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



 
     HEARING ON HARBOR MAINTENANCE FUNDING AND MARITIME TAX ISSUES

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

                                HEARING

                               before the

                       SUBCOMMITTEE ON OVERSIGHT

                                  and

                SUBCOMMITTEE ON SELECT REVENUE MEASURES

                                 of the

                      COMMITTEE ON WAYS AND MEANS

                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                            FEBRUARY 1, 2012

                               __________

                        SERIAL 112-OS09 & SRM06

                               __________

         Printed for the use of the Committee on Ways and Means





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                      COMMITTEE ON WAYS AND MEANS

                     DAVE CAMP, Michigan, Chairman

WALLY HERGER, California             SANDER M. LEVIN, Michigan
SAM JOHNSON, Texas                   CHARLES B. RANGEL, New York
KEVIN BRADY, Texas                   FORTNEY PETE STARK, California
PAUL RYAN, Wisconsin                 JIM MCDERMOTT, Washington
DEVIN NUNES, California              JOHN LEWIS, Georgia
PATRICK J. TIBERI, Ohio              RICHARD E. NEAL, Massachusetts
GEOFF DAVIS, Kentucky                XAVIER BECERRA, California
DAVID G. REICHERT, Washington        LLOYD DOGGETT, Texas
CHARLES W. BOUSTANY, JR., Louisiana  MIKE THOMPSON, California
PETER J. ROSKAM, Illinois            JOHN B. LARSON, Connecticut
JIM GERLACH, Pennsylvania            EARL BLUMENAUER, Oregon
TOM PRICE, Georgia                   RON KIND, Wisconsin
VERN BUCHANAN, Florida               BILL PASCRELL, JR., New Jersey
ADRIAN SMITH, Nebraska               SHELLEY BERKLEY, Nevada
AARON SCHOCK, Illinois               JOSEPH CROWLEY, New York
LYNN JENKINS, Kansas
ERIK PAULSEN, Minnesota
KENNY MARCHANT, Texas
RICK BERG, North Dakota
DIANE BLACK, Tennessee
TOM REED, New York

                       Jon Traub, Staff Director

                  Janice Mays, Minority Staff Director

                                 ______

                       Subcommittee on Oversight

             CHARLES W. BOUSTANY, JR., Louisiana, Chairman

DIANE BLACK, Tennessee               JOHN LEWIS, Georgia
AARON SCHOCK, Illinois               XAVIER BECERRA, California
LYNN JENKINS, Kansas                 RON KIND, Wisconsin
KENNY MARCHANT, Texas                JIM MCDERMOTT, Washington
TOM REED, New York
ERIK PAULSEN, Minnesota

                                 ______

                 Subcommittee on Select Revenue Measure

                   PATRICK J. TIBERI, Ohio, Chairman

PETER J. ROSKAM, Illinois            PRICHARD E. NEAL, Massachusetts
ERIK PAULSEN, Minnesota              MIKE THOMPSON, California
RICK BERG, North Dakota              JOHN B. LARSON, Connecticut
CHARLES W. BOUSTANY, JR., Louisiana  SHELLEY BERKLEY, Nevada
KENNY MARCHANT, Texas
JIM GERLACH, Pennsylvania


                            C O N T E N T S

                               __________

                                                                   Page

Advisory of February 1, 2012 announcing the hearing..............     2

                               WITNESSES

The Honorable Michael Strain, Commissioner of Agriculture & 
  Forestry.......................................................     8
Mr. Gary LaGrange, President and Chief Executive Officer of the 
  Port of New Orleans............................................    13
Mr. Steven A. Fisher, Executive Director, American Great Lakes 
  Ports Association..............................................    19
Mr. Morten Arntzen, President and Chief Executive Officer, 
  Overseas Shipholding Group.....................................    27
Mr. James C. McCurry, Jr., Director of Administration, Georgia 
  Ports Authority................................................    36
Mr. Michael Leone, Port Director, Massachusetts Port Authority...    43

                   MEMBER SUBMISSIONS FOR THE RECORD

The Honorable Kevin Brady, Statement.............................    68
The Honorable Wally Herger and Earl Blumenauer, Statement........    70
The Honorable Brian Higgins, Statement...........................    72

                   PUBLIC SUBMISSIONS FOR THE RECORD

AGL Resources, Statement.........................................    73
American Association of Port Authorities, Statement..............    75
American Road and Transportation Builders Association, Statement.    78
Big River Coalition, Statement...................................    81
Carrix Inc., Statement...........................................    86
Coastwise Coalition 1, Statement.................................    91
Coastwise Coalition 2, Statement.................................    94
Florida Ports Council, Statement.................................    95
Horizon Lines Inc., Statement....................................    98
Jersey Harborside Transport LLC., Statement......................   106
Lake Charles Harbor, Statement...................................   108
APL Limited and affiliated companies, Maersk Inc. and 
  Subsidiaries, Sealift Incorporated, and Hapag-Lloyd AG and 
  affiliated companies, Statement................................   112
Port Freeport, Statement.........................................   122
Port Metro Vancouver, Statement..................................   124
Port of Seattle, Statement.......................................   127
Port of Tacoma, Statement........................................   130
Shipbuilders Council of America, Statement.......................   136
Tonnage Tax Coalition, Statement.................................   140
West Gulf Maritime Association, Statement........................   143
American Maritime Labor Organizations, Statement.................   157


           HARBOR MAINTENANCE FUNDING AND MARITIME TAX ISSUES

                              ----------                              


                      WEDNESDAY, FEBRUARY 1, 2012

             U.S. House of Representatives,
                       Committee on Ways and Means,
                                 Subcommittee on Oversight,
                   Subcommittee on Select Revenue Measures,
                                                    Washington, DC.

    The subcommittees met, pursuant to notice, at 9:34 a.m., in 
Room 1100, Longworth House Office Building, the Honorable 
Charles Boustany [Chairman of the Subcommittee on Oversight] 
presiding.
    [The advisory of the hearing follows:]

ADVISORY

FROM THE 
COMMITTEE
 ON WAYS 
AND 
MEANS

                       SUBCOMMITTEE ON OVERSIGHT

                SUBCOMMITTEE ON SELECT REVENUE MEASURES

                                                CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE
February 1, 2012
OS-09 & SRM-06

                 Chairman Boustany and Chairman Tiberi

 Announce Hearing on Harbor Maintenance Funding and Maritime Tax Issues

    House Ways and Means Subcommittee on Oversight Chairman Charles 
Boustany, Jr, MD (R-LA) and Subcommittee on Select Revenue Measures 
Chairman Pat Tiberi (R-OH) today announced the Subcommittees will hold 
a hearing on harbor maintenance funding and maritime tax issues, with a 
focus on the Harbor Maintenance Trust Fund and Harbor Maintenance Tax, 
maintenance underfunding, and the tax treatment of foreign shipping 
operations. The hearing will take place on Wednesday, February 1, 2012, 
in Room 1100 of the Longworth House Office Building, beginning at 9:30 
a.m.
      
    In view of the limited time available to hear witnesses, oral 
testimony at this hearing will be from invited witnesses only. However, 
any individual or organization not scheduled for an oral appearance may 
submit a written statement for consideration by the Committee and for 
inclusion in the printed record of the hearing. A list of invited 
witnesses will follow.
      

BACKGROUND:

      
    The Harbor Maintenance Trust Fund (HMTF) provides funds for the 
United States Army Corps of Engineers (Corps) to dredge federally 
maintained harbors to their authorized depths and widths. The HMTF is 
funded by the Harbor Maintenance Tax (HMT), under which certain users 
of U.S. coastal and Great Lakes harbors pay a tariff of $1.25 per 
$1,000 in cargo value passing through these waters. The tax applies to 
imported and domestic waterborne cargo, as well as the ticket value of 
cruise ship passengers.
      
    The tax was intended to provide a sufficient, stable long-term 
source of funding to pay for harbor dredging to maintain authorized 
depths and widths. In recent years, HMTF expenditures have remained 
flat while HMT collections have increased with rising imports, creating 
a large surplus in the trust fund. The HMTF's uncommitted balance 
continues to grow and reached an estimated $6.1 billion at the 
beginning of fiscal year 2012. In fiscal year 2010 alone, $1.2 billion 
in Harbor Maintenance Taxes were collected, while only $793 million was 
spent on dredging and related maintenance. Despite the accumulating 
balances in the HMTF, many U.S. harbors are under-maintained, resulting 
in the full channel dimensions of America's busiest ports available 
less than 35 percent of the time. Reduced channel dimensions could 
increase both the cost of shipping and the risk of grounding or 
collision.
      
    Another potential concern with the structure of the HMTF arises 
with respect to what is known as ``short sea shipping.'' Some have 
argued that the HMT itself is a major reason why very little non-bulk 
commercial cargo is transported using inland and coastal waterways. 
Currently, the use of short sea shipping, which involves the movement 
of cargo along coastal and inland waters, is primarily limited to bulk 
cargo while commercial non-bulk cargo is moved throughout the U.S. via 
other modes of transportation.
      
    Finally, and unrelated to the HMTF, U.S. shipping companies must 
maintain investments in qualified shipping assets made between 1975 and 
1986 to avoid subPart F (anti-deferral) tax treatment for their 
qualified foreign shipping income. Some have questioned whether this 
requirement with which U.S. shipping companies must comply has 
encouraged these companies to invest capital in their foreign 
operations--capital that otherwise could have been used to expand 
domestic operations and to create U.S. jobs.
      
    In announcing the hearing, Chairman Boustany said, ``Our nation's 
harbors are a lifeblood of commerce. Years of chronic underfunding have 
severely limited ship traffic, prevented valuable cargo from moving 
efficiently, and adversely affected national, regional, and local 
economies. Funds collected by the HMTF should be utilized promptly and 
exclusively to keep our harbors open for business. The Subcommittees 
will conduct oversight of this critical problem and consider what 
solutions might better help American goods to compete in the global 
economy.''
      
    Chairman Tiberi added, ``The U.S. maritime industry is vital to our 
economy and national security. Today's Tax Code places preference on 
investment in foreign shipping operations over investment in domestic 
operations. The Tax Code also discourages the use of local shipping 
channels as a means to move non-bulk cargo throughout the United States 
and the Great Lakes region. The Subcommittees should examine how to 
design tax policies that help create U.S. maritime jobs and that ensure 
the long-term growth of the domestic maritime industry.''
      

FOCUS OF THE HEARING:

      
    The hearing will examine the structure of the Harbor Maintenance 
Trust Fund and the Harbor Maintenance Tax, with an emphasis on 
investigating whether the structures of the Trust Fund--including both 
its financing source and the expenditure of its balances--are 
appropriately structured. Similarly, the hearing will consider whether 
U.S. anti-deferral rules inhibit the expansion of the U.S. shipping 
industry.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Please Note: Any person(s) and/or organization(s) wishing to submit 
for the hearing record must follow the appropriate link on the hearing 
page of the Committee website and complete the informational forms. 
From the Committee homepage, http://waysandmeans.house.gov, select 
``Hearings.'' Select the hearing for which you would like to submit, 
and click on the link entitled, ``Click here to provide a submission 
for the record.'' Once you have followed the online instructions, 
submit all requested information. ATTACH your submission as a Word 
document, in compliance with the formatting requirements listed below, 
by the close of business on Wednesday, February 15, 2012. Finally, 
please note that due to the change in House mail policy, the U.S. 
Capitol Police will refuse sealed-package deliveries to all House 
Office Buildings. For questions, or if you encounter technical 
problems, please call (202) 225-1721 or (202) 225-3625.
      

FORMATTING REQUIREMENTS:

      
    The Committee relies on electronic submissions for printing the 
official hearing record. As always, submissions will be included in the 
record according to the discretion of the Committee. The Committee will 
not alter the content of your submission, but we reserve the right to 
format it according to our guidelines. Any submission provided to the 
Committee by a witness, any supplementary materials submitted for the 
printed record, and any written comments in response to a request for 
written comments must conform to the guidelines listed below. Any 
submission or supplementary item not in compliance with these 
guidelines will not be printed, but will be maintained in the Committee 
files for review and use by the Committee.
      
    1. All submissions and supplementary materials must be provided in 
Word format and MUST NOT exceed a total of 10 pages, including 
attachments. Witnesses and submitters are advised that the Committee 
relies on electronic submissions for printing the official hearing 
record.
      
    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.
      
    3. All submissions must include a list of all clients, persons and/
or organizations on whose behalf the witness appears. A supplemental 
sheet must accompany each submission listing the name, company, 
address, telephone, and fax numbers of each witness.
      
    Note: All Committee advisories and news releases are available on 
the World Wide Web at http://www.waysandmeans.house.gov/.
      
    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.

                                 

    Chairman BOUSTANY. We will get started. Good morning to 
everybody, and thank you for joining us for this morning's 
joint hearing of the Subcommittees on Oversight and Select 
Revenue Measures.
    Today's hearing will take a closer look at the underfunding 
of the nation's maritime transportation infrastructure, 
specifically the Harbor Maintenance Tax and the Harbor 
Maintenance Trust Fund, and the tax treatment of foreign 
shipping operations.
    While this might sound like an arcane subject, I think what 
you will see, as we go through the course of this hearing, is 
that this has--these issues have a huge economic impact on this 
country on its ability to receive imports, to export, our trade 
competitiveness, as well as the general economic impact and the 
job impact that this all has.
    The Harbor Maintenance Trust Fund was created in 1986 to 
provide a stable, long-term source of funding to pay 
maintenance costs in federally-maintained harbors, the taxes 
imposed on users of the system, particularly shippers of goods 
passing through those harbors. The revenues, which total as 
much as $1.3 billion to $1.6 billion annually, are placed in 
the Harbor Maintenance Trust Fund and exist to fund harbor 
maintenance costs.
    In the past decade we have seen growing disparities between 
the Harbor Maintenance Tax revenues and spending. Because the 
revenues and expenditures of the Harbor Maintenance Trust Fund 
are part of the overall budget, if the trust fund does not 
spend all of its revenues, the surplus goes toward offsetting 
and unrelated spending. Many see this as an abuse of a 
dedicated funding stream.
    As a result of chronic underfunding of critical harbor 
maintenance--as a result of this chronic underfunding, critical 
harbor maintenance has suffered. The uncommitted balance of the 
trust fund continues to grow, reaching $6.1 billion at the 
beginning of fiscal year 2012. This means that there are 
billions of unused dollars belonging to the trust fund, even 
though there are significant harbor maintenance needs, hurting 
U.S. competitiveness.
    Because of this underfunding, the full channel dimensions 
of America's busiest ports are available only a third of the 
time, and there is increased risk of grounding and collision, 
and certainly an adverse economic impact to this.
    To combat the chronic underfunding of federally maintained 
waterways, I have introduced H.R. 104, the Realize America's 
Maritime Promise Act. The bill requires that the total amount 
of available spending from the Harbor Maintenance Trust Fund 
each year be equal to the trust fund receipts, plus interest, 
as estimated by the President's budget for that year. This will 
ensure that taxes paid into the Harbor Maintenance Trust Fund 
will be used for their intended purposes, and not for other 
outside spending.
    As we strive toward economic growth and job creation, we 
must recognize the importance of our maritime infrastructure. 
The President has set a goal of doubling American exports by 
2015. If we are going to even come close to achieving this 
goal, we have to have the infrastructure to handle increased 
maritime traffic. This is not just a Mississippi or Calcasieu 
River problem, nor is it exclusively a Great Lakes problem. 
This is a nationwide transportation and economic problem. We 
ought to be spending these user fees on projects that improve 
our nation's critical transportation infrastructure, and make 
the American economy more competitive.
    As Congress begins consideration of the surface 
transportation and reauthorization bill this week, I look 
forward to hearing from our witnesses today about their ports 
and businesses and communities, and what changes are needed to 
bolster American jobs and competitiveness.
    Before I yield to the ranking member, the esteemed ranking 
member of the Subcommittee on Oversight, Mr. Lewis, I ask 
unanimous consent that all Members' written statements be 
included in the record.
    [No response.]
    Chairman BOUSTANY. And without objection, so ordered. Mr. 
Lewis, I now yield to you, sir.
    Mr. LEWIS. Well, thank you very much, Mr. Chairman. Mr. 
Chairman, I want to thank you for holding this hearing today. 
And I also want to thank Chairman Tiberi and Ranking Member 
Neal.
    Many of you know that I began my congressional career on 
what then was known as the Public Works and Transportation 
Committee. One of the main reasons for my move to the Ways and 
Means Committee center on this committee's work to finance our 
nation's transportation system, roads, transit, airways, and 
ports.
    Transportation has always been a bipartisan issue in 
Congress. We see this in the legislative proposal before us 
today. This hearing provides us with an opportunity to hear 
about the needs of our nation's waterways. Transportation is 
the key to jobs, not only in the state of Georgia, but all 
around our country.
    My congressional district is home to the largest passenger 
airport in the world, with nearly 90 million passengers each 
year. My district is only a few hours away from the Port of 
Savannah, the fourth largest and fastest-growing container port 
in the nation. In 2010, $8 billion in cargo good moved through 
the Port of Savannah to and from Metro Atlanta.
    Across the state of Georgia there are almost 300,000 port-
related jobs. The ports also contribute over $62 billion in 
revenue to Georgia's economy.
    After the earthquake in Haiti, the Georgia Port Authority 
contacted us to see how they could support the relief effort.
    Today I want to learn more what improvement should be made 
to the Harbor Maintenance Trust Fund. We must make sure that it 
is used for its intended purpose. Our ports must be able to 
compete internationally. We must move goods, service, and 
people safer and efficiently.
    I look forward to hearing from all of the witnesses. I 
would like to extend a special welcome to Mr. Jamie McCurry, a 
former congressional staffer for my good friend and colleague, 
Congressman Jack Kingston.
    And, Mr. Chairman, thank you very much again.
    Chairman BOUSTANY. I thank the esteemed ranking member of 
the Oversight Subcommittee. And now I yield to Mr. Tiberi, the 
chairman of the Subcommittee on Select Revenue Measures. Mr. 
Tiberi has been a staunch advocate of our maritime industry, 
and a member of this committee who has really worked hard to 
promote job growth and American competitiveness.
    Mr. Tiberi.
    Chairman TIBERI. I should just end and not even begin, 
after that introduction. I thank you, Mr. Chairman. It is a 
pleasure to have the opportunity to hold this joint hearing 
with you today with our subcommittee. Our members have a lot of 
interest, as well, in the maritime industry and the maritime 
issues, and believe today's hearing is an excellent chance to 
examine how to strengthen our U.S. maritime industry.
    I am glad to have the opportunity to join with my friends 
on the Oversight Subcommittee in examining the Harbor 
Maintenance Trust Fund. I too agree that it has been 
mismanaged, and appreciate immensely the leadership shown by 
Dr. Boustany on this particular issue and issues related to it.
    Today's hearing also examines the policy issues surrounding 
the unique tax structure of the maritime industry. In the past, 
the Internal Revenue Code has unnecessarily, in my opinion, 
hindered the growth of the U.S. maritime industry, putting it 
at a competitive disadvantage, internationally. And while 
Congress has taken measures over the last decade to correct 
some of these problems, I believe there is much work to be 
done.
    The Short Sea Shipping Act and the American Shipping 
Reinvestment Act are two pieces of legislation that stand to 
improve the maritime industry, help our economy, and create 
jobs. I look forward to exploring them further with our 
witnesses today. I thank you again, Dr. Boustany, for your 
leadership. And I yield back.
    Chairman BOUSTANY. Mr. Tiberi, I thank you for your 
leadership in introducing these very important bills and 
bringing my attention to those particular tax structure issues 
that need to be addressed to enhance maritime competitiveness.
    And now I yield to my friend from Massachusetts, Mr. Neal, 
who has also been a staunch advocate of our maritime 
competitiveness, and improving our trade competitiveness for 
this country. Mr. Neal?
    Mr. NEAL. Thanks very much, Dr. Boustany, and I want to 
thank you and Mr. Tiberi and Mr. Lewis for calling this hearing 
today on maritime tax issues. It is a topic that is 
particularly important to my home state of Massachusetts.
    The ports of Massachusetts have played an important role 
throughout our history. Plymouth, sometimes known as America's 
Hometown, is where the Mayflower and the pilgrims landed in 
1620. Gloucester is an important fishing port, both today and 
throughout our history. It is reportedly noted that the first 
schooner was built in 1713 in Gloucester. And, of course, the 
Boston Tea Party occurred in the Boston Harbor in 1773.
    And today, Massachusetts seaports continue to play an 
important role as economic drivers. According to my guest this 
morning, Mike Leone, the director of the Port of Boston, who is 
testifying with us, American ports help generate almost 30 
percent of America's GDP, and support more than 13 million 
jobs. America's ports provide a vital gateway to international 
trade by facilitating the transport of cargo around the world. 
I am delighted that Gulf Stream is locating a presence now in 
Westfield, Massachusetts. And the role that Westover Air Force 
Base plays in commercial activity is helpful to this argument 
today, as well.
    I am pleased that we are examining the Harbor Maintenance 
Trust Fund tax today. Many ports around the country, including 
in Massachusetts, are in need of maintenance. In fact, the U.S. 
Army Corps of Engineers estimates that full channel dimensions 
at the nation's busiest 59 airports are available less than 35 
percent of the time. However, even though users of our nation's 
waterways are paying significant amounts of money into the 
trust fund to maintain our ports, these dollars are not being 
spent on the ports and trust fund that last year had a surplus 
of almost $6.5 billion.
    A very key item that needs to be noted as well this 
morning. I am excited about the prospects of the expansion of 
the Panama Canal, which will be completed in 2014. What that is 
going to mean for East Coast shipping is really very exciting. 
We need to ensure that we will be ready to handle the increased 
flow of trade and exports that this project is certainly going 
to generate.
    To address this situation I am glad that I put my name as a 
cosponsor with Chairman Boustany and Representative Courtney's 
Realize America's Maritime Promise Act. This important 
legislation will ensure that the revenue from the Harbor 
Maintenance Tax is used exclusively for harbor maintenance 
projects.
    Again, I want to thank Mike Leone this morning, for coming 
down from Boston. I was there yesterday to pay my regards to 
one of the great legends in Massachusetts's recent political 
history--where we pay great attention to that skill--the 
passing of Mayor Kevin White, who for 16 years governed one of 
the most exciting cities in all of the world, Boston. So, I 
want to thank Mike for his presence today.
    And I look forward to hearing from our witnesses. And I 
want to thank you, Chairman Boustany, for conducting the 
hearing.
    Chairman BOUSTANY. Thank you, Mr. Neal. Now I would like to 
welcome our very distinguished group of panelists here today, 
our witnesses.
    First we have Mr. Michael Strain. He is commissioner of 
agriculture and forestry in Baton Rouge, Louisiana, a personal 
friend of mine and a staunch advocate not only for the 
agricultural sector, a national leader in agriculture, but he 
has also been one who has recognized the importance of our 
maritime commerce, so that we can ship these agricultural 
products to foreign destinations.
    Next we have Mr. Gary LaGrange, president and chief 
executive officer of the Port of New Orleans. He is no stranger 
to this committee. He has testified on our--in our hearings on 
trade agreements, and certainly understands the importance of 
all of this with regard to American competitiveness.
    Very pleased to have Mr. Steven Fisher as the executive 
director of the American Great Lakes Port Association. Mr. 
Fisher, I have been working with Chairman Upton, chairman of 
the Energy and Commerce Committee. He has spoken very highly of 
you. And we are pleased that you can be here today to give that 
Great Lakes perspective on this.
    Mr. Morten--is it Arntzen? Mr. Arntzen is president and 
chief executive officer of the Overseas Shipping [sic] Group, 
and we are very pleased to have your perspective, as well.
    Mr. James McCurry is director of administration for the 
Georgia Ports Authority. And Mr. McCurry, thank you for being 
here. We understand the importance of the port in Savannah, and 
of the work that is being done in Georgia.
    And Mr. Michael Leone is port director for the 
Massachusetts Port Authority. And I want you to know, Mr. 
Leone, Mr. Neal pushed very hard for you to be a part of this 
panel today, and I am very pleased that you are here today to 
give us an East Coast perspective, as well.
    So, with that, you will each have five minutes to present 
your testimony, as is customary, with your full written 
testimony submitted for the record.
    And Mr. Strain, we will begin with you.

 STATEMENT OF MICHAEL STRAIN, COMMISSIONER OF AGRICULTURE AND 
  FORESTRY, LOUISIANA DEPARTMENT OF AGRICULTURE AND FORESTRY, 
                     BATON ROUGE, LOUISIANA

    Dr. STRAIN. Good morning, Mr. Chairman, Members. First of 
all, thank you for the opportunity to come and spend some time 
and talk with you. I am testifying today on behalf of the 
Louisiana Department of Agriculture and Forestry.
    My statement is also consistent with the position of the 
National Association of the State Departments of Agriculture, 
NASDA, which represents the commissioners, secretaries, and the 
directors of the state departments of agriculture in all 50 
states and in 4 territories. We are, combined, responsible for 
a wide variety of things such as food safety, but also for 
fostering the economic vitality and growth in our rural 
communities.
    I am also president of the Southern United States Trade 
Association. It is a regional trade group that markets products 
from 14 southern states to foreign markets. We commend you for 
holding this hearing to discuss the Realize America's Maritime 
Promise Act, and express our appreciation for allowing us to do 
this.
    I am going to give you compelling reasons to continue to 
fund efforts to do this. This will boost America's food and 
agriculture products, our exports, but also will support our 
small businesses and Americans throughout the United States.
    The Mississippi River is the lifeline of transportation for 
agricultural products in our nation. It's been called America's 
Superhighway. More than 30 states and 2 Canadian provinces ship 
products: grain, coal, steel, petroleum, and aggregates, and 
many other products. It and its tributaries form one of the 
largest critical inland waterway systems in the nation, 
supporting about 50 percent of the nation's soybean exports and 
60 percent of the total U.S. corn exports. Annually, more than 
400 million bushels of soybeans, 1.1 billion bushels of corn, 
and more than 30 million bushels of wheat are moved by barge to 
ports along the lower Mississippi River.
    As one of the largest single contributors to the nations' 
gross domestic product, agriculture is critical to our economy. 
The inability to maintain the Mississippi River at sufficient 
depths and widths by dredging will have significant impacts to 
Louisiana agriculture. Agriculture represents more than 85 
percent of the surface area of our state, 10 percent of our 
workforce, 243,000 jobs. The exports from Louisiana grew by 
more than 15 percent last year, over $20 billion, accounting 
for more than 16 percent of America's total exports.
    In the United States we are speaking about the golden age 
of agriculture. Last year the American farmer had a profit of 
over $100 billion, increased exports by almost 20 percent. A 
positive balance of trade of $37 billion and growing, expected 
to hit $45 billion. We expect to have $148 billion to $150 
billion. One of the only sectors in America with a positive 
balance of trade.
    We look at what's going on worldwide, worldwide: an 
increase in population of 2.2 billion people, and a greater 
need of all the products we produce. When you look at food and 
fiber and energy, these products are shipped worldwide via our 
water resources.
    The great potential for the growth in the economy of 
America lies in our ability to compete worldwide. We see a 
growing middle class. The growth in the middle class will 
almost double in the next 15 years; 95 percent of that growth 
is outside of the United States, where real incomes are 
growing. They need our products. We have the products. We can 
grow those products. But failure to maintain our water systems 
severely limits our ability in trade.
    When you look just at the Port of South Louisiana, one of 
the largest port systems in the world, over $200 billion in 
activity when you look from the bridge at the bottom of Baton 
Rouge to the mouth. When you look at this, three feet now, we 
have to short-load these ships by three feet of silt. Six 
thousand ships. That is $18 billion lost, just to those 
shippers.
    Look at the Port of Lake Charles. The waterway gets down to 
150 feet wide.
    When you look at this, we must invest and dredge these 
rivers if we are going to double our exports. We have a market 
that needs our products. We are growing our products. We are 
selling our products. The shippers are paying the fees to do 
this.
    We have the greatest potential for economic growth and 
agriculture and in industry we have ever seen in our lifetimes. 
And what can inhibit it is our inability to move these 
products. Thank you.
    [The prepared statement of Dr. Strain follows:]
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    Chairman BOUSTANY. Thank you, Commissioner Strain.
    Mr. LaGrange, you may proceed.

   STATEMENT OF GARY LAGRANGE, PRESIDENT AND CHIEF EXECUTIVE 
   OFFICER OF THE PORT OF NEW ORLEANS, NEW ORLEANS, LOUISIANA

    Mr. LAGRANGE. Chairman Boustany, Chairman Tiberi, and 
Members of the Subcommittee, as the president and chief 
executive officer of the Port of New Orleans and a former 
chairman of the American Association of Port Authorities, I 
appreciate the opportunity that you provided us to highlight 
the importance of fully accessing the Harbor Maintenance Trust 
Fund to empower the Army Corps of Engineers to adequately 
maintain America's ports and harbors.
    I want to tell you that the Port of New Orleans 
enthusiastically supports the Realize America's Maritime 
Promise, or RAMP, Act. We would like to sincerely thank 
Chairman Boustany for introducing this legislation. And once 
enacted, will ensure that the revenue generated through the 
Harbor Maintenance Tax is used for maintenance of the nation's 
ports and harbors.
    Regrettably, decreased funding for dredging has limited the 
navigation capacity of the lower Mississippi River, including 
the New Orleans Harbor, thereby impeding the flow of imports 
and exports across the United States. In the past year, 
unusually high water led to the unfortunate flooding of many 
communities and the settlement of millions of tons of silt and 
settlement at the mouth of the Mississippi River.
    Draft restrictions on vessels transiting the river were 
imposed, and some vessels ran aground. In fact, 41 vessels ran 
aground in the last 3 years, and 5 already this year in 2012, 
in the first 25 days. We worked closely with Congress, the 
Corps of Engineers, and the shipping community to address this 
crisis. But one lesson was clear: the Corps of Engineers does 
not have sufficient funds to properly maintain the lower 
Mississippi River and other key waterways in this country. The 
RAMP Act, in our opinion, will go a long way towards addressing 
the problem and its passage is critical to the nation and the 
economic recovery of the nation.
    I would like to talk for a moment about the economic 
importance of the Port of New Orleans. As you know, through its 
direct facilitation of trade and commerce, the Port of New 
Orleans is one of the primary commercial engines of America. As 
a container and as a general cargo port, the Port of New 
Orleans serves the American Midwest through the 14,500-mile 
inland waterway system of the Mississippi River, and its most 
critical component, connecting approximately 30 states in the 
Heartland to international markets.
    Our port is served by 50 ocean carriers, 16 barge lines, 75 
trucking lines, and all 6 truck-line railroads. And in the past 
year we have invested a little over a half-a-billion dollars in 
improvements, in infrastructure improvements.
    Because of its geographic location and modern facilities, 
the Port of New Orleans is uniquely positioned to provide 
access for American exports for the global market, and to 
receive imports of the goods and the commodities on which our 
economy relies. However, our efforts to facilitate 
international trade are being severely hampered by the lack of 
reliable dredging of the navigation channels on the lower 
Mississippi River and throughout the country, completely 
throughout the country.
    The Corps of Engineers estimates that some 30 percent of 
port calls by commercial vessels are negatively impacted in 
this manner. To make matters worse, due to the Corps of 
Engineers's budget constraints, there have been discussions to 
dredge certain areas of the lower Mississippi River to only 38 
feet, where the traditional draft and the project draft is 45 
feet. The negative economic impact of such a reduction in draft 
at the mouth of the Mississippi would be profound.
    According to a recent study by Professor Tim Ryan of the 
University of New Orleans, Louisiana alone could be subject to 
spending losses of up to $423 million, the elimination of more 
than 3,800 jobs, and nearly $28 million in state and local tax 
revenue loss. At the national level, remember, 20 percent plus 
of all the cargo coming into the United States comes into the 
lower Mississippi River and the Port of New Orleans.
    That said, Professor Ryan estimates that the U.S. economy 
would face potentially losses of almost $14 billion in 
spending. More importantly, 38,000 American jobs could lose 
their jobs [sic]. These losses don't even speak to the greater 
threat the national economy faces from an inability to maintain 
America's other maritime transport arteries, which you are 
going to hear in a minute.
    The President has made a strong commitment through his 
national export initiative to double American exports over the 
next five years. However, we cannot double exports if we do not 
have the infrastructure in place.
    The users of the nations ports and harbors for years have 
been paying in to the Harbor Maintenance Trust Fund with the 
belief that these funds would be used to dredge our waterways. 
In fiscal year 2010 total receipts of the fund were $1.363 
billion. Sixty percent of these receipts were actually used, 
with a balance of $535 million left over last year. In fact, 
the fund's uncommitted balance has risen to an estimated $6.1 
billion, leaving us in harm's way of losing our trading edge.
    I assure that proper use of this surplus, together with the 
annual revenues deposited to the fund, would solve many of our 
nation's commercial navigation needs.
    So it is imperative that the RAMP Act be enacted into law 
as soon as possible. Thank you very much.
    [The prepared statement of Mr. LaGrange follows:]
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    Chairman BOUSTANY. Thank you.
    Mr. Fisher, you may proceed.

  STATEMENT OF STEVEN A. FISHER, EXECUTIVE DIRECTOR, AMERICAN 
        GREAT LAKES PORTS ASSOCIATION, WASHINGTON, D.C.

    Mr. FISHER. Thank you, Chairman Boustany, Chairman Tiberi, 
Ranking Member Lewis, and Ranking Member Neal. And I appreciate 
this opportunity to appear this morning before the 
subcommittees to discuss the Harbor Maintenance Tax, and 
specifically to discuss its impact on the development of short-
sea shipping services.
    As you mentioned, I am Steve Fisher, executive director of 
the American Great Lakes Ports Association. Our organization 
represents the major commercial ports on the U.S. side of the 
Great Lakes. Maritime commerce plays a critical role in the 
economy of our region.
    Last year we completed a massive economic impact analysis 
of the entire Great Lakes navigation system, both in the U.S. 
and Canada. It's a binational system. That study revealed that 
there are 227,000 jobs supported in the navigation system in 
our region; 128,000 of those jobs are in the United States, the 
rest in Canada. The navigation system generates $33.5 billion 
in business revenue; 18.1 billion of that amount is in the 
United States. So it has a significant impact on the region, 
and it is an economic driver in the region.
    Before I discuss the Harbor Maintenance Tax and its impact 
and relationship to short-sea shipping services, Chairman 
Boustany, I want to thank you for your considerable efforts on 
the RAMP legislation. H.R. 104 is critically important to all 
the ports who are represented here today, and the Great Lakes 
ports, as well. In the Great Lakes region, we are experiencing 
a dredging crisis. There is a $200 million dredging backlog at 
Great Lakes ports throughout the region. That amounts to more 
than 16 million cubic yards of sand and silt that are choking 
our harbors and our region that still needs to be removed.
    Last year, in fiscal year 2012 [sic], of the 52 federally-
authorized harbors in our region, 34 required dredging. Only 11 
were budgeted to be dredged by the Corps of Engineers. The rest 
were left to silt up with sand, and that affects their draft 
and the efficiency of those harbors.
    Last year we had two small ports, one in Michigan and one 
in Illinois, almost close. In fact, the Corps of Engineers had 
notified local officials that those harbors would be closing 
last year. Fortunately, the Corps found some last-minute end-
of-year money and was able to come in at the last minute and do 
some dredging and keep those harbors open.
    There is still commercial businesses on those two small 
harbors. There is still industries on those harbors. And I am 
pleased they were able to keep them open. But next year will be 
another challenge.
    As you mentioned, the Harbor Maintenance Tax was enacted by 
Congress in 1986 to be a user fee on the maritime industry for 
maintenance of our nation's ports by the U.S. Corps of 
Engineers. The tax was originally set at $.04 per $100 of cargo 
value. It is a value-based tax, it is an ad valorem tax. In 
1990, the tax was increased to $.125 per $100 of cargo value. 
The tax is not paid by the port, nor is it paid by the ship 
owner. The tax is paid by the owner of the cargo in the ship. 
In 1998--the tax originally applied to both exports, imports, 
and domestic cargo. In 1998 the U.S. Supreme Court struck down 
the tax as it applies to exports. So today it applies to 
imported cargo and cargo moved domestically between U.S. ports.
    The structure of the tax has had--it is an important tax, 
and it is important for the maintenance, as my colleagues have 
mentioned, of our nation's ports. But the structure of the tax 
has had some unfortunate side effects. In a sense, the user fee 
has created a disincentive, in some regards, for greater use of 
our nation's waterways. The United States is blessed with more 
than 25,000 miles of waterways, navigable waterways. This is a 
tremendous transportation asset for our country.
    At the same time--many of these waterways, unfortunately, 
are under-utilized. At the same time, our country is blessed 
with about 100--several hundred thousand miles of highways. 
These highways, unfortunately, are over-utilized, and are 
characterized by a lot of severe highway congestion.
    Transportation planners in recent years have been trying to 
look at ways to make better use of our under-utilized waterways 
to relieve some of the highway congestion that we experienced 
in most major American cities. One of the greatest impediments 
to making better use of our waterways is the U.S. Harbor 
Maintenance Tax.
    Throughout the nation there are entrepreneurs in the 
maritime industry trying to establish new short-sea shipping 
services. These are regional shipping services between U.S. 
coastal ports that are being explored as a means of relieving 
highway congestion. The Harbor Maintenance Tax, as I mentioned, 
acts as a disincentive to use waterborne transportation, and 
private companies that have to ship goods tend to prefer road 
and rail transportation in lieu of water transportation for the 
movement of domestic cargo.
    The tax also has a discriminatory double-taxation effect on 
trans-shipped cargo. For example, a shipping container brought 
into a coastal port is assessed the Harbor Maintenance Tax when 
it is offloaded from a ship. If the transportation company 
would like to then reload that shipping container onto a second 
vessel for delivery to a second coastal port, that same cargo 
is taxed a second time. And thus, the transportation company is 
encouraged, in fact, to not move that cargo by water. But 
rather, once it arrives in the United States, to keep it on 
road. That simply exacerbates highway congestion and leads to 
greater gridlock in our major cities.
    Chairman Tiberi, we very much support your legislation, 
H.R. 1533, which will provide a narrow exemption to the U.S. 
Harbor Maintenance Tax for short-sea shipping services in the 
United States, specifically for non-bulk cargo.
    The legislation has been scored by the Joint Committee of 
Taxation, and it has a de minimum impact on revenue into the 
trust fund. To give you a relationship, there was more than 
$1.4 billion collected from the Harbor Maintenance Tax last 
year. This bill, Chairman Tiberi's bill, will result in the 
loss of only $2 million a year of revenue to the trust fund.
    I would like to recognize the strong support the 
legislation has had by many members of this committee and the 
House Transportation Committee, including Chairman Camp, 
Ranking Member Levin, Chairman Mica of the Transportation 
Committee, and Ranking Member Rahall. Tremendous support for 
the legislation.
    We believe enactment of your bill, sir, will help remove 
the impediment, help relieve highway congestion, help create 
more maritime services and more jobs in the maritime industry, 
and help relieve highway congestion, and enable our economy to 
grow.
    Thanks very much for letting me join you today.
    [The prepared statement of Mr. Fisher follows:]
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    Chairman BOUSTANY. Thank you, Mr. Fisher.
    Mr. Arntzen, you may now proceed.

  STATEMENT OF MORTEN ARNTZEN, PRESIDENT AND CHIEF EXECUTIVE 
    OFFICER, OVERSEAS SHIPHOLDING GROUP, NEW YORK, NEW YORK

    Mr. ARNTZEN. Chairman Boustany, Chairman Tiberi, Ranking 
Member Neal, Ranking Member Lewis, and Members of the 
Subcommittee, thank you for convening this important hearing on 
tax matters facing the maritime industry. My name is Morten 
Arntzen, I am president and chief executive officer of Overseas 
Shipholding Group. We are, by far, the largest U.S. shipping 
company, a global leader in energy transportation. At the end 
of this last year we owned 116 U.S. flag and foreign-flagged 
ships. We employ about 3,600 people, and last year had revenues 
in excess of $1 billion.
    The U.S. maritime industry is critical to our economic 
well-being. Today there are more than 40,000 vessels in the 
domestic maritime fleet, comprised of some of the most 
technologically-advanced vessels in the world. It is estimated 
that the U.S. maritime industry currently employs approximately 
500,000 workers.
    The participants in the U.S.-flag industry continue to 
invest in the expansion and modernization of the U.S. fleet. We 
are not sitting still. For example, during the past year, OSG 
took delivery of the last of a series of 12 double-hulled Jones 
Act anchors constructed for us at Aker Philadelphia Shipyard, a 
huge investment that created thousands of shipbuilding jobs, 
and will create thousands more relating to the vessels' 
operation, maintenance, and commercial use.
    This 12-ship vessel series that we had constructed at the 
Aker Philadelphia yard, the site on which the original 
Philadelphia Naval Yard was founded by Benjamin Franklin in 
1787, constituted the largest commercial shipbuilding order in 
the United States since the end of World War II.
    Despite the successes of the U.S. maritime industry, we 
face severe competition and difficult market conditions. The 
last three years have been very challenging. Moreover, as a 
highly capital-intensive industry, we have very substantial 
funding needs. U.S. shipping companies simply cannot thrive if 
we are burdened with Tax Code provisions which do not apply to 
other U.S. corporations, or if access to capital, particularly 
our earnings, is impeded.
    The American Shipping Reinvestment Act, or ASRA, would 
correct a decades-old provision in our Tax Code law that 
singles out U.S. shipping companies for less favorable 
treatment than other U.S. businesses, and impedes our access to 
our own earnings. As a result, shipping companies like OSG have 
been denied access to their own capital that could be used here 
in America.
    The technical aspects of ASRA are detailed in the written 
testimony which I have submitted to the subcommittee. In short, 
due to Tax Code provisions enacted in 1975, U.S. shipping 
companies must keep the amounts earned by their foreign 
subsidiaries between 1975 and 1986 invested in foreign shipping 
assets or face a severe tax penalty. ASRA would repeal this.
    Enactment of ASRA will allow U.S. shipping companies to 
redeploy funds currently sent abroad for use here at home. ASRA 
will help U.S. shipping companies make investments in their 
U.S.-flags fleet, as well as vessels that support homeland 
security and the military.
    Prior to the passing of the Jobs Creation Act of 2004, we 
committed to a significant U.S. investment program if the Act 
passed, which it did. Since that Act was passed, we have 
invested close to $2 billion in new and upgraded double-hull 
tankers and articulated tug barges. As we have discussed, as 
with members of the committee the last couple of years, we 
committed to continuing to invest in our U.S.-flag business. 
And we have. Since January 2009 we have invested approximately 
$500 million in our U.S.-flag segment. The proof is in the 
pudding.
    I am deeply grateful for the leadership of Chairman Tiberi 
and Congressman McDermott, the lead sponsors of ASRA, as well 
as Chairman Boustany, Congressmen Roskam, Larson, Herger, 
Nunes, Rangel, Schock, who all have cosponsored the 
legislation.
    We in the maritime sector look forward to working closely 
with the chairman and members of this subcommittee to ensure 
prompt passage of this important legislation.
    Thank you again for the opportunity to testify today.
    [The prepared statement of Mr. Arntzen follows:]
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    Chairman BOUSTANY. Thank you, Mr. Arntzen.
    Mr. McCurry.

STATEMENT OF JAMES C. McCURRY, JR., DIRECTOR OF ADMINISTRATION, 
         GEORGIA PORTS AUTHORITY, GARDEN CITY, GEORGIA

    Mr. MCCURRY. Chairman Boustany, Ranking Member Lewis, 
Chairman Tiberi, and Ranking Member Neal, distinguished Members 
of the Subcommittees, my name is Jamie McCurry, director of 
administration for the Georgia Ports Authority. I am very 
pleased to offer comments on behalf of the GPA regarding harbor 
maintenance funding and, in particular, the Harbor Maintenance 
Trust Fund.
    If I had to summarize my presentation in the shortest way 
possible, it would be to say that this issue is about jobs. It 
is about preventing the waste of federal tax dollars already 
invested. And it is about opening the door to a proven pathway 
to economic growth.
    The world economy today is driven by international trade, 
and the U.S. economy is heavily dependent on exports and 
imports. We cannot win in that marketplace if we do not have 
21st century resources. To be competitive in international 
commerce, our U.S. port infrastructure must itself be 
competitive in its ability to handle the current generation of 
ships in the most efficient way, and to be able to accept the 
new generation of vessels that will come to dominate world 
trade.
    As Mr. Lewis noted, in Georgia deepwater ports and inland 
barge terminals support approximately 300,000 jobs annually and 
billions in revenue, tax income, and personal income to 
Georgians. Beyond the state, Georgia's port activity is a 
critical economic driver for the southeast, sustaining tens of 
thousands of jobs in the neighboring states of South Carolina, 
North Carolina, Tennessee, Alabama, Florida, and beyond.
    Georgia's ports contribute to over 3.5 billion in federal 
tax generation annually. Significantly, the Port of Savannah 
was the second-busiest U.S. container port for the export of 
American goods by tonnage in fiscal year 2011. It also handled 
8.7 percent of all U.S. containerized cargo volume, and 12.5 
percent of all containerized exports.
    Regrettably, in Georgia we have seen the direct 
consequences of not fully utilizing the Harbor Maintenance 
Trust Fund with the needed maintenance dredging. One year after 
completing a $120 million project to deepen the Brunswick 
Harbor to 36 feet, inadequate federal O&M funding resulted in 
channel dimensions of less than authorized depth and width. If 
not for the availability of stimulus funds in 2010, the 
Brunswick Harbor would likely be at pre-deepening dimensions 
today, thereby wasting the federal and state investment in a 
project completed just five years ago.
    Auto makers exported and imported over 465,000 vehicles 
through the Port of Brunswick in fiscal year 2011, and the port 
serves as a major conduit for the export of bulk agricultural 
products throughout the southeast. Nonetheless, save for the 
2010 stimulus money, Brunswick remains substantially 
underfunded annually, and harbor depth and width again risk 
deterioration if operations and maintenance funding is not 
increased. The Army Corps of Engineers estimates current 
Brunswick Harbor maintenance needs to be about $16 million 
annually. Yet typically, annual funding has been $3 million.
    Additionally, the Port of Savannah has experienced 
challenges due to a lack of adequate O&M funding, where the 
Corps estimates current Savannah maintenance needs to be 
approximately $30 million annually, yet typical annual O&M 
funding has been about $13 million annually.
    With such limited resources available, the Corps has at 
times only been able to maintain the center portion of the 
channel in faster shoaling areas, and for maintaining the 
primary turning basins. If the typical recent funding levels in 
Brunswick and Savannah are not increased, shoaling may 
ultimately result in channel restrictions being imposed by the 
U.S. Coast Guard. Such restrictions would limit access to large 
military and commercial vessels into the port.
    Beyond simply maintaining our harbors, we must also 
recognize the pressing need to invest in harbor-deepening 
projects required to serve the increasing size of vessels 
calling on U.S. ports.
    Completion of the Savannah Harbor Expansion Project, or 
SHEP, as we call it, is critically important to the continued 
economic recovery and growth in the southeastern U.S. and the 
country, as a whole. Savannah serves a large percentage of the 
U.S. population, including some 21,000 companies, with 
operations collectively in all 50 states. In fact, Savannah was 
responsible last year for moving more than 18 percent of all 
East Coast containerized trade. In addition, more than 50 
percent of all containers going through Savannah are exported 
U.S. goods.
    The Savannah project has a projected benefit-to-cost ratio 
that well exceeds four to one. And the Corps study has shown 
that it will create $150 million in annual benefits to the 
nation. That is a perfect example of a way to leverage taxpayer 
dollars to provide both new jobs, new tax revenue, all through 
increased economic activity.
    Today, due to the restricted depth, nearly 80 percent of 
container ships calling the Port of Savannah are forced to take 
on a lighter load or wait for high tide to sail into and out of 
port, and sometimes both. This already challenging situation 
will soon worsen, when the Panama Canal expansion is complete, 
and begins sending ships to Savannah and other East Coast 
ports. They are as much as three times the capacity of those 
current--those ships currently able to transit the canal.
    In closing, I submit that we cannot take for granted the 
importance of our nation's ports and harbors. They have too 
often been the invisible infrastructure that is easily 
forgotten in times of economic stress. However, their 
importance to the U.S. economy cannot be overstated. We must 
not only continue to invest in their ongoing maintenance, but 
also in the expansion programs necessary to ensure their 
competitiveness in the modern global marketplace.
    Again, I appreciate the opportunity to be with you today, 
and I look forward to any questions.
    [The prepared statement of Mr. McCurry follows:]
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    Chairman BOUSTANY. Thank you, Mr. McCurry.
    Mr. Leone.

 STATEMENT OF MICHAEL LEONE, PORT DIRECTOR, MASSACHUSETTS PORT 
             AUTHORITY, EAST BOSTON, MASSACHUSETTS

    Mr. LEONE. Chairman Boustany, Chairman Tiberi, Ranking 
Member Lewis, Ranking Member Neal, distinguished Members of the 
Committee, for the record my name is Michael Leone. I am the 
port director of the Massachusetts Port Authority, which owns 
and operates the public marine facilities within the Port of 
Boston. Thank you for this opportunity to testify in support of 
H.R. 104, the Realize America's Maritime Promise Act.
    As the title of the proposed new act implies, the promise 
that America's maritime industry is asking Congress to realize 
is the same promise that Congress made 26 years ago, when it 
first established the Harbor Maintenance Tax. That is to fully 
utilize the taxes which have been levied on port users for the 
maintenance dredging of our ports and harbors.
    I know, from the two terms I served as chairman of the 
American Association of Port Authorities, that ever since the 
trust fund's inception in 1986, port operators and customers 
have consistently raised concerns that Harbor Maintenance Tax 
revenues have been used for other programs, or never fully 
appropriated for their intended purpose of maintenance dredging 
of federal channels. As a result, only about 35 percent of 
America's navigation channels are currently at their authorized 
depth and width, which means that vessels calling our ports 
cannot be fully loaded, or maybe restricted to a one-way 
transit.
    The entire maritime industry, therefore, is grateful for 
the oversight provided by your committees to ensure that the 
tax on port users is used for its intended purposes, ensuring 
that navigation channels leading to our ports are regularly 
dredged to their authorized dimensions so that vessels calling 
our ports can deliver essential commodities and can take 
American-made products to its global customers. Only with 
regular investments in dredging can these critical parts of our 
national transportation system continue to serve as gateways 
for the more than two billion tons of domestic import and 
export cargo that are expected to be handled each year, which 
in turn helps keep American businesses, both large and small, 
competitive in world markets.
    As Congressman Neal has stated, this concern is even 
greater today, as East and Gulf Coast ports prepare for the 
larger vessels that will be transiting through an expanded 
Panama Canal.
    What is frustrating for many port directors who have 
dredging needs that go unmet is that the money for these 
projects is available. The users of our ports and harbors still 
pay their full share for maintenance dredging, over $1 for 
every $1,000 worth of imported and domestic cargo they move, 
while only getting back half as much in benefit. Current 
estimates are that users of our nation's waterways are paying 
approximately $1.4 billion each year in Harbor Maintenance 
Taxes, which is about the amount the Army Corps of Engineers 
has determined is the annual need for maintenance dredging.
    Yet this past fiscal year, only about 820 million was 
appropriated for channel maintenance. That still leaves, 
according to most estimates I have seen, a surplus in the 
Harbor Maintenance Trust Fund of over $6 billion and growing. 
This shortfall in funding is of particular concern to regional 
or niche ports, which are usually not included in the 
President's budget, because they generally handle less tonnage 
than the major container and bulk cargo ports.
    There are many ports in Massachusetts in need of 
maintenance dredging, for example, which could be completed if 
all of the Harbor Maintenance Tax was appropriated each year. 
Not every port will need to have channels that are 50-feet deep 
in order to handle larger ships that will traverse the expanded 
Panama Canal when that modernization program is set to be 
completed in 2014. But many will. And others will need to be 
dredged to handle larger vessels that will be used in moving 
cargo from the larger ports to regional ports.
    In the meantime, individual ports have been dredging our 
own berths at our own costs, buying cranes that can handle 
these larger vessels, and investing in terminal infrastructure. 
Indeed, it is estimated that seaports invest more than 2.5 
billion every year to maintain and improve their 
infrastructure, which is why ports are often discouraged that 
federal investments in maintenance dredging have not kept pace 
with their own.
    The larger issue with the spending on maintenance dredging 
is particularly critical at this time, and not only because of 
the larger ships that ports will soon be expected to handle, 
but to ensure that the administration's national export 
initiative, doubling U.S. exports within five years, can be 
fulfilled. U.S. ports are the gateways of international trade. 
And having a modern, reliable, and cost-effective marine 
transportation system will expedite the delivery of U.S. 
exports to the global marketplace. Delays in the movement of 
exporter cargo will only hurt the competitiveness overseas.
    As it true throughout the country, the Port of Boston is a 
vital economic engine for the New England region, carrying 
cargo, opening markets for domestic goods, creating jobs, and 
generating economic prosperity for our citizens. American 
seaports carry all but one percent of the country's overseas 
cargo. They help generate over 30 percent of gross domestic 
product, and support more than 13 million jobs.
    America's economic future depends on modern ports with 
facilities adequate enough and channels deep enough to keep 
pace with the demands of the global economy. It is now critical 
that Congress honor its pledge to maintain the nation's ports 
and harbors with the revenue provided by users. This can be 
accomplished through a shift in funding priorities in both the 
Congress and with the administration, given that annual revenue 
is available and adequate to meet current needs.
    I would also urge the passage of H.R. 104 that would 
require that the annual Harbor Maintenance Tax revenue be made 
fully available to the Corps of Engineers for maintenance 
dredging in its annual appropriation. I, along with many other 
port directors, strongly support passage of H.R. 104, so that 
our marine transportation system can remain efficient and 
continue to serve as a national and regional economic engine.
    I commend the efforts of Representative Boustany and the 
over-100 cosponsors in pressing for this important piece of 
legislation. And I urge the committee to support H.R. 104.
    This completes my prepared testimony. I am pleased to 
answer any questions you may have.
    [The prepared statement of Mr. Leone follows:]
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    Chairman BOUSTANY. Thank you, Mr. Leone. We will now 
proceed with questions. And I just want to thank all of you for 
very eloquent testimony about this problem.
    At a time when our country, everyone in our country, is 
concerned about jobs and the high level of employment, about 
the future of American competitiveness and global leadership, 
it is remarkable that we got Members on both sides of the aisle 
on this dais and in this House that see a way forward on this 
particular issue. And we are--with many of the problems that we 
are faced with, we don't see ready solutions. There is one 
here. And I think there is, you know, a recognition that we 
should go forward.
    But clearly, Americans are fed up with budgetary gimmicks 
and games and some of the arcane budget practices that occur 
here in Washington.
    So, I have a simple question and I would like each of you 
to answer it. Do you consider this a blatant abuse of a 
dedicated federal tax or user fee? Commissioner Strain?
    Dr. STRAIN. Yes, I do. And when you look at this, it is--
the dollars are being collected to dredge and to clean out our 
harbors. If you look at the Port of New Orleans and the Port of 
South Louisiana alone, failure to maintain short-shipping these 
loads, just short-shipping these loads, will result, at the 
Port of South Louisiana, in a $22 million decrease in the 
Harbor Maintenance Trust Fund in itself.
    And if you look at the alternative, we are paying to have 
this done. The ships that use this, pay for this, they want to 
have this done. They need to have it done. Failure to do this 
will result in just--in what comes through the mouth of the 
river, at a cost of $150 million to the farmers throughout the 
Heartland of America. And so when--it is very, very simple: 1 
15-barge tow, 1 tow, is the equivalent of 261 rail cars, or 
over 1,000 trucks.
    So, it is. It is an abuse of it. And we need to get it 
right. But the thing of it is, this is an all-win for 
everybody.
    Chairman BOUSTANY. Thank you. Mr. LaGrange.
    Mr. LAGRANGE. Yes, sir. Absolutely an abuse, without a 
question. At a bare minimum, the $14 billion in spending loss, 
the 38,000 U.S. jobs, potentially, at a bare minimum, but also 
the flip side, as I alluded to, 41 groundings on the lower 
Mississippi in the last 3 years, 5 already in the first 25 days 
of this year, not to mention the environmental hazards and the 
potential hazards that are there, another Alaskan Valdez.
    Homeland Security issues come into play, as well, when you 
have ships aground. In the shipping industry, transportation 
logistics times money. The cost of tug boats to come on the 
scene and spend four, five, six, eight hours to get that ship 
back into the main channel, whatever main channel might remain. 
In our case, a 750-foot-wide channel silted in recently to 115 
feet. These ships are 143 feet wide. That is absurd. Yes, sir.
    Chairman BOUSTANY. Thank you. Mr. Fisher.
    Mr. FISHER. Yes, sir. It is absolutely an abuse of 
Congress's commitment to users when the original agreement was 
reached in the mid-1980s to assess a fee on users to pay for 
harbor maintenance.
    Congress has even acknowledged that it is an abuse. We had 
this same problem with the highway trust fund and with the 
aviation trust fund. And Congress fixed it in those two 
instances. Those two trust funds had excess balances, as well, 
huge excess balances. And Congress enacted legislation to make 
sure those trust funds and those user fees were properly spent. 
Why wouldn't we do the same with the Harbor Maintenance Trust 
Fund?
    Chairman BOUSTANY. Thank you. Mr. Arntzen.
    Mr. ARNTZEN. Mine is a little bit different. It really 
isn't an abuse, it is an oversight. We are seeking to correct 
something that was not included in the 2004 Act. I have 
discussed it with many congressmen and senators on both sides 
of the aisle. I have not had one that objected. And we have 
very strong bipartisan support.
    We have agreed to put in provisions that, if we did not 
maintain employment, in fact we would take penalties for that. 
So this is just correcting a mistake which would enable us to 
continue to invest in the country. And I think it is broadly 
supported by Democrats and Republicans, alike.
    Chairman BOUSTANY. Mr. McCurry.
    Mr. MCCURRY. Mr. Chairman, I think it goes without saying 
that if users of our ports are paying the required Harbor 
Maintenance Tax, the revenue generated from the tax should, in 
turn, be used to maintain the ports and harbors that those 
users are paying to access.
    Chairman BOUSTANY. Thank you. Mr. Leone.
    Mr. LEONE. I absolutely agree, sir. It is--the user fees 
should be paid. The users are paying the fee. It is the only 
mode of transportation that does not have the fees used for its 
intended purposes. And there are many ports that are--have 
accumulated--in the Port of Boston itself, we generate--we only 
use 30 percent. We are a donor port. And we have unmet needs in 
our port, and yet we are only using 30 percent of the amount 
that is collected. I think it is absolutely an abuse, and it 
should be corrected.
    Chairman BOUSTANY. Thank you. I have one final question I 
want to ask Commission Strain, and that is you focused a lot on 
agriculture, and the importance for U.S. competitiveness. And I 
think you made a very eloquent statement. But could you further 
elaborate on why maintaining these waterways are so important 
to a farmer who might live remotely from a waterway?
    Dr. STRAIN. Well, if you look at the waterways, if you look 
just at the inland system--and we have seen and there is 
discussions in recent reports about the fact that many of our 
inland waterways are in desperate need of maintenance and 
repairs.
    To move that product, first of all, if you just look at 
that cost, $.10 a bushel, additional cost to move that product, 
say from Kansas to the coast. But also the infrastructure. If 
you look at the entire infrastructure along the systems that 
are in place, you are talking about billions of dollars of 
investment. If you don't have this, that similar infrastructure 
does not exist to move these products by different overland 
routes. And we are talking about efficiencies.
    And when you look at using waterways, they can move, you 
know, a ton of materials 576 miles on 1 gallon of diesel. So it 
is critical, especially when you look at economic 
competitiveness, and look at the commodity market: number one, 
increased cost not to do this; two, the availability to move 
this in an efficient manner and in a consistent manner.
    And it is about economics, but it is also about getting the 
products, raw products, up river, the products that we import 
to make the fertilizers, to make fuel components, and about all 
the other things.
    Chairman BOUSTANY. Thank you. Mr. Lewis.
    Mr. LEWIS. Thank you very much, Mr. Chairman. Again, I want 
to thank you for holding this hearing, and I want to thank each 
member of the panel for your testimony. I think you have been 
very convincing.
    I was joking with Mr. Tiberi a moment ago. I said seems 
like the chairman is no longer playing the role of a good 
doctor, but he is playing the role of a lawyer, he seems to be 
leading the witness.
    [Laughter.]
    Mr. LEWIS. I think you have been very convincing. But I 
want to ask each one of you. How does the funding or 
underfunding of a navigational channel affect the ability to 
create more jobs and move produce and goods? Could you just 
elaborate?
    Dr. STRAIN. Yes, sir. If you look at the underfunding of 
this, and when you don't have the ability to fully load these 
vessels, start off with that. We look at 35 percent of all of 
the ports and the waterways are not adequately funded. You are 
talking about the economics in shipping. And if you start 
short-loading, first of all, it costs more money. When you cost 
more money, there is less dollars. And those dollars go all the 
way back to the first point of production, in the farmers' 
hands, in the manufacturers' hands. These are American dollars.
    And what we talked about is the tremendous potential for 
growth, worldwide, to sell these products in the raw state and 
in the processed state. And along with that, all the 
technologies included. Not to do this will hamper our ability 
of this tremendous amount of growth throughout the heartland 
and throughout the United States, and will cost us the jobs 
that not only would have been generated, but also, when you 
start looking at--just talk about the cost on a ship, short-
loading a ship. It is a $1 million per foot, per foot, to 
short-load these ships. If you look at the Port of New Orleans, 
6,000 vessels, more than 400,000 vessel movements.
    And so, we are creating an inherent inefficiency that makes 
us non-competitive worldwide. And so this costs jobs 
dramatically, and it costs jobs all over the United States.
    Mr. LEWIS. Thank you.
    Mr. LAGRANGE. Yes, sir. I totally agree. At present we know 
that there is somewhere between a 30 and 40 percent loss in 
jobs due to the inability of ships to come in fully loaded, 
come in light.
    In looking at the future, though, the President's national 
export initiative, in looking at your wise passage of the free 
trade agreements with Panama, Colombia, and South Korea, and in 
looking at the expansion of the Panama Canal, threefold by the 
year 2014, all of these are perfect examples of the incremental 
new jobs that we will lose if we don't make ready our channels 
and dredge them appropriately.
    In three different studies recently completed by Parsons 
Brinckerhoff, Booz Allen Hamilton, and A.T. Kearney, all three 
studies indicated that the incremental growth from the Panama 
Canal, by the year 2025, should be in the area of 20 to 25 
million new TEUs a year, with about 75 to 80 percent of that 
going to the East Coast ports, Savannah included, and the other 
20 or 25 percent coming to the Gulf Coast ports. East Coast 
ports, because that is where the people live, the consumers 
consume.
    All of that said, this incremental growth is unbelievable, 
and we are just not ready to handle it. And that is just the 
Panama Canal, not the NEI and not the free trade agreements 
that were recently passed.
    Mr. LEWIS. Thank you.
    Mr. FISHER. Sir, it makes no more sense to operate a ship 
partially loaded than it makes sense to operate an aircraft 
half full of people. And if you can imagine the inefficiencies 
to an airline if it only flew its planes half full, it is the 
same thing with a shipping company operating a ship only 
partially loaded. It creates an inefficiency and it hits the 
bottom line of the shipping company and makes their asset, 
their investment in their ship, less competitive.
    A more direct impact, as far as jobs, to answer your 
question, we actually have some ports, as I mentioned in my 
testimony, in the Great Lakes that are on the cusp of actually 
closing, small ports that are actually on the cusp of actually 
closing. And there is active industries, maritime industries, 
still in those harbors. They are small companies, but these 
jobs are precious in those small communities up in Michigan and 
Wisconsin and Illinois.
    And so, if those harbors close and those industries are 
forced to close because they can't get delivery of raw 
materials, that is devastating to the local economy of those 
small communities.
    Mr. ARNTZEN. My perspective is a little bit different, but 
I would like to talk a little bit about a success story. About 
four years ago we exported no refined petroleum products from 
the United States. This year I think we will be exporting about 
800,000 barrels of refined petroleum products, mainly diesel, 
to Latin America and to Europe. This is an enormous growth 
market. It is because we have invested in refineries and we 
have accessed the cheap shale oil and gas.
    This is going to be growing dramatically, and it is going 
to put a real strain on the facilities we have down in the 
Gulf. So there is real opportunity and real growth. It is--
there are some good stories out there.
    Mr. LEWIS. Thank you. Mr. Chairman, I noticed my time is 
up, but if----
    Chairman BOUSTANY. Yes, the gentlemen, if they have 
comments to add to this, please proceed.
    Mr. MCCURRY. Very briefly, if I may. I will say--and Mr. 
LaGrange mentioned--the exacerbation of this issue that will 
come with the Panama Canal. At the end of the day, vessels 
waiting cost the ship lines money. That money rolls into their 
operations and, therefore, their cost to the customers, which 
are our exports and our consumers.
    Using, in Georgia, just the example of the poultry 
industry, where Georgia--we are the largest poultry exporting 
port in the country, which is a huge industry for Georgia. It 
is also an industry with very, very thin margins. And if the 
shipping cost fluctuates even $100 on a box of poultry, that is 
absolutely the difference between producers in Georgia versus 
producers in another country securing business to export to 
Asia and other parts of the world.
    Mr. LEONE. And just briefly, I concur with my colleagues, 
certainly, from Louisiana and Georgia. But the key element for 
every single port, the common theme for every port, is they 
need to have the highway--the channels into the terminals deep 
enough to handle the business they have. And the fastest 
growing portion of kind of the container business has been 
exports. We have seen that in Boston. And I understand from the 
Port of Georgia, the growth that they have seen.
    And it is the jobs, not necessarily the maritime jobs that 
I am concerned--I think we need to focus on those manufacturing 
jobs. If they can't get to market, that is the key to it. It is 
that area and those jobs that are created outside of the area 
in the inland portions that keeps those regional economies 
alive. And without deep channels, they are not going to get to 
their marketplace.
    Chairman BOUSTANY. Thank you, Ranking Member Lewis. 
Chairman Tiberi.
    Chairman TIBERI. Mr. Fisher, you verbalized at the very end 
of your testimony the example that you gave with respect to why 
the tax needs to be fine-tuned with respect to short-sea 
shipping. And I see nods heading [sic] here, as in agreement. 
And you gave this general example of the taxes paid, once it 
comes into port in the United States. And then, if it is 
transported again on a ship to another port, it is taxed yet 
again. So the incentive is for me, as the user, to put it on a 
truck or on rail, rather than to put it on a ship. Correct?
    From your spot where you sit today in your job, can you 
give some specific examples of people who have said to you, 
``Wow, we lost this because it is going by rail, by truck,'' or 
different ports within the Great Lakes that have seen a decline 
over the time that this has been instituted? And what are 
happening to those ports? Can you give us some more specifics?
    Mr. FISHER. Chairman Tiberi, transportation shipping 
companies throughout the United States would like to establish 
their operations in the most efficient way possible. In some 
places, that is establishing a service that is similar to what 
we are all familiar with with the airlines, a hub and spoke 
system, where essentially you go to a major hub first, and then 
you take a smaller aircraft, for example, to a secondary city.
    The same thing should be happening along our coasts. Cargo 
coming in to major hub ports, and then transferring cargo to 
smaller--what we call feeder--vessels to then make the journey 
to secondary ports. That is efficient.
    Unfortunately, the tax discourages that, and it doesn't 
generally go on. Yet, at the major hub ports in this country, 
which tend to be in the major cities, we have severe traffic 
congestion. So we are essentially forcing that second leg of 
commerce off the ships and on to the highways.
    Well, the highways are already congested. And most of the 
gentlemen at this table will tell you that they have congestion 
issues at their ports where they cannot move the cargo. Once it 
is off the ship, they have trouble moving it out into the 
hinterlands because there is so much congestion in their local 
city.
    So, this tax actually acts as a disincentive to allow the 
shipping industry to do what is most efficient to be done.
    Chairman TIBERI. And if you corrected that, then there 
would also be an increase in jobs in the maritime industry?
    Mr. FISHER. Absolutely. All those feeder vessels that I 
mentioned, we would see the establishment of these services. 
That would create additional jobs in the maritime industry. It 
actually also would make the general economy more competitive 
and more efficient, because it would relieve some element of 
highway congestion, and that is good for the economy. We have a 
lot of waste in our economy, as commerce sits clogged in 
traffic jams, and isn't getting to its destination.
    Chairman TIBERI. Dr. Strain, would you agree with that?
    Dr. STRAIN. Yes, I would. When you look at all of the ways 
that we move product, and if you are looking at this particular 
example, we are only talking about $2 million in something 
where we are collecting, like, $1.5 billion. We must be 
competitive. We must also have a fair playing field, as well.
    But if you look at the tremendous inland waterway systems 
that we have--and you talk about short-shipping--we must 
utilize those. But there is also something alarming that, as I 
have been reading in the last few weeks, there is such a 
deterioration of potential on our inland waterway systems. Many 
of those systems, locks and dams and others, are reaching past 
their 50-year life span.
    And if you look at--for instance, if one major system 
breaks down on those inner waterway systems, it could cost $50 
million to $100 million in lost economics. To tie up a ship, 
just a vessel, any vessel, unnecessarily, is $50,000 an hour.
    Chairman TIBERI. Thank you.
    Dr. STRAIN. An hour. So we must find all efficiencies 
possible.
    Chairman TIBERI. Thank you. Mr. Arntzen, you are the man 
who builds these ships on the panel. Can you talk about what 
you did last year, and why ASRA would help stop a perverse 
reality from occurring in the marketplace, and what you would 
do, in terms of--if we could pass this bill, what you would do, 
in terms of investment in jobs?
    Mr. ARNTZEN. Yes, I would love to. Last year for us was a 
really big year of pride, because we took delivery of our 
second Jones Act shuttle tanker. These are specially modified 
tankers that take oil from the ultra-deepwater Gulf and bring 
them into the refineries in the Gulf. We have the first two and 
we are now working on the third. And the second of those two 
did help clean up the BP spill. When they needed a ship to take 
the oil off the field after they finally capped it, they 
brought in our OSG shuttle tanker to do that. So we are very 
proud of that.
    We see that as a big, new, exciting market. In fact, it is 
the fastest--it is really the first really big new market in 
the Jones Act tanker market in many decades. We are working on 
one such project today. Those ships will cost you somewhere 
between $100 million and $150 million: 1 ship. We will have to 
employ 50 crew, 25 on and 25 off on those ships. We think there 
is a possibility of 18 to 25 shuttle tanker demand in just the 
U.S. Gulf in the next decade. We want to play a big role in 
that.
    So, at $100 million-plus a pop, these are very big capital 
equipment. This is why we have been pushing to be able to 
repatriate our foreign profits. It is a continuation of what we 
have been doing, and it is a very exciting market. And they are 
really well-paid secure jobs with pensions and medical benefits 
and training and the kind of jobs we want to create in the 
United States.
    Chairman TIBERI. Well, my time is expired. Thank you very 
much. Chairman, thank you for a great panel today.
    Chairman BOUSTANY. Thank you. Mr. Neal?
    Mr. NEAL. Thank you, Mr. Chairman. Mr. Leone, the 
Commonwealth of Massachusetts offers a dollar-for-dollar tax 
credit to corporations moving goods from Massachusetts ports to 
offset the federal Harbor Maintenance Tax. And the credit can 
be applied against current and future taxes in the 
Commonwealth. Jim Brett, who is an old friend of mine, is now 
president and CEO of the New England Council, was one of the 
leaders when this tax credit was established during the time he 
was chairman of the Massachusetts House Taxation Committee.
    The state seems to be unique in our approach to the Harbor 
Maintenance Tax. And can you tell us a bit about the policy 
behind the Commonwealth offering this tax credit? And, in your 
opinion, has the credit been successful in expanding harbor 
business in Massachusetts? Are you familiar with any other 
states that try a similar approach? And would you lay that out 
for us?
    But one of the reasons behind this tax credit was because 
of the close proximity of Massachusetts to Canada. Some 
companies were shipping to Canada instead of Boston to avoid 
the Harbor Maintenance Tax. Has the state tax fixed this 
problem? And are there other reasons for companies still 
shipping to Canada instead of Massachusetts?
    And lastly, seaports like Boston are certainly gateways to 
domestic and international trade, connecting us to the rest of 
the world. In your testimony you stated that U.S. ports and 
waterways handled more than two billion tons of domestic and 
import-export cargo annually. You also note that the Port of 
Boston is a vital economic engine for the New England region. 
Carrying cargo, opening markets for domestic goods, and 
creating jobs is certainly part of your mission. And perhaps 
then you could describe for us how much cargo goes through the 
Port of Boston, and how this translates into many of the jobs 
that we enjoy across the Commonwealth and New England because 
of that port.
    Mr. LEONE. Thank you, Congressman Neal, for that question. 
I think that the legislature and certainly the Government of 
Massachusetts understood kind of the threat that was going to 
happen with the Harbor Maintenance Tax, and the fear that being 
adjacent to Canada, whether it was Montreal or whether it was 
Halifax, that certain freight would be able to move over those 
gateways in lieu of Boston, and it was concerned that certainly 
we would lose business in Boston. So they offered the dollar-
for-dollar tax credit.
    And it has been very, very successful. A lot of different 
Massachusetts companies have utilized that particular plan to 
be able to offset the diversionary impact of HMT. And I know 
this is an ongoing problem in the western part of the state. 
Certainly in the Puget Sound it is an ongoing issue there as 
well. But I think this state tax credit has been effective.
    But it is limited, as well. It has been limited in the fact 
that it only applies to, obviously, those individuals or those 
companies that file a Massachusetts income tax, and not 
everyone would have that benefit, depending on what their 
business model is, depending on who the beneficial cargo owner 
is, eventually.
    So--but it has been effective in retaining business. And 
Boston's business had grown consistently to the point that it 
actually--we are handling well over 12 million tons of cargo, 
we are generating 34,000 jobs. It has also--has over $2 billion 
in economic impact. And that has been growing until some of 
this recent recessionary impacts.
    But the Harbor Maintenance Tax credit not only has its 
limitations internationally, but we lost one large account 
several years ago, when Volkswagen moved about 100,000 of its 
automobiles from Boston to Rhode Island. In that particular 
circumstance, the Port of Davisville in Rhode Island does not 
have to assess a Harbor Maintenance Tax on the cargo that moves 
in and out of that port because it was a former Army base and 
hadn't been dredged. And back in the days when I was practicing 
law for the port authority, we had drafted a letter asking 
customs to reinterpret the law to say we shouldn't be allowing 
this tax to create a competitive advantage from one state to 
the other.
    But the customs basically thought that my opinion was 
contrary to the initial interpretation and didn't change it. 
But Volkswagen clearly said moving 100,000 cars saved them at 
that point in time, back when the value of the car was less, 
about $3.5 million a year, pure savings from going from one 
port to the other.
    I don't know if there is any other ports--I believe--and 
maybe my colleague from Louisiana--there is another port in the 
Gulf, I think, that has a similar issue, as well.
    But that has been an issue for us. I don't know if other 
states has created a credit. I think maybe North Carolina was 
looking at it. I don't know if they still have that. But it has 
been an issue. So you not only have an HMT that you--you know, 
in Boston you are collecting a tax that you are getting 30 
percent of the benefit of it, the money goes elsewhere. Yet an 
adjacent state doesn't have to pay the tax, even though they 
may receive other federal benefits as EDA grants. I mean I know 
they are getting Tiger grants to build cranes down there to 
compete against you. But, you know, they have a--there is no 
tax assessed or user fee assessed to that, and that has created 
a competitive disadvantage between those particular ports.
    Mr. NEAL. Quickly, could you talk a little bit about your 
preparation, anticipation of the expansion of the Panama Canal, 
and what it is going to mean to the Port of Boston?
    Mr. LEONE. Well, we have done many things in anticipation 
of this. We have added new cranes, at a cost of $15 million to 
the facility. We have purchased an adjacent oil facility for 
expansion of our container facility. We have added a bunch of 
equipment to our facility, spending close to $100 million on 
new terminal operating systems, training programs for 
longshoremen to be prepared for.
    You know, we don't expect to be seeing the largest of 
ships, but we need to have deeper water. And I know this isn't 
exactly an HMT issue, but our improvement dredging project, 
which I know that Georgia alluded to as well, has been stalled 
for almost 20 years, moving forward, trying to get 
authorization for deeper channels to handle the larger vessels.
    So I know that necessarily isn't the subject of this, but 
that is kind of another frustration for ports, where you are 
making the investments in shore, but essentially, the major 
channel, the major access road to your facility, to a 
modernized facility, may not be available for you when the 
ships are--need to come there.
    Mr. NEAL. Thank you.
    Chairman BOUSTANY. Thank you, Mr. Neal. Ms. Jenkins.
    Ms. JENKINS. Thank you, Mr. Chair. And thank you, Chairmen 
Boustany and Tiberi, for holding this hearing on a very 
important issue. Thank you, panel, for participating.
    Mr. Arntzen, we have heard a lot of talk lately here in 
Washington about shipping jobs overseas. And no one is 
suggesting such a concern as it relates to this particular 
industry, but a general principle of deferral. And as you know, 
last fall the Ways and Means Committee released a discussion 
draft that would reform our system of international taxation. 
And while academics, economists, politicians can disagree about 
the pros and the cons of eliminating deferral, as your 
testimony references, the U.S.-based shipping industry gives us 
a real-life illustration of the peril of adopting such a 
policy.
    It appears that the U.S. industry in shipping has been hurt 
following the repeal of deferral back in 1986, leading to 
foreign acquisitions of American businesses and loss of jobs. 
According to a 2002 Treasury report, immediate taxation put the 
shipping industry at a disadvantage relative to the foreign 
competitor, leaving less income to reinvest in its business, 
which can mean less growth and reduced future opportunities.
    So, based on this real-life experiment in tax policy, can 
you elaborate on the lessons learned from the shipping 
industry's experience, particularly with regard to 
competitiveness, foreign acquisitions, and investments here at 
home?
    Mr. ARNTZEN. Yes, I think the history is very clear on 
this. This is textbook. In 1986 they ended deferral for 
foreign-flagged shipping for U.S. companies. And you saw 
basically the diminishment of the U.S. fleet from 1986 all the 
way to 2004. The biggest two container lines, one was acquired 
by a Danish company, one was acquired by a Singapore company. 
We ended up being practically the only U.S. company that 
remained that was both in the international flag and the U.S. 
flag. We were paying tax at that time. But there is no question 
that was what essentially stopped investment in U.S.-flag blue 
water shipping.
    The 2004 act got passed, and we, along with other of our 
competitors in the industry, started investing in new double-
hull tonnage, as required by the Coast Guard, as required by 
the Oil Pollution Act of 1990. We couldn't have done that 
without the changes to deferral. And we said if we got that we 
would invest. And, in fact, we did. And it wasn't just OSG, it 
was the rest of the industry. So, what you have now in the U.S. 
is a very modern double-hull tanker and large barge fleet 
operating along our coast, much safer than the older single-
hull ones that we replaced.
    So, I think it is absolutely textbook. And what we are 
asking for in the American Shipping Reinvestment Act is just a 
correction of the 2004 Act that was an oversight and that was 
sort of an obscure rule that went all the way back to 1986 to 
1975. So it is textbook, and I am very proud that we lived up 
to the commitments we did. And we still see opportunity, such 
as the shuttle tanker business we talked about before, and 
other things.
    Ms. JENKINS. Okay, thank you. And then for any member, 
really, on the panel that would care to comment, under these 
budget constraints that we are looking at at this point in 
time, how does the Army Corps of Engineers prioritize which 
projects get funded and which don't? Even with full funding, 
the Corps would continue to prioritize the work. How would you 
comment?
    Mr. LAGRANGE. Basically, they use a cost benefit ratio on 
their projects. And once a project construction, obviously, on 
a project has begun, obviously they stay the course on that 
project until its completion. The unfortunate thing with that, 
because of the lack of funding and due to inflation, we are 
looking at projects like on the Inland Water System, the 
Olmsted Lock and Dam, Chickamauga, the Kentucky Lock and Dam, 
Inner Harbor in New Orleans, all of these prices are 
escalating.
    In our case, with our lock, which connects 3,000 miles of 
inland waterways from Mexico to Canada, it was a $600 million 
price tag 10 years ago. It is now $1.4 billion. So we are going 
backwards, not forward. But it is by cost benefit ratio.
    Ms. JENKINS. Okay.
    Mr. MCCURRY. If I may, there are--clearly are two areas 
here, one with the Harbor Maintenance Trust Fund, where the 
country is taking in enough in fees to adequately provide for 
the maintenance dredging needs. So even with prioritization, 
the Corps could adequately perform the necessary work.
    Then, when you look at the necessary expansion programs, 
even those that have significantly justifiable benefit-to-cost 
ratios struggle to get funding necessary to complete 
construction. The only project that I know of with much 
specificity is our own.
    And when you are looking at a 4-and-a-half or greater to 1 
benefit-to-cost ratio on a project whose life span is 50 years, 
your return on the investment is in a time period that is 
approximately 5 years. That is a pretty good investment, pretty 
good return on your dollar in any business. It is not the kind 
of project or programs that typically fall into what might look 
more like a grant. The projects do return to the United States 
that investment. I think it is important to look at them in 
that way.
    Ms. JENKINS. Okay. Thank you, Mr. Chairman. I yield back.
    Chairman BOUSTANY. Thank you, Ms. Jenkins. I have received 
confirmation from the Army Corps of Engineers by mail that if 
they had the full receipts of the Harbor Maintenance Tax for a 
given year, they could take care of all the authorized--where 
they have federal authority--all the authorized operations and 
maintenance, and probably still have some left over. So, we 
repeatedly receive that kind of confirmation from the Army 
Corps.
    Dr. McDermott.
    Mr. MCDERMOTT. That is a wonderful segue. This hearing has 
two issues, and I want to thank Chairman Tiberi for bringing 
forward the American Shipping and Reinvestment Act. Thank you 
for your testimony, Mr. Arntzen. It is a bill that ought to 
pass without anything happening.
    Now, as we get close----
    Mr. ARNTZEN. Thank you.
    Mr. MCDERMOTT [continuing]. As we get close to throwing off 
the lines and letting this baby go, we come to the second thing 
that is being loaded on to it, and that is the Harbor 
Maintenance Tax. Now, I am probably the only Member of the 
Congress who has a Z Card. I sailed the merchant marine. I went 
aground in Great Lakes in Lake St. Clair in 1956. So I know a 
lot about dredging.
    [Laughter.]
    Mr. MCDERMOTT. I also feel like the people who put this 
hearing together think that all the shipping in the world goes 
out of the south or the east. I would feel a lot better if 
there was at least one guy here from the West Coast. So I am 
going to talk----
    Chairman BOUSTANY. We didn't think you had any problems 
with the West Coast ports.
    Mr. MCDERMOTT. Oh, yes, we do. We ship--35 percent of the 
cargo in the country comes in through the West Coast through 5 
ports. I happen to represent one of them. Seattle has submitted 
testimony; I hope the others will do the same.
    But we all agree that it needs to be fixed. It is a 
question of how to fix it. The HMT shouldn't just sit there 
while our nation's ports have problems. I agree to that. And I 
have talked with the Seattle Port people and they tell me that 
the HMT makes them uncompetitive. I mean we have got the 
problem Boston has in spades, with the Canadian ports and what 
is going to happen in the near future in Prince Rupert and some 
other things. So, we are talking about a serious economic hit.
    But the problem is that we don't get any of the money. We 
get $.01 back on every $1 we put into this thing. And 20 
percent of it goes to New Orleans. And I understand why the 
chairman would want to have this hearing and would want to talk 
about it and want more money for the southern waterways that 
are all filled. We got 70-foot draft, okay? We load ships that 
come out of Portland that can't fully load because they can't 
get over the bar out of the Columbia. They come up to Seattle, 
they top off, and then head for Asia.
    So, I know what the issues here are. And if my state got 20 
percent of the money I would probably be advocating for more. 
What I am interested in hearing you talk about--and Mr. 
Boustany gave me a beautiful segue--there would be some money 
left for some of the things we need.
    Now, Seattle has a sea wall. It has been there for 100 
years, put in with wood, and the worms have been working on it 
all this time. We also live in an earthquake zone. We know we 
live in an earthquake zone. We have watched it. You have 
watched what happened in the tsunami in Japan. You know what 
the impacts could be on one of the big ports of this country. 
And last year, 800,000 HMT-paying passengers boarded 193 cruise 
ships going out of Seattle. So this is not a--we are not 
talking a small operation. But if that sea wall goes, we are 
going to have a big problem.
    I have been fighting. In fact, I had a bill in here for 15 
years to deal with this. Jennifer Dunn, who is now gone from 
the committee, and I--a Republican and a Democrat; this is not 
a partisan issue, this is an economic issue that has got to be 
dealt with. And we can't get anybody to agree that we ought to 
use some of that money to study the sea wall and maybe repair 
it, because they say, ``Well, that's not dredging.''
    So, I wonder if the committee would comment on the 
possibility of maybe broadening the use of the sea wall money--
or the harbor maintenance money to make it a little bit fairer 
for those of us who are waiting for a disaster to happen. We 
know it is going to happen, it is just a matter of time.
    Dr. STRAIN. Thank you, Mr. McDermott. When you look at the 
issue here today, we are talking about the whole of America. 
When we look at the growth in shipping, there is going to be 
more money coming in. There is $6.1 billion in this trust fund. 
And so, when you talk about--we need to do all the things that 
we need to do to protect our ports and to expand our ports. And 
I agree with you. If there needs to a sea wall to protect that 
port, that should be there. If we need to dredge, we need to do 
that. If we need to rebuild the inland waterways and those lock 
systems that are now--again, those are--yours is 100 years old, 
these are 50 years old.
    But we have a way to generate the dollars. What we are 
talking about with this is a growth in the overall economy 
throughout the entirety of the United States. It affects coast 
to coast. And I think it would be wise to include such measures 
as that, and the other things that we need to do. Because it is 
all about our overall economic competitiveness.
    And when you talk about coming from a state where sometimes 
you have to wait for the disaster, they generally catch up with 
us, so I understand your position on sea walls.
    Mr. MCDERMOTT. Well, when we bring this bill for a markup, 
you would be supportive of an amendment to broaden the use 
maybe just a little bit?
    Dr. STRAIN. If you tell me what that dollar figure is.
    Mr. MCDERMOTT. Anybody else want to--yes, Mr. Leone?
    Mr. LEONE. I--the concern that I would have, sir, is that 
what the Corps of Engineers estimates is the need for dredging 
now. The intended purpose of the Harbor Maintenance was about 
what they are collecting now.
    And so, if we start to see a drift into other uses--and I 
understand, we are certainly a donor port, as well--but I think 
if you--then you will find out that you will have--the problem 
will continue. So I think it is very, very difficult to start 
to see more purposes for the Harbor Maintenance Trust Fund when 
there is such a backload of dredging work that needs to get 
done. And I understand the situation you are in, that Boston 
and others are in, but there are an awful lot of unmet needs 
over here that need to get dredged.
    Mr. TIBERI. [Presiding.] The gentleman's time has expired. 
Anyone else want to respond to his question?
    [No response.]
    Chairman TIBERI. No takers?
    Mr. MCDERMOTT. Thank you.
    Chairman TIBERI. Mr. McCurry? No? Okay. All right, the 
gentleman from Pennsylvania, Mr. Gerlach, is recognized for 
five minutes.
    Mr. GERLACH. Thank you, Mr. Chairman. Good morning, 
gentlemen. I apologize, I was out with a constituent meeting 
for a few minutes, so this question might have been asked, but 
I am going to pose it anyhow.
    Certainly I think all of us on this panel want to work to 
try to get released all of that $6 billion that is sitting in 
the fund so you can undertake the projects that are necessary 
at your port facilities. My district is just west of 
Philadelphia, and so the Philadelphia port facility is very 
important to our neck of the woods.
    But also, what seems to occur every now and then in the 
conversation--and I understand back in the Clinton 
Administration there was a specific proposal to establish a 
user fee on the ship owners themselves, and somebody alluded to 
this a little bit earlier in their testimony, about the larger 
ships that get constructed, get utilized, and certainly come 
into the port facilities, and then thereby require an expansion 
of the port facilities, an improvement of the port facilities 
to handle those larger ships and larger volumes of cargo.
    So, I would like to get your thoughts, in addition to our 
efforts, to try to make sure that $6 billion gets passed back 
out to you for the projects you need. Should we also be 
considering some type of user fee on the ship owners, 
themselves? Not the shippers of the cargo, but the ship owners 
who have these large vessels that certainly have a cost impact 
to the facilities themselves?
    Or, would a user fee simply be something passed on to the 
shippers anyhow as customers, and not really have an overall 
impact the way some might think?
    So I would like to get your thoughts on that, whether there 
should be an additional user fee on the part of the ship 
owners, as well as those that are owning the cargo that is 
being taxed when it comes into the port now. And whoever would 
like to--sir, Mr. Fisher.
    Mr. FISHER. Sir, I think the problem we start with that 
kind of an idea is a lack of trust. The Congress came to the 
maritime industry in the mid-1980s and told us that our harbors 
would be dredged if only we would agree to a new user fee being 
imposed on the users of our ports. And we agreed, and here we 
are today, 20 years, 30 years later, discussing why that user 
fee doesn't work, and talking about how to fix it.
    I think the problem with discussing a new type of user fee 
is that we feel a little bit hoodwinked from the last one. And 
moving forward with the discussion of a new one, I think we 
would want to make sure and look at the last one and get it 
fixed first.
    Mr. GERLACH. Others?
    Mr. ARNTZEN. Yes. The idea of a user fee for the shipping 
industry, which right now on a global and domestic basis is 
going through one of its more difficult periods in many 
decades--we, as companies, have to make big investments in 
double-hull ships. We are going to have to spend $20 million in 
the next 3 or 4 years on ballast water upgrades on our ships. 
We are going to have to spend $20 million a year just in 
mandatory dry docks to keep up with Coast Guard requirements.
    The companies that we--carry oil refined petroleum products 
are large refiners, large oil companies, national oil companies 
which have a much greater capacity to carry those type of 
costs. The shipping industry--we are a big company, by shipping 
industry standards. But you will find it is a lot of smaller, 
very lean operators on very tight budgets that are trying their 
hardest just to keep up with the environmental and safety 
requirements and equipment investments we have to make. I think 
it would be a difficult one for the industry.
    Mr. GERLACH. Okay, thank you. One other comment, and then I 
have one other question.
    Mr. LAGRANGE. Yes. Quickly, I would like to agree with 
that. Certainly I think the rate of profit by the carriers is 
marginal, at best, today. We have employed something I don't 
think will ever go away again, and that is slow steaming out in 
the open water, which--time is money, again, in the 
transportation industry.
    I think what this does is it encourages the competition 
from other countries, both Mexico and Canada, to those ports 
there and close to the borders, whereby the user fee would not 
be assessed.
    Mr. GERLACH. Thank you. One other question quickly. In 
Pennsylvania, you may know, we have a burgeoning natural gas 
industry in Marcellus shale. Gas is being collected and now 
being distributed. And that is going to perhaps put a lot of 
the Philadelphia Port area into a situation where improvements 
will be needed to the port facilities to handle that type of 
export.
    Should these harbor maintenance funds be used in any way to 
incentivize improvements to port facilities to handle new types 
of industry that will be happening in our country, and 
including the natural gas industry? Should some of these funds 
be used for things that transform these facilities to better 
accommodate that kind of new industry?
    Mr. ARNTZEN. We operate four large LNG carriers. When they 
were built they were the four biggest in the world. We took the 
first one into the Houston ship channel and we also took one 
into Boston.
    I mentioned earlier the growth in refined petroleum 
products, exports from the United States. It is phenomenal. 
Nobody saw it coming. We think there will be the capacity for 
the U.S. to export chemicals, ethylene, LPG gases. I think it 
is going to be a very exciting period, because we are going to 
be very competitive with the rest of the world in a whole lot 
of areas where we haven't been.
    So, I would encourage it. And I think there is going to be 
a big opportunity in that area for the country.
    Mr. GERLACH. Thank you. Any others?
    [No response.]
    Mr. GERLACH. Okay. Thank you very much. Appreciate it, Mr. 
Chairman.
    Chairman BOUSTANY [presiding]. Thank you. Mr. Thompson.
    Mr. THOMPSON. Thank you, Mr. Chairman, and thank you for 
holding the hearing, and for the RAMP Act. And I am pleased to 
be a coauthor of the bill.
    I represent a number of ports in my district on the West 
Coast. And I have seen firsthand how deferred maintenance and a 
lack of funding and attention has really hurt our area. I have 
one harbor in Crescent City in the northernmost part of 
California that, until we dredged it last year, was nearly 
completely silted in. You could--if you could walk on mud, you 
could have walked all the way across the water. And it was 
terrible for business, it was terrible from a public safety 
standpoint. The Coast Guard couldn't even get in and out of the 
harbor. And that is totally unacceptable.
    In Eureka, a deepwater port, the only deepwater port on the 
north coast, they have been underfunded. I think it is about 
$18 million short of what the Corps says they need for their 
O&M requirements in that area. Again, it is terrible for 
business. And I think that is the emphasis that we really need 
to focus on.
    This is about jobs. It is about the jobs that would be 
created if we lived up to our responsibility to maintain these 
ports and harbors. It is about the jobs that will follow 
because of the added business that these harbors, these ports 
and harbors, would do. I thought it was--I don't remember who 
said it, but the lost revenue because you have to short-load or 
light-load these ships, that is an astonishing fact that 
doesn't get talked about nearly enough.
    And it is about the jobs that will come to the surrounding 
economies, the surrounding communities, because there is a 
vibrant economic activity on these--at these ports.
    And then lastly, it is not about just jobs, jobs, and jobs, 
but it is about jobs, jobs, jobs, and public safety. It was 
mentioned--the homeland security issue, the oil spill issue. 
But any--I represent an area that has a rich commercial and 
sport fishing economy. And if something happens to one of those 
folks and the Coast Guard needs to respond and we don't have 
our harbors up to speed, it doesn't happen.
    And this is something that should be a national--that is a 
national embarrassment. We need to live up to our obligation. 
We need to fund these things. It would be good for the economy. 
It would be good for business. It would be good for jobs. And I 
will reserve the rest of my time to ask questions during the 
West Coast hearing that we are going to have on this issue. 
Thank you.
    [Laughter.]
    Chairman BOUSTANY. I thank the gentleman. Mr. Marchant.
    Mr. MARCHANT. Thank you, Mr. Chairman. I would like to 
follow up on a statement Mr. LaGrange made, and any of the 
panel that can answer this question.
    How do the Mexican ports and the Canadian ports pay for 
their maintenance and dredging?
    Mr. LAGRANGE. Yes, sir. It varies from country to country. 
But in Canada and Mexico it is usually a direct appropriation 
from the Federal Government to the channel and to the port. And 
it is also subsidized in some instances, not all, by a tariff 
or a user fee based--and placed on the carrier or the customer, 
one of the two.
    But in all cases, I think without exception, it is a direct 
appropriation from the Federal Government, sometimes 
subsidized.
    Mr. MARCHANT. And does that--and where does the final 
decision on where those funds get appropriated rest? Do they 
have a similar institution like the Army Corps of Engineers 
that makes that decision? Or is it a purely political decision?
    Mr. LAGRANGE. It is done at the legislative level. And I 
would probably like to yield in this case to Mr. Leone, who is 
a lot closer to the subject matter. But we have some of our 
friends in Canadian ports, certainly in Mexican ports, and I 
think it is done at the legislative or congressional level.
    Mr. MARCHANT. Okay. Thank you. Mr. Leone.
    Mr. LEONE. I believe that the--I am not exactly sure what 
the complete process is. I think Mr. LaGrange or myself, you 
know, have some information regarding it from conversations 
with our fellow port directors in those countries.
    But they have kind of federalized those ports now up in 
Canada. I am more familiar with Canada. I know our greatest 
competitor, Halifax, has got the similar situation as the 
Pacific Northwest, that dredging is not necessarily needed for 
them. But they generally--once the decision is made to get it, 
how that gets accomplished and how it gets done, I don't 
think--it is not like a Corps of Engineers. It is done at the 
port level.
    So I don't know of anybody such as the Corps of Engineers 
that kind of collects money, or it has money and then responds 
by doing it, the dredging, in and of itself in those particular 
ports. I think it is the port asking, and then the port then 
kind of finds a way to get it done itself in Canada.
    And I don't--in Mexico, does anyone have any more 
information on Mexico?
    Mr. LAGRANGE. Mexico is federalized totally.
    Mr. MARCHANT. So how often do you find--and since I am from 
Texas, I am most familiar with the Mexican ports just south of 
Texas--how often do you find competitive advantage is given to 
those Mexican ports, where they can ship into Mexico and then 
come across the border with either rail or truck?
    Mr. LAGRANGE. We haven't seen it from Mexico that often. 
And we have an organization, the Gulf Ports Association of the 
Americas, which consists of the nine ports on the Yucatan 
Peninsula, basically, from Cancun running west in the other 
direction, Tampico, Altamira, and so on and so forth. We have 
not seen that much in the way, due to the lack of overland 
infrastructure, the availability of it into the United States.
    There has been a spike over the last year I am told, with 
the relaxation of truckers coming in from Mexico to the United 
States, but it has been very minimal.
    Mr. MARCHANT. Thank you, Mr. Chairman.
    Chairman BOUSTANY. Thank you. Next--let's see. We have Mr. 
Berg.
    Mr. BERG. Thank you, Mr. Chairman. From North Dakota we 
don't have a lot of ports in our state. Having said that, you 
know, I guess even though we don't have a major port, obviously 
each of you are dealing with local and regional economies that 
don't have the port. But I would like you to just maybe just 
briefly talk about the direct and indirect benefits to those 
regional areas that don't have the port, and why it is 
important for the port, and also to explain why it is important 
for those constituencies to ensure that there is, you know, 
adequate money for the Harbor Maintenance Fund.
    Dr. STRAIN. Yes, sir. In North Dakota, as you know, you 
have a tremendous agricultural base. And you've got a lot of 
oil and gas activity going on. And if you look at the United 
States, most of our agricultural products are exported. We, you 
know, feed a great deal of the world.
    And so, for you to move your products out of your region, 
out of North Dakota, whether it is oil and gas, petrochemicals 
or all the different agricultural products--wheat, beef cattle, 
et cetera--and those markets are growing--without an efficient 
system, at the end of the day it will cost your farmers by not 
being able to move the products or moving them with greater 
cost.
    And again, the figure that we have seen is you are going to 
add another $.10-plus to a bushel of anything you move if we 
cannot move it efficiently through our waterway systems.
    Mr. FISHER. Sir, the closest port probably to North Dakota 
is probably the Port of Duluth on the Great Lakes. And I can 
tell you that North Dakota agricultural products are common 
cargoes at the Port of Duluth. They are exported--they are 
transported to Duluth and then put on export vessels and sent 
abroad. And that port essentially allows North Dakota farmers 
to market their products all over the world, and gives the 
state access to global trade.
    As my colleague has stated, if the Port of Duluth isn't 
properly dredged, and the vessel operators who call there to 
pick up North Dakota farm products and export them, if they can 
only partially load their vessel because of insufficient 
channel dredging, those products, on a per-ton basis, the 
transportation cost actually goes up, because you are carrying 
less product on each shipload.
    Mr. MCCURRY. Just to tack on to that, really the obvious, 
that if you have got goods that are going to other countries, 
or consumer goods that are typically coming in from other 
countries, they are going to go through the point of least 
resistance and maximum efficiency.
    So when you look at the retail import cargoes, most of them 
are coming in and being trucked or railed, depending on how far 
the destination is. In our case, having two class-one railroads 
on terminal allows us to pretty readily access the Midwestern 
markets for touching the distribution centers for retailers. 
And then similarly in the opposite direction for a lot of your 
agricultural products that, more and more, are going into 
containers, just as they go down the river on barges and go out 
of the Gulf.
    Mr. BERG. Thank you. I--kind of interesting. In North 
Dakota we never really talk about trucking it out or railing it 
out. We always use the word ``shipping.'' We are shipping our 
corn, shipping our wheat, doing those things. And yet Duluth 
would be the first point where they would see a ship.
    Thank you. I yield back.
    Dr. STRAIN. Mr. Berg, if I may just make one short comment.
    Mr. BERG. Sure.
    Dr. STRAIN. I am sure you are familiar with the term ``the 
basis.'' Right? Whenever you sell a product--you sell your 
wheat. If it is running, you know, $5.90, $6, the basis is set 
to the side. And so you have a positive or a negative. That 
positive or negative is one, what is going on in the Chicago 
Board of Trade, but it is also the transportation cost.
    And I can tell you that when you can have wheat get down to 
$2.80 with a $1 basis the wrong way, and you are getting $1.80 
for your wheat, that is a real thing. And we fight hard to make 
that basis positive and not negative. But shipping costs are a 
major part of that variable. And when your farmers contract to 
sell their products, that basis is variable. And so when they 
bring it and deliver it, when they deliver that product, that 
is when it is assessed, based on, to a great degree, the 
current shipping cost to move that to the next point of sale.
    Mr. BERG. Thank you.
    Chairman BOUSTANY. I want to thank all of you for your 
testimony, your expertise that you brought today to the 
subcommittees. And please be advised that Members may have some 
questions that they will submit to you in writing, and I would 
ask you to respond to those, those questions. And of course 
your written testimony will be made part of the official 
record.
    And with that, this hearing is now adjourned.
    [Whereupon, at 11:17 a.m., the subcommittees were 
adjourned.]
    [Member Submissions for the Record follow:]

                  The Honorable Kevin Brady, Statement
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       The Honorable Wally Herger and Earl Blumenauer, Statement
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                 The Honorable Brian Higgins, Statement
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    [Public Submissions for the Record follow:]

                        AGL Resources, Statement
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                     Big River Coalition, Statement
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                         Carrix Inc., Statement
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                    Coastwise Coalition, Statement 2
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                    Florida Ports Council, Statement
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                     Horizon Lines Inc., Statement
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               Jersey Harborside Transport LLC, Statement
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                     Lake Charles Harbor, Statement
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  APL Limited and affiliated companies, Maersk Inc. and Subsidiaries, 
                    Sealift Incorporated, and Hapag-
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                       Port of Seattle, Statement
[GRAPHIC] [TIFF OMITTED] 78178A.088

[GRAPHIC] [TIFF OMITTED] 78178A.089

[GRAPHIC] [TIFF OMITTED] 78178A.090


                                 

                       Port of Tacoma, Statement
[GRAPHIC] [TIFF OMITTED] 78178A.091

[GRAPHIC] [TIFF OMITTED] 78178A.092

[GRAPHIC] [TIFF OMITTED] 78178A.093

[GRAPHIC] [TIFF OMITTED] 78178A.094

[GRAPHIC] [TIFF OMITTED] 78178A.095

[GRAPHIC] [TIFF OMITTED] 78178A.096


                                 

               Shipbuilders Council of America, Statement
[GRAPHIC] [TIFF OMITTED] 78178A.097

[GRAPHIC] [TIFF OMITTED] 78178A.098

[GRAPHIC] [TIFF OMITTED] 78178A.099

[GRAPHIC] [TIFF OMITTED] 78178A.100



                                 

                    Tonnage Tax Coalition, Statement
[GRAPHIC] [TIFF OMITTED] 78178A.101

[GRAPHIC] [TIFF OMITTED] 78178A.102

[GRAPHIC] [TIFF OMITTED] 78178A.103






                                 

               West Gulf Maritime Association, Statement
[GRAPHIC] [TIFF OMITTED] 78178A.104

[GRAPHIC] [TIFF OMITTED] 78178A.105

[GRAPHIC] [TIFF OMITTED] 78178A.106

[GRAPHIC] [TIFF OMITTED] 78178A.107



                                 

            American Maritime Labor Organizations, Statement
[GRAPHIC] [TIFF OMITTED] 78178A.108

[GRAPHIC] [TIFF OMITTED] 78178A.109

[GRAPHIC] [TIFF OMITTED] 78178A.110

[GRAPHIC] [TIFF OMITTED] 78178A.111

[GRAPHIC] [TIFF OMITTED] 78178A.112

[GRAPHIC] [TIFF OMITTED] 78178A.113

[GRAPHIC] [TIFF OMITTED] 78178A.114

[GRAPHIC] [TIFF OMITTED] 78178A.115

[GRAPHIC] [TIFF OMITTED] 78178A.116

[GRAPHIC] [TIFF OMITTED] 78178A.117

[GRAPHIC] [TIFF OMITTED] 78178A.118

                                 
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