[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]









               MARITIME TRANSPORTATION REGULATORY ISSUES

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

                                (115-14)

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                COAST GUARD AND MARITIME TRANSPORTATION

                                 OF THE

                              COMMITTEE ON
                   TRANSPORTATION AND INFRASTRUCTURE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 3, 2017

                               __________

                       Printed for the use of the
             Committee on Transportation and Infrastructure




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             COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

                  BILL SHUSTER, Pennsylvania, Chairman
DON YOUNG, Alaska                    PETER A. DeFAZIO, Oregon
JOHN J. DUNCAN, Jr., Tennessee,      ELEANOR HOLMES NORTON, District of 
  Vice Chair                             Columbia
FRANK A. LoBIONDO, New Jersey        JERROLD NADLER, New York
SAM GRAVES, Missouri                 EDDIE BERNICE JOHNSON, Texas
DUNCAN HUNTER, California            ELIJAH E. CUMMINGS, Maryland
ERIC A. ``RICK'' CRAWFORD, Arkansas  RICK LARSEN, Washington
LOU BARLETTA, Pennsylvania           MICHAEL E. CAPUANO, Massachusetts
BLAKE FARENTHOLD, Texas              GRACE F. NAPOLITANO, California
BOB GIBBS, Ohio                      DANIEL LIPINSKI, Illinois
DANIEL WEBSTER, Florida              STEVE COHEN, Tennessee
JEFF DENHAM, California              ALBIO SIRES, New Jersey
THOMAS MASSIE, Kentucky              JOHN GARAMENDI, California
MARK MEADOWS, North Carolina         HENRY C. ``HANK'' JOHNSON, Jr., 
SCOTT PERRY, Pennsylvania                Georgia
RODNEY DAVIS, Illinois               ANDRE CARSON, Indiana
MARK SANFORD, South Carolina         RICHARD M. NOLAN, Minnesota
ROB WOODALL, Georgia                 DINA TITUS, Nevada
TODD ROKITA, Indiana                 SEAN PATRICK MALONEY, New York
JOHN KATKO, New York                 ELIZABETH H. ESTY, Connecticut, 
BRIAN BABIN, Texas                       Vice Ranking Member
GARRET GRAVES, Louisiana             LOIS FRANKEL, Florida
BARBARA COMSTOCK, Virginia           CHERI BUSTOS, Illinois
DAVID ROUZER, North Carolina         JARED HUFFMAN, California
MIKE BOST, Illinois                  JULIA BROWNLEY, California
RANDY K. WEBER, Sr., Texas           FREDERICA S. WILSON, Florida
DOUG LaMALFA, California             DONALD M. PAYNE, Jr., New Jersey
BRUCE WESTERMAN, Arkansas            ALAN S. LOWENTHAL, California
LLOYD SMUCKER, Pennsylvania          BRENDA L. LAWRENCE, Michigan
PAUL MITCHELL, Michigan              MARK DeSAULNIER, California
JOHN J. FASO, New York
A. DREW FERGUSON IV, Georgia
BRIAN J. MAST, Florida
JASON LEWIS, Minnesota
                                ------                                7

        Subcommittee on Coast Guard and Maritime Transportation

                  DUNCAN HUNTER, California, Chairman
DON YOUNG, Alaska                    JOHN GARAMENDI, California
FRANK A. LoBIONDO, New Jersey        ELIJAH E. CUMMINGS, Maryland
GARRET GRAVES, Louisiana             RICK LARSEN, Washington
DAVID ROUZER, North Carolina         JARED HUFFMAN, California
RANDY K. WEBER, Sr., Texas           ALAN S. LOWENTHAL, California
BRIAN J. MAST, Florida               ELEANOR HOLMES NORTON, District of 
JASON LEWIS, Minnesota, Vice Chair       Columbia
BILL SHUSTER, Pennsylvania (Ex       PETER A. DeFAZIO, Oregon (Ex 
    Officio)                             Officio)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
                                CONTENTS

                                                                   Page

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

                               TESTIMONY

Rear Admiral Paul F. Thomas, Assistant Commandant for Prevention 
  Policy, U.S. Coast Guard.......................................     3
Hon. Michael A. Khouri, Acting Chairman, Federal Maritime 
  Commission.....................................................     3
Todd Schauer, President, American Salvage Association............     3
Steven Candito, Board Member, Former President and Chief 
  Executive Officer, National Response Corporation...............     3
Nicholas J. Nedeau, Chief Executive Officer, Rapid Ocean Response 
  Corporation....................................................     3
Norman ``Buddy'' Custard, President and Chief Executive Officer, 
  Alaska Maritime Prevention and Response Network................     3
Thomas A. Allegretti, President and Chief Executive Officer, 
  American Waterways Operators...................................     3
John W. Butler, President and Chief Executive Officer, World 
  Shipping Council...............................................     3

          PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS

Hon. Peter A. DeFazio of Oregon..................................    48
Hon. John Garamendi of California................................    51

               PREPARED STATEMENTS SUBMITTED BY WITNESSES

Rear Admiral Paul F. Thomas......................................    54
Hon. Michael A. Khouri...........................................    63
Todd Schauer.....................................................    73
Steven Candito...................................................    82
Nicholas J. Nedeau...............................................   113
Norman ``Buddy'' Custard.........................................   116
Thomas A. Allegretti.............................................   123
John W. Butler...................................................   148

                       SUBMISSIONS FOR THE RECORD

Rear Admiral Paul F. Thomas, Assistant Commandant for Prevention 
  Policy, U.S. Coast Guard:

    Response to request for information from Hon. John Garamendi, 
      a Representative in Congress from the State of California..    10
    Responses to questions for the record from the following 
      Representatives:

        Hon. Garret Graves of Louisiana..........................    60
        Hon. Mark Sanford of South Carolina......................    61


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               MARITIME TRANSPORTATION REGULATORY ISSUES

                              ----------                              


                         WEDNESDAY, MAY 3, 2017

                  House of Representatives,
          Subcommittee on Coast Guard and Maritime 
                                    Transportation,
            Committee on Transportation and Infrastructure,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:14 a.m. in 
room 2167 Rayburn House Office Building, Hon. Duncan Hunter 
(Chairman of the subcommittee) presiding.
    Mr. Hunter. The subcommittee will come to order. Good 
morning. This is our second hearing in the 115th Congress, 
where we will review maritime transportation regulatory issues 
through two panels of witnesses. I ask unanimous consent that 
Members not on the subcommittee be permitted to sit with the 
subcommittee at today's hearing and ask questions.
    Without objection, so ordered.
    The question is on the motion.
    All those in favor, signify by saying aye.
    All those opposed, signify by saying nay.
    In the opinion of the Chair, the ayes have it, and the 
motion is agreed to.
    Our second order of business is to welcome new Members, 
since our last hearing was interrupted and, although rushed due 
to House floor votes, there was not time to properly welcome 
the new Members to the subcommittee.
    I welcome to the subcommittee Mr. Randy Weber, Sr., 
Representative for the 14th District of Texas, who joins us 
from the gulf coast. He is not here, so we are not going to 
introduce him any more.
    Brian Mast, not here, not going to introduce him.
    Mr. Jason Lewis, our vice chairman? Not here.
    I will now yield to Ranking Member Garamendi to recognize 
his new Members.
    You are recognized.
    [Laughter.]
    Mr. Garamendi. We note the Democrats present, and Alan 
Lowenthal down at the other end, representing the great port of 
Long Beach and part of L.A. Port.
    OK, would you like to make a 20-minute statement on the 
value of the Port of Long Beach?
    [Laughter.]
    Mr. Lowenthal. A bit later. I will defer----
    Mr. Garamendi. OK. We will defer. Welcome.
    Mr. Hunter. The LBC, right? Long Beach County. Home of 
Sublime. It is a great place.
    I will now move on to opening statements. Since we have a 
full slate of witnesses, I am going to go through the topics 
fairly quickly.
    The Oil Spill Pollution Act requires vessel owners and/or 
operators to have vessel response plans which address oil 
spills and salvage and firefighting response measures. The act 
requires vessel response plans to meet the national planning 
criteria, but there are areas of the country that, due to low 
population or vessel traffic, cannot, and therefore use an 
alternative planning criteria.
    The Coast Guard's view is that alternative planning 
criteria is a temporary solution to reaching the national 
planning criteria, however long that might take.
    Another issue with the alternative planning criteria is 
whether or not it should cover the geographic area of the 
captain of the port zone.
    I am interested to hear from the witnesses on these issues.
    The Coast Guard implements the International Convention on 
Standards of Training, Certification, and Watchkeeping, which 
is designed to ensure seafarers are properly trained and 
certified. The Coast Guard will update us on their progress 
implementing this International Maritime Organization 
convention.
    While commercial fishing vessel exams are somewhat 
controversial with the industry, the Coast Guard will give us 
an update on where they are with the mandated program.
    The towing vessel inspection program may get the award for 
the longest ever regulatory process, lasting over 12 years. 
Having finally issued the rule last year, the Coast Guard will 
discuss its implementation.
    Lastly, U.S. industry has concerns with the Federal 
Maritime Commission's recent review of ocean carrier 
agreements. I commend the Commission for deciding not to 
approve an agreement for the companies that are in the process 
of merging, to not extend prematurely antitrust immunity.
    The Commission and industry representatives will discuss 
this important issue today.
    I will now yield to Ranking Member Garamendi.
    Mr. Garamendi. Mr. Chairman, thank you. Given that our--I 
think I will ask that my statement be entered into the record.
    And, without objection, so ordered.
    Mr. Hunter. Without objection, so ordered.
    Mr. Garamendi. Thank you. And simply say that there are 
some very, very important things going on here with regard to 
the regulation. I am looking forward to this hearing.
    Of particular interest is the Federal Maritime Commission 
and their implementation of the Shipping Act, as it revolves 
around the issue of the alliances and the impacts that that may 
have on providers of services.
    And finally, obviously, the Coast Guard, just to echo what 
you said--not echo it, just say yes, you are on track. We need 
to hear from the Coast Guard on the regulatory issues. 
Obviously, it is very, very important that these regulations be 
done in a timely and proper way.
    And, with that, I yield back.
    Mr. Hunter. I thank the ranking member.
    Pursuant to rule 1(a)1 of the rules of the Committee on 
Transportation and Infrastructure, I move that the chairman be 
authorized to declare recesses during today's hearing.
    The question is on the motion.
    All those in favor, signify by saying aye.
    All those opposed, signify by saying no.
    In the opinion of the Chair, the ayes have it, and the 
motion is agreed to.
    On our first panel we will hear from Rear Admiral Paul 
Thomas, Assistant Commandant for Prevention Policy of the Coast 
Guard, and Mr. Michael Khouri, Acting Chairman for the Federal 
Maritime Commission.
    Admiral Thomas, you are recognized to give your statement.

TESTIMONY OF REAR ADMIRAL PAUL F. THOMAS, ASSISTANT COMMANDANT 
   FOR PREVENTION POLICY, U.S. COAST GUARD; HON. MICHAEL A. 
  KHOURI, ACTING CHAIRMAN, FEDERAL MARITIME COMMISSION; TODD 
   SCHAUER, PRESIDENT, AMERICAN SALVAGE ASSOCIATION; STEVEN 
  CANDITO, BOARD MEMBER, FORMER PRESIDENT AND CHIEF EXECUTIVE 
  OFFICER, NATIONAL RESPONSE CORPORATION; NICHOLAS J. NEDEAU, 
  CHIEF EXECUTIVE OFFICER, RAPID OCEAN RESPONSE CORPORATION; 
    NORMAN ``BUDDY'' CUSTARD, PRESIDENT AND CHIEF EXECUTIVE 
   OFFICER, ALASKA MARITIME PREVENTION AND RESPONSE NETWORK; 
 THOMAS A. ALLEGRETTI, PRESIDENT AND CHIEF EXECUTIVE OFFICER, 
AMERICAN WATERWAYS OPERATORS; AND JOHN W. BUTLER, PRESIDENT AND 
        CHIEF EXECUTIVE OFFICER, WORLD SHIPPING COUNCIL

    Admiral Thomas. Thank you and good morning, Chairman 
Hunter, Ranking Member Garamendi, distinguished members of the 
subcommittee. It is an honor for me to be here with you this 
morning to update you on the status of the Coast Guard maritime 
regulatory program.
    Mr. Chairman, on behalf of Coast Guard's men and women 
everywhere, thank you for your leadership of this committee and 
continued strong support of our United States Coast Guard.
    As you know, the Coast Guard offers truly unique and 
enduring value to our Nation. As the only branch of the U.S. 
armed services within the Department of Homeland Security, the 
Coast Guard is uniquely positioned to help secure the border, 
protect the homeland, and safeguard America's national and 
economic security.
    But, as our Commandant discussed with you during his April 
4th hearing, increasing mission demands, years of fiscal 
constraint, and diminishing purchasing power of our operating 
funds has eroded our ability to simultaneously execute the full 
set of missions and be prepared to respond to global 
contingencies.
    Secretary Kelly understands this, and he fully supports the 
President's call to rebuild all of our Nation's armed services. 
Prudence demands that we invest in and rebuild Coast Guard 
capacity, including the capacity of our marine safety and 
regulatory programs, as they are key components to the Coast 
Guard's national and economic security missions.
    Our Nation's Marine Transportation System supports over 
$4.5 trillion of economic activity and hundreds of thousands of 
American jobs. The Coast Guard's governance of this system 
ensures that it remains safe, secure, environmentally sound, 
and productive, particularly with regard to shared critical 
infrastructure that our Nation relies on for national security, 
border security, and economic prosperity.
    Regulations are one tool by which the Coast Guard shapes 
the environment in which we operate, and manages the risks in 
the Marine Transportation System. When we do regulate, we do so 
in response to congressional mandates, international 
obligations, and demand from industry and the public. And we 
are always mindful of the need to facilitate commerce, not 
impede it.
    Coast Guard regulations provide the certainty required to 
encourage investment in innovation, and the level playing field 
needed to ensure fair competition and free market solutions.
    In addition, a unified Federal regulatory regime adds 
consistency, and reduces the burden that can be associated with 
multiple, often contradictory State regulations, particularly 
for a global industry like shipping.
    Coast Guard regulations are developed in full compliance 
with the Administrative Procedure Act, and with all 
administration directives and Executive orders. We work in 
close coordination with the regulated industry, science and 
academic communities, the interagency, the public, and our 
international counterparts to develop risk-based performance 
standards that provide the regulated industry flexibility in 
the development of their compliance strategies.
    The Coast Guard is unique among Federal regulators, because 
we operate in the environment we regulate. And we know 
firsthand how maritime operations are impacted by regulations.
    For this reason, the Coast Guard is focused on practical 
implementation and measured enforcement of regulations, 
particularly in the case of new regulatory regimes, like the 
subchapter M towing vessel inspection, or the salvage and 
marine firefighting regulations that require both the regulated 
industry and the servicing industries to develop capacity and 
capability over time, before full implementation can be 
achieved. This fully informed, commonsense approach to the 
development and implementation of regulations enhances our 
ability to manage all risks in the increasingly complex 
nationally vital Marine Transportation System.
    Thank you again, Mr. Chairman, for your strong support of 
the Coast Guard, and for the opportunity to testify today. I 
ask that my written statement be entered in the record, and I 
look forward to your questions.
    Mr. Hunter. Thanks, Admiral Thomas. And we just figured out 
we have another panel that is going to be discussing oil spill 
and fire salvage issues, and we would ask if you could stick 
around for that panel, if you have time. We just asked Joanne 
behind, Commander----
    Admiral Thomas. If Joanne says it is OK, sir, I will----
    [Laughter.]
    Mr. Hunter. OK. Thank you, Admiral.
    Mr. Khouri, you are recognized.
    Mr. Khouri. Thank you, Chairman Hunter, Ranking Member 
Garamendi, and members of the subcommittee. Good morning, and 
thank you for the opportunity to testify today. I would like to 
address issues, several Shipping Act and Federal Maritime 
Commission issues of current interest.
    The FMC is a competition agency charged by Congress to 
prevent anticompetitive behavior by competitor collaborations 
in the international ocean liner industry, and protect 
competition.
    This industry transports 65 percent of our Nation's 
waterborne international imports and exports. We are also 
charged with a mission of ensuring that pro-competitive 
efficiencies and cost savings are obtained for U.S. consumers.
    On a broad scale, the Shipping Act provides full authority 
to the Commission to effectively carry out its mission.
    The competition standard used by the Commission to review 
carrier agreements is section 6(g) of the act. It is, in all 
relevant respects, the same standard used by the Department of 
Justice and the Federal Trade Commission when they review 
mergers, acquisitions, and competitor collaborations. Congress, 
however, specifically designed our competition standard to 
apply to the ocean transportation industry.
    As with DOJ and FTC, we assess industry concentration using 
the Herfindahl-Hirschman Index. Collaborations that do not 
result in concentrated markets under HHI are unlikely to 
produce adverse competitive effects. Key elements in any 
antitrust analysis are ease of entry into a market, ease of 
exit from the market, and availability of competitors able to 
compete in the relevant market.
    Note, all antitrust laws, including the Shipping Act, 
protect competition, not individual competitors. The act 
provides for public comment. Together with our competition 
analysis, the Commission considers the public's views in 
determining how to address anticompetitive concerns.
    The ``Prohibited Act'' section of the act mirror remedies 
found in other competition statutes. They provide the FMC with 
additional tools to address improper conduct, such as price-
fixing, market allocation, unreasonable practices, 
discrimination in price or accommodation, refusals to deal, 
retaliation, boycotts, predatory practices, and discrimination 
based on shipper affiliation.
    The ocean liner industry has undergone consolidation. 
However, by the end of 2018, there will still be 13 major 
shipping lines operating in the international trades. The 
number of major carrier alliances serving the U.S. trades has 
decreased from four to three. These two developments raise new 
issues and concerns for the FMC, and have changed the way we 
approach carrier agreements.
    Broad authorities and language acceptable for a world with 
20 or more carriers and more numerous but smaller alliances 
presented far fewer competitive concerns. With the increase in 
size and market share of alliances, the FMC has insisted on 
narrower agreement authorities and strict, clear, and definite 
agreement language.
    Importantly, we have strengthened the quarterly and monthly 
monitoring information requirements. Alliances do provide ocean 
carriers with operational flexibility, efficiencies, and 
opportunities for cost savings. In a capital-intensive industry 
they facilitate the survival of independent companies, 
preserving industry competition and averting further industry 
concentration.
    Because of concerns about potential market power of larger 
alliances, the FMC carefully analyzes and examines agreements 
that request joint procurement authority. After that market 
analysis, if the market shares and indicators fall within 
generally accepted antitrust standards, then the FMC has no 
legal basis to request an injunction in Federal court, where 
we, the government, have the burden of proof.
    Note, please, all U.S. competition laws, including DOJ and 
FTC rules, and the Shipping Act, allow for joint collaboration 
by competitors because they can benefit the end American 
consumer.
    To close, the Federal Maritime Commission, with its 
industry expertise and experience, is well positioned to 
understand the unique dynamics of the shipping industry and all 
of its stakeholders to apply to the competition laws fairly in 
this area, and to prevent anticompetitive behavior in these 
carrier agreements, all to ensure maximum benefits for the U.S. 
shipping public.
    Thank you for your attention. I ask that my written 
statement be entered into the record. I would be pleased to 
answer any questions you may have.
    Mr. Hunter. Thank you, Mr. Khouri. Without objection, it 
will be entered into the record.
    I am going to start. Chairman Young is not here. He is at a 
doctor's appointment. So I am going to ask some questions on 
his behalf, things that he is interested in that deal with 
Alaska. So let's start with those.
    Admiral, for over 20 years in Alaska, the approved 
alternative planning criteria covered the entire Western Alaska 
Captain of the Port Zone. Why did the Coast Guard approve 
alternative planning criteria for two entities covering only a 
portion of the Western Alaska Captain of the Port Zone?
    Admiral Thomas. Thank you for the question, Mr. Chairman. I 
know this is an important issue to Congressman Young. And he 
has been in contact with the Coast Guard, and also with our 
district commander, Rear Admiral Mike McAllister, on this 
topic.
    The regulations provide for alternative planning criteria 
that will allow vessels transiting certain portions of Alaska 
to meet the requirements by procuring services that are 
specific to their transit routes.
    And so, the alternative criteria that have been approved by 
the Coast Guard are in full compliance with the regulations. 
And we are working hard with the congressman to seek additional 
solutions that will ensure coverage for the entire region.
    Mr. Hunter. Is it the Coast Guard's expectation that the 
equipment of all oil spill response organizations in western 
Alaska will be available for any response in which an 
individual OSRO is responsible, as stated in Mr. Custard's 
testimony?
    Do you believe OSROs which are not responsible to respond 
will provide such equipment, despite their clear assertion that 
they are not--that they will not respond?
    Admiral Thomas. I absolutely believe that, in the case of a 
spill, all equipment in the area will be available for the 
Federal on-scene coordinator to leverage in response to that 
spill. And, in fact, we have seen that in several recent cases 
in Alaska, where we were able to bring to bear equipment from 
OSROs, who were not the primary providers, in order to mitigate 
a situation or, in some cases, prevent it from actually turning 
into a spill.
    So, we absolutely believe that the increased response 
capability that the APC [alternative planning criteria] in 
Alaska have brought to the region are a good thing, and the 
total price of coverage has decreased, as a result.
    Mr. Hunter. Could you explain to me the difference between 
an oil--your oil vessel--oil spill response vessel and a 
firefighting response vessel, according to Coast Guard 
criteria?
    Admiral Thomas. Well, they are certainly very different 
capabilities. The oil spill response vessel typically brings 
the capability to recover oil from--floating oil from the 
water. Firefighting vessels will bring----
    Mr. Hunter. So they have a big boom?
    Admiral Thomas. They have a number of different 
mechanical----
    Mr. Hunter. To contain an oil spill?
    Admiral Thomas. Contain it, sometimes to deliver 
disbursements or other means of mitigating oil on the surface 
of the water. The firefighting vessels bring the ability to put 
foam and water on to a fire.
    So there are different capabilities. Some vessels have 
both.
    Mr. Hunter. Some vessels do have both?
    Admiral Thomas. Yes, sir. Some vessels have both.
    Mr. Hunter. How many areas of the country cannot meet the 
national planning criteria for vessel response plans under the 
Oil Pollution Act?
    Admiral Thomas. Well, there are a number of areas of the 
country, mostly the remote areas, where we have approved 
alternative planning criteria specifically because the national 
planning criteria cannot be met. Alaska is one of them. Guam 
would be another one.
    But in mainland--you know, the continental U.S., the 
national planning criteria is appropriate, and can be met.
    Mr. Hunter. So you say--so, for instance, you have it in 
the Gulf of Mexico, right? But you don't have planning criteria 
that can meet the actual criteria.
    Admiral Thomas. Yes, sir, particularly----
    Mr. Hunter. In the gulf. But they can't in Alaska?
    Admiral Thomas. Yes, sir. That is right. They cannot in 
Alaska, mostly due to the expanse and the remoteness of the 
area.
    Mr. Hunter. So you issue waivers and give them the 
opportunity to have alternative planning criteria in Alaska?
    Admiral Thomas. The regulation, again--and this is a 
perfect example of practical implementation of regulation--
allows for the issuance of alternative criteria when the 
national planning criteria and the regulation cannot be met, 
and that is a means by which we can grow with our national 
capacity to respond, while still accommodating the needs of 
commerce.
    Mr. Hunter. Thank you. With that I would yield to Mr. 
Garamendi--or Mr. DeFazio, if Mr. Garamendi would like to 
yield.
    Mr. Garamendi. The structure of the hearing brings Admiral 
Thomas back a couple of times, so I am going to just move to 
some things that I think are not likely to be covered in the 
remainder of the hearing, and we will come back to the other 
issues later.
    One thing that we have wrestled with here all the time I 
have been on this committee is the ballast water issue. It 
remains an issue. Currently among the things that are of 
concern--just some questions for Admiral Thomas--has the Coast 
Guard been able to devote the necessary personnel and resources 
to conduct effective oversight of the independent laboratories 
that are conducting the ballast water management systems type 
approval testing?
    Admiral Thomas. Thank you for the question, Congressman. 
And as always--and I think our Commandant is on the record that 
our Nation needs more Coast Guard, and that extends to all of 
our responsibilities--we do conduct oversight at the 
independent labs. We do that in the process of first certifying 
them as an independent lab and then, in the course of their 
work, we visit them.
    No doubt, though, that particularly as the number of labs 
increase, and the workload at those labs increase, our ability 
to provide the level of oversight that we would like to is 
challenged by our lack of resources.
    Mr. Garamendi. Well, certainly, if the 14-percent cut 
actually goes through, that situation will get worse. But even 
at this stable funding level of today, you are not able to do 
the kind of oversight that you would--that you believe is 
necessary.
    Admiral Thomas. Our Commandant is on record saying that the 
Nation needs a Coast Guard that has a--about a 4-percent 
increase, annually, in our O&M funds, and about a $2 million 
investment every year in our infrastructure. And that type of 
budget would allow us to rebuild readiness across all of our 
missions, sir, and fill the gaps, including the ones that you 
are pointing out with regard to our oversight of independent 
labs.
    Mr. Garamendi. I didn't realize I had given you an 
opportunity to advocate for your budget, but I think it just 
happened.
    [Laughter.]
    Mr. Garamendi. Know that at least this member of this 
committee remains concerned about the quality of the oversight, 
and the independent testing laboratories. And, obviously, the 
international standards, all of these things remain a concern. 
It is a concern I know in California, from the various ports 
and water quality issues within those ports and the 
introduction of invasive species.
    An old issue that seems not to go away is a very old, stern 
paddlewheel steamer called the Delta Queen. Where are you with 
regard to the issue of the exemption for the Delta Queen from 
the fire safety standards?
    Admiral Thomas. Congressman, thank you for that question, 
as well. I am aware of some work in Congress on legislation 
that would exempt Delta Queen from certain provisions, 
particularly structural fire protection provisions. The Coast 
Guard has not taken any action, independent of providing advice 
on that particular legislation.
    However, we do not support an exemption for any vessel that 
would increase the risk, particularly of fire at sea.
    Mr. Garamendi. So, the Coast Guard remains opposed to 
exemptions from the fire safety standards for this vessel or 
any other vessel. Is that correct?
    Admiral Thomas. That is correct, Congressman.
    Mr. Garamendi. Well, we will undoubtedly be wrestling with 
that, as that piece of legislation comes around.
    The backlog on regulations. I guess that goes back to the 
14-percent proposed cut and the additional $2 billion that you 
just requested.
    So, have you received any new directives about the 
regulations from the Secretary of Homeland Security?
    Admiral Thomas. Well, Congressman, about the backlog, I 
mean, we are proud of the fact that we have reduced our 
regulatory backlog by over 40 percent since 2009. And we 
currently have about 60 rulemakings always working--each of our 
authorization acts adds, on average, 5 rulemakings to that 
backlog. So we have been able to hold steady, make improvements 
and hold steady.
    We are currently studying and working with the Department 
on the impacts of the Executive orders that have to do with 
regulations, and particularly with regard to the requirement to 
identify regulations to take off the books if additional ones 
go on.
    And we have--we are receiving some guidance from the 
Department and some from OMB, as well. We haven't really 
finished our assessment of what that will mean for our 
regulatory program.
    Mr. Garamendi. Yes, the two-for-one issue. The regulations 
that you are required to update really are not new regulations. 
They are updating existing regulations, for the most part, as I 
look at those regulations.
    So, you haven't yet figured out how to do the two for one, 
two out and one in. So what--in your opinion, given this point, 
given that Executive order, how then would you update the 
remaining regulations that are before you? Where would you find 
two to eliminate, as you update one?
    Admiral Thomas. So, we are currently conducting a 
comprehensive review of all the regulations. There are 
certainly some regulations that are still on the books that are 
outdated. And the reason we haven't taken them off the books is 
because the effort required to do that really exceeds the 
benefits, because there is really no one impacted by those 
regulations.
    So, for example----
    Mr. Garamendi. I want to hone in on that. To get rid of a 
regulation, it is the same process as establishing a 
regulation. Is that correct?
    Admiral Thomas. Yes, sir. And we are working hard to 
understand exactly how that process would work, and 
particularly how it would work in time with the process of 
putting additional regulations on the books.
    Mr. Garamendi. And the other issue has to do with some 
30,000 vessels that you are required to examine. I am basically 
giving you an opportunity to make a pitch for that $2 billion. 
Would you like to comment on that piece of it, and get it on 
the record as to what it takes to examine the 30,000 fishing 
vessels and the 5,000 commercial towing vessels?
    Admiral Thomas. Well, thank you for the opportunities, 
Congressman. We are challenged, as our mission demands grow 
across the Coast Guard's mission set and, in addition, with our 
marine safety mission. And we--as the Commandant has said, we 
need more Coast Guard.
    The Commandant has identified, you know, growth in O&M and 
in our infrastructure investment, which will allow us to close 
our readiness gaps and meet the mission demands that the 
Congress has put on us.
    Mr. Garamendi. For the record, if you would, please, 
provide us with more detail on what it would take to carry out 
the specific responsibilities that you have on those 
inspections: the number of personnel, the amount of money it 
would take, and also the timeframe of trying to move through 
those 30,000 vessels, given the present budget level.
    Admiral Thomas. Yes, sir, be happy to provide that.
    Mr. Garamendi. For the record, thank you.
    Admiral Thomas. For the record.

    [The information follows:]

        For towing vessels, the Coast Guard would need 76 additional 
        billets at a recurring cost of $9,306,000 and it would take 4 
        years to complete issuing the initial Certificates of 
        Inspection (COIs) to the affected population of towing vessels. 
        For fishing vessels, the Coast Guard would need 60 additional 
        billets at a recurring cost of $7,540,000 and it will take 3 
        years to complete the current 5-year examination cycle of the 
        affected fishing vessel population.

        In regard to Towing Vessels: The number of marine inspectors 
        required to verify compliance with the Subchapter M 
        regulations--``Towing Vessel Regulations,'' is directly related 
        to the number of vessels enrolled in the Towing Safety 
        Management System (TSMS) program. The TSMS program enables 
        Coast Guard approved Third Party Organizations (TPOs) to verify 
        compliance with the regulations, with the Coast Guard exerting 
        oversight. If a majority of operators use a TPO to verify 
        compliance, the Coast Guard's existing level of personnel 
        should be adequate to handle the initial round of inspections 
        for certification of the 5,000 towing vessels subject to 
        Subchapter ``M.'' Vessel owners and managing operators that 
        choose not to use the TSMS program will require a more indepth 
        annual exam from Coast Guard inspectors. To date, we do not 
        have a firm number of how many vessel owners or managing 
        operators will select the TSMS option. Once the initial round 
        of inspections is completed in 2021, the Coast Guard will have 
        sufficient records to assess the long-term personnel needs to 
        conduct inspections of towing vessels.

        In regard to Fishing Vessels: The Coast Guard has been able to 
        meet the 5-year mandatory exam cycle requirements for the 
        approximately 20,000 fishing vessels that require an exam using 
        existing Coast Guard staff, qualified Third Party Surveyors/
        Examiners, and Coast Guard Auxiliary personnel.

    Mr. Garamendi. I yield back my time.
    Mr. Hunter. I thank the gentleman.
    I yield to Mr. Rouzer for 5 minutes.
    Mr. Rouzer. Thank you, Mr. Chairman.
    Admiral, with regard to salvage and marine firefighting, 
what is the Coast Guard's position on where the response 
industry is today with regard to providing response 
capabilities for salvage and marine firefighting incidents?
    Admiral Thomas. Thank you for the question, Congressman. 
The congressional intent, when the Coast Guard implemented the 
regulations, the salvage and marine firefighting regulations, 
was to build our national capacity and capability to respond to 
such incidents. Our view is that the regulation has succeeded 
in that regard.
    That said, there are certainly portions of the country 
where we have not yet reached the capacity that is intended by 
the regulation, and we are focused on ensuring that we continue 
to build capacity in those areas.
    Mr. Rouzer. Is the Coast Guard aware of any incidents where 
a response vessel was not on scene within the required 
timeframe for a vessel incident?
    Admiral Thomas. I believe there have been a few incidents, 
but the key to remember is that the standards and the 
regulations are planning factors, not performance factors. And 
there are often, very often, other things like weather, et 
cetera, maybe multiple incidents at one time will make it 
impossible for the actual performance, on-scene performance, to 
match the planning factors that are required in the 
regulations.
    But we watch that very carefully. And when there is a 
significant mismatch between the capability that we expected to 
be available and that which is available, we will do some work 
to determine why.
    Mr. Rouzer. Have there been any incidents where a response 
vessel has refused to respond, as required by contract? What 
would prevent them from responding? You touched on that 
slightly. And would this be a vessel of opportunity, or would 
this be when a vessel of opportunity would be called to 
respond?
    Admiral Thomas. Again, in an actual event, as opposed to 
when--meeting their planning requirements, we are going to--the 
responsible party is going to use whichever resources are 
immediately available and can provide the services needed at 
the time.
    There may be--there may have been times--and I am not 
aware, personally, of specific incidents, though the next panel 
may have some examples, where a resource or a vessel that has 
been identified in a plan is unable to respond, as was 
originally thought would happen, and therefore has refused 
service, in which case a vessel of opportunity clearly can step 
in and take that responsibility.
    Mr. Rouzer. For the sake of time, Mr. Chairman, I yield 
back.
    Admiral Thomas. Thank you.
    Mr. Hunter. I thank the gentleman. I would now like to 
yield to the ranking member of the full committee, Mr. DeFazio.
    Mr. DeFazio. Thank you, Mr. Chairman. I want to continue 
where we left off last time, Mr. Khouri.
    You know, the issuance of the--to the folks of--you know, 
authority to jointly negotiate with our marine service 
providers, who are specifically precluded under U.S. law from 
joining together to negotiate--so we are talking about, you 
know, a conglomerate negotiating with individual service 
providers in the U.S. Apparently, your staff did an economic 
analysis. But the economic analysis has not been made 
available. Why not?
    Mr. Khouri. Thank you, Congressman. The Shipping Act 
statute under section 6(j) specifically says that all of the 
information provided by filing parties and all of the 
information developed during the review process is, number one, 
confidential; and, number two, is not subject to FOIA.
    When we are--when the Commission is operating under this 
particular area and authority, we are essentially doing a law 
enforcement function, and these are the same types of rules 
that would obtain if all of the information was submitted in a 
normal situation at Justice, for example, under----
    Mr. DeFazio. I--OK. If we could, so----
    Mr. Khouri. May I----
    Mr. DeFazio. Sir, you have given me an excuse, or a reason. 
But here is the point I want to make. You have the foreign 
entity joining together to negotiate singly with our service 
providers. Our service providers, you know--how can you 
conclude that they aren't put at a disadvantage in these sorts 
of agreements? And what kind of analysis could you conduct that 
would say--that is going to have confidential information?
    What did you get that was confidential from the RO/RO 
providers? Did they tell you what rates they were going to 
bargain for? What did they give you that was confidential?
    Mr. Khouri. If I could----
    Mr. DeFazio. Well, just--what is confidential about the 
fact a conglomerate is now going to be authorized to negotiate 
singly with people who can't form a similar organization? 
What--tell me what is confidential in there.
    You may be--you know, you are going to cite the law, and 
this and that, and this is all confidential. Your staff did an 
analysis. The analysis was there would be no negative impact. 
And you are saying that we can't see that analysis, the people 
who are going to be negotiating, you know, are somehow provided 
confidential information. What is the confidential information?
    Mr. Khouri. What I have offered to the Members that I have 
met with, and I offer to you today, Congressman, is, if I 
continue, under section 6(j) we can produce that information 
under a court order, or if Congress requests it.
    Mr. DeFazio. OK.
    Mr. Khouri. And we would welcome--that was my final part. 
We would----
    Mr. DeFazio. OK, great.
    Mr. Khouri [continuing]. Welcome a request from Congress.
    Mr. Hunter. I am pretty sure he just requested it. So there 
you go. Congress just requested it. Go ahead.
    Mr. Khouri. So we would be happy to bring that before you 
in a confidential setting with you and your staff. Let us bring 
our economist with us to that meeting, and lay out for you what 
we were looking at when we--and please understand, Congressman, 
it is a 2-step process.
    It is--the authority that was given to the RO/RO group was 
not to enter into an agreement. They were allowed to go and 
begin a negotiation. And then, any agreement, as it was, has to 
then be brought back to the Commission so we can complete a 
full economic analysis back and forth. So, we are still at the 
front end. The RO/ROs have never even started to do a single 
negotiation.
    All we said was when we looked at all of the ports going 
around, it appeared that the market shares were sufficiently 
low to say, OK, let's let them go ahead and have the right to 
go talk, but not the right to contract. That is a second part 
that would have to still be done when they come back and let us 
look at very specific situations.
    Mr. DeFazio. You are saying you have, your Commission, has 
the authority to look at an individual contract between a 
maritime service provider, domestic, and the foreign entity in 
this case, the RO/ROs, and that you could then say, no, that 
rate is too low, or somehow disallow it?
    Mr. Khouri. No, we do not regulate rates whatsoever, in any 
shape or fashion----
    Mr. DeFazio. OK. Well, then, what would you--what would 
they bring back to you that you would review?
    Mr. Khouri. We would be looking at, from a well-accepted 
antitrust standards, of what is the market power of the 
purchasing entity. In this case it would be the RO/RO 
agreement. What is their market share of the product being 
purchased, which is tug assist.
    Mr. DeFazio. All right. Well, the Justice Department, I 
have read--there are two letters from Justice expressing 
tremendous concern about this. But your--but the Commission is 
saying, ``We don't have a concern,'' or, ``Thus far we don't 
have a concern. We might have a concern after we see what 
happens''? I don't--I am not quite following this.
    And I think, again, Mr. Chairman--my time is up, but I 
think this really points to the pressing need for Congress to 
consider some legislation on this area.
    Mr. Hunter. If you don't mind, keep going on this. I have 
got a question.
    You say you can't do anything, that they entered into 
negotiations. So what actions can you take after they make an 
agreement? What do you do after that?
    So you allow them to go into negotiations, right?
    Mr. Khouri. Correct.
    Mr. Hunter. Then you step back after you allow that. And 
what if they make an unlawful agreement? I mean what if their 
agreement, as a consortium, is unlawful? Then what can you do?
    Mr. Khouri. Then we would go into court with that evidence 
before a Federal judge and seek an injunction saying----
    Mr. Hunter. Well, let's make this easier. How do you 
determine that they created an uncompetitive practice? How do 
you make that determination to even take them to court?
    Mr. Khouri. The standards are--have been gone over by the 
Department of Justice and the Federal Trade Commission.
    Mr. Hunter. Sure, but--all right, well, just tell us. How 
do you make that determination, you, the FMC? Otherwise, why do 
we have the FMC? Why not just have the Department of Justice 
and the FTC?
    Mr. Khouri. Well, I think--perhaps let me, if I can, just 
go back to Congressman DeFazio's last statement to help fill in 
exactly what you are trying to get to, Mr. Chairman.
    The Federal--excuse me, the Department of Justice, in their 
letter that you referenced, Congressman, they began with a 
factual assumption that all of the alliances were, in effect, 
mergers, and they say that they foreclose all competition 
amongst the alliances.
    And so, they started with a factual situation that is 
simply not true. For each one of the alliances, we have 
monitoring information that there is very active price 
competition within each alliance, members within each alliance, 
and there is very active separate decisionmaking going on as to 
capacity coming in and out of all of those trades, both inside 
of the alliance, and capacity by members outside of the 
alliance.
    Mr. Hunter. So let's just--so you have--let's say three or 
four companies get together and form an alliance. You watch 
them and make sure that they don't talk amongst themselves and 
what they are going to charge the--or what they are going to 
try to get the port to agree to as they come in? You guys know 
that for a fact?
    Mr. Khouri. We----
    Mr. Hunter. These are foreign entities.
    Mr. Khouri. We follow--they file monthly and quarterly data 
on all of the revenue, on their boxes, on capacity coming in 
and out. And we are looking for, on an active basis, to see if 
there are parallel actions in the marketplace that would 
indicate what you just put at the end of your question. And 
what we continually find is there remains active competition on 
a pricing basis and on a capacity basis inside of each 
alliance.
    If we found that they began to have parallel activity, I 
can promise you, Mr. Chairman and Congressman DeFazio, that we 
would be in court as quick as we could with that evidence 
presented to a Federal judge, saying, ``Sir, this alliance is 
now not operating the way it should. We want an injunction and 
break it up.''
    Mr. DeFazio. Mr. Chairman, could you just yield back for a 
second?
    Mr. Hunter. I yield back.
    Mr. DeFazio. Because I just want to follow up on this 
point. We are talking about one of these alliances--and again, 
I am reading from the Justice Department letter. For example, 
four companies, three of which are ocean carriers slated to 
join the alliance, have pled guilty. Eight corporate executives 
have been indicted or pled guilty in connection with worldwide 
conspiracy involving price fixing, bid rigging, market 
allocation among provides of roll-on/roll-off cargo shipping.
    In addition, three companies, six individuals have pled 
guilty or been convicted at trial in connection with a price-
fixing conspiracy among carriers of domestic freight between 
the continental U.S. and Puerto Rico.
    And that is not a problem? I mean this went on. They--you 
know, substantial fines were assessed. Was that initiated by 
FMC or by Justice?
    Mr. Khouri. There are two different actions in the issue--
--
    Mr. DeFazio. OK, so we have criminals, you know, running 
these companies that are now getting limited antitrust 
immunity. And they are going to negotiate fairly with U.S. 
marine service providers who have to individually negotiate 
with them, and these people aren't going to bring market clout 
and put our people at a disadvantage?
    I mean this is just extraordinary. It defies common sense 
and also, you know, history, since we get a bunch of criminals 
in these companies.
    Mr. Khouri. The Puerto Rico trades that you mentioned, 
Congressman, those operated under trade lanes regulated by the 
Surface Transportation Board, not the Federal Maritime 
Commission.
    The second matter that you bring up, these were activities 
by some carriers that they were operating without an agreement. 
They did a separate--totally outside of the sight of any--there 
was no agreement filed for which we could have monitored. So 
they were acting totally outside of any regulatory scope, and 
it was totally illegal, and they paid a heavy price for that.
    Mr. DeFazio. But now some of them are in the alliance, and 
the same people are running the companies. I mean that is who 
you are dealing with.
    Anyway, thank you, Mr. Chairman. Thank you for the time.
    Mr. Hunter. I thank the gentleman. I yield to Mr. Graves 
from Louisiana.
    Mr. Graves of Louisiana. Thank you, Mr. Chairman. Admiral, 
Chairman, I appreciate you both being here today.
    Admiral, the Coast Guard issued a notice of proposed 
rulemaking for electronic readers at certain facilities that 
handle certain dangerous cargo, CDC. In the proposed rulemaking 
there was a proposed nexus between facilities and maritime 
access, where the electronic readers were going to be needed.
    As you began to move forward in the rulemaking, in your 
final rulemaking, you actually significantly expanded the scope 
of the electronic reader to include any facility that could be 
within a security site plan. And that was a fairly expansive 
change within the rulemaking that was not part of the original 
notice. Therefore, people--the Coast Guard didn't have the 
benefit of comments.
    I am concerned about the lack of tie-back to actual 
maritime in this case, under the rule. The site security plan 
is not necessarily--that is not necessarily--it doesn't 
necessarily have a connection to maritime. A site could be 
anything. Folks could have a site security plan upon an entire 
facility, even though it could be walled off or prevented from 
having access to maritime.
    Can you give me a little bit of insight into why that 
expansion occurred during the rulemaking, and why that wasn't 
part of the notice of proposed rulemaking to begin with?
    Admiral Thomas. Congressman, thank you for the question. I 
am very familiar with that regulation, was involved in the 
development and implementation of the regulation all the way 
through, and I am very confused by your question.
    When we published a notice of proposed rulemaking, the 
population of impacted facilities that are regulated under the 
Maritime Transportation Security Act was quite large. The final 
rule, it was narrowed significantly. And normally, the question 
that I get is how come that narrowing occurred, so I am 
confused by your question.
    But in addition, the Maritime----
    Mr. Graves of Louisiana. Let me ask this. Did you remove 
the vessel interface requirement? Wasn't that the whole thing, 
is that when you finalize the rule you eliminated that vessel 
interface requirement?
    Admiral Thomas. Sir, and again, at the risk of maybe not 
understanding your question, the Maritime Transportation 
Security Act allows the facility operators to define for the 
Coast Guard what is their regulated footprint in the facility.
    And so, there is nothing about the TWIC reader rule that 
changed that. What we--what the TWIC reader rule said was, at 
the access points that you have defined in your approved 
security plan, you must have TWIC readers. And if they define 
those access points beyond the facility-ship interface place, 
then that is where they--because that is the assessment that 
they did, they were going to move their access points out--then 
that is where the readers need to go.
    But again, at the risk of maybe not understanding your 
question, there is nothing in between the proposed rule and the 
final----
    Mr. Graves of Louisiana. I understand that the law 
relegates the scope to site security plans. I understand that. 
However, in the notice of proposed rulemaking, you limited the 
geographic scope to the vessel-to-facility interface area.
    In the final rulemaking, you no longer required that nexus, 
or that interface. Therefore, the entire site security plan was 
within the scope. So that is a growth of scope. And my point is 
that site security plans for a company that may carry out 
various activities, that may go--that site security plan may be 
beyond the geographic scope of a vessel interface.
    Admiral Thomas. All right----
    Mr. Graves of Louisiana. And so, here is what my concern 
is. My concern is that companies may come back and start 
compartmentalizing site security plans--which I don't think is 
to the benefit of overall security--in an effort to not have to 
include electronic readers all over these huge facilities. Does 
that make sense?
    Admiral Thomas. Well, I would really like to offer you a 
brief on this topic, but I agree with you. There are a number 
of regulated facilities that have, by their own choice, 
extended the regulated perimeter beyond what is required by the 
law.
    Mr. Graves of Louisiana. OK. So we agree on that point. Do 
you agree that you removed the nexus for vessel-to-facility 
interface in your final rulemaking when that was in the notice 
of proposed rulemaking?
    Admiral Thomas. Sir, I don't want to disagree with you on 
that. Again, I don't----
    Mr. Graves of Louisiana. If I am wrong, that is fine. Tell 
me I am wrong, if I am wrong. Because that actually would sort 
of be very helpful, and what I was going to ask you to do, 
anyway.
    Admiral Thomas. I am not clear enough that I understand 
what you are saying that I can tell you that you are right or 
wrong.
    But again, this is--for me, this is totally----
    Mr. Graves of Louisiana. Oh, come on. You were going down 
such a good path.
    [Laughter.]
    Admiral Thomas. Well, that doesn't ring a bell to me, that 
we removed the nexus. I think there is probably an 
interpretation issue in that the law says you need a nexus 
between the facility and the--you need to secure the area where 
you have that nexus between the facility and the ship.
    Many facilities, for a lot of different reasons, have 
extended the regulated area beyond that. When they do their 
risk assessment and they give us their plan, we approve the 
plan, based on their assessment. And, in some cases, they have 
extended the regulated perimeter way beyond what is required by 
the law.
    Mr. Graves of Louisiana. Would you be willing to issue a 
clarifying statement that the rule applies to vessel-to-
facility interface areas that handle CDC in bulk? Is that the 
intent?
    Admiral Thomas. I would be certainly willing to make sure I 
understand the issue, and then issue any clarifying statement 
that is required. But right now, sir, I am really not 
understanding this issue well enough to make you any 
declarative promises.
    Mr. Graves of Louisiana. Based upon the perhaps uncertainty 
here--and again I will totally open up, and maybe I am not 
understanding this correctly. But based upon my read, I think 
that there was potentially a geographic expansion that occurred 
here that perhaps wasn't intentional. Would you be willing to--
if we can determine that there is uncertainty here, would you 
be willing to grant a longer compliance period, just so we can 
help sort this out, rather than requiring these facilities, 
many of which are in our district, to have to significantly 
change their reader profile?
    Admiral Thomas. Absolutely, sir. If there are unintentional 
consequences to the regulations that we--certainly don't meet 
congressional intent, we are all about practical implementation 
of regulations.
    Mr. Graves of Louisiana. Well, in additional to 
congressional intent, I think that--something else that is 
really important to me, and I am sure it is to you, as well, is 
when you issue a notice of proposed rulemaking and you identify 
scope, if you are going to go outside that scope, then the 
Coast Guard is not going to have the benefit of the public 
input on that broader scope. And I think that is an important 
point to make, as well.
    Admiral Thomas. I would agree, sir.
    Mr. Graves of Louisiana. Great. Thank you. But, look, I 
want to make sure that we do schedule a followup meeting here 
and try and track this down and figure out what steps the Coast 
Guard should take, moving forward, if there is some 
uncertainty.
    Admiral Thomas. Happy to do that, Congressman.
    Mr. Graves of Louisiana. Thanks, Admiral.
    I yield back.
    Mr. Hunter. I thank the gentleman. If we seem combative 
today, we had the airline CEOs in yesterday, and we just--there 
was a headline today that American Airlines cut their leg room 
in economy class more, just to make the American people like 
them more, I guess. They are cutting leg room to make us 
happier. The airlines hate the American people, that is all I 
am saying.
    I would yield to the gentleman from the LBC.
    Mr. Lowenthal. Thank you, Mr. Chair. And thank you both, 
Admiral Thomas and also Chairman Khouri. And I do congratulate 
you. I know you are the Acting Chair, or the Interim Chair. And 
my dear friend, Mario Cordero, is now the new chair, or the 
next executive director of the great Port of Long Beach. I 
think it was an excellent choice, and I am sure it was because 
of the great experiences he had at the FMC.
    My first question, though, is for Admiral Thomas. And let's 
go back to my concerns about the Ports of Long Beach and Los 
Angeles, which really cover about 40 percent of the Nation's 
containerized cargo. Now, we anticipate that that cargo will 
increase over the next number of years. And so, how is this 
going to--as the port--as trade continues to increase, 
especially with greater mega-ships coming in, how is this going 
to affect the Coast Guard?
    You already began, I think, talking about kind of stretched 
resources when you began. But as we see the growth in 
containerized trade continue, how will that impact the Coast 
Guard, and what additional resources to keep us safe do you 
think you will need?
    Admiral Thomas. Congressman, thank you for the question. 
And certainly we have seen growth in the size of ships, but not 
just the size, the complexity of systems that are used to move 
cargo through our ports more efficiently. And that is 
definitely a challenge for the Coast Guard, not just in L.A. 
and Long Beach, but around the Nation.
    We definitely--and our Commandant is on record as saying 
that we need to invest in our people and our workforce, so that 
we can remain agile and keep up with the technology that is 
allowing our Nation to enjoy the prosperity that we see through 
ports like L.A. We need to invest in the enterprisewide systems 
that we use for managing data and an enterprisewide system we 
use for managing our people.
    And we need to invest in the infrastructure that we 
currently use to service the marine industry, including the 
service we provide through our aids to navigation, but also 
that we provide at our National Maritime Center, where we 
credential mariners, and our National Vessel Documentation 
Center.
    So, absolutely, the growth and demand through the ports 
translates directly to the growth and demand for Coast Guard 
resources.
    Mr. Lowenthal. You know, we talk about national security, 
and the need for national security, and we look at our--and we 
take great pride in our military. But for me, who represents 
the port areas, I cannot tell you how appreciative I am of the 
Coast Guard. I mean I cannot overstate the importance of the 
Coast Guard to our--to protecting our maritime interests and 
protecting our citizens. It is just unbelievable on the west 
coast. And so we applaud you.
    Acting Chairman Khouri, you know, you have talked a lot 
about how the increased consolidation is changing the work of 
the FMC. Maybe you could tell us a little bit more how you see 
the FMC changing. We have talked a little bit about the 
consolidation and some of those issues, but how do you see the 
work of the FMC changing with this tremendous consolidation 
that is going on?
    Mr. Khouri. I guess, number one, in our Bureau of Trade 
Analysis, which is where all of our economists are housed, we 
have had a great staff, and they have been hiring some new 
terrific transportation economists--it is a specialized area.
    The monitoring that I mentioned earlier has become, 
according to the carriers, much more intrusive. And so that is 
music to our ears, not--you know, that is unfortunate, but--for 
them. But we have been quite insistent on, no, we need more 
information on a much more regular and timely basis, so that we 
can take all of this--and it is submitted to us confidentially, 
per the statute, then we match it up with an awful lot of 
commercially available information out there in the world, 
liner industry. It is labor-intensive for highly specialized 
people.
    And I would say that is the main areas we have become more 
and more--I don't want to use the word ``concerned,'' because 
that would make it sound like we think something is going on. 
It is just that the potential for activity that would be 
prescribed by the Shipping Act or by other antitrust laws 
grows.
    So I think that is the best that I can respond to your 
question. If--I look to the chairman and his experience. You 
always had one Marine standing on the wall. We now have two 
Marines. So that is, I think, the best answer I can provide for 
that, sir.
    Mr. Lowenthal. Thank you. And I will wait, and I will yield 
back.
    Mr. Hunter. I thank the gentlemen. With that, we are going 
to move to the second panel. I just got a quick question for 
Mr. Khouri.
    How many times has the Commission weighed in after an 
effective date of an agreement?
    Mr. Khouri. I am sorry, sir?
    Mr. Hunter. How many times has the FMC weighed in after an 
agreement has been made?
    Mr. Khouri. The way that actually works--and I have an 
example in my hand, and I will start with that.
    It should be no surprise that we have been in rather 
pleasant or otherwise conversations with filing counsel for the 
RO/RO agreement, and received a letter yesterday. And this is 
an agreement in effect as we speak today. I am authorized to 
share the content of the letter, but not the letter itself.
    But I am just going to say they have committed, ``willing 
to meet with the Commission staff to discuss possible 
amendments to the agreement that might address concerns being 
expressed with respect to the authority.'' So we expect them to 
be in promptly to talk about amendments. And that is how the 
process actually works, Mr. Chairman, is if there is something 
going on, we bring them in. They don't want to go to court, 
either, and that is how we obtain the constant update and 
amendments to all of these agreements.
    If I might say, also, we will work with you and schedule--I 
am not aware of any time we have had to actually go into court, 
but that is how the process works. We bring them in and say, 
``This isn't working, we are going to change this.''
    Mr. Hunter. Because--so just for the record, the Federal 
Maritime Commission has never taken a consortium or anybody to 
court.
    Mr. Khouri. May I----
    Mr. Hunter. Over anticompetitive practices.
    Mr. Khouri. May I consult my general counsel and his staff, 
and get back to you with a written answer to that?
    Mr. Hunter. So, to your knowledge, zero? To your knowledge, 
at this point in time.
    Mr. Khouri. In the 7 years I have been there, no. But we 
have been administering the Shipping Act for 100 years, so I 
think it would be foolish for me to make a categorical 
statement.
    Mr. Hunter. So the problem----
    Mr. Khouri. So we will come back to you.
    Mr. Hunter. The problem here, which I think we are all 
trying to get at, is you are here to protect American companies 
and American interests. I mean that is why you exist, right?
    Mr. Khouri. Absolutely.
    Mr. Hunter. That is why you are here. The law makes it so 
that you cover--you look more at the shippers, not the 
tugboats, and not the port or terminal operators. That is what 
you are looking at.
    So, right now, you are not protecting the American 
interests, because the only guys that are shipping are foreign 
entities that are basically ganging up and forming these little 
groups, to where we have almost no competition whatsoever. You 
are not protecting the terminal operators because, by law, it 
is not required. Or the tug operators.
    So, all the American companies, that is--basically, in your 
mind, as you follow the law and you quote law and cite law, 
there is no law making it so that you have to watch--you have 
to look out for the best interests of the American companies, 
because the law says you look at shippers, and that is it. That 
is what you are looking out for. And I think that is where we 
are getting kind of tied around the axle here, is that that is 
kind of hard to swallow for us, is that you are not there for 
the American companies.
    Mr. Khouri. Mr. Chairman, I believe a more, on one side, 
broad and perhaps--and more correct statement is we, like any 
other Federal competition agency, look to protect competition.
    And within that, not competitors in any one area, because, 
at the end of the day, at the end of the day, if full 
competition is at work in the marketplace, the end of that 
process is the American consumer. The American consumer is the 
one who benefits with lower prices and their goods. The 
American exporter, who has more reliable and the least 
expensive available transportation for their export goods into 
international markets.
    So, I would, with all respect, say we are not singularly 
focused on shippers in that regard. So----
    Mr. Hunter. Thank you, gentlemen. Admiral Thomas, if you 
will stick around, we are going to add a microphone and get on 
to panel 2.
    Mr. Khouri, thank you.
    Mr. Khouri. Thank you so much.
    Mr. Hunter. Mr. Khouri, do you mind sticking around, too? 
We are just going to throw the staff into a tizzy, but do you 
mind sticking around? Do you have time?
    Mr. Khouri. I planned on staying to listen, so I would be 
happy to.
    Mr. Hunter. OK, thank you. Admiral Thomas, you can just 
stay where you are, if you want to. Oh, they are moving you 
over. OK.
    [Pause.]
    Mr. Hunter. OK, I think we are all together. And if I could 
ask, too--I mean we want to get through this--obviously, this 
is a giant panel now, because we combined three into two. I 
guess we could have had you all there in the first place, but 
that enabled us to focus on a couple of things. And now we will 
go into this one.
    So if you could keep your remarks brief, we can submit them 
for the record, and we will start just talking back and forth.
    I thank the first panel for being with us today--and you 
are still here--and the second panel. The witnesses for the 
second panel are Mr. Todd Schauer, president of the American 
Salvage Association; Mr. Steven Candito, current board member 
and former president and chief executive officer with the 
National Response Corporation; Mr. Nicholas Nedeau, chief 
executive officer of Rapid Ocean Response Corporation; Mr. 
Norman ``Buddy'' Custard, president and chief executive officer 
of the Alaska Maritime Prevention and Response Network; Mr. Tom 
Allegretti, president and chief executive officer for American 
Waterways Operators; and Mr. John W. Butler, president and 
chief executive officer for the World Shipping Council.
    Mr. Schauer, you are recognized for your statement.
    Mr. Schauer. Good morning, Chairman Hunter, Ranking Member 
Garamendi, and members of this subcommittee. I represent 
American Salvage Association, known as the ASA. The ASA 
represents 90 percent of the U.S. salvage capability. We 
appreciate the chance to give an overview of the salvage 
industry, and to discuss current issues. In the interest of 
time, my submitted statement has been abbreviated.
    Salvors are not ship scrappers. We are emergency responders 
and problem-solvers for the shipping industry. Beyond search 
and rescue, the Coast Guard does not have the assets to perform 
salvage operations such as rescue towing, firefighting, or 
other salvage services. Simply put, salvors respond to any 
casualty, anywhere, at any time. This may include collisions, 
fires, explosions, or groundings. It may involve tankers, 
cruise ships, LNG carriers, offshore rigs, or any other vessel 
type. This statement commitment may be hard to believe, but it 
is quite true.
    Salvors are extremely resourceful and dedicated. Most of 
the companies are family-owned, multigenerational businesses. 
Salvors operate in the most difficult conditions on the planet. 
Some jobs are incredible feats of engineering. Most of you 
probably recall the Costa Concordia job led by an ASA member in 
Italy. Others are courageous acts of seamanship, such as 
rescuing a disabled tanker in heavy weather. A member did this 
just this past weekend off of Galveston.
    Our members are the special forces of the marine industry, 
maritime response. The ASA has a good working relationship with 
the Coast Guard. Our operations teams respond together, and we 
interact often on regulatory matters. While we have our 
disagreements, we respect the capabilities and commonsense 
nature of the U.S. Coast Guard.
    Salvors are the first line of defense in preventing marine 
pollution. Our objective is to keep the oil in the ship and out 
of the water. Plugging all breach fuel from a stricken vessel, 
or simply saving the ship from sinking is much more effective 
than skimming spilled oil.
    Regarding shipboard firefighting, the salvor has the 
requisite experience and equipment. We work alongside municipal 
fire teams, and we take the lead for all offshore fires. 
Salvors will clear all blocked waterways to restore commerce, 
whether caused by an accident or, God forbid, a terrorist 
attack.
    The U.S. Navy's global salvage capability depends on 
response contracts with ASA members.
    Due to the leadership of this subcommittee, the SMFF 
[salvage and marine firefighting] regulations were promulgated 
in 2008 for tankers, 2013 for nontankers. The result was 
extremely positive. The salvors rapidly organized, we expanded 
equipment inventories, and developed robust networks to comply.
    Now, some third parties have recently questioned the 
commitment and resources of the SMFF providers. Let me be very 
clear. We will always respond. Our livelihoods depend on 
salvage job income, and our Coast Guard-approved and pre-agreed 
contracts with the shipowners will prevent any delays.
    Now, providers rely heavily on subcontracted resources. Our 
networks are comprised of major fleets of tugs and barges, 
derrick barges, all variety of support vessels, and marine 
services. We also have agreements with municipalities. For 
example, the New York City Fire Department has pre-agreed to 
support us during a vessel fire.
    This system of combining salvor-owned, specialized assets 
with extensive resource networks has proven effective in more 
than 180 responses since the inception of the regulations. 
Provider capability and compliance is verified by many layers 
of oversight. These include drills and exercises, two separate 
Coast Guard verification programs, owner and insurer vetting, 
and direct approval of all actual operations by the Coast 
Guard.
    At the crux of the issue are nondedicated resources. Unlike 
spill response, the diversity of the 19 salvage services 
demands large networks of vessels of opportunity. There are no 
two ways to look at it. Providers rely heavily on this system. 
It includes more than 7,300 support vessels, alone. We also 
utilize existing U.S. air, sea, and ground logistics modes, 
arguably the most developed in the world. Duplicating all of 
these resources of opportunity with dedicated assets would be 
highly impractical, and overwhelmingly costly.
    In closing, salvors will continue to respond quickly, grow 
capacity, and comply with all required verifications. The 
vessel of opportunity system works. Any attempt to duplicate it 
will place undue financial burden on the shipping industry and 
the consumer.
    Thank you, and I request that my statement be submitted.
    Mr. Hunter. Without objection, so ordered.
    Mr. Candito?
    Mr. Candito. Good morning, Chairman Hunter, Ranking Member 
Garamendi, members of the subcommittee. I am Steven Candito, 
former CEO of National Response Corporation, one of the 
founders of 1 Call Alaska, along with Resolve Marine Group.
    NRC and Resolve are leading oil spill removal organizations 
and salvage and marine firefighting providers in the United 
States. Joining me today are leadership from Resolve, NRC, and 
senior members of 1 Call Alaska, the true local response 
experts. They represent the core 1 Call Alaska emergency 
response organization with the commitment and capability to 
prepare for and respond to marine casualties in western Alaska. 
I thank the subcommittee for the opportunity to address 
response plans under the alternative planning criteria for 
western Alaska.
    I respectfully disagree with the need for section 107 of 
H.R. 5978. It would stifle competition and hinder improvement 
of oil spill response in Alaska. I will address the inaccurate 
arguments advanced by organizations that support section 107.
    They claim reducing competition is necessary, and that a 
monopoly will better serve Alaska's interests. Specifically, 
section 107 prevents achieving a key goal of the Oil Pollution 
Act of 1990 to provide robust oil spill response capability 
along all U.S. coasts.
    Under the Coast Guard's implementation of APC, the response 
industry is improving coverage, investing in vessels, aircraft, 
and staging facilities, and hiring experienced manpower, most 
of which is based in Alaska. Section 107 sets back progress 
made by 1 Call Alaska, discouraging further investment needed 
to move Alaska closer to the higher OPA [Oil Pollution Act] 
standards in the lower 48.
    The Exxon Valdez exposed how ill-prepared the U.S. 
Government and the maritime industry were to respond to major 
spills, particularly in Alaska. There was very limited ability 
to respond to large, open-water spills. OPA jump-started the 
massive investment in private sector national response industry 
with four key provisions: first, clarifying chain of command 
and responsibilities under the National Contingency Plan; 
second, directing the private sector to provide the response 
equipment and manpower; third, incentivizing private investment 
by requiring vessel and oil facilities to contract with OSROs 
with capacity to meet the requirements; and finally, 
encouraging OSRO investment through responder immunity.
    The Coast Guard has provided the necessary flexibility and 
competitive environment to accommodate challenges in complying 
with OPA's standards in western Alaska, while driving 
improvements in coverage. Section 107 type legislation impedes 
expansion of resources by excluding competition from the very 
companies with the most experience and the largest inventory of 
assets already in Alaska.
    Such legislation is premised on false assertions: one, 
competition will drive up fuel prices; two, there will be a 
price war ultimately ending in an unsustainable price of zero; 
and, three, competitors provide duplicative resources, driving 
up costs. I will address each of these contentions separately. 
But, as a general matter, competition ultimately drives down 
prices, while increasing resources. The fallacy is that a 
nonprofit monopoly provides the most resources at the lowest 
cost.
    With regard to fuel prices, our written testimony includes 
a fuel price report by Alaska's Department of Commerce, 
Community, and Economic Development, published in January 2017, 
reviewing the previous year. This report concluded heating fuel 
and gasoline prices in most regions of the State are at their 
lowest since early in 2009, and most survey communities have 
seen significant declines.
    With regard to the remote communities, the report noted 
remote communities have higher shipping costs, resulting in 
fuel prices that are significantly higher than the statewide 
average. However, since most communities receive at least one 
fuel delivery a year, they are continuing to benefit from the 
lower cost of fuel. Thus, the primary fuel cost drivers are the 
price per barrel, the fixed cost per shipment, and infrequency 
of delivery, rather than any minimal APC market pressure.
    Secondly, I can confirm 1 Call Alaska has not participated 
in a price war. Our pricing is dependent on our cost of 
operations and number of customers. That scale has largely 
remained steady as of now, and we are the most expensive 
provider. In actuality, it is the nonprofit, which consistently 
undercuts our prices, seeking to compete, which they should not 
be doing, given their nonprofit status.
    Finally, with regard to the assertion multiple providers 
duplicate resources, I note the significant number of resources 
we included and specific investments in Alaska. Simply put, the 
main reason an APC is needed is that currently the resources 
are insufficient to meet OPA standards. Thus, competition has 
caused us to add personnel and equipment. Further, the 
resources we added are not the same type that existed.
    Since inception, 1 Call Alaska represents a $44 million 
investment in aircraft, equipment, vessels, and facilities. 
Resolve and NRC also employ full-time more than 100 Alaskans. 
Further, over the last year alone we cooperated with the Coast 
Guard to save 100-plus lives and prevent the discharge of 
millions of gallons of oil.
    Importantly, most of the casualties we responded to were 
not customers of our APC. In fact, our services were called 
upon out of a necessity, as the entities advocating could not 
effectively respond to our customers' spills.
    In closing, 1 Call Alaska is proud to announce plans to 
expand to the entire Western Alaska Captain of the Port Zone. 
Whether it is a stricken 4.2-million-gallon tanker, a disabled 
fishing vessel from Dillingham with 100 souls on board, or 
flying our aircraft, 1 Call Alaska endeavors to prevent, 
prepare for, and respond to marine casualties in western 
Alaska. Thank you.
    Mr. Hunter. Thank you.
    Mr. Nedeau? And I am saying that right, correct?
    Mr. Nedeau. Nedeau. That is close.
    Mr. Hunter. Nedeau? OK. You are recognized.
    Mr. Nedeau. Chairman Hunter, Ranking Member Garamendi, and 
members of the Subcommittee on Coast Guard and Maritime 
Transportation, thank you for giving me the opportunity to 
testify and provide information on the gap between marine 
salvage and firefighting requirements, and the actual services 
contracted for by vessel owners. The gap places the marine 
environment and vessel crews in considerable jeopardy.
    My name is Nicholas Nedeau. I am the CEO of Rapid Ocean 
Response Corporation. Rapid Ocean Response provides high-speed, 
dedicated vessels for offshore firefighters and surveyors, as 
required pursuant to the salvage and marine firefighting 
regulations. The salvage and marine firefighting regulations 
are derived from the Oil Pollution Act of 1990. That statute 
reads, in relevant part, that tank vessels ``identify, and 
ensure by contract or other means . . . the availability of, 
private personnel and equipment necessary to remove . . . a 
worst-case discharge (including a discharge resulting from fire 
or explosion), . . .''
    The clear import of that provision is that Congress 
intended that when a fire or similar incident occurs offshore, 
marine salvage and firefighting resources be identifiable and 
ensured by contract to be available to respond. As my testimony 
will explain, neither of those requirements are currently being 
met.
    In terms of the implementation of the salvage and marine 
firefighting regulations, the Coast Guard was surprisingly 
patient. Over a period of 23 years, the effective date of the 
regulations was repeatedly pushed back. The reason the Coast 
Guard usually provided for the delay was that more time would 
be needed to allow the resource providers to build the vessels 
necessary to achieve compliance with the rules. Unfortunately, 
the dedicated network the Coast Guard envisioned has not been 
established.
    Looking at the salvage and marine firefighting regulatory 
requirements, it is clear that these requirements cannot be met 
consistently without a dedicated network. The regulations 
require ``A planholder must ensure by contract or other 
approved means that response resources are available to respond 
. . .'' Instead of building the dedicated resources the 
regulations required, the regulating community attempted to 
achieve compliance using a vessel of opportunity approach.
    Under this strategy, a vessel owner lists numerous vessels 
in his vessel response plan, in the hopes that one might be 
available to respond. This approach is both legally and 
operationally deficient. Legally, of the four qualified 
resource providers, three conditioned the response on the 
availability of their vessels. All resource providers rely 
heavily upon subcontractors, whose contracts provide they will 
respond, if available.
    Operationally, the vessel of opportunity approach also 
cannot achieve compliance consistently. Because nondedicated 
vessels are often engaged in other work, they must first 
disengage and return to port. There these vessels load the 
necessary equipment and personnel and are retrofitted with 
firefighting pumps. It is unlikely these activities can be 
accomplished and mount a compliant response within the 6-, 12-, 
or 18-hour timeframes.
    The obvious question is how could these serious 
deficiencies not have come to the attention of the Coast Guard. 
The salvage and marine firefighting regulations provide a very 
specific list of mandatory exercises and drills. Unfortunately, 
the Coast Guard has not required vessel owners to provide proof 
of these exercises.
    There are real-life examples of these compliance issues. On 
March 14, 2015, the Grey Shark lost power off the Coast of New 
Jersey. On the 15th, fire broke out. On the 17th, she arranged 
a tow back to New York Harbor, where the New York Fire 
Department put the fire out on the 18th. During that time the 
Grey Shark utilized a vessel-of-opportunity approach to 
compliance. She contacted over 200 vessels. None were available 
to respond.
    The Caribbean Fantasy, a cruise ship, caught fire within 2 
miles of the entrance to San Juan Harbor. Although a very 
successful evacuation was performed, according to Coast Guard 
commander Janet Espino-Young, the active firefighting component 
of the vessel response did not meet the criteria as required by 
the regulations. That is within 2 miles of a major port.
    In 2015, RORC [Rapid Ocean Response Corporation] submitted 
an application to build a nationwide dedicated salvage and 
marine firefighting response network. That network, comprised 
mainly of harbor pilot groups, utilizes high-speed, oceangoing 
pilot boats to transport fire teams and surveyors. These pilot 
boats were to be used until custom-built fire boats could be 
placed in service. RORC provided examples of lack of compliance 
and operational deficiencies in each captain of the port zone.
    On March 14th, the Coast Guard responded, explaining that 
the Coast Guard could not approve RORC's application without 
first determining that a gap in compliance existed. On March 
17, 2016, Admiral Paul Brown announced a verification process 
to determine whether gaps in compliance did exist. 
Inexplicably, this process has not come to fruition.
    In closing, the congressional mandate that salvage and 
marine firefighting resources be identifiable and ensured by 
contract to be available to respond has not been achieved. I 
ask the Oversight Committee to press the Coast Guard to reject 
vessel response plans that do not provide evidence of the 
required drills and exercises. Without requiring proof of 
compliance, Congress' clear intentions will remain unfulfilled.
    Thank you, and I ask that my written statement be adopted 
to the record.
    Mr. Hunter. Without objection. This is interesting, too, 
because Mr. Schauer and Mr. Nedeau are talking about the same 
issues. Mr. Candito and Mr. Custard are going to be talking 
about the same issue on different sides.
    So, Mr. Custard, you are recognized.
    Mr. Custard. Thank you, Mr. Chairman. Good morning, 
Chairman Hunter, Ranking Member Garamendi, and members of the 
subcommittee. The Alaska Maritime Prevention and Response 
Network, a nonprofit organization, administers the only Coast 
Guard-approved, nontank vessel APC program that covers the 
entire Western Alaska Captain of the Port Zone. The Network 
supports over 450 maritime companies from around the globe 
operating in and transiting through western Alaska. I 
appreciate the opportunity to discuss the implementation of 
alternative planning criteria in western Alaska.
    By way of background, the area referred to as western 
Alaska has long been of interest to the U.S. Congress. As the 
committee knows, western Alaska includes the U.S. Arctic region 
and other areas of critical national interest in western 
Alaska, including the unique environment and critical habitat, 
the largest and most valuable commercial fishing industry in 
the United States, and unique cultural interests.
    In short, Congress has a long and valued history in 
recognizing and addressing the many challenging issues that are 
unique to this area for the benefit of all Americans. As an 
Alaskan, I very much appreciate Congress' efforts in that 
regard.
    The Western Alaska Captain of the Port Zone comprises over 
1 million square miles of ocean. Because this exceptionally 
large area has little infrastructure, the national planning 
criteria used to meet the requirements of the Oil Pollution Act 
of 1990 in the continental United States have been very 
difficult and challenging to obtain there. Instead, vessel 
owners and operators have been using alternative planning 
criteria, or APC. The Network has concerns on several major 
issues.
    The Coast Guard has deviated from the longstanding practice 
of managing the vessel response plan regulations in western 
Alaska on a captain-of-the-port-wide basis, creating confusion 
among the maritime industry and undermining the ability to 
sustain and enhance oil spill preparedness in western Alaska.
    The current management practice, as well as the proposed 
guidance by the Coast Guard, will, over time, continue to lower 
response capability and capacity. They will weaken the oil 
spill safety net in western Alaska, undermining environmental 
protection and putting the livelihood of fishing vessels in 
Alaska, Washington, Oregon, and California in jeopardy.
    The Coast Guard recently imposed competition on APC 
providers in western Alaska, but the terms were not clear, 
equitable, or consistently enforced. All APC providers should 
cover the entire captain of the port zone, and should position 
and build out, not minimize, equipment within Alaska, so that 
resources are readily available, rather than being a continent 
away, taking days to deliver and put in place. By then, the 
damage from the spill is done.
    There has been no objective economic analysis completed by 
the Coast Guard. The independent economic assessment we 
provided to the Coast Guard validates a downward trend we are 
witnessing in sustaining response capabilities in western 
Alaska. We are now witnessing a decline in greater intensity 
and velocity than predicted by that study.
    The claim that there is more equipment in western Alaska 
with multiple APC providers is a mischaracterization of 
reality, because it assumes all APC providers make their 
equipment available for any vessel during a response. But the 
only equipment a planholder can rely on is what is available 
through their individual APC provider.
    As Congress examines a path forward, and to the extent that 
changes are made to the way APC is implemented in Alaska, we 
request that the following principles be considered: APC 
providers must cover the entire Western Alaska Captain of the 
Port Zone; continued fragmentation of the captain of the port 
zone will continue to result in reduced capacity to protect 
western Alaska and the Arctic.
    Reducing the risk of oil spills must be an essential 
component of an APC program. The economic ramifications of how 
the Coast Guard is implementing APC in western Alaska must be 
analyzed and understood. Accountability is paramount. When an 
oil spill happens, Alaskans want assurance that vessels in an 
APC program have the resources in Alaska readily available to 
respond to a spill.
    Unlike now, the Coast Guard must be able to consistently 
apply and enforce whatever rules it develops. Waivers should be 
the exception, not the rule.
    Regular order must be adhered to in regulating industry. 
Regulations by administrative policy allows the Coast Guard to 
change the rules without notice or an opportunity for comment, 
and without analyzing the economic impact.
    Up until recently, the Coast Guard managed oil spill 
prevention and response on a captain-of-the-port-wide basis in 
western Alaska. The result was a long-term, sustainable build-
down of response resources for the benefit of the entire 
region. Congress should provide policy directives that result 
in continuity and predictability, and resolve the ambiguities 
in the regulations that allowed the Coast Guard to unilaterally 
depart from the successful approach, and direct the Coast Guard 
to return to an areawide APC requirement in western Alaska and 
the Arctic.
    These principles are offered to restore order to the 
process of regulating the maritime industry in western Alaska. 
More importantly, they will ensure that oil spill response is 
administered in a fair and balanced manner, and will ensure 
that a robust and sustainable oil spill prevention and response 
program protects all of western Alaska, including the U.S. 
Arctic region.
    The Network stands ready to work with the committee, the 
Coast Guard, and all stakeholders to craft a long-term solution 
that works for western Alaska.
    Mr. Chairman, I appreciate the subcommittee's examination 
of this important issue. I ask my written remarks be entered 
into the record. Thank you.
    Mr. Hunter. Without objection. Thank you.
    Mr. Allegretti, you are recognized.
    Mr. Allegretti. Good morning, Chairman Hunter, Ranking 
Member Garamendi, and members of the subcommittee, thank you 
for holding the hearing today. I am here to ask for your 
assistance in averting an existential threat to the health and 
the viability of AWO [American Waterways Operators] members in 
the ship-docking business.
    Over the past year, international ocean carrier alliances 
have filed agreements five times with the Federal Maritime 
Commission, seeking authorization to negotiate collectively 
with tugboat operators and other domestic service providers who 
have no counterbalancing ability to take such action under U.S. 
antitrust laws.
    In three of the cases, the parties to the agreement 
eventually withdrew the collective negotiation provision. But 
in January, a group of foreign car carriers filed an amendment 
that allows alliance members to negotiate jointly with American 
tugboat operators. Over AWO's objections, and without a 
thorough analysis of the injurious impact on the tugboat 
industry, the FMC allowed the amendment to take effect.
    AWO believes that both the letter of the Shipping Act and 
congressional intent in enacting that statute prohibit 
collective negotiation of rates with domestic service 
providers. We foresee an egregious competitive imbalance and 
grave harm to American companies if foreign ocean carrier 
alliances are allowed to negotiate collectively with the U.S. 
tugboat operators. We have laid out the legal and the practical 
reasons for our concerns in multiple submissions to the FMC and 
in meetings with FMC Commissioners and staff.
    We are gratified that both the Department of Justice and 
the bipartisan leadership of this subcommittee and the full 
committee have voiced similar concerns to the FMC. But frankly, 
we are astonished that a majority of the FMC Commissioners do 
not share them.
    Because the FMC allowed the car carrier group to 
collectively negotiate with U.S. companies, we were not 
surprised when, in March, a group of Japanese ocean carriers 
filed yet another agreement that would authorize the parties to 
negotiate collectively with tugboat operators. The FMC had 
signaled a green light for this provision. AWO and other 
service providers have registered strong opposition, but the 
offending provision was never removed from the agreement.
    This series of events leads us to three basic conclusions, 
all of which are very troubling to us.
    First, that foreign ocean carriers of ever-greater size and 
market power will continue to seek authority to negotiate 
collectively with American tugboat operators who enjoy no 
ability under the antitrust laws to take similar action.
    Second, that the FMC is either unwilling or unable to halt 
and reverse this unfair and anticompetitive situation.
    And third, that the FMC intends to extend its regulatory 
review over the tugboat industry, an authority Congress has not 
conferred. In the process, it will eviscerate the 
confidentiality of our commercial contracts with our customers.
    My central message to you is this: It is fundamentally 
unfair, anticompetitive, and detrimental to the U.S. maritime 
industry to skew the playing field in favor of massive 
international shipping conglomerates, which include foreign, 
State-owned enterprises, and entities that have paid criminal 
fines for anticompetitive behavior, at the expense of American 
tugboat companies.
    If the FMC lacks the will or the ability to act swiftly and 
decisively to stop and reverse this growing trend, then AWO 
members call upon Congress to amend the Shipping Act to 
unequivocally prohibit joint negotiation with domestic service 
providers. It is unconscionable to us that an agency of the 
U.S. Government would sanction the disadvantaging of an 
essential American industry in favor of foreign shipping 
alliances. Congress should act to rectify this injustice where 
the FMC has failed to do so.
    Thank you very much for your attention. I look forward to 
your questions.
    Mr. Hunter. Thank you, Mr. Allegretti.
    Mr. Butler, you are recognized.
    Mr. Butler. Chairman Hunter, Ranking Member Garamendi, 
members of the subcommittee, my name is John Butler, and I am 
the president and CEO of the World Shipping Council. I 
appreciate the opportunity to testify today. I have submitted 
written testimony that I would ask be included in the record.
    I would like to make two points about the liner shipping 
industry, and then I would like to address the issue of joint 
purchasing.
    The first point is that the liner shipping industry is a 
critical link in our Nation's international trade, and it is a 
major driver of the economic vitality of this country. Whether 
our members are carrying consumer goods to retailers in the 
United States, supplying parts to automobile manufacturers, or 
carrying U.S. agricultural goods to foreign markets, liner 
shipping touches almost every part of the U.S. economy.
    The second important point about liner shipping is that the 
industry is in a period of substantial change. The market for 
international containerized shipping services is intensely 
competitive. The result of that competition has been 
historically low ocean transportation rates for U.S. importers 
and exporters almost continuously since the global recession in 
2008.
    Persistent low freight rates have caused carriers to seek 
efficiencies in every part of their operations, and that 
includes tremendous investments in a new generation of highly 
fuel-efficient container ships. There have also been structural 
changes. A number of carrier mergers closed last year, and we 
will see several more that are likely to be completed this 
year. However, even after those mergers are completed, the 
liner shipping market will remain unconcentrated.
    As the committee has discussed already, vessel sharing 
agreements or alliances are one of the tools that carriers use 
to make sure they get the best operational efficiency out of 
their vessel fleets. Sharing vessels allows carriers to serve 
more ports worldwide, which improves choices for shipper 
customers and increases competition. All carrier agreements 
must be filed with the Federal Maritime Commission, and the 
Commission may seek changes to carrier agreements based on 
concerns that the Commission may have, as well as concerns that 
may be raised by the public and interested parties.
    As Mr. Allegretti referred to, in the case of the three 
major alliance agreements, for example, tug operators raised 
concerns about the authority of ocean carriers to jointly 
negotiate for tug services. And the carriers in those three 
agreements changed the language to clearly state that there 
would be no joint negotiation for tug services in the United 
States.
    The staff summary for this hearing mentions two carrier 
agreements that contain some joint purchasing authority. The 
Commission, just yesterday, has decided that it does not have 
jurisdiction over one of those agreements. The only remaining 
agreement in question with general joint purchasing authority 
requires the parties to go back to the FMC before they take any 
actual concrete action under that authority. That means nothing 
happens under that agreement until the FMC gets another look at 
it, and the public has an opportunity to comment.
    It is unclear at this stage whether and to what extent 
carriers in the future may wish to pursue joint purchasing of 
services and vessel supplies in the United States. What is 
clear is that any agreements with that authority will be 
subject to strict scrutiny. That is in line with the full 
committee's recent instructions to the FMC, and it is 
consistent with the FMC's actions to date. I think the message 
has been received on the carrier end, as well.
    The one thing that I would respectfully ask of the 
subcommittee, of the FMC, and of service providers is not to 
take a categorical view about joint purchasing. The Department 
of Justice, the Federal Trade Commission, the Department of 
Transportation, and the Supreme Court have all said that joint 
purchasing can be pro-competitive. And, whether in a given 
situation those activities should be allowed, or they should be 
challenged, depends on the specifics of that particular 
situation.
    As the shipping industry works through the current economic 
and operational challenges, there may be need for different 
types of business arrangements, including joint purchasing. And 
some of those activities may be beneficial, both to service 
providers and to service buyers. Let's not foreclose 
potentially useful tools without first making sure we 
understand how those tools might operate in the market.
    I thank you for the opportunity to testify. I would be 
happy to answer any questions.
    Mr. Hunter. I thank you, sir. I am going to yield to Mr. 
Larsen over there. I don't think he got a question during the 
first panel.
    Do you have a question? Please.
    Mr. Larsen. Sure. This question is really with regards to 
this--the firefighting issue. And I was wondering if--for 
Admiral Thomas, if the regulations, the SMFF regulations, 
delineate elicit exercises and drills that vessel owners are 
required to conduct.
    Are those vessel operators conducting those required 
drills?
    Admiral Thomas. Thank you for the question, Congressman. 
Yes, the regulations do specify, as was testified to, a number 
of different verification processes, including exercises and 
drills. The Coast Guard has limited resources to oversee all 
those, but we do oversee the ones that we can.
    I think this is really a question about our capacity to 
verify compliance with the SMFF regulations. And, as I 
testified to in the earlier panel, we are limited in our 
capacity across our Coast Guard. But we do have a robust 
verification currently underway. That--the verification process 
itself, sir, is limited by some legal requirements, in terms of 
how much information we can ask for from regulated entities. So 
we are conducting that verification in the course of required 
plan renewals.
    Mr. Larsen. So what kind of legal requirements are there 
if, in fact, the law says that you are supposed to verify that 
these drills are taking place?
    Admiral Thomas. Well, sir, so we--for example, we can 
attend and oversee the drills that are required by the law. But 
what we are limited in is our ability to ask for additional 
information that we might use for verification outside of the 
normal cycle in which a regulated entity would normally be 
proving that information to the Coast Guard.
    I think a key thing to understand here is that these 
regulations do not regulate anybody at this table, at least not 
the four gentlemen to my left. They regulate vessel operators. 
And those operators are compelled to comply with the 
regulations by procuring services from the likes of the 
gentleman to my left. And that is, I think, really, one of the 
fundamental issues here.
    Mr. Larsen. Much like the OSRO model?
    Admiral Thomas. Much like the OSRO model. The salvage 
model, business model, developed differently for a lot of 
reasons that Mr. Schauer touched on. But it is very similar, in 
terms of the legal and regulatory construct.
    Mr. Larsen. OK. Is it Nedeau? Nedeau?
    Mr. Nedeau. Nedeau, thank you.
    Mr. Larsen. Nedeau, sorry. All right. You said that 
earlier, thank you.
    What would a successful verification process look like, in 
your opinion?
    Mr. Nedeau. Well, I think it is--a comprehensive and robust 
verification process for the response resources that we address 
would simply identify a vessel crossing within the 50-mile 
barrier falling within the jurisdiction of salvage and marine 
firefighting, and asking that vessel where its response 
resources are, and then determining whether they have contracts 
with those resources, which require them to respond.
    If the contract provides that they will respond if they are 
available, it does not meet the legal requirements. If the 
vessels are 600 nautical miles away, or not in the captain of 
the port zone, it does not meet those requirements, 
operationally. And we provided evidence of that to the Coast 
Guard in 2015, with our application for an alternative planning 
criteria, evidence of the operational and legal deficiencies in 
every captain of the port zone, and they responded saying they 
would do a robust verification to determine if, in fact, those 
deficiencies were apparent. That has not come to fruition.
    Admiral Thomas, by the way, is a man of unquestioned 
integrity, and tremendous leadership, and we have great respect 
for him. However, this program has not been reporting to him. 
So I do not believe he is as knowledgeable about the lack of 
verification. And his response to your question about whether 
they are conducting or requiring the mandatory drills and 
exercises, to my knowledge I am not aware of one shipping 
company that is required to provide those.
    Mr. Larsen. That is a--thank you. I think we need to 
explore that a little further. I appreciate it, thanks a lot. I 
yield back.
    Mr. Hunter. I thank the gentleman.
    Mr. Graves?
    Mr. Graves of Louisiana. Thank you, Mr. Chairman. I 
appreciate it. I continue to have concerns about some of the 
vessel response that has been discussed today.
    For example, I am concerned about the timing it is going to 
take for these vessels to get to some of the potential 
accidents that occur. Representing south Louisiana, I had the 
chance to spend a good bit of time on Deepwater Horizon 
activities, the oil spill in the Gulf of Mexico in 2010, and I 
am curious about how a tug that is traveling at 10 knots is 
going to have the capability to get out there in any reasonable 
period of time to provide the response time that we need in a 
disaster.
    Admiral, do you care to comment on that?
    Admiral Thomas. Thank you, Congressman. The performance 
requirements, or planning requirements, are delineated in the 
regulations, in the national planning criteria, and they do 
specify response times that are required. The process of 
determining those times was subject to, you know, robust 
analysis and comment through the rulemaking process.
    I think one of the real keys here--and I would like to take 
this opportunity to correct--the law, and therefore, the 
regulation, never envisioned dedicated resources. It is not 
required. And, in the course of the regulatory analysis and, 
most importantly, in the economic----
    Mr. Graves of Louisiana. I just want to make sure--you said 
it never required dedicated resources? Is that what you said?
    Admiral Thomas. Yes, sir, that----
    Mr. Graves of Louisiana. OK.
    Admiral Thomas. That is what I said. And, in fact, the 
economic analysis--which, as you know, is required for every 
rulemaking--we would not have been able to support a cost-
benefit analysis, had we required dedicated, under-contract 
resources.
    So, the planning factors, they identify and procure, in one 
way or another, you know, make an arrangement with resources 
that can meet these planning factors. But as I explained 
earlier, those are not performance factors when it comes to 
actual response.
    So there is a misunderstanding, in terms--in other words, 
if the Coast Guard were to require dedicated resources for this 
purpose, the law would have to be very specific, so that our 
regulation could be equally prescriptive.
    Mr. Nedeau. If I could address this, this is a common 
misunderstanding, I believe.
    Mr. Graves of Louisiana. Sure, but quickly. I have got some 
other questions.
    Mr. Nedeau. I think, as to the nondedicated resource 
question, it appears in the Federal Register at page 80634, 
Vol. 73, No. 251: ``One commenter suggested that the use of 
nondedicated resources is a viable and commercially acceptable, 
cost-effective way of conducting emergency-response business, 
and therefore should be utilized to establish appropriate 
salvage and firefighting standards. The Coast Guard disagrees. 
This rulemaking has been designed to mirror the success that 
the OSROs and planholders have had with pre-arranged contracts 
as required in 33 CFR part 155. This will ensure that both 
industry and resource providers are clearly aware of who will 
respond on scene, and in what timeframe they are capable of 
arriving . . .''
    Mr. Graves of Louisiana. So we got a fight on our hands 
now.
    Mr. Nedeau. I would also like to address the planning 
standards if I could that were referenced by Admiral Thomas. 
The regulation is very specific. It provides that, in this 
instance, ``Compliance with the regulations''--I am quoting 
from 155.4010(c)--``Compliance with the regulations is based 
upon whether a covered response plan ensures that adequate 
response resources are available, not on whether the actual 
performance of those response resources after an incident meets 
specified arrival times . . .''
    The availability requirement that you have a contract with 
resources that are available and ensures that by contract is 
the legal requirement. It is true that planning standards don't 
kick in. Compliance is determined on whether you have a 
contract that ensures the resources are available. Thank you.
    Mr. Graves of Louisiana. Should we let the two folks in the 
middle move out of the way and let you all fight? Would that be 
better?
    [Laughter.]
    Mr. Graves of Louisiana. All right. Let me go back to--I do 
want to hear your comment, but I want to make sure I understand 
something that you commented on, Admiral. You said that, under 
a cost-benefit analysis, you determined that a dedicated vessel 
was not appropriate. Is that what we learned about last week, 
this Paperwork Reduction Act consideration that occurred that 
we recently again just learned about last week? Is that what 
you are referring to?
    Admiral Thomas. No, sir, I don't believe so. I think that 
that particular act is what is making it more difficult for us 
to conduct the verification on the timeline that we would like 
to do. So we are really forced to do the verification on a 
timeline that is in synch with the normal industry requirement 
to renew their plans with us.
    Remember that regulated entity here is the vessel operator. 
It is none of these services.
    Mr. Graves of Louisiana. When did that termination occur on 
the verification that would--as I understand from last week, we 
were briefed that it was based upon the Paperwork Reduction 
Act.
    Admiral Thomas. When did it occur, sir?
    Mr. Graves of Louisiana. Yes. When did that termination of 
verification occur?
    Admiral Thomas. We have not terminated the verification. We 
have just adjusted the timeline on when we can reasonably 
expect to get a good-enough representational data set to make a 
determination on whether or not the APC that has been requested 
is justified.
    Mr. Graves of Louisiana. OK.
    Admiral Thomas. We are still actively verifying.
    Mr. Graves of Louisiana. OK. So then, with--so it is being 
enforced, but you said the timeline is the issue right now.
    Admiral Thomas. Yes, sir. So we will conduct verification 
in the course of plan renewal--that is required already by the 
regulation--as opposed to going out to the planholders in 
between their renewal process and asking for additional 
information.
    Mr. Graves of Louisiana. OK. So your compliance process is 
what, again, then?
    Admiral Thomas. As--similar to what was described. But 
essentially, we will take a vessel's plan and we will impose a 
scenario on it, and we will freeze in time where that vessel is 
when it occurs, and where all their response resources are, and 
see how well they can meet the planning standards.
    Mr. Graves of Louisiana. Please, briefly, we are----
    Mr. Schauer. Yes. Thank you, Congressman. Just to extend 
the logic of Mr. Nedeau here, if we extend this logic 
throughout the system that we use, salvage and marine 
firefighting, every 200 miles on the coast you would have a 
large ocean tugboat, dedicated, not able to do anything else, a 
derrick barge, you would have supply boats, crew boats, 
firefighting vessels. You would have air--charter cargo 
aircraft, dedicated cargo aircraft parked, because those can't 
be of opportunity, either. You would have trucks parked, you 
would have--basically, all of the services that we provide are 
provided at the existing networks.
    So, if you are going to say they ought to be dedicated, 
then throw all that out and let's build a new system. It is 
sort of ridiculous, when you look at the cost of it.
    So now, we are commonsense folks. We think the Coast Guard 
is. There are layers--there are regions where probably less 
redundancy. There are places where there is a lot. In fact, the 
Gulf of Mexico, it is a resource-rich environment down there. 
We get a response there, it is easy. OK? Other places have 
less.
    So it is a process we have to go through, and we have to 
look at the areas of--that, you know, need the most focus, and 
continue to grow capacity. Our industry has been growing 
capacity for--since our inception. So we have no problem doing 
that.
    Mr. Graves of Louisiana. I just--I want to caution you in 
using the term ridiculous when we are talking about this here, 
because we are potentially talking about lives. And response 
time and capabilities are very important because, potentially, 
we have lives at risk. And I want to remind you Deepwater 
Horizon we lost 11 people, the biggest part of that tragedy.
    Can you go back? Just one thing that you mentioned earlier, 
you mentioned the New York Fire Department being part of your 
response capabilities. How does that work? And are you being 
compensated for the capabilities of the New York Fire 
Department? How does that----
    Mr. Schauer. They have signed an agreement to be a resource 
provider to the SMFF providers.
    Mr. Graves of Louisiana. And do you pay them, or no?
    Mr. Schauer. Yes, sir, if they--for their services, they 
are compensated for their services.
    Mr. Graves of Louisiana. OK, OK. And so--and they have 
complementary capabilities to yours, or----
    Mr. Schauer. Basically, if--a fire at the dock is the 
jurisdiction of the local fire department. So we support them 
at a fire at the dock. If the fire moves away from the dock 
into the port, offshore, it switches. We take the lead 
offshore. So we have a mutual aid agreement. We support them 
when the fire is at the dock. They support us as it moves away 
from the dock.
    Mr. Graves of Louisiana. OK. Because in the case of the 
Grey Shark, I think it took 4 days in that case to put that one 
out. And obviously, that kind of timeframe, if that were a 
vessel with passengers, would be incredibly concerning.
    Mr. Schauer. The Grey Shark started about 200 miles 
offshore, outside of the jurisdiction of everything. It was--I 
don't really want to talk specifically about cases, I am an 
elected officer of the ASA, but I am also--I work directly for 
one of the providers. So it was a competitor company, they 
responded to that. I am not going to address that specifically.
    But it started 200 miles offshore, outside the jurisdiction 
of the regulations. It was towed in. It was handled--the New 
York Fire worked together with the provider, and that is how it 
is supposed to work.
    Mr. Graves of Louisiana. Thank you----
    Mr. Nedeau. If I could just say one thing, my comments have 
been limited to the response requirements, not the other 19 
services provided by the salvage companies. I have limited my 
comments to those first three requirements, rapid response for 
firefighters and surveyors. That is what the subject of the 
alternative planning criteria I submitted to the Coast Guard 
addresses.
    Mr. Graves of Louisiana. Thank you.
    Thank you, Mr. Chairman.
    Mr. Hunter. I thank the gentleman. And just to be clear, 
before I yield to Mr. Garamendi, I think the gentleman's point 
was that fire that occurred on the Grey Shark, they towed it 
back to the dock for 4 days, and then the fire department put 
out the fire at the dock. Right? So the salvors didn't put the 
fire out, I think is what he is saying, in the ocean. They 
brought it all the way back as it burned, and then the New York 
Fire Department put it out at the dock, like they put out a 
house fire. Is that right?
    Mr. Schauer. That is correct. And again, it is--again, the 
specifics of the case I don't want to get into, but that is not 
an uncommon thing.
    Mr. Hunter. OK.
    Mr. Schauer. To work on a fire that is at a place of safety 
where you can----
    Mr. Hunter. Sure. Admiral Thomas, is that what you--is that 
why the regulation is there, so that that happens?
    Admiral Thomas. Well----
    Mr. Hunter. I mean is that what the Coast Guard envisioned 
when they put this in?
    Admiral Thomas. As Mr. Schauer mentioned, that particular 
incident occurred outside the jurisdictional limit of the law 
and the regulation in this case. So----
    Mr. Hunter. OK. Say that it happened 20 miles offshore. Is 
it still your--is it the Coast Guard's intent, then, that you 
tow in the boats to the closest fire department at the dock, as 
opposed to putting the fire out in the ocean?
    Admiral Thomas. Coast Guard regulations are not as 
prescriptive as to tell the salvage professionals the best way 
to put a fire out on a ship. There may be situations where that 
is, in fact, the best response, and there are others where the 
salvage professionals would determine bringing response 
resources to the vessel is best.
    But the regulations specify resource capabilities and 
timelines, but they are not prescriptive on which resources 
should be used when, and who--and how those decisions are made. 
That is made in consultation with the captain of the port as 
the situation evolves.
    Mr. Hunter. OK. I yield to the ranking member.
    Mr. Garamendi. Mr. Chairman, thank you for scheduling such 
an informative and necessary hearing. We have gone through this 
rapid response issue thoroughly. I have some questions--and I 
may ask them for the record--with regard to that.
    But I would like to focus, instead, on this alliance 
business and the FMC response to it. It seems to me that what 
has happened here is there has been a very significant change 
in the nature of the industry since the last amendment to the 
Ocean Shipping Act, and that the FMC's authority and 
responsibilities no longer fit the reality of the industry. The 
emergence of all of the alliances and the significant power 
they have as a result of those alliances raises a question of 
antitrust, anticompetitive activity.
    I noticed, Mr. Butler--I was reading your testimony here, 
and you kindly gave us the specific sections of the alliance 
agreements, and you helpfully underlined those sections, or 
those particular sentences that are to your benefit.
    For example, ``The parties shall negotiate independently,'' 
and the next 50 words are underlined, ``independently with . . 
. stevedores, tug operators,'' and so on and so forth. And then 
there is this word, ``provided, however,'' that specifically 
gives the alliances the opportunity to share information that 
is necessary to collude. And I am going ``something is wrong 
here,'' because the specific--``provided, however, . . . the 
Parties are authorized to discuss, exchange information, and/or 
coordinate negotiations with'' the providers of services.
    The bottom line in all of this is the law is not up to date 
with the realities of the industry, as it exists today. Our 
task is to address changes in the law, as well as 
implementation of the law. It seems to me that the FMC can 
correctly argue that they are simply carrying out the law. We 
can debate whether that is or is not the case, and whether they 
are carrying it out correctly. But I think there is no doubt in 
my mind that the current law is out of date, and has to be 
changed. So, my specific questions go to that task that we have 
of writing law.
    I want to start with Mr. Allegretti. How would you change 
the law to address the concerns that you have so ardently 
expressed to this committee?
    Mr. Allegretti. The problem, Mr. Garamendi, with the 
current interpretation of the law, is the Shipping Act has an 
explicit and express prohibition against foreign ocean carriers 
negotiating collectively with domestic service providers, 
except that it does exactly what you just said. And then it 
says, ``except or provided that it doesn't otherwise violate 
the antitrust laws.''
    The problem with that in the real world is who is going to 
determine that these negotiations have violated the antitrust 
laws? Is the tugboat operator supposed to sue his customers 
under the antitrust laws to push back on this? Shall we rely on 
the Department of Justice to do it? Should we rely on the FMC 
to do it? These are not going to happen in the real world. And 
the result is that, in fact, the express prohibition in the law 
will be routinely violated in the marketplace.
    Mr. Garamendi. So what change?
    Mr. Allegretti. Then the change would be to take that 
provision out of the current statute that says, ``provided that 
it doesn't otherwise violate the antitrust laws.''
    Mr. Garamendi. OK. So the removal of a specific section of 
law.
    Mr. Allegretti. It is a phrase at the end of that section 
that has the express prohibition in it.
    Mr. Garamendi. Mr. Khouri? Same question.
    Mr. Khouri. Congressman, I would have to take some time 
with our general counsel and with my fellow Commissioners. I 
can't individually speak on behalf of the FMC.
    I don't have a formed opinion as to whether that would be a 
bad idea or not. I don't have a current opposition to 
considering it, but I would want to have a reasoned amount of 
input from all parties to see might there be some unintended 
consequences with that. But I can't say, as I sit here and give 
testimony today, Congressman, that I am opposed to that as a 
solution.
    So, you know, it is not that any of us--and I said this, 
you know, when we had a private meeting the other day--at the 
Commission, you know--the only degree I have on my wall is my 
United States Merchant Marine Officer's License as a Master and 
First Class Pilot----
    Mr. Garamendi. I appreciate that. We really----
    Mr. Khouri. And we have others. So, you know, we have the 
sympathy----
    Mr. Garamendi. Well, let me put----
    Mr. Khouri [continuing]. But, as you say, we have to work 
with the law.
    Mr. Garamendi. Excuse me for interrupting, but I would like 
the--like your opinion, and I would like the opinion of the 
Commission as to how to address this problem of competition or 
lack thereof. So if you could respond to that question----
    Mr. Khouri. We will promptly prepare answers to all the 
committee----
    Mr. Garamendi. We are probably less than a month away of 
writing the new law for the Coast Guard maritime. And so I 
would appreciate that in the next 2 weeks, if you would please 
provide that.
    Mr. Butler, the same question to you.
    Mr. Butler. Mr. Garamendi, obviously, if the Congress 
wishes to amend the law, we would be pleased to work with you 
at looking at language. That is the prerogative of the Congress 
to make that policy and make the law.
    I would offer the perspective that the existing Shipping 
Act, as it was amended in 1998, did contemplate the kinds of 
activities that are going on today. I am not so sure that we 
are in a position where we need to look at a major rewrite of 
the Shipping Act. I think there is enough authority and 
flexibility to deal with these issues.
    I would just note that the issue Mr. Allegretti has raised 
is very specific, and I understand you to be talking about 
perhaps broader issues. I think it is important to make that 
distinction.
    Mr. Garamendi. Well, let me be very specific. Mr. 
Allegretti has proposed a specific change in the law that a 
certain clause be eliminated. Have you--I assume you have not 
had the opportunity to opine on that, but take a run at it.
    Mr. Butler. Well, I want to talk to Mr. Allegretti about 
what he is trying to----
    Mr. Garamendi. Well, if I----
    Mr. Butler [continuing]. To accomplish. And we have had a 
conversation. And as I understand it--and he will set me right 
if I get this wrong--I think what he is trying to have is a 
flat prohibition on joint negotiation for tug services. And 
if----
    Mr. Garamendi. Mr. Allegretti?
    Mr. Allegretti. Can I try to put a more specific and 
practical perspective on what the problem is? There is a lot of 
conversation about law and analysis and competition. But here 
is the effect of what will happen if we don't change the law, 
and let me give you a practical example.
    You are a tugboat operator in a port somewhere in the 
United States. You have three major customers, and they each 
constitute, let's say, 25 percent of the business that you have 
in that port. Those three customers form an alliance, and they 
are given authorization by the FMC to come to you and jointly 
negotiate their rate.
    The first thing they do is they share the rate information, 
and they determine that one of them was paying $1,000, one was 
paying $1,500, one was paying $2,000. Well, the immediate thing 
they will ask that tugboat operator for is, ``Give us all of 
the work at $1,000.'' Once they have done that, perhaps they 
will say, ``And you know what? This is 75 percent of the 
business. Maybe you ought to give it to us at $800.''
    So, if you are the tugboat operator, and you are faced with 
this dilemma, you are now faced with either taking work at a 
noncompensatory rate that doesn't allow you to meet the cost of 
capital for your $15 million tug, for the crew that you provide 
family wages to, or the loss of 75 percent of the business that 
you enjoy in this port. We should not allow that to happen, Mr. 
Garamendi.
    Mr. Garamendi. I very much appreciate your argument. It is 
clear to me--and I think to many members of this committee--
that we have a situation evolving in which oligarchic power is 
in existence and can be used to the detriment of competition, 
pricing, and a competitive environment.
    It seems to me that we need to modify the law, which is now 
almost 30 years old so that we recognize the realities of the 
industry as it exists today. I am particularly troubled by the 
language in the alliance, as Mr. Butler has presented to the 
committee, that allows the alliances to provide amongst 
themselves all the information they need to collude--
independently, but nonetheless, collude, prior to independent 
negotiations. I think that is wrong. I think we need to change 
the law.
    Mr. Allegretti, you have made a specific proposal as to how 
that might be done. I intend to pursue that. We will be writing 
a new authorization for the Coast Guard maritime in the next 
month or so, and it would be my intent to try to address this 
issue by changing the law to require--or to set up a balance 
that would create competition and eliminate collusion. Now, 
that would be my intent.
    And I would appreciate, Mr. Khouri, if you and the FMC 
Commissioners would opine on that, and specifically on the 
language that Mr. Allegretti has proposed.
    Mr. Butler, if you would do the same, it would be very 
helpful.
    I yield back my time.
    Mr. Hunter. I thank the ranking member. So let me just go 
through this really quick. There are three issues here. One is 
firefighting and oil response. The second is the Western Alaska 
Captain of the Port Zone--and let me apologize for Don Young 
not being here. Otherwise, Mr. Custard and Mr. Candito would be 
much more--you would be much more involved. I have been to 
Alaska once when I was 13, I went fishing with my dad. So we 
are going to work on this and be in touch. Then the third is 
the FMC and collusion between shippers, shipping companies.
    So let's start with that one first, and then we will go to 
the oil--fire response. I am just trying to drill down, because 
what the law says is that the FMC is required--it is basically 
you are looking out for consumers. So as long as the rates are 
low, and the stock at Walmart doesn't rise in price because of 
shipping prices, then you are happy, right?
    I mean that is, by law, what you care about. It is--because 
the law doesn't mention ports or tugs or terminals or any of 
that. It just mentions the shipping companies, right? And your 
job is to make sure that those prices stay low for the American 
people.
    Mr. Khouri. It is both price and service. So, you know, 
adequate service to the consuming public is included in that, 
Mr. Chairman.
    Mr. Hunter. And that means the availability of ships to 
export and to import, right?
    Mr. Khouri. Well, yes. But, you know, we do also regulate 
terminals, and they are common--they produce common tariffs, et 
cetera, and they also fall within our jurisdiction. So----
    Mr. Hunter. But when it comes to this case, by law you are 
looking at the availability of the ships to export and import, 
and low prices for the American people.
    Mr. Khouri. To see--as long as there is open competition, 
competition will obtain the best result. Yes, sir.
    Mr. Hunter. OK. So I think, in the end, that is what we are 
going to need to look at changing, if we are to make changes to 
this, so that the law can then prescribe to you that you are 
allowed to take in the interests of the American maritime 
industry, which is why you exist.
    I mean you brought up the FTC, the Department of 
Transportation, the DOJ. I mean if we have all that, then why 
do we really need the FMC? I mean the reason you have an FMC is 
to look after--in my opinion, and I think in the ranking 
member's too--is to look after American interests when it 
concerns the maritime industry.
    Mr. Khouri. I----
    Mr. Hunter. But we are wrong, because that is not what the 
law says. That is just what we want.
    Mr. Khouri. I will be happy to look at that. You know, 
again, the sympathy is with the sentiment that you express.
    If I could just take a second to make sure where we are 
moving from. Mr. Allegretti put together a hypothetical. Not to 
get back down into the weeds, but to be clear, if the 
hypothetical was--that he gave on the record today--was 
presented to us, I could look at my general counsel out there. 
It is 12:20. I bet you he could have an injunction on that 
hypothetical out of the U.S. District Court here in the 
District of Columbia before 5 o'clock today.
    What he described was a very clear abuse of market power. 
So it is not that we don't have power to address those issues 
when presented. So----
    Mr. Hunter. Yes, am I correct, though--am I correct in 
basically saying what the law allows you to do and prescribes 
for the FMC?
    Mr. Khouri. That is correct, sir.
    Mr. Hunter. OK, OK. So that is what we needed to drill down 
on.
    To Admiral, let's get to the response vessel plan, vessel 
response plans. If an oil-carrying rig off of Alaska gave you a 
vessel response plan that was a plan that included vessels of 
opportunity, some of which might not even have oil containment 
or oil-fighting, oil-dispersion capability, would you accept 
that?
    Admiral Thomas. Well, we would look at the plan to ensure 
that it meets, in the case of western Alaska, the alternative 
planning requirements that have been approved. That may include 
some vessels of opportunity that meet some of the 19 functional 
requirements. But we would have--in the case of oil spill 
response, we would have to make sure they meet the requirements 
in one way or the other. It may include vessels of opportunity, 
but, quite honestly, that is the case throughout the U.S., not 
just in western Alaska.
    Mr. Hunter. OK. Let's say in the gulf, where they drill for 
oil, would you be--the Coast Guard would accept vessels of 
opportunity for those oil response plans?
    Admiral Thomas. For the purpose of salvage or oil----
    Mr. Hunter. For the purpose of oil spills, for cleaning it 
up and stopping fires and oil stuff.
    Admiral Thomas. Absolutely. We will look--we verify that an 
OSRO who is listed on a vessel's response plan has the 
capability that is required by the law. If they provide that 
capability through vessels of opportunity, you know, that is 
common.
    Mr. Hunter. OK. So let's go back and make this simple for 
me. You are saying if the vessels of opportunity have the 
correct gear on them to deal with an oil spill, and you verify 
that, then that is acceptable?
    Admiral Thomas. Well, again, there are many different 
functional requirements in the regulations. Mechanical recovery 
of oil is one. Those are specialized vessels, and those would 
have to be, you know, specifically identified, and not 
necessarily used as a vessel opportunity.
    But there are other functional requirements----
    Mr. Hunter. OK, so--but--so let's just stop there. So just 
that 1 out of the 19, that would require the vessel to be a 
specialized vehicle for oil response stuff, right?
    Admiral Thomas. Well, I don't want to confuse the salvage 
and marine firefighting regulations with the oil spill recovery 
regulations. They are both in OPA, but they are----
    Mr. Hunter. Right, but I am--we are not talking fire, we 
are talking oil.
    Admiral Thomas. OK. So the 19 functional requirements are 
specified in the salvage and marine firefighting rules.
    Mr. Hunter. And----
    Admiral Thomas. So the oil spill regulations say you have 
to identify your worst-case discharge and the resources 
required to, you know, respond to that.
    So, for example, there may be a requirement to deploy boom. 
Deployment of boom is not going to require a highly specialized 
vessel, and that is a perfect opportunity for vessels of 
opportunity, particular, for example, vessels that are normally 
in a port working that port to be identified in the plan as the 
resource which will deploy the boom.
    Now, the resource that will conduct mechanical recovery, if 
that is actually required by the plan, is usually a very highly 
specified or highly specialized resource, and that would have 
to be identified, and we would have to confirm that it is 
reasonably available in the timeline required.
    Mr. Hunter. OK, and do you go by--do you look at--those 
vessel response plans on oil spills, do you look at those as 
planning requirements or performance requirements?
    Admiral Thomas. It is a planning requirement, sir. It is a 
worst-case discharge planning requirement, and identify the 
resources that would be required----
    Mr. Hunter. So they can say, ``here is our plan,'' and 
then, when it comes down to it, they don't really have 
anything, but that is OK, because they had it--they had a plan 
for----
    Admiral Thomas. No----
    Mr. Hunter [continuing]. Between performance and planning 
requirements----
    Admiral Thomas. Well, so we require that you provide us a 
plan that meets certain planning factors, and that you identify 
the resources that would be available to meet that plan. The 
difference is, when it actually comes time to deploy those 
things, we don't go out and say, ``Your plan said it would be 
here in 6 hours; it took 7 hours,'' right, because the 
performance didn't meet the plan.
    If it was--in our judgment, when we approved the plan, you 
reasonably identified the resources and had the contracts in 
place to meet the performance requirements. We don't then come 
back and say, well, you know, it was 7 hours because there was 
traffic on I-95.
    Mr. Hunter. So is there a difference in your mind, then--so 
now let's confuse the two, the oil spill and firefighting.
    Admiral Thomas. It is easy to do.
    Mr. Hunter. Right? So what is the difference between the 
requirements, planning, and performance requirements between 
those two? Or do you kind of see those the same way?
    Admiral Thomas. Well, with regard to oil spill response, 
you have to plan for a worst-case discharge from your facility, 
from your vessel, et cetera. And that drives the planning 
requirements, because it says what kind of product am I 
carrying, how much might spill, et cetera.
    With regard to salvage and marine firefighting, you have to 
plan for the 19 functional requirements that are in the 
regulations, things like deep-sea towing, firefighting, you 
know, et cetera, removal--wreck removal.
    Mr. Hunter. So that means, then, that the vessels that you 
choose, they have to have those capabilities, right?
    Admiral Thomas. Yes. Yes, absolutely. In the case--yes.
    Mr. Hunter. Go ahead, Mr. Garamendi.
    Mr. Garamendi. Thank you, Mr. Chairman. If I might, I had a 
meeting, a conversation, about a week ago with this--with the 
response organization for San Francisco Bay. And they had 
completed, within the last month or so, a drill in which they 
tested the response for an oil spill and a fire within the bay.
    I think that is, if I recall from my experience as head of 
the State Lands Commission in California, that is uniform 
throughout the ports and some of the coast of California. As 
you get into the more remote areas, I don't think that is the 
case. But they do have a response plan, and they do exercise on 
a regular basis that response program. So I think it goes to 
the issue of both the plan and the capabilities.
    Now, I can't speak for anywhere outside of the ports of 
California which I am familiar with that happening. And I think 
the question that we are trying to get to here is that--is it 
in other parts of the marine environment subject to American 
control sufficient planning and then response as a result of 
that planning? And does the Coast Guard have the capability of 
having some reasonable level of assurance that it does exist? 
Admiral?
    Admiral Thomas. So the regulatory requirements are 
consistent, you know, throughout the U.S., and including in 
western Alaska. And that includes the requirements for the 
planholders to conduct exercises like those that you have had 
the opportunity to observe.
    The Coast Guard will oversee those exercises when our 
resources permit. But the fact remains that the responsibility 
to comply with that portion, with the exercise portion of the 
regulation, remains with the regulated entity, or the 
planholder. That includes both facilities and vessels. And that 
is a uniform requirement.
    The question about whether or not the Coast Guard uniformly 
verifies compliance with both the exercise requirement and 
whether or not we uniformly verify compliance with the 
availability of the identified resources, absolutely, we are 
resource-constrained in our ability to do that. And we are also 
constrained in some ways by some legal requirements. But we are 
working hard to work our way around the country right now and 
complete those verifications.
    Mr. Garamendi. I appreciate that. And my last 30 seconds 
here--because I think I know I have to go--I share the concerns 
with Mr. Young about what is happening in Alaska, and the way 
in which the western zone has been divided up, and the effect 
that that would have on providing services in those areas that 
are not directly related to the Prince William Sound. So, I 
will let it go at that, share that comment with you.
    For those I said specifically--I asked specifically for 
three people to respond to Mr. Allegretti's point, and anybody 
else that wants to chime in, here we are. I look forward to 
that.
    Mr. Chairman, a most useful committee hearing. Thank you so 
much.
    Mr. Hunter. I thank the ranking member. And we will--this 
has been a marathon sitting here, so we will finish really 
quickly. I just--back to the firefighting response stuff.
    Admiral, I just read--John showed me the 155.4030(b). You 
do put in there--you have timeframes, right? You say you have 
to have fire suppression, do on-site assessment, and then you 
have timeframes for inside of 12 miles or inside of 50 miles, 
and you have to have external vessel firefighting systems and 
external firefighting teams, right? That is what you--that is 
what is in--that is Coast Guard regulation, right?
    Admiral Thomas. Yes, sir.
    Mr. Hunter. OK. So when you established that, what was--
just walk me through this. So you have that. Then you say, 
``However, if you don't have that, and just have a good plan,'' 
and you list vessels of opportunity that may or may not have 
this capability, that may or may not be able to meet this 
timeframe, walk me through--then that is OK, because it is just 
for planning purposes, and it is not oil spill stuff, it is 
just a fire.
    Admiral Thomas. So I will try to clarify, Congressman. I am 
sorry that I confused this issue.
    When we review a plan, we review the plan to ensure that 
they have made provisions--the contract or otherwise--for the 
resources that are required by the regulation and the response 
times that are required by the regulations.
    In other words, their plan says, ``Here is how I meet that 
6-hour requirement for firefighting, and here is who is going 
to provide that service for me,'' and we review the plan, we do 
what we can to establish that these arrangements are, in fact, 
true. And in the case of salvage and marine firefighting, most 
of those come through the four big agreements that are out 
there.
    And then, so that is how we approve the plan. So it--we do 
make sure that they have, in fact, identified a vessel that can 
fight fire.
    Mr. Schauer. Chairman?
    Mr. Hunter. Yes, please.
    Mr. Schauer. Thank you, Chairman. Just to clarify how--now 
we are operational guys. A fire is fought in a certain way. The 
way we look at it, similar to oil spill response, we use 
specialized equipment. We can't part--because we can't afford 
200 fire boats everywhere, it would--cost prohibitive--we take 
specialized equipment, portable equipment, large-capacity 
pumps, large-capacity monitors, storages of foam, we put them 
in depots around the country, 25 depots. We have a big fire 
offshore? OK. We have the specialized people and equipment to 
do the fire. We just need something to transport it out there. 
OK?
    We need--and the problem that is being presented is that it 
is trying to do two things at once. Carrying passengers and 
being set up to handle a big fire are two different things. 
Carrying the people offshore, that is taxicab service, OK? Not 
a big deal. We are concerned about, when we get there, having 
assets--taking those big pumps, big monitors--we can put remote 
monitors on top of the wheel houses of big tug boats, big 
offshore supply vessels, and direct the foam and water on the 
fire. That is effective operational response.
    So it is not about just one little taxicab with a fire 
pump. It is about the system we use. And that is how we do it, 
that is how we do it cost effectively, with the portable 
specialized equipment loaded on vessels of opportunity.
    Mr. Hunter. Mr. Nedeau, go ahead.
    Mr. Nedeau. If I could comment, I think that the question 
that you posed is a very, very good one, and I want to go back 
to something you said earlier. You were concerned that it took 
4 days to put out the fire on the Grey Shark. I should point 
out that it also took 4 days to put out the fire on the 
Caribbean Fantasy. That fire broke out within 2 nautical miles 
of the pierheads in San Juan, and the San Juan Fire Department 
put that fire out, as well.
    I think, if you go back to the transcript of the hearings 
that were held in San Juan with the National Transportation 
Safety Board and the Coast Guard, you will find that the 
firefighting response was wholly inadequate. I cited in my 
comments that the Coast Guard has already concluded it was not 
compliant. And the reason it is not compliant is, again, 
relying on a vessel of opportunity works in some instances. 
However, in this instance, if your plan cites certain vessels 
of opportunity to respond, and they do not--they are transient, 
and they are not in the captain of the port zone, for example, 
then you do not have an adequate plan, from my perspective.
    And my criticism of the Coast Guard is they haven't gone 
back to verify that a vessel entering a harbor--let's say 
Charleston--lists 30 vessels as its vessels of opportunity to 
respond, however none of those are located within the captain 
of the port zone. I do not think that is an adequate plan. And 
because the Coast Guard, as Admiral Thomas has pointed out, 
lacks the resources to do this type of verification, we have, 
time and time again, instances where the resources simply 
aren't available.
    We bring spent plutonium into Charleston under the MOX 
Treaty. In that instance, you would think that we would have at 
least a dedicated resource or ensure that resources are within 
the captain of the port zone to address that, in the event of a 
fire. And I am surprised that the Coast Guard has not taken it 
upon themselves to review our alternative planning criteria, 
where we do propose to provide a high-speed fire boat.
    Mr. Schauer is correct. The high-speed fire boats that we 
have proposed in the 20 largest ports in the United States 
would not necessarily put the fire out. We need the salvage 
community, we need them to bring those heavy assets. But to 
meet the response requirements in these strict timeframes that 
you alluded to, Chairman, that would require a high-speed, 
special-purpose fire boat, which we have proposed to provide in 
the 20 largest ports in the United States. Thank you.
    Mr. Hunter. Admiral, so let's end with you on this. What 
is--I guess put it this way. Is the Coast Guard happy with the 
way that things are? Because there is a clear delineation 
between what you require for oil spills, which might kill some 
fish, and fires, which may kill some people. I guess that is 
what I am trying to get to, because you require all this stuff 
for oil spills, because we all love the climate and it is--you 
know, the ocean is great.
    But when it comes to people, you require whatever could be 
available at any--whatever is available, basically. And you do 
make that difference.
    Admiral Thomas. Sir, I think the Coast Guard would like to 
see more robust response capability around our Nation for both 
oil and salvage and marine firefighting. And it is clear that 
the congressional intent, when we were directed to implement 
the regulations, was to build that capacity.
    Mr. Hunter. The author of the regulation is here, by the 
way.
    Admiral Thomas. And I would say that we are achieving that 
goal. Probably not as fast as some in this room would like to 
see.
    The Coast Guard, as you know, is constantly in the position 
of balancing the need to ensure that ships can continue to move 
in and out our ports, and that we raise the bar with regard to 
safety and environment, et cetera. This is a case where our 
measured implementation and our measured compliance or 
enforcement is helping to build the capacity envisioned by 
Congress. But we can't turn it on overnight.
    In the case of the Fast Response Boats, there is nothing in 
our regulation or in the law that prevents them from entering 
the market, from offering that service to a regulated entity--
in this case a ship operator. What they are asking us to do, 
essentially, is to require that product be purchased by a 
regulated entity.
    And we may, in fact, get to that point if, in the course of 
our verification, we determine that the salvage assets that are 
out there really don't meet the national planning criteria and 
so, as requested, we are going to lower those criteria in a way 
that then would allow the regulated ship--planholders to meet--
to be in compliance by purchasing this substitute service. But 
we haven't gotten there yet, sir.
    Mr. Hunter. Tell me. But why do you differentiate between 
oil spills and fires on ships in the types of vessels, the 
specialized vessels that you require to be on hand, on stand-
by?
    Admiral Thomas. I think that the type of assets that are 
required for oil spills are different. The regulatory regimes 
were put in place on different timelines. The industries 
matured differently. In fact, it is one of the reasons why the 
salvage industry was so anxious to get these regulations in 
place, because they saw what OPA did, in terms of our national 
capacity to respond to oil spills, and thought that that is 
what the Nation needs for other contingencies, as well.
    Mr. Hunter. Yes, sir?
    Mr. Schauer. Chairman, just maybe a quick clarification. 
Salvage and firefighting, 19 different services, it is wholly 
different than responding to an oil spill. Responding to an oil 
spill is pretty--we all pretty much understand what you do. You 
contain it and you skim it out of the water. You could have a--
you know, for salvage and firefighting, it is any manner of 
casualties. I described some of them. It could be fires, 
explosions, sinking vessels, fuel underwater, removing the 
wreck, even big, heavy-lift assets.
    So it is--the diversification of what we have to do is so 
large, that it is not really comparable, because it is--oil 
spill you can pretty much focus down on what you need and, OK, 
we will dedicate most of them. It is too big. It is too big a 
problem. And it is--we are trying to meet it by best use of 
specialized assets versus--alongside of the vessels of 
opportunity.
    Mr. Hunter. So I guess, getting down to it, why--the last 
question. The really, really last question. Why do you have 
these in there, the planning standards, if there is no real 
requirement for someone to perform to them?
    Admiral Thomas. Well, sir, the way the regulation is 
construed is--or constructed is to require--or is intended to 
build our--a capacity to respond by requiring the regulated 
entity--in this case, mostly foreign vessel operators--to 
contract with service providers. It is not intended to regulate 
those service providers.
    In other words, we are not going to go after the salvor and 
say, ``You said you would be there in 6 hours, you didn't get 
here. Here is your ticket.''
    Mr. Hunter. I understand.
    Admiral Thomas. So I think that is a key difference. But, 
really, what this boils down to, sir, is our capability to get 
out there and verify with some degree of robustness that the 
capability identified by the regulated entity actually exists. 
And if it doesn't, to hold them, the planholder, the ship 
operator, responsible. But we have to do that in a way, sir, 
that doesn't all the sudden stop vessel traffic in the U.S. And 
I think that is why you are seeing a measured approach to our 
verification.
    And then we will come up with the best solution, in terms 
of how to build the capacity intended by the regulation. It 
might be an alternative planning criteria. But, quite honestly, 
that would lower the national standard. I am not sure why we 
would want to do that. But we are in the course of really 
working through those issues.
    Mr. Hunter. Why--I mean every ship that goes out is 
insured. Why don't--in your opinions, why don't the insurers 
require that planning criteria really be performance criteria 
to save your asset?
    Admiral Thomas. I think one of the reasons--and I think 
that most of the panel members here would agree--is because the 
Coast Guard has not been aggressively the compliance----
    Mr. Hunter. But just in the marketplace why don't they 
care, the insurers?
    Admiral Thomas. I can't answer that question, sir. 
Certainly I know they begin to care when the Coast Guard begins 
to hurt them by holding their ship up, et cetera. And that is 
what aggressive enforcement will do.
    Mr. Hunter. OK. I think that is it for me. Everybody, thank 
you very much. Thanks for being here, and thanks for your 
patience.
    The hearing is adjourned.
    [Whereupon, at 12:39 p.m., the subcommittee was adjourned.]
    
    

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