191 1 STATE OF FLORIDA DIVISION OF ADMINISTRATIVE HEARINGS 2 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. ) 20 21 ---------------------------------------------------- ORAL DEPOSITION OF LONNIE L. JONES, Ph.D., VOLUME II 22 TAKEN ON MARCH 4, 1993 ---------------------------------------------------- 23 24 25 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 192 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. 6 7 8 MR. RICK J. BURGESS Peeples, Earl & Blank 9 One Biscayne Tower Suite 3636 10 Two South Biscayne Boulevard Miami, Florida 33131 11 COUNSEL FOR FLORIDA SUGAR CANE 12 LEAGUE, INC. 13 14 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 20 21 ALSO PRESENT: TEOFILO OZUNA, JR. 22 23 24 25 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 193 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 12 13 14 15 16 17 18 19 20 21 22 23 24 25 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 194 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 . . . . . . . . . . . . . . 4 2 Memorandum to G. Johns from R. Lacewell, 5 L. Jones and T. Ozuna dtd 6/3/92 . . . . 51 6 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 11 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 14 8-A Memorandum to K. Saxe from L. Jones. . . 266 15 9 Handwritten Notes to S. Ponzoli . . . . 16 10 Fax to S. Ponzoli dtd 1/22/93 . . . . . 17 11 Florida Sugar Cane League Summary of 18 Hazen & Sawyer's Potential Economic Impacts Analysis . . . . . . . . . . . . 19 12 Economic Effects of the SWIM Plan on 20 Sugarcane Production in the Everglades Agricultural Area of Florida . . . . . . 98 21 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 24 25 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 195 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 4 16 Notes . . . . . . . . . . . . . . . . . 141 5 17 Letter to G. Johns from L. Jones . . . . 147 6 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 11 22 Debt . . . . . . . . . . . . . . . . . . 300 12 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. . . . . 15 25 Memorandum to K. Saxe from T. Ozuna 16 dtd 7/30/92 . . . . . . . . . . . . . . . 17 18 19 20 21 22 23 24 25 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 196 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 197 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 198 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 * * * * * 17 18 19 20 21 22 23 24 25 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 199 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 200 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, PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 201 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 202 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 203 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 204 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 205 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. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 206 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 207 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 208 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. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 209 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 210 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 211 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. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 212 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 213 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 -- PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 214 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 215 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 216 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. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 217 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 218 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 219 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 220 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. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 221 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. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 222 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 223 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 224 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 225 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 226 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 227 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 228 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 229 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 230 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. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 231 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 232 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 233 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 234 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 235 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 236 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? PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 237 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 238 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 239 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 -- PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 240 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. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 241 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? PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 242 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 243 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 244 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 245 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? PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 246 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. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 247 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 248 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 249 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 250 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. 22 Q. And then if it makes a difference for your 23 answer, assume that the South Florida Water 24 Management District endorses the idea of examining 25 these alternative concepts. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 251 1 A. Well, in that case, if we're sitting at a 2 point in time where we have a large number of 3 alternatives, those have been worked out by the 4 biologists and the soil scientists and they have 5 brought them to the table, they've come to an 6 agreement that, yes, this is Alternative A, it will 7 accomplish "X"; this is Alternative B, it will 8 accomplish "Y." We're in agreement on that. We 9 think that's a -- those are suitable alternatives. 10 Then it would be appropriate for me as an economist 11 to look at those where I would be asked to do so. 12 Q. Do you have any idea as to whether or not 13 that scenario which you just outlined, in fact, 14 occurred with respect to the STA's or not? 15 A. No, I don't. I know there is a SAGE 16 Committee and it has representatives from a wide 17 body of interests and I think they are the technical 18 committee that are looking at implementation, but 19 I've not been privy to very much of their material 20 or conversation. 21 What I have done, basically, is to examine 22 the Hazen & Sawyer analysis of the SWIM plan, as she 23 was asked to analyze it by the board and then 24 subsequently, also, attempted to look at some of the 25 material that was presented by Dr. Polopolus and PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 252 1 Dr. Richardson. 2 Q. If, in fact, it is decided by the South 3 Florida Water Management District that STA's are not 4 the way to solve the water quality problem alleged 5 in the SWIM plan, how would that affect Grace Johns' 6 study? 7 MR. SAXE: What was the predicate 8 again? I'm sorry. 9 Q. (By Mr. Burgess) Assume that the board 10 decides STA's aren't the way to solve the water 11 problem. 12 A. They're not going to build STA's? 13 Q. Right. 14 A. Is that what you're saying? What about the 15 other parts that are included in her study? Do they 16 remain or -- I mean, not building STA's has 17 implications for other assumptions in her 10-year 18 study. 19 Q. That's kind of what I'm asking. Assume 20 that's the decision of the board. How does that 21 affect her study? What implications does it have? 22 A. Well, it's my understanding that, as she 23 went through sort of the layering of these impacts, 24 that she had information from the technical 25 scientists, physical scientists which assume sort of PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 253 1 an interconnection between the BMP's would make a 2 certain level of reduction and STA's would -- and 3 when you combine these, that you would get the 4 desired level of reduction in phosphorus 5 concentration. If you pull the STA's out of that, 6 then you'd have to go back and re-examine all of 7 those assumptions and levels as to what each part 8 was doing to see whether or not the analysis was 9 still appropriate or whether another analysis would 10 need to be done. 11 Q. Are you saying it's dependent upon whether 12 or not there is something that replaces the STA's? 13 A. That's not what you asked me. You asked 14 me, "Let's assume that we're going to build STA's." 15 Q. Right. I'm saying, is your answer 16 dependent upon whether or not we substitute some 17 other program for the STA's? 18 A. I don't understand your question. 19 Q. I think I understood your answer. 20 Do you know what the moderating provisions 21 are under Florida's Administrative Code? 22 A. No, I have no -- I'd have to -- I've never 23 seen the Florida -- what do you call it, the 24 administrative code? 25 Q. Do you know what a mixing zone is in the PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 254 1 context of Florida water quality standards? 2 A. I have seen that term. I will have to 3 review some notes and documents to have a clear 4 response to that. 5 Q. Do you know what "site specific alternative 6 criteria" are in the context of the Florida water 7 quality standards? 8 A. Again, I have either seen or heard that 9 term in meetings; but I couldn't give you a definite 10 definition of it. 11 Q. Have you been asked to look at the economic 12 costs associated with either mixing zones or site 13 specific alternative criteria? 14 A. Have I personally been asked to evaluate -- 15 I haven't personally been asked to evaluate any 16 costs, other than the work that we did that was 17 presented to the South Florida Water Management 18 Board recently. 19 Q. Is anyone, to your knowledge, examining the 20 concepts of the economic costs of mixing zones or 21 site specific alternative criteria? 22 A. Not to my knowledge, those specific items. 23 Q. For your February 11th presentation to the 24 governing board, did you independently calculate the 25 cost of the BMP's for the sugarcane grower? PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 255 1 A. For that -- I think you'll find, if you 2 look at our presentation, that we state in there 3 that we use the information that was available from 4 the Brown & Caldwell Consultants -- I believe is the 5 name of the firm. And it is a draft report of the 6 least cost BMP's that was submitted to the South 7 Florida Water Management District in January 1993. 8 And what they did in terms of BMP's was 9 look at the annual cost per acre for sugarcane to 10 achieve a 25 percent reduction in phosphorus 11 concentration in the sugarcane drainage water using 12 the least cost combination of the BMP's to achieve 13 that goal. 14 Q. And my question was -- then I guess your 15 answer is "no," you didn't independently calculate 16 those costs? 17 A. That's right. We used the Brown & Caldwell 18 Consultants' calculations. 19 Q. Now, for all capital purchases requirements 20 for BMP's, such as, land modification, machinery, 21 pumps, cultivators, et cetera, your testimony is you 22 relied on the Brown & Caldwell dollar cost values? 23 A. I think if you consult the Brown & Caldwell 24 document, you'll find that for this level of 25 phosphorus removal, 25 percent, I don't believe that PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 256 1 those BMP's that you mentioned were relevant to this 2 level of reduction. 3 This level of reduction, if we go back and 4 look at that document, I think we'll find that it 5 included calibrated soil testing, banning 6 fertilizer, preventing fertilizer from escaping into 7 the canals. Water table management, I believe, may 8 have been included in that. I can't remember all of 9 them. There were four or five that were combined to 10 achieve the 25 percent, some of which, at least, 11 would not require, as I understand it, major capital 12 investment. 13 Q. So did you review the calculations then 14 resulting in that 86-cent number? 15 A. I read the text. 16 Q. Is that 86-cent cost the projected cost for 17 BMP implementation on cane lands only or on sod and 18 vegetable lands, also? 19 A. That's cane land only. That's the only 20 thing that we were looking at. 21 Q. Is that 86-cent cost projected as an 22 average cost, a median, or a mean? 23 A. Well, the median and mean are both 24 considered to be averages; but a statistic that I 25 would say, that I believe -- and, again, I'd have to PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 257 1 go back and look at that document to be absolutely 2 sure in this response, but I think it's a mean. 3 Q. In your opinion, will the cost of that BMP 4 implementation be site specific, in other words, 5 different on Muck versus sandy soil? 6 A. I wouldn't have an opinion on that. I 7 would defer to Brown & Caldwell and need to get 8 information on that from them. 9 Q. Did that 86-cent cost include the cost of 10 compliance with the EAA rule? 11 A. What do you mean, "what's included in the 12 cost of compliance"? 13 Q. I'm sorry. Cost of implementation, 14 86 cents. 15 MR. SAXE: Object to form. 16 Q. (By Mr. Burgess) Does that include the 17 monitoring required by the EAA rule? Do you know? 18 A. I don't know what all is included in cost 19 of compliance. I think that was your original 20 question. If you could clarify it. I don't know if 21 I can answer it or not. 22 Q. Do you know what the EAA rule is? Are you 23 familiar with the rule? 24 A. Without consulting the documents -- I 25 couldn't give you a specific response to that, no. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 258 1 Q. Do you know whether that 86 cents includes 2 the cost of research and development of BMP's 3 previously spent or incurred by some of the farmers? 4 A. Again, I would have to go back and ask 5 Brown & Caldwell. They have a specific cost for 6 each one of the -- each BMP included in the 7 combination; and the development of that cost, 8 whether or not it includes research, I don't know. 9 Q. You were at the February 11th governing 10 board meeting, right? 11 A. I was. 12 Q. You were there for some of it, at least? 13 A. I was there for some it, yeah. 14 Q. Did you hear the U. S. sugar presentation 15 with respect to their BMP program? 16 A. Which presentation are you talking about? 17 Q. That preceded yours, a presentation by -- 18 A. Mr. Buecher (phonetic)? 19 Q. Mr. Buecher. 20 A. I heard parts of it. I was not there for 21 the entire presentation. 22 Q. Do you know whether or not that 86 cents 23 included the cost for the BMP programs that were 24 referenced in that presentation? 25 A. For the parts of the presentation that I PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 259 1 saw -- the parts of Mr. Buecher's presentation that 2 I saw, I believe there would have been some overlap; 3 but I don't think it was -- that they were totally 4 congruent. 5 MR. SAXE: Counsel, are you asking 6 about the cost of implementing those 7 BMP's or researching and developing 8 them? 9 MR. BURGESS: Implementing. 10 Well, he's already said he doesn't 11 know if R & D was included. 12 MR. SAXE: I think at that point 13 you were referring to R & D investment 14 by individual farmers? 15 MR. BURGESS: That's right. 16 Q. (By Mr. Burgess) You said that the January 17 report that you consulted was a draft, correct? 18 A. Uh-huh. 19 Q. Are you aware that some of the farmers 20 dispute the 86-cent cost figure or the accuracy of 21 that figure? 22 A. I haven't seen any specific disputes, 23 comments on it. 24 Q. Let's turn if we can to Exhibit 12, which I 25 think -- well, you may have that. That's in front PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 260 1 of you now. Okay. 2 If I recall your February 11th 3 presentation, you stated -- I think at that time you 4 used four different data sources; one of which was, 5 "I don't believe the March '92 Sugar & Sweetner 6 Report." During Ron Lacewell's testimony, he 7 referred to that a number of times in justifying 8 some of the figures in here. 9 Do you recall whether or not the March '92 10 Sugar & Sweetner Report was used in conjunction with 11 the preparation of this presentation? 12 A. Well, I wish I had those before me. I know 13 we used the June 1992 for the cost of production, 14 and I think the March -- there's one table in the 15 March Sugar & Sweetner Report that was used to look 16 at the price, historic price of sugar. I don't 17 believe I specifically excluded the March document 18 in my presentation before the board. 19 Q. It's not a trick question in your question, 20 and I'm not asking you whether you remember saying 21 it. I just recall him saying March. I don't recall 22 you saying March. I'm wondering whether or not you 23 recall using it. 24 A. Yeah. I think the June report, I think, 25 has primarily the cost of production numbers. The PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 261 1 March report has a series on prices. And I think 2 that's where the March report came in, was in 3 looking at the price of sugar. 4 Q. And that March information isn't reproduced 5 in the June. Is that why? 6 A. Right. As I understand it from Ron Lord, 7 one publication relates to primarily the prices, the 8 other one relates primarily to costs each year. 9 Q. You said yesterday that after your 10 presentation you called Ron Lord to discuss the 11 transportation cost issue. Since that presentation, 12 have you also spoken with Grace Johns about this? 13 A. Since the presentation? 14 Q. Yeah. 15 A. I don't recall a conversation with 16 her. I -- 17 Q. Have you spoken -- I'm sorry. 18 A. As I know -- I don't recall a conversation 19 with her. 20 Q. Do you recall a conversation with her 21 before the presentation which specifically involved 22 whether or not your estimate of production and 23 processing costs per pound of sugar included or 24 didn't include transportation costs? 25 A. I didn't have that conversation. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 262 1 Q. Do you know whether Ron Lacewell did? 2 A. I don't know -- well, let me think about 3 this a minute now. I believe he did. I believe 4 that Ron talked to both Grace Johns to see what she 5 did about -- in her price assumptions. I believe he 6 may have also talked to Carl Woelche about what he 7 did in his price assumptions. 8 Q. That was since February 11th or before? 9 A. That was -- I'm not sure about the date. 10 It may have been both, in fact. 11 Q. Was there a difference between what you did 12 and what Grace and/or Carl did with respect to 13 transportation costs? 14 A. I think the two methods are similar, in 15 terms of using the Sugar & Sweetner Report 16 information and making it. 17 Q. If I recall Dr. Lacewell's testimony 18 correctly, he recounted a conversation with Dr. Lord 19 concerning transportation costs. 20 Were you a part of that conversation? 21 A. Not the same conversation, no. 22 Q. Again, I believe Dr. Lacewell testified 23 that Dr. Lord said, perhaps as much as 60 percent of 24 the marketing component of variable cash expenses, 25 perhaps up to eight-tenths of one penny per pound PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 263 1 represented transportation costs. 2 Is that your understanding, as well? 3 A. Well, let me -- if I could, just -- I had a 4 conversation with Dr. Lord myself. 5 Q. After February 11th or before? 6 A. Yes. Yes. I'll be quite honest with you 7 and tell you, when I left the meeting and had heard 8 the charge that 2 cents had been left out of that -- 9 I wanted to verify it with him directly. 10 So I called Ron Lord and we had a 11 conversation about transportation in the Florida 12 sugar, where it goes, and what transportation costs 13 might be. And as I recall, it was his opinion or he 14 told me that we had at most -- there was, I think, 15 20 percent of the cane -- I believe is his 16 estimate -- about 20 percent is milled in the EAA. 17 It's refined. Excuse me. Not milled, but refined 18 in the EAA. And then about two-thirds of the cane 19 goes to the terminal in Florida; and at the 20 terminal, the sellers are charged are a weighted 21 average cost. And I think that relates back to 22 where the .8 cents transportation comes from. 23 And he did remind me that these costs came 24 from the books of the sugar mill and the sugar 25 growers that, I believe, were audited for the last -- PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 264 1 were audited for 1987. So, although, I didn't -- 2 was not in the same conversation with 3 Dr. Lacewell, I have a similar understanding about 4 transportation costs of sugar leaving the EAA. 5 Q. During your conversation with Ron Lord, did 6 he tell you that he had spoken to Jim Richardson 7 about this same topic, transportation costs? 8 A. To the best of my recollection, 9 Jim Richardson's name never came up. 10 Q. Did you tell him that there was an 11 allegation or an assertion that costs of 12 transportation from the mills to the refineries 13 average 2 cents a pound? 14 A. I probably did mention that as being one of 15 the reasons. As I recall in our conversation, I 16 told him, "Let me tell you why I'm calling." 17 And I told him I had made a presentation 18 before the South Florida Water Management District 19 Board and we had used their numbers in the 20 processing and production costs. We used the 21 reported price that comes, also, from their 22 publications; and that following the presentation -- 23 and I told him what I did with it. And