You are given two reports by the government agency.  

Report 1:
USDA’s Food and Nutrition Service (FNS) is responsible for promulgating SNAP program regulations, ensuring that state officials administer the program in compliance with program rules, and authorizing and monitoring retailers from which recipients may purchase food. States are responsible for determining applicant eligibility, calculating the amount of their benefits, issuing benefits on Electronic Benefit Transfer (EBT) cards—which can be used like debit cards to purchase food from authorized retailers—and investigating possible program violations by recipients. SNAP recipients are subject to various work requirements. Generally, all SNAP recipients ages 16 through 59, unless exempted by law or regulation, must comply with work requirements, including registering for work, reporting to an employer if referred by a state agency, accepting a bona fide offer of a suitable job, not voluntarily quitting a job or reducing work hours below 30 hours a week, and participating in a SNAP E&T program or a workfare program—in which recipients perform work on behalf of the state—if assigned by the state agency. SNAP recipients are generally exempt from complying with these work requirements if they are physically or mentally unfit, responsible for caring for a dependent child under age 6 or an incapacitated person, employed for 30 or more hours per week or receive weekly earnings which equal the minimum hourly rate set under federal law multiplied by 30, or are a bona fide student enrolled half-time or more in any recognized school training program, or institution of higher education, amongst other exemptions. SNAP recipients subject to the work requirements—known as work registrants— may lose their eligibility for benefits if they fail to comply with these requirements without good cause. One segment of the work registrant population, SNAP recipients ages 18 through 49 who are “able-bodied,” not responsible for a dependent child, and do not meet other exemptions—able-bodied adults without dependents (ABAWDs)—are generally subject to additional work requirements. In addition to meeting the general work requirements, ABAWDs must work or participate in a work program 20 hours or more per week, or participate in workfare, in which ABAWDs perform work to earn the value of their SNAP benefits. Participation in SNAP E&T, which is a type of work program, is one way for ABAWDs to meet the 20 hour per week ABAWD work requirement, but other work programs are acceptable as well. Unless ABAWDs meet these work requirements or are determined to be exempt, they are limited to 3 months of SNAP benefits in a 36-month period. At the request of states, FNS may waive the ABAWD time limit for ABAWDs located in certain areas of a state or an entire state under certain circumstances. A waiver may be granted if the area has an unemployment rate of over 10 percent or there are an insufficient number of jobs to provide employment for these individuals. If the time limit is waived, ABAWDs are not required to meet the ABAWD work requirement in order to receive SNAP for more than 3 months in a 36-month period yet they must still comply with the general work requirements. Federal requirements for state SNAP E&T programs were first enacted in 1985 and provide state SNAP agencies with flexibility in how they design their SNAP E&T programs, including who to serve and what services to offer. The state has the option to offer SNAP E&T services on a voluntary basis to some or all SNAP recipients, an approach commonly referred to as a voluntary program. Alternatively, the state can require some or all SNAP work registrants to participate in the SNAP E&T program as a condition of eligibility, an approach commonly referred to as a mandatory program. Further, states determine which service components to provide participants through their SNAP E&T programs, although they must provide at least one from a federally determined list. This list includes job search programs, job search training programs, workfare, programs designed to improve employability through work experience or training, education programs to improve basic skills and employability, job retention services, and programs to improve self-sufficiency through self- employment. Total federal expenditures on SNAP E&T programs were more than $337 million in fiscal year 2016. States are eligible to receive three types of federal funding available for state SNAP E&T programs: 100 percent funds—formula grants for program administration, 50 percent federal reimbursement funds, and ABAWD pledge funds—grants to states that pledge to serve all of their at-risk ABAWDs. The Office of Management and Budget has designated SNAP as a high- priority program due to the estimated dollar amount in improper payments—any payments that should not have been made or were made in an incorrect amount (including overpayments and underpayments) under statutory, contractual, administrative, or other legally applicable requirements. According to USDA’s fiscal year 2015 agency financial report, $2.6 billion, or 3.66 percent, of all SNAP benefits paid in fiscal year 2014 were improper, the most recent year for which data are available. SNAP improper payments are caused by variances in any of the key factors involved in determining SNAP eligibility and benefit amounts, and, according to USDA, household income was the most common primary cause of dollar errors. States review the accuracy of SNAP payments to recipients on an ongoing basis, and FNS assesses the accuracy of state reviews and determines a national improper payment rate annually. FNS and states share responsibility for addressing SNAP fraud, which can occur through the eligibility process and when benefits are being used. Specifically, recipients may commit eligibility fraud when they misrepresent their household size, income, or expenses in order to fraudulently obtain SNAP benefits. Another type of fraud—trafficking— occurs when recipients exchange benefits with authorized retailers or other individuals for cash or non-food items (e.g. rent or transportation). In a typical retailer trafficking situation, for example, a retailer may charge $100 to a recipient’s EBT card and give the recipient $50 in cash instead of $100 in food. The federal government reimburses the retailer $100, which results in a fraudulent $50 profit to the retailer. State agencies are directly responsible for preventing, detecting, investigating, and prosecuting recipient fraud, including eligibility fraud and trafficking by SNAP recipients, under the oversight and guidance of FNS. States play a key role in preventing fraud when determining eligibility for SNAP. State agencies collect applicant information, such as household income and employment, and verify it through data matches with other information sources. After benefits are issued, the agencies may monitor EBT transaction data to identify spending patterns that may indicate trafficking. If an individual or household intentionally violates SNAP rules, such as by trafficking or making false or misleading statements in order to obtain benefits, states conduct administrative disqualification hearings or, in some cases, refer the case for criminal prosecution. FNS is responsible for authorizing and overseeing retailers who participate in the program—totaling more than 263,000 in fiscal year 2017—including investigating potential retailer trafficking. In order to participate in SNAP, a retailer applies to FNS and demonstrates that they meet program requirements, such as those on the amount and types of food that authorized stores must carry. FNS verifies a retailer’s compliance with these requirements and generally authorizes retailers for 5 years. FNS then monitors retailers’ continued compliance with program requirements and administratively disqualifies, or assesses money penalties on, those who are found to have trafficked benefits. To this end, FNS officials collect and monitor EBT transaction data to detect irregular patterns of transactions that may indicate trafficking and also conduct undercover investigations. If found to be trafficking, retailers are generally permanently disqualified from SNAP or incur a monetary penalty in lieu of permanent disqualification. According to FNS data, about 14 percent of SNAP recipients, or about 6.1 million, were work registrants who were subject to work requirements, and about 0.5 percent of SNAP recipients, or about 200,000, participated in state SNAP E&T programs, in an average month of fiscal year 2016. (See fig. 1.) According to FNS, most SNAP recipients are exempt from work requirements. For example, according to FNS, almost two-thirds of SNAP recipients were children, elderly, or adults with a disability in an average month of fiscal year 2016—groups that are generally exempt. Further, adults who are already working at least 30 hours a week are also exempt from SNAP work requirements, and according to FNS data, more than 31 percent of non-elderly adult SNAP recipients were employed in an average month of fiscal year 2016. SNAP work registrants who are not participating in SNAP E&T programs may be participating in other activities to meet work requirements or eligible for other exemptions. FNS officials told us that the state data reported to FNS on SNAP E&T participants are the best and most recent data available on this group, yet they also have limitations, which we will continue to explore in our ongoing work. In recent years, the number and percentage of SNAP recipients and work registrants participating in SNAP E&T programs appears to have decreased, according to FNS data. From fiscal year 2008 through fiscal year 2016, the average monthly number of SNAP E&T participants decreased from about 256,000 to about 207,000, or by 19 percent, according to state data on SNAP E&T participants reported to FNS. (See fig. 2.) However, over the same time period, the average monthly number of SNAP recipients appears to have increased from about 27.8 million to about 43.5 million, and work registrants appears to have increased from about 3 million to about 6.1 million, according to FNS data. As a result, the percentage of total SNAP recipients participating in SNAP E&T programs decreased from about 0.9 to about 0.5 percent, and the percentage of SNAP work registrants participating in these programs decreased from approximately 8.1 percent to 3.4 percent, from fiscal year 2008 through fiscal year 2016. Available information suggests the characteristics of SNAP E&T participants are generally similar to those of SNAP work registrants who do not participate in these programs. A recent FNS study, which surveyed SNAP E&T participants and SNAP work registrants who had not participated in SNAP E&T, found that members of the two groups had similar demographic characteristics, including age and gender, and received similar monthly SNAP benefit amounts. Further, at the time they were surveyed, about one third of each group were employed, and their average wage rates were similar, at about $10 per hour. State SNAP agencies have broad flexibility in how they design their SNAP E&T programs, and the characteristics of these programs have changed in several ways over the last decade. For example, states have increasingly moved from mandatory to voluntary programs, focused on serving ABAWDs, and partnered with state and local organizations to deliver services. According to FNS data, states have increasingly moved from mandatory to voluntary SNAP E&T programs in recent years. In fiscal year 2010, 17 states operated voluntary programs; however, by fiscal year 2017, 35 states operated voluntary programs, according to FNS data. (See fig. 3.) FNS officials told us that they have been actively encouraging states to provide more robust employment and training services, such as vocational training or work experience, through voluntary programs. They said that they believe these types of robust services are more effective in moving participants toward self-sufficiency, but that funding may not be sufficient to provide these to the large numbers of participants served in mandatory programs. In addition, FNS officials told us that voluntary programs are less administratively burdensome than mandatory programs, as they allow states to focus on serving motivated participants rather than sanctioning non-compliant individuals. According to FNS officials, when states move to a voluntary program, they generally experience a decline in SNAP E&T participation—a trend consistent with our analysis of FNS data—which may have contributed to the decline in overall SNAP E&T participation. Of the 22 states or territories that changed from a mandatory to a voluntary program from fiscal year 2010 through fiscal year 2016, according to FNS data, 13 experienced a decrease in SNAP E&T participation—ranging from a 21 percent decrease to a 93 percent decrease. Overall, voluntary programs are generally smaller than mandatory programs, according to our analysis of FNS data. In fiscal year 2016, for example, the 32 states or territories operating voluntary programs together served less than half of the total number of SNAP E&T participants served by the 21 states or territories operating mandatory programs, although these two groups of states had similar numbers of new work registrants. Furthermore, states operating voluntary programs served an average of nearly 7,000 SNAP E&T participants per state, while states operating mandatory programs served an average of 23,000 SNAP E&T participants per state. Evidence suggests that states have increased their focus on serving ABAWDs—a sub-population of SNAP recipients subject to benefit time limits and additional work requirements—through SNAP E&T, as related waivers have expired in recent years, according to FNS data. During and after the 2007-2009 recession, the majority of states operated under statewide waivers of the ABAWD time limit due to economic conditions. However, as the economy recovered, most statewide waivers expired, and the ABAWD time limit was reinstated. For example, according to FNS data, in fiscal year 2011, 45 states or territories had a statewide waiver and 7 states had a partial waiver—one applying to certain localities. By fiscal year 2017, the number of states or territories with a statewide waiver had decreased to 9, while 27 states had partial waivers. FNS officials and state SNAP agency officials we spoke with in some states told us that, as the waivers have ended, state SNAP E&T programs have become increasingly focused on serving ABAWDs. Although state data on SNAP E&T programs reported to FNS suggest a greater percentage of ABAWDs have been participating in these programs in recent years, according to FNS officials, these data have limited usefulness in assessing state trends in serving ABAWDs for several reasons. For example, in recent years, FNS officials learned that there was widespread confusion among states regarding the need to track ABAWDs when waivers were in place, and that as a result, some states had not been tracking ABAWDs or properly documenting SNAP recipients’ ABAWD status. This is consistent with what some of the selected states we spoke with reported. As part of our ongoing work, we are continuing to explore the availability and reliability of data on ABAWDs. State SNAP agencies have increasingly partnered with other state and local organizations, such as workforce agencies, community-based social service providers, and community colleges, to provide services to SNAP E&T participants in recent years, according to FNS and states we selected for our review. In fiscal year 2018, nearly all states partnered with at least one other organization to deliver SNAP E&T services, with the majority partnering with more than one, according to an analysis by FNS. In recent years, FNS has urged states to make use of the broad network of American Job Centers. The American Job Centers, also known as one- stop centers, are funded through the Department of Labor’s Employment and Training Administration and designed to provide a range of employment-related services, such as training referrals, career counseling, job listings, and similar employment-related services, to job seekers under one roof. Our prior work has highlighted the value of coordination between federally funded employment and training programs to ensure the efficient and effective use of resources. Despite encouraging such partnerships, FNS officials said that American Job Centers typically provide lighter touch services to SNAP E&T participants, such as job search and job search training, and they therefore may not be well suited for SNAP E&T participants who have multiple barriers to employment. In our 2003 work on SNAP E&T, we found that while workforce system programs offered some of the activities needed by SNAP E&T participants, officials from 12 of the 15 states we contacted said that most participants were not ready for these activities, in part, because they lacked basic skills, such as reading and computer literacy, that would allow them to successfully participate. An alternative service delivery strategy that FNS has promoted is the development of third party partnerships with community-based social service providers, community colleges, and other entities to help states enhance their SNAP E&T programs. According to FNS, in this model, third party organizations use non-federal funding to provide allowable SNAP E&T services and supports, which are then eligible for 50 percent federal reimbursement funds through the state’s SNAP E&T program. According to FNS officials, third party partnerships enable states to leverage additional resources, grow their SNAP E&T programs, and reach more SNAP participants. In addition, FNS officials said that these partnerships allow states to improve their program outcomes by tapping into providers currently serving communities that include SNAP recipients. Federal 50 percent reimbursement funds expended increased from nearly $182 million to more than $223 million, or by 23 percent, from fiscal year 2007 to fiscal year 2016. FNS has taken steps to increase federal support of states’ SNAP E&T programs by increasing the number of federal staff responsible for SNAP E&T and providing additional technical assistance to states. Specifically, FNS officials said that in 2014, they created the Office of Employment and Training to provide support and oversight for the SNAP E&T program and expanded SNAP E&T staff in FNS headquarters from one to five fulltime employees. FNS has also taken steps to increase technical assistance to states. For example, they have developed tools, including the SNAP E&T Operations Handbook, intended to help states implement and grow their program, and by adding a dedicated SNAP E&T official in each of FNS’s seven regional offices. According to FNS, regional officials have targeted technical assistance to states on, for example, developing third-party partnerships, and they have emphasized evidence-based approaches to administering the program, such as providing skills-based training for in-demand occupations. FNS officials rely on various information sources to oversee states’ SNAP E&T programs, including participant outcome data reported by states for the first time in January 2018. For example, FNS officials conduct management evaluation reviews of states, annually review states’ SNAP E&T plans for compliance, and collect data from states on program participation and expenditures. In addition, as of January 2018, FNS has begun receiving new data on SNAP E&T program participants and outcomes from states. These data include employment outcomes, such as the number of SNAP E&T participants in unsubsidized employment after participation in the program, and participant characteristics, such as the number of participants entering the program with a high school degree or equivalent. FNS officials said that although states generally submitted the new data on time, states experienced challenges that likely affected the accuracy of the data. For example, some states needed to manually collect data on participant characteristics due to the limited capacity of their data systems. Further, according to FNS officials, some states did not correctly interpret certain reporting definitions or time periods. To address these challenges, FNS officials have been providing technical assistance to states to help them refine their participant and outcome data reports. Officials told us that they expect the states to submit revised reports by May 2018; we will examine these data and related issues in our ongoing work. FNS and the states partner to address issues that affect program integrity, including improper payments and fraud, and FNS has taken some steps to address challenges in these areas, but concerns remain. For example, regarding SNAP recipient and retailer fraud, FNS has taken some steps to address challenges identified in our 2006 and 2014 reports related to fraud committed by SNAP recipients and authorized retailers, but more remains to be done. We currently have ongoing work to assess the steps FNS and states have taken to address our recommendations related to recipient and retailer fraud and other program vulnerabilities. In 2016, we reviewed SNAP improper payment rates and found that states’ adoption of program flexibilities and changes in federal SNAP policy in the previous decade, as well as improper payment rate calculation methods, likely affected these rates. For example, when states adopted available SNAP policy flexibilities that simplified or lessened participant reporting requirements, these changes reduced the opportunity for error and led to a decline in the improper payment rate, according to a USDA study. In addition, we found that the methodology SNAP used to calculate its improper payment rate was generally similar to the methodologies used for other large federal programs for low- income individuals, including Medicaid, Earned Income Tax Credit, and Supplemental Security Income. However, we also found that some of the procedural and methodological differences in the rate calculation among these programs likely affected the resulting improper payment rates, such as how cases with insufficient information or certain kinds of errors were factored into the improper payment rate. In 2014, USDA identified SNAP improper payment data quality issues in some states and has since been working with the states to improve improper payment estimates. Although USDA reported national SNAP improper payment estimates for benefits paid through fiscal year 2014, USDA did not report a national SNAP improper payment estimate for benefits paid in fiscal years 2015 or 2016. In response to a report from USDA’s Office of Inspector General that identified concerns in the application of SNAP’s quality control process, which is used to identify improper payments, USDA began a review of state quality control systems in all states in 2014. According to USDA, due to the data quality issues uncovered in 42 of 53 states during the reviews, the improper payment rates for those states could not be validated, and the department was unable to calculate a national improper payment rate for benefits paid in fiscal year 2015. To address the data quality concerns, USDA updated guidance, provided training to relevant state and federal staff, and worked with states to update their procedures to ensure consistency with federal guidelines. According to USDA, the department also required individual states to develop corrective action plans to address issues identified and monitored progress to ensure states took identified actions. On June 30, 2017, USDA notified the states that the department would not release a national SNAP improper payment rate for benefits paid in fiscal year 2016 and remained focused on conducting the fiscal year 2017 review. FNS has increased its oversight of state anti-fraud activities in recent years by developing new guidance and providing training and technical assistance to states on detecting fraud by SNAP recipients and reporting on anti-fraud activities to FNS. In 2014, we reported on 11 selected states’ efforts to combat SNAP recipient fraud and made several recommendations to FNS to address the challenges states faced. We found that FNS and states faced challenges in the following areas: Guidance on use of data tools to detect fraud: States faced challenges using FNS-recommended data tools to detect fraud, and FNS is in the process of developing improved guidance to address this concern. Specifically, FNS’s guidance on the use of EBT transaction data to uncover potential patterns of benefit trafficking lacked the specificity states needed to uncover such activity, and we recommended FNS develop additional guidance. Since then, FNS contracted with a private consulting firm to provide 10 states with technical assistance in recipient fraud prevention and detection, which included exploring the use of data analytics to analyze and interpret eligibility and transaction data to identify patterns or trends and create models that incorporate predictive analytics. FNS officials also recently told us that the agency is developing a SNAP Fraud Framework to provide guidance to states on improving fraud prevention and detection. FNS officials anticipated releasing the framework in mid- 2018. Tools for monitoring e-commerce websites: We also found FNS- recommended tools for automatically monitoring potential SNAP trafficking on e-commerce websites to be of limited use and less effective than manual searches, and FNS has developed but not finalized guidance on using such tools. We recommended that FNS reassess the effectiveness of its current guidance and tools for states to monitor e-commerce and social media websites. In August 2017, FNS officials told us that they had developed revised guidance for states on using social media in detection of SNAP trafficking. According to FNS, the guidance will be incorporated into the SNAP Fraud Framework. Staff levels: During the time of our 2014 work, most of our 11 selected states reported difficulties conducting fraud investigations due to reduced or stagnant staff levels while numbers of SNAP recipients had greatly increased, but FNS decided not to make changes to address this issue. Specifically, 8 of the 11 states we reviewed reported inadequate staffing due to attrition, turnover, or lack of funding. Some states suggested changing the financial incentive structure to promote fraud investigations because agencies were not rewarded for cost-effective, anti-fraud efforts that could prevent ineligible people from receiving benefits. Specifically, when fraud by a SNAP recipient is discovered, a state may generally retain 35 percent of any recovered overpayments. However, there are no recovered funds when a state detects potential fraud by an applicant and denies the application. To help address states’ concerns about resources needed to conduct investigations, we recommended in our 2014 report that FNS explore ways that federal financial incentives could be used to better support cost-effective anti-fraud strategies. FNS reported that it took some steps to explore alternative financial incentives, through a review of responses to a Request for Information in the Federal Register. However, FNS decided not to pursue bonus awards for anti-fraud and program integrity activities. Given that FNS has not made changes in this area, state SNAP fraud agencies may continue to report resource concerns in addressing fraud. Reporting guidance: We also found that FNS did not have consistent and reliable data on states’ activities because of unclear reporting guidance, and FNS has since revised its data collection form and provided training on the changes. To improve FNS’s ability to monitor states and obtain information about more efficient and effective ways to combat recipient fraud, we recommended in 2014 that FNS take steps, such as providing guidance and training, to enhance the consistency of what states report on their anti-fraud activities. In response, FNS revised the form used to collect recipient integrity information and changed the reporting frequency from annual to quarterly, effective fiscal year 2017. FNS officials also reported providing training to approximately 400 state agency and FNS regional office personnel on the updates to the form and related instructions. In our ongoing work, we are further reviewing states’ use of data analytics to identify SNAP recipient fraud, including that which may be occurring during out-of-state transactions. Because transactions that may appear suspicious—such as those made out-of-state—may in fact be legitimate, states may use data analytic techniques to include additional factors that may help them better target their efforts to identify potential fraud. However, states may have different levels of capacity for using data analytics to detect fraud. We are examining how 7 selected states are using data analytics and identifying the advantages and challenges states have experienced in doing so. We are also assessing FNS’s efforts to assist states in implementing GAO’s leading practices for data analytics outlined in GAO’s Framework for Managing Fraud Risks in Federal Programs outlined in GAO’s Framework for Managing Fraud Risks in Federal Programs. In addition, we are conducting our own analysis of EBT out-of-state SNAP transaction data. We expect to report on our findings later this year. FNS has taken some steps to prevent, detect, and respond to retailers who traffic SNAP benefits since our last report on the issue in 2006, but trafficking continues to be a problem. For example, in February 2018, a federal jury convicted a grocery store operator in Baltimore on charges of wire fraud in connection with a scheme to traffic more than $1.6 million in SNAP benefits for food sales that never occurred. The grocery store operator paid cash for SNAP benefits, typically paying the recipient half the value of the benefits and keeping the other half for himself. In our 2006 report, we found that SNAP was vulnerable to retailer trafficking in several areas, including: Requirements for food that retailers must stock to participate in SNAP: In 2006, we found that FNS had minimal requirements for the amounts of food that retailers must stock, which could allow retailers more likely to traffic into the program, although the agency has since taken steps to increase these requirements. In our 2006 report, FNS officials said that they authorized stores with limited food stock to provide access to food in low-income areas where large grocery stores were scarce. At that time, retailers were generally required to stock a minimum of 12 food items (at least 3 varieties of 4 staple food categories, such as fruits and vegetables), but FNS rules did not specify how many items of each variety would constitute sufficient stock. FNS officials told us that a retailer that only carries small quantities of food, such as a few cans of one kind of vegetable, may intend to traffic. In 2016, FNS promulgated a final rule increasing food stock requirements. FNS officials told us that these new rules are designed to encourage stores to provide more healthy food options for recipients and discourage trafficking. According to FNS, retailers are now generally required to stock at least 36 food items (a certain variety and quantity of staple foods in each of the 4 staple food categories). Focus on high-risk retailers: We also found in 2006 that FNS had not conducted analyses to identify characteristics of retailers at high risk of trafficking and to target its resources—a shortcoming FNS has since taken some steps to address. For example, we reported that some stores may be at risk of trafficking because one or more previous owners had been found trafficking at the same location. However, FNS did not have a system in place to ensure that these retailers were quickly targeted for heightened attention. In addition, once a store was authorized to participate in the program, FNS staff typically would not inspect the store again until it applied for reauthorization 5 years later. We recommended that FNS identify the stores most likely to traffic and provide earlier, more targeted oversight to those stores. In 2009, FNS began establishing risk levels for each authorized retailer, identifying high-risk stores as those with a prior permanent disqualification at that location or a nearby location. In 2013, FNS required all high-risk retailers to go through reauthorization and to provide additional documentation regarding store ownership. That same year, FNS also consolidated its retailer management functions, including those for authorizing stores and analyzing EBT transaction data, into a single national structure known as the Retailer Operations Division. FNS officials told us that this structure enables the agency to identify and deploy their investigative resources to the areas of highest risk nationally, rather than within a given region. Penalties to deter retailer trafficking: We also found in our 2006 report that FNS’s penalties for retailer trafficking may be insufficient to deter traffickers, and since then, FNS has proposed—but not finalized—rules to increase them. FNS imposes administrative penalties for retailer trafficking—generally a permanent disqualification from the program or a monetary penalty. FNS relies on the USDA Office of Inspector General (OIG) and other law enforcement entities to conduct investigations that can lead to criminal prosecutions. In our 2006 report, we recommended that FNS develop a strategy to increase penalties for trafficking. The Food, Conservation, and Energy Act of 2008 (known as the 2008 Farm Bill) gave USDA authority to impose higher monetary penalties, and the authority to impose both a monetary penalty and program disqualification on retailers found to have violated relevant law or regulations (which includes those found to have trafficked). In 2012, FNS proposed regulatory changes to implement these authorities. However, FNS has not finalized these rules, and as of fall 2017, the rules were considered “inactive.” In our ongoing work, we are continuing to assess FNS’s efforts to prevent, detect, and respond to retailer trafficking, as well as examining what is known about the extent of retailer trafficking nationwide. As part of this work, we are continuing to review FNS’s response to our prior recommendations, as well as related recommendations made by USDA’s OIG. We are also studying FNS’s periodic estimates of the rate of retailer trafficking, expressed as the dollar value and percentage of all SNAP benefits that were trafficked and the percentage of retailers involved. These data suggest an increase in the estimated rate of retailer trafficking since our 2006 report. However, we and others, including a group of experts convened by FNS, have identified some limitations with the retailer trafficking estimates. For example, the trafficking rate is calculated based on a sample of retailers that FNS considers most likely to traffic. Although FNS adjusts the data to better represent the broader population of authorized retailers, it is uncertain whether the resulting estimates accurately reflect the extent of trafficking nationwide. We are reviewing these limitations and FNS’s efforts to address them in our ongoing work. Chairman Jordan, Chairman Palmer, Ranking Member Krishnamoorthi, Ranking Member Raskin, and Members of the Subcommittees, this completes my prepared statement. I would be pleased to respond to any questions that you may have at this time. If you or your staff have any questions about this testimony, please contact Kathryn Larin, Director, Education, Workforce, and Income Security Issues at (202) 512-7215 or LarinK@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony include Rachael Chamberlin, Celina Davidson, Swati Deo, Rachel Frisk, Alexander Galuten, Danielle Giese, Kristen Jones, Morgan Jones, Lara Laufer, Monica Savoy, and Kelly Snow. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. 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 Report 2:
The combination of growing supplies of liquefied natural gas (LNG) and new requirements for less polluting fuels in the international maritime shipping industry has heightened interest in LNG as a maritime fuel. For decades, LNG tanker ships have been capable of burning boil-off gas from their LNG cargoes as a secondary fuel. However, using LNG as a primary fuel is a relatively new endeavor; the first LNG-powered vessel—a Norwegian ferry—began service in 2000. Several aspects of LNG use in shipping may be of congressional interest. LNG as an engine, or "bunker," fuel potentially could help the United States reduce harmful air emissions, it could create a new market for domestic natural gas, and it could create economic opportunities in domestic shipbuilding. However, U.S. ports would need specialized vessels and land-based infrastructure for LNG "bunkering" (vessel refueling) as well as appropriate regulatory oversight of the associated shipping and fueling operations. The storage, delivery, and use of LNG in shipping also has safety implications. These and other aspects of LNG bunkering may become legislative or oversight issues for Congress. One bill in the 115 th Congress, the Waterway LNG Parity Act of 2017 ( S. 505 ), would have imposed excise taxes on LNG used by marine vessels on inland waterways. This report discusses impending International Maritime Organization (IMO) standards limiting the maximum sulfur content in shipping fuels, the market conditions in which LNG may compete to become a common bunker fuel for vessel operators, and the current status of LNG bunkering globally and in the United States. A broader discussion of oil market implications is outside the scope of this report. The IMO is the United Nations organization that negotiates standards for international shipping. Its standards limiting sulfur emissions from ships, adopted in 2008, have led vessel operators to consider alternatives to petroleum-based fuels to power their ships. In 1973, the IMO adopted the International Convention for the Prevention of Pollution from Ships (MARPOL). Annex VI of the convention, which came into force in 2005, deals with air pollution from ships. The annex established limits on nitrogen oxide (NO x ) emissions and set a 4.5% limit on the allowable sulfur content in vessel fuels. In 2008, the IMO announced a timeline to reduce the maximum sulfur content in vessel fuels from 4.5% to 0.5% by January 1, 2020. Annex VI requires vessel operators to either use fuels containing less than 0.5% sulfur or install exhaust gas-cleaning systems ("scrubbers") to limit a vessel's sulfur oxide (SO x ) emissions to a level equivalent to the required sulfur limit. MARPOL is implemented in the United States through the Act to Prevent Pollution from Ships (). The United States effectively ratified MARPOL Annex VI in 2008 when President Bush signed the Maritime Pollution Prevention Act ( P.L. 110-280 ). The act requires that the U.S. Coast Guard and the Environmental Protection Agency (EPA) jointly enforce the Annex VI emissions standards. MARPOL's Annex VI requirements are codified at 40 C.F.R. §1043. They apply to U.S.-flagged ships wherever located and to foreign-flagged ships operating in U.S. waters. In addition to its global sulfur standards, MARPOL Annex VI provides for the establishment of Emissions Control Areas (ECAs), which are waters close to coastlines where more stringent emissions controls may be imposed. The North American ECA limits the sulfur content of bunker fuel to 0.1% of total fuel weight, an even lower bar than that set by the IMO 2020 standards. This standard is enforced by Coast Guard and EPA in waters up to 200 miles from shore. Currently, most ships operating in the North American ECA meet the emissions requirements by switching to low-sulfur fuels once they enter ECA waters. The European Union also has an ECA with a 0.1% limit on sulfur in bunker fuels, and the Chinese government is considering putting the same standard in place. The IMO 2020 emissions requirement applies to vessels of 400 gross tons and over, which is estimated to cover about 110,000 vessels worldwide. However, analysts indicate that many of the smaller vessels in this group already burn low-sulfur fuel. Accounting for these smaller vessels, one estimate is that about 55,000 vessels currently burn high-sulfur fuel. Ship owners have two main options for meeting the emission requirements with existing engines: burn low-sulfur conventional fuel (or biofuels) or install scrubbers to clean their exhaust gases. Alternatively, ship owners may opt to install new LNG-fueled engines to comply with the IMO standard. The simplest option for vessel owners to comply with the IMO sulfur standards, and the one that appears most popular, is switching to low-sulfur fuel oils or distillate fuels. Although switching to low-sulfur fuels would increase fuel costs compared to conventional, high-sulfur fuels, it would require little or no upfront capital cost and would allow ocean carriers to use existing infrastructure to bunker ships at ports. Anticipating widespread adoption of this approach, many analysts predict that the implementation of the IMO 2020 regulations will drive up demand for low-sulfur fuel and, therefore, significantly increase its price above current levels. Such a trend could also reduce demand for high-sulfur fuels, increasing the price spread between low- and high-sulfur bunkers fuels. Switching to lower-sulfur fuel could increase fuel cost across the industry by up to $60 billion in 2020 for full compliance with the IMO standards. Moreover, while it may allow vessels to meet the existing IMO sulfur standards, low-sulfur fuel does not necessarily support compliance with potential future IMO emissions standards, especially with respect to greenhouse gases (GHGs) such as carbon dioxide (CO 2 ) discussed later in this report. Scrubbers are systems which remove sulfur from a vessel's engine exhaust emissions. A ship with a scrubber would be capable of meeting the IMO 2020 standard while using conventional high-sulfur fuel. Retrofitting a scrubber on an existing engine can cost several million dollars, however, before factoring in the lost revenue from taking the ship out of service for a month for the installation. Therefore, while using a scrubber will allow a ship to continue using (currently) cheaper high-sulfur fuel, it may take years to recover the initial investment. For example, one industry study estimates that, in the case of a typical tanker, a scrubber installation could cost $4.2 million with a payback time of approximately 4.8 years. Furthermore, scrubbers installed to capture sulfur emissions might have to be further refitted or replaced to comply with any future IMO standards for GHG emissions. The rate of scrubber adoption could affect the financial impacts of installing them in terms of fuel costs. Scrubbers ultimately offset some or all of their initial costs because they allow vessel operators to continue using relatively inexpensive high-sulfur fuel. However, the return on investment for scrubbers depends on the relative prices of high- and low-sulfur bunker fuels. The demand—and therefore, prices—for low-sulfur and high-sulfur fuels will be affected by how many vessels use the respective fuels under the IMO standards that take effect in 2020. For example, limited scrubber adoption could result in more vessels demanding more low-sulfur fuel oil, creating upward pressure on low-sulfur fuel prices. Under such a scenario, scrubbers would provide greater fuel cost savings for vessels that installed them. Alternatively, high-sulfur fuel could become more costly due to refinery production cutbacks (because shippers will not be allowed to burn it without scrubbers). In this case, the economic benefits of scrubbers would be diminished. Given the uncertain fuel supply and demand dynamics, it is difficult for vessel operators to know how big the market distortions from scrubber installation could be or how many other operators may choose to install scrubbers. As of September 2018, there were approximately 660 ships retrofitted with scrubbers and over 600 ships under construction with plans to install scrubbers. By 2020, projecting additional construction orders, some analysts predict about 2,000 vessels could have scrubbers installed. However, even with higher demand for the technology, the ability of vessel owners to install scrubbers is constrained; analysts estimate that current maximum capacity for installing scrubbers is be between 300 to 500 ships per year. Another option for ship owners to comply with the IMO 2020 sulfur standards is to switch to engines that burn LNG as a bunker fuel. LNG-fueled vessels emit only trace amounts of sulfur oxides in their exhaust gases—well below even the 0.1% fuel-equivalent threshold in some of the ECA zones—so they would be fully compliant with the IMO standards. As a secondary benefit, using LNG as an engine fuel also would reduce particulate matter (PM) emissions relative to both high- and low-sulfur marine fuel oils. Furthermore, LNG vessels have the potential to emit less CO 2 than vessels running on conventional, petroleum-based fuels. However, LNG vessels would have the potential to result in more fugitive emissions of methane, another GHG, because methane is the primary component of natural gas, further discussed below. Installing an LNG-fueled engine can add around $5 million to the cost of a new ship. Retrofitting existing ships appears to be less desirable because of the extra space required for the larger fuel tanks (new ships can be designed with the larger fuel tanks). The costs of retraining crews to work with LNG engines could also factor into a vessel operator's decision about switching to LNG. However, apart from their lower emissions, LNG-fueled engines may offset their capital costs with fuel cost advantages over engines burning petroleum-derived fuels. These savings would depend on the price spread between natural gas and fuel oil—which has been volatile in recent years. The likelihood that switching to LNG will produce long-term fuel costs savings relative to conventional fuels is, therefore, a critical consideration for many vessel owners. The 1920 Merchant Marine Act (known colloquially as the Jones Act) requires that vessels engaged in U.S. domestic transport be built domestically. Many newly built domestic ships receive a federal loan guarantee under the Maritime Administration's so-called "Title XI" program. In 2014, the program was modified to include the use of "alternative energy technologies" to power ships as part of the relevant criteria in evaluating a loan application. The Maritime Administration counts LNG-fueled engines as an "alternative energy technology" and may be more likely to approve loan applications for ships with LNG-capable engines. Since the North American ECA was established in 2015, Jones Act coastal ship operators have taken steps to transition their fleets to use cleaner burning fuels, including LNG. The three Jones Act operators that ship dry goods to Alaska, Hawaii, and Puerto Rico have taken delivery or have ordered LNG-fueled and LNG-capable vessels from U.S. shipyards in Philadelphia, PA, and Brownsville, TX. Harvey Gulf International has put into service five LNG-powered offshore supply vessels that service offshore oil rigs. Some Jones Act tanker operators that have recently built or ordered vessels have chosen to install LNG-ready engines while other operators have chosen to install scrubbers on their existing fleet. Ship engines and scrubbers for the Jones Act fleet do not have to be manufactured in the United States because they are not considered an integral part of the hull or superstructure of a ship. Seagoing barges, known as articulated tug barges, are also a significant portion of the domestic coastal fleet, especially for moving liquid cargoes. However, these vessels traditionally have burned lower-sulfur fuels and thus the ECA has not prompted fleet conversions. IMO fuel requirements do not apply to river barges operating on the nation's inland waterway system, although this fleet potentially could be a market for LNG as fuel. Bunkering vessels (small tankers with hoses for refueling ships) in U.S. waters must also be Jones Act compliant. Barges are the predominant method for bunkering ships in U.S. ports. An LNG bunkering vessel for the Port of Jacksonville—the first Jones Act-compliant LNG bunkering vessel to enter service in the United States—was built in 2017 by Conrad Shipyards in Orange, TX. Recent energy sector trends suggest that LNG may be cheaper in the long-run than petroleum-based, low-sulfur fuels. However, these price movements are correlated to some extent. Many existing long-term LNG contracts link LNG prices to oil prices (although such contract terms are on the decline), even in the spot market. Starting in 2008, the advent of shale natural gas production dramatically decreased natural gas prices in the United States. Natural gas spot prices in the United States at the Henry Hub—the largest U.S. trading hub for natural gas—averaged around $3/MMBtu (million British Thermal Units) in 2018, about a quarter of the peak in average price a decade before, just prior to the shale gas boom ( Figure 1 ). Liquefying natural gas into LNG adds around $2/MMBtu to the production cost. Including additional producer charges and service costs would bring the total cost of LNG available at a U.S. port (based on the 2018 average price in Figure 1 ) to approximately $6/MMBtu. Shipping of LNG from the United States to Asia or Europe adds from $1 to $2/MMBtu, so, based on the 2018 average cost in Figure 1 , LNG delivered to a port overseas would cost on the order of $7 to $8/MMbtu under long-term contracts, depending upon timing and location. Higher or lower prices could occur for specific long-term contracts and in the LNG spot market (i.e., for individual cargoes), based on the location and the supply and demand balance at the time. In general, the U.S. market will have the lowest-priced LNG. Northern Asia will have the highest LNG prices due to the region's comparative lack of pipeline gas supplies and its distance from LNG suppliers. Figure 2 compares LNG spot market prices in the Japan LNG market—the highest-priced LNG market—to spot prices for two common petroleum-based bunker fuels, low-sulfur gas oil and high-sulfur fuel oil. As the figure shows, over the last five years, Japan LNG generally has been cheaper than low-sulfur fuel and more expensive than high-sulfur fuel on an energy-equivalent basis (i.e., per MMbtu). However, Japan LNG and high-sulfur fuel prices converged in 2018. As the figure shows, spot prices for LNG deliveries to the Japan market fell below $6/MMBtu in 2016 from a high above $16/MMBtu in 2013. Likewise, low-sulfur gas oil prices have doubled, and high-sulfur fuel oil prices have tripled, since 2016. The volatility of the bunker fuel markets and the global LNG market lead to considerable unpredictability about the relative prices among fuels going forward. LNG may become increasingly price-competitive versus low-sulfur fuel as the 2020 IMO sulfur standards take effect. As discussed above, many analysts predict prices for low-sulfur gas oil, which are already higher than those for high-sulfur fuel oil, to increase significantly after 2020 due to a standards-driven rise in demand. Although fuel prices as shown in Figure 2 indicate favorable economics for LNG versus low-sulfur fuel, if prices for high-sulfur fuel oils collapse as some expect after the 2020 IMO regulations enter into force, it is possible that LNG could lose its price advantage over residual fuel oils. Likewise, the price spread between low-sulfur gasoil and high-sulfur fuel oil would increase, incentivizing more carriers to install scrubbers to capitalize on the savings in fuel costs by continuing to burn high-sulfur fuel. An additional complication is the variability of LNG prices by region. Many shipping lines are global operators seeking low-priced fuel worldwide, but unlike the global oil market, natural gas markets are regional. Because the price of LNG can vary significantly by region, the relative economics of LNG versus other bunker fuels would also vary by region. Another uncertainty in the market for LNG bunkering is the discrepancy between the spot price for traded LNG and the price for LNG sold as bunker fuel in ports. Added costs associated with marketing, storing and transporting LNG in bunkering operations (discussed below) would likely require ports to charge a rate for LNG bunker fuel above spot market prices. These additional overhead costs are likely to vary among ports. Before factoring in any effect of IMO standards on fuel prices, and assuming a favorable LNG-fuel oil price spread, it still could take years for the savings generated by using LNG to pay back the capital costs of switching fuels. Through May 2018, there were 122 LNG-powered vessels in operation and another 135 ordered or under construction. Many of the first LNG vessels delivered and ordered were Norwegian-flagged vessels, as the Norwegian government has subsidized LNG-fueled vessels with a "NO x Fund." The fund provides LNG-operated ships with an exemption from the country's tax on NO x emissions. As an alternative to committing to LNG as a fuel, some vessel owners may hedge their bets by opting to install "LNG-ready" engines, which can burn low-sulfur fuel oil currently, but are designed to make future LNG conversion easier. The number of LNG ships that may be in operation by 2030 is difficult to predict. First, as noted above, growth in LNG powered vessels is likely to be driven primarily by new builds rather than retrofits. However, the shipping industry has experienced nearly a decade of vessel overcapacity and slow growth. Weak growth in the shipping industry could result in slower growth in vessel orders overall and, therefore, fewer orders for LNG-powered vessels. Of new vessels ordered, or set to be delivered, in 2018 or after, 13.5% (by tonnage) are LNG-fueled—up from 1.4% in 2010. If this trend continues, demand for LNG from the shipping industry could still be relatively high, even if overall growth in the shipping industry remains slow. Because LNG bunkering infrastructure among global ports is currently limited, vessels that use large amounts of fuel and travel predictable routes—along which LNG is available—are the most suitable for LNG fuel. For this reason, cruise ships, vehicle ferries, and container ships initially may be the most likely vessel types to adopt LNG as bunker fuel. Order books have reflected this assessment: one quarter of all cruise ships on order by tonnage at the end of 2017 were LNG-powered. Likewise, a major container ship line, CMA CGM, recently announced that it was ordering nine extra-large container ships powered by LNG. The carrier stated that the fuel tanks will displace space for "just a few containers" and said it intends to refuel these ships just once on their round trip voyages between Asia and Europe. Conversely, LNG fuel adoption may be less likely for oil tankers. Half the global oil tanker fleet operates on the shipping spot market (also known as the "tramp" market), meaning that ship owners enter into contracts with cargo owners only for a single voyage. In this kind of trade, many oil tankers lack a consistent route. Having to limit spot contracts only to ports that may bunker LNG could reduce the arbitrage opportunities of tankers. Dry bulk cargo vessels (carrying grain, coal, and other commodities) also typically operate in the tramp market. LNG-powered vessels have lower direct exhaust emissions than comparable vessels using petroleum-derived fuels. However, the lifecycle—or "well-to-wake"—GHG emissions (especially of methane) and of volatile organic compound emissions from natural gas production, transportation, and liquefaction complicates the comparison. One study in 2015 concluded, "performing a ['well-to-wake'] GHG study on LNG used as a marine fuel is more complex than previously thought. Further studies are needed ... to investigate this subject." A 2016 study found that the relative GHG emissions benefits of LNG versus conventional fuel oil on a "well-to-wake" basis was highly dependent upon fugitive methane emissions in the LNG supply chain. A 2017 study funded by NGVA Europe, an association which promotes the use of natural gas in vehicles and ships, concluded that LNG as a bunker fuel provides a 21% well-to-wake reduction in GHG emissions compared to convention fuel oil. Evaluating such studies is beyond the scope of this report, although they indicate uncertainty about environmental benefits of LNG fuel, which may require further examination. Despite concerns over lifecycle emissions from the natural gas supply chain, in the short term, ships that pair LNG engines with newer vessel designs could reduce onboard GHG emissions. However, whether these GHG emission reductions would be sufficient to meet the future standards could become another issue for ship owners. The IMO has set a provisional goal of reducing GHG emissions from ships by 50% by 2050. Depending upon the state of engine technology, LNG-fueled ships might become less viable if GHG limits were to be established well before 2050. Concerns about such GHG limits might lead to a decrease in orders of LNG-powered ships over time. Commercial vessels have a typical lifespan of over 20 years, so firms ordering new ships have to take into account compliance with potential standards issued decades in the future. If renewable fuels, such as biodiesel, become more available and cheaper in the coming decades, renewable fuel-powered ships may take over part of the market that LNG-powered ships could occupy. A key requirement for ocean carriers to adopt LNG as an engine fuel is the availability of LNG bunkering facilities. Because LNG is extremely cold (-260 °F) and volatile, LNG bunkering requires specialized infrastructure for supply, storage, and fuel delivery to vessels. Depending upon the specific circumstances, LNG bunkering could require transporting LNG to a port from an offsite liquefaction facility for temporary storage at the port, or building an LNG liquefaction terminal on site. Alternatively, LNG could be delivered from offsite facilities directly to vessels in port via truck or supply vessel ( Figure 3 ). Truck-to-vessel LNG bunkering, in particular, provides some fueling capabilities without large upfront capital investments. LNG tanker trucks could also bring LNG to a storage tank built on site at the port, which could then bunker the LNG to arriving ships via pipeline. Supplying LNG using tanker trucks in this way may face capacity limitations due to truck size, road limitations, or other logistical constraints, but it has been demonstrated as a viable approach to LNG bunkering at smaller scales. The predominant method of bunkering today with high-sulfur fuel is vessel to vessel, either by a tank barge or smaller tanker. The type of infrastructure needed to temporarily store (if needed) and deliver LNG within a given port would depend on the size and location of the port, as well as the types of vessels expected to bunker LNG. Truck to ship bunkering is best suited for supporting smaller and mid-sized vessels, such as ferries or offshore supply vessels (OSVs) that support offshore oil platforms. Liquefaction facilities built on site can provide the greatest capacity of any LNG bunkering option, for example, to provide fuel for large vessels in transoceanic trade. However, constructing small-scale liquefaction facilities to produce and deliver LNG on site requires considerable planning and significant capital investment, in one case on the order of $70 million for a mid-sized port. Each LNG bunkering option in Figure 3 may be a viable means to begin LNG bunkering service in a given port. However, ports may face practical constraints as bunkering increases in scale. For example, a container port of significant size typically has multiple terminals, so even with an on-site liquefaction facility, it may need additional infrastructure or supply vessels for moving LNG to other port locations where a cargo ship might be berthed. There may also be port capacity and timing constraints upon the movement of LNG bunkering barges trying to refuel multiple large vessels in various locations around a crowded port. To date, the LNG bunkering operations already in place or in development are comparatively small, but scale constraints could become a factor as LNG bunkering grows and might require additional bunkering-related port investments. Early adoption of LNG bunkering occurred in Europe, where the first sulfur ECAs were created in 2006 and 2007. Through Directive 2014/94/EU, the European Union requires that a core network of marine ports be able to provide LNG bunkering by December 2025 and that a core network of inland ports provide LNG bunkering by 2030. This mandate has been promoted, in part, with European Commission funds to support LNG bunkering infrastructure development. In addition, the European Maritime Safety Agency published regulatory guidance for LNG bunkering in 2018. Over 40 European coastal ports have LNG bunkering capability currently in operation—primarily at locations on the North Sea and the Baltic Sea, and in Spain, France, and Turkey. These locations include major port cities such as Rotterdam, Barcelona, Marseilles, and London. Another 50 LNG bunkering facilities at European ports are in development. LNG bunkering is also advancing in Asia, led by Singapore, the world's largest bunkering port. Singapore has agreed to provide $4.5 million to subsidize the construction of two LNG bunkering vessels. The Port of Singapore plans to source imported LNG at the adjacent Jurong Island LNG terminal, loading it into the bunkering vessels for ship-to-ship fueling of vessels in port. Singapore also has signed a memorandum of understanding with 10 other partners—including a Japanese Ministry and the Chinese Port of Ningbo-Zhoushan—to create a focus group aimed at promoting the adoption of LNG bunkering at ports around the world. In Japan, one consortium is implementing plans to begin vessel-to-vessel LNG bunkering at the Port of Keihin in Tokyo Bay by 2020. Japan's NYK line, a large ship owner, recently announced that it had reached an agreement with three Japanese utilities to add LNG bunkering to ports in Western Japan. Asian countries, together with Australia and the United Arab Emirates, currently have around 10 coastal ports offering LNG bunkering, with another 15 projects in development. Some LNG bunkering operations in Europe and Asia are associated with existing LNG marine terminals, which already have LNG storage and port infrastructure in place. However, many smaller operations—including most of the projects in development—employ trucking, dedicated bunkering vessels, on-site liquefaction, and other means to extend LNG availability beyond the ports with major LNG terminals. LNG bunkering is not so advanced in South America, although with nine operating LNG marine terminals (one for export), and another six in development, South America also could support significant LNG bunkering operations in the near future. LNG bunkering in the United States currently takes place in two locations—Jacksonville, FL, and Port Fourchon, LA—with a third bunkering facility under development in Tacoma, WA. The LNG facilities in these ports serve the relatively small U.S.-flag domestic market. Bunkering of LNG-fueled cruise ships also is planned for Port Canaveral, FL. However, ports in North America have significant potential to expand the nation's LNG bunkering capability. Jacksonville is the largest LNG bunkering operation at a U.S. port. One bunkering facility at the port, developed by JAX LNG, initially began truck-to-ship refueling operations in 2016 for two LNG-capable container ships. (The LNG is sourced from a liquefaction plant in Macon, GA. ) In August 2018, upon delivery of the Clean Jacksonville bunker barge, the facility began to replace truck-to-ship bunkering with ship-to-ship bunkering. In the future, the barge plans to source LNG from a new, small-scale liquefaction plant which JAX LNG is currently constructing at the port. A second facility at Jacksonville's port, operated by Eagle LNG, provides LNG bunkering sourced from a liquefaction plant in West Jacksonville. Eagle LNG also is constructing an on-site liquefaction and vessel bunkering facility in another part of the port, expected to begin service in 2019. Taken together, the JAX LNG and Eagle LNG facilities is expected to establish Jacksonville as a significant LNG-bunkering location with the capability to serve not only the domestic fleet but larger international vessels as well. In 2015, Harvey Gulf International Marine (Harvey) began LNG bunkering operations in the Gulf of Mexico to fuel its small fleet of LNG-powered offshore supply vessels serving offshore oil rigs. Harvey has since constructed a $25 million facility at its existing terminal in Port Fourchon to store and bunker LNG sourced from liquefaction plants in Alabama and Texas. The facility can provide truck-to-ship bunkering services for LNG-fueled offshore supply vessels, tank barges, and other vessels. A Harvey subsidiary has ordered two LNG bunkering barges to enable ship-to-ship fueling in the future. Puget Sound Energy has proposed an LNG liquefaction and bunkering facility at the Port of Tacoma, WA. Vessels traveling between Washington and Alaska typically spend the entire journey within the 200-mile North America ECA. Consequently, vessel owners operating along these routes have been interested in LNG as bunker fuel. TOTE Maritime, for example, a ship owner involved in trade between Alaska and the lower 48 states, has begun the process of retrofitting the engines of two of its container ships to be LNG-compatible. The proposed Tacoma LNG facility would be capable of producing up to 500,000 gallons of LNG per day and would include an 8 million gallon storage tank. The facility would serve the dual purposes of providing fuel for LNG-powered vessels and providing peak-period natural gas supplies for the local gas utility system. Its total construction cost reportedly is expected to be $310 million. Community and environmental concerns have slowed the progress of the proposal, which is still under regulatory review. Puget Sound Energy originally planned to put the LNG facility into service in late 2019; however, permitting issues appear likely to delay its opening until 2020 or later—if it is eventually approved. Q-LNG Transport, a company 30% owned by Harvey, has placed orders for two LNG bunkering barges to provide ship-to-ship LNG fueling as well as "ship-to-shore transfers to small scale marine distribution infrastructure in the U.S. Gulf of Mexico and abroad." Q-LNG's first barge initially is expected to provide fuel to new LNG-fueled cruise ships based in Port Canaveral (and, potentially, Miami), while service from its second barge is still uncommitted. Initial plans are for the LNG to be sourced from the Elba Island LNG import/export terminal near Savannah, GA—approximately 230 nautical miles away—although the company may seek to develop an on-site LNG storage facility in the future. As noted above, U.S. LNG bunkering activities thus far have been limited to a handful of vessels in domestic trade and tourism. LNG bunkering for the much larger fleet of foreign-flag ships carrying U.S. imports and exports is still to be developed. As in Europe and Asia, domestic ports located near major LNG import or export terminals may serve as anchors for expanded LNG bunkering operations. Figure 4 shows existing LNG import and export terminals in North America. LNG can be liquefied from pipeline natural gas (or imported natural gas) and stored in large quantities at these facilities. The LNG can then be bunkered on site or transported to bunkering facilities elsewhere in the region by truck, rail, or barge. As discussed above, the distance between Port Canaveral and Elba Island in Q-LNG's bunker sourcing plan is 230 nautical miles. Taking this distance as a measure of how far away LNG can be sourced and barged economically, it is possible to extrapolate which U.S. ports are within reach of a potential supply of LNG for vessel bunkering. Table 1 lists the top 20 U.S. container shipment ports in the United States and their proximity to existing LNG import/export terminals. Of these top 20 ports, 12 are less than 230 nautical miles from an operating LNG terminal. Distances between LNG terminals and the other East Coast ports are not much greater, suggesting that LNG for vessel bunkering could be within reach of every U.S. port along the Eastern Seaboard and in the Gulf of Mexico. On the West Coast, the ports of Los Angeles and Long Beach—the two largest U.S. ports—are relatively close to the Costa Azul LNG import terminal in Ensenada, MX. Seattle and Tacoma are far from Ensenada, but would be served by the proposed Tacoma LNG bunkering project, if constructed. LNG bunkering for Seattle and Tacoma alternatively could be sourced from an existing LNG port facility around 100 nautical miles north in Vancouver, BC, which is expanding to provide LNG bunkering services to international carriers. Alaska's existing LNG export terminal currently is inactive, but potentially could supply LNG bunker fuel in the Pacific Northwest as well. Although existing LNG import or export terminals in North America could supply LNG for regional bunkering operations, such activities would require additional investment for infrastructure such as LNG transfer facilities and bunker barges. CRS is not aware of any public announcements among the LNG terminals above to develop bunkering operations. However, at least one LNG terminal owner, Cheniere Energy, which operates LNG terminals in Louisiana and Texas, identifies vessel bunkering as one source of future LNG demand growth worldwide. The IMO adopted safety standards for ships using natural gas as a bunker fuel in 2015. The standards, which took effect in 2017, apply to all new ships and conversions of ships (except LNG tankers, which have their own standards). The IMO standards address engine design, LNG storage tanks, distribution systems, and electrical systems. They also establish new training requirements for crews handling LNG and other low flashpoint fuels. As is the case for the sulfur standards, the IMO LNG safety standards apply to all IMO member nations, including the United States. In addition, a number of U.S. federal agencies, especially the Coast Guard and the Federal Energy Regulatory Commission, have jurisdiction over specific aspects of domestic LNG storage infrastructure and bunkering operations. The Coast Guard has the most prominent role in LNG bunkering, given its general authority over port operations and waterborne shipping. In 2015, the Coast Guard issued two guidelines for the handling of LNG fuel and for waterfront facilities conducting bunkering operations. In 2017, the Coast Guard issued additional guidelines to Captains of the Port, the local Coast Guard officials responsible for port areas, for conducting safe LNG bunkering simultaneously with other port operations. The guidelines advise on quantitative risk assessment of facilities bunkering LNG, which allows Captains of the Port to assess the risks posed to crews and facilities. The Federal Energy Regulatory Commission (FERC) plays a role in LNG bunkering due to its jurisdiction over the siting of LNG import and export terminals under the Natural Gas Act of 1938. Specifically, FERC asserts approval authority over the place of entry and exit, siting, construction, and operation of new LNG terminals as well as modifications or extensions of existing LNG terminals. Notwithstanding this siting authority, FERC reportedly does not intend to assert jurisdiction over the permitting of LNG bunkering facilities, but it may require amendment of permits it has issued for LNG import or export terminals to account for bunkering operations added afterwards. In addition to the Coast Guard and FERC, other federal agencies may have jurisdiction over specific aspects of LNG bunkering operations in U.S. ports under a range of statutory authorities. For example, the Pipeline and Hazardous Materials Safety Administration within the Department of Transportation regulates the safety of natural gas pipelines and certain associated LNG storage facilities (e.g., peak-shaving plants). LNG facilities also may need to comply with the Occupational Safety and Health Administration's regulations for Process Safety Management of Highly Hazardous Chemicals. Other federal agencies, including the Environmental Protection Agency, the U.S. Army Corps of Engineers, and the Transportation Security Administration, may regulate other aspects of LNG bunkering projects. CRS is not aware of new regulations to date among these agencies specifically addressing LNG bunkering. World production of LNG has been rising rapidly over the last few years, driven by growth in the natural gas sector in new regions—especially Australia and the United States. According to one industry analysis ( Figure 5 ), global LNG supply is expected to increase from 300 to 400 million metric tons per annum (MMtpa) from 2017 to 2021 based on new LNG liquefaction projects already operating or under development. An additional 150 MMtpa appears likely to come online after that. Collectively, LNG supply from these new liquefaction projects could exceed projections of demand, which would put downward pressure on LNG prices. While increases in the global supply of LNG do not necessarily translate directly into an increase in LNG available for bunkering, such increases could provide options for LNG bunkering in more ports. Estimating potential demand for LNG in the maritime sector is complicated and uncertain. One study of future LNG demand for bunkering, specifically, projects that LNG-powered vessels in operation and under construction as of June 2018 will require between 1.2 and 3.0 MMt of LNG per year. The study's review of several LNG consumption forecasts in the maritime sector shows a consensus projection between 20 to 30 MMt per year by 2030. This level of demand growth implies an increase in LNG-powered vessel construction from the current rate of around 120 ships per year to between 400 and 600 new builds per year. If these levels were reached, they could create a significant new market for LNG suppliers. Assuming a Henry Hub spot market price of $4/MMBtu in 2030, the annual market for LNG in shipping could be worth $2.9 billion to $5.8 billion, before accounting for liquefaction and transportation charges. Some studies have projected the LNG bunkering market to be even larger and to grow more quickly. However, key variables—such as the prices of Henry Hub natural gas and crude oil, the number of new vessel orders, and the future costs of emissions technology—are notoriously hard to predict with accuracy. Thus, it is not assured that natural gas consumption in the maritime sector will absorb more than a small amount of the global liquefaction capacity in development. The IMO sulfur standards apply to ship owners globally, as does the development of new LNG supply and bunkering infrastructure. In addition to these factors, domestic LNG bunkering also may be influenced by considerations more specific to the United States. These considerations include growth of the U.S. natural gas supply, domestic shipbuilding opportunities, and LNG safety and security. Because of its leading role in global natural gas production, the United States has a particular interest in any new source of natural gas demand. According to the Energy Information Administration, the United States has been the world's top producer of natural gas since 2009, when it surpassed Russia. In 2017, increases in production outstripped increases in domestic gas consumption, leading to the United States becoming a net exporter of natural gas for the first time in nearly 60 years. As discussed above, North America (primarily the United States) is expected to add the most new LNG production capacity through 2030 when including projects that are operating, under construction, and likely (according to investment analysts). Past increases in U.S. LNG exports were driven by greater throughput at the Sabine Pass LNG export terminal—the only operating U.S. LNG export terminal in 2017. In March 2018, the Cove Point terminal in Maryland became the second operating U.S. LNG export terminal. Four additional projects under construction or commissioning are set to nearly triple U.S. liquefaction by the end of 2019. This increase in liquefaction capacity likely will motivate LNG producers to secure new buyers. Figure 6 shows estimated LNG prices for various locations around the world as of October 2018. As the figure shows, LNG prices are substantially lower in North America than in Asia, Europe, and South America. Even after adding $1.00 to $2.00/MMBtu to transport the LNG to overseas ports, LNG produced in the United States is globally competitive at these prices. If LNG from the new liquefaction capacity coming online can be produced and delivered with similar economics, the cost advantage may create an opportunity for U.S. LNG in bunker supply. There are over 400 petroleum fuel bunkering ports in the world, but 60% of bunkering in recent years has happened in six countries: Singapore, the United States, China, the United Arab Emirates, South Korea, and the Netherlands. Of these countries, only the United States is a significant LNG producer. Therefore, the United States could be a favorable source of LNG for domestic bunkering and for bunkering at the other major ports. While the LNG industry historically has had a good safety record, there are unique safety risks associated with LNG in vessel operations. Leakage of LNG during LNG shipping or bunkering can pose several hazards. LNG is stored at temperatures below -162 °C (-260 °F), far below the -20°C at which the carbon steels typically used in shipbuilding become brittle. Consequently, extreme care must be taken to ensure that LNG does not drip or spill onto ship hulls or decking because it could lead to brittle fracture, seriously damaging a ship or bunkering barge. LNG spilled onto water can pose a more serious hazard as it will rapidly and continuously vaporize into natural gas, which could ignite. The resulting "pool fire" would spread as the LNG spill expands away from its source and continues evaporating. A pool fire is intense, far hotter and burning far more rapidly than oil or gasoline fires, and it cannot be extinguished; all the LNG must be consumed before it goes out. Because an LNG pool fire is so hot, its thermal radiation may injure people and damage vessels or property a considerable distance from the fire itself. Many experts agree that a large pool fire, especially on water, is the most serious LNG hazard. Leaks of boil-off gas (the small amount of LNG that vaporizes in storage) can also release natural gas into a port area and cause fires or explosions. Major releases of LNG from large LNG carriers would be most dangerous within 500 meters of the spill and would pose some risk at distances up to 1,600 meters from the spill. While a bunkering barge or a vessel using LNG for fuel contains far less LNG than large LNG carriers, LNG spills in bunkering operations could still be a significant concern. Risks associated with bunkering LNG are complicated in ports seeking to engage in "simultaneous operations" during the bunkering process. Simultaneous operations entail loading and unloading cargo and personnel from a ship, maintenance, and other logistical operations performed while a ship is bunkering. Accidents that occur during such operations (for example, the operation of heavy machinery near pipes transporting LNG) can result in a spill of LNG which can threaten workers positioned near the site of operations. LNG tankers, bunkering vessels, and land-based facilities could be vulnerable to terrorism. Bunkering tanks or vessels might be physically attacked to destroy the LNG they hold—and vessels might be commandeered for use as weapons against port or coastal targets. Potential terrorist attacks on LNG terminals or tankers in the United States have long been a key concern of the public and policymakers in the context of large scale LNG imports or exports because such attacks could cause catastrophic fires in ports and nearby populated areas. For example, a 2007 report by the Government Accountability Office stated that, "the ship-based supply chain for energy commodities," specifically including LNG, "remains threatened and vulnerable, and appropriate security throughout the chain is essential to ensure safe and efficient delivery." Affected communities and federal officials continue to express concern about the security risks of LNG. The potential risks from terrorism to LNG bunkering infrastructure may be different than those of larger LNG import or export operations due to smaller quantities of LNG involved, but the risks may become more widespread if LNG bunkering operations are established in more locations. The Maritime Transportation Security Act (MTSA, P.L. 107-295 ) and the International Ship and Port Facility Security Code give the Coast Guard far-ranging authority over the security of hazardous materials in maritime shipping. The Coast Guard has developed port security plans addressing how to deploy federal, state, and local resources to prevent terrorist attacks. Under the MTSA, the Coast Guard has assessed the overall vulnerability of marine vessels, their potential to transport terrorists or terror materials, and their use as potential weapons. The Coast Guard has employed these assessments to augment port security as necessary and to develop maritime security standards for LNG port facilities. The IMO's overall framework for controlling vessels emissions (MARPOL Annex VI) has been in place since 2005. While the United States, as an IMO member, is subject to the IMO's 2020 sulfur standards, the international standards apply equally to all parties and all vessels. The impacts of sulfur standards on bunker fuel have been an important consideration, but IMO member nations have agreed to the standards independent of any particular energy policies. Moreover, MARPOL Annex VI preceded the U.S. shale gas boom, so commitment to that initial IMO framework could not have anticipated United States' current role as a dominant energy producer. Any changes within the international shipping fleet to install sulfur scrubbers, fuel engines with LNG, or switch to other low sulfur fuels, are being driven primarily by market forces in fuel supply, shipbuilding, and shipping—not by any particular push to favor one fuel over another. Nonetheless, given its particular status, the question arises whether the standards may create an economic opportunity for the United States, in energy or otherwise. More specifically, could international adoption of LNG as a bunker fuel create an important new market for U.S. natural gas producers, shipbuilders, or infrastructure developers? As discussed above, depending upon the adoption of LNG bunkering in the global fleet, the LNG bunker fuel market could grow to several billion dollars by 2030. If U.S. LNG producers were to supply a significant share of this market—on the strength of comparatively low LNG production costs—LNG bunkering could increase demand for U.S. natural gas production, transportation, and liquefaction. Opportunities in LNG-related shipbuilding might be more limited, as most of this occurs overseas, with the exception of Jones Act vessels. In the latter case, demand for domestically-constructed LNG bunkering barges could be one significant area of economic growth. Engineering and construction firms could benefit from new opportunities to develop new port infrastructure for LNG storage and transfer. While likely limited in number, such port facilities could be complex, high value projects costing tens or hundreds of millions of dollars to complete. Such projects could create jobs in engineering, construction, and operation, which could be important to local communities. Although LNG bunkering could present the United States with new economic opportunities, it may pose challenges as well. Rising demand for LNG in the maritime sector could increase natural gas prices for domestic consumers. In addition to being the world's largest natural gas producer, as of 2018, the United States is also the world's largest producer of crude oil and the second largest bunkering hub. Consequently, while vessel conversion to LNG bunkering may increase demand for U.S.-produced natural gas, it could be partially offset by reduced demand for U.S.-produced crude oil or refined products. Exactly how changing demand in one sector could affect the other is unclear. Furthermore, while LNG can reduce pollutant emissions from vessels, emissions and environmental impacts from increased natural gas production and transportation could increase overall emissions. Much of the net environmental impact depends upon practices in the natural gas industry, which are the subject of ongoing study and debate. Although new LNG bunkering infrastructure can create jobs, as the Tacoma LNG projects shows, the construction of such port facilities can be controversial for reasons of safety, security, and environmental impact. Overarching the considerations above is uncertainty about how the global shipping fleet will adapt to the IMO sulfur standards over time. This uncertainty complicates decisions related to both private investment and public policy. LNG-fueled ships still account for only a fraction of the U.S. and global fleets, and it may take several decades for significant benefits of LNG-powered vessels to be realized. It is also possible that alternative ship fuels, including biofuels, electric engines, and hybrid engines, will become more economically viable in coming years. Given the uncertainty surrounding the future of LNG as a ship fuel, it is hard to predict the potential benefits or costs that LNG bunkering may provide to the United States. Until now, the private sector has added LNG-fueled vessels to fleets in the United States in a piecemeal manner under existing federal statutes and regulation. Congress could encourage the growth of LNG bunkering by various means, such as providing tax incentives to support the construction of LNG bunkering facilities and vessels, addressing any statutory or regulatory barriers to bunkering facility siting or operations, and providing funding for technical support to domestic carriers seeking to adopt LNG technology. Alternatively, Congress could seek to encourage competing bunker fuel options, such as biofuels, by incentivizing them in similar ways. In addition, Congress could also affect growth in LNG bunkering through policies affecting the LNG industry or domestic shipping industry as a whole. Changes in federal regulation related to natural gas production, or changes to the Jones Act, for example, while not directed at LNG bunkering, could nonetheless affect its economics. Therefore, evaluating the potential implications on LNG bunkering of broader energy, environmental, or economic objectives may become an additional consideration in congressional oversight and legislative initiatives. If LNG bunkering expands significantly in U.S. ports, Congress also may examine the adequacy of existing measures to ensure the safety and security of LNG vessels, storage, and related facilities.

Question: Write a one-page summary of the report 1.

Answer: SNAP is the largest federally funded nutrition assistance program. In fiscal year 2017, it provided about $63 billion in benefits. USDA and the states jointly administer SNAP and partner to address issues that affect program integrity, including improper payments and fraud. GAO has previously reported on various aspects of SNAP, including state SNAP E&T programs, improper payment rates, recipient fraud, and retailer trafficking. This testimony discusses GAO's prior and ongoing work on (1) SNAP E&T programs, including program participants, design, and USDA oversight, and (2) USDA's efforts to address SNAP program integrity, including improper payments, as well as recipient and retailer fraud. As part of its ongoing work on SNAP E&T programs, GAO analyzed E&T expenditures and participation data from fiscal years 2007 through 2016, the most recent data available; reviewed relevant research from USDA; and interviewed USDA and selected state and local officials. The prior work discussed in this testimony is based on four GAO products on E&T programs (GAO-03-388), improper payments (GAO-16-708T), recipient fraud (GAO-14-641), and retailer trafficking (GAO-07-53). Information on the scope and methodology of our prior work is available in each product. Overseen by the U.S. Department of Agriculture (USDA) and administered by states, Supplemental Nutrition Assistance Program (SNAP) Employment and Training (E&T) programs served about 0.5 percent of the approximately 43.5 million SNAP recipients in an average month of fiscal year 2016, according to the most recent USDA data available. These programs are generally designed to help SNAP recipients increase their ability to obtain regular employment through services such as job search and training. Some recipients may be required to participate. According to USDA, about 14 percent of SNAP recipients were subject to work requirements in an average month of fiscal year 2016, while others, such as children and the elderly, were generally exempt from these requirements. States have flexibility in how they design their E&T programs. Over the last several years, states have 1) increasingly moved away from programs that mandate participation, 2) focused on serving able-bodied adults without dependents whose benefits are generally time-limited unless they comply with work requirements, and 3) partnered with state and local organizations to deliver services. USDA has taken steps to increase support and oversight of SNAP E&T since 2014, including collecting new data on participant outcomes from states. GAO has ongoing work reviewing SNAP E&T programs, including USDA oversight. USDA and the states partner to address issues that affect program integrity, including improper payments and fraud, and USDA has taken some steps to address challenges in these areas, but issues remain. Improper Payments. In 2016, GAO reviewed SNAP improper payment rates and found that states' adoption of program flexibilities and changes in federal SNAP policy in the previous decade, as well as improper payment rate calculation methods, likely affected these rates. Although USDA reported improper payment estimates for SNAP in previous years, USDA did not report an estimate for benefits paid in fiscal years 2015 or 2016 due to data quality issues in some states. USDA has since been working with the states to improve improper payment estimates for the fiscal year 2017 review. Recipient Fraud. In 2014, GAO made recommendations to USDA to address challenges states faced in combatting recipient fraud. For example, GAO found that USDA's guidance on the use of transaction data to uncover potential trafficking lacked specificity and recommended USDA develop additional guidance. Since then, USDA has provided technical assistance to some states, including on the use of data analytics. GAO has ongoing work reviewing states' use of data analytics to identify SNAP recipient fraud. Retailer Trafficking. In 2006, GAO identified several ways in which SNAP was vulnerable to retailer trafficking—a practice involving the exchange of benefits for cash or non-food items. For example, USDA had not conducted analyses to identify high-risk retailers and target its resources. Since then, USDA has established risk levels for retailers based on various factors. GAO has ongoing work assessing how USDA prevents, detects, and responds to retailer trafficking and reviewing the usefulness of USDA's estimates of the extent of SNAP retailer trafficking. GAO is not making new recommendations. USDA generally concurred with GAO's prior recommendations.