1 2 3 4 STAKEHOLDERS EVALUATION GROUP 5 MEETING OF 6 FEBRUARY 14, 2006 7 8 9 MIGHTY EIGHTH AIR FORCE HERITAGE MUSEUM 10 11 12 POOLER, GEORGIA 13 14 15 16 17 18 19 20 21 22 23 24 25 2 1 2 3 4 I N D E X 5 6 OPENING REMARKS AND INTRODUCTIONS ------------- 3 7 8 OPERATING GUIDELINES COMMITTEE REPORT --------- 6 9 By Teri Beard 10 11 PRESENTATION ---------------------------------- 30 12 By Roger Burke 13 14 PRESENTATION ---------------------------------- 92 15 By Bill Bailey 16 17 COMMITTEE REPORTS ----------------------------- 145 18 19 20 CERTIFICATE ----------------------------------- 149 21 22 23 24 25 3 1 OPENING REMARKS AND INTRODUCTIONS 2 (THE REPORTER: I am appearing today on 3 behalf of my employer, Tom Crites & Associates. 4 My office was requested by Georgia Ports 5 authority to provide a court reporter today at 6 9:00 a.m. at this address. 7 Pursuant to the laws of Georgia, as well 8 as at the instructions of my employer, I wish 9 to disclose that, other than accepting to serve 10 as your reporter, we have not entered into any 11 other contractual agreement with any party 12 involved.) 13 MR. DYSART: Good morning. Let's bring 14 the meeting of Stakeholders Evaluation Group to 15 order. I'm Ben Dysart, the SEG facilitator. 16 I welcome y'all to this meeting. 17 It's been two months since we had a 18 meeting, and we look forward to the material 19 that will be presented here today, and the 20 discussions and deliberations of the body. 21 Kathleen, where do we want to start -- 22 start -- right up here. Introduce yourself 23 clearly so the reporter can get your name, and 24 indicate whatever affiliation you care to 25 indicate for the record. 4 1 OPENING REMARKS AND INTRODUCTIONS 2 MR. WRIGHT: Tom Wright, citizen. 3 MR. GRIFFIN: David Griffin, Georgia DOT. 4 MR. EUDALY: Ed Eudaly, Fish and Wildlife 5 Service. 6 MS. GRAINEY: Karen Grainey, Sierra Club. 7 MS. BOWERS: Gail Bowers, League of Women 8 Voters, Savannah Chapter. 9 MS. JENNINGS: Judy Jennings, Georgia 10 Sierra. 11 MR. KEEGAN: Larry Keegan, consultant to 12 the Georgia Ports Authority. 13 MR. SCHALLER: David Schaller with the 14 Georgia Ports Authority. 15 MR. REES: Morgan Rees, consultant for 16 GPA. 17 MS. VAUGHN: Cathy Vaughn, GPA. 18 MS. BEARD: Teri Beard. 19 MR. KYLER: David Kyler, Center for a 20 Sustainable Coast. 21 MS. WENDT: Priscilla Wendt, South 22 Carolina DNR. 23 MR. HALL: Carl Hall, Georgia Wildlife 24 Federation. 25 MR. FLEMING: Joel Fleming, Georgia DNR 5 1 OPENING REMARKS AND INTRODUCTIONS 2 Fisheries 3 MR. GADDIS: Gabe Gaddis, Georgia DNR 4 Fisheries. 5 MR. WYNNE: John Wynne, Georgia DNR, 6 Coastal Resources. 7 MR. GARRETT: Allan Garrett, Savannah 8 District Corps of Engineers. 9 MR. BURKE: Roger Burke, Corps of 10 Engineers, Mobile District. 11 MR. FARMER: Bill Farmer, self. 12 MR. BAILEY: Bill Bailey, Corps of 13 Engineers. 14 MR. DYSART: Thank you. We will also have 15 people who might be joining us a little later. 16 We'll try to remember to get them introduced on 17 the record also. 18 You should have in front of you now the 19 draft agenda for this meeting. And I would ask 20 you if you have additional items you wish to 21 put on the agenda, or if we need to adjust any 22 of the proposed items on there. Teri. 23 MS. BEARD: I'm going to ask that we move 24 the Operating Guidelines Committee report 25 before the presentation about dissolved oxygen 6 1 OPERATING GUIDELINES COMMITTEE REPORT 2 mitigation option, because we wanted to talk a 3 little bit about the SEG final report. We want 4 to make sure we have good participation, if 5 that's suits everybody. 6 MR. DYSART: Okay. So we'll have the 7 Operating Guidelines report, any discussion 8 before the DO oxygen mitigation. 9 MS. BEARD: That's correct. 10 MR. DYSART: Thank you. Without objection 11 we will do that. Okay. The previous meeting 12 transcript has been posted. You've had the 13 opportunity to review that. 14 Are there any corrections or 15 clarifications, that need to be made on the 16 record here, that anyone would like to suggest? 17 Okay. Seeing none we will consider the report, 18 the transcript of the December meeting, as 19 posted, to be acceptable to this body. 20 The item 4A, the scientific briefly, we 21 will now go to the Operating Guidelines 22 Committee, Teri Beard, and turn it over to you. 23 MS. BEARD: Thank you. 24 MS. BEARD: The Operating Guidelines 25 Committee met last week to discuss the looking 7 1 OPERATING GUIDELINES COMMITTEE REPORT 2 at the SEG final report. 3 As I recall, and anyone who was there 4 please feel free to jump in, we came up with 5 something that's between a suggestion and a 6 recommendation. 7 It's not a formal recommendation, but I 8 think that those who were present felt pretty 9 strongly about this plan of action. 10 What we suggest to the SEG is that we look 11 at a final report that's in a format of a 12 letter, and that letter would, specifically, 13 look at three different topics. 14 One is sort a history of the SEG. The 15 second would be to look at the scope of the 16 project, and reach a consensus on the scope of 17 the project; specifically, the scientific 18 studies. 19 And then last but not least, look at 20 consensus on a mitigation plan for options, so 21 the report could have an appendices attached 22 to it, such as any minority dissenting 23 opinions, or additional comments, possibly 24 committee reports, or a committee comment on 25 the report itself. 8 1 OPERATING GUIDELINES COMMITTEE REPORT 2 We feel that our facilitator, Ben 3 Dysart, should be involved in this effort, and 4 that the SEG look at forming some sort of small 5 working group to work on this report. 6 And as always, that membership of that 7 committee would be open to anyone whose 8 interested. 9 As to a timeline, there was a hand-out 10 that was passed around the table looking at the 11 milestones, and unfortunately, Hope can't be 12 here today, but she had looked at this. 13 We thought maybe the first meeting to look 14 at the final report could be done in October. 15 That would give us November, December and 16 January to complete the report. 17 So I'll throw that on the table. If 18 there's anyone else who was present that would 19 like to add to that -- Larry or Morgan or Judy 20 or Dave or Bill. 21 MR. DYSART: Okay. Thank you. David 22 Kyler, please. 23 MR. KYLER: I was actually physically 24 present, as opposed to some people who phoned 25 in. I'm not sure how much people that phoned 9 1 OPERATING GUIDELINES COMMITTEE REPORT 2 in including Teri were actually connected at 3 the time some of these things were said. 4 I don't fault anybody for not reflecting 5 this in the report, but I tried to bring to the 6 groups' attention, and to this body's attention 7 again, in making these comments, the idea of 8 interjecting, as much as possible, the concept 9 of adaptive management into the report we make 10 and the work we do toward a mitigation plan 11 especially. 12 And it seems to me that some of that is 13 already intuitive to making a mitigation plan, 14 but by making it more consciously a part of how 15 we structure the mitigation plan, and to take 16 into account both, you know, means of tracking 17 individual mitigation efforts, and their 18 interactive effects, and possible impacts that 19 go beyond or different than those expected to 20 be mitigated. 21 I think we ought to approach that as 22 consciously as possible, and as comprehensively 23 as possible, using the concept of an adaptive 24 management approach. 25 MR. DYSART: Could you -- perhaps it would 10 1 OPERATING GUIDELINES COMMITTEE REPORT 2 be useful to some folks here, could you 3 summarize, briefly, what adaptive management 4 is? 5 MR. KYLER: It's one of those things that 6 once you described, you'll say, that's what we 7 do all the time anyway. Well, to some extent, 8 but adaptive management is intended to be used 9 in a management context where there's a great 10 deal of uncertainty. 11 You build in a monitoring assessment to 12 adapt the management approach to achieve the 13 object of the project, as information comes 14 in during the time the project is being 15 managed. 16 So recognizing not everything can be 17 predicted accurately, and you are working in a 18 dynamic context of management that will result 19 in new information, possibly unpredicted 20 circumstances encountered, so forth, unintended 21 consequences, and try to structure an approach 22 to gather the information necessary to reveal 23 those things as early possible to take 24 corrective action as soon as possible to steer 25 the course of endeavor back toward the 11 1 OPERATING GUIDELINES COMMITTEE REPORT 2 objective of the project. 3 MR. DYSART: Any comments or thoughts on 4 that, or additional matters, pursuant to Teri's 5 invitation -- Judy. 6 MS. JENNINGS: Yes. To Teri, but also to 7 Dave, when we talked about this at the -- 8 whatever our last meeting was -- Operating 9 Guidelines, we -- Bill had said that adaptive 10 management would be part of the EIS in terms of 11 mitigation. 12 What I never did hear, whether yes or no, 13 is whether or not there were places where you 14 could plug in concepts that Dave talks about, 15 that would be as broad as Dave outlined just 16 now. 17 MR. KYLER: In other words, beyond 18 mitigation. 19 MS. JENNINGS: So, you know, since I don't 20 have the work in front of me, it's hard for me 21 to know how comprehensive and broad mitigation 22 will be, but is it likely to be as broad as the 23 concept David is describing? 24 MR. BAILEY: Beyond mitigation, I'm not 25 sure how to incorporate that into this project. 12 1 OPERATING GUIDELINES COMMITTEE REPORT 2 In some projects, that is possible. 3 I know in -- years ago up in Norfolk 4 Harbor, I think they deepened two-way traffic. 5 They deepened one lane and not the other lane 6 because, you know, the ships -- they only 7 needed -- I think coal was leaving -- leaving 8 the harbor, so the ships only needed a deep 9 draft on the outgoing lane. 10 I'm not sure beyond mitigation how to do 11 it in this project. I mean, it's -- I'm not 12 sure how that would work. Here the ships need 13 the draft, the whole length of the channel, as 14 well as both sides of the channel coming and 15 going. 16 I guess, David, if you have more -- more 17 concrete ideas on how you see that put in 18 place, maybe that would help me. 19 MR. KYLER: Okay. 20 MR. DYSART: Ed. 21 MR. EUDALY: One way that could be used, 22 it would be difficult, in some respects 23 perhaps, but there's a great deal of 24 uncertainty with regard to the model's 25 predicted impacts or some uncertainty, no 13 1 OPERATING GUIDELINES COMMITTEE REPORT 2 matter how good the model is. 3 So one way you could do that is deepen in 4 a certain increment, monitor that for a number 5 of years, and then you would actually know the 6 impacts of that incremental deepening. 7 That way, you could have some sort of 8 criteria in place to start with where, 9 depending on the outcome of that, the impacts 10 of that increment that you went ahead to the 11 next one, that would be one way it could be 12 used. 13 There would probably be a lot of 14 difficulties, perhaps, being in the Corps 15 planning process, but that's an idea that could 16 be explored. 17 MR. DYSART: Thank you. Morgan. 18 MR. REES: A little different approach to 19 what Ed was saying, what the Corps has done 20 elsewhere, and I'll defer to the Corps guys to 21 check on the specifics, I'm aware of some where 22 you design the mitigation plan and recognize 23 the uncertainties. 24 You have some specific checkpoints, during 25 the implementation of the mitigation plan, 14 1 OPERATING GUIDELINES COMMITTEE REPORT 2 where you make an assessment of whether it's 3 working the way you expect it to or not. 4 And then you gather folks like this 5 together again and say, okay, what do we need 6 to do to modify the mitigation plan? 7 The point is once the mitigation plan is 8 adopted, under the adaptive management concept, 9 that doesn't mean that's the way the mitigation 10 plan is always going to be. 11 It's going to be checked, periodically, to 12 make sure it's working and the appropriate 13 adjustments are made, rather than wait for the, 14 you know, do the project in increments. 15 The notion is do the project and then you 16 adjust the mitigation plan, as you find out 17 whether it's working properly or not. 18 And then you program into the project 19 authorization, the capability to do that. 20 MR. DYSART: Further comments on that, or 21 also the general outline or concept that Teri 22 presented on behalf of the Operating Guidelines 23 Committee going forward? Larry. 24 MR. KEEGAN: I'd like to observe we've 25 really got two things we're talking about here. 15 1 OPERATING GUIDELINES COMMITTEE REPORT 2 I think Teri was talking about the process by 3 which this group would reach final conclusions 4 and publish them. 5 David is talking about content for 6 whatever they publish. Both will need 7 conclusions by this group, both on how to get 8 there and what to include. 9 MR. DYSART: David. 10 MR. KYLER: I don't completely differ with 11 what Larry just said. The reason why I raise 12 adaptive management is the mitigation plan was 13 mentioned as part of the process. 14 I just thought it would help for everyone, 15 at this stage, to begin thinking about what 16 that mitigation plan entails from a broad 17 approach, not just individual items in that 18 plan. 19 That's why I -- I think it's sort of 20 halfway between content and structure, because 21 it's how you're structuring the approach to 22 mitigation. The Corps people may already be 23 fully aware of this. 24 I just think the people around the table, 25 not Corps people, who haven't done a mitigation 16 1 OPERATING GUIDELINES COMMITTEE REPORT 2 plan need to think creatively about adaptive 3 management. 4 In the process, we may introduce new ways 5 to apply that that haven't been done before. 6 On that note, I talked to Morgan a little bit 7 about this before the meeting. Part of that is 8 the use of adaptive management, which is to 9 aggressively market the information derived 10 from the monitoring assessment, and to apply it 11 in all kinds of ways to help the decision 12 process on other projects and on future 13 projects in the Savannah area. 14 Instead of just floating information out 15 there, using it to direct anything that needs 16 to be done on this project, we should make sure 17 it gets where it needs to go in the hands of 18 decision makers to get the most traction and 19 the most attractive use of that information in 20 other processes. 21 MR. DYSART: Bill Bailey. 22 MR. BAILEY: I guess I had a comment on 23 the process part that Teri mentioned. Teri had 24 talked about some different components of this 25 report. 17 1 OPERATING GUIDELINES COMMITTEE REPORT 2 One of them being -- I think one of them 3 being kind of SEG history, and studies, 4 recommended studies. I guess I would recommend 5 that the group complete those sections before 6 the draft -- before you start looking at the 7 draft report, just because once you get in the 8 draft report, you're going to have enough to 9 look at during that time period. 10 I think it would be good to have those 11 other sections kind of already written. You 12 can always go back and modify them a little 13 bit, but the work on those sections would be 14 done. 15 Then you can concentrate on what's in the 16 report, and the consensus on the mitigation 17 plan and all that. 18 MR. DYSART: Reactions to Bill's idea? 19 Judy. 20 MS. JENNINGS: Ben, this SEG work we want 21 to do when we grow up type question has been 22 difficult to deal with all along. 23 The way we broke it up at that meeting was 24 to do history, scope of studies, consensus on 25 mitigation. 18 1 OPERATING GUIDELINES COMMITTEE REPORT 2 And Bill's right, I mean, it's not hard to 3 come up with our history. It's a matter of 4 record, but we could follow Bill's advice, 5 which is basically what we said in the meeting. 6 Do the history first. There's not going 7 to be much disagreement there. It's difficult, 8 I know it's difficult, because there are a lot 9 of different voices and faces and backgrounds 10 that have sat around at the table, but there 11 does have to be a process, you would think, we 12 would be completely unanimous on the scope of 13 the studies. 14 I think we might be but we may not. I 15 think we all need -- there needs to be a 16 process by which we say, we've done everything 17 this group can think of, or we haven't, and 18 this is what I think should still be done. 19 This has to be a process. I don't know 20 how we to get to it for coming up with a 21 consensus on the mitigation plan. 22 It might not be very broad. It may be 23 this group can agree on, you know, we have a 24 nice facility everyday, and that may be all we 25 can agree on. But we might be able to agree on 19 1 OPERATING GUIDELINES COMMITTEE REPORT 2 gee, maybe this is a plan that will work. 3 So I don't know what it is going to be, 4 but I don't think we can continue to talk about 5 it with a schedule that ends in July '07, 6 without agreeing, as a body, on what the 7 process is by which we get to the letter that 8 Teri referenced. 9 It might be a really short one, but it 10 could be a really sweet one, so I don't know, 11 except to say that even though it's a difficult 12 question, it begs an answer. 13 MR. DYSART: Any further thoughts, Teri? 14 MS. BEARD: If no one else is going to say 15 anything, I hate to do this since I made the 16 report, but it would seem to me that it makes 17 sense, at the next SEG, after the SEG meeting 18 is finished with Ben, and those who are 19 interested, we meet and let's start looking at 20 this and see where we go from here. 21 I don't want to throw a recommendation or 22 suggestion on the table, and then we all look 23 at it and we don't come up with any plan of 24 action. 25 MR. DYSART: Will Berson, please. 20 1 OPERATING GUIDELINES COMMITTEE REPORT 2 MR. BERSON: I agree that we should start. 3 The only -- I guess my only comment is I've 4 been in a lot of these meetings, not all, and 5 recreating the history is actually not -- we're 6 actually going to have read some transcripts, 7 which sounds like say daunting idea. 8 So I don't think -- I guess what you are 9 proposing, Teri, is to use a common term, a 10 very common term, a spitball session, after the 11 next meeting. And we'll probably be able to 12 flush out what will be fairly easy to write, 13 and what will take some background and some 14 research. 15 Actually, I think there's a lot. A lot 16 predates me. I don't know if everybody can 17 recall all the various discussions about 18 different studies. I came into it about two 19 years later, so I know that there's a 20 definitely a gap for me. It was so long ago, I 21 can't believe everybody -- some people have 22 amazing memories. 23 But I suspect that's going to be our chief 24 obstacle in doing the history and scope of 25 studies, more than a difference of opinion. I 21 1 OPERATING GUIDELINES COMMITTEE REPORT 2 might be wrong, but that's my sense. 3 MR. DYSART: Teri. 4 MS. BEARD: Since we will probably have an 5 interim meeting -- I'm not definitely sure 6 about that -- we'll probably have an interim 7 meeting between this meeting and the next SEG 8 meeting. 9 Should we start looking at some of that at 10 the interim meeting; the history, the scope of 11 studies, start brainstorming on that, and then 12 discuss that after the next SEG meeting? What 13 do those of you who normally attend the interim 14 meeting think about that? 15 MR. BERSON: Sure. 16 MR. DYSART: What I'm hearing is there's 17 been a discussion of this. There seems to be 18 interest in pursuing some of these things, 19 fleshing out ideas for the process and so 20 forth. 21 Why don't y'all bring the further 22 deliberations, guided by the inputs from this 23 meeting, to the next SEG meeting? 24 MS. BEARD: Would you then been be able to 25 stay in an afternoon session, after the next 22 1 OPERATING GUIDELINES COMMITTEE REPORT 2 SEG meeting so we can start talking about this? 3 MR. DYSART: Sure. 4 MS. BEARD: Because we would like for you 5 to be involved. 6 MR. DYSART: Okay. Thank you. Does that 7 wind up things for now? This is obviously a 8 work in progress. You can say that about 9 everything. I think this has been very 10 constructive. 11 I would say, Will, there are different 12 people around the table, who have fond and 13 vivid memories of different periods as the 14 Stakeholders Evaluation Group has moved 15 forward. 16 I think everybody will be able to 17 contribute to fleshing out different pieces of 18 this. It's been an interesting and colorful 19 and productive process. 20 MS. JENNINGS: Ben. 21 MR. DYSART: Yes, Judy. 22 MS. JENNINGS: Just for clarification, 23 Teri, are you suggesting at the interim between 24 now and the next SEG we work towards pulling 25 together history? 23 1 OPERATING GUIDELINES COMMITTEE REPORT 2 MS. BEARD: History and/or studies, just 3 so we have something to start with at the next 4 working group, you know, SEG final report 5 working group meeting, after the next SEG 6 meeting. 7 MS. JENNINGS: Okay. 8 MR. DYSART: I presume this even could be 9 a more detailed outline or something. 10 We aren't necessarily talking about the draft 11 one of something. 12 MS. BEARD: Right. I think an outline is 13 a good suggestion, these are the high points 14 that we need to discuss or start fleshing out. 15 MR. DYSART: David Schaller, please. 16 MR. SCHALLER: My concept of these various 17 elements, of the SEG final report, might be -- 18 might be ripe with everybody else here, I'm 19 not sure, but I detect that it might not be. 20 The history of the SEG, in my view anyway, 21 is what it is. It's membership, if you will, 22 it's meetings, very brief discussion of its 23 deliberations through the process. 24 I don't think that's the place where we 25 start quoting verbatim, somebody said something 24 1 OPERATING GUIDELINES COMMITTEE REPORT 2 on February 14 of 2003. That, to me, is pretty 3 concise and fairly brief, as is, in my view, 4 the scope of the studies. 5 We have the list of all of the tasks, all 6 of the studies that have been undertaken. That 7 seems to me pretty straightforward as well. 8 And that section of this final letter, by the 9 SEG, would seem to me to be fairly brief and 10 quite straightforward. The issues, if you 11 will, will come in the mitigation consensus. 12 MR. DYSART: Teri. 13 MS. BEARD: I would agree with that. One 14 of the reasons, and I was one of the people 15 that really pushed for the history, is that the 16 people, who are going to read this report up in 17 Washington, hopefully it will go to Washington, 18 may not be familiar with all the shenanigans 19 we've gone through to become the body that we 20 are today. 21 I think it's important that this final 22 report may be sort of a capstone document that 23 someone goes back and reads, what was the SEG 24 and what did they do. 25 I want to make sure the history is a part 25 1 OPERATING GUIDELINES COMMITTEE REPORT 2 of that, so they can understand where we 3 started, and how we got to where we are today, 4 because that maybe instrumental in other 5 processes elsewhere. 6 I would think that it would be fairly 7 straightforward, almost sort of a timeline, but 8 there might be -- it might be a little more 9 involved than that, just from the standpoint 10 of the Operating Guidelines, how did we come to 11 this was the definition of consensus, or we may 12 not decide to flesh it out that much, but there 13 might be a little bit of that involved. I 14 would agree I would think it would be fairly 15 straightforward. 16 MR. DYSART: David. 17 MR. KYLER: At the risk of turning this 18 into the spitball session, it seems to me that 19 another one of many ideas I'm sure for what 20 would be the content of the history would be in 21 the way of highlights, would be the 22 presentations made, and why they were made, and 23 things like the modelling would be rather 24 interesting -- the history of the two sets of 25 models that have been developed. 26 1 OPERATING GUIDELINES COMMITTEE REPORT 2 MR. DYSART: Will. 3 MR. BERSON: I would -- another example I 4 would use might be the debate that I was 5 four-square in about mitigation. When you 6 start looking at mitigation, without saying 7 what was the right or wrong answer, there was 8 sort of a circular idea about how you can 9 discuss mitigation without impacts. 10 Stating that that was an issue, I think, 11 was probably something should be in there. You 12 know how -- where we ended up where we ended up 13 on mitigation would be sort of that narrative 14 of that section. 15 I don't think there's a right or wrong 16 answer. I don't think there's a conclusion 17 necessarily. It's just a recounting of the 18 concerns, and how we sort addressed them, would 19 be my sense of what that should reflect. 20 MR. DYSART: Judy. 21 MS. JENNINGS: Yeah, I agree with David 22 about the history, it can be very concise, and 23 a lot can be communicated with concise 24 articulations, but I think that and the section 25 on scope of studies needs to be compelling 27 1 OPERATING GUIDELINES COMMITTEE REPORT 2 enough to make a reader, not all that familiar 3 with this body, care what the bottom line is, 4 which is consensus on mitigation. 5 I think both of those things just sets the 6 stage for the last bullet, which is consensus 7 on mitigation for any dissenting opinions that 8 go with it. 9 MR. DYSART: Okay. David Schaller. 10 MR. SCHALLER: This might be the spitball 11 session. For me, the way I view it anyway, the 12 history, including the various models and all 13 of that is not subjective. It is what it is. 14 And the same is true with the scope. 15 And so, there is little reason, again in 16 my view and it's only one view, that we ought 17 to not try to wordsmith the history section or 18 the scope section with whatever view we have. 19 There will be an opportunity for those who 20 object, to the citation of history and citation 21 of the scope of work, to make that known in the 22 tail-end. I, for instance, believe that you 23 could include all of the transcripts of all the 24 meetings as a appendix, as a reference, and 25 incorporate them. 28 1 OPERATING GUIDELINES COMMITTEE REPORT 2 For those who really want to go back and 3 know every word spoken, we should make it 4 available, but I don't think it all belongs in 5 the history section. It's pretty 6 straightforward, in my view. 7 MR. DYSART: David Kyler. 8 MR. KYLER: Yeah. At the risk of sounding 9 like I'm being over-simplistic, let's step back 10 and think about what's the purpose of the 11 report document. It seems to me like there's 12 at least descriptors that would summarize the 13 purpose. One is descriptive and one is 14 prescriptive. 15 David, it seems to me the prescriptive is 16 very important, but I think a component of 17 this, I intuitively am assuming, is descriptive 18 as well. 19 To the extent we need something to be 20 descriptive, we need something an outsider 21 could see and get the gist of it. Judy was 22 saying it would highlight the most important 23 underlying issue, some of which would be 24 reflected in the resolution that would will be 25 recommended in the report, as well, and some 29 1 OPERATING GUIDELINES COMMITTEE REPORT 2 may not. Some may remain rhetorical and 3 unresolved. 4 MR. DYSART: Okay. Ed Eudaly, please. 5 MR. EUDALY: I just want to follow-up 6 briefly on what Will said about the impact 7 analysis. I agree with him. 8 I was wondering about that, wondering 9 whether to say anything, but I think -- and 10 maybe it's implied. You've got to look at the 11 impacts before you look at mitigation. And 12 also, you have to look at the alternative 13 plans, and perhaps make a recommendation of 14 which alternative plan is the best plan, in 15 terms of impacts. 16 So, you know, I think all that is 17 together, and it's probably implied, but it 18 does need to be mentioned. 19 MR. DYSART: Thank you. Further comments. 20 It is my view this had been constructive in 21 moving things forward, and I appreciate it. 22 We'll look forward to Teri's bringing an 23 additional report to us next time, and further 24 good discussion. 25 Okay. Then seeing no request to go 30 1 PRESENTATION - ROGER BURKE 2 anywhere else, let's proceed with the DO 3 mitigation options presentation, from the Corps 4 of Engineers. This was requested, as a result 5 of deliberations at the interim agenda 6 committee meeting. 7 MR. BAILEY: Do you mind if we do the 8 economics one first? 9 MR. DYSART: Sure. Okay. So that is -- 10 is that the item under new business that you 11 would like to -- 12 MR. BAILEY: Yes. 13 MR. DYSART: There is an agenda item about 14 discussion of the process for economics 15 analysis of the navigation projects also 16 presented by the Corps, and we will have that 17 first without objection. Seeing no objection, 18 that's fine Bill. Proceed and introduce it how 19 ever you care to. 20 MR. BURKE: My name is Roger Burke. I'm 21 the Assistant Chief of the Planning and 22 Environmental Division with the Mobile/Savannah 23 Planning Center. I think we mentioned two or 24 three SEG meetings ago that the planning 25 functions for the Mobile and Savannah district 31 1 PRESENTATION - ROGER BURKE 2 were being combined. That became effective as 3 of October 1st, 2005. 4 My academic background is economics and 5 statistics, although I really haven't practiced 6 that for quite a few years, but I haven't 7 forgetter everything I learned. I'll try to 8 share some of that with you this morning, as I 9 talk about the way Corps of Engineers does 10 economic evaluations of deep draft navigation 11 projects. 12 Now, the presentation will be general. It 13 won't be tailored, specifically, to Savannah 14 Harbor. Some of those studies are just now 15 being completed, and the results are being 16 shared as they become -- become available. But 17 the hard work is still ahead of us, and knowing 18 the outcomes is still yet in the future. 19 So I'll give you a general overview of how 20 we go about conducting economic evaluations of 21 deep draft navigation projects, in accordance 22 with the guidance that has been provided to us. 23 I'll talk first about the guidance, then a 24 few fundamental concepts of economic analysis, 25 and then a nine step methodology that is 32 1 PRESENTATION - ROGER BURKE 2 prescribed for us in our guidance, some example 3 computations, throw it open to questions and 4 hopefully some answers. 5 Our guidance stems -- for conducting 6 economic analysis of deep draft navigation 7 projects -- stems from three primary sources. 8 The first is the principles and guidelines. 9 These were signed into effect by President 10 Reagan began in 1983, but this is not the first 11 time these kinds of concepts and principles 12 have been laid out. 13 You can trace them back through time to 14 the predecessor principles and guidelines, 15 being principles and standards in the '70s, and 16 before that I forget which -- Senate Document 17 97 or the Green Book, back in the; 40s and 18 '50s. 19 So these are well-founded economic 20 principles and guidelines that are now codified 21 there. 22 They're elaborated on in an engineering 23 regulation 1105-2-100, a document about 3, 400 24 pages in length that gave you more detail on 25 all aspects of planning studies, including the 33 1 PRESENTATION - ROGER BURKE 2 economic -- the economic analysis. 3 And then the Institute for Water Resources 4 has developed a procedures manual, in 1991, 5 that still goes into a little more detail, 6 specifically, on deep draft navigation. So 7 there's plenty of published guidance on the way 8 we go about doing navigation studies. 9 Now, let's talk about a few fundamental 10 concepts of that economic analysis that applies 11 across the board, regardless of whether we're 12 talking about deep draft navigation, or some 13 other project purpose, such as the flood damage 14 reduction or hurricane and storm damage 15 reduction. 16 The first concept is that of national 17 economic development benefits. The principles 18 and guidelines identify four accounts they're 19 called or four areas of accounting for the 20 beneficial and adverse effects of projects that 21 the federal government proposes to construct. 22 One of those is national economic 23 development, and this is an account where you 24 take into account the changes in economic 25 value, of the national output of goods and 34 1 PRESENTATION - ROGER BURKE 2 services. 3 Any de-benefits are expressed in monetary 4 units, and it's based on the fundamental 5 principle of willingness to pay. Now, that 6 means that there's a market for the goods, it 7 can be -- or the service -- and a monetary 8 value can be placed -- placed on it. 9 Now, national economic development 10 benefits are different than -- may be different 11 than regional economic development benefits. 12 And the benefits that we can count and consider 13 in decision making, for whether or not the 14 federal government participates in a project or 15 not, is based on the national economic 16 development benefits. 17 For example, a project may result in 18 increased employment, in Savannah Harbor for 19 example, because of the deepening. But if you 20 were to deepen say Charleston Harbor, you might 21 also have some increased employment. 22 Well, from a national perspective, that's 23 simply a transfer of economic activity. So 24 that is not a benefit from a national 25 perspective that we would take into account. 35 1 PRESENTATION - ROGER BURKE 2 I'll get into, a little bit later, the 3 kinds of benefits we do look at from a national 4 perspective. 5 All right. With regard to national 6 economic development costs, we try to take into 7 account the total cost involved in constructing 8 a project, not just the -- simply the cost of 9 construction, but if there are modifications to 10 landside facilities that are required, in order 11 to accommodate the deeper channel, then those 12 costs need to be factored in to the analysis, 13 either as a cost, or perhaps if it's a facility 14 that the cost of improvements simply gets 15 wrapped into the cost of transfer and handling, 16 and is recouped, over time, through a charge 17 such as that, then that's okay too. 18 That's called the self-liquidating cost 19 concept, but the cost needs to be accounted for 20 one way or the other. 21 One other item that falls under the 22 national economic development cost notion is 23 that of interest during construction. The 24 federal government is going to spend money to 25 deepen say Savannah Harbor, rather than spend 36 1 PRESENTATION - ROGER BURKE 2 that money doing something else. 3 There's an opportunity cost of capital, 4 and we call that interest during construction. 5 It's calculated based on an expenditure pattern 6 that's expected to occur over the construction 7 period. And it's compounded -- the earlier 8 expenditures are compounded, the interest is 9 compounded through the date of when the project 10 is expected to be completed. 11 That is the interest, during construction, 12 that is added to the construction cost to 13 determine your total investment, and then we 14 apply, just like you would in determining what 15 your monthly payment on a home or an automobile 16 is, you apply interest factor, interest and 17 amortization factor to determine what the 18 average annual cost is going to be. Will. 19 MR. BERSON: When you talk about the 20 associated costs, I assume anything that was 21 called for in the mitigation plan would be one 22 of the associated costs. 23 MR. BURKE: Yes. 24 MR. BERSON: How do you factor in -- just 25 the most likely would be an aeration system; 37 1 PRESENTATION - ROGER BURKE 2 how do you factor in ongoing costs, forever, in 3 a sense? 4 MR. BURKE: Well, operation and 5 maintenance costs are a part of the overall 6 analysis, and whether it be operation and 7 maintenance of some component of the mitigation 8 plan, or continuing to operate and maintain the 9 deepened project -- of course, we're looking 10 only at an incremental cost in that case, but 11 that's factored into the analysis so that if 12 they're annual, recurring cost, or some other 13 period recurring cost, they're taken into 14 account and added to the initial construction 15 plus the interest during construction. 16 MR. BERSON: And then just to build on 17 that, we had talked about in the sense of 18 adaptive management, would you then factor in a 19 cost for if the aeration system didn't work, 20 and you had to go to a plan B. I was just 21 wondering how far down you go? 22 MR. BURKE: Of course, adaptive management 23 is a relatively new concept, and I've got to be 24 frank with you and say that the guidance 25 doesn't really address that. 38 1 PRESENTATION - ROGER BURKE 2 We would have to apply the common sense 3 principle, and maybe it would be in the form of 4 a contingency. We do apply risk and 5 uncertainty, and I'm not going to talk about 6 that specifically here. 7 But wherever appropriate, you consider 8 risk and uncertainty. And if, in connection 9 with the mitigation plan, there's some risk and 10 perhaps you want to add a contingency to 11 account for future costs, associated with 12 adapting the management. 13 MR. KYLER: You mentioned amortizing the 14 costs. That's over the period of the project 15 or just during construction? 16 MR. BURKE: Another point that I'll get to 17 in just a moment is called the period of 18 analysis. That is, simply, a period that -- 19 over which we'll call it a planning period or a 20 planning horizon, 50 years, for navigation 21 projects, is specified in our regulations. 22 That would be 50 years from the date when 23 construction is finished. So that's the period 24 over which the costs are amortized and the 25 benefits are considered. Now, you arrive at 39 1 PRESENTATION - ROGER BURKE 2 the beginning of that by trying to estimate the 3 time involved in planning, getting the project 4 authorized, doing the design, and then the 5 construction period. 6 You try to develop what that time frame is 7 going to be and arrive at a first year of when 8 the project would be on line and start accrue 9 benefits. 50 years from there would be your 10 planning period. 11 MR. KYLER: In keeping with your analogy 12 of a home mortgage, what about projects that 13 occur within the time line of the previous 14 project, which often happens with these 15 deepening projects, sort of like a second 16 mortgage, so to speak. You know what I'm 17 saying? 18 MR. BURKE: Not exactly. 19 MR. KYLER: Another deepening project will 20 occur within the 50 years, or has occurred in 21 the past within 50 years of the project. How's 22 the analysis of the subsequent project blended 23 into the cost horizon and time horizon for the 24 previous project? 25 MR. BURKE: Okay. I'm still not sure I'm 40 1 PRESENTATION - ROGER BURKE 2 following you, but let me try and answer, and 3 see if I know what you are talking about. 4 MR. KYLER: Okay. 5 MR. BURKE: Each individual investment 6 decision has to stand on its own. So we're 7 only trying to make a decision of whether to 8 deepen Savannah Harbor and to what extent and, 9 of course, associated mitigation and any other 10 features that it needs to be in order to be 11 implementable. 12 If, in the future, some other improvement 13 is suggested, it too needs to be evaluated on 14 its own, doing an analysis of its benefits and 15 costs, over an appropriate planning horizon 16 associated with it. 17 MR. KYLER: So I'm not sure what I'm 18 saying has any traction or not, but it seems 19 to be some interrelationship between rather 20 than it being a totally independent analysis, 21 but I may be wrong. 22 MR. BURKE: Again, I'm not -- do you have 23 a specific example you want to mention? Maybe 24 I can speak to that. 25 MR. KYLER: I'm just spitballing here. 41 1 PRESENTATION - ROGER BURKE 2 MR. BURKE: Okay. And I'm dodging. 3 MR. BERSON: Are you saying because we 4 have multiple projects that overlap, within a 5 50 year span, that we're still theoretically 6 realizing benefits from two deepening ago, and 7 still incurring costs, and is that sort of 8 scenario -- 9 MR. KYLER: Incurring costs, that's it. 10 MR. BURKE: Okay. All right. Well, from 11 an economic point of view, those are sunk 12 costs. There's not a thing you can do about 13 them. The decision was made, back in the '80s 14 for your last deepening, using the same 15 methodologies to estimate the benefits and 16 costs, and to make a decision as to whether the 17 federal government would participate in 18 deepening to that project depth. 19 So those are sunk costs, and each year, 20 since we're continuing to operate and maintain, 21 presumably that's been a good investment. The 22 economics continue to show it was a viable 23 project. 24 So now, we're looking at another 25 independent decision. And again, the economic 42 1 PRESENTATION - ROGER BURKE 2 analysis is based on a 50 year period. That 3 doesn't mean you have to wait 50 years, in 4 order to have an incremental change of some 5 sort to the project. 6 Each decision you make does have to stand 7 on its own, and take into account where you are 8 physically with regard to channel depth, and 9 width, and length, and any other relevant 10 factor. 11 MS. JENNINGS: If you don't mind, if I 12 could get this straight, I understand the 13 associated costs. You're including that. I 14 understand all the capitals you put into it. 15 I'm not quite sure what you with the O and M -- 16 that would be incremental or not? 17 MR. BURKE: Operation and maintenance 18 costs are an annual or biannual kind of 19 recurring charge. That gets added to the 20 amortized construction costs. 21 MS. JENNINGS: All right. Help me with 22 this associated cost. Do you only look at the 23 incremental O and M? 24 MR. BURKE: Yes. 25 MS. JENNINGS: Do you discount that? 43 1 PRESENTATION - ROGER BURKE 2 MR. BURKE: Discount in the sense of 3 interest? 4 MS. JENNINGS: Right. 5 MR. BURKE: If it's an annual amount, 6 there's no need to discount it. Let me make 7 one other point that I may not be clear in 8 everybody's mind. 9 We are not including inflation, and I'll 10 speak to this under price level here in just a 11 moment. We don't include inflation, except to 12 the construction costs, until the first year or 13 until the project is complete. 14 So inflation is included in trying to come 15 up with your total cash outlay, but from an 16 economic perspective, we're using a constant 17 price level. So inflation is not included in 18 this economic analysis. 19 You do account for inflation when you are 20 trying to estimate how many dollars you 21 actually need to construct the project, but as 22 long as your benefits and costs are on the same 23 price level, the fact that you're leaving 24 inflation out does not impact the fundamental 25 choices you're trying to make through the 44 1 PRESENTATION - ROGER BURKE 2 economic analysis. 3 MS. JENNINGS: You don't apply discount 4 rate to benefits? 5 MR. BURKE: Yes, you do and I'll get to 6 that in a second. But O and M, if it's annual 7 amount, like you say it's incremental, you 8 estimate what it is and there's no need to 9 discount that, because it's the same amount 10 every year. 11 Okay. You could apply interest and 12 discount it and so forth, but it would be the 13 same numbers, so it's nothing -- no reason to 14 do that. 15 Price level, like I say, we use comparable 16 price levels, for both the benefits and the 17 costs, so they're being compared on an equal 18 basis over the period of analysis, which I 19 indicated was 50 -- 50 years. 20 We also don't just look at one 21 alternative. We look at a number of 22 alternative depths, and we'll choose the one 23 that gives you the maximum benefits in excess 24 of costs. 25 That's shown graphically on this next -- 45 1 PRESENTATION - ROGER BURKE 2 next slide. This line here shows all 3 possible investments where the benefits equal 4 the costs. It's a 45 degree -- supposed to be 5 a 45 degree line. 6 This curve is the theoretical one. That 7 shows all possible combinations of benefits and 8 costs for a wide variety of different potential 9 investments. 10 The one with the dash line shows the point 11 where those two curves differ by the greatest 12 amount. 13 And so that shows the point where your 14 benefits exceed the cost by the greatest 15 amount. Remember, both of these are done on an 16 annual equivalent basis. 17 So we call that the -- practically 18 speaking, the way you arrive at that is 19 subtract average annual benefits from your 20 average annual cost. That gives you a number 21 called net benefits. 22 The largest one of those, for all your 23 various alternative plans, is the one we call 24 the NED plan, provided that it's consistent 25 with all environmental laws and so forth. Our 46 1 PRESENTATION - ROGER BURKE 2 excessive principle of net benefits or maximum 3 net benefits. Bill. 4 MR. BAILEY: One other thing from this 5 diagram, you may still have a project, a larger 6 project that is economically justified, but 7 that isn't the one the Corps normally 8 recommends. 9 It doesn't just go to find the 10 biggest project that is justified, which would 11 be out here. It stops at basically the biggest 12 bang for the buck. 13 MR. BURKE: Nor is it necessarily the plan 14 that gives you the largest benefit to cost 15 ratio. There may be a plan somewhat larger 16 than that one that does give you a little bit 17 larger benefits to cost ratio. The one we're 18 looking for gives the maximum benefits in 19 excess of the costs. That's the one federal 20 government would recommend participating in. 21 MR. KYLER: It may be premature, if you 22 are going to cover this later, but you can 23 postpone it. This came up at the discussion 24 in the Operation Guidelines meeting. 25 I think Morgan was saying something, or 47 1 PRESENTATION - ROGER BURKE 2 the speaker was, about what effort is there or 3 any kind of information gathering is there 4 that, after the sunk costs -- a term that gives 5 a sinking feeling -- are incurred, to verify 6 the decision that led to that cost and 7 incurring that cost? In other words, to what 8 extent are these assessments verified after 9 projects are done? 10 MR. BURKE: Sometimes, I think is the best 11 answer I can give you. There's not a standing 12 requirement to go back and look, except each 13 year you do have to do have to budget for 14 operation and maintenance costs. 15 So from that standpoint, Congress is made 16 aware of what's happening at each project that 17 they have invested money -- that the federal 18 government has invested money in. But the same 19 -- there's no analysis to the same level of 20 detail to go back and confirm. 21 MR. SCHALLER: Roger, if I might, isn't 22 one answer to that question that the benefits 23 are -- become self-evident when the Corps of 24 Engineers analyzes a project, estimates the 25 benefits, and in each case those benefits, if 48 1 PRESENTATION - ROGER BURKE 2 you will, tonnage one measurement, jobs 3 another measurement, are exceeded, in 4 particular, in the case of Savannah, exceeded 5 significantly. I think that's evidence that it 6 was a good investment. 7 MR. BURKE: One can look at those kinds of 8 parameters, and do some comparisons, and draw 9 some conclusions and inferences. Going the 10 next step to complete the analysis, by 11 computing transportation savings and benefits, 12 no, but certainly those kinds of measures, and 13 yardsticks to compare with the kinds of 14 information that the basic decision was made 15 upon in the first place, you can do that, sure. 16 Okay. All right. Back to the idea of 17 categories of benefits that we can claim as 18 national economic development benefits. 19 The first category has to do with more 20 efficient use of ships, for example, there 21 may be some ships entering the harbor that are 22 not loaded to their maximum capability. 23 If those ships, with a new project, a 24 deeper channel, can now come in more fully 25 loaded, then that's efficiency gain that we can 49 1 PRESENTATION - ROGER BURKE 2 calculate, economists can calculate, and it's 3 accounted for as a benefit, or the use of a 4 larger ship that can now enter the harbor. 5 There's the idea of economies of scale 6 where the larger ships are more economical, in 7 terms of cost per ton of cargo than smaller 8 ships. 9 And of course, the more deeply loaded a 10 ship the more efficient economically it is as 11 well. So those are two categories of or two 12 types of benefits that fit into that first 13 category. 14 The handling characteristics of ships, if 15 they change with a deep project, perhaps they 16 require fewer tugs because of technological 17 innovations. They now have bow thrusters, for 18 example, that make them more maneuverable at 19 slower speeds. 20 There is a change in the requirements to 21 use tugboats, then that can be counted as a 22 reduction in costs. Judy, are you thinking 23 about a question? 24 MS. JENNINGS: This always has been an 25 issue for me, when you look at that, because 50 1 PRESENTATION - ROGER BURKE 2 when you talk about elimination or reduction in 3 transportation costs, I understand the economy 4 of scale, but how do you superimpose that on 5 traditional -- traditional light-loading 6 practices, or traditional -- for instance, just 7 because you can doesn't mean they will. 8 MR. BURKE: Well, you certainly don't want 9 to extrapolate something, or make an assumption 10 about something in the future that's totally 11 inconsistent with practices going on now or 12 historically. 13 MS. JENNINGS: That's what I'm saying, how 14 do you account for what are historical usage -- 15 MR. BURKE: I think I'll get into that 16 when I get to the eight or nine step process 17 here in just a minute. 18 In some cases, if you deepen one harbor 19 you may attract some traffic that used to go 20 out of another harbor, just because it's more 21 economically attractive. That's called a shift 22 in origin. 23 It may be the other way around. If it's 24 an imported product, that formerly went into 25 another port that now comes into the port under 51 1 PRESENTATION - ROGER BURKE 2 study, that can be considered. And there's a 3 category of movement that sometime only move if 4 a project is modified, in some way, and that's 5 called induced traffic. 6 We'll get back to this in a little more 7 detail in just a few minutes. This shows a 8 diagram of a nine step process, and I'll step 9 through it fairly quickly. 10 This is presented in the principles and 11 guidelines, the guidelines part of it. It's 12 also presented in the engineering regulation 13 that I mentioned, and also the Institute for 14 Water Resources Procedures Manual. 15 MS. BEARD: Can I ask a quick question? 16 You mentioned shift of origin would be 17 considered a NED benefit, but if we are looking 18 at nationally and not regionally, why would 19 that make a difference? 20 If you are shifting from Charleston to 21 Savannah, from national perspective, wouldn't 22 that sort of be a wash? 23 MR. BURKE: Some aspects of it might be, 24 but to the extent the total transportation 25 costs from ultimate origin to ultimate 52 1 PRESENTATION - ROGER BURKE 2 destination is reduced, that's a national 3 benefit. 4 We'll get back to that kind of thing, in a 5 minute when we talk about multi-port analysis. 6 Okay. Each -- okay, next slide. I might say 7 these steps, sometimes you have to iterate back 8 to some earlier steps, depending on what you 9 find out in later steps. It's not a discrete 10 step one, step two kind of thing. 11 This is kind of like our planning process. 12 You might have to go back to earlier steps to 13 define information or develop new information. 14 The first thing you want to do is define the 15 economic study area, sometimes called a 16 hinterland, associated with the port. 17 That is the port and the geographical 18 region of origins and destinations of cargoes 19 that move through the port under study. The 20 boundaries are not necessarily fixed, and they 21 may overlap with adjacent ports. 22 It may vary from commodity to commodity. 23 One commodity's hinterland might be relatively 24 small and the other one might be relatively 25 large. 53 1 PRESENTATION - ROGER BURKE 2 They are subject to change over time. So, 3 if you want to collect information, that helps 4 you to find the economic steadier. 5 You're going to collect information 6 regarding the commodities moving through the 7 port. The annual volumes, the types of vessels 8 they're moving on, origins, destinations, trade 9 routes involved, volume of individual 10 movements, how frequently they move, those 11 kinds of basic data for all the cargo. 12 We're going to try to forecast what 13 that is likely to be, in the future, under two 14 conditions. And perhaps they're the same 15 forecast, but we want to see what the future is 16 without a project and with a project. 17 Generally, the cargo forecast themselves 18 would do that on an unconstrained basis 19 initially, and then step that down to a 20 facility specific forecast, which may have some 21 limitations of some sort, either due to land 22 side -- land required to facilitate thru-put of 23 a cargo, inventory storage space, or something 24 of that nature. 25 You collect information regarding the 54 1 PRESENTATION - ROGER BURKE 2 fleet using a port, historically as well as 3 currently, the cost, operating costs of those 4 vessels, all the different kinds of 5 characteristics of those vessels. 6 At the end of the presentation, I have a 7 numerical example that will step through that 8 gives you an illustration of some of these 9 kinds much things. 10 You look at what the fleet is likely to 11 be, both without making any change to the 12 project, and with alternative proposed changes. 13 You put -- you collect your information on 14 vessel operating costs, transfer and handling 15 costs, and costs of transportation on the land 16 side of movements. 17 You try to determine, where appropriate, 18 the total cost of transportation from origin to 19 destination. Sometimes there may be 20 alternatives that reduce the cost of 21 transportation. 22 That doesn't rely on deepening a project, 23 so you need to look at these kinds of practices 24 and their potential for implementation. For 25 example, lightering. There's crude oil, that's 55 1 PRESENTATION - ROGER BURKE 2 being imported to the Port of Pascagoula, 3 that's transported from the Middle East in very 4 large bulk carriers drawing 60 feet of water. 5 Pascagoula only has 38 feet of feet. 6 So there's a fleet of two smaller vessels 7 that make trips to that large vessel moored 8 offshore, and they offload into the smaller 9 ships that can use the navigation channel. So 10 that's the notion of lightering. 11 Topping off would be essentially the 12 reverse of that process, where a larger ship is 13 moored offshore. Smaller ships bring cargo out 14 to it. 15 Perhaps, it is partially loaded and the 16 smaller ships are just topping it off, adding 17 to its cargo carrying capacity. 18 Transhipment facilities are facilities, 19 which could be located near the ocean, for 20 purposes of receiving or discharging cargo that 21 might either necessitate or reduce the need of 22 deepening the channel, or its entire length. 23 Pipelines for liquid cargoes might provide 24 the same kind of capability, and other kinds of 25 alternatives might be suggested to look at ways 56 1 PRESENTATION - ROGER BURKE 2 of reducing transportation costs, without the 3 need for deepening the channel, or for 4 deepening it to the maximum extent. 5 Then we're going to look at -- this step 6 puts together information, from the previous 7 three steps, to identify what the future 8 movement costs are going to be for cargo 9 moving through a port over time. 10 All right. Now, we've talked through the 11 seven steps, and we're now ready to look at 12 number eight, which is determine harbor use 13 with and without the project. 14 Before I want to do that, I want to talk 15 about multi-port analysis for just a moment. 16 This is the point in the process where 17 that fits in. 18 I mentioned earlier that adjacent ports 19 may have overlapping hinterlands or economic 20 study areas and cargo. Not all cargo is 21 captive to any given port. 22 By that I mean if -- if there's crude oil 23 being imported into a port where a refinery is 24 located, like Houston, then you would say that 25 cargo is captive to Houston. 57 1 PRESENTATION - ROGER BURKE 2 It doesn't make any sense to import crude 3 oil to Corpus Christi and truck it or rail it 4 up to Houston where the refinery is. That is 5 an example of captive traffic. Some traffic, 6 if you have an over lapping hinterland, if 7 something is destined, ultimately, to Atlanta 8 say, it may not make a whole lot of difference 9 whether it is imported through Savannah or 10 Charleston. 11 Again, that is depending on how highway 12 speeds and conditions and traffic densities or 13 rail -- rail availability, those kinds of 14 things, it may not make any difference. There 15 are overlapping hinterlands. 16 The multi-port analysis also takes into 17 account the effect, which the port under study 18 if it is deepened, what effect will that have 19 on other adjacent ports. 20 It also looks at whether or not adjacent 21 ports have authorized federal projects already 22 on the books. If there's already a project 23 cooperation agreement, that's been executed for 24 an adjacent port, then you have to take into 25 account what depth that port is going to be, as 58 1 PRESENTATION - ROGER BURKE 2 a result of that construction project, and 3 whether or not it impacts the port you are 4 investigating. 5 So having done a multi-port analysis we 6 determine -- put all the information, we've 7 collected and developed so far, together to 8 determine what is the future use of the harbor 9 under study, both without a project and with 10 alternative projects. 11 And then finally we calculate national 12 economic benefits, and categorize them into 13 these three categories that we talked about 14 earlier. 15 Now, let's just step through an example. 16 I'm not sure how large -- maybe you can see 17 that. What we're showing here is an example of 18 coal being imported into Tampa, Florida. The 19 annual amount is four and a half million tons 20 from South America to Tampa, and the port in 21 Columbia where it is exported from is 50 feet 22 deep, and Tampa currently is 38 feet in this 23 example. 24 You have got the distance from Columbia to 25 Tampa in nautical miles, 480, and there's no 59 1 PRESENTATION - ROGER BURKE 2 significant tides at either place. That 3 describes the cargo kinds of data. 4 Now, this slide shows some of the vessel 5 kind of data, the size of the ship being used, 6 and in this particular trade is a 74,390 dead 7 weight ton vessel, when measured in short tons. 8 And the cargo to dead weight coefficient, 9 in other words, of that dead weight tonnage 10 what portion, how do you estimate the cargo it 11 will carry. 12 It will carry 91.8% of that 74,000 dead 13 weight tons. That would be its cargo carrying 14 capacity. It's got its length, its breadth, 15 maximum loaded draft is 43 1/2 feet, and it 16 requires a three foot under keel clearance to 17 navigate through a closed channel. 18 Also, on the last two lines, you've got 19 operating costs, both when it is underway at 20 sea, as well as when it is in port, being 21 somewhat less when it is not underway. 22 Putting that information together into a 23 -- to determine the transportation costs, on 24 the existing 38 foot channel there in Tampa, 25 this goes through the calculations, putting 60 1 PRESENTATION - ROGER BURKE 2 those numbers together, and shows to move four 3 and a half million tons requires 35 trips of 4 that vessel, and applying the costs to that, 5 taking the distance and average speed, compute 6 time at sea, take the loading unloading rates 7 times the tonnage being discharged gives you 8 the time in port. 9 Putting all that together, you find that 10 the total costs for four and a half million 11 tons a little over $13,000,000 per year. 12 That's just one point in time. If that four 13 and a half million tons is constant, through 14 the period of analysis, then that's your 15 average annual tonnage, and the 13 million 16 would be your average annual benefit. 17 If that four and a half million tends to 18 increase over time, for some reason, you would 19 do this calculation for several future periods 20 in time, and covert that to an average annual 21 equivalent benefit, using the discounting and 22 amortization methods we talked about earlier. 23 Looking at one alternative depth of a 48 24 foot deep channel, deepening that one by 10 25 feet, and the same four and a half million tons 61 1 PRESENTATION - ROGER BURKE 2 going through the same calculation shows a 3 total delivered cost, transportation cost, of 4 10.3 million tons, and the difference between 5 those two of 2.7 million is the benefit. 6 Again, if you do this kind of thing for 7 estimated future tonnage, you then have this 8 kind of a number for each of those years. 9 You discount it, amortize it, and get an 10 average. 11 MR. BERSON: Two points. I'm sorry, but I 12 just can't let this go by. That 2,733,000 is 13 counted as benefit to the American economy? 14 MR. BURKE: Yes. 15 MR. BERSON: Okay. That's where I have 16 problem. The travel costs could be -- could go 17 to the shipping line. It could go to their 18 shareholders. 19 It could go to any number of things that 20 have nothing to do with the American economy. 21 That's a particular bugaboo I have about this 22 process. 23 I've said too many times actually. The 24 other point is for the Savannah Harbor 25 deepening, we're assuming that cargo -- that 62 1 PRESENTATION - ROGER BURKE 2 containers are going to stay constant, with and 3 without project, right? 4 MR. SCHALLER: Say that again. 5 MR. BURKE: I don't know if we concluded 6 that or not. 7 MR. BERSON: In the Economics Working 8 Group, we've said that with and without 9 project, container traffic is going to stay the 10 same. 11 MS. JENNINGS. That's an assumption. 12 MR. BERSON: The assumption that the 13 Economics Working Group has said time and time 14 again, with and without project, container 15 traffic is supposed to stay the same. 16 MR. KYLER: Let me add to that. My 17 recollection is the same. I think the -- it is 18 rather a shocking revelation to me, and as I 19 recall the discussion, the whole merits of the 20 project hinge on the reduced per unit cost of 21 shipping being the benefit, not any increase in 22 shipping. 23 MR. BERSON: Thru-put, as it were. 24 MS. JENNINGS: Let me -- that is an 25 assumption, and everytime we do this we say 63 1 PRESENTATION - ROGER BURKE 2 okay, we do assume that. 3 Obviously, the voices you're hearing are a 4 little stunned we assume that. We're 5 constantly told that is an assumption. 6 MR. DYSART: Morgan, did you have a 7 comment? 8 MR. REES: Well, there are a couple of 9 different notions, I think I'm hearing in the 10 discussion. There is a projected growth rate 11 of trade through the project life. 12 So, when you say there is no difference in 13 the with and without project condition, well, 14 you need to keep in mind when you are thinking 15 about that that there is a growth in trade 16 throughout the project life. And that's 17 projected -- I'm not even sure I personally 18 know what is at this point. 19 MR. BURKE: I haven't looked at that 20 either. I think you're right. There is a 21 growth. 22 MR. REES: I don't know that the 23 contractor has furnished the report yet that 24 shows what this will be. I would be shocked 25 too if there was no projected growth in trade. 64 1 PRESENTATION - ROGER BURKE 2 MR. KYLER: I wasn't saying that. 3 MR. REES: Then the next part of that 4 question is, okay, there is a certain projected 5 growth in trade, is that projected growth going 6 to be different for different channel depths of 7 the incremental analysis? 8 In other words, the existing channel is 42 9 feet. What's the projected growth trade 10 attributable to a 42 foot channel; what's the 11 projected growth in a 44 foot channel, and so 12 forth. Okay. We're all clear on that. In the 13 feasibility report that GPA did, and the Corps 14 signed off on and it was authorized, there was 15 no change in the projected growth rates at the 16 different channel depths. 17 All right. There are lots of economic 18 reasons for that, but they get -- well, they 19 get pretty complicated to try to differentiate 20 how you might say, you would get a different 21 growth rate for 44 feet versus a growth rate 22 for 46 feet. 23 When you try to think about that problem, 24 and how you might differentiate, it gets 25 extremely, extremely complicated. 65 1 PRESENTATION - ROGER BURKE 2 And so there is a simplifying assumption 3 made, unless you have some evidence of why that 4 would not be the case, that's the assumption 5 you make. 6 I don't know whether the contractor, in 7 this case, has made that same assumption. 8 That's what we did in the feasible report. 9 MR. BURKE: I don't think we're to that 10 point yet. I think the contractor only made 11 his forecast, and is developing the benefits 12 model. We haven't begun to run that model yet. 13 That's what's going to -- if there is any 14 difference -- show that. 15 There is just one forecast of what the 16 trade in and out of Savannah is expected to be 17 in the future. And it's the same regardless of 18 your -- whether it's with or without the 19 project. 20 Now, there may be as a result of the 21 multi-port analysis or some other feature, as 22 we do get into the details of the analysis, 23 that might make some distinction, or place some 24 constraints on growth, at a particular channel 25 depth. 66 1 PRESENTATION - ROGER BURKE 2 I can't say there will be, but that's 3 where it will come in. When you look at, for 4 example, if container traffic growth was 5 expected to be so large, and Savannah's share 6 of it were expected to be so large that it just 7 cannot be handled through the landside 8 facilities, even with all the improvements that 9 might be expected to be made, and thru-put and 10 so forth, maybe the rail connections are a 11 constraint to it, highway connections are a 12 constraint to it, I don't know, just 13 generalizing here, that would be where some 14 distinction might come in. 15 MR. DYSART: David Kyler. 16 MR. KYLER: What Morgan said is what I was 17 trying to say myself, and evidently not doing 18 it very well. We know it is growing. 19 Some of us were a bit surprised the 20 assumption about growth would not alter with 21 channel depth, and to the extent the 22 projections overall are accurate, that's to me 23 an appropriate, conservative assumption, 24 because you're not trying to associate claims 25 on trade growth linked to the project depth. 67 1 PRESENTATION - ROGER BURKE 2 But here's a little bit of devil's 3 advocate spin on top of what Will already 4 interjected here. It maybe argued, to be a 5 little bit philosophical here, come on, we're 6 talking about a federal project and federal 7 policies that relate to trade. 8 It's been my kind of stickler issue, why 9 is that a national economic benefit to reduce 10 the cost of incoming trade, when we have such 11 a huge trade deficit. 12 Allegedly, you're trying to promote going 13 against that trade deficit to improve our 14 standing relative to the cost of things coming 15 in. So reducing the costs for things coming in 16 with port projects, aren't we just propagating 17 trade deficit we're already suffering. 18 And another example of that, a very 19 industry-specific example is energy 20 independence. If we are reducing the cost of 21 imported energy sources, with these trade 22 projects, aren't we going against national 23 policy to -- and economic forces -- inducing 24 such policy to achieve energy independence? 25 MR. BURKE: Well, the channel serves both 68 1 PRESENTATION - ROGER BURKE 2 imports and exports. 3 MR. KYLER: Yeah, until the trade deficit 4 shifts the other way, that benefit is not 5 obvious to me -- one that nation incurs. 6 MR. BURKE: That is a policy question that 7 is not taken into the account in the economic 8 decision. I mean, it can be taken into account 9 in the overall decision making, but it's not 10 reflected in the economics. I don't think I 11 answered quite your -- 12 MR. DYSART: Will Berson. 13 MR. BURKE: -- question you had a while 14 ago. I can't quite pull it up. 15 MR. BERSON: I think you're close to the 16 end. 17 MR. BURKE: Yeah. I've got about two 18 more. 19 MR. BERSON: Okay. 20 MR. BURKE: All right. Going through the 21 kinds computations that I showed you for just 22 one commodity movement, and again doing that 23 for the forecast for that particular movement 24 in the future, and for all other movements 25 coming in and out of the harbor, adding them up 69 1 PRESENTATION - ROGER BURKE 2 for alternative channel depths, you might get a 3 table that looks like this. 4 This is -- shows, for alternative channels 5 depths between 45 and 50 feet, the average 6 annual cost and the average annual benefit for 7 each of those channel depths. 8 And then the right most column is the 9 difference between cost and benefits. Remember 10 the curve I showed earlier, trying to determine 11 the point of maximum net -- net benefits. 12 Well, with these numbers, if you 13 multiplied them out, it wouldn't -- probably 14 you could make a curve out of it, but it would 15 probably be kind of a blocky one. 16 The channel depth shows the maximum net 17 benefits is a 49 foot channel, in that case, 18 which shows 3.6 million is the largest net 19 benefit. 20 That would be the one the study would 21 recommend the federal government participate 22 in. If the port wanted a 50 foot channel, we 23 could participate in that. The federal 24 government could participate in that, but the 25 federal contribution would be limited by the 70 1 PRESENTATION - ROGER BURKE 2 cost of the 49 foot channel. 3 We would not share in the total cost of 4 the locally preferred plan. All right. I 5 think that's it my last slide. 6 MR. DYSART: Let me, as facilitator, 7 suggest that we take a break, because I presume 8 it is going to be a decent amount of 9 discussion, and it's about the time that I 10 think a break would be good. Let's take a 10 11 minute break and then go forward with the 12 questions. 13 (Short Break) 14 MR. DYSART: Okay. We'll resume the 15 discussion now. Who has the first question? 16 Will. 17 MR. BERSON: Yes. Mr. Burke, I apologize. 18 My question is sort of a tangent back to 19 discussions we had in Economics Working Group 20 about -- and there's an overlap here -- the 21 feasibility study. 22 What I was asking was that during the 23 feasibility study, the assumption was that with 24 and without project, container traffic would be 25 the same, and an incremental deepening wouldn't 71 1 PRESENTATION - ROGER BURKE 2 have an impact on -- I guess I might have had 3 that wrong all along. 4 It may have been it wouldn't affect the 5 slope of the graph, since trade is generally 6 going up. 7 In actual numbers, there might be a 8 difference. But as a slope, it may not have 9 changed. 10 During the break, Larry and Bill Bailey 11 were kind enough to explain it to me. I guess 12 the working assumption is there is no 13 difference until your analysis says there is. 14 I mean, that is kind of -- 15 MR. BURKE: I think that's right. 16 MR. BERSON: -- the assumption is it won't 17 be an increase until you can prove or show that 18 there is. 19 MR. BURKE: There will only be a 20 difference if the analysis shows some 21 constraint somewhere in the transportation 22 system. 23 That would cause -- it wouldn't cause it 24 to go up from the forecast. It would be a 25 constraint on growth. We're not there yet, so 72 1 PRESENTATION - ROGER BURKE 2 we don't know. 3 MR. BERSON: Thank you. 4 MR. BURKE: I remembered the question you 5 asked about the benefits, and to whom they 6 accrue and where they accrue. The best answer 7 I can give you there is going back to the 1936 8 Flood Control Act, which specified, for the 9 first time, how the federal government would 10 participate in flood control projects. 11 But the fundamental principle still 12 applies the across board, and that is we 13 estimate benefits to whom so ever they may 14 accrue. 15 Now, whether they accrue to stockholders 16 or foreign interests, so forth, that's policy 17 level stuff that's above or beyond the scope of 18 economic analysis. 19 It certainly can be taken into account by 20 decision makers, but it's not something that we 21 include in the economic analysis. 22 MR. DYSART: David Kyler. 23 MR. KYLER: Yes. Give everyone the heads 24 up, what's the security cost factor and how's 25 that blended into the analysis? 73 1 PRESENTATION - ROGER BURKE 2 MR. BURKE: One thing I didn't say, in 3 connection with National Economic Development 4 costs, is we try to identify the relevant 5 costs; that is, those costs that would be 6 different under the with project and without 7 project conditions. 8 I think the security costs probably fall 9 into that category. To the extent they're 10 reflected in some of the wharfage and handling 11 costs, I don't know if they are or not, it 12 certainly -- federal costs for security, like 13 the Coast Guard and that sort of thing, is not 14 included. 15 But question is whether or not those would 16 be different with and without a deepening 17 project. If they're not any different, then 18 they're not a relevant cost for making this 19 decision. 20 It's not that they're irrelevant in the 21 general sense, but they're not relevant for 22 this particular purposes. 23 MR. KYLER: Seems to make a lot of sense. 24 One little quirk to that or factor I haven't 25 heard discussed much today; if we're assuming, 74 1 PRESENTATION - ROGER BURKE 2 unless shown otherwise in the analysis, that 3 the growth trend is not altered by the project 4 depth; and we also assume, unless analysis 5 reveals otherwise, no shipments, points of 6 origin or cargo blend or whatever, because it 7 seems to me there would be some different 8 security issues with different cargo types or 9 origins, is that right? 10 MR. BURKE: Not knowing the details yet of 11 what the commodity forecast is, I don't know 12 that there is any new commodity being 13 identified, to start moving with a project, as 14 compared to what presently moves. 15 In the general sense, I suppose if there 16 is some new commodity that's forecasted, and 17 that might be true in some other places where 18 -- I don't know -- crude oil maybe or refined 19 petroleum products start moving with a project, 20 they were not moving before the project was 21 modified, there may be some security costs, 22 that need to be taken into account, in that 23 kind of situation. I don't know if that's 24 going to be the case here. 25 MR. KYLER: Another question -- it's kind 75 1 PRESENTATION - ROGER BURKE 2 of related. I don't know if this has ever been 3 discussed here before, I think it has in 4 informal discussions with other members of the 5 group just as incidental; as you may or may not 6 know, the liquefied natural gas facility, at 7 Elba Island, is being reactivated. And how 8 does that type of trade relate to the analysis 9 of this project? 10 MR. BURKE: Is that something that can 11 move on the existing channel? 12 MR. KYLER: Yeah. 13 MR. BURKE: It would not rely on a deeper 14 channel? 15 MR. KYLER: I thought maybe it had 16 something to do with the accessibility of this 17 channel, because of that activity which has not 18 been the case in the past. 19 MR. BURKE: If it affects the amount of 20 time, the length -- the amount of time 21 available for all other traffic, it has to be 22 taken into account. 23 To the extent that it limits the use of 24 the channel for other traffic, for certain 25 periods of time, so yeah, that would have to be 76 1 PRESENTATION - ROGER BURKE 2 taken into account. 3 Even though it's not a movement that 4 is otherwise evaluated as benefitting from a 5 deepening, but the impact it has on other 6 traffic would certainly have to be taken into 7 account. 8 MS. JENNINGS: I was slow to settle in. I 9 apologize. I wasn't clear on what your topic 10 was with Will earlier, but I never have 11 understood about the cost, because you talked 12 about associated cost, and you talked about 13 during construction, and that's where you deal 14 with opportunity for cost for the money. 15 But I never have understood where you deal 16 with cost of -- financial costs that are borne 17 by other entities, as a result of the project. 18 I mean, for instance, we're being fairly 19 generous in leaving, you know, in letting 20 benefits count that accrue to other entities, 21 maybe not even American entities, but we count 22 them. 23 But we don't -- at least, I can't figure 24 where we deal with costs that are associated 25 with the project -- environmental costs. 77 1 PRESENTATION - ROGER BURKE 2 MR. BURKE: Environmental costs. 3 MS. JENNINGS: For instance, reduction in 4 air quality that might have impacts, reductions 5 in water quality. 6 I'm sure that you get around to dealing 7 with the loss of total freshwater wetlands in 8 mitigation -- I mean, I'm sure you do wetlands. 9 There are impacts you can't directly mitigate, 10 but that will cost somebody. I don't see that 11 anywhere, in your system, where you account for 12 that. 13 MR. BURKE: I think you would count that 14 in the other social effects. Remember back, I 15 didn't point that out too clearly, but the 16 principles and guidelines have four general 17 categories, of beneficial and adverse effects, 18 where they can be accounted for and described. 19 It was national economic development, 20 regional economic development, environmental 21 quality and other social effects. 22 Other social effects would be the generic 23 category where those kinds of things could be 24 discussed and described. I guess the 25 difficulty may be in getting some consensus on 78 1 PRESENTATION - ROGER BURKE 2 what those -- those cost areas are, and then 3 what the impacts are. That's -- generally, the 4 framework allows for that. 5 MS. JENNINGS: We've spent a good deal of 6 time talking about various ways to value 7 natural resources in this group. 8 I mean, there's been a lot of conversation 9 about that over time. And I don't think 10 there's ever -- I've never heard any consensus, 11 gee, that's the right way to do it, from any of 12 that. 13 I mean, you tell me. You put 14 environmental costs in a block. I mean, do you 15 do costing of it, do you cost it out? 16 MR. BURKE: Talking about if you place a 17 value on the environmental resources? 18 MS. JENNINGS: As a cost. 19 MR. BURKE: You could. 20 MS. JENNINGS: Do you, will you? 21 MR. BURKE: There's nothing to prevent us 22 from doing that. I guess, you know, our own 23 policies, when it comes to the way you evaluate 24 ecosystem restoration projects, is a 25 non-monetary issue. 79 1 PRESENTATION - ROGER BURKE 2 Of course, we know we can estimate some 3 costs for doing different kinds of things. 4 There is a cost effectiveness analysis. 5 There's some sort of -- we can, where possible, 6 try to estimate habitat units or some -- some 7 numerical output value of the environment. 8 We don't then try to turn around and 9 convert that to dollars, for the purposes of 10 making economic analysis no. 11 Personally, philosophically, I think 12 that's not a good idea on the one hand, but I 13 understand why some might think it would be 14 a good idea. 15 Our decision-making requirement, when we 16 have projects for -- that produce benefits that 17 can be quantified in dollar terms, and benefits 18 that cannot be quantified in dollar terms is to 19 recommend the plan that produces the maximum 20 net economic development, and national 21 environmental restoration benefits. 22 How do you that? Therein lies the real 23 problem. I don't know that the Corps has 24 completely solved that, although we do have 25 some approaches. 80 1 PRESENTATION - ROGER BURKE 2 MR. DYSART: Morgan. 3 MR. BURKE: I kind of talked around the 4 question. I'm not sure I answered it or not. 5 MR. REES: If I may just give a little 6 more historical background. When we did the 7 feasibility report, the going in assumption on 8 mitigation, and on environmental impacts, was 9 we would fully mitigate all the impacts. 10 So there would be no remaining question 11 about how to develop an economic analysis for 12 any unmitigated environmental impacts. And 13 without getting into whether we achieved that 14 or not, that's ancient history. 15 That was the assumption, that we were 16 planning the project in a way that there would 17 be no question of remaining unmitigated 18 impacts. 19 We hope to do that in this general 20 reevaluation report. To the extent that that's 21 not able to be done, if we ultimately find out 22 that we can't mitigate, for example some air 23 impacts or some whatever, as Roger was saying, 24 there's really no definitive way to put in 25 economic costs on that. 81 1 PRESENTATION - ROGER BURKE 2 There's a lot of debate on how to do that 3 kind of economic analysis. But having said 4 that it is required, and we would describe in 5 the decision documents, whether any impacts are 6 not fully mitigated, to what extent they are 7 not, and then describe the nature of those 8 impacts. 9 And then the decision makers make that 10 decision on whether those unmitigated impacts, 11 if you will, are sufficient to say no, we don't 12 want to do this project or we're not, you know, 13 going do it. 14 Anyway, that has to be all laid out. The 15 public has to see that, comment on it, and then 16 the decision makers get to know what the sense 17 of the public is relative to the degree of any 18 potential unmitigated impacts. 19 Now, we hope it doesn't come to that. We 20 really, really hope we can develop a mitigation 21 plan that says okay, everybody is okay with 22 this. All the impacts have been mitigated. 23 MR. DYSART: David Kyler. 24 MR. KYLER: I think this is sort of -- I 25 don't know where this is going. I think it's 82 1 PRESENTATION - ROGER BURKE 2 a pretty -- a noble objective, Morgan, and but 3 come on. 4 As a nation, from an environmental policy 5 standpoint, we don't even pretend to mitigate 6 everything. 7 We have limits we presume not to exceed, 8 but, I mean, everytime another pollution 9 emitting device is put into play, a car, a 10 ship, whatever, and the larger the emissions 11 presumably the more the adverse effect we 12 incur -- unmitigated adverse effects. 13 The question is how much and where over 14 how long and with what effect. But, one thing 15 that I've raised before that is a bit of sort 16 of a philosophical issue, with this economical 17 analysis, goes back to my studies in resource 18 management policy, back in graduate school, is 19 all these things -- all these project costs and 20 benefits in a stream over time, which we 21 discussed a little bit when we talked about 22 multiple projects overlapping are done with the 23 -- under certain assumptions that seem to be 24 unrealistically constant over time. 25 It seems to me to intuitive that the 83 1 PRESENTATION - ROGER BURKE 2 environmental benefit of a resource may 3 increase over time, as that resource becomes 4 scarcer. 5 Therefore, it would be a naive and 6 possibly adverse deviating outcome of an 7 analysis, if such a simplistic assumption is 8 made. So it just seems -- I don't expect any 9 clear resolution in response to this question I 10 raise. 11 It seems to me it should be -- there's 12 some room for analysis to include the cost, 13 the environmental costs of such projects 14 increasing over time, because of the relative 15 scarcity and value of the resources adversely 16 affected, in the future, increasingly so, in 17 the future, compared with what those values are 18 now. 19 MR. BURKE: Well, I would add one thing to 20 what you are saying maybe, and that is look at 21 what those resources are going to be in the 22 future without the project, not just what they 23 are now, because they may be deteriorating in 24 the absence of any channel -- channel 25 deepening. 84 1 PRESENTATION - ROGER BURKE 2 And consistent with the basis for our 3 economic analysis, you look at the difference 4 between without project future for your 5 resources, and with project future for your 6 resources, trying to account -- mitigate for 7 those differences. 8 MR. KYLER: That's a valid point. It's 9 sort of a double-edge sword, is it not, because 10 all these resources we're encountering are a 11 question of cumulative effects, and interacting 12 and compounding effects on multiple burdens on 13 those resources. 14 So this project may have what some may 15 have described as negligible adverse impacts 16 that are unmitigated. It, in combination with 17 any number of other demands on resources of 18 human activities would have effects, when 19 combined, that are unacceptable. And yet, 20 they're never looked at that way. 21 MR. DYSART: Will Berson and then Judy, 22 please. 23 MR. BERSON: I was never a good economics 24 student. I have to confess that right off the 25 bat. And I -- forgive me, this is painting a 85 1 PRESENTATION - ROGER BURKE 2 darker picture that we don't know is this dark, 3 but if -- if, for example, the mitigation plan 4 envisioned losing X number of freshwater 5 wetlands, tidal freshwater wetlands, as a 6 result of the deepening, I think what David is 7 saying is first of all, if we lose 2X or more, 8 the value of what's left -- suddenly, what you 9 are relying on, based on projections, has 10 changed. 11 The basic unit, meaning you've lost twice 12 what you expected, there is really no -- 13 there's no assessment of what it would cost, if 14 it's possible, to replace that, I guess is what 15 I'm saying. 16 Replacement cost is kind of, it seems to 17 me, integral here. How do you undo the damage 18 you've done, and it may not be possible, and it 19 makes anything else that happens, that effects 20 those wetland resources even more costly as 21 were, or it elevates the cost of what's left, 22 since it is a vanishing resource or a limited 23 resource. 24 I'm really casting about here. I guess 25 what I'm trying to say is what worries me is 86 1 PRESENTATION - ROGER BURKE 2 when we look and evaluate what a resource might 3 be worth, and a mitigation plan that is based 4 on forecasts, all that makes sense if the 5 forecasts work. 6 If the forecast doesn't work, if the 7 modelling is inaccurate, and if we take the 8 time to look, after the fact, to see how much 9 we lost, which is one of the questions that 10 came up today, we may find that we really 11 underestimated the cost, at least to a specific 12 resource dramatically. 13 We may have used a scarce resource in a 14 quantity we never envisioned. We may lose a 15 resource that we never envisioned to an extent, 16 and I don't see a way out of that. I mean, in 17 changing some of these functions, we may not be 18 able to recreate in any case. 19 If you can, it's usually horrendously 20 expensive to do that. I'm sorry -- that was 21 a very ill-defined statement. There was an 22 idea in there, I promise. 23 MR. BURKE: It sounds like Bill has got 24 his work cut out for him. Those are really 25 some issues outside the scope of what I was 87 1 PRESENTATION - ROGER BURKE 2 really talking about today, and not to say 3 they're not valid concerns because they are, 4 but they're big picture kind of things. 5 MR. DYSART: Judy. 6 MS. JENNINGS: What's the rule of thumb 7 right now on NED numbers? Clearly, it's going 8 to be one, but what -- would the Corps 9 recommend a project that had a NED greater than 10 one? 11 MR. BURKE: Well, we can recommend any 12 plan that has a benefit to cost ratio greater 13 than one. Again, choosing from among several 14 plans, it would be the one that has the maximum 15 net benefits that I was talking about. 16 But from a realistic point of view, I 17 forget exactly what the cut-off is now, but in 18 budgeting for a new start construction, 19 anything less than about a 1.3 or a 1.4 hasn't 20 got a chance. So you might -- might could make 21 a recommendation, Congress may or may not act 22 on it, and may or may not provide funds for its 23 construction. 24 MS. JENNINGS: That's different, though, 25 from the Army or the administration for 88 1 PRESENTATION - ROGER BURKE 2 funding? 3 MR. BURKE: Yes. 4 MS. JENNINGS: I was just wondering if you 5 had a rule of thumb. 6 MR. BURKE: I think we would look 7 extremely hard at anything less than about 1.1, 8 but that's just me -- that's just me. It would 9 run the gauntlet. You would see where it comes 10 out. That's just me. 11 MR. REES: Isn't it still so that those 12 rules change, essentially, every year -- 13 MR. BURKE: They do. It's kind of -- 14 MR. REES: -- depending on how many 15 projects there are, how much money they 16 represent? 17 MR. BURKE: Even though I would rather 18 they make policy decisions on whether something 19 is in the federal interest to do or not, and 20 then decide whether to budget for it or not, at 21 some point those two issues sort of get 22 commingled, and the rules do change each year. 23 They are much more stringent right now 24 because the budget dollars are fewer. 25 MS. JENNINGS: Which raises another 89 1 PRESENTATION - ROGER BURKE 2 question with me, I got lost in your 3 calculation for where you actually make sure 4 the benefits affect net. 5 Like, you know, you can't count jobs here, 6 if they're the same jobs that you would have in 7 Charleston. But what if you calculate the NED 8 and the project is not funded for one year, and 9 then change your economic calculation -- what 10 do you do? 11 I mean, what if Congress doesn't give us 12 money the first year we ask for it, and things 13 change in Charleston or -- 14 MR. BURKE: Well -- 15 MS. JENNINGS: -- do we have to go back 16 and revisit your number? 17 MR. BURKE: We can account for certain 18 changes, once the study has made a -- has come 19 to a conclusion, and made its recommendation on 20 certain sets of conditions, and the numbers are 21 reflecting those conditions; unless 22 specifically requested by Congress to go back 23 and do a reevaluation, what we do is to take 24 into account changes in the funding strengths 25 during construction and adjust the interest 90 1 PRESENTATION - ROGER BURKE 2 during construction. 3 Once you are underway, the decision on 4 whether to continue or not is made on a little 5 bit different basis. You look at the remaining 6 benefits and the remaining costs. 7 If you can -- if your funding for 8 construction stream is interrupted, and then 9 you're trying to decide whether you want to 10 resume or not, you do that on the basis of 11 what's the remaining benefits, and of course, 12 the costs to complete the project. 13 MS. JENNINGS: I realize that, but it's 14 because of that RDRC, and I mention this, 15 everybody loves it, but just the RDRC 16 calculation puts it near the bottom of the 17 list, because it's a new project and we don't 18 get funded. 19 So, it sits there for a year, and what if 20 something substantive changed? I mean, do you 21 reevaluate the numbers? I mean, if they're in 22 the projects favor -- 23 MR. BURKE: Well again, if they're 24 affecting the cost and interests, during 25 construction, we do make those adjustments. We 91 1 PRESENTATION - ROGER BURKE 2 don't, unless we're specifically asked to go 3 back and reevaluate, we don't go back and 4 reevaluate. 5 MS. JENNINGS: Before construction, I'm 6 talking about before Congress appropriates 7 anything. 8 MR. BURKE: Again, we don't continue to go 9 back and update, until specifically requested 10 by Congress to do so. 11 MR. DYSART: Morgan. 12 MR. REES: More a question than a 13 statement, isn't the Corps internally, within 14 the executive branch, not doing what Congress 15 tells you to do one way or another, don't you 16 update the economic analysis every three years, 17 if you are not funded? 18 MR. BURKE: You're right. I forgot about 19 that. We do. In putting the budget requests 20 together, the information should not be based 21 on the economic analysis that's over three 22 years old. 23 We would need to go back, but it's not to 24 a square one kind of thing, but we do look at 25 changes, and vessel costs, and if there's 92 1 PRESENTATION - BILL BAILEY 2 information known, like some of the fundamental 3 changes we talked about that are known, we 4 factor those in. It's not quite the scope -- 5 it's an update, not a total reevaluation 6 starting from scratch. 7 MR. DYSART: Any further questions on the 8 economic analysis, basic, generic approach? 9 Seeing none, we appreciate your presentation. 10 We appreciate the good discussion from the 11 members of the SEG. The next item on the 12 agenda would be appear to be the dissolved 13 oxygen mitigation options. Bill, who is going 14 to be presenting that? 15 MR. BAILEY: That would be me. 16 MR. DYSART: Okay. 17 MR. BAILEY: We were talking about this 18 report that we have we came out with last 19 summer, and that was conducted for two 20 different projects; the expansion project and 21 the ecosystem restoration project. 22 It's called identification and screening 23 level evaluation -- you can read it. MacTech 24 (phonetic) is the one who we contracted this 25 work out to, so they're the ones who did this 93 1 PRESENTATION - BILL BAILEY 2 work. 3 It had three basic purposes; to look at 4 techniques, evaluate them, and then recommend 5 the best ways to improve DO. It started with a 6 list that we had four years ago, and they're 7 supposed to add to that. 8 They grouped them into 5 different 9 categories to try to cover a broad range of 10 things. These are -- this is a list of what 11 they looked at. So with that list then they 12 did two different levels of assessment. 13 One was kind of more generic, and the 14 other was kind of more detailed. This first 15 one, the first level, these are the things they 16 considered. The last bullet there is -- one of 17 the things we had them do was to go and look 18 at the five largest contributors, point source 19 dischargers, BOD loads, and see what they were 20 doing now, and see what would be the normal 21 next step in treating their effluent. 22 So by going through those techniques or 23 those considerations they eliminated some 24 things. Some of the options were eliminated -- 25 one more was eliminated -- increased releases. 94 1 PRESENTATION - BILL BAILEY 2 The second level assessment was more 3 detailed and ended up with a ranking of 4 techniques. These are the factors they 5 considered in this level of their evaluations. 6 They had eliminated the aeration ones 7 first, in the first round assessment, so 8 there's just the techniques in the four other 9 categories. 10 We'll go through here and it just shows 11 the techniques by category. Management was the 12 first one. What this is, this one was the 13 paper mills shut down once a year for a week, 14 typically, to perform maintenance of their 15 line, maintenance of their equipment. 16 So in this management approach, basically, 17 you could have them shut down in the summer 18 when DO is worse, so that would be one way to 19 improve DO. If you could get the different 20 industries to all -- the different point source 21 dischargers to all shut down in the summer, 22 kind of one week after the next, then that 23 would be less loads going into the harbor and 24 DO would improve. 25 Physical modifications, we looked at these 95 1 PRESENTATION - BILL BAILEY 2 things. They have these kind of scores they 3 assign to them. Seaward pipeline is basically 4 collecting the effluent from the point source 5 dischargers and discharging closer to the 6 ocean timing it with the tide. 7 This looked at constructive wetlands, 8 storage ponds, looked at advanced treatment on 9 point source discharges, some of the different 10 oxygen injection techniques. 11 These are the highest scores that they 12 came up with, the different techniques, and the 13 rankings that they gave them. 14 So that was the first two steps that we 15 asked them to do, identify the techniques and 16 then evaluate them. So those scores are their 17 evaluations. 18 So for them, they said, basically, the 19 best thing that they thought was the one second 20 from the bottom, pipeline with the timed 21 discharge would be the best, based on what they 22 -- those criteria that they had. 23 And then the -- to recommend the best way, 24 this says several scenarios. Here's where it 25 starts to get real complicated. We gave them 96 1 PRESENTATION - BILL BAILEY 2 -- because it was -- this work was for two 3 different projects, we gave them two different 4 sets of scenarios. 5 The first one was compliance with DO 6 standards. It's an easy question to say well, 7 what does it take to comply with DO standards? 8 Well, don't ask a scientist an easy 9 question. He'll probably come back with 10 another question. The first one is, well, 11 what's the standard. 12 Well, we have a current standard, in 13 Georgia, but the EPA doesn't like that so 14 they recommended a different standard. So the 15 standards may change. 16 The other thing the scientist is going to 17 say, well, what's the load going in? That may 18 change. You have what's happening now, what's 19 being already permitted. So a simple question, 20 you end up with four different options. 21 The contractor, to pick the best one, we 22 wanted him to develop a design -- develop a 23 couple designs for each of those lines, so that 24 we're sure we actually had the best plan to 25 meet each of those four lines. 97 1 PRESENTATION - BILL BAILEY 2 For each of those four, you have a 3 different -- there's a different load on the 4 system. So you would have to improve the 5 system a different amount to meet the DO 6 standard. 7 So number one, you would have to improve 8 -- I think this is adding oxygen -- you have to 9 increase the oxygen amount by 290,000 pounds 10 per day for the first -- the first plan here. 11 So then they would have to look at ways to do 12 that. 13 And the permitted loads are higher than 14 what they are doing in '99, so you have to do 15 more for number two, 290,000 -- you have to do 16 twice as much for the permit loads. You have 17 to get up to 725,000. 18 MR. BERSON: Bill, that doesn't say that 19 people are actually discharging up to their 20 permits limits, right? 21 MR. BAILEY: That's what that says. 22 MR. BERSON: That they are? 23 MR. BAILEY: It says -- it says in '99 24 that they were not discharging at their permit 25 limits. 98 1 PRESENTATION - BILL BAILEY 2 MR. BERSON: Okay. They are now or if we 3 just wanted to meet that number? 4 MR. BAILEY: If you wanted to meet that 5 number -- if you wanted to know what they're 6 allowed to do, and you were able to design a 7 system for what may happen, what could happen 8 with nothing else the government has to do. 9 The government's already given them permission 10 to do that. 11 MR. BERSON: Exactly, I understand, but 12 they may not be at that level now really. 13 MR. BAILEY: Right, correct. 14 MS. JENNINGS: Bill, also on number four, 15 I guess number three, is that accounting, is 16 that the first thing that EPA put out or 17 exactly what recommended Georgia DO standard? 18 MR. BAILEY: I think it's -- 19 MS. JENNINGS: The first -- 20 MR. BAILEY: -- the draft TMDL that was 21 out. 22 MS. JENNINGS: The draft? 23 MR. BAILEY: I think that's the only thing 24 they put out. 25 MS. JENNINGS: I thought they were going 99 1 PRESENTATION - BILL BAILEY 2 to come back with something -- 3 MR. BAILEY: Yes. We expect them to have 4 another draft. 5 MS. JENNINGS: Okay. A refined draft. 6 MR. BAILEY: Second phase was where the 7 other project, the two projects wanted this 8 information. The other project, which was the 9 expansion then says well, we just want to 10 improve -- want a design that tells the best 11 way to improve DO, but we don't know how much 12 we want to improve it. 13 This was due in mitigation before you know 14 how much the impact was. All right. Well, if 15 you want to improve it two tenths or four 16 tenths or six tenths, just give me a design for 17 each of those. 18 Tell me the best way to increase the DO 19 each of those ways. I don't know where the 20 impacts are going to be. So to be able to do 21 work ahead of time, if I knew the answers I 22 would only have to have one number in there. 23 These are the amounts of improvement that 24 that translates to. So this is starting to get 25 some of the answers that they worked up. This 100 1 PRESENTATION - BILL BAILEY 2 says 1A and 1B. I think in this one they gave 3 us four different ways they can meet that one 4 target. 5 So we have got some costs here, both 6 construction costs and operating costs. It 7 will be a bunch of information. The next slide 8 is pretty much the same or very similar. 9 In 1C and 1D, they use a different 10 technique. Here it is just collecting the 11 effluent, putting in a pond, and then 12 discharging that for 60 days. The one on the 13 bottom is discharging that for 30 days. 14 You have costs with all those. Here's a 15 summary of those four, 36,000,000 to 62,000,000 16 to meet that -- just that one option which was 17 the '99 BOD loads and the current standard. 18 So from that then we'd say well, what's 19 the best way to meet that target? It's 20 probably going to be 1A or 1B. 21 Now, what came up here, 1A and 1B, is 22 the 29 speece cones. This is what they look 23 like. This is one in Kentucky that they have 24 that's a certain size, one milligram -- 25 1,000,000 gallons per day; one in Indiana 101 1 PRESENTATION - BILL BAILEY 2 that's five; another one in California for 3 seven. 4 The design these guys gave me, what they 5 showed for just sizing these things, this cone 6 for Savannah they said would be 12 foot in 7 diameter and 15 feet high -- was a basic size. 8 I don't know what the size of this one is. 9 It's probably going to be 12 foot in diameter, 10 15 high. It's going to be wider than what's 11 there. I don't know if it's going to be any 12 taller. 13 MR. BERSON: And you would need 29 of 14 them? 15 MR. BAILEY: That's one design, yes. 16 MS. JENNINGS: The one that showed how to 17 interpret seven MGD -- 18 MR. BAILEY: I'm sorry -- 19 MS. JENNINGS: I'm not quite sure how to 20 interpret that -- 21 MR. BAILEY: That's just a certain size, 22 where they are using them in other places 23 now -- 24 MS. JENNINGS: So seven, what -- 25 MR. BAILEY: 7,000,000 gallons a day 102 1 PRESENTATION - BILL BAILEY 2 is what that thing treats. 3 MS. LANDERS: Of effluent? 4 MR. BAILEY: Of effluent. 5 MS. JENNINGS: So seven -- 6 MR. KEEGAN: It would be raw water -- 7 water from the river. 8 MR. BAILEY: In our case -- in our case, 9 you would pump in river water. They add oxygen 10 to it and it goes back out to the river again. 11 MS. JENNINGS: So that machine could do 12 seven MGD? 13 MR. BAILEY: Yes. That's a typical, 14 basically, kind of what it looks like. For the 15 second target, 29 goes up a little bit. Now 16 you're talking 73, and the cost goes up. 17 And since it's getting late, I'll keep 18 going. And the summary for this target, which 19 was permitted loads, now you're talking 20 90,000,000, 120,000,000. Pretty soon you 21 get to real money. 22 MR. BERSON: That includes contributions 23 of BOD from both sides of the river, right, 24 from South Carolina as well as Georgia? 25 MR. BAILEY: Yes. This was -- the 103 1 PRESENTATION - BILL BAILEY 2 discharge is all the way up the whole river 3 including Augusta. 4 MR. BERSON: Would these cones have to be 5 sited throughout the basin or would they be 6 central in the harbor area, or how would 7 that be -- 8 MR. BAILEY: These were looked at in the 9 harbor area, because that's -- the harbor is 10 where DO standard is now. 11 MR. BERSON: I just wondered if there was 12 a way to break that out is a little bit? 13 MR. BAILEY: If you move forward to this, 14 you would look at those details, yes. We did 15 -- we did look at -- one of the things -- one 16 of the techniques that was eliminated, these 17 folks eliminated, was additional releases from 18 up river. 19 One of the ways we looked at that was in 20 the hydrodynamic model having the water coming 21 from the lakes having higher oxygen. It starts 22 off before it hits any industry having a higher 23 oxygen level, and then seeing what happens at 24 Clyo, what shows up at Clyo. 25 It ends up it made no difference at Clyo. 104 1 PRESENTATION - BILL BAILEY 2 The river is recovering on its own, as much as 3 it's going to recover, which was kind of a 4 surprise to me, but -- 5 MR. BERSON: How does the cost -- is the 6 cost of the project the element additional? I 7 mean, we have an existing condition now. We 8 have an oxygen deficit now. So is this project 9 considered -- 10 MR. BAILEY: We'll get to that. 11 MR. FLEMING: Quick question. You talked 12 about it made a difference at Clyo. Doesn't 13 that have something to do with carrying 14 capacity of the water itself, primarily 15 temperature in the -- 16 MR. BAILEY: Yeah. 17 MR. FLEMING: -- primarily affecting that? 18 So if you had 80 degree water, I don't care 19 what you infuse on the top, it is only going to 20 have a certain amount once it meets some 21 equilibrium downstream. 22 MR. BAILEY: We looked at it in the summer 23 which is the worst case for DO -- 24 MR. FLEMING: Right. 25 MR. BAILEY: -- so it can't hold as much, 105 1 PRESENTATION - BILL BAILEY 2 right. 3 MR. KYLER: The trade off between 4 operating costs and capital costs, I assume the 5 capital costs are incurred only once, and the 6 facility is good for the entire project period? 7 MR. BAILEY: When we go further with this, 8 we'll have to figure in some replacement, some 9 life for that facility, whether it's a 20 year 10 life where you have got to rebuild it again. 11 Right, you have to figure all that in. These 12 folks didn't do that. 13 MR. KYLER: Because with those figures, it 14 seems as if the higher capital cost is 15 well-justified by the reduced annual operating 16 cost over a 50 year period. 17 MR. BAILEY: Yeah. That's one of the 18 things shows up, once you do your amortization 19 and apply your interest back. For the third 20 option, third target here, they didn't need to 21 do as much. 22 Those numbers -- capital costs are lower. 23 The fourth target, back up those permitted 24 loads back to having a -- here they had -- this 25 one had four options how to meet that target. 106 1 PRESENTATION - BILL BAILEY 2 That one, the spread was not quite -- the 3 spread on the cost was not quite as large as it 4 was on the other ones. For this group of 5 targets, just a reminder again of increase in 6 DO in certain amounts from what they found. 7 In the first phase, they just went with 8 one design, and also the level of -- the level 9 of improvement that they had to produce from 10 what they found before. They concluded the 11 best way to meet those levels was between 100 12 and 300,000. 13 The best way to meet that was with that 14 technique of those speece cones. Then it was 15 just a question of how many of them they needed 16 to meet those different levels of improvement. 17 So those range, they said, from 10 to 18 40,000,0000 for capital costs. So they were 19 supposed to do three different things, and they 20 looked at 25 different techniques, and used 21 some different evaluation criteria when they 22 evaluated them. 23 We asked them -- gave them a number of 24 targets to design, come up with designs for. 25 So that's basically those costs, somewhere 107 1 PRESENTATION - BILL BAILEY 2 between 10,000,000 and 100,000,000, depending 3 on which target you're trying to reach. 4 This was for complying with DO standards. 5 The second one, just increase the DO a certain 6 amount, 10 to 40,000,000. This would be for 7 the incremental effect for expansion is what we 8 are looking at with this one. And the one -- 9 previous one is to meet the DO standard. Now, 10 back to your question. Say that again, what 11 your question was. 12 MR. BERSON: You were so close there to 13 saying it. Go back a slide. This would cover 14 the cost of deepening, the incremental deficit 15 that would be added by deepening the channel. 16 MR. BAILEY: Yes. 17 MR. BERSON: So I guess you didn't do the 18 overall cost of project plus current deficit 19 and DO, right? 20 MR. BAILEY: Correct. 21 MR. BERSON: You did not? 22 MR. BAILEY: Correct, did not. 23 MR. BERSON: Okay. 24 MR. BAILEY: That still -- let's see. 25 MR. BERSON: It depends what the actual 108 1 PRESENTATION - BILL BAILEY 2 standard is as far as to get that final number. 3 MR. BAILEY: This project, looks like the 4 best way to address the DO impact is with DO 5 injection. So we're going to look at that to 6 mitigate for impacts from harbor deepening. 7 That is going to use the improved models 8 to figure out what the level of impact is, and 9 use those same models, then design a DO 10 injection system. 11 That would tell you how much you need to 12 add, how much oxygen, and where you need to 13 place these things. You wouldn't probably put 14 them all in the same place. You would string 15 them out, but still within the area that has 16 the DO problem. 17 Now, what we didn't get to is that other 18 study, which is taking -- kind of taking care 19 of the existing problem. That one -- the 20 sponsor for that one, with the Corps, was the 21 city. 22 They -- we have taken another step, since 23 this report, and we basically used the 24 hydrodynamic model to look at, kind of, who's 25 responsible for the problem. 109 1 PRESENTATION - BILL BAILEY 2 And that was -- they have looked. They're 3 looking, using the model, to say what happens 4 if you didn't have a navigation channel? What 5 happens if you had no point source discharge? 6 Take those out of the system and what does 7 the DO look like then. There was something 8 else that I forgot -- 9 MR. BERSON: Didn't EPA's TMDL do that? I 10 mean, their conclusion was, with the existing 11 channel, you could remove every BOD source 12 up river and you still wouldn't make the -- 13 MR. BAILEY: You still have the problem. 14 MR. BERSON: You still have problem. 15 MR. BAILEY: That's right. You remembered 16 that correctly. We were using the latest 17 version of the model to go through that again. 18 The city wanted to make sure we went through 19 that again. 20 MR. BERSON: Is that ongoing, are you 21 working with the city, or has that been 22 completed? 23 MR. BAILEY: I'm supposed to have a report 24 Friday, but I was supposed to have a report for 25 a number of weeks. 110 1 PRESENTATION - BILL BAILEY 2 MR. BERSON: I understand. 3 MR. BAILEY: But the city -- the city is 4 not sure -- well, let's see. 5 MR. BERSON: Bob's not here. Don't worry. 6 MR. BAILEY: How much that project moves 7 forward, how much that project moves forward, 8 I'm not sure right now. The Corps has some 9 money this year, but the city has not 10 contributed any new money this year. 11 So without anymore money from the sponsor, 12 that study grinds to a halt. The city is 13 thinking that existing problems -- that the 14 state may want to get involved in solving 15 those. 16 It's a matter of talking with the 17 state. I think DNR does not have a lot of 18 extra money, do they? So the city was looking 19 for other people who may be interested in that 20 -- in that subject. 21 MR. DYSART: Ed has a question, Ed Eudaly, 22 and then David Kyler. 23 MR. EUDALY: Did the study look at any 24 combination of methods, in other words, using 25 the spence cones in conjunction with pipeline 111 1 PRESENTATION - BILL BAILEY 2 discharges? Did they look at various 3 combinations? 4 MR. BAILEY: Yes. 5 MR. EUDALY: The spence cones is the one 6 that came out as the best option. 7 MR. BAILEY: Yeah. There were some -- I 8 think the earlier set of targets I showed you, 9 I think one of the options was just a pipeline 10 discharging closer to the ocean, and that was 11 at least twice as expensive. 12 So they looked at some of those by 13 themselves. Then they looked at them in 14 combination to try to meet some of the -- some 15 of the scenarios that required doing a lot. 16 MR. EUDALY: Okay. 17 MR. BAILEY: The DO system was not -- it 18 costs some money to operate. It's not a cheap 19 system. But apparently, from the screen that 20 they did, it's the lowest cost. 21 MR. DYSART: David Kyler. 22 MR. KYLER: The magnitude and complexity 23 of this issue, it seems to me there is an 24 opportunity, if not a downright need, for some 25 sort of multiple party agreement or something, 112 1 PRESENTATION - BILL BAILEY 2 to obligate people to take certain steps 3 recognizing the DO constraint as a cost of 4 doing business, and addressing that constraint 5 responsibly as being the cost of doing 6 business. 7 It doesn't seem possible or fair for any 8 one party causing the DO problems to incur all 9 the costs of correcting that problem. 10 On the other hand, it seems unrealistic or 11 very difficult to -- for any one decision such 12 as the harbor deepening to hinge on assumed 13 cooperation or commitments from other parties, 14 without getting some legally binding agreement 15 for them to share their part of the burden of 16 correcting this. 17 It seems to me this is one, an opportunity 18 and obligation to mine multi-party agreements, 19 without which, it seems to me, this problem can 20 be resolved. 21 MR. DYSART: Bill. Is that an opinion or 22 a question. 23 MR. KYLER: Opinion and urging for the SEG 24 to take that into account in making its 25 recommendation. 113 1 PRESENTATION - BILL BAILEY 2 MR. BAILEY: I think we said there was two 3 projects that funded this work. I think for 4 expansion we're going to use the results to 5 identify how to mitigate for the incremental 6 effects of expansion. In my mind, that doesn't 7 address the other problem, the existing 8 problem. 9 MR. KYLER: Yeah. But what are the 10 opportunities, of the official bodies 11 responsible for this decision, to coerce or 12 compel corrective action by entities beyond the 13 scope of the project; the municipalities, the 14 state, others responsible for DO, dissolved 15 oxygen waste assimilation problems that are in 16 the same system -- the same river system? 17 MR. BAILEY: I believe EPA was working on 18 preparing the TMDL, and with that they were 19 going to set a target of what they thought the 20 total load the river could accept. I think 21 then it was up to the state to figure out how 22 to allocate that load through the permitting 23 system. 24 I have met with EPA a couple times, in 25 talking to them about this, when the work was 114 1 PRESENTATION - BILL BAILEY 2 underway and after we had the report. They 3 have been very interested in the results of it. 4 And they -- so I've given this to EPA and to 5 both states. 6 I haven't heard anything back from 7 Georgia. I think South Carolina -- I think 8 they have gotten an answer back from them. But 9 you're right, it's a very complicated 10 situation. 11 MR. DYSART: Will and then Priscilla. 12 MR. BERSON: Just sort of two questions. 13 I realize this was really an investigation, to 14 a large extent. Was there any evaluation of 15 the feasibility of siting 73 of these things? 16 If we're only targeting the harbor area, 17 that sounds like they're all going to be in 18 South Carolina, because I don't really see them 19 showing up on Rousakis Plaza any time soon. 20 You have a confined area, and siting these 21 things could be a challenge, it seems to me. 22 MR. BAILEY: You're right. That was the 23 part of the next phase, if we had to do 73, it 24 could be a challenge, yeah. 25 MR. BERSON: I didn't necessarily expect 115 1 PRESENTATION - BILL BAILEY 2 you looked at that. The other question was, in 3 doing some research on this technology, it 4 seems to be have been used a lot in TVA 5 projects, but it concerns me has it been used 6 in a highly active estuary system like 7 Savannah? 8 It's one thing to be doing rivers, with 9 this technology, that are not tidal in nature. 10 I mean, does that have -- has that -- has this 11 technology been used in that sort of situation, 12 do you know? 13 MR. BAILEY: It is being tested in some 14 estuary area in California, where they were 15 trying it out. They were going to put one in 16 to see how it work. 17 MR. BERSON: Was it Stockton? 18 MR. BAILEY: I'm not sure. It was about 19 a year ago when I read it. 20 MR. DYSART: Priscilla then Judy. 21 MS. WENDT: I was just going to point out 22 South Carolina is a player in this whole TMDL 23 process. In the promulgation of any revised 24 water quality standard, for DO for the river, 25 whether it's on the Georgia side or the river 116 1 PRESENTATION - BILL BAILEY 2 as a whole, we're going to be looking at 3 impacts to South Carolina waters. 4 And currently, you may be aware that South 5 Carolina's DO standard is more protective -- we 6 view it as more protective than either the 7 Georgia standard or recommended EPA standard. 8 It is currently a minimum of four 9 milligrams per liter DO throughout the lower 10 portion of the river. So I just wanted to let 11 you know that the TMDL process, as far as I 12 know, it's not a done deal, and some of these 13 analysis may need to be redone, depending on 14 what the final outcome of that -- of those 15 studies are. 16 And I think South Carolina is looking at, 17 according to an analysis that the Department of 18 Health Environmental and Control did, more than 19 90% of the BOD loading is from the Georgia side 20 of the river currently. 21 And so, we're looking at perhaps for a 22 more equitable allocation of loading between 23 the two states. Anyhow, I just wanted to alert 24 people to all that. 25 MR. BAILEY: David, you talked about it 117 1 PRESENTATION - BILL BAILEY 2 being complicated. 3 MR. KYLER: Yeah. 4 MR. BAILEY: You've got two states, 5 up river, down river, there are lots of 6 interests, lots of complications. 7 MR. DYSART: Judy. 8 MS. JENNINGS: Yeah. The complications, 9 skip that. But do these devices -- is there 10 any difference in temperature in the water that 11 comes out of them? 12 MR. BAILEY: No. 13 MS. JENNINGS: And do you use pure O2? 14 MR. BAILEY: Yes. 15 MS. JENNINGS: Is there any way to 16 differentiate -- I know back in the early days, 17 when we were talking about harbor deepening, it 18 made sense when they were explaining to me the 19 first time, but I couldn't explain it to you 20 now, the difference in the oxygen demand in the 21 river, on one hand, for effluent discharge and 22 on the other hand, from physical activities in 23 the river; does anybody -- is that part of -- 24 do you know what I'm talking about? 25 MR. BAILEY: I'm not sure. 118 1 PRESENTATION - BILL BAILEY 2 MS. JENNINGS: We'll let that ride. How 3 much of an environmental evaluation would you 4 do? I mean, for instance, the water comes out 5 of these things at a fair rate of speed, right, 6 or does it kind of bubble up? 7 I mean how -- how -- I mean 73 of those 8 devices, how would you determine what 9 environmental impacts of one of those things 10 going to 73 of those things going all the time? 11 How much difference -- do you have to 12 evaluate what environmental impact that would 13 be other than the oxygenation? 14 MR. BAILEY: Yes. You would have to 15 evaluate the siting of it, and the design of 16 it, the effects of each them. For instance, I 17 mean, you would have to design it -- they 18 design those things so that the water coming 19 into it is only at a certain speed, so that 20 small fish can swim away from it, kind of the 21 standard intake design. 22 So you would do that same thing on this 23 type of system. You would use those standard 24 design techniques on this. But you would have 25 to figure in all that stuff and make those part 119 1 PRESENTATION - BILL BAILEY 2 of the required design. 3 MS. JENNINGS: Where would you do that? I 4 mean, all the complications about city, two 5 states, all these various factors, I mean, who 6 -- it looks to me like it might even -- I don't 7 mean to say require its own EIS, but it looks 8 to me like it's a fairly complicated study as 9 to impacts of these devices in and of 10 themselves. How would you cost that out? 11 MR. BAILEY: Solving the existing problem 12 was being handled in a separate study. Now, if 13 you are talking about designing and 14 recommending these things for expansion, that 15 has to be included as part of the expansion 16 project. 17 MS. JENNINGS: I guess that's the part. I 18 mean, I understood the permitted BOD and the 19 Georgia standards. You had four of those up 20 there, but that's just fixing the current 21 problem, right? 22 MR. BAILEY: That was, yes. 23 MS. JENNINGS: Then you go on -- take that 24 and then you go to the incremental depths. 25 MR. BAILEY: Right .2, .4, .6, that was 120 1 PRESENTATION - BILL BAILEY 2 the incremental amount of improvement. 3 MS. JENNINGS: And in what study of harbor 4 deepening, or the restoration study, where do 5 you put the environmental questions of what 73 6 of these cones were? 7 MR. BAILEY: Okay. If -- if the DO impact 8 of a 46 foot channel comes out to be .4 9 milligrams per liter, then we would go this and 10 say well, this preliminary design says this is 11 the best technique to use to address that 12 impact of .4, and that requires -- it is 13 probably going to require about 10 of these 14 systems. 15 Now, I'll go through, use the new model, 16 figure out what that design really is, and then 17 where do you think we ought to place them, 18 where up and down the river, how close would 19 they have to be to solve the DO problem, how 20 far apart would they have to be. 21 Then you go in and look at is there any 22 land there to put these things. So you have to 23 build a road to that site, you have to do all 24 that as part of the costs that go into what 25 Roger was talking about earlier. 121 1 PRESENTATION - BILL BAILEY 2 MS. JENNINGS: So you would cost it to the 3 Harbor Deepening Project? 4 MR. BAILEY: Uh-huh, yes. 5 MS. GRAINEY: Is there a noise issue 6 associated with these devices? I don't know. 7 I was just -- 8 MR. BAILEY: I don't think so. 9 MS. GRAINEY: It's a pump? 10 MR. BAILEY: It's a pump. It's moving 11 water. 12 MR. DYSART: Morgan and then Will, please. 13 MR. REES: Bill, does the report discuss 14 how many days per year, under different 15 scenarios, the options have to be operated? 16 MR. BAILEY: Yes, yes. It's not all year 17 round. It's just the summer and even portions 18 of the summer. 19 MR. REES: So those numbers of annual 20 operating costs, that were listed, reflect 21 that -- 22 MR. BAILEY: Yes. 23 MR. REES: -- how ever many days a year? 24 MR. BAILEY: Yes. 25 MR. DYSART: Will. 122 1 PRESENTATION - BILL BAILEY 2 MR. BERSON: As we noted, there are an 3 awful lot of interests that come at this from a 4 different perspective. 5 Is the Corps at all -- ask this in a 6 politic way so I'm just going to say it -- is 7 the Corps being asked, as part of this project 8 to -- I mean, since EPA has sort of taken the 9 position, in the draft TMDL, it is the depth 10 that's causing the oxygen deficit, are they 11 asking that this project consider making up for 12 past deepenings as it were? I mean, since -- 13 did I say that -- 14 MR. BAILEY: Okay. Let me ask you whose 15 -- right now, as part of expansion, we're not 16 being asked that. 17 MR. BERSON: Okay. I guess what I'm 18 saying is has there been any -- have any of 19 these other players said, hey look, it's the 20 depth -- 21 MR. BAILEY: The city -- the city had said 22 they thought the navigation was responsible for 23 all the DO problem. With that, they were 24 implying that the Corps should fix that. 25 MR. BERSON: Are those discussions ongoing 123 1 PRESENTATION - BILL BAILEY 2 or are they sort of -- 3 MR. BAILEY: If we have no more money from 4 the sponsor, that study grinds to a halt. 5 MR. BERSON: Okay. 6 MR. DYSART: Judy. 7 MS. JENNINGS: Yeah. I know the TMDLs say 8 one thing, but when you deal with DO numbers, 9 are you considering that the DO is constant 10 throughout the water column? 11 MR. BAILEY: In this analysis, they didn't 12 run the model at all. They were just working 13 with total amounts of BOD load or DO. 14 In the next phase, we would run it through 15 the model, so that would tell you what the DO 16 is on all the different layers and locations 17 across the channel. 18 MS. JENNINGS: I guess when you say, okay, 19 I need 73, do you need 73 to make a given 20 amount of DO consistent in the water column? 21 I mean like surface, you know, two feet 22 above the surface, the surface, two feet under, 23 10 feet under; is that what you did here or 24 not? 25 MR. BAILEY: They were doing basic loads 124 1 PRESENTATION - BILL BAILEY 2 on the whole system. 3 MS. JENNINGS: So it didn't matter what 4 depth you looking at -- 5 MR. BERSON: I think I can answer the 6 question. Priscilla -- I think actually we're 7 getting at the operating standard. I think 8 sampling is part of the standard. 9 Some average and some do a literal sample 10 that's taken from a portion of a column. I 11 think that that's one of the uncertainties of 12 what they are dealing with now, is how you 13 would -- whose standard would you use, and 14 therefore how would you evaluate what the DO 15 was throughout the column? 16 One standard would require you to average 17 the column, and I think another one would 18 require you to take a sample from a portion of 19 it. I think there's a difference between 20 georgia's approach, the EPA approach, and South 21 Carolina's. 22 MS. WENDT: South Carolina's approach is 23 the DO standard is supposed to be met 24 throughout the water column at the minimum. We 25 realize it is, typically, not, but that's the 125 1 PRESENTATION - BILL BAILEY 2 position that DHEC takes. The reality is when 3 they monitor DO, it is monitored at the surface 4 pretty much. 5 And then whether you meet those water 6 quality standards, you know, has to do with 7 the number of exceedances (sic) or violations 8 of that DO standard at that depth. But the 9 official position is the DO standard is 10 supposed to be met down the column. 11 MS. JENNINGS: So when you ran the 12 numbers, .2, .4, .6, were you assuming that you 13 would be meeting what standard? 14 MR. BERSON: Yes. 15 MR. BAILEY: That one, that was 16 separate. The .2, .4, .6 was separate from the 17 analysis of meeting the standard. 18 MS. JENNINGS: I realize that, but at some 19 point in time, you're going to have to, .4 -- 20 MR. BAILEY: Yes. 21 MS. JENNINGS: -- at what depth of the 22 water, what are you measuring? 23 MR. BAILEY: We use the model to look at 24 the impacts of a deepening. It will tell us 25 the impacts at all depths. So then we'll have 126 1 PRESENTATION - BILL BAILEY 2 to -- the goal is to make that impact go away 3 by a mitigation technique. So that would be 4 impact at all depths. 5 MR. DYSART: Joel and David Kyler was 6 looking like he was getting ready to follow up. 7 MR. FLEMING: Just a quick question. Do 8 we have a way -- were you able to come up with 9 a cost associated with reducing BOD loads, from 10 existing permits, right, so there's cost 11 associated with that. 12 This kind of goes back to the previous 13 discussion about environmental costs in general 14 being incorporated into the project. 15 Would the cost of limitations to future 16 industrial development, will those be tacked on 17 to that as well; say we have to decrease BOD by 18 X amount, and we're set by some limitation, 19 would there be any kind of calculation of well, 20 we can't allow any further effluent to be put 21 into the river, will that be taken into 22 consideration as well? 23 MR. BAILEY: I don't think so because 24 right now the TMDL is already being exceeded. 25 The TMDL is saying -- 127 1 PRESENTATION - BILL BAILEY 2 MR. FLEMING: So that's a limiting factor 3 in and of itself. 4 MR. BAILEY: -- what you are saying, the 5 system is already receiving too much. You have 6 to cut back on what you are adding to it now. 7 MR. FLEMING: It is only receiving too 8 much because of the depth primarily, right -- 9 yeah. 10 MR. BAILEY: Well -- 11 MR. FLEMING: This comes back to -- I 12 mean, this is a more simplistic way of putting 13 a dollar figure on some sort of environmental 14 parameter, I think. 15 Like I said, it's neither here nor there. 16 What you have out there, if we all are limited 17 by strictly what the TMDL says, and by the 18 standards, we don't meet the standards because 19 of depth, not because of the actual load on the 20 system, is that correct? 21 MR. BAILEY: I hope to know that next 22 week, if I ever get my report. 23 MR. FLEMING: One more question, I guess. 24 This is kind of off the subject a little bit, 25 but it kind of relates to it in some way. 128 1 PRESENTATION - BILL BAILEY 2 We're working on modifying flows out of the 3 reservoir to inundate the flood plain for some 4 portion of the year, or for some time frame. 5 Do we have any way to calculate what the 6 load from the flood plain inundation may be, 7 how that will play a part? 8 Currently, right now, we're under a 9 modified system. It hardly ever reaches the 10 flood plain. If we do modify, we're trying to 11 help things on the upstream side, productivity 12 of fish populations, things like that, if we do 13 allow flows to reach the flood plane, will it 14 have a huge impact on what we're talking about 15 here, as far as the amount of load in the 16 system, and is that compensated for? 17 MR. BAILEY: Will you be able to tell me 18 the increased non-point source loading? 19 MR. FLEMING: No. There's obviously going 20 to be some natural loading, and then there's 21 going to be agricultural, things like that. 22 MR. BAILEY: There is -- non-point source 23 loading is part of the model. So if we -- 24 MR. FLEMING: Currently? 25 MR. BAILEY: Currently. 129 1 PRESENTATION - BILL BAILEY 2 MR. FLEMING: That is under current flow 3 regimes. 4 MR. BAILEY: Right. 5 MR. FLEMING: I just don't -- I'm looking 6 down the road thinking, are we going to be 7 restricted, to inundating flood plains, because 8 of the BOD -- 9 MR. BAILEY: I guess it is possible. If 10 we -- that would be -- that could be one of the 11 analyses you do. 12 In looking at that, you say if that's 13 going to increase the non-point source loading 14 down river, if that causes a problem, then 15 that's one of the factors in deciding on that 16 -- deciding whether to proceed with that flow 17 system. 18 MR. DYSART: David and then Judy. 19 MR. KYLER: Originally, I was going to say 20 something fairly simplistic, and Joel gave me a 21 bunch other food for thought. 22 Back on the off cost versus capital costs, 23 it seems to me, because I assume as with most 24 of these things, much of the operating costs 25 has to do with energy consumption. 130 1 PRESENTATION - BILL BAILEY 2 MR. BAILEY: I think in this one the 3 operating cost is with the oxygen. 4 MR. KYLER: Mostly oxygen operation costs? 5 MR. BAILEY: Yeah. 6 MR. KYLER: By producing the oxygen is an 7 energy consumption process itself. So 8 ultimately, we're talking about trading off 9 capital costs -- my opinion, my conjecture. 10 Therefore, I would urge whoever is looking 11 at this to keep that in mind, because energy 12 costs tend to increase over time. 13 They, themselves, have environmental costs 14 that are disproportionately large. So all 15 things being equal, assuming that conjecture is 16 reasonably accurate, I would urge the decision 17 makers to favor capital costs versus operating 18 costs. 19 It seems like it was a trade-off. Higher 20 capital costs are worth incurring, even when 21 the operating costs are not quite as bad as 22 they seem. 23 Because really, the worse they seem 24 because of the fact -- okay. On this point 25 Joel is making, I think we need to recognize a 131 1 PRESENTATION - BILL BAILEY 2 couple of things. 3 One is let's see what we can do about 4 correcting the problems of the past deepening 5 projects. But even after that is taken into 6 account, if we set it aside, I think one of the 7 fundamental flaws in all kinds of decision 8 making is, we're working on a case-by-case 9 basis. 10 First come first served, which tends to 11 lead, sometimes in public administration, to 12 disjointed incrementalism, which means you make 13 suboptimal decisions because you're making them 14 on a case-by-case basis, not systemically over 15 time. 16 The TMDL program is attempting to overcome 17 that by requiring the state, or any state, to 18 meet the federal standards of the Clean Water 19 Act, to have an allocation program for waste 20 assimilation capacity or other uses for the 21 water river systems to which the TMDLs apply. 22 But I just wondered to what extent we can, 23 through this project, take those kind of 24 factors into account and try to make it less 25 than something that is creating suboptimally, 132 1 PRESENTATION - BILL BAILEY 2 on a case-by-case basis, and instead view it 3 more systemically, and a lot of it, not just 4 TMDLs in the water, some of the other 5 environmental factors we've been discussing in 6 the river. 7 MR. DYSART: Judy, do you have a comment 8 or a question? 9 MS. JENNINGS: A question. Did I 10 understand you to answer, Will, to say where 11 these things have been used -- there's a study 12 of a river in California, but that's not the 13 point of my question? 14 I'm curious where you might consider, 15 since this is an international harbor, I'm just 16 wondering where, I mean, if you make it a 17 better biological environmental for the things 18 we want to live here, you might be improving 19 the chances of invasives. Did you think about 20 that? 21 MR. BAILEY: I'm not sure what to do about 22 it. 23 MS. JENNINGS: I mean, I don't know what 24 to do about it either, but it occurs to me 25 there is a possibility, because if the -- 133 1 PRESENTATION - BILL BAILEY 2 because of the shipping, because of the harbor. 3 MR. BAILEY: Yes. 4 MR. DYSART: Will 5 MR. BERSON: What -- is there any estimate 6 of the life expectancy of one of these cones? 7 MR. BAILEY: I'm sure there is. I don't 8 know what it is. 9 MR. BERSON: I was thinking if you are 10 using a 50 year frame, you might have to 11 replace those several different times? 12 MR. BAILEY: Right. 13 MR. BERSON: I guess the other question is 14 if you are using a 50 year time line, if we 15 reuse this system, it would, essentially, be a 16 permanent function to the river. 17 And so operational costs would have to go 18 well beyond 50 years. I mean, if we know that 19 river isn't sustainable without this, then it 20 seems to me it's not right to cut off 21 operational costs at 50 years, when we know it 22 will have to be continuing well past that. 23 Is there some sort of way to incorporate that 24 into the costs? 25 MR. BAILEY: I think the way the economics 134 1 PRESENTATION - BILL BAILEY 2 work, it doesn't have much of an effect. It 3 doesn't have much value, a cost that's out 4 there 75 years, it's value today is pretty 5 small. 6 MR. DYSART: Economically. 7 MR. BAILEY: Economically. We could run 8 all the numbers for a 100 year economic life. 9 It's not going to be much different than a 50 10 year life. 11 MR. FLEMING: What you are saying is you 12 have additional costs because of -- 13 MR. BERSON: Yeah. 14 MR. FLEMING: -- because you're having to 15 do this process versus not having to do the 16 process. 17 It's not any kind of additional expansion. 18 It's just simply addition of expense beyond 50 19 years that should be taken into consideration. 20 MR. BERSON: Whatever the annual operating 21 cost is, it's going to be every single year 22 from now until the cows come home. 23 MR. KYLER: Which could be next week. 24 MR. BAILEY: I think that's no different 25 than saying that the expansion project, that 135 1 PRESENTATION - BILL BAILEY 2 any deepening project, is not necessarily going 3 to end at 50 years. 4 We're not going to let it silt it on the 5 51st year. They're going to continue to 6 maintain it, and spend the operating costs, the 7 maintenance costs, through year 51 also. As 8 long as Congress keeps sending it, they will 9 keep maintaining the harbor. 10 MR. BERSON: Okay. I guess where the 11 difference for me is if the harbor silts in, 12 navigation is affected, but not necessarily the 13 environment. 14 If these things aren't run, you know, when 15 they're required to run, then the environment 16 suffers -- 17 MS. GRAINEY: Yeah. 18 MR. BERSON: -- materially. 19 MR. BAILEY: If the harbor silts in, then 20 the incremental impact goes away. 21 MR. BERSON: Well, yes and no. It's going 22 to have to silt in about 30 feet for it -- for 23 us to get to that point. 24 MR. BAILEY: If it's a two feet deepening 25 project, it would have to silt in two feet for 136 1 PRESENTATION - BILL BAILEY 2 that incremental effect to go away. 3 MR. BERSON: Well, I agree, but we have 4 already sort of established that these systems 5 are sort of a reaction to a perceived problem 6 that goes beyond this expansion issue. 7 So I guess what I was saying is you've got 8 to cost out your operational costs far beyond 9 50 years, even for the increment that this 10 harbor deepening is going to impose. 11 I mean, suppose we build a Jim Dandy 12 bubbler that is going to handle the existing 13 problem plus whatever is added by the harbor 14 deepening. That element that's added on -- 15 MR. BAILEY: I think where I disagree is 16 the plus. This project is not going to solve 17 the effects of the existing project. 18 MR. BERSON: I understand that. What I'm 19 asking you is when you cost out whatever your 20 element of an oxygenation system operating-wise 21 is concerned, 50 years is not the end of the 22 operation cycle of this element of the project, 23 right? 24 MR. BAILEY: It will go on as long as that 25 increment, as long as you have a two foot 137 1 PRESENTATION - BILL BAILEY 2 deeper harbor, yes. 3 MR. BERSON: Okay. So where is that cost 4 captured, in looking at the project as a whole? 5 I mean, does it stop at 50 years? My sense was 6 that both the benefits and the costs stop at 50 7 years. 8 MR. DYSART: Morgan, do you have an expert 9 opinion? 10 MR. REES: I don't know about expert. I 11 certainly have an opinion. When the economic 12 analyses are done, you need to keep in mind 13 that the 50 year -- it's called period of 14 analysis. 15 And the term is important to understand 16 the distinction between period of analysis and 17 project life. As Bill pointed out, the project 18 life goes on forever. 19 The period of analysis is truncated at 50 20 years for a lot good, solid policy and economic 21 reasons. 22 Policy reason number one, you don't know 23 what's going to happen 20 years from now let 24 alone 50 years from now. 25 There's no good reason, for a decision 138 1 PRESENTATION - BILL BAILEY 2 maker, to base a decision on today's investment 3 on some speculation of what may or may not 4 happen 50 years from now. That's the one 5 policy. 6 The economics issue, crunching the 7 numbers, if you will, whenever you have a 8 deferred expense operating a system 50 years 9 from now, you're making a decision today. 10 Economically, you have to discount that 11 expense 50 years from now to reflect today's 12 dollars. 13 If you run the numbers, what you find out 14 is that it's not going to change your decision 15 in any way, because discounting it, some would 16 argue, like yours truly will, even 25 years 17 from now doesn't make any difference in your 18 decision because of the discounting concept in 19 economics. 20 There are economics tables that tell you, 21 depending on the interest rate you assume -- 22 and the Corps does not assume the interest 23 rate, it is specified in legislation -- they 24 are told what interest rates. 25 It varies depending on treasury bill rates 139 1 PRESENTATION - BILL BAILEY 2 and all that sort of stuff. There is a 3 specific formula, in law, that tells the Corps 4 what interest rate to use. 5 When you use the current interest rates, 6 6 and 5/8s now, something like that -- I haven't 7 checked them lately -- I think what it is. 8 When you use the 6 and 5% discount rate, 9 for an expenditure 50 years from now, it's 10 going to come up to be nothing that would 11 affect your decision, in terms of economics. 12 That's the second reason. 13 The third reason is you truncate the 14 benefits at 50 years. They don't really stop 15 at 50 years. They keep going just like the 16 costs keep going. 17 So the policy decision is made that 18 whatever the variation of costs and benefits 19 that occur 50 years from now, when they are 20 discounted back to today's dollars, to make a 21 decision on an expenditure today, they're not 22 going to change the decision process. 23 You can demonstrate that pretty easily, by 24 making up a couple of examples and seeing, 25 that that's what happens when you do it. 140 1 PRESENTATION - BILL BAILEY 2 It doesn't change the relative economics 3 because those values, discounted 50 years from 4 now, become so small in terms of today's 5 dollars. It's overwhelmed by the first five to 6 10 years of the economic analysis. 7 MR. DYSART: David then Karen. 8 MR. KYLER: I'm glad Morgan went and 9 explained it better than I could. I think it 10 needs to be clear in everyone's minds, this is 11 the state of methodology for analyzing benefits 12 and costs over time. 13 It could be viewed as a constraint of 14 an assumption or it could be viewed as a tragic 15 flaw, depending upon how you think the relative 16 benefit/cost will change over time. 17 The way we value port capacity 50 years 18 from now, relative to fisheries, may change 19 compared to what it is now, but that is not, 20 and arguably could not be used in any mutually 21 acceptable way of analyzing costs over a period 22 of 50 years. 23 Unfortunately, that's what I was saying 24 before about future economic costs are grossly 25 -- could be argued -- grossly undervalued 141 1 PRESENTATION - BILL BAILEY 2 because of that cost revenue stream, cost 3 benefit stream, as discounted over a long 4 period of time. 5 MR. DYSART: Okay. Karen is the last card 6 that's up. Why don't we get her and then, 7 unless there's a great compelling argument, 8 let's move on to model development. 9 MS. GRAINEY: I'm kind of new and this 10 might be a stupid question, but I think -- 11 MR. DYSART: There are seldom any stupid 12 questions. 13 MS. GRAINEY: Okay. 14 MR. DYSART: Okay. 15 MS. GRAINEY: And that is maybe this is 16 touching on what's troubling Will, what is the 17 commitment over the 50 years to actually budget 18 the money necessary to keep this equipment 19 running optimally? 20 You know, often times we see situations 21 where very expensive and elaborate -- I don't 22 know how elaborate -- it looks like it needs 23 maintenance, and as it gets older, it might get 24 more difficult and more expensive to maintain. 25 What kind of commitment is there, in these 142 1 PRESENTATION - BILL BAILEY 2 calculations? 3 I mean, is the government, if they decide 4 to do this, are they committed for this 50 year 5 period to come up with the money that's 6 necessary to run this optimally? 7 MR. BAILEY: The mitigation is part of the 8 project, an equal part of the project. 9 MS. GRAINEY: Does the commitment only 10 last 50 years, the promise to pay to operate 11 these things? 12 He was saying that there are occasions -- 13 I got that from what you told us. You're 14 saying you're committed to covering these 15 costs? 16 MR. BAILEY: As Morgan said, the project 17 life, it's a perpetual life. The project -- 18 MS. GRAINEY: I'm just thinking of 30 19 years from now when this equipment starts 20 breaking down, and then we hear from the 21 government, oh, we don't have the money in the 22 budget to repair this right now. 23 Then we have to let it sit there broken 24 for a year and a half, for five years, before 25 we can get it, you know, operating the way it's 143 1 PRESENTATION - BILL BAILEY 2 supposed to. 3 You know, when a project like this is new, 4 everything runs just the way -- you know, it 5 looks nice and shiny and new. Is this issue 6 addressed at all? 7 MR. BERSON: Can I build on that and let's 8 ask another question, who would run these 9 things -- the Corps? 10 MR. BAILEY: At this point, I don't know. 11 It becomes part of the navigation project. 12 Yes, initially, it's the responsibility of the 13 Corps, and the sponsor, to keep them going, 14 keep them operating. 15 MR. DYSART: Having resolved all that, I 16 thought that was, obviously, a very interesting 17 discussion. And I would like to -- we had a 18 couple of people come in. 19 I'd like for them to introduce themselves. 20 they came in very shortly after we did the 21 introductions. Would you folks introduce 22 yourselves for the record? 23 MR. BERSON: I'm Will Berson. I'm with 24 The Georgia Conservancy, and I do apologize. 25 MR. DYSART: You don't have to apologize. 144 1 COMMITTEE REPORTS 2 MS. LANDERS: I'm Mary Landers. I'm with 3 The Savannah Morning News. 4 MR. DYSART: Thank you. Okay. Next item 5 is the model development status briefly by the 6 Corps. I guess you're the last man standing. 7 You get to do that too. 8 MR. BAILEY: The final report has been 9 sent to the agencies for comment and I think 10 that we asked for comments, I think, the 15th 11 -- by tomorrow. 12 I don't think we've received any yet. I 13 know the Fish and Wildlife Service said they 14 would probably have something for us at the end 15 of this month. 16 But where we are, we're in the process. 17 We've completed the work and the report is in 18 the agencies' hands for -- for a decision on 19 whether the model is acceptable for use on this 20 project. 21 MS. JENNINGS: You expect all those 22 comments to be wrapped up this month? 23 MR. BAILEY: Yes. 24 MR. DYSART: You talked too fast, Bill. 25 Okay. How about committee reports; Aquifer 145 1 COMMITTEE REPORTS 2 Committee, Beach Erosion, Dredging and 3 Disposal, Economics Working Group -- Judy, do 4 you have any comments on behalf of your 5 committee? 6 MS. JENNINGS: Well, I really appreciated 7 Roger's presentation today, and Bill, help me 8 remember what I'm supposed to report. We'll 9 look at it again after July, the economics -- 10 MR. BAILEY: I think the economics report 11 is supposed to be done in June. 12 MS. JENNINGS: Right, June. 13 MR. BAILEY: I think July would be a good 14 time probably for another talk, sometime 15 after June, and to take this more theoretical 16 approach on all navigation projects. Then you 17 can talk on the specifics of this project. 18 MR. DYSART: Okay. Will, what's happening 19 in the Fishing and Aquatic Resources area? 20 MR. BERSON: They're swimming swimmingly. 21 I didn't schedule a meeting and I need to. 22 MR. DYSART: Okay. We'll presume that 23 interim ad hoc committee will meet in the 24 interim. The Operating Guidelines Committee 25 has already reported. Striped Bass Committee, 146 1 COMMITTEE REPORTS 2 Joel. 3 MR. FLEMING: We have not met. 4 MR. DYSART: Okay. I had a request, Bill, 5 that the power point presentations, used in the 6 economics presentation and your presentation, 7 would be made available, either to include in 8 the transcript or for Larry to post, right, is 9 that okay? 10 MR. KEEGAN: I've already asked him so 11 I'll post it on the website. 12 MR. DYSART: Let's see -- okay. What I 13 have left is when do we want to meet next? 14 (Whereupon, there was an 15 off-the-record discussion by 16 the reporter and facilitator.) 17 MR. DYSART: Bill, do you have any idea 18 what Alan wanted put in the record? Did I miss 19 something? 20 MR. BAILEY: No, you didn't. I think we 21 can just talk about it in the next month the 22 next time we talk about the modelling. 23 MR. DYSART: Okay. Without objection, 24 we'll figure that will come back to us next 25 time we discuss models, which presumably won't 147 1 COMMITTEE REPORTS 2 be too long. Okay. Meeting dates suggested. 3 MR. SCHALLER: April 4th. 4 MR. DYSART: April 4th Mr. Schaller 5 suggests, do we have consensus? Seeing no 6 objections -- 7 MS. JENNINGS: Do we want to, so it's on 8 the record, make a plan for the interim to meet 9 in March? 10 MR. BERSON: So the 7th? 11 MR. DYSART: Okay. Then the next 12 scheduled SEG meeting will be on April 4th, and 13 I hear some discussion that there will probably 14 be an interim meeting on March the 7th. 15 Anything else for the good of the cause? 16 Seeing no hands, we'll declare the meeting 17 adjourned. I thank you all. 18 (Meeting concluded at 12:45 p.m.) 19 20 21 22 23 24 25 148 1 2 3 C E R T I F I C A T E 4 G E O R G I A 5 CHATHAM COUNTY 6 7 I hereby certify that the foregoing transcript 8 was taken down, as stated in the caption, and the 9 questions and answers thereto were reduced to 10 typewriting under my directions; that the forgoing 11 Pages 1 through 148 represent a true and correct 12 transcript of the evidence given upon said hearing, 13 and I further certify that I am not of kin or 14 counsel to the parties in the case; am not in the 15 regular employ of counsel for any of said parties 16 nor am I in anywise interested in the result of 17 said case. 18 19 This, the 7th day of March, 2005. 20 21 _______________________________ 22 Kathleen Dore, Certified Court 23 Reporter, B-2041 24 25