Statement by Governor John P. de Jongh, Jr. on the U.S. Department of the Interior Office of Insular Affairs Spending and the President’s Fiscal Year 2012 Budget Request for the Office of Insular Affairs

Oversight Hearing of the Committee on Natural Resources
Subcommittee on Fisheries, Wildlife, Oceans and Insular Affairs

U.S. House of Representatives 

March 2, 2011

But first, I would like to thank the Chairman for his leadership and efforts to ensure that this country responds vigorously and appropriately to the critical challenges the Insular Areas face. Under his leadership, we believe that the Committee on Natural Resources and the 112th Congress will reaffirm, and abide by, the principle that Congress has an important responsibility to ensure that the U.S. Insular Areas are treated fairly and equitably in all federal programs and economic policies.

My comments today will focus on three specific DOI programs, including the Technical Assistance, Covenant Grant, and Wastewater programs, and what we hope will be an effective Department of Energy program to implement the Insular Energy provisions of the Energy Policy Act of 2005.

OIA Technical Assistance Program

In the past, OIA has used the Technical Assistance Program (“TAP”) largely to provide federal assistance to address the unique economic and other needs of the Insular Areas. In particular, TAP grants have been awarded to improve the productivity and efficiency of Territorial governments (e.g., by funding training programs), as well as to address specific requests of Territorial Governors for financial support for critical projects not otherwise funded through, or addressed by, other OIA programs such as, most recently, the study of the uninsured in the Virgin Islands.

The Technical Assistance Program has been — and continues to be — an essential program that has not only enhanced institutional and governmental capacity in the Insular Areas, but has also resulted in practical and tangible benefits for our people. For example, the study of the uninsureds in the Virgin Islands, which could only have been funded by the TAP, has produced essential data which will enable the Government to make better informed and strategic decisions in the implementation of healthcare reform in the Territory. While the funding for this study was relatively modest, it will have enormous impact over the next several years as the Government develops its reform strategies and plans. Thus, while the needs of the Insular Areas continue to be great, especially during the current economic crisis, the ability of Territorial governments to respond would undoubtedly be lessened in the absence of the Program. Accordingly, I urge the Subcommittee to continue to support, and, if possible, increase funding for, this vital Program.

In particular, I respectfully request that Congress consider increasing funding for the Program in order to address identified, but under-resourced, needs in the Insular Areas. In prior years, approximately $12 million in TAP funds has been awarded annually to the Insular Areas. In more recent years we have seen a modest increase in funding, including $13.3 million in FY 2009 and $15.3 million in FY 2010, but the administration has reduced its requested funding for TAP in FY 2012 to $13.8 million, which represents a decrease of about 10% from FY 2010. In light of the fact that TAP requests by Insular governors historically far exceed appropriated amounts, I respectfully request that Congress at least maintain current funding for this essential Program.

In addition, I would request that this Subcommittee take measures to ensure the funds are equitably allocated among each of the Insular Areas. Indeed, it would appear that, in the absence of equitable rules or guidelines, the Virgin Islands in prior years has been receiving significantly less, on a proportional basis, than our sister jurisdictions in the Pacific.

More specifically, in FY 2010, approximately half (about $7.5 million) of the total annual TAP grants was distributed to the Insular Areas in the form of direct grants. The Virgin Islands received about $1.5 million of that $7.5 million, or approximately 20 percent. However, in prior years the Virgin Islands received a much smaller share of such direct grants. For example, in FY 2008, the Virgin Islands received only $252,373 in direct grant funds —less than seven percent of the total direct grants awarded. While the direct grant amounts for the Virgin Islands in 2009 were higher ($901,252) than in 2008, these amounts represented less than 14 percent of the total direct grants awarded.

Moreover, OIA awarded approximately two-thirds of the total amount of Program funds in non-direct grants, none of which was allocated to the Virgin Islands.

As these numbers demonstrate, the Virgin Islands has not received its fair share of Program funds in recent years. I am sensitive to the compelling needs of all of the Insular Areas, including those in the Pacific. In order to provide for more equitable distribution of the Program funds, however, while also protecting any Insular Area from a significant reduction in the amount it receives, I would respectfully propose that TAP funding be allocated as follows: 50 percent of the total amount appropriated each year should be allocated on an equal or proportionate (by population) basis among the Insular Areas (with a reallocation provision for any unused amounts), and the balance (the remaining 50 percent) should be allocated on a competitive needs basis (perhaps with statutory criteria). Not only would this allocation formula be more equitable, it would also provide a reasonably predictable stream of funding for each Insular Area and thereby minimize and mitigate the effect of any year-to-year changes in the amount of competitive grants received by each Insular Area.

I also would like to comment on a recent OIA initiative in the Program that will, in conjunction with the changes discussed above, help lead to more equitable distribution of TAP funds. We understand that, in FY 2009, OIA changed the manner in which TAP grant requests are processed in order to encourage advance planning and more efficient use of Program funds. OIA now requires the Governor of each Territory and the President (or appointee) of each Freely Associated State (“FAS”) to submit a consolidated Technical Assistance request on an annual basis. This is intended to facilitate a comprehensive review and comparative analysis of all TAP project applications, while helping Insular Area governments to better plan, implement, and track projects funded through the Program. We believe that this process will promote greater transparency regarding the award of Technical Assistance grants, and more efficient monitoring and oversight of funded projects.
OIA Covenant Grant Program

Covenant Grants provide an important source of funding for capital improvement projects (“CIP”) in the Territories and Freely Associated States. The mandatory funding for CIP Grants in the President’s budget is $27.72 million, the same as in past fiscal years. The CIP base amount for each Territory and FAS is subject to adjustment (plus or minus up to $2 million) based upon competitive criteria that are intended to measure the ability of each eligible government to exercise prudent financial management practices and to meet Federal grant requirements. While laudable in intent, the criteria, as a practical matter, do not adequately take into account the actual, or even comparative, infrastructure needs of each Territory. For example, the Virgin Islands has been under several EPA administrative orders requiring the Territory to expend resources it does not have to improve its solid waste facilities. Further, in 2010 the United States filed on behalf of EPA a complaint in U.S. District Court against the Virgin Islands Government and other entities seeking civil penalties and injunctive relief which would require the Territory to expend even more resources it does not have to address EPA’s concerns.

We are also very concerned about the proposed recalculation of base amounts for FY 2012 and beyond. In a May 28, 2010 letter from Anthony M. Babauta, Assistant Secretary for Insular Affairs, we were notified that the base amount for the Virgin Islands will be reduced from the existing $3.36 million to $2.48 million starting in FY 2012. The recalculated base amounts are reportedly derived from the average of the previous five annual allocations. Because those five annual allocations resulted from the use of the overly restrictive competitive criteria, the Virgin Islands’ recalculated base amount for FY 2012 and beyond is substantially understated. We believe that using a broader range of competitive criteria, including a needs assessment, the Virgin Islands’ base amount would be, and should be, substantially greater than $2.48 million.

Indeed, Covenant Grant funding is essential for financing the improvements required to comply with the EPA orders and to protect human health and the environment. Yet, the President’s FY 2012 Budget proposes that the Virgin Islands receive only $2.02 million, an amount substantially less than even its FY 2012 base amount of $2.48 million and, in any event, far less than what is needed to address our pressing solid waste problems and comply with the EPA orders and litigation. Accordingly, I respectfully urge that the Subcommittee recommend to OIA that it expand its competitive criteria to include actual needs assessment and request that the Virgin Islands CIP allocation for FY 2012 be increased to no less than our original base allocation.

OIA Water and Wastewater Program

Total water and wastewater funding was $1.9 million in FY 2010 and is currently being funded under the Continuing Resolution for FY 2011 at the same level. The Virgin Islands received, for the first time, $900,000 in FY 2010 funding for wastewater infrastructure improvements. However, the President’s Budget proposes to eliminate OIA Water and Wastewater Program funding for the Territories.
This funding, however, is critically needed for water and wastewater infrastructure in the Territories, including the Virgin Islands. The Territory remains under consent decree, EPA administrative orders, and a pending EPA complaint requiring us to increase expenditures to improve our wastewater and solid waste facilities. While my Administration has made significant progress in recent years, DOI water and wastewater funding is necessary to finance continued improvements. Accordingly, I respectfully request that, at a minimum, DOI water and wastewater funding in FY 2012 should be funded at levels no less than the current level.
Insular Energy Program
In 1980, Congress determined in the Omnibus Territories Act, Pub. L. No. 96-597, that (1) the Insular Areas are virtually completely dependent on imported sources of energy; (2) that dependence, coupled with the increasing cost and uncertain availability and supply of such energy sources, will continue to frustrate the political, social, and economic development of the Insular Areas and place increasingly severe fiscal burdens on the Insular Area governments; (3) the Insular Areas “are endowed with a variety of renewable sources of energy which, if developed, would alleviate their dependence on imported sources of energy, relieve the fiscal burden on local governments imposed by the costs of imported fuel, and strengthen the base for political, social, and economic development”; and (4) appropriate technologies are available to develop these renewable energy resources. See P.L. 96-597, § 604(a), 48 U.S.C. § 1492(a). Congress further declared that it is the policy of the Federal Government to “develop the renewable energy resources” of the Virgin Islands and the other Insular Areas. 48 U.S.C. § 1492(b).
That law further directed the Secretary of Energy to prepare and submit to Congress a comprehensive energy plan for the Insular Areas that emphasized indigenous renewable energy sources. An initial plan was completed in 1982, but to our knowledge the plan was never acted upon. Two decades later, Congress revisited Insular Area energy issues. In the Energy Policy Act of 2005, Congress reaffirmed its earlier findings on the energy needs in the Insular Areas. Further, Congress determined that electric power transmission and distribution lines in Insular Areas are inadequate to withstand damage caused by the frequent hurricanes or typhoons and that such infrastructure required hardening. Most significantly, Congress found that the 1982 plan was outdated and needed to be updated to reflect significant developments since 1982 in energy production, consumption, infrastructure requirements, reliance on imported energy, opportunities for energy conservation and increased energy efficiency, and indigenous renewable energy sources in the Insular Areas. In response to Congress’ directive, the Secretary of Interior updated the plan for each insular area in 2006. Those updated plans included recommendations for reducing imports of fossil fuels and energy costs, increasing the use of renewable energy sources and alternative technologies, and hardening of local power infrastructure.
In addition, the 2005 law authorizes the Secretary of Energy to implement demonstration projects and other programs contained in recommendations in the plan. Congress also authorized appropriations for DOE to carry out the purposes of the law, including providing financial assistance grants to Insular Area governments for demonstration and other projects and programs totaling up to $6 million annually starting in FY 2006. To our knowledge, the Administration has never requested funding under the Insular Energy Program, nor has Congress specifically appropriated such funding. However, in an important first step, in FY 2009 Congress appropriated $475,000 in designated funding for a technical feasibility study for a possible power grid interconnection between Puerto Rico and the Virgin Islands. And, the Virgin Islands is an active participant, along with the U.S. Department of Energy, in Energy Development in Island Nations (“EDIN”), which is an international partnership to advance the deployment of renewable energy and energy efficiency technologies in islands across the globe. But much more needs to be done to help reduce our reliance on imported fossil fuels and our energy costs, which are, because of our small size and geographic isolation, among the highest in the nation. Investments now to increase the use of renewable energy and other alternative technologies, as well as to harden our local power infrastructure to better withstand hurricanes and other natural disasters, will in the end save the federal government money.
Accordingly, because of the importance of clean, renewable, and affordable energy to the economic future, and environmental sustainability, of not only the Insular Areas, but the nation at large, I would respectfully urge this Subcommittee to work closely with the House Appropriations Subcommittee on Energy and Water Development to appropriate necessary funds under the Insular Energy Program in FY 2012 and beyond.
* * *
Mr. Chairman, I appreciate the critical budget issues confronting our country. I understand that difficult choices must be made. But I would also like to remind you that our U.S. citizens living in the offshore Territories of the United States face unique challenges posed by our geographic isolation, our historic under development, and our constitutional status.
Congress has played a critical role over the years in assisting the U.S. Territories develop our economies and provide opportunity for our people. I look forward to working with you and the other distinguished Members of the Subcommittee in developing effective measures to foster the social, economic, and institutional development of the U.S. Virgin Islands and other Insular Areas of the United States. I would be pleased to answer any questions or provide any further information on these important and beneficial programs. 
Thank you very much.

# # #