U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

78–178 2012

HEARING ON HARBOR MAINTENANCE FUNDING 

AND MARITIME TAX ISSUES 

HEARING 

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT 

AND

SUBCOMMITTEE ON SELECT REVENUE MEASURES 

OF THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

FEBRUARY 1, 2012

SERIAL 112–OS09 & SRM06 

Printed for the use of the Committee on Ways and Means 

( 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
ii 

COMMITTEE ON WAYS AND MEANS 

DAVE CAMP, Michigan, Chairman 

WALLY HERGER, California 

SAM JOHNSON, Texas 

KEVIN BRADY, Texas 

PAUL RYAN, Wisconsin 

DEVIN NUNES, California 

PATRICK J. TIBERI, Ohio 

GEOFF DAVIS, Kentucky 

DAVID G. REICHERT, Washington 

CHARLES W. BOUSTANY, JR., Louisiana 

PETER J. ROSKAM, Illinois 

JIM GERLACH, Pennsylvania 

TOM PRICE, Georgia 

VERN BUCHANAN, Florida 

ADRIAN SMITH, Nebraska 

AARON SCHOCK, Illinois 

LYNN JENKINS, Kansas 

ERIK PAULSEN, Minnesota 

KENNY MARCHANT, Texas 

RICK BERG, North Dakota 

DIANE BLACK, Tennessee 

TOM REED, New York 

SANDER M. LEVIN, Michigan 

CHARLES B. RANGEL, New York 

FORTNEY PETE STARK, California 

JIM MCDERMOTT, Washington 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

EARL BLUMENAUER, Oregon 

RON KIND, Wisconsin 

BILL PASCRELL, JR., New Jersey 

SHELLEY BERKLEY, Nevada 

JOSEPH CROWLEY, New York 

Jon Traub, Staff Director 

Janice Mays, Minority Staff Director 

SUBCOMMITTEE ON OVERSIGHT

CHARLES W. BOUSTANY, JR., Louisiana, Chairman 

DIANE BLACK, Tennessee 

AARON SCHOCK, Illinois 

LYNN JENKINS, Kansas 

KENNY MARCHANT, Texas 

TOM REED, New York 

ERIK PAULSEN, Minnesota 

JOHN LEWIS, Georgia 

XAVIER BECERRA, California 

RON KIND, Wisconsin 

JIM MCDERMOTT, Washington 

SUBCOMMITTEE ON SELECT REVENUE MEASURE

PATRICK J. TIBERI, Ohio, Chairman 

PETER J. ROSKAM, Illinois 

ERIK PAULSEN, Minnesota 

RICK BERG, North Dakota 

CHARLES W. BOUSTANY, JR., Louisiana 

KENNY MARCHANT, Texas 

JIM GERLACH, Pennsylvania 

PRICHARD E. NEAL, Massachusetts 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

SHELLEY BERKLEY, Nevada 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
iii 

C O N T E N T S 

Page 

Advisory of February 1, 2012 announcing the hearing ........................................ 2 

WITNESSES 

The Honorable Michael Strain, Commissioner of Agriculture & Forestry ......... 8 

Mr. Gary LaGrange, President and Chief Executive Officer of the Port of 

New Orleans ......................................................................................................... 13 

Mr. Steven A. Fisher, Executive Director, American Great Lakes Ports Association .................................................................................................................... 19 

Mr. Morten Arntzen, President and Chief Executive Officer, Overseas 

Shipholding Group ............................................................................................... 27 

Mr. James C. McCurry, Jr., Director of Administration, Georgia Ports Authority .......................................................................................................................... 36 

Mr. Michael Leone, Port Director, Massachusetts Port Authority ...................... 43 

MEMBER SUBMISSIONS FOR THE RECORD 

The Honorable Kevin Brady, Statement ................................................................ 68 

The Honorable Wally Herger and Earl Blumenauer, Statement ........................ 70 

The Honorable Brian Higgins, Statement ............................................................. 72 

PUBLIC SUBMISSIONS FOR THE RECORD 

AGL Resources, Statement ..................................................................................... 73 

American Association of Port Authorities, Statement .......................................... 75 

American Road and Transportation Builders Association, Statement ................ 78 

Big River Coalition, Statement ............................................................................... 81 

Carrix Inc., Statement ............................................................................................. 86 

Coastwise Coalition 1, Statement .......................................................................... 91 

Coastwise Coalition 2, Statement .......................................................................... 94 

Florida Ports Council, Statement ........................................................................... 95 

Horizon Lines Inc., Statement ................................................................................ 98 

Jersey Harborside Transport LLC., Statement ..................................................... 106 

Lake Charles Harbor, Statement ........................................................................... 108 

APL Limited and affiliated companies, Maersk Inc. and Subsidiaries, Sealift 

Incorporated, and Hapag-Lloyd AG and affiliated companies, Statement ...... 112 

Port Freeport, Statement ........................................................................................ 122 

Port Metro Vancouver, Statement .......................................................................... 124 

Port of Seattle, Statement ....................................................................................... 127 

Port of Tacoma, Statement ..................................................................................... 130 

Shipbuilders Council of America, Statement ........................................................ 136 

Tonnage Tax Coalition, Statement ......................................................................... 140 

West Gulf Maritime Association, Statement ......................................................... 143 

American Maritime Labor Organizations, Statement .......................................... 157 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS

wwoods2 on DSK499XVN1PROD with WAYS & MEANS
(1) 

HARBOR MAINTENANCE FUNDING AND 

MARITIME TAX ISSUES 

WEDNESDAY, FEBRUARY 1, 2012 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

SUBCOMMITTEE ON OVERSIGHT, 

SUBCOMMITTEE ON SELECT REVENUE MEASURES, 

Washington, DC. 

The subcommittees met, pursuant to notice, at 9:34 a.m., in 

Room 1100, Longworth House Office Building, the Honorable 

Charles Boustany [Chairman of the Subcommittee on Oversight] 

presiding. 

[The advisory of the hearing follows:] 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
2 

ADVISORY 

FROM THE COMMITTEE ON WAYS AND MEANS 

SUBCOMMITTEE ON OVERSIGHT 

SUBCOMMITTEE ON SELECT REVENUE MEASURES 

FOR IMMEDIATE RELEASE CONTACT: (202) 225–1721 

February 1, 2012 

OS–09 & SRM–06 

Chairman Boustany and Chairman Tiberi 

Announce Hearing on Harbor Maintenance 

Funding and Maritime Tax Issues 

House Ways and Means Subcommittee on Oversight Chairman Charles Boustany, 

Jr, MD (R–LA) and Subcommittee on Select Revenue Measures Chairman Pat 

Tiberi (R–OH) today announced the Subcommittees will hold a hearing on harbor 

maintenance funding and maritime tax issues, with a focus on the Harbor Maintenance Trust Fund and Harbor Maintenance Tax, maintenance underfunding, and 

the tax treatment of foreign shipping operations. The hearing will take place on 

Wednesday, February 1, 2012, in Room 1100 of the Longworth House Office 

Building, beginning at 9:30 a.m. 

In view of the limited time available to hear witnesses, oral testimony at this 

hearing will be from invited witnesses only. However, any individual or organization 

not scheduled for an oral appearance may submit a written statement for consideration by the Committee and for inclusion in the printed record of the hearing. A 

list of invited witnesses will follow. 

BACKGROUND: 

The Harbor Maintenance Trust Fund (HMTF) provides funds for the United 

States Army Corps of Engineers (Corps) to dredge federally maintained harbors to 

their authorized depths and widths. The HMTF is funded by the Harbor Maintenance Tax (HMT), under which certain users of U.S. coastal and Great Lakes harbors pay a tariff of $1.25 per $1,000 in cargo value passing through these waters. 

The tax applies to imported and domestic waterborne cargo, as well as the ticket 

value of cruise ship passengers. 

The tax was intended to provide a sufficient, stable long-term source of funding 

to pay for harbor dredging to maintain authorized depths and widths. In recent 

years, HMTF expenditures have remained flat while HMT collections have increased 

with rising imports, creating a large surplus in the trust fund. The HMTF’s uncommitted balance continues to grow and reached an estimated $6.1 billion at the beginning of fiscal year 2012. In fiscal year 2010 alone, $1.2 billion in Harbor Maintenance Taxes were collected, while only $793 million was spent on dredging and related maintenance. Despite the accumulating balances in the HMTF, many U.S. 

harbors are under-maintained, resulting in the full channel dimensions of America’s 

busiest ports available less than 35 percent of the time. Reduced channel dimensions could increase both the cost of shipping and the risk of grounding or collision. 

Another potential concern with the structure of the HMTF arises with respect to 

what is known as ‘‘short sea shipping.’’ Some have argued that the HMT itself is 

a major reason why very little non-bulk commercial cargo is transported using inland and coastal waterways. Currently, the use of short sea shipping, which involves 

the movement of cargo along coastal and inland waters, is primarily limited to bulk 

cargo while commercial non-bulk cargo is moved throughout the U.S. via other 

modes of transportation. 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
3 

Finally, and unrelated to the HMTF, U.S. shipping companies must maintain in- vestments in qualified shipping assets made between 1975 and 1986 to avoid subPart F (anti-deferral) tax treatment for their qualified foreign shipping income. 

Some have questioned whether this requirement with which U.S. shipping companies must comply has encouraged these companies to invest capital in their foreign 

operations—capital that otherwise could have been used to expand domestic operations and to create U.S. jobs. 

In announcing the hearing, Chairman Boustany said, ‘‘Our nation’s harbors 

are a lifeblood of commerce. Years of chronic underfunding have severely 

limited ship traffic, prevented valuable cargo from moving efficiently, and 

adversely affected national, regional, and local economies. Funds collected 

by the HMTF should be utilized promptly and exclusively to keep our harbors open for business. The Subcommittees will conduct oversight of this 

critical problem and consider what solutions might better help American 

goods to compete in the global economy.’’ 

Chairman Tiberi added, ‘‘The U.S. maritime industry is vital to our economy and national security. Today’s Tax Code places preference on investment 

in foreign shipping operations over investment in domestic operations. The 

Tax Code also discourages the use of local shipping channels as a means 

to move non-bulk cargo throughout the United States and the Great Lakes 

region. The Subcommittees should examine how to design tax policies that 

help create U.S. maritime jobs and that ensure the long-term growth of the 

domestic maritime industry.’’ 

FOCUS OF THE HEARING: 

The hearing will examine the structure of the Harbor Maintenance Trust Fund and the Harbor Maintenance Tax, with an emphasis on investigating whether the 

structures of the Trust Fund—including both its financing source and the expenditure of its balances—are appropriately structured. Similarly, the hearing will consider whether U.S. anti-deferral rules inhibit the expansion of the U.S. shipping industry. 

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: 

Please Note: Any person(s) and/or organization(s) wishing to submit for the hear- ing record must follow the appropriate link on the hearing page of the Committee 

website and complete the informational forms. From the Committee homepage, 

http://waysandmeans.house.gov, select ‘‘Hearings.’’ Select the hearing for which you would like to submit, and click on the link entitled, ‘‘Click here to provide a submission for the record.’’ Once you have followed the online instructions, submit all requested information. ATTACH your submission as a Word document, in compliance 

with the formatting requirements listed below, by the close of business on Wednesday, February 15, 2012. Finally, please note that due to the change in House mail policy, the U.S. Capitol Police will refuse sealed-package deliveries to 

all House Office Buildings. For questions, or if you encounter technical problems, 

please call (202) 225–1721 or (202) 225–3625. 

FORMATTING REQUIREMENTS: 

The Committee relies on electronic submissions for printing the official hearing record. As always, submissions will be included in the record according to the discretion of the Committee. The Committee will not alter the content of your submission, 

but we reserve the right to format it according to our guidelines. Any submission 

provided to the Committee by a witness, any supplementary materials submitted for 

the printed record, and any written comments in response to a request for written 

comments must conform to the guidelines listed below. Any submission or supplementary item not in compliance with these guidelines will not be printed, but will 

be maintained in the Committee files for review and use by the Committee. 

1. All submissions and supplementary materials must be provided in Word format and MUST NOT exceed a total of 10 pages, including attachments. Witnesses 

and submitters are advised that the Committee relies on electronic submissions for 

printing the official hearing record. 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
4 

2. Copies of whole documents submitted as exhibit material will not be accepted 

for printing. Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material not meeting these specifications will be maintained in 

the Committee files for review and use by the Committee. 

3. All submissions must include a list of all clients, persons and/or organizations on whose behalf the witness appears. A supplemental sheet must accompany each 

submission listing the name, company, address, telephone, and fax numbers of each 

witness. 

Note: All Committee advisories and news releases are available on the World 

Wide Web at http://www.waysandmeans.house.gov/. 

The Committee seeks to make its facilities accessible to persons with disabilities. 

If you are in need of special accommodations, please call 202–225–1721 or 202–226– 

3411 TTD/TTY in advance of the event (four business days notice is requested). 

Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above. 

f 

Chairman BOUSTANY. We will get started. Good morning to ev- erybody, and thank you for joining us for this morning’s joint hearing of the Subcommittees on Oversight and Select Revenue Measures. 

Today’s hearing will take a closer look at the underfunding of the nation’s maritime transportation infrastructure, specifically the 

Harbor Maintenance Tax and the Harbor Maintenance Trust Fund, 

and the tax treatment of foreign shipping operations. While this might sound like an arcane subject, I think what you will see, as we go through the course of this hearing, is that this 

has—these issues have a huge economic impact on this country on 

its ability to receive imports, to export, our trade competitiveness, 

as well as the general economic impact and the job impact that this 

all has. 

The Harbor Maintenance Trust Fund was created in 1986 to provide a stable, long-term source of funding to pay maintenance costs 

in federally-maintained harbors, the taxes imposed on users of the 

system, particularly shippers of goods passing through those harbors. The revenues, which total as much as $1.3 billion to $1.6 billion annually, are placed in the Harbor Maintenance Trust Fund 

and exist to fund harbor maintenance costs. 

In the past decade we have seen growing disparities between the 

Harbor Maintenance Tax revenues and spending. Because the revenues and expenditures of the Harbor Maintenance Trust Fund are 

part of the overall budget, if the trust fund does not spend all of 

its revenues, the surplus goes toward offsetting and unrelated 

spending. Many see this as an abuse of a dedicated funding stream. 

As a result of chronic underfunding of critical harbor maintenance—as a result of this chronic underfunding, critical harbor 

maintenance has suffered. The uncommitted balance of the trust 

fund continues to grow, reaching $6.1 billion at the beginning of 

fiscal year 2012. This means that there are billions of unused dollars belonging to the trust fund, even though there are significant 

harbor maintenance needs, hurting U.S. competitiveness. 

Because of this underfunding, the full channel dimensions of 

America’s busiest ports are available only a third of the time, and 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
5 

there is increased risk of grounding and collision, and certainly an 

adverse economic impact to this. 

To combat the chronic underfunding of federally maintained waterways, I have introduced H.R. 104, the Realize America’s Maritime Promise Act. The bill requires that the total amount of available spending from the Harbor Maintenance Trust Fund each year 

be equal to the trust fund receipts, plus interest, as estimated by 

the President’s budget for that year. This will ensure that taxes 

paid into the Harbor Maintenance Trust Fund will be used for 

their intended purposes, and not for other outside spending. 

As we strive toward economic growth and job creation, we must 

recognize the importance of our maritime infrastructure. The President has set a goal of doubling American exports by 2015. If we are 

going to even come close to achieving this goal, we have to have 

the infrastructure to handle increased maritime traffic. This is not 

just a Mississippi or Calcasieu River problem, nor is it exclusively 

a Great Lakes problem. This is a nationwide transportation and 

economic problem. We ought to be spending these user fees on 

projects that improve our nation’s critical transportation infrastructure, and make the American economy more competitive. 

As Congress begins consideration of the surface transportation 

and reauthorization bill this week, I look forward to hearing from 

our witnesses today about their ports and businesses and communities, and what changes are needed to bolster American jobs and 

competitiveness. 

Before I yield to the ranking member, the esteemed ranking 

member of the Subcommittee on Oversight, Mr. Lewis, I ask unanimous consent that all Members’ written statements be included in 

the record. 

[No response.] 

Chairman BOUSTANY. And without objection, so ordered. Mr. 

Lewis, I now yield to you, sir. 

Mr. LEWIS. Well, thank you very much, Mr. Chairman. Mr. 

Chairman, I want to thank you for holding this hearing today. And 

I also want to thank Chairman Tiberi and Ranking Member Neal. 

Many of you know that I began my congressional career on what 

then was known as the Public Works and Transportation Committee. One of the main reasons for my move to the Ways and 

Means Committee center on this committee’s work to finance our 

nation’s transportation system, roads, transit, airways, and ports. 

Transportation has always been a bipartisan issue in Congress. 

We see this in the legislative proposal before us today. This hearing provides us with an opportunity to hear about the needs of our 

nation’s waterways. Transportation is the key to jobs, not only in 

the state of Georgia, but all around our country. 

My congressional district is home to the largest passenger airport 

in the world, with nearly 90 million passengers each year. My district is only a few hours away from the Port of Savannah, the 

fourth largest and fastest-growing container port in the nation. In 

2010, $8 billion in cargo good moved through the Port of Savannah 

to and from Metro Atlanta. 

Across the state of Georgia there are almost 300,000 port-related 

jobs. The ports also contribute over $62 billion in revenue to Georgia’s economy. 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
6 

After the earthquake in Haiti, the Georgia Port Authority contacted us to see how they could support the relief effort. 

Today I want to learn more what improvement should be made 

to the Harbor Maintenance Trust Fund. We must make sure that 

it is used for its intended purpose. Our ports must be able to compete internationally. We must move goods, service, and people safer 

and efficiently. 

I look forward to hearing from all of the witnesses. I would like 

to extend a special welcome to Mr. Jamie McCurry, a former congressional staffer for my good friend and colleague, Congressman 

Jack Kingston. 

And, Mr. Chairman, thank you very much again. 

Chairman BOUSTANY. I thank the esteemed ranking member of 

the Oversight Subcommittee. And now I yield to Mr. Tiberi, the 

chairman of the Subcommittee on Select Revenue Measures. Mr. 

Tiberi has been a staunch advocate of our maritime industry, and 

a member of this committee who has really worked hard to promote job growth and American competitiveness. 

Mr. Tiberi. 

Chairman TIBERI. I should just end and not even begin, after 

that introduction. I thank you, Mr. Chairman. It is a pleasure to 

have the opportunity to hold this joint hearing with you today with 

our subcommittee. Our members have a lot of interest, as well, in 

the maritime industry and the maritime issues, and believe today’s 

hearing is an excellent chance to examine how to strengthen our 

U.S. maritime industry. 

I am glad to have the opportunity to join with my friends on the 

Oversight Subcommittee in examining the Harbor Maintenance 

Trust Fund. I too agree that it has been mismanaged, and appreciate immensely the leadership shown by Dr. Boustany on this particular issue and issues related to it. 

Today’s hearing also examines the policy issues surrounding the 

unique tax structure of the maritime industry. In the past, the Internal Revenue Code has unnecessarily, in my opinion, hindered 

the growth of the U.S. maritime industry, putting it at a competitive disadvantage, internationally. And while Congress has taken 

measures over the last decade to correct some of these problems, 

I believe there is much work to be done. 

The Short Sea Shipping Act and the American Shipping Reinvestment Act are two pieces of legislation that stand to improve the 

maritime industry, help our economy, and create jobs. I look forward to exploring them further with our witnesses today. I thank 

you again, Dr. Boustany, for your leadership. And I yield back. 

Chairman BOUSTANY. Mr. Tiberi, I thank you for your leadership in introducing these very important bills and bringing my attention to those particular tax structure issues that need to be addressed to enhance maritime competitiveness. 

And now I yield to my friend from Massachusetts, Mr. Neal, who 

has also been a staunch advocate of our maritime competitiveness, 

and improving our trade competitiveness for this country. Mr. 

Neal? 

Mr. NEAL. Thanks very much, Dr. Boustany, and I want to 

thank you and Mr. Tiberi and Mr. Lewis for calling this hearing 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
7 

today on maritime tax issues. It is a topic that is particularly important to my home state of Massachusetts. 

The ports of Massachusetts have played an important role 

throughout our history. Plymouth, sometimes known as America’s 

Hometown, is where the Mayflower and the pilgrims landed in 

1620. Gloucester is an important fishing port, both today and 

throughout our history. It is reportedly noted that the first schooner was built in 1713 in Gloucester. And, of course, the Boston Tea 

Party occurred in the Boston Harbor in 1773. 

And today, Massachusetts seaports continue to play an important role as economic drivers. According to my guest this morning, 

Mike Leone, the director of the Port of Boston, who is testifying 

with us, American ports help generate almost 30 percent of America’s GDP, and support more than 13 million jobs. America’s ports 

provide a vital gateway to international trade by facilitating the 

transport of cargo around the world. I am delighted that Gulf 

Stream is locating a presence now in Westfield, Massachusetts. 

And the role that Westover Air Force Base plays in commercial activity is helpful to this argument today, as well. 

I am pleased that we are examining the Harbor Maintenance 

Trust Fund tax today. Many ports around the country, including in 

Massachusetts, are in need of maintenance. In fact, the U.S. Army 

Corps of Engineers estimates that full channel dimensions at the 

nation’s busiest 59 airports are available less than 35 percent of 

the time. However, even though users of our nation’s waterways 

are paying significant amounts of money into the trust fund to 

maintain our ports, these dollars are not being spent on the ports 

and trust fund that last year had a surplus of almost $6.5 billion. 

A very key item that needs to be noted as well this morning. I 

am excited about the prospects of the expansion of the Panama 

Canal, which will be completed in 2014. What that is going to 

mean for East Coast shipping is really very exciting. We need to 

ensure that we will be ready to handle the increased flow of trade 

and exports that this project is certainly going to generate. 

To address this situation I am glad that I put my name as a cosponsor with Chairman Boustany and Representative Courtney’s 

Realize America’s Maritime Promise Act. This important legislation 

will ensure that the revenue from the Harbor Maintenance Tax is 

used exclusively for harbor maintenance projects. 

Again, I want to thank Mike Leone this morning, for coming 

down from Boston. I was there yesterday to pay my regards to one 

of the great legends in Massachusetts’s recent political history— 

where we pay great attention to that skill—the passing of Mayor 

Kevin White, who for 16 years governed one of the most exciting 

cities in all of the world, Boston. So, I want to thank Mike for his 

presence today. 

And I look forward to hearing from our witnesses. And I want 

to thank you, Chairman Boustany, for conducting the hearing. 

Chairman BOUSTANY. Thank you, Mr. Neal. Now I would like 

to welcome our very distinguished group of panelists here today, 

our witnesses. 

First we have Mr. Michael Strain. He is commissioner of agriculture and forestry in Baton Rouge, Louisiana, a personal friend 

of mine and a staunch advocate not only for the agricultural sector, 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
8 

a national leader in agriculture, but he has also been one who has 

recognized the importance of our maritime commerce, so that we 

can ship these agricultural products to foreign destinations. 

Next we have Mr. Gary LaGrange, president and chief executive 

officer of the Port of New Orleans. He is no stranger to this committee. He has testified on our—in our hearings on trade agreements, and certainly understands the importance of all of this with 

regard to American competitiveness. 

Very pleased to have Mr. Steven Fisher as the executive director 

of the American Great Lakes Port Association. Mr. Fisher, I have 

been working with Chairman Upton, chairman of the Energy and 

Commerce Committee. He has spoken very highly of you. And we 

are pleased that you can be here today to give that Great Lakes 

perspective on this. 

Mr. Morten—is it Arntzen? Mr. Arntzen is president and chief 

executive officer of the Overseas Shipping [sic] Group, and we are 

very pleased to have your perspective, as well. 

Mr. James McCurry is director of administration for the Georgia 

Ports Authority. And Mr. McCurry, thank you for being here. We 

understand the importance of the port in Savannah, and of the 

work that is being done in Georgia. 

And Mr. Michael Leone is port director for the Massachusetts 

Port Authority. And I want you to know, Mr. Leone, Mr. Neal 

pushed very hard for you to be a part of this panel today, and I 

am very pleased that you are here today to give us an East Coast 

perspective, as well. 

So, with that, you will each have five minutes to present your 

testimony, as is customary, with your full written testimony submitted for the record. 

And Mr. Strain, we will begin with you. 

STATEMENT OF MICHAEL STRAIN, COMMISSIONER OF AGRICULTURE AND FORESTRY, LOUISIANA DEPARTMENT OF AGRICULTURE AND FORESTRY, BATON ROUGE, LOUISIANA 

Dr. STRAIN. Good morning, Mr. Chairman, Members. First of 

all, thank you for the opportunity to come and spend some time 

and talk with you. I am testifying today on behalf of the Louisiana 

Department of Agriculture and Forestry. 

My statement is also consistent with the position of the National 

Association of the State Departments of Agriculture, NASDA, 

which represents the commissioners, secretaries, and the directors 

of the state departments of agriculture in all 50 states and in 4 territories. We are, combined, responsible for a wide variety of things 

such as food safety, but also for fostering the economic vitality and 

growth in our rural communities. 

I am also president of the Southern United States Trade Association. It is a regional trade group that markets products from 14 

southern states to foreign markets. We commend you for holding 

this hearing to discuss the Realize America’s Maritime Promise 

Act, and express our appreciation for allowing us to do this. 

I am going to give you compelling reasons to continue to fund efforts to do this. This will boost America’s food and agriculture products, our exports, but also will support our small businesses and 

Americans throughout the United States. 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
9 

The Mississippi River is the lifeline of transportation for agricultural products in our nation. It’s been called America’s Superhighway. More than 30 states and 2 Canadian provinces ship products: grain, coal, steel, petroleum, and aggregates, and many other 

products. It and its tributaries form one of the largest critical inland waterway systems in the nation, supporting about 50 percent 

of the nation’s soybean exports and 60 percent of the total U.S. 

corn exports. Annually, more than 400 million bushels of soybeans, 

1.1 billion bushels of corn, and more than 30 million bushels of 

wheat are moved by barge to ports along the lower Mississippi 

River. 

As one of the largest single contributors to the nations’ gross domestic product, agriculture is critical to our economy. The inability 

to maintain the Mississippi River at sufficient depths and widths 

by dredging will have significant impacts to Louisiana agriculture. 

Agriculture represents more than 85 percent of the surface area of 

our state, 10 percent of our workforce, 243,000 jobs. The exports 

from Louisiana grew by more than 15 percent last year, over $20 

billion, accounting for more than 16 percent of America’s total exports. 

In the United States we are speaking about the golden age of agriculture. Last year the American farmer had a profit of over $100 

billion, increased exports by almost 20 percent. A positive balance 

of trade of $37 billion and growing, expected to hit $45 billion. We 

expect to have $148 billion to $150 billion. One of the only sectors 

in America with a positive balance of trade. 

We look at what’s going on worldwide, worldwide: an increase in 

population of 2.2 billion people, and a greater need of all the products we produce. When you look at food and fiber and energy, these 

products are shipped worldwide via our water resources. 

The great potential for the growth in the economy of America lies 

in our ability to compete worldwide. We see a growing middle class. 

The growth in the middle class will almost double in the next 15 

years; 95 percent of that growth is outside of the United States, 

where real incomes are growing. They need our products. We have 

the products. We can grow those products. But failure to maintain 

our water systems severely limits our ability in trade. 

When you look just at the Port of South Louisiana, one of the 

largest port systems in the world, over $200 billion in activity when 

you look from the bridge at the bottom of Baton Rouge to the 

mouth. When you look at this, three feet now, we have to shortload these ships by three feet of silt. Six thousand ships. That is 

$18 billion lost, just to those shippers. 

Look at the Port of Lake Charles. The waterway gets down to 

150 feet wide. 

When you look at this, we must invest and dredge these rivers 

if we are going to double our exports. We have a market that needs 

our products. We are growing our products. We are selling our 

products. The shippers are paying the fees to do this. 

We have the greatest potential for economic growth and agriculture and in industry we have ever seen in our lifetimes. And 

what can inhibit it is our inability to move these products. Thank 

you. 

[The prepared statement of Dr. Strain follows:] 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
10 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.001
11 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.002
12 

f 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.003
13 

Chairman BOUSTANY. Thank you, Commissioner Strain. 

Mr. LaGrange, you may proceed. 

STATEMENT OF GARY LAGRANGE, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF THE PORT OF NEW ORLEANS, NEW 

ORLEANS, LOUISIANA 

Mr. LAGRANGE. Chairman Boustany, Chairman Tiberi, and 

Members of the Subcommittee, as the president and chief executive 

officer of the Port of New Orleans and a former chairman of the 

American Association of Port Authorities, I appreciate the opportunity that you provided us to highlight the importance of fully accessing the Harbor Maintenance Trust Fund to empower the Army 

Corps of Engineers to adequately maintain America’s ports and 

harbors. 

I want to tell you that the Port of New Orleans enthusiastically 

supports the Realize America’s Maritime Promise, or RAMP, Act. 

We would like to sincerely thank Chairman Boustany for introducing this legislation. And once enacted, will ensure that the revenue generated through the Harbor Maintenance Tax is used for 

maintenance of the nation’s ports and harbors. 

Regrettably, decreased funding for dredging has limited the navigation capacity of the lower Mississippi River, including the New 

Orleans Harbor, thereby impeding the flow of imports and exports 

across the United States. In the past year, unusually high water 

led to the unfortunate flooding of many communities and the settlement of millions of tons of silt and settlement at the mouth of the 

Mississippi River. 

Draft restrictions on vessels transiting the river were imposed, 

and some vessels ran aground. In fact, 41 vessels ran aground in 

the last 3 years, and 5 already this year in 2012, in the first 25 

days. We worked closely with Congress, the Corps of Engineers, 

and the shipping community to address this crisis. But one lesson 

was clear: the Corps of Engineers does not have sufficient funds to 

properly maintain the lower Mississippi River and other key waterways in this country. The RAMP Act, in our opinion, will go a long 

way towards addressing the problem and its passage is critical to 

the nation and the economic recovery of the nation. 

I would like to talk for a moment about the economic importance 

of the Port of New Orleans. As you know, through its direct facilitation of trade and commerce, the Port of New Orleans is one of 

the primary commercial engines of America. As a container and as 

a general cargo port, the Port of New Orleans serves the American 

Midwest through the 14,500-mile inland waterway system of the 

Mississippi River, and its most critical component, connecting approximately 30 states in the Heartland to international markets. 

Our port is served by 50 ocean carriers, 16 barge lines, 75 trucking lines, and all 6 truck-line railroads. And in the past year we 

have invested a little over a half-a-billion dollars in improvements, 

in infrastructure improvements. 

Because of its geographic location and modern facilities, the Port 

of New Orleans is uniquely positioned to provide access for American exports for the global market, and to receive imports of the 

goods and the commodities on which our economy relies. However, 

our efforts to facilitate international trade are being severely hamVerDate Mar 15 2010 14:13 Feb 22, 2013 Jkt 078178 PO 00000 Frm 00017 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\78178.XXX 78178

wwoods2 on DSK499XVN1PROD with WAYS & MEANS
14 

pered by the lack of reliable dredging of the navigation channels 

on the lower Mississippi River and throughout the country, completely throughout the country. 

The Corps of Engineers estimates that some 30 percent of port 

calls by commercial vessels are negatively impacted in this manner. To make matters worse, due to the Corps of Engineers’s budget constraints, there have been discussions to dredge certain areas 

of the lower Mississippi River to only 38 feet, where the traditional 

draft and the project draft is 45 feet. The negative economic impact 

of such a reduction in draft at the mouth of the Mississippi would 

be profound. 

According to a recent study by Professor Tim Ryan of the University of New Orleans, Louisiana alone could be subject to spending 

losses of up to $423 million, the elimination of more than 3,800 

jobs, and nearly $28 million in state and local tax revenue loss. At 

the national level, remember, 20 percent plus of all the cargo coming into the United States comes into the lower Mississippi River 

and the Port of New Orleans. 

That said, Professor Ryan estimates that the U.S. economy would 

face potentially losses of almost $14 billion in spending. More importantly, 38,000 American jobs could lose their jobs [sic]. These 

losses don’t even speak to the greater threat the national economy 

faces from an inability to maintain America’s other maritime transport arteries, which you are going to hear in a minute. 

The President has made a strong commitment through his national export initiative to double American exports over the next 

five years. However, we cannot double exports if we do not have 

the infrastructure in place. 

The users of the nations ports and harbors for years have been 

paying in to the Harbor Maintenance Trust Fund with the belief 

that these funds would be used to dredge our waterways. In fiscal 

year 2010 total receipts of the fund were $1.363 billion. Sixty percent of these receipts were actually used, with a balance of $535 

million left over last year. In fact, the fund’s uncommitted balance 

has risen to an estimated $6.1 billion, leaving us in harm’s way of 

losing our trading edge. 

I assure that proper use of this surplus, together with the annual 

revenues deposited to the fund, would solve many of our nation’s 

commercial navigation needs. 

So it is imperative that the RAMP Act be enacted into law as 

soon as possible. Thank you very much. 

[The prepared statement of Mr. LaGrange follows:] 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
15 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.004
16 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.005
17 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.006
18 

f 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.007
19 

Chairman BOUSTANY. Thank you. 

Mr. Fisher, you may proceed. 

STATEMENT OF STEVEN A. FISHER, EXECUTIVE DIRECTOR, 

AMERICAN GREAT LAKES PORTS ASSOCIATION, WASHINGTON, D.C. 

Mr. FISHER. Thank you, Chairman Boustany, Chairman Tiberi, 

Ranking Member Lewis, and Ranking Member Neal. And I appreciate this opportunity to appear this morning before the subcommittees to discuss the Harbor Maintenance Tax, and specifically to discuss its impact on the development of short-sea shipping 

services. 

As you mentioned, I am Steve Fisher, executive director of the 

American Great Lakes Ports Association. Our organization represents the major commercial ports on the U.S. side of the Great 

Lakes. Maritime commerce plays a critical role in the economy of 

our region. 

Last year we completed a massive economic impact analysis of 

the entire Great Lakes navigation system, both in the U.S. and 

Canada. It’s a binational system. That study revealed that there 

are 227,000 jobs supported in the navigation system in our region; 

128,000 of those jobs are in the United States, the rest in Canada. 

The navigation system generates $33.5 billion in business revenue; 

18.1 billion of that amount is in the United States. So it has a significant impact on the region, and it is an economic driver in the 

region. 

Before I discuss the Harbor Maintenance Tax and its impact and 

relationship to short-sea shipping services, Chairman Boustany, I 

want to thank you for your considerable efforts on the RAMP legislation. H.R. 104 is critically important to all the ports who are represented here today, and the Great Lakes ports, as well. In the 

Great Lakes region, we are experiencing a dredging crisis. There 

is a $200 million dredging backlog at Great Lakes ports throughout 

the region. That amounts to more than 16 million cubic yards of 

sand and silt that are choking our harbors and our region that still 

needs to be removed. 

Last year, in fiscal year 2012 [sic], of the 52 federally-authorized 

harbors in our region, 34 required dredging. Only 11 were budgeted 

to be dredged by the Corps of Engineers. The rest were left to silt 

up with sand, and that affects their draft and the efficiency of 

those harbors. 

Last year we had two small ports, one in Michigan and one in 

Illinois, almost close. In fact, the Corps of Engineers had notified 

local officials that those harbors would be closing last year. Fortunately, the Corps found some last-minute end-of-year money and 

was able to come in at the last minute and do some dredging and 

keep those harbors open. 

There is still commercial businesses on those two small harbors. 

There is still industries on those harbors. And I am pleased they 

were able to keep them open. But next year will be another challenge. 

As you mentioned, the Harbor Maintenance Tax was enacted by 

Congress in 1986 to be a user fee on the maritime industry for 

maintenance of our nation’s ports by the U.S. Corps of Engineers. 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
20 

The tax was originally set at $.04 per $100 of cargo value. It is a 

value-based tax, it is an ad valorem tax. In 1990, the tax was increased to $.125 per $100 of cargo value. The tax is not paid by the 

port, nor is it paid by the ship owner. The tax is paid by the owner 

of the cargo in the ship. In 1998—the tax originally applied to both 

exports, imports, and domestic cargo. In 1998 the U.S. Supreme 

Court struck down the tax as it applies to exports. So today it applies to imported cargo and cargo moved domestically between U.S. 

ports. 

The structure of the tax has had—it is an important tax, and it 

is important for the maintenance, as my colleagues have mentioned, of our nation’s ports. But the structure of the tax has had 

some unfortunate side effects. In a sense, the user fee has created 

a disincentive, in some regards, for greater use of our nation’s waterways. The United States is blessed with more than 25,000 miles 

of waterways, navigable waterways. This is a tremendous transportation asset for our country. 

At the same time—many of these waterways, unfortunately, are 

under-utilized. At the same time, our country is blessed with about 

100—several hundred thousand miles of highways. These highways, unfortunately, are over-utilized, and are characterized by a 

lot of severe highway congestion. 

Transportation planners in recent years have been trying to look 

at ways to make better use of our under-utilized waterways to relieve some of the highway congestion that we experienced in most 

major American cities. One of the greatest impediments to making 

better use of our waterways is the U.S. Harbor Maintenance Tax. 

Throughout the nation there are entrepreneurs in the maritime 

industry trying to establish new short-sea shipping services. These 

are regional shipping services between U.S. coastal ports that are 

being explored as a means of relieving highway congestion. The 

Harbor Maintenance Tax, as I mentioned, acts as a disincentive to 

use waterborne transportation, and private companies that have to 

ship goods tend to prefer road and rail transportation in lieu of 

water transportation for the movement of domestic cargo. 

The tax also has a discriminatory double-taxation effect on transshipped cargo. For example, a shipping container brought into a 

coastal port is assessed the Harbor Maintenance Tax when it is 

offloaded from a ship. If the transportation company would like to 

then reload that shipping container onto a second vessel for delivery to a second coastal port, that same cargo is taxed a second 

time. And thus, the transportation company is encouraged, in fact, 

to not move that cargo by water. But rather, once it arrives in the 

United States, to keep it on road. That simply exacerbates highway 

congestion and leads to greater gridlock in our major cities. 

Chairman Tiberi, we very much support your legislation, H.R. 

1533, which will provide a narrow exemption to the U.S. Harbor 

Maintenance Tax for short-sea shipping services in the United 

States, specifically for non-bulk cargo. 

The legislation has been scored by the Joint Committee of Taxation, and it has a de minimum impact on revenue into the trust 

fund. To give you a relationship, there was more than $1.4 billion 

collected from the Harbor Maintenance Tax last year. This bill, 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
21 

Chairman Tiberi’s bill, will result in the loss of only $2 million a 

year of revenue to the trust fund. 

I would like to recognize the strong support the legislation has 

had by many members of this committee and the House Transportation Committee, including Chairman Camp, Ranking Member 

Levin, Chairman Mica of the Transportation Committee, and Ranking Member Rahall. Tremendous support for the legislation. 

We believe enactment of your bill, sir, will help remove the impediment, help relieve highway congestion, help create more maritime services and more jobs in the maritime industry, and help relieve highway congestion, and enable our economy to grow. 

Thanks very much for letting me join you today. 

[The prepared statement of Mr. Fisher follows:] 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
22 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.008
23 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.009
24 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.010
25 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.011
26 

f 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.012
27 

Chairman BOUSTANY. Thank you, Mr. Fisher. 

Mr. Arntzen, you may now proceed. 

STATEMENT OF MORTEN ARNTZEN, PRESIDENT AND CHIEF 

EXECUTIVE OFFICER, OVERSEAS SHIPHOLDING GROUP, 

NEW YORK, NEW YORK 

Mr. ARNTZEN. Chairman Boustany, Chairman Tiberi, Ranking 

Member Neal, Ranking Member Lewis, and Members of the Subcommittee, thank you for convening this important hearing on tax 

matters facing the maritime industry. My name is Morten Arntzen, 

I am president and chief executive officer of Overseas Shipholding 

Group. We are, by far, the largest U.S. shipping company, a global 

leader in energy transportation. At the end of this last year we 

owned 116 U.S. flag and foreign-flagged ships. We employ about 

3,600 people, and last year had revenues in excess of $1 billion. 

The U.S. maritime industry is critical to our economic well-being. 

Today there are more than 40,000 vessels in the domestic maritime 

fleet, comprised of some of the most technologically-advanced vessels in the world. It is estimated that the U.S. maritime industry 

currently employs approximately 500,000 workers. 

The participants in the U.S.-flag industry continue to invest in 

the expansion and modernization of the U.S. fleet. We are not sitting still. For example, during the past year, OSG took delivery of 

the last of a series of 12 double-hulled Jones Act anchors constructed for us at Aker Philadelphia Shipyard, a huge investment 

that created thousands of shipbuilding jobs, and will create thousands more relating to the vessels’ operation, maintenance, and 

commercial use. 

This 12-ship vessel series that we had constructed at the Aker 

Philadelphia yard, the site on which the original Philadelphia 

Naval Yard was founded by Benjamin Franklin in 1787, constituted the largest commercial shipbuilding order in the United 

States since the end of World War II. 

Despite the successes of the U.S. maritime industry, we face severe competition and difficult market conditions. The last three 

years have been very challenging. Moreover, as a highly capital-intensive industry, we have very substantial funding needs. U.S. 

shipping companies simply cannot thrive if we are burdened with 

Tax Code provisions which do not apply to other U.S. corporations, 

or if access to capital, particularly our earnings, is impeded. 

The American Shipping Reinvestment Act, or ASRA, would correct a decades-old provision in our Tax Code law that singles out 

U.S. shipping companies for less favorable treatment than other 

U.S. businesses, and impedes our access to our own earnings. As 

a result, shipping companies like OSG have been denied access to 

their own capital that could be used here in America. 

The technical aspects of ASRA are detailed in the written testimony which I have submitted to the subcommittee. In short, due 

to Tax Code provisions enacted in 1975, U.S. shipping companies 

must keep the amounts earned by their foreign subsidiaries between 1975 and 1986 invested in foreign shipping assets or face a 

severe tax penalty. ASRA would repeal this. 

Enactment of ASRA will allow U.S. shipping companies to redeploy funds currently sent abroad for use here at home. ASRA will 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
28 

help U.S. shipping companies make investments in their U.S.-flags 

fleet, as well as vessels that support homeland security and the 

military. 

Prior to the passing of the Jobs Creation Act of 2004, we committed to a significant U.S. investment program if the Act passed, 

which it did. Since that Act was passed, we have invested close to 

$2 billion in new and upgraded double-hull tankers and articulated 

tug barges. As we have discussed, as with members of the committee the last couple of years, we committed to continuing to invest in our U.S.-flag business. And we have. Since January 2009 

we have invested approximately $500 million in our U.S.-flag segment. The proof is in the pudding. 

I am deeply grateful for the leadership of Chairman Tiberi and 

Congressman McDermott, the lead sponsors of ASRA, as well as 

Chairman Boustany, Congressmen Roskam, Larson, Herger, 

Nunes, Rangel, Schock, who all have cosponsored the legislation. 

We in the maritime sector look forward to working closely with 

the chairman and members of this subcommittee to ensure prompt 

passage of this important legislation. 

Thank you again for the opportunity to testify today. 

[The prepared statement of Mr. Arntzen follows:] 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
29 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.013
30 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.014
31 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.015
32 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.016
33 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.017
34 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.018
35 

f 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.019
36 

Chairman BOUSTANY. Thank you, Mr. Arntzen. 

Mr. McCurry. 

STATEMENT OF JAMES C. MCCURRY, JR., DIRECTOR OF ADMINISTRATION, GEORGIA PORTS AUTHORITY, GARDEN CITY, 

GEORGIA 

Mr. MCCURRY. Chairman Boustany, Ranking Member Lewis, 

Chairman Tiberi, and Ranking Member Neal, distinguished Members of the Subcommittees, my name is Jamie McCurry, director of 

administration for the Georgia Ports Authority. I am very pleased 

to offer comments on behalf of the GPA regarding harbor maintenance funding and, in particular, the Harbor Maintenance Trust 

Fund. 

If I had to summarize my presentation in the shortest way possible, it would be to say that this issue is about jobs. It is about 

preventing the waste of federal tax dollars already invested. And 

it is about opening the door to a proven pathway to economic 

growth. 

The world economy today is driven by international trade, and 

the U.S. economy is heavily dependent on exports and imports. We 

cannot win in that marketplace if we do not have 21st century resources. To be competitive in international commerce, our U.S. port 

infrastructure must itself be competitive in its ability to handle the 

current generation of ships in the most efficient way, and to be able 

to accept the new generation of vessels that will come to dominate 

world trade. 

As Mr. Lewis noted, in Georgia deepwater ports and inland barge 

terminals support approximately 300,000 jobs annually and billions 

in revenue, tax income, and personal income to Georgians. Beyond 

the state, Georgia’s port activity is a critical economic driver for the 

southeast, sustaining tens of thousands of jobs in the neighboring 

states of South Carolina, North Carolina, Tennessee, Alabama, 

Florida, and beyond. 

Georgia’s ports contribute to over 3.5 billion in federal tax generation annually. Significantly, the Port of Savannah was the second-busiest U.S. container port for the export of American goods by 

tonnage in fiscal year 2011. It also handled 8.7 percent of all U.S. 

containerized cargo volume, and 12.5 percent of all containerized 

exports. 

Regrettably, in Georgia we have seen the direct consequences of 

not fully utilizing the Harbor Maintenance Trust Fund with the 

needed maintenance dredging. One year after completing a $120 

million project to deepen the Brunswick Harbor to 36 feet, inadequate federal O&M funding resulted in channel dimensions of less 

than authorized depth and width. If not for the availability of stimulus funds in 2010, the Brunswick Harbor would likely be at predeepening dimensions today, thereby wasting the federal and state 

investment in a project completed just five years ago. 

Auto makers exported and imported over 465,000 vehicles 

through the Port of Brunswick in fiscal year 2011, and the port 

serves as a major conduit for the export of bulk agricultural products throughout the southeast. Nonetheless, save for the 2010 stimulus money, Brunswick remains substantially underfunded annually, and harbor depth and width again risk deterioration if operVerDate Mar 15 2010 14:13 Feb 22, 2013 Jkt 078178 PO 00000 Frm 00040 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\78178.XXX 78178

wwoods2 on DSK499XVN1PROD with WAYS & MEANS
37 

ations and maintenance funding is not increased. The Army Corps 

of Engineers estimates current Brunswick Harbor maintenance 

needs to be about $16 million annually. Yet typically, annual funding has been $3 million. 

Additionally, the Port of Savannah has experienced challenges 

due to a lack of adequate O&M funding, where the Corps estimates 

current Savannah maintenance needs to be approximately $30 million annually, yet typical annual O&M funding has been about $13 

million annually. 

With such limited resources available, the Corps has at times 

only been able to maintain the center portion of the channel in 

faster shoaling areas, and for maintaining the primary turning basins. If the typical recent funding levels in Brunswick and Savannah are not increased, shoaling may ultimately result in channel 

restrictions being imposed by the U.S. Coast Guard. Such restrictions would limit access to large military and commercial vessels 

into the port. 

Beyond simply maintaining our harbors, we must also recognize 

the pressing need to invest in harbor-deepening projects required 

to serve the increasing size of vessels calling on U.S. ports. 

Completion of the Savannah Harbor Expansion Project, or SHEP, 

as we call it, is critically important to the continued economic recovery and growth in the southeastern U.S. and the country, as a 

whole. Savannah serves a large percentage of the U.S. population, 

including some 21,000 companies, with operations collectively in all 

50 states. In fact, Savannah was responsible last year for moving 

more than 18 percent of all East Coast containerized trade. In addition, more than 50 percent of all containers going through Savannah are exported U.S. goods. 

The Savannah project has a projected benefit-to-cost ratio that 

well exceeds four to one. And the Corps study has shown that it 

will create $150 million in annual benefits to the nation. That is 

a perfect example of a way to leverage taxpayer dollars to provide 

both new jobs, new tax revenue, all through increased economic activity. 

Today, due to the restricted depth, nearly 80 percent of container 

ships calling the Port of Savannah are forced to take on a lighter 

load or wait for high tide to sail into and out of port, and sometimes both. This already challenging situation will soon worsen, 

when the Panama Canal expansion is complete, and begins sending 

ships to Savannah and other East Coast ports. They are as much 

as three times the capacity of those current—those ships currently 

able to transit the canal. 

In closing, I submit that we cannot take for granted the importance of our nation’s ports and harbors. They have too often been 

the invisible infrastructure that is easily forgotten in times of economic stress. However, their importance to the U.S. economy cannot be overstated. We must not only continue to invest in their ongoing maintenance, but also in the expansion programs necessary 

to ensure their competitiveness in the modern global marketplace. 

Again, I appreciate the opportunity to be with you today, and I 

look forward to any questions. 

[The prepared statement of Mr. McCurry follows:] 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
38 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.020
39 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.021
40 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.022
41 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.023
42 

f 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.024
43 

Chairman BOUSTANY. Thank you, Mr. McCurry. 

Mr. Leone. 

STATEMENT OF MICHAEL LEONE, PORT DIRECTOR, MASSACHUSETTS PORT AUTHORITY, EAST BOSTON, MASSACHUSETTS 

Mr. LEONE. Chairman Boustany, Chairman Tiberi, Ranking 

Member Lewis, Ranking Member Neal, distinguished Members of 

the Committee, for the record my name is Michael Leone. I am the 

port director of the Massachusetts Port Authority, which owns and 

operates the public marine facilities within the Port of Boston. 

Thank you for this opportunity to testify in support of H.R. 104, 

the Realize America’s Maritime Promise Act. 

As the title of the proposed new act implies, the promise that 

America’s maritime industry is asking Congress to realize is the 

same promise that Congress made 26 years ago, when it first established the Harbor Maintenance Tax. That is to fully utilize the 

taxes which have been levied on port users for the maintenance 

dredging of our ports and harbors. 

I know, from the two terms I served as chairman of the American Association of Port Authorities, that ever since the trust fund’s 

inception in 1986, port operators and customers have consistently 

raised concerns that Harbor Maintenance Tax revenues have been 

used for other programs, or never fully appropriated for their intended purpose of maintenance dredging of federal channels. As a 

result, only about 35 percent of America’s navigation channels are 

currently at their authorized depth and width, which means that 

vessels calling our ports cannot be fully loaded, or maybe restricted 

to a one-way transit. 

The entire maritime industry, therefore, is grateful for the oversight provided by your committees to ensure that the tax on port 

users is used for its intended purposes, ensuring that navigation 

channels leading to our ports are regularly dredged to their authorized dimensions so that vessels calling our ports can deliver essential commodities and can take American-made products to its global customers. Only with regular investments in dredging can these 

critical parts of our national transportation system continue to 

serve as gateways for the more than two billion tons of domestic 

import and export cargo that are expected to be handled each year, 

which in turn helps keep American businesses, both large and 

small, competitive in world markets. 

As Congressman Neal has stated, this concern is even greater 

today, as East and Gulf Coast ports prepare for the larger vessels 

that will be transiting through an expanded Panama Canal. 

What is frustrating for many port directors who have dredging 

needs that go unmet is that the money for these projects is available. The users of our ports and harbors still pay their full share 

for maintenance dredging, over $1 for every $1,000 worth of imported and domestic cargo they move, while only getting back half 

as much in benefit. Current estimates are that users of our nation’s 

waterways are paying approximately $1.4 billion each year in Harbor Maintenance Taxes, which is about the amount the Army 

Corps of Engineers has determined is the annual need for maintenance dredging. 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
44 

Yet this past fiscal year, only about 820 million was appropriated 

for channel maintenance. That still leaves, according to most estimates I have seen, a surplus in the Harbor Maintenance Trust 

Fund of over $6 billion and growing. This shortfall in funding is of 

particular concern to regional or niche ports, which are usually not 

included in the President’s budget, because they generally handle 

less tonnage than the major container and bulk cargo ports. 

There are many ports in Massachusetts in need of maintenance 

dredging, for example, which could be completed if all of the Harbor Maintenance Tax was appropriated each year. Not every port 

will need to have channels that are 50-feet deep in order to handle 

larger ships that will traverse the expanded Panama Canal when 

that modernization program is set to be completed in 2014. But 

many will. And others will need to be dredged to handle larger vessels that will be used in moving cargo from the larger ports to regional ports. 

In the meantime, individual ports have been dredging our own 

berths at our own costs, buying cranes that can handle these larger 

vessels, and investing in terminal infrastructure. Indeed, it is estimated that seaports invest more than 2.5 billion every year to 

maintain and improve their infrastructure, which is why ports are 

often discouraged that federal investments in maintenance dredging have not kept pace with their own. 

The larger issue with the spending on maintenance dredging is 

particularly critical at this time, and not only because of the larger 

ships that ports will soon be expected to handle, but to ensure that 

the administration’s national export initiative, doubling U.S. exports within five years, can be fulfilled. U.S. ports are the gateways 

of international trade. And having a modern, reliable, and cost-effective marine transportation system will expedite the delivery of 

U.S. exports to the global marketplace. Delays in the movement of 

exporter cargo will only hurt the competitiveness overseas. 

As it true throughout the country, the Port of Boston is a vital 

economic engine for the New England region, carrying cargo, opening markets for domestic goods, creating jobs, and generating economic prosperity for our citizens. American seaports carry all but 

one percent of the country’s overseas cargo. They help generate 

over 30 percent of gross domestic product, and support more than 

13 million jobs. 

America’s economic future depends on modern ports with facilities adequate enough and channels deep enough to keep pace with 

the demands of the global economy. It is now critical that Congress 

honor its pledge to maintain the nation’s ports and harbors with 

the revenue provided by users. This can be accomplished through 

a shift in funding priorities in both the Congress and with the administration, given that annual revenue is available and adequate 

to meet current needs. 

I would also urge the passage of H.R. 104 that would require 

that the annual Harbor Maintenance Tax revenue be made fully 

available to the Corps of Engineers for maintenance dredging in its 

annual appropriation. I, along with many other port directors, 

strongly support passage of H.R. 104, so that our marine transportation system can remain efficient and continue to serve as a national and regional economic engine. 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
45 

I commend the efforts of Representative Boustany and the over100 cosponsors in pressing for this important piece of legislation. 

And I urge the committee to support H.R. 104. 

This completes my prepared testimony. I am pleased to answer 

any questions you may have. 

[The prepared statement of Mr. Leone follows:] 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
46 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.025
47 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.026
48 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.027
49 

f 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.028
50 

Chairman BOUSTANY. Thank you, Mr. Leone. We will now proceed with questions. And I just want to thank all of you for very 

eloquent testimony about this problem. 

At a time when our country, everyone in our country, is concerned about jobs and the high level of employment, about the future of American competitiveness and global leadership, it is remarkable that we got Members on both sides of the aisle on this 

dais and in this House that see a way forward on this particular 

issue. And we are—with many of the problems that we are faced 

with, we don’t see ready solutions. There is one here. And I think 

there is, you know, a recognition that we should go forward. 

But clearly, Americans are fed up with budgetary gimmicks and 

games and some of the arcane budget practices that occur here in 

Washington. 

So, I have a simple question and I would like each of you to answer it. Do you consider this a blatant abuse of a dedicated federal 

tax or user fee? Commissioner Strain? 

Dr. STRAIN. Yes, I do. And when you look at this, it is—the dollars are being collected to dredge and to clean out our harbors. If 

you look at the Port of New Orleans and the Port of South Louisiana alone, failure to maintain short-shipping these loads, just 

short-shipping these loads, will result, at the Port of South Louisiana, in a $22 million decrease in the Harbor Maintenance Trust 

Fund in itself. 

And if you look at the alternative, we are paying to have this 

done. The ships that use this, pay for this, they want to have this 

done. They need to have it done. Failure to do this will result in 

just—in what comes through the mouth of the river, at a cost of 

$150 million to the farmers throughout the Heartland of America. 

And so when—it is very, very simple: 1 15-barge tow, 1 tow, is the 

equivalent of 261 rail cars, or over 1,000 trucks. 

So, it is. It is an abuse of it. And we need to get it right. But 

the thing of it is, this is an all-win for everybody. 

Chairman BOUSTANY. Thank you. Mr. LaGrange. 

Mr. LAGRANGE. Yes, sir. Absolutely an abuse, without a question. At a bare minimum, the $14 billion in spending loss, the 

38,000 U.S. jobs, potentially, at a bare minimum, but also the flip 

side, as I alluded to, 41 groundings on the lower Mississippi in the 

last 3 years, 5 already in the first 25 days of this year, not to mention the environmental hazards and the potential hazards that are 

there, another Alaskan Valdez. 

Homeland Security issues come into play, as well, when you have 

ships aground. In the shipping industry, transportation logistics 

times money. The cost of tug boats to come on the scene and spend 

four, five, six, eight hours to get that ship back into the main channel, whatever main channel might remain. In our case, a 750-footwide channel silted in recently to 115 feet. These ships are 143 feet 

wide. That is absurd. Yes, sir. 

Chairman BOUSTANY. Thank you. Mr. Fisher. 

Mr. FISHER. Yes, sir. It is absolutely an abuse of Congress’s 

commitment to users when the original agreement was reached in 

the mid-1980s to assess a fee on users to pay for harbor maintenance. 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
51 

Congress has even acknowledged that it is an abuse. We had this 

same problem with the highway trust fund and with the aviation 

trust fund. And Congress fixed it in those two instances. Those two 

trust funds had excess balances, as well, huge excess balances. And 

Congress enacted legislation to make sure those trust funds and 

those user fees were properly spent. Why wouldn’t we do the same 

with the Harbor Maintenance Trust Fund? 

Chairman BOUSTANY. Thank you. Mr. Arntzen. 

Mr. ARNTZEN. Mine is a little bit different. It really isn’t an 

abuse, it is an oversight. We are seeking to correct something that 

was not included in the 2004 Act. I have discussed it with many 

congressmen and senators on both sides of the aisle. I have not had 

one that objected. And we have very strong bipartisan support. 

We have agreed to put in provisions that, if we did not maintain 

employment, in fact we would take penalties for that. So this is 

just correcting a mistake which would enable us to continue to invest in the country. And I think it is broadly supported by Democrats and Republicans, alike. 

Chairman BOUSTANY. Mr. McCurry. 

Mr. MCCURRY. Mr. Chairman, I think it goes without saying 

that if users of our ports are paying the required Harbor Maintenance Tax, the revenue generated from the tax should, in turn, be 

used to maintain the ports and harbors that those users are paying 

to access. 

Chairman BOUSTANY. Thank you. Mr. Leone. 

Mr. LEONE. I absolutely agree, sir. It is—the user fees should 

be paid. The users are paying the fee. It is the only mode of transportation that does not have the fees used for its intended purposes. And there are many ports that are—have accumulated—in 

the Port of Boston itself, we generate—we only use 30 percent. We 

are a donor port. And we have unmet needs in our port, and yet 

we are only using 30 percent of the amount that is collected. I 

think it is absolutely an abuse, and it should be corrected. 

Chairman BOUSTANY. Thank you. I have one final question I 

want to ask Commission Strain, and that is you focused a lot on 

agriculture, and the importance for U.S. competitiveness. And I 

think you made a very eloquent statement. But could you further 

elaborate on why maintaining these waterways are so important to 

a farmer who might live remotely from a waterway? 

Dr. STRAIN. Well, if you look at the waterways, if you look just 

at the inland system—and we have seen and there is discussions 

in recent reports about the fact that many of our inland waterways 

are in desperate need of maintenance and repairs. 

To move that product, first of all, if you just look at that cost, 

$.10 a bushel, additional cost to move that product, say from Kansas to the coast. But also the infrastructure. If you look at the entire infrastructure along the systems that are in place, you are 

talking about billions of dollars of investment. If you don’t have 

this, that similar infrastructure does not exist to move these products by different overland routes. And we are talking about efficiencies. 

And when you look at using waterways, they can move, you 

know, a ton of materials 576 miles on 1 gallon of diesel. So it is 

critical, especially when you look at economic competitiveness, and 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
52 

look at the commodity market: number one, increased cost not to 

do this; two, the availability to move this in an efficient manner 

and in a consistent manner. 

And it is about economics, but it is also about getting the products, raw products, up river, the products that we import to make 

the fertilizers, to make fuel components, and about all the other 

things. 

Chairman BOUSTANY. Thank you. Mr. Lewis. 

Mr. LEWIS. Thank you very much, Mr. Chairman. Again, I want 

to thank you for holding this hearing, and I want to thank each 

member of the panel for your testimony. I think you have been 

very convincing. 

I was joking with Mr. Tiberi a moment ago. I said seems like the 

chairman is no longer playing the role of a good doctor, but he is 

playing the role of a lawyer, he seems to be leading the witness. 

[Laughter.] 

Mr. LEWIS. I think you have been very convincing. But I want 

to ask each one of you. How does the funding or underfunding of 

a navigational channel affect the ability to create more jobs and 

move produce and goods? Could you just elaborate? 

Dr. STRAIN. Yes, sir. If you look at the underfunding of this, 

and when you don’t have the ability to fully load these vessels, 

start off with that. We look at 35 percent of all of the ports and 

the waterways are not adequately funded. You are talking about 

the economics in shipping. And if you start short-loading, first of 

all, it costs more money. When you cost more money, there is less 

dollars. And those dollars go all the way back to the first point of 

production, in the farmers’ hands, in the manufacturers’ hands. 

These are American dollars. 

And what we talked about is the tremendous potential for 

growth, worldwide, to sell these products in the raw state and in 

the processed state. And along with that, all the technologies included. Not to do this will hamper our ability of this tremendous 

amount of growth throughout the heartland and throughout the 

United States, and will cost us the jobs that not only would have 

been generated, but also, when you start looking at—just talk 

about the cost on a ship, short-loading a ship. It is a $1 million per 

foot, per foot, to short-load these ships. If you look at the Port of 

New Orleans, 6,000 vessels, more than 400,000 vessel movements. 

And so, we are creating an inherent inefficiency that makes us 

non-competitive worldwide. And so this costs jobs dramatically, and 

it costs jobs all over the United States. 

Mr. LEWIS. Thank you. 

Mr. LAGRANGE. Yes, sir. I totally agree. At present we know 

that there is somewhere between a 30 and 40 percent loss in jobs 

due to the inability of ships to come in fully loaded, come in light. 

In looking at the future, though, the President’s national export 

initiative, in looking at your wise passage of the free trade agreements with Panama, Colombia, and South Korea, and in looking at 

the expansion of the Panama Canal, threefold by the year 2014, all 

of these are perfect examples of the incremental new jobs that we 

will lose if we don’t make ready our channels and dredge them appropriately. 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
53 

In three different studies recently completed by Parsons 

Brinckerhoff, Booz Allen Hamilton, and A.T. Kearney, all three 

studies indicated that the incremental growth from the Panama 

Canal, by the year 2025, should be in the area of 20 to 25 million 

new TEUs a year, with about 75 to 80 percent of that going to the 

East Coast ports, Savannah included, and the other 20 or 25 percent coming to the Gulf Coast ports. East Coast ports, because that 

is where the people live, the consumers consume. 

All of that said, this incremental growth is unbelievable, and we 

are just not ready to handle it. And that is just the Panama Canal, 

not the NEI and not the free trade agreements that were recently 

passed. 

Mr. LEWIS. Thank you. 

Mr. FISHER. Sir, it makes no more sense to operate a ship partially loaded than it makes sense to operate an aircraft half full of 

people. And if you can imagine the inefficiencies to an airline if it 

only flew its planes half full, it is the same thing with a shipping 

company operating a ship only partially loaded. It creates an inefficiency and it hits the bottom line of the shipping company and 

makes their asset, their investment in their ship, less competitive. 

A more direct impact, as far as jobs, to answer your question, we 

actually have some ports, as I mentioned in my testimony, in the 

Great Lakes that are on the cusp of actually closing, small ports 

that are actually on the cusp of actually closing. And there is active 

industries, maritime industries, still in those harbors. They are 

small companies, but these jobs are precious in those small communities up in Michigan and Wisconsin and Illinois. 

And so, if those harbors close and those industries are forced to 

close because they can’t get delivery of raw materials, that is devastating to the local economy of those small communities. 

Mr. ARNTZEN. My perspective is a little bit different, but I 

would like to talk a little bit about a success story. About four 

years ago we exported no refined petroleum products from the 

United States. This year I think we will be exporting about 800,000 

barrels of refined petroleum products, mainly diesel, to Latin 

America and to Europe. This is an enormous growth market. It is 

because we have invested in refineries and we have accessed the 

cheap shale oil and gas. 

This is going to be growing dramatically, and it is going to put 

a real strain on the facilities we have down in the Gulf. So there 

is real opportunity and real growth. It is—there are some good stories out there. 

Mr. LEWIS. Thank you. Mr. Chairman, I noticed my time is up, 

but if—— 

Chairman BOUSTANY. Yes, the gentlemen, if they have comments to add to this, please proceed. 

Mr. MCCURRY. Very briefly, if I may. I will say—and Mr. LaGrange mentioned—the exacerbation of this issue that will come 

with the Panama Canal. At the end of the day, vessels waiting cost 

the ship lines money. That money rolls into their operations and, 

therefore, their cost to the customers, which are our exports and 

our consumers. 

Using, in Georgia, just the example of the poultry industry, 

where Georgia—we are the largest poultry exporting port in the 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
54 

country, which is a huge industry for Georgia. It is also an industry 

with very, very thin margins. And if the shipping cost fluctuates 

even $100 on a box of poultry, that is absolutely the difference between producers in Georgia versus producers in another country securing business to export to Asia and other parts of the world. 

Mr. LEONE. And just briefly, I concur with my colleagues, certainly, from Louisiana and Georgia. But the key element for every 

single port, the common theme for every port, is they need to have 

the highway—the channels into the terminals deep enough to handle the business they have. And the fastest growing portion of kind 

of the container business has been exports. We have seen that in 

Boston. And I understand from the Port of Georgia, the growth 

that they have seen. 

And it is the jobs, not necessarily the maritime jobs that I am 

concerned—I think we need to focus on those manufacturing jobs. 

If they can’t get to market, that is the key to it. It is that area and 

those jobs that are created outside of the area in the inland portions that keeps those regional economies alive. And without deep 

channels, they are not going to get to their marketplace. 

Chairman BOUSTANY. Thank you, Ranking Member Lewis. 

Chairman Tiberi. 

Chairman TIBERI. Mr. Fisher, you verbalized at the very end of 

your testimony the example that you gave with respect to why the 

tax needs to be fine-tuned with respect to short-sea shipping. And 

I see nods heading [sic] here, as in agreement. And you gave this 

general example of the taxes paid, once it comes into port in the 

United States. And then, if it is transported again on a ship to another port, it is taxed yet again. So the incentive is for me, as the 

user, to put it on a truck or on rail, rather than to put it on a ship. 

Correct? 

From your spot where you sit today in your job, can you give 

some specific examples of people who have said to you, ‘‘Wow, we 

lost this because it is going by rail, by truck,’’ or different ports 

within the Great Lakes that have seen a decline over the time that 

this has been instituted? And what are happening to those ports? 

Can you give us some more specifics? 

Mr. FISHER. Chairman Tiberi, transportation shipping companies throughout the United States would like to establish their operations in the most efficient way possible. In some places, that is 

establishing a service that is similar to what we are all familiar 

with with the airlines, a hub and spoke system, where essentially 

you go to a major hub first, and then you take a smaller aircraft, 

for example, to a secondary city. 

The same thing should be happening along our coasts. Cargo 

coming in to major hub ports, and then transferring cargo to smaller—what we call feeder—vessels to then make the journey to secondary ports. That is efficient. 

Unfortunately, the tax discourages that, and it doesn’t generally 

go on. Yet, at the major hub ports in this country, which tend to 

be in the major cities, we have severe traffic congestion. So we are 

essentially forcing that second leg of commerce off the ships and on 

to the highways. 

Well, the highways are already congested. And most of the gentlemen at this table will tell you that they have congestion issues 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
55 

at their ports where they cannot move the cargo. Once it is off the 

ship, they have trouble moving it out into the hinterlands because 

there is so much congestion in their local city. 

So, this tax actually acts as a disincentive to allow the shipping 

industry to do what is most efficient to be done. 

Chairman TIBERI. And if you corrected that, then there would 

also be an increase in jobs in the maritime industry? 

Mr. FISHER. Absolutely. All those feeder vessels that I mentioned, we would see the establishment of these services. That 

would create additional jobs in the maritime industry. It actually 

also would make the general economy more competitive and more 

efficient, because it would relieve some element of highway congestion, and that is good for the economy. We have a lot of waste in 

our economy, as commerce sits clogged in traffic jams, and isn’t 

getting to its destination. 

Chairman TIBERI. Dr. Strain, would you agree with that? 

Dr. STRAIN. Yes, I would. When you look at all of the ways that 

we move product, and if you are looking at this particular example, 

we are only talking about $2 million in something where we are 

collecting, like, $1.5 billion. We must be competitive. We must also 

have a fair playing field, as well. 

But if you look at the tremendous inland waterway systems that 

we have—and you talk about short-shipping—we must utilize 

those. But there is also something alarming that, as I have been 

reading in the last few weeks, there is such a deterioration of potential on our inland waterway systems. Many of those systems, 

locks and dams and others, are reaching past their 50-year life 

span. 

And if you look at—for instance, if one major system breaks 

down on those inner waterway systems, it could cost $50 million 

to $100 million in lost economics. To tie up a ship, just a vessel, 

any vessel, unnecessarily, is $50,000 an hour. 

Chairman TIBERI. Thank you. 

Dr. STRAIN. An hour. So we must find all efficiencies possible. 

Chairman TIBERI. Thank you. Mr. Arntzen, you are the man 

who builds these ships on the panel. Can you talk about what you 

did last year, and why ASRA would help stop a perverse reality 

from occurring in the marketplace, and what you would do, in 

terms of—if we could pass this bill, what you would do, in terms 

of investment in jobs? 

Mr. ARNTZEN. Yes, I would love to. Last year for us was a really big year of pride, because we took delivery of our second Jones 

Act shuttle tanker. These are specially modified tankers that take 

oil from the ultra-deepwater Gulf and bring them into the refineries in the Gulf. We have the first two and we are now working 

on the third. And the second of those two did help clean up the BP 

spill. When they needed a ship to take the oil off the field after 

they finally capped it, they brought in our OSG shuttle tanker to 

do that. So we are very proud of that. 

We see that as a big, new, exciting market. In fact, it is the fastest—it is really the first really big new market in the Jones Act 

tanker market in many decades. We are working on one such 

project today. Those ships will cost you somewhere between $100 

million and $150 million: 1 ship. We will have to employ 50 crew, 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
56 

25 on and 25 off on those ships. We think there is a possibility of 

18 to 25 shuttle tanker demand in just the U.S. Gulf in the next 

decade. We want to play a big role in that. 

So, at $100 million-plus a pop, these are very big capital equipment. This is why we have been pushing to be able to repatriate 

our foreign profits. It is a continuation of what we have been doing, 

and it is a very exciting market. And they are really well-paid secure jobs with pensions and medical benefits and training and the 

kind of jobs we want to create in the United States. 

Chairman TIBERI. Well, my time is expired. Thank you very 

much. Chairman, thank you for a great panel today. 

Chairman BOUSTANY. Thank you. Mr. Neal? 

Mr. NEAL. Thank you, Mr. Chairman. Mr. Leone, the Commonwealth of Massachusetts offers a dollar-for-dollar tax credit to corporations moving goods from Massachusetts ports to offset the federal Harbor Maintenance Tax. And the credit can be applied 

against current and future taxes in the Commonwealth. Jim Brett, 

who is an old friend of mine, is now president and CEO of the New 

England Council, was one of the leaders when this tax credit was 

established during the time he was chairman of the Massachusetts 

House Taxation Committee. 

The state seems to be unique in our approach to the Harbor 

Maintenance Tax. And can you tell us a bit about the policy behind 

the Commonwealth offering this tax credit? And, in your opinion, 

has the credit been successful in expanding harbor business in 

Massachusetts? Are you familiar with any other states that try a 

similar approach? And would you lay that out for us? 

But one of the reasons behind this tax credit was because of the 

close proximity of Massachusetts to Canada. Some companies were 

shipping to Canada instead of Boston to avoid the Harbor Maintenance Tax. Has the state tax fixed this problem? And are there 

other reasons for companies still shipping to Canada instead of 

Massachusetts? 

And lastly, seaports like Boston are certainly gateways to domestic and international trade, connecting us to the rest of the world. 

In your testimony you stated that U.S. ports and waterways handled more than two billion tons of domestic and import-export 

cargo annually. You also note that the Port of Boston is a vital economic engine for the New England region. Carrying cargo, opening 

markets for domestic goods, and creating jobs is certainly part of 

your mission. And perhaps then you could describe for us how 

much cargo goes through the Port of Boston, and how this translates into many of the jobs that we enjoy across the Commonwealth 

and New England because of that port. 

Mr. LEONE. Thank you, Congressman Neal, for that question. I 

think that the legislature and certainly the Government of Massachusetts understood kind of the threat that was going to happen 

with the Harbor Maintenance Tax, and the fear that being adjacent 

to Canada, whether it was Montreal or whether it was Halifax, 

that certain freight would be able to move over those gateways in 

lieu of Boston, and it was concerned that certainly we would lose 

business in Boston. So they offered the dollar-for-dollar tax credit. 

And it has been very, very successful. A lot of different Massachusetts companies have utilized that particular plan to be able to 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
57 

offset the diversionary impact of HMT. And I know this is an ongoing problem in the western part of the state. Certainly in the Puget 

Sound it is an ongoing issue there as well. But I think this state 

tax credit has been effective. 

But it is limited, as well. It has been limited in the fact that it 

only applies to, obviously, those individuals or those companies 

that file a Massachusetts income tax, and not everyone would have 

that benefit, depending on what their business model is, depending 

on who the beneficial cargo owner is, eventually. 

So—but it has been effective in retaining business. And Boston’s 

business had grown consistently to the point that it actually—we 

are handling well over 12 million tons of cargo, we are generating 

34,000 jobs. It has also—has over $2 billion in economic impact. 

And that has been growing until some of this recent recessionary 

impacts. 

But the Harbor Maintenance Tax credit not only has its limitations internationally, but we lost one large account several years 

ago, when Volkswagen moved about 100,000 of its automobiles 

from Boston to Rhode Island. In that particular circumstance, the 

Port of Davisville in Rhode Island does not have to assess a Harbor 

Maintenance Tax on the cargo that moves in and out of that port 

because it was a former Army base and hadn’t been dredged. And 

back in the days when I was practicing law for the port authority, 

we had drafted a letter asking customs to reinterpret the law to 

say we shouldn’t be allowing this tax to create a competitive advantage from one state to the other. 

But the customs basically thought that my opinion was contrary 

to the initial interpretation and didn’t change it. But Volkswagen 

clearly said moving 100,000 cars saved them at that point in time, 

back when the value of the car was less, about $3.5 million a year, 

pure savings from going from one port to the other. 

I don’t know if there is any other ports—I believe—and maybe 

my colleague from Louisiana—there is another port in the Gulf, I 

think, that has a similar issue, as well. 

But that has been an issue for us. I don’t know if other states 

has created a credit. I think maybe North Carolina was looking at 

it. I don’t know if they still have that. But it has been an issue. 

So you not only have an HMT that you—you know, in Boston you 

are collecting a tax that you are getting 30 percent of the benefit 

of it, the money goes elsewhere. Yet an adjacent state doesn’t have 

to pay the tax, even though they may receive other federal benefits 

as EDA grants. I mean I know they are getting Tiger grants to 

build cranes down there to compete against you. But, you know, 

they have a—there is no tax assessed or user fee assessed to that, 

and that has created a competitive disadvantage between those 

particular ports. 

Mr. NEAL. Quickly, could you talk a little bit about your preparation, anticipation of the expansion of the Panama Canal, and 

what it is going to mean to the Port of Boston? 

Mr. LEONE. Well, we have done many things in anticipation of 

this. We have added new cranes, at a cost of $15 million to the facility. We have purchased an adjacent oil facility for expansion of 

our container facility. We have added a bunch of equipment to our 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
58 

facility, spending close to $100 million on new terminal operating 

systems, training programs for longshoremen to be prepared for. 

You know, we don’t expect to be seeing the largest of ships, but 

we need to have deeper water. And I know this isn’t exactly an 

HMT issue, but our improvement dredging project, which I know 

that Georgia alluded to as well, has been stalled for almost 20 

years, moving forward, trying to get authorization for deeper channels to handle the larger vessels. 

So I know that necessarily isn’t the subject of this, but that is 

kind of another frustration for ports, where you are making the investments in shore, but essentially, the major channel, the major 

access road to your facility, to a modernized facility, may not be 

available for you when the ships are—need to come there. 

Mr. NEAL. Thank you. 

Chairman BOUSTANY. Thank you, Mr. Neal. Ms. Jenkins. 

Ms. JENKINS. Thank you, Mr. Chair. And thank you, Chairmen 

Boustany and Tiberi, for holding this hearing on a very important 

issue. Thank you, panel, for participating. 

Mr. Arntzen, we have heard a lot of talk lately here in Washington about shipping jobs overseas. And no one is suggesting such 

a concern as it relates to this particular industry, but a general 

principle of deferral. And as you know, last fall the Ways and 

Means Committee released a discussion draft that would reform 

our system of international taxation. And while academics, economists, politicians can disagree about the pros and the cons of eliminating deferral, as your testimony references, the U.S.-based shipping industry gives us a real-life illustration of the peril of adopting 

such a policy. 

It appears that the U.S. industry in shipping has been hurt following the repeal of deferral back in 1986, leading to foreign acquisitions of American businesses and loss of jobs. According to a 2002 

Treasury report, immediate taxation put the shipping industry at 

a disadvantage relative to the foreign competitor, leaving less income to reinvest in its business, which can mean less growth and 

reduced future opportunities. 

So, based on this real-life experiment in tax policy, can you 

elaborate on the lessons learned from the shipping industry’s experience, particularly with regard to competitiveness, foreign acquisitions, and investments here at home? 

Mr. ARNTZEN. Yes, I think the history is very clear on this. 

This is textbook. In 1986 they ended deferral for foreign-flagged 

shipping for U.S. companies. And you saw basically the diminishment of the U.S. fleet from 1986 all the way to 2004. The biggest 

two container lines, one was acquired by a Danish company, one 

was acquired by a Singapore company. We ended up being practically the only U.S. company that remained that was both in the 

international flag and the U.S. flag. We were paying tax at that 

time. But there is no question that was what essentially stopped 

investment in U.S.-flag blue water shipping. 

The 2004 act got passed, and we, along with other of our competitors in the industry, started investing in new double-hull tonnage, as required by the Coast Guard, as required by the Oil Pollution Act of 1990. We couldn’t have done that without the changes 

to deferral. And we said if we got that we would invest. And, in 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
59 

fact, we did. And it wasn’t just OSG, it was the rest of the industry. So, what you have now in the U.S. is a very modern doublehull tanker and large barge fleet operating along our coast, much 

safer than the older single-hull ones that we replaced. 

So, I think it is absolutely textbook. And what we are asking for 

in the American Shipping Reinvestment Act is just a correction of 

the 2004 Act that was an oversight and that was sort of an obscure 

rule that went all the way back to 1986 to 1975. So it is textbook, 

and I am very proud that we lived up to the commitments we did. 

And we still see opportunity, such as the shuttle tanker business 

we talked about before, and other things. 

Ms. JENKINS. Okay, thank you. And then for any member, really, on the panel that would care to comment, under these budget 

constraints that we are looking at at this point in time, how does 

the Army Corps of Engineers prioritize which projects get funded 

and which don’t? Even with full funding, the Corps would continue 

to prioritize the work. How would you comment? 

Mr. LAGRANGE. Basically, they use a cost benefit ratio on their 

projects. And once a project construction, obviously, on a project 

has begun, obviously they stay the course on that project until its 

completion. The unfortunate thing with that, because of the lack of 

funding and due to inflation, we are looking at projects like on the 

Inland Water System, the Olmsted Lock and Dam, Chickamauga, 

the Kentucky Lock and Dam, Inner Harbor in New Orleans, all of 

these prices are escalating. 

In our case, with our lock, which connects 3,000 miles of inland 

waterways from Mexico to Canada, it was a $600 million price tag 

10 years ago. It is now $1.4 billion. So we are going backwards, not 

forward. But it is by cost benefit ratio. 

Ms. JENKINS. Okay. 

Mr. MCCURRY. If I may, there are—clearly are two areas here, 

one with the Harbor Maintenance Trust Fund, where the country 

is taking in enough in fees to adequately provide for the maintenance dredging needs. So even with prioritization, the Corps could 

adequately perform the necessary work. 

Then, when you look at the necessary expansion programs, even 

those that have significantly justifiable benefit-to-cost ratios struggle to get funding necessary to complete construction. The only 

project that I know of with much specificity is our own. 

And when you are looking at a 4-and-a-half or greater to 1 benefit-to-cost ratio on a project whose life span is 50 years, your return on the investment is in a time period that is approximately 

5 years. That is a pretty good investment, pretty good return on 

your dollar in any business. It is not the kind of project or programs that typically fall into what might look more like a grant. 

The projects do return to the United States that investment. I 

think it is important to look at them in that way. 

Ms. JENKINS. Okay. Thank you, Mr. Chairman. I yield back. 

Chairman BOUSTANY. Thank you, Ms. Jenkins. I have received 

confirmation from the Army Corps of Engineers by mail that if 

they had the full receipts of the Harbor Maintenance Tax for a 

given year, they could take care of all the authorized—where they 

have federal authority—all the authorized operations and mainteVerDate Mar 15 2010 14:13 Feb 22, 2013 Jkt 078178 PO 00000 Frm 00063 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\78178.XXX 78178

wwoods2 on DSK499XVN1PROD with WAYS & MEANS
60 

nance, and probably still have some left over. So, we repeatedly receive that kind of confirmation from the Army Corps. 

Dr. McDermott. 

Mr. MCDERMOTT. That is a wonderful segue. This hearing has 

two issues, and I want to thank Chairman Tiberi for bringing forward the American Shipping and Reinvestment Act. Thank you for 

your testimony, Mr. Arntzen. It is a bill that ought to pass without 

anything happening. 

Now, as we get close—— 

Mr. ARNTZEN. Thank you. 

Mr. MCDERMOTT [continuing]. As we get close to throwing off 

the lines and letting this baby go, we come to the second thing that 

is being loaded on to it, and that is the Harbor Maintenance Tax. 

Now, I am probably the only Member of the Congress who has a 

Z Card. I sailed the merchant marine. I went aground in Great 

Lakes in Lake St. Clair in 1956. So I know a lot about dredging. 

[Laughter.] 

Mr. MCDERMOTT. I also feel like the people who put this hearing together think that all the shipping in the world goes out of the 

south or the east. I would feel a lot better if there was at least one 

guy here from the West Coast. So I am going to talk—— 

Chairman BOUSTANY. We didn’t think you had any problems 

with the West Coast ports. 

Mr. MCDERMOTT. Oh, yes, we do. We ship—35 percent of the 

cargo in the country comes in through the West Coast through 5 

ports. I happen to represent one of them. Seattle has submitted 

testimony; I hope the others will do the same. 

But we all agree that it needs to be fixed. It is a question of how 

to fix it. The HMT shouldn’t just sit there while our nation’s ports 

have problems. I agree to that. And I have talked with the Seattle 

Port people and they tell me that the HMT makes them uncompetitive. I mean we have got the problem Boston has in spades, with 

the Canadian ports and what is going to happen in the near future 

in Prince Rupert and some other things. So, we are talking about 

a serious economic hit. 

But the problem is that we don’t get any of the money. We get 

$.01 back on every $1 we put into this thing. And 20 percent of it 

goes to New Orleans. And I understand why the chairman would 

want to have this hearing and would want to talk about it and 

want more money for the southern waterways that are all filled. 

We got 70-foot draft, okay? We load ships that come out of Portland 

that can’t fully load because they can’t get over the bar out of the 

Columbia. They come up to Seattle, they top off, and then head for 

Asia. 

So, I know what the issues here are. And if my state got 20 percent of the money I would probably be advocating for more. What 

I am interested in hearing you talk about—and Mr. Boustany gave 

me a beautiful segue—there would be some money left for some of 

the things we need. 

Now, Seattle has a sea wall. It has been there for 100 years, put 

in with wood, and the worms have been working on it all this time. 

We also live in an earthquake zone. We know we live in an earthquake zone. We have watched it. You have watched what happened 

in the tsunami in Japan. You know what the impacts could be on 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
61 

one of the big ports of this country. And last year, 800,000 HMTpaying passengers boarded 193 cruise ships going out of Seattle. So 

this is not a—we are not talking a small operation. But if that sea 

wall goes, we are going to have a big problem. 

I have been fighting. In fact, I had a bill in here for 15 years to 

deal with this. Jennifer Dunn, who is now gone from the committee, and I—a Republican and a Democrat; this is not a partisan 

issue, this is an economic issue that has got to be dealt with. And 

we can’t get anybody to agree that we ought to use some of that 

money to study the sea wall and maybe repair it, because they say, 

‘‘Well, that’s not dredging.’’ 

So, I wonder if the committee would comment on the possibility 

of maybe broadening the use of the sea wall money—or the harbor 

maintenance money to make it a little bit fairer for those of us who 

are waiting for a disaster to happen. We know it is going to happen, it is just a matter of time. 

Dr. STRAIN. Thank you, Mr. McDermott. When you look at the 

issue here today, we are talking about the whole of America. When 

we look at the growth in shipping, there is going to be more money 

coming in. There is $6.1 billion in this trust fund. And so, when 

you talk about—we need to do all the things that we need to do 

to protect our ports and to expand our ports. And I agree with you. 

If there needs to a sea wall to protect that port, that should be 

there. If we need to dredge, we need to do that. If we need to rebuild the inland waterways and those lock systems that are now— 

again, those are—yours is 100 years old, these are 50 years old. 

But we have a way to generate the dollars. What we are talking 

about with this is a growth in the overall economy throughout the 

entirety of the United States. It affects coast to coast. And I think 

it would be wise to include such measures as that, and the other 

things that we need to do. Because it is all about our overall economic competitiveness. 

And when you talk about coming from a state where sometimes 

you have to wait for the disaster, they generally catch up with us, 

so I understand your position on sea walls. 

Mr. MCDERMOTT. Well, when we bring this bill for a markup, 

you would be supportive of an amendment to broaden the use 

maybe just a little bit? 

Dr. STRAIN. If you tell me what that dollar figure is. 

Mr. MCDERMOTT. Anybody else want to—yes, Mr. Leone? 

Mr. LEONE. I—the concern that I would have, sir, is that what 

the Corps of Engineers estimates is the need for dredging now. The 

intended purpose of the Harbor Maintenance was about what they 

are collecting now. 

And so, if we start to see a drift into other uses—and I understand, we are certainly a donor port, as well—but I think if you— 

then you will find out that you will have—the problem will continue. So I think it is very, very difficult to start to see more purposes for the Harbor Maintenance Trust Fund when there is such 

a backload of dredging work that needs to get done. And I understand the situation you are in, that Boston and others are in, but 

there are an awful lot of unmet needs over here that need to get 

dredged. 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
62 

Mr. TIBERI. [Presiding.] The gentleman’s time has expired. Anyone else want to respond to his question? 

[No response.] 

Chairman TIBERI. No takers? 

Mr. MCDERMOTT. Thank you. 

Chairman TIBERI. Mr. McCurry? No? Okay. All right, the gentleman from Pennsylvania, Mr. Gerlach, is recognized for five minutes. 

Mr. GERLACH. Thank you, Mr. Chairman. Good morning, gentlemen. I apologize, I was out with a constituent meeting for a few 

minutes, so this question might have been asked, but I am going 

to pose it anyhow. 

Certainly I think all of us on this panel want to work to try to 

get released all of that $6 billion that is sitting in the fund so you 

can undertake the projects that are necessary at your port facilities. My district is just west of Philadelphia, and so the Philadelphia port facility is very important to our neck of the woods. 

But also, what seems to occur every now and then in the conversation—and I understand back in the Clinton Administration 

there was a specific proposal to establish a user fee on the ship 

owners themselves, and somebody alluded to this a little bit earlier 

in their testimony, about the larger ships that get constructed, get 

utilized, and certainly come into the port facilities, and then thereby require an expansion of the port facilities, an improvement of 

the port facilities to handle those larger ships and larger volumes 

of cargo. 

So, I would like to get your thoughts, in addition to our efforts, 

to try to make sure that $6 billion gets passed back out to you for 

the projects you need. Should we also be considering some type of 

user fee on the ship owners, themselves? Not the shippers of the 

cargo, but the ship owners who have these large vessels that certainly have a cost impact to the facilities themselves? 

Or, would a user fee simply be something passed on to the shippers anyhow as customers, and not really have an overall impact 

the way some might think? 

So I would like to get your thoughts on that, whether there 

should be an additional user fee on the part of the ship owners, as 

well as those that are owning the cargo that is being taxed when 

it comes into the port now. And whoever would like to—sir, Mr. 

Fisher. 

Mr. FISHER. Sir, I think the problem we start with that kind 

of an idea is a lack of trust. The Congress came to the maritime 

industry in the mid-1980s and told us that our harbors would be 

dredged if only we would agree to a new user fee being imposed 

on the users of our ports. And we agreed, and here we are today, 

20 years, 30 years later, discussing why that user fee doesn’t work, 

and talking about how to fix it. 

I think the problem with discussing a new type of user fee is that 

we feel a little bit hoodwinked from the last one. And moving forward with the discussion of a new one, I think we would want to 

make sure and look at the last one and get it fixed first. 

Mr. GERLACH. Others? 

Mr. ARNTZEN. Yes. The idea of a user fee for the shipping industry, which right now on a global and domestic basis is going 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
63 

through one of its more difficult periods in many decades—we, as 

companies, have to make big investments in double-hull ships. We 

are going to have to spend $20 million in the next 3 or 4 years on 

ballast water upgrades on our ships. We are going to have to spend 

$20 million a year just in mandatory dry docks to keep up with 

Coast Guard requirements. 

The companies that we—carry oil refined petroleum products are 

large refiners, large oil companies, national oil companies which 

have a much greater capacity to carry those type of costs. The shipping industry—we are a big company, by shipping industry standards. But you will find it is a lot of smaller, very lean operators 

on very tight budgets that are trying their hardest just to keep up 

with the environmental and safety requirements and equipment investments we have to make. I think it would be a difficult one for 

the industry. 

Mr. GERLACH. Okay, thank you. One other comment, and then 

I have one other question. 

Mr. LAGRANGE. Yes. Quickly, I would like to agree with that. 

Certainly I think the rate of profit by the carriers is marginal, at 

best, today. We have employed something I don’t think will ever go 

away again, and that is slow steaming out in the open water, 

which—time is money, again, in the transportation industry. 

I think what this does is it encourages the competition from 

other countries, both Mexico and Canada, to those ports there and 

close to the borders, whereby the user fee would not be assessed. 

Mr. GERLACH. Thank you. One other question quickly. In Pennsylvania, you may know, we have a burgeoning natural gas industry in Marcellus shale. Gas is being collected and now being distributed. And that is going to perhaps put a lot of the Philadelphia 

Port area into a situation where improvements will be needed to 

the port facilities to handle that type of export. 

Should these harbor maintenance funds be used in any way to 

incentivize improvements to port facilities to handle new types of 

industry that will be happening in our country, and including the 

natural gas industry? Should some of these funds be used for 

things that transform these facilities to better accommodate that 

kind of new industry? 

Mr. ARNTZEN. We operate four large LNG carriers. When they 

were built they were the four biggest in the world. We took the 

first one into the Houston ship channel and we also took one into 

Boston. 

I mentioned earlier the growth in refined petroleum products, exports from the United States. It is phenomenal. Nobody saw it coming. We think there will be the capacity for the U.S. to export 

chemicals, ethylene, LPG gases. I think it is going to be a very exciting period, because we are going to be very competitive with the 

rest of the world in a whole lot of areas where we haven’t been. 

So, I would encourage it. And I think there is going to be a big 

opportunity in that area for the country. 

Mr. GERLACH. Thank you. Any others? 

[No response.] 

Mr. GERLACH. Okay. Thank you very much. Appreciate it, Mr. 

Chairman. 

Chairman BOUSTANY [presiding]. Thank you. Mr. Thompson. 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
64 

Mr. THOMPSON. Thank you, Mr. Chairman, and thank you for 

holding the hearing, and for the RAMP Act. And I am pleased to 

be a coauthor of the bill. 

I represent a number of ports in my district on the West Coast. 

And I have seen firsthand how deferred maintenance and a lack of 

funding and attention has really hurt our area. I have one harbor 

in Crescent City in the northernmost part of California that, until 

we dredged it last year, was nearly completely silted in. You 

could—if you could walk on mud, you could have walked all the 

way across the water. And it was terrible for business, it was terrible from a public safety standpoint. The Coast Guard couldn’t 

even get in and out of the harbor. And that is totally unacceptable. 

In Eureka, a deepwater port, the only deepwater port on the 

north coast, they have been underfunded. I think it is about $18 

million short of what the Corps says they need for their O&M requirements in that area. Again, it is terrible for business. And I 

think that is the emphasis that we really need to focus on. 

This is about jobs. It is about the jobs that would be created if 

we lived up to our responsibility to maintain these ports and harbors. It is about the jobs that will follow because of the added business that these harbors, these ports and harbors, would do. I 

thought it was—I don’t remember who said it, but the lost revenue 

because you have to short-load or light-load these ships, that is an 

astonishing fact that doesn’t get talked about nearly enough. 

And it is about the jobs that will come to the surrounding economies, the surrounding communities, because there is a vibrant economic activity on these—at these ports. 

And then lastly, it is not about just jobs, jobs, and jobs, but it 

is about jobs, jobs, jobs, and public safety. It was mentioned—the 

homeland security issue, the oil spill issue. But any—I represent 

an area that has a rich commercial and sport fishing economy. And 

if something happens to one of those folks and the Coast Guard 

needs to respond and we don’t have our harbors up to speed, it 

doesn’t happen. 

And this is something that should be a national—that is a national embarrassment. We need to live up to our obligation. We 

need to fund these things. It would be good for the economy. It 

would be good for business. It would be good for jobs. And I will 

reserve the rest of my time to ask questions during the West Coast 

hearing that we are going to have on this issue. Thank you. 

[Laughter.] 

Chairman BOUSTANY. I thank the gentleman. Mr. Marchant. 

Mr. MARCHANT. Thank you, Mr. Chairman. I would like to follow up on a statement Mr. LaGrange made, and any of the panel 

that can answer this question. 

How do the Mexican ports and the Canadian ports pay for their 

maintenance and dredging? 

Mr. LAGRANGE. Yes, sir. It varies from country to country. But 

in Canada and Mexico it is usually a direct appropriation from the 

Federal Government to the channel and to the port. And it is also 

subsidized in some instances, not all, by a tariff or a user fee 

based—and placed on the carrier or the customer, one of the two. 

But in all cases, I think without exception, it is a direct appropriation from the Federal Government, sometimes subsidized. 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
65 

Mr. MARCHANT. And does that—and where does the final decision on where those funds get appropriated rest? Do they have a 

similar institution like the Army Corps of Engineers that makes 

that decision? Or is it a purely political decision? 

Mr. LAGRANGE. It is done at the legislative level. And I would 

probably like to yield in this case to Mr. Leone, who is a lot closer 

to the subject matter. But we have some of our friends in Canadian 

ports, certainly in Mexican ports, and I think it is done at the legislative or congressional level. 

Mr. MARCHANT. Okay. Thank you. Mr. Leone. 

Mr. LEONE. I believe that the—I am not exactly sure what the 

complete process is. I think Mr. LaGrange or myself, you know, 

have some information regarding it from conversations with our 

fellow port directors in those countries. 

But they have kind of federalized those ports now up in Canada. 

I am more familiar with Canada. I know our greatest competitor, 

Halifax, has got the similar situation as the Pacific Northwest, that 

dredging is not necessarily needed for them. But they generally— 

once the decision is made to get it, how that gets accomplished and 

how it gets done, I don’t think—it is not like a Corps of Engineers. 

It is done at the port level. 

So I don’t know of anybody such as the Corps of Engineers that 

kind of collects money, or it has money and then responds by doing 

it, the dredging, in and of itself in those particular ports. I think 

it is the port asking, and then the port then kind of finds a way 

to get it done itself in Canada. 

And I don’t—in Mexico, does anyone have any more information 

on Mexico? 

Mr. LAGRANGE. Mexico is federalized totally. 

Mr. MARCHANT. So how often do you find—and since I am from 

Texas, I am most familiar with the Mexican ports just south of 

Texas—how often do you find competitive advantage is given to 

those Mexican ports, where they can ship into Mexico and then 

come across the border with either rail or truck? 

Mr. LAGRANGE. We haven’t seen it from Mexico that often. And 

we have an organization, the Gulf Ports Association of the Americas, which consists of the nine ports on the Yucatan Peninsula, basically, from Cancun running west in the other direction, Tampico, 

Altamira, and so on and so forth. We have not seen that much in 

the way, due to the lack of overland infrastructure, the availability 

of it into the United States. 

There has been a spike over the last year I am told, with the relaxation of truckers coming in from Mexico to the United States, 

but it has been very minimal. 

Mr. MARCHANT. Thank you, Mr. Chairman. 

Chairman BOUSTANY. Thank you. Next—let’s see. We have Mr. 

Berg. 

Mr. BERG. Thank you, Mr. Chairman. From North Dakota we 

don’t have a lot of ports in our state. Having said that, you know, 

I guess even though we don’t have a major port, obviously each of 

you are dealing with local and regional economies that don’t have 

the port. But I would like you to just maybe just briefly talk about 

the direct and indirect benefits to those regional areas that don’t 

have the port, and why it is important for the port, and also to exVerDate Mar 15 2010 14:13 Feb 22, 2013 Jkt 078178 PO 00000 Frm 00069 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\78178.XXX 78178

wwoods2 on DSK499XVN1PROD with WAYS & MEANS
66 

plain why it is important for those constituencies to ensure that 

there is, you know, adequate money for the Harbor Maintenance 

Fund. 

Dr. STRAIN. Yes, sir. In North Dakota, as you know, you have 

a tremendous agricultural base. And you’ve got a lot of oil and gas 

activity going on. And if you look at the United States, most of our 

agricultural products are exported. We, you know, feed a great deal 

of the world. 

And so, for you to move your products out of your region, out of 

North Dakota, whether it is oil and gas, petrochemicals or all the 

different agricultural products—wheat, beef cattle, et cetera—and 

those markets are growing—without an efficient system, at the end 

of the day it will cost your farmers by not being able to move the 

products or moving them with greater cost. 

And again, the figure that we have seen is you are going to add 

another $.10-plus to a bushel of anything you move if we cannot 

move it efficiently through our waterway systems. 

Mr. FISHER. Sir, the closest port probably to North Dakota is 

probably the Port of Duluth on the Great Lakes. And I can tell you 

that North Dakota agricultural products are common cargoes at the 

Port of Duluth. They are exported—they are transported to Duluth 

and then put on export vessels and sent abroad. And that port essentially allows North Dakota farmers to market their products all 

over the world, and gives the state access to global trade. 

As my colleague has stated, if the Port of Duluth isn’t properly 

dredged, and the vessel operators who call there to pick up North 

Dakota farm products and export them, if they can only partially 

load their vessel because of insufficient channel dredging, those 

products, on a per-ton basis, the transportation cost actually goes 

up, because you are carrying less product on each shipload. 

Mr. MCCURRY. Just to tack on to that, really the obvious, that 

if you have got goods that are going to other countries, or consumer 

goods that are typically coming in from other countries, they are 

going to go through the point of least resistance and maximum efficiency. 

So when you look at the retail import cargoes, most of them are 

coming in and being trucked or railed, depending on how far the 

destination is. In our case, having two class-one railroads on terminal allows us to pretty readily access the Midwestern markets 

for touching the distribution centers for retailers. And then similarly in the opposite direction for a lot of your agricultural products 

that, more and more, are going into containers, just as they go 

down the river on barges and go out of the Gulf. 

Mr. BERG. Thank you. I—kind of interesting. In North Dakota 

we never really talk about trucking it out or railing it out. We always use the word ‘‘shipping.’’ We are shipping our corn, shipping 

our wheat, doing those things. And yet Duluth would be the first 

point where they would see a ship. 

Thank you. I yield back. 

Dr. STRAIN. Mr. Berg, if I may just make one short comment. 

Mr. BERG. Sure. 

Dr. STRAIN. I am sure you are familiar with the term ‘‘the 

basis.’’ Right? Whenever you sell a product—you sell your wheat. 

If it is running, you know, $5.90, $6, the basis is set to the side. 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
67 

And so you have a positive or a negative. That positive or negative 

is one, what is going on in the Chicago Board of Trade, but it is 

also the transportation cost. 

And I can tell you that when you can have wheat get down to 

$2.80 with a $1 basis the wrong way, and you are getting $1.80 for 

your wheat, that is a real thing. And we fight hard to make that 

basis positive and not negative. But shipping costs are a major part 

of that variable. And when your farmers contract to sell their products, that basis is variable. And so when they bring it and deliver 

it, when they deliver that product, that is when it is assessed, 

based on, to a great degree, the current shipping cost to move that 

to the next point of sale. 

Mr. BERG. Thank you. 

Chairman BOUSTANY. I want to thank all of you for your testimony, your expertise that you brought today to the subcommittees. 

And please be advised that Members may have some questions 

that they will submit to you in writing, and I would ask you to respond to those, those questions. And of course your written testimony will be made part of the official record. 

And with that, this hearing is now adjourned. 

[Whereupon, at 11:17 a.m., the subcommittees were adjourned.] 

[Member Submissions for the Record follow:] 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
68 

The Honorable Kevin Brady, Statement 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.029
69 

f 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.030
70 

The Honorable Wally Herger and Earl Blumenauer, Statement 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.031
71 

f 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.032
72 

The Honorable Brian Higgins, Statement 

f 

[Public Submissions for the Record follow:] 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.033
73 

AGL Resources, Statement 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.034
74 

f 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.035
75 

American Association of Port Authorities, Statement 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.036
76 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.037
77 

f 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.038
78 

American Road and Transportation Builders Association, Statement 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.039
79 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.040
80 

f 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.041
81 

Big River Coalition, Statement 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.042
82 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.043
83 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.044
84 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.045
85 

f 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.046
86 

Carrix Inc., Statement 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.047
87 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.048
88 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.049
89 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.050
90 

f 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.051
91 

Coastwise Coalition, Statement 1 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.052
92 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.053
93 

f 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.054
94 

Coastwise Coalition, Statement 2 

f 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.055
95 

Florida Ports Council, Statement 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.056
96 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.057
97 

f 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.058
98 

Horizon Lines Inc., Statement 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.059
99 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.060
100 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.061
101 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.062
102 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.063
103 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.064
104 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.065
105 

f 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.066
106 

Jersey Harborside Transport LLC, Statement 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.067
107 

f 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.068
108 

Lake Charles Harbor, Statement 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.069
109 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.070
110 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.071
111 

f 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.072
112 

APL Limited and affiliated companies, Maersk Inc. and Subsidiaries, Sealift Incorporated, and Hapag-Lloyd AG and affiliated companies, Statement 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.073
113 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.074
114 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.075
115 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.076
116 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.077
117 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.078
118 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.079
119 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.080
120 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.081
121 

f 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.082
122 

Port Freeport, Statement 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.083
123 

f 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.084
124 

Port Metro Vancouver, Statement 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.085
125 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.086
126 

f 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.087
127 

Port of Seattle, Statement 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.088
128 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.089
129 

f 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.090
130 

Port of Tacoma, Statement 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.091
131 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.092
132 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.093
133 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.094
134 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.095
135 

f 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.096
136 

Shipbuilders Council of America, Statement 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.097
137 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.098
138 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.099
139 

f 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.100
140 

Tonnage Tax Coalition, Statement 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.101
141 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.102
142 

f 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.103
143 

West Gulf Maritime Association, Statement 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.104
144 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.105
145 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.106
146 

f 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.107
147 

American Maritime Labor Organizations, Statement 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.108
148 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.109
149 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.110
150 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.111
151 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.112
152 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.113
153 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.114
154 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.115
155 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.116
156 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.117
157 

Æ 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert here 78178a.118