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73–190 PDF 2012

PROTECTING MARITIME JOBS AND ENHANCING 

MARINE SAFETY IN THE POST-BUDGET CONTROL 

ACT FISCAL ENVIRONMENT: A REVIEW OF THE 

ADMINISTRATION’S FISCAL YEAR 2013 

COAST GUARD AND MARITIME TRANSPORTATION 

BUDGET REQUEST 

(112–75) 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

COAST GUARD AND MARITIME TRANSPORTATION 

OF THE

COMMITTEE ON 

TRANSPORTATION AND 

INFRASTRUCTURE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

MARCH 7, 2012 

Printed for the use of the 

Committee on Transportation and Infrastructure 

( 

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

committee.action?chamber=house&committee=transportation 

(II) 

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE 

JOHN L. MICA, Florida, Chairman 

DON YOUNG, Alaska 

THOMAS E. PETRI, Wisconsin 

HOWARD COBLE, North Carolina 

JOHN J. DUNCAN, JR., Tennessee 

FRANK A. LOBIONDO, New Jersey 

GARY G. MILLER, California 

TIMOTHY V. JOHNSON, Illinois 

SAM GRAVES, Missouri 

BILL SHUSTER, Pennsylvania 

SHELLEY MOORE CAPITO, West Virginia 

JEAN SCHMIDT, Ohio 

CANDICE S. MILLER, Michigan 

DUNCAN HUNTER, California 

ANDY HARRIS, Maryland 

ERIC A. ‘‘RICK’’ CRAWFORD, Arkansas 

JAIME HERRERA BEUTLER, Washington 

FRANK C. GUINTA, New Hampshire 

RANDY HULTGREN, Illinois 

LOU BARLETTA, Pennsylvania 

CHIP CRAVAACK, Minnesota 

BLAKE FARENTHOLD, Texas 

LARRY BUCSHON, Indiana 

BILLY LONG, Missouri 

BOB GIBBS, Ohio 

PATRICK MEEHAN, Pennsylvania 

RICHARD L. HANNA, New York 

JEFFREY M. LANDRY, Louisiana 

STEVE SOUTHERLAND II, Florida 

JEFF DENHAM, California 

JAMES LANKFORD, Oklahoma 

REID J. RIBBLE, Wisconsin 

CHARLES J. ‘‘CHUCK’’ FLEISCHMANN, 

Tennessee 

NICK J. RAHALL II, West Virginia 

PETER A. DEFAZIO, Oregon 

JERRY F. COSTELLO, Illinois 

ELEANOR HOLMES NORTON, District of 

Columbia 

JERROLD NADLER, New York 

CORRINE BROWN, Florida 

BOB FILNER, California 

EDDIE BERNICE JOHNSON, Texas 

ELIJAH E. CUMMINGS, Maryland 

LEONARD L. BOSWELL, Iowa 

TIM HOLDEN, Pennsylvania 

RICK LARSEN, Washington 

MICHAEL E. CAPUANO, Massachusetts 

TIMOTHY H. BISHOP, New York 

MICHAEL H. MICHAUD, Maine 

RUSS CARNAHAN, Missouri 

GRACE F. NAPOLITANO, California 

DANIEL LIPINSKI, Illinois 

MAZIE K. HIRONO, Hawaii 

JASON ALTMIRE, Pennsylvania 

TIMOTHY J. WALZ, Minnesota 

HEATH SHULER, North Carolina 

STEVE COHEN, Tennessee 

LAURA RICHARDSON, California 

ALBIO SIRES, New Jersey 

DONNA F. EDWARDS, Maryland 

SUBCOMMITTEE ON COAST GUARD AND MARITIME TRANSPORTATION

FRANK A. LOBIONDO, New Jersey, Chairman 

DON YOUNG, Alaska 

HOWARD COBLE, North Carolina 

ANDY HARRIS, Maryland 

FRANK C. GUINTA, New Hampshire 

CHIP CRAVAACK, Minnesota 

BLAKE FARENTHOLD, Texas 

JEFFREY M. LANDRY, Louisiana, 

Vice Chair 

JOHN L. MICA, Florida (Ex Officio) 

RICK LARSEN, Washington 

ELIJAH E. CUMMINGS, Maryland 

CORRINE BROWN, Florida 

TIMOTHY H. BISHOP, New York 

MAZIE K. HIRONO, Hawaii 

MICHAEL H. MICHAUD, Maine 

NICK J. RAHALL II, West Virginia 

(Ex Officio) 

(III) 

CONTENTS Page 

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

TESTIMONY 

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

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

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

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

Hon. David T. Matsuda, Maritime Administrator, U.S. Department of Transportation, Maritime Administration ................................................................... 5 

PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS 

Hon. Elijah E. Cummings, of Maryland ................................................................ 38 

PREPARED STATEMENTS SUBMITTED BY WITNESSES 

Admiral Robert J. Papp ........................................................................................... 47 

Master Chief Michael P. Leavitt 1 ..........................................................................

Hon. Richard A. Lidinsky, Jr. ................................................................................. 72 

Hon. David T. Matsuda ........................................................................................... 84 

SUBMISSIONS FOR THE RECORD 

United States Coast Guard insert for the record .................................................. 36 

Admiral Robert J. Papp, Jr., Commandant, United States Coast Guard, responses to questions from Hon. Frank A. LoBiondo, a Representative in 

Congress from the State of New Jersey ............................................................. 56 

1Master Chief Michael P. Leavitt did not submit a written statement. 

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(1) 

PROTECTING MARITIME JOBS AND ENHANCING MARINE SAFETY IN THE POST-BUDGET 

CONTROL ACT FISCAL ENVIRONMENT: A 

REVIEW OF THE ADMINISTRATION’S FISCAL 

YEAR 2013 COAST GUARD AND MARITIME 

TRANSPORTATION BUDGET REQUEST 

WEDNESDAY, MARCH 7, 2012 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON COAST GUARD AND

MARITIME TRANSPORTATION, 

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE, 

Washington, DC. 

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

2167, Rayburn House Office Building, Hon. Frank LoBiondo 

(Chairman of the subcommittee) presiding. 

Mr. LOBIONDO. Good morning. The subcommittee will come to 

order. 

Before we get into the heart of the hearing, let me remind everybody that last week a very tragic event took place. We had a Coast 

Guard helicopter that went down in Mobile Bay, Alabama, on a 

training mission. Three servicemembers tragically lost their lives, 

and one is still missing. This is a very stark reminder of what our 

men and women in the Coast Guard have signed up to do, and how 

they put themselves in harm’s way every day. Our Nation owes 

them a great debt of gratitude. And we should be keeping the families in our thoughts and prayers, and wishing them peace and 

strength. 

So, Admiral Papp, if you would, please extend our condolences. 

The subcommittee is meeting today to hear testimony on the 

President’s fiscal year 2013 budget request from the leaders of the 

three Federal agencies which promote, protect, and regulate vessels 

and mariners in U.S. waters and in international trade. 

As my colleagues know, our Nation is facing a very tough budget 

climate, as we try to control our exploding national debt. This Congress must continue to make extremely difficult decisions to bring 

our spending under control and to cut the deficit. The effort continues today with the presentation of the fiscal year 2013 budget 

request. The President requests $9.96 billion for the Coast Guard in fiscal 

year 2013, a 4-percent cut over the current level. This is the first 

time in over a decade that a President proposes to reduce funding 

for the Coast Guard. These cuts have me gravely concerned. We 

2 

will repeat the same mistakes we made in the 1990s, when misguided cuts to the Service’s operating and acquisition budgets left 

it entirely unprepared to meet the 9/11 mission which was thrust 

upon the Coast Guard. 

For the fiscal year 2013 operating budget, the President proposes 

to slash the number of Coast Guard servicemembers by more than 

1,000. Now, 1,000 may not seem like much, but for the Coast 

Guard that is a huge number, when we fought for so long to get 

that number up. 

Those thousand will shutter recruiting stations, close seasonal 

air facilities, take recently upgraded helicopters out of service, and 

exacerbate the growing patrol boat mission hour gap by retiring 

vessels before their replacements arrive. 

For acquisition, the President proposes to slash the budget by 

$272 million, or 19 percent below the fiscal year 2012-enacted level. 

The request proposes to terminate or delay the acquisition of the 

critically needed replacement assets, including Response Boats-Medium, Fast Response Cutters, Maritime Patrol Aircraft, Long 

Range Surveillance Aircraft, and Unmanned Aircraft Systems. It 

also proposes to put off important upgrades to the Jayhawk helicopter fleet, and delay sustainment projects on buoy tenders. 

Finally, the request slashes the budget for improvements to 

shoreside installations by over 86 percent—86 percent, that is a big 

number—and eliminates funding to renovate its derelict housing 

for servicemembers and their dependents. And for me, that is one 

of the most troubling aspects, where we ask men and women to 

serve their country and put their lives on the line, and in many 

cases they are in substandard housing, as it is. Derelict is the proper word. And we eliminate funding to do any renovation, that is 

just not right. 

Although I commend Admiral Papp for being honest about what 

these cuts will mean for the ability of the Coast Guard to successfully conduct its missions, I am very disappointed that the Secretary of Homeland Security and the President feel, nonetheless, it 

is acceptable to make them. Admiral Papp, you have been put in 

a very tough situation, and we understand that. 

As I have said before, I think there are ways to find savings in 

the Coast Guard’s budget by trimming administrative costs and implementing efficiencies and operation. Our Coast Guard authorization bill, which passed the House in November—overwhelmingly, I 

might add—provided for just that. But this budget request undermines the Service readiness and mission effectiveness, and could 

adversely impact the safety and security of our ports and waterways. 

The budget request for the Maritime Administration represents 

a 1.6-percent reduction below the current level. Most of the cuts 

come from zeroing out funding for grants or other programs which 

are meant to revitalize the maritime sector and protect U.S. mariner jobs. 

I am particularly concerned with the Administration’s proposal to 

yet again zero out funding for title 11 loan guarantees. Title 11 

program has served as an important catalyst for growing American 

shipbuilding jobs in the past, and it could be an important compoVerDate Aug 31 2005 12:11 May 30, 2012 Jkt 000000 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 P:\HEARINGS\112\CG\3-7-12~1\73190.TXT JEAN
3 

nent to further our recovery from the current recession with very 

little cost to the taxpayer. 

Finally, the budget request for the Federal Maritime Commission 

proposes a nearly 8-percent increase over current levels. Although 

an 8-percent increase in the FMC budget amounts to less than $2 

million, I think it sends the wrong signal in the current fiscal environment. The Commission needs to take a much closer look at their 

operations, and to try to develop savings through consolidation of 

services and more efficient operations. 

With that, I would like to yield to Mr. Larsen for any comments 

he may wish to make. 

Mr. LARSEN. Thank you, Mr. Chairman. And I apologize, I am 

dealing with a cold. So I will get through my comments here and 

try to wrap up. But I want to thank you for conducting today’s subcommittee hearing to discuss the proposed budgets for the Coast 

Guard, the Maritime Administration and Federal Maritime Commission. 

Before I get started, Mr. Chairman, I do want to echo your comments made with regards to the loss of life and those still missing 

from the Coast Guard family. We all—still remain very concerned, 

and I just want to share my thoughts and prayers as well, Admiral 

and Chief. 

Maritime transportation continues to be a critical component of 

our national economy, contributing over $100 billion annually in 

economic output, and generating nearly 500,000 jobs, including 

75,000 jobs aboard vessels or at shipyards. Investing wisely and 

strategically to facilitate, protect, and to regulate maritime commerce in the United States remains vital in our efforts to sustain 

the ongoing recovery of our economy. 

I remain concerned with how the Federal Government spends the 

taxpayers’ money. The responsibility rests squarely on the shoulders of Congress. It is our obligation to ensure that the taxpayers 

get the biggest bang for the buck from the funds that we invest on 

their behalf, to sustain important Federal programs, including 

those activities that sustain the U.S. maritime economy. 

I noted at last year’s budget oversight hearing that in our efforts 

to grapple with the Federal budget deficit, some in Congress are 

placing too much emphasis on how much can we cut. Rather, we 

should be asking a more appropriate question, which is: how can 

we best direct available Federal resources to generate economic 

growth and spur job creation? 

That point remains just as relevant today. And after reviewing 

this year’s proposed budgets for the Coast Guard and Maritime Administration, my warning that cuts in the Federal spending will 

not result in agencies doing more with less, but in agencies doing 

less with less, seems to have been affirmed. 

Any way you slice it, the only conclusion I can reach concerning 

the Coast Guard’s piece of the Federal budget pie is that it is insufficient to meet the demands placed on this multimission military 

Service. 

Operating expenses account would see a small increase to maintain the pace of field operations. I am also pleased that funds are 

requested to allow the Coast Guard to move ahead with the acquisition of the sixth National Security Cutter, and that the AdminisVerDate Aug 31 2005 12:11 May 30, 2012 Jkt 000000 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 P:\HEARINGS\112\CG\3-7-12~1\73190.TXT JEAN
4 

tration has finally seen the light of reason, and requested funds to 

begin the planning and design work for a new Polar-class icebreaker. But these positive aspects are offset by cuts. Some steep 

in other Coast Guard accounts, including the acquisition, construction, and improvements account, and the research, development, 

test, and evaluation account. 

In particular, I am disappointed that this budget does not request any funds to address the long-term backlog of servicemember 

housing needs. 

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

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

placed on the Service. I will be interested in hearing from Commandant Papp on how he expects the Service to do more with less, 

and what will be the effects of tradeoffs embedded in this request. 

Unfortunately, MARAD’s budget proposal for fiscal year 2013 

also disappoints. Although the overall proposed budget for MARAD 

would be less than a 2-percent cut from fiscal year 2012, important 

MARAD accounts that support our domestic ship building industry 

would go without. 

First, as the chairman noted, the title 11 loan guarantee program which contributes to the ability of the United States to carry 

its foreign and domestic waterborne commerce helps sustain efficient shipbuilding activities, and preserves a skilled shipbuilding 

workforce would go unfunded in this budget. 

Second, the budget would eliminate funding for the assistance to 

small shipyards program. Similar to title 11, this program has 

made an important set of targeted investments to improve American port infrastructure, create American jobs, and help domestic 

shipyards. Rather than eliminating these programs, we should be 

investing in them to stimulate job growth, allow U.S. firms to retool to remain globally competitive, and provide a genuine return 

on investment for the taxpayers here in the U.S. 

If there is a ray of optimism this morning, it might be the proposed budget for the Federal Maritime Commission. For the second 

consecutive year, the Administration has proposed a modest increase to support the Commission. In light of the turbulent global 

economy, and the need to maintain reliable, efficient, and affordable marine supply chains, the Commission continues to play an 

often overlooked but vital role in monitoring world shipping practices. 

I do want to hear from Chairman Lidinsky in how the Commission intends to use the new funding proposed in this budget, and 

what they intend to do to support greater U.S. exports, especially 

in the transpacific trade. 

With that, Mr. Chairman, I look forward to testimony from our 

witnesses. Thank you. 

Mr. LOBIONDO. Thank you, Mr. Larsen. Before we go to our 

panel, I understand we have a number of State maritime academy 

cadets that are with us today. We welcome you. We applaud your 

career decisions, and hope you stick with your career dreams for 

the maritime industry. Thank you for joining us. 

Yes, Mr. Larsen? 

Mr. LARSEN. I would like to welcome them. And, although he 

could not be here because he is at a Veterans’ Affairs Committee 

5 

meeting, where he is a ranking member, Mike Michaud from 

Maine wanted me—I don’t know which one is from Maine, but 

Mike Michaud from Maine wanted me to specifically call out the 

guy from Maine or gal from Maine and welcome you here today. 

Mr. LOBIONDO. All right. We have our witnesses today—include 

Admiral Papp, the Commandant of the Coast Guard; Master Chief 

Michael Leavitt, the Master Chief, Petty Officer of the Coast 

Guard; Richard Lidinsky, the Chairman of the Federal Maritime 

Commission, and the Honorable David Matsuda, who is the Administrator of the Maritime Commission. 

We welcome you, Admiral Papp. The floor is yours. 

TESTIMONY OF ADMIRAL ROBERT J. PAPP, JR., COMMANDANT, UNITED STATES COAST GUARD; MASTER CHIEF 

MICHAEL P. LEAVITT, MASTER CHIEF PETTY OFFICER, 

UNITED STATES COAST GUARD; THE HONORABLE RICHARD 

A. LIDINSKY, JR., CHAIRMAN, FEDERAL MARITIME COMMISSION; AND THE HONORABLE DAVID T. MATSUDA, MARITIME 

ADMINISTRATOR, U.S. DEPARTMENT OF TRANSPORTATION, 

MARITIME ADMINISTRATION 

Admiral PAPP. Well, thank you, Mr. Chairman and Mr. Larsen, 

particularly for those kind words. If I can divert from my statement 

for just a moment, we really do appreciate your thoughts and your 

prayers for the crew of the 6535. There are certain things that only 

the Commandant of the Coast Guard can do or should do. 

One of those things was to fly over to Mobile on Friday to meet 

with the parents of Lieutenant Commander Taylor and the parents 

of Lieutenant Cameron, hug their mothers, do what I could, say 

what I could to help them feel a little bit better. But I was actually 

strengthened myself by the fact that they talked about their sons’ 

love for the Coast Guard, love for flying, love for serving their 

country, and they died—what they were doing. I also had a chance 

to speak to the shipmates of Chief Petty Officer Jorge and Petty 

Officer Knight, who remains missing. 

As well, I will go down there tomorrow for the memorial service, 

to speak to all hands in the assembled community as the keynote 

speaker for that memorial service. Once again, one of those things 

that the Commandant should and must do. 

But one of the other things that the Commandant must do is be 

the voice for the men and women for the Coast Guard when we 

have these hearings to talk about our needs, our challenges that 

we are facing. And doing the former only strengthens me to give 

my best in doing this today. So thank you for recognizing them. 

And there are some challenges ahead, but the Coast Guard has 

adapted to storms in the past, and we have adapted to operate in 

times of peace, and we have continually responded to meet emerging maritime challenges. 

And, as I said, today is no different. Coast Guard men and 

women are confronting a diverse array of maritime threats, whether it is transnational smuggling or illegal fishing on the high seas, 

increasing human activity driven by the economic opportunity of an 

ice-diminished Arctic Ocean, or piracy. 

Just this past weekend, the Coast Guard Cutter Northland was 

on patrol off South America when its embarked helicopter spotted 

6 

a go-fast vessel with numerous bails on deck. The vessel refused to 

stop, so the helicopter fired warning shots, and then eventually disabling fire to stop it. Northland’s boarding team recovered 1,600 

kilos, or nearly 2 tons, of pure cocaine, worth an estimated street 

value of $42 million. 

This year also celebrates a 100th anniversary of the loss of Titanic, yet 100 years later the cost of Concordia’s recent loss reminds us of the importance of having safety-at-sea standards. And 

to ensure compliance, we need a robust marine inspection and safety program. 

As you can see, our Nation is facing many maritime challenges. 

And if we don’t have the tools to confront those threats, they will 

pose a significant threat to Americans’ prosperity, because 95 percent of our commerce travels by sea. This is why responsibly rebuilding the Coast Guard and providing our hard-working Coast 

Guardsmen with the tools they need to do their job remains my top 

budget priority. 

The good news is that since 9/11, because of your support, we 

have taken numerous steps to mitigate the risk overseas and back 

here in our ports, our inland waterways, and near our coasts. We 

have invested in international port security officers, marine safety 

enhancement program, and more small boats, more capable aircraft, and more personnel to operate them. We have also deployed 

rescue 21 distress communication systems throughout the continental United States and the Great Lakes. We have unified our 

field operations through the creation of sector commands, which 

brings together our prevention and response capabilities. 

Using the authorities you provided in the Maritime Transportation and Security Act, we have enhanced our regulator inspection 

and compliance programs, and we have built out a highly effective 

deployable specialized force capability within our ports. We have 

also strengthened our partnership with the many Federal, State, 

and local operation agencies that we work with. 

And while there is always more work to do, I can say definitively 

that in my almost four decades of service, I am proud to say that 

our shore, boat, and patrol forces are the best shape I have ever 

seen. But we never want to let the threats reach our ports. That 

is playing pure defense, it is sitting on our heels. We need to play 

offensively too, and we need to intercept the threats before they 

reach our shores. 

So, back to the Cutter Northland. The condition of our offshore 

forces, especially our major cutter fleet, is a much different story 

than our inshore forces. Despite the best efforts of our crews, the 

state of our major cutter fleet, much of which is in excess of 40 

years of age, is deeply concerning. Our legacy High Endurance Cutters are only achieving 70 percent of their programmed underway 

hours, and more than 50 percent of the time they sail with debilitating casualties. 

This is cause for concern, because the key to interdicting threats 

offshore is maintaining a persistent presence with major cutters. If 

we don’t have those cutters, and if they are not capable of operating independently in the transit zone and along the trade routes, 

we can not mount a response. It is just that simple. 

7 

So, over the last year, almost 700 metric tons of cocaine moved 

through the western hemisphere transit zone. And despite of having actionable intelligence on a weekly basis, we know that we 

miss targets almost on a weekly basis because we don’t have the 

major cutters out there. 

Our maritime threats are also on the rise. Expanding global population is placing pressure on our fish stocks and increasing the demand for fossil fuel. As a maritime nation and an Arctic nation, we 

require major cutters to patrol and ensure the stewardship of these 

and other deep sea routes. That is why we must continue to build 

our major cutters, such as the sixth National Security Cutter and 

the icebreaker, which has now kicked off in this budget. And I am 

extremely proud of the Administration for their support in this regard. But doing so also lowers our cost, maintaining momentum on 

building these shops, and we put National Security Cutters number 

four and five on contract for nearly the same price because we did 

it within the same year. 

And there is two other reasons for our recent acquisition successes: first of all, your support; and our highly capable acquisitions workforce. I am proud of them all. And beyond those major 

cutters, we have also delivered our first fast-response patrol boats, 

and we have 11 more on order. We have delivered 13 Maritime Patrol Aircraft. The last two arrived ahead of schedule. And we have 

also delivered 83 of our Response Boats-Medium. 

So, the ships and aircraft that we are building today are going 

to define the Coast Guard’s capability for the next 50 years, the capability we need to remain true to our motto, semper paratus, as 

we enter our third century of service to the Nation. 

So, thanks for the opportunity to testify, and I look forward to 

expanding upon this in response to your questions. 

Mr. LOBIONDO. Thank you, Admiral Papp. 

Master Chief? 

Master Chief LEAVITT. Good morning, Mr. Chairman LoBiondo, 

Ranking Member Larsen, distinguished members of the subcommittee. It is a privilege to appear before you today, and it is 

also an honor to represent the hardworking Coast Guard men and 

women serving our Nation here in the United States and around 

the world. I continue to be humbled and amazed by the sacrifice, 

dedication, and commitment I see every day with our Coast 

Guardsmen, and for the unwavering support they receive from 

their families and loved ones, which allows us to better serve our 

Nation to its fullest extent. 

Our dedicated Coast Guard men and women are working hard 

every day to protect our Nation’s interest. We are overseas, we are 

on the high seas, we are in our Nation’s waters, we are in our Nation’s ports and waterways, we are manning our operation stations, 

we are working with our local agents in industry so we can help 

keep our Nation secure. 

Right now, these brave Coast Guardsmen our out in the maritime environment saving lives, protecting property, conducting law 

enforcement, setting and working buoys, and by the way, breaking 

ice and so much more. I couldn’t be more proud of the men and 

women of the United States Coast Guard for the outstanding job 

they do every day. 

8 

For example, just recently the icebreaker, Coast Guard Cutter 

Healy, completed a grueling 254-day deployment where she and her 

crew successfully supported important scientific research in the 

Arctic. But as you know, the Healy was diverted very late in her 

deployment to escort the Russian flag tanker vessel Renda along 

an 800-mile journey to deliver fuel to the people in Nome, Alaska. 

As the Nation watched, the Coast Guard Cutter Healy fought 

through severe storms in freezing temperatures to successfully escort the tanker Renda through the ice for the first ever wintertime 

fuel delivery at sea. 

So, I want to personally thank you, Mr. Chairman and the members of the subcommittee, for replacing our aging assets with new 

cutters, aircraft, and boats. In my role, it is my responsibility to 

look out for our workforce and their families’ well-being. The assets 

requested in our budget will provide our people with highly capable, safer, more efficient and effective platforms. Not only do these 

assets meet our most urgent operational requirements, they also 

help to greatly improve the quality of life and safety of the men 

and women that serve aboard and operate them. 

So, as you heard before, the material condition of our cutter fleet 

is unacceptable. These ships were built over 40 years ago. The 

berthing areas are cramped, with up to 20 people sharing a common area, along with the sanitary facilities. In fact, Mr. Chairman, 

I served on board the Coast Guard Cutter Boutwell, a High Endurance Cutter, almost 30 years ago. And she was not a new ship 

then. 

So, our crew spends countless hours repairing old, outdated mechanical systems to keep the ships running. And this results in lost 

training opportunities, and a decrease in operational proficiency 

that negatively impacts the crew’s morale. We owe them better. 

As the Commandant stated, we are now delivering and operating 

National Security Cutters to replace the aging High Endurance 

Cutter. I can tell you that the crews on these new ships are very 

excited to operate these new, very highly capable cutters. 

Last year in my testimony I mentioned some of the challenges 

our men and women and their families face, particularly with regards to housing and child care. And on behalf of the 

servicemembers, I am truly grateful for the housing and child care 

enhancements made possible in the fiscal year 2012 budget. Because of your support, we are making great strides towards enhancing these programs and bridging the parity gap with the Department of Defense. 

I visited multiple Coast Guard units during the past year, and 

I have heard the concerns of our members and their families. Ensuring adequate housing for our Coast Guard members living in 

high-cost areas is a high priority. Fiscal stewardship is also a high 

priority. And as such, we are currently in the process of assessing 

our housing inventory across the Nation, including Alaska, Hawaii, 

and Puerto Rico. In this constrained fiscal environment, we need 

to be very smart in how we spend our maintenance and recapitalization funding to sustain frontline operations so we can best support our members and their families. 

So, on behalf of the men and women of the United States Coast 

Guard, I thank you for your continued support of our military 

9 

members, their families, and loved ones. Thank you for giving me 

the opportunity to recognize the great work our Coast Guardsmen 

perform every day, as well as sacrifices they endure. Thank you for 

allowing me to testify here before you today. And I look forward to 

answering any questions you may have. 

Mr. LOBIONDO. Thank you, Master Chief. 

Mr. Lidinsky. 

Mr. LIDINSKY. Good morning, Mr. Chairman, Mr. Larsen, and 

members of the subcommittee. 

Mr. LOBIONDO. Excuse me, could you pull the microphone a little 

bit closer, maybe pull it a little bit closer to you? 

Mr. LIDINSKY. Better? 

Mr. LOBIONDO. That’s better. 

Mr. LIDINSKY. Thank you for this opportunity to present the 

President’s fiscal year 2013 budget for the Federal Maritime Commission. With me today are FMC Commissioners Rebecca Dye and 

Michael Khouri, and I bring best regards from your former colleague, Commissioner Joe Brennan, who is back at the Commission, manning the ship. Commissioner Mario Cordero is in Long 

Beach, California, this morning, attending an important shipping 

conference. I have submitted written testimony for the record, and 

with your permission would like to give a brief summary this 

morning. 

The President’s budget for the Commission provides $26 million 

for fiscal year 2013. As you noted before, Mr. Chairman, this would 

be an increase of $1.9 million over the enacted fiscal year 2012 appropriation. This is, however, $265,000 less than the President’s 

fiscal year 2012 request, and funds 131.6 positions at the Commission. This request would allow the Commission to make badly 

needed investments in information technology, increased data security, improve efficiency, and streamline filings and applications for 

the industry. The scope and speed of these investments and benefits will depend on the availability of these funds. 

The FMC greatly appreciates the faith and support that the 

chairman and rest of the committee have shown us in the past, and 

we would continue to use our limited resources wisely in the coming year. 

The state of the U.S. trades. My written remarks detail each 

trade route that our country deals in, but here are two highlights. 

After rapid recovery and 11-percent growth in 2010, total U.S. container volumes continue to grow in 2011, but at a more modest 

pace, at 4 percent. There were approximately 29.5 million containers moving in our import trade. U.S. containerized exports 

grew by 6 percent, roughly 12 million containers. And I want to 

note that next week, the South Korea Free Trade Agreement takes 

effect. Two-thirds of our agricultural exports to Korea will become 

duty free from day 1, as will nearly 80 percent of our consumer industrial products. So this is a very bright horizon for this export 

trade. 

I would like to give some highlights now of the Commission’s priorities and activities. In the coming year their top priority will be 

assisting the economic recovery for job growth. We will do this two 

ways. First, working to ensure our Maritime transportation system 

efficiently supports growing exports, and two, providing regulatory 

10 

relief so that companies can hire American workers. Third, applying the lessons that we learned in the depths of 209 and the disruptions we saw when demand returned to our industry in 2010. 

Each of the commissioners is committed to working in an efficient, cooperative, and bipartisan manner to accomplish the Commission’s goals. Here are the highlights of the steps that we are 

taking. 

Number one, supporting exports and economic growth. We have 

continued vigilance over the waterborne trade, as it affects imports 

and exports. Ninety-four percent of the United States oceans container trade travels on ships controlled by foreign carriers. Perhaps 

more often than they like, I remind these foreign ocean carriers 

that what they call a mere backhaul in moving their containers 

back out of this country, are exports that are crucial to our Nation’s recovery. 

Last year I reported the disruptions in 2010 prompted the Commission to launch a fact-finding investigation led by Commissioner 

Rebecca Dye. Following her recommendations, the Commission 

formed rapid response teams that dealt with over 438 cargo-related 

complaints that led to cases in dispute resolution. We increased 

oversight of discussion agreements in our largest Pacific trade with 

the two talking agreements there. 

Throughout the past year we have continued these efforts. And 

although current shipping capacity is adequate, we will continue to 

apply lessons learned, and watch closely for new signs of disruptions that we saw last year, 2 years ago. 

We are looking at new ways to assist exporters. After hearing 

from several major agricultural exporters, our staff is now looking 

at the idea of using data on file, while protecting service contract 

confidentiality to develop a container shipping rate index for targeted exports, such as grain, cotton, hay, and frozen meat. This will 

give exporters useful information to plan and hedge transportation 

costs that will, in turn, increase export sales. We look forward to 

the views of the industry on this matter, and the committee, as we 

consider this idea. 

One related note. Last week we issued a final rule clarifying that 

shippers and carriers can use service contracts with rates that adjust based on container freight indices. For small businesses and 

individuals we are developing a search tool on our Web site to help 

locate nearby licensed and bonded NVOCCs. 

Mr. Cummings is present, and I would just note that the item 

that he brought up 2 years ago has finally bore fruit with the 

USDA having a new project taking effect next month that will 

allow potential exporters to access a computer to see if container 

availability is present in about a dozen Midwest cities. So that is 

another tool in our arsenal to help exports. 

In addition to supporting exports, we have tried to reduce regulatory burdens. In February of last year, we issued a final rule to 

relieve 3,500 licensed NVOCCs from having to publish their tariff 

rates. The Commission has also been working on our rules and procedures to make them more clear and efficient. 

Just last month, the Commission has finished a landmark study 

on the EU lifting of the block exemption and competition law. The 

primary issue addressed in that multiyear study was simple. What 

11 

negative impact, if any, would repeal of the liner conference block 

exemption have on U.S. trades? The primary finding was that the 

repeal of the block exemption does not appear to have resulted in 

any impact on our trades. The study contains a wealth of data 

which maritime experts across the world are still analyzing. But 

the speculation and discussion concerning the study indicates the 

FMC’s key role as experts in this field. 

As I said in the past on the matter of anti-trust immunity, it is 

up to the Congress to make this decision. The best the FMC can 

do is assist you with objective facts. And we will be happy to answer any questions—any details regarding this study. 

In November of last year, the Commission responded to requests 

from several Members of the House and the Senate, by launching 

an inquiry into whether Harbor Maintenance Tax and other factors 

may be causing U.S.-bound containerized cargo to be diverted from 

ports in the U.S. to Canada and Mexico. We received nearly 80 

submissions during our comment period, and the Commission is 

working to gather additional data. We hope to publish this report 

in late spring or early summer of this year. In the meantime, the 

Commission will continue to work with fellow Government agencies 

and major trading partners to ensure that no unreasonable conditions impair our commerce. 

The Commission is also working to protect consumers through 

the fact-finding study of Commissioner Michael Khouri. More than 

2,500 complaints were received in recent years concerning the shipment of personal household goods. Commissioner Khouri’s findings 

are being adopted. And just last Friday we signed a memorandum 

of understanding with the Federal Motor Carrier Safety Administration to leverage the resources of these two agencies to protect 

household good movers across the country from the different kind 

of fraud that can emerge in these shipments. 

Mr. Chairman, thank you very much for your support of the 

Commission in the past. 

I am honored to appear before you, and be happy to answer any 

questions that you might have. 

Mr. LOBIONDO. Thank you. 

Mr. Matsuda. 

Mr. MATSUDA. Good morning, Chairman LoBiondo, Ranking 

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

the opportunity to discuss the President’s fiscal year 2013 budget 

priorities and initiatives for the Maritime Administration. With 

your permission, I would like to submit my written testimony for 

the record and summarize it for the subcommittee today. 

The Maritime Administration’s statutory mission is to promote 

and strengthen the U.S. marine transportation system, including 

infrastructure, industry, and labor, to meet the economic and security needs of the Nation. Never has this been more important than 

today. 

President Obama understands that investment in transportation 

is critical to the success of our Nation’s economy. And the President’s budget request reflects the Administration’s priorities. This 

budget request will enable us to build America’s infrastructure for 

the future, while putting people back to work today. 

12 

To start, the maritime industry’s future will depend on people 

willing to enter this workforce of 260,000, and make their careers 

in the profession by availing themselves of educational opportunities. Today, I am joined by several of these future leaders from 

maritime academies across the country, and I thank you for welcoming cadets and midshipmen from California Maritime Academy, 

Great Lakes Maritime Academy, Maine Maritime Academy, Massachusetts Maritime Academy, and the U.S. Merchant Marine Academy in Kings Point, New York. 

The President’s budget request includes funding for programs to 

support all of these institutions they attend, and it continues to 

focus on addressing long-deferred capital needs at the U.S. Merchant Marine Academy, as well as current operating requirements, 

so that we can continue to provide the highest possible caliber of 

academic study with state-of-the-art learning facilities for future 

merchant marine officers and marine transportation professionals. 

Following last year’s historic levels of capital funding for the 

academy, this $77 million request will allow us to continue our 

progress on improving campus facilities and address current academic needs. 

The budget request also includes $16 million for the State maritime academy programs, to continue Federal operational support, 

and allow us to provide school training ships for cadets to obtain 

valuable at-sea experience. 

For the maritime industry, putting people back to work today 

means fully funding key initiatives, like the maritime security program. This program, combined with the agency’s cargo preference 

program, supports 60 militarily useful ships trading in foreign commerce. The 2013 budget request proposes funding this program at 

the full authorized level of $186 million, including $2 million in 

carryover funds. 

The budget also supports our priority to develop America’s ports 

and marine highways, as we focus on increasing the use of marine 

transportation within the U.S. to alleviate congestion on our surface networks. I am pleased to report that key demonstration 

projects in 2010 are beginning to come to fruition, creating new 

jobs on the water, as well as in our ports and at key freight bottlenecks. 

The President’s budget includes $500 million for the popular 

TIGER grant program, which, through 3 rounds, has successfully 

funded 17 ports and maritime-related projects, totaling $276 million. 

Our focus on the environment remains strong, as well. As the 

Federal Government’s disposal agent for large, obsolete commercial 

vessels, we propose $10 million, nearly double 2012-enacted levels, 

to continue our progress in cleaning up our fleet sites responsibly, 

and create jobs in the recycling industry. And we propose $3 million to continue progress in identifying innovative operational solutions for the maritime industry. 

Working with our partners in the Coast Guard and the EPA, we 

are tackling new technology challenges, such as the management 

of ballast water discharges and vessel air emissions. And we are 

exploring the feasibility of a new generation of biofuels for use in 

13 

marine engines, and using liquified natural gas for vessels serving 

the Great Lakes and other marine highways. 

Finally, the budget request supports our agency’s greatest asset, 

its people. The Maritime Administration’s expertise, along with industry and international relationships developed over time has 

proven invaluable to the operations of the Federal Government, 

and in meeting our mission. 

Mr. Chairman, I look forward to working with you and—on advancing maritime transportation in the United States. I am happy 

to respond to any questions you and the members of the subcommittee may have. Thank you. 

Mr. LOBIONDO. OK. Thank you, Mr. Matsuda. Admiral Papp, I 

would like to start with you. The budget request calls for $13 million to complete the mission effectiveness program on the fleet of 

270 and 210 Medium Endurance Cutters. The capital investment 

plan contains no funding for further sustainment of the Medium 

Endurance Cutters beyond fiscal year 2013. 

Does the Coast Guard believe these vessels will need no further 

maintenance between now and the mid-2030s, when the OPC acquisition is estimated to be completed? 

Admiral PAPP. No, sir, not right now. We have invested in the 

210-foot Medium Endurance Cutter and the 270-foot Medium Endurance Cutter. And if we stay with our program of record, and if 

we can keep the Offshore Patrol Cutter on record, what ultimately 

we will do is start decommissioning our oldest 210s first. They are 

all in excess of 40 years of age right now. They will be decommissioned first. The average age of our 270s right now is about 25 

years. And if we can stay with the program, if we stay on course, 

we should have our OPCs built out by about 2030, at which time 

the oldest 270 would be about 43 or 45 years of age. 

So, it depends on how long this gets strung out, however. I need 

to qualify that. If we don’t get the funding and we can’t build out 

the OPCs faster, we will clearly have to reconsider what we do to 

extend the lives on the 210s and the 270s. But right now I don’t 

anticipate any major projects. Our routine maintenance money that 

we get should be sufficient to keep them going, now that we have 

replaced a lot of the problem engineering issues that we have that 

have been cropping up over the last few years. 

Mr. LOBIONDO. Admiral Papp, on the Fast Response Cutter, the 

Coast Guard proposes to withhold up to $135 million provided by 

Congress in the fiscal year 2012 budget to construct six new Fast 

Response Cutters, and instead construct four Fast Response Cutters in fiscal year 2012. The Service proposes to combine the withheld $139 million from 2012 funding with an additional $139 million from fiscal year 2013 to construct four FRCs in 2013. 

Can you talk to us a little bit about why the Coast Guard has 

apparently decided to disregard the intent of Congress and abandon plans to build the six FRCs in 2012? 

Admiral PAPP. Well, sir, I think almost every question that you 

ask today I could probably start off by saying that I have a budget. 

At the end of the day I have been given a budget. I have to live 

within that budget. I have to make decisions on priorities and what 

we are going to maintain. 

14 

You noted that it is a 4-percent reduction in the overall budget. 

But when you look at our acquisition funds, it is a 20-percent reduction this year. So all of our acquisition portfolio, every project 

that we have an approved baseline on, what we are forced to do 

is go to the minimum ordering quantity for each and every product, 

including the National Security Cutter and other projects. 

So, for the Fast Response Cutter, our contract requires us to 

build a minimum of four each year, or a maximum of six. We 

haven’t ramped up to six yet. Right now, with the shipyard, we 

have been ordering four a year. We are grateful that we got the 

money in the 2012 budget to build out six. We don’t want to do 

anything contrary to the—what the Congress—congressional intent 

is, but what we would like to do is work with the Congress to get 

permission to withhold that money, so that we can spread out four 

each year to keep the minimum level order going for the Fast Response Cutter. 

I could only find enough money within our 2013 appropriation in 

acquisitions to pay for two Fast Response Cutters. So in order to 

live up to the contract and build the minimum of four a year, we 

looked at that option of moving the money from 2012 into 2013 to 

balance it out at four a year. Hopefully, in future years, we will be 

able to go back up to six. 

Mr. LOBIONDO. Admiral, you know that I also had the opportunity to sit on the House Armed Services Committee. And we had 

a hearing—I think it was in the last week—where the Air Force 

is detailing plans on divesting 21—it appears to be either almost 

or brand new C–27Js, and that they may become available to other 

services at minimal cost. Is the Coast Guard looking into this option, and could you tell us a little bit about what you may be thinking here? 

Admiral PAPP. Yes, sir. We are looking into this vigorously. It is 

an intriguing prospect. I learned about it weeks ago, and started 

conversations with the chief of staff of the Air Force, General 

Schwartz. And obviously, rather than put it up for foreign military 

sales or other things, they would prefer to see it go to another 

Service, if there is a Service need. 

Interestingly enough, this aircraft was actually looked at in the 

deepwater system, when we had the deepwater project. It was one 

of the candidates that Lockheed Martin put forward for our short— 

our medium-range fixed-wing aircraft, Maritime Patrol Aircraft. 

Ultimately, it was compared against the CASA aircraft, the HC– 

144, which we are purchasing now. And the life cycle costs were 

higher for the C–27. 

However, having said that, if we get free aircraft or minimal cost 

aircraft, that is a very attractive option for us. And there are actually some benefits we could gain, because the C–27 uses the same 

engines as our C–130Js. So we already have those engines, training 

place, logistics in place for those engines. 

Bottom line is we are working a business case analysis. The Deputy Commandant for Mission Support is working that hard right 

now, and they intend to make that presentation to me within the 

next couple weeks. And as soon as we have that information, we 

would be happy to come up and brief it. 

15 

Mr. LOBIONDO. Yes, we would appreciate it. Although there was 

pushback from the HASC on how we have brand new planes that 

we are not using and we have a need, it appears the Air Force is 

determined to go down this route. So we would appreciate your 

keeping us up to date on that. 

Mr. Larsen? 

Mr. LARSEN. Thank you, Mr. Chairman. I will just continue with 

Commandant Papp, but I have questions for others as well. 

With regards to icebreakers, I note that in the budget there is 

$8 million for predesign. But until new icebreakers are operational, 

what is your view of repairing and operating the Polar Sea to make 

the U.S. self-sufficient for polar icebreaking? You might recall we 

had testimony in front of us a few months ago with a—the idea 

that for a minimal—relatively minimal—cost in the grand scheme 

of building versus repairing, that we could get icebreakers operational. Can you talk a little bit about that, that cost? And have 

you actually crunched some numbers that you can share with us? 

Admiral PAPP. For the Polar Sea or Polar Star? I think you said 

Polar Sea. 

Mr. LARSEN. I am sorry, yes. The Star, yes, yes. 

Admiral PAPP. The Polar Star is being reactivated right now. 

Mr. LARSEN. OK. 

Admiral PAPP. That is the one that was in moth balls, so to 

speak, in caretaker status. 

Mr. LARSEN. Right. 

Admiral PAPP. And it is in the process right now—Congress gave 

us about $80 million to reactivate that. And we will have that back 

in service in 2013. 

The Polar Sea is—it is our intent to decommission it right now. 

Mr. LARSEN. So—then we heard some testimony a few months 

ago that with a relatively minimal investment the Sea could be reactivated. 

Admiral PAPP. Well, I think in this current budget situation, relatively minimal is a relative term. And I don’t have room in my 

budget, regardless of what it is. I think a lot of people have underestimated how much it would cost to reactivate the Polar Sea. We 

are actually having to use parts of Polar Sea—— 

Mr. LARSEN. Right. 

Admiral PAPP [continuing]. To reactivate Polar Star. So I think 

there are some people who are enthusiastic about the potential for 

getting Polar Sea back out there. But the fact of the matter is I 

don’t have the money to operate it. And I think it is much more 

expensive to reactivate it than some people are giving, in terms of 

estimates. It would say it is probably in excess of what we are 

spending on Polar Star right now, would be to get her back out 

there. 

So, you know, we have gotten through the last couple of years 

with just the Healy. My bridging strategy was get Polar Star back 

out there good for another 10 years. We were lucky this year with 

Healy. And once I have an additional Polar icebreaker out there, 

I am comfortable that—now I am really grateful we have gained 

traction with the Administration in terms of getting money to start 

building a new icebreaker. 

16 

So I think we have reasons for optimism in our icebreaker fleet, 

and we need to keep that momentum going. 

Mr. LARSEN. With that in mind, what would be your estimate on the operational capability of a new Polar icebreaker, if in fact $8 

million is a start? 

Admiral PAPP. Well, yes, sir. That is survey and design work. 

And, frankly, what we need to do now—once again, I am very 

grateful. I have been talking about this for about 2 years now. In 

fact, the Coast Guard has been talking about it even longer. 

Mr. LARSEN. Right. 

Admiral PAPP. And we finally gained some traction. What we 

have done in the capital investment plan is put rough numbers 

that we got from a business case analysis that we prepared for the 

Congress on the feasibility of keeping Polar Sea and Polar Star 

going. 

Mr. LARSEN. Right. 

Admiral PAPP. So those are rough numbers right now. We will 

need to refine those, as well as reach out across the intergovernment, the interagency, to determine the requirements. 

National Science Foundation has significant requirements that 

we need to meet. Department of Defense has needs for icebreakers 

from time to time. So we need to reach out, gather the requirements, determine what we are going to build, and then refine the 

numbers, as we go forward. 

And, oh, by the way, I think industry and other people —obviously, the State of Alaska benefitted from Healy this year. I would 

be interested in looking at some sort of cost sharing on this, rather 

than having the Coast Guard budget absorb it completely. 

Mr. LARSEN. So you—at least in your mind now, you are thinking 

that—to build an additional icebreaker, starting with what you 

have in this budget, that actually constructing it might end up 

being a partnership among agencies and potentially at least one 

State? 

Admiral PAPP. Well, as Commandant of the Coast Guard, I would 

certainly like to see other people share in this, because we have a 

lot of other needs within our budget. But what we have right now 

is we have estimated what we think it will cost, which is probably 

in the range of about $800 million. 

Mr. LARSEN. Right. 

Admiral PAPP. That is spread out in our 5-year plan right now. 

And we are very anxious to step out smartly on this, and get it constructed. 

Mr. LARSEN. OK. I see that in the plan here. I have it here with 

me. 

On that continued point with regards to the Arctic—recent article discussing the budget climate and choices you may have to 

make to get an operational footprint, even a temporary or a parttime footprint in the Arctic, can you briefly explain how the expansion of operations there would affect other Coast Guard districts? 

Admiral PAPP. They are not going to affect other districts. I think 

what we will be doing this summer is, because of the lack of shore 

infrastructure, we need to put helicopters up there, we need to 

have rescue boats. There is going to be about 600 more people. 

Shell will bring about 600 people up there, 33 ships. Obviously, the 

17 

potential for search and rescue, environmental response, security— 

because we know there are groups that are seeking to probably disrupt the operations up there—so we have got the full spectrum of 

Coast Guard missions that will be employed up there. But we don’t 

have any fixed infrastructure. In fact, there is not hangar space at 

the Nome airport to put any of our helicopters. 

So, what we are going to do is what we have done throughout 

our history. We will take one of our major cutters, one of the new 

National Security Cutters, which can handle and hangar two helicopters, it can launch three small boats, it has worldwide command 

and control and communications, and we will station it. It is essentially a mobile Coast Guard district that can launch aircraft and 

launch boats that will provide for all our needs up there this next 

summer. 

You know, people worry about icebreakers, but the fact of the 

matter is the human activity will be up there as the ice recedes. 

Mr. LARSEN. Right. 

Admiral PAPP. So we need conventional Coast Guard cutters up 

there during the summer months to carry out these duties. 

Mr. LARSEN. Right. Yes, good. Mr. Chairman, just a few more 

questions, but—for Mr. Lidinsky, and then I will yield back, if you 

don’t mind. 

Just to clarify, Mr. Lidinsky, the cargo diversion study, you expect to have a preliminary or final report by late spring or early 

summer? 

Mr. LIDINSKY. Final. 

Mr. LARSEN. Final? A final report by—— 

Mr. LIDINSKY. Yes. 

Mr. LARSEN. In that timeframe? 

Mr. LIDINSKY. Yes. 

Mr. LARSEN. OK, good. And can you follow up with us a little bit 

on the Korea Free Trade Agreement? What impact do you expect 

the agreement is likely to have on our containerized exports? 

Mr. LIDINSKY. A very favorable impact. As I mentioned, nearly 

80 percent of containerized cargo will now receive duty-free treatment on the receiving end in Korea. We noticed increased requests 

for boxes. The shipping lines there are very excited about this prospect. So I think this is one bright spot on our export front. 

Mr. LARSEN. Do you anticipate, because of that increased demand for boxes, that you are going to have to do some—use the 

term loosely, not in the legal sense, but adjudicating among shippers and—— 

Mr. LIDINSKY. Well, we have continued to watch that situation 

since the shortages occurred in 2010. 

Mr. LARSEN. Right. 

Mr. LIDINSKY. And the industry now admits there are adequate 

boxes out there. So we keep a very close watch, and will take appropriate measures if we have to. 

Mr. LARSEN. Right. Yes, good, all right. Thank you. I will have 

a second round, Mr. Chairman. Appreciate that. Thank you. 

Mr. LOBIONDO. Thank you, Mr. Larsen. And now, in the most 

honorable tradition of the Coast Guard, our honorary Master Chief, 

Mr. Coble. 

18 

Mr. COBLE. Master Chief. I am glad he said ‘‘honorary.’’ That 

way I won’t be challenging you for your job. Thank you, Mr. Chairman. Gentlemen, good to have you all with us today. 

Admiral, the Administration proposes to close two air facilities 

which house the HA–65, the Dolphins. During the months of summer in Waukegan, Wisconsin, and Muskegon, Michigan. What will 

be the fiscal savings, as a result of these two proposed closures? 

Admiral PAPP. Well, both of those are only open—both of those 

stations are only open about 103 days a year, just during the summer months. And we reap about 14.6—almost $15 million in savings by closing them. 

Mr. COBLE. Is Air Station Traverse City capable of reaching 

these areas in a timely manner for emergency rescue? And if so, 

what is the response time difference? 

Admiral PAPP. OK. What we have—I need to digress a little bit, 

because I have got personal experience here. I was the Ninth District Commander. And while I was the Ninth District Commander 

up on the Great Lakes I advocated for this, because we are challenged at Air Station Traverse City. 

Many years ago we used to have larger helicopters there, the H3 

helicopter. And then the decision was made to put the smaller helicopters, the H–65s, up there as we transitioned. The challenge is 

they have—the H–65 is shorter duration. It is a slower helicopter, 

and it does not have de-icing. So, in the extreme other 9 months 

of the year up there, particularly the winter, the H–65 does not 

serve as well. 

Plus, it is not just Lake Michigan that Traverse City serves, it 

is also Lake Superior, which is huge. The helicopters that are up 

there right now, if they have to prosecute a search and rescue case 

in Lake Superior, often times have to fly, refuel, and then prosecute the case. Whereas, with H–60s, H–60s double the endurance 

time. They are faster. They can get there faster, they can stay on 

station longer, and they have de-icing, which is safer for my people, 

who have to prosecute these cases throughout the entire year, not 

just the summer months. 

So, having said that, it takes about an hour-and-a-half to get 

from Traverse City in an H–60 down to the extreme limit of southern Lake Michigan. But I think the focus has been all on aviation. 

Most of our SAR cases are not handled just by aviation, they are 

also in concert with surface forces. And we have four—and if you 

want to stretch it around, five—search and rescue stations just 

around southern Lake Michigan, all of which we have capitalized 

with much more capable, heavy weather capable Response Boats 

over the last couple years that can prosecute most of the cases 

down there, as well. 

So, I think, in my estimation, both as a former operational commander up there and as Commandant, southern Lake Michigan is 

well served by Coast Guard resources. And looking at the helicopters in isolation, particularly the two AIRFACs, is a little bit 

misleading. 

Mr. COBLE. And Admiral, again, the savings? You said $15 million? 

Admiral PAPP. For closing the air facilities? 

Mr. COBLE. Yes. 

19 

Admiral PAPP. Yes, sir. 

Mr. COBLE. Master Chief, as a former member of the enlisted 

workforce, I would be interested in knowing. What do you regard 

the most pressing challenge, as applicable to the enlisted workforce 

in the Coast Guard? 

Master Chief LEAVITT. Thank you, Mr. Coble. It is good to see 

you, by the way. 

Mr. COBLE. Good to see you, sir. 

Master Chief LEAVITT. It hasn’t really changed since the last 

time I testified last year. Housing and child care is one of the number one issues out there for our workforce. And we are making 

great strides to, like I said, to shore up that parity between the 

DOD. 

But there is other things out there that are on the minds of our 

workforce, too. And they read. They take a look at the reductions 

that the Department of Defense is looking at, with regards to personnel, and then kind of wondering, the Coast Guard, how is that 

going to relate to them. Last year there was talk in regard to pay 

and benefits and including retirement, what that is going to look 

like. And there was a lot of anxiety in regards to that. 

And then last year we went through a continuing resolution. And 

it is to a point where people didn’t know if that was going to affect 

their pay or not. And there are same concerns this year with the 

type of—the way we are going forward. 

So these are the main things in our folks’ mind out there, sir. 

Mr. COBLE. I thank you, sir. Mr. Chairman, my red light is about 

to illuminate, so I yield back. 

Mr. LOBIONDO. We thank you very much, Mr. Coble. Mr. Bishop? 

Mr. BISHOP. Thank you very much, Mr. Chairman, and thank 

you for holding this hearing. I have two questions for Mr. Matsuda, 

and the first has to do with the maritime security program. 

First off, I think we are all pleased to see that the maritime security program is—full funding for it is requested in the President’s 

budget. I think we all agree that this is a very cost-efficient way 

for the U.S. Government to sea lift the assets that it must during 

times of war and national emergency. 

I am, however, concerned about the level of foreign involvement 

in the maritime security program. It is my understanding that 49 

of the 60 maritime security program contracts are controlled by foreign companies. And it is my further understanding that this is 

clearly at odds with congressional intent. 

And so, my question is, what is MARAD doing to ensure that 

U.S. companies have greater access to this program? 

Mr. MATSUDA. Well, thank you, sir. The maritime security program, we believe, provides a tremendous value to the Federal Government, and certainly our partners in the military. There is no requirement in the law that any one of these companies must be a 

U.S.-owned versus foreign owned. All of them are companies incorporated in the U.S. that hire U.S. mariners. 

But they—we do make sure that any time there is a new slot 

that comes available because a vessel falls out or no longer is able 

to fulfill its commitment, that we do offer a preference to U.S.- 

owned companies—— 

20 

Mr. BISHOP. If I may, my understanding is that in 2003 the number of contracts were expanded from 47 to 60 and that, at that 

time, Congress insisted that all of the newly issued 13 contracts go 

to U.S. companies. 

And so, I guess my specific question to you: has that been complied with? Have all 13 contracts newly issued since 2003 gone to 

U.S. companies? 

Mr. MATSUDA. Let me verify that. 

[Pause.] 

Mr. MATSUDA. Not all 13 are currently held. The expanded slots 

are currently held by section 2 companies. The law does give priority to them, but we also need to take into account the military 

usefulness of the types of vessels that are offered. 

Mr. BISHOP. All right. I think that, Mr. Chairman, this is an 

issue that I, at least, am concerned about. And can I ask that this 

committee look at the issue of perhaps the authorizing legislation, 

and perhaps look at the issue of how a U.S. company is defined at 

some future point? 

Mr. LOBIONDO. It is an excellent point. But we will double-check, 

Mr. Bishop. It may be House Armed Services jurisdiction. If it is 

our jurisdiction, we will certainly look at it. If not, we will figure 

out a way to get Armed Services to look at it. 

Mr. BISHOP. Thank you very much. My second question has to 

do with the merchant marine academy. And I will speak just for 

myself. 

Each year, one of my happiest duties as a Member of Congress 

is to get to nominate young men and women, outstanding young 

men and women, to the Merchant Marine Academy, and even 

happier duty is when I get to call them to tell them that they have 

received an appointment. 

But I am also dealing, frankly, with a steady stream of Merchant 

Marine Academy alumni who are deeply concerned about the way 

in which the academy is administered, in their view. And I have 

to confess that I don’t have any independent knowledge. But I 

mean, when I have an alumnus stop me on the street—I am used 

to getting stopped on the street to talk about health care, let’s say, 

but when an alumnus stops me on the street and wants to talk 

about the current state of affairs at the Merchant Marine Academy, 

it raises concerns. 

My understanding is there has been three superintendents in the 

last 4 years. My understanding is there has been a very controversial decision to phase out a program called the GMATS program. 

So, can you—I am running out of time, but can you quickly sort 

of bring us up to date on your sense of the state of affairs at the 

Merchant Marine Academy? Are there issues that need to be attended to? Is there micromanagement from Washington, in terms 

of day-to-day affairs at the academy? 

Can you quickly—I am sorry, I am running out of time, but if 

you could quickly respond, I would appreciate it. 

Mr. MATSUDA. Happy to. And let me just take those briefly, that 

when we came into this Administration and took a look at the challenges at Kings Point, there were a number of challenges, including 

the lack of internal controls, the handling of finances that the GovVerDate Aug 31 2005 12:11 May 30, 2012 Jkt 000000 PO 00000 Frm 00034 Fmt 6633 Sfmt 6633 P:\HEARINGS\112\CG\3-7-12~1\73190.TXT JEAN
21 

ernment Accountability Office suggested we take a very close look 

at and review. 

We have also attempted to make sure that we have the leadership in place that there is no need—we certainly have—I can tell 

you this. Nobody in Washington wants to micromanage anybody, or 

certainly when it comes to the academic and success of the school. 

We have attempted to address each of the recommendations 

made by the Government Accountability Office. One of them was 

to go through and look at how each of the non-appropriated fund 

entities, including this one called GMATS—it was essentially a separate school operating on the academy campus—about how the finances were managed, and how they were operating with respect 

to the academy. After a thorough, it became very clear that this entity wasn’t necessarily serving the school, the midshipmen, or the 

community there. So it was decided to transition the GMATS entity. Eighty-five percent of its customers were outside of the academy 

all together. They were either the Federal agencies or other customers. 

So, we are in the process of making that transition. I know it has 

been rough. There have certainly been a number of folks who have 

put a lot of hard work into it over the years, but it just does not 

meet the criteria to be, you know, working on the campus and serving the midshipmen of the academy. 

Mr. BISHOP. I thank you for that—and, Mr. Chairman, just very 

quickly—would you be willing to meet with me so that we could 

pursue some of these issues? And I make that request in an effort 

to be helpful, so—— 

Mr. MATSUDA. Be happy to, sir. 

Mr. BISHOP. Thank you very much. And thank you for indulging, 

Mr. Chairman. 

Mr. LOBIONDO. Mr. Cravaack? 

Mr. CRAVAACK. Thank you, Mr. LoBiondo, for having such an important, vital meeting that we are having here today. I like to see 

Merchant Marine Academy guys here, women here, so welcome 

aboard. Good to have you here. And, Admiral Papp, I would like 

to express my condolences to the great men and women of the 

Coast Guard family for their recent loss of helicopter crew. So our 

prayers are out with your crew. 

Admiral PAPP. Thank you, sir. 

Mr. CRAVAACK. I am very concerned with the President’s budget 

and spreading Americans’ sea services too thin, and preventing 

them from being able to engage the various threats out there that 

they face on a daily basis. I am also concerned with the fate of the 

1,701 Service personnel that will be losing their positions if the 

President’s budget is enacted. 

As such, I am particularly interested today to hear about how we 

can protect our maritime fleet. Because I know that is a vital resource of this country, American flag vessels. And I am very concerned with that, and making sure that our young men and women 

have a very solid merchant fleet available to them. Because I consider this an essential asset of the United States. 

I am concerned that we need to protect American jobs at Great 

Lakes, and provide the Coast Guard the resources needed to fulfill 

its responsibilities among the emerging maritime threats, while at 

22 

the same time we need to find areas of efficiencies and reduced 

cost. But we cannot put our Nation unduly at risk. 

So, my question to you, Admiral, sir, would be to—what is America risking right now, if we go forth with these—the budget in our 

maritime forces right now? 

Admiral PAPP. I would say that this budget is probably the last 

year I have where we are able to keep up our performance before 

we start eating into frontline operations. 

I think this 1,000-plus person thing is a little bit of a red herring, because about 700 of those are associated with units that are 

being decommissioned, and we have already brought crews online 

for the units that are replacing—for instance, one example would 

be our Fast Response Cutters. We only have one, which is going 

to be commissioned next month, the Bernard C. Webber. But we 

have—this budget will have 10 crews standing by, ready to man 

the ones that are on the production line right now. 

And as a Service chief in an unconstrained environment, I would 

love to keep every crew on board until we have the crew trained 

up and the ship commission to replace them. Unfortunately, within 

the constraints of the current budget, I can’t afford that luxury. So 

what we are doing is a reasoned, balancing risk decommissioning 

schedule for some of the older units as we bring on the new ones. 

We have four crews on board right now for the National Security 

Cutters. We only have three that are out there in commission. So 

we are decommissioning some of our High Endurance Cutters to 

free up trade space within the budget so we can maintain those 

new crews. So that is about 700 of them. 

The remaining people are doing a reassessment of where we are 

at. For instance, we are closing—we are doing away with some recruiting billets. Well, we have got people standing in line waiting 

to come to Coast Guard. Some people say they are waiting 12 

months before they can go to boot camp, because we have so many 

people that want to be employed. So we don’t need the recruiting 

effort that we needed 10 years ago right now. We can afford to 

use—to cut some of those billets right now. 

There are other things, intelligence billets, other things that we 

built up strongly after 9/11 that, now that we have 10 years of experience, we can adjust, we can reassess and redistribute a little 

bit to make sure we are acting efficiently. 

With the constraints of this budget, we have to look at each and 

every thing we do, and make sure we are doing it efficiently. As 

far as turning people loose or cutting them, we are not going to be 

doing that, as far as I can determine right now, because we foresaw 

this about a year ago. We put a hiring freeze into effect. I think 

most of this will be able to be taken care of through attrition. Some 

of those military billets are on the books and will be transferred 

to other units or some of the new units that are coming on, and 

we will adjust our officer promotions and our intake at our recruit 

training facility to make sure that we are providing a balance, and 

that we don’t have to put people out on the street. 

Mr. CRAVAACK. Thank you, Admiral. And my time has just about 

expired here. I will yield back and wait for a second round. 

Mr. LOBIONDO. Thank you very much. Admiral Papp, last year 

we—oh, I am sorry, Mr. Cummings. I apologize, Mr. Cummings. 

23 

Mr. CUMMINGS. No problem. First of all, good morning, everyone. 

Admiral Papp, in recent years the Coast Guard Academy has 

made significant strides in expanding diversity. And I know you— 

that has been a majority priority of yours, and I appreciate that. 

I want to know what steps are being taken to maintain these 

gains, and will the budget cuts impede your ability to continue the 

expanded outreach and recruitment initiatives that have been so 

critical to the success? 

Admiral PAPP. Well, thank you, Mr. Cummings. And I appreciate 

the work of this subcommittee over the last couple of years to really push us in the right direction and make sure that we are reaching out to all Americans. That remains one of my highest priorities, 

to make sure our entire Service—but in particular, our academy, 

where we weren’t doing a very good job—make sure that we are 

spreading the word, and making it, the opportunity, available to all 

Americans. 

As you know, our percentages of underrepresented minorities 

and women continue to increase. I am very pleased with that. And 

I have stated to my staff that there will be no cut-backs in our efforts to recruit, particularly to come to the academy, and we are 

going to keep that effort up. 

All things, however, have to be reassessed on a year-to-year 

basis, as we go forward, to stay within the limits of this constrained budget. That would be one of the ones that we look at. But 

most of our recruiting efforts right now that I talked about earlier 

are confined to our enlisted side of the house, where we have some 

of the highest retention that we have ever had in the history of the 

Service right now. 

Mr. CUMMINGS. Now, Mr. Matsuda, Administrator Matsuda, let 

me tell you I want to briefly review the situation at MARAD. Is 

the deputy administrator’s position still vacant? 

Mr. MATSUDA. Yes, it is. 

Mr. CUMMINGS. I can’t hear you. 

Mr. MATSUDA. It is, sir. 

Mr. CUMMINGS. Is the chief counsel’s position still vacant? 

Mr. MATSUDA. No, no. We have a chief counsel. 

Mr. CUMMINGS. Can you keep your voice up? I can’t hear you. 

Mr. MATSUDA. Yes, we have a chief counsel, sir. 

Mr. CUMMINGS. OK. Do you—do we have any idea when that 

deputy administrator’s position might be filled? 

Mr. MATSUDA. We do not. We continue to look for strong candidates. 

Mr. CUMMINGS. And what does that mean? 

Mr. MATSUDA. Well, you—— 

Mr. CUMMINGS. ‘‘Continue to look’’? 

Mr. MATSUDA. Well—— 

Mr. CUMMINGS. You could be looking for the next 10 years. 

Mr. MATSUDA. Well, it is a political appointment. 

Mr. CUMMINGS. Right. 

Mr. MATSUDA. It is something that the President needs to make, 

and we work with the White House to try and identify strong candidates—— 

Mr. CUMMINGS. Are you involved in that process? 

Mr. MATSUDA. Yes. 

24 

Mr. CUMMINGS. All right. And what is the status of the superintendent’s position at the Merchant Marine Academy? 

Mr. MATSUDA. Well, thank you, sir. The superintendent’s position 

is vacant. It is current being advertised for being filled, and we are 

looking for the very best candidates to come apply. We have already received a number of applications, and we look forward to a 

strong and a thorough process. An inclusive one, as well, where we 

work with all of the academy stakeholders, the midshipmen, faculty, staff of the school to participate, as well as outside stakeholders, to make sure that all views are included, as we—— 

Mr. CUMMINGS. How long as that vacancy existed? 

Mr. MATSUDA. The vacancy itself has been advertised starting 

the past month. 

Mr. CUMMINGS. No, no, no, no, no, no. You are not answering my 

question. I said how long has the—— 

Mr. MATSUDA. Roughly since October 2011. 

Mr. CUMMINGS. All right. Let me go into something else. There 

is significant talk about the potential of releasing oil from the strategic petroleum reserve as gas prices continue to rise. Fiscal year 

2012 appropriations legislation prohibits the use of appropriations 

to waive the Jones Act unless steps are first taken to ensure that 

oil release from the SPR is transported on Jones Act-qualified vessels. 

Additionally, the Secretary of Transportation must provide a list 

of U.S. flag vessels that, singly or collectively, have the capacity for 

carrying releases from the SPR. 

Is MARAD prepared to implement these requirements in the 

event a drawdown is announced? 

Mr. MATSUDA. Yes, we are. 

Mr. CUMMINGS. In October, MARAD released a report comparing 

the competitiveness of U.S. flag vessels with vessels—other flags. 

As you know, I encouraged the preparation of this report. The report identifies the factors that raise the cost of operating under the 

U.S. flag, many of which, frankly, have been well-known for some 

time. 

Now that the report is complete, what does MARAD intend to do 

to help improve the competitive position of the U.S. flag fleet and 

our actions—and are action plans being developed? And when can 

we expect to see specific initiatives? 

Mr. MATSUDA. Well, sir, after that report was released, we did 

receive feedback from other stakeholders in the industry, besides 

those who were surveyed. 

As you know, we look to the CEOs of the carriers, the maritime 

carriers, the ones who make the decisions whether to flag in the 

U.S. flag or not, try and get a sense of what their concerns were 

and what their views were of the impediments to flagging in the 

U.S. We have reached out to other stakeholders in the industry to 

get their feedback on the report, and are still waiting to hear from 

several of those. 

Mr. CUMMINGS. All right. Thank you very much. 

Mr. LOBIONDO. Thank you, Mr. Cummings. The gentleman from 

coastal Louisiana, Mr. Landry. 

Mr. LANDRY. Thank you, Mr. Chairman. Mr. Cummings took my 

lead-in, but I am going to be a little more direct, then. 

25 

Are you saying that if the SPR is open again, that you promising 

this committee that we are not going to witness another round of 

record Jones Act waivers? 

Mr. MATSUDA. Sir, I am committed that we will be in compliance 

with the law. 

Mr. LANDRY. Well, I mean, are you saying that once again this 

Administration is going to favor giving jobs to foreign workers over 

American workers? 

Mr. MATSUDA. Sir, I can tell you that last summer, during the 

drawdown of the SPR, it was the first time ever in recollection that 

a U.S. flag vessel was able to carry fuel release from the SPR. And 

it was because of the very process taken, not issuing a blanket 

waiver from the President. 

Mr. LANDRY. Well, I think me and Mr. Cummings have a—we 

may—we agree, but disagree with you on that, just, you know, for 

the record. 

Let me ask you. Last year—I commend you all, because MARAD, 

for the first time since 2008, properly focused on vessel sales instead of acquisition contracts, which reaped the taxpayers millions 

of dollars. They made nearly $8 million in fiscal year 2011, and 

nearly $10 million in fiscal year 2012, for a total of $18 million of 

sales revenue. And in fiscal year 2012, you already removed and 

sold 10 vessels from your fleet with only $2.5 million in appropriated funds, generating nearly $10 million in revenue. 

And so, could you explain why you need $7 million in the budget 

to dispose—for vessel disposal for fiscal year 2013? What about all 

the money you made in the prior years? Why do you need any more 

money? 

Mr. MATSUDA. Well, these—the funds received from prior years 

by law are designated to several different accounts. One is actually 

for the benefit of the State maritime academies. We can take a portion of those proceeds and help fund the needs at the various maritime academies and their training ships, their excess fuel costs— 

as you know, the cost of fuel has been, you know, on the rise. The 

other portions go toward maritime historical preservation, and we 

work with the Department of Interior to help decide where those 

funds can be spent. They have a grant program that they use. And 

the remainder goes back to the national defense reserve fleet. 

Mr. LANDRY. So none of the money can be used to operate the 

program, is that what you are saying? Is that something by law, 

that none of those funds—— 

Mr. MATSUDA. That is correct. The funds we receive from Congress are the ones that help us get the ships out the door and sold 

to the private—— 

Mr. LANDRY. And none of those revenues can be used to help continue to promote the program? You can use none of those revenues 

derived off of those sales to help future—to help create future contracts and future sales? Is that what you are saying? 

Mr. MATSUDA. If—I believe it is only for upkeep of the fleet. If 

you have a specific suggestion, we are happy to consider—— 

Mr. LANDRY. Well, I mean, look. I come from a business community—and I am not blaming you, because it wouldn’t be you, of 

course. Not surprisingly, it would probably be Congress that would 

set up something so backwards as that. 

26 

I mean but when you think about it, in business you tend to 

budget and put money back into those things that are actually 

making you money, so that they don’t continue to cost you money. 

And I am not saying that the other areas of the budget that this 

money is going to is not needed or is not proper. But maybe we 

should be looking at making sure we are returning some of those 

dollars into the programs that are keeping those dollars flowing 

into those other programs. Does that make sense to you? 

Mr. MATSUDA. Yes, sir. 

Mr. LANDRY. OK. 

Mr. MATSUDA. It is something I am happy to take a look at and 

work with you on. We feel that the funds are very well spent, if 

they go to the State maritime academies and the future—— 

Mr. LANDRY. But suppose we don’t have the $7 million to give 

you? Then those academies and those areas are not going to get 

that money to begin with? We got the tail wagging the dog here, 

is my point. You know, again, those programs are good, and they 

like that money going in there. But if all of a sudden we say, ‘‘You 

are not getting your $7 million,’’ how much are they going to get 

next year? 

Mr. MATSUDA. Well, all I know is that if we continue to make 

sales out of this program—— 

Mr. LANDRY. Well, but you can’t make sales unless we appropriate the money. And if we don’t appropriate the money, you can’t 

make the sales and they can’t get the money. And so, over the past 

2 years you all made, like, $18 million and none of that has gone 

back to giving us an opportunity to continue these sales. That is 

my point. 

Mr. MATSUDA. We put them where the law tells us to put them. 

Mr. LANDRY. No, I know, I know, I got to clarify that so everybody understands. I appreciate it, thank you. Mr. Chairman, I yield 

back. 

Mr. LOBIONDO. OK. Mr. Matsuda, before I go back to Admiral 

Papp, Mr. Cummings and Mr. Landry raised the issue, and I thank 

you, Mr. Cummings, for first raising it. 

Just so there will be no misunderstanding, in a very bipartisan 

way we will be paying very close attention to compliance with the 

Jones Act. There is obviously concerns of some things that—how it 

was handled in the past. And it is something that we feel very, 

very, very strongly about. So just sort of a word of advance notice, 

that if this does come about, you know that it is going to be under 

a magnifying glass. 

Mr. MATSUDA. Thank you, sir. And I can tell you that I am actually meeting later this afternoon with a broad swath of stakeholders from the industry who want to continue to express concerns 

and offer ideas for moving forward. 

Mr. LOBIONDO. OK. Admiral Papp, we spent—I am not sure it 

was an entire hearing, but certainly a portion of it with the subcommittee regarding the testimony that was given from the Department that assured us that an increased cost associated with St. 

Elizabeths would not impact frontline operations. It seems that the 

budget request proposes to cut hundreds of military positions involved in such frontline operations such as intelligence, airborne 

use of force, patrol boat missions. 

27 

Could you give us some insight of how the Administration justi- fies the $24.5 million for the new headquarter building when its— 

these frontline operations are obviously going to be affected? 

Admiral PAPP. Well, I was deeply involved in this, so I am defending my Secretary on this one. We, as you know, you all understand the budget process, this budget started out much smaller 

than it is right now. And the Secretary didn’t get any additional 

funds for the Department. The Secretary went across the Department and found funds in other agencies to help the Coast Guard 

out this year. So she went to bat for us. And there is no doubt 

there. 

And my budget was completed, and then we went back to her 

and asked her for the money above and beyond what we ended up 

with. It is about $25 million to pay for the additional cost at St. 

Elizabeths. And she—the Department added that back into our 

budget. 

So, out of fairness to the Department, the Secretary has worked 

hard for us this year. Nowhere near where we would like to be. 

Once again, as a Service chief, I always want more for my service. 

But at the end of the day, after a long battle and working this 

budget through the Administration, she went to bat for us time 

after time. And then, after our top line was fixed, she put the $25 

million in to pay for the additional costs over there. 

Mr. LOBIONDO. I understand that. And I know that the current 

conditions are unacceptable, and that we had to look at something 

else. But I will just—will tell you that I don’t think these will be 

the last questions that you get, or the Secretary or the Department 

will get. When you have—I don’t care how you slice and dice. You 

got critical frontline missions that we don’t have money for. We are 

reducing the numbers, we are reducing all kinds of things because 

you have to fit the budget within what you were given. And I don’t 

want to begin to think of what $24-plus million would do to Coast 

Guard housing or frontline operations or a whole wide variety of 

things. So, don’t—you know, understanding everything that is involved here, there is kind of a big flag that is yellow or red, depending on how you look at it. 

Master Chief, I know we have had private discussions, and you 

have been a tireless advocate on the housing issue for 

servicemembers. Can you tell us what the status of the Coast 

Guard housing report is? And do you have a time table when we 

might see that? 

Master Chief LEAVITT. Yes, Mr. Chairman. The assessment, the 

national housing assessment, should be completed at the end of 

May. And we take a look—there are some preliminary findings. 

But as you know, the assessment takes a look at the whole Nation 

on all of our housing. And some of the areas we have, we have— 

you know, there is more housing than what we need, due to occupancy levels. In other areas we are challenged. And with the new 

authorities you gave us in housing, what we want to do is be careful about how we—where we put those monies into. And so we got 

to take a look. And this is going to give us a great plan forward 

of what that looks like. 

So, after May, we will have a good plan. We have about $8.8 million that we have already diverted into the housing fund. And we 

28 

sold six houses in Maui, three properties here in the national capital region. We sold housing up in Clyde Hill in Seattle. And we— 

and the properties there in Buxton, North Carolina. So we are 

moving forward on this housing authorization. But I think it is 

really important right now that we put a round turn on the direction forward, until we figure what the direction is. And so, I am 

really optimistic about this, and I think that is really going to help 

us focus those monies in the right area. 

And another thing we also did too this year is there are some 

tools we are using too, in regards to—we may not necessarily need 

housing-housing. We have options like leases we can get into, 

which we did up in Juneau just recently. We got five leases for our 

folks, very difficult area to get our folks into. So we are using some 

of the other tools we have out there, too, in regards to that. 

Mr. COBLE. Mr. Chairman? 

Mr. LOBIONDO. Another issue that we have had public discussions on and some private discussions that is particularly offensive 

to me, and that is the parity issue, where Coast Guard men and 

women are, in some cases, treated differently than DOD 

servicemember benefits. This is a fight I guess we are going to continue for a while. 

Can you identify for us what is the single largest issue still facing the Coast Guard, in terms of parity? Or the top couple of 

issues, for that matter? 

Master Chief LEAVITT. Well, I think some of the issues—obviously, you already looked into the housing and our child care. We 

had—parity last year was about 12 percent—excuse me, about 14 

percent versus 5. But authorities, and with that approval of last 

year’s budget, we are probably going to build a—bridge that gap, 

like I said on my statement. 

We hired seven folks, training care curriculum specialists for our 

CDCs. We hired—we haven’t hired, excuse me, we are looking at— 

about 12 weeks out we are hoping to get that job description out. 

But we are also looking at the regional daycare specialist. And 

these are folks that—when I talked last year, I talked about our 

folks out in the remote regions of the high-cost areas. And I am 

really optimistic about this, because when we put these folks out 

there, they are going to help. A lot of our spouses like to babysit, 

like to do in-house child care, but they are unable to break some 

of the red tape we have, in regards to getting their houses inspected, in regards to getting the first aid training they need, and 

all those types of things like that. So these are the folks that help 

them do it in these different regions. And that is going to help us 

bridge those numbers. 

Just last February we advertised the new program and our subsidies that they approved, and—because we had more money in 

there. And the 370 existing families that are now using our CDCs, 

we had—with 450 children, we updated theirs. And right now, as 

you and I speak, the—we have—150 new families have already put 

in for the new subsidies. And with 129 applications that are—right 

now, that are pending. And so about every day we are getting 20 

more applications in. And now we are getting ready to submit 

the—we are going to market this to our ombudsman program to get 

all that information out there. 

29 

So, in regards to child care, we are going to start bridging that 

gap, I am confident of that. It is going to take a little time to do 

it, because we got to get these things out in the field. 

The other ones that—in the housing piece right there, obviously 

when you look across and you see the public-private ventures of the 

DOD, we are trying to partner in those areas, too, with our DOD. 

And we are able to do this in some of the regions that we have. 

But the reality is not all our folks in those remote regions are able 

to get in that kind of housing. And you know, you have seen some 

of the housing that we have. So it won’t be the same. So we got 

a little bit of parity in there, but we are going to work forward with 

the new authorizations and the authorizations you gave us. 

The other one which was brought to my attention is in regards 

to the Reserve. Our reserve program is under title 14, and our 

DOD counterparts are working under title 10. And if I can just remind you that during Deepwater Horizon, there are some significant issues and differences in those two, and I am sure you are 

well aware of those. Medical—Deepwater Horizon, we had our 

Coast Guard men out there working side by side with our DOD 

counterparts, doing the same exact job. But one is under title 10, 

and title 10 gives you a lot more benefits in regards to health care. 

There is education benefits in that. There is a resource income replacement program for that. In other words, it takes care that—you 

may lose pay going to those types of things, so they got those types 

of programs, where our folks in title 14 don’t have those same benefits, but yet they are doing the same job. 

So when you take a look at maybe—to see if we can shore up 

some of that, and see if we can bridge that parity in regards to the 

14 and 10, title 10. 

Mr. LOBIONDO. Well, thank you. That is helpful. And as we approach the national defense authorization bill through the hearings 

with HASC, we want to continue to work closely with you to identify these areas where parity is not in place. And while we may not 

be able to solve it all in one fell swoop, we want to make sure that 

folks understand that this is unacceptable, as far as the Coast 

Guard is concerned, and it is really sort of a disgrace that we don’t 

have parity, and that we will keep on this. So any insight you 

have, as we move forward, will be very much appreciated. 

I wanted to go to Mr. Matsuda, but I want to respect the other 

Members here. So, Mr. Larsen, I will come back to you. 

Mr. LARSEN. Thank you, Mr. Chairman. Admiral Papp, some 

questions about the Offshore Patrol Cutter. Obviously, we are a little bit—a ways before that is operational. And I have a question 

about whether or not the requirements for the OPC will prioritize 

one set of factors over a different set of factors. Sea-keeping and 

endurance, that might be more helpful in the Pacific versus speed, 

armament, and other requirements. How are you approaching the 

setting requirements for the OPC? 

Admiral PAPP. Well, sir, realizing that this was going to be the 

largest acquisition project that the Coast Guard has ever done, and 

recognizing that these ships are going to last us 40 years, we are 

taking the long view on this. 

And I realize there are some people that feel like we have 

dragged our feet a little bit, or pushed this to the right a little bit. 

30 

And I would say that is just not the case. It is a little delayed from 

where we started out. But when I came in as Commandant, I realized that we were going to be facing constrained budgets. So I had 

the staff take a look at the OPC once again, scrub the requirements 

with a direction that the primary requirement is affordability. We 

just could not afford everything that was in the requirements before. So we set new thresholds for it. 

But the most important is the sea-keeping capability, because 

with a reduced number of National Security Cutters, if we only 

have 8 National Security Cutters replacing the 12 Hamilton-class 

cutters—— 

Mr. LARSEN. Right. 

Admiral PAPP [continuing]. We have to have a ship that is capable of going up into the Gulf of Alaska, the Bering Sea, the Western Pacific. Our Medium Endurance Cutters right now—and speaking as a captain of a 270-foot cutter—those ships cannot perform 

in the extreme weather conditions that you find sometimes in the 

North Atlantic, much less the Arctic and the Bering Sea. 

So, keeping the requirements for sea state 5, for helicopter 

launching and boat launching and the endurance were most important. And I am really pleased to say that we have finally passed 

that hurdle. We went through acquisition decision event number 

two with the Department of Homeland Security last week, and 

they approved our requirements. So we are stepping out smartly 

now and moving ahead. 

Mr. LARSEN. So you are able to move ahead. Good. Thank you. 

Mr. Matsuda, a couple questions about some of these programs 

that, at least to our eye, seem to be not funded. First off, the small 

shipyard assistance grant. Can you give us some thinking about— 

give us some of MARAD and the Administration’s thinking about 

the lack of funding for assistance to small shipyards? Because I 

think you will find that there have been a lot of successes in this 

particular program. There may be some hiccups, but a lot more 

successes. 

Mr. MATSUDA. Well, sir, I would have to agree with you. It has 

been very successful. I see the results of these grants in the form 

of new equipment at our small shipyards, or in new training programs put in place. We continue to administer and oversee $153 

million of—and 133 grants, including a large portion of them that 

were awarded as a result of the Recovery Act. And we are continuing to make investments in the—our U.S. shipyards. 

Overall, the Federal budget provides some $15 billion worth of 

spending on new vessels and shipyard work. Our own fleets require 

the types of service and repair work that many of these shipyards 

have really developed niche, you know, areas of expertise in. And 

so we are continuing to make progress there. But overall, this has, 

you know, become a tough budget year. And we certainly want to 

make sure we highlight the types of priorities that we are able to 

fund. 

Mr. LARSEN. Well, you have made a great argument for funding 

this program. And yet it is not. So do I hear you—do I just hear 

you saying despite the relative success of it, it is just not a highenough priority? 

31 

Mr. MATSUDA. Well, we are, like I said, continuing to make investments in the shipyard industry. We believe that the funds that 

we are currently administering and overseeing are being well 

spent, and we are monitoring those as appropriate. 

Mr. LARSEN. With regards to marine highways initiative, I 

couldn’t find any mention of this program in MARAD’s budget or 

in the DOT’s budget request. Can you explain what is the current 

status of the maritime highways initiative? 

Mr. MATSUDA. This is—remains one of our top priorities. We see 

it as a great potential to move additional cargoes on the water that 

are currently not going that way. There is containers, trailers can 

be moved much more environmentally efficiently. We are relieving 

congestion on our surface routes. And so we have done quite a bit 

of focus to make sure we can get these services up and running. 

The—starting 2 years ago, Secretary LaHood identified 18 corridors around the country where these types of services would 

make sense economically and certainly to—as a policy matter. We 

followed that up by providing funding for individual corridor analyses and studies, where people can kind of bring it from the chalkboard into, you know, conferences, to actually get together and 

focus, on a regional level, what it is going to require to start these 

services in the individual areas. 

We have also funded these projects through the TIGER grant program, where, as I mentioned, a total of $276 million has gone 

to ports and marine highway projects, to try and get the infrastructure needed, again, to get them up and running. 

Mr. LARSEN. So the lack of conversation in your budget request 

or in the DOT’s budget request about the maritime highways initiative should not lead us to think that you all have let it go by 

the wayside? 

Mr. MATSUDA. Oh, not at all, sir. It is—it remains a key priority. 

It is also one that is intended to get a private sector business service up and running, where these are private entities with their— 

you know, their own capital, their own investments, their own 

risks. We are trying to encourage it from the Federal Government 

and, to be honest, sir, many stakeholders who suggest that it is not 

a matter of throwing at it, but making the policy decisions to make 

sure that there is a climate that would induce folks to use water 

transportation. 

Mr. LARSEN. With regards to title 11, I guess I am a little surprised to see the Administration request for $3.75 million for administrative expenses for a program that seems to be going unfunded in this year’s—in the 2013 request. Can you explain this— 

I guess my disconnect? There must be a connect somewhere. 

Mr. MATSUDA. Well, we are obviously—we are continuing the 

program. We have a large number of carryover funds we are continuing to utilize. We are processing and receiving new applications. And currently we have sufficient funding to guarantee over 

300—towards $400 million worth of shipbuilding projects. 

Mr. LARSEN. OK. 

Mr. MATSUDA. But no new funds were requested this year. 

Mr. LARSEN. OK. One final question. And Mr. Michaud, again, 

couldn’t be here, Mr. Chairman. I just wanted to ask this question 

on his behalf—and many others. But Congressman Michaud 

32 

brought up the issue of State maritime academies, and explained— 

could you help us understand the budget request that cuts direct 

support assistance by $1.1 million to the State maritime academies? He is very concerned about it. 

Mr. MATSUDA. Overall, we—over the past several years, the 

State maritime academies in our budget has seen an increase 10 

percent higher over 2009 levels, and 20 percent higher over 2008 

levels. We believe that the difference will be more than made up 

for by additional funds we were able to get awarded to the State 

maritime academies through examples such as our successful ship 

disposal program, as your colleague discussed. That is due to our 

ability to get ships sold on the market and take those funds—it not 

only cleans up our fleet sites, but also makes investments back into 

the future of this industry. 

Mr. LARSEN. Well, I recommend some followup from you to Mr. 

Michaud and his office. 

Mr. MATSUDA. Pleased to do so. 

Mr. LARSEN. Thank you, Mr. Chairman. 

Mr. LOBIONDO. Mr. Cravaack. 

Mr. CRAVAACK. Thank you, Mr. Chairman. You know, being retired Navy, I find it a bit ironic, sitting on this side of the desk, 

and here we are, cutting your budget and telling you to do more. 

It just boggles my mind that we can’t give you the assets you need 

to actually complete your mission. 

And so, Admiral, I guess what I am asking from you, sir, as the 

Service chief, do you have enough money to complete your mission, 

take care of your people, and properly execute and protect the 

United States of America? 

Admiral PAPP. Well, Mr. Cravaack, any Service chief will tell you 

we never have enough money to do everything that is asked of us. 

At the end of the day I have got a budget to live within, and what 

I get paid to do is to make the determinations what the highest priorities are, and apply the money against that. 

So what I would say is that we have invested heavily in our 

inshore and in our ports over the last decade or so. We have recapitalized our small boat fleet 200 percent—I am sorry, by 20 percent—and they are all new boats now. Our patrol boat fleet, we 

have built 73 87-foot patrol boats within the last 10 years or so. 

We are building the Fast Response Cutters. We have put more people at our stations. So I am comfortable along the coastal zone. 

But as I said in my opening statement, you don’t want to discover the threats in your coastal zone or in your ports. What you 

want to do is you want to play offense. You want to have a—have 

your major cutters that can intercept things on the trade routes 

and in the trafficking zones. And that is where I see the greatest 

risk right now. That is why I am so intent on building out our 

major cutter program, the program of record of 8 National Security 

Cutters and 25 Offshore Patrol Cutters, so that we can recapitalize 

those 40-year-old ships that are out there that are getting increasingly expensive to maintain, and are really not serving us well, in 

terms of effectiveness. 

Mr. CRAVAACK. Homeland Security Secretary Janet Napolitano 

recently testified that the Administration made the budget cuts in 

light of what the Navy is doing. Now, could someone in the Coast 

33 

Guard Department and Homeland Security explain this, what this 

means, to me? 

Admiral PAPP. I am not sure where that quote is from, because 

I read her testimony. I read it verbatim. And what she—and I don’t 

have it, the exact quote, myself, but I am going to paraphrase. 

What she said was that in light of the current budget situation, the 

constraints that we find ourselves in, each and every acquisition 

project that we are working on needs to be reassessed on a yearly 

basis. 

And part of her responsibility and my responsibility under title 

14 U.S. Code is to work with the Navy to make sure that we are 

building complementary assets, not redundant assets. And that is 

just part of the process. And we do that on a regular basis. She has 

committed to me to meet with Secretary Panetta and with Secretary Mabus. I meet with Admiral Greenert almost weekly, sometimes twice a week, and we are following each other’s progress very 

closely. 

Admiral Greenert is reassessing his shipbuilding program. There 

are certain things he is not going to be able to build. And we want 

to make sure that the things that we are building, that we are investing in heavily, are going to serve us in our Western Hemisphere operations, and can complement the Navy when a crisis 

comes up. 

Mr. CRAVAACK. My concern, sir, is that with the shrinking Navy, 

the Coast Guard is supposed to cover more water. And you are telling me that your forward assets are diminished as well. I see a 

huge gap. So I am concerned with that, I am very concerned. But 

thank you, sir. 

Do you have a comment, or—— 

Admiral PAPP. Well, thank you for your support, sir. I mean we 

absolutely need it. We need to press that threat offshore. And in 

the past we have been able to depend upon Navy vessels as well. 

As you know, they are retiring the Perry frigates, which we have 

been using down in the Caribbean with our law enforcement detachments. So we have diminishing resources down particularly in 

the transit zones in the Eastern Pacific and the Caribbean to interdict those multiton loads of cocaine before they get into Mexico and 

get broken down into smaller loads which easily make it across the 

border. 

Mr. CRAVAACK. I share your concern, sir. I truly do. 

Just real quickly, if I can, dovetailing on Mr. Larsen’s comments, 

intercoastal waterways, Mr. Matsuda, basically an underutilized 

asset. But for the second year in a row you have requested to zero 

out the maritime highway feasibility grants. Could you kind of give 

us some light to what does the agency plan to do to promote or 

incentify the use of short sea shipping? 

Mr. MATSUDA. Well, as we discussed, marine highways have been 

successfully funded through the Department’s TIGER grant program, where we have been able to get far more resources toward 

these types of projects and through the amount of funding we have 

had available to us directly. So, we—a total of $276 million has gone toward these port and 

marine highway projects over the past three rounds of the TIGER 

program, and we are seeing differences, now that some of these 

34 

grants are coming to fruition, in developing not just new, you 

know, pieces of infrastructure, but they have helped lead to development of new services. And that is operating jobs, that is jobs on 

board the vessels, as well as in the ports. And so those are investments that we like to see. 

Mr. CRAVAACK. OK. Thank you, sir. My time has expired. I yield 

back, sir. 

Mr. LOBIONDO. Thank you, Mr. Cravaack. The first question you 

asked the Commandant—Commandant, we understand your difficult position, but the reality is that the Coast Guard does not 

have enough money to do everything they are asked to do. And 

what I think we on the subcommittee and maybe many other of us 

are worried about is we have seen this movie before in the 1990s. 

And the Congress continued to ask the Coast Guard to do more. 

Admiral Papp, you saw that maybe too up close and personal. And 

we continued to reduce your resources, we continued to reduce your 

personnel. When the tragedy of September 11th hit, things opened 

up a bit. And I really have a tremendous fear that if we are not 

careful we are going to repeat some terrible mistakes of the past. 

So, I don’t expect you to comment on it, but it is a big concern 

that we are going to continue to try to watch carefully. 

Mr. Cummings? 

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

Papp, according to the material circulated by staff, the Coast 

Guard needs more than 100,000 additional patrol boat hours to 

carry out its missions. At this time, what missions are not being 

conducted due to a lack of available patrol boat hours? 

Admiral PAPP. Sir, I get into these discussions often. And just as 

the 1,000 person reduction is a little bit of a red herring, so are 

patrol boat hours. 

The fact of the matter is we have more patrol boats today than 

we have ever had in our history, and they are more capable patrol 

boats. And we need each and every one of them. And I would love 

to have more, because there are more things we can do. But every 

facet of the Coast Guard never has enough resources to do 100 percent of the missions. 

Major cutters—we are reduced right now in major cutters, because our High Endurance Cutters are only about 70 percent effective. We are not getting our National Security Cutters quickly 

enough. Our Medium Endurance Cutters need replacement. So we 

are not doing 100 percent there. We are not meeting our hours for 

major cutters, either. 

But as I said in my opening statement and I repeated before, in 

the coastal zone patrol boats is a relatively good new story, because 

we have built 73 87-foot patrol boats just in the last dozen years. 

With the 2013 budget, we will have money for 20 Fast Response 

Cutters. And by the end of—in fact, while we will take a short-term 

reduction during fiscal year 2013 because with decommissioning of 

some of the older patrol boats, by the end of 2013 we are actually 

going to have more patrol boats out on the water. We will go from 

114 up to 118 by the end of 2013. 

So, these are just risk-based decisions that I make. I am confident that we are managing the risk within the coastal zone, and 

35 

that my highest risk area is offshore, where we need the larger cutters. 

Mr. CUMMINGS. Particularly following the recent tragic loss of 

another Coast Guard helicopter, have you examined the cause of 

the recent aviation accidents? And are there trends or notable findings? Has a lack of funding contributed in any way to these accidents? 

Admiral PAPP. I can say unequivocally, no, funding has not. As 

you probably recall, the loss of 14 aviators, which included the 

early part of my watch, as well, due to accidents over about a 2- 

year period had me distressed, deeply concerned. And we kicked off 

the aviation safety assessment action plan study. 

And what we found there is there are a mix of things, both 

human, and mission tasking, and really, I think most importantly 

to me, is a leadership issue, getting our senior leaders, our commanding officers at the air stations, back into the traditional modes 

of leadership, which have them meeting with their junior officers, 

keeping them focused, passing on their experience and using their 

mentorship to keep everybody’s heads in the game. Because the one 

consistent theme that we saw in these accidents that we suspect 

is probably complacency which crept into the cockpit during routine 

operations. Almost all those accidents were doing either training 

missions or transit missions, not while executing a search and rescue case in heavy weather, or something like that. 

The most recent accident, I can’t say. It would be premature for 

me to say, because we just haven’t had enough time to analyze it. 

The accident happened just a little over a week ago. We have two 

independent investigations that are looking at it. I am—I need 

some answers very quickly, because if it is a mechanical issue that 

caused the crash we need to know that so that we can look at our 

entire fleet. But if it was a human error, we will find that out as 

well, and identify that. But right now it is just too early to determine. 

Mr. CUMMINGS. All right. Chairman Lidinsky, the FMC recently 

released a study of the repeal of the liner conference exemption 

from the European Union’s competition law. While the study recommends further review of trends following the 2006–2010 time 

period, does the FMC recommend any changes at this time to U.S. 

policy regarding regulation of competition among liner services? 

Mr. LIDINSKY. We do not, Mr. Chairman. We view our—Mr. 

Cummings, we view our role is to offer Congress facts and figures, 

and our perspective on the situation. But this policy decision has 

to be taken after a great deal of steps take place. So the report 

makes no recommendation in that regard. 

Mr. CUMMINGS. All right. I see my time is up. Thank you very 

much. 

Mr. CRAVAACK. [presiding.] Thank you. Mr. Cummings yields 

back. 

I just have a couple quick questions, if you don’t mind, sir. Regarding your sea-going capabilities, with the—to meet those full capabilities when you have basically half the crew for these ships— 

is that correct? So basically you are operating half the time. Would 

that be a correct statement? 

36 

Admiral PAPP. No, the concept that we are going to experiment 

with is there will be four crews for every three ships. 

Mr. CRAVAACK. So—— 

Admiral PAPP. It is called a crew rotation concept. Conventionally, crewed ships, generally our standard is about 185 days away 

from home port. What we are hopeful of getting is 235 days away 

from home port by rotating crews through. 

[U.S. Coast Guard insert for the record:] 

The correct days away from home port are 230 days, vice 

235. 

But it is not two crews for every ship. We couldn’t afford that. 

What we are going to do is have four crews for every three ships, 

and then put them through rotation. 

Mr. CRAVAACK. OK, so you will just be—OK. I understand that. 

Without the VUAV capabilities as well, that kind of limits your 

ability to have a larger operating area. Would that be a correct 

statement? 

Admiral PAPP. It does, and we are anxiously looking forward to 

continued work with the Navy to come up with a solution to that. 

We—it is one of those things that is very expensive for us to try 

and do on our own. 

We have been following fire scout development with the Navy. 

And, in fact, this summer we are going to experiment with 

ScanEagle off our—one of our National Security Cutters. Actually, 

that holds a lot of promise for us, as well. But whatever we do, we 

need to be linked up with the Navy on this. 

We acknowledge right up front that it limits our capabilities by 

not having it. On the other hand, the National Security Cutter, as 

constructed, has much better sensors. And by using organic helicopters on board, we are gaining better command and control and 

ISR, just by having that new ship out there. 

Mr. CRAVAACK. Excellent. Thank you. I appreciate that, Admiral. 

Mr. Matsuda, our Nation’s cargo preference laws generally require the Government impel cargo to be carried on U.S. flag vessels. Last year MARAD was successful in ensuring the Department 

of Energy abides by these laws for cargo financed through Energy’s 

loan guarantee program. Does MARAD actively oversee the shipping practices of all governmental agencies, to ensure they abide by 

the cargo preferences laws? 

Mr. MATSUDA. Sir, I can tell you that we search wherever we can 

to find that there are cargos available for the U.S. flag fleet to 

carry. In this instance we are chasing with our limited resources 

the largest sources of cargo within the Federal cargo preference 

program to better ensure compliance. And we are trying to gain 

further access in—by, you know, letting all agencies know exactly 

what the rules are. 

But we have made great progress in—so the civilian agencies, including Department of Energy and also with the Export-Import 

Bank. And the maritime industry has responded as well. Since— 

in the past year alone, the fleet of heavy-lift ships has nearly doubled under the U.S. flag. And I think that is in result to a lot of 

the promise of cargoes that could be exported under—through the 

37 

U.S. Export-Import Bank. And we have worked very closely with 

them under the—Secretary LaHood’s leadership and Chairman 

Hochberg, to try and clarify what the rules are and how they would 

apply. 

We have also worked directly with the shippers, the exporters, 

and I think that we have seen a better understanding of the rules, 

and also a better appreciation for how to comply with them. 

Mr. CRAVAACK. You kind of dovetailed on my next question. The 

Cargo Preference Act requires the Secretary of Transportation to 

annually review the administration of the cargo shipping programs 

of other Government agencies to ensure the adherence to the law. 

Can you tell us whether these reviews occur on an annual basis, 

and whether any agencies have been found in violation of the act? 

Mr. MATSUDA. Well, last year we did hold, for the first time, a 

conference among Federal shipper agencies. As far as I know, nothing like that had ever taken place to begin that dialogue. Each 

agency is required to report cargoes that are shipped—that are 

subject to the cargo preference program, and we continue to make 

those results available in our annual reports. 

Mr. CRAVAACK. OK. All right, thank you. And the chair recognizes Mr. Larsen. 

Mr. LARSEN. Mr. Chairman, I just have a unanimous consent request to allow Mr. Cummings’ opening statement to be entered into 

the record. 

Mr. CRAVAACK. Without objection, so ordered. 

[Please see the table of contents section entitled ‘‘Prepared Statements Submitted by Members of Congress’’ for the prepared statement of Hon. Elijah E. Cummings.] 

Mr. CRAVAACK. The chair would like to recognize a former Federal maritime commissioner. Michael Khouri is in the audience. I 

would like to welcome you on board. And Rebecca Dye, former subcommittee staff director. So I would like to welcome you, as well. 

Good to have you on board, ma’am. 

So, if there are no further questions, I would like to thank the 

witnesses very much for their testimony and their commitment to 

the service of this great Nation, and Members, for their participation as well. This subcommittee stands adjourned. Thank you. 

[Whereupon, at 11:55 a.m., the subcommittee was adjourned.] 

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