Surface Transportation and Merchant Marine Subcommittee field hearing scheduled for Monday, July 7, at 11:00 a.m. at the Fort Eustis Maritime Museum in Newport News, VA. Members will hear testimony relating to current proposals for foreign and domestic ship disposal and the U.S. Maritime Administration’s plans to meet its statutory deadline for disposal of obsolete National Defense Reserve Fleet (NDRF) vessels. Senator Allen will preside. Following is the list of scheduled witnesses the members will hear from (not necessarily in order of appearance):
Witness Panel 1
The Honorable Jo Ann Davis
Mr. Chairman, I would like to commend you for coordinating this field hearing today on a most important topic. Your committee clearly recognizes the importance of dealing with the issues related to the James River National Defense Reserve Fleet, known locally as the “Ghost Fleet.” We Virginians have for far too long gazed across our beautiful waterway, the very waters that carried the English settlers to Jamestown, to view that hulking mess of ships. I believe in this case, our Nation has not served the Commonwealth well by allowing Virginia to be the dumping ground of these deteriorating, obsolete ships. While I recognize and appreciate the need for a reserve fleet, especially in today’s dangerous world, this environmental “ticking time bomb” needlessly threatens our shores and the way of life for tens of thousands of Virginians. I believe the Federal Government must perform its duty by providing the resources to rid the James and the Tidewater Region of this catastrophe waiting to happen. In a recent report, MARAD, as they assessed the possibility of an environmental mishap from the James River Reserve Fleet, “concludes that damage could stretch for 50 miles along the river and take weeks to clean up. MARAD continued, assessing the ecological damage could take years.” As you know Senator, the Ghost Fleet includes the most decrepit ships in the national reserve, stored in what one Virginia official described as ‘probably the worst place, from an environmental standpoint, that you could think of.’ Together, the fleet holds about 7.7 million gallons of oils and fuels, according to the latest government estimates. That’s slightly less than what the Exxon Valdez spilled off the coast of Alaska in 1989. (MARAD Report)... Virginia can not wait any longer. In Fiscal Year 2003, President Bush asked for only $11 million to scrap ships. I worked hard, and thankfully my colleagues and the House Merchant Marine Panel recognized the severity of this situation and authorized $20 million for the FY ‘03 ship disposal account to deal with this looming problem. Ultimately, after much debate and arm twisting, the President’s request was appropriated. And my colleagues in the Senate were able to provide an additional $20 million from DOD to fund scrapping at $31 million last year. We are making progress. For Fiscal Year 2004, I am happy to report that again the House Armed Services Committee has authorized my request of $20 million for ship scrapping. And just last week I spoke to Chairman Istook to again make my case to his committee that funding from Transportation Appropriators was critical to continuing this battle. September 30, 2006, the legislative deadline to rid the Reserve fleet of obsolete vessels, is quickly approaching. MARAD is making good progress and I look forward to Captain Schubert’s testimony and his update as to what the Maritime Administration has planned for this summer. Last we spoke a 13 ships deal was in the works and expected to be signed any day. Additionally, I am told that the Maritime Administration has plans for an additional 6 ships to soon follow. It is my hope that Captain Schubert can confirm these recent developments. Finally, I would be remiss if I did not comment on recent press articles regarding ship scrapping abroad. I concede that it is imperative that every practical measure is taken to ensure an environmentally sound scrapping program. Having said that though, I firmly believe that the best policy for scrapping takes into consideration the timely scrapping to meet the 2006 legislative mandate to rid MARAD of it’s obsolete inventory, cost effective proposals that provide the US government with the best value, with a strong emphasis on efforts to scrap ships domestically... BUT not at the expense of quicker more cost effective efforts abroad. Because as we all know, the more affordable our scrapping program is the more ships we can scrap. Thank you Mr. Chairman for allowing me to testify today.
Witness Panel 2
The Honorable William G. Schubert
Good morning, and thank you for the opportunity to testify about the obsolete ships in the James River Reserve Fleet and the Maritime Administration’s Ship Disposal Program. The Maritime Administration (MARAD) serves as the U.S. Government’s disposal agent for merchant type vessels of 1,500 gross tons or more. Most of the ships scheduled for disposal are located at MARAD’s three anchorages: the James River near Ft. Eustis, VA (JRRF); Beaumont, Texas (BRF); and Suisun Bay near Benicia, California (SBRF). In total, there are approximately 130 obsolete ships in all three fleet sites that make up a portion of the National Defense Reserve Fleet (NDRF). The NDRF was established for the maintenance of readiness assets, including the Ready Reserve Force (RRF) and other vessels owned or acquired by the United States Government that are determined to be of value for national defense purposes. The NDRF is maintained by the Secretary of Transportation; NDRF ships, especially the RRF component, serve as a reserve of vessels which can be activated to help meet U.S. shipping requirements during a national emergency. The National Maritime Heritage Act of 1994 authorizes MARAD to dispose of obsolete NDRF vessels, and directs the use of any proceeds derived from disposal. Prior to 1994, MARAD was able to sell obsolete vessels for dismantling to the highest bidder. From 1987 to 1994, MARAD sold for export and disposed of 130 ships at an average price of $108/ton, which netted approximately $80 million. However, as a result of Federal prohibitions on the export of PCBs (polychlorinated biphenyls) found onboard many obsolete vessels, as well as increasing national and international concerns regarding environmental and worker safety issues, foreign sales were stopped in 1994. With overseas sales curtailed in 1994, and upheld in 1998 as a specific Federal Government moratorium on overseas ship dismantling which expired in 1999, MARAD turned exclusively to the domestic market to sell ships for dismantling. However, only a few domestic facilities expressed an interest in purchasing vessels for dismantling. Since 1994, MARAD has sold 22 vessels, only 12 of which have been dismantled. Of the remaining vessels, the purchasers did not accept the vessels and as a result, the sales contracts were terminated. Marginal profits due to changing market conditions for scrap metals and the high costs for removal and disposal of hazardous material contributed to the decreased viability of the domestic sales program. When the domestic sales option became less viable in the mid-1990s, MARAD began negotiations with the Environmental Protection Agency (EPA) to allow the export of ships after the removal of liquid and “readily removable” PCBs prior to export. Two agreements were signed: November 30, 1995 and November 10, 1997. The first had unworkable notice language and the second was never put into effect because MARAD agreed to refrain from further pursuing this agreement due to heightened international attention on ship dismantling facilities in the third world. On September 23, 1998, Vice President Gore, issued a memorandum to then-Secretary of Defense Cohen and then-Secretary of Transportation Slater placing a further interim moratorium on efforts to export vessels for dismantling until October 1, 1999 to ensure that the Interagency Panel on Ship Scrapping recommendations were fully considered. During this time period, the ship disposal program was suspended. Although no ships were dismantled, vessels continued to arrive at the fleet sites. At this time, MARAD was also prohibited by statute from paying for dismantling services. Thus, a large backlog of obsolete ships was created with the number of obsolete vessels in our fleets increasing by over 60 ships between 1997 and 2000. This critical situation, exacerbated by the deterioration of hulls over time, prompted the Department of Transportation’s Office of Inspector General to name the disposal of MARAD’s obsolete ships as a Top 10 Management Challenge in 2000 and 2001 for DOT. The National Defense Authorization Act for FY 2001 contained statutory amendments which gave MARAD unprecedented ability to pay for dismantling services, if necessary. This change, along with $10 million transferred from a DoD appropriation to MARAD for ship disposal, allowed us to begin implementing Federal payment for a ship disposal program. MARAD was instructed by Congress to scrap obsolete vessels at qualified facilities, using the most expeditious scrapping methodology and location practicable. Scrapping facilities were to be selected on a best value basis consistent with the Federal Acquisition Regulation (FAR), without any predisposition toward foreign or domestic facilities. MARAD was also given a September 30, 2006 deadline to dispose of all obsolete vessels, and required to submit to Congress a report detailing its ship disposal program. MARAD began a program using a time phased and level-funded approach consisting mainly of domestic vessel dismantlement and recycling. Using the $10 million provided in the FY 2001 DoD Appropriation, MARAD was able to dispose of six high-risk vessels in domestic facilities. However, it became apparent that MARAD would not be able to meet the 2006 deadline to dispose of all obsolete vessels without direct appropriations and the use of additional vessel disposal alternatives. The high costs and limited cost-effective capacity of the domestic dismantling industry would make the disposal of obsolete ships a larger challenge than anticipated. In FY 2002, the Administration requested $11 million for ship disposal, but funding was not appropriated. At a crossroads regarding the ship disposal dilemma, the Agency was left with two approaches. The first approach was to do nothing and wait for future appropriations. To MARAD, this appeared irresponsible. The second approach was to start creating opportunities and seek out all possible no-cost options. In September 2001, MARAD initiated a Program Research and Development Announcement (PRDA). The PRDA is a competitive procurement mechanism allowable under the FAR. This competitive announcement solicited ship dismantling/recycling proposals from the ship dismantling industry both foreign and domestic. The PRDA provided the industry with opportunity to propose feasible and cost-effective solutions to MARAD’s ship disposal challenge that were based on their capabilities, methods and innovations and that made sense for their business. During FY 2002, MARAD received numerous proposals involving foreign vessel recycling facilities, so we began discussions with the EPA regarding possible export options. Through the PRDA process, we began to see opportunities to recycle ships domestically or export ships in a responsible cost-effective manner. MARAD’s discussions with EPA have led to a cooperative relationship that is results-oriented in seeking solutions to the challenges of the NDRF. We also began identifying other disposal opportunities, such as artificial vessel reefing and the deep sinking of vessels in conjunction with Navy’s SINKEX Program. In FY 2003, MARAD received, for the first time, a direct appropriation that met the Administration’s request for the Ship Disposal Program. This direct appropriation, coupled with additional funding received from a FY 2002 DOD appropriation, has allowed MARAD to maximize the number of vessels disposed. Taking advantage of all possible alternatives and options is critical to the effort of removing ships from the James River Reserve Fleet. Today, MARAD is announcing the award of one contract for the removal of three high priority vessels from the James River Reserve Fleet. Currently, we are on the verge of closing on another contract that would remove fifteen ships – at once, from the James River Reserve Fleet. Combined, this will be the largest removal of obsolete ships in a single year from any of MARAD’s fleets, including the James River Reserve Fleet, since 1993. The three-ship award is the result of a domestic Invitation for Bid (IFB) that was submitted by ESCO Marine of Brownsville, Texas. ESCO was awarded a contract to dismantle three high priority ships from the James River Reserve Fleet for $2.2 million. This is the second award to a Brownsville, Texas ship disposal facility in 2003. Earlier this year, Marine Metals was awarded a contract to dispose of two high priority vessels from the James River Reserve Fleet for approximately $600,000. The pending contract that has not yet closed will be the result of a negotiated PRDA. This company will remove a total of fifteen ships from the James River Reserve Fleet site. Thirteen vessels are scheduled to be dismantled at the AbleUK facility in Teesside, England and two will be converted for operation outside U.S. trade. MARAD employed a variety of procurement methodologies to achieve the best value to the taxpayer and Government in order to remove as many high priority ships as possible from the James River Reserve Fleet. The IFB and PRDA have resulted in best value awards. The ESCO Marine facility, and the PRP proposal that utilizes the Able UK facility, were selected under a best value basis consistent with Federal Acquisition Regulations (FAR). For the remainder of FY 2003, MARAD expects to continue making awards based on PRDA proposals already received and additional IFBs. Discussions have recently been opened with a domestic company related to their PRDA proposal for the dismantling of additional high risk James River Reserve Fleet vessels. Both domestic and international PRDA proposals that represent best value to the government will continue to be considered. With the initiation of the PRDA process, we have seen more competition and a significant decrease in disposal proposal costs since we first began paying for services in FY 2001. As you may know, the President’s budget includes $11 million to support MARAD’s continued efforts to eliminate high risk ships and significantly mitigate the environmental threat of oil discharge at the fleets. Adequate funding and aggressive pursuit of all cost effective disposal alternatives is especially important given the projections that approximately 47 additional vessels will be added to MARAD’s fleets as non-retention, obsolete vessels over the next five years. Our program currently focuses on removing all vessels that have a high or moderate risk as soon as possible. Having all disposal alternatives available to MARAD and the necessary funding in place to ensure that obsolete vessels can be disposed of at a rate greater than obsolete vessels coming into MARAD’s fleet will help us achieve these mutual goals. Mitigating the risk by removing the risk is what the Department of Transportation and the Maritime Administration intends to achieve. Thank you for the opportunity to discuss the disposal of obsolete Government vessels today. I would be pleased to answer any questions you may have at this time. ##
Witness Panel 3
The Honorable Joe S. Frank
· As a long-serving member of local government, I can tell you unequivocally that if the local government or a business tried to get federal permits to operate something like the James River Reserve Fleet it would be impossible. · The Federal Government does not hold itself to the same standards that it holds others when it comes to environmental and safety regulations. · I recognize that the purpose of the Reserve Fleet was a worthy one, however, time has passed that purpose by. · If some other organization wanted to have such an operation there would be many regulations. o There would be a requirement for an environmental assessment. o Surely there would be a requirement for an environmental impact statement. o Could anyone seriously imagine that a “finding of no significant impact” would result from a review of that operation? · The reasons why we are alarmed about the continuing presence of these obsolete vessels have been stated many times. · According to reports, over 70% of the ships in the Reserve Fleet are considered obsolete and should be scrapped. · Several million gallons of oils and lubricants remain aboard these vessels in a quantity approaching that which was spilled in Alaska by the Exxon Valdez. · In a 2002 report prepared by the government’s own Maritime Administration, it was suggested that an oil or gas spill from these ships is no longer a possibility, but a probability. · There have already been several documented fuel oil leaks from the Reserve Fleet in the last five years involving approximately $2 million of clean-up costs. The potential for serious environmental damage and the potential for a break-away ship to damage property or the James River Bridge are obvious concerns. · In today’s world, we have to add the fear that these ships could in some way be used as potential terrorist platforms. · On behalf of the citizens and City Council of Newport News, I urge you to move forward with all dispatch to eliminate this threat to our community’s environment and public safety.
The Honorable David K. Paylor
Mr. Chairman and members of the Committee, on behalf of Governor Warner I want to thank you for this opportunity to present testimony before you. The growing danger presented by the aging vessels of the National Defense Reserve Fleet anchored in the James River has become clear to all of us. This section of the James River is an ecologically diverse and sensitive estuary, which provides critical spawning, nursery and wildlife habitat. Our seafood industry relies on a healthy James River. As the hulls of these ships continue to corrode the likelihood of large oil spills increases. These spills would wreak environmental havoc and require expensive cleanup operations. Governor Warner underscored this threat last summer by calling upon the Maritime Administration to enter in to a Consent Order with the Commonwealth to remove the oil from the ships and immediately begin scrapping these ships to remove them from the James River. He also called upon the Environmental Protection Agency to establish guidelines that allow environmentally responsible scrapping operations to begin and to help find sources of funding. In truth, the lack of funding and of cost-effective disposal options was the principal factors that had stalled the scrapping effort. I want to recognize and thank Senator Warner, Congressman Wolf and Congresswoman Davis for their tireless efforts to provide funding to MARAD to restart the ship disposal process. The $31 million provided last year as a result of their efforts is an excellent beginning. As you have already noted, more funding will be needed. But with good planning we can be well on the way to removing the risk from the river. The Commonwealth’s principal goal is to remove the threat of oil spills and environmental damage from the James River. And the disposal effort must be done in an environmentally responsible manner, which protects the safety of workers. This responsibility falls to MARAD. Our expectation is that these criteria will be met and disposal of ships will proceed in a cost effective manner, which maximizes the use of available money. There are more than 70 non-retention vessels in the James River National Defense Reserve Fleet. At least 25 of these are designated as high-priority vessels, indicating that the risk of oil release is high. These ships need to be disposed of soon or the oil must be removed from their cargo. MARAD has been keeping the Commonwealth informed of its progress on a limited basis. However, we have repeatedly asked for, and have yet to receive, a comprehensive plan from MARAD for ship disposal based on funds available and anticipated additional revenues. This is important to us to assure that the risk is dealt with in a cost-effective manner. For example, MARAD has consistently resisted removing oil from the vessels because it adds to the overall cost of disposal. While we recognize this we are looking for some certainty that resources will be available to dispose of ships expeditiously and in priority order. Without some assurance that the high priority vessels will be removed in the next 12-24 months, and that funds will be available for continued disposal of remaining ships, we will insist that money be spent immediately to remove the oil from ships so that the primary source of environmental risk is gone. The Commonwealth’s highest priority is to make sure the oil and the ships are removed from the James River so that they no longer pose a threat to our people and environment. As I have said before, we will insist that this be done in an environmentally responsible way. And we look to MARAD to spend their money wisely to achieve a maximum result. To the extent it is cost-effective, we the find the reefing alternative to be attractive because it can result in an ongoing economic return from tourism and, perhaps, lower the per ship disposal cost. We count on the Environmental Protection Agency to establish guidelines that protect the environment and allow scrapping to proceed effectively. We need to recognize the ships already pose a significant environmental risk and must be removed. And we look to the United States Coast Guard to assure the ships are transported safely to their destination. I thank you again for your attention to this critical matter. We ask for your assistance to provide continuing appropriations to MARAD to complete the task of ship disposal. Thank you for your time and attention.
Ms. Patricia Jackson
The Honorable M. Kirkland Cox
Chairman Allen and members of the Subcommittee, thank you for the opportunity to discuss the issues related to the disposal of obsolete vessels in the National Defense Reserve Fleet. As Chairman of the House of Delegates’ Committee with responsibility for oversight of Virginia natural and historic resources, my remarks will focus on the environmental aspects of having these vessels on the waters of the Commonwealth. First, Mr. Chariman, let me extend my appreciation for your personal efforts and the rest of the Virginia delegation in securing the initial commitment of $31 million for remediation efforts. But, I think we all would acknowledge that properly completing any clean-up effort by 2006 will take a significantly greater commitment of federal funds. The James River Ghost Fleet is seen by many in the Commonwealth as the greatest threat to the environment of the Lower James River. These ships contain in excess of 7.8 million gallons of oil and significant amounts of PCBs, mercury, asbestos, and lead paint. According to our Department of Environmental Quality, since 1998 at least eight oil spills have been linked to these ships. We worry that a spill of thousands of gallons could result in damage to fishery habitats, wetlands, aquatic life, waterfowl, our seafood industry, and tourism. I would also note that our seed oyster beds are concentrated in the James. As Senator Warner has stated, and I find myself with a similar reaction, that “everytime I hear that a hurricane is approaching the coast, I think of the fleet.” One indication of the potential threat represented by the fleet was described in the Maritime Administration’s worst-case scenario report. The report commissioned by the agency, at the request of our Department of Environmental Quality, concluded that if just two of the more dilapidated ships broke apart due to a storm, 50 miles of the river and shoreline would be contaminated. The cost of clean-up could exceed $35 million. Even as recently as May of this year, oil leaked from one of the ships, which washed up on a 400-foot stretch of shore near Fort Eustis. Luckily only a small amount of oil was involved. Mr. Chairman, I know you recognize the importance of protecting this vast tributary of the Chesapeake Bay is not without some historical context. We appreciated your interest and efforts as Governor to find common sense solutions to our environmental challenges. Almost 30 years ago you’ll remember the upper regions of the James just south of Richmond experienced what some have characterized as its greatest environmental insult as a result of the Kepone contamination. We are still trying to recover from that disaster. So, many Virginians are again concerned about the health of their river, seeing the current situation as a “ticking time bomb,” which must be handled with some sense of urgency. It is regrettable that this situation has gotten to the point where Virginia’s Department of Environmental Quality has had to issue a series of Notice of Violations, the latest on June 18, 2003, for the May 13th oil release from the Mormac Wave. I understand that Maritime Administration has refused to sign any consent order to resolve the environmental issues claiming they cannot waive sovereign immunity. I hope this can be resolved without having to go to court. Virginia’s position has been that we want the risk removed from the river. That means if the funds are limited and full funding is not available, then some of the dollars should go to removing the oil from the remaining ships. I understand that MARAD (Maritime Administration) prefers not to remove the oil first because it increases the overall costs. The state has given MARAD the time to develop a plan for using available funds before taking further legal action. I have been informed by the Warner Administration that as long as MARAD’s plan addresses the risk and shows an ability to completely mitigate the problem, we will be satisfied. Addressing risks involves things like removing ships, with those most likely to leak going first, and some demonstration that there will be a sustained effort to scrap others. But, I am encouraged that our Secretary of Natural Resources, Tayloe Murphy, has communicated his desire to work with MARAD in addressing this environmental threat represented by the fleet. While I think the ultimate responsibility for the problem rests with the federal government, I am convinced that Virginia, working with the federal government, can develop an effective strategy for resolving this problem. In summary, Mr. Chairman, I thank you for your leadership in holding this hearing. I believe it will help bring this issue into focus as the deadline for action approaches to get the funds needed to complete this clean-up effort. Thank you, Mr. Chairman.