```

[Senate Hearing 108-978]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 108-978

 
               FUTURE OF THE JAMES RIVER ``GHOST FLEET''

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

                             FIELD HEARING

                               before the

                 SUBCOMMITTEE ON SURFACE TRANSPORTATION
                          AND MERCHANT MARINE

                                 of the

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                              JULY 7, 2003

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation

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       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                     JOHN McCAIN, Arizona, Chairman
TED STEVENS, Alaska                  ERNEST F. HOLLINGS, South 
CONRAD BURNS, Montana                    Carolina, Ranking
TRENT LOTT, Mississippi              DANIEL K. INOUYE, Hawaii
KAY BAILEY HUTCHISON, Texas          JOHN D. ROCKEFELLER IV, West 
OLYMPIA J. SNOWE, Maine                  Virginia
SAM BROWNBACK, Kansas                JOHN F. KERRY, Massachusetts
GORDON H. SMITH, Oregon              JOHN B. BREAUX, Louisiana
PETER G. FITZGERALD, Illinois        BYRON L. DORGAN, North Dakota
JOHN ENSIGN, Nevada                  RON WYDEN, Oregon
GEORGE ALLEN, Virginia               BARBARA BOXER, California
JOHN E. SUNUNU, New Hampshire        BILL NELSON, Florida
                                     MARIA CANTWELL, Washington
                                     FRANK R. LAUTENBERG, New Jersey
      Jeanne Bumpus, Republican Staff Director and General Counsel
             Robert W. Chamberlin, Republican Chief Counsel
      Kevin D. Kayes, Democratic Staff Director and Chief Counsel
                Gregg Elias, Democratic General Counsel
                                 ------                                

                SUBCOMMITTEE ON SURFACE TRANSPORTATION 
                          AND MERCHANT MARINE

                 KAY BAILEY HUTCHISON, Texas, Chairman
TED STEVENS, Alaska                  DANIEL K. INOUYE, Hawaii, Ranking
CONRAD BURNS, Montana                JOHN D. ROCKEFELLER IV, West 
TRENT LOTT, Mississippi                  Virginia
OLYMPIA J. SNOWE, Maine              JOHN F. KERRY, Massachusetts
SAM BROWNBACK, Kansas                JOHN B. BREAUX, Louisiana
GORDON H. SMITH, Oregon              RON WYDEN, Oregon
GEORGE ALLEN, Virginia               BARBARA BOXER, California
                                     FRANK R. LAUTENBERG, New Jersey
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on July 7, 2003.....................................     1
Statement of Senator Allen.......................................     1
    Prepared statement...........................................     4

                               Witnesses

Cox, Delegate M. Kirkland, Chairman, Virginia House of Delegates' 
  Committee on Agriculture, Chesapeake and Natural Resources.....    22
    Prepared statement...........................................    24
Davis, Hon. Jo Ann, Congresswoman, U.S. House of Representatives.     5
    Prepared statement...........................................     7
Frank, Hon. Joe S., Mayor-At-Large, Newport News, Virginia.......    25
    Prepared statement...........................................    27
Jackson, Patricia, Executive Director, James River Association...    31
Paylor, Hon. David K., Deputy Secretary of Natural Resources, 
  Commonwealth of Virginia.......................................    28
    Prepared statement...........................................    29
Schubert, Hon. William G., Maritime Administrator, U.S. 
  Department of Transportation...................................     8
    Prepared statement...........................................    12

                       FUTURE OF THE JAMES RIVER 
                            ``GHOST FLEET''

                              ----------                              

                          MONDAY, JULY 7, 2003

                               U.S. Senate,
Subcommittee on Transportation and Merchant Marine,
        Committee on Commerce, Science, and Transportation,
                                                  Newport News, VA.
    The Subcommittee met, pursuant to notice, at 11 a.m. at the 
Fort Eustis Transportation Museum Auditorium, Newport News, 
Virginia, Hon. George Allen, Chairman of the Subcommittee, 
presiding.

            OPENING STATEMENT OF HON. GEORGE ALLEN, 
                   U.S. SENATOR FROM VIRGINIA

    Senator Allen. Good morning. I want to call to order the 
Subcommittee on Surface Transportation and Merchant Marine. I 
want to welcome you all here today and wish you good morning. I 
want to thank all our witnesses for appearing today and meeting 
in an effort to gather information on the precarious and very 
dangerous situation and nature of the obsolete National Defense 
Reserve Fleet, and those ships particularly stored on the James 
River.
    Let me first thank Major General Dale for hosting this. 
Cindy Eure, where are you? Thank you and all the folks at Fort 
Eustis for allowing us to use this facility. I know you 
welcomed home 300 troops last Saturday, soldiers coming home, 
and more will be coming home. Thank you for all you do 
logistically to help out in our efforts to support our troops.
    I also want to thank--he's not here--but the Chairman of 
the Commerce, Science, and Transportation Committee, Senator 
John McCain, for acceding to my request to have a hearing of 
the Commerce, Science, and Transportation Committee, and in 
particular the Surface Transportation and Merchant Marine 
Subcommittee.
    This hearing is very important in making sure that the 
Chairman and all the Members, including the Ranking Member, 
Senator Hollings of South Carolina--that all our Members are 
aware of the facts, the evidence, and the need for action with 
this dangerous situation environmentally here in the Lower 
James River. I do want to thank them again for allowing me to 
hold the hearing.
    These ships as they rust and as they deteriorate, fuel oil 
aboard these ships--and it's estimated there is still a great 
quantity on these ships--certainly places the James River and 
jobs and citizens and wildlife that depend on this river in 
great danger. This is a danger, though, that can be mitigated 
and preventable with expeditious, prompt, and long overdue 
action.
    I think it's important to note that the James River Reserve 
Fleet, or the National Defense Reserve Fleet, ships stored on 
the James River--that's what they are known as. It's not only 
the reserve fleet that the government utilizes, but there are--
just here, but there are other similar fleets in Texas, a few 
in Alabama, and some in California, but none are nearly--
anywhere nearly as large or as old as the fleet that we have 
here in Virginia.
    In my estimation, having seen this Ghost Fleet for many 
years, having actually toured on several of those ships, 
recognizing the danger of even working on those ships, whether 
it's the cold, blustery winter weather or let's say a hurricane 
that might hit in the middle of the summer, this is a fleet 
that--you know, it's disaster, in my view, waiting to happen.
    This disaster waiting to happen should not continue. There 
are about 94 ships. These are government ships that can be 
activated in a time of national crisis. That's the logic; 
however, 69 of these ships have been deemed to be nonretention, 
obsolete, meaning they will not be returned to service.
    I had a wonderful tour. I will say the Administrator did a 
great job, as well as others from transportation, on that tour. 
They do a great job in understanding and trying to manage this 
precarious situation.
    We're very eager to hear from particularly the Honorable 
William G. Schubert, who is the Administrator of the United 
States Maritime Administration, in how--and also from witnesses 
on proposals of disposing of these obsolete, dangerous, 
deteriorating vehicles.
    In my view, the testimony that we're going to hear today 
from our witnesses will bolster my efforts and those of my 
colleagues, whether it's Congresswoman Davis or my good 
colleague John Warner and, indeed, the entire Virginia 
delegation, particularly Randy Forbes and Bobby Scott, Ed 
Schrock, and the tiger in the House, Jo Ann Davis, John Warner 
and I on the Senate side. We're working as a team in the 
effort.
    Many of these ships contain--and you can see them when you 
go on board--toxins. Some of them you can't see, but 
nevertheless some toxic chemicals, PCBs, asbestos. As I'm 
wandering around there I was actually glad it was pouring down 
rain so the asbestos wouldn't be in the air.
    They hold an estimated 13 million gallons of oil and fuel 
in these rusted, deteriorating hulls. When you think of 13 
million gallons, think back on the EXXON VALDEZ disaster in 
Alaska, that was 11 million gallons. So, could you imagine 
something of that nature or devastation here in Virginia?
    These ships were once proud satellite tracking device 
ships, helicopters being moved, cargo, missiles, troops all 
across all the seas of the world, but they're all now tied 
together. They have these cables--you know, cable wires, and 21 
of the 69 obsolete ships are listed by the Maritime 
Administration as being at high risk for leaks or breaking 
apart.
    According to a report by the Department of Transportation's 
inspector general, some of the ships have deteriorated to the 
point that a hammer can penetrate their rusting hulls. If just 
two of these toxic, latent ships broke apart, more than 50 
miles of the James River could be contaminated within 48 hours, 
or 2 days, requiring, obviously, years of cleanup of the spill 
and costing billions of dollars.
    This is not something you can say: Oh, this is just, you 
know, speculative. This is not an unlikely event. Indeed, over 
the last 3 years there have been nine oil spills on the fleet. 
The Lower James River, as we all know here, includes four State 
wildlife sanctuaries, marshes, national and State historical 
parks, including the original Jamestown Fort, where we'll be 
celebrating in 2007 the 400th anniversary of the cradle of 
American democracy.
    There also are species that live and breathe in the Lower 
James, including federally protected eagles, bald eagles, also 
egrets and blue--great blue herons. Just south of the fleet are 
some of the largest remaining public oyster grounds in 
Virginia. Hard-shell and soft-shell clams and blue crabs are 
also harvested from these waters.
    The James River, as we all know, served as the first major 
transportation way during the birth of this Nation, as part of 
one of our Commonwealth's largest and most popular tourist 
destinations.
    The health of the historic James River represents health of 
jobs and security for thousands of Virginians. So, in my view, 
in view of even these difficult economic times, it's important 
for Congress and the Federal Government to be fully cognizant 
of the danger these ships pose to the people in the 
Commonwealth of Virginia, and until recently--I will say 
there's been progress made, but until recently the Federal 
Government has regulated the coast fleet administration into a 
corner, making it nearly impossible for environmental concerns 
to remove the ships from the river.
    Disposal of vessels was further hampered in 1997 when the 
Clinton Administration imposed a moratorium prohibiting 
overseas ship scrapping based on their environmental concerns. 
That has now changed, and it is imperative that the Federal 
Government provide the funding for the Maritime Administration 
to find a safer haven for these rotting giants.
    On numerous occasions I have contacted the President and my 
Senate colleagues and have joined--been joined by my colleague 
Senator Warner and Congresswoman Davis in calling for adequate 
funding and increased funding for disposal of the ships.
    The Virginia delegation last year for this fiscal year was 
able to secure $31.2 million, which is unprecedented increased 
funding for proper disposal of these dangerous ships.
    Now, during this hearing we'll discuss the options for 
increasing competition for the disposal of ships. Because of 
taxpayers benefiting from competition, we are in favor of 
competition. If the price is close, I'd like to see U.S. jobs 
being able to do the scrapping, because the--the scrapping of 
it, because, after all, those are U.S. jobs, and if you have a 
relatively close price, those people doing that work will be 
paying Federal income taxes.
    So, as an enterprise sense it does make sense, but we do 
need competition, and that should not be a preclusion of those 
from overseas competing to do this work.
    We're also going to examine and discuss the proposals that 
are put forth and seek out the most appropriate and expeditious 
plan for the protection of the James River and all who depend 
on it.
    The point is: This is the time for action on this time 
sensitive and important issue, and I thank you all for joining 
us this morning.
    Our first panel will be a panel of one, as I said, a tiger. 
I'm delighted to have with us today Congresswoman Jo Ann Davis. 
She has been a terrific champion of the need to take action to 
prevent a disaster on the James River. I'm pleased to work with 
her on this important matter, someone who is articulate and as 
knowledgeable as Congresswoman Davis. She will be our first 
witness.
    [The prepared statement of Senator Allen follows:]

  Prepared Statement of Hon. George Allen, U.S. Senator from Virginia
    Good morning.

    I call this hearing of the Subcommittee on Surface Transportation 
and Merchant Marine to order. I want to thank our witnesses for 
appearing before us today. This morning we meet in an effort to shed 
more light on the fragile and dangerous nature of the obsolete National 
Defense Reserve Fleet (NDRF) ships stored in the James River. As these 
ships rust and deteriorate--fuel and oil storage aboard these ships 
place the James River--and the wildlife, jobs and citizens that depend 
on this river--in great danger.
    I think it's important to note that the James River Reserve Fleet, 
as the National Defense Reserve Fleet ships stored in the James River 
are known, is not the only reserve fleet the government utilizes. There 
are other similar fleets in Texas, Alabama and California--but none are 
nearly as large or as old as the one we have in Virginia.
    The Ghost Fleet, which is made up of 94 ships, is a disaster 
waiting to happen. It is currently the largest and oldest floating 
parking lot in the country, designed to hold government ships that can 
be reactivated in a time of national crisis. However, 69 of these ships 
are deemed to be non-retention obsolete--meaning that they will not be 
returned to service.
    I am eager to hear from our witnesses the proposals for disposing 
of these junked vessels and for doing it before the September 2006 
deadline--as set by Congress.
    These ships are packed with toxic chemicals and asbestos. All 
together they hold an estimated 13 million gallons of oil and fuel in 
rusted, deteriorating hulls.
    Once, this fleet carried cargo, missiles, and rescue equipment, 
helicopters, satellite-tracking devices and troops around the globe. 
Now, they are tied together with thick wire cable and 21 of the 69 
obsolete ships are listed by the Maritime Administration as being at 
high risk for leaks or breaking apart.
    According to a report by the Department of Transportation's 
Inspector General, some of the ships have deteriorated to the point 
that a hammer can penetrate their rusting hulls.
    If just two of these toxin-laden ships broke apart, more than 50 
miles of the James River could be contaminated--requiring years to 
clean up the spill and costing millions of dollars. This is not an 
unlikely event--just within the past 3 years there have been nine oil 
spills from the fleet.
    In just one of the incidents--October 11, 2002, the Virginia 
Department of Environmental Quality reported that a fuel leak caused an 
oil sheen measuring more than a mile long and 25 yards wide. A larger 
spill would place the vital and important tourist and fishing trades 
that flourish in this area at severe risk.
    The lower James River includes four state wildlife sanctuaries, 
national and state historical parks, marshes and undeveloped beaches. 
Species that live and breed there include federally protected terns, 
bald eagles and piping plovers, egrets and great blue herons. Just 
south of the fleet, in Burwells Bay, are some of the largest remaining 
public oyster grounds in Virginia. Hard-shell and soft-shell clams and 
blue crabs also are harvested from the waters.
    The James River served as the first major roadway during the birth 
of this Nation and is part of one of the Commonwealth's largest and 
most popular tourist destinations. The health of the historic James 
represents the health of jobs and security for thousands of Virginians.
    In 2001, Congress, as part of the National Defense Reauthorization 
Act, extended the deadline for the disposal of all obsolete National 
Defense Reserve Fleet ships to 2006.
    The law requires that Maritime Administration dispose of obsolete 
vessels

        ``without any predisposition toward foreign or domestic 
        facilities taking into consideration, among other things, the 
        ability of facilities to scrap vessels--(1) at least cost to 
        the government; (2) in a timely manner; (3) giving 
        consideration to worker safety and the environment and; (4) in 
        a manner that minimizes the geographic distance that a vessel 
        must be towed when towing a vessel poses a serious threat to 
        the environment.'' [Public Law 106-398]

    All of this must be done before September 30, 2006. At the current 
funding level, this deadline will not be met.
    Even in these times of economic difficulty, it is important for 
Congress and the Federal government to know the danger these ships pose 
to the Commonwealth of Virginia and its citizens.
    Until recently, the Federal government had regulated the ghost 
fleet into a corner, making it nearly impossible--for environmental 
concerns--to remove the ships from the river. That has now changed and 
it is imperative that the Federal government provide the funding for 
the Maritime Administration to find a safer haven for these rotting 
giants.
    I have contacted the President and have joined Congresswoman Davis 
and Senator Warner in calling for adequate funding--increased funding--
for the disposal of these ships.
    The history of Virginia, the livelihood of thousands of the 
Commonwealth's citizens and innumerable animals and plant species are 
so deeply tied to a healthy James River. And each one of them deserves 
better.
    The fleet was established in 1925 as a parking lot--Today, a large 
portion of the parking lot has become a junkyard. During this hearing, 
we will discuss options for increasing competition in the disposal of 
ships, because hardworking taxpayers benefit when competition is 
allowed. We will study the proposals that are put forward and seek out 
the most appropriate and expeditious plan for the protection of the 
James River and all who depend on it. The time is now to bring 
attention to the dire need for action on this important and time 
sensitive issue.
    Thank you all for joining us today.
    I am delighted that we have with us today Congresswoman Jo Ann 
Davis. She has been a terrific champion of the need to take action to 
prevent a disaster on the James River. I am pleased to work on this 
matter with someone as articulate and knowledgeable as Congresswoman 
Davis. She will be our first witness. After she has given her 
statement, I have asked her to join me at the dais in questioning the 
other witnesses.

    Senator Allen. Congresswoman Davis, after you complete your 
testimony, I hope you will join me and we'll make this a 
bicameral hearing, and you can propose questions as well.

        STATEMENT OF HON. JO ANN DAVIS, CONGRESSWOMAN, 
                 U.S. HOUSE OF REPRESENTATIVES

    Congresswoman Davis. Thank you, Senator.
    Mr. Chairman, I'd like to commend you for coordinating the 
field hearing today on what you know I consider a most 
important topic. Your Committee clearly recognizes the 
importance of dealing with the issues related to the James 
River National Defense Reserve Fleet, commonly known here as 
the ``Ghost Fleet.''
    We Virginians have far too long gazed across our beautiful 
waterway--the very waters that carried the English settlers to 
Jamestown--to view that hulking mess of ships. I know you know 
it's a mess. You've been there, as have I. I believe in this 
case our Nation has not served the Commonwealth well by 
allowing Virginia to be the dumping ground of these 
deteriorating, obsolete ships.
    While I recognize and appreciate the need for a reserve 
fleet, especially in today's dangerous world, this 
environmental ticking time bomb needlessly threatens our shores 
and the way of life for tens of thousands of Virginians. I 
believe the Federal Government must perform its duty by 
providing the resources to rid the James and the Tidewater 
region of this catastrophe waiting to happen.
    In a recent report, MARAD, as they assessed the possibility 
of an environmental mishap from the James River Reserve Fleet, 
concludes that damage could stretch, as you said, for 50 miles 
along the river and take weeks to clean up. MARAD continued: 
``assessing the ecological damage could take years.''
    As you know, Senator, the Ghost Fleet includes the most 
decrepit ships in the National Reserve, stored in what one 
Virginia official described as, quote, ``probably the worst 
place from an environmental standpoint that you could think 
of.''
    Together the fleet holds about 7.7 million gallons of oils 
and fuels, according to the latest government estimate. That's 
slightly less than what the EXXON VALDEZ spilled off the coast 
of Alaska in 1989, and that was in the MARAD report. According 
to MARAD, Virginia cannot wait any longer.
    In Fiscal Year 2003, President Bush asked for only $11 
million to scrap ships. I worked hard on the Virginia 
delegation and my Senate colleagues, and thankfully my 
colleagues and the House Merchant Marine Panel recognized the 
severity of the situation and authorized $20 million for the 
Fiscal Year 2003 ship disposal account to deal with this 
looming problem.
    Ultimately, after much debate and arm twisting, the 
President's request was appropriated. My colleagues in the 
Senate were able to provide an additional $20 million from DOD 
to fund scrapping at $31 million last year. Unfortunately, we--
we weren't able to get the $31 million before this past 
February, but we are making progress.
    For Fiscal Year 2004, I'm happy to report that again the 
House Armed Services Committee has authorized my request of $20 
million for ship scrapping. Just last week I spoke to Chairman 
Istook to again make my case to his committee that funding from 
transportation appropriators was critical to continuing this 
battle.
    September 30, 2006, the legislative deadline to rid the 
Reserve Fleet of obsolete vessels, is quickly approaching. 
MARAD is making good progress, and I look forward to Captain 
Schubert's testimony and his update as to what the Maritime 
Administration has planned for this summer.
    Last week--last we spoke, a 13-ship deal was in the works 
and expected to be signed any day. Additionally, I am told the 
Maritime Administration has plans for an additional six ships 
to soon follow. It is my hope that Captain Schubert can confirm 
these recent developments.
    Finally, I would be remiss if I did not comment on recent 
press articles regarding ship scrapping abroad. I concede that 
it is imperative that every practical measure be taken to 
ensure an environmentally sound scrapping program is done. 
However, having said that, I firmly believe that the best 
policy for scrapping takes into consideration the timely 
scrapping to meet the 2006 legislative mandate to rid MARAD of 
its obsolete inventory, cost effective proposals that provide 
the U.S. Government with the best value, with a strong emphasis 
on efforts to scrap ships domestically, but not at the expense 
of quicker, more cost effective efforts abroad, because, as we 
all know, the more affordable our scrapping program is, the 
more ships we can scrap.
    I thank you, Mr. Chairman, for allowing me to testify 
today. I can't stress enough that I hope that we don't do 
anything to slow down the possibility of 13 or possibly 6 more, 
a total of 19 ships leaving the James River this year.
    I thank you, Mr. Chairman, and I look forward to joining 
you and asking questions.
    [The prepared statement of Hon. Davis follows:]

        Prepared Statement of Hon. Jo Ann Davis, Congresswoman, 
                     U.S. House of Representatives
    Mr. Chairman, I would like to commend you for coordinating this 
field hearing today on a most important topic. Your committee clearly 
recognizes the importance of dealing with the issues related to the 
James River National Defense Reserve Fleet, known locally as the 
``Ghost Fleet.''
    We Virginians have for far too long gazed across our beautiful 
waterway, the very waters that carried the English settlers to 
Jamestown, to view that hulking mess of ships. I believe in this case, 
our Nation has not served the Commonwealth well by allowing Virginia to 
be the dumping ground of these deteriorating, obsolete ships. While I 
recognize and appreciate the need for a reserve fleet, especially in 
today's dangerous world, this environmental ``ticking time bomb'' 
needlessly threatens our shores and the way of life for tens of 
thousands of Virginians. I believe the Federal Government must perform 
its duty by providing the resources to rid the James and the Tidewater 
Region of this catastrophe waiting to happen.
    In a recent report, MARAD, as they assessed the possibility of an 
environmental mishap from the James River Reserve Fleet, ``concludes 
that damage could stretch for 50 miles along the river and take weeks 
to clean up.'' MARAD continued, ``assessing the ecological damage could 
take years.''
    As you know Senator, the Ghost Fleet includes the most decrepit 
ships in the national reserve, stored in what one Virginia official 
described as ``probably the worst place, from an environmental 
standpoint, that you could think of.'' Together, the fleet holds about 
7.7 million gallons of oils and fuels, according to the latest 
government estimates. That's slightly less than what the EXXON VALDEZ 
spilled off the coast of Alaska in 1989. (MARAD Report) . . . Virginia 
cannot wait any longer.
    In Fiscal Year 2003, President Bush asked for only $11 million to 
scrap ships. I worked hard, and thankfully my colleagues and the House 
Merchant Marine Panel recognized the severity of this situation and 
authorized $20 million for the FY '03 ship disposal account to deal 
with this looming problem. Ultimately, after much debate and arm 
twisting, the President's request was appropriated. And my colleagues 
in the Senate were able to provide an additional $20 million from DOD 
to fund scrapping at $31 million last year. We are making progress.
    For Fiscal Year 2004, I am happy to report that again the House 
Armed Services Committee has authorized my request of $20 million for 
ship scrapping. And just last week I spoke to Chairman Istook to again 
make my case to his committee that funding from Transportation 
Appropriators was critical to continuing this battle.
    September 30, 2006, the legislative deadline to rid the Reserve 
fleet of obsolete vessels, is quickly approaching. MARAD is making good 
progress and I look forward to Captain Schubert's testimony and his 
update as to what the Maritime Administration has planned for this 
summer. Last we spoke a 13 ships deal was in the works and expected to 
be signed any day. Additionally, I am told that the Maritime 
Administration has plans for an additional 6 ships to soon follow. It 
is my hope that Captain Schubert can confirm these recent developments.
    Finally, I would be remiss if I did not comment on recent press 
articles regarding ship scrapping abroad. I concede that it is 
imperative that every practical measure is taken to ensure an 
environmentally sound scrapping program. Having said that though, I 
firmly believe that the best policy for scrapping takes into 
consideration the timely scrapping to meet the 2006 legislative mandate 
to rid MARAD of it's obsolete inventory, cost effective proposals that 
provide the U.S. Government with the best value, with a strong emphasis 
on efforts to scrap ships domestically . . . BUT not at the expense of 
quicker more cost effective efforts abroad. Because as we all know, the 
more affordable our scrapping program is the more ships we can scrap.
    Thank you Mr. Chairman for allowing me to testify today.

    Senator Allen. Thank you. Thank you, Congresswoman Davis. 
I'm going to adduce testimony. These will be leading questions 
here so we get this all into the record, because we need to get 
the Senate, obviously, as well-versed as the House is on this.
    You mentioned the Jamestown Fort. I have here--this was 
prepared by apparently John Earl of The Virginian-Pilot. It 
asks how many hours away from a spill different sites were. 
Within 2 days, 48 hours, you get down to the mouth of the 
James, but the Jamestown Fort is only--according to this chart, 
the Colonial--original Jamestown about 12 hours upriver, and of 
course there are tides and if you had a wind blowing off the 
ocean, would you agree it's about 12 hours projected as far as 
the spill getting to the original Jamestown Fort?
    Congresswoman Davis. I have to take your word for it, 
Senator. I haven't seen that report, but I do know that it's 
awfully close, and 2007 is around the corner. The last thing I 
want--besides hurting the environment here locally--is to do 
anything to damage what's going on right now at Jamestown.
    Senator Allen. As far as the requests for proposal and the 
disposal, you and I both felt if we could get it done at the 
best price to--reasonably best price in this country, we would 
like those jobs. The bottom-line concern we have is: What is 
going to be the most prompt method of getting these 
deteriorating, dangerous ships out of this river?
    Congresswoman Davis. I'd rather give the jobs here 
domestically, but my main concern is moving those ships and 
getting them out of here, whatever it takes.
    Senator Allen. Thank you. If you would, please join me 
here. I also want to enter in the record the statement of 
Senator John Warner on the future of the James River Ghost 
Fleet. This will be made part of the record. Senator Warner is 
a wonderful teammate, a great ally, and one who shares our 
concerns. I'll give this to Rob.
    I'd like to call Captain Schubert. Captain Schubert, if 
you'd please come forward.
    The Honorable William G. Schubert is Administrator of the 
United States Maritime Administration.
    We thank you for being with us here today. Your testimony 
is going to be carefully listened to. We look forward to 
hearing from you on the progress that is being made and 
progress that will be made in the future on this important 
matter.

STATEMENT OF HON. WILLIAM G. SCHUBERT, MARITIME ADMINISTRATOR, 
               U.S. DEPARTMENT OF TRANSPORTATION

    Captain Schubert. Morning, Mr. Chairman, Congresswoman. I 
would like to request first that my formal statement be 
accepted into the record.
    Senator Allen. So ordered.
    Captain Schubert. I would like to read some brief opening 
remarks. Thank you for the opportunity to testify on the 
obsolete ships in the James River Fleet and the Maritime 
Administration's Ship Disposal Program.
    I would like to thank Senator Allen for holding this 
hearing that will help continue to raise awareness of issues 
and highlight the progress that the Bush Administration is 
making with the disposal of the obsolete vessels of the James 
River Reserve Fleet.
    You are providing an important forum from which we can all 
benefit. I would also like to thank Congresswoman Jo Ann Davis 
of Virginia's 1st Congressional District. She has been a 
tireless advocate on this issue and instrumental in ensuring 
the administration received the Fiscal Year 2003 funding 
requested for disposal of obsolete National Reserve Fleet 
ships.
    She has visited the James River Fleet site numerous times 
and has been a critical team player in raising the awareness 
among fellow Members of Congress.
    Lastly, I would like to thank the senior member of the 
Virginia delegation, Senator John Warner, who is not here 
today. Senator Warner has also served as a key team player in 
assuring the swift removal of obsolete vessels from the James 
River Reserve Fleet. His support of the program has been 
decisive.
    The Bush Administration has faced the challenges of the 
James River Fleet head on. This issue has been an intense focus 
during my tenure as the Maritime Administrator, and I am 
prepared to discuss what I believe is good news for the James 
River and the people of Virginia.
    Today we are announcing the award of one contract for the 
removal of three high-priority vessels from the James River 
Fleet to a domestic facility in Brownsville, Texas.
    Currently we are on the verge of closing another contract 
that would remove 15 ships, at once, from the James River 
Reserve Fleet. Together this will be the largest removal of 
obsolete ships in a single year from any of MARAD's fleets, 
including the James River Fleet, since 1993.
    However, before I discuss the current outlook, it is 
important that I highlight the recent history of MARAD's ship 
disposal program. The Maritime Administration serves as the 
U.S. Government disposal agent for merchant-type vessels of 
1500 gross tons or more. Most of the 130 ships--actually it's 
131 ships--scheduled for disposal are located at MARAD's three 
national defense reserve lead anchorages. That's the James 
River Fleet, the Beaumont, Texas Reserve, and the Suisun Bay 
Reserve Fleet in California.
    The National Defense Reserve Fleet, or NDRF, is maintained 
by the Secretary of Transportation and was established for the 
maintenance of readiness assets, including the ready reserve 
force and other vessels owned or acquired by the U.S. 
Government that are determined to be of value for national 
defense purposes. In fact, six ships from the local area here 
recently returned to the James River Fleet from the Operation 
Iraqi Freedom after successfully delivering critical cargo.
    The National Maritime Heritage Act of 1994 authorized MARAD 
to dispose of obsolete NDRF vessels and directs the use of any 
proceeds derived from disposal. Prior to 1994 MARAD sold 
obsolete vessels for dismantling to the highest bidder and 
netted a profit. However, foreign sales were stopped due to 
Federal prohibitions on the exports of PCBs found on board 
these vessels and an increasing national and international 
concern regarding environmental and worker safety.
    With overseas sales curtailed in 1994 and upheld in 1998 as 
a specific Federal Government moratorium on overseas ship 
dismantling, which expired in 1999, MARAD turned exclusively to 
the domestic market to sell ships for dismantling. However, 
only a few domestic facilities expressed interest in purchasing 
vessels for dismantling.
    Since 1994 MARAD has sold 22 vessels, only 12 of which have 
actually been dismantled. Of the remaining vessels, the 
purchasers did not accept the vessels, and as a result the 
sales contracts were terminated. Marginal profits due to 
changing market conditions for scrap metal and the high cost of 
removal and disposal of hazardous material contributed to the 
decreased viability of the domestic sales program.
    Coupled with the inability to sell ships in the domestic 
market and a prohibition on exports, the ship disposal program 
was suspended, yet ships continued to arrive at the fleets. At 
this time MARAD was also prohibited by statute from paying for 
dismantling services. Thus, as a large backlog of obsolete 
ships were created, the number of obsolete vessels increased by 
over 60 ships since 1997 through the year 2000.
    The National Defense Authorization Act of Fiscal Year 2001 
contained statutory amendments which gave MARAD unprecedented 
ability to pay for dismantling services, if necessary. This 
statutory change, along with $10 million transferred from the 
DOD appropriation to MARAD for ship disposal allowed us to 
begin implementing Federal payment for ship disposal services. 
MARAD was instructed by Congress to scrap obsolete vessels at 
qualified facilities using the most expeditious scrapping 
methodology and location practicable.
    Scrapping facilities were to be selected on a best-value 
basis, consistent with the Federal Acquisition Regulations, and 
without any predisposition toward foreign or domestic 
facilities. MARAD was also given a September 30, 2006 deadline 
to dispose of all obsolete vessels.
    MARAD began a program using a time-phased and level-funded 
approach, consisting mainly of domestic vessel dismantlement 
and recycling. Using the $10 million provided for in the Fiscal 
Year 2001 DOD appropriation, MARAD was able to dispose of six 
high-risk vessels in domestic facilities.
    However, it became apparent that the limited cost effective 
capacity of the domestic dismantling industry would make the 
disposal of obsolete ships a larger challenge than anticipated.
    In Fiscal Year 2002, the Administration requested $11 
million for ship disposal. This was the first request for a 
direct appropriation, but unfortunately funding was not 
appropriated. At the crossroads regarding the ship disposal 
dilemma, the agency was left with two approaches. The first 
approach was to do nothing and wait for future appropriations, 
basically using it as an excuse to do nothing, or to permit--
for MARAD, this appeared irresponsible. The second approach was 
to start creating opportunities and seek out all possible no-
cost options.
    In September 2001, MARAD initiated a Program Research and 
Development Announcement, also known as a PRDA. The PRDA is a 
comprehensive procurement mechanism allowed under the Federal 
Acquisition Regulations. This competitive announcement 
solicited ship dismantling/recycling proposals from the ship 
dismantling industry, both foreign and domestic.
    The PRDA provided the industry with the opportunity to 
propose feasible and cost effective solutions to MARAD's ship 
disposal challenge that are based on their capabilities, 
methods, innovations that made sense to their business. During 
Fiscal Year 2002, MARAD received numerous proposals involving 
foreign vessel recycling facilities, so we began discussions 
with the EPA regarding possible export options. Through the 
PRDA process we began to see opportunities to recycle ships 
domestically or export ships in an environmentally responsible 
and cost effective manner.
    MARAD's discussions with the EPA have led to a cooperative 
relationship that is results oriented in seeking solutions to 
the challenges of the NDRF. We also began identifying other 
disposal opportunities such as artificial vessel reefing and 
deep sinking of vessels in conjunction with the Navy's SINKEX 
program.
    In Fiscal Year 2003, MARAD asked and received for the first 
time a direct appropriation that met the administration's 
request for ship disposal--for the ship disposal program. This 
direct appropriation, coupled with the additional funding 
received from the Fiscal Year 2003 DOD appropriation, has 
allowed MARAD to maximize the number of vessels disposed. 
Taking advantage of all possible alternatives and options has 
been critical to the effort of removing ships from the James 
River Reserve Fleet, which is why in Fiscal Year 2003 I 
requested and received authority to pay for remediation 
services to clean vessels prior to artificial reefing.
    For the remainder of Fiscal Year 2003, MARAD expects to 
continue making awards based on the PRDA proposals already 
received and will release additional IFBs. Discussions have 
recently been opened with a domestic company relating to their 
PRDA proposal for the dismantling of additional high-risk James 
River Reserve Fleet vessels.
    Both international and domestic PRDA proposals that 
represent the best value to the government will continue to be 
considered. With the initiation of the PRDA process we have 
seen more competition and a significant decrease in disposal 
proposal costs since we first began paying for services in 
Fiscal Year 2001.
    Our program currently focuses on removing all vessels that 
have high or moderate risks as soon as possible. Having all 
disposable alternatives available to MARAD and the necessary 
funding in place to ensure the obsolete vessels can be disposed 
at a rate greater than the obsolete vessels coming into the 
fleet will help us achieve these mutual goals, mitigating the 
risk by removing the risk is what the Department of 
Transportation and the Maritime Administration intends to 
achieve.
    Thank you for the opportunity to discuss the disposal of 
obsolete government vessels today, and I would be pleased to 
answer any questions you may have at this time.
    [The prepared statement of Hon. Shubert follows:]

Prepared Statement of Hon. William G. Schubert, Maritime Administrator, 
                   U.S. Department of Transportation
    Good morning, and thank you for the opportunity to testify about 
the obsolete ships in the James River Reserve Fleet and the Maritime 
Administration's Ship Disposal Program.
    The Maritime Administration (MARAD) serves as the U.S. Government's 
disposal agent for merchant type vessels of 1,500 gross tons or more. 
Most of the ships scheduled for disposal are located at MARAD's three 
anchorages: the James River near Ft. Eustis, VA (JRRF); Beaumont, Texas 
(BRF); and Suisun Bay near Benicia, California (SBRF). In total, there 
are approximately 130 obsolete ships in all three fleet sites that make 
up a portion of the National Defense Reserve Fleet (NDRF).
    The NDRF was established for the maintenance of readiness assets, 
including the Ready Reserve Force (RRF) and other vessels owned or 
acquired by the United States Government that are determined to be of 
value for national defense purposes. The NDRF is maintained by the 
Secretary of Transportation; NDRF ships, especially the RRF component, 
serve as a reserve of vessels which can be activated to help meet U.S. 
shipping requirements during a national emergency.
    The National Maritime Heritage Act of 1994 authorizes MARAD to 
dispose of obsolete NDRF vessels, and directs the use of any proceeds 
derived from disposal. Prior to 1994, MARAD was able to sell obsolete 
vessels for dismantling to the highest bidder. From 1987 to 1994, MARAD 
sold for export and disposed of 130 ships at an average price of $108/
ton, which netted approximately $80 million. However, as a result of 
Federal prohibitions on the export of PCBs (polychlorinated biphenyls) 
found onboard many obsolete vessels, as well as increasing national and 
international concerns regarding environmental and worker safety 
issues, foreign sales were stopped in 1994.
    With overseas sales curtailed in 1994, and upheld in 1998 as a 
specific Federal Government moratorium on overseas ship dismantling 
which expired in 1999, MARAD turned exclusively to the domestic market 
to sell ships for dismantling. However, only a few domestic facilities 
expressed an interest in purchasing vessels for dismantling. Since 
1994, MARAD has sold 22 vessels, only 12 of which have been dismantled. 
Of the remaining vessels, the purchasers did not accept the vessels and 
as a result, the sales contracts were terminated. Marginal profits due 
to changing market conditions for scrap metals and the high costs for 
removal and disposal of hazardous material contributed to the decreased 
viability of the domestic sales program.
    When the domestic sales option became less viable in the mid-1990s, 
MARAD began negotiations with the Environmental Protection Agency (EPA) 
to allow the export of ships after the removal of liquid and ``readily 
removable'' PCBs prior to export. Two agreements were signed: November 
30, 1995 and November 10, 1997. The first had unworkable notice 
language and the second was never put into effect because MARAD agreed 
to refrain from further pursuing this agreement due to heightened 
international attention on ship dismantling facilities in the third 
world.
    On September 23, 1998, Vice President Gore, issued a memorandum to 
then-Secretary of Defense Cohen and then-Secretary of Transportation 
Slater placing a further interim moratorium on efforts to export 
vessels for dismantling until October 1, 1999 to ensure that the 
Interagency Panel on Ship Scrapping recommendations were fully 
considered.
    During this time period, the ship disposal program was suspended. 
Although no ships were dismantled, vessels continued to arrive at the 
fleet sites. At this time, MARAD was also prohibited by statute from 
paying for dismantling services. Thus, a large backlog of obsolete 
ships was created with the number of obsolete vessels in our fleets 
increasing by over 60 ships between 1997 and 2000. This critical 
situation, exacerbated by the deterioration of hulls over time, 
prompted the Department of Transportation's Office of Inspector General 
to name the disposal of MARAD's obsolete ships as a Top 10 Management 
Challenge in 2000 and 2001 for DOT.
    The National Defense Authorization Act for FY 2001 contained 
statutory amendments which gave MARAD unprecedented ability to pay for 
dismantling services, if necessary. This change, along with $10 million 
transferred from a DOD appropriation to MARAD for ship disposal, 
allowed us to begin implementing Federal payment for a ship disposal 
program. MARAD was instructed by Congress to scrap obsolete vessels at 
qualified facilities, using the most expeditious scrapping methodology 
and location practicable. Scrapping facilities were to be selected on a 
best value basis consistent with the Federal Acquisition Regulation 
(FAR), without any predisposition toward foreign or domestic 
facilities. MARAD was also given a September 30, 2006 deadline to 
dispose of all obsolete vessels, and required to submit to Congress a 
report detailing its ship disposal program.
    MARAD began a program using a time phased and level-funded approach 
consisting mainly of domestic vessel dismantlement and recycling. Using 
the $10 million provided in the FY 2001 DOD Appropriation, MARAD was 
able to dispose of six high-risk vessels in domestic facilities. 
However, it became apparent that MARAD would not be able to meet the 
2006 deadline to dispose of all obsolete vessels without direct 
appropriations and the use of additional vessel disposal alternatives. 
The high costs and limited cost effective capacity of the domestic 
dismantling industry would make the disposal of obsolete ships a larger 
challenge than anticipated.
    In FY 2002, the Administration requested $11 million for ship 
disposal, but funding was not appropriated. At a crossroads regarding 
the ship disposal dilemma, the Agency was left with two approaches. The 
first approach was to do nothing and wait for future appropriations. To 
MARAD, this appeared irresponsible. The second approach was to start 
creating opportunities and seek out all possible no-cost options. In 
September 2001, MARAD initiated a Program Research and Development 
Announcement (PRDA). The PRDA is a competitive procurement mechanism 
allowable under the FAR. This competitive announcement solicited ship 
dismantling/recycling proposals from the ship dismantling industry both 
foreign and domestic. The PRDA provided the industry with opportunity 
to propose feasible and cost-effective solutions to MARAD's ship 
disposal challenge that were based on their capabilities, methods and 
innovations and that made sense for their business.
    During FY 2002, MARAD received numerous proposals involving foreign 
vessel recycling facilities, so we began discussions with the EPA 
regarding possible export options. Through the PRDA process, we began 
to see opportunities to recycle ships domestically or export ships in a 
responsible cost-effective manner. MARAD's discussions with EPA have 
led to a cooperative relationship that is results-oriented in seeking 
solutions to the challenges of the NDRF. We also began identifying 
other disposal opportunities, such as artificial vessel reefing and the 
deep sinking of vessels in conjunction with Navy's SINKEX Program.
    In FY 2003, MARAD received, for the first time, a direct 
appropriation that met the Administration's request for the Ship 
Disposal Program. This direct appropriation, coupled with additional 
funding received from a FY 2002 DOD appropriation, has allowed MARAD to 
maximize the number of vessels disposed. Taking advantage of all 
possible alternatives and options is critical to the effort of removing 
ships from the James River Reserve Fleet.
    Today, MARAD is announcing the award of one contract for the 
removal of three high-priority vessels from the James River Reserve 
Fleet. Currently, we are on the verge of closing on another contract 
that would remove fifteen ships at once, from the James River Reserve 
Fleet. Combined, this will be the largest removal of obsolete ships in 
a single year from any of MARAD's fleets, including the James River 
Reserve Fleet, since 1993.
    The three-ship award is the result of a domestic Invitation for Bid 
(IFB) that was submitted by ESCO Marine of Brownsville, Texas. ESCO was 
awarded a contract to dismantle three high priority ships from the 
James River Reserve Fleet for $2.2 million. This is the second award to 
a Brownsville, Texas ship disposal facility in 2003. Earlier this year, 
Marine Metals was awarded a contract to dispose of two high priority 
vessels from the James River Reserve Fleet for approximately $600,000.
    The pending contract that has not yet closed will be the result of 
a negotiated PRDA. This company will remove a total of fifteen ships 
from the James River Reserve Fleet site. Thirteen vessels are scheduled 
to be dismantled at the AbleUK facility in Teesside, England and two 
will be converted for operation outside U.S. trade.
    MARAD employed a variety of procurement methodologies to achieve 
the best value to the taxpayer and Government in order to remove as 
many high priority ships as possible from the James River Reserve 
Fleet. The IFB and PRDA have resulted in best value awards. The ESCO 
Marine facility, and the PRP proposal that utilizes the Able UK 
facility, were selected under a best value basis consistent with 
Federal Acquisition Regulations (FAR).
    For the remainder of FY 2003, MARAD expects to continue making 
awards based on PRDA proposals already received and additional IFBs. 
Discussions have recently been opened with a domestic company related 
to their PRDA proposal for the dismantling of additional high risk 
James River Reserve Fleet vessels. Both domestic and international PRDA 
proposals that represent best value to the government will continue to 
be considered. With the initiation of the PRDA process, we have seen 
more competition and a significant decrease in disposal proposal costs 
since we first began paying for services in FY 2001.
    As you may know, the President's budget includes $11 million to 
support MARAD's continued efforts to eliminate high risk ships and 
significantly mitigate the environmental threat of oil discharge at the 
fleets. Adequate funding and aggressive pursuit of all cost effective 
disposal alternatives is especially important given the projections 
that approximately 47 additional vessels will be added to MARAD's 
fleets as non-retention, obsolete vessels over the next five years.
    Our program currently focuses on removing all vessels that have a 
high or moderate risk as soon as possible. Having all disposal 
alternatives available to MARAD and the necessary funding in place to 
ensure that obsolete vessels can be disposed of at a rate greater than 
obsolete vessels coming into MARAD's fleet will help us achieve these 
mutual goals. Mitigating the risk by removing the risk is what the 
Department of Transportation and the Maritime Administration intends to 
achieve.
    Thank you for the opportunity to discuss the disposal of obsolete 
Government vessels today. I would be pleased to answer any questions 
you may have at this time.

    Senator Allen. Thank you, Captain. Thank you for your 
leadership, your assessment, and also your good news that you 
have brought here. We ought to have hearings more often. That's 
good news. Thank you.
    I will ask some questions, and I'll allow Representative 
Davis to ask questions as well. I understand your testimony. I 
was trying to read how you wrote it here versus there. I 
understand obviously the lack of funding previously made it 
very difficult for the Maritime Administration, and if you 
couple, in your view, a lack of domestic capabilities, you add 
that to a lack of funding--some of this precedes your 
administration but, nevertheless, right when you were coming in 
this was a problem.
    Now, what is--what in your view are the current 
capabilities of the domestic market or capabilities for 
scrapping domestically now as opposed to previously, and if you 
could determine it--as a practical matter you've said: Here are 
the ones that are the most dangerous, the ones that most needed 
disposal.
    One of the great things for you is now the limits that it 
all has to be domestic is off. You can get it overseas if you 
can get it out there quickly, or you can put it in here. The 
competition has reduced the cost, which is good for the 
taxpayer, but what is--do you have an estimate of how much of 
this could be done domestically as far as the most dangerous 
deteriorating ships?
    Captain Schubert. Mr. Chairman, first of all, the disposal 
of the high-risk--or what we refer to as high-risk--vessels has 
been one of my top priorities as the Maritime administrator. 
Currently we have about 21 ships in the James River Fleet that 
are considered high-risk vessels.
    I wish I could have gone into a little more detail in my 
opening statement, but I tried to keep it down. The good news 
is with the current efforts that are underway right now which 
involve both domestic and foreign scrapping, that by--let's say 
the current ones that we have actually awarded or are on the 
verge of awarding--we will have diminished the high-risk 
vessels down to three ships.
    Senator Allen. So, of those 18--there's 3 that are going to 
Texas and 15 that may be going overseas. I assume----
    Captain Schubert. Yes, we----
    Senator Allen. Out of those--those 18 that you are talking 
about are the 3 plus the 15, right?
    Captain Schubert. The math gets a little confusing here, 
but we have--I can run down the current status if you like, but 
we have basically two ships that we have already awarded this 
year that have already left the fleet.
    Senator Allen. These are out of the 21 high risk?
    Captain Schubert. Out of the 21, correct. We have 15 ships 
which are part of the much publicized pending deal, which I 
can't go into any more detail, except out of those ships 11 of 
those ships are actually considered high-risk ships.
    Then we have a three-ship award, which I did announce in my 
opening statements, which I signed just the other day, then 
we're also evaluating another three-ship award under the PRDA 
and are considering--that would be a domestic--that would also 
be a domestic scrapping.
    So, if you add up all those ships, the 2, the 11, that's 
13--that's 19 ships, but 21 of the ships--one of the ships that 
we're going--one of the high-risk ships included in that is a 
ship down in Mobile, Alabama, which is even worse than the 
ships that we have here.
    So, that leaves three ships left that we have not 
contracted for yet. So, I think that is a big step forward. I 
think you would agree.
    Senator Allen. I definitely agree.
    Captain Schubert. So, my highest priority is to find a way 
to get rid of those last remaining three ships.
    Now, the good news is because of the--some of the 
creativity we used, the PRDA process, some of the--combined 
with some foreign options to get rid of a lot of ships fast, is 
that we should have--just the appropriations already given to 
us--somewhere between $6 million to $10 million left over.
    Senator Allen. That is my next question: Do you have enough 
funds to do that? Great.
    Captain Schubert. So, I'm guardedly optimistic that we will 
have all 21 ships that are considered high-risk ships with the 
current fundings that we have been appropriated. I say 
guardedly optimistic because you never know. You know, somebody 
who is contracted to do services may not come up with the bonds 
they need to do it properly.
    There's still some other sort of technical issues we need 
to address, but I wanted to give you a sense that I have taken 
this as the highest priority, one of the highest priorities, as 
the Maritime administrator.
    When I stepped in the office in July--excuse me--in 
December 2001, I had this--no money and a lot of ships to get 
rid of. As I said in my opening statement, we used our time 
wisely. We didn't use the lack of funds as an excuse to not try 
to address the problem, and we used our time wisely. I met 
personally with the EPA several times at the highest level to 
try to get some cooperation, not only on the issue of whether 
or not we can export ships again, but also on the artificial 
reefing, which we think is another very--very cost effective 
way to take care of a lot of ships, an environmentally 
acceptable way.
    But what we have to determine with the--to get the EPA's 
cooperation, which we have so far, we have a working group 
working on this. We have to have a remediation standard that's 
acceptable to where the five states that are currently 
interested in ships from our fleet to sink for artificial 
reefs, that they would be--the remediation standards would be 
acceptable to all five states. So, we are currently working on 
that.
    To get back I think to what your question was----
    Senator Allen. Before I--I'm going to get back to that. 
First of all, well done. If this all gets done as you planned--
and you seem like you are well on the way to getting it done--
you will have done with this funding and your proper planning 
more to alleviate the most disastrous and dangerous ships in 
one year than has been done in probably a decade.
    So, you ought to be very proud of that.
    Captain Schubert. Thank you, sir. I think that is also--I 
would like to take credit, but I won't. I think I have a good 
staff.
    Senator Allen. Fine. But your team is doing it. Everyone is 
working together. Congresswoman Davis and I want to make sure 
that you have proper funding.
    Now, back to the question: Do you feel there are--again, 
these are 21 ships. There will be more that will need to be 
scrapped. I'll get your criteria of how you determine the 
highest risk, but what is your estimation of the domestic 
capacity to handle this job?
    Captain Schubert. This has been part of our problem over 
the years is that there hasn't been a lot of interest from the 
full service yards. These are the shipyards that actually build 
ships, the ones that have expressed interest that in my opinion 
just cost--was not cost effective at some of the proposals that 
we looked at.
    So, that being said, we have some yards in Texas, some in 
the Commonwealth of Virginia that are interested. That's really 
where the heart of the issue is, is capacity. In Texas alone, 
where most of the ships if not all the ships have gone over the 
last several years, we're talking about a capacity of about 12 
ships a year is the capacity of actually dismantling ships.
    We don't like taking more ships than a shipyard can 
dismantle into an area, because--especially an area in the Gulf 
of Mexico, because it's a hurricane prone area. We just don't 
think the liability is wise. But let's just say 12 ships a year 
for the Texas yards.
    We are currently engaged in discussions with some local 
dismantling companies here in Virginia. We're hoping that we 
can maybe conclude some transactions. Obviously it would be 
much better to not have to tow them. Even down to Texas is a 
pretty long tow from here.
    If we can work that out under the PRDA process, the Program 
Research and Development Announcement that we've made, we think 
there could be some domestically here. Also, I've been having 
discussions with the shipyard repair industry, which is of 
vital importance to our--to our Navy to have places to repair 
ships.
    As you probably can be aware, the repair business is not a 
steady business in many cases. You need to have some business 
in between to kind of keep the workforce employed. We'd like to 
see some shipyard repair businesses on the East Coast 
especially maybe look at setting up a state-of-the-art 
dismantling process where they can keep the shipyard employees 
working in between repair jobs that they may have. So, we are 
working with them.
    The answer to your question in a nutshell is I don't 
believe to get rid of ships at the pace that we are going to 
have to dispose of these vessels--one of the reasons we need to 
look foreign is the capacity issue; that is, to do it at a cost 
effective way. I just--I don't think we want to be spending $3 
million or $4 million a ship to dispose of the ship. The 
taxpayers I think deserve better than that.
    Senator Allen. Thank you. I guess one more question, then 
I'll turn it over to Congresswoman Davis for some questions.
    What is your criteria, if you can summarize it, for when 
you determine a ship is a high-risk ship versus one that is 
still risk but not high risk? What is the criteria on that 
determination?
    Captain Schubert. First of all, we are continuously 
monitoring all the ships. We have 69 ships, obsolete vessels, 
in the James River Fleet for example. They are continuously 
monitored. We do audio gauging on the hull--the hull thickness 
within certain--within certain criteria if it's considered at 
risk for let's say a puncture on the side of the hull because 
of the hull thickness. That would be one of the considerations, 
also how much oil is onboard, primarily how much oil is 
onboard.
    It probably could be summarized as the condition of the 
hull primarily that puts it into a high-risk category.
    Senator Allen. Are those ones that are high-risk hulls, are 
they--you're not going to ship or transport something, whether 
it's across the Atlantic or down to Texas, unless it is 
seaworthy I assume?
    Captain Schubert. That's correct. Mr. Chairman, I'm also a 
ship's captain. I sailed 12 years, so I'm very familiar with 
the seaworthiness issue. Prior to any vessel--whether it goes 
to Texas or even down the river, let's say to a local facility 
or across the Atlantic, we have the independent surveyor make 
a--what's called a towing survey for its fitness for tow.
    If the vessel is not fit for tow, he won't issue the 
certificate for towage. Also, the Coast Guard has to approach 
those towing plans or actually view them before the ships can 
leave the U.S. waters.
    So, we try to exercise due diligence, and if the vessel 
really does not--cannot make--especially a transatlantic tow, 
then we won't risk that. We probably estimate that about 90, 95 
percent of our ships can be towed in open water tows. There's 
about 5 to 10 percent of ships that really cannot be towed for 
any length, just to give you some general sense. Thank you.
    Senator Allen. Thank you. Congresswoman Davis.
    Congresswoman Davis. You answered most of my questions by 
responding to the Senator, but I want to get to the ones that 
are supposed to leave here real soon. I notice you're very 
careful to not say that contract is affirmed yet, so I assume 
you are still waiting on the one thing you have been waiting 
on.
    The time line concerns me. We are getting into tropical 
storms, hurricane-type seasons. Are we going to make it with 
those? It's my understanding if we don't get those ships out of 
here soon they won't make it across the Atlantic.
    Captain Schubert. That's correct. We have a towing season 
that starts right about now to November that we are trying to 
use as a window to get those ships underway if this deal is 
concluded. I want to give you some peace about this. This isn't 
the only game in town. We have backup plans. If the transaction 
was to for some reason not be concluded, it's very ambitious, 
trying--the idea was to get rid of 15 ships as quickly as 
possible. That was our main objective here, plus the price 
was--I can't say. It was very good, very attractive.
    But we have backup plans to address this issue if the 
transaction is not concluded.
    Congresswoman Davis. So, if this one falls through, we are 
still looking at getting rid of as many as you said earlier?
    Captain Schubert. I don't know that we can get rid of 13 
ships as quickly, but we do have backup plans to expeditiously 
get rid of these ships as quickly as possible. This is the only 
foreign-approved alternative. We have actually been working on 
some other potentials involving exporting.
    Congresswoman Davis. Let me ask you this: If my math is 
correct--and I'm not sure--you said we have 69 that we need to 
get rid of out here in the James River; is that correct?
    Captain Schubert. Correct.
    Congresswoman Davis. And 21--let's see. Let me go back. 
You're looking at getting rid of 19 this year?
    Captain Schubert. Correct.
    Congresswoman Davis. That leaves 50.
    Captain Schubert. They are not all high-risk ships.
    Congresswoman Davis. Which ones have to be gone by 
November, September, whatever it is, of 2006?
    Captain Schubert. All of them.
    Congresswoman Davis. Either way, you still have 50 ships to 
dispose of in 3 years.
    Captain Schubert. That's correct. Actually, we have a total 
of 131 ships right now.
    Congresswoman Davis. How many of those have to be gone by 
2006?
    Captain Schubert. Well, If you go by the law that was 
passed, they are all supposed to be disposed of by September 
30, 2006.
    Congresswoman Davis. All 131?
    Captain Schubert. All 131 ships. What you need to know is 
that's an impressive number and a real challenge, but I--what 
I'm----
    Congresswoman Davis. Challenge? It sounds impossible.
    Captain Schubert. Well, I can highlight some other 
promising areas that we can get rid of all the ships very 
quickly if we just make a little more progress in some of the 
other areas we have been exploring, but my priority is to get 
rid of the high-risk ships, the ones we mentioned the EXXON 
VALDEZ and all these horrible things.
    I have to tell you, in January 2002, my first visit at the 
EPA to discuss this option, you would have thought I lived in 
Virginia. I was passionate about it. I said: You know what, we 
can't blame the people that came before us, because if 
something happens and it happens on my watch, it happens on my 
watch.
    So, we got everybody into high gear to do--to really work 
together with the EPA and other government agencies to try to 
address the issue, but my priority is to get rid of those 21. 
Plus the other fleet had a few high-priority ships, too, but to 
get rid--by this year to get rid of all those 21 high-priority 
ships, the ones that pose the biggest risk to the James River, 
the people that live in this area from an environmental point 
of view.
    Congresswoman Davis. That is my high priority, too. Having 
said all I just said, I want to commend you and all the folks 
at MARAD for the fantastic job you have done with working with 
me and my staff and the whole delegation in trying--from what I 
saw when I got to Congress was that we have given you a 
mandate, but we hamstrung you, wouldn't give you any money to 
do it with. It's like telling somebody to go buy groceries to 
feed the hungry but not giving them any money. How do you do 
it?
    I'm really pleased with all the work you are doing and you 
have given me some great news today.
    Captain Schubert. Thank you, Congresswoman. What I tried to 
do as Administrator and leadership of MARAD is to show good 
stewardship. With the money appropriated to us we can get rid 
of a lot of ships in a quick period of time, also being 
sensitive to the environmental issues and doing it in a 
responsible way. In fact, I'd like to see the United States 
lead the world in setting environmental standards for 
dismantling ships.
    So, all the things that we have been working on the last 
year and a half have hopefully furthered that objective.
    Congresswoman Davis. Senator, I want to thank you and 
Senator Warner, because you all have been fantastic over on the 
Senate side. If it hadn't been for the Senate, we would have 
had a very difficult time getting that $31 million. I really 
appreciate all that they have done, so I have to say thanks to 
them, too.
    Senator Allen. That's fine. It's bicameral and everyone 
working together.
    Let me ask you this, because I'm going to ask the next 
panel what they have to say, so you're going to get critiqued. 
What you're doing with this $31 million is great. Obviously 
there are some contingencies out there, backups and so forth. 
Very good.
    The law says 2006. Can you share with us what your plan is 
to meet this September 30, 2006 deadline for the disposal of 
these obsolete ships? That is a daunting task. You indicated 
you had some way of doing it. I assume it was an 
environmentally sound way. Could you share with us what your 
plans are as best you can determine in 2006.
    Don't make promises that you realize cannot be kept. We 
want straightforward, honest assessments from you, because I 
think we can trust you. And, to the extent you can--and I 
understand how it is when you have agency heads speaking for an 
executive. If at all possible, it would be helpful for us to 
know what you would estimate the cost would be to make sure 
those funds are there for you. Please proceed with answering 
those questions, Captain.
    Captain Schubert. OK. Thank you, Mr. Chairman. Settling the 
fact we let's say have disposed of the high-risk vessels, then 
we have a hundred or so other ships we need to dispose. Some of 
those are considered in poor condition but don't present any 
immediate threat. What you need to understand is a lot of the 
costs associated with dismantling the--these vessels that are 
in very bad condition is the disposal of the hazardous 
material, the oil. There's not a whole lot of steel left in the 
ships that you can really recycle that's really good steel.
    The more we get into the newer ships, let's say the ones 
that aren't in as bad condition, then we're looking at vessels 
might have a net positive value for all we know. So, to give an 
estimate of the total cost would be something that I really 
honestly couldn't answer at this time. I can say that I don't 
believe the newer ships will be as expensive to dismantle as 
the older ships, the ones we're worried about right now.
    Secondly, we have other, I think, very creative approaches 
to this problem. As I said earlier, we're working on our 
artificial reefing standards with the EPA. Let's say it costs 
only $300,000 to $500,000 a vessel to clean up the removable--
to do the remediation on the hazardous material on the ship 
before we sink it. That's a lot cheaper than paying a million 
dollars or more to scrap a ship.
    We have a lot of states interested in this. I mentioned the 
PRDA announcements, one of the ones. We notified all the 
states, told them that we can now pay for services. That is the 
thing about it. We didn't do a lot of artificial reefing in the 
past because the state would have to pay for the remediation. 
Now we can use our money to pay for the remediation and donate 
the ship to the state for diving platforms or whatever they 
want to use it for.
    Senator Allen. How many states?
    Captain Schubert. Five states.
    Senator Allen. Could you list them, please.
    Captain Schubert. For the record, Louisiana, Texas, 
Florida--I might have to ask my staff here who the other two 
were. I would be happy to provide that. Can I shout it out?
    Senator Allen. Yes.
    Captain Schubert. Who are the other two states?
    A Speaker. New Jersey and Virginia.
    Captain Schubert. New Jersey and Virginia. Another 
interesting program is the SINKEX program, a Navy program where 
they take it out and do deep sinking. Obviously the ships have 
to be cleaned up properly before you do that. We are not sure 
how much that will cost on a per-ship basis.
    We're--you know, as you know, some states are having 
coastal erosion problems. This may seem a little far fetched, 
but when I was walking around the D-Day museum in New Orleans I 
noticed that back in D-Day they actually scuttled ships and 
used them for barriers for ports, and they used it so they can 
discharge cargo in that place that didn't have a port before.
    So, we have started working with the Corps of Engineers 
and--U.S. Army Corps of Engineers and some others to look at a 
pilot project to use these ships as barriers, barrier islands 
to help coastal erosion. You might have visions of this hawk 
sitting out there with a boom sticking up in the air. You clean 
the ship off and you often actually use the ship as a 
containment vessel for some of the dredge material.
    So, I wanted to give you a sense that we are looking at 
virtually every single idea you can think of. I think between 
those--those are the main ones that I think have some real 
merit. Using that--using those methods, paying for some 
dismantling here in the United States, possibly reopening up a 
few more markets overseas, I think we would--we can go a lot 
further than anybody ever thought we would in terms of getting 
rid of these ships.
    Senator Allen. This is--may be unfair, but it is the law. 
I'm going to ask you this question: Do you think it's 
reasonably probable--I'm putting in enough qualifiers in there 
because I--I really believe your sincerity and your 
determination to get this done. What is the probability--
reasonable probability of being able to meet this law that was 
passed before either--right before Jo Ann and I got elected?
    Nevertheless, laws get passed. No one funds it, expects 
people to do--it was to be done in 6 years. At this point the 
funding came in Fiscal Year 2003. Granted, it was three times 
as much as had been requested but, regardless, you have--you 
have a pretty long way to go and a short length of time to get 
there, in a roundabout way.
    What is your sense of the ability to actually meet that 
deadline?
    Captain Schubert. It will be very challenging, to say the 
least. We are having--if we just froze the number of ships that 
we have now and we didn't take any more ships in, it would be 
33, 35 ships a year that we--starting in September that we 
would need to get rid of all the ships within that timeframe.
    Is it impossible? No. Is it likely? I really just--I think 
it depends on how much funding is provided and whether or not 
some of these other alternatives pan out.
    One issue that I need to advise the Committee here is we're 
also expecting to take over the next 5 years about 50 
additional ships into the fleet. So, at the same time we are 
getting rid of ships--we are disposing of ships, we are going 
to be bringing ships into the fleet.
    Senator Allen. Well----
    Captain Schubert. Ships in good condition, by the way.
    Senator Allen. I was looking at the great work--Rob Freeman 
of our staff had done a memorandum from our staff, and I do 
want to commend him for the great job. That is exactly what the 
problem was. You had--it's been a problem, really, through the 
1990s. Of course it's exacerbated in the late 1990s, where very 
few ships were being disposed of because of the law and 
restrictions and no funding, as well as restrictions.
    Just in 1999--this is for the general public to understand 
this situation. In 1999 alone, the Department of Defense 
vessels acquired were 40, adding 40 just in 1999, 4 in 2000, 18 
in 2001, 7 in 2002. So, it's an ongoing responsibility.
    My general view is your plan makes sense. There are a lot 
of contingencies, some uncertainties in it, but I very much 
appreciate your testimony and your leadership. It is very 
important. We are glad you feel like a Virginian and argue like 
a Virginian. We'll keep in contact.
    Again, thank you for your time, your leadership, and mostly 
thank you for your care.
    Captain Schubert. Thank you, Mr. Chairman.
    Senator Allen. I'd like to call our third panel, the 
Honorable Kirk Cox, Delegate, House of Delegates in Virginia; 
the Honorable Joe S. Frank, Mayor At-Large of Newport News; the 
Honorable David K. Paylor, Deputy Secretary of Natural 
Resources, Commonwealth of Virginia; and Ms. Patricia Jackson, 
Executive Director of the James River Association.
    Thank you all. We'll have folks testify. Mr. Cox, Mayor, 
Deputy Secretary. Patty, you're always a cleanup hitter; 
anyway, in that order. I want to welcome you all here. I know 
each of you all in a variety of different ways.
    Kirk Cox is a leader in the General Assembly, certainly a 
leader on environmental issues for many, many years. Thank you 
so much for being with us. I know you are the Chairman of the 
Agriculture of Chesapeake and Natural Resources Committee. That 
obviously is a Committee that cares about the issue.
    We welcome you, Delegate Cox. Please share with us your 
views.

        STATEMENT OF DELEGATE M. KIRKLAND COX, CHAIRMAN,

           VIRGINIA HOUSE OF DELEGATES' COMMITTEE ON

         AGRICULTURE, CHESAPEAKE AND NATURAL RESOURCES

    Mr. Cox. Thank you, Senator Allen. Obviously a lot of what 
I'm going to say has already been said, so I'll try to 
abbreviate a little bit. I know you have a lot on your agenda.
    Senator Allen. Incidentally, let me interrupt. Any of you 
all--I know we have written statements from you all. You need 
not read that whole statement. All your statements will be put 
into the record. Excuse me.
    Mr. Cox. Let me try and see if I can summarize what I had. 
First of all, I know everyone said this, but I think it is very 
important that we do thank you and Congresswoman Davis for your 
efforts here.
    I think, having come from the budget committee on the State 
side, trying to get a million from anybody is an 
accomplishment. Obviously 31--is a Herculean effort. We want to 
thank you for that. You have heard about the environmental 
risk. Obviously, as the Committee Chair of that, it's my major 
concern.
    Governor, I think--Senator, you know this. You know this I 
think as much as anyone. Obviously our oyster population we 
really struggled with. My Committee has taken several tours. 
Obviously, the Lower James is absolutely key. Anything that 
would impact the oyster population where we're at right now 
would be devastating.
    We recently had hearings in my Committee concerning the 
blue crab, very, very concerned with the harvest of the crab. 
It has been down very substantially. We had DMRC come in and 
talk about the blue crab, trying to figure out some of that, 
but obviously--I think on your reports the Commission says 
obviously a spill could be very detrimental to the blue crab, 
especially in the summertime. So, that would be something that 
would be a problem.
    Just an observation if I could. One of the things that I 
always liked about you as a Governor is you used to tell me 
``common sense solutions.'' One of the things I guess that 
doesn't make total sense to us on the State side is--I've heard 
Secretary Murphy comment on this, et cetera. It seems like--I 
won't exaggerate the point--it seems like if we need funds to 
restore or rehabilitate habitat after the spill we can get it. 
It doesn't seem to make much sense that it is so hard to get 
the funds to prevent what could be an obvious disaster that 
would cost tremendous amounts of money.
    Captain Schubert I think gave a tremendous testimony. My 
quick observation there would be: I hope your Committee will 
look at some of the things we did on the State side with the 
Governor. We did a pollution prevention fund for small 
businesses, which is proactive. I think he's got four or five 
solutions, that you all need to look at tax incentives or some 
other things that you can look at to help him out.
    Obviously if there doesn't seem to be a big market 
currently for the shipyards I think you-all need to look at how 
you can make that more attractive than you are currently doing. 
The other thing--I know this is obvious--is it seems to me just 
listening to the testimony is the ships that are decommissioned 
and in better shape, you need to immediately set up a policy to 
look at scrapping those as soon as you can, because I just 
think that is proactive.
    Everyone right now--I think Congresswoman Davis has said 
this--is tremendously concerned. The ships are in bad shape. 
What we tend to do in government sometimes is we're so worried 
about those, we forget about the 50 new ships been 
recommissioned. I think any kind of incentive system set up to 
get the market more viable, et cetera--let me just finish with 
this: I do think the Maritime Administration has done a 
tremendous job.
    Let me just tell you my sense, though. This is obviously a 
job--just sort of a sense. I think it would be helpful--I guess 
I'll say this for Dave Paylor, sort of my observation--if 
communication between the State officials and the Federal 
officials was a little bit better--I think what happens a lot 
of times on the Federal side is a lot of things come out of DC, 
and there are some intriguing things going on that I found out 
just today.
    Frankly, a lot of what I found out about was going on was 
in newspaper accounts. It was very, very hard to find out some 
of the other details. Let me give you some examples. The 
artificial reef issue I find fascinating. I think the state 
would have a lot of good input on that, DMRC, et cetera. They 
have some good ideas how that would work in Virginia.
    Obviously in Virginia the water is more shallow, a 
different situation than in Florida. I think it is very 
important at this point for the Maritime Administration to be 
in direct contact with the DEQ, not only telling them specifics 
about what they are going to do and some of those ideas, but 
listening to their input would be helpful. There are a lot of 
opportunities in Virginia that you could miss out on.
    I don't think it's deliberate by any means. It's a 
tremendously big agency, trying to do a lot, and have obviously 
done a lot. I think there is a little bit of a communication 
lapse that Virginia needs to be included on.
    That's sort of I guess the summary of my comments. 
Obviously your opening comments, Senator, I think were very 
important. Obviously being from Colonial Heights in the 
Hopewell area, the Kepone disaster we had--we just almost never 
recovered from that.
    So, just potentially--I think you are not exaggerating the 
point. Potentially it could be as disastrous. I appreciate your 
efforts. I certainly as chair of the fancy committee with the 
new name that makes me sound more important--I'm certainly 
willing to try to help you.
    [The prepared statement of Hon. Cox follows:]

  Prepared Statement of Delegate M. Kirkland Cox, Chairman, Virginia 
 House of Delegates' Committee on Agriculture, Chesapeake and Natural 
                               Resources
    Chairman Allen and members of the Subcommittee, thank you for the 
opportunity to discuss the issues related to the disposal of obsolete 
vessels in the National Defense Reserve Fleet. As Chairman of the House 
of Delegates' Committee with responsibility for oversight of Virginia 
natural and historic resources, my remarks will focus on the 
environmental aspects of having these vessels on the waters of the 
Commonwealth. First, Mr. Chariman, let me extend my appreciation for 
your personal efforts and the rest of the Virginia delegation in 
securing the initial commitment of $31 million for remediation efforts. 
But, I think we all would acknowledge that properly completing any 
clean-up effort by 2006 will take a significantly greater commitment of 
Federal funds.
    The James River Ghost Fleet is seen by many in the Commonwealth as 
the greatest threat to the environment of the Lower James River. These 
ships contain in excess of 7.8 million gallons of oil and significant 
amounts of PCBs, mercury, asbestos, and lead paint. According to our 
Department of Environmental Quality, since 1998 at least eight oil 
spills have been linked to these ships. We worry that a spill of 
thousands of gallons could result in damage to fishery habitats, 
wetlands, aquatic life, waterfowl, our seafood industry, and tourism. I 
would also note that our seed oyster beds are concentrated in the 
James. As Senator Warner has stated, and I find myself with a similar 
reaction, that ``everytime I hear that a hurricane is approaching the 
coast, I think of the fleet.''
    One indication of the potential threat represented by the fleet was 
described in the Maritime Administration's worst-case scenario report. 
The report commissioned by the agency, at the request of our Department 
of Environmental Quality, concluded that if just two of the more 
dilapidated ships broke apart due to a storm, 50 miles of the river and 
shoreline would be contaminated. The cost of clean-up could exceed $35 
million. Even as recently as May of this year, oil leaked from one of 
the ships, which washed up on a 400-foot stretch of shore near Fort 
Eustis. Luckily only a small amount of oil was involved.
    Mr. Chairman, I know you recognize the importance of protecting 
this vast tributary of the Chesapeake Bay is not without some 
historical context. We appreciated your interest and efforts as 
Governor to find common sense solutions to our environmental 
challenges. Almost 30 years ago you'll remember the upper regions of 
the James just south of Richmond experienced what some have 
characterized as its greatest environmental insult as a result of the 
Kepone contamination. We are still trying to recover from that 
disaster. So, many Virginians are again concerned about the health of 
their river, seeing the current situation as a ``ticking time bomb,'' 
which must be handled with some sense of urgency.
    It is regrettable that this situation has gotten to the point where 
Virginia's Department of Environmental Quality has had to issue a 
series of Notice of Violations, the latest on June 18, 2003, for the 
May 13 oil release from the Mormac Wave. I understand that Maritime 
Administration has refused to sign any consent order to resolve the 
environmental issues claiming they cannot waive sovereign immunity. I 
hope this can be resolved without having to go to court.
    Virginia's position has been that we want the risk removed from the 
river. That means if the funds are limited and full funding is not 
available, then some of the dollars should go to removing the oil from 
the remaining ships. I understand that MARAD (Maritime Administration) 
prefers not to remove the oil first because it increases the overall 
costs. The state has given MARAD the time to develop a plan for using 
available funds before taking further legal action. I have been 
informed by the Warner Administration that as long as MARAD's plan 
addresses the risk and shows an ability to completely mitigate the 
problem, we will be satisfied. Addressing risks involves things like 
removing ships, with those most likely to leak going first, and some 
demonstration that there will be a sustained effort to scrap others.
    But, I am encouraged that our Secretary of Natural Resources, 
Tayloe Murphy, has communicated his desire to work with MARAD in 
addressing this environmental threat represented by the fleet. While I 
think the ultimate responsibility for the problem rests with the 
Federal government, I am convinced that Virginia, working with the 
Federal government, can develop an effective strategy for resolving 
this problem.
    In summary, Mr. Chairman, I thank you for your leadership in 
holding this hearing. I believe it will help bring this issue into 
focus as the deadline for action approaches to get the funds needed to 
complete this clean-up effort.
    Thank you, Mr. Chairman.

    Senator Allen. Thank you, Delegate Cox, for all your 
leadership over the years on this. I think there certainly is a 
willingness on the part of Captain Schubert and his crew to 
do--I use crew in a larger sense--to communicate. One of the 
reasons to have a field hearing is to actually get--people see 
faces and personalities behind names on organizational charts. 
So, to the extent that's helped, that was one of the purposes 
accomplished at this hearing. Again, thank you for your great 
leadership.
    Mayor Frank, we want to hear from you in that your city--
and not that it would be only Newport News that would be 
affected. Clearly James City County, Surry County, Isle of 
Wight, Hampton, in fact on down to Suffolk and Virginia Beach 
and Norfolk could all be adversely affected. But clearly you 
have a long shoreline, and we wanted to get the perspective of 
a leader in local government. You're one who is well respected, 
and we wanted to get your views on the James River Fleet, and 
we welcome you and thank you for your time, Mayor.

 STATEMENT OF HON. JOE S. FRANK, MAYOR-AT-LARGE, NEWPORT NEWS, 
                            VIRGINIA

    Mr. Frank. Thank you, Senator. Thank you so much, 
Congresswoman Davis. You know, this isn't the first meeting the 
Congresswoman and I have had in this room about this subject. 
We have been here before and talked about these things before. 
You and I have engaged in these conversations before, Senator 
Warner and I.
    It is certainly appropriate, and I am certainly grateful 
that you all have come to give folks here an opportunity to 
express themselves on what I think is a critical public safety 
issue, public health issue in our region.
    I was very encouraged by the testimony of Captain Schubert 
on behalf of the Maritime Administration with regard to their 
plans. It seems to me that the number of points that need to be 
made--and I'll try to do those briefly.
    First of all, beyond the plans to demolish these ships and 
remove them from the fleet, I think there are a number of 
comments that are appropriate. First is that here we think all 
of these ships are high risk. I understand the definition that 
Captain Schubert tried to apply to what he defined as the high-
risk ships.
    Certainly you have to try to find a way to prioritize with 
limited resources those ships that you are going to address 
first, but beyond the risk of a hull giving way and oil and 
other virtually hazardous materials getting in the water is the 
risk of hurricanes and those ships becoming unmoored and 
creating havoc along the river ridge that's between the fleet 
and the Hampton Roads shipyard.
    Frankly, we think there is a terrorist risk with those 
ships there that could be easily compromised. We worry about a 
ship becoming loosened and the havoc it could play on shipping 
in the Hampton Roads Harbor, on the bridge and the tunnels, the 
shipyard itself, the waterfront of our citizens.
    Leaks have already cost over $2 million over the last 
several years, based on my information. So, again, while I 
understand you have to define the problem, my view is--and I 
think the views of the citizens of this region are that all of 
those ships pose a risk to health and public safety.
    I think a comment that someone else made is particularly 
useful. It's not just these ships. These ships will be replaced 
by other ships. We need to have a legislative plan and a 
program in effect, a funding mechanism in effect, to be sure 
that as time goes on you don't make the same mistakes of 
history and allowing these things to be there and deteriorate 
to the level where they pose the risk that they do. So, I would 
urge you to give that some careful thought.
    One of the things that I did not hear discussed by Captain 
Schubert was funding for adequate personnel for maintenance and 
security on these vessels until they are taken out of the 
river. One of the problems, at least in the prior discussions 
and conversations that have taken place in this room--and the 
Congresswoman and I were here with others talking about these 
issues--from local people who are assigned to service and 
provide security on the fleet was inadequate personnel, 
inadequate funding to provide maintenance and security so that 
you minimize the risk while plans are being evolved to remove 
the ships and demolish them at other locations.
    I think those are critical issues. I just point out that 
this is symptomatic of what I think is a problem that is real 
and needs to be put in some perspective. As a long serving 
member--some would say too long serving member--of local 
government, I tell you unequivocally that if local government 
or local business tried to get Federal permits to operate a 
James River Reserve Fleet, it would be impossible.
    The Federal Government doesn't hold itself to the same 
standards and to the same requirements when it comes to 
environmental and safety regulations that it applies to other 
people. While I understand the purpose of the reserve fleet 
historically was a valid one and important one to national 
defense, at some point we have to recognize the reality of 
impacts. The impacts here--potential of impacts and potential 
harm are really very serious, I think.
    The perception in our community is that these things pose a 
clear and present danger to the health, welfare, and well-being 
of our communities, to the river, to the oyster beds, to the 
fishing, to the homes along the banks, to the businesses along 
the banks, that these ships get loose or deteriorate to the 
point where we have the kind of polluting environmental impacts 
that we believe is a present danger, the consequences and the 
cleanup costs and the impacts are going to be overwhelming, I 
think incalculable.
    So, I don't think anybody would pretend that if an 
environmental impact statement were required to deal with these 
things that anyone would have a finding of no significant 
impact. These things are just beyond dangerous. So, if the 
reports I have are right that over 70 percent of the ships are 
considered obsolete and should be scrapped, if there are 59 
ships that need to be scrapped and we have funding for 21 of 
them and plans for 15 or 19 of them, you know, I'm not sure we 
have really fully and completely addressed the problem. 
Although, as you do, I certainly applaud the effort of the 
Maritime Administration to move forward.
    They didn't--the problem wasn't created overnight, and we 
all recognize it's not going to be cured overnight, but it 
certainly is critically important that a appropriately funded 
plan be implemented in a very, very time expedient way, because 
the clock is ticking. I really don't think that we have the 
luxury of more years to work all this out.
    Several million gallons of oils and lubricants remain 
aboard these vessels, and a quantity approaching that which was 
spilled by the--as you mentioned, the EXXON VALDEZ. That is a 
frightening number. A 2002 report prepared by the Maritime 
Administration suggested that an oil or gas spill from these 
ships is no longer a possibility but a probability.
    Those are the kinds of things that we hear on the 
Peninsula, and the citizens of Newport News are terribly 
concerned about it. So, we believe that all these ships pose a 
high risk of one kind or another, and the situation is not 
getting better. Beyond money to move them and dismantle them, I 
think that we need to address the issue of being sure that they 
are properly secured and maintained to prevent whatever 
disaster we can while the rest of that process is moving 
forward.
    So, without belaboring the point, which I know you are more 
familiar with than we are, I just have to tell you how grateful 
I am for the attention you are giving this, the support you are 
giving us here to remedy and address this situation that has 
become so critical for all of us. I thank you.
    [The prepared statement of Hon. Frank follows:]

       Prepared Statement of Hon. Joe S. Frank, Mayor-at-Large, 
                         Newport News, Virginia
    As a long-serving member of local government, I can tell you 
unequivocally that if the local government or a business tried to get 
Federal permits to operate something like the James River Reserve Fleet 
it would be impossible.
    The Federal Government does not hold itself to the same standards 
that it holds others when it comes to environmental and safety 
regulations.
    I recognize that the purpose of the Reserve Fleet was a worthy one, 
however, time has passed that purpose by.
    If some other organization wanted to have such an operation there 
would be many regulations.

   There would be a requirement for an environmental 
        assessment.

   Surely there would be a requirement for an environmental 
        impact statement.

   Could anyone seriously imagine that a ``finding of no 
        significant impact'' would result from a review of that 
        operation?

    The reasons why we are alarmed about the continuing presence of 
these obsolete vessels have been stated many times.
    According to reports, over 70 percent of the ships in the Reserve 
Fleet are considered obsolete and should be scrapped.
    Several million gallons of oils and lubricants remain aboard these 
vessels in a quantity approaching that which was spilled in Alaska by 
the Exxon Valdez.
    In a 2002 report prepared by the government's own Maritime 
Administration, it was suggested that an oil or gas spill from these 
ships is no longer a possibility, but a probability.
    There have already been several documented fuel oil leaks from the 
Reserve Fleet in the last five years involving approximately $2 million 
of clean-up costs.
    The potential for serious environmental damage and the potential 
for a break-away ship to damage property or the James River Bridge are 
obvious concerns.
    In today's world, we have to add the fear that these ships could in 
some way be used as potential terrorist platforms.
    On behalf of the citizens and City Council of Newport News, I urge 
you to move forward with all dispatch to eliminate this threat to our 
community's environment and public safety.

    Senator Allen. Thank you, Mayor. Thank you for your very 
coherent, logical advice. I agree with you. The Federal 
Government is doing something that I guarantee you no one else 
in this country can ever get away with, whether a government or 
private entity, would never be permitted.
    I will say Captain Schubert and all of us are trying to 
remedy this as quickly as possible. Clearly funding for the 
maintenance of it until the existing fleet--it is dangerous 
work, dangerous, hazardous work. Clearly laws are passed--
it's--the law was passed in late 2000 to get these all handled 
and disposed of by 2006.
    Clearly, as you say, this did not happen overnight. It's 
not going to get done overnight. We have a few nights to go. 
It's still going to be difficult, but you can count on us in 
your Virginia delegation to work with you and the General 
Assembly and State government and others.
    Mr. Frank. We know that and are confident of your support 
and your help, and we are grateful for it, and we thank you.
    Senator Allen. OK. Thank you. Now we'll hear testimony from 
the Commonwealth as represented by David Paylor, Deputy 
Secretary of Natural Resources.
    Secretary Paylor, welcome.

STATEMENT OF HON. DAVID K. PAYLOR, DEPUTY SECRETARY OF NATURAL 
              RESOURCES, COMMONWEALTH OF VIRGINIA

    Mr. Paylor. Thank you, Senator Allen, Congresswoman Davis. 
It's good to be here. I'll try to summarize my summary as well. 
I think everybody has pretty well rehearsed all of the hazards 
that are posed by the Ghost Fleet, and you know last summer 
Governor Warner underscored the problems that we have, and just 
to maybe reinforce Mayor Frank's comments, we called for the 
Maritime Administration to enter into a consent order with us 
to remove the oil from the ships and so forth.
    I'm not smart enough to understand the legalities of it, 
but we are still waiting to do that consent order, and it's 
been more challenging to hold the Federal Government to a 
standard that we're able to hold others to.
    Notwithstanding that, I want to thank Senator Warner and 
Congresswoman Davis and Congressman Wolf and you and all of the 
delegation for the support, because the $31 million that we got 
is really more than we could have hoped for when we became 
aware of how great a danger it was over the last year. As you 
already noted, more money is going to be needed, but with good 
planning we believe that we are well on the way to removing the 
risk from the river.
    The Commonwealth's main goal is to remove the threat of oil 
spills and environmental damage from the James River. We want 
this disposal done in an environmentally responsible manner 
which protects the safety of workers, and this responsibility 
falls to MARAD. We've heard some good news from them in that 
regard already.
    Our expectation is these criteria will be met and the 
disposal of ships will proceed, as you said, Senator, in a cost 
effective manner which maximizes the availability of the money.
    We've--there are a lot of different numbers out there about 
how many high-priority ships we have and how many are left. We 
know, as the mayor has said, there are close to 70 that need to 
go, and we need to see them go in a high-priority order.
    MARAD has been keeping the Commonwealth informed of this 
progress on a limited basis, however we have repeatedly asked 
for and not yet received comprehensive plans from MARAD for 
ship disposal based on funds available and anticipated revenue. 
We know we have $31 million available to us right now. The 
question mark is: What else do we have? We need to be making 
our plans in accordance with reasonable expectations. It's 
important to us to know this plan so we can ensure the risk is 
dealt with in a cost effective manner.
    For example, MARAD has consistently resisted the removing 
of oil from vessels because it adds to the overall disposal 
cost. We recognize this, but we are looking for some certainty 
that the resources will be available to dispose of the ships 
expeditiously and in priority order. Without some assurance 
that those high-priority vessels at least can be gone in the 
next 12 to 24 months and that funds will be available to 
continue the disposal of the remaining ships, we will continue 
to insist that some of the resources be spent on removing the 
oil from the ships that are in the fleet that remains in the 
river.
    The Commonwealth's highest priority is to make sure the oil 
in the ships is removed from the rivers so that they no longer 
pose a threat to other people and the environment. We want 
this--we will insist this be done in an environmentally 
responsible way, and we look to MARAD to use its money wisely 
to achieve a maximum result.
    As you discussed earlier, we would like to see this done 
domestically, but the taxpayers' money needs to be used wisely 
and the ships need to be removed from the river. To the extent 
that it's cost effective, we do find the reefing alternative to 
be attractive because it can result in an ongoing economic 
return from tourism and perhaps lower the per-ship disposal 
cost.
    We count on the Environmental Protection Agency to 
establish guidelines to protect the environment and allow the 
shipping to proceed effectively, because we need to recognize 
that we already have a significant environmental risk with our 
current condition. We need to address that as well. We look to 
the Coast Guard to ensure the ships are transported safely to 
their destination.
    Those are our comments, and I thank you for holding this 
hearing and for the opportunity to testify.
    [The prepared statement of Hon. Paylor follows:]

Prepared Statement of Hon. David K. Paylor, Deputy Secretary of Natural 
                  Resources, Commonwealth of Virginia
    Mr. Chairman and members of the Committee, on behalf of Governor 
Warner I want to thank you for this opportunity to present testimony 
before you. The growing danger presented by the aging vessels of the 
National Defense Reserve Fleet anchored in the James River has become 
clear to all of us. This section of the James River is an ecologically 
diverse and sensitive estuary, which provides critical spawning, 
nursery and wildlife habitat. Our seafood industry relies on a healthy 
James River. As the hulls of these ships continue to corrode the 
likelihood of large oil spills increases. These spills would wreak 
environmental havoc and require expensive cleanup operations.
    Governor Warner underscored this threat last summer by calling upon 
the Maritime Administration to enter in to a Consent Order with the 
Commonwealth to remove the oil from the ships and immediately begin 
scrapping these ships to remove them from the James River. He also 
called upon the Environmental Protection Agency to establish guidelines 
that allow environmentally responsible scrapping operations to begin 
and to help find sources of funding. In truth, the lack of funding and 
of cost effective disposal options was the principal factors that had 
stalled the scrapping effort.
    Iwant to recognize and thank Senator Warner, Congressman Wolf and 
Congresswoman Davis for their tireless efforts to provide funding to 
MARAD to restart the ship disposal process. The $31 million provided 
last year as a result of their efforts is an excellent beginning. As 
you have already noted, more funding will be needed. But with good 
planning we can be well on the way to removing the risk from the river.
    The Commonwealth's principal goal is to remove the threat of oil 
spills and environmental damage from the James River. And the disposal 
effort must be done in an environmentally responsible manner, which 
protects the safety of workers. This responsibility falls to MARAD. Our 
expectation is that these criteria will be met and disposal of ships 
will proceed in a cost effective manner, which maximizes the use of 
available money.
    There are more than 70 non-retention vessels in the James River 
National Defense Reserve Fleet. At least 25 of these are designated as 
high-priority vessels, indicating that the risk of oil release is high. 
These ships need to be disposed of soon or the oil must be removed from 
their cargo.
    MARAD has been keeping the Commonwealth informed of its progress on 
a limited basis. However, we have repeatedly asked for, and have yet to 
receive, a comprehensive plan from MARAD for ship disposal based on 
funds available and anticipated additional revenues. This is important 
to us to assure that the risk is dealt with in a cost-effective manner. 
For example, MARAD has consistently resisted removing oil from the 
vessels because it adds to the overall cost of disposal. While we 
recognize this we are looking for some certainty that resources will be 
available to dispose of ships expeditiously and in priority order. 
Without some assurance that the high priority vessels will be removed 
in the next 12-24 months, and that funds will be available for 
continued disposal of remaining ships, we will insist that money be 
spent immediately to remove the oil from ships so that the primary 
source of environmental risk is gone.
    The Commonwealth's highest priority is to make sure the oil and the 
ships are removed from the James River so that they no longer pose a 
threat to our people and environment. As I have said before, we will 
insist that this be done in an environmentally responsible way. And we 
look to MARAD to spend their money wisely to achieve a maximum result. 
To the extent it is cost-effective, we the find the reefing alternative 
to be attractive because it can result in an ongoing economic return 
from tourism and, perhaps, lower the per ship disposal cost. We count 
on the Environmental Protection Agency to establish guidelines that 
protect the environment and allow scrapping to proceed effectively. We 
need to recognize the ships already pose a significant environmental 
risk and must be removed. And we look to the United States Coast Guard 
to assure the ships are transported safely to their destination.
    I thank you again for your attention to this critical matter. We 
ask for your assistance to provide continuing appropriations to MARAD 
to complete the task of ship disposal. Thank you for your time and 
attention.

    Senator Allen. Thank you, Secretary Paylor. You and 
Delegate Cox and the Mayor all have a similar view. I know it's 
good that Captain Schubert is still here hearing these views. 
We don't need to turn this into any sort of back and forth, but 
I think they are all well-taken concerns. Not speaking for the 
captain, not turning this into a debate but rather a 
discussion, it strikes me that the--his stewardship is 
symmetrical and is constant with what--many of your comments 
insofar as maintenance and so on.
    I will say this: Having been Governor and serving the State 
legislature--and I know John Davis also served in State 
legislature--comparing the way things work in the Federal 
Government to anything you do in the State, just trying to 
estimate--I was trying to get the captain to give his estimates 
and so forth. There are a lot of contingencies, and a lot of 
them are in here. So, it makes it more difficult to get it. 
Congress passes a law, then it doesn't fund it, not that that 
might not happen in State government as well. In the Federal 
Government it seems to be the routine way of doing things.
    I'm one who--as I said, this is just another example. I 
hope I never get accustomed to thinking the way they do in 
Washington. It doesn't make much sense to say: Here, do this, 
and then not fund it or put constraints on the ability of 
Administrators to do the job you have told them to do. It's 
absurd.
    At any rate, you do have this effort on our part. It is 
bipartisan, it's bicameral. I also think the executive branch, 
the Bush Administration, is very much wanting to get this 
addressed. We may have to add some more money into it, but 
nevertheless there is a commonality of purpose and an awareness 
of this risk.
    Mr. Paylor. We agree, and we have certainly seen that over 
the last year. If you compare where we are now to where we were 
a year ago, we have made great strides, and we have heard 
really good, encouraging news from Captain Schubert as well. 
So, we agree, and I think we have a dialogue here that we are 
going to make progress with.
    Senator Allen. Great. I'd like to hear from the Executive 
Director of the James River Association, Ms. Patty Jackson.

STATEMENT OF PATRICIA JACKSON, EXECUTIVE DIRECTOR, JAMES RIVER 
                          ASSOCIATION

    Ms. Jackson. Thank you, Mr. Chairman.
    Senator Allen. Look at that. They don't move the 
microphones for--we don't even have one.
    Ms. Jackson. Thank you, Mr. Chairman.
    Senator Allen. Star witness. Go ahead, Ms. Jackson.
    Ms. Jackson. Senator, Congresswoman Davis. It's a pleasure 
to be here today. I'm Patty Jackson, the Executive Director of 
the James River Association. I want to thank you and echo all 
the comments that have been made. Thank you for all the efforts 
on behalf of the River and the resources and trying to acquire 
the funding necessary to remove this significant threat from 
the James River.
    Our organization has been a voice for the River and for 
riparian landowners and users of the river since 1976. Our 
goals match I think the goals of your hearing today, which are 
conservation, responsible stewardship of the James River and 
its resources. So, we are delighted to have this focus on this 
important issue.
    As you know, the James River has been described as 
America's most historic river and Virginia's largest tributary 
to the Chesapeake Bay, which has been heralded as the Nation's 
most productive estuary. What happens in the James is certainly 
not only important in the James but also in the Chesapeake Bay.
    I'm going to try to abbreviate my remarks as well. As 
Delegate Cox mentioned, we've already had one significant 
environmental catastrophe in the James, the Kepone. We still 
have a fishing advisory on part of the Lower James remaining 
from that catastrophe. So, it's very fresh in all of our minds 
what can happen in the event of a significant problem.
    The reserve fleet here on the James River presents a unique 
situation. We've all recognized the concept of a reserve fleet 
has made sense to folks over the years, but unfortunately over 
time we have become much more aware of a particular 
environmental hazard that this presents with not only the oil 
that's on these ships, but also PCB, asbestos, and other 
hazardous materials.
    Of particular concern to our association is the potential 
for a significant oil spill on the river, and as you've 
mentioned, Senator Allen, the devastating impacts that would 
result as a result of such an oil spill. There have been 
several leaks that have occurred, and this reserve fleet has 
been described as a ticking time bomb.
    Not to raise concerns even more, but in 1999 as many as 30 
of the ships did break loose from their moorings, and some went 
into the main shipping channel and some went onto nearby 
beaches. That I think makes us even more aware, as Mayor Frank 
said, of the potential for much greater impact, particularly on 
the James, which is so important to the Virginia economy, as 
well as the environment, not only with the shipping that occurs 
on this navigable river, but also as a result of the sea oyster 
beds for the Chesapeake Bay, the crab, and the commercial 
fishing industry, and tourism, which is very significant. And 
as you mentioned, Senator, with 2007 fast approaching, we 
certainly want to do everything we can to protect the historic 
resources of the James, as well as the natural resources.
    The MARAD report in 2002 on the potential for--the impacts 
of such a spill indicated that the cost of cleaning up just 
over about 263,000 gallons, which could be--of oil, which could 
be generated from just two of these vessels breaking apart, 
could cost as much as $123 million, based on cleanup costs for 
other oil spills of similar size, and with the heavy Bunker C 
oil which is on many of these vessels. That's pretty daunting.
    Even when we're talking about the potential for as much as 
$1 million or even a little more for each of these vessels to 
be scratched or decommissioned, the potential for cleaning up 
an oil spill is probably exponentially higher, and potentially 
as much as 8 million or more gallons of oil that are present on 
these vessels, the potential environmental problems could be 
significant.
    One of the things--this goes back to Delegate Cox's remark 
about spending money to prevent an oil spill rather than 
cleaning up an oil spill. There is a lot more emphasis now on 
pollution prevention rather than pollution control. One of the 
things we would hope that you would take a look at is the Oil 
Spill Liability Trust Fund, which is a fund that is available 
for cleaning up oil spills, but if you connect that to a 
section of the Clean Water Act on oil and hazardous substance 
liability, it does look to us--I'm not an attorney, but it does 
look to us like there is an opportunity that if there is a 
substantial threat of a discharge of oil or hazardous 
substances from a vessel that there is the opportunity to 
access this fund, that the President shall direct all Federal, 
State, and private actions to remove or mitigate to protect 
from the threat of such a discharge.
    It may not have been in the past. We understand that the 
EPA may not have been receptive to that suggestion previously, 
but it does look like the authority is there perhaps, and that 
might be an alternative for preventing pollution from this 
fleet. If not, if for some reason that is not accessible, then 
we certainly urge you to look at all of the potential funding 
sources from the Federal budget that could be used to clean 
this--to remove this threat from the James River as quickly as 
possible.
    We're acutely aware of the magnitude of the James River 
Reserve Fleet and what threat that presents to the James River 
estuary and its abundant resources. We really would hope the 
reserve fleet would not become an aquatic brown field or a 
floating Superfund site, and so in order to prevent that we 
would hope that every effort would be made to prevent a 
catastrophe from the site, but when we looked at it, thinking 
about what if this were--as Mayor Frank was saying, what if 
this were someone other than the Federal Government, it does 
seem the threat could be as high as a Superfund site or some 
radical sites in the country.
    We applaud your efforts. Thank you for the opportunity to 
be here and draw attention to this, and if there's anything we 
can do to help you with this endeavor, we'll be happy to do 
that, too. Thank you.
    Senator Allen. Thank you, Ms. Jackson. Thank you for your 
ideas. We'll check some of those out. I've not considered a 
floating junkyard. That's what it would be, something like 
that, obviously on water.
    Have you had a chance, Ms. Jackson--and any of you all can 
comment. Some of you already have. Have you reviewed the 
Maritime Administration's plan for disposal of these obsolete 
vessels? If you haven't reviewed it, you heard Captain Schubert 
on what they are developing and what their plans were and 
trying to meet this statutory goal of disposing or handling all 
of this as best they can by 2006. What is your view? Do you 
think that the--does it sound reasonable to you?
    Ms. Jackson. It does. I think that prior to today we 
certainly had misgivings about the ability of MARAD to move 
forward as quickly in order to meet that 2006 deadline, 
particularly because we're 2 years or more into that schedule 
without having a significant number of the vessels removed. I 
think Captain Schubert's remarks this morning are encouraging, 
but it does look like we are still going to need another $50 
million just on the James River Reserve Fleet if it's about a 
million dollars per ship to remove the additional obsolete 
vessels. And how that can be done in the next 3 years--I think 
we would certainly be interested in knowing what the specific 
plans would be for that.
    It sounds like if they have the funding and the market is 
creative for more opportunities for scrapping that those two 
things can go hand in hand and they could meet the deadline, or 
I would think come fairly close to it. So, that is encouraging.
    Senator Allen. Thank you. Do you have any----
    Congresswoman Davis. I just want to say something on what 
we heard from Mr. Paylor, and I think you alluded to it too, 
Ms. Jackson, on taking the oil off the ships. That's something 
I talked to Secretary Murphy about last year. The concern as I 
understand it from MARAD--if I can get a nod from them if I'm 
correct on this--just removing the oil does not take away the 
environmental danger, because it will still be oil residue left 
in the tanks. So, you could still get a pinhole leak, still 
have the same problems with the oil spill, and I think it is 
estimated roughly about $40 million just to remove the oil from 
the ships.
    Had we taken the $31 million to remove the oil, we wouldn't 
have accomplished anything, other than maybe wouldn't have as 
much oil spill, but still have the environmental danger, as 
well the PCB, asbestos, and other problems.
    So, I think MARAD's doing the best that they can do with 
the dollars that we and the Federal Government have given them, 
and I think it's a shame the Federal Government gets by with 
what they do. Who polices us?
    Senator Allen. We do, the board of directors.
    Congresswoman Davis. The board of directors. The only thing 
I can tell you is you have our word--I wake up every morning 
worried I'm going to see something in the headlines. That's one 
of the reasons I work on this as hard as I do. I don't want it 
to be on my watch, either.
    Delegate Cox, I enjoyed working with you on the Chesapeake 
committee when--it didn't have that fancy title when I was 
there. My office will certainly keep in better touch with you. 
I apologize for that.
    Senator Allen. Mayor Frank?
    Mr. Frank. I appreciate the question. I think it's a good 
plan. I have had an opportunity to look at it. Plans are plans. 
This is a time bomb. The risk is--as the Congresswoman says, we 
all have a fear of waking up one morning or going home one 
evening and turning on the news and finding there is a 
disaster, which is why I departed from my prepared remarks in 
talking about money for maintenance and security, because while 
the plan goes forward to dismantle these ships, I think there 
needs to be--you can't pump the oil out, if that is an issue, 
certainly making sure those things are maintained in a way and 
secured in a way that minimizes the risk until the plan can be 
implemented I think is critically important.
    None of us want to see a disaster out there, nobody working 
on this, nobody cognizant of the issues. Everybody has a 
different approach, perhaps, to what works best and the most 
cost effective way. If disaster strikes, the cost is going to 
be the least of the issues. Right now I think that the critical 
piece is, again, making sure that we are maintaining these 
things and protecting them in a way that gives the most 
possible security while the plan is implemented.
    Congresswoman Davis. If I might, I think, if I'm not 
mistaken, when I was out touring the ships the last time MARAD 
was working on resecuring or reanchoring or mooring the ships 
with better--so the security is--I'm getting a nod of yes. I 
think they are working on that as far as securing them.
    Mr. Frank. I was using security in a broader sense than 
that. I'm really talking about the environmental piece of the 
vessels, not just they might float off or come loose, although 
that is a critical issue. That oil is a huge risk. Everybody 
knows it. It's not news, it's just how you deal with it. You 
know, I know the State's position is: Pump it out. I know 
MARAD's position is: That doesn't work.
    I'm saying that you can't ignore maintaining those ships 
because next year they are going to get towed out of here and 
dismantled. We may not have until next year.
    Senator Allen. Agreed. Let me conclude this panel with this 
fact: They do spend millions of dollars on maintenance and 
administration of this. Everything that everyone of this panel 
has said is exactly correct. I was looking at the overview. 
This is an example: 1999, they spent $5.2 million in Fiscal 
Year 1999 to maintain the vessels. Maintenance performed by the 
Maritime Administration on these vessels is just enough to keep 
them afloat. In some cases it's done on an emergency basis. 
According the inspector general of the Department of 
Transportation, the Maritime Administration spent $1.3 million 
just to keep one vessel afloat over a two-year period.
    Now, using common sense, if you get this money to get these 
things disposed of and scrapped, you're going to save a whole 
lot of money, while also not obviously having to worry about 
the expense of maintenance issues. So, both need to be a 
concern. Maintenance, but the key focus and goal is getting 
across the goal line, and that is getting the ships out of this 
river, whether it's done domestically, overseas. Get them out 
of this river, and get them properly disposed in an 
environmentally sound way.
    That's what has not been being done until really this year. 
There's been a hiatus of neglect, and spending millions of 
dollars on a lot of maintenance keeping something afloat that--
--
    Mr. Frank. I couldn't agree with you more, Senator.
    Senator Allen. That is the approach we need to take. I 
thank you, this panel. Before you leave, I noticed Captain 
Rusty Mullane. Do you all have the capability to do anything 
here?
    Mr. Mullane. Yes, Senator.
    Senator Allen. You have 60 seconds.
    Mr. Mullane. We are a ship scrapping and reefing concern 
based in Chesapeake. I want to take the time out to say that 
the reefing is an excellent idea for a lot of the ships. There 
are some ships in the fleet that aren't any good for reefs, but 
there is a lot of financial gain to be had by reefing. There 
was a study in Broward County, Florida in the year 2000 that 
showed in Broward County their reefs brought in $2 billion--
that's billion with a ``b''--into their economy in the year 
2000.
    We stand prepared to help with this fleet and dispose of it 
in any way. Thank you.
    Senator Allen. Thank you very much. That idea of economic 
gain certainly had both of Secretary Paylor's eyebrows raised. 
With that, I want to--yes, sir. Did you have some pressing 
comments you wanted to make back there?
    Mr. Paul. Yes, sir.
    Senator Allen. You have 60 seconds.
    Mr. Paul. My name is Peter Paul. I'm an Engineering Analyst 
with the Department of Defense at Fort Lee. Two-and-a-half 
years ago I founded a group called the Memorial Reef Foundation 
with the express purpose of coordinating a memorial and seeing 
to it that these ships are remediated as quickly as possible.
    About a year-and-a-half ago we conducted a meeting at the 
Atlantic State Marine Fisheries Commission under the auspices 
of the State of Virginia, the VMRC office here in Newport News 
to make that happen. We gathered together the combined brain 
power of most of the people in this room, including agency 
representatives, the Corps of Engineers. MARAD was there, plus 
the state and others. I hope not to omit too many here at the 
moment.
    We came to the unanimous conclusion that in principal 
reefing was the way to go. We have heard that sort of addressed 
here, but not quite. When you talk about money--and I've been 
notoriously frugal at expending government money since I'm in 
charge of some of it. The idea that it could be less expensive 
to tow a ship for two or three thousand miles, and to tow 50 to 
a site off the coast of Virginia and lose the economic gain, as 
has been mentioned earlier, plus remediate the ships to a lower 
standards than the EPA now already recognizes in the REEFEX and 
SINKEX program doesn't make sense to me.
    The standards for deep water sinking defined in temperate 
Atlantic waters of 100 feet or more, which already exists. You 
have the reef site called the Triangle Reef area is there. The 
standards of the EPA mandates today under those Navy programs 
are lower than the standard required to convert that material 
to human use in any form, the two different numbers. The 
numbers are substantial.
    MARAD know this, and so does everyone else involved in this 
as intensively as I have. You heard the number $300,000--I 
believe Captain Schubert mentioned earlier--to 500- for doing a 
sinking exercise versus a scrapping exercise. That's not an 
insignificant number times 130 ships.
    Costs, location, distance, all of that dovetails with the 
expediency. If we can do one and we don't have to clean it up 
as much as we would have to clean it up for human use, you 
would think we could move more ships more quickly by keeping 
them local or Atlantic, and doing it as a reef and all the 
benefits that garners for the marine environment, which is my 
interest in this.
    It seems to me we have the opportunity in front of us to 
make everybody a winner, including the United States Navy, 
which is a rare opportunity when industry, the 
environmentalists, and the Navy can all dovetail and say: Yes, 
this is win/win.
    Senator Allen. We love the Navy.
    Mr. Paul. The Navy saw an opportunity at my suggestion that 
we use these ships as live-fire target objects. That is one of 
the options if you--they don't get this opportunity, as we 
witnessed in Puerto Rico, very often.
    The public, as witnessed by the article that was written up 
on this proposal in the Pilot was 100 percent for this. There 
is no backlash within the community as far as the environment 
goes. They are for it, because of the lack of reef structure 
offshore Virginia that this would in some sense improve.
    Senator Allen. Thank you, sir. You have only 1 second left.
    Mr. Paul. Sorry.
    Senator Allen. Do you have something in writing?
    Mr. Paul. Tons of it, sir.
    Senator Allen. No, do you have----
    Mr. Paul. I have my prepared remarks, which I totally 
ignored.
    Senator Allen. Of course. If anybody has any other evidence 
you want to put into the record--while this is not a town 
meeting as such, I see folks here who I know care about it. I 
want to get your input, but if you have anything in writing. I 
already have the letters from Bay Bridge Enterprises. Give that 
to us. I know Delegate Diamonstein has also written to me.
    Mr. Paul. I would have dressed less casually had I known 
this was a formal hearing.
    Senator Allen. Who cares? Who cares? It's hot and sweaty. 
Again, I want to conclude this, but thanking everyone for 
attending, thanking all the witnesses, administrator, Captain 
Schubert, thank you. We're all going to work together with you 
at the local, State, executive, legislative levels to get the 
job done. Again, thank you all so much. Hearing adjourned.
    [Whereupon, at 12:47 p.m. the hearing was adjourned.]
```