Senator MUSKIE. Now that description which is contained in your statement comes closer to my understanding of how the system in the Rhur operates than the concept of the effluent taxes which has been so widely discussed in this country and, I think, inaccurately applied to the Rhur experience. I think the Rhur experience is one of partership between industry, the communities, and the State; and the payment of appropriate shares of the cost of construction in the first place, and operation in the second place, by those three segments of society. They are operating under a system of service charges, as I understand it, and not effluent taxes, as they have been described in this country.

So I think what you are supporting here is the kind of program that is being conducted in the Rhur today.

Mr. ADAMS. I am not sure it is precisely that, Senator. I think it is similar to some situations that already exist in our industry, where the industry does use a municipal sewage disposal plant by paying a special fee, which is based on the cost of processing the industrial effluent. If I recollect, I think we have two plants in our company that do that; one in York, Pa., and one in Milwaukee, Wis. They put no effluent directly into the stream. It all goes through the municipal sewage treatment plant, and we pay to the municipality what has been negotiated as a fair charge.

Senator MUSKIE. Could we get for the record a description of the fiscal or financial arrangements that have been entered into in those two cases?

Mr. ADAMS. I think we could.

Senator MUSKIE. It might be useful, because that is the sort of thing that the demonstration plant program provided for in S. 2947 is designed to explore.

Mr. ADAMS. Yes, I think there is a greater opportunity for that than is being used at the moment.

Senator MUSKIE. Senator Boggs.

Senator BOGGS. Mr. Chairman, I have no questions at this time. I do appreciate your appearing, Mr. Adams. I regret I was not here to hear your full statement. I had an executive committee meeting to attend first. I shall read your statement with a great deal of

interest.

Mr. ADAMS. Thank you, Senator. We are very happy to be here. Senator MUSKIE. Senator Harris.

Senator HARRIS. Mr. Chairman, I would agree with you that the matter of water pollution is a matter for cooperation between the local, State, Federal, and private, and that incentives are as a practical matter required for private industry.

Mr. Adams, I wanted to call your attention to table A, which is attached to your statement and commend you for your helpful statement and ask if perhaps you might want to comment more in explanation of that table.

As I understand it, it substantiates your statement that the minimum Federal grant should be 50 percent, and that in preference to some kind of tax treatment, if there were going to be an alternative between the two types or methods of incentives. I take it you are saying, first, that the penalty type tax is not the proper approach;

that as between tax incentives and grants, the grants would be the better of the two alternatives. But do you recommend that they be mixed, and so forth?

Mr. ADAMS. I believe your interpretation is right, Senator. I am very much embarrassed to say I was supposed to have a financial adviser along with me this morning but because of the taxi strike in New York he has been delayed. We had expected that there might be some questions on that table, and I was to have expert advice at my right here to help me. But I think that the interpretation that you have made is a correct one; and if we can help you on that later, we will be very happy to. I do not pretend to be an expert on this table, and I must apologize.

Senator HARRIS. Thank you, Mr. Adams.

(Subsequently Mr. Adams submitted a supplemental statement on the tax incentive reference. See p. 665.)

Senator MUSKIE. Senator Randolph.

Senator RANDOLPH. Mr. Chairman, I have come to this subcommittee hearing from the Subcommittee on Roads. I am glad to arrive before Mr. Adams left the stand.

Mr. Adams, I had read the statement of the American Paper Institute. I thought that it had several interesting proposals which were advanced. I felt that the financial treatment suggested was creative. The fact that it had effluent discharge provisions, I felt should be studied, Mr. Chairman.

I am sure that the thoughts expressed will help us in the subcommittee. It is necessary, I am sure we can agree on this fact, that there be some type of meaningful assistance to industry to cover the very, very large costs of the abatement of pollution. If this is to be accomplished, I think industry will not need to be literally beaten over the head, but industry will need the incentives which can come. I am joining in the legislation toward this end. I have cosponsored bills that are pending in the Senate. So, I feel today that, although this is a problem that must be addressed by the Congress very promptly and that we must be very vigorous in our approach to these solutions of the abatement of pollution, that it is good, Mr. Chairman, that industries such as the paper industry-and this industry is involved in West Virginia, is involved throughout many sections of the country— that it is helpful when those industries, through their representatives, can counsel with us, Mr. Chairman, counsel with the Senator from Delaware, and I know they have counseled with Senator Boggs, and counseled with the Senator from West Virginia, preceding hearings such as we have today. Not that their testimony is thereby tempered, but we have the discussions which will be helpful to members of the subcommittee, of the Senate and also, I am hopeful, will cause the industry representatives to realize that there can be beneficial programs brought into being by legislation; and ofttimes these can be brought into being more constructively if we have the give and take between industry and the Congress itself.

This can only come when we discuss these matters and talk them through. So I wish, Mr. Chairman, to comment as I have on the statement which has been made today. I could not be here for it, but I did read the statement and I desire to commend those who have brought this approach, creative, resourceful, meaningful, I think in a sense very realistic.

Senator MUSKIE. Thank you very much, Senator Randolph. I appreciate your taking time to come. I know you are busy at another hearing.

Thank you, Mr. Adams.

Our next witness, Mr. J. A. vonFrank, chairman, Manufacturing Chemists Association Water Resources Committee; accompanied by Mr. William J. Conner, chairman, Legislation Subcommittee, Manufacturing Chemists Association Water Resources Committee.

STATEMENT OF A. J. vonFRANK, CHAIRMAN, MANUFACTURING CHEMISTS ASSOCIATION WATER RESOURCES COMMITTEE; ACCOMPANIED BY WILLIAM J. CONNER, CHAIRMAN, LEGISLATION SUBCOMMITTEE, MANUFACTURING CHEMISTS ASSOCIATION,

WATER RESOURCES COMMITTEE

Mr. VON FRANK. Our statement is somewhat lengthy. I am prepared to orally summarize it in the interest of time, and submit the entire statement for entry in the record.

Senator MUSKIE. Fine.

Mr. VONFRANK. There is one part which I would prefer to have Mr. Conner summarize; namely, title III and IV of 2987.

I am appearing as a witness on behalf of the Manufacturing Chemists Association, which is an association of 192 chemical corporations in the United States, both large and small, that collectively represent over 90 percent of the productive capacity of the basic chemical manufacturing industry here. I am professionally employed by a major chemical company to direct its air and water pollution control activities, and Mr. Conner is an attorney also with an association member company, and who has special knowledge in the field.

Mr. VON FRANK. I thought it might be wise at the outset of the oral summary to give the general tenor of our views on the two bills which we are prepared to talk about, S. 2947 and S. 2987.

We approve and support S. 2947 in its entirety. We do not favor S. 2987 as proposed.

A major desirable feature of S. 2947 is section 4, which removes the existing dollar limits on individual project grants for the construction of municipal sewage treatment facilities. In large measure, the pace of municipal sewage treatment construction is set by the Federal grant program, but the current arbitrary limit on grants diminishes the effectiveness of the program in the areas where it is needed most: the centers of urban populations where the pollution loads are greater, where the needs of the communities in terms of good water are most heavily required.

The $20 billion total cost of the program seems to us to be minimal and essential, based on a study of the record. We support the section confident that the program will be subjected to regular review and assessment to make certain that it conforms with the national needs, the presumption being that they say more likely go upward than downward.

Senator MUSKIE. Let me ask you this. In the technical supplement Mr. Adams gave us there was a figure of a billion dollars over 10 years

as the cost of dealing with the paper industry's problems. This was offered as a conservative estimate.

Do you have any figure for the manufacturing chemists as a whole? Mr. VON FRANK. Sir, we have a problem in accumulating similar type figures. Our industry is such a diverse one and is in various stages of technological development toward water pollution abatement, that the collection of this type of information we frankly have not found praeticable at this particular time.

It is a little difficult to accumulate, considering the far-ranging types of production that the chemical industry engages in. Some thought has been given in that direction, with a decision tentatively not to do it at this particular time.

The section of S. 2947 which deals with the research requirements and the expansion of Federal support to research and demonstration grants is one that has received almost unanimous support from prior witnesses, we want to emphasize further our accord with it as being desirable. We feel that in the area of municipal treatment there are some serious unresolved technical problems that are only going to worsen as time goes by. I do not mean to shift the context of my remarks out of the industrial situation; the point is that many of our industrial plants do discharge to municipal treatment plants with beneficial effects to both of us. Thus problems that bar further progress in the area of municipal treatment are of some concern to us as well. We have a direct interest in the satisfactory operation of municipal treatment plants.

However, the unresolved technical problems that are associated with the treatment of municipal wastes seem rather staggering to us. It may be that we are a little more familiar with our own problems and can see the routes by which we can proceed. In the area of the municipal treatment plant, this is not quite as clear to us, and perhaps not to some other people as well, based on consultations. They have the combined storm and sewer systems; they have no particular capability to treat or remove dissolved inorganic materials. There are residual inefficiencies in the process that are possibly responsive to research, such as the tertiary treatment program where the technical and economic development raises some serious questions.

We have an interest in that. These comments are designed to give a heavier emphasis to the research portions of S. 2947. The funds in S. 2947 that are made available to the State would be approximately doubled. Again, we want to go on record forcibly that we feel this is very necessary, since an effective nationwide program requires very viable State organizations. This is something that we have been interested in developing at State levels. For them to function properly, they need adequate funding, staffing, training, and proper equipment. Of course, the current intensive Federal activity in this field has put work burdens on them, both technical and administrative, that may cause other areas to suffer. I recognize that it is the States' responsibility to handle this as well, but this type of added support on the Federal level we highly endorse.

That concludes the oral summary on S. 2947.

I turn now to S. 2987, specifically at this point to title I. We found a rather curious construction here. It seems to be an improvisation

against what we had felt in the past to be a sound river resource management proposal in which water quality control played an integral part: the concept exemplified in the Delaware River Basin Commission having in the basin-"in" being an important word here a group representative of Federal and State interests on the spot dealing continually with the program, rather than one-shot plans to deal with. such problems. Various local interests in water as a resource frequently are incompatible next to regional and national interests, and these incompatibilities need to be equitably adjusted. There are many, many examples of these incompatibilities that do have to be adjusted, compromised.

Our concept of a river basin comprehensive management plan was exemplified by legislation last year, the Federal Water Resources Planning Act, which would set up river basin commissions armed with all the powers necessary to manage the river as a resource, Public Law 89-80, I believe it is. What we find difficult in title I of S. 2987 is two concepts:

One, making the water quality aspect of the operation of the river as a resource some sort of a bypassing proposal, placing it directly and thoroughly in the Secretary's hands. This is a proposal which, for existing river basin commissions and for future ones, compromises their effectiveness. It takes from what should be a coordinated view of a river basin as a whole and makes a portion of its authority diffuse off into another direction. This comes from a sense of what we think things should be, rather than what they are.

The Water Resources Planning Act of 1965 empowered the President to set up river basin commissions responsive to the Federal water resources concept. Such commissions, however, would serve only as ad hoc advisory and planning groups. Our supporting statement at that time to the committee which had hearings on it was that the commission should have permanent status and powers to implement their plans, which gives direction to our courts for proper river basin approaches which include water quality control.

The second portion of our comments on title I relate to an approach which is based on the Secretary's plan-presumably a one-shot plan; I may be wrong on that--being consistent with the broad comprehensive program that would be drawn up for a river basin plan, which gets outside of the Secretary's authority.

Now I think it bears a little close examination as to how this title I might abort a proper operation of a river basin scheme. As currently written, title I seems competitive, disruptive, and uncoordinated with the provisions of the carefully drafted Water Resources Planning Act which, in our judgment, provides a reasonable and proper basis for further development of coordinated river basin planning of which water quality control is an integral part. Section 103(a) of title I would

authorize the Secretary of the Interior to designate or establish a pollution control planning agency within the basin, on his own initiative, which need not necessarily be a basin commission agency established under the Water Resources Planning Act.

I will not read the other sections of like nature which set up this paralleling competitive organization in a river basin.