191

1 STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

SUGAR CANE GROWERS COOPERATIVE OF)

3 FLORIDA, INC., ROTH FARMS, INC., )

and WEDGWORTH FARMS, INC., )

4 )

and )

5 )

FLORIDA SUGAR CANE LEAGUE, INC., )

6 UNITED STATES SUGAR CORPORATION )

and NEW HOPE SOUTH, INC., )

7 )

and )

8 )

FLORIDA FRUIT AND VEGETABLE )

9 ASSOCIATION, LEWIS POPE FARMS )

W.E. SCHLECHTER & SONS, INC., and)

10 HUNDLEY FARMS, INC., )

)

11 Petitioners, )

)

12 v. )

)

13 SOUTH FLORIDA WATER MANAGEMENT )

DISTRICT, )

14 )

Respondent, )

15 )

and )

16 )

MICCOSUKEE TRIBE OF INDIANS OF )

17 FLORIDA, the UNITED STATES OF )

AMERICA, FLORIDA DEPARTMENT )

18 OF ENVIRONMENTAL REGULATION, and )

FLORIDA WILDLIFE FEDERATION, )

19 )

Intervenors. )

21 ----------------------------------------------------

ORAL DEPOSITION OF LONNIE L. JONES, Ph.D., VOLUME II

22 TAKEN ON MARCH 4, 1993

----------------------------------------------------

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1 A P P E A R A N C E S:

2 MS. DONNA H. STINSON

Hopping, Boyd, Green & Sams

3 123 South Calhoun Street

P. O. Box 6526

4 Tallahasee, Florida 32301

5 COUNSEL FOR SUGAR CANE GROWERS

COOPERATIVE OF FLORIDA, ET AL.

8 MR. RICK J. BURGESS

Peeples, Earl & Blank

9 One Biscayne Tower

Suite 3636

10 Two South Biscayne Boulevard

Miami, Florida 33131

COUNSEL FOR FLORIDA SUGAR CANE

12 LEAGUE, INC.

15 MR. KEITH E. SAXE

United States Department of Justice

16 Environmental & Natural Resources Division

General Litigation Section

17 601 Pennsylvania Avenue NW

Room 879

18 Washington, D.C. 20004

19 COUNSEL FOR UNITED STATES OF AMERICA

21 ALSO PRESENT: TEOFILO OZUNA, JR.

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1 T A B L E O F C O N T E N T S

2 PAGE

3 AGREEMENTS OF COUNSEL. . . . . . . . . . . . . 193

4 EXAMINATION OF LONNIE L. JONES, Ph.D., VOLUME II

5 BY MR. BURGESS . . . . . . . . . . . . . . 200

6 BY MR. SAXE. . . . . . . . . . . . . . . . 328

7 RE-EXAMINATION

8 BY MS. STINSON . . . . . . . . . . . . . . 318

9 WITNESS' SIGNATURE PAGE. . . . . . . . . . . . 331

10 CORRECTION SHEET . . . . . . . . . . . . . . . 332

11 REPORTER'S CERTIFICATE . . . . . . . . . . . . 334

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1 E X H I B I T S

2 NO. DESCRIPTION PAGE

3 1 Memorandum to G. Johns from R. Lacewell

dtd 5/21/92 . . . . . . . . . . . . . .

2 Memorandum to G. Johns from R. Lacewell,

5 L. Jones and T. Ozuna dtd 6/3/92 . . . . 51

3 Letter to G. Johns from Peterson Consulting

7 dtd 7/31/92 . . . . . . . . . . . . . .

8 4 Handwritten Notes - 20-Year Analysis . .

9 5 Handwritten Notes . . . . . . . . . . .

10 6 Memorandum to K. Saxe from L. Jones

dtd 10/23/92 . . . . . . . . . . . . . . 52

7 Memorandum to K. Saxe from L. Jones and

12 R. Lacewell dtd 8/28/92 . . . . . . . . 54

13 8 Memorandum to K. Saxe from L. Jones

dtd 8/4/92 . . . . . . . . . . . . . . . 65

8-A Memorandum to K. Saxe from L. Jones. . . 266

9 Handwritten Notes to S. Ponzoli . . . .

10 Fax to S. Ponzoli dtd 1/22/93 . . . . .

11 Florida Sugar Cane League Summary of

18 Hazen & Sawyer's Potential Economic

Impacts Analysis . . . . . . . . . . . .

12 Economic Effects of the SWIM Plan on

20 Sugarcane Production in the Everglades

Agricultural Area of Florida . . . . . . 98

13 Memorandum to K. Saxe from R. Lacewell

22 dtd 6/16/92. . . . . . . . . . . . . . .

23 14 Letter to R. Rosenberg from I. Hirschhorn

dtd 5/21/92 . . . . . . . . . . . . . . 94

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1 E X H I B I T S

2 NO. DESCRIPTION PAGE

3 15 Florida Sugar Cane League Summary of

Hazen & Sawyer's Potential . . . . . . . 104

16 Notes . . . . . . . . . . . . . . . . . 141

17 Letter to G. Johns from L. Jones . . . . 147

18 Agricultural Property Tax Assessment in

7 the EAA . . . . . . . . . . . . . . . . 155

8 19 Review of World Price Situation. . . . . 158

9 20 Review of World Price Situation. . . . . 203

10 21 Letter to G. Johns to Peterson Consulting

dtd 7/31/92 . . . . . . . . . . . . . . 298

22 Debt . . . . . . . . . . . . . . . . . . 300

23 The Validity of Benefits Transfers:

13 The Case of the Florida Everglades . . .

14 24 Issues Related to the Profitability of

Farming in the EAA Draft 6/15/92. . . . .

25 Memorandum to K. Saxe from T. Ozuna

16 dtd 7/30/92 . . . . . . . . . . . . . . .

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1 A G R E E M E N T S

2 DEPOSITION AND ANSWERS of LONNIE L. JONES,

3 Ph.D., VOLUME II, who resides in Bryan, Brazos

4 County, Texas, taken herein by Counsel for

5 PETITIONERS, before Lori A. Belvin, a Certified

6 Shorthand Reporter and Notary Public in and for the

7 State of Texas, on March 4, 1993, between the hours

8 of 8:30 A.M. to 2:00 P.M. at the Hilton Hotel,

9 Board Room, located at 801 University Drive East,

10 College Station, Brazos County, Texas, pursuant to

11 NOTICE and the following stipulations and

12 agreements:

13 IT WAS AGREED by and between counsel for the

14 Petitioners and Respondent, in the above-numbered

15 and styled cause, that all formalities are

16 specifically waived and that the oral deposition of

17 LONNIE L. JONES, Ph.D., VOLUME II, may be taken

18 herein forthwith before Lori A. Belvin, a Certified

19 Shorthand Reporter and Notary Public in and for the

20 State of Texas, said deposition being taken with the

21 same force and effect as though all the requirements

22 of the statutes and rules had been fully complied

23 with.

24 IT WAS FURTHER AGREED that no objections need be

25 made by any party at the time of taking said

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1 deposition, except objections as to the form of the

2 question or the responsiveness of the answer, which

3 if not made during the deposition are waived; but if

4 and when said deposition, or any portion thereof, is

5 offered in evidence on the trial of this cause by

6 any party hereto, it shall be subject to any and all

7 other legal objections, such objections to be made

8 at the time of the tender, the same as though the

9 witness were on the stand personally testifying.

10 IT WAS FURTHER AGREED that the witness shall

11 sign the deposition transcript before any notary

12 public or official authorized to administer oaths;

13 and, at such time, the witness has the privilege of

14 reading over said transcript and making any

15 corrections that he finds to be necessary such

16 corrections to be made in accordance with the Rules

17 of Civil Procedure.

18 IT WAS FURTHER AGREED that in the event the

19 original deposition transcript is not signed by the

20 witness within 20 days of receipt and filed at the

21 time of trial or any hearing, that the original or a

22 certified copy of said transcript may be filed in

23 court and used herein as though the witness had

24 signed said original transcript.

25 IT WAS FURTHER AGREED that after said deposition

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1 transcript has been returned to the deposition

2 officer along with changes, if any, made by the

3 witness in accordance with the Rules of Civil

4 Procedure, that the original deposition transcript,

5 together with copies of all exhibits, will be

6 delivered to MS. DONNA H. STINSON for safekeeping

7 and use in trial.

8 IT WAS FURTHER AGREED that after said deposition

9 transcript has been returned to counsel in

10 accordance with these stipulations and agreements,

11 it will be treated by the parties hereto and may be

12 used herein with the same force and effect as though

13 all statutes and rules relating to the taking and

14 returning into court of depositions had been fully

15 complied with.

16 * * * * *

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1 P R O C E E D I N G S

2 * * *

3 MR. SAXE: Before we begin, let me

4 raise something that came up last

5 night. In reviewing Professor Dan

6 Bromley's documents, I discovered a

7 copy of the paper that Professor Jones

8 testified yesterday he'd sent to Hazen

9 & Sawyer discussing the world price

10 that appears to be a more complete

11 version. It's substantially longer,

12 eight pages long instead of two.

13 I've shown it to Professor Jones

14 and we'll be producing this as part of

15 Dr. Bromley's collection of producible

16 documents, but I'm proposing to

17 present it today in case you want to

18 examine it and in case you want to ask

19 Professor Jones any questions

20 concerning it.

21 And if you do, and if you want it

22 either to come into evidence, what

23 I'll do is the same thing I'm doing

24 with Exhibit 12. I'll take it back

25 and get the Bates numbers put on it

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1 and then provide it for the court

2 reporter.

3 So here's a copy of it; and Rick

4 you may look at a copy, also.

5 MS. STINSON: What I'd like to do

6 is while Rick's asking questions, take

7 a minute to review it and see if it

8 raises any other questions. But, yes,

9 I'd like to go ahead and perhaps have

10 it to clarify the record --

11 MR. SAXE: That's fine.

12 MS. STINSON: -- and as an

13 exhibit.

14 THE WITNESS: There is -- I guess

15 it's appropriate for me to say that

16 there is one difference that I noticed

17 as I looked at this that I think I had

18 testified that we had talked -- Grace

19 Johns and I have talked about an

20 expected price settlement somewhere in

21 the range of 14 to 16 cents, and I

22 think that was our final conclusion

23 that we would use as an operating

24 range. I notice in this document that

25 I -- in reviewing all of the material,

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1 I found a range probably that's closer

2 of 10 to 15 cents.

3 But as I recall in our verbal

4 conversation back and forth after she

5 had received this, that sort of -- she

6 had said, "Well, I'm going to use

7 the" -- "I'm going to use something

8 like 14 to 16 cents." But she

9 obviously was getting information

10 elsewhere.

11 That's why yesterday when I said

12 14 to 16, I think I was going back to

13 that verbal conversation because I was

14 somewhat mystified by the shortness of

15 the document that was presented as

16 well.

17 MS. STINSON: Okay.

18 MR. SAXE: Just take one moment

19 before we proceed off the record.

20 (WHEREUPON, there was discussion

21 off the record.)

22 MR. SAXE: There is also another

23 document in Dr. Bromley's collection

24 that appears to be a draft version of

25 a document that was discussed

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1 yesterday, authored by Dr. Jones, and

2 I propose to do the same thing

3 basically with this. This is a draft

4 of the memorandum to me from Dr. Jones

5 concerning the subsidies to the

6 Florida sugarcane industry.

7 MS. STINSON: Okay. Yeah.

8 THE WITNESS: I'd like to, if I

9 could, say, also, that you asked me a

10 question, I believe, yesterday as to

11 who had seen this document.

12 MS. STINSON: Right.

13 THE WITNESS: Not this document,

14 but the one that we had before us at

15 the time which was the final draft of

16 what I sent to Mr. Saxe.

17 MS. STINSON: Right.

18 THE WITNESS: I don't remember

19 whether or not I mentioned the fact

20 that Dan Bromley had seen an earlier

21 version, an earlier draft, but --

22 MS. STINSON: I don't remember

23 either.

24 THE WITNESS: Anyway, he did and

25 commented on it; and, as I recall, I

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1 probably used some of his criticisms

2 and comments in the final draft.

3 MR. SAXE: Off the record.

4 (WHEREUPON, there was discussion

5 off the record.)

6 THE REPORTER: We're on the

7 record. And, Dr. Jones, I'd like to

8 caution you that you still remain

9 under oath.

10 * * *

11 LONNIE L. JONES, Ph.D.,

12 having been first duly cautioned and sworn upon

13 his oath to tell the truth, the whole truth

14 and nothing but the truth, testified as follows,

15 to wit:

16 * * *

17 E X A M I N A T I O N

18 * * *

19 BY MR. BURGESS:

20 Q. Good morning. In light of this document,

21 maybe I'll start with the subject matter.

22 My notes reflect -- and obviously your

23 testimony is on the record and it will stand as it

24 stands -- but my notes reflect that yesterday you

25 testified that when the price was dropped to

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1 16 cents per pound, Hazen & Sawyer had a scenario

2 where quote, unquote, "Everyone went out of

3 business."

4 And I think you added that although you

5 didn't have a firm or final opinion on that, your

6 preliminary opinion was that sugar would still be

7 grown there.

8 And my question to you is: What is the

9 basis for that statement?

10 A. As is reflected in that document, the

11 primary basis for -- that conclusion is based on

12 conversations with Dr. Ron Lord as well as reviewing

13 some of the documents that are cited there in terms

14 of the cost of production in Florida in comparison

15 with other countries.

16 The -- I would like -- I might clear up one

17 thing. I thought about this later. And that is

18 that I think there's a statement that you referred

19 to -- that was referred to several times yesterday

20 in questioning about where I had said the very

21 existence of the Florida sugar industry depended on

22 the subsidies.

23 As I recall, when I wrote that statement, I

24 was really relating that to the existence of the

25 Florida sugar industry as we know it today with the

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1 number of acres and the yields per acre, the returns

2 per acre that are observable for the industry at

3 this point in time.

4 I still will stand by that statement that

5 that existence does depend very much on the price

6 support program. I did not mean to imply that

7 without the price support program that the

8 Florida sugar industry would not exist at all. I

9 think it will exist in a different form and to a

10 different extent.

11 MR. SAXE: For the record, let me

12 just indicate that the document

13 Dr. Jones referred to at the start of

14 his testimony is this document -- is

15 the document titled, "Review of World

16 Price Situation." That hasn't come

17 into evidence yet, but that has been

18 provided to Counsel this morning.

19 MR. BURGESS: We might as well go

20 ahead and mark it right now as

21 Exhibit 20.

22 Do you have a copy for him?

23 MR. SAXE: You may mark one of

24 those copies as the exhibit copy,

25 and I'll just mark this.

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1 (WHEREUPON, Exhibit No. 20

2 was marked for identification.)

3 Q. (By Mr. Burgess) With the prices at 14 to

4 16 cents per pound then, are you saying that the

5 number of acres, the yields per acre, and returns

6 per acre would be different than they are today?

7 A. The documents that I cite in this document

8 point to the fact that the Florida sugar industry

9 compares reasonably well in terms of cost and

10 production with what the authors that I refer to

11 call "The major exporting countries," the costs of

12 major exporting countries.

13 There are some costs that have lower costs

14 than exist in Florida. I think that's what you have

15 to look to under a free trade situation, is what is

16 the underlying cost of production of sugar.

17 But the Florida sugar industry compares

18 favorably. So if you look at the entire EAA, where

19 clearly there would be their ability and cost of

20 production among different producers, I think it's

21 safe to conclude that some of those producers would

22 continue in business.

23 Q. And it would be profitable --

24 A. And there could be some acreage changes.

25 Q. But in your opinion, it would still be

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1 profitable to grow sugar at 14 to 16 cents per

2 pound?

3 A. For some growers. For some of the growers

4 in the EAA, given that we have a cost of production

5 of about 17 cents on average for the entire EAA,

6 that means that there could be some growers within

7 the EAA that have cost of production and processing

8 as low as the range at which I have talked about in

9 that document.

10 Q. How does the sugar program work to support

11 the price of sugar? Just in general, how does that

12 function?

13 A. It's my understanding that there are

14 several -- of course, there are several components

15 of it. I'll try to mention just the ones that I

16 think are most important in terms of supporting the

17 price of sugar.

18 First of all, there's the loan rate, which

19 is a construction that allows the commodity credit

20 corporation to give nonrecourse loans to sugar

21 growers up to 18 cents per pound of raw sugar, which

22 sets something as a floor. This is a nonrecourse

23 loan. Consequently the -- if the price were to drop

24 below 18 cents, or probably even near 18 cents, that

25 the farmers -- that simply means that the farmers

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1 don't have to pay that loan back. They can

2 sacrifice the collateralized sugar.

3 Now, there is also the import quota, which

4 in recent years has been converted to a tariff

5 quota; but, nevertheless, it serves to limit the

6 amount of sugar grown elsewhere in the world that

7 can enter the United States at the United States'

8 price.

9 And this quota is operated by the Secretary

10 of Agriculture, Justice Department of Agriculture,

11 to limit the amount of sugar that comes in to

12 achieve what used to be called "a market

13 stabilization price." I don't think they use that

14 term anymore. At one time it was called a market

15 stabilization price, and that price in the last few

16 years has been -- had ranged between 21 and 23 cents

17 per pound.

18 There's a clause in the law that says that

19 the sugar program shall be operated at no cost to

20 the Treasury. That means that the price -- the

21 market price -- the price at which raw sugar is

22 sold, has to be kept at a level that, to all extent

23 possible, avoids default on the nonrecourse loans;

24 but not only for Florida growers, but also for

25 growers in other states.

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1 Q. Okay. So the loan rate and the import

2 quota then would be two of the more important ways

3 that the sugar program supports the price of sugar?

4 A. Those are two of the major components that

5 are in the program that allow the market price to be

6 supported at a level higher than the world price,

7 yes.

8 Q. How would the sugar price to producers

9 change if, let's say, that import quota was

10 increased?

11 A. If it were increased so that the quantity

12 of sugar imported into the United States were

13 reduced?

14 Q. Yes.

15 A. Given that we had no major changes in

16 demand, assuming that demand is -- the domestic

17 demand for sugar remains, say, at about the same

18 level, then the economic theory would suggest that

19 the imposition of an import quota that reduced the

20 amount of sugar coming in from the outside would

21 reduce the supply; and the economic theory would

22 tell us that the price would rise.

23 Q. And would the reverse happen if the quota

24 was decreased, assuming the same assumptions?

25 A. Well, it's my understanding there's a

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1 number of things. If the quota were decreased,

2 which it has been -- as I look at the historic

3 statistics, the import quota for sugar has been

4 lowered through time over the historic period; and I

5 think that's to offset the increase in production

6 domestically.

7 So it has been lowered through time. Now,

8 that has been made up by domestic production, as we

9 have reduced the quota or vice versa. I'm not sure

10 which is the cause and effect. It may be that as

11 domestic production has grown, the USDA has lowered

12 the import quota in order to keep supply and demand

13 in balance.

14 MR. SAXE: Just for clarification,

15 Counsel, for the record, as you frame

16 the question, you're equating

17 increasing the quota with decreasing

18 the amount of imports permitted; is

19 that correct?

20 MR. BURGESS: Well, that's the

21 way he answered it the first time, and

22 then we kept --

23 MR. SAXE: Just kept that

24 polarity?

25 MR. BURGESS: Kept the

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1 consistency.

2 MR. SAXE: Okay. Thanks.

3 Q. (By Mr. Burgess) Do you have an opinion as

4 to whether or not there is a need in this country to

5 continue the current sugar program?

6 MR. SAXE: Objection to form.

7 A. Yeah. I don't know -- could you be a

8 little more -- a little clearer on what you mean by

9 "need." I mean --

10 Q. (By Mr. Burgess) Well, let me ask you: Do

11 you have an opinion as to whether or not the sugar

12 program, in its current form, should be continued or

13 should it be changed?

14 MR. SAXE: Objection to the form;

15 vague, "should be continued."

16 A. Yeah. I don't have a normative response to

17 what should and should not be U.S. policy. I may

18 have some personal opinions about the sugar policy,

19 as well as other policies, agricultural and

20 otherwise; but as far as professional normative

21 judgment, I think that's a little bit beyond my

22 reach.

23 Q. (By Mr. Burgess) Would it be beyond your

24 expertise?

25 A. My expertise.

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1 Q. Do you have any opinions as to whether the

2 farm program for U.S. sugar is going to change over,

3 let's say, the next ten years?

4 A. Well, let me consult my crystal ball here.

5 I think there's a general mood afoot for all

6 agricultural programs to re-examine those.

7 I don't have any particular information

8 that would suggest to me that there's going to be

9 major changes in the program until I hear -- get

10 some information or release from the U.S. Department

11 of Agriculture or the administration or Congress or

12 whoever the people are who make those decisions. I

13 really don't have any reason to suspect that.

14 We had the sugar program for quite sometime

15 now, and I think the sugar program in some form will

16 continue. Whether or not it's exactly the same, as

17 it has been in recent years or not, is really quite

18 hard to say.

19 Q. Do you know how Grace Johns intends to deal

20 with the farm program in her 20-year analysis?

21 A. I do not know what decision she has reached

22 in that regard. We talked about that in the

23 economists' meeting. In fact, I think the

24 economists were right in the middle of that

25 discussion when I got there. I got there a little

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1 bit late to that meeting because of airline

2 problems, but I have not talked to her about the

3 decision that she is going to use in her analysis in

4 that regard.

5 Q. How could one treat the issue of the

6 existence of the sugar program over a 10- or a

7 20-year time frame in an economic impact analysis?

8 How do you provide for change or the possibility of

9 change in that analysis?

10 MR. SAXE: Objection to form;

11 compound.

12 A. How do you provide for change?

13 Q. (By Mr. Burgess) Well, I assume in

14 conducting an economic impact analysis over the next

15 10 years or 20 years, given the fact that the U.S.

16 farm program exists in one form today, how do you,

17 in performing an economic impact analysis, provide

18 for whether that program is going to continue or not

19 continue?

20 A. Well, I think there would be obviously a

21 wide variety of assumptions that you could make in

22 that regard. We could assume that the program is

23 going to continue as it has in recent history. You

24 could then go into a series of alternative scenarios

25 that might exist. Perhaps the safest one is to --

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1 is what the economists often do, is to say that they

2 expect the future will reproduce the recent history

3 in terms of the parameters surrounding the analysis

4 and possibly one of those parameters.

5 As we go off into scenarios, we have no

6 historical data, or data otherwise, to support that,

7 other than it is simply an assumption that we're

8 going to make so that we could look at the effects

9 of a particular scenario.

10 Q. Do you plan to make any recommendations to

11 Grace, one way or the other, in your meeting with

12 her on Monday?

13 A. I have not at this time formulated any

14 recommendations related to assumptions concerning

15 farm policy.

16 Q. Do you have any opinions as to what the

17 effect of GATT will be on the U.S. sugar price if it

18 is implemented under the Dunkel proposal?

19 A. I've discussed that with some other

20 economists, and I wouldn't characterize my

21 understanding of the possible outcomes at this point

22 in time as a final decision or a final opinion.

23 But it's my understanding that the

24 United States has already, through their general Ag

25 policy and given the requirements that are included

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1 in GATT and the Dunkel proposal, that the United

2 States has probably already made the adjustments

3 that would be required in that and that there would

4 not be any significant further adjustments required

5 in foreign policy of the United States if we move

6 forward with those proposals.

7 Q. Such that you don't see any change, or at

8 least major change, with respect to the U.S. sugar

9 price if that proposal were implemented?

10 MR. SAXE: I'm sorry. What was the

11 last question, the last word in your

12 question?

13 Q. (By Mr. Burgess) Such that you don't see

14 any change or major change on the U.S. sugar price

15 if that proposal is implemented, the Dunkel

16 proposal, the GATT?

17 A. If that proposal is implemented, it's my

18 understanding that the requirements that are put on

19 all participating countries have already been

20 satisfied by the United States and that there would

21 not be -- would not be a requirement that they make

22 adjustments in the sugar price or in the policies

23 governing any of the other commodities in the

24 United States.

25 In order for me -- when I say

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1 "requirement," I mean it would not be a requirement

2 in order for them to participate in the

3 implementation of those proposals.

4 Q. Do you know how Grace Johns intends to deal

5 with GATT in her 20-year time frame?

6 A. I do not at this time know what -- if she's

7 reached a decision or what that decision might be.

8 I really don't even know what alternatives she's

9 considering.

10 Q. Are you going to recommend any alternative

11 considerations for her on Monday?

12 A. At this point in time, I haven't formulated

13 any recommendations regarding GATT.

14 Q. Do you have any opinions as to what the

15 effects of NAFTA will be on the U.S. sugar price if

16 NAFTA is implemented into present form?

17 A. Again, I wouldn't characterize my beliefs

18 or my understandings to be a final opinion. I have

19 participated in some studies of NAFTA, not related

20 specifically to sugar, the sugar industry, but more

21 to the general economic effects of NAFTA on the U.S.

22 economy and particularly on the Texas economy.

23 But I wouldn't, at this time, say I have

24 any firm or final opinions about the effect of

25 NAFTA.

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1 Q. What opinions have you expressed vis-a-vis

2 the effects of NAFTA on either the U.S. economy or

3 the Texas economy?

4 A. Well, I think NAFTA is going to have a

5 significant positive effect on the Texas economy. I

6 think it's going to have a positive effect on the

7 U.S. economy. Of course, when you fold it into the

8 magnitude of the U.S. economy, then it is not --

9 it's not a large effect percentagewise; but it will

10 be a positive effect, I believe.

11 Q. Do you have any opinion as to how it will

12 effect the U.S. sugar price?

13 A. I think the effect of NAFTA -- the effects

14 of NAFTA are going to reside primarily in Mexico.

15 The change in the Mexican economy is going to be

16 proportionately greater than the changes in the

17 United States; that is to say, that percentagewise

18 the impacts are going to be -- as a percentage of

19 the overall Mexican economy, the effects are going

20 to be quite a bit greater.

21 My second opinion is that most of the

22 impacts of NAFTA are going to be on the

23 nonagricultural sectors of the economy, both in

24 Mexico and in the United States.

25 I think the effect of NAFTA -- which is

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1 going to perhaps accelerate somewhat the already

2 existing growth in Mexico. You have to understand

3 that Mexico and the United States have already

4 largely liberalized the trade between the two

5 countries.

6 NAFTA is going to eliminate some further

7 trade restrictions, but most of the changes are

8 already in effect; and I think the economic results

9 of that are already ongoing.

10 But I think what we're going to see is that

11 Mexico has a very young population. They have

12 significant resources and with the capital

13 investment from the United States that I expect to

14 occur, I think we're going to see Mexico with a very

15 rapidly growing economy.

16 And as they do that, we're going to see the

17 demand for consumer products rise significantly in

18 Mexico; and I think that's going to affect the U.S.

19 sugar industry, as well as other industries in the

20 U.S.

21 Q. In what way is it going to effect the U.S.

22 sugar industry?

23 A. I think that we're going to see a very

24 rapid increase -- we'll see a rapid and significant

25 increase in the demand for sugar, the demand for

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1 sugar-bearing products, the soft drink industry,

2 bakery goods, pastries, and so forth in Mexico; and

3 that's going to increase their demand, their

4 domestic -- for domestic products as well as

5 imported products.

6 Q. Do you have an opinion as to how NAFTA

7 might affect the U.S. exports of high fructose corn

8 syrup to Mexico?

9 A. Well, I think it perhaps would be affected

10 in the same way as sugar is.

11 Q. Do you have any idea as to how Grace Johns

12 plans to treat NAFTA in her 20-year analysis?

13 A. At this point in time, I have no

14 information or knowledge as to how she plans to do

15 that.

16 Q. Do you have any recommendations for her in

17 that regard?

18 A. I have not formulated any recommendations

19 at this point in time.

20 Q. How does an economic impact analysis differ

21 from a farm level analysis?

22 A. Okay. I'm going to have to ask you to

23 clarify, if you would.

24 Q. Well, there's some testimony -- I think you

25 were here during the time of Dr. Lacewell's

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1 deposition when he testified that certain things

2 that Polopolus and Richardson did may have been

3 relevant for a farm level analysis or for an

4 analysis of farm firm survival, but that it wasn't

5 overall relevant to the economic impact analysis

6 that Grace Johns did?

7 A. That helps -- when you say "farm level

8 analysis," you're talking about the farm survival

9 analysis, basically, that they did. An economic

10 impact analysis, you're talking about a change in

11 the resource use within the industry that would

12 stimulate impacts not only in that industry but also

13 in other parts of the economy.

14 Q. Maybe it would be beneficial if you were --

15 I think you just defined economic impact analysis.

16 Is that how you would define conducting an economic

17 impact analysis?

18 MR. SAXE: Objection to form.

19 A. Yes. I would define an economic impact

20 analysis as one in which we look at the increase or

21 a decrease in some direct economic activity, which

22 then leads to changes in other economic activities

23 in other parts of the economy.

24 So what you're looking at -- excuse me. Go

25 ahead.

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1 MR. SAXE: Counsel, which of the two,

2 "economic impact analysis" or "farm

3 firm survival" were you asking for a

4 definition?

5 MR. BURGESS: Economic impact

6 analysis.

7 MR. SAXE: Okay.

8 Q. (By Mr. Burgess) Which I think that's what

9 you were answering, correct?

10 A. Yes. The difference was your first

11 question. "What are the differences between an

12 economic impact analysis" -- and you said, "farm

13 level analysis" -- but I assume you're talking about

14 the analysis that Richardson and Polopolus did?

15 Q. Well, I think you've defined economic

16 impact analysis. And do you also have a definition

17 for what might be called a "farm level analysis"?

18 Does that term have any meaning for you?

19 A. That term could have a lot of different

20 meanings. Farm level analysis is very broad; and it

21 could be, you know, anything from a simple partial

22 budgeting analysis to a complete modeling effort for

23 a farm to look at what happens to that farm under

24 different conditions.

25 Now, -- well, go ahead.

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1 Q. Does the term "farm firm survival" or "farm

2 firm survival analysis" have any meaning for you?

3 A. To me, that is a term that has been related

4 to and used in conjunction with the type of analysis

5 that Dr. James Richardson does and did in the case

6 of Florida.

7 Q. Which is what? I mean, how would you

8 define a "farm firm analysis"?

9 A. Well, basically the form --

10 MR. SAXE: Objection to form, "farm

11 firm survival analysis." You've moved

12 past farm level analysis. You're

13 talking about farm firm survival

14 analysis; is that correct?

15 Q. (By Mr. Burgess) Or farm firm analysis.

16 Are they two different things to you?

17 A. Well, they can be, yes. I think "farm

18 level analysis" is a broader term than "farm firm

19 survival."

20 Q. How about farm firm analysis?

21 A. What do you mean? What about it? I don't

22 understand your question. Are you asking me to

23 define it?

24 Q. Yeah. I think -- before Keith interrupted,

25 I think we were on track. I think that we were

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1 talking about -- I think I asked you whether the

2 term "farm firm analysis" had any meaning for you;

3 and you said, "Yes it did. It relates to the type of

4 analysis that Jim Richardson does and that he did in

5 Florida."

6 A. No. No, I disagree. You asked me, "Does

7 the term 'farm firm survival' have any meaning?"

8 And I said, "Yes, it does. It relates to

9 the kind of work that Dr. Richardson does."

10 And the point --

11 Q. Go ahead.

12 A. My point is farm level analysis can mean

13 any number of things.

14 Q. Including farm firm survival?

15 A. Yes. But farm firm survival -- farm level

16 analysis includes farm firm survival analysis, but

17 not necessarily the other way around.

18 Q. And, then, your understanding of what

19 Richardson did in Florida was what?

20 A. Farm firm survival.

21 Q. And what is the difference between "farm

22 firm survival" and "economic impact analysis"?

23 A. The -- specifically in the case of the

24 analyses that were done in Florida, an economic

25 impact analysis, which is similar to the one that

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1 Hazen & Sawyer did or it is one example of that kind

2 of analysis, the key factor there is what happens to

3 the use of resources in some target industry and if

4 you're looking at an increase or a decrease; and

5 with that change, what are the additional effects on

6 the rest of the economy.

7 The way Grace Johns and Hazen & Sawyer set

8 up their analysis, which is, in my opinion, a very

9 typical way that this is done, is to take a look at

10 what happens to the land resource in agriculture.

11 If you were in another industry, it might

12 be different; but in agriculture, the key factor is

13 what happens to land.

14 And so she set up her model in such a way

15 that she could, through time, run a baseline

16 analysis, which projected the production levels and

17 land use levels for the industries in the EAA in

18 agriculture for 10 years.

19 Then having established that baseline, she

20 went in and she began to impose some levels of

21 factors related to the SWIM plan; first the STA's,

22 then the BMP's, and then the different assessment

23 levels.

24 She looked at the effect of that on returns

25 to land. Her underlying assumption is that as long

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1 as the returns to land are positive, that land will

2 stay in production. But if the returns to land go

3 to zero or negative, then that land is taken out of

4 production. That is when you begin to stimulate the

5 loss of sales, jobs, income, and so forth. So that

6 is my understanding of an economic impact analysis;

7 and it's my understanding of how she used it, used

8 that methodology and applied it in the EAA.

9 Q. What is your understanding as to what

10 Polopolus and Richardson did from the aspect of a

11 farm firm survival analysis?

12 A. It's my understanding that they used

13 stochastic FLIPSIM model, which is designed to look

14 at -- take some representative farm that's defined

15 by the user. It's a hypothetical farm, in essence;

16 and it has certain characteristics. It has -- I

17 don't know that I can enumerate all of those

18 characteristics; but it has characteristics relating

19 to the assets of that farm, the equity position of

20 that farm, the debt position of that farm, allowance

21 for family living, an allowance for income taxes,

22 and a number of other factors.

23 Now, that model, as I understand it,

24 basically looks at what happens to the financial

25 position of that individual farm under varying

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1 circumstances, some of which might be policy, as in

2 the case of the SWIM plan.

3 Q. And that's your understanding as to what

4 they did?

5 A. I think that is -- those are the components

6 of the model and his analysis that I can recall

7 sitting here this morning. There may be some others

8 that don't come readily to mind, but I think those

9 are the key factors because, the farm firm analysis,

10 what you're doing is tracking the financial

11 condition of an individual firm.

12 Q. And then relating that firm to a broader

13 area or --

14 A. Well, this is where I really begin to run

15 into some problems as to how you can take an

16 individual firm and examine its financial position

17 and relate that to a broader area. I think they've

18 done that, but how they did it is -- to me is still

19 rather mystifying.

20 Q. I think I understand your testimony

21 relative to -- I think that some of this was as a

22 result of your testimony yesterday, that in your

23 opinion FLIPSIM in the stochastic mode was not the

24 best methodology to be employed to carry out the

25 objectives that Grace Johns had as those objectives

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1 were given to her by the board; is that correct?

2 A. I think FLIPSIM in the stochastic mode, as

3 I understand it, has some problems -- in the results

4 that it generates are not directly transferable to

5 secondary impacts or broad generalization for an

6 entire area.

7 Q. That's where there's a breakdown for you

8 and the ability to use FLIPSIM or an ability to use

9 FLIPSIM to model the impacts of the SWIM plan?

10 A. Right. That's one of the problems that I

11 see with it. What you're doing -- as we said in the

12 beginning, we said as we look at farm firm

13 survival. So if you look at -- a farm can go

14 bankrupt while the returns to land of the land that

15 it's farming is still positive; in which case,

16 someone else may take over the operation of that

17 land. And as far as the effects on the economy is

18 concerned, they may be negligible, zero; or it could

19 be even positive if it was taken over by a more

20 efficient and more productive operator.

21 Q. Do you have an opinion as to whether or not

22 FLIPSIM can be used in the stochastic mode to --

23 strike that.

24 In the context of an EAA examination; that

25 is, an examination of the effect of the SWIM plan

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1 program on the EAA, how, in your opinion, can

2 FLIPSIM be used in the stochastic mode and what

3 would that tell you as opposed to telling you

4 whether or not land goes out of production, which I

5 think you said it doesn't?

6 MR. SAXE: Objection. I think

7 assuming facts not in evidence. Are

8 you assuming that the witness believes

9 that FLIPSIM stochastically can be

10 used to evaluate the impacts of

11 implementing the SWIM plan on the area

12 economy?

13 Q. (By Mr. Burgess) Can it be?

14 A. On the area of economy? Now I'm confused

15 as to what the question is.

16 Q. How can FLIPSIM be used stochastically to

17 evaluate the effects of the SWIM plan on the EAA?

18 A. The EAA as a whole?

19 Q. Can it be, yes.

20 A. In a stochastic mode?

21 Q. Yes.

22 A. It's my opinion, given the construction of

23 FLIPSIM in a stochastic mode, what it looks at and

24 what it produces, that it has greatly serious

25 limitations for looking at what happens to the EAA

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1 economic impacts as a region.

2 Q. Can it be used to look at those impacts on

3 the region in the static mode?

4 A. Well, as I testified yesterday, when

5 FLIPSIM is run in a static mode, it's my opinion

6 that it's not greatly different from using another

7 accounting type model which might be constructed in

8 a spreadsheet format, in any of the ones that are

9 conveniently available. And so, in that sense, it

10 can be used. Hazen & Sawyer, in fact, used it to

11 look at the change through time so that you could

12 carry over from one year to the next the results of

13 previous years.

14 Now, I think I also testified yesterday

15 that there were some problems with it in the way

16 that it's constructed in its generic form. There

17 are some things when you try to relate to

18 agriculture, I think, that you have to go in and

19 change and change those underlying assumptions.

20 Q. To use it statically?

21 A. Even to use it statically, but those are

22 not overwhelming. I mean, they can be done. It's a

23 matter of changing the program some more.

24 Q. Can FLIPSIM be used stochastically to -- in

25 the context of the EAA -- model individual model

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1 farms within five different yield belts which

2 results can then be extrapolated to give you an

3 effect on or over the entire EAA?

4 A. I think there are serious problems there.

5 Q. And those problems are what?

6 A. Well, what I've already testified to. The

7 fact that the construction of FLIPSIM, the things

8 that it runs, and the results it produces are

9 basically changes in the financial position of an

10 individual firm. Those are affected by a very large

11 number of things other than the cost of production

12 and price and returns to land.

13 So FLIPSIM is not necessarily going to

14 remove a firm -- remove an acre of land from

15 production as it removes a firm from operating in

16 that business.

17 Q. Is that, in your opinion, the key

18 difference between what Polopolus and Richardson did

19 and what Hazen & Sawyer did, meaning that Hazen &

20 Sawyer looked at when land goes out of production,

21 and Polopolus and Richardson looked more at when the

22 firm goes out of production?

23 A. In my opinion, that is the key difference

24 in the underlying methodology. I guess methodology

25 means the logic of the method.

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1 And the logic of the method for Hazen &

2 Sawyer is to key on the returns to land, look at

3 costs, look at returns, and to take out the expenses

4 of production, the returns to the other factors of

5 production, and look at what -- is this land still

6 profitable in this enterprise. So long as it is and

7 this is the highest and best use, then it will stay

8 in that production. If it's not, it's going to go

9 out or go to another alternative and there are going

10 to have to be adjustments made.

11 FLIPSIM, on the other hand, is looking at a

12 complete and different thing.

13 Q. Have you conducted or participated in

14 studies in the past which considered whether or not

15 lands in agricultural production would be forced out

16 of production by some policy or program that was

17 being pursued?

18 A. I've been involved in studies that looked

19 at changes in regional agricultural production in

20 other areas of the country. Those are listed in my

21 list of publications provided in my resume.

22 Q. You say changes in reasonable agricultural?

23 A. Regional.

24 Q. I'm sorry. Regional agricultural

25 production. And just ballparking, how many of such

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1 studies?

2 A. I can't give you an exact number. Just

3 ballparking? Oh, let's say, more than five and less

4 than a dozen.

5 Q. And when you say "changes in regional

6 agricultural production," did some of them consider

7 whether or not -- or all of them consider whether or

8 not lands that were in production might be forced

9 out of production as a result of some policy or

10 program?

11 A. Yes, some of them did. Perhaps all of them

12 did. I'd have to review the list to be certain

13 about that. But that is probably the case.

14 Q. In any of those studies, did you or those

15 that you participated in use the FLIPSIM model?

16 A. No.

17 Q. In some or all of those studies -- well,

18 strike that.

19 What methodology did you go about in those

20 studies to determine those regional agricultural

21 impacts?

22 MR. SAXE: Objection to form,

23 Counsel, are you asking for a specific

24 aspect of methodology, like, modeling

25 FLIPSIM versus substitutes; or do you

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1 want to -- is it a very broad question

2 about it?

3 MR. BURGESS: It's a very broad

4 question.

5 A. Again, without the benefit of being able to

6 review my publication list, I can tell you that I

7 can recall studies in which we have used linear

8 programming models to look at the direct effects and

9 the direct adjustments within agriculture and then

10 link that up with an input/output model to look at

11 the secondary effects on the other sectors of the

12 economy, on personal income and employment.

13 I would say from my analysis that's been

14 the primary methodology that I've used in those

15 studies.

16 Q. (By Mr. Burgess) "Linear programming," is

17 that what you meant?

18 A. The marriage of linear programming and

19 input/output and all that.

20 Q. In some or all of those studies, did you

21 consider factors such as long-term debt or income

22 taxes?

23 A. Never income taxes. My opinion, as I

24 testified yesterday, income taxes are an

25 inappropriate consideration in economic impact

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1 analysis; and we never, to the best of my

2 recollection, ever considered long-term debt of

3 individual farms either.

4 That, again, points more to farm firm

5 survival rather than industrial or industrywide

6 production.

7 Q. How about yield risk? Did you consider

8 yield risk in any of those studies?

9 A. No, not using linear programming.

10 (WHEREUPON, there was discussion

11 off the record.)

12 Q. (By Mr. Burgess) In some or all of those

13 studies, did you consider uses for the land?

14 A. Yes.

15 Q. And how do you go about considering an

16 alternative use for the land?

17 A. Through the activities that you include in

18 the linear programming model.

19 No wonder you can't understand, I can't

20 pronounce it.

21 Q. And I'm just not familiar with that model,

22 so maybe you can elaborate.

23 A. Yeah. Activity has a specific meaning

24 there, and what you do is -- well, first of all, you

25 examine the region to see what crops are grown and

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1 if there are viable alternatives; and if there are,

2 then you'll want to represent those in the model,

3 each one being an activity.

4 You may have irrigated cotton as an

5 activity, dryland cotton as an activity, same thing

6 for grain sorghum, wheat, livestock production. And

7 basically what the linear programming model does --

8 is, until you put in the resource requirements for

9 each of those activities, the net returns per acre

10 of land, and when you run this model, it will select

11 the combination of activities that maximizes the

12 return to land and that -- and it produces for you

13 the number of acres that will be allocated to each

14 one of those crops, as well as other information.

15 Q. Did Grace Johns consider in the context of

16 her 10-year study any alternative uses for the land?

17 A. It's my understanding that she did not look

18 at alternatives. And, basically, the assumption

19 there, I guess, is that -- I do recall discussions

20 with her about alternatives; and I think it's a safe

21 conclusion that when you look at sugar and

22 vegetables and the returns to land that's achieved

23 from those crops and other crops that are suitable

24 for the Muck soil, you go through the cow/calf

25 operations in ranching, which is a large drop in net

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1 returns when you do that.

2 Q. From sugar and vegetables to cow/calf?

3 A. Yes. So I believe, as I recall from her

4 contract completion report in the final analysis,

5 she does not put in any net returns that would come

6 as sugar land goes from, let's say, sugar to

7 cow/calf. That would have an effect of modifying

8 somewhat the loss in the impacts, but I don't think

9 she did that.

10 Now, she did include, I believe, rice

11 production; but that was more in terms of a rotation

12 effect to achieve the -- as part of the BMP

13 scenarios.

14 Q. Do you know whether in the context of her

15 20-year study she's going to examine cow/calf

16 production in the EAA?

17 A. I do not know whether or not whether she is

18 or not at this point in time.

19 Q. Have you reviewed that concept at all?

20 A. What concept?

21 Q. The use of cow/calf in the EAA as an

22 alternative?

23 A. No, not in any detail, I haven't.

24 Q. You don't know whether it would' be

25 profitable endeavor or not?

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1 A. No, I don't know. It is my understanding

2 that there is some pasture land now in the EAA.

3 Whether or not it would be feasible to expand that

4 to larger acreage, I'd have to study it and look

5 into it to form any kind of an opinion.

6 Q. Just so I'm clear, do you know whether or

7 not Grace is going to consider any of these

8 alternative uses in a linear programming mode or

9 model that you've just testified to?

10 MR. SAXE: Objection to form.

11 Are you asking -- are you asking

12 whether she's going to consider these

13 factors and if she's going to consider

14 them, whether she's going to be using

15 them in linear programming; or are you

16 assuming that she's going to be --

17 Q. (By Mr. Burgess) Do you know whether Grace

18 is using a linear programming model in her 20-year

19 study?

20 A. I know that she didn't use the linear

21 program in the 10-year study. Whether or not she

22 plans to use it in the 20-year study, I do not

23 know.

24 Q. Do you have any knowledge as to whether

25 she's going to consider alternate land possibilities

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1 in her 20-year study?

2 A. No, I don't know.

3 (WHEREUPON, a recess was taken.)

4 Q. (By Mr. Burgess) Dr. Jones, do you recall

5 your testimony yesterday relative to -- I think it

6 was your Houston case where you said that concerning

7 examination of all the alternatives to reach policy

8 goals that would be a beneficial thing to do, a

9 beneficial exercise?

10 A. I believe I've testified that in that case

11 it proved to be a beneficial exercise because there

12 was no law or policy regulating individual pumping

13 of the water; and the study that we did, along with

14 other studies, assisted the legislature in

15 formulating a policy and implementing that policy to

16 bring that problem under control.

17 Q. And that, in fact, as a result of your

18 efforts, it showed that it was less expensive to use

19 available storm water in the area to reduce pumping

20 which wouldn't mine the aquifer, correct?

21 A. Storm water -- it was really -- the surface

22 water was really stored in reservoirs. I don't know

23 if that has the same meaning as storm water.

24 Q. Okay. Surface water?

25 A. There was surface water available. And

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1 when we did our study and were able to estimate and

2 quantify the cost of an economic -- well, the cost,

3 basically, of the externality, which was in terms of

4 loss of property, property damages, loss of income

5 from businesses and so forth, when we added that to

6 the cost of pumping water, that turned out to exceed

7 the cost of transporting and treating surface water

8 to meet the demand in the region.

9 Q. So when you conducted your examination, did

10 you look at not only the financial or financing

11 costs associated with the alternative, but also the

12 economic impact costs associated with the

13 alternative?

14 A. We had estimates from the City of Houston,

15 as I recall, and some of their consulting engineers

16 as to the cost per acre foot -- I believe was our

17 unit that we used -- of delivering or treating water

18 to the Houston area to get it into their

19 distribution system. So we did not have to go back

20 and look at the -- in a detailed examination of the

21 financing of the alternative system. That

22 information was available to us.

23 Q. Was available to you already. If it

24 wasn't, would you have done that?

25 A. That would have --

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1 Q. -- been a component of your study?

2 A. You would have to -- in order to make a

3 comparison between the direct pumping cost and the

4 externality, which we had estimated, you would have

5 to come to a cost per unit, a cost per acre foot or

6 cost per gallon of water from the alternatives so

7 you could make a comparison.

8 Q. What was the whole point of your effort to

9 examine the cost of these alternatives?

10 A. A bit of history: The argument -- this

11 issue had been debated for a long period of time as

12 to whether or not we should use alternative water.

13 The problem being that the damages that

14 were being incurred were not necessarily -- well,

15 let me rephrase that.

16 The property owners who were incurring

17 damages and lawsuits were not necessarily the same

18 property owners who were pumping the water. In many

19 cases they were one in the same; but in most cases,

20 they were not. It didn't necessarily follow that if

21 you were using a lot of water, it was going to be

22 your property that's damaged. Because you might be

23 inland and someone else is sitting -- a resident

24 who's sitting on the coastline, sinking into the

25 Galveston Bay may use very little water.

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1 So this debate had gone on for some time.

2 In fact, I think it's fairly safe to say it was

3 raised for some time. And with the people who were

4 being damaged saying that, "We need to go to an

5 alternative source of water." The people who were

6 pumping saying, "We can't afford to, that this is" --

7 "this source of water is much less expensive."

8 And so there was no vehicle for bringing

9 all this together. There was no way to make a

10 comparison because we didn't know what the extent or

11 the cost of the externalities were before we did the

12 study.

13 Q. And then that's what the study did; it

14 examined the externalities, examined the cost of the

15 externalities?

16 A. That's right.

17 Q. In the context of this case, assume for the

18 purposes of my question that there are alternative

19 ways provided for by law. That was one of your

20 dependencies, I think, yesterday, "provided for by

21 law" to achieve compliance with the water quality

22 goals of the SWIM plan.

23 Would you agree that in the context of

24 performing an economic impact analysis that those

25 alternatives should be considered?

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1 MR. SAXE: Objection to form; "should

2 be considered" is vague.

3 MR. BURGESS: I'm asking in the

4 context of performing an economic

5 impact analysis, should they be

6 considered in his professional

7 opinion. He's testified in the

8 context of his previous work that

9 looking at lower cost alternatives is

10 something that should be done, that it

11 was done in that case. I'm asking in

12 the context of this case, does he have

13 an opinion as to whether it should be

14 done.

15 A. Could I ask a question about your question?

16 Q. (By Mr. Burgess) Yeah.

17 A. You started out by saying "assume

18 something," and I don't remember what it was you

19 were asking me to assume.

20 Q. Yesterday, for some reason, it was

21 important to you that examination of alternatives

22 depended, you said, I think, primarily on whether

23 there exists legislation that provides for this,

24 provides for examination of the alternatives; and

25 I'm just saying assume for my purposes and my

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1 question that such legislation exists.

2 A. Well, legislation does exist, as I

3 understand it, for implementation of the SWIM plan.

4 In that case, I don't find it -- I would

5 not -- it's been my opinion, I guess, throughout my

6 profession that under those circumstances, it's not

7 imperative that economic analysis be done if the

8 legislature has considered the proposal.

9 It's been, I assume, debated in the halls

10 of Congress with input from all parties; and it's

11 been passed. It's my understanding that the SWIM

12 plan was passed unanimously. This seems to me to

13 speak rather strongly to the implementation of the

14 plan. And so I have some questions about whether or

15 not this similar kind of analysis that we did in

16 Houston would be required in this case.

17 Q. I'm not asking about requirements; and

18 assume, if you will, that there was no economic

19 impact study done for Congress or for the

20 legislature in Florida when it passed the SWIM

21 plan.

22 Are you telling me that just because it was

23 passed unanimously, if after that passage an

24 economic impact study is done which shows that the

25 area is going to be wiped out by implementation of

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1 what the legislature passed unanimously, that that's

2 not important to you as an agricultural economist or

3 a natural resource economist to consider?

4 MS. STINSON: I've got to object to

5 form. You said when the legislature

6 passed the SWIM plan. The legislature

7 did not pass the SWIM plan.

8 MR. SAXE: I'm going to also

9 object to form, but maybe I can be --

10 hopefully be constructive. Is your

11 question tending along the lines of

12 where the goal is to do an economic

13 impact analysis of implementing a

14 policy. Whether it is required to

15 analyze the economic impacts of

16 alternatives to the policy? Is that

17 effectively what you're asking?

18 MR. BURGESS: No, I'm not asking

19 that at all. I'm not asking whether

20 something is required or not

21 required. I'm trying to draw on his

22 experience that he testified to

23 yesterday with respect to the Houston

24 case, where my notes reflect that he

25 said, "Looking at the cost of

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1 alternatives and the least cost

2 alternatives is a beneficial

3 exercise."

4 I think he even said, "I assume

5 that it would always be prudent to do

6 that, to examine alternative ways to

7 alleviate, in that case, the damage,

8 the pumping practice."

9 MR. SAXE: And I think the

10 witness has testified that your

11 question today, your hypothetical, is

12 distinguishable and explained the

13 basis for distinguishing it from the

14 previous experience with the soil

15 subsidence and what kind of an impact

16 it's having.

17 Q. (By Mr. Burgess) Is that true what your

18 Counsel just said?

19 A. I do make a distinction between the two,

20 yes.

21 Q. Is the distinction the fact that the

22 Florida Legislature has spoke and passed a statute

23 unanimously which provides for a SWIM plan to be

24 implemented; and therefore, there is, in your mind,

25 no requirement that economic impacts be examined?

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1 A. I think we have -- I think there are a

2 number of situations of this type and this is a

3 democracy and we pass laws in an open forum. I

4 would assume that in any event the parties would

5 have been present in the debate for that and --

6 those potential impacts have been heard and taken

7 into consideration as the political and legal

8 process move forward.

9 Q. Is it your understanding or your testimony

10 that the Florida Legislature passed the SWIM plan?

11 A. They passed the Marjory Stoneman Douglas

12 Act. And I'll have to admit that I'm not a lawyer

13 and I don't know all of the intricate connections

14 between the Marjory Stoneman Douglas Act, the

15 settlement agreement of the SWIM plan per se.

16 Now, I have read the SWIM plan document,

17 parts of it, particularly those relating to

18 economics, which I assume was developed for purposes

19 of implementation of the Act. And that's been

20 adopted by the board. So it seems to me that as a --

21 not as a lawyer, but just as an observer, it seems

22 to me that the legal connection is pretty direct.

23 Q. Let's get away from -- and I'm not asking

24 you for legal conclusions, but you said you reviewed

25 the SWIM plan.

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1 Do you understand or is it your

2 understanding that the whole reason these various

3 assessments are being considered are to alleviate

4 some claimed water quality conditions? We'll start

5 at that broad point. Is that your understanding?

6 MR. SAXE: Objection to form.

7 A. Well --

8 Q. (By Mr. Burgess) Let me put it this way:

9 Why are we considering these assessments against the

10 farmers?

11 A. It is my understanding that there is a

12 problem, an identified problem of phosphorus

13 concentrations in water that's leaving the

14 agricultural area and going into the Everglades.

15 Q. And how does the SWIM plan purport to

16 alleviate those problems?

17 A. It's my understanding, from what I know of

18 it, that it proposes to try to clean up the water as

19 it -- between the point where it leaves the

20 agricultural area and goes into the Everglades to

21 reduce the phosphorus concentration.

22 Q. Through the construction of STA's?

23 A. That's one of the factors.

24 Q. So, then, assume then for purposes of my

25 question that there are alternatives which exist to

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1 meet those same goals enunciated in the SWIM plan,

2 i.e., cleaning up the water. I'm asking you

3 whether -- do you have an opinion with respect to

4 whether those alternatives should be evaluated or

5 considered?

6 A. You mean evaluated by the board?

7 Q. No. Evaluated -- let's talk about from a

8 financial standpoint. I mean both from a cost

9 standpoint and an economic impact standpoint to the

10 community, to the EAA. Should those alternatives be

11 considered as a policy?

12 MR. SAXE: I'm going to object to form

13 because of the vagueness of should

14 those alternatives be considered

15 economically. You mean, should -- you

16 can answer the question if you

17 understand it.

18 A. Well, I do think the word "should" asks for

19 a normative response; and I can't give that. I

20 wouldn't say necessarily that the board should

21 evaluate those because they've adopted the SWIM

22 plan. Now, if somebody else wanted to evaluate

23 those, then you could put the "should" question to

24 them and perhaps that would be appropriate.

25 Q. (By Mr. Burgess) As an economist, you have

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1 no opinion one way or the other as to whether

2 alternatives which are provided for by law and which

3 might have a lower economic impact and a lower

4 financial cost or burden, you have no opinion as to

5 whether or not those should be considered?

6 MR. SAXE: Counsel, for clarification,

7 is your question whether alternatives,

8 cheaper alternatives, equally

9 effective should always be considered

10 under every circumstance?

11 MR. BURGESS: No, it's not that

12 at all.

13 A. I think you're asking me to respond to a

14 very general question, which is a little bit beyond

15 the effort that I've put into this work so far; and

16 I'm just not sure that I'm -- I haven't -- I have

17 not been asked to look at alternatives or any of the

18 things that you've mentioned.

19 I've been asked to assist with the

20 evaluation of the SWIM plan; and so you've kind of

21 got me beyond, I guess, what I would consider to be

22 my expertise in this particular case with a very

23 general question.

24 Q. (By Mr. Burgess) Whether or not lower cost

25 alternatives provided for by law -- and by lower

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1 cost, I mean lower financial cost and lower cost in

2 terms of economic impact -- whether or not those

3 should be examined, in your opinion, is beyond your

4 area of expertise as an economist?

5 A. Well, you know, again, as I said earlier, I

6 don't have a complete understanding of the legal --

7 Q. And I don't want you to. I'm not asking

8 that as a predicate for my question. I'm saying,

9 assume that these alternatives and alternative ways

10 are provided for by law. You can take that as a

11 given.

12 A. We have to assume a little further I think,

13 do we not? Don't we, also, have to assume that the

14 South Florida Water Management District wants or

15 requires those to be considered and so forth?

16 That's what the "should" part of your

17 question, I think, is asking me to respond to, is to

18 tell you what I think they should do; and what I'm

19 trying to say to you is that takes me beyond

20 anything that I've been asked to do or that I have

21 worked on in this case so far.