I give two thumbs up to Rep. Duncan Hunter

although it is a wee bit transparent that it is NASSCO who butters his bread!

[B]Congressman Warns of Consequences from Shrinking U.S. Flagged Shipping Fleet[/B]

August 4, 2013

For centuries, the world’s oceans have been an influential force. They have forged industrial strength, enhanced security, established connectivity and contributed to science and research. As long as there are oceans, national and global interests will be inextricably linked to the seas.

Seventy percent of the earth’s surface is covered by oceans and even more surface area is blanketed by water. The world is smaller today, mainly through advances in communication and technology, but the oceans are just as important now as they were centuries ago when exploration and discovery were possible only by setting sail.

While the purpose and necessity of sea travel has evolved, the old saying of “he who rules the seas rules the world” is still relevant. Throughout history, the strength and power of navies and maritime fleets have helped nation’s prosper. America is a prime example. Ironclads, steamboats and the construction of Liberty ships during World War II helped build a nation as strong as the hulls of the vessels welded in docks and shipyards brandishing the marks of American ingenuity.

Through it all, oceans have remained the primary facilitator of commerce, supplying nations and continents with raw materials, food, medicine and household goods that arrive in ports and fill storeroom shelves. Currently, approximately 75 percent of global commerce moves by water while the overall volume of international trade by vessel is climbing.

Even so, the U.S. flag fleet is carrying just two percent of global cargo tonnage, down considerably from decades ago. The ramifications are not simply economic. There is also a direct impact on national security, resulting from the limitation of commercial trade vessels for military sealift under the Maritime Security Program (MSP).

Especially with an undersized naval fleet, the use of commercial vessels is needed to support operations by transporting military resources. With emerging threats requiring straining naval assets worldwide, along with a shift in defense posture to the Pacific region, the support provided through the MSP, which is supported by 60 U.S. flag vessels, is even more essential.

No less important is the U.S. domestic flag fleet, which carries over a bill tons of cargo and sustains $100 billion in economic output annually. The fleet is U.S. owned, U.S. built and U.S. crewed, carrying grains, coal, iron ore, limestone and petroleum through inland waterways, across the Great Lakes and along the coasts. Most of the 40,000-plus vessel fleet is owned and operated by family businesses that have been in the maritime industry for generations.

For these family businesses and the MSP, there are obstacles and complications imposed through the persistent failure to recognize the importance of a strong flag fleet to the U.S. industrial base and national security. For the entire maritime industry, from San Diego to Norfolk, a last line of defense is the Jones Act, requiring flag vessels to carry cargo between U.S. ports.

Fred Harris, CEO of NASSCO, rightly cautions that without a renewed commitment to the Jones Act fleet, the U.S. could lose its shipbuilding capability, similar to the way the United Kingdom lost their production capacity. Nearly 20 percent of the world’s commercial tonnage was built in the UK, but nearly a decade has passed since they constructed a commercial vessel, leading the Ministry of Defense to recently award a contract for military tankers to a South Korean shipyard.

NASSCO and others are doing all they can to ensure we strengthen the domestic maritime fleet rather than contribute to its decline. NASSCO, for instance, is partnering with TOTE, Inc, to produce the first Liquid Natural Gas (LNG) containerships in the world. Not only does this collaboration preserve capability critical to America’s future, but it’s creating jobs in the process.

Looking ahead, strengthening America’s maritime interests translates into benefits for the entire country. There are many great aspects of our maritime past. It is important now that a course is charted and pioneered for the future, with the intent of building on America’s long history of maritime innovation and success.

—California Congressman Duncan Hunter is chairman of the House Subcommittee on Coast Guard and Maritime Transportation. Article written exclusively for gCaptain.

Someone else to be proud of.senator Cantwell of Washington Congressional Representation
Washington State’s Junior Senator, Maria Cantwell (D) has perked up the ears of the maritime community with recent comments about the Jones Act.

At a hearing of the Energy and Natural Resources Committee on July 16th, the senator called for greater transparency in gasoline markets and refinery shutdowns. Senator Cantwell highlighted a new report demonstrating that West Coast gasoline prices have broken from historic trends since April 2012. The senator noted that in Washington State, prices had risen 9 cents in the past week and were 27 cents higher than the national average.

“Washington state prices are among some of the highest in the nation,” she said, noting that last year’s West Coast refinery fire was unfairly blamed for a spike in prices (see Pacific Maritime Magazine, September 2012) saying, “My constituents want to see more transparency there. Hamburger probably has more regulation on it than gasoline.”

During a presentation to the committee, Faisel Khan, Managing Director of Citi Research claimed that one of the reasons for spikes in gas prices was the Jones Act, and told the committee that the cost of moving crude by Jones Act tanker could be three to six-times the price of using non-Jones Act tankers.

“Mr. Khan I wanted to mention the fact that you bring up the Jones Act as something of a price increase,” the Senator countered. “CitiGroup has been under investigation and paid penalties both for fraud in the mortgage market and is now under investigation by the Financial Services Authority (FSA) for manipulation in gas prices, and the fact that you come here and blame the Jones Act as some reason why we have high gas prices is just amazing to me.”

Senator Cantwell’s mention of the Jones act had many in the US maritime industry cheering her defense of the much-maligned legislation. Ed Morse, chief commodity analyst at Citigroup, has said publicly the Jones Act adds between $6 and $8 a barrel to transport costs. Morse has said that based on his calculations, it’s often cheaper for a Gulf Coast refiner to send gasoline to Brazil than to New York. Recent news stories have interviewed oil company executives such as Joe Petrowski, CEO of Gulf Oil, who said, “If foreign owned and flag ships were able to carry gasoline in US waters, the price of gasoline in the North East and in Florida could be 20 to 30 cents lower.”

According to shipping and capital magazine Marine Money International, a mid-sized product tanker costs $130 million in the United States versus $34 million in Korea, and a 4800 TEU container ship would have a price tag of $200 million in the US vs. $46 million in South Korea.

This column doesn’t often see the need to defend the Jones Act, but we will call attention to the sad story of the 5-year-old MOL Comfort, a state of the art Korean-built containership that broke in two in the Indian Ocean in June, thankfully with no loss of life. The two pieces floated separately for a time while salvors raced to the scene. Too late for the aft section, which sank in late June and the bow section, which burned and sank in mid-July. Had that ship been built by a US yard, would she have met the same fate?