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[Senate Hearing 113-177]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 113-177
 
                OMNIBUS TERRITORIES AND PALAU AGREEMENT
=======================================================================

                                HEARING

                               before the

                              COMMITTEE ON

                      ENERGY AND NATURAL RESOURCES

                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                                   TO

 CONSIDER S. 1237, THE OMNIBUS TERRITORIES ACT OF 2013 AND S. 1268, TO 
  APPROVE AN AGREEMENT BETWEEN THE UNITED STATES AND THE REPUBLIC OF 
                                 PALAU

                               __________

                             JULY 11, 2013

                       Printed for the use of the
               Committee on Energy and Natural Resources

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               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                      RON WYDEN, Oregon, Chairman

TIM JOHNSON, South Dakota            LISA MURKOWSKI, Alaska
MARY L. LANDRIEU, Louisiana          JOHN BARRASSO, Wyoming
MARIA CANTWELL, Washington           JAMES E. RISCH, Idaho
BERNARD SANDERS, Vermont             MIKE LEE, Utah
DEBBIE STABENOW, Michigan            DEAN HELLER, Nevada
MARK UDALL, Colorado                 JEFF FLAKE, Arizona
AL FRANKEN, Minnesota                TIM SCOTT, South Carolina
JOE MANCHIN, III, West Virginia      LAMAR ALEXANDER, Tennessee
BRIAN SCHATZ, Hawaii                 ROB PORTMAN, Ohio
MARTIN HEINRICH, New Mexico          JOHN HOEVEN, North Dakota
TAMMY BALDWIN, Wisconsin

                    Joshua Sheinkman, Staff Director
                      Sam E. Fowler, Chief Counsel
              Karen K. Billups, Republican Staff Director
           Patrick J. McCormick III, Republican Chief Counsel

                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Bordallo, Hon. Madeleine Z., Delegate to Congress, Guam..........    12
Christensen, Hon. Donna M., Delegate to Congress, U.S. Virgin 
  Islands........................................................     8
Faleomavaega, Hon. Eni F. H., Delegate to Congress, American 
  Samoa..........................................................     4
Kagan, Edgard, Deputy Assistant Secretary of State, Bureau of 
  East Asian and Pacific Affairs, Department of State............    47
Murkowski, Hon. Lisa, U.S. Senator From Alaska...................     3
Pierluisi, Hon. Pedro R., Resident Commissioner to Congress, 
  Puerto Rico....................................................    20
Sablan, Hon. Gregorio Kilili Camacho, Delegate to Congress, 
  Northern Mariana Islands.......................................    17
Singh, Vikram J., Deputy Assistant Secretary of Defense for South 
  and Southeast Asia, Office of the Secretary of Defense for 
  Policy, Department of Defense..................................    44
Sobeck, Eileen, Acting Assistant Secretary for Insular Areas, 
  Department of the Interior.....................................    23
Wyden, Hon. Ron, U.S. Senator From Oregon........................     1

                               APPENDIXES
                               Appendix I

Responses to additional questions................................    57

                              Appendix II

Additional material submitted for the record.....................    59

                OMNIBUS TERRITORIES AND PALAU AGREEMENT

                              ----------                              

                        THURSDAY, JULY 11, 2013

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 9:40 a.m. in room 
SD-366, Dirksen Senate Office Building, Hon. Ron Wyden, 
chairman, presiding.

 OPENING STATEMENT OF HON. RON WYDEN, U.S. SENATOR FROM OREGON

    The Chairman. The committee will come to order.
    Today the committee meets to consider S. 1237, the Omnibus 
Territories Act and S. 1268, a bill to approve the September 
10, 2010, agreement between the United States and the Republic 
of Palau.
    We have with us the delegates from each of the territories, 
the Resident Commissioner from Puerto Rico and Eileen Sobeck 
from the Department of the Interior for our first panel on S. 
1237.
    Ms. Sobeck will also appear on the second panel along with 
Vikram Singh from the Department of Defense and Edgard Kagan 
from the Department of State to discuss the Palau agreement.
    Good morning to all of our witnesses. We welcome you.
    Let me just say a few words about S. 1237, the Omnibus 
Territories Act. The committee has jurisdiction over matters 
relating to the territories of our country. However because the 
territories are not represented in the Senate, few legislative 
proposals dealing with the territories are introduced here.
    That's why Senator Murkowski and I have asked Congressman 
Sablan to round up legislative proposals from the territories 
and send them to us. Senator Murkowski and I have introduced 
those proposals as S. 1237, the Omnibus Territories Act. 
Congressman, we thank you for your cooperation with us.
    Senator Murkowski and I have introduced the bill by 
request. As many of the Senators know introducing a bill by 
request is a courtesy that Senators usually provide to the 
Executive branch. However, it can be extended to others. We're 
happy to be able to do so.
    It also means that Senator Murkowski and I are not 
endorsing the bill or expressing support today for all of its 
provisions. We merely offer it for consideration at the request 
of others, in this case the elected representatives of the 
various territories.
    The Omnibus Territories Act contains a wide variety of 
proposals. Some have been considered by our committee before. 
Others are new.
    Some are a bit controversial. Others have significant 
support.
    Let me just talk for a minute about two of the proposals.
    Section 12 of the bill, the Guam War Claims Act has come 
before the Senate a number of times in different forms. It has 
been controversial. It certainly has a high cost.
    Few would deny the extraordinary heroism and steadfast 
loyalty of the citizens of Guam during World War II. Many were 
subjected to forced labor, tortured, raped and killed by 
Japanese military forces, often simply because they were 
Americans. However, as I touched on, the cost of the payment of 
reparations to the victims and survivors has made this a bit of 
a challenge to get the bill passed.
    But the Congresswoman is here, Ms. Bordallo. I hope I'm 
pronouncing that right. Again, we welcome her.
    She's tackled the issue by providing a creative way to pay 
for the proposal. The Guam War Claims would be paid using Guam 
tax dollars that are normally sent to Guam's treasury. So this 
is a creative offset, certainly. Hopefully this will bring 
Senators and colleagues together with respect to the cost 
issue.
    One of the new proposals in the bill, section 9, the 
Temporary Heating and Energy Assistance to the Virgin Islands, 
a provision designed to help those who have been hit hardest by 
the significant spike in electricity prices on the Islands. 
When the oil refinery on St. Croix closed last year, the 
Islands faced something of a double whammy where they were hit 
with big job losses and a huge increase in the cost of 
electricity. The economy of the Islands has been devastated.
    Congressman Christensen has been doing a lot of hard work 
on this. The Governor has. The Departments of Interior and 
Energy and local leaders have all been toiling diligently to 
address this economic disaster.
    They've been working to install a variety of renewable and 
traditional energy sources and increase efficiency. So a lot of 
people talked about all of the above in terms of energy policy. 
Congresswoman, I know you really are practicing it.
    It's going to take several years for these measures to 
provide relief. In the meantime, the Congresswoman is proposing 
that the Virgin Islands receive a greater share of Low Income 
Home Energy Assistance Act dollars. She proposes that 
eligibility be expanded to individuals with income up to 300 
percent of poverty. These would be temporary measures, in 
effect, to get the Virgin Islands through the disaster. We are 
anxious to hear from the Congresswoman about her proposal.
    One other point, just a few words about S. 1268, to approve 
the September 10, 2010, agreement between the United States and 
Palau. This agreement certainly has significant strategic value 
to our country. We're anxious to hear from the Pentagon and the 
Department of State on those matters this morning.
    It's hard to place a dollar value on an unsinkable aircraft 
carrier in the Pacific, unchallenged authority over a huge 
swath of the ocean and a steadfast international ally. But we 
do know the cost, $175 million by the way, of one F-35 fighter 
jet. So it is hard to overstate the value and strategic 
necessity of approving an agreement.
    I hope the Administration will continue to work with the 
committee to find an acceptable offset for the Palau agreement 
so that America can address an important national security 
issue.
    My friend and colleague, Senator Murkowski, is here. I want 
to let her make whatever statement she chooses.
    [The prepared statement of Senator Risch follows:]

  Prepared Statement of Hon. James E. Risch, U.S. Senator From Idaho, 
                               on S. 1237

    I would like to note my strong opposition to Section 7 of 
S. 1237, as introduced on June 27, 2013 and as considered by 
the Committee today. That section would require the Government 
of the U.S. Virgin Islands to hold a referendum on whether the 
Federal government may establish an unelected Chief Financial 
Officer (CFO) for the Territorial government. The provision 
then sets out a Rube Goldberg-type of process whereby a CFO 
would be identified and selected. The provision is strongly 
opposed by the Governor of the U.S. Virgin Islands.
    As a former governor, I cannot imagine a more unwieldy and 
unnecessary intrusion into the local self-governance of the 
Virgin Islands. Apart from the questionable merits of 
establishing a new bureaucracy to replicate the existing duties 
of the Territory's executive branch, I believe the proposal 
sends the wrong signal that the Territory is incapable of self-
governance and that the Federal government must somehow 
intervene to settle local disputes. Indeed, it would appear to 
violate the principles of federalism and to be a step 
backwards, not forward, in the Territory's path to greater 
self-governance. Certainly no governor of any State of which I 
am aware would tolerate federal legislation requiring (or even 
permitting) the establishment of a CFO in their respective 
States.
    If the people of the Virgin Islands believe that a CFO 
would be useful or beneficial, they are certainly free to 
require the same, through local referendum or local 
legislation. They do not need Congress to tell them what to do 
or how to do it.

        STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR 
                          FROM ALASKA

    Senator Murkowski. Thank you, Mr. Chairman. Good morning to 
each of you. Thank you for your representation in your 
respective regions. We welcome you to the committee here this 
morning.
    Mr. Chairman, I want to thank you for holding the hearing 
on two pieces of legislation that impact the territories and 
the freely associated states. As you have recognized, this is 
an area of a committee's jurisdiction. It probably doesn't 
generate as many headlines as some of the other issues that we 
take up. But nonetheless, very important to our Nation's 
economic and clearly, physical, security.
    So it is an important issue, a series of important issues, 
that we address today.
    The first bill, the Omnibus Territories Act of 2013, 20 
sections contained within it and really a very wide range of 
issues, going everywhere from the minimum wage to HUD programs 
to fisheries, endorsements and everything in between that may 
impact the territories both individually and collectively.
    As you note, Mr. Chairman, this bill was introduced by 
request. We have made some changes to the bill compared to what 
was introduced over on the House side. I anticipate that we're 
probably going to see further changes as we move forward with 
this. I look forward to working with each of the delegates on 
these matters.
    With respect to the second piece of legislation and this is 
the agreement between the United States and Palau. I do thank 
the Administration for transmitting the language to Congress so 
that it could be included in this hearing. I'm not going to go 
into all the details relating to the compact of free 
association between our two nations.
    But as a result of the very close and strategic and 
economic ties between our countries and our peoples, hundreds 
of Palauan citizens serve in all branches of the United States 
Armed Forces. We greatly appreciate their willingness to serve 
in our Nation's military. In some cases, giving their lives to 
defend our freedom.
    Palau is a steadfast ally of the United States in 
international forums who support we should be mindful of and 
grateful for. Palau, along with Israel, votes with the U.S. in 
the United Nations more times than any other member. It's also 
important to recognize Palau's leadership in working with the 
U.S. to resettle 6 ethnic Uighurs, who were detained at the 
Guantanamo Detention Facility. Palau was the first country to 
offer itself as a future home for these detainees.
    So as we deal with the issue related to the compact, the 
key question really is how to pay for it. This has been 
unresolved since the agreement was signed back in 2010. I am 
not aware of any policy objections to the agreement but I also 
acknowledge that, in my view, we have not yet seen an 
acceptable offset to the agreement's cost. So I'm hopeful that 
this morning we will hear from the Administration witnesses 
some politically viable ways to move this very important 
agreement forward.
    So I look forward to the testimony this morning from those 
who are assembled, both not only on this first panel, a very 
distinguished panel, but on our second panel as well.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Murkowski.
    I know we're going to work very closely together on these 
issues as we have on all of the matters that have come before 
us.
    Let's go to our witnesses now.
    We all know him as Eni, but certainly the Congressman, the 
American Samoa Delegate to Congress, has been doing good work 
for his communities for quite some time. He is Congressman 
Faleomavaega.
    He will be at the witness table with the Honorable Donna M. 
Christensen, who we know from health care days and appreciate 
her good work.
    The Honorable Madeleine Bordallo, we welcome her.
    The Honorable Gregorio Sablan of the Northern Mariana 
Islands Delegate to the Congress.
    The Honorable Pierluisi, a Resident Commissioner of Puerto 
Rico, welcome and Eileen Sobeck.
    We'll make all of your prepared remarks a part of the 
record in their entirety. I know there's always, kind of, a 
biological compulsion to just read a statement. We'll make your 
entire statement in the record in its entirety.
    If you'd just like to speak with us for 5 minutes or so 
that will leave some extra time for questions.
    We're also pleased that Senator Risch is here as well.
    Congressman, welcome.

STATEMENT OF HON. ENI F. H. FALEOMAVAEGA, DELEGATE TO CONGRESS, 
                         AMERICAN SAMOA

    Mr. Faleomavaega. Thank you, Mr. Chairman. Thank you Member 
Murkowski. It's an honor and a pleasure for us to be here this 
morning.
    I want to take this opportunity to thank you for holding 
this hearing on S. 1237, the Omnibus Territory's bill. This 
bipartisan legislation is critical in addressing the many 
issues that residents of our U.S. territories have faced for 
many years. For American Samoa this bill would provide the 
necessary tools for our new Administration to help the 
territory move forward.
    Mr. Chairman, I realize that I have a laundry list of about 
100 issues that I wanted to share with you this morning. So I 
decided to cut it down to 5, if that's alright with you.
    I'd, just to say on the general basis. By the way some of 
your colleagues are wondering why is it we're making this 
approach in settling some of the issues affecting the 
territories. In actuality this was the procedure that Congress 
had set years ago. I remember the 1970s on a bipartisan basis, 
especially in the House with the late Congressman Phil Burton 
and Lloyd Meeds and Patsy Mink and on the Republican side our 
colleagues Pablo DeMarcino and Don Clausen. They worked in such 
a way that in these issues.
    The Chairman. Congressman, the Senators up here on this 
panel still believe in working just that way.
    Mr. Faleomavaega. OK.
    The Chairman. I appreciate your pointing out this history 
of bipartisanship.
    Mr. Faleomavaega. Yes and that really was the spirit. I'd 
say look, so many of the issues affecting the territories are 
so municipal. This will affect the national framework in terms 
of some of the issues because there may be instances we get 
lost in the shuffle in many instances by oversight and not 
intentionally in any way.
    So these territories always are caught in that and we try 
to clean up the mess. I shouldn't say really the mess, but the 
problems that it's created. So there have been several examples 
where omnibus territories build it.
    I realize when it comes to committee jurisdictions there's 
a little problem with the sensitivities and how we do it. But 
all of this was done on the basis of trust and that our 
Republican/Democratic colleagues worked in such a way that 
these issues are non controversial, for the most part. Each 
issue affects that particular territory.
    All we need is just a little twitch and it's settled. But 
you have to go through the whole legislative process. Sometimes 
you never get heard.
    So I want to thank you, Mr. Chairman and Miss Murkowski, 
for being able to work this procedure again as a possible way 
to solve so many issues. As you notice we all have different 
issues affecting the different territories because we're not 
all from the same tribe. Our political relationships with the 
United States are also quite different.
    So I want to say that I really want to thank you for this 
initiative. Then hopefully that we can go through with this 
procedure and see what we can agree upon and move forward so it 
will be a great help to the territories.
    We've got a problem with the cost ratio studies. So in many 
instances I have a ten thousand foot runway airport but no 
airport tower because the FAA said you don't qualify for the 
cost ratio, whatever formula that they have. I say, how am I 
going to run an airport that doesn't have a tower? Yet we built 
a ten thousand foot runway that 747s can't fly on.
    I think that we should actually there at the Asiana 
airport. I mean, Asiana Airlines there at San Francisco is an 
example when you're talking about safety and hazards as far as 
the air transportation. We need this cost study ratio.
    The other is it also affects the construction of our 
harbors as I'm sure that all of territories are affected in 
that regard.
    We also have a problem of local matching. For 30 years 
we've been struck with the fact that you can only go up to 
$200,000. The cost of living, the increases in inflation and 
all of this has changed. Yet Congress still has not given us 
any assistance in that regard.
    The GAO study, we have 18 minimum wages, Mr. Chairman. For 
our little territory, we have 18 minimum wages. How in the 
world did we create an idiotic system like this? Thanks to our 
partners in the Federal Government and the Department of Labor 
we ended up with 18 minimum wages.
    We'd like to have a GAO study to see if we can have just 
maybe one minimum wage so that everybody will be on the same 
even playing field. That's another problem we have.
    The Chairman. Way too logical, Congressman.
    Mr. Faleomavaega. Another question that we've just had. A 
problem with some of our residents have decided to file a 
lawsuit demanding that our people should become automatically 
U.S. citizens under the 14th Amendment Citizenship clause. They 
lost the case.
    But what I wanted to present here was to offer as a 
plebiscite so that our people could decide once and for ever 
this has been an issue that has been ongoing for over 100 years 
simply because of our concerns with our traditional ways that 
it may have an impact on the culture and all of that. I'm 
offering this idea of maybe a plebiscite. Leave it to the 
people and not to the courts to decide whether we should become 
U.S. citizens.
    Mr. Chairman, I could go on for the next half day to give 
other details. But I want to thank you. I'm sure my colleagues 
will be just as good in giving their concerns on this.
    Thank you.
    [The prepared statement of Delegate Faleomavaega follows:]

    Prepared Statement of Hon. Eni F. H. Faleomavaega, Delegate to 
                  Congress, American Samoa, on S. 1327
    Chairman Wyden & Ranking Member Murkowski:

    I want to take this opportunity to thank you for holding this 
hearing on S. 1237, the Omnibus Territories Act. This bipartisan 
legislation is critical in addressing the many issues that residents of 
our U.S. territories have faced for many years. For American Samoa, S. 
1237 will provide the necessary tools for Governor Lolo and his new 
administration to help the Territory move forward.
 section 15. benefit to cost ratio study for projects in american samoa
    Included for American Samoa is a section requesting the Comptroller 
of the United States to study and provide a report on the benefit-to-
cost ratio formula used to determine funding for federal projects in 
American Samoa. This comprehensive study is necessary to address the 
discrepancies that American Samoa faces compared to other Territories. 
Due to our remote location, small population and single-industry 
economy, it is very difficult for American Samoa to meet any threshold 
for federal projects, especially federal agencies and departments that 
rely solely on the benefit-to-ratio formula.
    Because American Samoa does not meet the criteria, which I believe 
is discriminatory, American Samoa is the only U.S. territory without an 
airport tower even though American Samoa is an international 
destination and has one of the longest runways in the U.S. While making 
tourism a priority, it would be difficult for the local government to 
attract foreign carriers provided the airlines would not be comfortable 
with their planes landing at an international airport that does not 
have a physical control tower. Given the recent Asiana crash landing at 
San Francisco International Airport last week, a responsive and 
communicating physical presence is also essential to our residents.
    The benefit-to-cost ratio also affects our harbors. For now, we are 
unable to qualify for federal support for additional harbors but, with 
the increase in traffic in the Pago Pago harbor, building and creating 
harbors on other parts of Tutuila Island will improve and expand inter-
island commerce and build-up needed infrastructure.
    Having a GAO study to determine alternative methods to the benefit-
to-cost ratio will help Congress better understand and provide for one 
of our most vulnerable communities.
           section 16. waiver of local matching requirements
    I am in strong support of waiving local matching requirements for 
non-competitive grants received by our U.S. territories. Currently, 
federal departments and agencies that provide grant funding to the 
Territories are able to waive local matching requirements. Congress 
intended to waive such requirements in order to help support the local 
governments with improving infrastructure and programs. The current 
amount waived of $200,000 has not changed since 1983 when the Congress 
decided to increase it from $100,000 to $200,000.
    It is very unfortunate that the amount waived has not been 
increased even with inflation and the higher cost-of-living in the U.S. 
Thirty years later, our U.S. territories continue to struggle to 
provide for their residents given the global recession that affected 
all of us within the past 10 years. With the current push for reduction 
in federal spending, it will make it even far more difficult for our 
Territorial governments to provide for their residents.
                    section 17. fishery endorsements
    While the language for this section may need to be revised, the 
intent of the language is to restore fishery endorsements to U.S. tuna 
boats that are 100% U.S. built, 100% U.S. owned, and that offload the 
majority of their fish in American Samoa.
    We have some tuna boats that meet the above criteria but which have 
lost their fishery endorsement because they were repaired in a foreign 
shipyard meaning these boats are no longer permitted to fish in the 
U.S. EEZs in the South Pacific Tuna Treaty Area. This language corrects 
this problem and allows these vessels to fish where all other 100% U.S. 
built tuna boats are allowed to fish.
    This fix is critical to our economy because these boats supply the 
majority of their fish to American Samoa's canneries and, as this 
Committee knows, American Samoa's economy is a single-industry economy 
which is almost entirely dependent on the U.S. fishing and processing 
industry.
    I also want to add that this legislative fix does not affect Hawaii 
waters or waters in the mainland U.S. The waters related to this 
language are restricted to U.S. EEZs within the South Pacific Tuna 
Treaty Area.
    I might also add that the original law which required that U.S. 
boats to be repaired in U.S. shipyards if they want to retain their 
fishery endorsement has been in force since 1956 to protect the U.S. 
steel industry. I believe the law is somewhat antiquated.
  section 18. effects of minimum wage differentials in american samoa
    The Fair Labor Standards Act of 1938 was amended in 1956 to exempt 
the tuna industry from paying workers in American Samoa in accordance 
with federal minimum wage laws. Consequently, Special Industry 
Committees were established to determine wage rates in American Samoa.
    From then to now, American Samoa to date has 16 different wage 
rates based on industry classification including retailing, tour and 
travel services, fish canning and processing, publishing, private 
hospitals, government employees, etc. , although the original intent of 
the law was for wages among industry classifications to mesh into one.
    I believe the time has come for us to set this matter right because 
I feel it is discriminatory to pay some minimum wage workers less just 
because they work in the hotel industry, for example, versus the tuna 
industry. I believe anyone in American Samoa should have access to a 
set minimum wage rate because the cost of living is the same for all 
workers across industry sectors.
    A GAO report on the effects of minimum wage differentials in 
American Samoa will help us determine how we can best proceed to make 
the necessary corrections for the benefit of our workers.
         section 19. american samoa citizenship plebiscite act
    The citizenship plebiscite provision in the Senate Territorial bill 
will provide for a federally authorized plebiscite in American Samoa on 
the question of citizenship. The U.S. District Court for the District 
of Columbia reaffirmed just last month in the case of Tuaua v. U.S. 
that Congress has the plenary power to grant citizenship to persons 
living in the U.S. territories. The plaintiffs in Tuaua argued that 
U.S. citizenship should automatically apply to anyone born in American 
Samoa.
    The decision to become U.S. citizens should be decided by the 
people of American Samoa by an election. Once the decision is made by a 
majority of American Samoan voters to become citizens, I will work with 
my colleagues in Congress to draft legislation to provide citizenship 
to persons born in American Samoa.
    American Samoans have been struggling with the question of 
citizenship for over 70 years, and the time has come for the people to 
decide whether they want to become U.S. citizens. If we choose to do 
nothing, outside forces will decide our future for us, as is the case 
in Tuaua.
    The decision for American Samoans to become U.S. citizens has been 
complicated because of concerns of the impact of citizenship on our 
traditional way of life. However, history has shown examples of other 
U.S. territories that have preserved their traditional culture and 
still receive citizenship by an act of Congress.
    I am hopeful Congress will enact this important provision to allow 
the American Samoan people to decide whether they want to become U.S. 
citizens.
                               conclusion
    Chairman Wyden and Ranking Member Murkowski, I want to thank you 
again for holding this hearing and for allowing me to testify before 
the distinguished committee. I look forward to answering any questions 
you or members of the Committee may have.

    The Chairman. Congressman, thank you for an excellent 
statement and particularly your emphasis on bipartisanship. 
More than anything that's what the 3 of us have tried to do in 
this committee because without it we don't get anything done.
    Mr. Faleomavaega. Thank you, Mr. Chairman.
    The Chairman. Thank you for your thoughts on this.
    Congresswoman, welcome.

 STATEMENT OF HON. DONNA M. CHRISTENSEN, DELEGATE TO CONGRESS, 
                      U.S. VIRGIN ISLANDS

    Ms. Christensen. Thank you.
    Good morning, Chairman Wyden and Ranking Member Murkowski, 
members of the committee. I deeply appreciate the effort and 
time Chairman Wyden, Ranking Member Murkowski and your staff 
put into making both the Omnibus Territories bill and this 
hearing a reality. I'm very pleased that S. 1237 includes 5 
provisions that originated in bills I introduced in this and 
previous Congresses.
    Sections 6 and 9 would address a crisis in the cost of 
electricity facing my constituents. Our current average cost of 
50.8 cents for residential and 54.8 cents per kilowatt for 
commercial customers threatens Virgin Island's families and 
adversely impacts businesses causing closures, downsizing and 
job losses.
    Section 6 seeks long term sustainable solutions for the 
problem of high energy costs and cost of fuels for all of the 
insular areas.
    Section 9 would provide more immediate short term relief to 
Virgin Islanders over the next 18 months while the local public 
utility believes they will be able to reduce the cost of 
electricity by 30 percent by that time.
    Section 10 would establish the Castle Nugent National 
Historical Site. This continues an effort I began in 2006 to 
continue the great precedent set by our forefathers when 
Yellowstone became the first national park. It would become the 
fourth National Park Service unit on St. Croix and provide an 
excellent opportunity to preserve a very special and unique 
landscape for the people of St. Croix and visitors to the 
Islands for generations to come.
    The bill calls for preservation of 29 hundred acres which 
include a Caribbean dry forest, pristine coastal barrier coral 
reef system and pre-Columbian and post-European settlements. 
The property also has a long agricultural history dating back 
to the 1730s.
    Section 11 would establish a St. Croix National Heritage 
Area. The St. Croix National Heritage Area will play an 
important role in the revitalization of St. Croix where we lost 
the HOVENSA refinery and its towns and neighborhoods. It will 
be a key part of strategic economic development for the entire 
territory.
    It has been a top priority of mine for over 10 years. I am 
therefore hopeful and encouraged that S. 1237 could be the 
catalyst to finally make it a reality.
    Last, but not least in the bill it includes my legislation, 
H.R. 85, to establish a Chief Financial Officer. I first 
introduced this legislation to create a Chief Financial Officer 
for my district, the U.S. Virgin Islands in 2003 at a time when 
because of lack of accountability the Federal Government was 
either taking control of Federal funds or placing them under a 
third party judiciary. The then Governor was warning of 
layoffs, payless paydays and reduced services.
    The bill to create the Chief Financial Officer was my 
response. In recent years we've experienced layoffs, salary 
cuts and reduced services, ongoing budget shortfalls and 
austerity measures. So I feel it's still needed.
    The bill was revised in the 111th Congress so that the CFO 
would now simply certify the revenue of the territory mirroring 
that of the then work of the CFO in the District of Columbia. I 
expect it to pass the House for the fifth time later this 
month.
    It won't solve the fiscal problems we are facing. But it 
will pave the way for us working together to resolve them as we 
all will trust the numbers and be clear on where we are 
financially. If the best that I can achieve is a referendum, 
I'm willing to accept that and let the people voice their will. 
I can see no reason why anyone would object to that or to the 
establishment of better accountability and transparency in the 
finances of our government or any government.
    In response to one point of opposition I do not see how 
this bill could be considered an imposition of the will of the 
Congress on local authority. It is legislation introduced by 
the representative of the people of the Virgin Islands. Further 
there are many times that Congress has been and will continue 
to be called on to act on behalf of the Virgin Islands because 
we're still governed by an act of Congress, the Revised Organic 
Act of 1954.
    In closing I would request a consideration of adding two 
more of my bills as S. 1237 moves forward.
    The first bill is H.R. 374 which seeks to create an 
innovative pilot program to leverage private pension assets to 
raise revenues for both the Federal Treasury and investment in 
the Virgin Islands. It would creatively address the chronic 
underfunding of infrastructure needs in the Virgin Islands to a 
dedicated source of revenue and it would reduce our 
unemployment. We think it is likely to raise approximately $500 
million a year for the Federal Treasury.
    The second bill, H.R. 79, would tie the FMAP for Puerto 
Rico, the Virgin Islands, Guam, the Northern Mariana Islands 
and American Samoa to the highest FMAP applicable to any of the 
50 States consistent with our average income levels. The 
language was passed in the House version of the Affordable Care 
Act and it has no budget impact.
    So I'd like to thank you once again, Chairman Wyden and 
Ranking Member Murkowski for scheduling this hearing today and 
for the opportunity to testify.
    I have two letters of support.
    One from Senator Craig Barshinger, who is chairman of the 
committee on Energy and Environmental Protection of the Virgin 
Islands Legislature.
    One from the League of Women Voters in the Virgin Islands 
that I'd also like to enter as testimony for this hearing.
    I look forward to answering any questions.
    [The prepared statement of Delegate Christensen follows:]

Prepared Statement of Hon. Donna M. Christensen, Delegate to Congress, 
                    U.S. Virgin Islands, on S. 1237
    I want to begin by thanking you Chairman Wyden and Ranking Member 
Murkowski for the friendship you have shown to the residents of the 
Insular Areas and their representatives in the House with the 
introduction of S. 274 and the scheduling of this hearing today. My 
Colleagues and I deeply appreciate the effort and time you and your 
staff put into making both, the Omnibus Territories bill and this 
hearing a reality.
    Mr. Chairman, I am pleased that S. 1237 includes five provisions 
that originated in bills I introduced in this and previous Congresses. 
The first and third provisions of the bill. Sections 6 and 9, where 
included in legislation I sponsored last December to address a crisis 
in the cost of electricity facing my constituents. The current average 
cost for residential customers in the Virgin Islands is 50.8 cents per 
kilo watt hour and 54.8 cents for commercial customers. These high 
costs threaten Virgin Islands families at all income levels but 
especially low income. It also adversely impacting businesses causing 
closures and downsizing.
    Section 6 is intended to look for long term sustainable solutions 
to the problem of high energy coast from fossil fuels for all Insular 
Areas. Section 9 on the other hand, is intended to provide immediate 
``short-term'' relief to Virgin Islanders over the next 18 months when 
the local public utility believes it will be able to reduce the cost of 
electricity by 30%.
    Section 10 and 11 of the bill deals with legislation I sponsored to 
bolster and give a boost to the tourism based economy of my home island 
of St. Croix.
    Section 10 relates to the establishment of Castle Nugent National 
Historic site. Introduction of this bill continues an effort I begun in 
2006 to continue the great precedent set by our forefathers when 
Yellowstone in Wyoming became the first national park. The 
establishment of the Castle Nugent Historic Site would provide an 
excellent opportunity to preserve a very special and unique landscape 
for the people of St. Croix and visitors to the island for generations 
to come.
    If designated, the Castle Nugent Historic Site would become the 
fourth National Park Service unit on St. Croix. A special resource 
study authorized in 2006, has determined that the site meets criteria 
set by the NPS to determine national significance, suitability and 
feasibility. The bill calls for the preservation of 2,900 acres which 
include a Caribbean dry forest, pristine coastal barrier coral reef 
system and a pre-Columbian and post-European settlement.
    In addition to guaranteeing the protection of one of the most 
ecologically sensitive areas on the island, H.R. 3726 also preserves a 
rich part of our historical and cultural past, by preserving the 
archaeological remains of our indigenous Native American inhabitants. 
The property has a long agricultural history dating back to the 1730s, 
when the Danish estate house, now listed on the National Register of 
Historic Places, was constructed.
    Section 11 would establish the St. Croix National Heritage Area on 
St. Croix, U.S. Virgin Islands, which would provide us with a great 
opportunity to showcase and expose St. Croix to the world. According to 
a 2009 national research study on U.S. Cultural and Heritage Travel by 
Mandela Research, 78% of all U.S. leisure travelers participated in 
cultural and /or heritage activities while traveling. And these 
travelers spend more, $994 per trip compared to $611 for the average 
traveler.
    Additionally, 2011 study by the Advisory Panel for Historic 
Preservation has also confirmed that tourism is a growth industry 
worldwide and that there seems to be consistent evidence that heritage 
tourism is one of the fastest growing segments of that industry. the 
St. Croix National Heritage Area will play an important role in the 
revitalization of St. Croix; and its towns and neighborhoods and a key 
part of strategic economic development planning for the Territory.
    Enactment of a National Heritage Area for St. Croix has been a top 
priority of mine for almost ten years. I am therefore hopeful and 
encouraged that S. 1274 could be the catalyst to finally make it a 
reality.
    Last but not least, the bill includes my legislation, H.R. 85, to 
establish a Chief Financial Officer in section 7. I first introduced 
legislation to create a Chief financial Officer for my district, the U. 
S. Virgin Islands in 2003. At that time, the then governor was warning 
of layoffs, payless paydays and reduced services. My financial advisory 
team was urging a control board, and the Federal government had put our 
Housing Authority into receivership, the U S Department of Education 
was preparing to place a fiduciary to oversee and control spending in 
our local department and the Department of Justice was considering 
putting other local agencies under receivership. Our Prisons and waste 
water systems were under consent decree.
    Not seeing any concerted effort to reverse or correct the 
situation, as an elected leader of my community I did not feel I could 
sit by and do nothing. The Bill to create an independent CFO was my 
response.
    In the 111th Congress we revised the bill, removing any authority 
that would infringe on those of the Governor and his cabinet. This CFO 
would simply certify the revenue of the Territory. I felt that this was 
important then and now as the Virgin Islands' legislators, unions and 
every day citizens repeatedly question the reports and projections of 
the Virgin Islands government. At the very least it would confirm the 
government's projections objectively and independently, and at best the 
people of the Virgin Islands would have an accurate and trusted source 
of this information.
    Today after the layoffs of approximately 500 government employees, 
an across the board 8% cut in salaries, a structural deficit and budget 
shortfalls in FY 2013 yet to be filled with a 2014 unbalanced budget 
now before the VI Senate; with union negotiations stalled, and 
uncertainty on the restoration of the 8% cuts, coupled with the closure 
of our largest private sector employer the HOVENSA oil refinery--
resulting in reduced revenues, I feel that this office is more needed 
than ever.
    No, it will not solve the fiscal problems we are facing. All of 
us--elected and other leaders have a hard road ahead to meet these 
challenges, but it will pave the way for us working together to resolve 
them as we will all trust the numbers and be clear on where we are 
financially. HR. 85 is based on the CFO in the District of Columbia and 
that office has served them well over the past 20 or so years.
    Many may ask if such an office is needed why then is it not being 
created locally. There have been several attempts to pass legislation 
aimed at the same goal of better financial accountability and 
transparency, but they have not passed. The current administration 
strongly opposes this bill and would surely veto such local 
legislation.
    Some may feel that passing this bill would represent an imposition 
of the will of Congress on local authority. I would respond that it is 
legislation introduced by the representative of the people of the 
Virgin Islands, and further there are many times that Congress has been 
and will continue to be called on to act on behalf of the Virgin 
Islands because we are still governed by an act of Congress--the 
Revised Organic Act of 1954.
    I had expected that the House would have completed action on H.R. 
85 and sent it to you for further consideration as we have done on four 
previous occasions but that will not occur until later this month.
    In closing Mr. Chairman and Ranking Member, I would like to request 
your consideration for adding two more of my bills as S. 1237 moves 
forward.
    The first bill is H.R. 374 which seeks to create an innovative 
pilot program to leverage private pension assets to raise revenues for 
both the federal treasury and investment in the Virgin Islands. It 
would creatively address the chronic underfunding of infrastructure 
needs in the Virgin Islands through a dedicated source of revenue that 
would enable the territory to build a modern infrastructure that would 
move the islands toward self-sufficiency and reduce unemployment. These 
investments would substantially mitigate the federal government's cost 
for rebuilding after tropical storms and hurricanes. The Joint 
Committee on Taxation estimated that the bill would raise $477 million 
over 10 years to the U.S. Treasury; however, with the lull 
implementation of the Roth income cap removal, it is now likely to 
raise approximately $500 million a year.
    The second bill, H.R. 79, would address a problem with the 
Affordable Care Act which included a significant increase in the 
federal medical assistance percentage (FMAP) for the territories but 
kept or match at a rate which prevents us from accessing the increased 
funding. H.R. 79 would amend the law to tie the FMAP for Puerto Rico, 
the Virgin Islands, Guam, the Northern Mariana Islands, and American 
Samoa, beginning in FY2014, to the highest FMAP applicable to any of 
the 50 states. This legislation does not have a cost associated with it 
because it just shifts the existing pool of resources that already are 
available.
    Thank you once again Chairman Wyden and Ranking Member Murkowski 
for scheduling this hearing today. This concludes my oral remarks. I 
look forward to answering any questions you may have.

    The Chairman. Congresswoman, thank you. Without objection, 
we'll put those letters into the record.
    I thank you for your thoughtful statement. I also remember 
all our conversations about health care because you've always 
been very creative and very practical. And I appreciate your 
leadership in those areas.
    So, let's go next to you, Congresswoman Bordallo. We 
welcome you.
    We'll make your prepared remarks a part of the record. If 
you'd just like to talk for 5 minutes or so about what's 
important to you that would be great.

   STATEMENT OF HON. MADELEINE Z. BORDALLO, GUAM DELEGATE TO 
                            CONGRESS

    Ms. Bordallo. Hafa Adai, Chairman Wyden and Ranking Member 
Murkowski and members of the committee who are here. Thank you 
for your opportunity to provide testimony on the renewal of the 
Palau compact in the Omnibus Territory Act.
    First I'd like to address the critical importance of 
advancing the renewal of the Palau Compact.
    Palau is one of our closest and our strongest allies. 
Renewal of the Palau Compact has lingered in the U.S. Congress 
for over 4 years. Our lack of action on renewing the compact 
has very significant impacts for the geopolitical situation in 
the Western Pacific. Palau is truly critical to our national 
security and economic interest. We should not put this 
relationship in jeopardy.
    With regards to the Omnibus Territories legislation I want 
to particularly thank Chairman Wyden and Ranking Member 
Murkowski for introducing this bill. This bill contains many 
provisions important to the territorial delegates. I hope this 
committee will advance this legislation in the coming months.
    Of particular importance to the people of Guam is section 
12, the text of the Guam World War II Loyalty Recognition Act. 
I think, Mr. Chairman, this is one of those that you referred 
to as controversial. Bringing resolution to a painful chapter 
in Guam's history is critical.
    In particular this bill would implement the recommendations 
of the Guam War Claims Review Commission which was established 
by the 107th Congress. The Review Commission found that the 
occupation of Guam was especially brutal due to the unfailing 
loyalty of the people of Guam to the United States of America. 
The people of Guam were subjected to forced labor, forced 
marches, internment, beatings, rapes and executions and 
including public beheadings. The Review Commission recommended 
that Congress remedy this injustice through the enactment of 
legislation to authorize payment of the claims.
    Now the big question is why doesn't Japan pay for this?
    It is important to note that the Review Commission found 
that the United States signed a Treaty of Peace with Japan on 
September 8, 1951, which precludes Americans from making claims 
against Japan for war reparations. The treaty closed any legal 
mechanism for seeking redress from Japan. The U.S. Government 
has settled claims for U.S. citizens and other nationals 
through various claims programs authorized by Congress.
    Further, this section addresses concerns that have been 
raised about this legislation in the past.
    First, the text reflects a compromise that was reached with 
the Senate when they considered the legislation as a provision 
of the National Defense Authorization Act for fiscal year 2011. 
That compromise removes one claims category but protects the 
claims of living survivors. We went on with this.
    The provision also contains an offset for the estimated 
cost of the bill. The bill would be paid by section 30 funding 
remitted to Guam through the U.S. Department of the Interior at 
any level above section 30 funds in fiscal year 2012. With the 
realignment of military personnel to Guam, it is expected that 
Guam will receive additional section 30 funds above the current 
levels.
    This mechanism is a credible budget offset that meets 
Senate and House budget rules. I have talked to local leaders 
about this offset. There is a consensus that while they would 
prefer an outright appropriation from Congress, they recognize 
that we must overcome budget objections that have stymied this 
bill.
    Our community recognizes that we must solve this matter 
once and for all. I'm passing this authorization to bring 
justice and closure for the people of Guam.
    Earlier I discussed the importance of the Palau Compact 
Renewal. However, it is also important to remain mindful of the 
impacts of compact migrants on affected jurisdiction. The 
compacts, while important to our national interest, do have 
negative consequences for local affected jurisdictions. The 
amount of compact impact funding in a given fiscal year is not 
nearly enough to cover the expenses incurred by local 
governments, who provided services to compact migrants.
    Section 13 takes some important steps to address the issue 
of unreimbursed compact impact costs. Jurisdictions which are 
greatly impacted by compact migrants spend a significant amount 
of local funds to support the social needs of these migrants. 
While Congress does appropriate an annual compact impact 
funding, these funds are insufficient to cover the entirety of 
impacts imposed by these migrants.
    The Guam legislature has passed a resolution that asks me 
to seek additional compact impact funding. We recognize that an 
appropriation in the amounts requested by the Guam legislature 
is not feasible under the current budgetary constraints. So 
that is why we must look for other creative solutions that will 
have a tangible benefit for the affected jurisdictions. We 
achieve that, in part, through section 13.
    Finally, I strongly support inclusion of section 13 in the 
Omnibus legislation. The provision would very simply clarify 
current statutes. The provision would make clear the U.S. 
citizens and U.S. nationals have preference when applying for 
Section 8 housing on Guam.
    Finally, I strongly support section 16 that will increase 
the waiver on local matching requirements on most Federal grant 
programs. The territories have limited resources. Oftentimes 
the matching requirements inhibit them from competing for 
critical Federal funds.
    Mr. Chairman and Ranking Member Murkowski, at this table 
today we represent 1.4 million American citizens living in the 
territories. I want to thank you for the chance to testify. I 
look forward to your questions.
    Thank you.
    [The prepared statement of Delegate Bordallo follows:]

Prepared Statement of Hon. Madeleine Z. Bordallo, Delegate to Congress, 
                      Guam, on S. 1268 and S. 1237
    Chairman Wyden and Ranking Member Murkowski, thank you for the 
opportunity to testify on legislation pending before the Senate 
Committee on Energy and Natural Resources. In particular, I appreciate 
providing testimony on S. 1237 the Omnibus Territories Act and S. 1268 
a bill to renew the Compact with the Republic of Palau. I appreciate 
the concerted effort to advance legislation and policies that are 
important to the people of the U.S. territories. Moreover, I appreciate 
this Committee's continued leadership in finally passing the renewal of 
the Compact with the Republic of Palau.
                     s. 1268--palau compact renewal
    Before I address specific provisions in S. 1237, I want to address 
the critical importance of advancing S. 1268 the renewal of the Palau 
Compact. Palau is one of our closest and strongest allies. Renewal of 
the Palau Compact has lingered in the U.S. Congress for over four years 
and this is simply unacceptable. Moreover, I am deeply concerned by 
this Administration's lack of focus, effort and attention to this 
critical issue. Our lack of action on renewing the Compact has very 
significant impacts for the geopolitical situation in the Western 
Pacific.
    The Compact with Palau as well as the Federated States of 
Micronesia and Republic of the Marshall Islands is predicated on 
continued U.S. military access to these areas. In fact, the Compact 
gives the United States strategic control over a vast area of the Asia-
Pacific region. In order to have base rights for 50 years we provide 
Palauans with free access to the United States and limited direct 
financial assistance to the Palau government. The current Compact 
agreement would provide Palau with $215.75 million for 14 years and 
phase out assistance in fiscal Year 2023, a year before the next 
review.
    If we do not follow-up with our commitment to Palau we risk our 
strategic positioning in this area of the world. The lack of leadership 
from the Obama Administration and lack of action from the U.S. Congress 
on this compact renewal risks undermining our strategic goal of 
rebalancing to the Asia-Pacific region. Time after time I meet with 
officials from foreign governments who embrace the rhetoric behind the 
rebalance to the Asia-Pacific region yet express concern about the lack 
of tangible resources or commitment in the rebalance. The inability to 
renew the Compact reflects that lack of commitment. The total cost of 
the Compact renewal is only $215 million over 14 years. To put that 
figure in perspective, since 2009 we have spent $85.6 million in 
foreign assistance to China.
    Several years ago the Congressional China Caucus in the House of 
Representatives held a briefing from Department of Defense and 
Department of State officials on the importance of renewing the Palau 
Compact. The Department of Defense briefer presented a map of the 
Western Pacific and highlighted the importance of the first and second 
island chains in U.S. defense posture. Palau is on the front lines of 
the first island chain and truly critical to our national security, 
diplomatic and economic interests in the Asia-Pacific region. Our 
assistance to Palau is a small price to pay for this important 
partnership.
    I find it incomprehensible that we cannot find a reasonable offset 
to move the Palau Compact renewal legislation forward. I hope that the 
Obama Administration will renew their leadership role and work with 
Congress to find an appropriate offset for this critical legislation. I 
fear that further inaction will undermine the strength of our alliance 
with Palau and that has serious consequences for the Asia-Pacific 
region and for my constituents on Guam.
    It is also important to remain mindful of the impacts of Compact 
migrants on affected jurisdictions like Guam, Hawaii and the CNMI. The 
Compacts, while important to our national interest, do have negative 
consequences for local affected jurisdictions. The amount of Compact-
Impact funding in a given fiscal year is not nearly enough to cover the 
expenses incurred by local governments who provided services to Compact 
migrants. I appreciate that S. 1237 takes some important steps to 
address the issue of unreimbursed Compact-Impact but this issue 
requires creative solutions during these tight budgetary times.
                s. 1237--omnibus territories legislation
    Of similar importance is today's legislative hearing on S. 1237. I 
appreciate the efforts of Chairman Wyden and Ranking Member Murkowski 
to finally act on a variety of provisions and policies that are 
important to the people of the U.S. territories including my 
constituents on Guam. There has been little action on issues important 
to the U.S. territories over the past several years and this bill and 
hearing are an important step forward. I thank the Chairman and Ranking 
Member and look forward to working with them to advance this 
legislation.
             section 12--guam war claims review commission
    Of particular importance to the people of Guam is section 12, the 
text of the Guam World War II Loyalty Recognition Act. Guam war claims 
legislation is one of my top legislative priorities and I appreciate 
its inclusion as part of the overall omnibus legislation. Bringing 
resolution to a painful chapter in Guam's history is critical. In 
particular, this bill would implement the recommendations of the Guam 
War Claims Review Commission, which was appointed by Secretary of the 
Interior Gale Norton and established by an Act of the 107th Congress 
(Public Law 107-333). The Review Commission, in a unanimous report to 
Congress in June 2004, found that there were significant disparities in 
the treatment of war claims for the people of Guam as compared with war 
claims for other Americans. The Review Commission also found that the 
occupation of Guam was especially brutal due to the unfailing loyalty 
of the people of Guam to the United States of America. The people of 
Guam were subjected to forced labor, forced marches, internment, 
beatings, rapes and executions, including public beheadings. The Review 
Commission recommended that Congress remedy this injustice through the 
enactment of legislation to authorize payment of claims in amounts 
specified.
    It is important to note that the Review Commission found that the 
United States Government seized Japanese assets during the war and that 
the record shows that settlement of claims was meant to be paid from 
these forfeitures. Furthermore, the United States signed a Treaty of 
Peace with Japan on September 8, 1951, which precludes Americans from 
making claims against Japan for war reparations. The treaty closed any 
legal mechanism for seeking redress from the Government of Japan, and 
the United States Government has settled claims for U.S. citizens and 
other nationals through various claims programs authorized by Congress.
    Further, this section addresses concerns that have been raised 
about this legislation in the past. First, the text reflects a 
compromise that was reached with the Senate when they considered the 
legislation as a provision of the National Defense Authorization Act 
for Fiscal Year 2011. That compromise removes payment of claims to 
heirs of survivors who suffered personal injury during the enemy 
occupation. The provision continues to provide payment of claims to 
survivors of the occupation as well as to heirs of citizens of Guam who 
died during the occupation. The compromise continues to uphold the 
intent of recognizing the people of Guam for their loyalty to the 
United States during World War II.
    The provision also contains an offset for the estimated cost of the 
bill. Many have expressed concern that there was no offset to pay for 
the cost of the bill. Guam war claims has a very simple offset that 
will pay for the cost of the provision over time. The bill would be 
paid by section 30 funding remitted to Guam through the U.S. Department 
of Interior at any level above section 30 funds that were remitted to 
Guam in fiscal year 2012. With the impending relocation of Marines from 
Okinawa to Guam as well as additional Navy and Air Force personnel 
relocating to Guam, it is expected that Guam will receive additional 
section 30 funds. Claims would then be paid out over time based off the 
additional amounts that were made available in any given year. Not only 
does this offset address payment of claims but it impacts my 
jurisdiction only and is a credible source of funding that will ensure 
that claims will be paid.
    I have talked to local leaders about this offset and the Guam 
Legislature supports this approach provided that use of the Section 30 
funds does not set precedence for using these funds in the future which 
I do not believe it does. As a community, we agree that we must find 
the means to resolve this longstanding injustice, and the Section 30 
offset is a placeholder for the Administration to work with Congress in 
funding this requirement. We do intend to seek subsequent 
appropriations from the Obama Administration should this authorization 
pass so that our Section 30 funds which are intended to address local 
needs will continue to be made available to the Government of Guam.
    Again, resolving this issue is a matter of justice for the people 
of Guam. This carefully crafted compromise legislation addresses the 
concerns over the cost of this provision. This provision represents a 
unique opportunity to right a wrong because many of the survivors of 
the occupation are nearing the end of their lives. It is important that 
Congress act on the recommendations of the Guam War Claims Review 
Commission to finally resolve this longstanding injustice for the 
people of Guam.
    section 13--use of certain expenditures as in-kind contributions
    I strongly support section 13 of the underlying bill as it is an 
innovative way to mitigate the impacts of Compact migrants on affected 
jurisdictions. Essentially the provision would allow affected 
jurisdictions to consider the cost of providing local services to 
Compact migrants as an in-kind contribution for the purposes of 
providing matching funds to certain federal grant programs.
    Jurisdictions which are greatly impacted by Compact migrants spend 
a significant amount of local funds to support the social needs of 
these migrants. As I discussed earlier, the free access of these 
migrants to the United States is the key underpinning of these compact 
agreements. While Congress does appropriate an annual Compact-Impact 
funding, those funds are insufficient to cover the entirety of impacts 
imposed by these migrants. This has been affirmed by a GAO report 12-64 
in 2011.
    The provision will also help to address a key concern and 
recommendation from that GAO report. In particular, passage of this 
provision will require the Office of Insular Affairs to develop a 
mechanism to ensure that there is accurate and uniform way to account 
for the amount of local funds that supplement federal funding to 
support the Compact migrants.
    The Guam Legislature has passed a resolution that asks me to seek 
additional Compact-Impact funding. While we continue to engage the 
Administration and Congress on this issue, we recognize that an 
appropriation in the amounts requested by the Guam Legislature is not 
feasible or possible under the current budgetary and political 
environment here in Washington DC. That is why we must look for other 
solutions that will have a tangible benefit for the affected 
jurisdictions. I believe that this provision will help defray the cost 
of supporting Compact migrants over time and help affected 
jurisdictions apply for federal programs that support the needs of 
local citizens.
           section 14--improvements in hud assisted programs
    I also strongly support inclusion of section 14 in the Omnibus 
legislation. The provision would very simply clarify an apparent 
vagueness in current statute. The provision would make clear that U.S. 
citizens and U.S. nationals have preference when applying for Section 8 
housing on Guam. In 1999, Public Law 106-504 amended Section 214(a) of 
the Housing Community Development Act of 1980, to make citizens of the 
Freely Associated States (FAS) eligible for federal programs, grant 
assistance, and services of the United States, ``provided that, within 
Guam any such alien shall not be entitled to a preference in receiving 
assistance under this Act over any United States citizen or national 
resident therein who is otherwise eligible for such assistance.''
    Congressman Robert Underwood further clarified congressional intent 
of this legislation by stating on the Floor of the House on June 29, 
1999 ``American citizens in need of social services such as housing are 
not displaced by these very migrants. Our omnibus legislation will 
ensure that American citizens are not left in the back of the line for 
housing, for public housing.''
    The Guam Housing and Urban Renewal Authority (GHURA) promulgated 
regulations for public housing assistance on Guam that provided, among 
others, priority for U.S. citizens or nationals to receive assistance 
over FAS citizens. On May 11, 2012, GHURA received guidance from the 
U.S. Department of Housing and Urban Development (HUD) that ``it is 
legally inconsistent with HUD's statutory and regulatory scheme for 
GHURA to afford U.S. citizens a priority of COFA citizens in Guam on 
the basis of U.S. citizenship or nationality along.''
    I wrote to HUD on July 9, 2012 to request reconsideration of this 
guidance because I believed that HUD's distinction between 
``preference'' and ``priority'' with regard to GHURA's tenant selection 
process misapplied the intent of Congress to not displace U.S. citizens 
and nationals by permitting FAS citizens in the U.S. to benefit from 
federal social programs.
    HUD responded on August 3, 2012 and reaffirmed its guidance. The 
Department concluded that while the statute make explicit that FAS 
citizens cannot receive a housing preference over U.S. citizens, it 
does not provide that U.S. citizens may receive a preference over FAS 
citizens on the basis of national origin alone. The letter indicates 
that in some cases an FAS citizen could receive Section 8 benefits 
before a US citizen based off local requirements.
    I was deeply concerned by this interpretation by HUD and appreciate 
that this provision is included further clarifying Congressional intent 
and correcting HUD's misplaced guidance and interpretation of the 
underlying statute.
           section 16--waiver of local matching requirements
    Finally, I strongly support section 16 that will increase the 
waiver on local matching requirements from $250,000 to $500,000 on most 
federal grant programs. This provision will help our local 
jurisdictions compete for federal grant programs. The territories have 
limited resources and often times the matching requirements inhibit 
them from competing for critical federal funds. The initial underlying 
law that waived matching requirements was set back in 1977 and has not 
been adjusted since then.
    Again, I greatly appreciate the leadership of this Committee in 
holding a hearing on this bill and its important provisions. I look 
forward to working together along with other Delegates from the 
territories to ensure this bill becomes law. I look forward to your 
questions.

    The Chairman. Thank you, Congresswoman. You certainly 
deserve credit for bringing some real creativity to this. We'll 
certainly have questions about the details and those related 
issues.
    Mr. Faleomavaega. Mr. Chairman, I didn't mean to interfere. 
I do apologize. I have to go catch my canoe or I'm not going to 
be able to make the connecting flights.
    The Chairman. I understand.
    Mr. Faleomavaega. Thank you very much.
    The Chairman. We will excuse you. Thank you for coming.
    Mr. Faleomavaega. I have absolute confidence in my fellow 
delegates that they will answer any question you might have.
    The Chairman. Very good.
    Mr. Faleomavaega. Thank you very much.
    The Chairman. Thank you, Congressman.
    Alright, our next witness will be Congressman Sablan, 
Northern Mariana Islands.

 STATEMENT OF HON. GREGORIO KILILI CAMACHO SABLAN, DELEGATE TO 
               CONGRESS, NORTHERN MARIANA ISLANDS

    Mr. Sablan. Thank you very much, Chairman Wyden, Ranking 
Member Murkowski, Senator Risch. Let me start by thanking you 
for agreeing to introduce the Omnibus Territories Act, S. 1237 
and for moving so quickly to hold this legislative hearing.
    I'd also like to thank your committee staff for their 
generous help with our territory offices to assemble this bill 
so it could be introduced on a bipartisan basis.
    Traditionally as Congressman Faleomavaega earlier said, 
Congress has handled territorial issues outside of the partisan 
arena. Although recently when stand alone territory bills have 
come up for consideration they have sometimes been given a 
party label and sometimes they have to paired with other bills 
and that makes passage very difficult.
    But by getting the bipartisan sponsorship at the outset and 
by identifying a group of legislative proposals as territorial 
in nature, as with S. 1237, the hope is that we can get a lot 
of work done efficiently and without getting caught up in other 
concerns.
    That said, I acknowledge this committee already reported 
two sections of S. 1237 having to do with the Northern Mariana 
Islands as a single, stand alone bill last month which I very 
much appreciate.
    One section dealing with the territories also passed the 
House last month for the third time unanimously.
    The other section, rescheduling minimum wage increases in 
the Northern Mariana Islands is time sensitive. So there were 
special reasons to think that these two sections could and 
should move swiftly to the Senate Floor. I certainly hope the 
Senate will act this month.
    Section 5 of S. 1237 is new, however, and needs a brief 
explanation. This section makes 3 changes to the Consolidated 
Natural Resources Act which extended Federal immigration to the 
Northern Marianas.
    First, it provides greater accountability in the use of 
training funds intended to help U.S. workers replace foreign 
labor in the Northern Mariana's economy. This is a fee based 
fund. I think that employers, who pay the fee, deserve to know 
the money is spent effectively and for the intended purpose.
    Second, section 5 provides for the immigration transition 
period now scheduled to end on December 31, 2014, to continue 
through 2019. During this transition, which only began 2 years 
ago, the Department of Homeland Security has been authorized to 
allow non-immigrants to continue to work in the Northern 
Marianas until we reach the goal of an all U.S. workers.
    In September, however, the GAO reported that 54 percent of 
the Island's work force is still comprised of foreign labor and 
noted, ``The CNMI economy remains dependent on foreign 
workers.'' Recent improvements in hotel occupancy rates and the 
number of in-bound tourists indicate that the demand for 
service employees, largely fueled by foreign workers, will 
continue strong beyond 2014. So it seems necessary to extend 
the transition period.
    This does not undermine the conversion to a U.S. work 
force. Employers must continue to attest that no U.S. workers 
available for any given job before having a foreign worker. As 
I last mentioned, section 5 also sharpens the training program 
so more U.S. workers should be available.
    Third, during the transition period non-immigrants with 
established investments in the Northern Mariana Islands were 
also provided status. Section 5 extends the transition period 
for these investors just as it does for non-immigrant workers 
keeping investments in place.
    Each of these 3 proposed changes come experience 
implementing the Immigration and Nationality Act in the 
Northern Marianas. I should emphasize that these changes will 
help the implementation no matter what the outcome of 
comprehensive immigration reform bill, the Senate passed on 
June 27, which I strongly support.
    I will close with a word about section 13 which is not 
specific to the Northern Marianas, but will benefit my Islands 
as well as Guam and American Samoa. Each of our territories 
have received non-immigrants from the Freely Associated States 
which are allowed entry to the U.S. under terms of the compact. 
Each of our territories have experienced costs from this influx 
providing health care, education, public safety services.
    Congress recognized the Federal responsibility to defray 
these costs in Public Law 108-188. But there is a shortfall 
between the Federal reimbursement the law provides and the cost 
we bear locally. Increasing the Federal reimbursement is a 
steep hill to climb in the present fiscal environment. So 
section 13 allows our local government to use the costs of the 
services to FAS citizens as in-kind offsets for any local 
matching funds required by Federal formula grants.
    Credit to this idea goes to my colleague, Ms. Bordallo. It 
is also a creative way to remedy the long standing source of 
friction between the United States insular areas and the 
Federal Government. I support it fully. Our local governments 
will still be spending to provide services to FAS migrants, but 
at least they will have some additional compensation.
    Finally, Mr. Chairman, I'll just take a few moments, with 
your permission, I'd like to make a brief statement also in 
support of the other bill on the agenda today, S. 1268. As the 
only Micronesian in Congress, I feel an obligation, a duty, to 
speak up for the interest of the people of Palau and other 
parts of Micronesia when I have the opportunity.
    In this case I will simply say that the Republic of Palau 
is a very important island of the United States and that Palau 
has waited very patiently for Congress to take action and 
approval of the extension of the compact agreement.
    Thank you very much for allowing us to testify this 
morning. Thank you for the time.
    [The prepared statement of Delegate Sablan follows:]

Prepared Statement of Hon. Gregorio Kilili Camacho Sablan, Delegate to 
             Congress, Northern Mariana Islands, on S. 1237
    Chairman Wyden, Ranking Member Murkowski, let me start by thanking 
you for agreeing to introduce the Omnibus Territories Act, S. 1237, and 
for moving so quickly to hold this legislative hearing.
    I'd also like to thank your committee staff from both sides of the 
aisle, who helped the House territorial offices assemble this bill, so 
it could be introduced on a bipartisan basis.
    Traditionally, Congress has handled territorial issues outside of 
the partisan arena. Although, recently, when stand-alone, territorial 
bills have come up for consideration, they have sometimes gotten a 
party label. That makes passage more difficult. By getting bipartisan 
sponsorship at the outset, and by identifying a group of legislative 
proposals as ``territorial'' in nature--as with S. 1237--the hope is we 
can get a lot of work done efficiently and without getting caught up in 
other concerns.
    That said, I acknowledge this Committee already reported two 
sections of S. 1237 having to do with the Northern Mariana Islands, as 
a single, stand-alone bill, last month, which I very much appreciate. 
One section, dealing with the territorial sea, also passed the House 
last month--for the third time, unanimously. The other section, 
rescheduling minimum wage increases in the Northern Marianas, is time-
sensitive. So, there were special reasons to think those two sections 
could and should move swiftly to the Senate floor. And I certainly hope 
the Senate will act this month.
    Section 5 of S. 1237 is new, however, and needs brief explanation. 
This section makes three changes to the Consolidated Natural Resources 
Act, which extended federal immigration to the Northern Marianas.
    First, it provides greater accountability in the use of a training 
fund intended to help U.S. workers replace foreign labor in the 
Northern Marianas economy. This is a fee-based fund; and I think that 
the employers who pay the fee deserve to know the money is spent 
effectively and for the intended purpose.
    Second, Section 5 provides for the immigration transition period, 
now scheduled to end on December 31, 2014, to continue through 2019. 
During the transition, which only began two years ago, the Department 
of Homeland Security has been authorized to allow nonimmigrants to 
continue to work in the Northern Marianas, until we reach the goal of 
an all-U.S. workforce.
    In September, however, the Government Accountability Office 
reported that 54 percent of the island workforce is still comprised of 
foreign labor and noted ``[t]he CNMI economy remains dependent on 
foreign workers.'' Recent improvements in hotel occupancy rates and the 
number of in-bound tourists indicate that the demand for service 
employees, largely filled by foreign workers, will continue strong 
beyond 2014. So it seems necessary to extend the transition period.
    This does not undermine the conversion to a U.S. workforce. 
Employers must continue to attest that no U.S. worker is available for 
any given job before hiring a foreign worker. And, as mentioned, 
Section 5 also sharpens the training program, so more U.S. workers 
should be available.
    Third, during the transition period nonimmigrants with established 
investments in the Northern Mariana Islands were also provided status. 
Section 5 extends the transition period for these investors, just as it 
does for nonimmigrant workers, keeping investment in place.
    Each of these three proposed changes comes from experience 
implementing the Immigration and Nationality Act in the Marianas. And I 
should emphasize that these changes will help the implementation no 
matter what the outcome of the comprehensive immigration reform bill 
the Senate passed on June 27--which I strongly support.
    I'll close with a word about Section 13, which is not specific to 
the Northern Marianas, but which will benefit my islands, as well as 
Guam and American Samoa. Each of our territories has received 
nonimmigrants from the Freely Associated States, who are allowed entry 
to the U.S. under terms of the Compacts.
    Each of our territories has experienced costs from this influx--
providing health care, schooling, public safety services. Congress 
recognized the federal responsibility to defray these costs in Public 
Law 108-188. But there is a shortfall between the federal reimbursement 
that law provides and the costs we bear locally.
    Increasing the federal reimbursement is a steep hill to climb in 
the present fiscal environment. So, Section 13 allows our local 
governments to use the costs of services to the FAS citizens as in-kind 
offsets for any local matching funds required by federal formula 
grants.
    Credit for this idea goes to my colleague Ms. Bordallo. It is a 
creative remedy to a longstanding source of friction between the U.S. 
insular areas and the federal government. I support it fully. Our local 
governments will still be spending to provide services to FAS migrants, 
but, at least, they will have some additional compensation, even if not 
as new federal dollars.
    Finally, with your permission, Mr. Chairman, I ask that the 
comments of Northern Mariana Islands Governor Eloy Inos, which I have 
here, be added to the record on S. 1237 for the Committee's 
consideration.
    Thank you, again, for introducing this bill and for holding today's 
hearing.

    The Chairman. Congressman, thank you so much.
    We enjoyed talking with you as well in the office here 
recently and appreciate your good work.
    The Honorable Congressman Pierluisi.

STATEMENT OF HON. PEDRO R. PIERLUISI, RESIDENT COMMISSIONER TO 
                     CONGRESS, PUERTO RICO

    Mr. Pierluisi. Chairman Wyden, Senator Murkowski, Senator 
Risch, thank you for inviting me to testify.
    I want to begin by thanking the committee for scheduling a 
separate hearing on the political status referendum that was 
held in Puerto Rico and on the Federal Government's response to 
that referendum. I look forward to testifying about that 
subject next month.
    With respect to the present bill I want to express support 
for 3 particular provisions.
    Section 8 requires the GAO to evaluate the annual estimates 
of revenues and expenditures of the territory governments and 
to make recommendations for improving the process by which 
those estimates are developed. Puerto Rico faces severe 
economic challenges. Based on all indicators Puerto Rico has 
lagged far behind the States for at least 4 decades. The income 
gap between the territory and the States continues to widen.
    Puerto Rico's population decreased by nearly 4 percent 
between 2000 and 2012. With hundreds of thousands of island 
residents relocating to the States in search of economic 
opportunity. This exodus is likely to worsen because the 
governing party in Puerto Rico has enacted a series of laws 
that purport to stabilize and strengthen the economy but are so 
poorly conceived that they can be expected to produce the 
opposite effects.
    As this committee knows I support statehood for Puerto Rico 
and do so in meaningful part because history shows that every 
territory that joins the Union experiences a substantial 
increase in its economic activity and standard of living. 
Statehood is the only status that will enable Puerto Rico, on 
an enduring basis, to reduce unemployment, attract investment, 
retain talent, promote growth and manage our deficits and debt. 
However, until Puerto Rico becomes an equal member of the 
American family, I must take all reasonable steps to strengthen 
the island's economy within the constraints imposed by our 
territory status.
    My support for section 8 is rooted in this responsibility. 
The provision will address a problem that has been witnessed in 
Puerto Rico. That is the tendency for the local government to 
overestimate revenue and underestimate expenditures.
    For example, between 2006 and 2008 the Puerto Rican 
government overestimated revenue by an average of nearly $900 
million annually. Between 2009 and 2012 this practice came to 
an end with actual revenues slightly exceeding projected 
revenue. However, economists and rating agencies have expressed 
concern that the Puerto Rico government may now be returning to 
its old ways.
    When a government makes inaccurate budget projections it 
has a cascading effect resulting in larger deficits, excess 
borrowing, credit downgrades, higher interest payments and the 
diminished ability to meet pension obligations and make 
important investment decisions in priority areas. I am 
confident that the GAO can provide sound advice to help the 
territory governments with the budgeting process.
    Next, I want to express support for section 6 which 
requires the Federal Government to establish a team of experts 
to develop and helping implement a plan for each territory to 
reduce reliance on imported oil and to transition to cleaner 
energy sources that will improve the environment and lower 
electricity costs.
    A typical territory resident pays two to 3 times more for 
electricity than the U.S. national average. As an island that 
does not produce oil, coal or natural gas, Puerto Rico faces 
the inherent energy challenges notwithstanding the progress 
that was made under the last Administration in Puerto Rico 
which oversaw a nearly 15 percent increase in the use of 
natural gas and a doubling of the use of renewable sources. 
Puerto Rico still generates most of its electricity from 
imported oil.
    Burning oil pollutes the air and explains why Puerto Rico 
has the highest rate of asthma and other respiratory illnesses 
in the Nation. Oil is expensive and subject to sudden price 
shocks. The high cost of electricity strains family budgets and 
harms businesses.
    The plans called for by section 6 will help the governments 
of Puerto Rico and the other territories diversify their energy 
portfolios and reduce electricity rates.
    Finally, I want to express my support for section 20 which 
is drawn from legislation I introduced. Current law authorizes 
the Department of the Interior to support efforts in foreign 
countries to protect endangered marine turtles. Section 20 
would enable the Department to support such projects in the 
U.S. territories as well. This is appropriate given that most 
of the marine turtle species are found in Puerto Rico. Section 
20 empowers the Federal Government to provide assistance to 
preserve this species for present and future generations.
    In closing, I appreciate this committee's attention to the 
fiscal, energy and environmental concerns in the territories. I 
look forward to working with you to advance this bill and to 
make any additions that may be appropriate.
    Thank you.
    [The prepared statement of Commissioner Pierluisi follows:]

Prepared Statement of Hon. Pedro R. Pierluisi, Resident Commissioner to 
                         Congress, Puerto Rico
    Chairman Wyden, Ranking Member Murkowski and Members of the 
Committee: thank you for inviting me to testify about S. 1237, the 
Omnibus Territories Act.
    Before I begin, I want to thank the Committee for agreeing to hold 
a separate hearing, originally scheduled for June 11th and rescheduled 
for August 1st, on the referendum that was held last November in Puerto 
Rico regarding the territory's political status, and on the federal 
government's response to the historic results of that referendum. I 
look forward to testifying before the Committee about that subject next 
month.
    With respect to the legislation before the Committee today, I will 
use my time to express support for Sections 6, 8 and 20 of the bill.
    Section 8 would require the GAO to evaluate the annual estimates of 
revenues and expenditures of the territory governments, including the 
government of Puerto Rico, and to make recommendations for improving 
the process by which those estimates are developed.
    Puerto Rico faces severe economic challenges. Based on all economic 
indicators, the territory has lagged far behind the states for at least 
four decades, and the income gap between Puerto Rico and the states 
continues to widen. Puerto Rico's population decreased by nearly four 
percent between 2000 and 2012, with hundreds of thousands of island 
residents departing for the states in search of improved economic 
opportunities. This exodus is likely to worsen, because the governing 
party in Puerto Rico has recently enacted a series of laws that purport 
to stabilize and strengthen the economy, but are so poorly conceived 
that they can be expected to have the opposite effect.
    As the Members of this Committee are aware, I support statehood for 
Puerto Rico, and do so in meaningful part because history shows that 
every territory that joins the Union experiences a substantial increase 
in its economic activity and standard of living. I believe statehood is 
the only status that will enable Puerto Rico, on an enduring basis, to 
reduce unemployment, attract investment, retain talent, promote growth, 
and manage our deficits and debt.
    However, until the day--not too far off, in my estimation--that 
Congress welcomes Puerto Rico as a full and equal member of the 
American family, it is my responsibility to take all reasonable steps 
to strengthen the Island's economy within the severe constraints 
imposed by the current territory status.
    My support for Section 8 is rooted in this obligation. The 
provision will help address a problem that has been witnessed in Puerto 
Rico and other territories, and that is the tendency for the local 
government to overestimate the amount of revenue that will be collected 
and to underestimate the amount of government expenditures that will be 
made in the coming fiscal year. For example, between Fiscal Year 2006 
and 2008, the Puerto Rico government overestimated revenue by $1.1 
billion dollars, $822 million dollars, and $718 million dollars, 
respectively. Between Fiscal Year 2009 and 2012, this practice came to 
an end, with actual revenue exceeding forecasted revenue by a fairly 
small amount each year. However, economists and rating agencies have 
expressed concerns that the Puerto Rico government may now be returning 
to its old ways.
    When a government makes inaccurate budget projections, it has a 
negative, cascading effect--resulting in larger deficits, excess 
borrowing, credit downgrades, higher interest payments, and the 
diminished ability to meet pension obligations and make important 
investments in education, infrastructure, public safety and other 
priority areas. I respect the work of the GAO, and am confident that 
their sound advice will help the governments of Puerto Rico and the 
other territories better manage their finances.
    Next, I want to express support for Section 6 of the bill, which 
would require the federal government to establish a team of experts to 
develop--and help implement--an action plan for each territory to 
reduce reliance on imported oil and to transition to clean energy 
sources that will improve the environment and lower electricity costs.
    A typical territory resident pays two to three times more for 
electricity than the U.S. national average. As an island that does not 
produce oil, coal or natural gas, Puerto Rico faces inherent energy 
challenges. Notwithstanding the progress that was made under the last 
administration in San Juan--which oversaw a nearly 15 percent increase 
in the use of natural gas and a doubling of the use of renewable 
sources like solar and wind--Puerto Rico continues to generate most of 
its electricity from imported oil.
    Burning oil pollutes the air and is a major reason why Puerto Rico 
has the highest rate of asthma and other respiratory illnesses in the 
United States. Oil is expensive and subject to sudden price spikes 
based on world events outside our control. The high cost of electricity 
strains family budgets and is regularly cited as the main burden facing 
current and prospective island businesses.
    The action plan called for by Section 6 will help the governments 
of Puerto Rico and the other territories diversify their energy 
portfolios and reduce electricity rates, thereby improving the 
environment and bringing relief to consumers.
    Finally, I want to express my support for Section 20, which is 
drawn from legislation I introduced. Current law authorizes the 
Department of the Interior to support efforts in foreign countries to 
protect endangered marine turtles. Section 20 would enable the 
Department to support such projects in the U.S. territories as well. 
This is appropriate given that four of the seven species of marine 
turtles are found in Puerto Rico. The territories are home to many 
natural treasures. Section 20 empowers the federal government to 
provide assistance to preserve one of these treasures for present and 
future generations.
    In closing, I want to express my appreciation to this Committee for 
its attention to the fiscal, energy and environmental concerns in the 
territories. I look forward to working with the Committee to advance 
this legislation and to make any additions to the bill that may be 
appropriate.
    Thank you.

    The Chairman. Very good. Thanks so much.
    Ms. Sobeck, representing the executive branch. We have had 
4 legislators. We have now the executive branch.

  STATEMENT OF EILEEN SOBECK, ACTING ASSISTANT SECRETARY FOR 
           INSULAR AREAS, DEPARTMENT OF THE INTERIOR

    Ms. Sobeck. Thank you very much, Mr. Chairman. Thank you 
for your gracious invitation today. Ranking Member Murkowski 
and Senator Risch, thank you for including me on this 
distinguished panel.
    My full statement addresses all of the sections of the 
bill. In this limited time I will just touch on a few of them 
without any disrespect for the ones that I'm leaving out.
    First, with respect to section 3 of the bill regarding 
giving CNMI authority over submerged lands out to 3 miles from 
its coastline. CNMI is the only territory that currently 
doesn't have authority over, title to its submerged lands. We 
do support CNMI getting this authority out set out consistent 
with the January 2010 Presidential Proclamation creating the 
Marianas Trench Marine National Monument. Therefore the 
Department of the Interior strongly supports enactment of 
section 3.
    But we also strongly recommend an amendment that addresses 
the coordination of management as contemplated in the 
proclamation prior to the transfer of submerged lands to ensure 
that the island unit of the monument will retain its 
protections. We look forward to working with the CNMI to ensure 
that an appropriate agreement is worked out.
    With respect to section 6 of the bill which calls for 
energy action plans for each territory and the FAS. We believe 
that this language is largely duplicative of an existing law, 
Section 604 of Public Law 96-597, except that the Secretary of 
the Interior would now be responsible for the described energy 
effort rather than the Secretary of Energy.
    However 8 years ago Interior undertook a comprehensive 
effort to study energy needs and is currently supporting energy 
planning efforts through NREL and financed by our Technical 
Assistance Program within the Department of the Interior. Our 
2014 budget includes funds to implement a number of the NREL 
recommendations. Therefore the Department of the Interior 
opposes section 6 of S. 1237 as duplicative of existing 
authority and existing actions and programs being carried out 
by the Department of the Interior.
    With respect to section 7, which includes provisions for 
establishing a Chief Financial Officer for the Virgin Islands 
and a plebiscite of Virgin Island voters on the issue. In the 
past the Department of the Interior has had no objection to 
such a bill because it would only have imposed some diminimus 
interference with self government of the Virgin Islands. With 
the addition of the plebiscite we think that's only reinforced. 
So at this point the Department of the Interior has no 
objection to the enactment of section 7.
    With respect to the Low Income Home Energy Assistance 
Program. We are very sympathetic to the concerns that have been 
raised by Representative Christensen. Given that the electric 
rates in the Virgin Islands are more than 4 times those on the 
U.S. mainland, it seems as if payments under the Assistance Act 
of 3 times the mainland amount for a limited period is quite 
reasonable.
    We would note that in addition the territories of Guam, 
CNMI and American Samoa are also paying significantly higher 
residential rates than in the rest of the United States. We 
would have no objection to the enactment of similar provisions 
on a fair pro rata basis, some sort of formula that the 
committee devised for the other territories and that they be 
included in this section as well.
    Section 10 would establish Castle Nugent on St. Croix as a 
National Historic Site within the National Park system. A 
special resource study has already found that site has met the 
criteria for inclusion in the National Park system. Including 
this site would protect this outstanding cultural landscape. We 
support that provision.
    Section 11 would include the entire island of St. Croix as 
a National Heritage Area and we generally support the 
objectives of this section. But we would recommend that 
Congress enact a programmatic legislation that establishes 
criteria to evaluate potentially qualified National Heritage 
Areas and a process for the designation funding and 
Administration of these areas before designating any additional 
sites.
    With regard to the Guam War Claims Review Commission. We 
understand the importance of this provision. We understand that 
the creative measures being taken to fund it. We recommend that 
broad counsel be taken along Guam leaders.
    With respect to section 13. While we are mindful and 
sympathetic of the impacts and we know that this is a huge 
concern. We are very concerned and must object to the 
provisions of section 13. We believe that there are not the 
specific and exacting standards that are necessary to determine 
what the standards for measuring the costs and the benefits 
incurred by migration to the State of Hawaii and the 
territories and that those must be established before anything 
along those lines could ever be included.
    With respect to matching requirements. Of course we are 
fine with those provisions with respect to the Department of 
the Interior an increase seems more than reasonable.
    With regard to the American Samoa plebiscite, Citizenship 
Plebiscite Act, we support that provision. It seems like an 
auspicious time to support finding out what the will of the 
people of American Samoa are with respect to citizenship.
    Finally, with respect to the marine turtles, we would have 
to object to not support section 20 at the moment. While we 
support the intent for increased funding for turtle 
conservation in the U.S. territories, we note that there's 
already a significant amount of domestic spending for the 
States and the territories for marine turtle protection and 
conservation and that the Turtle Conservation Act of 2004 is 
designed to provide a small amount of funds to foreign 
countries.
    The Chairman. Why don't you see if you could, Ms. Sobeck, 
wrap up. We just want to ask some questions.
    Ms. Sobeck. That concludes my remarks, Mr. Chairman.
    The Chairman. Very good. Thank you.
    Congresswoman Christensen, on the electric rate front, as 
we've heard today all the territories are getting just 
clobbered with these high electric rates. I know your 
constituents have a particularly difficult time because of the 
suddenness of the price spike coinciding with the departure of 
HOVENSA, this very large employer and fuel supplier.
    So tell us a little bit. I understand you've got some 
short-term plans to cope with this. Why don't you lay out for 
us what you hope to do there?
    Ms. Christensen. If you would visit, especially St. Croix 
right now, you would find that many of our businesses have 
closed. Even in some areas you'll find that some households are 
going without electricity because of the high cost because we 
are approximately 5 times the national average.
    So while our utility, the Virgin Islands Water and Power 
Authority, is in the planning stages for making a transition to 
propane and then to natural gas. That would probably not happen 
for another 12 to 18 months. The people of the territory, given 
our economic conditions and the costs now cannot wait that 
long.
    So one of the areas is increasing the LIHEAP assistance in 
the territories for a period of time. I have no objection to 
having it extended to the other territories who are facing 
similar high costs.
    Another one is increasing weatherization funding so that 
households can reduce their use of electricity and thus reduce 
the costs.
    We have another proposal that we're trying to work through 
the Farm bill that would transfer funds from a loan program at 
USDA to the High Energy Costs Grant Program that they have that 
would assist any of the territories that meet the criteria of 
that grant right now with additional funding to help to lower 
the cost of their electricity. We're working with Senator 
Stabenow and her staff on that one.
    We just feel that it's really critical. There's no more 
important issue to the people of the territory right now than 
reducing their electricity costs. It is creating safety hazards 
for families. It is hampering our economic recovery and making 
it very difficult.
    I would add that the House Energy and Power Committee, 
yesterday, passed my bill to create the team of technical 
experts that is included in this bill today. We feel that that 
is critically important. EIA has been very helpful over the 
years, but we still are facing 50 cents and 54 cents costs. 
When we started to look at propane and natural gas, because 
they are focused on renewal, they were not able to really 
expand from that to help us look at the full range of fuel 
sources because we, like the President, we believe in an all of 
the above. We still don't have an integrated resource plan that 
would help us put the best mix of fuel sources together and 
create energy for the lowest cost for our territory.
    The Chairman. Let me see if I can get some of your other 
colleagues into this discussion. But I very much want to work 
with you on these energy issues and know you've put a lot of 
time into this.
    Ms. Bordallo, as you know various versions of the Guam War 
Claims issue have been discussed here in the Senate over the 
years. We've talked about the issues with respect to the price. 
Tell us your take with respect to how the text of the Guam War 
Claims issue in the Omnibus Territory bill is going to get us 
over the challenges we've seen in the past?
    I know you're trying very hard to be creative on this.
    Ms. Bordallo. Thank you. Thank you, Mr. Chairman.
    First let me correct the record. I mentioned that we 
represent, we delegates and the Resident Commissioner here, 
represent 1.5 million. It's 4.5 million thanks to the huge 
population of Puerto Rico. But I do want to emphasize that, 
that we are American citizens living in U.S. jurisdictions.
    The war claims is very important to me, Mr. Chairman. All 
of my predecessors, beginning with Mr. Won Pat, which he was 
our first, have tried to get this through. The immediate 
predecessor, Dr. Underwood, introduced legislation to establish 
a commission. We have followed the rules all along the way.
    I came into office, but there wasn't funding for this 
commission. So we received the funding, established a 
commission. They met several times, had meetings, public 
hearings, back in Guam and decided, very, very thoroughly that 
we were not treated, you know, in the right way. We deserved to 
be given some compensation and recognition for what we went 
through during World War II.
    Now the cost has come up, Mr. Chairman, at first. 
Incidentally this bill, 44, has gone through the House 5 times.
    Once by an outright vote. Other times it was included in 
the National Defense Authorization Act.
    Then it came over to the Senate. We took out a section 
there of survivors of those who died during the war and that 
was objectionable to one of the Senators. So we removed that. I 
went back to Guam and checked with our people. They agreed it's 
alright.
    So that was removed. Then the last time I went down on the 
Senate Floor we were asked for an offset. Now we have come up 
with an idea for an offset.
    So we have done everything we can. It is very, very 
important to Guam. Although there are very few survivors now, 
the CBO last estimated in 2010 that the bill would cost about 
$100 million. But that was before they had the 2010 census 
data.
    So now, we have roughly estimated off informal surveys that 
we did several years ago that the cost would be around $80 
million. Again, this is informal.
    As we speak many of the survivors are dying. They are in 
their 80s and 90s now. I just feel that, you know, as long as 
I'm a member of the Congress, I hope we will see this through.
    It's been a thorn in the side of many of our local people. 
They feel that other jurisdictions, the CNMI were given their 
recognition and compensation for what they went through. With 
that I just feel that it's very, very important to where I am 
to get it through.
    The Chairman. I'm over my time. I want to recognize my 
colleagues.
    But we will work very closely with you, Ms. Bordallo. I 
know this has just gone on and on and on. It's time to get a 
resolution of it.
    To my other colleagues, Congressman Sablan and Congressman 
Pierluisi, we may give you some questions in writing.
    Both of you have given excellent presentations.
    I know that Congressman Sablan, you have some issues with 
respect to the deadline on section 4 of S. 256 and some of the 
concerns that could cause a hardship if this isn't resolved 
quickly.
    So all of you have given excellent presentations.
    Let me recognize, Senator Murkowski now and then Senator 
Manchin.
    Senator Murkowski. Thank you, Mr. Chairman.
    As I listen to each of you present here on these issues I 
can't help but be reminded that it was just several decades ago 
that Alaska was in the same situation. We were a territory. We 
were treated like a territory.
    We've made some progress as a State. Some would say we have 
done some amazing things. But yet as I listen to your issues 
and your priorities, they are still so much the same as we face 
in Alaska.
    The high cost of energy, even though we are an energy 
producing State, unlike Puerto Rico, the Virgin Islands, where 
you are not able to produce. We're able to produce and yet we 
still have some of the highest energy costs in the 50 States. 
In one village, Lime Village, it is the highest cost per capita 
or per kilowatt/hour. The folks there in that village are 
paying $1.40 a kilowatt hour. It's not sustainable.
    It's not, as you know, Congresswoman, you can't afford to 
live in these places. So many of our rural communities, our 
rural villages, are facing energy costs in excess of 40, 50 
cents a kilowatt hour. They cannot continue to live.
    It's a different situation. They don't need the air 
conditioning, but they need the heat. So at the end of the day 
it all comes down to being able to live in a region, in an 
area.
    The Congressman from American Samoa, good friend, spoke to 
the issue of the cost benefit ratio that you face. It's pretty 
tough to meet a ratio that seems reasonable when your costs are 
so high because of transportation, small population numbers. 
It's never going to pencil out. So we lose every single time.
    You also mentioned the issue of meeting the match, the 
local match. Again, when you don't have significant population, 
it's just really difficult to be in there and competing.
    So please know that I share the frustration that so many of 
you have as you try to represent those in your respective 
territories. We have a lot of work to do together.
    I'd like to ask you, Congressman Sablan, about this 
immigration transition period. You mentioned it in your 
comments. It's my understanding that the Secretary of Labor 
doesn't need to make a decision on the extension until 180 days 
before the transition period ends there at the end of the year 
2014.
    So, OK, technically we've got a period of time here. But 
what does waiting do to the local businesses, the economy, if 
you don't know what the decision is going to be? Have you given 
any consideration to what the impact might be with the 
situation in terms of just really not knowing whether this 
transition is going to be extended?
    Mr. Sablan. Yes. Thank you. Thank you very much for the 
question.
    Yes, the impact is serious. At a time when we're just 
beginning to see an uptake in our economy. In the last study we 
saw an uptake of 2.3 percent.
    Basically grateful to Inos spending, it was territory 
government spending. Too recent the family beginning to pick 
up. Businesses need to make a decision.
    Obviously the present law says that the Secretary of Labor 
has to make a decision by 180 days before, but look, we've all, 
you know, we've seen, we know the bureaucracy like to wait 
until the very last minute to make decisions. But we would like 
to treat businesses and workers in the Northern Marianas better 
than that just out of common decency. Businesses need to plan 
out. Airline charters need to be arranged. Hotel rooms need to 
be booked. They need to decide, to know, whether those workers 
are going to be there.
    The Department of Homeland Security has said the number of 
workers, CW workers in the Northern Marianas at 15,000 up to 
2014. So we know that we can't zero this out immediately on 
December 31, 2014. We know that they will have to just make an 
extension, recently, consistent with the law. We're just urging 
them to do so. They can't wait until 180 days just because 
that's what the law says.
    But we've been trying to work with them. Now we finally had 
a meeting. We got nothing from that meeting really except, you 
know, just a lot of meeting. We really need to continue to urge 
them. So we're trying to include that in the language.
    Thank you very much. I hope I have answered your question, 
Senator.
    Senator Murkowski. You did. I appreciate that. It would be 
helpful if you could get something from that meeting in terms 
of an indication as to where they might want to go.
    My time is expired. But I want to ask very quickly to 
Congresswoman Bordallo regarding the Guam War Claims language.
    You've mentioned that given the very specific beneficiaries 
of these war claims and the fact that these individuals are 
dying off at a rate. That you initially anticipated about $100 
million would be necessary. Now it's down to 80.
    Given what we're seeing in terms of the military buildup so 
the additional funding that would then come under this section 
30. How many years of funding do you anticipate you would need 
to cover these war claims?
    Have you done an assessment on that?
    Ms. Bordallo. No, we haven't done that. But it's a good 
question.
    However, I do want to point out, Senator, that we do have, 
we have talked to the Guam legislature and the Governor about 
this and have explained it to them very thoroughly. They seem 
to be on board with this.
    We have had occasions where they've said they've agreed to 
it. I do want you to know that.
    The point is that we would take these section 30 moneys 
until such time this amount is covered and the years that it 
would take? I really couldn't. We'd have to know how much money 
the military is going to contribute to the section 30 funding.
    We could certainly let you know that if we could look at 
it. But it's a very good question.
    Senator Murkowski. I think it might be helpful.
    Ms. Bordallo. Yes. We will want to be sure that we go back 
to the previous. Once it's covered that we then, the section 30 
funding with addition to the military, will be back in the 
government of Guam coffers.
    Senator Murkowski. Thank you. Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Murkowski.
    We're always glad to have our friend, Senator Manchin. 
Welcome.
    Senator Manchin. Thank you, Mr. Chairman.
    Before I start my line of questioning with Congresswoman 
Christensen, my disclaimer is I'm a former Governor. So you 
know where I'm coming from with the questions.
    The revised Organic Act of the Territory of the Virgin 
Islands provides for the Executive and legislative branches to 
make important decisions on behalf of the territory's 
residents. It seems that your proposal to install a CFO to make 
important budgetary decisions for the Virgin Islands, 
undermining both this act and the current processes of trying 
to find a path toward a constitution.
    Your response?
    Ms. Christensen. On the issue of the constitution. Most 
every constitution has included a provision such as a Chief 
Financial Officer. And often we've seen that as we have not 
been able to pass a constitution certain provisions have 
actually been put in place.
    My legislation to create a Chief Financial Officer is a 
temporary position. It is one that would come to a referendum 
under the original legislation at some point before the term 
was up. So it's seen as a temporary, not a permanent, position. 
So we don't feel that it is contrary to the Organic Act.
    But more importantly, you know, when we looked at where our 
government was in 2003 and where we look at where it is today, 
I think it is a reasonable approach to addressing, not only the 
distress that exists of government, but in just being more 
fiscally responsible and fiscally accountable. It is 
interesting that in every election that has taken place since 
2003, as we go to forums and debates, the issue is always 
raised. Are you in favor of a Chief Financial Officer?
    I will tell you that, with very few exceptions, no one 
running for office is willing to say to the public that they 
don't support it. There's wide public support for it.
    Senator Manchin. Let me ask you this.
    Installing an appointed and not an elected CFO to supervise 
the finances of the Virgin Islands seem like that would be, to 
me, hard to do, especially when you enjoy democratic elections.
    As a former Governor I appointed my revenue secretaries. I 
appointed my budget teams. I was held accountable and 
responsible.
    You have an election. I understand you're running for 
Governor?
    Ms. Christensen. I plan to.
    Senator Manchin. OK. So why wouldn't you wait and then if 
you want to give those powers away or if you want to put the 
right person, why wouldn't you do it then?
    Ms. Christensen. As we have gone through this process and 
we've reached----
    Senator Manchin. Why----
    Ms. Christensen. Senator, this has passed the House 5 
times--4 times.
    Senator Manchin. Let me ask you this, if I may.
    Ms. Christensen. Can I just respond to the first question?
    Senator Manchin. OK.
    Ms. Christensen. At this point in this Omnibus Territories 
bill the Chief Financial Officer would go to a referendum where 
the people would decide at the next election. I think that that 
is only fair. Let the people voice their will.
    Senator Manchin. The people have voiced if they've elected 
your Governor. If I was your Governor I would be offended that 
you would be pushing my Administration that I'm not running it 
properly when I just got ratified. I just got elected.
    How?
    Ms. Christensen. The Governor himself, when he was first 
running, when he was asked at a forum, did he support the Chief 
Financial Officer? And at that time the Chief Financial Officer 
had more authority to interfere in the authority of the 
Governor in the first iteration of this bill. The Governor said 
yes, I support a Chief Financial Officer.
    Senator Manchin. The way this bill is drafted, S. 1237, it 
says each year prepare and certify spending limits of the 
annual budget including annual estimates. That's----
    Ms. Christensen. That's all they do.
    Senator Manchin. That's what your revenue person does. Do 
you not have a revenue person at all?
    Tax Department?
    Revenue Department?
    Ms. Christensen. Yes, we do.
    Senator Manchin. You're saying they're incompetent.
    Ms. Christensen. No. I'm saying that and you've heard it 
from the Puerto Rican Resident Commissioner, that at times the 
revenue projections are off and it has caused problems in 
Puerto Rico. It's caused problems in the Virgin Islands.
    Senator Manchin. If you revenue projections are off your 
legislature hasn't done their job. There's a check and balance. 
That's a democracy.
    You have a democracy.
    Ms. Christensen. Would you object to having the people of 
the Virgin Islands decide whether they wanted a Chief Financial 
Officer or not?
    Senator Manchin. Why don't you do away with your 
legislature and your elected officials?
    Ms. Christensen. I don't think that that is----
    Senator Manchin. You can't have your cake and eat it too. 
You can't have democracy.
    Ms. Christensen. I don't think that there's anything 
undemocratic. The District of Columbia has a Chief Financial 
Officer. If you read the bill the Chief Financial Officer goes 
through the process of a nomination by the Governor after 
having a committee present that person to them and is approved 
by our local legislature as well.
    Senator Manchin. But I understand revenue. I did an awful 
lot of budgets. I understand how the process works.
    If I gave erroneous revenue estimates to my legislature, 
they hold me accountable. The people hold me accountable when I 
go to the election because I haven't been honorable or 
transparent. I understand all that.
    The process either has to work or it doesn't work or you 
have to get new people.
    I just, very respectfully, I'm so sorry. I just disagree 
because I believe in a democracy. I believe in elected 
officials doing their job and being held accountable. If they 
don't, I think when the people speak then we must work through 
a system. If not, then you have incompetency. They can be 
removed or impeached.
    But you're forcing something to where I know your 
administration is opposed to that right now. If you wish to do 
it, God willing, and you're elected. Then you'll have that 
opportunity.
    Ms. Christensen. The current administration was not always 
opposed. But at this point in time at the next election where 
I'm supporting having the people of the territory decide 
whether they want that Chief Financial Officer.
    Senator Manchin. Sure.
    I think you should wait until that time to do that. That's 
why I will be opposing this process right now.
    Ms. Christensen. The current bill waits until 2014 for that 
referendum.
    Senator Manchin. I will duly, respectfully, oppose this at 
the proper time.
    Thank you.
    Ms. Christensen. Thank you for your question.
    The Chairman. I thank my colleague. I would just say, 
Senator Murkowski and I often find ourselves in this kind of 
situation. These issues generate a lot of strong feeling and 
two individuals I consider good friends, we've just seen that.
    One of the thoughts that I think is worth exploring in an 
effort to try to find some common ground is to see if we can 
use this GAO report to try to identify concerns that could 
allow us to come together. So I would just say to two people 
that I've worked with in the past and who I think have a lot of 
integrity, we will stay at this and see if we can find a way 
together.
    Senator Manchin. Mr. Chairman, I always like to work with 
you.
    The Chairman. You always do. I just tell my friend from 
West Virginia back when we were trying to do health reform and 
we had the only bipartisan proposal, the Congresswoman was 
there on those kinds of issues.
    Senator Manchin. Sure.
    The Chairman. I think there's something to be addressed 
here in terms of agreement and perhaps it will be the GAO 
approach. Perhaps it will be others. But I just want both of 
you to know that we will take your----
    Senator Manchin. I hope that the Congresswoman knows that 
with all due respect I just, as a former Governor, I have a 
hard, you know. Your political opponents and it becomes a 
political battle back and forth, always has been.
    But the bottom line is the elected official basically has 
the support of the majority of the people who voted. That's a 
democracy. You enjoy democracy.
    I've been to your beautiful islands. Your people are 
beautiful. I really love it.
    I've had interactions with, through the Governor's 
Associations, with everybody. I think when the people speak, 
you know, democracy has to grow from that. If there's something 
wrong, we can help and we can assist. There might be a report. 
There might be assistance.
    But to force legislation upon an administration that does 
not wish it and they're held accountable by the elected 
officials, by the electorate. You follow? It's hard for me to 
comprehend that. I just have a hard time with that.
    Ms. Christensen. Let me say to you, Governor Manchin, that 
we've appreciated the work that West Virginia has done with us 
on our health care issues. I would say that regardless of what 
a GAO study might or might not say, the people of the Virgin 
Islands may still desire to have a Chief Financial Officer.
    I've been elected since 2003 several times with more votes 
than any Governor running at the time. But I'm running which 
should say that the people of the Virgin Islands have supported 
the concept of the Chief Financial Officer as well.
    Senator Manchin. If I can say this, Mr. Chairman?
    Just one thing, very quickly is that what the Congresswoman 
was referring to, is that we found out that we had the capacity 
in our computer. We just bought a new computer system when I 
was Governor, that we could help the Virgin Islands basically 
run, help, assist them with their Medicaid without them having 
expenditure. It's really the cooperation we all should have. 
We're all together, all of us.
    The Chairman. Let's do this. Let's give the last word to a 
special peacemaker, Senator Murkowski. She's got to get to her 
11 hearing and there are also caucuses and the like. She has 
been particularly helpful in trying to bring all sides 
together.
    Because I happen to think the Congresswoman has valid 
concerns. We consistently appreciate Senator Manchin and his 
efforts to try to bring people together. We're going to stay at 
it.
    Last words for this panel for Senator Murkowski.
    Senator Murkowski. I thank you, Mr. Chairman. I don't have 
a magic wand to wave today. If I did I would fix all of the 
energy cost issues, not only in the territories, but all over 
the 50 States as well.
    But I think it's clear that you need to have a voice here 
in the U.S. Congress. You are all quite confident and 
qualified, but in doing your job and representing the people of 
your regions, you also know that you don't have that full vote. 
So it must be extraordinarily difficult as you try to advocate 
on some issues that are challenging, are complicated, are 
complex and oftentimes are very emotional.
    So, know that within this committee you have colleagues 
that want to try to help a process. That I think it was the 
Congressman from American Samoa that mentioned you sometimes 
you're just forgotten you're left out. Know that here we don't 
want you to feel forgotten and left out with your issues, as 
difficult as they may be.
    So we pledge to work with all of you.
    The Chairman. That sums it up ideally because you all have 
brought passion and expertise. We appreciate you. We'll excuse 
you at this time.
    Ms. Sobeck, we're going to have actually you on this next 
panel which will consist of Ms. Sobeck.
    Vikram Singh, representing the Department of Defense.
    Edgard D. Kagan, representing the Department of State.
    If you all would come forward.
    Alright, let us hear from Ms. Sobeck, then Mr. Singh and 
Mr. Kagan.
    As I indicated we'll make your prepared statements a part 
of the record. I suspect it's going to start getting hectic 
here this morning. If you can just take your 5 minutes and say 
your piece and represent your departments that would be great.
    All your prepared statements will be made part of the 
record.
    Ms. Sobeck.
    Ms. Sobeck. Thank you very much, Mr. Chairman.
    The Compact of Free Association with Palau has proven to be 
a very successful framework for both the United States and 
Palau, our joint relations.
    The goals of the first 15 years of the compact have been 
met.
    The trusteeship was terminated.
    Palau's self government was restored.
    A stable democratic state was established.
    Other countries were denied military influence in the 
region of Palau.
    With the United States financial assistance, a base for 
economic growth has been provided.
    The original financial terms and conditions of the compact 
have been fully implemented.
    Palau has made strong, economic gains under the Compact of 
Free Association. Its growth in real terms has averaged just 
over 2 percent per year. Palau has taken control of its destiny 
and is moving in the right direction.
    As both the United States and Palau began their mandated 
compact review several years ago they agreed that economic 
growth would rely on 4 key factors.
    First, trust funds ability to return $15 million a year.
    Second, fiscal reforms to shrink Palau's public sector and 
raise revenue.
    Third, increased foreign investment and private sector 
growth.
    Four, continuation of certain U.S. assistance.
    The new agreement addresses all of these concerns.
    The agreement extends U.S. assistance in declining annual 
amounts through fiscal 2024 with a total direct financial 
assistance under the agreement is $229 million, $52.6 million 
of which has already been appropriated through fiscal year 
2013.
    The amount of direct assistance will decline every year 
which is intended to provide an incentive for Palau to develop 
other sources for local revenue and the Palauan government will 
need to make systemic adjustments in order to live within those 
resources.
    The agreement contains 5 categories of financial assistance 
for Palau.
    Category 1, direct economic assistance for education, 
health, administration of justice and public safety, starting 
at $13 million a year and declining to $2 million in 2023.
    Category 2, infrastructure projects in the amount of $40 
million to be mutually agreed upon in the future.
    Category 3, infrastructure maintenance funds for capital 
projects previously financed by the United States.
    So during the life of the agreement the U.S. Government 
will have contributed $2 million annually and the Palau 
government will have contributed $600 thousand annually to the 
fund.
    Category 4 is a fiscal consolidation fund where the United 
States will have provided grants, $5 million, during each of 
the first 2 years to help Palau reduce its debt.
    Finally Category 5, the trust fund where the United States 
will contribute approximately $30 million through 2023. Palau 
will delay withdrawals from the trust fund. Under the agreement 
withdrawals from the trust fund may only be used for education, 
health, administration of justice and public safety.
    Under the new agreement the United States and Palau will 
work cooperatively through an advisory group on economic, 
financial and management reforms through an annual, bilateral, 
economic consultations and finally through the provision of 
other U.S. services and programs, through the Postal Service, 
through the Weather Service, the Federal Aviation 
Administration and the Departments of Education and Health and 
Human Services.
    While awaiting Congressional approval of the agreement, 
Interior has remained engaged with Palau through OIA's 
technical assistance program and assistance for repair of the 
compact road and facilitating Palau's participation in regional 
forums. Approval of this agreement remains a priority of the 
Administration, as I think is evident through the letter that 
transmitted the legislative proposal.
    We look forward to working in partnership with Palau. We're 
proud of the contribution that Interior and other agencies and 
the contribution of the United States has made to the success 
that we call Palau. We look forward to future progress in this 
area.
    Thank you for your consideration.
    [The prepared statements of Ms. Sobeck follow:]

 Prepared Statements of Eileen Sobeck, Acting Assistant Secretary for 
               Insular Areas, Department of the Interior
                                s. 1237
    Mr. Chairman and members of the Committee on Energy and Natural 
Resources, I am pleased to discuss, on behalf of the Department of the 
Interior, certain provisions of the Omnibus Territories Act of 2013, S. 
1237. Sections 14, 15, 17, 18 and 20 of the bill pertain to matters 
outside of the Department's jurisdiction; as such the Department defers 
to the relevant federal agencies for their views on these provisions.
Territorial Sea
    Section 3 would give the Commonwealth of the Northern Mariana 
Islands (CNMI) authority over the submerged lands out to three 
geographical miles from its coast lines.
    At present, the CNMI is the only United States territory that does 
not have title to the submerged lands in that portion of the United 
States territorial sea that is three miles distant from its coastline. 
It is appropriate that the CNMI be given the same authority as other 
territories.
    On January 6, 2009, by presidential proclamation, the Marianas 
Trench Marine National Monument (Monument) was created, including the 
Islands Unit, comprising the submerged lands and waters surrounding 
Uracas, Maug, and Asuncion, the northernmost islands of the CNMI. While 
creation of the monument is a historic achievement, it should be 
remembered that the leaders and people of the CNMI were and are these 
three islands' first preservationists. They included in their 1978, 
plebiscite-approved constitution the following language:

          ARTICLE XIV: NATURAL RESOURCES
          Section 1: Marine Resources. The marine resources in the 
        waters off the coast of the Commonwealth over which the 
        Commonwealth now or hereafter may have any jurisdiction under 
        United States law shall be managed, controlled, protected and 
        preserved by the legislature for the benefit of the people.
          Section 2: Uninhabited Islands . . . . The islands of Maug, 
        Uracas, Asuncion, Guguan and other islands specified by law 
        shall be maintained as uninhabited places and used only for the 
        preservation and protection of natural resources, including but 
        not limited to bird, wildlife and plant species.

    It is important to note that the Northern Marianas Commonwealth 
Legislature has never taken action adverse to the preservation of these 
northern islands and the waters surrounding them. The people of the 
CNMI are well aware of their treasures. CNMI leaders consented to 
creation of the monument because they believed that the monument would 
bring Federal assets for marine surveillance, protection, and 
enforcement to the northern islands that the CNMI cannot afford.
    If enacted, section 3 would become a public law enacted subsequent 
to the creation of the Monument, and would convey to the CNMI the 
submerged lands surrounding Uracas, Maug, and Asuncion without 
addressing the effect of this conveyance on the administrative 
responsibilities of the Department of the Interior and the Department 
of Commerce. Presidential Proclamation 8335 (Proclamation) assigned 
management responsibility of the Monument to the Secretary of the 
Interior, in consultation with the Secretary of Commerce. The 
proclamation further states that the ``Secretary of Commerce shall have 
the primary management responsibility . . . with respect to fishery-
related activities regulated pursuant to the Magnuson-Stevens Fishery 
Conservation and Management Act (16 U.S.C. Sec. Sec.  1801 et seq.) and 
any other applicable authorities.'' The Proclamation provides that 
submerged lands that are granted to the CNMI ``but remain controlled by 
the United States under the Antiquities Act may remain part of the 
monument'' for coordinated management with the CNMI. As envisioned by 
the Proclamation establishing the Monument, the Administration remains 
committed to protecting the outstanding resources in the waters 
surrounding the CNMI's three northernmost islands.
    Specifically, the Department strongly recommends an amendment to 
section 3 that addresses the coordination of management as contemplated 
within the Proclamation, prior to the transfer of the submerged lands 
within the Islands Unit of the Monument to the CNMI. Such language 
would protect the Islands Unit of the Monument and at the same time 
acknowledge the prescient and historic conservation effort of the 
leaders and people of the CNMI in protecting Uracas, Maug, and 
Asuncion, and their surrounding waters.
    The Department of the Interior strongly supports section 3 and 
strongly recommends the above-referenced amendment. The Department of 
the Interior looks forward to the Commonwealth of the Northern Mariana 
Islands gaining rights in surrounding submerged lands similar to those 
accorded other territories.
Adjustment of Scheduled Wage Increases in the CNMI
    Section 4 of the bill would slow minimum wage increases in the CNMI 
by forgoing the increases slated to take effect on September 30, 2013, 
and 2015. The 50-cent increases scheduled to occur in 2014, 2016 and 
annually thereafter would remain in effect.
    In 2007, the Congress put American Samoa and the CNMI on a path to 
match the United States minimum wage within a few years. Legislation 
dictated increases to the minimum wage of 50-cents per year, until 
parity was achieved.
    Due to substantial economic hardship in American Samoa--the closure 
of one of its two tuna canneries--the law was amended to skip the 
increases for American Samoa from 2011 through 2014.
    Both territories have isolated locations in the Pacific Ocean in 
neighborhoods of low wages. The CNMI has also suffered the loss of one 
of its two major industries--garment manufacturing. The purpose of 
section 4 is to spread out the minimum wage increases for the CNMI to 
help ensure the survival of island businesses and their employees' 
jobs. Specifically, section 4 would slow the pace of minimum wage 
increase until after 2015, when the annual increases would resume, 
similar to the adjustment made previously for American Samoa.
    The Department of the Interior has no objection to section 4.
CNMI Immigration Issues
    Section 5 deals with fees and funding vocational education 
curricula and development of educational entities, and a five year 
extension of the statutory period (through December 31, 2019) for 
lowering the number of CNMI-only foreign transitional worker permits to 
zero.
    Subsection 1 of Section 5 requires the CNMI government to provide a 
plan for the expenditure of educational funds collected (as required by 
statute) by the Department of Homeland Security as a supplemental fee 
on CNMI employers' transitional worker immigration petitions and 
provided to the CNMI government, and a projection of the effectiveness 
of these funds in finding employment for U.S. workers. Every two years 
the Secretary of Homeland Security must report on the effectiveness of 
meeting the goals set out in the annual plan.
    Subsections 2 and 3 of section 5 also relate to CNMI-specific 
immigration provisions contained in the Consolidated Natural Resources 
Act of 2008 (CNRA). The CNRA shifted administration of immigration in 
the CNMI from CNMI to Federal authority, but also established a five-
year transition period to allow the CNMI economy to adjust to the new 
regime.
    Coincident with change in World Trade Organization rules and the 
demise of the CNMI garment industry in the late 2000s, the CNMI's 
economy has struggled. The resulting tax and revenue decline has been 
challenging for the CNMI government.
    The Department of the Interior has always supported measures that 
promote economic development in the CNMI, and in the CNRA, the Congress 
specifically directed the Department of the Interior to aid the CNMI 
economy during the immigration transition. As a result, in 2011, the 
Department conducted a Forum on Economic and Labor Development (FELD) 
in Saipan, designed to elicit from the CNMI community ideas and goals 
for the CNMI economy. The Department later provided $1 million in grant 
funds to implement the FELD findings.
    While it cannot yet be characterized as an economic rebound, 
statistics from recent months show increases in CNMI tourism and hotel 
bookings.
    Nevertheless, businesses and CNMI government officials are 
concerned that if the approximately 12,000 foreign workers resident in 
the CNMI under the transitional worker program were forced to leave at 
the end of 2014, the reduction would have significant adverse 
consequences for the CNMI economy.
    Under the CNRA, the Secretary of Labor already has the discretion 
to extend the CNMI-only transitional worker program by up to five years 
if warranted by economic conditions. The Department of Labor is now 
conducting studies that will inform that decision.
    The Department of the Interior defers to the Departments of Labor 
and Homeland Security regarding important aspects of section 5.
Study of Electric Rates in the Insular Areas
    Section 6 of the bill is entitled ``Study of Electric Rates in the 
Insular Areas.'' The legislative language that follows, however, goes 
much beyond a study. The language calls for an ``energy action plan'' 
for each territory and freely associated state (FAS) and implementation 
of those plans. The legislative language is largely duplicative of 
section 604 of Public Law 96-597 (48 USC 1492), except that, the 
Secretary of the Interior would be responsible for the described energy 
effort, rather than the Secretary of Energy.
    It should be noted that eight years ago, Interior undertook a 
comprehensive effort to study energy needs in the U.S. territories and 
FAS, and to develop viable energy plans (which included an appropriate 
role for renewable energy sources) for each jurisdiction. Currently, 
the Office of Insular Affairs is supporting broad renewable energy 
planning efforts through the National Renewable Energy Laboratory 
(NREL) financed by our Technical Assistance Program. The President's 
2014 budget for OIA includes funding for specific energy projects under 
Empowering Insular Communities to implement a number of the NREL 
recommendations.
    The Department of the Interior opposes section 6 of S. 1237 as 
being unnecessary because it is duplicative of section 604 of Public 
Law 96-597, and of current efforts to implement the energy plans that 
have been and are being developed.
Chief Financial Officer of the Virgin Islands
    Section 7 includes a provision for establishing a chief financial 
officer (CFO) for the Virgin Islands, and a plebiscite of Virgin Island 
voters on the issue.
    In the mid-2000s, an earlier CFO bill would have placed significant 
restrictions on local self-government and the powers of the elected 
Governor of the Virgin Islands as established in the Virgin Islands 
Revised Organic Act. A revised CFO bill was the subject of a hearing 
last year in the House of Representatives. The Department of the 
Interior had no objection to that bill because it would have 
constituted ``only de minimus interference with self-government in the 
Virgin Islands.'' We noted that the purpose of the bill was to rein in 
deficit spending, but that the bill did not require a balanced budget.
    S. 1237 adds a new provision requiring a plebiscite on the question 
of whether or not a chief financial officer position should be 
established. This extra layer of approval for the CFO position by the 
voters of the Virgin Islands would demonstrate acceptance of the 
concept or not, by the citizens of the Virgin Islands.
    The Department of the Interior has no objection to the enactment of 
section 7.
Reports on Estimates of Revenue
    Section 8 would require the governors of American Samoa, the 
Northern Mariana Islands, Puerto Rico, Guam and the Virgin islands each 
to submit a report on the process for developing annual estimates of 
the government's revenues and expenditures and any supporting documents 
and schedules to appropriate committees of the Congress and the 
Comptroller General of the United States, and also require the 
Comptroller General to submit a report evaluating the reasonableness of 
those estimates and if necessary submit recommendations for improving 
the processes for developing the estimates to appropriate committees of 
the Congress.
    Over the years, in statements related to the legislation that would 
create a Chief Financial Officer of the Virgin Islands, the Department 
of the Interior has stated that all the territories have had difficulty 
with rising debt due to problematic budgeting processes. Section 8 
would provide a framework for studying the budget processes of the 
territories.
    Because the governors of each of the territories would be so 
intimately involved, the Department of the Interior defers to the 
opinions of the governors of each of the United States territories with 
regard to this provision.
Low-Income Home Energy Assistance Program
    Section 9 would provide that under the Low-Income Home Energy 
Assistance Act of 1981 energy assistance would be 300 percent of the 
normal rate when applied to households located in the Virgin Islands in 
years 2014 through 2017.
    United States Virgin Islanders are struggling with some of the 
highest electric rates in the U.S. Currently, the residential rate in 
the Virgin Islands is 50 cents per kilowatt hour, with the commercial 
rate at 54 cents per kilowatt hour. These high Virgin Islands rates 
contrast significantly with rates elsewhere in the United States, which 
average 12.8 cents per KWH.
    Considering both the high poverty rates and high electric rates in 
the Virgin Islands, one can understand the extreme difficulty under 
which many Virgin Islands residents are living. Many residents cannot 
afford to keep the lights on, and businesses are closing.
    Given the fact that electric rates in the Virgin Islands are five 
times that on the U.S. mainland, a LIHEAP payment of three times the 
mainland amount for a limited, four-year period of time would not be 
unreasonable.
    In addition, the territories of Guam, CNMI, and American Samoa are 
also paying significantly higher residential rates than in the rest of 
the United States. The rates are 24.5 cents per KWH on Guam, 32 cents 
per KWH in the CNMI, and 39 cents per KWH in American Samoa.
    The Department of the Interior has no objection to the enactment of 
section 9, but suggests, based on the rates paid by each of the 
territories, that a formula for Guam, CNMI, and American Samoa be 
included in this section as well.
Castle Nugent National Historic Site Establishment
    Section 10 would establish the Castle Nugent National Historic Site 
on the island of St. Croix in the U.S. Virgin Islands as a unit of the 
National Park System. This proposed national historic site was the 
subject of a special resource study, completed in 2010, that found that 
the site met the National Park Service's criteria for inclusion in the 
National Park System.
    This 2,900-acre site is located along the arid southeastern shore 
of St. Croix, about three miles south of the town of Christiansted. The 
terrain is mostly rolling and hilly with a mixture of dry forest, 
native vegetation, and rangeland that offers picturesque views to the 
Caribbean Sea and to distant parts of the island. Establishing this 
site as a unit of the National Park System would provide the 
opportunity to preserve and protect this outstanding Caribbean cultural 
landscape and interpret the cotton era and related agricultural themes 
that have been instrumental in the development of St. Croix and the 
Virgin Islands. It would also help protect five pre-Columbian 
archeological sites, two of which are among the oldest sites on St. 
Croix.
    The Department supports this section with an amendment. The 
recommended amendment, which would insert the standard language used in 
bills establishing new areas of the National Park System, is to strike 
``consists'' on line 12 of page 19 and insert ``shall consist''.
St. Croix National Heritage Area
    Section 11 would establish the St. Croix National Heritage Area on 
the island of St. Croix. A feasibility study completed in 2012 by the 
National Park Service found that this proposed heritage area, which 
would include the entire island, met the Service's interim criteria for 
designation as a National Heritage Area. The heritage area would be 
focused on five themes: early cultures, slavery and emancipation, the 
influence of seven colonial powers, the island's unique geography and 
natural environment, and modern-day cultures.
    The Department supports the objectives of this section. However, 
the Department recommends that Congress enact program legislation that 
establishes criteria to evaluate potentially qualified National 
Heritage Areas and a process for the designation, funding, and 
administration of these areas before designating any additional new 
National Heritage Areas. There are currently 49 designated national 
heritage areas, yet there is no authority in law that guides the 
designation and administration of these areas. Program legislation 
would provide a much-needed framework for evaluating proposed national 
heritage areas, offering guidelines for successful planning and 
management, clarifying the roles and responsibilities of all parties, 
and standardizing timeframes and funding for designated areas.
    If the committee moves forward on S. 1237 with section 11 included, 
we would like to recommend amendments to some of the terms used in this 
section. We would be happy to provide the committee with our 
recommended amendments.
Guam War Claims Review Commission
    Section 12 would approve payments and a funding source for claims 
arising from the World War II Japanese occupation of Guam.
    Sixty-nine years ago this month, U.S. forces stormed the beaches of 
Asan and Agat on the island of Guam. The fierce battles in the weeks 
that followed would end Japan's two-and-a-half year occupation of Guam. 
Approximately a thousand United States national residents of Guam died 
during the occupation; the people of Guam were subjected to summary 
executions, beheadings, rapes, torture, beatings, forced labor, forced 
march and internment.
    With the passage of the Guam Meritorious Claims Act of 1945, the 
people of Guam became the first group of United States nationals to be 
made eligible for payment of claims by the United States for damages 
suffered during the war. In the years that followed, however, many on 
Guam came to question whether the Guam Meritorious Claims Act, as 
implemented, sufficiently compensated the people of Guam for their 
suffering.
    The Guam War Claims Review Commission, created pursuant to 
legislation passed in 2002, was charged with determining whether there 
was parity in the treatment of Guamanians' World War II claims as 
compared with the claims of U.S. citizens or nationals in other areas 
occupied by Japan during the war. The commission determined that 
Guamanians did not receive treatment in parity with other United States 
individuals who similarly suffered during World War II.
    This section would provide payments to persons now living on Guam 
who actually suffered the Japanese occupation during World War II. It 
would not provide payments to heirs of survivors of the Guam 
occupation, but would compensate heirs of the approximate 1,000 United 
States national residents of Guam who died during the Japanese 
occupation.
    Funding for this section would be provided from the Guam Organic 
Act section 30 funding that is in excess of section 30 funding for 
fiscal year 2012.
    The Department of the Interior recommends that the committee seek 
broad counsel among leaders in Guam regarding the financing of claims 
under section 12.
Use of Certain Expenditures as In-Kind Contributions
    Section 13 would allow territorial and Hawaii government costs 
ascribed to the migration of freely associated state (FAS) citizens to 
Guam, Hawaii, the CNMI and American Samoa to be valued and applied as 
in-kind local matching contributions for Federal programs.
    With amendments to the Compacts of Free Association legislation 
passed in 2003, the Congress appropriated $30 million annually to be 
distributed among the four affected U.S. jurisdictions based on an 
enumeration of FAS citizens in those four jurisdictions. The Congress 
provided an additional $5 million in each of fiscal years 2012 and 
2013. It is uncontested that the impact of migration to Guam, Hawaii, 
CNMI and American Samoa exceeds the amounts appropriated.
    Under section 13 of S. 1237, amounts above the annual payments 
could be classified as eligible amounts to be drawn on as ``in-kind 
contributions'' that would aid the affected jurisdictions in satisfying 
matching requirements for Federal programs.
    In addition, under the compact legislation, the governors of Guam, 
Hawaii, the CNMI and American Samoa are invited annually to provide 
reports on the impact of migration from the freely associated states of 
the Marshall Islands, the Federated States of Micronesia, and Palau on 
their respective jurisdictions. Guam produces such a report annually; 
Hawaii sporadically; American Samoa and the CNMI do not. The Department 
of the Interior forwards these reports to the Congress.
    Among the governments, there is no consistent format or standards 
for inclusion of costs, and no inclusion of benefits that FAS citizens 
provide the respective jurisdiction. In its 2012 report on FAS 
migration, the Government Accountability Office (GAO) stated:

          . . . some jurisdictions did not accurately define compact 
        migrants, account for federal funding that supplemented local 
        expenditures, or include revenue received from compact 
        migrants.

    The GAO recommendations did not include specific recommendations 
necessary to achieve accuracy in reporting impacts of the compacts.
    The Department of the Interior has urged the governors to develop 
consistent standards of reporting among themselves, including the 
definition of FAS migrants, accurate accounting of migrant costs to the 
affected government, and benefits received by the affected jurisdiction 
from employment, taxation and consumption. To date, they have not done 
so.
    Assuming that accurate reporting is achieved in future reports, the 
accuracy of past reports remains a problem for calculating the amounts 
from which ``in-kind contributions'' could be drawn.
    Without establishing standards, the language in section 13 is 
untenable. For example, subsection (b) calls on the Secretary of the 
Interior to determine amounts eligible for ``in-kind'' classification 
``based on a reasonable estimate of the amount of impact expenditures 
for the Freely Associated States.'' The words I quoted give no 
direction for the Secretary to arrive at an estimate and the 
expenditures are not stated to be those of the four U.S. affected 
jurisdictions. Specific and exacting standards are missing.
    The Department of the Interior opposes the enactment of section 13.
Waiver of Local Matching Requirements
    Section 16 would amend section 501 of Public Law 95-134, which 
allows waiver of local matching requirements for Federal grants for 
U.S. territories, to require the waiver of all matching of $500,000 or 
less.
    The original waiver provision, giving all federal agencies 
permissive authority to waive local matching requirements of $200,000 
or less, has been in effect since 1977. Since 1980, statute has 
required the matching waiver for grants of the Department of the 
Interior. Generally the law has been interpreted not to apply to 
discretionary grants, because a granting agency could decide, in its 
discretion, to forgo making the grant if a territory were to insist on 
the waiver of the match. Such an eventuality would harm the 
territories.
    Considering that more than 30 years have passed since the $200,000 
waiver was established, the increase to $500,000 would seem appropriate 
and consistent with inflation over time.
    The Department of the Interior has no objection to the enactment of 
section 16 with regard to grants from the Department of the Interior. 
We express no view with regard to waiver changes for other Federal 
agencies.
American Samoa Citizenship Plebiscite Act
    Section 19 would require the Secretary of the Interior to direct 
the American Samoa Election Office to conduct a plebiscite on whether 
or not persons born in American Samoa desire United States citizenship.
    Under the Tripartite Convention of 1899, ratified February 16, 
1900, Great Britain and Germany ceded claims of the eastern portion of 
the Samoan Islands to the United States. This portion of the 
archipelago became known as ``American Samoa.'' The Matai (the chiefs) 
of Tutuila and Manu'a, signed voluntary Deeds of Cession in 1901 and 
1904, respectively, which were subsequently accepted, ratified and 
confirmed retroactively by Congress. In 1929, the Congress provided 
that with regard to the government of the territory of American Samoa, 
all civil, judicial, and military powers shall be exercised as the 
President shall direct. In 1951, the President delegated his authority 
to the Secretary of the Interior.
    Under the authority of the Secretary of the Interior, American 
Samoa adopted a constitution in 1960. The issue of citizenship versus 
status as a U.S. national was a key issue. The Samoan leaders and 
people were concerned that U.S. citizenship could cause the equal 
protection clause of the United States Constitution to interfere with 
their communal land tenure system, chiefly or matai titles, and the 
viability of Fono's Senate due to the selection of Senators from among 
persons with matai titles.
    To protect and ensure continuation of fa'a Samoa (the Samoan way of 
life), Samoans chose to be U.S. nationals rather than citizens of the 
United States. Both citizens and nationals owe allegiance to the United 
States, although the United States Constitution grants certain 
privileges to citizens, but not persons who are nationals alone.
    The United States national status of persons born in American Samoa 
was upheld on June 26, 2013, by the United States District Court for 
the District of Columbia in Leneuoti Fiafia Tuaua et al. v. United 
States of America et al. which included the following statement:

          To date, the Congress has not seen fit to bestow birthright 
        citizenship on American Samoa, and in accordance with the law, 
        this Court must and will respect that choice.

    In the fifty years since the adoption of the original constitution 
of American Samoa, attitudes of many in the local population of 
American Samoa may have shifted. The plebiscite called for in section 
19 will bring new discussion to these land, matai title and Senate 
issues. These are issues for the American Samoa polity to discuss and 
decide.
    Should the proposed vote in American Samoa favor citizenship, 
leaders in American Samoa would then approach the Secretary of the 
Interior and the Congress, to seek action on the issue.
    The Department of the Interior has no objection to the enactment of 
section 19.
Marine Turtles
    Section 20 would extend the Marine Turtle Conservation Act of 2004 
to United States territories and possessions. Marine turtles are 
``flagship species'' for both local and international coastal 
conservation. Because marine turtles circumnavigate the world's oceans 
to reach their nesting beaches, their conservation must be addressed 
through global efforts. By focusing on these species and their 
habitats, we can more adequately conserve and manage ecologically 
critical coastal and marine habitats around the world.
    The Department's U.S. Fish and Wildlife Service and the National 
Oceanic and Atmospheric Administration (within the Department of 
Commerce) share jurisdiction for the conservation of marine turtles. 
The Service focuses conservation activities on nesting beaches while 
NOAA works to conserve and recover turtles in their marine habitats. 
The Fish and Wildlife Service also administers the Marine Turtle 
Conservation Fund, which provides grants to countries with sea turtle 
nesting beaches on a cost share basis, to implement sea turtle 
conservation programs. Such international conservation is a key part of 
the effort to recover and conserve these global species.
    The Department of the Interior supports the intent of section 20 to 
provide greater funding opportunities for turtle conservation in the 
U.S. territories. However, we are concerned that this change would 
significantly dilute the limited funds available to implement 
conservation measures in foreign countries. There are resources already 
available for sea turtle conservation in the U.S., including the 
territories. The relatively small amount of Marine Turtle Conservation 
Fund grants (less than $1.8 million in FY 2012), which provide critical 
assistance to our international partners, accounts for about six 
percent of the overall funds spent by the U.S. on sea turtle 
conservation. If applicants in the U.S. are made eligible, this limited 
amount for critically important international work is likely to be 
significantly reduced.
Conclusion
    Mr. Chairman, we at the Department of the Interior are pleased that 
you and the ranking member have introduced the Territorial Omnibus Act 
of 2013. Despite the fact that the Department cannot support each and 
every provision, the bill gives an airing to important territorial 
issues of long standing. We will be pleased to work with the Committee 
as it finalizes the legislation.
                                s. 1268
    Chairman Wyden and members of the Committee on Energy and Natural 
Resources, I am pleased to be here today to discuss S. 1268, which 
would approve the agreement between the Government of the United States 
and the Government of the Republic of Palau following the Compact of 
Free Association section 432 review. My colleagues from the Departments 
of State and Defense will discuss the importance of the United States--
Palau relationship as it relates to national security and our policies 
in the Pacific. My statement today regarding Palau will focus on the 
financial assistance components of the new agreement with Palau, for 
which the Department of the Interior will be responsible.
The United States--Palau Relationship
    The Department of the Interior and the Government of Palau have 
been partners since 1951, when the Navy transferred to the Department 
of the Interior the administration of the United Nations Trust 
Territory of the Pacific Islands. Since the end of World War II, Palau 
has emerged from its status as a war-ravaged protectorate to become a 
sovereign nation and respected member of the world community. 
Consistent with the provisions of the 1994 Compact of Free Association, 
Palau has exercised its sovereignty in accordance with the principles 
of democracy and in firm alliance with the United States.
    The Compact of Free Association has proven to be a very successful 
framework for United States--Palau relations. The goals of the first 
fifteen years of the Compact have been met: the trusteeship was 
terminated; Palau's self-government was restored; a stable democratic 
state was established; third countries were denied military influence 
in the region of Palau; and with U. S. financial assistance, a base for 
economic growth has been provided.
    The original financial terms and conditions of the Compact have 
been fully implemented by the United States and Palau. The United 
States, through the Department of the Interior, has provided over $600 
million of assistance, including $149 million used to construct the 53-
mile road system on the island of Babeldoab and $38.7 million for 
health care and education block grants. Most of the funding, $400 
million, was expended on activities defined under Title Two of the 
Compact, which included general government operations, energy 
production, communications, capital improvements, health and education 
programs and establishment of the Compact Trust Fund.
    The Compact Trust Fund was an important feature of U.S. assistance. 
Capitalized with $70 million during the first three years of the 
agreement in the 1990s, the objective of the trust fund was to produce 
an average annual amount of $15 million as revenue for Palau government 
operations for the thirty-five year period fiscal year 2010 through 
fiscal year 2044. The fund also generated $5 million in annual 
operational revenue for Palau since the fourth year of the agreement, 
totaling $60 million for the years 1998 through 2009.
    Palau has made strong economic gains under the Compact of Free 
Association. Its growth, in real terms, has averaged just over two 
percent per year. Palau's governmental services are meeting the needs 
of its community. Palau has taken control of its destiny and is moving 
in the right direction.
Compact Review
    As both the United States and Palau began the required Compact 
section 432 review several years ago, each side took pride in the 
growth evident in Palau. However, the review, which examined the terms 
of the Compact and its related agreements and the overall nature of the 
bilateral relationship, also focused attention on several important 
issues. The United States and Palau agreed that prospects for continued 
economic growth relied on four key factors: 1) the viability of the 
Compact trust fund and its ability to return $15 million a year; 2) the 
implementation of fiscal reforms to close the gap between Palau's 
revenues and expenditures by shrinking its public sector and raising 
revenue; 3) the promotion of increased foreign investment and private 
sector growth, and, 4) the continuation of certain United States 
assistance, including access to United States Federal domestic programs 
and services.
    From the perspective of the United States, the viability of the 
Compact Trust Fund was of paramount concern. The economies of Pacific 
islands are always fragile; their size, distance from markets and 
relative lack of resources make growth a perennial problem. Although 
Palau has some relative advantages in contrast to other Pacific island 
countries, the Compact Trust Fund was established with the intention of 
providing a relatively secure revenue base for Palau's government 
through fiscal year 2044. As the 15-year review began, Palau's trust 
fund, which had earned roughly 9 percent annually since its inception, 
had suffered significant losses. As GAO reported in 2008, it was 
uncertain that the trust fund could pay $15 million annually to the 
Government of Palau through fiscal year 2044.
Compact Agreement
    The condition of the Compact Trust Fund, the need for fiscal and 
economic reforms, and the goal of strengthening conditions for private 
sector growth became the focus of the bilateral review. The Agreement 
Between the Government of the United States of America and the 
Government of the Republic of Palau Following the Compact of Free 
Association Section 432 Review (Agreement) that arose from the 15-year 
review, will address these concerns, maintain stability, promote 
economic growth and increase the progress already made under the 
Compact of Free Association.
    The Agreement extends United States assistance, in declining annual 
amounts, through fiscal year 2024. The total of direct financial 
assistance to Palau under the Agreement is $229 million, although $52.6 
million of that amount has already been appropriated for direct 
economic assistance by congressional action through fiscal year 2013.
    Under the Agreement, direct assistance for governmental operations 
declines annually. The declining amount of assistance is intended to 
provide an incentive for Palau to develop other sources of local 
revenue and serves notice that the Palauan government has agreed that 
it will need to make systemic adjustments to its government in order to 
live within those same resources.
    The Agreement contains five categories of financial assistance for 
Palau:

          Direct economic assistance.--The Agreement provides for 
        direct assistance for education, health, administration of 
        justice and public safety, in amounts starting at $13 million, 
        declining to $2 million, the last payment, in 2023. As 
        discussed below, this ``glidepath'' is coupled with a gradual 
        increase in how much Palau can withdraw from its trust fund. 
        The timing of direct assistance payments is conditioned on 
        Palau's making certain fiscal reform efforts. If the United 
        States government determines that Palau has not made meaningful 
        progress in implementing meaningful reforms, direct assistance 
        payments may be delayed until the United States Government 
        determines that Palau has made sufficient progress on the 
        reforms.
          Infrastructure projects.--Under the Agreement the United 
        States is to provide $40 million to Palau for mutually agreed 
        infrastructure projects to be decided after implementation has 
        begun.
          Infrastructure maintenance fund.--Under the Agreement, a 
        trust fund will be established to be used for maintenance of 
        capital projects previously financed by the United States, 
        including the existing Compact Road. During the life of the 
        agreement the United States government will contribute $2 
        million annually and the Palau government will contribute 
        $600,000 annually to the fund. This will protect crucial United 
        States investments in Palau that significantly contribute to 
        economic development.
          Fiscal consolidation fund.--The United States will have 
        provided grants of $5 million during each of the first two 
        years of the agreement to help the Palau government reduce its 
        debt. United States creditors must receive priority, and the 
        government of Palau must report quarterly on the use of the 
        grants until they are expended. This fund will also simplify 
        needed economic adjustments to Palau's fiscal policies.
          Trust fund.--The Agreement increases the size of Palau's 
        trust fund directly and indirectly to bolster the likelihood 
        that the trust fund will yield payments of up to $15 million 
        annually through 2044. First, the United States will contribute 
        a total of $30 million in annual contributions through 2022 and 
        contribute $250,000 in 2023. Second, the government of Palau 
        will delay withdrawals from the fund, drawing $5 million 
        annually through 2013 and gradually increasing its withdrawal 
        ceiling from $5.25 million in 2014 to $13 million in 2023. From 
        2024 through 2044, Palau is expected to withdraw up to $15 
        million annually, as originally scheduled. Under the Agreement, 
        withdrawals from the trust fund may only be used for education, 
        health, administration of justice and public safety.

Continuing Cooperation
    The United States and Palau will work cooperatively on economic 
reform. The Agreement requires the two governments to establish an 
advisory group to recommend economic, financial and management reforms. 
Palau is committed to adopting and implementing reforms. Palau will be 
judged on its progress in such reforms as the elimination of operating 
deficits, reduction in its annual budgets, reducing the number of 
government employees, implementing meaningful tax reform and reducing 
subsidies to public utilities.
    Palau's progress in implementing reforms will be addressed at 
annual bilateral economic consultations. If the government of the 
United States determines that Palau has not made significant progress 
on reforms, the United States may delay payment of economic assistance 
under the Agreement.
    The Agreement also continues to provide Palau with access to other 
United States services and grant programs, including the United States 
Postal Service, the National Weather Service, and the Federal Aviation 
Administration. The Postal Service moves mail between the United States 
and Palau, and offers other related services. Palau maintains its own 
postal service for internal mail delivery. The National Weather Service 
reimburses Palau for the cost of operating its weather station in 
Palau, which performs upper air observations twice daily, as requested, 
for the purpose of Palau's airport operations and the tracking of 
cyclones that may affect other United States territories, such as Guam. 
The Federal Aviation Administration provides aviation services to 
Palau, including en-route air traffic control from the mainland United 
States, flight inspection of airport navigation aids, and other 
services.
    The proposed legislation will also allow the continuance of other 
Federal program services currently available to Palau under separate 
authorizing legislation, including programs of the Departments of 
Education and Health and Human Services. The general authorization for 
Palau to receive such services was created by the Compact, but 
individual program eligibility has been created by specific laws that 
include Palau as an eligible recipient.
    Even as the Administration awaits congressional approval of the 
agreement, the Department of the Interior has remained engaged with 
Palau. Palau participates in OIA's technical assistance and other 
programs, and is a partner in regional forums supported by OIA. Palau 
is also receiving assistance from OIA to repair sections of the Compact 
Road.
    The Administration looks forward to continuing the United States 
partnership with Palau. The Department of the Interior is proud of the 
contribution the United States has made to the success we call Palau. 
We look forward to future progress over the period of the new 
agreement.

    The Chairman. Thank you.
    Mr. Singh.

  STATEMENT OF VIKRAM J. SINGH, DEPUTY ASSISTANT SECRETARY OF 
 DEFENSE FOR SOUTH AND SOUTHEAST ASIA, OFFICE OF THE SECRETARY 
          OF DEFENSE FOR POLICY, DEPARTMENT OF DEFENSE

    Mr. Singh. Thank you, Chairman Wyden for inviting me to 
testify with my colleagues from State and Interior to talk 
about the importance of the Palau Compact Agreement to the 
Department of Defense.
    Since its enactment in 1994 the Compact has served an 
important piece of our security strategy in the Asia Pacific 
region providing the United States with critical access, 
influence and the strategic denial of access to other regional 
militaries.
    Our compact with Palau coupled with our Compacts to the 
Federated States of Micronesia and the Republic of the Marshall 
Islands enable DOD to maintain critical access in the Asia 
Pacific. The United States exercises full authority over and 
responsibility for the security and defense of Palau, an 
arrangement similar to what we have with Micronesia and the 
Marshall Islands. With this authority and responsibility the 
United States is entitled to sole military access to the lands, 
water and air space of Palau.
    Our current security arrangement under the compact affords 
us expansive access which is increasingly an important asset in 
the defense and security interests of the United States in the 
Asia Pacific region. Given the increasing importance of the 
Asia Pacific overall, we are in the early stages of a rebalance 
toward the region and U.S. presence and power projection in the 
Asia Pacific is increasingly essential to our national security 
interests. The U.S./Palau compact, therefore, is a strategic 
asset for U.S. presence in the Western Pacific.
    Loss of the defense rights and unfettered access granted to 
the United States under the compact would certainly adversely 
affect U.S. national security. The relationship we have with 
Palau is unique and reliable and it's an important piece of our 
overall efforts to implement this rebalance and to have a 
steady and strong security presence in the Asia Pacific.
    Failure to implement the review agreement would also send a 
poor signal to the region about the United States' commitment 
and ongoing commitment to regional security.
    Passage of the proposed legislation approving the results 
of the 15 review would ensure that our important security 
agreement continues and reassure Palau of our sustained 
commitment to Palau and its people and our shared interests in 
regional and global security.
    So I urge you and the members of the committee to support 
the agreement and to support the proposed legislation.
    Thank you.
    [The prepared statement of Mr. Singh follows:]

 Prepared Statement of Vikram J. Singh, Deputy Assistant Secretary of 
   Defense for South and Southeast Asia, Office of the Secretary of 
               Defense for Policy, Department of Defense
    Chairman Wyden, Ranking Member Murkowski, members of the Committee, 
thank you for the opportunity to appear before you to discuss the 
importance of the Palau Compact Agreement.
    Since its enactment in 1994, the Compact has served as an important 
foundation for our security strategy in the Asia-Pacific region, 
providing the United States with critical access, influence, and 
strategic denial of access to other regional militaries. Our Compact 
with Palau, coupled with our compacts with the Federated States of 
Micronesia (FSM) and the Republic of the Marshall Islands (RMI), has 
enabled DoD to maintain critical access in the Asia-Pacific region. The 
Compact of Free Association between the United States and Palau is 
important to allowing the Department to continue to benefit from the 
security arrangement afforded by the Compact. Today, I would like to 
discuss the importance of Palau and the Compact to preserving U.S. 
national security interests in the Asia-Pacific region.
           palau's contributions to u.s. and global security
    Let me begin by discussing Palau in the context of the regional 
security environment in the Western Pacific. The Pacific Islands region 
is sparsely populated, physically isolated, and geographically 
widespread. However, Palau lies at a pivotal crossroad in the Pacific, 
an area near critical sea lines of communication and rich fishing 
grounds. It is also located directly in the so-called ``Second Island 
Chain'' from Mainland Asia, relatively close to all of the major East 
and Southeast Asian powers. With our strategic interests and equities 
shifting more toward the Asia-Pacific region, having Palau as a strong 
partner in the Pacific is increasingly important to maintaining 
military, as well as political and diplomatic, leadership in this 
quickly evolving strategic environment.
    We must take note of critical security developments in the Pacific 
that require the Department's sustained presence and engagement. 
Broadly speaking, numerous countries are actively courting Pacific 
Island States, seeking security opportunities that may challenge the 
security status quo in the region, by increasing their economic, 
diplomatic, and military engagement with the island States. These 
critical security developments require sustained U.S. presence and 
engagement in the region. Our relationship with Palau would be 
reinforced under the Compact and would ensure the United States the 
extraordinary advantage of sole military access to Palau. For these 
reasons, it is important for the U.S. Government to sustain this 
advantage.
    Since the Compact of Free Association between the Government of the 
United States of America and the Government of Palau entered into 
effect in 1994, the United States has taken full responsibility for the 
security and defense of Palau. This unique security arrangement has 
created a steadfast and reliable partner that helps the United States 
advance its national security goals in the region.
                 palau in the regional security context
    I would also like to highlight the extraordinary service of 
Palauans in the U.S. Armed Forces and contributions to U.S. security. 
Under the provisions of the Compact, Palauans are able to serve in the 
U.S. Armed Forces. Sadly, six Palauans have sustained casualties 
fighting on the battlefield in Afghanistan and Iraq since the terrorist 
attacks of September 11, 2001. Their sacrifice in the defense of the 
U.S. homeland as well as U.S. and Coalition security interests around 
the world should not go unnoticed. Furthermore, in 2009, Palau stepped 
up to offer resettlement of some of the detainees from Guantanamo Bay 
at a time when other countries were hesitant to take these individuals.
    Most notably, our commitment to the Compact with Palau allows the 
Department to leverage Palau's strategic geopolitical position to 
sustain U.S. security interests in the region. The United States 
exercises full authority over and responsibility for the security and 
defense of Palau, an arrangement similar to those that we have with the 
Federated States of Micronesia and the Republic of the Marshall 
Islands. With this authority and responsibility, the United States is 
entitled to sole military access to the lands, water, and airspace of 
Palau. Our current security arrangement affords us expansive access, 
which will be an increasingly important asset in the defense and 
security interests of the United States in the Asia-Pacific region in 
coming years. The Department recognizes the strategic value of the 
Compact, and we hope to continue to utilize it to serve our national 
security interests.
    We have growing national security interests and equities in the 
Western Pacific, a region that is traditionally overlooked and 
undervalued. Together with the two other Compact States, the Federated 
States of Micronesia and the Republic of the Marshall Islands, Palau 
forms part of an important security zone under exclusive U.S. control 
that spans the entire width of the Pacific when we include Hawaii and 
the U.S. territories--Guam, American Samoa, and the Commonwealth of the 
Northern Mariana Islands. Palau's location makes it an important part 
of the U.S. strategic presence in the Asia-Pacific. The Palau Compact 
affords us strategic positioning in a country with a unique 
geopolitical position in the Asia-Pacific region. The region's lack of 
political and security infrastructure has given rise to a trend of 
growing transnational crime, which underscores the importance of 
continued DoD engagement in the Western Pacific. With this in mind, the 
Department seeks to develop creative ways to remain strategically 
engaged in the region.
                      u.s.-palau defense relations
    Recognizing that Palau has no military and only limited law 
enforcement capabilities and resources, the Department's engagement 
with Palau primarily focuses on helping them develop maritime security 
and humanitarian assistance capabilities.
    First, maritime security has been one of the most fruitful areas of 
cooperation between our two nations. Palau's Exclusive Economic Zone 
(EEZ) is part of the Pacific's richest fishing grounds and has 
traditionally faced serious problems with foreign exploitation of the 
fishery resources. Large numbers of far-ranging fishing vessels from 
other pacific nations threaten encroachment, seeking access to Palau's 
abundant and lucrative tuna fishing areas.
    To combat illegal fishing, the U.S. Coast Guard has entered into a 
shiprider agreement with Palau, which enables Palauan security 
officials to embark on transiting U.S. Coast Guard vessels to conduct 
maritime patrol and enforce Palauan fishing laws in its enormous, 
under-patrolled EEZ. This kind of shiprider agreement allows the U.S. 
Coast Guard to play a more active role in developing partner law 
enforcement capacity of the island States.
    Second, the Defense Department's humanitarian programs have been 
very well-received in island communities. These programs primarily 
focus on the removal of explosive remnants of war from the World War II 
era, humanitarian projects, and prisoner of war/missing in action 
operations. DoD's 12-person Civic Action Team rotates through Palau, 
conducting small-to medium-scale humanitarian and civic action projects 
in the health, education, and infrastructure areas.
    Additionally, DoD leads large-scale, multinational, pre-planned 
humanitarian missions, such as the U.S. Air Force's Pacific Angel and 
U.S. Navy's Pacific Partnership, which include medical and engineering 
projects in remote regions that are conducted in close coordination 
with local communities. For example, in the summer of 2010, the USS 
BLUE RIDGE (LCC-19) treated more than 1,900 Palauans, completed 14 
community service projects, and spent more than 1,000 man hours across 
the three Palauan states of Koror, Peleliu, and Angaur as part of 
Pacific Partnership 2010. Also, the longest running humanitarian 
campaign in the world, Operation Christmas Drop, which provides air-
dropped supplies to the people of remote islands each year, celebrated 
its 60th anniversary in December 2012 and continues to assist the 
remote islands of Palau each year. These humanitarian missions are 
evidence that the Department's engagement in Palau extends well beyond 
traditional security parameters.
                               conclusion
    In conclusion, U.S. presence and power projection in the Asia-
Pacific region continue to be essential to our national security 
interests. The U.S.-Palau Compact is a strategic asset for U.S. 
presence in the Western Pacific, an increasingly important region. Loss 
of the defense rights and unfettered access granted to the United 
States under the Compact would adversely affect U.S. national security. 
Our relationship with Palau is unique and reliable. Passage of the 
proposed legislation approving the results of the 15-year Compact 
Review would ensure this important security agreement continues, and 
would reassure Palau of our sustained commitment to Palau and its 
people and of our shared interest in regional and global security. I 
urge you to support the continued security agreement the United States 
has developed with Palau over the years and ask for your support of the 
proposed legislation.
    Thank you, and I look forward to answering your questions.

    The Chairman. Very good. Thank you, Mr. Singh.
    Mr. Kagan.

STATEMENT OF EDGARD KAGAN, DEPUTY ASSISTANT SECRETARY OF STATE, 
 BUREAU OF EAST ASIAN AND PACIFIC AFFAIRS, DEPARTMENT OF STATE

    Mr. Kagan. Mr. Chairman, we're very grateful to you for the 
opportunity to come before you and the committee. We're also 
very grateful to you for your personal interest and your 
leadership on the issue of Palau.
    You know, you have spoken very eloquently, as has Ranking 
Member Murkowski, about Palau's importance to the United States 
and why the relationship has been beneficial to both countries. 
So there's no need to repeat that.
    What I will say is that 3 years ago the State Department, 
as called for under the original 1994 Palau Compact of Free 
Association, negotiated an agreement to extend and revise the 
assistance under the compact to provide a more economically 
sustainable future for Palau. This was done in very close 
consultation with Congress, as well as, obviously, with the 
Departments of Interior and Defense and was mandated under the 
original compact.
    We have since worked very closely with Congress to try and 
find a pathway to be able to move forward on this because I 
think we all share the goal of implementing the agreement and 
fulfilling our commitments.
    I think we have worked closely within the Administration, 
with Congress, because we all recognize the importance to doing 
this. Time is starting to drag.
    The relationship is important to us. It's important from a 
foreign policy perspective and to the Department of State 
because this is an example of U.S. commitment. The region is 
watching how we treat this.
    We've made a commitment. We have yet to fulfill it. So we 
believe it is important to move forward as quickly as possible.
    Should note that we believe that the agreement, as Acting 
Assistant Secretary Sobeck has said, is actually very good for 
both Palau and for the United States. It deals with some issues 
that have been raised originally, with the original agreement 
and has, we believe, has strengthened it and make it better for 
both sides.
    One of the key goals for the compact was to get Palau to 
the point where it would be able to stand on its own and be 
economically viable. We think Palau has made tremendous strides 
on self governance and democracy. We think that rapid 
implementation of the agreement will allow it to continue 
working on economic sustainability.
    We do believe that U.S. credibility is at stake and that 
moving on this will strengthen our overall approach toward the 
Asia Pacific and strengthen our rebalance to have greater 
emphasis on the region.
    We have worked closely with you and will continue to do so 
and really appreciate your strong support for this.
    Thank you.
    [The prepared statement of Mr. Kagan follows:]

   Prepared Statement of Edgard Kagan, Deputy Assistant Secretary of 
  State, Bureau of East Asian and Pacific Affairs, Department of State
    Chairman Wyden, Ranking Member Murkowski, and Members of the 
Committee, thank you for inviting me to appear before you today to 
testify on the importance of our bilateral relationship with Palau as 
well as to discuss the Compact with Palau and proposed legislation 
approving the results of the mandated 15-year review of the Compact. 
Let me just take a moment to thank you for introducing S.1268, which is 
identical to the legislative language proposed by the Administration to 
approve the Agreement.
    Our relationship with Palau is a key aspect of the Administration's 
focus on our engagement, based on our history, our values, and our 
national interest, with the Asia-Pacific region, and specifically on 
ensuring that we increase our engagement with Pacific Island nations as 
we look forward to what the President has called the ``Pacific 
Century.'' I know that several members of the Committee met recently 
with the President of Palau, Tommy Remengesau, Jr., and members of the 
Palau legislature, during his visit to Washington last month. Secretary 
Jewell, several other members of the Administration and I met with his 
team to discuss this legislation, and other important issues in our 
relationship, during that visit. I was fortunate during the first few 
weeks in my current position, almost exactly one year ago, to be able 
to travel with then-Assistant Secretary for East Asian and Pacific 
Affairs Kurt Campbell to the region, including to Palau. Secretary 
Clinton's participation at the Pacific Islands Forum in August 2012 was 
the first by a Secretary of State in its 41-year history and marked a 
historic high-water mark of engagement by the Administration with our 
Pacific partners, including Palau. In Palau, I was able to meet with 
several senior Palauan government officials, who repeatedly asked about 
the status of the legislation, passage of which is their highest 
priority in working with the United States. All of these events and 
meetings have demonstrated the excellent relationship we enjoy with the 
people of Palau, the genuine friendship they share with the United 
States and the importance the Administration places on this 
relationship.
                  palau: a friend and reliable partner
    Mr. Chairman, the vast stretch of the Pacific and the island 
countries that reside within it share an integral connection to our 
western border and are critical to our national security. Linking many 
of our close friends and allies, from Japan and Australia to Palau, 
Papua New Guinea, and Tonga, the Pacific region forms a crucial 
security arc that stretches from California to the Philippines, from 
Alaska to New Zealand. Our presence and ties to our partners in the 
Pacific not only safeguard our security interests, they also guarantee 
access to the critical sea lanes through which much of our trade flows. 
Among our many friends and partners in the region, we have perhaps none 
stronger than Palau, a country for which we paid a steep price in blood 
and treasure to liberate in 1944.
    Our relations with our Pacific partners are unfolding against the 
backdrop of a shifting strategic environment, where emerging powers in 
Asia and elsewhere seek to exert a greater influence in the Pacific 
region, through development aid, people-to-people contacts, and 
security cooperation. There is continued uncertainty in the region 
about the United States' willingness and ability to sustain the robust 
forward presence in the Pacific that has been a hallmark of much of the 
last 60 years. That is why the Administration has put such an effort 
into increasing our engagement not only with mainland and maritime 
Asia, but with the Pacific as well.
    With respect to our foreign policy goals in the region, I think we 
have two critical tasks that touch on our historic relationship with 
Palau. First, we have to sustain and reinforce our full authority and 
responsibility for the security and defense of Palau. We have no 
greater responsibility in the eyes of the Palauan people, and I know 
that we, and the other federal agencies that work with Palau, take that 
responsibility very seriously. Second, we have to ensure that our 
partners in the Pacific, including Palau, continue to work with us and 
support our common goals in regional and multilateral fora, on 
everything from fisheries management to human rights to countering the 
proliferation of weapons of mass destruction.
    Under the Compact of Free Association, the United States provides 
for the security of Palau, which occupies a strategic position in the 
Western Pacific. This security relationship gives us access to Palau 
and its waters, along with the critical authority to deny such access 
by military forces and personnel of other nations. While we have 
welcomed for many decades a peaceful and positive approach to relations 
in the Pacific by all parties, the relatively modest annual cost 
associated with the proposed legislation is leveraged many times over 
in the important strategic advantages this arrangement confers on the 
United States.
    As a result of our security guarantee, Palau does not maintain its 
own military forces, but under the terms of our Compact, their citizens 
are eligible to, and do, serve voluntarily in the U.S. Armed Forces. 
Palauan citizens volunteer in the U.S. military at a rate higher than 
in any individual U.S. state. Approximately 500 Palauan men and women 
serve in our military today, out of a population of about 14,000. We 
are grateful for their sacrifices and dedication to promoting peace and 
fighting terrorism. Palau has deployed soldiers for U.S. coalition 
missions and participated in U.S.-led combat operations in the world's 
most difficult and dangerous places, including Afghanistan and Iraq, 
where seven Palauans have lost their lives in combat.
    Palau's Ambassador to the United States, Hersey Kyota has a son, 
who is a staff sergeant in the Army and a daughter, who is also a staff 
sergeant in the Air Force. He also has one nephew, who is a sergeant in 
the Marine Corps and another nephew in the Army. Kyota also has other 
close relatives in the U.S. Armed Forces. The son of Minoru Ueki, 
Palau's Ambassador to Japan, serves in the U.S. Army. Palau Paramount 
Chief Reklai has a daughter and son in the Army. Similarly, many other 
Palauan sons and daughters of other government officials and of 
ordinary Palauan citizens served honorably in U.S. military units since 
the Compact has been in place.
    In addition to our specific responsibility for the safety and 
security of the Palauan people under the Compact, given the wide range 
of U.S. strategic interests and equities in the Western Pacific, 
security developments in the region require our sustained presence and 
engagement. The Reagan Ballistic Missile Defense Test Site on Kwajalein 
Atoll, the presence of U.S. Armed Forces, including the U.S. Coast 
Guard, in Guam and in the waters of the Pacific, and our disaster 
relief operations throughout the region are all crucial to peace and 
security not only for the region, but for the United States. Keeping 
our commitments to Palau, as reflected in S.1268, reinforces our 
defense posture in the Western Pacific, and therefore our strategic 
interests. Working closely with the Palauan government, we are able to 
better protect and conserve its resources, while our access to Palauan 
waters, lands, airspace, and its Exclusive Economic Zones (EEZ), 
facilitate mutual economic benefits and allows us to guard and protect 
our long-term interests in the region.
    With respect to the second goal of maintaining and strengthening 
our relationship, Palau is among our strongest supporters in regional 
and multilateral fora. In the former, Palau has been an ardent advocate 
for enhanced U.S. participation and engagement in the Pacific Islands 
Forum, the Secretariat of the Pacific Community and other regional 
bodies. Palau has been a constructive partner in our successful effort 
to work with Pacific Island nations to extend, and eventually renew, 
the South Pacific Tuna Treaty.
    At the 67th General Assembly of the United Nations in 2012, Palau's 
voting coincidence with the United States on all votes was 
approximately 97 percent, which is markedly higher than 74 percent for 
the United Kingdom, 71 percent for Australia, 57 percent for Japan, and 
61 percent for the Republic of Korea. Despite an increase in assistance 
from others interested in enhancing their engagement with the region, 
such as China, Russia, and the Arab League nations, Palau has not only 
supported the United States on Israel and Cuba-related votes but was 
one of only a handful of nations that voted with the United States on 
the divisive motion to grant Palestine ``non-member observer state'' 
status in the UN. Palau has supported UN resolutions seeking to combat 
the spread of weapons of mass destruction, and joined in efforts to 
address systematic human rights abuses in North Korea, Syria, and Iran.
                 our partnership extends beyond defense
    The importance of our strong relationship with Palau is not limited 
to defense. We work closely with Palau in the fight against 
international crime and terror. In 2009, Palau resettled six ethnic 
Uighur detainees from Guantanamo, the first country to stand up to 
support our efforts, when few other countries were willing to do so. 
Palau was our first island partner to sign the U.S. ship rider and 
ship-boarding agreements that are successfully increasing maritime 
surveillance and law enforcement cooperation in the Pacific Islands.
               shared responsibility as a compact partner
    The original process that led to our Compact with Palau was based 
on a solemn promise to help this young nation through financial, 
security, and other assistance to achieve self-governance and a 
sustainable economic development path. The effort that has gone into 
the 15-year Compact review and the positive contribution of Members of 
both chambers of Congress to work towards implementation of those 
arrangements is a symbol of our good faith and partnership, not just in 
Palau, but also among all our Pacific partners.
    The timing of this review could not be more important. We are now 
at a point where the goal of self-governance and democracy in Palau is 
firmly in place. The goal of sustainable economic development and 
independence, however, remains a work in progress. The tiered nature of 
the support agreed to in this 15-year review agreement is designed to 
reduce Palau's dependence on U.S. direct economic assistance and assist 
Palau in moving towards sustainable economic independence. Importantly, 
it also requires the Palauan government to continue undertaking serious 
economic and fiscal reforms, and, should the United States determine 
that progress towards such reform is inadequate, we are able to 
withhold further assistance until they are implemented.
    Our Compact with Palau took effect in 1994. It does not have a 
termination date and requires a review on the 15-year, 30-year, and 40-
year anniversaries. The direct economic assistance provisions of the 
Compact, however, expired on September 30, 2009. Our two governments 
worked closely over 20 months of discussions and negotiations to 
conclude the 15-year review, which resulted in an Agreement, signed by 
former Deputy Assistant Secretary Frankie Reed and former President 
Toribiong in September 2010. If approved, S. 1268 will implement the 
outcomes of that Review and is the manifestation of the shared 
commitment between our two governments. In support of our relationship 
with Palau, the Departments of Defense, State and Interior resubmitted 
draft legislation to Congress. The Agreement provides a glide path for 
Palau to move from reliance on the over $18 million it has been 
receiving to a sustainable $15 million level, provides for U.S. 
contributions to the Trust Fund from FY 2013 through FY 2023 and 
decreases the amount Palau may withdraw from the Trust Fund during this 
period, to allow the Trust Fund to grow. The Agreement has other 
provisions that supplement the Compact, resulting from a review of how 
the Compact worked over its first 15 years. The Agreement will also 
require Palauan nationals coming to the United States under the Compact 
to have machine readable passports (instead of allowing them to come to 
the United States without passports).
    If the bilateral Agreement between our two countries is not 
implemented, the trust fund would be unable to provide a steady outlay 
of $15 million a year, from now until 2044, which was the intended 
purpose of the Compact negotiators, backed by Senate and House 
concurrence, in the 1980s. To ensure smooth continuation of our 
bilateral relationship as well as the continued economic development 
and advance of its self sufficiency, it is crucial we provide Palau the 
assistance agreed to in the Compact review.
             supporting palau's transition to independence
    Our history with Palau began in bloody battle in 1944. It was a 
sense of duty, and the understanding that Palau was important then to 
our strategy in the Pacific, that led thousands of Marines ashore to 
free Palau from colonialism and occupation. Palau remains important 
now, and that same duty has led the United States down a long road of 
partnership with the people of Palau from liberation to trusteeship 
and, finally, to independence. That steadfast commitment to our friends 
has been noted not just in Palau, but across the Pacific.
    Shortly after the end of World War II, the United Nations assigned 
the United States administering authority over the Trust Territory of 
the Pacific Islands, which included Palau and island districts of 
Micronesia that we had liberated from Japanese occupation. Palau 
adopted its own constitution in 1981, and the governments of the United 
States and Palau concluded a Compact of Free Association that entered 
into force on October 1, 1994.
    With a government modeled on our own, Palau shares our goals for 
human rights and democracy throughout the world. Palau has shown 
maturity of a much older nation in its democratic processes, which is a 
testament to the commitment to strong values the people of the Pacific 
have, and reinforces the value of the Compact as a vehicle for 
transition.
    Palau has been a staunch ally to the United States, and it is 
essential we stand by our commitment to the people of Palau. The 
Palauan people have been loyal and dedicated partners, but they are 
concerned about their future and that of their grandchildren. Palau is 
as interested in regional and international security as we are. Failing 
to affirm the results of the 15-year review of the Compact with Palau 
is not in our national interest. We appreciate the interest and 
leadership of this Committee in considering this legislation promptly 
and hope both the House and the Senate will pass it before the end of 
the year.
    Senator Inouye of Hawaii was perhaps the most important example to 
the people of the Pacific of the American generation that fought in 
World War II and its aftermath. As his generation passes and other 
emerging powers seek to increase their influence in the region, passage 
of this legislation will send a reassuring signal that the United 
States is and will be engaged in the Pacific and will remain a faithful 
friend and ally through both good and challenging times.
              the importance of implementing the agreement
    Mr. Chairman, Secretary Kerry, and others in this Administration 
deeply appreciate not only the rich and historic World War II legacy of 
the Pacific, but also the continuing strategic role those islands and 
waters play globally. The Administration places great importance on 
continuing our strong alliance with Pacific Island partners. I recently 
visited the battlefield of Peleliu, where more than 1,700 U.S. Marines 
and other servicemen were lost liberating the island, a necessary step 
towards the eventual liberation of the Philippines and the seizure of 
other key island bases that helped bring the war to a close. I met with 
Palauans who are working with partners in the United States to identify 
personal effects that still remain on the battlefield and to return 
them to family members in the United States nearly seventy years later. 
These efforts are emblematic of our shared history and the deep 
connections that have been forged in the decades since World War II. In 
the current political environment in the Pacific region, it is 
paramount that we maintain those ties and continue to develop our 
strategic framework for a peaceful future in the region. Our investment 
will help to ensure that Palau becomes financially independent over 
time and continues to stand with us as a loyal, trustworthy, and 
democratic ally.
    In today's dynamic Pacific environment, others in the region 
closely watch how the United States treats its new and old friends. 
Changing out engagement with Palau could affect the way others view our 
commitment to the region. It is likely that Palau would face offers of 
assistance from other nations expanding their reach in the Pacific to 
fill the void we would leave.
    I hope that my testimony today gives you an understanding and sense 
of how the Compact deepens our partnership with Palau and serves the 
interests of the United States. I look forward to working with you and 
other Members of Congress to secure and advance U.S. interests in Palau 
by passing the legislation implementing the results of the Compact 
review before the end of the year.
    Thank you again for giving me the opportunity to testify before you 
today and to clarify the importance of this legislation. I look forward 
to answering your questions.

    The Chairman. Very good. Thank you all for your cooperation 
here. Let me just kick off a few issues that seem important to 
Senator Murkowski and me.
    Mr. Kagan, first, I don't think it's exactly an atomic 
secret that China wants to expand its sphere of influence in 
this part of the world. What would be the implications of 
failing to approve an agreement with respect to China?
    Mr. Kagan. The broader question is not just China, but it's 
about U.S. ability in the region.
    The Chairman. Allies in the region.
    Mr. Kagan. I think that what the region sees is that we 
have a long standing relationship with Palau. One that's been 
beneficial to both countries and which gives us, as Deputy 
Assistant Secretary of Defense Singh has said, very valuable 
national security prerogatives in a critical part of the world.
    I think that the broader question really is if the U.S. is 
unable to move forward on something that we have signed that 
this will call into question the credibility both of our own 
word, but more broadly of our engagement in the region and our 
commitment to the region.
    So I think the question of China is obviously an important 
one. I think it's worth noting that China has expanded its 
engagement in the region. But that said, it's done so in many 
other parts of the world commensurate with its own rise.
    I think that the broader question really is one of U.S. 
credibility and the fact that people are watching. This is a 
question that we are asked regularly about the Palau Compact by 
other Pacific States, some other states in the Asia Pacific. I 
think that we will not stand in good stead with our allies and 
partners if we're not seen fulfilling this.
    The Chairman. Alright.
    Ms. Sobeck, I think it's pretty obvious that in today's 
political realities, you need an offset for a piece of 
legislation like this.
    I'd like to ask that you and your staff commit to working 
with my staff and with Senator Murkowski's staff so that 2 
weeks from now we have found a politically viable offset. Will 
you commit to doing that?
    Ms. Sobeck. I'm happy to commit myself and my staff to work 
with you. I hope that we can achieve the goal. But we will 
certainly engage. We really appreciated working with your staff 
on this issue.
    So yes, we commit to work with you. Absolutely.
    The Chairman. I don't want to make this a brutal forced, 
star chamber proceeding, but we really need you all to dig in 
with us. We've got to get this done.
    I'm going to ask some other questions with respect to the 
offsets, but we need you all to really dig in with us.
    I'll just interpret your answer as you're willing to take 
out the shovels and help us address this offset. I appreciate 
it.
    Mr. Kagan, Palau and the other countries with which the 
United States has compacts of free association are all 
sovereign nations. We've got embassies. We've got Ambassadors. 
They've got their own seat at the United Nations.
    Yet the funding for the compacts comes out of the 
Department of the Interior. As we've looked at this question 
with respect to both how to address our responsibilities and 
how to address the offsets, I've come to think that what I just 
described to you made certainly a lot of sense several decades 
ago. But I think it is worth discussing the idea of moving the 
Compact of Free Association responsibilities from the Interior 
to the State Department.
    I want to emphasize that it seems to me this is an idea 
worth exploring just because these compacts are truly important 
to America's strategic interests. My concern is that with all 
the inertia that inevitably sets in with a challenging budget 
situation. These compacts are at risk.
    The Congress, the Administration, haven't been able to 
agree on an offset. I think part of this is due to the fact 
that this is an Interior program. So people say the offset has 
to come from Interior. I think the reason I asked Ms. Sobeck 
the question is we're all going to have to be part of this 
effort to address this.
    I think it's also worth noting that the reality is these 
agreements are with foreign nations. What we have traditionally 
said is agreements with foreign nations, logically, belong at 
the Department of State.
    Has there been discussion, Mr. Kagan, at the State 
Department of the idea of moving this program from Interior to 
State?
    Mr. Kagan. Thank you, Mr. Chairman.
    Obviously you raise a very valid and interesting point. I 
think the short answer is no. There has not been a discussion.
    The Chairman. Are you sure?
    Mr. Kagan. At the Department of State.
    The Chairman. You're sure there have been no discussions?
    Mr. Kagan. I think----
    The Chairman. That's a yes or no answer.
    Mr. Kagan. To the best of my knowledge we have had no 
discussions because we believe that the current arrangements 
work. There is a long legislative history, a long history, of 
our relationships with the compact states that go back to the 
original creation of the compacts where it was believed it was 
very important to maintain a very special relationship between 
the compact states and the United States.
    Because of this special relationship the compact states, 
typically Palau, are eligible to receive Federal assistance 
typically provided only to U.S. States and territories and not 
available to general recipients of U.S. foreign assistance.
    For this reason the Department of the Interior which had 
the expertise and continues to have the expertise and the 
experience and the understanding of the development needs of 
these countries, was the logical place to have the 
responsibility for continuing to provide the assistance.
    We believe that this has worked. I mean, I think, clearly 
in the case of Palau.
    The Chairman. So, time is brief.
    I just want to know whether you agree that the agreement 
with Palau is important enough to put this idea and, frankly, 
all other ideas on the table for discussion?
    That's a yes or no answer, too.
    Mr. Kagan. I think that the agreement with Palau is very 
important. It's important to move as quickly as possible. 
Certainly----
    The Chairman. That's not the question I'm asking.
    The question I'm asking is it important enough to put all 
the options for funding this on the table?
    Mr. Kagan. I believe, again, Mr. Chairman, that this is a 
very complex issue. This involves jurisdiction of a number of 
different committees both in the Senate and the House. It 
involves two executive departments. Moving forward on this and 
having these sorts of discussions could be something that we 
could do going forward.
    But at the same time, it is very important to recognize 
this is not an easy process. I mean we believe it's very 
important to move quickly on Palau.
    The Chairman. Mr. Singh, given your testimony about Palau's 
importance to America's national security isn't it appropriate 
that at least some of the cost of the Palau compact be borne by 
the Defense Department?
    Mr. Singh. I think, as Mr. Kagan was just saying, I think 
we have, there are sort of, two issues here, Senator.
    The first is can we quickly implement what we've agreed to? 
I think for all of us we believe that that is going to be most 
easily done by keeping the obligations where they have been, 
the responsibilities where they have been and managing it as--
--
    The Chairman. So are you answering my question no or yes?
    Mr. Singh. At this time, no. I do not think it is 
appropriate for the Department of Defense to fund this 
requirement. Actually at this point----
    The Chairman. Not even a part?
    Mr. Singh. At this point also given the significant 
pressure the Department is under and the difficulty we're 
having in the back and forth we're having with Congress right 
now simply to fund our FY'13 operations. Right now it is simply 
something the Department couldn't take on.
    I would echo what Mr. Kagan said. I think if we can get a 
way forward now that eventually in the future I would agree 
with you that this is, you know, anything should be discussed.
    But for not I think it is important that we try to move 
forward with the tools we have in place.
    The Chairman. Here's what we're going to do.
    No. 1, I'm going to hold the record open because I at least 
want to give you, Mr. Singh, and you, Mr. Kagan, the 
opportunity to flesh out the answers that you gave to my 
questions. We'll be open to any and all ideas.
    [The information referred to by response of Mr. Kagan 
follows:]

    While I am not aware of any serious discussions that have taken 
place at the State Department or between agencies involving the 
possibility of moving full responsibility for oversight and 
administration of the Compacts and their funding provisions to the 
Department of State, we consider moving forward on the Palau Compact 
Review Agreement to be an important foreign policy priority.
    Our partnership with Palau is a strategic asset and maintaining 
that relationship is a foreign policy priority for the Department of 
State; however, the Department of the Interior has many years of 
expertise, staffing resources, and institutional knowledge in 
administering Compact assistance and understanding the development 
needs of Palau, unlike the Department of State. Our Compact 
relationship affords Palau the eligibility to receive types federal 
assistance, including access to federal programs and services, 
typically provided only to U.S. states and territories (Commonwealth of 
Puerto Rico, Guam, American Samoa, U.S. Virgin Islands, and 
Commonwealth of Northern Marianas), that are generally not available to 
recipients of U.S. foreign assistance. Primary jurisdiction over Palau 
Compact assistance, and technical assistance to the other Compact 
states, has historically resided with the Department of the Interior. 
We will continue working with Interior, the rest of the Administration, 
and you on this important policy issue.
    Moving forward, any discussion on where Compact oversight 
responsibilities should reside should involve numerous stakeholders 
including the Department of the Interior, the Department of Defense, 
the Department of State, the U.S. Agency for International Development, 
the Office of Management and Budget, the National Security Staff, as 
well as the numerous Congressional committees that have an interest in 
the U.S.-Palau Compact. Given that such complex discussions could 
require a substantial amount of time and consideration, we believe that 
moving now, without any further delay, on the Palau Agreement is 
important.
    We hope this information is helpful. Please let us know if we can 
be of further assistance.

    The Chairman. But what I had hoped, Mr. Singh, and frankly 
what I think is disappointing, is I think everybody's got to 
step up. I don't think it's acceptable to just say, look, we've 
always done it this way. So we're going to keep doing it this 
way.
    I mean, that's not what I do on any other program. I mean, 
to have everybody just be on automatic pilot and say this is 
the way we've always done it, I think in these times we've got 
to be open to all the options.
    Particularly to say, look, and this would be fine with me 
to say this is difficult. Defense Department, other agencies 
under sequestration, but we're going to roll up our sleeves and 
try to figure out how to solve some stuff that looks 
intractable. Particularly on these kinds of issues, nobody gets 
exactly what they want. Nobody gets what they actually believe 
they deserve.
    The question is are we going to be able to get what we 
need?
    I think, certainly the two of you and I've heard your 
agencies talk about it, don't doubt for an instance, that this 
is a strategic relationship and one that we'd feel strongly 
about.
    So when you have a strategic relationship you start with 
that and say, look, there's some tough calls. We've got to find 
some ways to address it and particularly in difficult times.
    I've said, for example, to my constituents just down the 
hall on something we feel very strongly about, the Klamath 
Basin in rural Oregon, where it's dry as a bone. They've worked 
very hard to come up with a restoration agreement. I said, I 
don't think we can afford that.
    We're all going to have to go back to the table. That's 
what we're doing now on a bipartisan basis. We're going back to 
the table and looking for ways where I just heard you say this 
Mr. Singh. I don't want you to feel specifically singled out, 
where we are saying it's not enough to say this is the way it's 
been done in the past. We've got to say we're going to do some 
new stuff.
    So expect that we'll be in touch as well with your 
respective Secretaries or your agencies. This has to get done. 
The 3 of you are dedicated public servants. I don't doubt that 
for a moment.
    We're going to have to look at some fresh approaches.
    Ms. Sobeck, you got put under the microscope first because 
we committed you to 2 weeks. I guess what I'm going to do is 
say that for Mr. Kagan and Mr. Singh.
    I want you to have every opportunity to flesh out your 
statements for the record. I suspect you may want to do that. 
We need you to come back to us within 2 weeks as well with your 
ideas with respect to the points that I talked about.
    Mr. Singh, a question of the Defense Department since this 
is a strategic asset sharing at least some portion of the cost. 
Then looking at how the State Department can have a bigger role 
in this certainly with respect to the idea I talked about, 
moving it to the Department.
    But we'll stay open for other options.
    Do any of you have anything else you want to add before we 
wrap up?
    Alright.
    With that the Energy Committee is adjourned.
    [Whereupon, at 11:20 a.m., the hearing was adjourned.]
                               APPENDIXES

                              ----------                              

                               Appendix I

                   Responses to Additional Questions

                              ----------                              

        Response of Eileen Sobeck to Question From Senator Wyden
    Question 1. Assistant Secretary Sobeck, Delegate Christensen asks 
that the Committee also consider adding her legislation H.R. 374 to 
this Omnibus bill. H.R. 374 would establish a pilot program to leverage 
private pension funds to raise revenues for meeting the chronic 
infrastructure needs in the territory and it would raise funds for the 
U.S. Treasury. Because it is a revenue raiser, this bill would be in 
the jurisdiction of the Finance Committee and as a member of that 
Committee, I am interested in the Administration's views on this bill 
because it may also provide an offset for the legislation to approve 
the Compact Agreement with Palau.
    Would you please provide the Administration's views, including 
Treasury Department views, on this bill to the Committee with 45 days?
    Answer. Approving the results of the Compact Review Agreement is of 
critical importance to the national security of the United States, to 
our bilateral relationship with Palau, and to our broader strategic 
interests in the Asia Pacific region. The Department is interested in 
continuing to work with the Committee to identify an appropriate off-
set to approve the Compact Agreement with Palau. As you noted, HR 374 
amends the Internal Revenue Code to provide for a reduction of taxes on 
distributions from certain retirement savings plans designated by an 
individual under the age of 61 as being under investment by the Virgin 
Islands Investment Program for at least 30 years. This legislation 
amends the Internal Revenue Code to raise revenue, and therefore is 
within the purview of the U.S. Treasury. The Department is unable to 
comment on behalf of the U.S. Treasury, but has flagged your request 
for the U.S. Treasury's review.
                              Appendix II

              Additional Material Submitted for the Record

                              ----------                              

Statement of Hon. Hersey Kyota, Ambassador of the Republic of Palau to 
                     the United States, on S. 1268
    The Republic of Palau appreciates the opportunity to provide this 
Statement to the Senate Energy and Natural Resources Committee in 
connection with Senate Bill 1268, to approve the Agreement between 
Palau and the United States entered into on September 3, 2010. On 
behalf of President Remengesau and the people of Palau, I would also 
like to convey our special appreciation and gratitude to Chairman 
Wyden, Ranking Member Murkowski and the members of this Committee for 
their continued support and assistance to the Government and people of 
Palau.
    We particularly appreciate that Chairman Wyden so promptly 
introduced S. 1268 and included it in the July 11 hearing. Palau is 
also grateful for the efforts discussed at the hearing to expeditiously 
find the means to implement the Agreement.
    As the witnesses at the hearing explained, the S. 1268 would 
implement the Agreement reached between Palau and the United States 
following the review mandated under Section 432 of the Compact of Free 
Association between Palau and the United States. In short, as noted at 
the hearing, the Agreement addresses the goal of economic self-reliance 
by extending assistance to Palau under the Compact on a declining scale 
of funding through 2024 and it provides for Palau to continue to make 
economic, legislative, financial, and management improvements.
    The Agreement has been awaiting approval by the United States 
Congress for almost three years. In addition to creating regional 
strategic and security concerns, this delay is an obstacle to Palau's 
continued economic growth and progress toward self-reliance and 
negatively impacts the confidence of domestic and foreign investors. It 
also makes managing Palau's finances difficult and postpones critical 
public infrastructure investments and maintenance of existing economic 
infrastructure. Throughout this period, Palau has patiently worked as 
best it can to assist the United States government in implementing the 
Agreement.
    Chairman Wyden indicated that Palau is unsinkable as a country. 
Palau's friendship with the United States has also remained unsinkable. 
Our two countries need the Agreement so that the strong relationship 
between Palau and the United States can continue to be an important and 
strategic base for stability and security in the Western Pacific. Palau 
will continue to support the efforts of the United States to promptly 
approve the Agreement.
                                 ______
                                 
  Statement of David B. Gootnick, Director, International Affairs and 
            Trade, the U.S. Government Accountability Office
 compacts of free association.--guidelines needed to support reliable 
             estimates of cost impacts of growing migration
Why GAO Did This Study
    U.S. compacts with the FAS permit those three countries' citizens 
to migrate to the United States and its territories (U.S. areas) 
without regard to visa and labor certification requirements. Thousands 
of FAS citizens have migrated to U.S. areas (compact migrants)-
particularly to Hawaii, Guam, and the CNMI. In fiscal year 2004, 
Congress appropriated $30 million annually for 20 years to help defray 
affected jurisdictions' costs for migrant services. Interior allocates 
the $30 million as compact impact grants in proportion to the number of 
compact migrants living in each affected jurisdiction. Although not 
required, affected jurisdictions may report impact costs to Interior, 
which submits any reports it receives to Congress. This statement draws 
from GAO's November 2011 report on compact migrants and discusses 
challenges in identifying the impact of compact migrants on U.S. areas. 
For this statement, GAO assessed progress made by Interior to address 
the recommendation that it disseminate cost guidelines.
What GAO Recommends
    GAO is not making new recommendations in this statement. In its 
2011 report, GAO recommended that Interior disseminate adequate 
guidance for estimating compact cost impacts and call for the affected 
jurisdictions to apply these guidelines, among other steps needed to 
assess and address the impact of the growing compact migration. 
Interior concurred with the recommendation on providing adequate 
guidance for estimating compact cost impacts.
What GAO Found
    Data from the U.S. Census Bureau (Census) show that migrants from 
the freely associated states (FAS)-the Federated States of Micronesia 
(FSM), the Marshall Islands, and Palau-reside throughout U.S. areas. 
GAO's 2011 report found that Census estimates that roughly 56,000 
compact migrants-nearly a quarter of all FAS citizens-were living in 
U.S. areas in 2005 to 2009. About 58 percent of compact migrants lived 
in areas that Congress defined in the amended compacts' enabling 
legislation as affected jurisdictions: American Samoa, Hawaii, Guam, 
and the Commonwealth of the Northern Mariana Islands (CNMI).
    For fiscal years 2004 through 2010, Hawaii, Guam, and the CNMI 
reported more than $1 billion in costs associated with providing 
education, health, and social services to compact migrants-far in 
excess of the $210 million in compact impact grants over that time 
period. The affected jurisdictions reported impact costs for education, 
health, public safety, and social services to the Department of the 
Interior (Interior). Education accounted for the largest share of 
reported expenses in all three jurisdictions, and health care costs 
accounted for the second-largest share overall.
    However, assessed against best practices for cost estimation, these 
cost estimates contain a number of limitations with regard to accuracy, 
adequate documentation, and comprehensiveness, affecting the reported 
costs' credibility and preventing a precise calculation of total 
compact impact on the affected jurisdictions. For example, some 
jurisdictions did not accurately define compact migrants, account for 
federal funding that supplemented local expenditures, or include 
revenue received from compact migrants.
    Interior developed guidelines in 1994 for reporting compact impact. 
However, several officials from the reporting local government 
agencies, as well as Interior officials, were not aware of the 
guidelines and had not used them. Moreover, the 1994 guidelines do not 
address certain concepts that are essential for reliable estimates of 
impact costs, such as calculating revenue received from providing 
services. Providing more rigorous guidelines to the affected 
jurisdictions that address concepts essential to producing reliable 
impact cost estimates and promoting their use for compact impact 
reports would increase the likelihood that Interior can provide 
reliable information on compact impacts to Congress. Although Interior 
took initial steps to implement GAO's recommendation in 2012, it has 
not yet provided updated guidelines for estimating compact cost 
impacts. 

    Chairman Wyden, Ranking Member Murkowski, and Members of the 
Committee:

    I am pleased to submit this statement about our previous work on 
the impact of migration under provisions of the compacts of free 
association.\1\ Three Pacific island nations--the Federated States of 
Micronesia (FSM), the Republic of the Marshall Islands, and the 
Republic of Palau--have entered into compacts with the United States. 
Compact goals included achieving self government, promoting economic 
advancement, and securing security and defense rights. In addition, the 
compacts provide for citizens of these freely associated states (FAS) 
to enter and reside indefinitely in the United States, including its 
territories. Since the compacts went into effect--in 1986 for the FSM 
and the Marshall Islands and in 1994 for Palau--thousands of migrants 
from these countries have established residence in U.S. areas, 
particularly in Guam, Hawaii, and the Commonwealth of the Northern 
Mariana Islands (CNMI).\2\
---------------------------------------------------------------------------
    \1\ GAO, Compacts of Free Association: Improvements Needed to 
Assess and Address Growing Migration, GAO-12-64 (Washington, D.C.: Nov. 
14, 2011). We also previously reported on compact migrants and their 
impact in Foreign Relations: Migration From Micronesian Nations Has Had 
Significant Impact on Guam, Hawaii, and the Commonwealth of the 
Northern Mariana Islands, GAO-02-40 (Washington, D.C.: Oct. 5, 2001).
    \2\ n this report, ``U.S. areas'' refers to the 50 U.S. states; the 
U.S. insular areas (Guam, the CNMI, American Samoa, and the U.S. Virgin 
Islands); Puerto Rico; and the District of Columbia.
---------------------------------------------------------------------------
    In 2003, Congress approved amended compacts with the FSM and the 
Marshall Islands.\3\ In the amended compacts' enabling legislation, 
Congress extended additional economic assistance to the two countries 
and authorized and appropriated $30 million annually for 20 years for 
grants to Guam, Hawaii, the CNMI, and American Samoa, which it deemed 
``affected jurisdictions,'' to help defray the cost of services to 
compact migrants.\4\ Congress directed the Department of the Interior 
(Interior) to divide these compact impact grants among the affected 
jurisdictions in proportion to the most recent enumeration of compact 
migrants residing in each jurisdiction. Since 1986, affected 
jurisdictions have submitted to Interior compact impact reports that 
include descriptions of, and estimated costs for, education, health, 
public safety, and social services that local government agencies 
provided to compact migrants. However, affected jurisdictions have 
expressed continuing concerns that they do not receive adequate 
compensation for the growing cost of providing government services to 
compact migrants. In addition, thousands of compact migrants have moved 
to other states that are not eligible to receive compact impact grants. 
My statement draws from our November 2011 report on compact migrants 
and will discuss challenges in assessing the impact of compact migrants 
on U.S. areas.\5\
---------------------------------------------------------------------------
    \3\ Compact of Free Association Amendments Act of 2003, Pub. L. 
No.108-188, December 17, 2003. In this testimony, the act is referred 
to as ``the amended compacts' enabling legislation.''
    \4\ Because of American Samoa's small reported FAS population--
estimated at 15 in a 2008 enumeration--we did not address compact 
migrants in American Samoa in our 2011 report.
    \5\ GAO-12-64.
---------------------------------------------------------------------------
     For our 2011 report's discussion of the impact of compact 
migrants, we reviewed previous reports on compact migration and cost 
estimation, Interior's impact reports, as well as the supporting 
documentation and methodologies used to prepare impact reports. We also 
interviewed Interior and local government officials. To assess compact 
impact cost reporting, we reviewed affected jurisdictions' impact 
reports since 2004 and compared these reports to cost estimation 
criteria.\6\ To assess Interior's guidance on compact impact reporting, 
we reviewed the requirements in the amended compacts' enabling 
legislation and Interior's existing guidelines. To describe compact 
migrants' role in the economy, we used data from earlier FAS migrant 
surveys, supplemented where possible with additional information from 
local agencies and other literature. For this statement, in June 2013, 
we updated and assessed progress made by Interior on the recommendation 
in the 2011 report that Interior disseminate adequate guidance on 
estimating compact cost impacts. Our 2011 report contains a detailed 
description of its scope and methodology.
---------------------------------------------------------------------------
    \6\ GAO, GAO Cost Estimating and Assessment Guide: Best Practices 
for Developing and Managing Capital Program Costs, GAO-09-3SP 
(Washington, D.C.: March 2009) and OMB Circular No. A-94, Guidelines 
and Discount Rates for Benefit-Cost Analysis of Federal Programs, 
revised October 29, 1992.
---------------------------------------------------------------------------
    We conducted this work in accordance with generally accepted 
government auditing standards. Those standards require that we plan and 
perform the audit to obtain sufficient, appropriate evidence to provide 
a reasonable basis for our findings and conclusions based on our audit 
objectives. We believe that the evidence obtained provides a reasonable 
basis for our findings and conclusions based on our audit objectives.
Background
    The FSM, the Marshall Islands, and Palau are among the smallest 
countries in the world. In 2008, the three FAS had a combined resident 
population of approximately 179,000--104,000 in the FSM, 54,000 in the 
Marshall Islands, and 21,000 in Palau.
    Under the compacts of free association, citizens of the FAS are 
exempt from meeting the visa and labor certification requirements of 
the Immigration and Nationality Act as amended. The migration 
provisions of the compacts allow compact migrants to enter the United 
States (including all U.S. states, territories, and possessions) and to 
lawfully work and establish residence indefinitely.\7\ In the 1986 
compacts' enabling legislation, Congress stated that it was not its 
intent to cause any adverse consequences for U.S. territories and 
commonwealths and the state of Hawaii. Congress further declared that 
it would act sympathetically and expeditiously to redress any adverse 
consequences and authorized compensation for these areas that might 
experience increased demands on their educational and social services 
by compact migrants from the Marshall Islands and the FSM.
---------------------------------------------------------------------------
    \7\ Under the compacts, the United States has a responsibility for 
the defense of the FAS, and the compacts provide the United States with 
exclusive military use rights in these countries. In addition, under 
the compacts, the United States provided economic assistance and access 
to certain federal services and programs, among other things. Under the 
initial compacts with the FSM and the Marshall Islands, the United 
States provided $2.1 billion in economic assistance to these 
governments. Under the amended compacts, the United States will provide 
an estimated combined total of $3.6 billion in economic assistance, 
much of it in a form known as ``sector grants,'' in annually decreasing 
amounts from 2004 through 2023. For more information about U.S. 
assistance provided under the amended compacts, see Compacts of Free 
Association: Micronesia's and the Marshall Islands' Use of Sector 
Grants, GAO-07-514R (Washington, D.C.: May 25, 2007). We plan to 
publish an additional report on the use of these funds in September 
2013.
---------------------------------------------------------------------------
    The December 2003 amended compacts' enabling legislation restated 
Congress's intent not to cause any adverse consequences for the areas 
defined as affected jurisdictions-Guam, Hawaii, the CNMI, and American 
Samoa. The act also authorized and appropriated $30 million for each 
fiscal year from 2004 to 2023 for grants to the affected jurisdictions, 
to aid in defraying costs incurred by these jurisdictions as a result 
of increased demand for health, educational, social, or public safety 
services, or for infrastructure related to such services specifically 
affected by compact migrants resident in the affected jurisdictions.\8\
---------------------------------------------------------------------------
    \8\ Beginning in fiscal year 2010, Interior was to annually award 
approximately $16.8 million to Guam, $11.2 million to Hawaii, and $1.9 
million to the CNMI.
---------------------------------------------------------------------------
    Figure 1* shows the locations of the FAS and the affected 
jurisdictions.
---------------------------------------------------------------------------
    * Figures 1-3 have been retained in committee files.
---------------------------------------------------------------------------
    The amended compacts' enabling legislation provides for Interior to 
allocate the $30 million in grants to affected jurisdictions on the 
basis of their compact migrant population. Each affected jurisdiction 
is to receive its portion of the $30 million per year in proportion to 
the number of compact migrants living there, as determined by an 
enumeration to be undertaken by Interior and supervised by the U.S. 
Census Bureau (Census) or another organization at least every 5 
years.\9\ The act defines the population to be enumerated as persons, 
or those persons' children under the age of 18, who pursuant to the 
compacts are admitted to, or resident in, an affected jurisdiction. The 
amended compacts' enabling legislation permits, but does not require, 
affected jurisdictions to report on compact migrant impact. If Interior 
receives such reports from the affected jurisdictions, it must submit 
reports to Congress that include, among other things, the governor's 
comments and administration's analysis of any such impacts.
---------------------------------------------------------------------------
    \9\ Census conducted these enumerations in 2003 and 2008 and plans 
to conduct a third in 2013. Previous Interior and Census surveys had 
enumerated the migrant population in 1992-1993 and 1997-1998.
---------------------------------------------------------------------------
    The combined data from Census's 2005-2009 American Community Survey 
and the 2008 required enumerations in Guam and the CNMI estimated that 
approximately 56,000 compact migrants\10\--nearly a quarter of all FAS 
citizens--lived in U.S. areas, with the largest populations in Guam and 
Hawaii. An estimated 57.6 percent of all compact migrants lived in 
affected jurisdictions: 32.5 percent in Guam, 21.4 percent in Hawaii, 
and 3.7 percent in the CNMI, while nine mainland states each had an 
estimated compact migrant population of more than 1,000. (See fig. 2.)
---------------------------------------------------------------------------
    \10\ Census's 2005-2009 American Community Survey and 2008 
enumerations estimated the total number of compact migrants in U.S. 
states and territories as ranging from 49,642 to 63,048, with a 90 
percent confidence interval; that is, Census is 90 percent confident 
that the true number of compact migrants falls within that range. For 
additional detail on these Census estimates, see pages 12 through 18 of 
GAO-12-64.
---------------------------------------------------------------------------
    On the basis of these combined data, we estimate that approximately 
68 percent of compact migrants were from the FSM, 23 percent were from 
the Marshall Islands, and 9 percent were from Palau. Surveys conducted 
in affected jurisdictions from 1993 through 2008 show growth in the 
compact migrant populations in Guam and Hawaii. In the CNMI, from 2003 
to 2008, the compact migrant population declined. Over the same period, 
the total compact migrant population in Guam and Hawaii grew as a 
percentage of their total populations. The estimated number of compact 
migrants in Guam increased from 9,831 in 2003 to 18,305 in 2008. In 
2003, compact migrants represented approximately 6 percent of Guam's 
total population, but by 2008 they had increased to approximately 12 
percent. Compact migrants in Hawaii increased during the same period 
from an estimated 7,297 to 12,215 and represented approximately 1 
percent of Hawaii's total population in 2008.
    An analysis of 2010 decennial census race data also shows growth in 
the population of FAS-related persons throughout the United States, 
with the U.S. population of FAS-related persons more than tripling from 
17,380 in 2000 to 55,286 in 2010.\11\
---------------------------------------------------------------------------
    \11\ We use ``FAS-related persons'' to refer to individuals 
reporting that they are of one of the FAS races and only that race 
(e.g., Pohnpeian, Chuukese, Marshallese, Palauan) in the 2010 decennial 
census. There are substantial differences between the decennial census 
counts based on reported race and the Census estimates of compact 
migrants derived from the 2005-2009 American Community Survey and 2008 
migrant enumerations. For example, the 2010 decennial census counted 
21,226 persons reporting they were solely of an FAS race in Hawaii, 
while the 2005-2009 American Community Survey estimated 12,060 compact 
migrants in the state. On the U.S. mainland, the 2010 decennial census 
counted 4,302 persons reporting they were solely of an FAS race in 
Arkansas, while the American Community Survey estimated 1,155 compact 
migrants in the state. There are multiple definitional and 
methodological reasons why these numbers are not comparable. For a full 
discussion of these issues, see appendix IV of GAO-12-64.
---------------------------------------------------------------------------
Guam and Hawaii Report Rising Compact Costs, Primarily for Education 
        and Health
    For 2004 through 2010, the affected jurisdictions' reports to 
Interior show more than $1 billion in costs for services related to 
compact migrants.\12\ During this period, Guam's annual reported costs 
increased by nearly 111 percent, and Hawaii's by approximately 108 
percent. The CNMI's reported annual costs decreased by approximately 53 
percent, reflecting the decline in the CNMI compact migrant population. 
During the same period, the amended compacts' enabling legislation 
provided $210 million in impact grants--approximately $102 million to 
Guam, $75 million to Hawaii, and $33 million to the CNMI.\13\ Figure 3 
shows compact impact costs reported by the affected jurisdictions for 
1996 through 2010.\14\
---------------------------------------------------------------------------
    \12\ For 1986 through 2003, affected jurisdictions reported total 
compact impact costs of approximately $540 million to $568 million 
(unadjusted for inflation).
    \13\ In addition, from 1992 through 2003, Guam received 
approximately $53 million, Hawaii received $7 million, and the CNMI 
received $6.6 million from funds appropriated to Interior for grants to 
address compact impact. The largest annual compact impact grants to 
Guam in fiscal years 2005 through 2010 supported public school 
construction and maintenance. Most other compact impact grants to Guam 
funded health and public safety purchases, such as the purchase or 
renovation of facilities, emergency vehicles, and medical supplies, 
among many others. All compact impact grants to Hawaii in fiscal years 
2004 through 2010 were provided to its Department of Human Services to 
offset the cost of state-funded medical services. Compact impact grants 
to the CNMI in fiscal years 2004 through 2010 supported the operations 
of several CNMI government departments, such as the Departments of 
Public Health and Public Safety, and the public school system.
    \14\ Guam published its most recent estimate of the impact of 
compact migration in January 2013. In its January report, Guam 
estimated that its fiscal year 2011 impact was $95.3 million and its 
fiscal year 2012 impact was $125 million. CNMI estimated a 2011 impact 
of approximately $2.5 million and a 2012 impact of approximately $5.6 
million in its 2012 compact impact grant application. We have not 
assessed the reliability of these more recent estimates. Hawaii has not 
compiled updated compact impact estimates since its 2011 report.
---------------------------------------------------------------------------
    The affected jurisdictions reported impact costs for education, 
health, public safety, and social services. Education accounted for the 
largest share of reported expenses in all three jurisdictions, and 
health care costs accounted for the second-largest share overall (see 
table 1). Several officials in Guam and Hawaii cited compact migrants' 
limited eligibility for a number of federal programs, particularly 
Medicaid, as a key contributor to the cost of compact migration borne 
by the affected jurisdictions.\15\ While their parents may not be 
eligible for some programs, U.S.-born children of compact migrants are 
eligible as citizens for the benefits available to them as U.S. 
citizens.\16\
---------------------------------------------------------------------------
    \15\ When the compacts were signed, FAS citizens were eligible for 
Medicaid; however, the Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996 (PRWORA) removed this eligibility. Hawaii 
chose to continue to provide equivalent services at its own expense. 
Current legislation in both the House (H.R. 912 and H.R. 1222) and 
Senate (S. 744) would restore Medicaid eligibility for compact 
migrants. Guam and the CNMI, unlike states, are subject to annual caps 
on federal funds for Medicaid; once this cap is reached, each area must 
provide for the cost from its own funds. For further information, see 
GAO, U.S. Insular Areas: Multiple Factors Affect Federal Health Care 
Funding, GAO-06-75 (Washington, D.C.: Oct. 14, 2005).
    \16\ See table 2 on page 27 of GAO-12-64 for an analysis of the 
eligibility status of compact migrants as of November 2011 for ten 
selected federal benefit programs, including Social Security programs, 
Medicare, the Children's Health Insurance Program, Temporary Assistance 
to Needy Families, and the Supplemental Nutrition Assistance Program.

Compact Impact Estimates Have a Number of Weaknesses
    We identified a number of weaknesses related to accuracy, adequacy 
of documentation, and comprehensiveness in affected jurisdictions' 
reporting of compact impacts to Interior from 2004 through 2010.\17\ 
Examples of such weaknesses include the following.
---------------------------------------------------------------------------
    \17\ For a discussion of recommended cost estimation practices, see 
GAO-09-3SP. For federal cost estimation guidelines, see OMB Circular 
No. A-94.
---------------------------------------------------------------------------
            Accuracy
   Definition of compact migrants.--For several impact reports 
        that we examined, the reporting local government agencies, when 
        calculating service costs, did not define compact migrants 
        according to the criteria in the amended compacts enabling 
        legislation. For instance, some agencies defined and counted 
        compact migrants using the proxy measures of ethnicity, 
        language, or citizenship rather than the definition in the 
        amended compacts' enabling legislation. Using ethnicity or 
        language as a proxy measure could lead to overstating costs, 
        since neither measure would exclude individuals who came to the 
        jurisdiction prior to the compact, while using citizenship as a 
        proxy measure could lead to understating costs, since it would 
        exclude U.S.-born children of compact migrants.
   Federal funding.--Guam, Hawaii, and the CNMI, among other 
        U.S. states and territories, receive federal funding for 
        programs that compact migrants use; however, not all compact 
        impact reports accounted for this stream of funding and 
        included costs in compact impact estimates for programs that 
        federal funding had partially addressed. To the extent that 
        federal revenue for programs in affected jurisdictions is based 
        on population counts or data on usage, the presence of, and use 
        of services by, compact migrants lead to federal offsets. For 
        example, from 2004 to 2008, Hawaii developed its education 
        impact costs by calculating a per-pupil expenditure multiplied 
        by the number of compact migrant students enrolled each school 
        year. However, federal funds received through several programs 
        are included in these annual expenditures. If the federal funds 
        component of per-pupil expenditures were subtracted from 
        Hawaii's education impact reporting, as well as a correction 
        made to eliminate a data error that double-counted Marshallese 
        students, it would reduce the total cost of services to compact 
        migrants by approximately $61 million for 2004 through 2008 
        from $229 to $168 million.\18\
---------------------------------------------------------------------------
    \18\ The Hawaii Department of Education excluded federal funds from 
its costs reported to Interior in August 2011.
---------------------------------------------------------------------------
   Revenue.--Multiple local government agencies that receive 
        fees as a result of providing services to compact migrants did 
        not consider fees in their compact impact reports. Any 
        exclusion of revenue may cause an overstatement of the total 
        impact reported. Compact migrants also participate in local 
        economies through their participation in the labor force, 
        payment of taxes, consumption of local goods and services, and 
        receipt of remittances. Previous compact migrant surveys 
        estimated compact migrants' participation in the labor force, 
        but existing data on other compact migrant contributions such 
        as tax revenues, local consumption, or remittances are not 
        available or sufficiently reliable to quantify their effects.
   Capital costs.--Many local government agencies did not 
        include capital costs in their impact reporting. Capital costs 
        entail, for example, providing additional classrooms to 
        accommodate an increase in students or constructing additional 
        health care facilities. In cases where compact migration has 
        resulted in the expansion of facilities, agencies understated 
        compact migrant impact by omitting these costs.\19\
---------------------------------------------------------------------------
    \19\ In schools, the number of additional compact migrant students 
will likely have led to increased capital costs such as additional 
school space. According to school district data for the 2010-11 school 
year, in affected jurisdictions, migrants made up 21 percent of the 
student population in Guam, 12 percent in the CNMI, and 3 percent in 
Hawaii.
---------------------------------------------------------------------------
   Per person costs.--A number of local government agencies 
        used an average per-person service cost for the jurisdiction 
        rather than specific costs associated with providing services 
        to compact migrants. For example, one jurisdiction based the 
        cost of providing health care services to compact migrants on 
        the number of migrants served out of the total patient load 
        instead of totaling each patient's specific costs. Using the 
        average cost may either overstate or understate the true cost 
        of service provision.\20\
---------------------------------------------------------------------------
    \20\ A further refinement is to consider the incremental cost of 
providing service to a compact migrant. If an agency has unused service 
capacity, the cost of serving an additional person would be less than 
the agency's average service cost. However, if an agency is operating 
at capacity, serving compact migrants might require an expansion in 
agency operations, causing the cost of serving compact migrants to 
exceed the average service cost. For a discussion of these cost issues, 
see GAO, Illegal Alien Schoolchildren: Issues in Estimating State-by-
State Costs, GAO-04-733 (Washington, D.C.: June 21, 2004).
---------------------------------------------------------------------------
            Documentation Adequacy
    A number of local government agencies did not disclose their 
methodology for developing impact costs, including any assumptions, 
definitions, and other key elements, which makes it difficult to 
evaluate reported costs. Furthermore, some agency methodologies vary 
among affected jurisdictions.
            Comprehensiveness
    For those years when the affected jurisdictions submitted impact 
reports to Interior, not all local government agencies in the affected 
jurisdictions included compact impact costs for those years. For 
example, Hawaii did not provide estimated costs to Interior in 2005 and 
2006, although it included partial costs incurred in those years in its 
2007 and 2008 reports. Without comprehensive data in each year, the 
compact impact reports could understate total costs. In addition, 
compact impact reporting has not been consistent across affected 
jurisdictions. For example, Guam and the CNMI included the cost of 
providing police services, while Hawaii did not.
Existing Compact Impact Reporting Guidelines Have Gaps and Generally 
        Are Not Used
    Guidelines that Interior developed in 1994 for compact impact 
reporting do not adequately address certain concepts key to reliable 
estimates of impact costs. Developed in response to a 1993 
recommendation by the Interior Inspector General,\21\ the guidelines 
suggest that impact costs in Guam and the CNMI should, among other 
concepts, (1) exclude FAS citizens who were present prior to the 
compacts, (2) specify omitted federal program costs, and (3) be 
developed using appropriate methodologies. However, the 1994 guidelines 
do not address certain concepts, such as calculating revenue received 
from providing services to compact migrants, including capital costs, 
and ensuring that data are reliable and reporting is consistent.
---------------------------------------------------------------------------
    \21\ U.S. Department of the Interior Office of Inspector General, 
Audit Report: Impact of the Compact of Free Association on the 
Government of Guam, Report No. 93-I-1195 (1993).
---------------------------------------------------------------------------
    Several Hawaii and CNMI officials from the reporting local 
government agencies we met with, as well as Interior officials, were 
not aware of the 1994 guidelines and had not used them. Officials at 
the Guam Bureau of Statistics and Plans, which possessed the 
guidelines, said that the bureau attempts to adhere to them when 
preparing compact impact cost estimates. However, we found some cases 
where the bureau and other Guam agencies did not follow the guidelines.
    In order to strengthen Interior's ability to collect, evaluate, and 
submit reliable information to Congress on compact impact, we 
recommended in our November 2011 report that Interior disseminate 
guidelines to the affected jurisdictions on producing reliable impact 
estimates, and call for the affected jurisdictions to apply these 
guidelines when developing compact impact reports. Interior agreed with 
our recommendation. In March 2012, Interior convened a meeting of the 
Presidents of the FAS and governors and senior officials from affected 
jurisdictions to collaboratively develop strategies to address policy 
issues concerning the compacts. At the meeting, Interior stated that it 
would work directly with the affected jurisdictions regarding the 
feasibility of developing uniform reporting guidelines, with Guam and 
Hawaii having leadership roles in the effort. As of June 2013, Interior 
had not prepared any new guidance. We continue to believe that 
providing more rigorous guidelines to the affected jurisdictions and 
promoting their use for compact impact reports would increase the 
likelihood that Interior can provide reliable information on compact 
impacts to Congress.
    This concludes my statement for the record.
                                 ______
                                 
                 Legislature of the Virgin Islands,
             Energy and Environmental Protection Committee,
                                      St. Thomas, VI, July 9, 2013.
Hon. Ron Wyden,
Chairman, Committee on Energy and Natural Resources, U.S. Senate, 221 
        Dirksen Senate Office Building, Washington, DC.
    Dear Chairman Wyden: The Honorable Donna M. Christensen, U.S. 
Virgin Islands Delegate to Congress, informed Virgin Islanders of your 
introduction of an Omnibus Territories Bill. I write in support of this 
legislation, particularly your initiative to address the energy needs 
of insular areas including the U.S. Virgin Islands. In my capacity as 
Chairman of the 30th Legislature of the Virgin Islands Committee on 
Energy and Environmental Protection (``Committee'') , I most 
respectfully submit this letter of support to be referenced during the 
July 11, 2013 hearing on Senate Bill 1237 (S. 1237).
    I am aware that S. 1237 is the companion Bill to H.R. 2200, 
introduced in May by Delegate Gregorio Sablan of the Northern Mariana 
Islands and co-sponsored by Delegate Christensen and other territorial 
delegates. The Virgin Islands is in critical need of the energy action 
plan the legislation requires of the Energy Development in Island 
Nations (EDIN) Task Force, established by the Secretary of the 
Interior. Presently, we are totally reliant on fossil fuel which we 
burn at a rate of over 12,000 BTUs per kilowatt-hour. With modern 
equipment, this could be reduced well below 9,000 BTUs per kilowatt-
hour.
    Some action has been taken locally. Act No. 7075, codified as Title 
12, Virgin Islands Code, Chapter 23, was enacted to establish a 
benchmark for reliance on renewable energy technologies by Year 2025. 
Working with the Virgin Islands Water and Power Authority and the 
Virgin Islands Energy Office, my Committee has held hearings to discuss 
energy infrastructure and costs, as well as to explore energy 
generation options.
    On behalf of the Committee, we realize federal resources are needed 
to help us develop and implement a plan to reduce the Territory's 
reliance and expenditures on fossil fuel. We stand ready to work with 
the Department of Interior to reduce energy costs and improve energy 
efficiency for the benefit of residents and businesses in the Virgin 
Islands. We are supportive of S. 1237 proposed expansion of funding for 
the Low Income Home Energy Assistance Program (LIHEAP).
    I look forward to the success of this measure.
            Respectfully,
                               Senator Craig W. Barshinger,
                                                          Chairman.
                                 ______
                                 
                                    League of Women Voters,
                                     St. Thomas, VI, July 10, 2013.
Hon. Donna M. Christensen,
Delegate, U.S. Virgin Islands, U.S. House of Representatives, 
        Washington, DC.
    Dear Delegate Christensen: The League of Women Voters of the Virgin 
islands lends its support to the Omnibus Territorial Bill, S. 1237, 
particularly to those portions of the Bill that relate to the Virgin 
Islands. This bill, introduced by Sen. Ron Wyden, D-OR, Chair of the 
Committee on Energy and Natural Resources, will be of significant 
assistance to the U.S. Territories as they grapple with global fiscal 
issues that have larger than usual impact on insular economies when 
compared with impact at the national level. For this reason, LWV-VI is 
in favor of the passage of this bill, especially those provisions that 
relate to the U.S. Virgin Islands.
    We thank you for your contributions to the development and passage 
of this important piece of legislation for the U.S. Territories.
            Sincerely,
                          Gwen-Marie Moolenaar, Ph.D., LLD,
                                                 President, LWV-VI.
                                 ______
                                 
                 Legislature of the Virgin Islands,
                                          Capitol Building,
                                     St. Thomas, VI, July 11, 2013.
    Salutatory greetings to the Honorable Chairman Ron Wyden, members 
of the Senate Committee on Energy and Natural Resources, and other 
persons in physical or virtual attendance. My name is Clarence Payne, 
and I am an elected member of the 30th Legislature of the Virgin 
Islands. I am the body's Liaison to the U.S. Congress and the Vice-
Chairman of the Committee on Energy and Environmental Protection. 
However, I wish to make clear from the outset that I am not speaking on 
behalf of the 30th Legislature, and that the positions presented here 
are my own.
    Due to the financial constraints facing the territory I have chosen 
not to provide testimony in person. However, I am thankful for this 
opportunity to submit written remarks on S. 1237, the Omnibus 
Territories Act, inasmuch as the provisions of this legislation address 
issues of critical importance to the Virgin Islands. Although the 
various sections of the bill deal with a wide array of topics that 
directly address the territory, I will focus, for the most part, on the 
critical issues of energy assistance for lowincome households and the 
creation of a Chief Fiscal Officer in the Government of the Virgin 
Islands.
    I must begin by stating from the outset that I cannot, and in this 
instance I believe I represent the viewpoint of most if not all of my 
colleagues of the 30th Legislature, be more supportive of the Omnibus 
Territories Act in terms of increasing the allocation of funds and 
adjusting the eligibility requirements for the operation of LIHEAP in 
the Virgin Islands. As an elected official who stays close to the pulse 
of the grassroots, I can assure you that it is of critical importance 
to the survival and well-being of thousands of households in the 
territory. As such, I not only applaud the sponsors of this measure, 
but on behalf of all residents of the Virgin Islands I urge you to go 
further in addressing the territory's energy crisis by introducing and 
passing a Senate version of H.R. 92, The Virgin Islands Energy Crisis 
Relief Act, proposed by our Delegate to Congress, the Honorable Donna 
Christensen. This measure would appropriate resources to help lower the 
consumer cost of electricity over the next two years and thus help 
ensure that the Virgin Islands economy survives until the ongoing 
improvements to our energy infrastructure are in place. Recently, the 
30th Legislature of the Virgin Islands passed, by unanimous vote, 
Resolution No. 1794, urging the U.S. Congress to enact this important 
legislation introduced by our Delegate. A copy has been enclosed along 
with this presentation.
    Although the amounts involved are less than a drop in the bucket 
compared to the overall federal budget, the increase in Low Income Home 
Energy Assistance Program (LIHEAP) funding and the adjustment in 
program eligibility for Virgin Islands residents are literally matters 
of survival for many Virgin Islanders and for the economy of the 
territory. It is by now no secret, as many officials from the Virgin 
Islands have previously testified before Congress on energy issues, 
that electricity prices in the Virgin Islands, at over 50 cents per 
kilowatt hour, are the highest of any jurisdiction under the American 
flag and are nearly 5 times higher than the stateside average of 
11 cents/kwh. As a result, the average monthly electricity bill Virgin 
Islands households is $254-an amount unimaginable in any other U.S. 
jurisdiction.
    Further, as Representative Sanford Price noted in his questioning 
of USDA officials at an April 24th hearing of the House Committee on 
Appropriations-Subcommittee on Agriculture, Rural Development, Food and 
Drug Administration, and Related Agencies; the high price of 
electricity is particularly hard on the residents of the Virgin Islands 
inasmuch as we are an economically distressed territory. The per capita 
income in the Virgin Islands is roughly half of the mainland average 
and two-thirds that of the nation's least wealthy state, and the 
unemployment rate in the territory is 13.2% compared to the national 
rate of 7.6%. At the same time, however, the cost of living in the 
territory has been estimated to be as much as 150% of the national 
average. What this means in human terms is that for many households, 
and particularly for our elderly residents on fixed incomes, each month 
presents a harrowing choice between paying for electricity and buying 
medicine, food or other necessities. For a growing number of 
households, that choice has already been made for them, and we are 
seeing more and more households that have been living without 
electricity for weeks and months.
    Businesses hardly fare better in the struggle to cope with 
electricity prices in the territory. One restaurant on the island of 
St. Croix regularly posts its monthly electric bill in the foyer so 
that its clients can realize the link between the increase in prices on 
the menu and the establishment's $24,000 monthly electric bill. The 
only remaining dairy operation in the territory closed its doors a few 
months ago, citing its inability to keep up with a monthly electric 
bill that sometimes equaled a third of its monthly revenues. A similar 
fate has overtaken the only remaining bookstore on St. Thomas, which is 
closing its doors next month.
    These businesses are just a few among hundreds of establishments-
faced with the inability to pass on their increased costs to consumers 
who have ever-decreasing amounts of disposable income-that have closed 
over the past few years. As the V.I. Public Services Commission has 
recently noted, the unsupportable price of electricity is draining the 
territory's economy of at least $150-200 million dollars which would 
otherwise circulate in the economy-thus depriving the territory of much 
needed employment, internal investment, and economic opportunities.
    Policymakers in the Virgin Islands have long been aware that the 
crux of our problem in this regard stems from the territory's total 
dependence on petroleum fuels for electricity production. The last ten 
years, during which the price of petroleum has risen from $32 per 
barrel in October 2003 to the current price of over $103 and rising, 
have been catastrophic for residents and businesses in the territory. 
We are taking concrete steps to diversify our energy infrastructure, 
and over the next 24 months the territory is on course to replace 
diesel with much less costly liquefied propane gas as the feedstock for 
electrical generation, and to begin utilization of solar power for 17% 
of the territory's electrical needs. The Water and Power Authority has 
estimated that these developments, apart from various measures to 
increase efficiency and energy conservation, will result in electricity 
bills that are 30-40% lower than at present. Besides the obvious fact 
that the resultant electricity prices will still be roughly three times 
the national average, a burning question still remains. How are our 
seniors and other residents of limited means to survive between now and 
then?
    The Government of the Virgin Islands has taken its own measures and 
utilized its own resources to augment the funds provided under the 
LIHEAP program. Thus, in each of the last four fiscal years, the 
Legislature of the Virgin Islands has appropriated in excess of $1 
million to fund an Energy Crisis Assistance Program for elderly 
citizens and, to a lesser extent, low-income households. In the current 
fiscal year, for example, $1.5 million of local funds have been 
appropriated to augment the $147,389 provided to the territory under 
the LIHEAP program. However, even in combination with federal LIHEAP 
funds, the resources have not sufficed to meet the need. As such, the 
Department of Human Services, which administers the local program, has 
had to limit its service population to exclusively the elderly and 
persons with disabilities, leaving other low-income families 
unaddressed, and it has had to reduce the maximum bi-monthly benefit by 
43% in order to serve the increased caseload and still ensure that the 
appropriated funds last through the fiscal year.
    Both the federal government and the Virgin Islands government share 
the same goals regarding the medium and long term blueprint for energy 
security in the Virgin Islands, and we are making positive steps---
including reducing our reliance on fossil fuels and enhancing energy 
efficiency and conservation-which are admirably augmented and 
facilitated by provisions such as the LIHEAP adjustment and the Energy 
Action Plan contained in this Omnibus Territories Act. We must, 
however, ask you to go further. It is critical, for our territory's 
immediate survival, that you provide us with the assistance that our 
people need in the short term while the necessary changes are being put 
in place. It will not suffice to say, a few years hence, that the 
operation was successful but that the patient died.
    I also wish to say a few brief words on Section 7 of this bill, 
which would allow the people of the Virgin Islands to vote on the 
creation of a Chief Financial Officer position in the Virgin Islands. 
This bill, in various forms, has circulated through the halls of this 
august body for a number of years now. In the past, officials of the 
territorial government, including members of the Legislature of the 
Virgin Islands, have testified before Congress in vociferous opposition 
to legislation to establish a Chief Financial Officer. I believe, 
however, that this present version of the legislation follows a 
suitable approach. It seeks to accomplish the basic goal of the 
sponsor, which is to increase accountability and to create some degree 
of insulation between financial decision-making and the vagaries of the 
political process, while respecting the inherent right of the people of 
the Virgin Islands to self-determination. Unlike some previous versions 
of this measure, this bill calls for an expression of the people's will 
through a referendum, and it also provides that the CFO will be 
selected and appointed by local persons, rather than by the Department 
of the Interior or some other arm of the federal government. As such, I 
enthusiastically support the enactment of this Section.
    A few words are also in order regarding the increased waiver of 
local matching fund requirements for federal grants to the territories. 
The increase from $200,000 to $500,000, reflecting real dollar figures 
that are equivalent to the value of the waiver when originally enacted 
in the early 1980's is of tremendous importance. Of even greater 
importance, however, is the extension of the waiver to all federal 
departments and agencies. This will free up scarce local government 
resources and allow us to address pressing matters impacting the people 
of the Virgin Islands, and again in this instance I presume to believe 
I can speak for practically all residents of the Virgin Islands in 
expressing unhesitating support of this measure.
    Lastly, I wish to applaud the sponsors of this bill for the 
inclusion of sections to create the Castle Nugent National Historic 
Site Establishment and to establish the St. Croix National Heritage 
Area. The promotion, protection and preservation of Virgin Islands 
heritage and culture are not simply important as economic resources 
that contribute to the viability of the tourism industry on which we 
depend, but they are in fact vital to our very identity as a people. 
Delegate Christensen has fought hard to bring the process to this 
point, beginning in 2006 with her sponsorship of legislation to fund 
the feasibility study that found St. Croix to be a suitable site. I 
applaud her foresight and tenacity, and offer my full and enthusiastic 
support of these measures. I only hope that in the near future, similar 
studies may be conducted with the goal of establishing national 
heritage areas in my district of St. Thomas-St. John, as our historical 
and cultural resources are, in my humble and admittedly biased opinion, 
no less worthy of recognition and protection.
    I would like to thank Chairman Wyden and the members of this 
committee for your time and consideration, and I am confident that you 
will act with the best interests of the people of the Virgin Islands as 
a primary consideration. I, and others in the Virgin Islands, look 
forward to the forging of a new partnership with Congress and the 
administration in which the territory moves forward to true self-
sufficiency and sustainable economic, social and political development 
that provides a high quality of life for all Virgin Islands residents.
            Sincerely,
                                       Clarence Payne, III,
                                               Liaison to Congress.
                                 ______
                                 
   Statement of Frank Pogue, Vice President, Starkist Co., on S. 1237
    On behalf of StarKist Co., I want to thank Chairman Wyden, Ranking 
Member Murkowski, and the Members of the Committee for holding this 
hearing to discuss S. 1237 The Omnibus Territories Act of 2013. I also 
want to thank Representative Eni Faleomavaega for his dedication to 
American Samoa and his leadership in this important effort to bring 
economic stability to American Samoa.
    As you know, American Samoa has suffered a number of serious 
economic setbacks over the last five years. It is not hyperbole to say 
that when Chicken of the Sea closed its factory doors and took 2,000 
jobs away on September 30, 2009, leaving StarKist as the only remaining 
large employer in American Samoa, it was the economic equivalent of the 
earthquake that gave rise to a tsunami.
    American Samoa faces a tremendous threat to what remains of its 
tuna industry--the island's economic engine--due to massive competition 
from low-wage countries and diminished incentives for fishing vessels 
to deliver to American Samoa. It is my hope that your efforts in 
today's legislation are a beginning to a serious process of identifying 
changes to federal economic development policies necessary to promote 
diversification of the economy and growth within its current strengths.
                             about starkist
    StarKist is a leading manufacturer, distributor, and marketer of 
shelf-stable seafood products in the United States, best known for our 
tuna products and our beloved icon Charlie the Tuna. We are a U.S. 
corporation headquartered in Pittsburgh, Pennsylvania, we have more 
than 1,800 employees in the United States, and we pay U.S. taxes. 
StarKist is also a subsidiary of the Dongwon Group, a leader in the 
food, beverage and fisheries industries in South Korea. Our plant in 
Pago Pago, American Samoa is our largest processing facility.
    Our biggest challenge to manufacturing in American Samoa is a 
supply chain profile that is no longer competitive on a global basis. 
Consequently, we continue to lose market share to low-cost, foreign-
manufactured products that come in the form of private label tuna on 
U.S. store shelves. ``Private labels'' are the store-brand products you 
see at your grocery chains. Private label competes mostly on one 
metric: price.
                       starkist in american samoa
    Our company's long history in American Samoa provides some insight 
into why the island and its people are important to us, and why we are 
working hard to stay. Tuna canneries first arrived in American Samoa in 
the early 1950s. StarKist's facility was built in the early 1960s, and 
we have been there ever since. In fact, this August, StarKist will be 
celebrating our 50th anniversary manufacturing in the territory. It was 
American Samoa's prime location in the heart of the most prolific 
fishing ground in the world that drew processors to the island 
initially. The advantages that come with being a U.S. territory also 
drew processors; specifically, the ability to send finished tuna 
product to the mainland U.S. duty-free. Because of these and other 
factors such as wages, American Samoa offered a favorable cost 
structure for many years.
    It was in this environment that the tuna industry thrived, growing 
to be the island's largest source of private sector employment by far. 
Until the closure of the Chicken of the Sea facility, tuna processing 
accounted for 80 percent of American Samoa's private sector employment. 
It is also important to note that most of the other private sector 
employers in American Samoa are dependent on the tuna industry, as 
their businesses consist of providing goods and services to us, the 
fishing vessels that come into port to supply us, and to our employees. 
StarKist alone employed 40 percent of the island's private sector 
workers. StarKist has employed generation after generation of American 
Samoans, and we value the dedication the island's people have 
demonstrated to StarKist for decades. We recognize that our success has 
in many ways been due to their hard work and commitment.
    While these factors have historically combined to attract whole-
fish processors to American Samoa, in today's global economy, the 
fierce foreign competition faced by U.S.-based processors means that 
mere proximity to fish and a favorable trade status are no longer 
enough to make American Samoa competitive.
                changes in the tuna processing business
Two Different Business Models
    The increasingly global nature of the tuna business has enabled the 
industry to shift operations from one location to another, allowing 
producers to adjust more easily to supply and demand and the changes in 
input costs and prices. An example of this dynamic is the shift made by 
my competitors to outsource the most labor intensive aspects of tuna 
processing to low-wage countries, and then make final product and 
packaging from imported frozen tuna loins. The loin is the light, 
meaty, edible part of tuna.
    In a full scale tuna cannery, such as the cannery we operate in 
American Samoa, the manufacturing process starts with a whole fish--
known as a ``round'' fish--and ends with a consumer-ready product in a 
can. Upon delivery to our dock, the whole fish is cleaned, cooked, 
combined with other ingredients and packaged into cans by our American 
Samoan workforce. We then ship those cans directly to the U.S. mainland 
and distribute throughout the country for sale.
    In contrast, the alternate business model adopted by our 
competitors is the use of outsourced foreign labor for nearly all of 
the tuna preparation and then a small domestic loinery for final 
product packaging. In their business model, they have outsourced the 
most labor intensive aspect of tuna processing to extremely low wage 
countries. In these mostly South Asian factories, workers making as 
little as sixty cents per hour clean, prepare, and cook the whole tuna 
fish and transform it into a tuna loin. That loin is then frozen and 
exported to the Unites States nearly duty free. Having removed nearly 
80 percent of the labor expense, my competitors then take the frozen 
loin and use minimal U.S. employment to place the product into cans for 
consumers. To illustrate the impact, Chicken of the Sea was able to 
replace its 2,000 person workforce in American Samoa with fewer than 
300 workers in Georgia.
    As you can see, two different business models have emerged in the 
tuna industry. One model involves outsourcing the bulk of the labor-
intensive work to low-wage countries, using as little U.S. labor as 
possible to create the finished product and avoid import duties. The 
other model--the model we are trying to preserve in American Samoa--
uses more U.S. labor to manufacture a can of tuna. The owners of 
loineries in the United States have already maximized their competitive 
advantage by using an outsourced labor approach.
    StarKist applauds your efforts to identify, through this 
legislation, alternatives for less expensive energy in the territory--a 
major cost associated with business there. We also applaud your efforts 
to examine the fairness of the application of existing federal cost 
benefit requirements and local cost sharing requirements for federal 
economic development assistance. Significant improvements can, and 
must, be made to American Samoa's infrastructure, ports, and shipping 
capabilities. Finally, while not addressed in this legislation or 
within your committee's jurisdiction, we submit that the existing 
federal tax-based incentives for businesses operating in American Samoa 
are critical for survival of the territory's economy. However, the 
existing temporary structure drastically reduces the effectiveness of 
the policy and actively discourages new or long term investing.
    Thank you for your time and your interest in these matters.
                                 ______
                                 
    Statement of Wendy L. Doromal, Human Rights Advocate, on S. 1237
    As a labor and human rights advocate, I would like to express my 
strong objection to the provision in S. 1237 and in its companion bill, 
H.R. 2200, that would delay the increase of the federal minimum wage in 
the U.S. Commonwealth of the Northern Mariana Islands (CNMI) every 
other year starting in 2013.

          SEC. 4. ADJUSTMENT OF SCHEDULED WAGE INCREASES IN THE 
        COMMONWEALTH OF THE NORTHERN MARIANA ISLANDS.
                  Section 8103(b)(1)(B) of the U.S. Troop Readiness, 
                Veterans' Care, Katrina Recovery, and Iraq 
                Accountability Appropriations Act, 2007 (as amended by 
                section 2 of Public Law 111-244) is amended by striking 
                `2011' and inserting `2011, 2013, and 2015'.

    A separate Senate bill, S. 256, also calls for a delay in the 
CNMI's $.50 federal minimum wage increase in 2013 and 2015.
    The Fair Minimum Wage Act of 2007 component of P.L. 110-28 required 
the CNMI minimum wage to be increased by $.50 an hour each year until 
it reached the level of the national minimum wage in 2015. Before P.L. 
110-28 became law in May 2007 the CNMI minimum wage was a mere $3.05 an 
hour. Six years later the federal minimum wage in the CNMI remains at a 
shameful $5.55 an hour.
    The scheduled 2011 $.50 federal minimum hourly wage hike was 
delayed by passage of H.R. 3940, which became P.L. 111-244. The delay 
was promoted by the Saipan Chamber of Commerce and the Hotel 
Association of the Northern Mariana Islands (HANMI) and backed by CNMI 
Delegate Gregorio (Kilili) Sablan.\1\ Although they claimed that the 
weak economy would be further harmed by the scheduled $.50 hourly 
increase, the U.S. Department of Commerce Bureau of Economic Analysis 
indicated that the CNMI economy actually grew 2.3 percent in 2010.\2\
---------------------------------------------------------------------------
    \1\ The Saipan Tribune, Obama delays CNMI wage hike for 2011, by 
Haidee V. Eugenio, October 2, 2010.
    \2\ The U.S. Department of Commerce Bureau of Economic Analysis 
Blog, http://blog.bea.gov/?s=northern+mariana,September 17, 2012
---------------------------------------------------------------------------
    When members of Congress make decisions involving delaying the 
scheduled CNMI minimum wage increase, they primarily weigh the opinions 
of the Chamber of Commerce, the Hotel Association of the Northern 
Mariana Islands (HANMI) and other business owners who advocate for 
lower wages to ensure their own higher corporate profits. The members 
routinely ignore the needs and opinions of the 12,000 disenfranchised, 
legal long-term foreign workers who make up more than 80 percent of the 
private sector workforce. Although most of the foreign workers have 
lived and worked legally in the CNMI for 5, 10, 20 or more years, they 
remain the Northern Mariana Island's voiceless underclass.
    The U.S. citizens who work in the private sector deserve a fair 
wage. An underlying purpose of Title VII of P.L. 110-229 was to phase 
out foreign contract workers while training U.S. citizens to learn the 
skills needed to replace foreign workers thus reducing the unemployment 
among U.S. citizens in the CNMI. Maintaining an unfair minimum wage 
that promotes poverty and a poor quality of life is not the way to 
encourage U.S. citizens to work in the private sector. More and more of 
the CNMI's residents are leaving the CNMI to move to Guam and the U.S. 
mainland where they have opportunities to make a decent living.
    Resident and nonresident workers in the CNMI struggle to survive. 
Their meager earnings cannot keep up with the rising costs of 
commodities and utilities. Many of the workers must choose between 
paying rent and healthcare. According to the 2010 Census, over 33 
percent of the CNMI population has no health insurance, 85.3 percent of 
families with children under 18 years of age live in poverty, and the 
per capita income is a mere $9,656\3\. As of January 2013 there were 
3,518 household members and 9,522 individual recipients of the federal 
food stamp program.\4\ The CNMI Medicaid client base is about 
18,000.\5\ The poverty in the CNMI is worsened by government policies, 
and can be corrected by taking appropriate actions such as honoring the 
law that was passed in 2007 to incrementally raise the minimum wage in 
the CNMI.
---------------------------------------------------------------------------
    \3\ United States Census Bureau,http://factfinder2.census.gov/
faces/tableservices/jsf/pages/productview.xhtml?pid=DEC--
10_DPMP_MPDP3&prodType=table.
    \4\ The Saipan Tribune, Additional $12M to $24M into CNMI economy, 
by Haidee V. Eugenio, April 2, 2013.
    \5\ Pacific Islands Report, CNMI Medicaid Program Expects More 
Clients in 2014: High Premiums Leading toFamilies Dropping Medical 
Insurance, by Moneth Deposa, April 4, 2013.
---------------------------------------------------------------------------
    When the vast majority of a population lives below the poverty 
level, they cannot afford to stimulate the economy with any purchases 
other than those needed to survive. As long as the federal minimum wage 
is substantially less than a living wage, there will continue to be an 
exodus of people from the islands, and the economy will not improve. An 
economy built on the backs of indentured servants will not grow.
    There is no economic basis for proposing two more delays in the 
scheduled annual $.50 minimum wage increases in the CNMI. The tourism 
sector of the economy in the CNMI has increased significantly according 
to the Marianas Visitors Authority, which reported a boost in tourism, 
the CNMI's main industry.\6\ In May 2013 visitor arrivals were up 16 
percent compared to May 2012. In fact, it was reported that there is 
currently a shortage of hotel rooms in the CNMI to support the increase 
in visitor arrivals.\7\ In January 2013, HANMI reported the hotel 
occupancy rate was at 91.05 percent, the highest in 15 years.
---------------------------------------------------------------------------
    \6\ The Saipan Tribune, May visitor arrivals up by 16 percent, says 
MVA, Press Release, June 18, 2013.
    \7\ The Saipan Tribune, More rooms needed to sustain tourism 
recovery, by Moneth Deposa, March 01, 2013
---------------------------------------------------------------------------
    In his 2013 State of the Union Address, President Barack Obama 
called on Congress to increase the national minimum wage to $9.00, 
stating, ``Working folks shouldn't have to wait year after year for the 
minimum wage to go up while CEO pay has never been higher.''
    At the same time that some members of Congress are pushing to keep 
the CNMI federal minimum wage at an immoral $5.55 an hour, we see other 
members heeding President Obama's message by supporting an increase in 
the federal minimum wage. S. 460, introduced on March 5, 2013 by 
Senator Tom Harkin, and the companion bill, H.R.1010 introduced by Rep. 
George Miller on March 6, 2013, both propose an increase of the federal 
minimum wage.
    S. 460 and H.R. 1010, The Fair Minimum Wage Act of 2013, amend the 
Fair Labor Standards Act of 1938 (FLSA) to increase the federal minimum 
wage for employees to: (1) $8.20 an hour on the first day of the third 
month after the enactment of this Act; (2) $9.15 an hour after one 
year; (3) $10.10 an hour after two years; and (4) the amount determined 
by the Secretary of Labor (based on increases in the Consumer Price 
Index) after three years, and annually every following year.\8\
---------------------------------------------------------------------------
    \8\ The Library of Congress, Bill Summary & Status 112th Congress 
(2013-2014) H.R. 1010 CRS Summary,http://thomas.loc.gov/cgi-bin/
bdquery/z?d113:HR01010:@@@D&summ2=m&
---------------------------------------------------------------------------
    It is perplexing that CNMI Delegate Gregorio Sablan who introduced 
H.R. 2200, which proposes to delay the federal minimum wage increase in 
the CNMI, is also one of the 141 cosponsors of H.R. 1010 that proposes 
to increase the federal minimum wage. Likewise, Senator Ron Wyden (D-
OR), who sponsored H.R. 2200's companion bills, S. 1237 and S. 256, is 
one of the 30 cosponsors of S. 460 that would raise the federal minimum 
wage. Both support delaying a fair wage for the workers in the CNMI who 
are some of the lowest paid workers on U.S. soil, while both support 
raising the minimum wage for other U.S. workers. Why?
    It is time to end the disparity between workers who toil on U.S. 
soil in the CNMI and workers who toil on U.S. soil in the U.S. 
mainland. The vast majority of the workers in the CNMI are 
disenfranchised, oppressed, and voiceless. Elected officials in the 
CNMI and in the U.S. must listen not only to employers and business 
organizations who stand to benefit by keeping wages artificially low, 
but to the workers -residents and nonresidents-most impacted by the low 
wages.
    Income inequality in the CNMI prevents sustained economic growth, 
keeps U.S. citizens from applying for low-paying private sector jobs, 
and holds those working in the private sector in extreme poverty. The 
proposed wage delays mean that the resident and nonresident workers of 
the CNMI will not even see a federal minimum wage of $7.55 an hour 
until 2018, five years from now. That is truly unacceptable and unjust. 
I urge members of Congress to stop any further delays of the scheduled 
minimum wage increases in the CNMI.
                                 ______
                                 
                                                     July 11, 2013.

Hon. Ron Wyden,
Senator, 221 Dirksen Senate Office Bldg., Washington, DC.
Hon. Lisa Murkowski,
Senator, 709 Hart Senate Building, Washington, DC.
    Dear Chairman Wyden and Ranking Member Murkowski, To assist the 
Committee in its consideration of the issues presented in its hearing 
``To consider S. 1237, the Omnibus Territories Act,'' we write to 
address the significant constitutional issues raised by Section 19 of 
S.1237, titled the American Samoa Citizenship Plebiscite Act.
    We represent Leneuoti Tuaua and seven other people born in American 
Samoa in the federal case Tuaua v. United States. Our clients are 
challenging the constitutionality of federal statutes that deny them 
U.S. citizenship, labeling them instead with the inferior status of so-
called ``non-citizen national.''\1\ Like all other Americans, they owe 
permanent allegiance to the United States as U.S. nationals. But people 
born in American Samoa are the only Americans who, although U.S. 
nationals, are not recognized as citizens. The impact this has had on 
our clients' lives has been significant.\2\
---------------------------------------------------------------------------
    \1\ 8 U.S.C. Sec.  1408(1).
    \2\ For example, lead plaintiff Leneuoti Tuaua is pursuing this 
litigation because he wants his children to have opportunities that 
were denied to him--as a young man he was unable to pursue a law 
enforcement career in California because the federal government does 
not recognize him as a citizen. Another plaintiff living in Seattle 
lost her job at the DMV because her U.S. passport says she is not a 
citizen. A plaintiff who lives in Hawaii is unable to vote in state or 
federal elections despite ten years of service as an officer in the 
U.S. Armed Forces--he is also denied the right to bear arms. A 
plaintiff who received two purple hearts in Vietnam and is 80% disabled 
would face significant obstacles in obtaining an immigrant visa for his 
foreign national wife should he have to relocate from American Samoa to 
Hawaii for medical care. A plaintiff who served in the Liberation of 
Kuwait was unable to vote alongside his fellow soldiers after returning 
to the states from their deployment. See, Complaint, 4-10, available at 
http://www.equalrightsnow.org/case_overview.
---------------------------------------------------------------------------
    Our clients' case asks one simple question: so long as American 
Samoa is part of the United States, do people born in American Samoa 
have an individual right under the U.S. Constitution to be recognized 
as citizens? They believe that the Citizenship Clause of the Fourteenth 
Amendment provides a clear and definitive answer: ``All persons born . 
. . in the United States, and subject to the jurisdiction thereof, are 
citizens of the United States.'' Our clients' case, however, does not 
address--nor will it answer--any questions about American Samoa's 
future political status. Such questions about the territory's political 
status should be answered by the people of American Samoa.
    The American Samoa Citizenship Plebiscite Act raises significant 
constitutional concerns because it asks the wrong question. As the 
President's Task Force on Puerto Rico Status highlighted in its 2011 
report, the ``core question'' facing the people of U.S. territories is 
``whether they would like to be part of the United States or would like 
to be independent.''\3\ The Task Force's report repeatedly emphasized 
that on this question the ``will of the people'' is paramount. But so 
long as American Samoa remains part of the United States, we believe 
the question of citizenship is answered by the Constitution, not 
Congress. The individual right to citizenship guaranteed by the 
Fourteenth Amendment, like the individual rights of free speech or 
freedom of religion guaranteed by the First Amendment, is simply not 
something the Constitution permits to be put up for a vote. That is not 
how the Constitution works.
---------------------------------------------------------------------------
    \3\ Report by the President's Task Force on Puerto Rico's Status 
(``President's Report'') at 30 (March 11, 2011), available at http://
www.whitehouse.gov/administration/eop/iga/puerto-rico.
---------------------------------------------------------------------------
    History shows why the Citizenship Clause includes a constitutional 
guarantee of U.S. citizenship by birth within the territorial limits of 
the United States. The Citizenship Clause was ratified shortly after 
the Civil War, and it was written against a backdrop of prejudice 
against newly freed slaves and growing immigrant communities who lived 
in both states and territories. The purpose of the Clause was to take 
the power away from Congress or any state or territory to use the 
political process to deny the citizenship of people born in the United 
States.\4\ The Citizenship Clause was intended to overturn the Supreme 
Court's infamous pre-Civil War decision in Dred Scott v. Sanford, which 
allowed the government to deny citizenship to people of certain races 
who were considered inferior. By overturning Dred Scott, the 
Citizenship Clause enshrined within the Constitution the automatic 
guarantee that everyone born within the territorial limits of the 
United States would be a U.S. citizen, including those born in U.S. 
territories or the District of Columbia.\5\
---------------------------------------------------------------------------
    \4\ As the Reconstruction Framers explained, the Fourteenth 
Amendment ``settles the great question of citizenship and removes all 
doubt as to what persons are or are not citizens of the United 
States,'' putting the ``question of citizenship . . . beyond the 
legislative power . .'' Cong. Glob, 39th Cong., 1st Sess. 2890, 2896 
(Sen. Howard).
    \5\ During the debate over the Fourteenth Amendment, one of the 
chief architects of the Citizenship Clause observed that while ``[t]he 
second section [of the Fourteenth Amendment] refers to no persons 
except those in the States of the Union'' in apportioning 
representatives, ``the first section [of the Fourteenth Amendment] 
refers to persons everywhere, whether in the States or in the 
Territories or in the District of Columbia.'' Cong. Glob, 39th Cong., 
1st Sess. 2894 (1866) (statement of Sen. Trumbull) (emphasis added). 
Four years after the Fourteenth Amendment was ratified, the Supreme 
Court in the Slaughterhouse Cases confirmed in dicta that the 
Citizenship Clause ``put[] to rest'' the notion that ``[t]hose . . . 
who had been born and resided always in the District of Columbia or in 
the Territories, though within the United States, were not citizens.'' 
83 U.S. 36, 72-73 (1872) (emphasis added). Indeed, at the time the 
Fourteenth Amendment was ratified, the understanding of the Supreme 
Court was that ``the United States . . . is the name given to our great 
republic, which is composed of States and territories.'' Loughborough 
v. Blake, 18 U.S. 317, 319 (1820) (emphasis added).
---------------------------------------------------------------------------
    This June, the D.C. District Court set aside the text and history 
of the Citizenship Clause to rule that ``[t]he Citizenship Clause does 
not guarantee birthright citizenship to American Samoans.''\6\ In doing 
so, the District Court relied on controversial decisions known as the 
Insular Cases that were decided by a deeply divided Supreme Court in 
the early 1900s. First Circuit Judge Juan Torruella has compared the 
Insular Cases to Plessy v. Ferguson, criticizing them as establishing a 
``doctrine of separate and unequal'' status for the more than 4 million 
Americans living in U.S. territories.\7\ While acknowledging ``none of 
the Insular Cases directly addressed the Citizenship Clause,'' the 
District Court nonetheless applied an overly broad reading of the 
Insular Cases' outdated and deeply flawed logic to conclude ``that 
citizenship is not guaranteed to people born in unincorporated 
territories.''\8\.
---------------------------------------------------------------------------
    \6\ Tuaua v. United States, No. 12-01143, slip op. at 9 (D.D.C. 
June 26, 2013) (emphasis in original)
    \7\ JUAN R. TORRUELLA, THE SUPREME COURT AND PUERTO RICO: THE 
DOCTRINE OF SEPARATE AND UNEQUAL (1988).
    \8\ Tuaua slip. op. at 10-11, FN11.
---------------------------------------------------------------------------
    The District Court's embrace of an expansive reading the Insular 
Cases doctrine to determine the application of constitutional rights in 
American Samoa today contrasts with language from the Supreme Court's 
2008 decision in Boumediene v. Bush. There, the Supreme Court stated 
that ``[t]he Constitution grants Congress and the President the power 
to acquire, dispose of, and govern territory, not the power to decide 
when and where its terms apply.''\9\ Boumediene expressly rejected the 
idea that ``the political branches have the power to switch the 
Constitution on or off at will,'' explaining that ``[t]he test for 
determining the scope of [a constitutional] provision must not be 
subject to manipulation by those whose power it is designed to 
restrain.''\10\
---------------------------------------------------------------------------
    \9\ 553 U.S. 723, 765 (2008) (emphasis added).
    \10\ Id at 765-66.
---------------------------------------------------------------------------
    Addressing the Insular Cases application to current U.S. 
territories, the Supreme Court in Boumediene cited to Justice Brennan's 
view in an earlier case that ``[w]hatever the validity of the [Insular 
Cases] in the particular historical context in which they were decided, 
those cases are clearly not authority for questioning the application 
of [constitutional rights in U.S. territories today].''\11\ The Court 
explained, ``[i]t may well be that over time the ties between the 
United States and any of its unincorporated Territories strengthen in 
ways that are of constitutional significance.''\12\
---------------------------------------------------------------------------
    \11\ Id. at 759 (citing Torres v. Puerto Rico, 442 U.S. 465, 475-
476 (Brennan, J., concurring in judgment)).
    \12\ Id.
---------------------------------------------------------------------------
    History matters. As the findings of Section 19 indicate, the 
islands of American Samoa have been a part of the United States for 
over 113 years ago-fully half the existence of the U.S. Constitution. 
All living persons born in the islands that constitute the U.S. 
territory of American Samoa were born after the islands were ceded by 
voluntary deed. American Samoans have become an integral part of the 
fabric of America, with American Samoa's sons and daughters serving in 
the U.S. armed forces at a higher rate than any other jurisdiction.
    In considering the significance of the District Court's ruling in 
Tuaua, it is important to note that the question whether the 
Citizenship Clause applies in American Samoa is an open question before 
the Supreme Court and the D.C. Circuit. On appeal, the D.C. Circuit 
will have the opportunity to follow the guidance of Boumediene and 
place the text and history of the Constitution over dicta from the 
Insular Cases.
    In sum, the American Samoa Citizenship Plebiscite Act raises 
significant constitutional concerns because it asks the wrong question. 
Whether American Samoa continues to remain a part of the United States 
is a question that should be answered by the people of American Samoa. 
Votes in the past have always been to keep American Samoa a part of the 
United States. So long as it is, the question of citizenship is 
determined by the U.S. Constitution.
    Note: As a technical matter, Section 19(c) also incorrectly states 
that ``As United States Citizens .. . Persons born in American Samoa 
will no longer be United States nationals.'' Under current federal law, 
all U.S. citizens are also U.S. nationals.\13\
---------------------------------------------------------------------------
    \13\ 8 U.S.C. Sec.  1401.
---------------------------------------------------------------------------
            Sincerely,
                                Charles V. Ala'ilima, Esq.,
                          Law Office of Charles V. Ala'ilima, PLLC.
                                                Neil Weare,
                                  President, We the People Project.


```