[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]


   REVIEW OF FISCAL YEAR 2020 BUDGET REQUEST FOR THE COAST GUARD AND 
                    MARITIME TRANSPORTATION PROGRAMS

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

                                (116-17)

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                COAST GUARD AND MARITIME TRANSPORTATION

                                 OF THE

                              COMMITTEE ON
                   TRANSPORTATION AND INFRASTRUCTURE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 21, 2019

                               __________

                       Printed for the use of the
             Committee on Transportation and Infrastructure

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     Available online at: https://www.govinfo.gov/committee/house-
     transportation?path=/browsecommittee/chamber/house/committee/
                             transportation
                             
                              __________
                               

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
38-024 PDF                  WASHINGTON : 2019                     
          
--------------------------------------------------------------------------------------                             
                             
                             
                             
             COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

                    PETER A. DeFAZIO, Oregon, Chair
ELEANOR HOLMES NORTON,               SAM GRAVES, Missouri
  District of Columbia               DON YOUNG, Alaska
EDDIE BERNICE JOHNSON, Texas         ERIC A. ``RICK'' CRAWFORD, 
ELIJAH E. CUMMINGS, Maryland             Arkansas
RICK LARSEN, Washington              BOB GIBBS, Ohio
GRACE F. NAPOLITANO, California      DANIEL WEBSTER, Florida
DANIEL LIPINSKI, Illinois            THOMAS MASSIE, Kentucky
STEVE COHEN, Tennessee               MARK MEADOWS, North Carolina
ALBIO SIRES, New Jersey              SCOTT PERRY, Pennsylvania
JOHN GARAMENDI, California           RODNEY DAVIS, Illinois
HENRY C. ``HANK'' JOHNSON, Jr.,      ROB WOODALL, Georgia
    Georgia                          JOHN KATKO, New York
ANDRE CARSON, Indiana                BRIAN BABIN, Texas
DINA TITUS, Nevada                   GARRET GRAVES, Louisiana
SEAN PATRICK MALONEY, New York       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
MARK DeSAULNIER, California          PAUL MITCHELL, Michigan
STACEY E. PLASKETT, Virgin Islands   BRIAN J. MAST, Florida
STEPHEN F. LYNCH, Massachusetts      MIKE GALLAGHER, Wisconsin
SALUD O. CARBAJAL, California, Vice  GARY J. PALMER, Alabama
    Chair                            BRIAN K. FITZPATRICK, Pennsylvania
ANTHONY G. BROWN, Maryland           JENNIFFER GONZALEZ-COLON,
ADRIANO ESPAILLAT, New York            Puerto Rico
TOM MALINOWSKI, New Jersey           TROY BALDERSON, Ohio
GREG STANTON, Arizona                ROSS SPANO, Florida
DEBBIE MUCARSEL-POWELL, Florida      PETE STAUBER, Minnesota
LIZZIE FLETCHER, Texas               CAROL D. MILLER, West Virginia
COLIN Z. ALLRED, Texas               GREG PENCE, Indiana
SHARICE DAVIDS, Kansas
ABBY FINKENAUER, Iowa
JESUS G. ``CHUY'' GARCIA, Illinois
ANTONIO DELGADO, New York
CHRIS PAPPAS, New Hampshire
ANGIE CRAIG, Minnesota
HARLEY ROUDA, California
                                ------                                7

        Subcommittee on Coast Guard and Maritime Transportation

                 SEAN PATRICK MALONEY, New York, Chair
ELIJAH E. CUMMINGS, Maryland         BOB GIBBS, Ohio
RICK LARSEN, Washington              DON YOUNG, Alaska
STACEY E. PLASKETT, Virgin Islands   RANDY K. WEBER, Sr., Texas
JOHN GARAMENDI, California           BRIAN J. MAST, Florida
ALAN S. LOWENTHAL, California        MIKE GALLAGHER, Wisconsin
ANTHONY G. BROWN, Maryland           CAROL D. MILLER, West Virginia
CHRIS PAPPAS, New Hampshire, Vice    SAM GRAVES, Missouri (Ex Officio)
    Chair
PETER A. DeFAZIO, Oregon (Ex 
    Officio)
                                CONTENTS

                                                                   Page

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

                   STATEMENTS OF MEMBERS OF CONGRESS

Hon. Sean Patrick Maloney, a Representative in Congress from the 
  State of New York, and Chair, Subcommittee on Coast Guard and 
  Maritime Transportation:

    Opening statement............................................     1
    Prepared statement...........................................     2
Hon. Bob Gibbs, a Representative in Congress from the State of 
  Ohio, and Ranking Member, Subcommittee on Coast Guard and 
  Maritime Transportation:

    Opening statement............................................     3
    Prepared statement...........................................     4
Hon. Peter A. DeFazio, a Representative in Congress from the 
  State of Oregon, and Chair, Committee on Transportation and 
  Infrastructure:

    Opening statement............................................     5
    Prepared statement...........................................     6
Hon. Sam Graves, a Representative in Congress from the State of 
  Missouri, and Ranking Member, Committee on Transportation and 
  Infrastructure, prepared statement.............................    57

                               WITNESSES

Admiral Karl L. Schultz, Commandant, U.S. Coast Guard:

    Oral statement...............................................     7
    Prepared statement...........................................     9
Master Chief Jason M. Vanderhaden, Master Chief Petty Officer of 
  the Coast Guard, U.S. Coast Guard, oral statement \\...    15
Rear Admiral Mark H. Buzby, U.S. Navy (Ret.), Administrator, 
  Maritime Administration:

    Oral statement...............................................    16
    Prepared statement...........................................    17
Hon. Michael A. Khouri, Chairman, Federal Maritime Commission:

    Oral statement...............................................    21
    Prepared statement...........................................    22

                                APPENDIX

Questions from Hon. Rick Larsen for Admiral Karl L. Schultz, 
  Commandant, U.S. Coast Guard...................................    59
Questions from Hon. Mike Gallagher for Admiral Karl L. Schultz, 
  Commandant, U.S. Coast Guard...................................    59
Questions from Hon. Anthony G. Brown for Rear Admiral Mark H. 
  Buzby, U.S. Navy (Ret.), Administrator, Maritime Administration    60

----------
\\ Master Chief Jason M. Vanderhaden did not submit a prepared 
statement for the record.



                              May 17, 2019

    SUMMARY OF SUBJECT MATTER

    TO:       Members, Subcommittee on Coast Guard and Maritime 
Transportation
    FROM:   Staff, Subcommittee on Coast Guard and Maritime 
Transportation
    RE:       Hearing on ``Review of Fiscal Year 2020 Budget 
Request for the Coast Guard and Maritime Transportation 
Programs''

                                PURPOSE

    The Subcommittee on Coast Guard and Maritime Transportation 
will hold a hearing on Wednesday, May 21, 2019, at 10:00 a.m. 
in 2167 Rayburn House Office Building to examine fiscal year 
(FY) 2020 budget requests for the Coast Guard and Maritime 
Transportation Programs. The Subcommittee will hear testimony 
from the U.S. Coast Guard (Coast Guard or Service), the Federal 
Maritime Commission (Commission or FMC), and the Maritime 
Administration (MARAD).

                               BACKGROUND

COAST GUARD

    The Coast Guard was established on January 28, 1915, 
through the consolidation of the Revenue Cutter Service 
(established in 1790) and the Lifesaving Service (established 
in 1848). The Coast Guard later assumed the duties of three 
other agencies: the Lighthouse Service (established in 1789), 
the Steamboat Inspection Service (established in 1838), and the 
Bureau of Navigation (established in 1884).
    Under Section 102 of Title 14, United States Code, the 
Coast Guard has primary responsibility to enforce or assist in 
the enforcement of all applicable federal laws on, under, and 
over the high seas and waters subject to the jurisdiction of 
the United States; to ensure safety of life and property at 
sea; to carry out domestic and international icebreaking 
activities; and, as one of the five armed forces of the United 
States, to maintain defense readiness to operate as a 
specialized service in the Navy upon the declaration of war or 
when the President directs.
    The Coast Guard is directed by a Commandant, who is 
appointed by the President with the advice and consent of the 
Senate to a four-year term. Admiral Karl Schultz was sworn in 
as the 26th Commandant of the Coast Guard in June 2018.

    Coast Guard FY 2019 Enacted to FY 2020 President's Budget Request
                               Comparison
                         (Dollars in Thousands)
------------------------------------------------------------------------
                                                                % Diff.
                                                  Diff. Bet.    Bet. FY
                                      FY 2020       FY 2020      2020
       Program          FY 2019     President's     Budget      Budget
                        Enacted   Budget Request   Request &   Request &
                                                    FY 2019     FY 2019
                                                    Enacted     Enacted
------------------------------------------------------------------------
Operations & Support  $7,643,201  $7,858,900      $215,699    2.8%
 (O&S)
------------------------------------------------------------------------
Overseas Contingency  $163,000    $-              $(163,000)  -100.0%
 Operations \1\
 (OCO)
------------------------------------------------------------------------
Environmental         $13,469     $13,495         $26         0.2%
 Compliance &
 Restoration (EC&R)
------------------------------------------------------------------------
Medicare-Eligible     $199,360    $205,107        $5,747      2.9%
 Retiree Health Care
 Fund (MERHCF)
------------------------------------------------------------------------
Procurement,          $2,248,260  $1,234,656      $(1,013,60  -45.1%
 Construction &                                    4)
 Improvements (PC&I)
------------------------------------------------------------------------
Research &            $20,256     $4,949          $(15,307)   -75.6%
 Development \2\
 (R&D)
========================================================================
  Subtotal,           $10,287,54  $9,317,107      $(970,439)  -9.4%
   Discretionary       6
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
Retired Pay           $1,739,844  $1,802,309      $62,465     3.6%
------------------------------------------------------------------------
State Boating Safety  $114,682    $116,700        $2,018      1.8%
 Grants
------------------------------------------------------------------------
Maritime Oil Spill    $101,000    $101,000        $-          0.0%
 Program
------------------------------------------------------------------------
General Gift Funds    $2,864      $2,864          $-          0.0%
========================================================================
  Subtotal,           $1,958,390  $2,022,873      $64,483     3.3%
   Mandatory

    Total             $12,245,93  $11,339,980     $(905,956)  -7.4%
                       6
------------------------------------------------------------------------

The chart above compares the FY 2020 budget request to the FY 
2019 enacted funding level.
---------------------------------------------------------------------------
    \1\ Coast Guard OCO funding is historically requested in the Navy's 
request but appropriated directly to the Coast Guard.
    \2\ The FY 2020 reduction to R&D funding is due to the transfer of 
personnel costs to the O&S account. There is no actual reduction.

---------------------------------------------------------------------------
Fiscal Year 2020 Coast Guard Budget Request

    The President requests $11.34 billion in FY 2020 for the 
activities of the Coast Guard, including $9.32 billion in 
discretionary funding. The Coast Guard Authorization Act of 
2018 (Pub. L. 115-282) authorizes $10.6 billion in 
discretionary funds for the Coast Guard in FY 2019, $370 
million (or 4 percent) more than the current FY 2019 enacted 
level of $10.27 billion, and $1.32 billion (or 13 percent) 
greater than the FY 2020 requested level in the President's 
Budget. This amount does not include a transfer of 
approximately $160 million in funding to the Coast Guard from 
the Department of Defense (DoD) Overseas Contingency Operations 
(OCO) account. The transfer of those funds would support the 
ongoing deployment of six 110-foot Coast Guard Patrol Boats 
conducting national defense and port and waterways security 
operations in the Persian Gulf.
    In FY 2019, the Coast Guard transitioned to the Department 
of Homeland Security (DHS) Common Appropriations Structure 
(CAS). Accordingly, activities funded through the previous 
Operating Expenses, Reserve Training, Environmental Compliance 
and Restoration, and Medicare-Eligible Retiree Health Care Fund 
Contribution were included as part of the new Operations and 
Support (O&S) account in FY 2019. In addition, acquisition 
personnel costs previously funded through the Acquisition, 
Construction, and Improvements account are included as part of 
the O&S account. The Acquisition, Construction, and 
Improvements account transitioned to the Procurement, 
Construction, and Improvements account and the Research, 
Development, Test and Evaluation account became the new 
Research and Development account.

Operations and Support (previously Operating Expenses)

    The President's budget requests $7.86 billion for the O&S 
account in FY 2020, $51 million (or 0.7 percent) more than the 
FY 2019 enacted level.\3\ The O&S account supports the day-to-
day activities of the Coast Guard including administrative 
expenses, support costs, travel, lease payments, and the 
operation and maintenance of infrastructure and assets. The O&S 
account also funds personnel compensation and benefits for the 
Service's approximately 41,000 active duty military members, 
7,500 reservists, and 8,500 civilian employees.
---------------------------------------------------------------------------
    \3\ For this calculation, the FY 2019 O&S and OCO levels are 
combined.
---------------------------------------------------------------------------
    The O&S budget includes increases in funding to cover 
follow-on costs for the operation and maintenance of newly 
acquired assets and technology and increases in other 
administrative expenses. The request includes a $342 million 
increase from the FY 2019 enacted level to cover the cost of 
the 2020 military pay raise (2.6 percent), as well as expanded 
military benefits enabling Coast Guard servicemembers to 
maintain parity with benefits received by DoD servicemembers, 
operational adjustments, and operating and maintenance funds 
for new assets.
    O&S increases are offset by $120 million in cuts derived 
through decommissioning certain assets, information technology 
streamlining, and the termination of one-time costs. The 
proposed reductions in the O&S account include:
      Asset Decommissionings: The FY 2020 budget 
proposes to decommission four HC-130H aircrafts, which are 
being replaced by the new HC-130J aircrafts. The Coast Guard 
estimates these decommissionings will save $16.2 million in FY 
2020 through increased fuel efficiency. The Coast Guard is also 
in the process of decommissioning a High-Endurance Cutter 
(WHEC) for $9.3 million and three 110-foot Patrol Boats for 
$2.6 million.
      Information Technology Streamlining: The FY 2020 
budget proposes consolidating enterprise services, including 
replacing contractors at the Command, Control, Communications, 
Computers, and Information Technology (C4IT) Service Center 
with government full time employees (FTEs). The Coast Guard 
estimates this insourcing will save $3.7 million in FY 2020.
      Termination of One-Time Costs: The FY 2020 budget 
request proposes a $32.1 million savings associated with the 
termination of one-time costs for program start-up and exit 
transactions in FY 2019, including the termination of CG 
Aircraft FAA Compliance and Obsolete Equipment Replacement 
($20.2 million) and National Security Cutter and Fast Response 
Cutter Follow-On ($5.4 million).

Environmental Compliance and Restoration (EC&R)

    The President requests $13.5 million for the EC&R in FY 
2020, $98,000 (or 0.73 percent) more than the FY 2019 enacted 
level. The EC&R funding provides for the clean-up and 
restoration of contaminated Coast Guard facilities, as well as 
for the remediation of Coast Guard assets to ensure they are 
safe to operate or can be decommissioned in compliance with 
environmental laws.
    The Coast Guard plans to use the $13.5 million requested 
for EC&R to pay for continued long-term monitoring at 24 sites 
and begins or continues investigation/remediation site work at 
7 sites.

Procurement, Construction, and Improvements

    The President requests $1.23 billion for the Procurement, 
Construction, and Improvements (PC&I) account, a $1.01 billion 
(or 45.1 percent) decrease over the FY 2019 enacted level. The 
PC&I account funds the acquisition, procurement, construction, 
rebuilding, and physical improvements of Coast Guard owned and 
operated vessels, aircraft, facilities, aids-to-navigation, 
communications and information technology systems, and related 
equipment.
    The FY 2020 budget request includes $1.18 billion for the 
acquisition of aircraft, vessels, and the continued build-out 
of Command, Control, Communications, Computer, Intelligence, 
Surveillance, and Reconnaissance (C4ISR) systems. This 
represents a decrease of $912.3 million (or 55.4 percent) from 
the FY 2019 enacted level. Specifically, the budget request 
includes:
      $35 million for long-lead time materials for the 
second heavy icebreaker, now referred to as Polar Security 
Cutter (PSC). The joint Coast Guard and Navy Polar Security 
Cutter Integrated Program Office (IPO) recently awarded the 
contract for the construction of the Nation's first PSC in more 
than 40 years to VT Halter of Mississippi;
      $60 million to conduct Post Delivery Activities 
on National Security Cutters (NSC) 7 through 11;
      $140 million for the production of two Fast 
Response Cutters (FRC), hulls 53 and 54 of the planned 58 hull 
program of record;
      $457 million for the construction of the third 
Offshore Patrol Cutter (OPC) and scope acquisition of Long Lead 
Time Materials for OPCs 4 and 5. OPCs will replace the 
Service's aging 210-foot and 270-foot Medium Endurance Cutters 
(MEC);
      $103 million to support the ongoing HC-27J 
aircraft conversion project. The request funds HC-27J non-
recurring engineering required to support aircraft 
missionization and cockpit modernization, in addition to low-
rate initial production of missionized aircraft;
      $50 million for the continued modernization and 
sustainment of the HH-65 helicopter fleet;
      $25.2 million for C4ISR design, development, and 
integration; and
      No funding for the Alteration of Bridges program 
in FY 2020. The program last received funding in FY 2010. 
Established by the Truman-Hobbs Act of 1940 (33 U.S.C. 511 et. 
seq.), the Alteration of Bridges program authorizes the Coast 
Guard to share with a bridge's owner the cost of altering or 
removing privately or publicly owned railroad and highway 
bridges that are determined by the Service to obstruct marine 
navigation.
    The budget requests $173.6 million to construct or renovate 
shore facilities and aids-to-navigation. This request is an $81 
million (or 31.9 percent) decrease from the FY 2019 enacted 
level. The Coast Guard currently has a backlog of 125 
prioritized shore facility improvement projects with an 
estimated combined cost of over $1.7 billion; GAO estimates 
that the projects without cost estimates raise that value to 
above $2.6 billion.\4\
---------------------------------------------------------------------------
    \4\ GAO, COAST GUARD SHORE INFRASTRUCTURE: Applying Leading 
Practices Could Help Better Manage Project Backlogs of At Least $2.6 
Billion, GAO-19-82 [https://www.gao.gov/assets/700/697012.pdf], 
February 21, 2019.

Research and Development (previously Research, Development, 
---------------------------------------------------------------------------
Test, and Evaluation)

    The President requests $4.95 million in FY 2020 for the 
Coast Guard's Research and Development (R&D) account, $15.3 
million (or 75.6 percent) less than the FY 2019 enacted level. 
The reduction is due to the shifting of R&D personnel costs to 
the O&S account; it does not reflect a reduction in program 
costs. The R&D account supports improved mission performance 
for the Service's 11 statutory missions through applied 
research and development of new technology and methods.
    The Coast Guard intends to use the $4.95 million in FY 2020 
for programs to develop, test, and evaluate systems that 
improve operational presence and response, including supporting 
unmanned aircraft system (UAS) prototypes, continuing 
development and testing of the next generation Arctic 
navigation safety information system, evaluating emerging 
maritime oil spill response technology, and evaluating existing 
cybersecurity tools for critical port infrastructure protection 
and resilience.

FEDERAL MARITIME COMMISSION

    The Federal Maritime Commission (FMC or Commission) was 
established in 1961 as an independent agency that regulates 
oceanborne transportation in the foreign commerce of the United 
States. The FMC protects shippers and carriers from restrictive 
or unfair practices of foreign-flagged carrier alliances. The 
FMC also enforces laws related to cruise vessel financial 
responsibility, to ensure cruise vessel operators have 
sufficient resources to pay judgments to passengers for 
personal injury or death or for nonperformance of a voyage.
    The FMC is composed of five Commissioners appointed for 
five-year terms by the President with the advice and consent of 
the Senate. Michael A. Khouri was designated Chairman of the 
Commission by the President in March, 2019.

  FMC FY 2019 Enacted to FY 2020 President's Budget Request Comparison
                         (Dollars in Thousands)
------------------------------------------------------------------------
                                                                % Diff.
                                                  Diff. Bet.    Bet. FY
                        FY 2019       FY 2020       FY 2020      2020
       Account          Enacted     President's    Request &   Request &
                                  Budget Request    FY 2019     FY 2019
                                                    Enacted     Enacted
------------------------------------------------------------------------
Inspector General     $441        $487            $46         10.43%
------------------------------------------------------------------------
Operational and       $27,049     $27,513         $464        1.72%
 Administrative
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
  Total               $27,490     $28,000         $510        1.86%
------------------------------------------------------------------------

    The President requests $28 million in FY 2020 for the 
activities of the FMC, $510,000 (or 1.86 percent) more than the 
FY 2019 enacted level.

MARITIME ADMINISTRATION

    The Maritime Administration (MARAD) was established in 
1950. It administers financial programs to build, promote, and 
operate the U.S. flag fleet; manages the disposal of federal 
government-owned vessels; regulates the transfer of U.S. 
documented vessels to foreign registries; maintains a reserve 
fleet of federal government-owned vessels essential for 
national defense; operates the U.S. Merchant Marine Academy; 
and administers a grant-in-aid program for state operated 
maritime academies. Rear Admiral Mark H. Buzby, USN, (Ret.) has 
served as MARAD Administrator since August 2017.

Fiscal Year 2020 MARAD Budget Request


 MARAD FY 2019 Enacted to FY 2020 President's Budget Request Comparison
                         (Dollars in Thousands)
------------------------------------------------------------------------
                                                                % Diff.
                                                  Diff. Bet.    Bet. FY
                        FY 2019       FY 2020       FY 2020      2020
       Account          Enacted     President's    Request &   Request &
                                  Budget Request    FY 2019     FY 2019
                                                    Enacted     Enacted
------------------------------------------------------------------------
Operations and        $149,442    $377,497        $228,055    152.60%
 Training
------------------------------------------------------------------------
Assistance to Small   $20,000     $0              -$20,000    -100.00%
 Shipyards
------------------------------------------------------------------------
Ship Disposal         $5,000      $5,000          $0          0.00%
 Program
------------------------------------------------------------------------
Maritime Security     $300,000    $300,000        $0          0.00%
 Program
------------------------------------------------------------------------
Title XI--            $3,000      $0              ($3,000)    -100.00%
 Administrative
 Expenses
------------------------------------------------------------------------
Title XI--Loan        $0          $0              $0          0%
 Guarantees
------------------------------------------------------------------------
State Maritime        $345,200    $0              ($345,200)  -100%
 Academy Operations
 \5\
------------------------------------------------------------------------
Port Infrastructure   $292,730    $0              ($292,730)  -100%
 Program
========================================================================
  Total               $1,115,372  $682,497        -$432,875   -38.81%
------------------------------------------------------------------------

    The President requests $682.5 million in FY 2020 for the 
activities of MARAD, $432.8 million (or 39 percent) less than 
the FY 2019 enacted level.
---------------------------------------------------------------------------
    \5\ The FY 2020 budget request for O&T also includes $81.9 million 
for the U.S. Merchant Marine Academy, including $77.9 million for 
Academy Operations; $4 million for capital improvements, repairs, and 
maintenance; $242.4 million for the six state maritime academies, 
including $30.8 million for School Ship Maintenance and Repair; and, 
$53.3 million for MARAD Operations and Programs. The Merchant Marine 
Academy is under jurisdiction of the House Committee on Armed Services.

---------------------------------------------------------------------------
Operations and Training

    The President's FY 2020 request of $135.2 million for 
Operations and Training (O&T) is $14.2 million less than the FY 
2019 enacted level of $149.4 million. O&T funds the salaries 
and expenses for each of MARAD's programs, the operation, 
maintenance, and capital improvements to the U.S. Merchant 
Marine Academy, and financial assistance to the six state 
maritime academies.
    MARAD's budget does not include funding for the:
      Marine Highways Grant Program,
      Recapitalization of the State Maritime Academy 
training vessels,
      Port Infrastructure Development Grant Program
      Assistance to Small Shipyards Grant Program, or
      Title XI Loan Guarantees.

Assistance to Small Shipyards

    The Assistance to Small Shipyards Grant Program provides 
capital grants to small privately owned shipyards to expand and 
modernize shipbuilding capacity, efficiency, and 
competitiveness. Grant requests routinely exceed available 
funds. The program received $20 million in FY 2019 and is 
reauthorized through fiscal year 2020 at $35 million per year 
in the National Defense Authorization Act for Fiscal Year 2018 
(P.L. 115-91).

Ship Disposal

    The FY 2020 budget requests $5 million for the Ship 
Disposal Program, the same level as was enacted for FY 2019. 
The program provides for the proper disposal of obsolete 
government-owned merchant ships maintained by MARAD in the 
National Defense Reserve Fleet. This request includes $3 
million to maintain the Nuclear Ship SAVANNAH in protective 
storage according to Nuclear Regulatory Commission license 
requirements, while decommissioning of the vessel's defueled 
nuclear reactor, components, and equipment is in progress. The 
remaining $2 million is requested for program support, 
including salaries and overhead. MARAD is not expected to 
dispose of any more than two of the remaining eight non-
retention vessels in the National Defense Reserve Fleet due to 
low prices in the scrap metal market. The National Defense 
Reserve Fleet is under jurisdiction of the House Committee on 
Armed Services.

Maritime Security Program

    The FY 2020 budget requests $300 million for the Maritime 
Security Program (MSP), the same as was enacted for FY 2019. 
Under this program, $300 million in direct payments are 
allocated among up to 60 U.S. flagged vessel operators engaged 
in foreign trade. MSP vessel operators are required to keep 
their vessels in active commercial service and provide 
intermodal sealift support to the DoD in times of war or 
national emergency. This budget request enables vessel 
operators to remain active and available for service. 
Allocating less than $300 million annually allows U.S. vessels 
to exit the program without penalty, and likely also leave the 
U.S. flag registry. The MSP is under jurisdiction of the House 
Committee on Armed Services.

Title XI Loan Guarantees

    The President's Budget does not request funding to support 
loan guarantees for the construction or reconstruction of U.S.-
flagged vessels in U.S. shipyards under the Title XI program. 
While $3 million was enacted for the program in FY 2019, the 
President's Budget demonstrates intent to eliminate this 
program and transfer management of the active Title XI loan 
guarantee portfolio to the Surface Transportation Innovative 
Finance Bureau. The Title XI Loan Guarantee program is under 
jurisdiction of the House Committee on Armed Services.

                              WITNESS LIST

      Admiral Karl L. Schultz, Commandant, United 
States Coast Guard
      Master Chief Jason M. Vanderhaden, Master Chief 
Petty Officer of the Coast Guard, United States Coast Guard
      Rear Admiral Mark H. Buzby, USN, Ret., 
Administrator, Maritime Administration
      The Honorable Michael A. Khouri, Chairman, 
Federal Maritime Commission

 
   REVIEW OF FISCAL YEAR 2020 BUDGET REQUEST FOR THE COAST GUARD AND 
                    MARITIME TRANSPORTATION PROGRAMS

                              ----------                              


                         TUESDAY, MAY 21, 2019

                  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 a.m. in 
room 2167, Rayburn House Office Building, Hon. Sean Patrick 
Maloney (Chairman of the subcommittee) presiding.
    Mr. Maloney. Good morning, the hearing will come to order.
    Welcome to this morning's hearing to review the respective 
fiscal year 2020 budget request for the United States Coast 
Guard, the Maritime Administration, and the Federal Maritime 
Commission.
    At any given moment more than 20 million shipping 
containers full of raw materials and finished products are 
transecting the ocean, neatly stacked on ships. They might 
cross the Atlantic, enter the bustling port of New York and New 
Jersey, and make their way up the Hudson River, past Manhattan, 
to my district. The Hudson River, the 315-mile conduit of 
commerce that lies at the heart of my community, moves over 17 
million tons of cargo worth over $32 billion in State commerce 
annually. For hundreds of years, this river facilitated trade 
and transit by sloop, steamboat, and barge. In fact, from my 
backyard you can see the spot where Henry Hudson camped on 
September 14th, 1609. It looks much the same way today as it 
did then.
    For hundreds of years it has been that way. And today the 
Marine Transportation System, or MTS, is an almost invisible 
network that facilitates roughly $45.4 trillion in U.S. 
commerce across oceans, and thousands of miles of inland 
waterways. Yet the MTS and the regulatory agencies that oversee 
its function are perpetually under-resourced. This is 
surprising, considering the importance of the MTS to the U.S. 
supply chain. And moreover, it is fundamentally disappointing.
    This budget again underscores how little this 
administration understands or appreciates the importance of the 
U.S. shipbuilding and maritime industries and the agencies that 
regulate and facilitate commerce. Our Coast Guard stretches 
itself daily to execute its 11 statutory missions, from vessel 
safety inspections to search and rescue, despite proposed 
budget cuts like this. It does so through its exemplary 
leadership.
    I am pleased to welcome Coast Guard Commandant, Admiral 
Karl Schultz to his first budget hearing before this 
subcommittee. Unfortunately, in my view, the fiscal year 2020 
Coast Guard budget goes so far as to walk back and 
significantly reduce the funding appropriated by Congress for 
the Coast Guard just last year, and that simply makes no sense.
    I mean I will have more to say on this during the hearing. 
But the fact that the administration would send up a budget 
like that, I think, is disrespectful to the organizations that 
do this critical work because, in reality, everybody knows it 
makes no sense.
    Coordinating and monitoring our maritime industries is the 
Maritime Administration, or MARAD, the agency whose programs 
and authorities foster and promote the American maritime 
industry to meet the economic and national security needs of 
our Nation.
    In another unfortunate stroke, MARAD's budget is also 
shortchanged. Surprisingly, the administration makes no request 
for funding to carry forward progress made earlier this year 
when Congress appropriated almost $300 million to initiate a 
new port infrastructure development grant program. The American 
Association of Port Authorities estimates that there is a $32 
billion need to improve intermodal landside connections, 
hinterland connectivity, and facility infrastructure. Yet the 
administration has turned its back on supporting these 
investments to improve the efficiency and global 
competitiveness of U.S. ports and marine terminals. We need to 
recognize the importance of the MTS to the national economy, 
and be proactive in our Federal investments.
    The Federal Maritime Commission, or FMC, protects shippers 
and carriers from restrictive or unfair shipping practices of 
foreign-flag carrier alliances operating in the U.S. foreign 
trade. And now with foreign carriers moving more than 95 
percent of U.S. trade, the FMC's job has never been more 
important. That is why we need to make sure the FMC has more 
than sufficient resources to implement changes made in last 
year's Coast Guard Act to the Shipping Act, and make sure that 
U.S. port service providers at the Port of New York and New 
Jersey, downriver from my district, are able to compete and 
sustain good-paying jobs for U.S. workers.
    Our coasts are busier than ever. New uses emerge every day. 
It is the responsibility of these agencies testifying today to 
ensure that our Marine Transportation System remains reliable, 
sustainable, efficient, and safe. I look forward to engaging 
our witnesses this morning to learn if the administration's 
budget request comes close to meeting that challenge. And that 
doesn't mean we can't have disagreements about the right level 
of funding. But I think what is clear is that the 
administration's budget request fails in significant respects, 
and I would be very curious to hear our witnesses' 
understanding of that issue.
    [Mr. Maloney's prepared statement follows:]

                                 
 Prepared Statement of Hon. Sean Patrick Maloney, a Representative in 
 Congress from the State of New York, and Chair, Subcommittee on Coast 
                   Guard and Maritime Transportation
    Welcome to this morning's hearing to review the respective Fiscal 
Year 2020 budget requests of the United States Coast Guard, the 
Maritime Administration, and the Federal Maritime Commission.
    At any given moment, more than 20 million shipping containers full 
of raw materials and finished products are transecting the ocean, 
neatly stacked on ships. They might cross the Atlantic, enter the 
bustling Port of New York/New Jersey, and make way up the Hudson River, 
past Manhattan, to my district.
    The Hudson River, the 315-mile conduit of commerce that lies at the 
heart of my community, moves over 17 million tons of cargo, worth over 
$32 billion in state commerce, annually.
    For hundreds of years this river facilitated trade and transit, by 
sloop, steamboat, and barge. Today, the Marine Transportation System, 
or ``MTS,'' is an almost invisible network that facilitates roughly 
$45.4 trillion in U.S. commerce across oceans and thousands of miles of 
inland waterways.
    Yet, the MTS and the regulatory agencies that oversee its function 
are perpetually under-resourced. This is surprising considering the 
importance of the MTS to the U.S. supply chain, and moreover, 
fundamentally disappointing: this budget again underscores how little 
this administration understands or appreciates the importance of the 
U.S. shipbuilding and maritime industries and the agencies that 
regulate and facilitate, commerce.
    Our Coast Guard stretches itself daily to execute its 11 statutory 
missions, from vessel safety inspections to search and rescue, despite 
budget cuts. It does so through its exemplary leadership. I'm pleased 
to welcome the Coast Guard Commandant, Admiral Karl Schultz, to his 
first budget hearing before this subcommittee.
    Unfortunately, in my view, the FY 2020 Coast Guard budget goes so 
far as to walk back, and significantly reduce the funding appropriated 
by the Congress for the Coast Guard last year, and that simply makes no 
sense.
    Coordinating and monitoring our maritime industries is the Maritime 
Administration, or ``MARAD,'' the agency whose programs and authorities 
foster and promote the American maritime industry to meet the economic 
and national security needs of our Nation.
    In another unfortunate stroke, MARAD's budget is short changed. 
Surprisingly, the administration makes no request for funding to carry 
forward progress made earlier this year when Congress appropriated 
almost $300 million to initiate a new Port Infrastructure Development 
Grant program.
    The American Association of Port Authorities estimates that there 
is a $32 billion need to improve intermodal landside connections, 
hinterland connectivity, and facility infrastructure. Yet, the 
administration has turned its back on supporting these investments to 
improve the efficiency and global competitiveness of U.S. ports and 
marine terminals. We need to recognize the importance of the MTS to the 
national economy and be proactive in our federal investments.
    The Federal Maritime Commission, or ``FMC,'' protects shippers and 
carriers from restrictive or unfair shipping practices of foreign-
flagged carrier alliances operating in the U.S. foreign trade. And now 
with foreign carriers moving more than 95 percent of U.S. trade, the 
FMC's job has never been more important
    That is why we need to make sure the FMC has more than sufficient 
resources to implement changes made in last year's Coast Guard Act to 
the Shipping Act, and make sure that U.S. port service providers at the 
Port of New York/New Jersey downriver from my district are able to 
compete and sustain good paying jobs for U.S. workers.
    Our coasts are busier than ever. New uses emerge every day. It is 
the responsibility of these agencies testifying today to ensure that 
our maritime transportation system remains reliable, sustainable, 
efficient, and safe. I look forward to engaging our witnesses this 
morning to learn if the administration's budget request comes close to 
meeting that challenge.

    Mr. Maloney. I now call on the ranking member, Mr. Gibbs, 
for any opening remarks.
    Mr. Gibbs. Thank you, Chairman. I also want to thank our 
witnesses for being here today, and your service to our great 
country. Thank you.
    The United States Coast Guard carries out a broad array of 
law enforcement, safety, national security, environmental 
protection, and response missions on water under the control of 
the United States. Unfortunately, both Congress and multiple 
administrations dating back to the 1990s have failed to make 
investments in the Coast Guard infrastructure to allow it to 
maintain, much less improve, its capabilities to carry out its 
mission.
    By 2000 the Coast Guard offshore fleet was antiquated. It 
has made great strides since then in replacing High Endurance 
Cutters and Island-class patrol boats with the vastly more 
capable National Security Cutters and Fast Response Cutters. 
Those successes came at the expense of adequate shoreside 
infrastructure investment, and a lack of investment in 
modernizing the databases in which the Service relies for 
smooth operations.
    The Service faces another 15 years of major investments to 
complete its fleet recapitalization. It must still build 25 new 
Offshore Patrol Cutters to replace the Medium Endurance 
Cutters. It must also purchase multiple Polar Security Cutters.
    If we expect the Coast Guard to effectively carry out any 
of its many missions, we cannot continue to defer shoreside and 
IT investments. Yet the administration again seeks $1 billion 
less in fiscal year 2020 for acquisition and construction than 
was appropriated in fiscal year 2019.
    I am glad to say the bipartisan leadership of this 
committee and subcommittee has requested $2.8 billion in 
acquisition and construction funds for fiscal year 2020. I look 
forward to the Commandant's views and how he plans to complete 
the necessary upgrades and replacements and maintenance of 
assets.
    Additionally, I am pleased to see the Maritime 
Administration has requested full funding for the Maritime 
Security Program. However, I am interested in how we can close 
the projected shortfall of merchant mariners needed to assure 
our national defense sealift capability. I look forward to 
discussing that with the Maritime Administrator.
    Finally, Congress made changes to ocean shipping laws last 
year. I am interested to learn if these changes provided the 
Commission with the authority to assure that U.S. service 
providers are treated fairly when negotiating with large 
international shipping alliances.
    [Mr. Gibbs's prepared statement follows:]

                                 
Prepared Statement of Hon. Bob Gibbs, a Representative in Congress from 
the State of Ohio, and Ranking Member, Subcommittee on Coast Guard and 
                        Maritime Transportation
    The United States Coast Guard carries out a broad array of law 
enforcement, safety, national security, environmental protection, and 
response missions on waters under the control of the United States. 
Unfortunately, both Congress and multiple Administrations dating back 
to the 1990's have failed to make investments in the Coast Guard's 
infrastructure to allow it to maintain, much less improve, its 
capabilities to carry out its missions.
    By 2000, the Coast Guard offshore fleet was antiquated. It has made 
great strides since then in replacing High Endurance Cutters and 
Island-class patrol boats with the vastly more capable National 
Security Cutters and Fast Response Cutters.
    Those successes came at the expense of adequate shoreside 
infrastructure investment, and a lack of investment in modernizing the 
databases on which the Service relies for smooth operations. The 
Service faces another 15 years of major investments to complete its 
fleet recapitalization. It must still build 25 new Offshore Patrol 
Cutters to replace the Medium Endurance Cutters. It must also purchase 
multiple Polar Security Cutters.
    If we expect the Coast Guard to effectively carry out any of its 
many missions, we cannot continue to defer shoreside and IT 
investments. Yet the Administration again seeks a billion dollars less 
in FY 2020 for acquisition and construction than was appropriated in FY 
2019. I am glad to say the bipartisan leadership of this committee and 
subcommittee has requested $2.8 billion in acquisition and construction 
funds for FY 2020.
    I look forward to the Commandant's views on how he plans to 
complete the necessary upgrades, replacements, and maintenance of 
assets.
    Additionally, I am pleased to see that the Maritime Administration 
has requested full funding for the Maritime Security Program. However, 
I am interested in how we can close the projected shortfall of merchant 
mariners needed to assure our national defense sealift capability. I 
look forward to discussing that with the Maritime Administrator.
    Finally, Congress made changes to ocean shipping laws last year. I 
am interested to learn if these changes provided the Commission with 
the authority to assure that U.S. service providers are treated fairly 
when negotiating with large international shipping alliances.

    Mr. Gibbs. Mr. Chairman, I look forward to this hearing 
today, and I yield back.
    Mr. Maloney. Thank you, Mr. Gibbs. Let's now recognize the 
chair of the committee, Mr. DeFazio, for any remarks he may 
have.
    Mr. DeFazio. Thank you, Mr. Chairman. I appreciate you 
holding this hearing.
    Tomorrow is National Maritime Day, a day to celebrate the 
United States of America as a great maritime nation. However, 
that news hasn't penetrated, apparently, to this administration 
or the White House. As I look at the collective budget requests 
for the three Federal agencies responsible for oversight, 
regulation, and promotion of U.S. maritime--Coast Guard, 
Maritime Administration, FMC--there is not much to celebrate 
there.
    The administration has talked a lot about our 
competitiveness, and trade, and those things. But undermining 
these institutions--we have also talked a lot about drugs and 
drug smuggling, national security. Undermining the Coast Guard 
is not going to deliver on those goals.
    The Coast Guard went through a series of cuts because of 
the Budget Control Act. And finally, Congress has begun to make 
up with some of that deficit. But the submission by--the 
Mulvaney--oh, I mean the Trump budget submitted to Congress 
would lower Coast Guard 10 percent below 2019, you know, and 
that is after the Coast Guard didn't get paid during the stupid 
shutdown, the only military service not to get paid. So I would 
say these additional proposed cuts are disrespectful, at best.
    As I mentioned before, there has been a lot of concern 
about drug smuggling. We had intel from the retired Commandant 
last year or the year before last, and Senate testimony that we 
can ID 80 percent of the actionable--you know, with 
intelligence, actionable drug shipments. But we can only 
intercept 20 percent, because the Coast Guard doesn't have the 
resources. So the Trump administration is going to take care of 
that problem. They are going to send Coasties to the desert 
border. What a great idea. So I will have some questions about 
that.
    I am also disappointed in the cuts for MARAD, 39 percent. 
And, you know, zero port infrastructure development grants, 
small shipyard grants, which help keep us competitive, a vital 
component of keeping a domestic U.S. shipbuilding industry, 
particularly in light of the Communist Chinese Government 
shipbuilding interests, which are trying to compete.
    There is, you know, a little bit of good news, a small 
increase for the Federal Maritime Commission. Last year we 
refocused them on these carrier alliance agreements, and there 
is a lot of work to be done there. So they will need that 
money, and perhaps more.
    This budget is a disappointment, but let's use this hearing 
to constructively critique and encourage our colleagues to 
allocate more adequate resources to each of these agencies in 
the coming budget year.
    [Mr. DeFazio's prepared statement follows:]

                                 
   Prepared Statement of Hon. Peter A. DeFazio, a Representative in 
      Congress from the State of Oregon, and Chair, Committee on 
                   Transportation and Infrastructure
    Thank you Chairman Maloney. I intend to be brief in my remarks so 
that we might proceed to hear from our witnesses.
    Tomorrow we will celebrate National Maritime Day, a time-honored 
tradition that recognizes one of our country's most important 
industries.
    I have to say, however, after reviewing the collective budget 
requests for the three Federal agencies responsible for the oversight, 
regulation, or promotion of the U.S. maritime industry--the U.S. Coast 
Guard, the Maritime Administration and the Federal Maritime 
Commission--I find very little to celebrate.
    From our earliest origins as a nation, the U.S. Merchant Marine and 
the U.S. flag commercial fleet have been pillars in this country's 
foundation of prosperity and security. Regrettably, it would appear 
that this administration thinks otherwise.
    For example, despite years of suffering under budgets cuts imposed 
by the Budget Control Act, the administration again has decided to cut 
the Coast Guard's discretionary budget--this time by almost ten percent 
below what Congress appropriated for the Coast Guard in Fiscal Year 
2019.
    One has to wonder: how much more strain can we put the Coast Guard 
under before this exemplary military maritime law enforcement agency 
simply breaks and cannot be mended back together?
    Even worse, coming on the heels of the Coast Guard not getting paid 
at all during the recent government shut-down--the only military 
service to not get paid I might add--the cuts proposed in this budget 
are not only wrongheaded, they are downright cruel to the hardworking 
men and women of the Coast Guard.
    And so, here we are today with rumors flying around about the Coast 
Guard having to shift additional resources to the Southern Border; with 
the Coast Guard's only heavy icebreaker, the Polar Star, barely 
remaining operational due only to the ingenuity and determination of 
her crew; and with the gap in the Coast Guard's unmet budget needs 
growing wider each day.
    These are important matters, and I expect to pursue these thoughts 
and more with Admiral Schultz later this morning.
    I also am disappointed that the administration is proposing to cut 
funding for the Maritime Administration by almost thirty nine percent.
    If we want to remain a global maritime power, we cannot offer timid 
support for our own maritime industry, especially at a time when our 
trading partners, notably China, are investing billions of dollars to 
expand the global reach of their maritime industry.
    I fail to see the logic behind not requesting any funding for Port 
Infrastructure Development Grants, or Small Shipyard Grants. These 
programs are desperately needed right now to infuse capital to improve 
the technological capability and competitiveness of U.S. ports and 
shipyards.
    We need to be doing much, much more to support our maritime 
industry, and I hope that Admiral Buzby can provide more ideas than 
those put forth by the administration's budget request for MARAD.
    Allow me to say that there was one ray of modest good news: the 
small increase in the budget for the Federal Maritime Commission.
    Considering the Commission's vital role in ensuring that shipping 
practices in the U.S. foreign trade abide by antitrust requirements, an 
increase was not only overdue, but also warranted in order to provide 
the Commission the resources it needs to implement new requirements to 
monitor carrier alliance agreements.
    In closing, this budget is a disappointment and should serve as a 
catalyst for increasing support to our maritime industry. Let us use 
this hearing constructively and give ourselves something to celebrate 
when National Maritime Day rolls around next year. Thank you.

    Mr. DeFazio. With that I yield back the balance of my time.
    Mr. Maloney. I thank the gentleman. I would like now to 
welcome our witnesses.
    Admiral Karl L. Schultz, Commandant of the United States 
Coast Guard, we are delighted to have you here, sir.
    We are also joined by Master Chief Jason M. Vanderhaden, 
Master Chief Petty Officer for the United States Coast Guard; 
Rear Admiral Mark H. Buzby, Administrator for the Maritime 
Administration; and the Honorable Michael A. Khouri, Chairman 
of the Federal Maritime Commission.
    Gentlemen, we have received your testimonies. Without 
objection, that full statement will be included in the record. 
And since it has, we encourage you to limit your oral 
testimonies to 5 minutes to give adequate time for the Members' 
questions. But we appreciate your service, and all you do for 
our country.
    Admiral Schultz?

 TESTIMONY OF ADMIRAL KARL L. SCHULTZ, COMMANDANT, U.S. COAST 
 GUARD; MASTER CHIEF JASON M. VANDERHADEN, MASTER CHIEF PETTY 
OFFICER OF THE COAST GUARD, U.S. COAST GUARD; REAR ADMIRAL MARK 
      H. BUZBY, U.S. NAVY (RET.), ADMINISTRATOR, MARITIME 
 ADMINISTRATION; AND HON. MICHAEL A. KHOURI, CHAIRMAN, FEDERAL 
                      MARITIME COMMISSION

    Admiral Schultz. Well, full committee Chairman DeFazio, 
Chairman Maloney, Ranking Member Gibbs, members of the 
committee, thanks for the opportunity to testify today. And as 
you mentioned, my written testimony, I appreciate that being 
entered into the record.
    On behalf of the men and women of the United States Coast 
Guard, Chairman, please accept my profound thanks for your 
unwavering support, including the fiscal year 2019 
appropriation and the 2018 Frank LoBiondo Coast Guard 
Authorization Act. These were meaningful steps towards 
delivering the ready, relevant, and responsive Coast Guard the 
American public expects and deserves.
    Yet our work is not done. If you take away just one thing 
from my testimony today, please remember this: readiness, ready 
to push our maritime border 1,500 miles from our shore; ready 
to preserve the $5.4 trillion in economic activity that flows 
through our Marine Transportation System on an annual basis; 
ready to support combatant commander needs across the globe; 
ready for the next hurricane season, which is just around the 
corner; and ready to put our cyber authorities to use as we 
adapt to 21st-century threats.
    Without question, building and sustaining readiness is my 
top priority as Commandant, and we are at a critical juncture 
of what I call a tipping point.
    Almost after a decade of near flatline operations and 
support funding, Coast Guard readiness is, in fact, eroding, 
just like the other armed services have experienced in recent 
years. Yet, unlike the Department of Defense, Coast Guard 
funding is categorized as nondefense discretionary, which means 
we are excluded from the focused effort to rebuild our Nation's 
military readiness. And hence, we continue to find ourselves on 
the outside looking in when it comes to operations and support 
plus-up funds.
    In 2017, the Department of Defense received a 12-percent 
boost in operations and maintenance funding, while the Coast 
Guard received just a 4-percent increase. Yet the Coast Guard's 
military contributions are immutable. Every year we proudly 
expend over $1 billion in direct support to combatant 
commanders. But the $340 million of defense readiness dollars 
they receive towards these ends has not increased in over 18 
years.
    As an example of our growing defense portfolio, the 
National Security Cutter Bertholf is supporting the Indo-
Pacific commander in the South China Sea, enforcing U.N. 
sanctions against North Korea and protecting advancing 
interests throughout the Western Pacific. Though we strive for 
relentless resilience to execute homeland security defense 
operations, if we continue to neglect our growing backlog of 
deferred repairs work on our capital assets, we will lose 
ground in the fight to defend our homeland from evolving 
threats and challenges to the Nation.
    Despite these challenges, I am extremely proud of the Coast 
Guard's contributions. In 2018, as part of the Department of 
Homeland Security's layered security strategy, our surface and 
aviation assets interdicted 460,000 pounds of uncut cocaine, 
more than all other Federal agencies combined, and apprehended 
more than 600 drug smugglers. Disrupting transnational criminal 
organizations at sea, where they are most vulnerable, helps 
reduce the push factors responsible for driving migration to 
our southwest land border.
    Our National Security Cutters, what we call NSCs, have 
exceeded performance expectations by every metric, and now we 
must focus on transitioning from our outdated and costly Medium 
Endurance Cutters to our planned fleet of 25 highly capable 
Offshore Patrol Cutters, which will be the backbone of the 
Coast Guard's offshore presence in the decades to come.
    In the polar regions, presence equals influence, and your 
Coast Guard is the sole surface presence protecting our rights 
and projecting sovereignty. As access to the region expands, 
and interest from China and Russia grows, it is in our national 
interest to enhance Maritime Domain Awareness and build 
governance in this economically and geo-strategically 
competitive area. To this end, the Coast Guard released the 
Arctic Strategic Outlook last month, a refresh of our 2013 
Arctic strategy.
    In March, our sole operational heavy icebreaker, the 43-
year-old Polar Star, returned from a 105-day patrol to 
Antarctica. The crew worked miracles to keep that cutter 
mission viable, battling a shipboard fire, engine room 
flooding, and numerous electrical outages. I am proud of their 
efforts, but I remain concerned we are only one major casualty 
away from being a Nation without any heavy ice-breaking 
capability. New icebreakers cannot come fast enough.
    And I thank you, the Congress, for the $675 million 
provided in last year's 2019 appropriation. Coupled with the 
$300 million in prior years' appropriations, I am thrilled to 
report we awarded a detailed design and construction contract 
for the first Polar Security Cutter earlier this month--or last 
month, in April. Stable and predictable funding is key to 
keeping this vital program on schedule.
    Finally, I appreciate the administration's support for 
initiatives that invest in our greatest strength: our Coast 
Guard men and women, our people. They represent tangible steps 
towards a mission-ready total workforce. A dollar invested in 
the Coast Guard is a dollar well invested and well spent. And 
with your continued support, the Coast Guard will live up to 
our motto, semper paratus, always ready.
    Thank you Chairman, Ranking Member, members of the 
committee, for this opportunity to testify. I welcome your 
questions.
    [Admiral Schultz's prepared statement follows:]

                                 
 Prepared Statement of Admiral Karl L. Schultz, Commandant, U.S. Coast 
                                 Guard
                              introduction
    Chairman Maloney, Ranking Member Gibbs, and distinguished members 
of the Committee, I appreciate the opportunity to testify today. Thank 
you for your enduring support of the United States Coast Guard, 
particularly enactment of the Frank LoBiondo Coast Guard Authorization 
Act of 2018 and the significant investments provided in the Fiscal Year 
(FY) 2019 Consolidated Appropriations Act.
    Your Coast Guard is on the front lines of our Nation's effort to 
protect the American people, our homeland, and our way of life. As 
threats and challenges to our national security and global influence 
grow more complex, the need for a Ready, Relevant, and Responsive Coast 
Guard has never been greater.
    Appropriately positioned within the U.S. Department of Homeland 
Security (DHS), the Coast Guard is a federal law enforcement agency, a 
regulatory body, a first responder, a member of the U.S. Intelligence 
Community, and a military service and a branch of the Armed Forces of 
the United States at all times \1\--the Coast Guard offers specialized 
and unique capabilities across the full spectrum of maritime 
activities, from security cooperation up to armed conflict.
---------------------------------------------------------------------------
    \1\ 14 U.S.C. Sec.  101; 10 U.S.C. Sec.  101
---------------------------------------------------------------------------
    The Coast Guard has matured and evolved over the course of our 228-
year history, adapting our people, assets, and capabilities in response 
to emerging national demands and international challenges. We are 
locally based, nationally responsive, and globally impactful.
    To outline my vision for the Service, I recently released the U.S. 
Coast Guard Strategic Plan 2018-2022. To that end, my highest priority 
is to ``Maximize Readiness Today and Tomorrow,'' and readiness starts 
with our people, who are our greatest strength. In the competitive 
marketplace the Armed Forces find ourselves, now is a critical time to 
invest in our mission-ready total workforce.
    My second top priority is continuing to ``Address the Nation's 
Complex Maritime Challenges'' through international and domestic 
leadership in the maritime domain. A unique instrument of national 
power, the Coast Guard offers the ability to secure the maritime 
border, combat Transnational Criminal Organizations (TCOs), and 
facilitate $5.4 trillion of annual economic activity on our Nation's 
waterways.
    Finally, in a competitive budget environment, your Coast Guard is 
acutely focused on my third priority, ``Delivering Mission Excellence 
Anytime, Anywhere,'' by continuously challenging ourselves to innovate 
and drive increased efficiency for better organizational performance in 
response to both manmade crises and natural disasters.
                           strategic effects
    The Coast Guard plays a critical role in a comprehensive approach 
to securing our borders--from disrupting drug trafficking and illegal 
immigration in the southern transit zones, to projecting sovereignty 
across the globe. Our Nation's maritime borders are vast, and include 
one of the largest systems of ports, waterways, and critical maritime 
infrastructure in the world, including 95,000 miles of coastline.
    As part of the DHS layered security strategy, the Coast Guard 
pushes out our Nation's border, and serves as the ``offense'' in a 
comprehensive approach to layered border security strategy. Through the 
interdiction of illicit drugs and the detention of suspected drug 
smugglers, the Coast Guard disrupts TCO networks at sea, over a 
thousand miles from our shore, where they are most vulnerable. Coast 
Guard maritime interdictions weaken the TCOs who destabilize our 
immediate neighbor Mexico, the Central American land corridor, and 
South American countries. Our interdiction efforts minimize corruption 
and create space for effective governance to exist. Coast Guard 
interdiction efforts reduce the ``push factors'' that are responsible 
for driving migration to our Southwest land border.
    Working with interagency partners, the Coast Guard seized 209 
metric tons of cocaine and detained over 600 suspected smugglers in FY 
2018, which is more than all other federal agencies combined. 
Highlighting the capabilities of one of our modern assets, in November 
2018, the National Security Cutter (NSC) CGC JAMES, in support of Joint 
Interagency Task Force South (JIATF-S), seized nearly nine tons of 
cocaine and detained over 40 suspected drug smugglers from various drug 
conveyances, including low-profile go-fast vessels and fishing vessels. 
In addition to stopping these drugs from getting to our streets, the 
information we gather and share with our partners in the Intelligence 
Community facilitates deeper understanding of TCOs and ultimately helps 
our unified efforts to dismantle them.
    As an important part of the modern military's Joint Force \2\, we 
currently have forces assigned to each of the six geographic Combatant 
Commanders (COCOMs), as well as Cyber Command, Transportation Command, 
and Special Operations Command. The Coast Guard deploys world-wide to 
execute our statutory Defense Operations mission in support of national 
security priorities. Typically, on any given day, 11 cutters, 2 
maritime patrol aircraft, 5 helicopters, 2 specialized boarding teams, 
and an entire Port Security Unit are supporting Department of Defense 
(DoD) COCOMs on all seven continents. In the Middle East, our squadron 
of six patrol boats continues to conduct maritime security operations 
on the waters of the Arabian Gulf in close cooperation with the U.S. 
Navy, promoting regional peace and stability.
---------------------------------------------------------------------------
    \2\ In addition to the Coast Guard's status as an Armed Force (10 
U.S.C. Sec.  101), see also Memorandum of Agreement Between DoD and DHS 
on the Use of Coast Guard Capabilities and Resources in Support of the 
National Military Strategy, 02 May 2008, as amended 18 May 2010.
---------------------------------------------------------------------------
    Likewise, as one of the principal federal agencies performing 
Detection and Monitoring (D&M) in the southern maritime transit zone, 
the Coast Guard provides more than 4,000 hours of maritime patrol 
aircraft support and 2,000 major cutter days to DoD's Southern Command 
(SOUTHCOM) each year.
    Coast Guard authorities and capabilities bridge national security 
needs between DoD war fighters abroad and DHS agencies protecting our 
homeland. In addition to COCOM support, the Coast Guard partners with 
federal, state, local, territorial, tribal, private, and international 
stakeholders to address problems across an increasingly complex 
maritime domain. Our leadership on global maritime governing bodies and 
our collaborative approach to operationalize international agreements 
drive stability, legitimacy, and order. We shape how countries conduct 
maritime law enforcement and establish governance.
    Looking forward, the performance capabilities and expected capacity 
of our future Offshore Patrol Cutter (OPC) fleet will provide the tools 
to more effectively enforce federal laws, secure our maritime borders, 
disrupt TCOs, and respond to 21st century threats. Continued progress 
on this acquisition is vital to recapitalizing our aging fleet of 
Medium Endurance Cutters (MECs), some of which will be over 55 years 
old when the first OPC is delivered in 2021. In concert with the 
extended range and capability of the NSC and the enhanced coastal 
patrol capability of the Fast Response Cutter (FRC), our planned 
program of record for 25 OPCs will be the backbone of the Coast Guard's 
strategy to project and maintain offshore presence.
    In the Arctic region, the Coast Guard remains steadfastly committed 
to our role as the lead federal agency for homeland security, safety, 
and environmental stewardship. There, we enhance maritime domain 
awareness, facilitate governance and promote partnerships to meet 
security and safety needs in this geo-strategically and economically 
vital area. As access to the region continues to expand, strategic 
competition drives more nations to look to the Arctic for economic and 
geopolitical advantages, and the Coast Guard stands ready to provide 
the leadership and sustained surface presence necessary to protect our 
rights and sovereignty as an Arctic Nation.
    Looking to the Antarctic, the 43-year-old CGC POLAR STAR, the 
Nation's only operational heavy icebreaker, returned home after 
successfully completing Operation DEEP FREEZE (DF-19), the annual 
McMurdo Station breakout, though not without overcoming several high-
risk casualties to the ship's engineering systems. The ship's crew had 
to battle a fire that left lasting damage to electrical systems; ship-
wide power outages occurred during ice breaking operations. And in the 
same transit, divers were sent into the icy waters to investigate and 
repair a propeller shaft seal leak. Events like these reinforce the 
reality that we are only one major casualty away from leaving the 
Nation without any heavy icebreaking capability.
    With increased activity in the maritime reaches and growing 
competition for resources, we cannot wait any longer for increased 
access and a more persistent presence in the Polar Regions. Our 
sustained presence there is imperative to ensuring our Nation's 
security, asserting our sovereign rights, and protecting our long-term 
economic interests.
    Last year we released a request for proposal and in April, we 
awarded a contract for detail design and construction of the first 
Polar Security Cutter (PSC) with options for two additional PSCs. I am 
thankful for your support for the $675 million in the FY 2019 
appropriation. This funding, coupled with the $300 million in 
Shipbuilding and Conversion, Navy (SCN) funding in FY 2017 and 2018, 
made contract award possible and is sufficient to fund construction of 
the first PSC as well as initial long lead time material for a second 
PSC.
    Our value to the Nation is observed on the farthest shores around 
the globe as well as closer to home where we continue to be ``Always 
Ready'' to answer the call for help. The 2018 hurricane season led to 
yet another historic Coast Guard response effort. The Coast Guard 
mobilized over 8,600 active duty members, reservists, and civilians for 
hurricane response across the United States for hurricanes Florence and 
Michael in the mid-Atlantic states and Gulf Coast respectively, as well 
as typhoon Mangkhut in Guam.
    In support of, and in coordination with the Federal Emergency 
Management Agency (FEMA) and other federal, state, local, and 
territorial agencies, the Coast Guard saved nearly 1,000 lives using 
helicopters and shallow water craft, provided logistical support to 
first responders, and oversaw the safe and effective resumption of 
commerce at over 20 impacted sea ports.
    While such a level of professionalism and distinction is what the 
American people have come to expect from your Coast Guard, that 
response comes at a cost. We continue to do our very best to stand 
ready to respond to all maritime disasters, both natural and manmade; 
however, these efforts consume future readiness. Our aging assets and 
infrastructure require increased maintenance and repairs, all of which 
is compounded by the on-going recovery and restoration operations of 
the historic hurricane season of 2017.
    In 2017 alone, the Coast Guard lost the equivalent of two major 
cutters (e.g., over 300 operational days) due to unplanned repairs. 
Expanding that to the last two years, we have lost three years' worth 
of major cutter patrol days. In 2017 and again in 2018, shortages in 
parts and supplies cost the Coast Guard over 4,500 flight hours each 
year, or the equivalent of programmed operating hours for seven MH-65 
helicopters. Each hour lost in the transit zones keeps us further from 
reaching our interdiction targets and helps the TCOs deliver their 
illicit cargoes.
    Service readiness starts with our most valuable asset--our people. 
We must continue to recruit, train, support, and retain a mission-ready 
total workforce that not only positions the Service to excel across the 
full spectrum of Coast Guard missions, but is representative of the 
diverse Nation we serve. Our workforce end strength was reduced by over 
1,250 personnel during a three-year period from FY 2012 to FY 2015. And 
compared to the workforce of FY 2012, the Coast Guard has nearly 1,000 
fewer personnel to accomplish an ever increasing mission set. Adequate 
increases to depot maintenance funding, coupled with strategic human 
capital investments, are critical to addressing these readiness 
challenges.
                               conclusion
    The Coast Guard offers a capability unmatched in the federal 
government. Whether combating TCOs to help stabilize the Western 
Hemisphere, responding to mariners in distress in the Bering Sea, or 
supporting U.S. Central Command (CENTCOM) on the Arabian Gulf, the 
Coast Guard stands ready to execute a suite of law enforcement, 
military, and regulatory authorities and capabilities to achieve 
mission success anytime, anywhere. We cannot do this on the backs of 
our people--now is the time to address the erosion of readiness 
experienced in our Service over the past decade due to near flat line 
funding for operations and support.
    While the demand for Coast Guard services has never been higher, we 
must address our lost purchasing power, the growing backlogs of 
deferred maintenance on our capital assets, and the degraded 
habitability of our infrastructure.
    Our 48,000 active duty and reserve members, 8,500 civilians, and 
over 25,000 volunteer members of the Coast Guard Auxiliary need your 
support to maintain a Ready, Relevant, and Responsive Coast Guard.
    With the continued support of the Administration and Congress, your 
Coast Guard will live up to our motto--Semper Paratus--Always Ready. 
Thank you for your support of the men and women of the Coast Guard.
                         fy 2020 budget request
    The Coast Guard's FY 2020 Budget request is focused on three main 
priorities:
    1.  Maximize Readiness Today and Tomorrow
    2.  Address the Nation's Complex Maritime Challenges
    3.  Deliver Mission Excellence Anytime, Anywhere
Maximize Readiness Today and Tomorrow
    The Coast Guard's top priority is Service readiness. The FY 2020 
President's Budget request begins to address the erosion of readiness 
that resulted from years under the Budget Control Act. Critical 
investments in the workforce as well as depot maintenance for the fleet 
will put the Service on the path to recovery to sustain critical 
frontline operations.
    Additionally, investments in asset modernization sustain 
recapitalization momentum while advancing other critical programs. The 
FY 2020 Budget request supports the Service's highest priority 
acquisition, the OPC, and continues recapitalization efforts for 
cutters, boats, aircraft, IT systems, and infrastructure.
Address the Nation's Complex Maritime Challenges
    As one of the Nation's most unique instruments of national 
authority across the full spectrum of maritime operations, the Coast 
Guard cooperates and builds capacity to detect, deter, and counter 
maritime threats.
    While nefarious activities destabilize and threaten vulnerable 
regions, the Coast Guard offers capabilities, authorities, and 
established partnerships that lead to a more secure maritime border. 
The FY 2020 Budget invests in a holistic approach to combat TCOs 
through targeted detection and interdiction of suspected drug 
smugglers, at-sea biometrics, and increased partnerships with allied 
law enforcement nations in Central and South America, to quell illegal 
migration.
    As the Marine Transportation System (MTS) grows increasingly 
complex, the Coast Guard's marine safety workforce must adapt to 
continue to facilitate commerce. The FY 2020 Budget increases the 
marine inspection workforce while addressing key findings from the 
report on the tragic sinking of the freight vessel EL FARO and the loss 
of 33 crewmembers.
Deliver Mission Excellence Anytime, Anywhere
    The Coast Guard is an agile and adaptive force whose greatest value 
to the Nation is an ability to rapidly shift among its many missions to 
meet national priorities during steady state and crisis operations.
    As new threats in the cyber domain emerge, the Coast Guard's cyber 
workforce serves as the critical link between DoD, DHS, and the 
Intelligence Community. The FY 2020 Budget increases the cyber 
workforce to promote cyber risk management and protect maritime 
critical infrastructure from attacks, accidents, and disasters.
    The Coast Guard seeks to continually improve organizational 
effectiveness and the FY 2020 Budget eliminates redundant and outdated 
IT services to reinforce the culture of continuous innovation and 
enhance information-sharing across the Service.
                       fy 2020 budget highlights
Procurement, Construction, & Improvements (PC&I)
    Surface Assets: The budget provides $792 million for the following 
surface asset recapitalization and sustainment initiatives:
      National Security Cutter (NSC)--Provides funding for 
post-delivery activities for the seventh through eleventh NSCs, and 
other program-wide activities. The acquisition of the NSC is vital to 
performing DHS missions in the far offshore regions around the world. 
The NSC also provides a robust command and control platform for 
homeland security and contingency operations.
      Offshore Patrol Cutter (OPC)--Provides funding for 
construction of the third ship and long lead time materials (LLTM) for 
the fourth and fifth OPC. The OPC will replace the Medium Endurance 
Cutters, now well beyond their service lives, which conduct multi-
mission operations on the high seas and coastal approaches.
      Fast Response Cutter (FRC)--Funds procurement of two 
FRCs, totaling 54 of the 58 vessels needed for the domestic program of 
record. These assets provide coastal capability to conduct Search and 
Rescue operations, enforce border security, interdict drugs, uphold 
immigration laws, prevent terrorism, and enhance resiliency to 
disasters.
      Polar Security Cutter (PSC)--Provides funding to support 
detail design and construction activities of the joint Coast Guard-Navy 
Integrated Program Office (IPO) and program management associated with 
construction of the lead PSC. PSCs will provide the Nation with assured 
surface access to the Polar Regions for decades to come.
      Polar Sustainment--Supports a multi-year Service Life 
Extension Project (SLEP) for CGC POLAR STAR, including program 
management activities, materials purchases, and production work.
      Waterways Commerce Cutter (WCC)--Provides funding for 
acquisition planning activities, including continued evaluation of 
options to replace the capabilities provided by the current fleet of 
inland tenders and barges commissioned between 1944 and 1990. These 
multi-mission platforms are integral to the protection of maritime 
commerce on the inland rivers.
      Cutter Boats--Continues funding for the production of 
multi-mission cutter boats fielded on the Coast Guard's major cutter 
fleet, including the NSC, OPC, and PSC.
      In-Service Vessel Sustainment--Continues funding for 
sustainment projects on 270-foot Medium Endurance Cutters, 225-foot 
seagoing Buoy Tenders, and 47-foot Motor Lifeboats.
      Survey and Design--Continues funding for multi-year 
engineering and design work for multiple cutter classes in support of 
future sustainment projects. Funds are included to plan Mid-Life 
Maintenance Availabilities (MMA) on the CGC HEALY, CGC MACKINAW, and 
the fleet of 175-foot Coastal Buoy Tenders.
    Air Assets: The budget provides $200 million for the following air 
asset recapitalization or enhancement initiatives:
      HC-144--Continues Minotaur mission system retrofits and 
provides high-definition electro-optical infrared cameras to meet DHS 
Joint Operational Requirements.
      HC-27--Continues missionization activities, including 
funding for spare parts, logistics, training, and mission system 
development.
      HH-65--Continues modernization and sustainment of the 
Coast Guard's fleet of H-65 short range recovery helicopters, 
converting them to MH-65E variants. The modernization effort includes 
reliability and sustainability improvements, where obsolete components 
are replaced with modernized sub-systems, including an integrated 
cockpit and sensor suite. Funding is also included to extend aircraft 
service life for an additional 10,000 hours.
      MH-60--Includes funding to support a service life 
extension for the fleet of medium range recovery helicopters to better 
align recapitalization with DOD's future vertical lift program.
      sUAS--Continues program funding to deploy sUAS onboard 
the NSC allowing increased interdiction through greater Intelligence, 
Surveillance, and Reconnaissance (ISR).
    Shore Units and Aids to Navigation (ATON): The budget provides $174 
million to recapitalize shore infrastructure that supports Coast Guard 
assets and personnel, as well as construction and improvements to 
ensure public safety on waterways. Examples include:
      Replacement of covered boat moorings at Station Siuslaw 
River, Oregon; recapitalization of failed aviation pavement at Sector 
Columbia River, Oregon; construction in Boston, Massachusetts to 
support arriving FRCs; and construction in Sitka, Alaska to support 
arriving FRCs.
    Other (Asset Recapitalization): The budget provides $69 million for 
other initiatives funded under the Procurement, Construction, and 
Improvements account, including the following equipment and services:
      Command, Control, Communications, Computers, 
Intelligence, Surveillance, and Reconnaissance (C4ISR)--Provides 
design, development, upgrades, and assistance on C4ISR hardware and 
software for new and in-service assets.
      Program Oversight and Management--Funds administrative 
and technical support for acquisition programs and personnel.
      CG-Logistics Information Management System--Continues 
development and deployment of this system to Coast Guard operational 
assets.
      Cyber and Enterprise Mission Platform--Provides funding 
for emerging Command and Control, Communications, Computer, Cyber, and 
Intelligence (C5I) capabilities.
      Other Equipment and Systems--Funds end-use items costing 
more than $250,000 used to support Coast Guard missions, including 
equipment to support operation and maintenance of vessels, aircraft, 
and infrastructure.
Operations and Support (O&S)
    Operation and Maintenance of New Assets: The budget provides $59 
million and 297 FTE to operate and maintain shore facilities and 
sustain new cutters, boats, aircraft, and associated C4ISR subsystems 
delivered through acquisition efforts:
      Shore Facilities--Funds operation and maintenance of 
shore facility projects scheduled for completion prior to FY 2020. 
Projects include: Coast Guard Yard dry dock facilities in Baltimore, 
Maryland; FRC Homeport Facilities in Galveston, Texas; Electrical 
Utilities for Air Station Barbers Point, Hawaii; and Housing for 
Station Jonesport, Maine.
      FRC--Funds operation and maintenance and personnel for 
five FRCs and shore-side support for FRCs in Galveston, Texas; Key 
West, Florida; and Apra Harbor, Guam.
      NSC--Funds crew of NSC #9, as well as personnel for 
sensitive compartmented information facility (SCIF) crews and 
analytical support, and shore-side support personnel in Charleston, 
South Carolina.
      OPC--Funds a portion of the crew for OPC #1, as well as 
shore-side personnel to develop operational doctrine for the new class 
of cutter to be homeported in Los Angeles/Long Beach, California.
      HC-130J Aircraft--Funds operations, maintenance, air 
crews, and pilots for HC-130J airframe #12.
    Pay & Allowances: The budget provides $118 million to maintain 
parity with DoD for military pay, allowances, and health care, and for 
civilian benefits and retirement contributions, including a 3.1 percent 
military pay raise in 2020. As a branch of the Armed Forces of the 
United States, the Coast Guard is subject to the provisions of the 
National Defense Authorization Act, which include pay and personnel 
benefits for the military workforce.
    Asset Decommissionings: The budget saves $12 million and 119 FTE 
associated with the planned decommissioning of one High Endurance 
Cutter (WHEC) and three 110-foot Patrol Boats (WPBs). As the Coast 
Guard recapitalizes its cutter and aircraft fleets and brings new 
assets into service, the older assets that are being replaced will be 
decommissioned:
      High Endurance Cutter (WHEC)--The budget decommissions 
one WHEC. These assets are being replaced with modernized and more 
capable NSCs.
      110-foot Patrol Boats (WPBs)--The budget decommissions 
three WPBs. These assets are being replaced with modernized and more 
capable FRCs.
    Operational Adjustments: In FY 2020, the Coast Guard will make 
investments that begin to address the erosion of readiness of the 
Service while investing in new workforce initiatives:
      Aircraft Federal Aviation Administration (FAA) 
Compliance--The budget provides $22 million to replace obsolete 
aircraft equipment and systems necessary to comply with FAA 2020 
airspace requirements.
      Cyber and IT Infrastructure--The budget provides $16 
million and 38 FTE to mature the cybersecurity defense program. The 
budget also provides funding for an information technology framework 
and platform to establish a consolidated user interface primarily for 
Command Centers.
      Restoring Depot Readiness--The budget provides $10 
million to begin to restore eroded vessel and aircraft readiness and 
address critical information technology maintenance and inventory 
backlogs.
      Human Capital and Support Infrastructure--The budget 
provides $17 million and 22 FTE to improve enterprise-wide support for 
the workforce, including the transition to electronic health records 
and training and support for the Coast Guard Reserve.
      Counter Transnational Criminal Organizations (TCO)--The 
budget provides $7 million and 26 FTE to expand the Coast Guard's 
capacity to execute a multi-layered approach in the Western Hemisphere 
maritime transit zone, dismantle TCOs, and secure our Nation's borders 
from illicit smuggling of all kinds.
      Maritime Safety, Security, and Commerce--The budget 
provides $6 million and 20 FTE to strengthen the Coast Guard's marine 
safety program through improved marine inspector training, 
establishment of a third party oversight and auditing program, 
expansion of the marine inspector workforce, and improved accession 
opportunities for marine inspectors.

    Mr. Maloney. Impressive example, Admiral Schultz. You 
brought that in with 5 seconds to spare.
    [Laughter.]
    Mr. Maloney. Master Chief, no pressure. Thank you so much. 
You may proceed.
    Master Chief Vanderhaden. Full committee Chairman DeFazio, 
Chairman Maloney, Ranking Member Gibbs, distinguished members 
of the committee, thank you for the honor of appearing before 
you to represent the terrific members of your United States 
Coast Guard.
    First and foremost, I want to say thank you for your 
support for the Pay Our Coast Guard Parity Act. With each unit 
I visit I hear firsthand our members' concerns about another 
shutdown, and I hope I can count on your continued support to 
drive this legislation through to enactment.
    As I travel the country speaking with the men and women of 
our mission-ready total workforce, I can see the pride they 
take in serving their country. They are standing the watch, 
carrying out global operations, protecting our homeland in the 
maritime domain. But in order to continue to be successful, 
they need more resources.
    Last year's massive hurricanes in the Atlantic and gulf 
coast, as well as Typhoon Mangkhut in the Pacific, devastated 
communities around the United States and its Territories. The 
men and women of your Coast Guard responded heroically, saving 
nearly 1,000 lives and millions of dollars in property.
    Each day we patrolled maritime domain, domestically and 
globally, performing the multitude of missions entrusted by our 
Government and the American public. This others-before-self 
attitude is consistent throughout our Service, and speaks to 
our core value of devotion to duty. The American people place 
their trust in and count on the men and women of our Service, 
and we will not fail them.
    The size of the Coast Guard and the scope of their duties 
requires delegation of responsibilities far down the chain of 
command. We empower our junior officers and enlisted members 
far beyond our sister Services, and they always make me proud. 
We maximize the talents of our people and utilize every 
resource to accomplish the mission. Your return on investment 
for every dollar spent on a Coastie is immeasurable. With your 
continued support in recapitalizing our fleet, we will enable 
our dedicated professionals to excel in our missions.
    Building upon the success of the National Security Cutter 
and the Fast Response Cutter, the new Offshore Patrol Cutter 
will provide Coast Guard tools needed to efficiently and 
effectively meet our missions.
    Furthermore, we are thankful for the fiscal year 2019 
appropriation, which provided funding for the first Polar 
Security Cutter. The Coast Guard currently operates America's 
only heavy and medium icebreakers, and employs a small 
specialized community of polar sailors. The unique skills 
necessary to operate these ships in the high latitudes of the 
Arctic and the Antarctic require specialized training and 
experience. And with your support we will be able to retain and 
actually grow this important workforce.
    We are the world's finest coast guard, and the demand for 
our Service has never been greater. However, I am concerned 
about the erosion of our readiness that has negatively affected 
the quality of life for our servicemembers. Our people, your 
Coast Guard, deserve adequate housing, appropriate medical 
services, and access to affordable child care. This country 
still honors the right to employ an all-volunteer military, and 
we hope to make the Coast Guard an employer of choice, by 
providing benefits that offset the sacrifices that our families 
endure.
    Despite these challenges I am exceptionally proud to serve 
in the world's best coast guard, alongside my shipmates, 
including both my son and my daughter, who recently reenlisted 
for the second time. Our people feel valued, and they serve 
their country with pride. They enjoy coming to work, they enjoy 
the missions we do, and they serve their country with pride. As 
their representative before you today, it is my job to raise 
your awareness of the challenges they face, which have been 
caused by an erosion of readiness.
    Mr. Chairman, members of the committee, on behalf of the 
servicemembers of your United States Coast Guard, I thank you 
for your continued support, and for the opportunity to 
highlight some of the successes and challenges, and I look 
forward to your questions. Semper paratus.
    Mr. Maloney. Thank you, Master Chief. We are also joined by 
Rear Admiral Mark H. Buzby, the Administrator for the Maritime 
Administration.
    Admiral Buzby, you may proceed.
    Admiral Buzby. Good morning, Chairman DeFazio, Chairman 
Maloney, Ranking Member Gibbs, and members of the subcommittee. 
I appreciate the opportunity to testify this morning on the 
President's fiscal year 2020 budget priorities for the Maritime 
Administration.
    Congress recognized long ago that a robust U.S. merchant 
marine is critical for defending our Nation and growing our 
economy. It provides the essential sealift capacity our Nation 
needs to respond to domestic and international crisis. It 
supports hundreds of thousands of jobs at sea and ashore. If 
properly valued and supported, it offers our Nation the 
opportunity to control its domestic and international commerce.
    Regrettably, over the past several decades we have allowed 
this indispensable national asset to erode. Today, of 
approximately 50,000 large oceangoing commercial vessels 
operating around the world, only 181 of them fly the U.S. flag. 
Of those, only 81 operate exclusively in international trade. 
The remaining 100 operate almost exclusively in domestic Jones 
Act trade. This decline in ships has contributed to a drop in 
the number of qualified U.S. mariners that a long-term national 
emergency would require.
    While commercial vessels provide sustained sealift, our 
Nation relies on the 46 Government vessels of the Ready Reserve 
Force for initial emergency sealift response to domestic crisis 
and military deployments. However, these vessels now average 44 
years of age. We struggle to maintain their readiness. While 
funded by the Defense Department, the Maritime Administration 
supports the Navy's surge sea left recapitalization strategy, 
which includes a combination of targeted service life 
extensions, acquiring and converting used vessels, and building 
new vessels in U.S. shipyards.
    I would add that a central challenge is the fact that our 
maritime industry is not competing on a level playing field. We 
are matched against lower priced foreign competitors, who 
benefit from state subsidies, lax regulatory requirements, and 
favorable tax policies. This is all part of their attempt to 
achieve a strategic advantage against the United States.
    To help ensure a strong domestic maritime industry and the 
U.S. merchant marine by supporting the competitiveness of the 
U.S.-flag fleet and the education and training of the next 
generation of merchant mariners, the President's fiscal year 
2020 budget requests $682.5 million for the Maritime 
Administration.
    The budget request supports the Maritime Security Program, 
which provides a $5 million stipend per U.S.-flagged ship 
enrolled, in return for assured access to the 60 enrolled ships 
for military sealift, and to a multimillion-dollar global 
intermodal network. The stipend also supports the employment of 
the qualified mariners necessary to crew the Ready Reserve 
Force.
    The President's budget also invests in the U.S. Merchant 
Marine Academy, which trains and educates leaders obligated to 
serve as shipboard officers at sea and commissioned officers in 
our Active and Reserve Armed Forces. It also provides funding 
assistance to our six State maritime academies, which graduate 
approximately three-quarters of our entry-level merchant marine 
officers and, critically, includes funding for a third new 
training ship. We greatly appreciate the work of those on this 
committee and across the Congress who support this critical 
investment in our merchant marine training infrastructure.
    Finally, the request provides funding for the ship disposal 
program, including support to maintain the Nuclear Ship 
Savannah, while decommissioning its defueled reactor.
    In brief, as a Nation we must once again prioritize 
maritime issues if we are to adequately defend our Nation and 
grow our economy. Mr. Chairman, I appreciate the subcommittee's 
continued support of these priorities, and look forward to your 
questions, sir.
    [Admiral Buzby's prepared statement follows:]

                                 
  Prepared Statement of Rear Admiral Mark H. Buzby, U.S. Navy (Ret.), 
                 Administrator, Maritime Administration
    Good morning, Chairman Maloney, Ranking Member Gibbs and members of 
the Subcommittee. I appreciate the opportunity to testify this morning 
on the President's Fiscal Year (FY) 2020 budget priorities for the 
Maritime Administration (MARAD). MARAD's statutory mission is to 
foster, promote, and develop the United States merchant marine and 
maritime transportation industry to meet the economic and security 
needs of the Nation. This budget request furthers that mission by 
investing in U.S. mariner training, supporting programs that help U.S.-
flag commercial vessels compete globally, and maintaining sealift 
readiness to meet national security requirements.
                         fy 2020 budget request
    The United States is--and must remain--a maritime nation. A strong, 
resilient, reliable and efficient marine transportation system is 
required to keep the United States competitive in the global economy 
and to maintain our military strength. MARAD's programs strengthen and 
promote the U.S. merchant marine industry to ensure sealift capacity is 
available to support our defense and economic security needs.
    The number of U.S.-flag vessels operating in international trade 
has been at historic lows over the past several years. Of approximately 
50,000 large, oceangoing commercial vessels operating around the world 
today, only 181 fly the U.S. flag. Of those, 81 vessels operate 
exclusively in international trade. The remaining 100 operate almost 
exclusively in domestic (``Jones Act'') trade. These U.S.-flag vessels 
are critical to the employment base for mariners with the unrestricted 
credentials and training required to crew Government ships used to 
deploy and sustain our armed forces around the world. As the fleet 
dwindles, so does the employment base for U.S. merchant mariners and 
the U.S. shipbuilding and repair industry, which are all essential 
components of national security. In addition, ensuring our capability 
to participate as a nation in international maritime commerce is a 
critical component to remaining globally and economically competitive. 
Without U.S.-flag vessels operating in international trade, the U.S. 
would become completely reliant on foreign-flag shipping services.
    The Budget requests a total of $682.5 million to support MARAD's 
programs in FY 2020. These resources will focus on maintaining the 
competitiveness of the U.S.-flag internationally trading commercial 
fleet and training the next generation of well-qualified merchant 
mariners. MARAD remains committed to marine transportation policies 
that improve security, address our Nation's critical maritime 
infrastructure gaps, and leverage technology to meet the needs and 
challenges of the marine transportation industry. MARAD works in a 
variety of areas involving shipyards, ports, waterways, ships and 
shipping, vessel operations, national security and strategic mobility, 
ship disposal, and maritime education. A summary of the FY 2020 request 
is provided below.
                           national security
    The U.S. merchant marine is a fundamental component of our national 
defense strategy. Our strategic sealift relies on a Government-owned 
fleet and assured access to commercially operated U.S.-flag vessels, as 
well as the intermodal networks maintained by these vessel operators, 
to transport equipment and supplies to deploy and sustain our military 
forces anywhere in the world. Critical to the operation of both 
Government-owned and commercial U.S.-flag vessels is an adequate supply 
of qualified U.S. mariners to crew them. Currently, we face significant 
readiness challenges due to aging Government-owned vessels, 
historically low numbers of U.S.-flag vessels operating in 
international trade, and ensuring we have a sufficient number of 
qualified U.S. mariners that would be needed in the event of a long-
term national emergency. I am concerned that the current fleet size 
could impact our ability to quickly assemble an adequate number of 
qualified mariners with the proficiency to operate large ships 
(unlimited horsepower and unlimited tonnage) needed for surge and 
sustainment sealift operations during a mobilization that lasts more 
than six months. We may be short of the number of mariners needed to 
meet crewing requirements beyond those first six months.
Maritime Security Program (MSP)
    For FY 2020, $300 million is requested for the MSP, providing the 
full authorized stipend level of $5 million for each of the 60 ships 
enrolled in the program. The Maritime Security Act of 1996 established 
the MSP, which ensures access to 60 active, commercially viable, 
militarily useful, privately owned U.S.-flag vessels and crews 
operating in the international trade, and the necessary global 
intermodal logistics networks to move military equipment and supplies 
during armed conflict or national emergency. This program also 
facilitates critical employment for up to 2,400 U.S. merchant mariners 
qualified to sail on oceangoing vessels, some of whom would be called 
upon to crew the Government-owned fleet when those vessels are 
activated, and approximately 5,000 shore side maritime professionals 
each year. Participating MSP operators commit to making their ships and 
multibillion-dollar global networks of intermodal facilities and 
commercial transportation resources for service to the Department of 
Defense (DOD) during times of war or national emergency.
    Overall, the MSP fleet's military capacity is at the highest level 
in the program's history. Being at full capacity bolsters the ability 
of MARAD and the U.S. merchant marine to meet DOD mission requirements. 
The ships and crews receiving MSP stipends have supported every U.S. 
conflict since its inception in 1996, including Operations Enduring 
Freedom and Iraqi Freedom, by providing cargo preference-contracted DOD 
transportation services. These vessels stand ready to play a vital role 
in support of U.S. military operations worldwide.
National Defense Reserve Fleet (NDRF) and Ready Reserve Force (RRF)
    MARAD maintains a fleet of Government-owned vessels in the NDRF, 
which include training ships on loan to the six state maritime 
academies (SMAs) and the U.S. Merchant Marine Academy (USMMA or 
Academy). The fleet includes 46 RRF vessels that are maintained and 
ready for operation within five or ten days for transport of military 
cargo to critical areas of operation. In addition to providing 
strategic sealift support for DOD, these RRF vessels are relied upon to 
provide support services to emergency response personnel, such as meals 
and berthing, and deliver relief supplies, equipment, vehicles and 
emergency personnel to impacted disaster areas during national 
emergencies, including severe weather events. Our Nation has called 
upon RRF and NDRF vessels to respond to several recent disasters 
providing support for thousands of emergency responders.
    The FY 2020 Budget for the DOD requests $352 million for MARAD to 
maintain the RRF. Funds will allow MARAD to continue to provide ready 
surge sealift support and special mission vessels from the RRF fleet, 
and also maintain MARAD's NDRF fleet mooring sites. This request 
includes an increase from FY 2019 that is necessary for maintaining the 
aging RRF fleet of ships, which have an average age of more than 44 
years and significantly increased maintenance, repair, and regulatory 
compliance costs due to more stringent vessel inspections.
    For the past year, we have struggled to maintain readiness levels 
across the fleet. Older, increasingly obsolete equipment and systems 
require more time and money to repair or replace, if replacement parts, 
equipment and systems are even available. Thus, the escalating cost of 
service life extensions is an ongoing concern. Requested funding is 
needed to complete necessary repairs to comply with new regulatory 
requirements, such as upgrading and installing enclosed lifeboats, 
addressing exhaust emissions, and treating ballast water. MARAD is 
working with the U.S. Transportation Command (USTRANSCOM) and the U.S. 
Navy to address the urgent need for recapitalization of the RRF to 
ensure the readiness of these 46 ships. Long-term, MARAD supports the 
Navy's surge sealift recapitalization strategy, which includes a 
combination of targeted service life extensions, acquiring and 
converting used vessels, and building new sealift vessels in U.S. 
shipyards.
                    maritime education and training
    MARAD provides funding and oversight for mariner training programs 
to produce highly skilled U.S. Coast Guard (USCG) credentialed officers 
for the U.S. merchant marine. It takes many years of training to 
develop the necessary mariner competencies for deck and engineering 
officer positions on large vessels in international trade. An adequate 
pool of U.S. merchant mariners is vital to both the peacetime 
commercial success of the U.S.-flag fleet and to crew Government-owned 
surge sealift vessels to deploy and sustain U.S. forces overseas in 
times of national emergency.
    The USMMA and SMAs support our Nation with well-educated and 
trained merchant mariners entering the maritime industry who can serve 
in support of military operations, national emergencies, and 
humanitarian missions. The USMMA graduates an average of 225 USCG-
credentialed merchant marine officers annually who hold an unlimited 
license available to crew U.S.-flag ocean-going ships. Additionally, 
the combined six State Maritime Academies (SMAs) graduate approximately 
900 USCG-credentialed merchant marine officers annually.
United States Merchant Marine Academy
    The President's FY 2020 Budget requests $82 million for the USMMA. 
Of this amount, $78 million will support Academy operations, and $4 
million will fund priority maintenance and repairs to the Academy's 
facilities, grounds, and equipment. These resources will enable the 
Academy to effectively achieve its core responsibility to educate and 
train the next generation of outstanding leaders as shipboard officers 
at sea and commissioned officers in our active and reserve armed 
forces. This funding will also support an approximately seven percent 
increase in the size of the regiment as the Academy gets back to the 
full student capacity following the completion of renovation of the 
barracks.
    The USMMA is an accredited institution of higher education 
operating under the DOT and managed by MARAD. The USMMA offers a four-
year maritime-focused program, centered on rigorous academic and 
practical STEM-based technical training that leads to a Bachelor of 
Science degree, a USCG merchant mariner credential (MCC) with an 
unlimited tonnage or horsepower officer endorsement, and a commission 
(if offered) as an officer in the reserve or active Armed Forces. 
Distinctly, USMMA graduates incur an obligation to serve five years as 
a merchant marine officer aboard U.S. documented vessels or on active 
duty with the U.S. Armed Forces or uniformed services. If serving in 
the reserves, they must remain as a commissioned officer for eight 
years.
    The Academy, MARAD, and DOT are committed to ensuring the safety of 
Midshipmen both on campus and during their sea year. We have 
significantly improved Academy programs and procedures related to 
sexual harassment and sexual assault, and are making progress to 
instill a culture that does not tolerate such behavior. I am pleased 
with the direction and momentum of change at the Academy, but am also 
cognizant that eliminating sexual assault and sexual harassment is an 
issue that requires consistent attention. As such, addressing sexual 
harassment and sexual assault at the Academy and during sea year 
training remains a top priority for myself, our new Superintendent, 
RADM Jack Buono, and DOT leadership. MARAD will work with USMMA and DOT 
leadership to not only continue to establish effective procedural 
safeguards to respond to sexual assault and harassment, but to also 
ensure USMMA adopts a proactive mindset to respond immediately to 
conduct that enables assault and harassment. Proactive prevention 
measures are also critical to creating a learning environment that will 
enable the Academy to support MARAD's strategic goal of a maritime 
workforce that draws from all communities across the Nation.
State Maritime Academies
    In addition to providing oversight of the USMMA, MARAD provides 
funding assistance to six SMAs \1\, which collectively graduate more 
than three-fourths of the entry-level merchant marine officers 
annually. The President's FY 2020 Budget includes $242.3 million for 
SMA program support. This request includes $205 million for the 
construction of a third training ship. Unlike the USMMA, SMA cadets 
receive most of their sea time while sailing on board MARAD-provided 
training ships under instruction by their academy, with some training 
on commercial or military vessels. The current SMA training ships are 
very old and must be replaced. We appreciate the support Congress has 
provided for the School Ship recapitalization program, by appropriating 
funding for one vessel each in FY 2018 and FY 2019. Since that first 
appropriation in March 2018, MARAD has developed and implemented an 
acquisition strategy, incorporated industry feedback into the ship 
design, and is well along in evaluating proposals to select a Vessel 
Construction Manager who will contract for the construction of the 
vessels.
---------------------------------------------------------------------------
    \1\ The six SMAs are: California Maritime Academy; Great Lakes 
Maritime Academy; Texas A&M Maritime Academy; Maine Maritime Academy; 
Massachusetts Maritime Academy; and State University of New York 
Maritime College.
---------------------------------------------------------------------------
    Additionally, the request provides $30.1 million to maintain the 
six existing SMA training ships in accordance with the USCG and 
American Bureau of Shipping requirements, and training ship capacity-
sharing measures to allow uninterrupted availability of mandatory at-
sea training opportunities for SMA cadets. Ensuring the continued 
availability of SMA training vessels is a critical need and high 
priority for MARAD. Training ship maintenance work is increasingly 
critical and costly as the ships age and approach or exceed their 
designed service life. MARAD will use the funds to sequence and address 
priority maintenance needs across all the training vessels, and to 
ensure that cost effective viable alternatives are available for SMAs 
that require additional training capacity.
    Additionally, the request provides $2.4 million to fund the Student 
Incentive Program (SIP), which provides educational financial 
assistance to 75 new cadets each year (across all SMAs) who participate 
in this service obligation program. SIP students must maintain an 
unlimited USCG credential for six years, fulfill a three-year service 
obligation to serve as a merchant marine officer aboard U.S. documented 
vessels, and serve in a reserve unit of an Armed Forces or uniformed 
service for eight years if a commission is offered. The Budget also 
includes $3 million for direct payments to provide for operational 
support to each of the six SMAs, and $1.8 million for training ship 
fuel payments. The SMAs regard the SIP program and support for their 
training ships as among the most important recruiting tools to 
encourage potential cadets to pursue a merchant marine career. These 
programs and resources will also help ensure MARAD can fulfill its 
commitments to National security and supporting the growth of the 
Nation's maritime workforce, by creating opportunities for individuals 
from all backgrounds to serve as mariners.
                        other maritime programs
Ship Disposal Program
    The President's FY 2020 Budget requests $5 million for the ship 
disposal program, including $3 million to maintain the Nuclear Ship 
SAVANNAH (NSS) in protective storage, according to Nuclear Regulatory 
Commission (NRC) requirements, while decommissioning of the vessel's 
defueled nuclear reactor, components, and equipment is in progress. The 
ship disposal funding request also includes $2 million for staff and 
administrative program costs.
    MARAD is the ship disposal agent for Federal government-owned 
merchant-type vessels of 1,500 gross tons or greater and has custody of 
non-retention ships in the NDRF. When ships are determined to be no 
longer of sufficient value to merit the cost of further preservation, 
MARAD arranges for their responsible disposal, with priority emphasis 
on the disposal of vessels in the worst condition. Currently, MARAD has 
seven obsolete NDRF vessels not yet under contract for disposal, which 
is a historic low.
    As a Federal licensee, MARAD is responsible for continuing the 
required protective storage activities for the NSS until 
decommissioning and license termination are complete. Protective 
storage activities include radiological protection, vessel maintenance, 
lay berthing, and custodial care. The program received funding for 
decommissioning in FY 2017 to initiate and complete Phase I, and 
additional funding in FY 2018 for Phase II and Phase III, fully funding 
the three-phased and seven-year decommissioning project. Phase I is 
comprised of administrative and industrial activities that complete the 
prerequisites for commencement of the heavy engineering and industrial 
activities in Phase II. Phase III is the final license termination 
period before release of the vessel to MARAD for final disposition. All 
decommissioning and license termination activities are on track for 
completion ahead of the December 2031 required NRC deadline.
                               conclusion
    These programs represent MARAD's priorities supported by the 
President's Budget. We will continue to keep this Subcommittee apprised 
of the progress of our program activities and initiatives in these 
areas in the coming year.
    Mr. Chairman, thank you for the opportunity to present and discuss 
the President's Budget for MARAD. I appreciate the Subcommittee's 
continuing support for maritime programs and I look forward to working 
with you on advancing maritime transportation in the United States. I 
will be happy to respond to any questions you and the members of the 
Subcommittee may have.

    Mr. Maloney. Thank you, Admiral.
    We are also joined by the Chairman of the Federal Maritime 
Commission.
    Mr. Khouri, you may proceed.
    Mr. Khouri. Thank you and good morning, Chairman DeFazio, 
Chairman Maloney, Ranking Member Gibbs, and members of the 
committee. Thank you for the opportunity to discuss the Federal 
Maritime Commission's fiscal year 2020 funding request.
    I am joined today by my colleagues, Commissioners Louis 
Sola and Daniel Maffei.
    Last year this committee was instrumental in passing the 
Frank LoBiondo Coast Guard Act of 2018. The act broadened the 
Commission's authority to carry out its mission to protect the 
shipping public, and we are working diligently to implement the 
various parts of that legislation.
    The American economy relies on a competitive and efficient 
ocean transportation system. To meet that requirement, the 
Commission administers a focused antitrust regime tailored to 
the ocean liner industry.
    We continuously monitor cooperative operational agreements 
filed at the Commission by ocean carriers and by marine 
terminal operators. These collaborative business arrangements 
allow the ocean carriers or the marine terminals to achieve 
operating efficiencies and cost savings.
    We closely monitor the agreement parties' business 
activities, together with the broader international ocean 
shipping marketplace, for signs of improper collusive or 
anticompetitive behavior. We have a comprehensive and ongoing 
monitoring and compliance system that is constantly evolving to 
respond to changes in agreements, the industry, and the 
marketplace.
    Compared to the last decade that witnessed significant 
changes in the ocean transportation services market, 2018 was a 
more stable period for the industry. There have been no further 
consolidations among the top tier of ocean carriers. There does 
remain a surplus of ocean vessel capacity, and the marketplace 
is highly competitive, suggesting that cargo shippers will 
continue to benefit from lower freight rates offered by the 
ocean carriers.
    One area of uncertainty in the coming year is the 
International Maritime Organization mandate for vessels to 
either burn low-sulphur fuel or to install exhaust stack 
scrubbers to remove the sulfur from the higher sulfur bunker 
fuels. The mandate begins in January 2020. Estimated 
implementation and then ongoing industrywide compliance costs 
run as high as $15 billion per year.
    Now, normally, ocean carriers will try to pass these added 
direct costs on to shippers. The Commission is monitoring this 
issue to ensure that carrier cost recovery efforts do not 
violate the Shipping Act and harm U.S. exporters and consumers. 
Commissioner Dye is leading an investigation to examine carrier 
and marine terminal practices in assessing detention and 
demurrage charges. These are fees that cargo shippers pay when 
a container sits at a terminal facility beyond allowed free 
time, or a container is not unloaded and returned to the ocean 
carrier within an agreed period. Commissioner Dye is in the 
final phase of this effort, and will present her final report 
and recommendations to the Commission by September.
    Regarding our budget, the Commission is an agency with a 
specialized mission, requiring a small but highly skilled 
workforce. We are requesting $28 million to support 128 full-
time-equivalent personnel in fiscal year 2020. Slightly more 
than $24 million of this request goes to salaries and office 
rent. All other expenses associated with operating the agency, 
such as information technology, consulting, and outsource 
services, travel, and supplies are funded from the remaining 
roughly $4 million.
    I am proud of the work that our dedicated FMC staff 
performs every day, and the contribution our agency makes 
towards ensuring competition and integrity for America's ocean 
supply chain. We are grateful for the support of this committee 
and its members, and I look forward to working with each of 
you.
    I am happy to answer any questions you might have about the 
Federal Maritime Commission and its work. Respectfully, I 
request the full written testimony be accepted to the record. 
Thank you.
    [Mr. Khouri's prepared statement follows:]

                                 
    Prepared Statement of Hon. Michael A. Khouri, Chairman, Federal 
                          Maritime Commission
    Chairman Maloney, Ranking Member Gibbs, Members of the Committee, 
thank you for this opportunity to appear before you today to testify in 
support of the Fiscal Year 2020 budget request of the Federal Maritime 
Commission and to discuss the work of the agency as well as 
developments in the international ocean transportation industry we 
monitor. I am joined today by my colleagues, Commissioners Rebecca F. 
Dye and Daniel B. Maffei.
                    the federal maritime commission
    The FMC is an independent agency with specialized experience in the 
international ocean transportation industry. We administer a focused 
antitrust regulatory regime tailored to the particular factors 
affecting the ocean liner trade.
    Based on economic and non-economic conditions affecting the 
international ocean liner trade, Congress enacted the Shipping Act of 
1916 and first constituted the United States Shipping Board. The 1916 
Act provided for certain types of competitor collaborations that would 
not traditionally be permitted under other antitrust statutes in order 
to ensure the availability of ocean transportation and stability of the 
shipping infrastructure upon which our international commerce depends. 
Under the Shipping Act of 1984, as amended by the Ocean Shipping Reform 
Act of 1998, Congress found that collaborative joint venture agreements 
between and among ocean carriers and marine terminal operators may and 
do provide efficiencies and reduced costs that ultimately benefit U.S. 
exporters and saves the U.S. consumer money provided that such 
agreements are review by the Commission and determined to not be 
materially anticompetitive. The FMC reviews and monitors these joint 
collaborations and agreements under the Shipping Act to ensure that 
procompetitive efficiencies and cost savings are obtained for the 
benefit of U.S. consumers, and that any anticompetitive effects are 
prevented or properly mitigated.
    Our Annual Report was submitted on April 1, 2019 and provides a 
comprehensive summary of the Commission's activities and industry 
developments in Fiscal Year 2018. Our Fiscal Year FY 2020 Budget 
Justification was submitted on March 18, 2019 and provides detailed 
support for our budget request.
                    fiscal year 2020 budget request
    The FMC's Fiscal Year (FY) 2020 Budget Request is $28,000,000 to 
support 128 full-time equivalent positions (FTEs). This funding level 
builds on the Commission's FY 2019 budget request of $27,490,000 and 
primarily reflects necessary increases in operating costs and 
information technology modernization.
    The FMC is a small agency with a technical, commercial, and 
competition focused mission requiring a specialized workforce. The 
great majority of our budget, $24,057,000, goes to Personnel 
($20,638,000) and Rent ($3,419,000). All other costs associated with 
operating the agency such as interagency expenses, utilities, 
information technology, travel, supplies, equipment, miscellaneous 
purchases, and consulting services are funded from the remaining 
$3,943,000.
    The FMC staff includes a high percentage of economists and 
attorneys--career fields that tend to command higher compensation in 
order to successfully recruit and retain qualified candidates. The 
agency must continue to invest in our workforce, particularly in 
attracting and retaining the economists and transportation analysts who 
perform the critical economic analysis and oversight of the 
marketplace. Overhead costs such as interagency services, commercial 
services, travel and transportation, supplies, and equipment account 
for most of the remaining budget dollars. We constantly work to find a 
balance between our resources and our workload, working to prioritize 
our mission-critical activity.
                          lobiondo legislation
    On December 4, 2018, the ``Frank LoBiondo Coast Guard Authorization 
Act of 2018'' was enacted as Public Law No. 115-282 (LoBiondo Act). 
Most of the changes are aimed at broadening the Commission's authority 
and increasing the tools at the Commission's disposal to carry out its 
mission. It makes several changes and places further restrictions on 
cooperation between or among ocean carriers and marine terminal 
operators (MTOs). These changes include: removing antitrust immunity 
for certain activities; prohibiting certain joint procurement 
activities; restricting overlapping agreement participation; and 
modifying the legal standard for enjoining agreements to jointly 
procure certain services. The LoBiondo Act also expands and clarifies 
the Commission's authority to seek information from MTOs, and, during 
agreement review, to seek information from interested parties other 
than the filing parties. The legislative history reveals that many of 
these provisions were intended to address concerns regarding carriers' 
ability to form alliances and then collectively negotiate with certain 
domestic service providers, and the potential impacts on shippers and 
such port service providers. H.R. Rep. No. 115-1017 at 5-6 (2018).\1\
---------------------------------------------------------------------------
    \1\ H.R. Rep. No. 115-1017 accompanied H.R. 2593, an earlier 
authorization bill that contained several of the provisions later 
incorporated in the Authorization Act.
---------------------------------------------------------------------------
    The Commission applauds the Committee's work on this important 
legislation. We are diligently working on the LoBiondo Act's 
implementation and I assure the Committee that the additional 
authorities provided in the legislation will be implemented and 
enforced by the Commission as intended by Congress.
                       industry developments 2018
    The container shipping industry plays an integral role in America's 
international trade and commerce. American importers and exporters rely 
on container shipping to meet domestic retail demand, to provide the 
inputs manufacturers require, and to allow our companies and farmers to 
reach markets overseas.
    In FY 2018, approximately 35 million TEUs (twenty-foot equivalent 
units) moved through our Nation's ports, a 5 percent increase from FY 
2017. The U.S. imported over 23 million TEUs last fiscal year valued at 
$803 billion. This was an increase of over 6.3 percent by volume from 
FY 2017. In the same period, the U.S. exported approximately 12 million 
TEUs in FY 2018 with a value of $290 billion, a 2.7 percent increase 
over FY 2017 by volume. The U.S. share of the world's container trades 
was 16 percent, down slightly from FY 2017. Primarily as a result of 
continued growth in U.S. imports, the U.S. container trade imbalance 
worsened in FY 2018. Such imbalance is measured by the number of 
imported loaded containers versus exported loaded containers. For every 
100 loaded export containers shipped from the U.S., 195 loaded 
containers were imported into the U.S. For FY 2017, that metric was 190 
loaded import containers.\2\
---------------------------------------------------------------------------
    \2\ Source: PIERS Interactive.
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    The last decade has seen significant changes to the ocean 
transportation services marketplace. Mergers and acquisition activity 
among shipping lines and the bankruptcy of a top-ten ocean carrier 
reduced the number of major ocean carriers serving the international 
trade. Further, the formation of three global alliances--2M,\3\ 
OCEAN,\4\ and THE \5\--then realigned the operation of the U.S. east-
west trades. Compared with prior years that experienced these changes, 
2018 was a more stable period for the container shipping industry.
---------------------------------------------------------------------------
    \3\ The 2M Alliance carriers are Maersk Line and Mediterranean 
Shipping Company.
    \4\ The Ocean Alliance carriers are CMA CGM, COSCO Shipping Line, 
Evergreen, and Orient Overseas Container Line.
    \5\ THE Alliance carriers are Hapag Lloyd, ONE, and Yang Ming.
---------------------------------------------------------------------------
                        2019 industry challenges
    The calm of 2018 suggests the ocean carriers are in a settling 
period, assimilating companies they have acquired or merged with while 
adjusting to the new marketplace structure. Nevertheless, the industry 
faces business and operational issues that may challenge their revenues 
and financial health.
Excess Capacity
    There continues to be a surplus of carrier vessel capacity compared 
to global trade volumes. Shipping lines traditionally address this 
imbalance by offering lower freight rates in order to fill vessels or 
maintain an individual carrier's market share. Ocean freight rates have 
been relatively flat over the past decade, 2009-2018. Average revenue 
(rate per container) from China to the U.S. West Coast declined by 
nearly 17 percent in nominal terms. However, adjusted for inflation, 
real rates are 29 percent lower over this period. This decline provides 
an insight into the competitive pressure ocean carriers face as well as 
the real value ocean transportation has provided to American companies 
through consistently low ocean freight rates. In terms of growth, the 
vessel capacity of the ocean lines continues to expand through new 
vessel building at a rate that exceeds the growth in global trade 
volumes.
IMO 2020 Low Sulphur Rule Requirement
    An International Maritime Organization (IMO) Rule, commonly 
referred to as ``IMO 2020'', requires ocean carriers, beginning in 
January 2020, to burn low sulfur fuel that has a 0.5 percent sulfur 
content or install exhaust scrubbers in order to continue to run their 
vessels with heavy bunker fuel that contains 3.5 percent sulfur 
content. The low-sulphur requirements could boost ship fuel costs by as 
much as one third, and estimates run between $10 to $15 billion dollars 
a year in additional costs for ocean carriers. There is uncertainty 
about how some ocean carriers will comply with the IMO requirements, 
whether adequate supplies of low-sulphur fuel will be available, 
whether adequate supply of scrubber equipment will be available, and 
how individual ocean carriers will try to pass on part or all of these 
additional costs to cargo shippers.
    The Commission is monitoring this issue because of our interest in 
an efficient marketplace and to ensure that carrier efforts to recover 
costs associated with the new standards do not violate the Shipping 
Act. A primary concern to the Commission under the Shipping Act is 
whether ocean carrier bunker charge adjustment formulas are clear and 
definite.
    review of ocean carrier and marine terminal operator agreements
Ocean Carrier Agreements
    As noted above, nine of the major ocean carriers serving the U.S. 
trades have organized themselves under the Shipping Act into three 
major global alliances--2M, OCEAN, and THE. These alliances are joint 
operating agreements of ocean carriers where they are allowed to 
discuss and agree on the deployment of specific service strings of 
vessels in various trade routes. Each alliance operates multiple 
services in the major Trans-Pacific (Asia-U.S. and Canada), and Trans-
Atlantic (Europe-U.S. and Canada) trades. These three alliances supply 
80 percent of the vessel capacity in each of these trade lanes.\6\
---------------------------------------------------------------------------
    \6\ Source: PIERS Interactive.
---------------------------------------------------------------------------
    By all accounts, the marketplace for containerized ocean 
transportation services remains open and highly competitive. The 
Herfindahl-Hirschman Index values for the Trans-Pacific and North-
Atlantic trade lanes reveal that the marketplace remains 
unconcentrated. Smaller companies in specialized trades continue to 
exist and there are even new market entrants. No one company, even 
among the top carriers, has a dominant position in trade volumes to or 
from the United States. At year end, for U.S. combined import and 
export trades, the market share for all container operators were as 
follows: Maersk (13.2%), CMA CGM (12.8%), MSC (12.6%), COSCO/OOCL 
(12.0%), Ocean Network Express (10.8%), Hapag Lloyd (8.5%), Evergreen 
(7.7%), Yang Ming (3.9%), HMM (3.8%), Zim (2.6%), and all other 
combined carriers such as Crowley, Seaboard, PIL, SM Lines, Wan Hai, 
Matson, and ACL (12.1%).\7\
---------------------------------------------------------------------------
    \7\ Source: PIERS Interactive.
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    As discussed below, a critical function of the Federal Maritime 
Commission is to ensure that these carrier agreements do not violate 
the Shipping Act's competition standard.
Marine Terminal Operator Agreements
    There are 276 Marine Terminal Operators along the U.S. East, Gulf, 
and Pacific coasts that are registered with the FMC. The Commission 
oversees 89 port and MTO joint and/or collaborative agreements among 
these operators. To facilitate operations, some U.S. marine terminals 
enter into agreements on rates and/or terminal charges, or to cooperate 
in their daily terminal operations and related practices.
    The demands of significantly bigger vessels unloading larger 
numbers of containers at each port call demands more of marine 
terminals in terms of productivity and infrastructure. As a result, 
ports and marine terminal operators have filed agreements to combine 
aspects of their operations, finance necessary infrastructure 
improvements, increase terminal velocity, develop collective solutions 
to mitigate cargo bottlenecks, and a host of other business activities, 
all aimed at enhancing their ability to compete against other ports for 
cargo.
    In recent years, it has become increasingly important for ports and 
marine terminal operators to address and mitigate air quality and 
traffic congestion impacts on their local communities. Ports use 
agreements filed at the Commission to address environmental and 
community impact issues that require coordination within a port or 
region.
    Ports and MTOs use agreements filed at the Commission to address 
concerns that require a collective solution. For example, the supply of 
chassis in ports is critical to moving containers into and out of the 
ports. FMC-filed agreements have been used to help ports and MTOs in an 
area or region to manage chassis availability.
       competition and integrity for america's ocean supply chain
Ensuring Competition
    At the heart of the mission of the Federal Maritime Commission is 
ensuring a competitive and reliable international ocean transportation 
system that supports the U.S. economy and protects the public from 
unfair and deceptive practices. We keep constant oversight of the 
marketplace in general and the specific monitoring of ocean carrier 
and/or marine terminal operator behavior under agreements filed at the 
Commission. The FMC monitors agreements, service contracts, and tariffs 
in key trades as barometers of market cycles and shifts in the balance 
of supply and demand.
    The reporting requirements mandated by the Commission for the 
purposes of marketplace and agreement monitoring are not static. The 
Commission continuously refines procedures and requirements to help us 
better monitor and interpret developments in the shipping industry.
    The Commission may challenge an agreement in Federal District Court 
during the 45-day initial agreement filing period or any time after the 
effective date if we find evidence that service levels, freight rates, 
or charges by and among a group of ocean carriers or MTOs operating 
within an agreement are not reflective of the overall prevailing market 
conditions.
Ensuring Integrity
    The FMC engages in a variety of activities to protect the public 
from financial harm, including licensing, registration, and monitoring 
of financial bond requirements for over 6,000 ocean transportation 
intermediaries (OTI) \8\; periodic auditing of these OTIs, 
investigating and prosecuting unreasonable or unjust practices, ruling 
on private party complaints alleging Shipping Act violations, and 
helping mediate and resolve disputes concerning the shipment of goods 
or the carriage of passengers. These activities contribute to the 
competitiveness, integrity, fairness, and efficiency of the Nation's 
import and export supply chains and ocean transportation system. In 
addition, the FMC ensures that passenger vessel operators maintain 
proper financial coverage to reimburse cruise passengers in the event 
their cruise is cancelled or to cover liability in the event of death 
or injury at sea.
---------------------------------------------------------------------------
    \8\ Ocean Transportation Intermediaries include non-vessel 
operating common carriers and ocean freight forwarders
---------------------------------------------------------------------------
removing regulatory burdens, clarifying the shipping act, and removing 
                  obstacles in the ocean supply chain
    The Commission systematically reviews its regulatory requirements, 
interpretations of the Shipping Act, and processes for efficiency and 
effectiveness. A valuable and important role for the Commission is its 
ability to bring stakeholders together and facilitate workable 
solutions to problems.
Regulatory Reform Initiatives
    The Commission established a Regulatory Reform Task Force in March 
2017 with Managing Director Karen V. Gregory assigned as the Task Force 
leader. Since its establishment, the Task Force has undertaken a 
comprehensive examination of Commission rules and regulations, 
published notices and solicited the views of the public as part of the 
process, and released a strategy and time schedule for achieving those 
priorities.
41102(c) Interpretive Rule
    Effective December 17, 2018, following full notice and public 
comment procedures, a new Commission interpretive rule clarified for 
the industry and shippers the FMC's jurisdictional and evidentiary 
requirements when alleging conduct that would violate the Shipping 
Act's prohibition on unjust or unreasonable practices under 46 U.S.C. 
41102(c). Pursuant to this rule, a common carrier, OTI, or MTO must 
engage in a practice or regulation in a normal, customary, and 
continuous basis and such practice or regulation must be found to be 
unjust or unreasonable in order to constitute a violation of the 
Shipping Act. This interpretation restores the standard of what 
constitutes a violation under section 41102(c) of the Shipping Act to 
its traditional and proper definition under the Shipping Act of 1984, 
reflects longstanding Commission case law and related legal precedent, 
and reflects the clear intent of Congress.
Fact Finding 28
    On March 5, 2018, the Federal Maritime Commission initiated Fact 
Finding Investigation No. 28, a non-adjudicatory investigation into the 
practices of vessel operating common carriers and MTOs relating to U.S. 
demurrage and detention charges. Demurrage is the charge per container 
for the use of ground space at the marine terminal. Detention is the 
charge by the ocean carrier for use of the container equipment. All 
charges are subject to a set number of free days.
    The Commission designated Commissioner Rebecca F. Dye as the Fact-
Finding Officer and directed her to develop a record through public or 
nonpublic sessions, and issue interim and final reports and 
recommendations. In April 2018, Commissioner Dye issued an Information 
Demand on ocean carriers and marine terminal operators that provided 
the informational foundation for her investigation. The second phase of 
her work consisted of field interviews that took place at the Ports of 
Los Angeles and Long Beach, the Port of Miami, and the Port of New York 
and New Jersey. As a part of that phase of her investigation, she also 
conducted interviews in Washington, D.C.
    The Fact-Finding Officer conducted the investigation and issued an 
Interim Report on September 4, 2018 finding that bringing clarity, 
access, and efficiency to the delivery of cargo from carrier to shipper 
is key to improving the process for how and when detention and 
demurrage charges are levied. The Interim Report also considered 
organization of Innovation Teams of industry leaders to meet on a 
limited, short-term basis to refine commercially viable demurrage and 
detention approaches. On December 3, 2018, the Fact-Finding Officer 
issued a Final Report. The Commission approved the Fact-Finding 
Officer's Final Report on December 7, 2018.
    The work of Innovation Teams consisting of industry experts who are 
part of the ocean freight transportation system and global supply 
chains commenced the next phase of Fact Finding 28. The Teams met with 
Commissioner Dye at the Commission in early April and considered four 
areas identified in the Fact Finding 28 Final Report as offering the 
best opportunities to refine commercially viable demurrage and 
detention approaches: (1) transparent and standardized language for 
detention and demurrage practices; (2) clear, simplified, and 
accessible billing and dispute resolution practices for detention and 
demurrage charges; (3) evidence that would be relevant to resolving 
demurrage and detention billing disputes; and (4) consistent notice to 
cargo interests of container availability.
    A report to the Commission on the Innovation Teams, Commissioner 
Dye's findings, and any possible recommendations she may make, is 
scheduled to be filed by September 3, 2019.
                               conclusion
    I am proud of the contribution our agency makes toward ensuring 
competition and integrity for America's ocean supply chain. The 
Commission is grateful for the support of this Committee and its 
Members. I look forward to working with each of you. I am happy to 
answer any questions you may have about the jurisdiction, work, or 
budget request of the Federal Maritime Commission.
    Thank you.

    Mr. Maloney. I thank the gentleman and will now proceed to 
Members' questions. I begin by recognizing myself for 5 
minutes.
    Admiral Schultz, you were good enough to spend some time 
with me in District 7 recently. You saw the incredible work we 
are doing in the Joint Interagency Task Force. We saw the work 
you do from the Bahamas and Turks and Caicos. We spent some 
time together on the U.S. Coast Guard cutters Isaac Mayo and 
Bear. You were good enough to dangle me out of the back of an 
C-140. And I remember a young man named Kyle Suga, who was our 
boatswain's mate, BM1, who piloted that OTH boat up into the 
back of the Isaac Mayo and notched it up there pretty good. Not 
a bad day's work for a young man carrying the Coast Guard 
Commandant and the chairman of his oversight committee.
    And I want to ask you sir, because I know you are a 
straight shooter and you care about your Coasties, since you 
and I met first at Michael Kozloski's funeral in Mahopac, New 
York. The President's budget would take $1 billion a year out 
of your capital plan, out of your PC&I. I am not going to ask 
you to opine on that, except to tell us, sir, what would that 
mean? If we took at face value the President's budget request 
of $1.2 billion, what would that mean for the United States 
Coast Guard? What would you do?
    Admiral Schultz. Well, Chairman, first, thank you for 
spending some time with the men and women of the Coast Guard. 
And obviously, I think that had an impact on your awareness of 
what our folks do to support the security of the Nation.
    You know, your question, specifically on the capital 
budget, sir, I would tell you the 2020 budget submitted by the 
administration here--you know, forwarded by the Coast Guard up 
to the Department--does focus on our key acquisition 
priorities. First and foremost, the Offshore Patrol Cutter I 
mentioned in my opening statement: That will be about 70 
percent of our offshore capability when we build out that fleet 
of 25 cutters.
    There is the second Offshore Patrol Cutter funding, 
production funding. There is long lead materials for the third 
and fourth cutter in that class, the Polar Security Cutter 
program. There is bridging monies, about $35 million.
    You know, the 2019 budget included a big lift of $675 
million. If you look at about a 6- to 8-year trajectory on our 
capital budget, as proposed versus enacted, we have been the 
benefactors of a lot of strong congressional support on Coast 
Guard acquisitions. But there has been a slight continuous 
uptick: 2019 had that $675 million on top of that trajectory; 
2020 is an off-year, in terms of big funding for polar 
security; as we get into 2021, 2022, 2023 our goal would be to 
build out three Polar Security Cutters, the program of record, 
between now and 2027, 2028.
    So I think that some of that $1 billion you talked to, sir, 
is accountable with the noninclusion of $675 million for the 
Polar Security Cutter in 2020. This is a bridging year. The $35 
million allows us to keep the program of record moving forward, 
program management. It is not a big amount of money. But I 
think, sir, we can stay on track with that.
    Mr. Maloney. And Master Chief, that young man, Kyle Suga, 
you know, what he said to me on that boat that day was, ``What 
I like about the Coast Guard is, if you do your job, it takes 
care of its own. The Coast Guard takes care of its own, and the 
Coast Guard will have your back.''
    What are your concerns about the retention and development 
of young men like that, your young Coasties, when you look at 
this budget?
    Master Chief Vanderhaden. I am glad you had a good 
experience with them. Our boat drivers are some of the best 
boat drivers in the world, and I am thoroughly impressed with 
them every time I am out with them, as well.
    So, you know, we are wringing every efficiency we can out 
of the training system. We could use assistance with operations 
and support funds. That has been fairly flat over the years, 
and as the new assets come online, and they are a little bit 
more expensive to maintain, we are having to find those offsets 
from other places. And they are coming from some of the places 
that affect our quality of life.
    I would like to be able to offer them a little better 
conditions for their housing, a little better opportunities for 
training. And, you know, just basically take care of their 
families a little bit better through more opportunities for 
daycare affordability, things like that. Those are the things 
that take away from their focus while they are at sea. So I 
want them to take care of their families and take care of the 
things back home, and make sure they have everything they need 
to be successful, so they can focus on the mission.
    Mr. Maloney. I thank the gentleman. Admiral Buzby, we have 
a terrible shortage of mariners in this country. What should we 
be doing to fix that?
    Admiral Buzby. Sir, the most direct way we can fix that 
shortage is by having more ships at sea for them to be 
employed. Quite simply, that is how we are going to grow our 
mariner pool. They have to have some place to work. So we have 
to have a larger fleet, be it a Jones Act fleet and 
internationally trading fleet, to have employment places for 
those mariners to practice their trade and to be promoted.
    Mr. Maloney. Thank you, sir.
    Mr. Gibbs?
    Mr. Gibbs. I thank the chairman. Thank you.
    Admiral Schultz, I want to talk a little bit more about the 
budget request--and pretty bipartisan here, I guess--some 
similar questions.
    When I look at the procurement, construction, and 
improvements account, I am told that we are 10 years behind on 
cutter acquisitions, 15 years behind on acquisition for new 
heavy icebreakers, nearly $2 billion behind on shoreside 
facilities construction, $1 billion behind on shoreside 
facility maintenance, no plan to replace our HH-65 helos, a 
number of outdated freestanding databases.
    I guess my first question--I haven't heard anybody mention 
IT systems. You know, I guess replace the aging, freestanding, 
you know, incompatible databases currently limiting the Coast 
Guard's mission and your effectiveness.
    So, Admiral, you want to comment on this part of the 
budget, but then also comment on what your thoughts are about 
improving our IT capabilities?
    Admiral Schultz. Sure, Ranking Member Gibbs. I appreciate 
the question. We absolutely do have an aging and arguably 
obsolete enterprise mission platform, what we call the system 
that all our applications ride one. And we are focused on that.
    What we have included in the 2020 budget is--the first 
time--it is a PC&I acquisition-side $14 million line item that 
starts to tackle that problem. You know, that is a big 
undertaking. We are watching what Department of Defense is 
doing as they talk about JEDI and a cloud-based application. We 
are actually going to the cloud this summer with some specific 
applications, the auxiliary data system that the--so we are 
informing our own knowledge, we are--we have got our--what we 
call our CG6, that is our technical folks, smart folks there. 
They are mapping a roadmap for us. This is a big function. It 
has got to be a step function.
    I am not sure, when I took over last summer on 1 June, I 
anticipated this requiring my attention as soon as it did. But 
I think on my watch we will be laying the groundwork for a 
major recapitalization of our enterprise mission platform, and 
we are starting to do that in 2020 with this budget request, 
which is encouraging to me.
    What we have got to do is get our brain around exactly how 
you do that. We fielded about 1,100 what we call mobility 
devices, iPads, to the field so we can have men and women 
actually bring some of the technology that is out there 
societally that these young bright men and women want to have. 
They don't want to do their work, write down notes, go back and 
spend hours at the office, when we should be able upload that 
stuff in the field.
    So we are working this on an enterprise basis, we are 
working on a field that mobility--it has created a sense of 
urgency to the folks that manage this, to say now that we put 
those iPads in people's hands, you know, how are we going to 
give them the technology? Initially, it was a replacement for a 
bunch of books in a backpack. We are starting to see some 
solutions now in innovation that sort of forced ourselves to be 
a little bit more forward leaning. So I am encouraged by that, 
sir.
    Mr. Gibbs. I appreciate it. In prior years the capital 
investment plan was required with the President's annual budget 
request, and a change in the law was required to submit the 
plan 60 days after the President's annual budget request.
    I was told that Friday the committee still has not received 
that capital investment plan. When would we expect to receive 
that 5-year plan? And will the Coast Guard efforts to modernize 
Coast Guard databases such as MISLE be trackable through future 
capital investment plans, or will those efforts use operating 
funds?
    Admiral Schultz. Congressman Gibbs, that capital 5-year 
investment plan for 2024 is in the pipeline, clearing the 
administration. We also owe you the unfunded priority list, 
which is in the same clearing process. I don't ultimately own 
the final--you know, when those are released.
    Mr. Gibbs. Yes.
    Admiral Schultz. But my understanding is they are moving 
through the process. I hope they would be imminent. We would 
welcome the opportunity to come back and brief yourself or the 
committee staff when available.
    Mr. Gibbs. Thank you. Also, we got a new polar icebreaker. 
And when do you expect the first one to be commissioned, in 
2023?
    Admiral Schultz. Congressman, the way the recently awarded 
contract the VT Halter was rolled out, it is rolled out with a 
2024 deliverable date, but there is incentives in there for 
early delivery, possibly, you know, walking that back into 
fiscal 2023. But contractually, it is in 2024, with the options 
of pulling that left here a little bit earlier into 2023.
    So I am optimistic, you know, that we will meet the 2024, 
and we will see where the next year and a half plus really 
completes the detail design of this first Polar Security 
Cutter. So there is--we haven't built a ship like this in the 
Nation here in many, many years. So I think we will see where 
that goes. But 2024 is the no-later-than date, sir.
    Mr. Gibbs. Is it correct to think that the majority of the 
time of the Polar Security Cutter will be used in Antarctica to 
break out the research base down there, or would see additional 
operating time available in the Arctic? As I know my 
predecessor, Don Young, would say, Alaska.
    Admiral Schultz. Well, Ranking Member Gibbs, I would tell 
you this. My strategy that I have coined since day one on the 
watch has been a 6-3-1 strategy: six icebreakers; the minimum 
of three are heavy, what we designated, now Polar Security 
Cutters; the conversation on the one was one now. And one, 
obviously, now doesn't translate to the previous question of 
2023, 2024.
    The first cutter will be almost a direct one-for-one for 
the Polar Star. That mission is an essential mission. I 
mentioned in my opening statement about a 105-day trek to sail 
out of its home port, get down there, break out into McMurdo. 
But there is probably 60, 85 days of shoulder dates 
availability that I think we would anticipate that first Polar 
Security Cutter spending some time in the Arctic. When you get 
into the second and third hulls, we are having a conversation 
about a lot more of a persistent presence in the Arctic. So we 
would be represented in both high latitude areas, sir.
    Mr. Gibbs. My time is up, Mr. Chairman, but just one quick 
statement. The Great Lakes also needs another icebreaker. My 
time is up.
    Mr. Maloney. I thank the gentleman.
    Mr. DeFazio?
    Mr. DeFazio. Thanks, Mr. Chairman.
    Admiral, I read a news article yesterday that Senator Rubio 
inserted a provision into the pending disaster assistance that 
would allow renegotiation or negotiation of the fixed-price 
contract to the Eastern Shipbuilding Group; their justification 
is their shoreside facilities were damaged. Of course, I am 
pretty sure they had insurance. They say their labor costs are 
up. But I question whether or not this has something to do with 
their original bid, which some thought was low.
    I would like to know, as you move forward, if this is 
authorized, what are the factors that are involved in this? 
Because we don't want someone to bid low, get a contract, and 
then use a hurricane as an excuse to change a no-bid contract 
and then up the price to the Coast Guard. So I have concerns 
there.
    And I particularly--I have got to say I have got concerns 
when a former Commandant is in the news saying now he is going 
to have authority to negotiate with the Coast Guard. That 
concerns me a little bit. So that is one point.
    I am also concerned about the polar icebreaker contract. My 
understanding is there was a value to Government that is 
rumored to be worth $120 million per ship. When I was at the 
White House a few weeks ago, the President was quite upset at 
the price tag per ship. And I guess--I know that--I don't know 
if it is from protest or not, but I certainly would like to 
know what is the value per ship, and what was the number? Was 
it really $120 million? And what is the value, since apparently 
other bids were considered qualified, but this was a greater 
value?
    So those are not really questions, those are requests that 
I am making to you today.
    Master Chief, I got 187 people on the bill to pay the Coast 
Guard when we shut down. I hope we won't shut down. I put my 2 
cents' worth in on how we might not shut down the Government. 
We shouldn't pass the DoD appropriations bill--because they get 
paid--until we have negotiated and passed. Mick Mulvaney in the 
White House did not have a shutdown, and in that case none of 
our servicemembers will be paid, and then perhaps that will 
bring a quick halt to any stupid shutdown that radiates from 
downtown.
    And I appreciate your concerns, and I know it hurt morale a 
lot, and I really don't want people anticipating that this is 
going to happen again.
    Admiral Buzby, I would just like again--in my conversations 
at the White House on infrastructure, the issue has come up of 
the Jones Act, and I am told we really don't need the Jones 
Act. And particularly the President's chief economist says we 
should be competitive. And I asked him, well, so should we 
compete with the Communist Government of China selling things 
below cost? He didn't have much of an answer for that.
    I mean do we get competition under the Jones Act? Is there, 
you know, still somewhat of a robust shipbuilding industry in 
the United States of America?
    Admiral Buzby. Yes, sir, we do. There are a lot of Jones 
Act carriers, and there is pretty robust competition between 
them. So it is not a free-for-all, by any means. And it is 
absolutely critical to our ship--we would not have a domestic 
shipbuilding industry, save for Government contracts, if we 
didn't have a Jones Act.
    Mr. DeFazio. I think there are at least two fleets that 
supply Puerto Rico. And aren't they both undergoing major 
renovation of their fleets, in order to better serve Puerto 
Rico?
    Admiral Buzby. Both TOTE Maritime and Crowley Services have 
just inaugurated two new ships each, both are all LNG-burning 
ships, they are the most modern ships out there right now that 
have been invested in that market.
    Mr. DeFazio. Right. The Governor of Puerto Rico has 
recently said they could do better if they just went into the 
international market. Do you think it is likely that little, 
tiny Puerto Rico would be able to get daily or weekly service 
out of Jacksonville, Florida, from the international shipping 
conglomerates?
    Admiral Buzby. I am sure, if there was a business case for 
some shipping company to do that, that they would do that. I 
think it would come down to finding, you know, the economic 
conditions that would permit that. I don't know of those, off 
the top of my head.
    Mr. DeFazio. OK, thank you.
    Admiral Buzby. What they may be.
    Mr. DeFazio. I thank you, Mr. Chairman.
    Mr. Maloney. I thank the gentleman. I was remiss in not 
recognizing a former colleague of ours, the distinguished Dan 
Maffei, from central New York. Good to see you again. Nice to 
know there is successful life after Congress. You give us all 
hope. He served his constituents in central New York so well.
    Mr. Weber?
    Mr. Weber. Thank you, Mr. Chairman. Gosh, I don't know 
where to start.
    Admiral Buzby, you said in your comments earlier I think 
there are 50,000 vessels worldwide?
    Admiral Buzby. Yes, sir, 50,000 oceangoing, large 
oceangoing vessels.
    Mr. Weber. OK. And you said 180 of those fly the U.S. flag?
    Admiral Buzby. 181. Yes, sir.
    Mr. Weber. Well, who is keeping score? One hundred and 
eighty-one. Thank you. You said 80 of those are international?
    Admiral Buzby. Eighty-one.
    Mr. Weber. Eighty-one? I can do this. OK.
    Admiral Buzby. And 100 are large Jones Act ships.
    Mr. Weber. OK. And then you also mentioned having budget 
funding for a third new training ship.
    Admiral Buzby. Yes, sir.
    Mr. Weber. Now, you know, I am from the gulf coast of 
Texas, and we happen to have an academy down there. I don't 
know if you all are aware of that or not.
    Admiral Buzby. A fine academy, sir.
    Mr. Weber. Yes, sir, we would argue the best academy of the 
six, of course. Things are bigger and better in Texas.
    And so, you know, we are working on a ship. You are aware 
of the ship that they have down there.
    Admiral Buzby. Yes, sir.
    Mr. Weber. Do you know how many cadets it houses, holds?
    Admiral Buzby. About 50 at a time for training. Yes, sir.
    Mr. Weber. OK. About 50 at a time. And how does that 
compare with the other academies, do you know?
    Admiral Buzby. Michigan Maritime has the same class of 
ship, so very similar.
    Mr. Weber. All right.
    Admiral Buzby. New York and Massachusetts both have ships 
on the order of 600 cadets each.
    Mr. Weber. Right.
    Admiral Buzby. Both Maine and California have ships that 
hold on the order of about 350.
    Mr. Weber. Does Michigan get a lot of hurricanes?
    Admiral Buzby. None that I am aware of. They get a lot of 
storms, but no hurricanes.
    Mr. Weber. Well, Admiral Schultz knows, the great Coast 
Guard was down when Hurricane Harvey came through, and it was a 
big thing, and we really appreciated that. The Coast Guard was 
fab on helping with that, and we sure appreciate that.
    Of course, I am pushing for another big ship. Of the six 
training academies, do you know the count of cadets in each 
academy, offhand? This semester, for example.
    Admiral Buzby. Yes, I know each--for instance, I think 
Texas graduates--they have two graduations a year. I think they 
graduate on the order of 150 or so per graduation.
    Mr. Weber. How does that compare to the other five lesser 
academies?
    Admiral Buzby. Well, I know Kings Point is going to 
graduate about 230 this year. Maine and New York just had their 
graduations recently, on the order of the low 200s.
    Mr. Weber. OK. So we would agree that we really need 
funding for another ship. Would you agree with that, Admiral?
    Admiral Buzby. I would agree that all of the training ships 
are in need of replacement. Yes, sir.
    Mr. Weber. Right. Well, we are hoping that we can get them 
the budget. I have to hope and pray and believe that maybe the 
President's budget is an attempt to push way down low to see 
where we can come back up and we can get you all funded. We 
want to be sure that we fund the Coast Guard.
    I am on the bill, I think the chairman said--how many 
signatures--182 or 183 on the Pay Coasties bill. So we are glad 
to see that.
    A couple of questions for you. You mentioned Crowley 
Services and LNG in Puerto Rico under the Jones Act, for 
example. Now, for us LNG is huge. We would also like 
shipbuilding in our country to come up to that level. You did 
mention in your exchange with the chairman, I think, that you 
felt like there is a good shipbuilding industry, but I would 
argue that we want it even better, and we want to keep the 
Jones Act, and we want to make sure that we can train more 
mariners.
    I was looking over some of the notes here on training 
mariners. One of the things that--you say you have--a shortfall 
of mariners exists. And is that across all sectors of the 
industry?
    Admiral Buzby. The 1,800 number that I have used in the 
past, that is primarily unlimited tonnage, unlimited 
horsepower, oceangoing mariners.
    Mr. Weber. I was curious. The Master Chief called them boat 
drivers. I thought maybe pilots, or captains, or whatever. But 
do the credentials of those qualified mariners match the needs 
of the surge sealift vessels?
    Admiral Buzby. Yes, and those are the ones that I am 
primarily interested in. While all mariners are important to me 
for the----
    Mr. Weber. Sure.
    Admiral Buzby [continuing]. Across the industry, the 
mariners that I am going to need to flesh out the crews on the 
Ready Reserve Force ships are limited horsepower, limited 
tonnage mariners.
    Mr. Weber. How can you do that? How can we do that?
    Admiral Buzby. Well, again, it kind of comes back to kind 
of the earlier question. We have to have enough of a peace time 
commercial merchant marine in order to have jobs for those 
people, in order to progress. A lot of what we are--you know, 
we are graduating a lot of new midshipmen every year, a lot of 
new mates and engineers.
    Mr. Weber. Right.
    Admiral Buzby. But they are not staying all the way 
through, because they don't have the opportunities for many of 
them to----
    Mr. Weber. Sure.
    Admiral Buzby [continuing]. Progress all the way to master 
or chief engineer.
    Mr. Weber. I appreciate your focus. And I appreciate this 
hearing, Mr. Chairman, and I am so looking forward to getting 
that extra funding for our Galveston Academy. And I yield back, 
Mr. Chairman.
    Mr. Maloney. I appreciate the gentleman, appreciate my 
friend from Texas listing the fact that everything is bigger 
and better in Texas, except when compared to New York, 
apparently.
    [Laughter.]
    Mr. Maloney. Mr. Garamendi?
    Mr. Garamendi. Thank you, Mr. Chairman. I have a whole lot 
of questions here.
    First of all, for all the Members here, this is the 
maritime subcommittee. We have been trying for about 6 years to 
get a Congressional Gold Medal for the merchant mariners of 
World War II, who had the highest death rate of any of the 
Services. So I would appreciate all the Members signing on to 
that. We need a whole lot of names, so keep that in mind, and 
we will be around.
    Now, moving on. Admiral Schultz, what is the cost of the 
Polar Security Cutter?
    Admiral Schultz. The contract award here was for $749 
million. Coupled with some previous years' appropriations, 
there is about $300 million available. I anticipate that first 
ship is going to be north of $900 million. We hope hulls 2 and 
3 would probably come down below $700 million. It is a little 
premature, but those would be my rough order of magnitude 
numbers, sir.
    Mr. Garamendi. So to meet your 6-3-3 cutter, or----
    Admiral Schultz. The 6-3-1, sir, the----
    Mr. Garamendi. Yes, would be somewhere--what, $2 billion, 
$2\1/2\ billion?
    Admiral Schultz. Congressman, the award is for, you know, 
the initial ship and an option for two additional ships, a 
total of three hulls. The conversation--you know, additional 
icebreakers was possibly--you are looking at maybe something 
less than a heavy breaker to fill the need.
    We may find, as we get into production, that we have, you 
know, stable requirements, stable funding, predictable funding 
that--the differentiation between this heavy Polar Security 
Cutter and something that looks--from a cost--but we would have 
to have those puts and takes. It is premature, but I think, 
sir, it is about $1.9 billion on the first three, and then we 
would inform the conversation on what we are talking about 
beyond hull 3.
    Mr. Garamendi. There was a gee whiz moment for the U.S. 
Navy this last 18 months, and that is, oh my God, the Arctic is 
opening up. Yes, it is. So for a couple of billion dollars we 
could have the heavy icebreakers. I draw this to the attention 
of the committee, particularly those that are on either the 
Appropriations or the Armed Services Committee, that this is 
absolutely critical, and that we simply ought to move forward 
and get those three underway now, not wait until--current would 
be about 2030, the current plan.
    Next, Admiral Buzby, thank you for your leadership on the 
shipbuilding. I draw the attention of the committee to the 
comment of my--the previous Texan a moment ago--and, by the 
way, the academy in California, gentlemen and ladies, is the 
best.
    [Laughter.]
    Mr. Garamendi. Now that we have settled that, yes, we do 
need ships. And Texas is a big exporter of natural gas.
    The Energizing American Shipbuilding Act is about to be 
introduced. If it becomes law we will build perhaps 50 ships, 
tankers, oil tankers, and LNG tankers over the next 15 years or 
so, a major opportunity to use a critical national security 
asset, natural gas and oil, and combine it with two other 
national security assets, the ability of our shipyards to 
produce large oceangoing commercial ships, and also the 
mariners that go with them. It is about to be introduced. On 
the Senate side it would be Senator Wicker. I draw the 
attention to the members of the committee to that opportunity 
to meet the needs.
    Admiral Buzby, specifically to you, the question really 
goes to the Ready Reserve Fleet. You have been with several 
plans on what ships need to be built. You have mentioned 
refurbishing used ships, and the like. Has that plan B--is it 
updated? Is it available? And how does it fit in with the 
current budgets?
    Admiral Buzby. Thank you for the question, sir, and a very 
important area, and one that I have a lot of focus on, as you 
can--and as we have discussed, working very closely with the 
Navy. I actually had some discussions with Secretary Spencer 
last week about this. He is very, very focused on this, the 
Navy's three-pronged plan of service life. Extensions, 
purchasing, with Congress' approval, used ships to bring in to 
be modified, and then new construction is still the plan of 
record.
    We are working through what is the right business case, or 
what is the right ships to go after. The special mission ships 
of the Ready Reserve Force are of particular interest because 
they are all steamships, and they are all aging, and they all 
have very special capabilities. So we heard you, we are 
focusing very closely on those ships, in particular.
    Mr. Garamendi. Admiral, you produced a couple of placemats. 
If you could share those with the committee I think it would be 
eye-opening for all of us. And if you could also provide a memo 
as to what the current plan is, it would be very helpful.
    Admiral Buzby. Yes, sir.
    Mr. Garamendi. Thank you very much. I yield back.
    Mr. Maloney. I thank the gentleman.
    Mr. Gallagher?
    Mr. Gallagher. Thank you, Mr. Chairman.
    Admiral Schultz, good to see you again. I have heard a lot 
from my constituents in the Port of Green Bay--it is Titletown 
U.S.A., Green Bay, Wisconsin, in case anyone is paying 
attention--that there is an imminent need for a new Great Lakes 
heavy icebreaker. We currently have the Mackinaw-class 
icebreaker. It is only half as wide as the vessels it escorts, 
because it was intended to be working in tandem with a second 
icebreaker of its class. But the second icebreaker was never 
built. By itself, then, the lone Mackinaw has to double-back on 
the same path, which, of course, slows progress, slows commerce 
on the Great Lakes.
    It should be noted also that much of the iron ore shipped 
by the American steel industry travels on the Great Lakes. 
Obviously, we are in an interesting position right now, due to 
our disagreements over steel tariffs. That may be getting 
resolved, but that adds another complicating variable to it.
    So my question is I understand that the Coast Guard 
contract that procured the current Mackinaw was written to 
allow a second icebreaker to be procured, but it was never 
funded. Is that a correct understanding?
    Admiral Schultz. Congressman, I will take that for the 
record. I am not sure I can tell you that definitively, but we 
can answer that very quickly and get back to you on that.
    Mr. Gallagher. OK. My other understanding is that the Coast 
Guard has begun a whole new analysis on the issue of a new 
Mackinaw icebreaker. Do you have any insight into that, whether 
that is correct?
    Admiral Schultz. Yes, sir, Congressman. Congress has 
supported us from 2017, 2018, 2019, I think, with $2, $3, and 
$5 million, for a total $10 million, you know, this is design 
and survey-type funding.
    We are looking at kind of inventorying our current 
capabilities there. We have a report due back to the Congress, 
the Great Lakes Icebreaking Acquisition and Program Report that 
was directed in the 2018 Coast Guard authorization, so we will 
be delivering a plan to you on how we are looking at taking 
those design and survey funds and using them here.
    But some of it is inventory and what we have, looking at 
what it would take, requirements-wise, to build this ship at 
least as capable as the current Mackinaw for potential service 
on the Great Lakes in the years of the future.
    Mr. Gallagher. Is there an estimate of when the report will 
be completed and delivered?
    Admiral Schultz. Yes, I think we are in final phases of 
that, but let me let me circle back to your staff and give 
you----
    Mr. Gallagher. Yes, and I understand that. You know, any 
time you write a report in DHS or DoD, you have to get----
    Admiral Schultz. Yes, sir, it----
    Mr. Gallagher. The interagency does its thing.
    Admiral Schultz. We are working on the report, and we owe 
you some, you know, clarity and transparency on what we have 
planned and done to date with those funds provided by the 
Congress.
    Mr. Gallagher. I guess my concern would be related to the 
first question, that if we have already gone on record as 
saying that a new icebreaker is needed, that a second one was 
intended to be built, that is--if the new analysis is just a 
cause for delay, when we know we need to do that, that would 
concern me. So I just throw that out there. And
    Admiral Schultz. If I could, just----
    Mr. Gallagher. Please.
    Admiral Schultz. Let me--you know, there is a lot of 
conversation about sufficiency of capability, capacity on the 
Great Lakes. We are focused on our current fleet. We are doing 
a 15-year service life extension of the six 140-foot 
icebreaking tugs on the Great Lakes. That will push them out 
into the 2030 timeframe.
    But, you know, there is some urgency to look beyond that. 
Currently we finished up the sixth hull last summer. The 
seventh and eighth hulls are under, you know, service life 
extension now. We will tackle the ninth hull. There is nine in 
Coast Guard, writ large: three on the eastern seaboard, six on 
the lakes. And we think, capacity-wise, we are there today. But 
this conversation warrants some feedback from us on what the 
longer term plan is to----
    Mr. Gallagher. And I just want to say your young men and 
women who are stationed up there in Sturgeon Bay are doing a 
phenomenal job, and have really done a good job of integrating 
into the local community. And the local community has, in turn, 
embraced them. Indeed, during the Government shutdown, I mean, 
the outcry I heard from non-uniform-wearing local residents was 
very loud. And so I think that is a testament to the good work 
that they have done. You should be very proud.
    The other thing I just would ask on this issue of Great 
Lakes icebreaking: do we get any help from, for example, the 
Canadian Coast Guard? And if so, what does that look like?
    Admiral Schultz. Sir, we have an MOU with the Canadian 
Coast Guard. We have a terrific relationship. Our ninth 
district commander aligns with the Canadian Coast Guard 
counterpart. I will be meeting with Commissioner Jeff 
Hutchinson up in Seattle here the second week in June, and our 
collaboration with Canadians has never been at a stronger 
point. I think that is how we mitigate some of the challenges.
    You know, there is extreme ice years, you know, and then 
there is the typical ice years. I would tell you, capacity-
wise, what we have done is we have brought a 140-foot 
icebreaking tug in from the eastern seaboard to the Great Lakes 
during those heavier--into the earlier parts of the year that 
is going to be a heavy year, we bring an additional 140, and we 
rely on the Canadians. That MOU allows us to both look at what 
are we bringing in, ship-wise. So collaboratively, we try to 
meet the needs of all the mariners on the Great Lakes there, 
working together.
    Mr. Gallagher. Sure. With the 20 seconds I have left, did 
they actually--did the Canadians actually assist with any port 
needs this past winter in the U.S. that you know of?
    Admiral Schultz. Sir, I don't have a--I would answer 
probably so, but I can get back to you with a definitive 
answer.
    Mr. Gallagher. And I am all for cooperation with the 
Canadians, but I don't think we should outsource any of our 
icebreaking alliance to them.
    With that I yield back.
    Mr. Maloney. I thank the gentleman.
    Mr. Lowenthal?
    Mr. Lowenthal. Thank you, Mr. Chair. And this question is 
for Admiral Buzby.
    First, thank you for appearing before this panel, this 
subcommittee once again. Your important work to really promote 
our country's maritime industry--and I want to applaud MARAD's 
request for full funding of the Maritime Security Program. As 
you have already pointed out in your testimony, your support of 
the critical mission of a U.S.-flag ship, which, I think, is 
always at risk tremendously, and I think that your support is 
really very, very important.
    You know, when you were here in March, I asked you about 
the port security infrastructure development program at that 
time, which received nearly $300 million in the most recent 
appropriations legislation. Ports and other stakeholders across 
the country are eagerly anticipating this program. This is a 
huge thing for the ports.
    According to the American Association of Port Authorities 
their recent assessment, all ports have identified over $66 
billion in needed infrastructure investment. This Federal 
funding is a step in the right direction.
    The question I have for you, Admiral, is can you tell me 
why the President's budget proposes to eliminate this program 
before we have even awarded the first grants?
    Admiral Buzby. Yes, sir, I am happy to answer that.
    As you recall, the timing was a little bit off on the two 
budgets. When Congress put the money in for--the port 
infrastructure development money in the 2019 budget, our 2020 
budget had already left the hangar. It was already out. So we 
weren't really canceling it, it was not part of our budget 
initially.
    Mr. Lowenthal. Can you speak--would you support it?
    Admiral Buzby. Well, I think port development is extremely 
important. We are looking forward to getting the notice of 
funding opportunity out here very shortly, it will be within 
the coming months, very soon. You know, we do have a lot of 
other port grant money that we do distribute, part of the BUILD 
program.
    Mr. Lowenthal. Right. I believe there is an additional $100 
million in additional funding in that program, as you point 
out. But that doesn't make up for the $300 million that we are 
going to lose without the continuation of the port 
infrastructure development program.
    Admiral Buzby. Again, the 2020 budget is here. I mean it 
was developed before the Congress put the money in the 2019 
budget, and we are just beginning the 2021 budget right now. So 
we will see where that goes. Obviously, the funding priorities 
will have to be----
    Mr. Lowenthal. Well, as I pointed out, with the tremendous 
backlog, and the tremendous importance of our ports, and the 
$66 billion, and having that $300 million in this year in the 
appropriations just being--for the first time, beginning to 
address some of those, even those grants are not all out yet. 
It is a big loss. And I just wanted to convey that to you.
    My last thing is not a question, but a statement to Admiral 
Schultz. I also represent the port area of Long Beach as part 
of the L.A.-Long Beach complex. And we couldn't do it without 
the Coast Guard. And I am very, very proud of the work that--we 
work with the Coast Guard and America's largest port complex, 
and vitally, vitally important, not just for the port, but for 
the national security of the entire west coast. And I thank 
you.
    And with that I yield back.
    Mr. Maloney. I thank the gentleman.
    Mrs. Miller?
    Mrs. Miller. Thank you, Chairman Maloney and Ranking Member 
Gibbs, and thank you all on the panel for being here today.
    I would first like to thank you, Admiral Schultz, for the 
important work and sacrifice the brave men and women of the 
Coast Guard make every single day. As you know, the Coast Guard 
has been invaluable to my district in southern West Virginia, 
performing the dangerous search-and-rescue missions and saving 
many lives. We all agree that it is important that the Coast 
Guard has the resources needed to continue to perform their 
duties, while using our taxpayer money both efficiently and 
effectively.
    Admiral Schultz and Master Chief Vanderhaden, what major 
capital investments are needed most to maintain the Coast 
Guard's readiness? Is the Coast Guard's airborne fleet ready to 
meet the search-and-rescue challenges facing the inland parts 
in our country?
    Admiral Schultz. Congresswoman, good to see you, ma'am. 
Thanks for those words of gratitude for your Coast Guard men 
and women in West Virginia.
    And Congressman Lowenthal, thank you, as well, for the work 
and the men and women in Los Angeles.
    Congresswoman, I would say, as I testified in my opening 
statement, our number-one capital investment, you know, 
acquisition priority, is that Offshore Patrol Cutter, because 
that will be the backbone of the fleet. We are continuing to 
build National Security Cutters, we are continuing to build 
Fast Response Cutters. We have taken acceptance of 34 on a 
program of 58. On the latter, the Fast Response Cutter.
    In terms of your question about airborne fleet and search-
and-rescue work, you know, we are flying what we call MH-65 
Dolphin helicopters, an Aerospatiale product that--we got 98 of 
those. We will fly those, and we have already flown those 
further than others, and will continue to fly those into 
probably 30,000-plus hours. We are in a similar situation with 
our MH-60 Blackhawk helicopters, with the Jayhawks and the 
Coast Guard variant. We are going to fly those.
    We are watching closely what the Department of Defense is 
doing with future vertical lift. We have some service life 
extension programs in mind for our 60 helicopters. That is 
something that, you know, because those dates seem to get 
pushed out, it has my attention. My Vice Commandant is an 
aviator, we are watching that closely. But we have got a plan 
here through this current decade, as we get into 2030. We are 
really going to be keenly focused on, you know, just how far we 
can stretch those out. But right now I am comfortable where we 
are at. But we have got to start really putting together a 
long-term strategy on how we are going to do our air assets on 
the rotary side.
    Fixed-wing, we are continuing to field, with the support 
the Congress, C-130Js. We are upping the missionization of our 
C-27 medium-range, long, you know, aircraft. And that is going 
to be a good airplane. We have got a little bit of--we have got 
14 of those transferred to us, but we are playing some catchup 
on the sustainability, the missionization. But we are getting 
there, so I am encouraged on where we are, the air fleet. But 
we have got some challenges, sort of a decade-plus down the 
road, ma'am.
    Mrs. Miller. Good. Mr. Vanderhaden, do you have anything to 
add?
    Master Chief Vanderhaden. I would say that our aviation 
career fields are very popular. We have no problem finding 
people that want to fly in our Coast Guard aviation assets, and 
our folks do a magnificent job keeping them available and 
ready. We put more hours on them than any other branch in the 
Service, and that is a testament to the quality of work that 
our folks do, especially down in Elizabeth City.
    So I thank you for your concern for our aviation readiness. 
We have been very fortunate. We have put a lot of effort into 
our safety, and we have had very few aviation mishaps because 
our folks try really hard.
    Our air stations can use some help out in Hawaii. You know, 
as we get the C-130J, they are a little longer, they don't fit 
in the hangar so well. So we could use some help there. But by 
and large, I very much appreciate the plan that the Commandant 
and our leadership team put together to transition our 
aircraft.
    Mrs. Miller. Another quick----
    Admiral Schultz. Congresswoman, if I could, just----
    Mrs. Miller. OK.
    Admiral Schultz. Just one follow-on. One thing we are 
trying to do is there are no more Dolphin helicopters, MH-65s, 
built in the world. So that fleet, you know, is in a different 
situation. The 60s, we have an ability called the sundown 
program, and we have got low-hour aircraft that the Navy put 
out in the desert. And for about $14 million we can take that 
airframe at our aviation logistics center in Elizabeth City and 
basically bring that into service for a long service life 
ahead. So with some of the supplemental fundings and recent 
hurricane supplementals, we have--actually bringing three on 
board.
    My intention would be, wherever we have the chance to bring 
some of those former sundowner hulls onboard and offset some of 
our Dolphins with 60s, that is the bridging strategy. We are 
going to transition Borinquen in the near future from a 65 air 
station--sorry for the----
    Mrs. Miller. You just used up a lot of time.
    I also wanted to ask you about the major role that you all 
play in seizing the illegal and dangerous drugs flowing into 
our country. Has the Coast Guard seen an increase in the 
seizure of drugs, other than cocaine and fentanyl?
    Admiral Schultz. Congresswoman, most of our efforts are in 
the transit zone, the area between the Indian Ridge, where the 
drugs--the cocaine is produced, and reaching the United States 
shore. So we predominately are thwarting that cocaine threat.
    I think, if you look across Government writ large, I wear 
what they call the interdiction committee hat. You know, opioid 
use, methamphetamine use, those type of uses are all on the 
upswing. Where we focus our efforts is really on the cocaine 
threat, and we have--last year was a slight downtick from the 
previous year. I think our--explainable with some of our assets 
pulled off for hurricanes. But we are on trajectory this year 
for more than probably 430,000 or 450,000 pounds of uncut 
cocaine interdicted again, ma'am.
    Mrs. Miller. Thank you.
    Mr. Maloney. I thank the gentleman.
    Mr. Larsen?
    Mr. Larsen. Thank you, Mr. Chairman.
    Admiral Buzby, at the March 6th subcommittee hearing I 
asked you, for the small shipyard grant program, if the budget 
number would be higher than zero. And you emphasized that you 
had strong support for the program. I am not suggesting that 
you said yes or no, but you did say strong support for the 
program.
    As it turns out, the budget proposal number is not higher 
than zero, it is zero, it is a $20 million cut from the enacted 
2019, which I think Congress had to put in because the 
administration proposed eliminating it last year. I assume we 
will fix your problem for you again. And as well, a Senate 
committee passed a reauthorization of MARAD programs, including 
a $35 million authorization for small shipyards.
    So we are going one way, and the administration is going 
the other way on small shipyards. Can you let me know what 
changed between the March 6th hearing and the release of the 
budget?
    Admiral Buzby. Congressman, what I can tell you that has 
not changed is the importance that we believe that program 
brings to the maritime industry.
    Again, this comes down to the realities of the budget we 
are given to work within to prioritize the things that 
absolutely had to be budgeted for. And very regrettably, that 
was one that didn't make the cut. It does not by any way 
diminish how important we think it is, and how much good it 
does to the industry.
    Mr. Larsen. Well, I anticipate that we will fix your 
problem.
    Admiral, at the March 6th subcommittee hearing I requested 
details on the Coast Guard's plans regarding oil spill 
prevention and response in the Pacific Northwest, related to 
the Trans Mountain pipeline extension project, and have yet to 
receive specific information. Can you all get that to me for 
the record?
    Admiral Schultz. Absolutely, Congressman.
    Mr. Larsen. Thank you. We will do a followup with you on 
that.
    Would you comment, though, on the flat funding for the 
maritime oil spill prevention program for the 2020 budget, and 
whether or not those resources are adequate, if that funding 
considers the approval of the Trans Mountain pipeline extension 
project?
    Admiral Schultz. Well, sir, regarding the Trans Mountain 
pipeline, you know, we have a terrific relationship with the 
Canadians, Canadian Coast Guard, Transport Canada. We have a 
joint VTS up there where we track the traffic. I mean currently 
we are looking at potentially one of those transits a week 
under the current pace.
    Mr. Larsen. Right.
    Admiral Schultz. This could go to one a day, as you know.
    Marine environmental response is a top priority for me. We 
work in a joint contingency model with the Canadians for oil 
spill response. I think, at the end of the day, sir, with this 
bitumen, with this heavy crude, I think this is something, the 
response operations that work there on the international scene, 
are quite capable, sir.
    I think this is--obviously, we have to see where the 
Canadian Coast Guard and the First Nations go with their 
deliberations or decisionmaking, but we are postured to be 
responsive. I think the risk is manageable, and is obviously 
high on my list of priorities to make sure that pristine region 
of the Nation is not subject to some type of spill. It has my 
attention, sir.
    Mr. Larsen. Good. And certainly we can't control a Canadian 
Government decision and how it plays out, but in the 
eventuality it does play out we need the plan. So we will 
follow up with more detail with you.
    With regards to the backlog on shoreside infrastructure, we 
have the GAO study that shows that 45 percent of Coast Guard 
shore infrastructure is beyond its service life. So we are 
working with you all, having discussions with you all about OPC 
home-porting in the Northwest as a possibility. If that were to 
occur, how does new shoreside infrastructure fit into the 
backlog that you have? How do you end up budgeting for new 
infrastructure, versus what you have to fund now?
    Admiral Schultz. Congressman, I appreciate the question. 
What we do is we do--as you say, we have a high backlog. We 
have $1.7 billion of shore infrastructure that we are dragging 
along. We are not recapitalizing at a healthy pace like an 
organization--you normally tackle to 2, 2\1/2\ percent of that 
on an annual basis. We are in tenths of percentages. I would 
say we are making a small dent in that. We have got some money 
through supplementals and hurricanes.
    To your question about new assets, we use what we call 
major acquisition shore infrastructure, MASI, account. We 
anticipate those needs. Ideally--we asked for funds for that 
about 3 years ahead of the actual arrival of the new assets. So 
when the asset shows up, the pier, the shore ties, the 
infrastructure, landside buildings to support and enable the 
operations are all in place.
    Regarding OPCs, you know, the fifth and sixth OPC are 
programmed to go to the Pacific Northwest. We have been looking 
at, you know, a range of options: Everett, Astoria, Seattle. We 
had our folks up in Everett here recently that are on our 
cutter home-porting working group. The mayor of Everett was in 
here in April talking to Coast Guard folks. So I think in this 
calendar year we will probably roll out a decision on where 
home-porting will occur in the Pacific Northwest. It is a lot 
of factors: proximity to the area, the ability to support our 
people, you know, existing infrastructure, where we don't have 
to expend tax dollars, what are the upgrades to have sufficient 
infrastructure.
    But MASI, sir, that is the approach we take about 3, 3-plus 
years ahead of the actual arrival of the cutter to make sure 
when the ship arrives it is able to do the mission and we can 
support our men and women that are assigned to that unit.
    Mr. Larsen. All right, thank you. Just--I am not going to 
ask a question, but I will follow up with you all about pilots, 
and pilot shortages, and how it all impacts you, as well, 
because we are trying to coordinate with the--on the private-
sector side, making sure they are not poaching too much on the 
public-sector side.
    Admiral Schultz. Yes, sir----
    Mr. Maloney. The gentleman----
    Mr. Larsen. We will follow up, thanks.
    Mr. Maloney. I thank the gentleman.
    Mr. Mast?
    Mr. Mast. Thank you, Chairman.
    Thank you all for being here. Semper paratus. Good to see 
you. I will be out on the Ibis next week, so I am looking 
forward to that, as well.
    I will just give you everything that I have and let you--
Admiral, Master Chief--just start going off on all this.
    I want to start with shoreside infrastructure, as well. 
Undoubtedly, there is a lot of needs that need to be met out 
there. If you could triage a few of the most important, you 
know, a no-B.S. response to why these are the most important 
things that need to get done, that would be important for us to 
hear.
    Moving a little bit over beyond that into the 65s, how many 
of those 65s do we have available to replace? Can we meet that 
entire need with refurbishing those 60 airframes?
    And then what is the balance with doing that, with looking 
at the future of rotary lift? Do you want to see all of those 
65s replaced with refurbished 60s, or do you want to hold off 
on that a little bit, looking forward to what the future 
airframes might be out there in terms of rotary?
    I would love to hear you all speak a little bit on that. 
Thank you.
    Admiral Schultz. Let me grab that, and let the Master Chief 
offer some color commentary.
    I would say, first off, on the infrastructure, sir, with 
the pull from the Congress, the unfunded priority list--which 
we were delinquent on, behind schedule on, but that will come 
to the Hill--that reflects much of our prioritized list of 
unfunded projects that are in that $1.7 billion. So that is the 
best vehicle, it allows us to sort of rack and stack--and, 
obviously, what is attractive to the members of the committee, 
other Members of Congress have a chance to weigh in on that, 
and I think that is the best way forward there.
    In terms of 65s, there are 98. There are no more available 
in the world. So that will be--you know, we have been fortunate 
we kept them in flight. We have got great mechanics that work 
on these. We have got a depot down at ALC, Aviation Logistics 
Center. But at some point they become unsustainable. So where 
we can we would like to replace them with service life 
extension--you know, sundowner hulls, bring down new 60s. That 
is where we got to put a little bit of a more, you know, 
brushstroke details on a plan here, moving forward, as future 
vertical lift just seems to, you know, continually increment to 
the right there a little bit. We have got to make sure we have 
got a bridging strategy.
    Is it sustainable within our existing fleet, the 60s and 
increasing that number? Is there some type of interim period 
where we may have to contract some support? I think we have got 
to take a little more holistic view than we have to date on 
that, sir.
    Master Chief?
    Mr. Mast. Just to throw one more thing in the middle of 
that, can you talk a little bit about what is the risk? Is it 
responsible for risk to add another 10,000 hours or something 
to those air--to those 65s? Is it responsible to the pilots to 
ask that of those airframes, if that is----
    Admiral Schultz. Congressman, we will obviously--you know, 
the pilots, the safety of our men and women in the cockpit, in 
the backside of that airplane, is the number-one priority. We 
will delve into that very thoughtfully. That is a composite 
hull, it is not an aluminum-type hull. So we have got to make 
sure we understand it. There is not a track record there. So we 
will proceed with the best industry advice, the best scientific 
advice, and make sure, you know, we are not taking any undue 
risk with the safety of our men and women in the Coast Guard.
    Master Chief, do you have anything to add?
    Master Chief Vanderhaden. Yes, we have a lot of senior 
enlisted folks that are on those product lines that are 
rehabbing those, and they would let me know immediately if they 
thought there was an issue, there was a safety issue there, so 
I am confident. I am confident in them.
    Charleston, South Carolina, is going to be a big hub for 
us. That is going to be--we are going to--it is a strategic 
location. We desperately need to rebuild some piers in 
Charleston, South Carolina. Station Tybee Island in Georgia 
could use some help, just being perfectly frank with you, and 
then Alaska is going to be a big challenge, preparing those 
home ports in Alaska for the cutters that are going to be up 
there is a big deal.
    We want to be sure that Alaska is an attractive place to be 
stationed, we have a lot of interests up there, so we want the 
quality of life for our folks in Alaska to be good. And so we 
need to build that out correctly.
    Mr. Mast. Thank you, Mr. Chairman. I yield back.
    Mr. Maloney. I thank the gentleman.
    Mr. Brown?
    Mr. Brown. Thank you, Mr. Chairman.
    Admiral Schultz, I would like to talk to you a little bit 
about the--you know, more broadly, the Coast Guard mission. And 
I know it is to ensure maritime security and stewardship. I 
often think about the Coast Guard, you know, operating within 
the U.S. maritime limits and boundaries, and I also think about 
the Coast Guard, for example, when I went to Guantanamo Bay, 
that you provide port security to the Navy and around the 
world.
    But I want to ask you about your operations in the South 
China Sea.
    In September of 2017 the Director for Intelligence and 
Information Operations for the U.S. Pacific Fleet raised 
concerns about the U.S. Coast Guard operating in the South 
China Sea. Later that same year the Naval War College expressed 
concerns that the use of--and that is people at the War 
College, not the War College as an institution--that the use of 
the Coast Guard forces in the region could increase the risk of 
war, instead of easing tensions.
    Earlier this year a U.S. Coast Guard cutter was deployed to 
the South China Sea to transit the Taiwan Strait and conduct 
operations with Philippine coast guard vessels.
    I mean, given the small size of your budget, and the nature 
of your mission, can you sort of make the case of why that 
makes sense, that the Coast Guard is operating in a way that 
looks more like a naval freedom of navigation mission?
    Admiral Schultz. Congressman, I appreciate the question, 
and I will try to keep this short. I would tell you the Coast 
Guard brings unique capabilities, unique authorities. We are in 
the Indo-Pacific South China Sea AOR today with the Coast Guard 
Cutter Bertholf. We will replace her in the coming weeks with a 
second National Security Cutter. We will cover about 10 months 
of the 2019 calendar year. That is at the request of the four-
star Indo-Pacific Commander.
    You know, if you look at what is going on in that part of 
the world there, you look at how China is actioning, you know, 
things there, they are using their coast guard. You know, we--
when you see a United States Coast Guard cutter with that 
orange and blue stripe, I think that represents, you know, 
model maritime governance and behavior. I think we are the gold 
standard. You know, if you look across the world, including the 
China coast guard, they replicate that hull design here. Maybe 
different colors, but they use that Coast Guard symbol to brand 
their Service. I think having the Coast Guard there is a 
different tool in the kit.
    You know, we have done some Taiwan Strait transits 
alongside a Navy combatant. We are in the presence. I think the 
best application of the Coast Guard--obviously, when I send a 
ship to the Indo-Pacific commander or the 7th Fleet commander, 
it is to do the business that they see most suitable in that 
region.
    I think for us, you know, I think the Coast Guard offers an 
alternative, not just a--you know, we are below that threshold 
of war here. You know, we are looking to get out to the Oceana 
region here in the coming weeks with Bertholf, with the 
successor ship. We were in training with the Philippines at sea 
doing search-and-rescue exercises followed by port calls. We 
are offering an alternative to an increasingly aggressive 
China.
    China is using force with their coast guard, with their 
military militia against Vietnamese fishermen and Filipino 
fishermen. So I think there is a different thinking here when 
you bring the Coast Guard in. You know, we are a locally based, 
nationally relevant, globally deployed coast guard----
    Mr. Brown. Let me ask you this.
    Admiral Schultz. There are choices----
    Mr. Brown. Can I just ask you this question, though? I 
mean, like, I think of the Coast Guard, and you enforce the 
law, the law of the United States, international law. I think 
about, for example, you know, drug runners in the Caribbean 
and, you know, you are engaged there.
    I mean, but the notion that the Coast Guard is sort of 
enforcing the law against--or balancing against another nation 
state's coast guard--and, let's face it, their mission is 
different than yours, as you as you suggest. They are much more 
aggressive. They are patrolling alongside armed fishing boats. 
So what is the nature of that engagement, and what are you 
anticipating? And what are your concerns, in terms of that 
engagement with, for example, the Chinese Coast Guard?
    Admiral Schultz. Well, sir, I am going to pull it out of 
the South China Sea for a second and say, if you think about 
your Coast Guard, we are the face of the United States 
Government in the Arctic, in the Antarctic, the high latitudes. 
That is a competitive space. China has been up there 5 or 6 or 
7 of the last 8, 9 years, projecting their presence. So I talk 
about presence equals influence in that region. On a day-to-day 
basis, sir, we are representing about five of the six 
geographic combatant areas.
    We have just brought a ship back from Africa Maritime Law 
Enforcement Partnership, helping the Senegalese, Ghana, the 
Nigerians develop capability to protect, you know, protein 
sources from the sea, as China and others are raking, you know, 
through their waters and drawing more than 50 percent of their 
fish haul now off of Africa.
    In the CENTCOM area I have got 350 Coasties operating 6 
patrol boats supporting the 5th Fleet commander.
    So I think the misnomer is that the Coast Guard is a 
domestic nearshore coastal organization. We are a global Coast 
Guard. I mentioned in my opening statement, though, I get 
funded about $340 million towards those defense operations, 
contributing about $1 billion.
    So I think those are choices. I obviously serve the 
Secretary of Homeland Security, and then I serve, you know, 
force provision to the combatant commander, sir. So that is the 
challenge. Those are the enterprise choices about taking, you 
know, an insatiable demand for Coast Guard, and allocating 
finite capacity against all those demand signals.
    Mr. Brown. Thank you, Mr. Chairman.
    Mr. Maloney. I thank the gentleman and ask unanimous 
consent to allow the gentleman from Louisiana to join the panel 
for the purposes of questioning the witnesses.
    Without objection, Mr. Graves.
    Mr. Graves of Louisiana. Thank you, Mr. Chairman.
    Thank you all for being here, and thank you very much for 
your service.
    Admiral, the Offshore Patrol Cutter, I have seen some news 
reports regarding the potential impact there. Can you tell us, 
is the builder of the OPC going to be on schedule agreed to in 
the contract, in terms of delivery of those vessels?
    Admiral Schultz. Congressman, thanks for the question. 
Chairman DeFazio made some points on that, but it wasn't in the 
form of question.
    Sir, the Offshore Patrol Cutter is our number-one priority. 
It has our top leadership level interest, as of that of the 
Department. Eastern Shipbuilding Group owes us some 
deliverables here at the end of the month that are going to 
talk about the impacts. As you know and we all know, you know, 
Matthew--or Michael--was a devastating storm to the region 
recently, recategorized as a category 5 storm. So there is some 
impacts.
    What we are looking for is the specificity from Eastern 
Shipbuilding's, you know, feedback to us about how that will 
impact, from their perspective, costs, and contracts, 
schedules, and things like that. When we get that at the end 
of--you know, a week from Friday is the due date, the 31st, we 
will put our team of experts--in-house and some contracted 
experts in the shipbuilding industry--and do our analysis of 
that. And then, based on that, you know, we will see what the 
path forward looks like.
    This is a 25-ship procurement over the good part of two 
decades. You know, Mother Nature here dealt a pretty tough hand 
to Eastern Shipbuilding Group. So we are informing, you know, 
the way forward on that today.
    Mr. Graves of Louisiana. Sure. Admiral, you know our strong 
interest in recapitalizing the Coast Guard for many years. You 
all have been dealing with bubble gum and duct tape holding 
assets together for way too long. And we have very strong 
concerns about the recapitalization and how it is actually 
synchronized, because you have got certain vessels that are 
coming in that play an important role in the overall role of 
the Coast Guard, and if you don't have certain assets to come 
in and fill some of the voids that are there with some of the 
aged assets that we have, it potentially creates significant 
problems.
    But--or can you tell us if you--if the vessels are going to 
be delivered according to the terms of the firm fixed-price 
contract?
    Admiral Schultz. Congressman, the deliverable on the first 
ship was 2021--the Argus, which is going to L.A.--and that is 
what we are going to have to see. We are going to have to see 
what exactly, you know, the puts and takes are as it impacts 
schedule, as impacts costs in the Eastern Shipbuilding Group.
    You know, in terms of long ball, the 2020 budget has some 
money in there, as we look at a service life extension for our 
270-foot Medium Endurance Cutters. Those started being produced 
around the 1984 timeframe. They are 33, 35 years old, some less 
than that. You know, we have a fleet of 14 210-foot cutters 
built in the 1960s, early 1970s, and 13 270s built in the mid-
1980s into the early 1990s. You know, those 210s, at the end of 
the day, are going to be, you know close to 60 years old. We 
are operating them today at 50, 51, 52 years old at 92 percent 
availability.
    So our engineers, our mission support folks, are doing 
remarkable things. I am confident we will be able to bridge 
that gap. This service life extension for the 270s that we are 
just getting going with 2020 money here seeding the way 
forward, you know, we will get there. It is not ideal to run 
50-, 60-year-old ships.
    Unfortunately, that is sort of the nature of where we are 
as a Service, and we will continue to attenuate that. But I am 
confident, sir. You know, obviously, we have got to get all the 
analysis of the data from Eastern to figure out the path 
forward, sir. But if we can keep this program on track or close 
to on track, we will have capacity to continue to do the work 
of the Coast Guard. We are just going to have to keep some 
older ships going potentially a little bit longer.
    You know, arguably, we are a little behind where we are 
today, but I think this service life extension program is going 
to allow us to move forward here, sir.
    Mr. Graves of Louisiana. Admiral, look, you are well aware 
that we have been huge advocates to get the Coast Guard 
recapitalized. You have been dealing with an aging fleet of 
vessels that have been used well beyond their intended service 
life. And it is very important to us that we keep these things 
on schedule, and that we keep them on price to make sure that 
the men and women of the Coast Guard have all the assets that 
they need to do their job in this incredibly expensive mission 
that you all have been dealt over the last several years.
    I heard you loud and clear. May 31 is when you are going to 
have the information that you need. But you indicated you all 
are going to be doing some internal processing on that. Can you 
tell me when you think you will be able to come back to the 
committee and inform us whether the firm price will be adhered 
to, and whether the schedule would be adhered to?
    Admiral Schultz. Congressman, I would tell you it is 
probably a matter of weeks, the process--you know, weeks, not 
months. And I would commit to you that we will do due diligence 
on that, obviously, keeping this moving forward.
    You know, we do not want to lose any dates. You know, this 
need to replace those cutters, as you intimated, is absolutely 
essential. That said, you know, to go back to the drawing board 
here, were we not to find a way forward successfully here with 
the Eastern Shipbuilding Group, there is a time consideration 
there, as well, sir.
    So we are committed at the highest levels, including the 
Department, to make the right decisions on this procurement.
    Mr. Graves of Louisiana. So Mr. Chairman, I am hearing 
roughly mid-June for an update to the committee.
    Is that is that fair?
    Admiral Schultz. Sir, I would say before the end of June. 
And, you know, we can certainly try to move earlier in June, 
but I got to get a sense of just, you know, did we get 
everything we need? We want to make informed decisions. 
Hopefully, the first tranche of homework, I will call it, for 
lack of better--from Eastern Shipbuilding answers the 
questions. But I suspect it is their first heavy lift with a 
Government contract. There may be some puts and takes there, 
sir. But we will do due dispatch to get that information to the 
committee as soon as possible.
    Mr. Graves of Louisiana. Thank you, Mr. Chairman. I yield 
back.
    Mr. Maloney. The gentleman's time is expired. I will now 
proceed to the second round of questions and recognize myself 
for 5 minutes.
    You know, gentlemen, I think what is clear in the first 
round of questioning is that there is remarkably bipartisan 
consensus on this committee, with respect to the priorities 
that we think are important and that are being underfunded in 
the President's budget request. So I don't want to put you on 
the spot, but I think that the more you look at this budget 
request, I would just like to point out for the record that, 
when you look at the 11 statutory missions of the Coast Guard, 
when you look at what you guys are doing on border security--we 
talk a lot about that up here--when you look at what you are 
doing on drug interdiction, not just in the Caribbean, but in 
the Eastern Pacific, when we think about what the next 
generation of technology and improvements ought to be in that 
area--persistent overflight, use of drones, when we look at 
your Dolphin fleet, we know you have got to replace them.
    We know you have got airframe problems. We know we are not 
where we should be on the Polar Security Cutter program. We are 
way behind the Russians and the Chinese in our presence in the 
Arctic. We did a whole hearing on that the other day.
    We know what you can say and can't say about that, but we 
up here in a bipartisan way know that we haven't invested in 
that yet, if we were to follow the President's budget, we would 
continue a decade of neglect in the Arctic. We know we are not 
investing in our shoreside infrastructure. We see there is a 
$170 million cut in that.
    We know what it would mean to our personnel, where their 
costs of living are going up because they live in expensive 
seaside communities that have experienced all kinds of price 
inflation. We know what you make, and we know how hard it is to 
pay for your housing. We know what your retirement packages 
look like.
    The fact is that there is nothing about this budget that 
demonstrates a respect for the growing and critical nature of 
your missions. And that would be true if you weren't doing 
anything new. But the fact is that we have major emerging 
concerns about things like the export of LNG, and the security 
of that, things about the Arctic, and the great power 
competition there. These are new. We have an aging fleet of 
vessels and aircraft. We have all kinds of needs on shoreside.
    And so I just want you to know that we take that all 
seriously. And in a bipartisan way up here I think you will see 
us do what ought to be done on this. I think it is 
disappointing that we can't get a document from the 
administration either that reflects the genuine needs that that 
this industry, and particularly the Coast Guard, requires, but 
also that would at least, you know, let us know what the unmet 
needs are in a timely way for this hearing, so that we could 
get that document, as the ranking member points out, in time to 
do us some good. Because we are going to care about that, and 
we are actually going to keep faith with that.
    I am glad we are moving the pay issue, so that if we shut 
down the Government again we don't do to you again what we did 
to you last time. That was a disgrace. And most of the Members 
up here agree on that on a bipartisan basis. We ought to stop 
treating you like an afterthought. And when we are paying the 
rest of our military, we sure as heck ought to pay the Coast 
Guard.
    So--and by the way, if we didn't pay Members of Congress, 
we wouldn't shut down in the first place, so we ought to start 
by not paying the people up here, and we wouldn't put you in 
that place in the first place.
    So, with all of that, I just wanted to unburden myself with 
some of that. But because this a question-and-answer format, I 
am interested, Commandant, in the Arctic. We did hear a lot of 
testimony on this recently, but I would like to give you an 
opportunity to talk particularly about--following up on some of 
Mr. Brown's questions around the emerging missions we are going 
to ask of you in terms of what is happening in the Arctic, what 
we are seeing from the Chinese and others, and why that really 
puts a real urgency behind the Polar Security Cutter program.
    If you could, sir, what are you seeing in the Arctic?
    Admiral Schultz. Thank you, Chairman, and thank you for, 
you know, sort of your overview of the committee's bipartisan 
support here for the work of the Coast Guard and the maritime 
interests of the Nation, sir. That is encouraging to know, and 
there is a lot in that statement.
    You know, in the Arctic, sir, we are seeing different 
behaviors. You know, China has a fleet of more than four dozen 
icebreakers. China is an Arctic nation with a broad Arctic 
coast. They are deriving more than 20, 25 percent of their GDP 
from activities in the Arctic. They are reestablishing bases--
--
    Mr. Maloney. Did you mean China, sir, or did you mean 
Russia?
    Admiral Schultz. I mean Russia first, talking about----
    Mr. Maloney. Yes, I thought so, because China is about 900 
nautical miles from the Arctic----
    Admiral Schultz. Oh, I am talking----
    Mr. Maloney [continuing]. And yet they call themselves an 
Arctic nation. But I take your point. Go ahead, sir.
    Admiral Schultz. Just talking about the competing nature of 
the Arctic space. The Arctic off of Russia, you know, they are 
deriving LNG, they are partnering with the Chinese with a 30-
percent stake in the Amal energy project. They are looking to 
tax a Northern Sea Route. That will bring Russia back as a 
player in terms of deepening their pockets, you know, despite 
sanctions. That is the Russian game. They are in the meddlesome 
game.
    I think if you look at the Arctic off of Alaska, we have 
seen China up there. China is a non-Arctic state, they are a 
self-declared near-Arctic nation. You know, they have now a 
second research vessel, the Xue Long 2, they launched last 
summer. It probably becomes operational maybe as soon as this 
year. They are talking about building a heavy breaker. So they 
are invested in continually projecting presence off the 
Alaskan--in the Arctic, and we are concerned about it.
    You know, the Arctic is a space with very limited 
communications capability, with limited domain awareness. The 
Polar Security Cutters are a part of that conversation. In 
April I rolled out a new Arctic Strategic Outlook that takes a 
10-year look at the Arctic. We had just rolled one out in 2013, 
so a little bit early for a refresh, but things have changed. 
We talked about the Arctic as a peaceful, collaborative, 
environmental space when we rolled out our first strategy. Now 
we talk about it as an area of national security.
    And I say repeatedly, you know, presence equals influence. 
You know, until that second, third Polar Security Cutter, we 
won't really have much of a game up there, in terms of 
presence. But, you know, China is paying attention to the 
sighting of F-35 fighters, you know, fifth-generation fighters 
in Elmendorf. They are paying attention to the undersea cables 
that allow communications. From a national security standpoint, 
you hear General T.J. O'Shaughnessy at NORTHCOM talking about 
the pivotal importance of the access across the--you know, the 
polar regions here to the Nation, posing a national security 
threat.
    So the Arctic is a competitive space. It is a national 
security conversation. And, you know, the Navy will continue to 
do ice edge and show up there on a, you know, every-other-year 
basis, but we are the face of the Government there. It is about 
projecting sovereignty. And we take that seriously, and we will 
continue to inform our understanding. We will do Arctic Shield 
operations this summer again, some portion of a 3- or 4-month 
period to continue to define our learning there, continue to 
work with the indigenous populations. Because as we increase 
our presence up there, we have got to be sensitive to the--you 
know, to the stakeholders there across the full landscape.
    Mr. Maloney. I thank the gentleman.
    Mr. Gibbs?
    Mr. Gibbs. Thank you.
    Mr. Khouri, I woke you up, I guess, because--anyways, back 
in the last Congress you testified before the subcommittee 
dealing with the consolidation operations among international 
container lines and the Federal Maritime Commission 
Authorization Act.
    We expanded your Commission's authority to do things like 
prohibit the lines participating vessel sharing and rate 
discussion agreements, prohibit joint contract negotiations 
between towing vessel operators and international carrier 
alliances, restrict joint contract operations between marine 
terminal operators and international carrier alliances, and so 
on.
    A couple of questions there. Has the Commission used these 
authorities? And also, has the existence of these expanded 
authorities led to carriers to maybe change their behaviors 
without the Commission taking action?
    Mr. Khouri. Yes, there has been some activity in that 
regard. For example, the Trans-Pacific Stabilization Agreement, 
which was the largest rate discussion agreement in our Pacific 
trades, in the face of the legislation, decided to just close 
operations. So that removed a large amount. This was part of 
the LoBiondo bill where you cannot be simultaneously in a rate 
discussion agreement and also in a vessel sharing agreement 
that might discuss capacity allocations. So they voluntarily 
left the rate discussion part of that. So, you know, that was, 
I think, a good good result.
    The other part, in terms of implementing the LoBiondo Act, 
we have been going through--there are 438 different types of 
agreements that we have active at any--you know, currently. So 
we have been very meticulously going through every single one 
of them. There are about 160 that have been preliminarily 
flagged as perhaps having some need for modification due to the 
LoBiondo new requirements. We have been reaching out to each 
one of those, and see--is there a need to come in, amend that 
those authorities to make sure everyone understands exactly 
what is going on.
    Mr. Gibbs. Yes.
    Mr. Khouri. So that is in process. There has been no new 
activity in requesting joint purchasing authority. So I think 
the industry heard Congress loud and clear, and that is our----
    Mr. Gibbs. Has these--anything--less competition or 
anything increased consolidation between the international 
carriers?
    Mr. Khouri. There has been--as I said in my testimony, in 
the last year there has not been any new mergers, 
consolidations, either completed or announced.
    Mr. Gibbs. OK, I need to move on. I want to ask Admiral 
Schultz another question about the Great Lakes. Thank you, Mr. 
Khouri, I appreciate that.
    Is it my understanding--am I correct, the Merrimack class 
and the Coast Guard wants to develop a whole new icebreaker 
class for the Great Lakes, or why don't we just, you know, 
stick with what we got that works, and--are we trying to--is 
the Coast Guard trying to move on to a different class of 
icebreaker for the Great Lakes?
    Admiral Schultz. Ranking Member Gibbs I would tell you 
where we are today, sir, is we are focused on the current fleet 
of Great Lakes icebreakers. We have one Mackinaw-class, 240-
foot, more capable buoy icebreaking ship, a tremendous ship.
    Congressman Gallagher asked about whether that contract was 
built in with a provision for a second. I need to get back on 
that. I don't know the answer there.
    We have the six 140s of the nine 140-fleet Coast Guard writ 
large, and we are doing a service life extension to push them 
out 15 additional years. So, you know, 15 additional years puts 
us into the 2030, 2035 timeframe. So we need to be thinking 
about the future on Great Lakes.
    I would tell you today, sir, I believe we have sufficient 
capacity in our approach on the Great Lakes with the Mackinaw, 
with the six breakers, and our partnership with the Canadians. 
There is obviously interest from the Congress here about 
looking at an additional large icebreaker capability on the 
Great Lakes, something Mackinaw-like. So with the funding that 
was provided by the Congress over the 2017, 2018, and 2019 
appropriations we are doing some analysis work on that. That 
will inform our way forward, sir.
    Mr. Gibbs. Well, I guess what I was wondering--if the 
Mackinaw-class is, you know, sufficient, do we need to develop 
a whole new class, or--you know, or--it would be cheaper--
obviously, it would be more cost efficient to use that, if it 
is, you know, meeting the requirements.
    Admiral Schultz. Congressman, I think what might be the 
smart approach for us, as we had a conversation here with some 
of your colleagues about, you know, a 6-3-1 strategy, Mr. 
Garamendi said, you know, beyond these three polar security 
heavies, you know, we talk about maybe what a medium breaker 
looks like. There might be some parallel construct between a 
medium breaker that could serve places in Greenland and other 
things to get after the high latitude work, and a breaker on 
the Great Lakes. There might be some commonality, sir. So that 
is a conversation we would like to take.
    You know, we just awarded this detailed design construction 
for a Polar Security Cutter. There has been a lot of bandwidth 
as we are building NSCs, PSCs. We are--Congress is interested 
in these Waterways Commerce Cutters. I think that is sort of 
what is forward here. So I think this report that we owe you 
will start to share a little bit of what our thinking is, 
moving forward, sir.
    Mr. Gibbs. OK, thank you.
    Mr. Maloney. I thank the gentleman.
    Mr. Brown?
    Mr. Brown. Thank you, Mr. Chairman.
    I am going to ask Admiral Buzby a question, but I just do 
want to, without piling on too much, Admiral Schultz--I mean, 
look, you guys do a lot with a little. In the President's 
budget request for 2020, you know, your budget is 5 percent of 
the Navy's, right, $11.3 billion, and the Navy's is $205.6 
billion. The Navy doesn't do a lot of what you all do. So I 
guess my point is I don't want to see you doing a whole lot of 
what the Navy ought to be doing.
    The Arctic, different story. South China Sea, I have got 
concerns. Outside of providing maritime security or port 
security for our Navy, or perhaps training our allies' coast 
guards, I just have concerns with what might look like mission 
creep. But I do appreciate your response and that you are 
responding to what our Nation asked the Coast Guard to do. So I 
want to thank you for that.
    Admiral Buzby, based on data in the military sealift 
commands 2018 in review, nearly one-quarter of all petroleum 
products transported in the sealift program were on foreign-
flagged tankers. Additionally, it is my understanding that only 
2 of the 60 ships in the Maritime Security Program are 
dedicated tankers. The rest are roll-on/roll-off ships, 
containerships, or a multipurpose cargo ships, which can 
occasionally be used, I think, for that tanker roll. But only 
two dedicated for are exclusively tankers. It is concerning 
that the United States military is relying on foreign-flagged 
tankers to meet its military sealift requirements.
    I guess my question for you is how many additional tankers 
that are exclusively tankers do we need? And what I outlined, 
does that raise concerns to you, you know, maybe national 
security risks, or an overreliance on foreign tankers?
    Admiral Buzby. Thank you for that question, Congressman, 
and you have hit on a very important point. Of all of the 
programs that we have in place for national sealift, we have 
the dry side pretty well covered: the Maritime Security 
Program, other programs. What we don't have: assured access to 
our tankers. And that is a concern. Yes, yes, it is a concern, 
especially if we got into a protracted sealift in the Pacific, 
where we have to traverse great distances and be moving large 
volumes of petroleum.
    You know, there are a total of six U.S.-flag 
internationally trading tankers. Two of them, as you point out, 
are under the Maritime Security Program. The others are--you 
know, get chartered from time to time by military sealift 
command. But you know, the projections are that we would need 
upwards of 86 tankers to fulfill a continuous sealift out to 
the Western Pacific.
    Mr. Brown. Right. So I understand, you know, we always need 
more than what we have and what is, you know, probably within 
reach, given the resources we dedicate to address the threats 
and the risks.
    But if we are at two to six, as you described, I mean, is 
there a strategy to get to a larger number? And, if so, what is 
the larger number, and what is the timeframe?
    Admiral Buzby. Well, there are a number of ways that we 
could get after that.
    Congressman Garamendi outlined one approach in his 
legislation that he is proposing, along with Senator Wicker, a 
way to incentivize ships to come under the U.S. flag, to be 
available to us in time of need. Again, it comes down a 
business case, as pretty much all shipping really is, of--the 
business case of having--operating your vessel. There are many, 
many U.S.-owned tankers in the world. But business case and 
cost of operating often keep them out from underneath the U.S. 
flag.
    So there are a number of ways that could be used to 
approach--to bring the--incentivize them, and we are looking at 
several of those. And a Maritime Security Program-like approach 
could be applied to tankers, for instance.
    Mr. Brown. Thank you. And Mr. Chairman, I yield back.
    Mr. Maloney. I thank the gentleman.
    Mr. Graves?
    Mr. Graves of Louisiana. Thank you. I want to go through 
this very quickly, because the chairman has made it clear to me 
that I don't have my full 5 minutes.
    Admiral, going back to the OPC, does the Coast Guard have 
the authority to modify the fixed-price contract without 
additional legislation?
    Admiral Schultz. No, sir.
    Mr. Graves of Louisiana. Would you--I mean so it is 
feasible that, if your evaluation determines that it is not in 
the interest of taxpayers, it is feasible that could actually 
be put back out on the street. Is that possible?
    Admiral Schultz. Congressman, I think, you know, we awarded 
a firm, fixed-price contract. As I understand it, my 
understanding is to go back in and look at costs and schedule, 
things like that, would require some type of legislative 
authority to revisit that.
    Mr. Graves of Louisiana. Are you requesting any type of 
additional----
    Admiral Schultz. We have responded to ask for Congress 
about some drafting assistance on legislation that gets into, 
you know, an ability to open that up and possibly look at 
something like that. There is no numbers associated that--we 
don't have any data. So at the request of Congress we provided 
some language----
    Mr. Graves of Louisiana. But because you haven't done your 
assessment, it would be premature to--for the Coast Guard to 
request any type of additional authority. Is that safe to say?
    Admiral Schultz. Sir, I think we would say it is safe to 
say that we understand the impacts of a cat 5 hurricane and----
    Mr. Graves of Louisiana. Absolutely.
    Admiral Schultz. And Eastern Shipbuilding Group will have 
an impact on the OPC program. So recognizing a window of 
opportunity here with this disaster supplemental that is moving 
here, you know, we have provided language recognizing this is 
in our interest moving forward to at least have that option on 
the table. The Congress will decide if that is something they 
want to look at--you know, include or not.
    You know, we have steered clear of, you know, 
substantiating--there is Eastern Shipbuilding Group, advocacy 
on the Hill. We are detached from that. They are doing their 
thing. We are doing our thing. And right now our thing with 
Eastern is you need to show us the impacts, we will do our 
assessment. If there is a mechanism to possibly revisit the 
contract, then we will see where we are at the end of the day.
    Mr. Graves of Louisiana. And so, Admiral, I just--I want to 
flex the chairman's muscles here a little bit--being the 
authorizing committee, it sounds like that is authorizing 
legislation. So certainly, if the Coast Guard is requesting 
authorizing legislation, I certainly would hope that the Coast 
Guard would come before the authorizing committee staff and 
members and have an opportunity to discuss it with us, if that 
is the case.
    Admiral Schultz. Sir, we will make sure our efforts are 
full transparency to the committee. If we haven't done that to 
date, we will circle back and do that.
    Mr. Graves of Louisiana. Admiral, thank you very much, and 
I want to thank you all again for your service.
    Last comment. There were a number of news reports--and this 
isn't a question, just a comment--a number of news reports 
about Jones Act and potential discussion within the 
administration. I think it is really important for all of you, 
Admiral Buzby, Commandant, all of you, to continue sharing 
within the administration thoughts on modifications to the 
Jones Act.
    I know that some of the different advocates for changes in 
the Jones Act are some of our allies. And those same allies are 
not putting up their appropriate NATO dues. They don't have an 
appropriate defense industrial base and, in many cases, are 
having their ships built in countries that are not necessarily 
friendly to the United States.
    And I think that it is a really important discussion. I 
think that ensuring we continue to advocate for the Jones Act 
under these existing conditions is entirely consistent with 
this administration's policies on defense, and in ensuring we 
put America first. And I just wanted to flag that, as I try and 
do each hearing when you are here.
    It is important to this country. I think it is important to 
our security. And again, I think it is consistent with other 
policies of this administration.
    So with that I want to yield back 1 minute and 20 seconds 
to the chairman.
    Mr. Maloney. I thank the gentleman. And I don't believe 
there are any other Members' questions, but I do want to close 
the hearing by thanking you all once again for your service. So 
I want you to know, Admiral Schultz, we appreciate the work 
your Coasties do. We don't take it for granted. You make 
extraordinary and difficult things look routine.
    We know the sacrifices your Coasties make, Master Chief. 
Same comment to you. You know, as you know, a constituent from 
my district lost his life in the last year. It is a good 
reminder of the sacrifices our families make.
    We apologize for the additional burdens we put you through 
during the shutdown. We should never do that again. And you 
have our commitment that we are going to work in a bipartisan 
fashion to make sure we do not.
    Maritime Administration, Federal Maritime Commission, we 
appreciate the work you gentlemen do. Again, we are 
disappointed in some of the numbers the President's budget sent 
up here, but as you have heard on this panel we understand the 
work you do, we understand the importance of the Maritime 
Security Program, and the Jones Act. And I think you will see 
that bipartisan support continued.
    With that, that concludes today's hearing. Thank you all 
very much. The hearing stands adjourned.
    [Whereupon, at 11:55 a.m., the subcommittee was adjourned.]


                       Submissions for the Record

                              ----------                              


  Prepared Statement of Hon. Sam Graves, a Representative in Congress 
     from the State of Missouri, and Ranking Member, Committee on 
                   Transportation and Infrastructure
    As everyone will note today, the Coast Guard is at least a decade 
behind in completing its fleet recapitalization.
    It has no plan for replacing or extending the life of its 
helicopters, and its backlog for shoreside construction, maintenance, 
and environmental cleanup is in the billions.
    I look forward to hearing from the Commandant as to how we are 
going to catch up so the Coast Guard can carry out its important 
missions.
    I also want to hear from the Chairman of the Federal Maritime 
Commission about implementation of the changes Congress made last year 
to the Commission's authorities.
    Finally, I want to hear what the Maritime Administrator has to say 
about how we can increase the pool of available merchant mariners to 
assure our national defense sealift needs are met.
    I look forward to the witnesses testimony. I yield back the balance 
of my time.


                                Appendix

                              ----------                              


     Questions from Hon. Rick Larsen for Admiral Karl L. Schultz, 
                      Commandant, U.S. Coast Guard

    Question 1. At the hearings on March 6 and most recently, May 21, 
you mentioned you would provide the Committee with details on the Coast 
Guard's plans regarding oil spill prevention and response in the 
Pacific Northwest, related to the Trans Mountain pipeline extension 
project. Please provide that information.
    Answer. Within the United States, vessels carrying bulk liquid 
petroleum, non-tank vessels (self-propelled vessels of 400 gross tons 
or greater operating on the navigable waters of the United States and 
carrying oil of any kind as fuel for main propulsion), marine 
transportation-related facilities, pipelines and offshore facilities 
must submit oil spill response plans for approval by the U.S. 
government. The response plan specifies a means to mobilize and manage 
necessary personnel and resources required to mitigate up to a worst-
case discharge. The vessel response plan (VRP), the non-tank vessel 
response plan (NTVRP) and facility response plan (FRP) holders must 
cite specific Oil Spill Removal Organizations (OSROs) with whom the 
plan holder has a contractual agreement to provide equipment and 
personnel to abate a spill. OSROs provide specific amounts of core 
equipment to plan holders per regulations set out in 33 Code of Federal 
Regulations (CFR) 155 (tank and non-tank vessel requirements) and 33 
CFR 154 (marine transportation-related facility requirements).
    In District 13, the United States Coast Guard (USCG) has at its 
disposal the entire commercial OSRO equipment inventory resident in the 
region, US Navy spill response equipment, and the USCG's National 
Strike Force who are available to provide oil spill response expertise 
and have access to pre-positioned oil response equipment staged around 
the United States.
    Additionally, the USCG directs an Area Committee comprised of 
federal, state, and local agencies as well as federally recognized 
Indian Tribes. The Area Committee is responsible for drafting Area 
Contingency Plans to prepare for a worst case discharge and to mitigate 
or prevent a substantial threat of such a discharge in U.S. coastal 
zones. The Area Committee, under the direction of the USCG on-scene 
coordinator, will take into consideration any changes in potential 
worst case discharge scenarios associated with the Trans Mountain 
Pipeline expansion (i.e. transiting tanker ships and catastrophic 
pipeline system failures) and will ensure that the Area Contingency 
Plan properly addresses any new worst case discharge scenarios.
    Finally, the USCG engages in joint preparedness initiatives with 
Canada. The USCG and the Canadian Coast Guard (CCG) have a long history 
of cooperation in executing responsibilities to prepare for and respond 
to oil and hazardous substance incidents under the auspices of a 
bilateral agreement. The USCG/CCG established the Joint Marine 
Pollution Contingency Plan (JCP), a bilateral agreement for planning, 
preparing, and responding to harmful substance incidents in the 
contiguous waters along shared marine borders. The JCP contains a 
CANUSPAC annex specific to response procedures in the Canadian/US 
Pacific region. The USCG has and will continue to utilize this 
collaborative mechanism to ensure proper planning for potential spills.

    Questions from Hon. Mike Gallagher for Admiral Karl L. Schultz, 
                      Commandant, U.S. Coast Guard

    Question 1. Following up from the hearing, is it correct that the 
Coast Guard contract that procured the current Mackinaw was written to 
allow a second icebreaker to be procured, but it was never funded?
    Answer. The Great Lakes Icebreaker [GLIB] contract was not scoped 
to permit the procurement of a second icebreaker.

    Question 2. Is there an estimate of when the Great Lakes 
Icebreaking Acquisition and Program Report will be completed and 
delivered to Congress?
    Answer. The U.S. Coast Guard estimates that this report will be 
submitted to Congress no later than September 30, 2019.

    Question 3. At the May 21st hearing, you stated that you would 
provide an answer on whether the Canadians assisted with any port needs 
this past winter in the U.S. that you know of. Please provide that 
answer.
    Answer. The United States Coast Guard and the Canadian Coast Guard 
work collaboratively to facilitate commerce on the Great Lakes during 
the ice season. In the 2018-2019 winter season, ten United States Coast 
Guard and five Canadian Coast Guard Icebreakers collectively maintained 
navigable waterways in the Great Lakes for 109 days. During that time, 
the joint icebreaking operations assisted 763 vessel transits through 
ice-laden waters, supporting approximately 14.8 million tons of dry and 
liquid critical commodities estimated at a value of $536 million. While 
the ice covered 75% of the Great Lakes at the height of the season, the 
major waterways were open 95% of the season.

 Questions from Hon. Anthony G. Brown for Rear Admiral Mark H. Buzby, 
        U.S. Navy (Ret.), Administrator, Maritime Administration

    Question 1. What are the costs to transport the N.S. Savannah (NSS) 
per nautical mile?
    Answer. The Maritime Administration (MARAD) has solicited proposals 
to drydock the NSS for underwater hull maintenance and repair. Price 
offers were received on July 8th and are under evaluation. Transporting 
the NSS for drydocking would be accomplished as a ``dead-ship'' tow, in 
accordance with U.S. Coast Guard requirements. The costs for a dead 
ship tow are variable, and are highly dependent on the distance of the 
tow, the cost of marine diesel fuel at the time of the tow, and the tow 
route to its destination (whether the ship enters open ocean or not). 
Based on recent estimates, towing the NSS from its current berth in 
Baltimore, MD to Philadelphia, PA, for example, is estimated to cost 
approximately $1,900 per nautical mile and to Norfolk, VA is estimated 
to cost approximately $1,200 per nautical mile.

    Question 2. What is the cost of providing protective storage per 
nautical mile for the NSS?
    Answer. The average annual cost for protective storage is 
approximately $3 million. The costs to maintain the NSS in protective 
storage are ongoing, incidental to the cost of towing the vessel, and 
are not assessed on a per nautical mile basis. Protective storage is 
the Nuclear Regulatory Commission (NRC) designation required to carry 
out MARAD's basic license activities. This includes lay berth services, 
NRC license technical services, radiological protection, facility 
management, and maintenance. Funding to maintain protective storage and 
manage basic license activities of the NSS is required until 
decommissioning and license termination are completed.

    Question 3. How many days would it take to prepare and move the NSS 
from its current location to a port other than the Port of Baltimore?
    Answer. MARAD estimates moving the NSS within 30-45 days after 
awarding the drydocking contract. Under the terms of our license with 
the NRC, MARAD must first develop and approve an Emergency Port 
Operating Plan and then provide a minimum 30-day notification to the 
NRC before moving the ship. Additional vessel preparations prior to 
departure include providing a notice of intent to the U.S. 
Environmental Protection Agency (EPA) for a vessel general permit, 
which informs the EPA of MARAD's intent to operate (tow to a shipyard) 
the NSS and to conduct in-water hull cleaning to mitigate the spread of 
aquatic invasive species.

    Question 4. With the NSS currently moored in Baltimore, MD, what is 
the estimated cost savings for the Department of Transportation and 
MARAD with dry-docking the NSS for ship disposal in Baltimore, MD 
compared to Hampton Roads, VA or Philadelphia, PA?
    Answer. MARAD received bids only from shipyards in Philadelphia to 
perform the NSS drydocking. No offers were received from shipyards in 
Baltimore. Because no bid was submitted from a Baltimore shipyard, 
there is no basis upon which to estimate cost savings.

    Question 4a. Would dry-docking the NSS in Baltimore, MD for ship 
disposal facilitate MARAD's objective to begin the decommissioning and 
dismantling process as soon as possible?
    Answer. As noted above, no Baltimore shipyards submitted bids for 
drydocking the NSS. MARAD issued a request for proposals for the 
drydocking the NSS on May 30, 2019, with a deadline of July 8, 2019 for 
submitting proposals. MARAD received two proposals, both from shipyards 
located in Philadelphia, and expects to award a contract by August 2, 
2019.
    For background, drydocking, decommissioning of the nuclear power 
plant on the NSS, and disposing of the NSS are separate activities. 
During the drydock some pre-requisite work will be done on the 
infrastructure of the ship to support decommissioning; however, 
industrial dismantlement of the nuclear power plant on the NSS will 
begin next year with the award of the decommissioning and license 
termination contract. NSS decommissioning and license termination must 
be completed before the vessel could physically be disposed. Should the 
final disposition of the NSS be to dismantle the vessel, such work 
would have to be conducted in a qualified ship recycling facility. By 
statute, MARAD is required to qualify domestic ship recycling 
facilities to protect the environment and worker health and safety. To 
date, MARAD has qualified five ship recycling facilities, all located 
in Texas and Louisiana.

    Question 5. What specific ports or authorities has MARAD 
communicated with to dry dock the NSS among the three possible 
locations?
    Answer. In March 2019, MARAD issued a request for information to 
ascertain interest from commercial shipyards in the Baltimore, 
Philadelphia, and Norfolk areas. In Baltimore, MARAD communicated with 
two entities about the possibility of utilizing the former shipyard at 
Sparrows Point, MD, for the drydocking of the NSS; however, neither 
entity submitted an offer.


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