- SHORT SEA SHIPPING: REBUILDING AMERICA'S MARITIME INDUSTRY

[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]

SHORT SEA SHIPPING: REBUILDING AMERICA'S MARITIME INDUSTRY

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

(116-23)

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

__________

JUNE 19, 2019

__________

Printed for the use of the
Committee on Transportation and Infrastructure

[GRAPHIC(S) 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
39-742 PDF WASHINGTON : 2020

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
------

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........................................ v

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........................................... 3
Hon. Peter A. DeFazio, a Representative in Congress from the
State of Oregon, and Chair, Committee on Transportation and
Infrastructure, prepared statement............................. 37
Hon. Sam Graves, a Representative in Congress from the State of
Missouri, and Ranking Member, Committee on Transportation and
Infrastructure, prepared statement............................. 38

WITNESSES
Panel 1

Rear Admiral Mark H. Buzby, U.S. Navy (Ret.), Administrator,
Maritime Administration:

Oral statement............................................... 4
Prepared statement........................................... 5

Panel 2

Jonathan Nass, Chief Executive Officer, Maine Port Authority:

Oral statement............................................... 17
Prepared statement........................................... 19
James Weakley, President, Lake Carriers' Association:

Oral statement............................................... 20
Prepared statement........................................... 21
Larry I. Willis, President, Transportation Trades Department,
AFL-CIO:

Oral statement............................................... 25
Prepared statement........................................... 27

SUBMISSIONS FOR THE RECORD

Letter of June 19, 2019, from Percy R. Pyne, Chairman and CEO,
Green Shipping Line, Submitted for the Record by Hon. Maloney.. 32
Statement of Kurt Nagle, President and CEO, American Association
of Port Authorities, Submitted for the Record by Hon. Maloney.. 38
``America's Marine Highways,'' Fact Sheet, Maritime
Administration, Submitted for the Record by Hon. Maloney....... 40
``America's Marine Highway Program,'' Brochure, Maritime
Administration, Submitted for the Record by Hon. Maloney....... 42

APPENDIX

Questions from Hon. Alan S. Lowenthal for Rear Admiral Mark H.
Buzby, U.S. Navy (Ret.), Administrator, Maritime Administration 45
Questions from Hon. Alan S. Lowenthal for Jonathan Nass, Chief
Executive Officer, Maine Port Authority........................ 46
Questions from Hon. Bob Gibbs for James Weakley, President, Lake
Carriers' Association.......................................... 46

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

June 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: Subcommittee Hearing on ``Short Sea Shipping:
Rebuilding America's Maritime Industry''

PURPOSE

The Subcommittee on Coast Guard and Maritime Transportation
will meet on Wednesday, June 19, 2019, at 2:00 p.m. in 2167
Rayburn House Office Building to examine the state of short sea
shipping in the United States. The Subcommittee will hear from
the United States Maritime Administration, Maine Port
Authority, Lake Carriers' Association, and Transportation
Trades Department, AFL-CIO.

BACKGROUND

Short sea shipping (SSS) refers to the waterborne
transportation of commercial freight between domestic ports
(from one port in the Unites States to another port in the
United States) through the use of inland and coastal waterways.
Since vessels operating in SSS are required by the Jones Act to
be built, owned, and crewed by United States citizens, an
increased domestic trade would result in significant
development for the U.S. maritime industry.
The Department of Transportation's (DoT) Maritime
Administration (MARAD) has determined that increased SSS would
result in a number of ``public benefits'' \1\ including:
---------------------------------------------------------------------------
\1\ See https://www.maritime.dot.gov/grants/marine-highways/marine-
highway
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Creating and sustaining jobs on U.S. vessels and
in U.S. ports and shipyards;
Increasing the state of good repair of the U.S.
transportation system by reducing maintenance costs from wear
and tear on roads and bridges; \2\
---------------------------------------------------------------------------
\2\ Francesca Medda & Lourdes Trujillo (2010) Short-sea shipping:
an analysis of its determinants, Maritime Policy & Management, 37:3,
285-303, DOI: 10.1080/03088831003700678
---------------------------------------------------------------------------
Increasing the environmental sustainability of
the U.S. transportation system by using less energy and
reducing air emissions per ton-mile of freight moved; and
Increasing national security by adding to the
nation's strategic sealift resources.\3\
---------------------------------------------------------------------------
\3\ Development of Short Sea Shipping: Hearing before the
Subcommittee on Coast Guard and Maritime Transportation of the House
Committee on Transportation and Infrastructure, 116th Congress. 2
(2007) (Testimony of Sean Connaughton.
---------------------------------------------------------------------------
An opportunity may exist to develop a new SSS policy that
will promote the continued development of this method of
transportation. While MARAD established the ``America's Marine
Highway Program'' and a number of limited SSS services exist
that take advantage of that resource, the system remains
underutilized. For example, in Europe, shipping accounts for 37
percent of intra-EU trade.\4\ Conversely, in the U.S., there
are more than 25,000 miles of coastal, inland, and intracoastal
waterways that move more than 1.4 billion tons of freight
annually which represents approximately only 2 percent of the
domestic freight.\5\ Despite their inherent efficiencies,
domestic coastal and Great Lakes shipping carry barely half as
much cargo today as they did in 1960.\6\
---------------------------------------------------------------------------
\4\ See European Community Shipowners' Associations. Short Sea
Shipping. https://www.ecsa.eu/sites/default/files/publications/
ECSA_SSS_Download%201_0.pdf
\5\ https://www.researchgate.net/publication/248989077_Short-
sea_shipping_
An_analysis_of_its_determinants
\6\ See CRS R44831 Revitalizing Coastal Shipping for Domestic
Commerce. May 2, 2017. https://crsreports.congress.gov/product/pdf/R/
R44831
---------------------------------------------------------------------------
The majority of water freight shipping systems in the U.S.
operate on the Mississippi River, the Great Lakes, and the St.
Lawrence Seaway, and typically transport bulk cargoes. Bulk
cargo typically consists of commodities that are transported in
large unpackaged quantities. SSS is one of the most cost-
effective ways to move heavy, lower value, and non-time-
sensitive freight (as SSS is a slower mode of transportation
than truck, rail, or air). The types of vessels that could be
utilized in new SSS trades include towing, small and medium
cargo, and roll-on/roll-off vessels.

POTENTIAL BENEFITS OF SSS

Some of the potential benefits of SSS include:
Improved Freight Mobility: The volume of freight
transported in the U.S. is expected to continue increasing in
the coming years. Also expected to increase is congestion on
both our roadways (where trucks carry more than 70 percent of
freight by weight) and our rail networks. Increased SSS
capacity could offer freight shippers an additional
transportation option and help alleviate increased surface
congestion with less federal investment.
Reduced Environmental Impact: Transportation on
SSS vessels can have significant energy efficiencies over land-
based modes of transportation. On average, trucks can carry one
ton of freight approximately 145 miles on a gallon of diesel
fuel and rail achieves 477 ton-miles per gallon. Meanwhile, a
tug and barge operation can get as much as 647 ton-miles of
freight to a gallon of fuel and self-propelled vessels may
achieve an even greater rate of energy efficiency.\7\ Shifting
freight traffic to waterborne commerce can reduce associated
vehicle emissions and improve air quality.\8\
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\7\ Texas Transportation Institute, Center for Ports and Waterways,
A Modal Comparison of Domestic Freight Transportation Effects on the
General Public: 2001-2014, prepared for the National Waterways
Foundation, January 2017, p. 7.
\8\ Mulligan, Robert F. and Lombardo, Gary A., Short Sea Shipping:
Alleviating the Environmental Impact of Economic Growth. World Maritime
University Journal of Maritime Affairs, Vol. 5, No. 2, pp. 55-70, 2006.
Available at SSRN: https://ssrn.com/abstract=1028845
---------------------------------------------------------------------------
Increasing Mariner Jobs: As the U.S.-flagged
international fleet has declined, MARAD has identified a
shortage of 1,800 mariners. That shortage has a direct negative
effect on the Department of Defense's (DoD) readiness.
Increasing the number of small and mid-sized vessels operating
in the domestic trades would provide additional platforms on
which American mariners can work. Additional opportunities for
maritime employment would grow the pool of mariners available
for military sealift.
Increased Shipbuilding Capacity: Under current
law, vessels carrying cargo between U.S. ports are required to
be owned, crewed, and built by United States citizens. SSS
vessel construction and repair in U.S. shipyards would help to
assure the DoD's access to skilled shipbuilding workers and
facilities and promote job creation in the commercial
shipbuilding sector.

POTENTIAL IMPEDIMENTS TO SSS

Factors that could limit the development of SSS include:
Duplicated Harbor Maintenance Tax: As reported by
the Congressional Research Service (CRS) the Harbor Maintenance
Tax (HMT) is a levy placed on the value of cargo that is
imported to a port within the United States or that is
transported between two U.S. ports. The levy is assessed at a
rate of 0.125 percent of the value of the cargo. The tax is
assessed only once on cargo that is transported between one
U.S. port to another; however, cargo that is carried from a
foreign port may be taxed twice--once upon arrival at the
initial U.S. port, and again if transported aboard a different
vessel to another U.S. port. CRS concluded that the tax
discourages domestic water shipment of import and export
containers.\9\ CRS also noted the tax could be particularly
cumbersome for domestic vessel operators carrying containers of
mixed cargo assembled by consolidators, because these typically
hold shipments from multiple customers.
---------------------------------------------------------------------------
\9\ See CRS R41590, Can Marine Highways Deliver?, January 14 2011.
---------------------------------------------------------------------------
Shipper Reluctance: There exists a general
reluctance among freight shippers to try new, relatively
unproven, modes of transportation. Many shippers rely on trucks
or trains because they are known modes, and consequently, they
may be reluctant to utilize SSS even if it is marginally more
cost effective.
Ship Financing: It is difficult for potential
shipbuilders to secure financing for new ship construction if
they do not have freight contracts in place. Freight and
logistics companies are often unwilling to enter into those
contracts for a service that has not proven itself and at a
cost that cannot be specified before the ship is delivered from
a shipyard and placed into service. To help overcome ship
financing barriers, SSS proponents have advocated allowing the
Capital Construction Fund (CCF) program to be used for SSS. The
CCF is a tax-deferred program that allows ship owners to defer
Federal income taxes on their deposits as long as the
withdrawals are used to build ships in a U.S. shipyard (similar
to an IRA for ship owners). Others have recommended increased
use and funding of MARAD's Title XI loan guarantee program
under which the Federal Government will guarantee the mortgage
of a ship owner for up to 30 years.
Insufficient Port Facilities: Currently, major
container ports are built to service large, ocean-going
vessels. It is likely any additional cargo that would enter the
Marine Highway System would enter at these ports which are
equipped with large cranes to service large container ships. An
expansion of SSS may require the construction of right-sized
infrastructure that can service SSS vessels, many of which may
utilize Roll-on/Roll-off technology (meaning that cargo can be
driven or pushed on and off the vessel) rather than crane
technology. Additional infrastructure investments may be
necessary in smaller ports to ensure their ability to receive
SSS cargoes.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

Figure 1--America's Marine Highway Program, Maritime Administration.
Designation of these Marine Highway Routes is the first step towards
reducing landside congestion by focusing public and private efforts on
increasing the amount of cargoes and passengers transported on
commercially navigable waterways. See https://www.maritime.dot.gov/
grants/marine-highways/marine-highway.

FEDERAL INVOLVEMENT

Congress established America's Marine Highway Program
(AMHP) at MARAD in 2007 in order to reduce landside congestion
through the designation of Marine Highway Routes. In 2012,
Congress expanded the scope of the program to provide support
for projects that generate public benefits by utilizing Marine
Highway Routes. Though the AMHP has existed for over a decade
and a number of projects have been designated as SSS routes,
the system remains underutilized. The Consolidated
Appropriations Act of 2019, signed by the President on February
15, 2019, provided $7,000,000 for the AMHP to be used for
Marine Highway Grants for the development and expansion of
documented vessels, and port and landside infrastructure.
The AMHP currently includes 25 all-water Marine Highway
Routes that serve as extensions to the surface transportation
system.\10\ Routes are designated by the Secretary of
Transportation because they can offer relief to traffic
congestion on landside corridors, address excessive air
emissions, or other environmental concerns and challenges, or
provide new transportation options.
---------------------------------------------------------------------------
\10\ See https://www.maritime.dot.gov/grants/marine-highways/
marine-highway
---------------------------------------------------------------------------
MARAD identifies specific SSS opportunities through the
Office of Marine Highways. Every 6 months, MARAD reviews
applications and designates new Marine Highway Projects. SSS
operators can receive designation through the Office of Marine
Highways if their proposal has the potential to offer public
benefits and long-term sustainability without long-term Federal
support. Once a project has been received designation as a
Marine Highway Project, it receives preferential treatment for
Marine Highway Grants or any future federal assistance from the
DoT and MARAD.
MARAD released its last report on the AMHP in April 2011,
where it summarized the motivations behind the Program and
federal support required to capture environmental, economic,
and security benefits of the Program in addition to steps for
implementation.\11\ The program can work in conjunction with
other MARAD grants to improve port and terminal intermodal
infrastructure, as well as in collaboration with the
Environmental Protection Agency's SmartWay and Clean Ports
initiatives.
---------------------------------------------------------------------------
\11\ See https://www.maritime.dot.gov/sites/marad.dot.gov/files/
docs/intermodal-systems/marine-highways/3051/
maradamhreporttocongress.pdf. The report also includes recommendations
for leveraging the program through paired grants.
---------------------------------------------------------------------------
While MARAD issued grants totaling $7 million in 2010, the
AMHP has not provided the investment, incentives, or assistance
needed to jumpstart a robust SSS industry. In 2016 and 2017 the
Program received $5 million from Congress and another $7
million in 2018.

WITNESS LIST

PANEL I

Rear Admiral Mark H. Buzby, USN, Ret.,
Administrator, Maritime Administration

PANEL II

Mr. Jon Nass, Chief Executive Officer, Maine Port
Authority
Mr. James Weakley, President, Lake Carriers'
Association
Mr. Larry Willis, President, Transportation
Trades Department, AFL-CIO

SHORT SEA SHIPPING: REBUILDING AMERICA'S MARITIME INDUSTRY

----------

WEDNESDAY, JUNE 19, 2019

House of Representatives,
Subcommittee on Coast Guard and Maritime
Transportation,
Committee on Transportation and Infrastructure,
Washington, DC.
The subcommittee met, pursuant to call, at 3:18 p.m., in
room 2167, Rayburn House Office Building, Hon. Sean Patrick
Maloney (Chairman of the subcommittee) presiding.
Mr. Maloney. The subcommittee will come to order. I ask
unanimous consent that the Chair be authorized to declare a
recess during today's hearing. Without objection, so ordered.
Good afternoon. Welcome to today's hearing on short sea
shipping. I do apologize to our witnesses, the Members have
been detained by votes on the House floor, which just concluded
moments ago, so we apologize for keeping you all waiting. It
was unavoidable, unfortunately.
So on March 6, the subcommittee examined the state of the
maritime industry. In that hearing, the Maritime Administrator
and industry representatives repeated a common message: When it
comes to growing the American maritime industry, cargo is king.
Now, if you have driven on I-95 recently, you know full
well that there is an excess of cargo and, therefore, traffic,
on our roads. By 2045, truck freight volume is expected to grow
by 43 percent, which without major infrastructure improvements,
will further clog our roads and highways. This increased
traffic would be significantly alleviated if we shifted cargo
to our waterways through short sea shipping.
Short sea shipping is the waterborne transportation of
commercial freight between domestic ports through inland and
coastal waterways. While our friends in Europe have placed
short sea shipping at the center of their transportation
policies, moving over 40 percent of all European freight on
oceans and inland rivers, we have failed to leverage our
existing programs to provide additional support for our
domestic shipping industry. An invigorated short sea shipping
industry would not only increase the state of good repair of
the U.S. roads and bridges by reducing maintenance costs from
wear and tear and improve air quality and emissions, but it
would also help to address the critical shortage in our
merchant mariner workforce.
Administrator Buzby and other Government officials have
repeatedly stated that we have 1,800 fewer mariners than what
is needed to address America's sealift needs. That gap would
quickly begin to close if we fully utilized America's marine
highway and began shipping cargo on coastwise ships.
In order to rigorously promote short sea shipping, we must
develop a national multimodal transportation and infrastructure
plan that prominently features maritime transportation. The
Maritime Administration claims to be working to maintain the
health of the merchant marine, yet in the 5 years since
Congress tasked MARAD with the development of a comprehensive
maritime strategy, we have seen little movement to create a
comprehensive plan to promote short sea shipping.
So I look forward to hearing from Admiral Buzby on the
status of that strategy, particularly as it pertains to short
sea shipping. I also look forward to hearing from our civilian
panel on the benefits of short sea shipping, the status of
projects that currently exist, and what Congress and the
administration can be doing to advance the use of marine
highways.
Now I would call on the ranking member, Mr. Gibbs, for his
opening remarks.
[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
Good afternoon and welcome to today's hearing on Short Sea
Shipping. On March 6th, the Subcommittee examined the ``State of the
Maritime Industry.'' In that hearing, the Maritime Administrator and
industry representatives repeated a common message--when it comes to
growing the American maritime industry, ``cargo is king.''
If you've driven on Interstate 95 recently you know full well that
there is an excess of cargo, and therefore traffic, on our roads. By
2045 truck freight volume is expected to grow by 43 percent which,
without major infrastructure investments, will further clog our roads
and highways. This increased traffic would be significantly alleviated
if we shifted cargo to our waterways through Short Sea Shipping.
Short Sea Shipping is the waterborne transportation of commercial
freight between domestic ports through inland and coastal waterways.
While our friends in Europe have placed Short Sea Shipping at the
center of their transportation policies, moving over 40 percent of all
European freight on oceans and inland rivers, we have failed to
leverage our existing programs or provide additional support for our
domestic shipping industry.
An invigorated Short Sea Shipping industry would not only increase
the state of good repair of the U.S. roads and bridges by reducing
maintenance costs from wear and tear and improve air quality and
emissions, but would help to address the critical shortage in our
merchant mariner workforce. Administrator Buzby and other government
officials have repeatedly stated that we have 1,800 fewer mariners than
what is needed to address America's sealift needs. That gap would
quickly begin to close if we fully utilized America's marine highways
and began shipping cargo on coastwise ships.
In order to rigorously promote Short Sea Shipping, we must develop
a national multi-modal transportation and infrastructure plan that
prominently features maritime transportation. The Maritime
Administration claims to be working to maintain the health of the
merchant marine. Yet in the 5 years since Congress tasked MARAD with
the development of a comprehensive maritime strategy we have seen
little movement to create a comprehensive plan to promote Short Sea
Shipping. I look forward to hearing from Admiral Buzby on the status of
that strategy, particularly as it pertains to Short Sea Shipping. I
also look forward to hearing from our civilian panel on the benefits of
Short Sea Shipping, the status of projects that currently exist, and
what Congress and the Administration can be doing to advance the use of
marine highways.

Mr. Gibbs. Thank you, Chairman.
Increased use of waterborne transportation of commercial
freight between domestic U.S. ports--short sea shipping--could
expand the limited and increasingly crowded freight
transportation capacity of the Nation's rail and road system
without the need for large additional public investments.
Historically, freight has been moved by water in the United
States, and a large portion of bulk shipments still move by
water. Increased availability of trains and trucks have reduced
the usage of water transportation for movement of higher value
freight.
Water is far and away the most fuel efficient way to move
freight, but since it is geographically confined by where there
is water, it is limited in its ability to get goods to the
ultimate destination, the last-mile problem, and every loading,
unloading, and reloading of freight adds expense and time
delays.
Increased freight volumes, limited dollars to invest in new
infrastructure, increased road congestion, and increased
interest in reducing air emissions have also been cited in
recent years as reasons that short sea shipping should be
examined as an alternative source of added transportation
capacity. However, movement of container freight on America's
waterways has not increased. The reasons given include the
configuration of large ports to handle large vessels, a
reluctance of freight shippers to move to new modes of
transportation, and the difficulty for potential shipbuilders
to secure financing for new ship construction if they do not
have freight contracts in place to prove that they can pay off
the vessels' mortgages.
In 2007, Congress established a short sea transportation
program to promote the domestic transportation of freight by
water. I look forward to hearing from the witnesses today about
whether that program has worked and what additional public or
private actions can be taken to promote such transportation.
Mr. Chairman, I look forward to the hearing today, and I
yield back.
[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
Increased use of waterborne transportation of commercial freight
between domestic U.S. ports--short sea shipping--could expand the
limited, and increasingly crowded, freight transportation capacity of
the Nation's rail and road system without large additional public
investment.
Historically, freight moved by water in the United States, while a
large portion of bulk shipments still move by water. Increased
availability of trains and trucks have reduced the water movement of
higher value freight.
Water is far and away the most fuel efficient way to move freight,
but since it is geographically confined, it is limited in its ability
to get goods to their ultimate destination, the last mile problem, and
every loading, unloading and reloading of the freight adds expense and
time delays.
Increased freight volumes, limited dollars to invest in new
infrastructure, increased road congestion, and increased interest in
reducing air emissions have all been cited in recent years as reasons
that short sea shipping should be examined as an alternative source of
added transportation capacity.
However, movement of container freight on America's waterways has
not increased. Reasons given include, configuration of large ports to
handle large vessels; the reluctance of freight shippers to move to new
modes transportation; and, the difficulty for potential shipbuilders to
secure financing for new ship construction if they do not have freight
contracts in place to prove that they can pay off the vessel's
mortgages.
In 2007, Congress established the Short Sea Transportation program
to promote the domestic transportation of freight by water. I look
forward to hearing from the witnesses today about whether that program
has worked, and what additional public or private actions can be taken
to promote such transportation.

Mr. Maloney. I thank the gentleman.
I would like to welcome the witness on our first panel,
Rear Admiral Mark H. Buzby, Administrator of the Maritime
Administration.
Thank you for being here today, sir. I look forward to your
testimony.
Without objection, our witness' full statement will be
included in the record.
Since your written testimony has been made part of the
record, sir, the subcommittee requests that you limit your oral
testimony to 5 minutes. Thank you for being here. You may
proceed.

TESTIMONY OF REAR ADMIRAL MARK H. BUZBY, U.S. NAVY (RET.),
ADMINISTRATOR, MARITIME ADMINISTRATION

Admiral Buzby. Right. Thank you.
Good afternoon, Chairman Maloney, Ranking Member Gibbs,
members of the subcommittee, I appreciate the opportunity to
testify this afternoon on the Maritime Administration's efforts
to foster, promote, and develop short sea shipping through
America's Maritime Highway Program. The marine highway system
consists of our Nation's navigable waterways, including rivers,
bays, channels, the Great Lakes, St. Lawrence Seaway System,
coastal and open ocean routes.
As established by Congress, America's Marine Highway
Program aims to reduce road congestion, emissions, conserve
energy, improve safety, and reduce landside infrastructure
costs. Marine transport of goods offers a safe and efficient
option for shippers. One study estimates that in 2014,
congestion on our roads, bridges, railways, and in ports cost
the United States as much as $160 billion; trucks accounting
for $28 billion of this cost. Overall, the volume of imports
and exports transported by our freight system is expected to
more than double over the next 30 years. This will have an
implication for ports which handle approximately 70 percent of
America's international trade by volume. Expanding existing or
establishing new marine highway services on commercially
navigable waterways is a cost-effective way to meet some of our
freight transportation needs and relieve landside congestion.
America's Marine Highway Program designates routes and
projects and provides grant funding. As of this month, DOT has
designated 25 marine highway routes compromising a significant
portion of our navigable waterways. A semiannual call for
projects helps to identify concepts for new or expansion of
existing marine highway services that have the potential to
offer public benefits and long-term sustainability without
long-term financial support from the Federal Government. To
date, DOT has awarded $24 million in competitive marine highway
grants, supporting at least six new and two existing marine
highway services. America's Marine Highway Program grant-funded
services moved 35,215 20-foot equivalent units, or TEUs, in
fiscal year 2016 by water, saving an estimated $1.5 million in
road maintenance and congestion costs. These savings were from
the M-64 Express Marine Highway Service, running between
Hampton Roads and Richmond, Virginia, the only grant-funded
marine highway service operating in the United States at that
time.
In fiscal year 2017, savings calculations were estimated at
$3.6 million and increased to more than $4.9 million in fiscal
year 2018; a result of a new Baton Rouge to New Orleans service
and a New York Cross Harbor service. While the numbers may be
small relative to the initial grant, the equipment will operate
for decades, in most cases, and the reductions in
infrastructure damage, emissions, and fatalities will be felt
for years. We are considering specific ways the Maritime
Administration can maximize America's highway benefits,
particularly using our marine highways to move Federal cargo.
We are also exploring partnerships with the EPA Smart Way
program and other such programs to tout the efficiencies of
utilizing the marine highway system.
Finally, the Maritime Administration has been proactive in
engaging with local and regional officials and private
entrepreneurs in analyzing specific logistical challenges where
a waterborne solution may offer the best and most sustainable
approach.
We are proud of the effect that the America's Maritime
Highway Program has had in support of the Jones Act, and are
excited about the momentum it is building in such a short
period of time, but we are not done. We believe that continued
expansion of the use of marine highways can greatly benefit the
marine industry generally, while reducing road traffic and
emissions and landside infrastructure costs.
Thank you for the opportunity to testify this afternoon,
and I look forward to your questions.
[Admiral Buzby's prepared statement follows:]

Prepared Statement of Rear Admiral Mark H. Buzby, U.S. Navy (Ret.),
Administrator, Maritime Administration
Good afternoon, Chairman Maloney, Ranking Member Gibbs and members
of the Subcommittee. I appreciate the opportunity to testify today on
the Maritime Administration's (MARAD) efforts to foster, promote and
develop short sea shipping in the United States through the America's
Marine Highway Program (AMHP).
The Marine Highway System consists of our Nation's navigable
waterways including rivers, bays, channels, the Great Lakes, the Saint
Lawrence Seaway System, coastal, and certain open-ocean routes. These
navigable waterways touch 38 states plus the District of Columbia and
Puerto Rico. The purpose of the AMHP is to further incorporate these
waterways into the overall U.S. transportation system, especially where
marine transportation services are the most efficient, effective, and
sustainable transportation option.
Congress established the AMHP through the Energy Independence and
Security Act of 2007, P.L. 110-140. Recognizing the potential in the
program, in following years Congress expanded and modified the program.
The Coast Guard and Maritime Transportation Act of 2012, P.L. 112-213,
expanded the program to include efforts to increase the utilization and
efficiency of domestic freight and passenger transportation on Marine
Highway Routes between U.S. ports. The National Defense Authorization
Act of Fiscal Year 2016, P.L. 114-92, broadened the definition of short
sea shipping to include more kinds of cargo and cargo or freight
vehicles carried aboard commuter ferry boats.
purposes of the america's marine highway program
The AMHP is intended to, among other things, reduce travel delays
caused by congestion, cut greenhouse gas emissions, conserve energy,
improve safety, and reduce landside infrastructure costs. Marine
transport of goods offers a safe and efficient option for shippers as
reflected in the tables below: \1\
---------------------------------------------------------------------------
\1\ Tables created from data in, A Modal Comparison of Domestic
Freight Transportation Effects on the General Public, Texas
Transportation Institute, Center for Ports and Waterways, as amended
(2017): http://nationalwaterwaysfoundation.org/documents/
Final%20TTI%20Report
%202001-2014%20Approved.pdf

----------------------------------------------------------------------------------------------------------------
Emissions Safety Fuel Efficiency
----------------------------------------------------------------------------------------------------------------
Tons of
GHG/ Ratio of
Mode Million Mode Fatalities/ Mode Ton-Miles/
Ton- Million Ton- Gallon
Miles Miles
----------------------------------------------------------------------------------------------------------------
Barge............................. 15.6 Barge................ 1 Barge............... 647
----------------------------------------------------------------------------------------------------------------
Railroads......................... 21.2 Railroads............ 21.9 Railroads........... 447
----------------------------------------------------------------------------------------------------------------
Truck............................. 154.1 Truck................ 79.3 Truck............... 145
----------------------------------------------------------------------------------------------------------------

Congestion on our surface transportation system significantly
impacts our economic prosperity and quality of life. One study
estimates that in 2014 congestion cost America's urban commuters an
estimated $160 billion in wasted time and fuel; trucks account for $28
billion of this cost.\2\ Overall, the volume of imports and exports
transported by our freight system is expected to more than double over
the next 30 years. This will have implications for ports, which handle
approximately 70 percent of America's international trade by volume.\3\
Most of this additional cargo will ultimately move along our surface
transportation corridors, many of which are currently at or beyond
capacity.
---------------------------------------------------------------------------
\2\ 2015 Urban Mobility Scorecard, Texas A&M Transportation
Institute and INRIX (2015), 2015 Urban Mobility Scorecard [https://
d2dtl5nnlpfr0r.cloudfront.net/tti.tamu.edu/documents/mobility-
scorecard-2015.pdf].
\3\ BTS Freight Facts and Figures 2016, Figure 2-9, BTS Freight
Facts and Figures 2016 [https://www.bts.gov/bts-publications/freight-
facts-and-figures/freight-facts-figures-2017-chapter-2-freight-moved].
---------------------------------------------------------------------------
Expanding existing or establishing new marine highway services on
commercially navigable waterways is a cost-effective way to meet our
freight transportation needs and relieve landside congestion.
The AMHP consists of three elements: Route designation, project
designation, and grants.
marine highway routes
Marine Highway Routes are commercially navigable coastal, inland,
and intracoastal waters of the United States as designated by the
Secretary. This includes connections between U.S. ports and Canadian
ports on the Great Lakes-Saint Lawrence Seaway System, and non-
contiguous U.S. ports. Marine Highway Routes are a component of the
Nation's surface transportation system. Public entities may apply to
MARAD at any time to request that the Secretary of Transportation
designate (i.e., establish) a Marine Highway Route. To be eligible for
designation, at a minimum a route must relieve landside congestion
along coastal corridors or promote short sea transportation, as well as
meet AMHP objectives described in regulations.\4\ As of this month, DOT
has designated 25 Marine Highway Routes comprising a significant
portion of our navigable waterways.\5\ The Marine Highway Routes are
numbered akin to the interstate highways that they generally parallel.
The latest route to be designated, the M-H1, are the waters in and
around Hawaii.
---------------------------------------------------------------------------
\4\ 46 CFR 393.2
\5\ See attachment 1.
---------------------------------------------------------------------------
marine highway projects
Marine Highway Projects are planned or contemplated new services,
or expansions of existing services, on designated Marine Highway
Routes, that seek to provide new modal choices to shippers, reduce
transportation costs, and/or provide public benefits, which include
reduced air emissions, reduced road maintenance costs, and improved
safety and resiliency impacts. These projects represent concepts for
new, or expansion of existing, marine highway services that have the
potential to offer public benefits and long-term sustainability without
long-term Federal support. The desired outcome is that designated
projects will help start new businesses or expand existing ones to move
more freight or passengers along America's navigable coastal, inland,
and intra-coastal waters. The AMHP publicizes a semi-annual ``Call for
Projects.'' In response, applicants propose projects and the Secretary
of Transportation may designate qualified projects as ``Marine Highway
Projects.''
marine highway grants
Competitive grants form the third component of the AMHP. Only
Marine Highway Projects designated by the Secretary are eligible to
apply for Marine Highway Grants. Grantees may use the funds to develop
and expand the availability of documented vessels and port and landside
infrastructure. Only projects the Secretary designates are eligible to
apply for Marine Highway Grants. Either the grant applicant, or private
entities with endorsement by the applicant, are eligible to apply for
grant funding. There are currently 25 designated projects.\6\
---------------------------------------------------------------------------
\6\ See attachment 2.
---------------------------------------------------------------------------
To date, DOT has awarded $24 million in Marine Highway Grants
supporting six new and two existing marine highway services. In two
instances, we funded vessel construction. In another case, interest
from users on the inland waterways spurred Taylor Manufacturing of
Louisville, MS, to engineer a ``negative drop'' reach-stacker used to
load containers into river hopper barges; that equipment had previously
only been available from foreign sources.
The AMHP is clearly having an impact. Metrics we gather to measure
that impact include the number of truck road miles that have been
eliminated. Using Federal Highway Administration formulas, MARAD
estimates the public benefits of funded projects in dollars. In FY 2016
AMHP grant-funded services moved 35,215 twenty-foot equivalent units
(TEUs) by water saving approximately $1.5 million in road maintenance
and congestion costs. These savings were from the M-64 Express Marine
Highway Service, running between Hampton Roads and Richmond, Virginia,
the only grant funded marine highway service operating in the United
States at that time. That number has continued to increase. In FY 2017
savings calculations were an estimated $3.6 million and increased to
more than $4.9 million in FY 2018. This positive momentum is a result
of additional new services being added: the Baton Rouge to New Orleans
Service and the New York Cross Harbor Service. While the numbers may be
small relative to the initial grant, the equipment will operate for
decades in most cases, and the reductions in infrastructure damage,
emissions, and fatalities will be felt for years.
actions that could expand the america's marine highway program's reach
We manage the AMHP with an eye toward innovation and constant
improvement. To that end, we are considering specific ways MARAD can
maximize the program's effects. First, we are exploring opportunities
with other Federal entities to transport federally-owned or generated
cargo using a short sea transportation project when practical or
available. We are also exploring partnerships with the EPA's Ports
Initiative and Smart Way Programs, and other such programs, to tout the
efficiencies and environmental benefits of utilizing the Marine Highway
System. Finally, MARAD has been proactive in engaging with local and
regional officials, and private entrepreneurs, in analyzing specific
logistical challenges where a waterborne solution may offer the best
and most sustainable approach.
conclusion
We are proud of the effect that the AMHP has had and are excited
about the momentum it is building in the interest of national security,
economic success, and the lives of the American people, but we are not
done. We will continue to support innovation through the AMHP.
Mr. Chairman, thank you for the opportunity to discuss the AMHP and
MARAD's efforts to expand short sea shipping opportunities. 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.
attachment 1

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

attachment 2

List of Designated Marine Highway Projects
------------------------------------------------------------------------
Marine
Project Name Date Established Highway
------------------------------------------------------------------------
New England Marine Highway Expansion 2010 M-95
Project................................
------------------------------------------------------------------------
James River Container Expansion Project. 2010 M-64
------------------------------------------------------------------------
Trans-Hudson Freight Connector Project.. 2010 M-95
------------------------------------------------------------------------
Tenn-Tom Freight Project................ 2010 M-65
------------------------------------------------------------------------
Detroit/Wayne County Ferry Project...... 2010 M-75
------------------------------------------------------------------------
Gulf Atlantic Marine Highway Project.... 2010 M-95 &
M-10
------------------------------------------------------------------------
Cross Gulf Container Expansion Project.. 2010 M-10
------------------------------------------------------------------------
Cross Sound Enhancement Project......... 2010 M-95
------------------------------------------------------------------------
M-55/M-35 Container on Barge Project.... 2015 M-55 &
M-35
------------------------------------------------------------------------
Potomac River Commuter Ferry Project.... 2015 M-495
------------------------------------------------------------------------
New York Harbor Container and Trailer-on- 2015 M-95
Barge Service..........................
------------------------------------------------------------------------
Baton Rouge-New Orleans Shuttle......... 2016 M-55
------------------------------------------------------------------------
Paducah/McCracken County Container on 2016 M-70
Barge Marine Highway Project...........
------------------------------------------------------------------------
Illinois Intrastate Shuttle............. 2016 M-55
------------------------------------------------------------------------
Lake Erie Shuttle Service on the M-90... 2016 M-90
------------------------------------------------------------------------
Great Lakes Shuttle Service............. 2017 M-90
------------------------------------------------------------------------
Mid-Atlantic Barge Service.............. 2017 M-95
------------------------------------------------------------------------
Container on Barge & Heavy-Lift Corridor 2017 M-69
Service at Freeport TX.................
------------------------------------------------------------------------
Philadelphia-Canaveral Direct Service... 2017 M-95
------------------------------------------------------------------------
Port of Davisville/Brooklyn/Newark 2018 M-95
Container on Barge Service.............
------------------------------------------------------------------------
Harbor Harvest Long Island Sound Project 2018 M-95
------------------------------------------------------------------------
Container on Barge Service on the M-70 2018 M-70 &
and M-35............................... M-35
------------------------------------------------------------------------
South Carolina Ports Authority Container 2018 M-95
on Barge Service.......................
------------------------------------------------------------------------
Port of Everett Container on Barge 2018 M-84
Service................................
------------------------------------------------------------------------
Chambers County Container on Barge 2018 M-69
Expansion Service......................
------------------------------------------------------------------------

Mr. Maloney. I thank the gentleman.
I will now proceed to questions. I will be observing a 5-
minute rule this afternoon. I will begin by recognizing myself
for 5 minutes.
Admiral Buzby, please help us understand what the principal
barriers are to marine highway development, and please also
comment on when the Congress can expect to see the national
maritime strategy, since we have been waiting for some time on
that document and that strategy. And would you also refer to
the role that short sea shipping would play in such a strategy.
Admiral Buzby. Yes, sir. Thank you. I will address that
strategy piece first.
As you know, Congress has given us now an extension till
the 13th of February of next year, 2020, and I fully expect
that we will present the strategy within that timeline, sir. It
is currently in interagency coordination, and I will be
standing by to get it and move it forward to you, sir.
Mr. Maloney. What can you tell us about it, sir? Give us a
preview of coming attractions. Don't ruin the ending. I don't
want any spoilers, but surely after 6 years, we have got to
have some thoughts on what we are doing, right?
Admiral Buzby. I can tell you this, foundationally it is
built on the Merchant Marine Act of 1936, the Jones Act, cargo
preference. It is built on those things that have kept the
merchant marine alive and breathing, quite frankly, so that is
the basis of it.
I think that you will see that short sea shipping and port
development and port modernization play a key role, recognizing
that our ports are our economic gateways to this country, the
majority of our goods flow through those ports and then are
distributed through rail, through highways and hopefully
increasingly through maritime highways. So that will be a key
element of that, making sure we continue to modernize that flow
and, of course, preparing the workforce for the future.
That is a very key element of the strategy to make sure
that we are modernizing and bringing enough people in, which is
why the National Security Multi-Mission Vessel program is a
very key element of that. So while you haven't seen it yet, a
lot of the things that we are doing right now, you will
recognize in that strategy when you see it. We haven't stopped
waiting for that to be approved to move forward.
Mr. Maloney. And short sea shipping?
Admiral Buzby. Short sea shipping, the barriers, I think,
that are keeping us from really surging ahead thus far, I would
say, number one, is probably awareness, education of shippers,
that there are these ultimate means. And quite frankly, it is
understanding the business case that exists to move things by
water.
It takes a little digging into and understanding,
especially when you are just used to throwing it on the back of
a truck or throwing it on a railcar, understanding that there
are other ways to move it that, you know, there may be
tradeoffs in time or other certain aspects of it, but in the
end, it can have significant impacts in terms of the
environment, in terms of savings due to road wear and
everything else.
Mr. Maloney. What are the Europeans doing that we are not?
Admiral Buzby. Sorry?
Mr. Maloney. What are the Europeans doing that we are not?
Admiral Buzby. Well, you know, they have not benefited from
the road network and the rail network that we have. We have
been very blessed in this country in that we have such an
extensive road network that has enabled trucking really to take
the place of what rivers do in Europe. We kind of got spoiled
in that respect. You think back, our river system, our coastal
system, that is how America moved goods in the beginning.
Before we had roads, before we had railroads, that is how it
all happened. We moved away from that because we got so darn
good with our rail system and our road system, both of which
are becoming overtaxed now.
So our waterways are our one artery where we still have a
lot of capacity to grow into, and if we double our cargo, as we
say we think we are going to do over the next 30 years, we
won't have any choice; we will have to go into the waterways.
Mr. Maloney. Mr. Gibbs?
Mr. Gibbs. Thank you.
Thank you, Admiral, for being here.
Some of the options, I know the shipping community has
suggested that the harbor maintenance fee, Harbor Maintenance
Trust Fund, the law--any cargo that is imported from Canada or
between U.S. ports, there is the ad valorem tax for the Harbor
Maintenance Trust Fund. Do you know how much is raised annually
as a result between the domestic shipments?
Admiral Buzby. I don't have the number right at the tip of
my tongue, but, you know, that is an issue, is when you are
doing that sort of domestic shipping, you end up paying twice.
Mr. Gibbs. Do you think it is enough that it is a
disincentive to increase short sea shipping?
Admiral Buzby. It certainly is a factor. Like every form of
transportation has cost factors that have to be factored in,
this is one that has to be factored in.
Mr. Gibbs. I just raised this because some in the shipping
community are raising it--and at least from the Canadian and
domestic ports to ports.
Admiral Buzby. Right.
Mr. Gibbs. You know, we maybe talked about this in the
questions from the chairman, but is there anything the Federal
Government could do to really try to jump start the short sea
shipping?
You talked a little bit about infrastructure. I guess I am
just trying to think--this is really a private sector thing and
there are challenges, there are obstacles for one to do that.
Some of that is getting financing, building new ships, just
reluctance from shippers because there is competition between
other modes of transportation.
Do you see anything specifically that the Federal
Government should be doing to maybe help give confidence to the
shippers to want to increase their assets or capabilities?
Admiral Buzby. I think this program is a great impetus to
try and do that because it is not just the fact that we are
designating projects and providing grants for those designated
projects, which is an incentive, but I think the education
piece, as I mentioned before, is really important. It is just
not well-known, it is just not well-appreciated, I think, by
most shippers and many carriers, that this alternate means
exists and it can be beneficial to their business.
At the end of the day, it comes down to a business case,
people moving goods around. The business case has to be there
in order to do that. The reliability has to be there, costwise
it has to work, schedulewise it has to work. In some areas,
marine highways work like a champ where we have seven very
good, strong programs that are out there working where all of
those pieces fit in, but, you know--so that is discovery.
People figured that out, so more of that discovery has to
occur, so----
Mr. Gibbs. I think most of shipping and short seas maritime
is really bulk commodities, for lack of a better word, maybe
not so much the containers.
Admiral Buzby. Right. And this program is specific. It
doesn't address bulk, because bulk is moving pretty well. This
program was developed to address containers and later on break
bulk----
Mr. Gibbs. What was that last part?
Admiral Buzby. Break bulk, palletized goods. Which, you
know, in some areas--I think if you look at New York, if you
look at the New York area itself, a lot of the users of goods
in New York City or the area don't need a 20-foot TEU worth of
stuff; they need a pallet. So to the extent that you can use
the harbor to move things around instead of on a truck, in a
small vessel or something, move a pallet size and then move it
through the streets, I think there is potential there that
could be exploited. And I know there are entrepreneurs out
there that are looking at that kind of a thing. You know, it is
people thinking beyond the normal, we are stuck with this size,
this is all we got.
Mr. Gibbs. I guess if they could think outside the box and
satisfy what the markets demanding are asking, and I think you
just gave an example of that.
Admiral Buzby. Yeah. There are other projects around that,
I think, have great promise. They just need to kind of be fully
baked. They are conceptual in many cases. They just have to
work through that business case and then they will be ready to
go.
Mr. Gibbs. Thank you. I yield back.
Mr. Maloney. I thank the gentleman.
Mr. Gallagher.
Mr. Gallagher. Thank you, Mr. Chairman.
Admiral Buzby, thank you for being here. Thank you for your
testimony.
You mentioned the link between short sea shipping--it is
very hard to say quickly--and the Jones Act. Obviously, the
Jones Act is always the subject of debate. What do you think
the biggest misconception out there about the Jones Act is? If
you could sort of talk to the American people about why the
Jones Act is important and correct sort of some of the
misconceptions, what is at the top of that list?
Admiral Buzby. Well, these days, it is getting to be that
the Jones Act is the root of all evil, everything that is wrong
is the fault of the Jones Act, and that everything that costs
more is a result of the Jones Act, and that is just not borne
out in the facts. When you look at the detriment that would be
caused to this Nation by the Jones Act going away, in terms of
impact of shipbuilding and ship repair, or the 40,000 vessels
that are Jones Act vessels that all get built and repaired in
U.S. shipyards, to the number of people that are employed, the
American mariners that are employed that, oh, by the way, on
some of the larger Jones Act ships I depend upon to help crew
up our sealift vessels, they would go away. To just the people
that are pushing, you know, transiting our waterways, American
citizens that are a de facto layer of security for our Nation.
They are out there every day. They know what normal looks like.
If they see something wrong, they are going to say something is
wrong. I don't think we can believe that would ever happen with
a foreigner pushing goods up and down our internal waterways,
and why would we want to turn our internal commerce over to a
foreigner to control. It blows my mind. So, I think for all of
those reasons, it is absolutely critical.
Mr. Gallagher. I appreciate that. And you mentioned in your
testimony that we have congestion on our roadways and,
therefore, we have an advantage when it comes to maximizing our
maritime shipping lanes. Can you also speak about the
importance of icebreaking for keeping maritime shipping lanes
open and our current icebreaking capacity on the Great Lakes?
Admiral Buzby. Obviously, icebreaking falls into the
purview of the Coast Guard, and as we heard the Commandant last
time he and I were here speak, he believes he has a plan, for
the Great Lakes at least anyway, and he needs obviously some
help in the high latitudes with our new Polar Security Cutters.
But clearly, especially on those cold winters, icebreaking
capacity on the upper reaches of the rivers and the Great Lakes
toward the end of the seasons is really vital to ensuring that
flow of goods and that flow of commerce. On those years where
we have heavy freeze and heavy icing on the upper Mississippi,
it wreaks havoc, and even up on the upper Hudson, we have heavy
ice years, it wreaks havoc. So I know the Coast Guard has a lot
of inland cutters, 140 footers that they task pretty heavily,
but they all are a vital part of the entire marine highway
system, absolutely.
Mr. Gallagher. Thank you. I yield the balance of my time.
Mr. Maloney. I thank the gentleman.
Mrs. Miller.
Mrs. Miller. Thank you, Chairman Maloney. And thank you,
Admiral, for being here today.
Short sea shipping, especially along our Nation's rivers,
is vitally important in my district in West Virginia. The
Huntington Tri-State Port is one of the largest inland water
ports. It was the largest till Cincinnati got dredged, if I
remember correctly, but it ships over 80 million tons of cargo
every year. That is 80 million tons of natural resources
reaching domestic and foreign markets creating jobs and driving
our economy. Our waterways are essential for efficiently
shipping our products and staying competitive in the global
market.
This is a little bit like Congressman Gibbs's question, but
what steps can Congress take to promote maritime careers for
hardworking Americans?
Admiral Buzby. Thank you for the question, and it is a
great one because it really speaks to the workforce issue,
which is a big focus of mine. And traditionally, MARAD has
really focused at the State maritime academies and Kings Point,
our Federal maritime academy. We are increasingly looking lower
now. We are looking deeper into our educational system down to
the high school level. Maritime-focused high schools at
community colleges, we are getting ready to fire off the
Centers of Excellence for Domestic Maritime Workforce Training
and Education. I will be coming out with the advertisement for
that for comment here very shortly, but we really see that as
the generator of maritime workforce, especially for the inland
sector, Jones Act sector, becoming so much more important in
the future.
As we see growth on our maritime highways, we need to kind
of get ahead of that, if you will, I think, through increased
focus at our high school level, and I have asked all of my
State maritime academy presidents to reach out in their regions
to start interfacing with those folks to start getting it known
that maritime education, maritime careers, both ashore and
afloat, are really going to be vital to our Nation and they are
good-paying jobs. You will be able to raise a family on them.
Mrs. Miller. I am glad to hear you say that because there
is much more focus on career in technical happening now, and so
I think that would be wonderful.
What are the biggest regulatory burdens or unfair taxes
imposed on maritime shipping industry that keep it from
competing with trucking and rail?
Admiral Buzby. Well, we talked about the Harbor Maintenance
Tax and the fact that that is kind of a double jeopardy thing.
That has to probably ultimately be addressed at some point. I
am not sure how that is going to go, but that has been raised
repeatedly as an issue. We hear it from industry. It has been
made to work in some places, but depending on the market,
depending on the commodity, depending on the circumstances, it
can be more of a challenge to keep those programs moving
forward. I think that is probably the biggest thing.
Mrs. Miller. The maritime highway system includes the
section of the Ohio River that connects my district to the rest
of the country. How has the program expanded since its
enactment, and how can Congress continue to help the Maritime
Administration promote maritime highways?
Admiral Buzby. We have designated 25 marine highway routes,
and that really covers most of the navigable waterways. We may
have a couple yet to go, but I think we have pretty much--I
think we have one that is under consideration actually right
now by the Secretary, but we have done a pretty good job, I
think, of covering the navigable waters. But, you know, there
may be others, and we will certainly look for nominations of
those designations, because that is the basis of the program.
You have to have a highway in order to support the project.
So once the highway is there, the project can then go forward,
and that project designation then enables it to be considered
for grant funding based on the merits of the program and I
think that will continue to grow. I mean, every year, we see
more programs being requested for designation, and we are able
to then consider more for grants and that is, you know, we can
spread the funding that we get a little bit broader every year
with the broader grants, with the broader programs.
Mrs. Miller. OK. Thank you.
Are the Navy and the Coast Guard continuing to find more
effective ways to see that their ship drivers are eligible to
receive merchant mariner credentials after they leave the
Service?
Admiral Buzby. Of course, we have the Military to Mariner
program, which we continue to push forward on. Of course, the
President passed the Executive order a couple of months back
that helped that process along. I know I can speak for the
Navy, my old Service, they have done a lot of effort to try and
start cataloging the sea time and the actual coursework that is
done during the course of an officer's career in order to make
that transition, if they so choose to do it, much easier than
it was even a couple years ago.
So to answer your question, yes, we are moving well in that
direction. We will get some people to transition over.
Unfortunately, most of the people that leave the Navy do so
because they don't like the family separation, and coming into
this line of work, you get a little bit more of that. But we do
get naval officers and Coast Guard officers and Army officers,
for that matter, that enjoy coming over in the merchant marine.
Mrs. Miller. OK. Thank you. I yield back my time.
Mr. Maloney. I thank the lady.
Mr. Garamendi.
Mr. Garamendi. First, let me compliment you, Mr. Chairman
Maloney, for holding this hearing. It is a very, very important
step along the way to maintaining and enhancing our maritime
industry.
Admiral, I missed your opening statement. I have been
busily trying to catch up in reading it, but I do want to thank
you for your attention to the issues of maritime. The work that
you did with us on the NDAA and the issues there moves it
forward, and hopefully, we will be able to expand the maritime
support for our military.
Investing in our Nation's inland and coastal waterways will
always reduce roadway congestion and fatalities. Short sea
shipping can be competitive, but it needs help.
There are many different pieces to this, Army Corps of
Engineers dredging programs, or not, docks and the like that
are not exactly or even closely designed for the kind of
infrastructure necessary for short sea, which is a whole lot
different than across the ocean ships and the infrastructure
needed for that. It is interesting that the dredging issue in
my district becomes very important, and it is not just for
freight, but also for moving people.
The ferry system in the San Francisco Bay area sometimes
doesn't work because the ferries can't even get to the dock,
and so that brings us to the Army Corps of Engineers and their
budget and the allocation of their funds. Also, I noticed the
exchange between Interstate 80 and 680 in my district,
Fairfield area, is probably going to be a multibillion-dollar
interchange when it is finished. I guess I am pleased that we
provided some $7 million for short sea shipping, which is some
small, small fraction of the billions that will be spent on one
interchange, largely because of the truck traffic coming out of
this San Francisco Bay area.
In any case, just a couple of questions. How do we make
better use of the taxes that are presently collected, and is it
necessary for us to find a way of avoiding the double taxation
that will occur in short sea shipping?
Would you go into that in a little detail?
Admiral Buzby. To the extent I can, yes, sir. As we have
sort of discussed here earlier, that has long been an issue in
short sea shipping, and that is the double jeopardy for Harbor
Maintenance Tax, that it gets tagged twice.
Mr. Garamendi. This is something that comes to us, and your
earlier testimony, once again, I apologize for missing, should
be the foundation for an amendment to our current tax law so
that we don't double tax so that we eliminate this financial
disincentive. Also, I am going to bring your attention, which I
suspect you know, there is a very strong incentive to use the
Port of Vancouver rather than the ports in Seattle because of
that very same tax. So when that train arrives in the Midwest
from Vancouver, maybe that tax ought to apply when it crosses
the border. I don't think the MCA took that up, but it is an
issue that harms the industry on the west coast.
What is it going to take here? Is it going to take direct
subsidies to the shippers? Does it take better infrastructure?
Where would you suspect we spend the next $7 million or $20
million or $21 million?
Admiral Buzby. In terms of marine highways specifically?
Mr. Garamendi. Yes.
Admiral Buzby. Well, I am always siding on the
entrepreneurial sort of spirit in this country. Just about all
of these projects, you know, that are up and running now, seven
that are running and the many, many--25 that are approved and
probably another 30 that are in the queue, are all somebody's
brain child. They all looked at a situation and said, that
makes more sense to move it by water. And now figuring out the
business case to make that happen, you know, it takes a while
to do it. It doesn't work in every case, but we have good
examples where it makes great sense. Some places should not
probably ship by water. It just doesn't work, but I think
increasingly as we see the costs mounting and the----
Mr. Garamendi. Is it possible for the construction of the
vessels themselves? We have had programs in the past that
supported the construction of vessels. Is that a good place to
invest?
Admiral Buzby. Yeah. You know, building Jones Act vessels
of the size that we are talking about here, tugs and barges for
the most part, you know, that is not really an issue. The rest
of the world doesn't build tugs and barges as well as we do for
the cost that we do. We are very competitive. Our shipbuilding
industry is very competitive in tugs and barges, so having to
provide a lot of--building subsidies, I don't know that that is
specifically the answer. Certainly, in the international side--
--
Mr. Garamendi. Just a couple of--one final point.
Rebuilding our maritime industry requires specific legislative
support for the industry. Next week, we will be introducing the
Energizing American Shipbuilding Act. We appreciate your
support for that and the Members, many of the folks that are
here on the dais, for their support, and folks in the audience.
That will provide at least many of the jobs and much of the
industrial construction of the ships, so we will be working on
that and maybe fit into this. Thank you very much for your
testimony.
Mr. Chairman, I yield back.
Mr. Maloney. I thank the gentleman.
And seeing no further Member questions, I know we have kept
you longer than anticipated already, Admiral Buzby. We do have
your written testimony for the record. We appreciate very much
those submissions as we lay the necessary predicate for some of
the good work we want to do as a committee in this area. Work
that, without today's hearing, would not be possible under the
new House rules, so we appreciate very much your participation.
It does help us in our work.
I would like to move to the second panel, if that is
possible, and thank you very much, Admiral.
Admiral Buzby. Thank you very much.
Mr. Maloney. Thank you.
Mr. Maloney. While our witnesses are taking the table, I
will go ahead and begin to introduce them.
We are lucky to be joined today by Mr. Jonathan Nass, chief
executive officer of the Maine Port Authority; Mr. James
Weakley, president of the Lake Carriers' Association; and Mr.
Larry Willis, president of the Transportation Trades
Department, AFL-CIO.
Thank you all for being here today. We look forward to your
testimony.
Without objection, our witnesses' full statements will be
included in the record, as the previous panel. Since we have
your written testimony and it has been made part of the record,
the subcommittee requests that you limit your oral testimony to
5 minutes.
Mr. Nass, you may proceed.

TESTIMONY OF JONATHAN NASS, CHIEF EXECUTIVE OFFICER, MAINE PORT
AUTHORITY; JAMES WEAKLEY, PRESIDENT, LAKE CARRIERS'
ASSOCIATION; AND LARRY I. WILLIS, PRESIDENT, TRANSPORTATION
TRADES DEPARTMENT, AFL-CIO

Mr. Nass. Thank you, Mr. Chairman.
Mr. Maloney. If I could just recommend to the witnesses,
you can pull that box as close to you as needed. It does move.
And if you speak into the microphone, it helps our stenographer
and the folks watching it on TV. Thanks.
Mr. Nass. Chairman Maloney, Ranking Member Gibbs, and
members of the Subcommittee on Coast Guard and Maritime
Transportation, my name is Jonathan Nass, and I am the chief
executive officer of the Maine Port Authority. Thank you for
inviting me to speak today on the exciting topic of short sea
shipping.
The Maine Port Authority is a quasi-governmental entity
tasked with improving Maine's economy by developing and
promoting infrastructure that moves freight domestically and
internationally.
Maine has a long history of living from and by the sea. If
you drive Route 1 along Maine's coast, you will encounter
mansions sea captains built over several hundred years in
virtually every town you cross through. These once grand houses
are monuments of the prosperity once enjoyed from a thriving
coastal freight transportation network. Unfortunately, today,
many are in disrepair and suggest a time past and many lost
opportunities over the last 50 years.
The Maine Port Authority and many others are currently
working to revitalize that maritime shipping heritage. We
recently developed a brownfield in the City of Portland into
the international marine terminal, a container terminal that in
just 5 years has gone from a derelict abandoned eyesore to a
vibrant international, logistical, multimodal hub connecting
Maine to the world. We are very proud to note that we have had
annual growth and volume of over 20 to 30 percent every year.
I believe that we can build on that success by connecting
northern New England domestically to ports to our south through
establishing water service paralleling the congested I-95
highway system on the east coast.
For those of us that live in port cities, moving freight by
water is instinct, but it needs to become intuitive for others
as well, especially those who set transportation policy. One
only needs to sit for a few frustrating hours in Boston or
beltway traffic to appreciate the value of alternative
transportation of freight. Moving freight from highway to
seaway will improve commerce, decrease air pollution, and
reduce fuel consumption and traffic congestion in our largest
cities.
I am certainly not the first to suggest that the United
States has an infrastructure problem. There is no denying it.
In maritime terms, the Nation's surface transportation
infrastructure is like a vessel taking on water, fast.
Fortunately, fixing our transportation network is not a
political issue. Democrats and Republicans all agree it is
broken. Rather, it is a policy issue. How will we as a Nation
fix it? How can we help you as Congress to address it?
The first step in saving a sinking ship is to plug the
leaks. The infrastructure policy debate usually centers around
one question: Where will the funding come from to rebuild
America's highways?
But there is more to the transportation equation than
highways. As with any fixed asset, there is also a matter of
depreciation and use. If we can reduce the cost of the highway
system, reduce the rate of appreciation, and reduce the rate of
growth of trucks on our highways, then we are starting to plug
the leaks.
By not making an alternative freight transportation system
a national priority, especially short sea shipping
alternatives, I believe that we are misusing our surface
transportation network. We are missing a win-win opportunity to
both stop the leaks in the highway infrastructure while
fostering a revitalized waterway economy nationally.
What if we can establish a well-utilized marine highway as
functional as roads and bridges but without the cost of
pavement and steel, without potholes, without traffic jams? A
system where at least some long-haul freight bypasses the
heavily congested urban areas.
That is exactly what the Maritime Administration's marine
highway is designed to do, and it should be a top priority when
fixing the entire system.
Since the Eisenhower administration, the United States has
focused on a network of expensive fixed transportation assets.
The problem is that with constant patching, lost time, money,
road rage, accidents, but we have ignored a great opportunity.
In 2010, Secretary Ray LaHood designated the New England
marine highway system as part of the national marine highway
system. Part of that project was the designing of an
articulated barge that is Jones Act-compliant yet is 40 percent
CapEx and 40 percent OpEx of a comparable marine vessel.
We have also become a member of the North Atlantic Marine
Highway Alliance. This effort funded by the Maritime
Administration and managed by the New York City Economic
Development Corporation includes parties from the Chesapeake to
Maine.
Mr. Chairman, we recently hosted a meeting that brought
freight owners together with port owners and shippers in Maine,
and I would be happy to answer questions on that interesting
discussion. Thank you, sir.
[Mr. Nass's prepared statement follows:]

Prepared Statement of Jonathan Nass, Chief Executive Officer, Maine
Port Authority
Chairman Maloney, Ranking Member Gibbs, and members of the
Transportation and Infrastructure Subcommittee on Coast Guard and
Maritime Transportation, my name is Jonathan Nass and I am the Chief
Executive Officer of the Maine Port Authority.
Thank you for inviting me to speak today on the exciting topic of
Short Sea Shipping.
The Maine Port Authority (the MPA) is a quasi-governmental entity
tasked with improving Maine's economy by developing and promoting
infrastructure that moves freight both domestically and
internationally.
Maine has a long history of living from and by the sea. If you
drive Route One along Maine's coast you will encounter the mansions sea
captains built over several hundred years in virtually every town.
These once grand houses are monuments of the prosperity once enjoyed
from thriving coastal freight transportation networks. Unfortunately,
today, many are in disrepair and suggest a time past and many lost
opportunities in the last 50 years.
The MPA and many others are currently working to revitalize that
maritime shipping heritage. We recently developed a brownfield in the
City of Portland into the International Marine Terminal, a container
terminal that in five years has gone from a derelict abandoned eyesore
to a vibrant international, logistical, multimodal hub connecting Maine
to the world with annual growth in volume of 20 to 30 percent.
I believe we can build on that success by connecting Northern New
England domestically to ports to our south by establishing water
service paralleling the congested I-95 highway system on the East
Coast.
For those of us who live in port cities, moving freight by water is
instinct, but it needs to be intuitive for others as well--especially
those who set transportation policy. One needs only to sit for a few
frustrating hours in Boston or Beltway traffic to appreciate the value
of alternative transportation. Moving freight from highway to seaway
will improve commerce, decrease air pollution, and reduce fuel
consumption, and traffic congestion in our largest cities.
I am not the first to suggest that the United States has an
infrastructure problem. There is no denying it. In maritime terms, the
nation's surface transportation infrastructure is like a vessel taking
on water. Fast.
Fortunately, fixing our transportation network is not a political
issue. Democrats and Republicans all agree--it is broken. Rather, it is
a policy issue. How will we as a nation will fix it? How can we help
you, as a Congress to address it?
The first step to saving a leaking ship is to plug the leaks.
The infrastructure policy debate usually centers around one
question--Where will the funding come from to rebuild America's
highways?
But there is more to the transportation equation than highways. As
with any fixed asset, there is also the matter of depreciation and use.
If we can reduce the cost of the highway system, reduce the rate of
depreciation, and reduce the rate of growth of trucks on our highways
then we are starting to plug the leaks.
By not making alternative freight transportation systems a national
priority, especially short sea shipping alternatives, I believe that we
are misusing our surface transportation system. We are missing a win-
win opportunity to both stop the leaks in the highway infrastructure
while fostering a revitalized water-way economy nationally.
What if we can establish a well-utilized marine highway as
functional as roads and bridges but without the cost of pavement and
steel? Without potholes and traffic jams? A system where at least some
long-haul freight by-passes heavily congested urban area?
That's exactly what the Maritime Administration's Marine Highway
program is designed to do and it should be a top priority when fixing
the entire system.
Since the Eisenhower Administration, the United States has focused
on a network of expensive fixed transportation assets--superhighways,
bridges and interchanges, with efforts of constant widening, continuous
patching, lost time and money, road rage, and accidents.
What we as a nation have largely ignored is the natural highway
system that is part of the inherent American geographical make up--our
nation's waterways and coastal routes.
In 2010, then USDOT Secretary Lahood designated the New England
Marine Highway project as part of the National Marine Highway System.
That project funded the design of an articulated barge, in partnership
between the MPA and McCallister Tug, to operate a service between
Northern New England and New York/New Jersey.
Last year, the MPA became a member of the North Atlantic Marine
Highway Alliance. This effort is funded by the Maritime Administration
and managed by the New York City Economic Development Corporation and
the Port Authority of New York New Jersey. Its members include
interested parties from the Chesapeake to Maine.
We recently hosted a meeting in Portland, Maine that brought
interested parties--ports, shippers, barge service operators, the
Maritime Administration--to Maine to meet beneficial cargo owners to
discuss short sea shipping options.
The Alliance recognizes that freight owners are critical to the
success of a reinvigorated short sea shipping network. To convince
beneficial cargo owners to make a modal shift of a portion of their
supply chain--the new alternative must be cost-competitive and it must
be consistent and reliable.
To make this happen, there must be a shift in government policy to
make short sea shipping a priority. Perhaps not on the scale of the
creation of the interstate highway system, but that type of vision is
not a bad place to start. Let's apply the same vision, imagination, and
policy that brought us the interstate highway system to short sea
shipping.
Mr. Chairman, Transportation matters. Transportation policy
matters. A national policy, like that managed by the Maritime
Administration, to foster and encourage domestic water-borne freight
will make domestic businesses more competitive, create jobs on working
waterfronts, promote cleaner air, less congested and less damaged
roads, and could rebuild America's maritime industries.
Thank you for this opportunity to testify. I look forward to your
questions.

Mr. Maloney. I appreciate that, Mr. Nass. Thank you very
much.
Mr. Weakley, you may proceed.
Mr. Weakley. Thank you.
I represent 13 American companies operating 46 U.S.-flag
vessels on the Great Lakes. We carry the raw materials that
drive the Nation's economy: iron ore and limestone for steel,
aggregate and cement for construction, coal for power
generation, and more. Those cargoes generate 103,000 jobs with
an economic impact of over $20 billion.
I will discuss the benefits of marine transportation, the
Great Lakes navigation system, our role, the importance of the
Jones Act, and maritime infrastructure.
As this graphic demonstrates, it takes less energy to move
cargo via water. We move a ton of cargo 607 miles from Duluth
to Detroit with 1 gallon of fuel. A truck moves that ton 59
miles per gallon, and rail 202 miles.
Vessels also emit fewer tons of carbon dioxide per ton-
mile. Economies of scale help lower energy consumption. One of
our lakers can move 70,000 tons of cargo, which is the
equivalent of 700 railcars or 3,000 trucks. If trucks operated
with vessels' efficiency, they could be powered with a lawn
mower engine.
Prior to the development of the Interstate Highway System,
raw materials, lumber, people, vehicles, and finished goods
also moved on lakers. The higher value, time-sensitive cargoes
now move by faster modes, so low-value, heavy cargoes are our
focus. Self-unloading vessels can unload in hours what once
took weeks. This technology and larger vessels combine to make
the lakes the world's most efficient system for shipping dry
bulk cargo.
In fresh water, vessels last decades longer. We maintain
our vessels rather than replace them. Last winter, we invested
$70 million in maintenance. New construction and conversions
are also part of our investment plan. Interlake Steamship
recently announced the construction of a new laker. VanEnkvort
Tug and Barge announced the construction of a new laker-sized
barge, and Port City Marine Services completed the conversion
of a cement barge.
The Merchant Marine Act of 1920, the Jones Act, requires
that vessels moving cargo between U.S. ports be American owned,
American built, and American crewed. This bedrock of maritime
policy provides the stability necessary to invest in the fleet.
The national, economic, and homeland security benefits, and the
regulatory certainty it provides allows long-term contracts.
The Jones Act encourages Americans to invest huge sums of money
in assets that will last decades.
It takes more than vessels. The Corps of Engineers will
soon begin construction on a new Soo lock to add system
resiliency. No longer will 11 million Americans be dependent on
a single point of failure in northern Michigan.
Maintenance of channel depths is also critical. I applaud
the Transportation and Infrastructure Committee's efforts to
fully spend the Harbor Maintenance Trust Fund. Through your
efforts, we have made great strides.
We also need adequate and reliable Coast Guard icebreakers
on the Great Lakes, but we appear to be losing ground on that
front. Because we carry low-value cargo, we operate on thin
margins. We are sensitive to the cost of regulations. Even
high-value cargo is sensitive to additional shipping costs such
as the Harbor Maintenance Tax being applied a second time to
containerized imports that move domestically by ship.
Cargo is king and the transportation industry evolves to
serve its needs. We exploit the laws of physics that make
shipping the most efficient, environmentally friendly, and
socially responsible mode of transportation. We changed the
size of our vessels and invented self-unloading technology.
In order to grow the domestic maritime industry, we need:
regulatory stability--support the Jones Act, and consider the
cost of regulations; infrastructure--dredging, breakwalls,
locks, and icebreakers; and we need system resiliency--a new
lock in Sault Ste. Marie, Michigan.
Moving low-value, heavy commodities is what we do best. We
can and want to do more.
Thank you.
[Mr. Weakley's prepared statement follows:]

Prepared Statement of James Weakley, President, Lake Carriers'
Association
Good morning. Thank you for the opportunity to speak to you today.
I am Jim Weakley, President of the Lake Carriers' Association (LCA). We
represent 13 American companies that operate 46 U.S.-flag vessels on
the Great Lakes and carry the raw materials that drive the nation's
economy: iron ore and flux stone for the steel industry, aggregate and
cement for the construction industry, coal for power generation, as
well as sand and grain. Collectively, our members can transport more
than 100 million tons of dry-bulk cargo per year and employ more than
1,600 men and women, all of whom are U.S. citizens or legally admitted
aliens, and provide annual wages and benefits of approximately $125
million. In turn, the cargos our members carry generate and sustain
more than 103,000 jobs in the eight Great Lakes states and have an
annual economic impact of more than $20 billion.
I would like to provide a brief overview of the Great Lakes
Navigation System (GLNS), its different market segments, how we engage
in short sea shipping and are investing in our fleet. Then, I'll focus
the majority of my testimony on the economic and environmental benefits
of marine transportation. I'll touch on the challenges we face, the
importance of the Jones Act and government's role in maritime
infrastructure.
the glns
The Great Lakes Navigation System (GLNS) enables maritime commerce
on America's Fourth Sea Coast. The five Great Lakes are tied together
by three connecting channels (the St. Marys River, the Detroit/St.
Clair River system and Welland Canal) and the so-called ``Achilles Heel
of North American Manufacturing,'' the USACE navigation locks at Sault
Ste. Marie, Michigan (Soo). The St. Lawrence Seaway is the umbilical
cord that connects the GLNS and its 68 U.S. ports and 35 Canadian ports
to global trade. The Great Lakes are a bi-national system supporting
both domestic and international trade. For example, in the Detroit/St.
Clair River portion of the system alone the navigation channel crosses
the U.S./Canadian border 17 times. If measured as a single region, the
eight Great Lakes States and two Canadian Provinces represent the
world's third largest economy.
Although there is a great desire to move international container
traffic through the GLNS, the majority of the cargo moved today is
bulk. The international ocean-going fleet, vessels, sometimes referred
to as ``salties,'' primarily bring steel into the Great Lakes region
and take grain out. Approximately 225 salties call annually on both
sides of the border moving 10 million tons of cargo annually.
U.S.-flag ``lakers,'' the vessels LCA represents, are ships and
barges specifically designed for the Great Lakes trade. Most are self-
unloading dry-cargo vessels, although some lack the self-unloading
equipment, and others move liquid bulk material. Both the United States
and Canada reserve their domestic waterborne movements of cargo for
``coastwise qualified'' vessels. Our nation's Jones Act vessels are
American-owned, American-built and American-crewed. In 2018, U.S.-flag
lakers transported approximately 84 million tons of iron ore, coal,
limestone, cement, salt, sand, and grain in domestic moves (between two
U.S. points) under the Jones Act, and they carried 2 million tons of
cargo between U.S. and Canadian ports. In 2014 (the last year they
published cargo data) Canadian-flag lakers transported 69 million tons
of cargo. About half of that total moved domestically (between two
points in Canada), including Canadian points on the Great Lakes ports,
the Canadian Arctic or its East Coast, and about half between U.S.
Great Lakes ports and Canadian ports.
glns and soo lock economic importance
LCA members are the linchpin of what has been called ``one of the
nation's most economically vital systems, the iron mining--integrated
steel production--manufacturing supply chain . . . '' \1\ In general,
iron ore, the primary raw material for steel, is transported by our
ships from mines in Minnesota and the Upper Peninsula of Michigan to
steel mills in Indiana, Ohio, Michigan and Pennsylvania. So crucial is
that waterborne supply chain that the Department of Homeland Security
(DHS) has warned that an interruption of domestic shipping services
through the Poe Lock would have ``catastrophic impacts on the regional
and National economy,'' \2\ including the interruption of steel
production and the plunging of the North American economy into a
``severe recession.'' \3\
---------------------------------------------------------------------------
\1\ ``The Perils of Efficiency: An Analysis of an Unexpected
Closure of the Poe Lock and its Impact,'' Department of Homeland
Security, (October, 2015), at 1. While this report is focused on the
impact of a failure of the Poe Lock, through which vessels that are
part of this supply chain must pass, the analysis also demonstrates the
significant impact of shipping on the Great Lakes economy and beyond.
\2\ Id. at 29.
\3\ Id. at iii.
---------------------------------------------------------------------------
The DHS study estimated that 11 million Americans would become
unemployed if shipping through the Poe Lock was interrupted for a 6-
month period beginning at the start of the shipping season. According
to DHS, the State of Michigan's unemployment would reach 22%, exceeding
its peak unemployment rate of 15% during the Great Recession of 2008.
This is a direct result of interrupting the manufacturing made possible
by the 60 million tons of key raw materials transiting the Poe Lock on
an annual basis.
However, this is a national problem. In fact, the unemployment
spikes in the event of an interruption in Great Lakes shipping will
ripple through the United States, a result of the far-reaching impacts
of the automobile manufacturing and general steel industries. Three
States, Michigan (944,000), Texas (865,000) and Ohio (826,000) would
experience job losses in excess of 800,000 people. The DHS study also
determined that nearly 100% of North American appliance, auto,
construction equipment, farm equipment, mining equipment, and railcar
manufacturing would cease. The $1.1 trillion decrease in gross domestic
product would result in widespread bankruptcies and a likely recession.
DHS concluded that, ``In terms of an impact to the North American
economy, it is hard to conceive of a single asset more consequential
than the Poe Lock.'' \4\ Without our vessels to move the raw materials
via the GLNS, this North American manufacturing would not be possible.
---------------------------------------------------------------------------
\4\ Id. at 55.
---------------------------------------------------------------------------
this hearing
This hearing examines domestic movements of cargo via marine
transportation, also known as ``short sea shipping.'' By understanding
the dynamics and market forces that make the Great Lakes Navigation
System (GLNS) successful, we may be able to expand it to other markets.
Recognizing the challenges we face can lead to good investment
decisions by government and business.
economic and environmental benefits of marine transportation
Comparing Energy Consumption and Air Emissions:
It takes less energy to move cargo via water than it does the other
modes of transportation. A U.S.-flag laker can move a ton of cargo 607
miles, the approximate distance from Duluth to Detroit, while consuming
only one gallon of fuel. A truck can typically move that same ton of
cargo about 59 miles per gallon and rail can move it 202 miles per
gallon. Given the lower energy consumption, marine transportation emits
fewer tons of carbon dioxide. A laker will emit 19 tons to transport
1,000 tons of cargo 1,000 miles. Trucks making the same cargo movement
will emit 190 tons. Attachment 1 provides a modal comparison of fuel
consumption and carbon dioxide emissions.
Economies of scale also help us achieve lower energy consumption
rates. One of our lakers can move 70,000 tons of cargo. That is the
equivalent of 700 rail cars or 3,000 trucks. Another measure of modal
efficiency is horsepower per ton. Trucks require 12-20 horsepower for
each ton of cargo moved. For rail it is about 1 to 1 and for vessels,
it is 0.2-0.3. If trucks could operate with vessel efficiency, they
could be powered with a lawnmower engine.
Evolution of the GLNS
Lakers have always moved raw materials. However, there was a time,
prior to the development of the interstate highway system, that lumber,
people, vehicles and other finished goods moved via lakers. Those
higher value and time sensitive cargoes are less suited to domestic
maritime movements than they were 100 years ago because other faster
modes of transportation have evolved to serve those markets. Low value,
heavy cargoes are now our focus. Our self-unloading vessels use a
series of conveyor belts running from under the cargo holds to the
unloading boom. They can place cargo within 250 feet of the vessel on
the dock at a rate of up to 10,000 tons per hour. We can unload in
hours what it took days or weeks to do. The combination of self-
unloading technology and larger vessels have combined to make the GLNS
the most efficient system in the world for handling dry-bulk cargo.
Investing In Our Fleet
Given the fresh water environment of the Great Lakes, our vessels
can last decades longer than oceangoing vessels. That means we maintain
our vessels rather than replace them. During the winter Soo Lock
closure from January 15th until March 25, our owners will do engine
overhauls, steel replacement, drydock vessels, and upgrade systems.
Last winter, LCA members invested $70 million to maintain their fleet.
That is not unusual. In years when a vessel is repowered, that number
can be significantly higher.
New construction and conversions are also part of our member's
investment plans. Interlake Steamship recently announced the
construction of a new river class laker. VanEnkvort Tug and Barge
announced the construction of a laker sized barge. Port City Marine
Services recently completed a 21-month conversion of a bulk cargo barge
to a cement carrying barge.
Jones Act Remains Critical
The Merchant Marine Act of 1920, also known as the Jones Act,
requires that vessels moving cargo between U.S. ports be American
owned, American built and American crewed. This bedrock of maritime
policy provides the stability necessary for LCA's members to invest in
maintaining and adding to their fleet. The national, economic and
homeland security implications of the law and the regulatory certainty
it provides, allows us to enter into long-term contracts. The Jones Act
encourages Americans to invest huge sums of money in assets that will
last decades.
Maritime Infrastructure Investments
It takes more than vessels to keep the GLNS operating reliability
and efficiently. I've already mentioned the importance of the Soo
Locks. We are pleased that the U.S. Army Corps of Engineers will soon
begin construction on a second Poe-sized lock. More important than the
efficiency gains it will provide is the system resiliency. No longer
will we be dependent on a single point of failure. The maintenance of
channel depths and harbor breakwalls is also critical to the GLNS. I
applaud the Transportation and Infrastructure Committee's efforts to
fully spend the Harbor Maintenance Trust Fund. Through your efforts, we
have made great strides. On the Great Lakes we also need adequate and
reliable U.S. Coast Guard icebreakers, but we appear to be losing
ground on that front.
Maritime Regulation
Because U.S. lakers carry low-value cargo and our vessel operators
must make large annual investments just to maintain their current
fleet, we operate on thin margins. This makes U.S.-flag laker operators
sensitive to the cost impacts of regulations. While U.S. federal
agencies typically attempt to ensure that these cost impacts on U.S.
lakers do not eliminate our economic viability when considering new
regulations that directly impact us, this is not the case with Canada.
Transport Canada recently proposed new ballast water regulations
that would force U.S.-flag laker operators to either spend hundreds of
millions of dollars to comply or give up our portion of the U.S.-Canada
maritime trade. The Canadian government knows that their proposed
regulations would likely force our vessels out of that trade, leaving
Canadian vessels as the only option for U.S. exporters to ship
commodities by water to Canada. Although this cargo is a small portion
of our overall business, its loss would reduce U.S.-flag laker
operators' revenue and our ability to reinvest in our short sea
shipping assets.
conclusion
The Lake Carriers' Association was formed in 1880. Our members were
and continue to be engaged in short sea shipping. Our business has
evolved to meet the needs of our customers. As we often say in the
transportation world, cargo is king and the transportation industry
evolves to serve its needs. We have changed the size of our vessels and
invented self-unloading technology. We have exploited the laws of
physics that make the marine mode of transportation the most efficient,
environmentally friendly and socially responsible mode of
transportation. In order to grow the domestic maritime industry, we
need:

Regulatory stability--support the Jones Act and carefully
consider the cost impacts of new regulations
Infrastructure investment--dredging, breakwalls, locks, and
icebreakers
System resiliency--a new Poe-sized lock at Sault Ste. Marie, MI

Moving low value, heavy, raw material is what we do best. We have
been doing it for over 100 years and I believe will do it for the next
100. We can do more and we will. All it takes is sufficient cargo over
enough time to justify the investment.
Thank you for your interest and for the opportunity to provide my
perspective. I will answer any questions you may have about these
concerns.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

Mr. Maloney. Thank you, Mr. Weakley.
Mr. Willis.
Mr. Willis. Good afternoon, Chairman Maloney, Ranking
Member Gibbs. On behalf of the Transportation Trades Department
of the AFL-CIO and our affiliated unions, I want to thank you
for inviting us to testify this morning, and appreciate the
interest of the subcommittee in finding new and innovative ways
to grow our U.S. maritime industry.
You know, since the Nation's beginnings, waterborne freight
transportation has been key to moving goods in this country.
The mariners, the shipbuilders, the dredgers, the longshore
workers represented by TTD's unions, we are on the front lines
of this industry and we are fully supportive of the swift
deployment of short sea shipping.
Better utilizing our marine highways, we can reduce
congestion and delays at our major port, which in turn reduces
the strain on the entire freight network.
Short sea shipping is also green shipping. It offers a
viable freight alternative on vessels that are highly fuel
efficient with lower emissions, and this impact is further
magnified by cutting idling times and fuel consumption from
trucks that service our U.S. seaports.
And as noted, it is a particularly effective method of
transporting goods that can be challenging to move via other
modes of transportation, including oversized and overweight
cargoes.
But today's hearing, it asks a bigger and, I think, an
important question of how best to rebuild this industry. And we
are here to say that we think utilizing our marine highway is
part of that puzzle.
The U.S. maritime sector, this committee knows this, has
long suffered due to unfair competition from unscrupulous
foreign-flagged shippers. These companies, they have no
interest in the fair treatment of workers or safe working
conditions, let alone employing Americans. But because most
short sea shipping would take place between U.S. destinations
on vessels that are U.S. flagged by law, it would guarantee
thousands of good-paying jobs in this country. Jobs, quite
frankly, that cannot come quickly enough.
In times of humanitarian crisis and war, the Department of
Defense calls into service commercial mariners and their
vessels. Today, the existing pool is inadequate to meet DoD's
sealift needs. The jobs created by short sea shipping, they can
close this gap, creating both economic and national security
benefits with a single stroke.
Furthermore, short sea shipping would breathe new life into
America's shipbuilding industry. Once a point of pride in this
country, too many American shipyards struggle to compete with
Chinese and Korea shipyards that are heavily and unfairly state
subsidized. If we cannot change course on this, we run the real
risk of losing our ability to build commercial vehicles in this
country and that should be unacceptable.
A steady demand for Jones Act ships would put this industry
and the jobs it is able to support on stable footing. And as
short sea shipping generates business for ports of all sizes,
it will create jobs on the longshore side, unloading and
loading new water-bound cargoes.
And I would be remiss if I did not point out that the jobs
created in these industries are good jobs, the kind that people
can raise families on. Why? Because workers in maritime and
related sectors enjoy the benefits of strong union contracts.
The policy and commercial benefits of the marine highway
system, they are clear to us, and I think you have consensus on
that from this panel, but despite this, we have failed as a
Nation to unlock the potential.
We offer several ideas for Congress to consider, not an
all-inclusive list, but we should examine existing programs
like those meant to assist domestic shipbuilding to determine
if they can be modified or applied to support short sea
shipping.
Grants, Federal grants, designed to facilitate marine
highway services should be significantly increased. The initial
cost of acquiring equipment and infrastructure improvements
necessary for short sea shipping can be significant, and
Federal dollars, we think, are necessary to reduce this market
barrier to entry.
But the biggest hindrance to the use of short sea shipping
is the double tax imposed under the Harbor Maintenance Trust
Fund. By taxing shippers twice, once when their goods reach a
port of entry and again when these same exact goods arrive at a
secondary port, this law arbitrarily deincentivized shippers
from choosing short sea shipping as a viable method to move
their products.
We support legislation that will end this double tax and
pave the way for the marine highway to become an integral part
of our freight network. We stand ready to work with this
committee on this policy and others that strengthen the U.S.
maritime industry, create new jobs, and promise all the
economic benefits that short sea shipping we know has to offer.
Thank you.
[Mr. Willis's prepared statement follows:]

Prepared Statement of Larry I. Willis, President, Transportation Trades
Department, AFL-CIO
On behalf of the Transportation Trades Department of the AFL-CIO
and our affiliated unions, I want to first thank Chairman Maloney and
Ranking Member Gibbs for inviting me to testify before you today.\1\ We
deeply appreciate the Subcommittee's interest in taking a fresh look at
ways to promote the domestic maritime industry.
---------------------------------------------------------------------------
\1\ Attached is a complete list of TTD's 33 affiliate unions.
---------------------------------------------------------------------------
It is time to have serious conversations in this country about our
national freight network and the ever-increasing demand put on it. In
2015, across all modes of transportation, the U.S. moved 18.1 billion
tons of goods worth about $19.2 trillion. By 2045, the Department of
Transportation estimates that we will move 25 billion tons of freight
annually. Our existing network is strained as is, and the costs
associated with delays and congestion associated with adding even more
freight are substantial. It is imperative that we consider how our
transportation network can develop and adapt to the needs of our
economy. We cannot let economic growth, good jobs and prosperity pass
us by because we lack the capability and capacity to take advantage.
Since the nation's beginnings, waterborne freight transportation
has been an integral component of how we move goods domestically. As we
continue to address our needs, maritime shipping must be a linchpin of
any national freight strategy. The maritime industry and the workers we
represent look forward to continuing to rise to the challenge.
For this reason, we are pleased the Subcommittee is focused on
unlocking the benefits of short sea shipping. A fully developed short
sea shipping sector would provide shippers an additional and viable
option as they determine how to best direct cargo to its final
destination. In most instances, goods arrive at large hub ports like
L.A./Long Beach and New York/New Jersey aboard massive Panamax and
Post-Panamax vessels and are then transferred to surface transportation
shipping options. A short sea shipping model would allow these goods
travel down the coasts or through inland waterways to their ultimate
destinations or to less congested smaller ports and harbors.
As Congress, the GAO and the Maritime Administration have noted on
many occasions, the potential benefits of this model are significant.
As cargo volumes at major ports continue to rise, congestion at these
facilities presents an increasingly difficult and costly problem. A
recent Wall Street Joumal story described a trucking company who, due
to bottlenecks at the Port of Virginia, can move half as much goods per
day as it could last year. We've also heard from our members of two,
four, and even ten hour tum times at crowed ports. Moving cargo along
the coast or inland waterways to smaller facilities can significantly
reduce congestion at larger ports, decreasing the amount of time cargo
spends sitting on the dock or in warehouses, and cutting delays for
existing freight services.
Short sea shipping is also green shipping. When transporting
substantial volumes, utilizing these vessels is highly fuel efficient
per cargo ton-mile, and can result in substantially reduced emissions.
The environmental benefits of short sea shipping also go well beyond
the fuel efficiency of any particular vessel. Delays at ports and on
the surface freight network more broadly can result in unnecessary
truck idling and wasted fuel. The utilization of short sea shipping can
have a multiplier effect, functioning as a green option individually
while simultaneously increasing efficiency in other freight modes.
It also makes sense from a commercial perspective. There are
innumerable uses of a short sea shipping network, but moving certain
cargoes such as heavy, oversized, lower-value, and non-time-sensitive
goods can be extremely cost effective. These cargoes can present
challenges when shipped over surface modes, but are easily moved on
short sea container vessels or barges. Hazardous materials shippers
could also take advantage of the network when surface permitting
requirements prove too costly.
Today's hearing asks the bigger question of how to best rebuild our
maritime industry. We are here because we think short sea shipping is
part of that puzzle. The U.S. maritime sector has long suffered due to
unfair competition with unscrupulous foreign-flagged shippers. These
companies evade responsibility by registering in countries with no
labor or environmental protections, pay their mariners poorly, and are
known to simply abandon injured or sick mariners in foreign ports with
no way back home. We have watched as huge swaths of the industry have
abandoned the U.S. to operate under foreign flags. However, as most
short sea shipping would take place between U.S. destinations on
vessels that are U.S. flagged by law, it would guarantee thousands of
good paying mariner jobs in this country, an excellent step in the
right direction.
These jobs cannot come quickly enough. Due to partnerships like the
Maritime Security Program, many domestic U.S. mariners wear two hats.
They work aboard commercial vessels in the course of their normal
duties, but they can be called upon to provide sea-lift capacity to the
U.S. military in times of war or humanitarian crisis. This additional
capacity is of critical importance to national defense, and is
something the country simply cannot do without.
As Admiral Buzby highlighted earlier this year, we are 1,800
civilian mariners short of the Department of Defense's needs. As we
like to say in the maritime industry, cargo is king. If there is cargo,
we will train the mariners and build the vessels needed to carry it. By
increasing the availability of cargo moved through a strong short sea
shipping network, we have the opportunity to create thousands of good
seafaring jobs and address pressing national security needs with a
single stroke. For these reasons alone, we should take every action to
promote short sea services.
Short sea shipping also holds promise for the American shipbuilding
industry. Increases in shipping between domestic ports means increased
demand for U.S.-built Jones Act-compliant ships. American shipbuilding
companies do not manufacture the types of small to medium-sized
container vessels that would be most valuable in coastal short sea
shipping. Why? Because the domestic demand for these vessels does not
currently exist--a demand that short sea shipping creates. Increased
demands could also result in orders for new barges to replace many of
the 28,000 aging Jones Act barges currently in service.
These orders could alleviate difficult circumstances for the
shipbuilding industry, which employs over 100,000 workers across the
country. Many shipyards are struggling to find the reliable orders
necessary to keep the lights on, in no small part due to the
impossibility of trying to compete with foreign shipyards in China and
Korea that are deeply state-subsidized. The further decline of U.S.
shipbuilding would be deeply damaging to the the U.S. economy and our
U.S.-flagged commercial fleet.
If the shipbuilding industry is allowed to erode further, this
decline will be difficult to reverse. Skilled tradesmen will move to
other sectors, and expensive facilities will be permanently shuttered
or repurposed. We will be faced with a scenario in which we cannot
produce vessels in either the short or the long term for the first time
in our history. This is unacceptable. Creating a steady demand for U.S.
built vessels engaged in trade along our coasts will provide a badly
needed boost to the industry.
Increased maritime traffic from short sea shipping would also
create new longshore jobs. Jobs would be created at hub ports where
longshoremen move goods to smaller vessels and also at the smaller
ports and harbors which currently receive less traffic. These
facilities would be obligated to hire more workers to handle the
increase in cargo volumes that short sea shipping would bring.
The benefits of short sea shipping are clear but existing services
are minimal. It is incumbent on us to bridge this divide First, all
stakeholders must increase the visibility and explain the viability of
short sea shipping. Shippers' familiarity with the service and
understanding of its merits is a large hurdle to overcome. Companies
simply will not order what they do not know is on the menu of freight
options.
Additionally, MARAD must devote its resources towards both
promoting short sea shipping and determining what administrative,
regulatory, or statutory changes are necessary to achieve the level of
service MARAD has previously called for. We also recommend that
Congress specifically examine how existing shipbuilding programs like
the Federal Ship Financing Program (Title XI), Capital Construction
Fund and Construction Reserve Fund could be deployed in the effort to
encourage the growth of short sea shipping, and if changes to those
programs or new programs entirely may be effectual.
Finally, and perhaps most importantly, Congress must take immediate
action to end the Harbor Maintenance Trust Fund's ``double tax''.
Currently, the statute imposes a tax on vessel bound imports when those
goods reach their first destination. If those goods are then moved by
rail or truck, this is the full extent to which shippers pay into the
HMTF. However, if goods are moved onto smaller ships or barges, the tax
will be imposed again on arrival at a secondary port or harbor. By
applying the tax multiple times, current law arbitrarily
disincentivizes short sea shipping, as shippers have no interest in
being taxed twice on the same goods.
TTD has previously supported legislation that would enact this
overdue fix. We look forward to supporting future legislative efforts
in this regard, which will be required if any progress is to be made to
make short sea shipping a reality.
We stand ready to work with this committee on policies that
strengthen the U.S maritime industry, create new jobs and promote short
sea shipping. Thank you for the opportunity to testify.

TTD MEMBER UNIONS

Air Line Pilots Association (ALPA)
Amalgamated Transit Union (ATU)
American Federation of Government Employees (AFGE)
American Federation of State, County and Municipal Employees
(AFSCME)
American Federation of Teachers (AFT)
Association of Flight Attendants-CWA (AFA-CWA)
American Train Dispatchers Association (ATDA)
Brotherhood of Railroad Signalmen (BRS)
Communications Workers of America (CWA)
International Association of Fire Fighters (IAFF)
International Association of Machinists and Aerospace Workers
(IAM)
International Brotherhood of Boilermakers, Iron Ship
Builders, Blacksmiths, Forgers and Helpers (IBB)
International Brotherhood of Electrical Workers (IBEW)
International Longshoremen's Association (ILA)
International Organization of Masters, Mates & Pilots, ILA
(MM&P)
International Union of Operating Engineers (IUOE)
Laborers' International Union of North America (LIUNA)
Marine Engineers' Beneficial Association (MEBA)
National Air Traffic Controllers Association (NATCA)
National Association of Letter Carriers (NALC)
National Conference of Firemen and Oilers, SEIU (NCFO, SEIU)
National Federation of Public and Private Employees (NFOPAPE)
Office and Professional Employees International Union (OPEIU)
Professional Aviation Safety Specialists (PASS)
Sailors' Union of the Pacific (SUP)
Sheet Metal, Air, Rail and Transportation Workers (SMART)
SMART-Transportation Division
Transportation Communications Union/IAM (TCU)
Transport Workers Union of America (TWU)
UNITE HERE!
United Automobile, Aerospace and Agricultural Implement
Workers of America (UAW)
United Mine Workers of America (UMWA)
United Steel, Paper and Forestry, Rubber, Manufacturing,
Energy, Allied Industrial and Service Workers International Union (USW)

These 33 labor organizations are members of and represented by the TTD

Mr. Maloney. Thank you, sir. And I am very interested in
the point you ended on, and I would like to get the perspective
of other witnesses as well, about the Harbor Maintenance Tax.
For the people who don't understand, I think you laid it out
pretty well.
You know, there is a double tax applied to any cargo
transshipped to another U.S. port, whether it is domestic or
international in its original origin. How burdensome is the
second application of that Harbor Maintenance Tax to develop
short sea shipping? Mr. Nass, Mr. Weakley, Mr. Willis, if you
want to expand on that. It is a big issue for many of us on the
committee.
Mr. Nass. So when we met a couple weeks ago with some
beneficial cargo owners and port owners and shippers up and
down the east coast, the biggest part of the discussion was you
have to be competitive. A business is not going to move to a
mode of transportation that is more expensive than less
expensive. It is that simple.
So I believe any way that you can make waterborne
transportation more cost effective, more competitive, is going
to help get this program going. And I think, really, what we
need to do as a Nation is recognize the benefits of moving
heavy cargo off the road.
The numbers I have heard, 44 cents, 46 cents, damage to a
roadway from a heavy box. I see a win-win here, you know. Let's
spend 10 cents on getting that box onto the water. And
certainly, the Harbor Maintenance Tax, the notion of even--it
sounds like a small amount for your average person, right, .125
in an industry, though, where margins are razor thin and any
cost that you add to any of it just makes it that much less
competitive.
Mr. Maloney. Appreciate that.
Mr. Weakley, I don't know if we can get your slide back up.
I thought it was actually pretty compelling, and it doesn't
even include the point Mr. Nass just made about the external
cost of maintaining those roadways, right? That is not included
in your number?
Mr. Weakley. Correct, sir, that does not include that
external cost of the Harbor Maintenance Trust Fund. I concur
with everything Mr. Nass said, as well as Mr. Willis. If I may
pick up on a point Congressman Garamendi mentioned, it is not
only a disincentive to get around the west coast ports, it is a
disincentive for containers to come into the Great Lakes. They
are offloaded in Montreal and Quebec, they are put on a rail,
and they are railed into Detroit, Chicago. I see them crossing
the bridges all the time.
In the Port of Cleveland, they have come up with an
innovative approach to subsidize direct containerships on a
more liner basis to Europe. I think they have since stopped
subsidizing that. It still survives. However, the exact problem
we are talking about prevents Cleveland from being a feeder
port, a hub and spoke to Europe because of that second domestic
move. So it is a challenge for us on the lakes too, sir.
Mr. Maloney. Thank you.
With that, I will yield to the gentleman from Ohio, Mr.
Gibbs.
Mr. Gibbs. Thank you, Chairman.
I do want to welcome Mr. Weakley, because he is a
constituent. It is always nice to have a constituent here.
Mr. Weakley, you talk about the Soo locks project in your
testimony, and I have always been a strong advocate since my
tenure here that that should be of national significant
importance. I think during World War II we had a brigade up
there guarding it; they were so worried about it.
Can you tell us where we are in the process of getting that
redone?
Mr. Weakley. So, Congressman, again, I appreciate all your
support over the years, particularly your support through this
subcommittee.
Great news on the Soo locks. They have developed a positive
benefit to cost ratio. The Army Corps, to its credit, and to
OMB to its credit, recognized that this lock is of critical
significance well beyond the benefit to cost ratio.
As you mentioned, there were 10,000 troops up there. In
fiscal year 2019, we got $32.3 million out of the work plan.
The President's budget proposed $75.3 million. I think it
should be--I think it just passed. Was that one of the things
you were just voting on on the omnibus? So we are hoping that
will go forward. The project is well underway, and the State of
Michigan kicked in $52 million towards that project.
So I am not an optimist by nature, sir, but I am convinced
this project is going to go forward.
Mr. Gibbs. Well, I think I'll just reminiscence here a
little bit. When I was chairman of the Water Resources and
Environment Subcommittee, Secretary Darcy at the time, we were
talking about the cost-benefit analysis. And I said to her, I
think we can do this here in 15 minutes. Me and you can get it
done. So I am glad to see it is finally moving, because it
seemed like to me it was a no-brainer.
Mr. Weakley. Thank you, sir. I should also thank this
committee for reauthorizing it in the WRDA 2018. So thank you
for that, sir.
Mr. Gibbs. Go back to the Harbor Maintenance Trust Fund
fee, the .125 percent. It doesn't sound like a lot of money,
but I want to--you know, it is interesting. All three of you in
the testimony now, because if you have $1 million worth of
cargo, that is 1,250 bucks. You get charged once. You get
charged twice. So, you know, 2,500 bucks. It doesn't sound like
a whole lot of money for a big ship if it is $1 million of
cargo, but your competition doesn't have that, is what you are
saying.
And then you also got the challenge you are limited to
where you can move because of where the water is, and I am glad
to hear you say about how much improvement has been made in the
infrastructure and unloading and loading, because when that
vessel is sitting there, that is time. That is money, right?
And I know when I was over at the Shanghai port in China, I
unbelievably heard of when they told us how fast they were
turning those ships around. It was sometimes in less than 24
hours, or 36 hours, I guess, depending on the tide. So that is
amazing, all those containers. And I know in Cleveland we have
had the discussion that you are trying to do that with the
containers.
So I guess the point I am just trying to make, emphasize,
it doesn't sound like a lot of money, but when you have got the
competition with rail and truck and their ability to move that
cargo from point A to point B, the faster route, to the end
customer, that is what really factors in and makes it a
negative for you. Is that correct, right?
Mr. Weakley. Yes, sir. I would agree. Also, time value of
money, our ships are moving slower through the water than they
are over the road. So we have to make that up by handling point
and by economies of scales.
I will defer to Mr. Nass.
Mr. Nass. Absolutely. Efficiency at the dock is the name of
the game. That ship is only making money when it is moving.
Mr. Gibbs. The thought that came to my head here, going
back 10 years or so, how much change in efficiency at the docks
would you estimate we have picked up?
Mr. Nass. Well, sir, in our instance, we didn't exist 10
years ago.
Mr. Gibbs. Oh, OK.
Mr. Nass. So, my timeframe is 5 years.
Mr. Gibbs. OK.
Mr. Nass. And we were the recipient of a FASTLANE grant
that brought in some new machinery. And we really struggled at
about 10 moves an hour when we first started 5 years ago. With
a new vessel, with a new crane, with a great labor force that
is getting better and better every day, we are up to 23 moves
an hour. That makes a big difference. It means the ship is
leaving in a day and not----
Mr. Gibbs. It doubles efficiency. That is good.
Mr. Nass. Yes, sir.
Mr. Gibbs. Mr. Weakley, just quickly, you talked about the
ice cutters on the Great Lakes. Do you want to just point about
the important--I am meeting with the Commandant tomorrow night.
I thought maybe it might be good to get some more information
on that.
Mr. Weakley. Well, sir, with the chairman's permission, I
will provide some more detailed information for the record. But
I can tell you, in the winter of 2013-2014, we left 6.8 million
tons on the dock because of inadequate ice-breaking. That cost
the U.S. economy 3,800 jobs and $705 million in lost economic
activity because of inadequate ice-breaking. The winter of
2014-2015, similar numbers, 3.2 million tons, 2,000 jobs, $355
million in lost economic activity.
The reliability is abysmal. This year, four of their nine
icebreakers were out of commission. Last winter, five of their
nine icebreakers simultaneously inoperable.
Mr. Gibbs. OK. That is good to know.
Thank you. I yield back.
Mr. Maloney. I thank the gentleman.
One bit of housekeeping. Without objection, I would ask
unanimous consent to also include a statement by Mr. Percy Pyne
of Green Shipping Line into the record.
[The information follows:]

Letter of June 19, 2019, from Percy R. Pyne, Chairman and CEO, Green
Shipping Line, Submitted for the Record by Hon. Maloney
June 19, 2019.
United States House Transportation and Infrastructure Committee, Coast
Guard and Maritime Transportation Subcommittee

Hearing on ``Short Sea Shipping: Rebuilding America's Maritime
Industry''

Honored Members:
Thank you for this opportunity to offer my thoughts to your
Committee.
I am the Chairman and CEO of Green Shipping Line. Our goal is to
invigorate the nation's most underutilized mode of transportation and
help rebuild America's maritime industry. We intend to build modern,
fuel-efficient Jones Act compliant feeder ships for short sea shipping
on the American Marine Highways and for the installation and
maintenance of wind farms along the coast.
While all other modes of transportation are at or exceeding their
capacity, short sea shipping offers a solution to help ease our
congested highways, ports, airports and railways. When implemented,
short sea shipping will add reliable waterborne options for shippers
seeking resiliency and redundancy to their supply chain management.
The United States is a nation that was built on its water systems
which dictated its patterns of development. Using our waterways was the
preferred choice for transportation and trade until the mid-1960s.
Historically, we were the number one ship building nation in the world
until the mid-1980s and we produced more than 5,000 marine assets of
all kinds in 3 years during WWII.
Today, our nation faces a significant and growing infrastructure
and distribution crisis. That being the reality, we at Green Shipping
Line have looked to our past to find 21st century solutions for our
21st century problem. Our strong belief is that short sea shipping is
the answer and Jones Act commercial shipbuilding is critical to our
national security and economic survival.
In order to understand how commercial ship building is performed in
other countries today, we travelled the world to view how other ship
building nations including Korea, Germany and the Netherlands have
adopted, integrated and co-opted our systems.
Having discovered many new techniques, we have formed joint
initiatives with German, Dutch and Norwegian companies to bring their
knowledge to re-invigorate our small vessel commercial shipbuilding
industry. Further, we have sought out and began a long running dialogue
with our U.S. shipbuilding and maritime unions and the ILA to engage
them in our initiative from the beginning. The Unions are critical to
our effort as their members will ultimately build, man, and service our
ships. We are working with states such as Maryland to create training
programs and exclusively with ABS to ensure that our designs meet both
IMO and USCG standards.
One regional yard, Moran Iron Works, has been with us every step of
the way on the journey so far. However, the journey is just beginning
and we expect more will follow in the future.
What could our government do to help?
(1) MARAD must promote the America's Marine Highway program (AMH)
as defined in the 2007 National Security Law Section C to educate our
citizens on the importance of: the unlimited capacity of the AMH that
costs nothing to build and little to maintain, our significant existing
port networks, green economical water transportation, and
containerization.
(2) Offer Government support in the form of ``Completion
Guarantees'' or ``Refund Guarantee'' schemes that helped the German KGs
and Korean shipbuilders.
In the rest of the world, rail, trucking and water transport all
work together to move and distribute goods. (The proportions are
roughly equal between the three.) Adding water to our transportation
mix will not take away or diminish the need for rail or trucking, but
rather compliments it.
In conclusion, we believe that a vibrant short sea shipping
network, that every other industrialized economy in the world relies on
for transport and distribution of goods, is the only answer that will
save our landside transportation networks and allow our economy and
population to grow unabated. It's ironic that the United States, the
country with the longest coastlines and most developed ports network in
the world, is the only developed country without a short sea network.
Thank you again for this opportunity to express our views.
Yours sincerely,
Percy R. Pyne IV
Chairman and CEO, Green Shipping Line

cc: Tom Moran, Moran Iron Works Founder and CEO
Peter Franchot, State of Maryland Comptroller
Tom Trotter, AFL-CIO Legislative Representative Government Affairs
Dennis Daggett, ILA Executive Vice President
Scott Cowan, ILA Vice President
Rich Krueger, ILA Vice President
Don Marcus, MM&P President
Thorsten Schutt, Kongstein Chairman of the Board
Peter Tamm, Tamm Media CEO
Suresh Pisini, ABS Structures Group
Lauren Brand, MARAD Associate Administrator for Intermodal System
Development
Brian Davis, White Star International President
Colleen Robertson, Green Shipping Line Managing Director

Mr. Maloney. Mr. Garamendi.
Mr. Garamendi. Somebody mentioned icebreakers? I just wrote
down the two numbers here, $705 million and $365 million. Is
that correct?
Mr. Weakley. $705 million and $355 million, sir.
Mr. Garamendi. A super heavy icebreaker runs about $700
million a copy, and that is not for the Great Lakes, that is
for the Arctic. Just keep in mind the relative costs and the
benefits associated with icebreakers. Thank you for mentioning
it. This committee has been super on that issue.
We have talked about the double taxation here, which seems
to be maybe not the only issue but a significant issue. We need
to get down to the numbers on the potential revenue that is
lost currently and the economic activity that could be gained
were there no double taxation. So if you gentlemen could help
us with that analysis, it would be very useful.
My sense of it is that there is not much tax loss now,
should we eliminate the double taxation. But we are going to
have to score that. And if there is a tax bill ever, then we
would want to have this in it. So we would want to have that
kind of detailed information, if you could develop that.
Also, there is another way of going about it, and you
mentioned Cleveland and that Cleveland essentially rebated that
tax. Once again, numbers would be useful here. We have the
annual appropriation of $7 million, $10 million, whatever, for
the marine highway system, and just thinking of different ways
we can get this job done. On the tax side, you can rebate. We
could appropriate the money and then it gets rebated or we can
eliminate the tax. So, once again, numbers would be very useful
for that.
Also, the efficiency of loading and unloading, which is
said to be a problem. Appreciate your testimony on the
efficiency that you have achieved in Maine. But this may be an
infrastructure problem on the ports and the docks themselves.
So I would like to get some detail on that. What are we talking
about? There is one example in the written testimony here of a
method that did that.
So if you could just discuss those things, if you have the
numbers, if you have what it takes to make the dock efficient
for this purpose. Whichever one of you wants to jump in.
Mr. Nass. Maybe I can touch on the infrastructure end of
it. We have invested about $64 million into our relatively
small terminal. Much of that revolves around being more
efficient.
For instance, our maintenance facility was on the pier when
we started. The wrecking balls are coming today. We built a new
maintenance facility out of the way, and the entire notion is
to create that ship-to-shore space that just makes it more
efficient to unload a vessel. Similarly, we have expanded our
pier space and put new equipment on there, and it pays off.
The ROI on this, you know, is a matter of years when the
infrastructure lasts an awful long time. Our oldest crane is
over 20 years old, and she is still working great. We think it
is worth the investment.
Mr. Garamendi. Is there a specialty issue here also, the
kind of equipment that you need to take from, perhaps not in
Maine, but any of the major docks and ports, east coast, west
coast, coming off a big ship, putting it on a small vessel or a
tug or--excuse me--a barge? Are we talking about different
kinds of infrastructure that would be needed?
Mr. Nass. I think the equipment we have at the
International Marine Terminal in Portland is the same type of
equipment you would use for barge operations, mobile harbor
cranes, reach stackers, those types of items.
Mr. Garamendi. Very good.
One of the things we did a couple of years ago was to allow
the Harbor Maintenance Fund to be used for on-the-dock
improvements, which has really not been used very much.
My final point would be a question for us to try to get
into, and that is--and I did not ask this of Admiral Buzby.
What are the specific projects that are lined up? What we have
now created is what I call administrative earmarks. I want to
know what his earmarks are. So if we can dig that out and see
how they fit into the testimony and the priorities that you
have mentioned.
With that, I yield back.
Mr. Maloney. I thank the gentleman.
Mr. Gallagher.
Mr. Gallagher. Thank you, Mr. Chairman.
And I appreciate what I sense to be the bipartisan love of
icebreakers on this committee. I would like to probe the depths
of that a little bit more. And I want to thank all of our
witnesses for being here, for being patient with our schedule.
And thank you, Mr. Weakley, for your eloquent testimony to
the importance of the Great Lakes. And I represent Green Bay,
Wisconsin, and that is obviously critical to our economic
success. The Port of Green Bay in particular is an essential
part of maritime trade. We have over 166 vessel arrivals that
generate $147 million in economic impact in the region. As you
mention, we move everything from iron ore to Wisconsin soy.
But, ultimately, that trade is dependent on shipping lanes on
the Great Lakes being open, and in the wintertime, that means
icebreakers. It gets cold in my neck of the woods, in case
anyone was wondering.
So the Coast Guard right now operates 12 icebreakers that
are in high demand for one-quarter of the year, but only one of
these, the Mackinaw, is of medium size and was intended to work
in a pair, meaning that it must cut backwards on each shipping
lane without a second Mackinaw.
So last month, I questioned, and we had a great dialogue on
this committee. I questioned Admiral Schultz from the Coast
Guard on the need for a new icebreaker for the Great Lakes, and
I know you have already talked about the economic impact, but
in your testimony, you mentioned that we are losing ground. You
sort of briefly mentioned that we are losing ground with
respect to U.S. Coast Guard Great Lakes ice-breaking. And I
just wanted to give you a chance to kind of explain and expound
upon that comment.
Mr. Weakley. So I will focus on two areas, the 140s and the
need for the new Mac. So the 140s are going through their
Service Life Extension Program, or their SLEP. The biggest
problem with that SLEP program is they are not replacing the
engines. Those engines are 30 to 40 years old. They are very
expensive to maintain. They are very finicky. They could have
put a brandnew tier 4 state-of-the-art, lower energy, lower
pollution, more reliable engine with a reliable inventory of
spare parts in the commercial industry; that would have
streamlined it. In fact, the Morro Bay, one of the ships that
was out for a month, was out of commission for a month, and it
is a post-SLEP.
A Biscayne Bay, 16 months out of commission because of an
engine casualty. It took them 8 months to build the ship. It
took them 16 months to fix an engine repair. As a former Coast
Guard officer and a former engineer in the Coast Guard, I find
that somewhat frustrating.
The Mackinaw, as you mentioned, it is basically a single
point of failure. If the Mighty Mac goes down, we are not going
to open Sturgeon Bay. We are not going to open our shipyards to
get them out of layup. We are not going to get them through
Lake Superior. The original plan was to build two Mackinaws.
They cut that. I think there is some suggestion of combining it
with the polar program. The problem I see with that, sir, is
that it would waste a $100 million, you know, to build a Polar-
class icebreaker for the Great Lakes. We need a second Mac
size. We don't need a Polar. The ice conditions are different.
They are different styles of ice, and it is a different
operation. We need more maneuverability than they need in the
Arctic.
The old Mac was heavier, wider, did a better job to handle
our thousand footers. The new Mac is more maneuverable, but it
needed the second. The original plan, had they stuck with it,
would have worked. Unfortunately, cost cutting has a cost to us
and the economy.
Mr. Gallagher. You mentioned the Mac as a single point of
failure and that we would have to shut down Sturgeon Bay, et
cetera. Is it even possible to quantify the economic impact in
such a scenario?
Mr. Weakley. Well, the best I could do is the 2014-2015
numbers I would give you, but really, it would be catastrophic.
There is no way to measure the cost of shutting down a steel
mill. I think they estimated it would be $100 million, because
if you do a cold shutdown that is not planned, you have to
realign the steel mill. It would be catastrophic to the steel
mills of Indiana.
Mr. Gallagher. I appreciate that.
Mr. Chairman, I yield back. And we have got to break the
ice.
Mr. Maloney. I thank the gentleman for that bipartisan note
of consensus.
I don't see any further questions of the committee. I know
we have kept you gentlemen well past the time you probably
expected. So in the interest of respecting everyone's schedule,
I would like to thank all of you for your testimony. Your
contribution to today's discussion has been very informative
and helpful.
I would ask unanimous consent that the record stays here
and remain open until such time as our witnesses have provided
the answers to any questions that may have been submitted to
them in writing. I further ask unanimous consent that the
record remain open for 15 days for any additional comments and
information submitted by Members or witnesses to be included in
the record of today's hearing. Without objection, so ordered.
If no other Members have anything to add, with the thanks
to our panelists, the committee stands adjourned.
[Whereupon, at 4:29 p.m., the subcommittee was adjourned.]

Submissions for the Record

----------

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, Mr. Chairman. Earlier this year, the subcommittee held a
hearing to assess the condition of the U.S. maritime industry and to
begin an overdue discussion of what we can do in Congress to stimulate
greater job creation and economic opportunity in this vital mode of
transportation.
This afternoon's hearing to examine short sea shipping, or, as the
Obama administration tagged it, ``Marine Highways,'' is an excellent
follow on topic.
As noted by the Committee on the Marine Transportation System,
waterborne cargo and associated activities contribute more than $649
billion annually in personal wage and salary income and local
consumption expenditures. Waterborne commerce also sustains an
estimated 13.3 million direct and indirect port-related jobs, and
contributes over $212 billion in annual port sector federal, state, and
local taxes.
Those are impressive numbers. If projections by the U.S. Department
of Transportation's Bureau of Transportation Statistics hold, it is a
safe bet that the total volume and value of marine commerce will
continue to rise in the coming decade.
Of course, ill-advised trade wars may alter those projections, but
I prefer to remain optimistic.
The bottom line is that we are going to have to move substantially
more freight around the country. Short sea shipping--currently under-
utilized--offers the potential to move greater volumes of freight via
the most efficient and cost-effective manner available, bar none.
Moreover, short sea shipping offers other collateral benefits, such
as increased transportation options for shippers and reduced congestion
on crowded highways. In addition, lower vehicle emissions and better
air quality in densely populated metropolitan areas, and increased
employment in the longshore and domestic maritime industries, are both
desirable outcomes that are good for our economy and our communities.
Considering these attributes and the projections of rising freight
volumes, it remains a puzzle as to why short sea shipping has not risen
in prominence as a competitive transportation option.
I expect this hearing to identify factors that have thus far
stunted greater market interest in short sea shipping.
Yet, I think it is also worth mentioning that we absolutely need to
finalize a comprehensive, integrated national freight strategy.
Progress in this endeavor was initiated after Congress passed the
Moving Ahead for Progress in the 21st Century Act, or MAP-21, and was
further advanced when Congress passed the Fixing America's Surface
Transportation (FAST) Act, that directed the Department of
Transportation to produce a National Freight Strategic Plan by 2017.
Well, it is now 2019, and we only have a draft plan. We need to do
better.
In closing, until we think holistically and long-term about how we
plan to move freight around the country, the U.S. freight
transportation network will continue to be challenged by congestion,
inefficiency, and yes, crumbling infrastructure. And until we accept
that no one mode of transportation is the ultimate solution,
alternatives such as short sea shipping will continue to be overlooked
and under-utilized.
Consequently, the only thing we may succeed in doing is to erode
the global competitiveness of our own freight transportation network.
We would all be best advised to avoid such an outcome. Thank you.

Prepared Statement of Hon. Sam Graves, a Representative in Congress
from the State of Missouri, and Ranking Member, Committee on
Transportation and Infrastructure
Thank you, Chairman Maloney.
As a farmer and Member whose district is bounded by both the
Missouri and Mississippi Rivers, I understand the importance of
shipping commodities by water in the United States.
I look forward to learning more today about ways we can increase
the use of America's waterways to ship more of our higher value
cargoes.
Moving cargo via Short Sea Shipping can alleviate congestion in
other modes.
Unfortunately, Short Sea Shipping requires the additional loading
and unloading of vessels which creates expense and delays, as our
waterways do not extend to everyone's final destination.
In addition, shippers don't want to enter into contracts to move
cargo on ships that aren't built yet, and bankers don't want to fund
ship construction unless contracts are in place to move cargo on those
vessels.
Therefore, to encourage more Short Sea Shipping, Congress
established a program in 2007, and I am particularly interested in
hearing what actions the Maritime Administration has taken to implement
it.
I yield back the balance of my time.

Statement of Kurt Nagle, President and CEO, American Association of
Port Authorities, Submitted for the Record by Hon. Maloney
Chairman Maloney and Ranking Member Gibbs, thank you for allowing
the American Association of Port Authorities (AAPA) to submit testimony
following this timely hearing. AAPA looks forward to working with you
both throughout the 116th Congress.
AAPA strongly supports the Maritime Administration's (MARAD) Marine
Highway Program and the potential it has in providing and incentivizing
additional opportunities for shippers and ports. Specifically, a more
robust and integrated marine highway system will provide more options
to maritime customers, improve the environmental space connecting ports
and communities by reducing truck traffic and emissions as well as
managing the congestion around ports by providing sustainable waterway
options to move freight. A strong Marine Highway Program is a much-
needed tool for ports, shippers and communities.
Today's hearing is long overdue. The last time there was a hearing
in this Committee on short sea shipping was 2007. Much has changed in
the port and shipping industry these past twelve years--and much has
changed with the advent of the FAST Act and the creation of dedicated
freight programs at the U.S. Department of Transportation.
The FAST Act provided a baseline for freight programs and the
coming reauthorization of the FAST Act provides an opportunity for a
program such as the Marine Highway Program to become more integrated
into our supply chain by incentivizing its use. Additionally, 38 of the
50 states and Washington, D.C., are connected by navigable waterways
and marine highway routes. As the Marine Highway Program grows and
becomes a viable option for communities, shippers and port authorities,
AAPA believes that encouraging more of an emphasis on marine highways
in the next generation of state freight plans will be key to further
integrating the program as a tool in our country's transportation
supply chain.
AAPA has recommended updating the America's Marine Highway Program
authorization and including it in the Maritime Freight Supply Chain
title, as part of its FAST Act Reauthorization Platform. In the
meantime, AAPA has three immediate recommendations to energize the
program:
1) Step one--Wave the Harbor Maintenance Tax (HMT) tax when it is
applied a second time in an instance of transshipped cargo. AAPA
supports this exemption for certain U.S. port-to-port cargo. This is
the issue that is most often raised as the biggest disincentive for
shippers to utilize the marine highways.
2) Step two--Provide shippers with federal incentives or tax
credits to utilize marine highways. Some states have put incentives in
place, but a federal tax credit would send the message that marine
highways are a national priority and that it is a long-term sustainable
tool.
3) Step three--Build off the FAST Act Congestion Mitigation and
Air Quality (CMAQ) language and direct and codify more CMAQ funding for
marine highways with a focus on marine highway projects that have the
long-term potential to reduce emissions and congestion; two key goals
of the CMAQ program.
Other long-standing AAPA recommendations include:
Federal funding to support the return of transshipment
cargo service to U.S. mainland ports,
Federal funding support (operating and capital) for
short-sea shipping services,
Development of expertise at the state/MPO level on marine
highway alternatives/benefits, and
Reassessment of federal shipbuilding programs, exploring
how they could support marine highway development.
AAPA looks forward to working with you throughout the 116th
Congress on these important maritime issues.

``America's Marine Highways,'' Fact Sheet, Maritime Administration,
Submitted for the Record by Hon. Maloney

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

``America's Marine Highway Program,'' Brochure, Maritime
Administration, Submitted for the Record by Hon. Maloney

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

Appendix

----------

Questions from Hon. Alan S. Lowenthal for Rear Admiral Mark H. Buzby,
U.S. Navy (Ret.), Administrator, Maritime Administration

Question 1. As you've mentioned in your testimony, coastwise
shipping holds tremendous promise to alleviate congestion on our
highways and reduce harmful carbon emissions. In my region of Southern
California, moving containers on barges can help us grapple with our
world-famous traffic and allow our ports to handle more cargo without
adding additional truck trips to our highways.
As Vice Chair of the Sustainable Energy and Environment Coalition,
I included investments in marine highways as part of our infrastructure
proposal, because these investments drive substantial reduction in
diesel emissions.
I'm interested to know about some of the barriers to coastwise
shipping in my region.
I represent large container ports that have berths and terminals
for ships that hold over 10,000 TEUs.
Do container ports now have the infrastructure to allow for smaller
container-on-barge operations?
Answer. Adequate infrastructure that can best accommodate smaller
container-on-barge operations at a container port should include a
number of features including a dedicated barge berth adjacent to the
large container berth, which is necessary to facilitate transloading of
containers from the mother ship to a barge service. A dedicated berth
allows for the barge service to maintain a service schedule, ensuring
export loads do not miss the mother ship's scheduled departure.
Appropriately sized cargo handling equipment will allow loading/
unloading of the barge which may include a negative drop top pick or
mobile harbor crane vs. a large ship-to-shore crane.
A separate terminal area near the barge berth will allow for
aggregation of containers dedicated for the coastwise service. These
containers may already be cleared by U.S. Customs and Border
Protection, or may be domestic outbound moves, therefore a means to
separate them from the general import stack is desired. Non-intrusive
scanning of 100% of import containers is mandated. Most ports have such
scanners located at the exit gates of the port facility. When moving
containers between the mother ship and barge, a method of scanning
containers without driving them out of the port gate is needed.
For inland facilities, such as intermodal rail yards, enabling the
transfer of heavy freight onto trains to keep trucks away from
congested urban port areas is useful. To achieve this, high and wide
clearance is necessary for intermodal corridors from ports to inland
areas.
MARAD does not systematically collect information from ports about
the types of infrastructure they have or do not have to support smaller
container-on-barge operations; however, it is ourexperience that few
container ports have such facilities. To our knowledge, PNCT at Port
Newark, Mobile and the Port of Virginia each have a dedicated barge
berth adjacent to facilities that accommodate larger container vessels.
Houston is exploring the viability of implementing a barge berth near
their container facilities. Through work performed by the Marine
Highway Program, new projects to develop such facilities may assist the
following ports in the coming five years: New Orleans, other terminals
in New York, Savannah, Oakland and ports in South Florida and Southern
California.

Question 2. What kind of investments will these ports need to make
to establish smaller barge services to serve coastwise markets?
Answer. The types of investments will vary by port, but in general
the types of investments include expansions, including dedicated barge
berth capacity, dedicated uplands storage facility separate from the
general import stacks, and dedicated cargo handling equipment. Some
ports may need to invest in training simulators for waterfront labor,
such as to help with loading containers on a barge vs. loading large
container vessels. Investments may also be needed on dock or near-dock
rail access for ease of loading and discharging overweight cargo.
Dredging new berths or rehabilitating berths to ensure access for both
vessels and barges has also been a priority for large container ports.

Questions from Hon. Alan S. Lowenthal for Jonathan Nass, Chief
Executive Officer, Maine Port Authority

Question 2. What kind of investments will these ports need to make
to establish smaller barge services to serve coastwise markets?
Answer. If new port infrastructure is required the types of
investments necessary to support smaller barge services would include:
additional pier and terminal infrastructure in larger ports, rebuilt
terminal infrastructure in smaller feeder ports, new mobile harbor
cranes or gantry cranes, new reach stackers or straddle carriers to
move containers around, new chassis (the wheels for the containers
turning them into trucks), yard trucks, and potentially new barges/
tugs/or similar vessels. The majority of the above list should be
considered as qualifying for public investment to incentivize modal
shift in America. Port Infrastructure and all related equipment should
be considered equivalent to the asphalt of roads and bridges.
Financially it is a nominal amount of investment required for port
equipment and infrastructure to carry the same amount as trucks or
rail.
All investment should be tied to market participation, private
sector shippers (beneficial cargo owners AKA BCOs) committing freight
for a lower freight rate and the benefit of lower emissions and lower
social cost. This will not happen naturally under the present structure
where the federal and state governments are subsidizing trucking
through huge infrastructure investment without charging that back to
the truckers or American shippers.

Questions from Hon. Bob Gibbs for James Weakley, President, Lake
Carriers' Association

Question 1. At the hearing, you were asked to provide information
on the importance of ice cutters on the Great Lakes. You elaborated
with the economic costs and jobs lost because of inadequate ice
breaking but also stated you would provide more details for the record.
Please provide that information.
Answer. The U.S.-flag vessel delays caused by the inadequate
icebreaking during the 2019 ice season resulted in the loss of 5,421
jobs that were dependent upon the U.S.-flagged fleet's ability to
deliver cargo throughout the Great Lakes Region. Businesses that depend
upon the Great Lakes maritime industry lost over $1 billion in revenue.
The Federal government lost over $125 million in taxes and state and
local governments lost $46 million. Impacts of delays on Canadian-flag
lakers and oceangoing vessels flagged in countries other than the U.S.
and Canada calling on the Great Lakes ports (salties) were not
calculated.
Although economic losses were not calculated for the 2016-2018 ice
seasons, I have attached to this response the economic impacts for ice
seasons 2014, 2015 and 2019. All impacts were calculated using the
economic model developed by Martin & Associates for Great Lakes
shipping. The model was updated in July of 2018. The main reasons for
the increased impacts in 2019 are inflation and the use of the updated
economic model.
The U.S. Coast Guard (USCG) will report that they met their goal of
keeping ``major'' waterways open 95% of the time during the 2019 ice
season. LCA believes this measurement is not an accurate determination
of success in regard to their mandate to keep waterways open to
navigation by means of icebreaking operations.
First, the USCG is only reporting on the status of four waterways
in the Great Lakes which happen to be connecting waterways to the Great
Lakes System (St. Marys River, the Straits of Mackinac, the Detroit/St
Clair Rivers and Pelee Passage in Lake Erie). They call these waterways
Tier 1 waterways and prioritize icebreaking operations with Tier 1
highest priority to Tier 4 lowest. They do not report on the Lakes
themselves or the harbors that ships must load out of and deliver goods
into. For instance, a ship may not be able to transit out of Duluth,
MN, transit Southern Lake Huron or enter Cleveland, OH due to ice, but
that is not reported by the USCG. The USCG considers a Tier 1 waterway
``open'' even if it is unpassable, if no vessel is actively trying to
pass through it. In addition, the Canadian Coast Guard (CCG) is not
bound to a tiered prioritizing metric, therefore they are often
assisting Canadian vessels into and out of their Canadian ports and not
in the USCG's defined Tier 1 waterways. We only recall one day in the
spring 2019 ice season when a CCG icebreaker was deployed to a Tier 1
waterway. The vessel deployed to the Straits of Mackinaw was quickly
dispatched to the Canadian Port of Thunder Bay, when another CCG
icebreaker there experienced an engine casualty.
It is also important to note that the 95% that is reported to
Congress is not Great Lakes specific, it is the Great Lakes and Eastern
Seaboard aggregated. Therefore, a seldom difficult ice season in the
Northeast is ultimately diluting the percentage of closures on the
Great Lakes and further pushing the percentage of waterways open up. It
is also noteworthy that the tiered waterway approach is a relatively
new system and is not consistent with the ``reasonable demands of
commerce'' standard stated in the Executive Order that created the
USCG's icebreaking mission. LCA also questions the consistency of its
application on the East Coast and the Great Lakes.
Second, the USCG also does not take transit time into account when
reporting their performance. A normal round trip from Duluth to
Cleveland may take 96 hours. With difficult ice conditions on just one
Lake or connecting waterway, delays can stretch the trip to over a
week. With a defined shipping season from mid-March to mid-January,
every shipment is critical and delays shorten the season even further.
One U.S.-flag operator, based on the ice conditions and the USCG's
decision not to keep an icebreaker on Lake Superior after the Soo Locks
closed, delayed sailing its entire fleet. This delayed sailing is not
captured by the USCG metric. In fact, given the way the USCG calculates
waterway availability, delayed sailings contribute to their claimed
success. If all of the vessels delayed sailing until May, given the
USCG's metrics, they could claim ``100% availability of major
waterways'' without logging any icebreaking effort.
Third, the USCG waterway availability statistic does not measure
whether commercial vessels can safely transit the waterway without an
icebreaker escort. It measures whether they tried to make the transit,
misjudged the ice conditions and got stuck. The USCG waterway
availability statistic has little correlation with the availability of
its Great Lakes icebreaker fleet because of commercial vessel
operators' knowledge of that availability (or unavailability). Low
availability of USCG icebreakers, however, definitely drives commercial
vessel operators' winter voyage planning, which drives how much cargo
will be shipped or left ashore during the winter season. Commercial
vessels don't get underway if their operators know they are going to
get struck for an extended period of time. They may not only delay
sailing for the season, they will often wait at the dock until USCG
assistance is available.
LCA's economic impact analysis, given in the first paragraph, is
based on how much cargo was not shipped because:
1) Commercial vessels either could not risk a voyage due to the
unavailability of an icebreaker.
2) Commercial vessels proceeded with a transit through the ice
without adequate icebreaker escort, but made no or slower progress than
they would have if an icebreaker had been available to properly escort
them.
U.S.-flag lakers lost a total of 1,796.5 hours due to inadequate
icebreaking during the 2019 ice season, which delayed or prevented a
total of 4.9 million tons of cargo. LCA believes its economic analysis
is a better measurement of the impact of USCG icebreaker availability
than the USCG's major waterway availability statistic because
commercial vessel operators have an economic incentive to attempt to
ship cargo, but not get stuck in the ice (which consumes operating
costs and risks expensive damage to the vessel). The greater the
availability of USCG icebreakers, the less likely cargo shipments will
be delayed or foregone. The USCG waterway availability statistic does
not capture this dynamic. Nor does it capture the status of ports or
waterways other than the connecting channels. The USCG often cites the
number of vessels and tons assisted during the ice season. That is a
measure of industry's efforts, not the USCG's. If a vessel is stuck for
two days or two weeks in port, it is not captured in the USCG's
metrics. In one instance last winter, the USCG ordered a U.S.-flag
laker to slow down so one of the largest U.S.-flag lakers could serve
as the icebreaker for the Canadian-flag tug barge unit that was too
under powered to be the Tier 1 waterway (Straits of Mackinaw).
Industry needs a predictable Federal icebreaking response in order
to make logical business decisions. The current state of the USCG
icebreakers is bleak. The USCG Service Life Extension Program (SLEP)
for the 140-foot Bay Class icebreakers did not address the heart of the
vessel, two main diesel engines. These engines are failing at a rapid
pace and the 40-year-old icebreakers are not reliable. Last year the
USCG Great Lakes icebreakers lost 246 operating days during the ice
season, primarily because of icebreaker engine failures. One of the
post-SLEP 140's missed the entire spring icebreaking season this year
due to an engine casualty. The USCG has no plans to replace the most
critical pieces of machinery. The engines could easily be replaced by
commercial shipyards on the Great Lakes. This could be accomplished
independent of the SLEP program.
attachment a--economic impacts resulting from 2014 ice delays
To estimate the economic impact of the unusually long ice season on
the Great Lakes during the 2013-2014 winter season, year over year
tonnage comparisons were made between December 2012-May 2013 and
December 2013-May 2014. The data, showing tons by commodity, carried by
the U.S.-flagged Great Lakes fleet, was supplied by the Lakes Carriers'
Association. Using the 2010 Economic Impact study of the Great Lakes
and St. Lawrence Seaway--U.S. Flagged Fleet, jobs per ton and revenue
per ton ratios were developed for iron ore, coal, limestone/aggregates
and other dry bulks. These ratios were then applied to the net decrease
in tonnages from the 2013 winter shipping season to the 2014 winter
shipping season. This methodology assumes that demand for these cargoes
did not change from 2013 to 2014. From December 2013 through May 2014,
cargo moved by the U.S.-flagged fleet decreased by 6.8 million tons
from the previous year due to lost transit days caused by heavy ice.
The economic impacts of these delays are presented in terms of jobs and
business revenue in Table 1.

Table 1--Economic Impact of Lost Tonnages due to Heavy Ice
------------------------------------------------------------------------
2014 Ice-Delay
Impacts
------------------------------------------------------------------------
JOBS
Direct Jobs........................................ 1,311
Induced............................................ 1,298
Indirect........................................... 1,221
------------------
Total............................................ 3,830
------------------------------------------------------------------------
BUSINESS REVENUE (1,000)............................. $705,145
------------------------------------------------------------------------

The vessel delays caused by the 2014 ice season resulted in the
loss of 1,311 jobs that are directly dependent upon the U.S.-flagged
fleet's ability to deliver cargo throughout the Great Lakes Region.
This results in the additional loss of 1,298 induced jobs that had been
supported by direct job holders as they re-spent their wages/salaries
within the regional economy. Businesses that depend upon the region's
maritime industry lost over $705 million in revenues because of the ice
delays. As businesses use their revenue to purchase goods and services,
they support indirect jobs. The decrease in revenue and corresponding
decline in purchases of goods and services resulted in the loss of
1,221 indirect jobs. In total, 3,830 dependent jobs were lost due to
the 2014 ice delays.
attachment b--economic impacts resulting from decreased tonnage during
the 2015 ice season
To estimate the economic impact of the 2015 winter ice season on
the Great Lakes, tonnage comparisons were made between the January
2015-April 2015 period and the average tonnage carried during those
months from 2010-2013. Because the winter of 2014 was exceptionally
severe, it was excluded from long-term average calculations so as not
to skew the data. Tonnages carried by the U.S.-flagged Great Lakes
fleet were provided for separate commodity groups by the Lakes
Carriers' Association. Using the 2010 Economic Impact study of the
Great Lakes and St. Lawrence Seaway--U.S. Flagged Fleet, jobs per ton
and revenue per ton ratios were developed for iron ore, coal,
limestone/aggregates and salt. These ratios were then applied to the
net decrease in tonnages of each commodity, again comparing the 2015
winter shipping season against the average tons carried during the
2010-2013 winter shipping seasons. This methodology assumes that demand
for these cargoes has remained constant and that the lost tonnages
correlate to lower production levels by the end users. From January
2015 through April 2015, cargo moved by the U.S.-flagged fleet
decreased by 3.2 million tons from the 2010-2013 average due to lost
transit days caused by heavy ice. The economic impacts of these delays
are presented in terms of jobs and business revenue in Table 1.

Table 1--Economic Impact of Lost Tonnages due to Heavy Ice
------------------------------------------------------------------------
2015 Ice-Delay
Impacts
------------------------------------------------------------------------
JOBS
Direct Jobs........................................ 674
Induced............................................ 667
Indirect........................................... 628
------------------
Total............................................ 1,970
------------------------------------------------------------------------
BUSINESS REVENUE (1,000)............................. $355,578
------------------------------------------------------------------------

The vessel delays caused by the 2015 ice season resulted in the
loss of 674 jobs that are directly dependent upon the U.S.-flagged
fleet's ability to deliver cargo throughout the Great Lakes Region.
This results in the additional loss of 667 induced jobs that had been
supported by direct job holders as they re-spent their wages/salaries
within the regional economy. Businesses that depend upon the region's
maritime industry lost over $355 million in revenues because of the ice
delays. As businesses use their revenue to purchase goods and services,
they support indirect jobs. The decrease in revenue and corresponding
decline in purchases of goods and services resulted in the loss of an
estimated 628 indirect jobs. In total, 1,970 dependent jobs were lost
due to the 2015 ice delays.
attachment--economic impacts resulting from 2019 ice delays
To estimate the economic impact of the typical ice season on the
Great Lakes during the 2018-2019 winter season, we asked U.S.-flag
carriers to report their delays in hours and the number of tons carried
during their delays. The types of delays included being beset in the
ice, at anchor awaiting an icebreaker, having to slow down due to
inadequate icebreaking, waiting for Coast Guard permission to proceed,
and waiting for a convoy to form. In addition we recorded hours lost
due to repairing ice damage to vessels and the hours lost by vessels
that delayed their initial sailing times due to inadequate icebreaking.
We aggregated the fleet's lost hours and tons delayed and determined
that a total of 409,729 tons of coal were delayed for 206 hours. We
also calculated that 2,186,361 tons of iron ore were delayed for a
total of 1,586.5 hours. Since the vessels operating were a combination
of ``footers'' and smaller vessels, we used an average of 42,000 tons
per trip. We also assumed that a typical round trip for a U.S.-flag
laker takes 96 hours. Using those baseline assumptions, we determined
that we could have carried 879,210 additional tons of coal and
4,032,000 tons of iron ore had the fleet not lost time. In other words,
we lost 21 trips of coal and 860 trips of iron ore among the 31 vessels
reporting delays.
The data, showing tons by commodity, lost by the U.S.-flagged Great
Lakes fleet, was supplied by the Lakes Carriers' Association to Martin
Associates. The July, 2018 updated Economic Impact study of the Great
Lakes and St. Lawrence Seaway--U.S. Flagged Fleet, developed jobs per
ton and economic impact per ton ratios for iron ore, coal, limestone/
aggregates and other dry bulks. These ratios were then applied to the
estimated loss of 4,000,000 tons of iron ore and 900,000 tons of coal
for the relatively average winter of 2018/2019. The economic impacts of
these delays are presented in terms of jobs and business revenue in
table below.

Economic Impact of Lost Tonnages due to Inadequate Icebreaking in the
Average Winter of 2018/2019
4,000,000 ton loss of iron ore and 900,0000 ton loss of coal due to ice
delays
------------------------------------------------------------------------

------------------------------------------------------------------------
JOBS
Direct Jobs........................................ 1,925
Induced............................................ 1,666
Indirect........................................... 1,829
------------------
Total............................................ 5,421
------------------------------------------------------------------------
PERSONAL INCOME (1,000)
Direct............................................. $106,912
Re-Spending/Local Purchases........................ $203,098
Indirect........................................... $80,454
------------------
Total............................................ $390,464
------------------------------------------------------------------------
BUSINESS REVENUE (1,000)............................. $1,044,044
------------------------------------------------------------------------
LOCAL PURCHASES (1,000).............................. $187,193
------------------------------------------------------------------------
STATE AND LOCAL TAXES (1,000)........................ $46,429
------------------------------------------------------------------------
FEDERAL TAXES (1,000)................................ $125,518
------------------------------------------------------------------------

Source: Martin Associates

The vessel delays caused by the 2018/2019 ice season resulted in
the loss of 5,421 jobs that are dependent upon the U.S.-flagged fleet's
ability to deliver cargo throughout the Great Lakes Region. Businesses
that depend upon the region's maritime industry lost over $1 billion in
revenues because of the ice delays. Due to the lost business revenue,
the federal government lost over $125 million in taxes in addition to
the $46 million lost by state and local governments.