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[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]

  THE PRESIDENT'S FISCAL YEAR 2017 BUDGET REQUEST FOR COAST GUARD AND 
                    MARITIME TRANSPORTATION PROGRAMS

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

                                (114-37)

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                COAST GUARD AND MARITIME TRANSPORTATION

                                 OF THE

                              COMMITTEE ON
                   TRANSPORTATION AND INFRASTRUCTURE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 15, 2016

                               __________

                       Printed for the use of the
             Committee on Transportation and Infrastructure

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         Available online at: http://www.gpo.gov/fdsys/browse/
        committee.action?chamber=house&committee=transportation
                                 ______

                         U.S. GOVERNMENT PUBLISHING OFFICE 

99-435 PDF                     WASHINGTON : 2017 
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             COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

                  BILL SHUSTER, Pennsylvania, Chairman
DON YOUNG, Alaska                    PETER A. DeFAZIO, Oregon
JOHN J. DUNCAN, Jr., Tennessee,      ELEANOR HOLMES NORTON, District of 
  Vice Chair                             Columbia
JOHN L. MICA, Florida                JERROLD NADLER, New York
FRANK A. LoBIONDO, New Jersey        CORRINE BROWN, Florida
SAM GRAVES, Missouri                 EDDIE BERNICE JOHNSON, Texas
CANDICE S. MILLER, Michigan          ELIJAH E. CUMMINGS, Maryland
DUNCAN HUNTER, California            RICK LARSEN, Washington
ERIC A. ``RICK'' CRAWFORD, Arkansas  MICHAEL E. CAPUANO, Massachusetts
LOU BARLETTA, Pennsylvania           GRACE F. NAPOLITANO, California
BLAKE FARENTHOLD, Texas              DANIEL LIPINSKI, Illinois
BOB GIBBS, Ohio                      STEVE COHEN, Tennessee
RICHARD L. HANNA, New York           ALBIO SIRES, New Jersey
DANIEL WEBSTER, Florida              DONNA F. EDWARDS, Maryland
JEFF DENHAM, California              JOHN GARAMENDI, California
REID J. RIBBLE, Wisconsin            ANDRE CARSON, Indiana
THOMAS MASSIE, Kentucky              JANICE HAHN, California
MARK MEADOWS, North Carolina         RICHARD M. NOLAN, Minnesota
SCOTT PERRY, Pennsylvania            ANN KIRKPATRICK, Arizona
RODNEY DAVIS, Illinois               DINA TITUS, Nevada
MARK SANFORD, South Carolina         SEAN PATRICK MALONEY, New York
ROB WOODALL, Georgia                 ELIZABETH H. ESTY, Connecticut
TODD ROKITA, Indiana                 LOIS FRANKEL, Florida
JOHN KATKO, New York                 CHERI BUSTOS, Illinois
BRIAN BABIN, Texas                   JARED HUFFMAN, California
CRESENT HARDY, Nevada                JULIA BROWNLEY, California
RYAN A. COSTELLO, Pennsylvania
GARRET GRAVES, Louisiana
MIMI WALTERS, California
BARBARA COMSTOCK, Virginia
CARLOS CURBELO, Florida
DAVID ROUZER, North Carolina
LEE M. ZELDIN, New York
MIKE BOST, Illinois
                                ------                                

        Subcommittee on Coast Guard and Maritime Transportation

                  DUNCAN HUNTER, California, Chairman
DON YOUNG, Alaska                    JOHN GARAMENDI, California
FRANK A. LoBIONDO, New Jersey        ELIJAH E. CUMMINGS, Maryland
BOB GIBBS, Ohio                      CORRINE BROWN, Florida
MARK SANFORD, South Carolina         JANICE HAHN, California
GARRET GRAVES, Louisiana             LOIS FRANKEL, Florida
CARLOS CURBELO, Florida              JULIA BROWNLEY, California
DAVID ROUZER, North Carolina         PETER A. DeFAZIO, Oregon (Ex 
LEE M. ZELDIN, New York                  Officio)
BILL SHUSTER, Pennsylvania (Ex 
    Officio)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
                                CONTENTS

                                                                   Page

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

                               TESTIMONY

Admiral Paul F. Zukunft, Commandant, U.S. Coast Guard, 
  accompanied by Master Chief Steven W. Cantrell, Master Chief 
  Petty Officer of the Coast Guard, U.S. Coast Guard.............     4
Hon. Paul N. Jaenichen, Administrator, Maritime Administration...     4
Hon. Mario Cordero, Chairman, Federal Maritime Commission........     4

               PREPARED STATEMENTS SUBMITTED BY WITNESSES

Admiral Paul F. Zukunft..........................................    37
Hon. Paul N. Jaenichen...........................................    55
Hon. Mario Cordero...............................................    62

                       SUBMISSIONS FOR THE RECORD

Admiral Paul F. Zukunft, Commandant, U.S. Coast Guard, responses 
  to questions for the record from the following Representatives:

    Hon. Bob Gibbs of Ohio.......................................    44
    Hon. Don Young of Alaska.....................................    50
Hon. Duncan Hunter, a Representative in Congress from the State 
  of California, submittal of statement of Kathryn Sullivan, 
  Ph.D., Under Secretary of Commerce for Oceans and Atmosphere, 
  National Oceanic and Atmospheric Administration................    69
Hon. Mario Cordero, Chairman, Federal Maritime Commission, 
  response to request for information from Hon. John Garamendi, a 
  Representative in Congress from the State of California........    80
Hon. Garret Graves, a Representative in Congress from the State 
  of Louisiana, submittal of report entitled ``The Economic 
  Importance of the U.S. Shipbuilding and Repairing Industry'' by 
  the Maritime Administration, November 2015; Web link to report 
  provided.......................................................    33
Hon. John Garamendi, a Representative in Congress from the State 
  of California, submittal of statement of General Darren W. 
  McDew, U.S. Air Force, Commander, U.S. Transportation Command, 
  before the House Subcommittee on Readiness.....................    90
  
  
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  THE PRESIDENT'S FISCAL YEAR 2017 BUDGET REQUEST FOR COAST GUARD AND 
                    MARITIME TRANSPORTATION PROGRAMS

                              ----------                              

                        TUESDAY, MARCH 15, 2016

                  House of Representatives,
          Subcommittee on Coast Guard and Maritime 
                                    Transportation,
            Committee on Transportation and Infrastructure,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:03 a.m. in 
room 2167, Rayburn House Office Building, Hon. Duncan Hunter 
(Chairman of the subcommittee) presiding.
    Mr. Hunter. The subcommittee will come to order. The 
subcommittee is meeting today to hear testimony on the 
President's fiscal year 2017 budget request from the leaders of 
the Coast Guard, Maritime Administration, and the Federal 
Maritime Commission.
    For the fifth year in a row the Coast Guard is seeing 
funding cuts in the President's budget request sent to 
Congress. The request would slash the Coast Guard's acquisition 
budget by 42 percent from fiscal year 2016 enacted level. The 
proposed fiscal year 2017 request is roughly $1 billion short 
of what is required to sustain the acquisition program of 
record. The underfunding of Coast Guard programs will continue 
to severely undermine efforts to recapitalize the Service's 
aging and failing legacy assets, increase acquisition costs for 
taxpayers, and seriously degrade mission effectiveness.
    The administration is playing a reckless game. Annual 
budget requests cut funding for the Coast Guard to pay for 
increases at other agencies, betting that Congress will not 
ignore the needs of the Coast Guard and restore the hundreds of 
millions of dollars needed to sustain its acquisitions and 
frontline operations.
    This yearly game of chicken is not conducive to 
recapitalizing the Coast Guard's fleet or in sustaining its 
missions. What is perceived as the administration's lack of 
support for Coast Guard programs makes it difficult to 
continually fight for funding increases during the 
appropriations process. If the President is going to continue 
to propose these cuts year after year, he needs to tell us how 
he intends to rescope the missions of the Coast Guard to 
reflect his reduced budgets.
    Admiral Zukunft and Master Chief Cantrell are here before 
us today. I want to commend you both for your leadership and 
tremendous service to our Nation. Admiral, I fully understand 
the situation you have been put in with this budget and 
previous year budget requests, and I appreciate your candor in 
describing what these cuts will mean for the ability of the 
Service to successfully conduct its missions.
    The budget request for the Maritime Administration is a 
slight increase of 1 percent over the current level. Operations 
and training and the ship disposal program receive increases in 
fiscal year 2017. The administration is again requesting a one-
time payoff to the maritime industry in exchange for a 
permanent reduction in the number of U.S. mariner jobs carrying 
cargo under the hugely successful Food for Peace program.
    Since 1954, the Food for Peace program has provided 
agricultural commodities grown by U.S. farmers and transported 
by U.S. mariners on U.S.-flagged vessels to those threatened by 
starvation throughout the world. Unfortunately, since fiscal 
year 2014 the administration has proposed restructuring the 
Food for Peace program. This misguided proposal will eliminate 
a vital program for our farmers, put mariners out of work, and 
undermine our national security by reducing the domestic 
sealift capacity on which our Nation's military depends.
    Members of Congress have repeatedly, in a bipartisan 
manner, come together to vote down this flawed proposal. I hope 
my colleagues will join me once again in rejecting the 
President's proposal and work with me on efforts to strengthen 
our merchant marine. I look forward to hearing from the 
Administrator on how he intends to move forward with his 
efforts to revitalize the U.S.-flag fleet.
    Finally, for a second year in a row the budget request for 
the Federal Maritime Commission proposes a 7-percent increase 
in funding over current levels. While this budget increase 
amounts to less than $2 million, it is hard to reconcile with a 
42-percent cut in Coast Guard acquisition. Nonetheless, I look 
forward to receiving from the Commission the explanation that I 
have requested from the Chairman of the uncontrollable cost 
increases imposed on the FMC [Federal Maritime Commission] over 
the last several years.
    Our Nation is facing a very tough budget climate, and the 
President's unrealistic request only makes things harder.
    I look forward to working with my colleagues to enact a 
responsible budget.
    And with that I yield to Ranking Member Garamendi.
    Mr. Garamendi. Good morning, Mr. Chairman, and Admiral, 
Chief, Mr. Jaenichen, Mr. Cordero. Thank you very much for 
being here.
    Mr. Chairman, you pretty much laid it out. We got a problem 
here. Our national economic strength and vitality remains 
closely tethered to the global supply chain, a supply chain 
that is dependent on safe, efficient, and reliable marine 
transportation. Consequently, few things could be any more 
important than to ensure that we invest wisely and sufficient 
funding in agencies that serve to protect, secure, and 
facilitate the maritime commerce of the United States.
    Yet, after reviewing the fiscal year 2017 budget request 
for the United States Coast Guard, the Maritime Administration, 
and the Federal Maritime Commission, there is only one 
conclusion that I can make, and that is these are not going to 
be the best of times. We are headed for a problem here.
    Certainly it is the best of times when you have a Coast 
Guard and a budget that requests substantial funding to 
maintain progress on the vital recapitalization of the offshore 
cutter fleets, especially new funding to procure long lead-time 
materials for the Offshore Patrol Cutter, and to begin the 
recapitalization of the polar icebreakers.
    But the Coast Guard budget that cuts over $800 million from 
its acquisitions and construction account, which also neglects 
the requested adequate funding to address the significant 
backlogs in both unmet shoreside infrastructure and Coast Guard 
housing needs is shortsighted and disappointing.
    Similarly, the great success that we all shared last year 
when we pushed through the increased authorization funding 
levels for the Maritime Security Program, it has been dampened 
by MarAd's [Maritime Administration's] request seeking to fund 
the MSP at the 2015 funding level, while also perpetrating the 
administration's ill-advised food aid reform policies. I must 
tell you it is disappointing to see this come back again and 
again and again.
    The chairman spoke very clearly about the lack of wisdom of 
that program, and what it means to our mariners and, more 
important, what it means to starving people around the world. I 
note Ethiopia and the crisis that they are having there, and 
the need for food. Purchased locally? Are you kidding me? So, 
maybe we can put an end to the ill-advised reform that is 
inherent in this proposal.
    Mr. Jaenichen, on top of all this disappointment we also 
find that the administration has not requested funding for 
Title XI, loan guarantees for the small shipyards. Everybody 
wants to talk about making it in America, about manufacturing, 
about jobs. And one of the most important programs we have 
available to us on the cheap, Title XI. So we are going to 
starve it.
    In closing, we want to have a reliable marine supply chain 
and a vibrant maritime and shipbuilding industry and a safe and 
secure marine environment and to deter drugs and, and, and. 
Better fund the Coast Guard, folks, and the merchant marines. 
This budget doesn't do it.
    So, let's get in a brawl with the administration, and let's 
make some choices. I just left a meeting this morning with the 
Air Force that wants to rebuild their entire nuclear arsenal at 
a cost of several billion dollars a year. So let's make some 
choices. The Coast Guard comes out on top, the merchant marine 
comes out on top of that equation.
    All right. Enough said. Let's get on into it. Thank you, 
Mr. Chairman. I yield.
    Mr. Hunter. I thank the gentleman. Our panel of witnesses 
today is Admiral Paul Zukunft, Commandant of the U.S. Coast 
Guard; Master Chief Petty Officer of the Coast Guard, Steven 
Cantrell; the Honorable Paul Jaenichen, Administrator of the 
Maritime Administration; and the Honorable Mario Cordero, 
Chairman of the Federal Maritime Commission.
    Admiral, you are recognized.

 TESTIMONY OF ADMIRAL PAUL F. ZUKUNFT, COMMANDANT, U.S. COAST 
 GUARD, ACCOMPANIED BY MASTER CHIEF STEVEN W. CANTRELL, MASTER 
CHIEF PETTY OFFICER OF THE COAST GUARD, U.S. COAST GUARD; HON. 
PAUL N. JAENICHEN, ADMINISTRATOR, MARITIME ADMINISTRATION; AND 
   HON. MARIO CORDERO, CHAIRMAN, FEDERAL MARITIME COMMISSION

    Admiral Zukunft. Mr. Chairman and Ranking Member Garamendi, 
members of the subcommittee, let me first express my profound 
thanks to this subcommittee for the largest appropriation in 
Coast Guard history in fiscal year 2016. It literally got us 
out of debt.
    But we are here to talk about the President's budget in 
fiscal year 2017. I first ask that my written statement be 
accepted as part of the official record.
    Mr. Hunter. Without objection.
    Admiral Zukunft. OK. The fiscal year 2016 appropriation 
significantly advances our long-term acquisition strategy, and 
it provides stable operating funds for new assets. You are 
helping us build a 21st-century Coast Guard postured for 
mission success around the globe.
    Notably, our increased efforts and our approaches in 
transit zones netted 700 smugglers' arrests and seized over 190 
metric tons of pure cocaine destined for the United States this 
past year. You can be assured that we are leveraging the full 
scope of the intelligence community to drive our operations and 
disrupt transnational criminal networks attempting to move 
illegal goods and people by sea. Last year two of our National 
Security Cutters returned to port and offloaded more than $1 
billion worth of pure cocaine.
    But it is not just about the drugs. These cartels also 
undermine rule of law, good governance--as we see in Central 
America, where 8 out of the 10 most violent countries in the 
world exist south of the border, which also gives rise to human 
trafficking and unaccompanied minors arriving on our southwest 
border. Our interdictions at sea are making a significant 
difference, but we are doing so with very finite resources.
    The appropriation you provided in 2016 and the President's 
budget request in 2017 will allow us to move forward with the 
most important acquisition we have undertaken since 1790, and 
that is the recapitalization of our 50-year-old Medium 
Endurance Cutters with the Offshore Patrol Cutter. Now, I 
remain confident we will down-select to a single shipbuilder 
and award the Offshore Patrol Cutter detail design by the end 
of this fiscal year.
    The budget also provides funding to continue our efforts to 
complete our program of record for the Fast Response Cutter. We 
are in negotiations to award phase 2 of the Fast Response 
Cutter contract, and I remain committed to attaining a fair and 
reasonable price for the American public.
    The recapitalization of our cutter fleet is the Coast 
Guard's top priority, and I am open to all acquisition 
strategies, including multiyear and block-buy options. These 
new ships increase our operational capability, best leverage 
intelligence, and most importantly they keep our men and women 
safe on an often unforgiving sea.
    Moving to the polar regions, the cutter Healy reached the 
North Pole this past summer in support of the United States 
Arctic interest and sovereignty. Today, cutter Polar Star is 
homeward bound after completing a successful breakout and 
resupply of McMurdo Sound in Antarctica. She is the only heavy 
icebreaker in the United States inventory capable of completing 
that mission, and she has less than 7 years of service 
remaining.
    I am grateful for the President's request for $150 million 
that demonstrates our commitment to building heavy icebreakers, 
and takes this project through the critical design phase, and 
avoids the uncertainty that often plagues shipbuilding 
projects. I look forward to continuing to work with you to 
accelerate heavy icebreaker acquisition.
    In closing, investing in a 21st-century Coast Guard is as 
much about people as it is about platforms. Our 2017 budget 
request allows us to continue to build the workforce of the 
future. Now, this is not without challenges, but we have the 
best workforce in Coast Guard history.
    I am seeing the impact of decreased retention and slowed 
accessions. Our increasingly uncertain and complex world 
requires high-end skill sets from an in-demand talent pool such 
as cyber, intelligence, marine inspections, and technically 
trained professionals have many options today besides serving 
in the military service. To that end, we are crafting the Coast 
Guard manpower requirements plan to baseline our 21st-century 
workforce as this committee has mandated.
    As I said in my State of the Coast Guard Address--and I am 
an optimist--these are the finest hours to serve in the United 
States Coast Guard. I thank you for your support in making that 
a reality. I look forward to working with the subcommittee as 
we make prudent investments in the 21st-century Coast Guard. 
Thank you, and I look forward to your questions.
    Mr. Hunter. Thank you, Commandant.
    Master Chief, I understand you have comments for the 
record. Do you want to make a statement?
    Mr. Cantrell. No, sir, I will just forgo to limit the time, 
and then I will be ready to answer questions when you guys are.
    Mr. Hunter. Roger, OK.
    The Honorable Chip Jaenichen is recognized.
    Mr. Jaenichen. Good morning, Chairman Hunter and Ranking 
Member Garamendi, and members of the subcommittee. I appreciate 
the opportunity to discuss the President's fiscal year 2017 
budget priorities and initiatives for the Maritime 
Administration.
    The fiscal year 2017 budget request is $428.1 million, 
which funds activities supporting national security, strategic 
mobility, ships and shipping, port operations, ship disposal, 
environmental sustainability, and mariner training and 
education. The President's budget request continues to support 
funding readiness for programs that support the Department of 
Defense sealift requirements.
    For fiscal year 2017, $186 million is requested for the 
Maritime Security Program, or MSP, to fund $3.1 million for 
each of the 60 ships enrolled in the program. That funding 
amount was based on the program of record prior to the 
increased authorization amount that was included in the 
Consolidated Appropriations Act of 2016. The timing of that 
authorization did not allow sufficient time for us to analyze 
the new funding levels to support submission with the 
President's fiscal year 2017 request.
    The MSP provides direct annual stipends for up to 60 
active, commercially viable, militarily useful, privately owned 
U.S.-flag vessels and crews operating in international trade. 
The MSP fleet ensures access to U.S.-flag ships in oceanborne 
commerce with the necessary intermobile logistics capability to 
move military equipment and supplies during armed conflict or 
national emergency.
    Funding provided from the U.S. Navy will allow the Maritime 
Administration to continue to provide surge sealift support in 
2017 through our Ready Reserve Force program. This is a fleet 
of 46 vessels whose primary purpose is to provide for rapid 
surge movement of defense equipment and supplies and support of 
global projection of our armed forces, and to respond to 
national and humanitarian emergencies globally.
    It takes many years of training to develop the necessary 
merchant mariner competencies to operate these ships. The U.S. 
Merchant Marine Academy and the six State maritime academies 
graduate the majority of the U.S. Coast Guard credential 
merchant marine officers needed to crew these vessels.
    To support the necessary training, the President's fiscal 
year 2017 budget request includes $99.9 million for the U.S. 
Merchant Marine Academy. This request will enable the academy 
to achieve its core responsibility of providing the highest 
caliber of academic study with state-of-the-art learning 
facilities for the Nation's future merchant marine officers.
    The budget request also includes $29.6 million for the 
State maritime academy program. This request includes $22 
million to fund maintenance and repair costs for the federally 
owned training ships that are on loan from the Maritime 
Administration to the six State maritime academies. The 
training ship fleet is aging, with an average age of 37 years.
    And the oldest, the Empire State, at the State University 
of New York Maritime College, is 55. Through the fiscal year 
2017 budget request, the Maritime Administration is requesting 
priority maintenance for the six training vessels, to ensure 
they all meet safety and functional requirements to stay in 
service as long as possible.
    Additionally, the Maritime Administration will be 
validating the next appropriate steps to ensure adequate 
shipboard training capacity remains available in order to 
produce sufficient quantity and quality of mariners to support 
our sealift needs into the future.
    The fiscal year 2017 budget request also reflects a 
continuing commitment to reducing and mitigating maritime 
transportation-related impacts on the environment. This 
includes a request for the ship disposal program of $9 million 
to support disposal of nonretention National Defense Reserve 
Fleet vessels that are in the worst condition, with priority 
emphasis on the removal of the three remaining obsolete vessels 
in the Suisun Bay Reserve Fleet that were identified in the 
April 2010 California court consent decree.
    The President's fiscal year 2017 budget request also 
includes $11 million for the inactive former nuclear ship 
Savannah. This includes $8 million to begin the Nuclear 
Regulatory Commission required decommissioning process, 
including the dismantlement and decontamination of the defueled 
nuclear propulsion plant on board the vessel.
    In addition, the budget request includes $3 million for 
energy and environmental technology initiatives designed to 
enhance maritime sustainability and affordability through our 
maritime environmental technical assistance program.
    Finally, the fiscal year 2017 budget requests $3 million 
for a pilot program to support port infrastructure improvements 
through our StrongPorts program. This funding will provide port 
planning grants to enable ports to create investment-grade 
infrastructure development plans that comply with Federal 
planning requirements and satisfy private lending institutions, 
and also promote public and private partnerships.
    Mr. Chairman, thank you for your opportunity to present and 
discuss the President's fiscal year 2017 budget request for the 
Maritime Administration. I will be happy to respond to any 
questions that you or members of the subcommittee may have.
    Mr. Hunter. Thank you, Administrator.
    Chairman Cordero, you are recognized.
    Mr. Cordero. Chairman Hunter, Ranking Member Garamendi, 
members of the subcommittee, good morning and thank you for 
providing me the opportunity to testify in support of our 
fiscal year 2017 budget.
    With your permission, I will summarize my prepared remarks, 
which I kindly request to be entered into the record.
    Please allow me to begin by reporting our response to two 
congressional mandates we were given last year by way of the 
Howard Coble Coast Guard Act of 2014. The Commission issued a 
rule that became effective on March 1, 2016, that implements 
term limits on our Commissioners and changes how attorney fees 
are awarded in cases brought before FMC.
    Mr. Chairman, in 2015 the United States saw a level of 
international container traffic that was a record-breaking 31.5 
million TEUs [twenty-foot equivalent units]. The commodities 
inside these containers carried on ships, transiting marine 
terminals all move on top of a regulatory system that seeks to 
facilitate trade while protecting the American shipper from 
unlawful anticompetitive behavior. That regulatory system is 
the jurisdiction and responsibility of the Federal Maritime 
Commission. And through our work, we facilitate and safeguard 
fair, efficient, and reliable transportation for oceanborne 
international cargo.
    International container trade is growing significantly. 
Based on conservative estimates of a 5-percent annual growth, 
box volumes will double by the end of the next decade. That is 
tens of millions of containers above and beyond the 30 million 
TEUs that arrived here last year and are already overwhelming 
our marine terminal infrastructure, leading to port congestion 
and inefficiencies in the supply chain. If left unaddressed, 
congestion at our maritime gateways will result in gridlock, 
and that is an outcome that none of us can afford to see come 
to pass.
    We have directly tackled the issue of congestion. The 
latest development is the unanimous vote that was taken in 
February by the Commission to establish the Supply Chain 
Innovation Team project. That effort will be led by 
Commissioner Rebecca Dye, and will culminate in a report to be 
issued to the Commission.
    At the same time, as container volumes are growing, the 
container shipping industry is going through a period of major 
change. As a result of merger and acquisition activity, we 
anticipate considerable consolidation among container carriers, 
the net effect of which will likely be game-changing impacts on 
the marketplace.
    Additionally, we are noting a marked increase in the number 
of agreement filings made at the Commission by VOCCs [vessel-
operating common carriers] and MTOs [marine terminal 
operators]. These agreements reflect a trend in which carriers 
and terminal operators have increased working in cooperation 
with each other, sharing resources and assets.
    In short, we are projecting the future where millions and 
millions more containers are going to be entering the United 
States. The ships calling to the United States are ever going 
to be larger. The increased influence of foreign-controlled 
vessels via vessel-sharing alliances. There is a substantial 
consolidation in the industry among those overseas-based 
entities. Those very same companies are increasingly working 
cooperatively to share resources and assets.
    Chairman Hunter, the future has arrived. It is happening 
now. And it is fraught with challenges. Indeed, the Journal of 
Commerce noted in a recent issue--and I will quote--``Global 
changes in container shipping are confronting the U.S. Maritime 
Commission with some of the most difficult decisions in its 55-
year history.''
    As trade grows and the shipping industry consolidates, the 
Commission will need to increase its monitoring and analysis of 
the industry in order to ensure that the American shipping 
public and, ultimately the American consumer, does not become a 
victim of decreased ocean transportation options or unlawful 
anticompetitive behavior. This will be accomplished through 
ongoing, thorough, and careful review of service contracts and 
the VOCCs and MTO agreements filed with the FMC.
    Just as container volumes are hitting record levels, so are 
the number of filings received by the agency. It is 
significant, resource-intensive, and time-consuming work to 
assess what these documents reflect in terms of business 
trends. There is a significant strain to our agency's resources 
as our employees endeavor to stay on top of this amount of 
work. Simply put, we need additional specialized personnel in 
order to help meet the FMC mandate.
    In previous years this subcommittee has encouraged us to be 
efficient in how we spend our appropriated funds, and I assure 
each and every one of you, even without this directive, the FMC 
is diligent in maximizing its dollars. Recent steps have been 
taken to save money: one, looking for opportunities to share 
services with other agencies; two, reducing the amount of space 
we have in our headquarter building to save on our lease cost; 
three, delaying hiring of new personnel so as to create funds 
that we can use to address pressing requirements, such as 
conducting our information technology refresh; four, bringing 
whatever human resource services we can in-house in order to 
save money and payments that we must make to OPM [Office of 
Personnel Management].
    That said, only 2 percent of our budget may be 
characterized as discretionary spending. Furthermore, even 
though we are a small agency, we must comply with each and 
every obligation that other Federal agencies are required to 
meet.
    For example, the Commission responded to at least 75 
different annually mandated reporting requirements. When we are 
unexpectedly tasked to do something, the cost associated with 
satisfying that directive must come out of a budget that is 
already spoken for in its entirety.
    The Federal Maritime Commission budget request will 
alleviate some of the stressors that are challenging our 
ability to continue to operate effectively and responsibly. We 
hope our request will be supported by the subcommittee at the 
full amount.
    Thank you for your time, attention, and consideration. I am 
pleased to answer any questions you have regarding our budget 
request or any issues over which the Federal Maritime 
Commission has jurisdiction and can share our valuable insight.
    Mr. Hunter. Thank you, Chairman. Before we get into the 
question portion of the hearing, I would like to submit for the 
record the statement of Dr. Kathryn Sullivan, Under Secretary 
of Commerce for Oceans and Atmosphere, and Administrator for 
the National Oceanic and Atmospheric Administration, NOAA.
    [No response.]
    Mr. Hunter. Without objection, so ordered.

    [The information can be found on page 69.]

    Mr. Hunter. The NOAA Office of Response and Restoration has 
oil and chemical spills and marine debris programs which fall 
under this subcommittee. Some of us also take a parochial 
interest in other NOAA programs within the Office of Coast 
Survey, since all nautical charts and surveys are critical for 
safe navigation.
    So we are now going to move on to questions. But before I 
do that, Chairman Cordero, you have three Federal Maritime 
Commissioners here with you today: Rebecca Dye, right behind 
you; Michael Khouri; and Bill Doyle. Just want to say welcome, 
and thanks for being here.
    And with that, I am going to yield to Mr. Garamendi to 
start with the questions so I can call my kids before they go 
to school really quickly.
    Mr. Garamendi. They must start very late, or else they are 
in San Diego.
    Mr. Hunter. They are in San Diego.
    Mr. Garamendi. They are in San Diego, OK.
    Admiral Zukunft, a series of questions about the Fast 
Response Cutter, the contract. Where are we with it? Phase 2. 
Brief us.
    Admiral Zukunft. Congressman, right now we are continuing 
negotiations for a fair and reasonable price, and we are making 
great progress. I know there may be consternation among some of 
what is in the next block buy, the final 26 of these ships. The 
one change is we are modernizing the command and control 
systems, because the ones on the first 32 will have reached 
obsolescence by the time these next 26 are delivered. But 
basically, it is the same hull form, and so we are in 
negotiations right now.
    We will need to reach closure on these negotiations by mid-
May so we do not have a disruption in the build-out of this 
very critical asset.
    Mr. Garamendi. So we can look forward to fiscal year 2017 
moving these contracts underway and expenditures being made?
    Admiral Zukunft. Absolutely. We have got to come with a 
fair and reasonable agreed-upon price with the vendor----
    Mr. Garamendi. And you say the control systems on the 
previous set are going to be obsolete?
    Admiral Zukunft. These are command and control systems. It 
is computers, it is surveillance systems. And as we find, these 
normally have a shelf life of 10 years, maybe, at most. By the 
time these are built out, those will be obsolete. So that is 
the one modification that will be made.
    Mr. Garamendi. OK. The Offshore Patrol Cutter, can you 
assure us that you will be awarding the contract by the end of 
this year?
    Admiral Zukunft. Congressman, we have three very 
incentivized vendors, and those requirements are coming 
forward, as I speak. And by the fourth quarter of this fiscal 
year we absolutely will down-select to one vendor to move this 
forward.
    And again, I am very thankful for this subcommittee for 
putting in our appropriation the final design work, which is 
going to be a huge lift for us and the Department, but that was 
put into our appropriation, so we can move this major 
acquisition forward.
    Mr. Garamendi. So you were able to get one icebreaker to 
the North Pole. Let's talk about the Polar Sea. Where are you 
with that? And then also the $140 million for some sort of new 
icebreaker.
    Admiral Zukunft. Thank you for that question, Congressman.
    So we have pulled the Polar Sea out of the water to do a 
materiel assessment on the ship. A third party will validate 
and provide us that assessment by this summer. And within that 
should be a threshold of what it would take to reactivate the 
Polar Sea. Recognizing that would be a reactivation, probably 
measured in less than 10 years.
    And so it really becomes a business decision. Is it a 
prudent investment to put that much money in a ship that has 
been laid up for 6 years? And some of those parts were 
cannibalized in order to bring the Polar Star into service, as 
well. What this $147 million set-aside does, it has already 
incentivized industry. We can build a polar icebreaker here, in 
the United States. Maybe we look at parent craft designs. It 
provides us certainty that we will need to go forward as we 
have seen through funding lapses and continuing resolutions 
that have disrupted some of our major acquisitions. But this is 
not one that time can wait upon; we need to move this project 
forward.
    Mr. Garamendi. So we are really looking at two ships here, 
maybe, the Polar Sea being recommissioned--rebuilt, 
recommissioned, and then this new heavy polar icebreaker?
    Admiral Zukunft. So we are really looking at a variety of 
options. One, we have Polar Star, and we project she has 
roughly 7 years of service life remaining. A catastrophic 
casualty could change that. We have the potential reactivation 
of the Polar Sea.
    We have looked at leasing options, but, quite honestly, we 
have looked across the inventory here in the United States, and 
there are no ships that meet the requirements of either a 
medium or a heavy icebreaker for leasing. You may know we have 
looked--I have a 13-page matrix--side-by-side--and that vessel 
will not meet Coast Guard requirements.
    We put an operation requirement document together, cross-
walked that with the Arctic Research Council, National Science 
Foundation, Defense, Interior, Commerce, Coast Guard, and all 
came to agreement that this is what we need an icebreaker to do 
for the United States of America. So that requirement is out 
there. And so that leaves us with the final alternative of 
reacquiring--buying new--a heavy icebreaker.
    Mr. Garamendi. If the Polar Sea is to be rebuilt, 
repurposed, you will need money in the 2017 budget to carry 
that forward.
    Admiral Zukunft. We will, and we have this $147 million 
that is currently in the President's budget. So that is an 
option.
    And, fortunately, we will have this summer to make that 
final decision and fully brief members of this subcommittee of 
what it would take to reactivate a nearly 40-year-old ship and 
be honest of how many more years do you get out of a 40-year-
old ship, and how much money do you put into it.
    Mr. Garamendi. It sounds like you may have made a decision 
already.
    Admiral Zukunft. We have not. So we will see what it will 
cost. But that would provide us a floor, and maybe not a 
ceiling, of what it would take to reactivate a ship of that 
age.
    Mr. Garamendi. So if the Polar Sea is to be rebuilt, 
repurposed, there will only be money for the Polar Sea, and not 
for the second or third heavy icebreaker.
    Admiral Zukunft. Either way, Congressman, it would require 
further top-line relief in our budget. So this $147 million is 
a top-line relief. There was some back-and-forth whether it 
would come at the expense of some of our other, more mature 
acquisition programs, such as the Fast Response Cutter.
    Mr. Garamendi. Well, you are aware of the interest of the 
chair and the ranking member in icebreakers. So when is the 
next time you are going to report back to us about the Polar 
Sea?
    Admiral Zukunft. Yes, the next report will be when we get 
the materiel assessment back on the Polar Sea, which will be--
--
    Mr. Garamendi. Summer is a 3-month or 4-month period. Could 
you be more precise?
    Admiral Zukunft. I asked the same question of my staff 
yesterday, because I knew you were going to ask me that 
question.
    Mr. Garamendi. And the answer was?
    Admiral Zukunft. I am going to say July 31st.
    Mr. Garamendi. July 31st?
    Admiral Zukunft. Thirty-first.
    Mr. Garamendi. I think we are leaving before that. So why 
don't you push that up a week, while we are still here?
    Admiral Zukunft. Will do.
    Mr. Garamendi. Thank you. Yield back.
    Mr. Hunter. I thank the gentleman. I called my kids. Nobody 
answered. Now they are all calling me back right now. Right. 
That is just how it works.
    My first question is--let's talk about nukes really quick. 
We had a hearing here, we talked about--if you can get coke on 
U.S. soil you can get nuclear weapons on U.S. soil. And with 
the Iranian deal, let's just say that 10 or 15 years from now, 
nuclear weapons are not ubiquitous, but they are more prevalent 
throughout the world. You will have North Korea, you will have 
Iran at that point. They will have maybe sold them off.
    And what we are looking at, for the first time ever, is 
nonstate actors with nuclear weapons, where there is--where we 
can't attribute a strike to anybody, there is no way to 
retaliate, there is no deterrent in retaliation because you are 
not going to--because they are nonstate actors, right?
    So my question is what is the Coast Guard doing 10 years 
out from now--I mean that would be numero uno priority, right? 
What are you doing to face the nuclear threat that we could be 
facing? Not getting shot at by an ICBM [intercontinental 
ballistic missile], but simply having something either come 
across the border, come into a port, come in with the same 
routes that they use coke, or they bring up coke.
    Admiral Zukunft. Chairman, we have a number of actions in 
place, as I speak right now. One is being a member of the 
national intelligence community. Intelligence drives 
operations. So when I look at counterdrug as an example, 2 
years ago, right before I came into this job, we had awareness 
of about 80 percent of the maritime drug flow destined for 
Central America, but ultimately destined for the United States. 
But on any given day we had enough resources--and back then we 
had the Navy's Perry-class frigates in our inventory--to target 
maybe 15 percent of that 80 percent. So, we knowingly let 65 
percent get through.
    Since then, the Coast Guard has nearly doubled its presence 
at the expense of other missions. And so we have closed some of 
that gap. But now we no longer have the Navy Perry-class 
frigates in our inventory. So it is pretty much a Coast Guard 
mission.
    But when you look at the nuclear threat, we use that same 
maritime domain awareness. We have a special force team. We 
have two in the United States Coast Guard, one in San Diego, 
one in Chesapeake, Virginia. We have over a dozen bilateral 
agreements with flags of convenience that authorize the Coast 
Guard to board those ships anywhere on the high seas if we 
expect that there is a weapon of mass destruction aboard that 
ship.
    We don't ask permission. And we come in covertly. But we 
use it leveraging our Title XIV authorities. And so, it is a 
unique set of authorities, bilateral agreements, but it is the 
platforms that we have invested in, as well.
    The National Security Cutter can operate in a marine 
environment. Our people that fast-rope hook and climb operate 
in marine environments. And if they have to compel compliance 
using Title X authorities, they squeeze off about 40,000 rounds 
a year. These are the----
    Mr. Hunter. What about nukes coming in just in cargo 
containers?
    Admiral Zukunft. With cargo containers we work closely with 
Customs and Border Protection at the National Targeting Center 
in Reston, Virginia, where every cargo manifest, every 
crewmember is screened, from consignee to the packer, to 
discriminate if there is a new shipper, you know, in--you know, 
that has put something in a container that may profile that 
particular container as a potential threat. So we have 
increased our domain awareness just through the National 
Targeting Center, as well.
    Mr. Hunter. Does it make sense, in your point of view, to 
test every cargo box on a ship prior to it being loaded, or 
when it is offloaded?
    Admiral Zukunft. If we were to do that we would literally 
gridlock our----
    Mr. Hunter. Not necessarily. I mean based on the technology 
that exists today you can drive stuff through those quick-
scanners at certain ports. They have those now, right?
    In fact, didn't--it is not Kuwait. Is it Dubai that has--
that scans every single cargo container that comes into their 
country?
    Admiral Zukunft. I am not certain about Dubai. The 
technology may get there. But if you have to open and inspect, 
you know, each container before it is destined for the global 
market, the time that it would take would literally disrupt 
our----
    Mr. Hunter. We had a hearing here. There is technology 
right now where you can see through it. You don't have to open 
it and inspect it. Right?
    Admiral Zukunft. At a much higher level, if I were to try 
to conceal, you know, a weapon of mass destruction with the 
appropriate shielding, that may not be detectable. So the 
intelligence----
    Mr. Hunter. But the shielding is now detectable, too, 
because you can see a shield. You can see the lack of the----
    Admiral Zukunft. Right.
    Mr. Hunter [continuing]. Moving around if it is shielded, 
right?
    Admiral Zukunft. Right. So--but that would cause you to 
open and inspect a given container. Maybe you don't open each 
and every one of those. But right now we have that technology 
today to make those informed decisions. And we do actually 
carry out that work, working hand in hand with the Customs and 
Border Protection.
    Mr. Hunter. So that is more CBP?
    Admiral Zukunft. CBP and Coast Guard. I would say it is 
probably 70 percent CBP, 30 percent Coast Guard.
    Mr. Hunter. OK. All right, thank you. So let's get into, 
really quick, to acquisitions. You talked about block-buy 
options, you talked about multiyear procurement. So we have 
been talking about this. Tell me why it hasn't been done yet if 
you are amenable to doing it.
    Admiral Zukunft. Yes----
    Mr. Hunter. I mean because you are going to be building 
cutters for the next decade.
    Admiral Zukunft. So let me turn the hands of time back to 
when we first acquired the National Security Cutter. We did it 
under--through a third party known as Deepwater. We finally 
moved that acquisition program in-house under the United States 
Coast Guard. So, we were not able to do that with the National 
Security Cutter.
    We have also gone through variations as much as 35, 40 
percent in over a 3- to 4-year period in our AC&I [acquisition, 
construction, and improvements] budget. When we do a block buy 
we almost put that block buy into a nondiscretionary element of 
our budget. And so we have to make difficult trade-off 
decisions. But if we are making this block buy, we will incur a 
penalty if we can't deliver on that block-buy purchase. And 
maybe it comes at the expense of other operations. And that is 
where having a stable----
    Mr. Hunter. Wait, explain that. Explain that. Why would you 
incur a penalty if you do a block buy?
    Admiral Zukunft. So if I--say I want to do a block buy of 
two Offshore Patrol Cutters in 2021. But then my appropriation 
for that year is something less than what I needed to build out 
those two OPCs [Offshore Patrol Cutters]. Well, I have got to 
commit to that block buy, or I will pay a penalty to that 
vendor. So I lose the flexibility, if you will, to make other 
appropriations under a block buy. And that is why----
    Mr. Hunter. But you wouldn't do a block buy unless you had 
the money appropriated to do it.
    Admiral Zukunft. Right. And so it is the certainty of that 
appropriation, going forward. But certainly it makes all the 
good business sense, going forward. It is an area that we will 
look at with the Offshore Patrol Cutter.
    Mr. Hunter. So--OK. How about multiyear procurement, then? 
Because you know you are going to be buying years and years 
out. Why not do multiyear procurement?
    If you can save--I think it was 5 percent on the FRCs [Fast 
Response Cutters], right, 5 percent, $500 million, on the OPC 
program, you can save $1 billion--or 10 percent. And on an 
icebreaker you could save $1 billion. So the $1 billion you 
could save on the OPC is, according to CRS [Congressional 
Research Service]--that is a lot of money. Why not do that? And 
why hasn't it been done yet?
    Admiral Zukunft. Yes. So let me use the OPC, as I----
    Mr. Hunter. Because the Navy has been doing this. I mean 
the Navy buys ships, the Coast Guard buys ships. Much less 
complex systems, too, than the U.S. Navy buys. You don't build 
complex Navy ships, right? So you would--theoretically be 
easier for the Coast Guard to do this than it is for the Navy, 
who does this all the time, right?
    Admiral Zukunft. So, with the Offshore Patrol Cutter, it 
will take the first three. One is we hold our requirements 
steady. When you change requirements, that is where you see 
growth in any acquisition program, where you are building large 
ships or airplanes or the like.
    So you hold the requirements steady, but the underlying 
criteria for the Offshore Patrol Cutter, besides meeting our 
requirements, is affordability. And by the time you get to the 
first three, by that time we should be able to lock in what an 
affordable price is for the Offshore Patrol Cutter, which will 
be the time to negotiate for the remaining 23--22, forgive me--
to do a multiyear buy, a block buy, for those remaining 22. 
What the underlying criteria is, we have locked in an 
affordable price for the remainder of those ships.
    But right out of the starting block, taking a new ship off 
an assembly line, and as we run it through its paces, we don't 
know what we don't know yet with that first ship coming off the 
line----
    Mr. Hunter. So you are saying you can't do a block buy 
until you get through the first three OPCs.
    Admiral Zukunft. I feel like I owe it to the taxpayer to 
make an informed decision, rather than one that hopes for the 
best. So by the time we get through the first three, and as the 
contractor goes through those learning curves to build those 
first three ships----
    Mr. Hunter. That is what happened with the NSC.
    Admiral Zukunft. Right.
    Mr. Hunter. Right? It didn't--no one knew what they wanted 
until ship 3 came out.
    Admiral Zukunft. Number three met all of our requirements.
    Mr. Hunter. Sean Stackley, who--do you know who Sean 
Stackley is? U.S. Navy. So when Secretary Stackley talks about 
acquisition, buying ships up, it is like Moses coming down from 
on high with the word of God. And Stackley said that there is 
no reason whatsoever why the Coast Guard should not be doing 
multiyear procurement of block buys. I mean it should almost be 
mandatory.
    So, I guess my question is you said you like it. It sounds 
good. The Coast Guard wants to save money. So what would stop 
you from doing that, going forward? If anything.
    Admiral Zukunft. Yes. For us it is always the uncertainty 
of what is in our acquisition budget. I would love to have Sean 
Stackley's acquisition budget----
    Mr. Hunter. But if we give you the money and the authority, 
what would stop you from doing a multiyear----
    Admiral Zukunft. Absolutely nothing, Chairman. As I have 
said before, a floor of a recurring $1.5 billion AC&I budget--
put that next to the Navy budget. You know, if we had that 
reliability, repeatability, then we could certainly move 
forward with a block buy.
    If you look across our 5-year capital investment plan, as 
we mature that out we get to that threshold level that will 
allow us to make block-buy decisions.
    Mr. Hunter. Thank you very much. And we will keep going 
later, but I would like to yield to Mr. Gibbs.
    Mr. Gibbs. Thank you, Mr. Chairman. Thank you, Admiral, for 
your service and all your work on the drug interdiction, 
protecting our shores.
    I do just want to emphasize what the chairman was talking 
about with Iran and North Korea and their State-sponsored 
terrorism, and the tremendous growth of the terrorist 
organizations out there. And we know what they are, you know, 
hell bent to do. And that should be a top priority, and a 
growing priority. So I just want to emphasize that.
    But I do want to talk a little bit about--since I am from 
Ohio--concern about the Great Lakes. My first question, 
Admiral, is I see that the Coast Guard is conducting a mission 
analysis of the Great Lakes icebreaking needs. And, as you 
know, the Great Lakes, it has lost--loses millions of dollars 
when we have severe winters like we did not this current 
winter, but the last two winters, especially.
    I want to make sure that you ensure that the analysis that 
you are--the Coast Guard is doing will hit those domestic 
icebreaking targets, which I believe are 95 percent of keeping 
it open during icebreaking season. But hopefully, that is based 
on the worst winters, and not this past winter. And can--you 
want to address that?
    Admiral Zukunft. Thank you, Congressman. We are storing our 
140-foot icebreaking fleet. And certainly this year has given 
us a bit of a reprieve. There is an authorization for us to 
look at another Great Lakes icebreaker.
    We also have a series of memorandums of agreement with 
Canada. So if we require their assistance to do icebreaking to 
support our port infrastructure in the U.S., they will provide 
that to us, and we will do so, vice versa, as well.
    The real challenge with moving forward with the Great Lakes 
icebreaker is what is in my AC&I budget. And it concerns me 
that, for the next 4 to 5 years, we will make no investment 
whatsoever in our military housing. We underfund some of our 
shore infrastructure that currently has over a $1 billion 
shortfall. So we are paying interest on an existing debt, but 
we are not making any principal payment into that shore 
infrastructure. So it really comes down to an appropriation.
    But can I assume that the winter of 2016 will be repeated 
in years following? That would be a flawed decision for a 
Service that prides itself on being semper paratus to make.
    Positive news, those 140's are being refurbished. And 
again, we rely heavily on our relationship with Canada, as 
well, to address these very concerns that you address with 
commerce on the Great Lakes.
    Mr. Gibbs. Yes, I think the one that concerns us, the 
situation with the Mackinaw--that is the main icebreaker on the 
Great Lakes, right?
    Admiral Zukunft. It is.
    Mr. Gibbs. Mr. Cordero, speaking of Canada, in 2014 the 
Canadian Government was proposing the implementation of a 
transit standard for ballast water regulation. And I guess that 
would mean Canada would apply most of the onerous ballast water 
requirements on vessels that are not actually discharging in 
Canadian waters, but merely transiting through.
    My concerns with the proposal include the effect the 
standard would have on our U.S. carriers and shippers. Did the 
Commission hear from industry regarding the Canadian transit 
standard? And I got three here. Did the Commission investigate 
what Canada was proposing and comment on it and engage with the 
Canadian officials? And then, finally, what is the status of 
the proposal, the Canadian proposal?
    Mr. Cordero. Thank you for your question, Congressman. 
Number one, yes, the Commission did hear concerns of some 
stakeholders in the Great Lakes area. And with that, we have 
partnered with the State Department and gone to relevant 
meetings. In addition, Commissioner Doyle represented the FMC 
in meetings on this issue that he held in Canada with some of 
the officials to discuss this issue.
    In terms of the status, my understanding is there has been 
no further movement by Canada with regard to the implementation 
of those standards. So at this point my understanding is there 
is no further movement on that application. But, of course, our 
office will follow up with you to absolutely confirm that, and 
give you more detail on that. But thank you for your question.
    Mr. Gibbs. Well, that is good news, because we certainly 
don't want the Canadians making it tough on our side. We have 
got to work together.
    Mr. Cordero. Absolutely.
    Mr. Gibbs. Thank you, and I yield back.
    Mr. Hunter. I thank the gentleman. Mr. Garamendi is 
recognized again. He likes this, because we go back to him 
every time.
    Mr. Garamendi. We are a little short on our side over here.
    Admiral Zukunft, if you were told to do a block buy, the 
onus is really on us, that year after year we would have to 
meet that commitment, whatever it was. Could you do a little 
mathematical calculation for us, the amount that could be saved 
by a block buy versus the penalty of us failing to adequately 
fund at some future year the requirements? I suspect that that 
equation would work out that it is still cheaper to do a block 
buy, even though there may be a penalty because of our failure 
to fund the program.
    Admiral Zukunft. Yes, Congressman. I will be happy to 
provide that information to you. I will get my stubby pencil to 
work, but probably not an answer I could give you, you know, 
here, at this committee hearing.
    But I know you look out for the best interests of the Coast 
Guard, and we owe that so we can both go in and make informed 
decisions on block buys, going forward----
    Mr. Garamendi. I think----
    Admiral Zukunft [continuing]. The OPC.
    Mr. Garamendi. I know I, and I believe the chairman, would 
like to see a block-buy requirement in this year's 
appropriation. And we need to have some sense of the savings 
that would be achieved by a block buy, let's say, over the next 
5 years. If you would do that, it would be helpful to us, as we 
move that forward.
    Coast Guard housing, you are short $1.1 billion. Is there 
some way we can find at least $100 to buy a couple of gallons 
of paint? It would seem to us in this budget that, as we move 
this appropriation forward, that we find at least some money 
for the repair of the housing to go--just to zero it out is 
just, frankly, not acceptable.
    I will move to some other questions. Mind if I go to 
Jaenichen? You want--OK.
    Mr. Jaenichen, how long are we going to have to fight this 
food aid program before--I guess until we get a new 
administration. Is that a fair----
    Mr. Jaenichen. What is in the 2017 budget request, 
Congressman, is the administration proposal.
    Mr. Garamendi. Well, we will eventually have a new 
administration, which I hope has more sense about how to do 
this.
    If we move--if the administration's proposal were to move 
forward, what would be the effect on the American maritime 
industry?
    Mr. Jaenichen. Well, I can tell you, Congressman--thank you 
for the question--we have seen a--since 2011--a 40-percent drop 
in the total amount of food aid cargo and agricultural cargo 
that has been carried on ocean shipping. And, as a result of 
that, we have seen a decrease since 2012, in combination with 
the DOD [Department of Defense] cargoes, which have also 
dropped to about 75 percent in the same period.
    We have seen a reduction from 106 ships at the end of 2011, 
the first of January of 2012, to the current number of 77 
today. That is a 26-percent drop in the fleet, so we know that 
there has been an effect. But it is a combination of not just 
the amount of food aid cargo, it is a combination of all the 
cargoes that are being carried. Predominantly, that used to be 
DOD cargo, roughly 80 percent.
    But now, with the smaller footprint that we have overseas 
in basing, but also the number of troops that are stationed 
overseas, we are seeing much less DOD cargo movement. And, as a 
result, the agriculture----
    Mr. Garamendi. I want to focus----
    Mr. Jaenichen [continuing]. Larger contribution to the 
total carriage----
    Mr. Garamendi. I appreciate the DOD. Focus specifically on 
the food aid. How many ships have been lost as a result of the 
change in the food aid. And, more importantly, how many ships 
would be lost if we were to accept the administration's 
proposal on the food aid?
    Mr. Jaenichen. We estimate 6 to 12 have been lost as a 
result of some of the changes that have occurred since 2012. I 
can't give you an exact number, but we do know that the fleet 
that has had the most challenge is our bulkier fleet, 
especially dry bulk. And many of those ships are being laid up 
right now. So I think those ships would be at risk, though it 
is at least four to six.
    Mr. Garamendi. Four to six more ships?
    Mr. Jaenichen. Yes, sir.
    Mr. Garamendi. And the number of mariners that would be 
losing their jobs as a result of that?
    Mr. Jaenichen. Each ship carries a combination--it is about 
20 to 25 billets, so you are looking at 40 to 50 per vessel, 
total.
    Mr. Garamendi. And the risk to the United States national 
security of not having another six ships available?
    Mr. Jaenichen. If we lose additional ships--I am putting 
it--from a mariner availability standpoint today, I put us in 
the amber range, and I have probably a delta of about four 
ships before I go to the red. So I am concerned about the 
number of mariners that are available to fully man the 
Government reserve sealift fleet in a time of either conflict 
or in humanitarian crisis if we fully had to active that.
    Mr. Garamendi. So if the food aid program were to go 
forward, we would lose four to six more ships. And that puts 
the Nation's security with regard to the availability of ships 
into the red zone, as into very dangerous----
    Mr. Jaenichen. As part of the administration's proposal, 
there is $25 million that is intended to compensate for that 
loss. And so the $24 million would be used for non-MSP ships, 
specifically, and then $1 million for the mariners themselves. 
So that should offset the loss. That is the administration's 
proposal.
    Mr. Garamendi. So--but the mariners are not working. And 
therefore, they may not be licensed.
    Mr. Jaenichen. That is part of the challenge, yes, 
Congressman.
    Mr. Garamendi. So, instead of spending $25 million in 
basically what is a subsidy, a welfare check, we could just 
maintain the food program as it is today and ship food, keeping 
the ships busy, keeping the mariners busy, and actually doing 
something, rather than a welfare check.
    Mr. Jaenichen. The idea of the subsidy, or the $24 million, 
it would actually keep those ships in operation. So we do not 
see that the mariners would be lost. But your analysis is not 
flawed.
    Mr. Garamendi. My analysis is not what?
    Mr. Jaenichen. Flawed.
    Mr. Garamendi. In other words, correct?
    Mr. Jaenichen. Correct.
    Mr. Garamendi. Thank you. I yield back.
    Mr. Hunter. Mr. Graves is recognized.
    Mr. Graves of Louisiana. Thank you, Mr. Chairman. Admiral, 
welcome. I appreciate you being back again today.
    In the budget proposal you include an increase of 325 
personnel. You also have a decrease of 400 personnel, including 
the elimination of high-value escorts and other support 
services. Can you talk about how this sort of adapting--or how 
this change of the Coast Guard is occurring, and sort of the 
motivation behind the increase and the decrease?
    Admiral Zukunft. Congressman, we have--actually, it is a 
net gain at the end of the day of 325 personnel. But when you 
ask, ``Well, how did we arrive where we are today?'' and it 
goes back into some of these other questions about acquisition, 
repeatability, you know, what that floor needs to be.
    And in order to keep the National Security Cutter program 
alive without the support of this administration, we had to 
make force structure reductions in order to keep that program 
viable.
    And so, now that we have the best acquisition in Coast 
Guard history, we need to make sure that we are investing in 
the talent that is going to operate and maintain these 
platforms into the future, as well.
    So, when we talk about--and as mandated in the 
authorization bill, we owe you a force planning construct of 
what does the Coast Guard need to meet mission in the 21st 
century when it comes to people? We have made that argument 
when it comes to platforms. But without people, you know, those 
platforms really will not get the job done.
    Mr. Graves of Louisiana. Sure, OK. So, I mean, in summary, 
adapting to the evolving mission of the Coast Guard, evolving 
threat and new equipment?
    Admiral Zukunft. Yes, sir.
    Mr. Graves of Louisiana. All right, thanks. Another 
question for you. Two years ago you said--I think at the end of 
the day, changing the Jones Act would put our entire fleet in 
jeopardy. Can you talk briefly about the current status of the 
defense industrial base and--as we are working on this 
recapitalization effort for the Coast Guard?
    Admiral Zukunft. I can provide you a couple of data points.
    One, when I look at our acquisition program itself, holding 
steady requirements, on-time delivery, and platforms that will 
be serving our Nation 40 years from now. When I meet my 
counterparts from other coast guards, including the commandant 
of Japan Coast Guard, he is under scrutiny because at the end 
of 20 years many of their ships reached the end of their 
service life. And they say, ``Well, why can't you be like the 
United States Coast Guard?'' And I think that is a testimony to 
the quality of product that we are building here.
    Another data point, when I was at NASSCO [National Steel 
and Shipbuilding Company] shipyard, where they are building one 
of two ships for--this is an LNG [liquefied natural gas] and 
conventionally fueled U.S.-flag container carrier that will run 
between Jacksonville and Puerto Rico. State of the art. 
Absolutely state of the art. You take Jones Act away, the first 
thing that goes away are these shipyards. And what goes behind 
that is the mariners.
    And as we talk about what is the world going to look like 
10 years from now, and if we have a peer competitor, if we 
don't have a U.S. fleet, and if we don't have a U.S. shipyard 
to constitute that fleet, as we look at how did the United 
States prevail in wars past, it really began with our 
industrial base. And the Jones Act, I am concerned, you know, 
any repeal of that would cut at the heart of that industrial 
base.
    Mr. Graves of Louisiana. And how would the repeal or 
changes to it affect from a security, from a safety, from a 
pollution perspective, having foreign vessels running inland 
waterways of the United States?
    Admiral Zukunft. We do what is called port state control 
boardings. These are foreign-flag ships that do trade with the 
United States, and we inspect them for their port security code 
compliance under IMO, and for their Safety of Life at Sea 
compliance, also under the International Maritime Organization.
    On any given day we detain two or three ships that arrive 
in the United States because they are not in compliance, even 
though that flag state upholds that they are. We are dealing 
with an oil spill in Long Beach today. A foreign-flag carrier. 
We don't know why, but it had an oil spill.
    So, yes, the United States does hold a higher standard when 
it comes to safety and security. No one does it better than the 
United States.
    Mr. Graves of Louisiana. Thank you. Chief, thanks for being 
here, and good to see you again, as well. At the State of the 
Coast Guard Address that the Commandant gave, he really focused 
on the people of the Coast Guard. That was a big part of his--
theme of his message. If you deviate, or you have different 
thoughts than the Commandant, then I assure you your secret is 
safe with me. But I wanted to ask you. What are your greatest 
concerns for the Coast Guard workforce?
    Mr. Cantrell. Well, thanks, Congressman. I will tell you, 
our folks are the very best at what they do, despite budget or 
resource deficits. They will find a way to get the job done. 
And it is often at a cost of a work-life balance.
    So what concerns me is when we steer away from programs 
that make them more resilient: family, child-care programs, 
housing, tuition assistance, all those tangible programs that 
keep them focused on getting the job done.
    It also is a retention tool for us, because they need to 
know that we got them covered. But again, I think we have got 
the very finest workforce we have ever had in my 33 years of 
service. And I would just like to protect those programs that 
support them so that, one, we have got a new retirement system 
that comes online in 2018 that we don't know yet how that is 
going to affect our workforce.
    But we need to focus on those things, because there could 
be opportunity for people to leave service before they serve a 
20-year career after that plan goes into effect. And I believe 
that these programs that directly support them and their 
families are things that our budget process has to pay 
attention to.
    Mr. Graves of Louisiana. Thank you. Yield back.
    Mr. Hunter. I thank the gentleman. We are now honored to 
have the ranking member of the full committee here, who 
understands that it is not all about just trains and trucks and 
planes, but the importance of the maritime industry and the 
Coast Guard. Mr. DeFazio is recognized.
    Mr. DeFazio. Thank you, Mr. Chairman. I am honored to be 
here before the subcommittee today. Admiral, good to see you. 
Master Chief, good to see you.
    You might remember last year I made a bit of a point 
regarding the unfunded projects and/or backlog. And I see we 
have a somewhat more comprehensive list that--although it is--
and it is focused on very important things, so I will go over 
that first, and then I will talk a little bit about the total 
deficiencies.
    I am concerned that we are looking at less--you know, fewer 
dollars this year to deal with the, you know, shoreside 
infrastructure backlog than last year. And it seems to me 
that--and I am not an expert on housing, although I have my own 
home repair projects all the time. But it seems to me that some 
of these things you are dealing with, whether it is docks, 
hangars, housing, stations, you know, that there is probably a 
point at which they are deteriorating more quickly, they are 
impeding, to some extent, the mission because the facilities 
aren't adequate. And you know, this causes me concern.
    Now, I know that you are in a chain of command, you know, 
under the President, and you submit some requests to them and 
the trolls at OMB [Office of Management and Budget], you know, 
cut a lot of things out, and then we end up with whatever your 
proposal is, which is less than you originally proposed, which 
is what we see. And then we get this.
    But at least this is more comprehensive. I mean can you 
just address this a little bit? I mean it seems to me that 
this--you know, even if we move ahead with all due dispatch 
with a new class of cutters and do all the other things we are 
doing, this is going to impede the mission to some extent. Is 
it not, sir?
    Admiral Zukunft. It will. And I--first, Ranking Member, I 
will reflect on this year's omnibus appropriation in 2016. As I 
said at the very beginning, it did get us out of debtor's 
prison, somewhat. It bought down some of the principal of our 
shore AC&I debt that we carry, going forward. But you can see, 
you know, right now we will find on that unfunded priority list 
to be able to address some of our military housing, but not all 
of it.
    Some of those costs are actually hidden in our major 
acquisition shore infrastructure, which is as we move new ships 
into new home ports and piers and the like, there is 
infrastructure that comes in with that for people, as well.
    But, at the end of the day, what missions matter the most 
across our 11 statutory missions? First of all, mariners in 
distress on the high seas. And you and I have talked about this 
at length, and we have had several heroic rescues in your 
district here of late. I am very mindful of that. And as the 
chairman and others have brought up, the security of the 
homeland, which begins at sea. And so those will continue to be 
our areas of focus. And we cannot dismiss what is happening in 
the high latitudes in the Arctic and Antarctica, as well.
    So, as we look at building heavy icebreakers, we look at 
some top-line relief to bring that program of record. As we are 
building National Security Cutters, Fast Response Cutters, and 
offshore patrol craft, we are modernizing the C-27J, and now we 
are bringing in an icebreaker. So we have a lot going on right 
now in our acquisition budget.
    But we can't take our eye off this other ball. And it talks 
to some of these quality of life investments that Master Chief 
mentions, as well. The health of the workforce for the 21st 
century across all the armed services is a concern for me, as 
it is for all of the Service Chiefs in uniform today.
    Mr. DeFazio. Well, thank you. Master Chief, since you are 
the representative of the troops, you want to give us a little 
more perspective on that? Just fill out a little bit what it 
means, in terms of problems with housing and/or facilities.
    Mr. Cantrell. Well, thanks to this year's budget, we were 
able to make some pretty modest investments in some our 
housing, new housing in Astoria, Oregon; Kodiak, Alaska. We 
have been able to bump up some of the renovations that are done 
on some of the older housing.
    But most of our units, as you well know, are outside of a 
base-centered DOD or Coast Guard base area. They are in very 
rural, very coastal communities. Sometimes very high cost. And 
it is not just the Coast Guard-owned housing that concerns me. 
When we talk about basic allowance for housing, that is 
proposed to be reduced over the next 5 years. That can really 
hit home for some of our folks that are in those high-cost 
areas that don't really have a choice when, you know, they are 
competing with tourists and other high-cost competitors there 
to find adequate housing, and often have to drive an awful long 
way to get to work.
    And with medical care, as well, and in some of these very 
remote areas that don't have access to a military treatment 
facility, and they could be 2 hours away from the nearest 
doctor that accepts Tricare. And that burden is on the member, 
to get them and their families there. So those things concern 
me, and we need to continue to stay focused on that, because I 
don't want people making career decisions based on those types 
of services that are either hard to get or they are just too 
expensive and then they decide that they don't want to be in 
the Coast Guard any more.
    But the folks are not complaining, they are out there doing 
the very best that they can. And, you know, they are not shy 
about it. As you know, visiting some of our units, they are not 
shy about showing off their talent and what they are really, 
really good at.
    Mr. DeFazio. Yes. We had a good example of that on the bar. 
That was great. The Astoria Bar, not the bar-bar.
    Mr. Cantrell. Yes, sir. That was fun.
    Mr. DeFazio. Admiral, I was pleased that you mentioned the 
icebreakers. I assume we are now in the evaluation phase on the 
mothball--I always mix them up, the Polar Star and the Polar 
Sea. Which one? The Polar Sea. In terms of the feasibility of 
the, you know, rehabilitation versus new. Are we moving along 
with that analysis?
    Admiral Zukunft. Yes, we are, Ranking Member. And it was 
Ranking Member Garamendi who gave me the homework assignment 
that I will provide, you know, the materiel assessment, which 
is being done by a third party, by the way, of what would it 
take to reactivate the Polar Sea.
    Mr. DeFazio. All right.
    Admiral Zukunft. And that will really be a business 
decision, going forward, recognizing how many years do we buy 
forward with that reactivation? But does it get us out of the 
proposition of at what point do we build new, as well?
    But we will provide that by July 31st, and I believe 
Congressman Garamendi backed me up a week, so that would make 
it July 24th.
    Mr. DeFazio. Oh, yes. Before we depart for the longest 
summer break ever, since--and I have been here a long time. 
Sorry, excuse me.
    No, that is excellent, and I will look forward to that 
analysis.
    One other thing, quickly. You mentioned the--having to, you 
know, sometimes build new port infrastructure to accommodate 
new cutters, you know, and I know you are evaluating where we 
are going to base cutters. But I would say you are ready-made 
to go in Coos Bay, North Bend, for those--two of those ships. 
So just to put in my plug, locally. Thank you.
    Thank you, Mr. Chairman.
    Mr. Hunter. I thank the ranking member. Really quickly, 
before I go to Mr. Rouzer, we talked about the block buy and 
the multiyear procurement stuff. So you have CRS, you have 
Stackley. I would like you, if you could, to do your own study, 
and not take a long time. But see how much the Coast Guard 
thinks it will save if you wait until ship 3 for the phase 2 of 
the OPCs--excuse me, phase 2 of the FRC or the entire OPC 
program, if you wait until ship 3 and you do multiyear buys, 
how much money you think you will save. OK?
    Admiral Zukunft. Absolutely, Chairman. And it was my 
understanding as--you know, I wouldn't wait until year number 
three, because I will be long retired. No, we need to provide, 
you know, this Congress, you know, that diligence. And so we 
will work with your staff to run those numbers----
    Mr. Hunter. OK.
    Admiral Zukunft [continuing]. In terms of what are the 
savings, if there is a penalty involved as well, so we can look 
at this holistically.
    Mr. Hunter. OK, thank you. With that, the gentleman from 
North Carolina is recognized.
    Mr. Rouzer. Thank you, Mr. Chairman. Admiral, first let me 
say how much I appreciate the work of the Coast Guard, 
everything that you do in such a professional manner, and what 
a great service and commitment you have to this country.
    I have several questions here, and I am just trying to get 
some clarification. And this is an issue that has come to my 
attention over the past couple days, and it deals with 
implementation of the Safety of Life at Sea International 
Maritime Organization guidelines regarding the verified gross 
mass of a container carrying cargo, something that I understand 
you are more familiar with than I am.
    Obviously, exports of cargo from the United States are 
crucial to economic prosperity in this country. Steel and 
agriculture, in particular. My district, in southeastern North 
Carolina, is predominantly agriculture. We have the port right 
there at Wilmington, so I have a vested interest in this matter 
for a variety of reasons. But that one, specifically.
    Is it correct that the Coast Guard does not intend to 
enforce the SOLAS [Safety of Life at Sea] guidelines? Walk me 
through this, and what has transpired here.
    Admiral Zukunft. So the Coast Guard does enforce SOLAS 
guidelines. As I mentioned to Congressman Graves, we inspect 
ships for SOLAS compliance, and also for security compliance, 
and we will detain those ships if they are not in compliance.
    Now, for an exporter--and let's use grain as an example--
maybe that grain goes in a railcar. And so that exporter has no 
direct involvement with the container. But when that grain goes 
into a container, it then goes to the carrier, and it arrives 
in a manifest that will say what the contents of the container 
is, and what is the weight of the container. And if that 
carrier does not see a weight for that particular box, he won't 
take it on board the ship, because he would be in violation of 
these SOLAS guidelines.
    But, more importantly, these guidelines are designed for 
stability purposes and for Safety of Life at Sea. So what 
happens is that box does not get loaded until the weight can be 
verified. And there are two methods of verifying that weight. 
You can add the container and the contents all at once, or you 
can take the weight, the tare weight that shows up on that box, 
and then add in whatever weight is added into it, add the two, 
and then that is the weight that would show up on the cargo 
manifest. But the carrier has to see a weight before they will 
take that container on board, effective 1 July of this summer.
    Mr. Rouzer. I am sorry I wasn't here to hear the entire 
question and answer with my colleague, Mr. Graves. I was 
chairing a hearing of the Subcommittee on Livestock and Foreign 
Agriculture of the House Committee on Agriculture a few minutes 
ago, and just got here.
    But my question and what I am most concerned about, 
apparently the shipping industry feels like this is a change in 
direction, the rug has been pulled out from under them, so to 
speak, in terms of what they were anticipating, and the 
conflicting statements from the Coast Guard. Can you address 
that, specifically?
    Admiral Zukunft. I will. The IMO guidelines came out on the 
9th of June of 2014, and we have been engaged with the World 
Shipping Council, a number of exporters, carriers here in the 
United States. So we have had a very aggressive outreach 
campaign as this date draws nearer. And perhaps it is our 
outreach campaign that has sensitized others, and maybe it 
wasn't the IMO guidelines that came out. And I can only 
conjecture in that regard. But the information has rolled out 
and has been rolling out for nearly 2 years now, as this 
implementation date draws near.
    Foreign carriers are pretty much all in compliance today. 
When I was at the container terminal in Long Beach a month and 
a half ago, all of the containers that come on to that yard are 
already weighed before they go in. So I am not seeing a sky 
falling panacea playing out around us, but we need to make sure 
that there are not unintended consequences while we are 
continuing to reach out with the many exporters and how their 
commodity ultimately gets in the container, and that container 
shows up on a manifest before it is loaded on board a ship. 
What is needed is that final weight. But, by and large, most of 
these manifests already have that weight filled in in that 
column.
    Mr. Rouzer. Thank you, Mr. Chairman. I appreciate it.
    Mr. Hunter. I thank the gentleman. I have got just a 
quick--bring up a subject, and it is unmanned aircraft systems 
[UAS]. And from what I understand, the CBP has kind of taken 
control for the Coast Guard. If the Coast Guard wants to use 
UAS, they have to use CBP UAS. Is that correct? It means you 
don't have organic assets.
    Admiral Zukunft. Correct.
    Mr. Hunter. So if you want to use them, you have to say, 
``Hey, Border Patrol,'' or hey, whoever, ``We would like you to 
launch a UAS over this part of the Caribbean,'' right?
    Admiral Zukunft. Correct.
    Mr. Hunter. Has that ever happened?
    Admiral Zukunft. It has. We have done two proof of 
concepts, one in the Caribbean, and then we did another one in 
the Eastern Pacific. What this particular UAS lacks is a wide 
aerial surveillance sensor. It ostensibly looks through a 
straw. And so----
    Mr. Hunter. Let me stop you there, I mean, because we have 
wide area surveillance stuff, and you have the straw stuff, you 
have whatever you want. I mean you slap a sensor, any kind of a 
sensor, on any UAS, pretty much. So why haven't you, then?
    Admiral Zukunft. Well, I can't speak for another agency's 
acquisition project----
    Mr. Hunter. Which, to my point, why doesn't the Coast Guard 
have their own organic assets in which you could put on what 
you--whatever kind of sensor you wanted?
    Admiral Zukunft. So two-part answer to your very 
challenging question. The first is our immediate need is sea-
based UAS, because we follow a very mobile threat. And so, 
within our--you know, this year we will down-select, and it is 
not a major acquisition, a small UAS that will go on board our 
National Security Cutters that can look over the horizon, 
provide covert situational awareness.
    We are first pulling in national-level intel, so we already 
know that something is out there. And then we use a small UAS 
to discern what it is. And we have had great success using this 
in the past. But this technology will emerge.
    And do we need to be in the land-based UAS program? 
Absolutely. And as you look across our capital investment plan, 
as we get into years 20 and 21, we start making significant 
downpayments on UAS, which would be land-based, to keep step 
with technology as that emerges, as well. But this will be a 
key contributor for maritime----
    Mr. Hunter. Here is what I would ask. I mean if you are 
using a land-based UAS, you are not going to be armed, 
obviously. You are going to have over 40 hours of time up in 
the air, if you use a Predator, for instance. Up in the air for 
40 hours, plus. You don't need to launch off a ship, because 
you have so much sustained time, where they can loiter for 
pretty much--you know, forever. You have two or three, you are 
up in the air 24/7.
    I hope the money is not going into proof of concepts or 
saying, hey, let's try to figure out what we need, when they 
make what you need right now, especially for the land-based 
side. I mean that is out there, it exists. There doesn't need 
to be any tests on it or anything else. And I would say for 
your ship-based UAS, let the Navy lead the way, right? Why not 
use what the Navy is doing? If the Navy is spending tens of 
millions of dollars--hundreds of millions of dollars on R&D 
[research and development], on ship-based UAS, whether it is a 
Fire Scout, whether it is a, you know, rotary-type UAS or a 
fixed-wing, they are doing all of this for you, right? Why not 
piggyback?
    Admiral Zukunft. So we have done exactly that. So we took--
the Navy, as they went ahead with a ship-based UAS, we put it 
on one of our ships, and it is the same size as one of our 
manned helicopters. It comes with a support team of 20 people. 
And so, in our case, that is a lot of people. It becomes the 
tail that wags the dog. So that is why we are looking at small 
UAS, going forward.
    At the same time, though, we made an investment in the 
peopleware. We have Coast Guard members working with CBP so we 
operate these land-based UAS. And that is a downpayment, at 
least in the skills that it is going to take to bring this 
fully on board into the Coast Guard, as we take advantage of 
this technology.
    Mr. Hunter. Administrator Jaenichen, we have been working 
the National Maritime Strategy for a couple of years now. How 
is it going?
    Mr. Jaenichen. Thank you for the question. I am happy to 
report that the draft strategy is with OMB, it is going through 
the interdepartmental review. Prior to delivering it to OMB I 
did share it with the Committee on the Marine Transportation 
System, about 27 different Government agencies and commissions. 
I have incorporated all of their comments, as the comments from 
our national advisory committee, the Marine Transportation 
System National Advisory Council. Those have all been 
incorporated in the draft strategy that is currently undergoing 
interdepartmental review.
    So I am hopeful I will be able to get something that I can 
publish in the Federal Register here soon. And prior to that 
publication, we will provide it to the committees both in the 
House and the Senate.
    Mr. Hunter. But why--when are we going to get 
recommendations from you? When are we going to get 
recommendations? Not necessarily--I mean we are not doing this 
as an exercise on how to do it, right? We are doing this so we 
can actually do something and have an effective maritime 
strategy that incorporates everybody here today, and everybody 
that operates on the ocean who is not here today, all the 
fishermen, all the shippers, the Jones Act, all of that 
combined into one thing, right?
    Mr. Jaenichen. Absolutely.
    Mr. Hunter. So, I mean, we want recommendations from you on 
what we should do. That is why we are doing this.
    Mr. Jaenichen. Absolutely, and that is going to be included 
in the National Maritime Strategy, Chairman.
    Mr. Hunter. So when is OMB going to release it? Blink once 
if it is this year, blink twice if it is next year.
    [Laughter.]
    Mr. Jaenichen. We have met with OMB, and I can tell you it 
is going through the interdepartmental review, and I am hopeful 
we will have it out within a couple of months.
    Mr. Hunter. OK. Last thing, really quick. How do you choose 
who gets the small shipyard grants? Is it geographic location? 
Is it the type of project? Is it the yard itself that would be 
doing the shipbuilding? Or all of those things? What are your--
--
    Mr. Jaenichen. It is really all of the above, Chairman. And 
I will tell you, from a distribution standpoint--and we took a 
look at the actual numbers--we had 80 applications that were 
submitted with this particular round when it closed back on the 
16th of February. Actually, I am sorry, we had 118 that were 
submitted, a total of $80 million in requests. Of those we had 
about 22 from the west coast, 6 were from California. So it is 
a pretty even distribution, about 28 or so from the gulf coast, 
22 from the west coast, and the rest are from the east coast. 
So it is a fairly equal distribution, geographically.
    We do take a look at the return on investment, we do take a 
look at the projects. In this particular case, thank the 
Congress for appropriating $5 million, but it is a much smaller 
amount in order to disperse, and we are probably going to be 
limited to about eight different projects. So we are--it is 
going to be a very small portion of that which was--the 
applications that were actually submitted.
    But we do take a look at the whole project, in terms of 
what return on investment you get in terms of employment 
opportunity, you know, how it potentially impacts the local 
community. Have you received a previous grant? All those things 
are factored into the review.
    Mr. Hunter. Thank you all for being here. And I am going to 
pass it off to Mr. Graves. I am going to go--the Army Chief of 
Staff is in town here, and I am going to yield to Mr. Garamendi 
and then Mr. Graves is going to chair and finish up. So thank 
you all. We are going to keep on working and pushing forward, 
and we look forward to doing block-buy stuff, UAS, happy Coast 
Guard people, maritime strategy, and great oversight from the 
FMC. So, thank you.
    Mr. Garamendi is recognized.
    Mr. Garamendi. Thank you, Mr. Chairman. Let's just take--
you just mentioned the Small Shipyard Grant Program. It zeroed 
out this year. A little bit zeroes out in 2017, is that 
correct? And you discussed it.
    Have you engaged--Mr. Jaenichen, have you engaged with the 
SBA [Small Business Administration] and other governmental--
Federal governmental programs to assist the small shipyards, 
everything from educational programs, job training, SBA, and 
the like?
    Mr. Jaenichen. Thank you for the question, Congressman. I 
have not personally engaged. I would have to go back to my 
staff and check and see if we have done that.
    We do know that, as we build the budget, you know, some of 
the--we are challenged with our top-line number. In the 2017 
request we had to take a look at some other priorities that we 
had, and one of those included the--our ship disposal program, 
primarily because I am under a very tight timeline with the 
California consent decree to remove the last 3 remaining ships 
that were identified of the 57 back in April of 2010.
    So, I had to put a priority. And in some cases those 
priorities beat out other priorities. Otherwise, I would like 
to be able to include this funding in every year, because we 
know that it has a great return on investment.
    Mr. Garamendi. Well, here is my point. There are other 
Federal programs that could be coordinated with the Small 
Shipyard Grant Program, everything from job training to the 
SBA. SBA has actually had a significant increase in their 
budget year, year after year. So if you look at that--and maybe 
they are doing the same thing, maybe they are not--I am going 
to go at them and find out.
    With regard to the scrap metal ship disposal, you mentioned 
California. I think you are talking Suisun Bay. You had three 
ships there. I think--yes, it is. Mare Island is about 5 miles 
away. So why are you taking all these ships to Texas?
    Mr. Jaenichen. Currently, Mare Island is not a qualified 
Maritime Administration disposal facility.
    Mr. Garamendi. Is it not?
    Mr. Jaenichen. It has not----
    Mr. Garamendi. Could we not request it?
    Mr. Jaenichen. It has not been requested under the new 
ownership.
    Mr. Garamendi. Oh. You do not take into account the cost of 
moving the ship all the way to Texas from California, do you?
    Mr. Jaenichen. We actually do take into account in terms of 
the request for appropriations. We also have requirements from 
an invasive species standpoint to be able to drydock them 
before we actually remove them from the California waters----
    Mr. Garamendi. In terms of bid competition. In terms of the 
bid competition, you do not. The cost of moving the ship is 
separate from the bid itself. So the bid might be 100 for 
Texas, and, I don't know, 105 for Mare Island or San Francisco. 
But the cost of moving the ship is not part of that bid, is it?
    Mr. Jaenichen. The bid for a--sales, it actually is 
included. And--but if we do a service contract, we have to 
include that as part of the contract, to be able to get it 
moved.
    One of the challenges is currently today we are at a 
historic low for the number of ships that we actually have 
remaining to be recycled. That number is 16 today. I think it 
is a business decision on the part of the companies tho decide 
to do recycling. In this particular case, Mare Island does not 
have an application with us to certify them as a recycling 
facility.
    Mr. Garamendi. OK. I want to move on. Mr. Cordero, you say 
you are overloaded with 75 requests for information.
    Mr. Cordero. That is correct.
    Mr. Garamendi. Could you send us information as to what 
those 75 are? And are we the problem, we, the Congress, 
requesting multiple reviews and information? And, if so, could 
you please describe the 75? Not here, but in writing, so that 
we might assist you in reducing the onerous burden that has 
been placed upon you.
    Mr. Cordero. Thank you for the question, Congressman. We 
will do that.

    [The information can be found on page 80.]

    Mr. Garamendi. Good. Maybe we can help you. The supply 
chain. You spoke of the supply chain. I believe we moved a bill 
out of here called the FAST Act [Fixing America's Surface 
Transportation Act] that had a freight movement in it.
    Mr. Cordero. That is correct.
    Mr. Garamendi. How are you coordinating your work with the 
freight movement?
    Mr. Cordero. Well, first of all, by way of the Department 
of Transportation, they have the Bureau of Transportation 
Statistics, which will form a working group to address some of 
these issues. One of the primary questions is in terms of the 
metrics, the work performance group. The FMC is identified as 
one of the parties to that group, and we will be more than 
happy to participate and offer our insight with regard to that.
    Mr. Garamendi. So you are clearly integrated into and 
coordinating with the freight movement programs that the 
Department of Transportation is putting together?
    Mr. Cordero. Absolutely. We will partner with them. The 
Administrator has been very helpful in working with the FMC, as 
well as the Department of Commerce, and as well as the Surface 
Transportation Board. One of the good things that we have been 
doing the last couple years is partnering with our fellow 
agencies regarding issues of mutual interest.
    Mr. Garamendi. Thank you. Chairman Hunter left to go talk 
to the Army about their needs, which is important. But also 
going on simultaneous with this hearing was General McDew, on 
the other side of this building. And I have been informed that 
General McDew said that he has a very serious concern about the 
ability of the merchant marine to meet the needs of his global 
movement of men, women, and materiel.
    So, Mr. Jaenichen, can you explain to me why you and the 
administration are further weakening the ability of the 
merchant marine to have cargo, as in the food aid program, if 
we have a national security issue that--spoke about just a few 
moments ago? Is it that the administration is not coordinating 
on this critical issue of the ability to move materiel?
    Mr. Jaenichen. Thank you for the----
    Mr. Garamendi. You seem to be going in different directions 
here. Can you explain why you are going in different 
directions, why we have Mr. McDew over there, saying he is 
terribly concerned about this, and then, on the other hand, 
your organization and the USAID [United States Agency for 
International Development] removing cargo?
    Mr. Jaenichen. Ranking Member, the--General McDew and I are 
very closely tied with regards--and the real issue he is 
talking about is the mariner numbers. And I talked a little bit 
earlier about the mariner pool, and where we are, and it is----
    Mr. Garamendi. The real issue is cargo.
    Mr. Jaenichen. Well, without cargo, you don't have ships. 
Without ships, you don't have mariners. I agree, sir.
    Mr. Garamendi. Cargo comes from Export-Import Bank loans, 
guarantees. It comes from military, as you said earlier. And it 
also comes from food aid and other things. You and the 
administration are rapidly reducing one of the three.
    Why are you doing that, when we have--at least according to 
General McDew--a significant national security issue? Why are 
you doing it? Is it that you are not coordinated, the left hand 
doesn't know what the right hand is doing? Or maybe you just 
don't care about this. And by ``you,'' I mean the imperial you.
    Mr. Jaenichen. The administration's proposal, Ranking 
Member, is to ensure that there is some funding in the program. 
That is what is in the $25 million to try to offset some of 
these----
    Mr. Garamendi. The welfare program.
    Mr. Jaenichen. We certainly would tend to disagree with 
that, this would be a welfare program, but we recognize that a 
program that is modeled after the MSP program works. So that is 
the reason why we structured it as we did, as we attempted to 
support the administration's proposal, with regard to food aid 
reform. And that was a piece that was actually installed as 
part of that proposal. And that is the administration's request 
to achieve the 25-percent additional flexibility----
    Mr. Garamendi. The administration's request was to reduce 
food and transfer the money to the military. That is for the 
MSP program, which was a very interesting program. So we got 
hungry people in Africa. We are going to reduce the money for 
them and give it to the military. Is that still part of the 
program that you are proposing that----
    Mr. Jaenichen. That is not the administration's position.
    Mr. Garamendi. It was.
    Mr. Jaenichen. No, there was a discussion that was ongoing 
between the USAID and MarAd to support a proposal as a food aid 
reform. That is not on the table any longer, Ranking Member.
    Mr. Garamendi. Any longer. Good. So where is the $25 
million coming from?
    Mr. Jaenichen. The $25 million is included in the MarAd's 
2017 budget request, as part of the MSP program, and it is an 
effort to ensure that any type of food aid reform--in this 
particular case for the 25-percent additional flexibility for 
interventions that include local and regional purchase--to 
ensure that it does not affect the merchant marine fleet.
    Mr. Garamendi. Wouldn't it be better all the way around to 
ship food than to just ship money?
    Mr. Jaenichen. USAID has indicated that the cost of that 
actually does have an impact on the number of folks that can be 
fed. And again, that is a calculation that they have provided 
and the administration supports.
    Mr. Garamendi. Well, this fight is not over. And we are 
going to stay with it.
    I am out of time, Mr. Chairman, I yield back.
    Mr. Graves of Louisiana [presiding]. Thank you. 
Administrator, thank you also for being here today. It is good 
to see you again.
    Some folks in the office recently had a meeting in regard 
to the Maritime Security Program. It is my understanding that 
under that program you have a number of priorities. Number one 
is RoRo [roll-on, roll-off] vessels, number two is----
    Mr. Jaenichen. Tankers.
    Mr. Graves of Louisiana. Heavy lift. Yes, number two is 
heavy lift----
    Mr. Jaenichen. No, number two is tankers, number three is 
heavy lift. Those priorities that were established by the 
U.S.----
    Mr. Graves of Louisiana. Wait, so it is RoRo----
    Mr. Jaenichen. Tanker.
    Mr. Graves of Louisiana [continuing]. Tanker, geared----
    Mr. Jaenichen. Heavy----
    Mr. Graves of Louisiana. Oh, heavy lift----
    Mr. Jaenichen. Heavy lift, geared container ship, and then 
container ship.
    Mr. Graves of Louisiana. OK. And it is my understanding 
that you have a current section 2 participant that is proposing 
to replace vessels. And as I understand, they are allowed under 
the operating agreements to provide for a replacement vessel of 
equal or greater capacity, and it is my understanding that they 
have done just that, but that they are having some trouble 
getting approval from MarAd in regard to that.
    I want to ask, before you make a final decision on that, I 
would like to schedule a briefing with you to get an update on 
what is going on there, to understand the prioritization 
process, to understand the compliance or lack there of, of the 
operating agreement, if you would agree to that before you make 
a final decision on this.
    Mr. Jaenichen. Congressman, I would be happy to meet with 
you, but I would emphasize that both of these operating 
agreements have been vacant since the 15th and the 22nd of 
September of last year. And so we have been working with the 
company in question to get substitution, and we have been 
working and imploring them to fill those vacancies, and we are 
reviewing what they have submitted thus far. And I will make a 
decision here shortly. I well get with you some time this week 
to have that discussion.
    Mr. Graves of Louisiana. Great. Great, thank you. 
Commandant, I would like to come back to you. There has been 
talk--and following up on a previous conversation, there has 
been talk about the Jones Act recently, and I have seen some 
folks that have expressed concern about the Jones Act from a 
fiscal perspective. It certainly concerns me, as well, anything 
that would be perceived or in reality, of course, as being a 
waste of taxpayer funds.
    If you--you know, going back to what we talked about 
earlier, if we repealed the Jones Act, if we made significant 
changes, the potential game changer from a security situation 
and many others--referring back to your previous comments--do 
you view--you know, if you were to monetize the Jones Act, the 
capability it provides to the defense industrial base, the 
security stability that it provides, do you view that as a 
money loser for taxpayers?
    Admiral Zukunft. I can only conjecture on that. You know, 
my biggest focus is what is due to our resiliency, as a 
maritime Nation. And, quite honestly, it will nearly bankrupt 
our maritime resiliency.
    When we look at the challenges that the MarAd Administrator 
is facing, that the Commander of TRANSCOM [United States 
Transportation Command] is facing in the event of a 
contingency, and we don't have a lift within the U.S. fleet to 
respond to a contingency at a point in time we are seeing the 
reemergence of peer competitors, you know, it is in our 
Nation's best interest. And I think, from a sovereign interest, 
not necessarily from a taxpayer, that we protect our maritime 
resiliency. And the Jones Act does provide that wherewithal.
    Mr. Graves of Louisiana. Thank you. Another question----
    Mr. Jaenichen. Congressman, if I might interject----
    Mr. Graves of Louisiana. Please.
    Mr. Jaenichen [continuing]. On this particular topic, if 
the build requirement were changed, there's about 40 different 
yards across the country that are building both Federal 
programs and also commercial.
    Today, under construction, there are 32 large vessels under 
construction. And, of those, 12 are what I would refer to as 
normal, self-propelled tankers. There's also 20 articulated tug 
and barges with large vessels, in terms of the capability to 
carry 150,000 to 200,000 barrels. We also have four of what I 
call special purpose ships, they are built to carry containers. 
And roll-on, roll-off, and also just regular LNG-ready type 
container ships. Without the Jones Act, those builds don't 
occur, which means that the Federal Government now has to 
assume all of the cost of the overhead for that industrial 
base, which means that your cost for those vessels is going to 
go up.
    The industry itself--and that includes both the Federal 
shipbuilding and the commercial shipbuilding--we just released 
a study last fall that updated some numbers we did from 2013--
that is 110,000 people around the country that are building 
ships; that is a $36 billion industry. Without that commercial 
shipbuilding and that industrial base, it will have an impact 
on the taxpayer, in terms of what we have to pay to acquire the 
ships, whether they are for the Navy, the Coast Guard, for 
NOAA, for the Army Corps.
    Mr. Graves of Louisiana. Administrator, could you provide a 
copy of that report for the record?
    Mr. Jaenichen. Yes, sir, I can.
    [The Maritime Administration report from November 2015 entitled 
``The Economic Importance of the U.S. Shipbuilding and Repairing 
Industry'' can be found on the Maritime Administration Web site at 
https://www.marad.dot.gov/wp-content/uploads/pdf/
MARAD_Econ_Study_Final_Report_2015.pdf.]

    Mr. Graves of Louisiana. Thank you. So again, I want to 
make note, you know, any program that is going to waste 
taxpayer funds would obviously cause great concern. And I think 
if you look at only the surface, in some cases it may cause 
concern. But it sounds like, based on what you are saying and 
some of the admiral's comment, when you actually dig deeper, 
that this does provide value to taxpayers in regard to the 
resiliency of our defense industrial base and the security of 
the country.
    One last question. Admiral, I want to come back. The fiscal 
year 2016 NDAA bill, the National Defense Authorization Act, 
transitioned the military retirement program for the Coast 
Guard for new military servicemembers, or Coasties, from a 
defined benefit plan over to the Thrift Savings Plan that many 
other agencies participate in, and it requires participation in 
that. It provides a match from the Coast Guard in that program.
    Has the Coast Guard talked with OMB to determine how the 
Coast Guard's current mandatory funding for these benefits can 
be moved to a discretionary situation, as DOD currently is?
    Admiral Zukunft. Congressman, we haven't, but it is a 
conversation we must absolutely have. Right now we don't know 
how many people will opt in to up to 5 percent, with a matching 
5 percent. But we do know, if we have a significant number, 
right now that comes out of our operating base. And that will 
directly impact frontline operations. It will challenge some of 
our many other operating expenses that we have right now.
    And so, we need to build that wedge for those who will be 
required to opt in in 2018, whether they contribute the 5 
percent or not. But how many other members with fewer than 12 
years of service decided, hey, they want to opt in, as well? 
And so there are real costs involved with this. And right now 
our base does not provide us the wherewithal to sustain those 
type of matching payments to thrift savings.
    Mr. Graves of Louisiana. Thank you. Would you support using 
the $25 million for increased MSP payments, pursuant to the 
recently passed increase in the authorization? I am sorry, to 
the--Administrator Jaenichen?
    Mr. Jaenichen. Would that be assuming that food aid reform 
is actually implemented or not, Congressman?
    Mr. Graves of Louisiana. No.
    Mr. Jaenichen. What I can tell you with regard to the MSP 
program is that they are under severe pressure with regards--
when the program, at its inception back in 1996, it was really 
based on three things. It was based on a stipend amount, it was 
based on access to Government-impelled cargo, both DOD and 
civilian cargo, and also the ability to carry civilian cargo.
    Currently, civilian cargo today is--there is an over-
capacity, with--the actual scrapping price is so low they are 
not--ships aren't being scrapped, so that capacity is 
continuing. We have seen the lowest shipping rates in a long 
time. Our Government-impelled rates, as I indicated earlier, 
DOD is down 75 percent, agriculture and USAID cargoes are down 
40 percent. The only place you can go now is to go to the 
stipend amount in order to ensure the fleet is viable.
    DOD and the U.S. Transportation Secretary both support the 
viability of this program. We understand its significance in 
support of DOD requirements, specifically for sealift, to 
globally project and sustain our armed forces.
    Mr. Graves of Louisiana. Thank you.
    Mr. Garamendi?
    Mr. Garamendi. First of all, I would like to enter into the 
record of this hearing Mr. McDew's testimony today that he 
provided with regard to the MSP program and the necessity for 
that. I think it would be useful to have on our record.
    Mr. Graves of Louisiana. Without objection.

    [The information can be found on page 90.]

    Mr. Garamendi. Thank you. I think I will probably leave 
that go for a while.
    Chairman Hunter had been talking about the UAV [unmanned 
aerial vehicle], or UAS, or RPAS [remotely piloted aircraft 
system], as the military now calls them. There is a program 
that the CBP is conducting. They have nine Predator B and 
Guardian--a maritime variety of the Predator B that they are 
using to patrol the border.
    Recently, the analysis that has been done on their program 
by the Department of Homeland Security indicates that that 
program is just totally inefficient and ineffective. They are 
spending $600 million annually on that program, presumably to 
protect, like, one one-hundredth of the Mexican border. It 
seems to me that we need to make some choices about--here, 
where $600 million is being spent.
    We know that the Coast Guard has a need for better 
surveillance, some of which will be provided by new ships, but 
others of which might be more effectively provided by UAS, UAV, 
or RPAS, whatever we want to call them. And so I think this 
committee ought to take this issue up with the homeland 
security committees about where $600 million could be most 
effectively spent in protecting our borders. Since there is a 
whole lot more sea border than there is land border, perhaps 
that $600 million could be better spent by the Coast Guard 
acquiring maybe those very same assets.
    So, I put that out there. Mr. Zukunft--or Admiral, excuse 
me--you normally don't go mess with other people's budgets, but 
it seems to me you are part of the Homeland Security 
Department. Have you talked to the Secretary about transferring 
this $600 million and the nine Predators to you to be used more 
effectively?
    Admiral Zukunft. That would be the equivalent of internal 
warfare, Ranking Member.
    But what we do have within the Department of Homeland 
Security, we have a Joint Requirements Council. These nine 
Predators predate the standup of this Joint Requirements 
Council. An example is, working with the Navy, we identified 
the right sensor package to go into our fixed-wing aircraft. It 
is called Minotaur. But it is a defense project. You know, the 
R&D, the work has been done. And through this Joint 
Requirements Council at the Department of Homeland Security, it 
is not just Coast Guard, but CBP is now acquiring this Minotaur 
project, as well.
    As we mentioned earlier, you know, the remotely piloted 
aircraft, whatever we want to call them, it is merely a 
platform. It is the sensor pod that you put in it, and the 
sensor pod that is in it right now does not afford for the 
wide-aerial surveillance that we would need. But you could 
argue you might need that same capability, whether you are 
flying over land or over the water, as well. But that would be 
a process to work through the Joint Requirements Council that 
has been stood up under this Secretary's leadership within the 
Department of Homeland Security.
    Mr. Garamendi. You got a problem with internal warfare, 
when you have got $600 million that is inefficiently used by 
the CBP, and you are not willing to go grab it and be able to 
use it more effectively by putting in the new sensor system 
that the Navy and you are jointly commissioning?
    Admiral Zukunft. We are at an inflection point where, under 
this Secretary's leadership, it is all about unity of effort. 
And so we have created joint task forces, where we have 
combined the cultures of Coast Guard, CBP, and ICE [Immigration 
and Customs Enforcement]. And we are--you know, so we are 
operating at the front line.
    But if you have one agency now second-guessing how another 
administration expands its----
    Mr. Garamendi. It is our business to second-guess. And we 
have a report that there is $600 million that is being spent 
very inefficiently by CBP with their Predator B UAS. And I am 
curious as to whether they could be repurposed.
    Let me ask you a specific question. Could they be 
repurposed with a different sensing device for the use by the 
Coast Guard?
    Admiral Zukunft. Absolutely.
    Mr. Garamendi. Absolutely? Is that your answer?
    Admiral Zukunft. Yes. Identifying the right sensor pod that 
goes----
    Mr. Garamendi. Is that this new Minotaur thing that you 
are----
    Admiral Zukunft. This would probably be yet a different 
sensor pod.
    Mr. Garamendi. Does it exist today?
    Admiral Zukunft. That I can't answer. We will have to do 
a----
    Mr. Garamendi. I think the chair answered the question as 
yes, it does.
    Well, it is our business to conduct internal warfare within 
the Departments, and to decide where the money goes. We have 
evidence that the CBP is inefficiently using $600 million, and 
six or nine Predators that could be repurposed for the Coast 
Guard. If you had them, could you use them?
    Admiral Zukunft. Yes.
    Mr. Garamendi. Thank you. No more questions.
    Mr. Graves of Louisiana. If there are no further 
questions----
    Mr. Garamendi. Note that as a yes.
    Mr. Graves of Louisiana. If there are no further questions, 
I thank the witnesses for their testimony and the Members for 
their participation.
    The subcommittee stands adjourned.
    [Whereupon, at 11:50 a.m., the subcommittee was adjourned.]
    
    
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