases, Mr. Yates, yes, sir.

    Mr. YATES. Do you need more money?

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    Mr. BERRY. Yes, sir.

    Mr. YATES. Okay. [Laughter.]

    How much more money do you need?

    Mr. BERRY. In the budget request you've got in front of you there's some pretty significant increases, and, to be honest with you, this is going to go against something my grandfather told me long ago. He said——

    Mr. YATES. Well, you should never go against your grandfather. [Laughter.]

    Mr. BERRY. You're right.

    He told me, Mr. Yates, ''If somebody offers you something, take it with your left and hold out your right.''

    In this case, I think what we need—these increases are significant. What we need to do is build a trust with you, and we need to restore our credibility with you. That is my game plan for this year. I can——

    Mr. YATES. Well, you've started out well, let me put it that way.

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    Mr. BERRY. I don't think we need more money than what we've requested in the budget, to be honest with you, because——

    Mr. YATES. Yes, but those are increases.

    Mr. BERRY. They are increases.

    Mr. YATES. But you need that money?

    Mr. BERRY. We could use that money, and we could put it toward this plan.

    Mr. YATES. That isn't the same thing. You need that money?

    Mr. BERRY. Yes, sir.

    Mr. YATES. All right. Just the fact that you can use it doesn't mean the same as needing it. Now do you need it?

    Mr. BERRY. Yes, sir. [Laughter.]

    Mr. YATES. You don't remember what the figure is?

    Mr. BERRY. I can get you the numbers. This year there's an $82 million increase over fiscal year 1998 for the National Park Service.

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    Mr. YATES. Total? Just for the Park Service?

    Mr. BERRY. That's just for the Park Service. We do have increases requested for Fish and Wildlife and the Bureau of Land Management, and we'll get you those, and the Bureau of Indian Affairs. I'm including the Bureau of Indian Affairs in this, and I think that's an important point to point out. We have some significant safety and health issues in our Indian schools, and I think it's our responsibility. If we're going to continue—if the Federal Government is going to accept the responsibility for educating these children, we need to provide them a safe environment in which to go to school, and I was in some schools in North and South Dakota two weeks ago that I would not have my nieces and nephews in. They are not safe, and we need to correct that. We're going to have a request for increases there as well for you, but it's going to be on the same prioritization list. I'm holding them to the same standard. They've got to—we're going to put in front of you a list that——

    Mr. YATES. Well, you better move those up because that's a question of health and safety, and I think that should come first.

    Mr. BERRY. Absolutely, that's our first priority. The standard that I'm applying to all the Bureaus, Mr. Yates, is life, health and safety first for either the public or our employees. If it affects the health or safety of our visitors, that ought to be priority number one. That's our chief focus in 1999 for this year. Next year what we don't finish this year will become, obviously, the priority for year one of that five-year plan. That's going to be the bulk of our first year request. In other words, the same priority will be there for you in that five-year plan.

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    Mr. YATES. Your request for the Park Service is about $80 million. Now you haven't told us what the other funding is, and you've said you need that.

    Mr. BERRY. I do have the total here, Mr. Yates. The total maintenance we're requesting is $546 million for 1999 in the budget request.

    Mr. YATES. Just for this year?

    Mr. BERRY. Just for 1999.

    Mr. YATES. What was it last year?

    Mr. BERRY. $464 million.

    Mr. YATES. So you're raising it by $60 million, right?

    Mr. BERRY. More like $80 million.

    Mr. YATES. More like $80 million?

    Mr. BERRY. Yes.

    Mr. YATES. Okay, that's going to take a little doing, I think, but to the extent that we can, I think you're off on the right foot, and we'll see what we can do.

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    Mr. REGULA. You're talking about need here, but based on the testimony we've heard thus far, predicated on what? You're going to have to come back to us and define these with greater clarity to ensure that it's not just a number that you pulled out of the sky.

    Mr. BERRY. Absolutely. Mr. Chairman, that's my goal. The list that we're going to give you, when you look at these lists, they'll be line item projects, and you and your staff will be able to go down with a pencil and eliminate those that you don't think pass the laugh test.

    Mr. REGULA. To verify the $546 million in question?

    Mr. BERRY. Right, and I guarantee you if our lists don't total up to those numbers, then I won't request the money. But I'm pretty confident looking at just the general lists that we've gotten to date—Bob, do you have that book?

    Mr. LAMB. Yes.

    Mr. BERRY. Let me show you why this is taking us a little longer than I thought.

    Is this just the Park Service?

    Mr. LAMB. No, that's everybody. Those are the lists.

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CONSTRUCTION LISTS PRIORITIES

    Mr. BERRY. These are the lists that we're going through and we're scrubbing, just to give you a size of the——

    Mr. YATES. That you're scrubbing?

    Mr. BERRY. We are scrubbing. We're going through and prioritizing what affects life, health and safety first so that we can break out because in all these pages it's a mix-match, I'll be honest with you. It is not prioritized as carefully as it needs to be, and that's what we're doing. I was not happy with submitting a list that did not have that careful prioritization, and so we couldn't—in all honesty, I didn't get in here until the end of November. So in terms of the budget time line I just couldn't get it done before the time to go to print, but we'll have it done by the end of February for you, and then you'll be able to look at that, and we will have given it a good scrub to those standards—the life, health and safety, and urgent natural cultural resources, and ongoing construction projects, those three categories. In that way, with the lists that you will have you will know that it's legitimate and where the money, if you give us money, will go. In other words, no longer will it be just, well, if you give us money, we'll make some progress on it, and you don't know what you've gotten.

    We'll give you a plan. You'll have a list, and if you give us the funds, we'll be able to show you how it's solved. That's the game plan, or that's my game plan.

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ANNUAL MAINTENANCE FUNDING

    Now, with your permission, Mr. Chairman, there is one—and I'm not asking for it this year, but if this works, if we're successful in getting a five-year plan in front of you, one of the things that you'll see in this report where they compared us to the private sector, that the Government is not good at doing, is the annual maintenance, the fixing of the nickel-size hole. The maintenance levels that the Federal agencies have been receiving have been pretty straight-lined in terms of just the annual maintenance level. I don't have this, and I'm not requesting this now, but I just want to warn you that what may come out of this at the end of the day after we do the five-year plan is let's show you what the plan for the backlog is and what needs to be done to address it. But we may request a year from now an ongoing increase in the annual operations or the annual maintenance monies that are spent for fixing those nickel-size holes so that we don't get into a situation where there's a backlog again.

    So that would be my longer term goal, but I'm not ready to ask you for a year yet. That, I think, is next year's thing. I need to restore our credibility with you in terms of getting over this backlog. There ought not be a term called backlog. We ought to have a management plan in front of you. We ought to have a game plan for how we're going to fix it, and then there's no more discussion about a backlog.

    You can't be held accountable by the American public for this backlog because we haven't put a plan in front of you. Once we've got a five-year plan in front of you, if the Congress decides that you're not going to provide the funds for the plan, then that would be an issue of accountability. Until we can put that in front of you, it is unfair to hold the Congress accountable for this.

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TITLE V MAINTENANCE FUNDING

    Mr. REGULA. As you know, I insisted on backlog maintenance being included in the FY 1998 Title V, and the request from your three agencies for those funds to include not only land acquisition but also backlog maintenance.

    Did the agencies submit requests for that, for the 1998 Title V money?

    Mr. BERRY. For the 699 amount?

    Mr. REGULA. Right.

    Mr. BERRY. Yes, the special one-time fund. Sir, this plan that we're developing for 1999 would also be the same list that we would work against with 1998 resources.

    For example, the 20 percent of the fee monies that the park has for 1998 would be applied toward this prioritization list. Any monies that you agree to set aside out of that $699 million, we would propose would go toward this list. So you will have one list. We have a lot of pots of money out here, and I think whenever you have a lot of pots of money coming from different directions, it's important that you have some mechanism to hold everything in sync. I think the way to hold this in sync is to get one list, and then we'll apply those different resources toward it, and you'll see where that list comes down, and, hopefully, totally eliminate it.

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    Mr. REGULA. Did their request include maintenance money?

    Mr. BERRY. Yes, sir.

    Mr. REGULA. Do you know how much the total was that was requested?

    Mr. BERRY. I would have to——

    Mr. REGULA. It was $20 million, as I understand it, that has been put in but——

    Mr. BERRY. $29 million has been requested, for the record. In terms of specific requests, I don't know off the top of my head.

    Mr. REGULA. If you could supply that for the record because we'll have questions for the record.

    Mr. BERRY. Yes, sir, I will. I appreciate that, Mr. Chairman.

    Mr. REGULA. Mr. Nethercutt?

    Mr. NETHERCUTT. Thank you, Mr. Chairman.

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    Mr. Berry, thank you for your candor. Maybe you've established a new standard that I would hope could be replicated maybe from the top of the Government down in terms of accountability and responsibility.

    I'm wondering in your analysis of the blue book that you looked at——

    Mr. BERRY. We're still looking at. [Laughter.]

UNUSED OR UNDER-USED FACILITIES

    Mr. NETHERCUTT. I understand—whether there's any consideration of unused or under-used facilities in there? Are there any structures, any assets that perhaps we can dispose of, maybe sell them to the States, or give them to the States or just not use them anymore because they're unused or under-used? Is that a possibility?

    Mr. BERRY. Mr. Nethercutt, I think what you'll find—and I was amazed by the visitation numbers that we're facing on our public lands—I think probably one of the fastest growing businesses in the country is the recreation industry. Our numbers on BLM land, on national parks, Fish and Wildlife refuges, it is phenomenal, the growth, in terms of public usership and demand.

    There is no question that if there's a facility—let me show you. This will give you a sense of the visitorship totals. You can see how that is just increased. These facilities are under a lot of increased usage, and that just increases the wear and tear, quite frankly. So that's where a lot of this need is coming from for repairs and rehabilitation, but I'll pick out a specific to try and answer your question.

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    My understanding—and I'll let Mr. Stanton, the Director of the National Park Service, go into this with more detail with you because they are now doing a scrub of their entire housing inventory at the National Park Service. They're identifying where housing should occur at national parks and where it should no longer occur, and are there areas that maybe we built houses 20 years ago because there were no communities nearby for people to live. I mean, these were in the middle of nowhere then, but 20 years later now there are communities outside the gate that have housing supply and housing stock that is, quite frankly, better than what we were providing employees in the park. We ought to get out of that business in those places. We ought to knock those houses down and allow the employees to live in those communities in nearby places. There are still many parks where there are no real alternatives. There's no alternative in Ringo National Park in Alaska. You have a national park the size of Indiana, so there are places where we ought to be in that business but there are some where we shouldn't be, and the Park Service is going through and doing that scrub. So I would use that as an example.

    In terms of this list I think when you see the projects that we're talking about, we're talking pretty basic facilities, and I think if we're going to be in the business of serving the public, we pretty much have to do this. You have to provide this.

    Mr. NETHERCUTT. I would just suggest as you go through this that maybe you think about it in those terms——

    Mr. BERRY. That's a good point.

    Mr. NETHERCUTT [continuing]. And whether you should keep it, whether it's something that's expendable, notwithstanding the increase—I respect that there's the increase and the incidence of use very much, but that may be something you ought to think about.

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    Mr. BERRY. That's a good suggestion. I really appreciate that.

OMB'S ROLE

    Mr. NETHERCUTT. The only other thing, and then I have to leave, Mr. Chairman, is you say you have had a good working relationship with OMB. Who is OMB? I mean, I know but in terms of——

    Mr. BERRY. In our case, I deal directly with a gentleman named T.J. Glauthier who is OMB's organizer. Instead of Assistant Secretaries they have what they call PADS, Program Associate Directors, and T.J. is one of the best. He is just the salt of the earth, and we would be happy to come up and sit down with you and go over this and the game plan. I went to him with the management strategy, and he came through with the rest of the resources. So they've really, really done a good job.

    Mr. NETHERCUTT. And I think they are certainly good people at all levels of the government, many of whom are sitting here.

    What I've seen at least on the Agricultural Subcommittee on which I serve is that there seems to be—without trying to indict anybody—there seems to be a methodology, either coming from the White House or OMB, that says we're going to refuse some of the funding in a certain area knowing that the Congress will restore it, and then we can in our budget support other purposes for which we're committed. And I'm not sure whether that has happened in your experience with OMB, but I sense that it has happened in agriculture and other areas, kind of squeezing food programs—I should say squeezing agriculture research in favor of food programs, and then the Congress is somehow—we're the bad guys if we want to restore that agriculture research and perhaps trim back on some food programs.

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    So my sense is that there is a priority setting that goes on through OMB, through the White House, that impacts your agency and others maybe not positively. It may not be you in the broad sense at fault, but I respect your view of this.

    Mr. BERRY. In our case they have actually been extremely helpful and extraordinarily decent to work with, and we have a very positive relationship. So I understand what you're saying in terms of other agencies, but in our case, which is all I can really tell you about, it's been really good.

    Mr. NETHERCUTT. Well, congratulations. I hope I'm here when we have a chance to——

    [Laughter.]

    Mr. BERRY. Bob, we've got to have this five-year plan done. [Laughter.]

    I want to put it in front of you, because I think then all of this talk about backlog goes away. It's a five-year plan, and if it ain't in there, it can wait until the sixth year, and that's why we really need to get it.

    Mr. NETHERCUTT. Well, good luck to you.

    Mr. BERRY. Thank you, sir.

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    Mr. REGULA. I think you're right, Mr. Nethercutt. That's a game that gets played. We'll downsize what we'll do but not do it at the expense of something they like to do, and I want to say we're going to replicate this hearing a year from now, and I'm hopeful the results will be much more positive.

    Mr. NETHERCUTT. Thank you, Mr. Chairman.

    Mr. REGULA. Thank you, Mr. Berry.

    Mr. BERRY. Mr. Chairman, if I could, I would just like to give you for the record—these are just a record of the memoranda that verify the——

    Mr. REGULA. These will be a part of the record.

    [The information follows:]

    "The Official Committee record contains additional material here."

    Mr. BERRY [continuing]. So that you'll know I'm not just talking here, that we've done what we're talking about.

    Mr. REGULA. You've heard the old cliche, ''action speaks.''

    Mr. BERRY. You've got it.

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    Mr. REGULA. Okay, we'll look forward to that.

    Mr. BERRY. Thank you, sir. Thank you, Mr. Chairman.

    Mr. REGULA. The next panel—is the four land management agencies.

    Thank you, gentlemen, for coming. I'm glad that you were here for the preceding testimony because this impacts very substantially on the future of your management responsibilities. I hope you understand what we're after, and that's just to maximize the dollars for the benefit of the public. They're paying the bill, and I would very much appreciate it if you could summarize your statements. Obviously, your entire statement will be made a part of the record, and we will read those, but perhaps we can move along expeditiously.

    Our first statement will be from Mr. John Rogers, Deputy Director, U.S. Fish and Wildlife Service.

    We heard Mr. Kolbe give you a fairly good grade this morning, so we look forward to hearing from you. You may proceed with your statement.



WEDNESDAY, FEBRUARY 4, 1998.

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UNITED STATES DEPARTMENT OF THE INTERIOR

WITNESS

JOHN ROGERS, DEPUTY DIRECTOR, FISH AND WILDLIFE SERVICE

John Rogers' Summary

    Mr. ROGERS. Thank you, Mr. Chairman. We would hope the grade is somewhat better than just passing, but we'll let you be the judge of that.

    I'm pleased to be here today to discuss the Fish and Wildlife Service's maintenance management system, and, as you suggested, that the formal statement be put into the record.

    Mr. REGULA. Without objection.

    Mr. ROGERS. The Fish and Wildlife Service has had a comprehensive facility maintenance system in place since 1989. The purpose was conceived and is operated on four basic principles: first, to document maintenance backlogs; second, to identify project priorities; third, to provide a tool for planning and budgeting of maintenance needs on refuges and hatcheries; and, fourth, to provide accountability to track accomplishments.

    As the thrust of the hearing has gone so far, it's not surprising that we developed this system in response to the increasing backlog, and, in our view, insufficient funds to manage that backlog.

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FISH AND WILDLIFE SERVICE BACKLOG GROWTH

    Though the Fish and Wildlife Service's share of the departmental backlog, as stated by GAO this morning may be just to the right of the decimal point, we find it is significant to the effectiveness and efficiency of our agency. It does amount to some $716 million and 11,000 individual projects on refuges and hatcheries. Unfortunately, over the past five years the maintenance backlog has grown approximately six percent per year. The reasons for this growth, as you are well aware, are complex, but they include, first, the aging of about $190 million of refuge facilities and equipment that were purchased in the late 1970s as a part of the Bicentennial Land and Heritage program. These facilities, unfortunately, are all coming of age at once.

    Second, the refuge system continues to grow by approximately eight to ten refuges per year. Each new refuge comes with its own set of management and maintenance challenges. Finally, as I mentioned, the backlog continues to grow because of the primary reason that funding to deal with the backlog has been inadequate. Industry standards suggest about two to four percent of capital value be invested in maintenance each year. For the past five years the Fish and Wildlife Service has had about seven-tenths of one percent to invest in the maintenance backlog. This was increased to one percent this past year through the efforts of this committee, providing increase in maintenance, complemented by the Land and Water Conservation Fund increase.

MAINTENANCE MANAGEMENT SYSTEM

    I would briefly like to describe the system to you. The process of developing the database begins by documenting deficiencies against six major categories—first is buildings; second, utility systems; third, water management facilities—and this would include low hazard dams; fourth, roads and trails; fifth, other structures, which are fences, gates, observation towers, etcetera; and, finally, vehicles and equipment. The system is sufficiently flexible to accommodate other categories, as needed.

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    The maintenance management system, I want to emphasize, includes only projects for existing facilities—that is, it does not include new facilities or expansion of existing facilities. Also, cyclical maintenance or operations of a minor custodial nature, such as grass mowing, painting the fence, and janitorial services, are not included in the maintenance management system.

    We use standardized procedures for inspecting and documenting the backlog maintenance deficiencies. I would emphasize that our definition of a maintenance deficiency is a maintenance item that has not been addressed for at least one year. These procedures are documented in our Maintenance Management System Handbook, a copy of which I would like to submit for the record.

    Mr. REGULA. Without objection.

REVIEW OF PROJECTS

    Mr. ROGERS. After deficiencies are identified at the field level, they are submitted by field stations for an annual regional office review. At the regional levels staff reviews consolidate and submit data to the Washington office for the annual MMS update. We believe that the peer review that occurs at the Washington level is one of the most critical aspects of the system. It is the time we assure through specialists that the regions are consistent with the projects they put in the maintenance management systems. So that when priorities are determined, the projects are comparable.

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    Using data from the most recent maintenance management system update, we request funds annually in the Fish and Wildlife Services budget to address the backlog. The total maintenance funding request, of course, is established within overall service priorities. Unfortunately, it's a delicate balance, as you know, that we have had to deal with in the past.

    Once we receive funds, however, we allocate them by project, and the funds may be used for project materials, engineering support, contracts, construction, inspection, temporary labor, but they may not be used for permanent salaries. We carefully track MMS expenditures and project completion is an integral part of the annual review by the peer review team.

    During the annual update field personnel not only enter new deficiencies and updates of existing deficiencies into the system, but also account for costs associated with completed work to ensure the integrity of the system.

LESSONS LEARNED

    Now we have 10 years of experience, and we don't claim to be perfection yet, as Mr. Kolbe indicated, but we have learned a few things that have allowed us to refine, and, we hope, improve the system.

    First, the regional office overview of the field input is critical to provide consistency in the data before reporting to the Washington office. As I mentioned, another critical part is the peer review that takes place in Washington to make sure the database is accurate and that refinements are made on a national basis to ensure consistency from region to region.

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    We have learned that the system must be kept simple to avoid bogging it down with too much detail and that an annual assessment is adequate. We have learned that the system must be dynamic because, as we all know, resource priorities and funding are changeable due to unforeseen circumstances—such as El Nino storm damages or unexpected equipment and facility breakdowns—and that priorities are best set at the field and regional levels. It is very difficult to try to set individual project priorities sitting in Washington.

    Formal condition assessments were found not to be necessary for all but the most technically complex facilities. I think it is that lesson that has led to some of the discrepancies between our data and what the IG found. Project cost estimates from contractors and vendors on many types of service facilities have been adequate and have saved time and money.

    Finally, it should not go without saying that field managers are very busy, and it was not until we were able to get their attention by, in fact, allocating money based on the quality and quantity of the data they submitted that they actively and enthusiastically participated.

    Mr. Chairman, as I said, we're not perfect, but in fiscal year 1997 we were able to allocate $32 million toward the successful completion of 1,650 individual refuge and hatchery projects. We found the system both simple and straight-forward. I would be happy to answer any questions you may have.

    [The information follows:]

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    "The Official Committee record contains additional material here."

    Mr. REGULA. I'll have more but I think you heard the IG say that the maintenance system is not integrated with the financial management system.

    Are you trying to remedy that?

    Mr. ROGERS. Well, in our view it could be integrated fully into the financial management system, but it would take a lot of money and a lot of accountants that we don't have. It is integrated in that all projects are identified by field station codes and project numbers so that they can be cross-sorted that way, but there isn't a one for one——

    Mr. REGULA. You have enough pragmatic information?

    Mr. ROGERS. That is correct.

    Mr. REGULA. I was interested when you mentioned the utilities. I visited Fort Baker and I can say the Defense Department probably gets more funding than some of you, but in Fort Baker, which we may inherit, I learned that the utilities are going to cost big dollars with the upgrading of the houses. We may get something nice but extremely expensive, I think it illustrates what's happening and what happens if maintenance is neglected, and that's a classic example.

    Well, Mr. Shea, we're happy to welcome you. You're new on the block.

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WEDNESDAY, FEBRUARY 4, 1998.

UNITED STATES DEPARTMENT OF THE INTERIOR

WITNESS

PAT SHEA, DIRECTOR, BUREAU OF LAND MANAGEMENT

    Mr. SHEA. Thank you, I've been on the job six months.

    Mr. REGULA. Well, in Washington that's fairly new. [Laughter.]

    Mr. SHEA. Absolutely, I've made employment decisions—one was to hire Barbara Wainman, and I want to thank you and say that I'm here at her direction.

    Mr. REGULA. I don't know if I thank you. Barbara has been a very valued part of our team. [Laughter.]

    Mr. SHEA. We did have that discussion.

    And then, secondly, related to today's hearing, I named a deputy director last week who is Nina Hatfield. Her area of specialization is the budget and the GPRA, and I do think we are, as Assistant Secretary Berry indicated, in the process of transition so that accounting practices can be jointly agreed to, and that we're held to that standard.

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    So I would offer that as to where we will be a year from today.

LACK OF ACCOUNTABILITY

    I do have to agree with much of what the Inspector General said. There is a lack of direct accountability between the money that we believe is being spent in the field and where it's being spent, and I want to indicate the scope of the project that we have. As you know, our visitation in 1996 went to 60 million people going to our recreational sites on public lands that BLM has administrative responsibilities.

    Mr. REGULA. Most people think the Park Service is where everybody goes to visit, but in reality I know your agency, as well as the Forest Service and the Fish and Wildlife Service have enormous visitation. That's an element that we need to be concerned about.

    Mr. SHEA. We have 10,000 miles of trails, 76,000 miles of roads, and we have 264 million acres of land, and, believe me, having visited the 13 BLM States in the first 20 weeks that I was in my position, I can tell you the responsibility there is enormous. And, quite frankly, one of the tensions I see is between having a centralized enough of a system for accountability, and, yet, retain the aspect of decentralizing decision making so that we can administer those ways to help the public use it.

ROADS MAINTENANCE

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    Mr. REGULA. You mentioned roads, and I just want to ask. In backlog maintenance do you include roads because, of course, you get ISTEA, your Federal highway money, but do you add roads in your totals?

    Mr. SHEA. Yes, we do. Out of approximately the $220 million figure that has been put forward as the allowance maintenance backlog, $160 million are for roads. I can tell you—and let me just describe a process that I went through in December and continued in January.

    We have not had a confirmed director in the BLM for approximately four years, and so what I'm trying to do is gradually put my hands around an enormous task. Mike Dombeck did a great job as acting, but I think there is a significant difference when you finally confirm a director.

    I talk to each State director every week, but when we had our budget, which I only found out I get the Wednesday before Thanksgiving and I'm expected to have it back to John Berry the Monday after Thanksgiving, and then, what can only be described from a new person's perspective as creative chaos, we are working through December with OMB to come up with what the Department's budget will be. I'm a loyal soldier and will do what I'm asked to do.

    Once I had the information from my state directors, I called them and went through what we were doing with their budgets, and one thing that I said to them is ''you will be judged on how you deal with maintenance—that has not necessarily been a part of your evaluation to date, but I want you to know, as your director, I will be talking with you on a weekly basis.'' And, I think the model that Assistant Secretary Berry has put forward is one that we are going to become very familiar with.

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    I would beg to differ a little bit with the Fish and Wildlife Service—we need to make a very integrated approach between the GPRA and our budget figures because if we don't have those in sync, then we're going to be having sort of cacophony that you're hearing here in terms of the Inspector General's report.

    So you have my commitment, and I would cite one example. In Oregon in 1996 we had some flooding. If we had been able to have the proper maintenance on the roads, I believe we could have saved the American taxpayers about 1/2 of the $40 million because the damage that was done to culverts and other projects simply had not been maintained, and I think we need to have a five-year plan in place.

    Mr. REGULA. Certainly, I will do what I can to get that road money increased because talk about safety and health and everything else, that's a very significant part, but is there any reason you could not use fee money for at least emergency work on roads?

    Mr. SHEA. No, I understand that later this month you're having a hearing on the fee program, and Assistant Secretary Berry is coming, and I'm hoping to come as well. There is absolutely no reason why we can't use fee money. The difficulty can be related to the jurisdiction in which the fee is generated being applied to the roads there——

    Mr. REGULA. Well, I understand.

    Mr. SHEA. We operate ours State by State, and there are times when we do have some problem with that. But, no, I don't see any reason for that.

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MAINTENANCE IDEAS

    Let me make one other observation that I plan to do as director. I travel a great deal, much more than I had anticipated, but as I go to each of the States now, I am asking the State directors to tell me and show me on-going maintenance projects. I think that kind of spot direction or check from a director is going to have a certain solidifying effect that is a priority——

    Mr. REGULA. Yes——

    Mr. SHEA [continuing]. And so I will be making those observations, and I would be happy to report to the Committee as we go forward.

    Again, I think as we get that five-year plan in place, one of the first ideas of maintenance that came to me was when I served on the Board of Trustees for a not-for-profit organization, and they had all these wonderful committees like publication and travel. They had one on the camp that had been donated to the association, and I was put on the camp committee, which, to my disappointment, there was a wonderful gentleman—indeed, a farmer—who lived on this not-for-profit organization for some time and he insisted that we have a maintenance schedule to the point that 20 percent of the budget each year was put to maintenance and it just became part of the routine. I think we need to have that priority. It is not a glory item; it is not—it generates a lot of——

    Mr. REGULA. I agree.

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    Mr. SHEA. But if we don't do it, we're not doing the job that the American public is entitled to expect.

    So you have my commitment to do that, and, finally, I do want to echo something that John Berry said here. We are implementing—in fact, last Monday we started the ALMRS project in New Mexico, which is our data system for land management records. We also have a management information system that we are putting in place for budget so that we actually will be able with the State directors to see where the budget is being spent through the year and have greater accountability. But I think the use of information systems whether they are individually created or uniform—and I think we have to have some discussion about how we pay for those—are going to allow, I think, for a more accurate accountability rather quickly.

    [The information follows:]

    "The Official Committee record contains additional material here."

    Mr. REGULA. Thank you. We want to help. We want to be a part of the team, but we want to get the results. That's basically our objective here.

    Our next witness is Mr. Stanton who has been a director for how long?



WEDNESDAY, FEBRUARY 4, 1998.

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UNITED STATES DEPARTMENT OF THE INTERIOR

WITNESS

ROBERT STANTON, DIRECTOR, NATIONAL PARK SERVICE

    Mr. STANTON. Pat and I were sworn in on the same date, six months.

    Mr. REGULA. So you don't have to plead guilty to what the GAO said exactly. [Laughter.]

    We're very much interested in the future, and, as they say downtown, ''the past is prologue,'' and it is in this case.

    So we appreciate your summarizing.

Robert Stanton's Summary

    Mr. STANTON. Thank you, Mr. Chairman.

    It certainly is my pleasure to appear before you to address the National Park Service's planning, design and construction program, as it relates to the backlog, and, certainly, to join my three colleagues here with respect to managing our public lands.

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    This is my second opportunity to appear before the Committee to address the subject of planning, design, and construction in the National Park Service. Certainly, the comments made by Assistant Secretary John Berry have the full endorsement of the National Park Service, and we're actively engaged in working with the agencies under John's leadership with respect to establishing a common terminology, a common definition, with respect to backlogs.

    I would ask, Mr. Chairman, that my prepared statement be made available for the record.

    Mr. REGULA. Without objection.

    Mr. STANTON. And I would like to focus just briefly, if I may, with respect to the execution of the planning, design, and construction program of the National Park Service recognizing that a number of efforts are underway, as recommended by the IG and the GAO, and, certainly, as supported by Mr. Berry, that we are going to move forward with improving upon the very systems, again, the coordination between the various agencies with respect to the definitions. But that's the formulation side of the construction and maintenance program.

    We are addressing also the execution, and, to that end, we look to acting upon the recommendations of the National Association of Public Administrators with respect to their in-depth review of how the National Park Service conducts its planning, design, and construction program, and we will certainly be working with Mr. Berry on that. In addition, we are taking a look at how we can best carry out those projects for which Congress has already appropriated resources in fiscal year 1997 and fiscal year 1998.

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    We are applying what we call value analysis to ensure that even though those projects have been funded, that they are carried out in the most effective and efficient way possible, that we maximize the resources available to us. I have established as a priority the review of all of those projects by an interdisciplinary team under the leadership of one of our top administrators, and they have looked at a number of projects and made recommendations as to how we can improve upon them——

    Mr. REGULA. Mr. Stanton, we're not having another Delaware Water Gap——

    Mr. STANTON. In essence, that's the case, sir.

    In addition to that, I'm pleased to announce that we have awarded two contracts to conduct an inventory and assessment of our housing. We have 121 parks that have five or more housing units. As I made the commitment to the Committee in October at the oversight hearings, we will complete those reviews within a 12-month period of time, which will be the basis for us determining the critical need for additional appropriations to carry out our housing program, and I'm very pleased that that program is moving forward.

    Regarding the fee program, we are strengthening our oversight with respect to the authority that this Committee has granted to us to retain fees to carry out our most critical health and safety projects, resource management needs and what have you. We will benefit from roughly $140 million in fiscal year 1998 that would be derived from the fee program, and we are working cooperatively with Mr. Berry, with our regional directors and others to make sure that we maximize the use of those revenues in the fee parks to carry out our most critical needs in health, safety and resource protection.

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    Again, we want to thank the Committee for giving us that authorization.

GPRA LINKAGE

    One other point I must mention in echoing what John Berry, and Pat Shea, and others have said with resect to the Government Performance and Results Act. We recognize the obligation on our part to link, if you will, or to track, our expenditures in the context of what we've identified as our major program objectives and goals with respect to the Government Performance and Results Act. We believe that we have made some strides along those lines and that as we present our Government performance report to Congress for fiscal year 1998 and fiscal year 1999, you will be able to see that linkage between how we've used our construction dollars, our maintenance dollars and other dollars appropriated to us to carry out those goals and objectives.

CHOOSING BY ADVANTAGES

    Lastly, I might add that we are indebted to the U.S. Forest Service in that in 1995 we provided you with a report that said we would take a different approach of establishing our Service-wide priorities for construction and major rehabilitation. The U.S. Forest Service has put in place a system referred to as ''Choosing By Advantages,'' and it has been very beneficial to us in giving a true accounting of what our most critical needs are within the National Park System.

    Mr. REGULA. So you're trying to replicate in the park system what they have found to be successful?

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    Mr. STANTON. That's right, what has been successful.

    Mr. REGULA. That's great.

    Mr. STANTON. We're only able to put that new system in place as it relates to the fiscal year 1999 budget. So, again, when the construction program, the maintenance program, is presented to you by Mr. Berry's office for fiscal year 1999, it will reflect the application of the Choosing By Advantages approach, and I think each of the projects will stand on their individual merits because they've gone through a very stringent review process.

    Again, we appreciate borrowing that from the U.S. Forest Service.

    Mr. Chairman, that concludes my comments with respect to the execution, and, again, we look forward to the leadership of John Berry and other members of the Secretary's office in formulating and executing our programs.

    [The information follows:]

    "The Official Committee record contains additional material here."

    Mr. REGULA. Okay, thank you.

    What you're saying to me is that the Park Service is going to achieve the goals that Mr. Berry has outlined and——

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    Mr. STANTON. That is correct.

    Mr. REGULA [continuing]. And we can look forward to that in fiscal year 1999, and, hopefully, we'll have information prior to the mark-up of fiscal year 1999 so that we can make sound judgments.

    Mr. STANTON. It's my understanding, Mr. Chairman, that in discussion with Mr. Berry and others within the Department certainly that is the target, to have the line item construction program for the National Park Service available to you in advance of the formal appropriations hearing.

    Mr. REGULA. And what you hope to develop is good base line data that will be there for——

    Mr. STANTON. Consistent with our criteria, that is correct.

    Mr. REGULA [continuing]. A five-year work out of the backlog. Is that correct?

    Mr. STANTON. That is correct.

    Mr. REGULA. Our last witness today, Mr. Joslin, the Deputy Chief for the National Forest System. We're pleased to have you.

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WEDNESDAY, FEBRUARY 4, 1998.

UNITED STATES DEPARTMENT OF AGRICULTURE

WITNESS

ROBERT C. JOSLIN, DEPUTY CHIEF FOR NATIONAL FOREST SYSTEM

    Mr. JOSLIN. Thank you, Mr. Chairman.

    I'm another one of those six-month persons.

    Mr. REGULA. I've been here 25 years, go ahead.

    Mr. JOSLIN. With no objection, I would like to submit my comments for the record.

    Mr. REGULA. Without objection.

    Mr. JOSLIN. I would like to comment regarding the three areas—roads, recreation and facility utilization—and give some background to put our backlog situation in context and explain the distinct nature of the Forest Service infrastructure.

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FOREST SERVICE ROADS

    As you know, there are 191 million acres in the National Forest System lands in the country. In fiscal year 1996 these lands had 859 million visitors, and I think that was the point that you made just a minute ago. About 1.7 million vehicles drive on the National Forest System roads every day for the purpose of recreation, which is over 10 times the use in 1950.

    What makes these figures interesting is that this use is highly dispersed. Predominately, the National Forest are now, more than ever, America's backyard for the purpose of recreation. The National Forest contains the places where Americans go more than on any other Federal lands. Predominately their visits are characterized by leisurely drives to see the scenery on a weekend camping trip to their favorite fishing hole, or Sunday picnic with the family.

    We are truly concerned about the infrastructure that these people see. When a forest visitor makes use of the facility at the National Forest, be it a bridge, road, camp ground or visitor's center, the condition of that facility is perceived as a condition of the job that the agency is doing.

    In total the cost of bringing our infrastructure to current standards is approximately $13 billion, including a road system backlog of approximately $10.5 billion.

    Let me concentrate on roads for a minute: currently, visitors will drive over more than 7,700 bridges of which 13 percent are rated as deficient. We should be replacing or reconstructing 150 or more bridges per year; yet, annually, over the past five years we have averaged only 40 replacements.

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    Although the National Forest System road system consists of about 380,000 miles, only 86,000 are driveable by passenger cars. What is important about that figure, Mr. Chairman, is that at the end of fiscal year 1991 we had 93,600 miles that could be driven by passenger cars.

    Mr. REGULA. Let me interrupt you here because this roads issue, as you know, is always a topic of discussion.

    What percentage of your roads in mileage is logging and what percentage is for the recreation user?

    Mr. JOSLIN. Almost all of the roads are used by all recreationists, with the exception of those that are closed and some of the others. The same way when we talk about the trunk of a tree the main line roads that we have, and we have the arterials that go out and we have the collectors and the locals. Those roads are utilized by almost everybody for all of those kinds of things.

    Mr. REGULA. So in terms of health and safety, it's important that these roads be built to decent standards——

    Mr. JOSLIN. That's correct. You don't want to have passenger cars out there——

    Mr. REGULA. Because if there's a road, people are always going to drive on it, besides the person who may be logging, which is a temporary use.

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    Mr. JOSLIN. Right.

    That figure has gone up substantially. As a part of the work that we've done in connection with looking at the whole transportation policy needs, we have gotten new information, additional information, concerning that backlog as a part of that effort.

    Mr. REGULA. I notice——

    Mr. JOSLIN. It went up from and it's about double.

    Mr. REGULA. That's one of my questions. How did you get the dramatic increase?

    Mr. JOSLIN. That's the result of the efforts that we put in reflecting that new data.

RECREATION FEE PROGRAM

    A couple of other items that I just want to refer to is the recreation fee program that was talked about here. We collected about $7.7 million, and $638,000 of that was expended in 1997 and another $3.9 million will be expended in fiscal year 1998 for the maintenance on the 40 projects. That's been an excellent opportunity for us, and we appreciate the efforts that you folks have put in to making that happen.

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    Another item we're looking at to deal with our road infrastructure, we're implementing the direction of the subcommittee relative to what is referred to as the 10 percent fund to perform priority road, trail, and bridge maintenance projects, and, as you recall, that's about $50 million total in fiscal year 1996 and 1997. We're in the process now of implementing—those projects have to be done in the States where the money was collected, so we're doing that.

FACILITIES RENOVATION

    Lastly, I want to briefly note that renovating facilities is not the only important aspect of managing the infrastructure. It is equally important to ensure that those facilities which are not fully utilized are disposed of to avoid unnecessary expenditures. We have been especially successful in the road decommissioning program, having closed and stabilized 18,000 miles of road through fiscal year 1997. We'll close another 1,200 miles in fiscal year 1998——

    Mr. REGULA. Are you closing roads because you can't keep them up to standards, or because the recreational users aren't using them?

    Mr. JOSLIN. It's a combination of several different things. Some of those that we're converting when we say that we're closing and decommissioning, we're converting those into trails, those kinds of uses.

    Mr. REGULA. Okay.

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    Mr. JOSLIN. Some of those are the kinds of roads that are no longer needed for management or dispersal of recreational vehicles. So it's a combination of items.

EMPLOYEE HOUSING

    Mr. REGULA. Okay.

    Mr. JOSLIN. We have much more work to do regarding the effective utilization of our employee housing and administrative buildings. We're concerned with the levels of utilization of employee housing, and much of our housing needed, in what were once very rural areas, may no longer be needed due to increasing urbanization, and some of my colleagues have talked to that. We intend to examine that issue further in the very near future.

    We appreciate the opportunity to be here today, and would be glad to answer any further questions that you might have, Mr. Chairman.

    Thank you.

    [The information follows:]

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COMMITTEE QUESTIONS

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    Mr. REGULA. Well, we'll have a lot and will submit questions for the record.

    Let me urge you and your staff to be as precise as possible in answering these questions. Sometimes we get what I would almost classify as stonewalling historically on questions that we have submitted, and I have instructed the staff that if the answers aren't responsive, then send them back for a second time because we need information. We have so many dollars to allocate, and we want to use them as wisely as possible. I would say that, other than education, probably what your activities do is touch the lives of more people in terms of Federal functions than any other single thing, and it's something they like. They like recreation, they love the parks, they love all of your facilities, and so we owe it to them to have a quality experience for them. I think maintenance is a very important element. I mean, I look at the pictures here that you've submitted, and I see tables that are broken, barbecue grills that are down, and I'm sure all of you experience this. The American people have faith in you. They believe when they go to a park, when they go to Fish and Wildlife, or to the forest, or to the BLM, that their Government is going to do it right, and we want to respond to that faith that they have. That's why we're trying to work with you in addressing these problems, and I think it's clear from the testimony this morning that we need a credible database so that we can put the money where it is needed the most. That's something that you as managers certainly want to achieve too, I think, as part of your objective and you want to hold the people out in the field accountable. We have to be accountable to voters every two years, so you have to be accountable to the public, and your managers need to be accountable to you and you in turn to the people that we all represent.

    So I thank you all for coming this morning, and I hope that out of this effort we really get some positive results so that a year from now it will be something that we'll take some pride in based on what's been achieved.

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    Mr. STANTON. Mr. Chairman, again, we appreciate your support and the point that you make certainly is extremely important to all of us with respect to the protection of the infrastructure but also protecting the resources provided for public use, which is critically important to all of us.

    Mr. REGULA. Well, I know the First Lady is going to have a program on preservation, and that's part of what the President was alluding to the other night in the State of the Union address. There is nothing more precious than our land resources, and among the four of you, you control about 30 percent of America. It's something that's a treasure. I live on a farm and maintain my own park. I visited Ronald Reagan's ranch, and Mrs. Reagan told me the President's comment about his ranch. ''This may not be heaven, but it's got the same ZIP Code.'' [Laughter.]

    I hope people will have the same feeling toward the public lands, which are the treasures that belong to all of us.

    With that, we'll adjourn the hearing.

    "The Official Committee record contains additional material here."

THURSDAY, FEBRUARY 5, 1998.

BACKLOG MAINTENANCE FOR CULTURAL AGENCIES

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WITNESSES

I. MICHAEL HEYMAN, SECRETARY, SMITHSONIAN INSTITUTION

LAWRENCE J. WILKER, PRESIDENT, JOHN F. KENNEDY CENTER FOR THE PERFORMING ARTS

EARL A. POWELL III, DIRECTOR, NATIONAL GALLERY OF ART

JEFFREY T. LARICHE, ASSOCIATE MUSEUM DIRECTOR FOR FINANCE AND ADMINISTRATION, U.S. HOLOCAUST MEMORIAL MUSEUM

Opening Remarks

Mr. REGULA [presiding]. The Interior oversight hearing will come to order. I know many of you have other obligations this morning, so we'll try to expedite this as much as possible.

BACKLOG MAINTENANCE ESTIMATES

We have backlog estimates from the four agencies before us totaling $300 million. As you all know, the President made a point in his State of the Union about preserving our national treasures, and I think your institutions are certainly at the forefront of what we would call national treasures. And of course, as part of preserving these is the maintenance of your facilities in a very effective way.

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    I think what we're seeking in this hearing is: one, do you have a system in place to accurately establish the cost of maintenance needs, not only backlog, but on an ongoing basis. Secondly, are the current numbers that are in your budget justifications accurate? Does this really portray what you have in fact on maintenance? Do you have a system which establishes priorities or do you treat all maintenance needs equally? Obviously some are critical, some could be put off, and there should be a system. All we're saying is that we'd like to see a system in subsequent hearings so that in allocating the funds, we can address the high-priority items and plan prospectively to ultimately eliminate backlogs.

    What we're trying to do is to be constructive in the allocation of resources to address the problems that you see, and be helpful in any way to overcome what could, I think, be exacerbated by time. If you don't fix little things, they become big things and much more expensive.

    Mr. Skaggs, do you have any comments you'd like to make before we get started?

    Mr. SKAGGS. I don't believe I do, thank you.

    Mr. REGULA. Okay. Our first institution today will be the Smithsonian. And Mr. Secretary, Mr. Heyman, we're happy to have you. And I assume you have a little backlog in maintenance——

    [Laughter.]

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    Mr. REGULA [continuing]. Based on our conversations.

    Mr. HEYMAN. With the extended facilities that we have we——

    Mr. REGULA. All of your statements will be made a part of the record and we'll appreciate a summarization.

    Mr. HEYMAN. Okay. Mr. Chairman, Mr. Skaggs: I have some material in my testimony that shows that as we increase our affiliations program and as that starts to get some bite—and it's beginning to now—we'll be moving a number of our artifacts out on long-term loans around the country which, for purposes of this conversation, means the pressure will be reduced a little bit with regard to our own storage needs.

    Mr. REGULA. I think the McKinley Museum—I was just there for McKinley's birthday program—and they told me they had some there—artifacts.

    Mr. HEYMAN. Well, we have about six memoranda of understanding now with existing and new museums around the country, and we've got inquiries from 26 states. So I can just see and feel how this thing is beginning to catch on, and I'm fairly optimistic about our entering into more agreements. Perhaps I can talk a little bit more about that during our budget hearing. But it has some relevance, obviously, to what we're talking about here.

    You know that we operate more than 6 million square feet in 300 buildings which we own.

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    Mr. REGULA. Three hundred.

SUMMARY DESCRIPTION OF SMITHSONIAN

    Mr. HEYMAN. The facilities include 16 museums and 2 storage sites in the Washington and New York areas; research facilities in Panama, in Maryland, in Massachusetts, and Arizona; and the zoological park in Washington; and a animal conservation facility in Virginia. So it's pretty vast.

    These facilities collectively house the collections which are of great value, and in many instances, irreplaceable. Many of the buildings themselves are historic structures.

    You'll recall that the Smithsonian had a commission of citizens appointed. In May of 1995, that commission on the future of the Smithsonian, reported. One of the matters that it took up was assuring the future splendor and functionality of facilities. Some of those, of course, were built in the last century. The commission noted the cost of maintaining them, let alone upgrading them, and stated that, of course, the need grows at an impressive rate when you have buildings of this age. I just want to do one quotation from that report. ''A continuing long-term plan for the needed renovations and restorations must begin immediately if the costs are to be contained in the future. The Institution has done a thorough job of identifying needs and estimating costs,'' said the commission. ''A total of $50 million each year for the next decade would assure that present facilities are restored to the point of being safe and appropriate for people and for collections.'' As you know, we have presented that analysis showing how our buildings age and at the point that they really need new renovation of a major sort, and how at $50 million a year we can keep them all above the line. So we have been seeking that kind of funding.

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FACILITIES PLANNING AND ASSESSMENT

    Of course we conduct regular inspections of our buildings to identify deficiencies. We arrange for more detailed studies of specific problems when they are needed. The staff evaluates the relative urgency of deficiencies; their impact on the building and occupants; needed work on building exteriors and internal systems and all the rest; whether the problem is an active failure such as a roof leak, or an imminent failure such as a piece of equipment that requires frequent repairs, a predicted failure, or has a cost-effective payback period. It's, of course, a very complex analysis. It would be if we only had a single building or two, but with the extended facilities that we have, it obviously is very detailed. Rick Rice, who is Director of our facilities, is sitting behind me. If you've got technical questions, I'm clearly going to turn to him to help me.

    In any event, based on our analysis, as I indicated before, which of course we had provided to the commission on the future, we believe that, an annual funding of $50 million for repairs and restorations will ensure that we'll be able to provide responsible——

    Mr. REGULA. That's 10 years.

    Mr. HEYMAN [continuing]. For over a 10-year period, we'll be able to provide responsible stewardship of the facilities. My guess is, although I don't know the numbers precisely, that the 10 years will bring us all above that line. Obviously we've got to establish a figure thereafter to keep us above that line. My guess is that it would be in the same neighborhood, although I'm not sure about that.

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    We historically have treated the zoo budget separately from the rest of the institution. The sum that's needed over this decade at the zoo is about $10 million a year.

    Mr. REGULA. That's in addition.

    Mr. HEYMAN. In addition to the $50 million. The 50, I don't really know the history of the separate treatment in budget preparation and submission of the whole of the Smithsonian but for the zoo—but that's been the tradition. But it is $50 million and $10 million.

PLANNED REPAIR AND RENOVATION

    We're working on plans with priorities for the following four buildings, which are the ones that are below the line, or just about to be there. One is the Patent Office Building that houses the National Museum of American Art, the National Portrait Gallery, and the Archives of American Art. That building is an 1867 building. It was thoroughly renovated in 1964. And the present master renovation plan calls for roof replacement, and that began this year—we're working on the roof at the southwest portion of that building right now—and the treatment of the building facades; and in addition all of the major building systems must be replaced. These include mechanical, electrical, telecommunications, plumbing, fire protection, and security. It's important for you to know that we'll take the opportunity of the renovation to return as much space as it turns out to be feasible for public and exhibition spaces, and we'll be discussing this further during the budget hearings this year. We estimate that's between $40 and $50 million to do what I've just indicated.

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    The National Museum of American History was completed in 1911. Wings were added between 1960 and 1964. It's our largest building. It has over 1 million square feet for exhibit spaces and scientific research facilities, libraries, and administrative space. There's also space for the storage of collections, however, the space used for storage is diminishing as objects are being moved to the Museum Support Center in Suitland. The master renovation plan includes the installation of a new heating, ventilating, and air conditioning system. The renovation activities will also include upgrading fire protection, roof replacement, asbestos abatement, and improvement of the electrical, security, and communication systems. At the same time, we're going ahead with the construction of the congressionally approved east and west wings, as you know. And the latter, the west wing, is funded solely with private funds. We figure $100 million to $110 million; $37 million has already been spent in this process. We've been addressing the problems as we've been going along, obviously.

    Another priority project for the institution is replacing the skylights and the window walls at the National Air and Space Museum. That's now under contract with no-year funds and 1998 funds. And of course we're designing the major capital renewal projects at the Arts and Industry building in the castle. The castle, we estimate, will be between $30 million and $40 million, and A and I between $20 million and $30 million.

    If you put all of those together, it's somewhere between $200 million and $230 million for those four major buildings.

FUTURE REQUESTS

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    I again thank the chairman and other members of this committee for your continuing interest and support in this R and R program which is obviously critical for us. With the increased funding received from Congress since Fiscal Year 1996—you'll recall we started at $24 million a year and our aim, and I know your aim, is to get us up to $50 million a year from that 24. With the additions that we've been getting on the 24, we've made progress in addressing our needs. If we can get ourselves up to the $50 million a year plus what we need for the zoo, I feel very confident that we can maintain our facilities in very acceptable form.

    [The information follows:]

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    Mr. REGULA. Is the zoo a 10-year program too?

    Mr. HEYMAN. The zoo—Is the zoo a 10-year program?

    Mr. RICE. Yes, indeed.

    Mr. HEYMAN. Yes.

    Mr. REGULA. I think it is, from what I've heard.

    Mr. HEYMAN. I've gotten a very fervent response back there. [Laughter.]

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    Mr. REGULA. Okay. Thank you. We'll hear from each of you, and then we'll go to questions.

    Mr. Wilker.

    Mr. WILKER. Mr. Chairman, I'm Larry Wilker, President of the John F. Kennedy Center for the Performing Arts. And appearing with me today on behalf of the Kennedy Center are Clifton Geeter, Vice President of Facilities; James Kirkman, Project Executive; William Becker, General Counsel; and Jared Baral, Office of Government Liaison.

    I previously have submitted to the committee my written statement concerning the Kennedy Center's minor repair program which I request be included in the record of this hearing.

    Mr. REGULA. Without objection. All the statements will be put into the record.

    Mr. WILKER. Thank you.

ORGANIZATION OF THE KENNEDY CENTER

    As the subcommittee is aware, the Kennedy Center, an independently administered bureau of the Smithsonian Institution, took over responsibility for operations and maintenance and capital repair of the Kennedy Center building on October 1, 1994. The facility, as you know, at that time, was in very poor condition.

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    Following the requirements of the 1994 amendments to the Kennedy Center Act, we prepared the first ever comprehensive survey of the building's physical condition—a comprehensive building plan, which is updated annually. In the plan, we projected what would be required to bring the facility up to current life safety and accessibility standards while maintaining functionality.

    The plan estimated that it would take 15 years, through 2009, to rehabilitate the structure. I'm pleased to report that we are proceeding well in executing our long-term program within the cost projections included in the 1995 plan.

MINOR REPAIR PROGRAM

    The Kennedy Center has developed a rigorous procedure for identifying minor repair work items and establishing priorities for completing them. Within these procedures, we have accomplished a great deal. The 1995 plan identified a backlog of minor repair work items that needed to be addressed in addition to capital repairs. We define minor repair and replacement work items as work items that are relatively small in scope and budget, or require relatively little consultant involvement.

    Since 1995, we have completed many other studies to clarify and better define the scope of work items that must be addressed. During Fiscal Years 1996 and 1997, we completed almost $2 million in minor repair work items identified as backlog by our consultants and Kennedy Center staff. According to our most recent status report on our minor repair program, the minor repair backlog includes work items with an estimated cost of $11.2 million. A summary of some of the most significant work items that we have completed is included in my written statement and in a status report that I just mentioned which I am submitting to the committee.

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    The Center's minor repair program for Fiscal Year 1998 calls for completion of work items totaling $1,683,000. Just a few examples of these work items that we'll be addressing this year include: installation of emergency lighting fixtures where there is currently none or where emergency lighting is insufficient; installation of panic hardware, a mechanism that allows immediate egress on roughly 20 doors throughout the building; installation of additional exit signs at locations where direction to an exit is not visible to occupants; installation of fire retardant material at places where pipes or ducts penetrate fire separation walls; and installation of carbon monoxide detectors in the parking garage.

EMERGENCY REPAIRS

    In addition to the anticipated and projected minor repair work items, emergency repairs are completed each year as equipment and systems breakdown prematurely. And those repairs are included in the Kennedy Center's minor repair budget. As systems and features of the building deteriorate, unforseen breakdowns occur that require immediate attention to keep the facility operational. Some of these emergency repairs undoubtedly are due to deferred maintenance because of insufficient funding and repairs delayed by past funding constraints. As the capital repair program is implemented and the backlog of minor repairs is reduced, it is expected that the provision for emergency repairs will decrease.

    The list of minor repair work items and the priorities for completing the work will change from year to year. Additional engineering studies will identify work items not previously identified, capital repair projects will be developed that will include minor repair work items, and technology changes will render some systems obsolete. Therefore, the Kennedy Center updates the minor repair program on an annual basis. Planning for the Fiscal Year 1999 minor repair program is currently underway. It is expected that the Fiscal Year 1999 minor repair program will include work on elevators and escalators, repairs to the mechanical system, repairs to the building enclosure, and a provision for emergency repairs. The tentative budget for FY 1999 is $1,696,000.

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    The Kennedy Center is the national center for the performing arts and the sole national memorial to the late President John F. Kennedy. As such, the building hosts upwards of 4.5 million visitors each year and is open 365 days a year, 18 hours a day. The Kennedy Center board of trustees is committed to maintaining the building at a high standard and in a cost effective manner. We appreciate the support that this committee and the Congress has provided to enable us to accomplish what we have. And I am very grateful for the opportunity to appear before the subcommittee and respond to any questions you may have.

    [The information follows:]

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    Mr. REGULA. Thank you.

    Mr. Powell.

    Mr. POWELL. Thank you, Mr. Chairman. Good morning. Members of the committee, thank you for the opportunity to meet with you. It is a privilege to be here to offer my comments on the National Gallery's long-term needs.

LONG TERM PLANS—NATIONAL GALLERY

    One of the first commitments after taking over the director's job in 1992, was to begin plans to ensure the protection of the Nation's collection, as well as the preservation of the landmark John Russell Pope and I. M. Pei structures, which together comprise about 1.2 million square feet.

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    The west and east buildings of the National Gallery are themselves national monuments, and we intend to keep these building functioning efficiently, securely, and safely, and want to ensure that they continue to serve the high aesthetic standard that is fundamental to the National Gallery's mission.

    We're enormously grateful for your support in funding our major critical projects from Fiscal Year 1994 through Fiscal Year 1998. The first of these—the major one—is the west building skylight replacement effort which is on schedule and on budget. And if we're a little bit lucky with the weather, we'll wind up finishing it, perhaps, a little bit early.

    Mr. REGULA. If you don't have leaks.

    Mr. POWELL. We have no leaks. We checked this morning before we came. [Laughter.]

    That, as you know, Mr. Chairman, is a phased and integrated construction plan which is just over half complete. The project preserves the west building from water leaks and greatly reduces the transmission of harmful ultraviolet light. It also has the net plus that when it's completed of being constructed with energy conserving multilayered glass, it will furthermore produce important savings in energy costs.

    Also underway is an upgrade of the National Gallery's systems for fire detection and suppression which is a second major critical project. The initial phases of this multi-year, state-of-the-art project are underway. The equipment we are putting in place is the most reliable and efficient available for an art museum. If you need technical comments on this, my colleagues Mr. Wilson, and Mr. Schneider could provide that information.

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    In addition, we are now in the process of installing advanced direct digital controls for the heating, ventilating, air conditioning control system, which is the third major critical project. A $2 million energy efficiency grant from the Department of Energy offset over half of this cost. This new automation energy management system is expected to begin yielding immediate operating cost and energy savings as it is brought on line.

    The west and east buildings have been very well maintained, yet some of the infrastructure systems have outlived their designed life expectancies. For example, the original steam and electrical distribution systems in the west building, which is 55 years old, and the chillers and air handling equipment for the HVAC system, will need to be replaced.

STUDIES AND ASSESSMENTS

    Over the past 8 years, the Gallery has completed several specific studies and assessments identifying the areas that need to be addressed. An exterior building envelop study identified the most critical architectural and structural repair costs. Now, the first of these projects will begin in Fiscal Year 1999, with the reconstruction of the Mall entrance steps to the west building. They have settled over time and there's water leakage that could further destabilize those steps. In our Fiscal Year 1999 budget, we also identified critical mechanical and electrical requirements.

    We're grateful for your and OMB's interest and support in addressing these critical issues. Routine day-to-day maintenance and repair activities do not address deferred maintenance projects. The Gallery's annual appropriations take care of that routine maintenance repair, but not the larger requirements. And we have determined that an integrated plan to address a complete program is critical.

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MASTER FACILITIES PLAN

     To that end, the National Gallery initiated the preparation of a master facilities plan last summer by the Vitetta Group—this is the same group that designed the skylight project that's underway and their expertise is in historic building preservation. We felt a master facilities plan was needed to continue to safeguard the facility's collection, public, and staff, and to establish priorities, and to provide an organized framework for effective implementation.

    A project team has been assembled that includes key members of our staff and the consultants to produce an integrated picture of the total repair and renovation requirements. The assessment is now in process and it will tell us by April, I believe, the precise condition of the facilities, and give us a relative risk or reliability determination. Our goals are to extend the useful life of the facilities for at least 25 years and to respond to new maintenance standards as they evolve.

    This year, the National Gallery has received $6.2 million in Federal appropriations for repair and renovation projects. But until the completion of the masters facilities plan, we really won't know the magnitude of our future needs; but I could, obviously, anticipate that an increase in funding annually over the next 8 to 10 years would be necessary beyond the $6.2 million to accomplish the necessary work to preserve the building grounds and control the maintenance backlog.

    We will undertake a repair program that will not reduce our public service. We don't want to close our doors. And as we have done, we have integrated the skylight system into a phased program so that the public and the majority of the Gallery's permanent collection is on view at all times. But we also, at the same time, can't defer needed renovations. So, critical, stand-alone projects that minimally impact the operations and visiting public would be implemented first. We will carefully develop a phased plan covering 8 to 10 years for the work and established priorities and disparate work items into an integrated design and construction project and develop full funding requirements.

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    With the committee's assistance, we will proactively maintain a level of renovation that continues to minimize any risk to the collection and allows the Gallery to provide the consistently high-level of programs which we wish to continue to do. Our task is to manage this program responsibly and to have a plan which guarantees system replacement and repairs at the proper times. The goal is to allow the Gallery to continue to serve the public as a preeminent art museum for the American people. In fact, the longevity of the facilities, Mr. Chairman, over 50 years, in many cases, is a tribute to the original quality of the building construction and to the maintenance they have received over the years.

    Thank you very much.

    [The information follows:]

    "The Official Committee record contains additional material here."

    Mr. REGULA. Thank you.

    Our last witness is from the Holocaust Memorial Museum, Mr. LaRiche.

    Mr. LARICHE. Thank you, Mr. Chairman. I'm pleased to be here today to discuss our R and R program for the United States Holocaust Memorial Museum. I would also like to extend our directors, Dr. Reich, appreciation for the committee's interest and past support.

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REPAIR AND REHABILITATION

    We are the new fish in this rather impressive pond of R and R needs. We're fortunate that our building is relatively new, was well built, and is very sound. We're grateful to Congress and the administration for it's past support of our R and R program and grateful for the $500,000 increase to this program in the President's Fiscal Year 1999 budget, and an indication that the administration will support this increase for Fiscal Year 2000 as well.

    Since we opened our doors nearly 5 years ago, we have welcomed nearly 10 million visitors, almost four times the visitation we expected. Because of this unexpected level of visitation, wear and tear on the facility has been greater than expected. Also, during our early years, because of terrorist activity at home and abroad, we had to divert $3.5 million of R and R funding to physical projects to enhance the security of our physical plant. Therefore, we have had to delay needed R and R projects of a routine nature. Therefore, the $1 million increase—the $500,000 that has been indicated for this year, Fiscal Year 1999, and in the year 2000—that the administration is supporting will be very helpful. It will bring our overall funding for R and R to $2,750,000, and this will help us make significant progress on these delayed projects as well as maintaining the structure as needs arise.

    The goal of our R and R program is to avoid unneeded deterioration caused by having to defer necessary work due to lack of funds. And we have in place—and I brought as a witness today, our Director of Operations, Mr. Buddy Brown, who came to the museum with 27 years of experience at Bolling Air Force Base in his last role there as Deputy Director of Facilities—and he's put in place, over the last 2 years, a comprehensive review of all our facilities, as well as the initiation of studies so that when we make projections they are sound projections for our needs in the future.

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    Thank you for the opportunity to appear today.

    [The information follows:]

    "The Official Committee record contains additional material here."

    Mr. REGULA. Thank you.

PLAN TO ADDRESS BACKLOG MAINTENANCE

    A question to all of you. Would you be able to submit to us a general outline of what your plan or plans will be to meet and address these backlog maintenance problems, and an outline as to whether it's routine or whether its cyclical, like electric and so on, and how much you anticipate to get up to speed on these? Can we get those?

    Mr. HEYMAN. We certainly shall.

    Mr. REGULA. I'd like to have them before we have our hearing with you, so we can prioritize your budgets. Backlog is No. 1 to me—getting that taken care of because it just grows in magnitude if we don't.

    And so in the interest of time, I'll go to the committee members. Mr. Skaggs?

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    By the way we'll have many questions to submit for the record.

AIR AND SPACE MUSEUM ANNEX

    Mr. SKAGGS. Mr. Chairman, I'm just curious, since we, several years ago, started to hear about the particular difficulties with the Air and Space Museum artifacts in storage and threats there, how that's come along in the interim and what the—I don't think I heard you say anything about the annex and whether that is to be factored into your—It's obviously not a deferred maintenance item, but it's an important capital item.

    Mr. HEYMAN. Well, once we get the Dulles center complete, we'll be able to relieve an awful lot of the pressures at Garber and we'll be able to move a number of those artifacts over to the Dulles center.

    We are, at the moment, completing the construction drawings. We, of course, have gone through conceptual with the architects which are HOK, and in general we all know what this is going to look like. We are at the first stages now of the capital campaign. We have at least two very large requests out at the moment, and we're waiting to see what the ultimate reaction will be on those. We will be, obviously, enormously pleased if there's a good response at the beginning because that will get some momentum really going.

    My review of plan presently for the capital campaign for the Air and Space Museum indicates to me it's a pretty sound plan. I've been out on the road a little bit with Admiral Engen talking with potential folk. The regents at the last meeting, I think 2 weeks ago, established a board for the Dulles Center. So that will be in addition to the statutory board for the Air and Space Museum in general. We are presently recruiting people for that board who we hope will not only be able to give us general guidance, but will also be able to be very helpful in raising the necessary money.

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    The money is a big challenge because if we do everything we'd like to do, we're talking about raising about $120 million to $130 million.

    The State of Virginia, by the way, is coming right forward meeting what it has indicated it will. The legislature shortly will appropriating the money that's necessary for the infrastructure that has been promised.

    So I think we're getting there. And that will of course relieve the problems at Garber once that occurs.

    So we're putting minimum attention in at Garber, but we're making sure the roof doesn't leak.

    Mr. SKAGGS. Well, it was really the interplay between the two that I was curious about. It's too bad we weren't able to give you a ready-made infrastructure at no-cost. [Laughter.]

DEFINITION OF DEFERRED MAINTENANCE

    The other general question to the panel was, Mr. Chairman, we had a delightful time yesterday exploring the relative incoherence in the Department of the Interior and the Forest Service about definitions of what really is deferred maintenance. I assume with your relatively more easily embraced domains, you do have a good clear operational accounting definition of where to store these different items in your annual financial reviews. But if there's any question about that, I think we want to do our best to clarify it.

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    Mr. REGULA. If you'll yield; I would hope that would be in these reports I've asked them each to submit.

    Mr. HEYMAN. I think you'll find a uniformity of response among us in terms of the categorizations.

    Mr. SKAGGS. Thank you.

    Mr. HEYMAN. Deferred maintenance to me has always meant maintenance I wish I had done. [Laughter.]

    Mr. REGULA. Mr. Nethercutt?

MAINTENANCE INSPECTIONS PROCEDURES

    Mr. NETHERCUTT. Thank you, Mr. Chairman. Welcome gentlemen. I consider with a bit of envy in terms of the jurisdiction over the facilities that you have that are so, I guess, enlightening for you I'm sure, on a daily basis as you go about your work. It's certainly a treasure for our country to have the facilities that you manage.

    Mr. Chairman, I was wondering about, with regard to Smithsonian, you testified in your statement that you folks conduct regular inspections of the facilities to identify deficiencies, and then your staff develops priorities for correcting the deficiencies. Are those inspections done on a regular basis or are they done on an ad hoc basis? Is there a time every year you do it and then make a list? And if so, I wonder if you have a priority list?

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    Mr. HEYMAN. May I ask Mr. Rice to address that?

    Mr. RICE. Yes, sir; we do have a schedule. About every 2 years each building has documentation which I can provide an example of if you wish. And we have a prioritization system and I can provide that with the Secretary's written responses.

    Mr. NETHERCUTT. I think that would be helpful, because I think we've increased your budget in this committee every year for the last 3, over and above what the administration had asked for. And so, I'm a little surprised that you don't do it more than every 2 years. But maybe that works for you. Do you think it's adequate?

    Mr. RICE. I think it's adequate; yes, sir. But, I will provide the documentation and that will clarify it.

    Mr. NETHERCUTT. That's great. Do you know what the total amount of maintenance backlog needs are right now? Or will you provide that if you don't know it generally today?

    Mr. REGULA. If you'll yield, I would hope that we'll get this from all four agencies before we have the hearings. I've asked them to do that.

    Mr. NETHERCUTT. That's great.

USE OF PRIVATE CONTRACTORS

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    Mr. Wilker I gauge from your testimony that you have a pretty good handle on your maintenance needs and you've appropriately categorized those. It appears you employ some private contractors to help you identify those needs. Has that been a good system for you?

    Mr. WILKER. That's helped a great deal. Annually, we review the entire building and prioritize those items that come up, anywhere from emergency light safety issues, to items which we can defer because they can be accomplished in our capital repair program. As part of that review we use outside consultants—architects, engineers, folks with expertise in various areas—to help us assess what needs to be done, what the cost might be, how pressing the need would be to accomplish it so that we can put it on a scale that has seven or eight different levels of priority.

    Mr. NETHERCUTT. It sounds like a good idea. It sounds like it works for you.

    Mr. WILKER. It works very well.

    Mr. NETHERCUTT. And that it addresses what you need to have done and then let us know.

    Mr. Powell, the master facilities plan that you speak of in your testimony, when will that be finished?

    Mr. POWELL. I believe we'll have the initial phases of it completed by April 15.

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PRIORITIZE MAINTENANCE NEEDS

    Mr. NETHERCUTT. Okay, and that's a good idea it sounds like to me. But how do you prioritize your maintenance needs without that master plan? How have you done it in the past? Maybe I've missed it.

    Mr. POWELL. Well, the maintenance needs are developed and accomplished largely with our staff. The ongoing maintenance is just accomplished with that. The larger plan and the larger items, for instance the skylight project that's underway right now, the master plan will contain items like that which we will then prioritize for you. But things that will come on line with that would be as a result of the building envelope study: it is the water-tight integrity of the walls of the buildings; electrical, steam issues; things that work now but will need to be replaced over time but are not part of routine maintenance.

    Mr. NETHERCUTT. Okay.

HOLOCAUST MUSEUM BACKLOG NEEDS

    The Holocaust Museum has had a tremendous increase in numbers of people, it looks like—very popular here in Washington. You've accumulated quite a backlog of maintenance needs it looks like in the very short time that you've been in operation. To what do you attribute that?

    Mr. LARICHE. Well, we've had a lot of wear and tear on carpeting and on finishes—metal surfaces that have been painted, far more than we had anticipated. And we also have a rather complicated skylight system ourselves and have encountered many leaks that we wish weren't there. But we've conducted, over the past couple of years, studies to see how these can best be dealt with and we have in our submission Fiscal Year 1999, as well as our future plans for submissions, a request for funds to take care of these.

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    Mr. NETHERCUTT. You've also increased your personnel it looks like over the last year or two. It sounds like you've done that at the expense, perhaps, of your maintenance backlog. Do you see it that way?

    Mr. LARICHE. I don't see it that way, no. Most of our personnel has been, the largest increase has been on the private side, as a matter of fact, in order to honor the public-private partnership. Our council increased our private-side budget by some $5 million this year so that we could continue the one-third, two-thirds split we've been having with the Federal Government. So our growth we anticipate on that side of the budget. We realize that we've been very generously treated by the committee and the administration, and we appreciate it.

PRIORITY SETTING PROCEDURES

    Mr. NETHERCUTT. What is your priority-setting procedure in terms of your maintenance and your repairs, and your upgrades and so forth? How do you go through that?

    Mr. LARICHE. Well, I'll ask——

    Mr. NETHERCUTT. Is there a formal procedure for it?

    Mr. LARICHE. The formal procedure is that our Director of Operations, Mr. Brown, meets with his staff. They do constant inspections of the facilities, they create work-flow analysis of what should be taken care of first in order to keep anything from deteriorating beyond what it should. And we have highlighted several projects as priority projects. One is to fix leaks in the north towers. We have four towers along the north side of our building, and we have a plan to take care of those leaks as well as, in a future year, we have drainage problems on our Hall of Remembrance, so we have to repair those drains to keep leaks from continuing.

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CONTRACTOR ACCOUNTABILITY

    Mr. NETHERCUTT. Let me ask you, you know, I'm not chasing ambulances here, but I mean, somebody built that building. I assume you had very good contractors, very good architects, and so on. This is unusual, it seems to me, that you're having these leaks and these problems on a relatively new building—a very new building. How do you explain that? Or is there an explanation for it? Or have you gone back to the contractors?

    Mr. LARICHE. We have. The warranties on the construction have expired. The leaks have begun——

    [Laughter.]

    Mr. NETHERCUTT. In 6 years? It's 6 years on a contract in my state.

    Mr. LARICHE. I believe ours were 2 years. And we have gone back to both architects and to the construction companies and with their assistance looked at ways to address these repairs.

    Mr. NETHERCUTT. To what extent are they providing assistance? Are they doing anything substantive or is it——

    Mr. LARICHE. They have given some substantive recommendations. [Laughter.]

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    Mr. NETHERCUTT. But no money. [Laughter.]

    And no repairs. That's terrible, that you don't have a longer life——

    Mr. LARICHE. Were we to sue them, I'm afraid it would cost us more than fixing the leaks.

    Mr. NETHERCUTT. Well, thank you for being here today, all of you.

    Mr. DICKS. Would you yield on that question?

    Mr. NETHERCUTT. Sure.

    Mr. DICKS. Couldn't you have negotiated a better deal? I mean, could have the Government, I'm not saying you, but the Government, have negotiated a longer warranty period?

    Mr. LARICHE. I don't know the answer to that, but I can submit it for the record.

    Mr. DICKS. Yes. I mean, I just wonder whether we were limited to 2 years or was that just something that we agreed to.

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    Mr. LARICHE. These contracts were negotiated before I arrived, but I would be glad to submit that for the record.

    Mr. DICKS. Thank you.

    Mr. NETHERCUTT. Let me take back my time, if I have 30 seconds.

    The warranty may be 2 years, but I'm wondering—again, I don't want to get you in a law suit—but clearly you ought to threaten it at least—I mean that's real taxpayers money, and it is wrong that it's only a—you're looking at a three-year life, essentially. Somebody ought to really dig in on that one, it seems to me.

    Mr. LARICHE. Part of the problem, too, is that the building was built on fast-track, and I understand that it's quite usual when buildings are built on fast-track that some of these problems occur that don't occur when you take a longer time to build them.

    Mr. NETHERCUTT. Well, it wasn't cheap to build it. It was a lot of money, and there ought to be some accountability there someplace, because that's——

    Mr. LARICHE. And the money raised was privately raised. The council raised some $250 million in order to build the building and do the renovations to the annex building as well as to pay early operating costs for the council and for the staff.

    Mr. NETHERCUTT. Thank you.

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    Mr. REGULA. Mr. Dicks.

SMITHSONIAN FUNDING

    Mr. DICKS. In reading the testimony from the Smithsonian, it sounds as if the commission that did the review came up with the number of $50 million a year for 10 years?

    Mr. HEYMAN. Right.

    Mr. DICKS. And you agree with that figure, but as I understand it the budget request for this year is only $40 million.

    Mr. HEYMAN. Well, the budget request that has come to Congress is for $40 million, yes. [Laughter.]

    Mr. DICKS. That's not the one you sent to all of the——

    [Laughter.]

    Mr. DICKS. You still need the $50 million. Is that right?

    Mr. HEYMAN. Well, you know, $40 million is going to help a lot. But if we had had the extra $10 million, just as an example this year, we probably would not have to put into two phases part of the renovation that we're doing over in Natural History; we could have done it all at once. That probably would have saved a little bit of money to do it all at once, rather than in two phases.

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    It's very difficult always to say exactly what it means not to have gotten the full amount——

    Mr. DICKS. Right.

    Mr. HEYMAN [continuing]. In the year you want, but I thought I would give you that example because it's very concrete in relationship to the kind of activity you could undertake if you had all the money at once.

    Mr. DICKS. Now—and that $50 million over 10 years—that's separate from the zoo construction.

    Mr. HEYMAN. That's right, sir.

    Mr. DICKS. And what was that number?

    Mr. HEYMAN. Ten.

    Mr. DICKS. Ten—and you got $4.5 million.

    Mr. HEYMAN. That's correct.

    Mr. DICKS. Is that adequate for this year?

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    Mr. HEYMAN. Well, again, it's the same kind of problem.

    Mr. DICKS. Yes.

    Mr. HEYMAN. We'll do the things we have to do most for this year. It's really not adequate from the perspective of getting us closer and closer to being adequate across the board—you know, understanding that we're always going to need money because progressively buildings and facilities deteriorate, but to really assure us that not something major is going to break down.

VISITOR ATTENDANCE IN WASHINGTON, D.C.

    Mr. DICKS. You mentioned in your statement that you had a dramatic increase in visitation.

    Mr. HEYMAN. Twenty percent this year.

    Mr. DICKS. Why is that?

    Mr. HEYMAN. Well, we've all had the same experience, and it means that an awful lot of people have been coming to Washington, a big rise in the numbers of folks who have been coming to Washington, and as far as I can see, I attribute it to a better economy and probably a better sense of security with respect to coming to the city. But for whatever set of reasons, the tourist rate has gone up considerably in the city.

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    Mr. DICKS. So visitation is up. Will that have an effect on maintenance? I suppose it does; there are more people going through.

    Mr. HEYMAN. Well, it clearly does on some classes of maintenance. For instance, one of my colleagues here was talking about the rug, the rug in the National Air and Space Museum, which will have nearly 9 million people who have visited it this past year; it wears out considerably faster with all of those footsteps. And like things happen. In terms of basic systems, I don't sense there's a real problem with those, but as far as a variety of other lesser matters, obviously the replacement rate is increased.

KENNEDY CENTER REPAIRS

    Mr. DICKS. In looking at the statement of the Kennedy Center, 130 minor repair actions were implemented, or were they catalogued? I'm trying to decide which one it was. There's still quite a bit of—you did $1.5, $1.6, $1.7 million, but the need is around $10 million?

    Mr. WILKER. The total need at the moment is about $11.2 million, I believe.

    Mr. DICKS. Yes, there it is.

    Mr. WILKER. And we're accomplishing just under $2 million a year in working away at that backlog.

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    Mr. DICKS. Are there any serious matters that haven't been taken care of?

    Mr. WILKER. There is nothing worrisome. There are no emergency or life-safety issues. We addressed all of those first.

    Mr. DICKS. Okay. Thank you, Mr. Chairman.

    Mr. HEYMAN. Mr. Chairman, might I just say one thing?

    Mr. REGULA. Yes.

    Mr. HEYMAN. We've given everybody this little pamphlet, which you might find useful as you see the way we analyze our sets of problems and thus we face up to trying to prioritize what we're doing, but we'll have a more technical prioritization schedule for you in relation to your questions.

SMITHSONIAN BUILDINGS

    Mr. DICKS. One final thing. In here it said that you're in 300 different buildings?

    Mr. HEYMAN. Yes, sir.

    Mr. DICKS. Have you looked at that? Is that required? [Laughter.]

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    Mr. HEYMAN. We would argue strenuously, yes, but I mean——

    [Laughter.]

    No, we—the history of the buildout of the Smithsonian over the last 150 some-odd years has been one that has been a response to opportunity and interest of people at the Smithsonian. Some things have gone away because they've just not worked very well, but some of them have just grown very immensely and very soundly where it was not planned, really. It came from the quality of the activities in place.

    One of those examples is really the Smithsonian astrophysical observatory, which now is a world-class astronomical undertaking, and 20 years ago, 25 years ago, it was a much lesser operation. But all kinds of things occurred, not the least, Sputnik, NASA's growth, satellites, and personnel. It just filled more and more niches until now it's a very substantial operation that has a budget; it must be around an $80 million a year operating budget.

    Mr. DICKS. Thank you, Mr. Chairman.

    Mr. REGULA. Mr. Skeen.

KENNEDY CENTER MAINTENANCE OPERATIONS

    Mr. SKEEN. Thank you, Mr. Chairman. Let me ask Mr. Wilker—some years ago we had a discussion on the maintenance and upkeep. One of the problems that we had at the Kennedy Center was the garage, the parking garage in the basement. Did they every get that worked out—where there were bars coming up through the floor of the basement?

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    Mr. WILKER. Yes, sir. That was a very serious problem. That was during the time when the building was being operated by the National Park Service——

    Mr. SKEEN. That's correct.

    Mr. WILKER [continuing]. And we inherited that project about halfway through——

    [Laughter.]

    Mr. SKEEN. You said the magic words about maintenance and——

    [Laughter.]

    Mr. WILKER [continuing]. About halfway through the construction period, and we managed to wrap it up about two years ahead of schedule, and it is completely finished now. It was a very serious problem because the parking garage actually holds up—it's the foundation for the building itself.

    Mr. SKEEN. Well, you're also below the water line.

    Mr. WILKER. And part of it is below the water line; that's correct. You have a good memory.

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    Mr. SKEEN. I noticed that you're having other difficulties in other buildings around here. I can't believe that people are still designing buildings and putting them below the water line around this body of water that we have—the river and so forth. Like right now, it's up about flood stage.

    Mr. WILKER. Correct. We had a real water problem, because with the garage deteriorating——

    Mr. SKEEN. You sure did.

    Mr. WILKER [continuing]. We had water coming up through the garage, and with the roof deteriorating, we had water coming down through the roof, so we had it in both directions.

    Mr. SKEEN. And also there were also automobiles coming in there that were wet on the bottom and leaving the snow or material on the floor, so you had a real problem.

    Mr. WILKER. That's correct, but that's completely fixed.

    Mr. SKEEN. The Park Service didn't do it for you.

    Mr. WILKER. Well, they started it, and we took over the project and completed it.

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    Mr. SKEEN. No out-houses down there? [Laughter.]

    Mr. WILKER. No out-houses.

    Mr. SKEEN. And then also at that time, we had problems at the Smithsonian—not at the Smithsonian, but at one of the——

    [Laughter.]

    Mr. SKEEN. Now, did you raise the ante for parking?

    Mr. WILKER. Did we raise——

    Mr. SKEEN. What's the parking rate now? Is it $8.00?

    Mr. WILKER. The parking rate is $8.00; that's correct. That allowed us to institute a series of shuttle buses which we run now from parking garages and the Metro in the area as a service to visitors and to patrons, because as you know, our parking—the building was built with 1,400 parking spaces for 7,000 patrons, so we are very under-parked, if you will. And the shuttle buses now carry about 60,000 people a month to the Kennedy Center, and we still have a parking problem. So we've been trying to find creative ways of dealing with the visitorship that we have.

    Mr. SKEEN. One way is to raise the parking fee——

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    Mr. WILKER. Well, it helps us to accommodate the visitors in other ways.

    Mr. SKEEN [continuing]. Which you probably had to do. I understand that.

SKYLIGHT MAINTENANCE

    Then this window situation was one with the Smithsonian and the National Gallery of Art. Is that correct?

    Mr. POWELL. I'm sorry, sir?

    Mr. SKEEN. The windows.

    Mr. POWELL. The skylights.

    Mr. SKEEN. Skylights.

    Mr. POWELL. Skylights.

    Mr. SKEEN. So, we've had a problem with that in some buildings before. Is it the same building?

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    Mr. POWELL. The skylights in the West Building are the ones that are being replaced right now, and those——

    Mr. SKEEN. But don't you have a problem somewhere else in the complex?

    Mr. POWELL. No, those were the main problems. We had about—oh, during that heavy winter several years ago we had some leaks in the skylights of the East Building, but those have been repaired.

    Mr. SKEEN. Thank you, Mr. Chairman. Thank you, gentlemen.

    Mr. REGULA. Mr. Wamp.

ESTABLISHING MAINTENANCE PRIORITIES

    Mr. WAMP. Mr. Chairman, let me say anecdotedly, if I might, that 10 nights ago my brother's bluegrass band from east Tennessee played at the Kennedy Center, so it was good for change to not just glean culture from the Kennedy Center, but actually leave some there. [Laughter.]

    Mr. WILKER. Well, we appreciate that. [Laughter.]

    Mr. WAMP. I'm not—it's culture, George, culture. [Laughter.]

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    George was in east Tennessee for my birthday, the last of October, and he was filled with culture when he went back to Washington State.

    I'm not making news today, but I would like to serve on this subcommittee for the next 9 years, and so I have a concern about the priorities between maintenance and new programs and capital investment. To give you an example of what my concern is, I also serve on the Legislative Subcommittee, and if we had a finite amount of money and the proposal for the visitors' center is made to the Legislative Subcommittee, which it has been, and the dome leaks in the Capitol, but you only have ''X'' dollars, obviously the decision to fix the dome has to take precedent over building the new visitors' center.

    I believe it's the will of this subcommittee to invest, at times, even more than the President's request for maintenance to keep the facilities under your charge in the best possible condition. But it's human nature when you're in your business, and many people's, to look for new programs, look for the new mousetrap, look for the new experience, look for a new frontier, and that conflict creates a problem for us because if we just kept building new buildings and enacting new programs and carrying over backlog maintenance, the person who sits on this subcommittee 7 or 8 years from now has a real problem meeting the basic needs of maintenance.

    I'm going to throw a jump ball and say, How can we set the priorities? How can we work with you? And right now, how do you set the priorities to keep down the temptation to build new buildings or to engage in new programs, versus trying to take care of the problems we have with overlapping backlog maintenance?

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    Mr. REGULA. Why don't you each respond to this question.

    Mr. HEYMAN. Well, this probably affects me more than the others because we have so much broader a program. It's no secret that our aspirations with regard to new facilities are much moderated from the time that, at least, I took over as Secretary.

    The major new facilities we're talking about are privately funded, not federally funded, and I think we—and I would hope you—will start to really give some very considerable thought to what ought to be the conditions when we do privately-funded buildings with respect to setting up depreciation schedules and having to find from private sources, as well as elsewhere, the resources to carry on the kinds of maintenance that we carry on with regard to Federal.

    And I hope that as time goes on and as Federal provisions become more difficult, for all the reasons that we know, that we'll give good attention to, at least in our case—and I would suspect with my colleagues here—ways that we can turn to the private sector to meet some of the growth needs with the proper protections against draining Federal budgets thereafter.

    Mr. REGULA. But all new construction has operating costs down the road.

    Mr. HEYMAN. Yes, that will have to be discussed, too. That's right.

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    Mr. REGULA. So, it may be privately built, but it's federally operated.

    Mr. HEYMAN. But, clearly, if you do it the way I'm suggesting, maybe that's the way we can start to compromise need for growth and minimizing the impact of that growth on Federal budgets.

    Mr. REGULA. Mr. Wilker.

PUBLIC PRIVATE PARTNERSHIP

    Mr. WILKER. Thank you. I agree with Mr. Heyman, and, clearly, the public-private partnership is one that is very much in place at the Kennedy Center. I think your comment is a very good one, and we all walk a fine line between trying to be as fiscally responsible as we can and still provide the programs and facilities to serve the American public and preserve this country's great cultural heritage.

    As far as the Kennedy Center is concerned, we're not involved at all in constructing new facilities. We're trying to bring up to a current standard a building which we inherited that was in very bad condition.

    Mr. POWELL. I also think it's an excellent question, but I agree with my colleagues. The National Gallery has no new construction programs that would result in additional buildings. We do have—as the chairman knows, we are constructing a sculpture garden, which is privately funded, across from the Archives on Seventh Street.

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    But our master plan which we will submit to the committee will show that the maintenance—and ongoing maintenance—is really what the Gallery is interested in seeing substantially supported. The West Building is 55 years old. The East Building is now 20 years old, so there are things that need to be dealt with there, but no new construction.

    Mr. LARICHE. Likewise, the Holocaust Museum does not anticipate any new construction, and our R&R request in the President's budget we feel is the level that will enable us to keep a really sound building for the future.

    Mr. WAMP. Thank you, Mr. Chairman.

    Mr. REGULA. A number of those in the audience and these gentlemen want to go to the funeral for Roger Stevens, so what I would anticipate, since we're going to have a couple of votes, is to wrap up here in the next 6 or 7 minutes and adjourn.

    Mr. Miller.

REVENUE RECEIPTS ISSUES

    Mr. MILLER. I'm sorry I missed the early part of your statements, so I may be repeating some of the questions, but let me ask two questions. One is the question of revenues that you all receive, and the issue of fees.

    One of the things—and I'm not necessarily advocating it—but what is your position? The National Park Service has had a significant increase in fees to allow for maintenance of the Park Service, and it's been very successfully received in places. They are able to have money that can start fixing up the Yellowstone problems and the Grand Canyon problems.

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    So at the Kennedy Center, where there is a fee, what is the position on fees set aside or designated for maintenance and repairs?

    Mr. WILKER. Well, with regard to the Kennedy Center, as you mentioned, almost all of our programs are fee-driven—all of our performances—although we started this year a program to make the arts available to all people, and we have had a great success with the program now, where every day of the week, every day of the year, we have a free performance at 6:00 p.m. in the evening. And that has been, since we started that last March, has had over 130,000 people attend those performances.

    The way the Kennedy Center is structured financially is really a public-private partnership, with the Kennedy Center providing three-quarters of the funds through private means to run the building and provide the programs, and the Federal Government taking care of the facility. So we think that that is a very good deal for the Government, and a great relationship.

    Mr. MILLER. How about the National Gallery of Art and the Smithsonian? I know there is a philosophy of not charging, but the National Park Service changed and it's been, I think, very successful because all of a sudden they now have money to do repairs and maintenance that they never had in the past. So, I mean, is there any discussion about that as an option?

    Mr. HEYMAN. Well, let me speak for the Smithsonian. This question arises often, as you might imagine.

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    Mr. MILLER. Right.

    Mr. HEYMAN. And it arose 2 years ago when the Senate committee, the appropriations subcommittee, asked for a report, and we labored hard on that. The regents reviewed it and came out with a conclusion that fees, certainly at this time in their view and in mine, were not justified.

    It's a very, very complex problem for us. We have some museums for which, in their organizing papers, especially when they were gift museums, there is a provision, as there is for the National Gallery, that no fees would be charged, and that was the understanding by the donor at the time that the museum was created.

    We have other museums wherein their statutory charter indicate that no fees can be charged, and obviously that could be changed by the legislature, but it would require legislative action in order to do it. Then we have a number of facilities where there are no restrictions of that sort, and the regents would have the discretion to impose fees or not to impose fees.

    And then, as I recall in that analysis, we were comparing ourselves with other buildings and with other monuments in the Washington, D.C. area, and it was very difficult to draw logical distinctions between, for visitors from around the United States, coming to Washington and coming to one of the Smithsonian museums, or going to the White House or going to a variety of the other kinds of monuments, including ones that have intensive programs—free.

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    So, I must say, this is the kind of a problem that's bigger than the Smithsonian in a way, and in my view has to be addressed with respect to all of the Federal institutions that are in the Washington area.

    Mr. MILLER. Well, you might look at what happened with the National Park Service. Every park doesn't have the draw of the Grand Canyon or the Yosemite, but my understanding is that it has been well-received by the Park Service and the people who visit the parks, and so it is an interesting analogy.

    I know we are short on time, but there is one other question I want to ask, but I'd like to hear the others comment on, are there any other ways to do maintenance——

    Mr. REGULA. Let me suggest—that requires some extensive answers. Why don't you submit that for the record to all of them on the fee issue——

    Mr. MILLER. Okay.

    Mr. REGULA [continuing]. So at least we have it for the record.

    Mr. MILLER. And as I said, I think the National Park Service should be given a chance to revisit the issue again.

COSTS TO THE FEDERAL GOVERNMENT

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    The other question I have—and maybe it would be better because of time to ask for a comment, and maybe GEO is even going to be better on this. We went to this hearing on the National Park Service, and we saw the out-house problem—you've heard about the $300,000-and-some out-house; the cost of employee housing on the Park Service was $400,000 to $500,000. And why does it cost so much for the Government to do something, was the bottom line question, and we never got a very clear answer from the Park Service.

    And so when you do HVAC work, is it much more costlier than if, you know, some big developer downtown does the same work? I mean, what—we want to make the best use of our tax dollars, and we can agree to a project—whether it's repairing escalators, or roof work, but does it cost a lot more for the Government to do the same work as the private sector? Or is there a better way to go about finding a way to utilize the best dollars?

    So, I think, as I say, we saw that in one recent hearing with the Park Service, which is of great concern. We're just not getting the best, and when you get only so much money for maintenance, you want to get so much done. You see there's a certain amount of waste because Government requires it. Does anybody have a comment on that before we leave for a vote?

    Mr. HEYMAN. Well, I'd just make one comment. I've never really tried to see it in action in Federal construction, but I sure did see it in State construction in California when I was chancellor at the University of California at Berkeley, and it clearly was a 15 percent to 20 percent margin, given procurement rules and bidding rules and the like. It's a much more formal process that simply adds money to it.

    On the other hand, it does also provide a much greater amount of oversight, and it protects against favoritism in most instances.

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    Mr. REGULA. Do you all concur on that?

    Mr. MILLER. Okay, thank you all very much.

    Mr. REGULA. Thank you for coming. The committee is adjourned.

    [The information follows:]

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