    [House Hearing, 111 Congress]
    [From the U.S. Government Publishing Office]

                             [H.A.S.C. No. 111-170]

      FISCAL YEAR 2011 NATIONAL DEFENSE AUTHORIZATION BUDGET REQUEST FOR
           OVERSIGHT OF THE ACTIVITIES OF THE MARITIME ADMINISTRATION

                                   __________

                                    HEARING

                                   BEFORE THE

               SUBCOMMITTEE ON SEAPOWER AND EXPEDITIONARY FORCES

                                     OF THE

                          COMMITTEE ON ARMED SERVICES

                            HOUSE OF REPRESENTATIVES

                         ONE HUNDRED ELEVENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                  HEARING HELD

                                 JULY 14, 2010

                                      ______

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               SUBCOMMITTEE ON SEAPOWER AND EXPEDITIONARY FORCES

                       GENE TAYLOR, Mississippi, Chairman
    SOLOMON P. ORTIZ, Texas              W. TODD AKIN, Missouri
    JAMES R. LANGEVIN, Rhode Island      ROB WITTMAN, Virginia
    RICK LARSEN, Washington              ROSCOE G. BARTLETT, Maryland
    BRAD ELLSWORTH, Indiana              J. RANDY FORBES, Virginia
    JOE COURTNEY, Connecticut            DUNCAN HUNTER, California
    JOE SESTAK, Pennsylvania             MIKE COFFMAN, Colorado
    GLENN NYE, Virginia                  THOMAS J. ROONEY, Florida
    CHELLIE PINGREE, Maine
    MARK CRITZ, Pennsylvania
                      Will Ebbs, Professional Staff Member
                      Tom Holly, Professional Staff Member
                      Elizabeth Drummond, Staff Assistant

                                C O N T E N T S

                                  ----------

                         CHRONOLOGICAL LIST OF HEARINGS
                                      2010

                                                                       Page

    Hearing:

    Wednesday, July 14, 2010, Fiscal Year 2011 National Defense
      Authorization Budget Request for Oversight of the Activities of
      the Maritime Administration....................................     1

    Appendix:

    Wednesday, July 14, 2010.........................................    23
                                  ----------

                            WEDNESDAY, JULY 14, 2010
      FISCAL YEAR 2011 NATIONAL DEFENSE AUTHORIZATION BUDGET REQUEST FOR
           OVERSIGHT OF THE ACTIVITIES OF THE MARITIME ADMINISTRATION
                  STATEMENTS PRESENTED BY MEMBERS OF CONGRESS

    Akin, Hon. W. Todd, a Representative from Missouri, Ranking
      Member, Subcommittee on Seapower and Expeditionary Forces......     3
    Taylor, Hon. Gene, a Representative from Mississippi, Chairman,
      Subcommittee on Seapower and Expeditionary Forces..............     1

                                   WITNESSES

    Matsuda, Hon. David, Maritime Administrator, Maritime
      Administration, U.S. Department of Transportation..............     4

                                    APPENDIX

    Prepared Statements:

        Akin, Hon. W. Todd...........................................    30
        Matsuda, Hon. David..........................................    31
        Taylor, Hon. Gene............................................    27

    Documents Submitted for the Record:

        [There were no Documents submitted.]

    Witness Responses to Questions Asked During the Hearing:

        [There were no Questions submitted during the hearing.]

    Questions Submitted by Members Post Hearing:

        [There were no Questions submitted post hearing.]

      FISCAL YEAR 2011 NATIONAL DEFENSE AUTHORIZATION BUDGET REQUEST FOR
           OVERSIGHT OF THE ACTIVITIES OF THE MARITIME ADMINISTRATION

                                  ----------

                      House of Representatives,
                           Committee on Armed Services,
             Subcommittee on Seapower and Expeditionary Forces,
                              Washington, DC, Wednesday, July 14, 2010.
        The subcommittee met, pursuant to call, at 1:53 p.m., in
    room 2212, Rayburn House Office Building, Hon. Gene Taylor
    (chairman of the subcommittee) presiding.

     OPENING STATEMENT OF HON. GENE TAYLOR, A REPRESENTATIVE FROM
          MISSISSIPPI, CHAIRMAN, SUBCOMMITTEE ON SEAPOWER AND
                          EXPEDITIONARY FORCES

        Mr. Taylor. The committee will come to order. Today, the
    subcommittee meets in open session to receive testimony from
    the Administrator of the Maritime Administration of the
    Department of Transportation.
        The Maritime Administration, or MARAD, has a variety of
    functions, but their principal charge is to ensure that the
    United States maintains a robust commercial fleet, along with
    well-trained mariners capable of domestic and international
    commerce that could be called upon in times of national
    emergency to provide transportation of equipment and cargo and
    other maritime services as needed.
        In addition to ensuring an operational U.S. fleet of
    privately owned commercial vessels, the Maritime Administration
    must also ensure effective domestic shipbuilding and ship
    repair facilities are available to build and maintain that
    fleet.
        Unfortunately, the nation has lost the entire world market
    share in major commercial shipbuilding. We no longer construct
    any large vessels for the international trade. The few medium-
    sized product tankers or container ships that have been built
    in this country in the last few years have been used
    exclusively in a protective coast-wide trade known as the Jones
    Act, or built with the expectation of a long-term charter to
    the Military Sealift Command, or the United States Navy.
        This total elimination of large commercial vessel
    construction has the additional negative effect of increasing
    the cost of our Navy ships. The shipyard overhead charges,
    instead of being spread among commercial and government
    construction, are all included in the Navy construction
    contracts because there is no commercial work in our major
    shipyards.
        The facts of this loss of ability to build large commercial
    vessels is not well known. I think many people would be shocked
    to learn that this nation, which relies on sea transport for
    our imports and exports, does not have a domestically produced
    fleet.
        We have a fleet of commercial vessels, some 80, all told,
    which participate in a Maritime Security Program, or MSP. The
    MSP [Maritime Security Program] pays a ship owner a subsidy,
    which this year is $2.9 million per vessel, to register the
    vessel in the United States and operate the vessel with an
    American crew. They engage in international commerce, but they
    agree to carry cargo for the United States government,
    typically the Department of Defense, when requested.
        Make no mistake, these MSP vessels are all foreign-built
    ships, and there is no current plan that I am aware of for any
    ship owner to source these vessels from domestic yards.
        This nation has a mechanism in place which is not being
    used for helping ship owners with financing of ship
    construction. The formal name of the program is the Guaranteed
    Maritime Loan Program that is commonly referred to as the Title
    XI Loan Guarantee Program. From its historical roots in the
    Merchant Marine Act of 1936, this program supports ship
    mortgages with the full faith and credit of the United States
    government. MARAD is the executive department tasked with
    overseeing this program. Unfortunately, for whatever reason,
    the previous administration decided to ignore this program and
    failed to request any funding to support new ship guarantees.
    Likewise, the current administration has also failed to request
    any funding to support this program.
        Without strong support from the President and the
    Department of Transportation, this program, which could create
    hundreds, if not thousands, of new jobs throughout the
    shipbuilding industrial base, will perish, and with it any hope
    this nation has to regain any viable market share in large
    commercial vessel ship construction.
        More than just the oversight of the program, I believe it
    is MARAD's responsibility to actively encourage current and
    potential ship owners to invest in the domestic maritime
    industry. I believe MARAD should be working with other
    departments within the Department of Transportation to
    coordinate efforts to maximize the use of domestic shipping,
    particularly shore-sea shipping.
        Seaborne transportation is the most efficient and most
    environmentally friendly method of moving cargo that exists.
    Imagine the number of long-haul 18-wheelers that could be taken
    off our highways if we only had a robust coast-wide container
    vessel transport system.
        I look forward to a discussion with the administrator on
    these issues. We have also asked the administrator to update
    the subcommittee on the findings and recommendations of the
    Blue Ribbon Panel which was convened by Secretary LaHood to
    make recommendations for capital investment and improvement at
    the United States Merchant Marine Academy.
        The Blue Ribbon Panel Report, ``Red Sky in the Morning,''
    recommends significant investment and process and policy
    changes to restore the infrastructure of the academy and, just
    as important, maintain the buildings and grounds once they are
    restored. I look forward to Administrator Matsuda's comments on
    all aspects of the academy.
        The Administrator has recently been confirmed by the Senate
    but has been serving as acting administrator and deputy
    administrator for some time. He has extensive experience in
    maritime issues, both on and off Capitol Hill. We are indeed
    fortunate to be able to find time for this hearing, because I
    believe that these very important issues facing our nation, and
    we should work together, both the congress and the
    administration, to solve them.
        Before I will call on Administrator Matsuda for his opening
    statement, I turn to my colleague from Missouri, the ranking
    member of this subcommittee, for any comments he would like to
    make.
        Mr. Akin.
        [The prepared statement of Mr. Taylor can be found in the
    Appendix on page 27.]

    STATEMENT OF HON. W. TODD AKIN, A REPRESENTATIVE FROM MISSOURI,
      RANKING MEMBER, SUBCOMMITTEE ON SEAPOWER AND EXPEDITIONARY
                                 FORCES

        Mr. Akin. Thank you, Chairman Taylor, and good afternoon to
    our witness. That is a good way to start a week after the
    Fourth of July break, ``witness'' as opposed to ``witnesses.''
        And today, we turn our attention to a little-noticed but
    vitally important part of the subcommittee's jurisdiction and
    oversight responsibility, the U.S. Maritime Administration.
    Even though the many issues and unmet requirements facing the
    U.S. Navy and Marine Corps consume the bulk of the
    subcommittee's time, I am glad that the chairman called for
    this hearing.
        U.S. and global economy are both utterly dependent on a
    robust commercial shipping network, and the U.S. economy is
    further buttressed by shrinking but resilient U.S. Marine
    Maritime Fleet. With global maritime competition growing ever
    fiercer and U.S. overseas commitments showing no sign of
    abating, the United States must maintain a strong merchant
    marine fleet as a key strategic enabler and economic engine.
    Unfortunately, most aspects of our merchant marine policy are
    reliant on some form of federal subsidies, which we seem to be
    providing on the cheap in some cases.
        I am a big supporter of less federal spending and fewer
    federal subsidies, but believe that we must invest, as
    necessary, to maintain a strong U.S. flagged merchant marine
    fleet. Today's program, including the Title XI Loan Guarantees
    for building new vessels, the Maritime Security Program and
    Voluntary Intermodal Sealift Agreement, or VISA; which provides
    subsidies to U.S. flag carriers who guarantee shipping
    availability for national security needs, various cargo
    preference laws, including 100 percent of defense cargo on U.S.
    flag vessels; and finally, training of ships' officers in a
    federal merchant marine academy and the six state maritime
    academies.
        While the hand of the federal government touches all of
    these programs, the cost has been relatively modest. Too
    modest, in fact, in the case of the Merchant Marine Academy.
    And so, echoing the same chairman's comments about the
    findings, particularly at the Kings Point facility, the U.S.
    Merchant Marine Academy, I likewise am interested in hearing
    about how we should proceed, and I believe that we must.
        Thank you, Mr. Chairman. I yield back.
        [The prepared statement of Mr. Akin can be found in the
    Appendix on page 31.]
        Mr. Taylor. Chair thanks the gentleman.
        The chair now recognizes, with my apologies, Administrator
    Matsuda, for butchering your name.

       STATEMENT OF HON. DAVID MATSUDA, MARITIME ADMINISTRATOR,
       MARITIME ADMINISTRATION, U.S. DEPARTMENT OF TRANSPORTATION

        Mr. Matsuda. Thank you, Mr. Chairman.
        Good afternoon, Chairman Taylor, Ranking Member Akin,
    members of the subcommittee. I am honored to appear before you
    to provide a general update on the Maritime Administration's
    activities to sustain the U.S. Merchant Marine. With your
    permission, I would like to submit my complete written
    testimony for the record and summarize it for you here.
        Mr. Taylor. Without objection, so ordered.
        Mr. Matsuda. I would also like to introduce those joining
    me here today, Deputy Administrator Orlando Gotay,
    Congressional Affairs Director Julie Hrdlicka, and two interns
    from the Maritime Administration, Mr. James Walsh and
    Midshipman First Class Aaron Cummings, who is fresh off duty on
    an APL international voyage.
        Mr. Taylor. Welcome to all of you.
        Mr. Matsuda. At the subcommittee's request, today my
    testimony will focus on national security sealift programs,
    shipbuilding programs, and operation of the U.S. Merchant
    Marine Academy in Kings Point, New York. Our agency's primary
    mission is to develop and maintain a viable and vital U.S.
    Merchant Marine. This service includes both commercial and
    government-owned vessels that are crewed by civilian merchant
    mariners.
        On the commercial side, our Maritime Security Program
    sustains a small, modern U.S. flag fleet of 60 commercial ships
    that trade internationally all with trained crews. Over the
    years, the Maritime Administration has worked with the
    commercial industry to provide the Department of Defense with
    access to more types of ships they need in this program.
        Together with the agency's cargo preference program, which
    ensures federally financed cargo is transported on U.S.
    vessels, this program helps ensure that commercial U.S. flag
    ships can compete on a more level playing field in
    international trade and will be available to our military when
    called upon.
        The Maritime Administration also owns, administers and
    operates the Ready Reserve Force, an aging fleet of 49
    government ships. We are working with our partners at the U.S.
    Transportation Command, or TRANSCOM, to develop a
    recapitalization plan so this fleet can continue to meet
    strategic mobility needs in the future.
        One option for refreshing part of the fleet involves
    designing a new marine highway vessel to operate in commercial
    service along America's coasts and waterways, yet be built to
    be useful to the military. Secretary LaHood, as well as some of
    our military colleagues, have advocated for developing
    America's marine highway as a potential for introducing these
    new military-capable commercial ships.
        Mr. Chairman, as you know, a strong shipbuilding industry
    is the backbone of seapower. Our Title XI Loan Guarantee
    Program helps modernize shipyards and provides key financial
    assistance to those looking to build ships in the U.S. Title XI
    has proven even more critical since the credit markets dried up
    in the current--or largely dried up--in the current recession.
        So financing many shipbuilding projects has supported
    approximately 2,400 direct shipyard jobs and 1,400 indirect
    jobs through Title XI. The Maritime Administration currently
    has $76.6 million in budget authority to cover the subsidy
    costs for new Title XI loans.
        This amount would support approximately $1.1 billion in new
    loan guarantees. And we are processing applications, five
    applications for new loan guarantees in excess of $1.5 billion.
    Our agency is also exploring avenues to provide federal credit
    assistance for smaller vessel construction projects, as well.
        Finally, let me turn to the operation of the U.S. Merchant
    Marine Academy in Kings Point, New York. Improving the profile
    and prestige of the academy is one of Secretary LaHood's top
    priorities.
        To respond to a recent advisory panel's recommendations to
    improve the academy's capital program, President Obama has
    requested $100 million for the academy in fiscal year 2011.
    This would double the school's capital budget. I note the
    committee has acted to authorize this level of funding, which
    we believe will be very helpful in making overdue improvements
    to facilities and providing new educational opportunities for
    midshipmen.
        Our agency is also working to address government
    accountability office recommendations concerning financial
    conditions at the school. These improvements in fiscal
    management and physical plant at the academy will help restore
    it to its place as a preeminent federal academy. Together with
    the six state maritime academies, which we provide funding and
    support for, these schools graduate 700 trained maritime
    officers each year.
        Mr. Chairman, as a whole, all of these programs support a
    U.S. merchant marine that has responded to two recent major
    disasters in an unparalleled manner. Nearly 1,000 U.S. merchant
    mariners participated in the U.S. response effort to the
    earthquakes in Haiti earlier this year. These skilled crews
    served on several maritime administration ships and at least 25
    commercial vessels.
        And the vast majority of the estimated 7,000 vessel
    flotilla involved in the Deepwater Horizon oil spill response
    are U.S. flag commercial vessels with U.S. citizen crews.
    America's men and women of the merchant marine continue to
    deliver, and we are proud of their work.
        I appreciate the opportunity to be here and will be happy
    to respond to any questions you and the members of the
    subcommittee may have. Thank you.
        [The prepared statement of Mr. Matsuda can be found in the
    Appendix on page 31.]
        Mr. Taylor. Thank you, Mr. Administrator. By previous
    agreement, we agreed to recognize Ms. Pingree first so that she
    could get on to her other duties.
        Ms. Pingree for five minutes.
        Ms. Pingree. Thank you very much, Mr. Chair. I greatly
    appreciate that.
        And thank you for your testimony. Appreciate having you
    here before us today. And thank you for the work that you are
    doing. I think particularly when you just mentioned, the work
    that had been done in Haiti and around the oil spill, I think
    it reminds people again and again of the importance of the
    maritime industry and the well-trained mariners that we have in
    this country, and the role and the impact that they have.
        As you probably know, I am fortunate to represent the state
    of Maine, so our identity is all about the sea, about people
    who go to the sea, about building ships, boats, going fishing.
    This is, of course, a very critical issue to us.
        Then I want to say one thing about the Title XI. I
    appreciate that the chair brought that up earlier and the
    importance of fully funding all the possible options here and
    making sure that the administration is fully committed to
    investing in building United States-based ships and ships in
    this country. We are losing our industrial capacity all too
    fast, and that is just extremely important.
        I have heard a little bit from people in the shipbuilding
    industry about some concerns about shifting the focus into
    small yards. I am fortunate enough to represent one of the
    bigger yards in this country, Bath Iron Works, as well as many
    small yards. But we want to make sure that the focus continues
    to fund the bigger ships in this country.
        But I have a second issue I want to take up with you and
    just put it on your plate. And I appreciate, again, the
    increased funding request for the Kings Point Academy, and I
    know the concerns that have been raised there. But I also come
    from one of the states that has a state maritime academy, Maine
    Maritime Academy in Castine, Maine.
        I live on Penobscot Bay. Castine actually happens to be on
    the other side of the bay from me, which is in the second
    congressional district, but I know Congressman Michaud and our
    senators would join me in their concern about the level of
    funding that is received by state maritime academies.
        We are proud of our tradition of training young people and
    people of all ages to go off to sea. I happen to live on an
    island, so I ride a ferry when I get home, and often talk with
    crewmen who have gone to school at the Maritime Academy. It is
    a great choice for young people in our state who have the
    opportunity to go to sea because of that training, but it is
    often an unfair burden on our state legislature and our state
    budget to fund all of the activities there.
        It is my understanding that 70 percent of the new merchant
    marine officers each year come from state academies, and yet
    about $15 million in funding goes to state academies as opposed
    to the money we spend on federal training of our maritime
    personnel.
        So I just want to talk a little bit, or at least put that
    on your plate, of the disproportionate share, of the importance
    of increasing the funding to our state maritime academies, of
    the role that they play, and we hope the increasing role. If we
    can increase shipbuilding, we would love to have more of a
    maritime highway and see more transport going in that direction
    instead of on our roads and bridges, which are already
    overtaxed.
        So let me just throw those things out there and let you
    chat.
        Mr. Matsuda. Thank you.
        First I want to thank you for your interest in the Maine
    Maritime Academy. Had I known, we had our--they were kind
    enough to host a conference called The Women On The Water
    Conference that the Maritime Administration co-sponsors last
    fall. And, you know, had I known, I would have gladly sent you
    an invitation to participate. It is a great opportunity to
    bring together a number of young women in the industry and
    others who are experienced and have really put their careers
    into it.
        Ms. Pingree. Well, thank you for that, and we are glad that
    you came to Maine. Appreciate that.
        Mr. Matsuda. Well, I understand the concern about the
    funding for the Maine Maritime versus our--we hear that a bit
    from some of the folks outside of Kings Point. Frankly, I hope
    it does not seem like we are playing favorites, but Maritime
    Administration has more of a direct role and responsibility in
    overseeing and operating the U.S. Merchant Marine Academy.
        By law, our relationship with the other schools is simply
    limited to supporting their activities for student incentive
    payments in which we can provide stipends or scholarships to
    their students who apply, and in exchange, we retain them as
    merchant marine reserve officers for a number of years after
    they graduate. Every one of the midshipmen at Kings Point that
    graduates remains in the Naval Reserve for six years following
    their graduation.
        The other thing that we can do with the state academies is
    we provide them with a training ship and a budget for fuel and
    maintenance costs. And we continue to do the best we can to
    work with each one of the schools and make sure that these
    students have an opportunity to get out on the water and get
    actual experience before they graduate and come into the
    maritime industry.
        But we are happy to--we are more than willing to look at
    other opportunities to help out, given, you know, whatever
    resources we are able to use.
        Ms. Pingree. Great. Well, I will definitely talk to you
    further about that, but thank you. Thank you for that.
        Mr. Taylor. Thank you, ma'am.
        We were going to recognize Mr. Akin. He has been called out
    of the room. So we will get back to the regular order.
        Mr. Ortiz.
        Mr. Ortiz. Thank you, Mr. Chairman.
        Thank you so much for joining us today and for giving us an
    insight into MARAD operations.
        What I really want to know is, what is the annual upkeep
    of--cost of the obsolete ships that MARAD has under its
    control? And how does MARAD plan to remove the rest of the
    obsolete ships in its current register? And specifically, what
    is the release plan for the rest of the ships moored in Suisun
    Bay? So maybe you can give us a little insight as to what you
    are doing to address that problem, sir.
        Mr. Matsuda. I am happy to. MARAD, I am proud to tell you,
    has, once again, a very robust ship disposal program. For a
    number of years, there has been a hiatus due to a pending
    lawsuit over the removal of ships from the Suisun Bay Reserve
    Fleet. And this is our site, our only site on the West Coast
    that, as of last year, had about 57 obsolete vessels that were
    slated for disposal.
        As of today, there are only 47 left. We have made very good
    progress in meeting our targets and schedules pursuant to
    agreements we have made with local officials there.
        Suisun Bay contains, I believe, all but one or two of the
    ships in our entire fleet that are slated for disposal. So that
    is really where our focus has been. I can tell you that most of
    the ships, I believe 9 of the 10 ships, have all been recycled
    in yards in Brownsville, Texas, and we hope to continue this
    robust pace so long as we have funding available.
        And I can tell you that, due to the lawsuit that, you know,
    prevented the previous administration from moving a lot of
    these ships, we have a current amount of carryover budget that
    we have been able to utilize and push these ships through. They
    have been cleaned in an environmentally responsible manner, in
    a shipyard in the Bay area, and towed all the way around the
    Panama Canal to the recycling sites in Brownsville.
        Mr. Ortiz. You know, and specifically now with the budget
    the way it is, when the Navy chose artificial reefing for the
    disposal of the USS Oriskany. The end result was extremely
    costly by the time you had to move--and I know we had a problem
    with California, because they did not want those ships to move
    because they would cause pollution. Well, they were causing
    pollution right there.
        So I know costs are very expensive, but when these people,
    especially in Brownsville--I think they paid for the moving of
    the vessel, and then they do disposal. And it works both ways,
    because you keep a lot of people working.
        And I hope that you can continue to do. You guys are doing
    a good job by, you know, releasing the ships to be disposed of
    and by breaking them up and putting people to work. And let me
    say that we appreciate that.
        So I hope that, by doing what you started to do, that you
    will be able to provide more jobs not only in my district but
    also in other districts.
        Mr. Matsuda. We do our best. There is a limited supply of
    recyclers around the country. Of the six certified recycling
    sites, four of them are in Brownsville, one is in Louisiana,
    and one in Virginia. But there are none on the West Coast, and
    that makes it difficult and certainly adds cost to the
    recycling of all the ships that we have out there. But we will
    do our best to make sure that we maintain an aggressive pace
    and a robust disposal program.
        I should also mention, the USS Kittiwake is a ship we have
    in the James River Reserve Fleet in Virginia that is slated for
    artificial reefing. The reefing costs have been paid for by the
    Cayman Islands government. They wanted to do this. They wanted
    to pay for it. It has provided work in U.S. shipyards to
    prepare the ship for reefing. And we were happy to work with
    them to be able to do that.
        Mr. Ortiz. Well, thank you so much.
        Thank you, Mr. Chairman.
        Mr. Taylor. In the continued absence of Mr. Akin, we are
    now going to recognize Mr. Critz for what I think is his first
    subcommittee meeting, and remind him that your predecessor, Mr.
    Murtha, was a very, very strong supporter of the Title XI
    program in his many years up here, and we hope you will follow
    in that tradition.
        Mr. Critz.
        Mr. Critz. Thank you, Mr. Chairman. And following in my
    former boss's footsteps, my question refers to the Title XI
    program.
        In looking through the documentation and the history of the
    program, I see that, in the testimony that you supplied, Mr.
    Administrator, that you have approximately $2.1 billion within
    your portfolio under the Title XI program and that, over the
    past I think it is 3 years, there has been no request for
    funding for the loan subsidy portion, just administrative
    expenses.
        And I know that, over the past 2 fiscal years, Congress has
    appropriated $70 million into the loan guarantee program, which
    I notice in your testimony should cover the six applications
    for loan guarantees that you have right now, which would cover
    $1.6 billion in loans, although there seems to be a half a
    billion dollars difference in what the amount will cover and
    what the requests are.
        But going further and following in the footsteps of the
    chairman on the importance of a robust shipbuilding economy
    here in the United States, I just would like to know that, if
    Congress had not put that $70 million into the program, what
    the implications would be if they had not added that funding.
    And then, you know, what would not have occurred if it had not
    been for that $70 million addition?
        Mr. Matsuda. Thank you, sir.
        I hate to speculate, but I can tell you that we currently
    have a $79 million available to us in credit subsidy. So I
    guess without the 70, we would still have $9 million available
    to leverage into, you know, a certain amount of loan guarantees
    for shipbuilding projects.
        Now, having said that, we do have a number of five
    applicants that are still working on their applications for
    Title XI assistance. These projects, they are massive. They are
    complex, and they require a bit of scrutiny and time to make
    sure that they are understood as to what it is that the
    government is getting into in terms of risk, and then we are
    able to make decisions on that.
        So it is hard to speculate, but I know that having that
    number out there, that extra $70 million, it signals to the
    industry that there will be continued support for shipbuilding
    by the federal government. And that is something that the
    customers can keep in mind as they are looking to recapitalize
    their fleet or build new ships. So from that perspective, I
    think it is important.
        Mr. Critz. Well, thank you. And, you know, looking through
    the documentation a little bit more, I noticed that you
    mentioned about the 13 defaults since 1993, and that, as you
    move forward, you are putting in, I guess, rules and
    regulations that will hopefully prevent further. But if you
    could, just brief a little bit on that topic as well, and then
    I yield back.
        Mr. Matsuda. Shipbuilding is a risky business. It is hard
    when you build a 25-, 30-year asset to know what is going to
    happen, you know, 5, 10 years down the road, much less 2 or 3.
    So some of these vessels certainly had--you know, when the
    market turned or the rates went up or down, they have been
    affected by--many businesses have been affected by, the up-down
    turns in the economy.
        What we have done is respond to a number of inspector
    general recommendations, dating back as far as 2003, to make
    sure that there is a consolidated process within the
    administration for considering credit applications where the
    government is asked to extend credit in the form of either loan
    guarantees or loans.
        So we are treated no differently than other credit programs
    at the Department of Transportation, where we are--basically we
    present information about each loan application to an internal
    kind of a credit council. This information is also passed along
    to the Office of Management and Budget. But by and large, there
    is definitely more focus on the risk to the government when it
    comes to these applications.
        Mr. Critz. Thanks.
        Mr. Taylor. Chair now recognizes the Ranking Member for
    whatever time he wishes to consume.
        Mr. Akin. Thank you, Chairman.
        In your testimony, Administrator, you mentioned that we
    doubled the budget for getting the U.S. Merchant Marine Academy
    back online and taking care of a lot of the things that had to
    be done there. Is that correct?
        Mr. Matsuda. That is correct. That is what President Obama
    has proposed for 2011.
        Mr. Akin. Okay, because what I have here in the numbers we
    have, it looks like $100 million, and it looks like before, you
    had $74 million in 2010, so that is about a 30 percent, not a
    doubling.
        Mr. Matsuda. I am sorry. To be clear, the doubling is for
    the capital budget, the amount that is going into the
    facilities to improve----
        Mr. Akin. Oh, just the capital part of it.
        Mr. Matsuda. Right.
        Mr. Akin. Yes. Okay.
        Is that going to be spent pretty much just to follow the
    recommendations of that blue ribbon committee, or have you--
    because that didn't seem like that was going to be enough to do
    what they needed to do.
        Mr. Matsuda. Well, we believe it is a good start. They have
    recommended more than just a list of projects. They are
    really--made some great recommendations as to how do we make
    sure that we maintain these facilities on a lifecycle basis so
    that we have a regular capital maintenance budget and we don't
    get into this position again.
        Mr. Akin. Because it seems like the choices are either we
    are going to do the job right or else we just close the place
    down, one or the other. But you don't want to leave it just an
    eyesore and a mess.
        So, I mean--and it seems like, if you need some money to
    get the thing kicked into shape--what, there is no hot water or
    something like that? I mean, it just has really been let go for
    a good many years, I assume.
        Mr. Matsuda. Yes, there are many maintenance issues at the
    campus. Sometimes our staff would describe them as daily
    emergencies or putting Band-Aids on things, and that is taking
    away the focus largely from moving these----
        Mr. Akin. But the facility, is that pretty close to West
    Point?
        Mr. Matsuda. It is out on Long Island. I guess----
        Mr. Akin. What is on Long Island?
        Mr. Matsuda. As the crow flies maybe but----
        Mr. Akin. Oh, no, because it is not up--so it is on Long
    Island somewhere. Okay. All right.
        So your plan is, is to follow, more or less, what the Blue
    Ribbon Panel was saying to do, or along those lines anyway.
        Mr. Matsuda. Well, we believe they made some very good
    recommendations. This was a panel of experts comprised of folks
    from around the government who have significant experience in
    facilities maintenance. So we got them together, and the
    Secretary asked them to come up with their recommendations on
    how do we get this facility on the right path. And we are
    certainly taking their recommendations to heart.
        Mr. Akin. What is your anticipation in terms of what you
    need for maritime officers? Do you see that growing a lot or
    basically kind of holding its own because of the basic laws
    that we have in this country, or how do you see that?
        Mr. Matsuda. Well, I would say, by and large, we have an
    aging workforce. It is tough to get especially younger
    generation enthused about working in the maritime industry. And
    that is part of our challenge at the Maritime Administration,
    is making sure that there is a future. You know, there has
    been, I think, any number of examples over the years where,
    when called upon, we have been short on experienced mariners
    and have had to really dip into the pool to come up with folks
    to crew our ships.
        Mr. Akin. But in answer to my question, do you anticipate
    an increase in demand, or is it going to kind of stay the same,
    or is it going to go down in terms of----
        Mr. Matsuda. Well, a lot depends on the economy. But, you
    know, regardless, we still have military requirements. But, you
    know, even if we have a down economy for a number of years--it
    is tough when you lose a trained mariner and they go do
    something else and find a living--make a living doing something
    else. Getting them back and getting them qualified and
    certified is very challenging.
        Mr. Akin. So that is a function of the economy, then,
    whether or not they decide to stay in, etcetera, etcetera.
        Mr. Matsuda. And we have seen that in terms of the
    graduates from our academies. You know, the ones where they are
    able to get on board a ship and take a shipboard job, they will
    usually do so. And when those opportunities aren't there, they
    are forced to take other jobs, you know, shore-side jobs.
        Mr. Akin. And then they may not come back for that point.
        Mr. Matsuda. Yes. True.
        Mr. Akin. Thank you, Mr. Chairman.
        Mr. Taylor. The chair thanks the ranking member.
        Couple of things, Mr. Matsuda. And again, my apologies for
    the mistake on your name early on.
        The recent hearings in the Transportation Committee on the
    Deepwater Horizon and other committees, was certainly an eye-
    opener to discover the rig that has just caused so much turmoil
    for so many people along America's Gulf Coast was made in
    Korea, flagged in the Marshall Islands, and the taxes go to a
    shell corporation in Switzerland. That rig was operating in the
    American exclusive economic zone.
        And one of the things that has come out of the bill that
    just recently passed the Transportation Committee would be for,
    in the future, those vessels to be U.S. flagged, U.S. owned,
    U.S. crewed, made in America.
        I mean, if you think about it, the absurdity of telling a
    Gulf Coast shipbuilder that not only can you not go fishing
    this summer, not only can you not take your kid to the beach to
    go swimming because of what has happened, but your mom or dad
    didn't even get the privilege of building that ship, that the
    United States Coast Guard did not inspect it, that a third
    party, hired by the Marshall Islands, did the inspection.
        And quite frankly, when that rig caught on fire and those
    people had to jump in the water, neither the Korean, the
    Marshall Islands, or the Swiss Coast Guard was anywhere to be
    found. Our nation picked up the initial cost of that disaster.
    The people who profited from building it, from registering it
    and the taxes from it, all went elsewhere.
        So I would hope that your organization would very
    aggressively pursue those requirements: U.S. built, U.S. owned,
    U.S. crewed. And quite frankly, the ownership should be
    American. We should not have to wonder about who is going to
    pay the bill at the end of the day if something goes wrong.
        Secondly--as far as ideas for the Title XI program, it has
    come to my surprise, not pleasantly, that the last four single-
    hulled tankers in America belong to the United States Navy. The
    last 12 single-hulled tankers in America belong to the United
    States Navy. And I think we could all imagine the ``60
    Minutes'' episodes, or etcetera, if one of those tankers, by
    some accident, hit a rock, ran over its own anchor, or any of
    the other things that cause single-hulled vessels to start
    leaking oil.
        I would hope that your organization would very aggressively
    look for someone who would be willing to use the Title XI
    program to replace those vessels sooner rather than later,
    given our already-stretched Navy budget.
        And then, lastly, just by way of a request, I would hope
    that you would keep a sharp eye on the Maritime Academy. I
    don't think that Admiral Joe Stewart was given a fair shake
    when he was dismissed. I very much support his efforts of
    himself and other members to have the Global Maritime and
    Training School on-site to help subsidize the cost of that
    academy, save money for the taxpayers.
        And quite frankly, I thought they were given a raw deal by
    the previous administrator in not recognizing what a good thing
    that they were doing for the nation, and instead being held
    under a dark cloud to that. So I think it is important that
    those maritime assets, we make the most of them. It is
    important that we find jobs for these young mariners.
        And making the best use of our own economic exclusive zone,
    I would hope that you would actively pursue that that being
    reserved for Americans.
        Would you care to comment on any of those things?
        Mr. Matsuda. Yes, sir.
        First of all, we would be happy to work with this
    subcommittee or the Transportation Infrastructure Committee on
    any pending legislation certainly involving the maritime
    industry. As you know, almost everything impacts whether or not
    we will have a sufficient merchant marine, and we are happy to
    provide our views and technical assistance.
        Second, on the Title XI program, I believe we actually have
    a number of double-hulled tankers that are part of pending
    applications or the existing portfolio. Whether or not the Navy
    decides to buy them, use them or charter them is somewhat out
    of our hands, but we are certainly happy to work with our
    partners in Transportation Command to get them to--at least
    make them aware of these opportunities of our Title XI program.
        And then last, with the GMATS [Global Maritime and
    Transportation School], this is one of the organizations at the
    Merchant Marine Academy, what we consider a non-appropriated
    fund entity. And what we are doing is taking an organized look
    at each one of these NAFI [Non-Appropriated Fund
    Instrumentality] entities and making sure that we understand
    what the relationship is between them and the federal
    government and make sure there is a clear defined level of
    accountability and that they are well run.
        And so, we should be able to make some recommendations this
    summer as to where we go from there with GMATS.
        Mr. Taylor. Okay. And again, for those people who don't
    live on Capitol Hill, NAFIs are Non-Appropriated Funds----
        Mr. Matsuda. Right.
        Mr. Taylor [continuing]. That, again, were being used to
    help subsidize the academy and keep the costs down to the
    taxpayer.
        Last thing I would encourage you to do, it has been a while
    since I checked on the number, but the last time I checked,
    there were about 60 vacancies at the Merchant Marine Academy
    for everything from squad-level officers to plumbers,
    electricians and teachers.
        I would certainly request that, to the greatest extent
    possible, you work with our Wounded Warrior programs at Walter
    Reed and Bethesda Naval Hospital to try to get some of those
    people who have already paid a terrible price for their service
    to our nation, to try, to the greatest extent possible,
    encourage them to come work or teach or serve at the academies.
    I think it would be a great way for them, too.
        I know that all the services have agreed to keep them
    within their ranks for a significant period of time as they
    make an orderly transition to the private sector. And I think
    this would be, for those who choose to do so, a great way to do
    that.
        Mr. Matsuda. Thank you, sir. I believe we have a good
    relationship with these programs. I will go back and make sure
    that it stands strong and that these folks are given
    opportunities.
        Mr. Taylor. And lastly, in the 20 years that I have been
    lucky enough to do this, I regret to say that I have not really
    seen an aggressive Maritime Administration. I hope that changes
    on your watch. I hope that you will come to us with lots of
    good ideas and challenge this committee to find a way to fund
    them. And so I will leave it with that.
        With that, the chair recognizes the father of a merchant
    mariner, Mr. Wittman.
        Mr. Wittman. Thank you, Mr. Chairman.
        Administrator Matsuda, thank you so much for joining us
    today. We appreciate it.
        And as the chairman said, I hail from what I like to call
    America's first district there in Virginia. We are the home to
    a great shipbuilding workforce there that builds great Navy
    ships and commercial ships, and also home to the James River
    Reserve Fleet, which is based out of Ft. Eustis there. So as
    you can see, we have great pride in our ships, and also we are
    glad to be an important element of the ready reserve fleet,
    making sure we have the ships needed whenever they need to be
    called up.
        There is one issue that I want to bring up that does
    concern me. I have been out to visit the James River Reserve
    Fleet a number of times. And always when I meet with the MARAD
    administrator there to get his thoughts on things, several
    things come up. One is the effort to make sure that we are
    disposing of those ships that are non-retention status as
    quickly as possible.
        And last November, one of those ships broke loose, broke
    off anchor, drifted away, caused about a half a million dollars
    in damage. Took some time to find it, believe it or not, a big
    ship. You would think you would be able to find out where it
    is. But anyway, took a little while to find it.
        Obviously caused some concern with folks in the region,
    caused concern with myself to make sure that we are doing all
    we can not just to secure the fleet, but to make sure those
    non-retention ships are getting taken care of.
        Secondly are the environmental issues. Obviously older
    ships there, lots of substances on board. I appreciate what
    MARAD is doing with the new ships that come into that reserve
    fleet and making sure that any hazardous materials on board are
    taken care of. But there are still some older ships there that
    do cause some environmental concerns if there are rust-throughs
    in the hull or if one breaks loose, as it did last year and
    comes ashore, and we have a break in the hull or something
    along those lines.
        If I understand it correctly, we have 15 non-retention
    ships, I believe, there in the James River Reserve Fleet. And
    based on that, can you tell me, what do you think the expected
    timeline is for further disposal of ships within the James
    River fleet? And has there been a risk analysis for any
    potential environmental impacts for the remaining ships there
    in the fleet, both the ready reserve ships and the non-
    retention ships?
        And can you tell me, if that environmental impact statement
    has been done, what are the potential impacts there, and what
    is MARAD expected to do about planning for those? What
    mitigation plans are maybe there, and where we are with the
    disposal of the 15 non-retention ships?
        Mr. Matsuda. Happy to, sir.
        First, the James River Reserve Fleet is definitely one of
    our valued sites. The Maritime Administration has made great
    progress over the years in reducing the number of ships. My
    first visit there was in 2002, where there were 80 or--a number
    of ships that were ready to go, and I was surprised to see last
    fall, in a quick trip there, that there were--down to 25 or
    less total.
        A number of those are--well, let me make this clear: none
    of them there are considered high risk. We use a risk-based
    process to determine nationwide where the highest risks are to
    the environment and make sure we dispose of those ships first.
        Because of all the great progress we had made in James
    River, there are none that are there currently. But we will
    continue to make sure that we dispose of those, of the non-
    retention ships, as best we can given the funding resources we
    have available.
        As far as the Monongahela, this is that Navy oiler that
    broke loose. After that happened and we were able to refloat it
    and put it back in the fleet, I had asked our Maritime
    Administration staff to put together a complete incident
    report, determine how it happened, and how we can take steps to
    prevent it from ever happening again.
        I believe it was just a week or two ago I was able to send
    you a copy of that report, or to your staff. I am happy to meet
    with you personally and discuss it, or come down to the James
    River fleet site, if you would like. If there are constituents
    with questions about it, we are happy to let folks know exactly
    what we are doing to make sure that doesn't happen again.
        Mr. Wittman. Very good, thank you. I would be interested in
    getting some of that information from you.
        Let me ask this, too. Just looking out in the future for
    the James River Reserve Fleet, tell me, where is the size of
    the fleet going in light of the closing of Suisun Bay? And can
    we expect more ships there, or is there a contingent plan for
    the closing there? Where do you see us managing our ready
    reserve fleet and non-retention ships based on that closing?
        Mr. Matsuda. Well, let me just make clear, we are not
    closing Suisun Bay. What we are doing is making a concerted
    effort to address all of the high-risk non-retention ships kept
    there.
        There are still--we keep these fleet sites up for a number
    of reasons, not just for the non-disposable ships, but we host
    a number of ships for the Navy and other federal services to
    make sure that there is a low-cost way to maintain these. And
    we can do that with a limited staff and a very expert staff.
    These folks know what to do to make sure they keep them, you
    know, in whatever status they need to be kept.
        So we are, you know, placing a great focus on Suisun Bay
    right now, given our resources. If we had additional resources,
    I am sure we would be able to move some of these other ships
    that are ready to go, as well.
        Mr. Wittman. Very good.
        One additional question. In light of what is happening
    there at Suisun Bay and you taking those ships and making sure
    you are managing the high-risk vessels that you have, I think
    there is also a concern, too, in looking at the companies that
    do the salvage work and obviously, having that infrastructure
    available for that. And as we know, there on the James River,
    as you said, you all have done a fantastic job in getting that
    fleet down to a very manageable size.
        With that, though, as we know in the regions, whether it is
    Texas, Virginia, California, there are folks that are in that
    business that we all know that we want to try to keep that
    industrial capacity there. Just like we do on the shipbuilding
    side, we want to make sure we have it also on the disposal
    side.
        Is there anything that you are doing to make sure that, as
    you make decisions about the disposal of those ships, that you
    keep in mind all of those companies that are doing that so we
    don't lose a company that may, because of a gap in ships
    available for disposal or may not be given an opportunity to
    maybe bid on a ship that comes from another area, to make sure
    we look at maintaining that industrial base for disposal so, as
    those ships are needed, we have that strategic dispersal, we
    will call it, of those disposal companies?
        Mr. Matsuda. Understood, sir, and that is something. When
    we first decided to focus on Suisun Bay, I wrote a letter to
    each of the certified recycling companies and kind of let them
    know our plan for the near future. And we maintain very good
    contact, I believe, with every one of the six recyclers. We
    want to make sure that they are available when we need them.
        But I hear you loud and clear, and we will certainly make
    sure we understand what the needs are to make sure they are
    able to stay available.
        Mr. Wittman. That will be great. As long as you stay in
    touch with them and let them know, and give them all ample
    opportunity if they want to bid on any of the ships that are
    coming out of these fleets for disposal, sometimes for those
    companies, as you know, even though it may cost them a little
    more in transportation costs, as long as they can keep people
    working so they can get to the next contract where they can
    actually have a ship that is closer by, that does, I think,
    everybody good.
        Mr. Matsuda. We are happy to take bids from anyone who can
    do the work.
        Mr. Wittman. That is great. That is great.
        Mr. Chairman, with that, I yield back.
        Mr. Taylor. The chair thanks the gentleman.
        Mr. Akin.
        Mr. Akin. No, thank you, Mr. Chairman.
        Mr. Taylor. Okay. Mr. Matsuda, I have noticed in the past
    couple of weeks a heck of a lot of misinformation being put out
    on the public airwaves, sometimes from people in elected
    office, but often from people just in the media, as far as the
    Jones Act. You know, they made a big deal of saying that vessel
    skimmers from around the world were not being allowed in
    because of the Jones Act, but where there is clearly an
    exemption in the Oil Pollution Act of 1990 just for this
    circumstance.
        And so, just for the record, are you aware of any vessels
    that were kept out of the oil spill recovery in the Gulf of
    Mexico because of the Jones Act?
        Mr. Matsuda. Absolutely not. We work very closely with the
    National Incident Command. We have a role in executing the
    Jones Act and understanding whether there are U.S. ships who
    can do the work before a foreign--as part of the process to
    understand whether a foreign flag oil spill response vessel
    could be used.
        So we certainly are dialed in, and I am not aware of any
    instance----
        Mr. Taylor. Okay.
        Mr. Matsuda [continuing]. Where a Jones Act has prevented a
    ship from being used where it is needed.
        Mr. Taylor. And so, just for clarification, the law that
    says that the towboats pushing gasoline barges up and down the
    Mississippi River, that Jones Act says it has got to be
    American made, American crewed, American owned. The repeal of
    the Jones Act would mean it could be Mexican made, Mexican
    crewed, Mexican owned. Is that correct?
        Mr. Matsuda. That is right.
        Mr. Taylor. That you could have crews and tugs from Somalia
    transporting goods from one American port to another. Would
    that be correct if the Jones Act were repealed?
        Mr. Matsuda. Theoretically, yes, sir.
        Mr. Taylor. Okay. Again, for the people on the other side
    of this building who are calling for the repeal, particularly
    given the immigration attitude of the American public right
    now, I would hope that they would keep that in mind when they
    try, once again, to repeal the Jones Act.
        Mr. Critz.
        Mr. Critz. Thank you, Mr. Chairman.
        Just a couple of points came up when we were talking about
    when the chairman noted that there is upwards, or he read that
    there are 60 vacancies at the Merchant Marine Academy. And
    having worked for Chairman Murtha for so many years, we put a
    lot of stock in promoting all of the academies to students
    throughout our district.
        And the Merchant Marine is one that we promote pretty
    heavily in our district, even though we are in the middle of
    Pennsylvania and we have one inland port. It is a very busy
    port, the Port of Pittsburgh, but, you know, we have really
    enjoyed sending our young men and women there and have really
    received good reports back.
        But, you know, I know that there have been some financial
    irregularities at the Merchant Marine Academy, and I would be
    curious to know if they have been remediated at this point.
        Mr. Matsuda. Now, thank you for the opportunity to talk
    about this.
        First of all, with the vacancies, we are extremely
    concerned. I can tell you, we have got a number of vacancies at
    the Maritime Administration as well. I think we are just at a
    time where a lot of folks are retiring, and we have a lot of
    positions unfilled. So we are working on both a staffing
    strategy as well as a succession planning strategy to really
    make sure that we can continue to function as folks retire.
        As far as the--as far as the need to--I apologize, sir. I
    did focus only on the first part of your question. Could you
    repeat the second part?
        Mr. Critz. Financial irregularity.
        Mr. Matsuda. There are a number of financial irregularities
    that were identified by the Government Accountability Office,
    57--I am sorry, 47 recommendations they made on how to improve
    financial controls and accountability. We are taking their
    recommendations very seriously. To date, I believe we have
    implemented 32 of those recommendations, and we expect to have
    all of them addressed by the end of this fiscal year.
        Mr. Critz. Well, that is good to hear. And one more
    question about the academy would be that, you know, of course
    such an esteemed academy, leadership plays a very important
    role. And I would be curious to know when a new superintendent
    will be appointed.
        Mr. Matsuda. I can tell you, we are using a very thorough
    process in ensuring that we find the very best candidates and
    the best leader for this important role. I hope to have an
    announcement shortly. You know, the federal hiring process is,
    as I am learning, very complex, so we are getting there. But we
    are pretty close. I hope we should have one before the recess.
        Mr. Critz. Well, thank you very much. If I could, just one
    more question.
        And this goes back to the shipbuilding, is that there is no
    request for the program that provides assistance to small
    shipyards. And, you know, the assistance to small shipyard
    program supplied grants and loans to improve infrastructure and
    efficiencies at small shipyards. I would be curious to hear
    your response as to why there are no requests in there and what
    the plan is, going forward.
        Mr. Matsuda. Well, we are continuing to monitor our small
    shipyard grant program. For every dollar that we are given, we
    are putting out the door and into the hands of these small
    shipyards to enable them to purchase the equipment they need or
    implement the worker training programs they need.
        But as you correctly pointed out, the President's request
    does not contain funding for additional funds for the program.
    We are still continuing to see the impacts of the money
    provided through the American Recovery and Reinvestment
    programs that we are monitoring those.
        Mr. Critz. Thank you. I have no further questions. I yield
    back.
        Mr. Taylor. Mr. Matsuda, my last question would be that my
    observation during the previous administration was that the
    Credit Council existed to deny every loan guarantee request,
    that it was there for no other reason than to say, ``No, no,
    no.'' Again, that is my observation, but I think it is pretty
    close to fact. So the question would be, is there something
    statutorily that needs to be changed in order to get this
    program going again, or is it something administratively that
    needs to be changed to get this program?
        Because it is an important program. The price of metals has
    dropped approximately in half in the past three years, great
    time to buy steel, great time to buy aluminum.
        We have 10 percent unemployment. We have a number of older
    vessels. I just identified 12 single-hull tankers that this
    nation owns that need to be replaced. So what recommendations
    would you have for us, if need be, or for your own department,
    if need be, to get this program going again?
        Mr. Matsuda. As far as I can tell, sir, the program is
    driven by the applicants. Somebody has got to have an idea and
    funding for a ship that they want to build before they come to
    us. As far as I could tell, given the current credit situation,
    Title XI is one of the best deals in town if you are trying to
    build a large vessel or sinking many millions of dollars into
    building a vessel.
        So the process is also largely driven by the applicant.
    Sometimes I have heard discussion about why it takes so long to
    get approval for one of these things and whether the Credit
    Council is the holdup, or what is the--is it MARAD.
        I can tell you that, usually in the past several
    applications that we have approved, the largest chunk of time
    it takes is waiting on an applicant to produce additional
    information about either the design of the ship, the market for
    which they are going to use it, you know, how they intend to do
    that.
        There is a fairly thorough process that is involved, and we
    do our best to try and make sure that the applicants understand
    up front, they need to get this information in and get it
    quickly. And we will process the application as soon as we can
    to make sure that it keeps moving and gets considered in a
    timely manner.
        I know usually, with the amount of money we are talking
    about, you know, time is a big difference in terms of what kind
    of market rates you can get on your loans. So we certainly keep
    that in mind, and we do our best to communicate with the
    applicants to make sure they understand what is expected of
    them.
        But I guess the best thing we could do to stimulate
    shipbuilding is to really make sure this economy turns around
    and that there is a need for more ships in the future to make
    sure it can carry the goods for America's economy.
        Mr. Taylor. How would you rank, in the order of importance,
    the functions of the Maritime Administration? What would you
    say is your most important function, second, and third?
        Mr. Matsuda. Well, we have got--probably making sure that
    we have a viable merchant marine is our overall goal. As we
    know, it is so critical to both the economy and the military,
    that that is probably singularly one of our largest areas of
    focus.
        Close second I would have to say is--and many of our
    programs tie into that goal--second I think would be to make
    sure that we have an efficient freight transportation system,
    of which water transport is such a key element of, making sure
    that folks understand, when they plan for future investments,
    what it means to how goods move through their district or state
    or through their country is important. So many of these freight
    flows are--they go between or over state lines or district
    lines, and lines between the metropolitan planning
    organizations.
        Really, the federal government's one of the only entities
    in the right place to understand what is going on at the
    national level. So that is something we take very seriously and
    been working with a number of ports around the country to try
    and understand what we can do to help improve the efficiency of
    the system.
        These are probably the top two. I would say a number of the
    programs that we have really do feed into whether we can
    sustain the number of skilled mariners or vessels we need in
    the U.S. to keep the merchant marine.
        Mr. Taylor. Okay. Any further questions from the panel? Mr.
    Wittman.
        Mr. Wittman. Thank you, Mr. Chairman.
        Administrator Matsuda, one other question. I know that we
    had just traded some conversations here about the Title XI
    program, making sure we look at all the different shipyards.
    Obviously, there is a need to make sure we are looking at our
    small- and medium-size shipyards.
        Let me ask this, though. I am hoping that that doesn't
    result in two different Title XI programs. I think we want to
    make sure that we are looking for opportunities for all of our
    yards. We want to make sure that capacity grows everywhere. But
    that means also to make sure we are not, you know, selecting
    one or the other.
        Another concern of mine is making sure that the terms and
    conditions on these loans are significant across all the
    different sectors, in other words making sure that we aren't
    having a different set of terms and condition for one size
    shipbuilder versus another. And again, this is to make sure
    that we are standing up and helping the entire shipbuilding
    industrial base.
        I just want to get your feedback on that element of the
    Title XI program to make sure that it is--we are doing
    everything we can to help all of our yards, just not picking
    out a particular segment.
        Mr. Matsuda. Thank you, sir.
        The Title XI program is really just--we look at it as one
    tool. It is a major tool we have to enable folks to be able to
    build ships in this country.
        Unfortunately, just given the time and expense involved in
    pursuing one of these applications, it has really been not as
    useful for folks who are building a ship or a barge of, you
    know, 25 to 5, 10, $15 million. And that has been a real
    challenge, too, because we don't want that market to go away,
    either.
        Mr. Wittman. That is great. And if there are ways that you
    can streamline that process, again not changing the terms and
    conditions, making sure that we require the same of the
    fiduciary responsibility for every corporation, but as you
    said, maybe streamlining the administrative process. So for the
    smaller companies who don't have the wherewithal, they don't
    have to go through, you know, the same realm of paperwork that
    maybe a larger company that could do that more easily.
        So if we can look at ways to administratively cut that
    burden on folks, I think that would be great. But again,
    keeping in mind the same time that, you know, we have got to be
    making sure that we stand up all of our yards. And I agree, we
    need to make things easier so people can get through the
    paperwork and through the administrative process easier.
        Mr. Matsuda. We are happy to work with the committee on
    that.
        Mr. Wittman. Thank you, Mr. Chairman. I yield back.
        Mr. Taylor. In the ``No news is good news'' department, the
    question of piracy was a red-hot topic in this town a year ago
    right now. Like many other things, it has been put on the back
    burner, thank goodness, because of a lack of activity at least
    directed towards American vessels.
        Were the changes made in the law last year adequate? What
    are the people in the maritime industry saying as far as if
    there is need for additional changes in the law in order to
    protect American flag vessels and their crews?
        Mr. Matsuda. Thank you, sir. That is a very good question.
    I am not sure that, given that the many number of federal
    agencies and others that have oversight over the security of
    American ships and protection of them that I would be able to
    speak for everyone.
        But I can tell you that we have noticed, over the past
    year, an increase in piracy activity, but a decrease in
    activity with respect to U.S. ships. We have worked with our
    partners very closely to make sure that we can improve training
    of U.S. crews for piracy. Recently we produced a training
    video, working with the ship operations cooperative program. It
    is a short video, just basic training for how to avoid piracy
    situations or what to do in case of attack.
        We are also working with the Naval Criminal Investigative
    Service to do inspections aboard ships, U.S. ships, just to
    point out what kinds of vulnerabilities we see in the event of
    a piracy attack. And that has been an ongoing successful
    program--it is voluntary--that U.S. carriers can come to us and
    we will work with them to get them this advice.
        So we are continuing to work also with the rest of the
    world through what is called the--it is a U.N. body that has
    put a number of countries together to focus on the piracy
    problem. It is the Working Group 3 of the Contact Group on
    piracy off the coast of Somalia. And we have been able to work
    with industry very quickly over the past year to come up with
    best practices, which the companies can use to try and help
    prevent pirate attacks.
        And by and large, we have seen--we have encouraged our
    fellow shipping countries to adhere to those best practices.
    And we are making efforts, working with the State Department
    and others, to make sure that we do everything we can to reduce
    the risk.
        Mr. Taylor. Do you know of any additional legislative
    changes that any of your shippers are asking for in order to
    protect the crews?
        Mr. Matsuda. Legislative changes? I would have to get back
    to you, sir. I am not aware of any off the top of my head.
        Mr. Taylor. Okay.
        Are there any additional questions? Again, thank you very
    much for coming by, and the subcommittee stands adjourned.
        [Whereupon, at 2:59 p.m., the subcommittee was adjourned.]

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                                A P P E N D I X

                                 July 14, 2010

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                  PREPARED STATEMENTS SUBMITTED FOR THE RECORD

                                 July 14, 2010

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