[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]

PROTECTING MARITIME JOBS AND ENHANCING
MARINE SAFETY IN THE POST-BUDGET CONTROL
ACT FISCAL ENVIRONMENT: A REVIEW OF THE
ADMINISTRATION'S FISCAL YEAR 2013
COAST GUARD AND MARITIME TRANSPORTATION
BUDGET REQUEST

=======================================================================

(112-75)

HEARING

BEFORE THE

SUBCOMMITTEE ON
COAST GUARD AND MARITIME TRANSPORTATION

OF THE

COMMITTEE ON
TRANSPORTATION AND INFRASTRUCTURE
HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

SECOND SESSION

__________

MARCH 7, 2012

__________

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COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

JOHN L. MICA, Florida, Chairman
DON YOUNG, Alaska NICK J. RAHALL II, West Virginia
THOMAS E. PETRI, Wisconsin PETER A. DeFAZIO, Oregon
HOWARD COBLE, North Carolina JERRY F. COSTELLO, Illinois
JOHN J. DUNCAN, Jr., Tennessee ELEANOR HOLMES NORTON, District of
FRANK A. LoBIONDO, New Jersey Columbia
GARY G. MILLER, California JERROLD NADLER, New York
TIMOTHY V. JOHNSON, Illinois CORRINE BROWN, Florida
SAM GRAVES, Missouri BOB FILNER, California
BILL SHUSTER, Pennsylvania EDDIE BERNICE JOHNSON, Texas
SHELLEY MOORE CAPITO, West Virginia ELIJAH E. CUMMINGS, Maryland
JEAN SCHMIDT, Ohio LEONARD L. BOSWELL, Iowa
CANDICE S. MILLER, Michigan TIM HOLDEN, Pennsylvania
DUNCAN HUNTER, California RICK LARSEN, Washington
ANDY HARRIS, Maryland MICHAEL E. CAPUANO, Massachusetts
ERIC A. ``RICK'' CRAWFORD, Arkansas TIMOTHY H. BISHOP, New York
JAIME HERRERA BEUTLER, Washington MICHAEL H. MICHAUD, Maine
FRANK C. GUINTA, New Hampshire RUSS CARNAHAN, Missouri
RANDY HULTGREN, Illinois GRACE F. NAPOLITANO, California
LOU BARLETTA, Pennsylvania DANIEL LIPINSKI, Illinois
CHIP CRAVAACK, Minnesota MAZIE K. HIRONO, Hawaii
BLAKE FARENTHOLD, Texas JASON ALTMIRE, Pennsylvania
LARRY BUCSHON, Indiana TIMOTHY J. WALZ, Minnesota
BILLY LONG, Missouri HEATH SHULER, North Carolina
BOB GIBBS, Ohio STEVE COHEN, Tennessee
PATRICK MEEHAN, Pennsylvania LAURA RICHARDSON, California
RICHARD L. HANNA, New York ALBIO SIRES, New Jersey
JEFFREY M. LANDRY, Louisiana DONNA F. EDWARDS, Maryland
STEVE SOUTHERLAND II, Florida
JEFF DENHAM, California
JAMES LANKFORD, Oklahoma
REID J. RIBBLE, Wisconsin
CHARLES J. ``CHUCK'' FLEISCHMANN,
Tennessee
------ 7

Subcommittee on Coast Guard and Maritime Transportation

FRANK A. LoBIONDO, New Jersey, Chairman
DON YOUNG, Alaska RICK LARSEN, Washington
HOWARD COBLE, North Carolina ELIJAH E. CUMMINGS, Maryland
ANDY HARRIS, Maryland CORRINE BROWN, Florida
FRANK C. GUINTA, New Hampshire TIMOTHY H. BISHOP, New York
CHIP CRAVAACK, Minnesota MAZIE K. HIRONO, Hawaii
BLAKE FARENTHOLD, Texas MICHAEL H. MICHAUD, Maine
JEFFREY M. LANDRY, Louisiana, NICK J. RAHALL II, West Virginia
Vice Chair (Ex Officio)
JOHN L. MICA, Florida (Ex Officio)

CONTENTS

Page

Summary of Subject Matter........................................ iv

TESTIMONY

Admiral Robert J. Papp, Jr., Commandant, United States Coast
Guard.......................................................... 5
Master Chief Michael P. Leavitt, Master Chief Petty Officer,
United States Coast Guard...................................... 5
Hon. Richard A. Lidinsky, Jr., Chairman, Federal Maritime
Commission..................................................... 5
Hon. David T. Matsuda, Maritime Administrator, U.S. Department of
Transportation, Maritime Administration........................ 5

PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS

Hon. Elijah E. Cummings, of Maryland............................. 38

PREPARED STATEMENTS SUBMITTED BY WITNESSES

Admiral Robert J. Papp........................................... 47
Master Chief Michael P. Leavitt \1\..............................
Hon. Richard A. Lidinsky, Jr..................................... 72
Hon. David T. Matsuda............................................ 84

SUBMISSIONS FOR THE RECORD

United States Coast Guard insert for the record.................. 36
Admiral Robert J. Papp, Jr., Commandant, United States Coast
Guard, responses to questions from Hon. Frank A. LoBiondo, a
Representative in Congress from the State of New Jersey........ 56

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\1\ Master Chief Michael P. Leavitt did not submit a written
statement.

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PROTECTING MARITIME JOBS AND ENHANCING MARINE SAFETY IN THE POST-BUDGET
CONTROL ACT FISCAL ENVIRONMENT: A REVIEW OF THE ADMINISTRATION'S FISCAL
YEAR 2013 COAST GUARD AND MARITIME TRANSPORTATION BUDGET REQUEST

----------

WEDNESDAY, MARCH 7, 2012

House of Representatives,
Subcommittee on Coast Guard and
Maritime Transportation,
Committee on Transportation and Infrastructure,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:00 a.m. in
Room 2167, Rayburn House Office Building, Hon. Frank LoBiondo
(Chairman of the subcommittee) presiding.
Mr. LoBiondo. Good morning. The subcommittee will come to
order.
Before we get into the heart of the hearing, let me remind
everybody that last week a very tragic event took place. We had
a Coast Guard helicopter that went down in Mobile Bay, Alabama,
on a training mission. Three servicemembers tragically lost
their lives, and one is still missing. This is a very stark
reminder of what our men and women in the Coast Guard have
signed up to do, and how they put themselves in harm's way
every day. Our Nation owes them a great debt of gratitude. And
we should be keeping the families in our thoughts and prayers,
and wishing them peace and strength.
So, Admiral Papp, if you would, please extend our
condolences.
The subcommittee is meeting today to hear testimony on the
President's fiscal year 2013 budget request from the leaders of
the three Federal agencies which promote, protect, and regulate
vessels and mariners in U.S. waters and in international trade.
As my colleagues know, our Nation is facing a very tough
budget climate, as we try to control our exploding national
debt. This Congress must continue to make extremely difficult
decisions to bring our spending under control and to cut the
deficit. The effort continues today with the presentation of
the fiscal year 2013 budget request.
The President requests $9.96 billion for the Coast Guard in
fiscal year 2013, a 4-percent cut over the current level. This
is the first time in over a decade that a President proposes to
reduce funding for the Coast Guard. These cuts have me gravely
concerned. We will repeat the same mistakes we made in the
1990s, when misguided cuts to the Service's operating and
acquisition budgets left it entirely unprepared to meet the 9/
11 mission which was thrust upon the Coast Guard.
For the fiscal year 2013 operating budget, the President
proposes to slash the number of Coast Guard servicemembers by
more than 1,000. Now, 1,000 may not seem like much, but for the
Coast Guard that is a huge number, when we fought for so long
to get that number up.
Those thousand will shutter recruiting stations, close
seasonal air facilities, take recently upgraded helicopters out
of service, and exacerbate the growing patrol boat mission hour
gap by retiring vessels before their replacements arrive.
For acquisition, the President proposes to slash the budget
by $272 million, or 19 percent below the fiscal year 2012-
enacted level. The request proposes to terminate or delay the
acquisition of the critically needed replacement assets,
including Response Boats-Medium, Fast Response Cutters,
Maritime Patrol Aircraft, Long Range Surveillance Aircraft, and
Unmanned Aircraft Systems. It also proposes to put off
important upgrades to the Jayhawk helicopter fleet, and delay
sustainment projects on buoy tenders.
Finally, the request slashes the budget for improvements to
shoreside installations by over 86 percent--86 percent, that is
a big number--and eliminates funding to renovate its derelict
housing for servicemembers and their dependents. And for me,
that is one of the most troubling aspects, where we ask men and
women to serve their country and put their lives on the line,
and in many cases they are in substandard housing, as it is.
Derelict is the proper word. And we eliminate funding to do any
renovation, that is just not right.
Although I commend Admiral Papp for being honest about what
these cuts will mean for the ability of the Coast Guard to
successfully conduct its missions, I am very disappointed that
the Secretary of Homeland Security and the President feel,
nonetheless, it is acceptable to make them. Admiral Papp, you
have been put in a very tough situation, and we understand
that.
As I have said before, I think there are ways to find
savings in the Coast Guard's budget by trimming administrative
costs and implementing efficiencies and operation. Our Coast
Guard authorization bill, which passed the House in November--
overwhelmingly, I might add--provided for just that. But this
budget request undermines the Service readiness and mission
effectiveness, and could adversely impact the safety and
security of our ports and waterways.
The budget request for the Maritime Administration
represents a 1.6-percent reduction below the current level.
Most of the cuts come from zeroing out funding for grants or
other programs which are meant to revitalize the maritime
sector and protect U.S. mariner jobs.
I am particularly concerned with the Administration's
proposal to yet again zero out funding for title 11 loan
guarantees. Title 11 program has served as an important
catalyst for growing American shipbuilding jobs in the past,
and it could be an important component to further our recovery
from the current recession with very little cost to the
taxpayer.
Finally, the budget request for the Federal Maritime
Commission proposes a nearly 8-percent increase over current
levels. Although an 8-percent increase in the FMC budget
amounts to less than $2 million, I think it sends the wrong
signal in the current fiscal environment. The Commission needs
to take a much closer look at their operations, and to try to
develop savings through consolidation of services and more
efficient operations.
With that, I would like to yield to Mr. Larsen for any
comments he may wish to make.
Mr. Larsen. Thank you, Mr. Chairman. And I apologize, I am
dealing with a cold. So I will get through my comments here and
try to wrap up. But I want to thank you for conducting today's
subcommittee hearing to discuss the proposed budgets for the
Coast Guard, the Maritime Administration and Federal Maritime
Commission.
Before I get started, Mr. Chairman, I do want to echo your
comments made with regards to the loss of life and those still
missing from the Coast Guard family. We all--still remain very
concerned, and I just want to share my thoughts and prayers as
well, Admiral and Chief.
Maritime transportation continues to be a critical
component of our national economy, contributing over $100
billion annually in economic output, and generating nearly
500,000 jobs, including 75,000 jobs aboard vessels or at
shipyards. Investing wisely and strategically to facilitate,
protect, and to regulate maritime commerce in the United States
remains vital in our efforts to sustain the ongoing recovery of
our economy.
I remain concerned with how the Federal Government spends
the taxpayers' money. The responsibility rests squarely on the
shoulders of Congress. It is our obligation to ensure that the
taxpayers get the biggest bang for the buck from the funds that
we invest on their behalf, to sustain important Federal
programs, including those activities that sustain the U.S.
maritime economy.
I noted at last year's budget oversight hearing that in our
efforts to grapple with the Federal budget deficit, some in
Congress are placing too much emphasis on how much can we cut.
Rather, we should be asking a more appropriate question, which
is: how can we best direct available Federal resources to
generate economic growth and spur job creation?
That point remains just as relevant today. And after
reviewing this year's proposed budgets for the Coast Guard and
Maritime Administration, my warning that cuts in the Federal
spending will not result in agencies doing more with less, but
in agencies doing less with less, seems to have been affirmed.
Any way you slice it, the only conclusion I can reach
concerning the Coast Guard's piece of the Federal budget pie is
that it is insufficient to meet the demands placed on this
multimission military Service.
Operating expenses account would see a small increase to
maintain the pace of field operations. I am also pleased that
funds are requested to allow the Coast Guard to move ahead with
the acquisition of the sixth National Security Cutter, and that
the Administration has finally seen the light of reason, and
requested funds to begin the planning and design work for a new
Polar-class icebreaker. But these positive aspects are offset
by cuts. Some steep in other Coast Guard accounts, including
the acquisition, construction, and improvements account, and
the research, development, test, and evaluation account.
In particular, I am disappointed that this budget does not
request any funds to address the long-term backlog of
servicemember housing needs.
I am not convinced that the budget request for the Coast
Guard before us today is adequate to meet the demands that we
have placed on the Service. I will be interested in hearing
from Commandant Papp on how he expects the Service to do more
with less, and what will be the effects of tradeoffs embedded
in this request.
Unfortunately, MARAD's budget proposal for fiscal year 2013
also disappoints. Although the overall proposed budget for
MARAD would be less than a 2-percent cut from fiscal year 2012,
important MARAD accounts that support our domestic ship
building industry would go without.
First, as the chairman noted, the title 11 loan guarantee
program which contributes to the ability of the United States
to carry its foreign and domestic waterborne commerce helps
sustain efficient shipbuilding activities, and preserves a
skilled shipbuilding workforce would go unfunded in this
budget.
Second, the budget would eliminate funding for the
assistance to small shipyards program. Similar to title 11,
this program has made an important set of targeted investments
to improve American port infrastructure, create American jobs,
and help domestic shipyards. Rather than eliminating these
programs, we should be investing in them to stimulate job
growth, allow U.S. firms to retool to remain globally
competitive, and provide a genuine return on investment for the
taxpayers here in the U.S.
If there is a ray of optimism this morning, it might be the
proposed budget for the Federal Maritime Commission. For the
second consecutive year, the Administration has proposed a
modest increase to support the Commission. In light of the
turbulent global economy, and the need to maintain reliable,
efficient, and affordable marine supply chains, the Commission
continues to play an often overlooked but vital role in
monitoring world shipping practices.
I do want to hear from Chairman Lidinsky in how the
Commission intends to use the new funding proposed in this
budget, and what they intend to do to support greater U.S.
exports, especially in the transpacific trade.
With that, Mr. Chairman, I look forward to testimony from
our witnesses. Thank you.
Mr. LoBiondo. Thank you, Mr. Larsen. Before we go to our
panel, I understand we have a number of State maritime academy
cadets that are with us today. We welcome you. We applaud your
career decisions, and hope you stick with your career dreams
for the maritime industry. Thank you for joining us.
Yes, Mr. Larsen?
Mr. Larsen. I would like to welcome them. And, although he
could not be here because he is at a Veterans' Affairs
Committee meeting, where he is a ranking member, Mike Michaud
from Maine wanted me--I don't know which one is from Maine, but
Mike Michaud from Maine wanted me to specifically call out the
guy from Maine or gal from Maine and welcome you here today.
Mr. LoBiondo. All right. We have our witnesses today--
include Admiral Papp, the Commandant of the Coast Guard; Master
Chief Michael Leavitt, the Master Chief, Petty Officer of the
Coast Guard; Richard Lidinsky, the Chairman of the Federal
Maritime Commission, and the Honorable David Matsuda, who is
the Administrator of the Maritime Commission.
We welcome you, Admiral Papp. The floor is yours.

TESTIMONY OF ADMIRAL ROBERT J. PAPP, JR., COMMANDANT, UNITED
STATES COAST GUARD; MASTER CHIEF MICHAEL P. LEAVITT, MASTER
CHIEF PETTY OFFICER, UNITED STATES COAST GUARD; THE HONORABLE
RICHARD A. LIDINSKY, JR., CHAIRMAN, FEDERAL MARITIME
COMMISSION; AND THE HONORABLE DAVID T. MATSUDA, MARITIME
ADMINISTRATOR, U.S. DEPARTMENT OF TRANSPORTATION, MARITIME
ADMINISTRATION

Admiral Papp. Well, thank you, Mr. Chairman and Mr. Larsen,
particularly for those kind words. If I can divert from my
statement for just a moment, we really do appreciate your
thoughts and your prayers for the crew of the 6535. There are
certain things that only the Commandant of the Coast Guard can
do or should do.
One of those things was to fly over to Mobile on Friday to
meet with the parents of Lieutenant Commander Taylor and the
parents of Lieutenant Cameron, hug their mothers, do what I
could, say what I could to help them feel a little bit better.
But I was actually strengthened myself by the fact that they
talked about their sons' love for the Coast Guard, love for
flying, love for serving their country, and they died--what
they were doing. I also had a chance to speak to the shipmates
of Chief Petty Officer Jorge and Petty Officer Knight, who
remains missing.
As well, I will go down there tomorrow for the memorial
service, to speak to all hands in the assembled community as
the keynote speaker for that memorial service. Once again, one
of those things that the Commandant should and must do.
But one of the other things that the Commandant must do is
be the voice for the men and women for the Coast Guard when we
have these hearings to talk about our needs, our challenges
that we are facing. And doing the former only strengthens me to
give my best in doing this today. So thank you for recognizing
them. And there are some challenges ahead, but the Coast Guard
has adapted to storms in the past, and we have adapted to
operate in times of peace, and we have continually responded to
meet emerging maritime challenges.
And, as I said, today is no different. Coast Guard men and
women are confronting a diverse array of maritime threats,
whether it is transnational smuggling or illegal fishing on the
high seas, increasing human activity driven by the economic
opportunity of an ice-diminished Arctic Ocean, or piracy.
Just this past weekend, the Coast Guard Cutter Northland
was on patrol off South America when its embarked helicopter
spotted a go-fast vessel with numerous bails on deck. The
vessel refused to stop, so the helicopter fired warning shots,
and then eventually disabling fire to stop it. Northland's
boarding team recovered 1,600 kilos, or nearly 2 tons, of pure
cocaine, worth an estimated street value of $42 million.
This year also celebrates a 100th anniversary of the loss
of Titanic, yet 100 years later the cost of Concordia's recent
loss reminds us of the importance of having safety-at-sea
standards. And to ensure compliance, we need a robust marine
inspection and safety program.
As you can see, our Nation is facing many maritime
challenges. And if we don't have the tools to confront those
threats, they will pose a significant threat to Americans'
prosperity, because 95 percent of our commerce travels by sea.
This is why responsibly rebuilding the Coast Guard and
providing our hard-working Coast Guardsmen with the tools they
need to do their job remains my top budget priority.
The good news is that since 9/11, because of your support,
we have taken numerous steps to mitigate the risk overseas and
back here in our ports, our inland waterways, and near our
coasts. We have invested in international port security
officers, marine safety enhancement program, and more small
boats, more capable aircraft, and more personnel to operate
them. We have also deployed rescue 21 distress communication
systems throughout the continental United States and the Great
Lakes. We have unified our field operations through the
creation of sector commands, which brings together our
prevention and response capabilities.
Using the authorities you provided in the Maritime
Transportation and Security Act, we have enhanced our regulator
inspection and compliance programs, and we have built out a
highly effective deployable specialized force capability within
our ports. We have also strengthened our partnership with the
many Federal, State, and local operation agencies that we work
with.
And while there is always more work to do, I can say
definitively that in my almost four decades of service, I am
proud to say that our shore, boat, and patrol forces are the
best shape I have ever seen. But we never want to let the
threats reach our ports. That is playing pure defense, it is
sitting on our heels. We need to play offensively too, and we
need to intercept the threats before they reach our shores.
So, back to the Cutter Northland. The condition of our
offshore forces, especially our major cutter fleet, is a much
different story than our inshore forces. Despite the best
efforts of our crews, the state of our major cutter fleet, much
of which is in excess of 40 years of age, is deeply concerning.
Our legacy High Endurance Cutters are only achieving 70 percent
of their programmed underway hours, and more than 50 percent of
the time they sail with debilitating casualties.
This is cause for concern, because the key to interdicting
threats offshore is maintaining a persistent presence with
major cutters. If we don't have those cutters, and if they are
not capable of operating independently in the transit zone and
along the trade routes, we can not mount a response. It is just
that simple.
So, over the last year, almost 700 metric tons of cocaine
moved through the western hemisphere transit zone. And despite
of having actionable intelligence on a weekly basis, we know
that we miss targets almost on a weekly basis because we don't
have the major cutters out there.
Our maritime threats are also on the rise. Expanding global
population is placing pressure on our fish stocks and
increasing the demand for fossil fuel. As a maritime nation and
an Arctic nation, we require major cutters to patrol and ensure
the stewardship of these and other deep sea routes. That is why
we must continue to build our major cutters, such as the sixth
National Security Cutter and the icebreaker, which has now
kicked off in this budget. And I am extremely proud of the
Administration for their support in this regard. But doing so
also lowers our cost, maintaining momentum on building these
shops, and we put National Security Cutters number four and
five on contract for nearly the same price because we did it
within the same year.
And there is two other reasons for our recent acquisition
successes: first of all, your support; and our highly capable
acquisitions workforce. I am proud of them all. And beyond
those major cutters, we have also delivered our first fast-
response patrol boats, and we have 11 more on order. We have
delivered 13 Maritime Patrol Aircraft. The last two arrived
ahead of schedule. And we have also delivered 83 of our
Response Boats-Medium.
So, the ships and aircraft that we are building today are
going to define the Coast Guard's capability for the next 50
years, the capability we need to remain true to our motto,
semper paratus, as we enter our third century of service to the
Nation.
So, thanks for the opportunity to testify, and I look
forward to expanding upon this in response to your questions.
Mr. LoBiondo. Thank you, Admiral Papp.
Master Chief?
Master Chief Leavitt. Good morning, Mr. Chairman LoBiondo,
Ranking Member Larsen, distinguished members of the
subcommittee. It is a privilege to appear before you today, and
it is also an honor to represent the hardworking Coast Guard
men and women serving our Nation here in the United States and
around the world. I continue to be humbled and amazed by the
sacrifice, dedication, and commitment I see every day with our
Coast Guardsmen, and for the unwavering support they receive
from their families and loved ones, which allows us to better
serve our Nation to its fullest extent.
Our dedicated Coast Guard men and women are working hard
every day to protect our Nation's interest. We are overseas, we
are on the high seas, we are in our Nation's waters, we are in
our Nation's ports and waterways, we are manning our operation
stations, we are working with our local agents in industry so
we can help keep our Nation secure.
Right now, these brave Coast Guardsmen our out in the
maritime environment saving lives, protecting property,
conducting law enforcement, setting and working buoys, and by
the way, breaking ice and so much more. I couldn't be more
proud of the men and women of the United States Coast Guard for
the outstanding job they do every day.
For example, just recently the icebreaker, Coast Guard
Cutter Healy, completed a grueling 254-day deployment where she
and her crew successfully supported important scientific
research in the Arctic. But as you know, the Healy was diverted
very late in her deployment to escort the Russian flag tanker
vessel Renda along an 800-mile journey to deliver fuel to the
people in Nome, Alaska. As the Nation watched, the Coast Guard
Cutter Healy fought through severe storms in freezing
temperatures to successfully escort the tanker Renda through
the ice for the first ever wintertime fuel delivery at sea.
So, I want to personally thank you, Mr. Chairman and the
members of the subcommittee, for replacing our aging assets
with new cutters, aircraft, and boats. In my role, it is my
responsibility to look out for our workforce and their
families' well-being. The assets requested in our budget will
provide our people with highly capable, safer, more efficient
and effective platforms. Not only do these assets meet our most
urgent operational requirements, they also help to greatly
improve the quality of life and safety of the men and women
that serve aboard and operate them.
So, as you heard before, the material condition of our
cutter fleet is unacceptable. These ships were built over 40
years ago. The berthing areas are cramped, with up to 20 people
sharing a common area, along with the sanitary facilities. In
fact, Mr. Chairman, I served on board the Coast Guard Cutter
Boutwell, a High Endurance Cutter, almost 30 years ago. And she
was not a new ship then.
So, our crew spends countless hours repairing old, outdated
mechanical systems to keep the ships running. And this results
in lost training opportunities, and a decrease in operational
proficiency that negatively impacts the crew's morale. We owe
them better.
As the Commandant stated, we are now delivering and
operating National Security Cutters to replace the aging High
Endurance Cutter. I can tell you that the crews on these new
ships are very excited to operate these new, very highly
capable cutters.
Last year in my testimony I mentioned some of the
challenges our men and women and their families face,
particularly with regards to housing and child care. And on
behalf of the servicemembers, I am truly grateful for the
housing and child care enhancements made possible in the fiscal
year 2012 budget. Because of your support, we are making great
strides towards enhancing these programs and bridging the
parity gap with the Department of Defense.
I visited multiple Coast Guard units during the past year,
and I have heard the concerns of our members and their
families. Ensuring adequate housing for our Coast Guard members
living in high-cost areas is a high priority. Fiscal
stewardship is also a high priority. And as such, we are
currently in the process of assessing our housing inventory
across the Nation, including Alaska, Hawaii, and Puerto Rico.
In this constrained fiscal environment, we need to be very
smart in how we spend our maintenance and recapitalization
funding to sustain frontline operations so we can best support
our members and their families.
So, on behalf of the men and women of the United States
Coast Guard, I thank you for your continued support of our
military members, their families, and loved ones. Thank you for
giving me the opportunity to recognize the great work our Coast
Guardsmen perform every day, as well as sacrifices they endure.
Thank you for allowing me to testify here before you today. And
I look forward to answering any questions you may have.
Mr. LoBiondo. Thank you, Master Chief.
Mr. Lidinsky.
Mr. Lidinsky. Good morning, Mr. Chairman, Mr. Larsen, and
members of the subcommittee.
Mr. LoBiondo. Excuse me, could you pull the microphone a
little bit closer, maybe pull it a little bit closer to you?
Mr. Lidinsky. Better?
Mr. LoBiondo. That's better.
Mr. Lidinsky. Thank you for this opportunity to present the
President's fiscal year 2013 budget for the Federal Maritime
Commission. With me today are FMC Commissioners Rebecca Dye and
Michael Khouri, and I bring best regards from your former
colleague, Commissioner Joe Brennan, who is back at the
Commission, manning the ship. Commissioner Mario Cordero is in
Long Beach, California, this morning, attending an important
shipping conference. I have submitted written testimony for the
record, and with your permission would like to give a brief
summary this morning.
The President's budget for the Commission provides $26
million for fiscal year 2013. As you noted before, Mr.
Chairman, this would be an increase of $1.9 million over the
enacted fiscal year 2012 appropriation. This is, however,
$265,000 less than the President's fiscal year 2012 request,
and funds 131.6 positions at the Commission. This request would
allow the Commission to make badly needed investments in
information technology, increased data security, improve
efficiency, and streamline filings and applications for the
industry. The scope and speed of these investments and benefits
will depend on the availability of these funds.
The FMC greatly appreciates the faith and support that the
chairman and rest of the committee have shown us in the past,
and we would continue to use our limited resources wisely in
the coming year.
The state of the U.S. trades. My written remarks detail
each trade route that our country deals in, but here are two
highlights. After rapid recovery and 11-percent growth in 2010,
total U.S. container volumes continue to grow in 2011, but at a
more modest pace, at 4 percent. There were approximately 29.5
million containers moving in our import trade. U.S.
containerized exports grew by 6 percent, roughly 12 million
containers. And I want to note that next week, the South Korea
Free Trade Agreement takes effect. Two-thirds of our
agricultural exports to Korea will become duty free from day 1,
as will nearly 80 percent of our consumer industrial products.
So this is a very bright horizon for this export trade.
I would like to give some highlights now of the
Commission's priorities and activities. In the coming year
their top priority will be assisting the economic recovery for
job growth. We will do this two ways. First, working to ensure
our Maritime transportation system efficiently supports growing
exports, and two, providing regulatory relief so that companies
can hire American workers. Third, applying the lessons that we
learned in the depths of 209 and the disruptions we saw when
demand returned to our industry in 2010.
Each of the commissioners is committed to working in an
efficient, cooperative, and bipartisan manner to accomplish the
Commission's goals. Here are the highlights of the steps that
we are taking.
Number one, supporting exports and economic growth. We have
continued vigilance over the waterborne trade, as it affects
imports and exports. Ninety-four percent of the United States
oceans container trade travels on ships controlled by foreign
carriers. Perhaps more often than they like, I remind these
foreign ocean carriers that what they call a mere backhaul in
moving their containers back out of this country, are exports
that are crucial to our Nation's recovery.
Last year I reported the disruptions in 2010 prompted the
Commission to launch a fact-finding investigation led by
Commissioner Rebecca Dye. Following her recommendations, the
Commission formed rapid response teams that dealt with over 438
cargo-related complaints that led to cases in dispute
resolution. We increased oversight of discussion agreements in
our largest Pacific trade with the two talking agreements
there.
Throughout the past year we have continued these efforts.
And although current shipping capacity is adequate, we will
continue to apply lessons learned, and watch closely for new
signs of disruptions that we saw last year, 2 years ago.
We are looking at new ways to assist exporters. After
hearing from several major agricultural exporters, our staff is
now looking at the idea of using data on file, while protecting
service contract confidentiality to develop a container
shipping rate index for targeted exports, such as grain,
cotton, hay, and frozen meat. This will give exporters useful
information to plan and hedge transportation costs that will,
in turn, increase export sales. We look forward to the views of
the industry on this matter, and the committee, as we consider
this idea.
One related note. Last week we issued a final rule
clarifying that shippers and carriers can use service contracts
with rates that adjust based on container freight indices. For
small businesses and individuals we are developing a search
tool on our Web site to help locate nearby licensed and bonded
NVOCCs.
Mr. Cummings is present, and I would just note that the
item that he brought up 2 years ago has finally bore fruit with
the USDA having a new project taking effect next month that
will allow potential exporters to access a computer to see if
container availability is present in about a dozen Midwest
cities. So that is another tool in our arsenal to help exports.
In addition to supporting exports, we have tried to reduce
regulatory burdens. In February of last year, we issued a final
rule to relieve 3,500 licensed NVOCCs from having to publish
their tariff rates. The Commission has also been working on our
rules and procedures to make them more clear and efficient.
Just last month, the Commission has finished a landmark
study on the EU lifting of the block exemption and competition
law. The primary issue addressed in that multiyear study was
simple. What negative impact, if any, would repeal of the liner
conference block exemption have on U.S. trades? The primary
finding was that the repeal of the block exemption does not
appear to have resulted in any impact on our trades. The study
contains a wealth of data which maritime experts across the
world are still analyzing. But the speculation and discussion
concerning the study indicates the FMC's key role as experts in
this field.
As I said in the past on the matter of anti-trust immunity,
it is up to the Congress to make this decision. The best the
FMC can do is assist you with objective facts. And we will be
happy to answer any questions--any details regarding this
study.
In November of last year, the Commission responded to
requests from several Members of the House and the Senate, by
launching an inquiry into whether Harbor Maintenance Tax and
other factors may be causing U.S.-bound containerized cargo to
be diverted from ports in the U.S. to Canada and Mexico. We
received nearly 80 submissions during our comment period, and
the Commission is working to gather additional data. We hope to
publish this report in late spring or early summer of this
year. In the meantime, the Commission will continue to work
with fellow Government agencies and major trading partners to
ensure that no unreasonable conditions impair our commerce.
The Commission is also working to protect consumers through
the fact-finding study of Commissioner Michael Khouri. More
than 2,500 complaints were received in recent years concerning
the shipment of personal household goods. Commissioner Khouri's
findings are being adopted. And just last Friday we signed a
memorandum of understanding with the Federal Motor Carrier
Safety Administration to leverage the resources of these two
agencies to protect household good movers across the country
from the different kind of fraud that can emerge in these
shipments.
Mr. Chairman, thank you very much for your support of the
Commission in the past.
I am honored to appear before you, and be happy to answer
any questions that you might have.
Mr. LoBiondo. Thank you.
Mr. Matsuda.
Mr. Matsuda. Good morning, Chairman LoBiondo, Ranking
Member Larsen, and members of the subcommittee. Thank you for
the opportunity to discuss the President's fiscal year 2013
budget priorities and initiatives for the Maritime
Administration. With your permission, I would like to submit my
written testimony for the record and summarize it for the
subcommittee today.
The Maritime Administration's statutory mission is to
promote and strengthen the U.S. marine transportation system,
including infrastructure, industry, and labor, to meet the
economic and security needs of the Nation. Never has this been
more important than today.
President Obama understands that investment in
transportation is critical to the success of our Nation's
economy. And the President's budget request reflects the
Administration's priorities. This budget request will enable us
to build America's infrastructure for the future, while putting
people back to work today.
To start, the maritime industry's future will depend on
people willing to enter this workforce of 260,000, and make
their careers in the profession by availing themselves of
educational opportunities. Today, I am joined by several of
these future leaders from maritime academies across the
country, and I thank you for welcoming cadets and midshipmen
from California Maritime Academy, Great Lakes Maritime Academy,
Maine Maritime Academy, Massachusetts Maritime Academy, and the
U.S. Merchant Marine Academy in Kings Point, New York.
The President's budget request includes funding for
programs to support all of these institutions they attend, and
it continues to focus on addressing long-deferred capital needs
at the U.S. Merchant Marine Academy, as well as current
operating requirements, so that we can continue to provide the
highest possible caliber of academic study with state-of-the-
art learning facilities for future merchant marine officers and
marine transportation professionals.
Following last year's historic levels of capital funding
for the academy, this $77 million request will allow us to
continue our progress on improving campus facilities and
address current academic needs.
The budget request also includes $16 million for the State
maritime academy programs, to continue Federal operational
support, and allow us to provide school training ships for
cadets to obtain valuable at-sea experience.
For the maritime industry, putting people back to work
today means fully funding key initiatives, like the maritime
security program. This program, combined with the agency's
cargo preference program, supports 60 militarily useful ships
trading in foreign commerce. The 2013 budget request proposes
funding this program at the full authorized level of $186
million, including $2 million in carryover funds.
The budget also supports our priority to develop America's
ports and marine highways, as we focus on increasing the use of
marine transportation within the U.S. to alleviate congestion
on our surface networks. I am pleased to report that key
demonstration projects in 2010 are beginning to come to
fruition, creating new jobs on the water, as well as in our
ports and at key freight bottlenecks.
The President's budget includes $500 million for the
popular TIGER grant program, which, through 3 rounds, has
successfully funded 17 ports and maritime-related projects,
totaling $276 million.
Our focus on the environment remains strong, as well. As
the Federal Government's disposal agent for large, obsolete
commercial vessels, we propose $10 million, nearly double 2012-
enacted levels, to continue our progress in cleaning up our
fleet sites responsibly, and create jobs in the recycling
industry. And we propose $3 million to continue progress in
identifying innovative operational solutions for the maritime
industry.
Working with our partners in the Coast Guard and the EPA,
we are tackling new technology challenges, such as the
management of ballast water discharges and vessel air
emissions. And we are exploring the feasibility of a new
generation of biofuels for use in marine engines, and using
liquified natural gas for vessels serving the Great Lakes and
other marine highways.
Finally, the budget request supports our agency's greatest
asset, its people. The Maritime Administration's expertise,
along with industry and international relationships developed
over time has proven invaluable to the operations of the
Federal Government, and in meeting our mission.
Mr. Chairman, I look forward to working with you and--on
advancing maritime transportation in the United States. I am
happy to respond to any questions you and the members of the
subcommittee may have. Thank you.
Mr. LoBiondo. OK. Thank you, Mr. Matsuda. Admiral Papp, I
would like to start with you. The budget request calls for $13
million to complete the mission effectiveness program on the
fleet of 270 and 210 Medium Endurance Cutters. The capital
investment plan contains no funding for further sustainment of
the Medium Endurance Cutters beyond fiscal year 2013.
Does the Coast Guard believe these vessels will need no
further maintenance between now and the mid-2030s, when the OPC
acquisition is estimated to be completed?
Admiral Papp. No, sir, not right now. We have invested in
the 210-foot Medium Endurance Cutter and the 270-foot Medium
Endurance Cutter. And if we stay with our program of record,
and if we can keep the Offshore Patrol Cutter on record, what
ultimately we will do is start decommissioning our oldest 210s
first. They are all in excess of 40 years of age right now.
They will be decommissioned first. The average age of our 270s
right now is about 25 years. And if we can stay with the
program, if we stay on course, we should have our OPCs built
out by about 2030, at which time the oldest 270 would be about
43 or 45 years of age.
So, it depends on how long this gets strung out, however. I
need to qualify that. If we don't get the funding and we can't
build out the OPCs faster, we will clearly have to reconsider
what we do to extend the lives on the 210s and the 270s. But
right now I don't anticipate any major projects. Our routine
maintenance money that we get should be sufficient to keep them
going, now that we have replaced a lot of the problem
engineering issues that we have that have been cropping up over
the last few years.
Mr. LoBiondo. Admiral Papp, on the Fast Response Cutter,
the Coast Guard proposes to withhold up to $135 million
provided by Congress in the fiscal year 2012 budget to
construct six new Fast Response Cutters, and instead construct
four Fast Response Cutters in fiscal year 2012. The Service
proposes to combine the withheld $139 million from 2012 funding
with an additional $139 million from fiscal year 2013 to
construct four FRCs in 2013.
Can you talk to us a little bit about why the Coast Guard
has apparently decided to disregard the intent of Congress and
abandon plans to build the six FRCs in 2012?
Admiral Papp. Well, sir, I think almost every question that
you ask today I could probably start off by saying that I have
a budget. At the end of the day I have been given a budget. I
have to live within that budget. I have to make decisions on
priorities and what we are going to maintain.
You noted that it is a 4-percent reduction in the overall
budget. But when you look at our acquisition funds, it is a 20-
percent reduction this year. So all of our acquisition
portfolio, every project that we have an approved baseline on,
what we are forced to do is go to the minimum ordering quantity
for each and every product, including the National Security
Cutter and other projects.
So, for the Fast Response Cutter, our contract requires us
to build a minimum of four each year, or a maximum of six. We
haven't ramped up to six yet. Right now, with the shipyard, we
have been ordering four a year. We are grateful that we got the
money in the 2012 budget to build out six. We don't want to do
anything contrary to the--what the Congress--congressional
intent is, but what we would like to do is work with the
Congress to get permission to withhold that money, so that we
can spread out four each year to keep the minimum level order
going for the Fast Response Cutter.
I could only find enough money within our 2013
appropriation in acquisitions to pay for two Fast Response
Cutters. So in order to live up to the contract and build the
minimum of four a year, we looked at that option of moving the
money from 2012 into 2013 to balance it out at four a year.
Hopefully, in future years, we will be able to go back up to
six.
Mr. LoBiondo. Admiral, you know that I also had the
opportunity to sit on the House Armed Services Committee. And
we had a hearing--I think it was in the last week--where the
Air Force is detailing plans on divesting 21--it appears to be
either almost or brand new C-27Js, and that they may become
available to other services at minimal cost. Is the Coast Guard
looking into this option, and could you tell us a little bit
about what you may be thinking here?
Admiral Papp. Yes, sir. We are looking into this
vigorously. It is an intriguing prospect. I learned about it
weeks ago, and started conversations with the chief of staff of
the Air Force, General Schwartz. And obviously, rather than put
it up for foreign military sales or other things, they would
prefer to see it go to another Service, if there is a Service
need.
Interestingly enough, this aircraft was actually looked at
in the deepwater system, when we had the deepwater project. It
was one of the candidates that Lockheed Martin put forward for
our short--our medium-range fixed-wing aircraft, Maritime
Patrol Aircraft. Ultimately, it was compared against the CASA
aircraft, the HC-144, which we are purchasing now. And the life
cycle costs were higher for the C-27.
However, having said that, if we get free aircraft or
minimal cost aircraft, that is a very attractive option for us.
And there are actually some benefits we could gain, because the
C-27 uses the same engines as our C-130Js. So we already have
those engines, training place, logistics in place for those
engines.
Bottom line is we are working a business case analysis. The
Deputy Commandant for Mission Support is working that hard
right now, and they intend to make that presentation to me
within the next couple weeks. And as soon as we have that
information, we would be happy to come up and brief it.
Mr. LoBiondo. Yes, we would appreciate it. Although there
was pushback from the HASC on how we have brand new planes that
we are not using and we have a need, it appears the Air Force
is determined to go down this route. So we would appreciate
your keeping us up to date on that.
Mr. Larsen?
Mr. Larsen. Thank you, Mr. Chairman. I will just continue
with Commandant Papp, but I have questions for others as well.
With regards to icebreakers, I note that in the budget
there is $8 million for predesign. But until new icebreakers
are operational, what is your view of repairing and operating
the Polar Sea to make the U.S. self-sufficient for polar
icebreaking? You might recall we had testimony in front of us a
few months ago with a--the idea that for a minimal--relatively
minimal--cost in the grand scheme of building versus repairing,
that we could get icebreakers operational. Can you talk a
little bit about that, that cost? And have you actually
crunched some numbers that you can share with us?
Admiral Papp. For the Polar Sea or Polar Star? I think you
said Polar Sea.
Mr. Larsen. I am sorry, yes. The Star, yes, yes.
Admiral Papp. The Polar Star is being reactivated right
now.
Mr. Larsen. OK.
Admiral Papp. That is the one that was in moth balls, so to
speak, in caretaker status.
Mr. Larsen. Right.
Admiral Papp. And it is in the process right now--Congress
gave us about $80 million to reactivate that. And we will have
that back in service in 2013.
The Polar Sea is--it is our intent to decommission it right
now.
Mr. Larsen. So--then we heard some testimony a few months
ago that with a relatively minimal investment the Sea could be
reactivated.
Admiral Papp. Well, I think in this current budget
situation, relatively minimal is a relative term. And I don't
have room in my budget, regardless of what it is. I think a lot
of people have underestimated how much it would cost to
reactivate the Polar Sea. We are actually having to use parts
of Polar Sea----
Mr. Larsen. Right.
Admiral Papp [continuing]. To reactivate Polar Star. So I
think there are some people who are enthusiastic about the
potential for getting Polar Sea back out there. But the fact of
the matter is I don't have the money to operate it. And I think
it is much more expensive to reactivate it than some people are
giving, in terms of estimates. It would say it is probably in
excess of what we are spending on Polar Star right now, would
be to get her back out there.
So, you know, we have gotten through the last couple of
years with just the Healy. My bridging strategy was get Polar
Star back out there good for another 10 years. We were lucky
this year with Healy. And once I have an additional Polar
icebreaker out there, I am comfortable that--now I am really
grateful we have gained traction with the Administration in
terms of getting money to start building a new icebreaker.
So I think we have reasons for optimism in our icebreaker
fleet, and we need to keep that momentum going.
Mr. Larsen. With that in mind, what would be your estimate
on the operational capability of a new Polar icebreaker, if in
fact $8 million is a start?
Admiral Papp. Well, yes, sir. That is survey and design
work. And, frankly, what we need to do now--once again, I am
very grateful. I have been talking about this for about 2 years
now. In fact, the Coast Guard has been talking about it even
longer.
Mr. Larsen. Right.
Admiral Papp. And we finally gained some traction. What we
have done in the capital investment plan is put rough numbers
that we got from a business case analysis that we prepared for
the Congress on the feasibility of keeping Polar Sea and Polar
Star going.
Mr. Larsen. Right.
Admiral Papp. So those are rough numbers right now. We will
need to refine those, as well as reach out across the
intergovernment, the interagency, to determine the
requirements.
National Science Foundation has significant requirements
that we need to meet. Department of Defense has needs for
icebreakers from time to time. So we need to reach out, gather
the requirements, determine what we are going to build, and
then refine the numbers, as we go forward.
And, oh, by the way, I think industry and other people --
obviously, the State of Alaska benefitted from Healy this year.
I would be interested in looking at some sort of cost sharing
on this, rather than having the Coast Guard budget absorb it
completely.
Mr. Larsen. So you--at least in your mind now, you are
thinking that--to build an additional icebreaker, starting with
what you have in this budget, that actually constructing it
might end up being a partnership among agencies and potentially
at least one State?
Admiral Papp. Well, as Commandant of the Coast Guard, I
would certainly like to see other people share in this, because
we have a lot of other needs within our budget. But what we
have right now is we have estimated what we think it will cost,
which is probably in the range of about $800 million.
Mr. Larsen. Right.
Admiral Papp. That is spread out in our 5-year plan right
now. And we are very anxious to step out smartly on this, and
get it constructed.
Mr. Larsen. OK. I see that in the plan here. I have it here
with me.
On that continued point with regards to the Arctic--recent
article discussing the budget climate and choices you may have
to make to get an operational footprint, even a temporary or a
part-time footprint in the Arctic, can you briefly explain how
the expansion of operations there would affect other Coast
Guard districts?
Admiral Papp. They are not going to affect other districts.
I think what we will be doing this summer is, because of the
lack of shore infrastructure, we need to put helicopters up
there, we need to have rescue boats. There is going to be about
600 more people. Shell will bring about 600 people up there, 33
ships. Obviously, the potential for search and rescue,
environmental response, security--because we know there are
groups that are seeking to probably disrupt the operations up
there--so we have got the full spectrum of Coast Guard missions
that will be employed up there. But we don't have any fixed
infrastructure. In fact, there is not hangar space at the Nome
airport to put any of our helicopters.
So, what we are going to do is what we have done throughout
our history. We will take one of our major cutters, one of the
new National Security Cutters, which can handle and hangar two
helicopters, it can launch three small boats, it has worldwide
command and control and communications, and we will station it.
It is essentially a mobile Coast Guard district that can launch
aircraft and launch boats that will provide for all our needs
up there this next summer.
You know, people worry about icebreakers, but the fact of
the matter is the human activity will be up there as the ice
recedes.
Mr. Larsen. Right.
Admiral Papp. So we need conventional Coast Guard cutters
up there during the summer months to carry out these duties.
Mr. Larsen. Right. Yes, good. Mr. Chairman, just a few more
questions, but--for Mr. Lidinsky, and then I will yield back,
if you don't mind.
Just to clarify, Mr. Lidinsky, the cargo diversion study,
you expect to have a preliminary or final report by late spring
or early summer?
Mr. Lidinsky. Final.
Mr. Larsen. Final? A final report by----
Mr. Lidinsky. Yes.
Mr. Larsen. In that timeframe?
Mr. Lidinsky. Yes.
Mr. Larsen. OK, good. And can you follow up with us a
little bit on the Korea Free Trade Agreement? What impact do
you expect the agreement is likely to have on our containerized
exports?
Mr. Lidinsky. A very favorable impact. As I mentioned,
nearly 80 percent of containerized cargo will now receive duty-
free treatment on the receiving end in Korea. We noticed
increased requests for boxes. The shipping lines there are very
excited about this prospect. So I think this is one bright spot
on our export front.
Mr. Larsen. Do you anticipate, because of that increased
demand for boxes, that you are going to have to do some--use
the term loosely, not in the legal sense, but adjudicating
among shippers and----
Mr. Lidinsky. Well, we have continued to watch that
situation since the shortages occurred in 2010.
Mr. Larsen. Right.
Mr. Lidinsky. And the industry now admits there are
adequate boxes out there. So we keep a very close watch, and
will take appropriate measures if we have to.
Mr. Larsen. Right. Yes, good, all right. Thank you. I will
have a second round, Mr. Chairman. Appreciate that. Thank you.
Mr. LoBiondo. Thank you, Mr. Larsen. And now, in the most
honorable tradition of the Coast Guard, our honorary Master
Chief, Mr. Coble.
Mr. Coble. Master Chief. I am glad he said ``honorary.''
That way I won't be challenging you for your job. Thank you,
Mr. Chairman. Gentlemen, good to have you all with us today.
Admiral, the Administration proposes to close two air
facilities which house the HA-65, the Dolphins. During the
months of summer in Waukegan, Wisconsin, and Muskegon,
Michigan. What will be the fiscal savings, as a result of these
two proposed closures?
Admiral Papp. Well, both of those are only open--both of
those stations are only open about 103 days a year, just during
the summer months. And we reap about 14.6--almost $15 million
in savings by closing them.
Mr. Coble. Is Air Station Traverse City capable of reaching
these areas in a timely manner for emergency rescue? And if so,
what is the response time difference?
Admiral Papp. OK. What we have--I need to digress a little
bit, because I have got personal experience here. I was the
Ninth District Commander. And while I was the Ninth District
Commander up on the Great Lakes I advocated for this, because
we are challenged at Air Station Traverse City.
Many years ago we used to have larger helicopters there,
the H3 helicopter. And then the decision was made to put the
smaller helicopters, the H-65s, up there as we transitioned.
The challenge is they have--the H-65 is shorter duration. It is
a slower helicopter, and it does not have de-icing. So, in the
extreme other 9 months of the year up there, particularly the
winter, the H-65 does not serve as well.
Plus, it is not just Lake Michigan that Traverse City
serves, it is also Lake Superior, which is huge. The
helicopters that are up there right now, if they have to
prosecute a search and rescue case in Lake Superior, often
times have to fly, refuel, and then prosecute the case.
Whereas, with H-60s, H-60s double the endurance time. They are
faster. They can get there faster, they can stay on station
longer, and they have de-icing, which is safer for my people,
who have to prosecute these cases throughout the entire year,
not just the summer months.
So, having said that, it takes about an hour-and-a-half to
get from Traverse City in an H-60 down to the extreme limit of
southern Lake Michigan. But I think the focus has been all on
aviation. Most of our SAR cases are not handled just by
aviation, they are also in concert with surface forces. And we
have four--and if you want to stretch it around, five--search
and rescue stations just around southern Lake Michigan, all of
which we have capitalized with much more capable, heavy weather
capable Response Boats over the last couple years that can
prosecute most of the cases down there, as well.
So, I think, in my estimation, both as a former operational
commander up there and as Commandant, southern Lake Michigan is
well served by Coast Guard resources. And looking at the
helicopters in isolation, particularly the two AIRFACs, is a
little bit misleading.
Mr. Coble. And Admiral, again, the savings? You said $15
million?
Admiral Papp. For closing the air facilities?
Mr. Coble. Yes.
Admiral Papp. Yes, sir.
Mr. Coble. Master Chief, as a former member of the enlisted
workforce, I would be interested in knowing. What do you regard
the most pressing challenge, as applicable to the enlisted
workforce in the Coast Guard?
Master Chief Leavitt. Thank you, Mr. Coble. It is good to
see you, by the way.
Mr. Coble. Good to see you, sir.
Master Chief Leavitt. It hasn't really changed since the
last time I testified last year. Housing and child care is one
of the number one issues out there for our workforce. And we
are making great strides to, like I said, to shore up that
parity between the DOD.
But there is other things out there that are on the minds
of our workforce, too. And they read. They take a look at the
reductions that the Department of Defense is looking at, with
regards to personnel, and then kind of wondering, the Coast
Guard, how is that going to relate to them. Last year there was
talk in regard to pay and benefits and including retirement,
what that is going to look like. And there was a lot of anxiety
in regards to that.
And then last year we went through a continuing resolution.
And it is to a point where people didn't know if that was going
to affect their pay or not. And there are same concerns this
year with the type of--the way we are going forward.
So these are the main things in our folks' mind out there,
sir.
Mr. Coble. I thank you, sir. Mr. Chairman, my red light is
about to illuminate, so I yield back.
Mr. LoBiondo. We thank you very much, Mr. Coble. Mr.
Bishop?
Mr. Bishop. Thank you very much, Mr. Chairman, and thank
you for holding this hearing. I have two questions for Mr.
Matsuda, and the first has to do with the maritime security
program.
First off, I think we are all pleased to see that the
maritime security program is--full funding for it is requested
in the President's budget. I think we all agree that this is a
very cost-efficient way for the U.S. Government to sea lift the
assets that it must during times of war and national emergency.
I am, however, concerned about the level of foreign
involvement in the maritime security program. It is my
understanding that 49 of the 60 maritime security program
contracts are controlled by foreign companies. And it is my
further understanding that this is clearly at odds with
congressional intent.
And so, my question is, what is MARAD doing to ensure that
U.S. companies have greater access to this program?
Mr. Matsuda. Well, thank you, sir. The maritime security
program, we believe, provides a tremendous value to the Federal
Government, and certainly our partners in the military. There
is no requirement in the law that any one of these companies
must be a U.S.-owned versus foreign owned. All of them are
companies incorporated in the U.S. that hire U.S. mariners.
But they--we do make sure that any time there is a new slot
that comes available because a vessel falls out or no longer is
able to fulfill its commitment, that we do offer a preference
to U.S.-owned companies----
Mr. Bishop. If I may, my understanding is that in 2003 the
number of contracts were expanded from 47 to 60 and that, at
that time, Congress insisted that all of the newly issued 13
contracts go to U.S. companies.
And so, I guess my specific question to you: has that been
complied with? Have all 13 contracts newly issued since 2003
gone to U.S. companies?
Mr. Matsuda. Let me verify that.
[Pause.]
Mr. Matsuda. Not all 13 are currently held. The expanded
slots are currently held by section 2 companies. The law does
give priority to them, but we also need to take into account
the military usefulness of the types of vessels that are
offered.
Mr. Bishop. All right. I think that, Mr. Chairman, this is
an issue that I, at least, am concerned about. And can I ask
that this committee look at the issue of perhaps the
authorizing legislation, and perhaps look at the issue of how a
U.S. company is defined at some future point?
Mr. LoBiondo. It is an excellent point. But we will double-
check, Mr. Bishop. It may be House Armed Services jurisdiction.
If it is our jurisdiction, we will certainly look at it. If
not, we will figure out a way to get Armed Services to look at
it.
Mr. Bishop. Thank you very much. My second question has to
do with the merchant marine academy. And I will speak just for
myself.
Each year, one of my happiest duties as a Member of
Congress is to get to nominate young men and women, outstanding
young men and women, to the Merchant Marine Academy, and even
happier duty is when I get to call them to tell them that they
have received an appointment.
But I am also dealing, frankly, with a steady stream of
Merchant Marine Academy alumni who are deeply concerned about
the way in which the academy is administered, in their view.
And I have to confess that I don't have any independent
knowledge. But I mean, when I have an alumnus stop me on the
street--I am used to getting stopped on the street to talk
about health care, let's say, but when an alumnus stops me on
the street and wants to talk about the current state of affairs
at the Merchant Marine Academy, it raises concerns.
My understanding is there has been three superintendents in
the last 4 years. My understanding is there has been a very
controversial decision to phase out a program called the GMATS
program. So, can you--I am running out of time, but can you
quickly sort of bring us up to date on your sense of the state
of affairs at the Merchant Marine Academy? Are there issues
that need to be attended to? Is there micromanagement from
Washington, in terms of day-to-day affairs at the academy?
Can you quickly--I am sorry, I am running out of time, but
if you could quickly respond, I would appreciate it.
Mr. Matsuda. Happy to. And let me just take those briefly,
that when we came into this Administration and took a look at
the challenges at Kings Point, there were a number of
challenges, including the lack of internal controls, the
handling of finances that the Government Accountability Office
suggested we take a very close look at and review.
We have also attempted to make sure that we have the
leadership in place that there is no need--we certainly have--I
can tell you this. Nobody in Washington wants to micromanage
anybody, or certainly when it comes to the academic and success
of the school.
We have attempted to address each of the recommendations
made by the Government Accountability Office. One of them was
to go through and look at how each of the non-appropriated fund
entities, including this one called GMATS--it was essentially a
separate school operating on the academy campus--about how the
finances were managed, and how they were operating with respect
to the academy. After a thorough, it became very clear that
this entity wasn't necessarily serving the school, the
midshipmen, or the community there. So it was decided to
transition the GMATS entity. Eighty-five percent of its
customers were outside of the academy all together. They were
either the Federal agencies or other customers.
So, we are in the process of making that transition. I know
it has been rough. There have certainly been a number of folks
who have put a lot of hard work into it over the years, but it
just does not meet the criteria to be, you know, working on the
campus and serving the midshipmen of the academy.
Mr. Bishop. I thank you for that--and, Mr. Chairman, just
very quickly--would you be willing to meet with me so that we
could pursue some of these issues? And I make that request in
an effort to be helpful, so----
Mr. Matsuda. Be happy to, sir.
Mr. Bishop. Thank you very much. And thank you for
indulging, Mr. Chairman.
Mr. LoBiondo. Mr. Cravaack?
Mr. Cravaack. Thank you, Mr. LoBiondo, for having such an
important, vital meeting that we are having here today. I like
to see Merchant Marine Academy guys here, women here, so
welcome aboard. Good to have you here. And, Admiral Papp, I
would like to express my condolences to the great men and women
of the Coast Guard family for their recent loss of helicopter
crew. So our prayers are out with your crew.
Admiral Papp. Thank you, sir.
Mr. Cravaack. I am very concerned with the President's
budget and spreading Americans' sea services too thin, and
preventing them from being able to engage the various threats
out there that they face on a daily basis. I am also concerned
with the fate of the 1,701 Service personnel that will be
losing their positions if the President's budget is enacted.
As such, I am particularly interested today to hear about
how we can protect our maritime fleet. Because I know that is a
vital resource of this country, American flag vessels. And I am
very concerned with that, and making sure that our young men
and women have a very solid merchant fleet available to them.
Because I consider this an essential asset of the United
States.
I am concerned that we need to protect American jobs at
Great Lakes, and provide the Coast Guard the resources needed
to fulfill its responsibilities among the emerging maritime
threats, while at the same time we need to find areas of
efficiencies and reduced cost. But we cannot put our Nation
unduly at risk.
So, my question to you, Admiral, sir, would be to--what is
America risking right now, if we go forth with these--the
budget in our maritime forces right now?
Admiral Papp. I would say that this budget is probably the
last year I have where we are able to keep up our performance
before we start eating into frontline operations.
I think this 1,000-plus person thing is a little bit of a
red herring, because about 700 of those are associated with
units that are being decommissioned, and we have already
brought crews online for the units that are replacing--for
instance, one example would be our Fast Response Cutters. We
only have one, which is going to be commissioned next month,
the Bernard C. Webber. But we have--this budget will have 10
crews standing by, ready to man the ones that are on the
production line right now.
And as a Service chief in an unconstrained environment, I
would love to keep every crew on board until we have the crew
trained up and the ship commission to replace them.
Unfortunately, within the constraints of the current budget, I
can't afford that luxury. So what we are doing is a reasoned,
balancing risk decommissioning schedule for some of the older
units as we bring on the new ones.
We have four crews on board right now for the National
Security Cutters. We only have three that are out there in
commission. So we are decommissioning some of our High
Endurance Cutters to free up trade space within the budget so
we can maintain those new crews. So that is about 700 of them.
The remaining people are doing a reassessment of where we
are at. For instance, we are closing--we are doing away with
some recruiting billets. Well, we have got people standing in
line waiting to come to Coast Guard. Some people say they are
waiting 12 months before they can go to boot camp, because we
have so many people that want to be employed. So we don't need
the recruiting effort that we needed 10 years ago right now. We
can afford to use--to cut some of those billets right now.
There are other things, intelligence billets, other things
that we built up strongly after 9/11 that, now that we have 10
years of experience, we can adjust, we can reassess and
redistribute a little bit to make sure we are acting
efficiently.
With the constraints of this budget, we have to look at
each and every thing we do, and make sure we are doing it
efficiently. As far as turning people loose or cutting them, we
are not going to be doing that, as far as I can determine right
now, because we foresaw this about a year ago. We put a hiring
freeze into effect. I think most of this will be able to be
taken care of through attrition. Some of those military billets
are on the books and will be transferred to other units or some
of the new units that are coming on, and we will adjust our
officer promotions and our intake at our recruit training
facility to make sure that we are providing a balance, and that
we don't have to put people out on the street.
Mr. Cravaack. Thank you, Admiral. And my time has just
about expired here. I will yield back and wait for a second
round.
Mr. LoBiondo. Thank you very much. Admiral Papp, last year
we--oh, I am sorry, Mr. Cummings. I apologize, Mr. Cummings.
Mr. Cummings. No problem. First of all, good morning,
everyone.
Admiral Papp, in recent years the Coast Guard Academy has
made significant strides in expanding diversity. And I know
you--that has been a majority priority of yours, and I
appreciate that. I want to know what steps are being taken to
maintain these gains, and will the budget cuts impede your
ability to continue the expanded outreach and recruitment
initiatives that have been so critical to the success?
Admiral Papp. Well, thank you, Mr. Cummings. And I
appreciate the work of this subcommittee over the last couple
of years to really push us in the right direction and make sure
that we are reaching out to all Americans. That remains one of
my highest priorities, to make sure our entire Service--but in
particular, our academy, where we weren't doing a very good
job--make sure that we are spreading the word, and making it,
the opportunity, available to all Americans.
As you know, our percentages of underrepresented minorities
and women continue to increase. I am very pleased with that.
And I have stated to my staff that there will be no cut-backs
in our efforts to recruit, particularly to come to the academy,
and we are going to keep that effort up.
All things, however, have to be reassessed on a year-to-
year basis, as we go forward, to stay within the limits of this
constrained budget. That would be one of the ones that we look
at. But most of our recruiting efforts right now that I talked
about earlier are confined to our enlisted side of the house,
where we have some of the highest retention that we have ever
had in the history of the Service right now.
Mr. Cummings. Now, Mr. Matsuda, Administrator Matsuda, let
me tell you I want to briefly review the situation at MARAD. Is
the deputy administrator's position still vacant?
Mr. Matsuda. Yes, it is.
Mr. Cummings. I can't hear you.
Mr. Matsuda. It is, sir.
Mr. Cummings. Is the chief counsel's position still vacant?
Mr. Matsuda. No, no. We have a chief counsel.
Mr. Cummings. Can you keep your voice up? I can't hear you.
Mr. Matsuda. Yes, we have a chief counsel, sir.
Mr. Cummings. OK. Do you--do we have any idea when that
deputy administrator's position might be filled?
Mr. Matsuda. We do not. We continue to look for strong
candidates.
Mr. Cummings. And what does that mean?
Mr. Matsuda. Well, you----
Mr. Cummings. ``Continue to look''?
Mr. Matsuda. Well----
Mr. Cummings. You could be looking for the next 10 years.
Mr. Matsuda. Well, it is a political appointment.
Mr. Cummings. Right.
Mr. Matsuda. It is something that the President needs to
make, and we work with the White House to try and identify
strong candidates----
Mr. Cummings. Are you involved in that process?
Mr. Matsuda. Yes.
Mr. Cummings. All right. And what is the status of the
superintendent's position at the Merchant Marine Academy?
Mr. Matsuda. Well, thank you, sir. The superintendent's
position is vacant. It is current being advertised for being
filled, and we are looking for the very best candidates to come
apply. We have already received a number of applications, and
we look forward to a strong and a thorough process. An
inclusive one, as well, where we work with all of the academy
stakeholders, the midshipmen, faculty, staff of the school to
participate, as well as outside stakeholders, to make sure that
all views are included, as we----
Mr. Cummings. How long as that vacancy existed?
Mr. Matsuda. The vacancy itself has been advertised
starting the past month.
Mr. Cummings. No, no, no, no, no, no. You are not answering
my question. I said how long has the----
Mr. Matsuda. Roughly since October 2011.
Mr. Cummings. All right. Let me go into something else.
There is significant talk about the potential of releasing oil
from the strategic petroleum reserve as gas prices continue to
rise. Fiscal year 2012 appropriations legislation prohibits the
use of appropriations to waive the Jones Act unless steps are
first taken to ensure that oil release from the SPR is
transported on Jones Act-qualified vessels.
Additionally, the Secretary of Transportation must provide
a list of U.S. flag vessels that, singly or collectively, have
the capacity for carrying releases from the SPR.
Is MARAD prepared to implement these requirements in the
event a drawdown is announced?
Mr. Matsuda. Yes, we are.
Mr. Cummings. In October, MARAD released a report comparing
the competitiveness of U.S. flag vessels with vessels--other
flags. As you know, I encouraged the preparation of this
report. The report identifies the factors that raise the cost
of operating under the U.S. flag, many of which, frankly, have
been well-known for some time.
Now that the report is complete, what does MARAD intend to
do to help improve the competitive position of the U.S. flag
fleet and our actions--and are action plans being developed?
And when can we expect to see specific initiatives?
Mr. Matsuda. Well, sir, after that report was released, we
did receive feedback from other stakeholders in the industry,
besides those who were surveyed.
As you know, we look to the CEOs of the carriers, the
maritime carriers, the ones who make the decisions whether to
flag in the U.S. flag or not, try and get a sense of what their
concerns were and what their views were of the impediments to
flagging in the U.S. We have reached out to other stakeholders
in the industry to get their feedback on the report, and are
still waiting to hear from several of those.
Mr. Cummings. All right. Thank you very much.
Mr. LoBiondo. Thank you, Mr. Cummings. The gentleman from
coastal Louisiana, Mr. Landry.
Mr. Landry. Thank you, Mr. Chairman. Mr. Cummings took my
lead-in, but I am going to be a little more direct, then.
Are you saying that if the SPR is open again, that you
promising this committee that we are not going to witness
another round of record Jones Act waivers?
Mr. Matsuda. Sir, I am committed that we will be in
compliance with the law.
Mr. Landry. Well, I mean, are you saying that once again
this Administration is going to favor giving jobs to foreign
workers over American workers?
Mr. Matsuda. Sir, I can tell you that last summer, during
the drawdown of the SPR, it was the first time ever in
recollection that a U.S. flag vessel was able to carry fuel
release from the SPR. And it was because of the very process
taken, not issuing a blanket waiver from the President.
Mr. Landry. Well, I think me and Mr. Cummings have a--we
may--we agree, but disagree with you on that, just, you know,
for the record.
Let me ask you. Last year--I commend you all, because
MARAD, for the first time since 2008, properly focused on
vessel sales instead of acquisition contracts, which reaped the
taxpayers millions of dollars. They made nearly $8 million in
fiscal year 2011, and nearly $10 million in fiscal year 2012,
for a total of $18 million of sales revenue. And in fiscal year
2012, you already removed and sold 10 vessels from your fleet
with only $2.5 million in appropriated funds, generating nearly
$10 million in revenue.
And so, could you explain why you need $7 million in the
budget to dispose--for vessel disposal for fiscal year 2013?
What about all the money you made in the prior years? Why do
you need any more money?
Mr. Matsuda. Well, these--the funds received from prior
years by law are designated to several different accounts. One
is actually for the benefit of the State maritime academies. We
can take a portion of those proceeds and help fund the needs at
the various maritime academies and their training ships, their
excess fuel costs--as you know, the cost of fuel has been, you
know, on the rise. The other portions go toward maritime
historical preservation, and we work with the Department of
Interior to help decide where those funds can be spent. They
have a grant program that they use. And the remainder goes back
to the national defense reserve fleet.
Mr. Landry. So none of the money can be used to operate the
program, is that what you are saying? Is that something by law,
that none of those funds----
Mr. Matsuda. That is correct. The funds we receive from
Congress are the ones that help us get the ships out the door
and sold to the private----
Mr. Landry. And none of those revenues can be used to help
continue to promote the program? You can use none of those
revenues derived off of those sales to help future--to help
create future contracts and future sales? Is that what you are
saying?
Mr. Matsuda. If--I believe it is only for upkeep of the
fleet. If you have a specific suggestion, we are happy to
consider----
Mr. Landry. Well, I mean, look. I come from a business
community--and I am not blaming you, because it wouldn't be
you, of course. Not surprisingly, it would probably be Congress
that would set up something so backwards as that.
I mean but when you think about it, in business you tend to
budget and put money back into those things that are actually
making you money, so that they don't continue to cost you
money. And I am not saying that the other areas of the budget
that this money is going to is not needed or is not proper. But
maybe we should be looking at making sure we are returning some
of those dollars into the programs that are keeping those
dollars flowing into those other programs. Does that make sense
to you?
Mr. Matsuda. Yes, sir.
Mr. Landry. OK.
Mr. Matsuda. It is something I am happy to take a look at
and work with you on. We feel that the funds are very well
spent, if they go to the State maritime academies and the
future----
Mr. Landry. But suppose we don't have the $7 million to
give you? Then those academies and those areas are not going to
get that money to begin with? We got the tail wagging the dog
here, is my point. You know, again, those programs are good,
and they like that money going in there. But if all of a sudden
we say, ``You are not getting your $7 million,'' how much are
they going to get next year?
Mr. Matsuda. Well, all I know is that if we continue to
make sales out of this program----
Mr. Landry. Well, but you can't make sales unless we
appropriate the money. And if we don't appropriate the money,
you can't make the sales and they can't get the money. And so,
over the past 2 years you all made, like, $18 million and none
of that has gone back to giving us an opportunity to continue
these sales. That is my point.
Mr. Matsuda. We put them where the law tells us to put
them.
Mr. Landry. No, I know, I know, I got to clarify that so
everybody understands. I appreciate it, thank you. Mr.
Chairman, I yield back.
Mr. LoBiondo. OK. Mr. Matsuda, before I go back to Admiral
Papp, Mr. Cummings and Mr. Landry raised the issue, and I thank
you, Mr. Cummings, for first raising it.
Just so there will be no misunderstanding, in a very
bipartisan way we will be paying very close attention to
compliance with the Jones Act. There is obviously concerns of
some things that--how it was handled in the past. And it is
something that we feel very, very, very strongly about. So just
sort of a word of advance notice, that if this does come about,
you know that it is going to be under a magnifying glass.
Mr. Matsuda. Thank you, sir. And I can tell you that I am
actually meeting later this afternoon with a broad swath of
stakeholders from the industry who want to continue to express
concerns and offer ideas for moving forward.
Mr. LoBiondo. OK. Admiral Papp, we spent--I am not sure it
was an entire hearing, but certainly a portion of it with the
subcommittee regarding the testimony that was given from the
Department that assured us that an increased cost associated
with St. Elizabeths would not impact frontline operations. It
seems that the budget request proposes to cut hundreds of
military positions involved in such frontline operations such
as intelligence, airborne use of force, patrol boat missions.
Could you give us some insight of how the Administration
justifies the $24.5 million for the new headquarter building
when its--these frontline operations are obviously going to be
affected?
Admiral Papp. Well, I was deeply involved in this, so I am
defending my Secretary on this one. We, as you know, you all
understand the budget process, this budget started out much
smaller than it is right now. And the Secretary didn't get any
additional funds for the Department. The Secretary went across
the Department and found funds in other agencies to help the
Coast Guard out this year. So she went to bat for us. And there
is no doubt there.
And my budget was completed, and then we went back to her
and asked her for the money above and beyond what we ended up
with. It is about $25 million to pay for the additional cost at
St. Elizabeths. And she--the Department added that back into
our budget.
So, out of fairness to the Department, the Secretary has
worked hard for us this year. Nowhere near where we would like
to be. Once again, as a Service chief, I always want more for
my service. But at the end of the day, after a long battle and
working this budget through the Administration, she went to bat
for us time after time. And then, after our top line was fixed,
she put the $25 million in to pay for the additional costs over
there.
Mr. LoBiondo. I understand that. And I know that the
current conditions are unacceptable, and that we had to look at
something else. But I will just--will tell you that I don't
think these will be the last questions that you get, or the
Secretary or the Department will get. When you have--I don't
care how you slice and dice. You got critical frontline
missions that we don't have money for. We are reducing the
numbers, we are reducing all kinds of things because you have
to fit the budget within what you were given. And I don't want
to begin to think of what $24-plus million would do to Coast
Guard housing or frontline operations or a whole wide variety
of things. So, don't--you know, understanding everything that
is involved here, there is kind of a big flag that is yellow or
red, depending on how you look at it.
Master Chief, I know we have had private discussions, and
you have been a tireless advocate on the housing issue for
servicemembers. Can you tell us what the status of the Coast
Guard housing report is? And do you have a time table when we
might see that?
Master Chief Leavitt. Yes, Mr. Chairman. The assessment,
the national housing assessment, should be completed at the end
of May. And we take a look--there are some preliminary
findings. But as you know, the assessment takes a look at the
whole Nation on all of our housing. And some of the areas we
have, we have--you know, there is more housing than what we
need, due to occupancy levels. In other areas we are
challenged. And with the new authorities you gave us in
housing, what we want to do is be careful about how we--where
we put those monies into. And so we got to take a look. And
this is going to give us a great plan forward of what that
looks like.
So, after May, we will have a good plan. We have about $8.8
million that we have already diverted into the housing fund.
And we sold six houses in Maui, three properties here in the
national capital region. We sold housing up in Clyde Hill in
Seattle. And we--and the properties there in Buxton, North
Carolina. So we are moving forward on this housing
authorization. But I think it is really important right now
that we put a round turn on the direction forward, until we
figure what the direction is. And so, I am really optimistic
about this, and I think that is really going to help us focus
those monies in the right area.
And another thing we also did too this year is there are
some tools we are using too, in regards to--we may not
necessarily need housing-housing. We have options like leases
we can get into, which we did up in Juneau just recently. We
got five leases for our folks, very difficult area to get our
folks into. So we are using some of the other tools we have out
there, too, in regards to that.
Mr. Coble. Mr. Chairman?
Mr. LoBiondo. Another issue that we have had public
discussions on and some private discussions that is
particularly offensive to me, and that is the parity issue,
where Coast Guard men and women are, in some cases, treated
differently than DOD servicemember benefits. This is a fight I
guess we are going to continue for a while.
Can you identify for us what is the single largest issue
still facing the Coast Guard, in terms of parity? Or the top
couple of issues, for that matter?
Master Chief Leavitt. Well, I think some of the issues--
obviously, you already looked into the housing and our child
care. We had--parity last year was about 12 percent--excuse me,
about 14 percent versus 5. But authorities, and with that
approval of last year's budget, we are probably going to build
a--bridge that gap, like I said on my statement.
We hired seven folks, training care curriculum specialists
for our CDCs. We hired--we haven't hired, excuse me, we are
looking at--about 12 weeks out we are hoping to get that job
description out. But we are also looking at the regional
daycare specialist. And these are folks that--when I talked
last year, I talked about our folks out in the remote regions
of the high-cost areas. And I am really optimistic about this,
because when we put these folks out there, they are going to
help. A lot of our spouses like to babysit, like to do in-house
child care, but they are unable to break some of the red tape
we have, in regards to getting their houses inspected, in
regards to getting the first aid training they need, and all
those types of things like that. So these are the folks that
help them do it in these different regions. And that is going
to help us bridge those numbers.
Just last February we advertised the new program and our
subsidies that they approved, and--because we had more money in
there. And the 370 existing families that are now using our
CDCs, we had--with 450 children, we updated theirs. And right
now, as you and I speak, the--we have--150 new families have
already put in for the new subsidies. And with 129 applications
that are--right now, that are pending. And so about every day
we are getting 20 more applications in. And now we are getting
ready to submit the--we are going to market this to our
ombudsman program to get all that information out there.
So, in regards to child care, we are going to start
bridging that gap, I am confident of that. It is going to take
a little time to do it, because we got to get these things out
in the field.
The other ones that--in the housing piece right there,
obviously when you look across and you see the public-private
ventures of the DOD, we are trying to partner in those areas,
too, with our DOD. And we are able to do this in some of the
regions that we have. But the reality is not all our folks in
those remote regions are able to get in that kind of housing.
And you know, you have seen some of the housing that we have.
So it won't be the same. So we got a little bit of parity in
there, but we are going to work forward with the new
authorizations and the authorizations you gave us.
The other one which was brought to my attention is in
regards to the Reserve. Our reserve program is under title 14,
and our DOD counterparts are working under title 10. And if I
can just remind you that during Deepwater Horizon, there are
some significant issues and differences in those two, and I am
sure you are well aware of those. Medical--Deepwater Horizon,
we had our Coast Guard men out there working side by side with
our DOD counterparts, doing the same exact job. But one is
under title 10, and title 10 gives you a lot more benefits in
regards to health care. There is education benefits in that.
There is a resource income replacement program for that. In
other words, it takes care that--you may lose pay going to
those types of things, so they got those types of programs,
where our folks in title 14 don't have those same benefits, but
yet they are doing the same job.
So when you take a look at maybe--to see if we can shore up
some of that, and see if we can bridge that parity in regards
to the 14 and 10, title 10.
Mr. LoBiondo. Well, thank you. That is helpful. And as we
approach the national defense authorization bill through the
hearings with HASC, we want to continue to work closely with
you to identify these areas where parity is not in place. And
while we may not be able to solve it all in one fell swoop, we
want to make sure that folks understand that this is
unacceptable, as far as the Coast Guard is concerned, and it is
really sort of a disgrace that we don't have parity, and that
we will keep on this. So any insight you have, as we move
forward, will be very much appreciated.
I wanted to go to Mr. Matsuda, but I want to respect the
other Members here. So, Mr. Larsen, I will come back to you.
Mr. Larsen. Thank you, Mr. Chairman. Admiral Papp, some
questions about the Offshore Patrol Cutter. Obviously, we are a
little bit--a ways before that is operational. And I have a
question about whether or not the requirements for the OPC will
prioritize one set of factors over a different set of factors.
Sea-keeping and endurance, that might be more helpful in the
Pacific versus speed, armament, and other requirements. How are
you approaching the setting requirements for the OPC?
Admiral Papp. Well, sir, realizing that this was going to
be the largest acquisition project that the Coast Guard has
ever done, and recognizing that these ships are going to last
us 40 years, we are taking the long view on this.
And I realize there are some people that feel like we have
dragged our feet a little bit, or pushed this to the right a
little bit. And I would say that is just not the case. It is a
little delayed from where we started out. But when I came in as
Commandant, I realized that we were going to be facing
constrained budgets. So I had the staff take a look at the OPC
once again, scrub the requirements with a direction that the
primary requirement is affordability. We just could not afford
everything that was in the requirements before. So we set new
thresholds for it.
But the most important is the sea-keeping capability,
because with a reduced number of National Security Cutters, if
we only have 8 National Security Cutters replacing the 12
Hamilton-class cutters----
Mr. Larsen. Right.
Admiral Papp [continuing]. We have to have a ship that is
capable of going up into the Gulf of Alaska, the Bering Sea,
the Western Pacific. Our Medium Endurance Cutters right now--
and speaking as a captain of a 270-foot cutter--those ships
cannot perform in the extreme weather conditions that you find
sometimes in the North Atlantic, much less the Arctic and the
Bering Sea.
So, keeping the requirements for sea state 5, for
helicopter launching and boat launching and the endurance were
most important. And I am really pleased to say that we have
finally passed that hurdle. We went through acquisition
decision event number two with the Department of Homeland
Security last week, and they approved our requirements. So we
are stepping out smartly now and moving ahead.
Mr. Larsen. So you are able to move ahead. Good. Thank you.
Mr. Matsuda, a couple questions about some of these
programs that, at least to our eye, seem to be not funded.
First off, the small shipyard assistance grant. Can you give us
some thinking about--give us some of MARAD and the
Administration's thinking about the lack of funding for
assistance to small shipyards? Because I think you will find
that there have been a lot of successes in this particular
program. There may be some hiccups, but a lot more successes.
Mr. Matsuda. Well, sir, I would have to agree with you. It
has been very successful. I see the results of these grants in
the form of new equipment at our small shipyards, or in new
training programs put in place. We continue to administer and
oversee $153 million of--and 133 grants, including a large
portion of them that were awarded as a result of the Recovery
Act. And we are continuing to make investments in the--our U.S.
shipyards.
Overall, the Federal budget provides some $15 billion worth
of spending on new vessels and shipyard work. Our own fleets
require the types of service and repair work that many of these
shipyards have really developed niche, you know, areas of
expertise in. And so we are continuing to make progress there.
But overall, this has, you know, become a tough budget year.
And we certainly want to make sure we highlight the types of
priorities that we are able to fund.
Mr. Larsen. Well, you have made a great argument for
funding this program. And yet it is not. So do I hear you--do I
just hear you saying despite the relative success of it, it is
just not a high-enough priority?
Mr. Matsuda. Well, we are, like I said, continuing to make
investments in the shipyard industry. We believe that the funds
that we are currently administering and overseeing are being
well spent, and we are monitoring those as appropriate.
Mr. Larsen. With regards to marine highways initiative, I
couldn't find any mention of this program in MARAD's budget or
in the DOT's budget request. Can you explain what is the
current status of the maritime highways initiative?
Mr. Matsuda. This is--remains one of our top priorities. We
see it as a great potential to move additional cargoes on the
water that are currently not going that way. There is
containers, trailers can be moved much more environmentally
efficiently. We are relieving congestion on our surface routes.
And so we have done quite a bit of focus to make sure we can
get these services up and running.
The--starting 2 years ago, Secretary LaHood identified 18
corridors around the country where these types of services
would make sense economically and certainly to--as a policy
matter. We followed that up by providing funding for individual
corridor analyses and studies, where people can kind of bring
it from the chalkboard into, you know, conferences, to actually
get together and focus, on a regional level, what it is going
to require to start these services in the individual areas.
We have also funded these projects through the TIGER grant
program, where, as I mentioned, a total of $276 million has
gone to ports and marine highway projects, to try and get the
infrastructure needed, again, to get them up and running.
Mr. Larsen. So the lack of conversation in your budget
request or in the DOT's budget request about the maritime
highways initiative should not lead us to think that you all
have let it go by the wayside?
Mr. Matsuda. Oh, not at all, sir. It is--it remains a key
priority. It is also one that is intended to get a private
sector business service up and running, where these are private
entities with their--you know, their own capital, their own
investments, their own risks. We are trying to encourage it
from the Federal Government and, to be honest, sir, many
stakeholders who suggest that it is not a matter of throwing at
it, but making the policy decisions to make sure that there is
a climate that would induce folks to use water transportation.
Mr. Larsen. With regards to title 11, I guess I am a little
surprised to see the Administration request for $3.75 million
for administrative expenses for a program that seems to be
going unfunded in this year's--in the 2013 request. Can you
explain this--I guess my disconnect? There must be a connect
somewhere.
Mr. Matsuda. Well, we are obviously--we are continuing the
program. We have a large number of carryover funds we are
continuing to utilize. We are processing and receiving new
applications. And currently we have sufficient funding to
guarantee over 300--towards $400 million worth of shipbuilding
projects.
Mr. Larsen. OK.
Mr. Matsuda. But no new funds were requested this year.
Mr. Larsen. OK. One final question. And Mr. Michaud, again,
couldn't be here, Mr. Chairman. I just wanted to ask this
question on his behalf--and many others. But Congressman
Michaud brought up the issue of State maritime academies, and
explained--could you help us understand the budget request that
cuts direct support assistance by $1.1 million to the State
maritime academies? He is very concerned about it.
Mr. Matsuda. Overall, we--over the past several years, the
State maritime academies in our budget has seen an increase 10
percent higher over 2009 levels, and 20 percent higher over
2008 levels. We believe that the difference will be more than
made up for by additional funds we were able to get awarded to
the State maritime academies through examples such as our
successful ship disposal program, as your colleague discussed.
That is due to our ability to get ships sold on the market and
take those funds--it not only cleans up our fleet sites, but
also makes investments back into the future of this industry.
Mr. Larsen. Well, I recommend some followup from you to Mr.
Michaud and his office.
Mr. Matsuda. Pleased to do so.
Mr. Larsen. Thank you, Mr. Chairman.
Mr. LoBiondo. Mr. Cravaack.
Mr. Cravaack. Thank you, Mr. Chairman. You know, being
retired Navy, I find it a bit ironic, sitting on this side of
the desk, and here we are, cutting your budget and telling you
to do more. It just boggles my mind that we can't give you the
assets you need to actually complete your mission.
And so, Admiral, I guess what I am asking from you, sir, as
the Service chief, do you have enough money to complete your
mission, take care of your people, and properly execute and
protect the United States of America?
Admiral Papp. Well, Mr. Cravaack, any Service chief will
tell you we never have enough money to do everything that is
asked of us. At the end of the day I have got a budget to live
within, and what I get paid to do is to make the determinations
what the highest priorities are, and apply the money against
that.
So what I would say is that we have invested heavily in our
inshore and in our ports over the last decade or so. We have
recapitalized our small boat fleet 200 percent--I am sorry, by
20 percent--and they are all new boats now. Our patrol boat
fleet, we have built 73 87-foot patrol boats within the last 10
years or so. We are building the Fast Response Cutters. We have
put more people at our stations. So I am comfortable along the
coastal zone.
But as I said in my opening statement, you don't want to
discover the threats in your coastal zone or in your ports.
What you want to do is you want to play offense. You want to
have a--have your major cutters that can intercept things on
the trade routes and in the trafficking zones. And that is
where I see the greatest risk right now. That is why I am so
intent on building out our major cutter program, the program of
record of 8 National Security Cutters and 25 Offshore Patrol
Cutters, so that we can recapitalize those 40-year-old ships
that are out there that are getting increasingly expensive to
maintain, and are really not serving us well, in terms of
effectiveness.
Mr. Cravaack. Homeland Security Secretary Janet Napolitano
recently testified that the Administration made the budget cuts
in light of what the Navy is doing. Now, could someone in the
Coast Guard Department and Homeland Security explain this, what
this means, to me?
Admiral Papp. I am not sure where that quote is from,
because I read her testimony. I read it verbatim. And what
she--and I don't have it, the exact quote, myself, but I am
going to paraphrase. What she said was that in light of the
current budget situation, the constraints that we find
ourselves in, each and every acquisition project that we are
working on needs to be reassessed on a yearly basis.
And part of her responsibility and my responsibility under
title 14 U.S. Code is to work with the Navy to make sure that
we are building complementary assets, not redundant assets. And
that is just part of the process. And we do that on a regular
basis. She has committed to me to meet with Secretary Panetta
and with Secretary Mabus. I meet with Admiral Greenert almost
weekly, sometimes twice a week, and we are following each
other's progress very closely.
Admiral Greenert is reassessing his shipbuilding program.
There are certain things he is not going to be able to build.
And we want to make sure that the things that we are building,
that we are investing in heavily, are going to serve us in our
Western Hemisphere operations, and can complement the Navy when
a crisis comes up.
Mr. Cravaack. My concern, sir, is that with the shrinking
Navy, the Coast Guard is supposed to cover more water. And you
are telling me that your forward assets are diminished as well.
I see a huge gap. So I am concerned with that, I am very
concerned. But thank you, sir.
Do you have a comment, or----
Admiral Papp. Well, thank you for your support, sir. I mean
we absolutely need it. We need to press that threat offshore.
And in the past we have been able to depend upon Navy vessels
as well. As you know, they are retiring the Perry frigates,
which we have been using down in the Caribbean with our law
enforcement detachments. So we have diminishing resources down
particularly in the transit zones in the Eastern Pacific and
the Caribbean to interdict those multiton loads of cocaine
before they get into Mexico and get broken down into smaller
loads which easily make it across the border.
Mr. Cravaack. I share your concern, sir. I truly do.
Just real quickly, if I can, dovetailing on Mr. Larsen's
comments, intercoastal waterways, Mr. Matsuda, basically an
underutilized asset. But for the second year in a row you have
requested to zero out the maritime highway feasibility grants.
Could you kind of give us some light to what does the agency
plan to do to promote or incentify the use of short sea
shipping?
Mr. Matsuda. Well, as we discussed, marine highways have
been successfully funded through the Department's TIGER grant
program, where we have been able to get far more resources
toward these types of projects and through the amount of
funding we have had available to us directly.
So, we--a total of $276 million has gone toward these port
and marine highway projects over the past three rounds of the
TIGER program, and we are seeing differences, now that some of
these grants are coming to fruition, in developing not just
new, you know, pieces of infrastructure, but they have helped
lead to development of new services. And that is operating
jobs, that is jobs on board the vessels, as well as in the
ports. And so those are investments that we like to see.
Mr. Cravaack. OK. Thank you, sir. My time has expired. I
yield back, sir.
Mr. LoBiondo. Thank you, Mr. Cravaack. The first question
you asked the Commandant--Commandant, we understand your
difficult position, but the reality is that the Coast Guard
does not have enough money to do everything they are asked to
do. And what I think we on the subcommittee and maybe many
other of us are worried about is we have seen this movie before
in the 1990s. And the Congress continued to ask the Coast Guard
to do more. Admiral Papp, you saw that maybe too up close and
personal. And we continued to reduce your resources, we
continued to reduce your personnel. When the tragedy of
September 11th hit, things opened up a bit. And I really have a
tremendous fear that if we are not careful we are going to
repeat some terrible mistakes of the past.
So, I don't expect you to comment on it, but it is a big
concern that we are going to continue to try to watch
carefully.
Mr. Cummings?
Mr. Cummings. Thank you very much, Mr. Chairman. Admiral
Papp, according to the material circulated by staff, the Coast
Guard needs more than 100,000 additional patrol boat hours to
carry out its missions. At this time, what missions are not
being conducted due to a lack of available patrol boat hours?
Admiral Papp. Sir, I get into these discussions often. And
just as the 1,000 person reduction is a little bit of a red
herring, so are patrol boat hours.
The fact of the matter is we have more patrol boats today
than we have ever had in our history, and they are more capable
patrol boats. And we need each and every one of them. And I
would love to have more, because there are more things we can
do. But every facet of the Coast Guard never has enough
resources to do 100 percent of the missions.
Major cutters--we are reduced right now in major cutters,
because our High Endurance Cutters are only about 70 percent
effective. We are not getting our National Security Cutters
quickly enough. Our Medium Endurance Cutters need replacement.
So we are not doing 100 percent there. We are not meeting our
hours for major cutters, either.
But as I said in my opening statement and I repeated
before, in the coastal zone patrol boats is a relatively good
new story, because we have built 73 87-foot patrol boats just
in the last dozen years. With the 2013 budget, we will have
money for 20 Fast Response Cutters. And by the end of--in fact,
while we will take a short-term reduction during fiscal year
2013 because with decommissioning of some of the older patrol
boats, by the end of 2013 we are actually going to have more
patrol boats out on the water. We will go from 114 up to 118 by
the end of 2013.
So, these are just risk-based decisions that I make. I am
confident that we are managing the risk within the coastal
zone, and that my highest risk area is offshore, where we need
the larger cutters.
Mr. Cummings. Particularly following the recent tragic loss
of another Coast Guard helicopter, have you examined the cause
of the recent aviation accidents? And are there trends or
notable findings? Has a lack of funding contributed in any way
to these accidents?
Admiral Papp. I can say unequivocally, no, funding has not.
As you probably recall, the loss of 14 aviators, which included
the early part of my watch, as well, due to accidents over
about a 2-year period had me distressed, deeply concerned. And
we kicked off the aviation safety assessment action plan study.
And what we found there is there are a mix of things, both
human, and mission tasking, and really, I think most
importantly to me, is a leadership issue, getting our senior
leaders, our commanding officers at the air stations, back into
the traditional modes of leadership, which have them meeting
with their junior officers, keeping them focused, passing on
their experience and using their mentorship to keep everybody's
heads in the game. Because the one consistent theme that we saw
in these accidents that we suspect is probably complacency
which crept into the cockpit during routine operations. Almost
all those accidents were doing either training missions or
transit missions, not while executing a search and rescue case
in heavy weather, or something like that.
The most recent accident, I can't say. It would be
premature for me to say, because we just haven't had enough
time to analyze it. The accident happened just a little over a
week ago. We have two independent investigations that are
looking at it. I am--I need some answers very quickly, because
if it is a mechanical issue that caused the crash we need to
know that so that we can look at our entire fleet. But if it
was a human error, we will find that out as well, and identify
that. But right now it is just too early to determine.
Mr. Cummings. All right. Chairman Lidinsky, the FMC
recently released a study of the repeal of the liner conference
exemption from the European Union's competition law. While the
study recommends further review of trends following the 2006-
2010 time period, does the FMC recommend any changes at this
time to U.S. policy regarding regulation of competition among
liner services?
Mr. Lidinsky. We do not, Mr. Chairman. We view our--Mr.
Cummings, we view our role is to offer Congress facts and
figures, and our perspective on the situation. But this policy
decision has to be taken after a great deal of steps take
place. So the report makes no recommendation in that regard.
Mr. Cummings. All right. I see my time is up. Thank you
very much.
Mr. Cravaack. [presiding.] Thank you. Mr. Cummings yields
back.
I just have a couple quick questions, if you don't mind,
sir. Regarding your sea-going capabilities, with the--to meet
those full capabilities when you have basically half the crew
for these ships--is that correct? So basically you are
operating half the time. Would that be a correct statement?
Admiral Papp. No, the concept that we are going to
experiment with is there will be four crews for every three
ships.
Mr. Cravaack. So----
Admiral Papp. It is called a crew rotation concept.
Conventionally, crewed ships, generally our standard is about
185 days away from home port. What we are hopeful of getting is
235 days away from home port by rotating crews through.
[U.S. Coast Guard insert for the record:]

The correct days away from home port are 230 days, vice
235.

But it is not two crews for every ship. We couldn't afford
that. What we are going to do is have four crews for every
three ships, and then put them through rotation.
Mr. Cravaack. OK, so you will just be--OK. I understand
that.
Without the VUAV capabilities as well, that kind of limits
your ability to have a larger operating area. Would that be a
correct statement?
Admiral Papp. It does, and we are anxiously looking forward
to continued work with the Navy to come up with a solution to
that. We--it is one of those things that is very expensive for
us to try and do on our own.
We have been following fire scout development with the
Navy. And, in fact, this summer we are going to experiment with
ScanEagle off our--one of our National Security Cutters.
Actually, that holds a lot of promise for us, as well. But
whatever we do, we need to be linked up with the Navy on this.
We acknowledge right up front that it limits our
capabilities by not having it. On the other hand, the National
Security Cutter, as constructed, has much better sensors. And
by using organic helicopters on board, we are gaining better
command and control and ISR, just by having that new ship out
there.
Mr. Cravaack. Excellent. Thank you. I appreciate that,
Admiral.
Mr. Matsuda, our Nation's cargo preference laws generally
require the Government impel cargo to be carried on U.S. flag
vessels. Last year MARAD was successful in ensuring the
Department of Energy abides by these laws for cargo financed
through Energy's loan guarantee program. Does MARAD actively
oversee the shipping practices of all governmental agencies, to
ensure they abide by the cargo preferences laws?
Mr. Matsuda. Sir, I can tell you that we search wherever we
can to find that there are cargos available for the U.S. flag
fleet to carry. In this instance we are chasing with our
limited resources the largest sources of cargo within the
Federal cargo preference program to better ensure compliance.
And we are trying to gain further access in--by, you know,
letting all agencies know exactly what the rules are.
But we have made great progress in--so the civilian
agencies, including Department of Energy and also with the
Export-Import Bank. And the maritime industry has responded as
well. Since--in the past year alone, the fleet of heavy-lift
ships has nearly doubled under the U.S. flag. And I think that
is in result to a lot of the promise of cargoes that could be
exported under--through the U.S. Export-Import Bank. And we
have worked very closely with them under the--Secretary
LaHood's leadership and Chairman Hochberg, to try and clarify
what the rules are and how they would apply.
We have also worked directly with the shippers, the
exporters, and I think that we have seen a better understanding
of the rules, and also a better appreciation for how to comply
with them.
Mr. Cravaack. You kind of dovetailed on my next question.
The Cargo Preference Act requires the Secretary of
Transportation to annually review the administration of the
cargo shipping programs of other Government agencies to ensure
the adherence to the law. Can you tell us whether these reviews
occur on an annual basis, and whether any agencies have been
found in violation of the act?
Mr. Matsuda. Well, last year we did hold, for the first
time, a conference among Federal shipper agencies. As far as I
know, nothing like that had ever taken place to begin that
dialogue. Each agency is required to report cargoes that are
shipped--that are subject to the cargo preference program, and
we continue to make those results available in our annual
reports.
Mr. Cravaack. OK. All right, thank you. And the chair
recognizes Mr. Larsen.
Mr. Larsen. Mr. Chairman, I just have a unanimous consent
request to allow Mr. Cummings' opening statement to be entered
into the record.
Mr. Cravaack. Without objection, so ordered.
[Please see the table of contents section entitled
``Prepared Statements Submitted by Members of Congress'' for
the prepared statement of Hon. Elijah E. Cummings.]
Mr. Cravaack. The chair would like to recognize a former
Federal maritime commissioner. Michael Khouri is in the
audience. I would like to welcome you on board. And Rebecca
Dye, former subcommittee staff director. So I would like to
welcome you, as well. Good to have you on board, ma'am.
So, if there are no further questions, I would like to
thank the witnesses very much for their testimony and their
commitment to the service of this great Nation, and Members,
for their participation as well. This subcommittee stands
adjourned. Thank you.
[Whereupon, at 11:55 a.m., the subcommittee was adjourned.]