Coast Guard: Agency Could Better Assess Its Impact on Arctic Capability Gaps and Is Exploring Icebreaker Acquisition Options
Published: 2016-07-12T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The retreat of polar sea ice in the Arctic, as reported by the U.S. National Snow and Ice Data Center, combined with an expected increase in human activity there, has heightened U.S. and other nations' interests in the Arctic region in recent years. Growth in Arctic activity is expected to increase demand for services such as search and rescue and maritime navigation support, which can be a challenge to provide given the harsh and unpredictable weather and vast distances that responding agencies must travel to reach the Arctic. The Coast Guard plays a significant role in U.S. Arctic policy and issued its Arctic strategy in May 2013.
This statement addresses the extent to which the Coast Guard has (1) assessed its Arctic capabilities and taken actions to mitigate any identified gaps, and (2) reported being able to carry out polar icebreaking operations. This testimony is based on a June 2016 GAO report. GAO reviewed relevant laws and policies and Coast Guard documents that detail Arctic plans, among other things. Detailed information on GAO's scope and methodology can be found in the June 2016 report.
section_title: What GAO Found
paragraphs: GAO reported in June 2016 that the U.S. Coast Guard, within the Department of Homeland Security (DHS), had assessed its Arctic capabilities and worked with its Arctic partners—such as other federal agencies— to mitigate Arctic capability gaps, including communications and training. Although Coast Guard officials stated that the agency's actions, such as testing communication equipment in the Arctic and conducting Arctic oil spill response exercises, have helped to mitigate Arctic capability gaps, the Coast Guard has not systematically assessed the impact of its actions on these gaps. GAO recommended in June 2016 that the Coast Guard develop measures, as appropriate, and design and implement a process, for systematically assessing the extent to which its actions have helped mitigate Arctic capability gaps. DHS concurred with GAO's recommendations, and the Coast Guard reported that it planned to develop specific measures for some of its Arctic activities and systematically assess how its actions have helped to mitigate the capability gaps for which the Coast Guard is the lead agency. While officials stated they are unable to unilaterally close capability gaps for which the Coast Guard is not the lead agency, assessing the impact of Coast Guard actions for such capability gaps would better enable the Coast Guard to understand the effectiveness of its actions and the status of all capability gaps, as well as plan its Arctic operations.
GAO's June 2016 report also found that the Coast Guard has been unable to fulfill its polar icebreaking responsibilities with its aging icebreaker fleet, which currently includes two active icebreakers. In 2011 and 2012, the Coast Guard was unable to maintain year-round access to the Arctic and did not meet 4 of 11 requests for polar icebreaking services. With its one active heavy icebreaker—which has greater icebreaking capability—nearing the end of its service life, the Coast Guard initiated a program in 2013 to acquire a new one and is working to determine the optimal acquisition strategy. However, the Coast Guard's efforts to acquire an icebreaker, whether by lease or purchase, will be limited by legal and operational requirements. In addition, current projections show that the Coast Guard is likely to have a 3- to 6-year gap in its heavy icebreaking capability before a new icebreaker becomes operational, as shown below. The Coast Guard is developing a strategy to determine how to address this expected gap.
Coast Guard's Heavy Icebreaker Availability and Expected Capability Gap, Present until 2030

section_title: Letter
paragraphs: I am pleased to be here today to discuss our June 2016 report on the  Coast Guard’s Arctic capabilities—including polar icebreaking—that is  being publically released at today’s hearing. The retreat of polar sea ice  in the Arctic, as reported by the U.S. National Snow and Ice Data Center,  combined with an expected increase in human activity there, has  heightened U.S. and other nations’ interests in the Arctic region in recent  years. Diminishing sea ice has made some Arctic waters navigable for  longer periods and, as a result, may contribute to new economic  opportunities in commercial shipping, tourism, and commercial fishing,  among other activities. Growth in Arctic activity is expected to increase  demand for services such as search and rescue and maritime navigation  support, which can be a challenge to provide given the harsh and  unpredictable weather and vast distances that responding agencies must  travel to reach the Arctic. U.S. interest in the Arctic was further  heightened in anticipation of the United States taking over the  chairmanship of the Arctic Council—a voluntary intergovernmental  forum—in 2015.
My statement today summarizes selected findings from our June 2016  report, and addresses the extent to which the Coast Guard has (1)  assessed its Arctic capabilities and taken actions to mitigate any identified  gaps, and (2) reported being able to carry out polar icebreaking  operations. To conduct this work, we reviewed relevant laws and  policies, and Coast Guard documents that detail its Arctic plans, and  interviewed officials from the Department of Homeland Security (DHS)  and the Coast Guard, as well other federal agencies involved in Arctic  issues. We also conducted a site visit to Alaska and interviewed officials  from the Coast Guard, state and local government entities, native village  corporations, and private or nonprofit organizations. These observations  are not generalizable, but provided insights on Coast Guard activities.  More detailed information on our scope and methodology can be found in  our June 2016 report. Our work was performed in accordance with  generally accepted government auditing standards.
With this heightened Arctic focus, various strategies and policies have  been released by the White House and other federal entities to  supplement long-standing U.S. Arctic policy. For example, the White  House issued the National Strategy for the Arctic Region in 2013 and its  corresponding implementation plan in 2014, and the White House  National Ocean Council issued the National Ocean Policy Implementation  Plan in April 2013 which specifically identifies Arctic issues. To  coordinate the actions of federal entities involved in the Arctic, the White  House established the Arctic Executive Steering Committee in January  2015 and tasked it with shaping priorities, providing strategic direction,  overseeing implementation of the National Strategy for the Arctic Region,  and ensuring coordination of federal activities in the Arctic, among other  things.
The U.S. Coast Guard, within DHS, plays a significant role in U.S. Arctic  policy and issued its corresponding Arctic strategy, which seeks to  support national policy, in May 2013. According to the Coast Guard, the  development of its strategy was guided by the National Strategy for the  Arctic Region and the National Ocean Policy Implementation Plan, as well  as key presidential directives, executive orders, and other national  strategies. In December 2015, the Coast Guard issued the  implementation plan intended to operationalize its Arctic strategy within  existing resources. We reported in June 2016 that the Coast Guard was  developing a web-based tool to track the status of its Arctic  implementation plan, as well as the status of its Arctic-related  responsibilities under other national strategies, presidential directives,  and service directives. Coast Guard officials stated that they anticipate  finalizing the web-based tool for management approval by October 2016.
Since 2008, the Coast Guard has conducted an annual operation in the  Arctic (now known as Operation Arctic Shield). Coast Guard officials  stated that Arctic Shield is a seasonal surge operation designed to help  the Coast Guard learn how to operate in this increasingly active region.  Arctic Shield is intended to provide the Coast Guard with the opportunity  to (a) perform Coast Guard missions and activities, (b) advance maritime  domain awareness, (c) broaden partnerships in support of Coast Guard  Arctic operations, and (d) enhance and improve preparedness,  prevention, and response capabilities in the Arctic. In addition to the  aircraft, cutters, and personnel that are deployed for Arctic Shield, the  Coast Guard has also carried out the nation’s polar icebreaking needs  with its fleet of three polar icebreakers—the Polar Star, Polar Sea, and  Healy—of which just the Polar Star and Healy are currently active, as  shown in figure 1. The Polar Star and the Polar Sea are heavy polar  icebreakers and the world’s most powerful non-nuclear icebreakers. The  Healy is a medium icebreaker that primarily supports Arctic research.  However, the Healy cannot operate independently in Antarctic ice  conditions or ensure timely access to some Arctic areas in the winter.
We reported in June 2016 that various requirements drive the Coast  Guard’s icebreaking mission responsibilities which are based in statute,  presidential directive, strategies, and interagency agreements. For  example, the goals and activities set forth in the National Strategy for the  Arctic Region and the 2009 presidential directive on the Arctic region  drive the Coast Guard’s need to maintain the ability to project a sovereign  presence in the Arctic—a standard which requires the use of a polar  icebreaker at certain times when seasonal ice covers large portions of the  Arctic region. The Coast Guard’s icebreaking responsibilities are also  derived from interagency agreements that commit it to providing  icebreaking services to other departments and agencies in support of  various strategic and scientific missions—including national defense.  For example, under a 2010 Memorandum of Agreement between the  Coast Guard and the National Science Foundation, the Coast Guard  agreed to provide polar icebreaker support to conduct the resupply of  McMurdo Station to support the U.S. Antarctic program and to conduct  research in the Antarctic. Appendix I provides a selection of the laws  and policies that are cited as sources for the Coast Guard’s need to  maintain polar icebreaking capability.
subsections: section_title: The Coast Guard Has Assessed Its Arctic Capabilities and Taken Actions to Mitigate Gaps but Has Not Systematically Assessed Its Progress
paragraphs: In our June 2016 report, we found that although the Coast Guard had  assessed its Arctic capabilities and worked with its Arctic partners—such  as other federal agencies— to carry out actions to help mitigate Arctic  capability gaps—it had not systematically assessed how its actions have  helped to mitigate these gaps. Specifically, we reported that the Coast  Guard had assessed its capability to conduct its Arctic missions and had  identified various capability gaps, primarily through two key studies. The  capability gaps identified in these reports—which Coast Guard officials  confirmed remain relevant and highlighted in their Arctic strategy—include  (1) communications, (2) Arctic maritime domain awareness, (3)  infrastructure, (4) training and exercise opportunities, and (5) icebreaking.  These gaps are similar to the ones we identified in 2010.
According to Coast Guard officials, through the agency’s role in  implementing the various Arctic strategies and implementation plans, the  Coast Guard has taken actions, along with its Arctic partners, that have  helped to mitigate capability gaps. For example, the Coast Guard is the  lead agency for implementing the strategies’ tasks related to enhancing  Arctic maritime domain awareness. In addition, Coast Guard officials  reported that they utilize the annual Arctic Shield operations as the  primary operational method to better understand the agency’s Arctic  capabilities and associated gaps and to take actions to help mitigate  them. For example, during Arctic Shield operations, the Coast Guard  tested communications equipment belonging to the Department of  Defense—extending communications capabilities further north than  previously possible—and conducted Arctic oil spill response exercises.
However, we found in our June 2016 report that the Coast Guard had not  systematically tracked the extent to which its actions agency-wide have  helped mitigate Arctic capability gaps. Coast Guard officials attributed  this, in part, to not being able to unilaterally close the gaps. While fully  mitigating these gaps requires joint efforts among Arctic partners, the  Coast Guard has taken actions in the Arctic that are specific to its  missions and has responsibility for assessing the extent to which these  actions have helped to close capability gaps. Standards for Internal  Control in the Federal Government provide that ongoing monitoring  should occur in the course of normal operations and should help ensure  that the findings of reviews, such as the capability gaps identified in the  previously mentioned reports, are resolved. As a result, we  recommended in our June 2016 report that the Coast Guard develop  measures, as appropriate, and design and implement a process for  systematically assessing the extent to which its actions have helped  mitigate Arctic capability gaps.
DHS concurred with our recommendations, and in response, the Coast  Guard reported that it planned to develop specific measures for some of  its Arctic activities and systematically assess how its actions have helped  to mitigate the capability gaps for which the Coast Guard is the lead  agency, such as icebreaking capacity. We believe that these actions, if  implemented, will help the Coast Guard better understand the status of  these capability gaps and better position it to effectively plan its Arctic  operations. However, we continue to believe that it is important for the  Coast Guard to also systematically assess how its actions affect Arctic  capability gaps for which it is not the lead, such as communications.  Although the Coast Guard may not be the lead for these gaps, assessing  the impact of Coast Guard actions for such capability gaps would better  enable the Coast Guard to understand the effectiveness of its actions and  the status of all capability gaps. Also, as these gaps may affect its Arctic  missions, this knowledge may be helpful to the Coast Guard in planning  its operations.
section_title: Coast Guard Has Been Unable to Fulfill All Polar Icebreaking Operations and Is Taking Steps to Begin Icebreaker Acquisition
paragraphs: Our June 2016 report found the Coast Guard has been unable to fulfill  some of its polar icebreaking responsibilities with its aging polar  icebreaking fleet, and had efforts underway to acquire a heavy  icebreaker—which has greater icebreaking capability than a medium  icebreaker. Specifically, in 2011 and 2012 when its heavy icebreakers  were not active, the Coast Guard was unable to maintain assured, year- round access to the Arctic and did not meet 4 of 11 requests for polar  icebreaking services. The Coast Guard reported that increased heavy  icebreaking capacity is needed to fully meet requirements in the Arctic  and Antarctic regions. A 2010 Coast Guard-commissioned study found  that at least six icebreakers—three heavy and three medium—would be  required to carry out the Coast Guard’s statutory missions, if the Coast  Guard were to fully accomplish all of its polar icebreaking  responsibilities. Recognizing the fiscal challenges posed by such a  request, Coast Guard officials have stated that obtaining a minimum of  two heavy icebreakers is needed to at least maintain the fleet’s self- rescue capability in the event one vessel became beset in ice—a  capability the Coast Guard does not currently have.
We also found that the Coast Guard initiated a program in 2013 to  acquire a new heavy icebreaker to maintain polar icebreaking capability  after the Polar Star’s projected service life ends between 2020 and 2023.
Currently, the Coast Guard is working to determine the optimal acquisition  strategy. To move forward with the acquisition process, the Coast Guard  would need to receive funding for an icebreaker—which, according to a  2013 preliminary estimate, would be about $1.09 billion—and ensure that  a U.S.-based commercial shipyard would be able to build the vessel.  For many years, the Coast Guard’s annual acquisition budget has been  allocated primarily to other projects. The President’s fiscal year 2017  budget request outlined plans to accelerate the acquisition process for a  heavy icebreaker, so that production activities could commence by  2020.
Various factors limit the options available to the Coast Guard to maintain,  or increase, its icebreaker capacity. The Coast Guard has reported that  the long-term lease of a polar icebreaker is unlikely to result in cost  savings when compared with a purchase. Specifically, we reported in  June 2016 that two key factors limiting the Coast Guard’s options for  acquiring icebreaking capacity are the lack of an available icebreaker that  meets agency and legal requirements, and the total cost that would be  associated with a long-term lease.
Availability. The Coast Guard reported that no existing heavy  icebreakers were available to lease or purchase that met both its legal  and operational requirements. Specifically, to meet legal  requirements, the Coast Guard would need to either purchase or  demise charter the icebreaker, as legal requirements associated  with several Coast Guard missions prohibit a short-term lease.
Specifically, under federal law, to be capable of conducting all of its  statutory missions, the Coast Guard must use a public vessel, which  federal law defines as one that the United States owns or demise  charters. For example, federal law states that the Coast Guard’s  Ports, Waterways, and Coastal Security Mission may be carried out  with public vessels or private vessels tendered gratuitously for that  purpose. Further, federal law provides that no Coast Guard vessel  may be constructed in a foreign shipyard. According to the Coast  Guard, besides the Polar Star and the Polar Sea, the only existing  icebreakers powerful enough to meet the Coast Guard’s operational  requirements were built in and are owned by Russia and would not  comply with this legal requirement.
Budgeting and Total Cost. Budget requirements also affect the  Coast Guard’s ability to acquire an icebreaker. For example, Office of  Management and Budget (OMB) guidelines require federal agencies  to acquire assets in the manner least costly overall to the government.  Specifically, for a large acquisition like a heavy icebreaker, OMB  Circular A-94 requires the Coast Guard to conduct a lease-purchase  analysis based on total lifecycle costs of the asset. To proceed with  a lease, the Coast Guard would need to show that leasing is  preferable to direct government purchase and ownership. Budget  scorekeepers—specifically, OMB, the Congressional Budget Office,  and the House and Senate Budget Committees—score purchases  and capital leases at the outset of the acquisition. A 2011  preliminary cost analysis prepared for the Coast Guard indicated that  the lease option would be more costly to the federal government over  an icebreaker’s expected 30-year service life. According to this  analysis, the prospective ship owner’s profit rate would increase the  overall expense as this profit rate is priced into the lease, such that  government ownership would be less costly in the long run.  Moreover, because a demise charter requires the lessee to operate  and maintain the vessel, the Coast Guard would not be able to  outsource crewing or maintenance activities to reduce its operating  costs. Previous GAO work on the question of leasing versus buying  an icebreaker identified important assumptions in comparing the costs  to the federal government and suggested that outright purchase could  be a less costly alternative than a long-term vessel lease. Assuming  that the cost of building and operating the vessel was the same under  both the buy and the lease scenarios, the cost advantage to  government purchase over leasing in our previous work was based on  two factors. First, the costs of private sector financing under a lease  arrangement—which were higher than the government’s borrowing  costs—could be expected to be passed on to the federal government  in lease payments, thereby increasing the vessel’s financing costs  over what they would be under outright government purchase.  Second, under a lease arrangement, an additional profit would accrue  to the lessor for services related to its retained ownership of the  vessel.
Anticipating a likely gap of 3 to 6 years in heavy icebreaker capability  between the expected end of the Polar Star’s service life between 2020  and 2023 and the deployment of a new icebreaker in 2026, we reported in  June 2016 that the Coast Guard is developing a bridging strategy, as  required by law, to determine how to address this expected gap (see fig.  2).
We reported in June 2016 that the Coast Guard has not determined the  cost-effectiveness of reactivating the Polar Sea, and that a Bridging  Strategy Alternatives Analysis will assess and make recommendations on  whether to reactivate the Polar Sea and whether to further extend the  service life of the Polar Star. Coast Guard officials said that they have not  established a completion date for this report, but do not anticipate a final  decision on the Polar Sea before fiscal year 2017, after which they will  evaluate the cost-effectiveness of extending the Polar Star’s life, if  necessary.
In conclusion, the Coast Guard has made progress in assessing its  capabilities in the Arctic and taking steps to address identified capability  gaps, but the Coast Guard could do more to systematically determine the  progress it has made in helping to mitigate these various gaps. Further,  several factors exist that affect the Coast Guard’s options for acquiring a  new icebreaker, including both legal and budgetary considerations that  suggest a purchase of an icebreaker may be preferable to a long-term  lease. Regardless of the acquisition approach, there is a strong likelihood  of a 3 to 6 year gap in heavy icebreaking service, which underscores the  need for the Coast Guard to move forward with its bridging strategy.
Chairman Hunter, Ranking Member Garamendi, and Members of the  Subcommittee, this completes my prepared statement. I would be  pleased to respond to any questions that you may have at this time.
section_title: Contacts and Staff Acknowledgments
paragraphs: If you or your staff have any questions about this testimony, please  contact Jennifer Grover at (202) 512-7141 or groverj@gao.gov. Contact  points for our Offices of Congressional Relations and Public Affairs may  be found on the last page of this statement. Individuals making key  contributions to this testimony include Dawn Hoff (Assistant Director),  Tracey Cross (Analyst-in-Charge), Chuck Bausell, Linda Collins, John  Crawford, Michele Fejfar, Laurier Fish, Eric Hauswirth, Carol Henn,  Susan Hsu, Tracey King, Jan Montgomery, Jillian Schofield, Katherine  Trimble, and Eric Warren.
section_title: Appendix I: Selected Polar Icebreaking Authorities and Mandates
paragraphs: Description  Requires the Coast Guard to, in part, establish, develop, maintain, and operate  icebreaking facilities on, under, and over the high seas and waters subject to  the jurisdiction of the United States; and, pursuant to international agreements,  requires the Coast Guard to develop, establish, maintain, and operate  icebreaking facilities on, under, and over waters other than the high seas and  waters subject to the jurisdiction of the United States.
Requires the President to facilitate planning for the design, procurement,  maintenance, deployment, and operation of icebreakers as needed to support  the statutory missions of the Coast Guard in the polar regions by allocating all  funds to support icebreaking operations in such regions, except for recurring  incremental costs associated with specific projects, to the Coast Guard.
Authorizes the Coast Guard to maintain icebreaking facilities.  Requires the Coast Guard to conduct such oceanographic research, use such  equipment or instruments, and collect and analyze such oceanographic data,  in cooperation with other agencies of the government, or not, as may be in the  national interest.
Authorizes the Coast Guard to provide and accept personnel and facilities,  from other federal and state agencies, to perform any activity for which such  personnel and facilities are especially qualified and as may be helpful in the  performance of its duties, respectively.
Congress finds that the United States has important security, economic, and  environmental interests in developing and maintaining a fleet of icebreaking  vessels capable of operating effectively in the heavy ice regions of Antarctica.  The Department of Homeland Security is required to facilitate planning for the  design, procurement, maintenance, deployment, and operation of icebreakers  needed to provide a platform for Antarctic research.
Congress finds that the United States has important security, economic, and  environmental interests in developing and maintaining a fleet of icebreaking  vessels capable of operating effectively in the heavy ice regions of the Arctic.
Strategic policies  Implementation Framework for the National Strategy  for the Arctic Region (2016)
The Coast Guard is the lead agency for ensuring the United States maintains  icebreaking capability with sufficient capacity to project an assured Arctic  maritime access, supports U.S. interests in the polar regions, and facilitates  research that advances the fundamental understanding of the Arctic.
National Security Presidential Directive 66/Homeland  Security Presidential Directive 25 (NSPD-66/ HSPD- 25): Artic Region Policy (2009)
The Department of Homeland Security and other departments shall “reserve  the global mobility of United States military and civilian vessels and aircraft  throughout the Arctic region” and “project a sovereign United States maritime  presence in the Arctic in support of essential United States interests.”
Presidential Memorandum 6646: United States  Antarctic Policy and Programs (1982)
The Departments of Defense and Transportation (now Department of  Homeland Security) shall provide logistical support as requested by the  National Science Foundation to support the United States Antarctic Program.
Interagency agreements  Memorandum of Agreement between Department of  the Navy and Department of the Treasury on the  Operation of Icebreakers (1965)
Navy agreed to transfer all icebreakers to the Coast Guard, and the Coast  Guard agreed, among other things, to maintain and operate the U.S.  icebreaker fleet, to prepare for contingency or wartime operations in polar  regions, to assign icebreakers to the Navy’s operational control for seasonal  polar deployments, and to support scientific programs to the extent possible.
Memorandum of Agreement between Coast Guard  and National Science Foundation (2010)
The Coast Guard agreed to provide polar icebreaker support to conduct the  resupply of McMurdo Station to support the U.S. Antarctic program and to  conduct research in the Antarctic.
Memorandum of Agreement between the Department  of Defense and Department of Homeland Security on  the Use of U.S. Coast Guard Capabilities and  Resources in Support of the National Military Strategy  (2008/2010)
In ice-covered and ice-diminished waters, Coast Guard icebreakers are the  only means of providing assured surface access in support of the Department  of Defense missions. .
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