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87–288 PDF 2014

PRESIDENT’S FISCAL YEAR 2015 BUDGET REQUEST 

FOR COAST GUARD AND 

MARITIME TRANSPORTATION PROGRAMS 

(113–61) 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

COAST GUARD AND MARITIME TRANSPORTATION 

OF THE

COMMITTEE ON 

TRANSPORTATION AND 

INFRASTRUCTURE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

SECOND SESSION 

MARCH 26, 2014 

Printed for the use of the 

Committee on Transportation and Infrastructure 

( 

Available online at: http://www.gpo.gov/fdsys/browse/ 

committee.action?chamber=house&committee=transportation 

(II) 

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE 

BILL SHUSTER, Pennsylvania, Chairman 

DON YOUNG, Alaska 

THOMAS E. PETRI, Wisconsin 

HOWARD COBLE, North Carolina 

JOHN J. DUNCAN, JR., Tennessee, 

Vice Chair 

JOHN L. MICA, Florida 

FRANK A. LOBIONDO, New Jersey 

GARY G. MILLER, California 

SAM GRAVES, Missouri 

SHELLEY MOORE CAPITO, West Virginia 

CANDICE S. MILLER, Michigan 

DUNCAN HUNTER, California 

ERIC A. ‘‘RICK’’ CRAWFORD, Arkansas 

LOU BARLETTA, Pennsylvania 

BLAKE FARENTHOLD, Texas 

LARRY BUCSHON, Indiana 

BOB GIBBS, Ohio 

PATRICK MEEHAN, Pennsylvania 

RICHARD L. HANNA, New York 

DANIEL WEBSTER, Florida 

STEVE SOUTHERLAND, II, Florida 

JEFF DENHAM, California 

REID J. RIBBLE, Wisconsin 

THOMAS MASSIE, Kentucky 

STEVE DAINES, Montana 

TOM RICE, South Carolina 

MARKWAYNE MULLIN, Oklahoma 

ROGER WILLIAMS, Texas 

MARK MEADOWS, North Carolina 

SCOTT PERRY, Pennsylvania 

RODNEY DAVIS, Illinois 

MARK SANFORD, South Carolina 

DAVID W. JOLLY, Florida 

NICK J. RAHALL, II, West Virginia 

PETER A. DEFAZIO, Oregon 

ELEANOR HOLMES NORTON, District of 

Columbia 

JERROLD NADLER, New York 

CORRINE BROWN, Florida 

EDDIE BERNICE JOHNSON, Texas 

ELIJAH E. CUMMINGS, Maryland 

RICK LARSEN, Washington 

MICHAEL E. CAPUANO, Massachusetts 

TIMOTHY H. BISHOP, New York 

MICHAEL H. MICHAUD, Maine 

GRACE F. NAPOLITANO, California 

DANIEL LIPINSKI, Illinois 

TIMOTHY J. WALZ, Minnesota 

STEVE COHEN, Tennessee 

ALBIO SIRES, New Jersey 

DONNA F. EDWARDS, Maryland 

JOHN GARAMENDI, California 

ANDRE ́ CARSON, Indiana 

JANICE HAHN, California 

RICHARD M. NOLAN, Minnesota 

ANN KIRKPATRICK, Arizona 

DINA TITUS, Nevada 

SEAN PATRICK MALONEY, New York 

ELIZABETH H. ESTY, Connecticut 

LOIS FRANKEL, Florida 

CHERI BUSTOS, Illinois 

SUBCOMMITTEE ON COAST GUARD AND MARITIME TRANSPORTATION

DUNCAN HUNTER, California, Chairman 

DON YOUNG, Alaska 

HOWARD COBLE, North Carolina 

FRANK A. LOBIONDO, New Jersey 

PATRICK MEEHAN, Pennsylvania 

STEVE SOUTHERLAND, II, Florida, 

Vice Chair 

TOM RICE, South Carolina 

MARK SANFORD, South Carolina 

DAVID W. JOLLY, Florida 

BILL SHUSTER, Pennsylvania (Ex Officio) 

JOHN GARAMENDI, California 

ELIJAH E. CUMMINGS, Maryland 

RICK LARSEN, Washington 

TIMOTHY H. BISHOP, New York 

LOIS FRANKEL, Florida 

CORRINE BROWN, Florida 

JANICE HAHN, California 

NICK J. RAHALL, II, West Virginia 

(Ex Officio) 

(III) 

CONTENTS Page 

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

TESTIMONY 

PANEL 1 

Admiral Robert J. Papp, Jr., Commandant, United States Coast Guard ........... 4 

Michael P. Leavitt, master chief petty officer, United States Coast Guard ....... 4 

PANEL 2 

Hon. Paul N. Jaenichen, Acting Maritime Administrator, Maritime Administration ................................................................................................................... 23 

Hon. Mario Cordero, Chairman, Federal Maritime Commission ......................... 23 

PREPARED STATEMENTS AND ANSWERS TO QUESTIONS FOR THE 

RECORD SUBMITTED BY WITNESSES 

Admiral Robert J. Papp, Jr.: 

Prepared statement .......................................................................................... 36 

Answers to questions for the record from Hon. Duncan Hunter, a Representative in Congress from the State of California ................................ 43 

Michael P. Leavitt 1

Hon. Paul N. Jaenichen, prepared statement ....................................................... 44 

Hon. Mario Cordero: 

Prepared statement .......................................................................................... 53 

Answers to questions for the record from Hon. Steve Southerland II, 

a Representative in Congress from the State of Florida ........................... 65 

1Michael P. Leavitt, master chief petty officer, United States Coast Guard, did not submit 

a prepared statement for the record. 

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(1) 

PRESIDENT’S FISCAL YEAR 2015 BUDGET 

REQUEST FOR COAST GUARD AND 

MARITIME TRANSPORTATION PROGRAMS 

WEDNESDAY, MARCH 26, 2014 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON COAST GUARD AND MARITIME

TRANSPORTATION, 

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE, 

Washington, DC. 

The subcommittee met, pursuant to notice, at 9:35 a.m. in Room 

2167, Rayburn House Office Building, Hon. Duncan Hunter (Chairman of the subcommittee) presiding. 

Mr. HUNTER. The subcommittee will come to order. Good morning. 

The subcommittee is meeting today to hear testimony on the 

President’s fiscal year 2015 budget request from the leaders of the 

Coast Guard, the Maritime Administration, and the Federal Maritime Commission. 

The President has sent Congress yet another budget proposing to 

cut funding for the Coast Guard, this time by more than $360 million, or 4 percent below the fiscal year 2014 enacted level. The request would cut the Coast Guard’s acquisition budget by $291 million, or 21 percent. The President’s request proposes to delay the 

acquisition of critically needed replacement assets, such as the Fast 

Response Cutter. It will severely undermine efforts to recapitalize 

the Service’s aging and failing legacy assets, increase acquisition 

costs for taxpayers, and seriously degrade mission effectiveness. 

For the fiscal year 2015 operating budget, the President proposes 

to slash the number of Coast Guard servicemembers and reservists 

by over 1,300, and reduce hazardous duty pay for servicemembers. 

It would also exacerbate gaps in readiness by cutting programmed 

hours for aircraft, and jeopardize the success of the search and rescue mission by taking fixed-wing aircraft crews off alert status. 

This is the third year in a row the President has forced the Coast 

Guard to sacrifice mission success to pay for his questionable 

spending in other agencies. And, once again, Congress is being 

forced to come up with hundreds of millions of dollars just to sustain Coast Guard frontline operations. The administration needs to 

understand that the Coast Guard cannot continue to do more with 

less. If the President is going to continue to propose these cuts year 

after year, he needs to tell us, Congress, and you, the Coast Guard, 

how he intends to re-scope the missions of the Coast Guard to reflect his reduced budgets. 

2 

This is the last time that Admiral Papp and Master Chief Leavitt 

will appear before us. I want to commend both of you for your leadership and tremendous service to our Nation. 

Admiral, I fully understand the situation you’ve been put in with 

this budget, and I appreciate your candor in describing what these 

cuts will mean for the ability of the Service to successfully conduct 

its missions. 

The budget request for the Maritime Administration represents 

a 75-percent increase over the current level, except not really. However, the increase comes as a result of an accounting change in the 

Ready Reserve Fleet funding, and from a one-time subsidy offered 

to the maritime industry in exchange for a permanent reduction in 

the number of U.S. mariner jobs carrying cargo under the hugely 

successful Food for Peace program. 

Since 1954, the Food for Peace program has provided agricultural 

commodities grown by U.S. farmers and transported by U.S. mariners on U.S.-flagged vessels to those threatened by starvation 

throughout the world. The President’s restructuring of Food for 

Peace will eliminate a vital program for our farmers, put U.S. 

mariners out of jobs, and undermine our national security by reducing the domestic sealift capacity on which our military depends. 

I would add that the President’s attempt to placate the concerns 

of U.S. mariners by temporarily throwing some additional money 

at the Maritime Security Program will not work. As we did last 

year, I hope my colleagues will join me in—once again, in rejecting 

this misguided proposal. 

I am also concerned that the budget again zeroes out funding for 

Title XI and other U.S.-flag promotional programs that are at the 

core of the Maritime Administration’s mission. I look forward to 

hearing from the Acting Administrator on how he intends to move 

forward with his efforts to revitalize the U.S.-flag fleet under this 

budget. 

Finally, the budget request for the Federal Maritime Commission proposes a $991,000, or 4 percent, increase over current levels. 

That increase will sustain current staffing levels at the Commission and help it continue with its acquisition of a new information 

technology system. I encourage the chairman to continue to review 

the operations of the Commission to find savings through efficiencies. 

Our Nation is facing a very tough budget climate, as we all 

know. And this Congress is and must work together to find savings 

wherever possible. I look forward to working with my colleagues to 

achieve this goal in a responsible manner. 

I thank the witnesses for appearing today, and look forward to 

their testimony. With that, I yield to Ranking Member Garamendi. 

Mr. GARAMENDI. Mr. Chairman, thank you very much. I will 

make this quick, because I would like to hear from the witnesses. 

However, Admiral Papp, I understand this is going to be the last 

time you will be testifying before this committee, unless we somehow bring you back before your May 30th departure from the Coast 

Guard. I want to congratulate you for the extraordinary career you 

have had, for the leadership that you have put forth during some 

very difficult budget times, knowing that the budget that you presented to us is not a result of what you want, but rather what we 

3 

have given to the administration to spend. It is, in fact, the Congress that has managed to go through an austerity period of time. 

You are working as best you can with it. However, we do have 

some questions for you about the priorities that you have listed. 

In reflecting on the fiscal year 2015 budget request for the U.S. 

Coast Guard, Maritime Administration, and the Federal Maritime 

Commission, it dawned on me that it was an alarming situation, 

perhaps the greatest impediment to revitalizing our merchant marine, and realizing the vast potential of the U.S. maritime economy 

is a persistent disinterest by administrations, both current and 

past in the maritime agencies. This is reflected in the budgets. 

If you subject to the idea, as I do, that the Federal budget request represents the administration’s fundamental statement of 

policy, you cannot help but come to one conclusion: the budget request for the maritime agencies indicate that, as a matter of policy, 

these agencies remain undervalued, underresourced, and underappreciated. This is both regrettable and odd. After all, the global 

reach and dominance of the U.S. economy has historically been 

linked to our trade with other nations, trade that is dependent on 

vibrant maritime commerce. 

As the world’s largest trading nation, the United States exports 

and imports annually in value about one-fourth of the global merchandise trade. And approximately 95 percent of America’s foreign 

trade—that is 1.3 billion tons—moves by ship. Moreover, based on 

current projections, by the year 2020 United States foreign trade 

in goods may grow to four times today’s value, and almost double 

its current tonnage. And, additionally, our inland waterways traffic 

will increase by one-third. 

The economic potential is there for any who care to look. What 

remains missing or obscured is our commitment to seize that opportunity. Our economy rose from a maritime foundation and remains tethered to that foundation today. We should be investing 

wisely and strategically to ensure that this foundation remains 

solid, and up to the challenges of the 21st-century economy. Unfortunately, the budget request for our maritime agencies suggest that 

if we are to seize the opportunity before us, it will have to be Congress that shows the leadership and initiative to provide the necessary resources. And for Congress to do that, we must revisit the 

sequestration and the austerity budgeting phenomena that has 

taken over this Congress. 

With that, I yield back. 

Mr. HUNTER. I thank the ranking member. On our first panel of 

witnesses today are Admiral Robert Papp, Jr., Commandant of the 

United States Coast Guard; and Master Chief Michael Leavitt, 

master chief petty officer of the Coast Guard. 

Admiral Papp, thank you again for your over 40 years of service 

to our Nation and the Coast Guard. And, with that, you are recognized for your statement. 

4 

TESTIMONY OF ADMIRAL ROBERT J. PAPP, JR., COMMANDANT, UNITED STATES COAST GUARD; AND MICHAEL P. 

LEAVITT, MASTER CHIEF PETTY OFFICER OF THE COAST 

GUARD, UNITED STATES COAST GUARD 

Admiral PAPP. Well, thank you, Mr. Chairman, for that, and also 

for your opening statement, and also to Ranking Member 

Garamendi for his statement, and for your support. It is a pleasure 

for me to be here, just as it has been for the last 4 years, to talk 

to you about the brave young men and women of the Coast Guard 

who have chosen to serve our Nation. 

I would like to start by thanking this Congress for the support 

it provided in the Consolidated Appropriations Act of 2014. This 

Act helps to relieve the erosive effects of sequestration on our Service, and it restored frontline operations and badly needed training 

hours to ease many of the personnel management restrictions we 

have faced over this past year. 

I would also like to take this opportunity to thank my secretary, 

Secretary Johnson. In the short time he has been in, he has 

jumped into the middle of the budget situation, and really provided 

us some great support on a number of key issues that might have 

been lost along the way, if we hadn’t had his leadership. 

As you know, America is a maritime nation, just as Mr. 

Garamendi mentioned. We rely on the safe, secure, free flow of 

goods across the seas and into our ports. And I firmly believe that 

one measure of a nation’s greatness is its ability to provide safe 

and secure approaches to its ports. The system of uninterrupted 

trade is the life blood of our economy. 

And you can see it at work today. We may be a week into the 

spring, but the Coast Guard Cutter Mackinaw just recently completed about 2 months of continuous icebreaking service, keeping 

open the passages between the Great Lakes. Mackinaw, as we 

speak today, is working off Duluth, Minnesota, in some of the 

heaviest ice cover that the lakes have seen in the last 30 years to 

help commercial traffic deliver badly needed iron ore to keep the 

steel plants open in the Heartland, and validating decisions made 

by Congress 15 years ago to build that icebreaker. 

You can also see it in the work that we do to secure our maritime 

borders. Our new Fast Response Cutters have become the workhorses of our drug and migrant interdiction operations in the approaches to Florida and Puerto Rico, and they continue to be delivered on time and on budget. 

Every day the Coast Guard acts to both prevent and respond to 

an array of threats that, if left unchecked, would impede trade, 

weaken our economy, and create instability. These threats disrupt 

regional and global security, the economies of our partner nations, 

and access to both resources and international trade. All of these 

are vital elements of our national prosperity and, in turn, our national security. 

Layered security is the way I have described how the Coast 

Guard counters maritime threats facing the United States. This 

layered security first starts in foreign ports, then it spans the high 

seas, because the best place to counter a threat is before it reaches 

our ports. It then encompasses our exclusive economic zone, the 

5 

largest in the world, at over 4.5 million square miles, and continues 

into our territorial seas, our ports, and our inland waters. 

The work to address these challenges is being done by committed 

coastguardsmen who face risks each and every day. Yesterday 

morning I was reminded once again of the dangerous work they do. 

As I traveled up to Narragansett in Rhode Island to attend a memorial service for Petty Officer Third Class Ron Gill. Petty Officer 

Gill was killed nearly 7 years ago, but I made a commitment to his 

father 7 years ago that I would do all I could to make sure our people get the right tools and the right training so that accidents such 

as the one that happened to Petty Officer Gill might not happen, 

or at least be minimized in the future. His service, even though 7 

years ago, is still fresh in my mind, and his, like many other memorial services I have attended, reminds us that downstream of 

any decisions that are made here in Washington are the—is the 

work that is carried out by young men and women who are often 

cold, wet, and tired, and who have to stand the watch to keep our 

homeland safe. 

It is our responsibility to detect and interdict contraband and illegal drug traffic, enforce U.S. immigration laws, protect valuable 

natural resources, encounter threats to U.S. maritime and economic security, worldwide. And it is often most effective to do this 

as far from our shores as possible. 

Our fleet of major cutters has reached obsolescence, and is becoming increasingly expensive to maintain. The average Reliance 

class Medium Endurance Cutter is 46 years old; the oldest turns 

50 this year. I sailed one of those ships, the Valiant, when I was 

a cadet. And by the time I became an officer, that ship had been 

sailing for over a decade. And, as I retire on May 30th, the ship 

will still be serving, 40 years later. 

We have been able to keep them going because of the quality of 

our people. But this is no longer sustainable. And I am fully aware 

of the fiscal constraints we face, as a Nation. But the uncertainty 

and spending cuts have forced difficult decisions on how to 

prioritize our essential missions and functions. We examine the 

risks that exist, focus on the highest priority operations, and allocate our scarce resources where they are needed most, while continually working to maintain our readiness and surge capacity. And 

this often requires trade-offs informed by a clear understanding of 

the risks our country faces now, and what we foresee for the future. And we continue to make those difficult decisions, but I am 

encouraged by our recent down-selection of candidates for our Offshore Patrol Cutter, which is handled by a very capable acquisition 

for us, one that we have improved over the last 10 years, to become 

a model acquisition force for the Government. 

We have also become the first military Service to pass an audit, 

and that was the result of dedicated efforts by our financial managers. 

So, we can show how we are spending our money. We have a 

great acquisition force. We are at a critical point now where what 

we need is stable and predictable funding in order to give best return on investment to the taxpayers. 

As the Nation’s maritime governance force, the Coast Guard possesses unique authorities, capabilities, and partnerships, coupled 

6 

with capable cutters, aircraft, and boats. Operated by highly proficient personnel, we maximize those authorities and capabilities to 

execute layered security throughout the entire maritime domain. 

We are a ready force on continuous watch, with a proven ability 

to surge assets and our people to crisis events where and whenever 

they occur. 

So, I thank you for the opportunity to testify once again, and I 

am really looking forward to your questions. 

Mr. HUNTER. Admiral, thank you. I think you are totally right. 

Somebody said, ‘‘Whoever controls the ocean controls the world,’’ 

and the Coast Guard plays a major part in that. And you have definitely left your mark, with the National Security Cutter that are 

going to be roaming the high seas. 

Anyway, thank you for your service, again. 

Admiral PAPP. Yes, sir. 

Mr. HUNTER. Master Chief, question for you. If you have two sergeants major, it is sergeants major—attorneys general. Is it masters chief, or master chiefs, if there is two? If it is plural. 

Master Chief LEAVITT. Master chiefs. 

Mr. HUNTER. Master chiefs, OK. Well, thank you, Master Chief 

Leavitt, and I would like to recognize you and—for your statement. 

And thank you for your many years of service, as well. 

Master Chief LEAVITT. Thank you, Mr. Chairman. And good 

morning, Mr. Chairman and distinguished members of the subcommittee. It is an honor and a privilege to appear before you 

today, and to represent the dedicated men and women of the 

United States Coast Guard, who diligently stand the watch every 

day, protecting and serving our great Nation. 

For the past 4 years, as master chief petty officer of the Coast 

Guard, I have had the honor to see the resiliency, the hard work, 

and the outstanding accomplishments of our Coast Guard men and 

women on a daily basis. I have also seen the outstanding support 

they receive from their families, and it just fills me with pride. And 

it would you, too. 

So, as you know, coastguardsmen operate in an inherently dangerous maritime environment, and we must all be mindful of those 

dangers as we prepare our crews to be ready for the call. Consequently, we must ensure that our coastguardsmen have the resources and training they need, and they need to remain proficient, 

both in craft and in leadership. This is particularly important as 

we continue to meet the Nation’s needs, as demand for our services 

expand globally and at home with maritime trade, energy exploration, disaster response, search and rescue, law enforcement, and 

much more. 

So, as you heard, many of our frontline cutters are well over 40 

years old. And, as such, it becomes very difficult for our command 

to balance the ships’ mission priorities, especially when our crew 

is already working extremely hard, and expending an extraordinary amount of time, just to keep the ships operating mechanically. It makes it much harder for our crews to train and stay proficient. So it is vital that we continue with our recapitalization efforts. 

7 

Regardless of the many challenges they face, coastguardsmen 

continue to successfully complete our missions. That is our legacy, 

and that is a legacy I am very proud to be a part of. 

Last year in my testimony, I addressed some of the challenges 

our men and women and their families face, particularly with regards to providing adequate housing. So, on behalf of our 

servicemembers, we are truly grateful for your support in providing 

much-needed funding for our housing program. This funding will 

significantly enhance housing for our coastguardsmen and their 

families. 

The fiscal year 2015 budget will allow us to continue with the recapitalization of our aging fleet of cutters, aircraft, and small boats, 

and will help us support our people programs. 

Mr. Chairman and members of the committee, on behalf of the 

men and women of the United States Coast Guard and their families, I again thank you for your continued support, and I thank you 

for the opportunity to discuss some of the highlights and the challenges our Coast Guard men and women face. I look forward to answering any questions you may have. 

Mr. HUNTER. Thank you, Master Chief. I am now going to recognize Members, starting with myself, for questions. 

Admiral, first question is about the CIP. A few weeks ago, when 

you turned in the budget, the CIP didn’t get turned in. I would— 

U.S. law right now requires the CIP to be turned in by the Coast 

Guard to Congress when the budget is presented, as well. So, my 

question is, you are operating on such a small budget anyway, we 

are here to help and conduct oversight in any way that we can to 

just make sure things stay on track, as you have them now. When 

is the CIP going to be turned in to us? 

Admiral PAPP. Well, it should be any day, sir. I know that the 

Secretary has forwarded it on. The Secretary has been questioned 

on this, I was questioned on it 2 weeks ago at the Appropriations 

Subcommittee. 

Frankly, 2 weeks ago, as I told the subcommittee then, part of 

it was my obstinance in holding out and trying to get the best position for what I foresee the Coast Guard needs—— 

Mr. HUNTER. I read your testimony, and I appreciate it. 

Admiral PAPP [continuing]. In the future. And I think that is 

rightly so. We have those very robust discussions in the administration before the budget goes forward. The Secretary is supporting 

the position that I have, in terms of what should be in the CIP for 

the next 5 years. And I know that he was working directly with 

the Office of Management and Budget to—in order to get it 

through the administration as soon as possible. 

I don’t have the exact time, but I know, when I checked last, it 

was—— 

Mr. HUNTER. I don’t understand something, though. The CIP 

should be written according to your strategy for recapitalization 

and building new ships, based on the Coast Guard requirements, 

right? 

Admiral PAPP. Yes, sir. 

Mr. HUNTER. Why does that have to be politically scrubbed? 

Admiral PAPP. I am not sure it is a political scrub, sir. What I 

think—— 

8 

Mr. HUNTER. Well, if you agree, and the Secretary agrees with 

the current CIP, as you have written it, then what are they doing 

with it, if they are not scrubbing it politically? 

Admiral PAPP. Well, there are other priorities. For instance, we 

are facing the need for an icebreaker for the United States. It is 

going to be tough to fit a billion-dollar icebreaker in our 5-year 

plan, without displacing other things. If there is going to be no 

growth in the budget, and that is what I have to plan for right 

now, I need to address those highest priorities that I have. 

But rightly so, there are other people who have opinions with an 

opening Arctic and other things that perhaps an icebreaker ought 

to be higher priority. These things need to be negotiated out, and 

then come to an administration’s position on what the highest priorities are. I am hopeful that the priorities that I see for the Coast 

Guard will be reflected in that CIP when it gets up here. 

Mr. HUNTER. And so, the CIP is stuck with OMB right now? Is 

that where it is at? 

Admiral PAPP. I don’t know exactly where it is today, sir. We can 

find out and get back to the subcommittee. 

Mr. HUNTER. OK, thank you. And when it comes to the icebreaker, let’s talk about that. We have talked about having all the 

different agencies and all the different groups that want a polar 

icebreaker, which is from the—you, the Navy, NOAA, I think just 

about everybody. I think the Department of State would probably 

like to have an icebreaker so they could do stuff in the Arctic, or 

at least keep it open for our guys. I mean it benefits everybody in 

every agency. 

So, the question is, if you have to go it alone, what does that do 

to you? And, secondly, if you don’t go it alone, we bring in all the 

actors that have an interest, and have them help pay for it, I 

guess—will it ever really happen? I don’t think it would happen in 

that case, because trying to get one agency to do one thing takes 

many, many years. Trying to get five agencies to get on the same 

page I think would take more than both of our lifetimes. So what 

are your thoughts on that? 

Admiral PAPP. Well, we—there is no doubt in my mind that, 

eventually, the United States needs another new polar icebreaker. 

The need will be there for many decades to come yet. And, right 

now, we are running the 38-year-old Polar Star, and Healy is about 

14 years old now. And I am satisfied that we have sufficient capability to meet our needs. But we need to be planning for the future, 

as well. 

As I balance our needs against what is projected in the budget— 

and granted, we got a little bit of relief in 2014; 2015 we may have 

a little bit of relief, but in 2016 all bets are off, and I may very 

well have to fit within a $1 billion CIP for the out-years. I can’t 

afford to pay for an icebreaker in a $1 billion CIP, because it would 

just displace other things that I have a higher priority for. 

So, we are looking at other alternatives. Perhaps one of those alternatives, the Congress came up with a requirement for a business case analysis on the remaining Polar class icebreaker, Polar 

Sea. And potentially, we might be able to overhaul Polar Sea and 

fit that into the CIP as an affordable means for providing an addiVerDate Aug 31 2005 15:24 Oct 09, 2014 Jkt 000000 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 P:\HEARINGS\113\CG&JOI~1\3-26-1~1\87288.TXT JEAN
9 

tional icebreaker, as we await a time that we can build a new icebreaker. 

If we are going to build a new icebreaker, if that is a priority, 

we just can’t fit it within our acquisition account. And I would look 

across the interagency—you are absolutely right. There are many 

people who welcome having an icebreaker, but everybody is glad to 

have the Coast Guard pay for it. 

Mr. HUNTER. What about leasing? 

Admiral PAPP. You know, everything I see, Mr. Chairman, is that 

leasing, particularly something that is such a large capital asset, 

is good for—to fill a short-term need, but there is a long-term need 

for an icebreaker for this country. And I continue to believe—and 

I think our business case analysis demonstrates—that the best option for the country, if it is affordable, is to build a new polar icebreaker that would be ours, and could be managed by us for the 

long term. 

Mr. HUNTER. What about a long-term lease? 

Admiral PAPP. I think the longer the term of a lease, you end up 

spending more money on a leased icebreaker that you never get to 

own than you would in building an icebreaker that then you own 

and operate—look at Polar Sea and Polar Star. Thirty-eight years, 

and we have still got them around and, obviously, capable of operating. I think the best bet, in terms of reliability and confidence 

that we have the asset for the United States is to purchase a new 

icebreaker, rather than leasing. 

Mr. HUNTER. If your choice were between no icebreaker and leasing an icebreaker? 

Admiral PAPP. It—you would have to look at the cost per year. 

Because if you are leasing an icebreaker, that is an additional cost 

that is going to have to go into my operating funds, which would 

displace other people. 

And as you will see, as we go through this budget today, we are 

down to the point now where, when we talk about displacing 

things, what we are talking about is displacing people. We have got 

no further—we cannot cut any further in programs and other 

things without cutting people now. And that is why, as you look 

here, this budget reflects, potentially, another 800 people lost. 

One of the most important things to me, when I became Commandant, was preserving our end strength for our Service. And in 

my opinion, I have failed miserably, because we are down—getting 

close to possibly 2,000 people lost in the Coast Guard over the last 

4 years. 

Mr. HUNTER. Beats the Army having to get rid of 80,000. But relatively, size-ratio-wise—— 

Admiral PAPP. I wouldn’t throw the Army under the bus. They 

do an awful lot of—I personally will not. Ray Odierno faces a lot 

of challenges out there. 

But what I would say is we are winding down from wars. Yes, 

there are other threats, but there has been no winding down in 

Coast Guard responsibilities. In fact, they have increased. 

Mr. HUNTER. Last question. I am operating under the assumption that countries like Iran, in a matter of days or weeks, can get 

to a weaponized plutonium level. OK? They are not there yet, so 

we just kind of keep it—we talk about them not going past that 

10 

red line. The reality is the red line can be crossed in a matter of 

days, once you reach that 20-percent enrichment level. 

Do you think that you are doing everything that you can, and are 

you funded? Are all of your priorities, when it comes to stopping 

a—any kind of a weapon from getting offshore, or into the homeland through different ports, do you have what you need to do that 

right now, operating under the assumption that they have nuclear 

capability, or they could very easily have nuclear capability in a 

matter of days or weeks? 

Admiral PAPP. Well, rather than being specific about them, I 

would say the general threat of a weapon of mass destruction being 

shipped in a maritime conveyance, no, we don’t have—— 

Mr. HUNTER. Well, it is not going to come from Canada. It is 

going to come from Iran—— 

Admiral PAPP. Exactly. We look out, in terms of being concerned 

about a weapon of mass destruction, or any other threat coming by 

maritime conveyance. You know, the first step is intelligence, and 

we are fully involved in the intelligence community. We look at the 

security within our ports. We are very strong within our ports. The 

Congress and the administration have done a great job in recapitalizing our boat forces, our people, our deployable specialized forces. 

But we don’t want to be dealing with threats in the ports. 

We are doing a good job overseas, under the International Ship 

and Port Security Code, in inspecting those countries that are trading with us, in combination with intelligence. I think we are doing 

pretty good there. 

When I said we don’t have everything we need, it is because we 

have these vast expanses of the Pacific and the Atlantic, where we 

need offshore resources to interdict threats before they get to our 

shores. We should get some warning. But if we are to intercept it 

before it gets into the red zone, in football terms, inside our ports, 

we need to have good cutters out there on the high seas that are 

capable of sustained presence to be able to interdict threats before 

they get to our shores, whether it is a weapon of mass destruction, 

drugs, or migrants, or other things. 

Mr. HUNTER. So how do you reconcile that with your operating 

budget getting cut by .5 percent? It eliminates four vessel boarding 

and search teams that conduct safety and security, boarding foreign-flagged vessels entering U.S. ports. It cuts flight-hours of 

brand-new Maritime Patrol Aircraft by 200 hours, or 17 percent 

per aircraft. How do you reconcile that priority with this budget? 

Admiral PAPP. What we—for instance, the VBS teams that you 

talked about, the boarding and search teams that go out, these are 

teams that were implemented post-9/11. We have also built up our 

forces, our deployable specialized forces, and put more people at 

our sectors and our stations. 

If I had the wherewithal, I would love to keep those teams. However, we are making some very tough decisions as this budget gets 

tamped down, squeezed down. And, as I said earlier, we have no 

other option now than to start cutting people in specific locations, 

where we think we can absorb additional risk and use other forces 

to mitigate it. What it means, though, is those remaining forces 

work a little bit harder. 

11 

I keep on telling my Service that I am not going to make you do 

more with less. We will do less if we get less. But the fact of the 

matter is, Coastie’s attitude is, ‘‘OK, if I lose the guy next to me, 

I am just going to work twice as hard.’’ And I fear that is exactly 

what will happen. We will continue to look good, we will continue 

to get people out there doing the boardings, but it is making the 

other people that remain work harder. And I don’t like to do that, 

because you wear out your people, just like you wear out machinery. And all those things that you listed are things I would rather 

not do, but they have to be done in order to fit within the top line 

that I am given. 

Mr. HUNTER. I am just trying to reconcile this, and I am long out 

of time. But I am just trying to reconcile if you are—if the number 

one priority, let’s say, of our homeland defense, which is—the Coast 

Guard is part of—is stopping a catastrophic event from happening 

on the American homeland, and one way that you do that is by 

searching vessels for radioactive material, and you then take all 

of—you eliminate the four vessel boarding and search teams that 

do that actual type of searching, then that must not be one of the 

top priorities. 

It is hard for me to imagine that there aren’t other places in the 

Coast Guard where you could find efficiencies and savings, maybe 

in the back end, as opposed to the tip of the spear. 

Admiral PAPP. It remains a top priority. And we will inspect and 

board those vessels, but we will have to do it by different means. 

Instead of having a dedicated team at a sector office that—they become very good at that, and that’s what they do, we may need to 

send a Coast Guard cutter out there, and use their organic boarding team to do it. We may need to put together collateral duty 

boarding teams. We will find ways of getting it done. We will not 

allow a ship in without being inspected. 

What I am saying is having those teams available makes it easier on us, makes—allows us to do other things that are lower priority, because we have got the people. As we start whittling away 

at people, it just means other people in the Coast Guard have to 

take on those duties. They won’t be assigned as a VBS team. What 

they will do is, as needed, we will take people on a collateral duty 

basis, put them together as a team, and send them out there. 

Mr. HUNTER. Thank you, Admiral. I would like to yield to the 

ranking member, my good friend, Mr. Garamendi. 

Mr. GARAMENDI. Thank you, Mr. Chairman. I am going to pick 

up where you were taking this conversation with regard to major 

threats: the nuclear threat, the dirty bomb threat. You and I are 

both on the Armed Services Committee, and I am on the subcommittee, the Strategic Arms Subcommittee, which deals directly 

with these threats, specifically, the hearing yesterday on missile 

defense, where billions of dollars are being spent on missile defense 

systems that may or may not work. And we do know that there is 

probably a much more likely threat from a weapon arriving in a 

container, maybe into the port, but maybe it doesn’t have to even 

go there—offshore. Yet the Coast Guard is being cut, and the missile defense is being increased. So we are, in fact, making choices— 

the administration, together with us—making choices about 

prioritizing the threat. 

12 

At the present time, you are correct, Iran does not have a nuclear weapon. Certainly North Korea does. It is highly debatable 

whether North Korea has a missile that can reach the United 

States. Probably does. Its accuracy is questionable. Iran does not, 

at the present time. It could at some point in the future. 

So, the imminent threat is more likely to arrive by sea. And we 

need to look at the silos in which we budget. The Department of 

Homeland Security is one silo, the Department of Defense is another, yet the threat is seen in both, but in different timeframes, 

and the imminency is different. 

I would agree with the point you were making, that the threat 

from the sea is serious. The reduction in the Coast Guard’s personnel reduces our ability to address that threat. I believe that our 

budget committees, or appropriation committees, ought to be taking a very careful look at how we are spending the overall appropriation, the overall money that is available, as reduced as it is. We 

are spending a vast amount of money on something that may or 

may not work, and it is certainly not needed right now—for example, a new missile defense system on the east coast—while at the 

same time we are cutting what we do need today. 

Admiral, I am not going to ask you to respond, unless you would 

like to jump into this in the last 2 months of your tenure. But I 

would welcome such a response if you would like to do so. 

Admiral PAPP. Well, Mr. Garamendi, hopefully I have never hesitated for the last 4 years. And what I will tell you is—along the 

same lines as I was saying, there are many things I would like to 

do with my Service. At the end of the day, I need to live within 

a budget. And when I am given my budget, we set priorities, and 

we look at places where there are things that are needed, but we 

will find a way to get the job done. 

We never—you know, search and rescue always remains job 

number one, and closely linked to that is the security of our ports, 

the security of our country. And we are not going to allow anything 

to get through. We will find the people to get the job done. What 

concerns me is it means other people working harder when we displace these people because of the budget being squeezed down. 

Mr. GARAMENDI. Admiral, I understand your—the pride that you 

take in your people. I understand the position you have, that you 

will get the job done. I am dubious. If we continue to cut your 

budget, as we are, you and your men and women will not be able 

to get the job done. 

We have had testimony from South Command that they cannot 

get the job done, and they rely heavily on you. And one of the reasons they can’t get the job done is that you’re not there. That is 

the reality of the situation. 

And the point I am making here is that this is our problem. And, 

frankly, it is the administration’s problem in prioritizing. And it is 

the silo in which we budget and in which we operate—you, operating in the homeland defense silo, and the Department of Defense 

operating in a completely different one. And, for us, we have to 

look across these silos. 

And, frankly, we would be much better off moving half-a-billion 

dollars from the Department of Defense missile defense to you, so 

that you could carry out the tasks that we know are very real 

13 

threats. Maybe they are drugs, maybe they are smugglers. Maybe 

it is a dirty bomb. Who knows what it might be? But we know that 

that threat is very real, and it is very viable. If somebody really 

wanted to threaten this country with a nuclear weapon, why would 

you go to all the trouble of a missile when you could just as easily 

deliver it in a tugboat? That is my point. 

Admiral PAPP. Yes, sir. 

Mr. GARAMENDI. But I have got some other points, and I will 

take a few moments to get to them. 

We have pretty much talked about your budget in the personnel. 

I think it is a very real problem: 800 few personnel this year, and 

1,200 in the previous cuts. That is a serious reduction. It is one 

that you have discussed, and I know you are going to say that you 

are going to do the best—you are going to do the job with fewer. 

I doubt that you are going to be able to do the complete job with 

fewer, but you have made your response on that. 

I do have a question about the Fast Response Cutters. You have 

a contract to deliver four a year. You are going to deliver two—this 

budget calls for two. Are you renegotiating that contract? What 

does it mean, in terms of cost per cutter? 

Admiral PAPP. Yes, sir. And, just quickly, I don’t want to indicate 

that we are going to get the entire job done. What we do is—in 

fact, the term ‘‘re-scoping’’ came up in my last hearing, and the 

chairman brought that up, as well in his, suggesting that the administration re-scope. That is what I get paid to do. 

You are exactly right: if we devote and try to do 100 percent of 

search and rescue, 100 percent of interdicting those threats, there 

are other mission areas that are going to get shortchanged. So I 

don’t want to leave the impression the Coast Guard is going to get 

100 percent of all our missions done, because we have never been 

able to. 

To the Fast Response Cutter, the contract actually calls for up 

to six a year. Six a year is the most economical order quantity. 

That contract ran out in fiscal year 2014, when we ordered six. We 

are in the process of renegotiating that contract. What we have 

proposed is to—we were able to fit two into the budget this year 

when we got our final top line, and intend to award that under another vehicle, temporary vehicle with the shipyard, until we put 

out the new request for proposal to renew the contract. 

We are scrubbing the contract right now to see if there are areas 

where we can come up with savings to give us the best possible 

deal on the remaining buy of those cutters. If we had the money 

available, we would love to buy six a year, because that gives us 

the best price. But for this interim year, until we get the new contract awarded, two is what we are able to afford. 

Mr. GARAMENDI. When you have that information, I would like 

to know the cost per cutter. Up? Down? The same? 

Admiral PAPP. What we are hopeful in negotiating with the shipyard is we will be able to buy those two just about at the same 

price that we have been buying them when we order them six a 

year. They can spread their workforce an average—the boats that 

are on order right now, they can average that out to five a year, 

in terms of actually building them. And when we add the two in 

there, they should be able to keep the price per boat about the 

14 

same. I am hopeful, at least. But we will get back to the subcommittee, once we have finalized the negotiations on that. 

Mr. GARAMENDI. A final question. I am over my time, but this 

committee went to a lot of trouble to secure the C–27Js for you, for 

the Coast Guard. It appears that the budget does not provide for 

the actual use of those, but for—but, rather, only for the preparation of the C–27Js. Could you tell us if, in fact, there is any money 

to actually operate those in the coming year? 

Admiral PAPP. No, because they won’t be brought online—I think 

it is fiscal year 2017—I am sorry, 2016 that we actually will begin 

getting the aircraft processed through, and actually flying for us. 

We will address that in the 2016 budget, as they start coming online. We are working the 2016 budget right now. But I want to 

thank the subcommittee for all that work. As you know, it is going 

to save us about a half-billion dollars in future costs on the aircraft, and by the time we get them fielded—— 

Mr. GARAMENDI. Excuse me. 

Admiral PAPP. Sure. 

Mr. GARAMENDI. A technical question. Why does it take 2 years 

to retrofit them? 

Admiral PAPP. It is just—well—— 

Mr. GARAMENDI. Is that a budget issue, too? 

Admiral PAPP. No, sir. We have got money in the 2014 budget 

to set up the acquisition program office in order to start bringing 

them in. We have sent a team down there to look at the aircraft. 

The aircraft—basically, what we are going to do to get them into 

service is put them in our Coast Guard colors. But, being military 

aircraft, most of the equipment is compatible. They have a radar 

that is usable. They will not have a mission package, like the other 

medium-range aircraft that we have. But we were spacing those, 

the AC144s, out over the years, and buying mission packets, as 

they went along. 

We are having to re-look within our budget, and decide how we 

fully get them—how we get them fully mission capable with mission packages. But, in the interim, with the radar that they have, 

we can use them for maritime patrol efforts out there. 

Mr. GARAMENDI. OK. I would like a complete description of why 

it takes 2 years to paint the airplane, and to get it underway. I 

would like to get those half-billion-dollar savings sooner, rather 

than later. 

Admiral PAPP. Yes. 

Mr. GARAMENDI. So, if you could, provide that. I will yield back. 

There are other questions, but I will take them in the next round. 

Thank you. 

Mr. HUNTER. I thank the ranking member. The gentleman from 

Florida, Mr. Southerland, is recognized for 5 minutes. 

Mr. SOUTHERLAND. Thank you, Mr. Chairman. Admiral, welcome 

today. And I thank you for your service, as your tenure comes to 

a conclusion. And I want to also thank you for your kindness you 

showed me when we came over for a visit. Thank you very much. 

Admiral PAPP. Good to see you again. 

Mr. SOUTHERLAND. I am going to read a statement and then ask 

a question, a followup question. The Coast Guard participation and 

implementation of the National Ocean Policy is not referenced in 

15 

the White House’s or Department’s fiscal year 2015 budget documents. 

At the same time, pursuant to the July 2010 National Ocean Policy Executive Order, Coast Guard representatives have been participating in the policy’s marine planning initiative covering regions including the Northeast, the mid-Atlantic, the Gulf of Mexico, 

and the Pacific Islands. Language adopted by the July 2010 National Ocean Policy Executive Order stated that the policy’s marine 

planning effort will require significant initial investment of both 

human and financial resources. And in early 2010, the National 

Ocean Council noted that Federal agency had been asked to provide information on how existing resources can be re-purposed for 

greater efficiency and effectiveness in furtherance of the National 

Ocean Policy. 

So, my question, Admiral. Could you please describe in detail, if 

possible, any Coast Guard resources or personnel that have been 

or will be directed towards activities in support of the National 

Ocean Policy? 

Admiral PAPP. No, sir, I don’t have that in any detail. And I 

would request that we submit that for the record in response to 

your question. 

Mr. SOUTHERLAND. OK, thank you. Do you know if, to date, any 

of your resources have been utilized for the National Ocean Policy? 

Admiral PAPP. Well, we certainly have representatives that work 

with the staffs. And, once again, I would prefer to make sure I 

have accuracy in responding to your questions—— 

Mr. SOUTHERLAND. Sure, no, that is fair. I certainly would appreciate that information. 

Next I want to switch over. The budget—is that me, with this sound here? All right. The budget includes $20 million to continue 

preliminary design for Offshore Patrol Cutter, the OPC. The OPC 

is intended to replace the 210- and the 270-foot Medium Endurance 

Cutters, the MECs. The Coast Guard intends to award a construction contract in the fiscal year 2016 budget, and estimates the acquisition will not be complete until the mid-2030s. Is this level of 

funding sufficient to keep the OPC on its current timeline, in your 

opinion? 

Admiral PAPP. Yes, sir. 

Mr. SOUTHERLAND. OK, all right. I am going to ask just a series 

of questions. They should be easy. 

Three shipyards are currently challenging the Coast Guard’s decision not to select them for the OPC final design phase. What impact will these challenges have on the OPC procurement schedule, 

if any? 

Admiral PAPP. We believe there will be negligible impact at this 

point. It is part of the process. They are entitled to put in the protest. We are working through that right now. I am confident at this 

point that the—our decisions will be sustained, and then we will 

continue moving out on it. 

Mr. SOUTHERLAND. Very good. Are—how are any concerns over 

cost factoring in to the final OPC design selection? Is there any— 

I know it is attracting a lot of attention, and so I am—— 

Admiral PAPP. The cost of the ship that we will eventually build? 

Mr. SOUTHERLAND. Yes, yes. 

16 

Admiral PAPP. It is our driving requirement. I have made that 

clear at every group, whether it is testimony up here, or speaking 

in front of industry. I have continually insisted that affordability 

is the driving requirement for this ship. 

And I think that our contracting vehicle is unique in the fact 

that we have put in our contract—and that is part of why it took 

us a little bit of time to get this going—is I wanted to have affordability right in there. We have made it known to the shipyards 

what our—what we think our budget is, what we think that ship 

should cost, and that has got to drive their process, if they want 

to be selected as the final candidate for building this ship. 

Mr. SOUTHERLAND. Very good. Again, Admiral, thank you for 

your service, thank you for your candor. And I appreciate you being 

here today. And godspeed in your future endeavors. 

Admiral PAPP. Thank you, Mr. Southerland. 

Mr. SOUTHERLAND. With that I yield back. 

Admiral PAPP. Thanks. 

Mr. HUNTER. Thank the gentleman. And I would be remiss if I 

didn’t introduce the newest member of the Coast Guard Maritime 

Subcommittee, Mr. David Jolly from Florida, the newest Member 

of Congress and to this committee. David, welcome. 

And, with that, I would like to recognize Mr. Larsen for 5 minutes. 

Mr. LARSEN. Thank you, Mr. Chairman. I just want to note, just 

in the Pacific Northwest, you are all doing search and rescue, your 

recreational boating enforcement and safety, aid to navigation, you 

have got a Navy escort mission there, as well. And, on top of that, 

a couple years ago you worked with our office on kayak safety after 

a rash of kayakers drowning, just flat-out getting caught in the 

currents. And we had to develop a volunteer kayak safety program. 

And so, I mean, you kind of do it all. And so I understand your 

discussion about things being a top priority, because the priority 

some days for the Coast Guard is what shows up on the desk that 

day. Certainly got to do it. So I appreciate it. 

I also was intrigued by your comment, Admiral Papp, as you 

might imagine, because I believe that you said the Polar Sea may 

be a good option for icebreaking. And as far as I am aware, that 

is the first time that the Coast Guard has said that rehab could 

be a good option. Can you talk about the retrofitting of the Polar 

Sea? Is it attractive? What is the direction the Coast Guard 

planned to take on that? 

Admiral PAPP. Yes, sir. I want to make sure for the record I 

didn’t say ‘‘a good option.’’ I said it may be an option. I might have 

said—— 

Mr. LARSEN. For the record, an excellent option. 

[Laughter.] 

Admiral PAPP. It is certainly an option. It was demonstrated in 

the business case analysis, and I have known it has been out there 

as an option. Four years ago, I believed that the best option is to 

build a new icebreaker. And we put Polar Star back in service to 

provide us a gap of about 10 years in order to get it built. 

The budget was looking a little challenging 4 years ago; it looks 

even more challenging right now. And if we need to stay within, 

you know, somewhere in the range of $1 billion a year in acquisiVerDate Aug 31 2005 15:24 Oct 09, 2014 Jkt 000000 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 P:\HEARINGS\113\CG&JOI~1\3-26-1~1\87288.TXT JEAN
17 

tions for the Coast Guard, I just don’t see how we can fit an icebreaker in. 

The Offshore Patrol Cutter is my highest priority for the Coast 

Guard. I need to fit that in the budget. And I fear that if we try 

to fit the cost of an icebreaker in there, it would displace the Offshore Patrol Cutter, or some other very important things. So, I— 

my number one option is to get support across the interagency, 

those agencies that benefit from the support of an icebreaker, to 

contribute towards the construction of it. That would be my first 

choice. 

My second choice, however, when I start looking at what can I 

fit within our acquisition budget, refurbishment of the Polar Sea 

may be a viable option for that. I would say what you would want 

to do is overlap it so as Polar Star is coming towards the end of 

that decade of service after refurbishment, we have Polar—I think 

I said Polar Star—— Mr. LARSEN. Yes, right, yes. 

Admiral PAPP [continuing]. Polar Sea would be available to start 

phasing in, working up, so that we could use her for another 10 

years. And maybe you come up with a plan where you flip-flop. I 

don’t know. And there will be other people making those decisions 

in the out-years. So I am just speculating right now of what those 

options are that are out there for us to potentially look at. 

Mr. LARSEN. And right now, the budget, there is $6 million in the 

request for design, just to get started on design? 

Admiral PAPP. Yes, sir. I don’t think—I think that is money well 

spent. I think at some point, if the Nation can afford it, we need 

to build another new polar icebreaker that complies with modern 

environmental standards that can take care of the mission requirements of the National Science Foundation, and all those things 

that work across the interagency. I still believe firmly we need to 

build a new one. But we don’t have the wherewithal right now. But 

doing the preliminary work should inform decisions that are made 

3, 4, 5, maybe 10 years from now. 

Mr. LARSEN. All right. That is all I got. Thank you. I yield back, 

sir. 

Mr. HUNTER. Thank the gentleman. The gentlelady from Florida, 

Ms. Frankel, is recognized. 

Ms. FRANKEL. Thank you, Mr. Chair. Thank you. Welcome. 

Thank you for being here, and for your service. My father was in 

the Coast Guard. My son was a United States Marine. So I have 

a lot of respect for what you do. 

But I want to touch on a little bit of a sensitive issue. You know, 

I think it is very important that you have—get the resources that 

you need, the equipment, and so forth. But there is nothing more 

important than the people who—you are shaking your head, you 

agree—the people who serve us, and that they serve with dignity 

and respect for each other. 

As I am sure you are aware of, there has been a lot of discussion 

about sexual harassment in the military, not just the Coast Guard, 

but the military. And this is particularly a sensitive issue, because 

I have had constituents come to me—and one, in particular, I am 

not going to get into her situation—but who was a member of the 

Coast Guard, and a very brave young lady who was subjected to 

18 

sexual harassment by her commander, who eventually was prosecuted. 

In any event, because of her situation—actually resulted in this 

Congress passing some legislation last year, and I wanted to ask 

you about that. The—Congress mandated that the Coast Guard expedite processing of transfer requests from victims of sexual assault, so that they can physically get away from their attacker. And 

I am just wondering whether or not you have started to implement 

that policy. 

Admiral PAPP. Oh, yes, ma’am. Absolutely. We refer to it as a 

safe harbor program. And there is actually a little bit of a distinction there, because sometimes the victims do not want to leave 

their unit where they are comfortable, they would prefer to have 

the alleged perpetrator transferred. And we offer that option. 

We had a little bit of growing pains with it. In fact, I was at a 

large gathering—we call it all-hands meetings—as I travel around. 

For the last 2 years, every all-hands meeting—and I have spoken 

to—you know the size of our Service—we keep track, and I have 

spoken to, I think, about 35,000 people face to face, right there 

with them. And almost my entire discussion is on sexual assault, 

treating our people with dignity, harassment, hazing, whatever it 

might be. We have an eyeball-to-eyeball discussion. 

And in one of those discussions a young lady raised her hand, 

and she was a victim. She had been transferred. And we didn’t necessarily handle it very well, but she felt—this was a seaman apprentice—and she got up and raised her hand with the Commandant. Now, she was very nervous, but we looked into that particular case, it gave us some lessons learned on how we are dealing 

with it now, and we will continue to work that process, to make 

sure that each and every case is handled as an individual case, and 

with dignity. 

Ms. FRANKEL. Well, thank you for that. And I was—really, my 

followup question was going to be what else are you implementing 

in terms of outreach to not only the superior officers, but also, you 

know, the recruits that come in. What type of outreach are you 

doing with them, and what policies are you changing? 

Admiral PAPP. We have approached this head on. It started out 

with a flag officer, a group of admirals getting together for an action group to come up with a strategic plan. We assigned a Coast 

Guard captain to head our military campaign office on this. We 

have regular meetings at the White House, we have regular meetings with the Department of Defense. And, frankly, those inform 

our decisions, but I want to do more than everybody else to make 

sure our people are taken care of. And we have attacked this aggressively. 

As I said, I have gone and personally met with every coastguardsman. In my state of the Coast Guard speech this year, which 

I spoke to 500 people in a room, but it goes out to each and every 

member of the Coast Guard, and they are required to view it at allhands sessions, I spoke directly to the field, and talked to them 

about my concerns, what we were doing. And at the end of the day, 

though, it has to be those senior officers, and working its way down 

throughout the organization, through our chief petty officers, taking on this thing. 

19 

And my mission, my message, has been there can be no bystanders. Everybody has to be involved. It is their duty to be involved 

on this, and duty demands courage. And I—the anecdotal feedback, 

and people who have come to me, including the seaman apprentice 

up to a captain who was assaulted 26 years ago, they have had the 

courage to come forward now and talk to me. That captain, on the 

offense that happened 26 years ago, we had it investigated. And we 

came to a conclusion for that officer. 

So, this is very personal for both the master chief and me, all our 

senior leadership, and everybody is engaged. 

Ms. FRANKEL. Well, I thank you for your attention, and I hope 

you will continue to be vigilant. I know that we will. And I thank 

you for your time today. 

Admiral PAPP. Yes, ma’am. And rightly so. And we appreciate 

the oversight on this issue, and pushing us forward on this. And 

also, for accommodating some of the concerns we had within the 

military, in terms of potentially taking out of our hands—this has 

to be handled by us, and we appreciate your support. 

Ms. FRANKEL. Thank you, sir. 

Mr. HUNTER. Has the gentlelady yielded? 

Ms. FRANKEL. Back, Mr. Chair. 

Mr. HUNTER. Thank the gentlelady. I would like to recognize Ms. 

Hahn from California for 5 minutes. 

Ms. HAHN. Thank you, Mr. Chairman. I appreciate us having 

this opportunity to discuss the budget with the Coast Guard. I wish 

we would have just had one panel, Mr. Chairman, because I have 

some questions for the Chairman of FMC, Mario Cordero, and, unfortunately, I am going to have to leave; I have a conflict. So I wish 

we could have all been together on this. But I am just raising my, 

you know—— 

Mr. HUNTER. Be happy to submit any questions for the record. 

Ms. HAHN. Thank you, I am going to do that. 

So I—it is really disturbing to me to look at what we are imposing on the Coast Guard through our budget process: cuts to personnel, cuts to military pay, the—removing the Bravo Zero readiness, the—use—airborne use of force we are cutting, aircraft flighthour reduction, it is disturbing to me. 

And I know that the Coast Guard has—for the last several budget cycles, has really done a good job of doing—it is not even the 

same, you are kind of doing more with less. So it is disturbing to 

me that we are putting these budget restrictions on the Coast 

Guard. 

And I want to thank Ranking Member Garamendi. Apparently, 

before I arrived, you brought up the issue of personnel reductions, 

and how that could impede the Coast Guard’s ability to prevent 

bombs from going off at one of our ports. I will say, for the record, 

I still believe, ladies and gentlemen, that our ports are the most 

vulnerable entryway into this country. And I—every day, on the 

briefings that I get, I am more and more concerned about what can 

or what is coming in and out of our Nation’s ports. So just know 

that I appreciate what you are doing. And it is unfortunate that 

our budget doesn’t support the incredible mission that the Coast 

Guard has been given to protecting our coast. So I wish our budget 

20 

reflected the real security risk that I believe exists in our Nation’s 

ports. 

Let me just touch on one issue, Admiral Papp, and that is panga 

boats. And, of course, it became sort of highlighted in this country 

when we lost one of our coastguardsmen who was killed after a 

panga boat rammed the ship he was on in southern California. 

So, wondered what we are doing. Any new information on our attempt to contain these boats? We have any new actions that we are 

taking to minimize the risk of these panga boats? And how have 

you done recently? It feels like I haven’t seen any high-profile case 

of those off the cost of southern California, but wondering if you 

can give me an update on how you have been able to stem the tide 

of this threat of panga boats. 

Admiral PAPP. Thank you, Representative Hahn. And also, let 

me thank you once again for being out there for the memorial service for Senior Chief Terrell Horne. The family is doing well. I included a bit about Senior Chief Horne in our new publication of 

Coast Guard Pub 1, talking about the qualities of leadership that 

he demonstrated. We provided a copy of that to his wife, and, of 

course, we just passed over a 1-year anniversary there. But once 

again, thank you for being there, and bringing it up. 

The threat still exists. And, in fact, sequestration hurt us a lot. 

This last year—I think we went from roughly—oh, I think it was 

about—I will have to get you the—we went from 124,000 pounds 

of marijuana in fiscal year 2012 interdicted there to 81,000. So we 

had about a 35-percent reduction last year under sequestration, 

simply because we can’t keep sufficient assets out there if we don’t 

have the fuel to run them and the operating hours. Sequestration 

is the big thing that I fear. And we still have that specter out there 

for fiscal year 2016, if we don’t have another budget agreement. 

So, there is a direct correlation between reduction in the budget, 

which we got in sequestration, to people out there on the water. 

Everything we have indicates that people are using that route 

more and more, whether it is actually landings that we see, boats 

that are found on the beach. As we tighten up the border—and 

there has been a lot of resources put by our department along the 

southwest border—really, as a coastguardsman, I say a land border 

is much easier to defend, because you know where it is. In the maritime, there are thousands and thousands of miles and different 

routes you can take, and they can try to evade us, and we only 

have so many boats and aircraft that we can put out there. 

The other thing is we are making good success by staging a 

major cutter out there, which we had not used before. We put a 

major cutter out there that is flight deck-capable, can carry a helicopter, can use airborne use of force, and we were seeing great success. But major cutters require a lot of fuel, and we had to cut back 

there, as well, under sequestration. 

We are getting back to our historic numbers of cutters underway 

now, with the restoration and the fiscal year 2014 budget. But as 

we go into the 2015 budget and beyond, I become increasingly concerned that we just won’t have the assets out there in sufficient 

numbers to attack this new route that people are taking, and 

smuggling around the southwest terrestrial border. 

21 

Ms. HAHN. Well, thank you. And I appreciate that. And certainly 

drugs is one of the problems, but I also worry about other uses of 

those boats. And, yes, there was a landside docking that was made 

less than a mile from my home in San Pedro. It was in Rancho 

Palos Verdes, I believe, 19 folks made land in a panga boat. 

So, I appreciate your work. And again, it is unfortunate that 

some of the methods you were describing you have had to cut, in 

terms of how you operate within this budget. So thank you. 

Admiral PAPP. Yes, ma’am. 

Ms. HAHN. Appreciate that. I yield back no time. 

Mr. HUNTER. Thank the gentlelady from California. And I would 

like to recognize the former subcommittee chairman, Mr. 

Cummings from Maryland. 

Mr. CUMMINGS. Thank you very much, Mr. Chairman. Admiral 

Papp, this is obviously your last budget hearing—I am sorry I 

wasn’t here a little bit earlier, got an Oversight Committee hearing 

going on right now—but I want to just take an opportunity to 

thank you for your leadership. I have known you for quite a few 

years now, and I want to thank you for your candor and focus on 

identifying and addressing head-on the challenges that continued 

cuts in resources are creating for the Coast Guard. 

I have often said that you all are called on to do more and more 

with less and less. But one of the—and I know you have talked 

about the cuts extensively before I got here, but there was one area 

that I was most concerned with, because it is an area that I have 

worked a lot in, and that is the whole marine safety situation. 

What impact will the budget cuts have on marine—the marine 

safety workforce? And how do you see that playing out? 

Admiral PAPP. You know, Mr. Cummings, there could be some 

individual reductions across the marine safety workforce, but they 

are not many. Where the largest effect is is our VBS teams, the 

visit, boarding, and search teams that we discussed earlier here. 

They generally fall at the sector level. They are combinations of 

people with marine safety experience or response experience that 

we put together as teams to go out. 

If we have vessels which are suspect, or we have sanctions on 

that we require to stay offshore before they come into port, these 

teams are sent out there to inspect. We have had to cut back a 

number of those teams within this budget. So there would be an 

impact on some people within the marine safety field that are a 

part of those teams. 

We are not going to discontinue those inspections. What we will 

have to do is come up with other means of doing that, putting together teams from other organic sources that we have, or Coast 

Guard cutter boarding teams, et cetera, to continue on. It just 

means some of the people work harder. 

Mr. CUMMINGS. As you will recall, one of the big issues that we 

were trying to address before, and because we got a lot of complaints from the maritime community, is whether we always had 

qualified inspectors, those who knew exactly what they were supposed to be doing. And I think we made some headway there. 

How do you see that, making sure that we have—the people 

doing these inspections are doing them in an appropriate way, and 

lifting up the highest standards? 

22 

Admiral PAPP. Yes, sir. I make a point, when I travel around— 

we were talking earlier about my visits out to the field units—I 

visit a lot of our Coast Guard sectors. And, almost always, when 

I go there I ask for—to have them take me through the prevention 

department, where our marine safety people are, to ask them how 

is it going. I know about—I visit our Centers for Excellence, where 

we are training people. We have made vast improvements over the 

last probably 6 years or so. We continue on track. We are trying 

to retain as many people as we can. 

And, in fact, part of my emphasis to make sure this program is 

going is both my Deputy Commandants for operations—first, Vice 

Admiral Salerno, and now Vice Admiral Neffenger—are probably 

the two best marine safety specialists we have in the Coast Guard 

to give that additional emphasis to that program. 

Admiral Neffenger is going to be the next Vice Commandant. I 

have complete confidence that we will keep our foot on the gas 

pedal, in terms of our marine safety enhancement plan that was 

started under your tenure. 

Mr. CUMMINGS. Again, I want to thank you for having your fingerprints on the past of the Coast Guard, the present. And, because 

of all the things that you have done over the years to have your 

fingerprints on the future. May God bless you. 

Admiral PAPP. Thank you, sir. And thanks for your oversight 

over the years, as well. 

Mr. HUNTER. Thank the gentleman. I have one last question. 

Master Chief, when you talk to your young Coasties, what is 

their biggest complaint? 

Master Chief LEAVITT. Well, the biggest complaint we have when 

I get out there—because there is a lot of different complaints—if 

you are asking what the biggest complaint is, it is to look at the 

military pay and benefits. What does that look like? What is the 

challenges? What is the budget going to roll on that? And then how 

those things worked out. 

Within the Coast Guard, the biggest complaints depends on what 

unit you go to. Right now, the biggest ones I get is from these older 

ships. You know, at the end of the day—and it is no different in 

the Marines—what you want is a well-trained, equipped, and proficient crews, and you want to take care of your shipmates and 

their families. That means success for our future. So, as we push 

forward, we need to focus on those things. 

And so, when they are working on a ship that is 40 years old, 

that takes a lot of time and effort. And that has already been addressed here. But the real cost is when you go to a unit like—I just 

went out to the Scioto. We didn’t even talk about our river tender 

fleet. And they are out there setting buoys out there in the Midwest. I went out to its 50th year anniversary a couple years ago. 

And the crews are working hard. If you did walk on board that cutter, you can see the professionalism and pride that is put into that 

ship. They take really good care of it. But, at the same time, the 

amount of work and detail it takes to keep that cutter running is 

astronomical. It is extraordinary. And that is who we are, but there 

is a cost to that. 

And the last thing—and so, for me, and for most of the crew out 

there, we got to keep our crews trained. That is one of the biggest 

23 

complaints we have. And proficiency is a huge piece of that. See, 

in the Coast Guard, we don’t just operate. We have so many different missions out there. I am a surfman and I am a cutterman. 

In other words, I could be off the Columbia River right now, in 

the dark, in the fog, searching for somebody in 20-, 30-foot surf. 

And the risks are real high. So I want to make sure my crews are 

trained. I want to make sure they are proficient. I could be on a 

cutter up in Alaska, operating on the Bering Sea. Those are the 

most important things, and those are the most important things 

my senior and junior members bring up to me, make sure our 

crews are trained and proficient. 

And you have really helped us a lot with the recapitalization efforts that are happening right here, and you have really helped us 

a lot in regards to supporting our families with the housing and 

with the child care. You helped bridge that gap in parity. 

And, you know, despite all these budget challenges we have out 

there, we have done a few things within the Coast Guard to help 

our families out. And one of those things we have done is put out 

what we call a program—this is for our people and our families— 

called CG support. It is a much more comprehensive program that 

our people can get into, get counseling, where there is education, 

financial. Because, as times change, the dynamics of the families 

change, depending on what region you live in, and all those other 

things. And people are really important; those things won’t change. 

But well-trained, well-equipped, proficient crews is success for 

our people. We have got to support our members, and we have got 

to support our families. How we balance that is going to be the key, 

Mr. Chairman. Thank you. 

Mr. HUNTER. Thank you, Master Chief. Admiral Papp, thank 

you. Godspeed. 

Admiral PAPP. Thanks, Mr. Chairman. 

Mr. HUNTER. It is time for the second panel. 

(Pause.) 

Mr. HUNTER. All right, we are going to start our second panel. 

On our second panel we have the Honorable Paul ‘‘Chip’’ 

Jaenichen, Acting Administrator of the Maritime Administration, 

and the Honorable Mario Cordero, Chairman of the Federal Maritime Commission. 

And also in the audience today I want to recognize Commissioners Dye and Doyle on the FMC. Thanks for being here today. 

Mr. Jaenichen, you are now recognized for your statement. 

TESTIMONY OF HON. PAUL N. JAENICHEN, ACTING MARITIME 

ADMINISTRATOR, MARITIME ADMINISTRATION; AND HON. 

MARIO CORDERO, CHAIRMAN, FEDERAL MARITIME COMMISSION 

Mr. JAENICHEN. Good morning, Chairman Hunter, Ranking 

Member Garamendi, and members of the subcommittee. I am 

pleased to appear before you today, and I thank you for the opportunity to discuss the President’s fiscal year 2015 budget priorities 

and initiatives for the Maritime Administration. This budget request supports MarAd’s mission to foster, promote, and develop the 

U.S. merchant marine, and it reflects the MarAd’s priorities of 

maintaining security and preparedness, investing in mariner trainVerDate Aug 31 2005 15:24 Oct 09, 2014 Jkt 000000 PO 00000 Frm 00035 Fmt 6633 Sfmt 6633 P:\HEARINGS\113\CG&JOI~1\3-26-1~1\87288.TXT JEAN
24 

ing, enhancing U.S.-flag competitiveness, and fostering environmental sustainability. 

The primary goal of the fiscal year 2015 budget request is to continue funding for MarAd readiness programs that support Department of Defense sealift capacity. These programs are critical to ensuring that vessels and mariners are available for national security 

needs, and often with little notice. 

A recent example is the mobilization of the motor vessel Cape 

Ray, one of 46 vessels in MarAd’s ready reserve force, which is currently being used as the platform for destruction of the highest priority, Syrian chemical weapons. The Cape Ray is the United States 

key contribution in the international effort to eliminate the Syrian 

stockpile of chemical weapons. And, of most significance, this is the 

first time the destruction of chemical weapons will be accomplished 

at sea. 

Converting a sealift vessel into a U.N.-certified chemical weapons 

destruction facility, from concept to reality, was no easy task. Preparations were completed in record time, and—given the scope of the 

mission, the support of the maritime labor unions, the number of 

U.S. Government agencies, and commercial companies involved, 

and extensive modifications that were required to be completed. 

The fiscal year 2015 budget request includes $291 million in 

funding for the ready reserve force program, as you pointed out in 

your opening remarks. That is to ensure those vessels continue to 

be available to support Department of Defense strategic sealift requirements, as well as the capacity to support and provide humanitarian assistance and disaster response. The MarAd program most 

critical to meeting DOD sealift requirements is the maritime security program. The MSP provides operating assistance funds as a 

stipend to a fleet of 60 commercial, privately owned, military-useful, U.S.-flagged, and U.S.-crewed ships. The MSP fleet ensures 

that DOD has a shared access to a global fleet of ships, and an 

ocean-borne foreign commerce with the necessary intermodal logistics capacity to move military equipment and supplies during both 

armed conflict and national emergency. 

Moreover, as this subcommittee knows, the MSP fleet supports 

a pool of actively sailing U.S. mariners that we use to crew our 

Government sealift fleets. And I thank the subcommittee for your 

role in providing funding at the full authorized level in the Consolidated Appropriations Act of 2014. The President’s budget request 

continues full funding for that program in fiscal year 2015. 

However, there are challenges facing the MSP. The most immediate challenge is the declining cargo, specifically in defense cargo, 

due to the drawdowns of activity in Afghanistan and Iraq. Declining Government cargo volumes force greater reliance on commercial cargo in the global market. And, given that we have an overabundance of capacity, it makes booking cargo for the U.S.-flag 

fleet difficult in the international market. 

This is why the MarAd is actively working with industry and 

Government stakeholders to develop a national maritime strategy. 

And that is to support the U.S. maritime industry, and ensure the 

future availability of U.S.-flag vessels for both national defense and 

for national—and for economic security. 

25 

MarAd is also working to complete our cargo preference rulemaking, as authorized by Congress. And while I recognize there is 

frustration, and that we haven’t completed this rule, I can assure 

you that it is one of the Department’s highest priorities. 

The President’s budget request also continues important investment in mariner education and training. The request includes 

$79.8 million for the U.S. Merchant Marine Academy, and $17.7 

million for the six State maritime academies, of which $11.3 million will be used for the ever-increasing maintenance and repair 

costs for the school ships that are rapidly nearing the end of their 

useful life. 

It also provides $3.1 million for Title XI guaranteed financing 

program, allowing for the administration of the—the current subsidy balance of $73 million supports approximately $735 million in 

projects. These items represent the key policy proposals and initiatives highlighted in the President’s fiscal year 2015 budget, and we 

will continue to keep this committee appraised to the progress of 

our program activities and initiatives in these areas. In the coming 

year, and in particular, the work of the Congress, we are going to 

be focusing on the development of the national maritime strategy. 

Mr. Chairman, I thank you for the opportunity to present and 

discuss our fiscal year 2015 budget, and I am happy to respond to 

any questions that you or members of this subcommittee may have. 

Mr. HUNTER. Thank you. Mr. Cordero? 

Mr. CORDERO. Mr. Chairman, Ranking Member, and members of 

the subcommittee, thank you for the opportunity to discuss the 

President’s fiscal year 2015 budget for the Federal Maritime Commission. With me today are my colleagues Commissioners Rebecca 

Dye and William Doyle. 

With the committee’s permission, I would like to summarize my 

testimony, and request that my full written statement be included 

in the record as submitted. 

The President’s budget for the Federal Maritime Commission 

provides $25,660,000 for fiscal year 2015. This funds 124 full time 

equivalent employees, where $18,387,000 goes directly to salaries 

and benefits, to support the Commission’s programs. As in previous 

years, rent, salaries, and benefits, and other necessary expenses 

alone account for 96 percent of our budget. 

The Commission’s budget represents the spending levels necessary to conduct the Commission’s statutorily mandated activities. 

Those activities include cultivating a regulatory system that furthers competition, facilitating commerce to ensure reliable service 

to U.S. exporters and importers. 

Furthermore, acquiring IT hardware and software to make sure 

our staff can provide these services is paramount. The Commission’s IT situation is dire, and we have not been able to undertake 

proper backup and disaster preparedness measures. Without needed upgrades in 2015, and future years, the agency’s operations 

could be crippled. 

The recovery in the U.S. liner trades that began a few years ago 

continued in 2013 with U.S. container exports and imports reaching 30.5 million TEUs. And, of course, this is in the scope of a $944 

billion international trade market. 

26 

The Commission continues to closely monitor the service cooperation between carriers in alliance agreements filed with the Commission, such as the recently effective P3 Network Vessel Sharing 

Agreement. 

The Commission continues to work diligently to support the Nation’s push to increase exports, the vast majority of which move by 

ocean and necessarily travel through our Nation’s ports. Ports are 

the gateways that serve more than 80 percent of the volume of 

international trade; and the flow of exports, in particular, has the 

potential to create jobs for American business. 

The Commission monitors industry innovations and transitions, 

such as ocean carriers, divesting themselves of their chassis fleets 

to reduce costs and the growth of chassis and equipment-sharing 

agreements. 

The Commission continues to work with other Federal agencies 

on projects aimed at better understanding and finding solutions to 

supply chain bottlenecks that might negatively affect U.S. exporters. The Commission’s Office of Consumer Affairs and Dispute Resolution Services’ Rapid Response Team still serves the industry to 

quickly and inexpensively resolve shipping disputes generated by 

equipment availability. 

To reduce regulatory burdens, the Commission exempted foreignbased NVOCCs from certain publication requirements for negotiated rate arrangements. The Commission will continue to engage 

the shipping public, and the regulated industry, to explore, through 

its retrospective review of regulations, how it can streamline and 

improve its rules. 

With increased funding for fiscal year 2015, the Commission will 

be able to comply with governing IT statutes, and implement several information technology programs and initiatives to improve efficiency, convenience, and effectiveness of carrying out its congressional mandate. As noted, the Commission is at the beginning of 

a multiyear transition to upgrade information technology in order 

to better serve the public, and create staff efficiencies. With the 

committee’s support, the Commission will regain a solid footing in 

its IT infrastructure. 

The Commission’s Office of Consumer Affairs Dispute Resolution 

Services facilitates discussions between consumers and cruise lines 

to resolve disputes. The Commission also provides relief to smaller 

cruise ship operators by allowing them to reduce their coverage requirements, recognizing that there may be alternative forms of financial protections available to their customers. These alternative 

security arrangements, approved by the Commission, free up capital for passenger lines to reduce costs. 

The Commission’s internal Marine Environmental Committee 

continues to study environmental initiatives in the industry, and to 

highlight the innovations and work being done in this area. 

The Commission’s Bureau of Enforcement, its area representatives located in key maritime corridors, and its investigative staff 

continue to take action to address unfair and deceptive shipping 

practices that negatively impact shipping business costs, as well as 

such practices that pose safety and security risks. 

In fiscal year 2013, the Commission collected approximately $3 

million in civil penalties for Shipping Act violations. To date, the 

27 

Commission, for fiscal year 2014, has collected approximately $2.25 

million in penalties. 

The FMC’s unique mission affords it the opportunity to assist 

frontline security efforts by providing information regarding background of parties using our Nation’s supply chain, including those 

with direct access to seaports. Last summer, the FMC signed an 

updated memorandum of understanding with U.S. Customs and 

Border Protection that allows the FMC to share data in order to 

ensure compliance with the SAFE Port Act. With added IT capabilities, the Commission will then be able to submit necessary information to the ACE system to fulfill its MOU obligations. 

Mr. Chairman and members of the subcommittee, I thank you for 

your support of the Federal Maritime Commission throughout the 

years. It is an honor to be here before this subcommittee. And I am 

happy to answer any questions you may have. 

Mr. HUNTER. Thank you, Chairman Cordero. I think you are 

down to just the ranking member and I. So we can take our time. 

Administrator Jaenichen, I guess my first question is how hard 

is it to be flexible with the MSP? How hard is it to be flexible with 

Food for Peace? Meaning if we are down in cargo one year, we are 

not in any conflicts, then you are going to have fewer ships needed. 

The next year you may have need for 10 more ships than you had 

the previous year. How hard would that be, to be able to implement those changes, kind of on the fly, because you don’t really 

know right now what you will have next year? You could always 

have something pop up. How would you work to make it more flexible to where the MSP can respond to the market and to what the 

U.S. Government’s, say, excursions are that particular year? 

Mr. JAENICHEN. I thank you for the question. I think there is a 

couple things we would have to take a look at. The basic tenants 

of the MSP program was threefold. One was the stipend amount. 

The second was the fact that we—there would be access to Government-impelled cargo, primarily Department of Defense cargo, that 

you referred to that fluctuates fairly significantly. And final, to 

commercial cargo. 

As we look forward on that program, if you have a decrease in 

one of those particular areas, or you keep something else the same, 

we need to take a look at adjusting one of the other two areas. Either we increase the opportunity for commercial cargo, or potentially you increase the stipend rate to be able to level-load that 

over time. 

We would have to take a look at—because of the way the program is currently authorized, in terms of how we might be flexible, 

currently today it is authorized at 60 ships at the 3.1 stipend level, 

but we do have some specific requirements in the administration 

of the program, in terms of the commercial viability of those ships. 

I have been consulted by a couple of companies who have told us 

that right now it is not working, in terms of being able to make 

it feasible, financially, and that is going to create problems. So I 

think we are going to have to take a look at what we can do, going 

forward, with regard to that program. 

Mr. HUNTER. Does—on a different note, does MarAd have any 

say or control or jurisdiction or purview over building an icebreaker? Meaning, if it is a whole-of-Government approach, if every 

28 

agency, including DOD and Homeland Security and State and the 

EPA, and everybody wants to be involved in this—and Department 

of Energy, I would guess, too, you could name the departments— 

what organization do you think should have kind of the umbrella 

over all of those different agencies trying to come together on an 

icebreaker? 

Mr. JAENICHEN. I think, primarily, as you are taking a look at 

that particular mission set, that clearly falls within the Coast 

Guard’s purview. As you take a look at across the—all of the whole 

of Government, I think we would have to take a look at a solution. 

MarAd is really focused on the commercial side, from the ship financing side, specifically in the Title XI, in terms of what we do. 

That particular vessel would not be crewed by U.S. maritime labor 

or U.S. merchant marine. So—— 

Mr. HUNTER. If you lease it, it will. 

Mr. JAENICHEN. Potentially it might. That might be something 

that we could take a look at. 

But I think, as Admiral Papp pointed out, as you look at a leasing-type option, that always is going to cost you significantly more 

in the long run than it would be if you purchased a vessel outright. 

Mr. HUNTER. So back to the—who should have purview over 

bringing all these different agencies and departments together, is 

the Coast Guard capable of that? Or should it be an organization 

like MarAd, that has different interests and works with different 

agencies and different departments? Who is to pull everybody together? 

Mr. JAENICHEN. I think I would like to take an opportunity to 

sort of think a little bit deeper about that particular issue and get 

back to you, sir. 

Mr. HUNTER. OK, thank you. Chairman Cordero, let’s talk about 

ocean transportation intermediaries. 

In your statement, your full statement that you submitted, you 

argue that the advanced notice of proposed rulemaking concerning 

the licensing of ocean transportation intermediaries somehow reduces regulatory burden. I could not disagree more. The proposed 

rule will significantly increase regulatory burdens for OTIs, and it 

does so without a clear or compelling public policy purpose. 

My two questions are, one requirement included in the regulation would increase levels of responsibilities for ocean transportation intermediaries by as much as 50 percent. How many cases 

are the FMC aware of where an OTI exceeded its current level of 

financial responsibility? And are such large increases warranted for 

so few instances? 

Mr. CORDERO. Well, thank you, Mr. Chairman, for the question. 

Mr. HUNTER. And let me couch that in context. You are not a— 

you are not necessarily a regulatory agency. You are an agency 

that is there to promote and foster commerce, when it comes to 

shipping and maritime, not fine or introduce more regulatory burdens on the industry. We have plenty of groups that already do 

that, right? What you are there to do is make sure that that industry is flourishing, and do everything that you can in your power to 

make sure that that industry and that commerce stays strong. So 

that is the context in which this question is couched. 

29 

Mr. CORDERO. Thank you, Mr. Chairman. First of all, as you 

have mentioned, the mission of the FMC is to ensure that we have 

efficient, reliable ocean transportation, international ocean transportation system. Second is to make sure we protect the shipping 

public against deceitful and unlawful practices. 

With that in mind, I think the whole perspective and the intent 

of the OTI ANPR is to streamline, not only with regard to the 

rules, and address the regulatory burden aspect that you have referenced. And I will say that, with regard to the advance notice, at 

my direction, staff has presently composed a memorandum that 

has been presented to the Commission to substantially mitigate 

some of the concerns that have been addressed by the industry and 

your constituents. So I am very confident that, going forward, we 

will be able to move forward in such a way that I think most people will see that our objective here is, in fact, to streamline this 

process, and to protect the shipping public. 

Mr. HUNTER. So let’s talk about—and you said—let me see—in 

fiscal year 2013 the Commission collected $3 million, roughly, in 

civil penalties for Shipping Act violations, and that is over $2 million more than the $838,000 it collected in fiscal year 2012. So you 

over—you are basically 300 percent over the previous fiscal year. 

Right? 

Mr. CORDERO. In terms of the penalties? 

Mr. HUNTER. Yes. 

Mr. CORDERO. I think, as I have referenced, I think the penalties 

scenario—and I can bring some context to that—in accordance with 

the Shipping Act, we are mandated to address some of the violations that refer to the Shipping Act. I think some of the penalties 

that are involved are not just the OTI community, so to speak. I 

think there are some recent cases involving carriers, in terms of 

vessel carriers. And I think some of those penalties that I have referenced for fiscal year 2014 involve some of these cases. 

So, in fair context, I think the penalties that I have made reference, are ones that are mandated we address, in terms of those 

entities who do not follow the rules in accordance with the Shipping Act. 

Mr. HUNTER. I understand. I guess my fear and my reason for 

asking these questions is it seems like everybody is going to have 

their hands in the maritime cookie jar, and you are going to have— 

I mean it is great to have good regulation that stops fraudulent 

practices, and the Coast Guard to make sure that the ships are 

safe, and the EPA checks on the ballast water, and everybody has 

their fingers in this. And to some extent, it does become burdensome, and it becomes—it makes our U.S. carriers switch flags and 

go to other countries. And that is one reason that they do it, is because it costs so much, and it is just so arduous to do it as an 

American-flag ship, when it comes to Commerce. 

So, I would just—I would urge you, in the end, to get with Administrator Jaenichen, whoever the next Coast Guard Commandant is going to be, whoever the next head of the EPA is going 

to be, the Department of Energy, Department of Labor, which all 

of our mariners have to live under and comply with those rules. 

Everybody has got their hands in the maritime cookie jar. And if 

we could kind of maybe funnel those into one agency with a clear 

30 

set of rules, and stop making up different rulemaking procedures 

to increase the burdens more on our shippers—because it is not 

like they are coming in droves to be American-flagged ships. And 

there is a reason for that. 

And I think our job, and your job, is to make it as easy as possible, and say, ‘‘Hey, here we are. You want to ship with an American flag, with an American crew.’’ That is what you all are here 

for, and it is to promote American shipping on American ships. And 

as it gets more expensive and cost-prohibitive to do that, you are 

going to have more ships dropping that American flag and going 

to flags of convenience or to other countries. 

So, with that, thank you both for your service. And I am going 

to yield now to the ranking member, Mr. Garamendi. 

Mr. GARAMENDI. Thank you, Mr. Chairman. I believe there is a 

study that has been done in the recent past that addresses the concerns that you have about the ability of the American-flagged fleet 

to sustain itself through the course of time. I have asked for that 

study, and I am going to take a look at it. I will share with you 

what may be useful from that. You have raised some very important questions, ones that we might be able to address, in one way 

or another, as we move forward. 

In my opening statement, I expressed concern that the budget 

proposals are really a statement of policy priorities. And the budget 

proposals that we have before us for the Coast Guard and for the 

two agencies that are before us now indicate a retrograding, a reduction in what appears to me to be the administration’s lack of 

concern about the maritime trade. 

I trust that is not the case, and I will ask the two witnesses to 

respond to that concern. But I want to be very specific about an 

opportunity that presents itself to the maritime industry. Natural 

gas is a strategic American asset that is allowing America to enjoy 

low energy cost, and a resurgence of American manufacturing. The 

export of LNG at a modest level could create even more American 

jobs, if the LNG is transported on American-made LNG tankers, 

flying the American flag, with American sailors. 

The current approved export terminals—one just approved yesterday or the day before—will require America—will require approximately 100 LNG tankers. This tanker fleet will be phased in 

as the LNG export terminals come online, and LNG exports grow. 

The American shipyards could build these tankers over the next 

decade and beyond, creating thousands of jobs, and maintaining a 

vital industrial base for America and for our national security, specifically the Navy. 

For you two gentlemen, do you believe it is in the interest of the 

American business and American workers to share in the benefit 

of exporting LNG by requiring—by requiring—that LNG be transported on American-built ships, flying the American flag, with 

American sailors? Mr Jaenichen first, then Mr. Cordero. 

Mr. JAENICHEN. Ranking Member Garamendi, thank you for that 

question. 

First, I would say, from a perspective of supporting the U.S. maritime industry, the answer is absolutely. The question is can you 

do it within the confines of the current statutes, with regard to the 

various—— 

31 

Mr. GARAMENDI. No, no. My question doesn’t go to current statutes. It goes to the overarching policy direction. Should we do this, 

or not? If we should, then the next question is how can we achieve 

that. But I haven’t asked that question yet. I have asked, ‘‘What 

is your policy position?’’ 

Mr. JAENICHEN. The policy position right now, as you know, we 

do have export licenses that are able to approved. The Maritime 

Administration is involved in export policies on the deepwater side. 

We were authorized back in 2012 to do exports. Currently, we have 

no applications for deepwater ports, but we are in consultation 

with the Department of Energy and the Federal Energy Regulatory 

Commission to be able to do that. 

Mr. GARAMENDI. So, what is your policy? Are you going to push 

and promote a policy of LNG being exported on American ships 

with American sailors and American-built ships, or not? Yes or no? 

Mr. JAENICHEN. Well, let me caveat my answer. We are putting 

together a national maritime strategy which is going to focus on 

cargo opportunities. I believe that the energy sector is one of those 

areas that we need to focus on. So the answer is we are developing 

the policy to be able to take advantage of this particular opportunity, although I am not sure we are there yet. 

Mr. GARAMENDI. When will I know that policy? 

Mr. JAENICHEN. I will have to get back to you, sir. 

Mr. GARAMENDI. Mr. Cordero? 

Mr. CORDERO. Thank you, Congressman. Let me, first of all, say 

that the FMC, in terms of how it was composed, and per its regulatory mandate, is flag-neutral. So, given that mandate, the FMC 

has not taken a position with regard to the question you have 

posed. 

However, having said that, I will clearly say that the FMC has, 

pursuant to its regulatory purview, taken the opportunity to advocate on the American flag issue when the opportunity arises. So, 

with that, I believe that might answer your question. But I cannot 

represent to you that the FMC has a specific policy with regard to 

the question that you have posed. That doesn’t necessarily mean 

that I personally would be opposed to that, or if the statute is 

amended so that the FMC could weigh in on such a issue. Then, 

of course, I—— 

Mr. GARAMENDI. The President has stated repeatedly that he 

wants to rebuild the American manufacturing sector. We have an 

opportunity to do so with shipbuilding, for American shipyards, the 

workers in those yards, all across this Nation, and in many, many 

ports across this Nation. So, the administration’s stated policy of 

rebuilding the American manufacturing sector would seem to me to 

be carried out in America’s shipyards, specifically building the 

tankers that will be exporting a strategic American asset, our natural gas. 

And I guess it has not yet filtered down to MarAd or to the Maritime Commission that that Presidential statement would and could 

be implemented by a very aggressive policy implemented by the 

two of you. So, perhaps I shall deliver to you the President’s most 

recent statements on rebuilding the American manufacturing sector, and urging you to carry that out in your domain. 

32 

Now, I—after delivering those statements by the President to 

you, perhaps you can then answer my question. Do you support the 

construction, the building of tankers in American ports, or American shipyards, to export this strategic asset, liquified natural gas, 

with American-flagged ships, with American sailors? Obviously, 

you are not prepared to answer that today, but I shall deliver to 

you the President’s statement on this matter of rebuilding the 

American manufacturing sector. The question goes also to Mr. Jaenichen with regard to the $25 

million welfare program for American sailors—that is in your budget—when they lose their jobs because of the administration’s Public 

Law 480—that is, the destruction of the Public Law 480 program, 

the cash-out of it. How do you propose that that $25 million welfare program for American sailors, who I assume would prefer to 

be sailing, rather than getting a welfare check, how do you propose 

to implement that? 

Mr. JAENICHEN. Thank you for that question, Ranking Member 

Garamendi. As you pointed out, the President’s budget proposal is 

for up to 25 percent of food aid to be essentially done by local purchase. We have analyzed that and have estimated that approximately 4 to 6 ships would be affected, 200 to 275 mariners. The 

$25 million that is currently in the Maritime Administration budget is to support the potential loss of those mariner jobs. 

We have taken a look at how the $25 million would be used. And, 

again, that would be the beginning of a long-term, multiyear program to preserve those mariner opportunities. The first $24 million 

would be essentially taking a look at the ships that would potentially be affected by the changes in the cargo preference that 

would—they would be applied to. This would be outside of the maritime security program, and we would structure that program during the course of the summer. 

Again, that $25 million is only if that food aid reform is enacted. 

But in order for the Maritime Administration to be ready, we are 

going to have to do the planning throughout the summer to be able 

to make sure we can do that. 

The final $1 million would be to support training opportunities 

and also apprentice programs for the mariners for the specific jobs 

and specialty skills that are required. So, the $24 million would be 

in stipend payments, essentially to—as we transition to something 

else, in terms of cargoes, and then $1 million would be for mariner 

training. 

Mr. GARAMENDI. So transitioning into other cargoes like what 

cargoes? 

Mr. JAENICHEN. Potentially, as you have already pointed out, the 

energy sector is probably the most right for being able to have an 

opportunity for a U.S. flag to carry those cargoes. That would be 

something we would be taking a look at. 

Mr. GARAMENDI. So what is it going to be, peanut butter or is 

it going to be steel, coal, liquified natural gas? What is the cargo 

that you are looking at to replace the Public Law 480 cargoes? 

Mr. JAENICHEN. I will tell you that we have actually partnered 

with the Volpe Center, and they are doing a study for us that will 

be done later this summer. That study is focused on two things. 

Primarily, it is on the LNG market, what future markets will be, 

33 

what market opportunities are, and then we take a look at the potential policies and the various assumptions that might be used 

over a full range there. And so I will have a better answer in that 

timeframe in terms of what the potentials are. That is going to include shipbuilding opportunities and other things, so we are actually taking a look at this specific question that you have asked. 

Mr. GARAMENDI. If you hadn’t noticed, I am interested in this 

matter. And there are times when I have been accused of being tenacious. And I am going to be really, really tenacious on this matter. 

However, at this moment, Mr. Cummings has a series of questions. I would like to yield to him. Mr. Cummings? 

Mr. CUMMINGS. I want to thank the gentleman for yielding, but 

I want to pick up where the gentleman left off. 

Mr. Jaenichen, how many—do we have any idea of how many 

people would be replaced with regard to the—this $25 billion that 

we are using? About how many people do you think might be replaced? In other words, taken out of their normal jobs. 

Mr. JAENICHEN. Congressman Cummings, as I pointed out earlier, we have estimated it is four to six ships that are potentially 

affected. Those ships will either do one of two things. They will either re-flag, or potentially they will be—cease to be in service, and 

they will likely be scrapped. That is 200 to 275 mariner jobs we believe will be affected, and that was one of the reasons why there 

is the $25 million, if that particular proposal is enacted, that we 

would have to have a way to compensate and transition those mariners to—and other jobs within the maritime industry. 

Mr. CUMMINGS. Did you—have you had any impact on the $25 

million? I mean did anybody talk to you about that, and this whole 

Food for Peace situation? I am talking about you. 

Mr. JAENICHEN. That—— 

Mr. CUMMINGS. When this was being put in the budget. 

Mr. JAENICHEN. The answer to that, sir, is yes. And as—what we 

were taking a look at is what it would take to essentially mitigate 

the potential impact on mariner jobs. And we have taken a look at 

a couple different ways to do that. 

In the fiscal year 2014 proposal was the first time that we had 

seen that, and we have had some opportunities to take a look at 

how it might be conducted over the last year. Again, we would have 

to go into specific details. I have briefly discussed this with the 

maritime industry as the budget proposal for this fiscal year was 

rolled out, but we would have to go into significant detail on how 

we would actually structure that stipend program to minimize the 

impact on mariners. 

Mr. CUMMINGS. But shouldn’t we be working to prevent American job losses? I mean, hello. I mean shouldn’t we? 

Mr. JAENICHEN. Sir, I would agree with you, and that is one of 

the reasons why we recognize that this is going to impact mariner 

jobs, and it is one of the reasons why that $25 million was actually 

in the President’s budget. 

Mr. CUMMINGS. You know, I do appreciate your leadership at 

MarAd. And you have been a breath of fresh air. But I do share 

the concerns of our ranking member. I think we can do better. 

34 

In 1975 we had 857 oceangoing ships under U.S. flag, according 

to a 2009 study produced by IHS Global Insight for U.S. Maritime 

Administration. Today there are approximately 100 oceangoing vessels in a United States flag, and they carry barely 2 percent of our 

commercial cargoes. Doesn’t that bother you? 

Mr. JAENICHEN. Sir, indeed it does. In fact, as of the first of January of 2014, there were 89 vessels that were actually operating in 

international trade today. That is 60 in the MSP and then 29 additional that are outside of the MSP program. 

Mr. CUMMINGS. And so, what are the risks to the Nation that we 

lose our U.S.-flag oceangoing fleet? What is the risk? 

Mr. JAENICHEN. The potential risk is we lose control over our 

supply chain. We have 60,000 vessel calls that occur around the 

country to all of our ports where various commodities come into. 

And, as you pointed out, currently today about 2 percent of that is 

on U.S. flag. I think that is a strategic decision, and that is one 

of the reasons why MarAd is taking a leadership role to develop 

a national maritime strategy that addresses this particular issue. 

Mr. CUMMINGS. So, what impact is the decline in the U.S. military cargo having on the U.S.-flag fleet, and what can we do to help 

our fleet meet the challenge? I know what you just said—that loss 

of cargo poses, because it seems to me that we are sort of standing 

over somebody whose—we could save, and it just seems to be saying, ‘‘Well, what the hell, let’s just wait and wait and wait.’’ And 

every second that passes, they march closer to their death. I mean 

that is what it feels like. 

So, I mean, are we really putting forth the effort to do a rescue 

job here? Or are we—have we thrown up our hands already? It 

seems like we have thrown up our hands and said ‘‘What the hell?’’ 

Mr. JAENICHEN. First of all, Congressman, I think you have exactly what the situation is for the maritime industry. We are at the 

precipice of potential failure. And I am concerned about that, primarily because of the decrease in overall cargoes. Eighty percent 

of the cargo that is Government-impelled, that is carried by the 

U.S. flag, either the MSP operators or by the ships that are enrolled in a visa program, which is a voluntary intermodal sealift, 

80 percent of that is DOD cargo. I am concerned that those cargoes 

currently are not there, and are going down rapidly, which means 

that the U.S.-flag fleet has to be able to have commercial cargo opportunities. 

In this particular market, where there is an overabundance of capacity, we have to structure or take action, essentially, as an administration, as a Congress, to be able to put the correct policies, 

regulations, and statute in place to be able to support the maritime 

industry. Otherwise, it will potentially cease to exist, as you pointed out. 

Mr. CUMMINGS. So, my last question, Mr. Chairman, just one last 

thing. 

So, as I—based upon what you just said, then why are we proposing cutting Food for Peace? Duh. I mean, am I missing something? 

Mr. JAENICHEN. Congressman, that particular position, obviously, is the administration’s position in order to feed more starvVerDate Aug 31 2005 15:24 Oct 09, 2014 Jkt 000000 PO 00000 Frm 00046 Fmt 6633 Sfmt 6633 P:\HEARINGS\113\CG&JOI~1\3-26-1~1\87288.TXT JEAN
35 

ing children. And we are looking at opportunities to minimize the 

impact on the maritime sector. 

Mr. CUMMINGS. Thank you very much. Thank you, Mr. Chairman. 

Mr. HUNTER. I thank the gentleman from Maryland. I would like 

to recognize Mr. Garamendi for a closing statement, and we will be 

out of here. 

Mr. GARAMENDI. Thank you, Mr. Chairman. Mr. Cummings carried on with the questions I had. 

I have questions about the Title XI loan program. The basic 

question is, is this a guarantee program or not? It seems as though 

it is not. I take the answers for the record, because we do have to 

shut down here. 

I am going to just—oh, TIGER grants, there is a question about 

TIGER grants, and whether those are—whether the Department of 

Transportation is going to use TIGER grants for the ports. This is 

multimodal issues. Again, Mr. Jaenichen, if you could—and Mr. 

Cordero, if you could provide that information for the record, I will 

give you the specific questions. And, in fact, I will give you all of 

the questions in writing, and let the chairman—— 

Mr. HUNTER. Without objection. 

Mr. GARAMENDI. Thank you. 

Mr. HUNTER. And seeing as there are not any further questions, 

I thank the witnesses for their testimony, the Members for their 

participation, and, with that, the subcommittee stands adjourned. 

[Whereupon, at 11:28 a.m., the subcommittee was adjourned.] 

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