Panama Canal Commission

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Title:
Panama Canal Commission hearings before the Subcommittee on the Panama Canal of the Committee on Merchant Marine and Fisheries, House of Representatives, Ninety-sixth Congress, on organization and oversight of the Panama Canal Commission, November 2, 1979, Panama Canal authorization and oversight, H.R. 6515, H.R. 6516, February 19, 1980
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Serial - House, Committee on Merchant Marine and Fisheries ; no. 96-25
Physical Description:
ii, 1, 203 p. : 23 cm.
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English
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United States -- Congress. -- House. -- Committee on Merchant Marine and Fisheries. -- Subcommittee on Panama Canal
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Washington
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CIS Microfiche Accession Numbers: CIS 80 H561-15
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University of Florida
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aleph - 022702370
oclc - 06218717X
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AA00022246:00001

Table of Contents
    Front Cover
        Page i
        Page ii
    Table of Contents
        Page iii
        Page iv
    Organization and oversight of the Panama Canal Commission
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    Panama Canal authorization and oversight
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Full Text


PANAMA CANAL COMMISSION






[HEARINGS
BEFORE THE
BCG IT0EE ON THE PANAMA CANAL
OF THE

COMMITTEE ON

MERCHANT MARINE AND FISHERIES

HOUSE OF REPRESENTATIVES
NINETY-SIXTH CONGRESS
ON
ORGANIZATION AND OVERSIGHT OF THE PANAMA
CANAL COMMISSION
NOVEMER 2, 1979

PANAMA CANAL AUTHORIZATION AND OVERSIGHT-
H.R. 6515, H.R. 6516
FEBRUARY 19, 1980


Serial No. 96-25

Printed for the use of the Committee on Merchant Marine and Fisheries








U.S. GOVERNMENT PRINTING OFFICE
59-3190 WASHINGTON : 1980














COMMITTEE ON MERCHANT MARINE AND F
JOHN M. MURPHY, New York, Chairman
THOMAS L. ASHLEY, Ohio PAUL N. McCLO8K
JOHN D. DINGELL, Michigan GENE SNYDER, Kei
WALTER B. JONES, North Carolina EDWIN B. FORSYTI
MARIO BIAGGI, New York DAVID C. TREEN, I
GLENN M. ANDERSON, California JOEL PR
E (KIKA) DE LA GARZA, Texas DON G,
JOHN B. BREAUX, Louisiana ROBERT BAUMA
GERRY E. STUDDS, Massachusetts NORMAN F. LENT,
DAVID R. BOWEN, Mississippi DAVID F. EMERY,]
CARROLL HUBBARD, JR., Kentucky ROBERT K. DORNA
DON BONKER, Washington THOMAS B. EVANE
LES AuCOIN, Oregon PAUL S. TRIPLE, Ji
NORMAN E. D'AMOURS, New Hampshire ROBERT W. DAVIS,
JAMES L. OBERSTAR, Minnesota W IAM
WILLIAM J. HUGHES, New Jersey MLVIN H. E
BARBARA A. MIKULSKI, Maryland
DAVID E. BONIOR, Michigan
DANIEL K. AKAKA, Hawaii
MICHAEL OZZIE MYERS, Pennsylvania
JOE WYAT, Texas
MIKE LOWRY, Washington
EARL HUTIO, Florida
EDWARD J. STACK, Florida
BRIAN DONNELLY, Massachusetts
CARL L. PERIAN, Chief of Staff
LAWRENCE J. O'BRIuv, Jr, Chief Counsel
JULIA P. PERIAN, Chief Clerk/Administratoj
JACK E. SANDS, Minority Counsel


SUBCOMMITTEE ON PANAMA CAAL
CARROLL HUBBARD, JR., Kentucky, Chairs
DAVID R. BOWEN, Mississippi ROBERT E. BAUMA
DAVID E. BONIOR, Michigan DAVID C. TREEN, I
JOHN D. DINGELL, Michigan ROBERT K. DORNA
WALTER B. JONES, North Carolina WILLIAM CARNEY
MARIO BIAGGI, New York PAUL N. McCLOSK
GLENN M. ANDERSON, California (Ex Officio)
MIKE LOWRY, Washington
JOHN M. MURPHY, New York
(Ex Officio)
TERRENCE W. MODGLJN, StaffDirector
BERNARD TANNENBAUM, Special Counsel
W. MEILL WHITMAN, Consultant











CONTENTS


Page
ORGANIZATION AND OVERSIGHT OF THE PANAMA CANAL COMMISSION
Hearing held November 2, 1979 .................................................................................... 1
Statement of-
Bjorseth, Walter, Chief Financial Officer, Panama Canal Commission ....... 9
Blumenfeld, Michael, Assistant Secretary for the Army, Civil Works .......... 6
Constant, Thomas, Secretary, Panama Canal Commission ............................ 9
Manfredo, Fernando, Jr., Deputy Administrator, Panama Canal Commis-
sion ...................................... ................................................................................. 9
McAuliffe, D. P., Administrator, Panama Canal Commission ....................... 9
Additional material supplied-
Panama Canal Commission: Marine accident claims outstanding ................ 29
PANAMA CANAL AUTHORIZATION AND OVERSIGHT
Hearing held February 19, 1980 ................................................................................... 35
Text of-
H .R 6515 .................................................................................................................... 36
H .R 6516 .................................................................................................................... 47
Executive Communication No. 3476 .................................................................... 53
Reports from-
A rm y Departm ent ................................................................................................... 41
Panam a Canal Com mission .................................................................................... 43
State Departm ent .................................................................................................... 45
Statement of-
Bjorseth, Walter D., Chief Financial Officer, Panama Canal Commission 58
Blumenfeld, Michael, Assistant Secretary of the Army, Civil Works,
Department of the Army ...................................... 54
Constant, Thomas M., Secretary, Panama Canal Commission ....................... 58
McAuliffe, Hon. Dennis P., Administrator, Panama Canal Commission ..... 58
Schroeder, Myron A., Chief, Financial Planning Division, Panama Canal
Com m ission ............................................................................................................ 58
Rhode, Col. Michael, Jr., Military Assistant to the Assistant Secretary of
the A rm y, Civil W orks ........................................................................................ 54
Additional material supplied-
Army Department: Administrative Procedure Act ........................................... 107
Questions of subcommittee and answered by Mr. Blumenfeld ....................... 140
Defense Department: Additional questions of subcommittee and answers
provided ................................................. 141
Panama Canal Commission:
Accounts receivable from Panama ................................................................ 122
Additional capital projects .............................................................................. 126
Adm inistrator's residence .............................................................................. 123
Cargo carried .................................................................................................... 121
Expenses of Executive Direction .................................................................. 124
General port operations.................................................................................. 128
Justification of programs and estimates for the fiscal year ending
Septem ber 30, 1981 ...................................................................................... 66
Marine accidents in Panama ........................................................... 120
Objects of appropriation authorizations ...................................................... 111
Processed water deliveries 0..................................1
Questions of Mr. Bauman and answers ......................... 137
Questions of Mr. Hubbard and answered by Mr. McAuliffe ................... 134
Supplemental analysis for fiscal year 1981 budget ......................... 143
Communications submitted-
Hubbard, Hon. Carroll: Letter of March 10, 1980, to Dennis P. McAuliffe
w ith enclosures ..................................................................................................... 199
McAuliffe, D. P.: Letter to March 14, 1980, to Hon. Carroll Hubbard ......... 202




















Digitized by the Internet Archive
in 2013














http://archive.org/details/panacommi00unit










ORGANIZATION AND OVERSIGHT OF THE
PANAMA CANAL COMMISSION


FRIDAY, NOVEMBER 2, 1979
HOUSE OF REPRESENTATIVES,
SUBCOMMTrEE ON THE PANAMA CANAL
OF THE COMMIEE ON MERCHANT MARINE AND FISHERIES,
Washington, D.C.
The subcommittee met, pursuant to notice, at 9:55 a.m., in room
1334, Longworth House Office Building, Hon. Carroll Hubbard
(chairman of the subcommittee) presiding.
Present: Representatives Hubbard, Bowen, Lowry, Murphy,
Dornan, and Carney.
Mr. HUBBARD. The Subcommittee on the Panama Canal of the
Committee on Merchant Marine and Fisheries is now called to
order. This is a very imporant day in the history of the regimes
provided by the U.S. Government for operation of the Panama
Canal. Today, this subcommittee is pleased to witness the inaugu-
ral appearance before the Congress of Federal executives invested
with the authority and responsibility to operate and administer,
under the 1977 treaty with Panama, the crucial interoceanic water-
way on the Isthmus of Panama,
The importance of this briefing is underlined by the fact that the
Panama Canal Commission is a wholly new and different agency,
even though it employs many of the same loyal and faithful per-
sonnel who serve the Panama Canal Company and Canal Zone
Government. The uniqueness of its character was visualized in the
Panama Canal Treaty but, more importantly, it was given effect in
domestic law by the Panama Canal Act of 1979.
Many, if not most, of the objectives of the U.S. control of the
Panama Canal for the remainder of this century are reasonably
clear from a combined reading of the Panama Canal Treaty and
the Panama Canal Act. The subcommittee hopes to learn today
more precisely how it is that the U.S. Government is going to
organize to attain those objectives.
As a consistent opponent of the Panama Canal treaties, and the
implementing legislation, I recognize as well as anyone the signifi-
cance of the new agency and the threshold we crossed on October
1. I regret that the threshold has been crossed, but the door to
yesterday is closed and the treaties are in effect. Legislation imple-
menting the treaties is now law, so the best we can do, proponents
and opponents of the treaties in implementing legislation, is to
move forward and look out for the best interests of our country.
The forms and degrees of opposition to the implementing legisla-
tion on the part of various organizations and persons, whether






from the liberal or conservative side, are now immaterial to the
implementing law that has been enacted, signed by the President,
taken through the proper legislative process, and supported by our
Constitution. The Panama Canal Act is the law of the land.
We look forward today to becoming more aware of how this act,
which for the next generation will be the charter for the Panama
Canal operation, will be administered. We look forward to hearing:
How the Commission will be organized to tackle the numerous
financial questions facing it;
How the Commission will implement the scheme of committees
and working groups and service arrangements between the United
States and Panama;
How the Presidential delegation of authority to the Secretary of
Defense is being handled;
How the supervisory board of the Commission will relate to the
operation of the canal;
How the formation of employment policies and the establishment
of standards of conduct for personnel is processing; and
How appointments to the leadership positions in the Panama
Canal Commission and several advisory committees related to the
Panama Canal treaties are being treated.
Finally, since no one knows the reality of the new regime better
than those most affected by it-the canal employees and the people
in Panama-we hope that today's briefing will also include a
report on their state of mind with respect to the canal issue,
because this psychological environment is especially critical to the
success of the Commission in its embryonic stages.
This subcommittee is aware that the Panama Canal Act was
signed into law only 37 days ago, and that the majority of its
manifold and diverse provisions were to take effect only 4 days
after signing. However, it also is worthy of note that the outlines of
almost all of these provisions were known much earlier. The cir-
cumstances which prevented the passage of the implementing legis-
lation at an earlier time were certainly not due to any lack of
effort on the part of the bill managers in the Congress but rather
the serious political concerns that arose over the taxpayer impact
of the legislation and the question of the stability of the Panama-
nian Government.
The proper administration of the Panama Canal Act is an abso-
lute necessity for the successful operation of the canal. In my
estimation, given the attachment to the canal in both the United
States and Panama, the treaties and the implementing legislation
have at best a chance of succeeding only with the fierce determina-
tion of all responsible Government officials of the United States
and Panama. That determination has to be reflected from the very
beginning of the applicability of the Panama Canal Act.
Just as we in the Congress have a responsibility to monitor the
actions of the executive to see whether the laws are being executed
in accordance with their substance, so the executive has the duty
to carry out those laws quickly and fully. For this reason the
features of the Panama Canal Act such as those protecting the U.S.
taxpayer, providing for the delegation of authority, providing for
standards of conduct, and specifying positions of authority must be
acted on quickly.






What we hope to find today is that the steps being taken by the
executive to implement the Panama Canal Act are being taken
with the dispatch that is incumbent in responding to the worldwide
users of the waterway, and with the dispatch that makes for a
government operation truly accountable to the individual taxpay-
ers of the United States.
In the context of our hopes for the future successful operation of
the canal, and in the light of a forward-looking policy for develop-
ment of all resources to attain that objective, we now anticipate
the comprehensive statements of the Honorable Michael Blumen-
feld, Assistant Secretary of the Army for Civil Works, and the
Honorable Dennis P. McAuliffe, Administrator of the Panama
Canal Commission.
Chairman Murphy has a statement extending a cordial welcome
to Secretary Blumenfeld, General McAuliffe and Mr. Manfredo for
the initiation of a continuing colloquy between the Congress, repre-
sented by this subcommittee, and the officials of the newly estab-
lished Panama Canal Commission.
Because the Deputy Administrator of the Panama Canal Com-
ission, Fernando Manfredo, is not scheduled as a witness today, I
did not mention him in my prepared remarks, but I do see him in
the front row and was with him at a luncheon yesterday. We
welcome you to the subcommittee hearings, Sefior Manfredo. I am
sorry I didn't see you until I got into Mr. Murphy's prepared
remarks.
I now recognize Congressman Bob Dornan of California for any
remarks he would like to make.
Mr. DORNAN. Mr. Chairman, I appreciated how forthright your
statement was about your opposition to both the Panama Canal
Act and the proceedings that preceded it. I join you in that opposi-
tion, but I wholeheartedly want to express to the Panamanian
citizens and the Americans, who have the very difficult job of
maintaining a friendship down there and making this law of the
land work, that we and all good representatives involved in our
Government and the Panamanian Government, should now put the
past behind us, close the door, and proceed as vigorously and as
forthrightly and in as friendly a manner as possible to make this
work. I look forward to a continual flowering of friendship between
our Nation and a small nation that history has brought together in
such a peculiar way.
And may this next century make any small abrasions over the
past just fade into insignificance. There isn't any reason at all why
we cannot make this work for the benefit of not only our two great
Nations, but for all our neighbors in this, the most peaceful of the
two hemispheres on the planet.
Thank you, Mr. Chairman.
Mr. HUBBARD. Thank you, Congressman Dornan.
For those who might not know Fernando Manfredo, would you
stand, please. Thank you.
I would like to ask my dear friend Tom Constant, the Secretary
of the Panama Canal Commission, to stand, please. We are slowly
doing this right-welcoming both of you. One step at a time, you
will notice. We are glad to have you and everyone who is here
today visiting with us.






Congressman Michael Lowry of the State of Washington
Mr. LoWRY. Thank you, Mr. Chairman. I am indeed delighted to
see the individuals who are here continuing on this very important
work. During my visits to the Canal Zone I was so pleasantly
impressed with the work being done by both our Government and
the Government of Panama, and I have great confidence that we
are going to have a very strong working relationship that will
benefit the entire world, and the Panama Canal's importance as we
carry on here. I am delighted to see these individuals continue to
be involved with this very important mission.
Mr. HUBBARD. Thank you very much, Congressman Lowry.
At this time it would be proper for me to recognize the distin-
guished chairman of our Merchant Marine and Fisheries Commit-
tee, our friend Congressman John Murphy of New York, for his
opening statement.
Mr. MURPHY. I want to thank the chairman for his recognition. I
regret we just had some action on the floor involving legislation
from this committee that prevented my being here earlier.
I want to take this opportunity to extend a cordial welcome to
Secretary Blumenfeld, General McAuliffe and Mr. Manfredo to the
initiation of a continuing colloquy between the Congress, represent-
ed by this subcommittee, and the officials of the newly established
Panama Canal Commission. The frame of reference for our ex-
change of views on operation of the Panama Canal will be the
Panama Canal Act of 1979, which provides the basic ground rules
for the realization of our common interest in the efficient operation
of this great international waterway.
Although we have been engaged in this challenging undertaking
for three quarters of the century, the changed circumstances and
problems arising from the inception of an entirely new treaty
relationship with the Republic of Panama and the drastic changes
effected in the form and management of the operating organization
add a new dimension that will call for the very best effort on the
part of us all, if the provision of uninterrupted passage from one
ocean to the other is to continue to succeed.
Some of the problems that we must jointly confront and resolve
in the immediate future are already becoming visible. They include
the necessity for expeditious review of the operating organization
and the effectuation of changes consonant with the new form of
organization and method of operation; the speedy location and
appointment of personnel to fill the positions necessary under the
provisions of the applicable law; and the conversion of the financial
management of the agency from the relatively autonomous oper-
ation associated with corporate enterprise to the more closely con-
trolled and regulated procedures generally applicable to govern-
ment agencies.
Although I recognize that the operation of the agency is primar-
ily, if not exclusively, the responsibility of the executive, I believe
that there is also a general acceptance of the principle that the
enactment of legislation to provide the authority and means for the
accomplishment of the executive function requires close and con-
tinuing oversight by the Congr through the committee process.
Over and above that technical consideration it seems obvious to me
that we can all do a more effective job in the performance of our






respective functions if we maintain close coordination with free
exchanges of views on matters affecting our separate roles.
After this brief explanation of the way I see the purpose of these
oversight hearings and the important part they can have in reach-
ing prompt and prudent solutions of our common problems, I look
forward with great interest and expectation to the statements that
you gentlemen are here to give us.
Thank you, Mr. Chairman.
Mr. HUBBARD. Thank you very much, Chairman Murphy.
Congressman Bill Carney of New York.
Mr. CARNEY. Thank you, Mr. Chairman. I would like to take this
opportunity to associate myself with the remarks of the subcommit-
tee chairman, Congressman Hubbard. I think they reflect quite
accurately my feeling, and I personally look forward to carrying
out the responsibilities of this Subcommittee on Panama Canal. I
look forward to seeing this marriage between the United States
and the Panamanian Government work for the betterment of not
only both our Governments but for the people of the world, because
indeed much of the commerce of the world will go through that
most critical facility, and if the marriage works between the Pana-
manian Government and the American Government, the people of
the world will benefit by it, and I look forward to that responsi-
bility with vigor.
Thank you, Mr. Chairman.
Mr. HUBBARD. Before I introduce Mr. Michael Blumenfeld, I
would like to also introduce two other people in the audience. It
could easily make you believe that I was just doing this to break
the monotony of hearing Congressmen, to see people stand in the
audience, but not to be forgotten are the coordinators of the De-
partments of State and Defense for Panamanian Treaty affairs.
They are Ambassador David Popper, coordinator for the State De-
partment. Would you please stand? And retired Gen. Welborn
Dolvin, coordinator for the Defense Department. Would you stand,
please? Thank you very much.
As I am thanking different people I really ought to thank Terry
Modglin, the very efficient staff director for the Panama Canal
Subcommittee, for assisting the chairman in doing what is right
this morning, including the introductions.
Now it is my pleasure to present to the subcommittee our first
witness, the Honorable Michael Blumenfeld, Assistant Secretary
for the Army for Civil Works. Mr. Blumenfeld oversees for the
Secretary of the Army water resources development projects of the
Corps of Engineers as well as the Panama Canal operations. We
note that our witness has been working with Panama Canal affairs
for over 2 years. We also note that before assuming responsibility
in the Department of the Army, he held distinction in many impor-
tant positions in city government and private enterprise. Finally,
we note that Mr. Blumenfeld holds a bachelor's degree from Har-
vard, and a master of business administration degree from Harvard
Business School.
We are looking forward to your testimony today, Mr. Blumen-
feld. Thank you very much for being with us.







BRIEFING BY HON. MICHAEL BLUMENFELD, ASSISTANT
SECRETARY FOR THE ARMY-CIVIL WORKS
Mr. BLUMENFELD. Thank you very much, Mr. Chairman, and let
me say to you, Chairman Murphy and members of the committee,
that I very much appreciate the welcome and also associate myself
with the wisdom of this kind of continuing dialog in executing our
responsibilities well and faithfully.
With your permission, Mr. Chairman, I would like to enter my
full statement into the record and proceed to summarize it for you
at this time.
Mr. HUBBARD. Yes, without objection, that will be done.
[The information follows:]

BRIEFING BY HON. MICHAEL BLUMENFELD
Mr. Chairman, I am honored to appear before the committee today, as the
representative of the Secretary of Defense, with respect to the ization and
initiatives of the Panama Canal Commission to meet United S Government
obligations under the Treaty, and the Commission's responsibility under the
Panama Canal Act of 1979.
As you are aware, the lateness of the legislation has had an impact on some of
our management initiatives. Items such as appointment of the Administrator and
Deputy Administrator were unavoidably postponed beyond Treaty day, October 1st.
There has not been an initial meeting of the Board. We are hopeful that the Board
members of the new Commission will be nominated by the President this month. An
early meeting, hopefully in December, would be desirable in order that the Board
can adopt its bylaws and can vest in the Administrator certain authorities conferred
by the Panama Canal Act of 1979 on the Commission.
The same day the President signed the Panama Canal Act of 1979, the Secretary
of the Army was delegated interim responsibility for oversight of the Commission.
This assignment enabled the Secretary, and myself as his Deputy, to continue our
ongoing supervisory role pending development of an Executive detailing
delegations of authority. An interim Executive Order shortly to be published pro-
vides for interim application of existing rules governing various aspects of Canal
operations which are not inconsistent with either the Treaty or the implementing
legislation. This interim order delegates selected authorities ofthe President to the
Secretary of Defense for a 120-day period, and permits their legation. The
Panama Canal Act does not provide for continuance of rules and regulations except
in the specific cases of the employment system and the interim continuation of the
judicial system during the transition period. The recommended final form of the
Executive Order is being staffed. We anticipate the order will not beady for the
President's approval and signature until January 1980 due to staffing and coordina-
tion requirements outside the Department of Defense.
I am confident these issues will be resolved before the -end of the year. Let me
then focus on what we have accomplished in the single month s the Treaty
became effective.
The initial problem, placing someone in charge of the Canal effective October 1st,
was satisfied by appointing General McAuliffe as a Special Repr tative of the
Secretary of Defense, and assigning him the duty of managing the enterprise.
Mr. Manfredo was installed as his Deputy. Both positions were abolished when Mr.
McAuliffe and Mr. Manfredo were appointed to office. This action met our require-
ments of getting on with Treaty implementation under the direction of our nominee
while not usurping the prerogative of the Senate to consent to the appointment of
an Administrator.
The tolls increase for fiscal year 1980 was signed by the President on Septmber
29 and became effective on October 1, although vessels already in queue or ransit
were assessed at the prior rate. The new rate is only 29.3 percent h e than the
old one. This is substantially less than had been forecast earlier, due mainly to
increased North Slope oil shipment forecasts. Traffic and tolls ev iin
the Commission's fiscal year 1980 budget include an Alaska North move-
ment through the Canal of approximately 480,000 barrels daily, up sh y from an
average 295,000 barrels daily during fiscal year 1979. The estimate was baed on
information, provided by the major participants in the production and distribution
of North Slope oil, that indicated shipments through the Canal would average






400,000 barrels daily during October and November, increasing to approximately
barrels per day by December, with this average level being sustained
u t calendar year 1980. Of course, any optimism for sustaining the lower
toll rate is tempered by the realization that North Slope oil is an extremely volatile
c odity, and the sustained throughput could easily fall below expectations.
M C let me add that both Mr. McAuliffe and Mr. Manfredo are doing a
veryfn job in insuring that the Panama Canal continues to be operated efficiently
continues to make an important contribution to world commerce. Traffic
tthe Canal continues to increase. Transits continue to be conducted in the
same profeional, steady and safe manner that has always been the hallmark of
the Panama Canal workforce.
It is also appropriate to mention that the Republic of Panama is pursuing the
operation of the railroad, port facilities and bunkering activities (which passed to
Ion October 1) with great zeal. Assisted by Commission employees on
loan, Panamanians demonstrated so far they are capable of maintain-
ing t tankards that world commerce expects of them. Similarly, the refuse
section prvgam for which Panama became responsible has been both rensive
and effective, and the joint police patrols are functioning extremely well ater one
m of actual operations.
I will be followed by Mr. Dennis P. McAuliffe, the Administrator of the Panama
Canal Commission, who will brief you on the Commission's operations in greater
detail.
I recommend you hear Mr. McAuliffe's more detailed presentation at this time
and offerquestionsto the both of us.
Mr. BLUME As you are aware and referred to in your
opening statement, the lateness of the legislation has had an
impact on some of the management initiatives that we have begun
to undertake. Iems such as the appointment of the Administrator
and the Deputy Administrator were unavoidably postponed beyond
treat day, but are, of course, now a fact. They have been accom-
plid. We are hopeful that the board members of the new Com-
i d will be nominated by the President this month, and that
an early meeting of the board can be held, hopefully in early

e same day that the President signed the Panama Canal Act
of 1979 the Secretary of the Army was delegated interim responsi-
lity for oversight of the Commission. An Executive order shortly
tobe issued by the President provides for the interim application of
existing rules governing various aspects of the canal operations
which are not inconsistent with either the treaty or with the
implementing legislation. This interim Executive order will dele-
gate selected authorities of the President to the Secretary of De-
fense for a 120-day period, and permits their redelegation by the
Secretary of Defense.
A final Executive order, which would be issued at the end of that
120-day period, is now under preparation. We anticipate approval
and signature in January of 1980, probably not before that, due to
the staffing and the coordination requirements outside the Depart-
ment of Defense.
Let me focus now on what we have already accomplished in the 1
month since the treaty became effective. The initial problem, put-
t eone in charge of the canal effective October 1, was satis-
by appointing General McAuliffe, now Mr. McAuliffe, as a
Special Representative of the Secretary of Defense and assigning
him the duty of managing the canal enterprise. Mr. Manfredo was
installed as his deputy.
Both these temporary positions were abolished when Mr. McAu-
life and Mr. Manfredo were appointed to office. This action met






our requirements of getting on with treaty implem e o under
the direction of our nominee, while not usurping the of
the Senate to consent to the appointment of the Administrator.
As you are aware, a tolls increase for fiscal year 1980 was signed
by the President on September 29 and became -effective on October
1, although vessels that were already in line for transit were as-
sessed at the old, lower rate. This new rate is 29.3 p t higher
than the old rate. This increase, though, is substan less than
had been forecast earlier, due mainly to increased h Slope oil
shipment.
The estimate of three shipments was based on information pro-
vided by the major participants in the production and distribution
of North Slope oil. Of course, any optimism on sustaining a lower
toll rate beyond 1980 is tempered by the realization that North
Slope oil is an extremely volatile commodity and that the sustained
throughput could fall below expectations.
Let me say at this point that both Mr. McAuliffe and Mr. Man-
fredo are doing a very fine job in assuring that the Panama Canal
continues to operate efficiently and contribute to world commerce.
Traffic is increasing. Transit continues to be conducted in the
steady and safe manner that has always marked the Panama
Canal operation and its work force. I think it is also appropriate to
mention at this time that the Republic of Pa na is pursuing
operation of those functions which it took over on October 1, such
as railroad, port facilities, and bunkering activities, with great zeal
and marked effectiveness. They are assisted by Cornsion em-
ployees who are on reimbursable detail. They are demonstrating so
far that they are fully capable of maintaining the standards in
these operations that world commerce expects of them.
Mr. McAuliffe will talk in greater detail about some of the other
conditions now existing on the isthmus and in these operations, but
let me mention specifically that the joint police patrols, comprised
of Guardia Nationale of Panama and the U.S. Military Police and
Canal Police respectively in the military and canal operating areas,
are functioning very well indeed. Many of the fears and trepida-
tions of the U.S. employees of the canal living in the former zone
about the operation of the police function have neen put to rest by
what has so far been an outstanding operation of that police func-
tion.
Mr. McAuliffe has a statement as well, and I would recommend,
if it is acceptable to the committee, that you hear his more detailed
presentation on the situation on the isthmus, and then offer ques-
tions to both of us following that.
Mr. HUBBARD. Yes, there is no problem with that. Your request
is accepted. It is a privilege to introduce prior to questioning, and
for his statement, our second witness today, the Honorable Dennis
P. McAuliffe, newly confirmed Administrator of the Panama Canal
Commission. Mr. McAuliffe, having testified here earlier this year
on the implementing legislation and on Panama's involvement in
Nicaragua, is no stranger to this subcommittee. In fact, the mem-
bers who have heard him before appreciate his candor, his honesty,
and forthrightness.
We welcome you today to hear your plans and thoughts on the
policy and organization of the Panama Canal Commission, just as






we have welcomed your comments as a lieutenant general and
commander of the U.S. Southern Command.
Dennis McAuliffe's 35 years of military service to our country
have been marked with distinction. As an Army officer, he served
in man critical capacities. Among other posts he served in the
Office of the Chief of Staff of the Army. He served with the
Cof the Joint Chiefs of Staff, with the Supreme Headquar-
ters Allied Powers Europe, and as a regional director for the Inter-
national Security Affairs Office in the Department of Defense.
Administrator McAuliffe, with your background of achievement
and your knowledge of the Isthmus of Panama, we have high
expectations for the operation of the Panama Canal Commission,
and we congratulate your choice to your new position, and wish
you well in a tough assignment. We are anxiously awaiting your
remarks.
Mr. McAuum. Thank you, Mr. Chairman.
Mr. BAUMA. Mr. Chairman, before the general begins I wonder
if I might join in your statement of welcome, and express my own
pleasure at having you, Mr. McAuliffe appointed to this position,
and also at seeing Mr. Manfredo named as your deputy. I think
that it speaks well for the future of the operation of the canal, that
someone with the experience in Panama and in the Southern
Hemisphere that you have would be taking on this duty.
I know, as we mentioned yesterday, that you had expressed some
months ago you were looking forward to your retirement from the
Army, and now here you are with a task probably greater than you
f in the past. I compliment you for your willingness to take
that position.
Mr. Chairman, I wonder if we might ask, in view of the partner-
ship that now exists between our country and the Republic of
Panama in operating this canal, even though he may not be testify-
ing, Mr. Manfredo might join the Administrator at the table, since
he is Deputy Administrator.
Mr. HUBBARD. There is no problem. Prior to your coming in
Mr. BAUMAN. I promise not to ask questions that are too tough.
Mr. HuBARD. We have introduced him twice. It is fine to have
him sit at the witness table. We may have some questions for you
Mr. Manfredo.
CBauman, we will have your remarks later after we
hear Administrator McAuliffe.
Thank you. Dennis, go ahead.
STATEMENT OF HON. D. P. McAULIFFE, ADMINISTRATOR,
PANAMA CANAL COMMISSION, ACCOMPANIED BY FERNANDO
MANFREDO, JR., DEPUTY ADMINISTRATOR; THOMAS CON-
STANT, SECRETARY; AND WALTER BJORSETH, CHIEF FINAN-
CIAL OFFICER
Mr. McAuum. Thank you, Mr. Chairman. It is indeed a pleas-
ure to appear before you today. I propose, just as Secretary Blu-
menfeld did, to enter my full statement or offer the statement for
the record, and to summarize it in my remarks this morning.
Mr. HUBBR. Thank you. Without objection, it is so ordered.
[The information follows:]







STATEMENT OF HON. D. P. McAuLIF'n, ADMINISTRATOR, PANAMA CANAL
COMMISSION
INTRODUCTION
Mr. Chairman and members of the Subcommittee, my name is Mr. Dennis P.
McAuliffe and I am the Administrator of the Panama Canal Commission. It is a
pleasure to appear before you today to outline the organizational structure of the
Panama Canal Commission and to discuss the initiatives which this new agency has
taken and is taking to bring itself into compliance with the law which created it,
the Panama Canal Act of 1979.
Before doing that, however, as the Administrator of the Agency, I would like to
express my gratitude to this Subcommittee for assisting in the enactment of the
treaty implementing legislation prior to October 1. Potentially serious problems
would have resulted had October 1 come and gone without the requisite legislation.

ACTIVITIES OF ADMINISTRATOR AND DEPUTY
At the outset of my remarks, it seems appropriate for me to give you a rundown
on what the Administrator and his Deputy have been doing for the past month.
I assumed office in the Commission, in an acting capacity, from its beginning on
October 1, as did my Deputy, Mr. Fernando Manfredo, Jr. Since October 1, Mr.
Manfredo and I have spent much time visiting all of the facilities, offices and shops
which the Commission operates. Our purpose was not only to get personally ac-
quainted with the organization and its people, but also to give our employees at all
levels of the organization the opportunity to see and talk with us. We have also met
with a number of employee and community groups during this time.
These visits and meetings have served as a good first course in familiarization
with Canal operations for Mr. Manfredo and myself. I believe they also have had a
beneficial, reassuring effect on our people.
I must say that I have been very much impressed with the dedication, loyalty and
professional competence of the Canal work force. They have kept this important
waterway operating and maintained during what has been for them an extremely
turbulent and frustrating period. That, in my view, is a real tribute to them.
Many of the employees we have talked with have commented favorably on the
peaceful manner in which the change-over from U.S. to Panamanian jurisdiction
was carried out, and at the cooperation we have been receiving from the Panama-
nian Government in such matters as joint police patrols, refuse collection, the
issuance of licenses, employee documentation, railroad service and similar functions.
Mr. Manfredo and I are acutely aware, nevertheless, that the problems of uncer-
tainty and turbulence of the recent past have continued to impact on employee
morale, and I can assure you that corrective measures are being given priority
attention. I believe that the combination of a return to stability and the taking of
management actions which are sensitive to the needs of the organization as well as
to the concerns of our people will result in a favorable period of Canal operation in
the months ahead.
ORGANIZATION OF COMMISSION
Having said that, I would now like to turn to the organization of the Panama
Canal Commission and explain to you how the structure of the organization will aid
in carrying out its mission.
As you know, the Panama Canal Company and the Canal Zone Government were
disestablished by the Panama Canal Act of 1979, and were replaced by a new U.S.
Government agency, the Panama Canal Commission. The treaty provides that the
Commission may not engage in the commercial activities that had traditionally
been part of the mission of the Canal organization, such as the operation of retail
stores, harbor launch service, automobile repair and other activities intended to
benefit the general public.
Additionally, the treaty required a redistribution of these and other functions
that were previously performed by the Panama Canal Company and Canal Zone
Government. For example, functions such as education, health, postal service and
retail sales to employees were reassigned to the Department of Defense. The signifi-
cant port and railroad functions were transferred to the Republic of Panama togeth-
er with jurisdictional responsibilities, such as customs and immigration, formerly
carried out by the Canal Zone Government. Furthermore, the two governments now
share certain responsibilities, namely, law enforcement for the 30 month transition
period, and fire protection for the duration of the treaty. The redistribution of
functions mandated by the treaty is presented graphically in Attachment A to my
prepared remarks.





1

These major functional changes brought about a management requirement to
restructure the Panama Canal organization. Realizing the potentially unsettling
effect such action could have, it was decided at the outset to mitigate the impact of
this transition. To this end, plans were drawn which preserved the basic Panama
Canal Company organization structure to the extent practicable, consistent with
good management practice. In my view, we were successful in maintaining continu-
ity of operations during this reorganization.
Nevertheless, the impact of the changes on the Canal work force was dramatic. It
is understandable that with the termination of many major activities personnel
strength would be materially reduced. To illustrate, the full-time permanent work
force in the Panama Canal Company and Canal Zone Government immediately
prior to October 1 was approximately 12,200 employees. The number of employees
separated in the reduction in force was approximately 460 and about 2,300 employ-
ees (out of approximately 3,000 spaces) were transferred to the Department of
Defense. An additional 1,440 employees terminated their employment voluntarily
through retirement or resignation. The combination of these actions reduced the
Panama Canal full-time permanent work force to about 8,000 employees, of which
approximately 2,100 are U.S. citizens and 5,900 are Panamanians and third country
nationals. The large majority of these employees remaining with the Commission
are dedicated to transit-related activities.
The reconfiguration of the agency resulted in the disestablishment of four major
operating bureaus. Residual activities that are permitted by the treaty and that
continue to be performed by the Commission have generally been placed in existing
organizations or consolidated into a new General Services Bureau. A chart of the
Panama Canal Commission organization is presented in Attachment B to my pre-
pared remarks.
The reconfiguration of the Panama Canal organization impacted in different ways
on units continuing in the Commission. The Marine and the Engineering and
Construction Bureaus, which are the Canal's major operating bureaus, were virtual-
ly unaffected.
The formation of the organization's third major bureau, the General Services,
Bureau, evolved, from the dissolution of the former Supply and Community Service,
Transportation and Terminals, and Civil Affairs Bureaus of the Panama Canal
Company and Canal Zone Government. Each of these three large bureaus lost
significant portions of their functions as a result of the treaty. The remaining
activities, were for the most part, consolidated into the General Services Bureau.
This Bureau is divided into two primary service areas: Supply and Logistics
Services, and Protection and Support Services. The functions encompassed in these
service areas include such functions as agency procurement, operation of the Com-
mission-owned SS Cristobal and agency vehicles, fire and police protection, the
Library-Museum, and recreation services.
The elements making up the staff of the Commission are largely carried over
from Panama Canal Company and Canal Zone Government and include Personnel
Administration, Financial Management, Executive Secretary, General Counsel, Ex-
ecutive Planning, Industrial Relations, Equal Opportunity, Public Information and
Health and Safety.
I would like to point out here that the units I have described, particularly the
General Services Bureau, will be surveyed periodically by my staff in order to test
the results of agency planning and to improve the organization wherever possible.
The majority of future organization changes will be made as the period of transition
closes out and the agency settles into more routine activities. I would expect this to
occur over the next two to four years.
As you know, the implementing legistion established two new positions in the
Panama Canal agency, those of Chief Engineer and Ombudsman. We have been
studying the appropriate functions to be assigned to these positions as well as their
relationship with other elements of the organization. These are necessary first steps
before considering candidates for the positions. I expect to be forwarding my views
and recommendations on these matters to the Secretary of the Army soon.

INITIATIVES UNDER PUBLIC LAW 96-70
The Subcommittee has also asked that I address the initiatives which the Panama
Canal Commission has undertaken to bring the agency into compliance with the
requirements of Public Law 96-70, the new Panama Canal Act. These initiatives fall
mainly into two areas: personnel administration and the conversion from a corpo-
rate entity into an appropriated fund agency of the Government.





12


PERSONNEL
In the area of personnel administration, section 1214 of the Act provides for the
interim application of the Canal Zone Merit System until the Panama Canal Em-
ployment System is established. In accordance with that provision, the Canal Zone
Merit System continues in operation as before, except that the Treaty requirement
to extend hiring preference for Panamanians has been implemented. This has been
accomplished by adding 11 extra points to the numerical scores of all Panamanian
applicants tested after October 1 who have at least a minimum score of 70 on an
assembled or unassembled examination administered by the Central Exaninating
Office. Regular veterans preference entitlements and procedures continue to apply.
With regard to the Panama Canal Employment System, the Act calls for its
establishment by the President after consideration of recommendations by the Com-
mission. We are already in the process of development the Commission's recommen-
dations for that new system. Essentially, we foresee a new Panama Canal Employ-
ment System that is patterned substantially after the present Canal Zone Merit
System, but modified to carry out unique treaty requirements such as the hirng
preference for Panamanians.
In addition to the system of hiring preference for Panamanians, the Secretary of
the Army also established a new Panama Area Wage Base for employees hired after
October 1, which meets the requirements for minimum levels of pay and annual
increases set forth in Section 1225 of the Act. Other personnel policies have been
developed and are currently under review which would implement for the Commis-
sion other changes required by the treaty or the Act. These include policies govern-
ing periodic rotation of employees, off-the-Isthmus recruitment and labor relations.
Finally, Section 1112 of the Act requires that, no later than 60 days after all
members of the Board of the Commission have been appointed, the Board must
adopt a Code of Conduct applicable to each of its members and each Commission
officer and employee. A proposed Code of Conduct, which has been drafted and is
currently under review, will be completed and forwarded for action by the Board
well in advance of the prescribed deadline.

CONVERSION TO APPROPRIATED FUND AGENCY
I would like to turn now to the initiatives already taken, or in progress, to
implement the provisions of Public Law 96-70 with regard to the difficult task of
converting an agency which has operated as a Government corporation for the last
28 years to one that operates under the appropriated fund concept.
Section 1301 of the new law requires that there be covered into the general fund
of the Treasury any balances of the appropriation accounts of the Canal Zone
Government remaining unexpended at close of business September 30, 1979. In
addition, it authorizes funds to be appropriated to the Commission to cover out-
standing obligations that would otherwise be chargeable to these accounts.
On September 30, the unexpended balance of the appropriation accounts of the
Canal Zone Government amounted to $12.2 million. Final reporting to the Treasury
is due on November 7, and at that time these funds will be formally covered into
the general fund.
A final determination of the obligations outstanding against earlier appropri-
ations is still underway. In conformance with the authorization granted in the
statute, we have included in the Commission's 1980 budget request funding for $5.9
million to cover these Canal Zone Government obligations.
With regard to Panama Canal Company funds, the Act requires that all cash
balances of the Company as of September 30 be paid into the Treasury in an
account to be known as the Panama Canal Commission Fund. In addition, the law
requires that tolls and all other receipts of the Commission be thereafter deposited
to this fund.
On September 30, the cash balance in the Company Fund amounted to $71.2
million, which has been deposited in full into the Treasury to the account of the
Panama Canal Commission Fund. Also in accordance with this section of the stat-
ute, all receipts of the Commission are being deposited into that fund. Through
October 31, receipts so deposited have amounted to $30.4 million.
Section 1303 of Public Law 96-70 establishes the Panama Canal Emergency Fund
and authorizes the appropriation of $40 million for deposit therein for the fiscal
year beginning on October 1, 1979. We attach great importance to this provision as
it affords us what we consider to be an essential means of handling unforeseen
operational emergencies and traffic increases. On the other hand, although we have
requested through the fiscal year 1980 Budget Amendment a $40 million appropri-





13

a to h the fund in accordance with this provision of the Act, we do not
having to make withdrawals from it during the year.
Scon 1302 of the statute provides in part that no funds may be appropriated to
or the use of the Commission for any fiscal year in excess of the amount of
into the Commission Fund during such year, as such amount is
ethe Secretary of Defense and certified by the Comptroller General. In
with this requirement, the Secretary of Defense has estimated that total
d i uring fiscal year 1980 will amount to $463.9 million. This includes $391.2
nilion of operating revenue receipts, $71.2 million of unexpended Panama Canal
Funds, and $1.5 million of other miscellaneous receipts expected to be
during the year. The Secretary's estimate has been certified by the
Comptroller General as required by the Panama Canal Act.
In the Budget Amendment for the Commission's fiscal year 1980 programs, a total
aon of $511.4 million has been requested. However, this amount includes
$40 million to establish the Panama Canal Emergency Fund, discussed previously,
$59 million to cover outstanding fiscal year 1979 obligations of the Canal Zone
Government, and $2 million for obligation in subsequent years to complete Commis-
sion capital projects.
In essence, then, the net appropriation being requested for the operational and
capital needs of the Commission in 1980 is $463.5 million, as compared to estimated
deposits into the Panama Canal Commission Fund that year of $463.9 million. We
are anticipating, therefore, that deposits will be sufficient to reimburse the Treas-
ury for the appropriations used by the Canal agency.
While, of course, the Act requires that the Commission operate and account for its
funds as an appropriated-fund agency, it also requires that the agency keep a
business set of books for the purpose of setting tolls and other rates and for the
determination of whether payments are due Panama under paragraph 4(c) of Arti-
cle XIII of the treaty.
As you are aware, the Canal's accounting and budgeting systems were designed to
meet the objectives of commercial accounting. The problem faced, therefore, is to
make changes to these systems which will achieve an integration of the varying
requirements of an appropriated-fund accounting system and those of a business-
oriented system. Since these systems are automated and highly complex, and the
nature of fund and commercial accounting is so dissimilar, we foresee a large job
ahead before a fully satisfactory system can be implemented.
Another important aspect relating to the changed accounting is the need to orient
managers and budgetary personnel to their new responsibilities. Financial manage-
ment under the Panama Canal Company was directed more towards achieving
bottom line results than adhering to set fund limitations. Under the Commission,
profitability and fund control must share an equal role in the financial management
picture. This will require initiating an extensive orientation program for our em-
ployees.
I would like to take this opportunity to alert the subcommittee that we foresee
some management problems in the capital program area as a result of the authori-
zation bill for the Commission recently passed by the House. The bill, as passed,
does not provide the reprogramming authority necessary to take into account
changes in priorities or in estimates.
The Act sets forth the specific elements to be used in calculating the capital
investment of the United States in the Panama Canal on which interest is to be
computed, and provides further that interest be set at a rate determined by the
Secretary of the Treasury. In this connection, the Joint Explanatory Statement of
the Committee of Conference stated that interest on the net direct investment of the
United States would be computed at the coupon, rather than the average, yield rate.
For fiscal year 1980, the Treasury has established an interest rate of 7.096 percent.
Section 1602 requires that rates of tolls be calculated to produce revenues to
cover, as nearly as practicable, all costs of maintaining and operating the Panama
Canal, including interest, depreciation, payments to Panama under paragraph 5 of
Article 111 and paragraphs 4 (a) and (b) of Article XIII of the treaty, as well as
capital for plant replacement, expansion, and improvements. However, it specifical-
ly prohibits inclusion in the toll base of any provision for the contingent $10 million
parent to Panama under paragraph 4(c) of treaty Article XIII.
In accordance with the requirements of this same section, and under the authori-
ty granted in section 1605 for an interim toll adjustment, there were placed in effect
on October 1 new toll rates representing a 29.3 percent increase over prior rates.
The new rates conform in all respects with the bases of tolls set forth in the law.
In addition to the normal costs associated with the maintenance and operation of
the Canal, the rates provide for recovery of $14.8 million for interest, $16.7 million


I9-319 0 80 2







for the increase in the unfunded liability to the Civil Service Retirement Fund
attributable to the early retirement benefits extended to Canal employees, $75.9
million for payments to Panama, and $7.0 million for plant replacement, expansion,
and improvements. This $7.0 million represents the additional income needed, over
and above depreciation, to reimburse the U.S. Treasury for a requested appropri-
ation in 1980 of $25.2 million for new capital program obligations of the Commission
estimated for that year.
As a final comment on financial matters two agreements have been reached in
principle with Panama on the treatment of payments due each party. These agree-
ments, which we anticipate will be formalized soon by an exchange of diplomatic
notes, are in conformity with the provisions of Public Law 96-70, and do not
diminish the controls to be exercised by the Congress over the treaty payments to
Panama.
The first agreement provides that, with respect to amounts due Panama pursuant
to paragraph 5 of Article III and paragraphs 4(a) and (b) of Article XIII of the
treaty, the Commission is to make monthly payments, beginning in November.
Reimbursement for the public services to be performed by Panama and payment of
the fixed annuity will be at one-twelfth of the total annual amounts due under the
treaty. The thirty cents per ton payment will be calculated at the end of each
month based on tonnage actually transiting the Canal.
For any annual amounts that might be due Panama under the provisions of
paragraph 4(c) of treaty Article XIII, payment would be made no later than seven
months after the close of the fiscal year.
With respect to reimbursement by Panama for goods provided and services ren-
dered by the Commission, this agreement also stipulates that payments will be
made monthly, on a current basis, with the Commission having the right to offset
against treaty payments due Panama in the event that Government becomes delin-
quent.
The second agreement relates to Panama's back debt to the predecessor agencies.
Under this agreement, Panama will pay the full amount of the debt in quarterly
installments over a twenty-seven month period. If payments become delinquent, the
Commission, again, will have the right of offset against treaty payments.

TRAFFIC AND TOLLS OUTLOOK
I would like to conclude my testimony with a brief statement concerning the
traffic and tolls outlook for the Commission.
During fiscal year 1979, Canal traffic and tolls revenue levels fluctuated rather
widely and did not fully develop according to our earlier forecasts. Nevertheless, by
year end, traffic and tolls revenue totals had reached impressive levels. Cargo
movements through the Canal were up over 8.0 percent from fiscal year 1978,
reaching a record 154 million long tons, resulting from increases in the number and
size of vessels transiting the waterway. Tolls revenue corresponding to the increased
traffic levels was approximately $209.5 million, or $270.8 million at current toll
rates.
I expect further increases in traffic and tolls revenue during fiscal year 1980, with
most of the growth resulting from increased shipments of Alaska North Slope oil
through the Canal. Our fiscal year 1980 budget estimates include North Slope oil
movements through the Canal of approximately 480 thousand barrels daily, up
sharply from an average 310 thousand barrels daily during the prior year. Transits
directly related to the North Slope oil trade are now estimated at 1,075, with a
corresponding tolls revenue of $41.1 million under the new toll rate structure. That
estimate was based primarily on information provided by the major participants in
the production and distribution of North Slope oil, which indicated shipments
through the Canal would average 400 thousand barrels daily during October and
November, increasing to approximately 500 thousand barrels per day by December,
with this average level being sustained throughout 1980.
Other traffic is also expected to expand during the year, although at a moderate
pace. Continued and possibly deeper recession in the United States and the poten-
tial for some downturn in Japan in the latter half of the year will tend to limit
growth during fiscal year 1980. Nevertheless, I am optimistic that, barring unex-
pected, serious change in the economies of these two countries, traffic levels will
increase during the year. Our total traffic and tolls revenue, including North Slope
oil, is currently estimated at 13,765 oceangoing transits and $299.6 million.
This forecast is strengthened by actual results during the month of October.
Despite lower than expected North Slope oil shipments, total traffic and tolls
revenue levels are very near our estimates for the period. Actual shipments of
North Slope oil averaged approximately 295 thousand barrels during the month, but





15

have been increasing during the last two weeks. We understand Trans-Alaska
pipeline system throughput just recently reached the level necessary to sustain
Canal shipments at the 400,000 barrel per day level, and increases up to this
average are expected during November, with further increases to approximately 500
thousand barrels daily still anticipated by December or early January. Of course, we
recognize the volatility of this aspect of our traffic and the potential for wide
variation in the timing and/or amount of shipments through the Canal.
I would like to mention one last factor that could potentially affect Canal traffic
levels and that is the increase in toll rates of approximately 29.3 percent as of
October 1. The effect of this toll rate increase on the level of Canal traffic is a
function of the cost of using the Canal relative to the cost of users' alternatives.
While it is too soon to discern the actual effect of the recent toll rate increase on
Canal traffic, our studies indicate there will be no diminution of traffic through the
Canal as a result of the increase. Nevertheless, we will continue to monitor the
situation.
CONCLUSION
Mr. Chairman, that concludes my prepared remarks. I shall be pleased to answer
questions. Thank you.










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Mr. McAuLuw. As indicated, I am accompanied by Mr. Fer-
nando Manfredo, Jr., the Deputy Administrator; Mr. Thomas Con-
stant, the Secretary of the Panama Canal Commission, and Mr.
Walter Bjorseth, the Chief Financial Officer of the Panama Canal
Commission.
As the Administrator of the agency, I would like to express my
gratitude to this subcommittee for assisting in the enactment of
the treaty implementing legislation prior to October 1. Potentially
serious problems would have resulted had October 1 come and one
without the requisite legislation.
At the outset of my remarks it seems appropriate for me to give
you a rundown on what the Administrator and his Deputy have
been doing for the past month. I assumed office in the Commission,
in an acting capacity, from its beginning on October 1, as did my
Deputy, Mr. Fernando Manfredo, Jr. Since that time Mr. Manfredo
and I have spent much time visiting all of the facilities, offices and
shops which the Commission operates.
Our purpose was not only to get personally acquainted with the
organization and its people, but also to give our employees at all
levels of the organization the opportunity to see and talk with us.
We have also met with a number of employee and community
groups during this time.
These visits and meetings have served as a good first course in
familiarization with canal operations for Mr. Manfredo and myself.
I believe they also have had a beneficial, reassuring effect on our
people.
I must say that I have been very much impressed with the
dedication, loyalty and professional competence of the canal work-
force. They have kept this important waterway operating and
maintained during what has been for them an extremely turbulent
and frustrating period. That, in my view, is a real tribute to them.
Many of the employees we have talked with have commented
favorably on the peaceful manner in which the changeover from
United States to Panamanian jurisdiction was carried out, and at
the cooperation we have been receiving from the Panamanian Gov-
ernment in such matters as joint police patrols, refuse collection,
the issuance of licenses, employee documentation, railroad service,
and similar functions.
Mr. Manfredo and I are acutely aware, nevertheless, that the
problems of uncertainty and turbulence of the recent past have
continued to impact on employee morale, and I can assure you that
corrective measures are being given priority attention. I believe
that the combination of a return to stability and the taking of
management actions which are sensitive to the needs of the organi-
zation as well as to the concerns of our people will result in a
favorable period of canal operation in the months ahead.
I have with my prepared statement two charts reflecting the
transfer of functions to Panama, and the structure of our new
organization. I am prepared to answer questions on those, but I
shall not discuss them at length at this moment.
I do want to say something about the makeup of our workforce.
The full-time permanent workforce in the Panama Canal Company
and Canal Zone Government immediately prior to October 1 was
approximately 12,200 employees. The number of employees separat-






in e reduction in force was approximately 460 and about 2,300
e ees-out of approximately 3,000 spaces-were transferred to
eent of Defense. An additional 1,440 employees termi-
te their employment voluntarily through retirement or resigna-
n The combination of these actions reduced the Panama Canal
f ime permanent workforce to about 8,000 employees, of which
ately 2,100 are U.S. citizens and 5,900 are Panamanians
i-country nationals. The large majority of these employees
rwith the Commission are dedicated to transit and tran-
related activities.
My full statement covers such matters as initiatives taken in the
personnel planning and policy area. I wish to move to a discussion
of some financial aspects. I am, of course, prepared to answer
qu ons on both personnel and inancial matters.
I would like to mention the initiatives already taken or in prog-
r to implement the provisions of Public Law 96-70 with regard
t diffcult task of converting an agency which has operated as
agement corporation for the last 28 years to one that operates
u her appropriated fund concept.
S ion 1301 of the new law requires that there be covered into
general fund of the Treasury any balances of the appropriation
ants of the Canal Zone Government remaining unexpended at
c of business September 30, 1979. In addition, it authorizes
fn t be appropriated to the Commission to cover outstanding
obligations that would otherwise be chargeable to these accounts.
OnSeptember 30 the unexpended balance of the appropriations
ats of the Canal Zone Government amounted to $12.2 mil-
lreporting to the Treasury is due on November 7, and at
tt time these funds will be formally covered into the general
A final determination of the obligations outstanding against ear-

lier appropriations is still underway. In conformance with the au-
trization granted in the statute, we have included in the Com-
i n's 1980 budget request funding for $5.9 million to cover
t Canal Zone Government obligations.
On September 30, the cash balance in the Panama Canal Compa-
ny Fund amounted to $71.2 million, which has been deposited in
full into the Treasury to the account of the Panama Canal Commis-
sion Fund. Also in accordance with this section of the statute all
receipts of the Commission are being deposited into that fund.
Through October 31 receipts so deposited have amounted to $30.4
million.
Section 1303 of Public Law 96-70 establishes the Panama Canal
Emergency Fund and authorizes the appropriation of $40 million
for deposit therein for the fiscal year beginning on October 1, 1979.
W attach great importance to this provision as it affords us what
we consider to be an essential means of handling unforeseen oper-
ational emergencies and tra inc.
I would like totkethisopprtunity to alert the subcommittee
that we fresee some management problems in the capital program
oe aaesult of the autorization bill for the Commission recent-
ly passed by the House. The bill, as passed, does not provide the
rpgramig authority necessary to take into account changes in
priorities or i estimates.




20A


In accordance with the requirements of the section 1602, and
under the authority granted in section 1605 for a interim toll
adjustment, there were placed in effect on October 1 new toll rates
representing a 29.3-percent increase over prior rates. The new rates
conform in all respects with the bases of tolls set forth in the law.
In addition to the normal costs associated with the maintenance
and operation of the canal, the rates provide for recovery of $14.8
million for interest, $16.7 million for the increase in the unfunded
liability to the civil service retirement fund attributable to the
early retirement benefits extended to canal employees, $75.9 mil-
lion for payments to Panama, and $7.0 million for plant replace-
ment, expansion, and improvements.
This $7 million represents the additional income needed, over
and above depreciation, to reimburse the U.S. Treasury for a re-
quested appropriation in 1980 of $25.2 million for new capital pro-
gram obligations of the Commission estimated for that year.
A short word now on the traffic through the canal. Transits
directly related to the North Slope oil trade are now estimated at
1,075, a corresponding tolls revenue of $41.2 million under the new
toll rate structure. That estimate was based primarily on informa-
tion provided by the major participants in the production and
distribution of North Slope oil, which indicated shipments through
the canal would average 400,000 barrels daily during October and
November, increasing to approximately 500,000 barrels per day by
December, with this average level being sustained through 1980.
Our total traffic and tolls revenue including North Slope oil is
currently estimated at 13,765 oceangoing transits, and $299.6 mil-
lion. This forecast is strengthened by actual results during the
month of October. Despite lower than expected North Slope oil
shipments, total traffic and tolls revenue levels are very near our
estimates for the period. Actual shipments of North Slope oil aver-
aged approximately 295,000 barrels daily during the month but
have been increasing during the last 2 weeks.
We understand Trans-Alaska pipeline system throughput just
recently reached the level necessary to sustain canal shipments at
the 400,000-barrel-per-day level, and increases up to this average
are expected during November, with further increases to approxi-
mately 500,000 barrels daily still anticipated by December or early
January. Of course, we recognize the volatility of this aspect of our
traffic and the potential for wide variation in the timing and/or
amount of shipments through the canal.
While it is too soon to discern the actual effect of the recent toll
rate increase on canal traffic, our studies indicate there will be
diminution of traffic through the canal as a result of the increase.
Nevertheless, we will continue to monitor the situation.
Mr. Chairman, that concludes the summary of my prepared re-
marks, and together with Secretary Blumeeld Iam prepared to
answer questions. Thank you.
Mr. HUBBARD. Thank you, Dennis McAuliffe.
These questions from the chai man, before we call on Chairman
Murphy, Congressman Bauman and other members of the subcom-
mittee who are here. My first quesion for Michael Blumenfeld
regarding tolls. Have you received any communication from canal
users or countries with respect to the tolls increase that went into






e on October 1? Do you know of any user that has said the new
would preclude their using the canal?
M BLUME I am not aware of any specific user who has
s tha hey would be precluded from using the canal. I think, as
M McAuliffe said, our best knowledge now is that traffic will not
das a result of the increase. I am aware of a statement in
the OA which basically opposed the concept of raising tolls, and
s to keep them as low as possible. I think that is an understand-
able sentiment. But we have received, to my knowledge, no spe-
cific notification of people who will stop using the canal because of
thtincrease.
Mr HUBBARD. Have you heard any protests or criticisms about
the tll increase which went into effect on October 1?
M. BLUMENFELD. We had, of course, heard criticism back in the
summer months when the amount of the toll increase was under
c ration, and the then Panama Canal Company held hearings
on a proposed toll increase. There were a number of statements in
o tion to a toll increase. It would not surprise me if, as I said,
sentiment remains that tolls should not be raised, but we have not
heard specific complaints about this toll increase.
Mr. HUBBARD. Regarding employment and employment costs,
how do you intend to carry out the provisions of the treaty in
section 1271 of the Panama Canal Act relating to labor-manage-
m relations? Also, how soon do you expect to arrive at a scheme
of recognition and negotiation for a contract?
Mr. BLUMENFELD. I cannot give you a target date for that. That
is a very evolutionary kind of situation. Federal labor relations
authority which supervises title 7 of the Civil Service Reform Act
which will apply to both U.S. and non-U.S. employees in the zone
has made a visit to the isthmus, has discussed the situation both
with the union representatives and with representatives of the
Con and the Government of Panama. There is a training
proam which the AFL-CIO will be undertaking for its own affili-
ates down there sometime I believe in late November. People are
really just getting organized under the provisions of title 7, and
there are many open questions as to exactly how it is going to
work. So I have no target date for the first recognitions under that
title.
Mr. HUBBARD. The Panama Canal Act authorized in section 3101
the disinterment, transportation, and reinterment of remains of
U.S. citizens to fulfill the terms of the Randolph Reservation. How
would you describe the progress being made with respect to this
project?
Mr. BLUMENFELD. I would describe it as excellent, sir. The terms
of the Randolph Reservation were met. They were met on time,
and they were met with all of the dignity that properly should
have accompanied the removal and transfer of remains. I believe
next of kin are satisfied with the result. We are certainly satisfied
with the result, and think that the Canal Zone Government, assist-
ed by elements of the Department of the Army who were sent
down on detail, accomplished that task with dispatch and to their
great credit.
Mr. HUBBARD. Thank you so much.






A few questions, please, for Administrator McAuliffe. In earlier
testimony that had been supplied to the subcommittee, the esti-
mate of the amount of funds to be covered from the Panama Canal
Company Fund into the Treasury on September 30 was $82 million.
As you indicated in your statement, $71.2 million was actually
covered into the Treasury on September 30. What accounted for
the nearly $10 million variation from the earlier estimate?
Mr. MCAULIFFE. The difference was that we paid more predeces-
sor obligations than we had estimated, and also there were about
$1.5 million lower tolls than estimated. These were normal adjust-
ments made in the process.
Mr. HUBBARD. When the Canal Zone existed, each townsite had
an advisory-type civic council and the major civic representatives
of the townsites met periodically with the Governor. What is the
Commission's plan for relating to these communities within those
housing areas controlled by the Panama Canal Commission?
Mr. McAuUFFE. Sir, I am setting up a successor structure which
we will call resident advisory committees, and there will be repre-
sentatives from all of the townsites and housing areas in the com-
mittees that will meet with my deputy and myself periodically. I
will have to add that, since the makeup of many of our Commission
housing areas is now changed, you will find in many of them
employees not only of the Commission but also of the Department
of Defense agencies in the Panama Canal area, and even of the
Government of Panama, because of the transfer of functions that
has taken place.
Therefore, we are working out an arrangement whereby repre-
sentatives of the other agencies in the canal area will also sit with
us on the residential advisory committees, so that we can handle
matters across the board.
Mr. HUBBARD. During debate on the Panama Canal Act earlier
this year some concern emerged regarding a shortage of pilots
caused by the number of canal pilots not wishing to work under
Panamanian civil jurisdiction combined with some who would
retire, due to lucrative retirement benefits. Is there any shortage of
Panama Canal pilots?
Mr. MCAULIFFE. We have lost some pilots in the transfer over to
the new treaty, and we have also recruited some new pilots to
partially make up the deficit.
Mr. HUBBARD. What number of pilots is currently employed?
Mr. McAuLIFFE. If I may give that number to you for the record.
I don't have it immediately at hand. I do want to say that we do
have a sufficient number of pilots, qualified pilots, to handle canal
traffic at this time, and we are working together with the pilots
themselves on bringing up to the proper level of qualification some
new personnel.
Mr. HUBBARD. Can you give us the number--
Mr. McAUuFFE. Yes, sir, I can.
Mr. HUBBARD [continuing]. That you would like to have?
Mr. McAULIFFE. Yes.
Mr. HUBBARD. How about the number of pilots you would like to
have?
Mr. McAULIFFE. About 238 is our objective figure.




CIO


.HUBBARD. At present is the number substantially under

McAuu'E. The number currently employed is 220. We are
pretyclose.
M HB D. Two more questions from me. On page 8 of your
s moot you indicated that hiring preference for Panamanians
w being implemented by adding 11 points to the numerical score
oPanamanian applicants. This is related to paragraph 2 of
ai-10 of the Panama Canal Treaty. How does this policy relate
to positions requiring critical skills such as pilot, tugboat, and
c man positions?
Mr. McAuimF. The 11 points are being awarded to qualified
Pians who are being hired into the Commission, that is to
shires. The 11 points would be awarded to any qualified
Applicant whether in the skilled areas or the semi-
sor unskilled areas. The 11 points are added after the indi-
vidual has attained a passing score in qualification testing. This
thod is designed to provide a means of carrying out the thrust of
the legislation for a Panamanian preference in hiring, and I might
a that that seems to be working as intended, from my review of
the results of the first month under the treaty.
Mr. HUBBARD. Last, have the recent strikes and marches in
Phad any effect on the canal's operation? Do you anticipate
that there will be any effect in the future?
Mr. McAum. There has been, as the subcommittee knows, a
lding teachers strike that had picked up other elements of
tPanamanian economy. The strike was settled day before yester-
day-October 31-and the schools are expected to reopen on
M y, November 5.
The strike, while causing turbulence within Panama, had no
e at all on the operation of the canal. I might add that there
were some other labor problems experienced by Panama in one of
the port areas recently. This was not in itself directly related to the
teachers strike. It was an economic problem. It was settled fairly
quickly, although the Cristobal piers were at a standstill for about
a 1-day period. I am pleased to note that the canal operation
continued. We were able to continue to use our launches, to take
our pilots out from the Cristobal piers to the ships awaiting, and to
return the pilots there even while that 24-hour strike was in
progress.
What I am saying is that the labor problems that Panama has
been confronted with have not, fortunately, affected the canal oper-
ation, and I do not see any of those problems affecting our canal
operation for the foreseeable future.
Mr. HUBBARD. Thank you very much, Mr. McAuliffe. Chairman
Murphy, questions?
Mr. MURPHY. General, one of the major problems seems to be
water-the availability of water; the problems in the watershed
area; woodcutting; what is developing as a dry period in what has
normally not been a dry period. What contingency planning is the
Commission doing in reference to the general situation of refolia-
tion; security of those areas; and for provision of water, in order to
service the canal?






Mr. McAuum. Sir, our planning and participation with
Panama toward the conservation of the watershed area has contin-
ued through a Subcommittee on Conservation, and will be the
subject of a major effort on the Committee on the Environment,
which will shortly be established under the terms of the treaty. But
aside from the establishment of that committee, there has been
very effective and cooperative working relationships between Pana-
manian agencies and U.S. agencies-and I am talking here of both
the Commission and the Department of Defense elements-in help-
ing to preserve that watershed area.
I am happy to note that over the past year a major effort has
been made by the Panamanian Government to publicize the dan-
gers of further erosion, of further uncontrolled cutting of timber in
these areas, and also the Panamanian Government, with the co-
operation of the former Canal Zone Police, now the Commission
Police, has taken steps to gradually move these squatters and other
illegal farming activities out of that area, so that there is, I think,
a viable program between the two Governments to preserve the
watershed. Obviously it is something that has to be watched very
closely, so that there are no retractions on the progress that has
been made, and indeed that the progress does continue for the
years ahead.
The lake levels at the present time are at about the level that
they should be in this time of year. As I mentioned to some
members of the subcommittee privately yesterday, we have had a
rather unusual environmental event in that the month of October
turned out to be for the watershed area one of the driest Octobers
in many years, something like 7 years. We certainly hope that that
does not continue through November, or we may have to make
some further reevaluations of our water supply for the coming
year. But that is a short-term problem, one that is immediately
with us.
Mr. MURPHY. I have no other questions.
Mr. HUBBARD. Thank you very much, Chairman Murphy. Con-
gressman Bauman?
Mr. BAUMAN. I wanted to address one point that concerns me. In
your statement on page 11 you rather succinctly summarized the
problem that arises in my own mind. As you well know, section
1302 of the Public Law 96-70, the implementing legislation, makes
it clear that the fund must be both authorized and appropriated
and that the annual amount appropriated may not exceed the
revenues of the canal deposited in the Commission's fund in the
Treasury. This provision is the so-called Rudd amendment. The
contention made in your statement is that certain amounts that
may be required this year, the largest of which is the $40 million
emergency fund authorized by the implementing law, should not be
considered as part of the appropriation process, or at least not the
authorization process. Could you clarify for me your thinking and
the reasoning behind this?
Mr. BLUMENFELD. Let me, if I may, answer that. In our view the
authorities extended in sections 1301 and 1303 are supplemental to
the authority discussed in and limited in section 1302. I will be a
little bit more specific.




25


S1301 covers into the general fund of the Treasury unex-
bances of the Canal Zone Government. As noted in the
H Report on H.R. 111, the section specifically authorizes appro-
ptio to make payments'of duly audited obligations or claims
result from the operation of the Canal Zone Government

Weappropriation of $5.9 million to liquidate such
cl e estimate that the larger amount than $5.9 million, to be
p$6.1 million, will be deposited into the general fund of the
T ur during fiscal year 1980, which is an amount to be collect-
on Canal Zone Government accounts receivable.
T intent of the Rudd amendment, embodied in 1302(c), is that
tyer not subsidize the operation of the canal. The appropri-
ao f the funds as authorized in section 1301 would not subvert
t intent. The funds would satisfy claims such as accrued sala-
rts payable, which represent expenses already charged
to rs in past tolls and, therefore, are properly excluded from
ttoll base in 1980.
The $6.1 million that will be covered into the Treasury from
t Canal Zone Government accounts receivable, as I said, will
m than cover the $5.9 million that we seek to spend. The
ceon of the accounts receivable is no more speculative than
tof toll revenues which are estimated at the beginning
of and have been certified by the Comptroller General.
Revenues will go to finance the operation and mainte-
n of the canal under the constraints of section 1302(c). Section
12) does not contain language indicating that it overrides other
portions of the act such as section 1301 or 1303(a), which contain
t own separate authorizations. But if I may, let me get to the
effects of a failure to authorize and to appropriate the
.9 million as well as the emergency fund. I will treat them

As to the $5.9 million, what are the options? Dollars could be
ated and the legitimate claims could be paid. That is
opin1.
Option 2, the Commission could default on these claims, and be
sued.
Option 3, the Congress could force the Commission, if it wishes
not to default on the legitimate obligations, to finance that $5.9
million in payments by foregoing other operating expenses, and', in
effect, cing that $5.9 million which are carryover Canal Zone
obliaons out of fiscal 1980 tolls.
Smce thoe costs-carryover Canal Zone Government obliga-
tions-are not in the 1980 tolls base and are not costs of operating
a maintaining the canal, this course of action would raise the
question by Panama as to whether it creates a surplus
oeri a contingency payment to them. The Com-
1ssio4 would hve collected revenues and made expenditures not
rad to operation end maintenance of the canal. There is
quite arguably a case, therefore, that you would have a surplus
which would be payable to the Republic of Panama under article
III, section 4(c).





26


I believe that among those options it is most clearly desirable to
appropriate the $5.9 million and to let those legitimate claims be
paid.
With respect to the emergency fund-
Mr. BAUMAN. Before you go on to that, Mr. Secretary, I followed
you up to a point but you sure lost me on that last part about
triggering the article, whatever it is, 4(c) payments Let me go
back. You say there is roughly $6 million in accounts receivable
owed from the previous Canal Company operations. What is the
source of these receivables?
Mr. BLUMENFELD. Resulting from prior operation of the canal
and the Canal Zone Government.
Mr. BAUMAN. What is the source of these?
Mr. BLUMENFELD. The source in part is the Republic of Panama.
Mr. BAUMAN. Water payments, electricity, and things like that?
Mr. BLUMENFELD. That sort of thing, correct, and also from indi-
viduals who owe the Canal Zone Government for hospital or other
such services that have been provided. They are also from U.S.
agencies on the isthmus who owe and who have not yet paid for
services provided.
Mr. BAUMAN. It is your suggestion that this amount of money
should come into the hands of the Commission and then be used to
pay off the outstanding obligations that you describe?
Mr. BLUMENFELD. Mechanically, whether it comes into the hands
of the Commission and then is paid off or goes into the Treasury
and becomes appropriated funds from the Treasury general fund I
think is, as an nonfinancial expert, immaterial. The point is that it
will cost the taxpayer nothing because those funds are coming in:
$6.1 million is coming in, $5.9 million would go out.
Mr. BAUMAN. The actual physical transfer and the bookkeeping
doesn't concern me as much as your suggestion that the amount of
money, whatever it is, should not go through the authorization and
appropriation process.
Mr. BLUMENFELD. I believe it should be appropriated, yes, sir. I
believe that it has been separately authorized in section 1301.
Mr. BAUMAN. By virtue of the authority to pay claims of the
previous company?
Mr. BLUMENFELD. That is correct.
Mr. BAUMAN. You foresee this to be a one-time-only operation?
Mr. BLUMENFELD. Yes.
Mr. BAUMAN. Now if you want to proceed to the $40 million
fund, I would like to hear your answer on that.
Mr. BLUMENFELD. The $40 million emergency fund, I think the
le islative history makes clear, was placed into the legislation in
order to recognize that the constraints of an appropriated fund
agency, as opposed to the old corporate form, may lead to circum-
stances where an unexpected event-such as a landslide-leaves
you with no revenues and some costs, or where traffic increases
requiring increased outlays to service them, happen in a timeframe
where the requirements have to be met immediately, and the
formal congressional processes are simply not fast enough to ac-
commodate them.
The $40 million emergency fund was therefore authorized in
section 1303 to cover unforeseen expenses. You may have them,






y may not. To charge shippers for that, by putting it in the toll
b would raise, I think, a very understandable outcry.
T separate authorization existing in section 1303 means that
t is no question that it is separate from the limits established
in section 1302 for normal operating and maintenance expenses of
the canal, which are subject to the limit of those funds put into the
P a Canal Commission Fund.
Mr. BAUMAN. Then what you are suggesting is quite flatly that
the million fund has to come out of the U.S. Treasury, not out
of the income of the Commission, and that any replenishments in
the future must also come out of the U.S. Treasury?
Mr. BLUMENEL. No, sir, the concept would be that replenish-
m in the fund would come through tolls.
Mr. BAUMAN. Are you suggesting that the original appropriation,
the $40 million, the first amount, should be from the Treasury?
Mr MEFEDYes.
r. BAUMAN. I have to flatly disagree with your interpretation. I
Sell you as one who worked on that section, and specifically
saved it from oblivion because of a mistake in the printing -of the
House-passed bill, that it was always my understanding that the
amount of money in that fund would not be chargeable to the U.S.
t yer at any point, but would in fact be appropriated and have
to come originally from the tolls.
I have to tell you my own view is that you missed the boat on
your temporary toll increase, in not including this as a factor, and
I suggest to you as one who has been through the political
on this issue that if this has to be reopened on the floor of
the House only a matter of weeks after the passing of the imple-
menting legislation, you run a great deal of jeopardy in getting this
budetthrough.
I hope we can work out some accommodation. It may seem minor
in the context of the billions that this Government spends, but in
the context of the emotion raised by the entire issue, there are
people waiting for something like this. I don't want to pursue it at
l h today, I don't think that is appropriate, but I just suggest
we best work out something that does not allow the U.S. Treasury
o the to be liable for this original amount.
Mr. I 't pursue it at great length either, but if I
may respond, I think section 1303 on its face authorizes that ex-
penditure from appropriation from the Treasury. Were we to have
built it into the tolls base and ended up fiscal 1980 or 1981 or any
other fiscal year not having had the kind of emergency or the kind
of unexpected events that would have required expenditure of
funds, we could have a surplus arguably triggering a contingency
payentpenalty.
MBAUMAN. I agree. But one of the points of contention in the
f two conferences was the definition of operation and mainte-
nance, and I don't see how you can twist the definition of those
phrases to exclude emergency situations for operation or mainte-
nance that occur. They are intimately part of the operation and
maintenance of the canal, and I would say have to come from the
tolls, despite the diplomatic problem that may present to our Gov-
ernment with shippers from Latin American and other countries.




280


I hope we can resolve this. I have read the amendment offered by
Senator Bayh yesterday in the other body, and I think that it turns
the law on its head. It says, in effect, you can appropriate the
money beforehand and take it later out of income from the canal. I
guess that is the suggestion of the language.
Mr. BLUMENFELD. Yes, it is.
Mr. BAUMAN. That, to me, is an open-ended arrangement that I
think subverts the congressional process.
Mr. Chairman, I don't want to prolong the questioning but I did
have one other question regarding the amount of money that is
suggested for claims against the Canal Commission.
Drawing on my memory, you had something in the neighborhood
of $21 million in your revised budget estimates for possible vessel
damage claims, and the 1978 annual report of the Company indi-
cated that the estimated liability for such claims was only $6.9
million. Then there was a revised projection of $8.2 million.
The Public Law 96-70, chapter 4, drastically reduced the expo-
sure of the new Commission to these claims and turns over to the
United States the responsibility for prior claims.
What is the justification for the request for that increased
amount of money?
Mr. McAuuFFE. Sir, we had claims totaling some $15.9 million in
fiscal year 1979, and while there are limitations placed on the
amounts of claims for ship damage and certain pars of the water-
way, nevertheless the size of the ships, the almost excesively high
cost of repairing ship damage, has convinced us the amount
that we have estimated for claims in fiscal year 1986 is prudent.
Mr. BAUMAN. So the 1978 annual report of the company projects
approximately $7 million. Your March statement of this year on
which the tolls increase was projected gives about $8.2 million, and
you tell me that in fact more than $15 million -in claims were filed?
Mr. McAuuFFm. $15 million, yes, sir, in estimated claims.
Mr. BAUMAN. And on that basis you project for the coming year
$21 million?
Mr. McAuum. The $21 million was our estimate of all cl
for accidents projected through the end of fiscal year 1979.
Mr. BLUMENFELD. If I may add, sir, the increase in ve1 traffic
has been accompanied by an increase in the pr rtion of that
traffic accounted for by vessels of large size. Those vessels of large
size have a greater probability of accident, and I that prob-
ably accounts for some of the upward projection.
Mr. BAUMAN. Are these all current claims or ae you counting in
this amount any outstanding prior claims?
Mr. BLUMENFELD. The $21 million was an estimate, made in
March 1979, of claims which would be outstanding the end of
fiscal year 1979 for all accidents occurring prior o ber 1979.
The estimate turned out to be low. In fact,t outstanding
claims amounted to $27.7 million. There is included in the budget
$6 million for estimated future claims during fiscal 1980, along
with $21 million as a provision for payment of prior claims.
Mr. BAUMAN. Doesn't the new law limit the libility for such
claims rather severely? Did you take that into account?
Mr. McAuLIF. Yes, sir, it has been taken into account.





29


Mr. BAUMAN. I wonder if our counsel Mr. Whitman could pursue
this a little further. He has a better grasp than I do.
Mr. WHITmAN. The new law, as you know, limits the authority of
the commission settlement to $120,000 on each claim, and also
removes the exposure of the company to suit in the district court
on any claim except those occurring in the locks, so that you are
not faced with the potential liability of millions of dollars in any
case. The ship might be worth $1 million or might suffer damage to
that extent, but there isn't any liability of the commission for more
than $120,000.
Mr. BLUMENFELD. I believe, sir, that the limitation of $120,000
refers to accidents outside the locks. The accidents within the locks
are not subject to that limit. The accidents within the locks, as I
said, are raised in probability by the growing proportion of larger
beam ships.
Let me add that the estimate that was developed for fiscal year
1980 was developed with the help of Admiral Siler, former Com-
mandant of the Coast Guard, who worked with the Panama Canal
Company Board of Directors to develop these estimates, and I am
comforted by his concurrence that that kind of estimate was indi-
cated for fiscal year 1980.
Mr. WHITmAN. I wonder if you can supply for the committee, if
the chairman would agree, the tabulation of the claims occurring
in the locks and outside the locks in the last 5 years, and the
amount of those claims, and the amount that you project in the
locks and outside the locks for 1980.
Mr. McAuum. We will get those figures; yes. We will include
supplementary information on the $21 million estimate of marine
accident liabilities outstanding at the end of fiscal year 1979.
[The information follows:]
MARI-E AccDE, CLAIMS OUTSTANDING
We will also include clarifying information on marine accident claims outstanding
at the end of 1979 and our projection for 1980.
1979 CLAIMS OUTSTANDING
The $21 million estimate of marine accident claims outstanding at the end of 1979
was based on actual claims outstanding at the end of 1978 of $15.7 million plus an
estimated cost of accidents occurring in 1979 of $10 million, less anticipated pay-
ments of claims to be made during that year. As shown below, actual marine
accident costs in 1979 amounted to about $15.9 million, rather than the $10 million
projected in our $21 million estimate.
CLAIMS OUTSTANDING
Estimate Actual
Outstanding marine accident claims, Sept. 30, 1978 .............................................................................. $15.7 $15.7
New claim s during 1979........................................................................................................................ 10.0 15.9
Paymentsof claimsduring 1979........................................................................................................... 4.7 3.9
Outstanding marine accident claims 30, 1979.. . ..........................21.0 27.7

1980 PROVISIONS
For purposes of recovering marine accident costs from Canal users, we follow
reserve accounting whereby the estimated annual cost of accidents are charged to
expense and a reserve established. Cash payments are in turn charged to the


59-319 0 80 3





0


reserve. On this basis, $7 million of marine accident costs was booked in 1978 and $8
million included in the Company's March 1979 Tolls Proposal. This was reduced to
$6 million for purposes of the October 1 tolls increase on the basis of the liability
limitation contained in Public Law 96-70. The $6 million estimated cost for ship
accidents in 1980, which includes a factor for inflation, is also pro ted in our 1980
Budget Amendment and provides $4.3 million for accidents in te locks and $1.7
million for accidents outside the locks.
The tabulation of claims over the past 6 years follows:
SIX-YEAR EXPERIENCE
[Dollars in millions)
At locks Outside locks
Fiscal year Actual Actual
Number Actual amounts Number amounts over
amount under
$120,000 $120,000

1974 .................................................................... 11 $0.4 13 $0.6 2 $1.5
1975 .................................................................... 13 .7 10 .3 1 .3
1976 .................................................................... 10 .4 7 .2 3 1.6
1977 .................................................................... 14 1.1 18 .4 12 3.4
1978 .................................................................... 20 3.9 15 .5 3 1.7
1979 .................................................................... 16 3.5 10 .4 14 12.0

Mr. BAUMAN. The last question I might ask, Mr. Chairman, deals
with the change in the budget estimates you sent to the Congress a
few weeks ago. When the authorization legislation passed the
House, we provided line items for a number of specific capital
projects, and these were omitted in your revised budget estimates.
Yet the total amounts in the various categories of projected spend-
mg remain the same. What is the reasoning behind that change?
What is the justification for that?
Mr. BLUMENFELD. The reasoning is that the line-by-line limita-
tion on the capital expenditures may well result, because of the
inflation which we are undergoing, and because of the normal
vagaries of estimation, in hamstringing us on our ability to execute
the individual capital projects. The lump sums in the categories
represent a plan to execute those identical line item projects.
The amounts are the same because they are the aggregate of
what we expect those projects to cost. But by categorizing them,
and establishing limits on categories of projects, rather than on
individual items project-by-project within the category, we will
have the flexibility to actually execute the capital program. An
overrun on one particular line item could be compensated by not
doing in that fiscal year some other individual capital project,
thereby preserving the integrity of the category ceilings.
Mr. BAUMAN. I can understand your desire for flexibility, but on
the other hand it gives me some concern that such an arrange-
ment, if it is not tied to line items, might in fact lead the Commis-
sion to decide not to expend for certain amounts, and that could
lead to a surplus, and so on. I do think that if there is a reasonable
relationship between the appropriations and authorizations for
given projects, it would be far better.
Did you have questions? Mr. Whitman apparently has another
question.
Mr. WHITMAN. I would like to ask on behalf of the committee
whether the Department of Justice has made any move to abate







the actions that were pending in the district court against the
Panama Canal Company, that probably amounted to several mil-
lion dollars at the time.
Mr. McAuum. Not to my knowledge.
Mr. WmT AN. I asked the question because under normal legal
principles when a corporation is dissolved, the actions against it
are abated. Here there is certainly no liability on the part of the
Commission, and since the company is no longer in existence, there
is no liability on the part of the company, so I should think the
Department of Justice would want to take some appropriate action
in the matter.
Mr. BAUMAN. Mr. Chairman, last, I would just comment on the
issue of tolls increase, which was the subject of the OAS condemna-
tion. I am not at all sure from the AP dispatch that I read that the
U.S. representative at that meeting made clear the necessity for
the tolls increase, since it is tied directly to the costs of the trea-
ties.
This was made very clear during the debate in the Senate and
the House, and Mr. Manfredo made, I thought, a very concise
explanation in his remarks of some weeks ago the reason for these
increases. I would hope that both the Government of Panama and
the United States representatives of the OAS explain to our Latin
American neighbors and friends that this is one of the products of
the treaty, and it cannot be avoided.
There are only three sources for the money: First, is the canal
tolls; second, is the U.S. taxpayers, which was the major fight in
both Houses; and third, is the possibility that Panama itself might
wish to waive some of the payments.
There is only so much money to go around, and these tolls are
not the fault of the United States, even though we are vested with
the final authority to raise the tolls, as you well know. It is simply
the operation of economic forces in the terms of the treaties and
the legislation.
Thank you.
Mr. HUBBARD. Thank you, Congressman Bauman.
Congressman David Bowen of Missippi.
Mr. BoWEN. Thank you, Mr. Chairman.
I am sorry that I was not able to be here for your testimony. I
have not had an opportunity to read it, but I shall do that. I would
just like to take a moment, while you are reporting to us, to give
you a little bit of a report from here. There are a number of my
colleagues who voted for H.R. 111 with some apprehension, and
upon the assurance I had given them that I felt that after Treaty
Day, there would be a great deal more calm in this country, and
that people would be assured that our technicians are still in
Panama operating the canal, our troops there defending it, with
ships sailing in both directions.
That does happen to be the case, so I am happy to tell you that
most of those who had shown some concern politically about sup-
porting that legislation have reported to me that they have had
little or no mail on the subject since that time, and that there
seems to be a great deal of calm in the country. Of course, at the
same time I share the concern of Mr. Bauman and others who
pointed out that this is somewhat of a precarious sort of peace that





32


we have established politically here, and that it can be upset if
everything does not happen to go right.
I have had one or two of my colleagues who have asked me about
a couple of press reports that came out during the time of the
consideration of H.R. 111 regarding statements by some of the
Panamanian leaders, indicating that in terms of the specific lan-
guage of H.R. 111, particularly some of the later adjustments that
we made in the bill, that they might reserve the right not to abide
by that language, and to ignore it.
Do you know of any kind of expression of that sort which was
made to you, General McAuliffe, or to our Ambassador, or to
anyone else that would support that sort of position?
Mr. McAUIFFE. Sir, there has been to my knowledge no adverse
comment or protest, if you will, on the part of the Panamanian
Government to either the Ambassador or to myself in MY previous
or present capacity concerning Panama's intentions to carry out
the provisions of the treaty. To the contrary, we have seen on the
ground there a very intensive effort on the part of Panama to
fulfill her obligations as she accepted them on the first of October.
Many of those functions which directly tie into the people in the
canal area have been performed with courtesy, with thoroughness,
and with fairness.
Mr. BOWEN. I would hope that spirit of cooperation would contin-
ue. I think it will go a long way toward calming the apprehensions
of a great many Americans, certainly a good many Congressmen.
At this time would you say that you see no substantial problems
that would impair the smooth operation of the canal, and a harmo-
nious relationship between Americans and Panamanians in sup-
porting this operation?
Mr. McAUuFFE. Speaking as someone who is familiar with the
scene around the canal, I see no substantial problems ahead that
would interfere with the effective operation and maintenance of
the canal and its protection and defense. Obviously, because it is a
complicated enterprise, because of the transfer of so many func-
tions between U.S. agencies and between the United States and
Panama, there are day-to-day problems that arise in literally all
sorts of areas, but I am pleased to note that the cooperation of all
concerned toward the immediate resolution of these problems has
been very encouraging.
Mr. BOWEN. I would like to congratuate all of you and your
colleagues in Panama who have done so much to make this transi-
tion a successful one. Of course, I also want to caution you, as I
know you are aware, that we have only just begun, and we have a
long way to go. Thank you.
Mr. BLUMENFELD. If I may, Mr. Bowen, let me add, as Phil
McAuliffe said, there are bound to be day-to-day differences. I
think the favorable thing is that those differences are being dis-
cussed in amicable fashion. One, for example, which we are cur-
rently encountering relates to the APO postal system and the
handling thereof. There is a disagreement between us and the
Republic of Panama on exactly how that APO mail delivery will be
undertaken. We are working to straighten out that disagreement
now. We are standing firm on the U.S. rights which were secured
in the SOFA governing APO. We think Panama is missing that




33


determination of the SOFA and we are discussing it at a different
level right now
Mr. HUBBARD. Congressman Bauman.
Mr. BAUMAN. Following up on what Mr. Bowen said, I read the
press conference of the President shortly after the adoption of the
implementing legislation and I read various comments from other
political leaders, many of them not in the Government, to the
effect that not only were they not satisfied with some terms of the
implementing legislation, but that they would like to make
changes as soon as possible. We have not received any official
representations regarding such changes, have we?
Mr. BLUMENFELD. No, sir.
Mr. BAUMAN. I would say this for my own part: If indeed it
appears that any provisions of the implementing law are unworka-
ble or that any suggestions from the Government of Panama are
being considered, we would like to hear them.
One of the reasons that the law provides for authorization is to
allow the subcommittee and the full committee to make changes if
necessary. We are not, by any means locked into concrete forever,
but on the other hand I hope that there would not be any necessity
to use disagreements over the law to create an issue that does not
exist. I think we can address them if that time comes.
Mr. HUBBARD. Congressman Bauman, do you have any other
questions at this time? Chairman Murphy? Congressman Bowen?
Three more questions from the chairman, that were prepared by
staff, remain. Unless other members have further questions after
these three the hearing can and will be adjourned.
Administrator McAuliffe, what is being done to determine the
depreciation policy of the Panama Canal Commission? Are any
particular policies now being considered?
Mr. McAuumz. Sir, we are continuing the past policy of the
Panama Canal Company on straight line depreciation, and consid-
ering projects by groups within that depreciation program. We are
beginning to look at the depreciation program, but frankly have
not yet made any serious attempt to make a change to this pro-
gram. I think I want to see how it functions for a while before we
make any substantial change, a faster writeoff or anything of this
nature.
Mr. HUBBARD. The second of the three questions: The implement-
ing legislation was changed in its later stages to postpone the
effective date for the transfer of certain prisoners to the custody of
the Attorney General. Have there been any problems in the com-
mission's management of prison and jail facilities?
Mr. MCAULIFFE. No, sir, there have not. We are quite aware of
our responsibilities to support that facility, and the Department of
Justice activities there, and so far it is running quite smoothly.
Mr. HUBBARD. Have there been any problems of coordination
with Panama?
Mr. McAUurn. No, sir.
Mr. HUBBARD. Last, this subcommittee was informed in earlier
hearings that a number of Panama Canal Commission personnel
were going to be on loan to the Government of Panama on a
reimbursable basis. Their loan was to be for the purpose of helping
Panama to initially manage the ports and railroads transfer from






the Panama Canal Company. How many Commission personnel are
on loan to Panama, and how is this loan program being adminis-
tered?
Mr. McAuLIFFE. It is about 80. I believe the actual number is 81
employees of the Commission are on loan to Panama on a reim-
bursable basis.
All of these loans were made for a term of 1 year, but with the
understanding that if sometime short of that there was no further
need for those employees by Panama, they could be released and
returned to the Commission.
We have been monitoring the activities of these employees. We
find that in general they are well used in providing advice and
indeed in actively participating in these operations with Panama.
They are doing what they were intended to do, that is to say, help
Panama assume the new function.
Mr. HUBBARD. Thank you very much, Administrator McAuliffe.
Is there anything else you want to say before we conclude?
Mr. MCAULIFFE. No, sir.
Mr. HUBBARD. I would ask the same of any other member of our
committee.
Mr. Blumenfeld, do you have any other comments?
Mr. BLUMENFELD. No, sir.
Mr. HUBBARD. Again I would like to say to Secretary Blumenfeld
and Administrator McAuliffe how much we appreciate their testi-
mony and frank answers to our questions. Deputy Administrator
for the Panama Canal Commission, Sefior Fernando Manfredo, Jr.,
we thank you very much for being here today. Let us give you a
chance to say whatever is on your mind before we conclude. Do you
have anything to add?
Mr. MANFREDO. No, sir, except that the canal is much more than
an engineering marvel, than a hydraulic system, dams, locks to
move the canal. The canal is a very efficient organization, with a
long tradition of efficiency, with many people that have served
with loyalty, with efficiency, and I feel very proud to be a member
of that organization.
Thank you.
Mr. HUBBARD. Thank you very much. Congratulations upon your
appointment as Deputy Administrator of the Panama Canal Com-
miss ion. We are very hopeful that the Panamanian-United States
relationship will be enhanced in the years ahead. We further hope
that any of the fears that opponents of the Panama Canal treaties
might have had will vanish. Hopefully, President Carter and those
who urged the treaties will prove the opponents of the treaties
wrong, and the relationship between our two countries will grow
more meaningful.
Thank you again, and best wishes. The hearing is adjourned.
[Whereupon, at 11:30 a.m., the subcommittee adjourned.]











PANAMA CANAL AUTHORIZATION AND
OVERSIGHT

TUESDAY, FEBRUARY 19, 1980
HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON PANAMA CANAL,
COMMITTEE ON MERCHANT MARINE AND FISHERIES,
Washington, D.C.
The subcommittee met, pursuant to notice, at 9 a.m., in room
1334, Longworth House Office Building, Hon. Carroll Hubbard, Jr.
(chairman of the subcommittee) presiding.
Present: Representatives Hubbard and Bauman.
Staff present: Terrence W. Modglin, Merrill W. Whitman, Ber-
nard Tannenbaum, Luis Luna, Michael J. Smith, Mary Pat Bar-
rett, and Elizabeth Foley.
Mr. HUBBARD. I want to express my appreciation to all of you
who are here this morning, witnesses and guests, and to the staff
and members of the press. I would like to indicate that our rules of
statement in rule 3(c), that "testimony may be taken and evidence
received in any meeting in which there are present not fewer than
two members of the committee, one of whom should be, whenever
possible, a minority member."
We look forward to hearing the testimony this morning, in our
February 19, 1980, hearing on the fiscal year 1981 Panama Canal
authorization of the Honorable Michael Blumenfeld, Assistant Sec-
retary of the Army, Civil Works, Department of the Army, and
Hon. Dennis P. McAuliffe, Administrator, Panama Canal Commis-
sion.
At this time I would like to proceed with my own statement,
after having unanimous consent to submit the authorization bills
on which this hearing is being held, and the justification of esti-
mates, in the record.
[The following was received for the record:]
(35)






I




96TH CONGRESS
2D SESSION Ho R, 6515

To authorize appropriations for the fiscal year beginning October 1, 1980, for the
maintenance and operation of the Panama Canal, and for other purposes.




IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 13, 1980
Mr. MURPHY of New York (for himself, Mr. HUBBARD, Mr. MCCLOSKEY, and
Mr. BAUMAN) introduced the following bill; which was referred to the
Committee on Merchant Marine and Fisheries




A BILL
To authorize appropriations for the fiscal year beginning October
1, 1980, for the maintenance and operation of the Panama
Canal, and for other purposes.

1 Be it enacted by the Senate and House of Representa-
2 ties of the United States of America in Congress assembled,
3 That this Act may be cited as the "Panama Canal Appropri-

4 ations Authorization Act, Fiscal Year 1981".
5 OPERATING EXPENSES AND CAPITAL OUTLAY
6 SEC. 2. (a) There is authorized to be appropriated from
7 the Panama Canal Commission Fund for the use of the
8 Panama Canal Commission for the fiscal year beginning Oc-




37


2
1 tober 1, 1980, not to exceed $394,453,000, required for ex-
2 penses of the Commission incurred under the Panama Canal

3 Act of 1979, including-
4 (1) hiring of passenger motor vehicles and aircraft,
5 and the purchase of not to exceed 31 passenger motor
6 vehicles, of which 19 are for replacement only, for the
7 fiscal year beginning October 1, 1980;
8 (2) uniforms or allowances therefor, as authorized
9 by sections 5901 and 5902 of title 5, United States
10 Code;
11 (3) official reception and representation expenses;
12 (4) operation of guide services;
13 (5) residence for the Administrator;
14 (6) contingencies of the Administrator;
15 (7) procurement of expert and consultant services
16 as provided by section 3109 of title 5, United States
17 Code;
18 (8) maintenance and alteration of facilities of other
19 United States Government agencies in the Republic of
20 Panama used by the Panama Canal Commission;
21 (9) maintenance and alteration of facilities of the
22 Government of the Republic of Panama, used by the
23 Commission, of which the United States retains use
24 pursuant to the Panama Canal Treaty of 1977 and re-
25 lated agreements; and




38

3
1 (10) payment of liabilities of the Panama Canal
2 Company outstanding as of September 30, 1979.
3 (b) Not to exceed $23,000,000 of the authorization for
4 appropriations for the fiscal year beginning October 1, 1980,
5 provided in subsection (a), shall remain available until ex-
6 pended, for acquisition, construction, and replacement of im-
7 provements, facilities, structures, and equipment required by

8 the Panama Canal Commission.
9 (c) Of the sums referred to in subsection (b) of this sec-
10 tion, not more than the following amounts shall be available
11 for the following purposes:
12 (1) for transit projects, $17,876,000;
13 (2) for general support projects, $2,676,000;
14 (3) for utilities projects, $1,648,000; and
15 (4) for quarters improvement projects, $800,000.
16 (d)(1) Subject to the limitations prescribed in paragraph
17 (2), the amount which may be expended for any individual
18 project within any category of projects contained in para-
19 graphs (1) through (4) of subsection (c) may be increased
20 above the amount specified for that individual project in the
21 budget estimate submitted to the Congress by an amount
22 necessary to meet increased costs in such project due to infla-
23 tion or other unforeseeable factors, if the Board of the
24 Panama Canal Commission has approved such increase and
25 has notified in writing the Committee on Merchant Marine





39


4
1 and Fisheries of the House of Representatives, the Commit-

2 tee on Armed Services of the Senate, and the Subcommittees
3 on Transportation of the Committees on Appropriations of

4 the House of Representatives and the Senate of the Commis-
5 sion s approval of such increase, the reason for such approv-
6 al, and the new cost estimate for the project concerned.

7 (2) In no event may-
8 (A) the total cost of all projects within any of the

9 categories of projects contained in clauses (1) through
10 (4) of subsection (c) exceed the amount authorized by
11 law for that category, or
12 (B) the total cost of all capital projects authorized
13 by this section exceed the amount appropriated for
14 such projects.
15 (e) There may be credited to this appropriation, for pay-
16 ment to other United States Government agencies, funds re-

17 ceived from officers and employees of the Commission or
18 commercial insurers of Commission employees for expendi-

19 tures made for services provided to Commission employees
20 and their dependents by such other agencies.
21 EMERGENCY FUND
22 SEC. 3. There is authorized to be appropriated from the
23 Panama Canal Commission Fund for deposit into the
24 Panama Canal Emergency Fund $25,000,000 to remain




40

5
1 available until expended, for the purpose specified by section
2 1303(b) of the Panama Canal Act of 1979.

3 CONTINUING CONTRACTS
4 SEC. 4. Any program authorized in this Act may be
5 prosecuted by continuing contracts to be funded from appro-

6 priations made by law in annual appropriations Acts, not to

7 exceed in the aggregate the total amount for each program
8 specified herein.
9 NEW SPENDING AUTHORITY

10 SEC. 5. The Commission, in any fiscal year, is author-
11 ized to incur obligations in advance of adequate receipts in

12 the Fund, but only to the extent or in such amounts as are

13 provided in advance in appropriation Acts.

0









________DEPARTMENT OF THE ARMY
OFFICE OF THE ASSISTANT SECRETARY
WNAbIZNGON, DCQ autlo


S MAR lon


Honorable John M. Murphy
Chairman, Committee on Merchant
Marine & Fisheries
House of Representatives
Washington, D.C. 20515



Dear Mr. Murphy:

Reference is made to your request to the Secretary of
Defense for the views of the Department of Defense on H.R. 6515,
a bill "to authorize appropriations for the fiscal year begin-
ning October 1, 1980, for the maintenance and operation of the
Panama Canal, and for other purposes." The Department of the
Army has been assigned responsibility for expressing the views
of the Department of Defense on this bill.

The title of the bill states its purpose.

There exist two important differences between H.R. 6515
and H.R. 6516 (the Administration's bill).

First, H.R. 6516 contains the following provision in
section 2(d)(2):

"...Individual projects not included in the budget
estimates which the Board of the Panama Canal Commission
determines to be necessary may be initiated if notice
thereof is provided to the Committee on Merchant Marine
and Fisheries of the House of Representatives, the
Committee on Armed Services of the Senate, and the
Appropriations Subcommittees for the Panama Canal of
both Houses of Congress not later than 30 calendar days
before the end of a congressional session. Such pro-
jects shall not be initiated prior to expiration of
30 calendar days following the date of such notice."

There is no similar provision in H.R. 6515. Such authority
is extremely important in the conduct of an effective capital
program. It would provide the means to initiate essential
projects, the need for which was unforeseen at the time of
the budget submission.








Honorable John M. Murphy

The requested authority would not deprive the Congress
of necessary oversight authority, because of the 30 day
notice which.must be given to the Merchant Marine and Fisheries
Committee, the Senate Armed Services Committee, and to the
Appropriations Subcommittee in both houses. Furthermore, the
agency could not exceed the amounts authorized by law for a
given category of project, or the total amount appropriated
for capital programs.

The other important difference is that H.R. 6516 provides
in section 2e:

"There are authorized to be appropriated, in
addition to the amounts authorized by subsection (a)
of this section such additional supplemental amounts
for the activities for which appropriations are
authorized as may be necessary for increases in salary,
pay, retirement, or other employee benefits determined
by law or authorized by administrative action pursuant
to law, for covering payments to Panama under paragraph
4(a) of article XIII of the Panama Canal Treaty of 1977,
as provided by section 1341(a) of the Panama Canal Act
of 1979, and for increased costs for fuel expenses."

There is no similar provision in H.R. 6515. This type of
provision, which we understand is included in authorization
bills for many agencies, would be desirable for the Panama
Canal Commission. It would facilitate the supplemental
appropriation process for certain specific cost increases,
the occurrence of which is beyond the control of the agency.

The desirability of decreasing the time required for
obtaining supplementals for these increased costs is the same
for the agency as it is for others. Increased costs stemming
from legislation or other factors would create current obli-
gations for the Commission which must be covered by available
operating funds until a supplemental appropriation is obtained.
This, in turn, could force a curtailment of Canal maintenance
and other essential programs. Accordingly, inclusion of a
provision of this type is considered important.

The Department of the Army, on behalf of the Department
of Defense, favors either (1) enactment of H.R. 6516 in its
present form, or (2) inclusion of the two provisions discussed
above in H.R. 6515.

There are no appropriations to the Department of Defense
associated with either H.R. 6515 or H.R. 6516.

Sincerely,



Michael Blumenfeld
Assistant Secretary of the Army
(Civil Works)






40


PANAMA CANAL COM4,1iSSION
APO MIAMI 3401 1
OFFICE OF THE ADMiINISTRA'TOR



February 28, 1980



Honorable John M. Murphy
Chairman, Committee on Merchant
Marine and Fisheries
House of Representatives
Washington, D. C. 20515

Dear Mr. Chairman:

This is in response to your request of February 15 for a report by this
agency on H.R. 6515, a bill introduced by you on February 13 "to authorize
appropriations for the fiscal year beginning October 1, 1980 for the main-
tenance and operation of the Panama Canal, and for other purposes." If
enacted, the bill would provide appropriation authority for the Panama Canal
Commission for fiscal year 1981.
There exist two important differences between H.R. 6515 and H.R. 6516
(the Administration's bill).

First, H.R. 6516 contains the following provision in section 2(d)(2):

Individual projects not included in the budget esti-
mates which the Board of the Panama Canal Commission determines
to be necessary may be initiated if notice thereof is provided to
the Committee on Merchant Marine and Fisheries of the House of
Representatives, the Committee on Armed Services of the Senate,
and the Appropriations Subcommittees for the Panama Canal of
both Housesof Congress not later than 30 calendar days before
the end of a congressional session. Such projects shall not be
initiated prior to expiration of 30 calendar days following the
date of such notice."

There is no similar provision in H.R. 6515. Such authority is extremely impor-
tant in the conduct of an effective capital program. It would provide the
means to initiate essential projects, the need for which was unforeseen at the
time of the budget submission. One recent example of an instance where it was
necessary for the former Panama Canal Company to proceed with an unbudgeted
capital project was the emergency replacement of the softnoses at Pedro Miguel
and Gatun Locks in 1978. The project was necessitated by vessel accidents
occurring in January and April of that year which destroyed the existing
structure and, in one instance, repositioned the remains'in such a way as to
present a hazard to ship traffic. There are other examples of unforeseen re-
quirements that had to be met from the capital program.

The requested authority would not deprive the Congress of necessary over-
sight authority, because of the 30-day notice which must be given to your Com-
mittee as well as to the Senate Armed Services Committee and to the appropria-
tions subcommittee of both houses. Furthermore, the agency could not exceed
the total amount appropriated for capital programs.






44


For the reasons stated above, the Commission strongly favors inclusion of
the provision regarding unbudgeted projects in the authorization bill.

The other important difference is as follows:

"There are authorized to be appropriated, in addition to
the a-ounts authorized by subsection (a) of this section such
additional supplemental amounts for the activities for which appro-
priations are authorized as may be necessary for increases in salary,
pay, retirement, or other employee benefits determined by law or
authorized by administrative action pursuant to law, for covering
pay3) its to Panama under paragraph 4(a) of article XIII of the Panama
Canal Treaty of 1977, as provided by section 1341(a) of the Panama
Canal Act of 1919, and for increased costs for fuel expenses."

iTis tLye of provision, .,hich we understand is included in authorization bills
for v iay agencies, -wouId be desirable for the Commission. It would facilitate
t6e ippmental appropriation process for certain specific cost increases,
the 1c-ut'rnce of which is beyond the control of the agency.

The desirability of decreasing the time required for obtaining supplementals
for tLese increased costs is the same for the agency as it is for others. In-
r a'~ed costs stemmning from legislation or other factors would create current
!b1gat ions for the Commission which must be covered by available operating funds
untill a ,;upple intal appropriation is obtained. This, in turn, could force a
uitailoent of Canal maintenance and other essential programs. Accordingly,
inclusion of a provision of this type is considered important.

In conclusion, the Panama Canal Commission favors either (1) enactment of
H.R. 6516 in its present form or (2) inclusion of the two provisions discussed
above in H.R. 6515.

As required by Rule 13 of the Rules of the House of Representatives, there
is enclosed an estimate of the cost which would be incurred in carrying out
H.R. 6515 for the period 1981 through 1985. The costs would be the same with
the addition of the two provisions proposed above.

The Assistant Secretary of the Army (Civil Works) concurs in this
assessment.

The Office of Management and Budget advises that it has no objection to
the submission of this report to your Committee.

Sincerely yours,

/s/

D. P. McAuliffe
Administrator

Encl osure





45


DEPARTMENT OF STATE
Washington, D.C. 20520



OR 6 1980



Dear Mr. Chairman:

The Secretary has asked me to respond to your
letter of February 15 requesting comments on H.R.
6515, a bill to authorize appropriations for the
fiscal year beginning October 1, 1980, for the
maintenance and operation of the Panama Canal, and
for other purposes. I refer, for that purpose, to
H.R. 6516, legislation prepared for the same end
by the Administration and introduced on February 13
under your co-sponsorship.

As a comparison indicates, the two bills are
quite similar in most respects. There are, however,
two provisions of H.R. 6516 which are omitted in
H.R. 6515:

1. Section 2(d) (1) concludes with the sentences
"Individual projects not included in the budget
estimates which the Board of the Panama Canal Com-
mission determines to be necessary may be initiated
if notice thereof is provided to the Committee on
Merchant Marine and Fisheries of the House of
Representatives, the Committee on Armed Services
of the Senate, and the Appropriations Subcommittees
for the Panama Canal of both Houses of Congress
not later than 30 calendar days before the end
of a congressional session. Such projects shall not
be initiated prior to expiration of 30 calendar
days following the date of such notice."



The Honorable
John M. Murphy,
Chairman,
Committee on Merchant Marine and Fisheries,
House of Representatives.


59-319 o 80 4





46


2. Section 2 (e): "There are authorized to be
appropriated, in addition to the amounts authorized
by subsection (a) of this section such additional
supplemental amounts for the activities for which
appropriations are authorized as may be necessary
for increases in salary, pay, retirement, or other
employee benefits determined by law or authorized by
administrative action pursuant to law, for covering
payments to Panama under paragraph 4(a) of Article
XIII of the Panama Canal Treaty of 1977, as provided
by section 1341(a) of the Panama Canal Act of 1979,
and for increased costs for fuel expenses."

The Department remains convinced that these
provisions of H.R. 6516 would improve significantly
the management capability and flexibility of the
Panama Canal Commission and that their omission
would therefore not contribute to the efficient
operation of the Canal. Were a situation to evolve
whereby the regular and unimpeded vessel transits of
the Canal were to be interrupted, the United States
would most certainly be confronted with difficulties,
not only in our relations with Panama, but also with
other nations which are major users of the Canal. In
addition, the provisions of section 2 (e) would facilitate
the ability of the United States to comply with its
commitment to the Republic of Panama under section
XIII 4(a) of the Panama Canal Treaty of 1977. For these
reasons, we prefer the Administration's proposed bill
as being more in consonance with our basic interest
in maintaining an open and smoothly operating waterway.

I hope that the foregoing comments will be
helpful to the Committee in its d --iberaLiunb.

The Office of Management and Budget advises
that from the standpoint of the Administration's
program there is no opposition to the submission
of this report.

Sincerely,



J. Brian Atwood
Assistant Secretary for
Congressional Relations





47


96TH CONGRESS
2D SESSION H R.6516


To authorize appropriations for fiscal years beginning October 1, 1980, and
October 1, 1981, for the maintenance and operation of the Panama Canal,
and for other purposes.




IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 13, 1980
Mr. MURPHY of New York (for himself, Mr. HUBBARD, and Mr. MCCLOSKEY) (by
request) introduced the following bill; which was referred to the Committee
on Merchant Marine and Fisheries




A BILL
To authorize appropriations for fiscal years beginning October 1,
1980, and October 1, 1981, for the maintenance and oper-
ation of the Panama Canal, and for other purposes.

1 Be it enacted by the Senate and House of Representa-

2 ties of the United States of America in Congress assembled,
3 That this Act may be cited as the "Panama Canal Appropri-

4 ations Authorization Act, Fiscal Year 1981".
5 OPERATING EXPENSES AND CAPITAL OUTLAY
6 SEc. 2. (a) There is authorized to be appropriated from

7 the Panama Canal Commission Fund for the use of the





48


2
1 Panama Canal Commission for the fiscal year beginning Oc-

2 tober 1, 1980, not to exceed $394,453,000, and for the fiscal

3 year beginning October 1, 1981, such amounts as may be
4 required for expenses of the Commission, incurred under the

5 Panama Canal Treaty of 1977 or the Panama Canal Act of

6 1979, including-
7 (1) hiring of passenger motor vehicles and aircraft;

8 (2) uniforms or allowances therefor, as authorized

9 by section 5901 and 5902 of title 5, United States

10 Code;

11 (3) official reception and representation expenses;

12 (4) operation of guide services;
13 (5) residence for the Administrator;

14 (6) contingencies of the Administrator;
15 (7) procurement of expert and consultant services

16 as provided by section 3109 of title 5, United States

17 Code;
18 (8) maintenance and alteration of facilities of other

19 United States Government agencies in the Republic of

20 Panama used by the Panama Canal Commission; and

21 (9) maintenance and alteration of facilities of the
22 Government of the Republic of Panama, used by the

23 Commission, of which the United States retains use

24 pursuant to the Panama Canal Treaty of 1977 and re-
25 lated agreements.







3
1 (b) Some $23,000,000 of the aforementioned authoriza-

2 tion for appropriation for the fiscal year beginning October 1,

3 1980, and such amounts as may be necessary for the fiscal

4 year beginning October 1, 1981, shall remain available until

5 expended, for acquisition, construction, and replacement of

improvements, facilities, structures, and equipment required

7 by the Panama Canal Commission, including-

8 (1) the purchase of not to exceed 31 passenger
9 motor vehicles of which 19 are for replacement only

10 for the fiscal year beginning October 1, 1980, and such
11 numbers of passenger motor vehicles as may be neces-

12 sary for the fiscal year beginning October 1, 1981;
13 (2) the recruitment of expert and consultant serv-

14 ices, as authorized by section 3109 of title 5, United

15 States Code;

16 (3) the improvement of facilities of other United
17 States Government agencies in the Republic of

18 Panama used by the Panama Canal Commission; and

19 (4) the improvement of facilities of the Govern-
20 ment of the Republic of Panama, used by the Panama
21 Canal Commission, of which the United States retains

22 use pursuant to the Panama Canal Treaty of 1977 and

23 related agreements.





0


4
1 (c) Of the sums appropriated pursuant to subsection (b)

2 of this section, not more than the following amounts shall be

3 available for the following purposes:
4 (1) for transit projects, $17,876,000;
5 (2) for general support projects, $2,676,000;

6 (3) for utilities projects, $1,648,000; and
7 (4) for quarters improvement projects, $800,000.

8 (d)(1) Subject to the limitations prescribed in paragraph
9 (2) the amount that may be expended for any individual proj-

10 ect within any category of projects contained in clauses (1)
11 through (4) of subsection (c) may be increased above the
12 amount specified for that individual project in the budget esti-
13 mate submitted to the Congress by an amount necessary to
14 meet increased costs in such project due to inflation or other
15 unforeseeable factors if the Board of the Panama Canal Com-
16 mission has approved such increase and has notified the

17 Committee on Merchant Marine and Fisheries of the House
18 of Representatives and the Committee on Armed Services of
19 the Senate in writing of the Commission's approval of such
20 increase, the reason for such approval, and the new cost esti-
21 mate for the project concerned. Individual projects not in-
22 cluded in the budget estimates which the Board of the

23 Panama Canal Commission determines to be necessary may
24 be initiated if notice thereof is provided to the Committee on
25 Merchant Marine and Fisheries of the House of Representa-





51

5
1 ties, the Committee on Armed Services of the Senate, and

2 the Appropriations Subcommittees for the Panama Canal of

3 both Houses of Congress not later than 30 calendar days

4 before the end of a congressional session. Such projects shall
5 not be initiated prior to expiration of 30 calendar days follow-

6 ing the date of such notice.

7 (2) In no event may-

8 (A) the total cost of all projects within any of the

9 categories of projects contained in clauses (1) through

10 (4) of subsection (c) exceed the amount authorized by

11 law for that category, or
12 (B) the total cost of all capital projects authorized

13 by this section exceed the amount appropriated for

14 such projects.

15 (e) There are authorized to be appropriated, in addition

16 to the amounts authorized by subsection (a) of this section

17 such additional supplemental amounts for the activities for
18 which appropriations are authorized as may be necessary for

19 increases in salary, pay, retirement, or other employee bent-
20 fits determined by law or authorized by administrative action

21 pursuant to law, for covering payments to Panama under

22 paragraph 4(a) of article XIII of the Panama Canal Treaty of

23 1977, as provided by section 1341(a) of the Panama Canal

24 Act of 1979, and for increased costs for fuel expenses.





52

6
(0 There may be credited to this appropriation, for pay-
2 ment to other United States Government agencies, funds re-

3 ceived from officers and employees of the Commission or
4 commercial insurers of Commission employees for expendi-
5 tures made for services provided to Commission employees
6 and their dependents by such other agencies.
7 EMERGENCY FUND

8 SEC. 3. There is authorized to be appropriated from the
9 Panama Canal Commission Fund for deposit into the
10 Panama Canal Emergency Fund $25,000,000 to remain

11 available until expended, for the purposes specified by section
12 1303(b) of the Panama Canal Act of 1979.

13 CONTINUING CONTRACTS
14 SEC. 4. Any program authorized in this Act may be
15 prosecuted by continuing contracts to be funded from appro-
16 priations made by law in annual appropriations Acts, not to

17 exceed in the aggregate the total amount for each program
18 specified herein.
19 NEW SPENDING AUTHORITY
20 SEC. 5. The Commission, in any fiscal year, is author-
21 ized to incur obligations in advance of adequate receipts in

22 the Fund, but only to the extent or in such amounts as pro-
23 vided in advance in appropriation Acts.
0






[Executive Communication No. 3476]
PANAMA CANAL COMMISSION,
OFFICE OF THE ADMINISTRATOR,
Miami, January 30, 1980.
Hon. THOMAS P. O'NEILL, Jr.,
Speaker of the House of Representatives,
Washington, D.C.
DEAR MR. SPEAKER: Attached is draft legislation to authorize appropriations for
the Panama Canal Commission for fiscal years 1981 and 1982. I realize that under
the Congressional Budget and Impoundment Control Act of 1974, the proposed
legislation for 1981 should have been submitted by May 15, 1979. However, inas-
much as the legislation establishing the Panama Canal Commission was not enacted
until after that date, the established deadline for fiscal year 1981 could not be met.
Future submissions will be forwarded routinely by the dates required.
The language pertaining to fiscal year 1982 is by necessity very general in nature
since we have not as yet formalized budget estimates for that year. In the interim,
the general language is submitted to meet the requirement of section 607 of the
Congressional Budget Act.
We have been advised by the Office of Management and Budget that there is no
objection to the submission of this legislation to the Congress and that its enactment
would be in accord with the program of the President.
Sincerely yours,
D. P. McAuLIFFE, Administrator.
[The draft bill became H.R. 6516.]

Mr. HUBBARD. Fellow members, distinguished witnesses and
guests. Today marks this subcommittee's first opportunity to for-
mally examine budget estimates prepared by the Panama Canal
Commission under the framework of the Panama Canal Act of 1979,
which was signed into law by the President on September 27. We are
happy to have with us today to explain those estimates two key
executives who are responsible for the canal's operation. Our wit-
nesses are the Honorable Michael Blumenfeld, Assistant Secretary
of the Army for Civil Works, who oversees the canal operation for
the Department of Defense, and the Honorable Dennis P. McAuliffe,
Administrator of the Panama Canal Commission. Both of these
gentlemen have testified before the subcommittee previously and
need no lengthy introduction.
Although Mr. Blumenfeld's and Mr. McAuliffe's prepared re-
marks appear to address only the legislative language proposed by
the administration, I would like to remind the subcommittee that
these hearings are being held with respect to two Panama Canal
authorization bills. The first of these bills is H.R. 6515, introduced
by Chairman Murphy and cosponsored by the Chair, by the rank-
ing minority member of the full committee, and, by our subcommit-
tee's ranking minority member and fine colleague from Maryland.
This of course would include Congressman Murphy, Congressman
McCloskey, Congressman Bauman and the chairman of this sub-
committee.
The other bill is H.R. 6516, introduced by request and as a result
of executive communication by Chairman Murphy and cosponsored
by Congressman McCloskey and me.
There are several important differences between H.R. 6515 and
H.R. 6516, the bills just referenced, but I believe the major point to
note is that the administration bill, while authorizing $394.4 million
for fiscal year 1981, also authorizes such sums as are required for




54


fiscal year 1982. H.R. 6515, the Murphy bill, does not contain any
authorization for fiscal year 1982.
Again, I would hope that in the course of hearings today we
would remember that these two measures are pending. In the
course of today's hearings, I would hope that members will pursue
detailed and exacting questions based on the amounts that are
contained in the authorization and the rationale presented in
behalf of the estimates. This is of paramount importance in the
performance of our new role as authorizing subcommittee.
As a result of today's hearings and subsequent analysis. we hope
to be interrelating with the House Transportation Appropriations
Subcommittee to convey any views that we may develop. Our sub-
committee schedule now calls for an early markup of authorizing
legislation on March 5 so we hope that any supplementary data
that is requested today would be submitted as soon as possible.
Our distinguished ranking minority member, Congressman
Robert Bauman, has just returned yesterday from an inspection
visit to the Panama Canal and we will be happy to hear any
statement he may have.
Mr. BAUMAN. I will defer any statements, Mr. Chairman.
Mr. HUBBARD. I would like to recognize you later, Mr. Bauman,
to make any remarks you may have, as you have requested to do
after our witnesses have testified.
We hope that you will brief us on any comments concerning the
inspection visit of the canal that you and Congressman Bonior
conducted.
Now, the first witness to present testimony before our subcom-
mittee on te 1981 fiscal year authorization is the Honorable Mi-
chael Blumenfeld.
Mr. Blumenfeld, we appreciate your being here to bring us this
testimony.
STATEMENT OF HON. MICHAEL BLUMENFELD, ASSISTANT SEC-
RETARY OF THE ARMY, CIVIL WORKS, DEPARTMENT OF THE
ARMY, ACCOMPANIED BY COL. MICHAEL RHODE, JR., MILI-
TARY ASSISTANT TO THE ASSISTANT SECRETARY OF THE
ARMY, CIVIL WORKS
Mr. BLUMENFELD. Thank you, Mr. Chairman. It is good to be
here again.
If I may, I would like to enter my statement in the record, and
then proceed to summarize it orally, and then ask that the commit-
tee hear Mr. McAuliffe, and afterwards, both of us will be glad to
answer questions.
Mr. HUBBARD. Yes, certainly, it is so ordered.
[The following was received for the record:]
STATEMENT OF HON. MICHAEL BLUMENFEL
Mr. Chairman, members of the Panama Canal Subcommittee, I am Michael
Blumenfeld, Assistant Secretary of the Army, Civil Works. As a portion of my
responsibility, I oversee the operation of the Panama Canal Commission on behalf of
the Secretary of the Army. It is a pleasure for me to appear here today as you
receive testimony concerning the Authorization Bill for the Panama Canal Commis-
sion for fiscal year 1981.







ORGANIZATIONAL MATTERS
Since my testimony before this committee last November, a number of actions
have progressed. The nominations for members of the Board of the Commission
have been forwarded by the President to the Senate for confirmation. Although the
hearing is not yet scheduled, we are hopeful that the appointment process can be
completed by month's end, and our first board meeting can be scheduled in March.
The nominees, in accordance with the requirements of the Panama Canal Act of
1979 are: Mr. Jay W. Clark, President of Clark Maritime Associates and formerly
Chairman of the Board, Delta Steamship Lines; Mr. Clifford O'Hara, Director of
Port Commerce for the port authority of New York and New Jersey; Mr. William
Sidell, General President of the United Brotherhood of Carpenters and Joiners of
America; Mr. John A. Bushnell, Deputy Assistant Secretary of State for Inter-
American Affairs; and myself as the official designated by the Secretary of Defense.
The four Panamanian nominees are Mr. Edwin Fabrega, Minister Richardo Rodri-
guez, Ambassador Gabriel Lewis, and Ambassador Roberto Huertematte.
In other organizational developments, the office of Ombudsman has been estab-
lished and is now functional. We anticipate appointing a Panamanian Deputy to the
Ombudsman. The nomination of a Chief Engineer of the Commission will be an
agenda item at an early Board meeting.
The President has signed an Executive Order temporarily delegating to the Secre-
tary of Defense oversight of the Panama Canal Commission. This function has been
in turn redelegated to the Secretary of the Army and I am carrying out the
Secretary's responsibility in this regard. A permanent Executive Order is being
staffed and should be ready for the President's approval by mid-march.
Internally, while awaiting convening of the Board, we are developing for Board
consideration the regulations under which it will operate. We have worked to insure
that they reflect the intent of both the Congress and the Treaty negotiators and
facilitate and increasing involvement of the Panamanians in policy matters.
We are also now formulating draft recommendations on the Panama Canal Em-
ployment System that will replace the Canal Zone Merit System. While it is too
early to discuss any particular provision of the system, I would like to highlight the
policies that form the basis of the proposal.
A. Training that will contribute to increased participation by Panamanians in all
areas and levels of the Commission as required by the Treaty will receive added
emphasis.
B. Mechanisms will be established to maximize hiring of qualified Panamanian
nationals. Already implemented is a system whereby Panamanian applicants who
achieve a passing score on the entrance examination are awarded 11 additional
points.
C. A five-year rotation policy for off-the-Isthmus recruits will be established, as
required by the Treaty, in order to facilitate meeting local recruitment goals.
These are only a few of the policies being included in the proposal that will
eventually become the Panama Canal Employment System. Suffice it to say that we
are committed to the training and development of Panamanians over the course of
twenty years. A key to Panama's ultimate success is their involvement in the
employee selection and classification process. They must be able to identify, hire,
train and retain the best people available for the canal operation.

CANAL TRAFFIC
In my last appearance before this Committee in November, I had indicated that
increased shipments of North Slope oil were anticipated, and that shipments had
been predicted to reach 500 thousand barrels per day in December. I also cautioned
at that time, however, that shipments were not yet meeting our expectations. For
the first four months of this fiscal year, the daily average was in fact 327 thousand
barrels, building to 375 thousand barrels per day in January. In light of this, we
have applied stringent budget constraints to assure we remain close to a break-even
point by year's end. As you recall, our estimate was that $463 million would be
deposited in the Panama Canal Commission account this year.
We have noted that there has been a slight overall increase in the number of
oceangoing vessels transiting the Canal over the same period last year; however,
since the increase in shipments of North Slope oil has failed to materialize, we are
approximately $2 million below budget as of the end of January; but costs have been
held below budget as well and we are approximately on target for a breakeven year.





U


into.a~ the- eeus-t edpstdbytePnm aa




a a= CL wil dpstito 1O1O. u the Pau Ca-a Cm
t -=C fundc yea cera ote funds amoutin to e370.0 the
~th Panlln Canahel





and Yh fE o .a exeh reuse aproritin
ncte 'e zr h ed th-oiao Bil we __ prps t sabiha









for the Semerenc acinwiecnurnl
-if-nt e b e pru-o~ed, wepta mrga S milio ha
appointmen of tha bexm wille~ by theie to d F

In~l-- mother aa tninlde h




I. a-e se-Idl be capi Io frmigsaeut o ertr

Wnmlwie waine --his Auhcrzto Bilrwkste mos acc-
eSaC We Dae orke ar 7mm-c tat they exece nt reete an





57


We a oe aloe oiltn dat reoent s
t 5ay i
mutond.at that time, hoevr that shipment were not yet meet-
in-u xettos For the firs 4 months of ths fIRm year the
daily- avrgwsi fac 327,mW bares. building to 315.00 bar-

In ligt of this we have applied sngentbugtcnratso
assrew remain dlos to a brek-even point by yea'.s end. -- you
real, our mate wa that $463 million would he deoie mn

nin
th nme ofocagigv Itrniigtecalvrth

milinbelow budget as of th end of January. but cot have &enr

s to f yr 191 avenue and c I eimae that the
-ee e to he dested by the Pamn aa omsinIt





1 Pm
amout to S4O6,363,O0 of whc S313,940.000 will coerm tolIis.



fudsaoung to 93.750,000, copie of cletosfo h
Govenmet of Panama for Panama Canal Comay and CanalI
Zon Government aconts recivable, and funds recived frm
v u. Toa dep for fi yr 19.1 in the Panama
Co io Fnd ar thus poje to he WO1,113.000:.
Ths coupled with unexpene balance of the hund frm fica


;. an
yer1981. This fund wil be deive fro fia yer 1 revmenues

1bal of the fund fm 19S0, which I have

Wile the M million amt shor of the $0 m o nal-
ly reuse for ficl ywa 19S0. it apex-r adqute to cver any

-emi initiating eeqnyato hl cnu~nl ekn a

= million ha been reuse for 1981; $17.9miloofta
aont wil be applied to trni pojcs Th ore of funds for
this inemnt caegr mr the dpeito lw-n and the




L58


capital factor of 2.16 cents per Panama Canal ton included in the
toll rate. This level of capital funding is adequate for near term
requirements.
Finally, Mr. Chairman; we believe this authorization bill reflects
the most accurate estimate that can be made at this time of the
expected net revenues and required operating costs of the Commis-
sion during fiscal year 1981.
Again, I appreciate the opportunity to appear here today, and
bring you up to date on events since treaty day, and to speak to the
proposed authorization bill.
As I suggested earlier, I would urge that the committee hear Mr.
McAuliffe's statement, and then both of us would be available for
questions.
Mr. HUBBARD. Certainly, there is no objection to Mr. McAuliffe's
statement being heard now.
We thank you, Mr. Blumenfeld, for your synopsis, and your full
statement will be included in the record.
We will now hear from the Administrator of the Panama Canal
Commission, the Honorable Dennis P. McAuliffe.
STATEMENT OF HON. DENNIS P. McAULIFFE, ADMINISTRATOR,
PANAMA CANAL COMMISSION, ACCOMPANIED BY WALTER D.
BJORSETH, CHIEF FINANCIAL OFFICER; THOMAS M. CON-
STANT, SECRETARY; AND MYRON A. SCHROEDER, CHIEF, FI-
NANCIAL PLANNING DIVISION
Mr. McAuumFE. Thank you, Mr. Chairman. It is a pleasure to
appear once again before this committee.
I am accompanied today by Mr. Walter Bjorseth, the Chief Fi-
nancial Officer of the Panama Canal Commission; Thomas Con-
stant, the Secretary of the Panama Canal Commission, and Myron
Schroeder, the Chief, Financial Planning Division.
I propose to enter my full statement into the record, and to
summarize it at this time.
Mr. HUBBARD. Thank you. It is so ordered.
[The following was received for the record:]
STATEMENT OF DENNIS P. McAuwmc, ADmINSTRATOR, PANAMA CANAL
COMMISSION
INTRODUCTION
Mr. Chairman, members of the Panama Canal Subcommittee, I am Dennis P.
McAuliffe, Administrator of the Panama Canal Commission. I am pleased to appear
before you today to request authorization for the FY 1981 budget programs of the
Panama Canal Commission, the agency responsible for operation of the Panama
Canal. Attending with me are Walter D. Bjorseth, Chief Financial Officer; Thomas
M. Constant, Secretary; and Myron A. Schroeder, Chief, Financial Planning Divi-
sion. I would like first to provide you a brief assessment of the general situation in
the Panama Canal area in the period since the Pamana Canal Treaty took effect.
TREATY TRANSITION
The Treaty has now been in effect over four months. That is not a great deal of
time and, for those of us involved in day-to-day operations of the canal, it seems like
a very short period indeed. But perhaps enough time has gone by to permit an early
assessment of our status, and I believe that for the Panamal Canal Commission
things, generally, have been moving in a positive direction.
Considering the many possibilities for disruption of activities when the Treaty
went into effect, I am pleased to report that October 1 passed smoothly without any
adverse incidents. The Canal organization transferred functions such as health,





59


education, postal, and retail services to the Department of Defense. Responsibility
for jurisdiction, port and railroad operations, customs and immigration services was
transferred to the Government of Panama. The two governments began to share
responsibility for fire protection and police protection in the area. The interagency
and binational planning involved in the transfer of these activities was substantial,
with many built-in hazards and changes for failure, but the record now shows that
the extensive prior planning and prepations paid dividends. Personnel of both the
United States and the Republic of Panama prepared seriously for the transition and
put forth their best efforts to assure its success.
From the first day of the Treaty, the same spirit of cooperation has contributed to
successful continuation of all activities by their new managers. The bulk of the
bilateral agreements between the United States and Panama have been put into
effect smoothly to the benefit of our organization and our people. Notable among
these are the success of the joint police patrols in the Canal housing areas and the
fire protection services (also a joint endeavor), employee documentation, and auto-
mobile and driver licensing. The joint police patrols have been a particular source of
reassurance to all. However, there is still disagreement on some issues yet to be
resolved.
A good indication of the new relationship now existing between the United States
and Panama was evidenced on January 9, the anniversary date of the 1964 riots.
The anniversary was celebrated with a march through the former Canal Zone and
passed with less than the usual display of anti-Americanism.
Two major functions transferred to Panama on October 1 were the ports of Balboa
and Cristobal and the Panama Railroad. The transfer of facilities and equipment
was accomplished as planned, and both the ports and railroad continued normal
operations. The Commission provided experienced personnel on a loan labor, reim-
burseable basis to advise and assist in the transition of these activities to Panama-
nian management.
Recently, Panama has experienced problems of congestion in the operation of its
ports, particularly the Port of Cristobal, due to an increased volume of container
traffic, difficulties associated with the maintenance of materials handling equip-
ment at the terminals, and some labor problems. Panama is taking steps to correct
the situation.
Major functions transferred to the Department of Defense were those related to
health services and the hospitals, educational services, including the Panama Canal
College, the commissary stores, and postal service. These functions continued to
serve those authorized with little or no disruption. However, some problems have
arisen among Commission families using these facilities, largely due to different
funding and administrative criteria. The Army commissary system for example, has
had a particularly difficult time in serving the increased customer demand.
During the first four months of the new Treaty, the Canal organization has
continued to fulfill its mission of transiting vessels safely and efficiently through
the waterway. During that period, approximating 4,400 oceangoing vessels transited
the canal, a number approximating the level of the same period of the previous
year. There has been no apparent decrease in traffic because of the toll rate
increase that was placed in effect on October 1, 1979.
The smoothness of the transition should not, however, cause us to lose sight of the
traumatic impact of the Treaty on the Canal organization and its work force. The
Commission's organization is now settling down after the personnel turbulence
experienced last year. Some addition organizational changes are contemplated to
meet Treaty requirements but these are being designed to have minimal personnel
impact. Two such changes contemplated involve establishment of the Office of the
Chief Engineer and the Office of the Ombudsman. In fact, the Office of the Ombuds-
man is now functional.
The morale of the workforce, which was extremely low at the time the Treaty
took effect, is now beginning to build. Employee morale has been a matter receiving
priority attention from management. The task is all the more difficult as issues
impacting on the quality of life surface.
The full-time permanent workforce immediately prior to October 1 was approxi-
mately 12,200 employees. The number of employees separated through a reduction-
in-force was approximately 460, and about 2,300 employees were tranferred to
elements of the Department of Defense. An additional 1,440 employees terminated
their employment voluntarily through retirement or resignation. The combination
of these actions reduced the full-time permanent workforce to something over 8,000
employees, of which approximately 2,000 are U.S. citizens and 6,000 are Panama-
nians and third country nationals. We also employ up to 1,000 individuals on a part-
time or temporary basis, of whom about 700 are Panamanians. Of the 8,000 perma-





60


nent employees remaining with the Commission, over 1, 04) were either reassigned
to other jobs or reduced in grade, or both, on October 1.
Working to minimize the impact of these actions on personnel, a priority place-
ment program is in effect which seeks to place U.S. citizen employees in like jobs in
other Federal agencies in the United States. Another program is the priority reem-
ployment program which assures that those employees who were terminated be-
cause of the Treaty have first consideration in hiring. The third program, the
promotion priority program, is designed to give demoted employees preferential
consideration for promotion back to their former grade.
The Panama Canal employment system currently under development includes
provision for granting hiring preference to Panamanians, a five-year rotation policy
for recruitment outside of Panama, and a reduction in the need for off-the-Isthmus
recruitment through intensified local recruitment efforts and special training and
development programs. The hiring preference for Panamanians has already been
implemented by adding eleven extra points to the numberical scores of all Panama-
nian applicants tested after October 1 who have achieved a passing score. The five-
year rotation policy has also been established. Procedures to implement the other
changes are being developed at this time. We are also emphasizing training that
will contribute to increased Panamanian participation in all areas and levels of the
Panama Canal Commission, as required by the Treaty.
The concludes my assessment of the general situation since the Treaty went into
effect.
AUTHORIZATION REQUIREMENTS
Our authorization request covers two appropriations for the Panama Canal Com-
mission in fiscal year 1981, totaling $419.5 million. One is an appropriation of $394.5
million covering both operational and capital requirements of the Commission. Of
that amount, $23.0 million is for capital equipment and construction to remain
available until expended. A second authorization of $25.00 million is requested to
establish the Panama Canal Emergency Fund. All funds authorized for appropri-
ation to the Commission are to come from the Panama Canal Commission Fund.

OPERATING EXPENSES
The appropriation required for operating expenses in 1981 is $371.5 million. The
major cost components of this total are $184.4 million for personnel compensation,
$78.6 million for Treaty payments to Panama, $38.5 million for supplies and materi-
als, and $16.7 million for liberalized retirement benefits.
The appropriation requested for 1981 represents an increase of $8.2 million over
the amount authorized for operations in 1980. Most of this increase reflects pay
raises and other cost escalations, offset by a decrease of $6.7 million in reimbursable
technical support services to Panama. However, the 1981 program does provide for a
higher level of maintenance in the transit area, additional pilots, tug crews, and
deckhands related to increased transit workloads, and an expanded apprentice
training program.
The apprentice training program will allow a greater number of local recruit-
ments for skilled labor positions, benefiting the Commission and meeting the com-
mitment for increased participation by Panamanians in the operation of the canal.
The $78.6 million for Treaty payments to Panama is comprised of a $10 million
fixed annuity payment, a $10 million payment for public services that Panama is to
perform, and a $58.6 million payment calculated on the net tons transited.

CAPITAL PROGRAM
The Commission's capital program reflects $23 million in budget authority for
1981 and is dedicated primarily to meet the needs of the Canal in terms of increased
traffic capacity and safety and efficiency in operations. Accordingly, the major
portion of the resources requested, $17.9 million will be applied to the transit
operations function.
Improvements in the waterway itself include deepening and widening the channel
and moderation of difficult curves in the waterway. These projects will permit two-
way traffic in areas now restricted to one-way movements and reduce the potential
for marine accidents through improvements in navigational safet. Also, pro-
grammed in this year is construction of a ship tie-up station at PedroMguelLocks
which will increase the lockage output and ease scheduling difficulties affecting ship
movements at Pedro Miguel.
We have planned the obligation of $7.4 million for improvements and additions to
our floating equipment in 1981. The major procurement is for a replacement tug-







b tthe cost of $4 million. This acquisition is part of a long-range plan to replace
underpowered tugboats and to increase the tug fleet as the transit
demand materializes. The 1981 program also provides for the replacement
on ump scow, a large work boat and a small dredge tender.
A p of major significance in our capacity improvement efforts is the installa-
tion addition lighting in the locks chamber and approaches at a cost of $1.3
m We presently restrict large vessels to daylight movements. The added light
in the locks chambers will allow daylight transits to begin earlier and clear later,
athe handling of wide beam ships in the lock chambers at night time.

PROJECT GROUPINGS
T proposed authorization bill presents the Commission capital program in four
p groupings-tranist projects, utilities projects, quarters improvement projects,
support projects. The total dollar amounts for each project group
r s the limitation on obligations for that group. Within the project group
reprogramming of funds among the individual projects may be accom-
p with the approval of the Commission's Board and notification to the authori-
z committees. The proposed authorization bill would also authorize the Com-
misin to initiate individual projects not included in the budget upon providing 30
days' advance notice to the appropriate authorization and appropriation committees.
such projects initiated would have to be funded within the project group
l tion set by the Congress. The reprogramming authorization will provide the
m to accommodate unanticipated cost escalations and to initiate necessary proj-
ec, the need for which was unforeseen at the time of the budget submission. I
b that such authority is important to the conduct of an effective capital
EMERGENCY FUND
The Panama Canal Act of 1979 authorized the establishment of the Emergency
F The request for a $25 million authorization for fiscal year 1981 is based upon
a nt ent of the amounts that could be required immediately for addi-
t expenditures over those appropriated to defray emergency expenses or to
m tai continuous, efficient, and safe operation of the Canal. Factors considered
in arriving at this amount were the costs of correcting slides, removal of vessels
obstructing the Canal, clean up of a major oil spill, and the potential for additional
costs of increased Canal traffic. In arriving at that figure, it was also presumed that
in the event that $25 million proves insufficient to overcome the emergency a
request authorizing additional funding would be expeditiously processed.

PANAMA CANAL COMMISSION FUND
The Panama Canal Act of 1979 provides that no funds may be appropriated to or
for the use of the Commission for any fiscal year in excess of the revenue estimated
for deposit in the Panama Canal Commision Fund during the year, plus prior
d ts to the Fund remaining unexpended at the beginning of such year. The 1981
r is in compliance with such provisions of this Act.

CANAL TRAFFIC AND TOLLS
O budget for fiscal year 1980 is based on a forecast of oceangoing transit of
13,765 for the year or 37.6 daily and tolls revenue of $299.6 million. For 1981, the
budget predicts a 1.9 percent increase in oceangoing transits or 14,020, with tolls
revenues of $313.9 million.
estimates of North Slope oil movements in the current year projected ship-
4during October and November, increasing
to sOOO brreludaly
touring remainder of the year. The forecast for 1981
continuation of the 500,000 barrels level predicted for 1980, as well as a
moderate rate of growth for other segments of traffic from 1980
T revenues through the first quarter of 1980 are short of budget targets by
nearly $ million. The entire shortfall can be attributed to lower than expected
shipments of Alaska North Slope oil during this period. Other traffic, however, is at
a somewhat higher level than forecast, partially offsetting this shortfall. However,
recently shipments of North Slope oil have begun to rise and, although there is a
potential that it may not reach the levels originally projected, it would be prema-
tur at this time to adjust our budget estimates.
Before leaving the subject of Canal traffic, I would like to mention one significant
trend which is impacting on operations and makes the need for Canal improvement
more compelling-that is the increase in size of ships transiting the Canal. A decade


59-319 0 80 5







ago, only about 12 percent of transits were by vessels having min excess of 80
feet. This past year, vessels of this size accounted for more than 42 percent of all
oceangoing transits. Moreover, the growth in transits of the vessels-those
having beams over 100 feet-has been impressive. While in 1969 such vessels
accounted for about 2 percent of oceangoing transits, today they account for over 15
percent and further increases are expected to occur.
OPERATING RESULTS
Although tolls revenues are running slightly below projected levels, the Commis-
sion has recorded a $600,000 operating margin for the first quarter. Although this is
in line with our annual projection for a breakeven operation for 1980, we will
continue to closely monitor the situation. Our budget estimates of costs and rev-
enues for 1981 indicate that existing toll rates will be adequate to cover all costs of
operations of the Canal as required by law.
Detailed descriptions of the operating and capital programs for the Commission
for fiscal year 1981 are included in the justification booklet previoy furnished to
the Committee.
Mr. Chairman, that concludes my prepared remarks. I shall be pleased to answer
any questions that you or other members of the Committee may have.
Mr. McAuuFm. The treaty has been in effect for over 4 months,
and I believe that for the Panama Canal Commission things have
been moving in a positive direction.
The treaty went into effect smoothly, without any adverse inci-
dents, last October. Men and women of the United States and the
Republic of Panama prepared seriously for the transition, and put
forth their best efforts to insure its success. From the first day of
the treaty a spirit of cooperation has contributed to a successful
continuation of all activities by their new managers. A number of
bilateral agreements or arrangements between the United States
and Panama have been put into effect smoothly, to the benefit of
our organization and our people.
Notable among these are the success of the joint police patrols,
in the canal housing areas, and fire protection services, also a joint
endeavor, as well as employee documentation, and automobile and
driver licensing. These are just a few illustrations.
The joint police patrols have been a particularof
ance to all. However, there are still some issues to be resolved. A
good indication of the new relationships now existing between the
United States and Panama was evidenced on January 9, this year,
the anniversary of the 1964 riots. The anniversary was celebrated
with a march through the former Canal Zone, and with less
than the usual display of anti-Americanism of past years. There
were in fact no incidents on that day.
Two major functions transferred to Panama on October 1
the ports of Balboa and Cristobal, and the Panamae
transfer of facilities and equipment was accompl planned,
and both the ports and the railroad continued normal operations.
Panama has experienced problems of congestion in the operation
of its ports, particularly the Port of Cristobal, due to an increased
volume of container traffic, difficulties associated with the mainte-
nance of materials handling equipment at ti terminals, and some
labor problems. Panama is taking steps to correct the situation.
Major functions transferred to the Department of Defense were
the hospitals, educational services, including the Panama Canal
College, the commissary stores, and the postal service. These func-
tions continued to serve those authorized. However, some problems


&9
%y4w




63


hn among Commission families using these facilities,
ldue to different funding and administrative criteria.
T Army commissary system, for example, has had a particular-
lt time in serving the increased customer demand.
Dthe first 4 months of the treaty, the canal organization
h continued to fulfill its mission of transiting vessels safely and
etly through the waterway. During that period, approximate-
loceangoing vessels transited the canal, a number approxi-
mthe level of the same period of the previous year. There has
b no apparent decrease in traffic because of the toll rate in-
cwas placed in effect on October L The smoothness of
t t tion should not, however, cause us to lose sight of the
ttic, impact of the treaty on the canal organization and its
workfrce.
T Commission's organization is now settling down after the
pel turbulence experienced last year. The morale of the
w force, which was extremely low at the time the treaty took
effect, is now beginning to build. Employee morale has been a
receiving priority attention from management. The task is
alt more difficult as issues impacting on the quality of life

Our authorization request covers two appropriations for the
PCanal Commission in fiscal year 1981, totaling $419.5 mil-
l The principal one is an appropriation of $394.5 million cover-
ing operational and capital requirements of the Commission.
Amount, $23 million is for capital equipment and construc-
t to available until expended.
A nd authorization of $25 million is requested to establish
the Canal Emergency Fund. All funds authorized for ap-
p i ns to the Commission are to come from the Panama
Caa omsinFund.
appropriation required for operating expenses in 1981 is
$371.5 million. The major cost components of this total are $184.4
million for personnel compensation, $78.6 million for treaty pay-
mnts to Panama, $38.5 million for supplies and materials, and
$16.7 million for liberalized retirement benefits.
The appropriation requested for 1981 represents an increase of
$8.2 million over the amount authorized for operations in 1980.
Most of this increase reflects pay raises, and other cost escalations,
o by a decrease of $6.7 million in reimbursable technical sup-
port services to Panama. However, the 1981 program does provide
for a higher level of maintenance in the transit area, additional
pilots, tug crews, and deckhands related to increased transit work-
loads, and an expanded apprentice training program.
The $78.6 million for treaty payments to Panama is comprised of
a $10 million fixed annuity payment, a $10 million payment for
public services that Panama is to perform, and a $58.6 million
payment calculated on the net tons transited.
The Commission's capital program reflects $23 million in budget
authority for 1981, and is dedicated primarily to meet the needs of
the canal in terms of increased traffic capacity and safety and
efficiency in operations. Accordingly, the major portion of the re-
sources requested, $17.9 million, will be applied to the transit oper-
ations function.







Improvements in the waterway itself include deepening and wid-
ening the channel, and modernization of difficult curves in the
waterway. This will permit two-way traffic in now restricted
to one-way movements, and reduce the potential for marine acci
dents through improvements in navigational ty. Also pro-
gramed in this year is construction of a ship tieup station at Pedro
Miguel Locks, which will increase the lockage output and ease
scheduling difficulties affecting ship movements at Pedro M 1.
We have planned the obligation of $7.4 million for improvements
and additions to our floating equipment in 1981. The major pro-
curement is for a replacement tugboat at the cost of $4 million.
Also provided for is the replacement of one dump scow, a large
workboat and a small dredge tender.
A project of major significance in our capacity improvement
efforts is the installation of additional lighting in the locks cham-
ber, and approaches, at a cost of $1.3 million. The added light in
the locks chambers will allow the daylight transits of large-sized
ships to begin earlier, and clear later.
The proposed authorization bill presents the Commission capital
program in four project groupings, transit projects, utilities. proj-
ects, quarters improvement projects, and general support projects.
The total dollar amounts for each project group represents the
limitation on obligations for that group. Within the project group
limitation, reprograming of funds among the individ
may be accomplished with the approval of the 's pr ,
and notification to the authorization committees of the Congress.
The proposed authorization bill would also authorize the Com-
mission to initiate individual projects not included in, the et,
upon providing 30 days' advance notice to the appropriate authori-
zation and appropriations committees. Any such project initiated
would have to be funded within the project group set by
the Congress. The reprograming authorization will provide the
means to accommodate unanticipated cost escalations, and to initi-
ate necessary projects, the need for which was at the
time of the budget submission. I believe that such authority is
important to the conduct of an effective capital program.
The Panama Canal Act of 1979 authorized the estlhment of
the emergency fund. The request for a $25 million authorization
for fiscal year 1981 is based upon a current of
amounts that could be required immediately for tional expend-
itures over those appropriated to defray emergency expenses, or to
maintain continuous efficient and safe operation of te canal Fac-
tors considered in arriving at this amount were the of correct-
ing slides, removal of vessels obstructing the canal, cleanup of a
major oilspill, and the potential for additional costs of increased
canal traffic. In arriving at that figure, it was also presumed that
in the event that $25 million proves insufficient to overcome the
emergency, a request authorizing additional funding would be ex-
peditiously processed.
Our budget for fiscal 1980 is based on a forecast of oceangoing
transits of 13,765 for the year, or 37.6 daily, and tolls revenue of
$299.6 million. For 1981, the budget predicts a 1.9-percent increase
in oceangoing transits, or 14,020 with tolls revenues of $313.9 mil-
lion.




65


Tolls revenues through the first quarter of 1980 are short of
budget targets by nearly $2 million. The entire shortfall can be
attributed to lower than expected shipments of Alaska North Slope
oil during this period. Other traffic, however, is at a somewhat
higher level than forecast, partially offsetting this shortfall. How-
ever, recently shipments of North Slope oil have begun to rise.
Before leaving the subject of canal traffic, I would like to men-
tion one significant trend, which is impacting on operations, and'
makes the need for canal improvement more compelling; that is,
the increase in size of ships transiting the canal. A decade ago only
about 12 percent of transits were by vessels having beams in excess
of 80 feet. This past year, vessels of this size accounted for more
than 42 percent of all oceangoing transits. Moreover, the growth in
transits of the largest vessels, those having beams over 100 feet,
has been impressive. While in 1969, some 10 years ago, such vessels
accounted for about 2 percent of oceangoing transits, today they
account for over 15 percent, and further increases are expected to
occur.
As a matter of fact, earlier this month, we experienced close to
20 percent of our transits, in ships of this larger beam. Although
tolls revenues are running slightly below projected levels, the Coin-
ission has recorded a $600,000 operating margin for the first
quarter. This is in line with our annual projection for a breakeven
operation for 1980. We will continue to monitor the situation close-
ly.
Our budget estimates of costs and revenues for 1981 indicate that
existing toll revenues will be adequate to cover all costs of oper-
ations of the canal as required by law.
Detailed descriptions of the operating and capital programs for
the Comision for fiscal year 1981 are included in the justifica-
tion booklet previously furnished to the committee.
Mr. Chairman, that concludes my prepared remarks. I join with
Mr. Blumenfeld in being pleased to answer any questions that you
or other members of the committee may have.
Thank you.
Mr. HUmBARD. Thank you very much, Mr. McAuliffe.
Again, thank you, Mr. Blumenfeld.
At this point we will insert in the record the justification of
programs and estimates for fiscal year 1981 submitted by the
Panama Canal Commission.
[The information follows:]




66


Panama Canal Commission
1981





JUSTIFICATION OF PROGRAMS AND

ESTIMATES FOR THE

FISCAL YEAR ENDING SEPTEMBER 30, 1981






67


PANAMA CANAL COIMISSION, 1980-1981
Justification of Programs and Estimates for the Fiscal
Year Ending September 30, 1981

Tab. No. Table of Contents Page No.

1. Summary Statement ................................ 1

2. Panama Canal Commission Operating Expenses
Program and financing .......................... 5
Revenue and Expense/Statement of Deposits 7
Summary of Operating Expenses and
variations by activity .................. 8
Detail of accrued cost by activity:
Transit Operations
Canal traffic and tolls ................. 10
Traffic and tolls statistics ............. i1
Maintenance of channels, dams and
spillways ............................. 12
Navigation service and control ............. 12
Locks operation ............................ 13
General repairs, Engineering, and
Maintenance Services .................. 13
Security and Protection Services ........ 14
Industrial Health and Sanitation ........ 14
General Canal Expense ............ 15
Supporting Operations
Supply and Logistical Services ............. 16
Motor Transportation .................... 16
Water Transportation .................... 17
Power System ........................... 18
Communications System ................... 18
Water System ............................ 19
Central Air Conditioning Service ........ 19
Housing ........................... 20
Grounds, Custodial and other services ... 21
Administrative and General Expenses
Executive Direction .................... 21
Operations Direction ................... 22
Financial Managcment ....................... 22
Personnel Administration ................23
General Service ..................... .. 23
Employment Costs ........................... 23
Interest Payments ....................... 24
Other Operating Expenses ............... 24
3. Panama Canal Commission Capital Outlay
Schedule of capital projects .............. 26
Appropriation requirements ................. 28
Capital program justification index ....... 29
Justifications ................................ 30






68


PANAMA CANAL COMMISSION

Summary Statement

Introduction

1. The budget programs for FY 1981 presented herein represent the operating

and capital requirements of the Panama Canal Commission for the operation and

maintenance of the Panama Canal in the second year of operations under the Panama

Canal Treaty of 1977.

2. The Panama Canal Commission is an agency of the United States operating

by authority -f -. uj. ress of the United States with funds appropriated for

those purposes authorized. The Commission has a nine member Board of Directors,

an Administrator and a Deputy Administrator, all of whom are appointed by the

President of the United States. Five members of the Board will be United States

citizens and four members Panamanian citizens. The Administrator is a U. S.

citizen with the Deputy Administrator a Panamanian national. In 1990, the

Administrator will be Panamanian with a U.S. national as Deputy. Five Board

members, of whom at least three are U. S. nationals, constitutes a quorum for

the conduct of business.

Appropriation Requirements

3. The Panama Canal Commission is an appropriated fund agency of the United

States government. As such, the Commission seeks authorization and appropriations

annually for its capital and operating requirements and all revenues and cash

collected is deposited in the U. S. Treasury. For 1981, the Commission requests

a combined appropriation of $394,453,000, of which $371,453,000 is for operating

expenses and $23,000,000 for capital projects and equipment acquisitions. In

addition the Commission is seeking authority for ati appropriation of $25,000,000

to establish the Panama Canal Emergency Fund. The FY 1981 receipts to be deposited

in the U.S. Treasury are estimated at $410.1 million, including revenues of

$406.4 million and other miscellaneous collections for accounts receivables of

predecessor agencies and sale of fixed assets of $3.7 million. The total deposit

is some $2.6 million higher than the amount included in the President's Budget,

reflecting the deposit of $2.6 million of collection of Canal Zone Government

receivables deposited in the Panama Canal Commission Fund. Detail of the

appropriation requirements and the deposits into the U. S. Treasury are included

under Tab. 2. 1










Operating Expenses

4. Total operating costs including Iuprecila-Ln ia 1981 are escimaced ac

$402.1 million. This amount includes payments to Panama totaling $78.6 million,

comprising net tonnage payments of $58.6 million, a fixed annuity of $10.0 million,

and payments for public services of $10.0 million. Inasmuch as the Commission

projects a breakeven situation in FY 1981, there is no provision in the estimates

to pay Panama the contingency payment as provided under paragraph 4(c) of Article

XIII of the Treaty. Other major cost components in the total of $402.1 million

are the reimbursement to the Civil Service Retirement Fund for liberal retirement

benefits provided Commission employees ($16.7 million) and the interest on the

net direct investment of the United States in the Canal ($14.6 million).

Beginning in FY 1980 the Commission included in the tolls rate formula a capital

surcharge factor, which is based on the difference between depreciation and the

amount required for the capital program. Revenues to be deposited in the Treasury

in 1981 are estimated to be $406.4 million. Of this total, $313.9 million derives

from tolls assessed transiting vessels of which $4.2 million relates to the

capital surcharge, and $9224 million revenues from services provided transiting

vessels, Panama, other U. S. Government agencies operating in Panama, and employees

and others who may be eligible for services under the terms of the Treaty.

Capital Outlay

5. Capital projects and equipment obligations projected in 1981 total $23.0

million. Major projects in the 1981 program are:

FY 1981
Appropriation
Requested
(In thousands)

1. Transit projects
Canal Improvements ............................. 6,400
Improvement, replacement, and addition of
floating equipment ........................... 7,394
Replacement and addition of other transit equip-
ment ............................................ 1,359
Improvement, replacement and addition of transit
facilities ................................... 2,723
2. Utilities projects
Improvement, replacement, and addition to
utilities systems ............................ 1,648






70


Capital Outlay(Cont'd)

FY 1981
Appropriation
Request
(In thousands)

3. Quarters improvement projects
Improvement and rehabilitation of employee
quarters ............................................. 800
4. General support projects
Replace and add equipment general support 1,212
Improvements and rehabilitation of Commission
buildings and facilities ................ 944
Miscellaneous general SUpport projects .., 520

Panama Canal Commission Fund

6. The Panama Canal Act of 1979 provides that no funds shall be appropriated

to or for the use of the Commission unless covered by estimated receipt deposits

into the Commission Fund for the budget year, plus the unexpended balance of the

Fund at the beginning of that year. As identified in the tabulation below, the

... .... ng of FY 1981

are estimated at -469,039 and $459,699 thousand, respectively.

1980 1981

Unappropriated balance, start of year .......... 469,039
Collections and offsetting receipts:
Tolls and other deposits ........................ 397,823 410,113
Payment from the Panama Canal Company ........ 71,216

Total available for appropriation .......... 469,039 879,152
Appropriation Panama Canal Commission .......- -394,453
Emergency Fund .................- -25,000

Unappropriated balance end of year ........ 469039 _459,

The above tabulation incorporates the deposit of Canal Zone Government

accounts receivable collections into the Commission Fund and the Commission's

request for an appropriation to establish the Emergency Fund.

Explanation of Authorization Language

7. A section analysis of the authorization language proposed by the Panama

Canal Conmission follows:

Section 2. This section authorizes appropriation of $394,453,000 from the

Panama Canal Conision Fund for use of the Panama Canal Coinuis~ion in FY 1981.

The amount is a combined total for Operating Expenses and Capital Outlay. In

addition, the Comm1ission's proposal includes the following major items:

1. The Cormission proposes a general authorization for FY 1982, in






71


Explanation of Authorization Language(Cont'd)

accordance with the Budget and Impoundment Act of 1974.

2. The Commission is requesting that a method for making changes and

substitutes in capital projects be established within the amounts authorized.

3. Authority is sought to request supplementals for pay increases and

other increases as authorized.

4. The Commission seeks authority to credit the appropriation with

amounts collected for medical bills and other services provided employees and

dependents by other U. S.Government agencies which were paiu for by the Commission.

Section 3. This section is being proposed to provide for an Emergency Fund

in the amount of $25,000,000 in FY 1981.

Section 4. This section proposes an authorization that will allow the

obligation of multi-year renewable contracts each year subject to the availability

of funds.

Section 5. This section provides an authorization to incur obligations

as provided for in appropriation acts in advance of deposit of adequate receipts

in the Panama Canal Corinission Fund.

Explanation of Appropriation Language

8. The appropriation language for FY 1981 provides a total of $394,453,000,

to be derived from the Panama Canal Commission Fund, of which $23,000,000 is to

remain available until expended for capital outlay. The combining of the

appropriation request has been accomplished at the direction of the Office of

Management and Budget and the U. S. Treasury. The language also contains certain

other limitations, such as on the numbers of passenger motor vehicles to be

purchased and the amount of official reception and representation expenses. It is

intended that a separate appropriation be made for the establishment of the

Emergency Fund.






72


IANAJ'4A CANAL 2~1S~
OFERATMIN AND CAFITTAL EXrEYSES
Proezam and Fi-anclng (in thousands of dollar)


E s t -ate


Program by Activi ties:


1981
Estinate


Operating costs:
1. Transit operations ..........................
2. S~ip-orting Operations ............................
3. Administrative and General expense ...............

Total cperating costs .........................
Unfunded adjustments to total operating costs ..........

Total operating ccsts, funded ................
Change in selected resources ........................

Total cperating obligations ..................
Obligations from predecessor agencies ..................

Total obligations .............................

Capital investment, funded:
1. 'ranFit cpciatior. projects .......................
2. General support projects ..............
3. Utilities projects ..... ......................
4. Quarters imTrovetenoTt projects ....................
5. r' -- f ''---a recoveries ...........

Total capital investment, funded ............
Change in selected resources (undelivered orders) ......

Total capital investments .....................
Obligations from predecessor agencies .................
Total capital investments, obligations ........

Total obligations .............................

Financing:

Offsetting collections from:
Federal funds .........................................
Unobligated balance available, start of ycar (capital)..
Unobligated balance available, end of year (capital)

Budget authority (appropriation).....................


L. 9,804


391,183
-27,705

363,478


370,307
63,955

4 34.262


29,285
3, 8"60
2,L65
I ,015
- 1 1, 944

24V,681
._.2,863

21,818

435,125
469,387


-7, 000

1,500

463,887


2"9,570
55,667
96,901

402,138
-32,114

370,024


371,453


371,451


17,876
2,676
1,658
800


26,21C
-3,210

23,000



394,453


-1,500
1,500

394,-53


Distribution of budget au;thjrityr
Operating ex nses ...................................... 427,262
Capital outlay .......................................... 36,625
Panaa Canal C issien ..............................................- 394,453

Relation of obligations to outlays:
Obligations incurfred,utt.................................... &62,387 394,453
Obligated bal-ce, stirt of year .......................... 51,063
Obligated balance, end of year .......................... -52,346

Outlays ................................................. -41 ,324 393,170






73



OPERATING AND CAPITAL EXPNSES
Program and Financing (in thousands of dollars)

1980 198!
Estimate Estimate

littibution of outlays:
operating expenses ......... ...... .. .. 383,643 40,619
Capital outlay ....... ................. 24,681 11,944
Panama Canal Coinmission ...... ....................... 340,607


Selected resources as of September 30 (Operations):
Stores ...................................... 26,656 28,582
Unpaid undelivered orders ...... ........... 12,185 11,713
Liability for repatriation .............................. -7,500 -8,525
Accured annual leave ...........................? _Iq 1

Total .............................................. 2,329 3,758






74


ThE PANAMA CANAL

Revenue and Expense (in thousands of dollars)

1980 1981
Estimate Estimate
Revenues:

Transit operations ........................................ 344,555 354,177
Supporting activities ......................................... 46,191 51,805
Administrative and general ...................................... 468 381
Total ................................................ 391,214 406,363

Less: Capital Surcharge Included in Tolls Collections .... -7,031 -4,225

Total operating revenues ................................. 384,183 402,138
Expenses:

Transit operations ........................................ 241,270 249,570
Supporting activities ..................................... 49,804 55,667
Administrative and general ................................. 93,09 96,901
Total operating expenses ................................. 384183 402138

Operating results .............................................. -0- -0-


STATEMFNT OF DEPOSITS IN U. S. TREASURY

Panama Canal Commission Receipt Deposit
1980 1981
Estimate Estimate
Operating Revenues:
Tolls ................................................... 292,607 309,715
Navigation .............................................. 34,628 36,428
Power ................................................... 24,374 28,458
Water ................................................... 5,639 5,704
Housing ................................................. 5,449 5,845
All other operating revenues ................................... 21,486 15,988
Total operating revenues ................................. 384,183 402,138

Other Oollections:
Capital surcharge collected in tolls ....................... 7,031 4,225
Republic of'7anama accounts receivables .................... 1,057 1,094
Sale of fixed assets ....................................i..... 100 100
All other collections ........................................ 300
Total Panama Canal Commission collections deposited
in U. S. Treasury ...................................... 392671 ...

Panan a Canal Company Ending Cash Balance

79 deposited ........................ 71,216

Collection of Canal Zone Covernment Receivables

Republic of Panama accounts receivables ...................... 2,556 2,556
Other accounts receivables ................................. 2596
5,152 25

Total deposits in U. S. Treasury .............................. 469039 410,113






75


FAN kNA CANAL
SUY nMARY OF OFrATINSJ~



e:
0'


Transit Oparations
Maint-.- of, channels, .dams & spillways'

Navigation service and control ....

Locks operation ...................

General repair, engineering, and
maintenance service .............

Security and protection services

Industrial health and sanitation

General canal ....................

Subtotal ....................

interdivisicnal sales and service

Total Transit operating net
costs ......................

Supporting Operations
S,-pply and Logistical services..,,

Motor Transportation .............

Water Transpotration .............

Power System .....................

Comanications System ............

Water System .....................

Central Air Conditioning .........

Housing .........................

Grounds, custodial, and other
services .......................

Subtotal .....................

Interdivisional sales and services

Total supporting activities
net costs ................


COMiSSION 1980-1931
P"SES AND VARKAT IOnS BY ACTIVITY

1990 1981
stimate estimate
perating operating
xpenses expenses
(In thousands of dollars)

36,852 33,536

54,093 59,395

37,531 41,093


35,606

17,516

2,584

98,604

282,786




241,270


18,981

8,175

14,958

27,426

5,177

5,053

1,411

6,339


9,530

97,050

-47,246


39,788

18,249

2,811

93_, 94Q

293,812




249_570


18,887

8,690

15,322

32,040

5,400

5,461

1,545

6,874


102050

104,269

-8602


increase or
(decrease)
operating
expenses


1,684

5,302

3,562


4,182

733

227



11,026

Z2 726






(94)

515

364

4,614

223

408

134

535


520

7,219

-1,356






76


P.&xA CANAL COY"ISSION. 1980-1981
7 ERAI!NG EXPENSES AND VARIAIIONS BY ACTIVITY

1980 1981 1
ezti t estimate (
rcerating operating 0
expenses e senses e
(in thousands of dollars)


increase or
decrease)
operating
xp enses


Adinistrative and Ccncral Expenses

Executive Direction ...........

Operations Direction ..........

F cial nt..........



General Services ...........

Erplcyrent Costs ...........

Interest ......

Other ...........

Subtotal ..................

Interdivisinoal sales and services

Total Administrative and
Gee-cral Expenses net costs

Total Progrnncd Operating
costs ....................


5,630

3,835

11,561

4,214

6,541

4,164

14,622

L6,840

97,407

-506


,5,305

3,576

10,831

3,8 0

6,300

3,767

iA,846



93,764

-655


9 j09


384,183


325

259

730

324

241

397

(224)

1 591

3,643

149


4P2,138






77


FANAMA CANAL COMMISSION
CA2,AL TRAFFTC-AT D TOLLS

1980 1981
Estimate Estimate
(Dollars in thousands)

Tolls Income:

Ccmmercial traffic:
................. ........ ....... .312,590
Small craft ............ 105 105
Total commercial tolls .............................. 298,393 312,695

U.S. Government traffic:
Ocean-going ............... .............. 1,225 1,225
Small craft ......... .................. ......... .... 20 20
Ttal U.S.G0eemen.t tclls ......... ............. 1,245 1,245
Total tolls .......... .. .... ................ 299,638 313,940

Number of Transits:

Comercial traffic:
Ocean-goin....... ......... ... .... 13,655 13,920
Small craft ................ .. ...... ......... 750 750
Total commercial .................................... 144051

United States Gevernment traffic:
Ocean-going ............... ........ 100 100
Small craft .. -- .00 200
Total US. Government ......... ................... 300

Total revenue transits .............. ..... 1 14,970

Free transits, not included:
Ocean-going ........................................... 10 10
Small craft ........... ............... ............. 50 50
Total free transits ......................... 60 60

Total number of transits .......................... 14,765 15)030)

Other Data:

Average number of ocean-going ccmmercial vessels per day 37.3 38.1

10


59-319 0 80 6






78


FANLMA CANAL COMPANY, 1966-1979
FANA '-4A CANAL COMMISSION, 1980-1981

TRAFFIC AND TOLTS STATISTICS

Fiscal Years Actual 1966 to 1979 Estimated 1980 and 1981


Fiscal Years


1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
19TQ
1977
1978
1979
1980
1981


(Est.)
(Est.)


Number of Transits
Conmmer- U. S.
cial Govern- Total
Revenue ment Revenue
Transits Vessels Transits


12,470
12,982
13,770
13,733
14,234
14,601
14,543
14,563
14,859
14,413
12,902
3,241
12,655
13,469
13,871
14,405
14,670


725
980
1,625
1,495
1,158
626
561
491
358
280
221
54
365
290
426
300
300


13,195
13,962
15,395
15,228
15,392
15,227
15,104
15,054
15,217
14,693
13,123
3,295
13,020
13,759
14,297
14,705
14,970


Total
Tolls
(In thousands of
Dollars)

72,588
82,297
93,154
95,914
100,875
100,567
101,488
113,381
121,320
143,332
134,988
35,465
1641,685
195,735
209,520
299,638
313,940


PCC Net
Tor.nage
(in millions)

83.0
95.1
107.5
110.5
115.6
114.7
116.0-
128.8
137.9
136.4
128.5
33.8
134.0
157.6
168.5
186.4'
195.2


Monthly. Fiscal


Year 1979


October, 1978 1,169
November .... 1,145
December .... 1,173
January, 1979 1,157
February 1,054
March ....... 1,274
April ....... 1,222
May ......... 1,225
June ........ 1,068
July ........ 1,170
August ...... 1,141
September ... 1,073

Total FY 1979 13.871


Monthly, Fiscal Year 1980


October, 1979
November ....
December ....

Total year to
date FY 1980


1,170
1,074
1.134


1,213
1,106
1 -1 62


23,849
22,158
23 3R7


15.0
13.8


3 378 103 3,41 69,394 43.3


NOTE: Transits of and tolls from small vessels under 300 P.C. net tons measurement
are included in above statistics.
11


41
30
30
42
22
30
46
30
38
32
49
36

426


1,210
1,175
1,203
1,199
1,076
1,304
1,268
1,255
1,106
1,202
1,190
1,109

14.297


18,389
17,725
18,299
16,945
15,225
19,485
18,200
17,854
15,581
17,697
17,588
16,532

209.520


14.8
14.2
14.7
13.6
12.3
15.7
14.7
14.3
12.5
14.2
14.1
13.4

168.5






79


TRAiNSIT OPERATIONS
Mainterance of Channels, Dams and Spillways


1980
Estimate
(Dollars in


1981
Estimate
thousands)


Op~ratin5_Expenses:

Suction and dipper drLdging operations .................
Other floating equipment operations ...... .............
Coredrill operations ......... ...................
YeLcoroiogicai an yr~ :l ............
Maintenance repairs and overhaul services ..............
Supervision and general operaciens ......... I ...........


6,143
3,677
1,626
2.242
4,255
2,502


5,974
4,138
1,752

5,214
2,728


other ....... ... .. ................................ 7,090 6,69
Dcpreciation and nonfund expense .. ..................... 9,317 9647
Gross operating expenses .......... ............. 36,852 38,536
Interdivisional sales and services ....... 5,893 6,091
Net operating expenses .... ..................... 30,959 32 445

Revenue: (Sales of Service) ...... ........... 18 20

The basic purpose of this function is to maintain proper navigation depth
in the channel. In additicn, meteorological, hydrographic and seismologic
conditions are observed and studied, This function also includes the operation
and maintenance of a wide range of equipment and facilities such as lights, beacons
buoys and othcr navigation aids, the dams and spillways, and other earth works
and structures adjacent to the waterway,

Navigation Service and Control
1980 1981
Estim'ate Fstim-ate
(Dollars in thousands)
OperatiD7P En es:

Transit and port pilotage ................................... 15,190 16,360
General port operations ................................ 1,439 1,459
Vessel control, admeasurement and dispatch ............. 4,474 4,880
Handling ships' lines -. ................... 10,898 11,949
Tug and launch operations .......................... 18,332 20,895
r, n ,n A 1 -,.f,4 '1 rl. 1) A-


V C,,, It.. -ctc a. -f I "" Z' ,. ,. .. ,
Depreciation and nonfund expense .......................
Gross operating expenses ...........................
Interdivisional sales and services .....................
Net operating expenses ..............................

Revenue:

Hal rbor pilotage .......................................
Handling ships' lines ..................................
Tug and launch services ...............................
Uharfage, moorings, right of basin and misc(I. ... ......
Total revenue ....... .................................


1,126

54,093
101
5-3992


1,667
13,349
19,537
75
34 ,b28


1,082
59,395
109
59, 286



1,861
14,995
19,497
75
36 428


The Navigation Division under Panama Canal Co-issi-n is responsible for the
transiting of vessels through the C nal, dIcking vessels, and providing related
services such as tug and launch service, boarding and adifasuring services,
traffic control, and linehandling services, -he generAIl prohibition against all
co:merial services contained in the new Treaty will eventually eliminate all
commercial launch services and miscellaneous wharfage mooring services provided by
the Panama Canal Company. However, Panama has asked that the Coumission continue
to provide harbor tug services and certain launch services on a reimbursable basis
until they can arrange for alternative services.









TRANSIT OPERATIONS
Navigation Service and Control (Cont'd)

1980 1981
Estimate Estimate

Canal Transits (numbers of vessels):

Over 300 PC net tons:
Commercial ...................................... 13,655 13,920
Fre...................................... 100 10
Free ................................ 0.....0........0... 1 0 10
Small craft ............................................ 1,000 1,000


Locks Operations
1980 1981
Estimate Estimate
(Dollars in thousands)
Operating Expenses:

Lockage operations ..................................... 10,095 11,330
Locks maintenance and repair ........................... 19,509 21,109
Administration, supervision, and general operations .... 3,317 3,642
Accrual for locks overhauls, nonfund ................... 2,727 2,964
Depreciation and other nonfund expense ................. 1,883 2,048
Gross operating expenses ............................. 37,531 41,093
Interdivisional sales and services ..................... 2172 1,033
Net operating expenses ............................... 35,359 40,060

Revenue: ....................... ......................1 1

This activity is resnonsble for -o direct supervision, operation, and
maintenance of the locks and appurtenances, including periodic major overhauls
of the underwater -pvrtions of the locks.


General Repair, Engineering and Maintenance Services

1980 1981
Estimate Estimate
(Dollars in thousands)
Operating Expenses:

General maintenance .................................... 13,036 14,269
Vessel repair services .............................. 12,097 14,619
Electrical services .................................... 4,885 4,912
Engineering services ..................................3,854 4,116
Contract and inspection services ........................ 837 947
General laboratory services ..................... 381 411
Depreciation and other nonfund ........ ...........516 514
Gross operating expenses ............................ '35,*606 39,788
Interdivisional sales and services ..................... 33,349 37,008
Net operating expenses ............................... 2_ 1257 ..2,

Revenue: (Sales of Services) .......................... 1,202 1191

This activity provides the wide range of maintenance and repair work on
structures, floating equipment, and shop and construction equipment necessary
to the safe and efficient operation of the total canal enterprise. Also included
here are those related engineering services such as surveys, preparation of designs,
cost estimates and specifications for work, and the general supervision and
administration of construction and demolition work performed by private contracting
firms.
13










TRANSIT OPERATIONS
%er.era, Repair, Lni-cerln4 anz Ma nar:e Serv e s


Workload Data


1980
EC timate
(Dollars


fer acco-unt of Panama CangalC wi"o-,a'' other

.al services ..................................... ..
! repair servi s .............. .
rical services .....................................
Leering services ...................... I ............
act and inspection services .. ......................

Security and Protection Services


Police protection ..................................
Fire protection .........................................
Camal security ..folce, ........................... .. ..
Industrial security scrviceS ..........................
Dmergency preparedness ...........................
Deprcciatia ................................... I .........
Gross operating expenses ....................

Rev en ............................. .................


$13.9
12 2
4.9
3.6
0.8


1980
Fs t im*te
(Doll ars
9,765
3,667
3,373

106
205
17, 516


1981
Estimate
in thousands)



$14.4

4,9
3=4
0.7


1981
Esriiate
in thousands)
9,854
A,013
3,593

116
230
1_ 29


2, 382


This activity provides industrial security and prctztzicn services; an
agency preparedness program for Canal employees and dependAens; and police and
e protection services in Canal cperatin areas and other areas as specified
er the new treaty and in accord with joint agreements bet-an Panama and the
mission, including the eperstion of detention centers and a pEnitentiary.


Iniusfrial Health and Sanitaticn


Oper Expees:

Industrial health .........
Zoonotic disease cantroi ................................
Sanitation
Depreciation ............................................
Gross operating expenses ............................

RevenDue: . ............ 0..............................


1980
E tite
(Dol irs
1,148
102
1,328
6
2 L3 &Q/


1981
EstLhete
in thousands)
1,239
118
1,48
6
~2 61


8


8


Industrial licalth and Sanitation attiitics include fncticnal nd professional
supervision of industrial first aid station and on-thc-job injuries; the
coordination and review of physical examinatiors of Ccxision em1oyccs; prevention
of occupational disease i-d injuries; and relntzd industrial hclth ervicFso Also
included here are sanitation rc r ns for control of disea C vc ctrs, (ntenance
of sanitation stand rc in Co ,.iion operating and hcu~iir areas, and zI.noiic
disease control and fCo inspection programs,






82


TRANSIT OPERArIONS
General Canal Expense


1980 1981
Estimate Estimate.
(Dollars in thousands)-


Operating Ep enses:


Treaty Derived Costs:
Payments to Panama for public services .................
Fixed annuity payments to Panama .......................
Panama Canal net tons transited payment to Panama ......
Technical assistance to Panama .........................
Relocation of offices and facilities ...................
Retail stores closeout costs ...........................
Additional costs for printing of forms and regulations.
Provision for reproduction of drawings facilities
turned over to Panama ................................
Marine terminals closeout costs ........................
Cost of health services provided by DOD ..................
Board of Local Inspectors ................................
Miraflores Swingbridge maintenance .......................
Special Canal studies, traffic, and capacity studies.....
Central launch repair and marine salvage .................
Accrual for casualty losses and damages to vessels .......
Other miscellaneous Canal expense ........................
Functions formerly provided by Canal Zone Government: ....
Customs liaison unit ........................... .........
Maintenance of public areas ............................
Depreciation and other nonfund expense ...................
Gross operating expenses ...............................
Interdivisional sales and services .......................
Net operating expense ................................ ..
Revenue ..................................................


10,000
10,000
55,920
6,678
1,061
495
95

60
102
3,667
397
83
50
375
6,200
134

414
2,215
658
98,604
1
98,603
6,678


10,000
10,000
58,560

308





3,997
423
91
52
411
6,200
131

460
2,635
672
93,940
1
93,939


This category of expense comprises the annuity and public service payments
to Panama; the cost of health services provided to certain elderly and disabled
former employees and their dependents; a provision for casualty losses and

tation of the Treaty. There is also a provision in 1980 for technical assistance
to Panama, on a reimbursable basis, to aid Panama in assuming the responsibility
for operation of functions transferred.


15


e






83


SUPPORTING OPEPATICNS
Supply ad togititcal Services

1980 1981
Estimate Estimate
(Dollars in thousands)

Revenue:

Sale of goods ........................................... 193 193
Sale of services ........................................ 41 41
Total revenue ........................................... .. .. .

Operating Expenses:

Cost of goods ........................................... 13,856 13,890
Warehouse operations ......................... .......... 1,970 1,915
Procurement operations .................................. 847 833
Scrap and salvage operations ............................ 135 143
Excess property, liquid fuel, and office furniture
operations ............................................ 433 372
Management and general operations ....................... 1,388 1,380
Depreciation and other nonfund .......................... 352 354
Gross operating expenses ............................... 18,981 18,887
Interdivisional sales and services ................... lQ -33 14,061

Operating margin or cost (-) ............................- 714 -4. 52

This activity is comprised of the storehouse operations a-d provides for the
purchasing, warehousing, and issuing of supplies and materials required by Commissic
units.

Workload
1980 1981
Estimate Estimate
Storehouse services:
Receipts (line items) ................................... 32,000 27,000
Issues (line items) ..................................... ..280,000 230,000
Sales (line items) ... ................................... 15,000 15,000
Tons of metal classified ................................ 1,500 1,500

Motor Transportation 1980 1981
Estimate Estimrate
Revenue: (Sales of Services) ........................... 9 9

Operating Expenses:

Motor vehicle operations ................................ 4,379 4,730
Repair shops ............................................. 2,657 2,860
Administrative and general expense ...................... 485 437
Depreciation and other nonfund expense ..................654 663
Gross operating expenses .............................. 8,175 8,690
Interdivisional sales and services ...................... 3 82
Net operating expenses ................................ 62 34
Operating margin or cpst (-) .................................... -53 -25






84


SUPI'ORTING OI'FRATIONS
Motor Transportation (Cont'd)

This activity operates and maintains motor Lransportatioti faciltLes and
repairs construction, material handling, fire fighting, police and grounds
maintenance vehicular equipment of the Commission. In addition, the repair shops
operated on both sides of the Isthmus provide miscellaneous repair services to
other units of the Commission. The major impact of the Treaty on this activity is
.4,, :'- ti :-,c"' A q t" !iscont~ d g vetnv activities and
elimination of repair services to private individuals.

Workload Data
1980 1981
Estimate Estimate
Number of passenger-carrying vehicles (net fleet at year-end) 137 149
Number of trucks, trailers, and other vehicles .......... 630 618
Mileage, all vehicles except trailers (in thousands) .... 8,114 7,862

Water Transportation

1980 1981
Estimate Estimate
(Dollars in thousands)

Revenue: (Sales of Services) ........................... 6,900 7,

Operating Expenses:

Funded costs ........................................ ... 14,890 15,254
Depreciation ...................................................... 68 68z__
Cross operating expenses .................................. 14,958 15,322
Interdivisional sales and services ....................... 8.162 7,
Net operating expenses .................................... _96 7,649
Operating margin or cost (-) ............................ 104 107

The Water Transportation activity operates the SS CRISTOBAL, a vessel of
10,000 gross tons, between New Orlhans, Louisiana, and Cristobal, Panama. It
is planned that 25 round trip voyages will be made annually. The vessel is an
essential adjunct to the operation and maintenance of the Panama Canal. It
provides necessary cargo transportation service between the United States and the
Isthmus for the Panama Canal Commission and its employees, as well as other U. S.
agencies located in Panama.

Workload Data
1980 1981
Estimate Estimate

Tons of cargo shipped (in thousands) .................... 147 137
Number of passengers transported. ............................ 550 550






85


SUPPORTING OPERATIONS
Power System
1980 1981
Estimate Estimate
(Dollars in thousands)

Revenue: (Sales of Services) ........................... 24,374 28,458

Z~n xen ses:

Power generation ........................................ 21,879 26,400
Power transmission and distribution .................-.. 2,626 2,843
Supervision and general operations ...................... 1,529 1,418
Deprccia3tion ............................................ 1, 392 _! 379
Gross operating expenses ........................... 27,426 32,0'0
Interdivisional sales and services ............ ........ 4,716 6 5.347
Net operating expenses ................. ...... 22,710 26 693
)pcrating margin or cost (-) ..................... 664 765

The Power System operates and maintains generating stations, transmission
Lines, substations, and distribution systems to furnish electric power throughout
the Canal area. Power is also purchased to augment the system's generating
zafacity, During periods when there is an adequate supply of water in Gatun and
Madden Lakes, maximum -pssible power is supplied from Commission hydroelectric and
steam sources. Additional load variations up to peak demands are supplied from
;s turbines and purchased pcwer which also substitutes for base lead units
requiring emergency or planned maintenance. During the dry season, Gatun hydro-
alectric generation is curtailed to conserve water for transits and the energy
is surplied from the most economical available source.

Workload Data
1980 1981
Estimate Estimate

Fotal power sold, including distribution to Panama
Canal activities GWH (millions) ............... ... 603 603
'anal Zone peak, nW ..................................... 102 102
eneratirg stations operated:
Hydroelectric ........ ......... 2 2
Gas turbine ...0.0............................ ........ I I
Steam and gas turbine .....................o........ 1 1
substations remote controlled ..... ................ 6 6
4iles of transmission lines ................... .... 117.2 117.2

Communications System
1980 1981
Estimate Estimate
(Dollars in thousands)

Revenue: (Sales of Services) ........................... _I26 1,746



.entral office equipment ................................669 692
telephone systems operations ............................862 953
Electronics operation ................................... 1,761 1,776
microwave system .......................................85 92
Supervision and general ................................. 1,331 1,427
)epreciation and nonfund ................................ 469 460
Gross operating expenses .............................. ..... 5,177 5,400
(nterdivisiornal sales and services ....................... _3417 1,638
Net operating expenses ................................ 1,7 1.762
operatingg margin or cost (-).............................-34 -16






86


SUPPORT1Nu': OPERATIONS
Communications sYysf(Iir Cont'd)

The Cotmmunications Branch provides full scope telecommunications and electronics
services fcr the Panama Canal Commissicn; procurement, installation, and maintenance
of facilities and equipment; and, where appropriate, operation of systems, such as
telephone, microwave, radio paging, data transmission, and other communications
system- throughout the Canal areas. The Commission will continue to provide
communications services under the new Treaty.

Workload Data
1980 1981
Estimate Estimate

Telephone exchanges ..................................... 5 2
Microwave channels ...................................... 580 580
Radio units maintained......................................2450 2,400
Telephone instruments ..................................... 10,700 10,750

Water System
1980 1981
Estimate Estimate
(Dollars in thousands)

Revenue: (Sales of Services) ............. ......... o 639 5,704

Operating E__xpcnses:

Pumping operations ....................................... 1,599 1,724
Filtering operations .................................... 1,709 1,872
Reservoir and uater line maintenance ............... 800 883
Miscellaneous operations and maintenance ................. 314 340
Supervision and general operations ...................... 301 308
Depreciation ............................................. 330 334
Gross operating expenses .............................. 5,053 5,461
Interdivisinal sales and services ...................... 456 486
Net operating expenses ............................ 497
Operating margin or cost (-) ......................................... 1.042 729

The Water System consists of two principal units, one serving the Pacific
side of the Isthmus, including Panama City, and the other serving the Atlantic
side, including the city of Colon. Raw water is pumped to filtration plants
where it is filtered, treated, and then distributed to Canal and military
operating areas and Panama.
1980 1981
Central Air Conditioning Service Estimate Estimate

Revenue: (Sales of Services) ........ ............. 1,251

Operating Expenses:

Operation and maintenance .............................. 1,312 1,442
Depreciation ............................................ 99 103
Cross operating expenses ............................1,411 1,545
Interdivisional sales and services ....................... 297 306
Net operating expenses ................................ 1,239
Operating margin or cost (-) ............................. 137 146






807


SUPPORTING OPERATIONS
Central Air Conditioning Service(Cont'd)

This operation consists of a chilled water pumping and cooling plant in
the Balboa area which chills and distributes water to users by means of insulated
pipes. Two loops of insulated pipes are used, one carrying chilled water to the
buildings in the Ancon area and the second serving the Balboa area. The buildings
served provide the necessary air distribution systems, heat exchange equipment,
and humidity controls. The Commission provides, on a reimbursable basis, the
provision of air conditioning service for connected buildings transferred to
Panama and other governmental agencies.

Workload Data
1980 1981
Estimate Estimate
(Tons of air conditioning)

Connected tons at year-end ................................. 3,850 3,850


housingg
1980 1981
Estimate Estimate
(Dollars in thousands)

Revenue: (Rentals) .................................... 5,449 5,845

Operating Expenses:

Quarters operation .......................................... 1,132 1,220
Quarters maintenance ....................................... 3,514 3,855
Supervision and general operations .................... 858 938
Depreciation and other nonfund expense ...................... 835 861
Gross operating expenses .......................... 6,339 6,874
Interdivisional sales and services ............................ 190 210
Net operating expenses .............................. 61496
Operating margin or cost (-) ............................... -700 -819

The revenue and expenses shown represent the rental income and operation
and maintenance costs associated with providing living quarters in the Canal
operating areas for employees of the Panama Canal Comm.ission, and to certain
other individuals eligible for quarters. Rental rates are established on a
comparability basis. These costs and recoveries pertain to housing units the
use of which has been retained by the Commission for its employees.

Workload Data
1980 1981
Estimate Estimate

Quarters in operation ....................... .......... 3,127 3,127
Family Apartments, occupied ................................ 2,956 2,956
Bachelor Apartments, occupied ........................... 98 98
Bachelor Rooms, occupied ...................................... 20 20






88


SUPPORTING OPERATIONS<;
Grounds, Custodial and Other Sirvici%

1980 1981
Estimate Estimate
(In thousands of dollars)

Revenue: (Sales of Services)

Grounds maintenance ............................................. 439 483
All others ................................................... ...170 185
Total revenue ......................................... .......609 668

Operating Expenses:

Care of grounds ............................................ 3,921 4,135
Garbage and trash disposal .................................... 343 376
Custodial and community services ........................... 2,729 2,913
Agency press and duplicating service ........................ 1,355 1,317
Recreational facilities ........................................ 967 1,095
Depreciation and other nonfund ............................. 215 214
Cross operating expenses ................................. 9,530 10,050
Interdivisional sales and services ......................... 7.,862 8,225
Net operating expenses ................................... 1,668 1,825
Operating margin or cost (-) ................................... -1,059 -1,157



This activity provides for the care of grounds and the disposal of trash and
garbage. Custodial services are provided for the various buildings and offices
of the Commission. Additional services are also provided such as operation,
maintenance and rental of garage stalls; storage and issue of furniture items for
rental to quarters occupants and pickup, delivery and moving van services. Agency
press and duplicating service activity is a Government field printing plant
authorized under regulations of the Joiit Committee on Printing. It provides
press, duplicating, and related services. The costs for the youth activities
program and operation and maintenance of swimming pools and other recreational
facilities, previously a governmental responsibility, are provided for in this
activity.

ADMINISTRATIVE AND GENERAL EXPENSES
Executive Direction
1980 1981
Estimate Estimate
(Dollars in thousands)
Board expenses 79 85
Administrator's office and staff ....... .................... 3,575 3,876
Secretary's office, Washington, D. C ....................... 192 202
Panama Canal Information Office ............................ 802 887
Tour guide, launch, and reception service .................. 230 152
Consultants................................................ 427 428
Total executive direction ............................ 5 305 5 60

This function is comprised of: The Board of Directors, whose members are
paid per diem and travel expenses for meetings and time spent on special services
of the Commission, the Office of the Administrator, with an executive planning
staff and legal office, residence of the Administrator; the Secretary' soffice
in Washington, responsible for liaison with the Congress and Federal Government
departments and agencies; the Panama Canal Information Office, responsible for
public relations activities, press and news releases and the publication of the
Panama Canal Review and a weekly newspaper in English and Spanish; the guide and
reception service which provides tours for visitors to the Canal area; and a pro-
vision for consultants for special studies, Canal improvements, and organizational
studies. Legislation implementing the Panama Canal Treaty of 1977 provides that






89


ADMINISTRATIVE AND GENERAL EXPENSES
Executive Direction (Cont'd)


in ombudsrian office be established, and the expenses therefore are included in
-he Adminisrator's office and staff. The Coordinating Committee expenses are
ilso shown here.

Operations Direction
1980 1981
Estimate Estimate
(Dollars in thousands).

Marine Director's office .................................... 401 432
Engineering and Construction Director's office ......... 920 995
Health and Safety Director's office ................... 443 467
General Service Director's office .............................. 910 975
General and special engineering service ...................... 902 966
Total operations direction .............................. 3..576 3_835

This function comprises the offices of bureau heads responsible for directing
the non-administrative operations of the Commission. Also included are varying
needs for general and special engineering services, such as preliminary designs
and estimates for development of capital programs and studies relating to use and
alteration of existing facilities when functional changes are proposed.


Financial Management
1980 1981
Estimate Estimate
(Dollars in thousands)



Total Financial Management ................................. 10381 561

The Financial Management activity covers the office and staff of the Chief
Financial Officer. Estimates for the office and staff cover the cost of
development of accounting, financial, and rate-making policies; the issuance of
accounting procedures; the maintenance of the general books of account; the
preparation of payrolls and maintenance of records relating thereto; the
preparation of the overall financial statements and reports; establishment of
systems of internal control and conduct of comprehensive internal audits;
audit and settlement of all claims and demands by or against the Commission;
collection, custody, and disbursement of funds; budget programming, administration,
supervision, and coordination; and responsibility for manpower control and cost
control.






90


ADMINISTRATIVE AND GENERAL FEXPNSES
?er7onfil Administration

1980 1981
E3timate Estimate


Total personnel administration ............................. 3.890 4_214

Included herein are costs of administering the personnel functions of the
Panama Canal Commission, training and executive development programs conducted
by the Personnel Bureau, and the operation of an industrial training school for
apprentices and other employees who benefit from advanced technical training.
Also included is administration of the incentive awards program.

General Services

1980 1981
Estimate' Estimate
(Dollars in thousands)

Administrative Services Division .............................. 3,265 3,262
Public services .................................................. 105 122
Commission buildings ....................................... 2,930 3,157
General Services ........................................ 6,300 6,541


Included in this function are general services performed for the Panama Canal
such as records management and forms control; messenger service; the preparation
of various permits, authorizations and other documents, including issuance of
travel and transportation orders for official travel; eperation and maintenance
of office buildings; photographic services; microfilming; certain duplicating work
utilizing office-type duplicators, photocopying machines and related equipment;
limited assistance to employee associations; and participation of the Panama
Canal Information Office in public affairs observances and ceremonies.


Employments Costs 1980 1981
Estimate Estimate
Employees' States travel ............................. 1,522 1,523
Apprentice training program ............................. 1,495 1,826
Employer's contribution to FEGLI ........................ 470 510
Incentive awards payments ............................... 150 150
FICA ................................ ............ ....... 130 155
Total employments costs ............................... 3,767 4,_164

Included in this activity are certain employment costs of the Commission which
are general in nature and not identifiable with other specific activities. The
estimates include provision for employee states travel, certain other statutory
costs, and payments of awards in the incentive awards program. This activity also
covers a long-range training program designed to facilitate local recruitment for
administrative, management, and craft positions. The program is administered and
supervised by the present personnel administration staff.






91


ADY INI STRAT:VE AND ';EYERAPL EXFEYSES
Interest Favments to the United States Treaurv

The interest rate for 1980-81 is to be determined by the Secretary of the
Treasury based upon average market yields in the month preceding the beginning
of the fiscal year. The average interest-bearing investment, the estimated
interest rate, and the interest are shown below:

Average
Interest-bearing Interest
Investment Rate
FY (In millions) % (In thousands)

1980 $209.2 7.096 $14,846
1981 206.1 7.096 14,622


Other pe rat i:zxenses
1980 1981
Fstimate Es tiate
(Dollars in thozusar.ds)

Death and disability (Federal Fmpo3yees Compensation Act) 1,568 1,726
Federal Fnployees Health Benefit Act contribution ....... 5,147 5,395
Transportation of Fmployee's vehicles ................... 872 591
Recruitment and repatriaton .......................... 4443 3,047
Alien cash relief payments to former employees and their
widows ................................................ 1,579 1,586
Severance pay .......................................... 50 50
Annuitant welfare program .............................. 315 335
Joint personnel program ................................. 504 556
Extraordinary repairs to buildings and sites and official
moves ................................................. 636 690
Amortization of the cost for early retirement ........... 16,700 16,700
Panama Social Security payments ......................... 715 610
Excess facility expense .......................... 281 200
Mail directory services and.indiciacco~ts ............... .. 489 500
Community library ....................................... 587 625
Probation and parole costs .............................. 197 176
Judicial system .......................................... 430 423
All other funded costs, net ............................. 563 6i3
Reimbursement to DOD for education and hospital services. 12,388 13,129
Amortization of recoveries of accounts receivable ....... -1,733 -1,733
Repatriation expense variation (nonfund) ................ -1,076 -1,025
Depreciation and other nonfund expense ................. 594 596
Gross operating expenses ................ ............. 45,249 L6,840
Interdivisional sales ar.d services .................. ... 655 506
Other operating expenses, net ......................... 44,594 6,334

Revenue: ......................................... ....... 468 381







92


AI41 NISTRATIVE AND ER 7FL PESES
Other Operating' Exuenses

This activity is charged with certain Leneral expenses not assignable to
other activities. Death and disability payments are shown here, as are the
Commission's share of pre~iium costs for c-ployee health benefits insurance.
Alien cash relief estimates reflect the effect of 'Public Law 91-335 which provides
widows benefits and for periodic cost of living adjustments similar to those
given Civil Service retirees. The annuitant welfare program provides for home
visits by doctors and nurses to aged former employees and their survivors. The
service is provided by DOD doctors and nurses and their costs are reimbursed to
the DOD by the Commission. The Joint Personnel Program, which requires the direct
employment of personnel, includes the functions of a Civilian Personnel Policy
Board and a Central Flploy ment Office, which operates under direction of the
Policy Bloard. Costs of this program are fully recovered from participating
agencies.

The Commission costs for amortization of the expense foi the liberalized
retirement provision of the Treaty implementing legislation are included here.
The provision for social securityayrnts to Panama re-resents pay-ments on
behalf of those eiiployees covered under the Panamanian social security system.
Reimbursement to Dcpartment of Defense rccresents the Co-ission's expense for
hospital and education ser 'ices provided to eligible Comission employees and
dependnts includingg scholarships to the local junior college. Also included
are the cxopenses for postal services, a community library, the judicial system
including probation and parole activities, and the costs for recruitment,
repatriation and transportation of employee vehicles. The amortization of
recovery of receivables represents the first of five annual credits for outstanding
accounts previously written off as uncollectable which are expected to be
recovered from the Republic of Panama.






93


PAIAA CANAL C(7.1MISSION CAPITAL OUTLAY, 1980-1981
SCHEDULE OF CAPITAL PROJECTS
(In thousands of dollars)


Project
To tal


I
Actual
Thru
1979


1980
Estimate


19B1
Estimate


Subsequent
Years


Transit projects

Individual projects
within transit
projects

a. Canal improve-
ments ......
b. Improvements,
replace-
ments and
additions
of floating
equipment..
c. Replacements
and additions
of other
transit
equipment
c. Improvements
and replace-
ments of
transit
facilities

Utilities projects

Individual projects
within utilities
projects

a. Improvements
and replace-
ments of
utility
systems


28",826





59,960o




28,006




29,821


18,024


3. Quarters improvement
roect__s 12,648


15,066 5,000





264562 4,664




14,335 5,172


10,349
15,493


15,493


5,143

883


883


11,099 749


Individual projects
within quarter
improvement
projects .....

Improvement and
rehabilitation
of employee
quarters ......


59-319 0 80 7


17,876


6,400





7,394




1,359




2,723


2,360





21,340




7,140




,11,606


1,648


800


12,648


11,099


800


19,979






4



PAN:AM A '7-NA L OMISSION CAPITAL OUTmAY, 1930-1981


Project
Total


4. Ccneral support
PICojects

Individual projects
within general
support projects

a. Replace and add
equipment-
general
support...

b. Pnprovemnt and
rehabilitation
of Commission
buildings and
facilities .

c. Other miscellan-
eous general
supporting
projects ....
Total Capital Program

Adjustment of Slippage

GRAND TOTAL PANAMA
CANAL COMMISSION ....


25,900


15,513





5,286


Actual
Thru 1980
1979 Estimate


21,517 1,707


13,502






4,197


5 01 3 8i8 763
203,185 114,421 23;318


1981
Estimate


Subsequent
Years


2,676


1,212






944


520
23,000


42,446


203,,8 11',21 21_818






95


PAA A CA AL COMMI4SION CAPITAL PROGRAM

(In thousands of dollars)


Transit Projects ................................................

Utilities Frojects ..............................................

Quarter Improvement Projects .....................................

General Support Projects ........................................

Total Panama Canal Comnission ...............................


1981
Appropriation
Required

17,876

1,648

800

2,76

_23,000


PANAMA CANAL CCMISSION
CAFITAL OUTLAY JUSTIFICATION INDEX


Traasit Projects ......................................................

Utilitlcs Projects ....................................................

Quarter mImprovemcnt Projects ..........................................

General Scpport Projects .......................


PVIGE

30

35

36

37






96


1. Transit Projects (all dollars in thousands)
1 4 u e nt for Zansi I reject Group ........ $!7 376

A. Canal TmpTrov mcnts
Project appropriation requirement ........................... $ 6,400

i. Channel Improvements ($5,000)--This provides for a variety of
capacity and safety related channel improvements needed to safely accommTrodate
the future Canal traffic increase -as well as a pronounced increase in average
ship size. Currently underway are efforts to ease and widen Mamei and Bohio
Curves and to deepen the Canal.

ThFroving Mamei Curve is necessary to provide the capability of two-way
traffic for large ships at an acceptable level of safety. This effort involves
eas~ng he chnrel ficLicn angles at the :id of the curve and widening the
channel to 800 feet.

Easing and widening Bohio Curve will provide a greater degree of safety for
transiting vessels. This curve is one of the most difficult in the Canal to
negotiate, While the project is still in the study stage, a portion of perhaps
all of De Lesseps Iand will be removed with entrance and exists to the curve
flared to permit a wider channel and flatter curve. Present traffic requires
special scheduling to avoid large ships meeting at this curve,

Dce-ing Lhe Canal is a long-range capacity improvement program required to
Let additional lockage water requirements resulting from increasing size and
number of transiting ships. This effort involves digging approximately eight
ils of Gaillard Cut, about 3 miles of Camboa reach and some segments of Gatun
lake to a new navigational bottom of 37' PLD. It should be carried to completion
within the next few cars to minimize scheduling conflicts with transiting vessels,
to permit additional hydropower generation, and to minimize total project cost.

2. Other miscellaneous canal improvements ($1,400) This includes but
is not limited to such canal improvements as canal bank lighting, erosion control,
breakwater improvements, bank stability, and transit assist projects. Funds in
1931 are to be used to initiate construction of a ship tie-up station North of
Pedro Miguel Locks. The station is to consist of a series of berthing structures
parallel to the bank and equipped with bollards and protected by fendEring. Access
for linehandlers is provided by means of launches from the linehandler launch
station. Initially, the station will accommodate two vessels. Additional moorings
for up to five vessels will be added in future years. For FY 1981, work consists
of removing approximately 43,900 cubic yards of material from the east bank in
Paraiso Reach, and constructing six (6) breasting stations and seven (7) mooring
stations with lights at each station.

The tie-up station provides a means of increasing lockage output at Pedro
Miguel Locks by-imaking it possible to moor northbound vessels awaiting clearing
of southbound clearcut transiting vessels. When a southbound clearcut enters
(Cillard Cut, a lane must be made available for it at Pedro Miguel Locks to enter
upon arrival _, no uorth'ound vessel can use that lane during the 75 to 140
nintes that ellipse while the southbound clearcat transits travel through Gaillard
Cut In the opposite lane at Pedro Miguel Lock-, northbound lackages can be made
only as long a there is room for timing up of the locked vessels two on the
(enter approach wall and one in the lock chamber. By providing additional mooring.
space, the tie-up station allows using the lane, which otherwise would remain idle,
for locing up Vorthbounds. The tif-up station will also serve to tie-up northboudd
ve ,l waiting for fog to clear and for temporarily mooring a vessel that may be
di,.,h1td in Caillard Cut.

Project hroLgh FY 1980 FY 1981 Subsequent
Total FY 1979 Estimate Estimate Years
Obl :,,at ions Recurring $15,066 $5,000 $6,400 $2,360
Exp,-ndi tures Recurring 15,064 5,002 6,400 2,360