[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











                                  ______

                      U.S. GOVERNMENT PRINTING OFFICE
  58-453                   WASHINGTON : 2010
___________________________________________________________________________
For sale by the Superintendent of Documents, U.S. Government Printing Office, 
http://bookstore.gpo.gov. For more information, contact the GPO Customer 
Contact Center, U.S. Government Printing Office. Phone 202-512-1800, or 
866-512-1800 (toll-free). E-mail, [email protected].  




           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.]

=======================================================================



                            A P P E N D I X

                             July 14, 2010

=======================================================================


              PREPARED STATEMENTS SUBMITTED FOR THE RECORD

                             July 14, 2010

=======================================================================







                                  
