[Senate Hearing 113-401]
[From the U.S. Government Publishing Office]







                                                        S. Hrg. 113-401

                           NOMINATIONS TO THE
                   U.S. DEPARTMENT OF TRANSPORTATION,
                    THE U.S. DEPARTMENT OF COMMERCE,
                  AND THE SURFACE TRANSPORTATION BOARD

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

                                HEARING

                               before the

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                           NOVEMBER 21, 2013

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation



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       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

            JOHN D. ROCKEFELLER IV, West Virginia, Chairman
BARBARA BOXER, California            JOHN THUNE, South Dakota, Ranking
BILL NELSON, Florida                 ROGER F. WICKER, Mississippi
MARIA CANTWELL, Washington           ROY BLUNT, Missouri
MARK PRYOR, Arkansas                 MARCO RUBIO, Florida
CLAIRE McCASKILL, Missouri           KELLY AYOTTE, New Hampshire
AMY KLOBUCHAR, Minnesota             DEAN HELLER, Nevada
MARK WARNER, Virginia                DAN COATS, Indiana
MARK BEGICH, Alaska                  TIM SCOTT, South Carolina
RICHARD BLUMENTHAL, Connecticut      TED CRUZ, Texas
BRIAN SCHATZ, Hawaii                 DEB FISCHER, Nebraska
EDWARD MARKEY, Massachusetts         RON JOHNSON, Wisconsin
CORY BOOKER, New Jersey
                    Ellen L. Doneski, Staff Director
                   James Reid, Deputy Staff Director
                     John Williams, General Counsel
              David Schwietert, Republican Staff Director
              Nick Rossi, Republican Deputy Staff Director
   Rebecca Seidel, Republican General Counsel and Chief Investigator
















                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on November 21, 2013................................     1
Statement of Senator Rockefeller.................................     1
    Staff Report dated November 21, 2013 entitled ``Update on the 
      Financial State of the Class I Freight Rail Industry'' 
      submitted by Office of Oversight and Investigations 
      Majority Staff.............................................     2
Statement of Senator Thune.......................................    25
Statement of Senator Schatz......................................    64
Statement of Senator Booker......................................    66
    Article dated November 19, 2013 from The Wall Street Journal 
      entitled ``German Export Network Fuels Gap''...............    67
Statement of Senator Begich......................................    68
Statement of Senator Blumenthal..................................    71
Statement of Senator Klobuchar...................................    73

                               Witnesses

Paul N. Jaenichen, Sr., Nominee to be Administrator of the 
  Maritime Administration, U.S. Department of Transportation.....    26
    Prepared statement...........................................    28
    Biographical information.....................................    30
Debra Miller, Nominee for Commissioner, Surface Transportation 
  Board..........................................................    39
    Prepared statement...........................................    41
    Biographical information.....................................    43
Arun Kumar, Nominee to be the Assistant Secretary for Global 
  Markets and Director General of the U.S. and Foreign Commercial 
  Service, International Trade Administration, U.S. Department of 
  Commerce.......................................................    51
    Prepared statement...........................................    53
    Biographical information.....................................    54

                                Appendix

Response to written questions submitted to Paul N. Jaenichen, Sr. 
  by:
    Hon. John D. Rockefeller IV..................................    77
    Hon. Brian Schatz............................................    79
    Hon. John Thune..............................................    81
    Hon. Roger F. Wicker.........................................    82
Response to written questions submitted to Debra Miller by:
    Hon. John D. Rockefeller IV..................................    84
    Hon. John Thune..............................................    86
    Hon. Roger F. Wicker.........................................    87
Response to written question submitted by Hon. John Thune to Arun 
  Kumar..........................................................    87

 
                           NOMINATIONS TO THE
                   U.S. DEPARTMENT OF TRANSPORTATION,
                    THE U.S. DEPARTMENT OF COMMERCE,
                  AND THE SURFACE TRANSPORTATION BOARD

                              ----------                              


                      THURSDAY, NOVEMBER 21, 2013

                                       U.S. Senate,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 2:37 p.m., in 
Room SR-253, Russell Senate Office Building, Hon. John D. 
Rockefeller IV, Chairman of the Committee, presiding.

       OPENING STATEMENT OF HON. JOHN D. ROCKEFELLER IV, 
                U.S. SENATOR FROM WEST VIRGINIA

    The Chairman. This hearing will come to order, or this 
nominee questioning will come to order.
    There are a lot of people out there. How many of you work 
for the agencies which are being interviewed? Hands raised, 
please.
    [Laughter.]
    The Chairman. Well, that is not so many.
    How many of you are lobbyists against what they are doing?
    [Laughter.]
    The Chairman. No hands. I guess it is easy. I guess it is 
all easy.
    OK.
    Senator Thune. And how many of them are NSA just spying on 
the hearing?
    [Laughter.]
    The Chairman. Yes, that is true. That is true. And how do 
you find minimization?
    [Laughter.]
    The Chairman. That is a big word, Cory.
    Senator Booker. Yes, sir.
    The Chairman. OK. Today we are going to hear from nominees 
for the positions in the Federal Government that don't generate 
a lot of headlines, except with some of us around this table, 
but they play a key role in our country's economic success.
    We are going to hear first from Ms. Debra Miller, who has 
been nominated by the President to be a Commissioner on the 
Surface Transportation Board. Ms. Miller has extensive working 
experience on transportation policy at the state level and in 
something called private practice.
    As we discussed at our meeting earlier this week, however, 
Ms. Miller knows, the STB is an agency with a different 
function than a state transportation department. They are very, 
very different. The STB's job is to serve as an honest broker 
between freight railroads, shippers, and the millions of 
consumers, farms, and small businesses that our country's 
freight railroad network serves.
    Since Congress passed the Staggers Act in 1980, the STB has 
seen as its primary mission, in this person's judgment, as 
helping the freight rail industry get back onto a stable 
financial footing. Under the STB's watch, the freight rail 
industry has consolidated from 39 companies to 4 large carriers 
today: 2 that dominate the market east of the Mississippi River 
and 2 to the west. And the STB has set a high bar for captive 
shippers--that is not a good thing to say--who have the 
resources and the guts to challenge these dominant railroad 
business practices.
    It is not any secret, I think, that more than 3 decades 
after the Staggers Act the STB needs to change its perspective. 
The evidence is overwhelming, at this point. The four dominant 
freight railroads are financially strong, very strong. It is 
time for the STB to refocus its mission on supporting the 
businesses and people who use the rail network.
    I documented in a Commerce Committee staff report that I 
issued 3 years ago and in a new staff report that I released 
this morning that the freight railroads are setting new 
financial records almost every single quarter. While the rest 
of the economy has been limping along for the past few years, 
the freight railroads have been hauling in record amounts of 
cash.
    Even after paying for their operations and even after 
making needed capital investments, the companies are buying 
back record amounts of their stock and raising their dividends 
to their shareholders. They are hitting every benchmark of 
financial health that Congress, the STB, and the investor or 
anybody else in the wide, wide world has set for them. They are 
doing well.
    I ask unanimous consent to insert this Commerce Committee 
staff report, the recent one that came out this morning, into 
the record of this hearing,
    [The information referred to follows:]

    [The report is printed below. It can also be found at http://
www.commerce.senate
.gov/public/?a=Files.Serve&File_id=3cf1b5f2-9487-4c9c-9cea-
efb9eb5499d7.]
         Office of Oversight and Investigations--Majority Staff

   Update on the Financial State of the Class I Freight Rail Industry

        Staff Report for Chairman Rockefeller--November 21, 2013
                           Table of Contents
Executive Summary 
I. Background on Freight Railroad Financial Performance

II. Railroads Have Been Setting New Financial Performance Records

        A. Overview

        B. Freight Railroads' Operating Ratios Continue to Improve

        C. Operating Income Continues to Grow

        D. Freight Railroads Are Breaking Earnings Per Share Records

        E. STB Now Is Routinely Finding Class I Freight Railroads 
        ``Revenue Adequate''

III. Companies Project Continuing Financial Improvement

        A. Freight Railroads Continue to Enjoy Strong Pricing Power

        B. Projected Improvements in Operating Ratios and Operating 
        Income

IV. The Railroads' Strong Financial Performance is Benefiting 
Shareholders

V. Conclusion

VI. Appendices
Executive Summary
    In September 2010, Chairman Rockefeller issued a Senate Commerce 
Committee Majority Staff Report on the financial condition of the 
freight railroad industry. Relying on financial information that the 
dominant Class I freight railroads regularly report to their investors, 
the Staff Report concluded that the freight railroad industry had 
recovered from the serious financial problems that prompted Congress to 
pass the Staggers Rail Act of 1980. The report found that, three 
decades after the Staggers Act, the Class I freight railroads were 
financially sustainable and highly profitable companies.
    Understanding the financial condition of the railroads is integral 
to assessing whether the current regulatory system effectively balances 
the interests of railroads, shippers, and consumers. Because railroads 
were struggling financially when the Staggers Act was enacted, the 
regulatory system that was built on that law places heavy focus on 
helping railroads earn higher revenues. For example, under the Staggers 
Act, shippers that do not have access to other transportation modes 
(``captive shippers'') subsidize the freight railroads' revenues by 
paying transportation rates that far exceed the railroads' costs. If 
the railroad industry is now proving to be financially viable for the 
near and long term, policymakers will need to consider whether 
regulatory changes are in order to make sure the industry does not 
enjoy unfair advantages.
    Because the debate over freight railroad policy continues both in 
Congress and at the Surface Transportation Board (STB), Commerce 
Committee staff recently reviewed the railroad industry's latest 
financial reports to update the findings of the September 2010 Staff 
Report. These financial reports, as well as the public statements the 
companies' executives have recently made to their investors and Wall 
Street analysts, show that the financial performance of these companies 
is at its strongest since the passage of the Staggers Act. The positive 
financial trends identified in the 2010 Staff Report have continued in 
the most recent years, and the railroads appear confident they will 
continue for the foreseeable future.
    Specifically, this Committee staff report finds:

   In every reporting period since the last quarter of 2009, at 
        least one of the three largest publicly traded Class I freight 
        railroads set an all-time company quarterly record for 
        operating ratio, operating income, or earnings per stockholder 
        share (EPS);

   In the past four years, these companies broke records for 
        operating ratios in 29 of the 48 quarters, with Union Pacific 
        having a streak of 8 consecutive quarters in the most recent 
        reporting periods. A decrease in operating ratio means a 
        company is keeping more income after operating expenses are 
        removed from revenue;

   In 30 of the past 48 quarters, the companies set new records 
        for operating income--or the amount of income left over after 
        subtracting a company's operating expenses from its gross 
        profit. It is a measure of the profitability of a company's 
        basic business activities;

   The railroads have also achieved record results in earnings 
        per share (EPS) for stockholders, with Union Pacific breaking 
        its EPS record in 15 of the last 16 quarters, and Norfolk 
        Southern setting records for 6 straight quarters in 2011 and 
        2012;

   In the last few years the STB routinely has been finding 
        these companies to be ``revenue adequate'' under an analysis 
        that examines a company's return on investment in relation to 
        the industry's cost of capital. This trend stands in stark 
        contrast to the decades following enactment of the Staggers 
        Act, where railroads in the vast majority of years were found 
        not to be ``revenue adequate;''

   The companies' publicly traded stock shares have performed 
        significantly better in recent years than the Standard and 
        Poors stock market index; and

   Increasing free cash flow of the companies in the past few 
        years has enabled them to increase capital expenditures at the 
        same time they boost dividend payments and stock buyback 
        programs. For example, between 2006 and 2010, CSX increased its 
        dividend per share payments by 445 percent and the cumulative 
        value of its share buyback grew from $500 million in 2006 to 
        $5.6 billion in 2010.

    While much of the rest of the American economy has been struggling 
to recover from a deep recession, the freight railroads have been 
achieving new financial performance milestones. These financial results 
are especially remarkable as they were accomplished even while overall 
rail volumes were still below prerecession levels, and while the two 
dominant railroads operating east of the Mississippi River, CSX and 
Norfolk Southern, experienced significant drops in the volume of their 
coal shipments. Each new quarter brings further evidence that the large 
freight railroad companies are highly profitable enterprises that have 
confidence that their financial success will continue.
I. Background on Freight Railroad Financial Performance
    In September 2010, the Senate Commerce Committee Majority Staff 
issued a report examining the financial state of the Class I freight 
railroad industry.\1\ This report presented evidence showing that, 30 
years after the passage of the Staggers Rail Act of 1980, the freight 
rail industry had reached the law's goal of financial stability and 
profitability. It found that the large U.S.-based Class I railroads 
that dominate the industry today were generating significant profits 
for their owners, investing substantial capital in their networks, and 
competing successfully against other transportation modes.
---------------------------------------------------------------------------
    \1\ Senate Committee on Commerce, Science, and Transportation, 
Majority Staff Report on the Current Financial State of the Class I 
Freight Rail Industry (hereinafter ``September 2010 Staff Report'') 
(Sept. 15, 2010) (online at http://commerce.senate.gov/public/
?a=Files.Serve&File
_id=76823478-a901-4b4d-869b-9301bb43343b).
---------------------------------------------------------------------------
    The current financial condition of the freight railroads is an 
important issue for policymakers because the laws regulating the 
railroad industry were written at a time when the industry was 
experiencing serious financial problems. Two of the important goals of 
the Staggers Act were ``to assist the rail system to remain viable in 
the private sector of the economy'' and ``to assist in the 
rehabilitation and financing of the rail system.'' \2\ If these goals 
have been achieved, policymakers should take a fresh look at whether 
the current U.S. freight rail system is meeting another important goal 
of the Staggers Act, ``to provide a regulatory process that balances 
the needs of carriers, shippers, and the public.'' \3\
---------------------------------------------------------------------------
    \2\ The Staggers Rail Act of 1980, Pub. L. No. 96-448, 94 Stat. 
1895 (1980). In order to increase the railroads' ability to earn 
``adequate revenues,'' the Staggers Act allowed railroads to charge 
higher rates to shippers over which they had ``market dominance.'' U.S. 
House of Representatives, Staggers Rail Act of 1980 Conference Report, 
96th Cong. (H.R. Rep. No. 96-1430), at 90-91; 49 U.S.C. Sec. 10707. 
According to the Staggers Act conference report, regulators would have 
greater authority to review this so-called ``differential pricing'' 
when the railroads were once again financially stable businesses. 
Staggers Rail Act of 1980 Conference Report, at 91 (``The Conferees 
have adopted the concept of a jurisdictional level that varies 
according to the performance of the railroad industry. When the 
industry is earning revenues which are adequate, it is appropriate for 
the Commission to have the authority to review rate increases more 
carefully'').
    \3\ Id.
---------------------------------------------------------------------------
    In early 2011, recognizing the changing landscape of the freight 
railroad industry, the Surface Transportation Board (STB) initiated a 
new public hearing process to examine competition issues. Among the 
factors the Board cited as its reasons for opening the proceeding were, 
``the improving economic health of the railroad industry'' and 
``increased consolidation in the Class I railroad sector.'' \4\ In this 
proceeding, Ex Parte 705, the STB heard from a variety of interested 
parties on competitive access issues including whether to mandate 
``reciprocal switching'' and ``terminal use'' policies that require 
railroads to carry cars of a competitor or allow a competitor access to 
terminals for a fee.\5\ The proceeding also reviewed policy options 
concerning ``rail bottlenecks,'' where the origin or destination of an 
otherwise competitive route is served by only one carrier, and 
contractual provisions known as ``interchange commitments'' that limit 
the incentive or ability of a rail line purchaser or tenant carrier to 
interchange traffic with competitors of the seller or lessor 
railroad.\6\
---------------------------------------------------------------------------
    \4\ Competition in the Rail Industry, S.T.B. Ex Parte No. 705, 2011 
WL 93782, *3 (Jan. 11, 2011).
    \5\ Competition in the Rail Industry, S.T.B. Ex Parte No. 705, 2011 
WL 93782, *1-4 (Jan. 11, 2011).
    \6\ Competition in the Rail Industry, S.T.B. Ex Parte No. 705, 2011 
WL 93782, *2-4 (Jan. 11, 2011).
---------------------------------------------------------------------------
    Following the July 2011 closure of the record on Ex Parte 705,\7\ 
the STB initiated a proceeding regarding certain rules on rail rate 
cases and ultimately adopted a number of rule modifications.\8\ In a 
separate ongoing proceeding, Ex Parte 711, the STB is considering a 
petition for a rule to modify reciprocal switching and terminal use 
policies.\9\
---------------------------------------------------------------------------
    \7\ See Petition for Rulemaking to Adopt Revised Competitive 
Switching Rule, S.T.B. Ex Parte No. 711, 2011 WL 5257467, *1 (Nov. 3, 
2011); see also Competition in the Railroad Industry, S.T.B. Ex Parte 
No. 705, 2011 WL 2596922, *1-2 (June 30, 2011).
    \8\ Association of Corporate Counsel, Ex Parte No. 715, Rate 
Regulations Reforms (July 19, 2013) (online at http://www.lexology.com/
library/detail.aspx?g=9ef9f5b5-b8e7-4ec8-997d-ba4bc
395a6b9). For example, STB removed the $5 million relief cap previously 
imposed on pursuit of certain simplified relief cases. Id. It is 
unclear at this point whether these reforms will have a significant 
impact on rate regulation cases.
    \9\ Petition For Rulemaking to Adopt Revised Competitive Switching 
Rules, S.T.B. Ex Parte No. 711, 2012 WL 3059230, *1-2 (July 25, 2012). 
The rule would allow shippers located in terminal areas without 
competitive alternative carriers to be granted access to a competing 
carrier if there was an interchange within a reasonable distance. Id.
---------------------------------------------------------------------------
II. Railroads Have Been Setting New Financial Performance Records
A. Overview
    A detailed review of the freight railroads' financial results over 
the past four years shows that the companies have been establishing 
record-low operating ratios, experiencing record growth in operating 
income, and posting record earnings-per-share figures.\10\ As detailed 
in this report, 35 of the past 48 individual quarters of publicly 
available financial information were described by the three largest 
publicly traded Class I railroads as ``record'' or ``record-breaking'' 
quarters.\11\ In each of the most recent 16 quarters, at least one 
freight railroad set new records for operating ratio, operating income, 
or earnings per share.
---------------------------------------------------------------------------
    \10\ To conduct this update, Committee staff reviewed the last 
sixteen quarters of financial information reported by CSX, Norfolk 
Southern, and Union Pacific. Committee Staff reviewed 10-Q Financial 
Reports filed by the companies with the Securities and Exchange 
Commission (SEC), company earnings press releases, transcripts of the 
companies' quarterly earnings calls, as well as transcripts of rail 
industry investor conferences. Any subsequent revisions companies may 
have made to these reports were not part of this review. The September 
2010 Staff Report included BNSF quarterly financial results, while this 
update does not. Since Berkshire Hathaway acquired BNSF in early 2010, 
the company ceased conducting quarterly earnings calls, and it no 
longer reports earnings in the same manner as when it was a standalone 
company.
    \11\ For the purposes of this report, a ``record quarter'' occurs 
when the management of the railroad described its quarterly performance 
as a new quarterly or all-time financial record with respect to any of 
the following financial metrics: operating ratio, operating income, or 
earnings per share. In determining a quarterly record, the point of 
comparison is the same quarter in the previous year; e.g. first 
quarters are compared to first quarters in previous years, not to the 
immediately preceding or succeeding quarter.
---------------------------------------------------------------------------
    These impressive operating and earnings accomplishments occurred at 
a time when overall rail volumes were below their record 2006 peaks. 
Importantly for the purposes of this report, the freight railroads were 
able to continue improving their operating and earnings results even as 
the shipment of coal, which makes up a significant share of rail 
volume, decreased significantly as the U.S. utilities began a 
transition to natural gas a primary fuel for electrical generation.\12\
---------------------------------------------------------------------------
    \12\ Between 2008 and 2013, the price of natural gas in the United 
States fell from $13 to less than $4 per British thermal unit. This 
decline in the price of natural gas contributed to a drop in coal 
consumption by the Nation's electrical power plants from 264.3 million 
to 212.4 million short tons of coal between Q1 2008 and Q1 2013. This 
five-year drop was part of a larger trend of power plants in the United 
States turning to alternative energy sources. While in 1990, American 
power plants generated 53 percent of their electric power from coal, by 
2015, power plants are estimated to generate an estimated 39 percent of 
their electric power from coal. Railroads Struggle at the Coal Face, 
The Wall Street Journal (Mar. 16, 2012); A Declining Source of Energy, 
The New York Times (May 29, 2012); Investment Mine, 5 Year Natural Gas 
Prices and Natural Gas Price Charts (Nov. 13, 2013) (online at http://
www.infomine.com/investment/metal-prices/natural-gas/5-year/); U.S. 
Energy Information Administration, Quarterly Coal Report (Oct. 2, 2013) 
(online at http://www.eia.gov/coal/production/quarterly/); U.S. Energy 
Information Administration, Electricity Net Generation: Total (All 
Sectors) (Oct. 2013) (online at http://www.eia.gov/totalenergy/data/
monthly/pdf/sec7_5.pdf).
---------------------------------------------------------------------------
    The companies' public statements about their financial performance 
have been replete with superlatives, highlighting the companies' 
record-shattering results.\13\ For example, at an investor conference 
in June 2011, Union Pacific's CFO, Rob Knight, summarized his company's 
record-breaking 2010 performance:
---------------------------------------------------------------------------
    \13\ When the Committee in 2010 issued its initial staff report on 
the financial state of the railroad industry, the Association of 
American Railroads (AAR) took issue with the report's use of 
``accounting measures'' such as operating revenue and operating ratio, 
arguing for a focus on the railroads' return on investment instead. See 
Joint Verified Statement of Robert S. Hamada and Rajiv B. Gokhale, 
Competition in the Railroad Industry, Surface Transportation Board Ex 
Parte No. 705 (May 27, 2011) (report commissioned by AAR discussing the 
2010 Committee Staff Report). This criticism ignores the fact that when 
top rail industry executives themselves describe their companies' 
financial performance to investors and analysts, they repeatedly focus 
on the very same ``accounting'' metrics used in the Committee staff 
report.

        A little more than a year ago, we started to see a rebound from 
        the severe economic downturn of 2009. As 2010 progressed, we 
        continued to gain momentum, and ended up recording the most 
        profitable year in the history of our Company. Topline growth 
        and efficiency gains in 2010 resulted in an all-time record 
        operating ratio of 70.6. We achieved best-ever earnings per 
        share, free cash flow, and return on invested capital. These 
        were impressive results, considering our volume levels were 
        still 10 percent below peak levels of 2006.\14\
---------------------------------------------------------------------------
    \14\ Union Pacific Presentation at Deutsche Bank Securities, Inc. 
Global Industrials and Basic Materials Conference (June 15, 2011).

    Since that conference, Union Pacific's operating results continued 
to follow a record-breaking course. On the company's most recent 
---------------------------------------------------------------------------
quarterly investor teleconference, Mr. Knight asserted:

        Let's start with a recap of our third-quarter results. 
        Operating revenue grew 4 percent to an all-time quarterly 
        record of nearly $5.6 billion, driven mainly by solid core 
        pricing gains. Operating expense totaled $3.6 billion, 
        increasing 1.5 percent. Operating income grew 10 percent to 
        $1.96 billion, also hitting a best-ever quarterly mark. . . . 
        These results combined to produce a best-ever quarterly 
        earnings of $2.48 per share, up 13 percent versus 2012.\15\
---------------------------------------------------------------------------
    \15\ Union Pacific 3rd Quarter 2013 Earnings Conference Call (Oct. 
17, 2013).

    In CSX's investor teleconference call announcing the company's 
---------------------------------------------------------------------------
results for the second quarter of 2011, CEO Michael Ward commented:

        Last evening CSX was pleased to report another record quarter 
        of financial results. . . . From a financial perspective, it 
        was an excellent quarter. Operating income was up 21 percent to 
        a record $926 million, and the operating ratio improved 190 
        basis points to 69.3 percent. That represents real progress 
        against our target of achieving a high 60s operating ratio for 
        the year and a 65 percent operating ratio by no later than 
        2015. Looking at the full year, we expect the upward trends in 
        markets we serve to continue going forward and for CSX to 
        produce another record year in 2011 for our shareholders.\16\
---------------------------------------------------------------------------
    \16\ CSX 2nd Quarter 2011 Earnings Conference Call (July 20, 2011).

    CSX went on to have a record year in 2011 regarding performance in 
operating income, operating ratio, and earnings per share. Describing 
CSX's overall 2012 results, Mr. Ward predicted that even with a drop in 
its coal shipping volumes it was well positioned to reward 
---------------------------------------------------------------------------
shareholders:

        At this time last year, we had just completed eight straight 
        years of operating ratio improvement with earnings growth in 
        seven of those years. Both occurred in a period that included 
        one of the most severe economic periods in our Nation's 
        history. In 2012, we again grew earnings while facing a major 
        drop in a key market, one of the slowest economic recoveries on 
        record and a political environment that has added even more 
        uncertainty to the mix. Through all of this we have remained a 
        vibrant, healthy company with a compelling long-term value 
        proposition for investors.\17\
---------------------------------------------------------------------------
    \17\ CSX 4th Quarter 2012 Earnings Conference Call (Jan. 23, 2013).

    On January 24, 2012, Norfolk Southern CFO Jim Squires announced to 
Wall Street analysts that his company had set new records concerning 
---------------------------------------------------------------------------
several key financial metrics for 2011:

        Record revenues of $11.2 billion, up 17 percent versus 2010, 
        contributed to record income from railway operations of $3.2 
        billion, up 20 percent compared to $2.7 billion in 2010. These 
        results generated a 70 basis point improvement in our operating 
        ratio, which was 71.2 percent for the year, a close second to 
        our 71.1 percent post Conrail records set in 2008. Net income 
        for the year reached $1.9 billion compared to $1.5 billion in 
        2010 and diluted earnings per share increased from $4 to $5.45 
        per share. These results reflect a 28 percent increase in net 
        income and a 36 percent increase in diluted earnings per share. 
        Both measures set new records.\18\
---------------------------------------------------------------------------
    \18\ Norfolk Southern 4th Quarter 2011 Earnings Conference Call 
(Jan. 24, 2012).

    A drop in its coal volumes would also impact Norfolk Southern in 
2012. However, when discussing the company's second quarter of 2013 
financial results, Norfolk's Chief Marketing Officer Don Seale argued 
that with potential decreasing coal shipments, the company remained 
---------------------------------------------------------------------------
well-positioned for continued growth:

        Wrapping up in summary, we expect that our diverse market base 
        will generate volume growth ahead, despite continuing 
        challenges in the coal market and a slow growth economy. We 
        also remain committed to market based pricing at levels that 
        equal or exceed the rate of rail inflation. Obviously, with 
        current conditions in our coal business, this is a short-term 
        challenge. But that doesn't alter the value of our strong 
        service product across a very diverse set of markets, where our 
        pricing remains solid.\19\
---------------------------------------------------------------------------
    \19\ Norfolk Southern 2nd Quarter 2013 Earnings Conference Call 
(July 23, 2013).
---------------------------------------------------------------------------
B. Freight Railroads' Operating Ratios Continue to Improve
    One of the financial indicators that reflect the railroad 
industry's strong financial performance is its steadily improving 
operating ratio. This metric expresses as a percentage the relationship 
between operating expenses and revenues. A company that lowers its 
operating ratio is improving the productivity of its operations by 
keeping more income after operating expenses have been removed from 
revenues. As Union Pacific CFO Rob Knight explained to investors, the 
operating ratio measures ``UP's progress on improving total returns and 
profitability.'' \20\
---------------------------------------------------------------------------
    \20\ Union Pacific 4th Quarter 2009 Earnings Conference Call (Jan. 
21, 2010).
---------------------------------------------------------------------------
    As the September 2010 Staff Report documented, between 2000 and 
2009, the largest U.S. Class I freight railroads lowered their 
operating ratios by approximately nine percentage points, from ratios 
in the mid 80s to ratios in the mid 70s.\21\ The data the companies 
have reported during the last 16 quarters shows that they are 
continuing to drive their operating ratios even lower. While operating 
ratios vary from quarter to quarter for various reasons, Table I shows 
that the companies have regularly achieved quarterly operating ratios 
in the low 70s to high 60s, occasionally dropping into the mid 60s, 
over the past four years.\22\
---------------------------------------------------------------------------
    \21\ September 2010 Staff Report, at 6. See note 10 supra for a 
discussion of why BNSF financial results were used in the September 
2010 Staff Report, but were not available for this report.
    \22\ See also the CSX Power Point slide included at Appendix XI. 
Presented as part of CSX's fourth quarter 2010 earnings call, this 
chart shows the dramatic improvements the company made in operating 
ratios over the previous several years, dropping from 78.6 percent in 
the fourth quarter of 2006 to 70 percent in the comparable 2010 
quarter. CSX 4th Quarter 2010 Earnings Presentation, at 22 (Jan. 25, 
2011) (online at http://phx.corporate-ir.net/
External.File?item=UGFyZW50SUQ9Nzg0Mzd8Q2hpbGRJRD0tMXxUeXB1PTM=&t=1). 
CSX continued to set new operating ratio records in 2013, posting a 
first quarter record of 70.4 percent and a second quarter record of 
68.6 percent.
---------------------------------------------------------------------------
TABLE I--Operating Ratios Reported by the Three Largest Publicly-
        Reported Class I Freight Railroads (green highlight = company 
        record) \23\
---------------------------------------------------------------------------
    \23\ See note 11 supra for a discussion of the use of the term 
``record quarter'' in this report.


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    As the green highlighting in Table I \24\ indicates, the three 
largest publicly traded Class I railroads broke quarterly operating 
ratio records in 29 of the 48 quarters Committee staff reviewed. CSX 
and Union Pacific set new operating ratio records for six straight 
quarters in 2010 and 2011. Union Pacific exceeded this streak recently 
with its eight most recent record-breaking quarters.
---------------------------------------------------------------------------
    \24\ All tables and figures depicted in this report are included in 
the appendices section in the order in which they appear in the text.
---------------------------------------------------------------------------
C. Operating Income Continues to Grow
    Another investment measure the railroads tout in their quarterly 
earnings calls and press releases is their growing operating income. 
Operating income is the amount of income left over after subtracting a 
company's operating expenses from its gross profit. It is a measure of 
the profitability of a company's basic business activities.\25\ The 
railroads have set new operating income records in 30 of the 48 
quarters Committee Staff reviewed, as shown in Table II.
---------------------------------------------------------------------------
    \25\ Jan R. Williams, Susan F. Haka, Mark S. Bettner, and Joseph V. 
Carcello, Financial & Managerial Accounting The Basis for Business 
Decisions, at 622 (2008).
---------------------------------------------------------------------------
TABLE II--Operating Income ($ Millions) Reported by the Three Largest 
        Publicly Reported Class I Freight Railroads (green highlight = 
        company record)


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


        
D. Freight Railroads Are Breaking Earnings Per Share Records
    The healthy financial performance of the companies is also driving 
record results in earnings per share (EPS) for shareholders, a metric 
that the financial markets monitor closely. Comparing a company's EPS 
to a previous period's EPS (adjusted for any stock splits) is one of 
the most common ways for investors to see how fast a company's profits 
are growing.\26\ As shown in Table III, Union Pacific has broken its 
EPS record for 15 of the last 16 quarters. Norfolk Southern set new 
record EPS marks for six straight quarters in 2011 and 2012. And CSX 
broke its quarterly EPS records in two of the last three quarters 
before its 3:1 stock split in May of 2011, as well as in two quarters 
in 2011 and one of the last three quarters in 2013.\27\
---------------------------------------------------------------------------
    \26\ Morningstar, Morningstar Investing Glossary (Nov. 16, 2013) 
(online at http://www
.morningstar.com/InvGlossary/earnings_per_share.aspx).
    \27\ On May 4, 2011, CSX announced that its board of directors 
approved a 3-1 stock split, meaning that all shareholders of record 
would receive three shares for every one share owned at the close of 
business on May 31, 2011. CSX Corporation, CSX Announces Stock Split, 
Dividend Increase, Share Buyback (May 4, 2011) (online at http://
www.csx.com/index.cfm/media/press-releases/csx-announces-stock-split-
dividend-increase-share-buyback/). CSX appears to have set an EPS 
record in an additional recent quarter, Q2 of 2013, as the company 
press release on this quarter said that CSX saw ``record results'' in 
``all key financial measures.'' Because the company statement did not 
specifically address whether EPS was one of these measures, however, 
the Committee staff report does not count the CSX EPS results in that 
quarter as a ``record.''
---------------------------------------------------------------------------
TABLE III--Earnings per Share Reported by the Three Largest Publicly-
        Reported Class I Freight Railroads (green highlight = company 
        record)


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


        
E. STB Now Is Routinely Finding Class I Freight Railroads ``Revenue 
        Adequate''
    As the top Class I freight railroads report quarter-after-quarter 
of record results with respect to operating ratios and revenues, they 
also have been performing well in the ``revenue adequacy'' evaluation 
of rail companies that the Surface Transportation Board is required to 
conduct annually under the 1980 Staggers Act. ``Revenue adequacy'' is 
defined under law as revenues sufficient to cover ``total operating 
expenses, including depreciation and obsolescence, plus a reasonable 
and economic profit or return (or both) on capital employed in the 
business.'' \28\ While for many years following enactment of the 
Staggers Act, the top Class I freight railroads were found to be 
``revenue inadequate,'' that trend has been changing in recent years.
---------------------------------------------------------------------------
    \28\ 49 U.S.C. Sec. 10704(a)(2).
---------------------------------------------------------------------------
    The 1976 Railroad Revitalization and Regulatory Reform Act (known 
as the ``4R Act'') instructed the then-Interstate Commerce Commission 
(ICC) to help freight railroads regain their ability to earn 
``adequate'' revenues.\29\ Four years later, the 1980 Staggers Rail Act 
ordered the ICC to begin calculating annually ``which rail carriers are 
earning adequate revenues.'' \30\ When it implemented this annual 
reporting requirement in 1981, the ICC decided that to be revenue 
adequate, a railroad must be ``earning a rate of return equal to the 
current cost of capital.'' \31\
---------------------------------------------------------------------------
    \29\ Railroad Revitalization and Regulatory Reform Act of 1976, 
Pub. L. No. 94-210, 90 Stat. 31 (1976) Sec. 205. The STB's current 
statutory authority continues to recognize the broad policy goal that 
``rail carriers shall earn adequate revenues.'' 49 U.S.C. 
Sec. 10701(d)(2).
    \30\ Staggers Rail Act of 1980, Pub. L. No. 96-448, 94 Stat. 1895, 
Sec. 205.
    \31\ Interstate Commerce Commission, Standards for Revenue 
Adequacy, Ex Parte No. 393, 364 I.C.C. 803, 807 (1981).
---------------------------------------------------------------------------
    The theory behind this formula was that freight railroads could not 
be financially viable over the long term if their operating revenues 
were not strong enough to attract investors, either through selling 
equity shares or issuing debt. A railroad producing a return on 
investment high enough to attract investment (i.e., at the cost of 
capital level):

        [S]hould be able to generate sufficient revenue to cover all of 
        its operating expenses, including depreciation and taxes; 
        generate sufficient cash flow to fund needed capital 
        expenditures; retire maturing debt; pay interest on existing 
        and new debt; and earn for the shareholders a fair and 
        reasonable return on their investment commensurate with the 
        risk involved.\32\
---------------------------------------------------------------------------
    \32\ Interstate Commerce Commission, Standards for Railroad Revenue 
Adequacy, Ex Parte No. 393, 3 I.C.C. 2d 261, 268 (1986).

    In its 1986 Coal Rate Guidelines decision, the ICC offered more 
helpful guidance about the regulatory significance of the revenue 
adequacy evaluation. ``Adequate'' revenue meant the level ``necessary 
for a railroad to compete equally with other firms for available 
financing in order to maintain, replace, modernize, and, where 
appropriate, expand its facilities and services.'' \33\ The revenue 
adequacy standard represented ``a reasonable level of profitability for 
a healthy carrier'' that ``assures shippers that the carrier will be 
able to meet their service needs for the long term.'' But once the 
freight railroads reach the revenue adequacy standard, the decision 
explained, shippers should no longer be asked to subsidize carrier 
operations:
---------------------------------------------------------------------------
    \33\ Interstate Commerce Commission, Coal Rate Guidelines, 
Nationwide, Ex Parte No. 347, 1 I.C.C. 2d 520, 535 (1985).

        Carriers do not need greater revenues than this standard 
        permits, and we believe that, in a regulated setting, they are 
        not entitled to any higher revenues. Therefore, the logical 
        first constraint on a carrier's pricing is that its rates not 
        be designed to earn greater revenues than needed to achieve and 
        maintain this ``revenue adequacy'' level. In other words, 
        captive shippers should not be required to continue to pay 
        differentially higher rates than other shippers when some or 
        all of that differential is no longer necessary to ensure a 
        financially sound carrier capable of meeting its current and 
        future service needs.\34\
---------------------------------------------------------------------------
    \34\ Id., at 535-36.

    Since the original 1981 ruling, the ICC, and from 1996 onwards, the 
STB, have made a number of adjustments to the formulas used to 
calculate each freight railroad's return on investment (ROI) and the 
cost of capital (COC) against which it is annually compared. Many of 
these changes have been responses to concerns raised by freight 
railroads, shippers, or other interested parties about elements of the 
STB's methodology for calculating revenue adequacy.\35\
---------------------------------------------------------------------------
    \35\ For example, in 2008, in response to concerns raised by the 
shipper community, the STB replaced the ``Single-Stage Discount Cash 
Flow'' model for estimating the rate of return investors require to buy 
shares of freight railroads, with a different accounting method known 
as the ``Capital Asset Pricing Model.'' A year later, the STB modified 
its method for determining this so-called ``cost of equity'' by adding 
the Morningstar/Ibbotson ``Multi-Stage Discount Cash Flow'' method to 
the calculation. Surface Transportation Board, Use of a Multi-Stage 
Discounted Cash Flow Model in Determining the Railroad Industry's Cost 
of Capital, S.T.B. Ex Parte No. 664, 2009 WL 197991, *11 (Jan. 23, 
2009).
---------------------------------------------------------------------------
    While the freight rail community continues to debate whether the 
STB is properly calculating revenue adequacy,\36\ in recent annual 
evaluations the agency has routinely found that the large Class I 
freight railroads have been earning rates of return that meet or 
surpass their cost of capital.
---------------------------------------------------------------------------
    \36\ See, e.g., Statement of Professor Alfred E. Kahn and Report of 
Professor Jerome E. Hass on Revenue Adequacy Standards (Feb. 1997) 
(``The STB's measure of return on investment for each Class I railroad 
is fraught with short-comings and severely short-sighted; and the cost 
of capital estimate it uses as a benchmark against which to judge 
adequacy is severely flawed as well. Simple measures, such as market-
to-book ratios, retention rates and debt ratings indicate that the 
railroads have a high degree of financial integrity and are expected to 
earn returns on the book value of equity well in excess of their cost 
of capital. They clearly have no difficulty in raising capital without 
causing any dilution for existing shareholders'').
---------------------------------------------------------------------------
    As Table IV below shows:

   With the exception of 2009, Norfolk Southern's ROI has 
        either exceeded, met, or come close to meeting the cost of 
        capital in every year for the last decade.

   While CSX was reporting ROIs in the 4-6 percent range in the 
        2003-05 period, the company has come within a few basis points 
        of meeting, or has exceeded, COC in the 2010-12 time frame.

   In 2012, UP's ROI surged to 14.69 percent, exceeding the COC 
        by more than three full percentage points.
TABLE IV--STB's Railroad Cost of Capital and Revenue Adequacy 
        Determinations (* Indicates Pending STB Evaluation)


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


        
    Source: STB Revenue Adequacy Filings

    This pattern contrasts starkly with the two decades following the 
passage of the Staggers Act, during which the STB determined that most 
railroads in most years were not revenue adequate.\37\ As the graph 
below prepared by the American Association of Railroads (AAR) shows, in 
the most recent years, the freight railroads' ROI has been converging 
with the STB-calculated COC.
---------------------------------------------------------------------------
    \37\ Between 1980 and 2005, the ICC and STB made 445 individual 
determinations of revenue adequacy for railroad companies. It found 
railroads to be revenue adequate in just 32 instances. Congressional 
Research Service, Rail Transportation of Coal to Power Plants: 
Reliability Issues, at 78 (Sept. 26, 2007).
---------------------------------------------------------------------------
Figure I--Railroad Cost of Capital vs. Return on Investment Since the 
        Passage of the Staggers Act


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


        
    Source: American Association of Railroads

    Furthermore, while the ROI numbers reported by BNSF in the years 
following its 2010 purchase by Berkshire Hathaway were below the cost 
of capital, the recalculation of BNSF ROIs required by a recent STB 
ruling is expected to boost the revenue adequacy results for BNSF for 
the years 2010, 2011, and 2012.\38\
---------------------------------------------------------------------------
    \38\ In July 2013, the STB ruled that BNSF needed to calculate its 
ROIs for 2010, 2011, and 2012, to exclude the $8.1 billion 
``acquisition premium'' it had previously included when calculating its 
investment base. Western Coal Traffic League--Petition for Declaratory 
Order, S.T.B. FD 35506, 2013 WL 3834052, *25-26 (July 24, 2013). 
Because the investment base represents the denominator of the ROI 
ratio, the $8.1 billion acquisition premium makes the company's net 
operating income look smaller in comparison and reduces the return on 
investment percentage.
---------------------------------------------------------------------------
    These recent revenue adequacy findings suggest that the long-term 
policy goals of the Staggers Act have been reached with respect to the 
major Class I freight railroads. These companies are now reliably 
producing enough income to fund their operations, make appropriate 
capital expenditures, and attract and reward their investors. If the 
companies are now profitable and, as a regulatory matter, revenue 
adequate, policymakers need to take a new look at the competitive 
advantages Congress gave the railroads 30 years ago.
III. Companies Project Continuing Financial Improvement
    In their conversations with Wall Street analysts, railroad 
executives have repeatedly stated that they expect to continue 
delivering strong financial performance by ``pricing above inflation'' 
in future quarters and by continuing to drive operating ratios lower. 
These projections reflect a business environment starkly different from 
the one that existed at the time of the passage of the Staggers Act of 
1980.
A. Freight Railroads Continue to Enjoy Strong Pricing Power
    One of the key drivers behind the railroads' improving financial 
performance is their ability to charge their customers increasingly 
higher rates to move their goods. The September 2010 Staff Report 
reviewed the growing evidence that after many years of declines in the 
rates they could charge their non-captive shippers, the freight 
railroads started raising their prices beginning in about 2004 and 
2005.
    According to outside experts and the railroads themselves, this 
``pricing renaissance'' occurred because the railroads had steadily 
improved their productivity and were reaching the end of long-term 
``legacy'' contracts they had entered when they had less pricing 
power.\39\ In testimony before the STB on June 22, 2011, J.P. Morgan 
transportation analyst Tom Wadewitz commented: ``Since 2004 we believe 
that a favorable pricing trend has been an important factor that has 
attracted investors to the railroads.'' \40\
---------------------------------------------------------------------------
    \39\ September 2010 Staff Report, at 8-10.
    \40\ Testimony of Tom Wadewitz, J.P. Morgan, Competition in the 
Railroad Industry, Surface Transportation Board, Ex Parte No. 705 (June 
22, 2011).
---------------------------------------------------------------------------
    A review of the company's recent filings and investor calls shows 
that the railroad companies continue to expect they will be able to 
raise rates faster than the rate of rail inflation for the foreseeable 
future. For example, on a third quarter 2012 earnings call, Don Seale, 
Norfolk Southern's Chief Marketing Officer, stated:

        With respect to pricing, our commitment remains to price at 
        levels above the rate of rail inflation over the long run. 
        Export coal markets made this a difficult task in the third 
        quarter, and we expect those same headwinds over the next few 
        quarters. But based on our internal analysis, and excluding 
        that negative effect of export coal, we met our objective of 
        pricing above rail inflation in the third quarter, and we 
        expect that positive trend to continue as we provide excellent 
        service and value to our customers across our network.\41\
---------------------------------------------------------------------------
    \41\ Norfolk Southern 3rd Quarter 2012 Earnings Conference Call 
(Oct. 23, 2012).

    Similarly, CSX CEO Clarence Gooden highlighted the company's 
expectations to price above rail inflation, in the following exchange 
---------------------------------------------------------------------------
with an analyst:

        Analyst: It doesn't seem, at least from your results, that 
        there is any aggressive pricing between you and the NS going on 
        right now. I just wanted to make sure that that is the case.

        Gooden: What do you mean by aggressive pricing between us and 
        the NS?

        Analyst: I'm saying aggressive--are you guys getting more 
        aggressive with trying to steal freight from one another? I 
        think that was the crux of Bill's question.

        Gooden: Absolutely not. As we've told you earlier, we are going 
        to price to above rail inflation. We're going to price above it 
        because, one, we think we've got a product that offers a 
        significant value. And, secondly, because it's necessary for us 
        to invest in our infrastructure. We've had a solid plan over 
        the last 10 years now, nearly, in which we've wanted to work on 
        our pricing. And that's what we're going to continue to do.\42\
---------------------------------------------------------------------------
    \42\ CSX 1st Quarter 2013 Earnings Conference Call (Apr. 17, 2013).
---------------------------------------------------------------------------
B. Projected Improvements in Operating Ratios and Operating Income
    Executives from CSX have told investors and Wall Street analysts 
that the company's operating ratios will continue to improve, publicly 
announcing the company's goal of a 65 percent operating ratio by 2015. 
In the company's third Quarter 2011 earnings call, CEO Michael Ward 
told analysts, ``We remain highly committed to a 65 percent operating 
ratio by no later than 2015, and we fully expect that this will be 
achieved.'' \43\ CSX CFO Fredrick Eliasson, in a recent conference call 
with investors, noted that, even considering the ``coal headwinds'' 
that impacted CSX's financial results throughout 2012 and 2013, the 
company ``remains on track to sustain a high-60s operating ratio by 
2015, and a mid-60s operating ratio longer term.'' \44\
---------------------------------------------------------------------------
    \43\ CSX 3rd Quarter 2011 Earnings Conference Call (Oct. 19, 2011).
    \44\ CSX 2nd Quarter 2013 Earnings Conference Call (July 17, 2013).
---------------------------------------------------------------------------
    Union Pacific has set a similarly ambitious operating ratio goal. 
In 2007, the company initiated ``Project Operating Ratio'' with a goal 
of achieving a ``low 70s operating ratio by 2012.'' \45\ Union Pacific 
CFO Rob Knight recently explained that his company had already achieved 
the goals of ``Project Operating Ratio,'' and had set a new, even lower 
goal:
---------------------------------------------------------------------------
    \45\ Union Pacific, Project Operating Ratio Presentation (May 2008) 
(online at http://www.up.com/investors/attachments/presentations/2008/
analyst_conf/rmk_slides.pdf).

        While it's evident that the math of today's higher fuel prices 
        can inflate the operating ratio, as we just saw in the fourth 
        quarter, we are focused on achieving our new target of 65 
        percent to 67 percent full-year operating ratio by 2015.\46\
---------------------------------------------------------------------------
    \46\ Union Pacific 4th Quarter 2010 Earnings Conference Call (Jan. 
20, 2011).

    According to Committee staff's analysis, Union Pacific has set a 
new, lower operating ratio record for 14 of the last 16 quarters 
including the last eight consecutive quarters.
    Union Pacific has used the slide below at investor conferences over 
the past year to discuss progress made since initiating Project 
Operating Ratio and targets going forward:
Figure II--Union Pacific Analysis of Improvements to its Operating 
        Ratio Since the Beginning of Project Operating Ratio


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


        
    Source: Union Pacific Investor Presentation

    On the company's most recent conference call, Mr. Knight updated 
investors and Wall Street analysts on Union Pacific's record-breaking 
operating ratio of 64.8 percent, noting ``We are not going to stop. So 
the sub-65 percent is not an end game, it's just the next rung on the 
ladder.'' \47\
---------------------------------------------------------------------------
    \47\ Union Pacific 3rd Quarter 2013 Earnings Conference Call (Oct. 
17, 2013).
---------------------------------------------------------------------------
    In this same call, Union Pacfic CEO Jack Koraleski reaffirmed his 
confidence in the company's future financial performance in the 
following exchange with an analyst:

        Analyst: When you look at the Union Pacific network and you see 
        what you have been able to achieve over the last five to seven 
        years, which in margin terms are kind of breathtaking, is there 
        anything about the network that makes you say, yes, it is going 
        to be hard for us to ever achieve record profitability relative 
        to our peers in the industry? Is there anything about your 
        network structure that limits how good you can be?

        Koraleski: Man, I can't think of anything.\48\
---------------------------------------------------------------------------
    \48\ Union Pacific 3rd Quarter 2013 Earnings Conference Call (Oct. 
17, 2013).
---------------------------------------------------------------------------
IV. The Railroads' Strong Financial Performance is Benefiting 
        Shareholders
    The publicly traded shares of the freight railroads have performed 
significantly better in recent years than the widely followed stock 
market indexes. This strong performance is tied to the companies' 
excellent financial results. In June 2011 testimony before the STB, 
J.P. Morgan analyst Tom Wadewitz explained that ``[f]avorable EPS 
[earnings per share] growth performance and a broader trend of 
improving financial returns have been key factors that have attracted 
equity investors to the railroad stocks over the past seven years.'' 
\49\
---------------------------------------------------------------------------
    \49\ Testimony of Tom Wadewitz, Competition in the Railroad 
Industry, Surface Transportation Board Ex Parte No. 705 (June 22, 
2011).
---------------------------------------------------------------------------
    In testimony delivered during the same hearing, Scott Group from 
the Wolfe Trahan transportation industry analysis firm presented a 
graph showing that ``Rail Stocks Have Materially Outperformed Other 
Transports and the S&P Since 2005.'' According to this graph, ``Large-
Cap Rails'' have provided investors annualized returns of 15 percent 
since 2000, and trucking stocks had returns of 6.1 percent, while at 
the same time the S&P index return was -1.2 percent.\50\
---------------------------------------------------------------------------
    \50\ Testimony of Scott Group, Wolfe Trahan & Co., Competition in 
the Railroad Industry, Surface Transportation Board Ex Parte No. 705 
(June 22-23, 2011).
---------------------------------------------------------------------------
    The September 2010 Staff Report presented a graph showing that the 
performance of freight rail stocks between 1999 and 2009--the first 
decade after the rail industry had consolidated into four dominant U.S. 
based carriers--far exceeded the performance of companies that are part 
of the S&P 500 Index.\51\ A Fortune magazine story on the freight 
railroad industry showed the same graph updated through July 29, 2011. 
This graph was captioned, ``The total return of the Big Four railroads' 
stocks has left the S&P 500 far behind.'' \52\
---------------------------------------------------------------------------
    \51\ September 2010 Staff Report, at 6-7.
    \52\ Showdown on the Railroad, Fortune (Sept. 26, 2011) (online at 
http://features.blogs
.fortune.cnn.com/2011/09/13/showdown-on-the-railroad/).
---------------------------------------------------------------------------
    While AAR critiqued the September 2010 Staff Report's analysis of 
stock performance,\53\ the railroads themselves have presented similar 
information to their investors to illustrate the strong recent 
performance of their shares.
---------------------------------------------------------------------------
    \53\ Joint Verified Statement of Robert S. Hamada and Rajiv B. 
Gokhale, at 4-6, Competition in the Railroad Industry, Surface 
Transportation Board Ex Parte No. 705 (May 27, 2011) (statement 
commissioned by AAR). AAR takes the position that there is ``nothing 
extraordinary about railroad stock performance,'' arguing that the 
appropriate point of comparison is industries with similar capital 
intensities. See Reply Comments of the Association of American 
Railroads, Competition in the Railroad Industry, Surface Transportation 
Board Ex Parte No. 705, at 15 (May 27, 2011).
---------------------------------------------------------------------------
    For example, during an investor conference in 2011, a Norfolk 
Southern executive presented the graph below showing that over the past 
five and a half years, her company's stock ``has returned a compound 
annual growth of 11.4 percent versus 2.4 percent for the S&P 500.'' 
\54\ It is worth noting that, as of mid-November 2013, Norfolk Southern 
shares were trading at or near their 52-week highs.\55\
---------------------------------------------------------------------------
    \54\ Norfolk Southern Presentation at Morgan Keenan Industrial/
Transportation Conference (Sept. 14, 2011).
    \55\ Stock price graph for NSC, January 6, 2006 to November 19, 
2013, via Google Finance (accessed Nov. 19, 2013).
---------------------------------------------------------------------------
Figure III--Norfolk Southern Shareholder Return


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    Source: Norfolk Southern Investor Presentation

    Similarly, as part of its 2012 10-K financial filing to the 
Securities and Exchange Commission, Union Pacific (UNP) published the 
graph below showing that the company and its peers have substantially 
outperformed stocks in the Dow Jones and S&P indexes over the past five 
years. According to this graph, a $100 investment in UNP stock on 
December 31, 2007, with subsequent dividends reinvested, was worth 
approximately $230 at the end of 2012, while $100 invested in the major 
stock indexes would have only been worth marginally more at $110.\56\
---------------------------------------------------------------------------
    \56\ Union Pacific 2012 Form 10-K Securities and Exchange 
Commission Financial Filing, at 20 (Feb. 8, 2013). With respect to this 
chart, Union Pacific in its 10-K filing defines ``peer group'' as CSX 
and Norfolk Southern, and ``DJ Trans'' as the Dow Jones Transportation 
Index.
---------------------------------------------------------------------------
Figure IV--Union Pacific Shareholder Return


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    Source: Union Pacific SEC Filings

    The owners of freight railroad stocks are not just benefiting from 
the increasing value of their shares. They are also benefiting from the 
railroads' aggressive use of their free cash flows to expand their 
dividends and buy back outstanding shares. As noted in the September 
2010 Staff Report, the freight railroads have been using the growing 
income left over from operations to increase their capital 
expenditures.\57\ At the same time, they were also using significant 
portions of their free cash flows to boost the short-term value of 
their shares through stock buyback programs.
---------------------------------------------------------------------------
    \57\ While the dollar value of the freight railroads' capital 
expenditures has generally been growing in recent years, the portion of 
operating revenues they dedicate to capital expenditures has remained 
at a steady 16-18 percent. Testimony of Scott Group, Wolfe Trahan & 
Co., Competition in the Railroad Industry, Surface Transportation Board 
Ex Parte No. 705 (June 22-23, 2011).
---------------------------------------------------------------------------
    The CSX Power Point slide below illustrates what the company calls 
its ``balanced approach'' to managing its growing free cash flows. Free 
cash flows represent the cash a company has remaining after investing 
for the growth of its business operations.\58\ These funds can be used 
to pursue opportunities to enhance shareholder value. As depicted in 
the chart, at the same time the company continued its strong commitment 
to capital expenditures between 2006 and 2010, it also increased its 
dividend per share payments by 445 percent between 2005 and 2010, and 
the cumulative value of its share buyback grew from $500 million in 
2006 to $5.6 billion in 2010.\59\
---------------------------------------------------------------------------
    \58\ Morningstar, Morningstar Investing Glossary (Nov. 16, 2013) 
(online at http://www
.morningstar.com/InvGlossary/free_cash_flow_definition_what_is.aspx).
    \59\ CSX 4th Quarter 2010 Earnings Presentation, at 35 (Jan. 25, 
2011) (online at http://phx
.corporate-ir.net/
External.File?item=UGFyZW50SUQ9Nzg0Mzd8Q2hpbGRJRD0tMXxUeXBlPTM
=&t=1).
---------------------------------------------------------------------------
Figure V--CSX Free Cash Flow


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    Source: CSX Investor Presentation

    At a 2012 investor conference, CSX CFO Frederick Eliasson also 
highlighted CSX's ability to support a balanced approach to its cash 
deployment. Presenting the slide below, he commented:

        Our cash deployment, really since 2005, has been very, very 
        balanced, both between reinvesting in our business, but also in 
        regards to returning cash to our shareholders. Prior to 2006, 
        we weren't really in the position to either fully reinvest in 
        our business, nor to return significant amounts of cash to our 
        shareholders because of where we were in regards to our margins 
        in our business. But since then, we have improved that 
        significantly, and also as a result of that, been able to 
        reinvest and return cash to our shareholders in a way we hadn't 
        done previously.\60\
---------------------------------------------------------------------------
    \60\ CSX Presentation at UBS Best of Americas Health Care 
Conference, at 5 (Sept. 6, 2012).
---------------------------------------------------------------------------
Figure VI--CSX Strong Cash Deployment


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    Source: CSX Investor Presentation

    Norfolk Southern also has deployed its increasing cash flows to 
both increase capital investments in their networks and deliver short-
term rewards to company shareholders. The slide below, recently 
presented by Norfolk Southern at an investor conference hosted by Citi, 
shows the scale and split of the cash distribution the company has 
managed since 2006 through the end of 2012. Norfolk Southern split its 
$22 billion in cash flow roughly evenly between long-term capital 
investment and shorter-term shareholder gains. The company spent 34 
percent of cash flow on share repurchases, 15 percent on dividends to 
shareholders, and 51 percent on capital expenditures.\61\
---------------------------------------------------------------------------
    \61\ Norfolk Southern, Cowen Securities Global Transportation 
Conference, at 24 (June 11, 2013). (online at http://www.nscorp.com/
content/dam/nscorp/get-to-know-ns/investor-relations/Slides/
cowen_presentation_2013.pdf).
---------------------------------------------------------------------------
Figure VII--Norfolk Southern Balanced Cash Flow Utilization


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    Source: Norfolk Southern Investor Presentation

    Union Pacific as well has been using cash flows to pay dividends as 
well as buy back shares. In comments to investors and analysts in 2011, 
Union Pacific CFO Rob Knight asserted that since 2007, his company had 
``distributed more than $6.3 billion to shareholders through a 
combination of dividends and share repurchase,'' and that the company 
anticipated even larger shareholder payments in the future.\62\ At 
another investment conference in 2011, he explained:
---------------------------------------------------------------------------
    \62\ Union Pacific, J.P. Morgan Aviation, Transportation & Defense 
Conference (Mar. 24, 2011).

        In 2010, we achieved a record return on invested capital of 
        10.8 percent and free cash flow of $1.4 billion. Looking ahead, 
        we are confident our returns and cash flows will be even 
        higher, as we stay dedicated to growing our business, improving 
        pricing, and driving efficiency gains. Beyond investing back 
        into the business, we will reward our shareholders directly 
        through both dividends and share repurchases. And as our cash 
        grows, so does our ability to return even more to the 
        shareholders through these programs.\63\
---------------------------------------------------------------------------
    \63\ Union Pacific Presentation at Deutsche Bank Securities, Inc. 
Global Industrials and Basic Materials Conference (June 15, 2011).

    More recently, at an investor conference earlier this year, Mr. 
Knight discussed how Union Pacific was ``delivering value to 
---------------------------------------------------------------------------
shareholders.'' Referencing the slide below, he explained:

        Beyond funding our capital programs, our record profitability 
        has enabled us to grow shareholder returns. In the past five 
        years we have increased our declared dividend per share over 
        three-fold and bought back almost $6 billion worth of stock. 
        Cash returns in 2012 alone totaled over $2.6 billion, driven by 
        a 30 percent dividend payout ratio and opportunistic share 
        repurchases. Looking ahead, we expect to generate even more 
        cash to allocate over the next five years. Even with a larger 
        capital budget, we expect shareholders will receive a bigger 
        piece of the cash pie going forward.\64\
---------------------------------------------------------------------------
    \64\ Union Pacific Presentation at Cowen Global Transportation 
Conference (June 11, 2013).
---------------------------------------------------------------------------
Figure VIII--Union Pacific Analysis of Benefits to Shareholders Since 
        2007


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


        
    Source: Union Pacific Investor Presentation
Conclusion
    In 1980, at the signing ceremony for the Staggers Act, President 
Jimmy Carter heralded the Act's regulatory reforms with the following 
description:

        [S]tripping away needless and costly regulation in favor of 
        marketplace forces wherever possible, this act will help assure 
        a strong and healthy future for our Nation's railroads and the 
        men and women who work for them. It will benefit shippers 
        throughout the country by encouraging railroads to improve 
        their equipment and better tailor their service to shipper 
        needs. America's consumers will benefit, for rather than face 
        the prospect of continuing deterioration of rail freight 
        service, consumers can be assured of improved railroads 
        delivering their goods with dispatch.\65\
---------------------------------------------------------------------------
    \65\ Statement on Signing S. 1946 into Law, 3 Published Papers of 
the President, Jimmy Carter 1980-1981 1949, at 2229 (Oct. 14, 1980).

    There is a broad consensus that the Staggers Act enabled the 
successful restructuring of the American freight rail industry. Three 
decades after President Carter signed the Staggers Act into law, the 
large U.S. Class I freight railroads in the United States see a 
``strong and healthy future'' for their businesses. In recent public 
statements, the railroads have confidently predicted that their record-
setting financial performance will continue for the foreseeable future.
    While the railroads are prospering under the regulatory system 
established by the Staggers Act, it is less clear that today's shippers 
and consumers are enjoying the benefits President Carter envisioned in 
his 1980 statement. The goal of the Staggers Acts was not to enrich 
railroad companies, but to ``provide a regulatory process that balances 
the needs of carriers, shippers, and the public.'' As policymakers 
continue to discuss the future of America's rail transportation 
network, they will need to carefully consider whether changes are 
needed to reach this goal.
                               Appendices


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    The Chairman. As I told you in our meeting, Ms. Miller, I 
think that the STB needs to stop worrying so much about the 
financial health of the railroads and focus more on the 
persistent complaints coming from the shipper community about 
poor service, bullying tactics, and lack of competition. I also 
think that the STB needs to do a better job of responding to 
its stakeholders in a timely way. And we discussed these 
issues.
    Our next nominee is Chip Jaenichen--thank heavens for, you 
know, phonetic writing.
    [Laughter.]
    The Chairman. I mean, I don't know what I would have done 
with that.
    [Laughter.]
    The Chairman.--who has been nominated to lead the Maritime 
Administration within the Department of Transportation. Mr. 
Jaenichen would bring to this job the leadership experience he 
gained during a 3-decade-long career in the United States Navy.
    The maritime industry is critical to the continued success 
of our country, whether it is expanding exports, the opening of 
the--or the reopening of the Panama Canal, the new Panama 
Canal, creating jobs, or managing goods movement, especially in 
the growing energy sector.
    States around the country are looking to expand service, 
like many in my state of West Virginia, where we have been 
working to move more goods on Marine Highway 70 and add 
container-on-barge service.
    If you are confirmed, Mr. Jaenichen, you will be tasked 
with maintaining the health of the industry, including the 
support of mariners, shipbuilding, shipping, and port 
operations. You also have a vital role to play in working with 
the military and the Department of Homeland Security to ensure 
our country's national security.
    And I would also like to welcome Mr. Arun Kumar, who is the 
President's nominee to be Assistant Secretary for Global 
Markets and Director--this must be recently combined. This is a 
powerful group, in my mind--Director General of the U.S. and 
Foreign Commercial Service at the Department of Commerce.
    I remember when Susan Schwab--did you know Susan? I 
remember when she was doing that job.
    If he is confirmed, Mr. Kumar will lead the department's 
newly organized Global Markets Unit within the International 
Trade Administration. His job will be to promote exports by 
assisting American businesses access and penetrate foreign 
markets.
    He would also lead SelectUSA, President Obama's new 
initiative to promote foreign direct investment. My state of 
West Virginia is a great example of the profoundly positive 
impacts that foreign investment can have on our local 
economies.
    After decades of private-sector experience, Mr. Kumar 
retired in September of this year as a partner and member of 
the board of directors of KPMG. I don't know what that means, 
but it sounds like an enormous law firm.
    Mr. Kumar. It is actually an accounting firm.
    The Chairman. Sorry about that--where he worked for nearly 
20 years. He has executive experience, including as a CEO, at 
numerous companies before arriving at KPMG.
    And that is my statement. We welcome you all.
    And I turn now to my partner in this effort, Senator Thune.

                 STATEMENT OF HON. JOHN THUNE, 
                 U.S. SENATOR FROM SOUTH DAKOTA

    Senator Thune. Thank you, Mr. Chairman. Thank you for 
holding the hearing today to consider the nominations of Debra 
Miller to be a Member of the Surface Transportation Board, of 
Arun Kumar to be Assistant Secretary of Commerce for Global 
Markets and Director General of the U.S. and Foreign Commercial 
Service--that is a long title.
    The Chairman. It is. The U.S. and Foreign Commercial--it is 
impossible to say.
    Senator Thune.--and Paul Jaenichen to be Administrator of 
the Maritime Administration.
    I want to thank each of our nominees for being here and for 
their willingness to serve the Nation.
    As the Committee knows well, the Surface Transportation 
Board plays an important role as the independent Federal agency 
with regulatory authority over freight railroads. Among other 
things, the STB is charged with resolving railroad rate and 
service disputes and reviewing proposed railroad mergers.
    Ms. Miller has had a distinguished career in the 
transportation sector, including her service from 2003 to 2011 
as Secretary of the Kansas Department of Transportation under 
both Governor Sebelius and Governor Brownback. In that 
capacity, Ms. Miller managed more than 3,000 employees and a $1 
billion budget. She was responsible for a state highway system 
spanning 10,000 miles, as well as overseeing shortline railroad 
grants and rail planning. That is something I can relate to, as 
a former state rail director.
    I look forward to hearing her views on how the STB can help 
maintain a strong national rail network while also serving the 
interests of shippers, particularly small shippers, who often 
have difficulty bringing a case before the STB.
    I am also interested in hearing about Ms. Miller's major 
rail initiatives during her time as Transportation Secretary 
for Kansas and how her experiences there will shape her 
approach to issues that are brought before the Surface 
Transportation Board.
    Our nominee to be Assistant Secretary of Commerce for 
Global Markets and Director General of the U.S. and Foreign 
Commercial Service, Mr. Arun Kumar, has achieved success in the 
private sector and I look forward to hearing from Mr. Kumar 
about how he will measure success in terms of creating a 
favorable environment for U.S. export growth. I will also be 
asking Mr. Kumar what role he anticipates playing as Congress 
considers trade promotion authority.
    After serving at the helm of the Maritime Administration as 
Acting Administrator since June of this year, I am pleased to 
see that Captain Paul Jaenichen has been nominated to lead this 
important agency. Captain Jaenichen has a distinguished 30-year 
career in the United States Navy as a submarine commander and 
brings a wealth of maritime experience to bear in this 
position, should he be confirmed.
    Mr. Chairman, while we must fulfill our obligation to 
carefully examine the qualifications of these nominees, I 
expect that we will work together to advance these nominations 
through the Committee and hopefully the Senate in a timely 
manner, as we have done with several other Commerce Committee 
nominees this year.
    I do have to note, however, the irony of our holding this 
hearing on a day when the Senate has fundamentally changed the 
way it will consider such nominations. I think the dramatic 
rules change that we witnessed earlier today will have a 
lasting and damaging impact on the Senate and possibly even on 
the quality of nominees confirmed to executive and judicial 
positions because they will now require less bipartisan 
consensus to be confirmed.
    Nonetheless, Mr. Chairman, I thank you for holding this 
hearing. I look forward to hearing the testimony from our 
witnesses. Thank you.
    The Chairman. Well, I am all gloomy about your analysis of 
the Senate.
    [Laughter.]
    The Chairman. But I am going to overcome that and go right 
to Paul Jaenichen.
    Please, sir.

    STATEMENT OF PAUL N. JAENICHEN, SR., NOMINEE TO BE THE 
 ADMINISTRATOR OF THE MARITIME ADMINISTRATION, U.S. DEPARTMENT 
                       OF TRANSPORTATION

    Mr. Jaenichen. Chairman Rockefeller, Ranking Member Thune, 
and members of the Committee, it is an honor for me to appear 
before you today as the President's nominee to serve as the 
Administrator of the Maritime Administration.
    Before I begin, I would like to thank my wonderful wife, 
Paula, who is sitting behind me. She is here today. And I would 
like to express my gratitude for her support, both during my 
three decade military career and now as I look to continue in 
public service.
    The Chairman. If you were down in a submarine for 30 years, 
you darn well better express your appreciation.
    [Laughter.]
    Mr. Jaenichen. Yes, sir.
    I would also like to acknowledge the support of my two 
children. My son, Nathan, is a captain in the United States 
Marine Corps, and my daughter, Rachael, is a high school 
teacher.
    Although neither could attend today's hearing, the fact 
that every member of my immediate family, including Paula, who 
is a retired teacher, as well as my brother, Lee, who is here 
as well today--he retired from the Navy. And both of our 
parents served in the Army and retired there. All those folks 
either served in the defense of the Nation or in public service 
to others, and that is certainly one of the proudest 
accomplishments that I can credit.
    I have had the privilege of serving the U.S. Department of 
Transportation in the Maritime Administration since July of 
2012, first as the Deputy Administrator and since June of this 
year as the Acting Administrator.
    Over the past 16 months, I have developed a firm 
understanding of the challenges facing the U.S. marine 
transportation system and the maritime industry, but I have 
also seen its great potential. I have seen firsthand the 
dedication that the Maritime Administration employees, the 
Department of Transportation leadership, and key maritime 
stakeholders, both public and private, have shown in supporting 
the industry.
    During my time at the Maritime Administration, I have 
established a positive working relationship with stakeholders 
across the industry. This experience has provided me the 
insight and the background needed to lead the Maritime 
Administration as it works to fulfill its mission to foster, 
promote, and develop the U.S. Merchant Marine.
    Prior to coming to the Maritime Administration, I served 
for 30 years in the U.S. Navy as a nuclear-trained submarine 
officer. And that career was about two things: managing 
disparate interests to achieve a common goal and working to 
meet at-sea operational commitments to secure our national 
defense. Each of those tasks instilled in me that I must bring 
my full focus and full attention to detail to make sure, 
whatever I do, I do it correctly. Those leadership qualities 
are needed at this time as we meet the issues facing the U.S. 
maritime industry.
    If confirmed, I look forward to working with this committee 
in support of the Maritime Administration programs, as well as 
collaborating on new ideas to improve and grow the industry to 
ensure its viability in the future.
    And, as such, I plan to focus on the following areas if 
confirmed:
    First, I will continue to work with the industry 
stakeholders and Congress to revitalize the U.S. Merchant 
Marine.
    The U.S.-flag fleet not only provides safe, reliable, and 
environmentally responsible transportation of cargo to support 
economic activity both domestically and internationally, it 
also supports the Department of Defense sustainment sealift 
capacity requirements in times of armed conflict and national 
emergency.
    U.S.-flag vessels engaged in international trade has 
steadily declined since World War II and currently carries 
roughly 2 percent of our Nation's overseas cargo. We need a 
strategy that will result in a significantly higher portion of 
the U.S. overseas trade being carried on U.S.-flag vessels. 
This increased trade for U.S.-flag vessels would produce 
greater demand for additional ships and, more importantly, U.S. 
mariners to crew them.
    Support for the Merchant Marine Act of 1920, more commonly 
referred to as the Jones Act, is critical and is one of the 
strongest elements of U.S. maritime policy, one that encourages 
investment in privately owned U.S. companies to operate 
shipyards and vessels that employ trained crews and maritime 
industry workers.
    Second, policies must be supported that will protect U.S. 
mariner jobs. Sustaining a pool of qualified U.S. mariners is 
critical to meeting our national security needs. Programs and 
policies already in place need to be supported, as well as 
training at the U.S. Merchant Marine Academy, the six state 
maritime academies, and our maritime union training centers.
    All are key to ensuring this pool of mariners is ready and 
available when needed to support military sealift requirements. 
Without these programs, we will not have the skilled personnel 
we need to crew government-owned ships in time of armed 
conflict or national emergency and commercial ships to provide 
sustainment sealift capacity for the Department of Defense.
    Since without ships we have no requirement for mariners, I 
will support efforts to increase domestic shipbuilding. The 
Maritime Administration has seen increased applications in 
recent months for vessel loan guarantees, otherwise known as 
Title XI, reflecting a willingness to invest in this critical 
industry. If confirmed, I plan to focus on improving the 
administration of MARAD's Title XI ship financing program in 
order to support the increase in demand as efficiently and as 
effectively as possible.
    Finally, I will continue to support MARAD's programs to 
improve port infrastructure, increase marine highway services, 
and address maritime environmental challenges. Each of these 
will make our ports more efficient, increase cargo capacity, 
spur economic development, and promote job growth.
    The U.S. maritime industry plays a critical role in meeting 
the Nation's economic and security needs. If confirmed and 
given the honor to serve as the next maritime administrator, I 
plan to capitalize on opportunities to revitalize the U.S. 
Merchant Marine, and I look forward to working with this 
committee to address these important marine transportation 
issues and restore our Nation's status as one of the premier 
maritime nations in the world.
    Mr. Chairman, thank you for your scheduling of this 
hearing. And I will be happy to respond to any questions you or 
the Committee might have.
    [The prepared statement and biographical information of Mr. 
Jaenichen follow:]

Prepared Statement of Paul N. Jaenichen, Acting Maritime Administrator, 
       Maritime Administration, U.S. Department of Transportation
    Chairman Rockefeller, Ranking Member Thune and members of the 
Committee, it is an honor for me to appear before you today as the 
President's nominee to serve as Administrator of the Maritime 
Administration (MARAD).
    Before I begin, I would like to thank my wonderful wife, Paula, who 
is here today, and express my gratitude for her support both during my 
three decade military career and now as I look to continue in public 
service. I would also like to acknowledge the support of my two 
children, Nathan, who is a Captain in the U.S. Marine Corps assigned to 
Marine Light Attack Helicopter Squadron 469 at Camp Pendleton, CA and 
Rachael, who is a teacher at McCracken County High School in Paducah, 
KY. Although neither could attend today's hearing, the fact that every 
member of my immediate family including Paula, who is a retired school 
teacher, all chose careers in service to others is one of my proudest 
accomplishments.
    I have had the privilege of serving the U.S. Department of 
Transportation's Maritime Administration since July 2012; first as 
Deputy Administrator and, since June of this year, as Acting 
Administrator. Over the past 15 months, I have developed a firm 
understanding of the challenges facing the U.S. Marine Transportation 
System and the maritime industry, but I have also seen its great 
potential. I have seen firsthand the dedication MARAD employees, 
Department of Transportation (DOT) leadership and key maritime 
stakeholders, both public and private, have shown in supporting the 
industry. During my time at MARAD, I have established positive working 
relationships with stakeholder participants across the industry. This 
experience has provided the insight and background needed to lead MARAD 
as it works to fulfill its mission to foster, promote and develop the 
U.S. Merchant Marine.
    Prior to coming to MARAD I served for 30 years in the U.S. Navy as 
a submarine officer. During my career, I was assigned to numerous 
leadership positions including Officer in Charge of a Moored Training 
Ship to educate and qualify officer and enlisted nuclear operators, 
Commanding Officer of a nuclear Fast Attack Submarine and Commander of 
a Submarine Squadron of six Fast Attack Submarines. Additionally, as 
Chief of the North Atlantic Treaty Organization (NATO) Policy Division 
for the Joint Staff, I was responsible for military-to-military 
engagement on security cooperation and involvement in coalition 
operations with all NATO member nations.
    In short, my career has been about two key things: managing 
disparate interests to achieve a common goal and working to meet naval 
operational commitments to secure our national defense. Each instilled 
in me that whatever the task, you bring your full focus and make sure 
you do it correctly. These leadership qualities are needed to meet the 
issues facing the U.S. maritime industry. If confirmed, I look forward 
to working with the members of this Committee to continue support for 
MARAD programs, as well as collaborating on new ideas to improve and 
grow the industry to ensure its viability into the future.
    If confirmed, I plan to focus on the following areas:

        First, I plan to continue to work with industry stakeholders 
        and Congress to identify ways to revitalize the U.S. Merchant 
        Marine. The U.S.-flag fleet not only provides safe, reliable 
        and environmentally responsible transport of cargo to support 
        economic activity, both domestically and internationally, but 
        also supports Department of Defense (DOD) sustainment sealift 
        capacity requirements in times of armed conflict or national 
        emergencies.

        The U.S. Merchant Marine engaged in international trade has 
        steadily declined since World War II and currently carries less 
        than 2 percent of our Nation's overseas trade. We need a 
        strategy that will result in a significantly higher portion of 
        U.S. overseas trade being carried on U.S. flag vessels. This 
        increased trade for U.S. flag vessels would provide greater 
        demand for additional ships and more U.S. mariners to crew 
        them.

        Support for the Jones Act is also critical to maintaining 
        reliable coastwise trade and to ensuring the existence of a 
        domestic maritime industry of shipbuilders, vessels and 
        merchant mariners. The Jones Act is one of the strongest 
        elements of U.S. maritime policy, encouraging investment in 
        privately owned U.S. companies to operate shipyards and vessels 
        that employ well-trained crews and maritime industry workers.

        Second, policies must be supported that will protect U.S. 
        mariner jobs. Sustaining a pool of qualified U.S. mariners is 
        critical to meeting the Nation's security needs. Programs and 
        policies such as the National Defense Reserve Fleet (NDRF) and 
        its component Ready Reserve Force (RRF), the Maritime Security 
        Program (MSP), cargo preference, the Jones Act and training at 
        the U.S. Merchant Marine Academy and State Maritime Academies 
        are all key to ensuring this pool of mariners is ready and 
        available when needed to support military sealift requirements.

        Without these programs, we will not have the skilled personnel 
        needed to crew Government-owned ships in time of armed conflict 
        or national emergency and commercial ships to provide 
        sustainment sealift capacity for the DOD.

        Third, I will continue to support MARAD's programs to improve 
        port infrastructure, increase Marine Highway services and 
        address maritime environmental challenges. Each of these will 
        make our ports more efficient, increase cargo capacity, spur 
        economic development and promote job growth.

        Finally, I will support efforts to increase domestic 
        shipbuilding. Earlier this year, I was pleased to share the 
        findings of a MARAD report on the economic impact of the U.S. 
        shipbuilding and repair industry which showed that although 
        most shipbuilders are located in coastal areas, the direct and 
        indirect economic benefits reach all 50 states. On a nationwide 
        basis, the industry supported 402,010 jobs, $23.9 billion of 
        labor income and $36 billion in Gross Domestic Product. In 
        addition, MARAD has seen increased applications in recent 
        months for Maritime Loan Guarantees (Title XI) and Small 
        Shipyard Grants, reflecting a willingness to invest in this 
        critical industry. If confirmed, I plan to focus on improving 
        MARAD's administration of its Title XI ship financing program 
        in order to support this increase in demand as efficiently and 
        effectively as possible.

    The U.S. maritime industry plays a critical role in meeting the 
Nation's economic and security needs. As I stated earlier, while there 
are many challenges facing the U.S. maritime industry, there are also 
many opportunities. If confirmed and given the honor to serve as the 
next Maritime Administrator, I hope to capitalize on those 
opportunities and I look forward to working with this Committee to 
address these important issues and restore our Nation's status as one 
of the premier maritime nations in the world.
    Mr. Chairman, thank you for scheduling this hearing. I will be 
happy to respond to any questions you and the other members have.
                                 ______
                                 
                      a. biographical information
    1. Name (Include any former names or nicknames used): Paul Nathan 
``Chip'' Jaenichen, Sr.
    2. Position to which nominated: Maritime Administrator, United 
States Department of Transportation.
    3. Date of Nomination: September 11, 2013.
    4. Address (List current place of residence and office addresses):

        Residence: Information not released to the public.
        Office: Washington, D.C.

    5. Date and Place of Birth : 9/21/1960; Muenchweiler, Germany (U.S. 
Citizen. Father was in the U.S. Army stationed in Germany).
    6. Provide the name, position, and place of employment for your 
spouse (if married) and the names and ages of your children (including 
stepchildren and children by a previous marriage).

        Paula Auclair Jaenichen (wife); Small business owner, Vine 
        Grove, KY. Children: Paul Nathan Jaenichen, Jr. (son), Age 30; 
        Rachael Lynne Jaenichen (daughter), Age 28.

    7. List all college and graduate degrees. Provide year and school 
attended.

        United States Naval Academy (1978-1982), B.S. Ocean Engineering
        Old Dominion University (2003-2011), M.S. Engineering 
        Management

    8. List all post-undergraduate employment, and highlight all 
management level jobs held and any non-managerial jobs that relate to 
the position for which you are nominated. *italics denote management-
level positions

        Acting Maritime Administrator (June 2013 to present)

        Deputy Maritime Administrator (July 2012 to present)

        Executive Officer, USS KENTUCKY (SSBN 737) BLUE (September 
        1994-June 1996)

        Officer-in-Charge, Moored Training Ship 635 (September 1996-
        December 1998)

        Commanding Officer, USS ALBANY (SSN 753) (September 1999-June 
        2002)

        Executive Assistant to Director, Submarine Warfare Division 
        (July 2004-March 2005)

        Chief, Western/Eastern Europe and NATO Divisions (March 2005-
        March 2007)

        Commander, Submarine Squadron ELEVEN (April 2007-September 
        2008)

        Director, Submarine/Nuclear Officer Distribution (September 
        2008-0ctober 2010)

        Deputy Chief of Legislative Affairs, Department of the Navy 
        (October 2010-April 2012)

        Senior Member, Atlantic Fleet Nuclear Propulsion Examination 
        Board (June 2002-July 2004)

    9. Attach a copy of your resume. A copy is attached.
    10. List any advisory, consultative, honorary, or other part-time 
service or positions with Federal, State, or local governments, other 
than those listed above, within the last five years: None.
    11. List all positions held as an officer, director, trustee, 
partner, proprietor, agent, representative, or consultant of any 
corporation, company, firm, partnership, or other business, enterprise, 
educational, or other institution within the last five years: None.
    12. Please list each membership you have had during the past ten 
years or currently hold with any civic, social, charitable, 
educational, political, professional, fraternal, benevolent or 
religious organization, private club, or other membership organization. 
Include dates of membership and any positions you have held with any 
organization. Please note whether any such club or organization 
restricts membership on the basis of sex, race, color, religion, 
national origin, age, or handicap.

        Member, Army Navy Country Club (May 2013 to present)

        Member, Aircraft Owners and Pilots Association (Feb 2001 to 
        present)

        Member, USS ALBANY Association (September 1999 to present)

    13. Have you ever been a candidate for and/or held a public office 
(elected, non-elected, or appointed)? If so, indicate whether any 
campaign has any outstanding debt, the amount, and whether you are 
personally liable for that debt: No.
    14. Itemize all political contributions to any individual, campaign 
organization, political party, political action committee, or similar 
entity of $500 or more for the past ten years. Also list all offices 
you have held with, and services rendered to, a state or national 
political party or election committee during the same period: None.
    15. List all scholarships, fellowships, honorary degrees, honorary 
society memberships, military medals, and any other special recognition 
for outstanding service or achievements.

    Service Medals

        Defense Superior Service Medal (1 Award--March 2007)

        Legion of Merit Medal (4 Awards--April 2012, October 2010, 
        September 2008 and July 2004)

        Meritorious Service Medal (3 Awards--March 2005, June 2002 and 
        December 1998)

        Navy-Marine Corps Commendation Medal (5 Awards--June 1996, July 
        1994, August 1993, January 1991 and July 1990)

        Navy-Marine Corps Achievement Medal (2 Awards--July 1985 and 
        October 1988)

    16. Please list each book, article, column, or publication you have 
authored, individually or with others. Also list any speeches that you 
have given on topics relevant to the position for which you have been 
nominated. Do not attach copies of these publications unless otherwise 
instructed.
    I have done my best to identify all books, articles, columns, or 
other publications and relevant speeches, including a thorough review 
of my personal files and searches of publicly available electronic 
databases. Despite my searches, there may be other materials that I 
have been unable to identify, find or remember. I have located the 
following:

    Speeches

        Ground Breaking for TIGER Grant Project and Economic 
        Development Roundtable with Governor Scott in Port Manatee, FL 
        (August 17, 2013)

        ``President Eisenhower Atoms for Peace Visit of the Nuclear 
        Ship SAVANNAH''; at the 50th Anniversary Commemoration in 
        Savannah, GA. (August 22, 2012)

        ``Maritime Administration Update''; at the National Waterways 
        Conference in Washington, D.C. (October 17, 2012)

        ``Maritime Industry Advocacy''; at the Propeller Club of the 
        United States, DC Chapter in Washington, D.C. (October 31, 
        2012)

        Texas Maritime Graduation at Texas A&M University in Galveston, 
        Galveston, TX (December 16, 2012)

        Motor Tanker FLORIDA Christening at the Aker Philadelphia 
        Shipyard in Philadelphia, PA (January 30, 2013)

        ``Academy Update''; at U.S. Merchant Marine Academy Alumni, DC 
        Chapter in Washington, D.C. (February 7, 2013)

        ``Jones Act and Cargo Preference Update''; at the Exporters 
        Competitive Maritime Council Meeting in Washington, D.C. (April 
        4, 2013)

        ``Maritime Administration Update''; at the National Defense 
        Transportation Association, Transportation Advisory Board 
        Meeting in Ponte Vedra Beach, FL (April 16, 2013)

        Memorial Day, National World War II Memorial in Washington, 
        D.C. (May 27, 2013)

        ``Support of the US. Merchant Marine''; at the United Seamen's 
        Service (USS) and the American Merchant Marine Library 
        Association (AMMLA) in New York, NY (June 7, 2013)

        U.S. Merchant Marine Academy Commencement in Kings Point, NY 
        (June 17, 2013)

        ``Announcement of Maritime Administration Strong Ports 
        Initiative''; at the Future Ports Annual Conference in Long 
        Beach, CA (June 19, 2013)

        ``Maritime Administration Sea Services Update''; at the Navy 
        League of the United States Annual Convention in Long Beach, CA 
        (June 21, 2013)

        ``Maritime and Port Infrastructure Investment''; at the Rhode 
        Island Port Summit in Providence, RI (June 24, 2013)

        Small Shipyard Grant Announcement in New Albany, IN (July 24, 
        2013)

        ``Maritime Administration Update and Strategic Vision''; at the 
        American Waterway Operators Executive Committee Meeting, in 
        Washington, D.C. (July 31, 2013)

        ``American Marine Highways and Strong Ports Update''; at the 
        American Association of State Highway and Transportation 
        Officials (AASHTO)/Federal Highways Administration Freight 
        Transportation Partnership Meeting in Washington, D.C. (August 
        1, 2013)

        ``Maritime Industry Update and Academy Status''; at the U.S. 
        Merchant Marine Academy Alumni, Chesapeake Chapter Meeting, in 
        Baltimore, MD (August 11, 2013)

        ``Marine Transportation System Update''; at the Inland 
        Waterways User Board Meeting, Louisville, KY (August 13, 2013)

        ``American Marine Highways Update''; at the 2013 Barge and Rail 
        Symposium, Louisville, KY (August 14, 2013)

        ``Maritime Administration Update and Strategic Vision''; 
        American Waterway Operators Southern, Midwest and Ohio Valley 
        Regions Meeting in Louisville, KY (August 15, 2013)

        ``Marine Transportation System Infrastructure Investment''; at 
        the Inland Rivers, Ports and Terminal Operators Webinar, in 
        Granite City, IL (August 16, 2013)

        TIGER Grant Announcement at Port of Duluth in Duluth, MN 
        (September 5, 2013)

        ``Maritime Administration Update and Strategic Vision''; at the 
        Maritime Trades Department AFL-CIO Convention in Los Angeles, 
        CA (September 6, 2013)

        ``Marine Highway Crossing Designation Announcement''; at the 
        Northern Virginia Regional Council Ferry Stakeholders Meeting 
        in Fairfax, VA (September 11, 2013)

        ``Maritime Administration Update and Strategic Vision''; at the 
        American Maritime Partnership Annual Meeting, in Washington, 
        D.C. (September 17, 2013)

        ``Maritime Industry and Jones Act Update''; at the TradeWinds 
        Jones Act Shipping Forum in New York, NY (September 18, 2013)

        ``Impact of Panama Canal Expansion and Roll-out of Maritime 
        Administration Panama Canal Phase 1 Study''; at the Eno Center 
        for Transportation Forum on Panama Canal Expansion in 
        Washington, D.C. (September 19, 2013)

        ``Commercial Maritime Industry Update ``; at the Joint Military 
        Operations Curriculum at the Naval War College in Newport, RI 
        (September 23, 2013)

        ``Commercial Maritime Industry Update''; Joint Military 
        Operations Curriculum at the Naval War College in Newport, RI 
        (September 23, 2013)

        ``Inland Rivers and Waterways--America's Marine Highways''--
        2013 American Society for Transportation and Logistics Annual 
        Conference held in conjunction with the Sino-American Logistics 
        Conference and Yangtze-Mississippi Rivers Forum in Chicago, IL 
        (October 28, 2013)

        Christening of the Green Trade Corridor--Container on Barge 
        Marine Highway Service (M-580) at the Port of Stockton, CA 
        (November 1, 2013)

        ``Maritime Industry Update''; Ship Operations Cooperative 
        Program Fall Conference in Baltimore, MD (November 6, 2013)

    17. Please identify each instance in which you have testified 
orally or in writing before Congress in a governmental or non-
governmental capacity and specify the date and subject matter of each 
testimony.
    United States House of Representative Committee on Transportation & 
Infrastructure's Subcommittee on Coast Guard and Maritime 
Transportation's Legislative Hearing on ``Maritime Transportation 
Regulations : Impacts on Safety, Security, Jobs and the Environment, 
Part J '' (September 10, 2013)
    18. Given the current mission, major programs, and major 
operational objectives of the department/agency to which you have been 
nominated, what in your background or employment experience do you 
believe affirmatively qualifies you for appointment to the position for 
which you have been nominated, and why do you wish to serve in that 
position?
    The combination of my nautical background gained through a career 
in the U.S. Navy including having command at sea coupled with 15 months 
experience as Acting Administrator and Deputy Administrator in the 
Maritime Administration. As a result, I have a firm understanding of 
the challenges and issues facing the U.S. marine transportation system. 
Additionally, I am acquainted with and have developed a professional 
relationship with Maritime Administration employees, DOT leadership and 
with most of the key maritime industry stakeholders, including labor, 
U.S. Flag Fleet corporate leadership and numerous major port directors.
    The challenges facing the U.S. maritime industry, specifically the 
U.S. Flag companies operating in foreign trade are especially acute. 
Strong, innovative leadership is needed to resolve these challenges, 
and I desire to part of the solution, if confirmed as Maritime 
Administrator.
    19. What do you believe are your responsibilities, if confirmed, to 
ensure that the department/agency has proper management and accounting 
controls, and what experience do you have in managing a large 
organization?
    If confirmed, I would continue to supervise a staff of over 800 
government employees and contractors responsible for waterborne 
transportation and port infrastructure as well as being an advocate for 
the U.S. maritime industry, the Jones Act and providing oversight for 
U.S. cargo preferences laws. To accomplish these responsibilities, I 
would issue strategic guidance and engage the Maritime Administration's 
senior management team to develop priorities with plans of action and 
milestones for achievement. Since I am currently working in the 
Maritime Administration, I am familiar with accounting controls and 
budget authorities. If confirmed, I would provide continued oversight 
and periodic reviews of the Budget and Acquisition offices.
    I served in the U.S. Navy as a Submarine Officer for 30 years and 
was selected to serve in a progressive series of leadership assignments 
including Department Head, Executive Officer and Commanding Officer of 
a nuclear powered submarine and Major Command of a squadron of 
submarines. I was also handpicked to serve in several other specialized 
leadership assignments including Officer-in-Charge of a Moored Training 
Ship and Director, Submarine/Nuclear Officer Distribution. My 
operational leadership assignments included direct supervision of both 
small and large groups ranging from as few as six enlisted personnel to 
as many as 400 officers and enlisted personnel. Additionally, I have 
experience managing government civilian employees and contractors from 
GS-7 to Senior Executive Service.
    20. What do you believe to be the top three challenges facing the 
department/agency, and why?

        Development of a National Maritime Strategy--The size of the 
        U.S. Merchant Marine including the number of U.S.-flagged deep 
        ocean vessels involved in international trade has declined over 
        80 percent in the last 20 years. It is a national security 
        imperative that our Nation be able to move our military, their 
        equipment and supplies when required. We are at a point in 
        which that might not be possible. The Maritime Administration 
        (MARAD) will work with maritime industry stakeholders to 
        identify new markets and promote policy and regulatory 
        approaches that boost the competitiveness of the U.S.-flagged 
        vessel operators. MARAD is committed to retaining a strong and 
        viable U.S.-flagged deep ocean fleet operating in international 
        trade.

        Issue Cargo Preference Enforcement Rules as directed by the 
        Duncan Hunter National Defense Authorization Act for Fiscal 
        Year 2009--Government impelled cargo volumes that fall under 
        cargo preference regulations have declined significantly, that 
        coupled with a lack of monitoring, compliance and enforcement 
        is challenging the U.S. Maritime Industry. MARAD will work with 
        the Office of the Secretary of Transportation and the Office of 
        Management and Budget to issue rules to ensure that Cargo 
        Preference laws are vigorously enforced to support the existing 
        U.S.-flagged fleet.

        Implement changes to ensure the Title XI Federal ship Financing 
        Program is relevant and supports current U.S. Maritime Industry 
        requirements and U.S. Shipbuilding--There is an extensive 
        recapitalization effort to replace aging Jones Act Fleet 
        vessels and the need to build additional Jones Act tank vessel 
        capacity to support domestic production and movement of 
        petroleum products. Additionally, with advancement in 
        technology and the availability of alternative fuels, U.S. flag 
        carriers are building the world's first container ships that 
        will use liquefied natural gas (LNG) as a marine propulsion 
        fuel. MARAD will implement changes to the Title XI program to 
        be responsive and able to process applications in a timely 
        manner to support this significant increase in demand.
                   b. potential conflicts of interest
    1. Describe all financial arrangements, deferred compensation 
agreements, and other continuing dealings with business associates, 
clients, or customers. Please include information related to retirement 
accounts.
    I have contributed to retirement accounts through the Federal 
Thrift Savings Plan both while on active duty in the U.S. Navy and 
during my employment with the Department of Transportation. 
Additionally, my spouse and I have Roth Individual Retirement Accounts 
(IRAs) through American Funds. As a result of retiring from the U.S. 
Navy after a 30-year career, I began receiving a retirement annuity 
paid on a monthly basis effective 1 June 2012.
    2. Do you have any commitments or agreements, formal or informal, 
to maintain employment, affiliation, or practice with any business, 
association or other organization during your appointment? If so, 
please explain. No.
    3. Indicate any investments, obligations, liabilities, or other 
relationships which could involve potential conflicts of interest in 
the position to which you have been nominated.
    In connection with the nomination process, I have consulted with 
the Office of Government Ethics and the Department of Transportation's 
Designated Agency Ethics Official to identify potential conflicts of 
interest. Any potential conflicts of interest will be resolved in 
accordance with the terms of an ethics agreement that I have entered 
into with Department's Designated Agency Ethics Official and that has 
been provided to this Committee. I am not aware of any other potential 
conflicts of interest.
    4. Describe any business relationship, dealing, or financial 
transaction which you have had during the last ten years, whether for 
yourself, on behalf of a client, or acting as an agent, that could in 
any way constitute or result in a possible conflict of interest in the 
position to which you have been nominated.
    In connection with the nomination process, I have consulted with 
the Office of Government Ethics and the Department of Transportation's 
Designated Agency Ethics Official to identify potential conflicts of 
interest. Any potential conflicts of interest will be resolved in 
accordance with the terms of an ethics agreement that I have entered 
into with Department's Designated Agency Ethics Official and that has 
been provided to this Committee. I am not aware of any other potential 
conflicts of interest.
    5. Describe any activity during the past ten years in which you 
have been engaged for the purpose of directly or indirectly influencing 
the passage, defeat, or modification of any legislation or affecting 
the administration and execution of law or public policy.
    While serving as Deputy Chief of Legislative Affairs for the 
Department of the Navy, I participated in drafting testimony and 
assisted in hearing preparations for the Secretary of the Navy, The 
Honorable Ray Mabus, and the Chief of Naval Operations (CNO), Admiral 
Gary Roughead, for hearings on the U.S. Navy's Fiscal Year 2012 and 
2013 Budgets. Additionally, I prepared and accompanied the CNO on over 
30 office calls with Senators to discuss the United Nations Convention 
on Law of the Sea (UNCLOS) Treaty.
    6. Explain how you will resolve any potential conflict of interest, 
including any that may be disclosed by your responses to the above 
items.
    In connection with the nomination process, I have consulted with 
the Office of Government Ethics and the Department of Transportation's 
Designated Agency Ethics Official to identify potential conflicts of 
interest. Any potential conflicts of interest will be resolved in 
accordance with the terms of an ethics agreement that I have entered 
into with Department's Designated Agency Ethics Official and that has 
been provided to this Committee. I am not aware of any other potential 
conflicts of interest.
                            c. legal matters
    1. Have you ever been disciplined or cited for a breach of ethics 
by, or been the subject of a complaint to any court, administrative 
agency, professional association, disciplinary committee, or other 
professional group? If so, please explain.
    In May 2011, I was named as a responsible management official in my 
official capacity as the Deputy Chief of Legislative Affairs at the 
Department of the Navy in an EEO complaint filed by a subordinate 
employee. I was named in that complaint because I was in the 
Complainant's official chain of command. There was no finding of any 
wrongdoing.
    2. Have you ever been investigated, arrested, charged, or held by 
any Federal, State, or other law enforcement authority of any Federal, 
State, county, or municipal entity, other than for a minor traffic 
offense? If so, please explain. No.
    3. Have you or any business of which you are or were an officer 
ever been involved as a party in an administrative agency proceeding or 
civil litigation? If so, please explain. No.
    4. Have you ever been convicted (including pleas of guilty or nolo 
contendere) of any criminal violation other than a minor traffic 
offense? If so, please explain. No.
    5. Have you ever been accused, formally or informally, of sexual 
harassment or discrimination on the basis of sex, race, religion, or 
any other basis? If so, please explain.
    In May 2011, I was named as a responsible management official in my 
official capacity as the Deputy Chief of Legislative Affairs at the 
Department of the Navy in an EEO complaint filed by a subordinate 
employee. I was named in that complaint because I was in the 
Complainant's official chain of command. There was no finding of any 
wrongdoing.
    6. Please advise the Committee of any additional information, 
favorable or unfavorable, which you feel should be disclosed in 
connection with your nomination. None to my knowledge.
                     d. relationship with committee
    1. Will you ensure that your department/agency complies with 
deadlines for information set by congressional committees? Yes.
    2. Will you ensure that your department/agency does whatever it can 
to protect congressional witnesses and whistle blowers from reprisal 
for their testimony and disclosures? Yes.
    3. Will you cooperate in providing the Committee with requested 
witnesses, including technical experts and career employees, with 
firsthand knowledge of matters of interest to the Committee? Yes.
    4. Are you willing to appear and testify before any duly 
constituted committee of the Congress on such occasions as you may be 
reasonably requested to do so? Yes.
                  Resume of Paul Nathan Jaenichen, Sr.
Summary
   Proven Leader--Selectively assigned to four U.S. Navy 
        command/director assignments.

   Maritime Professional--Presidential Appointee to the U.S. 
        Maritime Administration. Detailed understanding of the industry 
        including U.S.-flagged vessel operations, maritime labor, 
        shipbuilding and port facilities.

   Continuous Improvement/Change Agent--Significant experience 
        identifying deficiencies, assessing root causes and 
        implementing corrective action in a resource limited 
        environment.

   Technical Expert--U.S. Navy Certified Nuclear Engineer and 
        Nuclear Propulsion Plant Inspection Team Leader.

   Training Specialist--Officer in Charge of a Navy Nuclear 
        Propulsion Program Training Ship. Supervised a training staff 
        of over 400 military and civilians responsible for operational 
        training and qualification of over 1,200 officer and enlisted 
        student operators annually.

   Human Resources Specialist--Extensive experience and 
        detailed knowledge of accession, retention and career 
        progression of nuclear trained submarine and surface warfare 
        officers. Directly responsible for assignment of over 5,200 
        nuclear trained officers and manning for 105 nuclear powered 
        warships and three training commands. Developed and implemented 
        the plan to integrate women into the Submarine Force.
Experience

United State Department of Transportation (DOT), Maritime 
Administration, Washington, D.C.
Acting Maritime Administrator--June 2013 to present
Deputy Maritime Administrator--July 2012-May 2013

   Political Appointment to a Senior Executive Service position 
        with oversight for the Nation's marine transportation system.

   Supervised a staff of over 800 government civilians and 
        contractors responsible for waterborne transportation and 
        seamless integration with all other modes of the transportation 
        system. The Maritime Administration's programs promote U.S.-
        flagged ships and shipping, maritime labor, movement of 
        government impelled cargo, shipbuilding, port operations, 
        vessel operations, national security, environment and shipboard 
        safety.

   Manages an annual budget of over $600M including $300M for 
        operation and maintenance of a fleet of 46 U.S. Government 
        reserve sealift vessels strategically located at ports 
        throughout the U.S to support Department of Defense 
        transportation of equipment, material and supplies for wartime 
        operations and national emergencies. These vessels can be 
        activated to support humanitarian or contingency operations 
        such as housing relief workers during the recovery from 
        Hurricane Sandy. The agency is also responsible for three 
        government maintained anchorages supporting over 70 National 
        Defense Reserve Fleet vessels.

   Provided executive leadership in the planning, direction and 
        coordination of all operational and administrative activities 
        related to support of the U.S. Merchant Marine including 
        oversight for the United States Merchant Marine Academy in 
        Kings Point, NY and six state maritime academies, each with an 
        assigned training vessel.

   Oversight for the U.S. Government's $2B shipbuilding loan 
        guarantee program.

United States Department of the Navy, Washington, D.C.
Deputy Chief of Legislative Affairs--October 2010-April 2012

   Supervised a staff of 34 military and 17 Civilians 
        responsible for engagement plans and strategy to develop and 
        coordinate the relationship between senior Navy leadership and 
        members of Congress and Committee Staff for all matters 
        affecting the Department of the Navy).

   Congressional Liaison for Navy Programs and National Defense 
        Authorization legislation.

   Provided executive leadership in the planning, direction and 
        coordination of all operational and administrative activities 
        related to support of the Navy's Programs and Congressional 
        oversight, including the formulation of plans, policies, 
        procedures and standards to affect information exchange between 
        the Department of the Navy, Department of Defense and the U.S. 
        Congress.

   Personally prepared the Secretary of the Navy, Chief of 
        Naval Operations and other senior Navy military and civilian 
        leaders for testimony before the Senate and House Armed 
        Services Committees.

   Coordinated the flow of information to Congress including 
        legislative proposals, responses to congressional 
        correspondence and other matters involving Navy policy.

   Provided final authority and oversight of a $3M Budget to 
        support Congressional travel escorted by the Navy.

   Awarded Legion of Merit Medal (4th Award) for distinguished 
        service.

United States Navy Personnel Command, Millington, TN
Director, Submarine/Nuclear Officer Distribution (PERS-42)--September 
2008-0ctober 2010

   Responsible for managing job assignments for over 5,200 
        nuclear trained officers to meet manpower requirements for 94 
        nuclear powered submarine crews, 11 aircraft carriers and three 
        nuclear propulsion training commands. Managed a $25M Budget to 
        execute over 1,700 personnel moves worldwide each year. 
        Implemented financial and operational controls to meet 
        reductions in funding resources while maintaining the same 
        level of support to control individual officer career 
        progression and prevent shortfalls in Fleet manning of the 
        Navy's nuclear powered warships.

   Additional duties as Navy Nuclear Propulsion Program Manager 
        (N 133) on the Chief of Naval Operations Staff (OPNAV), 
        Washington, D.C. Responsible for career management of over 
        14,400 nuclear trained enlisted personnel. Managed a $23SM 
        Budget for special, incentive and retention pays. Developed the 
        vision and long-term requirements to smooth the variation in 
        retention trends through use of these special and incentive 
        pays. Using an innovative statistical approach, developed the 
        nuclear officer accession and enlisted recruiting plans 
        executed by Navy Recruiting Command which dramatically reduced 
        fluctuations in monthly and annual goals.

   Experience in mentoring and developing leaders to succeed in 
        the today's changing operational environment.

   Ranked No. 1 of 8 Division Directors by Assistant Commander, 
        Navy Personnel Command (1-Star Navy Flag Officer)

   Awarded Legion of Merit Medal (3rd Award) for distinguished 
        service.

Submarine Squadron Eleven, San Diego, CA
Commander--April 2007-September 2008

   Responsible for operation, maintenance, training and 
        certification of five nuclear powered fast attack submarines 
        (SSNs), a floating Drydock and three open ocean vessels used 
        for underway training and exercise torpedo recovery. Senior 
        officer responsible for providing vision, leadership, 
        management and direction for all Submarine Squadron activities.

   Managed $8B in Navy capital assets including ships, small 
        craft and facilities, 1,100 military and civilian personnel and 
        an $11M Budget. Squadron staff included operations and 
        maintenance experts, public relations, medical facilities and 
        staff, a legal team and a logistics and shipping department 
        handling over $10M in provisions and repair parts inventory. 
        Developed the long-term vision to meet maintenance and 
        operational requirements to ensure prudent use of available 
        resources.

   Experience leading a large a complex organization to develop 
        and maintain the U.S. Submarine force's operating proficiency, 
        tactical superiority and undersea dominance in every theater, 
        open ocean and in the littorals.

   Navy spokesman with California state, county and city 
        officials as Area Commander for Radiological Emergencies. 
        Duties included oversight of a $3M Emergency Control Center and 
        supporting equipment, facilities and infrastructure.

   Experience in training, mentoring and developing leaders to 
        succeed in today's changing operational and tactical 
        environment.

   Ranked No. 1 of 5 Commodores by Commander, Submarine Force 
        U.S. Pacific Fleet (2-Star Navy Flag Officer).

   Awarded Legion of Merit Medal (2nd Award) for distinguished 
        service.

Western/Eastern Europe and North Atlantic Treaty Organization (NATO) 
Strategic Plans and Policy (J-5), Joint Staff, Washington, D.C.
Division Chief--January 2005-March 2007

   Supervised 12 military and civilian personnel in the 
        development and implementation of defense security cooperation 
        plans and theater engagement with the military organizations of 
        all 26 NATO nations including the integration of U.S. 
        Government interagency activities.

   Coordinated policy and coalition partner participation in 
        NATO missions in Afghanistan and Iraq.

   Principal member of combined Department of State and 
        Department of Defense negotiating team that planned and 
        executed the closure of Naval Air Station Keflavik in Iceland 
        which resulted in an annual budget savings of $200M.

   Significant understanding and experience working with the 
        Federal Government and interagency policy and processes as well 
        as the underlying principles and structure of both the U.S. and 
        foreign governments.

   Award Defense Superior Service Medal for distinguished 
        service.

United States Navy, Naval Operations (OPNAV), Washington, D.C.
Executive Assistant to the Director, Submarine Warfare Division (N87)--
June 2004-January 2005

   Supervised a staff of 35 military and civilian personnel 
        coordinating overall policy for Submarine Force planning, 
        platform integration and budget requirements.

   Provided executive support and advice to the Director (2-
        Star Navy Flag Officer). Coordinated activities for the staff 
        including liaison with outside organizations and engagement 
        with senior Navy military and civilian leaders.

   Experience leading a large and complex organization to 
        develop and maintain the U.S. Navy's undersea programs 
        including nuclear powered submarines, sensors and weapons.

   Experience in mentoring and developing leaders to succeed in 
        today's changing military and working environments.

   Awarded Meritorious Service Medal (3rd Award) for 
        distinguished service.

U.S. Fleet Forces Command, Norfolk, VA
Senior Member, Atlantic Fleet Nuclear Propulsion Examination Board 
(NPEB)--July 2002-June 2004

   Handpicked for assignment as Chief Inspector by the 
        Director, Naval Nuclear Propulsion (4-Star Navy Flag Officer).

   Conducted complex, technical operation and administrative 
        inspections of all operating nuclear powered submarines, 
        aircraft carriers and land-based training facilities on the 
        East Coast (over 45 inspections). Ensured the highest standard 
        of excellence, best practices and operational proficiency was 
        gained and maintained on all U.S. Navy nuclear powered vessels.

   Conducted time-compressed assessments (less than one week) 
        to determine compliance with written technical guidance, 
        maintenance standards and knowledge requirements to produce a 
        comprehensive written report that identified deficiencies and 
        root causes to support improving the organization's 
        performance.

   Profound impact on the Navy's ability to educate and train 
        highly qualified nuclear operators to man and operate the 
        Fleet's nuclear powered vessels.

   Awarded Legion of Merit Medal (1st Award) for distinguished 
        service.

USS ALBANY (SSN 753), Norfolk, VA
Commanding Officer--September 1999-July 2002

   Responsible for operation, logistics and maintenance of 
        $1.8B warship including managing a $1.2M annual budget. 
        Achieved significant improvement in the ship's operational 
        performance that resulted in numerous unit awards. Senior 
        officer responsible for providing vision, leadership, 
        management and direction for all nuclear-powered submarine 
        activities including both import and at sea operations.

   Supervised training, certification and professional 
        development of a crew of 15 officers and over 130 enlisted 
        personnel. Ensured a strong and productive academic and 
        practical training program that delivered well qualified 
        operators to stand watch and maintain a nuclear-powered 
        submarine. Elevated shipboard morale directly resulting in 
        retention that was recognized by the Fleet Honor Roll for 
        having greater than 70 percent retention for seven consecutive 
        quarters.

   Forward deployed to the North Atlantic and Mediterranean 
        Ocean to conduct missions of vital importance to the national 
        security of the United States.

   Planned and executed a one-year $125M depot modernization 
        period (DMP) shipyard maintenance availability. Maintained 
        strong fiscal and operational controls to ensure prudent use of 
        resources.

   Awarded Meritorious Service Medal (2nd Award) for 
        distinguished service.

Moored Training Ship One (MTS 635), Nuclear Power Training Unit, 
Charleston, SC
Officer-lo Charge--September 1996-December 1998

   Supervised a training staff (faculty) of over 400 military 
        and civilian personnel responsible for executing a rigorous 
        around the clock (24 hours/day) six-month technical curriculum 
        to successfully graduate over 1,200 officers and enlisted 
        mechanics, electricians and reactor operators annually for 
        their initial sea assignment aboard one of the Navy's 130 
        nuclear powered warships.

   Senior officer responsible for providing vision, leadership, 
        management and direction for all Moored Training Ship 
        activities.

   Directed initial ``hands on'' technical training and 
        qualification of Navy nuclear propulsion program operators 
        using an operating nuclear propulsion plant training platform. 
        Ensured a strong, productive academic and practical training 
        program that delivered well qualified graduates to the U.S. 
        Navy.

   Directly responsible for providing a safe, effective 
        academic and practical training environment that addressed both 
        the needs of the students and the assigned faculty.

   Personal oversight for the development and implementation of 
        scholastic standards to encourage the intellectual, 
        professional growth and physical well-being of assigned student 
        operators.

   Planned and executed the first ever out-of-area extended 
        maintenance availability for a U.S. Navy nuclear prototype 
        training unit. The $110M availability required two 600 mile 
        open ocean tows to support a 9-month dry-docking period. 
        Demonstrated strong fiscal responsibility and implemented 
        stringent operational controls to complete the availability on-
        time and under budget.

   Provided the highest standard for education, excellence, 
        best practices and learning in a shipboard training 
        environment.

   Experience in training and developing leaders to succeed in 
        today's changing operational environment.

   Awarded Meritorious Service Medal (1st Award) for 
        exceptionally distinguished service.
Education
Old Dominion University, Norfolk, VA
Master of Science, Engineering Management--December 2011

United States Naval Academy, Annapolis, MD
Bachelor of Science, Ocean Engineering (Hybrid Degree for Mechanical 
and Civil Engineering)--May 1982
Other
United States Patent, Department of the Navy
Wave Energy Conversion, 1989

Security Clearence Level
Top Secret (SCI/SSB), Expires February 2014

    The Chairman. Thank you, sir, very much.
    And now Ms. Debra Miller, to be a Member of the Surface 
Transportation Board.
    Welcome.

 STATEMENT OF DEBRA MILLER, NOMINEE FOR COMMISSIONER, SURFACE 
                      TRANSPORTATION BOARD

    Ms. Miller. Thank you. Thank you, Chairman Rockefeller, 
Ranking Member Thune, and members of the Committee, for the 
opportunity to appear before you today. I am very honored to be 
here as the President's nominee for Commissioner for the 
Surface Transportation Board.
    Before I begin my remarks, I would also like to thank my 
family members and friends who are here today. My husband, Jim 
McLean, flew in just this morning. And our good friends, David 
and Lynn Barclay and Bob Day, have come in, as well.
    The Chairman. Where is your husband? He needs to raise his 
hand.
    OK. You married well, sir.
    [Laughter.]
    Ms. Miller. Thank you, Senator. I will pull that out of my 
pocket sometime soon when I need it.
    [Laughter.]
    Ms. Miller. If confirmed, I look forward to working closely 
with the members of this committee to ensure that the STB's 
policies and regulatory initiatives promote a vibrant, 21st-
century railroad network that will grow the nation's economy, 
create jobs, and enhance our nation's ability to compete in the 
world economy.
    I bring to this nomination over 30 years of private- and 
public-sector experience in the transportation field, including 
serving as a Director of Planning and as the Chief Executive of 
the Kansas Department of Transportation. Because of my 
experience and broad perspective and deep knowledge of the 
industry, it is my broad perspective and deep knowledge that 
informs my approach to governing.
    I understand the importance of and the need for pragmatic, 
effective, and responsive regulation in the nation's rail 
transportation system. Rail issues were a significant part of 
my early public-sector career. In 1980, I was working for 
Governor John Carlin when the Chicago, Rock Island, and Pacific 
Railroad halted operations. Kansas faced the loss of 1,080 
miles of track, and those were important tracks that bridged a 
number of communities and many vital shippers in our state.
    Seeking to preserve as much of the Rock Island system as 
possible, the Governor formed a working group and assigned me 
as his representative. I have to say, I learned a great deal 
through that experience about crisis management. I saw how much 
rail service matters to communities and shippers, and I learned 
the value of healthy railroads.
    In 2003, I had the privilege of being appointed as the 
Kansas Secretary of Transportation. During my 9-year tenure, I 
worked effectively for Republican and Democratic Governors and 
with our state legislature.
    My primary objective was to make sure that our state's 
transportation system was meeting the needs of our citizens, 
facilitating economic growth, fostering innovation, promoting 
safety across all modes, and making Kansas a better place to 
live and work. These objectives, I found, are shared by 
Republicans and Democrats, and, if confirmed, I will work with 
all members of this committee to achieve common goals.
    As secretary, I managed a budget of more than a billion 
dollars and led more than 3,000 employees. I logged thousands 
of miles on Kansas roads, traversing the state to review 
projects, meet with employees, and, most importantly, engage 
with constituents.
    In my view, you can only be an effective leader of a public 
agency if you have an understanding of the people you serve and 
understand how your decisions are affecting them. If confirmed 
as STB Commissioner, I will work diligently with shippers large 
and small, railroads large and small, port authorities, 
intermodal facilities, and our partners in the Federal, state, 
and local governments to gain that necessary understanding and 
perspective.
    As the chief executive of a state agency, I focused on two 
management themes: accountability and transparency. They are 
ones I believe very much in. Over time, public agencies can 
become isolated from the people they serve, leading to an us-
and-them mentality.
    I found that KDOT was headed in that direction when I took 
the reins, but thankfully we changed course. Our pro forma 
public meetings became real listening sessions, and based on 
what we heard, we changed projects and we changed processes. 
And people noticed and appreciated it, and our credibility went 
up as an agency. If confirmed, I will apply this same mindset 
to ensuring that the STB listens to its stakeholders, balances 
their needs, and keeps their trust in the regulatory process.
    Before closing, I want to mention my view on the importance 
of developing a balanced freight and passenger rail system. I 
fully support a robust passenger rail network where population 
densities make it feasible. Recognizing the STB's important 
jurisdictional role in passenger rail matters, I am eager to 
help set the nation's course on passenger rail. As secretary of 
KDOT, I worked with Amtrak, freight railroads, and neighboring 
states towards the development of new passenger rail lines in 
the Midwest.
    In closing, I would say that I am honored to appear before 
the Committee as the President's nominee. If confirmed, I look 
forward to working actively with each of you and with your 
staffs on the important issues in the rail transportation 
industry.
    Mr. Chairman, thank you very much for your consideration 
and for scheduling this hearing. And I will be happy to answer 
your or any of the Committee members' questions when it is 
appropriate.
    [The prepared statement and biographical information of Ms. 
Miller follow:]

     Prepared Statement of Debra Miller, Nominee for Commissioner, 
                      Surface Transportation Board
    Thank you, Chairman Rockefeller, Ranking Member Thune, and Members 
of the Committee for the opportunity to appear before you today. I am 
honored to be here as the President's nominee for Commissioner of the 
Surface Transportation Board.
    Before I begin my remarks, I would like to take a moment to 
introduce some of my family members and friends who are here with me 
today: my husband, Jim McLean, my good friends, David and Lynn Barclay, 
and Bob Day. I thank them for their support and encouragement and for 
their presence.
    If confirmed, I look forward to working closely with the Members of 
this Committee to ensure that the STB's policies and regulatory 
initiatives promote the development of a vibrant, 21st Century railroad 
network that will grow the Nation's economy, create jobs, and enhance 
our ability to compete in the world economy.
    I bring to this nomination over 30 years of private and public-
sector experience in the transportation industry including serving as a 
Director of Planning and as the chief executive of the Kansas 
Department of Transportation. My experiences have provided me with a 
broad perspective and a depth of knowledge of the transportation 
industry and have informed my approach to governing. Through that 
experience, I have gained an understanding of the importance and the 
need for pragmatic, effective and responsive regulation of the Nation's 
rail transportation system.
    As a point of reference, Kansas ranks sixth, nationally, in terms 
of total route miles, rail tons carried and rail carloads. We have 
approximately 4,700 miles of railroad track, and the state is served by 
four Class I railroads--primarily Union Pacific Railroad and BNSF 
Railway and to a lesser degree, Kansas City Southern, and Norfolk 
Southern. We have approximately 14 Class III shortline railroads, which 
originate and terminate freight in connection with long-haul service. 
Kansas shippers mostly move agricultural products, outbound, and a 
variety of commodities, including coal, inbound.
    Indeed, rail Issues were a significant part of my early public 
sector career. In 1980 I was working for Governor John Carlin when the 
Chicago, Rock Island and Pacific Railroad filed for bankruptcy. The 
state faced the imminent loss of approximately 1,080 miles of track 
providing Kansas communities and rail shippers with a significant 
economic shock. The state quickly went into action, looking for ways to 
salvage as much rail service as possible. The Governor formed a 
railroad working group and assigned me to serve as his representative 
on the group. I learned a great deal through this experience about 
crisis management and saw firsthand how much rail transportation 
matters to communities and shipper s. The experience taught me the 
value of healthy railroads, the need for shipper access to the rail 
network, and the challenge of being a captive shipper.
    In 2003, I had the privilege of being asked to serve as Kansas' 
Secretary of Transportation and did so for nine years. During my 
tenure, I worked for both Republican and Democratic governors and 
worked effectively with our state legislature. Managing the vast 
transportation sector is challenging enough without allowing partisan 
politics to complicate it further. As secretary, my primary objective 
was to make sure that our state's transportation system was meeting the 
needs of our citizens, facilitating economic growth, fostering 
innovation, promoting safety across all modes and making Kansas a 
better place to live and work and I was happy to work with anyone who 
could help accomplish these objectives. These objectives aren't unique 
to Democrats or Republicans. They are shared by both parties and, if 
confirmed, I will work with the members of this Committee to achieve 
our common goals.
    The best part of my job at KDOT was meeting with representatives 
from local communities, businesses and transportation stakeholders, and 
the people of my state. I was responsible for managing a budget of more 
than $1 billion and leading more than 3,000 employees. I logged 
thousands of miles on Kansas roads, visiting every corner of the state 
to review projects, meet with employees, and, most importantly, engage 
community leaders and stakeholders. Effective leadership of a public 
agency requires an understanding of the people served and how they are 
impacted by the decisions made. The best way to acquire that 
understanding and perspective is to get out of the office when possible 
and appropriate. If confirmed as STB Commissioner, I will work 
diligently with shippers, large and small railroads, ports authorities, 
intermodal facilities, and our partners in federal, state and local 
governments working to gain that necessary understanding and 
perspective.
    One of my major accomplishments while serving as Secretary of KDOT 
was securing the passage of ``T-WORKS'' an $8 billion transportation 
program designed to be implemented over ten years. Even as we speak, 
the program is creating and sustaining thousands of jobs, preserving 
Kansas' enviable highway infrastructure, and creating multimodal 
economic development opportunities across the state. A key feature of 
T-WORKS is its focus on public participation, ensuring that individuals 
and communities can be active participants in the decision-making 
process.
    I will also mention one additional feature of T-WORKS which may be 
of interest to these proceedings; the reauthorization of, and increase 
in the funding for, the Kansas State Rail Service Improvement Fund. 
This fund provides low-interest loans and grants to railroads and port 
authorities to preserve rail service as well as make improvements to 
service. The funds can be used for the purchase of rail cars and for 
the rehabilitation of tracks, bridges, yards, maintenance shops, 
building and sidings. T-WORKS also broadened the list of eligible 
applicants to include shippers and local units of government who 
partner with the involved railroad. It has been an extremely important 
tool in Kansas for insuring that shippers and communities have access 
to needed rail services.
    Intermodal freight is also vitally important to Kansas. That is why 
as Secretary, I personally oversaw the process of providing BNSF with a 
$35 million grant that helped the company leverage $200 million of 
private-sector investment for construction of a new intermodal yard in 
Edgerton, Kansas and worked closely with the impacted local 
governments. Recognizing the significant, positive, economic impact the 
facility would have on the State, I helped resolve business, policy and 
community-specific challenges that had to be overcome to make the 
intermodal yard a reality.
    My relatively long tenure as Secretary also allowed me to address a 
cultural problem at KDOT. Put simply, over time large public agencies 
tend to become insulated from the people they serve. Too often, this 
leads to an ``us'' and ``them'' mentality that can, if not addressed, 
result in adversarial relationships between agencies and the people and 
communities they serve. That is where we were headed when I took the 
reins at KDOT. Thankfully, we changed course. Public engagement 
meetings that were once considered pro-forma became real listening 
sessions. We made changes in projects based on what we heard. And 
slowly, everyone in the agency, long-time engineers included, came to 
understand that real engagement with the public was just a better way 
to do business. The culture change that we accomplished during my years 
as Secretary is one of my proudest accomplishments. And it's one that I 
believe will serve me well in this new role where careful attention to 
the concerns of all parties is essential to balancing their needs and 
maintaining trust in the regulatory process.
    Another characteristic of a successful government agency is 
transparency. Under my leadership, KDOT opened up many of its processes 
to more collaborative engagement and greater accountability. The 
approach taken in 2011 when we updated our comprehensive railroad plan, 
which set policy objectives based on a study of our freight and 
passenger systems, is an example. To foster an open environment we 
established a Rail Stakeholder Outreach and Involvement Plan providing 
stakeholders with multiple opportunities to express their views and to 
guide KDOT in policy development. We also created a State Rail Plan 
Advisory Committee to analyze the findings from our public outreach, 
the work of our consultants and to advise our staff.
    In addition to my public sector experience, I have experience 
working in the private sector as an industry leader and a 
transportation planner. Currently I am a Senior Consultant with 
Cambridge Systematics, Inc., a firm that specializes in transportation 
planning and policy. Previously, I was a consultant at HNTB, a national 
architectural and engineering firm, at which I provided strategic 
planning and public communication assistance to municipalities and 
state DOTs. At the national level, I chaired the Transportation 
Research Board's Executive Committee, and headed various task forces at 
the American Association of State Highway and Transportation Officials 
(AASHTO), including chairing the Standing Committee on Planning for 
nine years.
    Before closing, I want to mention my view on the importance of 
developing a balanced transportation system that provides options for 
its users whether they are shippers or passengers. I believe in 
establishing and supporting a robust passenger rail network where 
population densities make it feasible. Recognizing the important 
jurisdictional role the STB has in passenger rail matters and that many 
of the issues that will come before the Board will be cases of first 
impression, I am eager to play a productive role in helping to set the 
Nation's course in passenger rail.
    In my role as KDOT secretary, I have experience with the 
development of passenger rail. In connection with Passenger Rail 
Investment and Improvement Act (PRIIA) and High Speed Intercity 
Passenger Rail Program (HSIPR), KDOT has been actively studying 
intercity rail passenger service between Kansas City, Oklahoma City, 
and Fort Worth. In November 2011, while I was Secretary, KDOT completed 
a Service Development Plan for this line working with the FRA, AMTRAK, 
BNSF and the states of Oklahoma, Missouri and Texas.
    In closing, I am honored to appear before this Committee as the 
President's nominee for Commissioner of the Surface Transportation 
Board. If confirmed, I look forward to working actively with each of 
you and your staffs on the important issues in the rail transportation 
industry. Mr. Chairman, thank you for your consideration and for 
scheduling this hearing. I would be pleased to answer any questions 
that you and the Committee may have.
                                 ______
                                 
                      a. biographical information
    1. Name (Include any former names or nicknames used):

        Debra L Miller
        Debra L Harrison (maiden)
        Debra L McKinzie (former married name)
        Deb.

    2. Position to which nominated: Commissioner, Surface 
Transportation Board (STB).
    3. Date of Nomination: September 25, 2013.
    4. Address (List current place of residence and office addresses): 
Topeka, KS.
    5. Date and Place of Birth: 12/25/1954; Scott City, Kansas.
    6. Provide the name, position, and place of employment for your 
spouse (if married) and the names and ages of your children (including 
stepchildren and children by a previous marriage).

        Jim M. McLean (spouse), Executive Editor, KHI News Service 
        Kansas Health Institute, Topeka, KS. Children: Adam Miller 
        (child)--29, Ian McLean (stepchild)--25, Katy McLean 
        (stepchild)--30.

    7. List all college and graduate degrees. Provide year and school 
attended.

        December 1976--Kansas State University--B.A. in Sociology

    8. List all post-undergraduate employment, and highlight all 
management level jobs held and any non-managerial jobs that relate to 
the position for which you are nominated.

        June 1977 to July 1978--Executive Director of Associated 
        Students of Kansas--Management Level

        Oct. 1978 to Nov. 1980--Management Development Trainee and 
        Business Office Supervisor Southwestern Bell--Management Level.

        Nov. 1980 to Sept. 1984--Policy Aide to Governor John Carlin.

        Sept. 1984 to Mar. 1986--Special Assistant to Secretary of 
        Transportation, Kansas Department of Transportation--Management 
        Level.

        Mar. 1986 to Mar. 1997--Director Planning and Development, 
        Kansas Department of Transportation--Management Level.

        Feb. 1998 to Jan. 2003 Senior Transportation Planner for HNTB 
        Corporation.

        Jan. 2003 to Dec. 2011--Secretary of the Kansas Department of 
        Transportation--Management Level.

        2012 to present--Senior Associate, Cambridge Systematics, Inc.

    9. Attach a copy of your resume. A copy is attached.
    10. List any advisory, consultative, honorary, or other part-time 
service or positions with Federal, State, or local governments, other 
than those listed above, within the last five years.

        Eno Foundation, Member, Board of Advisors, Oct. 2011 to 
        present.

    11. List all positions held as an officer, director, trustee, 
partner, proprietor, agent, representative, or consultant of any 
corporation, company, firm, partnership, or other business, enterprise, 
educational, or other institution within the last five years.

        Board of the American Association of State Highway and 
        Transportation Officials.

        Executive Committee of the Transportation Research Board 
        (functions as a Board of Directors).

        Chair of the TRB Executive Committee 2008.

        Mark A. & Debra L. Miller Trust, Trustee (a simple, family 
        revocable trust on behalf of my child, Adam Miller. The trust 
        is described in more detail in section E.6.).

        All of my transportation clients as senior associate with the 
        consulting firm Cambridge Systematics, Inc. are listed on 
        Schedule D, Part II of my certified Executive Branch Personnel 
        Financial Disclosure Report.

    12. Please list each membership you have had during the past ten 
years or currently hold with any civic, social, charitable, 
educational, political, professional, fraternal, benevolent or 
religious organization, private club, or other membership organization. 
Include dates of membership and any positions you have held with any 
organization. Please note whether any such club or organization 
restricts membership on the basis of sex, race, color, religion, 
national origin, age, or handicap.

        Member of the Transportation Research Board's Executive 
        Committee, January 2005 to December 2010; Chair of the 
        Executive Committee, January 2008 to January 2009.

        Member of the American Association of State Highway and 
        Transportation Officials Board of Directors, January 2003 to 
        December 2011; and Chair of the organization's Standing 
        Committee on Planning, January 2003 to December 2011.

        Member of the Board of the Kansas Turnpike Authority, January 
        2003 to December 2011 (by virtue of position as Secretary of 
        KDOT).

        Member of the Eno Foundation's Board of Advisors, October 2011 
        to Present.

    13. Have you ever been a candidate for and/or held a public office 
(elected, non-elected, or appointed)? If so, indicate whether any 
campaign has any outstanding debt, the amount, and whether you are 
personally liable for that debt.
    Appointed by Governor Sebelius to be the Kansas Secretary of 
Transportation in January 2003, and reappointed by Governor Brownback 
in January 2011.
    14. Itemize all political contributions to any individual, campaign 
organization, political party, political action committee, or similar 
entity of $500 or more for the past ten years. Also list all offices 
you have held with, and services rendered to, a state or national 
political party or election committee during the same period.

        Kathleen Sebelius for Governor: Sept. 2005, $1,000; Oct. 2005, 
        $500; Dec. 2005, $500 (refunded $100 12-31-05); Aug. 2006, 
        $1,000; Sept. 2006, $1,000

        Jim Slattery for Senate: Mar. 2008, $500

        Tom Holland for Governor: July 2010, $2,000

        Kansas Democratic Party: Feb. 2012, $500

    15. List all scholarships, fellowships, honorary degrees, honorary 
society memberships, military medals, and any other special recognition 
for outstanding service or achievements.

        2011--National Highway Traffic Safety Administration Public 
        Service Award, Ingram's Magazine ``50 Kansans You Should 
        Know'', Kansas Safe Kids Award of Excellence

        2010--Transportation Research Board's W.N. Carey Jr. 
        Distinguished Service Award, Kansas Wildlife Federation 
        Conservationist of the Year

        2009--Kansas Public Transit Association Willie M. Murry Award

        2008--Kansas Public Transit Assoc. Certificate of Appreciation 
        for Visionary Leadership in Long Range Planning

        2007--Pratt Community College Alumnus of the Year, American 
        Planning Assoc. Kansas Chapter Sod Buster Award for Advancing 
        the Cause of Planning

        2004--Kansas Public Transit Association Appreciation Award

    16. Please list each book, article, column, or publication you have 
authored, individually or with others. Also list any speeches that you 
have given on topics relevant to the position for which you have been 
nominated. Do not attach copies of these publications unless otherwise 
instructed.
    As the Secretary of Transportation, I gave numerous speeches to 
civic organizations, employee groups, etc. and frequently testified 
before the Kansas Legislature. Our agency had an employee newsletter 
that included my column. The table below lists 10 presentations that I 
made as Secretary. These are representative of the public speaking I 
did when I held that position.
    Railroad topics that I would have covered either in speeches or 
testimony included support for the State's railroad loan and grant 
program that was set up for the shortline railroad industry.

------------------------------------------------------------------------
       Date                 Forum                   Speech Title
------------------------------------------------------------------------
11-09-2011         Topeka, KS               Division of Administration's
                                             All Hands Meeting
------------------------------------------------------------------------
10-06-2011         Topeka Kansas            Transportation Project
                   Press Conference          Announcement
------------------------------------------------------------------------
03-10-2010         Topeka KS Senate         T-WORKS Program Summary
                    Transportation
                    Committee
------------------------------------------------------------------------
02-06-2010         Audubon of Kansas        Acceptance Speech for the
                                             Land Stewardship and
                                            Roadside Beautification
------------------------------------------------------------------------
02-04-2010         Kansas City Chamber      Transportation Update
------------------------------------------------------------------------
02-01-2010         Kansas City MO, WTS      Women in Transportation
                    Inaugural Luncheon
------------------------------------------------------------------------
01-20-2010         Kansas House             Overview of Transportation
                    Transportation           in Kansas
                    Committee
------------------------------------------------------------------------
10-15-2009         Dodge City Kansas        SW Bypass Ribbon Cutting
------------------------------------------------------------------------
09-02-2009         Kansas Public Transit    Luncheon speaker; State of
                    Association              Transportation and Transit
                                             in Kansas
------------------------------------------------------------------------
07-22-2009         Pleasanton Kansas        Ribbon Cutting for the U.S.
                                             69 Project
------------------------------------------------------------------------

    17. Please identify each instance in which you have testified 
orally or in writing before Congress in a governmental or non-
governmental capacity and specify the date and subject matter of each 
testimony.

        February 15, 2011
        Committee on Transportation, Subcommittee on Highways and 
        Transit
        U.S. House of Representatives
        Hearing on ``Accelerating the Project Delivery Process: 
        Eliminating Bureaucratic Red Tape and Making Every Dollar 
        Count''

        March 17, 2009
        Committee on the Budget
        U.S. House of Representatives
        Hearing on ``Funding and Financing Options Available for the 
        Surface Transportation Program''

        February 6, 2008
        United States Senate Committee on Environment and Public Works
        U.S. Senate
        Hearing on ``State Perspectives on the Transportation for 
        Tomorrow Recommendations of the National Surface Transportation 
        Policy and Revenue Study Commission''

    18. Given the current mission, major programs, and major 
operational objectives of the department/agency to which you have been 
nominated, what in your background or employment experience do you 
believe affirmatively qualifies you for appointment to the position for 
which you have been nominated, and why do you wish to serve in that 
position?
    I had the privilege to serve as the Secretary of Transportation in 
Kansas for almost a decade (2003-2011), and I believe that experience 
qualifies me for appointment as a member of the STB, if I am fortunate 
enough to be confirmed. During my tenure as Secretary, I worked on 
diverse aspects of transportation policy, such as: transportation 
infrastructure matters; the transportation needs of Kansas businesses; 
the importance of public transit; and the relationships between local 
interests and transportation providers. I was responsible for a 10,000 
mile state highway system, Kansas' rural public transportation, and 
overseeing shortline railroad grants and rail planning.
    Most of my working life has been in state government. I have always 
approached that work with a service mentality. Serving the public is a 
high and honorable calling, and the public deserves committed and 
engaged public servants. It would be an honor to continue my career in 
public service at the Federal level as a member of the STB.
    My service as a state cabinet secretary has given me the confidence 
and the experience to handle myself in public and to perform under 
pressure. The STB regulates a $60 billion freight rail system that is 
vital to our national economy and the shippers and communities who rely 
on that transportation. It is therefore important to handle the 
responsibilities of a member of the STB wisely. My priority as a new 
Board member would be to dig in and learn the job. If appointed to the 
STB, I will be committed to becoming an appropriate ambassador to the 
public and the community that the Board serves.
    In my previous work life, I have used my service mentality and a 
sense of humor to create mission focus and job satisfaction for myself 
and my staff and to create constructive working relationships with the 
public and the industry constituencies that I have served. That would 
be my approach in this job if I were confirmed.
    19. What do you believe are your responsibilities, if confirmed, to 
ensure that the department/agency has proper management and accounting 
controls, and what experience do you have in managing a large 
organization?
    I take very seriously the need to maintain proper management and 
accounting controls. In a public position one has a responsibility to 
taxpayers to deliver needed, quality, competent services and products 
to them and to bring focus and commitment to the job which requires 
management and accounting controls. Doing this matters from the 
standpoint of upholding public trust and is equally important to the 
employees of an agency. Employees deserve to know that someone is 
minding the store, that their hard work is not being wasted and that 
their efforts are not being squandered by actions outside of their 
control.
    As Secretary of Transportation at the Kansas Department of 
Transportation I managed an agency of 3,200 employees with over a $1 
billion budget. In that position, I took very seriously the 
responsibility to ensure that appropriate accounting controls and 
processes were in place. As Secretary of KDOT I viewed the overall 
management of the agency as my highest responsibility, and would intend 
to maintain that viewpoint at the STB, if confirmed.
    20. What do you believe to be the top three challenges facing the 
department/agency, and why?

        Balancing freight shipper and railroad interests--As the 
        Federal agency with economic regulatory authority over freight 
        railroads, the STB must balance the interests of the shippers 
        against the interest of the railroads. Getting the balance 
        right can be difficult but is important. Over-regulation of 
        freight railroads can stifle innovation, service, and 
        investment, but over pricing shipping can be unfair and harmful 
        to shippers. Balancing the economic interests of both 
        industries and pushing for private sector negotiations where 
        possible will be important challenges at the STB.

        Passenger Service--The renewed interest in high speed passenger 
        service may present a number of challenges. For example, the 
        sharing of rail lines between passenger, commuter, and freight 
        railroads can present conflicting public policy goals and 
        conflicting economic interests of important constituencies. 
        Balancing all of these interests will be an important 
        challenge.

        Efficiency & Transparency--In today's fiscal times, a top 
        challenge facing the STB will be to find ways to operate more 
        efficiently, and to do more with less funding while still 
        carrying out its congressional mandates. It will also be 
        important that the agency demonstrate its commitment to open 
        communications and transparency.
                   b. potential conflicts of interest
    1. Describe all financial arrangements, deferred compensation 
agreements, and other continuing dealings with business associates, 
clients, or customers. Please include information related to retirement 
accounts.
    In connection with the nomination process, I have consulted with 
the Office of Government Ethics and the Surface Transportation Board's 
ethics officials to identify potential conflicts of interest. Any 
potential conflicts of interest will be resolved in accordance with the 
terms of an ethics agreement that I have entered with the Board's 
ethics official, a copy of which has been provided to this Committee.
    2. Do you have any commitments or agreements, formal or informal, 
to maintain employment, affiliation, or practice with any business, 
association or other organization during your appointment? If so, 
please explain. None.
    3. Indicate any investments, obligations, liabilities, or other 
relationships which could involve potential conflicts of interest in 
the position to which you have been nominated.
    In connection with the nomination process, I have consulted with 
the Office of Government Ethics and the Surface Transportation Board's 
ethics officials to identify potential conflicts of interest. Any 
potential conflicts of interest will be resolved in accordance with the 
terms of an ethics agreement that I have entered with the Board's 
ethics official, a copy of which has been provided to this Committee.
    4. Describe any business relationship, dealing, or financial 
transaction which you have had during the last ten years, whether for 
yourself, on behalf of a client, or acting as an agent, that could in 
any way constitute or result in a possible conflict of interest in the 
position to which you have been nominated.
    In connection with the nomination process, I have consulted with 
the Office of Government Ethics and the Surface Transportation Board's 
ethics officials to identify potential conflicts of interest. Any 
potential conflicts of interest will be resolved in accordance with the 
terms of an ethics agreement that I have entered with the Board's 
ethics official, a copy of which has been provided to this Committee.
    5. Describe any activity during the past ten years in which you 
have been engaged for the purpose of directly or indirectly influencing 
the passage, defeat, or modification of any legislation or affecting 
the administration and execution of law or public policy.
    As Secretary of Transportation, my responsibilities included 
administering and executing public policy. My responsibilities also 
included some advocacy in legislative and public policy matters. For 
example, as the Secretary I sought funding for the State's railroad 
loan and grant program for the shortline railroad industry and 
frequently would reference the program and its importance to rural 
communities in Kansas and to the State's economic growth. I also 
supported and testified in favor of legislation that provided a state 
loan mechanism and other provisions that led to the construction of a 
rail intermodal facility in Johnson County, Kansas. Additionally, I 
worked to secure passage of T-WORKS, an $8 million, 10-year 
transportation program, and a variety of major safety transportation 
measures, such as a primary seat belt law and a ban on texting while 
driving.
    Since leaving public service, I have not worked as a lobbyist or 
been hired to represent anyone before a legislative body.
    6. Explain how you will resolve any potential conflict of interest, 
including any that may be disclosed by your responses to the above 
items.
    In connection with the nomination process, I have consulted with 
the Office of Government Ethics and the Surface Transportation Board's 
ethics officials to identify potential conflicts of interest. Any 
potential conflicts of interest will be resolved in accordance with the 
terms of an ethics agreement that I have entered with the Board's 
ethics official, a copy of which has been provided to this Committee.
                            c. legal matters
    1. Have you ever been disciplined or cited for a breach of ethics 
by, or been the subject of a complaint to any court, administrative 
agency, professional association, disciplinary committee, or other 
professional group? If so, please explain. No.
    2. Have you ever been investigated, arrested, charged, or held by 
any Federal, State, or other law enforcement authority of any Federal, 
State, county, or municipal entity, other than for a minor traffic 
offense? If so, please explain. No.
    3. Have you or any business of which you are or were an officer 
ever been involved as a party in an administrative agency proceeding or 
civil litigation? If so, please explain.
    As Secretary of the Department of Transportation, I was named in my 
official capacity when legal action was brought against the agency. I 
have been personally named in a few situations when an employee was 
either dismissed or did not get promoted. No findings of wrongdoing 
have ever been found against me.
    4. Have you ever been convicted (including pleas of guilty or nolo 
contendere) of any criminal violation other than a minor traffic 
offense? If so, please explain. No.
    5. Have you ever been accused, formally or informally, of sexual 
harassment or discrimination on the basis of sex, race, religion, or 
any other basis? If so, please explain.
    I long with others was accused of sexual discrimination in my 
official capacity by a female employee who did not receive a promotion. 
I was the Director of Planning and Development at the Kansas Department 
of Transportation in 1988 when the allegation was made. No findings of 
wrongdoing were made as to me.
    6. Please advise the Committee of any additional information, 
favorable or unfavorable, which you feel should be disclosed in 
connection with your nomination. None to my knowledge.
                     d. relationship with committee
    1. Will you ensure that your department/agency complies with 
deadlines for information set by congressional committees? Yes.
    2. Will you ensure that your department/agency does whatever it can 
to protect congressional witnesses and whistle blowers from reprisal 
for their testimony and disclosures? Yes.
    3. Will you cooperate in providing the Committee with requested 
witnesses, including technical experts and career employees, with 
firsthand knowledge of matters of interest to the Committee? Yes.
    4. Are you willing to appear and testify before any duly 
constituted committee of the Congress on such occasions as you may be 
reasonably requested to do so? Yes.
                          resume of deb miller
Experience
2012 to present--Senior Associate, Cambridge Systematics, Inc.

Responsibilities: Project Management, Business Development, Senior 
Advisor

Key Accomplishments:

   Invited by TRB to facilitate one of the premier events at 
        the 2012 Annual Meeting, ``A Conversation with the U.S. 
        Secretaries''

   Advising FHWA and creating the prototype for their 
        performance reporting

   Member of the team leading FHWA performance management 
        regional workshops for state DOTs, transit agencies, and MPOS, 
        responsible for facilitating the group discussion

   Asked to facilitate a TRB initiated dialog on 
        ``Transitioning from Reliance on Fuel Taxes to Other User-Paid 
        Alternatives''--A Planning Meeting
2003 to 2011--Secretary, Kansas Department of Transportation

Responsibilities: Directed a transportation agency with a $1 billion+ 
budget and 3,100 employees. Responsible for a 10,000 mile state highway 
system, rural public transportation, shortline railroad grants and rail 
planning, regional and community airport grant program, and assistance 
to cities and counties. Served on the Governor's cabinet and as a board 
member of the Kansas Turnpike Authority.

Key Accomplishments at KDOT:

    Cultural Change

   Transformed the agency's culture to be more collaborative, 
        transparent, and accountable to the public

   Significantly improved the agency's working relationship 
        with cities and counties

   Decentralized the decision-making process giving greater 
        authority to Districts

   Rebuilt the senior leadership team at the Department after 
        key retirements and to support evolving priorities

   Instituted agency-wide performance measures along with a 
        reporting structure

    Program Delivery

   Completed and delivered every major project under the ten-
        year, Kansas Comprehensive Transportation Program despite the 
        loss of nearly $1 billion in funding

   Created a new financial unit and instituted significantly 
        tighter fiscal controls

   Eliminated 5 percent of the department's positions in 
        anticipation of a difficult economy

   Secured authority for first design/build project in Kansas

   Changed project development thinking from ``here's the 
        scope, what does it cost?'' to ``here's the budget, what can we 
        build?''

    Transportation Funding Legislation Authorized

   Secured passage of T-WORKS, an $8 billion, 10 year program 
        funded through a sales tax increase and an increase in truck 
        registrations, during difficult economic times:

     Used a multi-year, collaborative engagement process to 
            craft proposals and projects that had strong community 
            support and credibility

     Developed an economic impact analysis process to show 
            linkages between transportation projects, the economy and 
            job creation

    Other Legislation Approved

   Crafted a financing approach enacted in law which allowed an 
        intermodal facility, a major economic development opportunity, 
        to be constructed

   Gained passage of major, key safety measures:

     Primary seatbelt law

     Booster seat law

     Graduated Drivers Licensing (GDL) requirements for 
            teens

     Texting ban

    National Level/International Level Experience

   Chair of AASHTO's Standing Committee on Planning for nine 
        years

   Led multiple taskforces and working groups on behalf of 
        AASHTO, including two on speeding up project delivery and one 
        on performance based planning and programming

   Chair of the TRB Executive Committee in 2008

   Testified to Congress on behalf of AASHTO

   Participated in an international discussion on 
        transportation performance management hosted by the Bipartisan 
        Policy Center in Bellagio, Italy

   Provided an overview of U.S. transportation finance for a 
        Chinese government audience in Beijing, China for a project 
        funded by the Asian Development Bank

    Key Accomplishments: KTA

   Reduced operating costs of the turnpike by $1 million in 
        anticipation of a slow-down in traffic
1998 to 2003--Senior Planner for HNTB

Responsibilities: Provided strategic planning and public engagement 
assistance to public sector clients

Key Accomplishments:

   Developed several successful community engagement approaches 
        to make difficult decisions about corridor alignment, project 
        design, etc.

   Updated the priority formulas used by KDOT to select 
        projects

   Participated in the development of Long-Range Transportation 
        Plans in Missouri, Louisiana, and Kansas
1986 to 1997--Director of Planning and Development, Kansas Department 
        of Transportation

Responsibilities: Supervised a staff of 105 with a budget of $30 
million. Coordinated Congressional affairs and analysis of national 
issues for KDOT. Assembled the state construction program, managed the 
rail, public transit and safety programs

Key Accomplishments:

   Established credibility with the staff, agency, and core 
        constituents, overcoming a perception that I was too young and 
        an outsider

   Core member of the team that secured passage of the Kansas 
        Comprehensive Highway Program (CHP), the largest infrastructure 
        program ever passed in Kansas at that time

   Developed national reputation for understanding 
        authorization issues
1984 to 1986--Special Assistant to Secretary of Transportation Kansas 
        Department of Transportation

Responsibilities: Served as liaison to the Legislature and Governor. 
Supervised Office of Inspector General. Prepared speeches, talking 
points and briefing materials for Secretary

Key Accomplishments:

   Led a task force to increase the number of women working at 
        KDOT

   Served as hearing office for all DBE/WBE appeals
1980 to 1984--Policy Aid, Office of Governor John Carlin

Responsibilities: Policy analysis and legislative coordination for 
transportation, environment, energy and regulatory issues

Key Accomplishments:

   All personally assigned legislation passed by the 
        Legislature

   Member of the team that worked on the Governor's agenda, 
        which included passage of the following landmark legislation: 
        construction of a transportation program; a, constitutional 
        amendment to reclassify property; creation of a state lottery; 
        first time ever severance tax; increased funding for education
1978 to 1980--Management Development Trainee, Southwestern Bell

Responsibilities: Managed eight Business Office service representatives

Key Accomplishments:

   Moved my unit from last in all metrics (out of six units) to 
        first in the space of a few months
1977 to 1978--Executive Director, Associated Students of Kansas

Responsibilities: Managed the organization's six university campus 
operations. Working with the Board, developed the organization's policy 
positions. Represented the organization before the Legislature, Board 
of Regents, and Governor

Key Accomplishments:

   Successfully lobbied for increase in work study pay

   Gained insights into how to manage an association and work 
        with strong personalities

   Learned the ``real'' legislative process, not the 
        theoretical one.
Major Awards




2011                  National Highway Traffic Safety Administration
                       Public Service Award
                      Ingram's Magazine ``50 Kansans You Should Know''
                      Kansas Safe Kids Award of Excellence

2010                  Transportation Research Board's W.N. Carey Jr.
                       Distinguished Service Award
                      Kansas Wildlife Federation Conservationist of the
                       Year

2009                  Kansas Public Transit Association Willie M. Murry
                       Award

2008                  Kansas Public Transit Association Certificate of
                       Appreciation for Visionary Leadership in Long
                       Range Planning

2007                  Pratt Community College Alumnus of the Year
                      American Planning Assoc. Kansas Chapter Sod Buster
                       Ward for Advancing the Cause of Planning

2004                  Kansas Public Transit Association Appreciation
                       Award


Education
Kansas State University, BA in Sociology, 1976

   Magna Cum Laude

   Phi Beta Kappa

   John Thurlow Hill award for outstanding senior sociologist

    Attended Pratt Community College

    The Chairman. Thank you very much. And your timing was 
impeccable. Five minutes on the dot.
    Mr. Arun Kumar, to be Assistant Secretary for Global 
Markets and Director General of the U.S. and Foreign Commercial 
Service.
    We welcome you, sir.

           STATEMENT OF ARUN KUMAR, NOMINEE TO BE THE

           ASSISTANT SECRETARY FOR GLOBAL MARKETS AND

      DIRECTOR GENERAL OF THE U.S. AND FOREIGN COMMERCIAL

          SERVICE, INTERNATIONAL TRADE ADMINISTRATION,

                  U.S. DEPARTMENT OF COMMERCE

    Mr. Kumar. Thank you.
    Chairman Rockefeller, Ranking Member Thune, members of the 
Commerce Committee, thank you for this opportunity to appear 
before you.
    When I landed at Boston's Logan Airport the Labor Day 
weekend of 1978, I would not have dreamed that 35 years later I 
would be here in front of this august committee of the Senate 
of the United States of America.
    Three days later, on my first day at MIT, one of my 
classmates remarked that I seemed shell-shocked. It must have 
shown on my face how different an experience America was for 
me. This, despite the fact that I had grown up on a staple of 
American history and literature, from the ample shelves of the 
United States Information Service library in my hometown of 
Trivandrum, India. I had been inspired by the accomplishments 
and eloquence of America's historic leaders--Washington, 
Jefferson, Franklin, Lincoln. I had been moved by the words of 
John F. Kennedy and Martin Luther King.
    If I seemed shell-shocked then, today I feel a sense of awe 
and honor to be here in this great city where many of those 
heroes influenced the trajectory of this great nation. I am 
humbled to have the chance to talk to you of my interest in 
serving this great country that has been my home for almost all 
of my adult life and has offered me so many great 
opportunities.
    I am deeply grateful to President Obama for nominating me 
and to Secretary Pritzker for her confidence and support.
    With me today to share in this experience are my wife of 35 
years, Poornima--while, Debra, in your case, you have a good 
match here, some people say that I married up. You married 
well, I married up.
    [Laughter.]
    Mr. Kumar.--and my sons, Ashvin and Vikram.
    Our entire life together, as a married couple and then as a 
family, has been in this great country. A molecular biologist 
by training, Poornima has worked in the biotech industry in 
California for the last 25 years. Our sons, Ashvin and Vikram, 
were born in Palo Alto, California. Ashvin lives in Mountain 
View, California, and is founder and CEO of a Silicon Valley e-
commerce company, and Vikram works here in Washington for an 
Internet company.
    My family has gained from the best of what America offers. 
I am before you today because I feel impelled to give back to 
this great country.
    My almost 40 years of business experience, global 
orientation, and engagement with broad industry issues has 
prepared me for the role with regard to which I appear before 
you.
    My experience comprises a blend of leadership roles in a 
large organization, KPMG, with 23,000 people in the U.S., and 
in entrepreneurial organizations in Silicon Valley. Prior to 
KPMG, I was involved in founding three companies in Silicon 
Valley, covering the entire cycle from the business plan stage 
through funding, staffing, product development, manufacture, 
and sales.
    In my advisory career, I have worked with companies in 
North America, Europe, and Asia. I founded the U.S. India 
Practice at KPMG to assist U.S. companies with their entry into 
the Indian market and Indian companies with investing and 
operating in the U.S. I was a Member of the Board of Directors 
of KPMG Americas. Over the years, I have been involved in 
business negotiations in the Americas, Asia, and Europe. As a 
member of the board of directors of the U.S. India Business 
Council, I have been deeply engaged in the mission of promoting 
U.S. exports to India.
    In my new role, should I be confirmed, I will strive to 
execute our national priorities of increasing exports as well 
as increasing the amount of foreign direct investment in our 
country and our communities, both with the express purpose of 
creating valuable jobs here in America.
    In the past couple of weeks, I have had the opportunity to 
meet with a number of the dedicated civil servants who 
constitute the leadership of the International Trade 
Administration's Global Markets and the U.S. and Foreign 
Commercial Service. I find their knowledge and desire to help 
American businesses succeed at home and abroad to be inspiring.
    If confirmed, I look forward to having the opportunity to 
lead this organization and will come to it with my global 
experience and business background that I believe can help 
enhance its effectiveness.
    As the Assistant Secretary for Global Markets, should I be 
confirmed, I would like to strengthen the focus on the markets 
offering the biggest opportunities for American products and 
services and on orchestrating efforts to increase our market 
share in those markets. I would make sure that my organization 
fully embraces efforts to work with cities and communities 
across this great country to attract foreign direct investment 
to create high-value jobs.
    The creation of high-value jobs and the enhancement of our 
global businesses are of critical importance to the wellbeing 
of our people, the strength of our economy, and our influence 
in the world. I would look to you for ideas, support, and 
counsel to help Global Markets contribute to its important 
goals in the service of our country.
    Thank you for your consideration of my nomination.
    [The prepared statement and biographical information of Mr. 
Kumar follow:]

   Prepared Statement of Arun Madhavan Kumar, Nominee for Assistant 
   Secretary for Global Markets and Director General of the U.S. and 
    Foreign Commercial Service, International Trade Administration, 
                      U.S. Department of Commerce
    When I landed at Boston's Logan airport the Labor Day weekend of 
1978, I would not have dreamed that 35 years later, I would be here in 
front of this august committee of the Senate of the United States of 
America.
    Three days later, on my first day at MIT, one of my classmates 
remarked that I seemed shell-shocked. It must have shown on my face how 
different an experience America was for me. This despite the fact that 
I had grown up on a staple of American history and literature, from the 
ample shelves of the United States Information Service library in my 
hometown of Trivandrum. I had been inspired by the accomplishments and 
eloquence of America's historic leaders--Washington, Jefferson, 
Franklin, Lincoln. I had been moved by the words of John F Kennedy and 
Martin Luther King.
    If I seemed shell shocked then, today I feel a sense of awe and 
honor to be here in this great city where many of those heroes 
influenced the trajectory of this great nation., I am humbled to have 
this chance to talk to you of my interest in serving this great country 
that has been my home for almost all of my adult life and has offered 
me so many great opportunities. I am deeply grateful to President Obama 
for nominating me and to Secretary Pritzker for her confidence and 
support.
    With me today, to share in this experience, are my wife of 35 
years, Poornima and my sons Ashvin and Vikram. Our entire life 
together, as a married couple and then as a family, has been in this 
great country. A molecular biologist by training, Poornima has worked 
in the biotech industry in California for the last 25 years. Our sons, 
Ashvin and Vikram, were born in Palo Alto, California. Ashvin lives in 
Mountain View, California, and is founder and CEO of a Silicon Valley 
e-commerce company, and Vikram works here in Washington for an Internet 
company. Ashvin's wife Melisa was born in Georgia, and is a physician 
in San Jose, California. Ashvin, Melisa and Vikram are graduates of 
great American universities: Stanford, Emory and New York University. 
In addition, my late father-in-law was a Fullbright scholar from India 
and earned his graduate degree from Harvard University in 1955. Thus 
three generations of my family have gained from the best of what 
America offers.
    I am before you today as I feel impelled to give back to this great 
country. My late father, who was a public servant in India all his 
life, and my high school headmaster both taught that it is more 
important to give than to receive. It is in that spirit that I would 
like to pursue this calling of public service.
    My almost forty years of business experience, global orientation 
and engagement with broad industry issues has prepared me for the role 
with regard to which I appear before you.
    My experience comprises a blend of leadership roles in a large 
organization (KPMG, with 23,000 people in the U.S.) and in 
entrepreneurial organizations in Silicon Valley. Prior to KPMG, I was 
involved in founding three companies in Silicon Valley, covering the 
entire cycle from the business plan stage through funding, staffing, 
product development, manufacture and sales.
    In my advisory career, I have worked with companies in North 
America, Europe and Asia. I founded the U.S. India Practice at KPMG, to 
assist U.S. companies with their entry into the Indian market and 
Indian companies with investing and operating in the U.S. I was a 
member of the Board of Directors of KPMG Americas. Over the years, I 
have been involved in business negotiations in the Americas, Asia and 
Europe.
    As a Member of the Board of Directors of the U.S. India Business 
Council (USIBC), I have been deeply engaged in the mission of promoting 
U.S. exports to India.
    In my new role, should I be confirmed, I will strive to execute our 
national priorities of increasing exports as well as increasing the 
amount of foreign direct investment in our country and our communities, 
both with the express purpose of creating valuable jobs here in 
America.
    In the past couple of weeks, I have had the opportunity to meet 
with a number of the dedicated civil servants who constitute the 
leadership of the International Trade Administration's Global Markets 
and the U.S. and Foreign Commercial Service. I find their knowledge and 
desire to help American businesses succeed at home and abroad to be 
inspiring. If confirmed, I look forward to having the opportunity to 
lead this organization and will come to it with my global experience 
business background that I believe can help enhance its effectiveness.
    As the Assistant Secretary for Global Markets, should I be 
confirmed, I would like to strengthen the focus on the markets offering 
the biggest opportunities for American products and services, and on 
orchestrating efforts to increase our market share in those markets. I 
would make sure that my organization fully embraces efforts to work 
with cities and communities across this great country to attract 
foreign direct investment to create high value jobs. The creation of 
high value jobs and the enhancement of our global business are of 
critical importance to the well-being of our people, the strength of 
our economy and our influence in the world. I would look to you for 
ideas, support and counsel to help Global Markets contribute to its 
important goals in the service of our country.
    Thank you for your consideration of my nomination. I am happy to 
answer any questions you may have.
                                 ______
                                 
                      a. biographical information
    1. Name (Include any former names or nicknames used): Arun Madhavan 
Kumar (formerly used, until about 1980, Madhavan Arun Kumar).
    2. Position to which nominated: Assistant Secretary, Commerce and 
Director General, U.S. and Foreign Commercial Service.
    3. Date of Nomination: October 7, 2013.
    4. Address (List current place of residence and office addresses):

        Residence: Information not released to the public.

        Office: None, retired on September 30, 2013 from KPMG LLP, 3975 
        Freedom Circle Drive, Santa Clara, CA 95054.

    5. Date and Place of Birth: November 25, 1952; Mavelikkara, India.
    6. Provide the name, position, and place of employment for your 
spouse (if married) and the names and ages of your children (including 
stepchildren and children by a previous marriage).

        Spouse: Poornima Kumar, not employed. Children: son--Ashvin 
        Arun Kumar, 31 years; son--Vikram Menon Kumar, 28 years.

    7. List all college and graduate degrees. Provide year and school 
attended.

        Massachusetts Institute of Technology, Sloan School of 
        Management, SM (Master of Science) in Management, 1980.

        University College, University of Kerala, Trivandrum, India. 
        Bachelor of Science (BSc) in Physics. 1972

    8. List all post-undergraduate employment, and highlight all 
management level jobs held and any non-managerial jobs that relate to 
the position for which you are nominated.

        KPMG LLP (including KPMG Consulting/BearingPoint) (1995-2013) 
        Retired on September 30, 2013.
        Note: KPMG LLP spun out KPMG Consulting Inc. (which changed its 
        name to BearingPoint Inc. and went public) in February 2000. I 
        transitioned into this new entity. I returned to KPMG LLP from 
        BearingPoint Inc. in March 2005, following a four month break 
        after leaving BearingPoint in October 2004.

        Member of the Board of Directors (2008-2013) (The highest 
        governing body of KPMG LLP)

        Member of Audit, Finance & Operations Committee (4 years), 
        Compensation Committee (2 years), Partnership and Employer of 
        Choice Committee (2 years), Partner Rights Committee (1 year), 
        Professional Practice and Ethics Committee (1 year). Member of 
        the Board of Directors of KPMG Americas (4 years).

     Leader, Management Consulting/Finance Management, West 
            (2005-2013)

     Leader, U.S. India Practice (2007-2013)

     Strategic Alliance Leader for a key alliance (2011-2013)

     Finance Management leader, KPMG LLP/KPMG Consulting Inc/
            BearingPoint Inc. (1995-2004)

        Planning & Logic Inc. (1993-1995)
        Chief Executive Officer, Member, Board of Directors, and 
        founder.

        Netlabs Inc. (1991-1993)
        Co-founder and Chief Financial Officer.

        Elite Microelectronics Inc. (1990-1991)
        Chief Financial Officer.

        Silicon Graphics Inc. (1989-1990)
        Director of Planning & Management Information.

        Cydrome Inc. (1984-1988)
        Co-founder, Chief Financial Officer, Vice President, 
        Operations, and Member of the Board of Directors.

        Elxsi Inc. (1980-1984)
        Controller.

        Tata Administrative Service (TAS) and Nelco, Mumbai, India 
        (1973-1978)
        Central management cadre of the Tata Group. Assigned to Nelco, 
        the electronics company of the group.

    9. Attach a copy of your resume. A copy is attached.
    10. List any advisory, consultative, honorary, or other part-time 
service or positions with Federal, State, or local governments, other 
than those listed above, within the last five years. None.
    11. List all positions held as an officer, director, trustee, 
partner, proprietor, agent, representative, or consultant of any 
corporation, company, firm, partnership, or other business, enterprise, 
educational, or other institution within the last five years.

        Principal/Partner and Member, Board of Directors, KPMG LLP 
        (2008-2013)

        Member, Board of Directors, U.S. India Business Council. 
        Member, Executive Committee, Chair of the Finance Committee. 
        (2007-2013)

        Member, Board of Governors, Asian School of Business, 
        Trivandrum, India (2006-2013)

        Executive Advisory Board, University of California, Santa Cruz. 
        (2009-2011)

        Foundation for Excellence, Santa Clara, CA. Member, Board of 
        Directors. (2012 to present)

    12. Please list each membership you have had during the past ten 
years or currently hold with any civic, social, charitable, 
educational, political, professional, fraternal, benevolent or 
religious organization, private club, or other membership organization. 
Include dates of membership and any positions you have held with any 
organization. Please note whether any such club or organization 
restricts membership on the basis of sex, race, color, religion, 
national origin, age, or handicap.

        Fremont Hills Country Club, Los Altos Hills. (2011 to present)

        TiE (The Indus Entrepreneurs) Silicon Valley (2005-2008). 
        Continuing to serve on the Nominating Committee. Chaired TiE 
        Economic Forum (2005-2010).

        Kerala International Centre, Trivandrum, India. (2012 to 
        present)

        Startup Village, Kochi, Advisory Council. (2011-2013)

    13. Have you ever been a candidate for and/or held a public office 
(elected, non-elected, or appointed)? If so, indicate whether any 
campaign has any outstanding debt, the amount, and whether you are 
personally liable for that debt. No.
    14. Itemize all political contributions to any individual, campaign 
organization, political party, political action committee, or similar 
entity of $500 or more for the past ten years. Also list all offices 
you have held with, and services rendered to, a state or national 
political party or election committee during the same period.



2004                       $2,000    John Kerry for President
2008                       $2,300    Barack Obama, Obama for America
2009                         $800    KPMG Partners/Principals &
                                      Employees PAC
2009                         $500    Raj Goyle, Raj Goyle for Congress
2010                         $800    KPMG Partners/Principals &
                                      Employees PAC
2010                       $1,000    Charles E Schumer, Friends of
                                      Schumer
2011                         $800    KPMG Partners/Principals &
                                      Employees PAC
2012                       $2,500    Barack Obama, Obama for America
2012                         $800    KPMG Partners/Principals &
                                      Employees PAC
2013                         $800    KPMG Partners/Principals &
                                      Employees PAC
2013                       $1,000    Aneesh Chopra, Chopra for Virginia
                                      Lt Governor
2013                       $2,500    Rohit Khanna, Ro for Congress


    15. List all scholarships, fellowships, honorary degrees, honorary 
society memberships, military medals, and any other special recognition 
for outstanding service or achievements.

        J N Tata Scholarship (Jamsetji Nusserwnaji Tata Endowment 
        Scholarship), 1978-80

        National Science Talent Scholar, India, 1969-72

        The President's Medal, Lawrence School, Lovedale, India 1969

    16. Please list each book, article, column, or publication you have 
authored, individually or with others. Also list any speeches that you 
have given on topics relevant to the position for which you have been 
nominated. Do not attach copies of these publications unless otherwise 
instructed.

        Co-editor of Kerala's Economy, Crouching Tiger, Sacred Cows, 
        published by DC Books, 2006.

        Author of a book of poetry, Plain Truths, published by Current 
        Books, 2010.

        Co-author of Advancing the Bi-Hemispheric Partnership, 
        published in connection with President Obama's visit to India, 
        November 2010.

        Authored articles The India Imperative, May 2010, and Big Data: 
        A Boon to Business Intelligence, in Finance Executive, 
        September 2012.

        Authored KPMG paper, The India Imperative: A Janus Strategy for 
        the Global Corporation (published in Finance Executive), April 
        2010, and India Prospective, June 2008.

        Authored article, The Yin and the Yang of Business, in Business 
        Line, May 2007.

        Contributed to KPMG publications, Velocity, Visibility, Value 
        and Piecing Together the Performance Puzzle and to annual white 
        papers on planning and forecasting, from 2009 onwards.

    17. Please identify each instance in which you have testified 
orally or in writing before Congress in a governmental or non-
governmental capacity and specify the date and subject matter of each 
testimony. None.
    18. Given the current mission, major programs, and major 
operational objectives of the department/agency to which you have been 
nominated, what in your background or employment experience do you 
believe affirmatively qualifies you for appointment to the position for 
which you have been nominated, and why do you wish to serve in that 
position?
    Through much of my career, my work experience has focused on 
elements of business leadership, global orientation and engagement with 
broad industry issues covering domestic and international initiatives. 
I have demonstrated experience in forward thinking, collaboration, team 
leadership and management of complex issues. I am confident that these 
experiences will help me successfully lead the International Trade 
Administration's Global Markets organization and encourage thought 
leadership and innovation throughout the organization.

  1.  Extensive management, entrepreneurial and diverse business 
        leadership experience. I have had a unique blend of leadership 
        roles in a large organization (KPMG, with 23,000 people in the 
        U.S.), in entrepreneurial organizations in Silicon Valley, and 
        in a large conglomerate in India before I came to the U.S. for 
        graduate study. Prior to KPMG, I was involved in founding three 
        companies in Silicon Valley, covering the entire cycle from the 
        business plan stage through funding, staffing, product 
        development, manufacture and consumer sales. I thus have the 
        understanding of the dynamics of both entrepreneurial ventures 
        and large organizations. I understand how to address diverse 
        challenges and make considered business decisions to benefit an 
        organization and its many stakeholders.

  2.  Global orientation: For the last 18 years, I have been in the 
        advisory business, serving global clients primarily in the area 
        of finance management. I have worked with companies in North 
        America, Europe and Asia. I founded the U.S. India Practice at 
        KPMG, to assist U.S. companies with their entry into the Indian 
        market and Indian companies with acquiring and operating in the 
        U.S. I have worked with KPMG professionals globally--presenting 
        at KPMG internal meetings and have developed connections with 
        senior KPMG leaders in many countries. I serve on the Board of 
        Directors of KPMG Americas. Previously, in my role leading 
        entrepreneurial ventures, I was involved in business 
        negotiations and deals in Japan, Singapore and Taiwan. I 
        started my professional life with five years as a member of the 
        select management cadre of the Tata Group, India, where I 
        worked directly for its recently retired chairman. I thus 
        gained an understanding of the dynamics of working in that 
        country before I came to the U.S. for graduate studies. The 
        lessons I learned over the years will help me if I am confirmed 
        to lead Global Markets. My in depth international experience 
        gives me a strong understanding of the importance of the global 
        market and how to operate in it.

  3.  Involvement in broad industry issues: As a member of the Board of 
        Directors of the U.S. India Business Council (USIBC), I have 
        been deeply engaged in the mission of promoting U.S. exports to 
        India. I was part of the Executive Delegation that the USIBC 
        organized in connection with President Obama's visit to India 
        in November 2010 I co-authored a white paper that was 
        distributed at his first meeting with Indian business leaders 
        during that visit. The experience I gained working in and with 
        India easily translates to markets around the globe. Developing 
        countries and top-tier markets are critically important to the 
        U.S. economy and for supporting American jobs and I am 
        confident that my international experience along with my broad 
        industry experience will guide me in leading this organization.

  4.  Innovation, strategy and out-of-the-box orientation: My career 
        continuously demonstrates that I have been a thought leader. At 
        KPMG I developed new consulting frameworks and solutions. As an 
        entrepreneur, I helped develop unique companies and strategies 
        to take advantage of evolving market opportunities, I have 
        also, in my Board role, focused on strategy issues and tried to 
        bring an innovation mindset to the deliberations. I encourage 
        my colleagues to think in new and creative ways to accomplish 
        stated goals, develop new strategies and advance the 
        organization. I will translate these experiences and my 
        creative approach to help advance the Global Markets 
        initiatives to help American companies and employees succeed in 
        the global marketplace.

    I wish to serve for two reasons.

        First, I firmly believe in the value of public service, of 
        giving back, especially to this country that has given me so 
        much. Having had a successful career in business, the time is 
        exactly right for me to focus my energies on giving back. I 
        would be honored to serve our country and this President. I 
        would consider it an honor to work with the United States 
        Congress to help America's businesses succeed and keep our 
        economy strong.

        Second, I believe deeply in the significance of the goals of 
        the Commerce Department. The creation of high value jobs and 
        the enhancement of our global business are of critical 
        importance to the well-being of our people, the strength of our 
        economy and our influence in the world. Commercial diplomacy 
        plays an important role in our international relations and I 
        believe I have the experience, drive and desire to advance 
        these important relationships.

    19. What do you believe are your responsibilities, if confirmed, to 
ensure that the department/agency has proper management and accounting 
controls, and what experience do you have in managing a large 
organization?
    I believe a significant responsibility of mine will be to ensure we 
have good management and enforce good governance. I will develop 
measures to track needs and successes and seek to enhance, as needed, 
management and accounting controls, supporting the organization's CFO, 
general counsel and other stakeholders.
    As a partner and member of the Board of Directors of a major public 
accounting firm, KPMG LLP, I have been trained in the importance of 
proper controls and compliance. I have served as the Chair of the 
firm's Audit Committee, with a repo1ting line coming up to me from our 
Chief Internal Audit Executive as well as the Chair of our Partnership 
Audit Committee.
    I have experience in leading the Western region business in 
management consulting at KPMG and various practices at KPMG over the 
years.
    I also founded and led the firm's U.S. India Practice, coordinating 
a large number of people between the two countries in the areas of 
audit, tax and advisory services.
    Finally, I have worked with a number of our clients in large scale 
transformation of their organizations, processes and systems.
    Having a vision and being able to develop and communicate it so 
that all employees, world-wide, understand and internalize it will also 
be an important part of what I do. Ensuring a clear mission, goals and 
measurements will be important to my success and that of the 
organization.
    20. What do you believe to be the top three challenges facing the 
department/agency, and why?
    I'd first like to share what I think are the three top 
opportunities:

  1.  Drive the President's agenda to increase annual exports to $3 
        trillion, and thereby generate American jobs.

  2.  Promote Foreign Direct Investment into the U.S., with the goal of 
        enhancing job creation.

  3.  Align and coordinate the initiatives of a diverse and dispersed 
        employee base, and with multiple agencies in the Administration 
        to help achieve the above two goals.

    The top three challenges facing the agency, in my view, are to:

  1.  Developing the resources needed to accomplish President Obama's 
        goal of increasing annual exports to help strengthen the 
        Nation's economy and create and support well-paying American 
        jobs. Staffing and financial constraints will offer challenges 
        that will require creativity and resourcefulness in dealing 
        with to ensure progress.

  2.  Educating a diverse population on why foreign investment in the 
        United States is important and good for our economy. This is 
        not well understood. Developing the resources and creating 
        visibility through a strong communications plan that highlights 
        success stories will be critical. Establishing robust ways to 
        track successes appears to me an area that still needs to be 
        developed.

  3.  Ensuring a department-wide and government-wide ability to set 
        goals, share information, develop relationships and speak with 
        a common voice can be a challenge. With different missions 
        focusing on singular goals, such harmonization can prove 
        difficult. I believe therefore it is important to create an 
        environment that is open and trusting and that encourages 
        sharing information and opportunities.
                   b. potential conflicts of interest
    1. Describe all financial arrangements, deferred compensation 
agreements, and other continuing dealings with business associates, 
clients, or customers. Please include information related to retirement 
accounts.
    KPMG Long Term Compensation Plan, entailing monthly payments of 
$7,419 for 121 months starting October 1, 2013.
    2. Do you have any commitments or agreements, formal or informal, 
to maintain employment, affiliation, or practice with any business, 
association or other organization during your appointment? If so, 
please explain. No.
    3. Indicate any investments, obligations, liabilities, or other 
relationships which could involve potential conflicts of interest in 
the position to which you have been nominated.
    In connection with the nomination process, I have consulted with 
the Office of Government Ethics and the Department of Commerce's 
designated agency ethics official to identify potential conflicts of 
interest. Any potential conflicts of interest will be resolved in 
accordance with the terms of an ethics agreement that I have entered 
into with the Department of Commerce's designated agency ethics 
official and that has been provided to this Committee. I am not aware 
of any other potential conflicts of interest.
    4. Describe any business relationship, dealing, or financial 
transaction which you have had during the last ten years, whether for 
yourself: on behalf of a client, or acting as an agent, that could in 
any way constitute or result in a possible conflict of interest in the 
position to which you have been nominated.
    In connection with the nomination process I have consulted with the 
Office of Government Ethics and the Department of Commerce's designated 
agency ethics official to identify potential conflicts of interest. Any 
potential conflicts of interest will be resolved in accordance with the 
terms of art ethics agreement that I have entered into with the 
Department of Commerce's designated agency ethics official and that has 
been provided to this Committee. I am not aware of any other potential 
conflicts of interest.
    5. Describe any activity during the past ten years in which you 
have been engaged for the purpose of directly or indirectly influencing 
the passage, defeat, or modification of any legislation or affecting 
the administration and execution of law or public policy. None.
    6. Explain how you will resolve any potential conflict of interest, 
including any that may be disclosed by your responses to the above 
items.
    In connection with the nomination process, I have consulted with 
the Office of Government Ethics and the Department of Commerce's 
designated agency ethics official to identify potential conflicts of 
interest. Any potential conflicts of interest will be resolved in 
accordance with the terms of an ethics agreement that I have entered 
into with the Department of Commerce's designated agency ethics 
official and that has been provided to this Committee. I am not aware 
of any other potential conflicts of interest.
                            c. legal matters
    1. Have you ever been disciplined or cited for a breach of ethics 
by, or been the subject of a complaint to any court, administrative 
agency, professional association, disciplinary committee, or other 
professional group? If so, please explain. No.
    2. Have you ever been investigated, arrested, charged, or held by 
any Federal, State, or other law enforcement authority of any Federal, 
State, county, or municipal entity, other than for a minor traffic 
offense? Ifso, please explain. No.
    3. Have you or any business of which you are or were an officer 
ever been involved as a party in an administrative agency proceeding or 
civil litigation? If so, please explain.
    As is the case with all major accounting firms, from time to time 
KPMG LLP (the Firm in which I was a Partner until September 30, 2013) 
has been named as a defendant in lawsuits and administrative 
proceedings by regulatory bodies, and in private civil lawsuits, 
particularly when one of the Firm's clients suffers an economic 
downturn. Understandably, the details of such litigation matters are 
sensitive and highly confidential. Personally, I have not been named as 
a defendant or respondent in any such agency proceeding or civil 
litigation matter.
    4. Have you ever been convicted (including pleas of guilty or nolo 
contendere) of any criminal violation other than a minor traffic 
offense? If so, please explain. No.
    5. Have you ever been accused, formally or informally, of sexual 
harassment or discrimination on the basis of sex, race, religion, or 
any other basis? If so, please explain. No.
    6. Please advise the Committee of any additional information, 
favorable or unfavorable, which you feel should be disclosed in 
cormection with your nomination. None to my knowledge.
                     d. relationship with committee
    1. Will you ensure that your department/agency complies with 
deadlines for information set by congressional committees? Yes.
    2. Will you ensure that your department/agency does whatever it can 
to protect congressional witnesses and whistle blowers from reprisal 
for their testimony and disclosures? Yes.
    3. Will you cooperate in providing the Committee with requested 
witnesses, including technical experts and career employees, with 
firsthand knowledge of matters of interest to the Committee? Yes.
    4. Are you willing to appear and testify before any duly 
constituted committee of the Congress on such occasions as you may be 
reasonably requested to do so? Yes.
                          resume of arun kumar

KPMG LLP (including KPMG Consulting/BearingPoint) July 1995-Sep 2013

Note: KPMG LLP spun out KPMG Consulting Inc. (which changed its name to 
BearingPoint Inc. and went public) in February 2000. I transitioned 
into this new entity. I returned to KPMG LLP from BearingPoint Inc. in 
March 2005, following a four month break after leaving BearingPoint in 
October 2004. I retired on September 30, 2013.

KPMG LLP Headquarters: 345 Park Avenue, New York, NY 10154. Office I 
worked out of: 3975 Freedom Circle Drive, Santa Clara, CA 95054.

Member of the Board of Directors (Nov 2008-Sep 2013)
The highest governing body of KPMG LLP.
Member of Audit, Finance & Operations Committee (4 years, Chair, Oct 
2012-Sep 2013), Compensation Committee (2 years), Partnership and 
Employer of Choice Committee (2 years), Partner Rights Committee 
(Chair, Oct 2011-Sep 2012, Member 2 years), Professional Practice and 
Ethics Committee (1 year). Member of the Board of Directors of KPMG 
Americas (4 years).

   Partner; Leader, Management Consulting/Finance Management, 
        West (March 2005-Sep 2013)

   Partner in Charge, U.S. India Practice (June 2007-Aug 2013)

   Strategic Alliance Leader for a key alliance (April 2011-Aug 
        2013)

KPMG Consulting Inc./BearingPoint Inc. Mountain View, CA (Feb 2000-Oct 
2004)

   Managing Director, Finance Management leader

KPMG LLP Mountain View, CA and Palo Alto, CA (July 1995-Feb 2000)

   Partner (June 1998-Feb 2000)

   Director/Manager (July 1995-June 1998)

Planning & Logic Inc. Mountain View, CA (1993-1995)
Chief Executive Officer, Member, Board of Directors, and founder.

Netlabs Inc. Los Altos, CA (1991-1993)
Co-founder and Chief Financial Officer.

Elite Microelectronics Inc. San Jose, CA (1990-1991)
Chief Financial Officer.

Silicon Graphics Inc. Mountain View, CA (1989)
Director of Planning & Management Information.

Cydrome Inc. Milpitas, CA (1984-1988)
Co-founder, Chief Financial Officer, Vice President, Operations, and 
Member of the Board of Directors.

Elxsi Inc. San Jose, CA (1980-1984)
Controller.

Tata Administrative Service (TAS) and Nelco, Mumbai, India (1973-1978)
Central management cadre of the Tata Group. Assigned to Nelco, the 
electronics company of the group. Role was to work with the CEO of the 
company to provide staff assistance on a number of matters.

    The Chairman. Thank you very much.
    We have three distinguished colleagues sitting over here, 
and they have the miserable problem of having to wait until 
myself and the Ranking Member have finished our questions, 
which must gall all of you very much.
    [Laughter.]
    The Chairman. But Senator Thune and I recall----
    Senator Blumenthal. We love you, Mr. Chairman.
    [Laughter.]
    The Chairman. Gotcha. OK.
    Mr. Jaenichen, many feel that maritime issues aren't as 
high a priority as other transportation issues at the 
Department of Transportation. With the administration's focus 
on expanding exports and the growing demand for moving goods, 
especially movement on inland waterways, the maritime industry 
will play a critical role in our country's economic vitality.
    It is interesting to me that the seventh-largest port in 
America--and if I am wrong, just go ahead and tell me. I will 
be crushed, but go ahead--is, in fact, Huntington, West 
Virginia. Do your research.
    [Laughter.]
    Mr. Jaenichen. I will take a look, sir.
    The Chairman. Yes. We boast that, so I hope we are right.
    So, given that people focus on other kinds of 
transportation but yours is so important, getting yourself up 
there and getting your administration up there to the full 
attention of the American people is really important. For 
example, the expansion of the Panama Canal is, I think, a huge 
economic development for the country and every port, wherever 
it may be.
    So how do you plan to protect critical maritime laws, like 
the Jones Act, to ensure the economic viability of America's 
maritime industry?
    Mr. Jaenichen. Senator, thank you for your question.
    I just had the unique opportunity of traveling with the 
Vice President to the Panama Canal on Monday and Tuesday of 
this week. And I would certainly agree with you that that is 
going to be a game-changer once the expanded canal is open and 
has a possibility to increase the commerce to the U.S.
    One key point----
    The Chairman. And our ports are not ready. Am I right?
    Mr. Jaenichen. We have some ports that are ready and some 
that still have some work to do. That is correct, sir.
    But two-thirds of what goes through the canal today is 
either going to or coming from the United States, going through 
the canal. So it is important that we be ready.
    The other opportunity that we have had is, we are looking 
at a maritime strategy. Back in October, we issued a Federal 
Register notice to solicit comments from all stakeholders 
across the entire maritime industry to revitalize the U.S. 
Merchant Marine. That is everything from cargo opportunities to 
how do we bring more ships under the U.S. flag.
    The Jones Act, in particular, is of critical importance and 
has been supported by the Obama administration and every 
administration for the last 100 years, and for good reason. It 
puts U.S. mariners on U.S. ships, ready to carry U.S. commerce 
and ready when we need them for national defense. We will do 
everything within the Maritime Administration to support the 
Jones Act.
    I have had a unique opportunity to talk about the maritime 
strategy directly with Secretary Foxx. He is open to all of the 
mode administrators to be able to make sure that each of the 
modes has a focus on that.
    Part of the Moving Ahead for Progress in the 21st Century 
required that we establish a national freight strategy. We 
currently, in the last 2 days, have convened essentially a 
session with the National Freight Advisory Council that was 
named to help advise us on that. We are putting together the 
framework for that strategy. And I will tell you that 
waterways, rivers, and Great Lakes are certainly part of that 
strategy, sir.
    The Chairman. Thank you, sir.
    Debra Miller, you know that I have very significant 
concerns about how railroads have treated captive shippers. And 
in the presentation that you made, which of course was gone 
over by OMB, that little secret that people don't know, it was 
a very even kind of a situation--the health of the railroads 
and, you know, the protection of shippers.
    I, for one, don't feel that it is an equal situation at 
all. And I would think that it would be, from my point of view, 
very important that you pay special attention to shippers. They 
have not been paid attention to. They do not bring cases often 
because they know they are going to lose the cases because the 
railroads will simply drag out the litigation forever, so they 
just don't try, and therefore they lose. And we lose millions 
and millions, hundreds of millions of dollars a year because of 
that, perhaps billions of dollars a year because of that.
    So you make a balanced presentation, which is 
understandable for, you know, a confirmation opening statement. 
But I don't think the work of the Commission ought to be 
equally divided, based upon its long history of doing almost 
anything the railroads want, no matter who got appointed, that 
you should focus a lot on the shippers.
    And I want to feel that you are going to. Help me feel that 
way.
    Ms. Miller. I will do my best, Mr. Chairman.
    Well, coming from an agricultural state, I have engaged 
with a number of shippers over the years who have had issues 
and certainly, I think, have a good, work-a-day understanding 
of how important it is to maintain or to be able to obtain rail 
service for so many of our shippers.
    And I recognize very clearly that this is not an academic 
discussion for shippers, this is about their livelihood, and 
that it is very important that they both not only be heard but, 
to the extent there is a recourse, that it be done in a time-
sensitive way.
    And I can tell you that I am a very time-sensitive person 
and will bring that sort of approach to the Surface 
Transportation Board, at least to the extent that as a member 
of the board I can do that--that is, if I am confirmed.
    The Chairman. So you will be efficient. And, believe me, 
after my conversation with you, that I totally accept and 
believe.
    What I am hoping is that you will also have sort of a 
special leaning toward shippers, because they have never had 
that leaning at the ICC or the STB in all of their history. 
Railroads control the show. They totally control the show. They 
fly below the radar, and they control the show.
    So, please--I am at the end of my time, but we will talk 
more about this.
    Ms. Miller. Thank you, Mr. Chairman.
    The Chairman. Ranking Member Thune?
    Senator Thune. Thank you, Mr. Chairman.
    Ms. Miller, people, stakeholders and others, have expressed 
skepticism about the STB's annual determination of revenue 
adequacy for Class I's, that it is overly burdensome on the 
agency, that it doesn't give a true reflection of the--an 
accurate picture of the railroads' financial strength for any 
given year.
    What are your thoughts about the usefulness of those 
determinations?
    Ms. Miller. Well, Senator Thune, thank you so much for the 
question. It is a really important one, and it is core, in many 
ways. It gets to the question that was asked by Senator 
Rockefeller, as well, in many ways.
    And, obviously, I am a long ways from an expert in issues 
like revenue adequacy. If I am confirmed, I have much to learn, 
and I intend to put my head down and learn it.
    I would say that it seems to me that the world changes and 
continues to change, and it is not unreasonable to take a step 
back and look at whether or not the way we approach and 
calculate revenue adequacy is, in fact, still the right way to 
do it.
    I think anytime you have a process that is in place for a 
long time, it may very well be in place because it is the right 
process. And I am open to concluding that. But I also would be 
open to looking at whether or not there is another way to look 
at revenue adequacy.
    Senator Thune. I am sure you probably heard this as you 
prepared for this, but one of the complaints I hear from 
constituents in my state is that it is overly costly and time-
consuming for a small shipper to bring a case to the STB.
    And I know the Board has made some progress in that area, 
but I am wondering if there are any suggestions that you might 
have about how the STB can be more accessible to shippers. 
There is, I think, room for improvement there still, and 
particularly to small shippers.
    Ms. Miller. Yes. And, Senator, I have to say, I couldn't 
say today, I couldn't offer, I am afraid, a very specific 
suggestion for improvement, but I am sympathetic to the concern 
that it is very difficult, I think, for small shippers. Just 
what you have to do to bring a case, the time period that it 
takes, it is a very high bar.
    The notion of simplifying that process is clearly one that 
the STB has been aware of, paid attention to. They have worked 
to streamline their processes. Whether or not that streamlining 
has gone far enough, I think, is certainly an issue that we 
could consider farther.
    Senator Thune. And I hope that, as you get a chance to 
drill down a little bit and take a look at that, if you have 
some suggestions that you could bring to bear on that process. 
As I said, there have been some changes there that I think have 
been in the right direction, but I still think there is 
significant room for improvement.
    One of the most important functions of the STB is to 
determine the reasonableness of rates charged to shippers. And, 
again, this is something that can be a costly and time-
consuming process. From your past work as a state 
transportation secretary, what concerns have you heard from 
shippers about how long it typically takes for the board to 
reach a decision on a rate-reasonableness case?
    Ms. Miller. Oh, no, I think certainly for some shippers, 
you know, it is a big concern.
    One of the things I would say I found in our state--and I 
am sure this is true in others, as well--but the shortline rail 
network that we have gotten in place has made a huge amount of 
difference. I think a lot of the issues that shippers were 
having in our state began to dissipate once we had a strong, 
viable shortline rail system in place.
    And so we don't have the kinds of problems that I would say 
15 years ago I would hear about more regularly from shippers. 
But, certainly, for a small agricultural shipper, it is a very 
high barrier.
    Senator Thune. I hope you will continue to look at that, 
because I think in some cases it is almost prohibitive for a 
lot of those smaller shippers.
    Mr. Kumar, I want to come back--I mentioned this in my 
opening remarks--and ask you about TPA. Recently, Secretary 
Pritzker stated that she would actively advocate for trade 
promotion authority with Congress and the American people. I am 
curious as to what role you anticipate playing as Congress 
considers TPA.
    Mr. Kumar. Thank you for the question, Senator.
    The expansion of free-trade agreements has been a big 
priority for President Obama. The country has 20 such free-
trade agreements. I would support all efforts that the 
President makes to expand free trade, including supporting him 
and the Secretary on efforts to advance the goals of expanding 
free trade and perhaps using TPA as a way to make that more 
effective.
    Senator Thune. OK. And what are some of the factors that 
you would consider in measuring whether or not some of these 
policies have been successful when it comes to promoting 
greater exports?
    Because there are lots of factors that contribute to export 
growth. And if you are confirmed in this position, I am 
wondering, what is the metric that you will use? How will you 
measure whether or not particular policies are successful in 
promoting export growth?
    Mr. Kumar. Thank you for that question, Senator.
    You know, in my working experience, one of my major areas 
of work with my clients has been setting metrics. And as you 
pointed out, as you implied, high-level metrics may not be the 
answer. There are a number of other contributory factors that 
contribute to an end result.
    In the Secretary's recent statement about an NEI 2.0, she 
mentioned looking at the metrics and goals as a key part of 
looking at NEI. If confirmed, I would look forward to working 
with her on assisting in creating the right set of metrics and 
goals to measure these efforts.
    Senator Thune. OK. Thank you.
    Mr. Chairman, my time has expired. I will----
    The Chairman. Thank you, Senator.
    Senator Thune.--get to Mr. Jaenichen later. Thanks.
    The Chairman. Senator Schatz?

                STATEMENT OF HON. BRIAN SCHATZ, 
                    U.S. SENATOR FROM HAWAII

    Senator Schatz. Thank you, Mr. Chairman.
    And thank you to all the testifiers and nominees. We 
appreciate your public service.
    Mr. Jaenichen, there has been a decades-long consensus in 
support of the Jones Act. We all believe that it must remain an 
essential pillar of the United States maritime and national 
security strategy.
    The law protects the maritime industry from cheaper foreign 
competitors that don't comply with our labor and environmental 
standards. And it protects the jobs of American seafarers, who 
are part of the backbone of the maritime community and meet our 
need for sustainment sealift and capacity.
    A comprehensive maritime strategy, which I know you are 
undertaking, will require strong cooperation between MARAD and 
the private sector, particularly given the industry's 
occasional desire to use cheaper foreign workers. Can you 
describe how you will work with industry to help protect 
American seafarer jobs?
    Mr. Jaenichen. Senator, thank you for that question.
    We have already begun the process of establishing a 
maritime strategy. If confirmed, I can give you my emphatic 
support that I am interested in increasing the number of U.S. 
maritime jobs that are available.
    To do that, we really need to take a look at opportunities 
to increase the number of ships that are under the U.S. flag. 
And that is the reason why it is critical to get, essentially, 
the ideas and the thoughts of the entire industry.
    Our plan is to, one, reach out, talk to them, establish an 
agenda here by the end of December so that we can have a public 
forum so that it is open and transparent when we meet on the 
14th through the 16th of January 2014 to be able to discuss 
those issues. Our focus at that time is going to be on cargo 
opportunities and increasing the number of ships under U.S. 
flag. At least that is what we are looking at right now based 
on the inputs that we have received. It could change over the 
next month and a half as we get additional thoughts and ideas 
of how we might increase that.
    We are going to continue to support the Jones Act. It is 
the stable--what has kept our domestic and our coastwise trade 
there. Without the Jones Act, we would not have today what is 
on the order book. We have 18 ships that are under order--the 
first time in 3 decades that we have the construction in our 
shipyards of that magnitude. Plus, we have options for nine 
more ships. That is significant. And the only reason that has 
taken place is because of the Jones Act, and we have to 
continue to support that in the Maritime Administration. If 
confirmed, that will be my focus.
    Senator Schatz. So as you are undertaking your strategy to 
increase the number of vessels in the fleet, I want to 
understand better how you determine what the requirements are 
in terms of the increase in the number of vessels.
    I have heard some sort of aspirational numbers in the long 
run, and I think those are all fine. But there are sort of two 
ways to build out a number. One is from what is possible, and 
the other is from what the real requirements are from the 
standpoint of our national security and economic strategy.
    And so what is your process for arriving at, speaking of 
metrics, our goals over a period of time? Because I don't want 
us to have aspirational goals that either can't be met or don't 
need to be met, especially given the economic resource 
constraints we face.
    Mr. Jaenichen. Senator, thank you for that question.
    One of the challenges that we have--obviously, we have 
70,000 port calls that occur in the U.S. at every port around 
the Nation. Today, roughly 2 percent of those have a U.S. flag 
on them.
    From a national strategic standpoint, at the number of 
ships that we currently have today, our labor force to be able 
to support our national defense requirements--that includes the 
60 ships that we have in the Maritime Security Program, plus 
the ships that we have that are what we refer to as our reserve 
sealift capacity, these are government-owned ships--the 
Maritime Administration and the Military Sealift Command--we 
are at the point where, with the number of ships that we 
currently have sailing, we have to increase the number of ships 
to be able to increase the number of mariners that are 
available in the pool to be able to man them.
    Senator Schatz. I understand that, but my question is, how 
much do we have to increase it? What are the requirements? And 
how are you going to determine whether we need, you know, 25 
additional vessels in the Maritime Security Program or 200 
vessels? And what is the process for arriving at whatever 
number we arrive at as a matter of strategy?
    Mr. Jaenichen. What we have done, sir--and I appreciate 
that question--is we have taken a look at a target level. One 
of the outcomes of this symposium we are going to have is to 
determine what is achievable, one, and, two, how would we get 
there.
    Because if you bring ships to the U.S. flag, you are going 
to have to have mariners to be able to man them. What that 
takes is additional training. We know that it takes 10 years to 
make a master or a chief engineer and it takes 4 years to get 
through either the U.S. Merchant Marine Academy or one of our 
state maritime academies. And even if you go through a union 
maritime training center, it still takes about 30 months to be 
able to become a third mate or a third engineer. We need to be 
able to have the capacity to be able to build that.
    So that metric that you are talking about will be 
established and will be part of the maritime strategy that we 
put together.
    Senator Schatz. Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator.
    And now Senator Booker.

                STATEMENT OF HON. CORY BOOKER, 
                  U.S. SENATOR FROM NEW JERSEY

    Senator Booker. Thank you, Mr. Chairman. Thank you, Ranking 
Member Thune.
    First of all, I also want to just join with the sentiments 
that have been already been expressed and thank all three of 
you for stepping up and serving. Service in this capacity is 
also a sacrifice, and I am just greatly appreciative of your 
willingness to step forward and serve your country.
    If I could address a question to Mr. Kumar, who, I must 
say, sir, you have a haircut that is vastly superior than your 
two sons', and they should try----
    [Laughter.]
    Mr. Kumar. I would agree with that, absolutely.
    Senator Booker. Thank you very much, sir. They really need 
to look at and emulate their father in every way.
    [Laughter.]
    Senator Booker. Your story is remarkable and a testimony to 
our nation.
    And I know it is not appropriate in this committee, but it 
is a testimony to the urgency of immigration reform right now. 
To see my generation losing out on a lot of the talent that 
your generation did when they came--when many people who came 
over from countries like India have so improved, vastly 
improved, the economy of our country.
    And that is why we are here. And my residents in my state 
sent me down here to focus on jobs, jobs, jobs. Well, 
immigration clearly helps to fuel job growth in our country.
    You have an opportunity now, I think, to serve in a role 
that is significant. The U.S. has right now reached a high when 
it comes to exports last year, even though--and this is the 
shocking statistic--even though less than 1 percent of 
America's 30 million companies export, less than 1 percent, a 
percentage that is lower than all other developed countries. We 
are way behind the game. And this is a realization that 70 
percent of the world's buying power is outside the United 
States.
    There was an amazing article just this week in The Wall 
Street Journal that talked about one of our competitor 
countries, Germany. We may be doing better in recent years, but 
we have a long way to go. Germany is the best; they are the 
gold standard. And forgive my nationalistic arrogance, but I 
strive for America to be the best.
    According to Commerce Department figures, the International 
Trade Administration has helped about 12,200 companies export 
in 2011. The export network created by Germany, a country with 
about a quarter of our population, helped roughly 50,000 
companies to export. And we can see the positive impact it has 
had on the German economy.
    Mr. Chairman, this is an amazing article, to see the boom 
that Germany has had.
    I would maybe pass that down to the Chairman.
    The Chairman. Do you want it in the record?
    Senator Booker. I would love it in the record.
    The Chairman. So ordered.
    [The information referred to follows:]



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    

    Senator Booker. As a powerful senator, I can put things in 
the record. This is a great job.
    [Laughter.]
    Senator Blumenthal. If he keeps talking that way, I am 
going to object.
    [Laughter.]
    Senator Booker. So these other countries--you know, Germany 
has all these offices; Canada, 155; Britain, 162. We are at 
about 75. And the number of Foreign Commercial Service staff we 
have has decreased from about 1,700 to about 1,300.
    Some parts of the International Trade Administration are 
great--the advocacy centers, for example. But the U.S. 
Commercial Service has had, over the last decade, a pretty bad 
reputation and sub-par management.
    So we have an opportunity here of incredible opportunity to 
drive growth, drive jobs and opportunity. And we have American 
exports rising even though we are experiencing attrition, this 
poor management, and the low morale.
    And so, should you be confirmed, can you walk me through a 
plan and the steps you would like to take to maximize the 
potential of the Commercial Service and the approach you will 
take in diagnosing how we can do better?
    Mr. Kumar. Thank you for your very kind comments and for 
the very important points that you made, Senator.
    I could not agree more with you, I agree wholeheartedly on 
most of the points that you have made, on the potential for us 
in the export area. As you pointed out, we export to--the 
potential is so huge. Ninety-five percent of the consumers live 
outside the United States. You mentioned that we sell 1 percent 
of the small businesses. And, actually, many of them only 
address one export market. And these are some of the areas that 
the Global Markets team has already been focused on.
    Secretary Pritzker, in a recent statement talking about NEI 
2.0, she talked about the importance of increasing the global 
orientation of our businesses. And she used a term called 
``global fluency.'' I believe that we need to have a way to 
make all our business think more globally.
    We have some great examples, by the way. Where I come from 
in Silicon Valley, you know, people think global from day one. 
You know, my wife was trying to start a company sometime ago 
for diagnostics for skin cancer, and she said, you know, there 
is a big market in Australia, we should think about Australia, 
along with other countries.
    So I think the mindset of thinking globally, we need to 
promote that. And that is the term that the secretary has used, 
``global fluency.''
    In terms of specific plans, Senator, once I get--if 
confirmed, I would like to work with our team to exactly 
address the very important issues that you brought up.
    Senator Booker. Thank you. My time has expired, but I 
strongly encourage you, as I did Secretary Pritzker, that this 
is one of the best opportunities for this economy to grow and 
actually produce the kind of jobs that we as a first-rate 
nation should have.
    The Chairman. Thank you, Senator Booker.
    Senator Begich?

                STATEMENT OF HON. MARK BEGICH, 
                    U.S. SENATOR FROM ALASKA

    Senator Begich. Thank you, Mr. Chairman.
    I appreciate the opportunity for you all to be here, and 
thank you for your willingness to serve. As all the members 
have said, it does take dedication and time away from your 
family, and the hours will be longer than you probably expected 
or whatever they told it would be. So I appreciate your 
willingness.
    I have a few questions. And I hope I pronounce this right. 
Is it ``Jaenichen''?
    Mr. Jaenichen. ``Jaenichen,'' sir.
    Senator Begich. Thank you very much. I have a couple 
questions. I apologize we didn't meet up, I got delayed, but I 
know my staff talked to you for a little bit. But I want to 
follow up on a couple things.
    One, let me kind of cut right to it, and that is on the 
Jones Act. I appreciate your opening statement and some of the 
comments you had there. But there are some folks in the 
community a little nervous about some things you have said 
recently, and I just want to kind of restate them, summarize 
them, not specifically, but regarding the Ready Reserve Fleet 
not necessarily having to be U.S.-controlled companies. And the 
second piece was, from some, it appears that some of your 
statements made it sound like you would be willing to allow 
foreign labor on U.S.-flag ships.
    So I want you to respond, but before you do that, I am 
going to be fair to you and say I am a very strong supporter of 
the Jones Act. So I anticipate, hopefully, a good response 
here. If not, that is problematic. But in all fairness, I want 
to put my disclaimer on the table here. So I am curious----
    The Chairman. Leading the witness.
    Senator Begich. Yes, it is leading the witness. Well, he is 
free to answer however he wants.
    But I am very concerned. Because we have had a very strong 
ship industry as it is today. There is some great opportunity 
ahead of us. But if we start weakening the conditions of U.S. 
workers on U.S. ships, I think that is a big problem, as well 
as U.S.-built ships.
    So give me your response. And I appreciate your opening 
comments. You had some commentary in there which I do 
appreciate. But----
    Mr. Jaenichen. Thank you for those questions, Senator.
    I think, first thing, with regard to the advance proposed 
notice of rulemaking with regard to citizenship for ship 
managers for the Ready Reserve Force, we have made no decisions 
on what to change.
    The rule that we currently have in place is from 1951. We 
have not changed the rule since then. The last time we looked 
at it was 1993, over 20 years ago. At the time, we made a 
notice of proposed rulemaking, we received public comment, and 
at that time, we chose not to change the rule.
    In this particular case, we are going to go take a look at 
it again, because we have 50 ships that are coming up for 
renewal in 2015 for those ship manager contracts. We want to 
make sure that we have gone through in a very transparent way 
to make sure that nothing has changed and we have the most 
efficient and effective way to manage those ships.
    We have two different ways of doing it in Federal 
Government right now. And so there is what we refer to as 
Section 2 citizenship, which I think is what you are referring 
to, and there is documentation citizenship. We have two 
different ways of doing it; the DOD looks at it differently 
than we do. We want to have a very open and public comment 
period to be able to evaluate whether that should be changed. 
We have made no decision to do that.
    So that is the first question you had. The second question 
you had was on allowing foreign labor.
    What we have proposed is we have to be able to increase the 
number of U.S.-flag ships in the fleet. Without ships, you 
can't train the mariners that we need to be able to man the 
government ships we have, plus the MSP ships, if we were to 
activate all of them in support of some kind of a military 
operation or for a national emergency.
    That is one of the concerns that we have. And as we develop 
the numbers that have to be there, we are going to have to have 
a plan for how many can you bring in, you know, what labor rate 
can be adjusted to be able to make sure that they are all U.S. 
labor.
    Today, under the current rules, 100 percent of the licensed 
officers have to be U.S. citizens and 75 percent of the 
unlicensed have to be U.S. citizens. All of them have to be 
documented; all of them have to have U.S. Coast Guard licenses.
    We don't see it necessarily to change that, but we have to 
be able to have a plan that if the ships come in, we have to be 
able to man them. Because if we can't, they won't come to the 
U.S. flag. And we have to have a strategy to do that.
    We want to be able to talk about that as we have this 
maritime strategy symposium that we do in January, and it is 
going to be for an open and frank discussion. There have been 
no decisions either way, sir.
    Senator Begich. OK. I just want to--you know where I stand. 
I will be anxious to engage with you at a later time to make 
sure we are on the right path.
    Let me throw out two other things. My time is about to run 
out. But, one, I would like to have some further discussion 
with you later on Title XI, the shipbuilding loan guarantees. 
As you know, in the budget right now, it has been zeroed out. 
There is about $36 million, $38 million I think you have on 
hand in the bank.
    The Obama administration has not really been aggressively 
supportive of this. Maybe it is the way the program is 
designed, but it seems logical to me that we should figure out 
the right kind of shipbuilding program for this country. It is 
good business, good for American jobs, good for American 
workers, and it touches so many states throughout our country.
    So I would like to further that discussion. Maybe after 
your January meeting, there might be some good evolution that 
comes out of that.
    The last thing, I will just throw this as a topic, and, 
again, something you could look at and maybe get back to me at 
a later time. The U.S. Merchant Marine Academy, I know it is 
kind of sacred and it is a legacy, but it costs us $81 million, 
give or take, or that budget unit is about $81 million. We get 
about 250 graduates a year. The cost of that is about 300-and-
some-thousand dollars for the graduates, in some cases, all in.
    So what I want to do--we know that is more expensive than 
the state academies. I mean, that is just--you know, in the 
sense of dollars. So I would like you, if you could, at some 
point, internally give me an analysis between state-academy-run 
facilities and the Merchant Marine Academy, and why not just 
give scholarships and have people go to the state academies.
    I know that is radical and people here--I will probably get 
calls within seconds of this conversation, if not right now. 
But, you know, I know it is a legacy program. It is a World War 
II concept. But it has been evolved over time. So I would like 
to see a cost-benefit analysis at some point. Because the goal 
is, and you have said it, more, we need more. So how do we do 
that and do it efficiently?
    So I am just kind of putting that in the back of your mind, 
and maybe at a later time we can have that conversation.
    Mr. Jaenichen. Yes, sir.
    Senator Begich. Thank you very much.
    Thank you.
    The Chairman. Thank you very much, Senator Begich.
    I need to say to all that votes, two votes, are expected at 
3:45, the second one being adjournment for Thanksgiving.
    Senator Blumenthal. Nope.
    [Laughter.]
    The Chairman. No?
    So I now call on Senator Blumenthal, to be followed by 
Senator Klobuchar.

             STATEMENT OF HON. RICHARD BLUMENTHAL, 
                 U.S. SENATOR FROM CONNECTICUT

    Senator Blumenthal. Thank you, Mr. Chairman.
    As you can see, the chairman exercises his leadership 
firmly and subtly.
    [Laughter.]
    Senator Blumenthal. And I will be brief, Mr. Chairman, 
taking that as guidance.
    I want to thank all of you for your public service in the 
past and in the future. And I anticipate I will be supporting 
you.
    I would join my colleague, Senator Booker, in his remarks 
about immigration, which I have fought to reform and been proud 
to work on very actively in the two and a half years. And I 
think your story, Mr. Kumar, is certainly very powerful 
evidence in support of it, but I am very confident that each of 
our other two nominees has somewhere in his and her background 
the same kind of story, because we are a nation of immigrants. 
And we should be welcoming and embracing a form of energy and 
initiative and talent which are exemplified by all three of 
you.
    And my father came to this country under somewhat different 
circumstances. He didn't arrive at Logan Airport. He came to 
Ellis Island. He was 17 years old in 1935, and he had not much 
more than the shirt on his back and spoke no English and knew 
no one. And he didn't go to MIT; he went to work and never had 
the immense benefits that I have enjoyed, and my brother, of a 
college education, or any education for that matter. And so I 
think he would be very proud of a success story like yours and 
your sons'.
    So all of that said, let me just go to the main question I 
have for you. Knowing of the very important locally led work 
such as the Commercial Service Export Center in Connecticut--
and I have worked closely with them--what do you envision as 
the functions of these local offices of the Commerce Department 
in promoting exports, as has been done successfully by our 
Connecticut office? I have been on a trade mission that they 
sponsored which has produced results.
    Do you foresee continuing that kind of mission and local 
offices? Or would you say that they must be cut back because of 
sequester and other similar kinds of fiscal issues?
    Mr. Kumar. Senator, first of all, thank you for your very 
kind comments.
    Coming to your question about the local offices, just to 
give you an example, recently I spent a half-day with the 
Export Assistance Center in Silicon Valley, and it was a very 
inspiring experience. I found that they were very engaged with 
a wide variety and a large number of small and medium 
businesses. Like, each person was dealing with about 1,000 of 
them. I mean, that is a very large number.
    And a variety of things: You would think, it is Silicon 
Valley and they are really doing technology. They were doing a 
lot of technology, but one was helping a winemaker export, 
another was helping a fish exporter in Monterey. So it was 
very, very impressive.
    Many of those exporters would never export without the kind 
of connection that the Commercial Service offices brought to 
them, the connectivity with foreign markets and the 
encouragement, the ability to help them to work through the 
whole export process.
    So I was very, very enthused. I am a big champion of the 
work they do. If confirmed, I would like to make sure that that 
work continues to be effective.
    Senator Blumenthal. Thank you.
    I have other questions I am going to submit for the record 
and yield the balance of my time to Senator Klobuchar.
    The Chairman. You have 1 minute and 25 seconds to ask two 
excellent questions.
    [Laughter.]
    Senator Blumenthal. Thank you.
    I would like to just ask Mr. Jaenichen about the Heritage 
Program.
    You attended the launching of the newly restored sailing 
ship, the whaler, in Mystic, and I thank you for being there. 
Do you see that program continuing?
    Mr. Jaenichen. That particular program, yes, sir, Senator.
    Just so you are aware, we recently signed a memorandum of 
agreement with the National Park Service. By statute, some of 
the funding that we get from the sales of our fleet that we 
recycle, actually, 25 percent goes to maritime heritage. We are 
going to share some of that funding with the National Park 
Service, and they are going to reestablish their grant program, 
which ceased in 1998. And we are looking forward to making that 
announcement.
    Senator Blumenthal. Thank you. And I look forward to your 
being present at other events involving the Morgan and similar 
kinds of efforts. Thank you.
    Mr. Jaenichen. Thank you, sir.
    Senator Blumenthal. Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Blumenthal.
    And Senator Klobuchar?

               STATEMENT OF HON. AMY KLOBUCHAR, 
                  U.S. SENATOR FROM MINNESOTA

    Senator Klobuchar. Well, thank you, Mr. Chairman. Thank you 
for noting Thanksgiving, since Minnesota is number one for 
turkeys in the country.
    I just said that to make South Dakota and Senator Thune 
jealous.
    [Laughter.]
    Senator Klobuchar. Yes, OK.
    Senator Thune. Did you say South Dakota?
    The Chairman. She said----
    Senator Klobuchar. I was saying we are number one for 
turkeys, and we are the only two states that would vie for that 
award.
    [Laughter.]
    Senator Klobuchar. I first wanted to ask you, Mr. 
Jaenichen--one of the reasons I was actually late here is I was 
meeting with our Great Lakes group, very important to me. And 
we were talking about the importance of dredging and what it 
means for navigation. I think you know that the Great Lakes 
region is suffering from an ongoing dredging crisis. I had some 
of the owners of the ships right in my office today, and they 
were talking about how, you know, they literally leave 10 
percent of the cargo behind because they can't make it through 
some of the locks further down the river.
    Region-wide, there is a $200 million backlog of dredging 
work. Both the Senate and House versions of the WRDA bill would 
dedicate a percentage of the Army Corps operation and 
maintenance dredging budget to the Great Lakes region.
    Can you talk about the importance of dredging and what it 
means for navigation?
    Mr. Jaenichen. Senator, thank you for that question.
    Obviously, as you pointed out, if you are operating a ship 
at only 90 percent of its capacity because of the draft 
requirements, then that potentially is a problem.
    We typically work with the Army Corps as we are taking a 
look at the various commerce and how the ports work. 
Unfortunately, the Maritime Administration is not involved in 
dredging; that is clearly an Army Corps function. But we do 
work closely with them in coordination. They were one of our 
peer--we recently released a Great Lakes study, which they were 
a peer reviewer on.
    But as you noted, the Great Lakes themselves actually 
provide about 28 percent of our GDP, so that dredging in that 
area certainly is important. And for the lakers and the 
operators on the lakes, they find that very important. The 
drafts in that area clearly are something that we need to take 
a hard look at.
    Senator Klobuchar. Thank you.
    And I had some Jones Act questions, which I will ask later.
    And you should know I was just named Great Lakes Legislator 
of the Year. I said that to intimidate you for our future 
questions.
    [Laughter.]
    Senator Klobuchar. But we do care a lot about that, as 
well.
    Ms. Miller, one of the very few industries, as you know, to 
enjoy an exemption from antitrust law is the freight railroad 
industry. Due to this exemption, we have heard from rail 
shippers across the country that suffer from high prices 
because they are served by only one railroad, and especially 
that last leg. There may be multiple railroads, and then you 
get to the last leg.
    The Consumer Federation of America estimated that rail 
rates are $3 billion higher for captive shippers than they 
would be if the market was competitive.
    I love rail. It takes a lot of things to and from my state. 
But we are still concerned about that. Could you talk about 
your views on that issue? I do have a bipartisan bill, the 
Railroad Antitrust Act, to repeal the antitrust exemption for 
railroads. But if you could comment on this issue of the rates.
    Ms. Miller. Yes. Thank you, Senator. I have been made aware 
of your interest in this issue and the bill that has been 
introduced.
    Certainly, it is a complex issue of jurisdiction and a 
difficult one to sort out. It is one that I would be interested 
in digging into more and becoming better acquainted with 
exactly what it would mean.
    I don't feel prepared today to give you a direct response, 
whether or not I think that is the right direction to go or 
not. But what I could say is that it is a topic that I would 
certainly take a look at and give consideration to.
    Senator Klobuchar. Very good. Because, obviously, the 
Surface Transportation Board can be helpful in making sure 
that----
    Ms. Miller. Sure.
    Senator Klobuchar.--they get a fair shake. So I look 
forward to working with you on that.
    Last question. Mr. Kumar, you should know that I actually 
previously chaired the Committee on Competitiveness, 
Innovation, and Export Promotion, and I am the one that added 
the words ``Export Promotion'' to the Subcommittee because I 
see it as so important and have worked significantly with the 
Department of Commerce.
    I know that Senator Booker asked you about the strategy to 
manage the Commercial Service. Could you talk about how you see 
both the domestic and international Commercial Service offices 
working together to help reach out to more businesses?
    I really think this is a key--I am on the President's 
Export Council, as you may know, and worked a lot on the export 
control list to help some of our businesses, and getting that 
modernized, and then also on multiple issues with our 
companies.
    Mr. Kumar. Senator, thank you for your question and your 
comments.
    I think your observations suggested that both the domestic 
and the foreign groups should work closely together. I think 
the new organization would promote that. In my conversations 
with the leadership team in place, I have found great 
willingness for them to work together.
    I think the connectivity between the opportunity, wherever 
they might be in the world, and the field, with the 100-odd 
offices in the country, that would be--you know, the latency of 
those connections would be greatly reduced by the new 
organization.
    So I personally am very optimistic about the new 
organization. I look forward to working with you to support you 
and the National Exports Council.
    Senator Klobuchar. Very good. Well, I hope you will hear 
about our office in Minnesota. We have one in the Twin Cities 
that is incredible. And then we also have in Fargo a woman 
named Heather who has helped so many small companies in that 
area.
    They are all nodding their head.
    And if you just want to meet an employee who does a great 
job, you should give her a call and see how she does it.
    Thank you very much.
    Mr. Kumar. Thank you.
    The Chairman. Thank you, Senator Klobuchar.
    And before I adjourn the hearing, I want to say two things.
    One, actually, I say on behalf of Senator Thune and myself. 
Everybody always starts out, except the two of us, by thanking 
folks like yourself who are willing to come in and make these 
enormous sacrifices and to work so hard for probably a 
relatively short period of time. Who knows? But I never do and 
Senator Thune never does, and I apologize on behalf of both of 
us. Because that is the main thing: You are willing to serve. 
So many people are so down on government, but you are not. You 
want to help, and you are here.
    The second thing I wanted to say was that we had a hearing, 
I had a hearing I think about 10 years ago on the U.S. and 
Foreign Commercial Service, an actual hearing, in Charleston, 
West Virginia. And I was astounded and happy that the room was 
absolutely--it was a courtroom--was absolutely packed with 
people.
    So, see, on the one hand, West Virginia is not that 
international. We don't--I do, but the folks there don't like 
the whole concept of foreign aid very much. I have never voted 
against a foreign aid bill. But the whole concept of reaching 
out to the rest of the world I would not necessarily associate 
with West Virginia. But we are ripe to do that, and that day 
made it very clear. So your job is an important one.
    I thank you all, and this hearing is adjourned.
    [Whereupon, at 3:47 p.m., the hearing was adjourned.]
                            A P P E N D I X

Response to Written Questions Submitted by Hon. John D. Rockefeller IV 
                       to Paul N. Jaenichen, Sr.
    Question 1. One of the most critical and cost effective investments 
made by the U.S. government is the Maritime Security Program (MSP), 
which provides our military with access to commercial maritime vessels 
during times of war and national emergency. How important is it that we 
continue to fully fund this vital program?
    Answer. The Maritime Security Program (MSP) fleet transports the 
majority of military sustainment cargoes in support of U.S. military 
requirements in both peace and war. The MSP provides funds to partially 
offset the operating costs for a fleet of 60 privately-owned, 
militarily useful, U.S.-flagged and U.S.-citizen-crewed ships. The MSP 
fleet provides the U.S. military with assured access to a global fleet 
of ships in international commercial trade, plus intermodal logistics 
capability, to move military equipment and supplies when required. The 
MSP fleet helps support the employment of approximately 2,700 U.S. 
mariners and an additional 5,000 shore-side jobs--key personnel to 
provide the necessary base to support government vessel crewing. MSP 
vessels have been key contributors to our Nation's efforts in 
Afghanistan and Iraq. Over the last decade the MSP fleet has 
transported over 26 million tons of military cargo to the Middle East. 
It was the MSP carriers that led development of multi-modal services 
into Afghanistan via the Northern Distribution Network, establishing 
air-sea bridging that provide critical alternative routes to resupply 
and support our U.S. military forces. Currently MSP carriers are 
transporting over 96 percent of all military cargoes in support of 
OPERATION ENDURING FREEDOM.
    Without full funding, it is possible that some ships subject to MSP 
operating agreements would have to be removed from the program. Given 
that MSP payments only partially offset the cost to operating under 
U.S. flag, many of the MSP vessel owners would have to consider placing 
their vessels under foreign flag registry to continue operation. The 
loss of these vessels would mean the permanent loss of availability of 
experienced U.S. mariners with unlimited all-ocean credentials needed 
to crew the Government-owned sealift fleet, and thus would diminish the 
country's ability to meet critical national security requirements. Such 
a loss would significantly affect our Nation's ability to meet the 
demands for vessels and seafarers in the event of an emergency sealift 
surge. Appropriations as provided by the Continuing Appropriations Act, 
2014 (P.L. 113-46), enacted 17 October 2013, allowed MARAD to renew all 
MSP operating agreements effective 1 October 2013, permitting 
continuous operations of the MSP fleet. Full funding for the rest of FY 
2014 will ensure no vessels are removed from the MSP due to lack of 
funding and will ensure that the DOD requirement for a 60-ship fleet is 
met with assured access to global multi-modal transportation logistics 
support for the U.S. Armed Forces.

    Question 2. The United States Merchant Marine Academy (USMMA) 
directly supports Defense, Commerce, Homeland Security, and 
Transportation needs, in addition to the needs of numerous other 
Federal agencies and private industry. Despite this, the Academy had to 
close its doors during the recent government shutdown. What steps have 
you taken or do you plan on taking to make sure the Academy does not 
close its doors again in the event of a government shutdown?
    Answer. I am committed to continuing to work with Congress to 
ensure that, in the event of a future government shutdown, the U.S. 
Merchant Marine Academy has the same flexibility as the other military 
academies to continue to operate over the course of a lapse in funding.

    Question 2a. What steps need to be taken to ensure the Academy 
remains the world's premier maritime training institution?
    Answer. Support for the USMMA continues to be a top priority for 
MARAD and DOT. This is reflected in DOT's commitment to capital 
improvements at the Academy to provide facilities that are conducive to 
an effective study environment for Midshipmen, as well as the 
appointment of new leadership to guide the Academy. In addition, a new 
Strategic Plan for the Academy was issued in 2012. Providing sufficient 
support and resources for implementation of this plan will enable USMMA 
to effectively achieve its core responsibility of providing the highest 
caliber education, with state of the art learning facilities and world 
class faculty and staff, for the Nation's future merchant marine 
officers and maritime transportation professionals.

    Question 3. While the Maritime Administration is not primarily 
responsible for port security, a strong commercial and defense maritime 
system depends on secure ports. As we have seen during Superstorm Sandy 
and past port strikes, the impact of a port closing can have 
significant long-term impacts on our economy and the maritime industry. 
And as we have seen repeatedly off the coasts of Nigeria and Somalia, 
pirate attacks on vessels can have serious consequences. What impact 
could a disruption from an attack on a port have on the industry?
    Answer. Based on observations of labor stoppages in U.S. ports, 
there is little question that an attack of sufficient magnitude could 
disrupt port operations or actually cause a port closure. The impact to 
shipping lines utilizing that particular port could be substantial and 
necessitate rerouting to other ports causing delays in loading and 
discharge operations. Clearly any disruption of the Nation's port 
network would negatively impact not only the maritime industry but also 
our economy.

    Question 3a. Are we currently doing enough to protect our ports and 
vessels from attacks?
    Answer. MARAD believes the Department of Homeland Security (and 
U.S. Coast Guard) and local port authorities are taking every 
precaution possible (subject to available resources) to protect the 
safety and security of U.S. ports. MARAD participates in interagency 
efforts to ensure the security of U.S. ports from a commercial 
perspective.

    Question 4. With the Administration's focus on expanding exports 
and the growing demand for moving goods--especially movement on inland 
waterways--the maritime industry will play a critical role in our 
country's economic vitality. How do you plan to protect critical 
maritime laws, like the Jones Act, to ensure the economic viability of 
America's maritime industry?
    Answer. The Merchant Marine Act of 1920 (Jones Act) is one of the 
strongest elements of U.S. maritime policy, encouraging investment in 
privately owned U.S. companies to operate shipyards and vessels that 
employ well-trained U.S. crews and maritime industry workers. I 
strongly support and will continue to support compliance with the Jones 
Act.
    During my time at MARAD, we have worked to develop and improve our 
processes for determining vessel availability under the Jones Act 
waiver process to maximize the use of Jones Act-eligible vessels and to 
achieve greater transparency and U.S. stakeholder participation. If 
confirmed, I will continue these efforts and work to protect the 
coastwise trade and the benefits the Jones Act provides to our domestic 
maritime industry.

    Question 4a. What do you see as the primary threat to the Jones 
Act? Would you propose any changes to the Jones Act during your tenure 
as Administrator?
    Answer. Critics of the Jones Act have cited the higher cost of 
transportation that results from the requirement to use only Jones Act 
compliant vessels. The Jones Act requirements for vessels in the 
coastwise trade to be U.S.-built and U.S.-crewed may result in higher 
costs than if vessels were foreign-built and foreign-crewed, but 
allowing U.S. jobs to disappear in favor of foreign substitutes would 
only erode our own economy and negatively impact our national security. 
Based on the present situation, there is no need to propose any changes 
in the Jones Act requirements. As market conditions improve and as 
there is increased demand for transportation capacity, we are looking 
for the market forces to call for additional vessel construction which 
will bring increased competition to the various trades.

    Question 5. In recent months, MARAD has contemplated making changes 
to longstanding policies as it relates to the Ready Reserve Force. 
Specifically, MARAD issued an Advance Notice of Proposed Rulemaking 
(ANPRM) which may alter ship management contract policies. This 
question has been discussed before, why do you believe it is necessary 
for MARAD to reexamine it now?
    Answer. MARAD has not issued an Advance Notice of Proposed 
Rulemaking (ANPRM) yet, but is considering doing so to request public 
comments on whether current ship management contract regulations should 
be changed. The existing MARAD citizenship regulation was last 
evaluated 20 years ago and was not changed at that time. It currently 
restricts ship managers to companies that are U.S. citizens within the 
meaning of 46 U.S.C. Sec. 50501 (generally referred to as ``Section 2 
Citizens'' because this definition derives from former Section 2 of the 
Shipping Act of 1916). A Section 2 Citizen is a corporation, 
partnership, or association whose controlling interest (i.e., greater 
than 50 percent) is owned by citizens of the United States.
    In contrast, ``foreign-owned'' U.S. companies that own a U.S. flag 
vessel are often referred to as ``documentation citizens.'' The term 
``documentation citizen'' is used to identify a vessel-owning entity 
that is able to document a vessel under the U.S. flag with a registry 
endorsement. The standard for determining a documentation citizen is 
lower than that for a Section 2 citizen because U.S. documentation 
citizen ownership does not require U.S. ownership at every tier of 
ownership. However, a U.S. documentation citizen still has significant 
control and involvement in the operation of the entity and over the 
vessel. The corporate eligibility requirements for documenting a vessel 
and the meaning for the term documentation citizen are found in 46 
U.S.C Sec. 12103(b).
    Currently, the U.S. Department of Defense (DOD) allows 
documentation citizen companies to manage Military Sealift Command 
vessels. There has been interagency discussion regarding the merits of 
changing MARAD's citizenship requirement to be the same as that allowed 
by DOD, given that the ship management services for these sealift 
vessels are similar and the purpose of the National Defense Reserve 
Fleet (NDRF) is to principally provide support to DOD. An Advanced 
Notice of Proposed Rulemaking (ANPRM) will solicit public comments 
about considering a regulatory change to amend the citizenship 
requirements for ship managers and general agents that maintain and 
operate NDRF vessels. At this time, no decision has been made to change 
the existing regulation.
    MARAD plans to evaluate whether the Agency's existing U.S. 
citizenship criteria for its vessel operators (ship managers and 
agents) benefit the maritime commercial and national security interests 
of the United States and provide the most current and effective 
approach in support of the operations of the NDRF. In particular, it 
will seek comments regarding the need for and relevancy of existing 
regulations governing the citizenship eligibility requirements for U.S. 
company vessel operators. MARAD will also welcome comments suggesting 
improvements to the Agency's existing regulations regarding the 
operations of the NDRF that strengthen the U.S. Merchant Marine.

    Question 5a. In addition to the public comment requirement, how are 
you working with stakeholders to address concerns with the ANPRM?
    Answer. Consistent with the Administrative Procedure Act, the 
public comment period/process is the vehicle for working with 
stakeholders to address concerns with the ANPRM. Comments from 
stakeholders received in response to the ANPRM will be used to 
determine whether MARAD should propose any changes. At this time, no 
decision has been made to change the existing regulation. If deemed 
appropriate that documentation (non-Section 2) U.S. citizen companies 
should be eligible to compete for ship management services, proposed 
changes would be published in a notice of proposed rulemaking, 
providing stakeholders further opportunity to comment on the issue.
                                 ______
                                 
    Response to Written Questions Submitted by Hon. Brian Schatz to 
                         Paul N. Jaenichen, Sr.
    Question 1. In your testimony, you emphasized the need to quickly 
grow the number of U.S.-flagged vessels in order to meet the growing 
domestic and international demands on the U.S. maritime fleet.
    Please explain the major drivers you believe are influencing the 
strategy to grow the U.S. maritime fleet. In your response, please 
specifically address the assumptions you are making about the future 
requirements on the U.S. maritime fleet, and how these requirements are 
informing the pace of development and total number of vessels and 
mariners needed to support U.S. economic and national security 
priorities.
    Answer. The U.S. Merchant Marine engaged in international trade has 
steadily declined since World War II and currently carries only a small 
fraction (roughly 2 percent) of our Nation's overseas trade. Today, 
there are less than 90 self-propelled U.S.-flag ocean-going ships of 
1,000 gross tons or more operating principally or solely in 
international trades, down from more than 300 vessels in 1975. Action 
is required to reverse this decline, or a viable U.S. presence in 
international maritime commerce could be at risk. The strategic and 
economic interests of the United States will not be well served if 
America is wholly dependent on foreign companies and mariners to carry 
our Nation's commerce and maintain the global supply chain. In 
addition, if the U.S. had no fleet in international trade, U.S. 
participation in the development of international vessel safety and 
security guidance could be compromised.
    Accordingly, the Maritime Administration (MARAD) currently is 
developing a strategy to revitalize the U.S. Merchant Marine. The 
strategy will focus on minimizing impediments for ship owners to flag 
vessels in the U.S. and employ U.S. crews. Although the strategy will 
likely address other segments of the industry, the initial focus will 
be on developing options which, if implemented, could result in gains 
for the U.S. flag and U.S. mariners and potentially result in a higher 
portion of U.S. international trade for U.S. flag vessels. Increased 
U.S. overseas trade for U.S. flag vessels could also provide more jobs 
for American seafarers. In turn, this would increase the number of 
ships and mariners to respond in time of armed conflict or national 
emergencies.
    MARAD notes that the foreign trade sector offers the greatest 
growth potential for U.S.-flag ships and U.S. mariners, given that 
domestic commerce is already served solely by U.S.-flag vessels and 
mariners and will grow largely at the rate of the overall economy. Any 
increase in the U.S.-flag share of our Nation's international trade, 
such as a doubling of trade share, could potentially double the number 
of U.S.-flagged ships and mariners operating in foreign trade.

    Question 2. In your testimony, you noted that there would not be a 
sufficient number of licensed and unlicensed American mariners to 
operate all of the new vessels the United States might laydown as part 
of its new maritime strategy. As a result, you explained that you would 
consider relying on non-American seafarers to fill open positions so 
that the United States could expedite the growth of its maritime fleet 
even as it continues to develop the next generation of U.S. mariners.
    What effort is the Maritime Administration (MARAD) making today to 
help grow the pool of U.S. citizen mariners? What additional resources 
(including changes to statutory authority) could help MARAD expedite 
its efforts to grow the pool of U.S. mariners so that we can minimize 
or avoid a future gap between the number of open mariner positions and 
the number of U.S. mariners available to fill those positions? How has 
MARAD engaged the maritime academies, the maritime industry and the 
maritime unions to determine how to minimize or avoid a future gap?
    Answer. I do not support any actions that would negatively impact 
the number of jobs available to U.S. mariners. MARAD's initial 
objective in developing a maritime strategy is to revitalize the U.S. 
flag industry engaged in international trade, which will increase the 
number of U.S. mariner jobs. As a first step in developing a strategy, 
MARAD is hosting a public meeting on January 14-16, 2014 to generate 
and discuss ideas to improve, strengthen and sustain U.S. international 
cargo opportunities and sealift capacity, and to develop a list of 
items for action, voluntary adoption or further study. MARAD will 
solicit not only ideas that would encourage vessel owners to operate 
under the U.S. flag, but also what the appropriate size of that fleet 
should be and how the U.S. can best sustain an expanded U.S. flag fleet 
in international trade. I believe this discussion is an important first 
step as we work to find consensus among maritime industry stakeholders 
to develop a national strategy.
    MARAD vigorously supports maritime training and education as well 
as mariner recruitment and retention programs. To ensure an adequate 
supply of capable and well trained licensed merchant mariners, MARAD 
funds and operates the U.S. Merchant Marine Academy (USMMA) and 
provides limited funding to six state maritime academies, which 
collectively produce more than 850 new officers annually. MARAD also 
provides training vessels to each of the state maritime academies. 
These vessels are critical for obtaining the necessary sea time for 
graduates to obtain their U.S. Coast Guard (USCG) credentials.
    MARAD also actively monitors mariner availability through its 
Mariner Outreach System (MOS) to ensure that the industry can meet both 
peacetime and contingency requirements. Created in 2006, the MOS 
monitors the number of qualified mariners through a partnership with 
USCG and mariner requirements through partnerships with the industry. 
This analysis is shared with labor, the maritime academies and our 
industry partners to identify trends and issues negatively affecting 
the workforce so that we can be proactive at devising solutions.
    Finally, MARAD established and provides oversight of an Electrician 
Apprentice Training Program to address a developing shortage of senior 
unlicensed engineers critical to the activation of the Ready Reserve 
Force vessels. The program has proven to be a cost effective way to 
create trained electricians to fulfill crewing requirements to meet 
both the economic and national security needs of the Nation.

    Question 3. In 2009, Congress granted MARAD the authority to 
promulgate regulations to allow for tougher enforcement of the United 
States' Cargo Preference laws. However, MARAD has fallen short in using 
its authority to promulgate those new regulations.
    Please explain why MARAD has been unable to promulgate these 
regulations. If confirmed as the Administrator, how would you 
prioritize the need to promulgate these new regulations, and what is a 
reasonable timeline for doing so? What additional authority could 
Congress provide MARAD in an effort to ensure that the Nation's Cargo 
Preference laws are being followed as intended?
    Answer. My priority is to promulgate a cargo preference enforcement 
regulation. MARAD currently is engaged in an intensive rule-development 
process to update its cargo preference regulations and implement the 
enforcement provisions of the Duncan Hunter National Defense 
Authorization Act for Fiscal Year 2009 (FY NDAA). I acknowledge the 
frustration that has been expressed about the delay in implementing 
this rule; however, prior efforts to issue this rule have contributed 
to the current rulemaking effort by the Department of Transportation 
(DOT) and MARAD. Preliminary draft rule language is under review within 
DOT and I am closely monitoring its progress. MARAD appreciates the 
authority the Congress has provided the Agency to enforce cargo 
preference laws and believes the current rulemaking will meet the 
intent of the FY 2009 NDAA.

    Question 4. The Maritime Security Program (MSP) is under 
extraordinary pressure as a result of sequestration. Up to one-third of 
the Nation's Merchant Marine ships may be pulled from service next year 
due to these misguided, across-the-board cuts. These ships cannot be 
brought back into service quickly once they are gone. And we cannot 
expect our Merchant Marines to wait around, hoping that they will get 
their jobs back.
    I am working closely with my colleagues to reverse the sequester 
cuts so that we can protect our maritime industry. But as the 
Administrator, you would ultimately be responsible for ensuring that 
MSP remains viable, even with the pressures of sequestration.
    What steps would you take as the Administrator to help blunt the 
impact of sequestration on the Merchant Marine fleet so that we do not 
lose these vessels or our Merchant Marines?
    Answer. Appropriations as provided by the Continuing Appropriations 
Act, 2014 (P.L. 113-46), enacted October 17, 2013, allowed the MARAD to 
renew all MSP operating agreements effective 1 October 2013, permitting 
continuous operations of the Maritime Security Program (MSP) fleet. 
Full funding for the remainder of FY 2014 will ensure no vessels are 
removed from the MSP due to lack of funding and will ensure that the 
Department of Defense (DOD) requirement for a 60-ship fleet is met with 
assured access to global multi-modal transportation logistics sealift 
support for the U.S. Armed Forces.
    If full funding is not extended for the remainder of FY 2014, the 
Secretary of Transportation, in consultation with the Secretary of 
Defense, must determine whether MSP operating agreements will be 
modified and/or which selected vessels should be retained within the 
funding level of the previous Fiscal Year. Vessels retained in the 
program will be those that are the most militarily useful and 
commercially viable.
                                 ______
                                 
     Response to Written Questions Submitted by Hon. John Thune to 
                         Paul N. Jaenichen, Sr.
    Question 1. During the government shutdown in October, the U.S. 
Merchant Marine Academy was required to shut down its operations--the 
only one of the five service academies that had to do so. While nobody 
wants to see another government shutdown, are there any steps that 
MARAD can take to prevent a similar situation at the Academy if another 
shutdown were to occur?
    Answer. While all the Federal service academies were forced to make 
changes as a result of the Government shutdown, the impact on the U.S. 
Merchant Marine Academy (USMMA) was especially severe because nearly 
all of the USMMA's faculty and staff are civilian Federal employees. 
Unlike the other service academies whose staffs include a large number 
of active duty military personnel, USMMA experienced significantly 
reduced operations, classes were cancelled and administrative support 
programs ceased. I am committed to continuing to work with Congress to 
ensure that, in the event of a future government shutdown, the U.S. 
Merchant Marine Academy has the same flexibility as the other military 
academies to continue to operate over the course of a lapse in funding.

    Question 2. In your Committee Questionnaire responses, you mention 
that the number of U.S.-flagged deep ocean vessels involved in 
international trade has declined over 80 percent in the last 20 years, 
which could have a detrimental impact on the U.S. military's ability to 
move troops, equipment, and supplies should our national security 
require such capabilities. Should you be confirmed, how will you 
address this potential problem?
    Answer. MARAD is developing a strategy to revitalize the U.S. 
Merchant Marine that will focus on actions that would enable ship 
owners to flag vessels under the U.S. flag and operate with U.S. crews. 
Although the strategy ultimately will include other segments of the 
industry, an initial focus will be on developing options which, if 
implemented, could result in gains for the U.S. flag operating in 
international trade and potentially result in an increased portion of 
ocean borne commerce being on U.S. flag vessels. Increased U.S. 
international trade and more vessels operating under U.S. flag would 
also provide more jobs for American seafarers. This increase in the 
number of ships and mariners would enhance national security by 
ensuring the Department of Defense has sufficient access to sealift 
capacity to respond in time of armed conflict or national emergencies.
    As part of its strategy, MARAD plans to analyze the costs of 
operating under the U.S. flag compared to foreign flag and to determine 
if the Agency can take actions to make the U.S. flag more competitive. 
In addition, MARAD will be looking at challenges facing the U.S. 
shipbuilding industry and options to promote this industry, which has 
proven to be beneficial to the Nation from both an economic and defense 
perspective. MARAD expects to conduct extensive public outreach on 
these issues to identify actions that could strengthen the U.S. 
Merchant Marine.
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Roger F. Wicker to 
                         Paul N. Jaenichen, Sr.
    Question 1. For almost a century, U.S. policy has required 
merchandise shipped by water within the United States to be carried by 
vessels that are U.S.-built, U.S.-owned, U.S.-flagged, and U.S.-crewed. 
This policy has enhanced our Nation's economic, national, and homeland 
security. Will you support and defend this policy if you are confirmed?
    Answer. Yes. I strongly support the Merchant Marine Act of 1920 
(Jones Act) because it is essential to maintaining reliable coastwise 
trade and to ensuring the existence of a domestic maritime industry of 
shipbuilders, vessels and merchant mariners.

    Question 2. The United States is now a net exporter of petroleum 
products for the first time since 1949. This boom in domestic energy 
production could greatly benefit the U.S.-flagged fleet. What plans do 
you propose to take advantage of this strategic time in history? What 
assistance can we in Congress provide?
    Answer. The potential increase in U.S. production of both crude oil 
and natural gas may increase the Nation's economic and national 
security and may present opportunities for the maritime transportation 
sector. Securing cargoes from this sector for U.S. carriers and U.S. 
mariners in this expanding market will be one of my priorities.
    For example, MARAD's Deepwater Port licensing program offers the 
potential for new employment opportunities for U.S. citizen crews in 
the operation of tank vessels serving the facilities licensed by MARAD. 
MARAD has made it a priority to negotiate U.S. crew and build 
agreements with the applicants of our offshore energy import and export 
facilities. MARAD anticipates additional license applications for 
offshore/deepwater port liquefied natural gas (LNG) export facilities 
in the Gulf of Mexico to be filed in the coming year. If confirmed, I 
intend to work with applicants to maximize the use of U.S. citizens in 
all aspects of facility operation--to include seeking opportunities for 
the U.S. shipbuilding industry in the facility construction, operation 
and maintenance activities.
    Additionally, natural gas now serves as an alternative fuel choice 
for marine propulsion. Over the past 18 months, five domestic ship 
operators have made public their intentions to convert existing and/or 
build new commercial cargo and offshore platform supply vessels that 
use LNG as a propulsion fuel. The first of these vessels is scheduled 
to be in service as early as spring 2014, with several more scheduled 
for 2015 and 2016.

    Question 3. Cargo preference programs are critical to the continued 
economic viability of the U.S.-flagged fleet. What is MARAD doing to 
ensure that all civilian shipper agencies are complying with the cargo 
preference laws? If MARAD moves forward with an enforcement rulemaking, 
how will you ensure that those rules do not create exceptions for 
agencies to circumvent existing cargo preference laws?
    Answer. There is a reporting requirement under current regulations 
that require shippers of U.S. Government impelled cargo to report all 
of their cargo moves, on both U.S.-flag and foreign-flag, to the 
MARAD's Office of Cargo Preference and Domestic Trade. Statistical 
information derived from this reporting allows MARAD to monitor 
compliance on a contract-by-contract and agency-by-agency basis. 
Additionally, our cargo preference program staff reviews bills of 
lading submitted by agencies, reviews U.S. Government contract 
listings, and gathers feedback from our U.S.-flag carriers on U.S. 
Government impelled cargo moving in international trade. MARAD 
currently is engaged in a rule-development process to update current 
cargo preference regulations and implement the enforcement provisions 
as directed by the Duncan Hunter National Defense Authorization Act for 
Fiscal Year 2009. As part of this rulemaking, MARAD will consider all 
options to address compliance with existing cargo preference laws.

    Question 4. MARAD has long maintained policies that have worked to 
strengthen the U.S. Merchant Marine. Those policies include preference 
clauses that set aside Ready Reserve Force ship management contracts 
for American-owned companies. As MARAD administrator, will you protect 
and uphold existing policies that reserve this line of work for U.S.-
owned companies?
    Answer. The existing MARAD citizenship regulation was last 
evaluated 20 years ago and was not changed at that time. Currently, the 
U.S. Department of Defense (DOD) allows documentation citizen 
companies, which are ``foreign-owned'' U.S. companies that are able to 
document a vessel under the U.S. flag with a registry endorsement, to 
manage Military Sealift Command vessels. There has been interagency 
discussion regarding the merits of changing MARAD's citizenship 
requirement to be the same as that allowed by DOD, given that the ship 
management services for these sealift vessels are similar and the 
purpose of the National Defense Reserve Fleet (NDRF) is principally to 
provide support to DOD.
    An Advance Notice of Proposed Rule Making (ANPRM) will solicit 
public comments regarding whether the Agency's existing U.S. 
citizenship criteria for its U.S. company vessel operators (ship 
managers and agents) benefit the maritime commercial and national 
security interests of the United States and provide the most current 
and effective approach to support the operations of the NDRF. In 
particular, it will seek comments regarding the need for and relevancy 
of existing regulations governing the citizenship eligibility 
requirements for vessel operators. MARAD will also welcome comments 
suggesting improvements to the Agency's existing regulations regarding 
the operations of the NDRF in a manner that strengthens the U.S. 
Merchant Marine. Comments received in response to the ANPRM will be 
used to determine whether MARAD should propose any changes. At this 
time, no decision has been made to change the existing regulation.

    Question 5. Many of the vessels in the Ready Reserve Fleet are 
reaching the end of their service life. What are your plans to maintain 
the Ready Reserve Force as a viable component of the National Defense 
Reserve Fleet?
    Answer. The 46 vessels currently in the Ready Reserve Force (RRF) 
provide half of the government owned surge sealift capability. DOD 
surge sealift requirements call for the full capability of the RRF as 
it exists today, and there is a recognized need to recapitalize the 
ships for the RRF program since most are nearing the end of their 
service life. If RRF capability is to be maintained at its present 
level, a recapitalization plan will need to be in effect by 2020 when 
several vessels reach 50 years of age. MARAD is working with the U.S. 
Navy and U.S. Transportation Command to determine the most cost 
effective manner to acquire replacement capacity.

    Question 6. In your written testimony, you touched briefly upon the 
importance of port infrastructure. I agree with you. In fact, my home 
state of Mississippi is investing nearly $570 million to upgrade our 
state port of Gulfport. Do you feel it is important to have a truly 
national transportation network that includes ports of all sizes and 
capabilities?
    Answer. Yes. A national network of port facilities, one that has 
been fully integrated into our overall freight transportation network, 
is vital to the Nation's future economic growth potential. Ports of all 
sizes and capabilities play an integral role in the Nation's freight 
supply chain, contributing to economic growth, job creation and our 
national security. The American Association of Port Authorities (AAPA) 
reports that U.S. seaports generate more than $212 billion in Federal, 
state and local taxes annually. It is also anticipated that between 
2012 and 2016, U.S. seaports and their marine terminal partners will 
invest approximately $46 billion into infrastructure projects in and 
around their facilities--generating significant landside economic 
activity. Further, seaports directly or indirectly support employment 
of more than 13 million people in the U.S.--accounting for $650 billion 
in personal income.
    Most importantly, seaports of all sizes and capabilities serve as 
our Nation's gateway to the expanding global marketplace. Each year, 
U.S. seaports process about 2 billion tons of cargo (import, export and 
domestic) including food, clothing, medicine, fuel, building materials, 
electronics and toys. According to the AAPA, our Nation's port network 
is responsible for moving nearly all of the country's overseas cargo 
volume (99.4 percent by weight and 64.1 percent by value). Each of the 
50 states relies on our port network to process both their imports and 
exports--totaling more than $3.8 billion worth of goods a day.
    By 2050, the Census Bureau expects there to be nearly 400 million 
Americans--an increase of nearly 100 million people. This kind of 
growth will trigger a corresponding increase in freight demand and 
movement through the Nation's port network--making efficient port 
operations, infrastructure expansion and modernization even more 
critical to our economic interests.
                                 ______
                                 
Response to Written Questions Submitted by Hon. John D. Rockefeller IV 
                            to Debra Miller
    Question 1. In 1980, the freight railroads were struggling, and 
Congress stepped in with the Staggers Act. This legislation, which 
governs much of the Board's work, was meant to help the freight 
railroads improve their finances, but also to ``provide a regulatory 
process that balances the needs of carriers, shippers, and the 
public.'' At this point, I think it's clear the freight railroads don't 
need our help any more.
    The staff report I released today shows that in each of their most 
recent 16 quarterly reports, one of the three publicly traded freight 
railroads (CSX, Norfolk Southern, and Union Pacific) have set all-time 
financial records. We don't have numbers for BNSF because Warren 
Buffett took the company private in 2009, but I'm sure he's doing fine 
too.
    In my statement, I talked about the STB's role in maintaining 
balance in the freight rail industry. How can the STB restore balance 
to a network that clearly favors the freight railroads right now over 
shippers and consumers?
    Answer. The STB was created to help ensure that the railroad 
industry earned revenues that would allow it to continue to invest in 
its network in order to meet the demands of a growing economy, while 
also protecting shippers from unreasonably high rates. Based on the 
earnings that the Class I railroads have achieved in recent years--as 
outlined in the Committee's report--it may indeed be time that more 
emphasis be placed on assuring that shippers are not paying more than 
is necessary for railroads to earn adequate revenues. In particular, 
the STB may need to examine if the manner in which it calculates 
revenue adequacy needs to be changed, or further develop the manner in 
which rates can be challenged when a railroad is revenue adequate.
    The issue of revenue adequacy aside, there may be other steps that 
the Board can take to better serve not only shippers, but all of its 
stakeholders. Based on comments that I heard during my meetings with 
members of the Committee and their staffs, there is significant concern 
that stakeholders do not file cases because they are frustrated with 
the expense and time that it takes for the STB to process cases. If 
confirmed, one of my priorities would be to meet with the Board's 
stakeholders--both shippers and railroads--and hear firsthand their 
thoughts regarding the STB's regulatory processes. As I noted during my 
opening comments, one of my concerns as Secretary of KDOT was that the 
agency had become too insulated from the people we served. Although I 
cannot say if that is the case with the Board, I would like to hear 
directly from those that the Board serves to get their perspective on 
how the STB may do better for its stakeholders.

    Question 1a. In September, the Board found that two of the four 
Class I railroads were revenue adequate; Norfolk Southern and Union 
Pacific. CSX was found to be just short of revenue adequacy and BNSF, 
while it needs to re-submit due to Warren Buffett's acquisition, is 
expected to be at or near revenue adequacy. Given this, do you believe 
the Board's revenue adequacy measurement presents a clear and accurate 
picture of the financial health of the railroads?
    Answer. I am only beginning to learn about these complex railroad 
finance issues. But I do know that the railroad industry today looks 
nothing like it did in the 1960s and 1970s. And so I think that the 
agency should take a fresh look at the issue of revenue adequacy and 
how the concept should inform the Board's general regulatory approach. 
If confirmed, I plan to make this one of my priorities; learning as 
much as possible about the Board's current approach to calculating 
revenue adequacy and determining whether changes are needed and, if so, 
whether such changes would entail a few minor tweaks or a complete 
overhaul.

    Question 2. Railroads have treated captive shippers very poorly--
increasing rates, shifting fuel surcharge costs, refusing to provide 
adequate service, and bullying the shippers around. And yet, the Board 
has continuously failed to adequately address these issues. Do you 
share my concerns about the issues impacting captive shippers?
    Answer. Given my background, I am very concerned about the issues 
that captive shippers face. As I noted in my comments before the 
Committee and my individual meetings with members of the Committee and 
their staffs, I have seen firsthand the impact to shippers and 
communities when rail service is not available, or is available only on 
arbitrary or unreasonable terms. In many such instances, the only 
source of protection or relief is the STB. If confirmed, I will do my 
best to ensure that shippers can turn to the STB for appropriate 
relief.

    Question 2a. Will you commit to work to ensure that the Board is 
accessible and affordable to shippers? What steps would you take to 
accomplish this?
    Answer. If confirmed, I commit to using my power as a Member to 
make sure that the Board is doing all that it can to make its processes 
accessible and affordable. As noted, I have heard concerns that 
stakeholders are deterred from seeking relief from the Board because of 
how expensive and time-consuming STB proceedings can be. Although such 
concerns are undoubtedly shared by both shippers and railroads, in many 
instances it is the shippers that are more likely to suffer, 
particularly shippers that cannot match the resources of the railroad. 
To ensure that railroads do not have an unfair advantage in this 
regard, one of my priorities, if confirmed, will be to meet with Board 
staff and review the Board's internal processes to determine if there 
are ways to build on the steps that the Board has already taken to 
speed up the process and reduce costs to stakeholders. I would also 
like to meet with the stakeholders to gather their input.

    Question 3. The Board has consistently determined that railroads 
are bound by common carrier obligations to transport hazardous material 
in instances where the appropriate agency has promulgated comprehensive 
safety regulations. In response to these requirements and the perceived 
risk of shipping hazardous materials, the Committee has received 
complaints that the railroads have reduced service, increased rates, 
and significantly altered contract terms and conditions to shippers of 
hazardous materials. How would you work to ensure hazardous materials 
shippers are not treated unfairly?
    Answer. The transportation of hazardous materials creates unique 
challenges not only for shippers, but also for the railroads that are 
required to carry such traffic. I am sympathetic to the railroads' 
concern that transporting such materials exposes them to potentially 
catastrophic liability. Yet I am also sympathetic to the chemical 
shippers' concern that rail is often the only viable means of 
transporting such materials--and in some instances, the only means.
    As I have noted throughout my confirmation process, the Board's 
processes must be accessible and affordable for shippers--including 
chemical shippers. Although I am too new to these issues to say whether 
there are special accommodations that the Board can or should make for 
chemical shippers, I believe that the Board needs to do all that it can 
to eliminate deterrents to shippers needing to seek relief at the 
Board, and if that is done, it will benefit chemical and non-chemical 
shippers alike. My commitment, if confirmed, is to work to ensure that 
the Board's processes are accessible to all shippers.

    Question 4. In many instances, the Board has been slow and 
inefficient in its decision making which has left many shippers without 
a resolution to their concerns for several years. In some instances, 
small shippers do not even bring cases to the Board because they cannot 
afford the time and money it would take to reach a decision. What do 
you see as the reasons for these inefficiencies?
    Answer. Without having been at the Board and having had the 
opportunity to view its internal processes firsthand, I have little 
basis for drawing any conclusions. I can say from my past work 
experience that delays tend to occur when the staff is overly concerned 
with eliminating risk, when the process itself has become bogged down 
with unnecessary layers of review, and when timeliness is simply not 
considered a priority. Whether any of that applies to the STB, I cannot 
say. However, if confirmed, this is an issue that I will explore and 
try to work with my fellow Board Members to address.

    Question 4a. How will you improve the Board's timeliness in making 
decisions?
    Answer. Deliberative decision-making is important and no attempt to 
improve timeliness should negate solid analysis and decision-making, 
but I believe that it is possible to accomplish both when those twin 
goals are kept firmly in mind. To be improved, timeliness has to be a 
priority, which means that it needs to be discussed and referenced 
regularly. In addition, an organization must assess the usefulness of 
each step in the decision-making process and eliminate those steps 
where the added value is not outweighed by the additional time that it 
adds to the process.
    I understand the idea that justice delayed can be justice denied. 
Therefore, if confirmed, one of my first tasks will be to meet with the 
Board employees and study the Board's decision-making process to try to 
determine if there are ways that the process can be made more 
efficient. I will also speak with the Board's stakeholders to see if 
they have ideas that may be of value.
                                 ______
                                 
     Response to Written Questions Submitted by Hon. John Thune to 
                              Debra Miller
    Question 1. Kansas is a rural, heavily agricultural state, and one 
strongly dependent on freight rail transportation. What were some of 
the major rail initiatives you advanced or participated in during your 
time as the state's transportation secretary? What lessons have you 
learned that you will bring to your position at the STB, if confirmed?
    Answer. During my tenure as the Secretary of Transportation for the 
state of Kansas, I worked on a number of significant rail initiatives. 
Notably, I was an active participant in the Kansas Department of 
Transportation's (KDOT's) creation of rail port authorities. These 
authorities were given taxing power and, with the revenue that they 
raised, the ability to purchase rail lines for preservation of rail 
service. An example of the success of this initiative was the 
establishment of the Mid-States Port Authority, a rail authority made 
up of 14 counties. Established in 1981, it eventually purchased 400 
miles of track. After it was created, I continued to work aggressively 
to secure Federal and state loans and guarantees that were needed to 
fund Mid-States' rail service and maintain operations. I am proud to 
say that Mid-States provided consistent and steady rail service to the 
northern tier of Kansas for nearly 30 years, a service that was 
important to shippers and local communities alike, before finally 
selling its lines to Rail America in 2009.
    While Director of Planning at KDOT, the agency also actively 
participated in the numerous rail merger proceedings before the STB in 
the 1980s and early 1990s. The focus of KDOT's participation was on 
representing the interests of shippers and local communities.
    I also led KDOT in the establishment and implementation of the 
Kansas State Rail Service Improvement Fund, a program that makes loans 
and grants to port authorities and railroads to maintain and improve 
service. As Secretary, I personally and aggressively defended the 
continuance of this program before the state legislature. During my 
tenure, KDOT also supported and participated in the development of 
several Transportation Investment Generating Economic Recovery (TIGER) 
grant applications for shortline railroad improvement to the U.S. 
Department of Transportation, including an application which was 
approved.
    I learned many valuable lessons while Secretary of KDOT. In terms 
of rail transportation, I learned the vital importance that rail plays 
to agricultural producers and small manufacturing companies, as well as 
the surrounding communities. In a rural state like Kansas, rail service 
is often the only viable means of transportation. But I also learned 
how precarious rail service is--once it is lost, it is not likely to be 
restored. Accordingly, it is important not to take rail service for 
granted and take the steps necessary to prevent it from being lost.

    Question 2. Several Federal transportation authorities, such as the 
NTSB and the FAA, have independent investigative authority, which 
allows them to investigate matters under their jurisdiction without the 
necessity of a formal complaint. The STB, however, does not have this 
authority. Would you favor Congress granting such independent 
investigative authority to the STB? If so, are there any limits you 
would consider appropriate to constrain such authority, such as 
limiting it to especially significant matters?
    Answer. As I understand it, there are already ways for stakeholders 
that have concerns or complaints to raise them with the STB. For 
relatively small filing fees, parties can file formal complaints, 
petitions in which they seek a legal determination from the Board, or 
petitions for rulemaking. The STB also has a free customer assistance 
program that can help shippers resolve service disputes with railroads.
    However, should Congress choose to grant the STB independent 
investigative authority, I believe that such authority should be 
limited to railroad service practices with industry-wide implications. 
Investigative authority should be limited in this manner because many 
individual railroad service disputes may not rise to a level of 
significance that would justify the expenditure of limited Board 
resources on own-motion investigations. And giving the Board 
investigative authority for rates could overwhelm the agency while not 
substantially reducing the burden on private parties, as parties would 
still have to develop substantial factual records. Investigative 
authority would be best limited to cases of industry-wide service 
disputes because those are the situations where the Board could have 
the most impact without creating enormous logistical challenges.

    Question 3. To what extent do the total resources devoted to 
conducting a rate reasonableness case--by shippers, by carriers, and 
even by the Surface Transportation Board itself--concern you?
    Answer. It has been explained to me that a rate reasonableness case 
generates a significant amount of litigation costs for the parties 
(both railroads and shippers) and man-hours for the STB staff. Any time 
that a regulatory process becomes that sizeable, it is a cause for 
concern. I also understand that the STB has taken a number of 
initiatives over the last several years to improve its large-case 
procedures and to streamline its rate reasonableness methodologies. If 
confirmed, I would be interested in exploring whether those initiatives 
have gone far enough and whether there are additional steps that my 
fellow Board Members and I can take to reduce resource requirements for 
the parties and the Board itself.

    Question 4. Would you favor regular reports by the Board to the two 
Congressional committees of jurisdiction, showing which cases have been 
open for more than six months?
    Answer. As the former head of large public agency, I believe that 
it is wise to err on the side of accountability and transparency, and 
regular reporting requirements are a good way of achieving that. 
Accordingly, I would support regular reports to the appropriate 
Congressional committees.
    Whether that means a report of cases pending more than six months 
or some different threshold, I cannot say. As for other parameters of a 
reporting requirement (the level of detail, the frequency), I would 
simply note that any reporting requirement should be adopted with the 
aim of improving accountability and transparency and not simply for the 
sake of creating a reporting requirement--otherwise, the exercise 
becomes meaningless. In addition, I believe it would be 
counterproductive if the reporting requirement itself were so 
burdensome that it required the Board to shift significant resources 
away from processing cases.
                                 ______
                                 
   Response to Written Question Submitted by Hon. Roger F. Wicker to 
                              Debra Miller
    Question. Rail lines are extremely capital-intensive investments 
and once abandoned are rarely rebuilt. As such, I encourage you to 
treat every request for abandonment with trepidation and suspicion. 
What additional tools or reforms do you feel the Surface Transportation 
Board needs in order to ensure that America is able to maintain its 
current rail infrastructure?
    Answer. I share the concern about the loss of rail lines. As I 
learned from my time serving at the Kansas Department of 
Transportation, it is indeed true that once rail lines are removed they 
are likely lost forever. Accordingly, if confirmed, I will be mindful 
of this fact when reviewing requests for abandonment authority that are 
filed with the Board--especially in those cases where there remain 
active shippers on the line.
    I believe that one of the best ways for America to maintain its 
current rail infrastructure is through the continued support of the 
shortline railroad industry. In Kansas, there were many instances where 
shortlines were able to take over operations on low-density, marginal-
revenue lines that otherwise would have been abandoned by the Class I 
carriers. I believe that the rise of the shortline industry is one of 
the true successes of the Staggers Act and that the STB (and ICC before 
it) did an excellent job of creating a regulatory environment that has 
allowed shortlines to flourish. Although I am too new to these issues 
to say at this time whether there are further tools or reforms that can 
be given to the STB in this regard, if confirmed I will continue to 
support the shortline industry in any way I can, and to encourage 
smaller carriers to step in and try to continue rail service for 
shippers that need it.
    That being said, I am also aware that there may be shortlines whose 
true aim is not to preserve rail service. If confirmed, I will proceed 
cautiously if I suspect that a shortline's ultimate goal may be 
contrary to preservation of rail service.
                                 ______
                                 
     Response to Written Question Submitted by Hon. John Thune to 
                               Arun Kumar
    Question. The Government of India is engaged in an apparent pattern 
of discrimination against foreign products, including those from the 
United States, designed to benefit its domestic corporations. It is 
unfairly compelling domestic production of everything from information 
technology and clean energy equipment to medicines and medical devices, 
and creating barriers at the expense of American jobs and exports. This 
is no way for one of the world's biggest economies to treat its second 
largest export trading partner. And there is reason to fear other 
countries may adopt similar tactics.
    If confirmed, what will you do to secure real and timely results 
for American manufacturers to ensure that they are not disadvantaged by 
India's non-compliance with international obligations?
    Answer. From my work with India, I am personally aware of the 
challenges that doing business there poses for U.S. companies. These 
include uncertainties in the policy environment; and localization 
barriers to trade and intellectual property issues that have the effect 
of discriminating against foreign producers.
    I share your concerns about discriminatory trading practices 
hurting U.S. businesses. I know the U.S. and Foreign Commercial Service 
has officers on the ground in India and around the world who are 
focused on helping U.S. businesses deal with such challenges.
    If confirmed, I will promote U.S. exports vigorously, and support 
our commercial diplomacy in India and around the world to address 
discriminatory trading practices that affect U.S. firms and workers. If 
confirmed, I will support our business advocacy efforts on behalf of 
U.S. exporters, to assist them in succeeding in India and other large 
markets. If confirmed, I will work with colleagues in the Commerce 
Department and elsewhere throughout the government to achieve 
appropriate enforcement of U.S. and international laws and provisions 
that prohibit discriminatory trade practices, particularly when such 
practices affect U.S. exporters.

                                  [all]
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