[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]


 
                     REVIEW OF THE ADMINISTRATION'S
                    FISCAL YEAR 2012 BUDGET REQUESTS
                       FOR THE U.S. COAST GUARD,
                    FEDERAL MARITIME COMMISSION, AND
                    FEDERAL MARITIME ADMINISTRATION;
                   FINDING WAYS TO DO MORE WITH LESS

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

                                (112-11)

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                COAST GUARD AND MARITIME TRANSPORTATION

                                 OF THE

                              COMMITTEE ON
                   TRANSPORTATION AND INFRASTRUCTURE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 1, 2011

                               __________

                       Printed for the use of the
             Committee on Transportation and Infrastructure


               Available online at: http://www.fdsys.gov/



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             COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

                    JOHN L. MICA, Florida, Chairman

DON YOUNG, Alaska                    NICK J. RAHALL II, West Virginia
THOMAS E. PETRI, Wisconsin           PETER A. DeFAZIO, Oregon
HOWARD COBLE, North Carolina         JERRY F. COSTELLO, Illinois
JOHN J. DUNCAN, Jr., Tennessee       ELEANOR HOLMES NORTON, District of 
FRANK A. LoBIONDO, New Jersey        Columbia
GARY G. MILLER, California           JERROLD NADLER, New York
TIMOTHY V. JOHNSON, Illinois         CORRINE BROWN, Florida
SAM GRAVES, Missouri                 BOB FILNER, California
BILL SHUSTER, Pennsylvania           EDDIE BERNICE JOHNSON, Texas
SHELLEY MOORE CAPITO, West Virginia  ELIJAH E. CUMMINGS, Maryland
JEAN SCHMIDT, Ohio                   LEONARD L. BOSWELL, Iowa
CANDICE S. MILLER, Michigan          TIM HOLDEN, Pennsylvania
DUNCAN HUNTER, California            RICK LARSEN, Washington
TOM REED, New York                   MICHAEL E. CAPUANO, Massachusetts
ANDY HARRIS, Maryland                TIMOTHY H. BISHOP, New York
ERIC A. ``RICK'' CRAWFORD, Arkansas  MICHAEL H. MICHAUD, Maine
JAIME HERRERA BEUTLER, Washington    RUSS CARNAHAN, Missouri
FRANK C. GUINTA, New Hampshire       GRACE F. NAPOLITANO, California
RANDY HULTGREN, Illinois             DANIEL LIPINSKI, Illinois
LOU BARLETTA, Pennsylvania           MAZIE K. HIRONO, Hawaii
CHIP CRAVAACK, Minnesota             JASON ALTMIRE, Pennsylvania
BLAKE FARENTHOLD, Texas              TIMOTHY J. WALZ, Minnesota
LARRY BUCSHON, Indiana               HEATH SHULER, North Carolina
BILLY LONG, Missouri                 STEVE COHEN, Tennessee
BOBB GIBBS, Ohio                     LAURA RICHARDSON, California
PATRICK MEEHAN, Pennsylvania         ALBIO SIRES, New Jersey
RICHARD L. HANNA, New York           DONNA F. EDWARDS, Maryland
STEPHEN LEE FINCHER, Tennessee
JEFFREY M. LANDRY, Louisiana
STEVE SOUTHERLAND II, Florida
JEFF DENHAM, California
JAMES LANKFORD, Oklahoma

                                  (ii)

  
?

        Subcommittee on Coast Guard and Maritime Transportation

                FRANK A. LoBIONDO, New Jersey, Chairman

DON YOUNG, Alaska                    RICK LARSEN, Washington
HOWARD COBLE, North Carolina         ELIJAH E. CUMMINGS, Maryland
ANDY HARRIS, Maryland                CORRINE BROWN, Florida
FRANK C. GUINTA, New Hampshire       TIMOTHY H. BISHOP, New York
CHIP CRAVAACK, Minnesota             MAZIE K. HIRONO, Hawaii
BLAKE FARENTHOLD, Texas              MICHAEL H. MICHAUD, Maine
JEFFREY M. LANDRY, Louisiana,        NICK J. RAHALL II, West Virginia
  Vice Chair                           (Ex Officio)
JOHN L. MICA, Florida (Ex Officio)

                                 (iii)

                                CONTENTS

                                                                   Page

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

                               TESTIMONY

Leavitt, Master Chief Michael P., Master Chief Petty Officer, 
  United States Coast Guard......................................     5
Lidinsky, Jr., Hon. Richard A., Chairman, Federal Maritime 
  Commission.....................................................     5
Matsuda, Hon. David T., Administrator, Maritime Administration...     5
Papp, Jr., Admiral Robert J., Commandant, United States Coast 
  Guard..........................................................     5

          PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS

Landry, Hon. Jeffrey M., of Louisiana............................    40
LoBiondo, Hon. Frank A., of New Jersey...........................    41

               PREPARED STATEMENTS SUBMITTED BY WITNESSES

Lidinsky, Jr., Hon. Richard A....................................    43
Matsuda, Hon. David T............................................    54
Papp, Jr., Admiral Robert J......................................    63

                       SUBMISSIONS FOR THE RECORD

Leavitt, Master Chief Michael P., Master Chief Petty Officer, 
  United States Coast Guard:
  Correction to his answer to Hon. LoBiondo's housing trust fund 
    question.....................................................    28
  Suggestions for improving the housing situation................    29
Papp, Jr., Admiral Robert J., Commandant, United States Coast 
  Guard:
  Funding for the sixth National Security Cutter.................    27
  Correction to his answer to Hon. Coble's question regarding the 
    decommissioning of Polar Sea.................................    32
  The U.S. Coast Guard's enforcement policy regarding the 
    Transportation Worker Identification Credential (TWIC).......    37

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                     REVIEW OF THE ADMINISTRATION'S
                    FISCAL YEAR 2012 BUDGET REQUESTS
                   FOR THE U.S. COAST GUARD, FEDERAL
                    MARITIME COMMISSION, AND FEDERAL
                    MARITIME ADMINISTRATION; FINDING
                       WAYS TO DO MORE WITH LESS

                              ----------                              


                         Tuesday, March 1, 2011

                  House of Representatives,
          Subcommittee on Coast Guard and Maritime 
                                    Transportation,
            Committee on Transportation and Infrastructure,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:00 a.m. in 
room 2167, Rayburn House Office Building, Hon. Frank A. 
LoBiondo, [chairman of the Subcommittee on Coast Guard and 
Maritime Transportation] presiding.
    Mr. LoBiondo. Good morning. The committee will come to 
order. The Subcommittee on Coast Guard and Maritime 
Transportation is meeting today to hear testimony on the 
President's fiscal year 2012 budget request from the leaders of 
the three Federal agencies which promote, protect, and regulate 
vessels and mariners in U.S. waters and international trade.
    As my colleagues know, our nation is facing a tremendous 
budget crisis. Years of overspending have driven our national 
debt and deficit to record levels. This congress must make 
extremely difficult decisions in the coming months to bring our 
spending under control and cut the deficit.
    The effort continues today with the presentation of the 
fiscal year 2012 budget request. The President's request, $9.85 
billion for the Coast Guard in fiscal year 2012, an increase of 
1.8 percent over the current level.
    The members of this subcommittee are keenly aware that 
resources have not kept pace with the service's rapidly 
expanding mission portfolio in recent years. That is why I 
commend Admiral Papp for publicly saying the service must 
closely evaluate whether they continue to take on new missions 
in the current fiscal environment.
    I also commend the service for uncovering some savings 
through efficiencies in operations and the consolidation of 
services. I am interested in knowing if more operational 
savings can be found that will not adversely impact safety, 
security, and mission success.
    I also have some concerns with the Coast Guard's budget 
request. First, the service continues to push off investments 
and the acquisition of assets. The five-year capital 
improvement plan proposes a fantastic 66 percent increase in 
funding over the next 3 fiscal years. The service needs to stop 
burying its head in the sand, and propose a fiscally-
sustainable long-term capital acquisition plan.
    I would point out that we should have had at least a 
partial solution to this years ago. But the service and the 
Department continued to refuse to provide this subcommittee 
with the fleet mix analysis. I remind the service that the 
subcommittee requested this analysis over 13 months ago. I urge 
the service in the strongest possible terms to satisfy our 
request for this document in very short and rapid order.
    Second, the service continues to lack the polar missions 
plan long sought by Congress. To add insult to injury, the 
service intends to spend millions of unbudgeted dollars to 
refurbish the Polar Sea's engine, and then decommission the ice 
breaker. I don't quite understand this, but maybe you can help 
us. A classic example of throwing good money after bad.
    The budget request for the maritime administration 
represents a 1.4 percent reduction below the current level. 
Most of the cuts come from zeroing out funding for the grants 
and other programs, which are meant to revitalize the maritime 
sector and protect U.S. mariner jobs. At the same time, the 
budget proposes to increase funding for operations and 
administration at the Agency.
    While I appreciate the difficult choices the administrator 
made in developing this budget, I am concerned these programs 
are being cut while operating expenses continue to grow.
    I am also concerned with the tremendous amount of time it 
takes the Administration to process applications for title XI 
loans. This is even more concerning, given the fact the budget 
proposes to rescind $54 million in unobligated title XI loans--
guarantees, when they have nearly $100 million worth of 
applications still to process. If all the applications were 
approved, it would provide $1.5 billion to U.S. shipyards and 
create thousands of new jobs at a time when our nation 
desperately needs to create jobs.
    Finally, the budget request for the Federal Maritime 
Commission proposes a three percent increase over the current 
levels. Although a three percent increase in the FMC budget 
amounts to less than $1 million, I really think it sends a 
wrong signal in the current fiscal environment, where many 
agencies are not receiving any increase, and some actually a 
reduction. The Commission needs to take a much closer look at 
their operations and try to develop savings through 
consolidation of services and more efficient operations.
    With that, I would like to yield to ranking member, 
Congressman Larsen, for your statement.
    Mr. Larsen. Thank you, Mr. Chairman. Mr. Chairman, I want 
to thank you for conducting today's subcommittee hearing, and I 
welcome the opportunity to discuss the President's fiscal year 
2012 budget proposals for the U.S. Coast Guard, the Federal 
Maritime Administration, and the Federal Maritime Commission.
    Maritime transportation remains a critical component of our 
national economy, contributing over $10 billion annually, and 
generating nearly 270,000 jobs. So today's message is clear, 
that we must continue to invest wisely to facilitate, protect, 
and regulate maritime commerce, if we want to see the U.S. 
economy expand and flourish.
    Mr. Chairman, I have a great deal of interest in how 
Congress spends our taxpayers' money and saves taxpayers' 
money. There may be a practical reality that forces hard-
working public servants to do more with less. However, today's 
testimony shows plainly that more will not get done with less. 
Rather, less will get done with less. Regrettably, too much 
emphasis is currently being placed on how much can we cut, 
rather than a more appropriate question, which is how can we 
best direct Federal resources to generate economic growth and 
spur job creation.
    It's our responsibility to ensure that these maritime 
agencies which oversee fair and competitive shipping practices, 
that respond to disastrous oil spills, or assist vessels in 
distress, or that retain a secure fleet of ships to support 
overseas deployment of our armed services have the necessary 
resources to fulfill their respective missions.
    Now, supporters and critics of the Coast Guard contend that 
its budget is insufficient for the demands placed on the 
service's nearly 50,000 military and civilian full-time 
employees. Commander Papp acknowledged in a recent 2011 state 
of the Coast Guard address, ``The Coast Guard does not have the 
resources to perform at 100 percent in every one of its 
missions on every given day.'' He went on to say that more with 
less is not an acceptable option. ``Without continued 
recapitalization, we will not be semper paratus.''
    I am not convinced that the budget request for the Coast 
Guard before us today is adequate to meet the demands that we 
have placed upon the service. I am interested in hearing how my 
colleagues expect the service to do more with less, and what 
trade-offs they will find acceptable.
    Now, the Maritime Administration is in a similar situation. 
MARAD has two critical investment programs that support our 
domestic shipbuilding industry, and they are both targeted for 
reduction.
    First, title XI, guaranteed loan program, provides 
federally-guaranteed loans for purchasers of U.S. flagships 
built or reconstructed by a U.S. shipbuilding industry, and for 
the modernization of U.S. shipyards. Vessels constructed under 
title XI contribute to the ability of the United States to 
carry its foreign and domestic water-borne commerce, to help 
sustain efficient shipbuilding facilities, and to help preserve 
a skilled shipbuilding workforce.
    No new funds for loan guarantees are requested for fiscal 
year 2012. Of the unrequested amounts made available in 2009 
and 2010, $54.1 million is proposed for cancellation. These 
proposals effectively kill these investments that generate 
good-paying jobs here in the U.S.
    And second, the budget requests no additional funds for 
assistance to small shipyards program. Similar to title XI, 
these funds invest in American port infrastructure, create 
American jobs, and help domestic shipyards such as Nichols 
Brothers Boat Builders, located in Freeland, Washington, 
helping them make the necessary capital investments to remain 
competitive and generate new business.
    Mr. Chairman, these cuts will not result in more with less, 
but less with less. I know there is a strong desire to cut 
Federal spending. I, myself, have voted for cuts in the last CR 
debate. And I agree that we must bring discipline to the 
nation's fiscal house, but I urge that we temper that effort 
with reason and sound judgement.
    Now, despite these tight budgets called for in fiscal year 
2012, I am pleased that the Administration has proposed a 
modest increase for the Federal Maritime Commission. In light 
of the important role the Commission has in monitoring world 
shipping practices, especially the growing trans-Pacific trade, 
I will want to hear from Chairman Lidinsky on how the 
Commission intends to use new funding to support U.S. exports, 
ensure fair competition, and protect American consumers.
    In closing, Mr. Chairman, the congress has recognized that, 
since the founding of our republic, that our nation's economic 
prosperity is interwoven with maritime commerce. The maritime 
agencies before us today carry on that legacy of Federal 
support for our domestic maritime industry and the oversight of 
maritime commerce that produces, annually, billions of dollars 
in economic activity, and thousands of jobs.
    America does not want less with less. What America wants is 
an efficient and effective Federal Government. When it comes to 
maritime commerce, that should be an objective on which we can 
all agree. Thank you, Mr. Chairman.
    Mr. LoBiondo. Do any Members wish to make opening 
statements? Mr. Coble?
    Mr. Coble. I will be very brief, Mr. Chairman. I commend 
you and the ranking member for having put together a very 
outstanding panel. We keep hearing about more with less, 
Admiral and Master Chief. The Coast Guard has been doing more 
with less since 1790. They wrote the book on it. I don't mean 
that you and the commandant have been around that long, Master 
Chief, but I feel like I have.
    But I was taken by a comment by the chairman--and maybe the 
ranking member touched on it--regarding the Polar Sea. Much 
monies are being expended to make certain repairs. And then, 
I'm told, she's going to be dispatched to the boat yard. Now, 
that hardly sounds prudent. So I hope we hear more about that.
    But thanks to all of you for being here. Mr. Chairman, good 
to see you again. Thank you, Mr. Chairman. I yield back.
    Mr. LoBiondo. Congresswoman Hirono?
    Ms. Hirono. Thank you, Mr. Chairman. Mr. Chairman and Vice-
Chair Landry, and Ranking Member Larsen, it is a pleasure to 
join this subcommittee as a member. And, having reviewed the 
testimony for today's hearing, I would like to associate myself 
with the remarks of Ranking Member Larsen.
    Having said that, I want to thank all of our witnesses for 
being here today. As you probably know, the maritime industry 
and security are very important to my home state of Hawaii. And 
there aren't any roads between our islands; the only options we 
have for moving goods and people from the mainland and between 
islands are either by boat or by air. In fact, we have to 
import 80 percent of our food and merchandise. And, of that 80 
percent, over 98 percent of those imported goods come by ship. 
So, shipping and maritime safety and security are of vital 
importance to the economy and livelihood of Hawaii's people.
    As Commandant Papp knows, ensuring the safety and security 
of the maritime public is a full-time challenge. I commend the 
work that the approximately 1,500 Coast Guard personnel in 
Hawaii's 14th district does on so many fronts to make sure that 
the people of the 14th district is protected. And you do have 
14.2 million square miles that make up this district, which 
includes Papahanaumokuakea, the northwestern Hawaiian Islands 
monument, the biggest monument in the country. So, you have a 
tremendous task, not just protecting the people and commerce, 
but also protecting 140,000 square miles, as I mentioned, of 
the monument.
    As this committee knows, ensuring that our nation's ports 
and harbors can handle the 21st century commerce is also of 
vital importance to our future economic growth. And I 
appreciate the work of the Maritime Administration and Maritime 
Commission to help ensure that we are always expanding 
commerce.
    And the harbor improvements that the Maritime 
Administration and Hawaii's Harbors Division have partnered on 
in the past, and most recently, the Honolulu Harbor Pier 29 
project, which received a $24.5 million Tiger Grant are 
critical to Hawaii's economic future.
    So, I look forward to hearing from you, and working with 
you. Thank you.
    Mr. LoBiondo. Thank you. We are going to turn to our panel. 
And our panel today includes Admiral Robert Papp, Commandant of 
the Coast Guard; Master Chief Michael Leavitt, the master chief 
petty officer of the Coast Guard; Richard Lidinsky, the 
chairman of the Federal Maritime Commission; and David Matsuda, 
administrator of the Maritime Administration.
    Thank you all for being here. Admiral Papp, the floor is 
yours.

  TESTIMONY OF ADMIRAL ROBERT J. PAPP, JR., COMMANDANT OF THE 
  COAST GUARD; MASTER CHIEF MICHAEL P. LEAVITT, MASTER CHIEF 
  PETTY OFFICER OF THE COAST GUARD; RICHARD A. LIDINSKY, JR., 
   CHAIRMAN OF THE FEDERAL MARITIME COMMISSION; AND DAVID T. 
     MATSUDA, ADMINISTRATOR OF THE MARITIME ADMINISTRATION

    Admiral Papp. Good morning, Chairman LoBiondo, Ranking 
Member Larsen, and distinguished members of the subcommittee. I 
am privileged to appear before the subcommittee today for the 
first time as commandant to discuss the Coast Guard's fiscal 
year 2012 budget request, and also to proudly represent the men 
and women of the United States Coast Guard.
    I am particularly pleased to be accompanied by Master Chief 
Petty Officer of the Coast Guard Michael Leavitt, as well as 
our partners from the Maritime Administration and the Federal 
Maritime Commission. My full written statement has been 
submitted for the record, and I would like to offer this brief 
oral statement.
    I would like to start off by thanking the subcommittee for 
the Coast Guard Authorization Act of 2010. We are using this 
authority to move forward with our internal reorganization, and 
increase support to our operational forces, and we will 
continue to use it to enhance our marine safety program and 
conduct acquisition reform. And we will use it to address an 
important issue for our families: housing. And I want thank you 
for that.
    I am pleased to be speaking before the subcommittee on the 
date of the eighth anniversary of the Department of Homeland 
Security. The Coast Guard is honored to be anchored in DHS, 
where we proudly serve as its maritime arm. While anchored in 
DHS, we enhance our value to the country by maintaining bridges 
to the Department of Transportation, the Department of Defense, 
the Department Justice, the Department Interior, the 
Environmental Protection Agency, and many other interagency 
partners.
    Now, as a ship captain having served 14 years of my 35 
years of service at sea, I readily admit to viewing the world 
through the lens of a sailor. Nine months ago, when I took 
command of the Coast Guard, my first reaction was that of a 
navigator: to take a fix, ascertain our position, and set a 
course for the future. And that's what I did. My four guiding 
principles--steady the service, honor our profession, 
strengthen our partnerships, and respect our shipmates--set the 
future course for our service.
    I would like to start off--two weeks ago I gave a situation 
report to the service in my State of the Coast Guard address, 
and further refined the goals with the release of my 
Commandants Direction 2011. As part of the release of the 
President's fiscal year 2012 budget, I also released our 
posture statement, which sets forth our budget objectives, all 
of which link back to my guiding principles.
    My priorities are: to sustain front-line operations, to 
rebuild the Coast Guard, to enhance maritime incident 
prevention and response, and to support Coast Guard families. 
This fiscal year 2012 budget is the first waypoint on the 
course to those priorities.
    Now, as a ship's captain, first and foremost, the duty is 
to assure the safety of the ship and the crew. This traditional 
responsibility often requires making tough choices. Working in 
the maritime environment is inherently dangerous, and captains 
must continuously balance mission accomplishment against risk 
to the ship and the crew. Today's challenging fiscal climate is 
no different. We must make tough choices to preserve our ship 
of the service. Working closely with and receiving strong 
support from the Secretary Napolitano and the Department, I 
have made the tough choices.
    In his State of the Union speech, the President asked us 
all to tighten our belts. While we tighten our belts, I will 
not lose sight of our utmost priority, which is serving the 
American people. The safety and security of our nation's 
waterways impacts the lives of every American.
    The challenge we face, though, is that the rising costs of 
running aging cutters, boats, aircraft, and shore facilities 
quickly consume any positive increment in our budget. In an 
effort to avoid any reduction in those front-line operations I 
talked about, we have carved out over $140 million by directing 
management efficiencies and making targeted reductions in 
administrative costs and professional services. We will invest 
those savings in front-line operations. These were tough 
choices, but, I think, the right ones.
    As an operator, I can tell you that our readiness is 
dependent upon simultaneously sustaining front-line operations 
while recapitalizing assets. There needs to be a balance. 
Unless we continue to recapitalize our ships, planes, and 
boats, and improve our shore, stations will not be able to 
maintain an acceptable level of readiness to perform our 
missions. We won't be ready to respond quickly and effectively 
to contingency operations, like we did in Haiti and Deep Water 
Horizon.
    We are requesting $1.4 billion in our acquisition request, 
and that goes to fully fund national security covenant number 
5, produces 6 new patrol boats, funding for 2 maritime patrol 
aircraft, funds 40 new response boat mediums, and sustains 
acquisition work in the design of our offshore patrol cutter, 
which will be the replacement for our medium endurance cutter, 
and funding to support critical shore recapitalization needs.
    We want to continue to enhance our maritime incident 
prevention and response, and this budget allows us to do that, 
which--it provides $10.7 million to hire additional marine 
safety inspections, investigators, and fishing vessel 
examiners, and it allows us to establish an incident management 
assist team, which will give us added capacity for 
contingencies in the future.
    And then, support for our military families. You can't have 
a strong military workforce without a healthy military family. 
So, Master Chief Leavitt will discuss some of the military 
family initiatives in the fiscal year 2012 budget supports upon 
the conclusion of my remarks.
    So, in conclusion, the Coast Guard, as the maritime 
component of the Department of Homeland Security, is committed 
to working hand in hand with our many partners to assure the 
safety and security of American citizens and our ports and 
waterways. For over 220 years we have been protecting those on 
the sea, protecting America from threats delivered by the sea, 
and protecting the sea itself. This is our chosen profession, 
this is our way, and this is what we do. I thank you for the 
opportunity to testify today, and I look forward to your 
questions.
    Mr. LoBiondo. Thank you, Admiral Papp.
    Master Chief?
    Master Chief Leavitt. Good morning, Mr. Chairman and 
distinguished members of the subcommittee. It is a privilege to 
appear before you here today. This is actually the first time I 
have ever testified before Congress, so it is truly an honor. 
Also, it's an honor and privilege to represent more than 39,000 
Coast Guard enlisted personnel.
    In the past nine months, I have had the opportunity to 
travel around the country and listen to the many challenges 
facing our hard-working men and women and their families. One 
of the most formal challenges is obtaining affordable and 
adequate housing and child care. For example, one instance is 
particularly telling: 14 percent of the DoD personnel have 
their children enrolled in subsidized military child care 
facilities, yet only 5 percent of Coast Guard personnel do.
    In order to meet our mission requirements, Coast Guard 
personnel are assigned throughout the United States and 
overseas. In some cases, our personnel are fortunate enough to 
be stationed on or near DoD or large Coast Guard facilities. In 
these locations, our personnel have better access to reasonable 
housing, affordable child care, and military treatment 
facilities, or civilian providers that really accept the 
military's health care program.
    But for many of our members and their families who are 
stationed in small coastal towns, or find themselves in 
isolated or seasonal high-cost areas, it's a much different 
story. In these locations, including the areas this 
subcommittee represents, obtaining adequate or affordable 
housing is a challenge. Child care providers are scarce and, in 
most cases, very expensive. Often times, medical and dental 
care providers are limited, and those who are nearby may not 
accept military health care program. As a result, our personnel 
tend to absorb these additional costs. These type of increased 
financial burdens, compounded by limited employment 
opportunities available to military spouses, stresses the 
entire family.
    So, that said, we are truly grateful for the housing and 
child care provisions in the fiscal year 2012 budget. The 
budget will ease the stress on our military members and their 
families. Furthermore, this budget will put us on a course 
towards closing the gap between the Coast Guard and our DoD 
counterparts. And ultimately, these provisions will enhance our 
mission readiness, and allow us to provide a much better 
service to our taxpayer.
    So, in closing, our Coast Guard men and women are standing 
the watch. They risk their lives to rescue those in peril, and 
they protect our homeland. They deserve these benefits.
    So, thank you again, Mr. Chairman, for the opportunity to 
discuss the needs of our Coast Guard personnel. I look forward 
to answering any questions you may have.
    Mr. LoBiondo. Thank you, Master Chief.
    Chairman Lidinsky, you are now recognized.
    Mr. Lidinsky. Thank you, Mr. Chairman, Mr. Ranking Member, 
members of the subcommittee. Thank you for this opportunity to 
present the President's fiscal year 2012 budget for the Federal 
Maritime Commission. With me today are FMC Commissioners 
Rebecca Dye and Michael Khouri. Your former colleague, 
Commissioner Joe Brennan, is back manning the ship, and sends 
his best regards.
    With the committee's permission, I would like to summarize 
my testimony, and request that my full written statement be 
included in the record of the hearing.
    The President's budget for this commission provides 
$26,265,000 for fiscal year 2012. This represents an increase 
of $2.1 million over the enacted fiscal year 2012 
appropriation, or 3 percent, 767,000, over the President's 
fiscal year 2011 request, and funds 133 positions. This 
includes an increase of two positions targeted for our office 
of consumer affairs and dispute resolution, who have seen a 16 
percent increase in complaints and disputes that they handle. 
This would strengthen our efforts to provide prompt, efficient 
solutions for commercial disputes between ocean carriers and 
their customers, and will help prevent problems with ocean 
transportation or equipment from hindering the growth of our 
exports.
    As the committee knows, from late 2008 to late 2009, the 
international container shipping industry suffered the worst 
year in its 45-year history. Fortunately, in calendar year 
2010, the U.S. liner trade saw a very rapid recovery, and U.S. 
container volumes grew an average of 11 percent. In our largest 
trade lane, the trans-Pacific, we saw shortages in early 2010, 
when demand returned. But in April, carriers began adding 
capacity. And by October, capacity passed its pre-recession 
levels. Currently, weekly capacity in the trans-Pacific is 24 
percent higher than it was last time this year, and container 
shortages have virtually disappeared.
    In the coming year, I plan working on the three top 
priorities I outlined during my confirmation hearing. First, 
the Commission must work for recovery and job growth within our 
ocean transportation industry, particularly among exporters and 
the businesses they serve.
    Second, the Commission must focus on protecting our 
country's shipping community from unfair and harmful practices 
by foreign governments, cargo carriers, or cruise lines. More 
than 95 percent of the United States ocean container trade 
travels on ships controlled by foreign carriers. And we've been 
watching them like a hawk to ensure that they efficiently and 
fairly serve U.S. exporters and importers.
    Third, the Commission shall work with all sectors of our 
maritime family to help airports and the shipping industry. 
Each commissioner at the FMC is committed to working in an 
efficient, cooperative, and bipartisan manner to bring about 
these goals.
    Here are some highlights that we have taken in the recent 
months. We are working hard to support our nation's export 
growth. U.S. exporters must have an efficient, fairly-priced, 
and reliable system to deliver goods to market.
    We instituted Fact-Finding 26 under Commissioner Dye, which 
interviewed over 170 witnesses to come up with explanations of 
what had happened during the recession, and to provide 
solutions to many of the problems that we faced. We are 
continuing to roll out various recommendations of that fact-
finding.
    Commissioner Khouri has undertaken a fact-finding to deal 
with household goods issues. We have had thousands of 
complaints in recent years, and we are working with the DoT on 
coming up with solutions in that area.
    The Commission is committed to applying the President's 
2011 January executive order to improve regulations and make 
them less burdensome. We have already made regulatory relief 
and modernization a top priority.
    We last week issued a final rule that will relieve more 
than 3,300 licensed non-vessel-operating common carriers from 
the cost and burdens of publishing tariffs in the rates they 
charge for cargo shipments. There are reports that many 
businesses could save up to $200,000 a year.
    Also last week the Commissioner issued a final rule that 
updates our filing requirements and clarifies procedures for 
informal proceedings, also to help parties that bring their 
business before the Commission. It is just the first step in an 
ongoing project that made the Commission's procedure rules more 
clear, modern, efficient, and cost savings.
    We are closely monitoring the impact of the People's 
Republic of China regulations on our trade. As part of our 
emphasis on service to consumers, we are focusing our needs and 
our growth in the consumer affairs division, where we hope that 
service contracts will be brought to the Commission for 
resolution.
    We have also seen environmental issues becoming intertwined 
with our area of regulation. One example of that is the slow 
steaming. And we have issued an order of inquiry, notice of 
inquiry, to solicit input that will give us guidance in that 
area.
    In conclusion, Mr. Chairman and members of the 
subcommittee, we thank you for your support, particularly as we 
celebrate our 50th anniversary year. It's an honor to appear 
before the subcommittee, and I am happy to answer any questions 
you may have later.
    Mr. LoBiondo. Thank you.
    Mr. Matsuda.
    Mr. Matsuda. Good morning, Chairman LoBiondo, Ranking 
Member Larsen, and members of the subcommittee. Thank you for 
inviting me to be here today. I look forward to working with 
you all in the 112th Congress. With your permission, I would be 
happy to summarize my testimony and submit the complete 
document for the hearing record.
    Mr. LoBiondo. Please do.
    Mr. Matsuda. Thank you, sir. And first, as you all know, 
last week we saw the tragic and senseless murder of four U.S. 
citizens at the hands of pirates. I want to assure the 
subcommittee that piracy remains a key focus for the Maritime 
Administration. Just yesterday I addressed a United Nations-
sponsored piracy working group, challenging our government and 
industry partners around the world to step up their efforts, 
harden the targets which pirates have turned into blood-stained 
profits. We continue to work with the Coast Guard and the State 
Department to take whatever steps are necessary to end this 
threat.
    I would also like to update you on another issue I know is 
of great importance to the subcommittee, and that is the U.S. 
Department of Energy's use of U.S. flagships to carry cargo for 
its renewable energy loan guarantee program. I have good news. 
Today the Department of Energy has formally changed its policy 
to apply cargo preference requirements to their program. We are 
working closely with our partners in the Administration to 
ensure the cargo preference requirements are applied fairly, 
consistently, and with common sense. This solution means we 
manage to avoid costly and time-consuming litigation, and the 
ultimate result is more cargo on U.S. ships crewed by U.S. 
workers.
    Let me provide you with an overview of the Maritime 
Administration's budget priorities for the coming year. Mr. 
Chairman, as Maritime Administrator, I am tasked with 
overseeing the health of an industry that contributes more than 
$10 billion each year to our economy, and employs more than a 
quarter-million Americans. This important industry contributes 
directly to our nation's economic competitiveness, 
environmental sustainability, and readiness. And, given the 
breadth and seriousness of these responsibilities, I am 
confident that this proposal best serves the needs not only of 
the Maritime Administration, but the nation, as a whole.
    Of the $357.8 million the Maritime Administration is 
requesting for 2012, the overwhelming share of the budget 
supports the merchant marines' vital role in maintaining the 
maritime transportation system and sealift capability, so that 
when disaster strikes we are able to provide help quickly and 
effectively whenever and wherever needed.
    We are a maritime nation, dependent on our waterways to 
survive. By weight, 95 percent of all goods imported into our 
country arrive by ship. That is why we are focused on the 
future of this important industry.
    And our future is highly dependant on investing in 
education. I share Secretary LaHood's vision to prioritize the 
training of future maritime leaders by making the U.S. Merchant 
Marine Academy at Kings Point, New York, a jewel among Federal 
academies. To achieve this, we have requested an additional $19 
million for necessary information technology updates, 
improvements in academic programs, and long-overdue facility 
capital improvements.
    We are also requesting additional funds for our state 
maritime academies. These investments in education are critical 
for the long term. At the same time, we are also facing current 
challenges head on, by requesting funds to honor maritime 
security program commitments at the fully authorized level of 
$186 million, including carry-over funds. This important 
program provides our military assured access to the commercial 
ships and crews we need to sustain U.S. forces overseas, as 
well as provide for our nation's commercial and humanitarian 
needs.
    For 2012, I am pleased to report that the Obama 
Administration has proposed funding for our nation's port 
infrastructure. Building on the successful Tiger Grant program, 
the budget proposal includes $5 billion for a national 
infrastructure bank, funds which ports and maritime projects 
will be able to compete for.
    Also, the Maritime Administration has for the first time 
proposed funding for two programs: the web portal MarView 
program, and an environmental research initiative focused on 
finding solutions to the maritime industry's environmental 
challenges like ballast water and air emissions.
    Funds requested for our ship disposal program will continue 
to create jobs and clean up the environment, as we remove 
obsolete vessels from the national defense reserve fleet.
    Mr. Chairman and Members of the Committee, the budget 
request I have outlined will help preserve and protect our 
nation through maintaining a healthy maritime industry. While 
meeting these critical needs, it is also sensitive to our 
nation's economic conditions. Our request is actually $5 
million less than fiscal year 2010. It reflects our confidence 
that we can do more with spending less.
    Thank you, and I am happy to answer any questions from the 
subcommittee.
    Mr. LoBiondo. Thank you. I would like to ask unanimous 
consent to submit for the record a statement from the gentleman 
from coastal Louisiana, Mr. Landry.
    [No response.]
    Mr. LoBiondo. Without objection, so ordered.
    Mr. LoBiondo. We will now go to questions. Mr. Larsen?
    Mr. Larsen. Thank you, Mr. Chairman. And I imagine we will 
have a couple of rounds of questions, so I will maybe jump 
around here with the panel. But I have got quite a number of 
questions I want to ask. But I will start with Admiral Papp.
    Regarding the recapitalization program for the Coast Guard, 
it's estimated it costs in excess of $24 billion over the next 
15 years. And in this budget request, or in your testimony, you 
note it's--you have a $1.4 billion in fiscal year 2012. How do 
you anticipate being able to achieve your full goals, given 
this request level of funding? Is this getting you on your way, 
or is this a tougher choice to take a small bite this year in 
hopes you're going to get larger bites in the ensuing years?
    Admiral Papp. Thank you, sir. First of all, I have made it 
clear, speaking to groups across the country, we cannot get 
these ships out there fast enough. I am continually reminded of 
how desperately we need the new ships.
    I was just out to the West Coast two weeks ago. I visited 
one of our national security cutters, and saw the great 
improvements that we are giving our people that have to go out 
and do dangerous missions. And at the same time, I went and 
visited some of the 42 and 43-year-old ships that are out there 
at the same piers, and sort of the desperate situation we find 
ourselves in, trying to keep those running. So we can't get 
them out there fast enough.
    However, what I will say is that we are getting there as 
quickly as we can. And as I said in my opening statement, there 
are tough decisions to be made when we are confronted with the 
budget constraints that not only the Coast Guard has, the 
Department has, but the country has. What I am gratified by is 
the fact that the $1.4 billion request from the President is 
the highest acquisition request that we have ever received. And 
it is at a time where we have been demonstrating our competency 
much better, in terms of our acquisition reform.
    And I would say that, to a certain extent, the Coast Guard 
is complicit in not being able to build up the credibility and 
confidence in our program, but I think we have come an awful 
long way. We have instituted acquisition reforms now that I 
think serve as a model for other organizations across 
government. We have come and gone through a very difficult 
negotiation on the national security number four to get a fixed 
price contract. But even working at a fixed price contract, 
because of the delays of getting that contract awarded, it came 
in more than it was budgeted for.
    So we have had to do some creative moving around of funds 
in concert with the Department and the Congress in order to get 
number four awarded, and we are working as quickly as we can to 
get number five.
    We have had to fit a lot of projects into that $1.4 
billion. I am satisfied at this point that we are moving along 
on a lot of fronts, including patrol boats and boats for our 
search and rescue stations. And as we have worked with the 
Department, they have increased our level of funding in the 
outyears in the capital and investment plan, and I am very 
hopeful that we can start moving this along quicker in the 
outyears.
    Mr. Larsen. And we still do need to get to that funding in 
the outyears, since we budget one year at a time.
    I will just note, as well, you used the word ``desperate,'' 
or a form of it, twice in your response: desperately needing 
new ships, and desperate to replace the old ones, and an 
appropriate use of the condition right now of the position that 
you're in at the Coast Guard, and I think a clear message that 
we need to move forward on the recapitalization.
    But you also have a lot of other things that we have asked 
you to do, including several new initiatives in the 2010 
authorization. Given the budget that the Coast Guard has 
received, do you have sufficient funds to ensure the Coast 
Guard is able to implement the measures that we have asked you 
to implement in the 2010 authorization?
    Admiral Papp. Yes, sir. We have amounts in there for 
continuing our acquisition reform. We have received money in 
there to continue our marine safety performance plan, and also 
we have received money to help us out with our housing 
authorities that the subcommittee gave us.
    So, incrementally, I think we are making progress on all 
fronts. And I cannot think of any areas that were put in the 
authorization plan that we don't have some funding directed 
towards that.
    Mr. Larsen. Thank you. Of the 11 missions that the Coast 
Guard has, you noted in your State of the Coast Guard speech 
that there were going to be some choices you will have to make. 
Of those 11 missions, are you doing 50 percent of 5 of them, 
and 100 percent of the rest of them, or how would you 
characterize your ability to make the full commitment to all 11 
missions?
    Admiral Papp. Well, sir, what I would say is I think in 
various forms what I said has been mischaracterized a little 
bit. I have no authority to stop doing any mission of the Coast 
Guard.
    Mr. Larsen. Right.
    Admiral Papp. Those are statutorily required. And I am 
given a finite set of resources to accomplish those missions. 
We make judgements on a day-to-day basis--my operational 
commanders do--to apply those resources against the highest 
need.
    A great example is a year ago, when I was one of those 
operational commanders, we have cutters that are deployed for 
various missions, interdicting migrants, interdicting drugs. 
But when an earthquake occurs in Haiti, that's a higher 
priority for us, and we were to redirect those resources, 
knowing full well that we will suffer, perhaps, a little 
degradation in migrant interdiction, and probably a little 
degradation in drug interdiction. But those are the choices 
that we make. We get the assets, we have to make the decisions 
how to operationally employ them.
    But I would say when I was talking in my speech, my State 
of the Coast Guard speech, there is also--because of our can-do 
attitude, there is a lot of things that we take on on our own. 
We see a need, so we rush out there to do it, often times 
saying we will do it, resource-neutral. Resource-neutral is 
never neutral, because the resources have to come from some 
other location within the Coast Guard.
    And what we are about right now--in fact, I have commenced 
a stem to stern review of what we call our deployable 
specialized forces, to make sure we're not overburdening them--
what things should we be doing for our country? What things 
were those teams intended to do? And then let's train them 
well, make them proficient in what they're supposed to do, so 
we serve the country well. And, oh, by the way, along the way, 
we will also perhaps accrue some savings that we can devote to 
other mission areas or jobs.
    Mr. Larsen. Right. Thank you, Mr. Chairman, and in the 
interest of, obviously, other members I will yield back, and--
--
    Mr. LoBiondo. Thank you.
    Mr. Larsen [continuing]. Do a second round later.
    Mr. LoBiondo. Mr. Coble.
    Mr. Coble. Thank you, Mr. Chairman. Good to have the four 
of you with us. Thank you for your service.
    Gene Taylor, the former congressman from Mississippi, 
knowing of my Coast Guard background, always addressed me as 
``Admiral.'' The present chairman, the gentleman from New 
Jersey, knowing of my Coast Guard background, addresses me as 
``Master Chief.'' I want the record to reveal that I am 
qualified to perform the duties of neither admiral nor master 
chief, but both titles have a real good ring to them. You may 
continue to address me that way, Mr. Chairman.
    Admiral, I was going to talk to you about recapitalization 
of the Coast Guard, but I think you have already touched on 
that. Let me get more directly to the Polar Sea. I am told that 
the Coast Guard plans to decommission her within the next five 
or six months. At the same time, I am furthermore told, 
Admiral, that the several million dollars--six, I think--will 
be expended to complete the overhaul of her main engine. Now, 
Admiral, tell me what I am missing here.
    Admiral Papp. Well, sir, while on the surface it looks like 
a bad news story, there is actually some positive rays of light 
there, at least as far as I am concerned. Once again, this goes 
back to the very challenging tough decisions that we have to 
make.
    What I am confronted with, as I sit before you today, is 
only one ice breaker that works. The Healy is working right 
now, but that's a medium ice breaker. We have no heavy ice 
breaker for the United States.
    Now, we can continue to pour money into Polar Sea. It has 
all its engines down right now. And we can continue to pour 
money into that, and then get maybe a year or two out of her 
once she gets--if she gets--back in service. What I have done 
is I have made the decision that we do not pour more money into 
that ship, using the scarce money we have to get Polar Star 
reactivated.
    The President proposes to transfer the funding back from 
the National Science Foundation back into the Coast Guard. 
That's the positive ray of light that I am talking about here. 
Because I feel that we can better manage that money for our ice 
breaker fleet, and start to build up the competencies of our 
ice breaker sailors once again.
    But given the limits under which I have to operate in terms 
of that money, I think that it's best just to--what we're going 
to do is continue to repair one of the engines on the Polar 
Sea, test that and learn from it. And we can take all the parts 
that we have purchased for the Polar Sea and transfer those 
over to Polar Star. Now, there will be a gap while we do not 
have a heavy ice breaker, but we've got a gap right now.
    But in terms of taking the scarce resources that I have, 
it's my judgement that we should transfer those over to the 
Polar Star, and do a complete reactivation on her, so we have a 
reliable heavy ice breaker that will last 7 to 10 years, rather 
than trying to piece together Polar Sea and get maybe a year or 
2 out of her.
    Mr. Coble. Admiral, how many heavy-duty ice breakers are 
active in the fleet now?
    Admiral Papp. None within the Coast Guard. We have the----
    Mr. Coble. I thought that's what you said.
    Admiral Papp. Yes, sir. Both Polar Sea and Polar Star are--
well, Polar Star is in a long-term reactivation. We have about 
$62 million that was appropriated to put her back into service, 
and perhaps get 7 to 10 more years while the country decides 
what we are going to do about ice breakers and the Arctic. 
Polar Sea was the one that was active, and all the engines are 
inoperative right now. We were going to spend a lot of money to 
get all the engines back up to speed, but I feel that that 
money is better devoted to getting Polar Star back online.
    Mr. Coble. And Healy is inactive, as well?
    Admiral Papp. No, Healy is our medium ice breaker for 
scientific response in the Arctic.
    Mr. Coble. OK.
    Admiral Papp. And she is active. So we will have Healy 
throughout this entire period.
    Mr. Coble. I thank you, sir. Mr. Chairman, good to see you 
again. Mr. Chairman, if carriers and shippers in their 
respective service contracts don't come to FMC to resolve their 
disputes, what action do you take?
    Mr. Lidinsky. Thank you for that question, Mr. Coble. As I 
said in my testimony, looking back at the recession that we 
went through, and many of the troubles that were experienced 
between carriers and shippers, the service contract is at the 
core of it.
    This is the document that does the deal in the moving of 
the cargo. We have over three million of them on file at the 
Commission, and nobody can argue they're not a successful 
document. It's what cargo flows today with. But the contract 
itself, in the 1984 Act, said that any dispute would go to 
state court over the argument. We want parties to come to the 
Commission, use our CADRS office to resolve their disputes, a 
no-cost, confidential process.
    Now, we're in a very crucial period at the moment of 
carriers and shippers renegotiating these contracts up to--May 
1 is the usual start date. If we find, come spring, come 
summer, that they have not put voluntarily to come to CADRS, I 
will come back to this subcommittee and request legislation 
that we change the shipping act.
    Mr. Coble. I got you.
    Mr. Lidinsky. Thank you.
    Mr. Coble. Thank you, Mr. Chairman. Mr. Chairman, I see my 
red light has illuminated, so I yield back my time.
    Mr. LoBiondo. Congresswoman Hirono.
    Ms. Hirono. Thank you, Mr. Chairman.
    Mr. Matsuda, I want to thank you for coming to Hawaii this 
past August and engaging with our State Department of 
Transportation.
    I do have a question for you. There was a time when we had 
a very robust shipbuilding industry in our country and not so 
much now, and we want to do everything we can to encourage the 
purchasing and acquisition of U.S. built ships. But I do note 
that the Maritime Guaranteed Loan Program, which is one of the 
ways that we can encourage shipbuilding in our country, is not 
being funded and, in fact, some of the money that is already in 
there is being canceled.
    Can you talk a little bit about what the impact of this is 
going to be? And are we doing anything else if we are going to 
pretty much cut back on the loan program, anything else to 
support a shipbuilding industry in our country?
    Mr. Matsuda. Thank you.
    And that is an excellent question. Let me be clear with the 
Title XI Loan Guarantee Program proposal. We are continuing to 
accept and process applications for loan guarantees in 
shipbuilding. This is not something that we are going to stop 
because of this proposal.
    What this proposal does is this: The Administration 
proposes taking an excess of funds it has accumulated in the 
Title XI Shipbuilding Program and canceling it. It is a tough 
choice in today's economy and the budget pressures that we are 
all under, but it is one that we feel will still be able to 
meet the needs of the industry as they look to continue to 
build ships in the U.S.
    I should point out that in my testimony I talk about the 
Capital Construction Fund. This is another program we have that 
allows tax deferred money to be used for shipbuilding. There is 
currently $2.8 billion sitting in that account. Title XI is an 
application driven process. We can only process what is in 
front of us. If the carriers decide not to build ships, we 
cannot really make them do it.
    But when they do come to us, we want to make sure we have a 
process that works and is efficient.
    Ms. Hirono. I think it is a real challenge to really 
recreate a robust shipbuilding industry in our country, and I 
am sure there are other ideas that we can bring to the fore to 
do that. I am not sure that these two programs that sort of 
maintain it seems to me a status quo kind of a situation so 
that we are not falling further backward. Is that an accurate 
way to look at it?
    Mr. Matsuda. I believe so.
    Ms. Hirono. For Commandant, when you allocate the scarce 
resources, on what basis are you going to do that? Because, of 
course, as I mentioned in my opening remarks, the 14th 
District, which includes Hawaii, Guam and other areas, it is 
14.2 million square miles that you have to cover in terms of 
all of your activities.
    So is the area of coverage one of the ways that you are 
going to allocate scarce resources?
    Admiral Papp. Yes, ma'am. Thank you for that question.
    And as far as shipbuilding goes, we would be happy to build 
more Coast Guard cutters to stimulate the industry, but the 
14th District provides us with unique challenges that are not 
found in all of our other districts in the expanse of the area 
that they have to cover, given all of the fisheries in the 
Western Pacific and as far over as deploying to do drug 
interdiction in the Eastern Pacific as well.
    So we have to have ships that can range far, that can 
sustain themselves, that can operate independently. The two 
high endurance cutters that you have out there, the Jarvis and 
the Rush, are both over 40 years old. They are two of those 
ships that I have been talking about, and across that fleet, we 
are losing ship-days as we speak because we generally like to 
get about 185 days a year out of each one of those ships, and 
right now we are averaging closer to about 140 days because of 
mechanical breakdowns.
    So getting the high endurance cutters replaced by the 
National Security Cutters is very important to us, and getting 
the newer boats and patrol boats that take care of the stuff 
closer to the islands out there is important, as well as long-
range aircraft to cover that broad expanse.
    In terms of how we make those decisions, once again it goes 
back to on a daily basis. The 14th District Commander will have 
units assigned to him from the Commander, Pacific area. Most of 
the time they will be on fisheries patrols or interdiction 
patrols, but that operational commander only has those finite 
resources, and based upon whatever cases come up, whether it 
might be an unexpected search and rescue case or some other 
security issue, we will have to redirect those resources.
    So those finite resources get transferred across various 
mission areas, which therein lies really the value of the Coast 
Guard, as we have versatile and adaptable resources to be used 
across those missions, as well as our people who are versatile 
and adaptable as well.
    Ms. Hirono. Thank you.
    Thank you, Mr. Chairman.
    Mr. LoBiondo. Mr. Harris.
    Dr. Harris. Thank you very much.
    If I could just ask Mr. Matsuda, the budget request that 
you have represents a 1.5 percent reduction below the current 
level, but if you remove the Title X area, it actually is an 
increase.
    First of all, I am going to ask you what was your fiscal 
year 2008 budget because there are some of us who think that 
that represents a realistic target for the non-defense portion 
of the budget.
    And how could you get there? How could you get to the 
fiscal year 2008?
    Mr. Matsuda. Thank you.
    Although I do not have the 2008 numbers in front of me, I 
can tell you that we have looked at what the impact would be at 
operating under 2008 levels. The most severe impact would be to 
the United States Merchant Marine Academy. They would be faced 
with some very difficult choices with immediate layoffs of 
faculty and staff, cutting the incoming classes, the class 
size, or offering services or limiting the actual academic 
year. All of those would severely impact the operations of the 
school.
    In addition, the budget for the academy has grown over the 
past couple of years primarily because a lot of the funds that 
were used to fund off-book or nonappropriated fund activities 
have been brought on book and now made a more transparent part 
of the budget.
    So these are realities that have really shaped up to make a 
harsh difference between the fiscal year 2008 environment and 
the current one.
    Dr. Harris. I came from State government before. I mean, 
our colleges are asked to do more with less. This is consistent 
across all of the institutions for higher education. So you are 
suggesting that somehow what you are responsible for should be 
exempt from doing more with less?
    Mr. Matsuda. I am suggesting, and actually the story with 
the academy and its capital needs are that these needs have 
been long deferred, for years, decades. There are buildings 
there that still exist from when they were built in 1945 or 
earlier. It is before a time when women were actually allowed 
at the school.
    So there are basic things like making sure there are 
sufficient women's restrooms or locker rooms that can 
accommodate that introduction. This was the first academy to 
actually allow women at the school. So there are some very 
basic capital needs that need to be met at the academy, and 
this budget that has been proposed by the President will go a 
long way toward addressing them.
    Dr. Harris. Well, I would suggest that these are the needs 
that are seen in every institution of higher education. If you 
look in our university system in Maryland, our university has 
backlogs of hundreds of millions of dollars of capital projects 
they would like to complete. They have buildings similarly as 
old, and they are just going to be asked to do more with less.
    So if you could just get the answer to me about what the 
fiscal year 2008 budget was broken down by the various 
components, I would appreciate that.
    Now, Mr. Chairman Lidinsky, I would also ask you the same 
question. You have actually asked for an increase in your 
budget this year. What was your budget in fiscal year 2008?
    You know, to the witnesses, this discussion has gone on for 
a few months now, this target of 2008. So I am a little 
surprised that some of you come to the Committee hearing 
without knowing what your budget was two years ago, since this 
has been much talked about.
    But, Mr. Chairman, could you just indicate why, again, you 
think your commission somehow needs an increase when every 
other part of non-defense discretionary spending is going to be 
asked for a decrease?
    Mr. Lidinsky. Mr. Chairman, our budget in fiscal year 2008 
was $22.072 million.
    Dr. Harris. So then can you go ahead and review why you 
think, you know, you need about 15 percent more?
    Mr. Lidinsky. We are a very small agency. When Mr. Coble 
brought up about the Coast Guard writing the book on doing more 
with less, when I first served at the Commission as a young 
lawyer back in the 1970's under Chairman Bentley, we had 330 
people on staff. Today we have 200 people less although trade 
is ten times what it was in that period.
    So coming from a small agency, our salaries, our pensions, 
our built-in costs are fixed at about 75 percent of the budget. 
So in terms of dollar figures, we have to be very careful in 
what we ask for in terms of meeting commitments for IT, for 
mandated programs, for security, for pensions, for people 
retiring, succession planning.
    We have over two-thirds of our people who are eligible to 
retire today if they wanted to retire. So when you are dealing 
with 130 people and you have got very strong fixed costs, any 
increase that you have to have for a mandated new program or to 
do additional efforts to help our exporters is going to look a 
large increase for a small agency.
    Dr. Harris. Thank you very much.
    Thank you, Mr. Chairman.
    Mr. LoBiondo. OK. The gentleman from Minnesota.
    Mr. Cravaack. Good morning. First off, Admiral Papp and 
Master Chief Leavitt, I would like to thank the great men and 
women of the fantastic Coast Guard for all of the missions that 
they accomplish on a daily basis and all the sacrifices that 
they render and their families as well. So thank you very much 
for your service, gentlemen.
    Mr. Matsuda, we talked just briefly up in Duluth and the 
Great Lakes. We have a very, very large merchant traffic using 
lakers and salties going up the seaway, and one of the things 
that I noticed in talking to Mr. Ojard here, the Port Authority 
out of Duluth, is that we do have a concern about the port.
    The port is the second largest dry bulk port in the United 
States, kind of funny even though it is in the middle of the 
United States.
    But my concern is that for the lack of shipping capital 
investment that I am seeing. Obviously taconite is one of our 
main exporters in that area, but we are seeing a very big 
difficulty in seeing, like you just mentioned, people building 
ships here in the United States under the United States flag.
    So I know that there was a study. The merit study was 
initiated just about a year ago; is that correct? Could you 
tell me, sir, what the result is of that study?
    Mr. Matsuda. Certainly. We made the decision to conduct a 
study on the future of shipping in the Great Lakes and look at 
the recapitalization options of the fleet. As you know, there 
are many challenges that the Great Lakes face operating under a 
full year, trying to meet the needs of the various shippers up 
there. It is not easy.
    We recently concluded a three-visit tour to Chicago, Duluth 
and Cleveland in the Great Lakes, and we are happy to hear from 
the stakeholders and discuss some of these issues. We focused 
on some of the environmental challenges, as well as the port 
and infrastructure challenges.
    We recently did this. I literally just got back last week, 
and we are happy to share with you the results of what we 
learned.
    We are going to take this data and also look at some more 
in-depth material, given the current status of the fleet, what 
are potential future shipping needs, and compile a full report, 
and we are happy to discuss that with you and the subcommittee 
as well.
    Mr. Cravaack. Great. Thank you for that.
    I would also like to dovetail on my colleague Ms. Hirono's 
comments. What do you feel that the Federal Government can do 
to help to promote business and industry in the Merchant 
Marine?
    I just had the great fortune of going to the Naval Academy 
just yesterday and did a tour at the Naval Academy, visited 
midshipmen there, and I realize how important an academy is. So 
you do have my concerns there. But as my colleague, Mr. Harris, 
did say, we are all under budget constraints, but hopefully we 
will be able to reach the needs of what midshipmen need there 
as well.
    But what can the Federal Government, in my minute and 50 
seconds left, can help promote us, that we can help you getting 
business going under the U.S. flag?
    Mr. Matsuda. Well, I could probably answer that question 
two ways. One is for the international trade, and that is 
something that we have been focused on, looking at the 
differences between U.S. and foreign flag operating costs and 
seeing if we cannot better understand what are the differences 
and whether there are any regulatory or other impediments to 
help encourage companies to flag under the U.S. registry.
    That is a study we have ongoing. We are close to getting 
the final results from, and again, we expect them some time 
this spring, and we are happy to share those results with you 
and the subcommittee.
    On the domestic fleet, obviously the Jones Act plays a 
strong role in making sure that there continues to be a strong 
shipbuilding component in the U.S. Having the Title XI and 
other shipbuilding tools are available. Title XI does not work 
for everybody, especially projects where they are a smaller 
size, smaller dollar value. But at the end of the day building 
a ship is such a risky proposition. It is a long-term asset. It 
is hard to find long-term money to do that, especially in 
today's credit market and credit situation.
    So making sure that we have all of the tools and programs 
that are available to assist folks who desire to build a ship 
in the U.S. is something that is very important to insuring the 
long-term survival.
    Mr. Cravaack. Thank you very much, sir.
    And I will yield back the rest of my time.
    Mr. LoBiondo. Mr. Cummings.
    Mr. Cummings. Thank you very much.
    Good morning, gentlemen. Mr. Matsuda, I am very pleased to 
hear that the Department of Energy agrees that the cargo 
preference requirement should apply to loan guarantee cargoes. 
As you know, that is something that I have been very, very 
concerned about.
    And do you know when such cargoes may begin to be moved? 
And how will you and the Department of Energy work together to 
apply the cargo preference requirements?
    Mr. Matsuda. Thank you, sir.
    We are very pleased to report that this morning. The 
language on the Department of Energy's Website has changed to 
indicate how we will be working with them to make sure those 
requirements are met.
    Basically, we are integrated with our agency partners at 
the Department of Energy to look at and work with the various 
project sponsors to make sure they are meeting these 
requirements. And a lot of times that means dealing with the 
project engineers, the folks who are in charge of procurement, 
making sure they understand the law and how they can meet it. 
And we have done that successfully already on several of the 
projects.
    The change on the Website also helps indicate to future 
applicants or those who might just be looking at the program 
now about how it will work and what requirements they need to 
meet.
    Mr. Cummings. Chairman Lidinsky, can you provide us with an 
update on Commissioner Dye's investigation, as well as whether 
there are recent changes in the cargo rolling canceled books, 
container shortages, and the attempts to force charges that 
were not agreed and contracts that were just executed last 
month?
    And what else can the FMC do to address those problems?
    Mr. Lidinsky. Thank you very much for the question, Mr. 
Cummings.
    The picture is much brighter than when we met a year ago. 
As you know, Commissioner Dye conducted her fact finding over 
the summer back in December. Many of her recommendations 
involving the problems that took place during that period of 
time have been rolled out here in the form of orders to the 
carriers, further investigations taking place.
    The issue that was of concern, we had a dialogue on this 
this year about container shortages. It is a much more improved 
picture today. Capacity is up.
    The USDA Program is just about to be formally launched. 
They have worked together with one of the shipping conferences 
in the westbound trade to help identify through computers where 
missing containers could be supplied to exporters.
    So I would say that we face a much more positive situation. 
The only cloud on the horizon, as I mentioned before you 
arrived, was the fact that the service contracts still need to 
be properly made in order to prevent rolling in the other 
issues. We are in the negotiating season right now, and should 
that not occur, we will be pleased to come back to the 
subcommittee and ask for legislation to bring that about.
    Mr. Cummings. Now, Admiral Papp, during your state of the 
Coast Guard address, you said we made great progress in 
executing our diversity strategic plan, but we have significant 
gaps which require us to continue our efforts.
    I recently visited the Coast Guard academy where I met with 
the admission staff, and they are reaching into communities 
where the Coast Guard is not well known and working hard to 
recruit our future. The academy has made great strides to 
increase the core of cadets' diversity, end of quote.
    Can you update us on the ongoing efforts to increase 
diversity at the Coast Guard Academy, including how things are 
looking as you seek to recruit the next class at the academy?
    Admiral Papp. Yes, sir, Mr. Cummings.
    And thank you for your job as Chairman during the last 
Congress. I got a chance to thank the subcommittee for their 
work on the authorization bill. I thank you publicly as well, 
but more importantly for your attention to the diversity 
concerns of our service and giving us proper oversight in that 
regard.
    I had a chance to travel up to the Coast Guard Academy in 
January to speak to the corps of cadets, 1,000 of them, about 
leadership issues, and of course, as I was talking to them, I 
talked about diversity as well. But I also took the opportunity 
to go over personally a visit with the recruiting staff at the 
academy.
    And I am very pleased with the progress we have been 
making. We have increased the number of people that are going 
out to the field to those areas where we have not recruited 
before, and what we are finding is that not only are there 
areas that were unfamiliar with the Coast Guard Academy, but 
also it is not just the students. It is also faculty advisors, 
guidance counselors, and others that need to be educated.
    And also many times some of the schools that we are 
targeting that have very good students with very good academic 
records, oftentimes the schools perhaps do not have the 
resources in terms of the numbers of guidance counselors that 
some more affluent localities do.
    So we have provided funding to the Coast Guard Academy to 
bring on I believe we have got about a dozen people now that 
are going out to targeted areas in the field, to work with 
guidance counselors, to work with students, to make sure we get 
the completed applications in, just to provide that little bit 
extra of a boost in those areas that heretofore were unfamiliar 
with the Coast Guard Academy.
    Right now, I do not have any figures in terms of 
acceptances or how many appointments have been issued because 
it is a little too early in the process, but in terms of the 
numbers of applications that we have coming in, it reflects 
another increase over last year's very promising numbers.
    Mr. Cummings. Thank you.
    Thank you very much, Mr. Chairman.
    Mr. LoBiondo. Mr. Farenthold.
    Mr. Farenthold. Thank you very much.
    Admiral, I would like to start with you if you would not 
mind. What do you see is the growth areas within the Coast 
Guard mission over the next five to ten years?
    Admiral Papp. The growth areas will be, I think, and it is 
reflected in our budget, how do we respond to incidents, such 
as Haiti, Deepwater Horizon, hurricanes. We are seeing an 
increased number of hurricanes, and thank goodness we dodged 
that bullet this last summer, particularly when we were in the 
midst of working on the oil spill down in the Gulf.
    But what we have found over the past probably four years, 
going back to Hurricane Katrina, is that we really lack the 
capacity for incident response. What we do is we curtail 
activities that we would normally be doing, and we deploy 
people to take care of those responsibilities.
    I will give you a for-instance. During the height of 
Deepwater Horizon, we had about 3,000 people forward deployed 
from the Coast Guard to man various incident command posts 
across the Gulf of Mexico. These were not people that we had on 
standby waiting to take care of incidents. In fact, I was 
speaking to an Army officer, who when he heard me sort of 
whining about the fact that we were so depleted, said, ``Well, 
why don't you use your folks that are in garrison?''
    And their mindset is you have these divisions of infantry 
or artillery or whatever that are in training, and then when 
crises come up, you order them up and you send them forward. 
The Coast Guard just does not have that band strength. So 
there----
    Mr. Farenthold. Do you see the Coast Guard's role as a 
direct responder or a first responder there, or do you see it 
more as a supervisory role over private sector response team?
    Admiral Papp. It is clearly a shared responsibility. One of 
my principles is strengthening our partnerships. It has got to 
be a partnership with industry, State, Federal and local 
forces, just as it was during the oil spill. And primarily it 
is supervisory.
    Those 3,000 people down there were in incident command 
posts, but it is also putting people out into the field either 
working directly on a spill or whatever the incident might be 
or supervising those people that industry is paying for out 
there.
    Mr. Farenthold. We also see a line item looking to purchase 
some more aircraft and maintain the air fleet. Much of what the 
Coast Guard does short of helicopter rescues, seems like it 
would be something worth studying, moving to unmanned vehicles. 
Are you all looking at rather than having guys flying up in 
jets doing the patrols doing some of that with unmanned 
vehicles as a cost savings?
    Admiral Papp. Actually the HC-144 Ocean Sentry aircraft 
that you see in the budget is a replacement for those jets that 
we have used for many years. This is going to give us probably 
in the long run a lower cost asset that is able to stay out 
there for more hours, do greater surveillance, has better 
sensors, has a sensor pallet that goes in there, and we have 
been putting it to good use. That is another one of those 
assets that we cannot get out there soon enough.
    Mr. Farenthold. And you do not think that a lot of that 
could be done with some of the technological advancements that 
we are seeing with things like the Predator drone?
    Admiral Papp. Some of it could be, and we are in the 
process right now of working with our partner within the 
Department of Homeland Security, Customs and Border Protection. 
They do have a Predator program that they are working on right 
now.
    The challenge is coming up with a Predator that is adapted 
to the maritime environment, which is completely different. It 
is a whole new set of environmentals that you are dealing with, 
with salt, air and other things.
    Mr. Farenthold. I live on the coast. I understand that.
    Admiral Papp. Yes, sir. So we are certainly interested in 
it. We have been working on a trial project with CBP, and we 
have, in fact, been providing some Coast Guard aviators to help 
fly the Predators and see what sort of return we can get on it.
    But those are very expensive, and I do not have the room in 
the budget at this point.
    Mr. Farenthold. And let's talk for just a quick second 
about ship disposal. What is your all's procedure for ship 
disposal? I understand there is a clean-up.
    Are you all sinking them? Are you sending them to ship 
recyclers? Are you stripping materials out and then selling 
them?
    It seems like there might be some people willing to take 
these for nothing in exchange for the scrap.
    Admiral Papp. Yes, sir. Actually that is a pretty good news 
story as well. To be truthful, we are talking about 40 year old 
ships. That means we have not been giving away too many ships 
recently. We are hopeful that we will be giving away more here 
in the near future, but what we do have is, first of all, we 
have foreign military sales, and there are some opportunities 
out there to sell the ships, getting money back, and also 
saving us the cost of having to clean them up environmentally.
    But we also have within the bill that is going forward, it 
gives us the authority to work with Mr. Matsuda and the 
Maritime Administration to go through their ship program, which 
would then sell them off for scrap, which then saves us the 
cost of having to have them environmentally pure before they 
are transferred someplace else or sunk and possibly give some 
returns to the Government.
    Mr. Farenthold. Thank you very much, sir.
    Mr. LoBiondo. Mr. Landry.
    Mr. Landry. Thank you.
    Commandant, of course, I do not have any problem with ICE 
down on coastal Louisiana, but I was just curious as a business 
owner, have you all looked into the possibility of leasing 
icebreakers from the private sector rather than trying to pour 
money into old assets and then come back to us and ask for 
large capital expenditures?
    Admiral Papp. Well, what happened here back in 2005, sir, 
is the operating funds for our polar icebreakers were 
transferred to the National Science Foundation, and I am not 
sure of the logic in that or the wisdom, but in any case, the 
National Science Foundation immediately turned around and then 
started leasing foreign icebreakers.
    It is interesting to note that the first year they did 
that, they leased a Russian icebreaker to break out McMurdo at 
the South Pole, and the Russian icebreaker broke down. We had 
to activate our icebreaker and send it all the way from Seattle 
to break it out.
    So there certainly are possibilities for leasing 
icebreakers, but I think there is probably some minimum number 
of icebreakers that this country wants to have on hand.
    Mr. Landry. Well, I would like you to lease them from U.S. 
companies rather than from foreign companies. I know that on 
the Great Lakes there are a number of icebreakers that are 
leased by governments from companies in the United States. I 
have one of the shipbuilders and owners in my district that 
actually leases icebreakers out on the Great Lakes. So it is 
amazing that we went out to foreign countries to lease 
icebreakers when the gentlewoman was talking about how we 
increase our shipbuilding capability and how we get people back 
to work in this country.
    It certainly seems to me that we could look at a cost 
savings measure, possibly leasing those icebreakers from 
companies right here in the United States.
    Admiral Papp. It is certainly an option that is out there. 
We have not investigated it because we are trying to come up 
with the wherewithal to support the icebreakers that we have, 
and most of the time we fall short of the hours just on the 
icebreakers that we have.
    Mr. Landry. Well, it seems like based upon the amount of 
money you are pouring into a very old vessel, maybe you all 
should have someone take a look at that. I will be more than 
happy to send you a couple of names of people who are building 
them and would lease them to you all.
    Admiral Papp. Thank you, sir. We will take a look at that.
    Mr. Landry. OK. Real quickly, as you know, seven years ago 
Congress passed a statutory requirement for the Coast Guard to 
craft regulations for touring vessel inspections, including 
safety management systems for touring vessels. The goal of 
these regulations is to increase the operational safety of the 
largest segment of commercial U.S. flag vessels. The safety 
management system required is one of the National 
Transportation Safety Board's top ten most wanted 
transportation safety improvements, and from what I have seen, 
these draft regulations are a great example of how the Coast 
Guard has worked, you know, to get input from private industry 
and rely greatly upon the wisdom of the private industry in 
promulgating those regulations.
    I understand that we still have not published those in the 
Federal Register, and after two congressional directives and 
countless industry contacts, could you tell me why we have not 
gotten those published yet?
    Admiral Papp. Yes, sir, and I understand the importance of 
pushing this through. There is a lot of good in there, but it 
does, as you noted, reflect a huge change and probably impacts 
a lot of resources not only for the Federal Government in terms 
of having inspectors, but also for industry as well in terms of 
changes they may need to make.
    That regulations package has gone back and forth a lot. I 
have had a chance to give it some focus now during the nine 
months that I have been the Commandant. It has been back with 
us and probably if there is any delay right now, it is because 
we have been back and reviewing it in the midst of Deepwater 
Horizon, and now we have been able to give some more attention 
to it.
    Frankly, I have taken the opportunity to go across the 
country and talk to the industry groups as well, a broad watch 
of the maritime industry, but in particular, the American 
Waterways Operators who certainly are most affected by this 
bill. In fact, I met with their executive committee just the 
other night to get input from them.
    We want to make sure we have got the right package going 
forward. I think we have answered the questions that were posed 
to us upon review, and we have transferred it back up to the 
department to get their final review on it.
    Mr. Landry. Seven years.
    Admiral Papp. Yes, sir.
    Mr. Landry. Mr. Commandant, that is a long time.
    Admiral Papp. Yes, sir.
    Mr. Landry. OK.
    Mr. LoBiondo. Mr. Matsuda, I wanted to follow up on a 
question that the Congresswoman from Hawaii posed to you about 
the Title XI, and I believe that you stated that there was $2.8 
billion in the capital construction fund that could be accessed 
by account holders, if I am accurate here, and you also noted 
that on the Title XI funds that you have to have applications 
before you in order to be able to expend the money.
    Well, unless we are mistaken, at present if your 
applications that you have before you were to move forward, you 
would not have enough money to approve them. You would not have 
enough money to cover them.
    I do not understand. Help me understand how you can say you 
do not have applications before you when either I have got 
wrong information or somehow you have got wrong information.
    Mr. Matsuda. I believe the information you have is correct 
in that that is the amount that the applications have 
requested. At the end of the day, we go through this process of 
determining whether this is a deal that is acceptable, an 
acceptable risk to the taxpayers. And that may not be the case 
by providing the amount of subsidy required compared to what 
they originally proposed.
    So at the end of the day some of these projects may not be 
good projects. They may not move along through the process with 
the same amount of speed that others do. We have found, given 
recent history, that it takes some time to get some of these 
projects moving along, and I know that that is due to a couple 
of factors.
    One involves our internal processes, and that is something 
that I have taken a very close look at. We hired a consultant 
to come look at the business processes used to see if we cannot 
speed those up or make them more efficient. But on the outside, 
the majority of the time it takes to process these applications 
is spent waiting for an applicant to provide more information 
on their application.
    Mr. LoBiondo. Admiral Papp, the Coast Guard completed a 
fleet mix analysis to determine the numbers and types of vessel 
platforms that would be necessary to support Coast Guard 
missions in the future. Chairman Mica and I requested this 
report 13 months ago. It is pretty hard to understand why we 
have not had it.
    Were you going to be able to provide it to the subcommittee 
by the end of the week?
    Admiral Papp. I would be reluctant to give you a guarantee 
that I could get it to you by the end of the week. I will 
commit to you to do my best to move this forward though, sir.
    Clearly, this is something that is very important to me as 
well. As you know, as I think the subcommittee knows, we have 
gone through phase one of the fleet mix analysis, which at 
least validates the construct of what we have in the 
acquisition baseline for what was known as the Deepwater 
Project in terms of the mix of National Security Cutters, 
offshore patrol cutters, fast response cutters, and the 
associated aircraft.
    Now it is in the process, a combination of the department, 
us, and GAO, taking a look at various options within that that 
would perhaps either provide better return or better value for 
what is proposed.
    But I commit to you to getting back and getting a timeline 
on that so that we can get this to the subcommittee.
    Mr. LoBiondo. I appreciate that. I hope we do not have to 
ask for this in a public setting again.
    Admiral Papp. Yes, sir.
    Mr. LoBiondo. On the National Security Cutter, the Office 
of Management and Budget is requiring the Coast Guard to have 
available amounts sufficient to cover the cost of long lead 
material, construction and post production before the 
production begins. As a result, the fiscal year 2012 budget 
requests $77 million to complete the construction of the 
National Security Cutter No. 5, but does not request funding 
for long lead materials for No. 6. This obviously will delay 
delivery in the future of National Security Cutters and I think 
cost the taxpayers millions more money.
    Can you talk about what is the impact of OMB's new full 
funding policy on the per vessel price of the National Security 
Cutter and what is the impact on the delivery schedule of 
future NSCs?
    Admiral Papp. Well, that is the big issue, the full funding 
in any given year for the long lead production and post 
production costs. That obviously takes up a large portion of 
whatever the amount is that we get for acquisitions in any 
given year.
    As we work through the fixed price contract, which I think 
was a righteous effort for us in terms of our acquisition 
reform, the fixed price contract on No. 4, and when the price 
came in we had to move money that was originally dedicated 
towards long lead time procurement for No. 5 and then work 
within the continuing resolution to make sure we had enough 
money to award the long lead money for No. 5.
    We were granted an exception by OMB to be able to do this 
because of the promise or at least what appeared to be the 
intent of Congress to put the money for No. 5 into the 2011 
budget.
    But even at the amount that we are trying to predict, it is 
hard for us to predict right now how much will come through in 
the 2011 budget because of the continuing resolution. What we 
think we are going to get would require another $77 million in 
the 2012 budget, and because we had to put money for No. 5 in 
the 2012 budget, we just could not come up with the room to fit 
in the entire cost of NSC No. 6 without displacing a lot of 
other very important projects that we cannot afford to breach 
the acquisition project baselines.
    And, frankly, I think we are gaining some savings by buying 
some more patrol boats. We are going to build out our response 
boat medium a little quicker and get that project out of the 
way so we can make room in the out-years. All in all, as I said 
right from the start, there were some very tough choices within 
this budget, and I think we have optimized our purchases within 
the amount of money that is available.
    Mr. LoBiondo. Admiral, I understand we have some very tough 
choices to make, but can you either tell me today or get back 
to us on what this is going to cost the taxpayers?
    Admiral Papp. In terms of a delay on No. 6 in terms of long 
lead?
    Mr. LoBiondo. Yes.
    Admiral Papp. Yes, sir. We will provide that to you.
    [The information follows:]

        Based on the current full funding policy, the funding 
        associated with the sixth NSC is not required until FY 
        2013. Future year requests will include funding for 
        both long-lead materials and production of the same 
        ship in a single fiscal year to ensure operational 
        return on fiscal investment.

    Mr. LoBiondo. OK. Master Chief, the Coast Guard 
Authorization Act of 2010 establishes a housing trust fund to 
help finance the construction and renovation of Coast Guard 
service member housing. Is the funding available in the trust 
fund sufficient to cover the backlog of service member housing 
improvement projects?
    Master Chief Leavitt. Thank you, Mr. Chairman, for the 
question. Thanks for approving that authorization, by the way, 
too.
    Right now we are in the process of identifying those 
properties that that Authorization Act allows us to do, and 
taking a look at the housing areas. Buckson, North Carolina, 
that housing area is looking at they are being sold and then 
put back, to reinvest back into our housing, along with other 
properties.
    The goal is probably to get those monies back in, look at 
it, and then get them appropriated for fiscal year 2013. But to 
be honest with you, this whole project is more to get us going, 
more to help jump start the housing because the long-term 
processes of our housing is to take a good look at our housing 
over the general Coast Guard because there are a lot of areas 
that it is going to take a lot more than $20 million that we 
may be able to get into it in the fiscal year 2013.
    [The information follows:]

        CORRECTION: The current housing account balance does 
        not cover the projected backlog of proposed military 
        housing projects, but the provision within the Coast 
        Guard Authorization Act of 2010 provides the Coast 
        Guard with a vehicle to address military housing needs 
        on a recurring basis. The Coast Guard is in the process 
        of conveying several pieces of property, and recouping 
        the proceeds into the established housing fund for 
        future housing projects, as authorized by the Coast 
        Guard Authorization Act of 2010. The Coast Guard 
        housing project request in the 2012 budget, and 
        authorities contained in the new legislation will begin 
        to address the backlog of eligible government owned 
        housing improvement projects.

    For example, across the broad base I think Admiral Allen 
said a third of it is in pretty good shape, a third of it is in 
medium shape, and a third of it is in poor shape, and that is 
what we are facing. We are facing the high cost of 
construction. Right now with this bill we are looking at $20 
million, and we are looking at replacing the unaccompanied 
personnel housing up at Cape Cod and as well as the lower 
Columbia River there. It is very expensive taking a look at 
that. So we are just looking at two housing areas. We have 
4,000 houses, plus or minus a few, out there in our inventory.
    So if you take a look at those numbers, you can see, well, 
$20 million this year might be able to cover other area 
housings right here, but the reality of it, Master Chief Bowen 
came in here last year and he told you that we are about $300 
to $350 million in backlog in the housing. So those are the 
challenges that we face and how we are going to organize across 
our mission because housing is included in the infrastructure 
that we have also, our older infrastructure, about the same age 
as our ships, Mr. Chairman.
    Mr. LoBiondo. Well, either today or as a follow-up, if you 
can suggest, make any recommendations to us, I mean, short of 
striking the lottery for you, what we can do to help improve 
the housing situation, we would be interested to try to 
continue working on that.
    Master Chief Leavitt. Yes, sir. One thing that we are doing 
is an analysis of our housing to identify the numbers we have 
throughout the country, to see what the supply and demand is 
for our housing versus basic allowance for housing, and we will 
have a much better idea once we run this analysis across to see 
what our position is. We can give you a much better number of 
what that deficit might be in that gap by identifying that gap, 
sir.
    [The information follows:]

        The Coast Guard is very appreciative of the new housing 
        legislation contained in the Coast Guard Authorization 
        Act of 2010. Specifically, the authority to leverage 
        the proceeds from the sale of excess Coast Guard 
        property for repair and construction of Coast Guard 
        housing will be an important tool for the Coast Guard 
        in managing its housing program. Currently, the Coast 
        Guard is aggressively pursuing execution of these new 
        authorities in order to improve the material condition 
        of Coast Guard owned housing and the quality of life of 
        our service members. The Coast Guard has also embarked 
        on a comprehensive national assessment of government 
        owned family and unaccompanied personnel housing. The 
        results of this assessment will baseline current 
        maintenance conditions and the proper allocation of 
        Coast Guard owned housing. Additionally, this 
        assessment will also prioritize housing maintenance/
        recapitalization requirements. Most immediately, the 
        Coast Guard requests the support of Congress in funding 
        the military housing projects contained in the 
        President's FY 2012 budget. These projects (Cape Cod, 
        MA and Sector Columbia River) are vital to providing 
        military members/families in these areas with 
        affordable, suitable housing critical to ensuring 
        operational readiness.

    Mr. LoBiondo. Thank you, Master Chief.
    Mr. Lidinsky, in December 2010, the FMC formally accepted 
the report of Commissioner Dye's investigation into vessel 
capacity and equipment shortages. Has the FMC established the 
shipper-carrier working groups to follow up on the 
investigation's recommendations?
    Mr. Lidinsky. We have, Mr. Chairman.
    Mr. LoBiondo. Is your mic on?
    Mr. Lidinsky. I say we have, Mr. Chairman, moved forward. 
The fact finding had six or seven different areas of action for 
the Commission to follow. Commissioner Dye is overseeing most 
of those. The Commission had a vote on several of those, such 
as getting full transcripts from some of the carriers, a Notice 
of Inquiry concerning the alliances that run certain carrier 
groups, and bringing together the shippers and carriers and the 
working groups as well.
    Mr. LoBiondo. Thank you.
    Mr. Larsen, back to you.
    Mr. Larsen. Thank you, Mr. Chairman.
    Back to Chairman Lidinsky, it was noted that you have a 
slight increase in your budget, and it seems that from my 
perspective the only possible way to justify that in this 
current fiscal environment is that there is some relation to 
your increase to economic growth and creating U.S. jobs here as 
a result of the trade that the Commission has responsibility to 
oversee.
    Can you give us an indication that that is, in fact, the 
case?
    Mr. Lidinsky. That is a correct analysis, Mr. Larsen. Every 
action that the Commission takes, whether approving an 
agreement or whether overseeing a new program such as Pier 
PASS, which on the West Coast, which has created hundreds of 
jobs for truckers, has an economic impact on our employment 
situation.
    In the specific case of the increases in the budget where 
we call for these two additional spots in our Consumer Affairs 
Office, this would help shippers who maybe just enter into the 
international export stream, to overcome any problems we are 
having with carriers.
    So I think it is a very strong investment to make just for 
two positions. At the current moment we have two people 
assigned from another office to help out that office because 
we're seeing an increase of over 16 percent in cases so far 
this year, a projected total of about 650 cases for the year 
resolving these issues.
    But people who would go particularly into the export trade 
often try it once and if they are unsuccessful for whatever 
reason, then they back off, and there are jobs that are not 
create.
    Mr. Larsen. Thank you.
    Chairman Matsuda or Administrator Matsuda, with regards to 
the MSP, you note that the Administration has requested $174 
million for the Maritime Security Program to support sealift 
operations. Considering the current and continued deployment of 
U.S. Armed Forces overseas, the unrest throughout the Middle 
East, and so on, and the likely scenario of increased fuel 
cost, is your request sufficient to meet the sealift needs of 
our Armed Forces?
    Mr. Matsuda. This request for the Maritime Security Program 
would fully fund the program at the authorized level, and this 
is a program that has throughout its history has always been 
funded at the authorized level. It has been a progressively 
larger amount. Over every several years it gets adjusted in the 
authorization, and that approach has helped to deal with things 
like fuel costs and inflation.
    I note that recently Congress extended the program for ten 
years, and we hope to have a proposal up to Congress shortly 
that would talk about how we might be able to address some of 
the details in the program.
    But it is a critical one. It is one that we work very 
closely with our partners, the United States Transportation 
Command and the Department of Defense, to make sure it is 
meeting their needs. Right now we will note that General Duncan 
McNabb, the commander, has called for more of specific types of 
ships, roll-on/roll-off vessels, for instance. Some of these 
have a hard time meeting commercial viability tests that you 
need to be able to operate in the foreign trade.
    So we are working with them to make sure it is a program 
that delivers the right mix of vessels and crews to make sure 
it meets their needs.
    Mr. Larsen. Thanks.
    With regard to the assistance to small shipyards, we had 
occasion to discuss this a little bit yesterday, and I have 
given my assessment of how the shipyards in my district have 
utilized it in order to become more efficient today so that 
they are more efficient over the next ten years. So the payback 
on this is not a one-year payback. It is a payback over the 
life of the shipyard.
    Given that, can you talk a little bit about why this is in 
the request zeroed out?
    Mr. Matsuda. Well, the Shipyard Grant Program is something 
that we take very seriously. We continue to administer the 
grants to make sure that the funding that has been provided, 
which was $100 million in the Recovery Act; there was another 
$15 million before that and I believe a similar amount in 
another previous year; overall these grants have done wonderful 
things. We have tallied at least 500 jobs created to date as a 
result of the grants. It helps the small shipyards purchase new 
equipment.
    Some of these equipment manufacturers have hired new folks 
to help produce the stuff here in the U.S. So overall we think 
it has had a great impact. It is too early to see maybe in the 
long term how that might impact the competitiveness of our 
shipyards and repair facilities, and so that is something we 
are continuing to monitor, but we certainly understand the 
importance of it.
    Mr. Larsen. If I could just note, Mr. Chairman, before I 
yield back that you mentioned 500 jobs, which obviously does 
not seem like a lot, given what has been put in this program, 
but again, none of these shipyards look at this as a one-year 
investment. They all look at it as part of investment today 
that pays off over the long term for them.
    And, again, I have invited you to several shipyards in my 
district to see what they have done with these grants that will 
mean a long-term investment for the shipyard so that they can 
maintain their viability, their competitiveness, and to get out 
there and go out and compete for shipbuilding jobs.
    Mr. LoBiondo. I would be happy to witness that.
    Mr. Larsen. Thank you. Thank you, Mr. Chairman.
    Mr. LoBiondo. I would like to ask unanimous consent that 
Mr. Southerland, a Member of the full Committee, be allowed to 
sit on the subcommittee for the hearing today.
    Without objection, so ordered.
    Master Chief Coble.
    Mr. Coble. Thank you.
    Mr. Chairman, when you address me in that manner, at least 
when Admiral Allen was here, there would be a broad smile 
across his face when you said that.
    Admiral and Mr. Chairman and Ranking Member, I do not want 
to be a Johnny One Note, but I am still having difficulty 
embracing the Polar Sea problem, Admiral. I am still steaming 
in the fog.
    Let me ask you this, Admiral. What do you plan to do with 
her once she is decommissioned? Are there plans to perhaps 
retain her with the hope of reactivating her at a subsequent 
date?
    Admiral Papp. Yes, sir, absolutely. The challenge that we 
are confronted with, and perhaps I should have given a little 
bit more detail here, is the money that is transferred back 
from the National Science Foundation back into the Coast Guard 
budget in the President's recommendation is enough to operate 
one medium icebreaker and one heavy icebreaker. So Healy, of 
course, will be operated. She is operating and will continue to 
do that.
    But right now we have only got one icebreaker crew. Polar 
Star, the one that has been under reactivation, has no crew. 
She was laid up in caretaker status for a number of years 
pierside, and then we have just recently gotten the funding to 
reactivate that, but we do not have operating funds for that 
ship. We only have operating funds for the Polar Sea, which is 
broken down and which I do not want to invest any more money 
in.
    So what we will do is we will transfer the operating funds 
from Polar Sea over to Polar Star to complete the reactivation 
and then have a full up ship ready for about another ten years 
of service.
    Mr. Coble. That being the Polar Star.
    Admiral Papp. The Polar Star.
    Polar Sea, we will lay that up and put it in caretaker 
status like Polar Star was before. We will retain it to see the 
outcomes of our high latitude study and other decisions that 
are made by the country in terms of what we want for organic 
icebreaking services for this country.
    [The information follows:]

        CORRECTION: After the POLAR SEA is decommissioned in FY 
        2011 and all personnel have been transferred to the 
        POLAR STAR, the Coast Guard will immediately begin the 
        disposal process with MARAD. Disposal plans have not 
        been finalized, but POLAR SEA will likely be 
        transferred to MARAD's Reserve Fleet in FY 2012 with 
        final disposal options at MARAD's discretion. We 
        strongly support enactment of DHS General Provision 
        Section 539 in the President's 2012 Request to enable 
        the most efficient means for disposition.

    Mr. Coble. Thank you, Admiral. I am still not grasping it, 
but I appreciate that, Admiral.
    Thank you, Mr. Chairman.
    Mr. LoBiondo. Mr. Cravaack.
    Mr. Cravaack. Thank you, Mr. Chairman.
    Mr. Matsuda, I would like to go back again. One of the main 
concerns that I have is regarding your Merchant Marine 
availability. With China developing a deep water navy, my 
question would be: how quickly could we spool up, if necessary, 
if we became involved in a global conflict once again where we 
would need our Merchant Marine fleet to be fully active under 
U.S. flag hopefully, if not, our allies, to be able to move men 
and materials to where they need to be for the conflict?
    Mr. Matsuda. I am happy to talk to you about that. This is 
something that we work very closely with the Department of 
Defense on, to make sure that as they are the customer, so to 
speak, that we meet their needs in terms of delivering this 
commercial capability to carry goods on U.S. ships with U.S. 
crews.
    One of the most important programs to make sure that can 
happen is the Maritime Security Program, and that provides an 
economic incentive for these private U.S. companies to maintain 
a ship under U.S. flag and hire U.S. crews.
    The other flip side of that is the Cargo Preference 
Program, which makes sure that they can carry cargos that are 
financed by the Federal Government and able to sustain their 
business operations and meeting their costs.
    These programs work to provide a Merchant Marine that is 
capable and available, ready to meet the needs of the military.
    In addition to this, we have a fleet of our own vessels 
that are held in reserve status around the country, 49 large 
cargo ships, some of them specialty mission, but for the most 
part these are crewed with a skeleton crew, and they rely on 
this pool of U.S. commercial mariners employed by American 
companies in the MSP program, and these are ships that can be 
available within five days' notice.
    The Maritime Security Program and the commercial ships, 
generally speaking, some of these can be anywhere in the world 
trading at any particular time. Generally speaking, they will 
take longer to make sure that they are available, but with the 
whole package of programs, we make sure that we have a product 
that works and delivers everything that our troops need on the 
front line when they need it.
    Mr. Cravaack. Thank you for that.
    Now, once step further, engaging, we have casualties to our 
maritime fleet. How are we prepared to replace those ships?
    Mr. Matsuda. Do you mean the reserve ships held by our 
agency or----
    Mr. Cravaack. Well, if we were in a full conflict, for 
example, obviously there will be casualties to our maritime 
fleet. How quickly is the United States able to respond to 
building more ships if necessary or being able to acquire 
assets needed to make sure that we are able to maintain the 
war?
    Mr. Matsuda. That is a good question. Obviously that 
depends on both our own country's industrial shipbuilding 
capability. I think that for the most part the focus of our 
Nation's shipbuilding has been on the military side and less so 
on the commercial side. However, given what the market is right 
now for vessels available in the world to sail, there is an 
abundance of, for instance, tanker vessels. This is just a fact 
of the industry.
    If we were to need one of these ships, we might not be able 
to get one fairly quickly, depending on the state of the 
current industry. For other types of vessels, we do not know, 
and that is why we focus more on maintaining a U.S. capability. 
But at the end of the day what we want to make sure we deliver 
to the military is assured access to sealift capability.
    Mr. Cravaack. Thank you much, sir.
    And I will yield back the rest of my time, Mr. Chairman.
    Mr. LoBiondo. Mr. Landry.
    Mr. Landry. Commandant, in your prepared statement you 
stated the Coast Guard provides our Nation with tremendous 
value and service to the public, and I could not agree with you 
more. You all do a great job. You all have done a great job 
during the Deepwater Horizon accident and also during the 
hurricanes that have plagued our coast.
    However, according to the Coast Guard's Website, there are 
more than 6,500 oil and gas producing wells in the Gulf of 
Mexico and fishing vessels numerous enough that nearly 40 
percent of the U.S. commercial catch is landed along the Gulf 
Coast.
    Considering the staggering number of commercial activity in 
the Gulf, is it realistic to expect the Coast Guard to reach 
every drilling platform accident site in enough time to save a 
maritimer's life who must abandon the platform by jumping 
overboard?
    Admiral Papp. Well, it might be unreasonable, sir, if that 
was the only response, and I will emphasize the word 
``response.'' We do two things in the Coast Guard. We do 
prevention and response, and part of our process is to make 
sure that platforms have the proper firefighting equipment; 
that the crews are trained; that there are lifeboats and other 
facilities that take care of that.
    In other words, we do not want the fire to start or an 
explosion or whatever it might be in the first place. So we 
pour a lot of effort into those prevention activities.
    In terms of response, we will continue to do our best. It 
is a lot to expect, but on the other hand, we do not get a lot 
of cases, and we do have sufficient helicopter coverage out 
there and boats that are close enough to respond within a 
required time period.
    Mr. Landry. And I appreciate that. I just know that there 
were two accidents actually in the Gulf of Mexico this year, 
one right after or a couple of months after the Deepwater 
Horizon accident. In both of those accidents men had to jump 
overboard. I think that probably as careful and as prudent as 
you can be when a man or a woman is faced with a disaster on a 
platform and trying to make a decision on how to survive, they 
have a tendency to want to jump into the water.
    I think we were lucky with the Deepwater Horizon that the 
Bankston Todd was there at the time. However, in the Manor 
accident, those men stayed in the water for ten hours. If that 
would have been in January or February when the Gulf 
temperatures are in the mid-50's, I do not know if we would 
have picked them all up alive, which is my concern.
    Admiral Papp. Yes, sir. Well, it is always balancing 
against risk. In an unlimited resource environment you could 
provide more out there, but then how many of them do you cover? 
How much do you keep in full-time reserve? I think we have got 
adequate resources.
    Mr. Landry. Would you say that the private sector could do 
as good of a job putting some sort of standby vessels within 
certain maybe three or four blocks of man?
    Admiral Papp. Well, it is an intriguing concept, sir, but 
it is going to cost somebody some money somewhere, and I do not 
know if you can predict where the optimal location would be. It 
is certainly something worth looking at.
    Mr. Landry. Thank you.
    Mr. LoBiondo. Mr. Southerland, you are up.
    Mr. Southerland. Mr. Chairman, thank you very much.
    Though not a regular sitting member of this subcommittee, I 
appreciate the opportunity to speak today.
    My questions today are for you, Mr. Matsuda, and I thank 
you for allowing me the opportunity to ask you a few questions. 
My questions today are in regards to the Title XI Loan Program.
    There is an application before you right now that I think 
you are aware of, Eastern Shipbuilding application, and the 
reason I am bringing my questions today is right now with 
Florida at historical unemployment numbers, 12 percent, 
creating jobs is clearly a mantra that gains traction in 
Florida.
    This application, which has been before MARAD for two years 
now, we are quickly approaching a deadline, March 10th, for 
this application to be heard and a decision made. I know that 
the Credit Committee will see this application on March 8th, 
just two days, 48 hours before the expiration, and I just 
wanted to get some feedback from you, if possible, regarding 
this application.
    Seeing the crisis that we are in in this country of having 
to create jobs, can you address this particular application?
    Mr. Matsuda. I surely can, sir, and this is one that we 
have been watching closely, as we know how important it is to 
you all and others certainly in the region and the industry.
    Like this application, we treat every application as one 
that has the potential to be successful, and so in many ways we 
work very closely to make sure we can put together a deal that 
meets the financial tests to allow the Federal Government to 
put their guarantee behind the project.
    There has been a number of instances in the past where 
decisions were made that, well, maybe they were not the best in 
terms of the risk that was before the Administration, but this 
is something we take very seriously and we look very closely 
at. We understand that we are approaching the statutory 
deadline. We do not think that that deadline will stand in the 
way of them actually refiling to make sure it is fully 
considered with sufficient time.
    Mr. Southerland. But you clearly understand though that in 
the business world time is not just money, but speed is also 
profit, and so therefore, there is a sense of urgency out there 
in the private sector that clearly, if this deadline is not 
met, that there is a great, I would almost tell you a better 
than average chance that this contract to build these vessels 
would go to a foreign country somewhere else.
    And so, therefore, I think that is why I just bring it up 
today. The sense of urgency, I appreciate the deadline 
extension, but after the project moves on, the extension to be 
able to attract a contract like this goes away.
    Mr. Matsuda. We are fully aware of it, and I assure you we 
are moving with all due haste to make sure it is considered. 
What we cannot change are the merits of the deal. If it is not 
a good deal for the Federal Government----
    Mr. Southerland. No, I understand. But here we are. It has 
been filed for two years. It is a two-year application, and we 
now hear this in the Credit Council 48 hours before the 
deadline, and so, therefore, I mean to say that we are at the 
11th hour, I would say that we are at like the 11th hour 59 
minutes.
    And so what happens? Is there, in your opinion, is there 
time for the Credit Council to hear this application, approve 
this, and will that be done on the 8th? Is it possible for this 
to meet the deadline or have we push this to the Credit Council 
to where it is impossible to approve this on the 8th and for 
this to be approved for funding by the 10th?
    Mr. Matsuda. Well, we do not like to put these types of 
applications before the Credit Council and other internal 
review processes until we are confident that this is a deal 
that can be approved that works for the Federal Government and 
they can make a recommendation to the Secretary.
    Mr. Southerland. So you feel, and the only reason I am 
hastening is because I am running out of time; so you feel that 
it has met that standard to be worthy to go before the Credit 
Council. Because you just stated that you did not want to put 
an application before the Credit Council unless it has met 
certain standards. So I am assuming since it is going before 
the Credit Council on the 8th that it has met certain standards 
that you feel that it is worthy to go before them
    Mr. Matsuda. Well, I do not think I could speak to the 
particulars of it or the merits of it, but I can tell you that 
we are working very hard to make sure that it is in that shape 
by that time, and we hope that we can get there.
    Mr. Southerland. So if it goes before them and if it be 
approved on the 8th and it can still meet the deadline on the 
10th in order for full approval so that we can create 300 jobs, 
1,500 ancillary jobs, a huge economic boost in a region that 
was hit by and affected by the Deepwater Horizon?
    Mr. Matsuda. Well, again, I could not speak to the 
particulars. I will tell you that we will not let the process 
be upended nor get in the way of these important goals that we 
understand.
    Mr. Southerland. But be sensitive that the process could 
very well be the reason that these jobs go elsewhere in the 
world. OK? So there is a sense of urgency here.
    Mr. Matsuda. Yes.
    Mr. Southerland. And I would just ask that it is my 
understanding that this transaction clearly falls inside the 
guidelines and that this is a very credit worthy applicant that 
can stand on its own merits. I appreciate you today and your 
comments. I would just ask that because of the sense of 
urgency, OK, that we would do our due diligence on the 8th and 
then do our due diligence on the 10th so that this contract and 
the jobs it will create will not go overseas.
    Mr. Chairman, I thank you for the time, and I really 
appreciate you allowing me to ask these questions.
    I yield back.
    Mr. LoBiondo. Sure. Mr. Matsuda, we understand you cannot 
speak to particulars today, but I guess it is only fair to tell 
you that the Chairman of the full Committee, Mr. Mica, will 
probably ask you for particulars if this falls apart from a 
timeline standpoint. The Committee is very interested in it, 
American jobs, and you heard all of the arguments.
    So just know there is a bigger picture than what you are 
hearing just here for Mr. Southerland.
    Mr. Matsuda. I fully appreciate that, sir, and I would be 
happy to talk about that. In the meantime, I will inform the 
Chair of the Credit Council, our Deputy Secretary, of your 
interest in this.
    Mr. Southerland. Thank you.
    Mr. LoBiondo. OK. Mr. Larsen.
    Mr. Larsen. Thank you, Mr. Chairman.
    Just a couple of questions to clean some things up. First, 
I am impressed with this subcommittee's full recognition 
apparently that there is definitely a Federal Government role 
in supporting jobs in this country, and that seems to be shared 
on both sides of the aisle, something we are hearing a lot of 
lately.
    Admiral Papp, last year's authorization bill in Section 809 
specified that not all Coast Guard licensed captains need to 
have TWIC, Transportation Worker Identification Credentials. 
Only those having unescorted access for secure areas of vessels 
would be required, that are required to have vessel security 
plans, but I am told that the National Maritime Center is still 
advising mariners that a license or a merchant mariner document 
is not valid unless the person also possesses a TWIC.
    And further, the center will not issue or accept an 
application without proof that the applicant has applied for 
the TWIC card.
    Is what I am hearing correct? Is the Coast Guard requiring 
TWIC as a prerequisite for obtaining a mariner license?
    Admiral Papp. Sir, I am not sure whether we are requiring 
it for the license itself. What I do know is that in the spirit 
of unintended consequences, when we move forward with the TWIC, 
often times like any other regulation or change that is 
developed, we find there are probably some groups that we 
probably did not intend to include.
    We discovered in my previous job as the Commander, Atlantic 
Area, we had laytexoma. We had some of the outer regions of the 
boundary waters up in Minnesota where you have uninspected 
vessel owners, fish guides and other people who clearly need 
some sort of licensing, but perhaps do not need the requirement 
of the TWIC.
    Unfortunately, the processes that we developed in terms of 
screening for both rely upon the same resources, and because of 
the database and their interaction together, and I cannot get 
into the technicality of this.
    Mr. Larsen. Sure.
    Admiral Papp. But what I do know is we came up with means 
to do these in tandem, and now we are in the process of trying 
to separate those. There are clearly some groups that we had 
not intended to have to take on this extra burden of having the 
TWIC as well, and we are working diligently to change that.
    Mr. Larsen. Can you get back to us with the specifics of 
how you are addressing this?
    Admiral Papp. Yes, sir. We will submit that for the record.
    [The information follows:]

        The present policy regarding the Transportation Worker 
        Identification Credential (TWIC) requirement for 
        mariners seeking a Coast Guard-issued credential 
        mandates that mariners provide their biometric and 
        biographic information to a Transportation Security 
        Administration (TSA) enrollment facility. This policy 
        and approach is in accordance with the regulations 
        required pursuant to 46 U.S.C. 70105, requiring all 
        mariners to hold a TWIC. DHS designed this requirement 
        to eliminate the multiple collection of similar 
        information by the Coast Guard and TSA--creating 
        efficiencies for both the Federal government and the 
        mariner. The coupling of the Merchant Mariner 
        Credential (MMC) with the TWIC allows TSA to collect 
        the information, perform the security threat 
        assessment, and then share the data with Coast Guard 
        for use in issuing the MMC.

        In response to the Coast Guard Authorization Act of 
        2010, the Coast Guard is in the process of developing a 
        short-term strategy to modify the TWIC enforcement 
        policies for the affected mariners and a long-term 
        strategy to decouple having a TWIC be a pre-requisite 
        for a MMC. Accordingly, the Coast Guard is working 
        closely with the DHS Screening Coordination Office and 
        TSA to maintain the efficiencies gained from sharing 
        enrollment centers with TWIC to obtain necessary safety 
        and suitability information for issuing MMCs, preserve 
        the convenience to the mariner of access to 
        significantly more enrollment locations than were 
        available before coupling TWIC and MMC enrollment, and 
        afford those individuals relief from financial costs 
        associated with the TWIC. These things are not easy to 
        accomplish, especially as we seek to avoid reversing 
        the efficiencies and elimination of unnecessary 
        redundancies gained under the current system. The 
        Service is currently working to issue both near-term 
        policy and longer term regulatory relief to affect 
        those statutory changes.

        In the short-term, the Coast Guard will develop and 
        implement policy that would remove the requirement for 
        holding a TWIC when serving under the authority of 
        their credential. Affected mariners would still be 
        required to use the TSA enrollment facilities to 
        provide their biographic and biometric information. The 
        Coast Guard is seeking to complete the short-term 
        solution during 2011. The long-term solution will 
        require a regulatory change.

    Mr. Larsen. That is great. I appreciate that very much.
    For Mr. Lidinsky, Chairman Lidinsky, I understand the 
Commission has recently published new rules that will relieve 
more than 3,300 licensed, non-vessel operating common carriers 
from the costs and burdens of publishing tariffs in tariffs or 
rates they charge for cargo shipping. Do you anticipate 
additional rulemaking in the upcoming year that will further 
reduce regulator burdens on the maritime industry and provide 
them additional incentives for economic growth?
    Mr. Lidinsky. We are, Mr. Larsen. In that NVOCC proceeding 
where I had mentioned before we had identified certain business 
that would save $200,000, we made the point that we hope some 
jobs come out of this. Of course, that is the decision of each 
individual business.
    But we are also agreeing all of our rules, regulations, and 
other orders and directives that we have put out under the 
spirit of the President's Executive Order, which as an 
independent agency you know we do not have to adhere to, but we 
are certainly doing so, to translate savings that could be 
translated into jobs in our ports and airlines.
    Mr. Larsen. Excellent. Well, if you can keep the 
subcommittee up to speed on the further steps you are taking to 
reduce regulatory burdens, I would certainly appreciate it.
    Mr. Lidinsky. We certainly will.
    Mr. Larsen. And my final question, Mr. Matsuda, MARAD has 
requested $2 million in base funding to support midshipmen 
finance requirements at the Merchant Marine Academy that were 
previously funded through midshipmen fees, which have since 
been discontinued. Is this the last budget or will we see 
additional plus-ups to the academy's base budget to cover these 
costs?
    Mr. Matsuda. For these costs we hope so. As we address the 
Government Accountability Office's recommendations, there are 
47 recommendations they made to help improve the accountability 
and transparency of the school's finances, and we have 
addressed 42 of them to date. We are making very good progress 
on closing out the remaining recommendations.
    Mr. Larsen. I am sorry. When you say the 42, have those 
been closed out? Have those been checked off?
    Mr. Matsuda. They have.
    Mr. Larsen. OK.
    Mr. Matsuda. And we have shared our work with the GAO, and 
they are going back over them as we speak.
    Mr. Larsen. OK.
    Mr. Matsuda. But I know that we made very good progress in 
cleaning up the finances and making sure that everything is 
working transparently and with full accountability.
    With the midshipmen fees, this is one that was responsible 
for a number of their recommendations, and we felt that it was 
actually less efficient to collect these than to simply request 
for the funds from Congress.
    Mr. Larsen. Thank you.
    Mr. Chairman, thank you very much for indulging me. Thank 
you.
    Mr. LoBiondo. Additional questions? The gentleman from 
Minnesota? The gentleman from Louisiana? Are you good?
    Mr. Landry. Yes, sir, Mr. Chairman. Thank you.
    Mr. LoBiondo. I would like to thank our distinguished panel 
very much.
    And the committee is adjourned.
    [Whereupon, at 11:55 a.m., the subcommittee was adjourned.]
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