[H.N.S.C. No. 104-31] Y 4.SE2/1 A: 995-96/31 The Annual Authorization for the Pa... THE ANNUAL AUTHUKlZAlluN FOR THE PANAMA CANAL COMMISSION AND THE ANNUAL AUTHORIZATION FOR THE UNITED STATES MARITIME ADMINIS- TRATION HEARING BEFORE THE SPECIAL OVERSIGHT PANEL ON THE MERCHANT MARINE OF THE COMMITTEE ON NATIONAL SECURITY HOUSE OF REPRESENTATIVES ONE HUNDRED FOURTH CONGRESS SECOND SESSION HEARINGS HELD MARCH 5, 1996 U.S. GOVERNMENT PRINTING OFFICE WASHINGTON 1997 : ForsalebytheU.S.GovernmentPrintingOffice SuperintendentofDocuments.CongressionalSalesOffice,Washington,DC 20402 ISBN 0-16-054397-5 [H.N.S.C. No. 104-31] Y 4.SE 2/1 A: 995-96/31 The Annual Authorization for the Pa... THE ANNUAL AUlliUKlZAlUjN FOR THE PANAMA CANAL COMMISSION AND THE ANNUAL AUTHORIZATION FOR THE UNITED STATES MARITIME ADMINIS- TRATION HEARING BEFORE THE SPECIAL OVERSIGHT PANEL ON THE MERCHANT MARINE OF THE COMMITTEE ON NATIONAL SECURITY HOUSE OF REPRESENTATIVES ONE HUNDRED FOURTH CONGRESS SECOND SESSION HEARINGS HELD MARCH 5, 1996 to U.S. GOVERNMENT PRINTING OFFICE WASHINGTON 1997 : ForsalebytheU.S.GovernmentPrintingOffice SuperintendentofDocuments.CongressionalSalesOffice,Washington,DC 20402 ISBN 0-16-054397-5 SPECIAL OVERSIGHT PANEL ON THE MERCHANT MARINE HERBERT H. BATEMAN, Virginia, Chairman RANDY "DUKE" CUNNINGHAM, California GENE TAYLOR, Mississippi DUNCAN HUNTER, California OWEN PICKETT, Virginia CURT WELDON, Pennsylvania NEIL ABERCROMBIE, Hawaii JIM SAXTON, New Jersey JANE HARMAN, California JOE SCARBOROUGH, Florida PATRICK J. KENNEDY, Rhode Island JAMES B. LONGLEY, JR., Maine WILLIAM J. JEFFERSON, Louisiana TILLIE K. FOWLER, Florida Hugh N. Johnston, Jr., Counsel MARCELLA A. WILDING StaffAssistant (II) CONTENTS STATEMENTS PRESENTED BY MEMBERS OF CONGRESS Page Bateman Hon. Herbert H., a Representative from Virginia, Chairman, Special Oversight Panel on the Merchant Marines 1 PRINCIPAL WITNESSES WHO APPEARED IN PERSON OR SUBMITTED WRITTEN STATEMENTS Herberger, Adm. Albert H., Maritime Administration, U.S. Department of Transportation: Statement 3 Prepared statement 5 Reeder, Joe E., Chairman, Board of Directors, Panama Canal Commission: Statement 36 Prepared statement 42 Guardia, Gilberto, Administrator, Panama Canal Commission: Statement 58 Prepared statement 61 (III) ANNUAL AUTHORIZATION OF THE PANAMA CANAL COM- MISSION AND THE ANNUAL AUTHORIZATION FOR THE UNITED STATES MARITIME ADMINISTRATION House of Representatives, Committee on National Security, Special Oversight Panel on the Merchant Marine, Washington, DC, Tuesday, March 5, 1996. The panel met, pursuant to notice, at 10 a.m., in room 2337, Ray- burn House Office Building, Hon. Herbert H. Bateman (chairman ofthe panel) presiding. OPENING STATEMENT OF HON. HERBERT H. BATEMAN, A REP- RESENTATIVE FROM VIRGINIA, CHAIRMAN, SPECIAL OVER- SIGHT PANEL ON THE MERCHANT MARINE Mr. Bateman. The panel will come to order. In today's hearing we will cover two very important topics, the annual authorization for the Panama Canal Commission and the annual authorization for the U.S. Maritime Administration. As many in the audience know, the National Security Committee assumed legislative and budget authority over these two agencies with the House rules change in 1995. I apologize for having to have this hearing so early in the cycle when all ofthe budget data is not available. However, please be as- sured that this material will be provided as soon as it is released. Nevertheless, I believe there are a sufficient number of issues that need to be examined that it makes sense to proceed with this hearing at this time. For both of these agencies, the level of the operational budget has not been a point of contention. I believe that will be the case again this year. In the case of the Maritime Administration, the big issue this year will hopefully be the implementation ofthe Maritime Security Act of 1995. I hope to be assured today that this agency is fully prepared for what is to be a historic event. We on this panel fought hard and successfully to get this legislation approved by the House. Many doubted whether it could be done. I would be remiss at this point if I did not commend the mem- bers of the panel for their support during the drafting stage and during the floor debate. The range of support from all elements of the political spectrum was truly amazing. I understand and indeed hope the Senate will shortly follow suit. In the case of the Panama Canal Commission, we had a similar success story. This panel worked closely with the Administration and the Canal Commission to develop and pass legislation that has been stalled in the Congress. Most notably, we were successful in converting the Canal Commission to a private Government corpora- (l) tion which is essential if the transition to Panamanian control is to be successful. We made a number of other important changes. That was but a first step. I am advised that the Administration will again be seeking changes to the organic statutes. While I realize that the Office of Management and Budget [OMBJ has yet to clear on a final pro- posal, I hope that the witnesses today can touch on the need for additional legislative changes. I understand that we can expect an- other package next year that will relate to procurement issues. Please be assured, and I think I speak for all the members of the panel, that we want the transition to go as smoothly as humanly possible. We on this panel want to facilitate that effort. At this point I would like to welcome the witnesses who have been invited to appear before us today. First, I want to extend a very personal welcome to the Honorable Gilberto Guardia, the Ad- ministrator of the Panama Canal Commission, and of course to Secretary Reeder who is the Chairman of the Board of Directors of the Commission. Mr. Guardia, I trust your visit to this country has been a pleas- ant one. The one thing I would ask is that you not bring us any more snow. I understand that we have additional individuals who will be at the witness table and I will leave it to you to introduce those persons. Finally, I would like to again welcome Admiral Herberger, the Administrator of the U.S. Maritime Administration. From my van- tage point, Admiral, you are doing an outstanding job and you are to be commended. I truly believe that we are as close as we have ever been to getting maritime reform through the Congress. And I want to express my personal thanks for your support and the sup- port of your staff over the past several months. We have produced a bill which will hopefully stop the hemorrhaging that has depleted our U.S. fleet and we have done it with very tight fiscal con- straints. Again thank you for your help. I would like to now call on our ranking member of the panel, the Honorable Gene Taylor of Mississippi for any remarks he may choose to make. But let me say to all of those who are present today that as chairman I could not have a better ranking member. Our efforts have been truly bipartisan and whatever success we have had is directly related to your assistance and support. Gene, I recognize you for any comments you choose to make. Mr. Taylor. Thank you, Mr. Chairman. It is always the remarks from someone immediately prior to the meeting, I would think that if the majority in the House of Representatives could shift back from the agenda, this panel would not change one iota. I think you have said everything that needs to be said. We have had some peo- ple come, in the case of Mr. Guardia, from thousands of miles away, and I think we ought to give them the opportunity to talk to us rather than the other way around. Thank you very much. Mr. Bateman. Thank you, Mr. Taylor. Admiral Herberger, we would be happy to hear from you at this time. STATEMENT OF ADM. ALBERT HERBERGER, MARITIME J. ADMINISTRATION, U.S. DEPARTMENT OF TRANSPORTATION Admiral HERBERGER. Mr. Chairman and members of the panel, I welcome the opportunity to be with you today to discuss the Mari- time Administration's programs for fiscal year 1997. As you know, the specific figures comprising the budget request will be transmit- ted to the Congress when the President's budget is submitted on March 18. First, I would like to thank the members ofthe Merchant Marine Panel and the Committee on National Security for all their support in passing H.R. 1350, the Maritime Security Act. I would especially like to thank you, Mr. Chairman, Vice Chairman Cunningham, and Congressman Taylor, for your bipartisan leadership, so critical to the passage in the House. Senate action on this legislation is pend- ing. I will highlight some of the Maritime Administration [MARAD's] accomplishments in fiscal year 1995 and fiscal year 1996 as an in- troductio—n to our fiscal year 1997 request. Title XI loan guarantee program since enactment of the National Shipbuilding Initiative MARAD in 1993, has approved over $1.5 billion of title XI financ- ing for 144 vessels and three shipyard modernization projects as of February 23, 1996. Recent approvals include the $247 million Hvide Van Ommeren Tanker project involving five double hull tankers to be built by Newport News Shipbuilding and operated in the domestic trade, and the Dannebrog project for two double hull chemical tankers to be built by the Alabama Shipyard. These projects and others total- ing 15 oceangoing ships represent a major breakthrough by U.S. shipyards back into the commercial shipbuilding market. MARAD's three approvals for shipyards' modernization included financing National Steel and Shipbuilding Company's [NASSCOJ capital improvement project. The $22.7 million title XI loan guar- antee assisted NASSCO in modernizing the yard. This moderniza- tion, along with Avondale's title XI modernization project, will en- able improved productivity on existing Navy work, resulting in a savings to the Government estimated to be $37.5 million, as well as improved capability for commerc—ial ship work. The Maritime Security Program as you know, H.R. 1350 will es- tablish a new Maritime Security Program [MSP1 under title VI of the 1936 Merchant Marine Act. This 10-year program with annual appropriations will provide support for up to 47 U.S.-flag vessels in foreign commercial trade of the United States. Payments are up to 50 percent less per vessel than payments made under the existing operating differential subsidy program. It should be noted that of critical importance to future sealift contingencies is the availability oftrained mariners to crew the Government-controlled fleet. A major element of the Maritime Security Program [MSPJ is an Emergency Preparedness Program. MARAD, together with the U.S. Transportation Command and U.S. carriers, is currently engaged in a 1-year prototype program called the Voluntary Intermodal Sealift Agreement [VISA] which will be the Emergency Prepared- ness Program. VISA has been developed using lessons learned from the Persian Gulf conflict. The objective of VISA is to facilitate De- partment of Defense [DODJ use of existing commercial intermodal transportation systems. The VISA program takes advantage of the U.S. commercial companies multibillion dollar capital base and its modern door-to-door transpor—tation capabilities. The Ready Reserve Force MARAD's National Defense Reserve Fleet [NDRFJ is now funded by the Department of Defense Na- tional Defense Sealift Fund. There are 220 ships in the NDRF of which 92 are Ready Reserve Fleet [RRF] ships. The RRF is geared to support rapid worldwide deployment of U.S. military forces and its operations have been outstanding. We recently deployed two ships in the RRF for Operations Joint Endeavor and Quicklift to assist the Bosnian peacekeeping effort. Our activation time response averaged only 2 days. MARAD's operations and training activities include maritime education and training and operating program expenses. The mari- time education and training program includes the cost of officer training at the U.S. Merchant Marine Academy at Kings Point and support for six State academies. America's economic and national security interests depend more and more on a modern, integrated, efficient intermodal transpor- tation system and shipyard and engineering management. As it has in the past, the United States depends on new well-educated leaders to operate and manage its increasingly complex intermodal transportation systems and shipyards. Critical Federal financial support is also provided to the six State maritime schools operated by California, Maine, Massachusetts, Great Lakes, New York, and Texas. As in the case of the Merchant Marine Academy, the State schools educate professional maritime industry graduates who ultimately become leaders in our vital mar- itime community. Another area that needs our attention, waterborne cargo and port facilities are extremely important to our economy and security interests. Waterborne transportation is inherently intermodal in the movement offreight from origin to final destination. Ports must be effectively linked with land-based modes of rail, road, and air to form a truly productive intermodal transportation system and to serve our military needs when needed. We will be working to improve port waterside and landside ac- cess to our ports and the intermodal connectors vital to our Na- tion's freight movements, our economic growth, and national secu- rity. Mr. Chairman, in summary, the Maritime Administration's fiscal year 1997 budget request will reflect the President's commitment to our Nation's maritime industry. The budget will seek to main- tain support for sealift readiness, the continuation of a U.S.-flag fleet, strong commercial shipbuilding, maritime education and training, and other maritime support programs. This concludes my prepared statement. I will be pleased to an- swer any questions you may have. [The prepared statement ofAdmiral Herberger follows:]