Maritime Administration (MARAD) Program Overview

1. Maritime Administration (MARAD) Program Overview October, 2016

2. MARAD Mission, Vision and Strategic Goals MISSION To foster and promote the Merchant Maritime industry of the United States to ensure the Nation’s economic and national security. VISION To achieve cargo, readiness and infrastructure priorities for the U.S. Marine Transportation System by developing and sustaining organizational excellence and effective advocacy. GOALS CARGO: Develop domestic and international transportation opportunities to modernize and sustain a competitive commercial U.S.-flag fleet that ensures the Nation’s economic and national security READINESS: Ensure the availability of a capable U.S. Merchant Marine Fleet with modern U.S.-flag vessels, skilled labor and global logistics support to meet national maritime transportation requirements in peacetime emergencies and armed conflicts INFRASTRUCTURE: Support the development of America’s ports, shipyards and related intermodal infrastructure as key integrated components of an efficient, resilient and sustainable national transportation system and freight network ADVOCACY: Advance awareness of the necessity and importance of a strong U.S. Marine Transportation System

3. MARAD Organizational Chart Total Full-Time Positions for FY 2016: 873

4. MARAD Gateway Offices and Reserve Fleet Sites USMMA Kings Point, NY U.S. Transportation Command Liaison Officer (LNO) at Scott AFB Joint Chiefs of Staff (J4)/Department of Defense (DoD) LNO at Pentagon Suisan Bay Reserve Fleet James River Reserve Fleet Division of Pacific Operations Oakland, CA Beaumont Reserve Fleet

5. U.S. Merchant Marine Academy (USMMA) • USMMA is an accredited Federal institution of higher education located at Kings Point, NY. The Academy educates and graduates licensed Merchant Mariners and U.S. military officers who will serve America’s marine transportation and defense needs • The Academy offers a four-year program leading to a Bachelor of Science Degree, a U.S. Coast Guard License, Merchant Marine Credential with Officer Endorsement for Unlimited Tonnage or Horsepower, and an officer’s commission on active duty or in reserve unit of the U.S. Armed Forces • Approximately 230 USMMA students graduate annually • In return for a fully funded four year education, graduates incur a 5 year service obligation to either sail as a U.S. Merchant Marine officer on U.S. flag vessels for a minimum # of days/year, or to serve as an active duty military officer • While sailing commercially, they must also maintain in good status with the U.S. Navy Reserve, or other Armed Service Reserve for eight years

6. State Maritime Academies (SMAs) • The six SMAs (ME, MA, NY, MI, TX, and CA) ensure sufficient highly trained Merchant Mariners are available to meet the economic and national security needs of the nation. Federalfunding supplements SMA state government funding. • An average of approximately 700 Merchant Marine officers graduate annually • MARAD’s SMA program provides: • Student Incentive Payment (SIP) Program: Stipend (Max $32k) in return for a service obligation • Sail on U.S.-flag vessel for 3 years, maintain a valid USCG Merchant Mariner Credential for 6 years and serve in U.S. Armed Forces Reserve for 8 years • Direct funding for maintenance and operations support for credentialing programs • Maintenance and repair of six Department of Transportation (DOT) owned training vessels • Since the late 1800’s the Federal Government has provided training ships to each of the six SMA’s. Vessels today are on loan from MARAD’s National Defense Reserve Fleet (NDRF). • Critical to obtaining minimum sea time for U.S. Coast Guard (USCG) credentials and international training endorsements - provide approximately 123,000 cadet sea days • Training vessels also provide relief support in times of national emergency • School ship recapitalization is a priority • Two oldest ships at 54 and 49 years old and the ships are rapidly approaching or have exceeded the designed service life and any further extensions are costly and substantially increase the annual operating cost • MARAD is exploring options to recapitalize the training vessels; including new construction of a proposed National Security Multi-mission Vessel to serve multiple purposes including military and disaster relief needs

7. MARAD Operations and Programs • Supports the agency’s headquarters program operations staffing and administrative infrastructure • Costs for management, direction and oversight of the following programs are included in Headquarters Operations • Cargo Preference • Requirement that Federally financed cargoes be shipped onboard US flag vessels • Provides for the economic viability of the Merchant fleet, which is vital to the Department of Defense (DoD) global transportation capabilities • For FY 2014, cargo preference generated $1.3B in revenue support for the U.S.-flag fleet, down from $2.3B in 2012 • Compliance and enforcement – Greatest challenges • Rulemaking for Enforcement of Cargo Preference is in development • Jones Act • Cargo moving between U.S. domestic ports must be transported on U.S.-flag coast-wise vice Jones Act qualified vessels • Department of Homeland Security (DHS) is responsible for issuing waivers for national defense interests or when U.S.-flag vessels are not available • MARAD’s role is checking vessel availability and oversight

8. MARAD Operations and Programs - Continued • StrongPorts (Port Infrastructure Development ) • Improve state of repair, capacity, efficiency and environmental sustainability of all U.S. ports • Enhance port connectivity with road and rail infrastructure by integrating ports into Federal, State and local transportation planning plans and programs, including National and State Freight Plans, (State) Transportation Improvement Programs, and DOT discretionary grant and financing programs • Assist U.S. ports in addressing infrastructure planning and investment needs to ultimately maintain the marine transportation system’s state of good repair • Create tools to help ports improve their competitiveness for public (Federal, State and local) and private funds through enhanced planning and engagement • Program will be incorporated into DOT’s National Freight Strategy to address port productivity concerns across road, rail and waterway modes • Deepwater Port Program • The Deepwater Port Program was specifically authorized by Congress to increase the safety and security of energy shipments.  The Deepwater Port Program also seeks to support the employment of U.S. mariners in the energy sector • Deepwater Ports are typically located more than 10 miles offshore to facilitate safe and secure transfer of oil and natural gas from ships to shore through sub-sea pipelines. • MARAD works closely with the U.S. Coast Guard to ensure compliance with the environmental impact analysis requirements of the Deepwater Port Act

9. MARAD Operations and Programs - Continued • America’s Marine Highway (AMH) Program • Award and manage grants designed to alleviate capital risk and expand freight movement and efficiency through the increased use of waterborne transportation where applicable, resulting in reduced traffic congestion and air emissions • To date, 12 grants totaling $11.85M have been awarded • Provide tools and workshops to assist ports, shippers, and service operators and other interested stakeholders in understanding and developing Marine Highway services as cost competitive and routine options for U.S. shippers • Assist the creation or expansion of services, including in Alabama/Louisiana/Mississippi, California, Kentucky, Michigan, New York/New Jersey, Texas and Virginia • Incorporate designated AMH Routes into State/Regional transportation planning for freight and passenger movement • Under the provisions of the Deepwater Port Act of 1974, as amended, MARAD issues licenses for the construction and operation of offshore ports for the import/export of oil and natural gas. • The 2016 Consolidated Appropriations Act authorized $5M for the Short Sea Transportation Program (Marine Highway Program) • MARAD awarded funds to six projects totaling $4.85M on October 21, 2016 • Funding of $150,000 will support administrative expenses

11. MARAD Operations and Programs - Continued • Transportation Investment Generating Economic Recovery (TIGER) Discretionary Grants: Rounds I – VIII • MARAD administers port and marine highway related TIGER grant awards (construction and planning) • To date, 48 grants totaling $585.7M awarded • Grants are used to assist ports with adding capacity, modernizing infrastructure, developing new marine highway services, and improving freight efficiencies • Fostering Advancements in Shipping and Transportation for the Long-term Achievement of National Efficiencies (FASTLANE) (2016) • MARAD administers port related FASTLANE grant awards (construction) • To date, 5 grants totaling $115.4M awarded • Grants are used to assist ports with adding capacity, modernizing infrastructure, developing and improving freight efficiencies

12. MARAD Operations and Programs - Continued • Safety, Security and Environment • Support the development of efficient, effective and achievable international, Federal and state regulations governing maritime safety, security and environment • Collaborate with Federal partners, industry and professional associations to develop technology, process and best management practices • Advance maritime industry safety by: • Developing maritime training materials, safety data management systems, and best management practices • Promote improved technologies such as vessel egress systems and anti-snapback mooring lines • Advance maritime industry security by: • Promoting Federal and industry collaboration to enhance Maritime Domain Awareness and support counter-piracy efforts • Issuing MARAD Advisories as necessary to alert the industry to emergent security and safety threats • Certifying cruise vessel security and safety training organizations • Advance maritime industry environmental performance and sustainability by: • Evaluating performance of alternative fuels and technologies (e.g. biofuels, liquefied natural gas and fuel cells) for maritime industry applications • Evaluating strategies, alternative energy and technologies to reduce air pollution from vessels and ports • Supporting research related to risks and prevention of the transfer of aquatic invasive species from ships ballast water and fouling of ships hulls

13. MARAD Operations and Programs - Continued • National Maritime Strategy (NMS) Initiative • Reversing the trend of declining cargo carriage on U.S. flag vessels and a shrinking maritime industry is a priority • Incorporates inputs from two industry symposiums, other Federal agencies • A draft NMS is being revised based on Interagency Review coordinated by the Office of Management and Budget. Intent is to publish prior to the end of the year • The NMS contains 6 goals to sustain a strong Merchant Marine and reliable transportations system in the future: • Strengthen maritime capabilities essential to economic and national security • Equip the maritime workforce with 21st century skills and inspire and educate the next generation of mariners • Improve waterborne transport to reduce congestion and increase mobility throughout the domestic transportation system • Expand capacity of U.S. international gateway ports to accommodate larger vessels • Minimize environmental and community impacts of water transportation and drive maritime innovation • Drive maritime innovation

14. Assistance to Small Shipyards • Assistance to Small Shipyards was authorized by the National Defense Act of 2006 to provide grants for capital improvements, equipment and training programs to foster efficiency, competitive operations and quality ship construction, repair and reconfiguration • Supports shipyard efforts to modernize and improve technology with capital that might not otherwise be available to the small shipyards • To date, 169 grants totaling $176.8M have been awarded • The 2016 Consolidated Appropriations Act authorized $5M for the Assistance to Small Shipyards Grant Program • MARAD awarded Small Shipyard Grant funds to nine projects totaling $4.9M on April 18, 2016 • The small shipyards are located in California, Florida, Louisiana, Maryland, Kentucky, New Jersey, Oregon, Rhode Island and Texas • MARAD received a total of 118 applications requesting $80M in assistance

15. Ship Disposal Program • MARAD is the disposal agent for Federally owned merchant-type ships >1,500 gross tons • Dismantling/recycling of non-retention worst conditioned NDRF ships, and vessels from other federal agencies transferred to MARAD for disposition, is the most expedient, cost-effective and environmentally safe disposal methods available • There are 13 non-retention NDRF ships in MARAD’s 3 fleet anchorages not yet under contract and awaiting disposal, which is an historic low • Ship recycling is achieved using MARAD qualified ship recycling facilities with competitive solicitations for award of best value sales or fee-for-service recycling contracts • Collapsed scrap steel market results in no vessel sales • Recycler’s dependent on service contracts to subsidize costs • MARAD uses 5 qualified ship recycling facilities located in Texas (3) and Louisiana (2) • Nuclear Ship Savannah (NSS), built by MARAD under the Atoms for Peace program during the Eisenhower Administration, operated from 1962-1970 and defueled in 1971 • A Nuclear Regulatory Commission (NRC) licensed and regulated nuclear power plant and National Historic Landmark • Retention asset until reactor plant decommissioned and the NRC license is terminated; must be completed by December 2031 (within 60 years of vessel defueling). Does not include final vessel disposition • Seven year $130M decommissioning plan – must start not later than FY 2024

16. Maritime Security Program (MSP) • MSP provides stipends to U.S.-Flag ship operators to sustain a minimum fleet of active, commercially viable, privately-owned, militarily useful vessels under U.S.-Flag registry.  Ships of the MSP Fleet are engaged in U.S. international commerce, and are readily available to meet U.S. defense and other sealift requirements during times of war or other national emergency‎ • 60 MSP ships to be enrolled and committed for service through FY 2025 • Employs approximately 2,400 U.S. mariners • Supports approximately 5,000 shore side maritime industry direct jobs • Fleet provided more than 90% of cargo transported in support of troops in Iraq and Afghanistan • The Omnibus Consolidated Appropriations Act, signed on December 18, 2015, included $210M for MSP ($3.5M for each of the 60 MSP vessels for FY 2016) • The bill also includes language authorizing funding increases for the program for FY 2017 through 2021 • FY 2017: $299.9M* • FY 2018: $300M • FY 2021: $314M • FY 2022: Funding returns to previously authorized level of $222M * If Congress does not appropriate this amount, ships will have to be removed from the program.

17. Maritime Guaranteed Loan Program (Title XI) • Maritime Guaranteed Loan Program (Title XI) provides for a full faith and credit guarantee of debt obligations: • Issued by U.S. or foreign ship owners to finance or refinance to either construct, or reconstruct or recondition, U.S.-flag vessels or eligible export vessels in U.S. shipyards; • Or by shipyards to finance the modernization and/or expansion of shipyard facilities located in the U.S. • MARAD issued 111 loan guarantee contracts since credit reform in 1993, totaling $6.7B in loan guarantees • The program currently has $1.54B in outstanding loan guarantees and 36 individual loan guarantee contracts • Remaining $42M carryover available for new loan subsidy to support approximately $518M in loan guarantees • Pending applications require an estimated $71M in loan subsidy to support approximately $775.7M in loan guarantees (Crowley Container Roll-on/Roll-off (ConRo) Letter of Commitment pending)

18. Key Committees and Advisory Boards • Committee on the Marine Transportation System (CMTS) • Federal departments and agencies with cognizance over the Marine Transportation System • Secretary of Transportation chairs the Cabinet-level Committee. Sub-cabinet representatives serve on a Coordinating Board • Marine Transportation System National Advisory Council (MTSNAC) • Advises DOT on the effective use of America’s Marine Transportation System. Three sub-committees focus on ports, marine highways and shipbuilding • 29 maritime industry and labor leaders • USMMA Advisory Board • Independent body examines USMMA instruction and management then advises the USMMA Superintendent and Maritime Administrator. • Board consist of 7 members appointed for 3 year terms by the Secretary of Transportation • USMMA Board of Visitors (BOV) • The BOV provides oversight on the state of morale, discipline, curriculum, instruction, physical equipment, fiscal affairs, and academic methods of the Academy, and composed of 19 members: • 3 Senators appointed by: Chairman of the Senate Committee on Commerce, Science, and Transportation and the Vice President; • 5 Members of the House of Representatives appointed by the Chairman of the Committee on Armed Services of the House and the Speaker of the House; • 5 individuals appointed by the President; and • 6 ex officio members

19. Ready Reserve Force (RRF) • RRF is comprised of Government-owned Merchant ships within the NDRF • Maintained in an advanced state of readiness to provide surge sealift capacity in the event of war or national emergency, berthed at 16 different ports around the country • Resources for RRF vessel maintenance, activation and operation costs and maintaining MARAD’s three NDRF fleet sites are currently provided by the Navy/DoD via reimbursable agreement • For FY 2017, $274.5M is budgeted for RRF • RRF provides over half of the government-owned surge sealift • 46 former commercial ships in the RRF (5 or 10-day availability) • Ships managed by commercial U.S. Ship Managers with partial 9 or 10 person crews • Maintained in an advanced state of readiness to provide surge sealift capacity in the event of war or national emergency; berthed at 16 different ports around the country • Major Operations and Relief Efforts • Desert Shield/Storm, Iraqi Freedom, Enduring Freedom • Hurricane/Earthquake Recovery – Katrina, Rita, Haiti, Mitch, and Sandy • CAPE RACE, CAPE RISE, CAPE WRATH were activated for the U.S. response to the Ebola outbreak in West Africa • CAPE RAY used for international effort to eliminate Syrian chemical weapons at sea

20. Ready Reserve Force (RRF) 5 and 10 day Vessels: R- Roll-On/Roll-Off(35) T- Crane Ships (6) A – Aviation Support (2) OP – Offshore Petroleum Discharge System (1) S – SEABEE Ships (2) Readiness: -5, -10 days from notice to activate