[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]






              PRESIDENT'S FISCAL YEAR 2015 BUDGET REQUEST
                          FOR COAST GUARD AND
                    MARITIME TRANSPORTATION PROGRAMS

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

                                (113-61)

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                COAST GUARD AND MARITIME TRANSPORTATION

                                 OF THE

                              COMMITTEE ON
                   TRANSPORTATION AND INFRASTRUCTURE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 26, 2014

                               __________

                       Printed for the use of the
             Committee on Transportation and Infrastructure



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             COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

                  BILL SHUSTER, Pennsylvania, Chairman
DON YOUNG, Alaska                    NICK J. RAHALL, II, West Virginia
THOMAS E. PETRI, Wisconsin           PETER A. DeFAZIO, Oregon
HOWARD COBLE, North Carolina         ELEANOR HOLMES NORTON, District of 
JOHN J. DUNCAN, Jr., Tennessee,          Columbia
  Vice Chair                         JERROLD NADLER, New York
JOHN L. MICA, Florida                CORRINE BROWN, Florida
FRANK A. LoBIONDO, New Jersey        EDDIE BERNICE JOHNSON, Texas
GARY G. MILLER, California           ELIJAH E. CUMMINGS, Maryland
SAM GRAVES, Missouri                 RICK LARSEN, Washington
SHELLEY MOORE CAPITO, West Virginia  MICHAEL E. CAPUANO, Massachusetts
CANDICE S. MILLER, Michigan          TIMOTHY H. BISHOP, New York
DUNCAN HUNTER, California            MICHAEL H. MICHAUD, Maine
ERIC A. ``RICK'' CRAWFORD, Arkansas  GRACE F. NAPOLITANO, California
LOU BARLETTA, Pennsylvania           DANIEL LIPINSKI, Illinois
BLAKE FARENTHOLD, Texas              TIMOTHY J. WALZ, Minnesota
LARRY BUCSHON, Indiana               STEVE COHEN, Tennessee
BOB GIBBS, Ohio                      ALBIO SIRES, New Jersey
PATRICK MEEHAN, Pennsylvania         DONNA F. EDWARDS, Maryland
RICHARD L. HANNA, New York           JOHN GARAMENDI, California
DANIEL WEBSTER, Florida              ANDRE CARSON, Indiana
STEVE SOUTHERLAND, II, Florida       JANICE HAHN, California
JEFF DENHAM, California              RICHARD M. NOLAN, Minnesota
REID J. RIBBLE, Wisconsin            ANN KIRKPATRICK, Arizona
THOMAS MASSIE, Kentucky              DINA TITUS, Nevada
STEVE DAINES, Montana                SEAN PATRICK MALONEY, New York
TOM RICE, South Carolina             ELIZABETH H. ESTY, Connecticut
MARKWAYNE MULLIN, Oklahoma           LOIS FRANKEL, Florida
ROGER WILLIAMS, Texas                CHERI BUSTOS, Illinois
MARK MEADOWS, North Carolina
SCOTT PERRY, Pennsylvania
RODNEY DAVIS, Illinois
MARK SANFORD, South Carolina
DAVID W. JOLLY, Florida
                                ------                                7

        Subcommittee on Coast Guard and Maritime Transportation

                  DUNCAN HUNTER, California, Chairman
DON YOUNG, Alaska                    JOHN GARAMENDI, California
HOWARD COBLE, North Carolina         ELIJAH E. CUMMINGS, Maryland
FRANK A. LoBIONDO, New Jersey        RICK LARSEN, Washington
PATRICK MEEHAN, Pennsylvania         TIMOTHY H. BISHOP, New York
STEVE SOUTHERLAND, II, Florida,      LOIS FRANKEL, Florida
  Vice Chair                         CORRINE BROWN, Florida
TOM RICE, South Carolina             JANICE HAHN, California
MARK SANFORD, South Carolina         NICK J. RAHALL, II, West Virginia
DAVID W. JOLLY, Florida                (Ex Officio)
BILL SHUSTER, Pennsylvania (Ex 
    Officio)
                                CONTENTS

                                                                   Page

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

                               TESTIMONY
                                Panel 1

Admiral Robert J. Papp, Jr., Commandant, United States Coast 
  Guard..........................................................     4
Michael P. Leavitt, master chief petty officer, United States 
  Coast Guard....................................................     4

                                Panel 2

Hon. Paul N. Jaenichen, Acting Maritime Administrator, Maritime 
  Administration.................................................    23
Hon. Mario Cordero, Chairman, Federal Maritime Commission........    23

 PREPARED STATEMENTS AND ANSWERS TO QUESTIONS FOR THE RECORD SUBMITTED 
                              BY WITNESSES

Admiral Robert J. Papp, Jr.:

    Prepared statement...........................................    36
    Answers to questions for the record from Hon. Duncan Hunter, 
      a Representative in Congress from the State of California..    43
Michael P. Leavitt \1\
Hon. Paul N. Jaenichen, prepared statement.......................    44
Hon. Mario Cordero:

    Prepared statement...........................................    53
    Answers to questions for the record from Hon. Steve 
      Southerland II, a Representative in Congress from the State 
      of Florida.................................................    65

----------
\1\ Michael P. Leavitt, master chief petty officer, United States Coast 
Guard, did not submit a prepared statement for the record.





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                  PRESIDENT'S FISCAL YEAR 2015 BUDGET
                      REQUEST FOR COAST GUARD AND
                    MARITIME TRANSPORTATION PROGRAMS

                              ----------                              


                       WEDNESDAY, MARCH 26, 2014

                  House of Representatives,
          Subcommittee on Coast Guard and Maritime 
                                    Transportation,
            Committee on Transportation and Infrastructure,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 9:35 a.m. in 
Room 2167, Rayburn House Office Building, Hon. Duncan Hunter 
(Chairman of the subcommittee) presiding.
    Mr. Hunter. The subcommittee will come to order. Good 
morning.
    The subcommittee is meeting today to hear testimony on the 
President's fiscal year 2015 budget request from the leaders of 
the Coast Guard, the Maritime Administration, and the Federal 
Maritime Commission.
    The President has sent Congress yet another budget 
proposing to cut funding for the Coast Guard, this time by more 
than $360 million, or 4 percent below the fiscal year 2014 
enacted level. The request would cut the Coast Guard's 
acquisition budget by $291 million, or 21 percent. The 
President's request proposes to delay the acquisition of 
critically needed replacement assets, such as the Fast Response 
Cutter. It will severely undermine efforts to recapitalize the 
Service's aging and failing legacy assets, increase acquisition 
costs for taxpayers, and seriously degrade mission 
effectiveness.
    For the fiscal year 2015 operating budget, the President 
proposes to slash the number of Coast Guard servicemembers and 
reservists by over 1,300, and reduce hazardous duty pay for 
servicemembers. It would also exacerbate gaps in readiness by 
cutting programmed hours for aircraft, and jeopardize the 
success of the search and rescue mission by taking fixed-wing 
aircraft crews off alert status.
    This is the third year in a row the President has forced 
the Coast Guard to sacrifice mission success to pay for his 
questionable spending in other agencies. And, once again, 
Congress is being forced to come up with hundreds of millions 
of dollars just to sustain Coast Guard frontline operations. 
The administration needs to understand that the Coast Guard 
cannot continue to do more with less. If the President is going 
to continue to propose these cuts year after year, he needs to 
tell us, Congress, and you, the Coast Guard, how he intends to 
re-scope the missions of the Coast Guard to reflect his reduced 
budgets.
    This is the last time that Admiral Papp and Master Chief 
Leavitt will appear before us. I want to commend both of you 
for your leadership and tremendous service to our Nation.
    Admiral, I fully understand the situation you've been put 
in with this budget, and I appreciate your candor in describing 
what these cuts will mean for the ability of the Service to 
successfully conduct its missions.
    The budget request for the Maritime Administration 
represents a 75-percent increase over the current level, except 
not really. However, the increase comes as a result of an 
accounting change in the Ready Reserve Fleet funding, and from 
a one-time subsidy offered to the maritime industry in exchange 
for a permanent reduction in the number of U.S. mariner jobs 
carrying cargo under the hugely successful Food for Peace 
program.
    Since 1954, the Food for Peace program has provided 
agricultural commodities grown by U.S. farmers and transported 
by U.S. mariners on U.S.-flagged vessels to those threatened by 
starvation throughout the world. The President's restructuring 
of Food for Peace will eliminate a vital program for our 
farmers, put U.S. mariners out of jobs, and undermine our 
national security by reducing the domestic sealift capacity on 
which our military depends.
    I would add that the President's attempt to placate the 
concerns of U.S. mariners by temporarily throwing some 
additional money at the Maritime Security Program will not 
work. As we did last year, I hope my colleagues will join me 
in--once again, in rejecting this misguided proposal.
    I am also concerned that the budget again zeroes out 
funding for Title XI and other U.S.-flag promotional programs 
that are at the core of the Maritime Administration's mission. 
I look forward to hearing from the Acting Administrator on how 
he intends to move forward with his efforts to revitalize the 
U.S.-flag fleet under this budget.
    Finally, the budget request for the Federal Maritime 
Commission proposes a $991,000, or 4 percent, increase over 
current levels. That increase will sustain current staffing 
levels at the Commission and help it continue with its 
acquisition of a new information technology system. I encourage 
the chairman to continue to review the operations of the 
Commission to find savings through efficiencies.
    Our Nation is facing a very tough budget climate, as we all 
know. And this Congress is and must work together to find 
savings wherever possible. I look forward to working with my 
colleagues to achieve this goal in a responsible manner.
    I thank the witnesses for appearing today, and look forward 
to their testimony. With that, I yield to Ranking Member 
Garamendi.
    Mr. Garamendi. Mr. Chairman, thank you very much. I will 
make this quick, because I would like to hear from the 
witnesses.
    However, Admiral Papp, I understand this is going to be the 
last time you will be testifying before this committee, unless 
we somehow bring you back before your May 30th departure from 
the Coast Guard. I want to congratulate you for the 
extraordinary career you have had, for the leadership that you 
have put forth during some very difficult budget times, knowing 
that the budget that you presented to us is not a result of 
what you want, but rather what we have given to the 
administration to spend. It is, in fact, the Congress that has 
managed to go through an austerity period of time. You are 
working as best you can with it. However, we do have some 
questions for you about the priorities that you have listed.
    In reflecting on the fiscal year 2015 budget request for 
the U.S. Coast Guard, Maritime Administration, and the Federal 
Maritime Commission, it dawned on me that it was an alarming 
situation, perhaps the greatest impediment to revitalizing our 
merchant marine, and realizing the vast potential of the U.S. 
maritime economy is a persistent disinterest by 
administrations, both current and past in the maritime 
agencies. This is reflected in the budgets.
    If you subject to the idea, as I do, that the Federal 
budget request represents the administration's fundamental 
statement of policy, you cannot help but come to one 
conclusion: the budget request for the maritime agencies 
indicate that, as a matter of policy, these agencies remain 
undervalued, underresourced, and underappreciated. This is both 
regrettable and odd. After all, the global reach and dominance 
of the U.S. economy has historically been linked to our trade 
with other nations, trade that is dependent on vibrant maritime 
commerce.
    As the world's largest trading nation, the United States 
exports and imports annually in value about one-fourth of the 
global merchandise trade. And approximately 95 percent of 
America's foreign trade--that is 1.3 billion tons--moves by 
ship. Moreover, based on current projections, by the year 2020 
United States foreign trade in goods may grow to four times 
today's value, and almost double its current tonnage. And, 
additionally, our inland waterways traffic will increase by 
one-third.
    The economic potential is there for any who care to look. 
What remains missing or obscured is our commitment to seize 
that opportunity. Our economy rose from a maritime foundation 
and remains tethered to that foundation today. We should be 
investing wisely and strategically to ensure that this 
foundation remains solid, and up to the challenges of the 21st-
century economy. Unfortunately, the budget request for our 
maritime agencies suggest that if we are to seize the 
opportunity before us, it will have to be Congress that shows 
the leadership and initiative to provide the necessary 
resources. And for Congress to do that, we must revisit the 
sequestration and the austerity budgeting phenomena that has 
taken over this Congress.
    With that, I yield back.
    Mr. Hunter. I thank the ranking member. On our first panel 
of witnesses today are Admiral Robert Papp, Jr., Commandant of 
the United States Coast Guard; and Master Chief Michael 
Leavitt, master chief petty officer of the Coast Guard.
    Admiral Papp, thank you again for your over 40 years of 
service to our Nation and the Coast Guard. And, with that, you 
are recognized for your statement.

 TESTIMONY OF ADMIRAL ROBERT J. PAPP, JR., COMMANDANT, UNITED 
STATES COAST GUARD; AND MICHAEL P. LEAVITT, MASTER CHIEF PETTY 
     OFFICER OF THE COAST GUARD, UNITED STATES COAST GUARD

    Admiral Papp. Well, thank you, Mr. Chairman, for that, and 
also for your opening statement, and also to Ranking Member 
Garamendi for his statement, and for your support. It is a 
pleasure for me to be here, just as it has been for the last 4 
years, to talk to you about the brave young men and women of 
the Coast Guard who have chosen to serve our Nation.
    I would like to start by thanking this Congress for the 
support it provided in the Consolidated Appropriations Act of 
2014. This Act helps to relieve the erosive effects of 
sequestration on our Service, and it restored frontline 
operations and badly needed training hours to ease many of the 
personnel management restrictions we have faced over this past 
year.
    I would also like to take this opportunity to thank my 
secretary, Secretary Johnson. In the short time he has been in, 
he has jumped into the middle of the budget situation, and 
really provided us some great support on a number of key issues 
that might have been lost along the way, if we hadn't had his 
leadership.
    As you know, America is a maritime nation, just as Mr. 
Garamendi mentioned. We rely on the safe, secure, free flow of 
goods across the seas and into our ports. And I firmly believe 
that one measure of a nation's greatness is its ability to 
provide safe and secure approaches to its ports. The system of 
uninterrupted trade is the life blood of our economy.
    And you can see it at work today. We may be a week into the 
spring, but the Coast Guard Cutter Mackinaw just recently 
completed about 2 months of continuous icebreaking service, 
keeping open the passages between the Great Lakes. Mackinaw, as 
we speak today, is working off Duluth, Minnesota, in some of 
the heaviest ice cover that the lakes have seen in the last 30 
years to help commercial traffic deliver badly needed iron ore 
to keep the steel plants open in the Heartland, and validating 
decisions made by Congress 15 years ago to build that 
icebreaker.
    You can also see it in the work that we do to secure our 
maritime borders. Our new Fast Response Cutters have become the 
workhorses of our drug and migrant interdiction operations in 
the approaches to Florida and Puerto Rico, and they continue to 
be delivered on time and on budget.
    Every day the Coast Guard acts to both prevent and respond 
to an array of threats that, if left unchecked, would impede 
trade, weaken our economy, and create instability. These 
threats disrupt regional and global security, the economies of 
our partner nations, and access to both resources and 
international trade. All of these are vital elements of our 
national prosperity and, in turn, our national security.
    Layered security is the way I have described how the Coast 
Guard counters maritime threats facing the United States. This 
layered security first starts in foreign ports, then it spans 
the high seas, because the best place to counter a threat is 
before it reaches our ports. It then encompasses our exclusive 
economic zone, the largest in the world, at over 4.5 million 
square miles, and continues into our territorial seas, our 
ports, and our inland waters.
    The work to address these challenges is being done by 
committed coastguardsmen who face risks each and every day. 
Yesterday morning I was reminded once again of the dangerous 
work they do. As I traveled up to Narragansett in Rhode Island 
to attend a memorial service for Petty Officer Third Class Ron 
Gill. Petty Officer Gill was killed nearly 7 years ago, but I 
made a commitment to his father 7 years ago that I would do all 
I could to make sure our people get the right tools and the 
right training so that accidents such as the one that happened 
to Petty Officer Gill might not happen, or at least be 
minimized in the future. His service, even though 7 years ago, 
is still fresh in my mind, and his, like many other memorial 
services I have attended, reminds us that downstream of any 
decisions that are made here in Washington are the--is the work 
that is carried out by young men and women who are often cold, 
wet, and tired, and who have to stand the watch to keep our 
homeland safe.
    It is our responsibility to detect and interdict contraband 
and illegal drug traffic, enforce U.S. immigration laws, 
protect valuable natural resources, encounter threats to U.S. 
maritime and economic security, worldwide. And it is often most 
effective to do this as far from our shores as possible.
    Our fleet of major cutters has reached obsolescence, and is 
becoming increasingly expensive to maintain. The average 
Reliance class Medium Endurance Cutter is 46 years old; the 
oldest turns 50 this year. I sailed one of those ships, the 
Valiant, when I was a cadet. And by the time I became an 
officer, that ship had been sailing for over a decade. And, as 
I retire on May 30th, the ship will still be serving, 40 years 
later.
    We have been able to keep them going because of the quality 
of our people. But this is no longer sustainable. And I am 
fully aware of the fiscal constraints we face, as a Nation. But 
the uncertainty and spending cuts have forced difficult 
decisions on how to prioritize our essential missions and 
functions. We examine the risks that exist, focus on the 
highest priority operations, and allocate our scarce resources 
where they are needed most, while continually working to 
maintain our readiness and surge capacity. And this often 
requires trade-offs informed by a clear understanding of the 
risks our country faces now, and what we foresee for the 
future. And we continue to make those difficult decisions, but 
I am encouraged by our recent down-selection of candidates for 
our Offshore Patrol Cutter, which is handled by a very capable 
acquisition for us, one that we have improved over the last 10 
years, to become a model acquisition force for the Government.
    We have also become the first military Service to pass an 
audit, and that was the result of dedicated efforts by our 
financial managers.
    So, we can show how we are spending our money. We have a 
great acquisition force. We are at a critical point now where 
what we need is stable and predictable funding in order to give 
best return on investment to the taxpayers.
    As the Nation's maritime governance force, the Coast Guard 
possesses unique authorities, capabilities, and partnerships, 
coupled with capable cutters, aircraft, and boats. Operated by 
highly proficient personnel, we maximize those authorities and 
capabilities to execute layered security throughout the entire 
maritime domain. We are a ready force on continuous watch, with 
a proven ability to surge assets and our people to crisis 
events where and whenever they occur.
    So, I thank you for the opportunity to testify once again, 
and I am really looking forward to your questions.
    Mr. Hunter. Admiral, thank you. I think you are totally 
right. Somebody said, ``Whoever controls the ocean controls the 
world,'' and the Coast Guard plays a major part in that. And 
you have definitely left your mark, with the National Security 
Cutter that are going to be roaming the high seas.
    Anyway, thank you for your service, again.
    Admiral Papp. Yes, sir.
    Mr. Hunter. Master Chief, question for you. If you have two 
sergeants major, it is sergeants major--attorneys general. Is 
it masters chief, or master chiefs, if there is two? If it is 
plural.
    Master Chief Leavitt. Master chiefs.
    Mr. Hunter. Master chiefs, OK. Well, thank you, Master 
Chief Leavitt, and I would like to recognize you and--for your 
statement. And thank you for your many years of service, as 
well.
    Master Chief Leavitt. Thank you, Mr. Chairman. And good 
morning, Mr. Chairman and distinguished members of the 
subcommittee. It is an honor and a privilege to appear before 
you today, and to represent the dedicated men and women of the 
United States Coast Guard, who diligently stand the watch every 
day, protecting and serving our great Nation.
    For the past 4 years, as master chief petty officer of the 
Coast Guard, I have had the honor to see the resiliency, the 
hard work, and the outstanding accomplishments of our Coast 
Guard men and women on a daily basis. I have also seen the 
outstanding support they receive from their families, and it 
just fills me with pride. And it would you, too.
    So, as you know, coastguardsmen operate in an inherently 
dangerous maritime environment, and we must all be mindful of 
those dangers as we prepare our crews to be ready for the call. 
Consequently, we must ensure that our coastguardsmen have the 
resources and training they need, and they need to remain 
proficient, both in craft and in leadership. This is 
particularly important as we continue to meet the Nation's 
needs, as demand for our services expand globally and at home 
with maritime trade, energy exploration, disaster response, 
search and rescue, law enforcement, and much more.
    So, as you heard, many of our frontline cutters are well 
over 40 years old. And, as such, it becomes very difficult for 
our command to balance the ships' mission priorities, 
especially when our crew is already working extremely hard, and 
expending an extraordinary amount of time, just to keep the 
ships operating mechanically. It makes it much harder for our 
crews to train and stay proficient. So it is vital that we 
continue with our recapitalization efforts.
    Regardless of the many challenges they face, coastguardsmen 
continue to successfully complete our missions. That is our 
legacy, and that is a legacy I am very proud to be a part of.
    Last year in my testimony, I addressed some of the 
challenges our men and women and their families face, 
particularly with regards to providing adequate housing. So, on 
behalf of our servicemembers, we are truly grateful for your 
support in providing much-needed funding for our housing 
program. This funding will significantly enhance housing for 
our coastguardsmen and their families.
    The fiscal year 2015 budget will allow us to continue with 
the recapitalization of our aging fleet of cutters, aircraft, 
and small boats, and will help us support our people programs.
    Mr. Chairman and members of the committee, on behalf of the 
men and women of the United States Coast Guard and their 
families, I again thank you for your continued support, and I 
thank you for the opportunity to discuss some of the highlights 
and the challenges our Coast Guard men and women face. I look 
forward to answering any questions you may have.
    Mr. Hunter. Thank you, Master Chief. I am now going to 
recognize Members, starting with myself, for questions.
    Admiral, first question is about the CIP. A few weeks ago, 
when you turned in the budget, the CIP didn't get turned in. I 
would--U.S. law right now requires the CIP to be turned in by 
the Coast Guard to Congress when the budget is presented, as 
well. So, my question is, you are operating on such a small 
budget anyway, we are here to help and conduct oversight in any 
way that we can to just make sure things stay on track, as you 
have them now. When is the CIP going to be turned in to us?
    Admiral Papp. Well, it should be any day, sir. I know that 
the Secretary has forwarded it on. The Secretary has been 
questioned on this, I was questioned on it 2 weeks ago at the 
Appropriations Subcommittee.
    Frankly, 2 weeks ago, as I told the subcommittee then, part 
of it was my obstinance in holding out and trying to get the 
best position for what I foresee the Coast Guard needs----
    Mr. Hunter. I read your testimony, and I appreciate it.
    Admiral Papp [continuing]. In the future. And I think that 
is rightly so. We have those very robust discussions in the 
administration before the budget goes forward. The Secretary is 
supporting the position that I have, in terms of what should be 
in the CIP for the next 5 years. And I know that he was working 
directly with the Office of Management and Budget to--in order 
to get it through the administration as soon as possible.
    I don't have the exact time, but I know, when I checked 
last, it was----
    Mr. Hunter. I don't understand something, though. The CIP 
should be written according to your strategy for 
recapitalization and building new ships, based on the Coast 
Guard requirements, right?
    Admiral Papp. Yes, sir.
    Mr. Hunter. Why does that have to be politically scrubbed?
    Admiral Papp. I am not sure it is a political scrub, sir. 
What I think----
    Mr. Hunter. Well, if you agree, and the Secretary agrees 
with the current CIP, as you have written it, then what are 
they doing with it, if they are not scrubbing it politically?
    Admiral Papp. Well, there are other priorities. For 
instance, we are facing the need for an icebreaker for the 
United States. It is going to be tough to fit a billion-dollar 
icebreaker in our 5-year plan, without displacing other things. 
If there is going to be no growth in the budget, and that is 
what I have to plan for right now, I need to address those 
highest priorities that I have.
    But rightly so, there are other people who have opinions 
with an opening Arctic and other things that perhaps an 
icebreaker ought to be higher priority. These things need to be 
negotiated out, and then come to an administration's position 
on what the highest priorities are. I am hopeful that the 
priorities that I see for the Coast Guard will be reflected in 
that CIP when it gets up here.
    Mr. Hunter. And so, the CIP is stuck with OMB right now? Is 
that where it is at?
    Admiral Papp. I don't know exactly where it is today, sir. 
We can find out and get back to the subcommittee.
    Mr. Hunter. OK, thank you. And when it comes to the 
icebreaker, let's talk about that. We have talked about having 
all the different agencies and all the different groups that 
want a polar icebreaker, which is from the--you, the Navy, 
NOAA, I think just about everybody. I think the Department of 
State would probably like to have an icebreaker so they could 
do stuff in the Arctic, or at least keep it open for our guys. 
I mean it benefits everybody in every agency.
    So, the question is, if you have to go it alone, what does 
that do to you? And, secondly, if you don't go it alone, we 
bring in all the actors that have an interest, and have them 
help pay for it, I guess--will it ever really happen? I don't 
think it would happen in that case, because trying to get one 
agency to do one thing takes many, many years. Trying to get 
five agencies to get on the same page I think would take more 
than both of our lifetimes. So what are your thoughts on that?
    Admiral Papp. Well, we--there is no doubt in my mind that, 
eventually, the United States needs another new polar 
icebreaker. The need will be there for many decades to come 
yet. And, right now, we are running the 38-year-old Polar Star, 
and Healy is about 14 years old now. And I am satisfied that we 
have sufficient capability to meet our needs. But we need to be 
planning for the future, as well.
    As I balance our needs against what is projected in the 
budget--and granted, we got a little bit of relief in 2014; 
2015 we may have a little bit of relief, but in 2016 all bets 
are off, and I may very well have to fit within a $1 billion 
CIP for the out-years. I can't afford to pay for an icebreaker 
in a $1 billion CIP, because it would just displace other 
things that I have a higher priority for.
    So, we are looking at other alternatives. Perhaps one of 
those alternatives, the Congress came up with a requirement for 
a business case analysis on the remaining Polar class 
icebreaker, Polar Sea. And potentially, we might be able to 
overhaul Polar Sea and fit that into the CIP as an affordable 
means for providing an additional icebreaker, as we await a 
time that we can build a new icebreaker.
    If we are going to build a new icebreaker, if that is a 
priority, we just can't fit it within our acquisition account. 
And I would look across the interagency--you are absolutely 
right. There are many people who welcome having an icebreaker, 
but everybody is glad to have the Coast Guard pay for it.
    Mr. Hunter. What about leasing?
    Admiral Papp. You know, everything I see, Mr. Chairman, is 
that leasing, particularly something that is such a large 
capital asset, is good for--to fill a short-term need, but 
there is a long-term need for an icebreaker for this country. 
And I continue to believe--and I think our business case 
analysis demonstrates--that the best option for the country, if 
it is affordable, is to build a new polar icebreaker that would 
be ours, and could be managed by us for the long term.
    Mr. Hunter. What about a long-term lease?
    Admiral Papp. I think the longer the term of a lease, you 
end up spending more money on a leased icebreaker that you 
never get to own than you would in building an icebreaker that 
then you own and operate--look at Polar Sea and Polar Star. 
Thirty-eight years, and we have still got them around and, 
obviously, capable of operating. I think the best bet, in terms 
of reliability and confidence that we have the asset for the 
United States is to purchase a new icebreaker, rather than 
leasing.
    Mr. Hunter. If your choice were between no icebreaker and 
leasing an icebreaker?
    Admiral Papp. It--you would have to look at the cost per 
year. Because if you are leasing an icebreaker, that is an 
additional cost that is going to have to go into my operating 
funds, which would displace other people.
    And as you will see, as we go through this budget today, we 
are down to the point now where, when we talk about displacing 
things, what we are talking about is displacing people. We have 
got no further--we cannot cut any further in programs and other 
things without cutting people now. And that is why, as you look 
here, this budget reflects, potentially, another 800 people 
lost.
    One of the most important things to me, when I became 
Commandant, was preserving our end strength for our Service. 
And in my opinion, I have failed miserably, because we are 
down--getting close to possibly 2,000 people lost in the Coast 
Guard over the last 4 years.
    Mr. Hunter. Beats the Army having to get rid of 80,000. But 
relatively, size-ratio-wise----
    Admiral Papp. I wouldn't throw the Army under the bus. They 
do an awful lot of--I personally will not. Ray Odierno faces a 
lot of challenges out there.
    But what I would say is we are winding down from wars. Yes, 
there are other threats, but there has been no winding down in 
Coast Guard responsibilities. In fact, they have increased.
    Mr. Hunter. Last question. I am operating under the 
assumption that countries like Iran, in a matter of days or 
weeks, can get to a weaponized plutonium level. OK? They are 
not there yet, so we just kind of keep it--we talk about them 
not going past that red line. The reality is the red line can 
be crossed in a matter of days, once you reach that 20-percent 
enrichment level.
    Do you think that you are doing everything that you can, 
and are you funded? Are all of your priorities, when it comes 
to stopping a--any kind of a weapon from getting offshore, or 
into the homeland through different ports, do you have what you 
need to do that right now, operating under the assumption that 
they have nuclear capability, or they could very easily have 
nuclear capability in a matter of days or weeks?
    Admiral Papp. Well, rather than being specific about them, 
I would say the general threat of a weapon of mass destruction 
being shipped in a maritime conveyance, no, we don't have----
    Mr. Hunter. Well, it is not going to come from Canada. It 
is going to come from Iran----
    Admiral Papp. Exactly. We look out, in terms of being 
concerned about a weapon of mass destruction, or any other 
threat coming by maritime conveyance. You know, the first step 
is intelligence, and we are fully involved in the intelligence 
community. We look at the security within our ports. We are 
very strong within our ports. The Congress and the 
administration have done a great job in recapitalizing our boat 
forces, our people, our deployable specialized forces. But we 
don't want to be dealing with threats in the ports.
    We are doing a good job overseas, under the International 
Ship and Port Security Code, in inspecting those countries that 
are trading with us, in combination with intelligence. I think 
we are doing pretty good there.
    When I said we don't have everything we need, it is because 
we have these vast expanses of the Pacific and the Atlantic, 
where we need offshore resources to interdict threats before 
they get to our shores. We should get some warning. But if we 
are to intercept it before it gets into the red zone, in 
football terms, inside our ports, we need to have good cutters 
out there on the high seas that are capable of sustained 
presence to be able to interdict threats before they get to our 
shores, whether it is a weapon of mass destruction, drugs, or 
migrants, or other things.
    Mr. Hunter. So how do you reconcile that with your 
operating budget getting cut by .5 percent? It eliminates four 
vessel boarding and search teams that conduct safety and 
security, boarding foreign-flagged vessels entering U.S. ports. 
It cuts flight-hours of brand-new Maritime Patrol Aircraft by 
200 hours, or 17 percent per aircraft. How do you reconcile 
that priority with this budget?
    Admiral Papp. What we--for instance, the VBS teams that you 
talked about, the boarding and search teams that go out, these 
are teams that were implemented post-9/11. We have also built 
up our forces, our deployable specialized forces, and put more 
people at our sectors and our stations.
    If I had the wherewithal, I would love to keep those teams. 
However, we are making some very tough decisions as this budget 
gets tamped down, squeezed down. And, as I said earlier, we 
have no other option now than to start cutting people in 
specific locations, where we think we can absorb additional 
risk and use other forces to mitigate it. What it means, 
though, is those remaining forces work a little bit harder.
    I keep on telling my Service that I am not going to make 
you do more with less. We will do less if we get less. But the 
fact of the matter is, Coastie's attitude is, ``OK, if I lose 
the guy next to me, I am just going to work twice as hard.'' 
And I fear that is exactly what will happen. We will continue 
to look good, we will continue to get people out there doing 
the boardings, but it is making the other people that remain 
work harder. And I don't like to do that, because you wear out 
your people, just like you wear out machinery. And all those 
things that you listed are things I would rather not do, but 
they have to be done in order to fit within the top line that I 
am given.
    Mr. Hunter. I am just trying to reconcile this, and I am 
long out of time. But I am just trying to reconcile if you 
are--if the number one priority, let's say, of our homeland 
defense, which is--the Coast Guard is part of--is stopping a 
catastrophic event from happening on the American homeland, and 
one way that you do that is by searching vessels for 
radioactive material, and you then take all of--you eliminate 
the four vessel boarding and search teams that do that actual 
type of searching, then that must not be one of the top 
priorities.
    It is hard for me to imagine that there aren't other places 
in the Coast Guard where you could find efficiencies and 
savings, maybe in the back end, as opposed to the tip of the 
spear.
    Admiral Papp. It remains a top priority. And we will 
inspect and board those vessels, but we will have to do it by 
different means. Instead of having a dedicated team at a sector 
office that--they become very good at that, and that's what 
they do, we may need to send a Coast Guard cutter out there, 
and use their organic boarding team to do it. We may need to 
put together collateral duty boarding teams. We will find ways 
of getting it done. We will not allow a ship in without being 
inspected.
    What I am saying is having those teams available makes it 
easier on us, makes--allows us to do other things that are 
lower priority, because we have got the people. As we start 
whittling away at people, it just means other people in the 
Coast Guard have to take on those duties. They won't be 
assigned as a VBS team. What they will do is, as needed, we 
will take people on a collateral duty basis, put them together 
as a team, and send them out there.
    Mr. Hunter. Thank you, Admiral. I would like to yield to 
the ranking member, my good friend, Mr. Garamendi.
    Mr. Garamendi. Thank you, Mr. Chairman. I am going to pick 
up where you were taking this conversation with regard to major 
threats: the nuclear threat, the dirty bomb threat. You and I 
are both on the Armed Services Committee, and I am on the 
subcommittee, the Strategic Arms Subcommittee, which deals 
directly with these threats, specifically, the hearing 
yesterday on missile defense, where billions of dollars are 
being spent on missile defense systems that may or may not 
work. And we do know that there is probably a much more likely 
threat from a weapon arriving in a container, maybe into the 
port, but maybe it doesn't have to even go there--offshore. Yet 
the Coast Guard is being cut, and the missile defense is being 
increased. So we are, in fact, making choices--the 
administration, together with us--making choices about 
prioritizing the threat.
    At the present time, you are correct, Iran does not have a 
nuclear weapon. Certainly North Korea does. It is highly 
debatable whether North Korea has a missile that can reach the 
United States. Probably does. Its accuracy is questionable. 
Iran does not, at the present time. It could at some point in 
the future.
    So, the imminent threat is more likely to arrive by sea. 
And we need to look at the silos in which we budget. The 
Department of Homeland Security is one silo, the Department of 
Defense is another, yet the threat is seen in both, but in 
different timeframes, and the imminency is different.
    I would agree with the point you were making, that the 
threat from the sea is serious. The reduction in the Coast 
Guard's personnel reduces our ability to address that threat. I 
believe that our budget committees, or appropriation 
committees, ought to be taking a very careful look at how we 
are spending the overall appropriation, the overall money that 
is available, as reduced as it is. We are spending a vast 
amount of money on something that may or may not work, and it 
is certainly not needed right now--for example, a new missile 
defense system on the east coast--while at the same time we are 
cutting what we do need today.
    Admiral, I am not going to ask you to respond, unless you 
would like to jump into this in the last 2 months of your 
tenure. But I would welcome such a response if you would like 
to do so.
    Admiral Papp. Well, Mr. Garamendi, hopefully I have never 
hesitated for the last 4 years. And what I will tell you is--
along the same lines as I was saying, there are many things I 
would like to do with my Service. At the end of the day, I need 
to live within a budget. And when I am given my budget, we set 
priorities, and we look at places where there are things that 
are needed, but we will find a way to get the job done.
    We never--you know, search and rescue always remains job 
number one, and closely linked to that is the security of our 
ports, the security of our country. And we are not going to 
allow anything to get through. We will find the people to get 
the job done. What concerns me is it means other people working 
harder when we displace these people because of the budget 
being squeezed down.
    Mr. Garamendi. Admiral, I understand your--the pride that 
you take in your people. I understand the position you have, 
that you will get the job done. I am dubious. If we continue to 
cut your budget, as we are, you and your men and women will not 
be able to get the job done.
    We have had testimony from South Command that they cannot 
get the job done, and they rely heavily on you. And one of the 
reasons they can't get the job done is that you're not there. 
That is the reality of the situation.
    And the point I am making here is that this is our problem. 
And, frankly, it is the administration's problem in 
prioritizing. And it is the silo in which we budget and in 
which we operate--you, operating in the homeland defense silo, 
and the Department of Defense operating in a completely 
different one. And, for us, we have to look across these silos.
    And, frankly, we would be much better off moving half-a-
billion dollars from the Department of Defense missile defense 
to you, so that you could carry out the tasks that we know are 
very real threats. Maybe they are drugs, maybe they are 
smugglers. Maybe it is a dirty bomb. Who knows what it might 
be? But we know that that threat is very real, and it is very 
viable. If somebody really wanted to threaten this country with 
a nuclear weapon, why would you go to all the trouble of a 
missile when you could just as easily deliver it in a tugboat? 
That is my point.
    Admiral Papp. Yes, sir.
    Mr. Garamendi. But I have got some other points, and I will 
take a few moments to get to them.
    We have pretty much talked about your budget in the 
personnel. I think it is a very real problem: 800 few personnel 
this year, and 1,200 in the previous cuts. That is a serious 
reduction. It is one that you have discussed, and I know you 
are going to say that you are going to do the best--you are 
going to do the job with fewer. I doubt that you are going to 
be able to do the complete job with fewer, but you have made 
your response on that.
    I do have a question about the Fast Response Cutters. You 
have a contract to deliver four a year. You are going to 
deliver two--this budget calls for two. Are you renegotiating 
that contract? What does it mean, in terms of cost per cutter?
    Admiral Papp. Yes, sir. And, just quickly, I don't want to 
indicate that we are going to get the entire job done. What we 
do is--in fact, the term ``re-scoping'' came up in my last 
hearing, and the chairman brought that up, as well in his, 
suggesting that the administration re-scope. That is what I get 
paid to do.
    You are exactly right: if we devote and try to do 100 
percent of search and rescue, 100 percent of interdicting those 
threats, there are other mission areas that are going to get 
shortchanged. So I don't want to leave the impression the Coast 
Guard is going to get 100 percent of all our missions done, 
because we have never been able to.
    To the Fast Response Cutter, the contract actually calls 
for up to six a year. Six a year is the most economical order 
quantity. That contract ran out in fiscal year 2014, when we 
ordered six. We are in the process of renegotiating that 
contract. What we have proposed is to--we were able to fit two 
into the budget this year when we got our final top line, and 
intend to award that under another vehicle, temporary vehicle 
with the shipyard, until we put out the new request for 
proposal to renew the contract.
    We are scrubbing the contract right now to see if there are 
areas where we can come up with savings to give us the best 
possible deal on the remaining buy of those cutters. If we had 
the money available, we would love to buy six a year, because 
that gives us the best price. But for this interim year, until 
we get the new contract awarded, two is what we are able to 
afford.
    Mr. Garamendi. When you have that information, I would like 
to know the cost per cutter. Up? Down? The same?
    Admiral Papp. What we are hopeful in negotiating with the 
shipyard is we will be able to buy those two just about at the 
same price that we have been buying them when we order them six 
a year. They can spread their workforce an average--the boats 
that are on order right now, they can average that out to five 
a year, in terms of actually building them. And when we add the 
two in there, they should be able to keep the price per boat 
about the same. I am hopeful, at least. But we will get back to 
the subcommittee, once we have finalized the negotiations on 
that.
    Mr. Garamendi. A final question. I am over my time, but 
this committee went to a lot of trouble to secure the C-27Js 
for you, for the Coast Guard. It appears that the budget does 
not provide for the actual use of those, but for--but, rather, 
only for the preparation of the C-27Js. Could you tell us if, 
in fact, there is any money to actually operate those in the 
coming year?
    Admiral Papp. No, because they won't be brought online--I 
think it is fiscal year 2017--I am sorry, 2016 that we actually 
will begin getting the aircraft processed through, and actually 
flying for us. We will address that in the 2016 budget, as they 
start coming online. We are working the 2016 budget right now. 
But I want to thank the subcommittee for all that work. As you 
know, it is going to save us about a half-billion dollars in 
future costs on the aircraft, and by the time we get them 
fielded----
    Mr. Garamendi. Excuse me.
    Admiral Papp. Sure.
    Mr. Garamendi. A technical question. Why does it take 2 
years to retrofit them?
    Admiral Papp. It is just--well----
    Mr. Garamendi. Is that a budget issue, too?
    Admiral Papp. No, sir. We have got money in the 2014 budget 
to set up the acquisition program office in order to start 
bringing them in. We have sent a team down there to look at the 
aircraft. The aircraft--basically, what we are going to do to 
get them into service is put them in our Coast Guard colors. 
But, being military aircraft, most of the equipment is 
compatible. They have a radar that is usable. They will not 
have a mission package, like the other medium-range aircraft 
that we have. But we were spacing those, the AC144s, out over 
the years, and buying mission packets, as they went along.
    We are having to re-look within our budget, and decide how 
we fully get them--how we get them fully mission capable with 
mission packages. But, in the interim, with the radar that they 
have, we can use them for maritime patrol efforts out there.
    Mr. Garamendi. OK. I would like a complete description of 
why it takes 2 years to paint the airplane, and to get it 
underway. I would like to get those half-billion-dollar savings 
sooner, rather than later.
    Admiral Papp. Yes.
    Mr. Garamendi. So, if you could, provide that. I will yield 
back. There are other questions, but I will take them in the 
next round. Thank you.
    Mr. Hunter. I thank the ranking member. The gentleman from 
Florida, Mr. Southerland, is recognized for 5 minutes.
    Mr. Southerland. Thank you, Mr. Chairman. Admiral, welcome 
today. And I thank you for your service, as your tenure comes 
to a conclusion. And I want to also thank you for your kindness 
you showed me when we came over for a visit. Thank you very 
much.
    Admiral Papp. Good to see you again.
    Mr. Southerland. I am going to read a statement and then 
ask a question, a followup question. The Coast Guard 
participation and implementation of the National Ocean Policy 
is not referenced in the White House's or Department's fiscal 
year 2015 budget documents.
    At the same time, pursuant to the July 2010 National Ocean 
Policy Executive Order, Coast Guard representatives have been 
participating in the policy's marine planning initiative 
covering regions including the Northeast, the mid-Atlantic, the 
Gulf of Mexico, and the Pacific Islands. Language adopted by 
the July 2010 National Ocean Policy Executive Order stated that 
the policy's marine planning effort will require significant 
initial investment of both human and financial resources. And 
in early 2010, the National Ocean Council noted that Federal 
agency had been asked to provide information on how existing 
resources can be re-purposed for greater efficiency and 
effectiveness in furtherance of the National Ocean Policy.
    So, my question, Admiral. Could you please describe in 
detail, if possible, any Coast Guard resources or personnel 
that have been or will be directed towards activities in 
support of the National Ocean Policy?
    Admiral Papp. No, sir, I don't have that in any detail. And 
I would request that we submit that for the record in response 
to your question.
    Mr. Southerland. OK, thank you. Do you know if, to date, 
any of your resources have been utilized for the National Ocean 
Policy?
    Admiral Papp. Well, we certainly have representatives that 
work with the staffs. And, once again, I would prefer to make 
sure I have accuracy in responding to your questions----
    Mr. Southerland. Sure, no, that is fair. I certainly would 
appreciate that information.
    Next I want to switch over. The budget--is that me, with 
this sound here? All right. The budget includes $20 million to 
continue preliminary design for Offshore Patrol Cutter, the 
OPC. The OPC is intended to replace the 210- and the 270-foot 
Medium Endurance Cutters, the MECs. The Coast Guard intends to 
award a construction contract in the fiscal year 2016 budget, 
and estimates the acquisition will not be complete until the 
mid-2030s. Is this level of funding sufficient to keep the OPC 
on its current timeline, in your opinion?
    Admiral Papp. Yes, sir.
    Mr. Southerland. OK, all right. I am going to ask just a 
series of questions. They should be easy.
    Three shipyards are currently challenging the Coast Guard's 
decision not to select them for the OPC final design phase. 
What impact will these challenges have on the OPC procurement 
schedule, if any?
    Admiral Papp. We believe there will be negligible impact at 
this point. It is part of the process. They are entitled to put 
in the protest. We are working through that right now. I am 
confident at this point that the--our decisions will be 
sustained, and then we will continue moving out on it.
    Mr. Southerland. Very good. Are--how are any concerns over 
cost factoring in to the final OPC design selection? Is there 
any--I know it is attracting a lot of attention, and so I am--
--
    Admiral Papp. The cost of the ship that we will eventually 
build?
    Mr. Southerland. Yes, yes.
    Admiral Papp. It is our driving requirement. I have made 
that clear at every group, whether it is testimony up here, or 
speaking in front of industry. I have continually insisted that 
affordability is the driving requirement for this ship.
    And I think that our contracting vehicle is unique in the 
fact that we have put in our contract--and that is part of why 
it took us a little bit of time to get this going--is I wanted 
to have affordability right in there. We have made it known to 
the shipyards what our--what we think our budget is, what we 
think that ship should cost, and that has got to drive their 
process, if they want to be selected as the final candidate for 
building this ship.
    Mr. Southerland. Very good. Again, Admiral, thank you for 
your service, thank you for your candor. And I appreciate you 
being here today. And godspeed in your future endeavors.
    Admiral Papp. Thank you, Mr. Southerland.
    Mr. Southerland. With that I yield back.
    Admiral Papp. Thanks.
    Mr. Hunter. Thank the gentleman. And I would be remiss if I 
didn't introduce the newest member of the Coast Guard Maritime 
Subcommittee, Mr. David Jolly from Florida, the newest Member 
of Congress and to this committee. David, welcome.
    And, with that, I would like to recognize Mr. Larsen for 5 
minutes.
    Mr. Larsen. Thank you, Mr. Chairman. I just want to note, 
just in the Pacific Northwest, you are all doing search and 
rescue, your recreational boating enforcement and safety, aid 
to navigation, you have got a Navy escort mission there, as 
well. And, on top of that, a couple years ago you worked with 
our office on kayak safety after a rash of kayakers drowning, 
just flat-out getting caught in the currents. And we had to 
develop a volunteer kayak safety program.
    And so, I mean, you kind of do it all. And so I understand 
your discussion about things being a top priority, because the 
priority some days for the Coast Guard is what shows up on the 
desk that day. Certainly got to do it. So I appreciate it.
    I also was intrigued by your comment, Admiral Papp, as you 
might imagine, because I believe that you said the Polar Sea 
may be a good option for icebreaking. And as far as I am aware, 
that is the first time that the Coast Guard has said that rehab 
could be a good option. Can you talk about the retrofitting of 
the Polar Sea? Is it attractive? What is the direction the 
Coast Guard planned to take on that?
    Admiral Papp. Yes, sir. I want to make sure for the record 
I didn't say ``a good option.'' I said it may be an option. I 
might have said----
    Mr. Larsen. For the record, an excellent option.
    [Laughter.]
    Admiral Papp. It is certainly an option. It was 
demonstrated in the business case analysis, and I have known it 
has been out there as an option. Four years ago, I believed 
that the best option is to build a new icebreaker. And we put 
Polar Star back in service to provide us a gap of about 10 
years in order to get it built.
    The budget was looking a little challenging 4 years ago; it 
looks even more challenging right now. And if we need to stay 
within, you know, somewhere in the range of $1 billion a year 
in acquisitions for the Coast Guard, I just don't see how we 
can fit an icebreaker in.
    The Offshore Patrol Cutter is my highest priority for the 
Coast Guard. I need to fit that in the budget. And I fear that 
if we try to fit the cost of an icebreaker in there, it would 
displace the Offshore Patrol Cutter, or some other very 
important things. So, I--my number one option is to get support 
across the interagency, those agencies that benefit from the 
support of an icebreaker, to contribute towards the 
construction of it. That would be my first choice.
    My second choice, however, when I start looking at what can 
I fit within our acquisition budget, refurbishment of the Polar 
Sea may be a viable option for that. I would say what you would 
want to do is overlap it so as Polar Star is coming towards the 
end of that decade of service after refurbishment, we have 
Polar--I think I said Polar Star----
    Mr. Larsen. Yes, right, yes.
    Admiral Papp [continuing]. Polar Sea would be available to 
start phasing in, working up, so that we could use her for 
another 10 years. And maybe you come up with a plan where you 
flip-flop. I don't know. And there will be other people making 
those decisions in the out-years. So I am just speculating 
right now of what those options are that are out there for us 
to potentially look at.
    Mr. Larsen. And right now, the budget, there is $6 million 
in the request for design, just to get started on design?
    Admiral Papp. Yes, sir. I don't think--I think that is 
money well spent. I think at some point, if the Nation can 
afford it, we need to build another new polar icebreaker that 
complies with modern environmental standards that can take care 
of the mission requirements of the National Science Foundation, 
and all those things that work across the interagency. I still 
believe firmly we need to build a new one. But we don't have 
the wherewithal right now. But doing the preliminary work 
should inform decisions that are made 3, 4, 5, maybe 10 years 
from now.
    Mr. Larsen. All right. That is all I got. Thank you. I 
yield back, sir.
    Mr. Hunter. Thank the gentleman. The gentlelady from 
Florida, Ms. Frankel, is recognized.
    Ms. Frankel. Thank you, Mr. Chair. Thank you. Welcome. 
Thank you for being here, and for your service. My father was 
in the Coast Guard. My son was a United States Marine. So I 
have a lot of respect for what you do.
    But I want to touch on a little bit of a sensitive issue. 
You know, I think it is very important that you have--get the 
resources that you need, the equipment, and so forth. But there 
is nothing more important than the people who--you are shaking 
your head, you agree--the people who serve us, and that they 
serve with dignity and respect for each other.
    As I am sure you are aware of, there has been a lot of 
discussion about sexual harassment in the military, not just 
the Coast Guard, but the military. And this is particularly a 
sensitive issue, because I have had constituents come to me--
and one, in particular, I am not going to get into her 
situation--but who was a member of the Coast Guard, and a very 
brave young lady who was subjected to sexual harassment by her 
commander, who eventually was prosecuted.
    In any event, because of her situation--actually resulted 
in this Congress passing some legislation last year, and I 
wanted to ask you about that. The--Congress mandated that the 
Coast Guard expedite processing of transfer requests from 
victims of sexual assault, so that they can physically get away 
from their attacker. And I am just wondering whether or not you 
have started to implement that policy.
    Admiral Papp. Oh, yes, ma'am. Absolutely. We refer to it as 
a safe harbor program. And there is actually a little bit of a 
distinction there, because sometimes the victims do not want to 
leave their unit where they are comfortable, they would prefer 
to have the alleged perpetrator transferred. And we offer that 
option.
    We had a little bit of growing pains with it. In fact, I 
was at a large gathering--we call it all-hands meetings--as I 
travel around. For the last 2 years, every all-hands meeting--
and I have spoken to--you know the size of our Service--we keep 
track, and I have spoken to, I think, about 35,000 people face 
to face, right there with them. And almost my entire discussion 
is on sexual assault, treating our people with dignity, 
harassment, hazing, whatever it might be. We have an eyeball-
to-eyeball discussion.
    And in one of those discussions a young lady raised her 
hand, and she was a victim. She had been transferred. And we 
didn't necessarily handle it very well, but she felt--this was 
a seaman apprentice--and she got up and raised her hand with 
the Commandant. Now, she was very nervous, but we looked into 
that particular case, it gave us some lessons learned on how we 
are dealing with it now, and we will continue to work that 
process, to make sure that each and every case is handled as an 
individual case, and with dignity.
    Ms. Frankel. Well, thank you for that. And I was--really, 
my followup question was going to be what else are you 
implementing in terms of outreach to not only the superior 
officers, but also, you know, the recruits that come in. What 
type of outreach are you doing with them, and what policies are 
you changing?
    Admiral Papp. We have approached this head on. It started 
out with a flag officer, a group of admirals getting together 
for an action group to come up with a strategic plan. We 
assigned a Coast Guard captain to head our military campaign 
office on this. We have regular meetings at the White House, we 
have regular meetings with the Department of Defense. And, 
frankly, those inform our decisions, but I want to do more than 
everybody else to make sure our people are taken care of. And 
we have attacked this aggressively.
    As I said, I have gone and personally met with every 
coastguardsman. In my state of the Coast Guard speech this 
year, which I spoke to 500 people in a room, but it goes out to 
each and every member of the Coast Guard, and they are required 
to view it at all-hands sessions, I spoke directly to the 
field, and talked to them about my concerns, what we were 
doing. And at the end of the day, though, it has to be those 
senior officers, and working its way down throughout the 
organization, through our chief petty officers, taking on this 
thing.
    And my mission, my message, has been there can be no 
bystanders. Everybody has to be involved. It is their duty to 
be involved on this, and duty demands courage. And I--the 
anecdotal feedback, and people who have come to me, including 
the seaman apprentice up to a captain who was assaulted 26 
years ago, they have had the courage to come forward now and 
talk to me. That captain, on the offense that happened 26 years 
ago, we had it investigated. And we came to a conclusion for 
that officer.
    So, this is very personal for both the master chief and me, 
all our senior leadership, and everybody is engaged.
    Ms. Frankel. Well, I thank you for your attention, and I 
hope you will continue to be vigilant. I know that we will. And 
I thank you for your time today.
    Admiral Papp. Yes, ma'am. And rightly so. And we appreciate 
the oversight on this issue, and pushing us forward on this. 
And also, for accommodating some of the concerns we had within 
the military, in terms of potentially taking out of our hands--
this has to be handled by us, and we appreciate your support.
    Ms. Frankel. Thank you, sir.
    Mr. Hunter. Has the gentlelady yielded?
    Ms. Frankel. Back, Mr. Chair.
    Mr. Hunter. Thank the gentlelady. I would like to recognize 
Ms. Hahn from California for 5 minutes.
    Ms. Hahn. Thank you, Mr. Chairman. I appreciate us having 
this opportunity to discuss the budget with the Coast Guard. I 
wish we would have just had one panel, Mr. Chairman, because I 
have some questions for the Chairman of FMC, Mario Cordero, 
and, unfortunately, I am going to have to leave; I have a 
conflict. So I wish we could have all been together on this. 
But I am just raising my, you know----
    Mr. Hunter. Be happy to submit any questions for the 
record.
    Ms. Hahn. Thank you, I am going to do that.
    So I--it is really disturbing to me to look at what we are 
imposing on the Coast Guard through our budget process: cuts to 
personnel, cuts to military pay, the--removing the Bravo Zero 
readiness, the--use--airborne use of force we are cutting, 
aircraft flight-hour reduction, it is disturbing to me.
    And I know that the Coast Guard has--for the last several 
budget cycles, has really done a good job of doing--it is not 
even the same, you are kind of doing more with less. So it is 
disturbing to me that we are putting these budget restrictions 
on the Coast Guard.
    And I want to thank Ranking Member Garamendi. Apparently, 
before I arrived, you brought up the issue of personnel 
reductions, and how that could impede the Coast Guard's ability 
to prevent bombs from going off at one of our ports. I will 
say, for the record, I still believe, ladies and gentlemen, 
that our ports are the most vulnerable entryway into this 
country. And I--every day, on the briefings that I get, I am 
more and more concerned about what can or what is coming in and 
out of our Nation's ports. So just know that I appreciate what 
you are doing. And it is unfortunate that our budget doesn't 
support the incredible mission that the Coast Guard has been 
given to protecting our coast. So I wish our budget reflected 
the real security risk that I believe exists in our Nation's 
ports.
    Let me just touch on one issue, Admiral Papp, and that is 
panga boats. And, of course, it became sort of highlighted in 
this country when we lost one of our coastguardsmen who was 
killed after a panga boat rammed the ship he was on in southern 
California.
    So, wondered what we are doing. Any new information on our 
attempt to contain these boats? We have any new actions that we 
are taking to minimize the risk of these panga boats? And how 
have you done recently? It feels like I haven't seen any high-
profile case of those off the cost of southern California, but 
wondering if you can give me an update on how you have been 
able to stem the tide of this threat of panga boats.
    Admiral Papp. Thank you, Representative Hahn. And also, let 
me thank you once again for being out there for the memorial 
service for Senior Chief Terrell Horne. The family is doing 
well. I included a bit about Senior Chief Horne in our new 
publication of Coast Guard Pub 1, talking about the qualities 
of leadership that he demonstrated. We provided a copy of that 
to his wife, and, of course, we just passed over a 1-year 
anniversary there. But once again, thank you for being there, 
and bringing it up.
    The threat still exists. And, in fact, sequestration hurt 
us a lot. This last year--I think we went from roughly--oh, I 
think it was about--I will have to get you the--we went from 
124,000 pounds of marijuana in fiscal year 2012 interdicted 
there to 81,000. So we had about a 35-percent reduction last 
year under sequestration, simply because we can't keep 
sufficient assets out there if we don't have the fuel to run 
them and the operating hours. Sequestration is the big thing 
that I fear. And we still have that specter out there for 
fiscal year 2016, if we don't have another budget agreement.
    So, there is a direct correlation between reduction in the 
budget, which we got in sequestration, to people out there on 
the water. Everything we have indicates that people are using 
that route more and more, whether it is actually landings that 
we see, boats that are found on the beach. As we tighten up the 
border--and there has been a lot of resources put by our 
department along the southwest border--really, as a 
coastguardsman, I say a land border is much easier to defend, 
because you know where it is. In the maritime, there are 
thousands and thousands of miles and different routes you can 
take, and they can try to evade us, and we only have so many 
boats and aircraft that we can put out there.
    The other thing is we are making good success by staging a 
major cutter out there, which we had not used before. We put a 
major cutter out there that is flight deck-capable, can carry a 
helicopter, can use airborne use of force, and we were seeing 
great success. But major cutters require a lot of fuel, and we 
had to cut back there, as well, under sequestration.
    We are getting back to our historic numbers of cutters 
underway now, with the restoration and the fiscal year 2014 
budget. But as we go into the 2015 budget and beyond, I become 
increasingly concerned that we just won't have the assets out 
there in sufficient numbers to attack this new route that 
people are taking, and smuggling around the southwest 
terrestrial border.
    Ms. Hahn. Well, thank you. And I appreciate that. And 
certainly drugs is one of the problems, but I also worry about 
other uses of those boats. And, yes, there was a landside 
docking that was made less than a mile from my home in San 
Pedro. It was in Rancho Palos Verdes, I believe, 19 folks made 
land in a panga boat.
    So, I appreciate your work. And again, it is unfortunate 
that some of the methods you were describing you have had to 
cut, in terms of how you operate within this budget. So thank 
you.
    Admiral Papp. Yes, ma'am.
    Ms. Hahn. Appreciate that. I yield back no time.
    Mr. Hunter. Thank the gentlelady from California. And I 
would like to recognize the former subcommittee chairman, Mr. 
Cummings from Maryland.
    Mr. Cummings. Thank you very much, Mr. Chairman. Admiral 
Papp, this is obviously your last budget hearing--I am sorry I 
wasn't here a little bit earlier, got an Oversight Committee 
hearing going on right now--but I want to just take an 
opportunity to thank you for your leadership. I have known you 
for quite a few years now, and I want to thank you for your 
candor and focus on identifying and addressing head-on the 
challenges that continued cuts in resources are creating for 
the Coast Guard.
    I have often said that you all are called on to do more and 
more with less and less. But one of the--and I know you have 
talked about the cuts extensively before I got here, but there 
was one area that I was most concerned with, because it is an 
area that I have worked a lot in, and that is the whole marine 
safety situation. What impact will the budget cuts have on 
marine--the marine safety workforce? And how do you see that 
playing out?
    Admiral Papp. You know, Mr. Cummings, there could be some 
individual reductions across the marine safety workforce, but 
they are not many. Where the largest effect is is our VBS 
teams, the visit, boarding, and search teams that we discussed 
earlier here. They generally fall at the sector level. They are 
combinations of people with marine safety experience or 
response experience that we put together as teams to go out.
    If we have vessels which are suspect, or we have sanctions 
on that we require to stay offshore before they come into port, 
these teams are sent out there to inspect. We have had to cut 
back a number of those teams within this budget. So there would 
be an impact on some people within the marine safety field that 
are a part of those teams.
    We are not going to discontinue those inspections. What we 
will have to do is come up with other means of doing that, 
putting together teams from other organic sources that we have, 
or Coast Guard cutter boarding teams, et cetera, to continue 
on. It just means some of the people work harder.
    Mr. Cummings. As you will recall, one of the big issues 
that we were trying to address before, and because we got a lot 
of complaints from the maritime community, is whether we always 
had qualified inspectors, those who knew exactly what they were 
supposed to be doing. And I think we made some headway there.
    How do you see that, making sure that we have--the people 
doing these inspections are doing them in an appropriate way, 
and lifting up the highest standards?
    Admiral Papp. Yes, sir. I make a point, when I travel 
around--we were talking earlier about my visits out to the 
field units--I visit a lot of our Coast Guard sectors. And, 
almost always, when I go there I ask for--to have them take me 
through the prevention department, where our marine safety 
people are, to ask them how is it going. I know about--I visit 
our Centers for Excellence, where we are training people. We 
have made vast improvements over the last probably 6 years or 
so. We continue on track. We are trying to retain as many 
people as we can.
    And, in fact, part of my emphasis to make sure this program 
is going is both my Deputy Commandants for operations--first, 
Vice Admiral Salerno, and now Vice Admiral Neffenger--are 
probably the two best marine safety specialists we have in the 
Coast Guard to give that additional emphasis to that program.
    Admiral Neffenger is going to be the next Vice Commandant. 
I have complete confidence that we will keep our foot on the 
gas pedal, in terms of our marine safety enhancement plan that 
was started under your tenure.
    Mr. Cummings. Again, I want to thank you for having your 
fingerprints on the past of the Coast Guard, the present. And, 
because of all the things that you have done over the years to 
have your fingerprints on the future. May God bless you.
    Admiral Papp. Thank you, sir. And thanks for your oversight 
over the years, as well.
    Mr. Hunter. Thank the gentleman. I have one last question.
    Master Chief, when you talk to your young Coasties, what is 
their biggest complaint?
    Master Chief Leavitt. Well, the biggest complaint we have 
when I get out there--because there is a lot of different 
complaints--if you are asking what the biggest complaint is, it 
is to look at the military pay and benefits. What does that 
look like? What is the challenges? What is the budget going to 
roll on that? And then how those things worked out.
    Within the Coast Guard, the biggest complaints depends on 
what unit you go to. Right now, the biggest ones I get is from 
these older ships. You know, at the end of the day--and it is 
no different in the Marines--what you want is a well-trained, 
equipped, and proficient crews, and you want to take care of 
your shipmates and their families. That means success for our 
future. So, as we push forward, we need to focus on those 
things.
    And so, when they are working on a ship that is 40 years 
old, that takes a lot of time and effort. And that has already 
been addressed here. But the real cost is when you go to a unit 
like--I just went out to the Scioto. We didn't even talk about 
our river tender fleet. And they are out there setting buoys 
out there in the Midwest. I went out to its 50th year 
anniversary a couple years ago. And the crews are working hard. 
If you did walk on board that cutter, you can see the 
professionalism and pride that is put into that ship. They take 
really good care of it. But, at the same time, the amount of 
work and detail it takes to keep that cutter running is 
astronomical. It is extraordinary. And that is who we are, but 
there is a cost to that.
    And the last thing--and so, for me, and for most of the 
crew out there, we got to keep our crews trained. That is one 
of the biggest complaints we have. And proficiency is a huge 
piece of that. See, in the Coast Guard, we don't just operate. 
We have so many different missions out there. I am a surfman 
and I am a cutterman.
    In other words, I could be off the Columbia River right 
now, in the dark, in the fog, searching for somebody in 20-, 
30-foot surf. And the risks are real high. So I want to make 
sure my crews are trained. I want to make sure they are 
proficient. I could be on a cutter up in Alaska, operating on 
the Bering Sea. Those are the most important things, and those 
are the most important things my senior and junior members 
bring up to me, make sure our crews are trained and proficient.
    And you have really helped us a lot with the 
recapitalization efforts that are happening right here, and you 
have really helped us a lot in regards to supporting our 
families with the housing and with the child care. You helped 
bridge that gap in parity.
    And, you know, despite all these budget challenges we have 
out there, we have done a few things within the Coast Guard to 
help our families out. And one of those things we have done is 
put out what we call a program--this is for our people and our 
families--called CG support. It is a much more comprehensive 
program that our people can get into, get counseling, where 
there is education, financial. Because, as times change, the 
dynamics of the families change, depending on what region you 
live in, and all those other things. And people are really 
important; those things won't change.
    But well-trained, well-equipped, proficient crews is 
success for our people. We have got to support our members, and 
we have got to support our families. How we balance that is 
going to be the key, Mr. Chairman. Thank you.
    Mr. Hunter. Thank you, Master Chief. Admiral Papp, thank 
you. Godspeed.
    Admiral Papp. Thanks, Mr. Chairman.
    Mr. Hunter. It is time for the second panel.
    (Pause.)
    Mr. Hunter. All right, we are going to start our second 
panel. On our second panel we have the Honorable Paul ``Chip'' 
Jaenichen, Acting Administrator of the Maritime Administration, 
and the Honorable Mario Cordero, Chairman of the Federal 
Maritime Commission.
    And also in the audience today I want to recognize 
Commissioners Dye and Doyle on the FMC. Thanks for being here 
today.
    Mr. Jaenichen, you are now recognized for your statement.

     TESTIMONY OF HON. PAUL N. JAENICHEN, ACTING MARITIME 
ADMINISTRATOR, MARITIME ADMINISTRATION; AND HON. MARIO CORDERO, 
             CHAIRMAN, FEDERAL MARITIME COMMISSION

    Mr. Jaenichen. Good morning, Chairman Hunter, Ranking 
Member Garamendi, and members of the subcommittee. I am pleased 
to appear before you today, and I thank you for the opportunity 
to discuss the President's fiscal year 2015 budget priorities 
and initiatives for the Maritime Administration. This budget 
request supports MarAd's mission to foster, promote, and 
develop the U.S. merchant marine, and it reflects the MarAd's 
priorities of maintaining security and preparedness, investing 
in mariner training, enhancing U.S.-flag competitiveness, and 
fostering environmental sustainability.
    The primary goal of the fiscal year 2015 budget request is 
to continue funding for MarAd readiness programs that support 
Department of Defense sealift capacity. These programs are 
critical to ensuring that vessels and mariners are available 
for national security needs, and often with little notice.
    A recent example is the mobilization of the motor vessel 
Cape Ray, one of 46 vessels in MarAd's ready reserve force, 
which is currently being used as the platform for destruction 
of the highest priority, Syrian chemical weapons. The Cape Ray 
is the United States key contribution in the international 
effort to eliminate the Syrian stockpile of chemical weapons. 
And, of most significance, this is the first time the 
destruction of chemical weapons will be accomplished at sea.
    Converting a sealift vessel into a U.N.-certified chemical 
weapons destruction facility, from concept to reality, was no 
easy task. Preparations were completed in record time, and--
given the scope of the mission, the support of the maritime 
labor unions, the number of U.S. Government agencies, and 
commercial companies involved, and extensive modifications that 
were required to be completed.
    The fiscal year 2015 budget request includes $291 million 
in funding for the ready reserve force program, as you pointed 
out in your opening remarks. That is to ensure those vessels 
continue to be available to support Department of Defense 
strategic sealift requirements, as well as the capacity to 
support and provide humanitarian assistance and disaster 
response. The MarAd program most critical to meeting DOD 
sealift requirements is the maritime security program. The MSP 
provides operating assistance funds as a stipend to a fleet of 
60 commercial, privately owned, military-useful, U.S.-flagged, 
and U.S.-crewed ships. The MSP fleet ensures that DOD has a 
shared access to a global fleet of ships, and an ocean-borne 
foreign commerce with the necessary intermodal logistics 
capacity to move military equipment and supplies during both 
armed conflict and national emergency.
    Moreover, as this subcommittee knows, the MSP fleet 
supports a pool of actively sailing U.S. mariners that we use 
to crew our Government sealift fleets. And I thank the 
subcommittee for your role in providing funding at the full 
authorized level in the Consolidated Appropriations Act of 
2014. The President's budget request continues full funding for 
that program in fiscal year 2015.
    However, there are challenges facing the MSP. The most 
immediate challenge is the declining cargo, specifically in 
defense cargo, due to the drawdowns of activity in Afghanistan 
and Iraq. Declining Government cargo volumes force greater 
reliance on commercial cargo in the global market. And, given 
that we have an overabundance of capacity, it makes booking 
cargo for the U.S.-flag fleet difficult in the international 
market.
    This is why the MarAd is actively working with industry and 
Government stakeholders to develop a national maritime 
strategy. And that is to support the U.S. maritime industry, 
and ensure the future availability of U.S.-flag vessels for 
both national defense and for national--and for economic 
security.
    MarAd is also working to complete our cargo preference 
rulemaking, as authorized by Congress. And while I recognize 
there is frustration, and that we haven't completed this rule, 
I can assure you that it is one of the Department's highest 
priorities.
    The President's budget request also continues important 
investment in mariner education and training. The request 
includes $79.8 million for the U.S. Merchant Marine Academy, 
and $17.7 million for the six State maritime academies, of 
which $11.3 million will be used for the ever-increasing 
maintenance and repair costs for the school ships that are 
rapidly nearing the end of their useful life.
    It also provides $3.1 million for Title XI guaranteed 
financing program, allowing for the administration of the--the 
current subsidy balance of $73 million supports approximately 
$735 million in projects. These items represent the key policy 
proposals and initiatives highlighted in the President's fiscal 
year 2015 budget, and we will continue to keep this committee 
appraised to the progress of our program activities and 
initiatives in these areas. In the coming year, and in 
particular, the work of the Congress, we are going to be 
focusing on the development of the national maritime strategy.
    Mr. Chairman, I thank you for the opportunity to present 
and discuss our fiscal year 2015 budget, and I am happy to 
respond to any questions that you or members of this 
subcommittee may have.
    Mr. Hunter. Thank you. Mr. Cordero?
    Mr. Cordero. Mr. Chairman, Ranking Member, and members of 
the subcommittee, thank you for the opportunity to discuss the 
President's fiscal year 2015 budget for the Federal Maritime 
Commission. With me today are my colleagues Commissioners 
Rebecca Dye and William Doyle.
    With the committee's permission, I would like to summarize 
my testimony, and request that my full written statement be 
included in the record as submitted.
    The President's budget for the Federal Maritime Commission 
provides $25,660,000 for fiscal year 2015. This funds 124 full 
time equivalent employees, where $18,387,000 goes directly to 
salaries and benefits, to support the Commission's programs. As 
in previous years, rent, salaries, and benefits, and other 
necessary expenses alone account for 96 percent of our budget.
    The Commission's budget represents the spending levels 
necessary to conduct the Commission's statutorily mandated 
activities. Those activities include cultivating a regulatory 
system that furthers competition, facilitating commerce to 
ensure reliable service to U.S. exporters and importers.
    Furthermore, acquiring IT hardware and software to make 
sure our staff can provide these services is paramount. The 
Commission's IT situation is dire, and we have not been able to 
undertake proper backup and disaster preparedness measures. 
Without needed upgrades in 2015, and future years, the agency's 
operations could be crippled.
    The recovery in the U.S. liner trades that began a few 
years ago continued in 2013 with U.S. container exports and 
imports reaching 30.5 million TEUs. And, of course, this is in 
the scope of a $944 billion international trade market.
    The Commission continues to closely monitor the service 
cooperation between carriers in alliance agreements filed with 
the Commission, such as the recently effective P3 Network 
Vessel Sharing Agreement.
    The Commission continues to work diligently to support the 
Nation's push to increase exports, the vast majority of which 
move by ocean and necessarily travel through our Nation's 
ports. Ports are the gateways that serve more than 80 percent 
of the volume of international trade; and the flow of exports, 
in particular, has the potential to create jobs for American 
business.
    The Commission monitors industry innovations and 
transitions, such as ocean carriers, divesting themselves of 
their chassis fleets to reduce costs and the growth of chassis 
and equipment-sharing agreements.
    The Commission continues to work with other Federal 
agencies on projects aimed at better understanding and finding 
solutions to supply chain bottlenecks that might negatively 
affect U.S. exporters. The Commission's Office of Consumer 
Affairs and Dispute Resolution Services' Rapid Response Team 
still serves the industry to quickly and inexpensively resolve 
shipping disputes generated by equipment availability.
    To reduce regulatory burdens, the Commission exempted 
foreign-based NVOCCs from certain publication requirements for 
negotiated rate arrangements. The Commission will continue to 
engage the shipping public, and the regulated industry, to 
explore, through its retrospective review of regulations, how 
it can streamline and improve its rules.
    With increased funding for fiscal year 2015, the Commission 
will be able to comply with governing IT statutes, and 
implement several information technology programs and 
initiatives to improve efficiency, convenience, and 
effectiveness of carrying out its congressional mandate. As 
noted, the Commission is at the beginning of a multiyear 
transition to upgrade information technology in order to better 
serve the public, and create staff efficiencies. With the 
committee's support, the Commission will regain a solid footing 
in its IT infrastructure.
    The Commission's Office of Consumer Affairs Dispute 
Resolution Services facilitates discussions between consumers 
and cruise lines to resolve disputes. The Commission also 
provides relief to smaller cruise ship operators by allowing 
them to reduce their coverage requirements, recognizing that 
there may be alternative forms of financial protections 
available to their customers. These alternative security 
arrangements, approved by the Commission, free up capital for 
passenger lines to reduce costs.
    The Commission's internal Marine Environmental Committee 
continues to study environmental initiatives in the industry, 
and to highlight the innovations and work being done in this 
area.
    The Commission's Bureau of Enforcement, its area 
representatives located in key maritime corridors, and its 
investigative staff continue to take action to address unfair 
and deceptive shipping practices that negatively impact 
shipping business costs, as well as such practices that pose 
safety and security risks.
    In fiscal year 2013, the Commission collected approximately 
$3 million in civil penalties for Shipping Act violations. To 
date, the Commission, for fiscal year 2014, has collected 
approximately $2.25 million in penalties.
    The FMC's unique mission affords it the opportunity to 
assist frontline security efforts by providing information 
regarding background of parties using our Nation's supply 
chain, including those with direct access to seaports. Last 
summer, the FMC signed an updated memorandum of understanding 
with U.S. Customs and Border Protection that allows the FMC to 
share data in order to ensure compliance with the SAFE Port 
Act. With added IT capabilities, the Commission will then be 
able to submit necessary information to the ACE system to 
fulfill its MOU obligations.
    Mr. Chairman and members of the subcommittee, I thank you 
for your support of the Federal Maritime Commission throughout 
the years. It is an honor to be here before this subcommittee. 
And I am happy to answer any questions you may have.
    Mr. Hunter. Thank you, Chairman Cordero. I think you are 
down to just the ranking member and I. So we can take our time.
    Administrator Jaenichen, I guess my first question is how 
hard is it to be flexible with the MSP? How hard is it to be 
flexible with Food for Peace? Meaning if we are down in cargo 
one year, we are not in any conflicts, then you are going to 
have fewer ships needed. The next year you may have need for 10 
more ships than you had the previous year. How hard would that 
be, to be able to implement those changes, kind of on the fly, 
because you don't really know right now what you will have next 
year? You could always have something pop up. How would you 
work to make it more flexible to where the MSP can respond to 
the market and to what the U.S. Government's, say, excursions 
are that particular year?
    Mr. Jaenichen. I thank you for the question. I think there 
is a couple things we would have to take a look at. The basic 
tenants of the MSP program was threefold. One was the stipend 
amount. The second was the fact that we--there would be access 
to Government-impelled cargo, primarily Department of Defense 
cargo, that you referred to that fluctuates fairly 
significantly. And final, to commercial cargo.
    As we look forward on that program, if you have a decrease 
in one of those particular areas, or you keep something else 
the same, we need to take a look at adjusting one of the other 
two areas. Either we increase the opportunity for commercial 
cargo, or potentially you increase the stipend rate to be able 
to level-load that over time.
    We would have to take a look at--because of the way the 
program is currently authorized, in terms of how we might be 
flexible, currently today it is authorized at 60 ships at the 
3.1 stipend level, but we do have some specific requirements in 
the administration of the program, in terms of the commercial 
viability of those ships.
    I have been consulted by a couple of companies who have 
told us that right now it is not working, in terms of being 
able to make it feasible, financially, and that is going to 
create problems. So I think we are going to have to take a look 
at what we can do, going forward, with regard to that program.
    Mr. Hunter. Does--on a different note, does MarAd have any 
say or control or jurisdiction or purview over building an 
icebreaker? Meaning, if it is a whole-of-Government approach, 
if every agency, including DOD and Homeland Security and State 
and the EPA, and everybody wants to be involved in this--and 
Department of Energy, I would guess, too, you could name the 
departments--what organization do you think should have kind of 
the umbrella over all of those different agencies trying to 
come together on an icebreaker?
    Mr. Jaenichen. I think, primarily, as you are taking a look 
at that particular mission set, that clearly falls within the 
Coast Guard's purview. As you take a look at across the--all of 
the whole of Government, I think we would have to take a look 
at a solution. MarAd is really focused on the commercial side, 
from the ship financing side, specifically in the Title XI, in 
terms of what we do. That particular vessel would not be crewed 
by U.S. maritime labor or U.S. merchant marine. So----
    Mr. Hunter. If you lease it, it will.
    Mr. Jaenichen. Potentially it might. That might be 
something that we could take a look at.
    But I think, as Admiral Papp pointed out, as you look at a 
leasing-type option, that always is going to cost you 
significantly more in the long run than it would be if you 
purchased a vessel outright.
    Mr. Hunter. So back to the--who should have purview over 
bringing all these different agencies and departments together, 
is the Coast Guard capable of that? Or should it be an 
organization like MarAd, that has different interests and works 
with different agencies and different departments? Who is to 
pull everybody together?
    Mr. Jaenichen. I think I would like to take an opportunity 
to sort of think a little bit deeper about that particular 
issue and get back to you, sir.
    Mr. Hunter. OK, thank you. Chairman Cordero, let's talk 
about ocean transportation intermediaries.
    In your statement, your full statement that you submitted, 
you argue that the advanced notice of proposed rulemaking 
concerning the licensing of ocean transportation intermediaries 
somehow reduces regulatory burden. I could not disagree more. 
The proposed rule will significantly increase regulatory 
burdens for OTIs, and it does so without a clear or compelling 
public policy purpose.
    My two questions are, one requirement included in the 
regulation would increase levels of responsibilities for ocean 
transportation intermediaries by as much as 50 percent. How 
many cases are the FMC aware of where an OTI exceeded its 
current level of financial responsibility? And are such large 
increases warranted for so few instances?
    Mr. Cordero. Well, thank you, Mr. Chairman, for the 
question.
    Mr. Hunter. And let me couch that in context. You are not 
a--you are not necessarily a regulatory agency. You are an 
agency that is there to promote and foster commerce, when it 
comes to shipping and maritime, not fine or introduce more 
regulatory burdens on the industry. We have plenty of groups 
that already do that, right? What you are there to do is make 
sure that that industry is flourishing, and do everything that 
you can in your power to make sure that that industry and that 
commerce stays strong. So that is the context in which this 
question is couched.
    Mr. Cordero. Thank you, Mr. Chairman. First of all, as you 
have mentioned, the mission of the FMC is to ensure that we 
have efficient, reliable ocean transportation, international 
ocean transportation system. Second is to make sure we protect 
the shipping public against deceitful and unlawful practices.
    With that in mind, I think the whole perspective and the 
intent of the OTI ANPR is to streamline, not only with regard 
to the rules, and address the regulatory burden aspect that you 
have referenced. And I will say that, with regard to the 
advance notice, at my direction, staff has presently composed a 
memorandum that has been presented to the Commission to 
substantially mitigate some of the concerns that have been 
addressed by the industry and your constituents. So I am very 
confident that, going forward, we will be able to move forward 
in such a way that I think most people will see that our 
objective here is, in fact, to streamline this process, and to 
protect the shipping public.
    Mr. Hunter. So let's talk about--and you said--let me see--
in fiscal year 2013 the Commission collected $3 million, 
roughly, in civil penalties for Shipping Act violations, and 
that is over $2 million more than the $838,000 it collected in 
fiscal year 2012. So you over--you are basically 300 percent 
over the previous fiscal year. Right?
    Mr. Cordero. In terms of the penalties?
    Mr. Hunter. Yes.
    Mr. Cordero. I think, as I have referenced, I think the 
penalties scenario--and I can bring some context to that--in 
accordance with the Shipping Act, we are mandated to address 
some of the violations that refer to the Shipping Act. I think 
some of the penalties that are involved are not just the OTI 
community, so to speak. I think there are some recent cases 
involving carriers, in terms of vessel carriers. And I think 
some of those penalties that I have referenced for fiscal year 
2014 involve some of these cases.
    So, in fair context, I think the penalties that I have made 
reference, are ones that are mandated we address, in terms of 
those entities who do not follow the rules in accordance with 
the Shipping Act.
    Mr. Hunter. I understand. I guess my fear and my reason for 
asking these questions is it seems like everybody is going to 
have their hands in the maritime cookie jar, and you are going 
to have--I mean it is great to have good regulation that stops 
fraudulent practices, and the Coast Guard to make sure that the 
ships are safe, and the EPA checks on the ballast water, and 
everybody has their fingers in this. And to some extent, it 
does become burdensome, and it becomes--it makes our U.S. 
carriers switch flags and go to other countries. And that is 
one reason that they do it, is because it costs so much, and it 
is just so arduous to do it as an American-flag ship, when it 
comes to Commerce.
    So, I would just--I would urge you, in the end, to get with 
Administrator Jaenichen, whoever the next Coast Guard 
Commandant is going to be, whoever the next head of the EPA is 
going to be, the Department of Energy, Department of Labor, 
which all of our mariners have to live under and comply with 
those rules. Everybody has got their hands in the maritime 
cookie jar. And if we could kind of maybe funnel those into one 
agency with a clear set of rules, and stop making up different 
rulemaking procedures to increase the burdens more on our 
shippers--because it is not like they are coming in droves to 
be American-flagged ships. And there is a reason for that.
    And I think our job, and your job, is to make it as easy as 
possible, and say, ``Hey, here we are. You want to ship with an 
American flag, with an American crew.'' That is what you all 
are here for, and it is to promote American shipping on 
American ships. And as it gets more expensive and cost-
prohibitive to do that, you are going to have more ships 
dropping that American flag and going to flags of convenience 
or to other countries.
    So, with that, thank you both for your service. And I am 
going to yield now to the ranking member, Mr. Garamendi.
    Mr. Garamendi. Thank you, Mr. Chairman. I believe there is 
a study that has been done in the recent past that addresses 
the concerns that you have about the ability of the American-
flagged fleet to sustain itself through the course of time. I 
have asked for that study, and I am going to take a look at it. 
I will share with you what may be useful from that. You have 
raised some very important questions, ones that we might be 
able to address, in one way or another, as we move forward.
    In my opening statement, I expressed concern that the 
budget proposals are really a statement of policy priorities. 
And the budget proposals that we have before us for the Coast 
Guard and for the two agencies that are before us now indicate 
a retrograding, a reduction in what appears to me to be the 
administration's lack of concern about the maritime trade.
    I trust that is not the case, and I will ask the two 
witnesses to respond to that concern. But I want to be very 
specific about an opportunity that presents itself to the 
maritime industry. Natural gas is a strategic American asset 
that is allowing America to enjoy low energy cost, and a 
resurgence of American manufacturing. The export of LNG at a 
modest level could create even more American jobs, if the LNG 
is transported on American-made LNG tankers, flying the 
American flag, with American sailors.
    The current approved export terminals--one just approved 
yesterday or the day before--will require America--will require 
approximately 100 LNG tankers. This tanker fleet will be phased 
in as the LNG export terminals come online, and LNG exports 
grow. The American shipyards could build these tankers over the 
next decade and beyond, creating thousands of jobs, and 
maintaining a vital industrial base for America and for our 
national security, specifically the Navy.
    For you two gentlemen, do you believe it is in the interest 
of the American business and American workers to share in the 
benefit of exporting LNG by requiring--by requiring--that LNG 
be transported on American-built ships, flying the American 
flag, with American sailors? Mr Jaenichen first, then Mr. 
Cordero.
    Mr. Jaenichen. Ranking Member Garamendi, thank you for that 
question.
    First, I would say, from a perspective of supporting the 
U.S. maritime industry, the answer is absolutely. The question 
is can you do it within the confines of the current statutes, 
with regard to the various----
    Mr. Garamendi. No, no. My question doesn't go to current 
statutes. It goes to the overarching policy direction. Should 
we do this, or not? If we should, then the next question is how 
can we achieve that. But I haven't asked that question yet. I 
have asked, ``What is your policy position?''
    Mr. Jaenichen. The policy position right now, as you know, 
we do have export licenses that are able to approved. The 
Maritime Administration is involved in export policies on the 
deepwater side. We were authorized back in 2012 to do exports. 
Currently, we have no applications for deepwater ports, but we 
are in consultation with the Department of Energy and the 
Federal Energy Regulatory Commission to be able to do that.
    Mr. Garamendi. So, what is your policy? Are you going to 
push and promote a policy of LNG being exported on American 
ships with American sailors and American-built ships, or not? 
Yes or no?
    Mr. Jaenichen. Well, let me caveat my answer. We are 
putting together a national maritime strategy which is going to 
focus on cargo opportunities. I believe that the energy sector 
is one of those areas that we need to focus on. So the answer 
is we are developing the policy to be able to take advantage of 
this particular opportunity, although I am not sure we are 
there yet.
    Mr. Garamendi. When will I know that policy?
    Mr. Jaenichen. I will have to get back to you, sir.
    Mr. Garamendi. Mr. Cordero?
    Mr. Cordero. Thank you, Congressman. Let me, first of all, 
say that the FMC, in terms of how it was composed, and per its 
regulatory mandate, is flag-neutral. So, given that mandate, 
the FMC has not taken a position with regard to the question 
you have posed.
    However, having said that, I will clearly say that the FMC 
has, pursuant to its regulatory purview, taken the opportunity 
to advocate on the American flag issue when the opportunity 
arises. So, with that, I believe that might answer your 
question. But I cannot represent to you that the FMC has a 
specific policy with regard to the question that you have 
posed. That doesn't necessarily mean that I personally would be 
opposed to that, or if the statute is amended so that the FMC 
could weigh in on such a issue. Then, of course, I----
    Mr. Garamendi. The President has stated repeatedly that he 
wants to rebuild the American manufacturing sector. We have an 
opportunity to do so with shipbuilding, for American shipyards, 
the workers in those yards, all across this Nation, and in 
many, many ports across this Nation. So, the administration's 
stated policy of rebuilding the American manufacturing sector 
would seem to me to be carried out in America's shipyards, 
specifically building the tankers that will be exporting a 
strategic American asset, our natural gas.
    And I guess it has not yet filtered down to MarAd or to the 
Maritime Commission that that Presidential statement would and 
could be implemented by a very aggressive policy implemented by 
the two of you. So, perhaps I shall deliver to you the 
President's most recent statements on rebuilding the American 
manufacturing sector, and urging you to carry that out in your 
domain.
    Now, I--after delivering those statements by the President 
to you, perhaps you can then answer my question. Do you support 
the construction, the building of tankers in American ports, or 
American shipyards, to export this strategic asset, liquified 
natural gas, with American-flagged ships, with American 
sailors? Obviously, you are not prepared to answer that today, 
but I shall deliver to you the President's statement on this 
matter of rebuilding the American manufacturing sector.
    The question goes also to Mr. Jaenichen with regard to the 
$25 million welfare program for American sailors--that is in 
your budget--when they lose their jobs because of the 
administration's Public Law 480--that is, the destruction of 
the Public Law 480 program, the cash-out of it. How do you 
propose that that $25 million welfare program for American 
sailors, who I assume would prefer to be sailing, rather than 
getting a welfare check, how do you propose to implement that?
    Mr. Jaenichen. Thank you for that question, Ranking Member 
Garamendi. As you pointed out, the President's budget proposal 
is for up to 25 percent of food aid to be essentially done by 
local purchase. We have analyzed that and have estimated that 
approximately 4 to 6 ships would be affected, 200 to 275 
mariners. The $25 million that is currently in the Maritime 
Administration budget is to support the potential loss of those 
mariner jobs.
    We have taken a look at how the $25 million would be used. 
And, again, that would be the beginning of a long-term, 
multiyear program to preserve those mariner opportunities. The 
first $24 million would be essentially taking a look at the 
ships that would potentially be affected by the changes in the 
cargo preference that would--they would be applied to. This 
would be outside of the maritime security program, and we would 
structure that program during the course of the summer.
    Again, that $25 million is only if that food aid reform is 
enacted. But in order for the Maritime Administration to be 
ready, we are going to have to do the planning throughout the 
summer to be able to make sure we can do that.
    The final $1 million would be to support training 
opportunities and also apprentice programs for the mariners for 
the specific jobs and specialty skills that are required. So, 
the $24 million would be in stipend payments, essentially to--
as we transition to something else, in terms of cargoes, and 
then $1 million would be for mariner training.
    Mr. Garamendi. So transitioning into other cargoes like 
what cargoes?
    Mr. Jaenichen. Potentially, as you have already pointed 
out, the energy sector is probably the most right for being 
able to have an opportunity for a U.S. flag to carry those 
cargoes. That would be something we would be taking a look at.
    Mr. Garamendi. So what is it going to be, peanut butter or 
is it going to be steel, coal, liquified natural gas? What is 
the cargo that you are looking at to replace the Public Law 480 
cargoes?
    Mr. Jaenichen. I will tell you that we have actually 
partnered with the Volpe Center, and they are doing a study for 
us that will be done later this summer. That study is focused 
on two things. Primarily, it is on the LNG market, what future 
markets will be, what market opportunities are, and then we 
take a look at the potential policies and the various 
assumptions that might be used over a full range there. And so 
I will have a better answer in that timeframe in terms of what 
the potentials are. That is going to include shipbuilding 
opportunities and other things, so we are actually taking a 
look at this specific question that you have asked.
    Mr. Garamendi. If you hadn't noticed, I am interested in 
this matter. And there are times when I have been accused of 
being tenacious. And I am going to be really, really tenacious 
on this matter.
    However, at this moment, Mr. Cummings has a series of 
questions. I would like to yield to him. Mr. Cummings?
    Mr. Cummings. I want to thank the gentleman for yielding, 
but I want to pick up where the gentleman left off.
    Mr. Jaenichen, how many--do we have any idea of how many 
people would be replaced with regard to the--this $25 billion 
that we are using? About how many people do you think might be 
replaced? In other words, taken out of their normal jobs.
    Mr. Jaenichen. Congressman Cummings, as I pointed out 
earlier, we have estimated it is four to six ships that are 
potentially affected. Those ships will either do one of two 
things. They will either re-flag, or potentially they will be--
cease to be in service, and they will likely be scrapped. That 
is 200 to 275 mariner jobs we believe will be affected, and 
that was one of the reasons why there is the $25 million, if 
that particular proposal is enacted, that we would have to have 
a way to compensate and transition those mariners to--and other 
jobs within the maritime industry.
    Mr. Cummings. Did you--have you had any impact on the $25 
million? I mean did anybody talk to you about that, and this 
whole Food for Peace situation? I am talking about you.
    Mr. Jaenichen. That----
    Mr. Cummings. When this was being put in the budget.
    Mr. Jaenichen. The answer to that, sir, is yes. And as--
what we were taking a look at is what it would take to 
essentially mitigate the potential impact on mariner jobs. And 
we have taken a look at a couple different ways to do that.
    In the fiscal year 2014 proposal was the first time that we 
had seen that, and we have had some opportunities to take a 
look at how it might be conducted over the last year. Again, we 
would have to go into specific details. I have briefly 
discussed this with the maritime industry as the budget 
proposal for this fiscal year was rolled out, but we would have 
to go into significant detail on how we would actually 
structure that stipend program to minimize the impact on 
mariners.
    Mr. Cummings. But shouldn't we be working to prevent 
American job losses? I mean, hello. I mean shouldn't we?
    Mr. Jaenichen. Sir, I would agree with you, and that is one 
of the reasons why we recognize that this is going to impact 
mariner jobs, and it is one of the reasons why that $25 million 
was actually in the President's budget.
    Mr. Cummings. You know, I do appreciate your leadership at 
MarAd. And you have been a breath of fresh air. But I do share 
the concerns of our ranking member. I think we can do better.
    In 1975 we had 857 oceangoing ships under U.S. flag, 
according to a 2009 study produced by IHS Global Insight for 
U.S. Maritime Administration. Today there are approximately 100 
oceangoing vessels in a United States flag, and they carry 
barely 2 percent of our commercial cargoes. Doesn't that bother 
you?
    Mr. Jaenichen. Sir, indeed it does. In fact, as of the 
first of January of 2014, there were 89 vessels that were 
actually operating in international trade today. That is 60 in 
the MSP and then 29 additional that are outside of the MSP 
program.
    Mr. Cummings. And so, what are the risks to the Nation that 
we lose our U.S.-flag oceangoing fleet? What is the risk?
    Mr. Jaenichen. The potential risk is we lose control over 
our supply chain. We have 60,000 vessel calls that occur around 
the country to all of our ports where various commodities come 
into. And, as you pointed out, currently today about 2 percent 
of that is on U.S. flag. I think that is a strategic decision, 
and that is one of the reasons why MarAd is taking a leadership 
role to develop a national maritime strategy that addresses 
this particular issue.
    Mr. Cummings. So, what impact is the decline in the U.S. 
military cargo having on the U.S.-flag fleet, and what can we 
do to help our fleet meet the challenge? I know what you just 
said--that loss of cargo poses, because it seems to me that we 
are sort of standing over somebody whose--we could save, and it 
just seems to be saying, ``Well, what the hell, let's just wait 
and wait and wait.'' And every second that passes, they march 
closer to their death. I mean that is what it feels like.
    So, I mean, are we really putting forth the effort to do a 
rescue job here? Or are we--have we thrown up our hands 
already? It seems like we have thrown up our hands and said 
``What the hell?''
    Mr. Jaenichen. First of all, Congressman, I think you have 
exactly what the situation is for the maritime industry. We are 
at the precipice of potential failure. And I am concerned about 
that, primarily because of the decrease in overall cargoes. 
Eighty percent of the cargo that is Government-impelled, that 
is carried by the U.S. flag, either the MSP operators or by the 
ships that are enrolled in a visa program, which is a voluntary 
intermodal sealift, 80 percent of that is DOD cargo. I am 
concerned that those cargoes currently are not there, and are 
going down rapidly, which means that the U.S.-flag fleet has to 
be able to have commercial cargo opportunities.
    In this particular market, where there is an overabundance 
of capacity, we have to structure or take action, essentially, 
as an administration, as a Congress, to be able to put the 
correct policies, regulations, and statute in place to be able 
to support the maritime industry. Otherwise, it will 
potentially cease to exist, as you pointed out.
    Mr. Cummings. So, my last question, Mr. Chairman, just one 
last thing.
    So, as I--based upon what you just said, then why are we 
proposing cutting Food for Peace? Duh. I mean, am I missing 
something?
    Mr. Jaenichen. Congressman, that particular position, 
obviously, is the administration's position in order to feed 
more starving children. And we are looking at opportunities to 
minimize the impact on the maritime sector.
    Mr. Cummings. Thank you very much. Thank you, Mr. Chairman.
    Mr. Hunter. I thank the gentleman from Maryland. I would 
like to recognize Mr. Garamendi for a closing statement, and we 
will be out of here.
    Mr. Garamendi. Thank you, Mr. Chairman. Mr. Cummings 
carried on with the questions I had.
    I have questions about the Title XI loan program. The basic 
question is, is this a guarantee program or not? It seems as 
though it is not. I take the answers for the record, because we 
do have to shut down here.
    I am going to just--oh, TIGER grants, there is a question 
about TIGER grants, and whether those are--whether the 
Department of Transportation is going to use TIGER grants for 
the ports. This is multimodal issues. Again, Mr. Jaenichen, if 
you could--and Mr. Cordero, if you could provide that 
information for the record, I will give you the specific 
questions. And, in fact, I will give you all of the questions 
in writing, and let the chairman----
    Mr. Hunter. Without objection.
    Mr. Garamendi. Thank you.
    Mr. Hunter. And seeing as there are not any further 
questions, I thank the witnesses for their testimony, the 
Members for their participation, and, with that, the 
subcommittee stands adjourned.
    [Whereupon, at 11:28 a.m., the subcommittee was adjourned.]





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