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







                   A REVIEW OF VESSELS USED TO CARRY
                 STRATEGIC PETROLEUM RESERVE DRAWDOWNS

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

                                (112-90)

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                COAST GUARD AND MARITIME TRANSPORTATION

                                 OF THE

                              COMMITTEE ON
                   TRANSPORTATION AND INFRASTRUCTURE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 27, 2012

                               __________

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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
ANDY HARRIS, Maryland                MICHAEL E. CAPUANO, Massachusetts
ERIC A. ``RICK'' CRAWFORD, Arkansas  TIMOTHY H. BISHOP, New York
JAIME HERRERA BEUTLER, Washington    MICHAEL H. MICHAUD, Maine
FRANK C. GUINTA, New Hampshire       RUSS CARNAHAN, Missouri
RANDY HULTGREN, Illinois             GRACE F. NAPOLITANO, California
LOU BARLETTA, Pennsylvania           DANIEL LIPINSKI, Illinois
CHIP CRAVAACK, Minnesota             MAZIE K. HIRONO, Hawaii
BLAKE FARENTHOLD, Texas              JASON ALTMIRE, Pennsylvania
LARRY BUCSHON, Indiana               TIMOTHY J. WALZ, Minnesota
BILLY LONG, Missouri                 HEATH SHULER, North Carolina
BOB GIBBS, Ohio                      STEVE COHEN, Tennessee
PATRICK MEEHAN, Pennsylvania         LAURA RICHARDSON, California
RICHARD L. HANNA, New York           ALBIO SIRES, New Jersey
JEFFREY M. LANDRY, Louisiana         DONNA F. EDWARDS, Maryland
STEVE SOUTHERLAND II, Florida
JEFF DENHAM, California
JAMES LANKFORD, Oklahoma
REID J. RIBBLE, Wisconsin
CHARLES J. ``CHUCK'' FLEISCHMANN, 
    Tennessee
                                ------                                7

        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)















                                CONTENTS

                                                                   Page

Summary of Subject Matter........................................    iv

                               TESTIMONY
                               Panel One

Hon. John D. Porcari, Deputy Secretary, United States Department 
  of Transportation..............................................     3

                               Panel Two

Thomas Allegretti, President, The American Waterways Operators 
  (AWO), on behalf of AWO and American Maritime Partnership......    18

               PREPARED STATEMENTS SUBMITTED BY WITNESSES

Hon. John D. Porcari.............................................    32
Thomas Allegretti................................................    39






 
                   A REVIEW OF VESSELS USED TO CARRY
                 STRATEGIC PETROLEUM RESERVE DRAWDOWNS

                              ----------                              


                        WEDNESDAY, JUNE 27, 2012

                  House of Representatives,
                    Subcommittee on Coast Guard and
                           Maritime Transportation,
            Committee on Transportation and Infrastructure,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:02 a.m. in 
Room 2167, Rayburn House Office Building, Hon. Frank A. 
LoBiondo (Chairman of the subcommittee) presiding.
    Mr. LoBiondo. The subcommittee will come to order.
    The subcommittee is meeting today to review the process 
used to determine the availability of U.S.-flag vessels during 
the summer 2011 drawdown of crude oil from the Strategic 
Petroleum Reserve.
    I would like to thank Ranking Member Larsen for requesting 
a hearing on this important topic. The subcommittee is very 
happy that he suggested it. My hope is that we will get some 
answers today to several important questions regarding the 
conduct of the administration and identify what mistakes were 
made so we can avoid this situation from happening in the 
future.
    On June 23, 2011, President Obama announced that the U.S. 
and its partners would release a total of 60 million barrels of 
oil into the world market over a 30-day period to offset the 
disruption in oil supply caused by unrest in Libya. As part of 
the effort, the U.S. pledged to release 30 million barrels of 
oil from the Strategic Petroleum Reserve.
    As most of us here today are aware, the waterborne 
transportation of oil from the SPR to U.S. refineries is 
governed by the Jones Act. That is law. The Jones Act protects 
our national security and promotes job growth in the United 
States maritime sector by requiring merchandise and passengers 
moving between two points in the U.S. to be carried on U.S.-
built, U.S.-owned, U.S.-crewed, and U.S.-flagged vessels.
    The Jones Act has been the law since 1920. In 1987, the 
Department of Energy, MarAd and Customs signed an agreement 
outlining the process agencies must follow to ensure compliance 
with the Jones Act during the Strategic Petroleum Reserve 
drawdown.
    During last summer's drawdown, however, reports from the 
press indicate the administration may have deliberately ignored 
U.S. law in issuing over 40 Jones Act waivers for the transport 
of oil from the SPR. After issuing a blanket waiver and then 
rescinding it a day later, it appears as though the 
administration was assuring potential bidders for SPR oil that 
individual waivers would be granted for large volume sales 
before applications were even submitted.
    It also appears the administration made no effort to use 
its authority to require the oil to be divided into smaller 
lots in order to be carried on U.S.-flag vessels.
    I find these actions extremely disturbing, particularly 
because it came at a time when so many Americans were out of 
work and these were American jobs that were affected. It is 
puzzling that an administration claiming to being doing 
everything they can to help America's unemployed would allow 
vessels crewed by foreigners, not Americans, owned by 
foreigners, built in foreign countries, and flying foreign 
flags to carry nearly all of the Strategic Petroleum Reserve 
oil released. In fact, only one U.S. vessel was used. That 
vessel carried less than 1 percent of the 25 million barrels of 
SPR oil that was moved on water.
    U.S.-owned vessels crewed by American mariners stood ready, 
were willing, and again, ready to move more of the oil, but it 
seems the administration decided to leave them at the dock.
    I look forward to hearing from our witnesses today on how 
this situation unfolded and why it unfolded. I am particularly 
interested in whether promises were made that Jones Act waivers 
would be granted before applications were submitted. I am also 
eager to hear an explanation regarding what appears to be a de 
facto 500,000 barrel lot size that effectively disqualified 
available U.S.-flag vessels.
    Finally, I am interested in hearing from an industry on the 
status of the Jones Act fleet at the time of the drawdown. It 
is important for us to know that there was, indeed, sufficient 
capacity available to move more of the oil and the process by 
which the administration was made aware of U.S.-flag vessel 
availability.
    I want to thank the witnesses for appearing today, and now 
I yield to Mr. Larsen.
    Mr. Larsen. Mr. Chairman, thank you for convening this 
morning's hearing to examine how best to uphold the integrity 
of the Jones Act when future shipments of oil are released from 
the Strategic Petroleum Reserve, or the SPR.
    The Jones Act exists for good reason. It sustains a vibrant 
and strong domestic maritime industry. It creates job 
opportunities for U.S. mariners. It underpins U.S. maritime 
defense policy.
    As you know, the ranking Democratic member of the full 
committee, Congressman Rahall, and I are both strong supporters 
of the Jones Act. On behalf of Mr. Rahall and I, I want you to 
know that we very much appreciate your quick action to schedule 
this morning's hearing as we requested in our April 24 letter 
to you and Chairman Mica.
    Thank you.
    Unfortunately, we missed such an opportunity to support the 
Jones Act last year. In response to oil shortages attributed to 
civil unrest in Libya, the President initiated in June 2011 a 
drawdown from the SPR for only the third time in history. 
Regrettably and contrary to longstanding policy under the Jones 
Act, U.S. tankers carried less than 1 percent of the oil from 
the SPR.
    Instead the administration authorized 44 separate waivers 
of the coastwise laws to allow foreign tankers to transport 
this oil. The administration denied available U.S. carriers 
this valuable and vital business.
    U.S. industry has available capacity to move U.S. strategic 
oil reserves on U.S.-flag ships putting U.S. mariners to work. 
I do not know of anyone on this committee who agreed with these 
controversial waivers, and Congress has responded accordingly 
to uphold the integrity of the Jones Act.
    First, Congress passed language to prohibit the use of 
funds to issue future Jones Act waivers for SPR drawdowns for 
the balance of this fiscal year until the administration has 
taken adequate steps to ensure the use of U.S.-flag vessels.
    Second, the House adopted an amendment offered by 
Congressman Cummings and Congressman Landry that strengthens 
information and notice requirements for any future Jones Act 
waivers. These actions are warranted and helpful, but they are 
limited in their scope and duration.
    Consequently, I concluded that we need to look squarely at 
the waiver process itself to ensure that future SPR releases 
benefit both our domestic maritime industries and the overall 
U.S. economy. With this thought in mind, it is my intention 
this morning not just to look backward, but to look forward.
    No one is satisfied with the status quo. Clearly we need a 
constructive dialogue on how best to release SPR reserves. Now 
is the time to begin that effort.
    By working together with you, Mr. Chairman, I contend that 
such a dialogue could produce a body of sensible, practical 
reforms to the waiver process, reforms that work for the U.S. 
economy, provide opportunities for our domestic maritime 
industries, and put U.S. seafarers to work. Those are the 
outcomes upon which we can agree, and I look forward to 
beginning that dialogue this morning.
    The Jones Act exists for good reason. Let's use it for good 
effect.
    Thank you.
    Mr. LoBiondo. Thank you, Mr. Larsen. And, again, thank you 
for the suggestion to move forward expeditiously with this.
    The first witness today is the Honorable John D. Porcari, 
deputy secretary of the U.S. Department of Transportation. Mr. 
Porcari, the floor is yours.

  TESTIMONY OF HON. JOHN D. PORCARI, DEPUTY SECRETARY, UNITED 
              STATES DEPARTMENT OF TRANSPORTATION

    Mr. Porcari. Thank you, Chairman LoBiondo, Ranking Member 
Larsen and members of the committee. I appreciate the 
invitation to discuss the Maritime Administration's role in 
determining Jones Act vessel availability during the Strategic 
Petroleum Reserve drawdowns.
    The Obama administration unequivocally supports the Jones 
Act and is committed to the continued success of the U.S. 
Merchant Marine. This administration has shown this 
commitment----
    Mr. LoBiondo. Excuse me. Is your microphone on?
    Mr. Porcari. Yes.
    Mr. LoBiondo. Could you pull it a little bit closer?
    Mr. Porcari. Certainly.
    Mr. LoBiondo. Thank you.
    Mr. Porcari. The Obama administration unequivocally 
supports the Jones Act and is committed to the continued 
success of the U.S. Merchant Marine. This administration has 
shown this commitment through the strong enforcement of the 
Jones Act, including the imposition of the largest fine ever 
recorded for a Jones Act violation and efforts to establish new 
markets, including marine highway services that will promote 
investment and create U.S. jobs in the maritime industry.
    In addition, the administration is focused on increasing 
cargo opportunities for U.S.-flag ships and crews through 
agreements reached for the first time with Ex-Im Bank and the 
Department of Energy.
    In keeping with this commitment, the Obama administration 
did not issue a blanket waiver of the Jones Act for the 2011 
Strategic Petroleum Reserve drawdown, unlike previous 
administrations. In June of 2011, President Obama authorized a 
drawdown of the SPR as part of an international effort to 
address the crude oil supply disruption caused by civil unrest 
in Libya. The Energy Department offered 30 million barrels to 
private buyers, largely oil companies and oil traders.
    MarAd surveyed the maritime industry and determined that 
the Jones Act coastwise tank fleet was already largely fully 
employed. Only two tankers of the 56 in the Jones Act fleet 
showed interest in carrying SPR oil during the drawdown period. 
Owners of about a dozen tank barges also indicated general 
interest.
    Relying solely upon the small amount of excess capacity in 
the Jones Act fleet to carry 30 million barrels of oil in 30 
days on an emergency basis would have made the United States 
unable to meet its international obligations and effectively 
address the Libyan oil supply disruptions. Thus, waivers of the 
Jones Act were considered.
    The Department of Homeland Security's Customs and Border 
Protection is responsible for waivers of the Jones Act. MarAd's 
role is to determine the availability of Jones Act vessels to 
perform the required carriage and advise CBP of its findings. 
CBP, as you know, makes the final decision on whether or not to 
issue a waiver.
    During the 2011 SPR drawdown, MarAd provided CBP with 
availability determine for each requested waiver. MarAd 
considered each waiver request individually and made 
determinations based on its own survey of the maritime industry 
regarding whether vessel operators were interested and 
available.
    In certain cases, MarAd found available Jones Act vessels 
and advised CBP accordingly. As a result, all SPR oil was moved 
quickly to market without major disruptions to the regular 
commercial movement of oil. In fact, one shipment was moved on 
the Jones Act vessel, as you pointed out, an apparent first for 
a major drawdown of the SPR.
    The Obama administration firmly believes that Jones Act 
implementation is consistent with the drawdown of the SPR. That 
is why we did it. MarAd's goal is to maximize the use of 
available Jones Act vessels during an SPR drawdown, and MarAd 
believes this can be accomplished without impacting a 
drawdown's effectiveness.
    Future SPR drawdowns, should there be any, may lead to 
additional opportunities for Jones Act vessels as MarAd is 
worked with DOE, DHS, and DOD to strengthen SPR auction 
processes to further include opportunities for Jones Act 
carriers.
    Mr. Chairman, thank you for this opportunity to discuss 
MarAd's role in the SPR drawdown process. I am happy to respond 
to any questions you and members of the subcommittee may have.
    Mr. LoBiondo. We thank you very much. I am first going to 
turn to turn to Mr. Larsen for questions.
    Mr. Larsen. Thank you, Mr. Chairman.
    Thank you, Mr. Secretary.
    Contrary to your statement, the maritime industry will 
insist that there was available capacity in the U.S.-flag 
tanker and barge fleet to carry a substantial portion of the 30 
million barrels. I am not sure how you made the statement that 
you did, but I think I would like to hear specifically can you 
tell us on what basis the DOE, CBP and MarAd conclude that 
American vessels were not available.
    Mr. Porcari. OK. I would be happy to, and it is an 
excellent question.
    Let me first go back to this SPR release itself, and as the 
Chairman correctly pointed out, it began with a blanket waiver 
of the Jones Act. It is important to point out that the 
Maritime Administration and the Secretary quickly got involved 
at the highest levels to make it clear that we wanted to make 
Jones Act vessels eligible and that we believed that a case-by-
case determination of Jones Act eligibility was the best way to 
do that.
    Just to run through the math quickly, there were a total of 
56 U.S.-flag tankers that were coastwise qualified. Eleven of 
these are dedicated crude carriers. Two of them were available 
during the recent drawdown.
    On the tank barge side, there were 30 U.S.-flag coastwise 
qualified tank barges. First on the tankers, of the two that 
were listed as available, upon further investigation, one was 
engaged under contract in Brazil at the time and would have 
taken 14 days to get to the U.S. coast. The other one was in 
dry dock.
    Of the available barges, as I mentioned, there are 30 
coastwise qualified barges. Fifteen of the thirty had issues 
that could arguably be said were impediments to their use. 
Three of them required shipyard work. Four required a Coast 
Guard waiver for not having crude oil washing systems. Seven 
were offered with the limitation that the charter had to clean 
the barges with three loads of heating fuel to make them 
suitable for the shipment, and finally, one of the barges did 
not have a vapor recovery system which prevented it from being 
used at certain of the loading locations.
    The fact is MarAd declined three nonavailability waiver 
requests because we believe U.S.-flag vessels of sufficient 
capacity were available on the timeframe required under our 
international obligations for the strategic petroleum reserve 
release.
    Mr. Larsen. So can you talk to us about the role that the 
500,000 barrel lot size plays in excluding potential carriers 
from participating in the SPR drawdown and how that impacted 
U.S.-flag carriers, and where the 500,000 lot size comes from?
    Mr. Porcari. The 500,000 barrel lot size for the sale of 
the crude oil was set by the Department of Energy. The 
transport, the vessel transport of oil was originally set at 
350,000 barrels. When we saw that there were two tankers that 
had less than 350,000 barrels of capacity but over 300,000, we 
prevailed upon the Department of Energy to lower that 
requirement from 350,000 barrels to 300,000 barrels so that 
those two at the time what we thought were available tankers 
would qualify for that. So we actively engaged with DOE, and I 
would say that DOE was quite willing to lower the 350,000 
barrels to 300,000 barrels for the transport of it.
    Ultimately, as I mentioned, those two tankers were not 
available in the timeframe for specific reasons, but both 
through that release and should there be future releases, we 
believe one of the important things that we can and will do is 
work aggressively with Department of Energy based on real 
availability of U.S. tankers and tank barges to write them into 
and make the Jones Act vessels eligible as much as possible.
    Mr. Larsen. It would seem that would be at least the spirit 
of the Jones Act, if not the law. Does the 500,000 barrel lot 
size create a barrier to participation for U.S.-flag carriers?
    Mr. Porcari. It is my understanding----
    Mr. Larsen. So my understanding, that is a purchase lot 
size.
    Mr. Porcari. Right.
    Mr. Larsen. And then from there it could be divvied up or 
aggregated after that.
    Mr. Porcari. Exactly. It is important to distinguish 
between the purchase lot size of 500,000 and the vessel 
transport lot size. And given the makeup of the U.S. fleet, 
tankers and tank barges, we think that having the number as low 
as possible for maximum eligibility is important.
    It is also critical, obviously, that the true availability 
be within the timeframe designated in the SPR release. We 
believe very strongly in the Jones Act. It is akin to an 
insurance policy that the Nation has, and you cannot buy 
insurance after your house is on fire.
    When we need the Nation's Jones Act fleet and at least as 
importantly, the U.S. crews that come with it, whether it is a 
natural disaster or a defense emergency, we cannot build a 
fleet then. We think this is an opportunity for the Jones Act 
fleet, just as we have prevailed upon the Ex-Im Bank and Energy 
to start using Jones Act vessels for project cargos where they 
were not specifically included before; we see this as an 
opportunity. And, again, I would point out that the two 
previous releases by the George H.W. Bush administration and 
the George W. Bush administration had a blanket waiver of the 
Jones Act. We do not think that is the right thing to do.
    Mr. Larsen. The next panelist will have some, I think, 
points on the bidding process, and so I want to find out there 
are some bookends in this debate regarding the role of SPR 
bidders. It is my understanding that oil purchasers and traders 
requested that their entire lot be transported in one trip, but 
that was not a requirement of DOE's Notice of Sale.
    So why do we agree to these requests when the evidence is 
clear that it can unfairly disadvantage U.S. carriers?
    Mr. Porcari. We had, at the time, and subsequently have had 
very productive discussions with DOE about optimizing the 
ability of U.S.-flag fleet, given the fleet mix that we have, 
to participate in these releases balanced with at the end of 
the day this SPR release is for national strategic reasons, and 
the timing of it in most cases is dictated by international 
releases designed to impact the market positively.
    We think we have certainly learned lessons from this first 
ever attempt to bring the Jones Act vessels into an SPR 
release. We have had very good discussions, including with 
industry. It is important to point out that we convened a 
meeting with industry after this release, and one of the clear 
homework items that we have collectively is we need and 
industry needs to provide better real time, true availability 
information so that in determining whether there are Jones Act 
vessels available, we know whether they are truly available in 
that timeframe, if they're of sufficient size, and if they can 
work in the loading facilities that DOE has designated.
    We think working closely on those on an individual basis in 
the future will actually maximize the ability to use Jones Act 
vessels.
    Mr. Larsen. Do you think the desires of the purchasers of 
the SPR oil to use large, foreign-flag vessels puts pressure on 
DOE and you to supersede clear Federal law on Jones Act to 
require American vessels first?
    Mr. Porcari. I do not, sir. I think that originally there 
was a blanket waiver and we prevailed in an interagency 
discussion to have a case-by-case waiver process shows that it 
can and will work. Again, I think it is clear, and I think that 
industry would agree there are clear lessons learned from this 
release that we can do it more effectively in the future.
    In this day and age real time true availability information 
is one of the ways we need to do that. But I think it is clear, 
and this administration has been very strong in supporting the 
Jones Act and supporting U.S. manufacturing and industries in 
general. This is an across the board attempt by the 
administration to maximize U.S. jobs, maximize U.S. employment, 
and quite frankly, to keep the Jones Act fleet viable for the 
reasons stated in the original Jones Act.
    Mr. Larsen. Mr. Chairman, I have just one more set of 
questions for this witness right now if you do not mind. It has 
to do with the future.
    And can you be more specific about what steps the 
administration is doing to ensure full compliance with the 
Jones Act and new requirements enacted by this Congress last 
fall with respect to the waiver process in the event of another 
drawdown this year, knowing full well, I think, that that 
probably runs out September 30th? But this Congress has shown a 
clear intent on what we want to see happen clearly after the 
existing authority runs out.
    Mr. Porcari. I will be happy to. And, first, Congress' 
intent is very clear, and I would say it is very consistent 
with what the administration wants to do. The nature of an SPR 
release is that there is little or no warning. So it puts a 
premium on having our act together and having an interagency 
process in place in advance before any SPR release is 
announced.
    We have had ongoing and very extensive discussions at the 
senior levels, for example, with my counterparts in both the 
Department of Energy and the Department of Homeland Security on 
how we can do the process better in the future. That includes 
an active partnership with industry on an ongoing basis so if 
there is a snap decision to have an SPR release, the process is 
in place. The availability information is better known.
    In this release, for example, the Maritime Administration 
by email had previously used brokers to survey availability. 
They sent out an email to industry at the time. We think there 
are better real time ways to have that kind of information 
including if there are vessels that are under short-term 
contract that can get out from those contracts and do this 
work, knowing those kinds of particulars.
    Mr. Larsen. There may be further questions for the next 
panelist I have, but I yield back.
    Before I do, I just want you to know I have to step into 
the anteroom to visit my hometown Boys and Girls Club folks. So 
I will just be right there, but I will be right back.
    Mr. LoBiondo. And, of course, you will be listening as you 
are in there, right?
    Mr. Cravaack.
    Mr. Cravaack. Thank you, Mr. Chair.
    I appreciate it, Mr. Secretary, your being here today.
    Section 501(b) of the Title 46 requires administration of 
MarAd to determine the suitability of Jones Act qualified 
vessels are not available to carry the cargo before a waiver 
can be granted, correct?
    Mr. Porcari. Correct.
    Mr. Cravaack. OK. How did MarAd determine the 
nonavailability of U.S.-flag vessels for the SPR drawdown?
    And did MarAd reach out to the U.S.-flag industry?
    Mr. Porcari. Yes, we did reach out to the U.S.-flag 
industry. Availability means available within the timeframe of 
the SPR release, including the total movements required for 
that particular lot sale, meeting the technical requirements, 
whether it's Coast Guard licensing, vapor recovery systems, 
having the tankers or the tank barges in a condition where they 
can receive crude oil. They may require cleaning, for example. 
Those all are a part of that.
    We then make that information that determination available 
to Customs and Border Protection in the Department of Homeland 
Security, who ultimately makes the waiver determination.
    What we are focused on going forward is being able to do 
that as quickly in as real time a basis as possible, and our 
intention is wherever possible to make opportunities available 
for the Jones Act fleet rather than having them written out in 
a blanket way by blanket waivers as has been done previously.
    Mr. Cravaack. OK, sir. Thank you very much.
    And with that said then, according to data provided by 
MarAd, only one U.S.-owned, built, flagged, and crewed vessel 
moved SPR oil during the 2011 drawdown. That vessel moved less 
than 1 percent of the total SPR oil that moved on the water.
    So are you saying, sir, it is the DOC's position that there 
was only one qualified Jones Act vessel available at that time?
    Mr. Porcari. Actually, sir, we declined three 
nonavailability waiver requests. One of the three ultimately 
resulted in the barge movement that you mentioned. The other 
two were shipped by other means, perhaps pipeline. I am not 
sure, but we did this on a case-by-case basis based on that lot 
of shipment, the best real time information we had on 
availability, and meeting that timeframe.
    And, again, everything else being equal, the larger the 
vessel, the less movements that are needed and the easier it is 
to meet the timeframe.
    Mr. Cravaack. OK. Then how many waivers were actually 
granted for foreign-owned, built, flagged, and crewed vessels 
for the 2011 drawdown?
    Mr. Porcari. I believe the number is 44, but I need to go 
back and verify that.
    Mr. Cravaack. OK. Forty-four, and again, only 1 percent of 
U.S.-flag maritime fleet vessels could actually rise to the 
occasion?
    Mr. Porcari. One of the things that we found, Mr. Cravaack 
in actually doing the determinations, and it is both a good 
news and a bad news scenario, is that much of the U.S.-flag 
fleet was engaged, was under contract or subcontract, and 
actually was working at the time. We believe that with better 
information and with more real time information, we should have 
better availability, but it will entirely depend on the market 
conditions at the time.
    The status of the Jones Act fleet, if it is employed 
elsewhere, the timing of the release, again, this is the first 
time that any administration has tried to use the Jones Act 
fleet during an SPR release. We believe, just like we have done 
with project cargos with the Ex-Im Bank and with the Department 
of Energy, that it is an opportunity to write the Jones Act 
fleet into rather than exclude it from business.
    Mr. Cravaack. I truly believe that a strong maritime fleet 
is essential to our national security.
    Mr. Porcari. It truly is.
    Mr. Cravaack. I am a strong proponent of that. So with that 
said, what outreach has MarAd had with the representatives of 
U.S.-flag industry and labor in the wake of the 2011 SPR 
drawdown to address their concerns and the concerns that you 
just spoke about right now?
    What are we doing to make sure that our fleet is ready to 
go when we need her?
    Mr. Porcari. One of the things that we did in the wake of 
the last SPR release was the Maritime Administrator and I 
convened a meeting with industry, Mr. Allegretti and others, on 
this specific issue and partly to deconstruct the events during 
that release, but mostly looking forward how we can do this 
better together.
    Ultimately this has to be a partnership. We believe very 
strongly in this partnership, and we think that by being smart 
and quick about this process that we in the future, should 
there be a future SPR release, that we can actually have better 
participation by the Jones Act fleet, again, depending on its 
actual availability.
    Mr. Cravaack. Thank you, Mr. Chairman. I appreciate your 
indulgence of the time, and I yield back.
    Mr. LoBiondo. Thank you, Mr. Cravaack.
    Actually Mr. Larsen and Mr. Cravaack covered an awful lot 
of what I had, but to go over this a little bit more, so you 
are, I think actually admitting that there was a de facto 
500,000 barrel lot size threshold.
    Mr. Porcari. For the sale, not necessarily the transport, 
Mr. Chairman. In other words, the DOE sale advertisement had a 
500,000 barrel minimum for bidding on it. It was our intention 
and in our discussions with DOE we wanted to make sure that the 
transport by any successful bidder was in quantities small 
enough that the U.S.-flag fleet could actually use it.
    So, again, DOE originally had 350,000 barrels as the 
minimum threshold. There were not any available U.S. tankers at 
350,000. There were two potential available tankers at 330,000. 
We got DOE to lower that to 300,000 because we wanted those 
tankers to be used.
    Mr. LoBiondo. So how many actual shipments were less than 
500,000?
    Mr. Porcari. I do not know offhand, and on a lot by lot 
basis we will be happy to get that information.
    Mr. LoBiondo. You know, we are not trying to give you a 
hard time, but this just kind of is not gibing here that only, 
you know, 1 percent of the movement can come from U.S.-flag 
vessels, and we just need to try to get to the bottom of it. 
But mostly since we cannot undo what was done, to try to 
understand this process for the future and, you know, if the 
industry was, you know, at 100 percent employment and 
everything was fine, you know, OK, there is just not 
availability. But we are just getting a different story about 
the availability.
    So I do not want to be repetitive with the questions again 
because Mr. Larsen had most of these questions. I will leave it 
at that for now.
    I would like to make note that Mr. Cummings is wrapped up 
in a markup, but that he had questions specifically, and we 
will take them for the record so that Mr. Cummings can get his 
questions answered.
    And, Mr. Porcari, we thank you very--oh, Mr. Landry, thanks 
for joining us. OK. You are recognized.
    Mr. Landry. Thank you, Mr. Chairman.
    Deputy Secretary, this committee, I believe, is growing 
tired of me saying that I represent more Jones Act jobs than 
any other Member in this body. Twenty-eight thousand men and 
women are employed in my district because of the Jones Act.
    Considering this information, do you find it ironic that I 
also represent the destination of more SPR releases transported 
on foreign-flag vessels than any other Member in the country?
    In other words, all of the oil released or a vast majority 
of the oil that is released out of the strategic reserve is 
then shipped to my district, but not by American-flag vessels 
while at the same time, I represent more mariners than any 
other Member.
    Mr. Porcari. I would classify it as an opportunity. We 
share the strong belief that the Jones Act both protects U.S. 
jobs and protects U.S. national interests, and the purpose of 
reversing what had previously been a blanket waiver in all 
cases on releases and going on a case-by-case basis was to 
provide whatever opportunities we possibly could for Jones Act 
vessels and their U.S. crews to participate.
    And we think we clearly learned lessons from this release. 
Should there be another one in the future, sir, we believe that 
a close partnership with industry and better real time 
information will allow us to maximize the Jones Act 
participation.
    Mr. Landry. Are you saying that the lessons that were 
learned move you so that if we have another release that the 
process that you would use would be more transparent and more 
applicable to sticking to the preamble of the Jones Act?
    Mr. Porcari. First, in terms of transparency, we posted the 
vessel availability on the MarAd Web site as a way to make sure 
we got the word out. I think from a policy point of view, the 
most important decision was made immediately, which was unlike 
previous administrations not to grant a blanket waiver and just 
waive the Jones Act, but instead to focus on opportunities to 
get Jones Act vessels and crews involved.
    We agree with both the letter and the spirit of the Jones 
Act in the sense that it exists for a reason, and that reason 
is that it is in the vital interest of the United States to 
have a strong U.S.-flag fleet and even more important than the 
vessels themselves in some ways, the crews, the U.S. crews.
    Mr. Landry. So are you saying that you believe that you all 
went through every possible scenario and worked diligently to 
uphold the preamble of the Jones Act in the process that you 
all used in granting these waivers? I mean, do you feel that 
today or do you feel that moving forward you can do a better 
job of insuring that American-flag vessels have an opportunity 
to carry it?
    Because it bothers me that while mariners that I represent 
sit on a dock, they get to watch a foreign-flag vessel pass 
their dock with oil, with oil paid for by their hard earned tax 
dollars, and that oil is being transported by foreign-flag 
vessels.
    And I am just trying to ensure that me and you have an 
understanding and that what you're telling this committee is 
that, look, maybe we did not do as good of a job as we could. I 
mean, you feel like you have, and that is what I am trying to 
understand. Do you think that you can take some steps in the 
future that would further strengthen the ability of U.S.-flag 
vessels to have a seat at this table?
    Mr. Porcari. The short answer is yes. We believe there 
clearly are steps that we can take in partnership with industry 
to do a better job. As with anything else, we should be 
learning from experience, and this was the first time that 
anyone tried to get the Jones Act fleet involved in an SPR 
release.
    Mr. Landry. And let me just tell you I appreciate the fact 
that you recognize that you can do a better job. Not many 
people come before us and admit, and I think that is very noble 
of you. I want you to know that, and I hope that you live up to 
that word and the next time we do a better job of getting more 
U.S.-flag vessels involved.
    Mr. Porcari. Sir, there is not a day that goes by that I do 
not realize I can do a better job, and we should all be 
learning from it. I very much look forward to working with you 
going forward should there be another release.
    And in the nature of the releases, it is quick and with no 
warning so that it can impact markets. That puts a premium on 
doing the work upfront very collaboratively. We have had some 
very good collaborative work with our colleagues at the 
Department of Energy and the Department of Homeland Security 
and others in both lessons learned and should there be another 
release, how it can be done better, just as we are doing with 
trying not to grant Buy America waivers on the manufacturing 
side, just as we are doing with the Ex-Im Bank agreement that 
we have where they are using U.S. vessels and we are not in the 
same way before, and just as we are doing with the Department 
of Energy. It was not necessarily using U.S.-flag ships for 
project cargo shipments and they are now.
    We see every one of these as an opportunity, even if it is 
at the margins. These margins add up to strengthen U.S. jobs 
and to get maximum U.S. employment for the Jones Act that we 
need in case of emergency.
    Mr. Landry. Thank you, Mr. Chairman. I yield back.
    Mr. LoBiondo. Thank you.
    Mr. Cummings.
    Mr. Cummings. Thank you very much, Mr. Chairman.
    Deputy Secretary Porcari, a waiver was issued. First of 
all, it is good to see you again.
    Mr. Porcari. It is good to see you.
    Mr. Cummings. A waiver was issued to Marathon Petroleum on 
July 25, 2011, which stated and I quote, ``You have purchased 1 
million barrels of crude oil from the SPR, and this portion 
represents 500,000 barrels.''
    The waiver noted that MarAd had made a nonavailability 
determination regarding the subject request. Looking at MarAd's 
nonavailability determination it states, and I quote, ``We have 
found no single U.S.-flag vessel available to carry the entire 
lot of cargo in one trip as requested by Marathon.''
    Similarly, on July 20th, a waiver was issued to J.P. Morgan 
Ventures Energy Corporation for the movement of 500,000 barrels 
of a $1.5 million barrel purchase from the SPR. Regarding this 
waiver, MarAd wrote, and I quote, ``We found no single U.S.-
flag vessel available to carry the entire lot of cargo in one 
trip as requested by J.P. Morgan.''
    The question is this. It is my understanding that there 
were Jones Act qualified vessels capable of carrying oil 
released from the SPR. Why were the Jones Act waivers for 
Marathon and J.P. Morgan Ventures and for dozens of other firms 
issued? Why is that?
    Mr. Porcari. Mr. Cummings, we tried to make sure we had 
good information on availability. I do not know those two 
specific ones on July 25th and 20th of the top of my head. What 
I would like to do because I want to give you a precise answer 
is actually go back and make sure we review those records and 
find out the particular circumstances of those.
    Each of the waiver requests was based on availability at 
that specific time, based on that specific shipment and with 
whatever other parameters were specified. So I cannot 
specifically comment on those two without some further 
research, but I would be happy to do that.
    Mr. Cummings. In these cases, Marathon and J.P. Morgan were 
already moving less than the entire amount of the oil they had 
purchased. Given that the Jones Act is the law of the land, I 
want to know, and I am sure you can get back to me on this, why 
were Marathon and J.P. Morgan required to break down their 
shipment sizes and move only the number of barrels that could 
be carried on Jones Act qualified vessels?
    In other words, why would MarAd write that there was no 
single U.S.-flag vessels available to carry the entire lot of 
cargo in one trip as J.P. Morgan requested? And why was J.P. 
Morgan not required to change its request or use more than one 
single vessel so that it could comply with the law?
    That is what I am concerned about.
    Mr. Porcari. It is a fair question, and I would like to get 
you the particulars on that. I do know the timeframes of the 
actual transport are one of the variables that were important, 
but these are two specific transactions, and I think we need to 
look into those specifics.
    I would further comment that this was sea change, if you 
will, for the bidders. In other words, up until this time when 
the Obama administration specifically tried to make Jones Act 
vessels available, all previous releases got blanket waivers. 
Bidders on SPR oil never had to think about or worry about 
U.S.-flag fleet availability.
    We have all learned lessons from this release. One of the 
lessons is by the bidders who need to understand and I think 
now do understand in a much more specific way that we are 
serious about this and that they need to really work to find 
availability, and so I will get back to you on those two.
    Mr. Cummings. One last thing. Based on the emails available 
to the committee, was not MarAd aware at the time that it was 
issuing nonavailability determination that lots of 500,000 
barrels might exceed the carrying capacity of all Jones Act 
qualified vessels? If so, did MarAd inform the Department of 
Energy that the lots should be broken into smaller sizes to 
ensure it could move on Jones Act compliant vessels?
    Mr. Porcari. Yes, my understanding is the two things. The 
minimum bidding quantity that DOE specified which was 500,000 
barrels and then separately the transport, which could be less 
than 500,000 barrels, I am told that 500,000 is basically a 
yardstick in the industry that they use.
    Our contention then and now is that does not mean you have 
to transport 500,000 barrels in one crude carrier, which would 
exclude all but the largest U.S.-flag ships that are fully 
engaged in Alaska trade, for example, that the transport could 
be in smaller quantities. That is why when DOE first put out 
350,000 barrels as the minimum for transport, we prevailed on 
them to lower to 300,000 because it would allow two U.S. 
tankers that we thought were available at the time to actually 
transport the oil.
    Mr. Cummings. I see my time is up. Thank you very much.
    Mr. LoBiondo. Mr. Cummings, for your information, the 
Department of Energy and the American Petroleum Institute were 
both invited today, but declined our invitation. I think I 
could guess why.
    Mr. Cummings. I thank you, Mr. Chairman.
    Mr. LoBiondo. Mr. Harris.
    Dr. Harris. Thank you very much, Mr. Chairman.
    And, Mr. Deputy Secretary, it is good to see you again, and 
thank you for the work you did for Maryland as our 
Transportation Secretary.
    Let me follow up on the gentleman from Maryland and what he 
asked because according to press reports, you know, well, I 
guess it was almost a month before those determinations were 
made for Marathon and J.P. Morgan that the Congressman referred 
to. Senior officials from DOE, MarAd, you know, conducted a 
conference call with potential drawdown. This is a month before 
they grant it, where a senior DOE official indicates that Jones 
Act waivers would be granted to bidders carrying 500,000 
barrels or more.
    Well, if I were them and I had a DOE official that said, 
``Oh, just say you are going to transport 500,000 because we 
will get the waiver,'' that sounds like, you know, someone 
either was not aware of the Jones Act or the importance of the 
Jones Act to maintaining our fleet and the economic importance.
    Now, I find this a little interesting because the 
Department of Energy comes before our committee and the 
Science, Space and Technology and all the time talks about 
creating American jobs, and this is one of the goals of the 
department and all, and here is a DOE official a month before 
waivers are granted that specifically the reason for the waiver 
is that the bidder asked to transport 500,000 barrels. Well, a 
month before, they were told, ``Well, basically you might as 
well ask for it because we are going to grant you the 
waivers.''
    What is going on? I mean, why is the DOE involved? They are 
not involved in the waiver process, are they?
    Mr. Porcari. No, they are not specifically involved in the 
waiver process, and in fairness to our DOE colleagues, the two 
previous SPR releases by two previous administrations had 
blanket waivers. This is not a process that they had been 
through before, and we worked very closely with them and very 
aggressively to make sure wherever possible Jones Act vessels 
could be included.
    I cannot comment on the specifics of the press report. I do 
not know it offhand, and I am leery about press reports in 
general, but there was certainly an education process with 
industry, with the bidders on the crude oil for the Jones Act 
process.
    To the extent they were familiar with it, they may not have 
been familiar with all of the details and the fact that the 
waiver where the Maritime Administration part of it, sir, is we 
determine whether vessels are available based on those 
individual circumstances, and then Customs and Border 
Protection in DHS actually either does or does not issue a 
waiver based on that.
    So it is a partnership in that sense. Industry had a number 
of questions about this. We tried to answer those questions, 
and I am talking about the industry bidding on the oil in this 
case. We in DOE tried to answer those questions.
    I think going forward, they clearly understand how serious 
we are about using wherever possible Jones Act vessels and 
crews.
    Dr. Harris. Sure. No, and I appreciate that, you know, we 
say that in the past it has been done, but in the past we are 
not in, you know, the third year of what the President admits 
is the largest economic downturn since the Great Depression. I 
mean, this is not the same instance.
    We had an opportunity to use American-flag vessels with 
Americans, American labor, and we decided not to. And so one 
question I have is, is the DOE involved?
    The DOE in previous administration did not have the 
authority to give waivers either, did they? You said the DOE 
official just, I guess, assumed it because previous 
administrations had done it?
    Mr. Porcari. What had happened previously, and I would 
respectfully disagree with the contention. We saw this as an 
opportunity to bring the U.S.-flag fleet in rather than exclude 
it.
    There have been two SPR releases prior to this one by the 
George H.W. Bush administration and the George W. Bush 
administration.
    Dr. Harris. Sure. No, I understand the history, but you 
know, is it true that only 1 percent of the oil was delivered 
on U.S.-flag vessels?
    Mr. Porcari. We basically did not grant three waiver 
requests, and two of them ultimately used other means to 
transport the oil. The one waiver request that we denied or 
that we recommended denial, DHS denied and it was complied 
with, transported about 150,000 barrels. That is right.
    Dr. Harris. Out of how many? One hundred and fifty thousand 
barrels out of how many?
    Mr. Porcari. The total release was 30 million.
    Dr. Harris. Well, I suspect that we could probably do a 
little better job than that in the future, and I hope we are 
serious about it.
    Can you get me information? I assume that the department 
was part of that conference call on June 28, 2011?
    Mr. Porcari. We did have a Maritime Administration 
representative on that, and I will be happy to get you----
    Dr. Harris. Could you determine whether that, in fact, is 
true, that on that call, you know, the DOE official indicated 
that waivers would be granted?
    And again, Mr. Chairman, I wish the DOE was here to answer, 
you know, under what authority they are making Jones Act 
determinations in conference calls with bidders that I think 
the evidence shows resulted in what would be expected. If you 
are told that a waiver is going to be granted, why bother to 
look for an American vessel when you are already told upfront 
that waivers would be granted?
    Thank you very much, Mr. Chairman.
    Mr. LoBiondo. Mr. Cummings, back to you.
    Mr. Cummings. Thank you very much, Mr. Chairman. I am only 
going to take a few minutes. I just wanted to just say a few 
words.
    I am deeply concerned about the issuance of waivers to 
allow Jones Act qualified vessels to carry cargo between United 
States ports, including the issuance of waivers following the 
2011 release from the Strategic Petroleum Reserve. The Jones 
Act is the law of the land. It is the cornerstone of our United 
States maritime capability, and it should be waived only in the 
interest of rarest of circumstances.
    To increase transparency surrounding the issuance of 
waivers, Congressman Landry and I introduced H.R. 3202, the 
American Mariners Job Protection Act. The bill would require 
MarAd to include in its assessments of the availability of 
Jones Act compliant vessels information on the actions that 
could be taken that enable Jones Act qualified vessels to carry 
the cargo for which a waiver is sought.
    MarAd would also be required to publish its determinations 
on its Web site and provide notification to Congress when a 
waiver is requested or issued.
    I thank the Chairman, Mr. LoBiondo, and Ranking Member 
Larsen, as well as Ranking Member Rahall and other members of 
this subcommittee for their support.
    Congressman Landry and I most recently offered this 
legislation as an amendment to the National Defense 
Authorization Act of 2012, and it was adopted. And I certainly 
hope that it will be included in the final NDAA conference 
report.
    On July 15, 2011, I wrote to Secretary LaHood to inquire 
about the issuance of waivers to enable Jones Act compliant 
vessels to carry oil released from the Strategic Petroleum 
Reserve. On August 29, 2011, Secretary LaHood provided copies 
of some documents associated with approximately 20 of the 
waivers. I appreciate the information Secretary LaHood 
provided, but I am deeply disappointed in DHS and DOE are not 
here today to discuss this matter.
    I have tried without success to assemble all of the 
agencies that are involved in the waiver process, and again 
today I see that the agencies will simply not come together to 
provide the clarity we need about exactly how this process is 
conducted.
    I continue to believe that we need to get all of the 
parties together in one room to understand what occurred in 
2011 and what steps need to be taken in the future to ensure 
that there is compliance with the Jones Act.
    Thank you very much, Mr. Chairman.
    Mr. Landry, I understand you have a brief statement and/or 
question.
    Mr. Landry. Yes. Mr. Chairman, I just wanted to try to 
clarify an answer that the Deputy Secretary gave to Mr. 
Cummings a while ago when he mentioned or I thought I heard him 
say that DOE set the 500,000 barrel limit or you mentioned that 
the 500,000 barrel limit came from DOE.
    Mr. Porcari. It is in the DOE prospectus for sale of the 
SPR release.
    Mr. Landry. Well, Mr. Chairman, I am holding the Notice of 
Sale from I believe DOE, which says that the minimum delivery 
lot sizes are 100,000 barrels for pipeline and 300,000 barrels 
for vessels.
    Now, nowhere in this notice do I see 500,000. In fact, we 
got to 500,000 because someone slipped information to the 
industry telling them that if they went to 500,000 they would 
get the waivers.
    Now, you and I just had a discussion about how we move 
forward in helping our mariners in this country, and the way we 
help them is by making sure that when DOE says 300,000 barrels 
because they know that we can use U.S.-flag vessels to move 
their cargo at this volume, that we try to adhere to it.
    So I just wanted to correct the record, Mr. Chairman, in 
that the Deputy Secretary said it was DOE that issued a 500,000 
barrel limit, and would you like to retract that?
    Mr. Porcari. No, there are two separate things here, Mr. 
Landry. One is the minimum bid amount that bidders for the oil 
can bid on, and that is 500,000 barrels. The delivery----
    Mr. Landry. No, no, no. That is 300,000.
    Mr. Porcari. The delivery of the product was 300,000 
barrels. It was originally, I would point out, 350,000 barrels, 
and we prevailed upon DHS or DOE to lower that because we knew 
there were two tankers that could carry up to 330,000 barrels.
    So you are absolutely right about the delivery size at 
300,000, and we specifically asked them to lower it from 350 
which it originally was to 300 so that two U.S. tankers that we 
thought were available at the time could get that business.
    Mr. Landry. Did they get the business?
    Mr. Porcari. They did not. Of the two tankers one was under 
contract in Brazil and the other one was either in or headed to 
dry dock.
    Mr. Landry. Thank you, Mr. Chairman.
    Mr. LoBiondo. Mr. Harris.
    Dr. Harris. Thank you.
    Just a very brief followup because your testimony was that 
we actually shipped 150,000 barrels. That is the only shipment 
on American-flag vessel.
    Mr. Porcari. Yes, and that was actually a barge. So, in 
other words----
    Dr. Harris. So 300,000 was not the real minimum. I mean, 
that document says it is supposed to be 300,000. I mean----
    Mr. Porcari. They can always break up the shipment and do 
it with two or three barges, which is something that we 
encouraged wherever possible.
    Dr. Harris. So you could have broken up a shipment of 
500,000 into a 300 or a 350 and 150 also.
    Mr. Porcari. That is correct. That is correct.
    Dr. Harris. So why was that not encouraged?
    Mr. Porcari. It was, in fact, encouraged. Again, for the 
industry bidding on the oil, we encouraged them as part of this 
process to look at multiple shipments. So if they bid for 
500,000 barrels, they had the ability to ship it on three 
barges or a tanker and two barges or whatever.
    Dr. Harris. And that was not encouraged in the June 28th 
phone call, that June 28th conference call. I guess you will 
try to get me the records, but again, apparently on that 
conference call DOE said 500,000 is OK and you'll get a waiver. 
That does not sound like encouraging breaking up shipments.
    Mr. Porcari. Well----
    Dr. Harris. How did the department encourage breaking up 
shipments if not on a conference call like that when you have 
the bidders on the line saying, you know, ``How are you going 
to ship this?''
    I mean, again, it is just not apparent to me that that 
encourages breaking it up if you say, ``Look. You are going to 
get a waiver if you request a shipment of 500,000.''
    Mr. Porcari. No, it is a fair question. One of the purposes 
of a case-by-case waiver determination was to see with those 
particular circumstances on those dates within whatever 
parameters were in that particular bid, if there was a way to 
use U.S. vessels, any combination of U.S. vessels.
    And we think one of the lessons learned, quite frankly, is 
that better real time information on combinations of vessels 
that might be available might well encourage more U.S. vessel 
usage, and we think going forward. And we have worked closely 
with our colleagues in Energy and DHS and others, for example, 
on tabletop scenarios since the last release to try to figure 
out the mechanics of encouraging and knowing to the extent 
possible U.S. vessel availability.
    Dr. Harris. OK. Thank you.
    Thank you for giving me that extra time, Mr. Chairman.
    Mr. LoBiondo. OK. Mr. Porcari, I thank you very much for 
being here today. We are going to take a short, brief 
adjournment so we can move to, or recess so we can move to 
Panel 2, and we will be proceeding very directly.
    Mr. Porcari. Thank you, Mr. Chairman.
    [Recess.]
    Mr. LoBiondo. The committee will come to order.
    Our second witness this morning is Mr. Tom Allegretti, 
president, The American Waterways Operators (AWO), and 
testifying on behalf of AWO and the American Maritime 
Partnership.
    Mr. Allegretti, thank you for being here. You are 
recognized.

    TESTIMONY OF THOMAS ALLEGRETTI, PRESIDENT, THE AMERICAN 
   WATERWAYS OPERATORS (AWO), ON BEHALF OF AWO AND AMERICAN 
                      MARITIME PARTNERSHIP

    Mr. Allegretti. Thank you, Mr. Chairman, for the 
opportunity to testify today on behalf of AWO and the American 
Maritime Partnership.
    The domestic maritime industry shares your goals for 
today's hearing, to shed light on the circumstances that gave 
rise to approximately 50 Jones Act waivers during last year's 
drawdown of the Strategic Petroleum Reserve and to ensure that 
history does not repeat itself in the event of another drawdown 
this summer.
    The Jones Act is the law of the land for good reason. It 
undergirds the national security, homeland security, and 
economic security of the United States. What we witnessed last 
year was the hollowing out of the Jones Act by unelected agency 
officials. Taking a critical look back at that experience is 
essential to insuring that as we move forward, such a travesty 
never happens again.
    What happened last year was illegal and unacceptable. 
Administration officials took actions that effectively excluded 
American vessels owned by American companies, crewed by 
American mariners from transporting American oil between 
American ports. They did this by establishing an arbitrary, 
unwritten minimum lot size for vessel movements that had no 
basis in law.
    Potential purchasers of SPR oil were promised Jones Act 
waivers in advance, and the administration delivered on those 
promises even as available American vessels and American 
mariners sat idle. The result, approximately 50 Jones Act 
waivers and only one lifting by a U.S.-flag vessel. More than 
99 percent of the oil moved on foreign vessels with foreign 
crews.
    We appreciate the subcommittee's oversight in probing how 
this disregard for the law could have transpired, and we are 
troubled that Deputy Secretary Porcari has not been joined 
today by officials from the Department of Energy. We hope that 
Congress will continue to press all of the departments that 
share responsibility for the mismanagement of last year's SPR 
drawdown for answers to this fundamental question: how a 
Federal action intended to help the American economy could have 
been carried out under unwritten ground rules that expressly 
favored foreign companies and foreign workers to the detriment 
of Americans.
    We also hope that Congress will continue to press the 
administration to clarify its plans to ensure compliance with 
the Jones Act. And with the new requirements governing the 
waiver process that you all enacted last fall, clarity is 
especially needed on the steps the departments will take to 
make full use of American vessels first in the event of another 
SPR drawdown.
    We appreciate DOT and the Maritime Administration meeting 
with AWO and AMP this spring to discuss the availability of 
American vessels and their suitability for the movement of SPR 
crude, but we are disappointed that the Department of Energy 
has been unwilling to meet with us, and we are especially 
troubled that the administration has not yet made clear what 
actions it will take to avoid a repeat of last year's debacle.
    Chairman LoBiondo, Ranking Member Larsen, members of the 
subcommittee, I want to be very clear about what the American 
maritime industry is saying with respect to another SPR 
drawdown. First, we are saying that the Jones Act requires the 
use of American vessels to move crude oil from the SPR to 
another U.S. destination. Nowhere does it say that American 
vessels must be used only if they meet arbitrary, unwritten 
criteria developed secretly by an administration official.
    Second, we are saying that American vessels and American 
mariners are available in substantial numbers to move SPR crude 
today and that they are fully capable of doing this work. We 
are not saying that the domestic fleet has the capability to 
move all of the oil in a drawdown within a short period of 
time.
    And, third, we are saying that the administration should 
establish procedures that make clear that available American 
vessels will be used first and to the full extent of their 
capability and availability, and that Jones Act waivers will be 
issued only when no American vessels are available.
    Our message is simple. The law is clear. American vessel 
owners and American mariners are ready, willing and able to do 
what they do best, move cargo safely, securely, and 
economically for the benefit of our customers and our country, 
but in order to do so we need the administration to follow the 
law.
    Thank you again for the opportunity to address this most 
serious situation today.
    Mr. LoBiondo. Thank you, Mr. Allegretti.
    An explanation offered by the Department of Energy and 
MarAd for not contracting Jones Act qualified vessels is that 
U.S.-flag vessels carrying less than 500,000 barrels cannot 
meet berthing and/or discharging parameters set forth by many 
receiving facilities. Do you believe this is true?
    Mr. Allegretti. I do not. But I will say this is 
reflective, Mr. Chairman, of the essential problem that we have 
with the administration and which you heard repeated here this 
morning. There is a mentality that resides within the 
Department of Transportation and the Department of Energy that 
essentially starts from the premise that what are the 
impediments, was the word used in the Secretary's statement 
submitted; what are the impediments to the use of American 
vessels and how do we deal with those impediments, and we have 
heard a range of them.
    American vessels are too small. They are too few. Well, 
what is the sufficient number that makes them not too few? What 
is the size that makes them not too small?
    All of the vessels that were available last year during the 
SPR drawdown in the barge fleet exceeded the minimum lot size 
in the DOE Notice of Sale, which was 40,000 barrels.
    We also hear that what you just said, DOE does not think 
that our vessels are capable of berthing at SPR terminals. That 
is incorrect, but it also is irrelevant. It is not a factor in 
the Jones Act.
    Then we hear that the size of our vessels is not 
consistent--and this is probably the part that is most 
Orwellian to me--not consistent with the desires of the oil 
purchasers, with their transportation plans, and with purchaser 
preferences, as though these matters supersede the law. And 
when we ask the administration to consider that these are 
outside the ambit of the Jones Act, what we get back is a 
legalistic interpretation that it is within MarAd's discretion 
to consider factors like loading windows, berth schedules, and 
cargo size in determining American vessel availability.
    And the end result of all of that is what you saw last 
year. There were more than 25 American-flag tank barges that 
were capable of lifting SPR oil during that drawdown, and not a 
single one of them got any work.
    Mr. LoBiondo. Can you tell me what the difference was 
between the vessels that were bypassed by Department of Energy 
and MarAd during this 2011 drawdown and the vessels that 
delivered oil to the Strategic Petroleum Reserve in the first 
place?
    Mr. Allegretti. Well, there are two principal differences. 
As you all said, 99 percent of the oil was delivered on 
foreign-flag vessels with foreign crews registered under the 
laws of foreign nations. And so that would be one distinction.
    The other major distinction is the size, and so it raises 
this issue of the secret 500,000 barrel minimum, that the 
public documents that are available to folks in our industry 
say that if you have a tank barge in excess of 40,000 barrels, 
you are eligible to lift this oil.
    And so think about this, Mr. Chairman. I know that you and 
other members of the committee try to look at the effect of 
your laws on real men and women. So think about it from this 
perspective for a second. You are an American-flag barge owner. 
You are probably a family-owned company. You have probably been 
in the business for three, four or five generations. You have 
reinvested the profits of your company consistently back into 
the business providing good jobs in your community and around 
the country. You play by the rules. You have complied with all 
of the new requirements of OPA-90, which means that over the 
course of the last 20 years, you have invested hundreds of 
millions of dollars in the recapitalization of your fleet.
    And so you now have a fleet of vessels that are 
technologically advanced, state-of-the-art, the very model of 
efficiency for coastwise transportation, and you hear that the 
administration is going to draw down the SPR, and you look at 
the Notice of Sale, and it says 40,000 barrel minimum. You 
think, ``Well, great. I have got plenty of vessels that are 
more than 40,000 barrels that are available, and I would be 
interested in that work.''
    And then you wait for the phone call. You wait for the oil 
company or the oil trader or the charterer to call you and ask 
you about the availability of your vessel, but no phone call 
comes in.
    And then the next thing you hear is that the Maritime 
Administration has made a declaration that there are no 
American vessels available to lift this cargo, and you look out 
your window and you have got vessels sitting idle at your dock.
    So if you are an American vessel owner, you have to be 
extraordinarily concerned about how this process went. I said 
it was illegal. You know, it was also unfair, and I think what 
it points us is that this process utilized by the Maritime 
Administration to determine the availability of vessels really 
was a sham.
    Mr. LoBiondo. Well, I appreciate that, but let me maybe ask 
this a little bit differently because I want to make sure I 
understand this correctly.
    Is it not true that the vessels that were bypassed are the 
same type of vessels that made the original deliveries?
    Mr. Allegretti. Absolutely, Mr. Chairman. I am sorry if I 
misinterpreted your question. That is absolutely true. The 
original filling of the Strategic Petroleum Reserve was done by 
a company no longer in business by the name of Coastal Towing, 
which had the contract for the original filling. Coastal 
Towing's barges were all in the neighborhood of 20, 25, 30,000 
barrels.
    So we filled the Strategic Petroleum Reserve with smaller 
barges, and it is also, in fact, true that as the reserve has 
had to be replenished, we have use ATVs to do that. These are 
the very vessels that were overlooked last summer during the 
drawdown.
    Mr. LoBiondo. OK. Thank you, Mr. Allegretti.
    Mr. Larsen.
    Mr. Larsen. Thank you, Mr. Chairman.
    Thank you, Mr. Allegretti, for coming today.
    You say that in the industry there are 25 or so available 
vessels.
    Mr. Allegretti. Last year.
    Mr. Larsen. Yes, right. Sorry. Last year. Secretary Porcari 
sort of went down a list by number and category of vessels that 
were not available for whatever reason.
    I did not do the math and add those up. I do not know that 
they added up to 54. I do not know if you did the math. It is 
possible it added up to 29, leaving the 25 available. Can you 
give us your evaluation of the list that Mr. Porcari gave us, 
the reasons why and the number of vessels not available?
    Mr. Allegretti. I would be happy to. And I might pivot off 
of something you said in your statement, Mr. Larsen.
    Mr. Larsen. Sure.
    Mr. Allegretti. About looking for practical reforms. This 
is an area that would be rich in that regard. One of the things 
that the Maritime Administration does, which it is not well 
equipped to do is to evaluate the commercial market. So it asks 
questions about when is your next dry docking. What kind of 
cargo did you carry the last time? What are you going to carry 
the next time?
    These are questions the Government does not need to be 
involved in. There is an unbelievably efficient system of cargo 
transportation in the United States that works perfectly day in 
and day out. The essence of what oil companies do for the 
movement of their cargos is to work with vessel owners and 
figure out how do I get this cargo from this place to this 
place. What is the most efficient way to do that? What vessels 
are available? How do I reposition vessels to make this work?
    These decisions go on every single day. So to have the 
Government try to micromanage the connection between a 
particular cargo and a particular vessel is really absurd. We 
could simplify this process and, I think, enhance the integrity 
of the Jones Act by doing one simple thing. We can say the 
Jones Act is the law of the land. You shall use American 
vessels first until there are no American vessels.
    So using the scenario of last year's drawdown, if the 
Department of Energy had not given advanced warning to the oil 
purchasers that it was going to give them automatic Jones Act 
waivers, all they needed to do was ask, and had said instead, 
``It is our expectation that you will follow the law and that 
you will contract with American vessel companies to move your 
cargo until there are none left,'' those guys would have 
figured out how to get that cargo to market, believe me, and we 
would not have had all of this kind of Maritime Administration 
management of what the list actually says.
    Mr. Larsen. Does MarAd and DOE have access to this database 
for cargo transportation vessel availability?
    Mr. Allegretti. Well, there are two answers to that 
question. Last summer the list that Deputy Secretary Porcari 
was referring to was actually a Maritime Administration list 
that was on MarAd's Web site. It reached out to vessel owners, 
said, ``What do you have available?'' and compiled that 
information, and it updated it on a regular basis.
    We found that that system did not provide sort of all of 
the detail and clarity that they were looking for. So one of 
the things that came out of our conversations this past spring 
with Secretary Porcari and the folks at MarAd was for us to try 
to help them put together a better list with more specificity 
about vessel availability and timeframes of availability, which 
we have done, and which we have shared with them.
    And so that list shows that at this point in time we have 
availability in the next 30 days more than 30 American-flag 
vessels with a capacity of somewhere between 50 and 150,000 
barrels each, with an aggregate capacity of about 2\1/2\ 
million barrels. That is where we stand today.
    Mr. Larsen. So if there was an SPR drawdown today of 30 
million on the same level they had last year, you could do 2\1/
2\ million of that 30, but that would max out the U.S. industry 
today.
    Mr. Allegretti. That is right. We could do 2\1/2\ million 
of the initial drawdown, but I would also point out that those 
vessels will become available again at some point in the 
timeframe of the drawdown, and so part of what the reform has 
to do is to be looking at an ongoing basis about vessel 
availability.
    Mr. Larsen. Right. Can you comment some on your views with 
regards to this 500,000 barrel lot size?
    And the question I had for Mr. Porcari had to do with 
whether or not that creates an artificial barrier to 
participation. Now, that's a purchasing lot size, but in your 
experience in the industry, does it not seem obvious there 
might be some connection between those who are purchasing and 
those who are delivering?
    You buy 500,000; you want to deliver the 500,000.
    Mr. Allegretti. Oh, exactly. And that is the problem, that 
you know, I thought that the answers on that question were 
incomplete. It is true that the 500,000 refers partly to the 
purchase of the oil, and if it had gone from there to you may 
purchase in 500,000 barrel lots, but you must deliver 
consistent with the requirements of the law, that would have 
been fine and we would all be here today celebrating that 
action rather than protesting it.
    But that is not what happened. It was if you buy in 
500,000, we will give you a waiver to transport it at 500. And 
I am sure the committee has this information available to it. 
If not, we would be happy to share it through our Freedom of 
Information Act request of the agencies. There are many 
documents that we have received and reviewed that make clear 
that although they never rescinded the 40,000 and 300,000 
barrel minimums in their notice of sale, as a de facto matter 
they changed that to make it 500,000. And that is why there 
were 44 waivers of the Jones Act, because there was a de facto 
500,000 barrel minimum, and there are no American vessels 
available to do that.
    Mr. Larsen. Right. Back to the issue of potential reforms 
to the waiver process, do you have other contributions to that, 
to reform ideas?
    Mr. Allegretti. Well, you know, the simplest is simply if 
we could all start at the same premise, and I think that is 
part of the problem that we have. Secretary Porcari talked 
about active partnership with industry, and we certainly 
welcome that, but a partnership has to be based on kind of a 
mutual understanding and mutual basis of similar philosophy, 
and we do not have that here.
    We have the industry saying follow the law, and we have the 
administration saying there are a bunch of impediments that get 
in the way of following the law. And I thought one of the 
things that was most troubling about Secretary Porcari's 
testimony was he talked about looking for a process to bring us 
in, to bring the American-flag vessel industry in.
    We are already in. The law requires us to be in, and yet 
they see us on the outside and they see reforms that give us a 
greater opportunity, as he put it, to participate. We have the 
first opportunity to participate under the law, not the last.
    So I would say if we could have a fundamental understanding 
about the premise from where we depart, that would be 
wonderful.
    Mr. Larsen. Thank you.
    Mr. Chairman, thank you.
    Mr. LoBiondo. Mr. Harris.
    Dr. Harris. Thank you very much.
    Let me ask. Obviously other shipments occur of oil between 
two American ports in everyday commerce in the United States. 
What percent of those shipments right now are delivered on 
Jones Act vessels?
    Mr. Allegretti. All of them. Between U.S. ports?
    Dr. Harris. Yes. So in everybody business conducted.
    To put it in perspective, what we are expected to believe 
is that although on everyday business 100 percent of shipments 
can be delivered on a Jones Act vessel, when normal commerce is 
conducted in the sale and purchase of oil, when the U.S. 
decides to sell part of its stock of oil, we can only do one-
half of 1 percent? Am I missing something here?
    I mean, all of a sudden when the U.S. Government is the 
seller of the oil instead of some other producer, we can only 
ship \1/200\ of it complying with Jones Act?
    Again, I am astounded.
    Mr. Allegretti. You are not missing anything, sir.
    Dr. Harris. OK.
    Mr. Allegretti. It goes to the issue of difference in the 
fundamental premise from which we depart.
    Dr. Harris. Right. Because I assume that when a normal 
conventional trade of oil is made, the DOE and MarAd is not on 
the phone between the prospective purchaser and the seller 
saying, ``You know, do not worry about that Jones Act because 
if you just contract for 500,000 barrels with an American 
producer, do not worry. We will allow you to.''
    I assume that is not the way business is normally 
conducted.
    Mr. Allegretti. No, sir. No, sir. And actually one thing 
that is relevant to your question is that this industry, the 
coastwise transportation of petroleum industry has undergone a 
fundamental transformation in the last 25 years. Part of that 
was driven by the requirements of OPA-90, which required double 
hauls, and so that spurred the reconstruction of all vessels 
going forward that want to participate in that trade.
    But the other thing that has changed fundamentally that is 
different than it was prior to OPA-90 is the partnership that 
exists between the oil companies and the vessel owners who 
transport their cargo where there is a fundamental partnership 
about how do we do this, what kinds of vessels do we want; are 
we both committed to flawless operations and no spills? And 
that is a very strong partnership, and so the state-of-the-art 
industry that exists today is part of that.
    And so you cannot have that partnership without them having 
a close commercial working relationship.
    Dr. Harris. So what you are suggesting is that the oil 
companies actually have a better relationship with the 
transport companies than the U.S. Government does, functional 
relationship.
    Mr. Allegretti. That is undoubtedly true.
    Dr. Harris. I also do not understand, and I guess I could 
have asked the Secretary although it is probably higher 
administration policy. What was the emergency about getting 
this oil shipped without complying with Jones Act?
    I mean once the decision is made that you are going to 
release the oil, its effect on the market is there. I mean, the 
market assume 30 million barrels of extra production are there. 
If it is released today, tonight, tomorrow, next week, next 
month, the market knows it is there.
    Is there an emergency that you can tell that meant we could 
not wait? Because as you suggest, some of these vessels could 
have been just recycled through the process. I mean, until we 
are literally on an everyday basis we ship 100 percent of that 
American produced oil. What was the emergency? Was there a 
perceived emergency?
    Mr. Allegretti. Well, there was an articulated emergency by 
the Department of Energy which laid out initially the goal of 
all of these cargos being into the economy within 30 days of 
the announcement of the drawdown at the beginning of July.
    Dr. Harris. And what was the purpose of that that you could 
tell?
    I mean, I am sorry. I have to ask you because the 
Department of Energy is not here to ask the question. But I 
mean, did some economist suggest that, you know, at 35 days it 
does not work? The effect is gone. At 40 days the effect is 
gone? Is this voodoo economics, oil economics out of the 
department?
    Mr. Allegretti. I mean, I do not know. I cannot tell you. I 
cannot speak for them, thankfully, and I cannot tell you what 
their basis of 30 days was, but here is what I can tell you, 
that it was a false goal on their part, and they knew that they 
were not going to achieve it, and I think they used it as a 
mechanism to exclude American vessels from the process.
    Factually, although they had a 30-day goal, there were 
still cargos moving to terminal locations 90 days later.
    Dr. Harris. On foreign vessels.
    Mr. Allegretti. On foreign vessels. So they did not deliver 
the cargo for 90 days. So one has to conclude that somewhere in 
that 90-day process there had to be room for American vessels 
to participate.
    And I will add this. The Department of Energy has provided 
not once scintilla of evidence to show what it suggests, that 
by the use of smaller American vessels we would have had a 
materially damaging effect on the President's policy. There is 
no evidence to suggest that.
    Dr. Harris. Well, thank you very much.
    And thank you, again, Mr. Chairman.
    Mr. LoBiondo. Mr. Landry.
    Mr. Landry. Mr. Chairman, thank you.
    My friend Mr. Harris has it right on the point. You know, 
at my house my wife and I set down some rules for my 7-year-
old, and when he does not want to follow them, he can give me 
every excuse in the world why he should not have to follow that 
rule. That kind of sounds like where we are at in this issue.
    You know, it is like it is a missed opportunity by this 
agency. So if you break it down in simplistic terms, like Mr. 
Harris said, there was no immediate rush. These refineries were 
not running out of oil. Is that not correct?
    Mr. Allegretti. That is correct.
    Mr. Landry. So the immediate indication by the 
administration to the markets that it was going to make 
available 30 million barrels of oil was in their mind supposed 
to have an effect on the market to lower the price at the pump. 
That was the excuse, right?
    But then those refineries are not short of oil. They 
basically just stopped some foreign oil from coming into the 
refinery at that time, said, ``Wait a minute. We do not need 
that shipment right now. Those tankers can sit off in the Gulf 
of Mexico, anchor down, and wait till we get this 30 million 
barrels.''
    Of course, what we know is that it is voodoo economics, Mr. 
Harris. I mean, the whole thing was a scam, all right, to try 
to tell the American people that this administration was going 
something to lower the price at the pump, when it is real easy 
to do. You have just got to the bit in the ground down in the 
Gulf of Mexico.
    And so we could have easily just said, ``Follow the law and 
allow American workers to transport that oil over a 30-, 60-, 
90-, 100-day period of time,'' than to try to shove all that 
oil into those refineries at that particular time because once 
they did that, those refineries simply picked up the phone and 
said, ``Hey, Saudi Arabia. Send your oil back now because we 
have got all of the American oil we need, and now you can bring 
your tankers in.''
    Am I missing something?
    Mr. Allegretti. No, I do not think so, Mr. Landry. I think 
that you have described it perfectly.
    Mr. Landry. So really the agency just missed an opportunity 
to put Americans to work. So what we hear out of this 
administration and out of these agencies is how American jobs 
are so important to them and how their main goal is to create 
American jobs. And when they had an opportunity to create or 
preserve American jobs, they said no. Is that a correct 
statement?
    Mr. Allegretti. That certainly was the effect of the 
actions taken by the agencies last summer.
    Mr. Landry. And so to simply solve this problem, it just 
needs to be said that if we are going to release the oil out of 
the Strategic Petroleum Reserve, barring an emergency 
tantamount to refineries actually running out of crude, that 
there is really no excuse not to use American-flag vessels.
    Mr. Allegretti. In our view, sir, none whatsoever.
    Mr. LoBiondo. Mr. Cummings.
    Mr. Cummings. Thank you very much.
    Mr. Allegretti, you wrote in your testimony, and I quote, 
``To this day DOE, DOT and DHS have not provided a satisfactory 
explanation for the American vessel unavailability 
determinations that amounted to a de facto blanket waiver of 
the Jones Act.''
    You also wrote that you have been unable to meet with the 
Department of Energy to discuss this issue. At the time of the 
2011 SPR drawdown, what steps did you and the Jones Act 
industry take to make MarAd and other agencies aware of the 
availability of Jones act qualified vessels to move oil 
released from the SPR?
    And what response did you receive from MarAd and other 
agencies?
    Mr. Allegretti. Well, the process that MarAd had in place 
that time was to reach out directly to the owners of the 
vessels and to inquire of them what vessels do you have 
available and what timeframes, and so they were compiling the 
list that appeared on the MarAd Web site at that time.
    And we found that the list was often inaccurate, and it 
also suffered from these sort of governmental decisions about 
that vessel really is not available because it is scheduled to 
go into the dry dock next month.
    So we reached out to MarAd and we suggested a different 
process where we would be able to provide them with more real 
time information, which we have done, and we would be happy to 
share that with the committee, the report that we have 
submitted to MarAd. We have given them now the second version 
of it, which we updated from the first.
    Mr. Cummings. Now, when you presented that information, did 
you get any response? I mean, did they say, ``Yeah, we got it. 
Thank you very much'' or, ``we are going to use this''? Did 
they say, ``To hell with you''?
    I mean, what did they do? What happened?
    Mr. Allegretti. Well, we did get a response the first time 
we submitted it and, you know, a polite thank you. We will take 
a look at it, and then we submitted an update a couple of 
months later, and I do not think we have actually received a 
response to that second submission.
    Mr. Cummings. And what kind of details, I mean, did you 
provide them with? I mean, when you say you gave them up to 
date, what does that mean?
    Mr. Allegretti. Well, we have reached out to our members, 
the members of American Maritime Partnership and AWO and asked 
them to tell us what vessels do they have available, and we 
asked them to do that in three basic tranches. One is vessels 
immediately available today to move SPR oil.
    The second tranche is vessels that will become available in 
the next 30 days, and then the third is vessels that might be 
reasonably available in the next 90 days, and then beyond that 
if it becomes very speculative.
    So we do list all other American vessels, but without a 
designation of their availability because we don't have that 
information.
    So what this shows them, just to give you the snapshot of 
what this says, is that there are currently 31 vessels 
available on the spot market today or will be available in the 
next 30 days, and they have a collective capacity of about 2\1/
2\ million barrels of tankage.
    Mr. Cummings. So subsequent to the drawdown, can you 
identify the agencies with whom you have met to discuss this 
issue, and what responses have you received from them?
    Mr. Allegretti. Well, we have met with, of course, MarAd 
and DOT, and I would say, you know, those are largely positive 
exchanges, although we have not gotten to the place where we 
have a shared premise about what the law says. I would put it 
that way.
    We have been very disappointed in our outreach to the 
Department of Energy. We actually had a situation where we were 
trying to set up a meeting. We think the Energy Department 
would benefit by a little bit of education about marine 
transportation. They were resistant to setting it up.
    We reached out to a U.S. Senator and asked her to help us 
get the meeting set up, and she did that for us. So we had a 
meeting set on a day in March, and we brought in four 
executives of tank barge companies from around the country. 
They all flew in that day. We took them over to the Department 
of Energy. We went through the security process, went up to the 
conference room to an empty table to be told that the 
Department of Energy decided not to meet with us.
    Mr. Cummings. Did they say why?
    Mr. Allegretti. No. And we called them subsequently to ask 
what happened. Can we talk? And none of our phone calls were 
returned.
    Mr. Cummings. Whom have you attempted to meeting with? I 
mean, who were you trying to meet with? Who did you think you 
wanted to meet with?
    Mr. Allegretti. I had better check the record so as not to 
misstate that. We did have the names of a couple of folks who 
we thought were scheduled to meet with us.
    Mr. Cummings. I mean, did you have some written 
confirmation? I mean, you did not just show up. You did not 
just barge in?
    Mr. Allegretti. No, we do not barge in, sir.
    [Laughter.]
    Mr. Cummings. No pun intended.
    Mr. Allegretti. No pun intended. No, we had written 
confirmation that the meeting was set for, as I recall, 11:00 
a.m. on this particular date, and we met with our folks earlier 
that morning, and we did a little bit of huddling to get ready 
for the meeting, and we went over there and they did not show 
up.
    Mr. Cummings. I see my time has expired. Thank you, Mr. 
Chairman.
    Dr. Harris. [presiding.] I recognize Ms. Hirono.
    Ms. Hirono. Thank you very much.
    And I do apologize for being late for the hearing. I think 
that we share the concerns about the blanket waiver of the 
Jones Act whenever the reserves are tapped. I have that concern 
also, but going forward, part of the issue apparently is the 
capacity of the Jones Act ships to be able to transport the oil 
that is release.
    Is there anything that we can do in the future to expand 
the capacity of our Jones Act ships? Do we need to, you know, 
do a lot more to support shipbuilding, for Jones Act ships 
being built in our country? What are some of your thoughts so 
that we can avoid this kind of or minimize a blanket waiver of 
the Jones Act every time we release oil from the reserves?
    Mr. Allegretti. Thank you, ma'am.
    I would like to narrow my answer to just the vessels that 
are engaged in the coastwise transportation of petroleum 
because that is sort of the subject of the hearing today.
    I would say that the size of the fleet, of the American 
fleet is sized to the requirements of the customer base. So you 
do not find ordinarily lots of excess capacity in the fleet. 
You would not expect that if people would build very expensive 
capital assets for which there is no work.
    So the system of commercial transportation actually works 
pretty well in managing supply and demand, and I do not think 
that there is a need for Government incentive to expand the 
size of that fleet because I think the fleet is sized in the 
requirements of the customer base.
    Ms. Hirono. So does that mean that every time that there is 
a release from our reserves that we are going to see a blanket 
waiver and we just have to live with it? The Jones Act ships or 
you all have to live with it?
    Mr. Allegretti. Oh, no, not at all. No, not at all because, 
you know, the system is not perfect. So to the extent that 
where we stand today is 31 available vessels of aggregate 
capacity of 2\1/2\ million barrels, there is an excess in the 
market at least insofar as the customer requirements exist 
today. So they are available to move SPR oil.
    And so if we would use those first to the full extent of 
their availability and then seek Jones Act waivers, that would 
seem to be making the best use of American assets with the 
surge capacity of foreign assets when we run out of 
availability.
    Ms. Hirono. That makes a lot of sense. So why are we not 
going that route?
    Mr. Allegretti. I am not sure I know the answer to that. It 
has really been a subject of some curiosity to us. I guess that 
is as kind a way as I can put it.
    The commentary we heard today from the department, I think, 
actually suggests a grim picture for the future. We have had a 
year of controversy about this issue. Congress has been 
fantastic in the clarity of its expression about the importance 
and integrity of the Jones Act, and yet if you read Secretary 
Porcari's statement, what you will see is essentially a 
justification of past action, past action which resulted in 
more than 99 percent of the oil moving on foreign bottoms.
    And when you look to the forward program of what will we do 
in the future different, I think it is very grim. I think what 
that testimony says is that the Jones Act fleet is hampered by 
impediments that make it difficult for us to use it for the 
transportation of SPR oil. I see no evidence of a change in 
mentality. I see no evidence to suggest that if there is 
another drawdown of the SPR after July 1, after the Iranian 
situation develops internationally, that we will not find 
ourselves in the same exact situation of 99 percent of the oil 
moving on foreign bottoms because the Department of Energy will 
have established minimum lot sizes that the oil purchasers will 
take full advantage of.
    So I think looking forward, I wish I could say that I 
thought that we had the basis for a better understanding, but I 
do not see it in the written testimony.
    Ms. Hirono. And the minimum lot size, that is an 
administrative decision. It is not based on any requirement of 
any law or any regulation that is in place?
    Mr. Allegretti. That is exactly right, and it is 
inconsistent with the published notice of sale that the 
Department of Energy published for the public. So what you have 
is a public document that says one thing, and you have an 
unwritten criteria that says something different, which is, in 
fact, the de facto criteria that drove all of the decisions 
about transportation.
    Ms. Hirono. Thank you.
    I think there must be something we can do, Mr. Chairman, 
because we seem to all be on the same the page as to the 
results that we are looking for.
    Thank you.
    Dr. Harris. Thank you very much.
    Let me just make a brief comment. Going forward, could you 
fill us in on what the industry looks like? You know, we are 
having an American renaissance of energy in the country where I 
suspect that we are going to have more, not fewer shipments of 
energy between American ports. What is the industry doing? Are 
more ships being built? Is production increasing? Is it stable?
    Could you just give us an idea where it is going?
    Mr. Allegretti. I can give you an anecdotal idea. I would 
not say that it is a scientifically valid idea.
    What I hear from the folks that I talk to is that they are 
bullish on the future of marine transportation for petroleum 
and energy products in the United States because of developing 
technologies, because of new opportunities on the North Slope 
of Alaska, and that they are staying very close to their 
customer base.
    That is what drives decisions for construction of vessels, 
is understanding customer requirements and the customer's 
expectation of transportation needs over the long term. So I 
would say a short answer is I think they feel bullish about the 
future of that part of the business.
    Dr. Harris. And is our capacity increasing in our ability 
to ship on American-flag vessels?
    Mr. Allegretti. In the petroleum area?
    Dr. Harris. Yes.
    Mr. Allegretti. Yes. Domestically yes.
    Dr. Harris. Thank you.
    Mr. Larsen.
    Mr. Larsen. Thank you, Mr. Chairman.
    Just a final comment from me. First off, you have given us 
a lot of food for thought on waiver process reforms. I think 
that is an important direction for us to look. So I appreciate 
your testimony.
    Second is if the available capacity of the U.S. fleet is 
something less than 30 million, I hope we can focus on 100 
percent of that capacity being available and being used for 
whatever number short of 30 that is being used.
    Finally, I have great respect for my friend from Louisiana. 
Unfortunately he is not here, but the effort in Libya last 
year, there is a lot of debate about it. We are here debating 
about the implementation of the Jones Act as it applies to the 
SPR and not so much about the international effort in Libya or 
the related international effort to release oil from national 
Strategic Petroleum Reserves, not just in the U.S. but in other 
countries in order to alleviate price spikes that resulted 
from, first off, the potential action and then the actual 
action in Libya.
    I personally do not characterize the release in SPR as a 
scam in any way, shape or form by this administration, nor did 
I characterize it as a scam under the second Bush 
administration. That is not my view, and I want to be clear 
about that.
    I do have problems with how it was implemented and the 
purpose of this hearing and the reason I called for or asked 
the Chairman for this hearing was to consider how we can 
improve the implementation of any SPR drawdown so that we are 
better utilizing the availability of a qualified and capable 
and available U.S. fleet. That is what our goal should be.
    Mr. Allegretti. Mr. Larsen, might I just say I hope you 
heard my answer to Mr. Landry as speaking to the issue of Jones 
Act and not to the larger foreign policy question.
    Dr. Harris. Ms. Hirono, do you have a closing? Ms. Hirono, 
do you have a statement?
    No. No further comments?
    [No response.]
    Dr. Harris. Well, if there are no further questions, I 
thank Mr. Allegretti again for his testimony and the Members 
for their participation.
    The subcommittee stands adjourned.
    [Whereupon, at 11:50 a.m., the subcommittee was adjourned.]
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