[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]


 
          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

                                   ____

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             COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

                 JAMES L. OBERSTAR, Minnesota, Chairman

NICK J. RAHALL, II, West Virginia    JOHN L. MICA, Florida
PETER A. DeFAZIO, Oregon             DON YOUNG, Alaska
JERRY F. COSTELLO, Illinois          THOMAS E. PETRI, Wisconsin
ELEANOR HOLMES NORTON, District of   HOWARD COBLE, North Carolina
Columbia                             JOHN J. DUNCAN, Jr., Tennessee
JERROLD NADLER, New York             WAYNE T. GILCHREST, Maryland
CORRINE BROWN, Florida               VERNON J. EHLERS, Michigan
BOB FILNER, California               STEVEN C. LaTOURETTE, Ohio
EDDIE BERNICE JOHNSON, Texas         RICHARD H. BAKER, Louisiana
GENE TAYLOR, Mississippi             FRANK A. LoBIONDO, New Jersey
JUANITA MILLENDER-McDONALD,          JERRY MORAN, Kansas
California                           GARY G. MILLER, California
ELIJAH E. CUMMINGS, Maryland         ROBIN HAYES, North Carolina
ELLEN O. TAUSCHER, California        HENRY E. BROWN, Jr., South 
LEONARD L. BOSWELL, Iowa             Carolina
TIM HOLDEN, Pennsylvania             TIMOTHY V. JOHNSON, Illinois
BRIAN BAIRD, Washington              TODD RUSSELL PLATTS, Pennsylvania
RICK LARSEN, Washington              SAM GRAVES, Missouri
MICHAEL E. CAPUANO, Massachusetts    BILL SHUSTER, Pennsylvania
JULIA CARSON, Indiana                JOHN BOOZMAN, Arkansas
TIMOTHY H. BISHOP, New York          SHELLEY MOORE CAPITO, West 
MICHAEL H. MICHAUD, Maine            Virginia
BRIAN HIGGINS, New York              JIM GERLACH, Pennsylvania
RUSS CARNAHAN, Missouri              MARIO DIAZ-BALART, Florida
JOHN T. SALAZAR, Colorado            CHARLES W. DENT, Pennsylvania
GRACE F. NAPOLITANO, California      TED POE, Texas
DANIEL LIPINSKI, Illinois            DAVID G. REICHERT, Washington
DORIS O. MATSUI, California          CONNIE MACK, Florida
NICK LAMPSON, Texas                  JOHN R. `RANDY' KUHL, Jr., New 
ZACHARY T. SPACE, Ohio               York
MAZIE K. HIRONO, Hawaii              LYNN A WESTMORELAND, Georgia
BRUCE L. BRALEY, Iowa                CHARLES W. BOUSTANY, Jr., 
JASON ALTMIRE, Pennsylvania          Louisiana
TIMOTHY J. WALZ, Minnesota           JEAN SCHMIDT, Ohio
HEATH SHULER, North Carolina         CANDICE S. MILLER, Michigan
MICHAEL A. ACURI, New York           THELMA D. DRAKE, Virginia
HARRY E. MITCHELL, Arizona           MARY FALLIN, Oklahoma
CHRISTOPHER P. CARNEY, Pennsylvania  VERN BUCHANAN, Florida
JOHN J. HALL, New York
STEVE KAGEN, Wisconsin
STEVE COHEN, Tennessee
JERRY McNERNEY, California

                                  (ii)

  
?

        SUBCOMMITTEE ON COAST GUARD AND MARITIME TRANSPORTATION

                 ELIJAH E. CUMMINGS, Maryland, Chairman

GENE TAYLOR, Mississippi             STEVEN C. LaTOURETTE, Ohio
RICK LARSEN, Washington              DON YOUNG, Alaska
CORRINE BROWN, Florida               HOWARD COBLE, North Carolina
JUANITA MILLENDER-McDONALD,          WAYNE T. GILCHREST, Maryland
California                           FRANK A. LoBIONDO, New Jersey
BRIAN HIGGINS, New York              TED POE, Texas
BRIAN BAIRD, Washington              JOHN L. MICA, Florida
TIMOTHY H. BISHOP, New York            (Ex Officio)
JAMES L. OBERSTAR, Minnesota
  (Ex Officio)

                                 (iii)

                                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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                       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 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 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 railroads, 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 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 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 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 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 maintenance 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--------
    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 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 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 
TEA-LU, 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 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 our Committee engaged energetically in the issue of 
short sea shipping. 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.
    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 domestically 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. Oberstar, 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 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, 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 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 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 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, DETROIT-WINDSOR 
 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 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 
Detroit-Windsor 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 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 service 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 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 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 
capability 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 
roll-on/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.
    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 price-service 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.
    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 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.
    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 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?
    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 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 compete, 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. 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 crisis, 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 lift-on/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.
    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.
    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.
    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 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 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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