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Page i Page ii Table of Contents Page iii Page iv Organization and oversight of the Panama Canal Commission Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 Page 17 Page 18 Page 19 Page 20 Page 21 Page 22 Page 23 Page 24 Page 25 Page 26 Page 27 Page 28 Page 29 Page 30 Page 31 Page 32 Page 33 Page 34 Panama Canal authorization and oversight Page 35 Page 36 Page 37 Page 38 Page 39 Page 40 Page 41 Page 42 Page 43 Page 44 Page 45 Page 46 Page 47 Page 48 Page 49 Page 50 Page 51 Page 52 Page 53 Page 54 Page 55 Page 56 Page 57 Page 58 Page 59 Page 60 Page 61 Page 62 Page 63 Page 64 Page 65 Page 66 Page 67 Page 68 Page 69 Page 70 Page 71 Page 72 Page 73 Page 74 Page 75 Page 76 Page 77 Page 78 Page 79 Page 80 Page 81 Page 82 Page 83 Page 84 Page 85 Page 86 Page 87 Page 88 Page 89 Page 90 Page 91 Page 92 Page 93 Page 94 Page 95 Page 96 Page 97 Page 98 Page 99 Page 100 Page 101 Page 102 Page 103 Page 104 Page 105 Page 106 Page 107 Page 108 Page 109 Page 110 Page 111 Page 112 Page 113 Page 114 Page 115 Page 116 Page 117 Page 118 Page 119 Page 120 Page 121 Page 122 Page 123 Page 124 Page 125 Page 126 Page 127 Page 128 Page 129 Page 130 Page 131 Page 132 Page 133 Page 134 Page 135 Page 136 Page 137 Page 138 Page 139 Page 140 Page 141 Page 142 Page 143 Page 144 Page 145 Page 146 Page 147 Page 148 Page 149 Page 150 Page 151 Page 152 Page 153 Page 154 Page 155 Page 156 Page 157 Page 158 Page 159 Page 160 Page 161 Page 162 Page 163 Page 164 Page 165 Page 166 Page 167 Page 168 Page 169 Page 170 Page 171 Page 172 Page 173 Page 174 Page 175 Page 176 Page 177 Page 178 Page 179 Page 180 Page 181 Page 182 Page 183 Page 184 Page 185 Page 186 Page 187 Page 188 Page 189 Page 190 Page 191 Page 192 Page 193 Page 194 Page 195 Page 196 Page 197 Page 198 Page 199 Page 200 Page 201 Page 202 Page 203 Back Cover Page 204 |
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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 $299.6 million. This forecast is strengthened by actual results during the month of October. Despite lower than expected North Slope oil shipments, total traffic and tolls revenue levels are very near our estimates for the period. Actual shipments of North Slope oil averaged approximately 295 thousand barrels during the month, but 15 have been increasing during the last two weeks. We understand Trans-Alaska pipeline system throughput just recently reached the level necessary to sustain Canal shipments at the 400,000 barrel per day level, and increases up to this average are expected during November, with further increases to approximately 500 thousand barrels daily still anticipated by December or early January. Of course, we recognize the volatility of this aspect of our traffic and the potential for wide variation in the timing and/or amount of shipments through the Canal. I would like to mention one last factor that could potentially affect Canal traffic levels and that is the increase in toll rates of approximately 29.3 percent as of October 1. The effect of this toll rate increase on the level of Canal traffic is a function of the cost of using the Canal relative to the cost of users' alternatives. While it is too soon to discern the actual effect of the recent toll rate increase on Canal traffic, our studies indicate there will be no diminution of traffic through the Canal as a result of the increase. Nevertheless, we will continue to monitor the situation. CONCLUSION Mr. Chairman, that concludes my prepared remarks. I shall be pleased to answer questions. Thank you. TREATY: 0 TRASFE 0 vE 2O _,,LLTr.S AND FUNCTIONS PANAMA CANAY. CO V PA5P Y CANAL zEN T 0 0V FN M-IE NT HELTSERVIES CCAOlCONAL SErWICES U. 5 ents] LOCKS" N.ON- COMMERCIAL VESSEL REPAIR. s.i, m I' u'fh .4ry SYS~TMSj ST:OP EIOL$FE$ P :T A;L SER~q ,,S Cu$.,)M AN,, f'O :MM IGflTION P'flr i FIRE PROrECTION Co,'k m,, EI.,. RESSEL OPERATIONS POR~T CP EFATh ONS COMiMER~CIAL VESSEL REP IW ATTACN!,ENT A PA NAI'A CA NA LC 0MIS$SI CN ADMI NIS TATOR AA,1N1'5TRAT R, 3 TAFF t~~~~~ IMUSV,\" LF CE N G I N FLR ("N IES NN L EX1CUTIV S/ REAR LIIE PAN ING, [EN ER At. C 0U 'S F L ,;MiF -1 Ci A NAG EM,[ N T l; !U.iL P IFAL "k rL a H-iALI H AND S AFFTY Iv JAN1.C) PPAnL ANA$IMW PUBt C CRtA 0 L NGN,, ,N@ cCOSrR__ucrT ON !3.tI!A tJ * ELECTRICAL * ENG INIiINC ' MA,,!N TU",,IA IC S!O M',,tT F, " 1, T0i2 Li. MARINE (kUREAU *3OAD OF LOCAL IN3PECTORS 0 TEAN 5V1 OPERATIONS o CAt,,A.L SUPPORT 0- AOK'\S U",NV * C' L R fA L I C 1Ci ,IU P U FIRE ANtD POLICE YTANSPORTATION I N',ID U"' TR ,- AL 5 NUR ITr( * MUSEOUSING * UJZ RARY -, MU SEU'M ,ATfTArRm7N7 R 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 |