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75–375 PDF 2012

A REVIEW OF VESSELS USED TO CARRY 

STRATEGIC PETROLEUM RESERVE DRAWDOWNS 

(112–90) 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

COAST GUARD AND MARITIME TRANSPORTATION 

OF THE

COMMITTEE ON 

TRANSPORTATION AND 

INFRASTRUCTURE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

JUNE 27, 2012 

Printed for the use of the 

Committee on Transportation and Infrastructure 

( 

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

committee.action?chamber=house&committee=transportation 

(II) 

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE 

JOHN L. MICA, Florida, Chairman 

DON YOUNG, Alaska 

THOMAS E. PETRI, Wisconsin 

HOWARD COBLE, North Carolina 

JOHN J. DUNCAN, JR., Tennessee 

FRANK A. LOBIONDO, New Jersey 

GARY G. MILLER, California 

TIMOTHY V. JOHNSON, Illinois 

SAM GRAVES, Missouri 

BILL SHUSTER, Pennsylvania 

SHELLEY MOORE CAPITO, West Virginia 

JEAN SCHMIDT, Ohio 

CANDICE S. MILLER, Michigan 

DUNCAN HUNTER, California 

ANDY HARRIS, Maryland 

ERIC A. ‘‘RICK’’ CRAWFORD, Arkansas 

JAIME HERRERA BEUTLER, Washington 

FRANK C. GUINTA, New Hampshire 

RANDY HULTGREN, Illinois 

LOU BARLETTA, Pennsylvania 

CHIP CRAVAACK, Minnesota 

BLAKE FARENTHOLD, Texas 

LARRY BUCSHON, Indiana 

BILLY LONG, Missouri 

BOB GIBBS, Ohio 

PATRICK MEEHAN, Pennsylvania 

RICHARD L. HANNA, New York 

JEFFREY M. LANDRY, Louisiana 

STEVE SOUTHERLAND II, Florida 

JEFF DENHAM, California 

JAMES LANKFORD, Oklahoma 

REID J. RIBBLE, Wisconsin 

CHARLES J. ‘‘CHUCK’’ FLEISCHMANN, 

Tennessee 

NICK J. RAHALL II, West Virginia 

PETER A. DEFAZIO, Oregon 

JERRY F. COSTELLO, Illinois 

ELEANOR HOLMES NORTON, District of 

Columbia 

JERROLD NADLER, New York 

CORRINE BROWN, Florida 

BOB FILNER, California 

EDDIE BERNICE JOHNSON, Texas 

ELIJAH E. CUMMINGS, Maryland 

LEONARD L. BOSWELL, Iowa 

TIM HOLDEN, Pennsylvania 

RICK LARSEN, Washington 

MICHAEL E. CAPUANO, Massachusetts 

TIMOTHY H. BISHOP, New York 

MICHAEL H. MICHAUD, Maine 

RUSS CARNAHAN, Missouri 

GRACE F. NAPOLITANO, California 

DANIEL LIPINSKI, Illinois 

MAZIE K. HIRONO, Hawaii 

JASON ALTMIRE, Pennsylvania 

TIMOTHY J. WALZ, Minnesota 

HEATH SHULER, North Carolina 

STEVE COHEN, Tennessee 

LAURA RICHARDSON, California 

ALBIO SIRES, New Jersey 

DONNA F. EDWARDS, Maryland 

SUBCOMMITTEE ON COAST GUARD AND MARITIME TRANSPORTATION

FRANK A. LOBIONDO, New Jersey, Chairman 

DON YOUNG, Alaska 

HOWARD COBLE, North Carolina 

ANDY HARRIS, Maryland 

FRANK C. GUINTA, New Hampshire 

CHIP CRAVAACK, Minnesota 

BLAKE FARENTHOLD, Texas 

JEFFREY M. LANDRY, Louisiana, 

Vice Chair 

JOHN L. MICA, Florida (Ex Officio) 

RICK LARSEN, Washington 

ELIJAH E. CUMMINGS, Maryland 

CORRINE BROWN, Florida 

TIMOTHY H. BISHOP, New York 

MAZIE K. HIRONO, Hawaii 

MICHAEL H. MICHAUD, Maine 

NICK J. RAHALL II, West Virginia 

(Ex Officio) 

(III) 

CONTENTS Page 

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

TESTIMONY 

PANEL ONE

Hon. John D. Porcari, Deputy Secretary, United States Department of Transportation ................................................................................................................ 3 

PANEL TWO

Thomas Allegretti, President, The American Waterways Operators (AWO), 

on behalf of AWO and American Maritime Partnership .................................. 18 

PREPARED STATEMENTS SUBMITTED BY WITNESSES 

Hon. John D. Porcari ............................................................................................... 32 

Thomas Allegretti .................................................................................................... 39 

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(1) 

A REVIEW OF VESSELS USED TO CARRY 

STRATEGIC PETROLEUM RESERVE 

DRAWDOWNS 

WEDNESDAY, JUNE 27, 2012 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON COAST GUARD AND

MARITIME TRANSPORTATION, 

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE, 

Washington, DC. 

The subcommittee met, pursuant to notice, at 10:02 a.m. in Room 

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

(Chairman of the subcommittee) presiding. 

Mr. LOBIONDO. The subcommittee will come to order. 

The subcommittee is meeting today to review the process used to 

determine the availability of U.S.-flag vessels during the summer 

2011 drawdown of crude oil from the Strategic Petroleum Reserve. 

I would like to thank Ranking Member Larsen for requesting a 

hearing on this important topic. The subcommittee is very happy 

that he suggested it. My hope is that we will get some answers 

today to several important questions regarding the conduct of the 

administration and identify what mistakes were made so we can 

avoid this situation from happening in the future. 

On June 23, 2011, President Obama announced that the U.S. 

and its partners would release a total of 60 million barrels of oil 

into the world market over a 30-day period to offset the disruption 

in oil supply caused by unrest in Libya. As part of the effort, the 

U.S. pledged to release 30 million barrels of oil from the Strategic 

Petroleum Reserve. 

As most of us here today are aware, the waterborne transportation of oil from the SPR to U.S. refineries is governed by the 

Jones Act. That is law. The Jones Act protects our national security 

and promotes job growth in the United States maritime sector by 

requiring merchandise and passengers moving between two points 

in the U.S. to be carried on U.S.-built, U.S.-owned, U.S.-crewed, 

and U.S.-flagged vessels. 

The Jones Act has been the law since 1920. In 1987, the Department of Energy, MarAd and Customs signed an agreement outlining the process agencies must follow to ensure compliance with 

the Jones Act during the Strategic Petroleum Reserve drawdown. 

During last summer’s drawdown, however, reports from the press 

indicate the administration may have deliberately ignored U.S. law 

in issuing over 40 Jones Act waivers for the transport of oil from 

the SPR. After issuing a blanket waiver and then rescinding it a 

2 

day later, it appears as though the administration was assuring potential bidders for SPR oil that individual waivers would be granted for large volume sales before applications were even submitted. 

It also appears the administration made no effort to use its authority to require the oil to be divided into smaller lots in order to 

be carried on U.S.-flag vessels. 

I find these actions extremely disturbing, particularly because it 

came at a time when so many Americans were out of work and 

these were American jobs that were affected. It is puzzling that an 

administration claiming to being doing everything they can to help 

America’s unemployed would allow vessels crewed by foreigners, 

not Americans, owned by foreigners, built in foreign countries, and 

flying foreign flags to carry nearly all of the Strategic Petroleum 

Reserve oil released. In fact, only one U.S. vessel was used. That 

vessel carried less than 1 percent of the 25 million barrels of SPR 

oil that was moved on water. 

U.S.-owned vessels crewed by American mariners stood ready, 

were willing, and again, ready to move more of the oil, but it seems 

the administration decided to leave them at the dock. 

I look forward to hearing from our witnesses today on how this 

situation unfolded and why it unfolded. I am particularly interested in whether promises were made that Jones Act waivers 

would be granted before applications were submitted. I am also 

eager to hear an explanation regarding what appears to be a de 

facto 500,000 barrel lot size that effectively disqualified available 

U.S.-flag vessels. 

Finally, I am interested in hearing from an industry on the status of the Jones Act fleet at the time of the drawdown. It is important for us to know that there was, indeed, sufficient capacity 

available to move more of the oil and the process by which the administration was made aware of U.S.-flag vessel availability. 

I want to thank the witnesses for appearing today, and now I 

yield to Mr. Larsen. 

Mr. LARSEN. Mr. Chairman, thank you for convening this morning’s hearing to examine how best to uphold the integrity of the 

Jones Act when future shipments of oil are released from the Strategic Petroleum Reserve, or the SPR. 

The Jones Act exists for good reason. It sustains a vibrant and 

strong domestic maritime industry. It creates job opportunities for 

U.S. mariners. It underpins U.S. maritime defense policy. 

As you know, the ranking Democratic member of the full committee, Congressman Rahall, and I are both strong supporters of 

the Jones Act. On behalf of Mr. Rahall and I, I want you to know 

that we very much appreciate your quick action to schedule this 

morning’s hearing as we requested in our April 24 letter to you and 

Chairman Mica. 

Thank you. 

Unfortunately, we missed such an opportunity to support the 

Jones Act last year. In response to oil shortages attributed to civil 

unrest in Libya, the President initiated in June 2011 a drawdown 

from the SPR for only the third time in history. Regrettably and 

contrary to longstanding policy under the Jones Act, U.S. tankers 

carried less than 1 percent of the oil from the SPR. 

3 

Instead the administration authorized 44 separate waivers of the 

coastwise laws to allow foreign tankers to transport this oil. The 

administration denied available U.S. carriers this valuable and 

vital business. 

U.S. industry has available capacity to move U.S. strategic oil reserves on U.S.-flag ships putting U.S. mariners to work. I do not 

know of anyone on this committee who agreed with these controversial waivers, and Congress has responded accordingly to uphold the integrity of the Jones Act. 

First, Congress passed language to prohibit the use of funds to 

issue future Jones Act waivers for SPR drawdowns for the balance 

of this fiscal year until the administration has taken adequate 

steps to ensure the use of U.S.-flag vessels. 

Second, the House adopted an amendment offered by Congressman Cummings and Congressman Landry that strengthens information and notice requirements for any future Jones Act waivers. 

These actions are warranted and helpful, but they are limited in 

their scope and duration. 

Consequently, I concluded that we need to look squarely at the 

waiver process itself to ensure that future SPR releases benefit 

both our domestic maritime industries and the overall U.S. economy. With this thought in mind, it is my intention this morning 

not just to look backward, but to look forward. 

No one is satisfied with the status quo. Clearly we need a constructive dialogue on how best to release SPR reserves. Now is the 

time to begin that effort. 

By working together with you, Mr. Chairman, I contend that 

such a dialogue could produce a body of sensible, practical reforms 

to the waiver process, reforms that work for the U.S. economy, provide opportunities for our domestic maritime industries, and put 

U.S. seafarers to work. Those are the outcomes upon which we can 

agree, and I look forward to beginning that dialogue this morning. 

The Jones Act exists for good reason. Let’s use it for good effect. 

Thank you. 

Mr. LOBIONDO. Thank you, Mr. Larsen. And, again, thank you 

for the suggestion to move forward expeditiously with this. 

The first witness today is the Honorable John D. Porcari, deputy 

secretary of the U.S. Department of Transportation. Mr. Porcari, 

the floor is yours. 

TESTIMONY OF HON. JOHN D. PORCARI, DEPUTY SECRETARY, 

UNITED STATES DEPARTMENT OF TRANSPORTATION 

Mr. PORCARI. Thank you, Chairman LoBiondo, Ranking Member 

Larsen and members of the committee. I appreciate the invitation 

to discuss the Maritime Administration’s role in determining Jones 

Act vessel availability during the Strategic Petroleum Reserve 

drawdowns. 

The Obama administration unequivocally supports the Jones Act 

and is committed to the continued success of the U.S. Merchant 

Marine. This administration has shown this commitment—— 

Mr. LOBIONDO. Excuse me. Is your microphone on? 

Mr. PORCARI. Yes. 

Mr. LOBIONDO. Could you pull it a little bit closer? 

Mr. PORCARI. Certainly. 

4 

Mr. LOBIONDO. Thank you. 

Mr. PORCARI. The Obama administration unequivocally supports 

the Jones Act and is committed to the continued success of the U.S. 

Merchant Marine. This administration has shown this commitment 

through the strong enforcement of the Jones Act, including the imposition of the largest fine ever recorded for a Jones Act violation 

and efforts to establish new markets, including marine highway 

services that will promote investment and create U.S. jobs in the 

maritime industry. 

In addition, the administration is focused on increasing cargo opportunities for U.S.-flag ships and crews through agreements 

reached for the first time with Ex-Im Bank and the Department of 

Energy. 

In keeping with this commitment, the Obama administration did 

not issue a blanket waiver of the Jones Act for the 2011 Strategic 

Petroleum Reserve drawdown, unlike previous administrations. In 

June of 2011, President Obama authorized a drawdown of the SPR 

as part of an international effort to address the crude oil supply 

disruption caused by civil unrest in Libya. The Energy Department 

offered 30 million barrels to private buyers, largely oil companies 

and oil traders. 

MarAd surveyed the maritime industry and determined that the 

Jones Act coastwise tank fleet was already largely fully employed. 

Only two tankers of the 56 in the Jones Act fleet showed interest 

in carrying SPR oil during the drawdown period. Owners of about 

a dozen tank barges also indicated general interest. 

Relying solely upon the small amount of excess capacity in the 

Jones Act fleet to carry 30 million barrels of oil in 30 days on an 

emergency basis would have made the United States unable to 

meet its international obligations and effectively address the Libyan oil supply disruptions. Thus, waivers of the Jones Act were considered. 

The Department of Homeland Security’s Customs and Border 

Protection is responsible for waivers of the Jones Act. MarAd’s role 

is to determine the availability of Jones Act vessels to perform the 

required carriage and advise CBP of its findings. CBP, as you 

know, makes the final decision on whether or not to issue a waiver. 

During the 2011 SPR drawdown, MarAd provided CBP with 

availability determine for each requested waiver. MarAd considered 

each waiver request individually and made determinations based 

on its own survey of the maritime industry regarding whether vessel operators were interested and available. 

In certain cases, MarAd found available Jones Act vessels and 

advised CBP accordingly. As a result, all SPR oil was moved quickly to market without major disruptions to the regular commercial 

movement of oil. In fact, one shipment was moved on the Jones Act 

vessel, as you pointed out, an apparent first for a major drawdown 

of the SPR. 

The Obama administration firmly believes that Jones Act implementation is consistent with the drawdown of the SPR. That is 

why we did it. MarAd’s goal is to maximize the use of available 

Jones Act vessels during an SPR drawdown, and MarAd believes 

this can be accomplished without impacting a drawdown’s effectiveness. 

5 

Future SPR drawdowns, should there be any, may lead to additional opportunities for Jones Act vessels as MarAd is worked with 

DOE, DHS, and DOD to strengthen SPR auction processes to further include opportunities for Jones Act carriers. 

Mr. Chairman, thank you for this opportunity to discuss MarAd’s 

role in the SPR drawdown process. I am happy to respond to any 

questions you and members of the subcommittee may have. 

Mr. LOBIONDO. We thank you very much. I am first going to turn 

to turn to Mr. Larsen for questions. 

Mr. LARSEN. Thank you, Mr. Chairman. 

Thank you, Mr. Secretary. 

Contrary to your statement, the maritime industry will insist 

that there was available capacity in the U.S.-flag tanker and barge 

fleet to carry a substantial portion of the 30 million barrels. I am 

not sure how you made the statement that you did, but I think I 

would like to hear specifically can you tell us on what basis the 

DOE, CBP and MarAd conclude that American vessels were not 

available. 

Mr. PORCARI. OK. I would be happy to, and it is an excellent 

question. 

Let me first go back to this SPR release itself, and as the Chairman correctly pointed out, it began with a blanket waiver of the 

Jones Act. It is important to point out that the Maritime Administration and the Secretary quickly got involved at the highest levels 

to make it clear that we wanted to make Jones Act vessels eligible 

and that we believed that a case-by-case determination of Jones 

Act eligibility was the best way to do that. 

Just to run through the math quickly, there were a total of 56 

U.S.-flag tankers that were coastwise qualified. Eleven of these are 

dedicated crude carriers. Two of them were available during the recent drawdown. 

On the tank barge side, there were 30 U.S.-flag coastwise qualified tank barges. First on the tankers, of the two that were listed 

as available, upon further investigation, one was engaged under 

contract in Brazil at the time and would have taken 14 days to get 

to the U.S. coast. The other one was in dry dock. 

Of the available barges, as I mentioned, there are 30 coastwise 

qualified barges. Fifteen of the thirty had issues that could arguably be said were impediments to their use. Three of them required 

shipyard work. Four required a Coast Guard waiver for not having 

crude oil washing systems. Seven were offered with the limitation 

that the charter had to clean the barges with three loads of heating 

fuel to make them suitable for the shipment, and finally, one of the 

barges did not have a vapor recovery system which prevented it 

from being used at certain of the loading locations. 

The fact is MarAd declined three nonavailability waiver requests 

because we believe U.S.-flag vessels of sufficient capacity were 

available on the timeframe required under our international obligations for the strategic petroleum reserve release. 

Mr. LARSEN. So can you talk to us about the role that the 

500,000 barrel lot size plays in excluding potential carriers from 

participating in the SPR drawdown and how that impacted U.S.- 

flag carriers, and where the 500,000 lot size comes from? 

6 

Mr. PORCARI. The 500,000 barrel lot size for the sale of the crude 

oil was set by the Department of Energy. The transport, the vessel 

transport of oil was originally set at 350,000 barrels. When we saw 

that there were two tankers that had less than 350,000 barrels of 

capacity but over 300,000, we prevailed upon the Department of 

Energy to lower that requirement from 350,000 barrels to 300,000 

barrels so that those two at the time what we thought were available tankers would qualify for that. So we actively engaged with 

DOE, and I would say that DOE was quite willing to lower the 

350,000 barrels to 300,000 barrels for the transport of it. 

Ultimately, as I mentioned, those two tankers were not available 

in the timeframe for specific reasons, but both through that release 

and should there be future releases, we believe one of the important things that we can and will do is work aggressively with Department of Energy based on real availability of U.S. tankers and 

tank barges to write them into and make the Jones Act vessels eligible as much as possible. 

Mr. LARSEN. It would seem that would be at least the spirit of 

the Jones Act, if not the law. Does the 500,000 barrel lot size create 

a barrier to participation for U.S.-flag carriers? 

Mr. PORCARI. It is my understanding—— 

Mr. LARSEN. So my understanding, that is a purchase lot size. 

Mr. PORCARI. Right. 

Mr. LARSEN. And then from there it could be divvied up or aggregated after that. 

Mr. PORCARI. Exactly. It is important to distinguish between the 

purchase lot size of 500,000 and the vessel transport lot size. And 

given the makeup of the U.S. fleet, tankers and tank barges, we 

think that having the number as low as possible for maximum eligibility is important. 

It is also critical, obviously, that the true availability be within 

the timeframe designated in the SPR release. We believe very 

strongly in the Jones Act. It is akin to an insurance policy that the 

Nation has, and you cannot buy insurance after your house is on 

fire. 

When we need the Nation’s Jones Act fleet and at least as importantly, the U.S. crews that come with it, whether it is a natural 

disaster or a defense emergency, we cannot build a fleet then. We 

think this is an opportunity for the Jones Act fleet, just as we have 

prevailed upon the Ex-Im Bank and Energy to start using Jones 

Act vessels for project cargos where they were not specifically included before; we see this as an opportunity. And, again, I would 

point out that the two previous releases by the George H.W. Bush 

administration and the George W. Bush administration had a blanket waiver of the Jones Act. We do not think that is the right thing 

to do. 

Mr. LARSEN. The next panelist will have some, I think, points on 

the bidding process, and so I want to find out there are some bookends in this debate regarding the role of SPR bidders. It is my understanding that oil purchasers and traders requested that their 

entire lot be transported in one trip, but that was not a requirement of DOE’s Notice of Sale. 

So why do we agree to these requests when the evidence is clear 

that it can unfairly disadvantage U.S. carriers? 

7 

Mr. PORCARI. We had, at the time, and subsequently have had 

very productive discussions with DOE about optimizing the ability 

of U.S.-flag fleet, given the fleet mix that we have, to participate 

in these releases balanced with at the end of the day this SPR release is for national strategic reasons, and the timing of it in most 

cases is dictated by international releases designed to impact the 

market positively. 

We think we have certainly learned lessons from this first ever 

attempt to bring the Jones Act vessels into an SPR release. We 

have had very good discussions, including with industry. It is important to point out that we convened a meeting with industry 

after this release, and one of the clear homework items that we 

have collectively is we need and industry needs to provide better 

real time, true availability information so that in determining 

whether there are Jones Act vessels available, we know whether 

they are truly available in that timeframe, if they’re of sufficient 

size, and if they can work in the loading facilities that DOE has 

designated. 

We think working closely on those on an individual basis in the 

future will actually maximize the ability to use Jones Act vessels. 

Mr. LARSEN. Do you think the desires of the purchasers of the 

SPR oil to use large, foreign-flag vessels puts pressure on DOE and 

you to supersede clear Federal law on Jones Act to require American vessels first? 

Mr. PORCARI. I do not, sir. I think that originally there was a 

blanket waiver and we prevailed in an interagency discussion to 

have a case-by-case waiver process shows that it can and will work. 

Again, I think it is clear, and I think that industry would agree 

there are clear lessons learned from this release that we can do it 

more effectively in the future. 

In this day and age real time true availability information is one 

of the ways we need to do that. But I think it is clear, and this 

administration has been very strong in supporting the Jones Act 

and supporting U.S. manufacturing and industries in general. This 

is an across the board attempt by the administration to maximize 

U.S. jobs, maximize U.S. employment, and quite frankly, to keep 

the Jones Act fleet viable for the reasons stated in the original 

Jones Act. 

Mr. LARSEN. Mr. Chairman, I have just one more set of questions 

for this witness right now if you do not mind. It has to do with the 

future. 

And can you be more specific about what steps the administration is doing to ensure full compliance with the Jones Act and new 

requirements enacted by this Congress last fall with respect to the 

waiver process in the event of another drawdown this year, knowing full well, I think, that that probably runs out September 30th? 

But this Congress has shown a clear intent on what we want to 

see happen clearly after the existing authority runs out. 

Mr. PORCARI. I will be happy to. And, first, Congress’ intent is 

very clear, and I would say it is very consistent with what the administration wants to do. The nature of an SPR release is that 

there is little or no warning. So it puts a premium on having our 

act together and having an interagency process in place in advance 

before any SPR release is announced. 

8 

We have had ongoing and very extensive discussions at the senior levels, for example, with my counterparts in both the Department of Energy and the Department of Homeland Security on how 

we can do the process better in the future. That includes an active 

partnership with industry on an ongoing basis so if there is a snap 

decision to have an SPR release, the process is in place. The availability information is better known. 

In this release, for example, the Maritime Administration by 

email had previously used brokers to survey availability. They sent 

out an email to industry at the time. We think there are better real 

time ways to have that kind of information including if there are 

vessels that are under short-term contract that can get out from 

those contracts and do this work, knowing those kinds of particulars. 

Mr. LARSEN. There may be further questions for the next panelist I have, but I yield back. 

Before I do, I just want you to know I have to step into the anteroom to visit my hometown Boys and Girls Club folks. So I will just 

be right there, but I will be right back. 

Mr. LOBIONDO. And, of course, you will be listening as you are 

in there, right? 

Mr. Cravaack. 

Mr. CRAVAACK. Thank you, Mr. Chair. 

I appreciate it, Mr. Secretary, your being here today. 

Section 501(b) of the Title 46 requires administration of MarAd 

to determine the suitability of Jones Act qualified vessels are not 

available to carry the cargo before a waiver can be granted, correct? 

Mr. PORCARI. Correct. 

Mr. CRAVAACK. OK. How did MarAd determine the nonavailability of U.S.-flag vessels for the SPR drawdown? 

And did MarAd reach out to the U.S.-flag industry? 

Mr. PORCARI. Yes, we did reach out to the U.S.-flag industry. 

Availability means available within the timeframe of the SPR release, including the total movements required for that particular 

lot sale, meeting the technical requirements, whether it’s Coast 

Guard licensing, vapor recovery systems, having the tankers or the 

tank barges in a condition where they can receive crude oil. They 

may require cleaning, for example. Those all are a part of that. 

We then make that information that determination available to 

Customs and Border Protection in the Department of Homeland 

Security, who ultimately makes the waiver determination. 

What we are focused on going forward is being able to do that 

as quickly in as real time a basis as possible, and our intention is 

wherever possible to make opportunities available for the Jones Act 

fleet rather than having them written out in a blanket way by 

blanket waivers as has been done previously. 

Mr. CRAVAACK. OK, sir. Thank you very much. 

And with that said then, according to data provided by MarAd, 

only one U.S.-owned, built, flagged, and crewed vessel moved SPR 

oil during the 2011 drawdown. That vessel moved less than 1 percent of the total SPR oil that moved on the water. 

So are you saying, sir, it is the DOC’s position that there was 

only one qualified Jones Act vessel available at that time? 

9 

Mr. PORCARI. Actually, sir, we declined three nonavailability 

waiver requests. One of the three ultimately resulted in the barge 

movement that you mentioned. The other two were shipped by 

other means, perhaps pipeline. I am not sure, but we did this on 

a case-by-case basis based on that lot of shipment, the best real 

time information we had on availability, and meeting that timeframe. 

And, again, everything else being equal, the larger the vessel, the 

less movements that are needed and the easier it is to meet the 

timeframe. 

Mr. CRAVAACK. OK. Then how many waivers were actually 

granted for foreign-owned, built, flagged, and crewed vessels for the 

2011 drawdown? 

Mr. PORCARI. I believe the number is 44, but I need to go back 

and verify that. 

Mr. CRAVAACK. OK. Forty-four, and again, only 1 percent of U.S.- 

flag maritime fleet vessels could actually rise to the occasion? 

Mr. PORCARI. One of the things that we found, Mr. Cravaack in 

actually doing the determinations, and it is both a good news and 

a bad news scenario, is that much of the U.S.-flag fleet was engaged, was under contract or subcontract, and actually was working at the time. We believe that with better information and with 

more real time information, we should have better availability, but 

it will entirely depend on the market conditions at the time. 

The status of the Jones Act fleet, if it is employed elsewhere, the 

timing of the release, again, this is the first time that any administration has tried to use the Jones Act fleet during an SPR release. 

We believe, just like we have done with project cargos with the ExIm Bank and with the Department of Energy, that it is an opportunity to write the Jones Act fleet into rather than exclude it from 

business. 

Mr. CRAVAACK. I truly believe that a strong maritime fleet is essential to our national security. 

Mr. PORCARI. It truly is. 

Mr. CRAVAACK. I am a strong proponent of that. So with that 

said, what outreach has MarAd had with the representatives of 

U.S.-flag industry and labor in the wake of the 2011 SPR drawdown to address their concerns and the concerns that you just 

spoke about right now? 

What are we doing to make sure that our fleet is ready to go 

when we need her? 

Mr. PORCARI. One of the things that we did in the wake of the 

last SPR release was the Maritime Administrator and I convened 

a meeting with industry, Mr. Allegretti and others, on this specific 

issue and partly to deconstruct the events during that release, but 

mostly looking forward how we can do this better together. 

Ultimately this has to be a partnership. We believe very strongly 

in this partnership, and we think that by being smart and quick 

about this process that we in the future, should there be a future 

SPR release, that we can actually have better participation by the 

Jones Act fleet, again, depending on its actual availability. 

Mr. CRAVAACK. Thank you, Mr. Chairman. I appreciate your indulgence of the time, and I yield back. 

Mr. LOBIONDO. Thank you, Mr. Cravaack. 

10 

Actually Mr. Larsen and Mr. Cravaack covered an awful lot of 

what I had, but to go over this a little bit more, so you are, I think 

actually admitting that there was a de facto 500,000 barrel lot size 

threshold. 

Mr. PORCARI. For the sale, not necessarily the transport, Mr. 

Chairman. In other words, the DOE sale advertisement had a 

500,000 barrel minimum for bidding on it. It was our intention and 

in our discussions with DOE we wanted to make sure that the 

transport by any successful bidder was in quantities small enough 

that the U.S.-flag fleet could actually use it. 

So, again, DOE originally had 350,000 barrels as the minimum 

threshold. There were not any available U.S. tankers at 350,000. 

There were two potential available tankers at 330,000. We got 

DOE to lower that to 300,000 because we wanted those tankers to 

be used. 

Mr. LOBIONDO. So how many actual shipments were less than 

500,000? 

Mr. PORCARI. I do not know offhand, and on a lot by lot basis 

we will be happy to get that information. 

Mr. LOBIONDO. You know, we are not trying to give you a hard 

time, but this just kind of is not gibing here that only, you know, 

1 percent of the movement can come from U.S.-flag vessels, and we 

just need to try to get to the bottom of it. But mostly since we cannot undo what was done, to try to understand this process for the 

future and, you know, if the industry was, you know, at 100 percent employment and everything was fine, you know, OK, there is 

just not availability. But we are just getting a different story about 

the availability. 

So I do not want to be repetitive with the questions again because Mr. Larsen had most of these questions. I will leave it at 

that for now. 

I would like to make note that Mr. Cummings is wrapped up in 

a markup, but that he had questions specifically, and we will take 

them for the record so that Mr. Cummings can get his questions 

answered. 

And, Mr. Porcari, we thank you very—oh, Mr. Landry, thanks for 

joining us. OK. You are recognized. 

Mr. LANDRY. Thank you, Mr. Chairman. 

Deputy Secretary, this committee, I believe, is growing tired of 

me saying that I represent more Jones Act jobs than any other 

Member in this body. Twenty-eight thousand men and women are 

employed in my district because of the Jones Act. 

Considering this information, do you find it ironic that I also represent the destination of more SPR releases transported on foreignflag vessels than any other Member in the country? 

In other words, all of the oil released or a vast majority of the 

oil that is released out of the strategic reserve is then shipped to 

my district, but not by American-flag vessels while at the same 

time, I represent more mariners than any other Member. 

Mr. PORCARI. I would classify it as an opportunity. We share the 

strong belief that the Jones Act both protects U.S. jobs and protects 

U.S. national interests, and the purpose of reversing what had previously been a blanket waiver in all cases on releases and going on 

a case-by-case basis was to provide whatever opportunities we posVerDate Aug 31 2005 13:36 Aug 13, 2012 Jkt 000000 PO 00000 Frm 00032 Fmt 6633 Sfmt 6633 P:\HEARINGS\112\CG\6-27-1~1\75375.TXT JEAN
11 

sibly could for Jones Act vessels and their U.S. crews to participate. 

And we think we clearly learned lessons from this release. 

Should there be another one in the future, sir, we believe that a 

close partnership with industry and better real time information 

will allow us to maximize the Jones Act participation. 

Mr. LANDRY. Are you saying that the lessons that were learned 

move you so that if we have another release that the process that 

you would use would be more transparent and more applicable to 

sticking to the preamble of the Jones Act? 

Mr. PORCARI. First, in terms of transparency, we posted the vessel availability on the MarAd Web site as a way to make sure we 

got the word out. I think from a policy point of view, the most important decision was made immediately, which was unlike previous 

administrations not to grant a blanket waiver and just waive the 

Jones Act, but instead to focus on opportunities to get Jones Act 

vessels and crews involved. 

We agree with both the letter and the spirit of the Jones Act in 

the sense that it exists for a reason, and that reason is that it is 

in the vital interest of the United States to have a strong U.S.-flag 

fleet and even more important than the vessels themselves in some 

ways, the crews, the U.S. crews. 

Mr. LANDRY. So are you saying that you believe that you all went 

through every possible scenario and worked diligently to uphold 

the preamble of the Jones Act in the process that you all used in 

granting these waivers? I mean, do you feel that today or do you 

feel that moving forward you can do a better job of insuring that 

American-flag vessels have an opportunity to carry it? 

Because it bothers me that while mariners that I represent sit 

on a dock, they get to watch a foreign-flag vessel pass their dock 

with oil, with oil paid for by their hard earned tax dollars, and that 

oil is being transported by foreign-flag vessels. 

And I am just trying to ensure that me and you have an understanding and that what you’re telling this committee is that, look, 

maybe we did not do as good of a job as we could. I mean, you feel 

like you have, and that is what I am trying to understand. Do you 

think that you can take some steps in the future that would further strengthen the ability of U.S.-flag vessels to have a seat at 

this table? 

Mr. PORCARI. The short answer is yes. We believe there clearly 

are steps that we can take in partnership with industry to do a better job. As with anything else, we should be learning from experience, and this was the first time that anyone tried to get the Jones 

Act fleet involved in an SPR release. 

Mr. LANDRY. And let me just tell you I appreciate the fact that 

you recognize that you can do a better job. Not many people come 

before us and admit, and I think that is very noble of you. I want 

you to know that, and I hope that you live up to that word and the 

next time we do a better job of getting more U.S.-flag vessels involved. 

Mr. PORCARI. Sir, there is not a day that goes by that I do not 

realize I can do a better job, and we should all be learning from 

it. I very much look forward to working with you going forward 

should there be another release. 

12 

And in the nature of the releases, it is quick and with no warning so that it can impact markets. That puts a premium on doing 

the work upfront very collaboratively. We have had some very good 

collaborative work with our colleagues at the Department of Energy and the Department of Homeland Security and others in both 

lessons learned and should there be another release, how it can be 

done better, just as we are doing with trying not to grant Buy 

America waivers on the manufacturing side, just as we are doing 

with the Ex-Im Bank agreement that we have where they are 

using U.S. vessels and we are not in the same way before, and just 

as we are doing with the Department of Energy. It was not necessarily using U.S.-flag ships for project cargo shipments and they 

are now. 

We see every one of these as an opportunity, even if it is at the 

margins. These margins add up to strengthen U.S. jobs and to get 

maximum U.S. employment for the Jones Act that we need in case 

of emergency. 

Mr. LANDRY. Thank you, Mr. Chairman. I yield back. 

Mr. LOBIONDO. Thank you. 

Mr. Cummings. 

Mr. CUMMINGS. Thank you very much, Mr. Chairman. 

Deputy Secretary Porcari, a waiver was issued. First of all, it is 

good to see you again. 

Mr. PORCARI. It is good to see you. 

Mr. CUMMINGS. A waiver was issued to Marathon Petroleum on 

July 25, 2011, which stated and I quote, ‘‘You have purchased 1 

million barrels of crude oil from the SPR, and this portion represents 500,000 barrels.’’ 

The waiver noted that MarAd had made a nonavailability determination regarding the subject request. Looking at MarAd’s nonavailability determination it states, and I quote, ‘‘We have found no 

single U.S.-flag vessel available to carry the entire lot of cargo in 

one trip as requested by Marathon.’’ 

Similarly, on July 20th, a waiver was issued to J.P. Morgan Ventures Energy Corporation for the movement of 500,000 barrels of 

a $1.5 million barrel purchase from the SPR. Regarding this waiver, MarAd wrote, and I quote, ‘‘We found no single U.S.-flag vessel 

available to carry the entire lot of cargo in one trip as requested 

by J.P. Morgan.’’ 

The question is this. It is my understanding that there were 

Jones Act qualified vessels capable of carrying oil released from the 

SPR. Why were the Jones Act waivers for Marathon and J.P. Morgan Ventures and for dozens of other firms issued? Why is that? 

Mr. PORCARI. Mr. Cummings, we tried to make sure we had good 

information on availability. I do not know those two specific ones 

on July 25th and 20th of the top of my head. What I would like 

to do because I want to give you a precise answer is actually go 

back and make sure we review those records and find out the particular circumstances of those. 

Each of the waiver requests was based on availability at that 

specific time, based on that specific shipment and with whatever 

other parameters were specified. So I cannot specifically comment 

on those two without some further research, but I would be happy 

to do that. 

13 

Mr. CUMMINGS. In these cases, Marathon and J.P. Morgan were 

already moving less than the entire amount of the oil they had purchased. Given that the Jones Act is the law of the land, I want to 

know, and I am sure you can get back to me on this, why were 

Marathon and J.P. Morgan required to break down their shipment 

sizes and move only the number of barrels that could be carried on 

Jones Act qualified vessels? 

In other words, why would MarAd write that there was no single 

U.S.-flag vessels available to carry the entire lot of cargo in one 

trip as J.P. Morgan requested? And why was J.P. Morgan not required to change its request or use more than one single vessel so 

that it could comply with the law? 

That is what I am concerned about. 

Mr. PORCARI. It is a fair question, and I would like to get you 

the particulars on that. I do know the timeframes of the actual 

transport are one of the variables that were important, but these 

are two specific transactions, and I think we need to look into those 

specifics. 

I would further comment that this was sea change, if you will, 

for the bidders. In other words, up until this time when the Obama 

administration specifically tried to make Jones Act vessels available, all previous releases got blanket waivers. Bidders on SPR oil 

never had to think about or worry about U.S.-flag fleet availability. 

We have all learned lessons from this release. One of the lessons 

is by the bidders who need to understand and I think now do understand in a much more specific way that we are serious about 

this and that they need to really work to find availability, and so 

I will get back to you on those two. 

Mr. CUMMINGS. One last thing. Based on the emails available to 

the committee, was not MarAd aware at the time that it was 

issuing nonavailability determination that lots of 500,000 barrels 

might exceed the carrying capacity of all Jones Act qualified vessels? If so, did MarAd inform the Department of Energy that the 

lots should be broken into smaller sizes to ensure it could move on 

Jones Act compliant vessels? 

Mr. PORCARI. Yes, my understanding is the two things. The minimum bidding quantity that DOE specified which was 500,000 barrels and then separately the transport, which could be less than 

500,000 barrels, I am told that 500,000 is basically a yardstick in 

the industry that they use. 

Our contention then and now is that does not mean you have to 

transport 500,000 barrels in one crude carrier, which would exclude 

all but the largest U.S.-flag ships that are fully engaged in Alaska 

trade, for example, that the transport could be in smaller quantities. That is why when DOE first put out 350,000 barrels as the 

minimum for transport, we prevailed on them to lower to 300,000 

because it would allow two U.S. tankers that we thought were 

available at the time to actually transport the oil. 

Mr. CUMMINGS. I see my time is up. Thank you very much. 

Mr. LOBIONDO. Mr. Cummings, for your information, the Department of Energy and the American Petroleum Institute were both 

invited today, but declined our invitation. I think I could guess 

why. 

Mr. CUMMINGS. I thank you, Mr. Chairman. 

14 

Mr. LOBIONDO. Mr. Harris. 

Dr. HARRIS. Thank you very much, Mr. Chairman. 

And, Mr. Deputy Secretary, it is good to see you again, and 

thank you for the work you did for Maryland as our Transportation 

Secretary. 

Let me follow up on the gentleman from Maryland and what he 

asked because according to press reports, you know, well, I guess 

it was almost a month before those determinations were made for 

Marathon and J.P. Morgan that the Congressman referred to. Senior officials from DOE, MarAd, you know, conducted a conference 

call with potential drawdown. This is a month before they grant it, 

where a senior DOE official indicates that Jones Act waivers would 

be granted to bidders carrying 500,000 barrels or more. 

Well, if I were them and I had a DOE official that said, ‘‘Oh, just 

say you are going to transport 500,000 because we will get the 

waiver,’’ that sounds like, you know, someone either was not aware 

of the Jones Act or the importance of the Jones Act to maintaining 

our fleet and the economic importance. 

Now, I find this a little interesting because the Department of 

Energy comes before our committee and the Science, Space and 

Technology and all the time talks about creating American jobs, 

and this is one of the goals of the department and all, and here is 

a DOE official a month before waivers are granted that specifically 

the reason for the waiver is that the bidder asked to transport 

500,000 barrels. Well, a month before, they were told, ‘‘Well, basically you might as well ask for it because we are going to grant 

you the waivers.’’ 

What is going on? I mean, why is the DOE involved? They are 

not involved in the waiver process, are they? 

Mr. PORCARI. No, they are not specifically involved in the waiver 

process, and in fairness to our DOE colleagues, the two previous 

SPR releases by two previous administrations had blanket waivers. 

This is not a process that they had been through before, and we 

worked very closely with them and very aggressively to make sure 

wherever possible Jones Act vessels could be included. 

I cannot comment on the specifics of the press report. I do not 

know it offhand, and I am leery about press reports in general, but 

there was certainly an education process with industry, with the 

bidders on the crude oil for the Jones Act process. 

To the extent they were familiar with it, they may not have been 

familiar with all of the details and the fact that the waiver where 

the Maritime Administration part of it, sir, is we determine whether vessels are available based on those individual circumstances, 

and then Customs and Border Protection in DHS actually either 

does or does not issue a waiver based on that. 

So it is a partnership in that sense. Industry had a number of 

questions about this. We tried to answer those questions, and I am 

talking about the industry bidding on the oil in this case. We in 

DOE tried to answer those questions. 

I think going forward, they clearly understand how serious we 

are about using wherever possible Jones Act vessels and crews. 

Dr. HARRIS. Sure. No, and I appreciate that, you know, we say 

that in the past it has been done, but in the past we are not in, 

you know, the third year of what the President admits is the largVerDate Aug 31 2005 13:36 Aug 13, 2012 Jkt 000000 PO 00000 Frm 00036 Fmt 6633 Sfmt 6633 P:\HEARINGS\112\CG\6-27-1~1\75375.TXT JEAN
15 

est economic downturn since the Great Depression. I mean, this is 

not the same instance. 

We had an opportunity to use American-flag vessels with Americans, American labor, and we decided not to. And so one question 

I have is, is the DOE involved? 

The DOE in previous administration did not have the authority 

to give waivers either, did they? You said the DOE official just, I 

guess, assumed it because previous administrations had done it? 

Mr. PORCARI. What had happened previously, and I would respectfully disagree with the contention. We saw this as an opportunity to bring the U.S.-flag fleet in rather than exclude it. 

There have been two SPR releases prior to this one by the 

George H.W. Bush administration and the George W. Bush administration. 

Dr. HARRIS. Sure. No, I understand the history, but you know, 

is it true that only 1 percent of the oil was delivered on U.S.-flag 

vessels? 

Mr. PORCARI. We basically did not grant three waiver requests, 

and two of them ultimately used other means to transport the oil. 

The one waiver request that we denied or that we recommended 

denial, DHS denied and it was complied with, transported about 

150,000 barrels. That is right. 

Dr. HARRIS. Out of how many? One hundred and fifty thousand 

barrels out of how many? 

Mr. PORCARI. The total release was 30 million. 

Dr. HARRIS. Well, I suspect that we could probably do a little better job than that in the future, and I hope we are serious about 

it. 

Can you get me information? I assume that the department was 

part of that conference call on June 28, 2011? 

Mr. PORCARI. We did have a Maritime Administration representative on that, and I will be happy to get you—— 

Dr. HARRIS. Could you determine whether that, in fact, is true, 

that on that call, you know, the DOE official indicated that waivers 

would be granted? 

And again, Mr. Chairman, I wish the DOE was here to answer, 

you know, under what authority they are making Jones Act determinations in conference calls with bidders that I think the evidence 

shows resulted in what would be expected. If you are told that a 

waiver is going to be granted, why bother to look for an American 

vessel when you are already told upfront that waivers would be 

granted? 

Thank you very much, Mr. Chairman. 

Mr. LOBIONDO. Mr. Cummings, back to you. 

Mr. CUMMINGS. Thank you very much, Mr. Chairman. I am only 

going to take a few minutes. I just wanted to just say a few words. 

I am deeply concerned about the issuance of waivers to allow 

Jones Act qualified vessels to carry cargo between United States 

ports, including the issuance of waivers following the 2011 release 

from the Strategic Petroleum Reserve. The Jones Act is the law of 

the land. It is the cornerstone of our United States maritime capability, and it should be waived only in the interest of rarest of circumstances. 

16 

To increase transparency surrounding the issuance of waivers, 

Congressman Landry and I introduced H.R. 3202, the American 

Mariners Job Protection Act. The bill would require MarAd to include in its assessments of the availability of Jones Act compliant 

vessels information on the actions that could be taken that enable 

Jones Act qualified vessels to carry the cargo for which a waiver 

is sought. 

MarAd would also be required to publish its determinations on 

its Web site and provide notification to Congress when a waiver is 

requested or issued. 

I thank the Chairman, Mr. LoBiondo, and Ranking Member 

Larsen, as well as Ranking Member Rahall and other members of 

this subcommittee for their support. 

Congressman Landry and I most recently offered this legislation 

as an amendment to the National Defense Authorization Act of 

2012, and it was adopted. And I certainly hope that it will be included in the final NDAA conference report. 

On July 15, 2011, I wrote to Secretary LaHood to inquire about 

the issuance of waivers to enable Jones Act compliant vessels to 

carry oil released from the Strategic Petroleum Reserve. On August 

29, 2011, Secretary LaHood provided copies of some documents associated with approximately 20 of the waivers. I appreciate the information Secretary LaHood provided, but I am deeply disappointed in DHS and DOE are not here today to discuss this matter. 

I have tried without success to assemble all of the agencies that 

are involved in the waiver process, and again today I see that the 

agencies will simply not come together to provide the clarity we 

need about exactly how this process is conducted. 

I continue to believe that we need to get all of the parties together in one room to understand what occurred in 2011 and what 

steps need to be taken in the future to ensure that there is compliance with the Jones Act. 

Thank you very much, Mr. Chairman. 

Mr. Landry, I understand you have a brief statement and/or 

question. 

Mr. LANDRY. Yes. Mr. Chairman, I just wanted to try to clarify 

an answer that the Deputy Secretary gave to Mr. Cummings a 

while ago when he mentioned or I thought I heard him say that 

DOE set the 500,000 barrel limit or you mentioned that the 

500,000 barrel limit came from DOE. 

Mr. PORCARI. It is in the DOE prospectus for sale of the SPR release. 

Mr. LANDRY. Well, Mr. Chairman, I am holding the Notice of 

Sale from I believe DOE, which says that the minimum delivery lot 

sizes are 100,000 barrels for pipeline and 300,000 barrels for vessels. 

Now, nowhere in this notice do I see 500,000. In fact, we got to 

500,000 because someone slipped information to the industry telling them that if they went to 500,000 they would get the waivers. 

Now, you and I just had a discussion about how we move forward 

in helping our mariners in this country, and the way we help them 

is by making sure that when DOE says 300,000 barrels because 

17 

they know that we can use U.S.-flag vessels to move their cargo at 

this volume, that we try to adhere to it. 

So I just wanted to correct the record, Mr. Chairman, in that the 

Deputy Secretary said it was DOE that issued a 500,000 barrel 

limit, and would you like to retract that? 

Mr. PORCARI. No, there are two separate things here, Mr. 

Landry. One is the minimum bid amount that bidders for the oil 

can bid on, and that is 500,000 barrels. The delivery—— 

Mr. LANDRY. No, no, no. That is 300,000. 

Mr. PORCARI. The delivery of the product was 300,000 barrels. It 

was originally, I would point out, 350,000 barrels, and we prevailed 

upon DHS or DOE to lower that because we knew there were two 

tankers that could carry up to 330,000 barrels. 

So you are absolutely right about the delivery size at 300,000, 

and we specifically asked them to lower it from 350 which it originally was to 300 so that two U.S. tankers that we thought were 

available at the time could get that business. 

Mr. LANDRY. Did they get the business? 

Mr. PORCARI. They did not. Of the two tankers one was under 

contract in Brazil and the other one was either in or headed to dry 

dock. 

Mr. LANDRY. Thank you, Mr. Chairman. 

Mr. LOBIONDO. Mr. Harris. 

Dr. HARRIS. Thank you. 

Just a very brief followup because your testimony was that we 

actually shipped 150,000 barrels. That is the only shipment on 

American-flag vessel. 

Mr. PORCARI. Yes, and that was actually a barge. So, in other 

words—— 

Dr. HARRIS. So 300,000 was not the real minimum. I mean, that 

document says it is supposed to be 300,000. I mean—— 

Mr. PORCARI. They can always break up the shipment and do it 

with two or three barges, which is something that we encouraged 

wherever possible. 

Dr. HARRIS. So you could have broken up a shipment of 500,000 

into a 300 or a 350 and 150 also. 

Mr. PORCARI. That is correct. That is correct. 

Dr. HARRIS. So why was that not encouraged? 

Mr. PORCARI. It was, in fact, encouraged. Again, for the industry 

bidding on the oil, we encouraged them as part of this process to 

look at multiple shipments. So if they bid for 500,000 barrels, they 

had the ability to ship it on three barges or a tanker and two 

barges or whatever. 

Dr. HARRIS. And that was not encouraged in the June 28th 

phone call, that June 28th conference call. I guess you will try to 

get me the records, but again, apparently on that conference call 

DOE said 500,000 is OK and you’ll get a waiver. That does not 

sound like encouraging breaking up shipments. 

Mr. PORCARI. Well—— 

Dr. HARRIS. How did the department encourage breaking up 

shipments if not on a conference call like that when you have the 

bidders on the line saying, you know, ‘‘How are you going to ship 

this?’’ 

18 

I mean, again, it is just not apparent to me that that encourages 

breaking it up if you say, ‘‘Look. You are going to get a waiver if 

you request a shipment of 500,000.’’ 

Mr. PORCARI. No, it is a fair question. One of the purposes of a 

case-by-case waiver determination was to see with those particular 

circumstances on those dates within whatever parameters were in 

that particular bid, if there was a way to use U.S. vessels, any combination of U.S. vessels. 

And we think one of the lessons learned, quite frankly, is that 

better real time information on combinations of vessels that might 

be available might well encourage more U.S. vessel usage, and we 

think going forward. And we have worked closely with our colleagues in Energy and DHS and others, for example, on tabletop 

scenarios since the last release to try to figure out the mechanics 

of encouraging and knowing to the extent possible U.S. vessel 

availability. 

Dr. HARRIS. OK. Thank you. 

Thank you for giving me that extra time, Mr. Chairman. 

Mr. LOBIONDO. OK. Mr. Porcari, I thank you very much for being 

here today. We are going to take a short, brief adjournment so we 

can move to, or recess so we can move to Panel 2, and we will be 

proceeding very directly. 

Mr. PORCARI. Thank you, Mr. Chairman. 

[Recess.] 

Mr. LOBIONDO. The committee will come to order. 

Our second witness this morning is Mr. Tom Allegretti, president, The American Waterways Operators (AWO), and testifying on 

behalf of AWO and the American Maritime Partnership. 

Mr. Allegretti, thank you for being here. You are recognized. 

TESTIMONY OF THOMAS ALLEGRETTI, PRESIDENT, THE 

AMERICAN WATERWAYS OPERATORS (AWO), ON BEHALF OF 

AWO AND AMERICAN MARITIME PARTNERSHIP 

Mr. ALLEGRETTI. Thank you, Mr. Chairman, for the opportunity 

to testify today on behalf of AWO and the American Maritime Partnership. 

The domestic maritime industry shares your goals for today’s 

hearing, to shed light on the circumstances that gave rise to approximately 50 Jones Act waivers during last year’s drawdown of 

the Strategic Petroleum Reserve and to ensure that history does 

not repeat itself in the event of another drawdown this summer. 

The Jones Act is the law of the land for good reason. It 

undergirds the national security, homeland security, and economic 

security of the United States. What we witnessed last year was the 

hollowing out of the Jones Act by unelected agency officials. Taking 

a critical look back at that experience is essential to insuring that 

as we move forward, such a travesty never happens again. 

What happened last year was illegal and unacceptable. Administration officials took actions that effectively excluded American vessels owned by American companies, crewed by American mariners 

from transporting American oil between American ports. They did 

this by establishing an arbitrary, unwritten minimum lot size for 

vessel movements that had no basis in law. 

19 

Potential purchasers of SPR oil were promised Jones Act waivers 

in advance, and the administration delivered on those promises 

even as available American vessels and American mariners sat 

idle. The result, approximately 50 Jones Act waivers and only one 

lifting by a U.S.-flag vessel. More than 99 percent of the oil moved 

on foreign vessels with foreign crews. 

We appreciate the subcommittee’s oversight in probing how this 

disregard for the law could have transpired, and we are troubled 

that Deputy Secretary Porcari has not been joined today by officials 

from the Department of Energy. We hope that Congress will continue to press all of the departments that share responsibility for 

the mismanagement of last year’s SPR drawdown for answers to 

this fundamental question: how a Federal action intended to help 

the American economy could have been carried out under unwritten ground rules that expressly favored foreign companies and foreign workers to the detriment of Americans. 

We also hope that Congress will continue to press the administration to clarify its plans to ensure compliance with the Jones Act. 

And with the new requirements governing the waiver process that 

you all enacted last fall, clarity is especially needed on the steps 

the departments will take to make full use of American vessels 

first in the event of another SPR drawdown. 

We appreciate DOT and the Maritime Administration meeting 

with AWO and AMP this spring to discuss the availability of American vessels and their suitability for the movement of SPR crude, 

but we are disappointed that the Department of Energy has been 

unwilling to meet with us, and we are especially troubled that the 

administration has not yet made clear what actions it will take to 

avoid a repeat of last year’s debacle. 

Chairman LoBiondo, Ranking Member Larsen, members of the 

subcommittee, I want to be very clear about what the American 

maritime industry is saying with respect to another SPR drawdown. First, we are saying that the Jones Act requires the use of 

American vessels to move crude oil from the SPR to another U.S. 

destination. Nowhere does it say that American vessels must be 

used only if they meet arbitrary, unwritten criteria developed secretly by an administration official. 

Second, we are saying that American vessels and American mariners are available in substantial numbers to move SPR crude today 

and that they are fully capable of doing this work. We are not saying that the domestic fleet has the capability to move all of the oil 

in a drawdown within a short period of time. 

And, third, we are saying that the administration should establish procedures that make clear that available American vessels 

will be used first and to the full extent of their capability and availability, and that Jones Act waivers will be issued only when no 

American vessels are available. 

Our message is simple. The law is clear. American vessel owners 

and American mariners are ready, willing and able to do what they 

do best, move cargo safely, securely, and economically for the benefit of our customers and our country, but in order to do so we need 

the administration to follow the law. 

Thank you again for the opportunity to address this most serious 

situation today. 

20 

Mr. LOBIONDO. Thank you, Mr. Allegretti. 

An explanation offered by the Department of Energy and MarAd 

for not contracting Jones Act qualified vessels is that U.S.-flag vessels carrying less than 500,000 barrels cannot meet berthing and/ 

or discharging parameters set forth by many receiving facilities. Do 

you believe this is true? 

Mr. ALLEGRETTI. I do not. But I will say this is reflective, Mr. 

Chairman, of the essential problem that we have with the administration and which you heard repeated here this morning. There is 

a mentality that resides within the Department of Transportation 

and the Department of Energy that essentially starts from the 

premise that what are the impediments, was the word used in the 

Secretary’s statement submitted; what are the impediments to the 

use of American vessels and how do we deal with those impediments, and we have heard a range of them. 

American vessels are too small. They are too few. Well, what is 

the sufficient number that makes them not too few? What is the 

size that makes them not too small? 

All of the vessels that were available last year during the SPR 

drawdown in the barge fleet exceeded the minimum lot size in the 

DOE Notice of Sale, which was 40,000 barrels. 

We also hear that what you just said, DOE does not think that 

our vessels are capable of berthing at SPR terminals. That is incorrect, but it also is irrelevant. It is not a factor in the Jones Act. 

Then we hear that the size of our vessels is not consistent—and 

this is probably the part that is most Orwellian to me—not consistent with the desires of the oil purchasers, with their transportation plans, and with purchaser preferences, as though these matters supersede the law. And when we ask the administration to 

consider that these are outside the ambit of the Jones Act, what 

we get back is a legalistic interpretation that it is within MarAd’s 

discretion to consider factors like loading windows, berth schedules, 

and cargo size in determining American vessel availability. 

And the end result of all of that is what you saw last year. There 

were more than 25 American-flag tank barges that were capable of 

lifting SPR oil during that drawdown, and not a single one of them 

got any work. 

Mr. LOBIONDO. Can you tell me what the difference was between 

the vessels that were bypassed by Department of Energy and 

MarAd during this 2011 drawdown and the vessels that delivered 

oil to the Strategic Petroleum Reserve in the first place? 

Mr. ALLEGRETTI. Well, there are two principal differences. As you 

all said, 99 percent of the oil was delivered on foreign-flag vessels 

with foreign crews registered under the laws of foreign nations. 

And so that would be one distinction. 

The other major distinction is the size, and so it raises this issue 

of the secret 500,000 barrel minimum, that the public documents 

that are available to folks in our industry say that if you have a 

tank barge in excess of 40,000 barrels, you are eligible to lift this 

oil. 

And so think about this, Mr. Chairman. I know that you and 

other members of the committee try to look at the effect of your 

laws on real men and women. So think about it from this perspective for a second. You are an American-flag barge owner. You are 

21 

probably a family-owned company. You have probably been in the 

business for three, four or five generations. You have reinvested 

the profits of your company consistently back into the business providing good jobs in your community and around the country. You 

play by the rules. You have complied with all of the new requirements of OPA–90, which means that over the course of the last 20 

years, you have invested hundreds of millions of dollars in the recapitalization of your fleet. 

And so you now have a fleet of vessels that are technologically 

advanced, state-of-the-art, the very model of efficiency for coastwise 

transportation, and you hear that the administration is going to 

draw down the SPR, and you look at the Notice of Sale, and it says 

40,000 barrel minimum. You think, ‘‘Well, great. I have got plenty 

of vessels that are more than 40,000 barrels that are available, and 

I would be interested in that work.’’ 

And then you wait for the phone call. You wait for the oil company or the oil trader or the charterer to call you and ask you 

about the availability of your vessel, but no phone call comes in. 

And then the next thing you hear is that the Maritime Administration has made a declaration that there are no American vessels 

available to lift this cargo, and you look out your window and you 

have got vessels sitting idle at your dock. 

So if you are an American vessel owner, you have to be extraordinarily concerned about how this process went. I said it was illegal. You know, it was also unfair, and I think what it points us is 

that this process utilized by the Maritime Administration to determine the availability of vessels really was a sham. 

Mr. LOBIONDO. Well, I appreciate that, but let me maybe ask 

this a little bit differently because I want to make sure I understand this correctly. 

Is it not true that the vessels that were bypassed are the same 

type of vessels that made the original deliveries? 

Mr. ALLEGRETTI. Absolutely, Mr. Chairman. I am sorry if I misinterpreted your question. That is absolutely true. The original filling of the Strategic Petroleum Reserve was done by a company no 

longer in business by the name of Coastal Towing, which had the 

contract for the original filling. Coastal Towing’s barges were all in 

the neighborhood of 20, 25, 30,000 barrels. 

So we filled the Strategic Petroleum Reserve with smaller 

barges, and it is also, in fact, true that as the reserve has had to 

be replenished, we have use ATVs to do that. These are the very 

vessels that were overlooked last summer during the drawdown. 

Mr. LOBIONDO. OK. Thank you, Mr. Allegretti. 

Mr. Larsen. 

Mr. LARSEN. Thank you, Mr. Chairman. 

Thank you, Mr. Allegretti, for coming today. 

You say that in the industry there are 25 or so available vessels. 

Mr. ALLEGRETTI. Last year. 

Mr. LARSEN. Yes, right. Sorry. Last year. Secretary Porcari sort 

of went down a list by number and category of vessels that were 

not available for whatever reason. 

I did not do the math and add those up. I do not know that they 

added up to 54. I do not know if you did the math. It is possible 

it added up to 29, leaving the 25 available. Can you give us your 

22 

evaluation of the list that Mr. Porcari gave us, the reasons why 

and the number of vessels not available? 

Mr. ALLEGRETTI. I would be happy to. And I might pivot off of 

something you said in your statement, Mr. Larsen. 

Mr. LARSEN. Sure. 

Mr. ALLEGRETTI. About looking for practical reforms. This is an 

area that would be rich in that regard. One of the things that the 

Maritime Administration does, which it is not well equipped to do 

is to evaluate the commercial market. So it asks questions about 

when is your next dry docking. What kind of cargo did you carry 

the last time? What are you going to carry the next time? 

These are questions the Government does not need to be involved 

in. There is an unbelievably efficient system of cargo transportation 

in the United States that works perfectly day in and day out. The 

essence of what oil companies do for the movement of their cargos 

is to work with vessel owners and figure out how do I get this cargo 

from this place to this place. What is the most efficient way to do 

that? What vessels are available? How do I reposition vessels to 

make this work? 

These decisions go on every single day. So to have the Government try to micromanage the connection between a particular cargo 

and a particular vessel is really absurd. We could simplify this 

process and, I think, enhance the integrity of the Jones Act by 

doing one simple thing. We can say the Jones Act is the law of the 

land. You shall use American vessels first until there are no American vessels. 

So using the scenario of last year’s drawdown, if the Department 

of Energy had not given advanced warning to the oil purchasers 

that it was going to give them automatic Jones Act waivers, all 

they needed to do was ask, and had said instead, ‘‘It is our expectation that you will follow the law and that you will contract with 

American vessel companies to move your cargo until there are none 

left,’’ those guys would have figured out how to get that cargo to 

market, believe me, and we would not have had all of this kind of 

Maritime Administration management of what the list actually 

says. 

Mr. LARSEN. Does MarAd and DOE have access to this database 

for cargo transportation vessel availability? 

Mr. ALLEGRETTI. Well, there are two answers to that question. 

Last summer the list that Deputy Secretary Porcari was referring 

to was actually a Maritime Administration list that was on 

MarAd’s Web site. It reached out to vessel owners, said, ‘‘What do 

you have available?’’ and compiled that information, and it updated 

it on a regular basis. 

We found that that system did not provide sort of all of the detail 

and clarity that they were looking for. So one of the things that 

came out of our conversations this past spring with Secretary 

Porcari and the folks at MarAd was for us to try to help them put 

together a better list with more specificity about vessel availability 

and timeframes of availability, which we have done, and which we 

have shared with them. 

And so that list shows that at this point in time we have availability in the next 30 days more than 30 American-flag vessels 

with a capacity of somewhere between 50 and 150,000 barrels each, 

23 

with an aggregate capacity of about 21⁄2 million barrels. That is 

where we stand today. 

Mr. LARSEN. So if there was an SPR drawdown today of 30 million on the same level they had last year, you could do 21⁄2 million 

of that 30, but that would max out the U.S. industry today. 

Mr. ALLEGRETTI. That is right. We could do 21⁄2 million of the initial drawdown, but I would also point out that those vessels will 

become available again at some point in the timeframe of the drawdown, and so part of what the reform has to do is to be looking at 

an ongoing basis about vessel availability. 

Mr. LARSEN. Right. Can you comment some on your views with 

regards to this 500,000 barrel lot size? 

And the question I had for Mr. Porcari had to do with whether 

or not that creates an artificial barrier to participation. Now, that’s 

a purchasing lot size, but in your experience in the industry, does 

it not seem obvious there might be some connection between those 

who are purchasing and those who are delivering? 

You buy 500,000; you want to deliver the 500,000. 

Mr. ALLEGRETTI. Oh, exactly. And that is the problem, that you 

know, I thought that the answers on that question were incomplete. It is true that the 500,000 refers partly to the purchase of 

the oil, and if it had gone from there to you may purchase in 

500,000 barrel lots, but you must deliver consistent with the requirements of the law, that would have been fine and we would all 

be here today celebrating that action rather than protesting it. 

But that is not what happened. It was if you buy in 500,000, we 

will give you a waiver to transport it at 500. And I am sure the 

committee has this information available to it. If not, we would be 

happy to share it through our Freedom of Information Act request 

of the agencies. There are many documents that we have received 

and reviewed that make clear that although they never rescinded 

the 40,000 and 300,000 barrel minimums in their notice of sale, as 

a de facto matter they changed that to make it 500,000. And that 

is why there were 44 waivers of the Jones Act, because there was 

a de facto 500,000 barrel minimum, and there are no American 

vessels available to do that. 

Mr. LARSEN. Right. Back to the issue of potential reforms to the 

waiver process, do you have other contributions to that, to reform 

ideas? 

Mr. ALLEGRETTI. Well, you know, the simplest is simply if we 

could all start at the same premise, and I think that is part of the 

problem that we have. Secretary Porcari talked about active partnership with industry, and we certainly welcome that, but a partnership has to be based on kind of a mutual understanding and 

mutual basis of similar philosophy, and we do not have that here. 

We have the industry saying follow the law, and we have the administration saying there are a bunch of impediments that get in 

the way of following the law. And I thought one of the things that 

was most troubling about Secretary Porcari’s testimony was he 

talked about looking for a process to bring us in, to bring the American-flag vessel industry in. 

We are already in. The law requires us to be in, and yet they see 

us on the outside and they see reforms that give us a greater opVerDate Aug 31 2005 13:36 Aug 13, 2012 Jkt 000000 PO 00000 Frm 00045 Fmt 6633 Sfmt 6633 P:\HEARINGS\112\CG\6-27-1~1\75375.TXT JEAN
24 

portunity, as he put it, to participate. We have the first opportunity 

to participate under the law, not the last. 

So I would say if we could have a fundamental understanding 

about the premise from where we depart, that would be wonderful. 

Mr. LARSEN. Thank you. 

Mr. Chairman, thank you. 

Mr. LOBIONDO. Mr. Harris. 

Dr. HARRIS. Thank you very much. 

Let me ask. Obviously other shipments occur of oil between two 

American ports in everyday commerce in the United States. What 

percent of those shipments right now are delivered on Jones Act 

vessels? 

Mr. ALLEGRETTI. All of them. Between U.S. ports? 

Dr. HARRIS. Yes. So in everybody business conducted. 

To put it in perspective, what we are expected to believe is that 

although on everyday business 100 percent of shipments can be delivered on a Jones Act vessel, when normal commerce is conducted 

in the sale and purchase of oil, when the U.S. decides to sell part 

of its stock of oil, we can only do one-half of 1 percent? Am I missing something here? 

I mean, all of a sudden when the U.S. Government is the seller 

of the oil instead of some other producer, we can only ship 1⁄200 of 

it complying with Jones Act? 

Again, I am astounded. 

Mr. ALLEGRETTI. You are not missing anything, sir. 

Dr. HARRIS. OK. 

Mr. ALLEGRETTI. It goes to the issue of difference in the fundamental premise from which we depart. 

Dr. HARRIS. Right. Because I assume that when a normal conventional trade of oil is made, the DOE and MarAd is not on the 

phone between the prospective purchaser and the seller saying, 

‘‘You know, do not worry about that Jones Act because if you just 

contract for 500,000 barrels with an American producer, do not 

worry. We will allow you to.’’ 

I assume that is not the way business is normally conducted. 

Mr. ALLEGRETTI. No, sir. No, sir. And actually one thing that is 

relevant to your question is that this industry, the coastwise transportation of petroleum industry has undergone a fundamental 

transformation in the last 25 years. Part of that was driven by the 

requirements of OPA–90, which required double hauls, and so that 

spurred the reconstruction of all vessels going forward that want 

to participate in that trade. 

But the other thing that has changed fundamentally that is different than it was prior to OPA–90 is the partnership that exists 

between the oil companies and the vessel owners who transport 

their cargo where there is a fundamental partnership about how do 

we do this, what kinds of vessels do we want; are we both committed to flawless operations and no spills? And that is a very 

strong partnership, and so the state-of-the-art industry that exists 

today is part of that. 

And so you cannot have that partnership without them having 

a close commercial working relationship. 

25 

Dr. HARRIS. So what you are suggesting is that the oil companies 

actually have a better relationship with the transport companies 

than the U.S. Government does, functional relationship. 

Mr. ALLEGRETTI. That is undoubtedly true. 

Dr. HARRIS. I also do not understand, and I guess I could have 

asked the Secretary although it is probably higher administration 

policy. What was the emergency about getting this oil shipped 

without complying with Jones Act? 

I mean once the decision is made that you are going to release 

the oil, its effect on the market is there. I mean, the market assume 30 million barrels of extra production are there. If it is released today, tonight, tomorrow, next week, next month, the market knows it is there. 

Is there an emergency that you can tell that meant we could not 

wait? Because as you suggest, some of these vessels could have 

been just recycled through the process. I mean, until we are literally on an everyday basis we ship 100 percent of that American 

produced oil. What was the emergency? Was there a perceived 

emergency? 

Mr. ALLEGRETTI. Well, there was an articulated emergency by 

the Department of Energy which laid out initially the goal of all 

of these cargos being into the economy within 30 days of the announcement of the drawdown at the beginning of July. 

Dr. HARRIS. And what was the purpose of that that you could 

tell? 

I mean, I am sorry. I have to ask you because the Department 

of Energy is not here to ask the question. But I mean, did some 

economist suggest that, you know, at 35 days it does not work? The 

effect is gone. At 40 days the effect is gone? Is this voodoo economics, oil economics out of the department? 

Mr. ALLEGRETTI. I mean, I do not know. I cannot tell you. I cannot speak for them, thankfully, and I cannot tell you what their 

basis of 30 days was, but here is what I can tell you, that it was 

a false goal on their part, and they knew that they were not going 

to achieve it, and I think they used it as a mechanism to exclude 

American vessels from the process. 

Factually, although they had a 30-day goal, there were still cargos moving to terminal locations 90 days later. 

Dr. HARRIS. On foreign vessels. 

Mr. ALLEGRETTI. On foreign vessels. So they did not deliver the 

cargo for 90 days. So one has to conclude that somewhere in that 

90-day process there had to be room for American vessels to participate. 

And I will add this. The Department of Energy has provided not 

once scintilla of evidence to show what it suggests, that by the use 

of smaller American vessels we would have had a materially damaging effect on the President’s policy. There is no evidence to suggest that. 

Dr. HARRIS. Well, thank you very much. 

And thank you, again, Mr. Chairman. 

Mr. LOBIONDO. Mr. Landry. 

Mr. LANDRY. Mr. Chairman, thank you. 

My friend Mr. Harris has it right on the point. You know, at my 

house my wife and I set down some rules for my 7-year-old, and 

26 

when he does not want to follow them, he can give me every excuse 

in the world why he should not have to follow that rule. That kind 

of sounds like where we are at in this issue. 

You know, it is like it is a missed opportunity by this agency. So 

if you break it down in simplistic terms, like Mr. Harris said, there 

was no immediate rush. These refineries were not running out of 

oil. Is that not correct? 

Mr. ALLEGRETTI. That is correct. 

Mr. LANDRY. So the immediate indication by the administration 

to the markets that it was going to make available 30 million barrels of oil was in their mind supposed to have an effect on the market to lower the price at the pump. That was the excuse, right? 

But then those refineries are not short of oil. They basically just 

stopped some foreign oil from coming into the refinery at that time, 

said, ‘‘Wait a minute. We do not need that shipment right now. 

Those tankers can sit off in the Gulf of Mexico, anchor down, and 

wait till we get this 30 million barrels.’’ 

Of course, what we know is that it is voodoo economics, Mr. Harris. I mean, the whole thing was a scam, all right, to try to tell the 

American people that this administration was going something to 

lower the price at the pump, when it is real easy to do. You have 

just got to the bit in the ground down in the Gulf of Mexico. 

And so we could have easily just said, ‘‘Follow the law and allow 

American workers to transport that oil over a 30-, 60-, 90-, 100-day 

period of time,’’ than to try to shove all that oil into those refineries 

at that particular time because once they did that, those refineries 

simply picked up the phone and said, ‘‘Hey, Saudi Arabia. Send 

your oil back now because we have got all of the American oil we 

need, and now you can bring your tankers in.’’ 

Am I missing something? 

Mr. ALLEGRETTI. No, I do not think so, Mr. Landry. I think that 

you have described it perfectly. 

Mr. LANDRY. So really the agency just missed an opportunity to 

put Americans to work. So what we hear out of this administration 

and out of these agencies is how American jobs are so important 

to them and how their main goal is to create American jobs. And 

when they had an opportunity to create or preserve American jobs, 

they said no. Is that a correct statement? 

Mr. ALLEGRETTI. That certainly was the effect of the actions 

taken by the agencies last summer. 

Mr. LANDRY. And so to simply solve this problem, it just needs 

to be said that if we are going to release the oil out of the Strategic 

Petroleum Reserve, barring an emergency tantamount to refineries 

actually running out of crude, that there is really no excuse not to 

use American-flag vessels. 

Mr. ALLEGRETTI. In our view, sir, none whatsoever. 

Mr. LOBIONDO. Mr. Cummings. 

Mr. CUMMINGS. Thank you very much. 

Mr. Allegretti, you wrote in your testimony, and I quote, ‘‘To this 

day DOE, DOT and DHS have not provided a satisfactory explanation for the American vessel unavailability determinations that 

amounted to a de facto blanket waiver of the Jones Act.’’ 

You also wrote that you have been unable to meet with the Department of Energy to discuss this issue. At the time of the 2011 

27 

SPR drawdown, what steps did you and the Jones Act industry 

take to make MarAd and other agencies aware of the availability 

of Jones act qualified vessels to move oil released from the SPR? 

And what response did you receive from MarAd and other agencies? 

Mr. ALLEGRETTI. Well, the process that MarAd had in place that 

time was to reach out directly to the owners of the vessels and to 

inquire of them what vessels do you have available and what timeframes, and so they were compiling the list that appeared on the 

MarAd Web site at that time. 

And we found that the list was often inaccurate, and it also suffered from these sort of governmental decisions about that vessel 

really is not available because it is scheduled to go into the dry 

dock next month. 

So we reached out to MarAd and we suggested a different process where we would be able to provide them with more real time 

information, which we have done, and we would be happy to share 

that with the committee, the report that we have submitted to 

MarAd. We have given them now the second version of it, which 

we updated from the first. 

Mr. CUMMINGS. Now, when you presented that information, did 

you get any response? I mean, did they say, ‘‘Yeah, we got it. 

Thank you very much’’ or, ‘‘we are going to use this’’? Did they say, 

‘‘To hell with you’’? 

I mean, what did they do? What happened? 

Mr. ALLEGRETTI. Well, we did get a response the first time we 

submitted it and, you know, a polite thank you. We will take a look 

at it, and then we submitted an update a couple of months later, 

and I do not think we have actually received a response to that second submission. 

Mr. CUMMINGS. And what kind of details, I mean, did you provide them with? I mean, when you say you gave them up to date, 

what does that mean? 

Mr. ALLEGRETTI. Well, we have reached out to our members, the 

members of American Maritime Partnership and AWO and asked 

them to tell us what vessels do they have available, and we asked 

them to do that in three basic tranches. One is vessels immediately 

available today to move SPR oil. 

The second tranche is vessels that will become available in the 

next 30 days, and then the third is vessels that might be reasonably available in the next 90 days, and then beyond that if it becomes very speculative. 

So we do list all other American vessels, but without a designation of their availability because we don’t have that information. 

So what this shows them, just to give you the snapshot of what 

this says, is that there are currently 31 vessels available on the 

spot market today or will be available in the next 30 days, and 

they have a collective capacity of about 21⁄2 million barrels of tankage. 

Mr. CUMMINGS. So subsequent to the drawdown, can you identify 

the agencies with whom you have met to discuss this issue, and 

what responses have you received from them? 

Mr. ALLEGRETTI. Well, we have met with, of course, MarAd and 

DOT, and I would say, you know, those are largely positive exVerDate Aug 31 2005 13:36 Aug 13, 2012 Jkt 000000 PO 00000 Frm 00049 Fmt 6633 Sfmt 6633 P:\HEARINGS\112\CG\6-27-1~1\75375.TXT JEAN
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changes, although we have not gotten to the place where we have 

a shared premise about what the law says. I would put it that way. 

We have been very disappointed in our outreach to the Department of Energy. We actually had a situation where we were trying 

to set up a meeting. We think the Energy Department would benefit by a little bit of education about marine transportation. They 

were resistant to setting it up. 

We reached out to a U.S. Senator and asked her to help us get 

the meeting set up, and she did that for us. So we had a meeting 

set on a day in March, and we brought in four executives of tank 

barge companies from around the country. They all flew in that 

day. We took them over to the Department of Energy. We went 

through the security process, went up to the conference room to an 

empty table to be told that the Department of Energy decided not 

to meet with us. 

Mr. CUMMINGS. Did they say why? 

Mr. ALLEGRETTI. No. And we called them subsequently to ask 

what happened. Can we talk? And none of our phone calls were returned. 

Mr. CUMMINGS. Whom have you attempted to meeting with? I 

mean, who were you trying to meet with? Who did you think you 

wanted to meet with? 

Mr. ALLEGRETTI. I had better check the record so as not to misstate that. We did have the names of a couple of folks who we 

thought were scheduled to meet with us. 

Mr. CUMMINGS. I mean, did you have some written confirmation? 

I mean, you did not just show up. You did not just barge in? 

Mr. ALLEGRETTI. No, we do not barge in, sir. 

[Laughter.] 

Mr. CUMMINGS. No pun intended. 

Mr. ALLEGRETTI. No pun intended. No, we had written confirmation that the meeting was set for, as I recall, 11:00 a.m. on this 

particular date, and we met with our folks earlier that morning, 

and we did a little bit of huddling to get ready for the meeting, and 

we went over there and they did not show up. 

Mr. CUMMINGS. I see my time has expired. Thank you, Mr. 

Chairman. 

Dr. HARRIS. [presiding.] I recognize Ms. Hirono. 

Ms. HIRONO. Thank you very much. 

And I do apologize for being late for the hearing. I think that we 

share the concerns about the blanket waiver of the Jones Act 

whenever the reserves are tapped. I have that concern also, but 

going forward, part of the issue apparently is the capacity of the 

Jones Act ships to be able to transport the oil that is release. 

Is there anything that we can do in the future to expand the capacity of our Jones Act ships? Do we need to, you know, do a lot 

more to support shipbuilding, for Jones Act ships being built in our 

country? What are some of your thoughts so that we can avoid this 

kind of or minimize a blanket waiver of the Jones Act every time 

we release oil from the reserves? 

Mr. ALLEGRETTI. Thank you, ma’am. 

I would like to narrow my answer to just the vessels that are engaged in the coastwise transportation of petroleum because that is 

sort of the subject of the hearing today. 

29 

I would say that the size of the fleet, of the American fleet is 

sized to the requirements of the customer base. So you do not find 

ordinarily lots of excess capacity in the fleet. You would not expect 

that if people would build very expensive capital assets for which 

there is no work. 

So the system of commercial transportation actually works pretty 

well in managing supply and demand, and I do not think that 

there is a need for Government incentive to expand the size of that 

fleet because I think the fleet is sized in the requirements of the 

customer base. 

Ms. HIRONO. So does that mean that every time that there is a 

release from our reserves that we are going to see a blanket waiver 

and we just have to live with it? The Jones Act ships or you all 

have to live with it? 

Mr. ALLEGRETTI. Oh, no, not at all. No, not at all because, you 

know, the system is not perfect. So to the extent that where we 

stand today is 31 available vessels of aggregate capacity of 21⁄2 million barrels, there is an excess in the market at least insofar as the 

customer requirements exist today. So they are available to move 

SPR oil. 

And so if we would use those first to the full extent of their availability and then seek Jones Act waivers, that would seem to be 

making the best use of American assets with the surge capacity of 

foreign assets when we run out of availability. 

Ms. HIRONO. That makes a lot of sense. So why are we not going 

that route? 

Mr. ALLEGRETTI. I am not sure I know the answer to that. It has 

really been a subject of some curiosity to us. I guess that is as kind 

a way as I can put it. 

The commentary we heard today from the department, I think, 

actually suggests a grim picture for the future. We have had a year 

of controversy about this issue. Congress has been fantastic in the 

clarity of its expression about the importance and integrity of the 

Jones Act, and yet if you read Secretary Porcari’s statement, what 

you will see is essentially a justification of past action, past action 

which resulted in more than 99 percent of the oil moving on foreign 

bottoms. 

And when you look to the forward program of what will we do 

in the future different, I think it is very grim. I think what that 

testimony says is that the Jones Act fleet is hampered by impediments that make it difficult for us to use it for the transportation 

of SPR oil. I see no evidence of a change in mentality. I see no evidence to suggest that if there is another drawdown of the SPR after 

July 1, after the Iranian situation develops internationally, that we 

will not find ourselves in the same exact situation of 99 percent of 

the oil moving on foreign bottoms because the Department of Energy will have established minimum lot sizes that the oil purchasers will take full advantage of. 

So I think looking forward, I wish I could say that I thought that 

we had the basis for a better understanding, but I do not see it in 

the written testimony. 

Ms. HIRONO. And the minimum lot size, that is an administrative 

decision. It is not based on any requirement of any law or any regulation that is in place? 

30 

Mr. ALLEGRETTI. That is exactly right, and it is inconsistent with 

the published notice of sale that the Department of Energy published for the public. So what you have is a public document that 

says one thing, and you have an unwritten criteria that says something different, which is, in fact, the de facto criteria that drove all 

of the decisions about transportation. 

Ms. HIRONO. Thank you. 

I think there must be something we can do, Mr. Chairman, because we seem to all be on the same the page as to the results that 

we are looking for. 

Thank you. 

Dr. HARRIS. Thank you very much. 

Let me just make a brief comment. Going forward, could you fill 

us in on what the industry looks like? You know, we are having 

an American renaissance of energy in the country where I suspect 

that we are going to have more, not fewer shipments of energy between American ports. What is the industry doing? Are more ships 

being built? Is production increasing? Is it stable? 

Could you just give us an idea where it is going? 

Mr. ALLEGRETTI. I can give you an anecdotal idea. I would not 

say that it is a scientifically valid idea. 

What I hear from the folks that I talk to is that they are bullish 

on the future of marine transportation for petroleum and energy 

products in the United States because of developing technologies, 

because of new opportunities on the North Slope of Alaska, and 

that they are staying very close to their customer base. 

That is what drives decisions for construction of vessels, is understanding customer requirements and the customer’s expectation 

of transportation needs over the long term. So I would say a short 

answer is I think they feel bullish about the future of that part of 

the business. 

Dr. HARRIS. And is our capacity increasing in our ability to ship 

on American-flag vessels? 

Mr. ALLEGRETTI. In the petroleum area? 

Dr. HARRIS. Yes. 

Mr. ALLEGRETTI. Yes. Domestically yes. 

Dr. HARRIS. Thank you. 

Mr. Larsen. 

Mr. LARSEN. Thank you, Mr. Chairman. 

Just a final comment from me. First off, you have given us a lot 

of food for thought on waiver process reforms. I think that is an 

important direction for us to look. So I appreciate your testimony. 

Second is if the available capacity of the U.S. fleet is something 

less than 30 million, I hope we can focus on 100 percent of that 

capacity being available and being used for whatever number short 

of 30 that is being used. 

Finally, I have great respect for my friend from Louisiana. Unfortunately he is not here, but the effort in Libya last year, there is 

a lot of debate about it. We are here debating about the implementation of the Jones Act as it applies to the SPR and not so much 

about the international effort in Libya or the related international 

effort to release oil from national Strategic Petroleum Reserves, not 

just in the U.S. but in other countries in order to alleviate price 

31 

spikes that resulted from, first off, the potential action and then 

the actual action in Libya. 

I personally do not characterize the release in SPR as a scam in 

any way, shape or form by this administration, nor did I characterize it as a scam under the second Bush administration. That is 

not my view, and I want to be clear about that. 

I do have problems with how it was implemented and the purpose of this hearing and the reason I called for or asked the Chairman for this hearing was to consider how we can improve the implementation of any SPR drawdown so that we are better utilizing 

the availability of a qualified and capable and available U.S. fleet. 

That is what our goal should be. 

Mr. ALLEGRETTI. Mr. Larsen, might I just say I hope you heard 

my answer to Mr. Landry as speaking to the issue of Jones Act and 

not to the larger foreign policy question. 

Dr. HARRIS. Ms. Hirono, do you have a closing? Ms. Hirono, do 

you have a statement? 

No. No further comments? 

[No response.] 

Dr. HARRIS. Well, if there are no further questions, I thank Mr. 

Allegretti again for his testimony and the Members for their participation. 

The subcommittee stands adjourned. 

[Whereupon, at 11:50 a.m., the subcommittee was adjourned.] 

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