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65–483 PDF 2011

REVIEW OF THE ADMINISTRATION’S 

FISCAL YEAR 2012 BUDGET REQUESTS 

FOR THE U.S. COAST GUARD, 

FEDERAL MARITIME COMMISSION, AND 

FEDERAL MARITIME ADMINISTRATION; 

FINDING WAYS TO DO MORE WITH LESS 

(112–11) 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

COAST GUARD AND MARITIME TRANSPORTATION 

OF THE

COMMITTEE ON 

TRANSPORTATION AND 

INFRASTRUCTURE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

MARCH 1, 2011 

Printed for the use of the 

Committee on Transportation and Infrastructure 

( 

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

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE 

JOHN L. MICA, Florida, Chairman 

DON YOUNG, Alaska 

THOMAS E. PETRI, Wisconsin 

HOWARD COBLE, North Carolina 

JOHN J. DUNCAN, JR., Tennessee 

FRANK A. LOBIONDO, New Jersey 

GARY G. MILLER, California 

TIMOTHY V. JOHNSON, Illinois 

SAM GRAVES, Missouri 

BILL SHUSTER, Pennsylvania 

SHELLEY MOORE CAPITO, West Virginia 

JEAN SCHMIDT, Ohio 

CANDICE S. MILLER, Michigan 

DUNCAN HUNTER, California 

TOM REED, New York 

ANDY HARRIS, Maryland 

ERIC A. ‘‘RICK’’ CRAWFORD, Arkansas 

JAIME HERRERA BEUTLER, Washington 

FRANK C. GUINTA, New Hampshire 

RANDY HULTGREN, Illinois 

LOU BARLETTA, Pennsylvania 

CHIP CRAVAACK, Minnesota 

BLAKE FARENTHOLD, Texas 

LARRY BUCSHON, Indiana 

BILLY LONG, Missouri 

BOBB GIBBS, Ohio 

PATRICK MEEHAN, Pennsylvania 

RICHARD L. HANNA, New York 

STEPHEN LEE FINCHER, Tennessee 

JEFFREY M. LANDRY, Louisiana 

STEVE SOUTHERLAND II, Florida 

JEFF DENHAM, California 

JAMES LANKFORD, Oklahoma 

NICK J. RAHALL II, West Virginia 

PETER A. DEFAZIO, Oregon 

JERRY F. COSTELLO, Illinois 

ELEANOR HOLMES NORTON, District of 

Columbia 

JERROLD NADLER, New York 

CORRINE BROWN, Florida 

BOB FILNER, California 

EDDIE BERNICE JOHNSON, Texas 

ELIJAH E. CUMMINGS, Maryland 

LEONARD L. BOSWELL, Iowa 

TIM HOLDEN, Pennsylvania 

RICK LARSEN, Washington 

MICHAEL E. CAPUANO, Massachusetts 

TIMOTHY H. BISHOP, New York 

MICHAEL H. MICHAUD, Maine 

RUSS CARNAHAN, Missouri 

GRACE F. NAPOLITANO, California 

DANIEL LIPINSKI, Illinois 

MAZIE K. HIRONO, Hawaii 

JASON ALTMIRE, Pennsylvania 

TIMOTHY J. WALZ, Minnesota 

HEATH SHULER, North Carolina 

STEVE COHEN, Tennessee 

LAURA RICHARDSON, California 

ALBIO SIRES, New Jersey 

DONNA F. EDWARDS, Maryland 

(II) 

SUBCOMMITTEE ON COAST GUARD AND MARITIME TRANSPORTATION

FRANK A. LOBIONDO, New Jersey, Chairman 

DON YOUNG, Alaska 

HOWARD COBLE, North Carolina 

ANDY HARRIS, Maryland 

FRANK C. GUINTA, New Hampshire 

CHIP CRAVAACK, Minnesota 

BLAKE FARENTHOLD, Texas 

JEFFREY M. LANDRY, Louisiana, 

Vice Chair 

JOHN L. MICA, Florida (Ex Officio) 

RICK LARSEN, Washington 

ELIJAH E. CUMMINGS, Maryland 

CORRINE BROWN, Florida 

TIMOTHY H. BISHOP, New York 

MAZIE K. HIRONO, Hawaii 

MICHAEL H. MICHAUD, Maine 

NICK J. RAHALL II, West Virginia 

(Ex Officio) 

(III) 

(V) 

CONTENTS Page 

Summary of Subject Matter .................................................................................... vi 

TESTIMONY 

Leavitt, Master Chief Michael P., Master Chief Petty Officer, United States 

Coast Guard .......................................................................................................... 5 

Lidinsky, Jr., Hon. Richard A., Chairman, Federal Maritime Commission ....... 5 

Matsuda, Hon. David T., Administrator, Maritime Administration ................... 5 

Papp, Jr., Admiral Robert J., Commandant, United States Coast Guard .......... 5 

PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS 

Landry, Hon. Jeffrey M., of Louisiana ................................................................... 40 

LoBiondo, Hon. Frank A., of New Jersey .............................................................. 41 

PREPARED STATEMENTS SUBMITTED BY WITNESSES 

Lidinsky, Jr., Hon. Richard A. ................................................................................ 43 

Matsuda, Hon. David T. .......................................................................................... 54 

Papp, Jr., Admiral Robert J. ................................................................................... 63 

SUBMISSIONS FOR THE RECORD 

Leavitt, Master Chief Michael P., Master Chief Petty Officer, United States 

Coast Guard: 

Correction to his answer to Hon. LoBiondo’s housing trust fund question ..... 28 

Suggestions for improving the housing situation .............................................. 29 

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

Funding for the sixth National Security Cutter ................................................ 27 

Correction to his answer to Hon. Coble’s question regarding the decommissioning of Polar Sea .......................................................................................... 32 

The U.S. Coast Guard’s enforcement policy regarding the Transportation 

Worker Identification Credential (TWIC) ....................................................... 37 

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(1) 

REVIEW OF THE ADMINISTRATION’S 

FISCAL YEAR 2012 BUDGET REQUESTS 

FOR THE U.S. COAST GUARD, FEDERAL 

MARITIME COMMISSION, AND FEDERAL 

MARITIME ADMINISTRATION; FINDING 

WAYS TO DO MORE WITH LESS 

Tuesday, March 1, 2011 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON COAST GUARD AND MARITIME

TRANSPORTATION, 

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE, 

Washington, DC. 

The subcommittee met, pursuant to notice, at 10:00 a.m. in room 

2167, Rayburn House Office Building, Hon. Frank A. LoBiondo, 

[chairman of the Subcommittee on Coast Guard and Maritime 

Transportation] presiding. 

Mr. LOBIONDO. Good morning. The committee will come to order. 

The Subcommittee on Coast Guard and Maritime Transportation is 

meeting today to hear testimony on the President’s fiscal year 2012 

budget request from the leaders of the three Federal agencies 

which promote, protect, and regulate vessels and mariners in U.S. 

waters and international trade. 

As my colleagues know, our nation is facing a tremendous budget 

crisis. Years of overspending have driven our national debt and deficit to record levels. This congress must make extremely difficult 

decisions in the coming months to bring our spending under control 

and cut the deficit. 

The effort continues today with the presentation of the fiscal year 2012 budget request. The President’s request, $9.85 billion for 

the Coast Guard in fiscal year 2012, an increase of 1.8 percent over 

the current level. 

The members of this subcommittee are keenly aware that resources have not kept pace with the service’s rapidly expanding 

mission portfolio in recent years. That is why I commend Admiral 

Papp for publicly saying the service must closely evaluate whether 

they continue to take on new missions in the current fiscal environment. 

I also commend the service for uncovering some savings through 

efficiencies in operations and the consolidation of services. I am interested in knowing if more operational savings can be found that 

will not adversely impact safety, security, and mission success. 

2 

I also have some concerns with the Coast Guard’s budget request. First, the service continues to push off investments and the 

acquisition of assets. The five-year capital improvement plan proposes a fantastic 66 percent increase in funding over the next 3 fiscal years. The service needs to stop burying its head in the sand, 

and propose a fiscally-sustainable long-term capital acquisition 

plan. 

I would point out that we should have had at least a partial solution to this years ago. But the service and the Department continued to refuse to provide this subcommittee with the fleet mix analysis. I remind the service that the subcommittee requested this 

analysis over 13 months ago. I urge the service in the strongest 

possible terms to satisfy our request for this document in very 

short and rapid order. 

Second, the service continues to lack the polar missions plan long 

sought by Congress. To add insult to injury, the service intends to 

spend millions of unbudgeted dollars to refurbish the Polar Sea’s 

engine, and then decommission the ice breaker. I don’t quite understand this, but maybe you can help us. A classic example of throwing good money after bad. 

The budget request for the maritime administration represents a 

1.4 percent reduction below the current level. Most of the cuts come 

from zeroing out funding for the grants and other programs, which 

are meant to revitalize the maritime sector and protect U.S. mariner jobs. At the same time, the budget proposes to increase funding for operations and administration at the Agency. 

While I appreciate the difficult choices the administrator made in 

developing this budget, I am concerned these programs are being 

cut while operating expenses continue to grow. 

I am also concerned with the tremendous amount of time it takes 

the Administration to process applications for title XI loans. This 

is even more concerning, given the fact the budget proposes to rescind $54 million in unobligated title XI loans—guarantees, when 

they have nearly $100 million worth of applications still to process. 

If all the applications were approved, it would provide $1.5 billion 

to U.S. shipyards and create thousands of new jobs at a time when 

our nation desperately needs to create jobs. 

Finally, the budget request for the Federal Maritime Commission 

proposes a three percent increase over the current levels. Although 

a three percent increase in the FMC budget amounts to less than 

$1 million, I really think it sends a wrong signal in the current fiscal environment, where many agencies are not receiving any increase, and some actually a reduction. The Commission needs to 

take a much closer look at their operations and try to develop savings through consolidation of services and more efficient operations. 

With that, I would like to yield to ranking member, Congressman 

Larsen, for your statement. 

Mr. LARSEN. Thank you, Mr. Chairman. Mr. Chairman, I want 

to thank you for conducting today’s subcommittee hearing, and I 

welcome the opportunity to discuss the President’s fiscal year 2012 

budget proposals for the U.S. Coast Guard, the Federal Maritime 

Administration, and the Federal Maritime Commission. 

Maritime transportation remains a critical component of our national economy, contributing over $10 billion annually, and generVerDate Aug 31 2005 11:51 Jun 13, 2011 Jkt 000000 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 P:\HEARINGS\112\CG\3-1-11~1\65483.TXT JEAN
3 

ating nearly 270,000 jobs. So today’s message is clear, that we 

must continue to invest wisely to facilitate, protect, and regulate 

maritime commerce, if we want to see the U.S. economy expand 

and flourish. 

Mr. Chairman, I have a great deal of interest in how Congress 

spends our taxpayers’ money and saves taxpayers’ money. There 

may be a practical reality that forces hard-working public servants 

to do more with less. However, today’s testimony shows plainly 

that more will not get done with less. Rather, less will get done 

with less. Regrettably, too much emphasis is currently being placed 

on how much can we cut, rather than a more appropriate question, 

which is how can we best direct Federal resources to generate economic growth and spur job creation. 

It’s our responsibility to ensure that these maritime agencies 

which oversee fair and competitive shipping practices, that respond 

to disastrous oil spills, or assist vessels in distress, or that retain 

a secure fleet of ships to support overseas deployment of our armed 

services have the necessary resources to fulfill their respective missions. 

Now, supporters and critics of the Coast Guard contend that its 

budget is insufficient for the demands placed on the service’s nearly 50,000 military and civilian full-time employees. Commander 

Papp acknowledged in a recent 2011 state of the Coast Guard address, ‘‘The Coast Guard does not have the resources to perform at 

100 percent in every one of its missions on every given day.’’ He 

went on to say that more with less is not an acceptable option. 

‘‘Without continued recapitalization, we will not be semper 

paratus.’’ 

I am not convinced that the budget request for the Coast Guard 

before us today is adequate to meet the demands that we have 

placed upon the service. I am interested in hearing how my colleagues expect the service to do more with less, and what tradeoffs they will find acceptable. 

Now, the Maritime Administration is in a similar situation. 

MARAD has two critical investment programs that support our domestic shipbuilding industry, and they are both targeted for reduction. 

First, title XI, guaranteed loan program, provides federally-guaranteed loans for purchasers of U.S. flagships built or reconstructed 

by a U.S. shipbuilding industry, and for the modernization of U.S. 

shipyards. Vessels constructed under title XI contribute to the ability of the United States to carry its foreign and domestic waterborne commerce, to help sustain efficient shipbuilding facilities, 

and to help preserve a skilled shipbuilding workforce. 

No new funds for loan guarantees are requested for fiscal year 

2012. Of the unrequested amounts made available in 2009 and 

2010, $54.1 million is proposed for cancellation. These proposals effectively kill these investments that generate good-paying jobs here 

in the U.S. 

And second, the budget requests no additional funds for assistance to small shipyards program. Similar to title XI, these funds 

invest in American port infrastructure, create American jobs, and 

help domestic shipyards such as Nichols Brothers Boat Builders, located in Freeland, Washington, helping them make the necessary 

4 

capital investments to remain competitive and generate new business. 

Mr. Chairman, these cuts will not result in more with less, but 

less with less. I know there is a strong desire to cut Federal spending. I, myself, have voted for cuts in the last CR debate. And I 

agree that we must bring discipline to the nation’s fiscal house, but 

I urge that we temper that effort with reason and sound judgement. 

Now, despite these tight budgets called for in fiscal year 2012, 

I am pleased that the Administration has proposed a modest increase for the Federal Maritime Commission. In light of the important role the Commission has in monitoring world shipping practices, especially the growing trans-Pacific trade, I will want to hear 

from Chairman Lidinsky on how the Commission intends to use 

new funding to support U.S. exports, ensure fair competition, and 

protect American consumers. 

In closing, Mr. Chairman, the congress has recognized that, since 

the founding of our republic, that our nation’s economic prosperity 

is interwoven with maritime commerce. The maritime agencies before us today carry on that legacy of Federal support for our domestic maritime industry and the oversight of maritime commerce that 

produces, annually, billions of dollars in economic activity, and 

thousands of jobs. 

America does not want less with less. What America wants is an 

efficient and effective Federal Government. When it comes to maritime commerce, that should be an objective on which we can all 

agree. Thank you, Mr. Chairman. 

Mr. LOBIONDO. Do any Members wish to make opening statements? Mr. Coble? 

Mr. COBLE. I will be very brief, Mr. Chairman. I commend you 

and the ranking member for having put together a very outstanding panel. We keep hearing about more with less, Admiral 

and Master Chief. The Coast Guard has been doing more with less 

since 1790. They wrote the book on it. I don’t mean that you and 

the commandant have been around that long, Master Chief, but I 

feel like I have. 

But I was taken by a comment by the chairman—and maybe the 

ranking member touched on it—regarding the Polar Sea. Much 

monies are being expended to make certain repairs. And then, I’m 

told, she’s going to be dispatched to the boat yard. Now, that hardly sounds prudent. So I hope we hear more about that. 

But thanks to all of you for being here. Mr. Chairman, good to 

see you again. Thank you, Mr. Chairman. I yield back. 

Mr. LOBIONDO. Congresswoman Hirono? 

Ms. HIRONO. Thank you, Mr. Chairman. Mr. Chairman and ViceChair Landry, and Ranking Member Larsen, it is a pleasure to join 

this subcommittee as a member. And, having reviewed the testimony for today’s hearing, I would like to associate myself with the 

remarks of Ranking Member Larsen. 

Having said that, I want to thank all of our witnesses for being 

here today. As you probably know, the maritime industry and security are very important to my home state of Hawaii. And there 

aren’t any roads between our islands; the only options we have for 

moving goods and people from the mainland and between islands 

5 

are either by boat or by air. In fact, we have to import 80 percent 

of our food and merchandise. And, of that 80 percent, over 98 percent of those imported goods come by ship. So, shipping and maritime safety and security are of vital importance to the economy and 

livelihood of Hawaii’s people. 

As Commandant Papp knows, ensuring the safety and security 

of the maritime public is a full-time challenge. I commend the work 

that the approximately 1,500 Coast Guard personnel in Hawaii’s 

14th district does on so many fronts to make sure that the people 

of the 14th district is protected. And you do have 14.2 million 

square miles that make up this district, which includes 

Papahanaumokuakea, the northwestern Hawaiian Islands monument, the biggest monument in the country. So, you have a tremendous task, not just protecting the people and commerce, but 

also protecting 140,000 square miles, as I mentioned, of the monument. 

As this committee knows, ensuring that our nation’s ports and 

harbors can handle the 21st century commerce is also of vital importance to our future economic growth. And I appreciate the work 

of the Maritime Administration and Maritime Commission to help 

ensure that we are always expanding commerce. 

And the harbor improvements that the Maritime Administration 

and Hawaii’s Harbors Division have partnered on in the past, and 

most recently, the Honolulu Harbor Pier 29 project, which received 

a $24.5 million Tiger Grant are critical to Hawaii’s economic future. 

So, I look forward to hearing from you, and working with you. 

Thank you. 

Mr. LOBIONDO. Thank you. We are going to turn to our panel. 

And our panel today includes Admiral Robert Papp, Commandant 

of the Coast Guard; Master Chief Michael Leavitt, the master chief 

petty officer of the Coast Guard; Richard Lidinsky, the chairman 

of the Federal Maritime Commission; and David Matsuda, administrator of the Maritime Administration. 

Thank you all for being here. Admiral Papp, the floor is yours. 

TESTIMONY OF ADMIRAL ROBERT J. PAPP, JR., COMMANDANT 

OF THE COAST GUARD; MASTER CHIEF MICHAEL P. 

LEAVITT, MASTER CHIEF PETTY OFFICER OF THE COAST 

GUARD; RICHARD A. LIDINSKY, JR., CHAIRMAN OF THE FEDERAL MARITIME COMMISSION; AND DAVID T. MATSUDA, ADMINISTRATOR OF THE MARITIME ADMINISTRATION 

Admiral PAPP. Good morning, Chairman LoBiondo, Ranking 

Member Larsen, and distinguished members of the subcommittee. 

I am privileged to appear before the subcommittee today for the 

first time as commandant to discuss the Coast Guard’s fiscal year 

2012 budget request, and also to proudly represent the men and 

women of the United States Coast Guard. 

I am particularly pleased to be accompanied by Master Chief 

Petty Officer of the Coast Guard Michael Leavitt, as well as our 

partners from the Maritime Administration and the Federal Maritime Commission. My full written statement has been submitted 

for the record, and I would like to offer this brief oral statement. 

6 

I would like to start off by thanking the subcommittee for the 

Coast Guard Authorization Act of 2010. We are using this authority to move forward with our internal reorganization, and increase 

support to our operational forces, and we will continue to use it to 

enhance our marine safety program and conduct acquisition reform. And we will use it to address an important issue for our families: housing. And I want thank you for that. 

I am pleased to be speaking before the subcommittee on the date 

of the eighth anniversary of the Department of Homeland Security. 

The Coast Guard is honored to be anchored in DHS, where we 

proudly serve as its maritime arm. While anchored in DHS, we enhance our value to the country by maintaining bridges to the Department of Transportation, the Department of Defense, the Department Justice, the Department Interior, the Environmental Protection Agency, and many other interagency partners. 

Now, as a ship captain having served 14 years of my 35 years 

of service at sea, I readily admit to viewing the world through the 

lens of a sailor. Nine months ago, when I took command of the 

Coast Guard, my first reaction was that of a navigator: to take a 

fix, ascertain our position, and set a course for the future. And 

that’s what I did. My four guiding principles—steady the service, 

honor our profession, strengthen our partnerships, and respect our 

shipmates—set the future course for our service. 

I would like to start off—two weeks ago I gave a situation report 

to the service in my State of the Coast Guard address, and further 

refined the goals with the release of my Commandants Direction 

2011. As part of the release of the President’s fiscal year 2012 

budget, I also released our posture statement, which sets forth our 

budget objectives, all of which link back to my guiding principles. 

My priorities are: to sustain front-line operations, to rebuild the 

Coast Guard, to enhance maritime incident prevention and response, and to support Coast Guard families. This fiscal year 2012 

budget is the first waypoint on the course to those priorities. 

Now, as a ship’s captain, first and foremost, the duty is to assure 

the safety of the ship and the crew. This traditional responsibility 

often requires making tough choices. Working in the maritime environment is inherently dangerous, and captains must continuously 

balance mission accomplishment against risk to the ship and the 

crew. Today’s challenging fiscal climate is no different. We must 

make tough choices to preserve our ship of the service. Working 

closely with and receiving strong support from the Secretary 

Napolitano and the Department, I have made the tough choices. 

In his State of the Union speech, the President asked us all to 

tighten our belts. While we tighten our belts, I will not lose sight 

of our utmost priority, which is serving the American people. The 

safety and security of our nation’s waterways impacts the lives of 

every American. 

The challenge we face, though, is that the rising costs of running 

aging cutters, boats, aircraft, and shore facilities quickly consume 

any positive increment in our budget. In an effort to avoid any reduction in those front-line operations I talked about, we have 

carved out over $140 million by directing management efficiencies 

and making targeted reductions in administrative costs and profesVerDate Aug 31 2005 11:51 Jun 13, 2011 Jkt 000000 PO 00000 Frm 00022 Fmt 6633 Sfmt 6633 P:\HEARINGS\112\CG\3-1-11~1\65483.TXT JEAN
7 

sional services. We will invest those savings in front-line operations. These were tough choices, but, I think, the right ones. 

As an operator, I can tell you that our readiness is dependent 

upon simultaneously sustaining front-line operations while recapitalizing assets. There needs to be a balance. Unless we continue to 

recapitalize our ships, planes, and boats, and improve our shore, 

stations will not be able to maintain an acceptable level of readiness to perform our missions. We won’t be ready to respond quickly 

and effectively to contingency operations, like we did in Haiti and 

Deep Water Horizon. 

We are requesting $1.4 billion in our acquisition request, and 

that goes to fully fund national security covenant number 5, produces 6 new patrol boats, funding for 2 maritime patrol aircraft, 

funds 40 new response boat mediums, and sustains acquisition 

work in the design of our offshore patrol cutter, which will be the 

replacement for our medium endurance cutter, and funding to support critical shore recapitalization needs. 

We want to continue to enhance our maritime incident prevention and response, and this budget allows us to do that, which— 

it provides $10.7 million to hire additional marine safety inspections, investigators, and fishing vessel examiners, and it allows us 

to establish an incident management assist team, which will give 

us added capacity for contingencies in the future. 

And then, support for our military families. You can’t have a 

strong military workforce without a healthy military family. So, 

Master Chief Leavitt will discuss some of the military family initiatives in the fiscal year 2012 budget supports upon the conclusion 

of my remarks. 

So, in conclusion, the Coast Guard, as the maritime component 

of the Department of Homeland Security, is committed to working 

hand in hand with our many partners to assure the safety and security of American citizens and our ports and waterways. For over 

220 years we have been protecting those on the sea, protecting 

America from threats delivered by the sea, and protecting the sea 

itself. This is our chosen profession, this is our way, and this is 

what we do. I thank you for the opportunity to testify today, and 

I look forward to your questions. 

Mr. LOBIONDO. Thank you, Admiral Papp. 

Master Chief? 

Master Chief LEAVITT. Good morning, Mr. Chairman and distinguished members of the subcommittee. It is a privilege to appear 

before you here today. This is actually the first time I have ever 

testified before Congress, so it is truly an honor. Also, it’s an honor 

and privilege to represent more than 39,000 Coast Guard enlisted 

personnel. 

In the past nine months, I have had the opportunity to travel 

around the country and listen to the many challenges facing our 

hard-working men and women and their families. One of the most 

formal challenges is obtaining affordable and adequate housing and 

child care. For example, one instance is particularly telling: 14 percent of the DoD personnel have their children enrolled in subsidized military child care facilities, yet only 5 percent of Coast 

Guard personnel do. 

8 

In order to meet our mission requirements, Coast Guard personnel are assigned throughout the United States and overseas. In 

some cases, our personnel are fortunate enough to be stationed on 

or near DoD or large Coast Guard facilities. In these locations, our 

personnel have better access to reasonable housing, affordable child 

care, and military treatment facilities, or civilian providers that 

really accept the military’s health care program. 

But for many of our members and their families who are stationed in small coastal towns, or find themselves in isolated or seasonal high-cost areas, it’s a much different story. In these locations, 

including the areas this subcommittee represents, obtaining adequate or affordable housing is a challenge. Child care providers are 

scarce and, in most cases, very expensive. Often times, medical and 

dental care providers are limited, and those who are nearby may 

not accept military health care program. As a result, our personnel 

tend to absorb these additional costs. These type of increased financial burdens, compounded by limited employment opportunities 

available to military spouses, stresses the entire family. 

So, that said, we are truly grateful for the housing and child care 

provisions in the fiscal year 2012 budget. The budget will ease the 

stress on our military members and their families. Furthermore, 

this budget will put us on a course towards closing the gap between 

the Coast Guard and our DoD counterparts. And ultimately, these 

provisions will enhance our mission readiness, and allow us to provide a much better service to our taxpayer. 

So, in closing, our Coast Guard men and women are standing the 

watch. They risk their lives to rescue those in peril, and they protect our homeland. They deserve these benefits. 

So, thank you again, Mr. Chairman, for the opportunity to discuss the needs of our Coast Guard personnel. I look forward to answering any questions you may have. 

Mr. LOBIONDO. Thank you, Master Chief. 

Chairman Lidinsky, you are now recognized. 

Mr. LIDINSKY. Thank you, Mr. Chairman, Mr. Ranking Member, 

members of the subcommittee. Thank you for this opportunity to 

present the President’s fiscal year 2012 budget for the Federal 

Maritime Commission. With me today are FMC Commissioners Rebecca Dye and Michael Khouri. Your former colleague, Commissioner Joe Brennan, is back manning the ship, and sends his best 

regards. 

With the committee’s permission, I would like to summarize my 

testimony, and request that my full written statement be included 

in the record of the hearing. 

The President’s budget for this commission provides $26,265,000 

for fiscal year 2012. This represents an increase of $2.1 million 

over the enacted fiscal year 2012 appropriation, or 3 percent, 

767,000, over the President’s fiscal year 2011 request, and funds 

133 positions. This includes an increase of two positions targeted 

for our office of consumer affairs and dispute resolution, who have 

seen a 16 percent increase in complaints and disputes that they 

handle. This would strengthen our efforts to provide prompt, efficient solutions for commercial disputes between ocean carriers and 

their customers, and will help prevent problems with ocean transportation or equipment from hindering the growth of our exports. 

9 

As the committee knows, from late 2008 to late 2009, the international container shipping industry suffered the worst year in its 

45-year history. Fortunately, in calendar year 2010, the U.S. liner 

trade saw a very rapid recovery, and U.S. container volumes grew 

an average of 11 percent. In our largest trade lane, the trans-Pacific, we saw shortages in early 2010, when demand returned. But 

in April, carriers began adding capacity. And by October, capacity 

passed its pre-recession levels. Currently, weekly capacity in the 

trans-Pacific is 24 percent higher than it was last time this year, 

and container shortages have virtually disappeared. 

In the coming year, I plan working on the three top priorities I 

outlined during my confirmation hearing. First, the Commission 

must work for recovery and job growth within our ocean transportation industry, particularly among exporters and the businesses 

they serve. 

Second, the Commission must focus on protecting our country’s 

shipping community from unfair and harmful practices by foreign 

governments, cargo carriers, or cruise lines. More than 95 percent 

of the United States ocean container trade travels on ships controlled by foreign carriers. And we’ve been watching them like a 

hawk to ensure that they efficiently and fairly serve U.S. exporters 

and importers. 

Third, the Commission shall work with all sectors of our maritime family to help airports and the shipping industry. Each commissioner at the FMC is committed to working in an efficient, cooperative, and bipartisan manner to bring about these goals. 

Here are some highlights that we have taken in the recent 

months. We are working hard to support our nation’s export 

growth. U.S. exporters must have an efficient, fairly-priced, and reliable system to deliver goods to market. 

We instituted Fact-Finding 26 under Commissioner Dye, which 

interviewed over 170 witnesses to come up with explanations of 

what had happened during the recession, and to provide solutions 

to many of the problems that we faced. We are continuing to roll 

out various recommendations of that fact-finding. 

Commissioner Khouri has undertaken a fact-finding to deal with 

household goods issues. We have had thousands of complaints in 

recent years, and we are working with the DoT on coming up with 

solutions in that area. 

The Commission is committed to applying the President’s 2011 

January executive order to improve regulations and make them 

less burdensome. We have already made regulatory relief and modernization a top priority. 

We last week issued a final rule that will relieve more than 3,300 

licensed non-vessel-operating common carriers from the cost and 

burdens of publishing tariffs in the rates they charge for cargo 

shipments. There are reports that many businesses could save up 

to $200,000 a year. 

Also last week the Commissioner issued a final rule that updates 

our filing requirements and clarifies procedures for informal proceedings, also to help parties that bring their business before the 

Commission. It is just the first step in an ongoing project that 

made the Commission’s procedure rules more clear, modern, efficient, and cost savings. 

10 

We are closely monitoring the impact of the People’s Republic of 

China regulations on our trade. As part of our emphasis on service 

to consumers, we are focusing our needs and our growth in the consumer affairs division, where we hope that service contracts will be 

brought to the Commission for resolution. 

We have also seen environmental issues becoming intertwined 

with our area of regulation. One example of that is the slow steaming. And we have issued an order of inquiry, notice of inquiry, to 

solicit input that will give us guidance in that area. 

In conclusion, Mr. Chairman and members of the subcommittee, 

we thank you for your support, particularly as we celebrate our 

50th anniversary year. It’s an honor to appear before the subcommittee, and I am happy to answer any questions you may have 

later. 

Mr. LOBIONDO. Thank you. 

Mr. Matsuda. 

Mr. MATSUDA. Good morning, Chairman LoBiondo, Ranking 

Member Larsen, and members of the subcommittee. Thank you for 

inviting me to be here today. I look forward to working with you 

all in the 112th Congress. With your permission, I would be happy 

to summarize my testimony and submit the complete document for 

the hearing record. 

Mr. LOBIONDO. Please do. 

Mr. MATSUDA. Thank you, sir. And first, as you all know, last 

week we saw the tragic and senseless murder of four U.S. citizens 

at the hands of pirates. I want to assure the subcommittee that piracy remains a key focus for the Maritime Administration. Just 

yesterday I addressed a United Nations-sponsored piracy working 

group, challenging our government and industry partners around 

the world to step up their efforts, harden the targets which pirates 

have turned into blood-stained profits. We continue to work with 

the Coast Guard and the State Department to take whatever steps 

are necessary to end this threat. 

I would also like to update you on another issue I know is of 

great importance to the subcommittee, and that is the U.S. Department of Energy’s use of U.S. flagships to carry cargo for its renewable energy loan guarantee program. I have good news. Today the 

Department of Energy has formally changed its policy to apply 

cargo preference requirements to their program. We are working 

closely with our partners in the Administration to ensure the cargo 

preference requirements are applied fairly, consistently, and with 

common sense. This solution means we manage to avoid costly and 

time-consuming litigation, and the ultimate result is more cargo on 

U.S. ships crewed by U.S. workers. 

Let me provide you with an overview of the Maritime Administration’s budget priorities for the coming year. Mr. Chairman, as 

Maritime Administrator, I am tasked with overseeing the health of 

an industry that contributes more than $10 billion each year to our 

economy, and employs more than a quarter-million Americans. 

This important industry contributes directly to our nation’s economic competitiveness, environmental sustainability, and readiness. And, given the breadth and seriousness of these responsibilities, I am confident that this proposal best serves the needs not 

only of the Maritime Administration, but the nation, as a whole. 

11 

Of the $357.8 million the Maritime Administration is requesting 

for 2012, the overwhelming share of the budget supports the merchant marines’ vital role in maintaining the maritime transportation system and sealift capability, so that when disaster strikes 

we are able to provide help quickly and effectively whenever and 

wherever needed. 

We are a maritime nation, dependent on our waterways to survive. By weight, 95 percent of all goods imported into our country 

arrive by ship. That is why we are focused on the future of this important industry. 

And our future is highly dependant on investing in education. I 

share Secretary LaHood’s vision to prioritize the training of future 

maritime leaders by making the U.S. Merchant Marine Academy at 

Kings Point, New York, a jewel among Federal academies. To 

achieve this, we have requested an additional $19 million for necessary information technology updates, improvements in academic 

programs, and long-overdue facility capital improvements. 

We are also requesting additional funds for our state maritime 

academies. These investments in education are critical for the long 

term. At the same time, we are also facing current challenges head 

on, by requesting funds to honor maritime security program commitments at the fully authorized level of $186 million, including 

carry-over funds. This important program provides our military assured access to the commercial ships and crews we need to sustain 

U.S. forces overseas, as well as provide for our nation’s commercial 

and humanitarian needs. 

For 2012, I am pleased to report that the Obama Administration 

has proposed funding for our nation’s port infrastructure. Building 

on the successful Tiger Grant program, the budget proposal includes $5 billion for a national infrastructure bank, funds which 

ports and maritime projects will be able to compete for. 

Also, the Maritime Administration has for the first time proposed 

funding for two programs: the web portal MarView program, and 

an environmental research initiative focused on finding solutions to 

the maritime industry’s environmental challenges like ballast 

water and air emissions. 

Funds requested for our ship disposal program will continue to 

create jobs and clean up the environment, as we remove obsolete 

vessels from the national defense reserve fleet. 

Mr. Chairman and Members of the Committee, the budget request I have outlined will help preserve and protect our nation 

through maintaining a healthy maritime industry. While meeting 

these critical needs, it is also sensitive to our nation’s economic 

conditions. Our request is actually $5 million less than fiscal year 

2010. It reflects our confidence that we can do more with spending 

less. 

Thank you, and I am happy to answer any questions from the 

subcommittee. 

Mr. LOBIONDO. Thank you. I would like to ask unanimous consent to submit for the record a statement from the gentleman from 

coastal Louisiana, Mr. Landry. 

[No response.] 

Mr. LOBIONDO. Without objection, so ordered. 

Mr. LOBIONDO. We will now go to questions. Mr. Larsen? 

12 

Mr. LARSEN. Thank you, Mr. Chairman. And I imagine we will 

have a couple of rounds of questions, so I will maybe jump around 

here with the panel. But I have got quite a number of questions 

I want to ask. But I will start with Admiral Papp. 

Regarding the recapitalization program for the Coast Guard, it’s estimated it costs in excess of $24 billion over the next 15 years. 

And in this budget request, or in your testimony, you note it’s— 

you have a $1.4 billion in fiscal year 2012. How do you anticipate 

being able to achieve your full goals, given this request level of 

funding? Is this getting you on your way, or is this a tougher choice 

to take a small bite this year in hopes you’re going to get larger 

bites in the ensuing years? 

Admiral PAPP. Thank you, sir. First of all, I have made it clear, 

speaking to groups across the country, we cannot get these ships 

out there fast enough. I am continually reminded of how desperately we need the new ships. 

I was just out to the West Coast two weeks ago. I visited one of 

our national security cutters, and saw the great improvements that 

we are giving our people that have to go out and do dangerous missions. And at the same time, I went and visited some of the 42 and 

43-year-old ships that are out there at the same piers, and sort of 

the desperate situation we find ourselves in, trying to keep those 

running. So we can’t get them out there fast enough. 

However, what I will say is that we are getting there as quickly 

as we can. And as I said in my opening statement, there are tough 

decisions to be made when we are confronted with the budget constraints that not only the Coast Guard has, the Department has, 

but the country has. What I am gratified by is the fact that the 

$1.4 billion request from the President is the highest acquisition 

request that we have ever received. And it is at a time where we 

have been demonstrating our competency much better, in terms of 

our acquisition reform. 

And I would say that, to a certain extent, the Coast Guard is 

complicit in not being able to build up the credibility and confidence in our program, but I think we have come an awful long 

way. We have instituted acquisition reforms now that I think serve 

as a model for other organizations across government. We have 

come and gone through a very difficult negotiation on the national 

security number four to get a fixed price contract. But even working at a fixed price contract, because of the delays of getting that 

contract awarded, it came in more than it was budgeted for. 

So we have had to do some creative moving around of funds in 

concert with the Department and the Congress in order to get 

number four awarded, and we are working as quickly as we can to 

get number five. 

We have had to fit a lot of projects into that $1.4 billion. I am 

satisfied at this point that we are moving along on a lot of fronts, 

including patrol boats and boats for our search and rescue stations. 

And as we have worked with the Department, they have increased 

our level of funding in the outyears in the capital and investment 

plan, and I am very hopeful that we can start moving this along 

quicker in the outyears. 

Mr. LARSEN. And we still do need to get to that funding in the 

outyears, since we budget one year at a time. 

13 

I will just note, as well, you used the word ‘‘desperate,’’ or a form 

of it, twice in your response: desperately needing new ships, and 

desperate to replace the old ones, and an appropriate use of the 

condition right now of the position that you’re in at the Coast 

Guard, and I think a clear message that we need to move forward 

on the recapitalization. 

But you also have a lot of other things that we have asked you 

to do, including several new initiatives in the 2010 authorization. 

Given the budget that the Coast Guard has received, do you have 

sufficient funds to ensure the Coast Guard is able to implement the 

measures that we have asked you to implement in the 2010 authorization? 

Admiral PAPP. Yes, sir. We have amounts in there for continuing 

our acquisition reform. We have received money in there to continue our marine safety performance plan, and also we have received money to help us out with our housing authorities that the 

subcommittee gave us. 

So, incrementally, I think we are making progress on all fronts. 

And I cannot think of any areas that were put in the authorization 

plan that we don’t have some funding directed towards that. 

Mr. LARSEN. Thank you. Of the 11 missions that the Coast 

Guard has, you noted in your State of the Coast Guard speech that 

there were going to be some choices you will have to make. Of 

those 11 missions, are you doing 50 percent of 5 of them, and 100 

percent of the rest of them, or how would you characterize your 

ability to make the full commitment to all 11 missions? 

Admiral PAPP. Well, sir, what I would say is I think in various 

forms what I said has been mischaracterized a little bit. I have no 

authority to stop doing any mission of the Coast Guard. 

Mr. LARSEN. Right. 

Admiral PAPP. Those are statutorily required. And I am given a 

finite set of resources to accomplish those missions. We make 

judgements on a day-to-day basis—my operational commanders 

do—to apply those resources against the highest need. 

A great example is a year ago, when I was one of those operational commanders, we have cutters that are deployed for various 

missions, interdicting migrants, interdicting drugs. But when an 

earthquake occurs in Haiti, that’s a higher priority for us, and we 

were to redirect those resources, knowing full well that we will suffer, perhaps, a little degradation in migrant interdiction, and probably a little degradation in drug interdiction. But those are the 

choices that we make. We get the assets, we have to make the decisions how to operationally employ them. 

But I would say when I was talking in my speech, my State of 

the Coast Guard speech, there is also—because of our can-do attitude, there is a lot of things that we take on on our own. We see 

a need, so we rush out there to do it, often times saying we will 

do it, resource-neutral. Resource-neutral is never neutral, because 

the resources have to come from some other location within the 

Coast Guard. 

And what we are about right now—in fact, I have commenced a 

stem to stern review of what we call our deployable specialized 

forces, to make sure we’re not overburdening them—what things 

should we be doing for our country? What things were those teams 

14 

intended to do? And then let’s train them well, make them proficient in what they’re supposed to do, so we serve the country well. 

And, oh, by the way, along the way, we will also perhaps accrue 

some savings that we can devote to other mission areas or jobs. 

Mr. LARSEN. Right. Thank you, Mr. Chairman, and in the interest of, obviously, other members I will yield back, and—— 

Mr. LOBIONDO. Thank you. 

Mr. LARSEN [continuing]. Do a second round later. 

Mr. LOBIONDO. Mr. Coble. 

Mr. COBLE. Thank you, Mr. Chairman. Good to have the four of 

you with us. Thank you for your service. 

Gene Taylor, the former congressman from Mississippi, knowing 

of my Coast Guard background, always addressed me as ‘‘Admiral.’’ 

The present chairman, the gentleman from New Jersey, knowing 

of my Coast Guard background, addresses me as ‘‘Master Chief.’’ 

I want the record to reveal that I am qualified to perform the duties of neither admiral nor master chief, but both titles have a real 

good ring to them. You may continue to address me that way, Mr. 

Chairman. 

Admiral, I was going to talk to you about recapitalization of the 

Coast Guard, but I think you have already touched on that. Let me 

get more directly to the Polar Sea. I am told that the Coast Guard 

plans to decommission her within the next five or six months. At 

the same time, I am furthermore told, Admiral, that the several 

million dollars—six, I think—will be expended to complete the 

overhaul of her main engine. Now, Admiral, tell me what I am 

missing here. 

Admiral PAPP. Well, sir, while on the surface it looks like a bad 

news story, there is actually some positive rays of light there, at 

least as far as I am concerned. Once again, this goes back to the 

very challenging tough decisions that we have to make. 

What I am confronted with, as I sit before you today, is only one 

ice breaker that works. The Healy is working right now, but that’s 

a medium ice breaker. We have no heavy ice breaker for the United 

States. 

Now, we can continue to pour money into Polar Sea. It has all 

its engines down right now. And we can continue to pour money 

into that, and then get maybe a year or two out of her once she 

gets—if she gets—back in service. What I have done is I have made 

the decision that we do not pour more money into that ship, using 

the scarce money we have to get Polar Star reactivated. 

The President proposes to transfer the funding back from the National Science Foundation back into the Coast Guard. That’s the 

positive ray of light that I am talking about here. Because I feel 

that we can better manage that money for our ice breaker fleet, 

and start to build up the competencies of our ice breaker sailors 

once again. 

But given the limits under which I have to operate in terms of 

that money, I think that it’s best just to—what we’re going to do 

is continue to repair one of the engines on the Polar Sea, test that 

and learn from it. And we can take all the parts that we have purchased for the Polar Sea and transfer those over to Polar Star. 

Now, there will be a gap while we do not have a heavy ice breaker, 

but we’ve got a gap right now. 

15 

But in terms of taking the scarce resources that I have, it’s my 

judgement that we should transfer those over to the Polar Star, and do a complete reactivation on her, so we have a reliable heavy 

ice breaker that will last 7 to 10 years, rather than trying to piece 

together Polar Sea and get maybe a year or 2 out of her. 

Mr. COBLE. Admiral, how many heavy-duty ice breakers are active in the fleet now? 

Admiral PAPP. None within the Coast Guard. We have the—— 

Mr. COBLE. I thought that’s what you said. 

Admiral PAPP. Yes, sir. Both Polar Sea and Polar Star are—well, 

Polar Star is in a long-term reactivation. We have about $62 million that was appropriated to put her back into service, and perhaps get 7 to 10 more years while the country decides what we are 

going to do about ice breakers and the Arctic. Polar Sea was the 

one that was active, and all the engines are inoperative right now. 

We were going to spend a lot of money to get all the engines back 

up to speed, but I feel that that money is better devoted to getting 

Polar Star back online. 

Mr. COBLE. And Healy is inactive, as well? 

Admiral PAPP. No, Healy is our medium ice breaker for scientific 

response in the Arctic. 

Mr. COBLE. OK. 

Admiral PAPP. And she is active. So we will have Healy throughout this entire period. 

Mr. COBLE. I thank you, sir. Mr. Chairman, good to see you 

again. Mr. Chairman, if carriers and shippers in their respective 

service contracts don’t come to FMC to resolve their disputes, what 

action do you take? 

Mr. LIDINSKY. Thank you for that question, Mr. Coble. As I said 

in my testimony, looking back at the recession that we went 

through, and many of the troubles that were experienced between 

carriers and shippers, the service contract is at the core of it. 

This is the document that does the deal in the moving of the 

cargo. We have over three million of them on file at the Commission, and nobody can argue they’re not a successful document. It’s 

what cargo flows today with. But the contract itself, in the 1984 

Act, said that any dispute would go to state court over the argument. We want parties to come to the Commission, use our CADRS 

office to resolve their disputes, a no-cost, confidential process. 

Now, we’re in a very crucial period at the moment of carriers and 

shippers renegotiating these contracts up to—May 1 is the usual 

start date. If we find, come spring, come summer, that they have 

not put voluntarily to come to CADRS, I will come back to this subcommittee and request legislation that we change the shipping act. 

Mr. COBLE. I got you. 

Mr. LIDINSKY. Thank you. 

Mr. COBLE. Thank you, Mr. Chairman. Mr. Chairman, I see my 

red light has illuminated, so I yield back my time. 

Mr. LOBIONDO. Congresswoman Hirono. 

Ms. HIRONO. Thank you, Mr. Chairman. 

Mr. Matsuda, I want to thank you for coming to Hawaii this past 

August and engaging with our State Department of Transportation. 

I do have a question for you. There was a time when we had a 

very robust shipbuilding industry in our country and not so much 

16 

now, and we want to do everything we can to encourage the purchasing and acquisition of U.S. built ships. But I do note that the 

Maritime Guaranteed Loan Program, which is one of the ways that 

we can encourage shipbuilding in our country, is not being funded 

and, in fact, some of the money that is already in there is being 

canceled. 

Can you talk a little bit about what the impact of this is going 

to be? And are we doing anything else if we are going to pretty 

much cut back on the loan program, anything else to support a 

shipbuilding industry in our country? 

Mr. MATSUDA. Thank you. 

And that is an excellent question. Let me be clear with the Title 

XI Loan Guarantee Program proposal. We are continuing to accept 

and process applications for loan guarantees in shipbuilding. This 

is not something that we are going to stop because of this proposal. 

What this proposal does is this: The Administration proposes 

taking an excess of funds it has accumulated in the Title XI Shipbuilding Program and canceling it. It is a tough choice in today’s 

economy and the budget pressures that we are all under, but it is 

one that we feel will still be able to meet the needs of the industry 

as they look to continue to build ships in the U.S. 

I should point out that in my testimony I talk about the Capital 

Construction Fund. This is another program we have that allows 

tax deferred money to be used for shipbuilding. There is currently 

$2.8 billion sitting in that account. Title XI is an application driven 

process. We can only process what is in front of us. If the carriers 

decide not to build ships, we cannot really make them do it. 

But when they do come to us, we want to make sure we have 

a process that works and is efficient. 

Ms. HIRONO. I think it is a real challenge to really recreate a robust shipbuilding industry in our country, and I am sure there are 

other ideas that we can bring to the fore to do that. I am not sure 

that these two programs that sort of maintain it seems to me a status quo kind of a situation so that we are not falling further backward. Is that an accurate way to look at it? 

Mr. MATSUDA. I believe so. 

Ms. HIRONO. For Commandant, when you allocate the scarce resources, on what basis are you going to do that? Because, of course, 

as I mentioned in my opening remarks, the 14th District, which includes Hawaii, Guam and other areas, it is 14.2 million square 

miles that you have to cover in terms of all of your activities. 

So is the area of coverage one of the ways that you are going to 

allocate scarce resources? 

Admiral PAPP. Yes, ma’am. Thank you for that question. 

And as far as shipbuilding goes, we would be happy to build 

more Coast Guard cutters to stimulate the industry, but the 14th 

District provides us with unique challenges that are not found in 

all of our other districts in the expanse of the area that they have 

to cover, given all of the fisheries in the Western Pacific and as far 

over as deploying to do drug interdiction in the Eastern Pacific as 

well. 

So we have to have ships that can range far, that can sustain 

themselves, that can operate independently. The two high endurance cutters that you have out there, the Jarvis and the Rush, are 

17 

both over 40 years old. They are two of those ships that I have 

been talking about, and across that fleet, we are losing ship-days 

as we speak because we generally like to get about 185 days a year 

out of each one of those ships, and right now we are averaging closer to about 140 days because of mechanical breakdowns. 

So getting the high endurance cutters replaced by the National 

Security Cutters is very important to us, and getting the newer 

boats and patrol boats that take care of the stuff closer to the islands out there is important, as well as long-range aircraft to cover 

that broad expanse. 

In terms of how we make those decisions, once again it goes back 

to on a daily basis. The 14th District Commander will have units 

assigned to him from the Commander, Pacific area. Most of the 

time they will be on fisheries patrols or interdiction patrols, but 

that operational commander only has those finite resources, and 

based upon whatever cases come up, whether it might be an unexpected search and rescue case or some other security issue, we will 

have to redirect those resources. 

So those finite resources get transferred across various mission 

areas, which therein lies really the value of the Coast Guard, as 

we have versatile and adaptable resources to be used across those 

missions, as well as our people who are versatile and adaptable as 

well. 

Ms. HIRONO. Thank you. 

Thank you, Mr. Chairman. 

Mr. LOBIONDO. Mr. Harris. 

Dr. HARRIS. Thank you very much. 

If I could just ask Mr. Matsuda, the budget request that you 

have represents a 1.5 percent reduction below the current level, but 

if you remove the Title X area, it actually is an increase. 

First of all, I am going to ask you what was your fiscal year 2008 

budget because there are some of us who think that that represents a realistic target for the non-defense portion of the budget. 

And how could you get there? How could you get to the fiscal 

year 2008? 

Mr. MATSUDA. Thank you. 

Although I do not have the 2008 numbers in front of me, I can 

tell you that we have looked at what the impact would be at operating under 2008 levels. The most severe impact would be to the 

United States Merchant Marine Academy. They would be faced 

with some very difficult choices with immediate layoffs of faculty 

and staff, cutting the incoming classes, the class size, or offering 

services or limiting the actual academic year. All of those would severely impact the operations of the school. 

In addition, the budget for the academy has grown over the past 

couple of years primarily because a lot of the funds that were used 

to fund off-book or nonappropriated fund activities have been 

brought on book and now made a more transparent part of the 

budget. 

So these are realities that have really shaped up to make a harsh 

difference between the fiscal year 2008 environment and the current one. 

Dr. HARRIS. I came from State government before. I mean, our 

colleges are asked to do more with less. This is consistent across 

18 

all of the institutions for higher education. So you are suggesting 

that somehow what you are responsible for should be exempt from 

doing more with less? 

Mr. MATSUDA. I am suggesting, and actually the story with the 

academy and its capital needs are that these needs have been long 

deferred, for years, decades. There are buildings there that still 

exist from when they were built in 1945 or earlier. It is before a 

time when women were actually allowed at the school. 

So there are basic things like making sure there are sufficient 

women’s restrooms or locker rooms that can accommodate that introduction. This was the first academy to actually allow women at 

the school. So there are some very basic capital needs that need to 

be met at the academy, and this budget that has been proposed by 

the President will go a long way toward addressing them. 

Dr. HARRIS. Well, I would suggest that these are the needs that 

are seen in every institution of higher education. If you look in our 

university system in Maryland, our university has backlogs of hundreds of millions of dollars of capital projects they would like to 

complete. They have buildings similarly as old, and they are just 

going to be asked to do more with less. 

So if you could just get the answer to me about what the fiscal 

year 2008 budget was broken down by the various components, I 

would appreciate that. 

Now, Mr. Chairman Lidinsky, I would also ask you the same 

question. You have actually asked for an increase in your budget 

this year. What was your budget in fiscal year 2008? 

You know, to the witnesses, this discussion has gone on for a few 

months now, this target of 2008. So I am a little surprised that 

some of you come to the Committee hearing without knowing what 

your budget was two years ago, since this has been much talked 

about. 

But, Mr. Chairman, could you just indicate why, again, you think 

your commission somehow needs an increase when every other part 

of non-defense discretionary spending is going to be asked for a decrease? 

Mr. LIDINSKY. Mr. Chairman, our budget in fiscal year 2008 was $22.072 million. 

Dr. HARRIS. So then can you go ahead and review why you think, 

you know, you need about 15 percent more? 

Mr. LIDINSKY. We are a very small agency. When Mr. Coble 

brought up about the Coast Guard writing the book on doing more 

with less, when I first served at the Commission as a young lawyer 

back in the 1970’s under Chairman Bentley, we had 330 people on 

staff. Today we have 200 people less although trade is ten times 

what it was in that period. 

So coming from a small agency, our salaries, our pensions, our 

built-in costs are fixed at about 75 percent of the budget. So in 

terms of dollar figures, we have to be very careful in what we ask 

for in terms of meeting commitments for IT, for mandated programs, for security, for pensions, for people retiring, succession 

planning. 

We have over two-thirds of our people who are eligible to retire 

today if they wanted to retire. So when you are dealing with 130 

people and you have got very strong fixed costs, any increase that 

19 

you have to have for a mandated new program or to do additional 

efforts to help our exporters is going to look a large increase for a 

small agency. 

Dr. HARRIS. Thank you very much. 

Thank you, Mr. Chairman. 

Mr. LOBIONDO. OK. The gentleman from Minnesota. 

Mr. CRAVAACK. Good morning. First off, Admiral Papp and Master Chief Leavitt, I would like to thank the great men and women 

of the fantastic Coast Guard for all of the missions that they accomplish on a daily basis and all the sacrifices that they render 

and their families as well. So thank you very much for your service, gentlemen. 

Mr. Matsuda, we talked just briefly up in Duluth and the Great 

Lakes. We have a very, very large merchant traffic using lakers 

and salties going up the seaway, and one of the things that I noticed in talking to Mr. Ojard here, the Port Authority out of Duluth, is that we do have a concern about the port. 

The port is the second largest dry bulk port in the United States, 

kind of funny even though it is in the middle of the United States. 

But my concern is that for the lack of shipping capital investment that I am seeing. Obviously taconite is one of our main exporters in that area, but we are seeing a very big difficulty in seeing, like you just mentioned, people building ships here in the 

United States under the United States flag. 

So I know that there was a study. The merit study was initiated 

just about a year ago; is that correct? Could you tell me, sir, what 

the result is of that study? 

Mr. MATSUDA. Certainly. We made the decision to conduct a 

study on the future of shipping in the Great Lakes and look at the 

recapitalization options of the fleet. As you know, there are many 

challenges that the Great Lakes face operating under a full year, 

trying to meet the needs of the various shippers up there. It is not 

easy. 

We recently concluded a three-visit tour to Chicago, Duluth and 

Cleveland in the Great Lakes, and we are happy to hear from the 

stakeholders and discuss some of these issues. We focused on some 

of the environmental challenges, as well as the port and infrastructure challenges. 

We recently did this. I literally just got back last week, and we 

are happy to share with you the results of what we learned. 

We are going to take this data and also look at some more indepth material, given the current status of the fleet, what are potential future shipping needs, and compile a full report, and we are 

happy to discuss that with you and the subcommittee as well. 

Mr. CRAVAACK. Great. Thank you for that. 

I would also like to dovetail on my colleague Ms. Hirono’s comments. What do you feel that the Federal Government can do to 

help to promote business and industry in the Merchant Marine? 

I just had the great fortune of going to the Naval Academy just 

yesterday and did a tour at the Naval Academy, visited midshipmen there, and I realize how important an academy is. So you 

do have my concerns there. But as my colleague, Mr. Harris, did 

say, we are all under budget constraints, but hopefully we will be 

able to reach the needs of what midshipmen need there as well. 

20 

But what can the Federal Government, in my minute and 50 seconds left, can help promote us, that we can help you getting business going under the U.S. flag? 

Mr. MATSUDA. Well, I could probably answer that question two 

ways. One is for the international trade, and that is something that 

we have been focused on, looking at the differences between U.S. 

and foreign flag operating costs and seeing if we cannot better understand what are the differences and whether there are any regulatory or other impediments to help encourage companies to flag 

under the U.S. registry. 

That is a study we have ongoing. We are close to getting the final 

results from, and again, we expect them some time this spring, and 

we are happy to share those results with you and the subcommittee. 

On the domestic fleet, obviously the Jones Act plays a strong role 

in making sure that there continues to be a strong shipbuilding 

component in the U.S. Having the Title XI and other shipbuilding 

tools are available. Title XI does not work for everybody, especially 

projects where they are a smaller size, smaller dollar value. But at 

the end of the day building a ship is such a risky proposition. It 

is a long-term asset. It is hard to find long-term money to do that, 

especially in today’s credit market and credit situation. 

So making sure that we have all of the tools and programs that 

are available to assist folks who desire to build a ship in the U.S. 

is something that is very important to insuring the long-term survival. 

Mr. CRAVAACK. Thank you very much, sir. 

And I will yield back the rest of my time. 

Mr. LOBIONDO. Mr. Cummings. 

Mr. CUMMINGS. Thank you very much. 

Good morning, gentlemen. Mr. Matsuda, I am very pleased to 

hear that the Department of Energy agrees that the cargo preference requirement should apply to loan guarantee cargoes. As you 

know, that is something that I have been very, very concerned 

about. 

And do you know when such cargoes may begin to be moved? 

And how will you and the Department of Energy work together to 

apply the cargo preference requirements? 

Mr. MATSUDA. Thank you, sir. 

We are very pleased to report that this morning. The language 

on the Department of Energy’s Website has changed to indicate 

how we will be working with them to make sure those requirements are met. 

Basically, we are integrated with our agency partners at the Department of Energy to look at and work with the various project 

sponsors to make sure they are meeting these requirements. And 

a lot of times that means dealing with the project engineers, the 

folks who are in charge of procurement, making sure they understand the law and how they can meet it. And we have done that 

successfully already on several of the projects. 

The change on the Website also helps indicate to future applicants or those who might just be looking at the program now about 

how it will work and what requirements they need to meet. 

21 

Mr. CUMMINGS. Chairman Lidinsky, can you provide us with an 

update on Commissioner Dye’s investigation, as well as whether 

there are recent changes in the cargo rolling canceled books, container shortages, and the attempts to force charges that were not 

agreed and contracts that were just executed last month? 

And what else can the FMC do to address those problems? 

Mr. LIDINSKY. Thank you very much for the question, Mr. 

Cummings. 

The picture is much brighter than when we met a year ago. As 

you know, Commissioner Dye conducted her fact finding over the 

summer back in December. Many of her recommendations involving the problems that took place during that period of time have 

been rolled out here in the form of orders to the carriers, further 

investigations taking place. 

The issue that was of concern, we had a dialogue on this this 

year about container shortages. It is a much more improved picture 

today. Capacity is up. 

The USDA Program is just about to be formally launched. They 

have worked together with one of the shipping conferences in the 

westbound trade to help identify through computers where missing 

containers could be supplied to exporters. 

So I would say that we face a much more positive situation. The 

only cloud on the horizon, as I mentioned before you arrived, was 

the fact that the service contracts still need to be properly made 

in order to prevent rolling in the other issues. We are in the negotiating season right now, and should that not occur, we will be 

pleased to come back to the subcommittee and ask for legislation 

to bring that about. 

Mr. CUMMINGS. Now, Admiral Papp, during your state of the 

Coast Guard address, you said we made great progress in executing our diversity strategic plan, but we have significant gaps 

which require us to continue our efforts. 

I recently visited the Coast Guard academy where I met with the 

admission staff, and they are reaching into communities where the 

Coast Guard is not well known and working hard to recruit our future. The academy has made great strides to increase the core of 

cadets’ diversity, end of quote. 

Can you update us on the ongoing efforts to increase diversity at 

the Coast Guard Academy, including how things are looking as you 

seek to recruit the next class at the academy? 

Admiral PAPP. Yes, sir, Mr. Cummings. 

And thank you for your job as Chairman during the last Congress. I got a chance to thank the subcommittee for their work on 

the authorization bill. I thank you publicly as well, but more importantly for your attention to the diversity concerns of our service 

and giving us proper oversight in that regard. 

I had a chance to travel up to the Coast Guard Academy in January to speak to the corps of cadets, 1,000 of them, about leadership 

issues, and of course, as I was talking to them, I talked about diversity as well. But I also took the opportunity to go over personally a visit with the recruiting staff at the academy. 

And I am very pleased with the progress we have been making. 

We have increased the number of people that are going out to the 

field to those areas where we have not recruited before, and what 

22 

we are finding is that not only are there areas that were unfamiliar 

with the Coast Guard Academy, but also it is not just the students. 

It is also faculty advisors, guidance counselors, and others that 

need to be educated. 

And also many times some of the schools that we are targeting 

that have very good students with very good academic records, oftentimes the schools perhaps do not have the resources in terms of 

the numbers of guidance counselors that some more affluent localities do. 

So we have provided funding to the Coast Guard Academy to 

bring on I believe we have got about a dozen people now that are 

going out to targeted areas in the field, to work with guidance 

counselors, to work with students, to make sure we get the completed applications in, just to provide that little bit extra of a boost 

in those areas that heretofore were unfamiliar with the Coast 

Guard Academy. 

Right now, I do not have any figures in terms of acceptances or 

how many appointments have been issued because it is a little too 

early in the process, but in terms of the numbers of applications 

that we have coming in, it reflects another increase over last year’s 

very promising numbers. 

Mr. CUMMINGS. Thank you. 

Thank you very much, Mr. Chairman. 

Mr. LOBIONDO. Mr. Farenthold. 

Mr. FARENTHOLD. Thank you very much. 

Admiral, I would like to start with you if you would not mind. 

What do you see is the growth areas within the Coast Guard mission over the next five to ten years? 

Admiral PAPP. The growth areas will be, I think, and it is reflected in our budget, how do we respond to incidents, such as 

Haiti, Deepwater Horizon, hurricanes. We are seeing an increased 

number of hurricanes, and thank goodness we dodged that bullet 

this last summer, particularly when we were in the midst of working on the oil spill down in the Gulf. 

But what we have found over the past probably four years, going 

back to Hurricane Katrina, is that we really lack the capacity for 

incident response. What we do is we curtail activities that we 

would normally be doing, and we deploy people to take care of 

those responsibilities. 

I will give you a for-instance. During the height of Deepwater 

Horizon, we had about 3,000 people forward deployed from the 

Coast Guard to man various incident command posts across the 

Gulf of Mexico. These were not people that we had on standby 

waiting to take care of incidents. In fact, I was speaking to an 

Army officer, who when he heard me sort of whining about the fact 

that we were so depleted, said, ‘‘Well, why don’t you use your folks 

that are in garrison?’’ 

And their mindset is you have these divisions of infantry or artillery or whatever that are in training, and then when crises come 

up, you order them up and you send them forward. The Coast 

Guard just does not have that band strength. So there—— 

Mr. FARENTHOLD. Do you see the Coast Guard’s role as a direct 

responder or a first responder there, or do you see it more as a supervisory role over private sector response team? 

23 

Admiral PAPP. It is clearly a shared responsibility. One of my 

principles is strengthening our partnerships. It has got to be a 

partnership with industry, State, Federal and local forces, just as 

it was during the oil spill. And primarily it is supervisory. 

Those 3,000 people down there were in incident command posts, 

but it is also putting people out into the field either working directly on a spill or whatever the incident might be or supervising 

those people that industry is paying for out there. 

Mr. FARENTHOLD. We also see a line item looking to purchase 

some more aircraft and maintain the air fleet. Much of what the 

Coast Guard does short of helicopter rescues, seems like it would 

be something worth studying, moving to unmanned vehicles. Are 

you all looking at rather than having guys flying up in jets doing 

the patrols doing some of that with unmanned vehicles as a cost 

savings? 

Admiral PAPP. Actually the HC–144 Ocean Sentry aircraft that 

you see in the budget is a replacement for those jets that we have 

used for many years. This is going to give us probably in the long 

run a lower cost asset that is able to stay out there for more hours, 

do greater surveillance, has better sensors, has a sensor pallet that 

goes in there, and we have been putting it to good use. That is another one of those assets that we cannot get out there soon enough. 

Mr. FARENTHOLD. And you do not think that a lot of that could 

be done with some of the technological advancements that we are 

seeing with things like the Predator drone? 

Admiral PAPP. Some of it could be, and we are in the process 

right now of working with our partner within the Department of 

Homeland Security, Customs and Border Protection. They do have 

a Predator program that they are working on right now. 

The challenge is coming up with a Predator that is adapted to 

the maritime environment, which is completely different. It is a 

whole new set of environmentals that you are dealing with, with 

salt, air and other things. 

Mr. FARENTHOLD. I live on the coast. I understand that. 

Admiral PAPP. Yes, sir. So we are certainly interested in it. We 

have been working on a trial project with CBP, and we have, in 

fact, been providing some Coast Guard aviators to help fly the 

Predators and see what sort of return we can get on it. 

But those are very expensive, and I do not have the room in the 

budget at this point. 

Mr. FARENTHOLD. And let’s talk for just a quick second about 

ship disposal. What is your all’s procedure for ship disposal? I understand there is a clean-up. 

Are you all sinking them? Are you sending them to ship recyclers? Are you stripping materials out and then selling them? 

It seems like there might be some people willing to take these 

for nothing in exchange for the scrap. 

Admiral PAPP. Yes, sir. Actually that is a pretty good news story 

as well. To be truthful, we are talking about 40 year old ships. 

That means we have not been giving away too many ships recently. 

We are hopeful that we will be giving away more here in the near 

future, but what we do have is, first of all, we have foreign military 

sales, and there are some opportunities out there to sell the ships, 

24 

getting money back, and also saving us the cost of having to clean 

them up environmentally. 

But we also have within the bill that is going forward, it gives 

us the authority to work with Mr. Matsuda and the Maritime Administration to go through their ship program, which would then 

sell them off for scrap, which then saves us the cost of having to 

have them environmentally pure before they are transferred someplace else or sunk and possibly give some returns to the Government. 

Mr. FARENTHOLD. Thank you very much, sir. 

Mr. LOBIONDO. Mr. Landry. 

Mr. LANDRY. Thank you. 

Commandant, of course, I do not have any problem with ICE 

down on coastal Louisiana, but I was just curious as a business 

owner, have you all looked into the possibility of leasing icebreakers from the private sector rather than trying to pour money 

into old assets and then come back to us and ask for large capital 

expenditures? 

Admiral PAPP. Well, what happened here back in 2005, sir, is the 

operating funds for our polar icebreakers were transferred to the 

National Science Foundation, and I am not sure of the logic in that 

or the wisdom, but in any case, the National Science Foundation 

immediately turned around and then started leasing foreign icebreakers. 

It is interesting to note that the first year they did that, they 

leased a Russian icebreaker to break out McMurdo at the South 

Pole, and the Russian icebreaker broke down. We had to activate 

our icebreaker and send it all the way from Seattle to break it out. 

So there certainly are possibilities for leasing icebreakers, but I 

think there is probably some minimum number of icebreakers that 

this country wants to have on hand. 

Mr. LANDRY. Well, I would like you to lease them from U.S. companies rather than from foreign companies. I know that on the 

Great Lakes there are a number of icebreakers that are leased by 

governments from companies in the United States. I have one of 

the shipbuilders and owners in my district that actually leases icebreakers out on the Great Lakes. So it is amazing that we went 

out to foreign countries to lease icebreakers when the gentlewoman 

was talking about how we increase our shipbuilding capability and 

how we get people back to work in this country. 

It certainly seems to me that we could look at a cost savings 

measure, possibly leasing those icebreakers from companies right 

here in the United States. 

Admiral PAPP. It is certainly an option that is out there. We have 

not investigated it because we are trying to come up with the 

wherewithal to support the icebreakers that we have, and most of 

the time we fall short of the hours just on the icebreakers that we 

have. 

Mr. LANDRY. Well, it seems like based upon the amount of money 

you are pouring into a very old vessel, maybe you all should have 

someone take a look at that. I will be more than happy to send you 

a couple of names of people who are building them and would lease 

them to you all. 

Admiral PAPP. Thank you, sir. We will take a look at that. 

25 

Mr. LANDRY. OK. Real quickly, as you know, seven years ago 

Congress passed a statutory requirement for the Coast Guard to 

craft regulations for touring vessel inspections, including safety 

management systems for touring vessels. The goal of these regulations is to increase the operational safety of the largest segment of 

commercial U.S. flag vessels. The safety management system required is one of the National Transportation Safety Board’s top ten 

most wanted transportation safety improvements, and from what I 

have seen, these draft regulations are a great example of how the 

Coast Guard has worked, you know, to get input from private industry and rely greatly upon the wisdom of the private industry in 

promulgating those regulations. 

I understand that we still have not published those in the Federal Register, and after two congressional directives and countless 

industry contacts, could you tell me why we have not gotten those 

published yet? 

Admiral PAPP. Yes, sir, and I understand the importance of pushing this through. There is a lot of good in there, but it does, as you 

noted, reflect a huge change and probably impacts a lot of resources not only for the Federal Government in terms of having inspectors, but also for industry as well in terms of changes they may 

need to make. 

That regulations package has gone back and forth a lot. I have 

had a chance to give it some focus now during the nine months 

that I have been the Commandant. It has been back with us and 

probably if there is any delay right now, it is because we have been 

back and reviewing it in the midst of Deepwater Horizon, and now 

we have been able to give some more attention to it. 

Frankly, I have taken the opportunity to go across the country 

and talk to the industry groups as well, a broad watch of the maritime industry, but in particular, the American Waterways Operators who certainly are most affected by this bill. In fact, I met with 

their executive committee just the other night to get input from 

them. 

We want to make sure we have got the right package going forward. I think we have answered the questions that were posed to 

us upon review, and we have transferred it back up to the department to get their final review on it. 

Mr. LANDRY. Seven years. 

Admiral PAPP. Yes, sir. 

Mr. LANDRY. Mr. Commandant, that is a long time. 

Admiral PAPP. Yes, sir. 

Mr. LANDRY. OK. 

Mr. LOBIONDO. Mr. Matsuda, I wanted to follow up on a question 

that the Congresswoman from Hawaii posed to you about the Title 

XI, and I believe that you stated that there was $2.8 billion in the 

capital construction fund that could be accessed by account holders, 

if I am accurate here, and you also noted that on the Title XI funds 

that you have to have applications before you in order to be able 

to expend the money. 

Well, unless we are mistaken, at present if your applications that 

you have before you were to move forward, you would not have 

enough money to approve them. You would not have enough money 

to cover them. 

26 

I do not understand. Help me understand how you can say you 

do not have applications before you when either I have got wrong 

information or somehow you have got wrong information. 

Mr. MATSUDA. I believe the information you have is correct in 

that that is the amount that the applications have requested. At 

the end of the day, we go through this process of determining 

whether this is a deal that is acceptable, an acceptable risk to the 

taxpayers. And that may not be the case by providing the amount 

of subsidy required compared to what they originally proposed. 

So at the end of the day some of these projects may not be good 

projects. They may not move along through the process with the 

same amount of speed that others do. We have found, given recent 

history, that it takes some time to get some of these projects moving along, and I know that that is due to a couple of factors. 

One involves our internal processes, and that is something that 

I have taken a very close look at. We hired a consultant to come 

look at the business processes used to see if we cannot speed those 

up or make them more efficient. But on the outside, the majority 

of the time it takes to process these applications is spent waiting 

for an applicant to provide more information on their application. 

Mr. LOBIONDO. Admiral Papp, the Coast Guard completed a fleet 

mix analysis to determine the numbers and types of vessel platforms that would be necessary to support Coast Guard missions in 

the future. Chairman Mica and I requested this report 13 months 

ago. It is pretty hard to understand why we have not had it. 

Were you going to be able to provide it to the subcommittee by 

the end of the week? 

Admiral PAPP. I would be reluctant to give you a guarantee that 

I could get it to you by the end of the week. I will commit to you 

to do my best to move this forward though, sir. 

Clearly, this is something that is very important to me as well. 

As you know, as I think the subcommittee knows, we have gone 

through phase one of the fleet mix analysis, which at least validates the construct of what we have in the acquisition baseline for 

what was known as the Deepwater Project in terms of the mix of 

National Security Cutters, offshore patrol cutters, fast response 

cutters, and the associated aircraft. 

Now it is in the process, a combination of the department, us, 

and GAO, taking a look at various options within that that would 

perhaps either provide better return or better value for what is 

proposed. 

But I commit to you to getting back and getting a timeline on 

that so that we can get this to the subcommittee. 

Mr. LOBIONDO. I appreciate that. I hope we do not have to ask 

for this in a public setting again. 

Admiral PAPP. Yes, sir. 

Mr. LOBIONDO. On the National Security Cutter, the Office of 

Management and Budget is requiring the Coast Guard to have 

available amounts sufficient to cover the cost of long lead material, 

construction and post production before the production begins. As 

a result, the fiscal year 2012 budget requests $77 million to complete the construction of the National Security Cutter No. 5, but 

does not request funding for long lead materials for No. 6. This obVerDate Aug 31 2005 11:51 Jun 13, 2011 Jkt 000000 PO 00000 Frm 00042 Fmt 6633 Sfmt 6633 P:\HEARINGS\112\CG\3-1-11~1\65483.TXT JEAN
27 

viously will delay delivery in the future of National Security Cutters and I think cost the taxpayers millions more money. 

Can you talk about what is the impact of OMB’s new full funding 

policy on the per vessel price of the National Security Cutter and 

what is the impact on the delivery schedule of future NSCs? 

Admiral PAPP. Well, that is the big issue, the full funding in any 

given year for the long lead production and post production costs. 

That obviously takes up a large portion of whatever the amount is 

that we get for acquisitions in any given year. 

As we work through the fixed price contract, which I think was 

a righteous effort for us in terms of our acquisition reform, the 

fixed price contract on No. 4, and when the price came in we had 

to move money that was originally dedicated towards long lead 

time procurement for No. 5 and then work within the continuing 

resolution to make sure we had enough money to award the long 

lead money for No. 5. 

We were granted an exception by OMB to be able to do this because of the promise or at least what appeared to be the intent of 

Congress to put the money for No. 5 into the 2011 budget. 

But even at the amount that we are trying to predict, it is hard 

for us to predict right now how much will come through in the 2011 

budget because of the continuing resolution. What we think we are 

going to get would require another $77 million in the 2012 budget, 

and because we had to put money for No. 5 in the 2012 budget, 

we just could not come up with the room to fit in the entire cost 

of NSC No. 6 without displacing a lot of other very important 

projects that we cannot afford to breach the acquisition project 

baselines. 

And, frankly, I think we are gaining some savings by buying 

some more patrol boats. We are going to build out our response 

boat medium a little quicker and get that project out of the way 

so we can make room in the out-years. All in all, as I said right 

from the start, there were some very tough choices within this 

budget, and I think we have optimized our purchases within the 

amount of money that is available. 

Mr. LOBIONDO. Admiral, I understand we have some very tough 

choices to make, but can you either tell me today or get back to 

us on what this is going to cost the taxpayers? 

Admiral PAPP. In terms of a delay on No. 6 in terms of long lead? 

Mr. LOBIONDO. Yes. 

Admiral PAPP. Yes, sir. We will provide that to you. 

[The information follows:] 

Based on the current full funding policy, the funding associated with the sixth NSC is not required until FY 2013. 

Future year requests will include funding for both longlead materials and production of the same ship in a single 

fiscal year to ensure operational return on fiscal investment. 

Mr. LOBIONDO. OK. Master Chief, the Coast Guard Authorization Act of 2010 establishes a housing trust fund to help finance 

the construction and renovation of Coast Guard service member 

housing. Is the funding available in the trust fund sufficient to 

cover the backlog of service member housing improvement projects? 

28 

Master Chief LEAVITT. Thank you, Mr. Chairman, for the question. Thanks for approving that authorization, by the way, too. 

Right now we are in the process of identifying those properties 

that that Authorization Act allows us to do, and taking a look at 

the housing areas. Buckson, North Carolina, that housing area is 

looking at they are being sold and then put back, to reinvest back 

into our housing, along with other properties. 

The goal is probably to get those monies back in, look at it, and 

then get them appropriated for fiscal year 2013. But to be honest 

with you, this whole project is more to get us going, more to help 

jump start the housing because the long-term processes of our 

housing is to take a good look at our housing over the general 

Coast Guard because there are a lot of areas that it is going to take 

a lot more than $20 million that we may be able to get into it in 

the fiscal year 2013. 

[The information follows:] 

CORRECTION: The current housing account balance does 

not cover the projected backlog of proposed military housing projects, but the provision within the Coast Guard Authorization Act of 2010 provides the Coast Guard with a 

vehicle to address military housing needs on a recurring 

basis. The Coast Guard is in the process of conveying several pieces of property, and recouping the proceeds into the 

established housing fund for future housing projects, as 

authorized by the Coast Guard Authorization Act of 2010. 

The Coast Guard housing project request in the 2012 

budget, and authorities contained in the new legislation 

will begin to address the backlog of eligible government 

owned housing improvement projects. 

For example, across the broad base I think Admiral Allen said 

a third of it is in pretty good shape, a third of it is in medium 

shape, and a third of it is in poor shape, and that is what we are 

facing. We are facing the high cost of construction. Right now with 

this bill we are looking at $20 million, and we are looking at replacing the unaccompanied personnel housing up at Cape Cod and 

as well as the lower Columbia River there. It is very expensive taking a look at that. So we are just looking at two housing areas. We 

have 4,000 houses, plus or minus a few, out there in our inventory. 

So if you take a look at those numbers, you can see, well, $20 

million this year might be able to cover other area housings right 

here, but the reality of it, Master Chief Bowen came in here last 

year and he told you that we are about $300 to $350 million in 

backlog in the housing. So those are the challenges that we face 

and how we are going to organize across our mission because housing is included in the infrastructure that we have also, our older 

infrastructure, about the same age as our ships, Mr. Chairman. 

Mr. LOBIONDO. Well, either today or as a follow-up, if you can 

suggest, make any recommendations to us, I mean, short of striking the lottery for you, what we can do to help improve the housing 

situation, we would be interested to try to continue working on 

that. 

Master Chief LEAVITT. Yes, sir. One thing that we are doing is 

an analysis of our housing to identify the numbers we have 

29 

throughout the country, to see what the supply and demand is for 

our housing versus basic allowance for housing, and we will have 

a much better idea once we run this analysis across to see what 

our position is. We can give you a much better number of what that 

deficit might be in that gap by identifying that gap, sir. 

[The information follows:] 

The Coast Guard is very appreciative of the new housing 

legislation contained in the Coast Guard Authorization Act 

of 2010. Specifically, the authority to leverage the proceeds 

from the sale of excess Coast Guard property for repair 

and construction of Coast Guard housing will be an important tool for the Coast Guard in managing its housing program. Currently, the Coast Guard is aggressively pursuing 

execution of these new authorities in order to improve the 

material condition of Coast Guard owned housing and the 

quality of life of our service members. The Coast Guard 

has also embarked on a comprehensive national assessment of government owned family and unaccompanied personnel housing. The results of this assessment will baseline current maintenance conditions and the proper allocation of Coast Guard owned housing. Additionally, this assessment will also prioritize housing maintenance/recapitalization requirements. Most immediately, the Coast 

Guard requests the support of Congress in funding the 

military housing projects contained in the President’s FY 

2012 budget. These projects (Cape Cod, MA and Sector Columbia River) are vital to providing military members/families in these areas with affordable, suitable housing critical to ensuring operational readiness. 

Mr. LOBIONDO. Thank you, Master Chief. 

Mr. Lidinsky, in December 2010, the FMC formally accepted the 

report of Commissioner Dye’s investigation into vessel capacity and 

equipment shortages. Has the FMC established the shipper-carrier 

working groups to follow up on the investigation’s recommendations? 

Mr. LIDINSKY. We have, Mr. Chairman. 

Mr. LOBIONDO. Is your mic on? 

Mr. LIDINSKY. I say we have, Mr. Chairman, moved forward. The 

fact finding had six or seven different areas of action for the Commission to follow. Commissioner Dye is overseeing most of those. 

The Commission had a vote on several of those, such as getting full 

transcripts from some of the carriers, a Notice of Inquiry concerning the alliances that run certain carrier groups, and bringing 

together the shippers and carriers and the working groups as well. 

Mr. LOBIONDO. Thank you. 

Mr. Larsen, back to you. 

Mr. LARSEN. Thank you, Mr. Chairman. 

Back to Chairman Lidinsky, it was noted that you have a slight 

increase in your budget, and it seems that from my perspective the 

only possible way to justify that in this current fiscal environment 

is that there is some relation to your increase to economic growth 

and creating U.S. jobs here as a result of the trade that the Commission has responsibility to oversee. 

30 

Can you give us an indication that that is, in fact, the case? 

Mr. LIDINSKY. That is a correct analysis, Mr. Larsen. Every action that the Commission takes, whether approving an agreement 

or whether overseeing a new program such as Pier PASS, which on 

the West Coast, which has created hundreds of jobs for truckers, 

has an economic impact on our employment situation. 

In the specific case of the increases in the budget where we call 

for these two additional spots in our Consumer Affairs Office, this 

would help shippers who maybe just enter into the international 

export stream, to overcome any problems we are having with carriers. 

So I think it is a very strong investment to make just for two 

positions. At the current moment we have two people assigned 

from another office to help out that office because we’re seeing an 

increase of over 16 percent in cases so far this year, a projected 

total of about 650 cases for the year resolving these issues. 

But people who would go particularly into the export trade often 

try it once and if they are unsuccessful for whatever reason, then 

they back off, and there are jobs that are not create. 

Mr. LARSEN. Thank you. 

Chairman Matsuda or Administrator Matsuda, with regards to 

the MSP, you note that the Administration has requested $174 million for the Maritime Security Program to support sealift operations. Considering the current and continued deployment of U.S. 

Armed Forces overseas, the unrest throughout the Middle East, 

and so on, and the likely scenario of increased fuel cost, is your request sufficient to meet the sealift needs of our Armed Forces? 

Mr. MATSUDA. This request for the Maritime Security Program 

would fully fund the program at the authorized level, and this is 

a program that has throughout its history has always been funded 

at the authorized level. It has been a progressively larger amount. 

Over every several years it gets adjusted in the authorization, and 

that approach has helped to deal with things like fuel costs and inflation. 

I note that recently Congress extended the program for ten 

years, and we hope to have a proposal up to Congress shortly that 

would talk about how we might be able to address some of the details in the program. 

But it is a critical one. It is one that we work very closely with 

our partners, the United States Transportation Command and the 

Department of Defense, to make sure it is meeting their needs. 

Right now we will note that General Duncan McNabb, the commander, has called for more of specific types of ships, roll-on/rolloff vessels, for instance. Some of these have a hard time meeting 

commercial viability tests that you need to be able to operate in the 

foreign trade. 

So we are working with them to make sure it is a program that 

delivers the right mix of vessels and crews to make sure it meets 

their needs. 

Mr. LARSEN. Thanks. 

With regard to the assistance to small shipyards, we had occasion to discuss this a little bit yesterday, and I have given my assessment of how the shipyards in my district have utilized it in 

order to become more efficient today so that they are more efficient 

31 

over the next ten years. So the payback on this is not a one-year 

payback. It is a payback over the life of the shipyard. 

Given that, can you talk a little bit about why this is in the request zeroed out? 

Mr. MATSUDA. Well, the Shipyard Grant Program is something 

that we take very seriously. We continue to administer the grants 

to make sure that the funding that has been provided, which was 

$100 million in the Recovery Act; there was another $15 million before that and I believe a similar amount in another previous year; 

overall these grants have done wonderful things. We have tallied 

at least 500 jobs created to date as a result of the grants. It helps 

the small shipyards purchase new equipment. 

Some of these equipment manufacturers have hired new folks to 

help produce the stuff here in the U.S. So overall we think it has 

had a great impact. It is too early to see maybe in the long term 

how that might impact the competitiveness of our shipyards and 

repair facilities, and so that is something we are continuing to 

monitor, but we certainly understand the importance of it. 

Mr. LARSEN. If I could just note, Mr. Chairman, before I yield 

back that you mentioned 500 jobs, which obviously does not seem 

like a lot, given what has been put in this program, but again, 

none of these shipyards look at this as a one-year investment. They 

all look at it as part of investment today that pays off over the long 

term for them. 

And, again, I have invited you to several shipyards in my district 

to see what they have done with these grants that will mean a 

long-term investment for the shipyard so that they can maintain 

their viability, their competitiveness, and to get out there and go 

out and compete for shipbuilding jobs. 

Mr. LOBIONDO. I would be happy to witness that. 

Mr. LARSEN. Thank you. Thank you, Mr. Chairman. 

Mr. LOBIONDO. I would like to ask unanimous consent that Mr. 

Southerland, a Member of the full Committee, be allowed to sit on 

the subcommittee for the hearing today. 

Without objection, so ordered. 

Master Chief Coble. 

Mr. COBLE. Thank you. 

Mr. Chairman, when you address me in that manner, at least 

when Admiral Allen was here, there would be a broad smile across 

his face when you said that. 

Admiral and Mr. Chairman and Ranking Member, I do not want 

to be a Johnny One Note, but I am still having difficulty embracing 

the Polar Sea problem, Admiral. I am still steaming in the fog. 

Let me ask you this, Admiral. What do you plan to do with her 

once she is decommissioned? Are there plans to perhaps retain her 

with the hope of reactivating her at a subsequent date? 

Admiral PAPP. Yes, sir, absolutely. The challenge that we are 

confronted with, and perhaps I should have given a little bit more 

detail here, is the money that is transferred back from the National 

Science Foundation back into the Coast Guard budget in the President’s recommendation is enough to operate one medium icebreaker and one heavy icebreaker. So Healy, of course, will be operated. She is operating and will continue to do that. 

32 

But right now we have only got one icebreaker crew. Polar Star, 

the one that has been under reactivation, has no crew. She was 

laid up in caretaker status for a number of years pierside, and then 

we have just recently gotten the funding to reactivate that, but we 

do not have operating funds for that ship. We only have operating 

funds for the Polar Sea, which is broken down and which I do not 

want to invest any more money in. 

So what we will do is we will transfer the operating funds from 

Polar Sea over to Polar Star to complete the reactivation and then 

have a full up ship ready for about another ten years of service. 

Mr. COBLE. That being the Polar Star. 

Admiral PAPP. The Polar Star. 

Polar Sea, we will lay that up and put it in caretaker status like 

Polar Star was before. We will retain it to see the outcomes of our 

high latitude study and other decisions that are made by the country in terms of what we want for organic icebreaking services for 

this country. 

[The information follows:] 

CORRECTION: After the POLAR SEA is decommissioned 

in FY 2011 and all personnel have been transferred to the 

POLAR STAR, the Coast Guard will immediately begin 

the disposal process with MARAD. Disposal plans have not 

been finalized, but POLAR SEA will likely be transferred 

to MARAD’s Reserve Fleet in FY 2012 with final disposal 

options at MARAD’s discretion. We strongly support enactment of DHS General Provision Section 539 in the President’s 2012 Request to enable the most efficient means for 

disposition. 

Mr. COBLE. Thank you, Admiral. I am still not grasping it, but 

I appreciate that, Admiral. 

Thank you, Mr. Chairman. 

Mr. LOBIONDO. Mr. Cravaack. 

Mr. CRAVAACK. Thank you, Mr. Chairman. 

Mr. Matsuda, I would like to go back again. One of the main concerns that I have is regarding your Merchant Marine availability. 

With China developing a deep water navy, my question would be: 

how quickly could we spool up, if necessary, if we became involved 

in a global conflict once again where we would need our Merchant 

Marine fleet to be fully active under U.S. flag hopefully, if not, our 

allies, to be able to move men and materials to where they need 

to be for the conflict? 

Mr. MATSUDA. I am happy to talk to you about that. This is 

something that we work very closely with the Department of Defense on, to make sure that as they are the customer, so to speak, 

that we meet their needs in terms of delivering this commercial capability to carry goods on U.S. ships with U.S. crews. 

One of the most important programs to make sure that can happen is the Maritime Security Program, and that provides an economic incentive for these private U.S. companies to maintain a 

ship under U.S. flag and hire U.S. crews. 

The other flip side of that is the Cargo Preference Program, 

which makes sure that they can carry cargos that are financed by 

33 

the Federal Government and able to sustain their business operations and meeting their costs. 

These programs work to provide a Merchant Marine that is capable and available, ready to meet the needs of the military. 

In addition to this, we have a fleet of our own vessels that are 

held in reserve status around the country, 49 large cargo ships, 

some of them specialty mission, but for the most part these are 

crewed with a skeleton crew, and they rely on this pool of U.S. 

commercial mariners employed by American companies in the MSP 

program, and these are ships that can be available within five 

days’ notice. 

The Maritime Security Program and the commercial ships, generally speaking, some of these can be anywhere in the world trading at any particular time. Generally speaking, they will take 

longer to make sure that they are available, but with the whole 

package of programs, we make sure that we have a product that 

works and delivers everything that our troops need on the front 

line when they need it. 

Mr. CRAVAACK. Thank you for that. 

Now, once step further, engaging, we have casualties to our maritime fleet. How are we prepared to replace those ships? 

Mr. MATSUDA. Do you mean the reserve ships held by our agency 

or—— 

Mr. CRAVAACK. Well, if we were in a full conflict, for example, 

obviously there will be casualties to our maritime fleet. How quickly is the United States able to respond to building more ships if 

necessary or being able to acquire assets needed to make sure that 

we are able to maintain the war? 

Mr. MATSUDA. That is a good question. Obviously that depends 

on both our own country’s industrial shipbuilding capability. I 

think that for the most part the focus of our Nation’s shipbuilding 

has been on the military side and less so on the commercial side. 

However, given what the market is right now for vessels available 

in the world to sail, there is an abundance of, for instance, tanker 

vessels. This is just a fact of the industry. 

If we were to need one of these ships, we might not be able to 

get one fairly quickly, depending on the state of the current industry. For other types of vessels, we do not know, and that is why 

we focus more on maintaining a U.S. capability. But at the end of 

the day what we want to make sure we deliver to the military is 

assured access to sealift capability. 

Mr. CRAVAACK. Thank you much, sir. 

And I will yield back the rest of my time, Mr. Chairman. 

Mr. LOBIONDO. Mr. Landry. 

Mr. LANDRY. Commandant, in your prepared statement you stated the Coast Guard provides our Nation with tremendous value 

and service to the public, and I could not agree with you more. You 

all do a great job. You all have done a great job during the Deepwater Horizon accident and also during the hurricanes that have 

plagued our coast. 

However, according to the Coast Guard’s Website, there are more 

than 6,500 oil and gas producing wells in the Gulf of Mexico and 

fishing vessels numerous enough that nearly 40 percent of the U.S. 

commercial catch is landed along the Gulf Coast. 

34 

Considering the staggering number of commercial activity in the 

Gulf, is it realistic to expect the Coast Guard to reach every drilling platform accident site in enough time to save a maritimer’s life 

who must abandon the platform by jumping overboard? 

Admiral PAPP. Well, it might be unreasonable, sir, if that was 

the only response, and I will emphasize the word ‘‘response.’’ We 

do two things in the Coast Guard. We do prevention and response, 

and part of our process is to make sure that platforms have the 

proper firefighting equipment; that the crews are trained; that 

there are lifeboats and other facilities that take care of that. 

In other words, we do not want the fire to start or an explosion 

or whatever it might be in the first place. So we pour a lot of effort 

into those prevention activities. 

In terms of response, we will continue to do our best. It is a lot 

to expect, but on the other hand, we do not get a lot of cases, and 

we do have sufficient helicopter coverage out there and boats that 

are close enough to respond within a required time period. 

Mr. LANDRY. And I appreciate that. I just know that there were 

two accidents actually in the Gulf of Mexico this year, one right 

after or a couple of months after the Deepwater Horizon accident. 

In both of those accidents men had to jump overboard. I think that 

probably as careful and as prudent as you can be when a man or 

a woman is faced with a disaster on a platform and trying to make 

a decision on how to survive, they have a tendency to want to jump 

into the water. 

I think we were lucky with the Deepwater Horizon that the 

Bankston Todd was there at the time. However, in the Manor accident, those men stayed in the water for ten hours. If that would 

have been in January or February when the Gulf temperatures are 

in the mid-50’s, I do not know if we would have picked them all 

up alive, which is my concern. 

Admiral PAPP. Yes, sir. Well, it is always balancing against risk. 

In an unlimited resource environment you could provide more out 

there, but then how many of them do you cover? How much do you 

keep in full-time reserve? I think we have got adequate resources. 

Mr. LANDRY. Would you say that the private sector could do as 

good of a job putting some sort of standby vessels within certain 

maybe three or four blocks of man? 

Admiral PAPP. Well, it is an intriguing concept, sir, but it is 

going to cost somebody some money somewhere, and I do not know 

if you can predict where the optimal location would be. It is certainly something worth looking at. 

Mr. LANDRY. Thank you. 

Mr. LOBIONDO. Mr. Southerland, you are up. 

Mr. SOUTHERLAND. Mr. Chairman, thank you very much. 

Though not a regular sitting member of this subcommittee, I appreciate the opportunity to speak today. 

My questions today are for you, Mr. Matsuda, and I thank you 

for allowing me the opportunity to ask you a few questions. My 

questions today are in regards to the Title XI Loan Program. 

There is an application before you right now that I think you are 

aware of, Eastern Shipbuilding application, and the reason I am 

bringing my questions today is right now with Florida at historical 

35 

unemployment numbers, 12 percent, creating jobs is clearly a 

mantra that gains traction in Florida. 

This application, which has been before MARAD for two years 

now, we are quickly approaching a deadline, March 10th, for this 

application to be heard and a decision made. I know that the Credit Committee will see this application on March 8th, just two days, 

48 hours before the expiration, and I just wanted to get some feedback from you, if possible, regarding this application. 

Seeing the crisis that we are in in this country of having to create jobs, can you address this particular application? 

Mr. MATSUDA. I surely can, sir, and this is one that we have 

been watching closely, as we know how important it is to you all 

and others certainly in the region and the industry. 

Like this application, we treat every application as one that has 

the potential to be successful, and so in many ways we work very 

closely to make sure we can put together a deal that meets the financial tests to allow the Federal Government to put their guarantee behind the project. 

There has been a number of instances in the past where decisions were made that, well, maybe they were not the best in terms 

of the risk that was before the Administration, but this is something we take very seriously and we look very closely at. We understand that we are approaching the statutory deadline. We do not 

think that that deadline will stand in the way of them actually refiling to make sure it is fully considered with sufficient time. 

Mr. SOUTHERLAND. But you clearly understand though that in 

the business world time is not just money, but speed is also profit, 

and so therefore, there is a sense of urgency out there in the private sector that clearly, if this deadline is not met, that there is 

a great, I would almost tell you a better than average chance that 

this contract to build these vessels would go to a foreign country 

somewhere else. 

And so, therefore, I think that is why I just bring it up today. 

The sense of urgency, I appreciate the deadline extension, but after 

the project moves on, the extension to be able to attract a contract 

like this goes away. 

Mr. MATSUDA. We are fully aware of it, and I assure you we are 

moving with all due haste to make sure it is considered. What we 

cannot change are the merits of the deal. If it is not a good deal 

for the Federal Government—— 

Mr. SOUTHERLAND. No, I understand. But here we are. It has 

been filed for two years. It is a two-year application, and we now 

hear this in the Credit Council 48 hours before the deadline, and 

so, therefore, I mean to say that we are at the 11th hour, I would 

say that we are at like the 11th hour 59 minutes. 

And so what happens? Is there, in your opinion, is there time for 

the Credit Council to hear this application, approve this, and will 

that be done on the 8th? Is it possible for this to meet the deadline 

or have we push this to the Credit Council to where it is impossible 

to approve this on the 8th and for this to be approved for funding 

by the 10th? 

Mr. MATSUDA. Well, we do not like to put these types of applications before the Credit Council and other internal review processes 

until we are confident that this is a deal that can be approved that 

36 

works for the Federal Government and they can make a recommendation to the Secretary. 

Mr. SOUTHERLAND. So you feel, and the only reason I am hastening is because I am running out of time; so you feel that it has 

met that standard to be worthy to go before the Credit Council. Because you just stated that you did not want to put an application 

before the Credit Council unless it has met certain standards. So 

I am assuming since it is going before the Credit Council on the 

8th that it has met certain standards that you feel that it is worthy 

to go before them 

Mr. MATSUDA. Well, I do not think I could speak to the particulars of it or the merits of it, but I can tell you that we are working 

very hard to make sure that it is in that shape by that time, and 

we hope that we can get there. 

Mr. SOUTHERLAND. So if it goes before them and if it be approved 

on the 8th and it can still meet the deadline on the 10th in order 

for full approval so that we can create 300 jobs, 1,500 ancillary 

jobs, a huge economic boost in a region that was hit by and affected 

by the Deepwater Horizon? 

Mr. MATSUDA. Well, again, I could not speak to the particulars. 

I will tell you that we will not let the process be upended nor get 

in the way of these important goals that we understand. 

Mr. SOUTHERLAND. But be sensitive that the process could very 

well be the reason that these jobs go elsewhere in the world. OK? 

So there is a sense of urgency here. 

Mr. MATSUDA. Yes. 

Mr. SOUTHERLAND. And I would just ask that it is my understanding that this transaction clearly falls inside the guidelines 

and that this is a very credit worthy applicant that can stand on 

its own merits. I appreciate you today and your comments. I would 

just ask that because of the sense of urgency, OK, that we would 

do our due diligence on the 8th and then do our due diligence on 

the 10th so that this contract and the jobs it will create will not 

go overseas. 

Mr. Chairman, I thank you for the time, and I really appreciate 

you allowing me to ask these questions. 

I yield back. 

Mr. LOBIONDO. Sure. Mr. Matsuda, we understand you cannot 

speak to particulars today, but I guess it is only fair to tell you that 

the Chairman of the full Committee, Mr. Mica, will probably ask 

you for particulars if this falls apart from a timeline standpoint. 

The Committee is very interested in it, American jobs, and you 

heard all of the arguments. 

So just know there is a bigger picture than what you are hearing 

just here for Mr. Southerland. 

Mr. MATSUDA. I fully appreciate that, sir, and I would be happy 

to talk about that. In the meantime, I will inform the Chair of the 

Credit Council, our Deputy Secretary, of your interest in this. 

Mr. SOUTHERLAND. Thank you. 

Mr. LOBIONDO. OK. Mr. Larsen. 

Mr. LARSEN. Thank you, Mr. Chairman. 

Just a couple of questions to clean some things up. First, I am 

impressed with this subcommittee’s full recognition apparently that 

there is definitely a Federal Government role in supporting jobs in 

37 

this country, and that seems to be shared on both sides of the aisle, 

something we are hearing a lot of lately. 

Admiral Papp, last year’s authorization bill in Section 809 specified that not all Coast Guard licensed captains need to have TWIC, 

Transportation Worker Identification Credentials. Only those having unescorted access for secure areas of vessels would be required, 

that are required to have vessel security plans, but I am told that 

the National Maritime Center is still advising mariners that a license or a merchant mariner document is not valid unless the person also possesses a TWIC. 

And further, the center will not issue or accept an application 

without proof that the applicant has applied for the TWIC card. 

Is what I am hearing correct? Is the Coast Guard requiring 

TWIC as a prerequisite for obtaining a mariner license? 

Admiral PAPP. Sir, I am not sure whether we are requiring it for 

the license itself. What I do know is that in the spirit of unintended consequences, when we move forward with the TWIC, often 

times like any other regulation or change that is developed, we find 

there are probably some groups that we probably did not intend to 

include. 

We discovered in my previous job as the Commander, Atlantic 

Area, we had laytexoma. We had some of the outer regions of the 

boundary waters up in Minnesota where you have uninspected vessel owners, fish guides and other people who clearly need some sort 

of licensing, but perhaps do not need the requirement of the TWIC. 

Unfortunately, the processes that we developed in terms of 

screening for both rely upon the same resources, and because of the 

database and their interaction together, and I cannot get into the 

technicality of this. 

Mr. LARSEN. Sure. 

Admiral PAPP. But what I do know is we came up with means 

to do these in tandem, and now we are in the process of trying to 

separate those. There are clearly some groups that we had not intended to have to take on this extra burden of having the TWIC 

as well, and we are working diligently to change that. 

Mr. LARSEN. Can you get back to us with the specifics of how you 

are addressing this? 

Admiral PAPP. Yes, sir. We will submit that for the record. 

[The information follows:] 

The present policy regarding the Transportation Worker 

Identification Credential (TWIC) requirement for mariners 

seeking a Coast Guard-issued credential mandates that 

mariners provide their biometric and biographic information to a Transportation Security Administration (TSA) enrollment facility. This policy and approach is in accordance 

with the regulations required pursuant to 46 U.S.C. 70105, 

requiring all mariners to hold a TWIC. DHS designed this 

requirement to eliminate the multiple collection of similar 

information by the Coast Guard and TSA—creating efficiencies for both the Federal government and the mariner. 

The coupling of the Merchant Mariner Credential (MMC) 

with the TWIC allows TSA to collect the information, perform the security threat assessment, and then share the 

data with Coast Guard for use in issuing the MMC. 

38 

In response to the Coast Guard Authorization Act of 2010, 

the Coast Guard is in the process of developing a shortterm strategy to modify the TWIC enforcement policies for 

the affected mariners and a long-term strategy to decouple 

having a TWIC be a pre-requisite for a MMC. Accordingly, 

the Coast Guard is working closely with the DHS Screening Coordination Office and TSA to maintain the efficiencies gained from sharing enrollment centers with 

TWIC to obtain necessary safety and suitability information for issuing MMCs, preserve the convenience to the 

mariner of access to significantly more enrollment locations than were available before coupling TWIC and MMC 

enrollment, and afford those individuals relief from financial costs associated with the TWIC. These things are not 

easy to accomplish, especially as we seek to avoid reversing the efficiencies and elimination of unnecessary 

redundancies gained under the current system. The Service is currently working to issue both near-term policy and 

longer term regulatory relief to affect those statutory 

changes. 

In the short-term, the Coast Guard will develop and implement policy that would remove the requirement for holding 

a TWIC when serving under the authority of their credential. Affected mariners would still be required to use the 

TSA enrollment facilities to provide their biographic and 

biometric information. The Coast Guard is seeking to complete the short-term solution during 2011. The long-term 

solution will require a regulatory change. 

Mr. LARSEN. That is great. I appreciate that very much. 

For Mr. Lidinsky, Chairman Lidinsky, I understand the Commission has recently published new rules that will relieve more than 

3,300 licensed, non-vessel operating common carriers from the costs 

and burdens of publishing tariffs in tariffs or rates they charge for 

cargo shipping. Do you anticipate additional rulemaking in the upcoming year that will further reduce regulator burdens on the maritime industry and provide them additional incentives for economic 

growth? 

Mr. LIDINSKY. We are, Mr. Larsen. In that NVOCC proceeding 

where I had mentioned before we had identified certain business 

that would save $200,000, we made the point that we hope some 

jobs come out of this. Of course, that is the decision of each individual business. 

But we are also agreeing all of our rules, regulations, and other 

orders and directives that we have put out under the spirit of the 

President’s Executive Order, which as an independent agency you 

know we do not have to adhere to, but we are certainly doing so, 

to translate savings that could be translated into jobs in our ports 

and airlines. 

Mr. LARSEN. Excellent. Well, if you can keep the subcommittee 

up to speed on the further steps you are taking to reduce regulatory burdens, I would certainly appreciate it. 

Mr. LIDINSKY. We certainly will. 

39 

Mr. LARSEN. And my final question, Mr. Matsuda, MARAD has requested $2 million in base funding to support midshipmen finance requirements at the Merchant Marine Academy that were 

previously funded through midshipmen fees, which have since been 

discontinued. Is this the last budget or will we see additional plusups to the academy’s base budget to cover these costs? 

Mr. MATSUDA. For these costs we hope so. As we address the 

Government Accountability Office’s recommendations, there are 47 

recommendations they made to help improve the accountability 

and transparency of the school’s finances, and we have addressed 

42 of them to date. We are making very good progress on closing 

out the remaining recommendations. 

Mr. LARSEN. I am sorry. When you say the 42, have those been 

closed out? Have those been checked off? 

Mr. MATSUDA. They have. 

Mr. LARSEN. OK. 

Mr. MATSUDA. And we have shared our work with the GAO, and 

they are going back over them as we speak. 

Mr. LARSEN. OK. 

Mr. MATSUDA. But I know that we made very good progress in 

cleaning up the finances and making sure that everything is working transparently and with full accountability. 

With the midshipmen fees, this is one that was responsible for 

a number of their recommendations, and we felt that it was actually less efficient to collect these than to simply request for the 

funds from Congress. 

Mr. LARSEN. Thank you. 

Mr. Chairman, thank you very much for indulging me. Thank 

you. 

Mr. LOBIONDO. Additional questions? The gentleman from Minnesota? The gentleman from Louisiana? Are you good? 

Mr. LANDRY. Yes, sir, Mr. Chairman. Thank you. 

Mr. LOBIONDO. I would like to thank our distinguished panel 

very much. 

And the committee is adjourned. 

[Whereupon, at 11:55 a.m., the subcommittee was adjourned.] 

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