[Senate Hearing 116-352]
[From the U.S. Government Publishing Office]
S. Hrg. 116-352
THE STATE OF
THE AMERICAN MARITIME INDUSTRY
=======================================================================
HEARING
before the
COMMITTEE ON COMMERCE,
SCIENCE, AND TRANSPORTATION
UNITED STATES SENATE
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
MARCH 6, 2019
__________
Printed for the use of the Committee on Commerce, Science, and
Transportation
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available online: http://www.govinfo.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
42-444 PDF WASHINGTON : 2023
SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
ROGER WICKER, Mississippi, Chairman
JOHN THUNE, South Dakota MARIA CANTWELL, Washington,
ROY BLUNT, Missouri Ranking
TED CRUZ, Texas AMY KLOBUCHAR, Minnesota
DEB FISCHER, Nebraska RICHARD BLUMENTHAL, Connecticut
JERRY MORAN, Kansas BRIAN SCHATZ, Hawaii
DAN SULLIVAN, Alaska EDWARD MARKEY, Massachusetts
CORY GARDNER, Colorado TOM UDALL, New Mexico
MARSHA BLACKBURN, Tennessee GARY PETERS, Michigan
SHELLEY MOORE CAPITO, West Virginia TAMMY BALDWIN, Wisconsin
MIKE LEE, Utah TAMMY DUCKWORTH, Illinois
RON JOHNSON, Wisconsin JON TESTER, Montana
TODD YOUNG, Indiana KYRSTEN SINEMA, Arizona
RICK SCOTT, Florida JACKY ROSEN, Nevada
John Keast, Staff Director
Crystal Tully, Deputy Staff Director
Steven Wall, General Counsel
Kim Lipsky, Democratic Staff Director
Chris Day, Democratic Deputy Staff Director
Renae Black, Senior Counsel
C O N T E N T S
----------
Page
Hearing held on March 6, 2019.................................... 1
Statement of Senator Wicker...................................... 1
Statement of Senator Cantwell.................................... 3
Statement of Senator Schatz...................................... 30
Statement of Senator Fischer..................................... 32
Statement of Senator Baldwin..................................... 34
Statement of Senator Scott....................................... 36
Statement of Senator Sullivan.................................... 37
Prepared statement...........................................
Witnesses
Matthew Woodruff, President, American Maritime Partnership....... 5
Prepared statement........................................... 6
Thomas Allegretti, President, American Waterways Operators....... 9
Prepared statement........................................... 11
Matthew Paxton, President, Shipbuilders Council of America....... 14
Prepared statement........................................... 16
Austin Golding, President, Golding Barge Line.................... 20
Prepared statement........................................... 22
Berit Eriksson, Workforce Development Director, Sailors' Union of
the Pacific.................................................... 24
Prepared statement........................................... 26
Appendix
Response to written questions submitted to Matthew Woodruff by:
Hon. John Thune.............................................. 41
Hon. Marsha Blackburn........................................ 41
Hon. Ron Johnson............................................. 42
Hon. Maria Cantwell.......................................... 42
Hon. Richard Blumenthal...................................... 44
Response to written questions submitted to Thomas Allegretti by:
Hon. John Thune.............................................. 44
Hon. Marsha Blackburn........................................ 45
Hon. Ron Johnson............................................. 46
Hon. Maria Cantwell.......................................... 46
Hon. Richard Blumenthal...................................... 48
Response to written questions submitted to Matthew Paxton by:
Hon. John Thune.............................................. 49
Hon. Marsha Blackburn........................................ 49
Hon. Ron Johnson............................................. 50
Hon. Maria Cantwell.......................................... 51
Hon. Richard Blumenthal...................................... 52
Response to written questions submitted to Austin Golding by:
Hon. Marsha Blackburn........................................ 53
Hon. Maria Cantwell.......................................... 54
Hon. Amy Klobuchar........................................... 54
Hon. Richard Blumenthal...................................... 55
Response to written questions submitted to Berit Eriksson by:
Hon. Maria Cantwell.......................................... 55
Hon. Richard Blumenthal...................................... 57
THE STATE OF
THE AMERICAN MARITIME INDUSTRY
----------
WEDNESDAY, MARCH 6, 2019
U.S. Senate,
Committee on Commerce, Science, and Transportation,
Washington, DC.
The Committee met, pursuant to notice, at 10:03 a.m. in
room SH-216, Hart Senate Office Building, Hon. Roger Wicker,
Chairman of the Committee, presiding.
Present: Senators Wicker [presiding], Cantwell, Fischer,
Scott, Sullivan, Schatz, Baldwin, and Duckworth.
OPENING STATEMENT OF HON. ROGER WICKER,
U.S. SENATOR FROM MISSISSIPPI
The Chairman. We are here this morning to hear testimony on
the State of the American Maritime Industry.
We're delighted to have five witnesses who reflect the
breadth of this industry. Mr. Matthew Woodruff, President of
the American Maritime Partnership; Mr. Thomas Allegretti,
President of the American Waterways Operators; Mr. Matthew
Paxton, President of the Shipbuilders Council of America; Mr.
Austin Golding, President of Golding Barge Line, based in
Vicksburg, Mississippi, with 225 employees in 11 states, and I
note that Mr. Golding is joined by his family today and the
Mayor of Vicksburg, the Honorable George Flaggs is with us,
too, for support for the maritime cause, and Ms. Berit
Eriksson, Workforce Development Director for the Sailors' Union
of the Pacific.
We're grateful that all of you are able to be with us today
and we look forward to your testimony.
The economic and national security of our country depends
on a healthy maritime industry. Indeed, our country's
independence can be tied to the success of product colonial
ships and merchant seamen that were authorized by General
Washington to prevent British ships from delivering arms and
ammunition.
Today, maritime freight transportation supports about $4.6
trillion in annual economic activity and the maritime industry
supports 650,000 U.S. jobs. According to the Transportation
Institute, 22,500 jobs in Washington State and 13,400 jobs in
Mississippi are dependent on various elements of the American
maritime industry.
Over 1.3 billion metric tons of waterborne merchandise is
imported to and exported from the United States each year and
almost that much cargo is carried on the 25,000 miles of inland
waterways.
Equally important to the economic benefits, a strong
domestic maritime industry is essential to national security.
DoD relies heavily on U.S.-flagged commercial vessels and
civilian mariners to meet its sealift requirements. The U.S.
Coast Guard and the Maritime Administration are critical
components to all of our defense and maritime functions and the
Committee will be working to reauthorize these agencies.
Federal law supports a strong domestic maritime industry.
Notably, the Merchant Marine Act of 1920, better known as the
Jones Act, requires that vessels transporting goods between two
U.S. points be American-built, owned, crewed, and flagged.
Today, over 41,000 Jones Act-qualified vessels operate in
the domestic trades. Properly enforcing the Jones Act is
important for economic and national security.
I recently sent a letter to the President, along with
several colleagues on this committee, to express support for
the Jones Act and to encourage the Administration to convene a
meeting of all stakeholders to discuss how the domestic
maritime industry can meet new demands and serve new markets.
The American shipbuilding and industrial base is capable of
building the vessels necessary to carry the Nation's abundant
energy resources, such as LNG and other fossil fuels, anywhere
in the world.
Becoming more internationally competitive is important to
secure the industry's future. Currently, there are only 81
U.S.-flagged ships operating exclusively in international
trade, carrying less than 2 percent of the Nation's annual
foreign trade.
This is troubling from a national security perspective
because sufficient U.S.-flagged ships and mariners must be
available to meet national defense requirements.
As to workforce, MARAD estimates that shortfall of 1,800
qualified mariners needed to sustain a prolonged military
sealift mobilization.
As a member of the Board of Visitors for the U.S. Merchant
Marine Academy, I would note that Jack Bouno was recently named
superintendent there and is working to recruit and train
mariners to fill this shortfall. We wish the U.S. Merchant
Marine Academy and other training academies well.
In that regard, let me express my support for the Trump
Administration's new initiative to help Active Duty military
and veterans transition to maritime careers. The initiative
will build on the successful military-to-mariner program
managed by the Coast Guard and MARAD.
During today's hearing, I hope witnesses will address
issues, such as the laws and regulations affecting the
operation and competitiveness of industry, the current and
future impact of the Vessel Incidental Discharge Act,
legislation that many of us sponsored last Congress was
included in the 2018 Coast Guard reauthorization bill.
Like so many issues, getting VIDA signed into law would not
have been possible without the coordination of the Committee's
Ranking Member, Senator Cantwell, and I also salute the efforts
of Senator Sullivan in this regard.
Also, members might want to comment on strategies to grow
the maritime workforce and improve education and training
programs.
America is a maritime nation. We have a distinguished
history of using our abundant maritime resources to expand
commerce and protect our country. A strong merchant marine,
shipbuilding, and maritime industrial base are the marks of a
great power.
I look forward to working with my colleagues to ensure
America's maritime industry has a vibrant future.
And I now turn to my friend, the Ranking Member, Senator
Cantwell, from another great coastal state of Washington, for
her comments.
STATEMENT OF HON. MARIA CANTWELL,
U.S. SENATOR FROM WASHINGTON
Senator Cantwell. That is why we call them the Seattle
Mariners, by the way.
Thank you, Chairman Wicker, and thank you for holding this
important hearing today, and welcome to the witnesses. Thank
you for being here to bring more attention to the needs of
investment in our maritime sector.
I'm happy to welcome our witness from Washington, Ms.
Eriksson. Thank you so much for being here. You've been a part
of the maritime economy in our state for a long time and
representing the Sailors' Union of the Pacific today. We thank
you for that.
I know we are going to talk about workforce, the Chairman
mentioned it, but I'm sure you'll bring a particular
perspective to that in your testimony.
The United States maritime transportation system is
critical to our Nation's economy and to our security with 90
percent of overseas trade entering or leaving the U.S. by ship,
contributing $650 billion annually to our GDP. This is a very
important part of our economy with 13 million jobs nationwide.
The large freight network supports more than 40 million
jobs nationwide and these jobs fuel an entire economy
supporting trade and the movements of goods.
In the state of Washington, we know this because we have
nearly 70,000 direct jobs. The Chairman mentioned the indirect
jobs also associated with that sector and so you see the large
economic footprint that we've had in the past.
So whether it's ports connecting to freight corridors,
warehouse sector, maritime, shipbuilding, cruise operations, we
know the value of the maritime sector in the state of
Washington.
But despite the importance of moving freight and investing
in freight infrastructure, that investment continues to lag.
According to the National Association of Manufacturers 2019
Building to Win Report, more than 70 percent of manufacturers
do not believe our infrastructure can respond to the
competitive needs of a growing economy.
Americans are losing thousands of dollars every year
because of crumbling infrastructure and the American Society of
Civil Engineers rates our infrastructure at D+. Accordingly,
the World Economic Quorum report ranks the United States ninth
in infrastructure quality. Other countries know the importance
of infrastructure investment and we need to keep pace.
The 2015 FAST Act took a big step toward addressing our
freight infrastructure challenges with the Multimodal Freight
Program and I thank Senator Thune and others for helping to get
that done.
However, we need to do more in this area. We must support
our domestic maritime industry with a strong U.S. maritime
workforce. I look forward to working with the Chairman on this
particular issue.
The mariners are an essential part of our economy and they
are critical to meeting our transportation needs and our
military needs. In recent years, the merchant marine has also
provided essential support for the Department of Defense
missions during devastating storms, like Hurricane Katrina,
Rita, and Super Storm Sandy, but despite the benefits the
merchant marine has provided, it's at a crossroads.
The U.S.-flagged fleet has experienced a decline and we are
facing serious shortage of mariners and we need to make sure
that we're making investment in the workforce of mariners a key
priority.
In addition to the strong support of the Jones Act, this
committee should consider supporting investments in vessel
recapitalization programs. The Pacific Northwest fishing fleet
has begun efforts to rebuild its vessels in American shipyards
which supports thousands of jobs and obviously rebuilding and
capitalization of both the Coast Guard and NOAA fleets is
another big area of infrastructure need that we need the
workforce.
One particular point I want to make is that while we have
secured the first heavy Polar Icebreaker funding in decades, I
want us to authorize even more. It's imperative that our Nation
understand that we are an Arctic nation, that this is an entire
new transportation path with many opportunities for us to forge
new relationships, but to do that, we will have to have an
icebreaking fleet.
So I look forward to working on that issue with many of my
colleagues on this committee.
The United States must also provide certainty for a
workforce by developing a national maritime strategy that
identifies the increase in the availability of U.S. ships to
ensure that merchant mariners and qualified men and women are
there to help with the challenges of increasing cargo and
capacity.
We must continue to bolster and support the ship-building
industry on this infrastructure issue, which I know many of the
witnesses will address today.
So, Mr. Chairman, whether it's developing the workforce,
focusing on infrastructure, supporting shipyards, supporting
the Coast Guard or new shipbuilding for the fishing sector, I
know there's a lot our Committee can do to help this particular
sector of the U.S. economy.
So I look forward to hearing from the witnesses today. I'm
looking forward to suggestions on how we help this
transportation sector of our economy.
The Chairman. Thank you, Senator Cantwell, and I do
particularly appreciate your mentioning the national security
role following storms and other disasters. Thank you for
bringing up NOAA icebreakers and the fishing sector. I think we
are on the same page on so many of these issues.
Mr. Woodruff, we're delighted to ask you to begin. We'll
just go down the table. Please limit your remarks to 5 minutes
and full statements will be placed in the record.
Mr. Woodruff.
STATEMENT OF MATTHEW WOODRUFF, PRESIDENT, AMERICAN MARITIME
PARTNERSHIP
Mr. Woodruff. Thank you, Mr. Chairman, Madam Ranking
Member, and Members of the Committee.
I'm Matt Woodruff. I work for Kirby Corporation. We're
based in Houston but our West Coast operations are
headquartered in Seattle.
We're the largest American operator of tank barges with a
fleet of over a thousand barges and over 300 tugboats and tow
boats operating throughout the United States.
I'm here today, though, as President of the American
Maritime Partnership or AMP. AMP is the voice of the domestic
maritime industry. It includes shipping companies, dredgers,
shipyards, mariners, and pro-defense organizations.
Our singular focus is the Jones Act, the foundational law
of the domestic maritime industry, and I hope that you will
remember two words from my testimony today: security and
certainty.
As you said this morning, Mr. Chairman, and as the
President said on Monday, a robust merchant marine is vital to
the national and economic security of the United States. For us
to continue to successfully serve in that role, we need
legislative and regulatory certainty surrounding the Jones Act.
To defend our nation, we must be able to build ships, not
just warships, but cargo ships to move material to the
battlefield. The Jones Act maintains that shipyard industrial
base, but ships are no good without crews to man them.
Increasingly, the domestic fleet is being relied upon by
war planners to supply the mariners needed to man our sealift
assets in a mobilization. They ensure our ability to protect
and sustain forces globally.
Monday's Executive Order will make it easier for us to hire
more veterans for a second career as mariners.
Homeland security is another important benefit of the Jones
Act. Our coastlines are our longest borders. Open American
waters equals open American borders. The Jones Act ensures that
the mariners aboard the 40,000+ American vessels that ply our
coastal and inland waters are security-screened Americans.
The Jones Act is also critical to economic security. It
means that foreign interests cannot control the internal
movements of petroleum and other vital cargos. It ensures that
the just-in-time supply chains that serve Alaska, Hawaii, and
Puerto Rico are American-controlled and could not become a
bargaining chip in a trade war.
It's worth mentioning that the domestic industry receives
no Federal appropriations or subsidies. We just ask for one
thing from our Government: certainty.
Today, our industry is strong and optimistic. There are now
four new LNG-powered ships serving Puerto Rico, Mr. Chairman,
you probably know that two of those ships were built in
Pascagoula, Mississippi. Ocean-going barges to transport LNG as
cargo are also under construction in Mississippi.
Container ships for Hawaii service are currently under
construction in Brownsville, Texas. These are just examples and
there are many more, but when there's talk of Jones Act repeal,
long-term waivers and the like, it has a chilling effect on the
willingness of people to commit to this industry and invest in
assets that last for 30 years or more.
Will qualified students still enroll in our maritime
academies when some of our Nation's leaders say it's their goal
to replace them with foreigners? Can we continue to offer
returning veterans a well-paying career in an industry that
recognizes and values their skills?
The standard for a waiver under the law is clear and
unambiguous. The requested waiver for Puerto Rico and other
waivers rumored to be under consideration fall far short of
that standard.
Mr. Chairman, our industry eagerly looks forward to putting
Americans to work to implement legally compliant American
solutions to American transportation challenges for energy or
for anything else.
A long-term waiver would simply ship those jobs and with
them American security overseas and they would never come back.
Thank you again for the opportunity to speak for the over
650,000 Americans whose jobs depend on our domestic maritime
industry, and I'm happy to answer any questions.
[The prepared statement of Mr. Woodruff follows:]
Prepared Statement of Matthew Woodruff, Vice President, Public and
Government Affairs, Kirby Corporation; and President, American Maritime
Partnership
Mr. Chairman, Madame Ranking Member, Members of the Committee.
Thank you for the opportunity to be with you today. I am Matt Woodruff,
Vice President of Public and Government Affairs for Kirby Corporation,
a large, American domestic shipping company. We are based in Houston
but operate vessels throughout the United States.
I am here today in my capacity as president of the American
Maritime Partnership (``AMP''). AMP is the largest maritime legislative
coalition ever assembled. Our organization includes all elements of the
American domestic maritime industry--shipping companies, ship
construction and repair yards, mariners, and pro-defense organizations.
Our singular focus is the Jones Act, the foundational law of the
domestic maritime industry. As everyone in this room should know, the
Jones Act requires that cargo moved by water between two points in the
United States be transported on American vessels. Notwithstanding what
you sometimes read people saying in the paper, it does not apply to
cargo coming or going from a foreign country to any point in the United
States, including Puerto Rico or Hawaii.
If there were one word to describe why we have a Jones Act in our
country it would be ``security.'' The Jones Act provides important
national, economic and homeland security benefits throughout our
country. The national security and homeland security benefits have been
well-documented through writings and statements by the Defense
Department, Coast Guard, and Customs and Border Protection officials,
as well as independent experts like the Lexington Institute. For
example, recently former Defense Secretary James Mattis referred to the
U.S. Merchant Marine as our Nation's ``Fourth Arm of Defense.'' I
submit to you that in these volatile times, with potential trade wars
on the horizon, our economic security as a nation should not be
subjected to the risk of a foreign power low bidding to buy the job of
moving our coastwise commerce, then holding us hostage to gain a trade
advantage elsewhere. In every case, the policy rationales for our Jones
Act can be summarized in the phrase ``American security.'' This
Committee this year created a subcommittee that is primarily focused on
maritime issues and named it the ``Security Subcommittee.'' We believe
that subcommittee is perfectly named because nearly every policy issue
that comes before it will in some way involve our Nation's security.
Summary of Key Points
I could spend my entire time talking about the security benefits of
the Jones Act, and will happily address any questions you may have in
this regard, but I wish to focus my time on two main points. First I
will provide you a brief update on the state of the American domestic
maritime industry. In short, the state of our industry is strong.
Second I will talk about a threat to that strength, and that is a long-
term waiver of the Jones Act for liquified gas cargos, which would
require wholesale changes to longstanding interpretations of the Jones
Act administrative waiver process. Nothing is more essential to the
long-term investments that are necessary for success in our capital-
intensive industry than a reliable, predictable, and consistent legal
framework. Every time we have a discussion of waivers or repeal of the
Jones Act, it has a chilling effect across our industry. It makes
vessel owners less willing to invest in vessels and bankers less
willing to lend money for them. It makes young people think again
before choosing the maritime industry for their career. These are
people we will need in the event we must mobilize and move our armed
forces in a national emergency. Threats to the Jones Act threaten
American security.
State of the American Maritime Industry
The American maritime industry is strong--growing, innovating, and
thriving. A recent study by PricewaterhouseCoopers for an AMP board
member, the Transportation Institute, shows that ours is an industry
that supports total American employment of about 650,000 and has a
total economic impact of more $150 billion annually. There are
approximately 40,000 vessels in the U.S. fleet distributing 877 million
short tons of cargo annually in a highly efficient, cost-effective and
environmentally friendly manner.
Most exciting, the study shows significant growth in our industry
between the previous PricewaterhouseCoopers study, which used 2011
data, and the new study, based on 2016 data, the most recent figures
available. For example, the number of American jobs related to the
domestic maritime industry has increased by 30 percent over that
period.
Many members of this Committee represent major domestic maritime
states, including you, Mr. Chairman, and you, Madame Ranking Member.
Both Mississippi and Washington are home to a robust domestic maritime
industry, with thousands of jobs in each state. The same is true for
many other members of this Committee. We welcome an opportunity to
visit with your individual offices to describe in more detail the
economic impact of our industry on each of your states, as well as
nationally.
The Core Element of Continued Success--Legal Certainty
We have one primary request when it comes to the Jones Act and that
is legal certainty. We exist in a highly capital-intensive business and
our investments in vessels and other infrastructure are long-term. We
make those investments in reliance on U.S. law as it stands today and
as it has generally stood for nearly 100 years. Our biggest single
concern is unanticipated changes to the rules ``in the middle of the
game.'' It is critically important that the legal, regulatory and
administrative framework that serves as the foundation for the American
maritime industry remains predictable and certain. Hundreds of
thousands of Americans depend on that.
In that light, our greatest concern today would be changes to
longstanding, consistent interpretations of the Jones Act
administrative waiver rules. As you know, administrative waivers of the
Jones Act are exceedingly rare and are granted only under the specific
requirements of 46 U.S.C. Sec. 501, a law not specific to the Jones Act
but permitting waivers of ``navigation or vessel-inspection laws''
under certain extremely limited circumstances. The core requirement of
Sec. 501 is that Jones Act waivers must be ``necessary in the interest
of national defense.'' \1\ ``Necessary,'' of course, means an action
that is ``essential or required.'' As such, the applicants for this
waiver must demonstrate that approval is required or essential for
national defense. In fact, Customs and Border Protection (CBP), the
agency within the Department of Homeland Security with initial
responsibility for managing administrative waiver requests, has
recognized that the burden for approval of an administrative waiver is
high and has ruled that there must be a showing of an ``immediate and
adverse impact to national defense.'' Indeed, CBP has repeatedly held
in their rulings that a Jones Act waiver cannot be issued solely for
economic reasons or economic benefit. The Defense Department has
historically analyzed administrative waivers by asking if there would
be an ``immediate adverse impact on defense operations'' absent the
waiver.
---------------------------------------------------------------------------
\1\ 46 U.S.C. Sec. 501.
---------------------------------------------------------------------------
Into this long-standing statutory regime governing administrative
waivers of the Jones Act has come the Government of Puerto Rico, which
in December filed a request for an unprecedented 10-year administrative
waiver under Sec. 501 to import LNG from domestic sources. There are
many reasons why this administrative waiver should not be granted.
There is no precedent for a waiver of anywhere near that length. Puerto
Rico already enjoys a legislative waiver to move LNG in certain
circumstances, a waiver it has never used. Puerto Rico currently lacks
the infrastructure to receive the gas in the quantity and location that
it desires. Puerto Rico has not executed any contracts for domestic
supplies of LNG, and international LNG is nearby and available. But the
principle reason the waiver request should not be granted is because
Puerto Rico's request does not qualify under the only allowable
standard for a Jones Act waiver--when it is ``necessary in the interest
of national defense.''
There is no national defense interest here. Puerto Rico government
officials have repeatedly described their interest in LNG in economic
terms. Puerto Rican officials have emphasized that an administrative
waiver is needed to lower electricity prices, which is an economic
issue. Puerto Rican government statements and actions about natural gas
use on the island far predate the administrative waiver request and
have focused on presumed economic benefits. The chief executive officer
of the Puerto Rico Electric Power Authority (PREPA), Jose Ortiz, and
Gov. Ricardo Rossello have touted natural gas as the best option to
cure the island's reliance on oil and to lower the price of electricity
on the island. In an article in Puerto Rico's largest newspaper
announcing the Jones Act waiver request recently, Gov. Rossello is
quoted as saying that LNG use could result in ``hundreds of millions of
dollars in savings for Puerto Rico and in profits for the U.S.
economy.'' In fact, the Puerto Rico request is nothing more than the
type of request CBP has said should not be permitted under the law--an
economic waiver.
AMP appreciates the desire of Puerto Rico to reduce its energy
costs and AMP members are actively engaged to find solutions that are
compliant with all laws, including the Jones Act, to achieve that goal.
No one is better positioned than the leading participants in the
domestic shipping industry to assess the economics of moving LNG to
Puerto Rico, and already Jones Act carriers are importing LNG into
Puerto Rico in ISO containers. We are confident that solutions can be
developed that will comply with American law, provide hundreds of
family-wage skilled jobs to Puerto Ricans and other Americans, and
achieve the substantial savings touted by Puerto Rico's leaders. Stated
otherwise, Puerto Rico can fully realize the benefits of shifting to an
LNG energy supply without bypassing Puerto Rican and other American
workers in the American maritime industry. We as an industry have
reached out to Puerto Rico government officials in an attempt to
stimulate that dialogue.
There have been other recent discussions regarding waivers to move
LNG to the Northeast. In addition, one prominent oil and gas executive
has publicly called for a national waiver to move LNG. But a waiver
under these circumstances would face the same challenge as the Puerto
Rico waiver--they would require a complete administrative
reinterpretation of the waiver statute and its unambiguous ``interest
of national defense'' requirement. As we have said previously, there
are no precedents for long-term waivers and no precedent for economic
waivers.
Given the growth in the U.S. supply of natural gas, there is a
strong interest by many in the development of a coastwise-qualified
domestic vessel fleet to transport gas to Puerto Rico and elsewhere in
America, as needed. Many observers believe that the construction of
such a fleet is inevitable. Within the U.S. domestic shipping and
shipbuilding industry, there is a strong interest in the construction
of a domestic LNG tank vessel fleet, which would represent a new
market.
However, just like pipelines, LNG liquefaction facilities and other
energy transportation infrastructure, most marine vessels are
traditionally not built ``on spec'' but rather built to meet the needs
of a customer, backed by a long-term contract. Contracts to move goods
not only provide stability for financing but also help the shipping
company establish the size and other characteristics of the vessel to
best meet the needs of its customers. Unfortunately, gas shippers or
developers have been unwilling to enter into the types of contracts or
commitments that would be necessary for American shipping companies to
finance domestic LNG vessels. In fact, several years ago, three
coastwise-qualified U.S. built LNG tankers were fully available in the
American Jones Act markets but were unable to find adequate domestic
work and eventually went overseas for work.
As markets develop, if the price of domestic natural gas remains
low and pipeline capacity remains constrained, customers and developers
are highly likely to enter into the types of long-term gas supply
contacts that will bring state-of-the-art Jones Act LNG vessels into
those markets. Granting this administrative waiver, however, would be a
significant setback, if not a death knell, to the effort to develop a
domestic LNG market. An extended administrative waiver would be
devastating. Domestic shipping markets with capital-intensive assets
that operate for more than 30 years depend on certainty. An
administrative waiver of the type proposed by Puerto Rico would add
massive volatility and disruption to the market and would undercut
efforts to build a domestic LNG fleet. In fact, the novel use of the
Sec. 501 authority for an extended LNG administrative waiver could
destabilize the entire American domestic shipping industry by
introducing extreme uncertainty and volatility into the market. Again,
our singular request to this Committee is certainty.
The points we have made above are true not only for LNG but for LPG
and for that matter, any cargo in any trade. Certainty is essential to
our success.
Conclusion
Again, thank you for allowing us to be with you today for one of
the first Commerce Committee hearings under your leadership. We are
grateful for the chance to tell our story and to emphasize to you the
exciting growth of our industry. Our industry is a great American
success story, and the key to our continued success is a predictable,
sound, consistent legal framework so that we can ``deliver the goods''
for our Nation.
The Chairman. Thank you very much, Mr. Woodruff.
Mr. Allegretti, on behalf of the Operators.
STATEMENT OF THOMAS ALLEGRETTI, PRESIDENT, AMERICAN WATERWAYS
OPERATORS
Mr. Allegretti. Good morning, Chairman Wicker, Ranking
Member Cantwell, Members of the Committee. Thank you for the
opportunity to testify today.
I'd like to use my time this morning to discuss the four
pillars that comprise the foundation of our industry's health
and viability and the critical role that Congress, and
especially this Committee, plays in providing the certainty and
preserving the strength of that foundation.
Those pillars are the Jones Act, Federal preemption,
infrastructure, and marine safety.
First, the Jones Act. The Jones Act is the basis for every
dollar that AWO members invest in American-built vessels and
every job they provide to American men and women. It allows our
industry to provide the family wage jobs and the ladders of
career opportunity and support hundreds of thousands of jobs in
related industries across the country.
The human dimension of the Jones Act is equally compelling.
High school graduates and military veterans can work their way
up from the deck to the wheelhouse, becoming captains on towing
vessels, and making six-figure salaries that provide for their
families and support their communities.
Many of our member companies are still owned by the third,
fourth, and even fifth generations of the same families. These
are things worth protecting.
The Commerce Committee has long been a deep reservoir of
bipartisan support for the Jones Act and we thank you for that
and we ask you to continue to maintain that vigorous posture in
support of the law.
Second, Federal preemption. American farmers, energy
producers, manufacturers depend on our industry to move their
products to market and to carry the raw materials on which they
rely, and because vessels can pass through the waters of a
dozen states on a single voyage, our industry depends on a
coherent and consistent regulatory regime that is administered
and enforced by knowledgeable Federal agencies.
The principle of Federal primacy is not new. It's the
foundation of the U.S. Constitution and has been consistently
applied to interstate commerce for more than 200 years and it
has been recently reflected in thoughtful bipartisan
policymaking by Congress, from the landmark Oil Pollution Act
of 1990 to, most recently, last year, your passage of the
Vessel Incidental Discharges Act.
Thank you for your leadership in passing VIDA. It is
important both for the maritime industry, which needs the
national uniformity that only Federal regulations can provide,
and for the marine environment, which will benefit as the
highest standards economically achievable are implemented
nationwide.
We urge the Committee to continue to ensure the primacy of
Federal laws governing vessel operations and to hold Executive
Branch agencies accountable for actively defending Federal
authority in this field.
The third pillar is waterways infrastructure, which is in
urgent need of modernization and repair. Critical failures and
unscheduled closures have occurred at locks across the system.
If left untended, these problems are going to compound,
increasing the cost of marine transportation and calling its
very reliability into question. That would be devastating not
only for our industry but for the shippers who rely on us.
Congress can continue to support waterways infrastructure
by keeping the Water Resources Development Act on a 2-year
reauthorization cycle and opposing additional taxation on
vessel operators. We already pay our fair share.
The fourth pillar is marine safety. Our industry's
franchise to operate. This responsibility falls primarily on us
but Congress also has an important role to play. A quarter
century ago, AWO members came together and developed the
Responsible Carrier Program as a code of best practices for
member companies, and we subsequently instituted a third party
audit mechanism to enhance the integrity of that process. We
then helped the Coast Guard put in place comprehensive new
regulations that govern towing vessels.
AWO members remain committed to being safer every day. Our
goal is not simply to comply with the regulations but to
institute a genuine culture of safety industry-wide. Please
hold us accountable for the commitments that we make to you
and, in addition, please help the Coast Guard incentivize a
culture of safety by ensuring that regulations, policy, and
user fees don't disincentivize the use of safety management
systems.
Thank you for the long record of support that this
committee has provided to our industry. I look forward to your
questions.
[The prepared statement of Mr. Allegretti follows:]
Prepared Statement of Thomas Allegretti, President and CEO,
The American Waterways Operators
Good morning, Chairman Wicker, Ranking Member Cantwell and Members
of the Committee. I am Tom Allegretti, President & CEO of The American
Waterways Operators. AWO is the national trade association for the
inland and coastal tugboat, towboat and barge industry. On behalf of
AWO's over 300 member companies, thank you for the opportunity to
testify at this important hearing on the state of the U.S. maritime
industry.
You have already gotten an introduction to our industry this
morning from Mr. Woodruff and Mr. Golding, but please allow me to
supplement that. The tugboat, towboat and barge industry is the largest
segment of the domestic maritime fleet. We operate more than 5,500
towing vessels and over 31,000 dry and liquid cargo barges on the
commercially navigable waterways that run through America's heartland;
along the Atlantic, Pacific and Gulf coasts; on the Great Lakes; and in
ports and harbors around the country. Each year, towing vessels and
barges safely, securely and efficiently move more than 760 million tons
of critical cargo, including agricultural products for export, coal to
electrify our homes and businesses, petroleum products to fuel our
cars, chemicals for manufacturing facilities, cement and sand for
construction projects, and other building blocks of the U.S. economy.
Tugboats also provide essential services in our Nation's ports and
harbors, including ship-docking, tanker escort and bunkering.
My colleagues at the witness table today offered insightful
perspectives on the importance of the domestic maritime industry. And,
I would compliment Austin Golding for taking it a step further by
vividly showing you the face of the towing industry in the State of
Mississippi. In fact, Mr. Golding's statement provides an excellent
launching point for my testimony today. As he described in detail, the
work that tugboat and towboat operators do in states like Mississippi,
Washington, and dozens of others has a national impact. With that in
mind, my objective today is to discuss the four pillars that, taken
together, comprise the foundation our industry's health and viability.
Those four pillars are the Jones Act, Federal preemption,
infrastructure, and marine safety.
I would also like to emphasize the critical role that Congress, and
especially this Committee, plays in preserving the strength of that
foundation. The sound state of our industry, and the strength and
resilience of our members to persevere through the ups and downs of the
commercial market, are directly reliant on the certainty that those
four public policy pillars provide. Were those pillars to erode, the
sound state of our industry would be threatened. With that in mind, I
would like to talk briefly about each.
I. The Jones Act
The Jones Act is foundational to the tugboat, towboat and barge
industry. It is the basis for every dollar American companies invest in
American-built vessels and every job they provide to American men and
women. The Jones Act allows our industry alone to provide family-wage
jobs and ladders of career opportunity for more than 50,000 Americans--
including nearly 39,000 positions as mariners on board our vessels--and
support more than 300,000 jobs in related industries across the Nation.
As Mr. Woodruff has explained, the domestic maritime industry in total
supports nearly 650,000 jobs and almost $155 billion in economic output
nationwide.
There is also a really important human dimension behind the
statistics. In the tugboat, towboat and barge industry, many high
school graduates and veterans of the U.S. Armed Forces have worked
their way up from the deck to the wheelhouse, becoming captains on
towing vessels and making six-figure salaries that allow them to
provide for their families. Those salaries result in purchasing power
that supports local economies in the communities where mariners live.
And as Mr. Golding mentioned in his statement, our industry is a rarity
in that many of our member companies are still owned by the second
generation, or even the third, fourth and fifth generations, of the
same families that have deep roots in their communities. This is a
testimony to the enduring strength of our members and the work they do.
It is also something we see less and less of in our country nowadays
and is a really special and powerful thing.
The Commerce Committee has traditionally been a deep reservoir of
bipartisan support for the Jones Act, and as I look around the dais
this morning, I am gratified to see that this continues to be the case.
Chairman Wicker, Ranking Member Cantwell, and Members of the Committee,
if you seek a single reason why the Jones Act remains critical to
America as it approaches its centennial, look no further than the
tugboat, towboat and barge operators in your states. Their valuable
work bears daily witness to the wisdom of a law that has sustained a
vibrant industry--past, present, and future. I would urge the Committee
to please continue vigorously supporting the Jones Act.
II. Federal Preemption
An efficient marine transportation system is essential to a healthy
American economy. American farmers, energy producers, and manufacturers
depend on the tugboat, towboat and barge industry to safely, securely
and efficiently move their products to market and to carry the inputs
and raw materials on which they rely. In turn, this economic powerhouse
relies on a nationally consistent regulatory regime administered by the
Federal Government.
Like other modes of transportation, the tugboat, towboat and barge
industry operates nationwide: AWO member vessels can pass through the
waters of a dozen states in the course of a single voyage. The smooth
and uninterrupted interstate movement of cargo between U.S. ports is a
centerpiece of our members' value proposition to their customers. As
such, a coherent and consistent regulatory regime that is administered
and enforced by knowledgeable Federal agencies--including the U.S.
Coast Guard and the Environmental Protection Agency--is vital to the
efficiency and the viability of the tugboat, towboat and barge
industry. Federal primacy in the regulation of maritime transport
allows Federal agencies to take input from all stakeholders, including
states and the public, to establish rules based on vessel operational
experience that have been analyzed from a national perspective.
Federal primacy is not a new concept. It is settled law that served
as a foundation for the U.S. Constitution and has consistently been
applied to interstate commerce for more than 200 years. The
Constitutional Convention of 1787 unanimously adopted the Supremacy
Clause, cementing the Federal Government's position as the supreme law
of the land when regulating interstate commerce.
Key to that supremacy is Congress' power to regulate commerce under
Article I of the Constitution. The Federalist Papers cite this
authority and the ability to regulate interstate navigation without
intervention from individual states as one of the reasons for adopting
the Constitution. Likewise, in 1824 the Supreme Court ruled that the
power to regulate commerce undoubtedly included the power to regulate
interstate navigation.
Today, Federal primacy over navigation remains just as important to
commerce as it was at the founding of our country. I would like to
highlight two recent examples in which Congress worked in a bipartisan
way on Federal preemption legislation beneficial to both the maritime
industry and the American public.
The first is the Oil Pollution Act of 1990, which was bipartisan
policymaking that enabled vessel owners to plan for and make multi-
billion dollar investments in state-of-the-art, environmentally
friendly tank barges and tankers to carry the Nation's vital energy
cargoes. The phaseout of single-hulled vessels and transition to an
all-double-hull fleet, combined with a comprehensive Federal regulatory
regime for oil spill prevention, response and liability and the
adoption by vessel owners of safety management systems, vendor vetting
programs and other safety measures, has produced dramatic, positive
results for the American public. Oil spills from tank barges have
plummeted by 99.6 percent since enactment of OPA 90. This outstanding
safety record is all the more relevant today given the Nation's energy
renaissance and the vastly increased need for marine transportation of
crude oil and petroleum products.
Second is the Vessel Incidental Discharge Act of 2018, or VIDA,
passed last year by the 115th Congress with the leadership and support
of this Committee. This law, included in the Frank A. LoBiondo Coast
Guard Authorization Act, is distinctive for many reasons, not least the
leadership of Chairman Wicker, Ranking Member Cantwell, and Senators
Thune, Sullivan, Klobuchar, and Peters, that helped make it a reality.
VIDA is a landmark bipartisan measure that will bring uniformity and
certainty to the regulation of ballast water and other incidental
discharges for vessels engaged in interstate commerce. While the
agreement enacted into law is preemptive in nature, it is also notable
for balancing the role of the states in the standard-setting and
implementation process. VIDA represents both a win for the maritime
industry, which needed the national uniformity that only Federal
regulations can guarantee, and for the marine environment, which will
benefit as the highest standards economically achievable are
implemented nationwide.
OPA 90 and VIDA have and will promote safety, protect the
environment, and preserve the efficiency of barges and towing vessels
engaged in interstate commerce. This should be the goal of Federal
preemption in the regulation of interstate commerce. As such, it is
critical that Federal primacy be maintained. I urge the Committee to
ensure the primacy of Federal laws governing the operation of towing
vessels and hold Executive Branch agencies accountable for actively
defending and preserving Federal authority over vessel operations.
III. Infrastructure
The third pillar, waterways infrastructure, is equally essential to
the towing industry. It is a key component of the Nation's intermodal
transportation network that helps to make America competitive in world
markets. However, that infrastructure is in urgent need of
modernization and repair. For example, more than half of the 238 locks
on our inland waterways system are over fifty years old and have
exceeded their design lifespan. Critical failures, and significant
unscheduled temporary closures, have occurred at locks across the
system. If left untended, these problems will compound, increasing the
cost of marine transportation and calling its very reliability into
question. That would be devastating not only to the tugboat, towboat
and barge industry, but to the shippers who rely on it and for air
quality and highway congestion as well. Each barge that is pulled off
the waterways adds 16 bulk rail cars to our railways or 70 tractor-
trailers to our highways, with a resulting increase of greenhouse gases
of more than 20 percent and 150 percent, respectively.
Fortunately, the ongoing revitalization of waterways infrastructure
has shown Congress at its bipartisan best. For the past six years,
lawmakers have worked across the aisle to secure long-sought
improvements for our Nation's coastal and inland waterways. The
resulting authorization and appropriations bills have ensured that
America's waterways will continue to remain vital to the safe, reliable
and efficient movement of cargo.
Congress can continue to support the pillar of infrastructure by
doing two things. First, we urge you to keep the Water Resources
Development Act (WRDA) on a two-year reauthorization cycle. WRDA is a
crucial part of a cooperative effort that involves the Inland Waterways
Users Board, the U.S. Army Corps of Engineers, and the key committees
of jurisdiction in Congress. As we have seen in the past, failure to
enact WRDA bills on a regular basis causes backlogs in much-needed
modernization and maintenance that result in costly navigation
stoppages on the inland waterways system.
Second, we urge Congress to oppose any additional taxation,
tolling, lockage fees, or other charges placed upon the users of the
inland waterway system. Our industry has already stepped up to the
plate there. In 2014, Congress, at the industry's request, enacted a 45
percent increase in the diesel fuel tax our member companies pay into
the Inland Waterways Trust Fund (IWTF), a longstanding public-private
partnership that yields positive results for our industry and the U.S.
economy. We already pay our fair share.
IV. Marine Safety
The fourth pillar is marine safety, which is our industry's
franchise to operate. Unlike the other pillars, this responsibility
falls primarily on us, and we know and welcome that. Congress also has
an important role to play. For more than 25 years, our members have
demonstrated their commitment to safety leadership through industry-led
initiatives and partnerships with government to safeguard human life
and protect the marine environment. AWO's top priority is to lead and
support members in continuously improving safety, security, and
environmental protection.
A quarter century ago, AWO developed the Responsible Carrier
Program (RCP) as a code of best practices for member companies.
Companies use the program to develop safety management systems that
meet or exceed applicable laws and regulations and are tailored to
reflect their unique operational needs. We subsequently instituted a
third-party external audit mechanism to enhance the integrity of our
safety management system. Building on these industry-led initiatives,
AWO worked closely with the Coast Guard for more than a decade to
develop comprehensive towing vessel safety and inspection regulations,
which went into full effect last July. These regulations will ensure
that each of the 5,500 affected U.S.-flag towing vessels meet minimum
standards of safety to protect lives, the environment and property,
while recognizing and incentivizing operators who exceed minimum
standards. The regulations, known as Subchapter M, also leverage safety
management systems and third-party organizations to help the Coast
Guard focus its limited resources where they're needed most.
It is important to emphasize that, even while Subchapter M is now
in effect, AWO members remain committed to getting safer every day. Our
goal is not simply to comply with the regulations, but to institute a
genuine culture of safety industry-wide. Last October, AWO's Board of
Directors unanimously approved Safety Leadership 3.0, a vision to guide
how AWO will lead and support members in continuously improving safety,
security and environmental stewardship in the post-Subchapter M
landscape. As we move forward with this initiative, we look forward to
working with Congress to build a safer marine transportation industry.
Please hold us accountable for the commitments we make.
In addition, help the Coast Guard incentivize a culture of safety,
and not simply a culture of compliance. This includes ensuring that the
agency's regulations and policy don't disincentivize the use of safety
management systems, which are the foundation of every effective safety
culture. That is why it is so important to establish towing vessel
inspection user fees that are lower for vessels that have implemented a
safety management system--in recognition of their reduced demand on
agency resources, because of the Coast Guard's ability to leverage
approved third parties to supplement their oversight. We thank the
Committee for directing the Coast Guard in last year's authorization
bill to compare the costs to government of towing vessel inspections
performed by the Coast Guard and those performed by a third party in
order to more accurately assess inspection user fees.
There are also other ways that Congress can help the industry and
the agency eliminate disincentives, including eliminating regulations
that pose implementation challenges for towing vessel operators, but
offer little positive impact on personnel or vessel safety or
environmental protection. Congressional assistance to resolve these
low-risk compliance challenges will enable the Coast Guard and the
industry to focus our attention on the regulatory requirements that
will make a real difference in protecting people, the environment and
property.
V. Conclusion
AWO's member companies are committed to a culture of continuous
improvement--to making our domestic maritime industry ever safer, more
efficient, and more environmentally sustainable. The vibrancy of the
towing industry is a direct result of the ingenuity, resourcefulness,
and work ethic of the men and women who comprise it. The sound state of
our industry is also a direct result of the bipartisan support that it
enjoys in this Committee specifically and in the Congress generally.
The statutory and regulatory certainty that you provide is foundational
to our survival and success.
I would again like to thank the Committee for its demonstrated
record of support for our industry, and ask for your continued support
for the four pillars that undergird our industry and enable us to do
what we do for the country. It is no exaggeration to say that this
Committee is the guarantor of the certainty that will ensure the towing
industry's continued success in the years ahead.
Thank you for this opportunity to testify, and I look forward to
answering your questions.
The Chairman. Thank you, Mr. Allegretti.
And now for the Shipbuilders Council, Matthew Paxton.
STATEMENT OF MATTHEW PAXTON, PRESIDENT, SHIPBUILDERS COUNCIL OF
AMERICA
Mr. Paxton. On behalf of the Shipbuilders Council of
America, I want to thank you, Mr. Chairman and Ranking Member
Cantwell and Members of the Committee, for the opportunity to
provide testimony on the state of the shipyard, on the state of
the maritime industry, specifically on the critical importance
of the U.S. shipyard industrial base.
The SCA represents shipyards and suppliers that build and
maintain all vessels, from tug boats to aircraft carriers. The
domestic shipbuilding industry is diverse and competes in both
government and commercial markets.
From our industry's perspective, the Jones Act ensures that
the U.S. maintains critical shipyard infrastructure and an
associated skilled workforce that can build, repair, modernize,
and maintain the more than 41,000 vessels of the domestic Jones
Act fleet.
This industrial base also ensures there is a sufficient
workforce and vital supply chain to support the construction
and repair of our Navy, Coast Guard, and other government
programs.
Simply put, the Jones Act sustains a domestic market for
which carriers, operators, and shipyards vigorously compete.
When the Jones Act is not enforced or undermined by short-
sighted policy, there can be dramatic influences on the market.
Recently, our shipyards successfully completed the
recapitalization of the tanker and domestic large ocean-going
container ships and RO/ROs, and it is a testament to the Jones
Act that the commercial shipbuilding sector was able to rapidly
meet the market demand for these vessels and will complete
construction for these trades in the coming years.
The fleet will include the world's first LNG-powered
container ship. Again, it is a result of the Jones Act that we
have such a capable and robust shipyard industry to build these
markets.
In contrast, a 2017 decision by the Department of Homeland
Security to not revoke a series of letter rulings that have
allowed foreign vessels to operate in violation of the Jones
Act has created uncertainty and resulted in the cancellation of
numerous new U.S. vessel construction contracts.
The cancellation of contracts dampens our industry's
ability to invest in a world-class workforce and modern and
efficient facilities.
Instead of seeking to undermine the law, the United States
should be promoting policies that actively support the
expansion of a shipyard industrial base. As the United States
has become the world's leader in energy production, so, too,
should we encourage our domestically produced natural
resources, including LNG, be transported on U.S. vessels, under
such policies as proposed by Chairman Wicker's bill, Energizing
American Shipbuilding Act.
Not only would that help us regain a foothold on the
international shipping market where we've ceded ground to
heavily subsidized and government-backed shipyards but there's
a direct relationship from the construction of LNG tanker
vessels to the recapitalization of our strategic sealift fleets
because of the stabilization would bring to the shipyard
supplier base and to shipyards generally.
The recapitalization of the Coast Guard fleet is also an
excellent example of how the Jones Act benefits national
security. Most shipyards engage in the construction of Coast
Guard assets, are bidding to do so, have engaged in the
construction of commercial Jones Act vessels. These yards have
benefited from stable commercial shipbuilding markets to
leverage materials and workforce to develop the capability and
capacity to build sophisticated Coast Guard vessels.
The most constant argument I hear is that we should do away
with the Jones Act and outsource the construction of some of
our government assets, commercial vessels, to foreign
shipbuilders just because of price.
Along with the significant national security implications
of such sentiments, the argument ignores that the U.S. does not
compete on a level international playing field in shipbuilding.
From 2015 to 2017, South Korea has bailed out one of its
shipyards to the tune of $12 billion over 2 years while the
company sells ships at zero margin.
In addition, according to the Wall Street Journal, the
Chinese Development Bank provided COSCO, the Chinese shipping
company, $26 billion in credit facilities to develop its
shipping fleet in 2018.
Comparatively, the U.S. shipyard industry receives no
subsidies and instead relies on the stability and certainty of
the Jones Act.
We ask for continued congressional and administrative
support and enforcement of the law because it is essential to
maintaining the critical U.S. industrial base that supports our
Navy and Coast Guard fleets.
Thank you again, Chairman Wicker and Ranking Member
Cantwell, for allowing me to testify along such distinguished
witnesses today. I look forward to your questions.
[The prepared statement of Mr. Paxton follows:]
Prepared Statement of Matthew Paxton, President,
Shipbuilders Council of America
On behalf of the Shipbuilders Council of America (SCA), I would
like to thank Chairman Wicker, Ranking Member Cantwell, and members of
the Committee for the opportunity to provide testimony on the state of
the American maritime industry, specifically the economic opportunities
in the U.S. and shipbuilding industries. I ask that my entire testimony
be submitted for the record.
I am Matthew Paxton, President of the Shipbuilders Council of
America (SCA), the national trade association of the U.S. shipyard
industry. The SCA is comprised of 85 member shipyard facilities and 105
industry partner member companies that represent the vital supply chain
that make up the U.S. shipyard industrial base.
From tug boats to aircraft carriers, and everything in between, the
domestic shipbuilding industry is diverse and operates in several
sectors including government new construction, government repair and
modernization, commercial repair and modernization and commercial new
construction. SCA Members and the U.S. shipyard industry build some of
the most technologically advanced ships in the world for our government
customers including the U.S. Navy and the U.S. Coast Guard as well as
for a vibrant domestic commercial market.
The Jones Act
That commercial market is sustained by the Jones Act by providing
certainty and stability. This law, which is provided at no cost to the
U.S. government, helps to ensure the existence of a domestic
shipbuilding and ship repair industrial base. The Jones Act also
ensures the maintenance of a merchant marine that is sufficient to
carry our domestic water-borne commerce and also ensures an adequate
number of ships and mariners to meet national security requirements in
times of war or national emergency.
From our industry's perspective, the Jones Act also ensures that
the U.S. maintains critical shipyard infrastructure and an associated
skilled workforce that can build, repair, modernize and maintain the
more than 40,000 vessels of the domestic Jones Act fleet. This
industrial base also ensures there is a sufficient workforce to support
the construction and repair of our critical national security fleets.
Simply put, the Jones Act sustains a domestic market for which
carriers, operators and shipyards vigorously compete. When the Jones
Act is not enforced or undermined by shortsighted policy, there can be
dramatic influences on that market.
Recently our shipyards completely recapitalized the tanker market
due to the oil boom. It is a testament to the Jones Act that the
commercial shipbuilding sector was able to rapidly meet the market
demand for domestic tankers and deliver these state-of-the-art vessels
for that transportation sector. It was a true success for our industry.
In addition, our shipyards recently delivered numerous large ocean
going containerships and RO/ROs to recapitalize the noncontiguous
fleets. Vessel construction for these important shipping routes is
ongoing at several shipyards, but will be completed in the coming
years. This fleet includes world's first LNG-powered containership.
Again, it is a result of the Jones Act that we have such a capable and
robust shipyard industry to build for these markets.
In a contrasting example, a 2017 decision by the Department of
Homeland Security to not revoke a series of letter rulings that have
allowed foreign-built, foreign-crewed and foreign-owned offshore supply
vessels to vessels to operate in violation of the Jones Act has created
uncertainty and resulted in the cancelation of numerous new U.S. vessel
construction contracts. The cancellation of contracts dampens our
industry's ability to invest in a world-class workforce and modern,
efficient facilities. I raise this issue as an example of how a
decision by an agency to not enforce the Jones Act can have an adverse
impact on commercial shipbuilding that reverberates throughout the
entire shipyard industrial base, further destabilizing its ability to
support national defense requirements.
LNG Market Emergence
Most recently, the industry has been concerned regarding the
Administration's potential consideration of a long-term waiver of the
Jones Act for purposes of transporting domestic LNG. Not only would a
long-term waiver be unprecedented, but it would have severe and
immediate impacts to a nascent shipbuilding market.
Several U.S. LNG export facilities have begun operations in the
last two years. These facilities are already fully subscribed to
foreign customers. It is expected over the next 5 years that
potentially 11 additional domestic LNG export facilities could come
online. As they do, there may be sufficient capacity to be able to
service a nascent domestic LNG market. As a result, there are presently
several inquiries being made in U.S. shipyards regarding the
construction of such vessels which can be constructed well ahead of
time to meet that market demand.
A Jones Act waiver is not necessary for the domestic LNG trade. In
fact, MARAD has reported that there are 52 LNG carriers in the world
that would qualify under existing 1996 legislation to transport LNG
from the contiguous United States to Puerto Rico. Opponents of the
Jones Act have countered that this is a false because ``the law still
requires these vessels to be U.S.-registered and U.S.-crewed.'' One
supposes from this that the Jones Act opposition wants to skirt all
U.S. regulations and taxes.
The LNG market in Boston is a spot market (several cargos during
the winter) and is likely to remain so. As such, regardless of where
the LNG might get loaded in a ship, in Louisiana, Maryland or Qatar, it
will be delivered at world price and at a price the market will bear.
The best example of that case is happening right now as there has been
an LNG carrier sitting off Boston harbor for over a month waiting for a
cold snap to cause a regional natural gas price hike before the ship
lands the gas.
Thus, unless it is the Congress's intent to suspend all U.S.
regulations and taxes for vessels operating in coastwise trade, then
there is no need to waive the Jones Act. Gas customers in the Northeast
will not receive any advantage and there are ships in the world today
that could serve a coastwise trade to Puerto Rico if there was a market
to justify it.
Waiving the Jones Act to allow coastwise trade by foreign vessels
will serve no purpose other than to destroy the Jones Act and the
American maritime industries it supports and ultimately damaging
national security.
Instead of seeking to undermine the Jones Act and undermine the
critical shipbuilding manufacturing sector, the United States should be
promoting policies that actively support the expansion of the shipyard
industrial base. As the United States has become the world's leader in
energy production, so to should we encourage that our domestically
produced natural resources, including LNG, be transported on U.S.
vessels under such policies as proposed by the Chairman's Energizing
American Shipbuilding Act. Not only would that help us regain a
foothold on the international shipping market where we've ceded ground
to heavily subsidized and government-backed shipyards, but there is a
direct relationship from the construction of LNG tanker vessels to the
recapitalization of our strategic sealift fleets because of the
stabilization it would bring to the shipyard supplier base and
shipyards generally.
If you do not think that our adversaries are not making investments
maintaining their same industrial base, consider that last month,
Russia adopted their own version of the Jones Act for purposes of
international trade, which would limit the carriage of the country's
national resources, including gas and petroleum to Russian-built, owned
and flagged vessels.\1\
---------------------------------------------------------------------------
\1\ https://www.pacmar.com/story/2019/02/01/features/russias-
arctic-more-than-promise/675.html
---------------------------------------------------------------------------
The Commercial Shipyard Industrial Base & National Security
In a 2016 Force Structure Assessment (FSA) the Navy called for a
fleet of 355-ships--substantially larger than the current fleet and
also larger than the Navy's previously stated goal of 308 ships. The
Congress, under the leadership of Chairman Wicker, made 355 ships the
policy of the United States in the FY2017 National Defense
Authorization Act.
Simultaneously, the United States Coast Guard is undertaking
efforts to recapitalize essential assets such as the Polar Security
Cutter (also known as the Polar Icebreaker), Offshore Patrol Cutters
(OPC) s, and the waterways river tenders that ensure the safe
navigation of inland marine transportation.
To note, the recapitalization of the Coast Guard's fleet is an
excellent example of how the Jones Act supports our government fleets.
Most shipyards engaged in the construction of Coast Guard assets or are
bidding to do so, have engaged in the construction of commercial Jones
Act vessels. These yards have benefitted from stable commercial
shipbuilding markets to leverage materials and workforce skillsets to
develop the capability and capacity to build the most sophisticated
Coast Guard vessels in the world.
Additionally, the Maritime Administration is currently
recapitalizing its school training ships that support our state
Maritime Academies and train the American mariners of the future. In
the criteria for awarding the shipbuilding contract for the procurement
of those ships, the Maritime Administration specifically requested the
shipyards bidding on the contract have commercial experience. The
Administration, through this request, recognizes the value in
commercial shipbuilding best practices to ``leverage existing
marketplace expertise targeting companies' experience in production of
innovative U.S.-built ships.''\2\
---------------------------------------------------------------------------
\2\ https://www.maritime.dot.gov/newsroom/press-releases/maritime-
administration-issues-request-proposal
---------------------------------------------------------------------------
Another area of significant concern for government fleets is the
recapitalization of the Nation's strategic sealift fleet, which ensures
that unitized military cargo can be delivered to the war front.
Currently the average age of the ships in this fleet is nearly 40 years
\3\ old, and the number of ships that will reach the end of their
programmed service lives over the next 10 years will reduce sealift
capacity by over 25 percent. The Navy, in partnership with TRANSCOM and
MARAD, is working through a plan to recapitalize that fleet through a
combination of service life extensions, acquiring used commercial
ships, and investing in new-build construction at U.S. shipyards.\4\
The U.S. shipyard industry is already vigorously competing to build and
convert these ships.
---------------------------------------------------------------------------
\3\ https://www.gao.gov/assets/690/686733.pdf
\4\ https://www.secnav.navy.mil/fmc/fmb/Documents/19pres/
LONGRANGE_SHIP_PLAN.pdf
---------------------------------------------------------------------------
In order to build and maintain these ships in as timely and
affordable manner, stable and robust funding as well as stable
construction rates and long-term procurement vehicles are necessary to
sustain those industrial capabilities which support Navy, Coast Guard
and other government shipbuilding and ship maintenance and
modernization programs. These programmatic attributes provide the
horizon and incentives required by industry to make risk-balanced
investments in support of our national defense needs.
To meet the demand for increased vessel construction while
maintaining the vessels we currently have will require U.S. shipyards
to expand their workforces and invest in their physical infrastructure
in varying degrees depending on ship type and ship mix. This is a
requirement our Nation's shipyards are eager to meet however, meeting
the national objectives is made more difficult by unstable procurement
and sustainment appropriations and associated procurement strategies.
Unfortunately, any debate within the Administration or in the
Congress of repealing or waiving the Jones Act adversely impacts
financing for the industry undermining the commercial market
substantially. This reverberates across the industry and financial
markets, directly impacting our industrial base supply chain and that
supply chain's ability to support the demands of our Navy and Coast
Guard fleets and incrementally erodes the national defense intent of
the Jones Act.
Many of our shipyards and suppliers that compete to build these
national security assets are sustained by commercial shipbuilding and
repair so they are viable when the time comes to build and repair the
national security fleets. Companies that would be bidding on contracts
for LNG carriers are the same shipyards and suppliers that the country
will look to help recapitalize the Nation's strategic sealift fleets.
Therefore, undermining the Jones Act through lack of proper enforcement
or through broad, unnecessary waivers will directly impact the ability
of the Nation to meet our own national security objectives.
International Competition in Shipbuilding
The most consistent argument I hear is that we should do away with
the Jones Act and outsource the construction of some of our Coast Guard
assets, such as the polar icebreaker, as well as commercial vessels,
such as tankers and LNG carriers to foreign shipbuilders because of
price. Along with the significant national security implications of
such sentiments, that argument ignores that the U.S. does not compete
on a level international playing field in shipbuilding.
Over the last twenty plus years, with significant government policy
and financial assistance, the world shipbuilding capacity grew
dramatically, primarily in Asia. At its peak Asian shipbuilders had
captured 92 percent of the world commercial shipbuilding market. In the
recent severe and sustained downturn in the world commercial
shipbuilding markets, Asian governments have doubled down on the
support of their shipbuilding industries.
For example, in 2015 alone South Korea's Daewoo shipbuilding took
on more than $1.9 billion in government-financed debt, as it racked up
cheap orders, likely at zero margin. Additionally, South Korea provided
financial aid totaling just over $10.7 billion, from 2015 to 2017 to
keep the company afloat. Despite that enormous capital injection,
Hyundai Heavy Industries, another Korean shipbuilder, agreed to acquire
a 56 percent stake in Daewoo this year, with financing coming from the
state-run Korean Development Bank,\5\ in order to prevent Daewoo from
completely going under.
---------------------------------------------------------------------------
\5\ https://asia.nikkei.com/Business/Business-deals/Hyundai-s-mega-
shipbuilder-plan-puts-China-and-Japan-on-edge
---------------------------------------------------------------------------
Comparatively, in the same period of 2015 to 2017, the U.S.
Maritime Administration provided $15 million in small shipyard
assistance grants and $49.7 million through the maritime guaranteed
loan program, also known as Title XI.\6\
---------------------------------------------------------------------------
\6\ https://www.transportation.gov/sites/dot.gov/files/docs/MARAD-
FY-2017-CJ.pdf
https://www.transportation.gov/sites/dot.gov/files/docs/mission/
budget/281151/marad-fy-018-cj-budget.pdf
---------------------------------------------------------------------------
While China's government subsidies are extremely difficult to
detect and measure partly because international trade agreements
prohibit direct and indirect subsidies, we know that there is a certain
amount of market manipulation based on international news reports and
recent studies. A September 2017 report from the Center for Economic
and Policy Research found evidence that shipyard costs in China
decreased implying a subsidy of between 13 and 20 percent between 2006
and 2012, leading to ``substantial misallocation of global production
with no significant consumer [gains].'' \7\
---------------------------------------------------------------------------
\7\ Kalouptsidi, Myrto. Detection and impact of industrial
subsidies: The case of Chinese shipbuilding. Washington, D.C.: Cetner
for Economic and Policy Research, 2017.
---------------------------------------------------------------------------
Additionally, between 2013 and 2017,\8\ China operated a ``cash for
clunkers'' program that increased subsidies for scrapping obsolete
ships by 50 percent to help cut overcapacity in the market. During this
period, the Chinese government granted $247 per gross ton for shipping
companies to replace obsolete ships. Chinese shipyards further
benefited from this initiative, because the grants were awarded to
shipping companies only after replacement orders had been placed in
Chinese shipyards.\9\
---------------------------------------------------------------------------
\8\ https://www.reuters.com/article/china-shipping/update-1-china-
extends-ship-scrapping-subsidy-programme-to-end-2017-
idUSL3N0Z91FB20150623
\9\ https://www.wsj.com/articles/china-ships-reforms-to-sea-
1386684631
---------------------------------------------------------------------------
On top of the scrapping incentive, the Chinese government offers
more overt support for its shipyard industry through cash infusions.
One such shipyard, Rongsheng, received state subsidies of the
equivalent of $202 million, per year from 2010 to 2012. In that same
time period, reports also noted that the shipyard had laid off 8,000
workers, and yet would still need to appeal for more government aid in
2013.\10\ Eventually, even state subsidies could not prop up the yard,
which went bankrupt and the facility was removed from the government's
white list in 2014.
---------------------------------------------------------------------------
\10\ https://www.reuters.com/article/us-china-shipping/china-to-
aid-ailing-shipbuilders-with-more-subsidies-idUSBRE9B80Q320131209
---------------------------------------------------------------------------
These are examples of direct and indirect government support that
distort the international shipbuilding market and render moot any
discussion of U.S. shipyards competing internationally. Even with
direct government support to shipyards in its various forms and huge
government supported shipbuilding credit pools for ship owners, many
Asian shipyards are taking contracts at zero-margin simply to keep the
economic engine of the country going. It is therefore an extreme
misrepresentation to compare the blatant manipulation of foreign
shipyards to the market stability provided by the Jones Act.
These countries are investing and financing their shipyard
industries because they consider it to be an issue of national
sovereignty.
Future Investment in U.S. Shipbuilding
Looking towards the future, we expect there to be the continued
investment by the U.S. Navy and U.S. Coast Guard in their
recapitalization of critical shipbuilding programs for their fleets.
Additionally, the Maritime Administration is in the process of
recapitalizing school ships which will support our state maritime
academies and we are seeing strong investment in marine transportation
around the Nation through expansion of ferry and passenger vessel
service. Concurrently, the commercial market will continue to respond
to industry demands for domestic shipbuilding.
We ask for continued Congressional and Administrative support and
enforcement of the Jones Act because it is essential to maintaining the
critical U.S. shipyard industrial base that supports our national
security fleets.
Thank you again Chairman Wicker and Ranking Member Cantwell for
allowing me to testify alongside such distinguished witnesses today. I
look forward to your questions.
The Chairman. Thank you very much, Mr. Paxton.
We now turn to Mr. Austin Golding, President of Golding
Barge Line.
Mr. Golding.
STATEMENT OF AUSTIN GOLDING, PRESIDENT,
GOLDING BARGE LINE
Mr. Golding. Good morning, Chairman Wicker, Ranking Member
Cantwell, and members of the Committee. Thank you for the
opportunity to come before you and discuss the state of the
U.S. maritime industry.
My name's Austin Golding, and I'm President of Golding
Barge Line of Vicksburg, Mississippi.
My family's been involved in the operation of towboats and
barges for 54 years. Our family's current operation includes 24
towboats, 63 barges, and 225 employees.
I am honored to come before the Committee today to discuss
the state of the industry that returns so much to our country.
Our business, Golding Barge Line, moves refined petroleum and
chemical products via tank barge.
Our voyages regularly consist of hundreds of miles and
transits through multiple states. We rely on an aging system of
infrastructure to accomplish these voyages that often link one
part of the country with another and a volume of trade that is
unmatched by another mode of transport.
The American mariner is at the heart of our story. At entry
level, mariners start out as a deckhand earning $30,000 a year
salary. Within one to 2 years, they could be promoted to tanker
man which comes with the responsibility of loading and
unloading the barges. That position starts at $70,000 a year.
From there, they can be promoted to pilot within five to 8
years from hire date. That position starts out at a $130,000 a
year with an earning potential of over $200,000 a year, all
before the employee's 30 years old.
One way that we recruit and develop entry-level positions
is a deckhand school that we have developed with our local
community college, Hines Community College. This is a 1-week
program that simulates life on the boat and what the job will
call for.
Students are enrolled in the program by their employing
company after they have passed all their pre-employment
requirements. Passing this class is the final piece on their
journey to becoming a real-deal deckhand.
Our company alone has hired 312 graduates of this program
since its inception. We have seen improvements in our safety
performance as well as improved entry-level retention.
Military veterans have found our industry is a great second
career option. When veterans enter our ranks, they understand
chain of command, being away from home, and working as a team
to accomplish a task safely. Many of these veterans find our
industry to be a perfect fit.
The Jones Act helps protect these maritime jobs. This
critical Act ensures our country will not only have American
citizens handling our precious cargo but also the equipment
carrying that cargo will be built in our country by American
citizens.
The Jones Act is a critical tool in protecting American
jobs and national security. Without the Jones Act, I can say
with confidence I would not be sitting before you today with a
great story to tell.
Without the Jones Act, I can say our security as a nation
wouldn't be as secure as it is today either. Our nation's
security is too important to be outsourced around the world.
The Jones Act ensures that the United States of America has
a robust maritime shipbuilding talent base. That is something
worth conserving.
A point I touched on is the state of our inland waterway
infrastructure. Many of the locks and dams we transit are well
beyond their economic design life. Many of the products that
move by barge travel through multiple locks before reaching
their destination.
An investment in Kentucky may mean products in West
Virginia can meet their end market in Texas, Louisiana, or
abroad. As an operator, I can attest that many of these
structures are in dire need of modernization or replacement.
Investment in locks and dams may be the best investment in bulk
commerce this country can make.
The cargo that passes through one lock may wind up on
countless roads or rail lines before meeting its end consumer.
As an industry, we want to pay our fair share to modernize our
infrastructure. Right now, companies like ours pay 29 cents a
gallon diesel fuel tax. At 29 cents per gallon, that is the
highest gas tax per gallon of any commercial surface
transportation mode.
The money we pay goes directly in the Inland Waterway Trust
Fund. We voluntarily increased that tax by 45 percent in 2014,
from 20 cents to 29 cents, because we want to see proper
investment in the system.
We are in an active public/private partnership as we speak.
Despite this increase, our industry still needs more Federal
support to keep our waterways viable. The value that these
locks and dams bring our country far exceeds their scale and
size.
One of the lesser-known benefits of the inland maritime
industry is how green we are. We are able to move cargo with
the lowest carbon footprint among all transportation modes who
move the same tonnage. We are stewards of the environment in
which we operate as nature itself.
Investment in our inland waterway system not only benefits
our economic interests. Flood control, municipal water supply,
and recreation are all positively impacted by investment in our
inland waterway system.
In closing, I must say it's an honor to come before the
Committee to discuss these important issues. This industry is a
critical thread in the fabric of America. It has been a key
contributor to the success of the United States and an ever-
present component of our country's prosperity.
Our operators quietly pass by harbors and city fronts,
under bridges, and through locks and dams with our country's
precious cargo in tow. The maritime industry keeps our country
moving forward by providing many points of light in an endless
enduring dream for American workers, farmers, manufacturers,
energy producers, and consumers.
Thank you for holding this hearing and allowing our story
and priorities to be discussed.
[The prepared statement of Mr. Golding follows:]
Prepared Statement of Austin Golding, President, Golding Barge Line
Good morning Chairman Wicker, Ranking Member Cantwell, and members
of the Committee:
Thank you for the opportunity to come before you and discuss The
State of the U.S. Maritime Industry. My name is Austin Golding and I am
President of Golding Barge Line in Vicksburg, Mississippi. My family
has been involved in the operation of towboats and barges for 54 years.
My grandfather and a group of investors entered this industry by
starting a shipyard with one boat in 1965. Our family's current
operation includes 24 towboats, 63 barges and over 225 employees and is
privately owned in it's entirety by my family. We truly are a small
family owned business. My family and our company have navigated the ups
and downs of this space that has been at the center of the United
State's ever-growing economy. I am honored to come before the Committee
today to discuss the state of an industry that returns so much to our
country.
Our business, Golding Barge Line, moves refined petroleum and
chemical products via tank barge. Our barges serve as inland tank
vessels as they move the material that fuels our country. Our voyages
take us all along our gulf coast from Brownsville, Texas to Panama
City, Florida. They also carry us the length of the Mississippi River
as well as the entire Ohio Valley. Our voyages regularly consist of
hundreds of miles and transit through multiple states. This is the case
with most inland operators regardless of cargo. We rely on an aging
system of infrastructure to accomplish these voyages that often link
one part of the country with another in a volume of trade that would be
impossible to move by another mode of transport. As far as our company
specifically, we carry 50,000 to 100,000 barrels of cargo per voyage.
That means we are responsible for delivering 2.1 to 4.2 million gallons
of product per voyage to someone in a safe and timely manner. We
accomplish this with reliable equipment, talented mariners and
competent management who all rely on an aging infrastructure system and
a regulatory environment that provides certainty.
The American mariner is at the heart of our story. Our business can
take a young man or woman and start them as an entry level deckhand
earning $30,000 annual salary. Within one to two years they can be
promoted to Tankerman, which yields a salary of $70,000 a year. If a
mariner is particularly talented and dedicated to their craft, they can
train to be a Pilot and be credentialed as such within five to seven
years, sometimes faster. A towboat pilot starts out making $135,000 a
year and can make over $200,000 with tenure. Our industry routinely
takes young men and women out of high school and develops them into
someone earning well over $100,000 a year before they are 30 years old.
That is the American dream.
One way that we recruit and develop our entry level positions is a
Deckhand School that we have developed with our local community
college, Hinds Community College. This is a one week program that
simulates life on the boat and what the job will call for. The class
itself is held on the campus of Hinds Community College. The students
leave their cars behind and are housed in a local hotel. They learn
life skills such as cooking and cleaning to go along with basic
towboating skills such as working lines and being aware of potential
safety issues. Students are enrolled in this program by their employing
company after they have passed all of their pre employment
requirements. Passing this class is the final piece of their journey to
becoming a real deal deckhand. This wonderful program was originally
funded via a Trade Adjustment Assistance Community College and Career
Training (TAACCCT) Grant funded through the U.S. Department of
Labor.That grant expired in the spring of 2017 and the companies
involved, as well as Hinds Community College, kept it going out of
their own pockets. Additional funding came through on July 1st 2018 via
a Delta Regional Authority grant that originated in the Department of
Agriculture. That funding piece expires later this year on June 30th
2019. Our company alone has hired 312 graduates of this program since
its inception. We have seen improvements in our safety performance, as
well as improved entry level retention. Programs like this could be
duplicated across the country to introduce more people to this
sometimes overlooked and undervalued occupation.
Military veterans have found our industry as a great second career
option. When veterans enter our ranks they understand chain of command,
being away from home and working as a team to accomplish a task safely.
We take great pride in employing our country's veterans and offering
them a chance to capitalize the skills they developed in the military.
Many of these veterans become great leaders on board and find our
industry to be a perfect fit.
The Jones Act helps protect these maritime jobs. This critical Act
ensures that our country will not only have American citizens handling
our precious cargo but also that the equipment carrying that cargo will
be built in our country by American citizens. The Jones Act is a
critical tool in protecting American jobs and national security.
Without the Jones Act I can say with confidence I would not be sitting
before you with a great story to tell. Without the Jones Act this
country will be looking for foreign shipyards to build the vessels that
protect not only the goods we produce but also our citizen's
themselves. Our security as a nation is too important to be outsourced
around the world. The Jones Act ensures that the United States of
America has a robust maritime and shipbuilding talent base. That is
something worth protecting.
A point I have touched on is the state of our inland waterway
infrastructure. Many of the locks and dams we transit are well beyond
their economic design life. Many corners of this country are perilously
close to losing their gateway to the world market. Many of the products
that move by barge travel through multiple locks before reaching their
destination. An investment in a lock in Kentucky may mean products from
West Virginia can reach their end market in Texas, Louisiana or abroad.
As a vessel operator I can attest that many of these structures are in
dire need of modernization or replacement. Considering the amount of
cargo that is carried along the inland waterways, investments in locks
and dams may be the best investment in bulk commerce this country can
make. The cargo that passes through one lock may wind up on countless
roads or rail lines before meeting its end consumer. An investment in
locks and dams needs to happen before this cargo is forced on to our
already congested roads, rail and pipelines. As an industry we want to
pay our fair share. Right now companies like ours pay $.29-per-gallon
diesel fuel tax. The money we pay goes directly to the Inland Waterways
Trust Fund (IWTF). We voluntarily increased that by 45 percent in 2014
from $.20 to $.29 because we want to see proper investment in the
system. That $.29 cents per gallon is the highest gas tax per gallon of
any commercial surface transportation mode. We are an active public
private partnership as we speak. Despite this increase and emphasis our
industry still needs more Federal support to keep our waterways viable.
The incredible scale of the locks and dams, as well as size of the
network of which they are a part, requires constant maintenance. The
value that these locks and dams bring to our country far exceeds their
scale and size.
One of the lesser known benefits of the inland maritime industry is
how green we are. We are able to move cargo with the lowest carbon
footprint among other transportation modes to move the same tonnage. We
are stewards of the environment in which we operate as it is nature
itself. Roads, rail and airports have not been here for thousands of
years as the rivers of this country have. An investment in our inland
waterways system not only benefits economic interests but also
environmental interests as well. Flood control, municipal water supply
and recreation are all positively impacted by investments in our inland
waterway system. With bulk cargo volume expected to increase in the
future it only makes sense to ensure the vitality of our maritime
industry so it can be the first choice to answer this need.
In closing, I must say it is an honor to come before the Committee
to discuss these important issues. This industry is a critical thread
in the fabric of America. The maritime industry traces its roots back
thousands of years due to its unmatched economics. It has been a
critical part of the success of the United States and an ever-present
component of our country's prosperity. The inland boat and barge
industry has proven itself to be the most efficient, safe and tenured
form of cargo transportation in our country but that does not ensure
it's properly prioritized in Washington, D.C. Our industry quietly
passes by harbors and city fronts, under bridges and through locks and
dams with our country's precious cargo in tow. Our industry provides
many points of light and an endless enduring dream for the American
workers, farmers, manufacturers, energy producers and consumers. Thank
you for holding this hearing and allowing our story and priorities to
be discussed.
The Chairman. Thank you very much, Mr. Golding.
Ms. Eriksson, we're delighted to have you on behalf of the
Sailors' Union of the Pacific.
STATEMENT OF BERIT ERIKSSON, WORKFORCE DEVELOPMENT DIRECTOR,
SAILORS' UNION OF THE PACIFIC
Ms. Eriksson. Good morning, Chairman Wicker and Ranking
Member Cantwell and members of the Committee.
As a mariner and a maritime workforce development
specialist, I would like to thank you for the opportunity to
address the Committee on the education and workforce
development successes and challenges facing the United States
Jones Act impact as well as the domestic maritime industry's
workforce.
Although I am now sailing a desk as a maritime training
director, I sailed many years as an able seaman and as a bosun
in Alaska. I serve on one Federal advisory committee
representing unlicensed deck, which is the Merchant Marine
Personnel Advisory Committee, also known as MERPAC, and I
anticipate to soon serve as a labor seat on the Maritime
Transportation Systems National Advisory, also known as MTSNAC.
Merchant marine and maritime industry workforce issues have
been my focus for the last 20 years or so. When I caught my
first ship in 1970 at the age of 18, getting my seaman's
documents was a relatively simple process. There were many more
unlicensed entry-level positions from which you could work your
way up to able seaman or oiler.
The maritime academies have supplied entry-level officers
and there were also many who hawsepiped from the unlicensed to
officer through an on-the-job training and U.S. Coast Guard
testing pathway.
As you may be aware, the International Treaty of 1978,
known as the Standards of Training, Certification, and
Watchkeeping, known as STCW, has created certain training and
certification regulations which have impacted the ability of
the industry to meet credentialing requirements.
Since the implementation in 2002, STCW has severely
affected the ability of mariners to hawsepipe due to these
requirements.
In the past, advancing from entry-level positions, such as
ordinary seaman and wiper, was relatively simple by just
accruing the appropriate sea time and taking a lifeboat and
able seaman or oiler test. This has now become a complicated
and expensive journey, even if you can find an entry-level job
on an American deep sea vessel.
As the entry positions are not U.S. Coast Guard-required
billets, these positions have been drastically reduced since I
first went to sea. Credentialing has even become a complex
process for the domestic maritime industry, such as towing and
passenger vessels.
All of this is affecting our ability to support the U.S.
Navy in its mission to protect our Nation. As Maritime
Administrator Admiral Busby has said, a battle group cannot
stay at sea longer than a week without replenishment from the
support fleet. These military sealift command or government-
contracted civilian support vessels are manned by U.S. merchant
mariners, of which approximately 75 percent are unlicensed
mariners.
To keep these vessels ready to serve, there needs to be
enough billets to provide the training platforms for entry-
level unlicensed mariners as well as maritime academy cadets.
They are needed to replace an aging workforce which many came
up in the Vietnam and Desert Storm eras when there were plenty
of support vessels to learn your trade on.
To ensure that we have enough vessels to grow new mariners
on, it is imperative that the Jones Act is protected, that the
Maritime Security Program is fully funded, and that USAID, also
known as Food for Peace, should come from U.S. farmers directly
and carried on U.S. vessels.
Without these programs, our ability to make more U.S.
mariners will be imperiled which will in turn impact our
ability to support our military missions at sea.
One path to building our mariner pool is the Military-to-
Mariner Project that has been developed over the last five or
six years. This has been a collaborative process that mainly
took place through MERPAC.
The parties involved were the U.S. Coast Guard, U.S. Navy,
U.S. Army, National Maritime Center, private industry, and
other subject matter experts. The issue that needed to be
addressed was that military personnel qualifications were not
accepted as equal to the U.S. Coast Guard qualifications, even
though the experience and training were mainly equal.
Several sessions where held with military training
personnel sat with National Maritime Center course approval
personnel and cross-walked military PQSs with civilian
competencies.
In the end, scores of military training programs for U.S.
Coast Guard were approved as meeting civilian standards. This
will enable a military member to acquire merchant marine
credentials before separation, thereby saving them time and
money if they wish to go to sea as a civilian mariner. This is
still an ongoing process, but the most difficult parts have
been completed.
Military-to-Mariner is still an open task at MERPAC and all
parties are working to ensure progress continues.
Besides our excellent merchant marine academies, there's
also some very good community colleges and private training
providers that provide maritime training for both entry-level
certifications and continuing professional developments.
In my home state of Washington, there has been developed a
high school career and technical education curriculum for both
merchant mariner and shipyard workers. These students can
acquire the skills needed for entering family wage employment
out of high school. This is supported by the State
Superintendent of Public Instruction.
In conclusion, considering all the challenges faced by the
industry workforce, in my opinion, the most urgent is the lack
of enough training platforms on our U.S. merchant vessels. It
is therefore vital that we maintain and grow our U.S. Jones Act
fleet.
Thank you.
[The prepared statement of Ms. Eriksson follows:]
Prepared Statement of Berit Eriksson, Workforce Development Director,
Sailor's Union of the Pacific
Good Morning Chairman Wicker, Ranking Member Cantwell and members
of the committee. As a mariner and maritime workforce development
specialist I would like to thank you for the opportunity to address the
Committee on the education and workforce development successes and
challenges facing the United States Jones Act impacted as well as the
domestic maritime industry's workforce.
Although I am now sailing a desk as a maritime training director, I
sailed many years as an Able Seaman and as Bosun. Currently I serve on
two Federal Advisory Committees, representing unlicensed deck on the
Merchant Marine Personnel Advisory Committee (or MERPAC) and as a labor
seat on the Marine Transportation Systems National Advisory Committee
(MTSNAC). Merchant marine and maritime industry workforce issues have
been my focus for the last 20 years or so.
When I caught my first ship in 1970 at the age of 18, getting my
seaman's document was a relatively simple process. There were many more
unlicensed entry-level positions from which to work your way up to Able
Seaman or Oiler. The maritime academies supplied entry level officers
and there were many who ``Hawsepiped'' from unlicensed mariner to
officer through on the job training and U.S. Coast Guard testing.
As you may be aware, the international treaty of 1978 known as the
Standards of Training, Certifications and Watchkeeping (known as STCW)
has created certain training and certification regulations which have
impacted the ability of the industry to meet credentialing
requirements. Since implemented in 2002, STCW has severely affected the
ability of mariners to ``Hawsepipe'' due to these requirements. In the
past, advancing from entry level positions such as Ordinary Seaman and
Wiper was relatively simple by just accruing the appropriate sea time
and taking a lifeboat and Able Seaman or Oiler test. This has now
become a complicated and expensive journey even if you can find an
entry level job on an American deep-sea vessel. As the entry positions
are not USCG required billets, these positions have been drastically
reduced since I first went to sea. Credentialing has even become a
complex process for the domestic maritime industry such as towing and
passenger vessels.
All of this is affecting our ability to support the U.S. Navy in
its mission to protect our Nation. As Maritime Administrator, Admiral
Busby has said, a battle group cannot stay at sea longer than a week
without replenishment from the support fleet. These Military Sealift
Command or government contracted civilian support vessels are manned by
U.S. Merchant Mariners of which approximately 75 percent are unlicensed
mariners. To keep these vessels ready to serve there needs to be enough
billets to provide the training platforms for entry level unlicensed
mariners as well as maritime academy cadets.
They are needed to replace an aging maritime workforce of which
many came up in the Viet Nam and Desert Storm eras when there were
plenty of support vessels to learn your trade on.
To ensure that we have enough vessels to grow new mariners on, it
is imperative that the Jones Act is protected, that the Maritime
Security Program is fully funded and that USAID (also known as Food for
Peace) should come from U.S. farmers directly and carried on U.S.
vessels. Without these programs our ability to make more U.S. mariners
will be imperiled which will in turn impact our ability to support our
military missions at sea.
One path to building our mariner pool is the Military to Mariner
project that has been developed over the last five or six years. This
has been a collaborative process that mainly took place through MERPAC.
The parties involved were the U.S. Coast Guard, U.S. Navy, U.S. Army,
National Maritime Center, private industry and other subject matter
experts. The issue that needed to be addressed was that military
personnel qualifications were not accepted as equal to the civilian
U.S. Coast guard qualifications even though the experience and training
were mainly equal. Several sessions were held where military training
personnel sat with National Maritime Center course approval personnel
and cross-walked military PQS's with civilian competencies. In the end
scores of military training programs were U.S. Coast Guard approved as
meeting the civilian standard. This will enable a military member to
acquire merchant mariner credentials before separation thereby saving
them time and money if they wish to go to sea as a civilian mariner.
This is still an ongoing process, but the most difficult parts have
been completed. Military to Mariner is still an open task at MERPAC and
all parties are working to insure progress continues.
Besides our excellent Merchant Marine Academies, there are also
some very good community colleges and private training providers that
provide maritime training for both entry level certifications and
continuing professional development.
In my home State of Washington, there has just been developed a
high school Career and Technical Education curriculum for both merchant
mariners and shipyard workers. These students can acquire the skills
needed for entering family wage employment out of high school. This is
supported by the State Superintendent of Public Instruction.
In conclusion, considering the all challenges faced by the
industry's workforce, in my opinion the most urgent is the lack of
enough training platforms on our U.S. merchant vessels. Therefor it is
vital that we maintain and grow our U.S. Jones Act fleet.
The Chairman. Thank you very, very much, and thank you all
for some very excellent testimony.
Mr. Golding, can you elaborate on the infrastructure
problem and how it affects you on a daily basis in your
business?
Mr. Golding. Yes, sir, Mr. Chairman. Many of the locks and
dams that we transit through are well beyond a useful life.
We've maintained them. We've been able to operate within their
scope, but as we testified here today, the infrastructure we
have is outdated and in need of investment.
Some examples I can give you, recently Olmstead Lock and
Dam was completed. I know that had been a long yoke around our
industry's neck. We changed our cost-share program to more
match the Inland Harbor Trust Fund. We added a more robust
match to what our industry pays in to and as a result that
project came together rather quickly and is now considered a
success.
One project I could point to that is in dire need of update
is the Industrial Lock and Canal in New Orleans, Louisiana.
This lock is nearing a hundred years old and in 1956 was
authorized for modernization. I don't think anything's been
done since then.
There are oftentimes we can wait two to three days to
transit that part of the country. It's a vital inland and
outlet for the east side of the Lower Gulf states of the
country, including the Port of Mobile, and entry to the Tenn
Tom Waterway.
Many of these gateways have massive delays associated with
them and as a result that cost gets passed on to the consumer.
If we can find a way to invest in these locks and dams and
create a system that's more efficient, I have no doubt that the
maritime industry will rise to the occasion and be at a price
point that will benefit and be looked back upon as a worthy
investment.
The Chairman. Thank you. Mr. Golding, during your
testimony, Senator Cantwell and I were just amazed at the
staggering salaries that a young American can make after a year
or so.
Were you giving the best case scenario or how accurate is
that across the board? Is there a little hyperbole here or is
$70,000-100,000 actually something that the average trainee can
aspire to after a year or two?
Mr. Golding. That is the salary that they begin that
position. This cycle of work does come at a high compensation,
but I have to stick up for our mariners and tell you they miss
a lot, Chairman. They work really hard. They work in elements
that are uncomfortable. They miss major life events and they do
it in the name of putting food on the table and providing a
wage and a living for their family. We're happy to pay these
wages. These men are talented. These men and women are
credentialed. These men and women sacrifice a lot to do this
work.
So as they go from $30,000 to $70,000, I can tell you
that's my favorite part of the job, especially when they go
from $70,000 to $150,000 or $130,000 to start that position. As
they become more proficient as a pilot, it doesn't stop there.
They can go from a $130,000 over $200,000 a day. I've had
pilots----
The Chairman. A year.
Mr. Golding. Oh, yes, a year. Where I was going with that
is we've had to call some of these guys to try to get them to
move our commerce and they'll tell you I'm not getting off the
couch for less than a thousand dollars a day and so I'm proud
to pay these wages.
We are as an industry proud to employ these mariners. I
think that the sacrifice and effort and the talent that goes
into these positions is well worth the money and I anticipate
those salaries actually increasing in the future.
The Chairman. Thank you very much.
Mr. Paxton, it's frustrating to hear people suggest that we
can't move our LNG and still operate under the Jones Act.
Help us confirm that the domestic shipbuilding industry is
capable and prepared to give our United States economy what we
need and also when we're talking transport to Europe, which we
would love to supply with our abundant resources and get them
out from under the thumb of a dominant Russia, those vessels
are not required to be under the Jones Act. So help us out on
that.
Mr. Paxton. Yes, sir. First of all, right now we're
building for the market for LNG transport. Two LNGs building
ocean-going articulated tug barge LNG carriers and we're
servicing the market that exists right now for LNG.
Now the question is could we build LNG carriers?
Absolutely, 1,000 percent, we could build those if there is a
market to move LNG domestically with an LNG carrier, we can
build that.
Right now, sir, there's not. There just isn't for a
domestic shipment of LNG in a carrier.
The Chairman. Well, let me sink this in. I want to get the
needed LNG to our American citizens in Puerto Rico.
Mr. Paxton. Yes, sir.
The Chairman. Do we have the capability to do that?
Mr. Paxton. Absolutely, sir. For years, we had LNG carriers
who were waiting to deliver LNG to Puerto Rico, three of them,
U.S.-built, U.S. crude, way back in 2011, and those vessels
were never used.
The reality is and the facts are, sir, in Puerto Rico to
deliver large LNG delivery, they don't have the infrastructure
to receive it. They don't. The fact is if they do develop that
infrastructure to receive large LNG quantities, we can build
those ships in time to do that, sir. Our shipyards are right
now talking to operators to build LNG carriers and we have
enough time width to build those carriers to deliver LNG to
Puerto Rico when they have the infrastructure to receive it,
sir.
The Chairman. So whether it's the Jones Act vehicle or non-
Jones Act vehicle, you've got to have the facilities to receive
the product?
Mr. Paxton. To have the facilities. Yes, sir. One last
thing on your question about delivering LNG internationally to
Europe. You know, your legislation in the last Congress, the
Energizing American Shipbuilding Act, is the way to do that.
Take some percentages, we did the same thing with Prudhoe Bay
with Alaska crude, and we put those on U.S. tankers and they
sent that crude internationally. We could do the same thing
with LNG.
In fact, Russia last year passed a law requiring all their
LNG and crude to go on Russian-built LNG carriers under Russian
control. They saw the wisdom of your legislation, sir, and they
implemented it in Russia. So that's what we're up against and I
think we should do the same thing here.
The Chairman. Thank you, sir.
Mr. Paxton. Thank you.
Senator Cantwell.
Senator Cantwell. Thank you.
Mr. Golding, Ms. Eriksson, you know, I think people hear
some of the salary numbers and think that that's very well
paid, but as you pointed out, Mr. Golding, when you are welding
underwater, it's a very unique skill set, but as you mentioned,
Ms. Eriksson, a lot of our young people can be very excited
about these jobs if they know about them. So it's really about
getting exposure at that high school and community college
level.
What can we do on the Committee to help with that? I know
I've been very involved with Department of Labor and Department
of Energy grants as it relates to community college and
curriculum development in aerospace and energy and various
things. What do we need to do in the maritime space?
Ms. Eriksson. Well, in terms of the secondary level, at the
high school level, the Perkins, the Current Technical Education
Act, I think would be a place to maybe put some emphasis on
meaningful secondary training.
You may be familiar with the Maritime Industrial Council,
Dave Gearing, he created the Washington State Core Plus
Curriculum for both mariners and shipyard workers, but the
funding would be coming through a Department of Education
program. So I think you would want to look at that for a
secondary.
I think under the new Current Technical Education emphasis
in education in general, now that's a good place and so the
Perkins Act I would just recommend initially.
Senator Cantwell. Mr. Golding.
Mr. Golding. Yes, thank you for the question. The specific
funding around our program came through a TAAC Grant, which is
a Trade Adjustment Assistance Community College Career Training
Grant that was granted to the Mississippi River Transportation
Distribution Logistics Consortium. That grant lasted from
November 15 to March 31, 2017, and I have to tell you it was
robust. It was close to $24 million. That was placed in nine
community colleges around the country.
2.1 million of it went to Hines Community College right
there in Vicksburg, Mississippi. We split that 50/50 between
trucking and maritime. That propped up our initial training
program. That funding expired, and I'll tell you the program's
so valuable to us that Hines Community College and the member
companies that participate in this paid our way until new
funding came. That funding came through the Department of
Agriculture, through the Delta Regional Authority locally in
Mississippi. The funding we got was $80,000.
I can tell you that we're making the most of it, but I also
know that from our standpoint, to train these young men and
women, we have over $2,000 in each participant in these
classes, whether it be pre-employment or whether it be cost of
the class.
Any funding that can go grant-wise in any direction, I can
tell you that our industry will take it to help train these
mariners. I hear it from our guys on board, whenever we have a
lapse in funding for this training and we don't have the
opportunity to send these young men and women through this
program, my captain's calling me on the phone and saying where
are you getting these folks? It really works. It really helps.
And to your point, it really helps advertise our industry.
We are passively overlooked so many ways and I can tell you
that as we've gone out and actively recruited in our
communities and around the country, we've found great untapped
talent out there that has also, I think, used our industry as
untapped, as well.
Senator Cantwell. Well, I look forward to working with you
also on the infrastructure investment on the lock and dam side.
I can't tell you, having done the Freight Act, how important
that is.
If you lose capacity to move on a timely basis, you will
lose. You know, your ports become less effective as movement of
product and that is their destination. Somebody decides to just
buy from somebody else and we just can't afford that.
Mr. Golding. No.
Senator Cantwell. Thank you, Mr. Chairman.
The Chairman. Thank you.
Senator Schatz and then Senator Fischer.
STATEMENT OF HON. BRIAN SCHATZ,
U.S. SENATOR FROM HAWAII
Senator Schatz. Thank you, Mr. Chairman. Thank you to all
of the testifiers.
I want to--we've been talking a lot about the economic
impact of the Jones Act. I want to talk about the national
security piece and this is for the whole panel because I think
it's important to back up a bit and recognize that every
Secretary of Defense, every Secretary of the Navy, every
President going back decades has been supportive of the Jones
Act, and I want you to talk about the national security
implications of the Jones Act not just in terms of the fleet
but also having the merchant mariners ready in case they are
needed, and I'll start with Mr. Woodruff.
Mr. Woodruff. Well, I think you hit probably the most
critical element and that's the people element because as the
Jones Act fleet becomes a predominant source of mariners in
this nation, it becomes the predominant pool from which we can
draw mariners to mobilize the gray ships that are tied up
throughout harbors in America that are just lacking a crew.
So if we have to mobilize, we have to have people to do it.
Without a domestic maritime industry, those people simply don't
exist and we have no ability to project force.
I'm not discounting the importance of the shipyard
industrial base because that's vital, as well, but to me I
think it's increasingly becoming about the people and so when
the vast majority of the American flag fleet is in the Jones
Act trades and the Jones Act personnel, it just becomes all the
more vital to maintain them.
Senator Schatz. Sir.
Mr. Allegretti. I think I would supplement that by saying
that, you know, we are about to celebrate the 100th Anniversary
of the Jones Act and anti-Jones Act forces are using that
centennial as an opportunity to seek to reform it or repeal it
and one of the taglines they use is that because it's a hundred
years old, it must be a relic.
I would tell you that I think any analysis of the
importance of the Jones Act to our country today tells you that
it is more important today than when it was enacted.
Senator Schatz. Well, talk a little bit about what happened
in the Gulf War and how the Jones Act plays into that.
Mr. Allegretti. Well, the Jones Act has repeatedly provided
what Mr. Woodruff referred to, is the assets, physical assets
and the mariners to move materiel into harm's way, and, you
know, it's absolutely startling and that experience tells you
that you need to have assets under American control and
citizens with allegiance to America who can be relied on to
move that cargo where it needs to go.
And so the idea that we would somehow transition from this
system we have today, where the allegiances are clear, where
the men and women who work on those vessels are the eyes and
ears of security, homeland security on a daily basis, and
somehow transfer that to foreign assets and foreign crews with
no allegiance to our country is just startling to me.
I don't think that there is--and so then the question
becomes why would we do that? Because we are seeking an
ideological purity to do away with protectionist laws, because
we're seeking to lower the cost of transportation
incrementally? I would say that those don't stand up to
scrutiny.
Senator Schatz. Does anybody else have anything to add on
that?
Mr. Paxton. I would just say as the panelist who represents
the industrial base, I would say this. If you don't have the
Jones Act and if you don't maintain the commercial shipbuilding
industrial base, you'll have incredibly complex Navy and Coast
Guard ships that will be hard to build because of the supply
chain that will atrophy. You will not be able to do that.
At a time where the law of the land, thanks to Chairman
Wicker, is a 355-ship Navy, we have to maintain an industrial
base to build that Navy, to build that Coast Guard.
And the last thing I'd say, every one of the Coast Guard
vessels, minus one, are being--the Coast Guard vessels are
being built in commercial Jones Act yards, yards that'll cut
their teeth on commercial work and have robust competition. The
Polar Security Cutter has five shipyards still competing for
that contract. It's because of the Jones Act. We cannot cede
that territory or our industrial base will go away.
Senator Schatz. Mr. Golding.
Mr. Golding. I would just have two quick points to make.
It takes us five to 10 years to make a seasoned mariner
that can actually operate one of our vessels. It is not
something that happens overnight. At the same time, we use the
same shipyards, the same Jones Act shipyards that would service
our military vessels and our defense vessels. We're the ones
that come in the in-between time. They're servicing our
domestic privatized vessels before they have a call to come
answer our national security needs.
So we help educate and develop mariners. We help develop
and further our inland shipbuilding. They all contribute to
national security and it does not happen overnight. It takes
years to develop.
Senator Schatz. Ms. Eriksson, I'm out of time, but go
ahead.
Ms. Eriksson. Just briefly, I'm a person who trains people
to serve on the supply vessels or MSE-contracted support
fleets, and for me to create a mariner from ordinary entry
level to become an AB that can sail and be part of any of the
support fleet and the mission, supporting the mission is that's
a real difficult--it's become more and more difficult to get
that person from entry level to above entry level.
The academies do a great job. They also have challenges,
but I don't think enough attention has been paid to the
unlicensed ranks.
Thank you.
Senator Schatz. Thank you.
The Chairman. Thank you.
Senator Fischer.
STATEMENT OF HON. DEB FISCHER,
U.S. SENATOR FROM NEBRASKA
Senator Fischer. Thank you, Mr. Chairman.
Thank you, Senator Schatz, for that question. That is so
important to hear the answers from this entire panel on how
vital it is for the military readiness of this country, for the
security of this country.
I thank all of you for your answers and helping to educate
Members of Congress and to educate our citizens in this country
on the importance of the Jones Act to the security and the
safety of the United States. Thank you all for your answers.
Mr. Woodruff, as you know, the Jones Act is a cabotage law
regulating coast-wise trade in the United States. Is the United
States unique in that compared to other maritime countries?
Mr. Woodruff. No, ma'am. The reality is I think 80 percent
of the coastlines of the world, those countries have cabotage
laws. Virtually every country that has more than one port has
some form of cabotage law to deal with the carriage of cargos
between those ports and as was pointed out by Mr. Paxton, there
are some countries, including now Russia, that go beyond that
and even command the use of their own vessels in foreign trades
originating in their ports.
Senator Fischer. Some of you touched on this when you
answered Senator Schatz's previous question, but I would ask
Mr. Paxton. How would the repeal of the Jones Act affect our
shipbuilding capabilities that we have in this country when we
compare it to the laws of the other countries?
Mr. Paxton. Thank you for the question. If we just repealed
the Jones Act or just even the Build requirement of the Jones
Act, it would have an immediate impact and why I say that is
what we know now is through foreign industrial policy, Asian
shipyards now control 90 percent of global tonnage annually.
And so as much as I am an adamant believer in our
competition and our capability in our shipyards because it's
unparalleled, built the most advanced and sophisticated Navy in
the world, you can't compete against subsidies that we see
taking place in foreign shipyards. It's just unbelievable.
As I mentioned in my testimony, one shipyard got 12 billion
just to stay afloat and are now taking zero margin contracts.
We cannot do that, you know, in the United States.
The last thing I'd say is China's doubled down on this--$25
billion to create terminals and shipping lanes that are
dominated by Chinese ships. This is their way to build their
next generation Navy and it'll be on the backs of outsourcing
commercial shipyards.
So it really is that dramatic and I would argue we should
be forward-thinking in policies. Again, Chairman Wicker had a
piece of legislation that looked at taking a small percentage
of our energy commodities and moving those on U.S. ships under
U.S. flag in the international market.
I think we're at that place. If we're going to recapitalize
our auxiliary fleets to do sealift for the Navy, we're going to
have to think about that. So thank you, Senator.
Senator Fischer. Thank you. Mr. Allegretti, last y ear I
was proud to work on the Federal Maritime Commission
Reauthorization and that was included in the Coast Guard
reauthorization.
A provision in it prohibited ocean carriers from
negotiating contracts jointly with tug boat operators through
alliances.
Can you speak broadly to what impact the ocean alliances
have on your members and what would be the impact on the tug
boat operators if the carriers could jointly negotiate those
contracts?
Mr. Allegretti. Simply, it would be devastating. We would
not be able to stand up to the collective rate-making power of
those ocean alliances were they allowed to continue and the
leadership of this Committee was instrumental in protecting us
in that regard.
You know, this was really, without any exaggeration, a
David and Goliath situation and if Congress had not stepped in
to ensure that that kind of rate-making authority wasn't
available, you would have seen devastating impacts. This was a
significant, a grave threat without overstatement.
Senator Fischer. Right.
Mr. Allegretti. Thank you very much for your help with
that.
Senator Fischer. Of course. Mr. Golding and Mr. Allegretti,
how significant is intermodal transportation on the inland
waterway that we are looking at that industry?
I had a subcommittee hearing on that last week, and does
that network have a role in addressing the congestion that we
see with our intermodal transportation system? Mr. Allegretti,
would you like to go first?
Mr. Allegretti. Sure. The system is intermodal and the
importance of the intermodality in the United States is that
it's driven by the markets. People make decisions based on the
efficiency of the movement of that particular cargo over a
particular route, and barge lines and railroads and trucking
companies work together to service the needs of their
collective customers, and make rational judgments about which
cargo should move by which mode, and I think it works
incredibly well.
Senator Fischer. Thank you. Mr. Golding.
Mr. Golding. Many times our voyages are interconnected with
rail, pipeline, highway, airport operation. Oftentimes, we're
the bulk answer or the versatile answer to those moves.
With a pipeline or a rail or a highway, you're in a fixed
area and a fixed process. With our operation, we offer
versatility in size, cargo amount, and voyage distance and
location we're able to reach.
So as we fit into the supply mode, not only do we offer
mass bulk transportation at an ultra-efficient cost but our
waterways are not mutually exclusive. We are inclusive in the
national supply chain and many times the people that we
negotiate for our services are also in control of those other
modalities.
So they're doing the math on where we fit in, where we fit
in best. So we play as a major part in these giant consumer
supplier supply chains, usually at the source, usually at the
beginning. It gets parceled out after we hold it. So as we take
it and it gets parceled out, the consumer benefits from our
efficiency down the line.
Senator Fischer. OK. Thank you. Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Fischer.
Senator Baldwin.
STATEMENT OF HON. TAMMY BALDWIN,
U.S. SENATOR FROM WISCONSIN
Senator Baldwin. Thank you, Mr. Chairman.
As representatives of the U.S. maritime industry, you all
represent a critical national security asset for the United
States. Our laws are clear that ships for the Government and
ships in the coast-wise trade must be manufactured in the
United States and national security justification for doing so
is absolutely compelling.
These laws are in place because foreign competitors often
have an advantage over us due to direct government support or
subsidy, less stringent regulatory requirements, and due to a
robust commercial shipbuilding market.
Our laws protect shipyards from unfair competition but the
same is not true for the shipbuilding supplier base since the
domestic manufacture requirements can be met simply by
constructing the hull with U.S.-made steel and other materials.
DoD recently published an industrial base report
highlighting the critical state of many aspects of our supplier
base. That is why last Congress, I introduced a bill called The
Made in America Shipbuilding Act and I intend to reintroduce it
very soon.
So, Mr. Paxton, do you believe that given the findings in
this DoD report that a reliable, secure domestic supply base is
essential to your members, and, if so, what can you do to
support strengthening the U.S. shipbuilding supplier base?
Mr. Paxton. Well, thank you, Senator, for the question,
and, of course, we supported emphatically your legislation last
Congress and will do so again.
We represent over a 110 supplier companies that are spread
out across our entire nation. We touch all 50 states. Building
big ships takes a lot of parts and pieces. So our supply chain
is absolutely critical and we have to continue to monitor it.
The report you speak to showed that from 2000 we lost about
20,500 U.S.-based manufacturing firms, 20,500 have exited our
industry, and we need to pull that back. So any policies that
look to build more ships here and more pieces of those ships
here, we support. So we're grateful for your leadership on
that, Senator.
I would say there are pinch points that are rising. We have
so many folks that can build chaps for submarines and so many
folks that can do these things. We need to have a policy where
we support these industries. We want to build the most advanced
Navy in the world. It's going to take a very sophisticated
supply chain and so we will work with you and, of course, the
Congress to do whatever it takes to do that.
Senator Baldwin. Thank you. Next, I wanted to highlight the
Small Shipyard Grant Program.
There's strong support for small shipyards within this
committee, which strengthened the grant program in the last
maritime bill. We will soon get to work writing a bill for
Fiscal Year 2020. The Small Shipyard Grant Program helps
shipyards make needed upgrades and investments in workers. The
program helps ensure that America's shipbuilding industry
remains strong, all while supporting military shipbuilding.
For you again, Mr. Paxton, how have you seen the Small
Shipyard Grants Program invest in facilities and workers, and
could you describe how these grants support programs for the
Navy and Coast Guard?
Mr. Paxton. Again, thank you, Senator. It's a great
question. I think the wisdom of the Small Shipyard Assistance
Grant Program is the reality that smaller and mid-tier
shipyards don't have the funds to do capital investments, to do
some of the expenditures it takes to make shipyards more
efficient, more competitive.
It's through the Small Shipyard Assistance Grant Program
we've seen those smaller to mid-tier shipyards get more and
more competitive and what happens is you have more competition
because shipyards can all of a sudden bid on those government
contracts they couldn't before because they learn how to build
more and more complex commercial ships.
So as a direct result, there's a cost savings that comes
back to the taxpayer because again you have more shipyards
bidding on more contracts, be it NOAA ships, be it Coast Guard
ships, be it Army ships. All those grants went into those
shipyards to allow them to get welding machines and heavy lifts
to allow them to be more competitive and it comes back in the
competition amongst those shipyards to bid on those government
projects that much more effectively.
So thank you for your support of that, Senator.
The Chairman. Thank you.
Senator Scott.
STATEMENT OF HON. RICK SCOTT,
U.S. SENATOR FROM FLORIDA
Senator Scott. Thank you to each of you for being here.
I just finished eight years as Governor of Florida. We have
15 seaports and I invested $1.5 billion in our ports in those
eight years and actually had to put up the Federal portion of
quite a few projects because the Federal Government wouldn't be
a good partner in that regard for whatever reason.
So I guess, Mr. Allegretti or anyone, what are the most
important investments you think the Federal Government ought to
do to continue to make American ports more competitive and our
shippers more competitive to make sure we continue to get jobs?
Just in the 8 years I was there, we added about 300,000
trade jobs and we got a great return. So what do you all think
we ought to be doing?
Mr. Allegretti. I think what I would say with respect to
the domestic fleet, Senator, is that the system that you have
in place today and that you support today works really well.
I've heard AWO members describe our business as a pure
capital market where contracts are won by efficiency, by
customer service, and that companies that grow and improve are
the ones that are rewarded, and costs are kept down and the
incredible employment opportunities that you've heard this
morning are maintained, and the basis of that is the Jones Act
and the certainty of cargo that it provides to the folks who
own those 40,000 vessels in the fleet.
The other piece is to ensure that we operate under a single
national standard, enforced by Federal agencies, whether that's
the EPA or the Coast Guard, and to ensure that as we're moving
in interstate commerce, we're not subject to a patchwork of
state regulations.
If you maintain that foundation of certainty, the industry
will continue to flourish.
Senator Scott. Do you think the Federal Government's making
the investments they need to make as far as dollar investments?
Mr. Allegretti. Well,----
Senator Scott. Are we behind other countries?
Mr. Allegretti.--we're certainly behind other countries in
terms of the modernization and maintenance of our inland
waterways infrastructure.
As has been said, most of the locks and dams on our inland
system are well beyond their design life. Many of them are
crumbling and we need to not only spend more but we need to
spend more efficiently.
The example that Mr. Golding referenced of Olmstead is a
great example. If you spend the money efficiently and you
provide the funding to complete the project, there are enormous
benefits that accrue from that. The fact that Olmstead was
finished 3 years before it was concluded saved the Federal
Government $300 million in costs that it would have incurred
had that project continued and the benefits of the project then
accrue much earlier than they otherwise would.
So if we spend the money more efficiently, we'll make
substantial gains.
Senator Scott. Anybody else?
Mr. Golding. I would like to add that in the case of our
coastal ports, we have a trust fund, the Harbor Maintenance
Trust Fund, that has some $9 billion of excess in it. It's an
ad valorem tax paid on cargo coming into our coastal ports
that's supposed to be spent to maintain those ports and it's
not being spent to maintain those ports. So that is a
responsibility the Government has had since the founding days
of our Nation.
Senator Scott. Did you say $9 billion and they're not being
a partner with what the states are doing?
Mr. Golding. Well, really the states shouldn't have to pay
a dime for maintenance of Federal waterways. The tax is
collected on the cargo coming in to pay all the costs. We're
bringing in enough money every year in that tax to maintain all
of our harbors and that money is being spent elsewhere in the
Federal budget.
You know, people say, well, the Federal Harbor Maintenance
Trust Fund is, you know, sitting somewhere, I guess in Ft.
Knox, but I challenge anyone to find it.
Senator Scott. Being swept. Is that what's happening?
Mr. Golding. It's being swept. It's being used to offset
other costs to the Federal Government. It's not being spent for
its intended purpose.
Mr. Paxton. Senator Scott, I would just add I echo all of
those comments as well as if there is an infrastructure bill,
we need to make sure that these projects are included in it.
These projects aren't transited by the general public a lot
of times but the products that go through them end up in your
house and we have to include these projects in a major
infrastructure bill and not just the ones that are most visible
in our communities.
A lot of these locks, dams, and river infrastructure
projects are beyond the public sight. They don't need to be
beyond the public mindset.
Senator Scott. Thank you.
The Chairman. Thank you very much.
Senator Sullivan.
STATEMENT OF HON. DAN SULLIVAN,
U.S. SENATOR FROM ALASKA
Senator Sullivan. Thank you, Mr. Chairman, and I want to
thank our witnesses today.
I'm going to focus on a theme of the new subcommittee you
may have heard about on this committee under the Chairman's
leadership on economic and security issues. I happen to chair
that subcommittee and, of course, the maritime industry is kind
of a key component of that. So I want to keep my questions kind
of in that sphere.
Let me begin by--and I'll just again to all of you open up
the opportunity to comment, if you'd like.
The President just a couple days ago issued this Executive
Order to better enable veterans to move into domestic maritime
jobs. I'm actually getting ready to go to a hearing we have on
the Veterans Affairs Committee happening right now in a couple
minutes.
But can you give me your sense of both the importance of
that Executive Order and the challenges that the maritime
industry has in attracting qualified workforce, particularly
now when we have such a strong economy and low unemployment?
I'll just open that up to any and all.
Mr. Woodruff.
Mr. Woodruff. Well, we do have challenges. There are
particular challenges to the lifestyle that you've heard some
about from other testimony. People have to go away from home
for periods of time. That's offset by very good wages, but what
we find in particular is that veterans are great candidates for
the type of work we have because they're accustomed to being
away from home, having a chain of command, having an
environment where----
Senator Sullivan. Work hard, discipline, know how to get up
at 05 in the morning, that kind of thing?
Mr. Woodruff. Roger that, and the other part of it, I
think, that's very essential to recognize is that while we
focused in--the Executive Order this week focuses on people
with seagoing experience in the military, we'll take a veteran
from any service who has done anything because we can train
them in our company, as Mr. Golding said about his company
through their community college.
We have our own training facility where we train in-house,
but those folks, we can give them the skills they need to be
very successful and have a career in the industry, whether they
were a rifleman, whether they worked on a tank, whether they
did any other skill in the military. Those skills are
absolutely transferrable to the maritime industry.
Senator Sullivan. Thank you. Thanks for all that you guys
are doing with regard to veterans and also I appreciate what
the President did with regard to--yes, Ms. Eriksson, would you
like to comment on that?
Ms. Eriksson. Yes, I would. I actually chair the
subcommittee at MERPAC that worked on this.
Senator Sullivan. Great. I really appreciate that.
Ms. Eriksson. So in terms of the Executive Order, I was
very pleased to see it in terms of it outlines pretty much what
we're working on and reinforces what we're working on, in terms
of enabling not just veterans but also in-service military
members to acquire the credentialing they need prior to
separation.
Senator Sullivan. Good.
Ms. Eriksson. And that's work that's been done with the
Navy Cool Group and that actually is a little further along
than the EO indicates.
Senator Sullivan. Great. Thank you for that work. Again,
working with this committee and the Veterans Affairs Committee,
we want to continue to take advantage of benefits to the
industry, your industry, but it really helps our veterans and
it's a totally win-win and we want to keep working on that.
Let me turn to another economic and national security
topic. I know it was in a number of your testimonies. It's an
issue that a number of us care about. The Chairman and I
certainly do.
That's the importance of the Jones Act with regard to not
just shipyard industrial base but our broader national security
issues.
One of the things, you know, we're hearing these rumors. A
number of us signed on to a letter under the Chairman's
leadership to the White House saying, hey, you know, the Jones
Act is very important.
I know there's already a lot of discussion on it, but if
you were going to send a message to the Administration on some
of the things you're thinking about, I want to just offer the
opportunity and also this is a really important point.
I'm not sure many other countries would go without a Jones
Act. Last time I checked, Korea, China, Japan, they certainly
have like Jones Act on steroids and I think it's important to
recognize not just the importance to our domestic economy,
jobs, and national security, but the rest of the world
certainly has similar policies that benefit their shipbuilding
and maritime industry.
Any additional comments that haven?t already been mentioned
with regard to the importance of the Jones Act in terms of what
this committee or the White House needs to hear?
Mr. Golding. I'd like to just sum it up in the best way
possible. The Jones Act is about being built in America, crewed
by Americans, and owned by Americans.
The second part of that, the eco effect that we're really
proud of, is the revenue that we generate to move American
products from American port to American port stays in America.
This revenue is passed back out not only through payroll but
also all our vendor services and all of our investment. That is
an American investment that gets to stay in America, that gets
to be invested in American security.
I don't know how much more it has to have America in it for
anybody to support this, but I can tell you that we benefit
from it and we're proud to be a beneficiary of that patriotic
Act.
Senator Sullivan. Any other comments on the Jones Act?
Mr. Paxton. Yes, Senator Sullivan. The one thing I would
point out is your Subcommittee on Security, it really has an
intersection with you both serve on the Armed Services
Committee and any talk of waivers, any talk of eroding the
Jones Act just impedes our goal of a 355-ship Navy because that
industrial base is building commercial ships. It's supply chain
dynamics. If that were to go anywhere, we can't build that
Navy. We can't build that Coast Guard or if we do, it's going
to be just that much harder.
We have great competition on our Navy and our Coast Guard
and in commercial yards, but, sir, this subcommittee and your
work on readiness and sea power and all those really intersect
with this committee quite nicely and I would just say we should
be doing more, not less, when it comes to this industrial base
and maintaining it to build that Navy we're going to need for
our next generation.
Senator Sullivan. And I'm sure you know the author of the
355-ship Navy is the Chairman of this committee.
Mr. Paxton. Yes, sir, yes, sir.
Mr. Allegretti. Can I supplement,----
Senator Sullivan. Yes.
Mr. Allegretti.--Senator, just to say that with respect to
the situation in Puerto Rico and the request for a 10-year
waiver of the Jones Act, you know, my recommendation to those
folks would be they seek to comply with the law before they
seek to waive it and, you know, our business is all about
meeting customer demands.
So if there is a long-term need to move LNG into Puerto
Rico to help them transition their energy grid over to a better
fuel source, we should be part of that solution. We will be
happy to move that under long-term contract for them and that's
the proper way to come at it, not to seek to waive the law to
use foreign assets.
Senator Sullivan. Ms. Eriksson, did you have a comment?
Ms. Eriksson. Yes, speaking of the mariners needed to keep
the Jones Act fleet and the national security support fleet
going, I used to sail on the Alaska Marine Highway. I've lived
in Seward and one of the things the Alaska Marine Highway has
is entry-level billets and without the Jones Act, will there be
an Alaska Marine Highway where very vital positions for
creating mariners to serve this country are created. It's a big
carry system.
Senator Sullivan. Great. Thank you. Thank you, Mr.
Chairman. Oh, Mr. Woodruff.
Mr. Woodruff. Well, I'd just like to add to what the others
have said and be perfectly blunt that the long-term waiver of
the Jones Act would be a gut punch to the American maritime
worker. It would make Buy America/Hire America ring hollow.
Thank you.
Senator Sullivan. Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Sullivan, and all the
Senators on both sides of the dais who have very strongly
spoken today in favor of the Jones Act.
I would simply say I hope the Administration is listening.
I hope our letter, Senator Sullivan, from you and me and others
has been given some attention and this is a fight that the
Administration doesn't need to have with folks that are
creating American jobs and standing by to protect the security
needs of our Nation in case something happens.
We're going to close the hearing now but the record will
remain open for two weeks. During this time, Senators are asked
to submit any questions for the record. Upon receipt, witnesses
are requested to submit their written answers to the Committee
as soon as possible but no later than Wednesday, March 20.
And again I want to thank the witnesses for great testimony
and a wonderful exchange during the question and answer period.
This hearing is now adjourned.
[Whereupon, at 11:24 am, the hearing was adjourned.]
A P P E N D I X
Response to Written Question Submitted by Hon. John Thune to
Matthew Woodruff
Question. Mr. Woodruff, your testimony highlighted the importance
of legal certainty in your industry, especially when making
considerations for capital investments. Thanks to bipartisan efforts to
establish a uniform Federal framework for ballast water discharge
rules, the Vessel Incidental Discharge Act was signed into law last
year as part of the Coast Guard reauthorization. Could you elaborate on
how the establishment of uniform vessel discharge rules will affect
your industry when it comes to capital planning and investment?
Answer. It gives us confidence to invest, either in upgrades to
existing vessels or new vessels. Before the law was passed, we could
not be sure whether an investment in a ballast water system meeting the
Federal standard would meet potentially evolving state requirements.
When you are not sure, you hold back on making investments. Now that we
have statutory certainty, we can evaluate which vessels should get a
ballast water system and which are candidates for retirement/
replacement and proceed with system installation on vessels that need
them.
______
Response to Written Questions Submitted by Hon. Marsha Blackburn to
Matthew Woodruff
Question 1. There was much discussion during the hearing regarding
the economic and national security benefits provided by the domestic
maritime industry. Barge companies in my home state of Tennessee make
long-term business decisions based on the current legal regime, such as
purchasing large amounts of steel to replace and refit barges for the
next thirty years. These decisions require certainty in U.S. maritime
law, and Section 27 of the Merchant Marine Act--the Jones Act--is the
foundational statute underpinning U.S. maritime law. What are some
potential market disruptions that would occur in the maritime industry
if Congress or the Administration were to make changes to the Jones
Act?
Answer. The domestic maritime industry is fundamentally premised on
the legal certainty that the Jones Act provides. Every investment that
the industry makes is made in reliance on existing U.S. law. The
maritime industry is particularly dependent on legal certainty because
our business is highly capital-intensive and the assets we invest in
(such as newly constructed vessels) are long-life assets. An
administrative waiver of the length and type proposed by Puerto Rico
would undercut efforts to build a domestic LNG fleet and, in fact, the
novel use of the Sec. 501 authority for an extended LNG administrative
waiver could destabilize the entire American domestic shipping industry
by introducing extreme uncertainty and volatility into the market.
Question 2. What are the national security implications of changing
this statute, or allowing waivers to the Jones Act?
Answer. The Jones Act has important national and homeland security
benefits. That is why waivers of the Jones Act under 46 U.S.C. Sec. 501
are limited to waivers of the navigation or vessel-inspection laws that
are ``necessary in the interest of national defense.''
First, the Jones Act supports national security by providing the
Department of Defense with access to commercial sealift and intermodal
capacity to support force deployment abroad and by ensuring that the
country maintains a strong defense industrial base by supporting
shipyards that make or repair vessels for both the domestic market and
the military. Perhaps most importantly, mariners on Jones Act ships
form a substantial portion of the pool of mariners that are required to
crew government-owned vessels in the case of emergencies. It is perhaps
best said by General Paul Selva, the Vice Chairman of the Joint Chiefs
of Staff, who stated: ``I am an ardent supporter of the Jones Act. It
supports a viable ship building industry, cuts costs and produces 2,500
qualified mariners. Why would I tamper with that?''
Second, the Jones Act supports homeland security by ensuring that
the vessels that travel between domestic points every day are American-
owned and American-crewed. These Americans are additional eyes and ears
for the agencies charged with homeland security. Our economy relies on
just-in-time delivery of domestic cargoes. The Jones Act ensures that
the movement of this domestic waterborne traffic (including vital
products such as agriculture, chemicals, and energy sector cargoes) is
not dependent on foreign companies, crews or governments, who could use
their control of supply chains to delay or prevent delivery and thus
wreak havoc on our economy. Our non-contiguous territories would be
especially vulnerable if the vessels they depend on for fresh groceries
and other necessities suddenly did not arrive in port due to a trade
dispute or similar situation.
______
Response to Written Questions Submitted by Hon. Ron Johnson to
Matthew Woodruff
Question 1. As you testified, the Jones Act serves a critical role
in maintaining the ready workforce of mariners that can be used to
mobilize the fleet of grey hulled American ships that only lack a crew.
Can you please provide annual data on the number of U.S. mariners over
the past 30 years?
Answer. I do not have access to annual data on the number of U.S.
mariners. The Maritime Workforce Working Group, a subset of the U.S.
Maritime Transportation System National Advisory Committee, reported to
Congress in 2017 that there are about 11,768 qualified mariners with
unlimited credentials available to crew the Ready Reserve Force and
that 3,380 of those come from the Jones Act fleet. Admiral Buzby,
Administrator for the U.S. Maritime Administration, recently testified
that the United States is short about 1,800 mariners that would be
needed in case of a full, prolonged mobilization. To help address that
need, President Trump recently signed an executive order entitled
``Supporting the Transition of Active Duty Service Members and Military
Veterans into the Merchant Marine'' which is designed to ease the
transition from military service to working in the industry.
Question 2. As you noted in the hearing, some 80 percent of
coastline nations have some form of cabotage laws. Can you provide a
complete list of nations that have cabotage laws? Can you provide a
complete list of nations with laws that include domestic build
requirements?
Answer. A full list of nations that have cabotage laws, including
nations that have domestic build requirements, can be found in the
report Cabotage Laws of the World, released in September 2018 by
Seafarers' Rights International (SRI), a leading international research
center on maritime and seafarers' law. See this link for the full
report: http://ftp.elabor8.co.uk/sri/cabotage/flipbook/mobile/
index.html. A map from that report that identifies the countries with
cabotage laws is below.
______
Response to Written Questions Submitted by Hon. Maria Cantwell to
Matthew Woodruff
Question 1. Federal Freight Funding. Ports, waterways and other
freight infrastructure are a critical part of our transportation
network, but frequently get overlooked when it comes to Federal
funding. With more than 40 percent of jobs in Washington state
connected to international trade, we know the importance of being able
to get product to the market.
The FAST Act included new freight programs to help move freight
more efficiently. However, during the first year of the INFRA grants
program I authored, the Department of Transportation received
applications requesting $9.8 billion, more than 12 times the amount of
funding provided. This shows that we need to do more to improve our
freight infrastructure.
Why is it important that Federal funding is provided for freight
infrastructure investments?
Answer. Infrastructure is the foundation of America and facilitates
economic generation for our country. When freight shipping costs are
low, the Nation's GDP goes up. If our country wants to continue to be a
leader in world, I believe that significant Federal investment needs to
be made in all modes of transportation in order to gain efficiency and
stay at the top of the global leader board.
Question 2. How is the supply chain affected when portions of our
freight network don't work?
Answer. The supply chain is connected by all modes of freight
transportation. Shippers choose the most efficient mode or combination
of modes for their particular cargo. If one piece of the network goes
down it affects all shippers by increasing rates due to limited and
less efficient options to get commodities to market. If you look at
export grain along the Mississippi River, grain is transported from the
family farmer's field to a river terminal by truck, from the river
terminal to the American seaport by barge, and then from the seaport to
the export market by ocean vessel. If one of these links in the supply
chain were to break then that grain would have to look at an
alternative, less efficient and more expensive way to ship. This is
just one example of how the freight transportation is interconnected.
Question 3. What else should the Committee consider to improve
freight infrastructure?
Answer. The Committee should look at a plus-up of the INFRA grants
program that was provided in the FAST Act. As you mentioned in your
first question, DOT received $9.8 billion in requests, which is 12
times the amount of funding provided. This shows that there are
communities out there that have antiquated infrastructure that needs
modernization and recapitalization. The Committee should also enact an
infrastructure bill in the 116th Congress that has meaningful Federal
dollars for all modes of transportation.
Question 4. National Maritime Strategy. The maritime industry is
critically important to our economy, but it also plays a vital role
during times of national crisis, including military conflicts and
national emergencies.
However, the industry faces challenges with fewer ships, mariners
and cargoes that impact its ability to support our defense needs.
Congress has called on the Department of Transportation to complete
a national maritime strategy to address these challenges, and last year
the Government Accountability Office report found that the strategy
needs to be completed expeditiously.
Can you speak to the importance of a national maritime strategy and
why these challenges must be addressed in the near-term?
Answer. Development of a national maritime strategy is important
and has been a priority for many years. For example, the Jones Act is
crucial to supporting a strong domestic maritime industry. It also
provides important national, homeland, and economic benefits to our
nation, including military sealift and 650,000 American jobs. Military
leaders, key Members of Congress, and senior government officials have
consistently endorsed the Jones Act but it would be helpful to have
that support memorialized in a national maritime strategy document.
Question 5. Domestic Maritime Industry. The Jones Act is crucial to
supporting a strong domestic maritime industry. How would a long-term
waiver of the Jones Act for the shipment of liquefied natural gas (LNG)
to Puerto Rico affect the domestic maritime industry? Do you believe
U.S. carriers have the capacity to meet this need?
Answer. A long-term waiver of the Jones Act to ship LNG to Puerto
Rico would have a devastating impact on the domestic maritime industry.
As mentioned in my testimony, the industry is dependent on legal
certainty. The Jones Act is the foundational law of the domestic
maritime industry and every investment that the industry makes is made
in reliance on existing U.S. law. The maritime industry is particularly
dependent on legal certainty because our business is highly capital-
intensive and the assets we invest in (such as newly constructed
vessels) are long-life assets. Long-term waivers of existing law make
it less likely that companies will invest in these long-term assets,
which impacts the ability of the industry to grow and thrive.
I do believe that U.S. carriers have the capacity to meet Puerto
Rico's LNG needs. Given the growth in the U.S. supply of natural gas,
the industry is already investing in the LNG market and is looking to
continue that investment in the future. At the moment, domestic
shipyards are already building or have delivered assets capable of
moving LNG, and Puerto Rico is currently receiving LNG through ISO
containers. Representatives of these shipyards tell me they are ready,
willing and eager to build more and have the capacity to meet any
domestic needs. The domestic maritime industry has always responded to
new market demands (including building new tankers for the shale oil
boom), and this would be an opportunity to invest in a new market.
______
Response to Written Questions Submitted by Hon. Richard Blumenthal to
Matthew Woodruff
Question 1. Multimodal investment to benefit ports. Freight--with
an emphasis on goods that move through our ports--took a big step
forward after passage of the FAST Act. Specifically, the bill provided
a total of $11 billion in dedicated freight funding over five years.
However, of that, only $1.13 billion is multimodal eligible. In 2018,
the American Association of Port Authorities identified more than $20
billion in multimodal funding needs for public port authorities alone
over the next decade. Do you consider ports to be a critical part of
our multimodal freight network?
Answer. Absolutely. They are the connecting link that allows cargo
to shift between modes. Without ports and terminals, you cannot have a
multimodal network.
Question 2. Could investing in multimodal facilities at our ports
reduce highway congestion, increase supply chain efficiency, and save
money through reduced delays?
Answer. Again, absolutely. The right investments at the right
places can do these things and more, including reducing pollution. They
should be considered as a part of an overall national strategy to
ensure that our transportation system is sound and efficient.
Question 3. Do you support increasing the amount of multimodal
eligible funding in a reauthorization of the FAST Act?
Answer. I am not familiar with the details of this program. For the
programs I do follow, I know that they suffer from chronic underfunding
and that in general, underfunding of all forms of infrastructure is a
major concern for the Nation.
Question 4. The Coast Guard's polar icebreaker fleet. The Coast
Guard has stated that it needs at least three heavy icebreakers and
three medium icebreakers to ensure continued access to the polar
regions. Updating our fleet is essential to maintaining a national
presence, the safety and security of the maritime transportation
system, as well as coordinating national search and rescue efforts in
colder regions.
Congress recently passed the Consolidated Appropriations Act of
2019, which provided $655 million for construction of the first Coast
Guard Polar Security Cutter. In addition, the bill provided $20 million
for some long lead-time materials toward a second ship. However, this
falls well short of the funding needed to satisfy the Coast Guard's
commitment to acquiring six polar icebreakers and more funding is
undoubtedly needed to accomplish this goal.
I imagine you recognize the importance of the Coast Guard's ability
to provide this vital icebreaking services to protect our Nation's
security and economic prosperity. Would you agree that it is critical
to continue this vital acquisition?
Answer. As a maritime nation, it is critical that we have the
ability to operate anywhere, anytime, on the navigable waters of the
world. We cannot cede our ability to access any international waters to
other nations. We must have appropriate access to U.S. territorial
waters to protect national security and facilitate American coastwise
and other maritime commerce. It seems to me that replacing our aging
and less than reliable polar icebreakers is a vital national interest.
In fact, Admiral Schultz, Commandant of the Coast Guard, recently
testified to the importance of a revitalized icebreaking fleet. I rely
on the expertise of our Coast Guard leaders to define the needs and
priorities in this area.
Question 5. What are the potential consequences of failing to fully
fund the Coast Guard's icebreaker acquisition?
Answer. Initially, it will be delays in the program, but more
importantly, it will delay our ability as a nation to enjoy the
benefits of these assets or abate the risks these assets are intended
to abate. I defer to the leaders of the Coast Guard with respect to the
particulars.
______
Response to Written Questions Submitted by Hon. John Thune to
Thomas Allegretti
Question 1. Mr. Allegretti, you mentioned in your testimony the
urgent need for modernization and repair of inland waterways
infrastructure. In addition to locks and dams, inland ports play a
vital role in the maritime supply chain, serving as critical intermodal
connections for agricultural commodities bound for markets across the
country and the world. Could you speak to the importance of inland port
facilities to the supply chain, especially as it relates to the
movement of agricultural commodities?
Answer. 592 million tons of cargo is transported by barge on U.S.
inland waterways each year, including nearly 90 million tons of food
and farm products. The 25,000 miles of navigable waterways serve 38
states and act as a key gateway in efficiently moving American
agricultural products from the heartland to export markets around the
world.
Inland ports are an important part of that transportation supply
chain. Waterways Council, Inc., estimates that there is a $20.37/ton
cost savings to transport goods by waterway. For farmers buying bulk
fertilizer or selling commodities moved by barge, inland port
facilities provide the opportunity to take advantage of that reduced
transportation cost closer to home. In addition to the economic savings
for producers and consumers, shifting more cargo to waterways served by
inland ports reduces highway congestion and roadway infrastructure
requirements while also reducing emissions, since a single dry cargo
barge can hold the equivalent cargo of 70 tractor trailers.
Question 2. As a follow-up, when it comes to Federal freight
policy, do you see any gaps in the promotion of intermodal
infrastructure development at inland ports?
Answer. Federal freight policy should be responsive to the
individualized needs and conditions of localities. As highways become
more congested, states, counties, and cities have begun looking to
intermodal transportation and opportunities to utilize waterways for
alternative transportation options. This diversification shows the
greatest promise when a locality identifies a congested highway or a
new transportation need in tandem with identifying a waterway that can
be utilized to relieve that congestion or provide a needed new service
to consumers. I encourage Congress to use the authorizations and
appropriations process to be responsive to this type of ground-up
approach to support localities in building and expanding intermodal
links.
______
Response to Written Questions Submitted by Hon. Marsha Blackburn to
Thomas Allegretti
Question 1. There was much discussion during the hearing regarding
the economic and national security benefits provided by the domestic
maritime industry. Barge companies in my home state of Tennessee make
long-term business decisions based on the current legal regime, such as
purchasing large amounts of steel to replace and refit barges for the
next thirty years. These decisions require certainty in U.S. maritime
law, and Section 27 of the Merchant Marine Act--the Jones Act--is the
foundational statute underpinning U.S. maritime law. What are some
potential market disruptions that would occur in the maritime industry
if Congress or the Administration were to make changes to the Jones
Act?
Answer. The requirements of the Jones Act all work in tandem to
support America's domestic maritime industry. Weakening any one of
those elements would seriously undermine the national, homeland, and
economic security that the maritime industry provides for the country.
As you correctly note in your question, maritime businesses make
long-term decisions based on the stability and certainty of the Jones
Act. Without this foundational law, the maritime industry would become
a race-to-the-bottom as foreign competitors that are supported by
state-owned enterprises, subsidies, and lax regulations enter the
domestic market. When lawmakers or members of the Administration waiver
in their support of the Jones Act, vessel operators hesitate to make
long-term business decisions to hire more American workers or make
investments that support shipbuilding, manufacturing, and an efficient
transportation system for producers and consumers throughout the
country.
Question 2. What are the national security implications of changing
this statute, or allowing waivers to the Jones Act?
Answer. America's ability to project and deploy forces globally
depends on having the civilian sealift capacity to transport military
and humanitarian cargos. Military leaders consistently express strong
support for the Jones Act because it ensures a domestic maritime
industrial base of vessels and mariners to reliably transport equipment
and supplies from U.S. ports to distant parts of the world.
Domestically, the Jones Act fleet of tugboats, towboats and barges also
provides vital services that support the day-to-day operation and
readiness of the U.S. military, including waterborne transportation of
military goods and cargos throughout the U.S., harbor assist services
to safely escort military vessels in and out of port, and transporting
coal and petroleum products to maintain the operation and resiliency of
electrical generation on which military bases and installations rely.
Without strong support for the Jones Act, those tasks would be
outsourced to foreign companies.
______
Response to Written Question Submitted by Hon. Ron Johnson to
Thomas Allegretti
Question. As you noted in discussions with Senator Schatz regarding
the Gulf War, it is critical that our Nation maintains a reliable fleet
of vessels and mariners with an unquestionable allegiance in order to
move our military assets in times of war. Could you please provide the
breakdown of which Jones Act assets were used to provide that critical
transport support, and what percentage of transport was made via Jones
Act vs non-Jones Act vessels?
Answer. A wide array of American civilian and military vessels
supported what the Department of Defense called the largest rapid
deployment of U.S. forces and supplies in history. According to
Military Sealift Command, more than 95 percent of all the equipment,
supplies, and fuel needed to support the Gulf War was transported by
sea, with U.S.-flagged military and civilian vessels carrying nearly 80
percent of that seaborne cargo. Those U.S.-flagged civilian vessels
included both cargo vessels and tankers. Additionally, several U.S.-
flagged containerships delivered cargoes as part of their regularly-
scheduled liner service.
The remaining 20 percent of seaborne cargo was carried by foreign-
flagged vessels chartered by the military. To show the vulnerability we
face as a nation in relying on foreign vessels to transport wartime
materiel, alarmingly, crews on 13 of those foreign-flagged vessels
mutinied and forced the ships away from the warzone. Our nation cannot
afford this kind of uncertainty when our armed forces rely on the
timely delivery of these critical cargoes.
Again, thank you again for the opportunity to provide testimony and
for your interest in the American maritime industry. If you have any
further questions or need additional information, please do not
hesitate to contact me.
______
Response to Written Questions Submitted by Hon. Maria Cantwell to
Thomas Allegretti
Question 1. Federal Freight Funding. Ports, waterways and other
freight infrastructure are a critical part of our transportation
network, but frequently get overlooked when it comes to Federal
funding. With more than 40 percent of jobs in Washington state
connected to international trade, we know the importance of being able
to get product to the market.
The FAST Act included new freight programs to help move freight
more efficiently. However, during the first year of the INFRA grants
program I authored, the Department of Transportation received
applications requesting $9.8 billion, more than 12 times the amount of
funding provided. This shows that we need to do more to improve our
freight infrastructure.
Why is Federal funding for freight infrastructure investment
important to growing the United States maritime economy?
Answer. Properly funding maritime infrastructure is important
because it is an investment in jobs and economic opportunity for the
broader economy. The U.S. Coast Guard's Maritime Commerce Strategic
Outlook notes that the U.S. marine transportation system supports $4.6
trillion of economic activity each year and accounts for the employment
of 23 million Americans. Because such a high percentage of goods move
through ports and via waterways, the growth outlook of the maritime
economy and the full U.S. economy are inextricably linked; to grow one,
you must grow the other.
Question 2. How is the supply chain affected when portions of our
freight network don't work?
Answer. Inefficiencies in the freight transportation network result
in increased costs and delays to shippers and consumers. When
inadequate waterways infrastructure causes delays or closures at locks,
customers will look to other modes of transit to move their goods.
Waterways Council, Inc., estimates that our waterways network produces
a savings of more than $20.00 a ton for domestic cargoes transported by
waterway. That cost savings translates to over $12 billion in annual
transportation cost savings that would instead be borne by American
businesses and consumers if their goods had to instead move by road or
rail.
One increasing problem affecting the freight network is development
pressure from states, localities and citizens that oppose ports and
working waterfronts. In Seattle, the Northwest Seaport Alliance is
undertaking a $300 million modernization of Terminal 5. This project
has taken several years, and numerous regulatory and permitting steps,
to reach its current stage of soliciting construction bids.
Fortunately, local government is supportive of this project and its
economic and environmental benefits to the entire region.
But, that kind of support for ports and industrial waterfronts is
not universal. The nation's ports are the critical gateway for
interstate and foreign commerce, either as the final step in the
process of exporting goods from as far away as the interior heartland
of landlocked states or the first step in importing products from
abroad.
Despite that pivotal role in interstate and international commerce,
waterfront development decisions are controlled by local governments. A
single vote to deny a permit for port infrastructure development by a
city council can impact transportation chains that span the country and
the globe. Moreover, if that decision is challenged, courts are
hesitant to consider the far-reaching effects on interstate and
international commerce and the cumulative effects of these decisions on
the country's entire transportation network. To systemically support
the development of port infrastructure and maintain supply chain
effectiveness, the Federal Government must consider how to more
equitably balance local opinions on waterfront development against the
transportation needs of the entire country.
Question 3. What else should the Committee consider to improve
freight infrastructure?
Answer. Beyond the Committee's consideration of the important
matter of the level of Federal funding, consideration should also be
given to consistency in the authorizations and appropriations
processes. That consistency is critical to improving freight
infrastructure. Several waterways maintenance and modernization
projects have lagged for years because of inconsistent Congressional
action. When those projects lag, vessel operators are forced to delay
or alter their long-term business investment plans, which can
negatively impact their ability to provide efficient and reliable
transportation to their customers.
Question 4. National Maritime Strategy. The maritime industry is
critically important to our economy, but it also plays a vital role
during times of national crisis, including military conflicts and
national emergencies.
However, the industry faces challenges with fewer ships, mariners
and cargoes that impact its ability to support our defense needs.
Congress has called on the Department of Transportation to complete
a national maritime strategy to address these challenges, and last year
the Government Accountability Office report found that the strategy
needs to be completed expeditiously.
Can you speak to the importance of a national maritime strategy and
why these challenges must be addressed in the near-term?
Answer. America is a maritime nation and therefore needs a national
maritime strategy to assure sufficient vessels and mariners to project
and deploy military force and diplomatic assistance globally. The
absence of a viable U.S.-flag fleet to move critical military and
humanitarian cargos would leave America vulnerable and reliant on
foreign vessels and crews to conduct military strategy and foreign
policy around the globe.
Question 5. Domestic Maritime Industry. The Jones Act is crucial to
supporting a strong domestic maritime industry. How would a long-term
waiver of the Jones Act for the shipment of liquefied natural gas (LNG)
to Puerto Rico affect the domestic maritime industry?
Answer. Puerto Rico is just beginning to invest in transitioning to
a natural gas-powered economy. Granting a waiver now, in addition to
not meeting the statutory requirements for issuing a waiver, would not
be justified and would stifle any complementary investments the
domestic maritime industry will make as a market for LNG shipping
develops.
Like pipelines, liquefaction facilities and other components of the
natural gas transportation network, LNG vessels are built to serve the
contractual needs of a customer. Those contractual agreements provide
stability for financing and determining the size and capacity
requirements for the construction of the vessels. If a market for LNG
develops in Puerto Rico and developers on the island commit to long-
term supply contracts for domestically-produced LNG, then a market will
likewise develop for the domestic transportation of LNG to the island,
and Jones Act carriers will vigorously compete to provide that service
via Jones Act-compliant LNG vessels.
LNG vessels are some of the most sophisticated and expensive
vessels in the world. Discussions of granting a waiver of the Jones Act
to transport domestic LNG have already chilled the certainty needed to
make a capital-intensive investment in vessel assets that can operate
safely for over 30 years. Moreover, granting that waiver would ensure
that LNG vessels are never built in American shipyards, never operated
by American companies and never crewed by American mariners.
______
Response to Written Questions Submitted by Hon. Richard Blumenthal to
Thomas Allegretti
Question 1. The impact an oil spill could have on America's
maritime industry. Last year, former Interior Secretary Zinke announced
that the Trump Administration would open up 90 percent of outer
continental shelf waters to oil and natural gas drilling and
extraction.
In 2010, our Nation witnessed Deepwater Horizon, the greatest oil
spill disaster in U.S. history, in horror as it ravaged the Gulf coast.
To this day, even with restoration efforts, the Gulf is struggling to
heal from the damage and we continue to see the long-term consequences
ranging from effects on human health, the environment, and the economy.
The Trump administration's decision to open up offshore drilling
leases, including in the North Atlantic region, raises serious
environmental disaster and economic concerns for coastal states. We are
currently awaiting the release of the administration's updated five-
year plan, but we expect the proposal to massively expand offshore oil
and gas drilling. How would an oil spill off the coast of New England
affect our local maritime economy?
Answer. Serious oil spills damage the marine environment. The
maritime industry knows this and constantly works to lower and mitigate
the risks posed in the transportation of petroleum products, so that an
oil spill off the coast of New England, or anywhere else for that
matter, is prevented.
Congressional enactment of the Oil Pollution Act of 1990 (OPA 90)
brought about many changes that spurred both more environmentally
protective vessels and improved pollution prevention vessel operations.
For example, OPA 90 compelled a phase-out of single-hull tankers and
tank barges in favor of double-hull vessels. Importantly, Congress
understood that retiring single-hulled vessels and replacing them with
new double-hulled vessels was a multi-billion-dollar undertaking that
needed to be carried out in a phased process over time. Instead of
requiring that all single-hull vessels be immediately retired, and
therefore causing a major economic disruption to shipping, OPA 90
required that new tankers and tank barges be doubled-hulled and
provided for the orderly phaseout of existing single-hulled vessels
over a 25-year period based on vessel age and size.
In addition to complying with the requirements of OPA 90, the
maritime industry has actively worked to implement additional measures
to prevent oil spills. AWO's Responsible Carrier Program (RCP) requires
vessel operators to implement a safety management system that seeks to
achieve zero harm to human life, property and the environment. In a
2012 report to Congress, the Coast Guard noted that ``[a]nother
downward shift in spill volume occurred about 1997, which corresponds
to the implementation of voluntary industry standards, known as the
`Responsible Carrier Program'. . .'' Further, since ``most of the U.S.
tank barge population belongs to member companies of AWO'' that must
comply with the RCP, ``spill volumes reach new record low values'' that
represent ``approximately one gallon spilled for every 71.4 million
gallons transported . . . a remarkable improvement given that the
amount of oil transported by barge has been relatively constant, at
approximately 69 billion gallons per year.''
Question 2. Multimodal investment to benefit ports. Freight--with
an emphasis on goods that move through our ports--took a big step
forward after passage of the FAST Act. Specifically, the bill provided
a total of $11 billion in dedicated freight funding over five years.
However, of that, only $1.13 billion is multimodal eligible. In 2018,
the American Association of Port Authorities identified more than $20
billion in multimodal funding needs for public port authorities alone
over the next decade. Do you consider ports to be a critical part of
our multimodal freight network?
Answer. Yes. All ports, whether inland or coastal, are gateways for
transporting the domestic commerce of the United States, for bringing
imports into the country and moving exports out of the country. A
strong and successful multimodal system relies on developing the most
efficient means of getting goods to and from those gateways.
Question 3. Could investing in multimodal facilities at our ports
reduce highway congestion, increase supply chain efficiency, and save
money through reduced delays?
Answer. Yes. As highways become more congested, states, counties,
and cities have begun looking to intermodal transportation and
opportunities to utilize waterways for alternative transportation
options. This diversification shows the greatest promise when a
locality identifies a congested highway, or a new transportation need,
in tandem with identifying a maritime waterway that can be utilized to
relieve that congestion or provide a needed new service to consumers.
Federal freight policy should be responsive to the individualized needs
and conditions of localities, and we encourage Congress to use the
authorizations and appropriations process to be responsive to this type
of ground-up approach to support localities in building and expanding
intermodal links.
Question 4. Do you support increasing the amount of multimodal
eligible funding in a reauthorization of the FAST Act?
Answer. Yes. A single dry cargo barge can hold the equivalent cargo
of 70 tractor trailers. Increased funding for multimodal projects that
shift cargo and freight from the congested roadways to marine highways
can reduce congestion and the cost of roadways construction and
maintenance, all while also reducing emissions and increasing
environmental sustainability.
Question 5. The Coast Guard's polar icebreaker fleet. The Coast
Guard has stated that it needs at least three heavy icebreakers and
three medium icebreakers to ensure continued access to the polar
regions. Updating our fleet is essential to maintaining a national
presence, the safety and security of the maritime transportation
system, as well as coordinating national search and rescue efforts in
colder regions.
Congress recently passed the Consolidated Appropriations Act of
2019, which provided $655 million for construction of the first Coast
Guard Polar Security Cutter. In addition, the bill provided $20 million
for some long lead-time materials toward a second ship. However, this
falls well short of the funding needed to satisfy the Coast Guard's
commitment to acquiring six polar icebreakers and more funding is
undoubtedly needed to accomplish this goal.
I imagine you recognize the importance of the Coast Guard's ability
to provide this vital icebreaking services to protect our Nation's
security and economic prosperity. Would you agree that it is critical
to continue this vital acquisition?
Answer. Yes.
Question 6. What are the potential consequences of failing to fully
fund the Coast Guard's icebreaker acquisition?
Answer. America is a maritime nation, with an extensive coastline,
much of which needs an icebreaking capability to assure navigation and
commerce. Moreover, without this icebreaking capability, the U.S.
cannot secure its territorial integrity and control over its resources
in the Arctic. If the U.S. Congress chooses not to invest in building
an adequate icebreaker fleet, it is essentially choosing to outsource
icebreaking responsibilities to other countries, countries whose
interests may not align with ours.
______
Response to Written Question Submitted by Hon. John Thune to
Matthew Paxton
Question. Mr. Paxton, in 2018, more than 90 percent of U.S. grain
destined for international markets moved via the Nation's inland
waterways. In your testimony, you highlighted the importance of a
robust shipyard industrial base to sustaining a diverse fleet capable
of responding to growth in various sectors. Do you believe the current
vessel fleet operating on our Nation's waterways will be able to
adequately respond to future growth in agricultural exports?
Answer. The benefit of the Jones Act is that it enables the U.S.
shipyard industry to rapidly respond to market demands. As you can see
from the chart attached, the industry has engaged in continued
investment in dry cargo barges that would provide the necessary tonnage
to transport agricultural exports. Over the last five years, the
industry has built more than 3.600 of these vessels to service that
trade.
However, any waiver of the Jones Act could threaten the dry cargo
barge market as financing available to recapitalize the inland fleet
would freeze. Any waiver would also stifle investment in the industry
and prevent U.S. shipyards from competing in emerging domestic markets,
and also erodes the shipyard industrial base.
______
Response to Written Questions Submitted by Hon. Marsha Blackburn to
Matthew Paxton
Question 1. There was much discussion during the hearing regarding
the economic and national security benefits provided by the domestic
maritime industry. Barge companies in my home state of Tennessee make
long-term business decisions based on the current legal regime, such as
purchasing large amounts of steel to replace and refit barges for the
next thirty years. These decisions require certainty in U.S. maritime
law, and Section 27 of the Merchant Marine Act--the Jones Act--is the
foundational statute underpinning U.S. maritime law. What are some
potential market disruptions that would occur in the maritime industry
if Congress or the Administration were to make changes to the Jones
Act?
Answer. If the Congress or the Administration were to undermine the
Jones Act, there would be a severe disruption to the U.S. shipyard
industrial base. As your question states, the industry makes long-term
business decisions on the stability of current law. Any change to the
Jones Act would signal uncertainty in those long-term business
decisions. This signal would reverberate across the industry and
financial markets, directly impacting the industrial base supply chain
and that supply chain's ability to support the demands of our Navy and
Coast Guard fleets and incrementally erodes the national defense
implications of the Jones Act. Any waiver will stifle investment in the
industry and prevent U.S. shipyards from competing in emerging domestic
markets, therefore further eroding the shipyard defense industrial
base.
Question 2. What are the national security implications of changing
this statute, or allowing waivers to the Jones Act?
Answer. Any change to the statute or the allowance of waivers to
the Jones Act will have disproportionate impacts to the U.S. shipyard
industrial base. In a September 2018 report, Assessing and
Strengthening the Manufacturing and Defense Industrial Base and Supply
Chain Resiliency in the United States, the White House and the Office
of the Secretary of Defense outlined their concerns to the overall
defense industrial base and specifically cited their concern for the
decline of the U.S. manufacturing and its impact to defense
shipbuilding.
The report states:
Industries involved in the manufacturing of shipbuilding
components were among the hardest hit by the global shift in
the industrial base over the last 20 years. Of the top ten
highest grossing industries in Navy shipbuilding, six are in
the manufacturing sector. Since 2000, these industries
experienced a combined decline of over 20,500 establishments in
the U.S.
Contraction of the shipbuilding sector limits competition among
U.S. suppliers of Navy components. In many cases, competition
has altogether vanished, forcing the Navy to rely on single and
sole source suppliers for critical components. These companies
struggle to survive and lack the resources needed to invest in
innovative technology. Expanding the number of companies
involved in Navy shipbuilding is important to maintaining a
healthy industrial base that can fulfill the 355 ship fleet and
support the Navy's long range shipbuilding plan.
Furthermore, in the FY202 Long Range Shipbuilding Plan, the Navy
echoed those concerns stating
``. . . the commercial industry supporting our auxiliaries and
sealift has atrophied due to increased foreign competition
through modernized facilities and inexpensive labor. A
contributing factor was policy legislation that ended U.S.
Government shipyard subsidies, putting U.S. industry at a
considerable disadvantage compared to subsidized overseas
competitors.''
In summation, the U.S. shipyard industry has already weathered the
negative impacts of the decline in overall manufacturing coupled with
the rise in heavily-subsidized foreign competition. The way to ensure
there is a stable industrial base going forward is to ensure the
consistent enforcement and application of the Jones Act. Any waiver
will stifle investment in the industry and prevent U.S. shipyards from
competing in emerging domestic markets, therefore further eroding the
shipyard defense industrial base.
______
Response to Written Questions Submitted by Hon. Ron Johnson to
Matthew Paxton
Question 1. Mr. Paxton, in your testimony you stated that there is
currently no demand for a domestic shipment of LNG by a carrier. A
number of states have signaled a need for U.S. natural gas and
acknowledged that current imports of natural gas come from places like
Nigeria. Could you please explain what these states would need to
further signal to demonstrate that there is domestic demand for
shipment of LNG by a U.S. carrier?
Answer. Several U.S. LNG export facilities have begun operations in
the last two years including in Cheniere, LA and Cove Point, MD. These
facilities are already fully subscribed to foreign customers meaning
there is no domestic supply of LNG from these facilities. A foreign
carrier entering the domestic trade would therefore have no product to
move.
However, it is expected over the next 5 years that potentially 11
additional domestic LNG export facilities could come online. As they
do, there may be sufficient LNG capacity to be able to service a
nascent domestic LNG market. As a result, there are presently several
inquiries being made in U.S. shipyards regarding the construction of
such vessels which can be constructed well ahead of time to meet that
market demand.
A Jones Act waiver is not necessary for the domestic LNG trade. In
fact, MARAD has reported that there are 52 LNG carriers in the world
that would qualify under existing 1996 legislation to transport LNG
from the contiguous United States to Puerto Rico. Opponents of the
Jones Act have countered that this is a false because ``the law still
requires these vessels to be U.S.-registered and U.S.-crewed.'' One
supposes from this that the Jones Act opposition wants to skirt all
U.S. regulations and taxes.
The LNG market in Boston is a spot market (several cargos during
the winter) and is likely to remain so. As such, regardless of where
the LNG might get loaded in a ship, in Louisiana, Maryland or Qatar, it
will be delivered at world price and at a price the market will bear.
The best example of that case is happening right now as there has been
an LNG carrier sitting off Boston harbor for over a month waiting for a
cold snap to cause a regional natural gas price hike before the ship
lands the gas.
Thus, unless it is the Congress's intent to suspend all U.S.
regulations and taxes for vessels operating in coastwise trade, then
there is no need to waive the Jones Act. Gas customers in the Northeast
will not receive any advantage and there are ships in the world today
that could serve a coastwise trade to Puerto Rico if there was a market
to justify it.
U.S. shipyards have already built bunkering barges to serve the
needs of new LNG-powered ships coming to market. Those barges could
easily respond to spot markets, such as Boston, during the winter
months if the demand signal was given.
Question 2. As you testified, it is critical that the United States
maintain an industrial base to construct its Navy and Coast Guard
vessels. Can you please provide annual data on the number of
domestically-owned shipyards and the number of commercial and non-
commercial vessels built?
Answer. According to a 2016 U.S. Maritime Administration study,
there are more than 125 private shipyards currently operating in the
United States. As you can see from the chart below of ships delivered
by type, there is a certain amount of cyclical nature to the U.S.
shipyard business. The chart also shows commercial vs. non-commercial
ships built in the U.S. from 2013 to 2018, and the number of vessels
delivered each year.
The number of commercial ships delivered far outweighs the number
of Navy and Coast Guard ships delivered. However, it should be noted
that in terms of spending, the Maritime Administration has estimated
that 70 percent of dollars spent on shipbuilding in the U.S. is from
government contracts while 30 percent is spent on commercial projects.
The difference in spending is derived from many factors including the
complexity of the vessel.
______
Response to Written Questions Submitted by Hon. Maria Cantwell to
Matthew Paxton
Question 1. Foster Growth in Number of U.S. Mariners, Apprentice
Programs and Training. I have been working on a bill with Senator
Collins that would allow retiring workforce to continue to work and
mentor our next generation. This is particularly important in the
trades, where skills and knowledge that workers have learned over a
lifetime could be passed to the next generation. Is this program
something that your shipyards could put to good use?
Answer. The SCA is continuously evaluating policies that will help
train the next generation of shipyard workers. To that end, a stable
and predictable order book is the best way to ensure that our shipyard
can invest in the next generation of their workforce. As we stated in
our written testimony, any undermining of the Jones Act contributes to
the instability and unpredictability of potential future work,
therefore hurting the ability of our shipyards to invest in their
workforce and facilities.
Question 2. Small Shipyard Grants. Our maritime economy also
supports a robust shipbuilding and ship repair industry in Washington.
Nearly 20 percent of shipyards in the U.S. are in the state of
Washington.
The Federal Small Shipyard Grant Program provides funds for the
construction and repair of vessels at small U.S. shipyards.
Since 2010, Washington state shipyards have received eight grants,
valued at over $4.8 million dollars in investments into our
shipbuilding industry.
How important is Federal support for small shipyards?
Answer. Federal support for small shipyards is invaluable. When
funded, the Small Shipyard Assistance Grant Program has helped many
small shipyards make critical capital investments in their facilities.
These investments help improve the competitiveness of the shipyards and
supports continued workforce training and development programs. Funding
for this program is intended to help small shipyards improve the
efficiency of their operations by providing funding for equipment and
other facility upgrades, including dredging of waters located within
the shipyard's geographical location for the purpose of improving the
shipyard facility operations.
According to MARAD: ``Small shipyard facilities vary in size, from
family-owned businesses employing a few dozen workers, to multifaceted
establishments with hundreds of employees. The grants, which were
primarily available to U.S. shipyards with less than 600 production
employees, are generally less than $1 million each, but can make a huge
difference in a shipyard's bottom line.''
The administration of this program should also be lauded as the
efficiency created by MARAD in awarding these grants has allowed more
money to be awarded through this grant program.
Small shipyard grants allow smaller shipyards to make capital
investments to increase their facility's competitiveness. That
competition allows them to better compete for open commercial projects
and help streamline workloads in shipyards by making their workforce
more efficient.
There have been several cases where small shipyards were awarded
grants that in turn allowed them to bid on more complex commercial
projects. The complexity in those projects then allowed those shipyards
to become competitive for larger and more dynamic vessel contracts
ultimately resulting in their ability to compete for government
contracts
Question 3. What changes to the program should we consider as we
develop the next maritime reauthorization legislation?
Answer. SCA would request that lawmakers increase the amount
available for the Small Shipyard Assistance program. The Maritime
Administration should be lauded as the efficiency created by the staff
at MARAD has allowed more money to be awarded through this grant
program. Additionally, the SCA supports the reauthorization and funding
of the Maritime Administration's Title XI loan guarantee program, also
known as ``Title XI.'' Funding and implementation of the Title XI
program creates loans for privately financed commercial ship
construction and shipyard modernization--all in the United States. The
amount appropriated funds the credit guarantee--essentially insuring
the payment the government makes to itself.
Question 4. Jones Act. The Government Accountability Office has
said that a loss of the Jones Act could result in significant effects
on U.S. shipyards and the shipyard industry base. What are your views
on the importance of the Jones Act to the U.S. shipbuilding industry.
What more could be done to enforce the act's provisions?
Answer. If the Congress or the Administration were to undermine the
Jones Act, there would be a severe disruption to the U.S. shipyard
industrial base. As your question states, the industry makes long-term
business decisions on the stability of current law. Any change to the
Jones Act would signal uncertainty in those long-term business
decisions. This signal would reverberate across the industry and
financial markets, directly impacting the industrial base supply chain
and that supply chain's ability to support the demands of our Navy and
Coast Guard fleets and incrementally erodes the national defense
implications of the Jones Act. Any waiver will stifle investment in the
industry and prevent U.S. shipyards from competing in emerging domestic
markets, therefore further eroding the shipyard defense industrial
base.
______
Response to Written Questions Submitted by Hon. Richard Blumenthal to
Matthew Paxton
Question 1. Multimodal investment to benefit ports. Freight--with
an emphasis on goods that move through our ports--took a big step
forward after passage of the FAST Act. Specifically, the bill provided
a total of $11 billion in dedicated freight funding over five years.
However, of that, only $1.13 billion is multimodal eligible. In 2018,
the American Association of Port Authorities identified more than $20
billion in multimodal funding needs for public port authorities alone
over the next decade. Do you consider ports to be a critical part of
our multimodal freight network?
Answer. Ports are an essential part of America's transportation
system and the maintenance of our ports is critical. The SCA would
support the use of the Harbor Maintenance Trust Fund to be used to
invest and modernize domestic pot facilities, including dredging ports
with U.S.-dredgers.
Question 2. Could investing in multimodal facilities at our ports
reduce highway congestion, increase supply chain efficiency, and save
money through reduced delays?
Answer. Multimodal facilities, including short sea shipping and the
development of the maritime highway would relieve some highway
congestion and provide a more environmentally friendly option for
transporting large amounts of domestic goods.
Question 3. Do you support increasing the amount of multimodal
eligible funding in a reauthorization of the FAST Act?
Answer. The SCA supports multi-modal funding so long as there are
guarantees that all investments and upgrades to maritime systems are
compliant with the Jones Act. This includes dredging and ensuring that
ships used in the multi-modal operations are not only built in the
United States but also required to be repaired in U.S. shipyard
facilities as well.
Question 4. The Coast Guard has stated that it needs at least three
heavy icebreakers and three medium icebreakers to ensure continued
access to the polar regions. Updating our fleet is essential to
maintaining a national presence, the safety and security of the
maritime transportation system, as well as coordinating national search
and rescue efforts in colder regions.
Congress recently passed the Consolidated Appropriations Act of
2019, which provided $655 million for construction of the first Coast
Guard Polar Security Cutter. In addition, the bill provided $20 million
for some long lead-time materials toward a second ship. However, this
falls well short of the funding needed to satisfy the Coast Guard's
commitment to acquiring six polar icebreakers and more funding is
undoubtedly needed to accomplish this goal.
I imagine you recognize the importance of the Coast Guard's ability
to provide this vital icebreaking services to protect our Nation's
security and economic prosperity. Would you agree that it is critical
to continue this vital acquisition?
Answer. Yes--the Shipbuilders Council of America absolutely
supports the full recapitalization of Coast Guard Polar assets. The
U.S. shipyard industry is certainly up to the task of building polar
icebreakers and has the expertise, the capability, the critical
capacity and the unmatched skilled workforce to build these national
assets. In fact, in a letter sent to the House Coast Guard & Maritime
Transportation in 2011, SCA member companies urged the Congress, the
Coast Guard and the Administration to work together to quickly
authorize and fund such a project to deliver these critical vessels to
meet the Nation's future strategic icebreaking needs. The U.S.
shipbuilding industry is excited and eager for the opportunity to
compete to build the Coast Guard's next icebreakers.
Question 5. What are the potential consequences of failing to fully
fund the Coast Guard's icebreaker acquisition?
Answer. According to the Congressional Research Service: \1\
---------------------------------------------------------------------------
\1\ https://fas.org/sgp/crs/weapons/RL34391.pdf
---------------------------------------------------------------------------
The operational U.S. polar icebreaking fleet currently consists of
one heavy polar icebreaker, Polar Star, and one medium polar
icebreaker, Healy. In addition to Polar Star, the Coast Guard has a
second heavy polar icebreaker, Polar Sea. Polar Sea, however, suffered
an engine casualty in June 2010 and has been nonoperational since then.
Polar Star and Polar Sea entered service in 1976 and 1978,
respectively, and are now well beyond their originally intended 30-year
service lives. The Coast Guard has used Polar Sea as a source of spare
parts for keeping Polar Star operational.
A Department of Homeland Security (DHS) Mission Need Statement
(MNS) approved in June 2013 states that ``current requirements and
future projections . . . indicate the Coast Guard will need to expand
its icebreaking capacity, potentially requiring a fleet of up to six
icebreakers (3 heavy and 3 medium) to adequately meet mission demands
in the high latitudes. . . .''
While we do not know the details of the Coast Guard operations, we
know from the shipyard industry perspective that further delay in the
full funding and awarding of these programs will only put more pressure
on the existing Coast Guard assets to cover an ever expanding Arctic
presence.
______
Response to Written Questions Submitted Hon. Marsha Blackburn to
Austin Golding
Question 1. Question. There was much discussion during the hearing
regarding the economic and national security benefits provided by the
domestic maritime industry. Barge companies in my home state of
Tennessee make long-term business decisions based on the current legal
regime, such as purchasing large amounts of steel to replace and refit
barges for the next thirty years. These decisions require certainty in
U.S. maritime law, and Section 27 of the Merchant Marine Act--the Jones
Act--is the foundational statute underpinning U.S. maritime law. What
are some potential market disruptions that would occur in the maritime
industry if Congress or the Administration were to make changes to the
Jones Act?
Answer. The initial impact would be massive collapse of our
countries shipbuilding sector. All contracts to move products would be
subject to the bids of foreign operators with lower operating costs.
With those lower operating costs come more risk and less oversight. The
price differential would take all the cargo out of U.S. operator's
hands and put them into foreign operator's possession. Companies like
ours would be forced to sell into a brand new market of foreign owned
domestic operation that would be a shadow of the safe and
environmentally aware industry we have built up to this point. Any
military support the maritime sector could be counted on would be in
foreign hands.
Question 2. What are the national security implications of changing
this statute, or allowing waivers to the Jones Act?
Answer. Changing the statute or making a consistent habit of
writing waivers chips away at the investment in our shipbuilding
capability as a nation. It de-incentivizes investment in new operation
and emerging markets. All of this means that our country has fewer
options to build our Navy up and maintain it. It also erodes the
support in the Jones Act fleet would provide in war time. This industry
and the knowledge associated with it cannot be jump started over night.
If we outsource our maritime industry our military is less supported,
our cargo is now in foreign hands in our own backyards and if a
conflict were to arise we would be dependent on non-US options to
answer the call of that conflict. The Jones Act is a national security
measure first and an economic measure second.
______
Response to Written Question Submitted by Hon. Maria Cantwell to
Austin Golding
Question. National Maritime Strategy. The maritime industry is
critically important to our economy, but it also plays a vital role
during times of national crisis, including military conflicts and
national emergencies.
However, the industry faces challenges with fewer ships, mariners
and cargoes that impact its ability to support our defense needs.
Congress has called on the Department of Transportation to complete
a national maritime strategy to address these challenges, and last year
the Government Accountability Office report found that the strategy
needs to be completed expeditiously.
Can you speak to the importance of a national maritime strategy and
why these challenges must be addressed in the near-term?
Answer. Having a deep understanding of this countries marine assets
and capabilities is very hard to do. We are not in communities the same
way other modes of transport are. A national maritime strategy is an
essential step in understanding this industry that is so distant to
most citizens. While most Americans never step foot on a vessel,
everyone's lives are impacted by them. A national understand and
strategy would surely help optimize our industry.
______
Response to Written Questions Submitted by Hon. Amy Klobuchar to
Austin Golding
Question 1. The Port of Duluth is the largest and busiest port on
the Great Lakes and is a national leader for shipping. In 2017, a new
intermodal terminal opened for Canadian National Railway and Duluth
Cargo Connect to improve the flow of freight in and out of the Midwest.
How can investments in multi-modal port infrastructure help reduce
delays and congestion?
Answer. Multi-modal ports are the gateway for products to be traded
in this country. Connecting supply chains at the point of origination
is a key in any distribution system. Why not take that to the largest
scale possible, multi-modal port facilities. These are great
investments that have an echo impact.
Question 2. The Soo Locks Complex provides safe passage and a
critical shipping connection within the Great Lakes. In November, the
U.S. Army Corps of Engineers announced that the Soo Locks will receive
more than $32 million as part of its 2019 work plan. How do
improvements to inland waterway infrastructure benefit domestic
commerce in the United States?
Answer. Improvements equate to a more efficient supply chain and
thus a benefit to the consumer and trader. You are talking about the
largest volume possible being impacted. With one lock or dam project
you get the same return as hundreds of road, bridge, rail projects all
in one spot and project. It is the most impactful investment in
infrastructure this country can make in my opinion. The investment will
last decades, not just years. The products can change but the pathway
and economic advantage remain.
______
Response to Written Questions Submitted by Hon. Richard Blumenthal to
Austin Golding
Question 1. Multimodal investment to benefit ports. Freight--with
an emphasis on goods that move through our ports--took a big step
forward after passage of the FAST Act. Specifically, the bill provided
a total of $11 billion in dedicated freight funding over five years.
However, of that, only $1.13 billion is multimodal eligible. In 2018,
the American Association of Port Authorities identified more than $20
billion in multimodal funding needs for public port authorities alone
over the next decade. Do you consider ports to be a critical part of
our multimodal freight network?
Answer. No doubt about it they are a critical part. The volume
ports can process far exceeds what normal highway, rail or airport
volume can support. Once you incorporate maritime port elements in with
multimodal options you unlock a universe of efficiency and options.
Question 2. Could investing in multimodal facilities at our ports
reduce highway congestion, increase supply chain efficiency, and save
money through reduced delays?
Answer. The volume handled through barges and ships equals
thousands of trucks and rail cars. Many times the products are a
beneficiary of a streamlined supply chain. The decision to trade the
product can come down to the logistics. If the analysis includes a
crowded highway or a delayed point of passage the product may not be
traded at all or for a price that isn't as competitive. A multi-modal
port saves money and makes money.
Question 3. Do you support increasing the amount of multimodal
eligible funding in a reauthorization of the FAST Act?
Answer. I do. With proper oversight this could be a bountiful
investment.
Question 4. The Coast Guard's polar icebreaker fleet. The Coast
Guard has stated that it needs at least three heavy icebreakers and
three medium icebreakers to ensure continued access to the polar
regions. Updating our fleet is essential to maintaining a national
presence, the safety and security of the maritime transportation
system, as well as coordinating national search and rescue efforts in
colder regions.
Congress recently passed the Consolidated Appropriations Act of
2019, which provided $655 million for construction of the first Coast
Guard Polar Security Cutter. In addition, the bill provided $20 million
for some long lead-time materials toward a second ship. However, this
falls well short of the funding needed to satisfy the Coast Guard's
commitment to acquiring six polar icebreakers and more funding is
undoubtedly needed to accomplish this goal.
I imagine you recognize the importance of the Coast Guard's ability
to provide this vital icebreaking services to protect our Nation's
security and economic prosperity. Would you agree that it is critical
to continue this vital acquisition?
Answer. Operating exclusively in the inland space of the lower 48
states I have to admit this is not ny area of expertise. My opinion is
that this is a needed tool for our countries security and I support the
coast guards efforts in this space.
Question 5. What are the potential consequences of failing to fully
fund the Coast Guard's icebreaker acquisition?
Answer. I would assume advanced threats from other nations. The
Coast Guard does a great job of policing our waters and defending the
USA's security interests.
______
Response to Written Questions Submitted by Hon. Maria Cantwell to
Berit Eriksson
Question 1. Fostering Growth in Number of U.S. Mariners, Workforce
Training. The maritime industry contributes $21 billion to Washington
state's economy and supports nearly 70,000 jobs. Yet, the maritime
sector is facing a serious workforce shortage.
According to a 2013 report, the average age of the maritime
workforce in Washington was over 54 years old.
Maritime academies and schools, such as at Seattle Central College,
provide important vocational education and training to help develop
future mariners.
In your view, what can be done to increase the number of mariners
and why is it important that we focus on this issue now?
Answer. In my view, to increase the number of U.S. mariners would
be a greater availability of entry level unlicensed positions available
on Jones Act impacted ships. Currently the U.S. Merchant Marine Academy
as well as the State Maritime Academies do a very good job in producing
entry level officers. Unfortunately, the unlicensed deck and engine
entry level needs are largely overlooked and poorly understood. This is
probably due to when panels are asked about training issues the
panelists are often from both civilian and military officer ranks. It
is mainly their perspective that is being presented.
Todays unlicensed mariners are greatly impacted by STCW regulatory
training requirements and without entry level positions there are VERY
few opportunities to accrue the sea time needed to advance to Able
Seaman or QMED. Without entry level training positions, we cannot
create enough unlicensed U.S. mariners to replace a rapidly ageing
workforce to sail in commercial trades or serve in support of our
military at sea. The unlicensed mariner is just as vital to the mission
as the licensed officer.
There are two possible solutions that I would suggest. One, on a
vessel's Certificate of Inspection, the Coast Guard would require the
manning level to include one Ordinary Seaman and one Wiper. This is
currently not the case and may need a legislative solution. Two,
revisit HR 2651 ``The Maritime Workforce Development Act'' that passed
the House in the 1st session of the 111th congress. This legislation
would provide much needed loans and grants for developing and funding
unlicensed mariners as they move from entry level to licensed on an
``on-the-job'' pathway. The bill would need to be reviewed and updated
for today's maritime education environment.
All maritime education programs, community colleges, private or
union schools are constrained by the lack of at sea entry level
positions.
Question 2. Fostering Growth in Number of U.S. Mariners, Apprentice
Programs and Training. I have been working on a bill with Senator
Collins that would allow retiring workforce to continue to work and
mentor our next generation. This is particularly important in the
trades, where skills and knowledge that workers have learned over a
lifetime could be passed to the next generation.
How would this type of program benefit the maritime workforce?
Answer. This is a great idea. Both Secondary and Post-Secondary
maritime programs can benefit from having instructors with maritime
experience. The now closed (due to lack of funding) Mar Vista High
School maritime program in Southern California had retired U.S. Coast
Guard and Navy Bosun Mates as instructors. The kids respected them,
were eager to learn and graduated with Merchant Marine Credentials. The
instructors will probably need to acquire some sort of instructor
certification from the State Dept of Education or whoever does that.
Question 3. How can the Federal Government better support training,
recruitment and job growth in this critical sector?
Answer. Besides restating my answer to Question 1, I find merit in
USDOT's exploration of decreasing the cost of bringing a ship under
U.S. flag and requiring that certain energy export commodities such as
oil or LNG be carried on U.S. flag vessels.
Also, the Carl Perkins Act (Career and Technical Education) is
requiring a sector strategy approach to CTE and having Maritime (at sea
and in ship building) CTE education as one of the sector priorities.
The State level Perkins Plans (under U.S. Dept of ED) must now
coordinate with the State level Workforce Plans (under USDOL's WIOA) in
developing sector strategies. Perhaps some language in both of those
program future reauthorizations may help.
Question 4. National Maritime Strategy. The maritime industry is
critically important to our economy, but it also plays a vital role
during times of national crisis, including military conflicts and
national emergencies. However, the industry faces challenges with fewer
ships, mariners and cargoes that impact its ability to support our
defense needs. Congress has called on the Department of Transportation
to complete a national maritime strategy to address these challenges,
and last year the Government Accountability Office report found that
the strategy needs to be completed expeditiously. Can you speak to the
importance of a national maritime strategy and why these challenges
must be addressed in the near-term?
Answer. The National Maritime Strategy needs to be completed so
there is a clear plan on maintaining and growing a merchant mariner
workforce to man the support fleet for our military force projection.
This must be addressed in the near term as the current workforce is
aging out quite rapidly and it takes several years to bring up an entry
level mariner to full competency. I anticipate that I will soon be
serving on the Marine Transportation Systems National Advisory
Committee (MTSNAC) where I may have an opportunity to provide input on
this project.
______
Response to Written Questions Submitted by Hon. Richard Blumenthal to
Berit Eriksson
Question 1. Multimodal investment to benefit ports. Freight--with
an emphasis on goods that move through our ports--took a big step
forward after passage of the FAST Act. Specifically, the bill provided
a total of $11 billion in dedicated freight funding over five years.
However, of that, only $1.13 billion is multimodal eligible. In 2018,
the American Association of Port Authorities identified more than $20
billion in multimodal funding needs for public port authorities alone
over the next decade. Do you consider ports to be a critical part of
our multimodal freight network?
Answer. Yes. Ports are an integral link for international trade.
Millions of tons of import/export cargo are moved efficiently across
the docks of U.S. ports daily creating thousands of jobs throughout the
multimodal system. Ports are a critical link for our manufacturing and
agricultural exporters to reach international markets with their
products. This does come with challenges for instance the much needed
Harbor Maintenance Tax creates crucial funding needed to keep our ports
efficient but also has the unintended consequence of diverting import
cargo from ports located near international borders to ports of other
countries limiting much needed capacity and equipment for U.S.
exporters in affected regions and ``shipping'' U.S. jobs to foreign
countries.
Question 2. Could investing in multimodal facilities at our ports
reduce highway congestion, increase supply chain efficiency, and save
money through reduced delays?
Answer. Yes. Getting cargo to and to and from ports in the ``last
mile'' efficiently is key to importers and exporters success. Highway
projects that improve the ``last mile'' pay huge dividends in the
multimodal system. In addition, funding rail projects such as grade
separations throughout the rail system not only reduces highway
congestion at ports but improves the impacts that freight have on
communities throughout the system.
Question 3. Do you support increasing the amount of multimodal
eligible funding in a reauthorization of the FAST Act?
Answer. Yes
Question 4. The Coast Guard's polar icebreaker fleet. The Coast
Guard has stated that it needs at least three heavy icebreakers and
three medium icebreakers to ensure continued access to the polar
regions. Updating our fleet is essential to maintaining a national
presence, the safety and security of the maritime transportation
system, as well as coordinating national search and rescue efforts in
colder regions.
Congress recently passed the Consolidated Appropriations Act of
2019, which provided $655 million for construction of the first Coast
Guard Polar Security Cutter. In addition, the bill provided $20 million
for some long lead-time materials toward a second ship. However, this
falls well short of the funding needed to satisfy the Coast Guard's
commitment to acquiring six polar icebreakers and more funding is
undoubtedly needed to accomplish this goal.
I imagine you recognize the importance of the Coast Guard's ability
to provide this vital icebreaking services to protect our Nation's
security and economic prosperity. Would you agree that it is critical
to continue this vital acquisition?
Answer. Yes. Having lived and sailed in Alaska for 21 years prior
to moving to Washington, I am very much in agreement on the need for
more icebreakers. I am very opposed to the idea of leasing or
chartering foreign owned icebreakers. We might as well lease our navy
warships from a foreign power in that case.
Question 5. What are the potential consequences of failing to fully
fund the Coast Guard's icebreaker acquisition?
Answer. The U.S. ability to keep a position of superiority in the
opening of Arctic sea lanes is of great concern. Even Finland has
greater capacity/modernity then we do. The worst case consequences
would be the control of arctic shipping by Russia and China which would
further maritime tensions between the U.S. and these countries.
[all]