[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
PRESIDENT'S FISCAL YEAR 2014
BUDGET REQUEST FOR COAST GUARD AND
MARITIME TRANSPORTATION PROGRAMS
=======================================================================
(113-9)
HEARING
BEFORE THE
SUBCOMMITTEE ON
COAST GUARD AND MARITIME TRANSPORTATION
OF THE
COMMITTEE ON
TRANSPORTATION AND INFRASTRUCTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
APRIL 16, 2013
__________
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COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
BILL SHUSTER, Pennsylvania, Chairman
DON YOUNG, Alaska NICK J. RAHALL, II, West Virginia
THOMAS E. PETRI, Wisconsin PETER A. DeFAZIO, Oregon
HOWARD COBLE, North Carolina ELEANOR HOLMES NORTON, District of
JOHN J. DUNCAN, Jr., Tennessee, Columbia
Vice Chair JERROLD NADLER, New York
JOHN L. MICA, Florida CORRINE BROWN, Florida
FRANK A. LoBIONDO, New Jersey EDDIE BERNICE JOHNSON, Texas
GARY G. MILLER, California ELIJAH E. CUMMINGS, Maryland
SAM GRAVES, Missouri RICK LARSEN, Washington
SHELLEY MOORE CAPITO, West Virginia MICHAEL E. CAPUANO, Massachusetts
CANDICE S. MILLER, Michigan TIMOTHY H. BISHOP, New York
DUNCAN HUNTER, California MICHAEL H. MICHAUD, Maine
ERIC A. ``RICK'' CRAWFORD, Arkansas GRACE F. NAPOLITANO, California
LOU BARLETTA, Pennsylvania DANIEL LIPINSKI, Illinois
BLAKE FARENTHOLD, Texas TIMOTHY J. WALZ, Minnesota
LARRY BUCSHON, Indiana STEVE COHEN, Tennessee
BOB GIBBS, Ohio ALBIO SIRES, New Jersey
PATRICK MEEHAN, Pennsylvania DONNA F. EDWARDS, Maryland
RICHARD L. HANNA, New York JOHN GARAMENDI, California
DANIEL WEBSTER, Florida ANDRE CARSON, Indiana
STEVE SOUTHERLAND, II, Florida JANICE HAHN, California
JEFF DENHAM, California RICHARD M. NOLAN, Minnesota
REID J. RIBBLE, Wisconsin ANN KIRKPATRICK, Arizona
THOMAS MASSIE, Kentucky DINA TITUS, Nevada
STEVE DAINES, Montana SEAN PATRICK MALONEY, New York
TOM RICE, South Carolina ELIZABETH H. ESTY, Connecticut
MARKWAYNE MULLIN, Oklahoma LOIS FRANKEL, Florida
ROGER WILLIAMS, Texas CHERI BUSTOS, Illinois
TREY RADEL, Florida
MARK MEADOWS, North Carolina
SCOTT PERRY, Pennsylvania
RODNEY DAVIS, Illinois
VACANCY
------ 7
Subcommittee on Coast Guard and Maritime Transportation
DUNCAN HUNTER, California, Chairman
DON YOUNG, Alaska JOHN GARAMENDI, California
HOWARD COBLE, North Carolina ELIJAH E. CUMMINGS, Maryland
FRANK A. LoBIONDO, New Jersey CORRINE BROWN, Florida
PATRICK MEEHAN, Pennsylvania RICK LARSEN, Washington
STEVE SOUTHERLAND, II, Florida, TIMOTHY H. BISHOP, New York
Vice Chair JANICE HAHN, California
TOM RICE, South Carolina LOIS FRANKEL, Florida
TREY RADEL, Florida NICK J. RAHALL, II, West Virginia
VACANCY (Ex Officio)
BILL SHUSTER, Pennsylvania (Ex
Officio)
CONTENTS
Page
Summary of Subject Matter........................................ iv
TESTIMONY
Admiral Robert J. Papp, Jr., Commandant, United States Coast
Guard.......................................................... 3
Master Chief Michael P. Leavitt, Master Chief Petty Officer of
the Coast Guard, United States Coast Guard..................... 3
Hon. Mario Cordero, Chairman, Federal Maritime Commission........ 3
Hon. David T. Matsuda, Administrator, Maritime Administration.... 3
PREPARED STATEMENT SUBMITTED BY MEMBER OF CONGRESS
Hon. John Garamendi, of California............................... 30
PREPARED STATEMENTS AND ANSWERS TO QUESTIONS FOR THE RECORD SUBMITTED
BY WITNESSES
Admiral Robert J. Papp, Jr.:
Prepared statement........................................... 31
Answers to questions for the record from the following
Representatives:
Hon. John Garamendi, of California....................... 40
Hon. Rick Larsen, of Washington.......................... 52
Master Chief Michael P. Leavitt \\
Hon. Mario Cordero:
Prepared statement........................................... 53
Answers to questions for the record from Hon. John Garamendi,
of California.............................................. 66
Hon. David T. Matsuda:
Prepared statement........................................... 70
Answers to questions for the record from Hon. John Garamendi,
of California.............................................. 77
SUBMISSIONS FOR THE RECORD
United States Coast Guard, 4 inserts for the record......14, 18, 22, 24
----------
\\ Master Chief Michael P. Leavitt did not submit a
prepared statement.
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PRESIDENT'S FISCAL YEAR 2014
BUDGET REQUEST FOR COAST GUARD AND
MARITIME TRANSPORTATION PROGRAMS
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TUESDAY, APRIL 16, 2013
House of Representatives,
Subcommittee on Coast Guard and Maritime
Transportation,
Committee on Transportation and Infrastructure,
Washington, DC.
The subcommittee met pursuant to notice at 2:28 p.m. in the
Rayburn House Office Building, Room 2167, the Honorable Duncan
Hunter (Chairman of the subcommittee) presiding.
Mr. Hunter. The subcommittee will come to order. Sorry
about that. We had some votes and we will probably have some
more folks trickle in as we go.
So, the subcommittee is meeting today to hear testimony on
the President's fiscal year 2014 budget request from the
leaders of the Coast Guard, the Federal Maritime Commission and
the Maritime Administration. The President requests $7.9
billion for the discretionary accounts of the Coast Guard in
fiscal year 2014 and an 8-percent cut below the current level.
This is the second year in a row the President has forced the
Coast Guard to have reductions to offset his questionable
spending in other agencies.
The President guts the Coast Guard acquisition budget,
reducing it by $634 million or 41 percent below the fiscal year
2013 enacted level. The President's request proposes to
terminate or delay the acquisition of critically needed
replacement assets, including Response Boat-Mediums, Fast
Response Cutters, and Maritime Patrol Aircraft. The request
also slashes the budget to improve shoreside installations by
nearly 95 percent, and zeroes out funding to renovate derelict
housing for servicemembers and their dependents.
The President's request will severely undermine efforts to
recapitalize the Service's aging and failing legacy assets,
increase acquisition costs for taxpayers, and seriously degrade
mission effectiveness. The subcommittee has worked for over a
decade to implement a meaningful acquisitions program, which
will enable the Coast Guard to carry out its missions in 5, 10,
and 15 years. This budget slows that effort and dooms us to a
future in which a down-sized Coast Guard is unable to
accomplish even its most basic missions.
For the fiscal year 2014 operating budget, the President
proposes to reduce the number of Coast Guard servicemembers and
reservists by nearly 2,000; eliminate tuition assistance for
officers; reduce the number of foreign-flag vessels boarded for
inspection; cut the number of foreign ports security
inspections; close air stations; take recently upgraded
helicopters out of service; and exacerbate the gaps in
readiness by cutting training for personnel and retiring assets
before their replacements arrive. In this budget environment,
no agency can escape budget cuts, and I think there are ways to
find savings in the Coast Guard's budget in a responsible
manner; but, the budget the President sent us makes cuts that
could adversely impact the safety and security of our ports and
waterways.
I commend Admiral Papp for his honesty in describing what
these cuts will mean for the ability of the Service to
successfully conduct its missions, and I appreciate the
Admiral's efforts to do his best with the hand that was dealt
him. The budget request for the Maritime Administration
represents a 3.6-percent increase over the current level, but
the increase comes as a result of the President's misguided
effort to effectively eliminate the hugely successful Food for
Peace Program. Since 1954 the Food for Peace Program has
provided agricultural commodities grown by U.S. farmers and
transported by U.S. mariners on U.S.-flag vessels to those
threatened by starvation throughout the world.
The President's restructuring of Food for Peace will
eliminate a vital program for our farmers, put U.S. mariners
out of work, and undermine our national security by reducing
the domestic sea lift capacity on which our military depends. I
would add that the President's attempt to placate the concerns
of U.S. mariners by throwing some additional money at the
Maritime Security Program for 1 year will not work. I hope my
colleagues will join me in rejecting the President's misguided
proposal.
Finally, the budget request for the Federal Maritime
Commission proposes a nearly 10-percent increase over current
levels. Although a 10-percent increase in the FMC budget
amounts to little more than $2 million, I think it sends the
wrong signal in the current fiscal environment. While other
agencies have implemented hiring freezes, the Commission
proposes to add more employees. The Commission needs to take a
much closer look at their operations and present a more
realistic budget.
Our Nation is facing a very tough budget climate. This
Congress must work together to bring our exploding national
debt under control. I look forward to working with my
colleagues to achieve this goal in a responsible manner.
With that, I yield to Ranking Member Garamendi.
Mr. Garamendi. Mr. Chairman, thank you very much. There is
much to be said following your comments.
I have a written statement that I would like to put in the
record for openers, but I think I'm just going to go off the
written statement for a moment and simply say that much of the
problem that this organization faces, or these three
organizations face, and much of the rest of Government, is of
the making of Congress. It is Congress that enacted the
sequester and it is Congress that over the last several years
has repeatedly diminished the Federal spending and raised much
revenue. So, indeed, I agree with you. We need to address this
issue in a comprehensive way.
I know the Coast Guard is taking a big hit here and the
budget as presented is not one that I like at all. I don't like
the 480 program. I think that's a mistake, having spent 40
years of my life working on famine and food issues around the
world. I don't think this is the right way to go about solving
that problem for the reasons that you stated and many others.
With regard to the Coast Guard acquisition programs, we are
going to have to work on that. The President's budget is not
correct on that and we have to work on it. But, there's a
larger issue that permeates everything we are doing in every
budget in every hearing, and it is that we are unwilling to
fund the Government that we really need.
With that, I will yield back and ask that my written
statement be printed in the record.
Mr. Hunter. Without objection.
I thank the ranking member, and with that our witnesses
today are Admiral Robert Papp, Commandant of the Coast Guard;
Michael Leavitt, MCPO of the Coast Guard; the Honorable Mario
Cordero, Chairman of the Federal Maritime Commission; and the
Honorable David Matsuda, Administrator of the Maritime
Administration.
Admiral, you are recognized for your statement.
TESTIMONY OF ADMIRAL ROBERT J. PAPP, JR., COMMANDANT, UNITED
STATES COAST GUARD; MASTER CHIEF MICHAEL P. LEAVITT, MASTER
CHIEF PETTY OFFICER OF THE COAST GUARD, UNITED STATES COAST
GUARD; HON. MARIO CORDERO, CHAIRMAN, FEDERAL MARITIME
COMMISSION; AND HON. DAVID T. MATSUDA, ADMINISTRATOR, MARITIME
ADMINISTRATION
Admiral Papp. Thank you, Chairman Hunter, and to Ranking
Member Garamendi, it is an honor to be here in front of you and
the distinguished members of the subcommittee. And before I get
into the bulk of my statement, I would just like to say the
collective hearts of the entire Coast Guard family go out to
the people of Boston. It was a tragedy, yesterday, but it is a
tragedy for the Coast Guard as well.
Our people are home-based within Boston. It has been a
great, traditional port for us; but, in spite of everything
going on, we were able to respond immediately with boats and
boat crews from Sector Boston, the Maritime Safety and Security
Team, an armed helicopter and boarding teams to enhance the
overall Maritime Transportation Security posture.
Now, our ability to respond like that is a direct result of
the tremendous support that the Congress and the Administration
have given us over the last 12 years, and that support enabled
major responses this past year as well. During Hurricane Sandy
we rescued 14 crewmembers from the H.M.S. Bounty in 30-foot
seas and 60-knot winds, 80 miles offshore. In the Port of New
York and New Jersey we serve eight channels; evaluated
waterfront facilities; restored the AIDS Navigation System;
and, worked across Government and industry to reopen the port.
To meet the growing demands in the Arctic, we completed
Operation Arctic Shield, a 9-month inner agency effort
including the deployment of a National Security Cutter, two
ice-capable buoy tenders, and two helicopters, 300 miles above
the Arctic Circle. Given the lack of shore infrastructure and
the extreme conditions in the Arctic, the capabilities provided
by our National Security Cutter were critical to our operation.
In executing the Department of Homeland Security, layered
security strategy, the Coast Guard detected and interdicted
threats as far offshore as possible. Targeting Central America
coastal traffic routes, our cutters and aircraft teamed with
interagency aircraft detected and interdicted drug-smuggling
vessels carrying 107 metric tons of cocaine with a street value
of nearly $15 billion, and we disrupted transnational criminal
organizations.
Closer to shore we responded to the growing threat of small
go-fast vessels that smugglers are increasingly using to avoid
increased security along the southwest U.S. border. Drug
smuggling, human trafficking and other illicit maritime
activity continues to threaten our Nation. Those engaged in
this trade are growing smarter and bolder, and they are
increasing the danger to our homeland.
In December I presided over the memorial service for Senior
Chief Boatswain's Mate Terrell Horne III of Coast Guard Cutter
Halibut. Rep. Hahn, I want to thank you once again for being
there for that ceremony and speaking to his family. He was
killed by smugglers when they rammed his Coast Guard pursuit
boat near San Diego. Our commitment to the Nation and our duty
to honor the memory of SC Horne strengthens our resolve to
defeat these threats.
Unfortunately, much like the weather and the seas the Coast
Guard faces on a daily basis, the Coast Guard cannot control
the fiscal environment that we operate within. We will make the
very best use of the resources you provide to safely and
effectively conduct operations in areas of greatest risk to the
Nation, while recapitalizing our cutters, boats and aircraft to
address current and emerging threats, particularly in the
offshore environment.
The President's 2014 budget helps us to do that. This past
year we made great strides in recapitalizing the Coast Guard's
aging fleet. In October we'll christen the fourth National
Security Cutter. Number 5 is under construction and Number 6
will be under contract soon with the money in the 2013 budget.
To date, we have taken delivery of 5 Fast Response Cutters
with funding for another 19, and we have had the 14th of our HC
144 aircraft delivered. We have also contracted for the ninth
AC-130J and completed a midlife availability on our patrol
boats, and we are nearly complete with the midlife availability
on our Medium Endurance Cutters at the Coast Guard yard.
Despite these successes, we have a long way to go to
recapitalize the Coast Guard with ships, boats, and aircraft
the Nation needs. The Capital Investment Plan should inform
this discussion, and I look forward to getting it to you as
soon as possible.
As the Department of Defense rebalances to the Pacific and
our maritime activities increase in the Arctic, offshore demand
for Coast Guard capabilities is increasing. Our older, High
Endurance Cutters have served offshore for nearly 50 years;
but, as I have testified before, they are at the end of their
service lives.
I am very happy to report that I received the support of
the Secretary and the President on my highest acquisition
priority, including funding for the seventh National Security
Cutter in the 2014 budget. The 2014 budget sustains the most
critical frontline operations while funding our most critical
acquisition projects. In the current fiscal environment, this
required tough decisions informed by my highest priorities.
They were difficult decisions for me and for my Service,
but they were the best decisions to ensure we provide the next
generation of Coast Guardsmen the tools required to protect our
Nation. As I look back over the past year, I have never been
more convinced of the value your Coast Guard provides to the
Nation, and I have never been prouder of my Coast Guard people.
While realistic and mindful of the current fiscal
environment, I remain optimistic about the future of the Coast
Guard. And it is my duty to look beyond the annual budget cycle
and prepare and adapt the Service and keep moving it forward to
address the greatest maritime safety and security risk to the
Nation, not just now, but into the future. The men and women of
the Coast Guard give all for the sacrifices they make every
day, putting their country first, and we owe it to them to give
them our very best efforts to provide the support they need.
I want to thank this subcommittee for longstanding support
for the Coast Guard in recognizing the sacrifices of our
people; and, on behalf of my Coast Guard shipmates I say thank
you, and I look forward to answering your questions.
Mr. Hunter. Thank you, Commandant.
Master Chief Leavitt, you are now recognized.
Mr. Leavitt. Good afternoon, Mr. Chairman and distinguished
members of the subcommittee. It is an honor and a privilege to
appear before you today and to represent the dedicated men and
women of the United States Coast Guard who stand to watch every
day, always protecting and serving our Nation.
Coast Guardsmen are charged with maintaining operational
excellence across a very broad and diverse spectrum of
missions. They are standing the watch overseas, on the high
seas and our Nation's ports and waterways, and often in remote
coastal communities. They are saving lives, protecting property
and natural resources, conducting law enforcement, marking
navigational channels for shipping, breaking ice, performing
national defense missions, responding to national disasters and
humanitarian needs, performing environmental prevention and
response, building partnerships, internationally and locally,
and so much more.
As I begin my final year as a Master Chief Petty Officer of
the Coast Guard, I continue to be amazed by the dedication and
professionalism of our Coast Guard men and women and the
support they receive from their families. Coast Guardsmen
operate in some of the most challenging and unforgiving
environmental conditions imaginable. Performing missions and
conducting training in a maritime environment is inherently
dangerous. A stark reminder of this reality was the tragic loss
of the crew of our Coast Guard helo 6535 while they were
training to operational proficiency.
Last month the Coast Guard aircraft located a drug-
smuggling vessel 25 nautical miles off the Colombian coast. The
aircraft vectored in a nearby Coast Guard cutter, which
launched its helicopter to investigate. When the vessel tried
to escape, the helicopter used warning shots which compelled
them to stop. We boarded the vessel and prevented 2,000 pounds
of cocaine from ending up on our streets. This case is a
perfect example of how well-trained, equipped and proficient
crews continue to carry out Coast Guard missions.
Keeping illegal drugs out of our cities and towns is in our
Nation's best interest. We do this by interdicting drugs close
to the source at sea, where larger seizures are made with
greatest effect. However, our efforts are not without a cost.
As you have already heard, last December we lost one of our
shipmates, Senior Chief Terrell Horne, who had made the
ultimate sacrifice to the service of our Nation. His sacrifice
will never be forgotten.
That said, as leaders, we have responsibility to equip,
train and care for our workforce and their families. We face
challenges. The majority of our major cutters are over 40 years
old, some even reaching 50. There is a cost to maintaining old-
fleeted cutters, and that is not just in dollars. The new
assets that are requested in the 2014 budget, including the
seventh National Security Cutter, are safer, much more capable
and allow our crews to execute Coast Guard missions as
efficiently as possible. The Sentinel Class Fast Response
Cutters funded in previous budgets and requested in our 2014
budget are now in service, and performing extremely well.
I thank you for your continued support in helping the Coast
Guard recapitalize our aging cutters, despite the challenging
fiscal environment. Last year to my testimony I discussed some
of the challenges our Coast Guardsmen and their families face
in regards to adequate housing and childcare. We are truly
grateful for the housing enhancements made possible in the 2013
budget. These resources have helped to better support our
military members and their families, and the 2014 budget will
continue to do the same.
Providing adequate housing for our Coast Guardsmen and
their families remains a high priority. We recently completed
an assessment of all our housing across the Nation, including
Alaska, Hawaii and Puerto Rico. In this constrained fiscal
environment, we will leverage to find that assessment to ensure
funding is directed to those housing units that provide the
greatest benefit for active duty workforce and their families.
Additionally, with your support we are beginning to bridge the
gap with the DOD in regards to offering childcare services.
Since 2011 Coast Guard-sponsored childcare services have
increased by 27 percent. Mr. Chairman, members of the
committee, on behalf of the men and women of the United States
Coast Guard and their families, I thank you for your continued
support and I thank you for the opportunity to discuss some of
the highlights and challenges Coast Guard men and women face,
and I look forward to answering any questions you may have.
Mr. Hunter. Thank you, Master Chief.
Chairman Cordero.
Mr. Cordero. Mr. Chairman, Ranking Member, members of the
subcommittee, thank you for this opportunity to present the
President's fiscal year 2014 budget for the Federal Maritime
Commission. With me today are my fellow colleagues,
Commissioners Rebecca Dye, Michael Khouri and William Doyle.
Commissioner Lidinsky is unable to attend today due to a
prior medical commitment, but does send his best regards. With
the committee's permission, I would like to summarize my
testimony and request that my full statement be submitted as
part of the record.
The President's budget for the Federal Maritime Commission
provides $25 million for fiscal year 2014. This represents an
increase of $2,160,575 over the enacted post-sequestration
fiscal year 2013 appropriation, and funds 126 full-time
positions. Our fiscal year 2014 budget request contains
$18,478,000 for salaries and benefits to support the
Commission's programs. This figure includes funds for salaries
and benefits for 123 positions expected to be onboard by end of
fiscal year 2013.
It provides funding for three entry-level positions to
backfill some critical positions. Rent, salary and benefits
alone account for approximately 95 percent of our budget. The
Commission's budget represents the spending levels necessary to
conduct the Commission's basic operations, reduce regulatory
burdens and cultivate the regulatory system that furthers
competition, facilitates commerce and ensures reliable services
to U.S. exporters and importers.
The recovery in the U.S. liner trades that began 2 years
ago continued in 2012, but at a slower rate, with U.S.
container volumes increasing to a mere 3 percent to reach 29.8
million TEUs. With this increase, total container volumes now
surpass their 2007 rescission peak, and 2012 was a record year
for export volumes. The Commission continues to work diligently
to support the Nation's push to increase exports, the vast
majority of which travel to a port and by ocean. Ports are the
gateways that serve more than 80 percent of the volume of
international trade.
The Commission continues to work with Federal agencies on
projects aimed at better understanding and finding solutions to
supply chain bottlenecks that might negatively affect U.S.
exporters. One such project is the USDA's ``Ocean Shipping
Container Availability Report,'' also known as OSCAR. OSCAR
provides agriculture shippers with estimates of equipment
availability. A concern has been previously raised by this
committee.
The Commission has also developed a search tool, now
available on our Web site, that shows consumers where to find
licensed and bonded freight forwarders or nonvessel-operating
common carriers. The Commission analyzes the impacts of
industry innovations aimed at productivity, sustainability and
efficient use of resources, such as the use and control of
equipment used to move international ocean-going containers.
The Commission actively monitors the industry to watch for
canceled bookings, cargo rolled to the next sailing, and rapid
increases in rates and surcharges that are identified by
Commissioner Rebecca Dye who led Fact-Finding Investigation
Number 26 back in the year 2010. As a result of that fact-
finding, the Commission's Office of Consumer Affairs and
Dispute Resolution Services' Rapid Response Team still served
the industry to quickly and cost-effectively resolve shipping
disputes.
To reduce regulatory burdens, the Commission has expended
tariff exemptions and eliminated unnecessary recordkeeping
requirements. We are also reviewing regulations governing and
licensing and oversight of ocean transportation intermediaries,
the review of filed agreements and service contract filings.
The Commission will continue to engage with the shipping public
and the regulatory industry to explore through its
retrospective review of regulations, how it streamlines and
improves rules and regulations.
Earlier this year, the Commission increased the maximum
coverage requirement of large cruise lines for nonperformance
of wages from $15 million to $30 million per cruise line. At
the same time, the Commission said it would provide on a case
by case basis relief for smaller cruise ship operators by
allowing them to reduce their coverage requirements and
recognizing that there may be alternative options for financial
protection available to their customers.
In accordance with the mandate of Section 19 of the
Merchant Marine Act of 1920, the Foreign Shipping Practices Act
of 1988 and the Controller Carrier Act of 1978, the Commission
studies the maritime practices for our trading partners. Not
yet completed when the Commission last appeared before the
subcommittee, the Commission released in July of 2012 the
``Study of U.S. Inland Containerized Cargo Moving Through
Canadian and Mexican Seaports.''
Environmental sustainability concerns continue to play an
important role in the agreements and shipping practices the
Commission regulates. The Commission's internal Maritime
Environmental Committee, originally established in the year
2009 by my predecessor Chairman Lidinsky, studies environmental
initiatives in the industry and highlights innovations in this
area.
The Commission's Bureau of Enforcement, its area
representatives is located in key maritime corridors, and its
investigative staff continue to take action to thwart shipping
practices that are unfair and deceptive. Targeted violations
have included illegal or unfulfilled agreements among ocean
common carriers, unfair and fraudulent practices affecting
household goods shippers, and misdescription of cargo. These
violations affect not only shipping costs, but can also post
serious safety and security risks. In fiscal year 2012 the
Commission collected $838,000 in civil penalties per Shipping
Act violations.
The Commission-appropriated level of $24,100,000 for fiscal
year 2012 was subsequently reduced by $1,260,575 through
sequestration and rescission of an additional .2 percent. These
reductions have resulted in a fiscal year 2013 funding level of
$22,839,425, an amount roughly equal to the Commission's fiscal
year 2009 appropriation. As a very small regulatory agency with
an extremely lean budget, options to reduce costs,
substantially, without furloughing staff are limited.
As previously noted, salaries, benefits and rent account
approximately for 95 percent of the Commission's budget. As a
result, we estimate that FMC employees have approximately 10 to
14 furlough days. Unfortunately, the measures we have been
recently required to take will affect the Commission's ability
to oversee the shipping industry, resolve problems through
direct negotiations, monitor activities of regulated entities,
consult with foreign trading partners to ensure harmony in
international regulatory affairs, and expand compliance
oversight.
Mr. Chairman and members of the committee, I thank you for
your support and ongoing support of the Federal Maritime
Commission through the many years. It is an honor to appear
before the subcommittee, and I am happy to answer any questions
you may have. Thank you very much.
Mr. Hunter. Thank you, Chairman.
Administrator Matsuda, you are recognized for your
statement.
Mr. Matsuda. Good afternoon, Chairman Hunter, Ranking
Member Garamendi and members of the subcommittee. Thank you for
the opportunity to discuss the President's fiscal year 2014
budget priorities and initiatives for the Maritime
Administration.
I know, as the Commandant mentioned, all of us are thinking
of yesterday's events in Boston, and I would like to begin by
expressing on behalf of the men and women of the Maritime
Administration my most heartfelt condolences to those impacted
by this tragedy.
Our agency's programs help to ensure that the ocean
transportation services our Nation requires at a moment's
notice will be available to us when needed. The effectiveness
of these programs and the ability of the U.S. Merchant Marine
to respond quickly in a time of crisis were clearly
demonstrated during the response to Superstorm Sandy last year.
At the request of the Federal Emergency Management
Administration, we work with the Defense Department to deploy
the National Defense Reserve Fleet training ships Empire State
and Kennedy, along with Ready Reserve Force Vessel Wright, to
the New York region. Those three ships and their crews housed
and fed nearly a thousand emergency responders and relief
workers a night, providing warm beds, hot meals, and places to
recharge communications devices. This action saved the Federal
Government millions of dollars in hotel and per diem cost while
not taking up local accommodations needed for displaced
families. It is a great example of successful collaboration
among Federal agencies and highlights the effectiveness of both
our readiness programs and the U.S. Merchant Marine.
The President's budget request reflects our continued
commitment to the future of the industry, including educational
excellence at the U.S. Merchant Marine Academy. The Maritime
Administration has made significant progress over the past year
in shaping the course and direction of the academy, including
the appointment of new leadership and a new strategic plan.
This budget request will allow the academy to build upon this
progress by providing $81 million in funding. Of this amount,
$14 million is dedicated to capital improvements to continue
our efforts to create an enriching, educational environment.
In addition, the budget request continues Federal support
for State maritime academies. This includes funding for
maintenance and repair costs for training ships like the two
used in Superstorm Sandy response. The President's budget
request also recognizes the important role of a militarily
useful fleet and crews by proposing funding for the Maritime
Security Program. This program provides the Federal Government
assured access to a fleet of 60 militarily useful vessels,
intermodal networks throughout the world, and shipboard jobs
for 2,700 U.S. mariners.
Late last year a major milestone was reached when the
President signed into law legislation requested by the
Administration, effectively extending the program from 2015 to
the year 2025. This law helps provide long-term stability to a
militarily useful U.S.-flag fleet, and I thank the subcommittee
for supporting passage of that legislation.
In addition, the budget requests $25 million for a new
initiative aimed at mitigating the impact on sealift capacity
and mariner jobs resulting from proposed food aid program
reform. Should Congress approve this funding, the Maritime
Administration will work with stakeholders to best leverage
these resources to preserve U.S.-flag ships and mariner jobs.
The budget also supports our priority to develop America's
ports and marine highways. Included in this year's request is
$2 million in new funding for port infrastructure development.
Initially, we will target improvement of port planning
activities and propose to develop a pilot grant program to help
ports determine more effective investment strategies.
Finally, the President's budget request addresses pressing
environmental issues facing the maritime industry. It provides
$2 million to continue critical research to identify solutions
for better management of invasive species and ballast water,
energy use and air emissions. It also provides funding to
continue the steady and significant progress we have made in
removing and disposing of obsolete ships from the National
Defense Reserve Fleet. We are proud to report that the number
of nonretention ships is at a historic low, and we are nearly 2
years ahead of schedule in our cleanup of the Suisun Bay
Reserve Fleet in California.
Mr. Chairman, I look forward to working with the
subcommittee on advancing maritime transportation in the United
States and I am happy to respond to any questions you and the
members of the subcommittee might have. Thank you.
Mr. Hunter. Thank you, Administrator.
I will now recognize Members for questions, beginning with
myself. Admiral Papp, we are going to start on what I see as
the three biggest issues here in regards to funding.
Number one, the law requires that your Coast Guard provide
us a 5-year Capital Improvement Plan in conjunction with the
President's budget. We have not received that. Capital
Investment Plan--excuse me. Is it investment or improvement? I
have both written down. I could ask you or the staff up here,
because somebody is.
Improvement plan--Capital Improvement Plan that was made in
law in 2012--why haven't we received it?
Admiral Papp. Sir, I am just as unhappy that you don't have
it in your hands, because the Capital Improvement Plan helps to
inform the discussion on what we are purchasing this year and
how that fits into the overall picture going into the out
years. So I would prefer to have that here. It is currently
being reviewed by the Administration; and, based on a hearing
we had this morning, we contacted the Department of Homeland
Security and they said it would be delivered to the Congress on
the 1st of May.
Mr. Hunter. How could a 42-percent cut over your
acquisitions account be made while not having a Capital
Improvement Plan or to plan out why those cuts would be made,
and what you can do with those cuts?
Admiral Papp. Well, sir, that's----
Mr. Hunter. Clearly, no one else has done, and how do you
get the 42 percent?
Admiral Papp. Right. Being mindful of the situation we find
ourselves in in this fiscal environment, we had to make some
very tough decisions based upon the money that was available
and make decisions based upon our highest priorities. The
highest priority for me is getting our offshore fleet
completed. The National Security Cutter is a large part of
that.
Once that decision is made and supported in the budget,
then the top line figure determines how much of everything else
we can buy. This pushes everything to the right. It increases
the price, because we are not able to order an economic
quantity numbers, and delays the implementation of our fleet
plan that we started out on a number of years ago.
The other thing it does is it increases the soft,
significantly, of maintaining the current assets, the old ships
that are out there, those that are 25, 30, and up to 50 years
old. The maintenance costs on them never go down. They continue
to increase and take a larger bite out of our operating funds.
Our operating funds, if you look at them superficially, remain
fairly stable, but the costs within there, whether it's pay
raises or increased maintenance on antiquated, obsolete
equipment, continues to erode the buying power of those
operating funds.
Mr. Hunter. So there is no maintenance offset in the
President's budget to make up for the cutting of your
acquisition account?
Admiral Papp. No, sir. Within our operating funds we need
to make sacrifices in other areas in order to be able to pay
for the increased maintenance costs.
Mr. Hunter. So let me ask you this, then. Why do you think
that the Administration basically canceled the Coast Guard's
acquisition program with this budget?
Admiral Papp. Well, the entire program is not canceled. We
are continuing; but, as I said, National Security Cutter is a
big one.
Mr. Hunter. I am being a little bit facetious.
Admiral Papp. Right.
Mr. Hunter. It is a 42-percent cut. That's a pretty big
cut.
Admiral Papp. I have no insight onto why that number was
established. I gave my requirements. It's a negotiation
process, and at the end of the day I am giving a top line that
I have to live within, and hopefully my priorities are
reflected within that. National Security Cutter is a priority,
because we need to get those eight ships constructed.
Fast Response Cutter is another high priority, because our
patrol boats are failing; but, given the room in the budget
that was left over after fitting in the National Security
Cutter and other priorities, we were limited to two Fast
Response Cutters in that budget. Another one is our aircraft
program. These are tough decisions. We completed ordering 18 of
our AC-144 aircraft, our medium-range, fixed-wing aircraft. We
are taking a pause on that.
Mr. Hunter. Those Air Force C-27s are looking pretty good
right now.
Admiral Papp. Absolutely, yes, sir, and we are in
negotiations to see what we can do, because that would save us
a lot of upfront costs and I think provide us with a very
capable aircraft into the future. But with the way the language
was written in the Defense Authorization Bill, there's a split
of those aircraft between the Forest Service and the Coast
Guard.
We are working with the Forest Service right now to see how
we determine this, because, obviously, you have to have a
certain number of aircraft to make it economically feasible to
operate with your logistics program and training programs.
Mr. Hunter. Last question. So this is just looking forward
with this budget. Let's say that everything stays where it is.
What are you going to have to cut back on in the coming years
in order to move the money from operations to maintenance to
take care of the older ships that you would have decommissioned
upon getting newer ships? What is going to happen in the next
year? In what way is your capability and your ability to reach
out and touch throughout the oceans? How is it going to be
limited?
Admiral Papp. Well, sir, you mentioned in your opening
statement the fact that there are personnel losses. We could
probably quibble over the numbers, but just as importantly as
maintaining and getting the new equipment is sustaining our
workforce. Our uniform personnel, just shy of 42,000, are at
the level the Coast Guard was in 1990.
During the 1990s, we got reduced down to 36,000 people in
uniform and it was almost impossible for us to carry out our
missions and do proper support for our training capabilities
and everything else. It is nearly as high a priority for me as
the new equipment to maintain that workforce, and we are doing
everything we can to keep as many people as we can, because we
depend upon our military and civilian workforce to work as a
team to get the job done.
On the personnel side, I would have to use a term that was
used by somebody else, that we are probably at the tipping
point. I think we have whittled away enough on our personnel
that now we're going to start eating into training programs. We
are reducing the numbers of officers or cadets, potential
officers coming into the Coast Guard Academy. We have reduced
our input at Cape May to 1500 people this year.
As far as I know, that is the lowest we have ever brought
into our training center at Cape May since World War II. And,
commensurately, we have to reduce training staffs along the way
as well. These have long-term impacts for us that would be
difficult to recover from. Incrementally, we can make due, but
as you accumulate them over the years as we have seen over the
last couple of budget cycles with personnel, it will have a
longstanding impact for us.
Mr. Hunter. Thank you, Admiral. And, before I recognize the
ranking member, I would like to throw one thing out there.
We would like to say that Congress did this, and we blamed
this on sequester. And we would like to say that this fiscal
environment that we find ourselves in, but from 2001 to 2006,
the Coast Guard had some problems with its acquisitions
program. It is questionable how much money just kind of went
down the hole. You can say it is roughly $300 million just went
away.
And I think this committee and your leadership and others
are responsible for getting that out of the trenches, again,
that acquisition system back onboard. So it is a lot of
people's problem we find ourselves right now, but it is not
solely that of Congress. I just want to say that, and with that
I recognize Ranking Member Mr. Garamendi.
Mr. Garamendi. Thank you, Chairman Hunter.
Admiral Papp, Chairman Hunter went through a series of
questions about the acquisition programs. I am sure that he and
I and the members of this committee will do whatever we can to
try to restore as much money as possible to the Coast Guard
overall account. It would be helpful to us--well, before I go
there, I think it is unlikely that we are going to see
restoration of the full authorization.
For example, in acquisition construction improvement, you
are authorized at $1\1/2\ billion; you are down to $909 million
right now. Assuming we have any success of restoring money for
the Coast Guard from the President's budget increase, it would
be helpful for us to know your priorities. If we were able to
get $1 back, where would you spend it?
If we were able to get $100 million back, where would you
spend it? So, if you could, share with us that information,
probably not today, but in the near future so that our efforts
can be targeted.
Admiral Papp. Well, I would be happy to address at least a
large portion of that, sir. First of all, last year when we
sent up the Capital Improvement Plan, there was no National
Security Cutter Number 7 in it for the 2014 budget; none for
National Security Cutter Number 8 in a subsequent budget. So I
am grateful for the fact that we now have the money for
National Security Cutter Number 7 in the budget.
That was helped, quite frankly, last year by both the House
and the Senate providing long lead money for Number 7. Getting
long lead money in the construction of the National Security
Cutter saves us money in the long run; gives the shipyard
predictability, so they can plan out economically; and helps us
in our negotiating position when we work towards the contract
on the next cutter, after that, of course, the Fast Response
Cutter.
The shipyard is set up to construct six or receive orders
for six Fast Response Cutters a year. We only had money for two
last year. We are grateful that Congress put money for four
more, so that we are potentially able to order six in fiscal
year 2013. But, as it stands now, I only have enough money left
within our acquisition counts to offer up two.
The next dollars I would spend would be on the Fast
Response Cutter, because ordering two per year, first of all,
is below the minimum quantity. We'd have to renegotiate the
contract, which ultimately ends up in a higher cost, building
them at a slower rate and stretches out that program, probably,
over the course of about 15 years at a much higher cost as our
current patrol boat fleet is failing us rapidly and we are not
getting the number of hours we need out of them. So, continuing
construction on the National Security Cutter and the Fast
Response Cutters are my next highest priorities.
Mr. Garamendi. Well, if you could assign dollar numbers to
each of those programs so that, certainly, for me, and I
suspect the chair also, would then have specific numbers to go
to the Appropriations Committee and try to alter the
President's budget.
So, that would be useful. And then just your ranking; start
with your highest ranked number of dollars, and then all the
way down to the lowest so that your full authorization is
complete.
Admiral Papp. Yes, sir. We will be happy to provide that
for the record.
[The information follows:]
The Coast Guard and Maritime Transportation Act of 2012
(P.L. 112-213) requires the submission of a Report
containing the Coast Guard's Capital Investment Plan
and a list of each unfunded priority for the Coast
Guard. This product has been drafted and is with the
Administration for review.
Mr. Garamendi. And I'm sure we will go to bat for that and
see if we can make some progress and restore some of the cuts
that are in the President's budget. Personnel on the other side
of it also, if you would take a look at that, so that we have
some sense of what might be possible, so that we know what we
can work on.
I do have a couple of other questions. I am concerned
about, Mr. Matsuda--excuse me. This would be for Mr. Cordero.
I'll get my act together here in a moment. The Title XI loan
program is not funded. So what is your mission? How do you
carry out your mission of providing support for the maritime
industry? Title XI is not covered, so what are we doing here?
Mr. Matsuda. I would be happy to answer that, sir.
Currently, the Maritime Administration possesses $38
million in carryover funding from previous years for the Title
XI program. So the Administration did request funding to
continue the program, continue to monitor the portfolio $2
billion worth of shipbuilding projects that we are overseeing.
We will continue to process applications as they come in.
Mr. Garamendi. So you have money from previous
appropriations that have not yet been encumbered.
Mr. Matsuda. We do. We have enough to fund $420 million
worth of shipbuilding projects. I will point out that there are
other shipbuilding incentive programs that contain up to close
to $3 billion worth of tax-protected funds that could be used
by the private sector to build ships in the U.S.
Mr. Garamendi. Thank you. The food program, 480 program,
the chairman mentioned, this is his concern. I share that
concern. I also come at this from a different perspective, and
that is the availability of food in those parts of the world
where there is hunger. And the proposal by the Administration
is essentially one of purchasing food regionally rather than
using American commodities and on American ships to be
delivered to those areas.
I don't think it works. I've been at this for 40 years, and
I don't think it works. I am trying to figure out where the
regional food purchasing is available. Presumably, there is a
shortage of food in that area, so what is the region. Do you
have any idea when they say ``region'' what is a region?
Mr. Matsuda. Well, I'm probably not in the best position to
get into the specifics of the proposal. I can tell you that
there will be an impact to the maritime industry, and we do
include funding in the budget proposal to help address any
potential loss of ships, the U.S. flag or mariners to the
mariner pool.
Mr. Garamendi. Yeah. But the proposal puts that entire
industry on a downhill slope to the point where it won't exist,
because the program doesn't exist upon which it is based.
Mr. Matsuda. Well, the program in 2014 would. The proposal
would cut it to 55 percent of the current funding level, so
there would be some U.S.-sourced food as well as flexibility
for other ways to implement those programs.
Mr. Garamendi. And then beyond? And the succeeding years?
Mr. Matsuda. Well, the current proposal addresses fiscal
year 2014.
Mr. Garamendi. Well, it is kind of like a short-term
unemployment insurance program with no job in the future.
Mr. Matsuda. Well, I know that my colleagues in the
Administration are certainly anxious to talk more about the
specifics, especially with those that administer the food aid
programs, to convey the details about the local purchasing part
of the program.
Mr. Garamendi. So, for me, there are two parts to this, two
problems that have been presented by the Administration. First,
the availability of food within a region where there is hunger
and the impact that this might have in that area, or the
unavailability of that food; and, secondly, the impact within
the United States, both in agriculture as well as in shipping.
These are questions that I have not yet received answers to
from the Administration, and I await those answers.
Mr. Chairman, there are about a thousand other questions,
but I will yield back at this point.
Mr. Hunter. Thank the gentleman.
Mr. LoBiondo is recognized.
Mr. LoBiondo. Thank you, Mr. Chairman.
I want to join in with the chorus and express my strong
opposition to the proposed cuts in the President's budget for
the Coast Guard. And, as you mentioned, Mr. Chairman, a 43-
percent cut in Coast Guard acquisition account, it is just
wrong. It is just absolutely wrong. I mean we haven't learned
our lessons in the past, and can blame this on sequestration,
if you want. But this is the second year in a row the President
is separated from the reality of what the Coast Guard is
expected to do.
The budget also includes heavy cuts in training. Admiral
Papp, you talked about this for a minute. The only Coast Guard
recruit training center in the Nation happens to be in my
district, and I am pretty proud of it. The work that's being
done there, it's scaled back to 1500 a year. The intangible is
what it is going to do to morale. The intangible is what it is
going to do to our officer corps. The intangible is what it is
going to do to the ranks of the Coast Guard.
The immediate is what these cuts are going to mean to
satisfy the needs of the Coast Guard, but it is just wrong.
And, as noted out by the chairman and ranking member, the
Administration's decision to restructure the Food for Peace
Program, I think is, again, absolutely wrong. These are
American jobs that will be lost. This is American capacity that
will be lost; and, again, it is a separation from the reality
of a program that really works.
I have a couple questions, Administrator Matsuda. The
fiscal year 2009 NDAA Bill contained language authorizing MarAd
to draft long-sought regulations that would provide the agency
with enforcement authority over cargo preference laws,
including fines and debarment. The bill was signed into law in
2008, yet 4\1/2\ years later, despite repeated promptings,
urgings, cajolings, these regulations still have not been
promulgated.
With a pool of available preference cargoes in rapid
decline for a number of various reasons, cargo preference laws
are more important than ever and will help ensure the U.S.-
flagged industry as being utilized as required by law. What is
the status of this and what's been the holdup, and what can we
expect?
Mr. Matsuda. Well, we continue to work within the
Administration to try and get that rulemaking into place. In
the meantime, we try to address the problem of working with the
specific agencies that have either historically or had reported
problems in getting compliance with the cargo preference laws.
But, in any event, we are fully pursuing both the rulemaking
and any action we can take to try and gain full compliance. In
many cases, we found it is simply a matter of education, that
the staff of other agencies just either were unfamiliar with
the law or the folks making the sourcing decisions.
Mr. LoBiondo. Is the rulemaking at OMB or MarAd?
Mr. Matsuda. Currently, we are developing it.
Mr. LoBiondo. Well, you know, I have got to say, Mr.
Chairman, I don't know. You know. Years and years, and we are
at a critical juncture now. I mean, at a certain point, if you
are on this side of the table--you are anybody in the real
world--you say, the bureaucracy is wagging the dog here. I mean
any prospect 2 months, 6 months, 6 years?
Mr. Matsuda. I couldn't say. I can tell you it is a top
priority for the Maritime Administration.
Mr. LoBiondo. Oh. With all due respect, Mr. Chairman, I
think that is an unacceptable answer.
For the Commandant, my question is the Air Force recently
made available 21, brand new, C-27 J cargo transport planes as
excess defense articles. Could these aircraft fill any near or
long-term capacity shortfalls in the Coast Guard's ability for
airlift? And, if so, have you informed the Secretary of Defense
of the Coast Guard's interest in receiving these aircraft?
Admiral Papp. Yes, sir. They will definitely fill a need.
They will be a great replacement for additional AC-144s that we
would have to buy brand new; and, frankly, they are such a
capable aircraft that we can probably replace some of our C-
130s, the older C-130H models, with C-27s.
I have not spoken directly to the Secretary of Defense, but
I have spoken to the Chief of Staff of the Air Force and the
Secretary of the Air Force. They are well aware of our desire
for those aircraft and support that; but the current
legislation requires a split of those aircraft between us and
the Forest Service. 14 is the minimum number that would make
economic sense, because we have to outfit multiple air
stations. We need at least 14 to do multiple air stations and
have some for our product line in maintenance at Elizabeth
City.
We would love to get all 21 of those aircraft, because that
would be not only a superb aircraft, but would allow us to do
more air stations in outfitting them. So we will continue to
work with them.
Mr. LoBiondo. Thank you.
And that's it, Mr. Chairman, except I hope that we can talk
further with you and any interested members of the subcommittee
of how almost 5 years later we can't get these rules
promulgated. I think that is just inexcusable.
I yield back.
Mr. Hunter. I thank the former chairman of the
subcommittee. Ms. Hahn is recognized for 5 minutes.
Ms. Hahn. Thank you, Mr. Chairman, Ranking Member Garamendi
for convening this very important hearing today focused on the
President's budget.
I want to thank all the distinguished guests for appearing
before us today, Administrator Matsuda, and again my thanks to
you for graciously coming out to Los Angeles/Long Beach, having
a meeting in my office with the stakeholders at the port so
that they could share with you some of their concerns about the
future of that port complex. And, of course, I always want to
say hello to my friend, Hon. Mario Cordero, and congratulate
you on your appointment as chairman of the Federal Maritime
Commission.
And, Admiral Papp, thanks again for--you know--always
remembering our Senior Chief Petty Officer Horne. Every time we
get together we should remember him. And if there was any
silver lining to his tragic death, it was maybe Americans began
to really see what the Coast Guard actually does day in and day
out and the danger that they experience. You have for so long
done your jobs with strength and dignity, but sometimes
quietly, just doing what you're supposed to do. But I think his
death brought it to light, really, the dangers, particularly
since 9/11, what we are facing out there.
So I represent the Port of Los Angeles and next door in
Long Beach we represent probably the largest port complex.
Well, we do in the country, and really in the world. And so one
of my priorities is, of course, to keep that complex running
safely and efficiently, and without disruption. So I do not
know if I am misinformed, but I was told that we actually have
no plan moving forward from either the TSA or the Coast Guard
to prepare for the nearly 60,000 port workers who will need to
renew their TWIC badges this year.
I met last week with the director of security for the Port
of Long Beach, and he stated that he is concerned that this
event, the renewal of these badges, has the potential to
completely shut down the entire Port complex. Longshoremen
would not be able to load goods onto the ships; truckers would
not be able to access the port to ship their goods, and the
port responsible for moving over 40 percent of our Nation's
goods could be shut down.
And I know there is a grace period for expiring TWIC cards,
which I think is about 37 days, which is not nearly long enough
to accommodate all of the workers at the port the size of the
L.A. and Long Beach, and I know that TSA is responsible for
implementing the program. But the Coast Guard has told me that
they're responsible for enforcing the program. So my question
to you is what does the Coast Guard expect to do when possibly
60,000 port workers try to access the port with expired TWIC
cards this year?
Admiral Papp. Ma'am, you have caught me cold on that one.
Frankly, I am not aware of that problem, and TWIC is of
significant interest to me as might be expected.
Wherever I travel and I run into a transportation worker, I
ask them, and I ask them about the process and how easy or
difficult it is to get it. I was in the Rhode Island Airport
just last Saturday night coming back here, and I was listening
to a couple of merchant mariners talking about how easy it was
for them to get their TWIC card the last time. So, all the
feedback I've had in terms of getting the cards has been
positive. I am not aware of this particular situation. I will
find out about it immediately; and, if you don't mind, will
provide you the information.
Ms. Hahn. Good. Great. And, I don't know, David or Mario,
if you are aware of this potential problem of all the cards or
many of the cards expiring at the same time and the ability for
us to actually process that. And, again, what do we do when
they show up and they've got expired cards? What are we going
to do?
And, Admiral Papp, I appreciate you kind of not being aware
about this. I wasn't either until it was brought to my
attention last week. But I thought since I had you here and we
were talking about the budget, it might be a good opportunity
to tell you that I think it is a problem, and I think we better
figure out what we are going to do.
Admiral Papp. Yes, ma'am. One thing though is if they have
a TWIC and if we are aware of this problem, a solution can be
found, because part of the beauty of TWIC is having one,
identifiable card across the entire industry that we can use
instead of multiple ones. So it makes it much easier if there
is a problem to come up with a unified position that we can
take to either accept those cards, and know that even though
the date might be expired that we continue to use it for some
certain period of time until it is resolved. But, once again, I
don't have the detail. So we'll have to get back to you.
[The information follows:]
(1) TSA is responsible for processing TWIC
applications, vetting the applicants, issuing the
cards, and associated administrative functions.
The Coast Guard and TSA encourage TWIC holders to begin
their TWIC renewal or application for an Extended
Expiration Date (EED) TWIC from up to 4 months prior to
the expiration of their current TWIC to ensure timely
processing.
(2) Coast Guard regulations grant an individual up to 7
days of unescorted access without a TWIC while they
await delivery of a replacement credential. To minimize
business disruptions, the Coast Guard also developed a
policy which allows owner/operators of MTSA regulated
vessels, facilities, and OCS facilities to extend this
provision an additional 30 days (37 days total), for
workers who have applied for a TWIC renewal prior to
its expiration, and through no fault of their own, are
not able to take possession of their TWIC due to a
significant delay in the application, production,
issuance, and/or activation process.
The Coast Guard will continue to consider and evaluate
the impact and effectiveness of this policy to meet
challenges while ensuring a secure and reliable TWIC
program. To date the Coast Guard is not aware of any
facility that has had to shut down operations due to
workers being unable to obtain replacement TWICs.
Ms. Hahn. Great. Well, when you come up with a plan, let me
know.
Admiral Papp. Yes, ma'am.
Ms. Hahn. Thank you. Thank you, Mr. Chairman.
Mr. Hunter. Thank the gentlelady, and just some information
I didn't know this either. TSA has--you can get a 3-year
extension while you are waiting for the readers for the badges
right now. They are trying to do that. If there is no reader
and you don't have the badge for the reader, you can get an
extension.
So, now, we all know that, at least we can go from there.
With that, Mr. Southerland is recognized for 5 minutes.
Mr. Southerland. Thank you, Mr. Chairman.
I would like to thank each of you for being here today. As
I listen to the discussion regarding the budget, I try to keep
everything in context. And I know it is clear you are
performing a constitutional requirement of Government to
provide for the security. You do that. You do that well and I
am bothered, as other Members have expressed today.
I am bothered by the disproportionate cuts that you seem to
take regarding the overall budget, but also in acquisition, the
42. As a business owner, 42 percent is I think unreasonable. I
know in the last year we have heard a lot of people say that a
1.3-percent cut to food stamps is cruel, and when food stamps
have increased 50 percent in the last 4 years. The 2-percent
sequestration, we have heard that characterized; but, a 42-
percent cut, I don't know anyone who thinks that that is--well,
no one here today thinks that is proper.
I couldn't help, Admiral, you had mentioned over the last
few moments, you mentioned forestry several times. I happened
to sit in a forestry hearing last week, because I serve on the
Natural Resources Committee. You can understand. When I hear
that 42 percent cut in acquisition, you can imagine what is
going through my mind when I recall that hearing last week when
the Forestry Service came to us and asked for in the
President's budget a 58-percent increase in land acquisition.
So when we are talking about really understanding the
budget in its entirety, when we see that part of the
President's budget is asking for this massive increase to buy
more land, they already own 12 million acres in the United
States; and, yet, you have a constitutional responsibility to
provide for the security of this country. You can imagine my
bewilderment at the consistency here.
How do you come to that conclusion? I don't understand
that. And so I am bothered that we are looking at such--really,
draconian is the word that seems to be used up here oftentimes.
But when you are talking about a 42-percent cut in acquisition
for a constitutionally mandated program, and then we are
looking at a 58-percent increase in land that we can't even
manage now, and we are asking for more. And to whom much is
given, much is expected. I am just curious.
I mean, in any of your careers have you known a 42-percent
cut in a department? Mr. Matsuda?
Mr. Matsuda. You know. I have been in Washington about a
decade or more. I have seen quite a bit. You know.
Mr. Southerland. I know that is an unfair question and I
hate that I even have to ask it. I hate that I am even put in
the position to have to ask you that, but that just seems to me
to be an outlier. It just seems to be--you know. And, look. I
am a fiscal hawk. OK? But I do believe as a business owner in
gradual phasing in and phasing out, and this just seems to be
off the chart. And I can't help but focus on it.
Again, I don't want to put any of you in a bad situation,
but, so why don't we just leave this as a comment and not a
question. I think you all, probably all four, would like that.
Let me ask you a quick question, Mr. Matsuda, on the small
shipyards. In your experience, since you've been here, has this
program over the years had job producing effects to our
domestic shipyards? And if someone asked you that question
before, I apologize. I may not have heard it.
Mr. Matsuda. This is a good program. We have administered
the $9.5 million that was provided by Congress for this year.
It is currently out there. We are receiving applications for
this round, but the past several rounds, including the Recovery
Act amount of $98 million, we continue to administer all of
these grants around the country. They are to help modernize our
shipyards with new equipment, with training programs for the
workers; and what I have seen is that they tend to have longer
term impacts where there are really investments in the long-
term competitiveness of our small shipyards.
Mr. Southerland. OK. So that is obviously good for jobs and
makes us far more competitive as we compete in this global
market.
Mr. Matsuda. Yes.
Mr. Southerland. Great. Thank you.
My time has expired, Mr. Chairman. I yield back.
Mr. Hunter. Thank the gentleman.
Mr. Larsen is recognized.
Mr. Larsen. Thank you, Mr. Chairman.
Mr. Matsuda, the answer to the last question is yes,
especially in places like my district. But with regard to the
Jones Act, the committee enacted a part of the Coast Guard
Authorization Bill, a provision designed to encourage the use
of U.S. flight vessels prior to issuance of administrative
waivers of the Jones Act.
First, have any Jones Act waivers been requested or
approved since the enactment of the new law, and are any being
contemplated by the Administration?
Mr. Matsuda. Sir, as you know, the Customs and Border
Protection is the agency that administers the waivers of the
Jones Act at this time. I am not aware of anybody seeking any
waivers. I do know that a waiver was sought after Superstorm
Sandy hit in order to allow additional fuel shipments to be
brought in to the Northeast, and we worked with the U.S.-flag
industry to try to find available vessels, first and foremost,
which is always our priority. And, secondly, when a waiver was
requested and issued, we worked with the Customs and Border
Protection to include a reporting requirement so that we could
see exactly which foreign-flag ships were carrying what, when
and where, and that made a big difference in being able to
administer those waivers and enforce them, and fully assess the
need for any future ones.
Mr. Larsen. Mr. Cordero, can you explain a little better
what FMC is doing independently of other Federal agencies to
increase exports in the U.S.?
Mr. Cordero. Thank you for your question, Congressman. As I
indicated in my opening statement, that is a priority. We are
working with other agencies to work on that question. As an
example, with USDA, I mentioned the OSCAR program with regard
to our in-house agency issues.
With regard to that, we are trying to make the whole export
process easier when it comes to the bureaucracy, as an example,
the paperwork related to negotiated rate agreements that we
just passed; and, also address specifically the question of
container availability. As you know, the FMC, a few years back,
addressed that issue. And as I mentioned Commissioner Rebecca
Dye's fact-finding study in effect was relevant to the
availability issue, which of course is a big question when it
relates to our exports and to make sure that we have an
efficient export transportation process.
Mr. Larsen. All right. Thanks.
Admiral Papp, last year the Coast Guard requested $8
million for survey design activities for a new icebreaking
fleet. This year they request $2 million. Can you give me a
little insight into why there is less money being requested
this year? And would you characterize that as a step back from
the commitment to developing icebreakers?
Admiral Papp. No, sir. It signals increased commitment. The
fact of the matter is we tried to exercise some good
stewardship as we were going through the protracted, continued
resolution; and, we were not able to execute on a new project.
Of course, we are halfway into the year by the time we got an
approved budget. So, looking at carrying over some of that $8
million in the 2013 budget into 2014, and combined with the $2
million allows us to continue our work.
I don't think it will result in much of a setback, but we
are formally committed to getting this new icebreaker built;
and, as I said, I would have hoped that the CIP would have been
up here so that we could look at projections. But as we go into
the out years, there will be sequential funding to take us
through, probably, a 10-year period until we have that new
icebreaker produced.
Mr. Larsen. Right. We will look at the CIP when it gets up
here then on that question.
With regards to the business case analysis that we had
asked for in the Authorization Bill regarding reactivating the
Polar Sea, where are you and is the Coast Guard engaged with
shipbuilders to determine what the cost for reactivation would
be?
Admiral Papp. I have not received a report on that
recently, but I am anxious to get that report. If you will,
sir, I can provide response for the record. We are continuing
along, working on that study, and anxious to get that
completed. And I believe we have to work with industry, because
they give us the estimates. A bigger shipyard, in particular,
has just worked on Polar Star and got her put back into shape.
They have got good experience with it, and I will give you a
better projection when I have a chance to check up on it.
Mr. Larsen. Well, if you would take that, for the record, I
would appreciate it. I am eager for the report. In about 2
months I will be anxious for it.
Admiral Papp. Yes, sir.
[The information follows:]
The Coast Guard and Maritime Transportation Act of 2012
(P.L. 112-213) requires the submission of a Report
containing the CGC Polar Sea Business Case Analysis no
later than September 9, 2013. The Coast Guard is on
schedule to meet this congressionally set deadline.
Mr. Larsen. And then, finally, the OPC, continued
development of the OPC is in the budget. I see $25 million for
the Offshore Patrol Cutter?
Admiral Papp. Yes, sir. And that should not be interpreted
as diminishing in commitment either. We just, once again,
looking at how do we get the most out of our acquisition money
coming into this year. We looked at unspent accounts that we
can carry over and continue the process going.
I am very pleased. I don't know for sure how many responses
we got, because I am not supposed to as we are in the
acquisition process. But I am told it is somewhere between 8
and 12, which is a robust response for our request for
proposal. We will have those down-selected to the final three
best candidates by the end of this year; and, then, once we
have the detailed designs on all three of those, we will make
our down-selection in fiscal year 2015 and then be off to the
races, hopefully, with counted on funding to get that ship
construction.
Mr. Larsen. Just to clarify, that will be end of calendar
year or end of fiscal year?
Admiral Papp. Fiscal year.
Mr. Larsen. Fiscal year.
Admiral Papp. Yes, sir.
Mr. Larsen. Thank you, Mr. Chairman.
Mr. Hunter. The gentleman, a former chairman of the full
committee is now recognized, Mr. Young.
Mr. Young. Thank you, Mr. Chairman.
First, I would like to remind everybody it is the
President's budget, but we write the budget, and I want
everybody to remember that. And this cut is dramatic and I just
want to know that I don't support it.
Mr. Cordero, according to published reports, morale at the
FMC has fallen dramatically. This is your second week as the
chairman. You may not know it, but what change will you make at
the Commission headquarters to address the concerns of
employees at the Commission to make them feel supported by your
office?
Mr. Cordero. Thank you, Congressman. I appreciate your
question.
First and foremost, that is a high priority for us. And to
answer your question in terms of specific actions taken, just
last week we had an all-hands meeting at the agency. And I
communicated to the personnel that this question is a priority
for the Commission.
Going forward, we do have a plan of action to address that
issue. I will say, some employees feel that they are not
empowered, they are not valued. Here, I am referring to the
employees' survey, but I can assure you and I can assure this
committee this is a priority for the Commission, and we are
addressing the issue.
Mr. Young. Good answer, and I appreciate it. And keep us
informed of progress.
Mr. Cordero. Thank you, Congressman, and I appreciate the
question.
Mr. Young. Admiral, I understand this morning you told the
Appropriations Committee that you would reconsider the
requirement for the Offshore Patrol Cutter and reopen the
design competition. If that is correct, how long will this
delay construction of much of the needed cutters? I mean what
will happen?
Admiral Papp. Sir, that wasn't quite an accurate report. I
said that we remain committed to the Offshore Patrol Cutter,
and I was asked if the ability to operate in sea state 5 was
hard and fast. And I said, ``The highest requirement for the
Offshore Patrol Cutter is affordability.'' And, as we evaluate
the candidate vessels, we may need to go back and look at some
of the requirements. I am hopeful that we don't have to.
I think we hammered out these requirements, in fact reduced
some of them when I came to this Commandant, because I want to
make sure this ship is affordable. And I have reported to this
subcommittee and other subcommittees that we are intent on
making this an affordable ship for the Coast Guard.
If we had opened it up to revise the seakeeping capability,
there probably would be a delay, but I have no intent to open
that up at this point. We have to evaluate all the candidates
that we have, and I am hopeful that we will find three
candidates that look affordable, because we are going to need
to operate this ship in Alaska, and it is going to need to be
able to launch and recover boats and aircraft while operating
in the Bering Sea.
Mr. Young. Speaking of affordability, when we built the
three icebreakers, I found out--and you can correct me if not--
a lot of times when something would break on the vessel because
of the requirement of buying the cheapest product, sometimes,
you have to buy inferior product to repair something in the
engine room or something like that. That is correct?
Admiral Papp. I have no knowledge on that.
Mr. Young. Could you find out this, because I understood
that one of the reasons those ships have been such a pain in
the neck--and they were good ships when they were built, but
things wore out. When you put onto purchase, a procurement
program, you are required, I think by law, to buy the cheapest
product that is offered to fill the spot. That's in case you've
got a bastardized ship. So you check that out for me and get
back to me.
Admiral Papp. Yes, sir. We will provide that to you for the
record.
[The information follows:]
The Polar Class icebreakers are unique, highly complex
vessels that operate in the most arduous maritime
environment in the world. They are designed to
continuously transit through ice up to 6 feet thick and
to break through up to 21 feet of ice by backing and
ramming. The Polar Class icebreakers are inherently
maintenance-intensive due to their design and mission
profile; not due to the purchase of inferior parts and
services.
All parts and services for Polar Class icebreakers have
been purchased in accordance with the requirements of
the Federal Acquisition Regulations. These regulations
do not limit contract awards solely to the lowest
bidder, but allow for a best value determination.
Improvements to reliability, both large and small, have
been pursued throughout the 30-year design service
lives of these vessels, culminating in the recent
completion of the reactivation of USCGC Polar Star
(WAGB 10). This 3-year project included numerous major
system upgrades that specifically targeted low
reliability/high-cost-to-repair systems for renewal.
The Coast Guard's challenge is to effectively maintain
these aged vessels beyond their design service lives
when the original vendors for many shipboard systems
have long been out of business. In some cases, the
existing technical documentation may not allow a new
vendor to reverse engineer obsolete components. When
reverse engineering is possible, there are long lead
times and high production costs associated with these
custom fabrication projects.
Mr. Young. Forest Service, I happen to agree with the
gentleman, Mr. Southerland. I will do everything in my power to
make sure you get those airplanes.
Mr. Chairman, I want you to remember this is the right way
to go. The Forest Service is a lousy agency right now. They are
not doing anything but playing with themselves. They don't do
anything, and they want 12\1/2\ million acres of what? And I'm
saying this is wrong. You need these. So we can get them to
you.
And I think we ought to pressure the appropriate committees
and Appropriations Committee to make sure that the Coast Guard
gets these aircraft instead of the Forest Service. They are
letting their timber burn. They have burned 9,600,000 acres of
trees last year, and if you add that up, it's over 900 million
barrels of oil, because there is 100 barrels of volatility on
each acre. And they say they are managing.
They are not managing; and, trying to put out fires, where
if they would let us log and cut it, it would be all right and
get it done. But I just wanted you to know I feel pretty
strongly about it. Are you up to speed as far as the Coast
Guard reimbursement because of the rise in spill? Are you
pretty much working with the BP or whoever is involved here?
Admiral Papp. For the Deepwater Horizon?
Mr. Young. Yes.
Admiral Papp. Yes, sir. We have been involved with the
Justice Department all along and are participating in that.
Mr. Young. And are you receiving money?
Admiral Papp. Yes, sir. Money. There has been reimbursement
for our services along the way, and also the Oil Spill
Liability Trust Fund.
Mr. Young. But, in your case, you use it for the Coast
Guard, I hope.
Admiral Papp. There has been no direct reimbursement to us.
I believe everything that is reimbursed goes into the general
treasury.
Mr. Young. Well, that is our fault, Mr. Chairman. I mean
you spend it. It takes it out of your budget. It takes away
from your other duties. You ought to be able to get reimbursed.
So we will talk about that later. Thank you. I yield back.
Mr. Hunter. I thank the gentleman. Mr. Cummings is
recognized.
Mr. Cummings. I agree with Chairman Young. We need to
figure out a way, Admiral, to deal with that, what you just
talked about, this whole idea, Deepwater Horizon and
reimbursement money. I take it that is what you are talking
about.
Admiral Papp. Yes, sir.
Mr. Cummings. The question you just answered?
Admiral Papp. Yes, sir.
Mr. Cummings. OK. First, let me say I oppose the cuts
proposed to the Coast Guard's budget and the President's
request. The request would cut the Coast Guard's acquisitions
budget by more than $600 million, cut the operating budget by
more than $56 million, and reduce the end strength by hundreds
of servicemembers.
The terrible events in Boston, yesterday, demonstrate that
our homeland remains at risk, and yet we are confronted with a
budget that would result in real deductions in the Coast
Guard's capabilities. This budget demonstrates as vividly as
possible how senseless sequestration is and how its effects in
the form of loss, even capabilities, and delayed acquisitions
will ripple for years to come.
We cannot continue to stretch the Coast Guard and assume
that it will still be able to complete all of the missions we
have assigned to it, and I deeply appreciate the candor and
leadership of Admiral Papp that you have shown in identifying
the Service's challenges. You know I have tremendous amount of
respect for you. We have worked closely together to bring the
Coast Guard to where it's come to after having some real
problems. And I don't want to see us lose our progress.
Now, it is up to the Congress to listen to what we are
being told. If we continue to cut the Coast Guard's budget, we
need to identify those missions it will no longer be expected
to perform, including those areas it will no longer be expected
to guard, those boats will no longer be expected to inspect,
and those patrols it will no longer be able to conduct. That's
real.
Ladies and gentlemen, when you have cuts there are
consequences. I am also deeply concerned by measures proposed
in the Administration's budget that would have devastating
consequences for our Merchant Marine. In 1975 we had 857 ocean-
going ships under the United States flag, according to a 2009
study produced by IHS global insight for the U.S. Maritime
Administration. Today, there are approximately 100 ocean-going
vessels in the U.S. flag, and they carry barely 2 percent of
our commercial cargoes.
Ladies and gentlemen, we are not just slipping. We have
slipped. It is ridiculous the downward spiral that we have in
that area. Sadly, we haven't even developed policies that will
reverse this decline. Recent policy developments threaten only
to drive more vessels away from our flag. As we are all aware,
Section 100124 are MAP-21 legislation. A provision slipped into
the Highway Bill in the dead of night, reduce the amount of
U.S. food aid required to be carried on U.S.-flag ships from 75
percent to just 50 percent. Something is absolutely wrong with
that picture, Mr. Matsuda.
In the last Congress I introduced legislation to reverse
Section 100124. I intend to introduce that legislation again
with Congressman Scott Rigell. And I thank my colleagues on the
subcommittee for their support.
Now, the President's budget would significantly change the
food program, the Food for Peace Program, while we are still
examining specifics of the proposal, to shift funds away from
Public Law 480 and to allow some measure of available funding
to purchase food in recipient nations or even to provide cash
transfers, the budget also provides $25 million per year for
``additional targeted operating subsidies for militarily used
vessels,'' and states that ``Worker adjustment would be
available for the remaining eligible mariners.''
Now, Mr. Matsuda, I must tell you I am concerned about your
performance, and there are a lot of people that are concerned
about your performance. And I don't usually make these kinds of
statements, but if they don't tell you, I am telling you. And,
so, I want to know why does the Administration believe it would
be sufficient to subsidize seafarers to allow them to maintain
the unlimited deep ocean credentials, if there is no cargo or
ship for them to sail on?
And then I want you to tell us what you are doing with
regard to what our last reauthorization said, that just would
be fostering, promoting and developing the merchant and
maritime ministry in the United States. I want to know what you
are doing. I want to know what you are doing to make that
happen, because, I am telling you, I am getting very, very
frustrated.
Mr. Chairman, if he could just answer my question, I will
yield back.
Mr. Hunter. You have all the time in the World, Mr.
Cummings.
Mr. Matsuda. Thank you, Congressman.
Well, first, let me say that the U.S. Merchant Marine has
throughout history and currently been able and willing to carry
whatever, whenever, a cargo's needed. This proposal by the
Administration is not about--the intent was not to cut cargo
opportunities. I think that is a second order effect. Their
primary goal is to reform the way that the food aid programs
are administered, and we understand there will be an impact to
the U.S. Merchant Marine.
There is funding, and I would say this is the first time
new funding for a new incentive program has been proposed in a
very long time for the U.S. Merchant Marine. We recognize that
we have to do whatever we can to try to retain those vessels
and those crews as mariners are extremely valuable, both to the
commercial industry and to the U.S. when we need them to crew
up, reserve Government-owned vessels.
Mr. Cummings. One last question, Mr. Chairman, just one
question.
And I will get to some substance, but you need to answer
this one. You talked about, a few minutes ago, after Sandy. You
said there were waiver requests, and I think you said you all
monitored the ships to see who was available and all that kind
of thing. What success did you have making sure that oil was
carried on U.S. ships? Tell me about the success, because that
is your job.
Mr. Matsuda. Absolutely, sir. I can tell you that since I
have been here, we have completely----
Mr. Cummings. You were not talking about that, the one that
you talked about.
Mr. Matsuda. That's right.
Mr. Cummings. OK.
Mr. Matsuda. I am talking about the way that the Jones Act
has been administered by this administration. In previous
administrations, when a President signs a waiver of the Jones
Act, it has been either so broad or with no transparency that
we heard reports that after Hurricane Katrina there were
vessels on the west coast, foreign flag, carrying cargoes
between U.S. ports.
What we have attempted to do is bring more transparency to
the process to make sure if a waiver is administered, it is
done in a way so that the public can see what is going on, who
is carrying what. But, our primary goal, and especially in the
aftermath of Superstorm Sandy, was to find all available
vessels to bring fuel into the Northeast to prevent----
Mr. Cummings. How many? Just tell me. I am begging you. How
many vessels carried the oil, U.S.-flag vessels? And how many
waivers were given?
Mr. Matsuda. Every available U.S. flag----
Mr. Cummings. No. You are not answering my question. You
should know that. You know that that is a priority for many of
us in Congress. Please answer my question. How many vessels?
Mr. Matsuda. I am answering it, sir.
Mr. Cummings. Yes. Was it one? Two? Three? And how many
waivers? One? Two? Three? Give me some numbers, and then I am
finished, Mr. Chairman.
Mr. Matsuda. It was every available U.S.-flag vessel and
then 11 additional foreign-flag vessels brought fuel into the
Northeast in the aftermath of Hurricane Sandy.
Mr. Hunter. I thank the gentleman for his questions.
I have got a couple of questions to close with here,
Administrator Matsuda. I am sure that there was analyses done
when you were arguing against changing the Food for Peace
Program. Right? So when you did your analysis on that, and
MarAd did its analysis on that, how many international U.S.-
flag ships did you figure we would lose by losing the Food for
Peace Program?
Mr. Matsuda. Well, the challenge in developing policy
proposals, sometimes, you don't always have the information you
need in front of you. But we know that there are 50 vessels
that carry some food aid currently in the last year for which
we have data. Twenty of those are a part of the Maritime
Security Program, and an additional 30 carried some food in to
some extent.
We believe that is the pool of U.S.-flag vessels that could
be at risk. Now, keep in mind that 55 percent of the funds
would still be proposed in fiscal year 2014 for U.S.-based food
aid. So these are funds that would still continue to see U.S.-
sourced food aid on U.S.-flag ships subject to the cargo
preference rule.
Mr. Hunter. But there is $25 million set aside and there is
$186 million in the NMSP for 60 ships, roughly. Right? And
there is $20 million for the remaining 30 that are Food for
Peace ships that are not in the MSP, those 20. Right? So that
leaves about 30 that would be affected purely by Food for
Peace. I think you have about $25 million associated with them
in the budget. Right?
Mr. Matsuda. Well, the $25 million proposal is something
that we feel we do need dialogue with the industry to ensure
that we offer incentives that will continue to attract and
retain, as much as possible, as much militarily useful vessels
and U.S. mariners as possible.
Mr. Hunter. How many ships is that, roughly, based on your
analysis? How many ships out of that 30 will $25 million keep
you?
Mr. Matsuda. It really depends on the type of incentive. I
would say for comparison purposes, the Maritime Security
Program, a portion is currently $3.1 million per vessel. So
that would be about eight vessels; however, that does rely upon
available cargoes to ensure that these vessels can stay
commercially viable.
Mr. Hunter. So, I think you realize from the committee and
the feedback that we are going to try to save the Food for
Peace Program for basic industrial capability and capacity for
our shipbuilders, our operators, our mariners and industry in
general.
So, let us move on. Last thing, Title XI. I think Ranking
Member Garamendi asked about it, and you said that there is
plenty of money there, right now. How many Title XI loans has
the Administration given out, let's say, last year?
Mr. Matsuda. In the past year?
Mr. Hunter. Yeah.
Mr. Matsuda. I am not sure I have that in front of me. I do
know that in all over a half billion dollars' worth of projects
have been approved in the previous 4 years.
Mr. Hunter. So, 4 years, $500 million. So it is a magnitude
of 10, roughly. Right? You get 10 times the amount in loan
guarantees? What is the number you use as your multiplier?
Mr. Matsuda. Well, it is a pretty complex formula;
somewhere between 5 and 20, I think. Is that fair?
Mr. Hunter. OK. 5 and 20, so there is $38 million there
now. Right? This is your calculation that I am reading, so
there is $38 million in Title XI loan subsidies. That equals
$420 million in available loan guarantees. So I just did a
factor of 10. Is that OK to do?
Mr. Matsuda. Yeah. That's fair.
Mr. Hunter. OK. So let's say it is 10. Right? So if you
wanted about a billion dollars, which is what we think it would
be if you had a billion dollars' worth of loan guarantees to
really kick-start the industry, that would mean having about
$70 million added to that $38 million that's in there now. That
would give you about a billion dollars in loan guarantees. Is
that right?
Mr. Matsuda. I believe so.
Mr. Hunter. So based on your analysis, what do you think it
has to be to really kick-start the commercial industry?
Mr. Matsuda. Well, the Title XI program, it simply helps
cover the cost of capital. There still has to be a market for
these new ships to be built in. We have heard from some members
of parts of the industry that they are interested in availing
themselves of the program, and we have seen some Jones Act
vessels start to commence design and construction.
So we do anticipate some interest in the program, but again
it's a capital program, and we can only incentivize so much.
But we try to make sure we can use every available dollar to
build as many vessels in U.S. yards as we can. That's the real
purpose.
Mr. Hunter. You know. To get efficiencies and scale, and in
building you have to do more than one. And if you have a $400
million ship or a $200 million ship, and you only have a
billion dollars available, that means that for a $200 million
ship, you can build five. Right. You can get a loan for five.
Mr. Matsuda. True. There are smaller vessels that are built
in U.S. yards where they can build that many in scale, but we
have seen as far as orders come in for the larger vessels, they
come in in ones and twos.
Mr. Hunter. With that, let me thank the panel for your
time, for your service to your Nation. And the committee is
adjourned. The hearing is adjourned.
[Whereupon, at 3:57 p.m., the subcommittee was adjourned.]