oversight

Costs, Alternatives, and Benefits of the Tellico Water Resources Project

Published by the Government Accountability Office on 1977-07-21.

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

                          DOCUMENT RESUME
 02791 -   A2073163]

[Costs, Alternatives, and Benefits of the Tellico Water
Resources Project]. Jujy 21, 1977. 9 pp.   6 enclosures   7 pp.).
Testimony before the Senate Committee on Environment and Public
Works: Resource Protection Subcommittee; by Monte Cnfir"A Jr.,
Director, Energy and Minerals Div.

Issue Area: Water and Water Related Prograrn (2500).
Contact: Energy and Minerals Div.
Budget Function: Natural Resources, Environment, and Energy:
    Water Resources and Power (3 0i).
Organization Concerned: Department of the Interior; Tennessee
    Valley Authority.
Congressional Relevance: Senate Committee on Environment and
    Public Works: Resource Protection Subcommittee.
Authority: Endangered Species Act of 173.

          A Federal Court of Appeals alted the completion of the
 Tellico dam because it would destroy the critical habitat of the
snail darter--a 3-inch fish protected by the Endangered Species
 Act. As of January 1977, the Tennessee Valley Authority (TVA)
had obligated about $103 million on the project and estimated
that about $13 to $19 million was required for completion. The
actual dam portion of the project has been completed. A workable
compromise between completing the Tellico project and the
continued existence of the snail darter in the Little Tennessee
River is not possible. TVA has twice petitioned the Secretary of
the Interior to delist the Little Tennessee River as the snail
darter's critical habitat. Because the dam in its present form
threatens the snail darter's survival, any evaluation of
alternative plans ust include the costs of removing at least
part of tb dam. TVA estimates that removing the concrete and
- rthen dams and restoring the area could cost as much as $16
million. The Chairman of the Board of TVA should gather and
provide to the Congress detailed remaining cost and benefit
information on the project and its alternatives. Until this
information is received, Congress should prohibit by law the
expenditure of existing appropriations and not authorize
additional appropriations for work on the project that would
further endanger the snail darter's survival or not be necessary
if the project i not completed r is modified. (SC)
        UNITED STATES GENERAL ACCOUNTING OFFICE
                WASHINGTON, D.C. 20548

                                       FOR RELEASE ON DELIVERY
                                       EXPECTED AT 930 A.M. EST
                                       THURSDAY, JULY 21, 1977

                      STATEMENT OF
                  MONTE CNFIELD, JR.
         DIRECTOR, ENERGY AND MINERALS DIVISION
                       BEFORE THE
          SUBCOMMITTEE ON RESOURCE PROTECTION
                         OF THE
       COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS
                  UNITED STATES SENATE

Mr. Chairman-

     We appreciate your invitation to discuss the tentative

conclusions of our study on the costs, alternatives and

benefits for the Tellico Water Resources Project.   As you

know, we are in the process of incorporating agency comments

into our report, which we hope to issue in a matter of weeks.

I would appreciate it if the full report could be made part

of the record at that time.

     In January 1977 a Federal Ccurt of Appeals halted

completion of the Tellico dam because it would destroy the

critical habitat of the snail darter--a three-inch fish

protected by the Endangered Species Act.   Shortly thereafter,

the Chairman of the House Committee on Merchant Marine and

Fisheries, Senator James Sasser and Representative John Duncan

of Tennessee requested GAO to assist in assessing this issue

by (1) identifying what portion of project expenditures

would provide benefits if the project were not completed,

(2) identifying alternative methods to operating the

completed project that would not adversely impact the
snail da:ter, and (3) examining the benefits that would

occur if the project is   ompleted.   We were asked to

include in our analysis the "real" costs and benefits,

including "unquantifiable" items.

     I will briefly discuss each of these areas and our

tentative recommendations.
BENEFITS WITHOUT COMPLETION

    As of January 1977, TVA had obligated about $103 million

(Attachment I) on the project and estimated that about $1     to

$19 million was   equired for completion.   T:   funds for com-

pletion are primarily for roads, recreation centers and

reservoir clearing.   The actual dam portion of the project

has been completed.   Closing the sluice gates and impounding

the reservoir, however, depends on the outcome of TVA's

appeal of the Court's decision to the U.S. Supreme Court and

action by the Congress on exemption legislation.

     There are varying estimates of the amount of funds spent

to date which might provide benefits if the project is not

completed (Attachment II).    The Tennessee Endangered Species

Committee, for example, has asserted that $80 million of the

$103 million expended could still provide benefits. TVA

es imates that only $25.65 million is recoverable. These

estimates do not address exactly the same point, however,

since TVA's valuation is limited to an estimate of the current

value of the land plus the estimated cost of roads and bridges

which were needed even without the prcject.

                              2
     Our analysis looks at what portions of the project

might provide at least some benefits even if the project

were not completed.     Tie believe that $56 million, or about

half of the project costs--primarily for land, roads, and

bridges--could provide some benefits under this criterion,

but the amount of benefits to be derived will depend on how

the land is used.     Because bridges were built higher and

longer than normal to accommcdate a reservoir and many of

the roads were built to replace existing roads scheduled

for inundation, the benefits probably     ill not be pro-
portionate with the cost.

     Another type of benefit associated with the Tellico

project is the economic stimulation from almost $25 million

in salaries and wages paid to the project workers.     Some
argue that a portion of these payments should be included

in the calculation.    However, since the direct benefits
created by these wages have already been realized, and any

secondary stimulation that might accrue will also be realized

without regard to wnether the project is completed, we have

not included these payments as "benefits."

ALTERNATIVES

     Project proponents and opponents agree that a workable

compromise between completing the Tellico project and the

continued existence of the snail darter in the Little

Tennessee River is not possible.     A low or an intermediate
dam would threaten the survival of the snail darter and at


                              3
the same time, reduce projected benefits for the reservoir.
Abandoning the project without removing at least a portion

of the dam is also not feasible because life cycle studies

of the snail darter indicate that the dam in its present

fcrm also threatens the darters' survival in the river.
     TVA has   ransplanted about 700 darters to the Hiwassee

River.   Although still questioned by some biologists, TVA

claims its transplant is successful based on survival,

maturity and reproduction.   For that reason, and because

the existing Tllico construction is threatening the darter,

TVA has twice petitioned the Secretary of the Interior to

delist the Little Tennessee River as its critical habitat.

The Secretary of the Interior rejected the first petition

and suggested certain steps to preserve the darter population.

TVA has not received a response to the second petition.
     In addition to studying modifications to te dam and

transplanting the snail darter, TVA has considered alter-

nate uses for the valley if the project is not completed
(Attachment III).   Other groups such as the Tennessee

Endangered Species Committee and students and faculty at

the University of Tennessee have also developed alternate

use plans (Attachment IV). Each of the other groups' plans

proposes to preserve the existing river and to develop the

agricultural lands, cold-water recreational opportunities

and numerous archeological and historical sites. Although

 some of the plans are quite detailed, none are supported


                             4
 by current benefit-cost estimates which evaluate

 their feasibility.

      Because the dam i     its present form threatens the
 snail darter's survival, any evaluation of alternative

 plans must include the costs of removing at least a

portion of the dam, which is partly concrete and partly

earthen.     We believe that removal costs could vary con-
siderably depending on the extent of restoration deemed

necessary.     Removing a portion of the earthen dam, as
suggested by the Tennessee Endangered Species Committee,

to allow the river to flow more freely could likely be

accomplished without great expense.     However, TVA main-
tains that removing only a poirtion of the dam will rsult

in periodic flooding of some of the prime agricultural

land in the valley.     TVA estimates that removing the con-
c;ete and earthen dams and restcring the area could cost

as much as $16 million (Attachment V).
BENEFITS WITH COMPLETION

     The Tellico reservoir would principally provide

recreation, shoreline development and flood control

benefits.     Other benefits, such as navigation and electric
power generation are also expected.     The most recent
analysis of these benefits was prepared primarily in 1968

by TVA.     TVA estimated direct annual benefits of about
$3.8 million annually from the project and a benefit-cost

ratio of 1.7 to 1 (Attachment VI).    Although project costs


                              5
have increased about 115 percent, TVA has not updated

its cost-benefit analysis.

     We examnined the assumptions and logic used by TVA

to estimate benefits for Tellico.    Generally, we conclude

that TVA's projections are not representative of the actual

benefits that could be derived.     In some instances we found

that the methodologies used did not conform to Federal

guidelines and, in other   instances, statistical projections

were not valid.
     For example, TVA's projection of recreation benefits,

which accounts for about 38 percent of all benefits, had

several questionable assumptions and die not adequately

consider factors such as water quality, type and amount of

shoreline development, the amount of land devoted to public

access, and proximity to population centers.

     TVA based its estimate on an averale annual visitation

rate per shoreline mile at all existing reservoirs and

adjacent parks in the TVA system.    Our analysis showed that

this average does not reflect the extreme variations, or

the reasons for variations, among the individua: reservoirs

used in the analysis.   The visits per shoreline mile used

to compute the average ranged from 258 at one reservoir to

19,351 at another.

     Also, TVA did not make allowances for recreation

visits at Tellico that would result in a reduction in




                             6
visits at nearby existing reservoirs.     TVA officials agreed
that difterent factors would be used if the analysis were

to be made again.

     Because of problems with this and other benefits, we

were unable to determine whetheL the benefits claimed for

the Tellico project were over- or u.r-stated.        Clearly,
we believe that more current remaining benefit and cost

information is needed on the project and its alternatives

before an informed decision can be made.

RECOMMENDATIONS

     As I stated at the beginning, we plan to issue a report

to the Congress in the. near future on our assessment of the

Tellico project including a detailed analysis on each of the

major point: which I have discussed here today, and commerts

of TVA and other affected agencies.     Wse expect to make sevreral
recommendations to the Congress and to the Chairman of the

Board of TVA concerning the need for more crrent information

on the project.    Since the report is not yet final, the recom-

mendations I am about to make must be regarded as tentative.

     We plan to recommend that the Chairman of the Board of

TVA gather and provide to the Congress, through the Office

of Management and Budget, detailed remaining cost and re-

maining benefit information on the Tellico project and its

alternatives.     In addition, we plan to recommend that the




                               7
information include the formal comments of the Office of

Management and Budget, the Council on Environmenta!. Quality

and the Department of the Interior, and be submitted to

the Congress not later than 6 months    rom the date of our
report.

     TVA is ready to impound the reservoir and spend an

estimated $13 to $19 million to complete the project if the

U.S. Supreme Court rules in favor of its appeal and lifts

the current injunction.   For this reason and because current
detailed benefit information is not available, we expect

to recommend that, until the remaining cost and remaining

benefit information on the Tellico project is received from

the Chairman of the Board of TVA, including the comments

of agencies referred to above, the Congress prohibit by

law the expenditure of existing appropriations, and not

authorize further appropriations for work on the project

that would (1) further endanger the snail darter's survival,

such as closing the sluice gates, or   (2) not be necessary
if the project is not completed or is modified.

     Finally, we also expect to recommend that no action

be taken on legislation which would exempt the Tellico project

from the Endangered Species Act of 1973 until the Congress

has had time to receive and assess the updated information

outlined above.

                      *   *   **


                              8
     In closing. I should emphasize that these recommenda-

tions should not be construed that GAO   is either for or
against the completion of the Tellico project, but rather

that we believe additional information is necessary to

allow the Congress to act on the questions before it.




                           9
ATTACHMENT I                                      ATTACHMENT I
                  Tellico Dam-Project Costs
                      As Of February 1977-
                                                       Cost
Type of expense                                   (in millions)
Land acquisition

    Purchase price
        Land                            $16.9
        Improvements                    - 5.2
                                                     $22.1
    Other related costs
        Acquisition expense             $ 1.9
        Surveying and mapping             0.8
        Legal                             0.2
        Relocation                        0.5
                                                        3.4
    Total land acquisition                                        $ 25.5
Construction

    Dams
           Concrete dam spillway       $ 5.0
           Main earth dam               16.2
           Auxiliary dams                1.3
                                                     $22.5
   Reservoir roads, bridges and
     other adjustments
       Highways and bridges            $25.'
       Railroad and bridge               4.1
       Reservoir clearing and
         rim treatment                      4,0
       Utility relocations and
         miscellaneous                  -   2.0
                                                      35.7
   Other construction features
       Access roads                    $ 2.1
       Interreservoir canal              1.8
       Public use facilities             0.1
       General yard improvements
         and miscellaneous                  0.8
                                                       4.8
   Total construction                                              63.0

                             10
ATTACPdE,!T I
                                              ATTACHMENT I
                  Tellico Dam Project Costs
                      As of February 1977
                         (Continued)

Type of expense                                      Cost
                                              (in   millions)
Other

    General engineering and
      design
                                                    $ 1.6
    Planning, s;rveying, model
      tests
                                                         3.2
    Environmental studies, con-
      struction sp:ervision and
      support, and nonallocated
      overheads                                      8.2
    Contracts not    et paid in full                -1    7
    Total other
                                                                $ 14.7
Total costs
                                                                $103.2




                            11
 ATTACL        ENT II                                   ATTACHMENT II

                   Estimates Of The Amount Of Tellico
                       Dam Project Costs That Are
                  Recoverable    r   ould Provide Benefit
                        Without Project Completion
                                                            Estimate of amounts
                                            TVA estimate     that could povide
                                Original     of recover-          benefit
Category                        - cost-,    -able cost          GAO     TESC

Land                             $ 25.5        $21.0           $25.5    $25.5

Construction
  Dams                               22.5        0.0             0.0      0.0
  Roads, bridges, and
    other reservoir
    facilities                       35.7        3.3            26.5     34.0
  Other facilities                    4.8        0.0             0.0      0.0

Other costs                          14.7        1.35            4.3      5.5

       Total                     $103.2        $25.65          $56.3    $65.0 1/


1/ In addition to the $65 million, the Tennessee Endangered
   Species Committee (TESC) also contends that $15 million
   in salaries will provide benefits.




                                       12
ATTACHMENT III                                                                                                                                                          ATTACHMENT III



                                   -


                                   413

                     41lp                                                             r               0C                                     0                     0




                 Aj
                     -od c
                             Q~1111
                           C a
                               (a             C4




                                                   p
                                                                       0




                                                                     "ri
                                                                                  qw

                                                                                                                                             00
                                                                                                                                                                   0

                                                                                                                                                                   09


                                           ~> aa             ~ a a~                            ~~~                                                                 ac
                      41                       0                     0O           0IQ                                 a                      rl
           I~C   J                             0~                    0            0                  0                0                      0                     0




                 at                                    000        0-4                                F-4~~-4
                                                                                                     Cq                                      -                0
                        C41                   (%l
                                               4                     4)0          4                                           0                                    0

           to                                                                                        4)00
     PV4   >                 (A               (n .                     4-4                                                                   I
     0
                                                                                                                                                                                0
     0r                                                              42,                             4
                                           P~~~cllU                                                                                                                         0
                                            41                                   4                       r~~~~
                                                                                                             L
                                                                                                                                                                           Ai

     41                                      -.4                     ~                                                                                    0



                                             0m                      U cr                                           Li                                P
     41                                      -Il                  41(                                41             C.
                                                                                                                    O
                                                             0    0              0                   0~.            0-
                             Li                                                                  ~~
                                                                                               0114            ~          ~
                              oD             4)                              4
                                                                                           C                                                          -4
                                                                                                                                                          -                 0t
                                                                                                                                                                            hir5
                             4.)          4   to                             4                                       L                                                     4)
                                       4' (%4                        41          (*~~~~~~~~~4
                                                                                           41                             ~             f-            o414
            Li                 i             '0    ~~C                 00        DC              to41                Li       Ai                              *             .4.

                             cm                        ro
                                                                  a n naaa                           cr
                                                                                                                   '"Lo
                                             41                   41             41               4            . 41                     0             .- Lt
                                              *              41 U                41                  U              41                  J         i                        m

                                       o
                                            L~                   0
                                                                             *O *
                                                                             0                   0
                                                                                                                   '~
                                                                                                                   U                                                       'I
                                                                                                                                       '-4                                  U
                             *                           0           0                                     0                       0
                             C                                    43         V                                                                        -4
                                            O-                                                                                           0~oto043
                                       41L                        41             0         O               L         i        L                       Li4


                                                        a                        O
                                                       0~4             U         00       0l
                                                                                          43410
                                                                                                               GOC
                                                                                                                              'IO
                                                                                                                                        C
                                                                                                                                                  ~ 4)
                                                                                                                                                    0r
                                                                                                 4)
                                                                                                 Ai1           c                                                  Li
                                   o0                         0              '            40                                           0~r            -                     U
                                   hi                        0m              C                                 ~              0                           1
                                                             mma~j~m~~L13
  ATTACHMENT IV                                    ATTACHMENT IV
                  Land-Use Alternatives Proposed
                         By Other Grous
Proposal                                                 Estimated
 number              Major elements                       Costs    1/
  (1)      Declare the LIttle Tennessee River a
           Class II pastoral river. Acquire ease-
           ments: 2891 acres scenic and 764 acres
           public use. Acquire islands: 730 acres.
           Provide 3 access sites.                       $      20,000
  (2,      All aspects of plan (1) plus 2 added
           access sites. Develop 14 archeological
           and historic sites. Construct a visitor
           center at Halfway Town.                           1,998,500
  (3)      All aspects of plans (1) and (2) plus
           11,000 acre state park, stable facilities
           at several historic sites, 15 cabins, 50
           trailer campground with facilities and a
           group lodge for 60 persons.                       5,450,800
 (4)       Return all land to private ownership.          Negligible
 (5)       All aspects of plan (2) and return adja-
           cent lands to private ownership and agri-
           cultural development. Provide 5 access
           sites. Develop 14 archeological-histori-
           cal sites.                                     1.998,500
 (6)       Designation of Class II river, develop
           archeological and historical sites, estab-
           lish a state park and return agricultural
           lands to private or semi-private control.     5.450,800
 (7)       All aspects of plan (1) plus return all
           land to private ownership. Provide scenic
           and public use easements and 3 access
           sites.                                              20,000
 (8)       Return all land to private or semi-private
           ownership with minimal control by a manag-
           ing authority. Use area as a model agricul-
           tural management region in combination with
           a recreational facility. Construct a loop
           system to maximize tourism.                 No estimate
1/ GAO did not verify the cost. estimates or determine
   associated project benefits. Estimates exclude
   the cost of removing a portion of the Tellico dam.

                              14
ATTACHMENT V                              ATTACHMENT V
                   TVA's Estimate Of
                   Removing Dams And
                 Restoring Project Area

                                          Estimated cost
Remove concrete dam and spillway          $ 3,800,000
Remove earth fill dam                        5,300,000
Remove auxiliary dams                         700,000
Fill interreservoir canal                   3,300,000
Reforest river banks and reservoir            500,000
Obliterate incompleted roads and
  site facilities                           1,100,000
Restore fill at Old Fort Loudoun.
  Chota, and Blockhouse                       700,000
Remove 411 and railroad bridges               200.000
Remove miscellaneous facilities              -400,000
    Total Estimated Cost                  $16,000,000




                            15
ATTACHMENT VI                               ATTACHMENT VI

                  TVA'S-Estimate Of The
                Direct Annual Benefits Of
                 The Tellico Dam Project


        Recreation                     $1,440,000
        Shoreline development             710,000
        Flood control                     505,000
        Navigation                        400,000
        Power                             400,000
        Fish and wildlife                 220,000
        Water supply                       70,000
        Redevelopment                  -'-15,000

                                       $3,760,000




                           16