Prepared Remarks of

Sean T. Connaughton

Maritime Administrator

Propeller Club’s 80^th International Conference and Convention

Norfolk, VA

Friday, October 13, 2006

12:30 PM

Thank you for that gracious introduction. I am delighted to be here at the Propeller Club’s 80^th International Conference and Convention and to have the opportunity to meet with so many members and proponents of the maritime industry.

We at the Department of Transportation view the Propeller Club of the United States as a valued partner. Your dedication to the well-being of the entire maritime community on a national and international basis strengthens our nation’s overall transportation system. You understand the vital role it plays in our country’s economy and quality of life.

What is unique about the Propeller Club is that it brings together every segment of the maritime industry. The breadth of experience and knowledge, not to mention the variety of viewpoints, represented in this organization makes it a tremendous forum for confronting the challenges – or rather “opportunities” -- facing the marine transportation industry. As a result, I cannot think of a more appropriate organization to discuss “Building Maritime Momentum” than the Propeller Club.

I also cannot think of a more appropriate place to discuss these issues than here in Norfolk. The Hampton Roads area has been an industrial and transportation center going back almost 400 years – to the founding of the first English settlement in the New World. You can Go to Cape Henry and see a cross commemorating the first landing of the English colonists in 1607 or view the first lighthouse authorized by Congress in 1792 in order to aid navigation. By the way, that first federal construction project under the U.S. Constitution cost less then $18,000! On September 5^th we celebrated the 225^th Anniversary of the Battle of the Virginia Capes, a French naval victory that sealed the fate of Lord Cornwallis at Yorktown and ensured America’s independence. Not far from here the first clash between two ironclad warships, the Monitor and the Merrimack—or, as some still prefer, the Monitor and the CSS Virginia—was fought. Drive anywhere in this region and you will find constant reminders that the Hampton Roads area remains a national center of commercial maritime and naval operations, shipbuilding and repair, port and transportation management. And those of you living and working here know firsthand the important and significant role that marine transportation plays in maintaining and improving both the local and national economy.

Hampton Roads is part of a national and international transportation system. We must never forget that the primary role of the maritime industry is to support and expand our economy. Our sea lanes carry both commercial cargo and military equipment. At our ports, cargo and equipment is transferred to vessels or other modes of transportation that carry them to and from their shoreside destinations. As such, the ships sailing these waters and the ports that handle their cargo are at the forefront of America’s continuing economic prosperity.

Last year, America’s economy outpaced those of every other major industrialized nation. During the first half of this year, America’s economy grew at an impressive rate of 4.2 percent. Recently released job data indicates that unemployment has fallen to 4.6 percent and we have witnessed 37 consecutive months of job growth.

The marine transportation industry supports as well as contributes to this robust economy. Waterborne cargo and associated activities contributed more than $742 billion annually to the U.S. Gross Domestic Product. America’s network of waterways moves 2.2 billion tons of domestic and foreign commerce each year, and the top 50 ports in the U.S. account for about 84% of all waterborne domestic and international cargo tonnage.

In the coming years and long into the future, America’s maritime infrastructure will only grow in importance. Conservative estimates project that U.S. trade and freight volumes at American ports will double by 2020. That’s less than 15 year from now!

So the marine transportation industry carries this trade is going to be essential to our economic future. And continued investment in our maritime infrastructure and assets (including our personnel) is essential to keep our transportation network from becoming a chokepoint for our economy.

There is no doubt that America faces a vast transportation challenge--- actually that sounds too much like a buzz word, so let’s call it as it is; congestion—that threatens to overwhelm our ports and our distribution network and erase any efficiencies gained from improved vessel and cargo handling designs.

As a former official in one of our nation’s fastest-growing counties, I know all too well how congestion can adversely impact our quality of life and economic development. Congestion is costly. It already costs America $200-billion a year in lost time, lost revenue, and wasted fuel. Congestion shows on our highways, our railroads, in our airports, in our ports; it is a major threat to our economic prosperity.

We need a new approach and we need it now. That’s why this past May, the Bush Administration rolled out a comprehensive Congestion Relief Strategy. Our entire Department is focused on finding ways to reduce congestion on America’s transportation network. The Maritime Administration will play a large role within this far-reaching and comprehensive approach to ensure America’s economic prosperity.

And as our nation’s new Secretary of Transportation, Mary Peters is focusing her energy on improving the safety and performance of our transportation systems and expanding options for investment that will allow them to keep pace with current and future demands on our network.

Secretary Peters is a proven problem solver who has spent her career working on transportation issues in the private and public sectors. She understands the price that we pay for congestion and is determined to keep America moving.

The $286 billion surface transportation bill President Bush signed into law in August 2005 gives us some important new tools in this fight. It contains many innovative financing provisions requested by the Bush Administration to improve freight movement through our gateway seaports and along major trade corridors. This includes several provisions that encourage private-sector involvement and make transportation investments inside seaports eligible for credit assistance.

Further, the Maritime Administration has been working with stakeholders at our biggest ports: Los Angeles, Long Beach, and the Port of New York & New Jersey, and we will expand our work in the months to come. We’ve taken the lead in exploring and developing more effective uses of our shoreside connections as well as coastal waters and inland waterways. This will lead to more cost-effective and environmentally conscious means of American cargo transport. This is one manner in which we are “Building Maritime Momentum.”

Another is transforming the Maritime Administration’s organization and priorities to reflect the changes in the industry and the challenges it faces. We want to position our agency to be a partner in the overall mission of the Department of Transportation and an advocate for assisting the industry in meeting current transportation challenges. This is an issue we will be focused on in the coming months and I look forward to working with each one of you in this endeavor.

As currently envisioned, the Maritime Administration will be organized to address four areas: transportation facilitation; compliance; domestic industry development; and national security.

Transportation facilitation is obviously linked to the challenges posed by congestion but also about developing better approaches to moving cargo and people by and through seaports. As all of you know all too well, the maritime industry is complicated. It involves ports, carriers, shippers, different modes of transportation, as well as numerous levels and subdivisions of government. It also involves passengers and different commodities that either can be carried in containers or considered break bulk, liquid bulk, dry bulk, and roll on-roll off cargoes. It involves individuals and companies with operations that span from the Alaska North Slope to the Great Lakes and inland waterways to the offshore energy industry and coastwise and deep sea carriers. It is international is scope in practically every imaginable way.

This inherent complexity has made it difficult to advance projects and programs to improve transportation infrastructure in a timely fashion. We believe that the Maritime Administration can bring knowledge, experience, and networking capability to bear for more effective coordination and cooperation and for the development of best practices and solutions to address the challenges we are facing from congestion. Better utilization of the shoreside and waterborne transportation infrastructure will move freight and passengers in a cost-effective, environmentally friendly, and efficient way, while helping relieve the tie-ups in our ports and on our roads and railways.

A second area of focus is compliance. This industry, whether ashore or afloat, is facing an ever burgeoning set of requirements regarding the protection of the environment, safety and security. The international, federal, state and local programs that are developed must be harmonized, effective, and implemented properly. As both a vessel and facility owner and operator, the Maritime Administration is in a unique position to address best practices and ensure implementation of appropriate methodologies to satisfy current and proposed marine safety, security and environmental protection standards.

Third, we must systematically encourage investment in U.S. marine transportation infrastructure, including our personnel. The continued growth in trade and transportation requires growing investment in the infrastructure that support it. We must secure additional investment to make congestion mitigation a reality.

In addition, we must find ways to increase American presence within the global maritime and transportation marketplace. This role involves more than simply the strength and size of U.S.-flag fleet. For us to maintain a position of power and economic leadership, American presence in the worldwide industry, whether in the financing, operations, staffing and management, of shipping lines, ports, and related industries, must grow. This will only increase business growth and employment opportunities for U.S. seafarers and workers, and all Americans benefit. If fact, we have the key foundation for that growth represented in the audience today – each one of you.

Finally, there is national security. Throughout the world, attitudes and concepts toward security are changing. The Maritime Administration has always had a leading role in America’s security: our country cannot address conflict or emergencies overseas without sealift.

More than 90% of the material for the War on Terror has been carried to the Middle East by water. Ships of the Maritime Administration’s own Ready Reserve Force—as well as commercial U.S. flagged ships under MARAD’s initiative—are transporting food, machinery and equipment to Iraq, all vital elements to aid our troops and win the peace that will bring true freedom to Iraq and our soldiers back home. We will continue to be the lead agency in preparing our commercial industry and ports to deal with whatever emergency, whether natural or man-made, presents itself in the future.

It is my hope that these initiatives will help you in “Building Maritime Momentum.” My thanks go to the Propeller Club of the United States for your vital efforts in the past, today and in the future to ensure that America’s maritime lifeline continues to be strong and viable.

Here in Norfolk, where so many of America’s ships have been built and sent to sea, some in trade, some in war, I am constantly reminded of the glorious traditions and vital importance of America’s Maritime Community.

As the new Administrator for the Maritime Administration I am humbly reminded of my task to keep our tradition and our industry strong, modern, and thriving for the next generation. I look forward to working with you to achieve that goal.

Thank you.

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