oversight

Environmental and Economic Problems Associated With the Development of the Burns Waterway Harbor, Indiana

Published by the Government Accountability Office on 1971-09-20.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

REPORT TO THE CONGRESS



Environmental And Economic
Problems Associated With
The Development Of
The Burns Waterway Harbor,
Indiana B6,,0199
Corps of Engineers (Civil Functions)
Department of the Army
Environmental Protection Agency
National Park Service
Department of the Interior




BY THE COMPTROLLER GENERAL
OF THE UNITED STATES



                                       SEPT. 20, 197 1
             COMPTROLLER GENERAL OF THE UNITED STATES
                        WASHINGTON, D.C. 20548




 B-160199




To the President of the Senate and the
Speaker of the House of Representatives

      This is our report on the environmental and economic
problems associated with the development of Burns Waterway
Harbor, Indiana. This review was made pursuant to the Bud-
get and Accounting Act, 1921 (31 U.S.C. 53), and the Accounting
and Auditing Act of 1950 (31 U.S.C. 67).

       Copies of this report are being sent to the Director, Of-
fice of Management and Budget; the Secretaries of Defense,
Army, Interior; and the Administrator of the Environmental
Protection Agency.

                                   Sincerely yours,




                                   Comptroller General
                                   of the United States




                  50TH ANNIVERSARY        1921-1971
COMPTROLLER GENERAL'S              ENVIRONMENTAL AND ECONOMIC PROBLEMS ASSOCIATED
REPORT TO THE CONGRESS            WITH THE DEVELOPMENT OF THE BURNS WATERWAY
                                  HARBOR, INDIANA
                                  Corps of Engineers (Civil Functions)
                                  Department of the Army
                                  Environmental Protection Agency
                                  National Park Service
                                  Department of the Interior B-160199

DIGEST

WHY THE REVIEW WAS MADE

     The Secretary of the Army is authorized by Public Law 89-298 to reimburse
     the State of Indiana for the construction of such parts of the Burns
     Waterway Harbor as are approved by and constructed under the supervision
     of the Chief of Engineers. The same law requires the State of Indiana to
     furnish assurances satisfactory to the Secretary of the Army that air and
     water pollution would be controlled to the maximum extent feasible in order
     to minimize any adverse effects on public recreational areas.
     The Deputy Director, Bureau of the Budget, now the Office of Management and
     Budget (OMB), recommended authorization of the project subject to the condi-
     tion that prior to the expenditure of funds for construction, local interests
     assured the Secretary of the Army that adequate transfer and terminal facili-
     ties would be constructed on a self-liquidating basis. The Secretary agreed
     and stated he would require binding'assurances.
      Because of expressions of public concern that air and water pollution from
      the Harbor would have adverse effects on the Indiana Dunes National Lake-
      shore recreational area, the General Accounting Office (GAO) made a review
      to determine if the Secretary of the Army had received the required assur-
      ances from the State.

FINDINGS AND CONCLUSIONS

      Pollution from existing and future development in the Burns Waterway
      Harbor area, unless adequately controlled, will have a detrimental effect
      upon the Indiana Dunes National Lakeshore Park Area which is currently
      being developed in the general vicinity of the Harbor. Although the
      Harbor is not complete, it has contributed to industrial development in
      the area which will inevitably increase the problems of controlling pollu-
      tion.   (See p. 6.)

     GAO evaluated the adequacy of the assurances provided by the State of Indiana
     to the Secretary of the Army, that air and water pollution sources would be
     controlled to the maximum extent feasible. Certain weaknesses were noted
     in the State's implementation of its air and water pollution control program
     which, in GAO's opinion, raise questions regarding the adequacy of the

 Tear Sheet
                                          1           SEPT.20,1 9 7 1
     assurances provided. The weaknesses noted resulted primarily from a lack
     of adequate resources and a need to strengthen the State's laws and regu-
     lations.
     Also, although control of water pollution is primarily a State respon-
     sibility, the Indiana Air Pollution Control Law allows and encourages
     local air quality control programs as an essential means for maintaining
     appropriate levels of air quality. However, Porter County, where both
     the Burns Waterway Harbor and the Indiana Dunes National Lakeshore recrea-
     tion area are located, lacks both legislation and the organization needed
     to control air pollution. (See p. 6.)
     GAO believes that the assurances obtained by the Corps from the State were
     not adequate to assure that the arrangements and schedules for providing
     public terminal and transfer facilities would support the traffic on which
     the Burns Waterway Harbor project benefits were based, and that such facili-
     ties would be financed on a self-liquidating basis. Of the planned 19
     berths, only one had been completed at the time of GAO's review and only
     one tenant had located at the Harbor. Furthermore, the Port Commission had
     no firm commitments from additional prospective tenants who will be needed
     to provide the necessary traffic to make the project self-liquidating.
     (See p. 20.)

RECO~MENDATIONS OR SUGGESTIONS

     The Secretary of the Army, the Secretary of the Interior, and the Administra-
     tor of the Environmental Protection Agency should coordinate their efforts
     to assure that the Indiana Dunes National Lakeshore and adjacent recrea-
     tional areas will not be adversely affected by existing and future indus-
     trial development in the Harbor area. (See p. 17.)
     The Secretary of the Army should require the Chief of Engineers to (1)re-
     evaluate the adequacy of the assurances provided by the State and determine
     that adequate terminal and transfer facilities will be constructed on a
     self-liquidating basis and (2)take appropriate action to encourage future
     development of the Harbor. In the event it is decided that the type of as-
     surances originally anticipated by the Secretary of the Army cannot be ob-
     tained, the Congress should be informed. (See p. 28.)

.AGENCYACTIONS AND UNRESOLVED ISSUES

     The Departments of the Army and of the Interior, and the Environmental Pro-
     tection Agency agreed to coordinate their efforts to assure that the Dunes
     recreational area will not be adversely affected by the industrial develop-
     ment. The Department of the Army also stated that it may find justification
     to require an "environmental proviso" as a condition for the final repayment
     to the State. (See p. 36.)
     The Department of the Interior stated that air and water pollution from
     the Harbor is a definite threat to the conservation and enjoyment of the

                                        2
     Dunes. The Depa;tment stated that a further review of the air and water qual-
     ity standards and enforcement should be undertaken now to determine and cor-
     rect deficiencies. The Department stated that it is working with the Environ-
     mental Protection Agency's Water Quality Office in Chicago to develop a plan
     which can detect and identify pollution sources within the Dunes and particu-
     larly along its beaches. (See p. 38.)
     The Environmental Protection Agency acknowledged the desirability of stan-
     dards regulating future water pollution, but stated that the "plan approval
     process" adopted by the State imposes effluent restrictions and adequately'
     serves the function of effluent standards. The Agency agreed that air qual-
     ity was a problem but advised that the State had agreed to adopt comprehen-
     sive air quality standards and concentrate its limited manpower resources
     in the Harbor area. (See p. 39.)
     The Department of the Army did not agree that the required assurances had
     not been obtained and stated that the assurances had been interpreted to
     mean the State's ability and intent to provide the landward facilities on
     a schedule that would meet the need for the developing traffic. A judgment
     was made by the Department that such ability and intent had been demonstrated.
     (See pp. 36 and 37.)

MATTERS FOR CONSIDERATION BY THE CONGRESS

     This report informs the Congress of the environmental and ecQnomic problems
     resulting from the development of industrial facilities by one Federal
     agency in the general vicinity of national recreational facilities being
     developed by another Federal agency and the need for greater coordination
     among Federal agencies in the planning and implementation of Federal pro-
     grams.




   Tear Sheet
                          Contents
                                                         Page

DIGEST                                                    1

CHAPTER

   1       INTRODUCTION                                   4

   2       NEED FOR AGGRESSIVE ACTION TO CONTROL AIR
           AND WATER POLLUTION IN THE AREA OF THE IN-
           DIANA DUNES NATIONAL LAKESHORE                 6
               Indiana Air and Water Pollution Control
                 Programs Limited by a Lack of Re-
                 sources                                  7
                   Inspection problems resulting from
                     inadequate staffing                  7
                   Need for the State to improve the
                     water quality monitoring system      9
               Need for Improved Legislation and Regu-
                 lations for Controlling Pollution       10
                   Air pollution                         10
                   Water pollution                       12
               Need for More Affective Control of Air
                 Pollution by Porter County              15
               Conclusion                                17
               Recommendation                            17

   3       QUESTIONABLE ASSURANCES REGARDING ECONOMIC
           DEVELOPMENT OF BURNS WATERWAY HARBOR          20
               Recommendation to the Secretary of the
                 Army                                    28

   4       SCOPE OF REVIEW                               29

APPENDIX

   I       Legislative History and Circumstances Sur-
             rounding the Authorization of the Burns
             Waterway Harbor                             33

  II       Map of Burns Waterway Harbor, Indiana         34

III        Map of Indiana Dunes National Lakeshore       35
APPENDIX                                                  Page

  IV       Letter dated May 21, 1971, from the Under
             Secretary of the Army to the General Ac-
             counting Office                               36

  V        Letter dated May 18, 1971, from the Office
             of the Secretary of the Interior to the
             General Accounting Office                     38

 VI        Letter dated July 21, 1971, from the En-
             vironmental Protection Agency to the Gen-
             eral Accounting Office                       39

VII        Principal Management Officials of the De-
             partment of Defense and the Department of
             the Army Responsible for Administration
             of the Activities Discussed in this Report   41
COMPTROLLER GENERAL'S             ENVIRONMENTAL AND ECONOMIC PROBLEMS ASSOCIATED
REPORT TO THE CONGRESS            WITH THE DEVELOPMENT OF THE BURNS WATERWAY
                                  HARBOR, INDIANA
                                  Corps of Engineers (Civil Functions)
                                  Department of the Army
                                  Environmental Protection Agency
                                  National Park Service
                                  Department of the Interior B-160199

DIGEST


WHY THE REVIEW WAS MADE

     The Secretary of the Army is authorized by Public Law 89-298 to reimburse
     the State of Indiana for the construction of such parts of the Burns
     Waterway Harbor as are approved by and constructed under the supervision
     of the Chief of Engineers. The same law requires the State of Indiana to
     furnish assurances satisfactory to the Secretary of the Army that air and
     water pollution would be controlled to the maximum extent feasible in order
     to minimize any adverse effects on public recreational areas.
     The Deputy Director, Bureau of the Budget, now the Office of Management and
     Budget (OMB), recommended authorization of the project subject to the condi-
     tion that prior to the expenditure of funds for construction, local interests
     assured the Secretary of the Army that adequate transfer and terminal facili-
     ties would be constructed on a self-liquidating basis. The Secretary agreed
     and stated he would require binding assurances.
     Because of expressions of public concern that air and water pollution from
     the Harbor would have adverse effects on the Indiana Dunes National Lake-
     shore recreational area, the General Accounting Office (GAO) made a review
     to determine if the Secretary of the Army had received the required assur-
     ances from the State.

FINDINGS AND CONCLUSIONS

     Pollution from existing and future development in the Burns Waterway
     Harbor area, unless adequately controlled, will have a detrimental effect
     upon the Indiana Dunes National Lakeshore Park Area which is currently
     being developed in the general vicinity of the Harbor. Although the
     Harbor is not complete, it has contributed to industrial development in
     the area which will inevitably increase the problems of controlling pollu-
     tion.: (See p. 6.)
     GAO evaluated the adequacy of the assurances provided by the State of Indiana
     to the Secretary of the Army, that air and water pollution sources would be
     controlled to the maximum extent feasible. Certain weaknesses were noted
     in the State's implementation of its air and water pollution control program
     which, in GAO's opinion, raise questions regarding the adequacy of the
     assurances provided. The weaknesses noted resulted primarily from a lack
     of adequate resources and a need to strengthen the State's laws and regu-
     lations.
     Also, although control of water pollution is primarily a State respon-
     sibility, the Indiana Air Pollution Control Law allows and encourages
     local air quality control programs as an essential means for maintaining
     appropriate levels of air quality. However, Porter County, where both
     the Burns Waterway Harbor and the Indiana Dunes National Lakeshore recrea-
     tion area are located, lacks both legislation and the organization needed
     to control air pollution. (See p. 6.)
     GAO believes that the assurances obtained by the Corps from the State were
     not adequate to assure that the arrangements and schedules for providing
     public terminal and transfer facilities would support the traffic on which
     the Burns Waterway Harbor project benefits were based, and that such facili-
     ties would be financed on a self-liquidating basis. Of the planned 19
     berths, only one had been completed at the time of GAO's review and only
     one tenant had located at the Harbor. Furthermore, the Port Commission had
     no firm commitments from additional prospective tenants who will be needed
     to provide the necessary traffic to make the project self-liquidating.
     (See p. 20.)

RECOMMENDATIONS OR SUGGESTIONS

     The Secretary of the Army, the Secretary of the Interior, and the Administra-
     tor of the Environmental Protection Agency should coordinate their efforts
     to assure that the Indiana Dunes National Lakeshore and adjacent recrea-
     tional areas will not be adversely affected by existing and future indus-
     trial development in the Harbor area. (See p. 17.)
     The Secretary of the Army should require the Chief of Engineers to (1) re-
     evaluate the adequacy of the assurances provided by the State and determine
     that adequate terminal and transfer facilities will be constructed on a
     self-liquidating basis and (2)take appropriate action to encourage future
     development of the Harbor. In the event it is decided that the type of as-
     surances originally anticipated by the Secretary of the Army cannot be ob-
     tained, the Congress should be informed. (See p. 28.)

AGENCY ACTIONS AND UNRESOLVED ISSUES

     The Departments of the Army and of the Interior, and the Environmental Pro-
     tection Agency agreed to coordinate their efforts to assure that the Dunes
     recreational area will not be adversely affected by the industrial develop-
     ment. The Department of the Army also stated that it may find justification
     to require an "environmental proviso" as a condition for the final repayment
     to the State. (See p. 36.)
    The Department of the Interior stated that air and water pollution from
    the Harbor is a definite threat to the conservation and enjoyment of the

                                        2
    Dunes. The Department stated that a further review of the air and water qual-
    ity standards and enforcement should be undertaken now to determine and cor-
    rect deficiencies. The Department stated that it is working with the Environ-
    mental Protection Agency's Water Quality Office in Chicago to develop a plan
    which can detect and identify pollution sources within the Dunes and particu-
    larly along its beaches. (See p. 38.)
     The Environmental Protection Agency acknowledged the desirability of stan-
     dards regulating future water pollution, but stated that the "plan approval
     process" adopted by the State imposes effluent restrictions and adequately
     serves the function of effluent standards. The Agency agreed that air qual-
     ity was a problem but advised that the State had agreed to adopt comprehen-
     sive air quality standards and concentrate its limited manpower resources
     in the Harbor area. (See p. 39.)
     The Department of the Army did not agree that the required assurances had
     not been obtained and stated that the assurances had been interpreted to
     mean the State's ability and intent to provide the landward facilities on
     a schedule that would meet the need for the developing traffic. A judgment
     was made by the Department that such ability and intent had been demonstrated.
     (See pp. 36 and 37.)

MATTERS FOR CONSIDERATION BY THE CONGRESS

     This report informs the Congress of the environmental and economic problems
     resulting from the development of industrial facilities by one Federal
     agency in the general vicinity of national recreational facilities being
     developed by another Federal agency and the need for greater coordination
     among Federal agencies in the planning and implementation of Federal pro-
     grams.
                         CHAPTER 1

                       INTRODUCTION

     The River and Harbor Act of 1965 (Public Law 89-298)
approved October 27, 1965, authorized the construction of
the Burns Waterway Harbor in Indiana. The act authorized
the Secretary of the Army to reimburse the State of Indiana
for the funds used in financing the construction of such
portions of the Harbor as approved by, and constructed under,
the supervision of the Chief of Engineers, and estimated to
cost about $25 million. As a result of changes in the de-
sign of the Harbor, the Federal obligation to reimburse the
State was reduced to about $13.5 million.

     The act required that the State of Indiana furnish
assurances to the Secretary of the Army that water and air
pollution from the Harbor will be controlled to the maximum
extent feasible in order to minimize any adverse effects on
public recreational areas in the general vicinity of the
Harbor.

     The Harbor is located on the shore of Lake Michigan
(see app. II) about 18 miles east of the Illinois-Indiana
State line. The Harbor is bordered on the west by the Mid-
west Steel Division (Midwest) of National Steel Corporation,
and on the east by a Bethlehem Steel Corporation fully inte-
grated steel mill.

     The Indiana Port Commission has directed the develop-
ment of the Harbor which was started in July 1966. The
Federal Government is reimbursing the State for the cost of
constructing the north breakwater and of dredging the inner
harbor. As of August 1971, the State had been reimbursed
approximately $12 million of the total estimated reimburs-
able costs of $13.5 million.

     The Port Commission, with use of State funds, is to
construct the inner bulkhead of the harbor and to provide
land area improvements such as grading, roads, and utilities.
Midwest constructed the west dockwall of the harbor and
Bethlehem constructed the east dockwall of the harbor.



                              4
     The Harbor was dedicated on July 17, 1970, and ships
are being docked at the one berth that has been constructed.
Midwest's rolling and finishing mill began operating in late
1960. Bethlehem expanded its steel finishing mill in late
1969 into a fully integrated steel mill capable of convert-
ing ore into steel by the construction of a basic oxygen
furnace, a blast furnace, and a battery of 82 coke ovens
and currently is constructing another blast furnace and a
battery of 88 coke ovens which are planned to become opera-
tional in 1971.

     Northern Indiana Public Service Company's (NIPSCO)
Bailly Generating Station, located east of Bethlehem's mill,
consists of two fossil fuel generating units. The Company's
plans provide for the construction of a nuclear unit to be
completed in 1976.

     The National Park Service (NPS), Department of the
Interior, is acquiring land on both sides of the Harbor
area for development of the Indiana Dunes National Lakeshore
(Dunes) park (see app. III) authorized by Public Law 761,
approved November 5, 1966. Pursuant to this law, $27.9 mil-
lion was appropriated for the acquisition of land. NPS cur-
rent plans provide for a park area consisting of 8,274 acres
including 5,390 acres of privately owned lands. As of
January 15, 1971, of the 5,390 acres, 2,644 acres have been
purchased at a cost of $20.8 million, 1,439 acres are pend-
ing acquisition by condemnation, 8 acres have been acquired
by donation, and negotiations are in process for the acqui-
sition of the remaining 1,299 acres.

     NPS plans provide for the development of the Dunes
Park at a cost of about $50 million, bringing the Govern-
ment's total cost to about $78 million. NPS estimates that
the Dunes Park will have a capacity to accommodate 88,000
visitors daily and that about 1.2 million visitors will
recreate at the park annually.




                             5
                         CHAPTER 2

           NEED FOR AGGRESSIVE ACTION TO CONTROL

              AIR AND WATER POLLUTION IN THE

       AREA OF THE INDIANA DUNES NATIONAL LAKESHORE

     Pollution from existing and future development in the
Burns Waterway Harbor area, unless adequately controlled,
will have a detrimental effect upon the Indiana Dunes Na-
tional Lakeshore Park Area which is currently being devel-
oped in the general vicinity of the Harbor. In this regard,
the State of Indiana provided assurances to the Secretary
of the Army that air and water pollution sources would be
controlled to the maximum extent feasible in order to mini-
mize any adverse effects on public recreational areas in
the general vicinity of the Harbor. However, certain weak-
nesses in the State's air and water pollution control pro-
gram and the State's implementation of the program raise
questions regarding the adequacy of the assurances provided.
The noted weaknesses resulted primarily from (1) a lack of
adequate resources, and (2) a need to strengthen the air and
water pollution control legislation and regulations.

     Also, although control of water pollution is primar-
ily a State responsibility, the Indiana Air Pollution Con-
trol Law allows and encourages localities to establish con-
trol programs for maintaining appropriate levels of air
quality. However, Porter County, where both the Burns
Waterway Harbor and the Indiana Dunes National Lakeshore
recreation area are located, does not have adequate legis-
lation to control air pollution. In addition, the County
does not have the type of organization which would be
needed to effectively administer an air quality control
program.

     In order to assure that the State would be able to
control air and water pollution in the area of the Harbor,
the Corps sought the advice of the National Air Pollution
Control Administration (NAPCA), and the Federal Water Qual-
ity Administration (FWOA). Both of these agencies have
been merged into the Environmental Protection Agency (EPA).


                            6
Both agencies informed the Corps that the State of Indiana
had adequate legislation and enforcement means. Subse-
quently, however, EPA acknowledged weaknesses in the State's
pollution control program.

INDIANA AIR AND WATER POLLUTION CONTROL
PROGRAMS LIMITED BY A LACK OF RESOURCES

     The State of Indiana has not provided the manpower nor
the financial resources necessary to adequately control the
sources of air and water pollution in the Harbor area. In
the 1969 annual reports to the Governor of Indiana, the
Indiana Air Pollution Control Board (APCB) and the Stream
Pollution Control Board (SPCB) stated that financial re-
sources and manpower are two deterrents to developing an
effective air pollution control program for Indiana, and
that sufficient personnel are not available to give ade-
quate attention to the abatement of industrial waste water
pollution in the State.

     An EPA report in 1969 also cited the lack of State ap-
propriated funds and the availability of qualified person-
nel as weaknesses in Indiana's air pollution program.

     The Indiana Division of Air Pollution Control (DAPC),
which is charged with implementation of the air pollution
control program, at the time of our review had a staff of
only ten employees including three Federal employees on
loan to the Division. Although the DAPC requested 26 addi-
tional staff members at an estimated annual cost of about
$500,000, the requested funds were not provided for in the
State's fiscal year 1971 budget. Also, the Industrial
Waste Section of the Division of Water Pollution Control
(DWPC) had a staff of only six employees to carry out
State-wide responsibilities for pollution control of 896
major industries requiring routine inspections of either
waste water treatment or waste water control surveillance.
Inspection problems resulting from
inadequate staffing
      The APCB reported that in fiscal year 1970 the DAPC
had made 480 field investigations concerning sources of air
pollution. The DWPC also reported that 510 industrial in-
spections had been made concerning sources of water pollu-
tion.
                             7
     We were advised by a State official that it was the
policy of the State to inspect the larger industrial plants
on a quarterly basis. We believe that the State's ability
to meet this objective had been affected by the lack of
adequate staff.

     For example, we noted that during the period 1964 to
1970, the DWPC made only seven inspections at Bethlehem's
plant. These inspections were directed to fluid discharges
and covered problems such as turbidity in storm drains,
oil problems, caustic discharges, and algae growth. During
the same period, the DAPC made only two inspections of
Bethlehem's plant. By letter dated October 17, 1969, DAPC
advised Bethlehem of air pollution problems that were re-
sulting in emissions from coke ovens, including smoke, dust,
and gaseous and vaporous materials. DAPC instructed Beth-
lehem to install satisfactory equipment or to modify the
existing equipment. Bethlehem was advised also that the
plant would be reinspected.

     We were informed by DAPC officials almost a year later
that no follow-up inspection of Bethlehem's coke ovens had
been made because the modifications undertaken were con-
sidered to be of a nature that could not be physically in-
spected.

     We noted also that the DAPC had made only one inspec-
tion of air pollution controls at the NIPSCO Bailly Generat-
ing Station. The report on this inspection indicated that
it was completed in January 1969, that it was of the nature
of an introductory visit, and that no tests or calculation
of emissions were made.

     Since 1965, the DWPC had made four water pollution
control inspections at the NIPSCO Bailly plant. None of
these inspections disclosed any irregularities in the waste
water treatment system. We noted, however, that two of the
inspections were mainly concerned with the plant's septic
system rather than with its industrial waste water system.

     During our visit to the NIPSCO plant in September 1970
we also noted that an outfall pipe on the side of a road op-
posite the plant's waste water lagoon system was discharg-
ing discolored materials--apparently from the lagoon

                             8
system--into the neighboring Cowles Bog which is part of
the Dunes Park area. An NPS official advised us that he
had also noted the discharges into the Bog and stated that
NPS plans to monitor the outfall and conduct tests to de-
termine if the discharge from the outfall has had adverse
environmental effects upon the Bog.

     NIPSCO officials advised us that the pipe had been
built as a temporary device in 1968 and that to their
knowledge it has never been used. At the time of our
second visit in November 1970, there was no discharge from
the pipe.

Need for the State to improve
the water quality monitoring system

     The State's water quality monitoring system is not
fully developed and currently is of limited value because
water data is not collected frequently nor analyzed to
show water quality trends.

     The State has four water quality monitoring stations
in the Harbor area and samples of water are generally taken
every two weeks. We were advised by DWPC that the data
cannot be used to determine trends in water quality because
what may appear as an improvement may be merely the result
of a higher flow in the waterway. We were advised also that
the data is not computerized and that any attempt at analy-
sis would be difficult. We were further advised that at
the present time, the data could be adopted for use as a
historical data base. When the system becomes computerized,
this historical data can also be used in determining the
type and number of daily samples needed.
     With regard to compliance with water quality standards,
we noted that in an appraisal of Indiana's fiscal year 1971
Water Pollution Control Program, EPA and the State indicated
that the State did not have readily available information
on compliance with established water quality standards. It
was agreed, however, that prior to submission of the fiscal
year 1972 Program Plan, the State would compile a tabula-
tion of those waters that are in compliance with established
water quality standards.



                             9
NEED FOR IMPROVED LEGISLATION AND REGULATIONS
FOR CONTROLLING POLLUTION

Air pollution

     The Indiana Air Pollution Control Law, enacted by the
1961 Legislature, became effective January 1, 1963. The
first seven Air Pollution Control (APC) Regulations for im-
plementation of the law were adopted by the Air Pollution
Control Board on July 25, 1968, and became effective on
December 6, 1968.

     Regulation APC-8 contains theambientair quality stan-
dards for particulates and sulfur dioxide. This regulation
was approved by EPA subject to the development of an imple-
mentation plan designed to actually achieve the standards.

     Other regulations proposed include (1) APC-12, which
established levels of concentration of particulates and sul-
fur dioxide that constitute an episode (emergency condition),
and (2) APC-13, which establishes the maximum allowable
hourly ground level concentration of sulfur dioxide from all
process and fuel burning installations.

     Indiana does not have an approved implementation plan
to achieve the air quality standards contained in APC-8.
EPA made a preliminary evaluation of an Interim Implementa-
tion Plan in July 1970. The evaluation stated that the In-
diana Law provided APCB with authority to (1) adopt and en-
force air pollution control regulations, (2) hold public
hearings, (3) assess fines and penalties, (4) take action
during air pollution emergencies, and (5) conduct inspections
of sources of air pollution. EPA stated, however, that the
State's legal authority is not adequate to provide for (1)
a permit system for new construction and operation, (2)
source testing for emission quality, (3) declaration of
episodes to prevent an emergency situation from developing;
and (4) obtaining information from air pollution sources.

     Need for a permit system in Indiana

     EPA noted that one of the more serious weaknesses in
Indiana's legislation was the lack of authority to provide
a permit system for new construction. EPA's criteria de-
fines a permit.system as a function which:
                            10
     "*** covers all the work involved in reviewing
     plans for potential new sources of air pollution;
     consultation with builder, owner and/or other in-
     terested parties to effect changes, where neces-
     sary; making inspections to insure that what is
     done conforms to the plans; and appearing before
     boards to substantiate findings. It is assumed
     that permits are issued to prevent pollution in a
     comprehensive manner, and that the system in-
     cluded an authority to construct and a permit to
     operate."

     Although the Indiana law does not provide for either a
permit system or the review of plans and specifications by
the APCB, Regulation APC-1 requires any person planning to
construct a new installation to submit a report and the
plans and specifications for approval prior to the initia-
tion of construction.

     Regulation APC-1 allows the APCB to accept, in lieu of
detailed plans and specifications, a certificate stating
that proposed air pollution control equipment will operate
in accordance with emission limitations specified by In-
diana's regulations. This certificate has no practical ef-
fect in controlling air pollution from sulfur dioxide be-
cause proposed regulation APC-13 establishing emission limi-
tations for sulfur dioxide has not been adopted by the State.
We noted that the proposed regulation does not specify a
timetable for compliance by industry with the emission lim-
itations after such time as it is adopted.

     Other than requiring the submission of plans, APC-1
does not provide for the usual requirements of a permit sys-
tem such as inspection during the construction of new in-
stallations with a potential for new sources of air pollu-
tion or authority to inspect it after construction. We be-
lieve that the following example demonstrates inadequate
controls over new sources of pollution.

     In June 1967, Bethlehem submitted a report to the APCB
outlining plans for the expansion of its finishing mill at
the Harbor into a fully integrated steel mill. The plans
provided for the construction of a group of 82 coke ovens,
a blast furnace, and a basic oxygen furnace shop and other

                             11
supporting facilities. Since APC-1 was not effective until
December 1968, Bethlehem was not required to submit for ap-
proval the detailed plans and specifications for the ex-
pansion.

     In December 1969, Bethlehem submitted another report
to the APCB outlining plans for additional construction of
another group of 88 coke ovens, another blast furnace, and
a vessel for the basic oxygen furnace shop.

     The report stated that the planned facilities and sys-
tems would provide quality of plant effluents and control
of air to standards that were equal or superior to those ap-
plying to the Phase II Step I approval in June 1967 of Beth-
lehem's initial expansion facilities or to all applicable
existing code requirements.

     The APCB accepted the above statement in lieu of the
submission of plans and tentatively approved the report on
January 21, 1970, subject to the condition that final plans
and specifications be submitted for approval, thus allowing
Bethlehem to proceed with construction.

     Although the DAPC inspections in November 1969 of
Bethlehem's coke ovens had disclosed specific problems that
were resulting in emissions and no reinspections had been
made to determine whether the problems had been corrected,
the APCB, in January 1970, approved construction of a sec-
ond group of 88 coke ovens.

     We believe that the actions taken by the State, as dis-
cussed above, in approving new construction, illustrates the
need for the Indiana Air Pollution Control Law to provide
for a permit system as has been suggested by EPA. EPA's
conclusion in reference to a permit system in Indiana states
that such a system should be developed and should include a
timetable as to when it will become fully operational.

Water pollution

     The Indiana water pollution control law is similar to
the Federal law in that degradation of the water quality
must be shown. Because damages to or impairment of water
uses must be shown, the law does not serve as a preventive

                            12
measure because effluent restrictions cannot be readily im-
posed except through the courts and as a result, enforcement
action may be difficult.

     The Indiana statutes provide that it will be unlawful
for any corporation to discharge material that will contrib-
ute to a polluted condition of the water (becoming detri-
mental to the public health or impairing water uses). The
State has the task of proving that an industry's discharge
has resulted in a polluted condition. The law states

     "*** the court shall have jurisdiction to deter-
     mine whether said order is reasonable or unreason-
     able and whether a polluted condition of any water
     or waters exists or is about to exist, and to af-
     firm, modify, or wholly set aside such order, ***
     that the findings of said board as to whether a
     polluted condition of any water or waters exists
     or is about to exist is final only when so deter-
     mined by such court." (Underscoring supplied)

     With respect to approval of new construction, the In-
diana statutes provide that all plans and specifications for
abatement facilities shall be approved by the Stream Pollu-
tion Control Board.

     Our review showed that preliminary and final construc-
tion plans for treatment facilities at Bethlehem and Midwest
were reviewed and approved by the State. The State in its
letters of approval set out certain requirements to be met
and defined the necessary action to be taken in the event
pollution problems occurred.

     Furthermore, we noted that although the State generally
does not establish the specific effluent restrictions, the
industry submits its plans which include the limits on pol-
lutants it feels will meet the established water quality
standards for a stream. The State, on the basis of profes-
sional judgment, either approves or disapproves the plans.

     The State specifies no limits as to the total pounds
of any contaminant that an industry can deposit into a wa-
terway. Increases in production normally result in in-
creases in wastes generated. State officials advised us

                            13
that they monitor these increases by observing the increased
flow reported from treatment facilities. We noted, however,
that Bethlehem's 1967 operating reports indicated a flow
of about 200 million gallons a day--about double the cur-
rently reported flow level which reflects the increased
volumes from the expanded facilities. Bethlehem officials,
however, advised us that the Corporation's earlier reported
flow data was inaccurate and that flow data reported cur-
rently is correct.

     An EPA evaluation of Indiana's water pollution control
program dated August 1970 states that:

     "The State does not have effluent standards or a
     formal permit system. However, the State con-
     tends that it controls effluent discharges
     through it's plan approval system. Even though
     this approach appears to be generally satisfac-
     tory, it is felt that the State should develop
     effluent standards or a formal permit system
     which delineates the specific constituents of a
     waste and the permissive strength of each of
     these constituents.



     "It is felt that the enforcement program for the
     State is adequate; however, the addition of ef-
     fluent standards or a formal permit system would
     greatly enhance this segment of its program."

     A program appraisal report by the State of Indiana in
March 1971 indicated that there was proposed legislation
which would require the establishment of effluent standards.




                            14
NEED FOR MORE EFFECTIVE CONTROL OF
AIR POLLUTION BY PORTER COUNTY

     The Indiana Air Pollution Control Law, as does the Fed-
eral Air Quality Act of 1967, allows and encourages local-
ities to establish air quality control programs for main-
taining appropriate levels of air quality. Section 8 of the
Indiana Law allows towns, cities, and counties to enact and
enforce local air pollution ordinances either consistent
with or more restrictive than the State Law and to adminis-
ter their own control programs. State officials advised us
that local governments should play an important part in the
State's air pollution control program. We believe that Por-
ter County, where the Harbor is located, lacks the capabil-
ity to assume this role because of a lack of an adequate or-
dinance for the establishment of an air pollution control
program or an agency to conduct such a program.

     On December 4, 1968, the Secretary of HEW, pursuant to
the Air Quality Act of 1967, designated the boundaries of
the Chicago Air Quality Control Region to encompass six
counties in Northeast Illinois and two counties in Northwest
Indiana--Lake and Porter.

     Subsequent to the designation of the area of the Chicago
Control Region, HEW issued air quality criteria and control
technology documents for sulfur dioxide and particulate mat-
ter. Release of these documents in February 1969 marked the
beginning of the 15-month timetable within which the State
was required to submit air quality standards and implementa-
tion plans to HEW. Standards and plans for the Chicago Con-
trol Region were required by May 7, 1970.

     Four air pollution control agencies in the Indiana por-
tion of the Chicago Region--Lake County agency, and three
local agencies (Gary, Hammond, and East Chicago)--have
adopted air pollution control ordinances, the latest being
effective on December 15, 1969. At the time of our field
review, Porter County had not adopted an adequate air pollu-
tion control ordinance.

     The State informed Porter County officials that the Por-
ter County's Master Plan air pollution performance standards
were not as restrictive as the State law, and recommended


                            15
that the County adopt a satisfactory comprehensive air pollu-
tion control ordinance as soon as possible.

     We were informed by State and County officials that the
proposed ordinance will be in agreement with the State's
ambient air quality standards.

     The Porter County air pollution control program consists
of an air quality monitoring program initiated in 1966. The
County owns and maintains the monitoring stations. Valpa-
raiso University, under a contract with Porter County, anal-
yses, compiles, and reports the monitored data on air pollu-
tion levels in an annual report submitted to the Porter
County Board of Commissioners.

     Porter County budgeted $17,000 in 1970 and $14,000 in
1971 for its air quality monitoring program. Of these
amounts, $12,500 was for monitoring and the balance was for
procurement and maintenance of the monitoring equipment.
Porter County receives no State or Federal funds for operat-
ing its air quality monitoring programs. Two employees from
the County Health Department perform limited administrative
and managerial functions relating to air pollution control
but no funds are officially budgeted nor have employees been
officially designated to perform air pollution control func-
tions.

     Although Porter County officials have expressed the de-
sire to conduct an air pollution control program, the County
has not adopted an ordinance providing for the establishment
of an air pollution control program or an agency to conduct
such a program.




                             16
CONCLUSION

     Information obtained from Bethlehem and NIPSCO indicated
that they have taken steps and utilized significant resources
in an attempt to control air and water pollution. We have
made no overall effort to evaluate the effectiveness of the
pollution control systems of these two companies. The pur-
pose of our review was to determine whether the assurances
provided by the State of Indiana to the Secretary of the
Army were adequate to control pollution as required by the
legislation authorizing the Harbor.

     We believe that the State of Indiana's air and water
pollution control program in the Harbor area is hampered by
a lack of resources, and that the State's legislation and
regulations need to be improved to assure adequate control
of pollution in the area. We believe also that there is
need for more aggressive coordinated action by the Federal
agencies involved to assure that pollution in the area will
not have an adverse effect on the Dunes and other public
recreational areas in the vicinity of the Harbor.

RECOMMENDATION

     We recommend that the Secretary of the Army, the Secre-
tary of the Interior, and the Administrator of the Environ-
mental Protection Agency coordinate their efforts to assure
that the Dunes and adjacent recreational areas will not be
adversely affected by existing and future industrial devel-
opment in the Harbor area.



     In commenting on our draft report, the Under Secretary
of the Army, in a letter dated May 21, 1971 (see appen-
dix IV) noted that although responsibility for air and wa-
ter pollution lies primarily with the State and other
agencies involved, the Department of the Army would make
every effort to comply with our recommendation for coordina-
tion among the Federal agencies. He stated that the Depart-
ment of the Army may find a justification for an "environ-
mental proviso" as a condition for the final payment of
$1.5 million to the State of Indiana.



                              17
     The Department of the Interior, in commenting on our
draft report in a letter dated May 18, 1971, (see appen-
dix V) acknowledged that air and water pollution from the
Harbor was a definite threat to the conservation and enjoy-
ment of the natural resources in the Dunes area. The De-
partment stated that the lack of pollution control at the
Harbor was apparent and that it indicates the need for a
comprehensive effort that can preclude pollution and prevent
additional environmental damage.

     The Department stated also that a further review of air
and water quality standards and enforcement should be under-
taken to determine and correct these deficiencies and that
it is presently working on this problem along with EPA. The
Department said that it was encouraged by our report and
looked forward to continued cooperation with the EPA and the
Corps of Engineers in protecting the Dunes area.

     EPA in its comments on our draft report dated June 21,
1971, (see appendix VI) emphasized that primary responsibil-
ity for water and air pollution control in the Harbor area
rests with the State of Indiana, but admitted that Federal
action may be necessary in this case.  In response to ques-
tions raised on the number of personnel available to superin-
tend Indiana's water pollution control program which includes
responsibilities in the Harbor area, EPA stated that some
assurances were given by the State that its limited manpower
resources would be concentrated in the Harbor area. EPA
agreed that, in coordination with the Corps, it would moni-
tor and determine the adequacy of the State's actions in
the area.

      EPA acknowledged the desirability of standards regulat-
ing future water pollution, but stated that the "plan approval
process" adopted by the State imposes effluent restrictions
and adequately serves the function of effluent standards.
EPA noted that air quality was a serious problem in the Har-
bor, area but pointed out that the Governor of Indiana had
proposed standards and an implementation plan which, on first
impression, appeared to be acceptable. EPA emphasized the
need for maximum cooperation of all Federal agencies in pro-
tecting not only the Harbor area but the whole environment.



                              18
     Other comments received from the State of Indiana, the
Indiana Port Commission, and from Bethlehem Steel, were
evaluated and appropriately considered in the body of our
report.




                            19
                         CHAPTER 3

             QUESTIONABLE ASSURANCES REGARDING

                  ECONOMIC DEVELOPMENT OF

                   BURNS WATERWAY HARBOR

     We believe that the assurances obtained by the Corps
from the State of Indiana were not adequate to assure that
the arrangements and schedules for providing public terminal
and transfer facilities would support the traffic on which
the Burns Waterway Harbor project benefits were based and
that such facilities would be financed on a self-liquidating
basis.

     At the time of our review, only one of the planned 19
berths had been completed and only one tenant was located
at the Harbor. Furthermore, the Port Commission had no firm
commitments from the additional prospective tenants that
would be needed to provide the necessary traffic to make
the project self-liquidating.

     Prior to the legislation authorizing the development
of the Harbor, OMB reviewed the Corps' estimated benefits
and costs in determining the project's economic justifica-
tion. The Deputy Director of OMB in a letter dated Septem-
ber 24, 1963, to the Secretary of the Army, which was in-
cluded in House Document No. 160 (88th Cong., 1st sess.),
recommended the authorization of the Harbor project subject
to the requirement that before the Corps reimburses the
State for the cost of constructing any facilities, the State
furnish assurances satisfactory to the Secretary of the
Army that:

     "Arrangements and schedules for providing public
     terminals and transfer facilities are adequate
     to support the traffic on which project benefits
     are based and such facilities will be financed
     on a self-liquidating basis."

     The Deputy Director of OMB stated that OMB would re-
gard the formal assurances given by the Governor of Indiana


                            20
as adequate for authorization purposes, but stipulated that
firm assurances, pertaining to the financing of the con-
struction of the transfer and terminal facilities on a self-
liquidating basis, be obtained from the Indiana Port Commis-
sion prior to construction of the Harbor. The Deputy Direc-
tor also recommended that the Chief of Engineers make a de-
tailed study to evaluate the items used to support the eco-
nomic justification of the project.

     The Secretary of the Army, in a letter to the Speaker
of the House of Representatives dated September 24, 1963,
which was also included in House Document' 160, concurred
with the recommendation of the Deputy Director of OMB on
the need for further detailed study to support clearly the
economic justification of the project and stated:

           '*** the Secretary of the Army will require
     binding assurances, prior to the expenditure of
     funds for construction, that arrangements and
     schedules for providing these facilities are ade-
     quate to support the traffic as gptimated in the
     further detailed studies of the economic justifi-
     cation of the project."

     On March 5, 1968, the Port Commission met with the
Corps' Chicago District officials to obtain advice and
guidance regarding the assurances to be furnished. During
this meeting, the Corps officials defined a fully acceptable
form of assurance by private industry as resolutions of the
respective boards of directors of the companies to be fur-
nished through the Port Commission. Although this reference
to private industry related primarily to the intentions of
the steel companies at the Harbor to construct integrated
mills, we believe that it was also considered as being ap-
plicable to those companies providing the traffic data on
which the project benefits were based.

     On May 9, 1968, the Port Commission provided the Corps
with an assurance document. One of the assurances included
in the document dealt with local cooperation and read as
follows:




                           ,21
     "To provide and maintain at local expense ade-
     quate public terminal and transfer facilities
     open to all on equal terms."

     It should be noted that this statement did not fully
comply with the 1963 requirements of the Deputy Director of
OMB and the Secretary of the Army because it did not provide
any assurance that the terminal and traqsfer facilities
would be adequate to support the traffic on which project
benefits were based. Also, it did not comply with the re-
quirement by the Deputy Director of OMB, which was agreed
to by the Secretary of the Army, that firm assurances ob-
tained be more than a statement from the Governor.




                             22
     In a letter dated August 15, 1968, the Chicago Dis-
trict Engineer and the North Central Division Engineer ad-
vised the Office of the Chief of Engineers that the Port
Commission's assurance document "appears to constitute the
binding assurance referred to by the Secretary of the Army."

     The Office of the Chief of Engineers did not agree,
and on September 5, 1968, directed the Chicago District to
take the following additional step before submitting the
Port Commission's request for reimbursement of the construc-
tion costs.

          "A written statement will be obtained from
     the Port Authority to the effect that its firm
     construction schedule provides for completion of
     terminal and transfer facilities adequate to
     handle traffic sufficient to justify the invest-
     ment in the harbor. In particular, the state-
     ment should indicate that a coal transfer facil-
     ity, capable of ultimately handling at least
     10,000,000 tons per year, is provided for in the
     firm plans of the Authority."

     In response to that directive, the Chicago District
telephoned the Port Commission on May 8, 1969, and asked a
Commission official whether a firm construction schedule
provides for completion of terminal and transfer facili-
ties--including a facility to handle 10 million tons of
coal a year--adequate to handle traffic sufficient to jus-
tify the investment in the Harbor.   The Commission official
replied in the negative.

     On June 18, 1969, after several meetings between the
Corps' Chicago District and North Central Division, a deci-
sion was made that it would be impractical to comply with
the requirements of the Office of the Chief of Engineers on
the statement to be obtained from the Port Commission.

     On August 8, 1969, the Port Commission, in a letter to
the Chicago District, stated:

          "We have no firm construction schedule that
     provides for a coal transfer facility having an



                             23
     ultimate capacity of ten (10) million tons of
     coal annually."

     On August 11, 1969, the Chicago District prepared and
forwarded to the Office of the Chief of Engineers an eco-
nomic study which did not include any benefits attributable
to coal shipments. The letter stated that the exclusion of
the coal benefits from the study did not imply that the
Port Commission no longer considered future transshipments
of coal at the Harbor, but merely indicated that it has "no
definite schedule at this time for the provision of coal
handling facilities."

     It should be noted that although the economic study
did not include any benefits from the transshipment of coal,
it did include benefits attributable to the transshipment
of grain and general cargo. We found no evidence, however,
that the Chicago District inquired into the firmness of the
Port Commission's construction schedule for providing grain
or general cargo handling facilities.

     The District Engineer recommended to the Office of the
Chief of Engineers that its requirement of September 5,
1968, for a written statement from the Port Commission be
waived. The Office of the Chief of Engineers did not concur
with this recommendation, however, and on December 19, 1969,
directed the District Engineer by telephone to obtain addi-
tional information from the Port Commission.

     On December 22, 1969, the Chicago District, by tele-
phone, requested the Port Commission to furnish a letter
providing (1) its present plans to develop Harbor facili-
ties, (2) information on the types of commodities to be
handled by the proposed Harbor facilities and the estimated
annual tons of these commodities, and (3) information as to
any firm commitments or anticipated commitments from prospec-
tive users of the Harbor.

     The Port Director responded for the Commission in a
letter dated January 2, 1970, and submitted a narrative
summary of the progress of the Harbor construction. The
summary stated that one tenant had signed a lease and that
a leasing agent was actively engaged in discussions with
several prospective tenants and port users. The summary

                            24
also cited nine specific companies as prospective tenants,
and stated that the Port Commission estimated that these
companies would generate a total of about 9 million tons
of cargo by 1975.

     We noted that of the nine companies mentioned in the
summary, only one, accounting for 150,000 of the estimated
nine million tons, had signed a lease with the Port Commis-
sion which would constitute the suitable binding assurances
required. In addition to the nine million tons of cargo
attributed to these companies, six million represented the
transshipment of coal for which the Port Commission had
previously stated it had no firm schedule for the construc-
tion of the necessary handling facilities.

     The Port Director in his letter of January 2, 1970,
stated that the Commission had established a master plan
for the development of the Harbor and that no deviations
from the plan had been made or were planned. The master
plan provided for water-borne cargo handling facilities
consisting of general cargo transit sheds, a public dry
storage warehouse, a container and bulk storage area, a
refrigerated warehouse, grain elevators, a coal transfer
facility, a sugar refinery, and a bulk terminal for petro-
leum products.




                             25
     The master plan showed an estimated cost of these fa-
cilities of about $38.6 million. The master plan did not,
however, provide for the design and construction of these
facilities until leases providing adequate revenue were ex-
ecuted with tenants for use of the facilities. Since only
one of the nine prospective tenants had signed a lease with
the Port Commission, the letter of January 2, 1970, cannot
be considered as sufficient binding assurances that adequate
terminal and transfer facilities will be provided to support
the traffic on which project benefits were based.

     The Corps' Chicago District prepared a final economic
study dated January 19, 1970. The benefits claimed in the
study were based on information contained in the Port Direc-
tor's January 2, 1970, letter.

     An official of the Department of the Army informed us
that the documents used as the basis for the Army's deter-
mination that the "binding assurances" as stipulated in
House Document 160 had been met were (1) the Port Commis-
sion's assurance document of May 8, 1968, (2) the Port Di-
rector's letter of January 2, 1970, and (3) the Chicago Dis-
trict's final economic study dated January 19, 1970. He
also stated that it was his understanding that the Harbor
was substantially developed and that the Port Commission had
signed contracts with various tenants.

     The Port Director informed us, however, that his letter
of January 2, 1970, was never meant to provide the binding
assurances "that the named industries would locate at the
Harbor." He also said that the assurance document, executed
by the Commission on May 8, 1968, only assured the Federal
Government that the Port Commission would provide adequate
public terminal and transfer facilities. As previously
noted, the May 8, 1968, assurance document was rejected by
the Office of the Chief of Engineers as not being responsive
to either the requirement by the Deputy Director of OMB or
the Secretary of the Army that assurances be "binding." Fur-
thermore, the Chicago District's final economic study was
based on the Port Director's letter of January 2, 1970,
which was not considered to be adequate by the Office of the
Chief of Engineers.




                             26
     The Under Secretary of the Army, in commenting on our
draft report in a letter dated May 21, 1971 (see app. IV),
advised us, with respect to the requirement that local in-
terests provide adequate terminal and transfer facilities
(binding assurances) at the Harbor, that the primary con-
sideration was to assure that the State had the ability to
finance the construction of these facilities on a schedule
that would support the traffic estimated in the economic
justifications for the project. He said that the reduction
in the cost of the Harbor from the estimated cost of
$25 million to a cost of about $14 million changed'both the
volume of traffic and type of shipments needed for the eco-
nomic justification of the Harbor and of the schedule for
the construction of the facilities required to handle such
shipments. The' Under Secretary stated that the Department
had made a judgment that the State had demonstrated its
ability and intent to provide the facilities on a schedule
that would meet the need for the developing traffic and
that the assurances provided by the State met the intent of
the Secretary of the Army's requirements.

     In our opinion, the Department's present views as to
the adequacy of the assurances by the Indiana Port Commis-
sion that the transfer and terminal facilities will be pro-
vided on a self-liquidating basis is not consistent with
the intent either of the Deputy Director of OMB or the Sec-
retary of the Army as set forth in their letters as in-
cluded in House Document No. 160 (88th Cong., 1st sess.).
Furthermore, in view of the changes in the design of the
Harbor and the reduction of the Federal obligation from the
originally estimated cost of $25 million to about $13.5 mil-
lion, we are of the view that the Corps should have made a
further study to determine the changes in the type and
volume of shipments necessary for the economic justifica-
tion of the Harbor.




                             27
RECOMMENDATION TO THE SECRETARY OF THE ARMY

     We recommend that the Chief of Engineers be required
to (1) reevaluate the adequacy of the assurances provided
by the State and determine whether adequate terminal and
transfer facilities will be constructed on a self-liquidating
basis and (2) take appropriate action to encourage further
development of the harbor. In the event it is decided that
the type of assurances originally anticipated by the Sec-
retary of the Army cannot be obtained, the Congress should
be so informed.




                            28
                          CHAPTER 4

                        SCOPE OF REVIEW

     We reviewed pertinent legislation, regulations, poli-
cies, procedures, and practices related to construction of
the Burns Waterway Harbor. We also held discussions with
Federal, State, and private industry officials having man-
agement responsibility for development of the Harbor and
surrounding areas.

     Air and water pollution control inspection reports
were reviewed. We also accompanied officials on pollution
inspection tours of industries in the Harbor area.

     The following agencies were included in our review:

            Federal                              Location
U.S. Army, Corps of Engineers             Washington, D.C.
  Office of the Chief of Engi-
  neers
  District Engineer                       Chicago, Illinois
Environmental Protection Agency           Chicago, Illinois
U.S. Department of the Interior           Washington, D.C.
  National Park Service                   Chesterton, Indiana

             State
Indiana Port Commission                   Burns Waterway Harbor,
                                            Indiana
State Board of Health                     Indianapolis, Indiana
Porter County Health Department           Valparaiso, Indiana

            Private
Bethlehem Steel Corporation               Chesterton, Indiana
Midwest Steel Division of Na-             Portage, Indiana
  tional Steel Corporation
Northern Indiana Public Service           Baileytown, Indiana
  Company



                                29
I
APPENDIXES




 31
                                                 APPENDIX I

            Legislative History and Circumstances
         Surrounding the Authorization of the Burns
                       Waterway Harbor


1930 - Public Law 71-520 authorized the Corps to perform a
study of the feasibility of constructing a harbor at the
Burns Waterway site.

December 1931 - Corps submitted a report to Congress un-
favorable toward Federal participation in the construction
of a harbor at that site.

December 1944 - Another unfavorable report was submitted to
the Congress.

October 1960 - The Corps submitted a report that favored the
construction of a Harbor at the Burns Waterway site.  This
report differed from the previous reports because it recog-
nized increased project benefits from the construction of
one or more steel mills at the site.  This report was re-
turned for further study.

February 1961 - A bill was introduced in Congress to incorpo-
rate 5,000 acres including the proposed Burns Waterway site
into a national park (Indiana Dunes National Lakeshore).  The
bill was not enacted into law.

July 1961 - A compromise bill was introduced to provide for
both harbor and park facilities.  The bill was not enacted
into law.

November 1961 - In a letter to the Secretary of the Army, the
Secretary of the Interior opposed the construction of a harbor
at the Burns Waterway site because it would destroy the
Indiana Dunes National Lakeshore.

January 1962 - The Chicago district submitted another report
to the Secretary of the Army that favored Federal participa-
tion in construction of a harbor at the Burns Waterway site.

September 1962 - The Secretary of the Army submitted the re-
port to the Congress.

October 27, 1965 - Public Law 89-298 authorized the construc-
tion of a harbor at the Burns Waterway site.

November 5, 1966 - Public Law 89-761 authorized the Indiana
Dunes National Lakeshore (Dunes).  Congress appropriated
$27.9 million to acquire land for the Dunes.




                             33
APPENDIX II




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                                                                                   34.
                                                                                                                                                                           APPUMDIX III



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APPENDIX IV




                        DEPARTMENT OF THE ARMY
                              WASHINGTON. D.C.   20310




 Mr. C. M. Bailey
 Director, Defense Division
 United States General Accounting Office                 21   AyT 1971
 Washington, D.C.   20548



 Dear Mr. Bailey:

      The Secretary of Defense and Secretary of the Army have- asked that I
 reply to your recent request for comments on the draft report prepared by
 your office entitled, "Economic and Environmental Problems Associated with
 the Development of the Burns Waterway Harbor, Indiana" dated March 1971.

       Prior to authorizing reimbursement to the State of Indiana on 30 March
  1970, a careful study was made of all aspects of the requirements established
  by the Congressional authorization of the Burns Waterway Harbor, and the
  recommendations of the Secretary of the Army, the Bureau of the Budget and
  the Chief of Engineers. With respect to the requirement that local interests
 would provide adequate terminal and transfer facilities, the primary considera-
  tion was to assure that the State had the ability to finance these on a
  schedule that would support the traffic to be estimated in further detailed
 studies of the economic justification of the project. This concern was
 based on a harbor estimated to cost $25,000,000 for construction by the
 Federal Government, and on the assumption of a long time interval before
 beginning construction. The term "binding" as used by the Secretary of the
 Army was interpreted to have the same meaning as the term "firm assurances"
 used by the Bureau of the Budget. That agency differentiated between
 "formal assurances" from the Governor of Indiana, which were considered
 adequate for authorization purposes, and "firm assurances" which required
 additional evidence-prior to beginning construction by the Federal Government.
 The project was authorized by Public Law 89-298 with a provision that allowed
 the State to construct the harbor with reimbursement by the Secretary of the
 Army. The State of Indiana promptly began the work and was able to construct
 an adequate harbor at a cost of about $14,000,000.   This reduction in cost
 changed the volume and type of shipments needed for economic justification
 of the project, and in addition changed the schedule for providing the
 facilities required for the new mix of commodities to be shipped through the
 harbor. Balancing all factors, a judgment was made that the State had
 demonstrated its ability and intent to provide the landward facilities on
 a schedule that would meet the need for the developing traffic, and that the
 assurances provided by the State met the intent of the Secretary of the
 Army's requirements.




                                       36
                                                           APPENDIX IV



     Turning now to the recommendation that the Secretary of the Army,
the Secretary of the Interior and the Administrator of the Environmental
Protection Agency should coordinate efforts to assure that the Indiana
Dunes Lakeshore will not be adversely affected by the industrial develop-
ment, we shall make every effort to comply with this recommendation.
Through its enforcement of the Refuse Act (33 USC407) the Army Corps of
Engineers can control discharges or deposits into Lake Michigan which
will aid in controlling water pollution. We note that the report
credits the Corps with obtaining the expert advice of the National Air
Pollution Control Administration and the Federal Water Quality Administration
concerning their judgment that the State had the capability to control air
and water pollution. Although primary responsibility for air and water
pollution lies with the State and the other involved agencies as stated
in your report, we may find a justification for an environmental proviso
as a condition for final repayment to the State.

     We appreciate the opportunity to review your draft report.

                                        Sincerely,



                                        Thaddeus R. Beal
                                   Under Secretary of the Army




                                   37
APPENDIX V.




          United States Department of'the Interior
                      OFFICE OF THE SECRETARY
                       WASHINGTON, D.C. 20240


                                                            MAY 1 8 1971
Mr. Wilbur D. Campbell
Assistant Director, Civil Division
General Accounting Office
Washington, D.C. 20548

Dear Mr. Campbell:

The Department of the Interior has reviewed with interest the GAO
draft report entitled, "Economic and Environmental Problems Associated
with the Development of the Burns Waterway Harbor, Indiana, Corps of
Engineers, Department of the Army; Environmental Protection Agency;
and National Park Service, Department of the Interior."

Air and water pollution from the Burns Waterway Harbor is a definite
threat to the conservation and enjoyment of the natural resources in
the Indiana Dunes National Lakeshore. The lack of pollution control
at the Harbor is apparent and indicates the need for a comprehensive
effort that can preclude pollution and prevent additional environmental
damage. A further review of the air and water quality standards and
enforcement should be undertaken now to determine and correct
deficiencies.

We are working with the Environmental Protection Agency's Water Quality
Office in Chicago to develop a plan which can detect and identify
pollution sources within the lakeshore and particularly along its
beaches. This monitoring system could be used to detect pollutants
and changes in water quality or of the biota and to confirm the
effectiveness of the regulations. We are encouraged by the GAO's
report and we look forward to the continued cooperation of the Corps
of Engineers and the Environmental Protection Agency in protecting the
resources of the Indiana Dunes National Lakeshore.

We appreciate the opportunity to review the report in draft.

                                     Sincerely yours,




                                     Di   y   r of Survey       Review




                                     38
                                                           APPENDIX VI


          ENVIRONMENTAL PROTECTION AGENCY
                    WASHINGTON, D.C. 20460


                                             21 JUN 1971
Mr. Lloyd Smith
Associate Director
U.S. General Accounting Office
441 G. Street, N.W.
Room 6828, Civil Division
Washington, D. C. 20548

Dear Mr. Smith:

     On March 15, 1971, you transmitted to us copies of a proposed
report to the Congress on environmental problems associated with
the development of the Burns Waterway Harbor, Indiana for the
purposes of review and comment. It was specifically requested that
we comment on the water quality and air pollution control matters
contained in the draft report. In response to that request, we
wish to offer the following comments for consideration in the
preparation of the final report.

     Your report recommends (1) that payment to the state for the
project be withheld until arrangements are made for it to operate
on a self-paying basis; and (2) the Secretaries of the Army, Interior,
and the Administrator of EPA coordinate their efforts to insure that
the Indiana National Lakeshore will not be adversely affected by
existing and future industrial development in the Harbor area; and
(3) there should be a more aggressive federal action to insure that
the Dunes area will not be adversely affected by air and water
pollution.

     These conclusions and recommendations would, in effect, shift
the primary responsibility for water and air pollution control in
the Harbor area from the state to this agency. While the evidence
in the draft report suggests that this may become necessary, the
state should not be absolved of its commitments.

     Both the Clean Air Act and Federal Water Pollution Control Act
designate the states as the first line of defense against environ-
mental degradation. Federal involvement supplements local efforts
by rendering technical and other assistance. Where the states fail
to fulfill their responsibilities, then Federal actions are authorized.




                                  39
 APPENDIX VI


     Public Law 89-298 builds on these principles and specifically
provides that "The State of Indiana shall furnish assurance satis-
factory to the Secretary of the Army that water and air pollution
sources will be controlled to the maximum extent feasible in order
to minimize any adverse effects on public recreational areas in the
general vicinity of the Burns Waterway Harbor."

     Your draft report raises serious questions about the numbers
of available personnel to superintend Indiana's water pollution
control program. Some assurances have been made that the state
will concentrate its limited manpower resources in the Harbor area
and fulfill its obligations. We will, in coordination with the
Corps of Engineers, monitor the state's action to determine its
adequacy.

     The draft report suggests a need to prevent water pollution
before it occurs and suggests the adoption of general standards for
liquid water discharge. We agree that standards are a desirable
prophylactic for regulating future pollution. However, it is our
opinion that the Indiana "plan approval process" imposes effluent
restrictions and adequately serves the function of effluent standards,

     We agree that air quality is a serious problem. The Governor
of Indiana, consistent with his duties under the Clean Air Act, has
announced his intention to adopt ambient air quality standards and
an implementation plan applicable to the area. The standards and
plan are subject to the approval of the Administrator of EPA. These
standards, on first impression, appear to be acceptable.

     It is important to EPA that this project proceed on an environ-
mentally sound basis and we are encouraged that GAO and other Govern-
ment agencies have taken an interest in this effort. We hope you will
continue to provide assistance. This is a significant project, and
we feel maximum cooperation of all federal agencies will enhance
prospects for fulfilling the national commitment to protecting the
environment. We appreciate the opportunity to furnish comments to
your draft report.

                             Sincere    yours,



                             Th mas E. Carroll
                             Assistant Administrator
                              for Planning and Management




                                   40
                                                              APPENDIX VII


                        PRINCIPAL MANAGEMENT OFFICIALS OF

                           THE DEPARTMENT OF DEFENSE

                        AND THE DEPARTMENT OF THE ARMY

          RESPONSIBLE FOR ADMINISTRATION OF THE ACTIVITIES

                           DISCUSSED IN THIS REPORT


                                                 Tenure of office
                                                 From          To

                             DEPARTMENT OF DEFENSE

 SECRETARY OF DEFENSE:
        Melvin R. Laird                       Jan.     1969    Present
        Clark Clifford                        Mar.     1968    Jan. 1969
        Robert S. McNamara                    Jan.     1961    Feb. 1968
        Thomas S. Gates, Jr.                  Dec.     1959    Jan. 1961
        Neil McElroy                          Oct.     1957    Dec. 1959
        Charles E. Wilson                     Jan.     1953    Oct. 1957

                             DEPARTMENT OF THE ARMY

 SECRETARY OF THE ARMY:
     Robert F. Froehlke                       July     1971     Present
     Stanley R. Resor                         July     1965     June 1971
     Stephen Ailes                            Jan.     1964     July 1965
     Cyrus R. Vance                           July     1962     Jan. 1964
     Elvis J. Stahr, Jr.                      Jan.     1961     June. 1962
     Wilber M. Brucker                        July     1955     Jan. 1961

 CHIEF OF ENGINEERS:
     Lt. Gen. Frederick J. Clarke             Aug.     1969     Present
     Lt. Gen. William F. Cassidy              July     1965     July 1969
     Lt. Gen. Walter K. Wilson, Jr.           May      1961     June 1965
     Lt. Gen. Emerson C. Itschner             Oct.     1956     Mar. 1961
     Lt. Gen. Samuel D. Sturgis               Mar.     1953     Sept. 1956



U.S. GAO. Wash., D.C.


                                       41