MERCHANT MARINE APPROPRIATIONS

AUTHORIZATION

WEDNESDAY, APRIL 10, 1968

U.S. SENATE,

COMMITTEE ON COMMERCE,

Washington, D.C.

The committee met at 10:07 a.m., in room 5110, New Senate Office Building, the Honorable E.L. Bartlett presiding.

Senator BARTLETT. The committee will be in order.

Mr. Gulick, Mr. Imhoff, and the others at the table, we are sorry that despite the very considerable time available yesterday, we did not get through with our questions. Mr. Barer has at least a few more to ask; I have many to ask.

Mr. Barer.

STATEMENT OF J. W. GULICK, ACTING MARITIME ADMINISTRATOR, MARITIME ADMINISTRATION, DEPARTMENT OF COMMERCE, WASHINGTON, D.C.; ACCOMPANIED BY CARL DAVIS, GENERAL COUNSEL, MARITIME ADMINISTRATION; AND WILLIAM HENEGHAN, BUDGET OFFICER, MARITIME ADMINISTRATION; ALSO LAWRENCE E. IMHOFF, DEPUTY ASSISTANT SECRETARY FOR ADMINISTRATION, DEPARTMENT OF COMMERCE, WASHINGTON, D.C. Mr. BARER. Mr. Gulick, last February 12, Secretary of Commerce Trowbridge and yourself and some other officials from that Department testified before this subcommittee on the present state and future of the U.S. merchant marine. At this time, we learned there were only 211 vessels left in the reserve fleet which could actually be utilized for the carriage of cargo without substantial modification. How does the pending bill recognize this deficiency?

Mr. GULICK. The authorization bill does not cure any deficiency in this connection, Mr. Barer. The authorization bill merely provides, as in the case of some of the other programs, for a holding action. The reserve fleet is already just about down to the bottom of the barrel. It comes out about this way on a broad look at the fleet for purposes of future planning.

The backbone of the reserve fleet over the next 10 years is going to be about 130 Victory ships to be selected from those now operating in service under general agency agreements to Southeast Asia. Of course, the availability of these ships will depend upon their proper maintenance and their layup and preservation. The fleet itself in addition to these ships has today available for breakout, but at some

rather high cost, 19 Victory ships which have not been reactivated for Vietnam. These will be available only until around 1975; 18 Victory AP-2 ships configured as troop ships also available only until about 1975; 31 smaller ships of the C-1A and C-1B class available only until 1969 because we are not expending, planning to expend, money on their preservation; and 37 C1-M-AV1 ships commonly called "Cimavis" will be available until around 1971.

In addition to these, there are 187 standard dry cargo Liberty ships under preservation. But all preservation on these ships will cease as of June this year. And they will be expected to be available in an extreme emergency use only until around 1971.

The rest of the fleet is composed of a large number of scrap ships, certain miscellaneous types and certain priority ships on both a maritime and a navy priority listing such as 104 AP-5 troop ships. This is a Victory type, the larger one, which are potentially convertible to dry cargo configuration at a cost of probably not less than $3.5 million per ship. This, Mr. Barer, is our reserve fleet.

Mr. BARER. Now, Mr. Gulick, from time to time, there are additions to this fleet, is that correct-trade-ins?

Mr. GULICK. Trade-in ships come into the fleet, right.

Mr. BARER. Generally, the trade-in vessel is worse than the trade-out vessel, is that not true?

Mr. GULICK. This is true and particularly so because from now on all of the ships coming into the fleet as trade-ins either on new construction or under the exchange program are going to be quite old and not at all in good shape.

Mr. BARER. Now, of the 292 vessels that are listed as dry cargo ships on the attachment to your statement which you just summarized, what is the average age of those 292 vessels?

Mr. GULICK. Let me get the attachment briefly.

These are every one over 20 years of age.

Mr. BARER. What is the normal useful life of a merchant vessel? Mr. GULICK. Depending upon the care which has been given the ship, it could run from 15 to 30 or more years.

Mr. BARER. Does this figure of 292 include any of the 170-some vessels that were broken out for Vietnam duty?

Mr. GULICK. It does not, sir.

Mr. BARER. Well, will any of those be put back into the fleet and become part of this dry cargo ship category?

Mr. GULICK. We anticipate that of the 148 now allocated for operation to Southeast Asia, approximately 18 will be in such bad shape they will not be good economic projects to go back into the fleet. This will leave the 130 I mentioned a moment ago. Even some of those might not be worth while, depending upon how long they are used in Southeast Asia service.

Mr. BARER. As I read the figures in your attachment, it indicates that by 1971, 255 of the 292 vessels now listed will no longer be in the reserve fleet. That leaves a total of 37 ships in that category. Is that not correct?

Mr. GULICK. I do not have those figures.

Mr. BARER. What I have done is added the figures 187, 37, and 31. If my addition is correct, that adds up to 255. And I subtracted the 255 from 292. That leaves 37 vessels.

Mr. GULICK. Correct. I agree.

Mr. BARER. Do you feel that 37 cargo vessels provides a strong reserve fleet to aid our national defense?

Mr. GULICK. I certainly do not. But do not forget, please, I mentioned that these would be supplemented by approximately 130 coming back from Southeast Asia operations.

Mr. BARER. Those are the ones we spent somewhere over a half a million dollars apiece on, to put them into the water.

Mr. GULICK. That is correct.

Mr. BARER. And yet 18 of those are so bad they are going to be scrapped for sure, not even put back into the fleet?

Mr. GULICK. In all probability, there will be at least 18 we will not put back into the fleet.

Mr. BARER. Mr. Gulick, you may not want to answer this in any detail or even comment on it, but my understanding is that some months ago, when the Middle East crisis broke out, your agency did a study as to our ability to maintain a supply line to another part of the world in addition to Southeas Asia. Was such a study done?

Mr. GULICK. Are you talking about a recent study?

Mr. BARER. Or a study at that time to see what our response capability was in the area of being able to carry cargo to two crisis areas at the same time.

Mr. GULICK. I do not have any hesitation, Mr. Barer, in saying that every now and again we conduct an exercise just to be sure we know where we stand and how we can handle things which might come up on a contingency basis. We did postulate the possibility of a need for, say, in round figures, 100 ships. And we picked this right out of the air. We had no advice on this from any other Government agency or any other source. This was our own doing.

We said, "Suppose we need 100 additional ships, where would they come from and how much would it cost?" I do not have the cost figures at my fingertips. In any event, they were strictly off the top estimates. I will say that they were completely exorbitant; that in order to break out some of these ships we are talking about in the dry cargo type that are in the listing attached to my statement, the cost could well be in excess of $800,000 per ship. And of the 100 available, a great majority of this 100 would have to be taken out of the Liberty ship class which means small cargo capability, which means slow speed, and which means pretty horrible quarters for crews and this sort of thing.

Mr. BARER. Those are the ones that are given a life only to 1971 in the reserve fleet, is that not correct?

Mr. GULICK. That is correct, sir.

Mr. BARER. There is a reserve fleet base at Olympia, Wash.?

Mr. GULICK. Yes, sir.

Mr. BARER. Are there any present plans to phase out that operation? Mr. GULICK. The agency is taking a very close look at all of the reserve fleet sites. Astoria and Wilmington will be phased out very shortly-probably by the end of this fiscal year. No more ships are in Astoria. I believe there is one being held temporarily on an exchange application. Wilmington has only a small number-around, I believe, 20 ships of the scrap variety. We have just accepted a bid for the sale of those ships for scrap.

Now, this means that two of the eight fleets are already just about out. This leaves six. Depending upon the number of ships to be preserved and the cost of this preservation, we have to decide whether to retain in existence six fleets or reduce the number of fleets to, say, three, one on each coast, or for that matter even go below that. We have not reached any positive conclusions on this as yet. Our answer will be dependent largely upon plans for the reserve fleet, need for a reserve fleet, and numbers of ships.

I would say in answer to your question specifically that I do not believe anyone could say positively at this stage that Olympia or any other fleet is to be phased out apart from the two I originally mentioned.

Mr. BARER. In the event of a phaseout in any one of these sites, are any steps taken to help those working at those sites to find other employment? They are Government employees, are they not?

Mr. GULICK. They are Government employees, and steps are definitely taken to provide for a change in employment or other action which can relieve the people from any financial distress as far as it is within our power to do so.

For example, we arrange to transfer to other locations and other jobs, those people who can be transferred, who are qualified to transfer and whose family and other requirements do not make it necessary for them to remain in the particular area. If we have people who are eligible for retirement and this has certainly been the case in Astoria, we assist them to take advantage of the best breaks on their retirement.

In addition, we advertise and interview all local area job opportunities in order to attempt to place people who have, say, a small number of years of service-who are general types, without specific skills-into jobs with private industry. So far we have been very successful in this regard. I do not know of any person who has been hurt by any of these closing activities.

Mr. BARER. With relation to the study you talked about a few minutes ago as to our ability to supply another area of the world such as a study you had done last summer, you indicated it would cost in excess of $800,000 per vessel to get them into the water. How soon would these additional 100 vessels be ready for carriage of cargo in actual operation?

Mr. GULICK. I hate to qualify this, but, obviously, the length of time to put them on berth would depend almost exclusively on the speed requirements dictated by, say, the military. If they wanted all of these ships on berth within 3 months, the costs would go up there is no doubt about this-because the ships would have to be activated on an around-the-clock type operation.

Mr. BARER. What period of time was used to determine the $800,000plus figure?

Mr. GULICK. The $800,000-plus requirement is just about on a 3month basis.

Let me check this statement, please, sir.

I do not have this with me. I will have to furnish this for the record. Mr. Barer.

(The information requested follows:)

The time periods for the 100 Ship Study were: 14 ships on berth within 15 days; 25 ships on berth in 30 days; 75 ships on berth in 60 days; 100 ships on berth in 120 days. These periods could be reduced by using additional work

shifts, towing vessels between districts, or changing vessel types. Costs involved were: Victory ship reactivation-$800,000 per ship; AP2 troop ship reactivation-$850,000 per ship; Liberty ship reactivation-$450,000 per ship; and $54,000 per ship for the return of ships to service that had been placed in inactive status because of reduced operating requirements.

Mr. BARER. One last question. With relation to your research and development activities which you elaborated upon yesterday, will any portion of those funds be utilized for a study of containerization? I am thinking specifically of the recent bill which became law which puts that duty upon the Maritime Administration to make that type of a study.

Mr. GULICK. We have no portion of the 1969 fiscal year request allocated to the specific type of study indicated in the recent legislation. Obviously, the reason for this is that the legislation came after the budget was already packaged and settled upon the administration-by the President.

Mr. BARER. In other words, the budget figure as in the request bill does not allow you funds to do this study which the law requires you to do?

Mr. GULICK. If we find that under the terms of the bill-and I have not given this consideration as yet to make this determination-that the study must be made within a very rapid time, the only course open to us will be to reprogram some of the projects we already have, if we have to make a choice.

Senator BARTLETT. Mr. Gulick, how much is the operation of the Savannah costing during this fiscal year?

Mr. GULICK. During the current fiscal year, 1968, her cost planned obligations are for $3.3 million.

Senator BARTLETT. And where are the funds coming from for that operation?

Mr. GULICK. This is out of appropriated funds, Mr. Chairman.
Senator BARTLETT. Appropriated for what purpose?

Mr. GULICK. For the operation of the Savannah.

I trust we understand that this is a part of our research and development appropriation; and that, as a part of this commercial operation of the Savannah, we have a charter with the operator, First Atomic Ship Transport, Inc.-FAST, for short-under which the operator forecasts and the agency agrees upon the amount of revenue to be generated and then pays the difference between the cost of operation and any lack of funds. This comes out to round figures $3.3 million to cover, not only the operation of the ship, but also maintain the nuclear group in Washington headquarters.

Senator BARTLETT. Each year since the Savannah has been operated, the operating funds have come from the research and development pocket; right?

Mr. GULICK. Yes, sir.

Senator BARTLETT. You said in your statement that the amount requested by way of authorization would provide for construction of 10 new replacement vessels. And you told us that these would be divided between container ships and standard cargo carriers. Have you any idea of what that division will be?

Mr. GULICK. We do not have a firm-that is, fully agreed upon and signed-contract type of agreement. We are, however, thinking generally of, in addition to the 11 LASH already awarded, and the