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25–312 PDF 2017

MARITIME TRANSPORTATION REGULATORY ISSUES 

(115–14) 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

COAST GUARD AND MARITIME TRANSPORTATION 

OF THE

COMMITTEE ON 

TRANSPORTATION AND 

INFRASTRUCTURE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FIFTEENTH CONGRESS 

FIRST SESSION 

MAY 3, 2017 

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 

JOHN J. DUNCAN, JR., Tennessee, 

Vice Chair 

FRANK A. LOBIONDO, New Jersey 

SAM GRAVES, Missouri 

DUNCAN HUNTER, California 

ERIC A. ‘‘RICK’’ CRAWFORD, Arkansas 

LOU BARLETTA, Pennsylvania 

BLAKE FARENTHOLD, Texas 

BOB GIBBS, Ohio 

DANIEL WEBSTER, Florida 

JEFF DENHAM, California 

THOMAS MASSIE, Kentucky 

MARK MEADOWS, North Carolina 

SCOTT PERRY, Pennsylvania 

RODNEY DAVIS, Illinois 

MARK SANFORD, South Carolina 

ROB WOODALL, Georgia 

TODD ROKITA, Indiana 

JOHN KATKO, New York 

BRIAN BABIN, Texas 

GARRET GRAVES, Louisiana 

BARBARA COMSTOCK, Virginia 

DAVID ROUZER, North Carolina 

MIKE BOST, Illinois 

RANDY K. WEBER, SR., Texas 

DOUG LAMALFA, California 

BRUCE WESTERMAN, Arkansas 

LLOYD SMUCKER, Pennsylvania 

PAUL MITCHELL, Michigan 

JOHN J. FASO, New York 

A. DREW FERGUSON IV, Georgia 

BRIAN J. MAST, Florida 

JASON LEWIS, Minnesota 

PETER A. DEFAZIO, Oregon 

ELEANOR HOLMES NORTON, District of 

Columbia 

JERROLD NADLER, New York 

EDDIE BERNICE JOHNSON, Texas 

ELIJAH E. CUMMINGS, Maryland 

RICK LARSEN, Washington 

MICHAEL E. CAPUANO, Massachusetts 

GRACE F. NAPOLITANO, California 

DANIEL LIPINSKI, Illinois 

STEVE COHEN, Tennessee 

ALBIO SIRES, New Jersey 

JOHN GARAMENDI, California 

HENRY C. ‘‘HANK’’ JOHNSON, JR., Georgia 

ANDRE ́ CARSON, Indiana 

RICHARD M. NOLAN, Minnesota 

DINA TITUS, Nevada 

SEAN PATRICK MALONEY, New York 

ELIZABETH H. ESTY, Connecticut, Vice 

Ranking Member 

LOIS FRANKEL, Florida 

CHERI BUSTOS, Illinois 

JARED HUFFMAN, California 

JULIA BROWNLEY, California 

FREDERICA S. WILSON, Florida 

DONALD M. PAYNE, JR., New Jersey 

ALAN S. LOWENTHAL, California 

BRENDA L. LAWRENCE, Michigan 

MARK DESAULNIER, California 

SUBCOMMITTEE ON COAST GUARD AND MARITIME TRANSPORTATION

DUNCAN HUNTER, California, Chairman 

DON YOUNG, Alaska 

FRANK A. LOBIONDO, New Jersey 

GARRET GRAVES, Louisiana 

DAVID ROUZER, North Carolina 

RANDY K. WEBER, SR., Texas 

BRIAN J. MAST, Florida 

JASON LEWIS, Minnesota, Vice Chair 

BILL SHUSTER, Pennsylvania (Ex Officio) 

JOHN GARAMENDI, California 

ELIJAH E. CUMMINGS, Maryland 

RICK LARSEN, Washington 

JARED HUFFMAN, California 

ALAN S. LOWENTHAL, California 

ELEANOR HOLMES NORTON, District of 

Columbia 

PETER A. DEFAZIO, Oregon (Ex Officio) 

(III) 

CONTENTS Page 

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

TESTIMONY 

Rear Admiral Paul F. Thomas, Assistant Commandant for Prevention Policy, 

U.S. Coast Guard ................................................................................................. 3 

Hon. Michael A. Khouri, Acting Chairman, Federal Maritime Commission ...... 3 

Todd Schauer, President, American Salvage Association .................................... 3 

Steven Candito, Board Member, Former President and Chief Executive Officer, National Response Corporation ................................................................... 3 

Nicholas J. Nedeau, Chief Executive Officer, Rapid Ocean Response Corporation ........................................................................................................................ 3 

Norman ‘‘Buddy’’ Custard, President and Chief Executive Officer, Alaska 

Maritime Prevention and Response Network .................................................... 3 

Thomas A. Allegretti, President and Chief Executive Officer, American Waterways Operators ..................................................................................................... 3 

John W. Butler, President and Chief Executive Officer, World Shipping Council ........................................................................................................................... 3 

PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS 

Hon. Peter A. DeFazio of Oregon ........................................................................... 48 

Hon. John Garamendi of California ....................................................................... 51 

PREPARED STATEMENTS SUBMITTED BY WITNESSES 

Rear Admiral Paul F. Thomas ................................................................................ 54 

Hon. Michael A. Khouri .......................................................................................... 63 

Todd Schauer ........................................................................................................... 73 

Steven Candito ......................................................................................................... 82 

Nicholas J. Nedeau .................................................................................................. 113 

Norman ‘‘Buddy’’ Custard ....................................................................................... 116 

Thomas A. Allegretti ............................................................................................... 123 

John W. Butler ......................................................................................................... 148 

SUBMISSIONS FOR THE RECORD 

Rear Admiral Paul F. Thomas, Assistant Commandant for Prevention Policy, 

U.S. Coast Guard: 

Response to request for information from Hon. John Garamendi, a Representative in Congress from the State of California ................................ 10 

Responses to questions for the record from the following Representatives: 

Hon. Garret Graves of Louisiana ............................................................. 60 

Hon. Mark Sanford of South Carolina ..................................................... 61 

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(1) 

MARITIME TRANSPORTATION REGULATORY 

ISSUES 

WEDNESDAY, MAY 3, 2017 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON COAST GUARD AND MARITIME

TRANSPORTATION, COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE, Washington, DC. 

The subcommittee met, pursuant to notice, at 10:14 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. This is our second hearing in the 115th Congress, where we 

will review maritime transportation regulatory issues through two 

panels of witnesses. I ask unanimous consent that Members not on 

the subcommittee be permitted to sit with the subcommittee at today’s hearing and ask questions. 

Without objection, so ordered. 

The question is on the motion. 

All those in favor, signify by saying aye. 

All those opposed, signify by saying nay. 

In the opinion of the Chair, the ayes have it, and the motion is 

agreed to. 

Our second order of business is to welcome new Members, since 

our last hearing was interrupted and, although rushed due to 

House floor votes, there was not time to properly welcome the new 

Members to the subcommittee. 

I welcome to the subcommittee Mr. Randy Weber, Sr., Representative for the 14th District of Texas, who joins us from the gulf 

coast. He is not here, so we are not going to introduce him any 

more. 

Brian Mast, not here, not going to introduce him. 

Mr. Jason Lewis, our vice chairman? Not here. 

I will now yield to Ranking Member Garamendi to recognize his 

new Members. 

You are recognized. 

[Laughter.] 

Mr. GARAMENDI. We note the Democrats present, and Alan 

Lowenthal down at the other end, representing the great port of 

Long Beach and part of L.A. Port. 

OK, would you like to make a 20-minute statement on the value 

of the Port of Long Beach? 

[Laughter.] 

Mr. LOWENTHAL. A bit later. I will defer—— 

2 

Mr. GARAMENDI. OK. We will defer. Welcome. 

Mr. HUNTER. The LBC, right? Long Beach County. Home of Sublime. It is a great place. 

I will now move on to opening statements. Since we have a full 

slate of witnesses, I am going to go through the topics fairly quickly. 

The Oil Spill Pollution Act requires vessel owners and/or operators to have vessel response plans which address oil spills and salvage and firefighting response measures. The act requires vessel 

response plans to meet the national planning criteria, but there are 

areas of the country that, due to low population or vessel traffic, 

cannot, and therefore use an alternative planning criteria. 

The Coast Guard’s view is that alternative planning criteria is a 

temporary solution to reaching the national planning criteria, however long that might take. 

Another issue with the alternative planning criteria is whether 

or not it should cover the geographic area of the captain of the port 

zone. 

I am interested to hear from the witnesses on these issues. 

The Coast Guard implements the International Convention on 

Standards of Training, Certification, and Watchkeeping, which is 

designed to ensure seafarers are properly trained and certified. The 

Coast Guard will update us on their progress implementing this 

International Maritime Organization convention. 

While commercial fishing vessel exams are somewhat controversial with the industry, the Coast Guard will give us an update on 

where they are with the mandated program. 

The towing vessel inspection program may get the award for the 

longest ever regulatory process, lasting over 12 years. Having finally issued the rule last year, the Coast Guard will discuss its implementation. 

Lastly, U.S. industry has concerns with the Federal Maritime 

Commission’s recent review of ocean carrier agreements. I commend the Commission for deciding not to approve an agreement for 

the companies that are in the process of merging, to not extend 

prematurely antitrust immunity. 

The Commission and industry representatives will discuss this 

important issue today. 

I will now yield to Ranking Member Garamendi. 

Mr. GARAMENDI. Mr. Chairman, thank you. Given that our—I 

think I will ask that my statement be entered into the record. 

And, without objection, so ordered. 

Mr. HUNTER. Without objection, so ordered. 

Mr. GARAMENDI. Thank you. And simply say that there are some 

very, very important things going on here with regard to the regulation. I am looking forward to this hearing. 

Of particular interest is the Federal Maritime Commission and 

their implementation of the Shipping Act, as it revolves around the 

issue of the alliances and the impacts that that may have on providers of services. 

And finally, obviously, the Coast Guard, just to echo what you 

said—not echo it, just say yes, you are on track. We need to hear 

from the Coast Guard on the regulatory issues. Obviously, it is 

3 

very, very important that these regulations be done in a timely and 

proper way. 

And, with that, I yield back. 

Mr. HUNTER. I thank the ranking member. 

Pursuant to rule 1(a)1 of the rules of the Committee on Transportation and Infrastructure, I move that the chairman be authorized to declare recesses during today’s hearing. 

The question is on the motion. 

All those in favor, signify by saying aye. 

All those opposed, signify by saying no. 

In the opinion of the Chair, the ayes have it, and the motion is 

agreed to. 

On our first panel we will hear from Rear Admiral Paul Thomas, 

Assistant Commandant for Prevention Policy of the Coast Guard, 

and Mr. Michael Khouri, Acting Chairman for the Federal Maritime Commission. 

Admiral Thomas, you are recognized to give your statement. 

TESTIMONY OF REAR ADMIRAL PAUL F. THOMAS, ASSISTANT 

COMMANDANT FOR PREVENTION POLICY, U.S. COAST 

GUARD; HON. MICHAEL A. KHOURI, ACTING CHAIRMAN, FEDERAL MARITIME COMMISSION; TODD SCHAUER, PRESIDENT, 

AMERICAN SALVAGE ASSOCIATION; STEVEN CANDITO, 

BOARD MEMBER, FORMER PRESIDENT AND CHIEF EXECUTIVE OFFICER, NATIONAL RESPONSE CORPORATION; NICHOLAS J. NEDEAU, CHIEF EXECUTIVE OFFICER, RAPID OCEAN 

RESPONSE CORPORATION; NORMAN ‘‘BUDDY’’ CUSTARD, 

PRESIDENT AND CHIEF EXECUTIVE OFFICER, ALASKA MARITIME PREVENTION AND RESPONSE NETWORK; THOMAS A. 

ALLEGRETTI, PRESIDENT AND CHIEF EXECUTIVE OFFICER, 

AMERICAN WATERWAYS OPERATORS; AND JOHN W. BUTLER, 

PRESIDENT AND CHIEF EXECUTIVE OFFICER, WORLD SHIPPING COUNCIL 

Admiral THOMAS. Thank you and good morning, Chairman 

Hunter, Ranking Member Garamendi, distinguished members of 

the subcommittee. It is an honor for me to be here with you this 

morning to update you on the status of the Coast Guard maritime 

regulatory program. 

Mr. Chairman, on behalf of Coast Guard’s men and women everywhere, thank you for your leadership of this committee and continued strong support of our United States Coast Guard. 

As you know, the Coast Guard offers truly unique and enduring 

value to our Nation. As the only branch of the U.S. armed services 

within the Department of Homeland Security, the Coast Guard is 

uniquely positioned to help secure the border, protect the homeland, and safeguard America’s national and economic security. 

But, as our Commandant discussed with you during his April 4th 

hearing, increasing mission demands, years of fiscal constraint, and 

diminishing purchasing power of our operating funds has eroded 

our ability to simultaneously execute the full set of missions and 

be prepared to respond to global contingencies. 

Secretary Kelly understands this, and he fully supports the 

President’s call to rebuild all of our Nation’s armed services. Prudence demands that we invest in and rebuild Coast Guard capacity, 

4 

including the capacity of our marine safety and regulatory programs, as they are key components to the Coast Guard’s national 

and economic security missions. Our Nation’s Marine Transportation System supports over $4.5 

trillion of economic activity and hundreds of thousands of American 

jobs. The Coast Guard’s governance of this system ensures that it 

remains safe, secure, environmentally sound, and productive, particularly with regard to shared critical infrastructure that our Nation relies on for national security, border security, and economic 

prosperity. 

Regulations are one tool by which the Coast Guard shapes the 

environment in which we operate, and manages the risks in the 

Marine Transportation System. When we do regulate, we do so in 

response to congressional mandates, international obligations, and 

demand from industry and the public. And we are always mindful 

of the need to facilitate commerce, not impede it. 

Coast Guard regulations provide the certainty required to encourage investment in innovation, and the level playing field needed to ensure fair competition and free market solutions. 

In addition, a unified Federal regulatory regime adds consistency, and reduces the burden that can be associated with multiple, 

often contradictory State regulations, particularly for a global industry like shipping. 

Coast Guard regulations are developed in full compliance with 

the Administrative Procedure Act, and with all administration directives and Executive orders. We work in close coordination with 

the regulated industry, science and academic communities, the 

interagency, the public, and our international counterparts to develop risk-based performance standards that provide the regulated 

industry flexibility in the development of their compliance strategies. 

The Coast Guard is unique among Federal regulators, because 

we operate in the environment we regulate. And we know firsthand 

how maritime operations are impacted by regulations. 

For this reason, the Coast Guard is focused on practical implementation and measured enforcement of regulations, particularly 

in the case of new regulatory regimes, like the subchapter M towing vessel inspection, or the salvage and marine firefighting regulations that require both the regulated industry and the servicing industries to develop capacity and capability over time, before full 

implementation can be achieved. This fully informed, commonsense 

approach to the development and implementation of regulations enhances our ability to manage all risks in the increasingly complex 

nationally vital Marine Transportation System. 

Thank you again, Mr. Chairman, for your strong support of the 

Coast Guard, and for the opportunity to testify today. I ask that 

my written statement be entered in the record, and I look forward 

to your questions. 

Mr. HUNTER. Thanks, Admiral Thomas. And we just figured out 

we have another panel that is going to be discussing oil spill and 

fire salvage issues, and we would ask if you could stick around for 

that panel, if you have time. We just asked Joanne behind, Commander—— 

Admiral THOMAS. If Joanne says it is OK, sir, I will—— 

5 

[Laughter.] 

Mr. HUNTER. OK. Thank you, Admiral. 

Mr. Khouri, you are recognized. 

Mr. KHOURI. Thank you, Chairman Hunter, Ranking Member 

Garamendi, and members of the subcommittee. Good morning, and 

thank you for the opportunity to testify today. I would like to address issues, several Shipping Act and Federal Maritime Commission issues of current interest. 

The FMC is a competition agency charged by Congress to prevent 

anticompetitive behavior by competitor collaborations in the international ocean liner industry, and protect competition. 

This industry transports 65 percent of our Nation’s waterborne 

international imports and exports. We are also charged with a mission of ensuring that pro-competitive efficiencies and cost savings 

are obtained for U.S. consumers. 

On a broad scale, the Shipping Act provides full authority to the 

Commission to effectively carry out its mission. 

The competition standard used by the Commission to review carrier agreements is section 6(g) of the act. It is, in all relevant respects, the same standard used by the Department of Justice and 

the Federal Trade Commission when they review mergers, acquisitions, and competitor collaborations. Congress, however, specifically 

designed our competition standard to apply to the ocean transportation industry. 

As with DOJ and FTC, we assess industry concentration using 

the Herfindahl-Hirschman Index. Collaborations that do not result 

in concentrated markets under HHI are unlikely to produce adverse competitive effects. Key elements in any antitrust analysis 

are ease of entry into a market, ease of exit from the market, and 

availability of competitors able to compete in the relevant market. 

Note, all antitrust laws, including the Shipping Act, protect competition, not individual competitors. The act provides for public 

comment. Together with our competition analysis, the Commission 

considers the public’s views in determining how to address anticompetitive concerns. 

The ‘‘Prohibited Act’’ section of the act mirror remedies found in 

other competition statutes. They provide the FMC with additional 

tools to address improper conduct, such as price-fixing, market allocation, unreasonable practices, discrimination in price or accommodation, refusals to deal, retaliation, boycotts, predatory practices, 

and discrimination based on shipper affiliation. 

The ocean liner industry has undergone consolidation. However, 

by the end of 2018, there will still be 13 major shipping lines operating in the international trades. The number of major carrier alliances serving the U.S. trades has decreased from four to three. 

These two developments raise new issues and concerns for the 

FMC, and have changed the way we approach carrier agreements. 

Broad authorities and language acceptable for a world with 20 or 

more carriers and more numerous but smaller alliances presented 

far fewer competitive concerns. With the increase in size and market share of alliances, the FMC has insisted on narrower agreement authorities and strict, clear, and definite agreement language. 

6 

Importantly, we have strengthened the quarterly and monthly 

monitoring information requirements. Alliances do provide ocean 

carriers with operational flexibility, efficiencies, and opportunities 

for cost savings. In a capital-intensive industry they facilitate the 

survival of independent companies, preserving industry competition 

and averting further industry concentration. 

Because of concerns about potential market power of larger alliances, the FMC carefully analyzes and examines agreements that 

request joint procurement authority. After that market analysis, if 

the market shares and indicators fall within generally accepted 

antitrust standards, then the FMC has no legal basis to request an 

injunction in Federal court, where we, the government, have the 

burden of proof. 

Note, please, all U.S. competition laws, including DOJ and FTC 

rules, and the Shipping Act, allow for joint collaboration by competitors because they can benefit the end American consumer. 

To close, the Federal Maritime Commission, with its industry expertise and experience, is well positioned to understand the unique 

dynamics of the shipping industry and all of its stakeholders to 

apply to the competition laws fairly in this area, and to prevent 

anticompetitive behavior in these carrier agreements, all to ensure 

maximum benefits for the U.S. shipping public. 

Thank you for your attention. I ask that my written statement 

be entered into the record. I would be pleased to answer any questions you may have. 

Mr. HUNTER. Thank you, Mr. Khouri. Without objection, it will 

be entered into the record. 

I am going to start. Chairman Young is not here. He is at a doctor’s appointment. So I am going to ask some questions on his behalf, things that he is interested in that deal with Alaska. So let’s 

start with those. 

Admiral, for over 20 years in Alaska, the approved alternative 

planning criteria covered the entire Western Alaska Captain of the 

Port Zone. Why did the Coast Guard approve alternative planning 

criteria for two entities covering only a portion of the Western 

Alaska Captain of the Port Zone? 

Admiral THOMAS. Thank you for the question, Mr. Chairman. I 

know this is an important issue to Congressman Young. And he 

has been in contact with the Coast Guard, and also with our district commander, Rear Admiral Mike McAllister, on this topic. 

The regulations provide for alternative planning criteria that will 

allow vessels transiting certain portions of Alaska to meet the requirements by procuring services that are specific to their transit 

routes. 

And so, the alternative criteria that have been approved by the 

Coast Guard are in full compliance with the regulations. And we 

are working hard with the congressman to seek additional solutions that will ensure coverage for the entire region. 

Mr. HUNTER. Is it the Coast Guard’s expectation that the equipment of all oil spill response organizations in western Alaska will 

be available for any response in which an individual OSRO is responsible, as stated in Mr. Custard’s testimony? 

7 

Do you believe OSROs which are not responsible to respond will 

provide such equipment, despite their clear assertion that they are 

not—that they will not respond? 

Admiral THOMAS. I absolutely believe that, in the case of a spill, 

all equipment in the area will be available for the Federal on-scene 

coordinator to leverage in response to that spill. And, in fact, we 

have seen that in several recent cases in Alaska, where we were 

able to bring to bear equipment from OSROs, who were not the primary providers, in order to mitigate a situation or, in some cases, 

prevent it from actually turning into a spill. 

So, we absolutely believe that the increased response capability 

that the APC [alternative planning criteria] in Alaska have 

brought to the region are a good thing, and the total price of coverage has decreased, as a result. 

Mr. HUNTER. Could you explain to me the difference between an 

oil—your oil vessel—oil spill response vessel and a firefighting response vessel, according to Coast Guard criteria? 

Admiral THOMAS. Well, they are certainly very different capabilities. The oil spill response vessel typically brings the capability to 

recover oil from—floating oil from the water. Firefighting vessels 

will bring—— 

Mr. HUNTER. So they have a big boom? 

Admiral THOMAS. They have a number of different mechanical—— 

Mr. HUNTER. To contain an oil spill? 

Admiral THOMAS. Contain it, sometimes to deliver disbursements 

or other means of mitigating oil on the surface of the water. The 

firefighting vessels bring the ability to put foam and water on to 

a fire. 

So there are different capabilities. Some vessels have both. 

Mr. HUNTER. Some vessels do have both? 

Admiral THOMAS. Yes, sir. Some vessels have both. 

Mr. HUNTER. How many areas of the country cannot meet the 

national planning criteria for vessel response plans under the Oil 

Pollution Act? 

Admiral THOMAS. Well, there are a number of areas of the country, mostly the remote areas, where we have approved alternative 

planning criteria specifically because the national planning criteria 

cannot be met. Alaska is one of them. Guam would be another one. 

But in mainland—you know, the continental U.S., the national 

planning criteria is appropriate, and can be met. 

Mr. HUNTER. So you say—so, for instance, you have it in the Gulf 

of Mexico, right? But you don’t have planning criteria that can 

meet the actual criteria. 

Admiral THOMAS. Yes, sir, particularly—— 

Mr. HUNTER. In the gulf. But they can’t in Alaska? 

Admiral THOMAS. Yes, sir. That is right. They cannot in Alaska, 

mostly due to the expanse and the remoteness of the area. 

Mr. HUNTER. So you issue waivers and give them the opportunity 

to have alternative planning criteria in Alaska? 

Admiral THOMAS. The regulation, again—and this is a perfect example of practical implementation of regulation—allows for the 

issuance of alternative criteria when the national planning criteria 

and the regulation cannot be met, and that is a means by which 

8 

we can grow with our national capacity to respond, while still accommodating the needs of commerce. 

Mr. HUNTER. Thank you. With that I would yield to Mr. 

Garamendi—or Mr. DeFazio, if Mr. Garamendi would like to yield. 

Mr. GARAMENDI. The structure of the hearing brings Admiral 

Thomas back a couple of times, so I am going to just move to some 

things that I think are not likely to be covered in the remainder 

of the hearing, and we will come back to the other issues later. 

One thing that we have wrestled with here all the time I have 

been on this committee is the ballast water issue. It remains an 

issue. Currently among the things that are of concern—just some 

questions for Admiral Thomas—has the Coast Guard been able to 

devote the necessary personnel and resources to conduct effective 

oversight of the independent laboratories that are conducting the 

ballast water management systems type approval testing? 

Admiral THOMAS. Thank you for the question, Congressman. And 

as always—and I think our Commandant is on the record that our 

Nation needs more Coast Guard, and that extends to all of our responsibilities—we do conduct oversight at the independent labs. 

We do that in the process of first certifying them as an independent lab and then, in the course of their work, we visit them. 

No doubt, though, that particularly as the number of labs increase, and the workload at those labs increase, our ability to provide the level of oversight that we would like to is challenged by 

our lack of resources. 

Mr. GARAMENDI. Well, certainly, if the 14-percent cut actually 

goes through, that situation will get worse. But even at this stable 

funding level of today, you are not able to do the kind of oversight 

that you would—that you believe is necessary. 

Admiral THOMAS. Our Commandant is on record saying that the 

Nation needs a Coast Guard that has a—about a 4-percent increase, annually, in our O&M funds, and about a $2 million investment every year in our infrastructure. And that type of budget 

would allow us to rebuild readiness across all of our missions, sir, 

and fill the gaps, including the ones that you are pointing out with 

regard to our oversight of independent labs. 

Mr. GARAMENDI. I didn’t realize I had given you an opportunity 

to advocate for your budget, but I think it just happened. 

[Laughter.] 

Mr. GARAMENDI. Know that at least this member of this committee remains concerned about the quality of the oversight, and 

the independent testing laboratories. And, obviously, the international standards, all of these things remain a concern. It is a 

concern I know in California, from the various ports and water 

quality issues within those ports and the introduction of invasive 

species. 

An old issue that seems not to go away is a very old, stern 

paddlewheel steamer called the Delta Queen. Where are you with 

regard to the issue of the exemption for the Delta Queen from the 

fire safety standards? 

Admiral THOMAS. Congressman, thank you for that question, as 

well. I am aware of some work in Congress on legislation that 

would exempt Delta Queen from certain provisions, particularly 

structural fire protection provisions. The Coast Guard has not 

9 

taken any action, independent of providing advice on that particular legislation. 

However, we do not support an exemption for any vessel that 

would increase the risk, particularly of fire at sea. 

Mr. GARAMENDI. So, the Coast Guard remains opposed to exemptions from the fire safety standards for this vessel or any other vessel. Is that correct? 

Admiral THOMAS. That is correct, Congressman. 

Mr. GARAMENDI. Well, we will undoubtedly be wrestling with 

that, as that piece of legislation comes around. 

The backlog on regulations. I guess that goes back to the 14-per- cent proposed cut and the additional $2 billion that you just requested. 

So, have you received any new directives about the regulations 

from the Secretary of Homeland Security? 

Admiral THOMAS. Well, Congressman, about the backlog, I mean, 

we are proud of the fact that we have reduced our regulatory backlog by over 40 percent since 2009. And we currently have about 60 

rulemakings always working—each of our authorization acts adds, 

on average, 5 rulemakings to that backlog. So we have been able 

to hold steady, make improvements and hold steady. 

We are currently studying and working with the Department on 

the impacts of the Executive orders that have to do with regulations, and particularly with regard to the requirement to identify 

regulations to take off the books if additional ones go on. 

And we have—we are receiving some guidance from the Department and some from OMB, as well. We haven’t really finished our 

assessment of what that will mean for our regulatory program. 

Mr. GARAMENDI. Yes, the two-for-one issue. The regulations that 

you are required to update really are not new regulations. They are 

updating existing regulations, for the most part, as I look at those 

regulations. 

So, you haven’t yet figured out how to do the two for one, two 

out and one in. So what—in your opinion, given this point, given 

that Executive order, how then would you update the remaining 

regulations that are before you? Where would you find two to eliminate, as you update one? 

Admiral THOMAS. So, we are currently conducting a comprehensive review of all the regulations. There are certainly some regulations that are still on the books that are outdated. And the reason 

we haven’t taken them off the books is because the effort required 

to do that really exceeds the benefits, because there is really no one 

impacted by those regulations. 

So, for example—— 

Mr. GARAMENDI. I want to hone in on that. To get rid of a regulation, it is the same process as establishing a regulation. Is that correct? 

Admiral THOMAS. Yes, sir. And we are working hard to understand exactly how that process would work, and particularly how 

it would work in time with the process of putting additional regulations on the books. 

Mr. GARAMENDI. And the other issue has to do with some 30,000 

vessels that you are required to examine. I am basically giving you 

an opportunity to make a pitch for that $2 billion. Would you like 

10 

to comment on that piece of it, and get it on the record as to what 

it takes to examine the 30,000 fishing vessels and the 5,000 commercial towing vessels? 

Admiral THOMAS. Well, thank you for the opportunities, Congressman. We are challenged, as our mission demands grow across 

the Coast Guard’s mission set and, in addition, with our marine 

safety mission. And we—as the Commandant has said, we need 

more Coast Guard. 

The Commandant has identified, you know, growth in O&M and 

in our infrastructure investment, which will allow us to close our 

readiness gaps and meet the mission demands that the Congress 

has put on us. 

Mr. GARAMENDI. For the record, if you would, please, provide us 

with more detail on what it would take to carry out the specific responsibilities that you have on those inspections: the number of 

personnel, the amount of money it would take, and also the timeframe of trying to move through those 30,000 vessels, given the 

present budget level. 

Admiral THOMAS. Yes, sir, be happy to provide that. 

Mr. GARAMENDI. For the record, thank you. 

Admiral THOMAS. For the record. 

[The information follows:] 

For towing vessels, the Coast Guard would need 76 additional billets at a 

recurring cost of $9,306,000 and it would take 4 years to complete issuing 

the initial Certificates of Inspection (COIs) to the affected population of 

towing vessels. For fishing vessels, the Coast Guard would need 60 additional billets at a recurring cost of $7,540,000 and it will take 3 years to 

complete the current 5-year examination cycle of the affected fishing vessel 

population. 

In regard to Towing Vessels: The number of marine inspectors required to 

verify compliance with the Subchapter M regulations—‘‘Towing Vessel Regulations,’’ is directly related to the number of vessels enrolled in the Towing 

Safety Management System (TSMS) program. The TSMS program enables 

Coast Guard approved Third Party Organizations (TPOs) to verify compliance with the regulations, with the Coast Guard exerting oversight. If a 

majority of operators use a TPO to verify compliance, the Coast Guard’s existing level of personnel should be adequate to handle the initial round of 

inspections for certification of the 5,000 towing vessels subject to Subchapter ‘‘M.’’ Vessel owners and managing operators that choose not to use 

the TSMS program will require a more indepth annual exam from Coast 

Guard inspectors. To date, we do not have a firm number of how many vessel owners or managing operators will select the TSMS option. Once the initial round of inspections is completed in 2021, the Coast Guard will have 

sufficient records to assess the long-term personnel needs to conduct inspections of towing vessels. 

In regard to Fishing Vessels: The Coast Guard has been able to meet the 

5-year mandatory exam cycle requirements for the approximately 20,000 

fishing vessels that require an exam using existing Coast Guard staff, 

qualified Third Party Surveyors/Examiners, and Coast Guard Auxiliary personnel. 

Mr. GARAMENDI. I yield back my time. 

Mr. HUNTER. I thank the gentleman. 

I yield to Mr. Rouzer for 5 minutes. 

Mr. ROUZER. Thank you, Mr. Chairman. 

Admiral, with regard to salvage and marine firefighting, what is 

the Coast Guard’s position on where the response industry is today 

11 

with regard to providing response capabilities for salvage and marine firefighting incidents? 

Admiral THOMAS. Thank you for the question, Congressman. The 

congressional intent, when the Coast Guard implemented the regulations, the salvage and marine firefighting regulations, was to 

build our national capacity and capability to respond to such incidents. Our view is that the regulation has succeeded in that regard. 

That said, there are certainly portions of the country where we 

have not yet reached the capacity that is intended by the regulation, and we are focused on ensuring that we continue to build capacity in those areas. 

Mr. ROUZER. Is the Coast Guard aware of any incidents where 

a response vessel was not on scene within the required timeframe 

for a vessel incident? 

Admiral THOMAS. I believe there have been a few incidents, but 

the key to remember is that the standards and the regulations are 

planning factors, not performance factors. And there are often, very 

often, other things like weather, et cetera, maybe multiple incidents at one time will make it impossible for the actual performance, on-scene performance, to match the planning factors that are 

required in the regulations. 

But we watch that very carefully. And when there is a significant 

mismatch between the capability that we expected to be available 

and that which is available, we will do some work to determine 

why. 

Mr. ROUZER. Have there been any incidents where a response 

vessel has refused to respond, as required by contract? What would 

prevent them from responding? You touched on that slightly. And 

would this be a vessel of opportunity, or would this be when a vessel of opportunity would be called to respond? 

Admiral THOMAS. Again, in an actual event, as opposed to 

when—meeting their planning requirements, we are going to—the 

responsible party is going to use whichever resources are immediately available and can provide the services needed at the time. 

There may be—there may have been times—and I am not aware, 

personally, of specific incidents, though the next panel may have 

some examples, where a resource or a vessel that has been identified in a plan is unable to respond, as was originally thought would 

happen, and therefore has refused service, in which case a vessel 

of opportunity clearly can step in and take that responsibility. 

Mr. ROUZER. For the sake of time, Mr. Chairman, I yield back. 

Admiral THOMAS. Thank you. 

Mr. HUNTER. I thank the gentleman. I would now like to yield 

to the ranking member of the full committee, Mr. DeFazio. 

Mr. DEFAZIO. Thank you, Mr. Chairman. I want to continue 

where we left off last time, Mr. Khouri. 

You know, the issuance of the—to the folks of—you know, authority to jointly negotiate with our marine service providers, who 

are specifically precluded under U.S. law from joining together to 

negotiate—so we are talking about, you know, a conglomerate negotiating with individual service providers in the U.S. Apparently, 

your staff did an economic analysis. But the economic analysis has 

not been made available. Why not? 

12 

Mr. KHOURI. Thank you, Congressman. The Shipping Act statute 

under section 6(j) specifically says that all of the information provided by filing parties and all of the information developed during 

the review process is, number one, confidential; and, number two, 

is not subject to FOIA. 

When we are—when the Commission is operating under this particular area and authority, we are essentially doing a law enforcement function, and these are the same types of rules that would 

obtain if all of the information was submitted in a normal situation 

at Justice, for example, under—— 

Mr. DEFAZIO. I—OK. If we could, so—— 

Mr. KHOURI. May I—— 

Mr. DEFAZIO. Sir, you have given me an excuse, or a reason. But 

here is the point I want to make. You have the foreign entity joining together to negotiate singly with our service providers. Our 

service providers, you know—how can you conclude that they aren’t 

put at a disadvantage in these sorts of agreements? And what kind 

of analysis could you conduct that would say—that is going to have 

confidential information? 

What did you get that was confidential from the RO/RO providers? Did they tell you what rates they were going to bargain for? 

What did they give you that was confidential? 

Mr. KHOURI. If I could—— 

Mr. DEFAZIO. Well, just—what is confidential about the fact a 

conglomerate is now going to be authorized to negotiate singly with 

people who can’t form a similar organization? What—tell me what 

is confidential in there. 

You may be—you know, you are going to cite the law, and this 

and that, and this is all confidential. Your staff did an analysis. 

The analysis was there would be no negative impact. And you are 

saying that we can’t see that analysis, the people who are going to 

be negotiating, you know, are somehow provided confidential information. What is the confidential information? 

Mr. KHOURI. What I have offered to the Members that I have 

met with, and I offer to you today, Congressman, is, if I continue, 

under section 6(j) we can produce that information under a court 

order, or if Congress requests it. 

Mr. DEFAZIO. OK. 

Mr. KHOURI. And we would welcome—that was my final part. We 

would—— 

Mr. DEFAZIO. OK, great. 

Mr. KHOURI [continuing]. Welcome a request from Congress. 

Mr. HUNTER. I am pretty sure he just requested it. So there you 

go. Congress just requested it. Go ahead. 

Mr. KHOURI. So we would be happy to bring that before you in 

a confidential setting with you and your staff. Let us bring our 

economist with us to that meeting, and lay out for you what we 

were looking at when we—and please understand, Congressman, it 

is a 2-step process. 

It is—the authority that was given to the RO/RO group was not 

to enter into an agreement. They were allowed to go and begin a 

negotiation. And then, any agreement, as it was, has to then be 

brought back to the Commission so we can complete a full economic 

13 

analysis back and forth. So, we are still at the front end. The RO/ 

ROs have never even started to do a single negotiation. 

All we said was when we looked at all of the ports going around, 

it appeared that the market shares were sufficiently low to say, 

OK, let’s let them go ahead and have the right to go talk, but not 

the right to contract. That is a second part that would have to still 

be done when they come back and let us look at very specific situations. 

Mr. DEFAZIO. You are saying you have, your Commission, has 

the authority to look at an individual contract between a maritime 

service provider, domestic, and the foreign entity in this case, the 

RO/ROs, and that you could then say, no, that rate is too low, or 

somehow disallow it? 

Mr. KHOURI. No, we do not regulate rates whatsoever, in any 

shape or fashion—— 

Mr. DEFAZIO. OK. Well, then, what would you—what would they 

bring back to you that you would review? 

Mr. KHOURI. We would be looking at, from a well-accepted antitrust standards, of what is the market power of the purchasing entity. In this case it would be the RO/RO agreement. What is their 

market share of the product being purchased, which is tug assist. 

Mr. DEFAZIO. All right. Well, the Justice Department, I have 

read—there are two letters from Justice expressing tremendous 

concern about this. But your—but the Commission is saying, ‘‘We 

don’t have a concern,’’ or, ‘‘Thus far we don’t have a concern. We 

might have a concern after we see what happens’’? I don’t—I am 

not quite following this. 

And I think, again, Mr. Chairman—my time is up, but I think 

this really points to the pressing need for Congress to consider 

some legislation on this area. 

Mr. HUNTER. If you don’t mind, keep going on this. I have got 

a question. 

You say you can’t do anything, that they entered into negotiations. So what actions can you take after they make an agreement? 

What do you do after that? 

So you allow them to go into negotiations, right? 

Mr. KHOURI. Correct. 

Mr. HUNTER. Then you step back after you allow that. And what 

if they make an unlawful agreement? I mean what if their agreement, as a consortium, is unlawful? Then what can you do? 

Mr. KHOURI. Then we would go into court with that evidence before a Federal judge and seek an injunction saying—— 

Mr. HUNTER. Well, let’s make this easier. How do you determine 

that they created an uncompetitive practice? How do you make 

that determination to even take them to court? 

Mr. KHOURI. The standards are—have been gone over by the Department of Justice and the Federal Trade Commission. 

Mr. HUNTER. Sure, but—all right, well, just tell us. How do you 

make that determination, you, the FMC? Otherwise, why do we 

have the FMC? Why not just have the Department of Justice and 

the FTC? 

Mr. KHOURI. Well, I think—perhaps let me, if I can, just go back 

to Congressman DeFazio’s last statement to help fill in exactly 

what you are trying to get to, Mr. Chairman. 

14 

The Federal—excuse me, the Department of Justice, in their letter that you referenced, Congressman, they began with a factual 

assumption that all of the alliances were, in effect, mergers, and 

they say that they foreclose all competition amongst the alliances. 

And so, they started with a factual situation that is simply not 

true. For each one of the alliances, we have monitoring information 

that there is very active price competition within each alliance, 

members within each alliance, and there is very active separate decisionmaking going on as to capacity coming in and out of all of 

those trades, both inside of the alliance, and capacity by members 

outside of the alliance. 

Mr. HUNTER. So let’s just—so you have—let’s say three or four 

companies get together and form an alliance. You watch them and 

make sure that they don’t talk amongst themselves and what they 

are going to charge the—or what they are going to try to get the 

port to agree to as they come in? You guys know that for a fact? 

Mr. KHOURI. We—— 

Mr. HUNTER. These are foreign entities. 

Mr. KHOURI. We follow—they file monthly and quarterly data on 

all of the revenue, on their boxes, on capacity coming in and out. 

And we are looking for, on an active basis, to see if there are parallel actions in the marketplace that would indicate what you just 

put at the end of your question. And what we continually find is 

there remains active competition on a pricing basis and on a capacity basis inside of each alliance. 

If we found that they began to have parallel activity, I can promise you, Mr. Chairman and Congressman DeFazio, that we would 

be in court as quick as we could with that evidence presented to 

a Federal judge, saying, ‘‘Sir, this alliance is now not operating the 

way it should. We want an injunction and break it up.’’ 

Mr. DEFAZIO. Mr. Chairman, could you just yield back for a second? 

Mr. HUNTER. I yield back. 

Mr. DEFAZIO. Because I just want to follow up on this point. We 

are talking about one of these alliances—and again, I am reading 

from the Justice Department letter. For example, four companies, 

three of which are ocean carriers slated to join the alliance, have 

pled guilty. Eight corporate executives have been indicted or pled 

guilty in connection with worldwide conspiracy involving price fixing, bid rigging, market allocation among provides of roll-on/roll-off 

cargo shipping. 

In addition, three companies, six individuals have pled guilty or 

been convicted at trial in connection with a price-fixing conspiracy 

among carriers of domestic freight between the continental U.S. 

and Puerto Rico. 

And that is not a problem? I mean this went on. They—you 

know, substantial fines were assessed. Was that initiated by FMC 

or by Justice? 

Mr. KHOURI. There are two different actions in the issue—— 

Mr. DEFAZIO. OK, so we have criminals, you know, running these 

companies that are now getting limited antitrust immunity. And 

they are going to negotiate fairly with U.S. marine service providers who have to individually negotiate with them, and these 

15 

people aren’t going to bring market clout and put our people at a 

disadvantage? 

I mean this is just extraordinary. It defies common sense and 

also, you know, history, since we get a bunch of criminals in these 

companies. 

Mr. KHOURI. The Puerto Rico trades that you mentioned, Congressman, those operated under trade lanes regulated by the Surface Transportation Board, not the Federal Maritime Commission. 

The second matter that you bring up, these were activities by 

some carriers that they were operating without an agreement. 

They did a separate—totally outside of the sight of any—there was 

no agreement filed for which we could have monitored. So they 

were acting totally outside of any regulatory scope, and it was totally illegal, and they paid a heavy price for that. 

Mr. DEFAZIO. But now some of them are in the alliance, and the 

same people are running the companies. I mean that is who you 

are dealing with. 

Anyway, thank you, Mr. Chairman. Thank you for the time. 

Mr. HUNTER. I thank the gentleman. I yield to Mr. Graves from 

Louisiana. 

Mr. GRAVES OF LOUISIANA. Thank you, Mr. Chairman. Admiral, 

Chairman, I appreciate you both being here today. 

Admiral, the Coast Guard issued a notice of proposed rulemaking 

for electronic readers at certain facilities that handle certain dangerous cargo, CDC. In the proposed rulemaking there was a proposed nexus between facilities and maritime access, where the electronic readers were going to be needed. 

As you began to move forward in the rulemaking, in your final 

rulemaking, you actually significantly expanded the scope of the 

electronic reader to include any facility that could be within a security site plan. And that was a fairly expansive change within the 

rulemaking that was not part of the original notice. Therefore, people—the Coast Guard didn’t have the benefit of comments. 

I am concerned about the lack of tie-back to actual maritime in 

this case, under the rule. The site security plan is not necessarily— 

that is not necessarily—it doesn’t necessarily have a connection to 

maritime. A site could be anything. Folks could have a site security 

plan upon an entire facility, even though it could be walled off or 

prevented from having access to maritime. 

Can you give me a little bit of insight into why that expansion 

occurred during the rulemaking, and why that wasn’t part of the 

notice of proposed rulemaking to begin with? 

Admiral THOMAS. Congressman, thank you for the question. I am 

very familiar with that regulation, was involved in the development 

and implementation of the regulation all the way through, and I 

am very confused by your question. 

When we published a notice of proposed rulemaking, the population of impacted facilities that are regulated under the Maritime 

Transportation Security Act was quite large. The final rule, it was 

narrowed significantly. And normally, the question that I get is 

how come that narrowing occurred, so I am confused by your question. 

But in addition, the Maritime—— 

16 

Mr. GRAVES OF LOUISIANA. Let me ask this. Did you remove the 

vessel interface requirement? Wasn’t that the whole thing, is that 

when you finalize the rule you eliminated that vessel interface requirement? 

Admiral THOMAS. Sir, and again, at the risk of maybe not understanding your question, the Maritime Transportation Security Act 

allows the facility operators to define for the Coast Guard what is 

their regulated footprint in the facility. 

And so, there is nothing about the TWIC reader rule that 

changed that. What we—what the TWIC reader rule said was, at 

the access points that you have defined in your approved security 

plan, you must have TWIC readers. And if they define those access 

points beyond the facility-ship interface place, then that is where 

they—because that is the assessment that they did, they were 

going to move their access points out—then that is where the readers need to go. 

But again, at the risk of maybe not understanding your question, 

there is nothing in between the proposed rule and the final—— 

Mr. GRAVES OF LOUISIANA. I understand that the law relegates 

the scope to site security plans. I understand that. However, in the 

notice of proposed rulemaking, you limited the geographic scope to 

the vessel-to-facility interface area. 

In the final rulemaking, you no longer required that nexus, or 

that interface. Therefore, the entire site security plan was within 

the scope. So that is a growth of scope. And my point is that site 

security plans for a company that may carry out various activities, 

that may go—that site security plan may be beyond the geographic 

scope of a vessel interface. 

Admiral THOMAS. All right—— 

Mr. GRAVES OF LOUISIANA. And so, here is what my concern is. 

My concern is that companies may come back and start compartmentalizing site security plans—which I don’t think is to the benefit of overall security—in an effort to not have to include electronic 

readers all over these huge facilities. Does that make sense? 

Admiral THOMAS. Well, I would really like to offer you a brief on 

this topic, but I agree with you. There are a number of regulated 

facilities that have, by their own choice, extended the regulated perimeter beyond what is required by the law. 

Mr. GRAVES OF LOUISIANA. OK. So we agree on that point. Do 

you agree that you removed the nexus for vessel-to-facility interface in your final rulemaking when that was in the notice of proposed rulemaking? 

Admiral THOMAS. Sir, I don’t want to disagree with you on that. 

Again, I don’t—— 

Mr. GRAVES OF LOUISIANA. If I am wrong, that is fine. Tell me 

I am wrong, if I am wrong. Because that actually would sort of be 

very helpful, and what I was going to ask you to do, anyway. 

Admiral THOMAS. I am not clear enough that I understand what 

you are saying that I can tell you that you are right or wrong. 

But again, this is—for me, this is totally—— 

Mr. GRAVES OF LOUISIANA. Oh, come on. You were going down 

such a good path. 

[Laughter.] 

17 

Admiral THOMAS. Well, that doesn’t ring a bell to me, that we 

removed the nexus. I think there is probably an interpretation 

issue in that the law says you need a nexus between the facility 

and the—you need to secure the area where you have that nexus 

between the facility and the ship. 

Many facilities, for a lot of different reasons, have extended the 

regulated area beyond that. When they do their risk assessment 

and they give us their plan, we approve the plan, based on their 

assessment. And, in some cases, they have extended the regulated 

perimeter way beyond what is required by the law. 

Mr. GRAVES OF LOUISIANA. Would you be willing to issue a clarifying statement that the rule applies to vessel-to-facility interface 

areas that handle CDC in bulk? Is that the intent? 

Admiral THOMAS. I would be certainly willing to make sure I understand the issue, and then issue any clarifying statement that is 

required. But right now, sir, I am really not understanding this 

issue well enough to make you any declarative promises. 

Mr. GRAVES OF LOUISIANA. Based upon the perhaps uncertainty 

here—and again I will totally open up, and maybe I am not understanding this correctly. But based upon my read, I think that there 

was potentially a geographic expansion that occurred here that perhaps wasn’t intentional. Would you be willing to—if we can determine that there is uncertainty here, would you be willing to grant 

a longer compliance period, just so we can help sort this out, rather 

than requiring these facilities, many of which are in our district, 

to have to significantly change their reader profile? 

Admiral THOMAS. Absolutely, sir. If there are unintentional consequences to the regulations that we—certainly don’t meet congressional intent, we are all about practical implementation of regulations. 

Mr. GRAVES OF LOUISIANA. Well, in additional to congressional 

intent, I think that—something else that is really important to me, 

and I am sure it is to you, as well, is when you issue a notice of 

proposed rulemaking and you identify scope, if you are going to go 

outside that scope, then the Coast Guard is not going to have the 

benefit of the public input on that broader scope. And I think that 

is an important point to make, as well. 

Admiral THOMAS. I would agree, sir. 

Mr. GRAVES OF LOUISIANA. Great. Thank you. But, look, I want 

to make sure that we do schedule a followup meeting here and try 

and track this down and figure out what steps the Coast Guard 

should take, moving forward, if there is some uncertainty. 

Admiral THOMAS. Happy to do that, Congressman. 

Mr. GRAVES OF LOUISIANA. Thanks, Admiral. 

I yield back. 

Mr. HUNTER. I thank the gentleman. If we seem combative 

today, we had the airline CEOs in yesterday, and we just—there 

was a headline today that American Airlines cut their leg room in 

economy class more, just to make the American people like them 

more, I guess. They are cutting leg room to make us happier. The 

airlines hate the American people, that is all I am saying. 

I would yield to the gentleman from the LBC. 

Mr. LOWENTHAL. Thank you, Mr. Chair. And thank you both, Admiral Thomas and also Chairman Khouri. And I do congratulate 

18 

you. I know you are the Acting Chair, or the Interim Chair. And 

my dear friend, Mario Cordero, is now the new chair, or the next 

executive director of the great Port of Long Beach. I think it was 

an excellent choice, and I am sure it was because of the great experiences he had at the FMC. 

My first question, though, is for Admiral Thomas. And let’s go 

back to my concerns about the Ports of Long Beach and Los Angeles, which really cover about 40 percent of the Nation’s containerized cargo. Now, we anticipate that that cargo will increase over 

the next number of years. And so, how is this going to—as the 

port—as trade continues to increase, especially with greater megaships coming in, how is this going to affect the Coast Guard? 

You already began, I think, talking about kind of stretched resources when you began. But as we see the growth in containerized 

trade continue, how will that impact the Coast Guard, and what 

additional resources to keep us safe do you think you will need? 

Admiral THOMAS. Congressman, thank you for the question. And 

certainly we have seen growth in the size of ships, but not just the 

size, the complexity of systems that are used to move cargo through 

our ports more efficiently. And that is definitely a challenge for the 

Coast Guard, not just in L.A. and Long Beach, but around the Nation. 

We definitely—and our Commandant is on record as saying that 

we need to invest in our people and our workforce, so that we can 

remain agile and keep up with the technology that is allowing our 

Nation to enjoy the prosperity that we see through ports like L.A. 

We need to invest in the enterprisewide systems that we use for 

managing data and an enterprisewide system we use for managing 

our people. 

And we need to invest in the infrastructure that we currently use 

to service the marine industry, including the service we provide 

through our aids to navigation, but also that we provide at our National Maritime Center, where we credential mariners, and our National Vessel Documentation Center. 

So, absolutely, the growth and demand through the ports translates directly to the growth and demand for Coast Guard resources. 

Mr. LOWENTHAL. You know, we talk about national security, and 

the need for national security, and we look at our—and we take 

great pride in our military. But for me, who represents the port 

areas, I cannot tell you how appreciative I am of the Coast Guard. 

I mean I cannot overstate the importance of the Coast Guard to 

our—to protecting our maritime interests and protecting our citizens. It is just unbelievable on the west coast. And so we applaud 

you. 

Acting Chairman Khouri, you know, you have talked a lot about 

how the increased consolidation is changing the work of the FMC. 

Maybe you could tell us a little bit more how you see the FMC 

changing. We have talked a little bit about the consolidation and 

some of those issues, but how do you see the work of the FMC 

changing with this tremendous consolidation that is going on? 

Mr. KHOURI. I guess, number one, in our Bureau of Trade Analysis, which is where all of our economists are housed, we have had 

a great staff, and they have been hiring some new terrific transportation economists—it is a specialized area. 

19 

The monitoring that I mentioned earlier has become, according 

to the carriers, much more intrusive. And so that is music to our 

ears, not—you know, that is unfortunate, but—for them. But we 

have been quite insistent on, no, we need more information on a 

much more regular and timely basis, so that we can take all of 

this—and it is submitted to us confidentially, per the statute, then 

we match it up with an awful lot of commercially available information out there in the world, liner industry. It is labor-intensive 

for highly specialized people. 

And I would say that is the main areas we have become more 

and more—I don’t want to use the word ‘‘concerned,’’ because that 

would make it sound like we think something is going on. It is just 

that the potential for activity that would be prescribed by the Shipping Act or by other antitrust laws grows. 

So I think that is the best that I can respond to your question. 

If—I look to the chairman and his experience. You always had one 

Marine standing on the wall. We now have two Marines. So that 

is, I think, the best answer I can provide for that, sir. 

Mr. LOWENTHAL. Thank you. And I will wait, and I will yield 

back. 

Mr. HUNTER. I thank the gentlemen. With that, we are going to 

move to the second panel. I just got a quick question for Mr. 

Khouri. 

How many times has the Commission weighed in after an effective date of an agreement? 

Mr. KHOURI. I am sorry, sir? 

Mr. HUNTER. How many times has the FMC weighed in after an 

agreement has been made? 

Mr. KHOURI. The way that actually works—and I have an example in my hand, and I will start with that. 

It should be no surprise that we have been in rather pleasant or 

otherwise conversations with filing counsel for the RO/RO agreement, and received a letter yesterday. And this is an agreement in 

effect as we speak today. I am authorized to share the content of 

the letter, but not the letter itself. 

But I am just going to say they have committed, ‘‘willing to meet 

with the Commission staff to discuss possible amendments to the 

agreement that might address concerns being expressed with respect to the authority.’’ So we expect them to be in promptly to talk 

about amendments. And that is how the process actually works, 

Mr. Chairman, is if there is something going on, we bring them in. 

They don’t want to go to court, either, and that is how we obtain 

the constant update and amendments to all of these agreements. 

If I might say, also, we will work with you and schedule—I am 

not aware of any time we have had to actually go into court, but 

that is how the process works. We bring them in and say, ‘‘This 

isn’t working, we are going to change this.’’ 

Mr. HUNTER. Because—so just for the record, the Federal Maritime Commission has never taken a consortium or anybody to 

court. 

Mr. KHOURI. May I—— 

Mr. HUNTER. Over anticompetitive practices. 

Mr. KHOURI. May I consult my general counsel and his staff, and 

get back to you with a written answer to that? 

20 

Mr. HUNTER. So, to your knowledge, zero? To your knowledge, at 

this point in time. 

Mr. KHOURI. In the 7 years I have been there, no. But we have 

been administering the Shipping Act for 100 years, so I think it 

would be foolish for me to make a categorical statement. 

Mr. HUNTER. So the problem—— 

Mr. KHOURI. So we will come back to you. 

Mr. HUNTER. The problem here, which I think we are all trying 

to get at, is you are here to protect American companies and American interests. I mean that is why you exist, right? 

Mr. KHOURI. Absolutely. 

Mr. HUNTER. That is why you are here. The law makes it so that 

you cover—you look more at the shippers, not the tugboats, and not 

the port or terminal operators. That is what you are looking at. 

So, right now, you are not protecting the American interests, because the only guys that are shipping are foreign entities that are 

basically ganging up and forming these little groups, to where we 

have almost no competition whatsoever. You are not protecting the 

terminal operators because, by law, it is not required. Or the tug 

operators. 

So, all the American companies, that is—basically, in your mind, 

as you follow the law and you quote law and cite law, there is no 

law making it so that you have to watch—you have to look out for 

the best interests of the American companies, because the law says 

you look at shippers, and that is it. That is what you are looking 

out for. And I think that is where we are getting kind of tied 

around the axle here, is that that is kind of hard to swallow for 

us, is that you are not there for the American companies. 

Mr. KHOURI. Mr. Chairman, I believe a more, on one side, broad 

and perhaps—and more correct statement is we, like any other 

Federal competition agency, look to protect competition. 

And within that, not competitors in any one area, because, at the 

end of the day, at the end of the day, if full competition is at work 

in the marketplace, the end of that process is the American consumer. The American consumer is the one who benefits with lower 

prices and their goods. The American exporter, who has more reliable and the least expensive available transportation for their export goods into international markets. 

So, I would, with all respect, say we are not singularly focused 

on shippers in that regard. So—— 

Mr. HUNTER. Thank you, gentlemen. Admiral Thomas, if you will 

stick around, we are going to add a microphone and get on to panel 

2. 

Mr. Khouri, thank you. 

Mr. KHOURI. Thank you so much. 

Mr. HUNTER. Mr. Khouri, do you mind sticking around, too? We 

are just going to throw the staff into a tizzy, but do you mind sticking around? Do you have time? 

Mr. KHOURI. I planned on staying to listen, so I would be happy 

to. 

Mr. HUNTER. OK, thank you. Admiral Thomas, you can just stay 

where you are, if you want to. Oh, they are moving you over. OK. 

[Pause.] 

21 

Mr. HUNTER. OK, I think we are all together. And if I could ask, 

too—I mean we want to get through this—obviously, this is a giant 

panel now, because we combined three into two. I guess we could 

have had you all there in the first place, but that enabled us to 

focus on a couple of things. And now we will go into this one. 

So if you could keep your remarks brief, we can submit them for 

the record, and we will start just talking back and forth. 

I thank the first panel for being with us today—and you are still 

here—and the second panel. The witnesses for the second panel are 

Mr. Todd Schauer, president of the American Salvage Association; 

Mr. Steven Candito, current board member and former president 

and chief executive officer with the National Response Corporation; 

Mr. Nicholas Nedeau, chief executive officer of Rapid Ocean Response Corporation; Mr. Norman ‘‘Buddy’’ Custard, president and 

chief executive officer of the Alaska Maritime Prevention and Response Network; Mr. Tom Allegretti, president and chief executive 

officer for American Waterways Operators; and Mr. John W. Butler, president and chief executive officer for the World Shipping 

Council. 

Mr. Schauer, you are recognized for your statement. 

Mr. SCHAUER. Good morning, Chairman Hunter, Ranking Member Garamendi, and members of this subcommittee. I represent 

American Salvage Association, known as the ASA. The ASA represents 90 percent of the U.S. salvage capability. We appreciate the 

chance to give an overview of the salvage industry, and to discuss 

current issues. In the interest of time, my submitted statement has 

been abbreviated. 

Salvors are not ship scrappers. We are emergency responders 

and problem-solvers for the shipping industry. Beyond search and 

rescue, the Coast Guard does not have the assets to perform salvage operations such as rescue towing, firefighting, or other salvage services. Simply put, salvors respond to any casualty, anywhere, at any time. This may include collisions, fires, explosions, 

or groundings. It may involve tankers, cruise ships, LNG carriers, 

offshore rigs, or any other vessel type. This statement commitment 

may be hard to believe, but it is quite true. 

Salvors are extremely resourceful and dedicated. Most of the 

companies are family-owned, multigenerational businesses. Salvors 

operate in the most difficult conditions on the planet. Some jobs are 

incredible feats of engineering. Most of you probably recall the 

Costa Concordia job led by an ASA member in Italy. Others are 

courageous acts of seamanship, such as rescuing a disabled tanker 

in heavy weather. A member did this just this past weekend off of 

Galveston. 

Our members are the special forces of the marine industry, maritime response. The ASA has a good working relationship with the 

Coast Guard. Our operations teams respond together, and we interact often on regulatory matters. While we have our disagreements, 

we respect the capabilities and commonsense nature of the U.S. 

Coast Guard. 

Salvors are the first line of defense in preventing marine pollution. Our objective is to keep the oil in the ship and out of the 

water. Plugging all breach fuel from a stricken vessel, or simply 

22 

saving the ship from sinking is much more effective than skimming 

spilled oil. 

Regarding shipboard firefighting, the salvor has the requisite experience and equipment. We work alongside municipal fire teams, 

and we take the lead for all offshore fires. Salvors will clear all 

blocked waterways to restore commerce, whether caused by an accident or, God forbid, a terrorist attack. 

The U.S. Navy’s global salvage capability depends on response 

contracts with ASA members. 

Due to the leadership of this subcommittee, the SMFF [salvage 

and marine firefighting] regulations were promulgated in 2008 for 

tankers, 2013 for nontankers. The result was extremely positive. 

The salvors rapidly organized, we expanded equipment inventories, 

and developed robust networks to comply. 

Now, some third parties have recently questioned the commitment and resources of the SMFF providers. Let me be very clear. 

We will always respond. Our livelihoods depend on salvage job income, and our Coast Guard-approved and pre-agreed contracts with 

the shipowners will prevent any delays. 

Now, providers rely heavily on subcontracted resources. Our networks are comprised of major fleets of tugs and barges, derrick 

barges, all variety of support vessels, and marine services. We also 

have agreements with municipalities. For example, the New York 

City Fire Department has pre-agreed to support us during a vessel 

fire. 

This system of combining salvor-owned, specialized assets with 

extensive resource networks has proven effective in more than 180 

responses since the inception of the regulations. Provider capability 

and compliance is verified by many layers of oversight. These include drills and exercises, two separate Coast Guard verification 

programs, owner and insurer vetting, and direct approval of all actual operations by the Coast Guard. 

At the crux of the issue are nondedicated resources. Unlike spill 

response, the diversity of the 19 salvage services demands large 

networks of vessels of opportunity. There are no two ways to look 

at it. Providers rely heavily on this system. It includes more than 

7,300 support vessels, alone. We also utilize existing U.S. air, sea, 

and ground logistics modes, arguably the most developed in the 

world. Duplicating all of these resources of opportunity with dedicated assets would be highly impractical, and overwhelmingly costly. 

In closing, salvors will continue to respond quickly, grow capacity, and comply with all required verifications. The vessel of opportunity system works. Any attempt to duplicate it will place undue 

financial burden on the shipping industry and the consumer. 

Thank you, and I request that my statement be submitted. 

Mr. HUNTER. Without objection, so ordered. 

Mr. Candito? 

Mr. CANDITO. Good morning, Chairman Hunter, Ranking Member Garamendi, members of the subcommittee. I am Steven 

Candito, former CEO of National Response Corporation, one of the 

founders of 1 Call Alaska, along with Resolve Marine Group. 

NRC and Resolve are leading oil spill removal organizations and 

salvage and marine firefighting providers in the United States. 

23 

Joining me today are leadership from Resolve, NRC, and senior 

members of 1 Call Alaska, the true local response experts. They 

represent the core 1 Call Alaska emergency response organization 

with the commitment and capability to prepare for and respond to 

marine casualties in western Alaska. I thank the subcommittee for 

the opportunity to address response plans under the alternative 

planning criteria for western Alaska. 

I respectfully disagree with the need for section 107 of H.R. 5978. 

It would stifle competition and hinder improvement of oil spill response in Alaska. I will address the inaccurate arguments advanced by organizations that support section 107. 

They claim reducing competition is necessary, and that a monopoly will better serve Alaska’s interests. Specifically, section 107 prevents achieving a key goal of the Oil Pollution Act of 1990 to provide robust oil spill response capability along all U.S. coasts. 

Under the Coast Guard’s implementation of APC, the response 

industry is improving coverage, investing in vessels, aircraft, and 

staging facilities, and hiring experienced manpower, most of which 

is based in Alaska. Section 107 sets back progress made by 1 Call 

Alaska, discouraging further investment needed to move Alaska 

closer to the higher OPA [Oil Pollution Act] standards in the lower 

48. 

The Exxon Valdez exposed how ill-prepared the U.S. Government 

and the maritime industry were to respond to major spills, particularly in Alaska. There was very limited ability to respond to large, 

open-water spills. OPA jump-started the massive investment in private sector national response industry with four key provisions: 

first, clarifying chain of command and responsibilities under the 

National Contingency Plan; second, directing the private sector to 

provide the response equipment and manpower; third, incentivizing 

private investment by requiring vessel and oil facilities to contract 

with OSROs with capacity to meet the requirements; and finally, 

encouraging OSRO investment through responder immunity. 

The Coast Guard has provided the necessary flexibility and competitive environment to accommodate challenges in complying with 

OPA’s standards in western Alaska, while driving improvements in 

coverage. Section 107 type legislation impedes expansion of resources by excluding competition from the very companies with the 

most experience and the largest inventory of assets already in 

Alaska. 

Such legislation is premised on false assertions: one, competition 

will drive up fuel prices; two, there will be a price war ultimately 

ending in an unsustainable price of zero; and, three, competitors 

provide duplicative resources, driving up costs. I will address each 

of these contentions separately. But, as a general matter, competition ultimately drives down prices, while increasing resources. The 

fallacy is that a nonprofit monopoly provides the most resources at 

the lowest cost. 

With regard to fuel prices, our written testimony includes a fuel 

price report by Alaska’s Department of Commerce, Community, 

and Economic Development, published in January 2017, reviewing 

the previous year. This report concluded heating fuel and gasoline 

prices in most regions of the State are at their lowest since early 

24 

in 2009, and most survey communities have seen significant declines. 

With regard to the remote communities, the report noted remote 

communities have higher shipping costs, resulting in fuel prices 

that are significantly higher than the statewide average. However, 

since most communities receive at least one fuel delivery a year, 

they are continuing to benefit from the lower cost of fuel. Thus, the 

primary fuel cost drivers are the price per barrel, the fixed cost per 

shipment, and infrequency of delivery, rather than any minimal 

APC market pressure. 

Secondly, I can confirm 1 Call Alaska has not participated in a 

price war. Our pricing is dependent on our cost of operations and 

number of customers. That scale has largely remained steady as of 

now, and we are the most expensive provider. In actuality, it is the 

nonprofit, which consistently undercuts our prices, seeking to compete, which they should not be doing, given their nonprofit status. 

Finally, with regard to the assertion multiple providers duplicate 

resources, I note the significant number of resources we included 

and specific investments in Alaska. Simply put, the main reason an 

APC is needed is that currently the resources are insufficient to 

meet OPA standards. Thus, competition has caused us to add personnel and equipment. Further, the resources we added are not the 

same type that existed. Since inception, 1 Call Alaska represents a $44 million investment in aircraft, equipment, vessels, and facilities. Resolve and 

NRC also employ full-time more than 100 Alaskans. Further, over 

the last year alone we cooperated with the Coast Guard to save 

100-plus lives and prevent the discharge of millions of gallons of 

oil. 

Importantly, most of the casualties we responded to were not 

customers of our APC. In fact, our services were called upon out 

of a necessity, as the entities advocating could not effectively respond to our customers’ spills. 

In closing, 1 Call Alaska is proud to announce plans to expand 

to the entire Western Alaska Captain of the Port Zone. Whether it 

is a stricken 4.2-million-gallon tanker, a disabled fishing vessel 

from Dillingham with 100 souls on board, or flying our aircraft, 1 

Call Alaska endeavors to prevent, prepare for, and respond to marine casualties in western Alaska. Thank you. 

Mr. HUNTER. Thank you. 

Mr. Nedeau? And I am saying that right, correct? 

Mr. NEDEAU. Nedeau. That is close. 

Mr. HUNTER. Nedeau? OK. You are recognized. 

Mr. NEDEAU. Chairman Hunter, Ranking Member Garamendi, 

and members of the Subcommittee on Coast Guard and Maritime 

Transportation, thank you for giving me the opportunity to testify 

and provide information on the gap between marine salvage and 

firefighting requirements, and the actual services contracted for by 

vessel owners. The gap places the marine environment and vessel 

crews in considerable jeopardy. 

My name is Nicholas Nedeau. I am the CEO of Rapid Ocean Response Corporation. Rapid Ocean Response provides high-speed, 

dedicated vessels for offshore firefighters and surveyors, as required pursuant to the salvage and marine firefighting regulations. 

25 

The salvage and marine firefighting regulations are derived from 

the Oil Pollution Act of 1990. That statute reads, in relevant part, 

that tank vessels ‘‘identify, and ensure by contract or other means 

. . . the availability of, private personnel and equipment necessary 

to remove . . . a worst-case discharge (including a discharge resulting from fire or explosion), . . .’’ 

The clear import of that provision is that Congress intended that 

when a fire or similar incident occurs offshore, marine salvage and 

firefighting resources be identifiable and ensured by contract to be 

available to respond. As my testimony will explain, neither of those 

requirements are currently being met. 

In terms of the implementation of the salvage and marine firefighting regulations, the Coast Guard was surprisingly patient. 

Over a period of 23 years, the effective date of the regulations was 

repeatedly pushed back. The reason the Coast Guard usually provided for the delay was that more time would be needed to allow 

the resource providers to build the vessels necessary to achieve 

compliance with the rules. Unfortunately, the dedicated network 

the Coast Guard envisioned has not been established. 

Looking at the salvage and marine firefighting regulatory requirements, it is clear that these requirements cannot be met consistently without a dedicated network. The regulations require ‘‘A 

planholder must ensure by contract or other approved means that 

response resources are available to respond . . .’’ Instead of building the dedicated resources the regulations required, the regulating 

community attempted to achieve compliance using a vessel of opportunity approach. 

Under this strategy, a vessel owner lists numerous vessels in his 

vessel response plan, in the hopes that one might be available to 

respond. This approach is both legally and operationally deficient. 

Legally, of the four qualified resource providers, three conditioned 

the response on the availability of their vessels. All resource providers rely heavily upon subcontractors, whose contracts provide 

they will respond, if available. 

Operationally, the vessel of opportunity approach also cannot 

achieve compliance consistently. Because nondedicated vessels are 

often engaged in other work, they must first disengage and return 

to port. There these vessels load the necessary equipment and personnel and are retrofitted with firefighting pumps. It is unlikely 

these activities can be accomplished and mount a compliant response within the 6-, 12-, or 18-hour timeframes. 

The obvious question is how could these serious deficiencies not 

have come to the attention of the Coast Guard. The salvage and 

marine firefighting regulations provide a very specific list of mandatory exercises and drills. Unfortunately, the Coast Guard has not 

required vessel owners to provide proof of these exercises. 

There are real-life examples of these compliance issues. On 

March 14, 2015, the Grey Shark lost power off the Coast of New 

Jersey. On the 15th, fire broke out. On the 17th, she arranged a 

tow back to New York Harbor, where the New York Fire Department put the fire out on the 18th. During that time the Grey Shark 

utilized a vessel-of-opportunity approach to compliance. She contacted over 200 vessels. None were available to respond. 

26 

The Caribbean Fantasy, a cruise ship, caught fire within 2 miles 

of the entrance to San Juan Harbor. Although a very successful 

evacuation was performed, according to Coast Guard commander 

Janet Espino-Young, the active firefighting component of the vessel 

response did not meet the criteria as required by the regulations. 

That is within 2 miles of a major port. 

In 2015, RORC [Rapid Ocean Response Corporation] submitted 

an application to build a nationwide dedicated salvage and marine 

firefighting response network. That network, comprised mainly of 

harbor pilot groups, utilizes high-speed, oceangoing pilot boats to 

transport fire teams and surveyors. These pilot boats were to be 

used until custom-built fire boats could be placed in service. RORC 

provided examples of lack of compliance and operational deficiencies in each captain of the port zone. 

On March 14th, the Coast Guard responded, explaining that the 

Coast Guard could not approve RORC’s application without first 

determining that a gap in compliance existed. On March 17, 2016, 

Admiral Paul Brown announced a verification process to determine 

whether gaps in compliance did exist. Inexplicably, this process has 

not come to fruition. 

In closing, the congressional mandate that salvage and marine 

firefighting resources be identifiable and ensured by contract to be 

available to respond has not been achieved. I ask the Oversight 

Committee to press the Coast Guard to reject vessel response plans 

that do not provide evidence of the required drills and exercises. 

Without requiring proof of compliance, Congress’ clear intentions 

will remain unfulfilled. 

Thank you, and I ask that my written statement be adopted to 

the record. 

Mr. HUNTER. Without objection. This is interesting, too, because 

Mr. Schauer and Mr. Nedeau are talking about the same issues. 

Mr. Candito and Mr. Custard are going to be talking about the 

same issue on different sides. 

So, Mr. Custard, you are recognized. 

Mr. CUSTARD. Thank you, Mr. Chairman. Good morning, Chairman Hunter, Ranking Member Garamendi, and members of the 

subcommittee. The Alaska Maritime Prevention and Response Network, a nonprofit organization, administers the only Coast Guardapproved, nontank vessel APC program that covers the entire 

Western Alaska Captain of the Port Zone. The Network supports 

over 450 maritime companies from around the globe operating in 

and transiting through western Alaska. I appreciate the opportunity to discuss the implementation of alternative planning criteria in western Alaska. 

By way of background, the area referred to as western Alaska 

has long been of interest to the U.S. Congress. As the committee 

knows, western Alaska includes the U.S. Arctic region and other 

areas of critical national interest in western Alaska, including the 

unique environment and critical habitat, the largest and most valuable commercial fishing industry in the United States, and unique 

cultural interests. 

In short, Congress has a long and valued history in recognizing 

and addressing the many challenging issues that are unique to this 

27 

area for the benefit of all Americans. As an Alaskan, I very much 

appreciate Congress’ efforts in that regard. 

The Western Alaska Captain of the Port Zone comprises over 1 

million square miles of ocean. Because this exceptionally large area 

has little infrastructure, the national planning criteria used to 

meet the requirements of the Oil Pollution Act of 1990 in the continental United States have been very difficult and challenging to obtain there. Instead, vessel owners and operators have been using 

alternative planning criteria, or APC. The Network has concerns on 

several major issues. 

The Coast Guard has deviated from the longstanding practice of 

managing the vessel response plan regulations in western Alaska 

on a captain-of-the-port-wide basis, creating confusion among the 

maritime industry and undermining the ability to sustain and enhance oil spill preparedness in western Alaska. 

The current management practice, as well as the proposed guidance by the Coast Guard, will, over time, continue to lower response capability and capacity. They will weaken the oil spill safety 

net in western Alaska, undermining environmental protection and 

putting the livelihood of fishing vessels in Alaska, Washington, Oregon, and California in jeopardy. 

The Coast Guard recently imposed competition on APC providers 

in western Alaska, but the terms were not clear, equitable, or consistently enforced. All APC providers should cover the entire captain of the port zone, and should position and build out, not minimize, equipment within Alaska, so that resources are readily available, rather than being a continent away, taking days to deliver 

and put in place. By then, the damage from the spill is done. 

There has been no objective economic analysis completed by the 

Coast Guard. The independent economic assessment we provided to 

the Coast Guard validates a downward trend we are witnessing in 

sustaining response capabilities in western Alaska. We are now 

witnessing a decline in greater intensity and velocity than predicted by that study. 

The claim that there is more equipment in western Alaska with 

multiple APC providers is a mischaracterization of reality, because 

it assumes all APC providers make their equipment available for 

any vessel during a response. But the only equipment a planholder 

can rely on is what is available through their individual APC provider. 

As Congress examines a path forward, and to the extent that 

changes are made to the way APC is implemented in Alaska, we 

request that the following principles be considered: APC providers 

must cover the entire Western Alaska Captain of the Port Zone; 

continued fragmentation of the captain of the port zone will continue to result in reduced capacity to protect western Alaska and 

the Arctic. 

Reducing the risk of oil spills must be an essential component of 

an APC program. The economic ramifications of how the Coast 

Guard is implementing APC in western Alaska must be analyzed 

and understood. Accountability is paramount. When an oil spill 

happens, Alaskans want assurance that vessels in an APC program 

have the resources in Alaska readily available to respond to a spill. 

28 

Unlike now, the Coast Guard must be able to consistently apply 

and enforce whatever rules it develops. Waivers should be the exception, not the rule. 

Regular order must be adhered to in regulating industry. Regulations by administrative policy allows the Coast Guard to change 

the rules without notice or an opportunity for comment, and without analyzing the economic impact. 

Up until recently, the Coast Guard managed oil spill prevention 

and response on a captain-of-the-port-wide basis in western Alaska. 

The result was a long-term, sustainable build-down of response resources for the benefit of the entire region. Congress should provide 

policy directives that result in continuity and predictability, and resolve the ambiguities in the regulations that allowed the Coast 

Guard to unilaterally depart from the successful approach, and direct the Coast Guard to return to an areawide APC requirement 

in western Alaska and the Arctic. 

These principles are offered to restore order to the process of regulating the maritime industry in western Alaska. More importantly, they will ensure that oil spill response is administered in 

a fair and balanced manner, and will ensure that a robust and sustainable oil spill prevention and response program protects all of 

western Alaska, including the U.S. Arctic region. 

The Network stands ready to work with the committee, the Coast 

Guard, and all stakeholders to craft a long-term solution that 

works for western Alaska. 

Mr. Chairman, I appreciate the subcommittee’s examination of 

this important issue. I ask my written remarks be entered into the 

record. Thank you. 

Mr. HUNTER. Without objection. Thank you. 

Mr. Allegretti, you are recognized. 

Mr. ALLEGRETTI. Good morning, Chairman Hunter, Ranking 

Member Garamendi, and members of the subcommittee, thank you 

for holding the hearing today. I am here to ask for your assistance 

in averting an existential threat to the health and the viability of 

AWO [American Waterways Operators] members in the ship-docking business. 

Over the past year, international ocean carrier alliances have 

filed agreements five times with the Federal Maritime Commission, 

seeking authorization to negotiate collectively with tugboat operators and other domestic service providers who have no 

counterbalancing ability to take such action under U.S. antitrust 

laws. 

In three of the cases, the parties to the agreement eventually 

withdrew the collective negotiation provision. But in January, a 

group of foreign car carriers filed an amendment that allows alliance members to negotiate jointly with American tugboat operators. Over AWO’s objections, and without a thorough analysis of 

the injurious impact on the tugboat industry, the FMC allowed the 

amendment to take effect. 

AWO believes that both the letter of the Shipping Act and congressional intent in enacting that statute prohibit collective negotiation of rates with domestic service providers. We foresee an egregious competitive imbalance and grave harm to American companies if foreign ocean carrier alliances are allowed to negotiate colVerDate Aug 31 2005 14:27 Jul 20, 2017 Jkt 000000 PO 00000 Frm 00038 Fmt 6633 Sfmt 6633 P:\HEARINGS\115\CG\5-3-20~1\25312.TXT JEAN
29 

lectively with the U.S. tugboat operators. We have laid out the 

legal and the practical reasons for our concerns in multiple submissions to the FMC and in meetings with FMC Commissioners and 

staff. 

We are gratified that both the Department of Justice and the bipartisan leadership of this subcommittee and the full committee 

have voiced similar concerns to the FMC. But frankly, we are astonished that a majority of the FMC Commissioners do not share 

them. 

Because the FMC allowed the car carrier group to collectively negotiate with U.S. companies, we were not surprised when, in 

March, a group of Japanese ocean carriers filed yet another agreement that would authorize the parties to negotiate collectively with 

tugboat operators. The FMC had signaled a green light for this provision. AWO and other service providers have registered strong opposition, but the offending provision was never removed from the 

agreement. 

This series of events leads us to three basic conclusions, all of 

which are very troubling to us. 

First, that foreign ocean carriers of ever-greater size and market 

power will continue to seek authority to negotiate collectively with 

American tugboat operators who enjoy no ability under the antitrust laws to take similar action. 

Second, that the FMC is either unwilling or unable to halt and 

reverse this unfair and anticompetitive situation. 

And third, that the FMC intends to extend its regulatory review 

over the tugboat industry, an authority Congress has not conferred. 

In the process, it will eviscerate the confidentiality of our commercial contracts with our customers. 

My central message to you is this: It is fundamentally unfair, 

anticompetitive, and detrimental to the U.S. maritime industry to 

skew the playing field in favor of massive international shipping 

conglomerates, which include foreign, State-owned enterprises, and 

entities that have paid criminal fines for anticompetitive behavior, 

at the expense of American tugboat companies. 

If the FMC lacks the will or the ability to act swiftly and decisively to stop and reverse this growing trend, then AWO members 

call upon Congress to amend the Shipping Act to unequivocally 

prohibit joint negotiation with domestic service providers. It is unconscionable to us that an agency of the U.S. Government would 

sanction the disadvantaging of an essential American industry in 

favor of foreign shipping alliances. Congress should act to rectify 

this injustice where the FMC has failed to do so. 

Thank you very much for your attention. I look forward to your 

questions. 

Mr. HUNTER. Thank you, Mr. Allegretti. 

Mr. Butler, you are recognized. 

Mr. BUTLER. Chairman Hunter, Ranking Member Garamendi, 

members of the subcommittee, my name is John Butler, and I am 

the president and CEO of the World Shipping Council. I appreciate 

the opportunity to testify today. I have submitted written testimony that I would ask be included in the record. 

I would like to make two points about the liner shipping industry, and then I would like to address the issue of joint purchasing. 

30 

The first point is that the liner shipping industry is a critical 

link in our Nation’s international trade, and it is a major driver of 

the economic vitality of this country. Whether our members are 

carrying consumer goods to retailers in the United States, supplying parts to automobile manufacturers, or carrying U.S. agricultural goods to foreign markets, liner shipping touches almost every 

part of the U.S. economy. 

The second important point about liner shipping is that the industry is in a period of substantial change. The market for international containerized shipping services is intensely competitive. 

The result of that competition has been historically low ocean 

transportation rates for U.S. importers and exporters almost continuously since the global recession in 2008. 

Persistent low freight rates have caused carriers to seek efficiencies in every part of their operations, and that includes tremendous investments in a new generation of highly fuel-efficient container ships. There have also been structural changes. A number 

of carrier mergers closed last year, and we will see several more 

that are likely to be completed this year. However, even after those 

mergers are completed, the liner shipping market will remain 

unconcentrated. 

As the committee has discussed already, vessel sharing agreements or alliances are one of the tools that carriers use to make 

sure they get the best operational efficiency out of their vessel 

fleets. Sharing vessels allows carriers to serve more ports worldwide, which improves choices for shipper customers and increases 

competition. All carrier agreements must be filed with the Federal 

Maritime Commission, and the Commission may seek changes to 

carrier agreements based on concerns that the Commission may 

have, as well as concerns that may be raised by the public and interested parties. 

As Mr. Allegretti referred to, in the case of the three major alliance agreements, for example, tug operators raised concerns about 

the authority of ocean carriers to jointly negotiate for tug services. 

And the carriers in those three agreements changed the language 

to clearly state that there would be no joint negotiation for tug 

services in the United States. 

The staff summary for this hearing mentions two carrier agreements that contain some joint purchasing authority. The Commission, just yesterday, has decided that it does not have jurisdiction 

over one of those agreements. The only remaining agreement in 

question with general joint purchasing authority requires the parties to go back to the FMC before they take any actual concrete action under that authority. That means nothing happens under that 

agreement until the FMC gets another look at it, and the public 

has an opportunity to comment. 

It is unclear at this stage whether and to what extent carriers 

in the future may wish to pursue joint purchasing of services and 

vessel supplies in the United States. What is clear is that any 

agreements with that authority will be subject to strict scrutiny. 

That is in line with the full committee’s recent instructions to the 

FMC, and it is consistent with the FMC’s actions to date. I think 

the message has been received on the carrier end, as well. 

31 

The one thing that I would respectfully ask of the subcommittee, 

of the FMC, and of service providers is not to take a categorical 

view about joint purchasing. The Department of Justice, the Federal Trade Commission, the Department of Transportation, and the 

Supreme Court have all said that joint purchasing can be pro-competitive. And, whether in a given situation those activities should 

be allowed, or they should be challenged, depends on the specifics 

of that particular situation. 

As the shipping industry works through the current economic 

and operational challenges, there may be need for different types 

of business arrangements, including joint purchasing. And some of 

those activities may be beneficial, both to service providers and to 

service buyers. Let’s not foreclose potentially useful tools without 

first making sure we understand how those tools might operate in 

the market. 

I thank you for the opportunity to testify. I would be happy to 

answer any questions. 

Mr. HUNTER. I thank you, sir. I am going to yield to Mr. Larsen 

over there. I don’t think he got a question during the first panel. 

Do you have a question? Please. 

Mr. LARSEN. Sure. This question is really with regards to this— 

the firefighting issue. And I was wondering if—for Admiral Thomas, if the regulations, the SMFF regulations, delineate elicit exercises and drills that vessel owners are required to conduct. 

Are those vessel operators conducting those required drills? 

Admiral THOMAS. Thank you for the question, Congressman. Yes, 

the regulations do specify, as was testified to, a number of different 

verification processes, including exercises and drills. The Coast 

Guard has limited resources to oversee all those, but we do oversee 

the ones that we can. 

I think this is really a question about our capacity to verify compliance with the SMFF regulations. And, as I testified to in the 

earlier panel, we are limited in our capacity across our Coast 

Guard. But we do have a robust verification currently underway. 

That—the verification process itself, sir, is limited by some legal requirements, in terms of how much information we can ask for from 

regulated entities. So we are conducting that verification in the 

course of required plan renewals. 

Mr. LARSEN. So what kind of legal requirements are there if, in 

fact, the law says that you are supposed to verify that these drills 

are taking place? 

Admiral THOMAS. Well, sir, so we—for example, we can attend 

and oversee the drills that are required by the law. But what we 

are limited in is our ability to ask for additional information that 

we might use for verification outside of the normal cycle in which 

a regulated entity would normally be proving that information to 

the Coast Guard. 

I think a key thing to understand here is that these regulations 

do not regulate anybody at this table, at least not the four gentlemen to my left. They regulate vessel operators. And those operators 

are compelled to comply with the regulations by procuring services 

from the likes of the gentleman to my left. And that is, I think, 

really, one of the fundamental issues here. 

Mr. LARSEN. Much like the OSRO model? 

32 

Admiral THOMAS. Much like the OSRO model. The salvage 

model, business model, developed differently for a lot of reasons 

that Mr. Schauer touched on. But it is very similar, in terms of the 

legal and regulatory construct. 

Mr. LARSEN. OK. Is it Nedeau? Nedeau? 

Mr. NEDEAU. Nedeau, thank you. 

Mr. LARSEN. Nedeau, sorry. All right. You said that earlier, 

thank you. 

What would a successful verification process look like, in your 

opinion? 

Mr. NEDEAU. Well, I think it is—a comprehensive and robust 

verification process for the response resources that we address 

would simply identify a vessel crossing within the 50-mile barrier 

falling within the jurisdiction of salvage and marine firefighting, 

and asking that vessel where its response resources are, and then 

determining whether they have contracts with those resources, 

which require them to respond. 

If the contract provides that they will respond if they are available, it does not meet the legal requirements. If the vessels are 600 

nautical miles away, or not in the captain of the port zone, it does 

not meet those requirements, operationally. And we provided evidence of that to the Coast Guard in 2015, with our application for 

an alternative planning criteria, evidence of the operational and 

legal deficiencies in every captain of the port zone, and they responded saying they would do a robust verification to determine if, 

in fact, those deficiencies were apparent. That has not come to fruition. 

Admiral Thomas, by the way, is a man of unquestioned integrity, 

and tremendous leadership, and we have great respect for him. 

However, this program has not been reporting to him. So I do not 

believe he is as knowledgeable about the lack of verification. And 

his response to your question about whether they are conducting 

or requiring the mandatory drills and exercises, to my knowledge 

I am not aware of one shipping company that is required to provide 

those. 

Mr. LARSEN. That is a—thank you. I think we need to explore 

that a little further. I appreciate it, thanks a lot. I yield back. 

Mr. HUNTER. I thank the gentleman. 

Mr. Graves? 

Mr. GRAVES OF LOUISIANA. Thank you, Mr. Chairman. I appreciate it. I continue to have concerns about some of the vessel response that has been discussed today. 

For example, I am concerned about the timing it is going to take 

for these vessels to get to some of the potential accidents that 

occur. Representing south Louisiana, I had the chance to spend a 

good bit of time on Deepwater Horizon activities, the oil spill in the 

Gulf of Mexico in 2010, and I am curious about how a tug that is 

traveling at 10 knots is going to have the capability to get out there 

in any reasonable period of time to provide the response time that 

we need in a disaster. 

Admiral, do you care to comment on that? 

Admiral THOMAS. Thank you, Congressman. The performance requirements, or planning requirements, are delineated in the regulations, in the national planning criteria, and they do specify reVerDate Aug 31 2005 14:27 Jul 20, 2017 Jkt 000000 PO 00000 Frm 00042 Fmt 6633 Sfmt 6633 P:\HEARINGS\115\CG\5-3-20~1\25312.TXT JEAN
33 

sponse times that are required. The process of determining those 

times was subject to, you know, robust analysis and comment 

through the rulemaking process. 

I think one of the real keys here—and I would like to take this 

opportunity to correct—the law, and therefore, the regulation, 

never envisioned dedicated resources. It is not required. And, in the 

course of the regulatory analysis and, most importantly, in the economic—— 

Mr. GRAVES OF LOUISIANA. I just want to make sure—you said 

it never required dedicated resources? Is that what you said? 

Admiral THOMAS. Yes, sir, that—— 

Mr. GRAVES OF LOUISIANA. OK. 

Admiral THOMAS. That is what I said. And, in fact, the economic 

analysis—which, as you know, is required for every rulemaking— 

we would not have been able to support a cost-benefit analysis, had 

we required dedicated, under-contract resources. 

So, the planning factors, they identify and procure, in one way 

or another, you know, make an arrangement with resources that 

can meet these planning factors. But as I explained earlier, those 

are not performance factors when it comes to actual response. 

So there is a misunderstanding, in terms—in other words, if the 

Coast Guard were to require dedicated resources for this purpose, 

the law would have to be very specific, so that our regulation could 

be equally prescriptive. 

Mr. NEDEAU. If I could address this, this is a common misunderstanding, I believe. 

Mr. GRAVES OF LOUISIANA. Sure, but quickly. I have got some 

other questions. 

Mr. NEDEAU. I think, as to the nondedicated resource question, 

it appears in the Federal Register at page 80634, Vol. 73, No. 251: 

‘‘One commenter suggested that the use of nondedicated resources 

is a viable and commercially acceptable, cost-effective way of conducting emergency-response business, and therefore should be utilized to establish appropriate salvage and firefighting standards. 

The Coast Guard disagrees. This rulemaking has been designed to 

mirror the success that the OSROs and planholders have had with 

pre-arranged contracts as required in 33 CFR part 155. This will 

ensure that both industry and resource providers are clearly aware 

of who will respond on scene, and in what timeframe they are capable of arriving . . .’’ 

Mr. GRAVES OF LOUISIANA. So we got a fight on our hands now. 

Mr. NEDEAU. I would also like to address the planning standards 

if I could that were referenced by Admiral Thomas. The regulation 

is very specific. It provides that, in this instance, ‘‘Compliance with 

the regulations’’—I am quoting from 155.4010(c)—‘‘Compliance 

with the regulations is based upon whether a covered response 

plan ensures that adequate response resources are available, not 

on whether the actual performance of those response resources 

after an incident meets specified arrival times . . .’’ 

The availability requirement that you have a contract with resources that are available and ensures that by contract is the legal 

requirement. It is true that planning standards don’t kick in. Compliance is determined on whether you have a contract that ensures 

the resources are available. Thank you. 

34 

Mr. GRAVES OF LOUISIANA. Should we let the two folks in the 

middle move out of the way and let you all fight? Would that be 

better? 

[Laughter.] 

Mr. GRAVES OF LOUISIANA. All right. Let me go back to—I do 

want to hear your comment, but I want to make sure I understand 

something that you commented on, Admiral. You said that, under 

a cost-benefit analysis, you determined that a dedicated vessel was 

not appropriate. Is that what we learned about last week, this Paperwork Reduction Act consideration that occurred that we recently 

again just learned about last week? Is that what you are referring 

to? 

Admiral THOMAS. No, sir, I don’t believe so. I think that that particular act is what is making it more difficult for us to conduct the 

verification on the timeline that we would like to do. So we are 

really forced to do the verification on a timeline that is in synch 

with the normal industry requirement to renew their plans with 

us. 

Remember that regulated entity here is the vessel operator. It is 

none of these services. 

Mr. GRAVES OF LOUISIANA. When did that termination occur on 

the verification that would—as I understand from last week, we 

were briefed that it was based upon the Paperwork Reduction Act. 

Admiral THOMAS. When did it occur, sir? 

Mr. GRAVES OF LOUISIANA. Yes. When did that termination of 

verification occur? 

Admiral THOMAS. We have not terminated the verification. We 

have just adjusted the timeline on when we can reasonably expect 

to get a good-enough representational data set to make a determination on whether or not the APC that has been requested is 

justified. 

Mr. GRAVES OF LOUISIANA. OK. 

Admiral THOMAS. We are still actively verifying. 

Mr. GRAVES OF LOUISIANA. OK. So then, with—so it is being enforced, but you said the timeline is the issue right now. 

Admiral THOMAS. Yes, sir. So we will conduct verification in the 

course of plan renewal—that is required already by the regulation—as opposed to going out to the planholders in between their 

renewal process and asking for additional information. 

Mr. GRAVES OF LOUISIANA. OK. So your compliance process is 

what, again, then? 

Admiral THOMAS. As—similar to what was described. But essentially, we will take a vessel’s plan and we will impose a scenario 

on it, and we will freeze in time where that vessel is when it occurs, and where all their response resources are, and see how well 

they can meet the planning standards. 

Mr. GRAVES OF LOUISIANA. Please, briefly, we are—— 

Mr. SCHAUER. Yes. Thank you, Congressman. Just to extend the 

logic of Mr. Nedeau here, if we extend this logic throughout the 

system that we use, salvage and marine firefighting, every 200 

miles on the coast you would have a large ocean tugboat, dedicated, 

not able to do anything else, a derrick barge, you would have supply boats, crew boats, firefighting vessels. You would have air— 

charter cargo aircraft, dedicated cargo aircraft parked, because 

35 

those can’t be of opportunity, either. You would have trucks 

parked, you would have—basically, all of the services that we provide are provided at the existing networks. 

So, if you are going to say they ought to be dedicated, then throw 

all that out and let’s build a new system. It is sort of ridiculous, 

when you look at the cost of it. 

So now, we are commonsense folks. We think the Coast Guard 

is. There are layers—there are regions where probably less redundancy. There are places where there is a lot. In fact, the Gulf of 

Mexico, it is a resource-rich environment down there. We get a response there, it is easy. OK? Other places have less. 

So it is a process we have to go through, and we have to look 

at the areas of—that, you know, need the most focus, and continue 

to grow capacity. Our industry has been growing capacity for— 

since our inception. So we have no problem doing that. 

Mr. GRAVES OF LOUISIANA. I just—I want to caution you in using 

the term ridiculous when we are talking about this here, because 

we are potentially talking about lives. And response time and capabilities are very important because, potentially, we have lives at 

risk. And I want to remind you Deepwater Horizon we lost 11 people, the biggest part of that tragedy. 

Can you go back? Just one thing that you mentioned earlier, you 

mentioned the New York Fire Department being part of your response capabilities. How does that work? And are you being compensated for the capabilities of the New York Fire Department? 

How does that—— 

Mr. SCHAUER. They have signed an agreement to be a resource 

provider to the SMFF providers. 

Mr. GRAVES OF LOUISIANA. And do you pay them, or no? 

Mr. SCHAUER. Yes, sir, if they—for their services, they are compensated for their services. 

Mr. GRAVES OF LOUISIANA. OK, OK. And so—and they have complementary capabilities to yours, or—— 

Mr. SCHAUER. Basically, if—a fire at the dock is the jurisdiction 

of the local fire department. So we support them at a fire at the 

dock. If the fire moves away from the dock into the port, offshore, 

it switches. We take the lead offshore. So we have a mutual aid 

agreement. We support them when the fire is at the dock. They 

support us as it moves away from the dock. 

Mr. GRAVES OF LOUISIANA. OK. Because in the case of the Grey 

Shark, I think it took 4 days in that case to put that one out. And 

obviously, that kind of timeframe, if that were a vessel with passengers, would be incredibly concerning. 

Mr. SCHAUER. The Grey Shark started about 200 miles offshore, 

outside of the jurisdiction of everything. It was—I don’t really want 

to talk specifically about cases, I am an elected officer of the ASA, 

but I am also—I work directly for one of the providers. So it was 

a competitor company, they responded to that. I am not going to 

address that specifically. 

But it started 200 miles offshore, outside the jurisdiction of the 

regulations. It was towed in. It was handled—the New York Fire 

worked together with the provider, and that is how it is supposed 

to work. 

Mr. GRAVES OF LOUISIANA. Thank you—— 

36 

Mr. NEDEAU. If I could just say one thing, my comments have 

been limited to the response requirements, not the other 19 services provided by the salvage companies. I have limited my comments to those first three requirements, rapid response for firefighters and surveyors. That is what the subject of the alternative 

planning criteria I submitted to the Coast Guard addresses. 

Mr. GRAVES OF LOUISIANA. Thank you. 

Thank you, Mr. Chairman. 

Mr. HUNTER. I thank the gentleman. And just to be clear, before 

I yield to Mr. Garamendi, I think the gentleman’s point was that 

fire that occurred on the Grey Shark, they towed it back to the 

dock for 4 days, and then the fire department put out the fire at 

the dock. Right? So the salvors didn’t put the fire out, I think is 

what he is saying, in the ocean. They brought it all the way back 

as it burned, and then the New York Fire Department put it out 

at the dock, like they put out a house fire. Is that right? 

Mr. SCHAUER. That is correct. And again, it is—again, the specifics of the case I don’t want to get into, but that is not an uncommon thing. 

Mr. HUNTER. OK. 

Mr. SCHAUER. To work on a fire that is at a place of safety where 

you can—— 

Mr. HUNTER. Sure. Admiral Thomas, is that what you—is that 

why the regulation is there, so that that happens? 

Admiral THOMAS. Well—— 

Mr. HUNTER. I mean is that what the Coast Guard envisioned 

when they put this in? 

Admiral THOMAS. As Mr. Schauer mentioned, that particular incident occurred outside the jurisdictional limit of the law and the 

regulation in this case. So—— 

Mr. HUNTER. OK. Say that it happened 20 miles offshore. Is it 

still your—is it the Coast Guard’s intent, then, that you tow in the 

boats to the closest fire department at the dock, as opposed to putting the fire out in the ocean? 

Admiral THOMAS. Coast Guard regulations are not as prescriptive as to tell the salvage professionals the best way to put a fire 

out on a ship. There may be situations where that is, in fact, the 

best response, and there are others where the salvage professionals 

would determine bringing response resources to the vessel is best. 

But the regulations specify resource capabilities and timelines, 

but they are not prescriptive on which resources should be used 

when, and who—and how those decisions are made. That is made 

in consultation with the captain of the port as the situation 

evolves. 

Mr. HUNTER. OK. I yield to the ranking member. 

Mr. GARAMENDI. Mr. Chairman, thank you for scheduling such 

an informative and necessary hearing. We have gone through this 

rapid response issue thoroughly. I have some questions—and I may 

ask them for the record—with regard to that. 

But I would like to focus, instead, on this alliance business and 

the FMC response to it. It seems to me that what has happened 

here is there has been a very significant change in the nature of 

the industry since the last amendment to the Ocean Shipping Act, 

and that the FMC’s authority and responsibilities no longer fit the 

37 

reality of the industry. The emergence of all of the alliances and 

the significant power they have as a result of those alliances raises 

a question of antitrust, anticompetitive activity. 

I noticed, Mr. Butler—I was reading your testimony here, and 

you kindly gave us the specific sections of the alliance agreements, 

and you helpfully underlined those sections, or those particular 

sentences that are to your benefit. 

For example, ‘‘The parties shall negotiate independently,’’ and 

the next 50 words are underlined, ‘‘independently with . . . stevedores, tug operators,’’ and so on and so forth. And then there is this 

word, ‘‘provided, however,’’ that specifically gives the alliances the 

opportunity to share information that is necessary to collude. And 

I am going ‘‘something is wrong here,’’ because the specific—‘‘provided, however, . . . the Parties are authorized to discuss, exchange information, and/or coordinate negotiations with’’ the providers of services. 

The bottom line in all of this is the law is not up to date with 

the realities of the industry, as it exists today. Our task is to address changes in the law, as well as implementation of the law. It 

seems to me that the FMC can correctly argue that they are simply 

carrying out the law. We can debate whether that is or is not the 

case, and whether they are carrying it out correctly. But I think 

there is no doubt in my mind that the current law is out of date, 

and has to be changed. So, my specific questions go to that task 

that we have of writing law. 

I want to start with Mr. Allegretti. How would you change the 

law to address the concerns that you have so ardently expressed 

to this committee? 

Mr. ALLEGRETTI. The problem, Mr. Garamendi, with the current 

interpretation of the law, is the Shipping Act has an explicit and 

express prohibition against foreign ocean carriers negotiating collectively with domestic service providers, except that it does exactly 

what you just said. And then it says, ‘‘except or provided that it 

doesn’t otherwise violate the antitrust laws.’’ 

The problem with that in the real world is who is going to determine that these negotiations have violated the antitrust laws? Is 

the tugboat operator supposed to sue his customers under the antitrust laws to push back on this? Shall we rely on the Department 

of Justice to do it? Should we rely on the FMC to do it? These are 

not going to happen in the real world. And the result is that, in 

fact, the express prohibition in the law will be routinely violated 

in the marketplace. 

Mr. GARAMENDI. So what change? 

Mr. ALLEGRETTI. Then the change would be to take that provision out of the current statute that says, ‘‘provided that it doesn’t 

otherwise violate the antitrust laws.’’ 

Mr. GARAMENDI. OK. So the removal of a specific section of law. 

Mr. ALLEGRETTI. It is a phrase at the end of that section that has 

the express prohibition in it. 

Mr. GARAMENDI. Mr. Khouri? Same question. 

Mr. KHOURI. Congressman, I would have to take some time with 

our general counsel and with my fellow Commissioners. I can’t individually speak on behalf of the FMC. 

38 

I don’t have a formed opinion as to whether that would be a bad 

idea or not. I don’t have a current opposition to considering it, but 

I would want to have a reasoned amount of input from all parties 

to see might there be some unintended consequences with that. But 

I can’t say, as I sit here and give testimony today, Congressman, 

that I am opposed to that as a solution. 

So, you know, it is not that any of us—and I said this, you know, 

when we had a private meeting the other day—at the Commission, 

you know—the only degree I have on my wall is my United States 

Merchant Marine Officer’s License as a Master and First Class 

Pilot—— 

Mr. GARAMENDI. I appreciate that. We really—— 

Mr. KHOURI. And we have others. So, you know, we have the 

sympathy—— 

Mr. GARAMENDI. Well, let me put—— 

Mr. KHOURI [continuing]. But, as you say, we have to work with 

the law. 

Mr. GARAMENDI. Excuse me for interrupting, but I would like 

the—like your opinion, and I would like the opinion of the Commission as to how to address this problem of competition or lack thereof. So if you could respond to that question—— 

Mr. KHOURI. We will promptly prepare answers to all the committee—— 

Mr. GARAMENDI. We are probably less than a month away of 

writing the new law for the Coast Guard maritime. And so I would 

appreciate that in the next 2 weeks, if you would please provide 

that. 

Mr. Butler, the same question to you. 

Mr. BUTLER. Mr. Garamendi, obviously, if the Congress wishes to 

amend the law, we would be pleased to work with you at looking 

at language. That is the prerogative of the Congress to make that 

policy and make the law. 

I would offer the perspective that the existing Shipping Act, as 

it was amended in 1998, did contemplate the kinds of activities 

that are going on today. I am not so sure that we are in a position 

where we need to look at a major rewrite of the Shipping Act. I 

think there is enough authority and flexibility to deal with these 

issues. 

I would just note that the issue Mr. Allegretti has raised is very 

specific, and I understand you to be talking about perhaps broader 

issues. I think it is important to make that distinction. 

Mr. GARAMENDI. Well, let me be very specific. Mr. Allegretti has 

proposed a specific change in the law that a certain clause be eliminated. Have you—I assume you have not had the opportunity to 

opine on that, but take a run at it. 

Mr. BUTLER. Well, I want to talk to Mr. Allegretti about what he 

is trying to—— 

Mr. GARAMENDI. Well, if I—— 

Mr. BUTLER [continuing]. To accomplish. And we have had a conversation. And as I understand it—and he will set me right if I get 

this wrong—I think what he is trying to have is a flat prohibition 

on joint negotiation for tug services. And if—— 

Mr. GARAMENDI. Mr. Allegretti? 

39 

Mr. ALLEGRETTI. Can I try to put a more specific and practical 

perspective on what the problem is? There is a lot of conversation 

about law and analysis and competition. But here is the effect of 

what will happen if we don’t change the law, and let me give you 

a practical example. 

You are a tugboat operator in a port somewhere in the United 

States. You have three major customers, and they each constitute, 

let’s say, 25 percent of the business that you have in that port. 

Those three customers form an alliance, and they are given authorization by the FMC to come to you and jointly negotiate their rate. 

The first thing they do is they share the rate information, and they determine that one of them was paying $1,000, one was paying $1,500, one was paying $2,000. Well, the immediate thing they 

will ask that tugboat operator for is, ‘‘Give us all of the work at 

$1,000.’’ Once they have done that, perhaps they will say, ‘‘And you 

know what? This is 75 percent of the business. Maybe you ought 

to give it to us at $800.’’ 

So, if you are the tugboat operator, and you are faced with this 

dilemma, you are now faced with either taking work at a noncompensatory rate that doesn’t allow you to meet the cost of capital 

for your $15 million tug, for the crew that you provide family 

wages to, or the loss of 75 percent of the business that you enjoy 

in this port. We should not allow that to happen, Mr. Garamendi. 

Mr. GARAMENDI. I very much appreciate your argument. It is 

clear to me—and I think to many members of this committee—that 

we have a situation evolving in which oligarchic power is in existence and can be used to the detriment of competition, pricing, and 

a competitive environment. 

It seems to me that we need to modify the law, which is now almost 30 years old so that we recognize the realities of the industry 

as it exists today. I am particularly troubled by the language in the 

alliance, as Mr. Butler has presented to the committee, that allows 

the alliances to provide amongst themselves all the information 

they need to collude—independently, but nonetheless, collude, prior 

to independent negotiations. I think that is wrong. I think we need 

to change the law. 

Mr. Allegretti, you have made a specific proposal as to how that 

might be done. I intend to pursue that. We will be writing a new 

authorization for the Coast Guard maritime in the next month or 

so, and it would be my intent to try to address this issue by changing the law to require—or to set up a balance that would create 

competition and eliminate collusion. Now, that would be my intent. 

And I would appreciate, Mr. Khouri, if you and the FMC Commissioners would opine on that, and specifically on the language 

that Mr. Allegretti has proposed. 

Mr. Butler, if you would do the same, it would be very helpful. 

I yield back my time. 

Mr. HUNTER. I thank the ranking member. So let me just go 

through this really quick. There are three issues here. One is firefighting and oil response. The second is the Western Alaska Captain of the Port Zone—and let me apologize for Don Young not 

being here. Otherwise, Mr. Custard and Mr. Candito would be 

much more—you would be much more involved. I have been to 

Alaska once when I was 13, I went fishing with my dad. So we are 

40 

going to work on this and be in touch. Then the third is the FMC 

and collusion between shippers, shipping companies. 

So let’s start with that one first, and then we will go to the oil— 

fire response. I am just trying to drill down, because what the law 

says is that the FMC is required—it is basically you are looking 

out for consumers. So as long as the rates are low, and the stock 

at Walmart doesn’t rise in price because of shipping prices, then 

you are happy, right? 

I mean that is, by law, what you care about. It is—because the 

law doesn’t mention ports or tugs or terminals or any of that. It 

just mentions the shipping companies, right? And your job is to 

make sure that those prices stay low for the American people. 

Mr. KHOURI. It is both price and service. So, you know, adequate 

service to the consuming public is included in that, Mr. Chairman. 

Mr. HUNTER. And that means the availability of ships to export 

and to import, right? 

Mr. KHOURI. Well, yes. But, you know, we do also regulate terminals, and they are common—they produce common tariffs, et 

cetera, and they also fall within our jurisdiction. So—— 

Mr. HUNTER. But when it comes to this case, by law you are 

looking at the availability of the ships to export and import, and 

low prices for the American people. 

Mr. KHOURI. To see—as long as there is open competition, competition will obtain the best result. Yes, sir. 

Mr. HUNTER. OK. So I think, in the end, that is what we are 

going to need to look at changing, if we are to make changes to 

this, so that the law can then prescribe to you that you are allowed 

to take in the interests of the American maritime industry, which 

is why you exist. 

I mean you brought up the FTC, the Department of Transportation, the DOJ. I mean if we have all that, then why do we really 

need the FMC? I mean the reason you have an FMC is to look 

after—in my opinion, and I think in the ranking member’s too— 

is to look after American interests when it concerns the maritime 

industry. 

Mr. KHOURI. I—— 

Mr. HUNTER. But we are wrong, because that is not what the law 

says. That is just what we want. 

Mr. KHOURI. I will be happy to look at that. You know, again, 

the sympathy is with the sentiment that you express. 

If I could just take a second to make sure where we are moving 

from. Mr. Allegretti put together a hypothetical. Not to get back 

down into the weeds, but to be clear, if the hypothetical was—that 

he gave on the record today—was presented to us, I could look at 

my general counsel out there. It is 12:20. I bet you he could have 

an injunction on that hypothetical out of the U.S. District Court 

here in the District of Columbia before 5 o’clock today. 

What he described was a very clear abuse of market power. So 

it is not that we don’t have power to address those issues when 

presented. So—— 

Mr. HUNTER. Yes, am I correct, though—am I correct in basically 

saying what the law allows you to do and prescribes for the FMC? 

Mr. KHOURI. That is correct, sir. 

41 

Mr. HUNTER. OK, OK. So that is what we needed to drill down 

on. 

To Admiral, let’s get to the response vessel plan, vessel response 

plans. If an oil-carrying rig off of Alaska gave you a vessel response 

plan that was a plan that included vessels of opportunity, some of 

which might not even have oil containment or oil-fighting, oil-dispersion capability, would you accept that? 

Admiral THOMAS. Well, we would look at the plan to ensure that 

it meets, in the case of western Alaska, the alternative planning requirements that have been approved. That may include some vessels of opportunity that meet some of the 19 functional requirements. But we would have—in the case of oil spill response, we 

would have to make sure they meet the requirements in one way 

or the other. It may include vessels of opportunity, but, quite honestly, that is the case throughout the U.S., not just in western 

Alaska. 

Mr. HUNTER. OK. Let’s say in the gulf, where they drill for oil, 

would you be—the Coast Guard would accept vessels of opportunity 

for those oil response plans? 

Admiral THOMAS. For the purpose of salvage or oil—— 

Mr. HUNTER. For the purpose of oil spills, for cleaning it up and 

stopping fires and oil stuff. 

Admiral THOMAS. Absolutely. We will look—we verify that an 

OSRO who is listed on a vessel’s response plan has the capability 

that is required by the law. If they provide that capability through 

vessels of opportunity, you know, that is common. 

Mr. HUNTER. OK. So let’s go back and make this simple for me. 

You are saying if the vessels of opportunity have the correct gear 

on them to deal with an oil spill, and you verify that, then that is 

acceptable? 

Admiral THOMAS. Well, again, there are many different functional requirements in the regulations. Mechanical recovery of oil 

is one. Those are specialized vessels, and those would have to be, 

you know, specifically identified, and not necessarily used as a vessel opportunity. 

But there are other functional requirements—— 

Mr. HUNTER. OK, so—but—so let’s just stop there. So just that 

1 out of the 19, that would require the vessel to be a specialized 

vehicle for oil response stuff, right? 

Admiral THOMAS. Well, I don’t want to confuse the salvage and 

marine firefighting regulations with the oil spill recovery regulations. They are both in OPA, but they are—— 

Mr. HUNTER. Right, but I am—we are not talking fire, we are 

talking oil. 

Admiral THOMAS. OK. So the 19 functional requirements are 

specified in the salvage and marine firefighting rules. 

Mr. HUNTER. And—— 

Admiral THOMAS. So the oil spill regulations say you have to 

identify your worst-case discharge and the resources required to, 

you know, respond to that. 

So, for example, there may be a requirement to deploy boom. Deployment of boom is not going to require a highly specialized vessel, and that is a perfect opportunity for vessels of opportunity, 

particular, for example, vessels that are normally in a port working 

42 

that port to be identified in the plan as the resource which will deploy the boom. 

Now, the resource that will conduct mechanical recovery, if that 

is actually required by the plan, is usually a very highly specified 

or highly specialized resource, and that would have to be identified, 

and we would have to confirm that it is reasonably available in the 

timeline required. 

Mr. HUNTER. OK, and do you go by—do you look at—those vessel 

response plans on oil spills, do you look at those as planning requirements or performance requirements? 

Admiral THOMAS. It is a planning requirement, sir. It is a worstcase discharge planning requirement, and identify the resources 

that would be required—— 

Mr. HUNTER. So they can say, ‘‘here is our plan,’’ and then, when 

it comes down to it, they don’t really have anything, but that is 

OK, because they had it—they had a plan for—— 

Admiral THOMAS. No—— 

Mr. HUNTER [continuing]. Between performance and planning requirements—— 

Admiral THOMAS. Well, so we require that you provide us a plan 

that meets certain planning factors, and that you identify the resources that would be available to meet that plan. The difference 

is, when it actually comes time to deploy those things, we don’t go 

out and say, ‘‘Your plan said it would be here in 6 hours; it took 

7 hours,’’ right, because the performance didn’t meet the plan. 

If it was—in our judgment, when we approved the plan, you reasonably identified the resources and had the contracts in place to 

meet the performance requirements. We don’t then come back and 

say, well, you know, it was 7 hours because there was traffic on 

I–95. 

Mr. HUNTER. So is there a difference in your mind, then—so now 

let’s confuse the two, the oil spill and firefighting. 

Admiral THOMAS. It is easy to do. 

Mr. HUNTER. Right? So what is the difference between the requirements, planning, and performance requirements between 

those two? Or do you kind of see those the same way? 

Admiral THOMAS. Well, with regard to oil spill response, you 

have to plan for a worst-case discharge from your facility, from 

your vessel, et cetera. And that drives the planning requirements, 

because it says what kind of product am I carrying, how much 

might spill, et cetera. 

With regard to salvage and marine firefighting, you have to plan 

for the 19 functional requirements that are in the regulations, 

things like deep-sea towing, firefighting, you know, et cetera, removal—wreck removal. 

Mr. HUNTER. So that means, then, that the vessels that you 

choose, they have to have those capabilities, right? 

Admiral THOMAS. Yes. Yes, absolutely. In the case—yes. 

Mr. HUNTER. Go ahead, Mr. Garamendi. 

Mr. GARAMENDI. Thank you, Mr. Chairman. If I might, I had a 

meeting, a conversation, about a week ago with this—with the response organization for San Francisco Bay. And they had completed, within the last month or so, a drill in which they tested the 

response for an oil spill and a fire within the bay. 

43 

I think that is, if I recall from my experience as head of the State 

Lands Commission in California, that is uniform throughout the 

ports and some of the coast of California. As you get into the more 

remote areas, I don’t think that is the case. But they do have a response plan, and they do exercise on a regular basis that response 

program. So I think it goes to the issue of both the plan and the 

capabilities. 

Now, I can’t speak for anywhere outside of the ports of California 

which I am familiar with that happening. And I think the question 

that we are trying to get to here is that—is it in other parts of the 

marine environment subject to American control sufficient planning and then response as a result of that planning? And does the 

Coast Guard have the capability of having some reasonable level 

of assurance that it does exist? Admiral? 

Admiral THOMAS. So the regulatory requirements are consistent, 

you know, throughout the U.S., and including in western Alaska. 

And that includes the requirements for the planholders to conduct 

exercises like those that you have had the opportunity to observe. 

The Coast Guard will oversee those exercises when our resources 

permit. But the fact remains that the responsibility to comply with 

that portion, with the exercise portion of the regulation, remains 

with the regulated entity, or the planholder. That includes both facilities and vessels. And that is a uniform requirement. 

The question about whether or not the Coast Guard uniformly 

verifies compliance with both the exercise requirement and whether or not we uniformly verify compliance with the availability of 

the identified resources, absolutely, we are resource-constrained in 

our ability to do that. And we are also constrained in some ways 

by some legal requirements. But we are working hard to work our 

way around the country right now and complete those verifications. 

Mr. GARAMENDI. I appreciate that. And my last 30 seconds 

here—because I think I know I have to go—I share the concerns 

with Mr. Young about what is happening in Alaska, and the way 

in which the western zone has been divided up, and the effect that 

that would have on providing services in those areas that are not 

directly related to the Prince William Sound. So, I will let it go at 

that, share that comment with you. 

For those I said specifically—I asked specifically for three people 

to respond to Mr. Allegretti’s point, and anybody else that wants 

to chime in, here we are. I look forward to that. 

Mr. Chairman, a most useful committee hearing. Thank you so 

much. 

Mr. HUNTER. I thank the ranking member. And we will—this has 

been a marathon sitting here, so we will finish really quickly. I 

just—back to the firefighting response stuff. 

Admiral, I just read—John showed me the 155.4030(b). You do 

put in there—you have timeframes, right? You say you have to 

have fire suppression, do on-site assessment, and then you have 

timeframes for inside of 12 miles or inside of 50 miles, and you 

have to have external vessel firefighting systems and external firefighting teams, right? That is what you—that is what is in—that 

is Coast Guard regulation, right? 

Admiral THOMAS. Yes, sir. 

44 

Mr. HUNTER. OK. So when you established that, what was—just 

walk me through this. So you have that. Then you say, ‘‘However, 

if you don’t have that, and just have a good plan,’’ and you list vessels of opportunity that may or may not have this capability, that 

may or may not be able to meet this timeframe, walk me through— 

then that is OK, because it is just for planning purposes, and it is 

not oil spill stuff, it is just a fire. 

Admiral THOMAS. So I will try to clarify, Congressman. I am 

sorry that I confused this issue. 

When we review a plan, we review the plan to ensure that they 

have made provisions—the contract or otherwise—for the resources 

that are required by the regulation and the response times that are 

required by the regulations. 

In other words, their plan says, ‘‘Here is how I meet that 6-hour 

requirement for firefighting, and here is who is going to provide 

that service for me,’’ and we review the plan, we do what we can 

to establish that these arrangements are, in fact, true. And in the 

case of salvage and marine firefighting, most of those come through 

the four big agreements that are out there. 

And then, so that is how we approve the plan. So it—we do make 

sure that they have, in fact, identified a vessel that can fight fire. 

Mr. SCHAUER. Chairman? 

Mr. HUNTER. Yes, please. 

Mr. SCHAUER. Thank you, Chairman. Just to clarify how—now 

we are operational guys. A fire is fought in a certain way. The way 

we look at it, similar to oil spill response, we use specialized equipment. We can’t part—because we can’t afford 200 fire boats everywhere, it would—cost prohibitive—we take specialized equipment, 

portable equipment, large-capacity pumps, large-capacity monitors, 

storages of foam, we put them in depots around the country, 25 depots. We have a big fire offshore? OK. We have the specialized people and equipment to do the fire. We just need something to transport it out there. OK? 

We need—and the problem that is being presented is that it is 

trying to do two things at once. Carrying passengers and being set 

up to handle a big fire are two different things. Carrying the people 

offshore, that is taxicab service, OK? Not a big deal. We are concerned about, when we get there, having assets—taking those big 

pumps, big monitors—we can put remote monitors on top of the 

wheel houses of big tug boats, big offshore supply vessels, and direct the foam and water on the fire. That is effective operational 

response. 

So it is not about just one little taxicab with a fire pump. It is 

about the system we use. And that is how we do it, that is how 

we do it cost effectively, with the portable specialized equipment 

loaded on vessels of opportunity. 

Mr. HUNTER. Mr. Nedeau, go ahead. 

Mr. NEDEAU. If I could comment, I think that the question that 

you posed is a very, very good one, and I want to go back to something you said earlier. You were concerned that it took 4 days to 

put out the fire on the Grey Shark. I should point out that it also 

took 4 days to put out the fire on the Caribbean Fantasy. That fire 

broke out within 2 nautical miles of the pierheads in San Juan, 

and the San Juan Fire Department put that fire out, as well. 

45 

I think, if you go back to the transcript of the hearings that were 

held in San Juan with the National Transportation Safety Board 

and the Coast Guard, you will find that the firefighting response 

was wholly inadequate. I cited in my comments that the Coast 

Guard has already concluded it was not compliant. And the reason 

it is not compliant is, again, relying on a vessel of opportunity 

works in some instances. However, in this instance, if your plan 

cites certain vessels of opportunity to respond, and they do not— 

they are transient, and they are not in the captain of the port zone, 

for example, then you do not have an adequate plan, from my perspective. 

And my criticism of the Coast Guard is they haven’t gone back 

to verify that a vessel entering a harbor—let’s say Charleston— 

lists 30 vessels as its vessels of opportunity to respond, however 

none of those are located within the captain of the port zone. I do 

not think that is an adequate plan. And because the Coast Guard, 

as Admiral Thomas has pointed out, lacks the resources to do this 

type of verification, we have, time and time again, instances where 

the resources simply aren’t available. 

We bring spent plutonium into Charleston under the MOX Treaty. In that instance, you would think that we would have at least 

a dedicated resource or ensure that resources are within the captain of the port zone to address that, in the event of a fire. And 

I am surprised that the Coast Guard has not taken it upon themselves to review our alternative planning criteria, where we do propose to provide a high-speed fire boat. 

Mr. Schauer is correct. The high-speed fire boats that we have 

proposed in the 20 largest ports in the United States would not 

necessarily put the fire out. We need the salvage community, we 

need them to bring those heavy assets. But to meet the response 

requirements in these strict timeframes that you alluded to, Chairman, that would require a high-speed, special-purpose fire boat, 

which we have proposed to provide in the 20 largest ports in the 

United States. Thank you. 

Mr. HUNTER. Admiral, so let’s end with you on this. What is— 

I guess put it this way. Is the Coast Guard happy with the way 

that things are? Because there is a clear delineation between what 

you require for oil spills, which might kill some fish, and fires, 

which may kill some people. I guess that is what I am trying to 

get to, because you require all this stuff for oil spills, because we 

all love the climate and it is—you know, the ocean is great. 

But when it comes to people, you require whatever could be 

available at any—whatever is available, basically. And you do 

make that difference. 

Admiral THOMAS. Sir, I think the Coast Guard would like to see 

more robust response capability around our Nation for both oil and 

salvage and marine firefighting. And it is clear that the congressional intent, when we were directed to implement the regulations, 

was to build that capacity. 

Mr. HUNTER. The author of the regulation is here, by the way. 

Admiral THOMAS. And I would say that we are achieving that 

goal. Probably not as fast as some in this room would like to see. 

The Coast Guard, as you know, is constantly in the position of 

balancing the need to ensure that ships can continue to move in 

46 

and out our ports, and that we raise the bar with regard to safety 

and environment, et cetera. This is a case where our measured implementation and our measured compliance or enforcement is helping to build the capacity envisioned by Congress. But we can’t turn 

it on overnight. 

In the case of the Fast Response Boats, there is nothing in our 

regulation or in the law that prevents them from entering the market, from offering that service to a regulated entity—in this case 

a ship operator. What they are asking us to do, essentially, is to 

require that product be purchased by a regulated entity. 

And we may, in fact, get to that point if, in the course of our 

verification, we determine that the salvage assets that are out 

there really don’t meet the national planning criteria and so, as requested, we are going to lower those criteria in a way that then 

would allow the regulated ship—planholders to meet—to be in compliance by purchasing this substitute service. But we haven’t gotten there yet, sir. 

Mr. HUNTER. Tell me. But why do you differentiate between oil 

spills and fires on ships in the types of vessels, the specialized vessels that you require to be on hand, on stand-by? 

Admiral THOMAS. I think that the type of assets that are required for oil spills are different. The regulatory regimes were put 

in place on different timelines. The industries matured differently. 

In fact, it is one of the reasons why the salvage industry was so 

anxious to get these regulations in place, because they saw what 

OPA did, in terms of our national capacity to respond to oil spills, 

and thought that that is what the Nation needs for other contingencies, as well. 

Mr. HUNTER. Yes, sir? 

Mr. SCHAUER. Chairman, just maybe a quick clarification. Salvage and firefighting, 19 different services, it is wholly different 

than responding to an oil spill. Responding to an oil spill is pretty—we all pretty much understand what you do. You contain it and 

you skim it out of the water. You could have a—you know, for salvage and firefighting, it is any manner of casualties. I described 

some of them. It could be fires, explosions, sinking vessels, fuel underwater, removing the wreck, even big, heavy-lift assets. 

So it is—the diversification of what we have to do is so large, 

that it is not really comparable, because it is—oil spill you can 

pretty much focus down on what you need and, OK, we will dedicate most of them. It is too big. It is too big a problem. And it is— 

we are trying to meet it by best use of specialized assets versus— 

alongside of the vessels of opportunity. 

Mr. HUNTER. So I guess, getting down to it, why—the last question. The really, really last question. Why do you have these in 

there, the planning standards, if there is no real requirement for 

someone to perform to them? 

Admiral THOMAS. Well, sir, the way the regulation is construed 

is—or constructed is to require—or is intended to build our—a capacity to respond by requiring the regulated entity—in this case, 

mostly foreign vessel operators—to contract with service providers. 

It is not intended to regulate those service providers. 

47 

In other words, we are not going to go after the salvor and say, 

‘‘You said you would be there in 6 hours, you didn’t get here. Here 

is your ticket.’’ 

Mr. HUNTER. I understand. 

Admiral THOMAS. So I think that is a key difference. But, really, 

what this boils down to, sir, is our capability to get out there and 

verify with some degree of robustness that the capability identified 

by the regulated entity actually exists. And if it doesn’t, to hold 

them, the planholder, the ship operator, responsible. But we have 

to do that in a way, sir, that doesn’t all the sudden stop vessel traffic in the U.S. And I think that is why you are seeing a measured 

approach to our verification. 

And then we will come up with the best solution, in terms of how 

to build the capacity intended by the regulation. It might be an alternative planning criteria. But, quite honestly, that would lower 

the national standard. I am not sure why we would want to do 

that. But we are in the course of really working through those 

issues. 

Mr. HUNTER. Why—I mean every ship that goes out is insured. 

Why don’t—in your opinions, why don’t the insurers require that 

planning criteria really be performance criteria to save your asset? 

Admiral THOMAS. I think one of the reasons—and I think that 

most of the panel members here would agree—is because the Coast 

Guard has not been aggressively the compliance—— 

Mr. HUNTER. But just in the marketplace why don’t they care, 

the insurers? 

Admiral THOMAS. I can’t answer that question, sir. Certainly I 

know they begin to care when the Coast Guard begins to hurt them 

by holding their ship up, et cetera. And that is what aggressive enforcement will do. 

Mr. HUNTER. OK. I think that is it for me. Everybody, thank you 

very much. Thanks for being here, and thanks for your patience. 

The hearing is adjourned. 

[Whereupon, at 12:39 p.m., the subcommittee was adjourned.] 

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