the operation of completed reservoirs and local protection projects in the flood area which prevented damages in excess of $122 million. Other authorized projects not yet constructed would also have been highly effective had they been in operation during this flood. For example, the R. D. Bailey project, on which construction is scheduled to start next month, would have prevented over $4 million in damages, virtually eliminating all flood losses that were experienced on the Guyandot below the dam site. The Rowlesburg project, now being planned, and the Stonewall Jackson Reservoir, on which a planning start is proposed in the FY 1968 budget, would have prevented damages in excess of $2 million each. These projects would, of coure, produce many other important benefits contributing to the economy of the Appalachian Region.

I wish to assure this Committee that the Corps of Engineers attaches a high sense of urgency in moving ahead with our authorized program in the Appalachian Region. Similiary we are maintaining a high level of activity under our authorized investigations program which will lead to additional recommendation to Congress for project authorizations. There has been no suspension in this activity to await the result of the Comprehensive Survey authorized by Section 206. Instead we are moving these reports ahead, reflecting to the extent possible Appalachian objectives and compatibility with the plans of the Commission and with the comprehensive plan for water development currently evolving. The 1966 Omnibus Act authorized $50,400,000 for improvements within the region. We expect to complete some additional reports that will be available for consideration during this session of Congress. I feel this continuing effort will go far toward ensuring a satisfactory program for meeting Appalachia's urgent water problems in advance of completion of the overall comprehensive survey.

This completes my formal statement. With your permission, I would now like Colonel Lee to review for you the progress being made on the Comprehensive Water Survey. We will then stand ready to respond to any questions the Committee members may have concerning our activities in the region.

I thank you.

General WOODBURY. As the Chairman well knows, for many years the civil works program of the Army Corps of Engineers has made important contributions to the economy of Appalachia. The estimated cost of our present active authorized program totals about $4.3 billion, beyond 109 projects having a total cost of $1.2 billion having been completed, and additional projects costing $1.9 billion are currently in a construction status, the remainder of the authorized program consisting of 50 projects costing $1.1 billion having not yet been initiated although advance planning preparatory to construction is underway on 20 of these. These figures, of course, are exclusive of the work that has been done by the Tennessee Valley Authority and other Federal agencies under their regular programs.

One of the most serious deterrents to the well-being of the people in Appalachia and their opportunities for economic growth is the chronic flood problem which plagues many parts of the region. The program activity I mentioned has given high priority to areas of Appalachia having serious flood problems and, as the Chairman is aware, as a result of your visit to the area in March of this year, the region again suffered serious flood damage in portions of Pennsylvania, West Virginia, and eastern Kentucky as well as other areas along the Ohio.

Residual flood losses this spring totaled more than $35 million, but this figure would have been much higher had it not been for the operation of completed reservoirs authorized by this committee. Preliminary estimates of losses prevented as a result of this construction are in excess of $122 million. Other authorized projects not yet constructed would have been highly effective had they been in operation during this flood. For example, the R. D. Bailey project on which construction is scheduled to start this next month would have prevented over $4 mil

lion in damages virtually eliminating all flood losses that were experienced on the Guyandot. The Stonewall Jackson Reservoir, on which a planning start is proposed in the 1968 budget, would have prevented damages in excess of $2 million and, of course, would have produced many other important benefits contributing to the economy of Appalachia. There has been no suspension of our regular program in Appalachia to await the results of the comprehensive survey which was authorized by section 206.

At this time, sir, I would like to call on Colonel Lee, with your agreement, to briefly review for you his work in the area.

Mr. JONES. Thank you. Colonel Lee.

Colonel LEE. Mr. Chairman, I also have a formal statement, sir, which I would ask be placed in the record and I will summarize it very quickly.

Mr. JONES. Without objection, that statement will be received and we will continue to hear your summation for the record.

(The document follows:)

STATEMENT BY COL. JOHN C. H. LEE, JR., DIRECTOR, OFFICE OF APPALACHIAN STUDIES, CORPS OF ENGINEERS, CINCINNATI OHIO

Mr. Chairman and Members of the Committee: I am Colonel John C. H. Lee, Jr., Director, Office of Appalachian Studies in Cincinnati. I am delighted to have this opportunity to appear before you and discuss the progress that has been accomplished on the Appalachian Water Resource Survey, authorized under Section 206 of the Act.

This study, being accomplished in coordination with numerous Federal and State agencies concerned with water resource development. raises their planning horizons and includes entirely new dimensions in their considerations. Section 206 (a) breaks down into three clauses. The first of these directs preparation of a comprehensive plan for "the development and efficient utilization of the water and related resources of the Appalachian region." The second requires us to "give special attention to the need for an increase in the production of economic goods and services within the region"; under this clause, we are to consider aspects of the regional and local economies which have not been explicitly considered in past surveys and investigations. The third clause directs that our plan be compatible, "integral and harmonious" are the words, with the overall program for Appalachia. I shall return to the implications of these three clauses several times in this statement.

A major part of our work in 1965 was concerned with working out with each of the appropriate Federal agencies what tasks each would perform in order to prepare the comprehensive plan required under Section 206. Working agreements were reached with the following :

These and Dere Services Acrinisers

A coordinated rewrch prowerem was worked our with the Appalachian Re atomical Commmberton, and some of the mound antracted for by the Commissom has been emppsried in peers with funds andorised under Section 206. It is

to be noted that much of the work being accomplished by the Soil Conservation Service, Federal Water Pollution Control Administration, and the Tennessee Valley Authority as part of the Appalachian Water Resource Survey is being funded by monies obtained through each of the agencies' regular appropriation procedures.

Accomplishment of the Appalachian Water Resource Survey requires extensive coordination among the Federal agencies just mentioned and the numerous agencies in each of the Appalachian States also concerned with water resource planning. The Water Development Coordinating Committee for Appalachia was organized in September 1965 as a formal mechanism for coordination under the authority of Section 206(c) of the Act. Representatives of the Appalachian Regional Commission, the Governors of the twelve Appalachian states, and of the various Federal agencies having water development responsibilties in the region comprise the committee, twenty in all.

An early accomplishment by our office was preparation of a draft Plan of Survey which was adopted by the Coordinating Committee in February 1966. It contains explicit summaries of the tasks to be performed by the participating agencies. It also details the extensive coordination procedures required, sets the general schedule for the work, and provides fund allocations.

As an example of this coordination, I would like to mention the planning boundaries that we are using. As you are aware, the natural river basin boundaries or watersheds describe the geographic responsibilities of the Corps of Engineers districts and divisions, and of the Tennessee Valley Authority. In the Soil Conservation Service, boundaries are set on state lines. The Appalachian states have developed multi-county planning areas within the states which may become the local development districts authorized under Title III of Public Law 89-4. Also, because a major part of our survey centers around stimulating area economies, we asked the Office of Business Economics of the U.S. Department of Commerce to break down the Appalachian region into economic sub-regions and to provide us with certain data and projections of economic growth for each sub-region. The Office of Business Economics sub-regional delineation produced 26 separate economic entities including many counties in metropolitan areas outside the region but on which nearby Appalachian counties were economically satellited. The Office of Business Economics' boundaries do not coincide with the boundaries set by the states for their planning areas and, of course, neither of these sets of boundaries even approximated the natural watersheds.

We have assigned to nine Corps of Engineers districts and to the Tennessee Valley Authority water sub-regions on which they will prepare sub-regional reports. These water sub-regions generally include most of the territory normally assigned to the responsible office. But the edges of the water sub-regions, with three minor exceptions, strictly follow the boundaries of the state planning areas. Thus our water resource report, due to you at the end of 1968, will be presented as a composite of ten water sub-regions-so bounded that any local development district and others concerned with multi-county development can find all of the facts they need in one place in the report, even though the multi-county unit might fall in two or more river basins or economic sub-regions.

I have discussed boundaries because it leads to an understanding of how we are applying the three clauses of Section 206 (a) in our survey. We must produce a comprehensive plan for the development of water and related resources of Appalachia which, if authorized and when carried out, will not only stimulate the Appalachian economy but also provide those water related goods and services such that water problems will be substantially alleviated as the region grows to its full potential, that is, when the Appalachian Regional Development Program is fully successful. From this plan we will derive recommendations for authorization of urgently needed projects, projects which will correct identified impediments to growth and development, and which will be justified by showing a high expected rate of return on the investments, to both the national and regional economies.

Accomplishing these objectives requires determining the full developmental potential of the Appalachian region. For how much growth in new industry should we be planning? We have developed rather simple and direct methods for recomputing the projections of growth, which the Office of Business Economics made on the basis of historical trends, to describe what Appalachia might produce in the way of new job opportunities and income. These developmental benchmarks have been tested against the real life constraints such as developable

real estate, other natural resource restraints, and the availabilities of people in the right age and sex cohorts, and have been adjusted as appropriate. They can now be accepted for use in deriving our plan.

In order to measure the economic stimulation that our projects might cause and to which the Congress directed us to give special attention, we have found it necessary to extend and revise certain of the procedures which we have been accustomed to using. There is a clear intention stated throughout PL 89-4, and especially in Sections 2 and 206(a), that developmental growth and economic opportunity for Appalachia are to be part and parcel of our national economic policy. Therefore, our reports to you on the anticipated performance of our projects must necessarily assess how well they support not only the commonly accepted national efficiency criteria, but also the extension of goals set by the Act. The Presidential standards set forth in Senate Document No. 97, 87th Congress, 2nd Session, "Policies, Standards, and Procedures in the Formulation, Evaluation, and Review of Plans for Use and Development of Water and Related Land Resources", outline the principles we needed to follow. Using these, and many inputs from widely accepted economic theory, we produced a manual to guide our survey and to which we gave the title "Evaluation Procedures." This manual is only a "working tool" and is being refined by further research, experience and testing.

In "Evaluation Procedures" we have attempted to redefine benefits flowing from water resources projects. We feel that it is desirable to consider benefits as falling into two distinct categories, those which flow to users to project goods and services, and those which expand employment and income flows in the region. In our shorthand use of these definitions we have called them either "user" or "expansion" benefits. User benefits are all benefits which stem directly from the use of goods and services the project provides, and can always be credited to a national account. Expansion benefits generally stem from or are induced by the project indirectly--although some do flow directly-and can fall into either a national or regional account. What you have come to know as "area redevelopment benefits" we would categorize as "expansion benefits." But also, when a project helps induce expansion, let us say, helps induce a private investment in a new industrial plant in an area, the project's share of the values of the new wages and salaries, rents and profits would also be counted as expansion benefits. The payroll of employees in the new plant which were previously employed in the region or elsewhere, would contribute to regional prosperity but would not affect the national account. In those cases where the new plant employs persons otherwise unemployed, this part of the new payroll would be added to the national

account.

We held a workshop in Cincinnati in the fall of 1966 at which the procedural guidelines were explained and given a preliminary field test. We anticipate some difficulty in applying them to real projects primarily because we are moving into some unexplored fields. We are testing these procedures on an accelerated basis on projects which will clearly be "integral and harmonious" with the Appalachian program, and which will clearly support all of the objectives described. A major accomplishment in the past calendar year was completion of what we termed, "Initial Stage Studies." We asked each of the Corps of Engineers districts involved in Appalachia, and the Tennessee Valley Authority, to reassess their river basins to find potential projects which promised either to correct existing impediments to growth or clearly to stimulate economic growth and development. We asked that these offices submit many more projects than could conceivably be developed and recommended with the manpower, time and funds available. These studies have been essentially completed and have been screened in our office and with each of the Appalachian States. To these lists of projects the states themselves have added a few projects which they consider should go into our total plan. The states were most active in direct consultation with the districts during the Initial Stage Studies, so that all concerned were made aware of problem areas where water resource development would correct the problem and assist local economic growth.

In a similar way the twelve State Conservationists of the Soil Conservation Service have embarked on a program of conducting 100 preliminary watershed investigations throughout Appalachia. These investigations are supplemental to the normal watershed program under Pl. 336 and also to the work separately enthorized on the Coosa and Potomac River basin watersheds. Each of the 100 watersheds selected for a pre minary investigation was judged to have both a

serious agricultural water resource problem and a contiguous community that might provide a base for light industry were the watershed development completed and installed.

Working closely with the Appalachian Regional Commission, we have accomplished several pieces of research of some significance both to the survey and the reginoal program. As I mentioned earlier, the Office of Business Economics has completed projections of population, employment, income, and indices of output for related industries for each of their 26 sub-regions in Appalachia ; this work is essential to our derivation of the developmental benchmarks. A study of "recreation as an industry" has been completed and we will use it in order to compute the expansion benefits that will evolve from those of our projects which contain recreation as a project purpose; it also contains most ingeniously derived multipliers for each Appalachian county. Another study to define the locational characteristics of 25 key industries, including a description of those public investments and decisions which can contribute to the competitive locational attractiveness of an area is being actively applied in our work. Many other important studies are still underway. We have let a contract to obtain economic models of the existing Appalachian economies which will be presented to us in the form of three input-output matrices. This research will be used in our survey to obtain measures of the multiplier effects induced by project investments; this research will also have great value to those concerned with industrial development in the states and in the Commission. A major problem, on which we have another research contract, is concerned with how to apportion benefits between complementary programs which are impacting nearly simultaneously on a growth area. The Appalachian program contains, among others, programs of highway development, water resource development, vocational education, and health. The question to be solved is how to apportion the cumulative benefits of all four such programs to each, especially to water resource development.

The deadline set in Section 206 requires that our report be submitted at the end of 1968. Allowing six months for review and analysis, the Ohio River Division must publish the report and public notices thereon in July 1968. We have much to do before that date. We must evaluate the tested developmental benchmarks in terms of their local impacts so that they can truly become the backdrop for our water plans. Second, we must derive the ten sub-regional comprehensive water development plans in consonance with the backdrop. Third, we must test our "Evaluation Procedures" against each of our urgently needed programs and projects, developing costs and benefits in the new planning environment which you require. Lastly, we must wrap-up all of these matters in a final report and include therein not only recommendations concerning program and project authorizations but also recommendations concerning how the total plan can continue to be carried out through its effective life, and especially through FY 1971, which ends the legislative life of the Appalachian Regional Commission. Summarizing this statement, I will now address the problems yet to be solved. If the research that we have presently under contract is successful, and the guidelines in our "Evaluation Procedures" manual continue to test out, we do not anticipate any further problems in method. On the other hand, we still must take a good hard look to determine whether current policy concerning the division of responsibility between Federal and non-Federal interests in practicable of application in all cases in the Appalachian Region. In passing PL 89-4, you recognized that the typical Appalachian community had far less tax base and fiscal capabilities than similar sized communities elsewhere in the nation. How this fact should affect our recommendations concerning cost-sharing remains to be resolved; we are currently considering deferred repayment as equitable, with payments to begin once the affected area has begun its recovery. Certainly, an essential criterion for an acceptable project which involves local economic stimulation as a project purpose is that local leadership supports the project and is prepared to carry out reasonable responsibilities to obtain the goals of economic development. Our problem is defining what is "reasonable."

This completes my prepared statement.

Colonel LEE. Thank you, sir.

The Appalachia water survey is a bit unusual and this stems from the second clause of section 206(a) of the current legislation where we are directed to give special attention to the need for an increase in