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34–782 PDF 2007

SHORT SEA SHIPPING OPPORTUNITIES IN THE UNITED STATES

(110–11)

HEARING

BEFORE THE

SUBCOMMITTEE ON 

COAST GUARD AND MARITIME TRANSPORTATION

OF THE

COMMITTEE ON 

TRANSPORTATION AND 

INFRASTRUCTURE 

HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

FEBRUARY 15, 2007

Printed for the use of the 

Committee on Transportation and Infrastructure

(

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE 

JAMES L. OBERSTAR, Minnesota, Chairman 

NICK J. RAHALL, II, West Virginia 

PETER A. DEFAZIO, Oregon 

JERRY F. COSTELLO, Illinois 

ELEANOR HOLMES NORTON, District of 

Columbia 

JERROLD NADLER, New York 

CORRINE BROWN, Florida 

BOB FILNER, California 

EDDIE BERNICE JOHNSON, Texas 

GENE TAYLOR, Mississippi 

JUANITA MILLENDER-MCDONALD, 

California 

ELIJAH E. CUMMINGS, Maryland 

ELLEN O. TAUSCHER, California 

LEONARD L. BOSWELL, Iowa 

TIM HOLDEN, Pennsylvania 

BRIAN BAIRD, Washington 

RICK LARSEN, Washington 

MICHAEL E. CAPUANO, Massachusetts 

JULIA CARSON, Indiana 

TIMOTHY H. BISHOP, New York 

MICHAEL H. MICHAUD, Maine 

BRIAN HIGGINS, New York 

RUSS CARNAHAN, Missouri 

JOHN T. SALAZAR, Colorado 

GRACE F. NAPOLITANO, California 

DANIEL LIPINSKI, Illinois 

DORIS O. MATSUI, California 

NICK LAMPSON, Texas 

ZACHARY T. SPACE, Ohio 

MAZIE K. HIRONO, Hawaii 

BRUCE L. BRALEY, Iowa 

JASON ALTMIRE, Pennsylvania 

TIMOTHY J. WALZ, Minnesota 

HEATH SHULER, North Carolina 

MICHAEL A. ACURI, New York 

HARRY E. MITCHELL, Arizona 

CHRISTOPHER P. CARNEY, Pennsylvania 

JOHN J. HALL, New York 

STEVE KAGEN, Wisconsin 

STEVE COHEN, Tennessee 

JERRY MCNERNEY, California 

JOHN L. MICA, Florida 

DON YOUNG, Alaska 

THOMAS E. PETRI, Wisconsin 

HOWARD COBLE, North Carolina 

JOHN J. DUNCAN, JR., Tennessee 

WAYNE T. GILCHREST, Maryland 

VERNON J. EHLERS, Michigan 

STEVEN C. LATOURETTE, Ohio 

RICHARD H. BAKER, Louisiana 

FRANK A. LOBIONDO, New Jersey 

JERRY MORAN, Kansas 

GARY G. MILLER, California 

ROBIN HAYES, North Carolina 

HENRY E. BROWN, JR., South Carolina 

TIMOTHY V. JOHNSON, Illinois 

TODD RUSSELL PLATTS, Pennsylvania 

SAM GRAVES, Missouri 

BILL SHUSTER, Pennsylvania 

JOHN BOOZMAN, Arkansas 

SHELLEY MOORE CAPITO, West Virginia 

JIM GERLACH, Pennsylvania 

MARIO DIAZ-BALART, Florida 

CHARLES W. DENT, Pennsylvania 

TED POE, Texas 

DAVID G. REICHERT, Washington 

CONNIE MACK, Florida 

JOHN R. ‘RANDY’ KUHL, JR., New York 

LYNN A WESTMORELAND, Georgia 

CHARLES W. BOUSTANY, JR., Louisiana 

JEAN SCHMIDT, Ohio 

CANDICE S. MILLER, Michigan 

THELMA D. DRAKE, Virginia 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

(II)

SUBCOMMITTEE ON COAST GUARD AND MARITIME TRANSPORTATION 

ELIJAH E. CUMMINGS, Maryland, Chairman 

GENE TAYLOR, Mississippi 

RICK LARSEN, Washington 

CORRINE BROWN, Florida 

JUANITA MILLENDER-MCDONALD, 

California 

BRIAN HIGGINS, New York 

BRIAN BAIRD, Washington 

TIMOTHY H. BISHOP, New York 

JAMES L. OBERSTAR, Minnesota 

(Ex Officio) 

STEVEN C. LATOURETTE, Ohio 

DON YOUNG, Alaska 

HOWARD COBLE, North Carolina 

WAYNE T. GILCHREST, Maryland 

FRANK A. LOBIONDO, New Jersey 

TED POE, Texas 

JOHN L. MICA, Florida 

(Ex Officio) 

(III)

(V)

CONTENTS Page

Summary of Subject Matter .................................................................................... vi 

TESTIMONY 

Barker, James R., Chairman, Interlake Steamship Company, New England 

Fast Ferry Company ............................................................................................ 22

Connaughton, Hon. Sean T., Administrator, Maritime Administration, U.S. 

Department of Transportation ............................................................................ 3

Flott, Stephen P., Chairman, Seabridge, Inc. ........................................................ 22

Johnson, Hon. Collister, Jr., Administrator, St. Lawrence Seaway Development Corporation ................................................................................................. 3

Margaronis, Anastassis, President, Santa Maria Shipping, LLC ........................ 22

Ward, Gregg M., Vice President, Detroit-Windsor Truck Ferry .......................... 22

Yonge, Mark, Managing Memeber Maritime Transport and Logistics Advisors, 

LLC ........................................................................................................................ 22

PREPARED STATEMENTS SUBMITTED BY WITNESSES 

Barker, James R ...................................................................................................... 44

Connaughton, Hon. Sean T ..................................................................................... 59

Flott, Stephen P ....................................................................................................... 69

Johnson, Hon. Collister, Jr ..................................................................................... 96

Margaronis, Anastassis ........................................................................................... 100

Ward, Gregg M. ....................................................................................................... 105

Yonge, Mark ............................................................................................................. 145

SUBMISSIONS FOR THE RECORD 

LaTourette, Hon. Stephen C., a Representative in Congress from the State 

of Ohio, Allen Walker, President, Shipbuilders Council of America, letter, 

February 14, 2007 ................................................................................................ 163

ADDITIONS TO THE RECORD 

Center for the Commercial Deployment of Transportation Technologies, Feasibility Assessment of Short Sea Shipping to Service the Pacific Coast ............ 166

Horizon Lines, Inc., written statement .................................................................. 173

Richard J. Silva, Westar Transport, Selma, CA, written statement ................... 183

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(1)

SHORT SEA SHIPPING SYSTEM 

Thursday, February 15, 2007

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE, 

SUBCOMMITTEE ON COAST GUARD AND MARITIME

TRANSPORTATION, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 10:00 p.m., in room 

2167, Rayburn House Office Building, the Honorable Elijah E. 

Cummings [Chairman of the Subcommittee] presiding. 

Mr. CUMMINGS. Good morning and thank you all for being with 

us. 

Mr. LaTourette I am sure is on his way, and so we will hear his 

opening statement when he gets here. 

When I assumed the Chairmanship of the Subcommittee on the 

Coast Guard and Maritime Transportation, I promised that our 

Subcommittee would balance oversight of the Coast Guard with our 

responsibility to strengthen our maritime industry. Today we begin 

to make good on that promise by conducting this hearing on short 

sea shipping, in an ongoing effort to realize the full potential of waterborne transportation to become a reliable and widely accepted 

transportation mode, particularly for the movement of freight. 

At the present time, the most highly developed water freight 

transportation systems in the United States operate on the Mississippi River, the Great Lakes and the St. Lawrence Seaway and 

often carry agricultural products and other raw materials. However, the Maritime Administration has found that these routes are 

carrying only about 13 percent of total freight tonnage in the 

United States. By comparison, nearly 70 percent of the freight tonnage transported in the United States is moved by trucks traveling 

across our Nation’s roadways, emitting pollution and adding to 

traffic congestion, particularly in metropolitan areas. 

At the present time, our Nation’s transportation policy tends to 

be individualized for each mode, whether for highways, transit, 

aviation or railroads, and almost all the other transportation modes 

receive more attention than does maritime transportation. Maritime transportation, one of the oldest forms of transportation in the 

world, has become something of a stepchild and one whose welfare 

is rarely discussed. In fact, the Congressional Research Service reports that expenditures on two of the major programs for supporting U.S. shipping, the Cargo Preference Program and the Maritime Security Program, combined with MARAD’s own operating 

budget and its expenditures on United States Merchant Marine 

2

Academy, and the State maritime academies are likely to total 

about $446 million in fiscal year 2007. 

This is a drop in the ocean compared to the nearly $39 billion 

in Federal highway aid the United States Government is expected 

to provide to our States. While highway travel is obviously our 

most common form of travel, even it is underfunded. I believe that 

we urgently need to develop national transportation strategies that 

are multi-modal in scope and that focus on the unique challenges 

concerning the movement of freight. 

The potential of short sea shipping to be a productive mode in 

our transportation network has not been realized. In large measure, this is because adequate studies have not yet been conducted 

to assess the nature of short sea shipping’s potential, understand 

the obstacles that may keep us from realizing that potential and 

identify strategies to overcome these obstacles. Only once these 

questions are answered can we begin to develop a Federal policy 

regarding short sea shipping that responds to these issues that sets 

a vision for what short sea shipping can become and that supports 

the realization of that division. 

I know the development of such a policy is a top concern of those 

in the United States maritime industry, including both the Maritime Administration and the St. Lawrence Seaway Development 

Corporation, port authorities, shipping lines and even shippers. 

However, it should also be a top concern of every driver who has 

ever been stuck in traffic behind a semi-truck at rush hour. It is 

my hope that today’s hearing will be the first step of a concerted 

and coordinated effort to more closely incorporate maritime transportation and short sea shipping in particular into our national 

transportation system. 

Now it gives me great pleasure to recognize our Ranking Member, Mr. LaTourette. 

Mr. LATOURETTE. Thank you, Mr. Chairman. Thank you for 

holding this important hearing today. Short sea shipping could potentially transfer thousands of cargo containers off of our interstates and onto U.S.-flag vessels. An increase in the amount of 

freight traffic that is moved by coastwise trade would benefit the 

U.S. fleet, our merchant mariners, our ports and our Nation’s shipbuilders. 

However, short sea shipping will not be widely accepted until 

coastal transportation services become more dependable, timely 

and cost effective. The Department of Transportation has identified 

short sea shipping as a high priority and the Department’s plans 

to enhance freight mobility in the United States. In 2005, the Government Accountability Office studied the concept of short sea shipping and made several recommendations on actions that should be 

taken before any national short sea shipping plan is developed. I 

am looking forward to hearing from our first panel, the Federal 

witness panel, about how they have addressed those recommendations and whether Government assistance is necessary to enhance 

short sea shipping options nationwide. 

I am also looking forward to hearing from our second panel on 

ways that the private sector can promote acceptance and expansion 

of short sea shipping options. Ultimately, the success of any coastal 

3

transportation proposal will rest on the commercial viability of the 

project. 

Lastly, I am particularly interested in hearing about the options 

of using short sea shipping to transport bulk goods and cargoes between ports in the Great Lakes. Each of the major ports along the 

Great Lakes and the St. Lawrence Seaway already have the capability and capacity to absorb increased vessel traffic. I hope to hear 

from our witnesses about how the cargo handling capacity of our 

Great Lakes ports could be tapped as part of a national program. 

Again, I thank you, Mr. Chairman, and yield back my time. 

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

Mr. Larsen. 

Mr. LARSEN. Thank you, Mr. Chairman, and I appreciate your 

holding this hearing today on short sea shipping. In the last week 

and a half, I have spoken with a number of ports, shippers and 

labor as well in Washington State about short sea shipping. A 

major theme from all my conversations has been, is short sea shipping cost effective? 

At least for the Pacific Northwest right now, the answer appears 

to be, beyond what is taking place currently, it does not seem to 

be cost effective. But I certainly agree with MARAD’s short sea 

shipping vision. But I want to find out and hopefully explore how 

we can match that vision with the reality on the water. 

I look forward to hearing the testimony of today’s witnesses, and 

hope they can address these issues of cost effectiveness, these 

issues that I have been hearing from State shippers, ports and 

labor in Washington State. 

With that, I yield back and thanks again for the hearing today, 

Mr. Chairman. 

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

We will now hear from Mr. Sean Connaughton, Administrator of 

the Maritime Administration, and Mr. Collister Johnson, Administrator of the St. Lawrence Seaway Development Corporation. Good 

morning, gentlemen, and thank you very much for being with us. 

TESTIMONY OF THE HONORABLE SEAN T. CONNAUGHTON, ADMINISTRATOR, MARITIME ADMINISTRATION, U.S. DEPARTMENT OF TRANSPORTATION; THE HONORABLE COLLISTER 

JOHNSON, JR., ADMINISTRATOR, ST. LAWRENCE SEAWAY DEVELOPMENT CORPORATION 

Mr. CONNAUGHTON. Good morning, Mr. Chairman, Mr. 

LaTourette and Mr. Larsen. Thank you very much for having me 

here today, and Mr. Johnson. 

As you mentioned, sir, I am Sean Connaughton, I am the Administrator of the Maritime Administration. I do have a prepared testimony, Mr. Chairman, and would like to submit that for the record 

and just briefly summarize that for you. 

Mr. CUMMINGS. Without objection, so ordered. 

Mr. CONNAUGHTON. Thank you, sir. 

As you mentioned during your statement, actually the waterways 

of the United States were our original interstates. In fact, in the 

days before railroads and the actual interstates themselves, the 

waterways were the primary way to move around the United 

States, to move cargo and move people. As we developed the railVerDate 0ct 09 2002 11:18 Feb 15, 2008 Jkt 000000 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 P:\DOCS\34782 HTRANS1 PsN: JASON
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roads, as we developed the interstate highway system, waterways 

became less and less in use, even though they still are a vital part 

of our transportation network. We still see large amounts of cargo 

moving on our inland waterways as well as the Great Lakes and 

in different parts of the United States, along the coast as well. 

But we are facing different problems and challenges in our transportation system today, particularly obviously on the shoreside system. The first is obviously most of our major metropolitan areas 

are facing increasing congestion. What is interesting is that most 

of these metropolitan areas are also along the coast and also are 

large ports. We are seeing a great growth in trade. In fact, we are 

projecting that trade moving though these ports is going to increase 

by almost 100 percent in the next 15 years, so we are going to see 

even more stress on our system. 

We are facing enormous environmental issues, particularly clean 

air issues, in almost all these metropolitan areas. And also concern 

and growing concern about movement of hazardous substances and 

cargoes. And finally, as you mentioned, we are seeing that the cost 

of infrastructure, shoreside infrastructure, is getting more and 

more expensive to build new highways, build new railroads and actually maintain those. 

Because of all these, the Department of Transportation, the Maritime Administration, the lead, has been focusing on how do we go 

back to the future, how do we go and start to look at our waterways as an asset. Because really right now they are under-utilized 

in their ability to move cargo, move people in a very efficient manner. 

We have been conducting and supporting studies, both in the Department of Transportation as well as participating in studies, the 

GAO study, the I–95 cooperative studies that have been done, both 

privately and publicly. We have also been holding various conferences as well to try to get stakeholder input, so we can understand some of the challenges that are being faced by shippers, carriers, the ports, and the various localities and what is slowing or 

what is providing a hurdle to actually utilizing our waterways 

more. 

We have helped form an industry-led cooperative to encourage 

the use of short-sea shipping, and we have also met with and are 

working now with our NAFTA partners, both Mexico and Canada, 

to help address some of the issues on moving trade along our coasts 

and on the Great Lakes as well, and how do encourage some of this 

cross-border trade. 

Finally, we have been focusing very much and trying to get more 

information about many of the current operators out there, and 

what they are doing. Because there are quite a few operators who 

are out there, who are financially sound, who are actually making 

money in some of these short sea shipping operations. So we are 

trying to understand what is making them successful and how do 

we end up building on that experience. 

Through all this, as Mr. LaTourette, I believe mentioned, one of 

the problems that we have seen and one of the biggest hurdles we 

have to get over is how do we make these operations reliable, how 

do we make them cost-effective and how do we address the issue 

on time, making sure that the cargo moves in a timely fashion and 

5

a reliable fashion. The biggest thing that we have seen is that we 

need to have shipper buy-in into these types of operations for them 

to expand. The shippers are the ones who right now are very reluctant to move their cargoes onboard these various operations. 

And by the way, we are starting to call this not just the short 

sea shipping, we are starting to really focus and call it marine 

highways, and America’s marine highways, because we believe that 

is a little bit more descriptive of what we are trying to achieve, 

that is, trying to take cargo off our roadways and put them on the 

waterway. But also we think it is a little bit more inclusive of what 

is the biggest success story currently in short sea shipping, and 

that is our inland waterways, as well as what is happening in the 

Great Lakes. 

But for greater use of the marine highways, again, it is getting 

shipper buy-in, it is trying to focus on making sure we have facilities that are available. Because right now, port space in our major 

ports is scarce, and it is very difficult to find capacity in our ports 

to actually support these operations. We have been told by various 

shippers and carriers that various financial impediments, such as 

the harbor maintenance tax in which cargo owners have to potentially pay two or three times every time the cargo is moved onboard 

in different operations, that ends up being an impediment. There 

are various operational practices that we have to overcome, that is, 

how do we get the major carries to start to look at a spoke and hub 

type of operation in moving cargo into a big port and then dispersing it out to the smaller ports. It is making sure we have the 

vessels available, because right now there is actually a shortage of 

the types of vessels that we need to make sure that these operations are efficient and effective. 

And also, this issue about just sharing information. Because even 

as we have gotten into it, it has become very evident to us that a 

lot of people just don’t know what is going on out there. That is 

why we are actually setting up a clearinghouse, a web site, in fact, 

we are starting to roll that web site today, right after this hearing. 

In fact, some of the first items on that web site will be identifying 

the current carriers, identifying the various shippers who are moving cargoes, but also the testimony from this hearing, so that people know what is out there, and hopefully we can connect the shippers and carriers that are out there today. 

I am just going to say where we are going to be going from here 

is that we are going to be looking at four different areas. First is 

focusing more on the shippers, trying to get the shippers to buy in. 

In fact, next week in St. Petersburg, Florida, we are going to be 

having a conference on this subject that we are really trying to get 

as many shippers as possible to get them there, to hopefully get 

them to buy into moving their cargoes more on the waterways 

versus on the land. The second is trying to identify the existing operators more and focus on them, because they are obviously successful today. And how do we then build on that success to ensure 

that whatever operations, whatever support, whatever backing that 

we may give to them, that they actually have a foundation to move 

forward from. 

The next is trying to identify all these structural barriers, the 

things like the harbor maintenance tax, and some of these other 

6

items that we again are hearing from our stakeholders that are 

concerns of them. We are working within the Administration to 

identify those impediments so we can come forward with some proposals to you and to Congress to hopefully be able to work on. 

Finally, we are trying to focus on a few model and pilot programs 

and projects that we hopefully can build on again that we can show 

people that if we use the marine highways, we can actually take 

trucks off the road, and people can then start to see real benefits 

from this sort of program. 

So we think this is a great hearing that you focus on this, Mr. 

Chairman. We think this has some great opportunities for the Nation as America faces greater and greater congestion problems on 

its roadways. Really one of the only options right now that we 

have, we look out there and we have unused capacity in our waterways. We think that this is something that is the start of a great 

dialogue between us and yourselves and something that we think 

has a great future. 

Thank you very much, Mr. Chairman. 

Mr. CUMMINGS. Thank you very much. 

Administrator Johnson. 

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

LaTourette, Mr. Larsen, for having us here. I want to endorse the 

comments of my friend, Sean Connaughton, who has talked about 

the opportunity for maritime transportation throughout the Country. I would like to focus on the opportunities that we have in the 

Great Lakes and the Seaway, particularly, because I think it is a 

unique situation. It truly can be taken advantage of in the short 

term. 

Historically, the Seaway has been a pathway for bulk commodities. But since the Seaway serves the industrial and agricultural 

heartland of North America, and because it only operates at 60 percent of capacity, which is a statement that I think few other modes 

can make, we really do think that this could be an opportunity for 

reducing congestion and strengthening the national economy. 

The attributes of the Great Lakes, I think, are somewhat unique. 

It has ports with the space and with the desire for this type of 

service. It has established U.S. and Canadian companies and well 

financed entrepreneurs who are making sizeable investments in 

proposed new short sea shipping service. 

An additional reason for our interest, obviously, as I mentioned 

before, is the Department’s focus on mitigation of congestion. We 

think the Seaway and the Great Lakes could be a major contributor to this cause. 

As a result of the enormous volume of Canada-U.S. trade, which 

is the largest in the world, there is really enormous congestion on 

the land border crossing points, as I am sure people in that region 

know. If you have ever seen the Ambassador Bridge in Detroit at 

rush hour, it will truly make your head hurt. 

For this reason, one would really expect to find numerous marine 

ferry services between the U.S. and Canada carrying trailers and 

containers and all kinds of other cargo. Sadly, that is not the case. 

In fact, in the entire Great Lakes region is only one active short 

sea shipping truck ferry service, the Detroit-Windsor Truck Ferry, 

a niche carrier carrying hazmat and oversize project cargo. We are 

7

very grateful that Mr. Greg Ward, who is going to be on the second 

panel today, is here, because he and his father had to drive 16 

hours from Detroit to get here for this hearing because of weather 

conditions. 

The reason why there is no more short sea shipping in the Great 

Lakes is really quite simple. It is not rocket science. It has to do 

with public policy. And the harbor maintenance tax is really a 

prime example of why we have public policies that almost force 

cargo onto the roads and away from water. The HMT is vitally important to supporting the commercial navigation infrastructure of 

this Country and my agency is funded by it, so we support it. But 

nevertheless, in the Great Lakes, certainly as well as other places, 

HMT does not apply to cargo imported into this Country over land. 

As a result, U.S. shippers moving goods into this Country who have 

a choice will invariably move cargo in truck over land rather than 

ship over water, even if doing so means having to incorporate hours 

of delay at the border and with their logistics schedule. 

I would like to mention the bipartisan legislative proposal introduced earlier this week by Representative Tubbs Jones and Representative English, H.R. 981, which directly address this issue. 

The Great Lakes Short Sea Shipping Enhancement Act would provide a limited exemption to the HMT for non-bulk commercial 

cargo moving by water in the Great Lakes. It would remove the 

disincentive to use the marine highway, thus encouraging the development of these new shipping services in the region. 

The intriguing aspect of H.R. 981 is that since there is no appreciable short sea shipping on the Great Lakes involving non-bulk 

commodities, the HMT produces virtually no revenue for the U.S. 

Treasury from this source. Consequently, it appears that if HMT 

was removed away from the Great Lakes and short sea shipping 

as proposed in H.R. 981, there would be no appreciable loss of revenue to the U.S. Government. 

So we have a rare animal here which is bipartisan and appears 

to be revenue neutral. And we are hopeful that you will consider 

that favorably. 

Another public policy issue that adversely affects the development of short sea shipping on the Great Lakes is the 24 hour rule 

that is imposed by the Customs and Border Patrol. In the case of 

a truck trailer, a shipper must provide CBP with advance notice of 

only one hour prior to arriving at the border. For shipments moving by rail, the notice requirement is two hours. As previously 

noted, for a similar shipment moving into the U.S. via water where 

there is no driver on board, the CBP requires at least 24 hours advance notice. 

So while advance notice is absolutely needed to protect our Country, we need to work with Customs on programs that can be more 

friendly to the water mode, while at the same time protecting our 

Country. 

So again, Mr. Chairman, thank you for having this hearing. We 

are pleased to be here to offer our views and would be happy to 

answer any questions you have. 

Mr. CUMMINGS. Thank you very much. 

First of all, let me say this. We are trying to figure out how to 

find solutions to problems. I think I have said that to both of you 

8

in private. And what we are looking for is practical solutions. We 

don’t want to be having hearings just to be having hearing and 

meeting to have meetings and 30 years later or 10 years later another group of people is sitting up here going through the same motions. As I have often said, life is short, there is no dress rehearsal 

and this is the life. So we are trying to figure out, how do we address this problem. 

When you look at, Mr. Connaughton, when I read your testimony 

and you laid out the savings on our roads, when you talked about 

the fact that you take a tractor trailer and one tractor trailer, the 

impact on our roads just the surface was significant, then you 

talked about rush hours and all kinds of pollution, I said to myself, 

this seems to make a lot of sense. I am wondering, I know we have 

the harbor maintenance tax problem. I want you all to talk about 

that for just a moment. 

Page 8 of your testimony, Mr. Connaughton, you talked about the 

SCOOP study. Are you familiar? Tell me a little bit about that, because you say there that the harbor maintenance tax, this study, 

the SCOOP study found that domestic container HMT movements 

only yielded the Treasury $1.7 million to $1.9 million per year. And 

that study was dated October 2005. 

I am just wondering, help me with this, if it is yielding that kind 

of money, it seems like a little bit of money. And if the cost, if this 

is a major impediment to having short sea shipping, I don’t understand the issue. What is the problem? Do you follow the question? 

Mr. CONNAUGHTON. Yes, I do, Mr. Chairman, and I appreciate 

the question. It is obviously not a large amount of money, and it 

is something that we now have numbers to verify what people have 

been telling us. When we look at where we are in the process right 

now, this has been going on for I am going to say three or so, three 

or four years that this Administration has been looking at the 

whole issue on utilizing the waterways more. It went from being 

some anecdotal information to now actually having studies, including a GAO study, these other studies, including studies done by our 

own Office of the Secretary in Transportation. 

So we now have numbers, and we now have a list of potential 

impediments to the expansion of the use of the waterways that we 

can now put together in a proposal and bring it to you all. I think 

that is where we are right now. We are working internally to put 

together a package that will go through the clearance process within the Administration. But it will include many of the items that 

we are talking about here. 

But it has taken us some time to essentially get these studies 

done. I think one of the things that we have to do internally as well 

as externally is explain to people how important this is. Because 

it has been difficult to get people to start to focus on the use of the 

waterways more. But right now, when you do look at the congestion problems that we are facing, particularly on the eastern seaboard and on the western seaboards, this is one of the few options 

we have to greatly expand capacity at a not very large cost. 

Mr. CUMMINGS. Yes, I got that. But let me tell you where I am 

going, because I want you to go specifically to my question. If you 

tell me that shippers are reluctant to do short sea shipping because 

of a harbor maintenance tax and you tell me that the harbor mainVerDate 0ct 09 2002 11:18 Feb 15, 2008 Jkt 000000 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 P:\DOCS\34782 HTRANS1 PsN: JASON
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tenance tax, up here we deal with billions. And you tell me that 

the harbor maintenance tax is yielding $1.7 to $1.9 million, I am 

trying to figure out what am I missing? It is on page 8 of your testimony, first paragraph, last three sentences. 

Mr. CONNAUGHTON. Yes. 

Mr. CUMMINGS. Mr. Johnson, if you want to chime in, you are 

certainly welcome. 

Mr. JOHNSON. I am waiting to do so, I would be happy to. 

Mr. CUMMINGS. I could see you, I thought you were trying to 

jump out of your seat. 

Mr. CONNAUGHTON. I can tell you, Mr. Chairman, we understand, we are now, now that we have some numbers, we are starting to vett a proposal to come forward on this issue, but also to address some of the other hurdles and impediments that we see that 

are potentially out there. Because this really is one of several 

issues that do, once you take care of this one issue, there are still 

other issues that have to be addressed to encourage greater utilization of the waterways. 

Mr. CUMMINGS. Mr. Johnson? 

Mr. JOHNSON. Yes, Mr. Chairman. 

I think in terms of the Great Lakes, I understand Sean’s position 

with respect to the whole Country, but with respect to the Great 

Lakes, it is actually simpler, I believe. If a limited waiver of the 

harbor maintenance tax for the Great Lakes is passed, there will 

be results in months, not in years. We have stakeholders who are 

putting together their business plans and are ready to go to implement short sea shipping. 

But when you get to the issue of the HMT tax, it destroys the 

economics. If $1.9 million or $1.7 million or whatever is a little 

amount of money, in the Great Lakes it is zero, or virtually zero, 

because there is no short sea shipping . So there would be no loss 

of revenue to the Treasury. 

Mr. CUMMINGS. So you are saying the barrier is so high, in other 

words, you said there is no short sea shipping? 

Mr. JOHNSON. Virtually none. 

Mr. CUMMINGS. OK. 

Mr. JOHNSON. Virtually none. And the reason is because in my 

view, because the HMT destroys the economics for the Great Lakes 

carriers. But if that barrier is removed, and if indeed it is the case 

there is no loss of revenue to the U.S. Treasury, it seems to me 

that that has a lot going for it in terms of amending our public 

policies to improve short sea shipping, at least in the Great Lakes. 

Mr. CUMMINGS. I am just going to ask you another question, because I want other Committee Members to have an opportunity, let 

me ask you this. What would you like to see, what would you all 

like to see us do to try to resolve the problem? I know you mentioned the Tubbs Jones bill, got that one. What other things would 

you like to see us do? Mr. Connaughton, I was glad to hear you 

comment about the web site that is going up, right after this hearing? 

Mr. CONNAUGHTON. Yes, Mr. Chairman. 

Mr. CUMMINGS. So I should be able to go back to my office as 

soon as I leave here and————

10

Mr. CONNAUGHTON. They told me 10:00 o’clock, so I will send 

them an e-mail to make sure. 

[Laughter.] 

Mr. CUMMINGS. Can we take credit for that? We in Congress, we 

like to take credit for things. 

Mr. CONNAUGHTON. Mr. Chairman, you are my oversight Chairman, if you want to take credit for it, take as much credit as you 

would like, sir. But we did time it for this hearing, sir. 

[Laughter.] 

Mr. CUMMINGS. We appreciate that. Tell us a little bit about the 

web site and then to my other question. 

Mr. CONNAUGHTON. Yes, Mr. Chairman. What the web site will 

have on it is actually, it is going to be outlining the work that has 

been done to this point, it will also have the short sea or marine 

highway operations hat we have identified in pretty much every 

port of the United States, and what are the operators and what 

type of capability they have. We are going to start highlighting specific operators on a monthly basis, as well as shippers and try to 

commend shipper who commit to utilizing these types of operations. And then also, we are going to make this a general clearinghouse so we can end up in the long term making this not just for 

the United States but also to expand it to both what is happening 

in Mexico and Canada as well. 

Mr. CUMMINGS. And now to my other question, gentlemen, the 

whole issue of what can we do? What is one of the most practical 

things that we can do as Member of Congress to help make this 

happen? 

Mr. CONNAUGHTON. Mr. Chairman, again, this issue is one where 

there are several facets to it. We are putting together a proposal 

for you all to consider. 

Mr. CUMMINGS. When can we expect to have that proposal? 

Mr. CONNAUGHTON. We are in the final stages of putting it together within the Maritime Administration and we will then be forwarding it to the Department of Transportation and get clearance 

through OMB as well. So it is as long as that process can take. It 

could be very quick, it could be very lengthy, sir. 

It is our hope, we are right now essentially done with it and we 

are going to start sending it through our clearance process. 

Mr. CUMMINGS. I think I speak for our entire Committee, we 

would like for that process to move along. We want it to be a thorough process, of course, but we would like to get that as soon as 

possible. As soon as you can give us a date certain, because I want 

to be able to hold you to a commitment. 

Mr. CONNAUGHTON. Yes, sir. 

Mr. CUMMINGS. Because we who have been around here for a little while get commitments and then the next thing you know, we 

are not here any more. So we want to hold you to that. Get that 

to us as soon as you can. 

Mr. CONNAUGHTON. We will, Mr. Chairman. 

Mr. CUMMINGS. Mr. Johnson, to my question, what can we do? 

Mr. JOHNSON. Mr. Chairman, I think it is in my testimony. Of 

course, neither the Department nor the Administration have taken 

a position yet on H.R. 981. But for our part, on the Seaway, we are 

going to be advocating inside DOT and inside the Administration 

11

that they should look upon this favorably. Hopefully we will succeed. 

With respect to Customs and Border Patrol, I think it would be 

helpful as we enter into discussions with them as to how to solve 

this problem, how to solve their security issue, how to solve the industry issue of advance notice, if the Committee would support the 

notion that there ought to be consideration of the short sea shipping implications of the 24 hour rule. That would be helpful to us. 

Mr. CUMMINGS. Mr. LaTourette? 

Mr. LATOURETTE. Thank you, Mr. Chairman. 

First, Mr. Chairman, I would ask unanimous consent that a letter to me dated yesterday from the Shipbuilders Council of America 

be included in the record. 

Mr. CUMMINGS. Without objection, so ordered. 

Mr. LATOURETTE. Thank you very much. 

Gentlemen, thank you for coming. Mr. Johnson, I particularly appreciated the point you made about the harbor maintenance tax, 

because when I was getting ready for this hearing yesterday, with 

Mr. Rayfield, and we were talking about the harbor maintenance 

tax, I said, well, how can someone squawk about losing revenue 

when we don’t have any shipping that is paying the revenue currently. 

Mr. JOHNSON. When you don’t have it to begin with, right. 

Mr. LATOURETTE. That’s right. And I think that we were just 

talking during the Chairman’s questioning, and I think to the 

Chairman’s question about what can we do, it would be my predisposition, and I will chat with the Chairman a little bit later, to 

perhaps draft a H.R. 981-like bill. As you know, that only went to 

Ways and Means, a tax-writing Committee. Perhaps we can draft 

a piece of legislation that gets a subsequent referral to the Transportation Committee, since it is what we do here. 

And as well, I know that you know there is a ferry title in the 

Federal Transportation bill, SAFETEA-LU. That has primarily focused on North Carolina, New York and Alaska. It would be our 

hope that, and I think the reason my colleague, Stephanie Tubbs 

Jones, perhaps introduced this piece of legislation, one of the stakeholders that is getting ready to go is the Port of Cleveland. They 

are aggressively moving forward. 

That is what I want to chat with both of you about. Because I 

get the 24 hour rule is an impediment, I get that the harbor maintenance tax is an impediment. But clearly, there must be some 

other impediments. I understand that harbor maintenance tax 

makes it commercially unfeasible. 

Mr. Connaughton, when you and I talked a couple of weeks ago, 

is there a difficulty with our bilateral relations with the Canadians 

that makes this, for instance is there a Canadian Jones Act? Is 

there something that would prevent us from launching tomorrow, 

if we took your suggestions, passed H.R. 981, got the waiver on the 

harbor maintenance tax, solved the 24 hour rule, had a lot of educational sessions and the shippers bought in, are there other impediments to this working across the Great Lakes? 

Mr. CONNAUGHTON. Mr. LaTourette, we are currently in discussions with the Canadians over an issue that we were not aware of 

until there was an attempt by the Canadians to impose their own 

12

Jones Act, their own coastal act, to an American ferry operator. 

The Canadians had amended their law, from what I understand, 

to require that ferries be essentially Canadian vessels, those going 

between the United States and Canada. We were not aware of this 

until this one operator had the Canadian authorities actually come 

to them and actually try to impose his requirements. 

We have been having meetings at the Department of Transportation, Department of State, the Maritime Administration, with the 

Canadians. They are quite clear to that as to what their law says. 

They have indicated a willingness to amend that law, but that has 

not happened at this point. 

So we do see some problems with trying to move forward on 

some of these operations if at the end of the day it is being mandated that they be Canadian vessels. 

Mr. LATOURETTE. I think it is more than a little bit of a problem. 

As a Member of the Congress, and I think I would be joined by 

both sides, I don’t think we would stand for that, that if we are 

going to have trans-Lake shipping, we are going to have to accept 

Canadian vessels and they don’t have to accept vessels made in the 

United States. That is kind of a non-starter to me, and that is a 

big obstacle. 

Can you just give me a rough idea of where you are? Do you expect this to be resolved or not resolved by summer, by next year? 

What do you think is going to happen? 

Mr. CONNAUGHTON. We have had meetings with the Canadians 

within the last month about this issue. The Department of Transportation and Maritime Administration have been very strong in 

stating to the Canadians that this law is unacceptable and that we 

view it as a violation of some of our other treaties and that it violates international law. So we are pursuing this with the Canadians very aggressively. They have indicated a willingness to revisit this with their Parliament. However, at this point, that has 

not happened. But we just met with them within the last month, 

sir. 

Mr. LATOURETTE. Is there any role that the IGC can play in this? 

Or do you think NAFTA covers this? 

Mr. CONNAUGHTON. Sir, I am not quite sure. I was made aware 

of this as this issue started percolating along in the most recent 

meetings that have occurred. I will have to come back and give you 

more information. 

Mr. LATOURETTE. If you could, when you do have more information, with the Chairman’s position, if you could sort of update us, 

let us know where that issue is. That seems to be a big one. 

Mr. CUMMINGS. I agree. 

Mr. LATOURETTE. Mr. Connaughton, you talked about pilot 

projects. Can you tell me where the pilot projects are and what 

they involve? 

Mr. CONNAUGHTON. Right now, actually, sir, going back to TEALU, which you referred to, Congress actually did authorize a couple 

of pilot projects. One of them in particular is the movement of containers from the Port of New York up to Bridgeport, and actually 

has authorized the spending of money toward those projects. We 

have also been approached by some other operators where there 

have been shippers who have come forward and indicated they 

13

would be willing to move their cargoes onboard some of these marine highway operations on a regular basis. So we are trying to see 

how we can facilitate those. We have met with a couple of these 

operators and the shippers and what we would like to do is essentially put them together as a package to move forward and bring 

to you. 

Mr. LATOURETTE. One of the other difficulties, I think Mr. Johnson is right, that we have excess capacity in some of the Great 

Lakes ports, but one of the difficulties is the development of the infrastructure. It is OK once you get the boat moving and everything 

else, but getting it to the port and loading it and then taking it 

over. For instance, there is a town in my district that wants to do 

trans-lake shipping to Port Burwell over in Canada. I just read a 

newspaper article that the Port Burwell people don’t want the 

trucks on their streets and they don’t have the infrastructure to receive it. 

So how do you envision the infrastructure part of this working? 

Would you envision ramping up the ferry title in TEA-LU? Or additional Federal partnership with private entities? 

Mr. CONNAUGHTON. It would have to be greater partnerships 

with private entities. We are seeing a greater utilization of where 

those ferries exist today, we are seeing just an enormous use and 

bottlenecks. A very good example that ties into both your points 

and your question, in Bridgeport, Connecticut, which I went up and 

visited up there. One of the reasons was because of the provisions 

in TEA-LU on a proposed operation. There they essentially had 

been authorized, although not appropriated, funds to build a ro/ro 

facility. What the truckers want to do is be able to put the container and trailer on a vessel or barge, get to the other side, essentially avoid all that bottleneck and then drive it off right onto 95. 

The problem is, there is no ro/ro facility there in Bridgeport, and 

that is what they need. 

Being up there and visiting them there, there is this Bridgeport 

to Port Jefferson Long Island Ferry across to Long Island Ferry. 

What was interesting was that they indicated they are seeing an 

enormous increase in truck traffic on those ferries. In fact, so much 

so that I think they have actually added additional ferry vessels. 

It is essentially truckers trying to avoid taking 95, going across and 

coming back on the Long Island Expressway. 

So what we would like to do is focus on some of these operations, 

identify where they may be successful and more importantly, how 

do we build on both what Congress has already done and also 

where there is a successful operation, how do we help them expand 

their operations. 

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

Mr. CUMMINGS. Thank you very much. 

We are very pleased to be joined this morning by the Chairman 

of the Full Committee, Chairman Oberstar. Welcome, Mr. Chairman. I yield time to you. 

Mr. OBERSTAR. Thank you, Mr. Chairman, and thank you for 

convening this hearing. Thanks also to Mr. LaTourette. 

I have wanted since the outset of this session of Congress to get 

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ping. It is one that been of interest for a long time, but not of interest to the Committee. And we are going to make it a focus of this 

Committee’s actions. 

The President just recently launched a congestion mitigation initiative. We need to have maritime engaged vigorously as a part of 

that initiative. There were a number of other shortcomings in that 

congestion initiative, one was that it didn’t even reference the existing congestion mitigation and air quality improvement provisions of current law for the Federal highway program. It didn’t enlist the intelligent transportation systems of current law. There are 

tools available to help with congestion. Short sea shipping is one 

of those important tools. Today it takes a container longer or as 

long to cross seven miles in Chicago as it does to go 1,800 miles 

from the west coast to Chicago. It costs $300 per container to go 

1,800 miles in roughly 40 hours, and it takes $300 and 40 hours 

to go seven miles through Chicago. Then that container has to go 

another 1,200 miles to the east coast. 

If we mount a vigorous short sea shipping initiative, those containers that are now coming in at International Falls, Minnesota 

from the west coast, some 500,000 containers last year, making 

International Falls a ‘‘seaport’’ on the U.S. Canadian border, we 

could instead of continuing to contribute to the congestion in Chicago move them through the Port of Duluth or the Port of Two 

Harbors and short circuit that congestion in Chicago that is so desperately choking our transcontinental shipping system. 

There is going to be more of that congestion as Cosco moves to 

a 10,000 container vessel fleet. They already have several 9,000 

container ships, 7,000 container ships. Maersk launched a 12,000 

container vessel that can only probably put in on one port on the 

east coast. The St. Lawrence Seaway, as the Administrator mentioned just moments ago, is vastly under-utilized and we will soon 

be considering legislation in the Committee to establish a bi-national seaway authority. Canada and the United States ought to 

merge their separate authorities, reduce the costs, instead of two 

charges, one Canadian and one U.S., we can have one charge, one 

team. We only need one buoy distribution, we need only one aids 

to navigation system. We don’t need two of them. We can harness 

the resources and the capacity of the St. Lawrence Seaway to be 

a major contributor and also a financing mechanism as we established for Dulles and National Airports to upgrade the operations 

of the St. Lawrence Seaway. So that the gentleman’s State of Ohio 

will see increased vessel activity on Lake Erie, and I know Mr. 

LaTourette is very keen on that, will probably more ships and use 

more steel. 

So the hearing today is sort of a down payment on an extended 

inquiry into the obstacles to an efficient short sea shipping initiative. Mr. Connaughton, I understand the government of Canada requires some U.S.-flag ferries to get an exemption from the Canadian version of our Coastwise Trade Act, they call it the Coasting 

Trade Act. Even if they are on an international voyage, that is between U.S. and Canada, what is the basis for that, and what are 

its impediments for cross border traffic? 

Mr. CONNAUGHTON. Thank you, Mr. Chairman. 

15

We were made aware of the situation from a small ferry operator, it was actually on a lake, I believe, it was in Montana, when 

the Canadian authorities attempted to enforce this law on this operator. We have made representations and we have had several 

meetings with the Canadians, both here in Washington as well as 

in Ottawa, protesting this and vigorously defending obviously the 

right of the United States to have American vessels engage in ferry 

operations with Canada. 

We have within the last month had a meeting with the Canadians about this. They had indicated a willingness to bring this 

back to their Parliament to amend the law, to address this. But as 

far as I am aware, this has not occurred yet. So we are continuing 

to pressure them to amend this law, because we believe this is a 

barrier, obviously, to the purpose and the thrust of this hearing, 

but also it violates obviously agreements and understandings that 

we have had with the Canadians. So we will continue to vigorously 

represent our interests to the Canadian government on this issue, 

sir. 

Mr. OBERSTAR. I will be happy to be engaged in that process with 

the Canadian embassy here and with my colleagues in the Canadian Parliament, the Commons and the Senate. In fact, I just last 

week had a visit with a Canadian delegation here in the U.S. I 

wasn’t aware at that point, in preparation for today’s hearing, of 

this particular issue. But in preparation for the hearing, we saw 

this as a concern. So we will join with you vigorously in pursuing. 

Mr. CONNAUGHTON. Mr. Chairman, we would be very happy to 

come up here and brief you about what the status is of the law 

whenever it is convenient for Members of the Committee. 

Mr. OBERSTAR. We will do that. 

Mr. Johnson, the harbor maintenance tax on moving from Canada is an impediment. In what ways does that affect the Seaway? 

Mr. JOHNSON. Well, the way it affects the Seaway, Mr. Chairman, and by the way, thank you for your comments about the 

Great Lakes and the Seaway. As the panelist who is most responsible for talking to that issue, your words are music to our ears. 

The Seaway could be a way of easing congestion across border if 

we are able to increase our container traffic. As you know, the Seaway is primarily a bulk pathway now. But it could be a way to 

move containers inland. We are working now with several entrepreneurs who have a business plan put together to do that. But 

they are only planning now on moving containers from Halifax and 

Montreal to Canadian ports, not to U.S. ports. And the reason why 

is because of the HMT. 

So in my testimony I have talked about the H.R. 981 that has 

been introduced and how that limited waiver would positive impact 

the flow of traffic and cargo on the Great Lakes. 

Mr. OBERSTAR. Mr. Connaughton, the effect on the harbor maintenance tax would be minimal, wouldn’t it? 

Mr. CONNAUGHTON. Mr. Chairman, I actually have some of the 

estimates, the overall numbers on the harbor maintenance tax. But 

currently, just on domestic moves, as was referenced by Chairman 

Cummings, that on containers right now, domestically the HMT is 

about $1.7 million to $1.9 million a year that is collected. Overall, 

there are about $60 million a year on all commodities moving doVerDate 0ct 09 2002 11:18 Feb 15, 2008 Jkt 000000 PO 00000 Frm 00025 Fmt 6633 Sfmt 6633 P:\DOCS\34782 HTRANS1 PsN: JASON
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mestically in the United States. That is all cargoes for the HMT. 

And that is a subset of the overall annual collections which was 

about $880 million a year from all HMT. 

Mr. OBERSTAR. All that harbor tax money that is being collected 

is being deposited in the trust fund and that is being used to improve our harbors and our navigation channels, and it just sitting 

there making the deficit look smaller. 

Mr. Chairman, I will have other questions. 

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

Mr. Gilchrest. 

Mr. GILCHREST. Thank you, Mr. Chairman. 

I am not sure if you have welcomed the former administrator of 

the Maritime Administration, but Helen Delich Bentley is in the 

room. Welcome, Helen, back to Washington. 

Mr. OBERSTAR. Will the gentleman yield? May I join in that welcome? 

Mr. GILCHREST. Certainly. 

Mr. OBERSTAR. [Greeting in Serbian.] 

Mr. GILCHREST. I thank the Chairman for yielding. I think the 

study and the evaluation that is coming up from many of our interests is in the area of where can short sea shipping be competitive, 

what are the costs, who should share in that cost, where are the 

viable options around the Country, where can this type of shipping 

complement existing modes of transportation. I am hoping that 

when your evaluation comes through you can have some specific 

recommendations in the Country and then maybe we can expand 

the pilot project. 

I say that because I represent most of the Maryland section of 

the Chesapeake Bay. And in the Chesapeake Bay, of course, we 

have two significant rather large harbors, ports, one is down in the 

Norfolk region and one is the Port of Baltimore. But in our region, 

we also have to take into consideration Philadelphia and the Port 

of Wilmington. So the modes of transportation most of them, are 

95 and Route 13. But connecting all these ports are things like the 

C&D Canal, the Wicomico River, there is a good deal of barging 

that goes up that river to the town of Salisbury. Going up the Nanticoke River, you go over to Seaford, Delaware. You could get from 

Crisfield, Maryland to St. Mary’s County on the western shore in 

a short ferry ride and you would virtually eliminate a full day’s 

drive for a trucker. 

So as we are talking about the St. Lawrence Seaway and the 

Great Lakes and other places, it might sound parochial, but in this 

region we are looking at Philadelphia and Baltimore and Annapolis 

and Washington and Richmond and Norfolk and all those places. 

So to see what is viable and can be interconnected, don’t leave us 

out of that evaluation. 

Mr. CONNAUGHTON. Mr. Gilchrest, I just would point out that actually one of the current operators out there right now that is successful is a company called Columbia Coastal Transport, which actually has essentially as its hub Baltimore. They move cargo containers, particularly from Baltimore to New York and from Baltimore to Norfolk and back and forth. 

Mr. GILCHREST. And you know that the Port of Baltimore, largely 

with the help of—I am not going to say the middle name, Mr. OberVerDate 0ct 09 2002 11:18 Feb 15, 2008 Jkt 000000 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 P:\DOCS\34782 HTRANS1 PsN: JASON
17

star, because I will probably mispronounce it again—but my dear 

friend Helen, we have a great ro/ro facility in the port of Baltimore. 

So if we can get some understanding about eliminating the tax, 

some type of tax incentive, a joint operation, that was mentioned 

in some of the brief concerning the Marco Polo program in Europe, 

and are we looking at that to see how somehow that could be replicated here in the United States. We have NAFTA with North 

America, that free trade agreement. Can that be replicated in some 

sense with the idea of this short sea shipping? 

I just wanted to make another comment if I have enough time. 

I would look forward to continuing our communication with both of 

you and actually the second panel. As we go through all this, there 

is a measure, and I don’t want to say this is an obstacle. But when 

we are looking at Mississippi for short sea shipping, they are likely 

to close the Mississippi Gulf Outlet, for several reasons, to protect 

the city of New Orleans, to better replicate what the needs of nature’s infrastructure are as rebuilding the wetlands down there 

naturally, with the silt coming down from the Mississippi and not 

just moving in infrastructure because it is going to be an economic 

growth important part of the community. 

But as we go through all this and we are looking at short sea 

shipping, taking pollution out of the air, taking trucks off the highway, the facilities I think would be wise to look to make those facilities, that infrastructure, compatible with nature’s design in that 

region, so we don’t replace one form of pollution with another. 

Thank you, Mr. Chairman. 

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

Mr. Larsen. 

Mr. LARSEN. Thank you, Mr. Chairman. I want to thank the 

panel for being with us this morning. I want to apologize on behalf 

of the people I represent in Washington State, because as Mr. 

LaTourette mentioned the ferry title of SAFETEA-LU and he mentioned Alaska and New York, New Jersey and North Carolina, I 

am not doing my job to explain to other Members of this Committee that Washington State has the largest ferry system in the 

Country. So that is my fault and I apologize for that. I will do a 

better job of being a good commercial for the Washington State 

ferry system. 

On any one day, if you are sitting not too far from my home in 

Everett, Washington, which you look out into Possession Sound, 

you can see the kind of traffic that we are using Possession Sound 

for. If you go to the other side of Whidbey Island on Puget Sound, 

if you sat on Ebey’s Landing you could watch container ships, bulk 

carriers, log rafts, barges, commercial fishermen, recreational fishermen. We are using our marine highway, as you called it, quite 

extensively. So as I was talking with some of the folks who represent a variety of interests, ports, shippers, labor, so on, in Washington State and mentioned the concept of short sea shipping, they 

had sort of heard of it, but they didn’t put that name on it. It was 

just, we are doing what we are doing because we have the water 

and we use the water. 

But I was wondering from a Washington State perspective, Pacific Northwest perspective overall, there are some limitations that 

they discussed about how to expand that. An example that the Port 

18

of Everett used, they had considered moving paper rolls from Vancouver Island and barging those down to the Port of Everett, they 

were looking at it as a potential business. And the numbers didn’t 

work out, for a variety of reasons, including there was no potential 

for backhaul. 

But if you look at truckers, truckers are moving things forward, 

backward, everywhere. There is a way to spread out the costs, at 

least if you look at the I–5 corridor in the Pacific Northwest, and 

you compare that to what you can do to expand business on the 

marine highway. 

I am wondering if you have looked at, as we talk about east coast 

and Mississippi and the St. Lawrence, have you compared the Pacific Northwest potential versus the focus of at least some of the 

literature in the Gulf Coast, Eastern Seaboard, St. Lawrence? Have 

you compared and contrasted, and what conclusions have you come 

up with? 

Mr. CONNAUGHTON. Mr. Larsen, actually some of the studies 

have actually evaluated the viability of some of these operations on 

the west coast as well. There are the same sorts of hurdles that are 

being faced out there. One of the biggest problems is again about 

reliability service. It is about getting the shippers to buy in. It is 

trying to make sure that there is the opportunity for a balanced 

commercial operation. 

But what is interesting is that we are for the first time starting 

to see much more interest by shippers as well as trucking companies to utilize, to look at these services. Because many of the trucking companies are facing greater problems in their operations and 

trying to be able to move their cargoes on behalf of cargo owners 

through some of the major cities. They are also looking at the problems, they can’t find drivers. So there is more interest. 

One of the issues out there is that you are looking at much 

longer distances, which means that there is a lot more, there are 

some opportunities there. But on the east coast, there are lots of 

small businesses, you have some major ports, you can move it very 

quickly out of there to a smaller port somewhere along the way, 

where it can then avoid those bottlenecks in the major congested 

areas. 

Your area, though, is actually one of the great success stories. 

That ferry system that operates, that Washington State operates, 

is an enormous number of trucks that are taken off the road. And 

then the fact that you see such an incredible number of movements 

up to Alaska that again, a lot of it is ro/ro traffic that is actually, 

I mean, there are some land site connections to Alaska. But for the 

most part, that operation up there is such that it is kind of a model 

for the rest of the Country. 

But we have not forgotten the west coast. We actually have attempted to identify, these are some bulk commodity movers that 

are moving cargoes. We have actually had also, we know there are 

some operations down in southern California that are using the 

waterways to move cargoes between southern California and Mexico, to avoid some of the bottlenecks at the border because it is 

cheaper. 

Mr. LARSEN. If I may, Mr. Chairman, I just want to put my oar 

in the water on this issue of the U.S.-Canada ferry issue as well, 

19

not only the Washington State ferry system. We have one run between Anacortes and Sidney, B.C., on the south end of Vancouver 

Island. But there is a private operator, Black Ball Transport, that 

runs from Port Angeles on to Vancouver Island as well that would, 

I am sure, be very interested in the end result of any conversation 

between the U.S. and Canada on this ferry issue. 

Mr. CONNAUGHTON. Yes, sir. 

Mr. CUMMINGS. Mr. Bishop. 

Mr. BISHOP. Thank you, Mr. Chairman. Thank you very much for 

holding this hearing. 

I represent New York One, which is the eastern half of Long Island, about the last 70 miles of Long Island. So my district is bordered by water on three sides, and both the Port Jefferson Ferry 

and the Cross Sound Ferry are in my district. I was very interested 

to hear, Mr. Connaughton, your comments about the success thus 

far. I guess my question would be, could you elaborate more on 

that specific issue and perhaps make note of what impediments, 

other than the harbor maintenance tax, exist for this truly short 

sea shipping? The distance between Connecticut and Long Island 

is, I think at its widest point, only 20 miles. Yet that represents 

an avenue for us that would significantly help with congestion on 

the Long Island Expressway, which is not so affectionately referred 

to as the world’s longest parking lot. 

So I am just curious as to what additional comments you could 

make in that area. 

Mr. CONNAUGHTON. Thank you, Mr. Bishop. It was actually an 

eye-opener for me when I went to Bridgeport and I was provided 

this information about that ferry. Because I am a good Long Island 

native, and I hate to say this, but if you wanted to go on a cheap 

date and take a date out on a cruise, you would drive out to Port 

Jefferson and buy a ticket and go over and go out on Long Island 

Sound. When I was there, those are my memories of Port Jefferson————

Mr. BISHOP. That is a cheap date. 

[Laughter.] 

Mr. CONNAUGHTON. Yes, sir. I was a cadet at the Merchant Marine Academy, so you have to look for cheap dates. But I was very 

surprised when I was there to see the number of trucks coming off. 

They indicated that they had seen, I think they number they used 

to me was almost a 60 percent increase in the number of trucks 

that are actually on that ferry. So we are gathering some information about that ferry, as well as the Orient Point ferry and the New 

London ferry as well, to understand what is happening up there. 

Because as you mentioned, obviously there was a lot of congestion, 

generally a lot of congestion, but even more congestion with the reconstruction of the Long Island Expressway. I am very interested 

to see what is happening now that they finally have finished with 

that construction, has that seen a drop-off in the amount of trucks 

using those ferries. 

But I think it is a great example of something that the marketplace actually worked, where truckers saw this as an opportunity 

to get off the island in a much quicker—obviously they are going 

to end up paying more. But when you look at reliability and the 

fact that they can get off the island, off and on the island. I think 

20

it is again another great example. One of the things we have been 

trying to do in the Maritime Administration, as we have gotten 

into this, is have a much broader look at what opportunities exist 

out there. Because before I think to a certain extent we were looking at, OK, whole new operations. Maybe there is at least a foundation that we can show some successes in, look at some of these existing operations, see what we can potentially do to help them expand. 

In fact, one of the things, when I was out there in Bridgeport, 

was they were indicating that they were expanding the ferry operation. What do we need to do with that, because the ferry facilities 

are still the same size. 

Mr. BISHOP. You earlier mentioned a report that you were working on. Will there be in that report suggestions for how ferry operations of this type can be expanded? 

Mr. CONNAUGHTON. That is where we would like to go. 

Mr. BISHOP. Let me move to a related but different subject, and 

that is, there are 40 some liquid natural facilities being proposed 

in coastal areas throughout the United States, one of which is in 

the middle of Long Island Sound. I am just curious, all of these facilities will require a security buffer zone, will require floating security zones as the tankers arrive to in effect feed the LNG facility. 

Has your department made any assessment of the impact that 

those facilities might have on short sea shipping as an impediment 

to the development of shipping? 

Mr. CONNAUGHTON. No, sir, we have not. We are involved actually in not the broad water facility that you are mentioning, but we 

are actually the licensing authority for almost all offshore deepwater LNG facilities. Just because of where that facility is, we are 

not involved. But when we do look at the facilities that are responsible for in licensing, we do make sure that the siting of the locations of those facilities are such that they do not impede or impact 

navigation. 

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

Mr. CUMMINGS. Thank you very much. 

Just two questions. Administrator Connaughton, MARAD administers the Title XI loan guarantee program, is that right? 

Mr. CONNAUGHTON. Yes, sir. 

Mr. CUMMINGS. And they will provide guarantee on ships, mortgages for like 30 years, is that right? 

Mr. CONNAUGHTON. Twenty-five years, I believe. 

Mr. CUMMINGS. Twenty-five years? 

Mr. CONNAUGHTON. I believe it is, sir, 25. It might be 30. 

Mr. CUMMINGS. Do you believe the loan program can be helpful 

in providing security financing for short sea shipping ventures? 

What do you believe the default rate would be, the risk would be? 

Mr. CONNAUGHTON. Obviously, sir, we evaluate these applications for Title XI on a case by case basis. We actually do an economic analysis to see if the proposed operation is viable. The Administration did not support, has not supported additional funding 

for Title XI. But when applications come in and if Congress provides the funding for it, we make sure that those funds that are 

allocated or appropriated by Congress are, that the money is well 

21

spent, and that the operations are viable and that we will not hopefully have a default. 

I want to go back to, one of the opportunities again is if we do 

focus more on some of these operations that are in existence today 

and see how we can expand it, at least then you have a foundation 

to avoid potential defaults or problems than you do with brand new 

operations. 

Mr. CUMMINGS. So I take it that the recommendations, I am not 

asking you to, I know you all still are having things checked over 

with your various agencies. But the recommendations that you will 

be giving to us I take it do not have a recommendation for more 

money, based on what you just said, for Title XI? Is that a fair 

statement? 

And did you all consider that? We are here trying to solve a problem, and I am just wondering, you seem to think that if the proper 

appropriate applications came before you, it is something that certainly would be considered. I am just wondering, then you said, 

that one of the problems would be the funding. And I am just wondering if you all considered that when you all were putting together your recommendations? 

Mr. CONNAUGHTON. Mr. Chairman, the package we are putting 

together will, at least at the start, attempt to address what we 

think—it will be a fairly comprehensive package. As it goes 

through the process, obviously there is a strong possibility that as 

we get into a dialogue with other parts of the Government, changes 

may be made. But essentially we are going to look at this as a 

clean sheet, as we make our proposals internally, sir. 

Mr. CUMMINGS. OK, so now going back to my question, so you 

all did consider it, and right now, it is not, to your knowledge, it 

won’t be a part of what you are presenting to us? 

Mr. CONNAUGHTON. I don’t know what the package will look like 

at the end of the process, sir. But essentially we are putting together a package that looks at each element of the marine highways. 

Mr. CUMMINGS. Is that package still open? In other words, if 

you————

Mr. CONNAUGHTON. Yes, sir, we have not started the clearance 

process. It is essentially, actually it is sitting on my desk, along 

with some other legislative proposals that we would like to bring 

forward this year. But we are going to break out this issue, the 

general issues involved with this and send that forward initially to 

get it going in the process. 

Mr. CUMMINGS. I was extremely impressed with how you got that 

web site going at the beginning of this hearing. That was just wonderful. If there are things sitting on your desk, maybe we need to 

schedule another hearing and get some of that stuff moving. 

[Laughter.] 

Mr. CUMMINGS. It just seems to me something that is practical, 

that might be a good thing. 

Did anyone else have any questions? 

Thank you very much. We really appreciate your being here. 

Did you have something, Mr. Johnson? 

Mr. JOHNSON. I just wanted to say with respect to the Great 

Lakes, you were talking about funding, the interesting thing that 

22

I find is that the entrepreneurs we are dealing with are self-financed. They are not coming to the Government for money, which 

I think is refreshing. 

Mr. CUMMINGS. Very. 

Mr. JOHNSON. So it is the public policy issues that we need resolved, and commerce will start to flow. Thank you. 

Mr. CUMMINGS. Thank you very much. Thank you all. 

Our next group of witnesses, would you come forward, please? 

Our next panel consists of Mr. Gregg Ward, Vice President of Detroit-Windsor Truck Ferry; Mr. Mark Yonge, President of the Maritime Transport and Logistics Advisors; Mr. James Barker, Chairman of the Interlake Steamship Company; Mr. Stephen Flott, 

Chairman of Seabridge, Inc.; and Mr. Anastassis Margaronis, 

President of the Santa Maria Shipping Company. I want to note 

that Mr. Margaronis will be discussing his effort to construct ships 

for the short sea trade in the Port of Baltimore, and I welcome him. 

I also want to take a moment to add my welcome to former Congresswoman and guru of all shipping imports, Helen Delich Bentley. Thank you very much for being with us. 

Mr. Ward. 

TESTIMONY OF GREGG M. WARD, VICE PRESIDENT, DETROITWINDSOR TRUCK FERRY; MARK YONGE, MANAGING MEMBER, MARITIME TRANSPORT AND LOGISTICS ADVISORS, 

LLC; JAMES R. BARKER, CHAIRMAN, INTERLAKE STEAMSHIP 

COMPANY, NEW ENGLAND FAST FERRY COMPANY; STEPHEN 

P. FLOTT, CHAIRMAN, SEABRIDGE, INC.; ANASTASSIS 

MARGARONIS, PRESIDENT, SANTA MARIA SHIPPING, LLC 

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

When you think of short sea shipping, I hope you will think of 

it as an extension of the highway. Mr. Johnson mentioned that we 

had a long drive here. I tried to come in on Tuesday to Washington, 

but all the flights were canceled out of Detroit. They were going to 

be canceled on Wednesday for weather, so I decided to jump in the 

pickup truck and with my Father as my co-pilot, and with my father back there, we started the business together. 

Mr. CUMMINGS. Where is your father? 

Mr. WARD. In the corner. 

Mr. CUMMINGS.Why don’t you stand up? You did all that driving? 

[Laughter.] 

Mr. WARD. He’s too tired. 

Mr. CUMMINGS. We want to thank you for being with us. We appreciate all the efforts that you went through, and we want you to 

realize that we consider all this testimony very important. We really do appreciate the fact that you took up the time and went 

through all of that to get here today. Thank all of you for being 

here. 

Mr. WARD. Thank you very much. It was very insightful to come 

down the interstate, because it was mostly a whiteout, we drove 

through most of the night. There were times where the interstate 

was closed and we had to take arterial roads and then get back on 

the interstate. When I think of short sea shipping, I see it as an 

important opportunity to add redundancy and resiliency to our 

23

transportation system. In fact, I think it should be a national security priority. 

I am focusing mainly on the Great Lakes, and I will use DetroitWindsor as a point of reference. We have three bridges or three 

bridge areas between the U.S. and Canada. In Detroit, we have the 

Ambassador Bridge, built in 1929, that takes over $300 million 

worth of cargo a day across it. If that infrastructure failed, there 

are no alternatives. If you look at the Department of Homeland Security priorities: prevention, protection, response and the last one 

is recovery, we need a means of recovery at the border. 

I think the importance of short sea shipping is to provide alternatives to make a more redundant, resilient transportation system. 

I think it is critical that we look at doing that. 

Today we mentioned the harbor maintenance tax. It is a very 

critical issue and I would even say that if the harbor maintenance 

tax isn’t settled, there will be no short sea shipping. A case in 

point, we have been doing this for over 16 years. We started Earth 

Day 1990. We had the mission of congestion mitigation. There are 

rules on hazardous materials at the bridges and tunnel in Detroit. 

Your legal alternative is 165 miles away. Our small service, which 

is no more than a parking lot, a means of conveyance, we use a 

tug barge to another parking lot, we have eliminated tens of millions of miles off the highway system. 

We think that this is very important to think of, because not only 

from the environmental perspective, but from the what do you do 

in an emergency. After 9/11, the automotive companies used our 

service to keep plants open. In fact, GM said that they were able 

to keep the Hamtramck assembly plant open in a letter to Customs 

because of the Detroit-Windsor Truck Ferry. That is 3,400 people. 

This little service was able to help. 

We need a more resilient transportation system, and we have 

this great waterway that exists, and we have the U.S.-Canada 

trade, our largest trading partner, we have the density of traffic, 

the density of commerce already moving. So we have the ability to 

have that market. I don’t think it is a question of coming to the 

Government for money. It is changing the regulatory framework so 

that we have a system that will run efficiently and effectively. 

With the harbor maintenance tax, if a truck is coming to Detroit 

and it comes to the bridge, and there is a great amount of congestion, which happens frequently, they cannot move over to the water 

route. Because if they did, that truck driver would have to call his 

dispatch and his dispatch would have to call every single customer 

with freight in that truck and get their permission to be subject to 

the harbor maintenance tax. It is $125 per every $100,000 in cargo. 

It is not going to happen, and it doesn’t happen. If you look at 

our business, the primary freight we bring back from Canada to 

the United States is empty hazmat tankers, because it has no cargo 

value, therefore no HMT. 

So I think is necessary, when we look at building a transportation system, when we look at short sea shipping, it really is a security issue. It is the opportunity to make our system more redundant. When we were coming down the interstate, we saw the Eisenhower symbol for the building of the interstate system, I hope 

some day that we can look back at this Committee as taking a 

24

leadership role in advancing our transportation system and utilizing these existing resources, the waterways, to build a more redundant and reliable transportation system. 

The challenge is the HMT. There are some other challenges with 

Canada as far as customs cost recovery. Any new maritime service 

has to pay for customs. Bridges and tunnel gets customs for free 

forever. That makes it very non-competitive. Our company, and we 

are a very small company, had to take the Canadian government 

to court. We litigated it, and now we don’t pay this fee. But at one 

time, this fee we pay Canada for customs was representing $10 of 

every truck that crossed. That is going to hurt anybody coming 

after us, because it was an out of court settlement. and there is no 

precedence. 

We also have an issue of ice-breaking fees in the river. We have to cross a one mile river. We pay $3,100 to the Canadian government for ice-breaking fees, and we are not eligible for ice-breaking 

services. And the majority of the ice-breaking in the Detroit River 

is done by the U.S. Coast Guard. So the Canadians are charging 

us $3,100 for services provided by the U.S. Government and paid 

for by U.S. taxpayers. 

One last issue is on the hazardous material which we transport. 

It is supposed to restricted from the local bridge and tunnel. When 

you come into the tunnels in Baltimore, you will see big signs that 

show the hazmat restrictions. There are no such restrictions signs 

in the Detroit area. Here you have the Ambassador Bridge, the 

most critical piece of infrastructure for the U.S.-Canada trade, and 

we don’t have a consistent, reliable hazardous material enforcement policy. So when you look at short sea shipping, I hope you 

will look at the security end of it and the ability to add redundancy 

and resiliency to our transportation system 

Thank you. 

Mr. CUMMINGS. Thank you very much. 

Mr. Yonge. 

Mr. YONGE. Good morning, Chairman Cummings and distinguished Members of the Subcommittee. 

In my written testimony I have attempted to provide you with 

a brief overview of the development of short sea shipping from a 

commercial operator’s point of view. I have provided a number of 

recommendations that I trust you will find helpful. 

As a past owner and operator of U.S.-flag vessels, I have a deep 

passion for the preservation and enhancement of our U.S. merchant marine and our U.S. sea lift capability. Therefore, I wish to 

thank you for this opportunity to offer my assistance to what I feel 

is a great opportunity for the U.S. maritime industry to provide 

needed additional transportation capacity for our Nation’s economic 

future and security. 

Based on the global proviso that transportation capacity and economic sustainability go hand in hand, and accepting the reality 

check that the surface transportation capacity in the United States 

has not kept pace with transportation demand, a freight capacity 

crunch of unprecedented dimensions is predicted through 2035. 

Just building more roads or expanding rail capacity to meet projected demand are simply not viable options. Even if they were possible, adding trucking company driver shortages, new hours of servVerDate 0ct 09 2002 11:18 Feb 15, 2008 Jkt 000000 PO 00000 Frm 00034 Fmt 6633 Sfmt 6633 P:\DOCS\34782 HTRANS1 PsN: JASON
25

ice regulations and other trucking perfect storm challenges compounds the problem. Short sea shipping, which is to say, the U.S. 

maritime industry, has the potential to provide our Nation with almost immediate cost-effective additional surface transportation capacity that will assist in securing our Nation’s economic sustainability. 

While much attention has been paid in recent years to the increasing flood of imports to this Country and to the additional burden it has placed on our transportation system, significant growth 

is also occurring in domestic freight in greater volumes. It is the 

transport of goods and domestic service where short sea shipping 

can make a major contribution to the Nation’s transportation system. 

There are a number of existing operating companies and started 

companies that have developed plans or are capable of providing 

short sea shipping services here in the United States. However, 

there are barriers that need to be addressed, sooner better than 

later. 

The domestic harbor maintenance tax, the HMT, places a tax on 

the movement of goods by water. Freight that could utilize marine 

alternatives is discouraged from doing so by the HMT, and relies 

instead on trucks and rail even when faced with congestion. The 

HMT is presently a major disincentive for shippers and logistics 

providers to consider short sea shipping as an intermodal marine 

alternative. 

Quick action by Congress can produce immediate results. As an 

example, Chuck Raymond, Chairman of Horizon Lines, a major 

U.S.-flag vessel operator, has given me permission to advise you 

that if the domestic harbor tax is removed, his company will seriously pursue dedicating up to four 21-knot 600 plus FEU container 

ships to the coastwise trade by mid–2007. Chuck estimates about 

2,200 trucks per week would be taken off the roads in highly congested areas. That is 114,400 trucks per year. 

Availability of existing U.S.-flag Jones Act vessels is limited. Additional vessels are needed, including new technology, high speed 

vessels that can meet supply chain needs and expectations. Financing new vessels and/or new U.S.-flag vessel technology is nearly 

impossible today without Government credit assistance, such as the 

MARAD Title XI program. 

Another possible aid might be the restricted use of the capital 

construction funds, CCF. There may well be other alternatives, 

such as those that are being discussed today. But the U.S. has a 

proven Title XI and CCF program in place now that could be enacted relatively quickly, while other alternatives may take years to 

enact or put into place. 

The MARAD Title XI loan guarantee program has been responsible for much of our Country’s U.S.-flag fleet development. Without it, two new short sea shipping services could not have been 

commenced in Hawaii and the Great Lakes. Expanding the use of 

CCF could also be a means to foster the building of new coastal 

short sea shipping vessels. I think that the expansion of CCF may 

be accomplished in a targeted way to answer concerns by some in 

the maritime community who are fearful of too many vessels being 

26

built and thus creating over-capacity in the market. At least it is 

worth looking at. 

Horizon Lines, Matson and Tote are all successful participants in 

Title XI and CCF. Congress would do well to continue to strengthen their support for vessel financing. 

There are other suggestions that I have included in my written 

testimony that offer additional options that have been under discussion in recent years. Consider the billions of dollars that are 

spent on highway infrastructure and hundreds of millions in public 

funds that are spent on rail, but very little funding is available for 

building ships for a marine highway, or what we refer to as an 

intermodal marine transportation system. 

In my written testimony, I provided a statement that 12 miles of new four-lane highway construction equates to about $100 million. That amount in a Title XI loan guaranty program would generate loan willingness from this financial sector of about $1 billion, 

or an example, 10 $100 million U.S.-flag Jones Act short sea vessels. Providing assistance to stimulate the initiation of new short 

sea services or new intermodal marine alternatives will not only 

add surface transportation capacity but increase our Nation’s sea 

lift capability. Reinforce the vitality and growth of our merchant 

marine and add fuel to our marine transportation economic engines. 

I close with the suggestion that time is of the essence to secure 

our economic sustainability. Consider carefully that even if the critical barrier is resolved today, the HMT, and the difficulty of obtaining long-term vessel financing, it will be two to three years before 

new ships can be built and launched and put into service. That is 

another two to three years of population growth and economic 

growth, creating additional transportation demand. Add the trucking companies’ dilemmas and we may well find our Nation caught 

in the perfect storm warning that a trucking company executive 

stated to us. 

Thank you again for your invitation and I look forward to any 

questions you may have. 

Mr. CUMMINGS. Thank you very much. 

Mr. Barker. 

Mr. BARKER. Thank you, Mr. Chairman. Good morning, Members 

of the Committee. 

I am Jim Barker, Vice Chairman of Mormac Marine Group, 

which includes three companies operating ships in the U.S. domestic trades: Interlake Steamships Company on the Great Lakes; 

Moran Towing in the coastwise, and Harbor Towing Trades and 

New England’s Fast Ferry Company in the coastwise passenger 

service. 

I am pleased to appear before this Subcommittee today to speak 

on the development of short sea shipping in the United States. In 

particular, I would like to address what seems to be an enigma. If 

short sea shipping really offers so many benefits for addressing the 

congestion that increasingly clogs our rail and highway systems, 

why don’t we have it already? 

The short answer is, of course, we already do. The companies I 

represent here today are primarily engaged in short sea shipping 

in one form or another, in some cases for many decades. Thus a 

27

second, more vexing question is that if short sea shipping does 

exist successfully on a commercial basis in some trades or services, 

such as bulk or passenger ferries, why isn’t it developing more rapidly in other areas directly related to reducing highway and rail 

congestion, such as intermodal freight? 

Before answering those questions, let me provide some background on our already existing short sea operation. Interlake 

Steamship is among the three largest vessel operating companies 

on the Lakes. Our ten vessels include four 1,000 foot long self-unloading bulk carriers. We are proud that Interlake was among the 

first companies introducing these revolutionary vehicles in the 

Lakes trade. 

Today we are one of only three operators of that class ship in the 

Great Lakes. In addition, we operate four smaller 700 to 800 foot 

self-unloading bulk vessels, one non-self-unloading bulk vessel and 

one self-unloading integrated tug barge. Moran Towing Corporation 

owns and operates a fleet of 84 tugs providing coastwise towing 

and harbor services in 13 U.S. east and Gulf ports with an additional 11 tugs under construction or on order. In addition, Moran 

operates an extensive fleet of 8 ocean-going dry bulk barges, 11 inland harbor barges and 7 petroleum product barges, all of which 

are double hulled, and has 3 additional double hulled articulated 

tug barges under construction. In addition to these coastwise services, Moran has also supplied towing services for other short sea 

services. 

The newest member of our family, New England Fast Ferry, operates two high speed passenger ferries operating three to ten voyages daily between New Bedford, Massachusetts and Martha’s 

Vineyard, depending on the season. During the summer season, six 

voyages daily between Providence and Newport, Rhode Island, with 

another vessel. 

As its web site states, by traveling with us from New York, Connecticut, Boston or Providence, you save over an hour each way 

and feel fresh sea air, rather than staring at brake lights on the 

Cape and I–95. Together, these companies provide a broad perspective into the Jones Act industry and short sea shipping in the 

United States as it exists today, and how it can develop further in 

the future. 

As this small plug for New England Fast Ferry suggests, short 

sea shipping is already contributing to reducing congestion on U.S. 

highways, or at least helping to ease the impact of continued 

growth. Nowhere, however, is this more clear than the Great Lakes 

region. 

Shipping on the Great Lakes began in 1679, when the first ships 

to sail the upper Lakes, the Griffon, was launched. By the mid–

19th century, the bulk shipping industry had begun on the Great 

Lakes, with the transport of iron ore, wheat and coal. While the 

late 19th century may have been the golden age of Great Lakes 

shipping, when the lines of ships moving up and down the Lakes 

were similar to the bumper to bumper traffic of today’s urban roadways, the cargoes carried by today’s fleet far exceed those of earlier 

times. 

How this translates into congestion mitigation on our roads and 

highways can be easily extrapolated from the cargo-carrying capaVerDate 0ct 09 2002 11:18 Feb 15, 2008 Jkt 000000 PO 00000 Frm 00037 Fmt 6633 Sfmt 6633 P:\DOCS\34782 HTRANS1 PsN: JASON
28

bility of just one of our 1,000 foot vessels. In a single voyage, each 

such vessel transports the equivalent cargo of 700 car unit trains, 

or 2,800 25 ton trucks. Thus, in the course of a 300 day 50 voyage 

season, the Interlake fleet of 4 1,000 footers and 6 smaller vessels 

conservatively carries the cargo equivalent of almost 3,000 100 car 

unit trains and over 1 million 25 ton trucks. This means less congestion on the already congested road and rail networks in the region, less impact on aging rail and highway infrastructures, less 

impact on the environment and less impact on the millions of U.S. 

and Canadian citizens living in the region. 

To help address the challenge of developing intermodal freight 

services, we looked at three examples of potential short sea intermodal roll-on/roll-off freight services employing truck ferries: a 

cross-lake service between Michigan and Wisconsin; an inner harbor network serving the New York metropolitan area that is taking 

trucks from Perth Amboy to Brooklyn; and a coastwise service from 

Perth Amboy, or New Jersey, to a point or points in southern New 

England. 

The prototype vessel we used in this analysis is a 320 foot rollon/roll-off single deck truck ferry built on catamaran hulls. We 

would have a service speed of 19 knots, although the ships could 

do 27 knots. These ships would be constructed of steel, although 

they also could be constructed of aluminum. But you would certainly need the steel on Lake Michigan to break ice. 

It is now commonly accepted that the principal user customers 

of short sea intermodal freight service will be trucking companies. 

But what does it take to get trucks off the roads and onto our 

ships? Let me say that we have looked at this from the trucking 

companies’ viewpoint, we have looked at it from our viewpoint as 

a shipping company, and we have looked at the public policy implications. And it is really a difficult problem. You have heard about 

the harbor maintenance tax, and I won’t go into that. 

Let’s just look at the commercial operation of how you would do 

this. We have looked at it on a cost basis: can we beat the cost of 

a truck, say a truck comes out of Minneapolis and is going to Detroit. Instead of going around to Chicago, can we take him across 

Lake Michigan, which is a shorter route in mileage, which is good 

news, and beat the cost. And the answer is, we can. We can under 

certain circumstances. 

When you look at all the short sea operations we are in now, 

when we take a load of iron ore to Indiana harbor from Duluth, we 

are full. We carry 57,000 tons. Now, you tell me I can be full going 

across Lake Michigan and I can beat the cost of a trucking company. You tell me that I am half full and I can’t. 

So one of the key ingredients here is working with the trucking 

companies to get close to a full load. That is hard to do. People 

have talked about Title XI, and Title XI is a useful tool. To use 

Title XI as we have on the Great Lakes, we have long-term contracts with iron or steel companies. That guaranteed that the debt 

will be paid. 

You have no such guarantee with a trucking company, especially 

when you are working with five or six trucking companies, and you 

certainly don’t have a guarantee for 10 years, say, to do the underlying financing. And therein lies a huge problem. 

29

Mr. CUMMINGS. I will have to ask you to wrap up, Mr. Barker. 

I have let you go three minutes over so far. 

Mr. BARKER. I am sorry about that. 

So the answer is, we can meet those costs, but it is a very difficult infrastructure problem of working with the trucking companies to get the long-term commitment. Because they are just not 

set up to do that, and to solve the problems that will happen as 

you put the system together. It is the commercial problem that we 

are trying to solve. 

Mr. CUMMINGS. Thank you very much. 

Mr. Flott. 

Mr. FLOTT. Thank you, Mr. Chairman, Members of the Committee, Mr. LaTourette. Thank you for inviting me to testify. 

In the background notes to the hearing and in prior testimony 

you have heard a lot about the challenges and the reasons why we 

are here. What I want to do today is show you what we intend to 

do at SeaBridge, which is making money making short sea services 

work. Now, because pictures are worth a thousand words, I 

brought some slides, and I will go through them very quickly. 

This slide presents essentially an unsustainable future. I think 

we have all recognized that today. But what is the cause? Where 

does the source of this come from? The major driver of our infrastructure problem is domestic highway freight. It dwarfs all other 

movements in this Country. 

Congestion is not caused, though, by trucks alone. There are an 

awful lot of cars on I–5, I–10 and I–95 where coastal waters are 

available. Indeed, there are many more, and a lot of people traveling in those cars going up and down those routes. 

In my view, in SeaBridge’s view, this is a business opportunity. 

That is how we have approached it. 

Our competition is the highway, the very highway itself. The 

challenge just referred to by Mr. Barker is to attract the traffic to 

that highway. How? 

Like any business, you have to prepare a compelling value proposition for your customers. You have to save them time, money, 

make using our marine highway more convenient. Help it become 

more cost-effective. 

For truckers, that is taking all the reasons that they use rail 

intermodal today in the right markets, adding speed and flexibility 

at a price that compares with using the highway. For motorists, it 

is offering a more convenient, comfortable transit in less time, and 

at about the same cost as driving. That is the compelling priceservice offering we are going to make. 

We have taken a well-proven European model, indeed a global 

model, the use of ro-pax vessels. Last year in the European Union, 

450 million people, 100 million cars and 22 million trucks used ferries as part of their transportation. We have spent six years and 

$4 million of our own money developing tools to make that work. 

What are the tools? Well, marine highways, at the end of the 

day, are ports and ships. Both are critical, but ships are key. Size, 

speed, sea-keeping, the term for how comfortable the ship is as it 

rides at sea, and fuel efficiency are essential to create the frequency, reliability and comfort that users require. The key words 

in motor transportation are frequency, reliability, and speed. 

30

Simply put, we have developed an extraordinary ship that can 

produce the right speed for a variety of routes that maximizes our 

utilization of the vessel and makes the service offering work. We 

will bring the service to the United States. It is a matter of time. 

People keep talking about getting shipper buy-in. Shippers today 

don’t ask often how their goods get from where they are picked up 

to where they are delivered. They use 3PPLs, they use truckers, 

others to manage that flow. 

When we build highways, people come. If we produce a better 

way of getting goods from point A to point B, the truckers will buy 

into it as they have rail intermodal. 

You have heard a number of obstacles. The biggest obstacle I see 

is financing, and it drives everything. There is the highway trust 

fund, Rail Rehabilitation and Improvement Fund, our air traffic 

fund. That is probably not the right name. There is nothing comparable, though, for water. We don’t have a comparable RRIF for 

water. 

It is a good model. But I would urge the Government to consider 

the use of leverage, just like we do with the Title XI program. Private capital uses leverage to increase the value of its capital and 

to earn greater returns. It seems to me the Government might take 

a page out of that book as well in looking at things like Title XI’s 

ability to draw private capital to public uses. 

It seems to me, Mr. Chairman and Members of the Committee, 

that short sea shipping is a matter of private initiative backed by 

public support. 

Thank you very much for your time. My prepared testimony is 

in the record. 

Mr. CUMMINGS. Thank you very much. 

Mr. Margaronis. 

Mr. MARGARONIS. Thank you, Mr. Chairman. 

My name is Anastassis Margaronis and I am the President of 

Santa Maria Ship Owning and Trading. As you pointed out, we recently signed a letter of intent to operate the shipbuilding facilities 

at Sparrows Point. I should point out, Mr. Chairman, that that 

would not have been possible without the assistance of former Congresswoman Bentley, who was very instrumental in getting us 

across the street, so to speak. 

There are a couple of points that I would like to make. First of 

all, you will all be pleasantly surprised to find out that there are 

some short sea shipping routes that already are competitive and 

profitable. Those are the feeder ship routes between major ports to 

satellite ports. They would include, starting in the Pacific Northwest, Seattle-Tacoma to the Port of Olympia, where there are 

major distribution centers around Lacey and the Olympia area out 

there; Oakland to Stockton; L.A.-Long Beach to satellite ports at 

San Diego and Port Wynimie. On the east coast, Norfolk to Baltimore-Philadelphia; Norfolk down toward Jacksonville. Those would 

also include New York. 

We did a study that include the shipbuilding costs based on our 

projections for what we would be able to build a ship at Sparrows 

Point and concluded that we would be able to operate, or somebody 

would be able to operate a vessel service between a major port and 

a satellite port at a 75 mile distance and reduce the cost it takes 

31

to truck that container by 10 to 15 percent, assuming a diesel cost 

of $2.50 a gallon. That includes paying for the new cost of construction of the ship. The way that that would be guaranteed initially 

would be either through the ports or through major shippers like 

a Wal-Mart or a Target. 

Number two, we need new shipbuilding in the United States. 

You asked what it is that the Committee could do. The most important thing is to re-fund the Title XI program, put a billion dollars 

in there and provide us to build $20 billion worth of ships and then 

all of this can become a reality. Without that program, it is going 

to be very, very incremental and it is not going to be very successful. We need the economies of scale. 

The program can do a lot of things. It can create the financing 

of owners and ship owners to come in to order the ships. It can be 

used to help shipyard upgrade their facilities. And I would suggest 

it should be extended to ports to upgrade their terminal operations, 

because especially the satellite ports would need upgrades in order 

to make this happen. A Title XI program is ideally suited for this. 

If you put in the money, we can make it happen. Without that, 

many of the shipbuilders around the United States don’t have the 

economies of scale to make this a competitive go. They need some 

assistance. 

Having said that, we would not need a taxpayer subsidy in any 

of the routes that I mentioned. They could all be done privately 

with guarantees either from a shipper or from a port. We are competitive already. 

If I could say one thing, we have heard a lot about the Jones Act 

and the problems of American shipbuilding. We can be competitive 

if we have the right tools. Right now we need those tools. 

A couple of other things, terminal operations. We do need to look 

at terminal operations at smaller and satellite ports. We have had 

some discussion about the Great Lakes. That would be an ideal setting for moving container traffic. As Mrs. Bentley pointed out to 

me, she said, some of the Members may be too young to remember, 

but there was a time when we used to have coastal shipping in the 

United States, before it was run out of business by some of our bigger modal carriers, who shall remain nameless. 

In any case, the potential is already here. We can do it. We need 

the tools. We need some financial direction. The ports themselves 

in some of the cases are big enough to do the job. They could guarantee the long-term charters that we need. We heard something 

about the problem of the long-term agreements. In the feeder ship 

area, we can already do that. The long haul will be a little bit more 

problematic, as some of the speakers have mentioned. The ro/ro is 

an excellent idea for the long haul. Again, we could be building 

those ships. And that again really needs some support from something like Title XI. 

We have had a lot tougher challenges to meet in our past. We 

have built a national highway system, we have built a national 

railway system, we have gone to the moon and back. It is time we 

returned to our maritime roots. It is time we went back to sea. 

Thank you very much. 

Mr. CUMMINGS. Thank you very much. Thank you all very much. 

32

We are going to ask a few questions and see if we can wrap this 

up by no later than about 5 after 12:00, 10 after max. So I just 

have a few questions. 

Mr. Flott and Mr. Yonge, you both cite development of a high 

speed 30 to 40 knot vessel for short sea shipping. Are there any 

high speed vessels that move trucks over these types of routes anywhere in the world? 

Mr. FLOTT. Yes, Your Honor—my lawyering background. 

Mr. CUMMINGS. I understand. I used to practice myself. 

[Laughter.] 

Mr. FLOTT. There are, but it is not a question of the amount of 

speed, it is the right speed. Often it is the ability to make a schedule reliable, it is the reliability of the schedule. So often the speed 

of the vessel is really used as a way of making sure that in bad 

weather or in other circumstances the vessel is able effectively to 

make its schedule. 

One of the first things I was told when I started talking to trucking companies about our service and our concept of creating this 

marine highway as a highway was, well, how are you going to 

make up time. For them, it is OK to leave late, but you had better 

arrive on time. So the fact is there are, in many parts of the world, 

high speed vessels carrying tracks. High speed is of course a relative term. In some parts of the world high speed may be in the 

upper 20’s. In other parts of the world, it may be in the high 30’s 

or 40’s. 

Mr. CUMMINGS. Mr. Barker, you looked like you wanted to say 

something. I know I didn’t address that to you. 

Mr. BARKER. No, I really didn’t, except that one of the problems, 

you see, as you go high speed, you start sucking up fuel in a huge 

way. The reason we, for example, had this set on about 20 knots 

is in that one little ferry that would carry, take 45,000 trucks off 

the road, you would also save 750,000 gallons of gasoline. And that 

for each ferry would be it. As you start ramping up that speed, you 

start sucking up a lot of fuel and increase your costs. 

Mr. FLOTT. And indeed, that is one of the things about the vessel, that is exactly right. In ships, you have this dramatic curve, 

this is a physics exercise, essentially you are shoving a solid mass 

through water. So as you go faster through water, you essentially 

drive up the amount of energy necessary to push that vessel 

through the water. That is one of the things we have spent our 

time solving, because you can’t just burn up more fuel. The idea 

was to find a way of moving freight faster but with more fuel efficiently. 

Now, the pentamaran hull, the vessel we have designed, essentially is designed to do that. And its performance, as fuel efficiency 

for dead weight ton at speed, is considerable. 

Mr. CUMMINGS. Yes, sir. Mr. Yonge. 

Mr. YONGE. Chairman Cummings, our group has been fortunate 

that we have worked for a number of different clients. We are a 

consulting group. So we have done financial modeling for a number 

of vessels based on a number of different hull designs. Recently, 

medium speed diesels have come into play. What we have found, 

what has been mentioned over here, speeds are achievable at very 

33

economical to what they would have been by using the type of engines we were thinking about five years ago. 

And it is all about what is needed. You might need a 30 knot vessel on one run between Jacksonville and New York and you might 

need an 18 knot vessel that would work just fine between a shorter 

haul. It is all a matter of shipper’s requirements, but mostly what 

the truck, what intermodal systems are today and we are trying to 

match those kinds of speeds and transit times. Many times ships 

can beat it and improve it. 

Mr. CUMMINGS. You all think, and I guess, Mr. Ward, you might 

be interested in this question. Do you all think that we have to 

have the States and metropolitan planning organizations involved 

in this process, and to what degree do you think they need to be 

involved? I see Mr. Flott, you are shaking your head. 

Mr. FLOTT. I will let Mr. Ward answer the question first, because 

you directed it to him. 

Mr. CUMMINGS. Did you want to respond to that? 

Mr. WARD. No. 

Mr. CUMMINGS. OK, Mr. Flott. 

Mr. FLOTT. One of the issues of course, any time that you shift 

traffic from an existing throughput area, I–95 to say, another one, 

you are going to increase traffic at certain places. So if you, for example, went from New London to Charleston as a long haul ferry 

service, you are going to move more traffic into New London by necessity. That traffic is passing along New London today anyway. 

You are not increasing the amount of traffic. But you are diverting it. And that in the case of the Long Island ferry will raise some 

concerns among locals when all of a sudden they are not used to 

seeing 53 foot trailers pulled by conventional tractors pulling 

through their main streets and going onto the ferry, which has generally been a car ferry. I think you should anticipate some 

pushback from that change in the traffic flow. 

Now, that is why, it seems to me, you need to involve the MPOs 

in these larger types of planning processes. But you are not going 

to get short sea shipping going at any extent if you don’t increase 

traffic in the seaports. They go together. 

Mr. CUMMINGS. Mr. Barker? 

Mr. BARKER. There has to be, the crisis isn’t here yet. You can 

still get a truck through New York. The time is coming when you 

are going to have to build another bridge, which is a billion dollars, 

they’re talking about, the TappanZee. So at some point, you are 

going to have something where the joint authorities, whether it is 

the port authority or the cities, say the trucks have to go over the 

ferry across New York, because it is the only way we can relieve 

the bridge traffic. 

So there will come a time when that happens. That time is not 

here now. Because you can still get the truck through New York. 

It is difficult, but it can be done. So that pressure hasn’t built to 

a point, but it will build that way. 

Mr. CUMMINGS. Mr. Margaronis, this is my final question. You 

talked about Title XI. I am wondering, what are the obstacles with 

regard to financing that you found and what, I mean, how do you 

go about trying to get around them? 

34

Mr. MARGARONIS. The obstacle right now is that the program is 

oriented toward people who are already in the program. There is 

a debt to equity ratio which makes it difficult for new entrants to 

come in. The program needs to be oriented more toward working 

capital, which would be a much better filter for the kind of loan 

loss problems that they are worried about. Mrs. Bentley asked me 

to point out that the failures in the program in recent periods have 

not been because they were commercially viable but because they 

were sponsored by Members of Congress. She said to say that, I am 

just telling you. 

[Laughter.] 

Mr. MARGARONIS. And she said that in the absence of that, the 

program has an excellent record. 

Mr. CUMMINGS. Well, thank you very much, Congresslady. 

Mr. MARGARONIS. What I would like to say is, we cannot have 

short sea shipping without the Title XI program. We need serious 

money. We have to have a billion dollars in there, we have to be 

talking about $20 billion of shipbuilding. Then the economies of 

scale for the shipbuilders will kick in. It will make it more attractive for the shippers to come into something that provides an avenue where there is a guarantee in place. The ports could be a partner in terms of doing the guarantees to provide some of the support 

that some of the gentlemen have mentioned has been lacking. It 

would allow shipyards to get financing for upgrades, which they 

will need to do if you are going to start talking about the types of 

ships that we are talking about. 

Finally, what I think is critical, and it was germane to your previous question, we need to have the ports coming in here as partners, especially the smaller and shallow draft ports that actually 

are the areas of the most growth and where the traffic mitigation 

issues are most clear. If we have money for terminal upgrades and 

helping them to deal with their traffic programs through the Title 

XI program, so they don’t have to go get it, we will make 

everybody’s job a lot easier. 

Mr. CUMMINGS. Mr. LaTourette. 

Mr. LATOURETTE. Thank you, Mr. Chairman. I just have a couple 

of follow-up questions. I assume all of you were in the room when 

we had the Federal panel talking about the harbor maintenance 

tax and the 24 hour rule and things of that nature. Mr. Ward, first 

to you, is it your observation or feeling that if we pass this H.R. 

981 and the harbor maintenance tax is waived on Great Lakes 

short shipping that you would be able to compete commercially 

with the people going over the bridge? 

Mr. WARD. We would be able to compete better. There are some 

other issues, like the APHIS fees, the animal plant services, they 

have new fees coming in that they are going to charge $5.25 per 

truck crossing the border. If you cross on the bridge, you pay $5.25. 

If you cross on the barge, the truck pays $5.25 and the vessel pays 

$490, this is for a flat-deck barge to go across the river. I think 

things like that make it difficult to be competitive and I think you 

have to resolve the Canadian issues that I mentioned earlier to 

make it cost competitive. 

But I think we can compete if you look at the cost of truck delay being $100 plus per hour. That cost of that truck sitting in line to 

35

get across a bridge is very high. We are able to compete with that 

if we have the regulatory framework which would allow those 

trucks to use us. 

Mr. LATOURETTE. My understanding is that your company has 

sort of a niche market with hazmat containers? 

Mr. WARD. Yes, sir. 

Mr. LATOURETTE. How far do you sail? 

Mr. WARD. One mile. 

Mr. LATOURETTE. One mile? 

Mr. WARD. We are the short in short sea shipping. 

[Laughter.] 

Mr. LATOURETTE. Mr. Barker, let me get to you, because I had 

understood you to say that while the harbor maintenance tax is important, there are other economies of scale that may not make this 

Great Lakes proposal commercially competitive. Aside from just 

needing to have full ships, is there anything else that gets in the 

way? 

Mr. BARKER. Well, it is just this transition is going to be very difficult in the sense that you are dealing with a whole bunch of 

trucking companies, all of whom are not used to either signing a 

long-term contract, I mean, we can finance the ferry across Lake 

Michigan if somebody just will sign up and say they are going to 

use it. 

But it is the whole system. I mean, as was said in testimony that 

a shipper calls a trucker and he gets it there as fast as he can, no 

fuss, no muss. You are talking about a whole systematic change. 

It has lots of advantages. It can relieve a lot of truck driving, which 

is an advantage to them. But it is a whole re-education of the system. We have a shipping system, the trucks have a trucking system. And getting them to mesh is one big job and should not be 

underestimated. 

Mr. LATOURETTE. Mr. Yonge, I will get to you in just a second. 

Where I live in Cleveland, it is a no brainer to sail 38 miles across 

Lake Erie as opposed to going up through Detroit or going around 

through New York. So to Mr. Ward’s plan about not being stuck 

in traffic, I don’t know the cost savings is to having that trucker 

be on the road for 16 or 18 hours, particularly given your—I bet 

you drove through Ohio on your way here, and that was an unpleasant experience. 

But it just seems to me that that makes sense. I guess it all 

comes down to what is the cost. I think truckers are just like everybody else, they want to know what it costs. 

Mr. Yonge? 

Mr. YONGE. I just wanted to add a little comment, we really have 

come a long way in short sea shipping. When we started over four 

years ago, started the initiative, and you have heard intermodal, 

intermodal. Really, short sea, once our group started talking to 

truckers, we call them logistics providers, third party logistics providers, the trucking companies and so on. The minute you start referring to intermodal, everybody wakes up and says, oh, that is 

great. Because originally they thought of us competitors. And that 

was a big resistance. 

We have done a number of financial modelings. It just matters 

on where the run is and how you approach it. When you say comVerDate 0ct 09 2002 11:18 Feb 15, 2008 Jkt 000000 PO 00000 Frm 00045 Fmt 6633 Sfmt 6633 P:\DOCS\34782 HTRANS1 PsN: JASON
36

pete, can we provide a competitive rate to the logistics providers, 

not so much compete with the truckers but be their partners. That 

is a very important part of it. 

Mr. LATOURETTE. Not so long ago, the truckers and the train 

guys were always at each other’s throats. We don’t have that any 

more. I had the retiring president of the Union Pacific in my office 

last year and he said, you know, I have been in the business for 

almost 50 years and I never thought I would be sitting here telling 

somebody we are sold out, but we are sold out. And now you have 

a great collaboration between the truckers and the trains. 

Mr. Flott? 

Mr. FLOTT. I think Mr. Barker and Mark had made the point. 

Ultimately creating a highway is really meshing the needs of truckers for what they need with the needs of a marine operator for 

what he needs or she needs. That is what we have really been 

working on. It is a Rubik’s cube. It is a matter of looking at the 

ship, it is looking at what the truckers want, it is kind of going 

back and forth between each side of this equation. 

But at the end of the day, if we can offer a compelling reason 

to use the service at a price that competes favorably with the highway, we will get the business. We build highways without having 

any sort of promise from users to use it. But the fact of the matter 

is, when we build it, they do come, and they come in droves. Because by the time we usually deliver those highways, they are already almost at capacity. 

Well, the advantage of the marine mode is we can get those assets in play at cost that compares favorably with our land-side infrastructure. 

Mr. LATOURETTE. Sure. I think the one difference, though, if I 

have a truck, I leave when I feel like leaving. If I have to wait for 

your ship to sail to take care of that————

The last question of Mr. Barker and Mr. Ward, maybe on the 

Great Lakes, is there, as we look to the future and installing some 

of these routes, if they can solve the Canadian Jones Act problem 

and other things, is there a distinction or a mode that has a better 

chance of success in the roll on/roll off technology or actually loading the containers? Either one of those better for what we are talking about in the Great Lakes? 

Mr. BARKER. Yes, I think it is very clear. Roll on/roll off really 

works. It keeps your costs down. Once you have to pick a container 

up, move it over, put it back on a chassis, you are talking, as 

Chairman Oberstar said, $400 or $500 or $600 or $700. If you can 

drive it off with your own driver, there is almost no cost. That is 

a significant cost. Your landing costs have to be kept to a minimum 

or you will never be competitive. 

Mr. LATOURETTE. And maybe Chairman Oberstar, we can talk 

about hours of service while the truck driver is enjoying the salt 

breeze rather than driving his truck, as well. 

Thank you, Mr. Chairman. Oh, I am sorry. 

Mr. WARD. On that idea of the cost, just to give an example, prior 

to the Iraq war there was a very large manufacturer in Detroit 

that came to us and bought a majority of our capacity. They bought 

it as a contingency in case the border became very backed up, that 

they could use the ferry service to get their critical freight across. 

37

So they have already paid for it. And there were severe backups, 

four or five hours. Those trucks waited in line, idling instead of diverting to the truck ferry, which had zero cost, because of those impediments. 

So I know the harbor maintenance tax is one on a list, but I 

think it is so high on that list and so important, this company paid 

for the crossing and instead waited in line four to five hours at 

$100 an hour because of the HMT. 

Mr. LATOURETTE. OK, thank you. 

Mr. FLOTT. And Mr. Chairman, to answer your question about 

the HMT, it is really the administrative difficulty of dealing with 

the tax, because the tax isn’t paid by the trucker, it is paid by the 

shipper. So now all of a sudden, the shipper has to deal with a 

whole set of paperwork that he doesn’t have to deal with if he simply uses a truck. 

Mr. CUMMINGS. Right. 

Mr. FLOTT. So you put an administrative impediment into the 

use, it is not the tax. It is the administration of dealing with the 

tax. 

Mr. CUMMINGS. I am glad you cleared that up. That is very significant. 

Mr. Margaronis, you seem like you are about to jump out of your 

seat. Go ahead. Briefly. 

Mr. MARGARONIS. Yes, sir. We do not agree that the ro/ro is necessarily the way to go. The reason for that is simply that a container ship is more compact, we could build it for about half the 

price. Also if you use modern terminal operations, you will be able 

to get similar, or actually you will get faster production. 

The other thing is that a lot of trucking companies don’t want 

to use their drivers for long periods of time. So what they want to 

do is they want to drive in and drive out. You can do that with a 

container ship. 

Putting that ro/ro on takes time, it takes manning. We just 

haven’t looked at that because we have the same container capability that we do in Europe and in Asia. If you saw the differences, 

I think you would find that there are some compelling reasons. 

Mr. CUMMINGS. Mr. Larsen. 

Mr. LARSEN. Thank you, Mr. Chairman. I will try to be brief in 

what I want to ask and give some time to folks. 

Mr. Barker, you talked about the crisis, that is, we are not at a 

crisis point. And in looking at the map that was supplied by one 

of you that showed Tote and Matson coming off the west coast, that 

screams out necessity. That is, we are not going to truck what 

Alaska needs from Washington State through Canada into Alaska. 

The infrastructure is not there to handle that. It has to go by 

water. Hawaii, from the west coast, for the larger bulk and obviously container, it is going to go by water. So it is a matter of necessity, which is why it tends to work, short sea shipping tends to 

work. 

In terms of crisis on I–5, putting $43 million investment with the 

thanks of some of the Federal dollars right now at the Pacific highway crossing to separate passenger vehicle traffic from commercial 

truck traffic to get more utilization out of the Pacific highway 

crossing as well as the Blaine crossing. So we are not yet at a criVerDate 0ct 09 2002 11:18 Feb 15, 2008 Jkt 000000 PO 00000 Frm 00047 Fmt 6633 Sfmt 6633 P:\DOCS\34782 HTRANS1 PsN: JASON
38

sis, we are not waiting four to five hours to cross there, even 

though we tell folks, between Buffalo-Niagara and Detroit-Windsor, 

I forget which is number one and number two in terms of crossings. 

But Blaine will always be number three. It will never be two and 

it will never be four. The Blaine crossings will always be number 

three. But it is important for I–5, but we are not at a crisis point. 

So I was real interested, Mr. Flott, in your graphs. You make the 

economic case. It really is, it seems to me, short sea shipping is an 

economic case. There is not much beyond that. After talking to all 

the folks I have talked to in the last two weeks and hearing from 

you all, it is an economic case. That is all well and good, but I want 

to talk about the economic case that Mr. Margaronis talked about. 

What service are you talking about from Olympia, Port of Olympia 

to Seattle and Tacoma? 

Mr. MARGARONIS. We had actually had some discussions a couple 

of years ago. What we would do in that case is, we would probably 

use an inland waterway ship which would not be a sea-going ship. 

That would make it cheaper. What you would do is, you would do 

same principle for all of the ports. Your vessel would tie up behind 

the ocean carrier, you would drop the boxes directly onto the short 

sea ship and you go straight down to Olympia. And you can do that 

very, very efficiently. You don’t have the extra handling costs. And 

by the time they get those boxes out of either of those two ports, 

you would already be down there. 

So we would have speed, we would have competitive costs. Your 

fuel consumption is 50 percent on a per unit basis of what it is for 

the trucks. And you would save one ship, doing one turn a day, you 

could take 300 trucks off the road. So if you built a couple of them, 

you could take 1,000 trucks off the road for a fraction of what you 

are spending on doing that road widening. 

Mr. LARSEN. Mr. Flott, do you have a comment on that? 

Mr. FLOTT. I just wanted to make two comments. Number one, 

I don’t think there is an either/or situation here. I think we need 

feeder container ships, I think we need ro/ro ships. It is horses for 

courses in particular cases. So I didn’t want to make my comment 

about ro/ro vessels in the lake, that only use ro/ro, don’t use lifton/lift-off. We need both. The fact is the challenge is to get not hundreds of loads of trucks off the road, but hundreds of thousands of 

trucks off the road. 

There is not going to be one tool. In some markets, where speed 

is not as critical perhaps, and where the traffic will bear the handling at port terminals and we can make them more efficient. We 

have a difficulty here in the United States, because the 40 foot 

international container is not our domestic standard. We use a 53–

102. That is what our domestic trucking industry uses. It is what 

our domestic intermodal system uses. And we bring in 40 foot 

equivalent units and we have a lot of trans-loading, trans-shipping. 

And those units now, the steamship companies don’t want them 

going inland, because they are hard to get back. They don’t get 

used in domestic service. 

So these are the challenges of building domestic containerized 

cargo movements versus a highway trailer type movement that is 

more conducive to a roll-on/roll-off type configuration. They are two 

different trades. 

39

Mr. LARSEN. Thank you. 

Mr. CUMMINGS. Mr. Oberstar. 

Mr. OBERSTAR. This hearing is shaping up as the textbook definition of and guidepost for the future of interdependent transportation, or intermodal transportation. This is the best presentation, 

Mr. Chairman and Mr. LaTourette, that I have heard in a decade 

on the subject of intermodal and interdependent transportation. We 

are talking about short sea shipping, a relatively recent concept 

embraced by the Department of Transportation under Secretary 

Mineta’s leadership. 

But the combined testimony of this panel is really the textbook 

on interdependency and intermodal goods movement. It is the best 

and most thoroughly documented presentation I have read, and I 

have read an enormous amount of material. I want to thank each 

of the witnesses at the table, especially my good friend, Mr. Barker, 

who has been onto this issue for quite some time and has been an 

inspiration, frankly, for it. 

And to that point, on page 5 of Mr. Barker’s testimony in response I think to Mr. Flott’s, or completing Mr. Flott’s thought, he 

points out that in each voyage of a 1,000 foot vessel in the Interlake fleet, you carry the equivalent of 7,100 car unit trains or 2,800 

25 ton trucks. That is taking a lot of traffic off the highways and 

off the railways and a lot of abuse. 

Now, in our Committee, we have the collective responsibility for 

all these modes of transportation. And as I have watched over the 

last two decades, in fact, in 1987, I, as Chair of the Investigations 

and Oversight Subcommittee, held hearings on the future of transportation in the post-interstate Europe. We had witnesses then 

who forecast the coming collision of movement of goods and people 

on the Nation’s highways and the extraordinary growth of transportation in excess of population growth. If you look at the 20 year 

period, population has grown about 4 percent a year. But transportation has grown on an average of 14 percent, well over three times 

population growth. 

Futurists usually fall way beyond actual performance of their 

projected model. In transportation, futurists fall well short of actual demand. That is our challenge, is to think beyond the model, 

beyond current practice and not be limited by it. 

In today’s economy, there are a 1,400,000 rail cars moving by 

just our five major railroads. They need to replace 50,000 of those 

a year and add another 50,000. There are only three rail car manufacturers in the United States, they can’t keep up with the demands. They need to replace locomotives, build new ones. Because 

they haven’t invested over the last decade and a half, now they are 

making substantial profits, $4.5 billion net profit for the five major 

railroads last year. Now they have the money to invest in capital 

equipment and rail bed. But they are way short, way short of 

where they need to be. 

There are 7 million trucks, inter-city commercial truck vehicles. 

They cannot carry all the demand placed on them by our economy. 

They are asking the railroads to carry their trailers. The railroads 

are asking the trucking sector to carry more of the container traffic, because they can’t handle it all. That is not a formula for, it 

is gridlock. 

40

Maritime now can make its contribution. On the inland waterways, however, a round trip voyage by a barge tow from Clinton, 

Iowa to the world’s most important grain export facility, New Orleans, is 820 hours round trip. Why? Because those 1,200 foot barge 

tows have to be broken up at each lock, except for Alton, Illinois, 

into two smaller tows sent through separately, lashed together onto 

the next one. If we expanded the locks on the Mississippi River to 

1,200 feet, the five principal locks and the two on the Ohio and Illinois River system, then we can take up to 60 hours off that transit 

time. That means that our grain will move at lower cost into the 

international markets. 

If you look at Brazil, which is vigorously developing soybean sector in their agriculture, the point of export in Brazil, Sao Paulo, is 

1,200 miles further out into the Atlantic Ocean than New Orleans. 

More than 800 miles further out into the Atlantic Ocean than any 

east coast port of the United States. That means they have a four 

day sailing advantage or so over exports from New Orleans. Grain 

moves on as little as an eighth of a cent per bush in international 

markets. 

So if together we move to, as Mr. Barker said in his testimony, 

remove the obstacles that Government has placed in our way, we 

have failed to invest in our infrastructure, we have failed to upgrade our inland water system, we have failed, the Corps of Engineers over the last ten years has failed to dredge the interconnecting channels on the Great Lakes and the harbors on the 

Great Lakes, because we had high water and they didn’t need to 

do the dredging and now we have low water. And our ships, our 

vessels are going out 6,400 tons lighter than they would if the 

channels were dredged to the appropriate depth. That means higher cost to produce steel in Mr. LaTourette’s State. It means higher 

cost for goods shipped in the heartland of the United States. 

Why is all of this important? Because in the Great Lakes States 

we have 35 million people, we produce 40 percent of the Nation’s 

agriculture, one-third of the Nation’s industrial goods and 40 percent of the Nation’s export commodities, but we move less than 1 

percent of the containers. We can do better than that on the Great 

Lakes if we take the ideas that each of you has set forth and harness them into an initiative. 

Mr. Cummings is going to take the initiative on the harbor maintenance tax. We will develop the necessary legislative language, we 

will determine what the offsets are in this pay as you go,budget 

process that we Democrats have imposed on us and the Congress. 

It may be a great budget idea, I liked the old days when we just 

added to the deficit. 

[Laughter.] 

Mr. OBERSTAR. All right, we will pat ourselves on the back and 

be responsible, find the offset and then we will move that legislation. And we need to do it. We need to address the matter of, again, 

Mr. Barker cited the shoreside infrastructure. That is one thing I 

would like each of the witnesses to comment on, is what do we 

need, what do ports need in shoreside infrastructure to accommodate short sea shipping. Mr. Barker, since you raised it, I will ask 

you first. 

41

Mr. BARKER. The big issue we see, and it is not huge in terms 

of the operations that we are thinking of, is basically the bulkhead 

dock so you can accommodate roll-on/roll-off ships when they’re not 

around in every port. It is not big money but it is important money. 

Mr. OBERSTAR. And that is the role of the public sector. 

Mr. BARKER. Yes. 

Mr. OBERSTAR. There is a partnership here of the public sector 

and the private sector. The public sector does its job of being efficient and providing the infrastructure, the private sector will 

thrive. Do others have comments on that? 

Mr. MARGARONIS. We are going to need new container crane capability at the satellite ports. And we are going to need to look at 

some new designs for those terminals, because the existing terminal operations are 50 years old. And we are not using our space 

intelligently. One of the issues that we have not talked about much 

is the high impact of emissions at some of the major ports and the 

need to mitigate those with something that is more streamlined. 

Those ports are going to need new cranes. They are going to need 

better designs to move the boxes in and out, whether they are on 

a ro/ro basis or on a container basis. Those designs are available, 

but the ports don’t have the money for that. They are going to need 

help from somebody to get that. 

Mr. FLOTT. The ports we are looking at, Mr. Chairman, I would 

agree with Mr. Barker, it is a roll-on/roll-off, you need a parking 

lot by the sea, essentially. In our case, the scheduling is very important, because you are looking at a synchronized and quite highly timed operation to meet a schedule. So we would be working 

with ports to create private facilities, so that you actually have a 

private terminal and you can do the turnaround in those private 

terminals. But they are not big capital investments, generally. 

Mr. OBERSTAR. Mr. Yonge? 

Mr. YONGE. Mr. Chairman, in the studies that we have done, 

there are some secondary ports that are just waiting there for some 

capacity and some use. But keep in mind if you will that in some 

of the points a number of us have made here is that domestic cargo 

is really where the volumes are that is going to be a challenge to 

our transportation capability. All we need is a truck terminal. We 

don’t need customs, we don’t need immigration, we don’t need anything complicated. We just need, if you can imagine what a truck 

terminal is or a rail intermodal depot is, rather simple operations. 

That is all that is needed. It is not a lot of cost and there are places 

along the U.S. east coast, Gulf, west cost, that can be used. 

Mr. OBERSTAR. Mr. Ward? 

Mr. WARD. Chairman Oberstar, we use a brownfields site, and it 

is nothing more than a parking lot and we have customs on both 

sides. I think that is a model that can be followed. Another benefit 

is the security within the Great Lakes, because a new service 

would most likely become a border crossing, is you can have a higher level of security on short sea shipping that you cannot have at 

the fixed crossing. So I think that is an additional benefit. 

Mr. OBERSTAR. I have looked at several of the major intermodal 

containers moving from portside to rail and truck and truck to rail, 

and they are just beehives of activity. They can’t handle all of the 

pressure. The new size container vessels that I described a moment 

42

ago are going to unload more containers on our shores. We need 

to find, of course, in our high-tech economy, we have to find something to put into those empty boxes to ship back to the Pacific Rim. 

We are not doing a very good job of that, except for scrap iron and 

shredded paper. 

[Laughter.] 

Mr. OBERSTAR. But that is a matter for the private sector to figure out. We will do our part, and with your contribution, we will 

address these issues and list the energy of short sea shipping. 

I noticed, Mr. Margaronis, your recommendation of an infusion 

of capital into the Title XI guaranty program. 

Mr. MARGARONIS. Yes, sir. 

Mr. OBERSTAR. Elaborate on what you think might be a capitalization need. 

Mr. MARGARONIS. I think for what we are talking about, we 

should be talking about a billion dollars. I think we should be looking at a $20 billion shipbuilding program. The benefits that, we are 

talking about building, whether you go with a container ship or you 

go with a ro/ro ship, we are talking about ramping up to a production capacity we currently do not have. 

And we are not going to be able to do that without the financing 

mechanism. I think the good thing about the Title XI program is 

you are not going to need a taxpayer subsidy to operate these services. Most of them can be done privately and commercially. But the 

loan guarantee is a critical link here. And the banks and the financial institutions are going to be much more oriented toward getting 

involved if Title XI is back on track. 

Mr. OBERSTAR. Mr. Flott? 

Mr. FLOTT. Could I also suggest, I agree with Mr. Margaronis in 

one respect, but I also think the RRIF program, which under 

SAFETEA-LU was dramatically increased, is another model that 

should be looked at in combination with Title XI. I think we have 

already examples of financing systems, both Title XI and RRIF, 

that have proved their value. And the issue would be to see how 

perhaps an updating or a combination in creating an RRIF or Title 

XI type program for waterside might be in order. 

I would also want to point out one other thing, and I think, Mr. 

Chairman, you are right to point it out, and that is that we have 

this enormous system of inland waterways which had been starved 

of investment for many, many years. But the cargo that is choking 

our highways has never really moved in that system. It moves 

today from distribution centers to retail establishments and between assembly points and further assembly points. That is the 

highway traffic. That is really the dominant driver of our congestion, and we need to really look at these two issues in combination 

in parallel rather than as either-ors. 

Mr. OBERSTAR. Yes, you are quite right about that, I agree. Today’s economy needs the creativity and the energy and the contribution of all of the modes of transportation. 

Now, the Administration has done everything they could to choke the RRIF loan program. We increased it from $3.5 billion to $35 

billion in a bipartisan initiative in SAFETEA-LU. The Administration’s fiscal 2008 budget submitted just a week ago zeroes out the 

RRIF loan. Well, we are not going to stand for that. I have already 

43

made a pitch to the Budget Committee and the Appropriations 

Committee to restore the funds. The Title XI guaranty over the 

years I served on the Merchant Marine and Fisheries Committee, 

before it was dissolved and absorbed into, largely absorbed into the 

Public Works and Transportation—well, within Public Works and 

Transportation, now T&I, we have made over $11 billion in loan 

guarantees over the years and about $8 billion or $10 billion in 

construction differential subsidies and operating differential subsidies, and those largely went to the saltwater port operations. 

Mr. Barker, I think on the Great Lakes there may be two or 

three of the 1,000 foot ore carriers that benefitted from Title XI 

guarantees? 

Mr. BARKER. Yes, there were at least three. 

Mr. OBERSTAR. So we have not had our fair share on the Great 

Lakes of the Title XI guaranty. And we can do that authorization 

in this Committee and in this Subcommittee. And we will do that. 

We will move that ahead. We have to take leadership and responsibility and ownership of these issues, and this Committee is going 

to do that. 

Mr. MARGARONIS. That would be enormously helpful, Congressman. Enormously helpful. 

Mr. OBERSTAR. I am sure Mr. LaTourette will be in full partnership and agreement. The Lorraine Shipyards will be happy to see 

some of that money flow. 

[Laughter.] 

Mr. MARGARONIS. So would we. 

Mr. OBERSTAR. I yield back. I thank our witnesses for their patience, their contribution. I am sorry I couldn’t be here for your individual testimony. I had other problems, the cities and the highways and others to deal with. 

Mr. CUMMINGS. I want to thank all of you for being here. Your 

testimony has been extremely helpful and as I said at the beginning of the hearing, one of the things that Mr. Oberstar has emphasized is that we don’t need to be having hearings just to be having hearings. We are trying to get things done and solve the problems of the American people. This is a major one. It just has, no 

pun intended, a rippling effect. 

So you have heard the Chairman, and we are going to work to 

make as much happen as we possibly can in the time that we have. 

We just don’t want to be in the situation, as I said before, where 

10 years from now we are grappling with the same problems, or 

another group of Congresspeople are grappling with the problems. 

We really appreciate all of you. We appreciate you for driving 

again, so far, and hope that you all have a better trip back. Your 

father looks like he is in better shape than you. 

[Laughter.] 

Mr. CUMMINGS. Maybe this driving is good for him. 

Thanks a lot, and this hearing is called to an end. 

[Whereupon, at 12:32 p.m., the Subcommittee was adjourned.]

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