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THE NEEDS OF THE U.S. WATERWAYS TRANSPORTATION SYSTEM
WEDNESDAY, JULY 29, 1998
U.S. House of Representatives,
Subcommittee on Coast Guard and Maritime Transportation,
Committee on Transportation and Infrastructure,
Washington, D.C.
The subcommittee met, pursuant to notice, at 10:15 a.m., in room 2167, Rayburn House Office Building, Hon. Wayne Gilchrest (chairman of the subcommittee) presiding.
Mr. GILCHREST. Good morning everyone. The Coast Guard and Maritime Transportation Subcommittee hearing will come to order. We appreciate such a good crowd on this early, warm, humid morning in the Nation's Capitol. We also look forward to the testimony in hopes of learning a little bit more about the trends in the maritime industry in a global sense.
I'm pleased to welcome everyone to this hearing today to consider answers to one of the most important questions facing our country. Are our ports and waterways prepared to handle the huge increase in waterborne trade expected in the next century? Our witnesses view this question from different perspectives and offer different solutions to meet the needs of commerce in the 21st century. Although we have posed this issue from different angles, our goal is the same: to manage our waterways in a safe and efficient manner and to meet the needs of all recreational and commercial users of these waterways.
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And, even though we don't have the scientific community representing the green ecology here this morning, I would assume and to some extent expect all of us, since we do live on this same fragile planet together, regardless of our roles, jurisdiction, and responsibilities, I think it's—especially at the beginning of this new century—incumbent upon each of us to have some sense of understanding of the complexity of the biological functions that are inherent to the Nation's, to this world's, oceans and how we all have to have some understanding of that in order to be responsible citizens and make judgments and decisions that future generations will benefit from.
By the year 2020, experts expect U.S. international trade to double or even triple. Excluding Mexico and Canada, 95 percent of overseas trade is shipped by sea and 14 percent of U.S. intercity freight is transported by water. We must prepare our marine transportation systems for the upcoming surge in international trade. I commend the Administration for holding a series of meetings around the country to allow users of the waterways to offer their views of the current and future needs of our Nation's marine transportation system. The information gathered in these sessions will be used at a national conference this fall to assess the information gathered during the regional meetings. I look forward to hearing the Administration's witnesses concerning the insights that they have gained from these meetings, as well as the information's possible effects on future Federal transportation policy.
The needs of our waterway systems are so great that we could only begin to discuss them today. I intend to hold a series of hearings on this topic to allow representatives from all waterway user groups to have an opportunity to offer their perspectives and solutions to the problems facing the marine transportation system. Finally, I am pleased to be holding this hearing to discuss the future of U.S. marine transportation systems because we hope that we can develop fresh approaches to meet the waterways and transportation needs of this country. This is the situation in which the solutions of the past may simply be totally insufficient to the great challenges that we face in the future.
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[The prepared statement Mr. Shuster follows:]
[Insert here.]
Mr. GILCHREST. I am now pleased to recognize the gentleman from Tennessee, Mr. Clement.
Mr. CLEMENT. Thank you, Mr. Chairman. As you know, this particular hearing is focused on the future needs for the U.S. waterway transportation system. It is projected that the U.S. foreign oceanborne trade is going to be more than double between now and the year 2020. To meet this growing demand on our waterways is going to require planning and investment by the Federal Government, State and local governments, ports, and private interests.
As waterborne commerce and ships continue to grow, so too must our ports and land-based infrastructure. We must be able to move more containers per hour off ships, decrease the amount of time that they sit on the dock, and get them on the railroad or interstate highway system to find their final destination quicker than ever before.
I've been in Congress now for over 10 years. We've all heard about the problems with dredging our waterways. We've heard about the problems getting truck and rail traffic off our city streets and into dedicated cargo corridors. We've heard about competing interest of users of our waterways, including cargo interests, fishing vessel interests, and recreational boating interests.
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What I want to hear at today's hearing is what we are going to do to solve these problems. What can be done to increase container unloading from 50 moves per hour to 140 moves per hour? What can be done to ensure that more vessels can use our waterways safely? What can be done to speed up the transfer and shipment of cargoes from our ports and onto our intermodal transportation system? What is the role of the Federal Government in increasing the capacity of our transportation system to handle this growth? And to what extent will the private sector accomplish these goals, much like when APL and Sealand invested the double-stack train system to increase the capacity of our rail systems to move cargoes out of our ports?
Mr. Chairman, I don't believe that we need to hear about the status of ports and problems in our intermodal system. We need to hear about the solutions to these problems. I'm hopeful that today's witnesses will be able to recommend concrete steps for this committee to take to ensure that the United States is able to accommodate the projected growth in our international marine transportation system over the next 20 years.
Mr. GILCHREST. Thank you, Mr. Clement. Mr. Bateman.
Mr. BATEMAN. Thank you, Mr. Chairman. I just dropped in to manifest my considerable interest in the subject of this hearing. We are, through these hearings, exploring, I think, one of the most vital, but often taken for granted aspects about our transportation system. So I commend you for holding the hearings. I'm not going to able to tarry as long as I would like, but I read fairly well and I'm willing to do so and I have the package of all your statements.
So thank you all and I hope, during the course of your discussions, you might even get into an area of increasingly great importance to the maritime administration and to the navy, and that's the matter of how we get rid of ships that have got to be scrapped. It's a very prosaic, pedestrian kind of issue, but it becomes increasingly important.
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Thank you, Mr. Chairman.
Mr. GILCHREST. Thank you, Mr. Bateman. If you're still here when the questions come up, that would be a good question to ask. Mr. Johnson.
Mr. JOHNSON. Welcome again, gentleman. The first three witnesses are Admiral James Loy, commandant of the U.S. Coast Guard; John Graykowski, acting administrator, Maritime Administration; and Charles Hess, chief, operations division, Directorate of Civil Works, United States Army Corps of Engineers. Admiral Loy, you may go first, sir.
TESTIMONY OF ADMIRAL JAMES LOY, COMMANDANT, U.S. COAST GUARD; JOHN GRAYKOWSKI, ACTING ADMINISTRATOR, U.S. MARITIME ADMINISTRATION; AND CHARLES HESS, CHIEF OPERATIONS DIVISION, DIRECTORATE OF CIVIL WORKS, UNITED STATES ARMY CORPS OF ENGINEERS
Admiral LOY. Good morning, Mr. Chairman. Thank you very much. I'll submit my full statement for the record and just focus on a couple of points, if I might, in my opening statement and then listen to my colleagues on the panel.
I think recognition of the challenge is the first order of solution. This hearing gives us the opportunity to raise the visibility of these issues for all of America, and especially for those of us who are immersed in the business.
I'd like to just make four points through the course of my opening statement. One, to highlight the significance of the issue; you and Mr. Clement have already begun the process of doing that. Two, to induce a sense of urgency to forge a national vision in terms of the overall situation. Three, to quickly review our efforts to date and the immediate plans for this November's conference and what it might hold for us as a beginning point for leadership in the Nation. And, fourth, just to note a couple of things that the Committee itself might do as Secretary Slater steps out smartly to provide leadership in this area.
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First, as to significance, you mentioned a number of things, sir. Let me just add a couple of other facts. The United States remains an island nation, in 1998, as it was at its birth. 95 percent of the tonnage of what serves this Nation in terms of export-import trade comes and goes by sea. Ports, waterways, and the intermodal connections to terrestrial systems are crucial links to our national transportation system. And we, in the maritime business, have no desire to be the weak link in that chain of events that gets cargo from point A to point B.
They're about a $78 billion contribution to the GDP of America on an annual basis. The maritime transportation system provides about 16 million jobs to the economy. TEA 21, recently passed, established a national plan for highways and transit that we can all gauge our activities around over the course of the next 6 years. I am of the mind that a maritime parallel to that kind of legislation with its national vision is needed.
Everyone from farmers to manufacturers depends on the maritime end of our national transportation system to deliver their goods to market. The trends are astonishing: whether they're demographic, which suggests about a 50 percent population growth over the course of the next 20 years globally, or congestion trends, which you cited in your opening statement, sir, associated with recreational passenger ferries, and a cruise ship explosion—that's ''explosion''in terms of numbers, not actual cruise ship explosions. Over the next 5 years, we'll see, perhaps a 15 percent increase in tanker traffic, a 15 percent increase in bulk carrier traffic, and as much as a 30 percent increase in the comings and goings of containers in our ports and waterways.
Over two billion metric tons of cargo move on an annual basis worth over $1 trillion. Now that's an astonishing amount of trade. 90 million passengers sailed aboard cruise ships this past year and we still are looking at over 25,000 fishing vessels that ply our waters, as well as tens of millions of recreational boats; with the demographic profiles cited earlier, these things are only going to become much more contributive to the congestion of our waterways. So that adds a sense of significance to this topic.
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Second, the urgency of need. Our regional listening sessions that you cited noted a stressed system. We are watching observed losses of business to more efficient and more effective ports, whether they be Halifax or Freeport or Vancouver. There are national security implications associated with these issues. Only a couple of years ago, we watched as over 200 ships were mobilized to carry 95 percent of the raw materials to aid the United States forces in the Persian Gulf.
A recent visit by a Maersk liner to the Port of New York and New Jersey offered the opportunity to see the future. A beautiful new ship carrying 6,000 TEUs, when fully loaded, with a draft of about 52 feet. That ship can't get into any port on the east coast of the United States when fully loaded. So there are a wide variety of issues that point to the urgency of the need to us discuss this topic.
Third, efforts to date. The listening sessions revealed the following: the desire for a national vision on the part of all the attendees so that we all have a sense of leadership and where we're going; a desire for partnering on the local and State levels and with industry as we develop solutions to these issues; and the need to incorporate technology in the ports and waterways of the Nation. We heard concerns about national security and secure borders, and questions that the Critical Infrastructure Study poses for the Nation.
Our November conference is designed to take four basic themes: security, safety, global competitiveness, and environmental soundness. And write those things down so that we can develop a task orientation that Mr. Clement was speaking about in terms of specific solutions. We look forward to partnering with the Congress, focusing visibility on these issues, and look forward to working with you through the course of the next year, sir.
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Mr. GILCHREST. Thank you, Admiral. Mr. Graykowski.
Mr. GRAYKOWSKI. Thank you, Mr. Chairman. I want to echo Admiral Loy's comments. We are speaking as one DOT here and, indeed, that serves as a backdrop to the process we've initiated here. I also want to thank you for this opportunity and if I leave you with one message, it's an open and sincere invitation, for you, this committee, and, indeed the whole Congress, to join us as we move forward because we've begun a very unique process. I'll address Mr. Clement's comments here.
We had seven regional listening sessions. We heard from over 300 people and, contrary to the normal sort of joke, if you will, of being from the government and being here to help you and prescribe and dictate approaches, I think we really created an atmosphere and presented ourselves as not only the Department of Transportation, but a wide array of Federal agencies to the maritime community and said, ''You tell us what you need.'' '' What's on your mind?'' '' What are your biggest concerns?'' '' How do you see the future and where can we, indeed, help and join with you?''
I, for one, was very surprised because what we elicited in the course of that process were thoughtful, well-intentioned and well-reasoned concerns, comments, and discussions about the waterborne transportation system and the maritime community generally. I think that presents a tremendous opportunity for all of us in government. We've got a ready, willing, and able constituency out there that's saying, Just give us a focal point. Give us a means of coordination and we're going to run with it. We understand, as a community, we have to take the biggest step; we have to make the investments; we have to translate thoughts into the real actions down at the pavement level or the dockside levels. But my invitation is extended because I don't think we can avoid, as the Admiral indicated, the opportunity nor the challenges that we're facing here.
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You speak of world trade doubling or perhaps tripling. Put that in terms of practical realities. Right now, I think that in the Port of L.A. and Long Beach, today, you've got 20,000 trucks and 30 trains moving each and every day. And that's just one port out of all the ports in the country. If trade triples by the year 2020, that one port, is going to have to move 50,000 trucks and 100 trains every day just to keep up with everything that's moving in and out.
And, lest we forget, we can't just focus on boxes. While they're easy to see and easy to describe much of what comes in and out of this country is not containerized; most is bulk cargoes and we have a similar need on the side of pipelines and all of the facilities that handle grain, bulk dry commodities, and bulk liquid commodities. We just passed a major investment and took a big step, with your help and support and the whole Congress in the form of the Transportation Equity Act for the 21st Century (TEA–21). The whole emphasis there the creation of an intermodal transportation system that's world-class and going to carry this country forward and meet the challenges of world trade.
But unless we turn our attention to the connections that exist today between our continental United States and the rest of the world, we aren't addressing the Nation's full potential. Are returns going to be 7 percent versus 15, to put it in financial terms. What we're arguing and what our constituents, in the community are arguing for is that sort of focus. It's not just dollars and cents; it's making government work smart and work right. That is the predicate for what we've initiated here with a broad array of Federal agencies, which has struck a responsive chord.
For example, in the Port of Oakland, we were informed that one box has to make three separate stops before it clears the port—Customs, FDA, and I think Agriculture—in three different places. That translates into dollars and time and inefficiency. We can make improvements of that nature, without major investments. Again, it's process.
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The national security side cannot be underestimated. We're a close partner with the United States Transportation Command. As you all well know, we pulled most of our force structure back in the United States on the assumption that, when necessary we're going to deploy to far regions in the world. We can't meet those commitments unless all of us pay attention, once again, to those potential choke points. In moving material, be it trade and commercial cargoes or tanks, ammunition and what we need to support our commitments abroad, it all comes down to one thing: making the system work efficiently and smoothly.
Our challenge if you will, but with a tremendous opportunity for the country to benefit, is creating this truly seamless intermodal transportation system. Mr. Clements, that's where we're going, but I think what we're going to look to is using our partners out there to help us craft the way we want to go because there are phenomenally well-intentioned and thoughtful people out there that will be far more productive in our process as we go forward.
Thank you.
Mr. GILCHREST. Thank you, Mr. Graykowski. Next is Mr. Hess.
Mr. HESS. Thank you. Mr. Chairman, members of the subcommittee, I'm Charles Hess, chief of the operations division, Directorate of Civil Works, U.S. Army Corps of Engineers. I thank you for this opportunity to testify on the U.S. Army Corps of Engineers involvement in the future needs of our marine transportation system. I would ask that my complete testimony be submitted for the record and, in view of the time constraints, I would offer my thoughts to amplify some of the points raised by my colleagues here on this panel this morning.
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To set the perspective, I think it's important to note the history associated with this, but the history also sort of sets the tone for where we're going in the future in terms of the urgency, again, that Admiral Loy spoke of. The Corps has enjoyed a long history of development and management of navigation projects, as you are well aware. In fact, the Survey Act of 1824 established the U.S. Army Corps of Engineers role as the Federal Water Resource Agency for the primary mission of constructing and maintaining a safe, reliable, and economically efficient navigation system. For two centuries, the Corps has been committed to providing that safe, reliable, and efficient waterborne transportation system. But, as my colleagues has alluded to, that challenge is becoming increasingly difficult to keep up with.
From the initial congressional authorization in 1824 of $30,000 for the planning, improving, and maintaining of all navigable waterways in the United States, the Corp navigation mission now encompasses a capital stock value of approximately $31.5 billion with an annual budget for planning, engineering, construction, and operation exceeding $1.4 billion. From the original mission of removing sand bars from the Ohio River and snags on the Mississippi River, the scope of improvements has grown to include providing waterway channels, anchorages, turning basins, locks and dams, harbor areas, protective jetties and breakwaters to ensure that adequate dimensions for safe and efficient movement of vessels is accomplished.
There are approximately 25,000 miles of commercially navigable channels and waterways in the United States. Of this total, almost 11,000 miles constitute what is known as the commercial fuel-taxed inland waterway system. Vessel operators on this system pay into the Inland Waterways Trust Fund, which is used to fund half the cost of new construction and major rehabilitation of inland waterway infrastructure. The annual Federal operation and maintenance expenditures is approximates $480 million, while recent annual capital outlays have ranged from $300 million in 1991 to $150 million in 1994.
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Again, to place some historical context on this infrastructure, of the 238 operating lock chambers at 192 lock sites on the currently operated inland waterway system, 9 of these locks are over 100 years old. By the year 2000, 46 percent of these operating locks will be over 50 years old including many of the heavily used locks on the upper Mississippi River and the Illinois River, again, indicating the sense of urgency to deal with the issue. Construction of new locks, with additional capacity and major rehabilitation of older locks, is essential to maintain the efficiency of the inland waterway system and maximize net transportation savings.
It has been estimated the queuing delays at the lock cost waterway operators on the order of $700 dollars per hour, increasing total transportation costs and diminishing economic benefits. Most locks with critical delay problems have larger replacement projects to eliminate lock delays either underway right now or in design. Others have system studies underway that will address lock capacity and rehabilitation needs over a 50-year time horizon to help prioritize our capital investment decisions for the waterway system after the year 2000.
With the construction costs of new locks and the rehabilitation expense of existing systems continuing to rise, the Corps has continued to seek ways to reduce these costs through innovative design and construction techniques. Construction alternatives that we have used, include modifying or eliminating project features, modifying our design criteria, in fact, offsite preparation and fabrication of structures such as cast-in-place dams and locks. Some of those projects are underway right now in our Great Lakes and Ohio River Division.
In addition to the inland navigation system, of course, the Corps maintains 926 ports and harbor projects for which operation and maintenance costs are recoverable from the Harbor Maintenance Trust Fund. The Corps maintains these projects are at annual average cost of about $500 million. The cost of improvements to these harbors to provide for increasing traffic and changes in ship sizes has averaged about $125 million annually. The existing deep-draft ports comprise the Nation's primary means of international trade, as was alluded to by Admiral Loy and Mr. Graykowski, with 95 percent of all overseas trade by tonnage passing through these ports.
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I would like, at this point in time, to focus on the interagency activities that we clearly see as being the essence of trying to address these problems. And, as Mr. Graykowski and Admiral Loy suggested, the listening sessions that were sponsored and offered under the diplomacy of the Department of Transportation have been very beneficial in allowing us collectively to hear the concerns of the constituents who use these systems.
The Corps has enjoyed a close working relationship with the Coast Guard and the Maritime Administration and continues to participate in several joint activities with them. Close interagency coordination and communication is critical to the success of our navigation mission. As you know, the Corps currently co-chairs a national dredging team and regional dredging teams with the Environmental Protection Agency and included as members of those teams are MARAD, Fish and Wildlife Service, the Department of Commerce, and National Oceanic and Atmospheric Administration. The Corps is a member of the Interagency Committee on Waterways Management, chaired by the Coast Guard. Our respective regional offices also participate in similar interagency working groups, which serve to establish lines of communication and opportunities for focusing on issues of mutual interest.
We have been able to realize many successful interagency-leveraged activities, including issues regarding safety and navigation. Joint participation with the Coast Guard in regard to establishment of global positioning system towers covering all of our waterways, participation in the port sponsored regional listening sessions, as I mentioned, participation in the transportation science and technology development conference, and serving on the Federal Water Transportation Statistics Working Group. We continue to support these interagency activities as a means to effectively utilize the best resources of all agencies and we see this as a critical means for ensuring future growth of our water-borne transportation systems in a cost-effective manner.
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In conclusion, Mr. Chairman, and members of the committee, the Corps is committed to its mission of providing safe, reliable, and efficient waterborne transportation systems for the movement of commerce, national security, and recreation. We continually seek opportunities to work with our partners to do such in a manner which, in fact, enhances the efficiency and economy to the public. We applaud the DOT initiative with the coastal and inland ports regional listening sessions and we look forward to continuing our participation in that process.
Thank you very much for this opportunity to testify.
Mr. GILCHREST. Thank you, Mr. Hess. I would like to start with you, Admiral. I guess there is no disagreement about the next 27 years increasing the size and the volume of the traffic on the Nation's waterways and on the high seas. Do you have any idea how many people are in the Coast Guard right now, Admiral?
Admiral LOY. We have about 35,000 active duty serving, 8,000 civilians, and are augmented by an 8,000 person strength reserve. Plus the Coast Guard Auxiliary, the volunteer group that's about 40,000 strong.
Mr. GILCHREST. Do you have too many people on active duty in the Coast Guard right now to deal with your responsibilities?
[Laughter.]
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Admiral LOY. Mr. Chairman, you're a kind gentleman. Absolutely not. We are overwhelmed with the responsibilities that have been mandated either by the Congress or by the President over the course of the last 20 years. My people are working as hard as they have ever worked. We are about the same size we were in 1966 and I could give you a list as long as my arm of things that have been added to our responsibilities over the course of those years.
So we are, if anything, understaffed and overemployed in terms of doing the Nation's business.
Mr. GILCHREST. If projections bear out and are true, and the amount of waterborne traffic increases to those estimates by the year 2020, what will the U.S. Coast Guard of 35,000 active duty do?
Admiral LOY. Sir, we have over the years always been in the business of prioritizing around those mandates in terms of what our strength is able to contribute its focus to. I don't see this, however, as some kind of explosion of people requirement on the part of the Coast Guard. I think there are tremendous efficiencies to be found just within that circle of—I put a couple of charts over here to refer to through the course of the hearing. The second one, sir, reflects just the Federal agencies and services that have been part of our listening session process and with whom we imagine we can achieve greater coordination, co——
Mr. GILCHREST. Agencies is going to be essential. Are you saying, then, that, if waterborne traffic doubles by the year 2020 to what it is now, from recreational to containers, to cargo, to bulk carriers, you name it, given you don't have any more area that you have to cover, as far as distance traveled, I would guess, but you'll have more ships, more recreational boaters, more people out there, likely, fishing. And it's not only the enforcement of the regulations that you were given the responsibility for, but it's the security of the country, both environmental security, drug interdiction, illegal immigrants, people smuggling weapons in, a whole range of things.
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I guess what I'm trying to ask, is there some sense, within the Coast Guard, that, within the near future, 10 or 20 years, even with the efficiencies with the other Federal agencies, is it your guess that you may need a larger Coast Guard?
Admiral LOY. There's no doubt about the implications as it relates to, for example, marine inspections of those ships as they're being built, as they visit our ports through the course of their trading with us over time. The harsh realities of congestion on those waterways to some degree can be dealt with in a technological fashion, but in others it goes simply to the ability of response capability being there when it's needed. I think there is an algorithm associated with prevention that we need to focus on to a great deal, keeping that prevention piece has an awful lot of Coast Guard inspectors associated with it, to keep bad things from happening. But we always have to be ready in the response end of our organization in the event whatever occurs occurs.
So, yes sir, I see the potential for us reasoning out the proper resource levels necessary to deal with the projections and trends that you're describing. Absolutely.
Mr. GILCHREST. Has any of this been raised, Mr. Graykowski, at any of these sessions? The amount of people necessary to enforce the safety, the environmental, and all the other security issues with this increased volume of traffic?
Mr. GRAYKOWSKI. I'm trying to think back. I don't think in specific reference to the Coast Guard alone. I think basically—
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Mr. GILCHREST. Well, to Customs, to the ports themselves?
Mr. GRAYKOWSKI. Sure. What's been raised is a concern, not only do we have the resources directed appropriately, we discovered a whole array of agencies governed or controlled in some way the waterway system. Are we talking together, I don't recall specifically dealing with do we have enough bodies here. I think the Admiral's correct. Clearly if you're going to have an almost exponential increase in the demand for ''government services,'' I think there's an inescapable need to look at a proper and effective allocation of resources to meet that demand.
Mr. GILCHREST. I guess especially in the whole intermodal system itself. If you have so many trains going out of the port that you described in California and that increases dramatically, are the number of Customs agents, the number of security people in and around the Nation's ports, will they have to increase? I have in one of my notes, when you were describing that, the expansion of the marine transportation system, do you see at any point the need for additional security? Additional security with Customs, Coast Guard, drug enforcement agents?
Mr. GRAYKOWSKI. Sure.
Mr. GILCHREST. Maybe even, at some point, Federal troops?
Mr. GRAYKOWSKI. But what we have—well, I don't think at this point we can walk all the way down that road. I think we haven't fully explored what we could get out of technology, not only today, but in the future. We're just now at the beginning of electronic data interchange literally, tracking an individual container from one point to the dock, to the ship—and not just on the ship, but the exact row—and slot that that container resides in, and, potentially to the dock in the United States and then onward on the train to Chicago or Iowa or whatever.
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That may relieve the manpower intensive side of cargo tracking, and assist in Customs clearance, because incorporated in that concept is the integrity of the cargo being protected. If we saw it being filled in Hong Kong and locked up with a seal, we know it's been not violated along the way. Customs doesn't have to examine that container.
But I would suggest, Mr. Chairman, that there's going to be demand; probably a greater demand on government resources on all fronts. But let's make sure we have the ability to tap into all of the potential offered by non-human, if you will, activities and capabilities.
Mr. GILCHREST. Do you see—apparently there's going to be, especially with underdeveloped countries becoming more affluent, improving their economies, increasing their buying power, producing products that they're beginning to sell—we only need to look, I suppose at the Asian markets and the Asian economy—during these seven session and, especially, I guess, your November meeting, do you see—and with the size of the ship, 52-foot draft, I wanted to ask, who's driving the dredging projects in our ports? Is it our domestic policy or the international steamship owners? How far do we go to accommodate them?
That was not my question, but since I asked it, I guess—
[Laughter.]
Well, I guess I should—I had another question, which you can answer both of them and for the sake of time I'll get them both out. That's one: Who drives our dredging projects? Maybe the Corps wants to answer that as well.
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But what about the number of ports? With the increased volume of trade, do we have enough ports? Will they become specialized places? Will there be certain amount—will New York Harbor be recognized as a particular unloading place for a particular product? Will Los Angeles be looked at as a specific type of port? San Diego as a specific type of port? Baltimore? Norfolk? All over the Northern Hemisphere? Will Latin America take up with increased development any trade away because they develop ports?
Admiral LOY. Sir, if I could take a stab at that. Initially, I think the answer to your question is yes, yes, yes, yes, and yes. The potential there is that it's very important for us to understand what the national vision is. What is it that we want to have as the national vision? The marketplace will dictate for us which ports on which coasts become megaports or become feeder ports. I think that's not what the Federal Government is going to be involved in. But it ought to happen with a national vision in mind that is a collaborative one from industry and from port authorities and from the labor side of the house and from the Federal agencies responsible for many of the facets of regulatory activity in those ports. So internal to that national vision, if it is forged in a collaborative manner, those players can play out their responsibilities together with the economic realities of the marketplace that will occur.
As to any given segment of that, dredging for example, of course, is very much a part of what the Army Corps is all about, in conjunction with the marketplace and those respective ports. From the Coast Guard's perspective, our contribution is all about safety, national security, and how we weigh into the algorithm of what that national vision can become.
The one chart over here was an effort simply on my part last night to portray—if you asked me today what the national vision was, it is that we can produce that kind of a set of ports, waterways, and intermodal connectors. They are safe. They are secure in a national security sense. They are environmentally sound and they allow the United States to remain competitive in the global marketplaces of the future.
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Mr. GILCHREST. I've really taken too much time, but I would, if my colleagues will just bear with me so Mr. Hess could comment and I will pass the time along. Mr. Hess.
Mr. HESS. Yes, Mr. Chairman, Admiral Loy, I think, has hit the nail on the head. The development of our ports really is focused on national economic benefits that can be generated from each one and different ports support different types of commodities, different commodity movements, different distribution processes. And so, consequently, each port is very unique and needs to stand, essentially, on its own merits in terms of the economic benefits that it provides the Nation.
So in our free market environment, the competition and market demand really are the primary determinants for port viability.
Mr. GILCHREST. Is it domestic economic benefits we're talking about here or international economic benefits? Because it seems to me if we expend a certain amount of money dredging, that's an economic benefit to a larger foreign steamship owner.
Mr. HESS. We're looking at all benefits in terms of recapturing of benefits associated with movement of commodities at our ports.
Mr. GILCHREST. So that's benefits to Maersk, but there's nothing wrong with that.
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Mr. HESS. We count the tonnages that are associated with port movements from all commodities from all sources. And that's captured in our statistics for commodity movements and that includes international trade from external sources, as well as domestic trade moving overseas.
Mr. GILCHREST. Is the Corps running into problems with dredge disposal sites, where to put the material? Or how to manage materials so you don't have acidic leaching or heavy metals leaching?
Mr. HESS. That is a principal issue that we are wrestling with. As you know, many ports are troubled by contaminated materials that require extensive investigation and cannot be easily disposed of. That is a cost that is certainly driving up our cost of maintaining port infrastructure.
Mr. GILCHREST. Is technology available now to manage those dredge disposal sites to prevent leaching? And are old dumping sites being relooked at to mitigate some of the problems of the past?
Mr. HESS. Certain technologies are available right now to deal with the materials that are contaminated. In the Port of New York and New Jersey, for example, we are looking at technologies to preclude the migration of the contaminated sediments. We are looking at new methodologies for confined disposal of materials so—such that the contaminants do not migrate. It is clearly a very sensitive issue because people are concerned about the quality of the material and what it does on the environment.
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But we believe that, ultimately, our efforts in terms of dredging research, looking at State and local sponsorship to help us identify the right areas to move the dredged material to and store it will help us provide long-term solutions to a problem which will increase, based upon the need to deepen ports.
Mr. GILCHREST. I'll close with this. There's a community in my district, a place called Pierce Creek where they're—the other question was is there such a thing as clean dredged material?
Mr. HESS. Yes, there is.
Mr. GILCHREST. But this particular site was, Pierce Creek site, was a disposal area for clean dredged material. The problem is when the material comes upland and you have oxygen mixed with material that was below the surface of the water for generations, it becomes very acidic and that—
Mr. HESS. Contributes to a problem.
Mr. GILCHREST. —leached into their wells and now this community cannot use their wells. And so I understand that there were some measures that could have been taken to relieve that problem as the disposal material was being put there, with lime or limestone periodically.
Mr. HESS. Or within a slurry wall or some type of containment.
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Mr. GILCHREST. Yes.
Mr. HESS. Yes, sir. In fact, we're aware of the Pierce Creek issue. As you suggest, it is a problem and it is one the Corps is familiar with. I know the State of Maryland Department of Environment and the Cecil County Maryland Health Department have serious concerns about the water quality there. Each residence has its own shallow well for potable water and the high sulfides, as you suggest, the irons and chlorides found in those locations do cause problems. It's not unique to that particular community and the concern that possible leachate from the dredged material is adversely influencing those shallow wells, we are cognizant of that.
We are studying those wells. The State of Maryland and the Environmental Service is looking at that. The study of the groundwater movement is being conducted by Black and Veich to determine whether or not that contaminant is impacting those wells. And the reports themselves were inconclusive. So we have looked—or, again, are looking at an independent study to review those reports and determine whether or not we can determine whether the contaminated material is, in fact, impacting those well conditions.
Mr. GILCHREST. Thank you, Mr. Hess. I see that you came well-prepared for that question.
[Laughter.]
And, poor Mr. Clement, he's a good man. But if you're put in my position and your own Maryland Department of the Environment makes a comment such as this, ''It is ludicrous to assume that these wells have not been contaminated by this disposal site.'' And I, as a member of Congress, must aggressively pursue that.
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Mr. HESS. I understand.
Mr. GILCHREST. Thank you very much. Mr. Clement.
Mr. CLEMENT. Thank you, Mr. Chairman. Admiral Loy, number one, congratulations on your new position as Commandant and I know, with your background, you can sure do a good job in accomplishing those missions and good to see Admiral North here as well.
Admiral LOY. Thank you, sir.
Mr. CLEMENT. Admiral Loy, what are the barriers to a master marine transportation system plan?
Admiral LOY. I think the barriers are, at least first, a willingness on the part of participants to understand the value of leveraging partnered kinds of activity, as opposed to isolated individual agency activity or even activity at the State and local industry level. If each of the elements on that wheel would pursue their own aspect of this business responsibly, I would offer to you that, at the end of the day, we would be miles short of the efficiencies and the effectiveness quotients that we want out of the other end of the system as a whole.
I think the truth lies in the word ''system.'' The maritime transportation system is a piece of the national transportation system. I am of the mind that the maritime end of that national system has had less attention paid to it universally over the course of the last 50 years. And in so noting, we are trying simply to raise the visibility. The Secretary's commitment here is to raise the visibility. We now have a terrestrial piece put together, pretty solidly, in the form of TEA 21 over the course of the next several years to make certain that the maritime subcomponent of the national transportation system is not allowed to become the weak link of that overall national transportation system.
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To go to the Chairman's question just momentarily a minute ago, the farmer in Iowa doesn't want to pay those extra couple of pennies per ton or dollars per ton associated with the exporting of his materials to the world market that are imposed on him by inefficiencies in the connections from one of the links in that national transportation system to the next. We, as a nation, should want his product on the world market to be as competitive as possible. So through our collective wisdom we, with him at the table as well as all the representatives from those Federal agencies, industry, and those who are engaged in port and waterway end connections, have to optimize this system.
Our goal with the conference in November will be to begin the process of forging that national vision and beginning to break down these four themes we heard from the listening sessions.
Mr. CLEMENT. And that conference you're referring to is the one Secretary Slater is sponsoring? A national conference?
Admiral LOY. That's correct, sir.
Mr. CLEMENT. And this is a dialogue between Federal agencies affecting our intermodal water transportation system and various users of the system.
Admiral LOY. Users and stakeholders and interested parties of all kinds. Labor will be represented there, sir. We'll have academe represented there. All of the aspects of anyone who can bring light rather than heat to the issue we want to have at the table in November.
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Mr. CLEMENT. But what exactly are the goals of the Secretary when he attends this conference?
Admiral LOY. Severalfold, sir. First of all, continuing to keep the issue on the front burner so that we are all cognizant of, and willing to participate in, finding the solution. Second, an articulation of what that national vision might be for the Nation. The beginning of at least a draft version that is a consensus product of all those players at the table. And then, third, to take each of these key issues that have been offered by the listening sessions and begin the process of breaking them down and finding specific tasks that we can go forward with in terms of collaborative effort on down the road, including, where appropriate, to identify things that can be brought to the Congress for consideration.
Mr. CLEMENT. Mr. Graykowski, I know a while ago you mentioned about what we need to do is be smart and be more efficient and all that. Are ports and terminals in other parts of the world, such as Rotterdam or Hong Kong, more efficient than ours in the United States? And what is the key to increase productivity in our Nation's ports?
Mr. HESS. Can I add one comment to your last question?
Mr. CLEMENT. Yes.
Mr. HESS. Going back to what I'd indicated in my statement. I think we've created an expectation, if you will, and we've told folks out there that we're going to walk with you and they come forward with these comments, as I indicated, and suggestions and heartfelt real thoughtful approaches. I think it's incumbent on us that we continue some essence and some feeling of momentum and commitment, because the worst thing we can do to a community which has been, in my view, as well as the Admiral's, fairly neglected by a lot of levels of government and policy and attention over the last few years, is to sort of let it drop and have a vacuum created.
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So one thing that this conference, I think, will accomplish is we're delivering them what we said we would. We're going to keep the ball rolling and we are going to continue to build this partnership and consensus that I think will lead to a lot of tremendous benefits.
With respect to competitiveness, yes, I think you can go around the world to any of the so-called, quote, ''seafaring or maritime nations,'' be it the European Union with Rotterdam as the crown jewel or certainly the Asian nations, both emerging and developed, and find a marked difference throughout their governments and, indeed, in industry and focused attention and commitment to waterborne commerce and transportation.
Europe, in this case Holland, as the gateway to much of Europe, could not and would not survive in terms of economic growth and development without that port. Korea is the same way. Japan is the same way. Singapore is the same way. You can go around the world. Hong Kong is that way. And you find a direct link between investment and productivity and emphasis on maritime commerce right straight back to sort of the national government, if you will, of each of those respective nations. Or in the case of the European, the European Union.
And so, you know, kind of deduct the question, how are you going to measure efficiency? Do they move boxes faster than us? Pick a measure. I think, yes, you could probably find certain measures which would indicate that other ports are far more efficient than ours. I think we have to strive very hard to find a port or, in this case, Long Beach in Los Angeles that's even in the top 10 of the world ports in terms of cargo movements.
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But that is not to say that we don't have a phenomenally efficient and tremendously effective transportation system and port system. APO has spent God knows how many hundreds of millions of dollars in total to develop their Long Beach facility. We, as a government in partnership with industry in the Alameda Corridor, DOT's putting in $400 million. And I think the whole cost, private and public, is $2 billion.
But, the point is, it's not enough. It's the old adage that we can't rest on our laurels because everybody's running a little bit faster than us and you've got trade growing at three times.
Mr. CLEMENT. Mr. Graykowski, are port, rail, and highway connection issues considered by DOT and their programs or are these mainly issues to be dealt with by the State and local transportation planning departments?
Mr. GRAYKOWSKI. I think that in my time there—it's been 5 years since I've been at the Department—it's been almost a mantra to build an intermodal transportation system. That was Secretary Pena's theme and vision, and absolutely embraced, endorsed, and expanded on by Secretary Slater.
Intrinsic in that concept is: It's not going to work unless all the pieces fit together. I think that was certainly a driving factor when we considered TEA–21. But, again, it cannot be done by the Federal Government alone. We've empowered the States and the localities in the whole concept to be part of the process. I think business is driving it, and it isn't going to work unless trucks and trains feed into each other efficiently and then, ultimately, through the ports.
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Mr. CLEMENT. Mr. Hess, to what extent does the Corps of Engineers consider competition and changing international trade patterns in its waterways investment policies and practices?
Mr. HESS. When we do our economic benefits assessments, we are looking to see what our commodities, what tonnages are moved, and those all play into decisionmaking process at the local level in terms of how projects are reviewed, authorized, and approved by Congress. So there is an assessment given at that time of what the economics are associated with each particular project.
Mr. CLEMENT. Well, is the cost of transporting products to world markets a way of our inland waterway system increasing or decreasing?
Mr. HESS. Right now, we are, in fact, very competitive in terms of shipping products to world markets. For example, the cost of shipping grain from the United States to overseas, because of the fact that we have a inland waterway system, makes us very competitive in terms of that commodity. Whereas, if you go to South America, they can produce the grain much cheaper, but they don't have the transportation infrastructure to ship it.
Mr. CLEMENT. Well, what types of improvements need to be made to our lock and dam system on the inland rivers to make it more efficient?
Mr. HESS. Well, certainly we're looking at longer tows. We're looking at, again, a system which has very antiquated infrastructure. We are doing system studies to identify which locks require prioritization in terms of replacements and rehabilitation and all of those decisions are done, basically, looking at the economic benefits associated with each of those particular reaches of the inland navigation system.
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Mr. CLEMENT. Thank you.
Mr. GILCHREST. Thank you, Mr. Clement. Mr. Johnson.
Mr. JOHNSON. Thank you, Mr. Chairman. Just a quick follow-up, Mr. Hess. I know we've got one of the 100-year-old locks in our area. We're closing it down, trying to turn over to the State, communities, and we're looking forward to that transfer.
What role do you see in terms of your agency, as you look forward to this conference in November, trying to provide the input to make us have a more efficient waterway system?
Mr. HESS. I see our role as being in a very supportive manner. One of sharing information and understanding of the facts associated with the infrastructure that is existing in terms of the navigation system. What we know in terms of the transportation patterns that have either changed or are appearing to change, depending upon the movement of commodities. And, so—and we are very much in a listening mode, because, clearly like my colleagues here, we want to get a better understanding from the community that uses the services of that infrastructure of what they see in terms of changing patterns, not only in the United States economy that are related to movement along the waterways, but also international trade.
So it's a matter of listening to the ports. It's listening to the American Waterways Operators, the inland navigation interests, and all of those who have an interest on the water, whether it's recreation interest or environmental interest.
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Mr. JOHNSON. What about—and you, Mr. Graykowski, may want to talk about this—we talked about the hub system or maybe a hub-spoke system like the airlines do now in developing among the ports some being the hub, some being the feeders. I wondered if you could expand on a little on how you see this developing or is it developing by itself or do we need to encourage or discourage this?
Mr. GRAYKOWSKI. Well, is it developing? I guess what we're seeing, is ''niche ports'' where certain cargoes seem to congregate. Baltimore, for example, seems to be handling more reefer cargoes and whatnot and some of that—
Mr. GILCHREST. What kind of cargo is Baltimore—
Mr. GRAYKOWSKI. I'm sorry, refrigerator, reefer.
Mr. GILCHREST. Reefers, you know.
Mr. GRAYKOWSKI. I don't put the—
[Laughter.]
Not that kind, Mr. Chairman, all right. You know. Whatever you were thinking it isn't.
Mr. GILCHREST. I wasn't considering it. I thought you said—I thought I heard—
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Mr. GRAYKOWSKI. Coal is a better example. Yes, let's call it coal—
Admiral LOY. Well, I thought you said roll on, roll off. I was just—
Mr. GRAYKOWSKI. Well they have a lot of that in Baltimore, too. But, you know, I tell you we're—what's the curious confluence we're seeing and one of the elements of my agency is its involvement in ship finance, and ship construction, is the confluence of the congestion that we're all party to every day if we drive on I–95 or the rails. We don't have the infrastructure to move cargo efficiently on the landside, and that leads to thinking that maybe we can go back to the water.
What I'm seeing, is that sort of predicate leading to people saying, I wonder if I really can institute a coastwise shipping service. This is similar throughout the world, in Europe. I'll take a risk which I don't think is very high. We're going to see that develop more and more over the next few years. You can call it hub and spoking or coastwise trading.
Every ship can take hundreds of trucks off the road. We helped start service between York and Jacksonville on a triple-stack trailer barge. That's just begun. We financed that particular vessel. Frankly, I just don't see it as anything other than logical and inevitable that we're going to do that with cargo and with people.
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Ask yourselves, all around the world you see passenger ferries going long distances, North Sea, Mediterranean, etc. You don't see that here. Why? But I think the time is approaching very quickly where the time and economic calculation to a family and the technology of moving things and people faster is going to be such that we're going to return to the water in this country in a big way.
Mr. JOHNSON. I was going to ask you about that. What do you see now in terms of the condition of the rail and highway interface with the inland waterway system?
Mr. GRAYKOWSKI. With the inland system in particular?
Mr. JOHNSON. Yes.
Admiral LOY. Let me take a stab at that, sir. My answer to that question is it's exactly why we need FRA, FHWA, and all those other players at the table when we're dealing with these kinds of issues. To whatever degree John and I are principally focused on our maritime business, it is an absolute requirement for the efficiencies of the national transportation system, of which we're a significant part, that all those other players are at the table to weigh in such that consensus decisions are reached for good motion and progress in those areas.
We're not experts about trains. We're not experts about highways. But in DOT, those exist and that's exactly the Secretary's point about making this a significantly intermodal approach to the issue overall.
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Mr. JOHNSON. Go ahead.
Mr. GRAYKOWSKI. Congressman, I think the connections work to a certain extent but there's a natural tension between the inland industries because the cargoes that are carried by barges—so-called brown water side—are very similar in many cases to the cargoes carried by rail and truck. So the connections work, but there's a competitive atmosphere, that exists.
As the Admiral indicated, putting more cargo on the water is my business. Every barge that's filled with goods takes some 60 trucks off the road and 15 railcars off the tracks. I would argue from the Maritime Administration perspective, we need to of put more into these dedicated cargo corridors. But, as the Admiral also indicated, DOT itself is working on making the things fit together better and more efficiently.
Mr. JOHNSON. So it's got to be an integrated policy and I guess that's why it comes under—do you think Congress maybe ought to designate the Cabinet Secretary, Secretary Slater, as kind of a coordinator of the waterway transportation system, being that he does have the awesome responsibility of all the other transportation systems, truly intermodal, as you're talking about, because, even though it's competitive, we're looking for the most efficient way for goods transportation. That's what the customers are looking for.
Admiral LOY. I think it would be a terrific blessing, coming from the Congress. The reality is that the Secretary has already stepped forward and, in a very aggressive fashion, has asked MARAD and the Coast Guard to lead the way towards finding more efficiencies associated with our maritime component of the national transportation system. So recognizing that and endorsing it would, I think, be a strong signal from the Committee, sir.
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Mr. JOHNSON. Thank you very much, Mr. Chairman.
Mr. GILCHREST. Thank you, Mr. Johnson. I have some other questions for the first panel. But, due to time and I have to—we're going to have to recess now because I have a committee markup that I must attend, and we can get, if any of the other members had questions as well, we'll submit them for the record and get them over to the three of you.
I apologize to those other witnesses that we can't move forward. What we need to do, unfortunately, is to take an hour recess. That might be a good time for everybody to get lunch. And then we'll be back here, I hope, I should be back here—we ought to back here by about 12:30. Thank you very much, gentlemen. The subcommittee is recessed until 12:30.
[Recess.]
Mr. GILCHREST. The subcommittee will come to order. And I really apologize for all this. It's just some days are worse than others in the democratic process and this is one of the finest, I can tell you. I just left the subcommittee markup where it is really volatile, but that's democracy. That's still going on. I'm going to try to stay here as long as I can. But we'll go through the testimony. I appreciate you coming here this afternoon. We'll get through as many questions as we can. I really want to apologize. People of your stature should be treated better and we're doing our best.
And because of some time constraints, I will go to Ms. Borrone and then Mr. duMoulin. And Mr. deMoulin and Ms. Borrone, if you could stay during the rest of this process, that's fine.
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Well, we'll start with Ms. Borrone. That's a vote on the House Floor now. Or whatever arrangement you want to make is fine with me.
TESTIMONY OF RICHARD T. DUMOULIN, CHAIRMAN, INTERNATIONAL ASSOCIATION OF INDEPENDENT TANKER OWNERS (INTERTANKO); LILLIAN C. BORRONE, DIRECTOR, PORT COMMERCE DEPARTMENT, PORT AUTHORITY OF NEW YORK AND NEW JERSEY, AND CHAIRMAN, AMERICAN ASSOCIATION OF PORT AUTHORITIES; JOSEPH J. COX, PRESIDENT, CHAMBER OF SHIPPING OF AMERICA; DONALD F. CAMERON, MANAGER OF CORPORATE LOGISTICS, BOSE CORPORATION, FARMINGTON, MA, AND CHAIRMAN, OCEAN TRANSPORTATION COMMITTEE, NATIONAL INDUSTRIAL TRANSPORTATION LEAGUE; PROFESSOR JON S. HELMICK, DIRECTOR, LOGISTICS AND INTERMODAL TRANSPORTATION PROGRAM, U.S. MERCHANT MARINE ACADEMY; AND CAPTAIN JACK SPARKS, PRESIDENT, AMERICAN PILOTS' ASSOCIATION
Mr. DUMOULIN. Thank you very much, Mr. Chairman. Lillie and I made our own arrangement that I could start first and maybe I'll catch a plane. Thank you very much.
I'm glad to return here. I was here two weeks ago for the previous hearing and I'm Richard duMoulin, CEO of Marine Transport Lines, based in Weehawken. We're the oldest shipping company in the United States, operating 31 U.S. ships and 6 foreign-flag ships. But I'm here today in my role as chairman of INTERTANKO, which is the International Association of Independent Tanker Owners. We represent about 300 tanker operators from around the world, including the United States, operating 2,000 tankers, about 70 percent of the world fleet. They import about two-thirds of the United States crude oil and products and chemicals.
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I've got written comments, which will be submitted. I'd like to just make a few verbal comments. We're very gratified that the committee has decided to hold these hearings on waterway management, which we consider a very important issue. We're particularly concerned about the quality of the channels, aids to navigation, vessel traffic systems, and the berths at the oil terminals.
In 1996, we prepared a report called Port Terminal Safety and this was because we felt the United States systems were deficient when compared to the rest of the world. And this study was endorsed by Admiral Crammick of the Coast Guard and has been part of what I think led to a lot of this focus. The issue is not just for tanker, though. With the bigger cruise ships and container ships, all of our issues, except, perhaps, for the oil terminals themselves, are common to the other types of ships.
INTERTANKO vessels call on all major ports in the world, so we have a very good firsthand experience in comparing U.S. facilities with others in other countries. And the quality of our ports are deficient when compared to other major port areas in the world, particularly when you consider that we are the world's leading trading nation and we have the toughest environmental laws and a public that cares the most about safe navigation and eliminating pollution. It's disappointing to us and we think the costs of putting the system in order are microscopic when you compare it to the value, the economic value, of what goes through the ports in and out of the United States and the importance of the systems to the United States.
If the ports—if the channels are not dredged properly, if the charts are not accurate, aids to navigation are not maintained or are ineffectual, if navigational channels have not kept pace with the size of vessels using them, if terminals are unsuitable for the vessels tying up alongside, then the system isn't working. And I might note that there was discussion this morning about the bigger versus smaller vessels. It's our opinion that fewer bigger vessels trading into well-designed ports are going to be safer than a multitude of small ships trading in and out of lesser developed ports.
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Our study, in 1996, of the conditions of U.S. ports focused on several—excuse me—areas. Some key points to keep in mind include, number one, waterway management. We advocate that each significant port in the United States should have a clearly defined waterway management system, subject to the control of a unified authority. One of the biggest challenges for our port systems is the fragmentation. So unified authority is needed to make sure there's progress.
Number two, the Coast Guard has made tremendous progress with vessel traffic systems heading towards a modern transponder bay system. A few years ago, there was quite a dispute about what kind of system, but the AWO, INTERTANKO, Coast Guard, and other interest groups got together, got focused, and are now heading the right way. There's great international technology available and international solutions, or solutions compatible with international methods, is the best because shipping is international.
Third area we focused on is passage planning. And we worked with the American Pilots Association. We've improved coordination between pilots and the vessel masters. We believe the pilots have been proactive in this area. We encourage them to continue in the efforts to improve master pilot communication and ensure uniform standards of pilots throughout the U.S. Much as the shipping industry has embraced international standards such as STCW—the Standards of Training, Certification, and Watchkeeping—and safety management systems—ISM—we encourage the pilots to continue in the same direction.
The fourth area is hydrography or charting. This is the area where the greatest improvement can be made the quickest with the least expense. NOAA's been hampered by lack of funding in keeping the surveys and charts up-to-date. And all of navigation is really based on having charts that are accurate. We know that's not part of this subcommittee's oversight, but anything the members of this committee to help with the funding of NOAA to get better charts is a very useful thing.
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Funding is really the basis of a lot of the problems that we see, and the decline of the waterways. And the lack of leadership and central focus, the lack of support to get the funding, has let this happen. We believe that revenues from the General Treasury are appropriate for building the infrastructure, not just shoving the requirement for providing the funding to narrow groups, to narrow segments of industry is not going to solve the problem. We also think another source of funds is the Liability Trust Fund, which could be used for prevention of accidents, not just response to accidents.
Hand-in-hand with the funding goes the question of authority and responsibility. Fragmentation of responsibility for maintenance and operation does not help and we urge Congress to fix the responsibility in one agency. Now we don't want to tell the government what to do. It's our initial opinion the Coast Guard is best suited to be the lead agency to coordinate other government agencies, but, regardless of how Congress decides to go about it, it needs one body that's responsible for coordinating and having authority to get the other groups to work together.
We have some optimism regarding the process. We think the Coast Guard has done a great job in opening up the issue of waterways management. Secretary Slater has jumped in and gotten involved. The listening sessions held in the regions were a very effective way to initialize the communication and even the Year of the Ocean conference in Monterey the President and the Vice President, who attended, talked about waterways management and are aware of the issues.
Two weeks ago, I talked about the chain of responsibility which describes the fact that ships operate in a system which includes the ports, the pilots, the terminals, the aids to navigation, the cargo interests, support authorities, that all links in the chain must do their part to make the system efficient. Open 90 has put all the liability in the hands of the tanker owner, for example, but it's both a business and an ethical responsibility by everybody in the chain to participate and work for the solution.
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Finally, I'd just note that if we were able to get men to the moon and back alive, we ought to be able to get ships in and out of port safely. The technology is available. And, in closing, I'd like to just quote from an editorial that was printed July 22 in Lloyd's List. And, with the discussion this morning and to come later about the world's largest container ship coming into New York, this editorial is called, ''A Maersk Gamble,'' talking about their container ship. I won't read the whole editorial, but a few paragraphs.
''Lloyd's List. The world's largest trading nation has second-rate ports. A harsh statement maybe, but one that many ship owners would not challenge. The condition of many U.S. ports with their poor navigational systems, shallow waters, has been bane of tanker and bulk carrier operators for many years. Indeed, it is so long that many tanker owners about the poor level of safety that some U.S. oil that INTERTANKO initiated a U.S. port and terminal safety study 2 years ago to assess what could be done to reduce the risk of calling in the U.S.
Considerable progress has been made since then by INTERTANKO, with a number of oil terminals making an effort to raise operational standards and once fraught relations with U.S. pilots much improved. Now it is the turn of container operators to try and force U.S. ports to upgrade their facilities. But instead of just talking to the port authorities, Maersk liner has taken the bold decision to actually take one of the new-generation of container vessels to the U.S. to show a ship of the future to both the terminal operators and, perhaps more crucially, the importers and exporters.
For, while container ships of 6,000 TEU or larger are now commonplace in the major ports of Europe and Asia, ships of this size are unable to call at any North American port fully laden.''
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Mr. GILCHREST. Mr. duMolin, I appreciate that. I will get that editorial and read it. I have about a little less than 5 minutes to make my vote. I'll be back, if you can wait, Mr. duMolin, in less than 10 minutes. We will recess, because I'm going to miss this vote. I'll be right back.
[Recess.]
Mr. GILCHREST. The subcommittee will come back to order. We appreciate with this chaos, but democracy rolls on. Ms. Borrone.
Ms. BORRONE. Mr. Chairman, good afternoon. I am Lillian Borrone. I'm the port commerce director for the Port Authority of New York and New Jersey. And I am chairman of the American Association of Port Authorities this year. I think you know that AAPA was founded in 1912 and represents virtually every U.S. public port agency as well as the major port agencies in Canada, Latin America, and the Caribbean.
Today my testimony reflects the views of the AAPA U.S. delegation. Mr. Chairman, AAPA commends you and the committee for convening this hearing on marine transportation system needs. We are grateful to the committee for your work in support of the Coast Guard and other programs that are crucial, in our view, to the health and efficiency of our nation's waterway system.
Public ports throughout the country support efforts by this committee to look at ways that we can better prepare for predicted trade growth. In addition, we have always been supportive of the U.S. Department of Transportation's efforts and most particularly, recently, the Regional Waterway Management Outreach sessions. And we certainly join with others who are testifying today in looking forward to the national conference scheduled in November.
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So I'm very pleased to, today, present the views of the industry with respect to increasing waterborne commerce because we are, in our view, the waterways or the highways that will serve a broad range of economic and strategic interests. As ports, we link every community in this country to the world marketplace, enabling us to create the economic activity through exports and the delivery of imported goods more inexpensively to consumers across the Nation.
I'm not going to repeat the statistics that Admiral Loy and Mr. Graykowski talked about this morning in terms of volume or value of trade. But I do want to point out that the overall national economic impact of port activities generates approximately 16 million jobs in this country, about $783 billion to the Gross Domestic Product and over $210 billion in taxes at every level of government.
Those benefits are generated because of a partnership that exists. It's the result of local investment by ports in modern marine terminal facilities and related infrastructure, in combination with the funds that you, the Congress, provide to the Federal Government to improve our navigation channels. In 1996, the cumulative local investment in port facilities was $1.3 billion for that year alone. A similar level of non-Federal investment is expected each year from 1997 to 2001 and, as you can suspect, all of us are engaged in our strategic planning for the next 5 years. And so I would imagine that will see of us talking about even greater levels of annual investment beyond 2001 as we look at what our needs are for the future.
In my testimony today, I'm going to stress three areas of concern. First, although the marine transportation system must be integrated into the national transportation vision, specific improvements to account for increased trade growth must be developed locally. A proper solution to accommodating the Nation's growth in waterborne commerce must include a long-term commitment by the Congress and the administration to adequately plan for and fund crucial infrastructure programs in partnership with us as the stakeholders.
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And third, the Federal Government should reaffirm it's longstanding responsibility for maintaining modern aids to navigation and navigation channels. AAPA would like to see this commitment funded from the general treasury, particularly as the maritime industry and the import and export community are already paying their fair share of fees to support the flow of commerce.
Clearly, the U.S. needs to keep pace with the changes in transportation infrastructure, if we intend to ensure our success in the global marketplace. Along with Ports, it's crucial for the Federal Government, the administration, to address the current changes in the marine transportation industry occurring worldwide. We're facing a situation in which trade grows in the U.S. on average about 5 percent a year for the predicted future, and we are talking about the Department of Transportation's forecasts prepared last year when they were looking 20 years out.
Container trade is expected to double at the same time that cargo movement to and from the U.S. will be increasingly concentrated in larger vessels. These vessels are expected to call at a few primary gateways and other ports are expected to strengthen their roles as regional or feeder ports—the hub and spoke discussion that you were having this morning.
Now, I know you discussed this morning that last week the 1,043 foot long mega ship, the Regina Maersk, called at several ports along the East coast of North America. That ship draws 52 feet of water when fully loaded, and it was noted in the comment that Mr. duMoulin read in Loy's list, that currently none of the East coast ports can accommodate the Regina Maersk at this steps, or her sister ships, because of limitations in our waterway infrastructure.
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Mr. Chairman, I've brought to you for the committee a photo of the Regina Maersk entering New York harbor last week. You can see how large she is when you compare her to the Statue of Liberty and to the vessels near to her.
Mr. GILCHREST. Thank you very much. It will be a battle where we're going to hang that.
Ms. BORRONE. Pardon me?
Mr. GILCHREST. It will be a little bit of a battle as to where that will be hung.
Ms. BORRONE. I can produce additional copies, if you need them.
Mr. GILCHREST. Staff or my office.
[Laughter.]
We'll work that out.
Ms. BORRONE. OK. What will it take one of the primary gateways? Well, infrastructure upgrades and yard improvements at the facilities, in addition to deeper channels and births; new equipment, especially larger cranes with greater outreach; efficient and high capacity container storage areas; on-dock rail terminals; efficient gate processing, including electronic data interchange and paperless processing; and multi-modal transportation and traffic management systems—in the waterways, within the marine terminals, and on the roadway and rail systems leading to and from our port facilities.
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Now, the Federal Government does not advocate one gateway over another, and nor do we want it to. However, the government has the responsibility to define and shape policy, and it influences port activities through it's regulatory processes, the management of the Federal channel system, and of course, through financial support given or not given.
In reality though—and I'm agreeing with something Mr. duMoulin said—we believe there is an absence of centrality in the Federal policy process regarding the waterways transportation system. There are examples of waterways development that are frustrated by uncoordinated involvement among the Federal agencies. The leadership of Secretary Slater and the activities of the Coast Guard and the Maritime Administration to develop and invigorate a National vision for the marine transportation system are helping. I believe they're significantly improving the situation before us. As they're efforts unfold, I think we'll find that it is the local activities at each port, and the Federal Government's ability to listen to local constituents, and then help to translate that back into a vision that will guide the future Federal actions.
Addressing changing market conditions requires active involvement and participation by all of us at the Federal, State, and local levels, along with our private sector partners. How should we implement this partnership? I believe first we have to start with an attitude of cooperation and collaboration. Behavioral change is probably the foundation. Second, we need to agree on a vision, and that vision needs to be locally developed and nationally supported. We then should work to identify Federal barriers, as well as local barriers, to progress and to work to determine how to resolve conflicts to implement our vision.
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We then should next establish Federal, State, and local teams to address projects and issues at the local level, to assess the steps necessary for implementation of the policy vision, to identify barriers, and then develop a dialogue through quarterly or semiannual meetings and relationships that we can put in place. And lastly, we should develop new capital formation approaches. T21 has some helpful initiatives, such as new capital infrastructure banks. But we need to continue to be creative about financing our facility investments for the future, whether they are in the water or on land.
I would like to congratulate you and the members of the House Transportation and Infrastructure Committee for your leadership on T21. AAPA supports increases in land site infrastructure investment that are possible with T21. Yet, as provisions within T21 are as positive as they are, the bill addresses the land site system only. And there are other important components of our Nation's transportation system that are being neglected on the water side.
Water side infrastructure needs are increasing with the advent of these larger ships and increased trade. Yet the budget for dredging, as proposed by the administration's Fiscal Year 1999 budget, proposal fell far short of what was necessary to develop safe and efficient navigation channels.
As well, the administration's Fiscal Year 1999 budget flat-lined the navigation services of Coast Guard and NOAH, and proposed to implement a user fee on both NOAH and Cost Guard navigation aids. I'd like to thank members of this committee who opposed that proposal. I think we have an excellent track record in the U.S. for safe marine navigation. The Federal Government is under investing in navigation information systems, and I just want to add one point.
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60 percent of NOAH's nautical charts were obtained before 1940, leaving over 39,000 square nautical miles of U.S. water, considered critical to commercial navigation, in need of being re-surveyed. As ship size increases, real time water depth information will increasingly become a critical harbor management tool that we will need in order to enhance waterway safety and efficiency. Congress and the administration must take a greater commitment to updating navigation charts and installing and operating more real time systems to safely accommodate growing trade volumes.
Lastly, of all the issues facing public port authorities, few are more critical than funding for Federal navigation channels, whether for the maintenance of the existing channels, or funding new construction projects. That's why the current discussions about how to fund Federal maintenance drudging, following the Supreme Court decision on the harbor and maintenance tax on exports is unconstitutional, is so critical. As Congress takes up this issue—I would assume most likely next year—we urge you to consider carefully the impact of any navigation channel funding source on trade and port competitiveness. Mr. Chairman, we don't want to see our cargos head outside the U.S. ports to other countries in order for them to be railed or trucked back into this country.
I'd like to thank you on behalf of AAPA for the opportunity to testify today. I appreciate your giving us the opportunity highlight our views. I have a full statement that I'd like to submit for the record.
Mr. GILCHREST. Thank you very much, Ms. Borrone. We appreciate your testimony and your patience. Mr. Joe Cox, you're next. You don't have on your card adjunct staffer for the subcommittee, do you?
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Mr. COX. Thank you, Mr. Chairman. I was thinking this morning, this is the fourth time that I've testified before your committee in a couple of months. And the first time we discussed the Coast Guard's IMO work, and at that hearing I recall that you and I had a discussion in the question and answer period about the ports in the United States, and our infrastructure, and how important it was.
I think, at that time, you agreed that this would be an important issue for this committee to take up. So I certainly appreciate that you have lived up to that analysis from May. I think that this is perhaps, sir, one of the most important issues facing the United States maritime community that we have faced in a number of decades, and one that will have an impact in decades to come. And I am quite serious about that. I think it's that important.
With your permission, I'm going to submit my full testimony for the record and I will make extemporaneous comments here.
Mr. GILCHREST. Without objection, so ordered.
Mr. COX. Thank you. I will also submit for the record the Lloyd's List editorial that Mr. duMoulin left with me when he left.
Mr. GILCHREST. Thank you. We'll appreciate that.
Mr. COX. With one caveat. There is a little x'd-out part here that refers to militant pilots, and he and I agreed that we would not agree with that part of this editorial.
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Mr. GILCHREST. Militant pilots.
Mr. COX. Militant pilots.
Mr. GILCHREST. Are there such things?
Mr. COX. Seriously, we did make that comment, and I will give it to your staff for inclusion in the record.
Mr. Chairman, I think that the basic thought that brought us together today, and that you're holding this hearing on, is incontrovertible. Our trade in this Nation is going to grow, and we must be able to accommodate that trade.
And by trade, we're not just dealing with the ships and the interface at the direct dock level, we're dealing with the trade of getting a manufactured product from the interior part of our country to the interior part of a consuming Nation, and vice versa. I think that our public has begun to appreciate the efficiencies of a transportation system that can bring to them manufactured goods that are competitive and inexpensive, and therefore attainable by more people in a community.
I've read that along the Eastern Gulf coast, we have 7 million TEU's moved across our docks in any one particular year—let's say last year, the year before—and I must say that I'm rather skeptical about these statements—that say we're going to double or triple trade. I think that's a—I wonder who made up these—who made these studies and who arrived at these. That's the type of a mind I have. But I read that this 7 million is projected to be, by the year 2010, 13 million. And when I took the numbers and worked them back, that's roughly a 5 percent increase in trade. So I really think that's a believable number for me—5 percent growth per year—sounds quite reasonable. In fact, one would say perhaps on the low side, when you just look at that pure number.
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So I think that we can see that by the year 2010, 2015, we will probably double the amount of cargo that must cross our waters. Our ports have to accommodate that trade. And in the chamber, we see three areas where we have to make some changes in order to accommodate that increase. And some of them we're working on; some of them I think we have to make some decisions on how we're going to work on them.
The first one is that ships are going to have to be larger. I think that in many port areas and many congested arenas, you simply have to move more cargo with less vehicles. And in a ship, you can get a volumetric increase by increasing one dimensional measure of the vessel. So if you make the vessel somewhat deeper, you've cubed the additional volume that that one dimension gives you.
Ships are gretting larger, and we're certainly seeing that. The ships are being designed for an international trade and that international trade dictates the size of the ships. I'd like to say that we would be so powerful in this country as to control the design of ships internationally, but I don't think that's the case with respect to the size of vessels that we're seeing today.
I think the second general area is that people operating the ships have to become more efficient and we have to have operating practices which improve on our present practices. The chamber's involved in two efforts now. One we have completed. It's a very modest, yet we think very important, issue of pilot master information exchange. We have worked on a concept which we have run not only through our membership, but through the international community, and we've also had dialogue with our domestic pilots. We think that information exchange makes for a more efficient, and therefore, a better movement of the vessel from the pilot station to dock and vice versa.
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We are also leading a prevention through people partnership where we're partnering with the Coast Guard and the API. We're improving communications that our vessels have to have when they're in an important transit mode from the pilot to the docks in this country.
And the third area where we've done some work is in the automatic identification system transponder arena. We're working not only with the Coast Guard and with our colleagues here in the United States—I think Mr. duMoulin mentioned that INTERTANKO was involved. Yes, they are. We are equal partners with them in that. We have also worked with this at the International Maritime Organization. We see all that as an improvement in how we operate the ships and more efficient, effective operation.
Lastly, Mr. Chairman, and I see the red light is on-—because—and I'm kind of happy it is—because I was going to talk about the harbor maintenance tax, and I was going to indicate to our administration that red means stop.
Mr. GILCHREST. We will ask for unanimous consent for you to proceed for an additional two minutes, Mr. Cox, if you need that time.
Mr. COX. Thank you, Mr. Chairman. I think on the harbor maintenance tax, I certainly would like to send more than a casual signal to the Office of Management and Budget that, if you act—sometimes if you want something bad, you'll get it bad. And I think that in the harbor maintenance tax arena, we could be asking for something bad and get it bad.
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I think this is the area where we need to have a public policy debate. I think that in the past our public policy was to support our trade—the government, the commercial community, the ship owners—we were all part of a growing Nation and a growing trade, and sometime in the past we had a policy debate. Maybe it wasn't a total public policy debate, but it did end up in a funding scheme for of a major part of our port infrastructure being handled or being paid for by the cargo going through those ports. That has now been determined to be in question. We have to debate this.
Sir, I don't know the answers. I can only tell you I've been dealing with this for the past couple months. It's very complex. I understand that there can be dislocations which are going to be very harmful to this Nation if we don't make the right steps. I would, as a ship owner representative, like to be a part of that public policy debate. I think to date, we have not been. And we don't ask that we always win, but we certainly ask that we be involved in a process that has our interests involved in it.
I think the stakeholders must participate. And if there's one message that I could leave with the Congress through your subcommittee, is that statement. Thank you very much. I certainly would respond to any questions that you may have.
Mr. GILCHREST. Thank you, Mr. Cox. Mr. Cameron.
Mr. CAMERON. Thank you, Mr. Chairman. My name is Donald Cameron, and I'm the manager of corporate logistics for the Bose Corporation, headquartered in Framingham, Massachusetts. Bose is the leading manufacturer of high-quality audio systems for home, automotive, commercial markets, with manufacturing facilities and sales worldwide.
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I'm pleased to be here today representing the National Industrial Transportation League, the Nation's oldest and largest broad-based organization. I currently serve as chairman of the League's Ocean Transportation Committee.
As most of the members of the committee know, the League has been a long time proponent of reforms to our Nation's ocean liner regulatory system. We are very pleased by the work of this subcommittee in the last Congress which laid the framework for S. 414, the Ocean Shipping Reform Act of 1998, which passed the Senate earlier this year. With S. 414 pending before the full House of Representatives, the League is hopeful that these important reforms—will be adopted so as to create a more competitive and efficient ocean transportation environment. The new and more flexible ways of doing business, created by S. 414, will certainly make U.S. companies more competitive in the world marketplace.
A strong U.S. economy is dependent on an efficient and reliable transportation system. League members and their companies need a cohesive U.S. marine transportation system in order to be competitive in domestic and international markets. We can no longer focus on a single mode to bring products to the marketplace, but rather we must view the links in water, surface, and air transportation as part of the vital network in making U.S. companies competitive at home and abroad.
Today, marine carriers transport nearly 2 billion metric tons of materials, parts, and consumer items in domestic and foreign commerce. U.S. deep draft ports are critical links, not only in support of our foreign commerce, but also in support of trade in the non-contiguous States and territories, as well as inter-coastal and coastwise traffic. Congressionally-designated navigational channels and canals created by dredging and widening, form an extensive network of deep draft shipping lanes. For the last 11 years, a tax on the value of goods moving through these channels and ports has been paid into the harbor maintenance trust fund for the purpose of financing maintenance dredging.
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This spring, as you know, the U.S. Supreme Court, in an unanimous vote 9–0 decision declared the export portion of the harbor maintenance tax unconstitutional. The HMT, which was enacted in 1986, required shippers to pay .04 percent of the value of commercial freight that moves through U.S. ports. The percentage was raised to .125 in 1991. The tax has been collected by U.S. Customs Service directly from shippers, and deposited in the harbor maintenance trust fund from which Congress may appropriate amounts to pay for harbor maintenance, development projects, and related expenses. The Court's decision has put into play a series of events that will require an alternative mechanism to be developed to finance dredging projects in order to keep channels and harbors open for commercial navigation. Although the Federal Government still collects the taxes on the import portion of the commerce, there is a growing recognition that the entire tax will have to be scrapped in favor of a new plan for financing dredging.
While the new funding mechanism has not been formally proposed to date, the Office of Management and Budget, in a letter dated May 20th of this year, said that, ''expanding the uses of fee revenues to include the Corp's port construction projects recognizes that ensuring an economically healthy and international competitive port system requires an investment in new construction.'' In addition to new construction, the administration is also purportedly looking at an alternative fee-type mechanism to include financing for safety related programs.
Some groups, including the American Association of Port Authorities, have recommended that the Federal Government return to funding maintenance dredging from the general treasury revenues, as it did before 1986. In addition, the League's Ocean Transportation Committee recently met and developed a three-tiered approach to guide it's participation in the debate over a financing alternative to the harbor maintenance tax.
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First, the League believes that the monies remaining in the existing trust fund should be used solely for dredging and other port maintenance projects. Two, the import portion of the HMT should be repealed. Third, with respect to developing a new system for financing dredging, the League feels that any alternative should carefully consider the needs of actual commercial users of the Nation's port system. Based on the Supreme Court's decision, it is clear that any fee on users would have to be fairly reflective of the cost of the services provided.
As indirect users of the deep draft channels and harbors, the League intends to play a major role in the public policy debates that will lead to finding an acceptable financing alternative.
As it is expected that the Congress will soon be faced with the prospect of developing an alternative financing mechanism, it must be aware that any proposal that places financial responsibilities on the user—whether it be a ship or a specific commodity—will likely result in U.S. exports being less competitive and imports becoming more expensive to American consumers.
As the party ultimately responsible for the price of moving freight, shippers are keenly aware of the need for efficient and low cost intermodal connections. At too many U.S. ports, for example, these connections require freight to be handled more than once and to move considerable distances through congested urban areas, resulting in wasteful additional costs and delays.
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In my home area at the Port of Boston, or Massport, for example, there is no direct rail service for containers moving on and off ships. This means that shippers must endure additional drayage costs of up to approximately $150 for the privilege of moving a container through the port. The calculation is based on the unloading of a container at the rail head, and the subsequent loading of the container onto a truck, and the movement of the container through the urban areas, before being moved into the port facility for positioning on the ship. It should be emphasized that this scenario is not unique to Boston, and is typical of circumstances at many U.S. ports.
Although there are 355 ports in this country today, only about 150 of them, or 42 percent of the total, account for 99 percent of the cargo tonnage. Over the next several years, we believe it will be critically important for these ports to have an infrastructure in place to move freight more economically and efficiently. As airports in the early 1970's had to revamp their infrastructure to accommodate larger passenger loads from the then new generation of jumbo jets, today, marine ports must be positioned to handle the new generation of containerships which will accommodate in excess of 6,000 TEU's. Simply stated, if the intermodal connections are not in place to handle current and anticipated increases in volume of cargo, the end result will be freight gridlock resulting in accompanying higher freight costs and longer delays.
There are 25,000 miles of navigable waterways within the United States. Congress has set forth over 10,000, or about 40 percent of the total, to be major inland waterways that are currently subject to fuel taxes. These taxes fund the U.S. Army Corps of Engineers, the agency responsible for maintaining some 168 lock sites, as well as dams and other marine projects. Today, navigable waterways provide relatively low cost alternatives to shipping commodities, such as coal and grain.
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Today, a major problems exists for users and other beneficiaries of the navigable waters. Earlier this year, in it's budget proposal, the administration reduced proposed levels of funding for the Corps to a level which would stop work on virtually all new starts that were funded in Fiscal Year 1998, and slow down nearly every other inland construction project. Necessary maintenance should be seriously deferred.
The administration's $3.15 billion request falls short of the $4.54 billion needed to allow the Corps to meet the demand of it's civil works program. Without sizeable increases in funding levels, the Corps will be unable to honor cost-sharing arrangements with non-Federal sponsors, thus delaying many projects and, ultimately, driving up their costs.
Mr. GILCHREST. Mr. Chairman, I don't want to—
Mr. CAMERON. Yes, sir.
Mr. GILCHREST. There's a potential for another vote. We have two other witnesses.
Mr. CAMERON. Yes, sir.
Mr. GILCHREST. If we could just——
Mr. CAMERON. OK. I will end my testimony then, sir, by stating that it is important to shippers that efficient intermodal connections are in place, and I think that this is area the that committee should address. As the committee moves forward we certainly look to the opportunity to participate. Thank you.
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Mr. GILCHREST. Thank you very much. Professor Helmick.
Mr. HELMICK. Thank you, Mr. Chairman. Good afternoon. I am Jon Helmick, Director of the Logistics and Intermodal Transportation Program at the U.S. Merchant Marine Academy. Thank you for the opportunity to discuss the Academy's role in transportation education and training.
The challenges and opportunities that confront our maritime transportation system have been well documented by the distinguished witnesses who have already spoken. If we are to meet these challenges and capitalize on these opportunities, the human resource element of the transportation system equation must be carefully addressed. The need for qualified decision makers and technical operators with expanded knowledge and skills is acute. In maritime education, curricula of broader scope are now required to meet the demands of an increasingly complex and sophisticated transportation system.
The U.S. Merchant Marine Academy began educating and training deck and engine officers in 1942. Operated by the U.S. Department of Transportation through the Maritime Administration, the Academy has consistently provided highly qualified personnel to government, industry, and the military. Our graduates receive a Bachelor of Science degree, a U.S. Coast Guard license as Third Mate or Third Assistant Engineer, and a commission in the U.S. Naval Reserve.
Under the leadership of outgoing Superintendent Rear Admiral Thomas T. Matteson, we have recently developed several innovative programs intended to ensure that our graduates continue to excel in their service to the country. In the engineering domain, these include a program in Shipyard and Marine Engineering Management.
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In marine transportation, we have created a program in Logistics and Intermodal Transportation. This direction is consistent with the Academy's mission to graduate officers and leaders who are dedicated to serving the economic and defense interests of the United States, and who will contribute to an intermodal transportation system that effectively ties America together. We have received strong encouragement and support for these initiatives from DOT, MARAD, the military, and the corporate sector.
The cornerstone of the Logistics and Intermodal Program is a new academic major. Central themes in this major are the role of ports and maritime elements in global logistics systems, and concern for environmental management and transportation safety.
The Academy is also working in support of the Garrett A. Morgan Technology and Transportation Futures Program, which is Secretary Slater's initiative to ensure the availability of a fully qualified workforce for the 21st Century transportation system. Our charge within this program is the integration of intermodal topics into the undergraduate curriculum. The Academy has also undertaken several outreach projects directed at the K through 12 population.
We are also expanding our research activities. This involves inclusion of midshipmen in the research process, and joint programs with organizations such as the Transportation Research Board and the Volpe National Transportation Systems Center. The National Institute for Maritime Research and Education was recently established by MARAD at the Academy, in recognition of our potential as a national research resource.
At the continuing education level, we provide professional education and training for personnel in both military and commercial organizations. Our Center for Global Logistics and Transportation offers short courses, conferences, and seminars on intermodal transportation, logistics management, port operations, and related topics. Because it is self-supporting, the continuing education program leverages the Federal investment in the Academy, by providing the industry with outstanding professional training at no additional cost to the taxpayer.
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The U.S. Merchant Marine Academy has a worldwide reputation for providing quality education and training to merchant marine officers. This activity will remain at the core of our mission. However, the Academy is now responding to a changing transportation environment by developing value-added, customer-focused programs in logistics and intermodal transportation. Through these initiatives, we are promoting National defense and economic interests, and supporting the strategy and policy objectives of the Federal Government with regard to workforce development, transportation education, and research.
As stated by the Academy's incoming superintendent, Major General Joseph D. Stewart, former Marine Corps Deputy Chief of Staff for Installations and Logistics, ''As a long time logistician, I understand the enormous opportunities that are available for both graduates and continuing education in transportation and logistics. I think we need to pursue these opportunities, while at the same time building our country's best leaders.''
This concludes my prepared remarks. Thank you for the invitation to appear before you today. I would be pleased to answer any questions.
Mr. GILCHREST. Thank you, Professor Helmick. Mr. Sparks.
Mr. SPARKS. A non-militant pilot, I might add.
[Laughter.]
Mr. GILCHREST. Is there such a thing?
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[Laughter.]
Mr. SPARKS. Well, it depends what side of the mic you're planted on, I guess.
The needs of the U.S. Marine transportation system is a broad topic, but I will limit my comments to current issues that are of particular interest to pilots. Compulsory State pilots play an increasingly important role in marine transportation. The pilot's duty is to ensure navigational safety and facilitate the efficient movement of waterborne commerce. Because 95 percent of our country's oceangoing commerce is carried by foreign vessels, an APA pilot is often the only American aboard these ships transiting our waters.
Our member pilots take these responsibilities seriously and take great pride in their safety record.
Last May, I had the pleasure of testifying before this committee at a hearing on commercial vessel safety. I focused my reports on three issues of particular interest to pilots. Number one, recognizing the important role of the compulsory pilot. Number two, stressing the need for better enforcement of the English language requirement. And number three, the further development and implementation of automated information system and vessel identification and navigational systems, DGPS. These issues continue to be important to pilots in improving navigational safety in the future.
The importance of dredging has been widely discussed. Most often we have heard of the need of channel deepening projects. We should not forget the importance of maintaining channels at their authorized project depths and that the new mega ships are not only deeper, they are wider. Adequate channel width is equally important to navigational safety, and often forgotten. Pilots need sufficient room to maneuver these giant ships. Channels, turning basins, berths, and anchorages should be designed to provide a margin of safety. In addition to well maintained channels, pilots need accurate and up-to-date charts and real time tide and current information.
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These new challenges present us with opportunities to work collectively to improve our marine transportation system. The APA is very interested in the Department of Transportation's waterways management initiative, headed by the Coast Guard and the Maritime Administration. After participating in the listening sessions conducted throughout the country, pilots believe that this interagency working group, with industry input, can provide a positive force to identify solutions to the current and future needs of our marine transportation system.
As this initiative gains momentum, we feel there are two guideposts critical to it's success. First, pilots feel strongly the many excellent local and regional harbor safety committees that are currently in place. These local committees know the specific needs of their local ports and waterways. To be successful, the Federal waterways management initiative should encourage and support the work of these existing harbor safety committees and supplement, not supplant, them.
Secondly, pilots applaud a systematic approach to evaluating the needs of our marine transportation system. However, care must be taken to ensure that the effort is balanced and does not get derailed by one specific challenge, such as dredging, or intermodal connectors, or VTS. It is a system. It makes no sense to build a great cargo handling and land transportation capabilities ashore, if you can't bring the ship safely into U.S. ports.
In conclusion, we appreciate the interest of this subcommittee in approving our marine transportation system. The APA, as a professional association, and the APA members are committed to working with the subcommittee and all others who share the goal of making our waters safer and our ocean-borne commerce more efficient. Thank you.
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Mr. GILCHREST. Thank you, Mr. Sparks. Professor Helmick, I'm just curious, are you or is someone from the Merchant Marine Academy a part of these listening sessions put on by the secretary of transportation?
Mr. HELMICK. Yes, sir. In fact, several of us have been part of the sessions, and a member of our faculty is currently detailed here in Washington to work on the November conference—that's Captain Anne Sanborn.
Mr. GILCHREST. So you have been a part of the listening sessions?
Mr. HELMICK. I was part of the mega ship conference series. I've not been part of this particular series.
Mr. GILCHREST. I see. But there is somebody that's a part of that?
Mr. HELMICK. Yes, sir.
Mr. GILCHREST. Do you find that very helpful—in transferring that information in an academic perspective to the cadets.
Mr. HELMICK. Yes, sir, I would say so. And I would say that what we heard in the mega ship conference series, for example, and what I've read of what came out of these more recent sessions, confirms our own needs assessment about what will be required to make sure that the brainpower is available as a result of our new curriculum to help resolve some of these challenges that we've been talking about today.
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Mr. GILCHREST. Do you feel that the Nation is graduating enough people in this field, based on the projections of the increased marine transportation needs, based on the condition of our ports, our own fleet?
Mr. HELMICK. Sir, I would observe that the industry says there is a definite shortage of people with appropriate skills, education, and training to deal with the kind of integrated intermodal system that we're striving for at this time. So there is currently a shortage. That much I can say with certainty.
Mr. GILCHREST. How big is the shortage? Is it moderate, serious, critical?
Mr. HELMICK. I'd say it's a moderate one. I'd be happy to secure some numbers and provide them for the record, if you would like.
Mr. GILCHREST. Thank you. We would appreciate that.
Mr. HELMICK. Yes, sir.
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Mr. GILCHREST. Can you give us any idea as to the number or the percentage of graduates that go into the private marine industry?
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Mr. HELMICK. Sir, at this time, approximately—and it varies by year—approximately 20 percent in a recent year went active duty military. About 40 percent in total ended up in some form of marine terminal operation, intermodal company, or logistics provider—all transportation, or marine transportation-related occupations.
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Mr. GILCHREST. Thank you. I'm going to ask sort of a general question, because each of you—not so much Professor Helmick, although you may participate in this discussion—but Mr. Sparks, Mr. Cameron, Mr. Cox, and Ms. Borrone all made some reference to the fact that we are going to move to larger ships; that we need an intermodal system where the Federal, State, local, and private sectors get together and work out the infrastructure so that we can continue to participate and have some impact on this international marine marketplace. I think we have some impact on it now.
But I'm getting a sense of what people said this morning and what you're saying now is that at least for right now, there is no clear vision, no clear focus on how we are going to proceed. And that, Ms. Borrone, you made some comment that while the private sector needs to be the major player in this, the Federal Government has a role. And I think one of the comments you made—I don't know if I'll be able to find my notes—but one of your comments was—well basically, that there is no—
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Ms. BORRONE. Central.
Mr. GILCHREST. —central core understanding within the Federal Government about what the future holds, and which direction we all should work toward. Now, but there is some agreements. There's agreements that there's going to be bigger ships, that we need to maintain our harbors and our channels to accommodate those bigger ships.
Mr. duMoulin said earlier that—suggested that—there's going to be bigger ships, but fewer ports. And herein lies my question. It costs a lot to dredge—probably costs too much to dredge, if you look at everything that goes into the study as to whether we are going to do it, and then you have another study—preliminary engineering design study—as to, maybe we're going to do it, how we're going to do it. These things last for years, and they cost an enormous amount of money. And Mr. Cox, you made some statement about how we need to become more people efficient in this whole process.
So I guess—and Mr. Sparks, you're also talking about not only deepening the channels, but we're going to have to widen these channels. Now, assuming that we spend the few dollars available to us wisely and efficiently, and we know that these big mega ships are going to carry more cargo so there will be fewer ships, I would guess—at least in the short term—is there a mechanism that we need to look at as to where we're going to deepen these channels, where are we going to widen these channels, how do we figure out which ports are most suitable?
This morning—and I've dealt with the Corp of Engineers in the Port of Baltimore, and all the approach channels to the Port of Baltimore, and they are in direct competition Norfolk, and Wilmington, and Philadelphia, and New York, and you name it. So, if we're looking at—I'm talking too long, I guess, now—but how do we—we've got bigger ships coming, is there a—do we just let the chips fall where they may, the market takes it over, or do we in this group that's now listening and talking to each, do we need to get people together—New York people together with Baltimore people, with Federal people, with the private shippers, with the ship owners—to talk about, at least in an academic sense, what's likely to be the ports that would be able to receive the big ships?
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And just one other quick follow-up to that. I'm not saying that Baltimore's going to close down because we're only going to dredge New York, or New York is going to close down because we're only going to dredge the Port of Baltimore. Where in the equation do we have off-loading from a larger ship to a smaller ship or to a barge? It's my understanding, to be a little parochial, that about 5 years ago, 13 percent of the goods unloaded in Norfolk were barged up to Baltimore via the Chesapeake Bay. That's increased to about 30 percent—it's increasing. So, where in the equation do we look at feeder ships in this—is this a question that should be asked, or do we leave it go, is there no merit to it? What's the story here?
Ms. BORRONE. Can I start?
[Laughter.]
Mr. GILCHREST. Yes. Should we turn the green light on for everybody? You each get 5 minutes to respond.
[Laughter.]
Ms. BORRONE. I think you are posing many of the questions that those of us who participated in the listening sessions talked through. We don't have the answers to a lot of them, but we have pieces of the answers perhaps. And there needs to be a dialogue.
I'd like to start out with a couple of thoughts in response to what you said. The first is that I think we have to look at the political context that we operate within. We are a group of States, and the Congress agreed after the Civil War that we should be individual and that only through the congressional agreements would States be able to make compacts with each other. So we are very competitive as individual States primarily because we recognize that ports are an asset for economic development purposes in our local communities and our own regions supporting our State.
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But we also recognize today that our coastal ports and our Great Lakes ports also service multiple States. Many of us can look at our State or our port, like New York, and say that we can see that we support or provide the gateway for 20 or 30 different States. It is not just the coast of New York and New Jersey.
There is a role that we have to deal with, and that is the local role. But there is an international role, and there is a marketplace role. And how we weave those three pieces together, I think is the question you are asking.
Does that mean there should be a national port system, as there is today in Canada? We, the U.S. ports, argue no. We don't think there should be a national port system where the Federal Government and the States get together and say we will only have four or five or six primary gateway ports, maybe two on each of the East and West Coasts and maybe a Great Lakes port or a Gulf port, because we really believe in the system the U.S. is operating under, which is each State has the right to make whatever decisions and investments it wants to make.
And if a State wants to go in and dredge their harbor fully and take on the full navigation role and the maintenance role, they can do that if they can afford it. But we have also agreed that most of us cannot afford it unilaterally. I want to use the term ''confederacy,'' because that is the best way to express what I mean. An agreement among the States that we find there is national value, because we all play one role or another that complements each other.
Business helps us to see that they will make choices. If we are less efficient, if we are more costly, if we don't have the depth in place, business will move their cargo. They'll either move the vessels or the shippers will not choose our harbor because of the delays. Time and money are the factors that govern their decision-making. And so they may choose New York or Norfolk or Baltimore, depending on what their need is.
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So, too, will the private sector providing the road and rail system make choices about the investments they are willing to make based on what they perceive the value returning to them will be, because they can see in this system relationship that they'll get the volumes they are looking for to justify the investment.
So I think the need is for us to get together and talk; the need is for us to understand not only the forecasts and the business strategies that are unfolding and what the implications may be operationally, but also politically.
There is also, though, the need for the Federal Government to face up to what I was trying to describe, which is the fact that it is too stovepiped. We have too many agencies with single-focus responsibilities that have not successfully integrated in working with one another in the past to help us achieve change.
The Federal Government does make national policy by deciding what regulations it will employ and how. I return to the comment I made before about there being multiple agencies, for example, in the dredging permit process. That even with an agreement, brokered by the White House, that the Army Corps would be the lead, these other agencies like the EPA can delay a project for long periods of time.
Mr. GILCHREST. Fisheries Service and Fish and Wildlife.
Ms. BORRONE. Fish and Wildlife, exactly. I am not just picking on one agency. We've got to find a system—
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Mr. GILCHREST. That's interesting. I'm not picking on them either, but you are right that we have to find a system, because the Corps of Engineers doesn't always look at where fish spawn.
Ms. BORRONE. That's right.
Mr. GILCHREST. And Fish and Wildlife and the Corps of Engineers don't always look at where the ground water is that you might be intruding when you dig a channel deeper, and are you losing fresh water or are you having salt water intrusion in somebody's ground well. So I understand the nature of the complexity of it, and a system that is designed to expedite that process would—
Ms. BORRONE. So I think my concluding comment is that we need this seminar, the forum in November, to help us really start putting some of the problems and the issues on the table in a way that allows us to engage in a dialogue.
Mr. Chairman, I look at the portraits behind you and recall the very assertive efforts of Mr. Rowe to fashion the Intermodal Service Transportation Efficiency Act, and it was in thought—being in New Jersey and having worked with Mr. Rowe—that we'd actually see the system integrate.
And that's where I think we are today on the waterways side. We are seeing that we need to integrate not only the channels and their shape and their depth and their width, but also how they are managed on the Coast Guard's part so that they are safe, and on the environmental side so that they are protective of the environment. And then how we integrate the rest of it from an information and operational point of view so that we connect with the land side, and that pipeline is not constricted.
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Mr. GILCHREST. Well, this is a great next step then.
Ms. BORRONE. I agree with you, absolutely.
Mr. GILCHREST. Thank you. Mr. Cox.
Mr. COX. Thank you, Mr. Chairman. I only reacted earlier to a basic Virginian's response to a New Jersey person talking about the Confederacy. But I congratulate Lillian for trying to sum this up in a brief statement, but is it virtually impossible. I think there are just so many interactions in this circumstance.
And when you say confederacy and how are we going to work together, I think this country has always been best served by the capitalist system where we have invested capital and people make their decisions and there are some winners and some losers.
But at the same time, the national issue maybe has to be looked at in a different way than that. And we have always been successful doing that, I think, in the dredging arena. But rather than get launched into a lot of these complexities, let me focus down on the ship owners' side of the issue, because the ship owner has invested in an asset, and he's hopefully made a decision to invest in an asset which is going to pay him and his investors a return on that particular investment.
And he takes some chances and tries to guess what the future holds, and part of that determination is what does the infrastructure within which he has to take the ship look like; what does the ship itself have to look like from a manning standpoint. And I will make this statement, that I think Americans are very productive individuals, and in a given vessel we can be as productive as anyone else.
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But let's consider the types of ships. I will just use three: container ships, bulk ships, and tankers. Just from the ship owner standpoint, how do you design a port? What is important in a port from the particular segment's standpoint? If those two segments are being asked to pay for something, as in the Harbor Maintenance Tax that was based on value of cargo, that means something totally different to the ship owner when you then shift that cost over to a ship owner and say we are going to charge you on size.
And the effects of that down the line are even greater because you are not talking to the ship owner anymore, you are talking to the cargo he carries. So a bulk shipper says now I am going to have to absorb a huge cost because my ship is a relatively large ship compared to some of these others.
See, I am falling into a trap that I warned myself against, Chairman, and that is getting into all the complexities of this circumstance. Ships can be measured by different methods, and you can talk—
Mr. GILCHREST. So your preference would be the value of the cargo, as opposed to the size of the ship.
Mr. COX. Well, sir, I was not part of the debate in the early 1980's, and sitting here, I truthfully cannot tell you what I would, as an individual, suggest. I will suggest that we know that whatever we do there are going to be the effects of that, and we have to look into those effects. And there is no one better to ask about those effects than the people who are going to be impacted by it.
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Tankers, is the third type of ship that I would mention, we import a large amount of our oil into this nation, and that is only going to increase as our domestic supply decreases and as our needs for oil increase. We are going to have to find terminals. We are going to have to find ways of moving enormously greater amounts of oil into this nation. Have we looked at that? I think that is just one of the type of ships.
The second area I will talk about—I feel like I have already talked about too many areas—but the second area is the size of the ship. I think if a ship owner has built a vessel that can carry 3,000 20-foot equivalent units, the cost of building that ship has been amortized by the ship owner over a certain period time, he knows he is going to carry so much cargo over a certain time, and he is going to get a return on that investment.
Certainly, the shipper knows that he is going to pay a certain amount for that ship. When the ship owner then invests in a ship that carries twice as many containers, and at the same time, the incremental cost of building that ship is not double the cost of the 3,000 because we are talking about volumetric increases versus a one-dimensional change in a ship's size, you are talking about economies of size.
So the ship owner is therefore able to recoup a return on that investment which is much better based on a per container carrier. So the shipper knows that and so we, the customers of that service, benefit from that size.
Now, if that size ship cannot come into our country, then we are going to get the smaller size ship which has a higher cost basis, relative to the amount of cargo carried. So we as a nation, our society, is going to pay that additional price. And that is what I would suggest we have to consider when we are looking at all these variances.
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I say that the government, as much as it has its individual identities of the particular government agencies handling certain things, and there is a complaint that the government hasn't sat down and talked among itself perhaps to the degree that it should.
Without agreeing or disagreeing with that, I will suggest that we in the private sector industry perhaps can suffer under the same allegation, only more so. Maybe we haven't sat down. And there is a suggestion that the private sector have a task force to sit down in a room and try to hash out a lot of these complexities and just bring them out into the sunshine and see what we can make of those items that are then brought out onto the table. I think that may be a good idea.
Mr. GILCHREST. I think we can only benefit from the exchange of information.
Mr. COX. Correct, I firmly agree with you, Mr. Chairman.
Mr. GILCHREST. The complexity of it now, there is no solution that I know anybody has laid on the table. So that exchange of information is going to be extraordinarily necessary.
Joe, just one other quick question. I don't want to keep throwing these things back on Mr. duMoulin, but he made a comment that U.S. ports—he didn't use the word ''inferior,'' but I think it meant the same thing, not as good as many foreign ports. Do you want to make a—
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Mr. COX. I can make a comment, Mr. Chairman, because we have dealt with INTERTANKO on many issues and we have certainly worked with them on the port and safety study that they put together. They met with my board of directors and they presented that, and I think they have made many valid points.
But the one place where we would disagree would be to label our ports as unsafe, because we believe that we are bringing our vessels into our ports in a safe manner. We are crewing them with able people, we are running the ships themselves safely and, we are maintaining those vessels. We work with the American Pilot's Association. We think we have some of the finest pilots in the world. We think we are operating a safe system.
The point we would make as the Chamber Shipping of American is can we make it safer, and we think undoubtedly, yes. And with that, we agree wholeheartedly with the full effort that INTERTANKO was making to try and make our ports and our waterways transport safer.
But we will digress from them by stating that we have unsafe ports.
Mr. GILCHREST. Thank you, Mr. Cox.
Mr. Cameron, any comment on this?
Mr. CAMERON. Yes, Mr. Chairman, just a couple of quick points. One is that as we in American industry in determining plant locations and new sites, look at port facilities and rail connections' proximity to airports. In doing so, we look for a coordinated system where we can move our goods overseas or we can import goods for the U.S. market.
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I think that the subject is an important one to discuss. I don't know if there is only one answer. I think that market forces will dictate which ports continue to grow. Those ports that are responsive to changing transportation needs will win the decisions about where we place the few dollars that we have.
I will just make one point. There are larger ships—scheduled for operation soon. These ships will have different port facility requirements, i.e., deeper draft, new terminals. As yet, we don't knowhow many of these ships will enter the market. Do we restructure all ports to accommodate these ships or do we create a system of small niche ships and feeder ports.
But I think one thing is that if you have ever been to the port of Halifax just to the north of us, there are, rail tracks next to the piers. And that is how the Canadians are able to move freight long distances fairly inexpensively. And that particular port is known for moving a lot of American goods in and out of the United States.
And I think that until we get those kinds of operations in the United States, where you have on-dock rail facilities and you have the safe, efficient, economical transfer of goods, I think U.S. ports are not going to be in contention for a lot of freight in the future.
Mr. GILCHREST. I know you are not suggesting—and I shouldn't even—but the Canadian system is different from the U.S. system, and I would assume that the European community has a somewhat different, more than a confederate system, more of a Federalized system in determining the whole structure of their ports.
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Does that give them an advantage to what we do here?
Mr. CAMERON. No, just the opposite, I think. Generally, the Europeans have only a small amount of freight moving on their rail systems. Almost all of their cargo, not all, but much of their cargo actually moves over the road. They have got a much more difficult problem landside than we have in the United States.
We still have a great rail system, but I think we ought to use it more and I think that is the expansion to the major ports that should be made. And I think it will be made in the future.
Mr. GILCHREST. Thank you. Mr. Sparks, any comment on this?
Mr. SPARKS. Just a few for a minute or two. You mentioned the dredging and the expense of dredging. The water is still the cheapest way to transport goods, no matter how much the cost of dredging is.
Mr. GILCHREST. So it's cheaper to dredge than it is to lay a rail or build a highway.
Mr. SPARKS. Yes, sir. You know, you've got a lot of problems when you are talking about roads and railways. That really becomes a lot of problems. It is much easier, I think, to improve the waterway, even though it is costly.
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Probably the biggest problem today is not cost, either, with the dredging, it is the environmental issues, as you point out. That might be the biggest hurdle to get over. I think that the ports that do a lot of business and are willing to put forth the amount of money to participate with the Federal Government, they are the ones that will eventually become the main ports.
I look at it as there are not going to be as many ports in the future as there is today, simply because of the draft and the cost of those dredgings. So it might be narrowed down. But probably the main thing I would want to say is whatever this is, it has got to come to the bottom line that it costs money. And it is very difficult to appropriate money through this body or the other body. So that is always the number one issue, the money issue.
Mr. GILCHREST. Mr. Cameron, could you give us a figure. You mentioned there is about 355 ports in the United States, but that 90 percent of the cargo goes through a certain number right now. Do you know how many ports take up 90 percent of the cargo? Would it be two dozen? Fifty? One hundred?
Mr. CAMERON. I think that there are certainly major ports and subports across the U.S. Certainly, the West Coast, in my opinion, is the busiest part of our port system.
Mr. GILCHREST. How many major ports on the West Coast?
Mr. CAMERON. I think three qualify as major.
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Mr. GILCHREST. Three. How many major ports on the East Coast?
Mr. CAMERON. Major ports?
Mr. GILCHREST. Could we count them on two hands?
Mr. CAMERON. I would say you can, yes, major ports.
Mr. GILCHREST. How many major ports in the Gulf?
Mr. CAMERON. You have New Orleans and Houston.
Mr. GILCHREST. So if we are looking at three major ports on the West Coast, two in the Gulf of Mexico, what would we say on the East Coast? Six?
Mr. CAMERON. That would be a good number. It's better than five.
Mr. GILCHREST. I guess the question is if we are looking at bigger ships, are these dozen ports in our coastal waters, do we assume these are the ones that will be carrying—should these dozen ports then be dredged to accommodate the bigger vessels?
Mr. CAMERON. There is no question about economic efficiencies in operating a large ship. I am not a ship operator, but certainly, the fewer number of ports it calls on, the more efficient it is. Large ship operators are not going to visit 20 ports on the East Coast. They will select specific ones to call, as they do in Europe.
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So you are correct. I think we are narrowing down on the freight side which ports will be used in the future, no question about it. But I think the smaller ports, like Boston, for example, are still going to handle those low value cargos such as oil, LNG, fertilizers, grains, and sugars. Even though they are not major freight ports, there will still need to be ports to handle bulk cargos. 6,000 TEU size vessels will not be the type of ships that will use these ports.
Mr. GILCHREST. Mr. Cox.
Mr. COX. Thank you, Chairman. I am informed that there are 84 deep draft ports in the U.S., so certainly we've got some questions about dredging there.
Mr. GILCHREST. When you say deep draft, what is the depth of it? What is considered deep draft?
Mr. COX. Thirty feet.
Mr. GILCHREST. Thirty feet is considered deep draft.
Mr. COX. It varies by the nature of the source. It can be 45 feet or 14 feet or even 12. That is from a colleague of mine that I have been working with from the Association of Port Authorities. I am sure they are correct on their numbers.
But I went back, Mr. Chairman, to the Corps of Engineers this morning, where they said they have 926 port and harbor projects that are costing $500 million for operational maintenance dredging. I think we heard testimony about 350 ports, and 150 of the ports are the ones that are transiting 90 percent of the cargo. These numbers begin to make some sense.
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But, Mr.Chairman, the idea I had was even if we have a limited number of ports and we are doubling all these cargos, it dawns on me that I don't want to have going through my back yard the road that is going into that port. Because there is going to be truckload and trailer and it is an enormous transference of cargo in one single location. I don't think that is going to happen, either.
Mr. GILCHREST. Thank you.
Mr. COX. That's a personal opinion. It's the old not-in-my-backyard.
Mr. GILCHREST. I guess if I lived in Dundalk right in Baltimore, I wouldn't want—although if you talk to the Port of Baltimore, the more ships that come in, the better, which is true to a certain extent.
Professor Helmick, any comments you want to make?
Mr. HELMICK. Sir, just a couple of points, briefly. As I recall, in the current world fleet, the number of megaships—that is, those of over 4,500 TEU (20-foot equivalent unit) capacity, are less than about 1 percent of the world fleet.
Those on order constitute about eight percent—and I would have to verify that number—of the world order book for container ships. My own view is that there is perhaps some tendency to view the megaship issue in black and white. In other words, to believe that the entire fleet will in short order become vessels of that type, the very large ones with their demands on infrastructure and ports and terminals.
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And if we talk about a doubling or even tripling of trade by the year 2020, I think the issues related to landside congestion and landside access that Mr. Cox referred to mean that most of our ports are going to have to help bear the load.
Now, on the draft issue in particular, the very deep draft of the large container ships, as those become more prevalent, will mean that only certain ports are capable of handling them. But I don't think that means or implies that traffic necessarily goes away for the others.
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Mr. GILCHREST. This is fascinating. I guess I could stay here for the rest of the afternoon. We're trying to juggle all this.
Mr. SPARKS. I think if you would have said to any one of the panelists that 6 or 7 years ago, what would be a major port on the East Coast, I don't think anybody would have put Charleston in that mix. And I think their minds have drastically changed now.
Mr. GILCHREST. You say you probably wouldn't use Charleston 6 or 7 years ago, but you would today?
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Mr. SPARKS. Six or seven years ago, it would not be on a list of the major ports.
Mr. GILCHREST. But it is today.
Mr. SPARKS. Today it definitely is, most definitely. It is a coming thing. They are spending millions upon millions of dollars there improving the facility and enlarging the facility. They've got a lot of land, so that is now in the category. So this forever changes.
Also, you just couldn't pick out a set of places and say, well, these are going to be the major ports and these are the only ones that are going to do it, because circumstances change and technology changes. So I wouldn't get hooked into just listing 12 or 15 places.
Mr. GILCHREST. Continue the dialogue.
Mr. COX. Mr. Chairman, if you have time for an anecdote, I could talk about a meeting I had in Houston where we were dealing with a pilotage issue and the port commissioners are the pilot commissioners in that port.
I was talking with the director and we were talking about costs of coming into Houston. Then he gave me the exact cost down to the penny of what it cost to bring a container into Charleston and get it into a Texas area. And I said what is that? And he said well, Charleston is a competing port for us for container traffic, so we have to know what the commercial realities are. And I must tell you, that surprised me. That was a statement by the Houston people saying we are in competition with other ports in this country for cargos and we have to know what the costs are for moving cargo.
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Mr. GILCHREST. Charleston is competing with Houston for container traffic?
Mr. COX. Houston people know how much it costs to bring a container into another port and take it from that port to their interior part of their State or the area that they service.
Mr. GILCHREST. Does Houston have a disadvantage because of where it is located?
Mr. COX. Well, Chairman, this is part of the complexity of it, and that is why I mentioned it. Houston is in the Gulf of Mexico. You have to bring a ship in for another probably day and a half to almost two days to get it into the Houston location versus getting the ship into an East Coast location, and then trailering or putting it on a train and getting it to an inland situation.
Mr. GILCHREST. How can Houston entice container ships to Houston?
Mr. COX. I would think it is a matter of economics, sir.
Mr. GILCHREST. Probably so. Well, gentlemen, thank you all very, very much. It has been very helpful, and we hope to see you again at the next hearing.
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The subcommittee is adjourned.
[Whereupon, at 2:40 p.m., the subcommittee adjourned subject to the call of the Chair.]
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