OK! We're getting something positive out of this MarAd symposium

now we just need more!

[B]Congressman Garamendi Makes Bold Call to Support U.S. Merchant Marine[/B]

By Rob Almeida On January 14, 2014

Congressman John Garamendi spoke at the National Maritime Strategy Symposium this morning and set an aggressive tone to revamp the maritime policy of the United States.

Recognizing that no real maritime policy exists for the United States and a dwindling fleet of 179 U.S.-flagged merchant vessels trading worldwide, he called for a unified voice while executing caution and judgement.

In his speech, he outlined the following pillars around which a U.S. Merchant Marine policy should be created:

  1. We must continue to support the Jones Act – “It’s foundational for a vibrant U.S. Merchant Marine.”

  2. “Need to recognize the U.S. Merchant Marine is a public private enterprise”

  3. We must find new trades and new cargo to revitalize the U.S. Fleet

Oil and gas reserved within the United States are “strategic national assets. We should not squander or give it away, but there is some portion of that which could be exported,” he notes.

  1. Made in America

If oil and gas is to be exported from the United States, “it must be on the bottoms of U.S. flagged ships,” said Garamendi. ”Made in America is fundamental to any U.S. maritime strategy.”

Meeting all of Congressman Garamendi’s pillars will be extremely difficult.

It must be recognized that the crude oil shipping market is a global market and with a current oversupply of large crude tankers worldwide, tanker rates are at historically low levels. Building more tonnage at U.S. shipyards would result in expensive ships that would require high day rates in order to maintain profitable returns on investment (ROI).

Large crude and LNG carriers are not being built in the United States.

For VLCCs and Suezmax-sized ships, the technology is not necessarily a major factor, but rather the physical limitations from a shipyard perspective for such vessels. Aker Philadelphia and NASSCO would likely be the only potential yards in the U.S which could support such large vessels.

NASSCO’s graving dock is only 174-feet wide and a 300,000 dwt VLCC could have a beam of 196 feet. Not only that, but the width of the channel leaving San Diego bay might also be a factor.

San Francisco might also be a possibility, however in all cases, significant investment would be required.

For LNG carriers however, the technology is certainly a factor.

The fact is, most of the shipbuilding talent worldwide is located in the far east and recruiting professionals with LNG experience is an incredibly difficult thing to do. Exasperating the issue is the difficulty in hiring non-Americans who are technical experts in LNG shipbuilding.

Some might argue that that talent can be home grown, however I would argue that building highly technical ships like LNG carriers isn’t something that can be simply relearned overnight and a policy to move this sort of shipbuilding to the U.S. needs to also include policy to make it easier for shipbuilders to hire the people who will enable them to accomplish the job.

The National Maritime Strategy Symposium this week is aimed at coming up with solutions to some of these issues and using the collective talent of the U.S. Merchant Marine industry to come up with a sustainable plan.

Rob, please give us a report on what else has been said so far?

[QUOTE=c.captain;128290]It must be recognized that the crude oil shipping market is a global market and with a current oversupply of large crude tankers worldwide, tanker rates are at historically low levels. Building more tonnage at U.S. shipyards would result in expensive ships that would require high day rates in order to maintain profitable returns on investment (ROI).

Large crude and LNG carriers are not being built in the United States.
[/QUOTE]

Since the energy transport trade would not be a Jones Act trade, the fact that there is an oversupply of capacity makes it that much better at time to coerce American money into buying, manning, and flagging those ships American.

Subsidize them, give them tax breaks, put a huge tax on exports via foreign bottoms, do whatever it takes but stop just talking about it. We don’t build those ships here because we use our taxes to support American owned foreign companies that our own government pays to put American mariners out of work.

Building more tonnage at U.S. shipyards would result in more capable shipyards and the industries that support them and the people that work in them.

If nations that have a standard of living high enough to put us to shame can afford to build ships for the rest of the world then maybe we should start looking at what we are doing wrong, not at some artificial bottom line defined by untaxed corporate cash in the pockets of politicians and legislators.

Rep. Duncan Hunter spoke yesterday as well and the significant take-away from his speech is that he wants to improve cargo preference enforcement ensuring that “it’s more than a slap on the wrist when agencies bypass US Jones Act” as well as to reduce the regulatory burdens to improve competitiveness of the maritime industry.

Other priorities include making access to jobs in the U.S Merchant Marine easier for USN and USCG veterans and improving structural reforms to MarAd in order to hold them accountable.

And, of course, MarAd needs to come up with a national maritime strategy.

I’m not there today, but you can watch the presentations here: http://www.marad.dot.gov/mariners_landing_page/National_Maritime_Strategy_Symposium1.htm#

Besides the presentations, everyone in the room was involved in presenting their ideas to how to tackle the issue of shoring up the US Merchant Marine… and there were a lot of smart people in the room. MarAd will undoubtable have some valuable ideas to work a strategy from in the coming weeks.

My overall feeling after attending yesterday is that a lot of changes will need to happen in order to revive the U.S. Merchant Marine. The answer isn’t simply to build more ships and put U.S Merchant Mariners on them hoping that they find a cargo to ship. It’s a combination of many different things that will provide a market-based solution to the problem with the support of the U.S. government.

I would also like to add the fact that any maritime strategy needs to be inline with our energy policy as well. You can say all you want about building a fleet of ships to ship U.S. energy products, but if you’re not allowed to ship U.S. energy products, or only allowed to ship a small amount of energy products (crude and LNG) well, you’ve got a bunch of ships and mariners that serve no purpose.

[QUOTE=rob;128297]I would also like to add the fact that any maritime strategy needs to be inline with our energy policy as well. You can say all you want about building a fleet of ships to ship U.S. energy products, but if you’re not allowed to ship U.S. energy products, or only allowed to ship a small amount of energy products (crude and LNG) well, you’ve got a bunch of ships and mariners that serve no purpose.[/QUOTE]

If everything we ship today on FoC ships were shipped tomorrow on American flagged and crewed ships it would probably employ every American mariner and marine service company in the nation. Adding more would be a bonus.

Energy (and raw lumber) products are (or should be designated) a critical national resource and shipment beyond our borders should be limited to American bottoms. Period.

[QUOTE=rob;128293]Rep. Duncan Hunter spoke yesterday as well and the significant take-away from his speech is that he wants to improve cargo preference enforcement ensuring that “it’s more than a slap on the wrist when agencies bypass US Jones Act” as well as to reduce the regulatory burdens to improve competitiveness of the maritime industry.

Other priorities include making access to jobs in the U.S Merchant Marine easier for USN and USCG veterans and improving structural reforms to MarAd in order to hold them accountable.

And, of course, MarAd needs to come up with a national maritime strategy.

I’m not there today, but you can watch the presentations here: http://www.marad.dot.gov/mariners_landing_page/National_Maritime_Strategy_Symposium1.htm#

Besides the presentations, everyone in the room was involved in presenting their ideas to how to tackle the issue of shoring up the US Merchant Marine… and there were a lot of smart people in the room. MarAd will undoubtable have some valuable ideas to work a strategy from in the coming weeks.

My overall feeling after attending yesterday is that a lot of changes will need to happen in order to revive the U.S. Merchant Marine. The answer isn’t simply to build more ships and put U.S Merchant Mariners on them hoping that they find a cargo to ship. It’s a combination of many different things that will provide a market-based solution to the problem with the support of the U.S. government.[/QUOTE]

How about reversing this administrations decisions regarding cargo preference and food-aid? Enforcing cargo preference would be a big help but it’s over-all importance has diminished since that percentage has been slashed by 25% and the over all size of the pie, of which we have only one piece, has also been reduced by sending cash overseas instead of food-aid.

Also, no such luck watching the discussions online, I maneuvered around the MARAD website for a little while and finally found a link to watch the discussion but I got a “page cannot be found” message. Given this government’s recent reputation with websites I’m neither surprised nor disappointed.

Exports of energy should be required to be on US tonnage. Big deal if tanker rates are low globally, if you can only get the product on us tonnage…then don’t buy it here. End of story. And any releases of strategic reserve or whatever in crisis must be on us to tonnage as well, no exceptions…Aka hurricanes where “no tonnage” was available.

Had no problem building these nearly 40 years ago: http://www.maritimeresearch.com/remote-sensing/avondale-launches-tankers-alaskan-210593 And we had no problem re-flagging and manning 11 Kuwaiti tankers in the 80s.

[QUOTE=z-drive;128307]Exports of energy should be required to be on US tonnage. Big deal if tanker rates are low globally, if you can only get the product on us tonnage…then don’t buy it here. End of story. And any releases of strategic reserve or whatever in crisis must be on us to tonnage as well, no exceptions…Aka hurricanes where “no tonnage” was available.[/QUOTE]
US energy products are already being shipped on foreign flagged ships, hence the reason Scorpio Tankers (and others) are building a giant fleet of product tankers in the far east. If you’re going to sell US energy products on the international market, you need to have a transportation system that competes on the international market. US-built ships are really expensive and are thus not competitive on the international market.

Case in point: Matson’s ship that is going to get re-powered with an LNG system is going to get the work done overseas AND pay a 50% tax on top of that, and it’s STILL cheaper to have it done overseas.

Oil and gas are certainly assets of the United States, but production of oil and gas also creates a LOT of jobs in the United States, along with huge tax revenues.

Requiring that US energy products be shipped on US bottoms is a great goal and I hope that some day it successfully comes to fruition, however with that goal in mind you must also be cognizant of the fact that in order to sell your oil and gas on an international market, you need to present a business plan that competes on an international market. That goes with any product that leaves US shores.

A bigger loss of jobs are to the foreign shuttle tankers which offload crude in the GoM and take it into the refineries in Texas and Louisiana. THOSE SHOULD ALWAYS HAVE BEEN US FLAGGED SHIPS AND SHOULD BE TODAY! Tell that to the symposium!

Where is this happening?

The Afrodite runs crude from Albany to St. John for Irving, with a day rate and “profit sharing” system in place, is it that uncompetitive for a US bottom to get that work? They have been talking about a second ship going on that run, of course a foreign ship. That ship’s capacity is about 220k BBl for crude…EVERYONE barks that ATB units are rule-beaters to bypass manning and whatnot for a lower operating cost. Do you think a 200k BBl ATB unit is cheaper to operate, or more, than a FOC product tanker? It defeats the anti-ATB arguement if so. Just saying, the solution isn’t always necessarily a ship to replace a ship. 8 day trip on a ship, I would think 8 days or less for an ATB considering the ability to run inside, pilotage savings, etc.

Also, just curious how they have the exception here for export? I would guess its Canadian oil to begin with though. There was an interesting article in marex about tanker rates adjusting on trends here; mainly the rotterdam/NY and houston/amsterdam.

[QUOTE=rob;128351]US energy products are already being shipped on foreign flagged ships, hence the reason Scorpio Tankers (and others) are building a giant fleet of product tankers in the far east. If you’re going to sell US energy products on the international market, you need to have a transportation system that competes on the international market. US-built ships are really expensive and are thus not competitive on the international market.

Case in point: Matson’s ship that is going to get re-powered with an LNG system is going to get the work done overseas AND pay a 50% tax on top of that, and it’s STILL cheaper to have it done overseas.

Oil and gas are certainly assets of the United States, but production of oil and gas also creates a LOT of jobs in the United States, along with huge tax revenues.

Requiring that US energy products be shipped on US bottoms is a great goal and I hope that some day it successfully comes to fruition, however with that goal in mind you must also be cognizant of the fact that in order to sell your oil and gas on an international market, you need to present a business plan that competes on an international market. That goes with any product that leaves US shores.[/QUOTE]

[QUOTE=crazyelbowbob;128355]Where is this happening?[/QUOTE]

Where is it not happening?

Gulf of Mexico.

Yeah,and off of NY too!!!

Shuttle tankers and all other vessel activity carried on within our exclusive economic zone (e.g., oil and mineral) should be on US flag and US crewed ships.

in general, the US should NOT allow exports of either crude or refined products outside of North America. We are going to need that oil ourselves eventually.

34% of all foreign trade should be reserved for US flag ships. 33% for our trading partners, and the other 33% for anyone that can get the freight. That would give the US 1/3 of the jobs, 1/3 of the ship repair, 1/3 of the carrying capacity under US control, and enough shipping capacity for self-sufficiency and national defense.

Look at the the economic success that Norway has with government support for its “Maritime Clusters” and shipping? Even though they have higher costs than we do. The US is almost 100 times the size of Norway, yet our foreign trade US flag fleet is tiny compared to Norway’s. The US would do very well to emulate the Norwegian shipping model.

This symposium has raised some interesting and troubling thoughts for me outside of just what was said by all the administrators, congressmen, etc… The fact that they asked what the economic interest is in having a strong domestic merchant marine really sort of pissed me off at first. I felt personally insulted because I was being asked to financially justify my own livelihood. When that first came up I fully intended to go on a long rant about how the importance of national defense far outweighs the need for economic justification, just as Adam Smith asserts in his penultimate text on economics, “The Wealth of Nations”. Shortly thereafter I came to another equally important conclusion: no body really cares about the defense implications of the merchant marine and no one will until the next time its needed for something really important, and even then maybe it won’t really hit them until the problem goes from bad to worse.

The facts bear out that we haven’t really “needed” a merchant marine since 1945. Even in Vietnam, which was one of the largest military operations in U.S. history, the effect of the USMM has been mostly overlooked. Why? Because the part it played in that operation was so comparatively small, no matter how important it truly was, that no one cares. Not anyone in a position to do anything about it, that is. So where does this leave us? If the defense implications of what we do aren’t enough to affect any significant change in the already very poor state of things, what else do we have? The answer is nothing. The conclusion I have come to is that we have no recourse. The bottom line is that we don’t fit into the bottom line. This industry isn’t going anywhere in an upward direction if it doesn’t make business sense to do so. It has been proven time and time again that the Jones Act is not enough to keep the industry afloat indefinitely and there certainly isn’t going to be any more legislation to try and bolster the American fleet any further.

If we really do cost so much more than foreign options then we are condemned to death. There is no saving the United States Merchant Marine at the current prices that it costs to run. We will continue to shrink until we are gone all together. This industry simply represents too much cost for it to be worthwhile to keep us in business. The margins are just too high to justify. Unless we are willing to make sacrifices and lower our costs exponentially, to levels comparable with foreign interests, then I cannot in any good conscience blame any shipper for wanted to move a cargo on a cheaper foreign ship instead of an exorbitantly expensive American one. If it doesn’t make business sense then how could we possibly ask any business to do it? Our only options are to streamline or die. I’m confident that the inland barge fleets will continue to operate out of necessity, and maybe even a few coastal runs here and there too, but for the first time in my life I am coming to terms with the fact that days of the unlimited tonnage American ship are very, very soon to come to an eternal close. May they rest in peace.

[QUOTE=Texaco;128322]Had no problem building these nearly 40 years ago: http://www.maritimeresearch.com/remote-sensing/avondale-launches-tankers-alaskan-210593 And we had no problem re-flagging and manning 11 Kuwaiti tankers in the 80s.[/QUOTE]

but wasn’t the kuwaiti tanker re-flag event just for the owner/operators to get physical protection under USA flag during some Persian gulf shenanigans?

Refined oil products are exported from the US on a daily basis, and it’s not Canadian oil products refined in the US, this is actually US oil refined in the US and shipped overseas. Crude oil is the only exception, the rest of it is just how it’s currently done.

Yes, we do export product on both US bottoms (Houston-Israel for example, but its probably a donation), and on foreign bottoms to Europe mostly. As far as canadian crude exports go, I mis-spoke thinking some of that bakken oil coming through Albany for Irving was canadian, thus the exception to the rule. I just don’t see why a US flag ATB couldn’t do that run when all the tanker companies cry about how much “cheaper” they are to operate than a ship. Does a large ATB cost more than a FOC product tanker to operate? I would think the savings would be there, especially factoring in less in the way of pilotage, assist tugs and a shorter run.

The thing I can’t stand is that while some of that oil goes right down the river to Bayway, a good amount is going to Irving…albeit often coming back as product to New England, why the hell export it when bayway still has to import oil in the shadow of exporting some. Talking crude here, not product.

I was specifically referring to the foreign flag shuttle tankers in the GOM. I have only heard of the BW Pioneer being offloaded by OSG Jones Act shuttle tankers.