[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
REVIEW OF FISCAL YEAR 2020 BUDGET REQUEST FOR THE COAST GUARD AND
MARITIME TRANSPORTATION PROGRAMS
=======================================================================
(116-17)
HEARING
BEFORE THE
SUBCOMMITTEE ON
COAST GUARD AND MARITIME TRANSPORTATION
OF THE
COMMITTEE ON
TRANSPORTATION AND INFRASTRUCTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
MAY 21, 2019
__________
Printed for the use of the
Committee on Transportation and Infrastructure
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available online at: https://www.govinfo.gov/committee/house-
transportation?path=/browsecommittee/chamber/house/committee/
transportation
__________
U.S. GOVERNMENT PUBLISHING OFFICE
38-024 PDF WASHINGTON : 2019
--------------------------------------------------------------------------------------
COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
PETER A. DeFAZIO, Oregon, Chair
ELEANOR HOLMES NORTON, SAM GRAVES, Missouri
District of Columbia DON YOUNG, Alaska
EDDIE BERNICE JOHNSON, Texas ERIC A. ``RICK'' CRAWFORD,
ELIJAH E. CUMMINGS, Maryland Arkansas
RICK LARSEN, Washington BOB GIBBS, Ohio
GRACE F. NAPOLITANO, California DANIEL WEBSTER, Florida
DANIEL LIPINSKI, Illinois THOMAS MASSIE, Kentucky
STEVE COHEN, Tennessee MARK MEADOWS, North Carolina
ALBIO SIRES, New Jersey SCOTT PERRY, Pennsylvania
JOHN GARAMENDI, California RODNEY DAVIS, Illinois
HENRY C. ``HANK'' JOHNSON, Jr., ROB WOODALL, Georgia
Georgia JOHN KATKO, New York
ANDRE CARSON, Indiana BRIAN BABIN, Texas
DINA TITUS, Nevada GARRET GRAVES, Louisiana
SEAN PATRICK MALONEY, New York DAVID ROUZER, North Carolina
JARED HUFFMAN, California MIKE BOST, Illinois
JULIA BROWNLEY, California RANDY K. WEBER, Sr., Texas
FREDERICA S. WILSON, Florida DOUG LaMALFA, California
DONALD M. PAYNE, Jr., New Jersey BRUCE WESTERMAN, Arkansas
ALAN S. LOWENTHAL, California LLOYD SMUCKER, Pennsylvania
MARK DeSAULNIER, California PAUL MITCHELL, Michigan
STACEY E. PLASKETT, Virgin Islands BRIAN J. MAST, Florida
STEPHEN F. LYNCH, Massachusetts MIKE GALLAGHER, Wisconsin
SALUD O. CARBAJAL, California, Vice GARY J. PALMER, Alabama
Chair BRIAN K. FITZPATRICK, Pennsylvania
ANTHONY G. BROWN, Maryland JENNIFFER GONZALEZ-COLON,
ADRIANO ESPAILLAT, New York Puerto Rico
TOM MALINOWSKI, New Jersey TROY BALDERSON, Ohio
GREG STANTON, Arizona ROSS SPANO, Florida
DEBBIE MUCARSEL-POWELL, Florida PETE STAUBER, Minnesota
LIZZIE FLETCHER, Texas CAROL D. MILLER, West Virginia
COLIN Z. ALLRED, Texas GREG PENCE, Indiana
SHARICE DAVIDS, Kansas
ABBY FINKENAUER, Iowa
JESUS G. ``CHUY'' GARCIA, Illinois
ANTONIO DELGADO, New York
CHRIS PAPPAS, New Hampshire
ANGIE CRAIG, Minnesota
HARLEY ROUDA, California
------ 7
Subcommittee on Coast Guard and Maritime Transportation
SEAN PATRICK MALONEY, New York, Chair
ELIJAH E. CUMMINGS, Maryland BOB GIBBS, Ohio
RICK LARSEN, Washington DON YOUNG, Alaska
STACEY E. PLASKETT, Virgin Islands RANDY K. WEBER, Sr., Texas
JOHN GARAMENDI, California BRIAN J. MAST, Florida
ALAN S. LOWENTHAL, California MIKE GALLAGHER, Wisconsin
ANTHONY G. BROWN, Maryland CAROL D. MILLER, West Virginia
CHRIS PAPPAS, New Hampshire, Vice SAM GRAVES, Missouri (Ex Officio)
Chair
PETER A. DeFAZIO, Oregon (Ex
Officio)
CONTENTS
Page
Summary of Subject Matter........................................ iv
STATEMENTS OF MEMBERS OF CONGRESS
Hon. Sean Patrick Maloney, a Representative in Congress from the
State of New York, and Chair, Subcommittee on Coast Guard and
Maritime Transportation:
Opening statement............................................ 1
Prepared statement........................................... 2
Hon. Bob Gibbs, a Representative in Congress from the State of
Ohio, and Ranking Member, Subcommittee on Coast Guard and
Maritime Transportation:
Opening statement............................................ 3
Prepared statement........................................... 4
Hon. Peter A. DeFazio, a Representative in Congress from the
State of Oregon, and Chair, Committee on Transportation and
Infrastructure:
Opening statement............................................ 5
Prepared statement........................................... 6
Hon. Sam Graves, a Representative in Congress from the State of
Missouri, and Ranking Member, Committee on Transportation and
Infrastructure, prepared statement............................. 57
WITNESSES
Admiral Karl L. Schultz, Commandant, U.S. Coast Guard:
Oral statement............................................... 7
Prepared statement........................................... 9
Master Chief Jason M. Vanderhaden, Master Chief Petty Officer of
the Coast Guard, U.S. Coast Guard, oral statement \\... 15
Rear Admiral Mark H. Buzby, U.S. Navy (Ret.), Administrator,
Maritime Administration:
Oral statement............................................... 16
Prepared statement........................................... 17
Hon. Michael A. Khouri, Chairman, Federal Maritime Commission:
Oral statement............................................... 21
Prepared statement........................................... 22
APPENDIX
Questions from Hon. Rick Larsen for Admiral Karl L. Schultz,
Commandant, U.S. Coast Guard................................... 59
Questions from Hon. Mike Gallagher for Admiral Karl L. Schultz,
Commandant, U.S. Coast Guard................................... 59
Questions from Hon. Anthony G. Brown for Rear Admiral Mark H.
Buzby, U.S. Navy (Ret.), Administrator, Maritime Administration 60
----------
\\ Master Chief Jason M. Vanderhaden did not submit a prepared
statement for the record.
May 17, 2019
SUMMARY OF SUBJECT MATTER
TO: Members, Subcommittee on Coast Guard and Maritime
Transportation
FROM: Staff, Subcommittee on Coast Guard and Maritime
Transportation
RE: Hearing on ``Review of Fiscal Year 2020 Budget
Request for the Coast Guard and Maritime Transportation
Programs''
PURPOSE
The Subcommittee on Coast Guard and Maritime Transportation
will hold a hearing on Wednesday, May 21, 2019, at 10:00 a.m.
in 2167 Rayburn House Office Building to examine fiscal year
(FY) 2020 budget requests for the Coast Guard and Maritime
Transportation Programs. The Subcommittee will hear testimony
from the U.S. Coast Guard (Coast Guard or Service), the Federal
Maritime Commission (Commission or FMC), and the Maritime
Administration (MARAD).
BACKGROUND
COAST GUARD
The Coast Guard was established on January 28, 1915,
through the consolidation of the Revenue Cutter Service
(established in 1790) and the Lifesaving Service (established
in 1848). The Coast Guard later assumed the duties of three
other agencies: the Lighthouse Service (established in 1789),
the Steamboat Inspection Service (established in 1838), and the
Bureau of Navigation (established in 1884).
Under Section 102 of Title 14, United States Code, the
Coast Guard has primary responsibility to enforce or assist in
the enforcement of all applicable federal laws on, under, and
over the high seas and waters subject to the jurisdiction of
the United States; to ensure safety of life and property at
sea; to carry out domestic and international icebreaking
activities; and, as one of the five armed forces of the United
States, to maintain defense readiness to operate as a
specialized service in the Navy upon the declaration of war or
when the President directs.
The Coast Guard is directed by a Commandant, who is
appointed by the President with the advice and consent of the
Senate to a four-year term. Admiral Karl Schultz was sworn in
as the 26th Commandant of the Coast Guard in June 2018.
Coast Guard FY 2019 Enacted to FY 2020 President's Budget Request
Comparison
(Dollars in Thousands)
------------------------------------------------------------------------
% Diff.
Diff. Bet. Bet. FY
FY 2020 FY 2020 2020
Program FY 2019 President's Budget Budget
Enacted Budget Request Request & Request &
FY 2019 FY 2019
Enacted Enacted
------------------------------------------------------------------------
Operations & Support $7,643,201 $7,858,900 $215,699 2.8%
(O&S)
------------------------------------------------------------------------
Overseas Contingency $163,000 $- $(163,000) -100.0%
Operations \1\
(OCO)
------------------------------------------------------------------------
Environmental $13,469 $13,495 $26 0.2%
Compliance &
Restoration (EC&R)
------------------------------------------------------------------------
Medicare-Eligible $199,360 $205,107 $5,747 2.9%
Retiree Health Care
Fund (MERHCF)
------------------------------------------------------------------------
Procurement, $2,248,260 $1,234,656 $(1,013,60 -45.1%
Construction & 4)
Improvements (PC&I)
------------------------------------------------------------------------
Research & $20,256 $4,949 $(15,307) -75.6%
Development \2\
(R&D)
========================================================================
Subtotal, $10,287,54 $9,317,107 $(970,439) -9.4%
Discretionary 6
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
Retired Pay $1,739,844 $1,802,309 $62,465 3.6%
------------------------------------------------------------------------
State Boating Safety $114,682 $116,700 $2,018 1.8%
Grants
------------------------------------------------------------------------
Maritime Oil Spill $101,000 $101,000 $- 0.0%
Program
------------------------------------------------------------------------
General Gift Funds $2,864 $2,864 $- 0.0%
========================================================================
Subtotal, $1,958,390 $2,022,873 $64,483 3.3%
Mandatory
Total $12,245,93 $11,339,980 $(905,956) -7.4%
6
------------------------------------------------------------------------
The chart above compares the FY 2020 budget request to the FY
2019 enacted funding level.
---------------------------------------------------------------------------
\1\ Coast Guard OCO funding is historically requested in the Navy's
request but appropriated directly to the Coast Guard.
\2\ The FY 2020 reduction to R&D funding is due to the transfer of
personnel costs to the O&S account. There is no actual reduction.
---------------------------------------------------------------------------
Fiscal Year 2020 Coast Guard Budget Request
The President requests $11.34 billion in FY 2020 for the
activities of the Coast Guard, including $9.32 billion in
discretionary funding. The Coast Guard Authorization Act of
2018 (Pub. L. 115-282) authorizes $10.6 billion in
discretionary funds for the Coast Guard in FY 2019, $370
million (or 4 percent) more than the current FY 2019 enacted
level of $10.27 billion, and $1.32 billion (or 13 percent)
greater than the FY 2020 requested level in the President's
Budget. This amount does not include a transfer of
approximately $160 million in funding to the Coast Guard from
the Department of Defense (DoD) Overseas Contingency Operations
(OCO) account. The transfer of those funds would support the
ongoing deployment of six 110-foot Coast Guard Patrol Boats
conducting national defense and port and waterways security
operations in the Persian Gulf.
In FY 2019, the Coast Guard transitioned to the Department
of Homeland Security (DHS) Common Appropriations Structure
(CAS). Accordingly, activities funded through the previous
Operating Expenses, Reserve Training, Environmental Compliance
and Restoration, and Medicare-Eligible Retiree Health Care Fund
Contribution were included as part of the new Operations and
Support (O&S) account in FY 2019. In addition, acquisition
personnel costs previously funded through the Acquisition,
Construction, and Improvements account are included as part of
the O&S account. The Acquisition, Construction, and
Improvements account transitioned to the Procurement,
Construction, and Improvements account and the Research,
Development, Test and Evaluation account became the new
Research and Development account.
Operations and Support (previously Operating Expenses)
The President's budget requests $7.86 billion for the O&S
account in FY 2020, $51 million (or 0.7 percent) more than the
FY 2019 enacted level.\3\ The O&S account supports the day-to-
day activities of the Coast Guard including administrative
expenses, support costs, travel, lease payments, and the
operation and maintenance of infrastructure and assets. The O&S
account also funds personnel compensation and benefits for the
Service's approximately 41,000 active duty military members,
7,500 reservists, and 8,500 civilian employees.
---------------------------------------------------------------------------
\3\ For this calculation, the FY 2019 O&S and OCO levels are
combined.
---------------------------------------------------------------------------
The O&S budget includes increases in funding to cover
follow-on costs for the operation and maintenance of newly
acquired assets and technology and increases in other
administrative expenses. The request includes a $342 million
increase from the FY 2019 enacted level to cover the cost of
the 2020 military pay raise (2.6 percent), as well as expanded
military benefits enabling Coast Guard servicemembers to
maintain parity with benefits received by DoD servicemembers,
operational adjustments, and operating and maintenance funds
for new assets.
O&S increases are offset by $120 million in cuts derived
through decommissioning certain assets, information technology
streamlining, and the termination of one-time costs. The
proposed reductions in the O&S account include:
Asset Decommissionings: The FY 2020 budget
proposes to decommission four HC-130H aircrafts, which are
being replaced by the new HC-130J aircrafts. The Coast Guard
estimates these decommissionings will save $16.2 million in FY
2020 through increased fuel efficiency. The Coast Guard is also
in the process of decommissioning a High-Endurance Cutter
(WHEC) for $9.3 million and three 110-foot Patrol Boats for
$2.6 million.
Information Technology Streamlining: The FY 2020
budget proposes consolidating enterprise services, including
replacing contractors at the Command, Control, Communications,
Computers, and Information Technology (C4IT) Service Center
with government full time employees (FTEs). The Coast Guard
estimates this insourcing will save $3.7 million in FY 2020.
Termination of One-Time Costs: The FY 2020 budget
request proposes a $32.1 million savings associated with the
termination of one-time costs for program start-up and exit
transactions in FY 2019, including the termination of CG
Aircraft FAA Compliance and Obsolete Equipment Replacement
($20.2 million) and National Security Cutter and Fast Response
Cutter Follow-On ($5.4 million).
Environmental Compliance and Restoration (EC&R)
The President requests $13.5 million for the EC&R in FY
2020, $98,000 (or 0.73 percent) more than the FY 2019 enacted
level. The EC&R funding provides for the clean-up and
restoration of contaminated Coast Guard facilities, as well as
for the remediation of Coast Guard assets to ensure they are
safe to operate or can be decommissioned in compliance with
environmental laws.
The Coast Guard plans to use the $13.5 million requested
for EC&R to pay for continued long-term monitoring at 24 sites
and begins or continues investigation/remediation site work at
7 sites.
Procurement, Construction, and Improvements
The President requests $1.23 billion for the Procurement,
Construction, and Improvements (PC&I) account, a $1.01 billion
(or 45.1 percent) decrease over the FY 2019 enacted level. The
PC&I account funds the acquisition, procurement, construction,
rebuilding, and physical improvements of Coast Guard owned and
operated vessels, aircraft, facilities, aids-to-navigation,
communications and information technology systems, and related
equipment.
The FY 2020 budget request includes $1.18 billion for the
acquisition of aircraft, vessels, and the continued build-out
of Command, Control, Communications, Computer, Intelligence,
Surveillance, and Reconnaissance (C4ISR) systems. This
represents a decrease of $912.3 million (or 55.4 percent) from
the FY 2019 enacted level. Specifically, the budget request
includes:
$35 million for long-lead time materials for the
second heavy icebreaker, now referred to as Polar Security
Cutter (PSC). The joint Coast Guard and Navy Polar Security
Cutter Integrated Program Office (IPO) recently awarded the
contract for the construction of the Nation's first PSC in more
than 40 years to VT Halter of Mississippi;
$60 million to conduct Post Delivery Activities
on National Security Cutters (NSC) 7 through 11;
$140 million for the production of two Fast
Response Cutters (FRC), hulls 53 and 54 of the planned 58 hull
program of record;
$457 million for the construction of the third
Offshore Patrol Cutter (OPC) and scope acquisition of Long Lead
Time Materials for OPCs 4 and 5. OPCs will replace the
Service's aging 210-foot and 270-foot Medium Endurance Cutters
(MEC);
$103 million to support the ongoing HC-27J
aircraft conversion project. The request funds HC-27J non-
recurring engineering required to support aircraft
missionization and cockpit modernization, in addition to low-
rate initial production of missionized aircraft;
$50 million for the continued modernization and
sustainment of the HH-65 helicopter fleet;
$25.2 million for C4ISR design, development, and
integration; and
No funding for the Alteration of Bridges program
in FY 2020. The program last received funding in FY 2010.
Established by the Truman-Hobbs Act of 1940 (33 U.S.C. 511 et.
seq.), the Alteration of Bridges program authorizes the Coast
Guard to share with a bridge's owner the cost of altering or
removing privately or publicly owned railroad and highway
bridges that are determined by the Service to obstruct marine
navigation.
The budget requests $173.6 million to construct or renovate
shore facilities and aids-to-navigation. This request is an $81
million (or 31.9 percent) decrease from the FY 2019 enacted
level. The Coast Guard currently has a backlog of 125
prioritized shore facility improvement projects with an
estimated combined cost of over $1.7 billion; GAO estimates
that the projects without cost estimates raise that value to
above $2.6 billion.\4\
---------------------------------------------------------------------------
\4\ GAO, COAST GUARD SHORE INFRASTRUCTURE: Applying Leading
Practices Could Help Better Manage Project Backlogs of At Least $2.6
Billion, GAO-19-82 [https://www.gao.gov/assets/700/697012.pdf],
February 21, 2019.
Research and Development (previously Research, Development,
---------------------------------------------------------------------------
Test, and Evaluation)
The President requests $4.95 million in FY 2020 for the
Coast Guard's Research and Development (R&D) account, $15.3
million (or 75.6 percent) less than the FY 2019 enacted level.
The reduction is due to the shifting of R&D personnel costs to
the O&S account; it does not reflect a reduction in program
costs. The R&D account supports improved mission performance
for the Service's 11 statutory missions through applied
research and development of new technology and methods.
The Coast Guard intends to use the $4.95 million in FY 2020
for programs to develop, test, and evaluate systems that
improve operational presence and response, including supporting
unmanned aircraft system (UAS) prototypes, continuing
development and testing of the next generation Arctic
navigation safety information system, evaluating emerging
maritime oil spill response technology, and evaluating existing
cybersecurity tools for critical port infrastructure protection
and resilience.
FEDERAL MARITIME COMMISSION
The Federal Maritime Commission (FMC or Commission) was
established in 1961 as an independent agency that regulates
oceanborne transportation in the foreign commerce of the United
States. The FMC protects shippers and carriers from restrictive
or unfair practices of foreign-flagged carrier alliances. The
FMC also enforces laws related to cruise vessel financial
responsibility, to ensure cruise vessel operators have
sufficient resources to pay judgments to passengers for
personal injury or death or for nonperformance of a voyage.
The FMC is composed of five Commissioners appointed for
five-year terms by the President with the advice and consent of
the Senate. Michael A. Khouri was designated Chairman of the
Commission by the President in March, 2019.
FMC FY 2019 Enacted to FY 2020 President's Budget Request Comparison
(Dollars in Thousands)
------------------------------------------------------------------------
% Diff.
Diff. Bet. Bet. FY
FY 2019 FY 2020 FY 2020 2020
Account Enacted President's Request & Request &
Budget Request FY 2019 FY 2019
Enacted Enacted
------------------------------------------------------------------------
Inspector General $441 $487 $46 10.43%
------------------------------------------------------------------------
Operational and $27,049 $27,513 $464 1.72%
Administrative
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
Total $27,490 $28,000 $510 1.86%
------------------------------------------------------------------------
The President requests $28 million in FY 2020 for the
activities of the FMC, $510,000 (or 1.86 percent) more than the
FY 2019 enacted level.
MARITIME ADMINISTRATION
The Maritime Administration (MARAD) was established in
1950. It administers financial programs to build, promote, and
operate the U.S. flag fleet; manages the disposal of federal
government-owned vessels; regulates the transfer of U.S.
documented vessels to foreign registries; maintains a reserve
fleet of federal government-owned vessels essential for
national defense; operates the U.S. Merchant Marine Academy;
and administers a grant-in-aid program for state operated
maritime academies. Rear Admiral Mark H. Buzby, USN, (Ret.) has
served as MARAD Administrator since August 2017.
Fiscal Year 2020 MARAD Budget Request
MARAD FY 2019 Enacted to FY 2020 President's Budget Request Comparison
(Dollars in Thousands)
------------------------------------------------------------------------
% Diff.
Diff. Bet. Bet. FY
FY 2019 FY 2020 FY 2020 2020
Account Enacted President's Request & Request &
Budget Request FY 2019 FY 2019
Enacted Enacted
------------------------------------------------------------------------
Operations and $149,442 $377,497 $228,055 152.60%
Training
------------------------------------------------------------------------
Assistance to Small $20,000 $0 -$20,000 -100.00%
Shipyards
------------------------------------------------------------------------
Ship Disposal $5,000 $5,000 $0 0.00%
Program
------------------------------------------------------------------------
Maritime Security $300,000 $300,000 $0 0.00%
Program
------------------------------------------------------------------------
Title XI-- $3,000 $0 ($3,000) -100.00%
Administrative
Expenses
------------------------------------------------------------------------
Title XI--Loan $0 $0 $0 0%
Guarantees
------------------------------------------------------------------------
State Maritime $345,200 $0 ($345,200) -100%
Academy Operations
\5\
------------------------------------------------------------------------
Port Infrastructure $292,730 $0 ($292,730) -100%
Program
========================================================================
Total $1,115,372 $682,497 -$432,875 -38.81%
------------------------------------------------------------------------
The President requests $682.5 million in FY 2020 for the
activities of MARAD, $432.8 million (or 39 percent) less than
the FY 2019 enacted level.
---------------------------------------------------------------------------
\5\ The FY 2020 budget request for O&T also includes $81.9 million
for the U.S. Merchant Marine Academy, including $77.9 million for
Academy Operations; $4 million for capital improvements, repairs, and
maintenance; $242.4 million for the six state maritime academies,
including $30.8 million for School Ship Maintenance and Repair; and,
$53.3 million for MARAD Operations and Programs. The Merchant Marine
Academy is under jurisdiction of the House Committee on Armed Services.
---------------------------------------------------------------------------
Operations and Training
The President's FY 2020 request of $135.2 million for
Operations and Training (O&T) is $14.2 million less than the FY
2019 enacted level of $149.4 million. O&T funds the salaries
and expenses for each of MARAD's programs, the operation,
maintenance, and capital improvements to the U.S. Merchant
Marine Academy, and financial assistance to the six state
maritime academies.
MARAD's budget does not include funding for the:
Marine Highways Grant Program,
Recapitalization of the State Maritime Academy
training vessels,
Port Infrastructure Development Grant Program
Assistance to Small Shipyards Grant Program, or
Title XI Loan Guarantees.
Assistance to Small Shipyards
The Assistance to Small Shipyards Grant Program provides
capital grants to small privately owned shipyards to expand and
modernize shipbuilding capacity, efficiency, and
competitiveness. Grant requests routinely exceed available
funds. The program received $20 million in FY 2019 and is
reauthorized through fiscal year 2020 at $35 million per year
in the National Defense Authorization Act for Fiscal Year 2018
(P.L. 115-91).
Ship Disposal
The FY 2020 budget requests $5 million for the Ship
Disposal Program, the same level as was enacted for FY 2019.
The program provides for the proper disposal of obsolete
government-owned merchant ships maintained by MARAD in the
National Defense Reserve Fleet. This request includes $3
million to maintain the Nuclear Ship SAVANNAH in protective
storage according to Nuclear Regulatory Commission license
requirements, while decommissioning of the vessel's defueled
nuclear reactor, components, and equipment is in progress. The
remaining $2 million is requested for program support,
including salaries and overhead. MARAD is not expected to
dispose of any more than two of the remaining eight non-
retention vessels in the National Defense Reserve Fleet due to
low prices in the scrap metal market. The National Defense
Reserve Fleet is under jurisdiction of the House Committee on
Armed Services.
Maritime Security Program
The FY 2020 budget requests $300 million for the Maritime
Security Program (MSP), the same as was enacted for FY 2019.
Under this program, $300 million in direct payments are
allocated among up to 60 U.S. flagged vessel operators engaged
in foreign trade. MSP vessel operators are required to keep
their vessels in active commercial service and provide
intermodal sealift support to the DoD in times of war or
national emergency. This budget request enables vessel
operators to remain active and available for service.
Allocating less than $300 million annually allows U.S. vessels
to exit the program without penalty, and likely also leave the
U.S. flag registry. The MSP is under jurisdiction of the House
Committee on Armed Services.
Title XI Loan Guarantees
The President's Budget does not request funding to support
loan guarantees for the construction or reconstruction of U.S.-
flagged vessels in U.S. shipyards under the Title XI program.
While $3 million was enacted for the program in FY 2019, the
President's Budget demonstrates intent to eliminate this
program and transfer management of the active Title XI loan
guarantee portfolio to the Surface Transportation Innovative
Finance Bureau. The Title XI Loan Guarantee program is under
jurisdiction of the House Committee on Armed Services.
WITNESS LIST
Admiral Karl L. Schultz, Commandant, United
States Coast Guard
Master Chief Jason M. Vanderhaden, Master Chief
Petty Officer of the Coast Guard, United States Coast Guard
Rear Admiral Mark H. Buzby, USN, Ret.,
Administrator, Maritime Administration
The Honorable Michael A. Khouri, Chairman,
Federal Maritime Commission
REVIEW OF FISCAL YEAR 2020 BUDGET REQUEST FOR THE COAST GUARD AND
MARITIME TRANSPORTATION PROGRAMS
----------
TUESDAY, MAY 21, 2019
House of Representatives,
Subcommittee on Coast Guard and Maritime
Transportation,
Committee on Transportation and Infrastructure,
Washington, DC.
The subcommittee met, pursuant to notice, at 10 a.m. in
room 2167, Rayburn House Office Building, Hon. Sean Patrick
Maloney (Chairman of the subcommittee) presiding.
Mr. Maloney. Good morning, the hearing will come to order.
Welcome to this morning's hearing to review the respective
fiscal year 2020 budget request for the United States Coast
Guard, the Maritime Administration, and the Federal Maritime
Commission.
At any given moment more than 20 million shipping
containers full of raw materials and finished products are
transecting the ocean, neatly stacked on ships. They might
cross the Atlantic, enter the bustling port of New York and New
Jersey, and make their way up the Hudson River, past Manhattan,
to my district. The Hudson River, the 315-mile conduit of
commerce that lies at the heart of my community, moves over 17
million tons of cargo worth over $32 billion in State commerce
annually. For hundreds of years, this river facilitated trade
and transit by sloop, steamboat, and barge. In fact, from my
backyard you can see the spot where Henry Hudson camped on
September 14th, 1609. It looks much the same way today as it
did then.
For hundreds of years it has been that way. And today the
Marine Transportation System, or MTS, is an almost invisible
network that facilitates roughly $45.4 trillion in U.S.
commerce across oceans, and thousands of miles of inland
waterways. Yet the MTS and the regulatory agencies that oversee
its function are perpetually under-resourced. This is
surprising, considering the importance of the MTS to the U.S.
supply chain. And moreover, it is fundamentally disappointing.
This budget again underscores how little this
administration understands or appreciates the importance of the
U.S. shipbuilding and maritime industries and the agencies that
regulate and facilitate commerce. Our Coast Guard stretches
itself daily to execute its 11 statutory missions, from vessel
safety inspections to search and rescue, despite proposed
budget cuts like this. It does so through its exemplary
leadership.
I am pleased to welcome Coast Guard Commandant, Admiral
Karl Schultz to his first budget hearing before this
subcommittee. Unfortunately, in my view, the fiscal year 2020
Coast Guard budget goes so far as to walk back and
significantly reduce the funding appropriated by Congress for
the Coast Guard just last year, and that simply makes no sense.
I mean I will have more to say on this during the hearing.
But the fact that the administration would send up a budget
like that, I think, is disrespectful to the organizations that
do this critical work because, in reality, everybody knows it
makes no sense.
Coordinating and monitoring our maritime industries is the
Maritime Administration, or MARAD, the agency whose programs
and authorities foster and promote the American maritime
industry to meet the economic and national security needs of
our Nation.
In another unfortunate stroke, MARAD's budget is also
shortchanged. Surprisingly, the administration makes no request
for funding to carry forward progress made earlier this year
when Congress appropriated almost $300 million to initiate a
new port infrastructure development grant program. The American
Association of Port Authorities estimates that there is a $32
billion need to improve intermodal landside connections,
hinterland connectivity, and facility infrastructure. Yet the
administration has turned its back on supporting these
investments to improve the efficiency and global
competitiveness of U.S. ports and marine terminals. We need to
recognize the importance of the MTS to the national economy,
and be proactive in our Federal investments.
The Federal Maritime Commission, or FMC, protects shippers
and carriers from restrictive or unfair shipping practices of
foreign-flag carrier alliances operating in the U.S. foreign
trade. And now with foreign carriers moving more than 95
percent of U.S. trade, the FMC's job has never been more
important. That is why we need to make sure the FMC has more
than sufficient resources to implement changes made in last
year's Coast Guard Act to the Shipping Act, and make sure that
U.S. port service providers at the Port of New York and New
Jersey, downriver from my district, are able to compete and
sustain good-paying jobs for U.S. workers.
Our coasts are busier than ever. New uses emerge every day.
It is the responsibility of these agencies testifying today to
ensure that our Marine Transportation System remains reliable,
sustainable, efficient, and safe. I look forward to engaging
our witnesses this morning to learn if the administration's
budget request comes close to meeting that challenge. And that
doesn't mean we can't have disagreements about the right level
of funding. But I think what is clear is that the
administration's budget request fails in significant respects,
and I would be very curious to hear our witnesses'
understanding of that issue.
[Mr. Maloney's prepared statement follows:]
Prepared Statement of Hon. Sean Patrick Maloney, a Representative in
Congress from the State of New York, and Chair, Subcommittee on Coast
Guard and Maritime Transportation
Welcome to this morning's hearing to review the respective Fiscal
Year 2020 budget requests of the United States Coast Guard, the
Maritime Administration, and the Federal Maritime Commission.
At any given moment, more than 20 million shipping containers full
of raw materials and finished products are transecting the ocean,
neatly stacked on ships. They might cross the Atlantic, enter the
bustling Port of New York/New Jersey, and make way up the Hudson River,
past Manhattan, to my district.
The Hudson River, the 315-mile conduit of commerce that lies at the
heart of my community, moves over 17 million tons of cargo, worth over
$32 billion in state commerce, annually.
For hundreds of years this river facilitated trade and transit, by
sloop, steamboat, and barge. Today, the Marine Transportation System,
or ``MTS,'' is an almost invisible network that facilitates roughly
$45.4 trillion in U.S. commerce across oceans and thousands of miles of
inland waterways.
Yet, the MTS and the regulatory agencies that oversee its function
are perpetually under-resourced. This is surprising considering the
importance of the MTS to the U.S. supply chain, and moreover,
fundamentally disappointing: this budget again underscores how little
this administration understands or appreciates the importance of the
U.S. shipbuilding and maritime industries and the agencies that
regulate and facilitate, commerce.
Our Coast Guard stretches itself daily to execute its 11 statutory
missions, from vessel safety inspections to search and rescue, despite
budget cuts. It does so through its exemplary leadership. I'm pleased
to welcome the Coast Guard Commandant, Admiral Karl Schultz, to his
first budget hearing before this subcommittee.
Unfortunately, in my view, the FY 2020 Coast Guard budget goes so
far as to walk back, and significantly reduce the funding appropriated
by the Congress for the Coast Guard last year, and that simply makes no
sense.
Coordinating and monitoring our maritime industries is the Maritime
Administration, or ``MARAD,'' the agency whose programs and authorities
foster and promote the American maritime industry to meet the economic
and national security needs of our Nation.
In another unfortunate stroke, MARAD's budget is short changed.
Surprisingly, the administration makes no request for funding to carry
forward progress made earlier this year when Congress appropriated
almost $300 million to initiate a new Port Infrastructure Development
Grant program.
The American Association of Port Authorities estimates that there
is a $32 billion need to improve intermodal landside connections,
hinterland connectivity, and facility infrastructure. Yet, the
administration has turned its back on supporting these investments to
improve the efficiency and global competitiveness of U.S. ports and
marine terminals. We need to recognize the importance of the MTS to the
national economy and be proactive in our federal investments.
The Federal Maritime Commission, or ``FMC,'' protects shippers and
carriers from restrictive or unfair shipping practices of foreign-
flagged carrier alliances operating in the U.S. foreign trade. And now
with foreign carriers moving more than 95 percent of U.S. trade, the
FMC's job has never been more important
That is why we need to make sure the FMC has more than sufficient
resources to implement changes made in last year's Coast Guard Act to
the Shipping Act, and make sure that U.S. port service providers at the
Port of New York/New Jersey downriver from my district are able to
compete and sustain good paying jobs for U.S. workers.
Our coasts are busier than ever. New uses emerge every day. It is
the responsibility of these agencies testifying today to ensure that
our maritime transportation system remains reliable, sustainable,
efficient, and safe. I look forward to engaging our witnesses this
morning to learn if the administration's budget request comes close to
meeting that challenge.
Mr. Maloney. I now call on the ranking member, Mr. Gibbs,
for any opening remarks.
Mr. Gibbs. Thank you, Chairman. I also want to thank our
witnesses for being here today, and your service to our great
country. Thank you.
The United States Coast Guard carries out a broad array of
law enforcement, safety, national security, environmental
protection, and response missions on water under the control of
the United States. Unfortunately, both Congress and multiple
administrations dating back to the 1990s have failed to make
investments in the Coast Guard infrastructure to allow it to
maintain, much less improve, its capabilities to carry out its
mission.
By 2000 the Coast Guard offshore fleet was antiquated. It
has made great strides since then in replacing High Endurance
Cutters and Island-class patrol boats with the vastly more
capable National Security Cutters and Fast Response Cutters.
Those successes came at the expense of adequate shoreside
infrastructure investment, and a lack of investment in
modernizing the databases in which the Service relies for
smooth operations.
The Service faces another 15 years of major investments to
complete its fleet recapitalization. It must still build 25 new
Offshore Patrol Cutters to replace the Medium Endurance
Cutters. It must also purchase multiple Polar Security Cutters.
If we expect the Coast Guard to effectively carry out any
of its many missions, we cannot continue to defer shoreside and
IT investments. Yet the administration again seeks $1 billion
less in fiscal year 2020 for acquisition and construction than
was appropriated in fiscal year 2019.
I am glad to say the bipartisan leadership of this
committee and subcommittee has requested $2.8 billion in
acquisition and construction funds for fiscal year 2020. I look
forward to the Commandant's views and how he plans to complete
the necessary upgrades and replacements and maintenance of
assets.
Additionally, I am pleased to see the Maritime
Administration has requested full funding for the Maritime
Security Program. However, I am interested in how we can close
the projected shortfall of merchant mariners needed to assure
our national defense sealift capability. I look forward to
discussing that with the Maritime Administrator.
Finally, Congress made changes to ocean shipping laws last
year. I am interested to learn if these changes provided the
Commission with the authority to assure that U.S. service
providers are treated fairly when negotiating with large
international shipping alliances.
[Mr. Gibbs's prepared statement follows:]
Prepared Statement of Hon. Bob Gibbs, a Representative in Congress from
the State of Ohio, and Ranking Member, Subcommittee on Coast Guard and
Maritime Transportation
The United States Coast Guard carries out a broad array of law
enforcement, safety, national security, environmental protection, and
response missions on waters under the control of the United States.
Unfortunately, both Congress and multiple Administrations dating back
to the 1990's have failed to make investments in the Coast Guard's
infrastructure to allow it to maintain, much less improve, its
capabilities to carry out its missions.
By 2000, the Coast Guard offshore fleet was antiquated. It has made
great strides since then in replacing High Endurance Cutters and
Island-class patrol boats with the vastly more capable National
Security Cutters and Fast Response Cutters.
Those successes came at the expense of adequate shoreside
infrastructure investment, and a lack of investment in modernizing the
databases on which the Service relies for smooth operations. The
Service faces another 15 years of major investments to complete its
fleet recapitalization. It must still build 25 new Offshore Patrol
Cutters to replace the Medium Endurance Cutters. It must also purchase
multiple Polar Security Cutters.
If we expect the Coast Guard to effectively carry out any of its
many missions, we cannot continue to defer shoreside and IT
investments. Yet the Administration again seeks a billion dollars less
in FY 2020 for acquisition and construction than was appropriated in FY
2019. I am glad to say the bipartisan leadership of this committee and
subcommittee has requested $2.8 billion in acquisition and construction
funds for FY 2020.
I look forward to the Commandant's views on how he plans to
complete the necessary upgrades, replacements, and maintenance of
assets.
Additionally, I am pleased to see that the Maritime Administration
has requested full funding for the Maritime Security Program. However,
I am interested in how we can close the projected shortfall of merchant
mariners needed to assure our national defense sealift capability. I
look forward to discussing that with the Maritime Administrator.
Finally, Congress made changes to ocean shipping laws last year. I
am interested to learn if these changes provided the Commission with
the authority to assure that U.S. service providers are treated fairly
when negotiating with large international shipping alliances.
Mr. Gibbs. Mr. Chairman, I look forward to this hearing
today, and I yield back.
Mr. Maloney. Thank you, Mr. Gibbs. Let's now recognize the
chair of the committee, Mr. DeFazio, for any remarks he may
have.
Mr. DeFazio. Thank you, Mr. Chairman. I appreciate you
holding this hearing.
Tomorrow is National Maritime Day, a day to celebrate the
United States of America as a great maritime nation. However,
that news hasn't penetrated, apparently, to this administration
or the White House. As I look at the collective budget requests
for the three Federal agencies responsible for oversight,
regulation, and promotion of U.S. maritime--Coast Guard,
Maritime Administration, FMC--there is not much to celebrate
there.
The administration has talked a lot about our
competitiveness, and trade, and those things. But undermining
these institutions--we have also talked a lot about drugs and
drug smuggling, national security. Undermining the Coast Guard
is not going to deliver on those goals.
The Coast Guard went through a series of cuts because of
the Budget Control Act. And finally, Congress has begun to make
up with some of that deficit. But the submission by--the
Mulvaney--oh, I mean the Trump budget submitted to Congress
would lower Coast Guard 10 percent below 2019, you know, and
that is after the Coast Guard didn't get paid during the stupid
shutdown, the only military service not to get paid. So I would
say these additional proposed cuts are disrespectful, at best.
As I mentioned before, there has been a lot of concern
about drug smuggling. We had intel from the retired Commandant
last year or the year before last, and Senate testimony that we
can ID 80 percent of the actionable--you know, with
intelligence, actionable drug shipments. But we can only
intercept 20 percent, because the Coast Guard doesn't have the
resources. So the Trump administration is going to take care of
that problem. They are going to send Coasties to the desert
border. What a great idea. So I will have some questions about
that.
I am also disappointed in the cuts for MARAD, 39 percent.
And, you know, zero port infrastructure development grants,
small shipyard grants, which help keep us competitive, a vital
component of keeping a domestic U.S. shipbuilding industry,
particularly in light of the Communist Chinese Government
shipbuilding interests, which are trying to compete.
There is, you know, a little bit of good news, a small
increase for the Federal Maritime Commission. Last year we
refocused them on these carrier alliance agreements, and there
is a lot of work to be done there. So they will need that
money, and perhaps more.
This budget is a disappointment, but let's use this hearing
to constructively critique and encourage our colleagues to
allocate more adequate resources to each of these agencies in
the coming budget year.
[Mr. DeFazio's prepared statement follows:]
Prepared Statement of Hon. Peter A. DeFazio, a Representative in
Congress from the State of Oregon, and Chair, Committee on
Transportation and Infrastructure
Thank you Chairman Maloney. I intend to be brief in my remarks so
that we might proceed to hear from our witnesses.
Tomorrow we will celebrate National Maritime Day, a time-honored
tradition that recognizes one of our country's most important
industries.
I have to say, however, after reviewing the collective budget
requests for the three Federal agencies responsible for the oversight,
regulation, or promotion of the U.S. maritime industry--the U.S. Coast
Guard, the Maritime Administration and the Federal Maritime
Commission--I find very little to celebrate.
From our earliest origins as a nation, the U.S. Merchant Marine and
the U.S. flag commercial fleet have been pillars in this country's
foundation of prosperity and security. Regrettably, it would appear
that this administration thinks otherwise.
For example, despite years of suffering under budgets cuts imposed
by the Budget Control Act, the administration again has decided to cut
the Coast Guard's discretionary budget--this time by almost ten percent
below what Congress appropriated for the Coast Guard in Fiscal Year
2019.
One has to wonder: how much more strain can we put the Coast Guard
under before this exemplary military maritime law enforcement agency
simply breaks and cannot be mended back together?
Even worse, coming on the heels of the Coast Guard not getting paid
at all during the recent government shut-down--the only military
service to not get paid I might add--the cuts proposed in this budget
are not only wrongheaded, they are downright cruel to the hardworking
men and women of the Coast Guard.
And so, here we are today with rumors flying around about the Coast
Guard having to shift additional resources to the Southern Border; with
the Coast Guard's only heavy icebreaker, the Polar Star, barely
remaining operational due only to the ingenuity and determination of
her crew; and with the gap in the Coast Guard's unmet budget needs
growing wider each day.
These are important matters, and I expect to pursue these thoughts
and more with Admiral Schultz later this morning.
I also am disappointed that the administration is proposing to cut
funding for the Maritime Administration by almost thirty nine percent.
If we want to remain a global maritime power, we cannot offer timid
support for our own maritime industry, especially at a time when our
trading partners, notably China, are investing billions of dollars to
expand the global reach of their maritime industry.
I fail to see the logic behind not requesting any funding for Port
Infrastructure Development Grants, or Small Shipyard Grants. These
programs are desperately needed right now to infuse capital to improve
the technological capability and competitiveness of U.S. ports and
shipyards.
We need to be doing much, much more to support our maritime
industry, and I hope that Admiral Buzby can provide more ideas than
those put forth by the administration's budget request for MARAD.
Allow me to say that there was one ray of modest good news: the
small increase in the budget for the Federal Maritime Commission.
Considering the Commission's vital role in ensuring that shipping
practices in the U.S. foreign trade abide by antitrust requirements, an
increase was not only overdue, but also warranted in order to provide
the Commission the resources it needs to implement new requirements to
monitor carrier alliance agreements.
In closing, this budget is a disappointment and should serve as a
catalyst for increasing support to our maritime industry. Let us use
this hearing constructively and give ourselves something to celebrate
when National Maritime Day rolls around next year. Thank you.
Mr. DeFazio. With that I yield back the balance of my time.
Mr. Maloney. I thank the gentleman. I would like now to
welcome our witnesses.
Admiral Karl L. Schultz, Commandant of the United States
Coast Guard, we are delighted to have you here, sir.
We are also joined by Master Chief Jason M. Vanderhaden,
Master Chief Petty Officer for the United States Coast Guard;
Rear Admiral Mark H. Buzby, Administrator for the Maritime
Administration; and the Honorable Michael A. Khouri, Chairman
of the Federal Maritime Commission.
Gentlemen, we have received your testimonies. Without
objection, that full statement will be included in the record.
And since it has, we encourage you to limit your oral
testimonies to 5 minutes to give adequate time for the Members'
questions. But we appreciate your service, and all you do for
our country.
Admiral Schultz?
TESTIMONY OF ADMIRAL KARL L. SCHULTZ, COMMANDANT, U.S. COAST
GUARD; MASTER CHIEF JASON M. VANDERHADEN, MASTER CHIEF PETTY
OFFICER OF THE COAST GUARD, U.S. COAST GUARD; REAR ADMIRAL MARK
H. BUZBY, U.S. NAVY (RET.), ADMINISTRATOR, MARITIME
ADMINISTRATION; AND HON. MICHAEL A. KHOURI, CHAIRMAN, FEDERAL
MARITIME COMMISSION
Admiral Schultz. Well, full committee Chairman DeFazio,
Chairman Maloney, Ranking Member Gibbs, members of the
committee, thanks for the opportunity to testify today. And as
you mentioned, my written testimony, I appreciate that being
entered into the record.
On behalf of the men and women of the United States Coast
Guard, Chairman, please accept my profound thanks for your
unwavering support, including the fiscal year 2019
appropriation and the 2018 Frank LoBiondo Coast Guard
Authorization Act. These were meaningful steps towards
delivering the ready, relevant, and responsive Coast Guard the
American public expects and deserves.
Yet our work is not done. If you take away just one thing
from my testimony today, please remember this: readiness, ready
to push our maritime border 1,500 miles from our shore; ready
to preserve the $5.4 trillion in economic activity that flows
through our Marine Transportation System on an annual basis;
ready to support combatant commander needs across the globe;
ready for the next hurricane season, which is just around the
corner; and ready to put our cyber authorities to use as we
adapt to 21st-century threats.
Without question, building and sustaining readiness is my
top priority as Commandant, and we are at a critical juncture
of what I call a tipping point.
Almost after a decade of near flatline operations and
support funding, Coast Guard readiness is, in fact, eroding,
just like the other armed services have experienced in recent
years. Yet, unlike the Department of Defense, Coast Guard
funding is categorized as nondefense discretionary, which means
we are excluded from the focused effort to rebuild our Nation's
military readiness. And hence, we continue to find ourselves on
the outside looking in when it comes to operations and support
plus-up funds.
In 2017, the Department of Defense received a 12-percent
boost in operations and maintenance funding, while the Coast
Guard received just a 4-percent increase. Yet the Coast Guard's
military contributions are immutable. Every year we proudly
expend over $1 billion in direct support to combatant
commanders. But the $340 million of defense readiness dollars
they receive towards these ends has not increased in over 18
years.
As an example of our growing defense portfolio, the
National Security Cutter Bertholf is supporting the Indo-
Pacific commander in the South China Sea, enforcing U.N.
sanctions against North Korea and protecting advancing
interests throughout the Western Pacific. Though we strive for
relentless resilience to execute homeland security defense
operations, if we continue to neglect our growing backlog of
deferred repairs work on our capital assets, we will lose
ground in the fight to defend our homeland from evolving
threats and challenges to the Nation.
Despite these challenges, I am extremely proud of the Coast
Guard's contributions. In 2018, as part of the Department of
Homeland Security's layered security strategy, our surface and
aviation assets interdicted 460,000 pounds of uncut cocaine,
more than all other Federal agencies combined, and apprehended
more than 600 drug smugglers. Disrupting transnational criminal
organizations at sea, where they are most vulnerable, helps
reduce the push factors responsible for driving migration to
our southwest land border.
Our National Security Cutters, what we call NSCs, have
exceeded performance expectations by every metric, and now we
must focus on transitioning from our outdated and costly Medium
Endurance Cutters to our planned fleet of 25 highly capable
Offshore Patrol Cutters, which will be the backbone of the
Coast Guard's offshore presence in the decades to come.
In the polar regions, presence equals influence, and your
Coast Guard is the sole surface presence protecting our rights
and projecting sovereignty. As access to the region expands,
and interest from China and Russia grows, it is in our national
interest to enhance Maritime Domain Awareness and build
governance in this economically and geo-strategically
competitive area. To this end, the Coast Guard released the
Arctic Strategic Outlook last month, a refresh of our 2013
Arctic strategy.
In March, our sole operational heavy icebreaker, the 43-
year-old Polar Star, returned from a 105-day patrol to
Antarctica. The crew worked miracles to keep that cutter
mission viable, battling a shipboard fire, engine room
flooding, and numerous electrical outages. I am proud of their
efforts, but I remain concerned we are only one major casualty
away from being a Nation without any heavy ice-breaking
capability. New icebreakers cannot come fast enough.
And I thank you, the Congress, for the $675 million
provided in last year's 2019 appropriation. Coupled with the
$300 million in prior years' appropriations, I am thrilled to
report we awarded a detailed design and construction contract
for the first Polar Security Cutter earlier this month--or last
month, in April. Stable and predictable funding is key to
keeping this vital program on schedule.
Finally, I appreciate the administration's support for
initiatives that invest in our greatest strength: our Coast
Guard men and women, our people. They represent tangible steps
towards a mission-ready total workforce. A dollar invested in
the Coast Guard is a dollar well invested and well spent. And
with your continued support, the Coast Guard will live up to
our motto, semper paratus, always ready.
Thank you Chairman, Ranking Member, members of the
committee, for this opportunity to testify. I welcome your
questions.
[Admiral Schultz's prepared statement follows:]
Prepared Statement of Admiral Karl L. Schultz, Commandant, U.S. Coast
Guard
introduction
Chairman Maloney, Ranking Member Gibbs, and distinguished members
of the Committee, I appreciate the opportunity to testify today. Thank
you for your enduring support of the United States Coast Guard,
particularly enactment of the Frank LoBiondo Coast Guard Authorization
Act of 2018 and the significant investments provided in the Fiscal Year
(FY) 2019 Consolidated Appropriations Act.
Your Coast Guard is on the front lines of our Nation's effort to
protect the American people, our homeland, and our way of life. As
threats and challenges to our national security and global influence
grow more complex, the need for a Ready, Relevant, and Responsive Coast
Guard has never been greater.
Appropriately positioned within the U.S. Department of Homeland
Security (DHS), the Coast Guard is a federal law enforcement agency, a
regulatory body, a first responder, a member of the U.S. Intelligence
Community, and a military service and a branch of the Armed Forces of
the United States at all times \1\--the Coast Guard offers specialized
and unique capabilities across the full spectrum of maritime
activities, from security cooperation up to armed conflict.
---------------------------------------------------------------------------
\1\ 14 U.S.C. Sec. 101; 10 U.S.C. Sec. 101
---------------------------------------------------------------------------
The Coast Guard has matured and evolved over the course of our 228-
year history, adapting our people, assets, and capabilities in response
to emerging national demands and international challenges. We are
locally based, nationally responsive, and globally impactful.
To outline my vision for the Service, I recently released the U.S.
Coast Guard Strategic Plan 2018-2022. To that end, my highest priority
is to ``Maximize Readiness Today and Tomorrow,'' and readiness starts
with our people, who are our greatest strength. In the competitive
marketplace the Armed Forces find ourselves, now is a critical time to
invest in our mission-ready total workforce.
My second top priority is continuing to ``Address the Nation's
Complex Maritime Challenges'' through international and domestic
leadership in the maritime domain. A unique instrument of national
power, the Coast Guard offers the ability to secure the maritime
border, combat Transnational Criminal Organizations (TCOs), and
facilitate $5.4 trillion of annual economic activity on our Nation's
waterways.
Finally, in a competitive budget environment, your Coast Guard is
acutely focused on my third priority, ``Delivering Mission Excellence
Anytime, Anywhere,'' by continuously challenging ourselves to innovate
and drive increased efficiency for better organizational performance in
response to both manmade crises and natural disasters.
strategic effects
The Coast Guard plays a critical role in a comprehensive approach
to securing our borders--from disrupting drug trafficking and illegal
immigration in the southern transit zones, to projecting sovereignty
across the globe. Our Nation's maritime borders are vast, and include
one of the largest systems of ports, waterways, and critical maritime
infrastructure in the world, including 95,000 miles of coastline.
As part of the DHS layered security strategy, the Coast Guard
pushes out our Nation's border, and serves as the ``offense'' in a
comprehensive approach to layered border security strategy. Through the
interdiction of illicit drugs and the detention of suspected drug
smugglers, the Coast Guard disrupts TCO networks at sea, over a
thousand miles from our shore, where they are most vulnerable. Coast
Guard maritime interdictions weaken the TCOs who destabilize our
immediate neighbor Mexico, the Central American land corridor, and
South American countries. Our interdiction efforts minimize corruption
and create space for effective governance to exist. Coast Guard
interdiction efforts reduce the ``push factors'' that are responsible
for driving migration to our Southwest land border.
Working with interagency partners, the Coast Guard seized 209
metric tons of cocaine and detained over 600 suspected smugglers in FY
2018, which is more than all other federal agencies combined.
Highlighting the capabilities of one of our modern assets, in November
2018, the National Security Cutter (NSC) CGC JAMES, in support of Joint
Interagency Task Force South (JIATF-S), seized nearly nine tons of
cocaine and detained over 40 suspected drug smugglers from various drug
conveyances, including low-profile go-fast vessels and fishing vessels.
In addition to stopping these drugs from getting to our streets, the
information we gather and share with our partners in the Intelligence
Community facilitates deeper understanding of TCOs and ultimately helps
our unified efforts to dismantle them.
As an important part of the modern military's Joint Force \2\, we
currently have forces assigned to each of the six geographic Combatant
Commanders (COCOMs), as well as Cyber Command, Transportation Command,
and Special Operations Command. The Coast Guard deploys world-wide to
execute our statutory Defense Operations mission in support of national
security priorities. Typically, on any given day, 11 cutters, 2
maritime patrol aircraft, 5 helicopters, 2 specialized boarding teams,
and an entire Port Security Unit are supporting Department of Defense
(DoD) COCOMs on all seven continents. In the Middle East, our squadron
of six patrol boats continues to conduct maritime security operations
on the waters of the Arabian Gulf in close cooperation with the U.S.
Navy, promoting regional peace and stability.
---------------------------------------------------------------------------
\2\ In addition to the Coast Guard's status as an Armed Force (10
U.S.C. Sec. 101), see also Memorandum of Agreement Between DoD and DHS
on the Use of Coast Guard Capabilities and Resources in Support of the
National Military Strategy, 02 May 2008, as amended 18 May 2010.
---------------------------------------------------------------------------
Likewise, as one of the principal federal agencies performing
Detection and Monitoring (D&M) in the southern maritime transit zone,
the Coast Guard provides more than 4,000 hours of maritime patrol
aircraft support and 2,000 major cutter days to DoD's Southern Command
(SOUTHCOM) each year.
Coast Guard authorities and capabilities bridge national security
needs between DoD war fighters abroad and DHS agencies protecting our
homeland. In addition to COCOM support, the Coast Guard partners with
federal, state, local, territorial, tribal, private, and international
stakeholders to address problems across an increasingly complex
maritime domain. Our leadership on global maritime governing bodies and
our collaborative approach to operationalize international agreements
drive stability, legitimacy, and order. We shape how countries conduct
maritime law enforcement and establish governance.
Looking forward, the performance capabilities and expected capacity
of our future Offshore Patrol Cutter (OPC) fleet will provide the tools
to more effectively enforce federal laws, secure our maritime borders,
disrupt TCOs, and respond to 21st century threats. Continued progress
on this acquisition is vital to recapitalizing our aging fleet of
Medium Endurance Cutters (MECs), some of which will be over 55 years
old when the first OPC is delivered in 2021. In concert with the
extended range and capability of the NSC and the enhanced coastal
patrol capability of the Fast Response Cutter (FRC), our planned
program of record for 25 OPCs will be the backbone of the Coast Guard's
strategy to project and maintain offshore presence.
In the Arctic region, the Coast Guard remains steadfastly committed
to our role as the lead federal agency for homeland security, safety,
and environmental stewardship. There, we enhance maritime domain
awareness, facilitate governance and promote partnerships to meet
security and safety needs in this geo-strategically and economically
vital area. As access to the region continues to expand, strategic
competition drives more nations to look to the Arctic for economic and
geopolitical advantages, and the Coast Guard stands ready to provide
the leadership and sustained surface presence necessary to protect our
rights and sovereignty as an Arctic Nation.
Looking to the Antarctic, the 43-year-old CGC POLAR STAR, the
Nation's only operational heavy icebreaker, returned home after
successfully completing Operation DEEP FREEZE (DF-19), the annual
McMurdo Station breakout, though not without overcoming several high-
risk casualties to the ship's engineering systems. The ship's crew had
to battle a fire that left lasting damage to electrical systems; ship-
wide power outages occurred during ice breaking operations. And in the
same transit, divers were sent into the icy waters to investigate and
repair a propeller shaft seal leak. Events like these reinforce the
reality that we are only one major casualty away from leaving the
Nation without any heavy icebreaking capability.
With increased activity in the maritime reaches and growing
competition for resources, we cannot wait any longer for increased
access and a more persistent presence in the Polar Regions. Our
sustained presence there is imperative to ensuring our Nation's
security, asserting our sovereign rights, and protecting our long-term
economic interests.
Last year we released a request for proposal and in April, we
awarded a contract for detail design and construction of the first
Polar Security Cutter (PSC) with options for two additional PSCs. I am
thankful for your support for the $675 million in the FY 2019
appropriation. This funding, coupled with the $300 million in
Shipbuilding and Conversion, Navy (SCN) funding in FY 2017 and 2018,
made contract award possible and is sufficient to fund construction of
the first PSC as well as initial long lead time material for a second
PSC.
Our value to the Nation is observed on the farthest shores around
the globe as well as closer to home where we continue to be ``Always
Ready'' to answer the call for help. The 2018 hurricane season led to
yet another historic Coast Guard response effort. The Coast Guard
mobilized over 8,600 active duty members, reservists, and civilians for
hurricane response across the United States for hurricanes Florence and
Michael in the mid-Atlantic states and Gulf Coast respectively, as well
as typhoon Mangkhut in Guam.
In support of, and in coordination with the Federal Emergency
Management Agency (FEMA) and other federal, state, local, and
territorial agencies, the Coast Guard saved nearly 1,000 lives using
helicopters and shallow water craft, provided logistical support to
first responders, and oversaw the safe and effective resumption of
commerce at over 20 impacted sea ports.
While such a level of professionalism and distinction is what the
American people have come to expect from your Coast Guard, that
response comes at a cost. We continue to do our very best to stand
ready to respond to all maritime disasters, both natural and manmade;
however, these efforts consume future readiness. Our aging assets and
infrastructure require increased maintenance and repairs, all of which
is compounded by the on-going recovery and restoration operations of
the historic hurricane season of 2017.
In 2017 alone, the Coast Guard lost the equivalent of two major
cutters (e.g., over 300 operational days) due to unplanned repairs.
Expanding that to the last two years, we have lost three years' worth
of major cutter patrol days. In 2017 and again in 2018, shortages in
parts and supplies cost the Coast Guard over 4,500 flight hours each
year, or the equivalent of programmed operating hours for seven MH-65
helicopters. Each hour lost in the transit zones keeps us further from
reaching our interdiction targets and helps the TCOs deliver their
illicit cargoes.
Service readiness starts with our most valuable asset--our people.
We must continue to recruit, train, support, and retain a mission-ready
total workforce that not only positions the Service to excel across the
full spectrum of Coast Guard missions, but is representative of the
diverse Nation we serve. Our workforce end strength was reduced by over
1,250 personnel during a three-year period from FY 2012 to FY 2015. And
compared to the workforce of FY 2012, the Coast Guard has nearly 1,000
fewer personnel to accomplish an ever increasing mission set. Adequate
increases to depot maintenance funding, coupled with strategic human
capital investments, are critical to addressing these readiness
challenges.
conclusion
The Coast Guard offers a capability unmatched in the federal
government. Whether combating TCOs to help stabilize the Western
Hemisphere, responding to mariners in distress in the Bering Sea, or
supporting U.S. Central Command (CENTCOM) on the Arabian Gulf, the
Coast Guard stands ready to execute a suite of law enforcement,
military, and regulatory authorities and capabilities to achieve
mission success anytime, anywhere. We cannot do this on the backs of
our people--now is the time to address the erosion of readiness
experienced in our Service over the past decade due to near flat line
funding for operations and support.
While the demand for Coast Guard services has never been higher, we
must address our lost purchasing power, the growing backlogs of
deferred maintenance on our capital assets, and the degraded
habitability of our infrastructure.
Our 48,000 active duty and reserve members, 8,500 civilians, and
over 25,000 volunteer members of the Coast Guard Auxiliary need your
support to maintain a Ready, Relevant, and Responsive Coast Guard.
With the continued support of the Administration and Congress, your
Coast Guard will live up to our motto--Semper Paratus--Always Ready.
Thank you for your support of the men and women of the Coast Guard.
fy 2020 budget request
The Coast Guard's FY 2020 Budget request is focused on three main
priorities:
1. Maximize Readiness Today and Tomorrow
2. Address the Nation's Complex Maritime Challenges
3. Deliver Mission Excellence Anytime, Anywhere
Maximize Readiness Today and Tomorrow
The Coast Guard's top priority is Service readiness. The FY 2020
President's Budget request begins to address the erosion of readiness
that resulted from years under the Budget Control Act. Critical
investments in the workforce as well as depot maintenance for the fleet
will put the Service on the path to recovery to sustain critical
frontline operations.
Additionally, investments in asset modernization sustain
recapitalization momentum while advancing other critical programs. The
FY 2020 Budget request supports the Service's highest priority
acquisition, the OPC, and continues recapitalization efforts for
cutters, boats, aircraft, IT systems, and infrastructure.
Address the Nation's Complex Maritime Challenges
As one of the Nation's most unique instruments of national
authority across the full spectrum of maritime operations, the Coast
Guard cooperates and builds capacity to detect, deter, and counter
maritime threats.
While nefarious activities destabilize and threaten vulnerable
regions, the Coast Guard offers capabilities, authorities, and
established partnerships that lead to a more secure maritime border.
The FY 2020 Budget invests in a holistic approach to combat TCOs
through targeted detection and interdiction of suspected drug
smugglers, at-sea biometrics, and increased partnerships with allied
law enforcement nations in Central and South America, to quell illegal
migration.
As the Marine Transportation System (MTS) grows increasingly
complex, the Coast Guard's marine safety workforce must adapt to
continue to facilitate commerce. The FY 2020 Budget increases the
marine inspection workforce while addressing key findings from the
report on the tragic sinking of the freight vessel EL FARO and the loss
of 33 crewmembers.
Deliver Mission Excellence Anytime, Anywhere
The Coast Guard is an agile and adaptive force whose greatest value
to the Nation is an ability to rapidly shift among its many missions to
meet national priorities during steady state and crisis operations.
As new threats in the cyber domain emerge, the Coast Guard's cyber
workforce serves as the critical link between DoD, DHS, and the
Intelligence Community. The FY 2020 Budget increases the cyber
workforce to promote cyber risk management and protect maritime
critical infrastructure from attacks, accidents, and disasters.
The Coast Guard seeks to continually improve organizational
effectiveness and the FY 2020 Budget eliminates redundant and outdated
IT services to reinforce the culture of continuous innovation and
enhance information-sharing across the Service.
fy 2020 budget highlights
Procurement, Construction, & Improvements (PC&I)
Surface Assets: The budget provides $792 million for the following
surface asset recapitalization and sustainment initiatives:
National Security Cutter (NSC)--Provides funding for
post-delivery activities for the seventh through eleventh NSCs, and
other program-wide activities. The acquisition of the NSC is vital to
performing DHS missions in the far offshore regions around the world.
The NSC also provides a robust command and control platform for
homeland security and contingency operations.
Offshore Patrol Cutter (OPC)--Provides funding for
construction of the third ship and long lead time materials (LLTM) for
the fourth and fifth OPC. The OPC will replace the Medium Endurance
Cutters, now well beyond their service lives, which conduct multi-
mission operations on the high seas and coastal approaches.
Fast Response Cutter (FRC)--Funds procurement of two
FRCs, totaling 54 of the 58 vessels needed for the domestic program of
record. These assets provide coastal capability to conduct Search and
Rescue operations, enforce border security, interdict drugs, uphold
immigration laws, prevent terrorism, and enhance resiliency to
disasters.
Polar Security Cutter (PSC)--Provides funding to support
detail design and construction activities of the joint Coast Guard-Navy
Integrated Program Office (IPO) and program management associated with
construction of the lead PSC. PSCs will provide the Nation with assured
surface access to the Polar Regions for decades to come.
Polar Sustainment--Supports a multi-year Service Life
Extension Project (SLEP) for CGC POLAR STAR, including program
management activities, materials purchases, and production work.
Waterways Commerce Cutter (WCC)--Provides funding for
acquisition planning activities, including continued evaluation of
options to replace the capabilities provided by the current fleet of
inland tenders and barges commissioned between 1944 and 1990. These
multi-mission platforms are integral to the protection of maritime
commerce on the inland rivers.
Cutter Boats--Continues funding for the production of
multi-mission cutter boats fielded on the Coast Guard's major cutter
fleet, including the NSC, OPC, and PSC.
In-Service Vessel Sustainment--Continues funding for
sustainment projects on 270-foot Medium Endurance Cutters, 225-foot
seagoing Buoy Tenders, and 47-foot Motor Lifeboats.
Survey and Design--Continues funding for multi-year
engineering and design work for multiple cutter classes in support of
future sustainment projects. Funds are included to plan Mid-Life
Maintenance Availabilities (MMA) on the CGC HEALY, CGC MACKINAW, and
the fleet of 175-foot Coastal Buoy Tenders.
Air Assets: The budget provides $200 million for the following air
asset recapitalization or enhancement initiatives:
HC-144--Continues Minotaur mission system retrofits and
provides high-definition electro-optical infrared cameras to meet DHS
Joint Operational Requirements.
HC-27--Continues missionization activities, including
funding for spare parts, logistics, training, and mission system
development.
HH-65--Continues modernization and sustainment of the
Coast Guard's fleet of H-65 short range recovery helicopters,
converting them to MH-65E variants. The modernization effort includes
reliability and sustainability improvements, where obsolete components
are replaced with modernized sub-systems, including an integrated
cockpit and sensor suite. Funding is also included to extend aircraft
service life for an additional 10,000 hours.
MH-60--Includes funding to support a service life
extension for the fleet of medium range recovery helicopters to better
align recapitalization with DOD's future vertical lift program.
sUAS--Continues program funding to deploy sUAS onboard
the NSC allowing increased interdiction through greater Intelligence,
Surveillance, and Reconnaissance (ISR).
Shore Units and Aids to Navigation (ATON): The budget provides $174
million to recapitalize shore infrastructure that supports Coast Guard
assets and personnel, as well as construction and improvements to
ensure public safety on waterways. Examples include:
Replacement of covered boat moorings at Station Siuslaw
River, Oregon; recapitalization of failed aviation pavement at Sector
Columbia River, Oregon; construction in Boston, Massachusetts to
support arriving FRCs; and construction in Sitka, Alaska to support
arriving FRCs.
Other (Asset Recapitalization): The budget provides $69 million for
other initiatives funded under the Procurement, Construction, and
Improvements account, including the following equipment and services:
Command, Control, Communications, Computers,
Intelligence, Surveillance, and Reconnaissance (C4ISR)--Provides
design, development, upgrades, and assistance on C4ISR hardware and
software for new and in-service assets.
Program Oversight and Management--Funds administrative
and technical support for acquisition programs and personnel.
CG-Logistics Information Management System--Continues
development and deployment of this system to Coast Guard operational
assets.
Cyber and Enterprise Mission Platform--Provides funding
for emerging Command and Control, Communications, Computer, Cyber, and
Intelligence (C5I) capabilities.
Other Equipment and Systems--Funds end-use items costing
more than $250,000 used to support Coast Guard missions, including
equipment to support operation and maintenance of vessels, aircraft,
and infrastructure.
Operations and Support (O&S)
Operation and Maintenance of New Assets: The budget provides $59
million and 297 FTE to operate and maintain shore facilities and
sustain new cutters, boats, aircraft, and associated C4ISR subsystems
delivered through acquisition efforts:
Shore Facilities--Funds operation and maintenance of
shore facility projects scheduled for completion prior to FY 2020.
Projects include: Coast Guard Yard dry dock facilities in Baltimore,
Maryland; FRC Homeport Facilities in Galveston, Texas; Electrical
Utilities for Air Station Barbers Point, Hawaii; and Housing for
Station Jonesport, Maine.
FRC--Funds operation and maintenance and personnel for
five FRCs and shore-side support for FRCs in Galveston, Texas; Key
West, Florida; and Apra Harbor, Guam.
NSC--Funds crew of NSC #9, as well as personnel for
sensitive compartmented information facility (SCIF) crews and
analytical support, and shore-side support personnel in Charleston,
South Carolina.
OPC--Funds a portion of the crew for OPC #1, as well as
shore-side personnel to develop operational doctrine for the new class
of cutter to be homeported in Los Angeles/Long Beach, California.
HC-130J Aircraft--Funds operations, maintenance, air
crews, and pilots for HC-130J airframe #12.
Pay & Allowances: The budget provides $118 million to maintain
parity with DoD for military pay, allowances, and health care, and for
civilian benefits and retirement contributions, including a 3.1 percent
military pay raise in 2020. As a branch of the Armed Forces of the
United States, the Coast Guard is subject to the provisions of the
National Defense Authorization Act, which include pay and personnel
benefits for the military workforce.
Asset Decommissionings: The budget saves $12 million and 119 FTE
associated with the planned decommissioning of one High Endurance
Cutter (WHEC) and three 110-foot Patrol Boats (WPBs). As the Coast
Guard recapitalizes its cutter and aircraft fleets and brings new
assets into service, the older assets that are being replaced will be
decommissioned:
High Endurance Cutter (WHEC)--The budget decommissions
one WHEC. These assets are being replaced with modernized and more
capable NSCs.
110-foot Patrol Boats (WPBs)--The budget decommissions
three WPBs. These assets are being replaced with modernized and more
capable FRCs.
Operational Adjustments: In FY 2020, the Coast Guard will make
investments that begin to address the erosion of readiness of the
Service while investing in new workforce initiatives:
Aircraft Federal Aviation Administration (FAA)
Compliance--The budget provides $22 million to replace obsolete
aircraft equipment and systems necessary to comply with FAA 2020
airspace requirements.
Cyber and IT Infrastructure--The budget provides $16
million and 38 FTE to mature the cybersecurity defense program. The
budget also provides funding for an information technology framework
and platform to establish a consolidated user interface primarily for
Command Centers.
Restoring Depot Readiness--The budget provides $10
million to begin to restore eroded vessel and aircraft readiness and
address critical information technology maintenance and inventory
backlogs.
Human Capital and Support Infrastructure--The budget
provides $17 million and 22 FTE to improve enterprise-wide support for
the workforce, including the transition to electronic health records
and training and support for the Coast Guard Reserve.
Counter Transnational Criminal Organizations (TCO)--The
budget provides $7 million and 26 FTE to expand the Coast Guard's
capacity to execute a multi-layered approach in the Western Hemisphere
maritime transit zone, dismantle TCOs, and secure our Nation's borders
from illicit smuggling of all kinds.
Maritime Safety, Security, and Commerce--The budget
provides $6 million and 20 FTE to strengthen the Coast Guard's marine
safety program through improved marine inspector training,
establishment of a third party oversight and auditing program,
expansion of the marine inspector workforce, and improved accession
opportunities for marine inspectors.
Mr. Maloney. Impressive example, Admiral Schultz. You
brought that in with 5 seconds to spare.
[Laughter.]
Mr. Maloney. Master Chief, no pressure. Thank you so much.
You may proceed.
Master Chief Vanderhaden. Full committee Chairman DeFazio,
Chairman Maloney, Ranking Member Gibbs, distinguished members
of the committee, thank you for the honor of appearing before
you to represent the terrific members of your United States
Coast Guard.
First and foremost, I want to say thank you for your
support for the Pay Our Coast Guard Parity Act. With each unit
I visit I hear firsthand our members' concerns about another
shutdown, and I hope I can count on your continued support to
drive this legislation through to enactment.
As I travel the country speaking with the men and women of
our mission-ready total workforce, I can see the pride they
take in serving their country. They are standing the watch,
carrying out global operations, protecting our homeland in the
maritime domain. But in order to continue to be successful,
they need more resources.
Last year's massive hurricanes in the Atlantic and gulf
coast, as well as Typhoon Mangkhut in the Pacific, devastated
communities around the United States and its Territories. The
men and women of your Coast Guard responded heroically, saving
nearly 1,000 lives and millions of dollars in property.
Each day we patrolled maritime domain, domestically and
globally, performing the multitude of missions entrusted by our
Government and the American public. This others-before-self
attitude is consistent throughout our Service, and speaks to
our core value of devotion to duty. The American people place
their trust in and count on the men and women of our Service,
and we will not fail them.
The size of the Coast Guard and the scope of their duties
requires delegation of responsibilities far down the chain of
command. We empower our junior officers and enlisted members
far beyond our sister Services, and they always make me proud.
We maximize the talents of our people and utilize every
resource to accomplish the mission. Your return on investment
for every dollar spent on a Coastie is immeasurable. With your
continued support in recapitalizing our fleet, we will enable
our dedicated professionals to excel in our missions.
Building upon the success of the National Security Cutter
and the Fast Response Cutter, the new Offshore Patrol Cutter
will provide Coast Guard tools needed to efficiently and
effectively meet our missions.
Furthermore, we are thankful for the fiscal year 2019
appropriation, which provided funding for the first Polar
Security Cutter. The Coast Guard currently operates America's
only heavy and medium icebreakers, and employs a small
specialized community of polar sailors. The unique skills
necessary to operate these ships in the high latitudes of the
Arctic and the Antarctic require specialized training and
experience. And with your support we will be able to retain and
actually grow this important workforce.
We are the world's finest coast guard, and the demand for
our Service has never been greater. However, I am concerned
about the erosion of our readiness that has negatively affected
the quality of life for our servicemembers. Our people, your
Coast Guard, deserve adequate housing, appropriate medical
services, and access to affordable child care. This country
still honors the right to employ an all-volunteer military, and
we hope to make the Coast Guard an employer of choice, by
providing benefits that offset the sacrifices that our families
endure.
Despite these challenges I am exceptionally proud to serve
in the world's best coast guard, alongside my shipmates,
including both my son and my daughter, who recently reenlisted
for the second time. Our people feel valued, and they serve
their country with pride. They enjoy coming to work, they enjoy
the missions we do, and they serve their country with pride. As
their representative before you today, it is my job to raise
your awareness of the challenges they face, which have been
caused by an erosion of readiness.
Mr. Chairman, members of the committee, on behalf of the
servicemembers of your United States Coast Guard, I thank you
for your continued support, and for the opportunity to
highlight some of the successes and challenges, and I look
forward to your questions. Semper paratus.
Mr. Maloney. Thank you, Master Chief. We are also joined by
Rear Admiral Mark H. Buzby, the Administrator for the Maritime
Administration.
Admiral Buzby, you may proceed.
Admiral Buzby. Good morning, Chairman DeFazio, Chairman
Maloney, Ranking Member Gibbs, and members of the subcommittee.
I appreciate the opportunity to testify this morning on the
President's fiscal year 2020 budget priorities for the Maritime
Administration.
Congress recognized long ago that a robust U.S. merchant
marine is critical for defending our Nation and growing our
economy. It provides the essential sealift capacity our Nation
needs to respond to domestic and international crisis. It
supports hundreds of thousands of jobs at sea and ashore. If
properly valued and supported, it offers our Nation the
opportunity to control its domestic and international commerce.
Regrettably, over the past several decades we have allowed
this indispensable national asset to erode. Today, of
approximately 50,000 large oceangoing commercial vessels
operating around the world, only 181 of them fly the U.S. flag.
Of those, only 81 operate exclusively in international trade.
The remaining 100 operate almost exclusively in domestic Jones
Act trade. This decline in ships has contributed to a drop in
the number of qualified U.S. mariners that a long-term national
emergency would require.
While commercial vessels provide sustained sealift, our
Nation relies on the 46 Government vessels of the Ready Reserve
Force for initial emergency sealift response to domestic crisis
and military deployments. However, these vessels now average 44
years of age. We struggle to maintain their readiness. While
funded by the Defense Department, the Maritime Administration
supports the Navy's surge sea left recapitalization strategy,
which includes a combination of targeted service life
extensions, acquiring and converting used vessels, and building
new vessels in U.S. shipyards.
I would add that a central challenge is the fact that our
maritime industry is not competing on a level playing field. We
are matched against lower priced foreign competitors, who
benefit from state subsidies, lax regulatory requirements, and
favorable tax policies. This is all part of their attempt to
achieve a strategic advantage against the United States.
To help ensure a strong domestic maritime industry and the
U.S. merchant marine by supporting the competitiveness of the
U.S.-flag fleet and the education and training of the next
generation of merchant mariners, the President's fiscal year
2020 budget requests $682.5 million for the Maritime
Administration.
The budget request supports the Maritime Security Program,
which provides a $5 million stipend per U.S.-flagged ship
enrolled, in return for assured access to the 60 enrolled ships
for military sealift, and to a multimillion-dollar global
intermodal network. The stipend also supports the employment of
the qualified mariners necessary to crew the Ready Reserve
Force.
The President's budget also invests in the U.S. Merchant
Marine Academy, which trains and educates leaders obligated to
serve as shipboard officers at sea and commissioned officers in
our Active and Reserve Armed Forces. It also provides funding
assistance to our six State maritime academies, which graduate
approximately three-quarters of our entry-level merchant marine
officers and, critically, includes funding for a third new
training ship. We greatly appreciate the work of those on this
committee and across the Congress who support this critical
investment in our merchant marine training infrastructure.
Finally, the request provides funding for the ship disposal
program, including support to maintain the Nuclear Ship
Savannah, while decommissioning its defueled reactor.
In brief, as a Nation we must once again prioritize
maritime issues if we are to adequately defend our Nation and
grow our economy. Mr. Chairman, I appreciate the subcommittee's
continued support of these priorities, and look forward to your
questions, sir.
[Admiral Buzby's prepared statement follows:]
Prepared Statement of Rear Admiral Mark H. Buzby, U.S. Navy (Ret.),
Administrator, Maritime Administration
Good morning, Chairman Maloney, Ranking Member Gibbs and members of
the Subcommittee. I appreciate the opportunity to testify this morning
on the President's Fiscal Year (FY) 2020 budget priorities for the
Maritime Administration (MARAD). MARAD's statutory mission is to
foster, promote, and develop the United States merchant marine and
maritime transportation industry to meet the economic and security
needs of the Nation. This budget request furthers that mission by
investing in U.S. mariner training, supporting programs that help U.S.-
flag commercial vessels compete globally, and maintaining sealift
readiness to meet national security requirements.
fy 2020 budget request
The United States is--and must remain--a maritime nation. A strong,
resilient, reliable and efficient marine transportation system is
required to keep the United States competitive in the global economy
and to maintain our military strength. MARAD's programs strengthen and
promote the U.S. merchant marine industry to ensure sealift capacity is
available to support our defense and economic security needs.
The number of U.S.-flag vessels operating in international trade
has been at historic lows over the past several years. Of approximately
50,000 large, oceangoing commercial vessels operating around the world
today, only 181 fly the U.S. flag. Of those, 81 vessels operate
exclusively in international trade. The remaining 100 operate almost
exclusively in domestic (``Jones Act'') trade. These U.S.-flag vessels
are critical to the employment base for mariners with the unrestricted
credentials and training required to crew Government ships used to
deploy and sustain our armed forces around the world. As the fleet
dwindles, so does the employment base for U.S. merchant mariners and
the U.S. shipbuilding and repair industry, which are all essential
components of national security. In addition, ensuring our capability
to participate as a nation in international maritime commerce is a
critical component to remaining globally and economically competitive.
Without U.S.-flag vessels operating in international trade, the U.S.
would become completely reliant on foreign-flag shipping services.
The Budget requests a total of $682.5 million to support MARAD's
programs in FY 2020. These resources will focus on maintaining the
competitiveness of the U.S.-flag internationally trading commercial
fleet and training the next generation of well-qualified merchant
mariners. MARAD remains committed to marine transportation policies
that improve security, address our Nation's critical maritime
infrastructure gaps, and leverage technology to meet the needs and
challenges of the marine transportation industry. MARAD works in a
variety of areas involving shipyards, ports, waterways, ships and
shipping, vessel operations, national security and strategic mobility,
ship disposal, and maritime education. A summary of the FY 2020 request
is provided below.
national security
The U.S. merchant marine is a fundamental component of our national
defense strategy. Our strategic sealift relies on a Government-owned
fleet and assured access to commercially operated U.S.-flag vessels, as
well as the intermodal networks maintained by these vessel operators,
to transport equipment and supplies to deploy and sustain our military
forces anywhere in the world. Critical to the operation of both
Government-owned and commercial U.S.-flag vessels is an adequate supply
of qualified U.S. mariners to crew them. Currently, we face significant
readiness challenges due to aging Government-owned vessels,
historically low numbers of U.S.-flag vessels operating in
international trade, and ensuring we have a sufficient number of
qualified U.S. mariners that would be needed in the event of a long-
term national emergency. I am concerned that the current fleet size
could impact our ability to quickly assemble an adequate number of
qualified mariners with the proficiency to operate large ships
(unlimited horsepower and unlimited tonnage) needed for surge and
sustainment sealift operations during a mobilization that lasts more
than six months. We may be short of the number of mariners needed to
meet crewing requirements beyond those first six months.
Maritime Security Program (MSP)
For FY 2020, $300 million is requested for the MSP, providing the
full authorized stipend level of $5 million for each of the 60 ships
enrolled in the program. The Maritime Security Act of 1996 established
the MSP, which ensures access to 60 active, commercially viable,
militarily useful, privately owned U.S.-flag vessels and crews
operating in the international trade, and the necessary global
intermodal logistics networks to move military equipment and supplies
during armed conflict or national emergency. This program also
facilitates critical employment for up to 2,400 U.S. merchant mariners
qualified to sail on oceangoing vessels, some of whom would be called
upon to crew the Government-owned fleet when those vessels are
activated, and approximately 5,000 shore side maritime professionals
each year. Participating MSP operators commit to making their ships and
multibillion-dollar global networks of intermodal facilities and
commercial transportation resources for service to the Department of
Defense (DOD) during times of war or national emergency.
Overall, the MSP fleet's military capacity is at the highest level
in the program's history. Being at full capacity bolsters the ability
of MARAD and the U.S. merchant marine to meet DOD mission requirements.
The ships and crews receiving MSP stipends have supported every U.S.
conflict since its inception in 1996, including Operations Enduring
Freedom and Iraqi Freedom, by providing cargo preference-contracted DOD
transportation services. These vessels stand ready to play a vital role
in support of U.S. military operations worldwide.
National Defense Reserve Fleet (NDRF) and Ready Reserve Force (RRF)
MARAD maintains a fleet of Government-owned vessels in the NDRF,
which include training ships on loan to the six state maritime
academies (SMAs) and the U.S. Merchant Marine Academy (USMMA or
Academy). The fleet includes 46 RRF vessels that are maintained and
ready for operation within five or ten days for transport of military
cargo to critical areas of operation. In addition to providing
strategic sealift support for DOD, these RRF vessels are relied upon to
provide support services to emergency response personnel, such as meals
and berthing, and deliver relief supplies, equipment, vehicles and
emergency personnel to impacted disaster areas during national
emergencies, including severe weather events. Our Nation has called
upon RRF and NDRF vessels to respond to several recent disasters
providing support for thousands of emergency responders.
The FY 2020 Budget for the DOD requests $352 million for MARAD to
maintain the RRF. Funds will allow MARAD to continue to provide ready
surge sealift support and special mission vessels from the RRF fleet,
and also maintain MARAD's NDRF fleet mooring sites. This request
includes an increase from FY 2019 that is necessary for maintaining the
aging RRF fleet of ships, which have an average age of more than 44
years and significantly increased maintenance, repair, and regulatory
compliance costs due to more stringent vessel inspections.
For the past year, we have struggled to maintain readiness levels
across the fleet. Older, increasingly obsolete equipment and systems
require more time and money to repair or replace, if replacement parts,
equipment and systems are even available. Thus, the escalating cost of
service life extensions is an ongoing concern. Requested funding is
needed to complete necessary repairs to comply with new regulatory
requirements, such as upgrading and installing enclosed lifeboats,
addressing exhaust emissions, and treating ballast water. MARAD is
working with the U.S. Transportation Command (USTRANSCOM) and the U.S.
Navy to address the urgent need for recapitalization of the RRF to
ensure the readiness of these 46 ships. Long-term, MARAD supports the
Navy's surge sealift recapitalization strategy, which includes a
combination of targeted service life extensions, acquiring and
converting used vessels, and building new sealift vessels in U.S.
shipyards.
maritime education and training
MARAD provides funding and oversight for mariner training programs
to produce highly skilled U.S. Coast Guard (USCG) credentialed officers
for the U.S. merchant marine. It takes many years of training to
develop the necessary mariner competencies for deck and engineering
officer positions on large vessels in international trade. An adequate
pool of U.S. merchant mariners is vital to both the peacetime
commercial success of the U.S.-flag fleet and to crew Government-owned
surge sealift vessels to deploy and sustain U.S. forces overseas in
times of national emergency.
The USMMA and SMAs support our Nation with well-educated and
trained merchant mariners entering the maritime industry who can serve
in support of military operations, national emergencies, and
humanitarian missions. The USMMA graduates an average of 225 USCG-
credentialed merchant marine officers annually who hold an unlimited
license available to crew U.S.-flag ocean-going ships. Additionally,
the combined six State Maritime Academies (SMAs) graduate approximately
900 USCG-credentialed merchant marine officers annually.
United States Merchant Marine Academy
The President's FY 2020 Budget requests $82 million for the USMMA.
Of this amount, $78 million will support Academy operations, and $4
million will fund priority maintenance and repairs to the Academy's
facilities, grounds, and equipment. These resources will enable the
Academy to effectively achieve its core responsibility to educate and
train the next generation of outstanding leaders as shipboard officers
at sea and commissioned officers in our active and reserve armed
forces. This funding will also support an approximately seven percent
increase in the size of the regiment as the Academy gets back to the
full student capacity following the completion of renovation of the
barracks.
The USMMA is an accredited institution of higher education
operating under the DOT and managed by MARAD. The USMMA offers a four-
year maritime-focused program, centered on rigorous academic and
practical STEM-based technical training that leads to a Bachelor of
Science degree, a USCG merchant mariner credential (MCC) with an
unlimited tonnage or horsepower officer endorsement, and a commission
(if offered) as an officer in the reserve or active Armed Forces.
Distinctly, USMMA graduates incur an obligation to serve five years as
a merchant marine officer aboard U.S. documented vessels or on active
duty with the U.S. Armed Forces or uniformed services. If serving in
the reserves, they must remain as a commissioned officer for eight
years.
The Academy, MARAD, and DOT are committed to ensuring the safety of
Midshipmen both on campus and during their sea year. We have
significantly improved Academy programs and procedures related to
sexual harassment and sexual assault, and are making progress to
instill a culture that does not tolerate such behavior. I am pleased
with the direction and momentum of change at the Academy, but am also
cognizant that eliminating sexual assault and sexual harassment is an
issue that requires consistent attention. As such, addressing sexual
harassment and sexual assault at the Academy and during sea year
training remains a top priority for myself, our new Superintendent,
RADM Jack Buono, and DOT leadership. MARAD will work with USMMA and DOT
leadership to not only continue to establish effective procedural
safeguards to respond to sexual assault and harassment, but to also
ensure USMMA adopts a proactive mindset to respond immediately to
conduct that enables assault and harassment. Proactive prevention
measures are also critical to creating a learning environment that will
enable the Academy to support MARAD's strategic goal of a maritime
workforce that draws from all communities across the Nation.
State Maritime Academies
In addition to providing oversight of the USMMA, MARAD provides
funding assistance to six SMAs \1\, which collectively graduate more
than three-fourths of the entry-level merchant marine officers
annually. The President's FY 2020 Budget includes $242.3 million for
SMA program support. This request includes $205 million for the
construction of a third training ship. Unlike the USMMA, SMA cadets
receive most of their sea time while sailing on board MARAD-provided
training ships under instruction by their academy, with some training
on commercial or military vessels. The current SMA training ships are
very old and must be replaced. We appreciate the support Congress has
provided for the School Ship recapitalization program, by appropriating
funding for one vessel each in FY 2018 and FY 2019. Since that first
appropriation in March 2018, MARAD has developed and implemented an
acquisition strategy, incorporated industry feedback into the ship
design, and is well along in evaluating proposals to select a Vessel
Construction Manager who will contract for the construction of the
vessels.
---------------------------------------------------------------------------
\1\ The six SMAs are: California Maritime Academy; Great Lakes
Maritime Academy; Texas A&M Maritime Academy; Maine Maritime Academy;
Massachusetts Maritime Academy; and State University of New York
Maritime College.
---------------------------------------------------------------------------
Additionally, the request provides $30.1 million to maintain the
six existing SMA training ships in accordance with the USCG and
American Bureau of Shipping requirements, and training ship capacity-
sharing measures to allow uninterrupted availability of mandatory at-
sea training opportunities for SMA cadets. Ensuring the continued
availability of SMA training vessels is a critical need and high
priority for MARAD. Training ship maintenance work is increasingly
critical and costly as the ships age and approach or exceed their
designed service life. MARAD will use the funds to sequence and address
priority maintenance needs across all the training vessels, and to
ensure that cost effective viable alternatives are available for SMAs
that require additional training capacity.
Additionally, the request provides $2.4 million to fund the Student
Incentive Program (SIP), which provides educational financial
assistance to 75 new cadets each year (across all SMAs) who participate
in this service obligation program. SIP students must maintain an
unlimited USCG credential for six years, fulfill a three-year service
obligation to serve as a merchant marine officer aboard U.S. documented
vessels, and serve in a reserve unit of an Armed Forces or uniformed
service for eight years if a commission is offered. The Budget also
includes $3 million for direct payments to provide for operational
support to each of the six SMAs, and $1.8 million for training ship
fuel payments. The SMAs regard the SIP program and support for their
training ships as among the most important recruiting tools to
encourage potential cadets to pursue a merchant marine career. These
programs and resources will also help ensure MARAD can fulfill its
commitments to National security and supporting the growth of the
Nation's maritime workforce, by creating opportunities for individuals
from all backgrounds to serve as mariners.
other maritime programs
Ship Disposal Program
The President's FY 2020 Budget requests $5 million for the ship
disposal program, including $3 million to maintain the Nuclear Ship
SAVANNAH (NSS) in protective storage, according to Nuclear Regulatory
Commission (NRC) requirements, while decommissioning of the vessel's
defueled nuclear reactor, components, and equipment is in progress. The
ship disposal funding request also includes $2 million for staff and
administrative program costs.
MARAD is the ship disposal agent for Federal government-owned
merchant-type vessels of 1,500 gross tons or greater and has custody of
non-retention ships in the NDRF. When ships are determined to be no
longer of sufficient value to merit the cost of further preservation,
MARAD arranges for their responsible disposal, with priority emphasis
on the disposal of vessels in the worst condition. Currently, MARAD has
seven obsolete NDRF vessels not yet under contract for disposal, which
is a historic low.
As a Federal licensee, MARAD is responsible for continuing the
required protective storage activities for the NSS until
decommissioning and license termination are complete. Protective
storage activities include radiological protection, vessel maintenance,
lay berthing, and custodial care. The program received funding for
decommissioning in FY 2017 to initiate and complete Phase I, and
additional funding in FY 2018 for Phase II and Phase III, fully funding
the three-phased and seven-year decommissioning project. Phase I is
comprised of administrative and industrial activities that complete the
prerequisites for commencement of the heavy engineering and industrial
activities in Phase II. Phase III is the final license termination
period before release of the vessel to MARAD for final disposition. All
decommissioning and license termination activities are on track for
completion ahead of the December 2031 required NRC deadline.
conclusion
These programs represent MARAD's priorities supported by the
President's Budget. We will continue to keep this Subcommittee apprised
of the progress of our program activities and initiatives in these
areas in the coming year.
Mr. Chairman, thank you for the opportunity to present and discuss
the President's Budget for MARAD. I appreciate the Subcommittee's
continuing support for maritime programs and I look forward to working
with you on advancing maritime transportation in the United States. I
will be happy to respond to any questions you and the members of the
Subcommittee may have.
Mr. Maloney. Thank you, Admiral.
We are also joined by the Chairman of the Federal Maritime
Commission.
Mr. Khouri, you may proceed.
Mr. Khouri. Thank you and good morning, Chairman DeFazio,
Chairman Maloney, Ranking Member Gibbs, and members of the
committee. Thank you for the opportunity to discuss the Federal
Maritime Commission's fiscal year 2020 funding request.
I am joined today by my colleagues, Commissioners Louis
Sola and Daniel Maffei.
Last year this committee was instrumental in passing the
Frank LoBiondo Coast Guard Act of 2018. The act broadened the
Commission's authority to carry out its mission to protect the
shipping public, and we are working diligently to implement the
various parts of that legislation.
The American economy relies on a competitive and efficient
ocean transportation system. To meet that requirement, the
Commission administers a focused antitrust regime tailored to
the ocean liner industry.
We continuously monitor cooperative operational agreements
filed at the Commission by ocean carriers and by marine
terminal operators. These collaborative business arrangements
allow the ocean carriers or the marine terminals to achieve
operating efficiencies and cost savings.
We closely monitor the agreement parties' business
activities, together with the broader international ocean
shipping marketplace, for signs of improper collusive or
anticompetitive behavior. We have a comprehensive and ongoing
monitoring and compliance system that is constantly evolving to
respond to changes in agreements, the industry, and the
marketplace.
Compared to the last decade that witnessed significant
changes in the ocean transportation services market, 2018 was a
more stable period for the industry. There have been no further
consolidations among the top tier of ocean carriers. There does
remain a surplus of ocean vessel capacity, and the marketplace
is highly competitive, suggesting that cargo shippers will
continue to benefit from lower freight rates offered by the
ocean carriers.
One area of uncertainty in the coming year is the
International Maritime Organization mandate for vessels to
either burn low-sulphur fuel or to install exhaust stack
scrubbers to remove the sulfur from the higher sulfur bunker
fuels. The mandate begins in January 2020. Estimated
implementation and then ongoing industrywide compliance costs
run as high as $15 billion per year.
Now, normally, ocean carriers will try to pass these added
direct costs on to shippers. The Commission is monitoring this
issue to ensure that carrier cost recovery efforts do not
violate the Shipping Act and harm U.S. exporters and consumers.
Commissioner Dye is leading an investigation to examine carrier
and marine terminal practices in assessing detention and
demurrage charges. These are fees that cargo shippers pay when
a container sits at a terminal facility beyond allowed free
time, or a container is not unloaded and returned to the ocean
carrier within an agreed period. Commissioner Dye is in the
final phase of this effort, and will present her final report
and recommendations to the Commission by September.
Regarding our budget, the Commission is an agency with a
specialized mission, requiring a small but highly skilled
workforce. We are requesting $28 million to support 128 full-
time-equivalent personnel in fiscal year 2020. Slightly more
than $24 million of this request goes to salaries and office
rent. All other expenses associated with operating the agency,
such as information technology, consulting, and outsource
services, travel, and supplies are funded from the remaining
roughly $4 million.
I am proud of the work that our dedicated FMC staff
performs every day, and the contribution our agency makes
towards ensuring competition and integrity for America's ocean
supply chain. We are grateful for the support of this committee
and its members, and I look forward to working with each of
you.
I am happy to answer any questions you might have about the
Federal Maritime Commission and its work. Respectfully, I
request the full written testimony be accepted to the record.
Thank you.
[Mr. Khouri's prepared statement follows:]
Prepared Statement of Hon. Michael A. Khouri, Chairman, Federal
Maritime Commission
Chairman Maloney, Ranking Member Gibbs, Members of the Committee,
thank you for this opportunity to appear before you today to testify in
support of the Fiscal Year 2020 budget request of the Federal Maritime
Commission and to discuss the work of the agency as well as
developments in the international ocean transportation industry we
monitor. I am joined today by my colleagues, Commissioners Rebecca F.
Dye and Daniel B. Maffei.
the federal maritime commission
The FMC is an independent agency with specialized experience in the
international ocean transportation industry. We administer a focused
antitrust regulatory regime tailored to the particular factors
affecting the ocean liner trade.
Based on economic and non-economic conditions affecting the
international ocean liner trade, Congress enacted the Shipping Act of
1916 and first constituted the United States Shipping Board. The 1916
Act provided for certain types of competitor collaborations that would
not traditionally be permitted under other antitrust statutes in order
to ensure the availability of ocean transportation and stability of the
shipping infrastructure upon which our international commerce depends.
Under the Shipping Act of 1984, as amended by the Ocean Shipping Reform
Act of 1998, Congress found that collaborative joint venture agreements
between and among ocean carriers and marine terminal operators may and
do provide efficiencies and reduced costs that ultimately benefit U.S.
exporters and saves the U.S. consumer money provided that such
agreements are review by the Commission and determined to not be
materially anticompetitive. The FMC reviews and monitors these joint
collaborations and agreements under the Shipping Act to ensure that
procompetitive efficiencies and cost savings are obtained for the
benefit of U.S. consumers, and that any anticompetitive effects are
prevented or properly mitigated.
Our Annual Report was submitted on April 1, 2019 and provides a
comprehensive summary of the Commission's activities and industry
developments in Fiscal Year 2018. Our Fiscal Year FY 2020 Budget
Justification was submitted on March 18, 2019 and provides detailed
support for our budget request.
fiscal year 2020 budget request
The FMC's Fiscal Year (FY) 2020 Budget Request is $28,000,000 to
support 128 full-time equivalent positions (FTEs). This funding level
builds on the Commission's FY 2019 budget request of $27,490,000 and
primarily reflects necessary increases in operating costs and
information technology modernization.
The FMC is a small agency with a technical, commercial, and
competition focused mission requiring a specialized workforce. The
great majority of our budget, $24,057,000, goes to Personnel
($20,638,000) and Rent ($3,419,000). All other costs associated with
operating the agency such as interagency expenses, utilities,
information technology, travel, supplies, equipment, miscellaneous
purchases, and consulting services are funded from the remaining
$3,943,000.
The FMC staff includes a high percentage of economists and
attorneys--career fields that tend to command higher compensation in
order to successfully recruit and retain qualified candidates. The
agency must continue to invest in our workforce, particularly in
attracting and retaining the economists and transportation analysts who
perform the critical economic analysis and oversight of the
marketplace. Overhead costs such as interagency services, commercial
services, travel and transportation, supplies, and equipment account
for most of the remaining budget dollars. We constantly work to find a
balance between our resources and our workload, working to prioritize
our mission-critical activity.
lobiondo legislation
On December 4, 2018, the ``Frank LoBiondo Coast Guard Authorization
Act of 2018'' was enacted as Public Law No. 115-282 (LoBiondo Act).
Most of the changes are aimed at broadening the Commission's authority
and increasing the tools at the Commission's disposal to carry out its
mission. It makes several changes and places further restrictions on
cooperation between or among ocean carriers and marine terminal
operators (MTOs). These changes include: removing antitrust immunity
for certain activities; prohibiting certain joint procurement
activities; restricting overlapping agreement participation; and
modifying the legal standard for enjoining agreements to jointly
procure certain services. The LoBiondo Act also expands and clarifies
the Commission's authority to seek information from MTOs, and, during
agreement review, to seek information from interested parties other
than the filing parties. The legislative history reveals that many of
these provisions were intended to address concerns regarding carriers'
ability to form alliances and then collectively negotiate with certain
domestic service providers, and the potential impacts on shippers and
such port service providers. H.R. Rep. No. 115-1017 at 5-6 (2018).\1\
---------------------------------------------------------------------------
\1\ H.R. Rep. No. 115-1017 accompanied H.R. 2593, an earlier
authorization bill that contained several of the provisions later
incorporated in the Authorization Act.
---------------------------------------------------------------------------
The Commission applauds the Committee's work on this important
legislation. We are diligently working on the LoBiondo Act's
implementation and I assure the Committee that the additional
authorities provided in the legislation will be implemented and
enforced by the Commission as intended by Congress.
industry developments 2018
The container shipping industry plays an integral role in America's
international trade and commerce. American importers and exporters rely
on container shipping to meet domestic retail demand, to provide the
inputs manufacturers require, and to allow our companies and farmers to
reach markets overseas.
In FY 2018, approximately 35 million TEUs (twenty-foot equivalent
units) moved through our Nation's ports, a 5 percent increase from FY
2017. The U.S. imported over 23 million TEUs last fiscal year valued at
$803 billion. This was an increase of over 6.3 percent by volume from
FY 2017. In the same period, the U.S. exported approximately 12 million
TEUs in FY 2018 with a value of $290 billion, a 2.7 percent increase
over FY 2017 by volume. The U.S. share of the world's container trades
was 16 percent, down slightly from FY 2017. Primarily as a result of
continued growth in U.S. imports, the U.S. container trade imbalance
worsened in FY 2018. Such imbalance is measured by the number of
imported loaded containers versus exported loaded containers. For every
100 loaded export containers shipped from the U.S., 195 loaded
containers were imported into the U.S. For FY 2017, that metric was 190
loaded import containers.\2\
---------------------------------------------------------------------------
\2\ Source: PIERS Interactive.
---------------------------------------------------------------------------
The last decade has seen significant changes to the ocean
transportation services marketplace. Mergers and acquisition activity
among shipping lines and the bankruptcy of a top-ten ocean carrier
reduced the number of major ocean carriers serving the international
trade. Further, the formation of three global alliances--2M,\3\
OCEAN,\4\ and THE \5\--then realigned the operation of the U.S. east-
west trades. Compared with prior years that experienced these changes,
2018 was a more stable period for the container shipping industry.
---------------------------------------------------------------------------
\3\ The 2M Alliance carriers are Maersk Line and Mediterranean
Shipping Company.
\4\ The Ocean Alliance carriers are CMA CGM, COSCO Shipping Line,
Evergreen, and Orient Overseas Container Line.
\5\ THE Alliance carriers are Hapag Lloyd, ONE, and Yang Ming.
---------------------------------------------------------------------------
2019 industry challenges
The calm of 2018 suggests the ocean carriers are in a settling
period, assimilating companies they have acquired or merged with while
adjusting to the new marketplace structure. Nevertheless, the industry
faces business and operational issues that may challenge their revenues
and financial health.
Excess Capacity
There continues to be a surplus of carrier vessel capacity compared
to global trade volumes. Shipping lines traditionally address this
imbalance by offering lower freight rates in order to fill vessels or
maintain an individual carrier's market share. Ocean freight rates have
been relatively flat over the past decade, 2009-2018. Average revenue
(rate per container) from China to the U.S. West Coast declined by
nearly 17 percent in nominal terms. However, adjusted for inflation,
real rates are 29 percent lower over this period. This decline provides
an insight into the competitive pressure ocean carriers face as well as
the real value ocean transportation has provided to American companies
through consistently low ocean freight rates. In terms of growth, the
vessel capacity of the ocean lines continues to expand through new
vessel building at a rate that exceeds the growth in global trade
volumes.
IMO 2020 Low Sulphur Rule Requirement
An International Maritime Organization (IMO) Rule, commonly
referred to as ``IMO 2020'', requires ocean carriers, beginning in
January 2020, to burn low sulfur fuel that has a 0.5 percent sulfur
content or install exhaust scrubbers in order to continue to run their
vessels with heavy bunker fuel that contains 3.5 percent sulfur
content. The low-sulphur requirements could boost ship fuel costs by as
much as one third, and estimates run between $10 to $15 billion dollars
a year in additional costs for ocean carriers. There is uncertainty
about how some ocean carriers will comply with the IMO requirements,
whether adequate supplies of low-sulphur fuel will be available,
whether adequate supply of scrubber equipment will be available, and
how individual ocean carriers will try to pass on part or all of these
additional costs to cargo shippers.
The Commission is monitoring this issue because of our interest in
an efficient marketplace and to ensure that carrier efforts to recover
costs associated with the new standards do not violate the Shipping
Act. A primary concern to the Commission under the Shipping Act is
whether ocean carrier bunker charge adjustment formulas are clear and
definite.
review of ocean carrier and marine terminal operator agreements
Ocean Carrier Agreements
As noted above, nine of the major ocean carriers serving the U.S.
trades have organized themselves under the Shipping Act into three
major global alliances--2M, OCEAN, and THE. These alliances are joint
operating agreements of ocean carriers where they are allowed to
discuss and agree on the deployment of specific service strings of
vessels in various trade routes. Each alliance operates multiple
services in the major Trans-Pacific (Asia-U.S. and Canada), and Trans-
Atlantic (Europe-U.S. and Canada) trades. These three alliances supply
80 percent of the vessel capacity in each of these trade lanes.\6\
---------------------------------------------------------------------------
\6\ Source: PIERS Interactive.
---------------------------------------------------------------------------
By all accounts, the marketplace for containerized ocean
transportation services remains open and highly competitive. The
Herfindahl-Hirschman Index values for the Trans-Pacific and North-
Atlantic trade lanes reveal that the marketplace remains
unconcentrated. Smaller companies in specialized trades continue to
exist and there are even new market entrants. No one company, even
among the top carriers, has a dominant position in trade volumes to or
from the United States. At year end, for U.S. combined import and
export trades, the market share for all container operators were as
follows: Maersk (13.2%), CMA CGM (12.8%), MSC (12.6%), COSCO/OOCL
(12.0%), Ocean Network Express (10.8%), Hapag Lloyd (8.5%), Evergreen
(7.7%), Yang Ming (3.9%), HMM (3.8%), Zim (2.6%), and all other
combined carriers such as Crowley, Seaboard, PIL, SM Lines, Wan Hai,
Matson, and ACL (12.1%).\7\
---------------------------------------------------------------------------
\7\ Source: PIERS Interactive.
---------------------------------------------------------------------------
As discussed below, a critical function of the Federal Maritime
Commission is to ensure that these carrier agreements do not violate
the Shipping Act's competition standard.
Marine Terminal Operator Agreements
There are 276 Marine Terminal Operators along the U.S. East, Gulf,
and Pacific coasts that are registered with the FMC. The Commission
oversees 89 port and MTO joint and/or collaborative agreements among
these operators. To facilitate operations, some U.S. marine terminals
enter into agreements on rates and/or terminal charges, or to cooperate
in their daily terminal operations and related practices.
The demands of significantly bigger vessels unloading larger
numbers of containers at each port call demands more of marine
terminals in terms of productivity and infrastructure. As a result,
ports and marine terminal operators have filed agreements to combine
aspects of their operations, finance necessary infrastructure
improvements, increase terminal velocity, develop collective solutions
to mitigate cargo bottlenecks, and a host of other business activities,
all aimed at enhancing their ability to compete against other ports for
cargo.
In recent years, it has become increasingly important for ports and
marine terminal operators to address and mitigate air quality and
traffic congestion impacts on their local communities. Ports use
agreements filed at the Commission to address environmental and
community impact issues that require coordination within a port or
region.
Ports and MTOs use agreements filed at the Commission to address
concerns that require a collective solution. For example, the supply of
chassis in ports is critical to moving containers into and out of the
ports. FMC-filed agreements have been used to help ports and MTOs in an
area or region to manage chassis availability.
competition and integrity for america's ocean supply chain
Ensuring Competition
At the heart of the mission of the Federal Maritime Commission is
ensuring a competitive and reliable international ocean transportation
system that supports the U.S. economy and protects the public from
unfair and deceptive practices. We keep constant oversight of the
marketplace in general and the specific monitoring of ocean carrier
and/or marine terminal operator behavior under agreements filed at the
Commission. The FMC monitors agreements, service contracts, and tariffs
in key trades as barometers of market cycles and shifts in the balance
of supply and demand.
The reporting requirements mandated by the Commission for the
purposes of marketplace and agreement monitoring are not static. The
Commission continuously refines procedures and requirements to help us
better monitor and interpret developments in the shipping industry.
The Commission may challenge an agreement in Federal District Court
during the 45-day initial agreement filing period or any time after the
effective date if we find evidence that service levels, freight rates,
or charges by and among a group of ocean carriers or MTOs operating
within an agreement are not reflective of the overall prevailing market
conditions.
Ensuring Integrity
The FMC engages in a variety of activities to protect the public
from financial harm, including licensing, registration, and monitoring
of financial bond requirements for over 6,000 ocean transportation
intermediaries (OTI) \8\; periodic auditing of these OTIs,
investigating and prosecuting unreasonable or unjust practices, ruling
on private party complaints alleging Shipping Act violations, and
helping mediate and resolve disputes concerning the shipment of goods
or the carriage of passengers. These activities contribute to the
competitiveness, integrity, fairness, and efficiency of the Nation's
import and export supply chains and ocean transportation system. In
addition, the FMC ensures that passenger vessel operators maintain
proper financial coverage to reimburse cruise passengers in the event
their cruise is cancelled or to cover liability in the event of death
or injury at sea.
---------------------------------------------------------------------------
\8\ Ocean Transportation Intermediaries include non-vessel
operating common carriers and ocean freight forwarders
---------------------------------------------------------------------------
removing regulatory burdens, clarifying the shipping act, and removing
obstacles in the ocean supply chain
The Commission systematically reviews its regulatory requirements,
interpretations of the Shipping Act, and processes for efficiency and
effectiveness. A valuable and important role for the Commission is its
ability to bring stakeholders together and facilitate workable
solutions to problems.
Regulatory Reform Initiatives
The Commission established a Regulatory Reform Task Force in March
2017 with Managing Director Karen V. Gregory assigned as the Task Force
leader. Since its establishment, the Task Force has undertaken a
comprehensive examination of Commission rules and regulations,
published notices and solicited the views of the public as part of the
process, and released a strategy and time schedule for achieving those
priorities.
41102(c) Interpretive Rule
Effective December 17, 2018, following full notice and public
comment procedures, a new Commission interpretive rule clarified for
the industry and shippers the FMC's jurisdictional and evidentiary
requirements when alleging conduct that would violate the Shipping
Act's prohibition on unjust or unreasonable practices under 46 U.S.C.
41102(c). Pursuant to this rule, a common carrier, OTI, or MTO must
engage in a practice or regulation in a normal, customary, and
continuous basis and such practice or regulation must be found to be
unjust or unreasonable in order to constitute a violation of the
Shipping Act. This interpretation restores the standard of what
constitutes a violation under section 41102(c) of the Shipping Act to
its traditional and proper definition under the Shipping Act of 1984,
reflects longstanding Commission case law and related legal precedent,
and reflects the clear intent of Congress.
Fact Finding 28
On March 5, 2018, the Federal Maritime Commission initiated Fact
Finding Investigation No. 28, a non-adjudicatory investigation into the
practices of vessel operating common carriers and MTOs relating to U.S.
demurrage and detention charges. Demurrage is the charge per container
for the use of ground space at the marine terminal. Detention is the
charge by the ocean carrier for use of the container equipment. All
charges are subject to a set number of free days.
The Commission designated Commissioner Rebecca F. Dye as the Fact-
Finding Officer and directed her to develop a record through public or
nonpublic sessions, and issue interim and final reports and
recommendations. In April 2018, Commissioner Dye issued an Information
Demand on ocean carriers and marine terminal operators that provided
the informational foundation for her investigation. The second phase of
her work consisted of field interviews that took place at the Ports of
Los Angeles and Long Beach, the Port of Miami, and the Port of New York
and New Jersey. As a part of that phase of her investigation, she also
conducted interviews in Washington, D.C.
The Fact-Finding Officer conducted the investigation and issued an
Interim Report on September 4, 2018 finding that bringing clarity,
access, and efficiency to the delivery of cargo from carrier to shipper
is key to improving the process for how and when detention and
demurrage charges are levied. The Interim Report also considered
organization of Innovation Teams of industry leaders to meet on a
limited, short-term basis to refine commercially viable demurrage and
detention approaches. On December 3, 2018, the Fact-Finding Officer
issued a Final Report. The Commission approved the Fact-Finding
Officer's Final Report on December 7, 2018.
The work of Innovation Teams consisting of industry experts who are
part of the ocean freight transportation system and global supply
chains commenced the next phase of Fact Finding 28. The Teams met with
Commissioner Dye at the Commission in early April and considered four
areas identified in the Fact Finding 28 Final Report as offering the
best opportunities to refine commercially viable demurrage and
detention approaches: (1) transparent and standardized language for
detention and demurrage practices; (2) clear, simplified, and
accessible billing and dispute resolution practices for detention and
demurrage charges; (3) evidence that would be relevant to resolving
demurrage and detention billing disputes; and (4) consistent notice to
cargo interests of container availability.
A report to the Commission on the Innovation Teams, Commissioner
Dye's findings, and any possible recommendations she may make, is
scheduled to be filed by September 3, 2019.
conclusion
I am proud of the contribution our agency makes toward ensuring
competition and integrity for America's ocean supply chain. The
Commission is grateful for the support of this Committee and its
Members. I look forward to working with each of you. I am happy to
answer any questions you may have about the jurisdiction, work, or
budget request of the Federal Maritime Commission.
Thank you.
Mr. Maloney. I thank the gentleman and will now proceed to
Members' questions. I begin by recognizing myself for 5
minutes.
Admiral Schultz, you were good enough to spend some time
with me in District 7 recently. You saw the incredible work we
are doing in the Joint Interagency Task Force. We saw the work
you do from the Bahamas and Turks and Caicos. We spent some
time together on the U.S. Coast Guard cutters Isaac Mayo and
Bear. You were good enough to dangle me out of the back of an
C-140. And I remember a young man named Kyle Suga, who was our
boatswain's mate, BM1, who piloted that OTH boat up into the
back of the Isaac Mayo and notched it up there pretty good. Not
a bad day's work for a young man carrying the Coast Guard
Commandant and the chairman of his oversight committee.
And I want to ask you sir, because I know you are a
straight shooter and you care about your Coasties, since you
and I met first at Michael Kozloski's funeral in Mahopac, New
York. The President's budget would take $1 billion a year out
of your capital plan, out of your PC&I. I am not going to ask
you to opine on that, except to tell us, sir, what would that
mean? If we took at face value the President's budget request
of $1.2 billion, what would that mean for the United States
Coast Guard? What would you do?
Admiral Schultz. Well, Chairman, first, thank you for
spending some time with the men and women of the Coast Guard.
And obviously, I think that had an impact on your awareness of
what our folks do to support the security of the Nation.
You know, your question, specifically on the capital
budget, sir, I would tell you the 2020 budget submitted by the
administration here--you know, forwarded by the Coast Guard up
to the Department--does focus on our key acquisition
priorities. First and foremost, the Offshore Patrol Cutter I
mentioned in my opening statement: That will be about 70
percent of our offshore capability when we build out that fleet
of 25 cutters.
There is the second Offshore Patrol Cutter funding,
production funding. There is long lead materials for the third
and fourth cutter in that class, the Polar Security Cutter
program. There is bridging monies, about $35 million.
You know, the 2019 budget included a big lift of $675
million. If you look at about a 6- to 8-year trajectory on our
capital budget, as proposed versus enacted, we have been the
benefactors of a lot of strong congressional support on Coast
Guard acquisitions. But there has been a slight continuous
uptick: 2019 had that $675 million on top of that trajectory;
2020 is an off-year, in terms of big funding for polar
security; as we get into 2021, 2022, 2023 our goal would be to
build out three Polar Security Cutters, the program of record,
between now and 2027, 2028.
So I think that some of that $1 billion you talked to, sir,
is accountable with the noninclusion of $675 million for the
Polar Security Cutter in 2020. This is a bridging year. The $35
million allows us to keep the program of record moving forward,
program management. It is not a big amount of money. But I
think, sir, we can stay on track with that.
Mr. Maloney. And Master Chief, that young man, Kyle Suga,
you know, what he said to me on that boat that day was, ``What
I like about the Coast Guard is, if you do your job, it takes
care of its own. The Coast Guard takes care of its own, and the
Coast Guard will have your back.''
What are your concerns about the retention and development
of young men like that, your young Coasties, when you look at
this budget?
Master Chief Vanderhaden. I am glad you had a good
experience with them. Our boat drivers are some of the best
boat drivers in the world, and I am thoroughly impressed with
them every time I am out with them, as well.
So, you know, we are wringing every efficiency we can out
of the training system. We could use assistance with operations
and support funds. That has been fairly flat over the years,
and as the new assets come online, and they are a little bit
more expensive to maintain, we are having to find those offsets
from other places. And they are coming from some of the places
that affect our quality of life.
I would like to be able to offer them a little better
conditions for their housing, a little better opportunities for
training. And, you know, just basically take care of their
families a little bit better through more opportunities for
daycare affordability, things like that. Those are the things
that take away from their focus while they are at sea. So I
want them to take care of their families and take care of the
things back home, and make sure they have everything they need
to be successful, so they can focus on the mission.
Mr. Maloney. I thank the gentleman. Admiral Buzby, we have
a terrible shortage of mariners in this country. What should we
be doing to fix that?
Admiral Buzby. Sir, the most direct way we can fix that
shortage is by having more ships at sea for them to be
employed. Quite simply, that is how we are going to grow our
mariner pool. They have to have some place to work. So we have
to have a larger fleet, be it a Jones Act fleet and
internationally trading fleet, to have employment places for
those mariners to practice their trade and to be promoted.
Mr. Maloney. Thank you, sir.
Mr. Gibbs?
Mr. Gibbs. I thank the chairman. Thank you.
Admiral Schultz, I want to talk a little bit more about the
budget request--and pretty bipartisan here, I guess--some
similar questions.
When I look at the procurement, construction, and
improvements account, I am told that we are 10 years behind on
cutter acquisitions, 15 years behind on acquisition for new
heavy icebreakers, nearly $2 billion behind on shoreside
facilities construction, $1 billion behind on shoreside
facility maintenance, no plan to replace our HH-65 helos, a
number of outdated freestanding databases.
I guess my first question--I haven't heard anybody mention
IT systems. You know, I guess replace the aging, freestanding,
you know, incompatible databases currently limiting the Coast
Guard's mission and your effectiveness.
So, Admiral, you want to comment on this part of the
budget, but then also comment on what your thoughts are about
improving our IT capabilities?
Admiral Schultz. Sure, Ranking Member Gibbs. I appreciate
the question. We absolutely do have an aging and arguably
obsolete enterprise mission platform, what we call the system
that all our applications ride one. And we are focused on that.
What we have included in the 2020 budget is--the first
time--it is a PC&I acquisition-side $14 million line item that
starts to tackle that problem. You know, that is a big
undertaking. We are watching what Department of Defense is
doing as they talk about JEDI and a cloud-based application. We
are actually going to the cloud this summer with some specific
applications, the auxiliary data system that the--so we are
informing our own knowledge, we are--we have got our--what we
call our CG6, that is our technical folks, smart folks there.
They are mapping a roadmap for us. This is a big function. It
has got to be a step function.
I am not sure, when I took over last summer on 1 June, I
anticipated this requiring my attention as soon as it did. But
I think on my watch we will be laying the groundwork for a
major recapitalization of our enterprise mission platform, and
we are starting to do that in 2020 with this budget request,
which is encouraging to me.
What we have got to do is get our brain around exactly how
you do that. We fielded about 1,100 what we call mobility
devices, iPads, to the field so we can have men and women
actually bring some of the technology that is out there
societally that these young bright men and women want to have.
They don't want to do their work, write down notes, go back and
spend hours at the office, when we should be able upload that
stuff in the field.
So we are working this on an enterprise basis, we are
working on a field that mobility--it has created a sense of
urgency to the folks that manage this, to say now that we put
those iPads in people's hands, you know, how are we going to
give them the technology? Initially, it was a replacement for a
bunch of books in a backpack. We are starting to see some
solutions now in innovation that sort of forced ourselves to be
a little bit more forward leaning. So I am encouraged by that,
sir.
Mr. Gibbs. I appreciate it. In prior years the capital
investment plan was required with the President's annual budget
request, and a change in the law was required to submit the
plan 60 days after the President's annual budget request.
I was told that Friday the committee still has not received
that capital investment plan. When would we expect to receive
that 5-year plan? And will the Coast Guard efforts to modernize
Coast Guard databases such as MISLE be trackable through future
capital investment plans, or will those efforts use operating
funds?
Admiral Schultz. Congressman Gibbs, that capital 5-year
investment plan for 2024 is in the pipeline, clearing the
administration. We also owe you the unfunded priority list,
which is in the same clearing process. I don't ultimately own
the final--you know, when those are released.
Mr. Gibbs. Yes.
Admiral Schultz. But my understanding is they are moving
through the process. I hope they would be imminent. We would
welcome the opportunity to come back and brief yourself or the
committee staff when available.
Mr. Gibbs. Thank you. Also, we got a new polar icebreaker.
And when do you expect the first one to be commissioned, in
2023?
Admiral Schultz. Congressman, the way the recently awarded
contract the VT Halter was rolled out, it is rolled out with a
2024 deliverable date, but there is incentives in there for
early delivery, possibly, you know, walking that back into
fiscal 2023. But contractually, it is in 2024, with the options
of pulling that left here a little bit earlier into 2023.
So I am optimistic, you know, that we will meet the 2024,
and we will see where the next year and a half plus really
completes the detail design of this first Polar Security
Cutter. So there is--we haven't built a ship like this in the
Nation here in many, many years. So I think we will see where
that goes. But 2024 is the no-later-than date, sir.
Mr. Gibbs. Is it correct to think that the majority of the
time of the Polar Security Cutter will be used in Antarctica to
break out the research base down there, or would see additional
operating time available in the Arctic? As I know my
predecessor, Don Young, would say, Alaska.
Admiral Schultz. Well, Ranking Member Gibbs, I would tell
you this. My strategy that I have coined since day one on the
watch has been a 6-3-1 strategy: six icebreakers; the minimum
of three are heavy, what we designated, now Polar Security
Cutters; the conversation on the one was one now. And one,
obviously, now doesn't translate to the previous question of
2023, 2024.
The first cutter will be almost a direct one-for-one for
the Polar Star. That mission is an essential mission. I
mentioned in my opening statement about a 105-day trek to sail
out of its home port, get down there, break out into McMurdo.
But there is probably 60, 85 days of shoulder dates
availability that I think we would anticipate that first Polar
Security Cutter spending some time in the Arctic. When you get
into the second and third hulls, we are having a conversation
about a lot more of a persistent presence in the Arctic. So we
would be represented in both high latitude areas, sir.
Mr. Gibbs. My time is up, Mr. Chairman, but just one quick
statement. The Great Lakes also needs another icebreaker. My
time is up.
Mr. Maloney. I thank the gentleman.
Mr. DeFazio?
Mr. DeFazio. Thanks, Mr. Chairman.
Admiral, I read a news article yesterday that Senator Rubio
inserted a provision into the pending disaster assistance that
would allow renegotiation or negotiation of the fixed-price
contract to the Eastern Shipbuilding Group; their justification
is their shoreside facilities were damaged. Of course, I am
pretty sure they had insurance. They say their labor costs are
up. But I question whether or not this has something to do with
their original bid, which some thought was low.
I would like to know, as you move forward, if this is
authorized, what are the factors that are involved in this?
Because we don't want someone to bid low, get a contract, and
then use a hurricane as an excuse to change a no-bid contract
and then up the price to the Coast Guard. So I have concerns
there.
And I particularly--I have got to say I have got concerns
when a former Commandant is in the news saying now he is going
to have authority to negotiate with the Coast Guard. That
concerns me a little bit. So that is one point.
I am also concerned about the polar icebreaker contract. My
understanding is there was a value to Government that is
rumored to be worth $120 million per ship. When I was at the
White House a few weeks ago, the President was quite upset at
the price tag per ship. And I guess--I know that--I don't know
if it is from protest or not, but I certainly would like to
know what is the value per ship, and what was the number? Was
it really $120 million? And what is the value, since apparently
other bids were considered qualified, but this was a greater
value?
So those are not really questions, those are requests that
I am making to you today.
Master Chief, I got 187 people on the bill to pay the Coast
Guard when we shut down. I hope we won't shut down. I put my 2
cents' worth in on how we might not shut down the Government.
We shouldn't pass the DoD appropriations bill--because they get
paid--until we have negotiated and passed. Mick Mulvaney in the
White House did not have a shutdown, and in that case none of
our servicemembers will be paid, and then perhaps that will
bring a quick halt to any stupid shutdown that radiates from
downtown.
And I appreciate your concerns, and I know it hurt morale a
lot, and I really don't want people anticipating that this is
going to happen again.
Admiral Buzby, I would just like again--in my conversations
at the White House on infrastructure, the issue has come up of
the Jones Act, and I am told we really don't need the Jones
Act. And particularly the President's chief economist says we
should be competitive. And I asked him, well, so should we
compete with the Communist Government of China selling things
below cost? He didn't have much of an answer for that.
I mean do we get competition under the Jones Act? Is there,
you know, still somewhat of a robust shipbuilding industry in
the United States of America?
Admiral Buzby. Yes, sir, we do. There are a lot of Jones
Act carriers, and there is pretty robust competition between
them. So it is not a free-for-all, by any means. And it is
absolutely critical to our ship--we would not have a domestic
shipbuilding industry, save for Government contracts, if we
didn't have a Jones Act.
Mr. DeFazio. I think there are at least two fleets that
supply Puerto Rico. And aren't they both undergoing major
renovation of their fleets, in order to better serve Puerto
Rico?
Admiral Buzby. Both TOTE Maritime and Crowley Services have
just inaugurated two new ships each, both are all LNG-burning
ships, they are the most modern ships out there right now that
have been invested in that market.
Mr. DeFazio. Right. The Governor of Puerto Rico has
recently said they could do better if they just went into the
international market. Do you think it is likely that little,
tiny Puerto Rico would be able to get daily or weekly service
out of Jacksonville, Florida, from the international shipping
conglomerates?
Admiral Buzby. I am sure, if there was a business case for
some shipping company to do that, that they would do that. I
think it would come down to finding, you know, the economic
conditions that would permit that. I don't know of those, off
the top of my head.
Mr. DeFazio. OK, thank you.
Admiral Buzby. What they may be.
Mr. DeFazio. I thank you, Mr. Chairman.
Mr. Maloney. I thank the gentleman. I was remiss in not
recognizing a former colleague of ours, the distinguished Dan
Maffei, from central New York. Good to see you again. Nice to
know there is successful life after Congress. You give us all
hope. He served his constituents in central New York so well.
Mr. Weber?
Mr. Weber. Thank you, Mr. Chairman. Gosh, I don't know
where to start.
Admiral Buzby, you said in your comments earlier I think
there are 50,000 vessels worldwide?
Admiral Buzby. Yes, sir, 50,000 oceangoing, large
oceangoing vessels.
Mr. Weber. OK. And you said 180 of those fly the U.S. flag?
Admiral Buzby. 181. Yes, sir.
Mr. Weber. Well, who is keeping score? One hundred and
eighty-one. Thank you. You said 80 of those are international?
Admiral Buzby. Eighty-one.
Mr. Weber. Eighty-one? I can do this. OK.
Admiral Buzby. And 100 are large Jones Act ships.
Mr. Weber. OK. And then you also mentioned having budget
funding for a third new training ship.
Admiral Buzby. Yes, sir.
Mr. Weber. Now, you know, I am from the gulf coast of
Texas, and we happen to have an academy down there. I don't
know if you all are aware of that or not.
Admiral Buzby. A fine academy, sir.
Mr. Weber. Yes, sir, we would argue the best academy of the
six, of course. Things are bigger and better in Texas.
And so, you know, we are working on a ship. You are aware
of the ship that they have down there.
Admiral Buzby. Yes, sir.
Mr. Weber. Do you know how many cadets it houses, holds?
Admiral Buzby. About 50 at a time for training. Yes, sir.
Mr. Weber. OK. About 50 at a time. And how does that
compare with the other academies, do you know?
Admiral Buzby. Michigan Maritime has the same class of
ship, so very similar.
Mr. Weber. All right.
Admiral Buzby. New York and Massachusetts both have ships
on the order of 600 cadets each.
Mr. Weber. Right.
Admiral Buzby. Both Maine and California have ships that
hold on the order of about 350.
Mr. Weber. Does Michigan get a lot of hurricanes?
Admiral Buzby. None that I am aware of. They get a lot of
storms, but no hurricanes.
Mr. Weber. Well, Admiral Schultz knows, the great Coast
Guard was down when Hurricane Harvey came through, and it was a
big thing, and we really appreciated that. The Coast Guard was
fab on helping with that, and we sure appreciate that.
Of course, I am pushing for another big ship. Of the six
training academies, do you know the count of cadets in each
academy, offhand? This semester, for example.
Admiral Buzby. Yes, I know each--for instance, I think
Texas graduates--they have two graduations a year. I think they
graduate on the order of 150 or so per graduation.
Mr. Weber. How does that compare to the other five lesser
academies?
Admiral Buzby. Well, I know Kings Point is going to
graduate about 230 this year. Maine and New York just had their
graduations recently, on the order of the low 200s.
Mr. Weber. OK. So we would agree that we really need
funding for another ship. Would you agree with that, Admiral?
Admiral Buzby. I would agree that all of the training ships
are in need of replacement. Yes, sir.
Mr. Weber. Right. Well, we are hoping that we can get them
the budget. I have to hope and pray and believe that maybe the
President's budget is an attempt to push way down low to see
where we can come back up and we can get you all funded. We
want to be sure that we fund the Coast Guard.
I am on the bill, I think the chairman said--how many
signatures--182 or 183 on the Pay Coasties bill. So we are glad
to see that.
A couple of questions for you. You mentioned Crowley
Services and LNG in Puerto Rico under the Jones Act, for
example. Now, for us LNG is huge. We would also like
shipbuilding in our country to come up to that level. You did
mention in your exchange with the chairman, I think, that you
felt like there is a good shipbuilding industry, but I would
argue that we want it even better, and we want to keep the
Jones Act, and we want to make sure that we can train more
mariners.
I was looking over some of the notes here on training
mariners. One of the things that--you say you have--a shortfall
of mariners exists. And is that across all sectors of the
industry?
Admiral Buzby. The 1,800 number that I have used in the
past, that is primarily unlimited tonnage, unlimited
horsepower, oceangoing mariners.
Mr. Weber. I was curious. The Master Chief called them boat
drivers. I thought maybe pilots, or captains, or whatever. But
do the credentials of those qualified mariners match the needs
of the surge sealift vessels?
Admiral Buzby. Yes, and those are the ones that I am
primarily interested in. While all mariners are important to me
for the----
Mr. Weber. Sure.
Admiral Buzby [continuing]. Across the industry, the
mariners that I am going to need to flesh out the crews on the
Ready Reserve Force ships are limited horsepower, limited
tonnage mariners.
Mr. Weber. How can you do that? How can we do that?
Admiral Buzby. Well, again, it kind of comes back to kind
of the earlier question. We have to have enough of a peace time
commercial merchant marine in order to have jobs for those
people, in order to progress. A lot of what we are--you know,
we are graduating a lot of new midshipmen every year, a lot of
new mates and engineers.
Mr. Weber. Right.
Admiral Buzby. But they are not staying all the way
through, because they don't have the opportunities for many of
them to----
Mr. Weber. Sure.
Admiral Buzby [continuing]. Progress all the way to master
or chief engineer.
Mr. Weber. I appreciate your focus. And I appreciate this
hearing, Mr. Chairman, and I am so looking forward to getting
that extra funding for our Galveston Academy. And I yield back,
Mr. Chairman.
Mr. Maloney. I appreciate the gentleman, appreciate my
friend from Texas listing the fact that everything is bigger
and better in Texas, except when compared to New York,
apparently.
[Laughter.]
Mr. Maloney. Mr. Garamendi?
Mr. Garamendi. Thank you, Mr. Chairman. I have a whole lot
of questions here.
First of all, for all the Members here, this is the
maritime subcommittee. We have been trying for about 6 years to
get a Congressional Gold Medal for the merchant mariners of
World War II, who had the highest death rate of any of the
Services. So I would appreciate all the Members signing on to
that. We need a whole lot of names, so keep that in mind, and
we will be around.
Now, moving on. Admiral Schultz, what is the cost of the
Polar Security Cutter?
Admiral Schultz. The contract award here was for $749
million. Coupled with some previous years' appropriations,
there is about $300 million available. I anticipate that first
ship is going to be north of $900 million. We hope hulls 2 and
3 would probably come down below $700 million. It is a little
premature, but those would be my rough order of magnitude
numbers, sir.
Mr. Garamendi. So to meet your 6-3-3 cutter, or----
Admiral Schultz. The 6-3-1, sir, the----
Mr. Garamendi. Yes, would be somewhere--what, $2 billion,
$2\1/2\ billion?
Admiral Schultz. Congressman, the award is for, you know,
the initial ship and an option for two additional ships, a
total of three hulls. The conversation--you know, additional
icebreakers was possibly--you are looking at maybe something
less than a heavy breaker to fill the need.
We may find, as we get into production, that we have, you
know, stable requirements, stable funding, predictable funding
that--the differentiation between this heavy Polar Security
Cutter and something that looks--from a cost--but we would have
to have those puts and takes. It is premature, but I think,
sir, it is about $1.9 billion on the first three, and then we
would inform the conversation on what we are talking about
beyond hull 3.
Mr. Garamendi. There was a gee whiz moment for the U.S.
Navy this last 18 months, and that is, oh my God, the Arctic is
opening up. Yes, it is. So for a couple of billion dollars we
could have the heavy icebreakers. I draw this to the attention
of the committee, particularly those that are on either the
Appropriations or the Armed Services Committee, that this is
absolutely critical, and that we simply ought to move forward
and get those three underway now, not wait until--current would
be about 2030, the current plan.
Next, Admiral Buzby, thank you for your leadership on the
shipbuilding. I draw the attention of the committee to the
comment of my--the previous Texan a moment ago--and, by the
way, the academy in California, gentlemen and ladies, is the
best.
[Laughter.]
Mr. Garamendi. Now that we have settled that, yes, we do
need ships. And Texas is a big exporter of natural gas.
The Energizing American Shipbuilding Act is about to be
introduced. If it becomes law we will build perhaps 50 ships,
tankers, oil tankers, and LNG tankers over the next 15 years or
so, a major opportunity to use a critical national security
asset, natural gas and oil, and combine it with two other
national security assets, the ability of our shipyards to
produce large oceangoing commercial ships, and also the
mariners that go with them. It is about to be introduced. On
the Senate side it would be Senator Wicker. I draw the
attention to the members of the committee to that opportunity
to meet the needs.
Admiral Buzby, specifically to you, the question really
goes to the Ready Reserve Fleet. You have been with several
plans on what ships need to be built. You have mentioned
refurbishing used ships, and the like. Has that plan B--is it
updated? Is it available? And how does it fit in with the
current budgets?
Admiral Buzby. Thank you for the question, sir, and a very
important area, and one that I have a lot of focus on, as you
can--and as we have discussed, working very closely with the
Navy. I actually had some discussions with Secretary Spencer
last week about this. He is very, very focused on this, the
Navy's three-pronged plan of service life. Extensions,
purchasing, with Congress' approval, used ships to bring in to
be modified, and then new construction is still the plan of
record.
We are working through what is the right business case, or
what is the right ships to go after. The special mission ships
of the Ready Reserve Force are of particular interest because
they are all steamships, and they are all aging, and they all
have very special capabilities. So we heard you, we are
focusing very closely on those ships, in particular.
Mr. Garamendi. Admiral, you produced a couple of placemats.
If you could share those with the committee I think it would be
eye-opening for all of us. And if you could also provide a memo
as to what the current plan is, it would be very helpful.
Admiral Buzby. Yes, sir.
Mr. Garamendi. Thank you very much. I yield back.
Mr. Maloney. I thank the gentleman.
Mr. Gallagher?
Mr. Gallagher. Thank you, Mr. Chairman.
Admiral Schultz, good to see you again. I have heard a lot
from my constituents in the Port of Green Bay--it is Titletown
U.S.A., Green Bay, Wisconsin, in case anyone is paying
attention--that there is an imminent need for a new Great Lakes
heavy icebreaker. We currently have the Mackinaw-class
icebreaker. It is only half as wide as the vessels it escorts,
because it was intended to be working in tandem with a second
icebreaker of its class. But the second icebreaker was never
built. By itself, then, the lone Mackinaw has to double-back on
the same path, which, of course, slows progress, slows commerce
on the Great Lakes.
It should be noted also that much of the iron ore shipped
by the American steel industry travels on the Great Lakes.
Obviously, we are in an interesting position right now, due to
our disagreements over steel tariffs. That may be getting
resolved, but that adds another complicating variable to it.
So my question is I understand that the Coast Guard
contract that procured the current Mackinaw was written to
allow a second icebreaker to be procured, but it was never
funded. Is that a correct understanding?
Admiral Schultz. Congressman, I will take that for the
record. I am not sure I can tell you that definitively, but we
can answer that very quickly and get back to you on that.
Mr. Gallagher. OK. My other understanding is that the Coast
Guard has begun a whole new analysis on the issue of a new
Mackinaw icebreaker. Do you have any insight into that, whether
that is correct?
Admiral Schultz. Yes, sir, Congressman. Congress has
supported us from 2017, 2018, 2019, I think, with $2, $3, and
$5 million, for a total $10 million, you know, this is design
and survey-type funding.
We are looking at kind of inventorying our current
capabilities there. We have a report due back to the Congress,
the Great Lakes Icebreaking Acquisition and Program Report that
was directed in the 2018 Coast Guard authorization, so we will
be delivering a plan to you on how we are looking at taking
those design and survey funds and using them here.
But some of it is inventory and what we have, looking at
what it would take, requirements-wise, to build this ship at
least as capable as the current Mackinaw for potential service
on the Great Lakes in the years of the future.
Mr. Gallagher. Is there an estimate of when the report will
be completed and delivered?
Admiral Schultz. Yes, I think we are in final phases of
that, but let me let me circle back to your staff and give
you----
Mr. Gallagher. Yes, and I understand that. You know, any
time you write a report in DHS or DoD, you have to get----
Admiral Schultz. Yes, sir, it----
Mr. Gallagher. The interagency does its thing.
Admiral Schultz. We are working on the report, and we owe
you some, you know, clarity and transparency on what we have
planned and done to date with those funds provided by the
Congress.
Mr. Gallagher. I guess my concern would be related to the
first question, that if we have already gone on record as
saying that a new icebreaker is needed, that a second one was
intended to be built, that is--if the new analysis is just a
cause for delay, when we know we need to do that, that would
concern me. So I just throw that out there. And
Admiral Schultz. If I could, just----
Mr. Gallagher. Please.
Admiral Schultz. Let me--you know, there is a lot of
conversation about sufficiency of capability, capacity on the
Great Lakes. We are focused on our current fleet. We are doing
a 15-year service life extension of the six 140-foot
icebreaking tugs on the Great Lakes. That will push them out
into the 2030 timeframe.
But, you know, there is some urgency to look beyond that.
Currently we finished up the sixth hull last summer. The
seventh and eighth hulls are under, you know, service life
extension now. We will tackle the ninth hull. There is nine in
Coast Guard, writ large: three on the eastern seaboard, six on
the lakes. And we think, capacity-wise, we are there today. But
this conversation warrants some feedback from us on what the
longer term plan is to----
Mr. Gallagher. And I just want to say your young men and
women who are stationed up there in Sturgeon Bay are doing a
phenomenal job, and have really done a good job of integrating
into the local community. And the local community has, in turn,
embraced them. Indeed, during the Government shutdown, I mean,
the outcry I heard from non-uniform-wearing local residents was
very loud. And so I think that is a testament to the good work
that they have done. You should be very proud.
The other thing I just would ask on this issue of Great
Lakes icebreaking: do we get any help from, for example, the
Canadian Coast Guard? And if so, what does that look like?
Admiral Schultz. Sir, we have an MOU with the Canadian
Coast Guard. We have a terrific relationship. Our ninth
district commander aligns with the Canadian Coast Guard
counterpart. I will be meeting with Commissioner Jeff
Hutchinson up in Seattle here the second week in June, and our
collaboration with Canadians has never been at a stronger
point. I think that is how we mitigate some of the challenges.
You know, there is extreme ice years, you know, and then
there is the typical ice years. I would tell you, capacity-
wise, what we have done is we have brought a 140-foot
icebreaking tug in from the eastern seaboard to the Great Lakes
during those heavier--into the earlier parts of the year that
is going to be a heavy year, we bring an additional 140, and we
rely on the Canadians. That MOU allows us to both look at what
are we bringing in, ship-wise. So collaboratively, we try to
meet the needs of all the mariners on the Great Lakes there,
working together.
Mr. Gallagher. Sure. With the 20 seconds I have left, did
they actually--did the Canadians actually assist with any port
needs this past winter in the U.S. that you know of?
Admiral Schultz. Sir, I don't have a--I would answer
probably so, but I can get back to you with a definitive
answer.
Mr. Gallagher. And I am all for cooperation with the
Canadians, but I don't think we should outsource any of our
icebreaking alliance to them.
With that I yield back.
Mr. Maloney. I thank the gentleman.
Mr. Lowenthal?
Mr. Lowenthal. Thank you, Mr. Chair. And this question is
for Admiral Buzby.
First, thank you for appearing before this panel, this
subcommittee once again. Your important work to really promote
our country's maritime industry--and I want to applaud MARAD's
request for full funding of the Maritime Security Program. As
you have already pointed out in your testimony, your support of
the critical mission of a U.S.-flag ship, which, I think, is
always at risk tremendously, and I think that your support is
really very, very important.
You know, when you were here in March, I asked you about
the port security infrastructure development program at that
time, which received nearly $300 million in the most recent
appropriations legislation. Ports and other stakeholders across
the country are eagerly anticipating this program. This is a
huge thing for the ports.
According to the American Association of Port Authorities
their recent assessment, all ports have identified over $66
billion in needed infrastructure investment. This Federal
funding is a step in the right direction.
The question I have for you, Admiral, is can you tell me
why the President's budget proposes to eliminate this program
before we have even awarded the first grants?
Admiral Buzby. Yes, sir, I am happy to answer that.
As you recall, the timing was a little bit off on the two
budgets. When Congress put the money in for--the port
infrastructure development money in the 2019 budget, our 2020
budget had already left the hangar. It was already out. So we
weren't really canceling it, it was not part of our budget
initially.
Mr. Lowenthal. Can you speak--would you support it?
Admiral Buzby. Well, I think port development is extremely
important. We are looking forward to getting the notice of
funding opportunity out here very shortly, it will be within
the coming months, very soon. You know, we do have a lot of
other port grant money that we do distribute, part of the BUILD
program.
Mr. Lowenthal. Right. I believe there is an additional $100
million in additional funding in that program, as you point
out. But that doesn't make up for the $300 million that we are
going to lose without the continuation of the port
infrastructure development program.
Admiral Buzby. Again, the 2020 budget is here. I mean it
was developed before the Congress put the money in the 2019
budget, and we are just beginning the 2021 budget right now. So
we will see where that goes. Obviously, the funding priorities
will have to be----
Mr. Lowenthal. Well, as I pointed out, with the tremendous
backlog, and the tremendous importance of our ports, and the
$66 billion, and having that $300 million in this year in the
appropriations just being--for the first time, beginning to
address some of those, even those grants are not all out yet.
It is a big loss. And I just wanted to convey that to you.
My last thing is not a question, but a statement to Admiral
Schultz. I also represent the port area of Long Beach as part
of the L.A.-Long Beach complex. And we couldn't do it without
the Coast Guard. And I am very, very proud of the work that--we
work with the Coast Guard and America's largest port complex,
and vitally, vitally important, not just for the port, but for
the national security of the entire west coast. And I thank
you.
And with that I yield back.
Mr. Maloney. I thank the gentleman.
Mrs. Miller?
Mrs. Miller. Thank you, Chairman Maloney and Ranking Member
Gibbs, and thank you all on the panel for being here today.
I would first like to thank you, Admiral Schultz, for the
important work and sacrifice the brave men and women of the
Coast Guard make every single day. As you know, the Coast Guard
has been invaluable to my district in southern West Virginia,
performing the dangerous search-and-rescue missions and saving
many lives. We all agree that it is important that the Coast
Guard has the resources needed to continue to perform their
duties, while using our taxpayer money both efficiently and
effectively.
Admiral Schultz and Master Chief Vanderhaden, what major
capital investments are needed most to maintain the Coast
Guard's readiness? Is the Coast Guard's airborne fleet ready to
meet the search-and-rescue challenges facing the inland parts
in our country?
Admiral Schultz. Congresswoman, good to see you, ma'am.
Thanks for those words of gratitude for your Coast Guard men
and women in West Virginia.
And Congressman Lowenthal, thank you, as well, for the work
and the men and women in Los Angeles.
Congresswoman, I would say, as I testified in my opening
statement, our number-one capital investment, you know,
acquisition priority, is that Offshore Patrol Cutter, because
that will be the backbone of the fleet. We are continuing to
build National Security Cutters, we are continuing to build
Fast Response Cutters. We have taken acceptance of 34 on a
program of 58. On the latter, the Fast Response Cutter.
In terms of your question about airborne fleet and search-
and-rescue work, you know, we are flying what we call MH-65
Dolphin helicopters, an Aerospatiale product that--we got 98 of
those. We will fly those, and we have already flown those
further than others, and will continue to fly those into
probably 30,000-plus hours. We are in a similar situation with
our MH-60 Blackhawk helicopters, with the Jayhawks and the
Coast Guard variant. We are going to fly those.
We are watching closely what the Department of Defense is
doing with future vertical lift. We have some service life
extension programs in mind for our 60 helicopters. That is
something that, you know, because those dates seem to get
pushed out, it has my attention. My Vice Commandant is an
aviator, we are watching that closely. But we have got a plan
here through this current decade, as we get into 2030. We are
really going to be keenly focused on, you know, just how far we
can stretch those out. But right now I am comfortable where we
are at. But we have got to start really putting together a
long-term strategy on how we are going to do our air assets on
the rotary side.
Fixed-wing, we are continuing to field, with the support
the Congress, C-130Js. We are upping the missionization of our
C-27 medium-range, long, you know, aircraft. And that is going
to be a good airplane. We have got a little bit of--we have got
14 of those transferred to us, but we are playing some catchup
on the sustainability, the missionization. But we are getting
there, so I am encouraged on where we are, the air fleet. But
we have got some challenges, sort of a decade-plus down the
road, ma'am.
Mrs. Miller. Good. Mr. Vanderhaden, do you have anything to
add?
Master Chief Vanderhaden. I would say that our aviation
career fields are very popular. We have no problem finding
people that want to fly in our Coast Guard aviation assets, and
our folks do a magnificent job keeping them available and
ready. We put more hours on them than any other branch in the
Service, and that is a testament to the quality of work that
our folks do, especially down in Elizabeth City.
So I thank you for your concern for our aviation readiness.
We have been very fortunate. We have put a lot of effort into
our safety, and we have had very few aviation mishaps because
our folks try really hard.
Our air stations can use some help out in Hawaii. You know,
as we get the C-130J, they are a little longer, they don't fit
in the hangar so well. So we could use some help there. But by
and large, I very much appreciate the plan that the Commandant
and our leadership team put together to transition our
aircraft.
Mrs. Miller. Another quick----
Admiral Schultz. Congresswoman, if I could, just----
Mrs. Miller. OK.
Admiral Schultz. Just one follow-on. One thing we are
trying to do is there are no more Dolphin helicopters, MH-65s,
built in the world. So that fleet, you know, is in a different
situation. The 60s, we have an ability called the sundown
program, and we have got low-hour aircraft that the Navy put
out in the desert. And for about $14 million we can take that
airframe at our aviation logistics center in Elizabeth City and
basically bring that into service for a long service life
ahead. So with some of the supplemental fundings and recent
hurricane supplementals, we have--actually bringing three on
board.
My intention would be, wherever we have the chance to bring
some of those former sundowner hulls onboard and offset some of
our Dolphins with 60s, that is the bridging strategy. We are
going to transition Borinquen in the near future from a 65 air
station--sorry for the----
Mrs. Miller. You just used up a lot of time.
I also wanted to ask you about the major role that you all
play in seizing the illegal and dangerous drugs flowing into
our country. Has the Coast Guard seen an increase in the
seizure of drugs, other than cocaine and fentanyl?
Admiral Schultz. Congresswoman, most of our efforts are in
the transit zone, the area between the Indian Ridge, where the
drugs--the cocaine is produced, and reaching the United States
shore. So we predominately are thwarting that cocaine threat.
I think, if you look across Government writ large, I wear
what they call the interdiction committee hat. You know, opioid
use, methamphetamine use, those type of uses are all on the
upswing. Where we focus our efforts is really on the cocaine
threat, and we have--last year was a slight downtick from the
previous year. I think our--explainable with some of our assets
pulled off for hurricanes. But we are on trajectory this year
for more than probably 430,000 or 450,000 pounds of uncut
cocaine interdicted again, ma'am.
Mrs. Miller. Thank you.
Mr. Maloney. I thank the gentleman.
Mr. Larsen?
Mr. Larsen. Thank you, Mr. Chairman.
Admiral Buzby, at the March 6th subcommittee hearing I
asked you, for the small shipyard grant program, if the budget
number would be higher than zero. And you emphasized that you
had strong support for the program. I am not suggesting that
you said yes or no, but you did say strong support for the
program.
As it turns out, the budget proposal number is not higher
than zero, it is zero, it is a $20 million cut from the enacted
2019, which I think Congress had to put in because the
administration proposed eliminating it last year. I assume we
will fix your problem for you again. And as well, a Senate
committee passed a reauthorization of MARAD programs, including
a $35 million authorization for small shipyards.
So we are going one way, and the administration is going
the other way on small shipyards. Can you let me know what
changed between the March 6th hearing and the release of the
budget?
Admiral Buzby. Congressman, what I can tell you that has
not changed is the importance that we believe that program
brings to the maritime industry.
Again, this comes down to the realities of the budget we
are given to work within to prioritize the things that
absolutely had to be budgeted for. And very regrettably, that
was one that didn't make the cut. It does not by any way
diminish how important we think it is, and how much good it
does to the industry.
Mr. Larsen. Well, I anticipate that we will fix your
problem.
Admiral, at the March 6th subcommittee hearing I requested
details on the Coast Guard's plans regarding oil spill
prevention and response in the Pacific Northwest, related to
the Trans Mountain pipeline extension project, and have yet to
receive specific information. Can you all get that to me for
the record?
Admiral Schultz. Absolutely, Congressman.
Mr. Larsen. Thank you. We will do a followup with you on
that.
Would you comment, though, on the flat funding for the
maritime oil spill prevention program for the 2020 budget, and
whether or not those resources are adequate, if that funding
considers the approval of the Trans Mountain pipeline extension
project?
Admiral Schultz. Well, sir, regarding the Trans Mountain
pipeline, you know, we have a terrific relationship with the
Canadians, Canadian Coast Guard, Transport Canada. We have a
joint VTS up there where we track the traffic. I mean currently
we are looking at potentially one of those transits a week
under the current pace.
Mr. Larsen. Right.
Admiral Schultz. This could go to one a day, as you know.
Marine environmental response is a top priority for me. We
work in a joint contingency model with the Canadians for oil
spill response. I think, at the end of the day, sir, with this
bitumen, with this heavy crude, I think this is something, the
response operations that work there on the international scene,
are quite capable, sir.
I think this is--obviously, we have to see where the
Canadian Coast Guard and the First Nations go with their
deliberations or decisionmaking, but we are postured to be
responsive. I think the risk is manageable, and is obviously
high on my list of priorities to make sure that pristine region
of the Nation is not subject to some type of spill. It has my
attention, sir.
Mr. Larsen. Good. And certainly we can't control a Canadian
Government decision and how it plays out, but in the
eventuality it does play out we need the plan. So we will
follow up with more detail with you.
With regards to the backlog on shoreside infrastructure, we
have the GAO study that shows that 45 percent of Coast Guard
shore infrastructure is beyond its service life. So we are
working with you all, having discussions with you all about OPC
home-porting in the Northwest as a possibility. If that were to
occur, how does new shoreside infrastructure fit into the
backlog that you have? How do you end up budgeting for new
infrastructure, versus what you have to fund now?
Admiral Schultz. Congressman, I appreciate the question.
What we do is we do--as you say, we have a high backlog. We
have $1.7 billion of shore infrastructure that we are dragging
along. We are not recapitalizing at a healthy pace like an
organization--you normally tackle to 2, 2\1/2\ percent of that
on an annual basis. We are in tenths of percentages. I would
say we are making a small dent in that. We have got some money
through supplementals and hurricanes.
To your question about new assets, we use what we call
major acquisition shore infrastructure, MASI, account. We
anticipate those needs. Ideally--we asked for funds for that
about 3 years ahead of the actual arrival of the new assets. So
when the asset shows up, the pier, the shore ties, the
infrastructure, landside buildings to support and enable the
operations are all in place.
Regarding OPCs, you know, the fifth and sixth OPC are
programmed to go to the Pacific Northwest. We have been looking
at, you know, a range of options: Everett, Astoria, Seattle. We
had our folks up in Everett here recently that are on our
cutter home-porting working group. The mayor of Everett was in
here in April talking to Coast Guard folks. So I think in this
calendar year we will probably roll out a decision on where
home-porting will occur in the Pacific Northwest. It is a lot
of factors: proximity to the area, the ability to support our
people, you know, existing infrastructure, where we don't have
to expend tax dollars, what are the upgrades to have sufficient
infrastructure.
But MASI, sir, that is the approach we take about 3, 3-plus
years ahead of the actual arrival of the cutter to make sure
when the ship arrives it is able to do the mission and we can
support our men and women that are assigned to that unit.
Mr. Larsen. All right, thank you. Just--I am not going to
ask a question, but I will follow up with you all about pilots,
and pilot shortages, and how it all impacts you, as well,
because we are trying to coordinate with the--on the private-
sector side, making sure they are not poaching too much on the
public-sector side.
Admiral Schultz. Yes, sir----
Mr. Maloney. The gentleman----
Mr. Larsen. We will follow up, thanks.
Mr. Maloney. I thank the gentleman.
Mr. Mast?
Mr. Mast. Thank you, Chairman.
Thank you all for being here. Semper paratus. Good to see
you. I will be out on the Ibis next week, so I am looking
forward to that, as well.
I will just give you everything that I have and let you--
Admiral, Master Chief--just start going off on all this.
I want to start with shoreside infrastructure, as well.
Undoubtedly, there is a lot of needs that need to be met out
there. If you could triage a few of the most important, you
know, a no-B.S. response to why these are the most important
things that need to get done, that would be important for us to
hear.
Moving a little bit over beyond that into the 65s, how many
of those 65s do we have available to replace? Can we meet that
entire need with refurbishing those 60 airframes?
And then what is the balance with doing that, with looking
at the future of rotary lift? Do you want to see all of those
65s replaced with refurbished 60s, or do you want to hold off
on that a little bit, looking forward to what the future
airframes might be out there in terms of rotary?
I would love to hear you all speak a little bit on that.
Thank you.
Admiral Schultz. Let me grab that, and let the Master Chief
offer some color commentary.
I would say, first off, on the infrastructure, sir, with
the pull from the Congress, the unfunded priority list--which
we were delinquent on, behind schedule on, but that will come
to the Hill--that reflects much of our prioritized list of
unfunded projects that are in that $1.7 billion. So that is the
best vehicle, it allows us to sort of rack and stack--and,
obviously, what is attractive to the members of the committee,
other Members of Congress have a chance to weigh in on that,
and I think that is the best way forward there.
In terms of 65s, there are 98. There are no more available
in the world. So that will be--you know, we have been fortunate
we kept them in flight. We have got great mechanics that work
on these. We have got a depot down at ALC, Aviation Logistics
Center. But at some point they become unsustainable. So where
we can we would like to replace them with service life
extension--you know, sundowner hulls, bring down new 60s. That
is where we got to put a little bit of a more, you know,
brushstroke details on a plan here, moving forward, as future
vertical lift just seems to, you know, continually increment to
the right there a little bit. We have got to make sure we have
got a bridging strategy.
Is it sustainable within our existing fleet, the 60s and
increasing that number? Is there some type of interim period
where we may have to contract some support? I think we have got
to take a little more holistic view than we have to date on
that, sir.
Master Chief?
Mr. Mast. Just to throw one more thing in the middle of
that, can you talk a little bit about what is the risk? Is it
responsible for risk to add another 10,000 hours or something
to those air--to those 65s? Is it responsible to the pilots to
ask that of those airframes, if that is----
Admiral Schultz. Congressman, we will obviously--you know,
the pilots, the safety of our men and women in the cockpit, in
the backside of that airplane, is the number-one priority. We
will delve into that very thoughtfully. That is a composite
hull, it is not an aluminum-type hull. So we have got to make
sure we understand it. There is not a track record there. So we
will proceed with the best industry advice, the best scientific
advice, and make sure, you know, we are not taking any undue
risk with the safety of our men and women in the Coast Guard.
Master Chief, do you have anything to add?
Master Chief Vanderhaden. Yes, we have a lot of senior
enlisted folks that are on those product lines that are
rehabbing those, and they would let me know immediately if they
thought there was an issue, there was a safety issue there, so
I am confident. I am confident in them.
Charleston, South Carolina, is going to be a big hub for
us. That is going to be--we are going to--it is a strategic
location. We desperately need to rebuild some piers in
Charleston, South Carolina. Station Tybee Island in Georgia
could use some help, just being perfectly frank with you, and
then Alaska is going to be a big challenge, preparing those
home ports in Alaska for the cutters that are going to be up
there is a big deal.
We want to be sure that Alaska is an attractive place to be
stationed, we have a lot of interests up there, so we want the
quality of life for our folks in Alaska to be good. And so we
need to build that out correctly.
Mr. Mast. Thank you, Mr. Chairman. I yield back.
Mr. Maloney. I thank the gentleman.
Mr. Brown?
Mr. Brown. Thank you, Mr. Chairman.
Admiral Schultz, I would like to talk to you a little bit
about the--you know, more broadly, the Coast Guard mission. And
I know it is to ensure maritime security and stewardship. I
often think about the Coast Guard, you know, operating within
the U.S. maritime limits and boundaries, and I also think about
the Coast Guard, for example, when I went to Guantanamo Bay,
that you provide port security to the Navy and around the
world.
But I want to ask you about your operations in the South
China Sea.
In September of 2017 the Director for Intelligence and
Information Operations for the U.S. Pacific Fleet raised
concerns about the U.S. Coast Guard operating in the South
China Sea. Later that same year the Naval War College expressed
concerns that the use of--and that is people at the War
College, not the War College as an institution--that the use of
the Coast Guard forces in the region could increase the risk of
war, instead of easing tensions.
Earlier this year a U.S. Coast Guard cutter was deployed to
the South China Sea to transit the Taiwan Strait and conduct
operations with Philippine coast guard vessels.
I mean, given the small size of your budget, and the nature
of your mission, can you sort of make the case of why that
makes sense, that the Coast Guard is operating in a way that
looks more like a naval freedom of navigation mission?
Admiral Schultz. Congressman, I appreciate the question,
and I will try to keep this short. I would tell you the Coast
Guard brings unique capabilities, unique authorities. We are in
the Indo-Pacific South China Sea AOR today with the Coast Guard
Cutter Bertholf. We will replace her in the coming weeks with a
second National Security Cutter. We will cover about 10 months
of the 2019 calendar year. That is at the request of the four-
star Indo-Pacific Commander.
You know, if you look at what is going on in that part of
the world there, you look at how China is actioning, you know,
things there, they are using their coast guard. You know, we--
when you see a United States Coast Guard cutter with that
orange and blue stripe, I think that represents, you know,
model maritime governance and behavior. I think we are the gold
standard. You know, if you look across the world, including the
China coast guard, they replicate that hull design here. Maybe
different colors, but they use that Coast Guard symbol to brand
their Service. I think having the Coast Guard there is a
different tool in the kit.
You know, we have done some Taiwan Strait transits
alongside a Navy combatant. We are in the presence. I think the
best application of the Coast Guard--obviously, when I send a
ship to the Indo-Pacific commander or the 7th Fleet commander,
it is to do the business that they see most suitable in that
region.
I think for us, you know, I think the Coast Guard offers an
alternative, not just a--you know, we are below that threshold
of war here. You know, we are looking to get out to the Oceana
region here in the coming weeks with Bertholf, with the
successor ship. We were in training with the Philippines at sea
doing search-and-rescue exercises followed by port calls. We
are offering an alternative to an increasingly aggressive
China.
China is using force with their coast guard, with their
military militia against Vietnamese fishermen and Filipino
fishermen. So I think there is a different thinking here when
you bring the Coast Guard in. You know, we are a locally based,
nationally relevant, globally deployed coast guard----
Mr. Brown. Let me ask you this.
Admiral Schultz. There are choices----
Mr. Brown. Can I just ask you this question, though? I
mean, like, I think of the Coast Guard, and you enforce the
law, the law of the United States, international law. I think
about, for example, you know, drug runners in the Caribbean
and, you know, you are engaged there.
I mean, but the notion that the Coast Guard is sort of
enforcing the law against--or balancing against another nation
state's coast guard--and, let's face it, their mission is
different than yours, as you as you suggest. They are much more
aggressive. They are patrolling alongside armed fishing boats.
So what is the nature of that engagement, and what are you
anticipating? And what are your concerns, in terms of that
engagement with, for example, the Chinese Coast Guard?
Admiral Schultz. Well, sir, I am going to pull it out of
the South China Sea for a second and say, if you think about
your Coast Guard, we are the face of the United States
Government in the Arctic, in the Antarctic, the high latitudes.
That is a competitive space. China has been up there 5 or 6 or
7 of the last 8, 9 years, projecting their presence. So I talk
about presence equals influence in that region. On a day-to-day
basis, sir, we are representing about five of the six
geographic combatant areas.
We have just brought a ship back from Africa Maritime Law
Enforcement Partnership, helping the Senegalese, Ghana, the
Nigerians develop capability to protect, you know, protein
sources from the sea, as China and others are raking, you know,
through their waters and drawing more than 50 percent of their
fish haul now off of Africa.
In the CENTCOM area I have got 350 Coasties operating 6
patrol boats supporting the 5th Fleet commander.
So I think the misnomer is that the Coast Guard is a
domestic nearshore coastal organization. We are a global Coast
Guard. I mentioned in my opening statement, though, I get
funded about $340 million towards those defense operations,
contributing about $1 billion.
So I think those are choices. I obviously serve the
Secretary of Homeland Security, and then I serve, you know,
force provision to the combatant commander, sir. So that is the
challenge. Those are the enterprise choices about taking, you
know, an insatiable demand for Coast Guard, and allocating
finite capacity against all those demand signals.
Mr. Brown. Thank you, Mr. Chairman.
Mr. Maloney. I thank the gentleman and ask unanimous
consent to allow the gentleman from Louisiana to join the panel
for the purposes of questioning the witnesses.
Without objection, Mr. Graves.
Mr. Graves of Louisiana. Thank you, Mr. Chairman.
Thank you all for being here, and thank you very much for
your service.
Admiral, the Offshore Patrol Cutter, I have seen some news
reports regarding the potential impact there. Can you tell us,
is the builder of the OPC going to be on schedule agreed to in
the contract, in terms of delivery of those vessels?
Admiral Schultz. Congressman, thanks for the question.
Chairman DeFazio made some points on that, but it wasn't in the
form of question.
Sir, the Offshore Patrol Cutter is our number-one priority.
It has our top leadership level interest, as of that of the
Department. Eastern Shipbuilding Group owes us some
deliverables here at the end of the month that are going to
talk about the impacts. As you know and we all know, you know,
Matthew--or Michael--was a devastating storm to the region
recently, recategorized as a category 5 storm. So there is some
impacts.
What we are looking for is the specificity from Eastern
Shipbuilding's, you know, feedback to us about how that will
impact, from their perspective, costs, and contracts,
schedules, and things like that. When we get that at the end
of--you know, a week from Friday is the due date, the 31st, we
will put our team of experts--in-house and some contracted
experts in the shipbuilding industry--and do our analysis of
that. And then, based on that, you know, we will see what the
path forward looks like.
This is a 25-ship procurement over the good part of two
decades. You know, Mother Nature here dealt a pretty tough hand
to Eastern Shipbuilding Group. So we are informing, you know,
the way forward on that today.
Mr. Graves of Louisiana. Sure. Admiral, you know our strong
interest in recapitalizing the Coast Guard for many years. You
all have been dealing with bubble gum and duct tape holding
assets together for way too long. And we have very strong
concerns about the recapitalization and how it is actually
synchronized, because you have got certain vessels that are
coming in that play an important role in the overall role of
the Coast Guard, and if you don't have certain assets to come
in and fill some of the voids that are there with some of the
aged assets that we have, it potentially creates significant
problems.
But--or can you tell us if you--if the vessels are going to
be delivered according to the terms of the firm fixed-price
contract?
Admiral Schultz. Congressman, the deliverable on the first
ship was 2021--the Argus, which is going to L.A.--and that is
what we are going to have to see. We are going to have to see
what exactly, you know, the puts and takes are as it impacts
schedule, as impacts costs in the Eastern Shipbuilding Group.
You know, in terms of long ball, the 2020 budget has some
money in there, as we look at a service life extension for our
270-foot Medium Endurance Cutters. Those started being produced
around the 1984 timeframe. They are 33, 35 years old, some less
than that. You know, we have a fleet of 14 210-foot cutters
built in the 1960s, early 1970s, and 13 270s built in the mid-
1980s into the early 1990s. You know, those 210s, at the end of
the day, are going to be, you know close to 60 years old. We
are operating them today at 50, 51, 52 years old at 92 percent
availability.
So our engineers, our mission support folks, are doing
remarkable things. I am confident we will be able to bridge
that gap. This service life extension for the 270s that we are
just getting going with 2020 money here seeding the way
forward, you know, we will get there. It is not ideal to run
50-, 60-year-old ships.
Unfortunately, that is sort of the nature of where we are
as a Service, and we will continue to attenuate that. But I am
confident, sir. You know, obviously, we have got to get all the
analysis of the data from Eastern to figure out the path
forward, sir. But if we can keep this program on track or close
to on track, we will have capacity to continue to do the work
of the Coast Guard. We are just going to have to keep some
older ships going potentially a little bit longer.
You know, arguably, we are a little behind where we are
today, but I think this service life extension program is going
to allow us to move forward here, sir.
Mr. Graves of Louisiana. Admiral, look, you are well aware
that we have been huge advocates to get the Coast Guard
recapitalized. You have been dealing with an aging fleet of
vessels that have been used well beyond their intended service
life. And it is very important to us that we keep these things
on schedule, and that we keep them on price to make sure that
the men and women of the Coast Guard have all the assets that
they need to do their job in this incredibly expensive mission
that you all have been dealt over the last several years.
I heard you loud and clear. May 31 is when you are going to
have the information that you need. But you indicated you all
are going to be doing some internal processing on that. Can you
tell me when you think you will be able to come back to the
committee and inform us whether the firm price will be adhered
to, and whether the schedule would be adhered to?
Admiral Schultz. Congressman, I would tell you it is
probably a matter of weeks, the process--you know, weeks, not
months. And I would commit to you that we will do due diligence
on that, obviously, keeping this moving forward.
You know, we do not want to lose any dates. You know, this
need to replace those cutters, as you intimated, is absolutely
essential. That said, you know, to go back to the drawing board
here, were we not to find a way forward successfully here with
the Eastern Shipbuilding Group, there is a time consideration
there, as well, sir.
So we are committed at the highest levels, including the
Department, to make the right decisions on this procurement.
Mr. Graves of Louisiana. So Mr. Chairman, I am hearing
roughly mid-June for an update to the committee.
Is that is that fair?
Admiral Schultz. Sir, I would say before the end of June.
And, you know, we can certainly try to move earlier in June,
but I got to get a sense of just, you know, did we get
everything we need? We want to make informed decisions.
Hopefully, the first tranche of homework, I will call it, for
lack of better--from Eastern Shipbuilding answers the
questions. But I suspect it is their first heavy lift with a
Government contract. There may be some puts and takes there,
sir. But we will do due dispatch to get that information to the
committee as soon as possible.
Mr. Graves of Louisiana. Thank you, Mr. Chairman. I yield
back.
Mr. Maloney. The gentleman's time is expired. I will now
proceed to the second round of questions and recognize myself
for 5 minutes.
You know, gentlemen, I think what is clear in the first
round of questioning is that there is remarkably bipartisan
consensus on this committee, with respect to the priorities
that we think are important and that are being underfunded in
the President's budget request. So I don't want to put you on
the spot, but I think that the more you look at this budget
request, I would just like to point out for the record that,
when you look at the 11 statutory missions of the Coast Guard,
when you look at what you guys are doing on border security--we
talk a lot about that up here--when you look at what you are
doing on drug interdiction, not just in the Caribbean, but in
the Eastern Pacific, when we think about what the next
generation of technology and improvements ought to be in that
area--persistent overflight, use of drones, when we look at
your Dolphin fleet, we know you have got to replace them.
We know you have got airframe problems. We know we are not
where we should be on the Polar Security Cutter program. We are
way behind the Russians and the Chinese in our presence in the
Arctic. We did a whole hearing on that the other day.
We know what you can say and can't say about that, but we
up here in a bipartisan way know that we haven't invested in
that yet, if we were to follow the President's budget, we would
continue a decade of neglect in the Arctic. We know we are not
investing in our shoreside infrastructure. We see there is a
$170 million cut in that.
We know what it would mean to our personnel, where their
costs of living are going up because they live in expensive
seaside communities that have experienced all kinds of price
inflation. We know what you make, and we know how hard it is to
pay for your housing. We know what your retirement packages
look like.
The fact is that there is nothing about this budget that
demonstrates a respect for the growing and critical nature of
your missions. And that would be true if you weren't doing
anything new. But the fact is that we have major emerging
concerns about things like the export of LNG, and the security
of that, things about the Arctic, and the great power
competition there. These are new. We have an aging fleet of
vessels and aircraft. We have all kinds of needs on shoreside.
And so I just want you to know that we take that all
seriously. And in a bipartisan way up here I think you will see
us do what ought to be done on this. I think it is
disappointing that we can't get a document from the
administration either that reflects the genuine needs that that
this industry, and particularly the Coast Guard, requires, but
also that would at least, you know, let us know what the unmet
needs are in a timely way for this hearing, so that we could
get that document, as the ranking member points out, in time to
do us some good. Because we are going to care about that, and
we are actually going to keep faith with that.
I am glad we are moving the pay issue, so that if we shut
down the Government again we don't do to you again what we did
to you last time. That was a disgrace. And most of the Members
up here agree on that on a bipartisan basis. We ought to stop
treating you like an afterthought. And when we are paying the
rest of our military, we sure as heck ought to pay the Coast
Guard.
So--and by the way, if we didn't pay Members of Congress,
we wouldn't shut down in the first place, so we ought to start
by not paying the people up here, and we wouldn't put you in
that place in the first place.
So, with all of that, I just wanted to unburden myself with
some of that. But because this a question-and-answer format, I
am interested, Commandant, in the Arctic. We did hear a lot of
testimony on this recently, but I would like to give you an
opportunity to talk particularly about--following up on some of
Mr. Brown's questions around the emerging missions we are going
to ask of you in terms of what is happening in the Arctic, what
we are seeing from the Chinese and others, and why that really
puts a real urgency behind the Polar Security Cutter program.
If you could, sir, what are you seeing in the Arctic?
Admiral Schultz. Thank you, Chairman, and thank you for,
you know, sort of your overview of the committee's bipartisan
support here for the work of the Coast Guard and the maritime
interests of the Nation, sir. That is encouraging to know, and
there is a lot in that statement.
You know, in the Arctic, sir, we are seeing different
behaviors. You know, China has a fleet of more than four dozen
icebreakers. China is an Arctic nation with a broad Arctic
coast. They are deriving more than 20, 25 percent of their GDP
from activities in the Arctic. They are reestablishing bases--
--
Mr. Maloney. Did you mean China, sir, or did you mean
Russia?
Admiral Schultz. I mean Russia first, talking about----
Mr. Maloney. Yes, I thought so, because China is about 900
nautical miles from the Arctic----
Admiral Schultz. Oh, I am talking----
Mr. Maloney [continuing]. And yet they call themselves an
Arctic nation. But I take your point. Go ahead, sir.
Admiral Schultz. Just talking about the competing nature of
the Arctic space. The Arctic off of Russia, you know, they are
deriving LNG, they are partnering with the Chinese with a 30-
percent stake in the Amal energy project. They are looking to
tax a Northern Sea Route. That will bring Russia back as a
player in terms of deepening their pockets, you know, despite
sanctions. That is the Russian game. They are in the meddlesome
game.
I think if you look at the Arctic off of Alaska, we have
seen China up there. China is a non-Arctic state, they are a
self-declared near-Arctic nation. You know, they have now a
second research vessel, the Xue Long 2, they launched last
summer. It probably becomes operational maybe as soon as this
year. They are talking about building a heavy breaker. So they
are invested in continually projecting presence off the
Alaskan--in the Arctic, and we are concerned about it.
You know, the Arctic is a space with very limited
communications capability, with limited domain awareness. The
Polar Security Cutters are a part of that conversation. In
April I rolled out a new Arctic Strategic Outlook that takes a
10-year look at the Arctic. We had just rolled one out in 2013,
so a little bit early for a refresh, but things have changed.
We talked about the Arctic as a peaceful, collaborative,
environmental space when we rolled out our first strategy. Now
we talk about it as an area of national security.
And I say repeatedly, you know, presence equals influence.
You know, until that second, third Polar Security Cutter, we
won't really have much of a game up there, in terms of
presence. But, you know, China is paying attention to the
sighting of F-35 fighters, you know, fifth-generation fighters
in Elmendorf. They are paying attention to the undersea cables
that allow communications. From a national security standpoint,
you hear General T.J. O'Shaughnessy at NORTHCOM talking about
the pivotal importance of the access across the--you know, the
polar regions here to the Nation, posing a national security
threat.
So the Arctic is a competitive space. It is a national
security conversation. And, you know, the Navy will continue to
do ice edge and show up there on a, you know, every-other-year
basis, but we are the face of the Government there. It is about
projecting sovereignty. And we take that seriously, and we will
continue to inform our understanding. We will do Arctic Shield
operations this summer again, some portion of a 3- or 4-month
period to continue to define our learning there, continue to
work with the indigenous populations. Because as we increase
our presence up there, we have got to be sensitive to the--you
know, to the stakeholders there across the full landscape.
Mr. Maloney. I thank the gentleman.
Mr. Gibbs?
Mr. Gibbs. Thank you.
Mr. Khouri, I woke you up, I guess, because--anyways, back
in the last Congress you testified before the subcommittee
dealing with the consolidation operations among international
container lines and the Federal Maritime Commission
Authorization Act.
We expanded your Commission's authority to do things like
prohibit the lines participating vessel sharing and rate
discussion agreements, prohibit joint contract negotiations
between towing vessel operators and international carrier
alliances, restrict joint contract operations between marine
terminal operators and international carrier alliances, and so
on.
A couple of questions there. Has the Commission used these
authorities? And also, has the existence of these expanded
authorities led to carriers to maybe change their behaviors
without the Commission taking action?
Mr. Khouri. Yes, there has been some activity in that
regard. For example, the Trans-Pacific Stabilization Agreement,
which was the largest rate discussion agreement in our Pacific
trades, in the face of the legislation, decided to just close
operations. So that removed a large amount. This was part of
the LoBiondo bill where you cannot be simultaneously in a rate
discussion agreement and also in a vessel sharing agreement
that might discuss capacity allocations. So they voluntarily
left the rate discussion part of that. So, you know, that was,
I think, a good good result.
The other part, in terms of implementing the LoBiondo Act,
we have been going through--there are 438 different types of
agreements that we have active at any--you know, currently. So
we have been very meticulously going through every single one
of them. There are about 160 that have been preliminarily
flagged as perhaps having some need for modification due to the
LoBiondo new requirements. We have been reaching out to each
one of those, and see--is there a need to come in, amend that
those authorities to make sure everyone understands exactly
what is going on.
Mr. Gibbs. Yes.
Mr. Khouri. So that is in process. There has been no new
activity in requesting joint purchasing authority. So I think
the industry heard Congress loud and clear, and that is our----
Mr. Gibbs. Has these--anything--less competition or
anything increased consolidation between the international
carriers?
Mr. Khouri. There has been--as I said in my testimony, in
the last year there has not been any new mergers,
consolidations, either completed or announced.
Mr. Gibbs. OK, I need to move on. I want to ask Admiral
Schultz another question about the Great Lakes. Thank you, Mr.
Khouri, I appreciate that.
Is it my understanding--am I correct, the Merrimack class
and the Coast Guard wants to develop a whole new icebreaker
class for the Great Lakes, or why don't we just, you know,
stick with what we got that works, and--are we trying to--is
the Coast Guard trying to move on to a different class of
icebreaker for the Great Lakes?
Admiral Schultz. Ranking Member Gibbs I would tell you
where we are today, sir, is we are focused on the current fleet
of Great Lakes icebreakers. We have one Mackinaw-class, 240-
foot, more capable buoy icebreaking ship, a tremendous ship.
Congressman Gallagher asked about whether that contract was
built in with a provision for a second. I need to get back on
that. I don't know the answer there.
We have the six 140s of the nine 140-fleet Coast Guard writ
large, and we are doing a service life extension to push them
out 15 additional years. So, you know, 15 additional years puts
us into the 2030, 2035 timeframe. So we need to be thinking
about the future on Great Lakes.
I would tell you today, sir, I believe we have sufficient
capacity in our approach on the Great Lakes with the Mackinaw,
with the six breakers, and our partnership with the Canadians.
There is obviously interest from the Congress here about
looking at an additional large icebreaker capability on the
Great Lakes, something Mackinaw-like. So with the funding that
was provided by the Congress over the 2017, 2018, and 2019
appropriations we are doing some analysis work on that. That
will inform our way forward, sir.
Mr. Gibbs. Well, I guess what I was wondering--if the
Mackinaw-class is, you know, sufficient, do we need to develop
a whole new class, or--you know, or--it would be cheaper--
obviously, it would be more cost efficient to use that, if it
is, you know, meeting the requirements.
Admiral Schultz. Congressman, I think what might be the
smart approach for us, as we had a conversation here with some
of your colleagues about, you know, a 6-3-1 strategy, Mr.
Garamendi said, you know, beyond these three polar security
heavies, you know, we talk about maybe what a medium breaker
looks like. There might be some parallel construct between a
medium breaker that could serve places in Greenland and other
things to get after the high latitude work, and a breaker on
the Great Lakes. There might be some commonality, sir. So that
is a conversation we would like to take.
You know, we just awarded this detailed design construction
for a Polar Security Cutter. There has been a lot of bandwidth
as we are building NSCs, PSCs. We are--Congress is interested
in these Waterways Commerce Cutters. I think that is sort of
what is forward here. So I think this report that we owe you
will start to share a little bit of what our thinking is,
moving forward, sir.
Mr. Gibbs. OK, thank you.
Mr. Maloney. I thank the gentleman.
Mr. Brown?
Mr. Brown. Thank you, Mr. Chairman.
I am going to ask Admiral Buzby a question, but I just do
want to, without piling on too much, Admiral Schultz--I mean,
look, you guys do a lot with a little. In the President's
budget request for 2020, you know, your budget is 5 percent of
the Navy's, right, $11.3 billion, and the Navy's is $205.6
billion. The Navy doesn't do a lot of what you all do. So I
guess my point is I don't want to see you doing a whole lot of
what the Navy ought to be doing.
The Arctic, different story. South China Sea, I have got
concerns. Outside of providing maritime security or port
security for our Navy, or perhaps training our allies' coast
guards, I just have concerns with what might look like mission
creep. But I do appreciate your response and that you are
responding to what our Nation asked the Coast Guard to do. So I
want to thank you for that.
Admiral Buzby, based on data in the military sealift
commands 2018 in review, nearly one-quarter of all petroleum
products transported in the sealift program were on foreign-
flagged tankers. Additionally, it is my understanding that only
2 of the 60 ships in the Maritime Security Program are
dedicated tankers. The rest are roll-on/roll-off ships,
containerships, or a multipurpose cargo ships, which can
occasionally be used, I think, for that tanker roll. But only
two dedicated for are exclusively tankers. It is concerning
that the United States military is relying on foreign-flagged
tankers to meet its military sealift requirements.
I guess my question for you is how many additional tankers
that are exclusively tankers do we need? And what I outlined,
does that raise concerns to you, you know, maybe national
security risks, or an overreliance on foreign tankers?
Admiral Buzby. Thank you for that question, Congressman,
and you have hit on a very important point. Of all of the
programs that we have in place for national sealift, we have
the dry side pretty well covered: the Maritime Security
Program, other programs. What we don't have: assured access to
our tankers. And that is a concern. Yes, yes, it is a concern,
especially if we got into a protracted sealift in the Pacific,
where we have to traverse great distances and be moving large
volumes of petroleum.
You know, there are a total of six U.S.-flag
internationally trading tankers. Two of them, as you point out,
are under the Maritime Security Program. The others are--you
know, get chartered from time to time by military sealift
command. But you know, the projections are that we would need
upwards of 86 tankers to fulfill a continuous sealift out to
the Western Pacific.
Mr. Brown. Right. So I understand, you know, we always need
more than what we have and what is, you know, probably within
reach, given the resources we dedicate to address the threats
and the risks.
But if we are at two to six, as you described, I mean, is
there a strategy to get to a larger number? And, if so, what is
the larger number, and what is the timeframe?
Admiral Buzby. Well, there are a number of ways that we
could get after that.
Congressman Garamendi outlined one approach in his
legislation that he is proposing, along with Senator Wicker, a
way to incentivize ships to come under the U.S. flag, to be
available to us in time of need. Again, it comes down a
business case, as pretty much all shipping really is, of--the
business case of having--operating your vessel. There are many,
many U.S.-owned tankers in the world. But business case and
cost of operating often keep them out from underneath the U.S.
flag.
So there are a number of ways that could be used to
approach--to bring the--incentivize them, and we are looking at
several of those. And a Maritime Security Program-like approach
could be applied to tankers, for instance.
Mr. Brown. Thank you. And Mr. Chairman, I yield back.
Mr. Maloney. I thank the gentleman.
Mr. Graves?
Mr. Graves of Louisiana. Thank you. I want to go through
this very quickly, because the chairman has made it clear to me
that I don't have my full 5 minutes.
Admiral, going back to the OPC, does the Coast Guard have
the authority to modify the fixed-price contract without
additional legislation?
Admiral Schultz. No, sir.
Mr. Graves of Louisiana. Would you--I mean so it is
feasible that, if your evaluation determines that it is not in
the interest of taxpayers, it is feasible that could actually
be put back out on the street. Is that possible?
Admiral Schultz. Congressman, I think, you know, we awarded
a firm, fixed-price contract. As I understand it, my
understanding is to go back in and look at costs and schedule,
things like that, would require some type of legislative
authority to revisit that.
Mr. Graves of Louisiana. Are you requesting any type of
additional----
Admiral Schultz. We have responded to ask for Congress
about some drafting assistance on legislation that gets into,
you know, an ability to open that up and possibly look at
something like that. There is no numbers associated that--we
don't have any data. So at the request of Congress we provided
some language----
Mr. Graves of Louisiana. But because you haven't done your
assessment, it would be premature to--for the Coast Guard to
request any type of additional authority. Is that safe to say?
Admiral Schultz. Sir, I think we would say it is safe to
say that we understand the impacts of a cat 5 hurricane and----
Mr. Graves of Louisiana. Absolutely.
Admiral Schultz. And Eastern Shipbuilding Group will have
an impact on the OPC program. So recognizing a window of
opportunity here with this disaster supplemental that is moving
here, you know, we have provided language recognizing this is
in our interest moving forward to at least have that option on
the table. The Congress will decide if that is something they
want to look at--you know, include or not.
You know, we have steered clear of, you know,
substantiating--there is Eastern Shipbuilding Group, advocacy
on the Hill. We are detached from that. They are doing their
thing. We are doing our thing. And right now our thing with
Eastern is you need to show us the impacts, we will do our
assessment. If there is a mechanism to possibly revisit the
contract, then we will see where we are at the end of the day.
Mr. Graves of Louisiana. And so, Admiral, I just--I want to
flex the chairman's muscles here a little bit--being the
authorizing committee, it sounds like that is authorizing
legislation. So certainly, if the Coast Guard is requesting
authorizing legislation, I certainly would hope that the Coast
Guard would come before the authorizing committee staff and
members and have an opportunity to discuss it with us, if that
is the case.
Admiral Schultz. Sir, we will make sure our efforts are
full transparency to the committee. If we haven't done that to
date, we will circle back and do that.
Mr. Graves of Louisiana. Admiral, thank you very much, and
I want to thank you all again for your service.
Last comment. There were a number of news reports--and this
isn't a question, just a comment--a number of news reports
about Jones Act and potential discussion within the
administration. I think it is really important for all of you,
Admiral Buzby, Commandant, all of you, to continue sharing
within the administration thoughts on modifications to the
Jones Act.
I know that some of the different advocates for changes in
the Jones Act are some of our allies. And those same allies are
not putting up their appropriate NATO dues. They don't have an
appropriate defense industrial base and, in many cases, are
having their ships built in countries that are not necessarily
friendly to the United States.
And I think that it is a really important discussion. I
think that ensuring we continue to advocate for the Jones Act
under these existing conditions is entirely consistent with
this administration's policies on defense, and in ensuring we
put America first. And I just wanted to flag that, as I try and
do each hearing when you are here.
It is important to this country. I think it is important to
our security. And again, I think it is consistent with other
policies of this administration.
So with that I want to yield back 1 minute and 20 seconds
to the chairman.
Mr. Maloney. I thank the gentleman. And I don't believe
there are any other Members' questions, but I do want to close
the hearing by thanking you all once again for your service. So
I want you to know, Admiral Schultz, we appreciate the work
your Coasties do. We don't take it for granted. You make
extraordinary and difficult things look routine.
We know the sacrifices your Coasties make, Master Chief.
Same comment to you. You know, as you know, a constituent from
my district lost his life in the last year. It is a good
reminder of the sacrifices our families make.
We apologize for the additional burdens we put you through
during the shutdown. We should never do that again. And you
have our commitment that we are going to work in a bipartisan
fashion to make sure we do not.
Maritime Administration, Federal Maritime Commission, we
appreciate the work you gentlemen do. Again, we are
disappointed in some of the numbers the President's budget sent
up here, but as you have heard on this panel we understand the
work you do, we understand the importance of the Maritime
Security Program, and the Jones Act. And I think you will see
that bipartisan support continued.
With that, that concludes today's hearing. Thank you all
very much. The hearing stands adjourned.
[Whereupon, at 11:55 a.m., the subcommittee was adjourned.]
Submissions for the Record
----------
Prepared Statement of Hon. Sam Graves, a Representative in Congress
from the State of Missouri, and Ranking Member, Committee on
Transportation and Infrastructure
As everyone will note today, the Coast Guard is at least a decade
behind in completing its fleet recapitalization.
It has no plan for replacing or extending the life of its
helicopters, and its backlog for shoreside construction, maintenance,
and environmental cleanup is in the billions.
I look forward to hearing from the Commandant as to how we are
going to catch up so the Coast Guard can carry out its important
missions.
I also want to hear from the Chairman of the Federal Maritime
Commission about implementation of the changes Congress made last year
to the Commission's authorities.
Finally, I want to hear what the Maritime Administrator has to say
about how we can increase the pool of available merchant mariners to
assure our national defense sealift needs are met.
I look forward to the witnesses testimony. I yield back the balance
of my time.
Appendix
----------
Questions from Hon. Rick Larsen for Admiral Karl L. Schultz,
Commandant, U.S. Coast Guard
Question 1. At the hearings on March 6 and most recently, May 21,
you mentioned you would provide the Committee with details on the Coast
Guard's plans regarding oil spill prevention and response in the
Pacific Northwest, related to the Trans Mountain pipeline extension
project. Please provide that information.
Answer. Within the United States, vessels carrying bulk liquid
petroleum, non-tank vessels (self-propelled vessels of 400 gross tons
or greater operating on the navigable waters of the United States and
carrying oil of any kind as fuel for main propulsion), marine
transportation-related facilities, pipelines and offshore facilities
must submit oil spill response plans for approval by the U.S.
government. The response plan specifies a means to mobilize and manage
necessary personnel and resources required to mitigate up to a worst-
case discharge. The vessel response plan (VRP), the non-tank vessel
response plan (NTVRP) and facility response plan (FRP) holders must
cite specific Oil Spill Removal Organizations (OSROs) with whom the
plan holder has a contractual agreement to provide equipment and
personnel to abate a spill. OSROs provide specific amounts of core
equipment to plan holders per regulations set out in 33 Code of Federal
Regulations (CFR) 155 (tank and non-tank vessel requirements) and 33
CFR 154 (marine transportation-related facility requirements).
In District 13, the United States Coast Guard (USCG) has at its
disposal the entire commercial OSRO equipment inventory resident in the
region, US Navy spill response equipment, and the USCG's National
Strike Force who are available to provide oil spill response expertise
and have access to pre-positioned oil response equipment staged around
the United States.
Additionally, the USCG directs an Area Committee comprised of
federal, state, and local agencies as well as federally recognized
Indian Tribes. The Area Committee is responsible for drafting Area
Contingency Plans to prepare for a worst case discharge and to mitigate
or prevent a substantial threat of such a discharge in U.S. coastal
zones. The Area Committee, under the direction of the USCG on-scene
coordinator, will take into consideration any changes in potential
worst case discharge scenarios associated with the Trans Mountain
Pipeline expansion (i.e. transiting tanker ships and catastrophic
pipeline system failures) and will ensure that the Area Contingency
Plan properly addresses any new worst case discharge scenarios.
Finally, the USCG engages in joint preparedness initiatives with
Canada. The USCG and the Canadian Coast Guard (CCG) have a long history
of cooperation in executing responsibilities to prepare for and respond
to oil and hazardous substance incidents under the auspices of a
bilateral agreement. The USCG/CCG established the Joint Marine
Pollution Contingency Plan (JCP), a bilateral agreement for planning,
preparing, and responding to harmful substance incidents in the
contiguous waters along shared marine borders. The JCP contains a
CANUSPAC annex specific to response procedures in the Canadian/US
Pacific region. The USCG has and will continue to utilize this
collaborative mechanism to ensure proper planning for potential spills.
Questions from Hon. Mike Gallagher for Admiral Karl L. Schultz,
Commandant, U.S. Coast Guard
Question 1. Following up from the hearing, is it correct that the
Coast Guard contract that procured the current Mackinaw was written to
allow a second icebreaker to be procured, but it was never funded?
Answer. The Great Lakes Icebreaker [GLIB] contract was not scoped
to permit the procurement of a second icebreaker.
Question 2. Is there an estimate of when the Great Lakes
Icebreaking Acquisition and Program Report will be completed and
delivered to Congress?
Answer. The U.S. Coast Guard estimates that this report will be
submitted to Congress no later than September 30, 2019.
Question 3. At the May 21st hearing, you stated that you would
provide an answer on whether the Canadians assisted with any port needs
this past winter in the U.S. that you know of. Please provide that
answer.
Answer. The United States Coast Guard and the Canadian Coast Guard
work collaboratively to facilitate commerce on the Great Lakes during
the ice season. In the 2018-2019 winter season, ten United States Coast
Guard and five Canadian Coast Guard Icebreakers collectively maintained
navigable waterways in the Great Lakes for 109 days. During that time,
the joint icebreaking operations assisted 763 vessel transits through
ice-laden waters, supporting approximately 14.8 million tons of dry and
liquid critical commodities estimated at a value of $536 million. While
the ice covered 75% of the Great Lakes at the height of the season, the
major waterways were open 95% of the season.
Questions from Hon. Anthony G. Brown for Rear Admiral Mark H. Buzby,
U.S. Navy (Ret.), Administrator, Maritime Administration
Question 1. What are the costs to transport the N.S. Savannah (NSS)
per nautical mile?
Answer. The Maritime Administration (MARAD) has solicited proposals
to drydock the NSS for underwater hull maintenance and repair. Price
offers were received on July 8th and are under evaluation. Transporting
the NSS for drydocking would be accomplished as a ``dead-ship'' tow, in
accordance with U.S. Coast Guard requirements. The costs for a dead
ship tow are variable, and are highly dependent on the distance of the
tow, the cost of marine diesel fuel at the time of the tow, and the tow
route to its destination (whether the ship enters open ocean or not).
Based on recent estimates, towing the NSS from its current berth in
Baltimore, MD to Philadelphia, PA, for example, is estimated to cost
approximately $1,900 per nautical mile and to Norfolk, VA is estimated
to cost approximately $1,200 per nautical mile.
Question 2. What is the cost of providing protective storage per
nautical mile for the NSS?
Answer. The average annual cost for protective storage is
approximately $3 million. The costs to maintain the NSS in protective
storage are ongoing, incidental to the cost of towing the vessel, and
are not assessed on a per nautical mile basis. Protective storage is
the Nuclear Regulatory Commission (NRC) designation required to carry
out MARAD's basic license activities. This includes lay berth services,
NRC license technical services, radiological protection, facility
management, and maintenance. Funding to maintain protective storage and
manage basic license activities of the NSS is required until
decommissioning and license termination are completed.
Question 3. How many days would it take to prepare and move the NSS
from its current location to a port other than the Port of Baltimore?
Answer. MARAD estimates moving the NSS within 30-45 days after
awarding the drydocking contract. Under the terms of our license with
the NRC, MARAD must first develop and approve an Emergency Port
Operating Plan and then provide a minimum 30-day notification to the
NRC before moving the ship. Additional vessel preparations prior to
departure include providing a notice of intent to the U.S.
Environmental Protection Agency (EPA) for a vessel general permit,
which informs the EPA of MARAD's intent to operate (tow to a shipyard)
the NSS and to conduct in-water hull cleaning to mitigate the spread of
aquatic invasive species.
Question 4. With the NSS currently moored in Baltimore, MD, what is
the estimated cost savings for the Department of Transportation and
MARAD with dry-docking the NSS for ship disposal in Baltimore, MD
compared to Hampton Roads, VA or Philadelphia, PA?
Answer. MARAD received bids only from shipyards in Philadelphia to
perform the NSS drydocking. No offers were received from shipyards in
Baltimore. Because no bid was submitted from a Baltimore shipyard,
there is no basis upon which to estimate cost savings.
Question 4a. Would dry-docking the NSS in Baltimore, MD for ship
disposal facilitate MARAD's objective to begin the decommissioning and
dismantling process as soon as possible?
Answer. As noted above, no Baltimore shipyards submitted bids for
drydocking the NSS. MARAD issued a request for proposals for the
drydocking the NSS on May 30, 2019, with a deadline of July 8, 2019 for
submitting proposals. MARAD received two proposals, both from shipyards
located in Philadelphia, and expects to award a contract by August 2,
2019.
For background, drydocking, decommissioning of the nuclear power
plant on the NSS, and disposing of the NSS are separate activities.
During the drydock some pre-requisite work will be done on the
infrastructure of the ship to support decommissioning; however,
industrial dismantlement of the nuclear power plant on the NSS will
begin next year with the award of the decommissioning and license
termination contract. NSS decommissioning and license termination must
be completed before the vessel could physically be disposed. Should the
final disposition of the NSS be to dismantle the vessel, such work
would have to be conducted in a qualified ship recycling facility. By
statute, MARAD is required to qualify domestic ship recycling
facilities to protect the environment and worker health and safety. To
date, MARAD has qualified five ship recycling facilities, all located
in Texas and Louisiana.
Question 5. What specific ports or authorities has MARAD
communicated with to dry dock the NSS among the three possible
locations?
Answer. In March 2019, MARAD issued a request for information to
ascertain interest from commercial shipyards in the Baltimore,
Philadelphia, and Norfolk areas. In Baltimore, MARAD communicated with
two entities about the possibility of utilizing the former shipyard at
Sparrows Point, MD, for the drydocking of the NSS; however, neither
entity submitted an offer.
[all]