DIVISION OF ADMINISTRATIVE HEARINGS DEPARTMENT OF ADMINISTRATION, STATE OF FLORIDA SUGAR CANE GROWERS COOPERATIVE OF CASE NOS. 92-3038 FLORIDA, a Florida agricultural 92-3039 cooperative marketing association; ROTH 92-3040 FARMS, INC.; and WEDGWORTH FARMS. INC., and FLORIDA SUGAR CANE LEAGUE, INC.; and UNITED STATES SUGAR CORPORATION, and FLORIDA FRUIT AND VEGETABLE ASSOCIATION, LEWIS POPE FARMS, W. E. SCHLECHTER & SONS, INC., and HUNDLEY FARMS, INC., Petitioners vs. SOUTH FLORIDA WATER MANAGMENT DISTRICT, an Agency of the State of Florida, Respondent, and THE UNITED STATES OF AMERICA, MICCOSUKEE TRIBE OF INDIANS, THE FLORIDA DEPARTMENT OF ENVIRONMENTAL PROTECTION, THE FLORIDA WILDLIFE FEDERATION, THE FLORIDA AUDUDON SOCIETY and THE SIERRA CLUB, Respondent-Intervenors. _________________________________________/ DEPOSITION OF: DR. F. LARRY LEISTRITZ TAKEN: March 15, 1994 VOLUME 1 DEPOSITION OF: DR. F. LARRY LEISTRITZ TAKEN AT THE INSTANCE OF: United States of America Respondent-Intervenor DATE: Tuesday, March 15, 1994 TIME: Commenced at 9:00 a.m. Concluded at 5:30 p.m. LOCATION: 315 South Calhoun Street Tallahassee, Florida REPORTED BY: ANITA M. PEKEROL, CCR, RPR, CP, CM. Notary Public in and for the State of Florida at Large. APPEARANCES: REPRESENTING THE PETITIONERS SUGAR CANE GROWERS COOPERATIVE OF FLORIDA a Florida agricultural cooperative marketing association; ROTH FARMS, INC. and WEDGEWORTH FORMS, INC.: CAROLYN S. RAEPPLE, ESQUIRE Hopping, Boyd, Green & Sams 123 South Calhoun Street Post Office Box 6526 Tallahassee, Florida 32314 REPRESENTING RESPONDENT-INTERVENOR UNITED STATES OF AMERICA: KEITH E. SAXE, ESQUIRE United States Department of Justice 601 Pennsylvania Avenue Northwest Room 879 Post Office Box 663 Washington, D. C. 20044 ALSO PRESENT: Lonnie L. Jones, Ph.D. Ronald D. Lacewell I_N_D_E_X _ _ _ _ _ WITNESS PAGE _______ ____ DR._F._LARRY_LEISTRITZ ___ __ _____ _________ Direct Examination by Mr. Saxe 5 CERTIFICATE_OF_REPORTER 89 ___________ __ ________ E_X_H_I_B_I_T_S _ _ _ _ _ _ _ _ DEPOSITION_EXHIBITS: __________ ________ NUMBER DESCRIPTION PAGE ______ ___________ ____ 1 Memorandum from Eric Schubert to Larry Leistritz, 2-2-94, and tables 37 2 Memorandum from Larry Leistritz to Ron Luke, 2-6-94 49 4 1 P_R_O_C_E_E_D_I_N_G_S _ _ _ _ _ _ _ _ _ _ _ 2 - - - 3 The following deposition of DR. F. LARRY 4 LEISTRITZ was taken on oral examination, pursuant to 5 notice, for purposes of discovery, for use as evidence, 6 and for such other uses and purposes as may be permitted 7 by the applicable and governing rules. Reading and 8 signing is not waived. 9 - - - 10 COURT REPORTER: Today is Tuesday, March 11 15, 1994. We are here on the case of Sugar Cane 12 Growers Cooperative of Florida, Florida Sugar 13 Cane League, Inc., and Florida Fruit and 14 Vegetable Association vs. South Florida Water 15 Management District and The United States of 16 America, et cetera, Case Nos. 92-3038, 3039 and 17 3040 18 In attendance today are Dr. Lonnie Jones, 19 attorney Keith Saxe, Ronald Lacewell, Dr. Larry 20 Leistritz and Carolyn Raepple, attorney. And 21 Anita Pekerol is the court reporter. 22 Thereupon, 23 DR. F. LARRY LEISTRITZ 24 was called as a witness, having been first duly sworn, 25 was examined and testified as follows: 5 1 DIRECT EXAMINATION 2 BY MR. SAXE: 3 Q Professor Leistritz, I'm Keith Saxe, with 4 the U. S. Department of Justice. I represent the United 5 States in this case. We have met before, of course, 6 when your deposition was taken last year by another 7 Federal attorney. I will be continuing that deposition 8 today. I will be taking your deposition today and 9 tomorrow, and, if necessary, at some future date to be 10 arranged. 11 I will ask you a series of questions. You 12 are under oath, and you are required to give me your 13 complete and honest answer to those questions, unless 14 your attorney instructs you not to answer. 15 If you don't understand a question, please 16 tell me so before you try to give an answer. 17 Do you understand those instructions? 18 A Yes. 19 Q The rules are, basically, the same as they 20 were at the last deposition. 21 A All right. 22 Q Professor Leistritz, have you reviewed the 23 deposition notice and the document production request 24 that was issued by the United States for this 25 deposition? 6 1 A Yes. 2 Q To your knowledge, have all of the 3 responsive documents in your possession been produced in 4 response to that, except for documents that have been 5 listed as privileged by your attorney and withheld? 6 A Yes. 7 Q Professor, by the way, I'll refer, 8 generally, to the Sugar Cane Growers Cooperative, Roth 9 Farms and Wedgworth Farms in this deposition as the 10 Cooperative. 11 Are you familiar with the witness 12 designation, expert witness designation, that has been 13 filed by the Cooperative, in which you are identified as 14 an expert witness in this case? 15 A Yes. 16 Q I'm going to refer you to a page of that 17 expert witness designation. If you would, take a look 18 at it. 19 MR. SAXE: Do you, by any chance, have 20 another copy of the witness designation? 21 MS. RAEPPLE: I might. 22 MR. SAXE: I think I've got copies of every 23 Post-It note, but I don't think I have a copy of 24 this one. 25 7 1 BY MR. SAXE: 2 Q Professor Leistritz, would you describe for 3 me, in your own words, please, what your understanding 4 is of what your role at trial in this case may be, your 5 testimonial role? 6 A It is my understanding, at this time, that 7 I am probably not going to be called as a witness. If I 8 were -- well, no. 9 Q When you say probably not going to be 10 called as a witness, do you understand that there is any 11 issue or topic that you might be called as a witness 12 about? 13 A I am not sure I understand the question. 14 Q Do you understand that you will certainly 15 not be called as a witness in the case? 16 A No. Are you asking if I were to be called, 17 what topics would I be knowledgeable about? 18 Q No. Actually, what I'm asking is, do you 19 understand that you might be called concerning any 20 matters in this case? 21 A Yes, I understand that I might be called. 22 Q I will refer you to paragraph B on your 23 witness designation, substance of facts and opinions. 24 You have reviewed that? 25 A Yes. 8 1 Q Does that describe the facts and opinions 2 regarding which you understand you might be called to 3 testify to at trial? 4 A Yes. That seems reasonable. 5 Q Are there any facts and opinions that you 6 have developed knowledge of, or opinions in this case, 7 that you understand you might be called to testify to 8 that are not listed on this witness list? 9 A I believe that the list covers what I would 10 be testifying about. 11 MS. RAEPPLE: Mr. Saxe, could I see the 12 designation? 13 MR. SAXE: Yes, sure. 14 BY MR. SAXE: 15 Q Professor Leistritz, I'm going to refer you 16 to a pleading in this case titled The Statement of 17 Ultimate Facts, Policy and Law by Petitioners Sugar Cane 18 Growers Cooperative, Roth and Wedgworth, which is dated 19 February 4, 1994. I would like you to look at page 7 of 20 this moving paper. 21 The paragraph at the top, Section 3, titled 22 Reliance of Farmers, would you read those first two 23 boldface paragraphs to yourself? 24 A Okay. 25 Q Can you tell me what facts and/or opinions 9 1 might you testify to at trial in support of the 2 allegations in those two paragraphs? 3 A I think my answer at this point is, I don't 4 know. 5 MR. SAXE: Do you have the witness 6 designation, or did I take it back? 7 MS. RAEPPLE: It is right here. 8 BY MR. SAXE: 9 Q Why don't you take a look at this and, if 10 you could, tell me, in your view, whether any of these 11 facts or opinions that are summarized on the witness 12 designation relate to the allegations in those 13 paragraphs, in your opinion? 14 A I would say that the testimony that I might 15 present, really, I would not anticipate relating very 16 directly to the statements here. I think that's a good 17 way to summarize it. 18 Q If you look at the bottom, there is a 19 paragraph 33-D referred to in Footnote 3. Why don't you 20 take a second and read that? 21 A All right. I think I have a question about 22 that footnote. It appears that perhaps the footnote 23 ends with "state law," although there is no period. 24 Should I understand that "state law" is the end of 25 the -- 10 1 Q Why don't you assume, for purposes of my 2 question, that there should be a period after the last 3 word, "law," and that it has just been dropped. 4 Now that you have reviewed that, can you 5 tell me what, if any, facts or opinions you might 6 testify to at trial in support of the allegations in 7 Footnote 3, paragraph 33-D? 8 A I don't believe my testimony would really 9 relate to that statement. That really has not been the 10 thrust of the work that I have been asked to do. 11 Q Referring you, again, to the witness 12 designation, there are three paragraphs, entries, under 13 the subheading Substance of Facts and Opinions. Do you 14 understand that you may be called to testify to facts 15 and/or opinions concerning all of those entries? 16 A I am not quite sure how to respond to the 17 question. I have not really been given any specific 18 direction about my possible testimony. 19 In general, most of the work that I have 20 been involved in would relate to Number 1 at this point. 21 Q Okay. Then we'll save Number 1, and let's 22 focus on Number 2. 23 A All right. 24 Q Would you read that paragraph into the 25 record for me, please? 11 1 A "Number 2: In its current incomplete form, 2 the SWIM Plan does not determine the plan's probable 3 costs and benefits, and, therefore, does not comply with 4 Federally-accepted standards and principles for water 5 resources projects or state law requirements for 6 analysis of socioeconomic impacts of major 7 developments." 8 Q Would you tell me, please, what are 9 referred to by the Federally-accepted standards and 10 principles for water resources projects? 11 A Okay. There is a document, a rather 12 extensive document, with, basically, that title, 13 Principles and Standards for Water Resources Projects. 14 Q Any others? 15 A Other Federal standards and principles 16 would, of course, include, basically, NEPA, National 17 Environmental Policy and related analysis. Those would 18 be the two things that would come to mind immediately. 19 Q How about the phrase "state law 20 requirements for analysis of socioeconomic impacts of 21 major developments"? If you could, explain to me, in 22 your understanding, what those state law requirements 23 are. 24 A Okay. It is my understanding that the 25 State of Florida has some requirements relative to 12 1 economic and fiscal impact analysis for certain kinds of 2 development projects. I have not been asked to analyze 3 or review those in detail, however. 4 Q Have you formulated opinions about what the 5 state law requirements for analysis of socioeconomic 6 impacts of major developments are? 7 A For the State of Florida, no. 8 Q Have you formed opinions about what the 9 Federally-accepted standards and principles for water 10 resources projects are? 11 A Yes. 12 Q I'm going to show you a document that was 13 introduced as an exhibit in the deposition earlier this 14 month of Dr. Luke. It is Exhibit Number 1 to the Luke 15 deposition of March 4th and 5th. 16 Take a minute, if you would, to review the 17 document; especially pages 1 through 8. 18 Before you do that, excuse me and let me 19 interrupt you. 20 Have you seen this document before? 21 A No. 22 Q If you would, go ahead and review pages 1 23 through 8. 24 A All right. 25 (Brief pause.) 13 1 BY MR. SAXE: 2 Q You can stop right before the sentence that 3 says "inadequacies in the proposed SWIM Plan." 4 You indicated earlier that the Federal 5 principles and guidelines and NEPA were the 6 Federally-accepted standards and principles for water 7 resources projects. In your opinion, do the Federal 8 principles and guidelines and NEPA apply to the SWIM 9 Plan? 10 A I don't feel I know the answer to that 11 question, outside the scope of what I have been involved 12 in. 13 Q The document that you have just reviewed, 14 Exhibit 1, pages 1 through the middle of page 8, does 15 that describe, in your view, what is required under the 16 Federal principles and guidelines and NEPA? 17 A The section that you asked me to review, 18 essentially, appears to me to be a summary of the 19 principles and guidelines document. 20 Q Do you know any water resources projects 21 for which analyses have been done that do comply with 22 the Federally-accepted standards and principles for such 23 projects by the South Florida Water Management District? 24 In other words analyses, sufficient analyses, that have 25 been done by the district? 14 1 A I would like to ask you to repeat the 2 question. 3 Q Are you aware of any studies that have been 4 done by the South Florida Water Management District that 5 do, in your opinion, comply with the Federally-accepted 6 standards and principles for water resources projects? 7 A I am really not familiar with other studies 8 by the South Florida Water Management District, besides 9 the ones that we have reviewed relative to the SWIM Plan 10 before us. 11 Q And which studies are those that you have 12 reviewed? 13 A Well, primarily, the Hazen & Sawyer 14 reports. 15 Q And could you describe those, kind of name 16 those, roughly, for me which Hazen & Sawyer reports you 17 have reviewed? 18 A Okay. I believe that, essentially, there 19 was a draft report and a final report. But, basically, 20 Hazen & Sawyer's analysis of the effects of the SWIM 21 Plan on the agriculture in the EAA. 22 Q Would that be a draft and final report of 23 the 10-year evaluation? 24 A Yes. 25 Q And would it, also, be a draft and final 15 1 report of the 20-year evaluation by Hazen & Sawyer? 2 A Yes. 3 Q Are there any others that you have 4 reviewed? 5 A Those were the major documents. 6 Q And I take it, in your opinion, those 7 analyses did not comply with the Federally-accepted 8 standards and principles for water resources projects. 9 A I think my response would be that the Hazen 10 & Sawyer reports did not address the full range of steps 11 that are outlined in the principles and standards. It 12 is probably, also, reasonable to say that the Hazen & 13 Sawyer report was only intended to be one part of the 14 overall planning process. And, essentially, evaluation 15 of the effects of, in this case, basically, a certain 16 set of alternatives. 17 Q Do you know of any analyses of water 18 resources projects that have been done by any other 19 Florida, agency besides the South Florida Water 20 Management District, that do, in your opinion, comply 21 with the Federal principles and standards for water 22 resources projects? 23 A I am not familiar with studies conducted by 24 the Florida agencies. 25 Q Are you aware of any analyses that have 16 1 been performed by any agency in Florida, Federal or 2 State, for water resources projects that have complied 3 with the Federally-accepted standards and principles? 4 A Again, I'm not familiar with studies of 5 other projects. 6 Q Do you know of any analyses performed or 7 prepared by or on behalf of state or local agencies in 8 other states for water resources projects that have 9 complied with the Federally-accepted standards and 10 principles? 11 A Yes. 12 Q Could you identify one for me, please? 13 A Okay. The one that I would be most 14 familiar with is the planning process and series of 15 studies conducted with respect to the Garrison Diversion 16 Irrigation Project in North Dakota. 17 Q I'm sorry, in North Dakota? 18 A In North Dakota. 19 Q Was a formal report produced reflecting 20 that analysis? 21 A Yes. A whole series of reports and 22 planning documents. 23 Q Do you know whether those reports have been 24 produced or identified in your document production? 25 A You asked me if I was familiar with -- 17 1 Q Yes, that's right. I am asking you a 2 different question. 3 A I think the answer to that is, no. 4 Q Are there any other analyses performed by 5 state agencies or local agencies, in states other than 6 Florida, for water resources projects that, in your 7 opinion, have complied with the Federally-accepted 8 standards and principles, besides the Garrison Diversion 9 Irrigation Project? 10 A My answer would be, yes. 11 Q Could you name another for me? 12 A Okay. Again, I'm not necessarily familiar 13 with these different projects or studies in great 14 detail. I am aware of a number of studies conducted by 15 the U. S. Bureau of Reclamation in North Dakota and 16 surrounding states for a variety of water development 17 projects. 18 Also, for instance, a whole series of 19 planning studies relative to water resources projects on 20 the Colorado River. Again, I would not profess intimate 21 familiarity with these studies. 22 Q Any others that come to mind? 23 A Those would be the ones that come most 24 immediately to mind. 25 Q The Garrison Diversion Irrigation Project, 18 1 what agency performed the analyses in that case? 2 A The U. S. Bureau of Reclamation, I believe, 3 is the lead agency. 4 Q Do you know of any analyses that have been 5 performed by state or local agencies, as opposed to 6 Federal agencies, for water resources projects outside 7 of Florida that comply with the Federally-accepted 8 standards and principles? 9 A Yes. In general terms, for instance, the 10 North Dakota State Water Commission has conducted a 11 variety of analyses and planning studies over the years. 12 Q Can you specify any of those that you are 13 familiar with, and, in your opinion, have complied with 14 the Federally-accepted standards and principles? 15 A Again, I would not at this point claim 16 detailed familiarity with any of those studies. 17 Q Do you know whether any of those studies 18 have been produced with your documents? 19 A No, I don't believe they have. 20 Q Do you know whether any of those studies 21 have been, specifically, identified in a list in your 22 document production? 23 A I would not think they have. 24 Q In your opinion, are state or local 25 agencies in North Dakota required to comply with the 19 1 Federally-accepted principles and standards for water 2 resources projects? 3 A That's my understanding. 4 Q Do you have an opinion as to why they're 5 required to comply with those Federally-accepted 6 standards and principles? 7 A I think my answer is, no. That is really 8 outside of the scope of my work in this case. 9 Q Are there any other requirements for the 10 analysis of socioeconomic impacts or the relationships 11 of cost and benefits that do apply to the SWIM Plan, 12 except for the Federally-accepted standards and 13 principles, and whatever those state law requirements 14 are that are referred to in this witness designation? 15 A It seems to me that the principles and 16 standards, and NEPA, and the state requirements would 17 pretty well cover it. 18 Q Have you been involved in any of the 19 analyses that have been performed by state or local 20 agencies for water resources projects that, in your 21 opinion, do comply with the Federally-accepted standards 22 and principles; personally involved? 23 A Yes. 24 Q Which ones would those be? 25 A I have been involved in several analyses on 20 1 behalf of the North Dakota State Water Commission. 2 Q Would those be among the North Dakota State 3 Water Commission studies that have been performed over 4 the years that you referred to earlier in your 5 testimony? 6 A Yes. 7 Q You indicated that you didn't really have 8 any specific recollection about the nature of those 9 studies. And I think your words were that you don't 10 presently have detailed knowledge, and that is fine. I 11 mean, I am not asking you to over-tax your powers of 12 recall. But could you tell me what your involvement in 13 those studies involved? 14 A Okay. Yes. Preparation, basically, of 15 socioeconomic impact analyses for various alternatives. 16 Or economic and demographic, what you might call, 17 baseline projections for different parts of the state. 18 Q Did those involve proposed actions by the 19 North Dakota State Water Commission? 20 A Yes. 21 Q Can you tell me what some of those proposed 22 actions were? 23 A Okay. The most recent thing that I was 24 involved in was, basically, a short study for the Water 25 Commission, based on one of their proposals to provide 21 1 municipal and industrial water to communities in the Red 2 River Valley of North Dakota, as part what is known as 3 the Garrison Diversion Project. And as part of that, 4 part of the Water Commission's effort, then we provided 5 economic and demographic projections, primarily, 6 population projections, for a number of communities in 7 the Red River Valley. 8 Q You have indicated that that was a proposal 9 to provide industrial and what other kind of water? 10 A And municipal water. 11 Q And when do you work on this analysis? 12 A As I recall, that would have been in the 13 summer of 1989. 14 Q Were you involved in defining the study 15 area for that analysis? 16 A Actually, the study area had already been 17 defined, so the answer is, no, I was not involved in 18 defining the study area. 19 Q But that analysis, in your view, did comply 20 with the Federal principles and guidelines, correct? 21 A Yes. 22 Q Do you recall whether you were involved in 23 the analysis of alternatives in your work on that 24 project? 25 A On that particular project, no. 22 1 Q Do you know whether alternatives to the 2 proposal to provide industrial and municipal water in 3 the Red River Valley were analyzed by the North Dakota 4 State Water Commission in that project? 5 A It is my understanding they were, yes. 6 Q Did you work with or rely on the services 7 of any demographers in that study? 8 A In that particular study, no. 9 Q Describe for me, in a little bit more 10 detail, if you would, what your socioeconomic impact 11 analysis and baseline analysis in that study involved. 12 A Okay. In that particular study, we were 13 developing population projections for municipalities and 14 I believe, also, counties, in the study area, 15 encompassing several valleys in the Red River Valley. 16 We, basically, used a demographic projection model; a 17 more technical term, "a cohort-survival model." 18 Q I'm sorry? 19 A A cohort, C-O-H-O-R-T, -survival model. We 20 developed projections, I believe, for about a 30-year 21 future projection horizon. 22 Q Did you quantify socioeconomic impacts in 23 that analysis? 24 A No. 25 Q You provided your work on population 23 1 projections to somebody else who was working on that? 2 A Yes. 3 Q Who did you provide it to? 4 A We provided our projections to the State 5 Water Commission. 6 Q Do you know whether the State Water 7 Commission quantified, or somebody else working on their 8 behalf quantified, socioeconomic impacts in that 9 analyses? 10 A I don't, specifically, know the answer to 11 that. 12 Q Are you familiar with any other aspects of 13 the full analysis that was done in that case? 14 A No. 15 Q So, you don't know whether the North Dakota 16 State Water Commission did a benefit cost analysis for 17 that project? 18 A No, not specifically. An answer would be 19 speculative. 20 Q Other than that proposed action involving 21 industrial and municipal water for the Red River Valley, 22 what other North Dakota State Water Commission projects 23 have you been personally involved in doing analysis for? 24 A We have, I have, been requested on a number 25 of occasions to, basically, provide, you know, economic 24 1 impact analyses, economic base data and information of 2 this sort to the Water Commission. In those cases, I 3 was only, generally, familiar with the subsequent use 4 that the Commission might be making of the information. 5 Q Can you name or describe for me one of the 6 proposed actions that was at issue in one of those 7 studies? 8 A Again, in many of these cases, I was not 9 familiar with the details of the analysis that they were 10 doing. They were asking me for very specific things, 11 which we had developed as part of our research program 12 at North Dakota State University. I was providing 13 information, models, multipliers and the like to them, 14 and was not particularly familiar with the specific 15 analyses that they were undertaking. 16 Q So, then, it would be fair to say that your 17 role in those analyses, and your knowledge of the 18 analysis in the total sense, was limited to certain 19 aspects of the analysis? 20 A Yes, that would be very fair. 21 Q We started in this line of questions 22 because I was interested in those analyses that had been 23 performed by the North Dakota Water Resources Commission 24 for water resources projects that, in your view, 25 complied with the Federal principles and guidelines. 25 1 And you have identified for me the one 2 involving the proposed provision of industrial and 3 municipal water to the Red River Valley. But there are 4 no other projects that you can enumerate for me that did 5 comply with the Federal principles and guidelines? 6 A I think I will ask you to restate the 7 question. 8 Q Let me do that for you. I'm sorry, it was 9 a long question. 10 Did the analysis that was performed by the 11 North Dakota State Water Commission for the proposed 12 action involving the provision of industrial and 13 municipal water to the Red River valley, in your view, 14 comply with the Federal principles and guidelines? 15 A To the extent that I am aware of what was 16 done, yes. 17 Q Was a report produced, that you are aware 18 of, that described the analysis performed by the North 19 Dakota Water Resources Commission, State Water 20 Commission? 21 A Yes. 22 Q Did you review that report? 23 A I have read the report, yes. 24 Q And, in your opinion, that report reflected 25 analysis that does comply with the Federal principles 26 1 and guidelines? 2 A Yes. 3 Q Are there any other reports of analysis 4 performed by the North Dakota State Water Commission for 5 proposed actions involving state water resources 6 projects that you have reviewed? 7 A Are there other reports by the State Water 8 Commission involving water resources projects that I 9 have reviewed? 10 Q Yes. 11 A Yes. 12 Q Do you remember whether any of those 13 complied, in your opinion, with the Federal principles 14 and guidelines? 15 A Yes. 16 Q Can you identify those reports for me? 17 A Okay. I would identify, primarily, a 18 series of reports relating to the previously referenced 19 Garrison Diversion Irrigation Project. 20 Q Let me just stop there for a moment. Did 21 the North Dakota State Water Commission perform analysis 22 in the Garrison Diversion Irrigation Project? 23 A That's my understanding. 24 Q You had indicated earlier that that 25 involved the U. S. Bureau of Reclamation; is that 27 1 correct? 2 A Yes. 3 Q The North Dakota State Water Commission 4 was, also, involved? 5 A That's my understanding, yes. 6 Q Did you know whether the North Dakota State 7 Water Commission was the lead agency in that project? 8 A I don't know precisely which agency was the 9 lead agency. Basically, there have been a series of 10 analyses over a span of something in excess of 20 years 11 now. 12 Q I understand. Well, we have the Garrison 13 Diversion and we have the Red River Valley Water 14 Project. Are there any other projects for which reports 15 were produced by the North Dakota State Water Commission 16 that, in your view, comply with the Federal principles 17 and guidelines, that you are aware of? 18 A None that I could describe in detail for 19 you today. 20 Q Referring, again, to paragraph 18-B-2, on 21 page 11 of the expert witness designation for Professor 22 Leistritz, would it be fair to say, in your view, that 23 it describes defects in the SWIM Plan? 24 A Yes. 25 Q I would like to refer you, once again, to 28 1 Exhibit 1 to the deposition of Dr. Ronald Luke. And if 2 you would, look at page 8, from the middle of the page 3 on. Just review that for a moment, please. 4 A Beginning with "inadequacies"? 5 Q Beginning with "inadequacies in the 6 proposed SWIM Plan." 7 MS. RAEPPLE: How many pages do you want 8 him to review? 9 MR. SAXE: Page 8 to the end of the 10 document. 11 MS. RAEPPLE: That is a pretty lengthy 12 document. Could we take a five or 10-minute 13 break while he does that? 14 MR. SAXE: Sure. How about a five-minute 15 break? He is a fast reader. 16 (Brief recess.) 17 BY MR. SAXE: 18 Q In the interest of time, let me revise my 19 previous request to you to review those pages of the 20 document and go at this another way. 21 I am interested in identifying what, in 22 your opinion, are the defects in the SWIM Plan that are 23 referred to in subparagraph B-2 of your witness 24 designation. 25 Now, Dr. Luke, in his deposition, tendered 29 1 this exhibit, tendered this document. He described it 2 as reflecting his opinions about defects in the SWIM 3 Plan, among other things. 4 You haven't reviewed this document before. 5 Is there a document that you have produced that 6 describes the defects in the SWIM Plan that you have 7 formulated opinions on? 8 A I have not been asked to review the SWIM 9 Plan, per se. In the early going of our work, I was 10 involved in reviewing the Hazen & Sawyer report. 11 Q In this statement of the facts and opinions 12 to which you may testify, it says, "In its current 13 incomplete form, the SWIM Plan does not determine the 14 plan's probable cost and benefits," et cetera. 15 Would it be fair to say that, in your 16 opinion, the Hazen & Sawyer report or the Hazen & Sawyer 17 analysis was the analysis that was performed on behalf 18 of the district that you have formulated critical 19 opinions about? 20 A Yes. The Hazen & Sawyer report is the only 21 major document that I have been asked to review. 22 Q Is there a document that you have produced 23 that summarizes the defects in the Hazen & Sawyer 24 report, in your opinion? 25 A I can't tell you a precise date, but, 30 1 basically, Dr. Luke, with the assistance of myself and 2 others, produced a review document some time back, like 3 a year or more ago, basically reviewing, critiquing the 4 Hazen & Sawyer study. 5 Q Do you know whether that referred to the 6 Hazen & Sawyer 10-year study? 7 A A review document was prepared, which I 8 feel comfortable was related to the 10-year study. 9 Whether a document was subsequently prepared relative to 10 the subsequent 20-year study, I am not sure at this 11 point. 12 Q Did the document that was prepared in 13 reference to the 10-year study reflect your opinion 14 about the defects in the Hazen & Sawyer 20-year report? 15 A I am sure one of the criticisms of the 16 10-year study was the short planning horizon, shorter 17 than we thought appropriate. There were, however, 18 others, so that concern would be, to some extent, 19 addressed by a longer planning horizon, a 20-year study. 20 There were other concerns, however, that would not have 21 been reflected in the 20-year study. 22 Q So, so far as you are aware, there has been 23 no document prepared that summarizes the defects in the 24 Hazen & Sawyer 20-year contract completion report 25 prepared by you, or RPC, or Dr. Luke, or others working 31 1 for RPC or with RPC? 2 A I don't know. 3 Q Have you reviewed the Hazen & Sawyer 4 contract completion report for their 20-year analysis? 5 A Yes. 6 Q Let me refer you to paragraph B-1 on your 7 witness designation. 8 A All right. 9 Q It refers to socioeconomic impacts that 10 implementation of the SWIM Plan would result in? 11 A Yes. 12 Q Have you performed any analyses in 13 formulating your opinions that are reflected in this 14 paragraph? 15 A Yes. 16 Q Have you been involved in preparing an 17 economic impact analysis of the SWIM Plan? 18 A Yes. 19 Q I would like to ask you some questions 20 about that analysis. 21 A Okay. 22 Q And to give me a frame of reference, I am 23 going to ask you to refer, as we go over these 24 questions, to the Hazen & Sawyer contract completion 25 report. 32 1 BY MR. SAXE: Do you, by any chance, have a 2 copy handy for Professor Leistritz? I think I 3 can dig up an extra one, but I would have to pull 4 off some Post-It notes and stuff. If it is a 5 hassle, I can readily clean this one up. 6 MS. RAEPPLE: I don't have it with me. I 7 can have it delivered. 8 MR. SAXE: Let me just pull these off. 9 BY MR. SAXE: 10 Q Professor Leistritz, I am showing you the 11 contract completion report for the South Florida Water 12 Management District's 20-year evaluation by Hazen & 13 Sawyer, dated August 1993. I am removing some Post-It 14 notes. Here you go. 15 A Okay. 16 Q Is it fair to say that you, and when I say 17 you, I mean, you and RPC and others working to assist 18 Dr. Luke in the preparation of his opinions for trial, 19 performed an economic impact analysis that was in many 20 ways similar to that performed by Hazen & Sawyer and 21 reported in this contract completion report? 22 A Yes. 23 Q I would like you to turn to Section 7 of 24 this report. 25 A Okay. 33 1 Q Section 7.1, on page 7-1. I think you are 2 probably at Appendix 7. 3 A Okay, okay. 4 Q It is closer to the front of the document. 5 A Yes. Section 7. 6 Q That's correct. 7 A Yes. 8 Q Section 7.1 says there are seven factors 9 that measure the economic contribution of an industry. 10 And then it lists a number of factors for measuring 11 economic contribution. Would you review those briefly, 12 please? 13 A All right. 14 Q Do you agree that these are seven factors 15 that measure the economic contribution of the 16 agricultural industry in South Florida? 17 A Yes. 18 Q Are there any that are missing from this 19 list? 20 A These appear to be some of the very 21 commonly used indicators of economic impact or economic 22 contribution. 23 Q Are there any factors that measure the 24 economic contribution of the agricultural industry in 25 the EAA that you or RPC analyzed that are not listed 34 1 here? 2 A It seems to me that these are probably the 3 major indicators that were analyzed. 4 Q Are there any factors not listed here that, 5 in your opinion, Hazen & Sawyer should have analyzed to 6 comply with the Federal principles and guidelines in the 7 measurement of the economic contribution of the 8 agricultural industry in the EAA? 9 A Again, it seems to me that these are some 10 of the generally accepted major indicators for measuring 11 economic contribution. 12 Q So, would it be fair to say that, in your 13 opinion, there are no missing factors that Hazen & 14 Sawyer should have considered in measuring the economic 15 contribution of the agricultural industry in the EAA? 16 Missing in the sense that they're not listed here? 17 A I don't see any substantial omissions. 18 Q At the bottom of the page, there are two 19 sentences. It says, "The value of sales and earnings 20 are not additive. They represent a different measure of 21 economic contribution." 22 Do you agree with those statements? 23 A Yes. 24 Q On the next page, Section 7.2, methodology 25 for estimating economic impacts. If you would, read the 35 1 first paragraph to yourself. 2 A All right. 3 Q Is there anything in that paragraph that 4 you disagree with? 5 A I guess I would probably not agree with the 6 criteria for land being removed from or going out of 7 agricultural production. 8 Q Is that the sentence, "If the sales of a 9 product could not cover at least the cash cost from 10 producing the product, then production of the product 11 ceases on the model farm"? 12 A Yes. 13 Q In the analysis that RPC, and I use RPC 14 broadly, in the analysis that RPC performed, how was 15 that handled? 16 A Okay. As I understand it, in the analysis 17 that RPC performed, the land would go off production at 18 the point where returns were not covering, basically, 19 the full cost of production, including capital 20 replacement; whereas, Hazen & Sawyer is not taking the 21 land out of production until revenues no longer cover 22 what they call the cash cost. They're saying capital 23 replacement is not a cash cost, as I understand it. 24 Q Is it your opinion that land would go out 25 of production when it could not fully cover capital 36 1 replacement? 2 A Yes. 3 Q And what is the basis for that? 4 A The basis for that is kind of the economic 5 principal that investors, entrepreneurs, managers, would 6 need to recover their full cost of production in order 7 to stay in production, as economists say, in the long 8 run. 9 Q In your view, land would go out of 10 production in the first year when the owner could not 11 fully cover capital replacement? 12 A That's my understanding of how the RPC 13 modeling addressed the issue, yes. 14 Q And, in your opinion, that is the correct 15 way to address the issue? 16 A Yes. 17 Q And that, in your opinion, would be because 18 in that first year when the owner could not fully cover 19 capital replacement costs, the owner would perceive that 20 they would not be able to cover capital replacement 21 costs in the future, as well? 22 A Right. 23 Q What would that perception be based on, in 24 your view? 25 A That would be based on the producer having 37 1 access to the same general type of information that is 2 reflected in the models. Which is to say that the 3 adverse experience that is being experienced in year one 4 is not seen as temporary aberration, but rather a 5 long-term trend. 6 Q Professor Leistritz, let me get this marked 7 as an exhibit. 8 (Deposition Exhibit 1 marked for 9 identification.) 10 BY MR. SAXE: 11 Q Professor Leistritz, I'm handing you what 12 has been marked as Exhibit Number 1. If you would, take 13 a look at that document. You might show it to Ms. 14 Raepple first. 15 A All right. 16 Q If you would, could you identify this 17 document for the record for me? 18 A Yes, this is a memo from Eric Schubert, an 19 RPC employee, to me, copies to Ron Luke and Ed Warren, 20 also, of RPC, dated February 2nd. 21 Q Have you seen this document before, 22 Professor Leistritz? 23 A Yes. 24 Q Would you explain for me what this 25 memorandum was about? 38 1 A Okay. The memorandum, basically, addresses 2 the issue that was addressed in your previous question. 3 That is, the appropriate assumptions for land being 4 removed from agricultural production in the EAA, in the 5 face of declining net returns from agricultural 6 production. 7 Q Does this reflect a request from Eric 8 Schubert to you to answer certain questions? 9 A Yes. 10 Q Are those questions described in the second 11 paragraph, under the heading "The timing and conditions 12 of agricultural land leaving production"? 13 A Yes. Yes. 14 Q Looking at the bottom paragraph on page 1, 15 four lines down there is a question: "Does this reflect 16 the true experience of farmers?" 17 Did you formulate an opinion about the 18 answer to that question? 19 A Yes. 20 Q What was that opinion? 21 A That opinion, in fact, was summarized in a 22 memo to -- 23 MR. SAXE: Let me mark another one, and see 24 if this is what you are looking for. 25 Would you mark that, please? 39 1 (Deposition Exhibit 2 marked for 2 identification.) 3 THE WITNESS: That is the one, yes. 4 BY MR. SAXE: 5 Q Professor Leistritz, referring to what has 6 been marked as Exhibit Number 2, would you identify that 7 for the record for me, please? 8 A Yes. This is a memo from myself to Ron 9 Luke, dated February 6, 1994, responding to the memo 10 from Eric Schubert. 11 Q Going back to the question, "Does this 12 reflect the true experience of farmers," did that refer 13 to the preceding sentence, which reads, on Exhibit 1, 14 "Hazen & Sawyer claims that a farm would operate for a 15 number of years when a farm is losing money, but is 16 covering operating costs by eating depreciation on farm 17 equipment." Then it says, "Does this reflect the true 18 experience of farmers?" 19 In your opinion, does that reflect the true 20 experience of farmers? 21 A Yes. The memo of February 6th attempts to 22 address that issue. And, basically, what we're saying 23 is that in order to be economically viable, the revenue 24 must be sufficient to cover all costs of production and 25 provide a positive residual return of the land and risk. 40 1 The costs that must be covered include a capital 2 replacement charge, also often termed depreciation, and 3 it enumerates other costs. 4 Q Can depreciation, also, be considered as a 5 return to investment in machinery? 6 A Not in the usual sense of economic 7 analysis. The depreciation, essentially, can be termed 8 "capital replacement cost." 9 Most investors would want to not only be 10 able to replace their equipment, but, also, in addition, 11 to have some sort of "positive return on their 12 investment." The depreciation is, generally, seen as 13 the cost of replacing the capital goods; the tractors, 14 that sort of thing. 15 Q Do you know how Hazen & Sawyer accounted 16 for depreciation in their analysis? Handled 17 depreciation in their analysis? 18 A Okay. It was my understanding, from 19 reading the report, that they would treat depreciation 20 in the way that I just described. The issue, I think, 21 was the issue of what costs had to be covered in order 22 for the land to stay in production. And they were 23 saying that depreciation did not have to be covered. 24 Did not have to be covered in order for the land to stay 25 in production. 41 1 Q Independent of the land use change criteria 2 and the role of depreciation in it, do you know whether 3 Hazen & Sawyer allowed an expense for depreciation in 4 their analysis? 5 A Yes. It is my understanding that they 6 allowed depreciation as one of the expenses of 7 production. 8 Q And how did they calculate depreciation? 9 A I can't describe it to you in detail, 10 certainly without reference to their report. I guess 11 that's the best answer I can give. 12 Q Did you form an opinion of whether Hazen 13 and Sawyer's calculation of depreciation was defective? 14 A I don't recall, on reviewing the report, 15 having questions or concerns about the way in which they 16 calculated depreciation charges. 17 Q How does a farmer know whether he or she is 18 in an aberrational situation involving an inability to 19 cover capital replacement costs, or a long-term trend? 20 A That is, of course, a very good question. 21 And one could say that is what makes management, in this 22 case farm management, a challenge. 23 Q Other than the challenging nature of making 24 that determination for a farmer, is it fair to say that 25 a farmer's decision to leave production would be based 42 1 on his or her estimation of whether the first year's 2 inability to cover capital replacement was an aberration 3 or a long-term trend? 4 A Yes. It all goes back to the 5 decision-maker, in this case the farm manager's 6 assessment. Their expectation or their assessment of 7 the future. Which, of course, farm operators often have 8 various sources of market outlook information and other 9 kinds of economic information which they consult, to a 10 greater or lesser extent, prior to making decisions. 11 Q In Exhibit 2, the sentence in the bottom 12 paragraph, above the footnotes, four lines down, it 13 says, "If the information embodied in our models is 14 generally available to the industry, then a producer 15 facing such a negative return situation would understand 16 that the outlook was for residual returns to become even 17 more negative in the future." 18 Have I read that correctly? 19 A Yes. 20 Q What is this information embodied in our 21 models? What information? 22 A In other words, the projections of future 23 prices for the product, likely trends in costs, yields 24 and the like. 25 Q When you say "and the like," could you be 43 1 more specific? 2 A Well, all of the various factors that enter 3 into the projections of returns, costs and, hence, net 4 returns from these different agricultural enterprises in 5 the EAA; including prices, yields, major factors in 6 determining gross receipts. A whole array of components 7 on the cost side. 8 Q On the cost side, would that be what you 9 referred to earlier as market outlook information? 10 A The market outlook information would relate 11 to product prices and, hence, to gross revenue. The 12 costs, the whole array of fertilizer, pesticides, 13 herbicides assessments. 14 Q And is that information embodied in the RPC 15 model? 16 A Right. 17 Q Given the historical profit and growth in 18 the EAA for sugar production, would you say that sugar 19 growers should be optimistic or pessimistic about the 20 future outlook? 21 A I guess that would depend on various 22 possible changes in water management, in international 23 sugar policy and the whole array of forces that affect 24 the industry. 25 Q In RPC's analysis, land was taken out of 44 1 production in the first year when the model farm owner 2 was unable to cover capital replacement costs; is that 3 correct? 4 A Yes. 5 Q Would that reflect an assumption that in 6 that first year, when the model farm owner was unable to 7 cover capital replacement costs, he or she would 8 perceive that the future outlook for residual returns 9 was negative? 10 A Yes. 11 Q What was that assumption based on in the 12 analysis? The assumption that in the first year where 13 there were negative residual returns that the perceived 14 outlook would be negative? 15 A It is, I guess, based on going back to the 16 principle that profitable production implies the need to 17 cover full cost of production. 18 And, also, based on the assumption that the 19 farm operators, the decision-makers in this case, have 20 access to information regarding the future outlook for 21 the different factors that are going to affect their 22 returns and their costs; such that at the point where 23 returns are no longer covering the full cost of 24 production, they have information available that allows 25 them to formulate accurate expectations. In this case, 45 1 accurate expectations that the future is only going to 2 have less favorable returns. 3 Q What information did RPC assume would yield 4 the conclusion in the mind of such a farmer that the 5 future outlook was negative, specifically? 6 A Well, basically, the factors that would 7 affect sugar prices, the knowledge, the schedule of 8 assessments, this sort of thing. And a producer's 9 experience relative to the different costs of 10 production. 11 Q So, would it be fair to say that RPC 12 assumed that in the first year where a model farm was 13 unable to cover capital replacement costs, all revenues 14 would be expected to decline in the future? 15 A I think I'll ask you to repeat the 16 question, sir. 17 Q Did RPC assume that in the first year when 18 a model farm was unable to cover capital replacement, 19 that the information would indicate that all revenue 20 would be expected to decline in the future? 21 A I think what the model is indicating is 22 that net revenues are expected to decline in the future. 23 Q Net revenues being revenue minus costs? 24 A Yes. 25 Q So, what I'm asking you is, was there an 46 1 assumption made about the revenue side of that equation? 2 Was there an assumption made about whether revenues 3 would decrease in the future? 4 A I believe the most appropriate way for me 5 to answer the question is to say that I have not been 6 intimately involved in all of the dimensions of the RPC 7 modeling, so I should not speculate on the precise 8 assumptions relative to the revenue and so on. 9 Q So, then, would it be fair to say that you 10 don't have an opinion about whether RPC assumed revenues 11 would decline after the first year in which a model farm 12 was unable to cover capital replacement costs? 13 A I think that is fair, yes. 14 Q Do you have an opinion about whether RPC 15 assumed that costs would increase after the first year 16 in which a model farm became unable to cover capital 17 replacement costs? 18 A Let me respond by saying that, in general, 19 it is my understanding that the model incorporates 20 assumptions of cost, of increasing costs, and I believe 21 revenues that are probably stable in nominal dollars, so 22 that the model definitely embodies assumptions that lead 23 to declining net revenue. 24 Q When you say revenues that are stable in 25 nominal terms, are those revenues declining in real 47 1 terms? 2 A With an assumption of a positive rate of 3 inflation, which I'm sure is still incorporated in the 4 analysis, then if revenue is constant in nominal terms, 5 it would be, by definition, declining in real terms, 6 because real in this case relates to inflation adjusted 7 or deflated dollars. 8 Q Would you be testifying to any opinions 9 about the basis for the assumption on the future trend 10 in revenues being stable in nominal terms, but declining 11 in real terms? 12 A I don't think so. 13 Q Would you have formulated any opinion that 14 you would be testifying to concerning the future trend 15 in costs as increasing? 16 A I don't believe so. 17 Q Do you have opinions about the assumption 18 made in RPC's analysis whereby land is taken out of 19 production as soon as total revenue is less than total 20 cost? Do you have an opinion about the soundness of 21 that assumption? 22 A Yes. 23 Q What is that opinion? 24 A Well, my opinion is that that is a 25 reasonable assumption. 48 1 Q And to the extent that you haven't already 2 indicated, what is that based on? 3 A Again, really based on the economic 4 principle of the need to cover all costs of production. 5 Q Are you familiar with any other areas and 6 instances in the country where farmers have encountered 7 residual returns that render them unable to fully cover 8 capital replacement costs? 9 A Yes. 10 Q In what areas of the country are you 11 familiar with such situations? 12 A In the Northern Great Plains region, 13 basically, North Dakota and adjacent states, there 14 certainly have been years over the last decade when 15 producers have been in that situation. 16 Q Any others, besides the Northern Great 17 Plains, that you are familiar with? 18 A Well, certainly, that would be the area 19 that I would be most familiar with. 20 Q Have you analyzed responses of farmers in 21 the Northern Great Plains to such situations? 22 A Yes. 23 Q In your analysis, have farmers ever 24 continued to farm even though they can't cover all of 25 their fixed costs? 49 1 A Have farmers continued to farm even though, 2 at least in individual years, they were not able to 3 cover their fixed costs? Yes, indeed. 4 Q So, in your analysis, there have been 5 instances where farmers have not taken land out of 6 production in the first year where they were rendered 7 unable to fully cover capital replacement costs? 8 A Yes. 9 Q What differentiated those situations from 10 the situations that farmers in the EAA would be facing, 11 in your opinion? 12 A The expectation that at some time in the 13 foreseeable future, the economic conditions in farming 14 in that region, that is, the Northern Plains, would 15 improve, such that they would be able to cover their 16 costs. 17 Q Why would farmers', in the EAA, 18 expectations not be as optimistic as farmers in the 19 midwest about the future ability to cover capital 20 replacement costs? 21 A The assumption with respect to the EAA is 22 that producers there will be familiar with or will, 23 essentially, have an assessment of future market 24 conditions and cost conditions that are consistent with 25 the assumptions that are built into the model. 50 1 Q Well, would it be fair to say that farmers 2 in the EAA, in RPC's assumption, would have no reason to 3 be optimistic in a way that farmers in the midwest have 4 sometimes had in your analysis? 5 A Yes. 6 Q Is that assumption taken simply as an 7 axiom, or is it based on some rationale, or any other 8 alternative that you might care to supply to that 9 answer? 10 A I guess maybe I'll ask you to restate the 11 question. 12 Q Is there a rationale for the assumption 13 that farmers in the EAA would have reason to be 14 pessimistic about the future trend in residual returns 15 that would explain why they would behave differently 16 than farmers in the midwest facing the same situation? 17 A Probably one thing that I could point to 18 would be the fact that producers in the midwest, dealing 19 in wheat, small grains and feed grains, have 20 traditionally been dealing in commodities, whose prices, 21 at least partially, are determined by international -- 22 well, there have, at least at times, seemed to be 23 reasons to think that "international market conditions 24 might improve" and things of that nature. And perhaps 25 the EAA producers are dealing with a situation where 51 1 their product price is more controlled by government 2 policy. 3 Q Okay, let's take that for a moment, and 4 I'll assume that is not an exhaustive list. 5 So, then, would it be fair to say that that 6 rationale involves what you referred to earlier as the 7 stable real price for raw sugar? 8 A Yes. 9 Q If you would, turn to page 4-4 in the 10 contract completion report for the 20-year Hazen & 11 Sawyer study. 12 A All right. 13 (Discussion off the record.) 14 MR. SAXE: Carolyn, the United States would 15 propose a stipulation. Rather than marking three 16 volumes of the Hazen & Sawyer 20-year contract 17 completion report as an exhibit in this case, 18 that it be stipulated that these are the same 19 three volumes as were marked as Exhibits 3, 4 and 20 5 in the Luke deposition of March 4th and 5th. 21 MS. RAEPPLE: That's fine. 22 BY MR. SAXE: 23 Q Professor Leistritz, the second paragraph 24 refers to the sugar program and to the prices supported 25 by the Federal Government. Are these the factors that 52 1 you alluded to earlier in describing the stable real 2 price? Or, excuse me, the stable nominal price of 3 sugar? 4 A Yes. 5 Q There is a sentence at the end of this 6 paragraph, the last sentence in paragraph 2. Would you 7 read that into the record for me, please? 8 A Okay. This is the sentence that begins 9 with "however"? 10 Q Yes, sir. 11 A "However, given that farm programs to 12 support farm income have existed for the past 58 years, 13 and that international trade agreements may not affect 14 sugar prices in the near term, it is not unreasonable to 15 assume that they will continue in their present form 16 through the 1990s." 17 Q Would you agree with that statement? 18 A I guess that they, in this case, refer to 19 farm programs, and, more specifically, to the sugar 20 program. So, yes, I think that is, basically, then what 21 Hazen & Sawyer is assuming, which is, also, consistent 22 with what was assumed in the RPC analysis. That the 23 sugar program, essentially, continues in the present 24 form through the 1990s, as I read it. 25 Q Do you have an opinion on whether the 53 1 current sugar price support program is operated to 2 prevent defaults on non-recourse loans to sugar 3 producers? 4 A I think I would answer by saying that I 5 have not really been asked to formulate opinions about 6 the sugar program, so I think my answer is, I don't 7 know. 8 Q So, then, would it be fair to say that you 9 don't know or you don't have an opinion on whether the 10 assumption about stable nominal price and declining real 11 prices is likely to occur or not likely to occur? 12 A Yes. 13 Q Is it true that North Dakota wheat farmers 14 are replacing wheat with sugar beets? 15 A In the Red River Valley of eastern North 16 Dakota, we produce a substantial acreage of sugar beets. 17 In the area that is suited for sugar beet production, 18 sugar beets, in recent years, have been probably a more 19 profitable crop than wheat. 20 It is my understanding that our acreage in 21 the Red River Valley area is relatively stable. I don't 22 believe we have had any kind of major changes in acreage 23 in recent years. There are year-to-year fluctuations, 24 but in recent years sugar beets have been a more 25 profitable crop than wheat, certainly. 54 1 Q Do you know whether farmers in other areas, 2 wheat farmers in other areas, have been switching to 3 sugar beets? 4 A I guess I don't have an opinion about sugar 5 beet acreage trends in other areas of the country. 6 Q In your opinion, does the switching that 7 has occurred in North Dakota from wheat to sugar beets 8 reflect optimism about the sugar market? 9 A Yes. 10 Q Do you think that a North Dakota farmer 11 would rather have a government price support program 12 like that for sugar or have a government program like 13 that for wheat? 14 A I don't think I have an opinion on that. 15 Q Do you know how many sugar farmers elected 16 to terminate production in 1981 in the EAA? 17 A No. 18 Q Do you know whether sugar farmers in the 19 EAA in 1981 had negative returns, residual returns? 20 A No, I don't. 21 Q Hypothetically, if sugar farmers in the EAA 22 had negative residual returns in 1981, and significant 23 numbers of them did not take land out of sugar 24 production, why might they not have done so, in your 25 view? 55 1 A The reason they would not do so would be 2 that their expectation with regard to future returns was 3 that future returns would be more favorable. 4 Q And what would cause them to have been 5 optimistic in 1981 that, in your opinion, would be 6 different at some point in the next 20 years in a 7 similar circumstance? 8 A I guess I have to say I'm not familiar with 9 the circumstances that were extant in 1981. 10 Q In referring to Exhibit 2, can you give me 11 any real life examples of significant numbers of farms 12 or farmers electing to take land out of production in 13 the first year where they were unable to fully cover 14 capital replacement costs? 15 A In North Dakota, we had, I guess, probably 16 several thousand producers who enrolled part or all of 17 their land into a government program called Conservation 18 Reserve Program. This would be during the period 1986, 19 roughly, through 1990. Something approaching three 20 million acres were then taken out of agricultural 21 production and put into the Conservation Reserve Program 22 during that period. 23 Q Did you say three million acres? 24 A Yes. 25 Q Can you explain why the farmers or owners 56 1 of those three million acres made that election in that 2 circumstance? 3 A Well, yes. Based on a survey of quite a 4 number of these people that we conducted in 1988, I 5 guess it was, basically, these producers were seeing the 6 government Conservation Reserve Program as offering a 7 higher return in net income to them from their land than 8 they had anticipated being able to achieve by farming or 9 renting the land. And/or they, also, saw the 10 Conservation Reserve Program as offering a lower level 11 of risk, compared to continuing to farm the land. 12 Q Did farmers associated with those three 13 million acres have to liquidate the farming operation 14 under that circumstance? 15 A In some cases, as near as we could 16 determine, enrolling land in the Conservation Reserve 17 Program was part of an overall plan to, basically, 18 liquidate the farming operation, get out of farming. 19 In some cases, it was part of a plan to, 20 basically, retire. In other cases, it was part of a 21 plan to get out of farming and look for another 22 occupation. And in many cases, it was a situation where 23 some producers put part of their land into the CRP. And 24 CRP is shorthand for Conservation Reserve Program. 25 In many cases, the producer enrolled part 57 1 of their land in the Conservation Reserve Program and 2 continued to farm the rest. 3 Q What is the relative proportions that 4 you -- did you make any determination, or do you have 5 any basis for -- 6 A We do, and I would have to look at the 7 research report that we prepared. 8 Q Well, did the majority liquidate? 9 A I would say, no. The majority were 10 enrolling a portion of their land in Conservation 11 Reserve, and continuing to farm the remainder. 12 Q What happened to the land where the farmers 13 did liquidate? 14 A What happened, the land was placed in the 15 Conservation Reserve Program, and it is, basically, the 16 same, regardless of what the owner-operator chose to do. 17 That is, the land, via the directives of the program, is 18 placed in a permanent cover; basically, grass. And the 19 owner-operator, also, has responsibilities to control 20 weeds and this sort of thing. 21 Q When you say permanent, would that be for 22 the duration of the contract? 23 A Yes, a 10-year contract. 24 Q So, it would actually be a 10-year period, 25 not a permanent period? 58 1 A Right. 2 Q What, in your opinion, will happen to the 3 CRP acreage when the contracts expire? 4 A I think the appropriate answer is, I don't 5 know. I might add that an awful lot of folks up in our 6 part of the country are asking that question these days. 7 Q Let me ask it this way: Is the 8 determination that those folks will have to make, in 9 fact, the same type of determination that the farmers in 10 the EAA have to make when residual returns render them 11 unable to cover capital costs; namely, what the future 12 outlook is for the residual returns? 13 A Yes. 14 Q What would you, as a resource economist, 15 with expertise in that kind of subject matter, think 16 would be likely of those CRP farmers if they are fully 17 rational and have good information? 18 A I would anticipate that the landowners 19 would, basically, take a look at the different 20 alternatives at the point that the contract expires. 21 You know, one alternative is to return the 22 land to crop production. If, in fact, crop prices are 23 high, net returns from crop production are more 24 favorable than from other uses of the land. Much of the 25 land very likely might return to crop production. 59 1 Another factor or another option would be 2 for the producer to leave the land in grass, utilizing 3 it for grazing and/or hay production. 4 So, these choices, I would anticipate, 5 would be really based on the producer's outlook and 6 expectation relative to net returns from different uses 7 at the point in time when they need to make that 8 decision. 9 Q In your opinion, given what you know now 10 about those factors, what would be the rational decision 11 to make if the contract were to expire this year? 12 A It would seem to me, and, again, I'll 13 reflect on the situation of the Conservation Reserve 14 Program acres in North Dakota, which would be the area 15 that I would have some understanding of, it would seem 16 to me that the rational decision is going to depend 17 on -- some will probably put the land back into crop 18 production, others might very well leave it in 19 grassland. But then they would be utilizing it for 20 livestock production in one way or another as pasture or 21 hay land. 22 Q Which would be the sounder decision, in 23 your opinion? 24 A It would depend on the characteristics of 25 the land. It would, also, depend on the situation for 60 1 the farm operator. 2 Q Do you know how much farmers were paid per 3 acre to enroll in the CRP in North Dakota? 4 A Again, those statistics are available in 5 considerable detail. It strikes me that at the time, 6 when much of the land was being signed up, it was 7 perhaps on the order of $40. It strikes me that an 8 awful lot of it was in the range of 35 to $45. 9 Q Do you know how that amount compared with 10 the farmers' net returns to lands at that time? 11 A Well, many of them, at least taking into 12 account the perceptions of the risk and so on, many 13 producers saw this as a better return, a more favorable 14 return, than what they could obtain by farming or 15 renting the land. 16 Q Do you know how that figure, I think you 17 used 35 to $40 an acre, compared with their variable 18 costs at the time? 19 A Not off the cuff, no. 20 Q Fixed costs? 21 A Well, again, that would differ by the part 22 of the state. It would differ by what crops were being 23 produced and so on. But, in general, the CRP payments 24 were often equal or greater than what was being 25 experienced for net returns for the crop production. 61 1 Q Do you know what became of the land placed 2 in the Land Bank of several years ago after contracts 3 expired? 4 A In the Land Bank in North Dakota, we can 5 tell you in general terms. And, in general terms, these 6 contracts were expiring in the early 1970s, I guess. A 7 high percentage of that land went back into crop 8 production. That was a period of relatively high crop 9 prices. 10 That which did not go back into crop 11 production, apparently, was used for hay and 12 pastureland. I have not seen any kind of a statistical 13 study to say what the percentages were in North Dakota, 14 or, for that matter, nationwide. But, in general terms, 15 in North Dakota, a very substantial percentage went back 16 into crop production. 17 Q Going back to Exhibit Number 2, and the 18 sentence, "A reasonable response by the producer would 19 be to liquidate the farming operation under such 20 circumstances," at the bottom of the first page and the 21 top of the second page, I asked you earlier about any 22 real life examples, and you gave me the CRP example in 23 North Dakota. 24 Are there any others, that you are aware 25 of? 62 1 A Okay. 2 Q Would you like me to clarify the question? 3 A Yes. 4 Q Let me do that. 5 Other than land availing itself to the CRP 6 program in North Dakota, are you familiar with any 7 examples, real life examples, where significant acreage 8 has elected to liquidate production in the first year 9 where it is faced with an inability to fully cover 10 capital replacement costs? 11 A I guess the question seems to have two 12 parts. One part is, can we identify major instances 13 where agricultural production was not able to cover full 14 costs and leave a residual return to land and 15 management? 16 And then the second part of that question 17 would be, in those cases are there examples of, 18 basically, people liquidating in the first year? 19 As I read it, again, it is kind of an 20 empirical question, I don't believe that in our major 21 crop producing areas, for instance, in the Northern 22 Great Plains, we have really had extended periods when 23 production would not, basically, cover costs and leave 24 some positive return to land and management. 25 Q When you say extended periods, my question 63 1 is examples of instances where significant acreage left 2 production in the first year, where the farmer or owner 3 was unable to fully cover capital costs. So, I'm not 4 sure, when you say extended periods, if you are 5 answering my question. Would you like me to restate the 6 question? 7 A I guess my answer should be, no, I don't 8 know. That is, I would not be able to demonstrate 9 instances of major amounts of land leaving production 10 after one year of returns inadequate to cover costs. 11 Q How about significant amounts of acreage 12 leaving production. When you say major, I'm not sure if 13 maybe we're getting hung up on the qualifier. 14 Are you aware of any examples where what, 15 in your opinion, would be a significant volume of 16 acreage in production left production in the first year, 17 where there was an inability to fully cover capital 18 replacement costs? 19 A Again, I guess that the answer should be, 20 no, I don't know of specific examples. 21 Q Returning, again, to this Exhibit Number 2, 22 the sentence, "A reasonable response by the producer," 23 the example that you gave me involved a government 24 program, where the producer was paid to take land out of 25 production. 64 1 A Yes. 2 Q In your opinion, might a reasonable 3 response by a producer to liquidate depend, to some 4 extent, on the availability of a government program such 5 as CRP? 6 A Oh, yes, that would definitely have an 7 effect. 8 Q Might a producer reasonably decide to 9 liquidate even where there were no such government 10 program paying the producer to take land out of 11 production? 12 A In a situation where returns don't cover 13 costs, that remains the rational response. 14 Q In order for a producer's election to 15 liquidate in such circumstances, namely, the first year 16 where they're unable to fully cover capital replacement 17 costs, to reasonably make that election, would it 18 require that there be some market available for the 19 assets that would be liquidated? 20 A Okay. The availability of a market for the 21 assets certainly would have an influence on a decision 22 to liquidate. Yes, machinery and that sort of thing. 23 If there was a "strong market" for those assets, that 24 would be a positive for liquidating, versus if it is 25 perceived that there is very little market. Some 65 1 economists would say, with very little salvage value to 2 some of those investments, that would favor a decision 3 to let's hang in there and see if things get better. 4 Q Which investments would have to be 5 liquidated in the EAA in the instance of sugar 6 production? 7 A Well, the producer's major capital 8 investments would include land, if it is owned. And 9 then the various production equipment, machinery, the 10 different tractors, tillage equipment and so on. 11 Q Did RPC make an assumption about the 12 existence of a market for the land in the first year 13 where a model farm became unable to fully cover capital 14 costs? 15 A I think the appropriate answer is -- maybe 16 the appropriate answer is, I don't know. 17 Q In your view, would RPC have had to make 18 such an assumption in order to soundly handle land going 19 out of production in the way it did? Namely, that it 20 went out of production in the first year, where it was 21 unable to fully cover capital replacement costs? 22 A I think the answer has to be, yes. That 23 is, some kind of assumption has to be made. 24 Q What kind of assumption would have to be 25 made in order for that to be a reasonable treatment of 66 1 the land use change criteria? 2 A You are asking for my opinion of the 3 assumption that one would make about the marketability 4 of the land at a point where the returns from production 5 no longer covered the full cost of production? 6 Q That's right. 7 A It seems to me that the assumption that I 8 would make under those conditions would be that the land 9 would, basically, have a zero value as an agricultural 10 asset, because agricultural production no longer 11 provides any positive return to the land. 12 Q What kind of market would there have to be 13 for land having zero market value? 14 A Again, I guess you are asking for my 15 opinion. It seems to me, logically, that there are two 16 possibilities. One is, the land simply stands idle, 17 because in a situation where agricultural production can 18 no longer cover the cost of production, no one wants to 19 farm it. 20 And we, of course, have had, historically, 21 some examples of that kind of situation in different 22 parts of the country. 23 But the other possibility is that the land 24 goes into some other non-agricultural use, I'm not sure 25 what that is, in the EAA. 67 1 In northern Minnesota, returning to forest 2 was an alternative use that happened to substantial 3 amounts of land a couple of generations ago. 4 Q Would it be correct to say that RPC had to 5 assume, in its treatment of the criterion for land 6 leaving production, based on the inability to fully 7 cover capital replacement costs, that in that first 8 year, where that situation obtained, the land value fell 9 to zero? 10 A I think I'll ask you to restate the 11 question. 12 Q Would it be correct that RPC's treatment of 13 land leaving production in the first year, where there 14 was an inability to fully cover capital replacement 15 costs, included the assumption that in that year the 16 land value fell to zero? 17 A It doesn't seem to me that the assumption 18 of the land value falling to zero is critical to the RPC 19 model. It does, however, seem to me to be a logical 20 conclusion, given a situation of an outlook for returns 21 from production not covering costs. 22 Q With respect to the market for machinery 23 and equipment, in order for a producer to reasonably 24 decide to liquidate in the first year, where he or she 25 was unable to fully cover capital replacement costs, 68 1 would there have to be some market for the equipment and 2 the machinery? 3 A Certainly, some market for the equipment 4 and machinery would be a factor that would certainly 5 favor and encourage liquidating. The lack of a market 6 for the equipment and machinery would work against a 7 decision to liquidate immediately. 8 Q What price would a producer have to be able 9 to obtain for the equipment and machinery in order for 10 it to still be a reasonable decision to leave production 11 in the first year, where he or she was unable to fully 12 cover capital replacement costs? 13 A What price would they need to be able to 14 receive? It seems to me that probably the answer to 15 that should be that they should be able to obtain a 16 price equal to the undepreciated value of the machinery. 17 Q So, then, would it be fair to say that, in 18 your opinion, a producer, faced with zero land value, 19 and a market price reflecting the undepreciated value of 20 the machinery and equipment, would reasonably decide to 21 leave production in the first year, where he or she was 22 unable to fully cover capital replacement costs? 23 A Yes. Given an expectation that if they 24 don't expect things to get significantly better in the 25 foreseeable future, then that would be a very rational 69 1 decision. 2 Q Describe for me, again, in your own words, 3 how you describe the price that a producer would have to 4 be able to obtain for the machinery and equipment in 5 such an instance to reasonably decide to leave 6 production. Was it undepreciated? How did you -- 7 A What I said was the undepreciated value. 8 That is, the value at which it is carried on the books, 9 so to speak. Acquisition cost, less previous 10 depreciation. 11 Q If a producer could not get the 12 undepreciated value of machinery and equipment at that 13 instance, might the producer reasonably elect to 14 continue in production, even though it had encountered 15 the first year in which it was unable to fully cover 16 capital replacement costs? 17 A The question is, might it be rational to 18 continue in production, even though not covering capital 19 replacement costs, if, in fact, the machinery assets of 20 this sort have very little "salvage value"? 21 Q Well, not necessarily very little salvage 22 value. Salvage value less than the undepreciated value 23 of the machinery and equipment. 24 A I think the answer probably should be, yes, 25 under some circumstances it might appear reasonable to. 70 1 The answer should be, yes. 2 Q Is there a relationship between the 3 shortfall in the market price for the machinery and 4 equipment and the shortfall in covering capital 5 replacement costs that govern whether it is a reasonable 6 decision to continue to produce or take it out of 7 production? 8 A The basic thing is, as I tried to outline 9 in the memo, is, basically, what costs are seen as fixed 10 and what costs are seen as variable. So that in a 11 short-run situation where we produce, we can cover 12 variable costs. But at some point, with a longer 13 planning horizon, all costs can be seen as variable. 14 Q And what determines the relationship 15 between the length of the planning horizon and whether 16 capital replacement costs are treated as variable or 17 fixed? 18 A Well, basically, the point at which one has 19 to, in fact, make capital replacement decisions. It 20 seems to me that the difficult issue is that while farm 21 machinery has a multiple year, useful life, a typical 22 farm probably does not start at year one with all new 23 machinery, such that nothing needs to be replaced until 24 a year or quite a ways down the road. Rather, 25 typically, some sort of capital replacement decisions 71 1 seem to come up almost annually. 2 Q If a farmer did have all new machinery and 3 equipment, would the farmer still leave production in 4 the first year if they were unable to fully cover 5 capital replacement costs? 6 A I guess that would depend on the question 7 that you previously asked about what are the 8 possibilities for recovering -- what can we obtain by 9 liquidating our assets? 10 Q As increasing numbers of sugar farmers go 11 out of production, do you know what would happen to the 12 price of their used machinery and equipment? 13 A One way to answer would be to say, no, I 14 don't know what would happen. 15 If you are asking for an opinion -- 16 Q Yes. 17 A -- then, again, at least two factors would 18 be applicable. One would be how many people are going 19 out of production; hence, how much equipment are they 20 likely to be liquidating? 21 A second factor would be to what extent is 22 this machinery or equipment specialized for sugar 23 production, as opposed to being usable for producing 24 other crops. 25 Some of the equipment used in the sugar 72 1 cane production is, obviously, highly-specialized. 2 Other items of equipment probably can readily be used by 3 other types, you know, vegetable growers, outside of the 4 EAA and so on. 5 Q Do you have an opinion about what would 6 happen in the EAA to the market prices for used sugar 7 machinery and equipment in circumstances where 8 increasing numbers of sugar farmers were liquidating? 9 A If substantial numbers were liquidating, 10 then one would anticipate that prices for the equipment 11 that is highly-specialized for sugar production, my 12 opinion would be that those prices would tend to be 13 depressed; more so than the equipment, tractors and the 14 like, that might be readily used for other kinds of 15 agricultural production. 16 Q Do you have an opinion about the types of 17 machinery and equipment that are used in sugar 18 production with respect to how much of it is 19 highly-specialized and how much of it is transferable to 20 other crop production? 21 A No. 22 Q What would be the effect of that declining 23 market for the used machinery and equipment on the 24 remaining farmers' decisions whether or not to leave 25 production the first year that they were unable to fully 73 1 cover their capital replacement costs? 2 A Well, the depressed market for assets would 3 be a factor that would encourage people to stay in 4 production for a bit longer. 5 Q Do you know whether RPC made any assumption 6 about that effect on the likelihood of land leaving 7 production the first year that it was unable to fully 8 cover replacement costs? 9 A No, I don't know. 10 Q Do you have any reason to believe that they 11 did make any assumption about that relationship? 12 A No. 13 Q Do you know whether RPC is using accounting 14 or economic depreciation for its analysis? 15 A No. 16 Q Are you assuming one or the other in the 17 formulation of the opinions that you have testified to 18 on this issue? 19 A I guess I am assuming economic 20 depreciation. 21 Q What difference would it make if RPC had 22 used accounting depreciation? 23 A I think that I would have to answer that I 24 don't know. I guess the relationship between economic 25 and accounting depreciation is not something that I have 74 1 an opinion on. 2 Q Again, back to Exhibit 2, but on the second 3 page this time, the last paragraph, I want to draw your 4 attention to this paragraph, generally, and the sentence 5 that says, "The potential subsidy would be limited, 6 however, by the cost saving that the mill can achieve by 7 maintaining volume (or the cost penalty associated with 8 loss of volume)." 9 Would a vertically integrated mill operate 10 to maximize the combined profits of the farm and the 11 mill? 12 A I would assume so. 13 Q In your opinion, is the sugar industry and 14 the EAA a vertically integrated industry? 15 A As I understand it, yes, to a large extent. 16 Q Did RPC make an assumption about vertical 17 integration in its analysis? 18 A I believe my answer should be, I don't 19 know. 20 Q For an integrated industry like sugar and 21 the EAA, is it reasonable that the mill might forego 22 some return to investment in the mill in order to 23 maintain cane production? 24 A As we tried to say, yes, that could be a 25 reasonable approach, but only to the extent of the cost 75 1 saving. Well, the cost saving that would be associated 2 with maintaining the volume of production, so that the 3 amount of subsidy that would be rational would be 4 limited by -- certainly not to exceed the savings from 5 maintaining volume. And in some situations, there may 6 be other options available to the mill that may be more 7 attractive. 8 Q Would it be correct to say that the 9 discussion in this paragraph refers to the likely price 10 that a mill would pay for cane? 11 A Yes. 12 Q In that context, would you tell me what you 13 mean by grower's subsidy? 14 A Okay. Well, I guess the "subsidy" in this 15 case would refer to offering the grower a higher price 16 than what the model was originally assuming. Offering 17 the grower an additional price increment to encourage 18 them to keep land in production, I guess. 19 Q When you say a higher price, higher 20 relative to what? 21 A Higher relative to the price that had been 22 assumed was used as the base case in the model. 23 Q And by the model, do you mean the RPC 24 model? 25 A Yes. 76 1 Q How was that price calculated in the RPC 2 model? 3 A I have to say that I don't know, in the 4 sense that I can't describe that to you in any real 5 detail. 6 Q Professor Leistritz, do you know how Hazen 7 & Sawyer, in its analysis, adjusted the maximum price 8 the mill would pay for cane when net returns aggregate 9 for the mill and farm rendered the mill unable to fully 10 cover capital replacement costs if it increased the 11 price paid for cane necessary to keep an acre of land in 12 production? 13 A Okay. I think I'm going to ask you to 14 repeat the question. 15 MR. SAXE: Would you read it back? 16 (Requested portion read.) 17 THE WITNESS: You are asking at the point 18 where returns would no longer cover capital 19 replacement costs for the farm, for the mill, for 20 the two in aggregate? I didn't quite understand 21 that. 22 BY MR. SAXE: 23 Q Yes, correct. It would not fully cover the 24 aggregate capital replacement costs. 25 A Aggregate, okay. 77 1 Q For both. 2 A Okay. It was my understanding, from 3 reading the report that, basically, when the farm 4 operation could no longer cover capital replacement 5 costs, that the mill was assumed to offer additional 6 price increments to the farmers to keep land in 7 production up to 80 percent of the mill depreciation 8 allowance. 9 Q Is that what -- 10 A That was what I had understood, from what 11 RPC, I think, had understood, from reading the Hazen & 12 Sawyer report. 13 Q And that is true -- excuse me. 14 A Go ahead. 15 Q And that is true, also, of the contract 16 completion report, the Hazen & Sawyer completion report? 17 A That's my understanding. 18 Q Is that what is referred to in the sentence 19 where it says, "Certainly I don't believe there is any 20 clear justification for assuming that 80 percent of the 21 mill depreciation can be offered as a grower subsidy"? 22 A Yes. 23 Q Do you know how RPC handled in its analysis 24 the determination of a grower's subsidy as you use it in 25 this sentence? 78 1 A I think I should answer that I don't know 2 how RPC chose to handle that. 3 Q If RPC handled it by assuming the mill 4 would give zero percent of its mill depreciation as a 5 grower's subsidy, do you have an opinion on whether that 6 would be the appropriate assumption for the EAA? 7 A I think my answer should be, no, I don't 8 have an opinion. 9 Q Professor Leistritz, does the determination 10 of the grower's subsidy as you use it, the term in this 11 exhibit, play a part in the finding of RPC's criteria 12 for land use change in its analysis? 13 A Does the treatment of the relationship 14 between the grower and the mill have an effect on the 15 analysis of whether land goes out of production? 16 Q Yes. 17 A I think the answer has to be, yes. 18 Q Am I correct in understanding that your 19 testimony is that you have no opinion about how RPC 20 handled the amount or the determination of the price 21 paid by the mill to the farm for a ton of cane? 22 A I have not examined, reviewed, the final 23 completed RPC model, so I cannot say how the farm-mill 24 relationship was handled in that sense. 25 Q When you say the final complete RPC model, 79 1 which model would you be referring to, or which version 2 of the model? 3 A The spread sheet model, which I gather they 4 have delivered to you. I have not seen the model in its 5 entirety. 6 Q Do you have an understanding that there is 7 a final complete version of the RPC model that you have 8 just referred to as your not having reviewed? 9 A Yes. 10 Q And have you reviewed any RPC model in 11 which some treatment was made of the relationship 12 between the mill and the grower with respect to the 13 price the mill would pay for a ton of cane? 14 A No. My role has been, basically, 15 discussing with the RPC staff some of the assumptions, 16 and so on, that they were going to incorporate into 17 their analysis. But I have not seen the analytical 18 model. 19 Q Let me kind of start this over. Do you 20 have an understanding of how RPC is handling the 21 relationship between the mill and the grower in setting 22 the price paid by the mill for a ton of cane? 23 A Okay. I believe I understand, in general 24 terms, what they're doing. But, as I say, I am not in a 25 position to testify about details, because at this point 80 1 I haven't seen the details which represent the 2 culmination of their analysis. 3 Q Well, I'm not necessarily asking for the 4 culmination of their analysis, or whether you have 5 formally reviewed a final version of the model. I'm 6 just asking you, generally, if you have any 7 understanding of how RPC is handling the relationship 8 between the mill and the farm in setting the price paid 9 for cane? 10 A I think I should probably answer, no, that 11 I don't know in detail what they decided to do. 12 Q Have you had any conversations with anybody 13 else in RPC about that issue? 14 A I would say that my memo here sort of 15 represents the culmination of those conversations. 16 Q After this memo, and we are referring to 17 Exhibit 2, did you have any further discussion or 18 correspondence with anybody associated with RPC's effort 19 concerning the issue of mill depreciation? 20 A No. 21 Q Do you know whether, in the case of the 22 cooperative, total mill depreciation is shared 23 proportionally by member owners? 24 A I don't know. 25 Q I now want to refer to this entire section 81 1 of your memo, entitled Agricultural Land, and that's the 2 Exhibit 2 memo. It starts on the first page and goes to 3 the second. 4 We have discussed several issues, one being 5 the reasonable response by a producer in the first year 6 that they were unable to fully cover capital replacement 7 costs. We have, also, discussed the issue of the grower 8 subsidy, as you have put it. 9 Have you had any further discussions or 10 correspondence with anyone associated with the RPC 11 effort about the issue of the reasonable response by 12 producers in the first year? 13 A No. 14 Q Do you have any further understanding of 15 how RPC is handling that issue in its analysis? 16 A No. 17 Q Let's go to the next section of this memo, 18 Local Employment in Construction of STAs. 19 A All right. 20 Q Would you read the first sentence into the 21 record for me, please? 22 A "Based on analysis of secondary data 23 concerning the EAA work force and their skills, 24 supported by interviews conducted in the EAA (by 25 Leistritz in July 1993 and by Luke on several occasions) 82 1 we can conclude that the EAA work force (e.g." -- I 2 think it should be "that is" -- "persons who live in the 3 EAA and are in the labor force) are predominantly 4 unskilled or semi-skilled, and their skills tend to be 5 quite specialized to the agricultural operations of the 6 EAA." 7 Q Thank you. 8 The reference in the beginning of the 9 sentence, "based on analysis of secondary data," could 10 you explain to me what secondary data you are referring 11 to there? 12 A The RPC had collected information from the 13 census, and from the Job Service relative to workers' 14 skills, educational levels and that sort of thing.