THE GENERAL COUNSEL OF THE TREASURY, Hon. PATRICK MCNAMARA, Chairman, Committee on Public Works, DEAR MR. CHAIRMAN: Reference is made to your request for the views of this Department on S. 737, "To promote water and air pollution control and abatement by authorizing the Secretary of Health, Education, and Welfare to provide cer tain assistance to small business concerns in obtaining necessary treatment works." The bill would establish a new Federal credit program under which the Secretary of Health, Education, and Welfare would be authorized to make direct loans to small business concerns for the acquisition, installation, or construction of treatment works necessary to abate or control water or air pollution caused by such concerns. It is the position of this Department that the interest rate on direct Federal loans should generally cover the cost of borrowing to the Treasury, plus an allowance for administrative expenses and probable losses. Clause (4) of section 3 of the bill would establish the interest rate at not more than the higher of 24 percent, or the total of one-fourth of 1 percent above the average annual interest rate on all interest-bearing obligations of the United States forming a part of the public debt. The interest rate arrived at under this formula would be influenced by the rates on short-term Treasury borrowing and borrowing over many years in the past, including the artificially low rates during World War II. To the extent that this average coupon rate is lower than the rate reflecting current market yields on outstanding Treasury issues with remaining periods to maturity comparable to the maturities of the proposed loans, a Federal interest rate subsidy is involved. Clause (2) of section 3 of the bill would authorize loans only if the applicant is unable to secure the amount of the loan from other sources upon terms and conditions equally as favorable as the terms and conditions provided by the bill. To authorize Federal loans at subsidy interest rates where equally favorable terms cannot be obtained from private sources would mean that substantially all the loans would be made by the Federal Government. The Department has no independent knowledge of the need for a Federal interest rate subsidy program to finance the construction of treatment works by small business concerns to abate water or air pollution. It would appear, however. from arguments advanced in favor of S. 737. that the alleged need for Federal assistance is due not to the inability of small businesses to pay a reasonable rate of interest but to the unavailability of private long-term capital for such unprofitable projects as treatment works. Moreover, since the loans would not be available to large businesses, the bill's apparent purpose is to assist small business rather than to subsidize all private treatment works. Thus, it would appear that any such credit assistance deemed necessary should be provided at nonsubsidy interest rates under the regular small business loan program of the Small Business Administration. Under the circumstances, the Department would be opposed to the enactment of S. 737. The Department has been advised by the Bureau of the Budget that there is no objection from the standpoint of the administration's program to the submission of this report to your committee. DEAR MR. CHAIRMAN: This is in response to your request for the views of the Bureau of the Bduget on S. 737, a bill "To promote water and air pollution control and abatement by authorizing the Secretary of Health, Education, and Welfare to provide certain assistance to small business concerns in obtaining necessary treatment works." The bill would establish a new Federal credit program by authorizing the Secretary of Health, Education, and Welfare to make loans to small business concerns for the acquisition, installation, or construction of treatment facilities necessary for water and air pollution control and abatement. These loans would be made from a revolving fund, which would be established in the Treasury. The bill provides that loans shall be made only for treatment works determined to be in conformity with State and Federal water and air pollution programs and in an amount not in excess of the cost of the treatment facility, as determined by the Secretary, and shall be made only if the applicant is unable to obtain a loan from other sources on terms and conditions as favorable as those provided by the bill. The loan period shall not exceed 10 years at an annual interest rate no higher than 24 percent or the total of one-fourth of 1 percent per annum above the average annual interest rate paid on the public debt. The bill provides certain administrative authorities and authorizes appropriations as may be necessary for the purposes of the bill. The Bureau of the Budget recognizes that the operations of industry, both large and small, are one of the major sources of the Nation's water and air pollution problems and that, therefore, it is important to encourage action by industry to control and abate such pollution. We have serious questions, however, about (1) the necessity of the proposed program which would be authorized under S. 737, (2) the substitution of public for private credit, which would be entailed. (3) the proposed interest formula, and (4) the inadequate coverage of costs by the revolving fund authorized under the bill. In all of these respects, moreover, the bill appears inconsistent with the recently issued recommendations of the Committee on Federal Credit Programs, which the President has endorsed as guidelines for all Federal departments and agencies “especially in proposing any new or expanded credit authority." Under present law, the Small Business Administration is authorized to make loans for this and other purposes if and when such financial assistance is not otherwise available on reasonable terms. Thus both public and private credit is already available to small businesses for financing air and water pollution treatment facilities. Furthermore, in our judgment the somewhat lower interest rate provided in this bill would not be sufficient to induce any significant number of small businesses to construct treatment facilities which would not otherwise be willing and able to do so if they had to rely on other sources of financing, including the existing SBA loan program. The proposal conflicts directly with the Administration's emphasis upon placing primary reliance on the use of private rather than public credit. S. 737 would make funds available for the purposes of this program if the borrower cannot obtain them from other sources "upon terms and conditions equally as favorable" as the terms and conditions provided in S. 737. Since these terms, particularly the interest rates, are more favorable than can be obtained from any other private or public sources, many small businesses who otherwise could and would finance such facilities privately would borrow from the Federal Government, substituting public credit for private credit to a wholly unnecessary extent. The interest formula provided in the bill would require loans to be made at rates significantly below the cost to the Government, since it is not based upon the current borrowing costs of the Federal Government and does not make adequate allowances for administrative costs and for possible losses. The loans made under such an interest formula, moreover, are unlikely to prove attractive later in the private market and therefore, probably could not be sold prior to maturity without causing significant losses. Finally, the revolving fund which would be established by the bill would be defective, since it would be required neither to pay interest to the Treasury on the funds used, nor to cover administrative expenses from its own revenues. Hence, it would fail to accomplish one of the major purposes of such fund of disclosing systematically the relationship between revenues and expenses as well as any subsidy provided by the Government. In the circumstances, the Bureau of the Budget is unable to recommend enactment of S. 737. Sincerely yours, PHILLIP S. HUGHES, Assistant Director for Legislative Reference. OFFICE OF THE ADMINISTRATOR, Re S. 737 To promote water and air pollution control and abatement by authorizing the Secretary of Health, Education, and Welfare to provide certain assistance to small business concerns in obtaining necessary treatment works. Hon. PAT MCNAMARA, Chairman, Committee on Public Works, U.S. Senate, Washington, D.C. DEAR MR. CHAIRMAN: Further reference is made to your letter of February 13, 1963, requesting my comments on the captioned bill. S. 737 calls for the establishment of a low-interest loan program to assist small business concerns, as defined in the Small Business Act, in financing the acquisition, installation, or construction of treatment works necessary to abate or control water or air pollution caused by such concerns. Under the terms of the bill, the loan program would be entrusted to the Secretary of Health, Education and Welfare, rather than the Small Business Administration, which bears primary responsibility for the welfare of small business and possesses all of the necessary lending facilities. Thus I question the wisdom of this feature of S. 737. Under the Small Buiness Act, SBA is authorized to make loans for the purposes contained in S. 737, when such loans are not available from private sources on reasonable terms. Recognizing the interest of HEW in the subject matter as underlined by this bill, and the importance of the objectives of the bill, I believe that mutually satisfactory arrangements can be developed under which HEW would make determinations relating to the needs of the facility, its compliance with Federal and State standards, etc., at the same time utilizing SBA's competence in the field of lending. The Bureau of the Budget has advised that there is no objection to the submission of this report from the standpoint of the administration's program. With kind regards, I am Sincerely, JOHN E. HORNE, Administrator. [S. 1118, 88th Cong., 1st sess.] A BILL To amend the Federal Water Pollution Control Act to protect the navigable waters of the United States from further pollution by requiring that synthetic petroleumbased detergents manufactured in the United States or imported into the United States comply with certain standards of decomposability Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the Federal Water Pollution Control Act (33 U.S.C. 466-466k) is amended by redesignating sections 10 through 14 as sections 11 through 15, respectively, and by inserting immediately after section 9 thereof the following new section: "REGULATION OF DETERGENTS "SEC. 10. (a) The Congress finds that the navigable waters of the United States are being irreparably polluted through the ever-increasing discharge into such waters of synthetic petroleum-based detergents which decompose slowly or do not decompose at all. The Congress further finds that to prevent the further pollution of the navigable waters of the United States in the public interest it must regulate the composition of detergents which will eventually be discharged into the navigable waters of the United States, but because of the impossibility of determining and thereby effectively regulating only those detergents it must regulate all detergents manufactured in the United States or imported into the United States. Therefore, it is the policy of the Congress by the enactment of this section to invoke and exercise its fullest constitutional powers in order to effectively regulate the composition of all such detergents. "(b) It shall be unlawful for any person to import into the United States or manufacture in the United States any detergent after June 30, 1965, unless such detergent conforms with standards of decomposability prescribed pursuant to subsection (c) of this section. (c) The Secretary shall, on or before the one hundred and eightieth day after the date of enactment of this section prescribe and publish in the Federal Register standards of decomposability for detergents, based on the latest scientific and technical knowledge available with respect to the manufacture of detergents and the operation of sewage treatment systems, which will assure that all detergents manufactured in the United States or imported into the United States after June 30, 1965, will decompose reasonably quickly and completely after use. Included with such standards shall be specific methods by which detergents shall be tested by the Secretary to determine if they conform to such standards. Such standards shall be the sole standards of decomposability applicable to any detergent manufactured in or imported into the United States. “(d) (1) Any detergent which does not conform with standards prescribed pursuant to subsection (c) of this section shall be liable to be proceeded against on libel of information and condemned in any district court in the United States within the jurisidiction of which such detergent is found. "(2) Such detergent shall be liable to seizure by process pursuant to the libel, and the procedure in cases under this subsection shall conform, as nearly as may be, to the procedure in admirality; except that on demand of either party any issue of fact joined in any such case shall be tried by jury. When libel for condemnation proceedings under this subsection, involving the same claimant and the same issues, are pending in two or more jurisdictions, such pending proceedings, upon application of the United States or the claimant seasonably made to the court of one such jurisdiction, shall be consolidated for trial by order of such court, and tried in (A) any district selected by the applicant where one of such proceedings is pending; or (B) a district agreed upon by stipulation between the parties. If no order for consolidation is so made within a reasonable time, the United States or the claimant may apply to the court of one such jurisdiction, and such court (after giving the other party, the claimant, or the United States attorney for such district, reasonable notice and opportunity to be heard) shall by order, unless good cause to the contrary is shown, specify a district of reasonable proximity to the claimant's principal place of business, in which all such pending proceedings shall be consolidated for trial and tried. Such order of consolidation shall not apply so as to require the removal of any case the date for trial of which has been fixed. The court granting such order shall give prompt notification thereof to the other courts having jurisdiction of the cases covered thereby. "(3) Any detergent condemned under this subsection shall, after entry of the decree, be disposed of by destruction or sale as the court may, in accordance with the provisions of this subsection, direct and the proceeds thereof, if sold, less the legal costs and charges, shall be paid into the Treasury of the United States; but such detergent shall not be sold under such decree for a use which would result in the pollution of the navigable waters of the United States contrary to subsection (a) of this section; except that after entry of the decree and upon the payment of the costs of such proceedings and the execution of a good and sufficient bond conditioned that such detergent shall not be sold or disposed of contrary to the provisions of this section, the court may by order direct that such detergent be delivered to the owner thereof to be destroyed or brought into compliance with the provisions of this section under the supervision of an officer or employee duly designated by the Secretary, and the expenses of such supervision shall be paid by the person obtaining release of the detergent under bond. "(4) When a decree of condemnation is entered against the detergent, court costs and fees, and storage and other proper expenses, shall be awarded against the person, if any, intervening as claimant of the detergent. "(5) In the case of removal for trial of any case as provided by paragraph (2) of this subsection "(A) the clerk of the court from which removal is made shall promptly transmit to the court in which the case is to be tried all records in the case necessary in order that such court may exercise jurisdiction; "(B) the court to which such case is removed shall have the powers and be subject to the duties, for purposes of such case, which the court from which removal was made would have had, or to which such court would have been subject, if such case had not been removed. "(e) (1) The United States district courts shall have jurisdiction, for cause shown and subject to the provisions of rule 65 (a) and (b) of the Federal Rules of Civil Procedure, to restrain violations of this section. "(2) In any proceeding for criminal contempt for violation of an injunction or restraining order issued under this subsection, which violation also constitutes a violation of this section, trial shall be by the court or, upon demand of the accused, by a jury. Such trial shall be conducted in accordance with the practice and procedure applicable in the case of proceedings subject to the provisions of rule 42(b) of the Federal Rules of Criminal Procedure. "(f) All libel or injunction proceedings for the enforcement, or to restrain violations, of this section, shall be by and, in the name of the United States. Subpenas for witnesses who are required to attend a court of the United States in any district may run into any other district in any such proceeding. "(g) The Secertary of the Treasury and the Secretary shall jointly prescribe regulations for the efficient enforcement of the provisions of subsection (1) of this section, except as otherwise provided therein. Such regulations shall be promulgated in such manner and take effect at such time, after due notice, as the Secretary shall determine. "(h) (1) The Secretary is authorized to conduct examinations, inspections, and investigations for the purposes of this section through officers and employees of the Department of Health, Education, and Welfare or through any health officer or employee of any State, or political subdivision thereof, duly commissioned by the Secretary. "(2) For purposes of enforcement of this section, officers or employees duly designated by the Secretary, upon presenting appropriate credentials and a written notice to the owner, operator, or agent in charge, are authorized (A) to enter, at reasonable times, any factory, warehouse, or establishment in which detergents are manufactured, processed, packed, or held, or to enter any vehicle being used to transport or hold such detergents; (B) to inspect, at reasonable times and within reasonable limits and in a reasonable manner, such factory, warehouse, establishment, or vehicle, and all pertinent equipment. finished and unfinished materials; and (C) to obtain samples of such materials. A separate notice shall be given for each such inspection, but a notice shall not be required for each entry made during the period covered by the inspection. Each such inspection shall be commenced and completed with reasonable promptness. "(3) If the officer or employee obtains any sample, prior to leaving the premises, he shall give to the owner, operator, or agent in charge a receipt describing the samples obtained. If an analysis is made of such sample, a copy of the results of such analysis shall be furnished promptly to the owner, operator, or agent in charge. "(i) (1) The Secretary of the Treasury shall deliver to the Secretary, upon his request, samples of detergents which are being imported or offered for import into the United States, giving notice thereof to the owner or consignee. who may appear before the Surgeon General and have the right to introduce testimony. If it appears from the examination of such samples or otherwise that such detergent does not conform to standards prescibed pursuant to subsection (c) of this section, such detergent shall be refused admission, except as provided in paragraph (2) of this subsection. The Secretary of the Treasury shall cause the destruction of any such detergent refused admission unless such detergent is exported, under regulations prescribed by the Secretary of the Treasury, within ninety days of the date of notice of such refusal or within such additional time as may be permitted pursuant to such regulations. "(2) Pending decision as to the admission of a detergent being imported or offered for import, the Secretary of the Treasury may authorize delivery of such detergent to the owner or consignee upon the execution by him of a good and sufficient bond providing for the payment of such liquidated damages in the event of default as may be required pursuant to regulations of the Secretary of the Treasury. "(j) As used in this section, the term 'detergent' means any synthetic foaming surface active cleaning agent." |