BC Shipping News - March 2012

INSIDE: SEASPAN AND THE CONTAINER SHIP INDUSTRY

BC SHIPPING NEWS

Volume 2 Issue 2

www.bcshippingnews.com

March 2012

Commercial Marine News for Canada’s West Coast.

Tankers in Canadian waters: Are we ready?

Part One: Marine pollution preparedness and response.

Greenhouse gases:

International shipping proactively addresses GHGs.

Industry insight

Peter Bernard, Q.C., Lawyer, crisis manager and problem-solver.

12-MAR MARCH 2012

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Plus: Panama Canal expansion: Canadian opportunities.

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March 2012

Volume 2 Issue 2

On the cover: Oil tankers at the Anacortes Refinery in the Puget Sound.

Below: The Russian flagship Varyag refuels with the use of an oil barge.

(Photo courtesy of Silvester Law/HBMG)

Cover Story - P.43

Contents

Tankers in Canadian waters: Are we ready?

Canada’s marine pollution and response on the West Coast.

By K.Joseph Spears

10 Industry insight The ‘go-to’ guy: Lawyer, crisis manager and problem-solver BCSN speaks with one of the founding members of Bernard & Partners, one of Canada’s largest maritime legal firms.

30 Container shipping

Seaspan and the container ship industry

BC Shipping News welcomes Syd Heal to our roster of writers. Mr. Heal’s first article looks at the Seaspan brand and its international presence in the container ship industry.

49 Technology / New products

New benchmark to prove coatings performance: International Paint and BMT ARGOSS come together to verify benefits.

New product from Hamann AG: Solution to black and grey water onboard treatment for any size vessel

D E P A R T M E N T S

F E A T U R E S

Peter Bernard, Q.C.

6

News briefs / industry traffic

18

History lesson

20

Ports & terminals (I)

23

Ports & terminals (II)

26

Ports & terminals (III)

34

International shipping

38

Mercy Ships

41

Legal affairs

47

Workboats

54

Upcoming events

Letters to the editor and news.

Running around the law.

By Lisa Glandt.

FMC inquiry threatens to blow B.C.’s container trade onto the rocks.

By Darryl Anderson.

Port updates and briefs.

Panama Canal expansion could bring Canadian opportunities. By Ray Dykes.

International shipping proactively addresses greenhouse gases.

By Captain Oscar de Gouveia Pinto.

A vessel of hope.

By Jennell Dippel.

Pleasure craft police sting gets stung

by TATC. By Thomas S. Hawkins.

New boat for Nanaimo Port from Daigle Welding & Marine.

ICMA2012 and Mari-Tech 2012.

March 2012 BC Shipping News 3

March 2012 Volume 2/Issue 2 Publisher McIvor Communications Inc. President & Editor Jane McIvor

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EDITOR’S NOTE

Taking a closer look at prevention and response

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hen I read the title of Joe Spears’ article (“Tankers in Canadian waters: Are we ready?), I thought: of course we are.

What a silly question. BC Shipping News has already looked at oil spill response on the West Coast (September, 2011) and I had been very impressed with the knowledge, expertise and dedication from those interviewed at Western Canada Marine Response Corporation (WCMRC). There is no doubt that they’re ready.

Just to be sure, I re-read the article on WCMRC as well as the article in the following month’s edition from Mike Richards (Georgia Strait Alliance) who provided another perspective. I also reread the article from Captain Stephen Brown (Chamber of Shipping of British Columbia) that was featured in May, 2011, which provided an excellent overview of prevention measures, including double-hulled tankers, escort tugs, specific routing, better training for officers and shared best practices.

After a full review, I realized that BC Shipping News had not yet addressed Mike’s main concern: what happens if there is a really big spill? As good as the WCMRC is, their mandate for response preparedness is only up to 10,000 tonnes; and as good as vessel construction or training is, accidents still happen. I could hear Mike’s voice in the

back of my head: “yes, that’s all good but what happens if, through some freak of nature, there is a really big spill?”

...the debate on tanker traffic is a bit superfluous because we already have a significant amount of traffic traversing the coast...

So I started reading Joe’s article to find the answer. By the time I finished, I sent Joe a note suggesting we make this a two-part feature. Joe raises some points that cannot, and should not, be ignored and he needs more space to fully flush out his ideas.

The first part of Joe’s article deals with setting the stage; providing us with a primer on the reality of shipping on the West Coast. He points out that the debate on tanker traffic is a bit superfluous because we already have a significant amount of traffic traversing the coast and have had for many years.

And it’s not just oil tankers — there are chemical tankers and container vessels and passenger vessels and bulk carriers, all of which hold thousands of tonnes of fuel.

Peter Bernard raised the same point in this month’s Industry Insight. Even if there were a ban on tankers you would still have ships taking grain out to sea or

passengers up to Alaska. The shipping industry is not going away and legislation that bans only tankers would be “a strange, strange law”.

Those who advocate for a ban on tankers would likely be better served to learn more about the shipping industry and understand that a ban doesn’t really make sense. What we need is a better investment in our capabilities so that there is no question about our readiness. My understanding from Joe is that there are plans in place to deal with spills over 10,000 tonnes but, to the best of his knowledge, they have never been excercised.

As you’ll read in the Industry Insight with Peter Bernard, the shipping industry’s track record for environmental sustainability has improved immensely over the past 25 years. It would be a shame to have all of that work wasted just because no one took the lead and demonstrated to the public that yes, we are ready.

Coming up in the April issue, I’ve drafted an idea for a skit and only wish Monty Python were still around to act it out: A government ministry representative tells a poor fellow that he must follow a law...and then makes it near impossible to do so...that’s right, we’ll be taking a look at the North American Emission Control Area!

BCSN

Member of: International Sailor’s Society Canada

March 2012 BC Shipping News 5

INDUSTRY traffic Pacific Coast Terminals signs new 30year lease with Port Metro Vancouver

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acific Coast Terminals Co. Ltd. (PCT) has signed a 30-year lease with Port Metro Vancouver (PMV) assuring operations at its Port Moody terminal until 2041.

Incorporated in 1927, PCT’s operations were originally located in New Westminster. In 1960 the marine bulk terminal opened its facilities on land owned by the Port, in the City of Port Moody, beginning its 52-year history in the waterfront municipality.

“The City of Port Moody is pleased that PCT will continue its operations here for the next 30 years,” said Mayor Mike Clay. “PCT is a valuable community partner and has made significant contributions to our community.”

Over the past 50 years, PCT has donated over $1 million to support local businesses, charities and not-for-profit organizations. PCT is proud of its community programs and involvement in supporting the lives of residents in Port Moody.

Lorne Friberg, PCT’s President and CEO confirmed: “This lease will allow us to move ahead in our strategic planning and explore expansion into new products and markets. We are looking forward to continuing to provide a superior, competitive service in a growing global market.”

“Port Metro Vancouver is pleased to work as a partner with PCT in developing Canada’s largest gateway,” said Robin Silvester, President & CEO, Port Metro Vancouver. “I commend PCT for their ongoing commitment to sustainable growth.”

The lease will expire December 31, 2041.

Pacific Coast Terminals Co. Ltd. operates the world’s largest and most automated export sulphur marine terminal in the world and also handles bulk liquids. PCT loads more than two million tonnes of sulphur and close to one million tonnes of bulk liquids each year onto more than 100 vessels.

Pacific Coast Terminals’ President & CEO Lorne Friberg signs 30-year lease with Port Metro Vancouver’s President & CEO Robin Silvester. PCT General Manager Ken Catton and Port Moody Mayor Mike Clay look on.

6 BC Shipping News March 2012

NEWS BRIEFS BCIT and Q3 Marine Training Solutions partner to provide fast rescue boat training

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3 Marine Training Solutions, a Transport Canada approved, STCW-compliant training resource, and British Columbia Institute of Technology, a leading provider in preparing students for careers at sea, have announced they will work together to develop a new course to satisfy international requirements for Proficiency in Fast Rescue Boats.

This partnership will combine Q3 Marine Training Solutions’ technology expertise with BCIT’s maritime education capabilities to create a powerful and innovative training platform. The program will run on a quarterly basis and will be conducted at the BCIT Marine Campus in North Vancouver.

Quoting a senior BCIT representative, “To reach our goal of improving the nation’s maritime workforce, it is critical that BCIT work closely with other educational institutions. By partnering with Q3 Marine Training Solutions, BCIT is having a definitive impact on the educational opportunities available to students and improving the education process for all involved.”

Q3MTS and BCIT have partnered to provide the Fast Rescue Boat Program at the Marine Campus in North Vancouver.

By 2015, a worldwide shortage of ships’ officers is forecasted. Canada, as a maritime nation with the longest coastline of any country in the world, will have plenty of opportunities for new mariners in offshore oil, cruise and commercial businesses. ”We are very pleased to extend our partnership to jointly develop a strong and innovative proficiency in this Fast Rescue Boat Program and address the

next-generation needs of Canadian mariners,” said Graeme Wilson, CEO Q3 Marine Training Solutions. “Q3MTS is best-in-class when it comes to lifeboat and rescue boat technology which enables us to offer highly differentiated instruction and services. We look forward to a fruitful and long-term relationship.”

For more information, including course schedules and registration details, please visit: www.q3mts.com.

LETTER TO THE EDITOR The Island Commander: 100 years old... he Island Commander is still a very able and ready tug. She arrived on the B.C. coast to take part in the B.C. Halibut fishing industry on January 13, 1913 after being built in Selby, England in 1912 as the Andrew Kelly, one of three identical sisters.

Converted to a tug and renamed in 1939-40, she served the U.S. Army in the Army Transport Service throughout WWII. The Island Commander has been — and still is — owned

by Captain Ken Higgs of Island-Sea Marine Ltd. since December 1971 where she was used for line-haul towing along the B.C. Coast.

The tug is in great condition, but ‘line-haul’ towing along the BC coast has diminished tremendously, probably not

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to return. She was /is one of the finest vessels ever on this coast for such tows, many of them very famous.

Captain Ken Higgs March 2012 BC Shipping News 7

INDUSTRY traffic McLaren brothers sell Allied Shipbuilders to Chuck Ko

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im and Malcolm McLaren have sold their majority ownership in Allied Shipbuilders in North Vancouver to Chuck Ko, P.Eng., the company’s VicePresident of Operations. The transaction occurred on February 8, 2012.

Allied Shipbuilders is B.C.’s second-largest, privately owned commercial shipyard and currently employs 120 people.

“Chuck has been with the firm for 31 years,” says Malcolm, the outgoing president of Allied. “He trained directly under my father, who founded Allied in 1948, and Chuck has had an active role in every major project we’ve handled since 1980. My father believed a shipbuilding and repair operation should be run by somebody with a lot of hands-on experience, and we don’t want that to change. Plus, Chuck is family to us.”

Ko adds: “With the $8 billion federal shipbuilding program recently awarded in British Columbia, this is a great time for our industry. B.C.’s shipyards will have great opportunities, and Allied is poised to take advantage of this historic decision.”

Malcolm and Jim announced the leadership transition alongside Chuck

as one of their last acts before stepping away, each for different reasons. Jim is retiring from his position as Shipyard Manager to spend more time with his wife and sailboat, while Malcolm is leaving for health reasons following his diagnosis of Parkinson’s disease seven years ago.

“I began thinking seriously about the ownership of the company soon after my diagnosis,” Malcolm explains.

“At first, I wondered whether it might be best to sell the operation to a big competitor. But then Chuck said, ‘Why don’t you sell it to me?’, and I thought, ‘Well, there’s a good idea.’” Malcolm and Jim worked closely with Ko over the past several years to plot a transition course that would ensure the continued success of the firm.

Douglas McLaren, the second oldest of the three McLaren brothers, will continue on as part owner and as the company’s Electrical Superintendent.

His sons, Jason and Marcus, will also remain with the company, as will Jim McLaren’s son, Ward.

New President Chuck Ko, P.Eng, was hired by Arthur McLaren, P.Eng in

For the first time in over 60 years, Allied Shipbuilders in North Vancouver will not have a McLaren as the majority owner.

8 BC Shipping News March 2012

1980. A Registered Professional Engineer in Naval Architecture and Marine Engineering and a Member of the Society of Naval Architects and Marine Engineers, Chuck has progressed through the company from Design Draftsman to Technical Manager to Vice-President of Operations.

Ko has excelled in leading ship construction and refit projects. In the last four years alone, he successfully managed projects valued in excess of $50 million on behalf of Allied Shipbuilders.

For over 60 years, Allied Shipbuilders Ltd. had always been owned entirely by the McLaren family. W.D. McLaren, father of Allied’s founder T.A. (Arthur) McLaren and grandfather of the current generation of ‘managing’ McLarens, was a partner in the Coaster Construction Company, a shipyard on the East Coast of Scotland before moving to B.C. in 1927. During the 1920s, Coaster built a number of steamships for the Union Steamship Company in B.C. Those that saw service here included the Lady Cecilia, Lady Cynthia, Lady Alexandra and the Catala.

W.D. established himself as a consulting Naval Architect in Vancouver before being hired as Managing Director of West Coast Shipbuilders, located in Vancouver’s False Creek. Arthur joined his father at West Coast Shipbuilders in 1941 after completing his Mechanical Engineering degree at the University of British Columbia. West Coast Shipbuilders ceased operations in 1948.

It was Arthur’s idea to lease a corner of West Coast’s property and to create Allied Builders Ltd., as it was then called. The firm was renamed to Allied Shipbuilders Ltd. in 1961. Arthur’s own sons became involved in the business from an early age.

Arthur McLaren suffered a stroke in 1990 which reduced his day-to-day involvement in the business. He died on February 19, 1999.

NEWS BRIEFS New trailer for Mission at Roberts Bank

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running into the old building and we all realized that the building was beyond repair.”

Both Captain Bjorndal and Reverend Parker expressed amazement at the response from the shipping community and their willingness and efforts to help.

Special recognition was paid to Hank Hamstra, Hans Verhoeff, Ernst Devries and long-time board member Glen Mitchell for their dedication and efforts in making the project for the new trailer a reality. Mission staff — Barb Andrew, Kathryn Murray and Eileen Connors

— were also singled out for their hard work.

Before unveiling a plaque that pays tribute to the many donors, the Right Reverend Michael Ingham, Bishop of the Diocese of New Westminster in the Anglican Church of Canada, led guests in a prayer and congratulated Reverend Parker and the Misison board of directors on the successful launch of the new trailer. BCSN More photos online. Visit www.bcshippingnews.com

Photo credit: BC Shipping News

he new trailer for the Mission to Seafarers at Roberts Bank was officially opened last month with major donors and industry stakeholders on hand to commemorate the event.

Mission Chair Captain Bert Bjorndal (President, BC Coast Pilots Ltd.) welcomed guests, saying that: “Tonight is about welcoming the stranger in our midst and we are here to celebrate and recognize a coming together of a variety of players and stakeholders in the shipping industry.”

Noting that there were many to thank for making the Mission’s project a success, Captain Bjorndal recognized the hard work of the board, volunteers and many generous donors, including: • The Teekay Foundation • OOCL • Valles Shipping • Waterfront Shipping • The Chamber of Shipping of British Columbia • The West Coast Charity Golf Event (The Forest Legacy Group) • Westshore Terminals • TSI • Gearbulk • Port Metro Vancouver • The International Sailor’s Society • Enbridge • CRC Canada • Empire Shipping “There were so many who supported this project — shipping companies, terminal operators, pilots, longshoremen, the port, agents, misison workers, retired tradesmen — all people with a desire to make a difference in the lives of seafarers,” said Bjorndal.

Original plans to expand the trailer began in January 2009 and a second double-wide trailer had been added when Deltaport 3 opened in July 2009.

It was quickly recognized however that the old building needed to be replaced.

“Last winter we had sailors literally stepping through the floor,” said Reverend Nick Parker, Senior Port Chaplain. “The roof was shot, we had streams of water

The Right Reverend Michael Ingham and Reverend Nick Parker unveil the plaque commemorating donors to the Roberts Bank Trailer Project.

Captain Stephen Brown, Captain Bert Bjorndal and Yoss Leclerc.

March 2012 BC Shipping News 9

INDUSTRY INSIGHT

The ‘go-to’ guy…

Lawyer, crisis manager and problem-solver: Peter Bernard, Q.C.

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CSN’s interview with Peter Bernard, Q.C., maritime lawyer for over 40 years and founding partner of one Canada’s largest maritime legal firms, was a difficult one to say the least. Trying to cover the extent of Peter’s work — or even begin to scratch the surface of his knowledge of the shipping industry — was too much to expect for one article but I think we’ve done a decent job of demonstrating just how complicated maritime law can be and how much experience and expertise is needed to fully manage its intricacies. What struck me most while interviewing Peter for this month’s Industry Insight is that, while knowledge of marine law is obviously key to his success, his ability to “take away the panic” is likely at the cornerstone of such a long and accomplished career.

BCSN: Peter, before we start, I need a primer. I’d like to understand more about Bernard & Partners and a bit of background on the laws and regulations you deal with on a regular basis.

PB: Bernard & Partners was set up in June 2002. Initially, our main practice 10 BC Shipping News March 2012

has been through our representation of protection and indemnity associations — P&I Clubs. There are 13 P&I Clubs internationally and we are appointed or utilized as correspondents for 11 of them. Any master from a ship that visits B.C. and is entered with that P&I Club for liability purposes can call us for any number of different reasons.

In Vancouver, there are four firms who act as correspondents for P&I Clubs. A ship’s needs can be quite broad and go beyond the scope of P&I insurance so we’ll get called in even if it isn’t covered under P&I rules — it could be a problem like a salvage matter or a grounding; a deserter or a medical problem — and the ship needs immediate assistance.

...when the Queen of the North hit Gil Island at about 1:00 am, we had three people in Prince Rupert by 10:00 am.

The most important difference between a maritime lawyer and other lawyers is that we attend right at the very beginning of an incident. It isn’t like an

auto accident where adjusters look at the claim and you get a file from ICBC two years later. For example, when the Queen of the North hit Gil Island at about 1:00 am, we had three people in Prince Rupert by 10:00 am. We represented BC Ferries through the P&I Club. Or when the Sundancer hit a rock near Campbell River in June 1984 — I heard about it on the 6:30 am news and was in Campbell River by 9:00 am on that morning. You deal with any problem that arises and you try to take away the panic that occurs following an event like this. There are interviews that need to be managed with agencies like the Transportation Safety Board and Transport Canada or the coroner in the event of a death. I can only imagine what it’s been like with the Costa Concordia. That will take 10 years to sort out.

In terms of a quick overview of the legal framework, you need to start with the International Maritime Organization (IMO) which oversees a number of conventions. There are about 170 member states who adopt, accede to and ratify these conventions.

INDUSTRY INSIGHT Basically, member states work together to draft the text for a convention and, once approved by a set number of the member states or states flagging a set per cent of the world’s tonnage, it becomes the responsibility of individual nations, like Canada, to take steps to bring it into national law.

Sometimes the convention is brought into national law by a simple statement that acknowledges it shall have the force of law but there are also cases where the implementing nation establishes certain exceptions or extensions. A good example in Canada is the International Convention on Limitation of Liability for Maritime Claims, 1976, which has effect with respect to “seagoing” ships — the Canadian exception extends the effect to all ships. So a 20-foot runabout has the same remedies with respect to limitation of liability that are provided for in the international convention.

B&P partners in 2010 at Whale Channel — Peter (centre) stands with (left to right): Peter Swanson, David Jones, Gary Wharton, Nevin Fishman, Tom Hawkins and Mark Hilton.

...the whole concept is to try to achieve international consistency so those running the ship have a reasonably good idea of what they can be subjected to in any nation.

Many of the conventions fall into four main areas: 1) safety — which covers issues like ship construction and includes the International Convention for the Safety of Life at Sea (SOLAS); 2) environmental — conventions like the Prevention of Pollution from Ships (MARPOL) and the Convention on Civil Liability for Oil Pollution Damage (CLC); 3) what I like to call the “human” side — conventions like the Standards of Training, Certification and Watchkeeping (STCW) or the International Labour Organization Convention (ILO); and 4) carriage — including such things as the Hague-Visby Rules (the International Convention for Classification of Certain Rules of Law Relating to Bills of Lading 1924 and

1968 Protocol), the Convention for Safe Containers and the Athens Convention relating to the carriage of passengers and their luggage by sea.

Many of these conventions have limitations of liability. It is generally accepted internationally that ship owners should be entitled to the benefit of limitation.

Their liability can be maximized on the basis of a set formula — for example, under the Athens Convention, the limitation for the ship owner is 175,000 SDRs (Special Drawing Rights). The International Monetary Fund has a basket of currencies which balances out the different exchange rates, so one SDR in Canadian funds is currently worth about $1.56. Under the 1976 Limitation of Liability Convention, the tonnage of the ship is also factored into the calculation to reach the limitation.

For example, a small vessel in Canada under 300 tonnes that causes personal injury to one or more individuals may limit its liability to $1 million. In the event that the damage is only damage

to property including other vessels, the maximum limitation is $500,000.

If a small tug or speedboat were to collide with and sink a multi-million dollar yacht, the maximum amount of liability would be $500,000. Under the 1976 Limitation of Liability Convention, the only way you can challenge the right to limit is to show that the loss resulted from the personal act or omission of the individual claiming limitation “committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result”. That is a very high standard and in the result, limitation is rarely overcome, at least under the 1976 convention.

BCSN: Do you ever get an uneven application of conventions, whether it’s one country acting quicker than the others or changing the specifics of the convention too much?

PB: That’s always a problem — the whole concept is to try to achieve international consistency so those running the ship have a reasonably good idea March 2012 BC Shipping News 11

INDUSTRY INSIGHT of what they can be subjected to in any nation. If a ship comes to Canada, the owners and the master know that MARPOL and the Civil Liability Convention are in place and they know what to expect. If they go to a country where those conventions are not in place — and, in many cases, the U.S. provides a good example of that — they are subjected to things they won’t understand without having a lawyer stand beside them.

BCSN: What about national laws that don’t fall under the IMO?

Bird Convention Act which is a U.S./ Canadian convention created in 1916 to deal with who could shoot what birds and harvest what eggs. In 1994, the concepts of environment and pollution were introduced in a very general way; as a result of amendments passed in more recent years, the Act became a punitive statute in terms of pollution incidents from ships. It’s a convention but only signed by two parties.

BCSN: How do you determine jurisdiction and who has the right to prosecute infractions of conventions?

PB: There are, of course, many but a good example of that is the Migratory

PB: There are typically three jurisdictions: departure point, arrival point and

flag state. One of them will have the right to take jurisdiction over an event occurring on the high seas.

There was an incident a number of years ago when a bosun and a third engineer had gone to a Canadian steamship inspector (i.e., a port state control inspector) and told him they had pumped oil over the side of the ship while in international waters. Why did they do that? They confused the U.S. and Canada to a certain degree — there’s a whistleblower provision in U.S. law that provides for the whistleblower to get up to half of a penalty. So a fine of $1 million meant you could be a wealthy man. There was a question of jurisdiction here because the U.S. would prosecute it. Nobody wants to have ships pumping oil on the high seas but short of a law that says the U.S. is going to extend its jurisdiction to the mid-Pacific, I couldn’t see how they had jurisdiction.

The Canadian inspector didn’t know what to do with it because the incident happened in international waters and the vessel was not Canadian-flagged.

After some discussion, the inspector recognized that his only option was to tell the flag state what the crew had told him and leave it to them to prosecute.

In the U.S. there has been tremendous enforcement of shipboard misconduct in pumping oil on the high seas.

Peter in Ilulissat, Greenland, proceeding towards the North West Passage in 2009.

12 BC Shipping News March 2012

In the U.S. there has been tremendous enforcement of shipboard misconduct in pumping oil on the high seas.

They started to prosecute seafarers for being involved in those matters and the prosecutions were often very serious.

Seafarers were arrested and sometimes held without bail. Fines were huge — as much as $38 million for multiple transgressions. The high fines that were being extracted by the U.S., and the attention that was getting, in my view was partially responsible for changes in the Migratory Birds Convention Act.

INDUSTRY INSIGHT Canada could see that the U.S. was getting millions in fines and wanted to share in that and increase the punitive levels substantially. Under the statute, the fine amount can be apportioned between payment of the penalty and allocated for environmental projects and rehabilitation.

BCSN: What sort of trends have you seen in the development of regulations over the past decade?

PB: In the early days, IMO conventions focused on ship safety and carriage — things like SOLAS and the load line.

The focus on the environment started after the Torrey Canyon incident in 1967 — this was a supertanker that became shipwrecked off the western coast of Cornwall in England with 120,000 tonnes of crude oil on it. Pollution became a major focus for IMO members, international ship owners and their underwriters in terms of international law and conventions.

So through the 1970s you had many conventions dealing with pollution, prevention and civil liability. In terms of evolution of law, clearly the environmental aspects are huge.

BCSN: Do you think we’ve gone overboard on conventions and regulations?

PB: That’s a hard call — in terms of protection I don’t know how you would argue against regulations that have had a positive effect on reducing pollution or improving the lot of seafarers. If you look at everything from the quality of the ships, the quality of the people on the ships, the quality of the carriage arrangements, containerization and those sorts of things — the IMO has been amazingly effective. At the same time, technology and the regulatory regime have played a part as well.

We’ve come a long way. Fifteen to 20 years ago, we used to have a pollution incident at least once a month. Now, it’s about once a year and I’m including everything from fishing vessels to passenger ships. You just don’t see it anymore simply because practices have become so much better.

There are a number of laws that were a little hard to accept at first — one is strict or absolute liability, for example. When a person commits an offence in Canada, under the law that person is innocent until proven guilty and it’s up to the Crown to prove otherwise. Under the Canada Shipping Act, 2001 and Migratory Birds Convention Act, the Crown only needs to prove that the event took place and establish the fact that

Examples of when things go wrong — accidents happen and Peter and his team are called in immediately.

March 2012 BC Shipping News 13

INDUSTRY INSIGHT some person was involved in that event whether they were identified or not.

And that’s it — the ship and captain are now guilty. You’ve got the guilt which may be imposed on the person who caused the event to happen but also on the person who oversees the event such as the chief engineer or the captain and now, the directors and officers of corporations are exposed.

There’s nothing new about Canadian law providing jail terms or the ability to charge masters with pollution offences and the ability to put them in jail but it’s never happened.

BCSN: This leads me to ask about your thoughts on the criminalization of seafarers.

PB: The United Nations Convention on the Law of the Sea (UNCLOS) contains a number of provisions that are designed to create uniformity in the control and prohibition of pollution both within and beyond the territorial seas of coastal states. Canada is a signatory to UNCLOS but has ignored the provisions of Article 230 which provides that only monetary penalties are to be imposed with respect to violations on international laws and regulations or applicable international rules and standards for the prevention and control of pollution of the marine environment committed by foreign vessels either beyond or within the territorial sea except in cases of a wilful and serious act of pollution within the territorial sea.

Bernard & Partners was quite involved in making representations dealing with Bills C15 and C16 relating to the Migratory Bird Convention Act and criminalization. There’s nothing new about Canadian law providing jail terms or the ability to charge masters with pollution offences and the ability to put them in jail but it’s never happened. The 14 BC Shipping News March 2012

Migratory Birds Convention Act broadened that further and was more definitive on the abilities of the Crown to prosecute masters, chief engineers and in particular, directors and officers.

While the directors and officers clause is a huge concern in terms of attracting shipping business to Canada, the thing that has created the greatest controversy is the criminalization of the actual seafarer. Canada has, as suggested earlier, taken the lead from the United States with respect to prosecution of seafarers and the level of penalties. However, the U.S. is not a signatory to UNCLOS whereas Canada may well be in violation of its agreed obligation.

Perhaps a recognition of that position is the reason for a very small number of prosecutions under the Migratory Birds Convention Act and as far as I am aware at this time, there have been no convictions of vessels or ship masters or engineers let alone directors or officers.

That’s the main argument but there are some other problems as well — such as the potential for a games officer with no shipping experience to be able to tell a master where to put his ship at any given time. To be fair, as I understand it, there is an agreement between

Environment Canada and Transport Canada with respect to who has the authority and competence to order vessels to take any particular steps in the given circumstances. That’s fine as long as you don’t get someone who is over-zealous.

Any number of potential disasters, including loss of life, could flow from an inexperienced person exercising his purported powers.

Surprisingly, there is no specific law in Canada that says the captain must be the last one to leave the ship.

BCSN: Would this be a good time to talk about the Costa Concordia and the fate of Captain Schettino?

PB: Surprisingly, there is no specific law in Canada that says the captain must be the last one to leave the ship.

There are specific requirements of a master — section 109 of the Canada Shipping Act, 2001 is an example of a statutory provision that places the responsibility for the safety of the people onboard the ship with the master requiring him to take reasonable measures to protect persons on board from any safety hazard. If he were to direct

Left to right: Peter with Tom Hawkins and Martin Green (then president of Burrard Clean).

the evacuation from a lifeboat, he may well have been doing his job, just in a different way than expected. However, any captain who has left his post before everybody is safe is finished as a master and as a human being.

In terms of jurisdiction, it will get complicated. Along with the place of the accident, you need to factor in the location of the company headquarters, the nationals onboard and where the tickets were sold. The criminal matter itself and the charges levied against the captain will likely fall to Italy and I understand that the IMO Secretary-General has stated that the IMO is the right international body to deal with safety of passenger ships and, in particular, a safety review of the Costa Concordia accident.

BCSN: With the 100-year anniversary of the Titanic coming up in April, many people are asking how an event like this could still happen.

PB: Following the Titanic, a number of changes in the design of ships were implemented. This included alteration of the height of transverse water-tight bulkheads. Many of the changes in hull construction which followed from the Titanic disaster were included in the SOLAS Convention in 1948, the question for passenger ships becomes how many of the water-tight compartments can be penetrated without the vessel sinking or rolling over. The Sundancer that went down in Campbell River in June 1984 was a two-compartment ship but she still went down. We worked on that and found two things had occurred: 1) even though the water-tight doors had been closed, the Sundancer was originally a car ferry so the water came up the elevator shafts, onto the car deck and down other elevator shafts; 2) we found that there was a 40-tonne healing tank on the starboard side that had been cut as had the two compartments and that was enough to allow water to come up and flow through the ship. They’re asking why the Costa Concordia went down when it was a two-compartment

ship. If in fact only two compartments were breached by the very significant gash in the side of the vessel, it would appear that they may not have closed all the water-tight doors on the vessel which is particularly egregious given the nature of the navigation at the time.

...if the government really wanted to ban loaded tankers or tankers of any sort then it would be a strange, strange law.

BCSN: The reaction here, especially in the media, had many people making comparisons to tanker traffic on the West Coast and the likelihood of an incident happening here. Do you have any insights on this?

PB: I don’t think the Costa Concordia had a pilot onboard. In B.C., you have a pilot starting in Victoria that travels with the ship all the way to the north

end of Vancouver Island. There’s an area in Hecate Strait where you don’t have a pilot but then one gets back on for the Inside Passage route. So that’s one reason they say it wouldn’t happen. The media were trying to take the example of the cruise ship and apply it to tankers when it’s quite different. Also a tanker follows a very clearly specified route at a slower speed and with the attendance of at least two tugs as escorts.

BCSN: How would a ban on tanker traffic be implemented? What would the law look like?

PB: It would have to be a federal law even though the B.C. government is very much involved in dealing with the coast.

I haven’t really thought through how it would work but if the government really wanted to ban loaded tankers or tankers of any sort then it would be a strange, strange law. It would be almost impossible. It’s like saying: ‘you can come here

March 2012 BC Shipping News 15

INDUSTRY INSIGHT in a bulk carrier that carries our grain to sea and you can have 2,000 tonnes of fuel in the bottom of that ship but you can’t come here in a tanker because you might spill something. You’re not going to stop all shipping.

I can’t think of the last time there was a spill from a tanker accident on the West Coast of B.C. or in fact if there ever

A

has been one. There have been a couple on the East Coast and I once attended a small spill from a gasoline tanker in Port Moody but I don’t think we’ve had any tanker groundings, spills or collisions — not in my practice in 45 years.

BCSN: You mentioned the East Coast where there is three or four times the amount of tanker traffic and an environ-

About Peter Bernard, Q.C.

fter obtaining his law degree from the University of British Columbia, Peter joined the long established Vancouver Maritime Law Firm of Macrae Montgomery Hill & Cunningham. He was a partner in that firm from 1969 until he joined Campney & Murphy in 1982 where he was a partner until 2002. In June 2002 Peter became one of the founding members of Bernard & Partners.

Peter’s practice has enveloped a very broad spectrum in the field of maritime law over a period of more than 40 years. He has represented ship owners and charterers in both international and coastal shipping, terminal operators, P&I Clubs, hull and machinery underwriters, shipbuilders and various worldwide financial institutions. Litigious matters have included areas such as collision, salvage, maritime liens, pollution, immigration, bodily injury, carriage and chartering disputes and also includes commercial work such as carriage and chartering along with ship purchase and finance. Peter has been involved in Arbitrations and Mediations as counsel and as an Arbitrator or Mediator.

Peter has been a leading influence in the marine community, particularly in western Canada. He has been a director of the Chamber of Shipping of British Columbia, the International Maritime Centre, the Canadian Bar Association, the Canadian Maritime Law Association and Vancouver Maritime Museum. He has chaired or otherwise organized many events, including the International Congress of Maritime Arbitrators in 1991, the International Conference of Marine Arbitration in 1988 and a number of continuing legal education seminars and presentations. Peter was appointed Queen’s Counsel in January 2001 and is listed as a leading lawyer in Canada and in the maritime world in Who’s Who Legal, Best Lawyers. Peter was recently given the honour of the Best Maritime Lawyer in Vancouver, British Columbia for 2011. He was also recently appointed to the Transportation Appeal Tribunal of Canada.

In his spare time, Peter heads to Buccaneer Bay on Thormanby Island with his wife Susan. “It’s one of the best sandy beaches on the coast. My wife’s family started going there in 1895 and there is now a special community of 63 homes.” Peter has two children, Michael and Christie, and three grandchildren, Sarah, Emma and Ethan.

16 BC Shipping News March 2012

ment that is just as beautiful and just as pristine as here in the West and yet you don’t have the same outcry. Why do you think that is?

PB: The attitude is certainly different. Every day in the news there are stories about the need for more money for healthcare or education and then you look at the economic potential of this project and the question becomes one of whether people can accept a manageable risk in exchange for an economic benefit. The Exxon Valdez was a very sad event but, realistically, they’ve been moving a lot of oil out of Alaska for a long time and that has been the only significant spill. Also, that was 25 years ago and now you have better ship design, better communication and better practices including, for example the presence of high-powered tugs as escorts.

BCSN: You mentioned earlier that the law to ban tanker traffic would have to be federal but that the Province of B.C. is very much involved. Does the Province ever try to step in to regulate aspects of shipping?

PB: Shipping and navigation are matters of federal legislation competence.

B.C. is pretty careful about its constitutional position but when they do get into shipping it can be difficult. For example, WorksafeBC wants to legislate or investigate questions of ship safety including stability and other aspects of performance of a vessel. It’s best seen in the fishing industry or sometimes with ferries where a provincial position is put forth while at the same time a federal position already exists and the vessel owner doesn’t know which one he needs to follow. If he complies with the federal position and not the provincial position he’s liable to be operating contrary to the law. So there are those areas between the province and the federal government that result in confusion for the industry.

The other area that has been problematic is the Waste Management Act where the province has taken some

INDUSTRY INSIGHT pretty rigid positions on things like security and pollution. It hasn’t come to litigation but they get pretty involved in dealing with oil pollution matters mostly because of public pressure.

Similarly, there is a tremendous effort by American states to get involved in maritime jurisdiction — for example, Washington State tried to pass some regulations with respect to tankers but they were declared unconstitutional.

[The North American Emission Control Area] calls for ships to burn fuel with a lower sulphur content even though there are questions about its availability.

BCSN: Have there been any difficulties bringing IMO conventions into Canadian law?

PB: One that comes to mind is MARPOL and a number of annexes that are related to sewage and garbage. When they passed the annexes into Canadian law, they provided for areas where you could pump sewage suitably treated or dump comminuted garbage as described in the Convention. The Canadian government got it wrong. Essentially, they said it could only be a certain number of miles from the nearest “baseline”. Well there are no “baselines” in the interior of Vancouver Island, they’re all on the West Coast. So if a small sailboat owner wanted to pump treated sewage over the side, he could only go to one of a few reception stations in Georgia Strait or the Salish sea or go out to the West Coast.

What they really meant to say was if you’re three or 12 miles from land, you may discharge the sewage or garbage depending on how it was processed onboard before discharing. The federal legislators changed this with respect to sewage but not for garbage which makes no sense, so there are some things that need to be corrected there.

The North American Emission Control Area (ECA) is another provision

that will likely cause problems. ECA calls for ships to burn fuel with a lower sulphur content even though there are questions about its availability. The ECA provisions require vessels to burn low sulphur fuel for the 200 miles of its voyage closest to the coast which can give rise to a very significant cost. It appears at this stage that Transport Canada intends to enforce the ECA requirements beginning in August, 2012 but they fail to provide an answer to the ship owners as to where they will be able to acquire fuel with the necessary low sulphur content.

BCSN: Are there any proposed laws that you think might be problematic for the industry?

PB: I’m not aware of any specific considerations. I think the bigger issue is the number of regulations we have today. You almost have to have a lawyer (or someone well versed in the regulations) close by to be able to keep up. In

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general, in my view the increase in the number of regulations is more problematic than any one specific piece of legislation.

You also run into issues where the Canadian position is not very clear, especially on smaller vessels and enforcement of stability, passenger ship regulations or safety equipment. It has been poorly legislated and difficult to determine, for example, whether a 60foot sport fishing vessel is a passenger ship or a pleasure vessel when rented to individuals. We actually just had a decision this week in a case concerning the definition of “bare boat charter” and whether the charterer can enlist the services of the vessel owner as master without changing the status of the vessel from pleasure to passenger. In my view, the law was clear and all charges were correctly dismissed by the finding that the yacht remained a pleasure vessel in the circumstances. BCSN

About Bernard & Partners

he Bernard & Partners Admiralty and Maritime practice group is one of the largest and most experienced in Canada. Starting in 2002 with six partners and three associates, all of whom had been with Campney & Murphy, Bernard & Partners has grown to a size of 16.

The firm represents a broad range of clients in both a litigation and transactional context. Clients are both domestic and international, and cover all aspects of marine transportation.

On the litigation side, the firm acts for virtually all of the International Group Protection and Indemnity Clubs, and Defence Clubs. The firm routinely acts for both domestic and foreign hull and machinery underwriters as well as general insurers. They also act directly for Canadian and foreign ship owners, charterers, forwarders as well as shippers and terminal operators.

On the transactional side, they advise and assist in the preparation of key transport documents such as bills of lading, charter parties, contracts of affreightment and passenger ticket contracts. They also advise on the purchase, sale and financing of ships, including the construction and repair of ships, both pleasure and commercial, terminal service agreements, salvage agreements, and security service agreements. They have been extensively involved in assisting foreign companies to either relocate to Canada or establish Canadian branch offices.

For information on Bernard & Partners, please visit: www.bernardpartners.com.

March 2012 BC Shipping News 17

HISTORY LESSON

Running around the law

By Lisa Glandt

Librarian/Archivist, Vancouver Maritime Museum

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or every law that is written, there are those who will try to find a loophole and profit from it.

Vancouver’s maritime past is filled with the stories of rogues and their adventures trying to evade the rules of maritime law. Nothing captures the outlaw imagination like the tale of the rum running industry that flourished along British Columbia’s West Coast from 1920 to 1933.

In 1920 the American prohibition laws came into effect decreeing that “thou shalt not manufacture, sell, barter, transport, import, export, deliver, or furnish any intoxicating liquor”.

Canada had not banned the production of liquors for export so for the first couple of years smuggling bourbon, beer, rye, wine, rum, gin and any other variety of liquor from Vancouver to locations in Washington, Oregon and California was profitable and uneventful. The only violations of Canadian law that smugglers could face was if they dealt in moonshine or failed to pay the required duty on bonded products.

The California coast was fondly nicknamed “Rum Row” as this was where 18 BC Shipping News March 2012

much of the rum running activity took place. By 1924 the U.S. Coast Guard had begun to seize more vessels and by 1926 they seemed to have the upper hand in thwarting the activities of liquor smugglers. Yet, the rum runners were smart and in the early years had found ways around the existing Canadian and U.S. laws.

By 1929 rum runners had begun to use larger “mother ships” that could hold a larger cargo and crew...

The law required that foreign liquorladen ships stay outside the U.S. by a 12-mile limit, or beyond a distance the ship could steam in one hour, whichever was greater. A ship’s speed through water is influenced by a number of factors including weather, the ships’ condition, engine efficiency, weight of cargo, and ocean currents — thus by default, rum runners would stay in international waters off the coastline.

By 1929 rum runners had begun to use larger “mother ships” that could hold a larger cargo and crew and would

then rendezvous with smaller transport boats outside the 12-mile limit near San Francisco, Los Angeles and San Diego.

The Lillehorn and Malahat were the two most famous running ships in the 1930s, and there are reports that the Malahat carried anywhere from 60,000 to 84,000 cases of liquor per trip. A typical Malahat transfer to a smaller shore vessel might have consisted of 200 cases of well-known brands of scotch whiskey, gin, champagne, and liquors, followed by 100 cases of Old Colonel Rye and Corn Hollow Bourbon. The Malahat was often referred to as “queen of the rum fleet” because of her access to supplies of all types — she was considered a floating warehouse of sorts for fuel, canned goods, medicines, fresh water and other supplies that the smaller vessels might need.

The United States continued to pressure Canadian legislation, leading to a new law that required all Canadian ships cleared for a foreign port and loaded with liquor to actually reach the named port and discharge its cargo. Rum runners soon found Tahitian ports where they could offload, complete some

Photo credit: E.W. Grey Collection, VMM

VANCOUVER MARITIME MUSEUM

The Malahat at Rum Row, 1931. creative paperwork for port authorities that looked the other way, and then reload their liquid cargo and sail back to Rum Row (ships from Europe were not affected by Canadian law so they sailed directly to Rum Row).

It is a history that might surely have remained silent as the unofficial rum runner’s motto was: “Don’t never tell nobody nothing, nohow”.

Rum Runners also avoided paying the $20 Canadian export duty that was to be charged on each case of liquor that went to the United States by loading the cargo on vessels that claimed to be heading to non-U.S. ports. Once they reached international waters along the West Coast, the cargo would be unloaded and goods transported to shore. Smuggler vessels were networked together by a short wave radio telegraph system and they used code to communicate with each other on a set schedule. Fraser Miles worked aboard the rum running vessel Ruth B in 1931. He recalled his first experience of loading and redistributing illegal cargo in his book Slow Boat on Rum Row as: “Sure nothing to the rum running business. Get a release by radio, meet and load a speedboat and run back out to sea. Like shooting fish down a well.” Playing cat and mouse with U.S. Coast Guard vessels added excitement to days that might slowly pass

The Malahat deck loaded with cargo of liquor in boxes. while waiting for the next coded radio message.

The repeal of the Volstead Act on April 4, 1933 brought an end to prohibition in the United States and led to the end of rum running. It is a history that might surely have remained silent as the unofficial rum runner’s motto was: “Don’t never tell nobody nothing, nohow”.

Ships’ captains often kept two logs: the official and unofficial record of their voyage. Little information is recorded in the official logbooks that have found their way to museums and archives while the unofficial logbooks were often destroyed. The Library at the Maritime Museum contains copies of the few books written about this engaging his-

tory: Slow Boat on Rum Row by Fraser Miles, Pass the Bottle: Rum Tales of the West Coast by Eric Newsome, My Dad the Rum Runner by Jim Stone, RumRunner: The Life and Times of Johnny Schnarr by Marion Parker and Robert Tyrrell, and Personality Ships of British Columbia by Ruth Greene. Perhaps as the days go by we will be able to document more of this history as stories are finally shared.

Lisa Glandt has been the Librarian/ Archivist for the Vancouver Maritime Museum since 2007. She started volunteering at the museum in 1999 sharing maritime stories with school children and now she preserves the stories. She can be contacted at: archives@vancouvermaritimemuseum.com

March 2012 BC Shipping News 19

DARRYL ANDERSON

FMC inquiry threatens to blow B.C.’s container trade onto the rocks

By Darryl Anderson Managing Director, Wave Point Consulting

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he governor of the Bank of Canada Mark Carney’s January 22, 2012 comments on the nature of the U.S. economic recovery provides a solid reason why we need to be concerned about our international markets. He observed that not only is it going to take a number of years, but in the Bank’s opinion the United States is not “ultimately going to get back fully to the U.S. we used to know”. Canadian firms will need to develop international markets to make up the difference in lost U.S. export sales to sustain our pace of economic growth.

With this economic outlook in mind it is not surprising that the United States Federal Maritime Commission’s (FMC) Inquiry into Disparities Driving U.S. Cargo from U.S. Ports to Canada or Mexico has generated intense interest. In the fall of 2011 U.S. Senators Maria Cantwell and Patty Murray, D-Wash., on behalf of the state’s ports and a bipartisan group of eight U.S. Representatives, fuelled the call for FMC action by arguing that the impact of the Harbour Maintenance Tax (HMT) paid on imports through U.S. ports is driving traffic to competing Canadian 20 BC Shipping News March 2012

ports. The Washington Public Ports Association believes that this “land border loophole” — i.e., imports routed via Canadian ports are not subject to the HMT — is diverting cargo to B.C. ports at the expense of Washington State revenue and jobs.

The first issue is the magnitude of cargo diversion and the second is government transportation policy priorities.

At first glance the FMC inquiry appears to be one more example of trade protectionism at work in the U.S. political system. Based on the last presidential election cycle there is ample room for shipper concern that protectionist sentiments will grow in 2012. In this trade skirmish, British Columbia’s container ports of Prince Rupert and Port Metro Vancouver are pitted against their West Coast rivals, the Ports of Seattle/Tacoma and Los Angeles/Long Beach.

Yet, a closer look at the material filed in the course of the FMC inquiry reveals that there is more than simple trade protectionism sentiment at play. Two

very important issues relevant to the future growth of North American container traffic and port development are emerging. The first issue is the magnitude of cargo diversion and the second issue is government transportation policy priorities.

Concern over potential diversion of cargo from U.S. West Coast ports has been growing as the expansion of the Panama Canal nears completion.

Prior to the start of the FMC inquiry, the accepted wisdom in the U.S. port community was that Canadian ports have been dramatically increasing their share of U.S Pacific Rim import traffic. Two phases of a major study on the impact of gateway costs on port traffic have been completed for the Southern California Association of Governments.

The results suggest that port traffic is highly elastic to costs and transit time differentials. A similar study for the Washington State Joint Transportation Committee concluded that the imposition of container fees of $60 for a 40foot equivalent container (FEU) could result in the loss of 25 per cent of Puget Sound ports’ import container traffic.

These studies assessed the impact of

PORTS & TERMINALS gateway costs on container traffic levels through West Coast ports. The studies estimate high elasticity of West Coast container traffic to port cost — particularly low-value commodities transported inland in marine containers is highly sensitive to additional costs.

If significant container cargo volumes could be diverted as a result of a $60 cost difference on a FEU container then Washington Public Ports Association State and their supporters became convinced that they faced significant risks from the existing Harbour Maintenance Tax. The Port of Seattle, in their December 20111 FMC filing, indicated that the HMT is an ad valorem tax that averages $89 per FEU at the Port of Seattle, well above the $60 price difference that their 2009 study indicated would lead to diversion. The Port of Seattle asserts that because the HMT is assessed directly to shippers who make decisions on cargo routing they

are particularly vulnerable to cargo diversion from Canada because the HMT does not apply to containers that enter the United States from a land border.

The Port of Seattle acknowledges that the HMT is only one of several factors contributing to cost differences, but “it’s significant enough to influence shippers’ decisions”. Thus, they are seeking to persuade the FMC that the HMT should also be applied to cargo imported through land border crossings.

The fundamental question...is whether Canadian container ports have indeed been dramatically increasing their share of U.S Pacific Rim import traffic.

The fundamental question that appears to have been missed by U.S. studies is whether Canadian container ports have indeed been dramatically

increasing their share of U.S Pacific Rim import traffic. While it makes for good politics to repeat the marketing message (about the cost benefits for shippers by avoiding the HMT) from competing Canadian container terminals, the real test of a competitive threat is determined by the actual trade outcomes.

Vancouver, B.C. based economist Phil Davies of Davies Transportation Consulting was one of the first analysts on either side of the border to challenge the conventional wisdom. His paper, entitled Cost Elasticity and Port Choice for West Coast Container Traffic, examined the impact of relative cost increases (particularly the appreciation of the Canadian dollar) on the market share of the Port of Vancouver’s share of West Coast container traffic. The elasticity of port traffic was estimated to be significantly lower than values found in previous studies for U.S. West Coast ports. Davies concluded that the

Port of Seattle with Terminal 30 in the foreground, Terminal 18 in the middle and Terminal 5 at the top of image (Elliott Bay, Puget Sound, Seattle, Washington, USA).

March 2012 BC Shipping News 21

PORTS & TERMINALS impact of increased relative costs due to the exchange rate was outweighed by the increase in Canadian Pacific Rim imports due to lower prices for imported goods. Based on a sample of Canadian customs data, it appears that the Lower Mainland has actually lost market share in its core Canadian market and that the largest portion of traffic lost to competing ports enters Canada by truck through land border crossings in Eastern Canada. These results are at odds with the consensus among the U.S. port community that Canadian ports have been dramatically increasing their share of U.S import traffic.

Based on a sample of Canadian customs data, it appears that the Lower Mainland has actually lost market share...

It was somewhat ironic that Davies presented his follow-up research at the fall 2011 METRANS conference in California just days before the launch of the FMC investigation. In his latest research, U.S. and Canadian Port Competitiveness for Asia-Pacific Import Traffic, he used new data from the U.S. Bureau of Transportation Statistics (BTS) to explore the transshipment patterns for Pacific Rim imports through the Ports of Vancouver and Prince Rupert.

Davies’ research indicates that the BTS data substantially understates actual U.S. Pacific Rim import transshipment traffic through Canadian ports. Based on Canadian information, it appears that recent volumes of Pacific Rim import containers transshipped through the Ports of Vancouver and Prince Rupert total approximately 200,000 TEUs. Doubling this figure to 400,000 TEUs to account for return of the containers via the same ports, this is approximately 1.7 per cent of total West Coast container traffic of 23 million TEUs in 2010. U.S. Pacific Rim import transshipments by truck accounted for the equivalent of an additional 90,000 22 BC Shipping News March 2012

TEUs or 180,000 TEUs on a round trip basis. Inclusion of this traffic would increase the share of West Coast TEU traffic transshipped to the U.S. through Vancouver and Prince Rupert to 2.5 per cent.

Given these facts there would appear to be very little evidence to suggest that the HMT is harming U.S. ports’ ability to compete with those in Canada.

Canadian Pacific Railway (CP) provided North American container flow data in response to the FMC inquiry.

CP’s documents noted that U.S. ports handled 83 per cent of the total TEUs through North America and have captured 74 per cent of the growth between 2000 and 2010. In 2010 Canadian market share for import TEUs into the U.S. is 2.5 per cent, down from 3.2 per cent in 2000. In 2010, Canadian ports handled 748,877 laden TEUs that were U.S. origin or destined as compared to 353,850 TEUs handled by U.S. ports that were Canadian origin or destined.

The deficit volume as a percentage of total TEU volume handled at U.S. ports amounts to only 1.4 per cent, down from 1.8 per cent in 2000.

Given these facts there would appear to be very little evidence to suggest that the HMT is harming U.S. ports’ ability to compete with those in Canada. Thus, there must be other factors at play within the U.S. system that were driving the call for FMC action.

The Port of Los Angeles response to the FMC inquiry provides some insight. While the FMC asked a number of questions to stakeholders, the Port of Los Angeles choose to respond to the question asking what actions the U.S. Government can take to improve competitiveness of U.S. ports. Of those, what are the most important or pressing? Ms. Geraldine Knatz, Executive Director of the Port of Los Angeles, indicated that the creation of a national

freight transportation strategy, the utilization, allocation and competitiveness of the harbour maintenance tax and the competitiveness impact of other federally imposed import/export fees should be reviewed.

Such a thoughtful response from one of America’s leading port executives could hardly be called protectionist. In fact, the Port of Memphis, the fourth largest Inland Port in the United States, argued for the right balance of government policy measures to sustain international trade competitiveness. Executive Director Randy Richardson wrote in the Port’s inquiry response that the FMC should investigate all potential factors contributing to a shift in trade and carefully consider the ramifications of future actions on all parts of the country.

Canadian shippers and port interests have grappled with the question of the right composition of government policies to ensure international trade competitiveness over the last seven years as the Asia-Pacific Gateway Initiative was conceived and implemented. Yet, for all this work at least in terms of competing for market share of North American container cargo we appear at best to only be holding our own.

Perhaps in time the true value of the FMC inquiry will be revealed as all the parties to international supply chain competiveness confront the challenges based on the facts. As the B.C. Department of Transportation and Infrastructure prepares to finalize the Pacific Gateway 2 strategy, Canadian shippers strongly hope that the prevailing conventional wisdom within each of the transport modes doesn’t slow our response to a changing commercial landscape brought about by the Panama Canal expansion or any other factors.

Darryl Anderson is a Victoria-based maritime and transportation consultant. He maintains an active independent research practice focusing exclusively on maritime transportation and policy issues. Darryl can be reached at wavepoint@shaw.ca.

PORTS & tERMINALS

Port updates and briefs...

2011 – Strong showing for Nanaimo Port Authority.

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he Nanaimo Port Authority had an exceptional year in 2011 with the completion of its new $25 million cruise berth and welcoming centre and the positive growth in commodities handled and exports through its deep sea terminals.

The new cruise facility, which received partnership funding from both the provincial and federal governments, was completed in eight months and was viewed as one of the more successful federal government infrastructure funding projects. The facility received positive reviews from both the cruise operators and visiting passengers alike and sets the stage for continual growth in Nanaimo’s cruise sector.

Another highlight for Nanaimo Port Authority in 2011 was the significant increase in cargo movement through the Port, particularly export products.

Lumber volumes were the highest they had been since 2008 and represented a 200 per cent increase over 2010 volumes. Export log volumes also experienced an increase of 87 per cent over the previous year, and in the Port as a whole, there were 167 deep sea ships that went to berth, compared to 100 in 2010. Total export units this year were 220,919 (807,801 metric tonnes) as compared to 94,736 units (396,065 metric tonnes) in 2010.

“The Port was very pleased to see our cargo volumes increase this past year, and the increase in lumber shipments is a solid indication that the Vancouver Island lumber industry has stabilized and is growing with the new export demands from the Far East,” said Bernie Dumas, President & CEO. “During the year we saw significant growth in lumber, log and salt handling, and to a lesser extent, an increase in the amount of kaolin which moved through the Port. We are encouraged by the growth

in what we consider to be some of our mainstay exports. The Nanaimo Port Authority is continuing to work on several projects which could come to fruition in 2012 and have a major impact on the transportation services available on

the Island as well as impacting economic growth and distribution services.”

Dumas is encouraged by the opportunities he sees in the Mid-Island region and has been working on a 2025 strategic business plan.

Nanaimo’s new $25 million cruise berth and welcoming centre are a hit with both cruise guests and operators.

Strong, stable performance from key sectors at Port Metro Vancouver in 2011.

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anada’s largest and most diverse port has released its 2011 yearend results, showing that Port Metro Vancouver handled 122.5 million tonnes of cargo, a 3.4 per cent increase over 2010. The 2011 throughput volumes reflect the strength of Port Metro Vancouver’s diversity, moving goods and passengers across five business sectors, and building further on several records set in 2010.

Auto volumes dropped 22 per cent, a reflection of international challenges resulting from the major disruption of manufacturing in Japan due to the devastating earthquake and tsunami in March. By the fourth quarter, volumes were rebounding and the Port anticipates a stronger 2012.

Breakbulk cargo is down 4.4 per cent overall; however, foreign breakbulk imports have posted a 30 per cent increase

due to the strength in Canadian demand for foreign steel and construction materials. Breakbulk lumber exports rose 107 per cent, primarily due to strong demand from China.

Bulk volumes set records with dry bulk cargoes like coal up 7.8 per cent overall, with thermal coal exports rising 46 per cent to a record 11.7 million metric tonnes, and potash posting a 30 per cent increase and setting a new record of 7.2 million metric tonnes. Liquid bulk cargo ended the year down 20 per cent, largely due to lack of capacity at the terminal.

Container traffic at Port Metro Vancouver has continued to keep pace with a record setting 2010, with volumes flat at 2.5 million TEUs (20-foot equivalent unit containers), supported by a six per cent increase in containerized exports.

March 2012 BC Shipping News 23

PORTS & TERMINALS Port Metro Vancouver (cont’d)...

Cruise voyage and passenger numbers have increased with 199 cruise calls and 663,425 passengers in 2011 representing a 15 per cent increase.

Sustainability and Stability Achievements In 2011, Port Metro Vancouver advanced a long-term visioning exercise, Port 2050, which has provided a strategic framework for conversations and discussions to inform stakeholders on the update of land use planning now taking place.

The Port also released its first ever Sustainability Report: The Way Forward, underscoring the importance of each of the economic, social and environmental initiatives to growth and prosperity.

Spring 2011 saw the unprecedented eight-year labour agreement between the BC Maritime Employers Association and International Longshore and Warehouse Union Canada, representing stability at Port Metro Vancouver as a key competitive advantage. The BCMEA

Disney Cruise Lines and Port Metro Vancouver announced the return of the Disney Wonder for the 2013 cruise season. also announced a tentative collective agreement with Longshore Foremen Local 514. The term of the tentative collective agreement is identical to that of ILWU Canada (Longshore).

Looking forward, the Port was pleased to announce the return of the Disney Wonder, beginning May 27, 2013. The cruise ship will sail seven-night cruises from Vancouver to Tracy Arm, Skagway,

Juneau and Ketchikan. The return of Disney Cruise Lines to Vancouver as the hub for its Alaska cruises was decided on several factors: closer proximity to Alaska allows for longer port stays, and passengers’ feedback on the “Vancouver experience” was very positive. Disney’s new Alaska cruises have proven popular with customers and the line is planning to stay in the region long term.

Greater Victoria Harbour Authority announces board and staff updates.

T

he GVHA welcomed new members Doug Crowder (Independent Director) and Graham Hill (Capital Regional District) to the Board of Directors. In addition, re-appointments recently announced included Barbara DesjardinS (Township of Esquimalt), Pamela Madoff (City of Victoria) and Mike Williamson (Independent Director). Ms. Desjardins, Mayor of Esquimalt, will serve as Acting Chair while the board reviews executive positions later this year.

GVHA’s staff organizational structure was updated to meet the growing demands of the Harbour. CEO Curtis Grad was pleased to announce the following changes: Sonterra Ross was promoted to the position of Chief Operating Officer.

Sonterra has acted in many capacities at GVHA, including Acting CEO and 24 BC Shipping News March 2012

Manager of Finance and Property. She will be responsible for financial, commercial, property and human resource planning, investment and growth, and will provide support to the CEO on strategic initiatives.

Kyla Fiddick has been promoted to Financial Controller for the Harbour Authority. Previously the Financial Analyst, Fiddick’s new senior management role will focus on financial management, reporting and planning.

In addition to the promotions announced above, Rebecca Penz and Ian Crocker both received new titles: Rebecca Penz is now the Manager of Sustainability & Quality Management.

She will focus on corporate sustainability and instituting a comprehensive Quality Management program. She will also support the CEO on strategic projects and initatitives, policy de-

velopment, corporate communications and community outreach.

Ian Crocker is now the Manager of Operations & Maintenance. While Ian’s position remains relatively unchanged, his new title more accurately reflects his duties.

And the GVHA is pleased to welcome Colin Lowndes, Project Manager, CPR Steamship Terminal as a temporary contractor responsible for delivering on the CPR building revitalization project.

In other news for the GVHA, the 2012 cruise season schedule has been published and the number of calls and passengers expected will surpass the 2011 season. Ogden Point will see 229 vessel calls (up from 211 in 2011) with over 475,000 passengers. This season will be the first to bring regularly scheduled visits from the Disney Wonder and the Norwegian Jewel.

ports & terminals Port of Prince Rupert reports banner year for 2011.

T

he Port of Prince Rupert beat expectations and had another banner year in 2011 with record exports of forest, coal and grain products to China, Japan and Korea.

Some highlights of increased port traffic include: • 19.3 million tonnes of cargo moved, an increase of 18 per cent over 2010.

• Total coal tonnage shipped from Ridley Terminals Inc. (RTI) to Korea, China and Japan was up 16 per cent over 2010. RTI shipped 9.64 million tonnes of product compared to 8.3 million tonnes in 2010.

• Fairview Container Terminal saw a 20 per cent increase in volumes in 2011 compared to 2010 volumes, driven largely by exports of B.C. pulp, lumber and other wood products to Asian markets.

• The number of loaded containers shipped out through Prince Rupert was up 59 per cent from 2010, with much of the growth attributed to strong exports of B.C. forest products to the expanding Chinese market.

• Grain exports, principally to Asia, increased 17 per cent, from 4.29 million tonnes in 2010 to five million tonnes in 2011. The majority of growth came from barley, canola and grain pellets.

Additional news from Prince Rupert includes an announcement that the B.C. Government has committed $15 million for the Prince Rupert Road Rail Utility Corridor Project, which supports terminal developments and increased capacity on Ridley Island.

The Government of Canada invested $30 million in the construction of Phase 1 of the new Port of Prince Rupert container terminal plus a further $28 million was provided to establish a stateof-the-art container-screening program to help ensure secure and efficient border services for the terminal.

To date, the Government of Canada has invested almost $1.5 billion and

Prince Rupert’s container terminal, like all the rest of the Port’s operations, saw a significant increase in business in 2011. announced almost 50 Asia-Pacific Gateway infrastructure projects. The combined investment with the private sector, all four western provincial governments and municipalities totals $3.5 billion.

Federal Minister of International Trade and Minister for the Asia-Pacific Gateway Ed Fast, said: “These investments are positioning Canada as the gateway of choice between Asia and North America. In fact, Canada’s West Coast ports are more than two days closer to Asian markets than are any other port in North America.”

Also on hand to congratulate Prince Rupert for another banner year of growth,

B.C. Minister of Transportation and Infrastructure Blair Lekstrom: “We know that China, Japan and Korea are hungry for our products. That’s why we are focusing on developing infrastructure that provides businesses with the means to move their products to Asia, creating jobs all across B.C. Canada’s Pacific Gateway is the preferred gateway for business to and from Asia and North America.”

Prince Rupert Port Authority CEO Don Krusel credited the efficient and committed workforce as a key driver of Prince Rupert’s success. “It also stems from the support of citizens, companies, and cities along the entire trade corridor.”

March 2012 BC Shipping News 25

RAY DYKES

Panama Canal expansion could bring Canadian opportunities

By Ray Dykes

T

he long-awaited $5.25 billion expansion of the Panama Canal may well prove to be a U.S. challenge and a surprising Canadian opportunity.

That’s some of the thinking on the West Coast of North America as the expanded canal heads for opening in late 2014. Even a six-day strike in January 2012 by workers seeking higher pay hasn’t muted the growing sense of foreboding or tingle of excitement as to what the bigger canal access connecting the Atlantic and Pacific Oceans will mean to West Coast ports.

If there was an anxiety meter, the sister ports of Long Beach and Los Angeles — two of the busiest in all of North America for container movements — would be right at the top. Estimates put expected lost business as high as a worst case 25 per cent or three million boxes a year for the southern California ports, which currently handle 40 per cent of the nation’s imported Asian cargo.

At the other extreme of the anxiety meter is the growing Port of Prince 26 BC Shipping News March 2012

Rupert with its closer proximity to Asia and rapid rail links to the rest of Canada and the U.S. Mid-West. Also near the low end of the anxiety measure is Port Metro Vancouver, where some new opportunities for bulk shipments through an expanded Panama Canal to South American countries such as Brazil, are creating a ripple of excitement.

If there was an anxiety meter, the sister ports of Long Beach and Los Angeles... would be right at the top.

Stuck firmly in the middle of the anxiety gauge are the Washington ports of Seattle and Tacoma with their heavy reliance on container traffic.

“We don’t know what the impact of the expanded Panama Canal will be,” says the Port of Seattle’s Director of Commercial Strategy, Bari Bookout.

“There are so many different factors in this equation.” About 70 per cent of the current trade through Seattle and Tacoma is deemed “discretionary” as

it chooses a route to get to the port’s main inland U.S. markets of Ohio and Chicago.

Will this trade opt in 2014 to stay onboard a container vessel and make one call at an East Coast port for market distribution instead of offloading in Seattle or Tacoma for the rail journey east? The West Coast brains trust isn’t sure and that includes major railways such as Burlington Northern-Santa Fe, which may have to do some serious pencil sharpening when it comes to future freight rates to maintain business.

While the Port of Tacoma admits the Panama Canal expansion “is one of many competitive developments” that it is tracking, Seattle’s Bookout wants action and says there is a need for a national infrastructure policy in the U.S., noting that “Canada has well-planned and orchestrated gateways.” Co-incidentally, the United States — the Number One global economic market — ranks a dismal 23rd for port infrastructure behind countries including Namibia, Barbados and Estonia, according to the World

ports & terminals Economic Forum. Singapore took the top spot and Panama made it to the Top Five. In this climate, some U.S. political leaders have called for infrastructure spending of at least $200 billion a year.

Naturally, ports on the East Coast see the Panama Canal expansion and growing talk of a need for higher infrastructure spending as nothing short of a bonanza of opportunity.

There’s a flurry of dredging and channel widening and deepening projects to reach a draft of 50 feet, but already some ports are finding they can’t get the money or the approvals they had hoped for in time.

Ports in Florida, Texas, South Carolina, Georgia, Virginia and as far north as New York/New Jersey all want a piece of the action post-2014 as the expanded canal will take container ship sizes from 4,400 to 5,000 TEUs (20-foot equivalent units) now to ships with 12,600 containers onboard. From late 2014, ships up to 965 feet long and 106 feet wide will be able to pass through the Panama Canal with a whole new book being written on what that will mean for economies of scale.

And it’s not just channel width and depth on those East Coast work orders, either, as the Port of New York/New Jersey is planning to raise the Bayonne Bridge by 64 feet in a fiveyear, $1 billion project to allow the larger container ships to pass underneath.

Post Panamax vessels of 100,000 to 120,000 dwt could

Partial Panama Canal cruises will probably continue giving passengers a taste of the engineering marvel rather than the whole trip.

For Canada’s major port, the diversified Port Metro Vancouver, the overall impact of the Panama Canal expansion is officially expected to be “relatively minor,” according to Peter Xotta, Vice President, Planning & Operations. The Vancouver port isn’t involved in most of the markets most likely to be affected.

Instead, Xotta says possible positive impacts from expansion could emerge from higher trade opportunities for Western Canadian companies through the port for all cargo types with destinations in the Caribbean, East Coast of South America, Europe and Africa that are currently constrained by the Panama Canal’s current capacity and restriction on ship size to about 80,000 deadweight tonnes (typical Panamax vessel size).

Post Panamax vessels of 100,000 to 120,000 dwt could change the ball game for Canadian exporters, especially bulk shipments to South America’s East Coast and Europe that could use the canal from 2014. The larger Cape Size vessels with their better economy now have to travel via the Cape of Good Hope off South Africa or via the Straits of Magellan near the southern tip of South America and that is not expected to change.

change the ball game for Canadian exporters, especially bulk shipments to South America’s East Coast and Europe Back on the West Coast, there’s already concern two years out from an expanded Panama Canal completion that the East Coast is winning traffic from the West. TEU totals peaked in 2006 at 8.5 million TEUs in the Port of Los Angeles, and container movement was up only slightly in 2011 over 2010 at 7.9 million TEUs. The Port of Long Beach also peaked in 2006 at 7.3 million TEUs, but was down over one per cent in 2011 over 2010 at 6.1 million TEUs. Meanwhile, total container volume in the Port of New York/ New Jersey rose four per cent in 2011 and some contend the erosion away from the West Coast is well underway before the expected further impact of the Panama Canal expansion.

The expanded Panama Canal will also open new opportunities for cruise ships with larger vessels being available for easier repositioning between the Atlantic and Pacific Oceans.

But the biggest of the cruise ships — Royal Caribbean’s Oasis, Freedom and Voyager for example — will be unable to use the canal because of height rather than length or width restrictions, mainly due to the Bridge of the Americas which passes over the canal.

A cargo container passes through Mirafolres Locks, Panama Canal.

March 2012 BC Shipping News 27

PORTS & TERMINALS Panama Canal Expansion 2014

K

nown as the third set of locks project, the expansion of the Panama Canal is expected to

be in operation in the 2014-2015 fiscal and in essence will add a third lane to the waterway. Approved by a national referendum in 2006, the project officially began on September 3, 2007 and involves: • A new lock on both the Atlantic and Pacific sides of the canal • Each will have three chambers and three water-saving basins • Excavation of new lock access channels and the widening of existing navigation channels • The deepening of the navigation channels and the elevation of Gatun Lake’s maximum operating level.

As well, Xotta says Port Metro Vancouver is working to ensure its users get a good deal. The port has negotiated collaborative agreements with both Canadian National and Canadian Pacific railways to “drive further efficiencies” while recognizing “the importance of reciprocal accountability for service delivery and service improvements”.

The port is also involved in a number of Lower Mainland projects that Xotta says “will further improve the flow of port-related rail and truck activity while also mitigating or reducing the impact of these operations on neighbouring communities”.

And Xotta says for bulk shippers or any British Columbian export company the expanded Panama Canal’s impact could be quite the opposite of what some might think as it could “further open opportunities for all B.C. exporters

giving them greater access to markets beyond that waterway”.

In the Port of Prince Rupert, there aren’t any noticeably furrowed brows over the Panama Canal expansion.

Shaun Stevenson, Vice President of Marketing & Business Development, is quick to stress the port’s closeness to Asia and its speed and reliability in getting goods to the key markets. The Northern Gateway is also improving its two-way flow of goods and operator Maher Terminals is taking a serious look at the commercial case for proceeding with the Phase 2 Expansion of the Fairview Container Terminal. That project, which will lift container capacity from 700,000 to 2 million TEUs, is expected to be through its environmental assessment stage by late this summer.

Several ports are watching closely to see what the response of the

The canal is Panama’s main economic activity and the current work will enable the facility to handle another 1,250 million PCUMs (Panama Canal Universal Measurement System, the unit used to establish tolls) per year.

By 2015, the Panama Government expects its canal contributions to triple and by 2025, be eight times higher.

The expansion of the canal is expected to reduce the Panamanian poverty rate by 30 per cent.

Currently, a typical container vessel pays about $200,000 to pass through the canal.

The expansion will allow Post Panamax vessels to access the canal (normally 100,000 to 120,000 deadweight tonnes), with new ship sizes being given as 965 feet long and 106 feet wide (295 metres x 32 metres).

28 BC Shipping News March 2012

Aerial view of work underway on the new locks and expansion of the Panama Canal (Mirafolres Locks) to be completed by the end of 2014.

major railways will be to the threat and opportunities of the Panama Canal expansion. At Prince Rupert, Stevenson says he feels a response from the railways is likely. “BNSF is not going to sit back, it will likely become more rate competitive.

“The railways have become much more responsive to shippers over the past two or three years and have been aggressively defending their market share,” he adds.

Another factor in the expanded Panama Canal scenario, according to Stevenson, is that shippers will have to determine whether the extra 8-10 days longer to go through the canal is better than a West Coast offload and a speedy rail journey to the heart of the markets.

Long Beach and Los Angeles have been improving rail and truck corridors to speed freight movements in the congested south, and up the coast Port Metro Vancouver is constantly engaged in programs to improve the reliability and efficiency of its supply chain, according to Xotta.

“That has emerged as a key competitive issue for all ports along the West Coast over the past decade,” Xotta adds.

Port Metro Vancouver CEO Robin Silvester gave a sharp warning recently when talking of the strategic visioning process called Port 2050 when he said: “The future is coming at us faster than we could have imagined, faster than the capacity and adaptability of some to face it head on.

“We need to be bold. We need to be fearless, taking on issues and forging linkages that preference or easy practice have put off limits in the past.”

No wonder there’s a scramble to get some of the expanded Panama Canal action by some ports and great angst by others, particularly in southern California, as they see possible market share erosion in future.

Ray Dykes is a former journalist who has worked his way around the world. He is now based in Nanaimo as a writer/photographer. Ray can be reached at prplus@ shaw.ca.

March 2012 BC Shipping News 29

container shipping

Seaspan and the container ship industry

By Syd Heal

T

he Seaspan brand name is known internationally around the world as being that of the leader in the leasing of container ships to first-class operating companies. A central feature of the portfolio of 65 ships in service plus an order book for a further seven due for delivery this year and into 2013, is that all charter contracts are long term, usually 10-12 years with options and all are chartered to major lines with first-class covenants. In the conceptual plan that led to the founding of the Seaspan Corporation this was a central feature that in practice has been rigorously applied with only minor exception.

A brief history of the choice of this powerful brand name for the Seaspan Corporation and its several subsidiaries is appropriate as to the lay person it can be quite confusing considering that there is also a Seaspan Marine Corporation with its own family of companies some of which also carry the Seaspan name. Both companies represent major investments on the part of Montana-based billionaire, Dennis Washington and his family and while 30 BC Shipping News March 2012

both companies derive from a common root their connection with each other is now solely through the common ownership factor of the Washington family.

It would in fact be hard to find a major brand so totally owned or as extensively controlled by one single family name.

Seaspan Corporation grew out of the offshore division within Seaspan International (SIL) when the latter was the central company, pre-Washington era.

Seaspan Corporation grew out of the offshore division within Seaspan International (SIL) when the latter was the central company, pre-Washington era. Grouped under SIL were the shipyard interests, Vancouver Shipyards, Victoria Shipyards, Vancouver Drydock Company along with Seaspan Intermodal (now renamed Seaspan Ferries).

The offshore division got its start through becoming the working tool of SIL in its joint ventures with Crowley of San Francisco and Fednav of Montreal

in the 1970s. Like all such joint ventures they are designed for a purpose and then dissolve when the ventures’ purposes have been achieved. These joint ventures in the Canadian Arctic, North Sea and Middle East, when terminated, left each participant with a collection of unemployed tugs and barges plus considerable knowledge and experience gained. SIL’s man in this activity was Captain Svein Stokke who, once clear of the joint ventures, developed Seaspan Offshore Services to operate SIL’s offshore activities and under Stokke’s management it enjoyed considerable success as a profit making venture from 1977 to 1994. SIL went through a number of management shakeups when controlled

by Genstar until Genstar itself was the subject of an unfriendly takeover, mounted by IMASCO, a subsidiary of BA Tobacco, who broke up Genstar and as a result SIL came on the market. A local syndicate headed by Peter Shields moved in and took control. Heavily reliant on bank backing, the decision was made during the Shields management era to shut down and dispose of

container shipping the assets of Seaspan Offshore for cash.

Sale of the fleet of deep-sea tugs and its fleet of large ocean going barges was accomplished by Stokke with most of the barges being sold to Boa A/s of Norway.

Stokke set up a management agreement with Boa which allowed the residual Seaspan Offshore division to retain its position in the international ocean towing industry moving heavy drill rigs and a great range of oversize equipment associated with the oil and dredging industries.

Following completion of the disposal of the floating assets, Stokke acquired a big enough stake in Seaspan Offshore Services to allow him a high degree of independence. Seaspan Cyprus was set up to handle the Boa barges. As SIL’s directive to turn SOS’ hard assets into cash had been accomplished, it was content to assume a benign interest, receiving its share of profits thrown off in the

ongoing development of SOS. It was an arrangement that suited all parties at the time — Stokke from selling himself out of a job had turned the situation into a virtually new venture that gave him good prospects for the future and Boa had a source of secure employment for its newly acquired barges. Stokke had the wisdom to recognize that Seaspan was a powerful brand name with an increasing presence in the maritime field and he was content to shelter under its wing.

[Stokke] focused his interest in China which, under Deng Xiao Ping, was starting the process of shaking off the dust of Chairman Mao’s dictatorship...

In the interim, Stokke had done what any shipping executive would do in searching out new markets. He focused

his interest in China which, under Deng Xiao Ping, was starting the process of shaking off the dust of Chairman Mao’s dictatorship and the so-called Cultural Revolution and the world was starting to recognize that China in the right hands was capable of becoming a superpower.

In that era, travel to China was very restricted. An invitation and application for a visa took months and then the visit that followed was supervised and directed at every turn. One of Stokke’s new contacts was Cathy Ma, executive secretary and interpreter at the Department of Communications, who would effectively become the source of a key connection in the future. The benefits of the Chinese trips were mostly represented by the contacts for the future that had been made and as these were of no specific interest to SIL, it followed automatically that these would accrue also to SOS, so that Stokke started

March 2012 BC Shipping News 31

container shipping visitor’s permit. Wang had been an assistant professor at Shanghai Maritime University and more latterly an employee of COSCO, China’s largest shipping company at their Hong Kong office.

On the strength of Cathy Ma’s connection with Stokke, her husband visited Seaspan Offshore. In view of Wang’s connections with the Chinese government establishment, and the university and business communities, Stokke Photo credit: Lonnie Wishart — www.lonniewishart.com

the renewed Seaspan Offshore with him at the helm as both manager and part owner with an extensive client list from previous business, the Boa connection and the potential that was developing from his Chinese visits.

Seaspan Offshore had its office in the SIL headquarters in North Vancouver.

Cathy Ma had been sent over to UBC to take a course. While here in 1990, her husband Gerry Wang came over on a

hired Wang as a broker. Wang did not go back to China, but stayed here on an employment permit until he gained Canadian citizenship. In 1992 SOS engaged Graham Porter, then freshly graduated from UBC with degrees in transportation studies and accounting. Porter worked with Wang and they quickly demonstrated to Stokke that they made a great and effective team who, by 1994, had made a deal with Stokke that enabled him to retire early as he wished.

In 1995, the hot name in town was Dennis Washington who was making all the moves to build a portfolio of B.C. transportation assets. Among Washington’s acquisitions was Cates Towing to be followed by SIL which he bought out in a convoluted process that saw Shields sell to Genstar Capital who in turn sold SIL to Washington.

Following this Cates was amalgamated into SIL. Meanwhile, the team of Gerry Wang and Graham Porter were making big plans for their future. In the Seaspan International sale and purchase it came with a variety of lesser interests including the 25 per cent SIL investment in the Stokke-controlled SOS which was a mere detail in the main part of the transaction between Washington and Genstar. It was however, a matter of major importance to the future of Wang and Porter, although that might not have been fully apparent to them at the time. These two young, but increasingly seasoned shipping executives, took over where Stokke left off. Wang’s executive ability, hands-on experience as a broker, plus strong connections in China when combined with Porter’s brilliant financial concepts in dealing with issues of vessel ownership and his ability in The COSCO Prince Rupert, number 58 in a fleet of 65 vessels owned and chartered out by Seaspan Corporation. Permission for use of photo provided by Lonnie Whishart, www.lonniewishart.com.

32 BC Shipping News March 2012

container shipping negotiating with the bankers made for a very strong team.

As a first step and some years before the launch of Seaspan Container Lines, they had opened an office in Shanghai using the new name Greathorse. This office was set up to develop access to Chinese and other Oriental shipbuilders and ship owning companies and was actually the Oriental end of their ship brokering activities, based in Vancouver, conducted under the name Seaspan Shipbrokers. It also acted as an intermediary on behalf of foreign owners wishing to take advantage of the attractive terms and prices on offer by the rapidly expanding Chinese and South Korean shipbuilding industries.

They were able to develop a new, upto-the-minute design for a 4,250 TEU container ship. They sold this design to European owners along with negotiating a building contract and providing supervisory service.

To launch their plan for a container ship leasing company they needed a major investor to strengthen the covenant and provide equity capital. They found their backer in Dennis Washington and with that backing Porter was able to sell the deal to the banks in arranging mortgage financing at the same time as Wang, through his connections, was able to arrange long-term chartering of their first ships to China Shipping Container Line. It was a true back to back arrangement with mortgage finance amortized over about eight years and a longer time charter from a strong counter party and it set the pattern for each ship that followed.

By the time they had assembled a dozen ships the next move was to go public. Seaspan Container Lines (the name they used initially) became Seaspan Corporation, a Marshall Islands company in the biggest IPO of any of the shipping flotations on the NYSE. The latest big development has been a joint venture with the Carlyle Group of the U.S. by which Seaspan and a private

company headed by Graham Porter, Tiger Investment Group and Carlyle, a major private equity company, have put together a joint venture in container ships with a maximum contributed capital of $900 million.

Tiger is an interesting company hand-

As an investment vehicle, Seaspan Corporation has succeeded in maintaining a perfect record of quarterly dividends on its common stock... ling the investments of “high net worth families.” However, being a wholly private group no announcement beyond Graham Porter’s own involvement has been revealed. It is within this group that the old Seaspan Offshore Group including Seaspan Shipbrokers have found a new home using the name Seabridge which entered into its own joint venture with the Ezion group of Singapore, owners of a large fleet of jack-up rigs and support vessels. Tiger maintains an interest in Seaspan Corporation, but in addition has its own ship owning and management operation — Greathorse Shipping. It follows a similar pattern to that of Seaspan with finance backed to back by long term charters up to 15 years. It owns a mixed fleet of four small container feeder 900 TEU ships, two 13,000-tonne chemical tankers and eight large bulkers in two designs of 115,000 and 180,000 tdw all leased to Chinese industrial concerns.

As an investment vehicle, Seaspan Corporation has succeeded in maintaining a perfect record of quarterly dividends on its common stock from its free cash flow since it was floated.

However, it has also developed something of a mystery among the stock market pundits, busily engaged as they are with constant number crunching. Talk of flowing with red ink at every seam betrays an ignorance of that perfect combination, the chartering of vessels

on firm long-term lease contracts to first class liner operators, fully backed by shorter term finance. In the Seaspan fleet of today an ever increasing number of vessels are clearing title as mortgages are paid off thus increasing the free cash flow. This is a process that will be continuous and will increase periodically as ships come clear of mortgage. The daily gross earnings from lease contracts of the 65 ships in service are estimated to now total about $2.2 million per day which gives some idea of the large cash flows involved.

It is not all clear sailing for Seaspan when it comes to the all-important stock market assessment of the company. Some assume incorrectly that it is Chinese and group it among Chinese companies with a New York Stock Exchange listing. In an offshore arrangement typical of today’s international shipping industry, it is a Marshall Islands company which establishes its legal basis. Its operational activities are conducted from Hong Kong which is perfectly reasonable considering its shipbuilding needs are all met

by Chinese or South Korean shipbuilders and the biggest block of its customer base are Chinese, Japanese and South Korean liner companies. However, the executive offices and ship management for the entire fleet are run from Vancouver which functions under the rules of the Vancouver International Maritime Centre. Seaspan is a founding member of the International Ship Owners Alliance of Canada and the entire project was conceived and launched in Vancouver and clearly it maintains a large and key presence here even if the Wall Street analysts cannot get it straight.

Syd Heal, a veteran of the marine industries and a prolific writer and publisher of marine books, can be contacted at: richbook@shaw.ca

March 2012 BC Shipping News 33

INTERNATIONAL SHIPPING

International shipping proactively addresses greenhouse gases (GHGs)

By Captain Oscar de Gouveia Pinto Chairman, International Ship-Owners Alliance of Canada Director, Valles Steamship (Canada) Ltd.

I

t is estimated that international shipping emits about 2.7 per cent of the global human-made emissions of C02 which is calculated as being about 870 million tonnes. The International Maritime Organization (IMO) has been working on controlling GHGs from international shipping through a global approach. A global approach must be observed, as it is impossible to attribute to any one nation the CO2 emissions from shipping due to the intrinsic international nature of the industry’s global activities. In July 2011, through the leadership of the IMO, shipping was the first industry sector to introduce mandatory GHG reduction measures by agreeing to new globally applicable regulations.

First ever mandatory GHG reduction regime The Energy Efficiency Design Index (EEDI) and the Ship Energy Efficiency 34 BC Shipping News March 2012

Management Plan (SEEMP) are the first ever mandatory measures to reduce GHGs from a sector on a global scale. These new regulations, which are amendments to MARPOL Annex VI Regulations for the prevention of air pollution from ships, add a new Chapter 4 to Annex VI and are expected to come into force January 2013. Under the EEDI, ships built between 2015 and 2019 will have to rate 10 per cent higher in terms of their energy efficiency performance. For ships built between 2020 and 2024 the rating will increase to 20 per cent. For those built after 2024 an energy efficiency improvement of 30 per cent will be required. It is estimated that these new IMO measures will reduce CO2 emissions from international shipping by 180 million tonnes annually by 2020 and 390 million tonnes by 2030.

Market-based measures (MBMs) In addition to the technical and operational measures that have been agreed upon for the reduction of GHGs, in view of the growth projections of human population and world trade, the IMO is also considering a further tier of reductions through market-based measures (MBMs) that would provide fiscal incentives to the maritime industry to reduce emissions further and/or off-set the growing concern of ship emissions.

Some aspects of the various proposals that are currently under consideration by the IMO will be reviewed below.

Key proposals at the IMO An International Fund for Greenhouse Gas Emissions from Ships (GHG Fund), proposed by Denmark et al.

This model would require the setting of a global reduction target for

INTERNATIONAL SHIPPING international shipping, as established either by IMO or the United Nations Framework Convention on Climate Change, (UNFCCC). When a vessel bunkers, it pays an agreed amount for every tonne of bunkered heavy fuel oil (a surcharge on fuel), referred to as the GHG Contribution, which is channeled to the International GHG Fund.

CANADIAN CAPERS

By Svein Stokke and S.C. Heal

Contains extensive notes on...

• MacMillan Bloedel • Canadian Transport • Star Shipping & the Port of Squamish • Seaspan Offshore and Seaspan International • Seaspan Container Lines

It is estimated that these new IMO measures will reduce CO2 emissions from international shipping by 180 million tonnes annually by 2020

Price $32.95 (including delivery in Canada)

and 390 million tonnes by 2030.

The funds raised will cover the costs and expenses for the administration of the fund and then allocation of the funds will be directed to mitigation and adaptation purposes with an emphasis on Less Developed Countries Funds and Small Island Development States as well as Research and Development projects with the aim of reducing the shipping industry’s CO2 emissions.

An Emissions Trading System (ETS) for international shipping, different forms of ETS as proposed in their individual capacities by Norway, the United Kingdom, France and Germany In the interest of simplicity, the four different ETS proposals that have been put forth will not be detailed because of the technical differences under each proposal. The main thrust of an ETS will be explained.

An ETS will have a global cap on total emissions from the shipping industry and establish a trading mechanism to facilitate the necessary emissions reductions, either by in-sector or out-ofsector methods.

The various proposals have distinct differences with respect to the method of allocating the emissions allowances and the approach for setting the cap.

Emission allowances can be allocated either by including free allocation based

Cordillera Books

102 - 8708 French Street, Vancouver, BC V6P 4W7 Telephone: 604 261-1695 / Email: richbook@shaw.ca

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Contact: Louise Kawaler ACTM, Director Canada Mobile: 604.329.1143 Email: Louise.Kawaler@atpi.com

www.atpi.com March 2012 BC Shipping News 35

international shipping on historic emissions, on a baseline or by auctioning. Also, allowances can be allocated to national governments by auctioning. A distinct difference with respect to the U.K. proposal is that it suggests that allowances could be allocated to national governments for auctioning and that the revenue generated would belong to the national government treasury. The Norwegian proposal indicates the possibility for limited exemptions for specific voyages to Small Island Developing States.

The U.S. Proposal: Ship Efficiency and Credit Trading (SECT) All ships including the existing fleet would be subject to mandatory energy

efficiency standards rather than a cap on emissions or a surcharge on fuel.

The efficiency standards would be based on a reduction from an established baseline. Based on a trading programme, ships operating more efficiently than required could earn efficiency credits based on current ship efficiency rate and activity and credits could be sold for use in the maritime sector. Ships operating less efficiently would have the option of purchasing these efficiency credits as one method of achieving compliance.

This proposal allows efficient ships to earn credits and promotes in-sector technology efficiency improvements.

This proposal does not fund projects outside the international maritime sector and therefore focuses on ensuring the maritime sector will reduce its emissions.

Efficiency Incentive Scheme (EIS) as proposed by Japan and the World Shipping Council (WSC) EIS would establish mandatory efficiency standards for both new and existing ships. This proposal would establish explicit efficiency standards for both new and existing ships in the world fleet, measured by using the Energy Efficiency Design Index (EEDI).

Ships falling short of the specific standards set would pay a fee (penalty) based on the amount of fuel consumed and how far short of the standard the specific ship falls. The per-unit fee applied per tonne of fuel is adjusted based on the relative efficiency of the vessel.

This method differs from an ETS/Fund proposal because efficient ships are not subject to recurring additional costs.

A ship may reduce costs by improved vessel efficiency or the use of selected technologies, but it cannot avoid these costs because those proposals would require every tonne of fuel or C02 to be taxed equally regardless of the vessels’ efficiency. Furthermore, EIS does not impose a figurative cap on global ship emissions. The EIS focus is on in-sector emissions reductions to reduce the actual carbon footprint of the maritime transportation sector.

Fees collected would be allocated to support further in-sector reductions through research and development focused on additional efficiency gains and emissions reductions in the fleet and funding other projects as set forth by the Parties to the EIS instrument.

Technical and Operational Measures to cut C02 by the Bahamas The Bahamas holds the position that the only way GHGs can be reduced is through operational and technical means. The position states that market-based measures (MBMs) can never

36 BC Shipping News March 2012

international shipping achieve direct reductions as they are reliant on a market mechanism to deliver the reduction and that through this financial liability, owners will alter their behavior and use less fuel. Therefore, in the basic construction of an MBM, it is a monetary mechanism that will alter behavior.

INTERTANKO believes that a MBM is not justified at this time because the industry is already incentivized by high fuel prices.

With respect to the funds that would be raised, Bahamas states that the funds raised by shipping should be proportionate to the level of emissions and therefore shipping accountability should not be more than 2.7 per cent of any global fund when all other industries are accounted for. Therefore, if at the UNFCCC the total fund is proposed at $100 billion, then shipping should contribute a maximum of $2.7 billion.

There are of course further proposals that have been submitted to the IMO but will not be covered in this short discussion.

International perspectives In reaching a consensus, nine fundamental principles were agreed upon by the IMO: • Effective in contributing to the reduction of the total GHG (greenhouse gas) emissions.

• Binding and equally applicable to all member flag states.

• Cost Effective.

• Able to limit or effectively minimize competitive distortion.

• Based on sustainable environmental development without penalizing global trade and growth.

• Based on a goal-based approach and not prescribe specific methods.

• Supportive of promoting and facilitating technical innovation and R&D in the entire shipping sector.

• Accommodating to leading technologies in the field of energy efficiency.

• Practical, transparent, fraud free and easy to administer.

INTERTANKO believes that a MBM is not justified at this time because the industry is already incentivized by high fuel prices. (Up until 2005, fuel prices were below $200 per tonne while today they are above $700 per tonne and the carbon prices for a bunker tax is estimated at $25 per tonne of carbon.)

However, if a MBM should be required then the preferred proposal is the GHG Fund. The International Chamber of Shipping (ICS) also holds a preference for the GHG Fund. Both industry associations believe this system will maintain a level playing field, avoid market distortion, provide transparency and allow for a more simple system to manage. Furthermore, as also stipulated by BIMCO and INTERTANKO, ICS believes that CO2 emissions from international shipping cannot be reduced effectively through the use of a regional financial instrument and therefore these global shipping organizations are strongly opposed to a European Union imposed ETS.

The MBM’s should be looked upon for meaningful GHG reductions and not contemplated as a “cash cow” in the political scene.

On January 19, 2012, the European Commission launched an on-line public consultation process in furtherance of a 2008 Directive which stated that if no international agreement was approved which included intentional maritime emissions before the end of 2011, the Commission would make a proposal to include these in the EU reduction commitment.

owner charters his vessel, then the charterer will pay for the fuel and therefore the simple method of applying a levy on the bunkers sold is the preferred method. If the ship owner pays for the vessel’s fuel directly, the owner’s interest will be to invest in better technologies for the owner’s ships. However, an Emissions Trading System for shipping is not the preferred method for ship owners because it is highly complicated, it sets a “cap” on shipping trade, increases administration for shipping companies and allows pollution to continue at a theoretical price. It is also observed that MBMs are turning into a “political decision”. The MBM’s should be looked upon for meaningful GHG reductions and not contemplated as a “cash cow” in the political scene. Whatever is agreed upon at the IMO, it will be important to be aware of the implications of a “cap” system as compared to a “target” system and that the system chosen in fact reduces global GHGs while promoting research and development to improve the performance of ships and reduce their carbon footprint on the environment globally.

Captain Oscar de Gouveia Pinto is the Chairman of the International ShipOwners Alliance of Canada.

Captain Pinto is the Director of Valles Steamships (Canada) Ltd. and has over 35 years experience in the shipping industry.

He started his career with the Shipping Corporation of India in 1973, received his Masters and Command in 1982, became a Mooring Master carrying Ship to Ship (STS) Transfer operations as well as berthing large oil tankers to offshore terminals, and then joined Valles of Hong Kong in 1986. His long established career has included sailing large tankers (VLCC’s) as Captain around the globe as well as holding on-shore management positions.

Conclusions There are varying degrees of support for the different proposals. If a ship March 2012 BC Shipping News 37

MERCY SHIPS

Mercy Ships: A vessel of hope

By Jennelle Dippel, Mercy Ships Canada

I

t was 1964. A group of young Americans were visiting the Bahamas when Hurricane Cleo released her fury. As they huddled together in the storm, an idea was born that would change the lives of people in need around the globe and take top of the line medical care to an entirely new place — the high seas.

“Wouldn’t it be wonderful if we had a ship with doctors, nurses and engineers? A ship filled with cargo that could come in to help after a disaster like this?” a young woman asked. Her friend Don Stephens agreed. It was an unlikely dream for a Colorado boy but 14 years later Stephens turned this vision into a reality. In 1978 he and his wife Deyon founded the charity Mercy Ships, a fleet of hospital vessels that would deliver medical care and relief aid to coastal countries free of charge. Today the organization has grown to include offices in 16 countries, with a Canadian headquarters in Victoria, B.C. The first vessel acquired by Mercy Ships was a retired luxury passenger and cargo liner, the MV Victoria, which underwent four gruelling years of transformation to become a first class floating hospital. Renamed the MV Anastasis, the vessel visited 275 ports

The Africa Mercy, donated by a Scottish foundation and converted from a Danish rail ferry into the largest vessel Mercy Ships has ever operated. during its service, conducting 66 field assignments in 23 nations including Guatemala, New Zealand, Fiji, Mexico, Jamaica, Poland, Africa and more. In 1983 the organization received a donated second vessel, the MV Good Samaritan (later called Island Mercy), to serve the Caribbean, Central and South America and the South Pacific. A third ship, the MV Caribbean Mercy, was added in 1993.

By 2007 all three vessels had entered into retirement and the charity focused on the acquisition of one large hospital ship. The MV Africa Mercy was donated by a Scottish foundation and converted from a Danish rail ferry into the largest vessel Mercy Ships had ever operated.

She became, in fact, the largest nongovernmental medical ship in the world.

Africa Mercy is 152 metres in length and weighs 16,572 gross registered tonnes.

Before and after — Mercy Ships medical staff performed an operation to repair this girl’s cleft lip and changed her life.

38 BC Shipping News March 2012

mercy ships

The technical crew onboard the Africa Mercy.

Operating like a small city, she is complete with dorms, lounges, a cafeteria, a small shop, a donated Starbucks cafe, internet services and of course a stateof-the-art hospital operation. She has six operating theatres, a 78-bed ward, a CT scanner and full laboratory services.

Africa Mercy’s first service was in Liberia in 2007 and she continues her mission along the coast of West Africa today.

A Mission of hope Mercy Ships continues to be driven by the compassion that first energized Stephens to pursue his dream. Their mission to deliver hope and healing to the world’s forgotten poor transforms thousands of lives every year.

Roughly 450 volunteers from upwards of 40 countries pay their own way to be involved in the task of delivering free medical care, relief aid and community support to some of the poorest people on earth. In addition to medical personnel, volunteers include cooks, teachers, engineers, mechanics, stewards, security officers, communications agents, divers, agriculturists, deck crew and many others.

The Africa Mercy docks for an average of 10 months at a time in different port cities of West Africa, sailing to dry dock for maintenance and repair between assignments. During field service, patients

go through a screening process before they are accepted into a surgery or clinic.

They receive an appointment card that tells them when they can return to the ship to receive care and a place for recovery. The most common conditions seen by medical crew are blindness resulting from cataracts, enormous goitres and growths, cleft lip and palates, noma, obstetric fistulas and bowed legs. Easily treated in North America, these ailments are the cause of tremendous devastation in Africa and commonly lead to extreme social ostracism or death.

Medical procedures available onboard the Africa Mercy are hard to come by elsewhere in Africa due to a lack of doctors (there are about two per every 10,000 people) and equipment, thus the medical ship is often seen as the only hope. In response to this need, Mercy Ships also works to train local healthcare professionals and to support local clinics.

Life on a Mercy Ship The Africa Mercy is as much a ship as it is a hospital; the medical work that takes place onboard would not be possible without an array of deck crew, technicians and tradesmen. Technical departments onboard the ship consist of both licensed and non-licensed crew members. Officer and rating positions

require current certificates of seafarer training while entry level positions and skilled trades, such as carpenters or electricians, are not required to have maritime licensing.

Canadian National Director of Mercy Ships, Tim Maloney says, “Many times, I am asked ‘Is there a place for me? I am not a medical professional’. While medical folks are essential, so are all of the others. Our maritime volunteers, by supporting the work of our medical volunteers, are also transforming the lives of the world’s forgotten poor one by one.”

Canadian volunteers Phil Chandra, a 28-year-old electrician, and Charles Davies, a 42-year-old Second Officer, are doing just this. Their mindset is that the more efficiently they do their jobs, the greater number of people can be reached by the Africa Mercy.

“Coming from Canada where we have good healthcare, we don’t see some of the things we do here...”

“My goal is to make sure the hospital is able to provide all the surgeries they can,” Chandra says. “That is, making sure all the medical equipment is working and that there aren’t any disruptions in power.”

Chandra originally heard about the charity through a college event. “The reason [Mercy Ships] appealed to me was that I could serve in a practical way.

I liked that they helped people by meeting them at their point of need.

“Coming from Canada where we have good healthcare, we don’t see some of the things we do here,” he continues. “If I can be part of something that changes a person’s life through using my skills, I’m all for it.”

Davies started helping Mercy Ships as a deck hand during his summers off from his job as a school guidance counsellor. When he discovered how much he enjoyed working with the charity he March 2012 BC Shipping News 39

MERCY SHIPS enrolled in school to become a deck officer. His reason for investing so much in his volunteer career with Mercy Ships is derived from his simple mantra, “I want the world to be a better place because I was in it.”

Working on a hospital ship is no doubt a different experience than being onboard a commercial vessel — perhaps the biggest highlight being that both men are able to sail with their families. Chandra’s wife is one of the charity’s committed nurses and Davies’ wife teaches children of the crew in the Africa Mercy’s onboard school.

Mercy Ships by the numbers Founded in 1978 70+ countries served $834,000,000 free medical service provided 56,000 life-transforming surgeries 243,800 dental procedures 29,000 local health care professionals trained 1,095 community development projects 1,200+ volunteers serving annually 16 national offices

www.mercyships.ca ”I salute the vision and mission of Mercy Ships and ask that you join me in supporting their noble work and contribute to make this world a better place.” Nelson Mandela 40 BC Shipping News March 2012

The volunteers also notice a difference in workplace morale. “Everyone here has a common goal to help the people of Africa,” Chandra says. “On other vessels it can tend to be about a paycheque.”

“To see the joy in her face was amazing to me — now she could go home and be close to people; get a job. To me, that makes it worth being here...”

Davies adds, “On a commercial ship we help people by supplying the things they need, but we don’t see [those people]. Onboard the Africa Mercy those we help stay onboard with us — you can see the impact right away.”

On the flip side, there are challenges.

The age of the ship presents complications and getting needed parts can be frustrating. Being in Africa, the crew must anticipate future needs months ahead of time in order to get what they require when they require it. And though Chandra has been with Mercy Ships for four years and Davies for 10, there is also the issue of operating a vessel that has so many short-term volunteers. The rotation of new faces can add extra hurdles to maintaining routine.

Chandra says, “At the end of the day it is a ship, so we need to comply with the STCW regulations, especially for safety, security and technical manning of the ship.”

Both agree that it’s all worth it for the chance to experience what takes place onboard the Africa Mercy. Davies recalls a patient named Geneviève. For seven years she had cared for her three very young children, all born blind with cataracts. Taking one in each hand and strapping one on her back she would guide them through darkness every moment of every day. Davies was privy to the excitement of watching the woman’s life transform as the three little ones underwent surgery to regain their sight

and saw their mother for the first time.

Chandra recalls a chance he had to visit with a recovering fistula patient who had been leaking urine for 10 years. “Her family made a small hut for her at the back of their property and no one came near her, touched her or talked to her,” he says. “She underwent a simple surgery that people in the western world would have had access to at anytime.

“To see the joy in her face was amazing to me — now she could go home and be close to people; get a job. To me, that makes it worth being here. At the end of the day I can go back to Canada, get a job and be well-off, but to be part of this for a season of my life is pretty awesome.”

It’s been over 30 years since Mercy Ships sailed to their first port and the charity isn’t slowing down. They are actively seeking opportunities to add vessels and are growing...

Sailing into the future It’s been over 30 years since Mercy Ships sailed to their first port and the charity isn’t slowing down. They are actively seeking opportunities to add vessels to the fleet and are growing in numbers of projects, volunteers and transformed lives every year.

Maloney says, “While our original focus has been on delivering medical care that transforms individual lives, an increased part of our work is focusing on building the health care capacity of the nations in which we work.

“When the Africa Mercy leaves its port of call, we want the country to have been touched not only on individual levels, but on a national level as well.”

For more information about Mercy Ships Canada, visit www.mercyships.ca.

To directly reach the recruitment office, email marine@mercyships.org.

legal affairs

Pleasure craft police sting gets stung by the Transportation Appeal Tribunal

By Thomas S. Hawkins

A Vancouver lawyer with Bernard & Partners

O

n July 1, 2007, the Canada Shipping Act, 2001 (CSA 2001) replaced the old Canada Shipping Act as the government’s principal legislation that governs safety and marine transportation, recreational boating and the protection of the marine environment. Many regulations were updated and new regulations were written.

One of the more important changes included the adoption of administrative monetary penalties (AMPS). The introduction of AMPS to the marine sector gives Transport Canada the right to issue administrative monetary penalties for contraventions of CSA 2001 or its regulations. Transport Canada states on its website that this administrative system will save time and money for everyone by providing a way, outside of the courts, to enforce the law. A schedule of violations specifying particular subsections of the CSA 2001 together with a range of penalties is set out in the Administrative Monetary Penalties Regulations. A vessel owner or individual who has been issued a Notice of Violation can apply for a Review by way

of a hearing before the Transportation Appeal Tribunal of Canada.

The Sting One of the longstanding issues for Transport Canada has been concerns regarding pleasure craft being used as passenger vessels to circumvent the tougher regime applicable to passenger vessels.

In August 2009 Transport Canada launched an undercover operation with the Vancouver Police Department in response to complaints about allegations that pleasure craft were being used as passenger vessels.

Transport Canada directed the Vancouver Police to book a charter on the subject vessel for August 14, 2009, through a separate yacht charter company. The Charter Agreement was between a numbered company which owned the vessel and the charterer, Steven Glasser, the fictitious name of an undercover police officer. The cover story used by the police officer was that he wanted to book the boat as an activity for participants in a conference. He paid the charter fee by credit card and it included the master and crew but he

never did board the vessel. Three undercover officers boarded the vessel and brought a cooler with cold beer aboard.

One of the officers asked the master if they could fish, which was agreed to, and they consumed alcohol during the trip. The police reported that the vessel did not display licensing markings nor was life-saving equipment located onboard. The police also reported that no safety briefing was conducted.

The master of the vessel was a shareholder of the numbered company that owned the vessel. He testified that the master of the vessel is determined at the request of the charterer. The master said that when a charterer requests that a master be provided and when he is the master, as on the day in question, he is paid for his individual services as master.

The Alleged Violations Transport Canada alleged that the vessel was engaged in a passenger vessel operation disguised as a bare-boat charter business. Transport Canada submitted that the question is to determine whether persons carried on a vessel are passengers or guests, particularly March 2012 BC Shipping News 41

legal affairs where a charter party agreement is in existence. Transport Canada argued that if any people onboard are paying money for their carriage on the vessel, then they are deemed to be passengers.

Further, if the owner of the vessel receives any form of remuneration for the use of the vessel, even if indirectly, then the persons carried are passengers. On the other hand, if the persons are guests and there is no form of remuneration with the vessel being used exclusively for pleasure, then the persons onboard are not considered passengers.

Transport Canada issued four notices of violation against the vessel owner: 1. the vessel engaged in a voyage without obtaining an inspection certificate under the Vessel Certificates Regulations; 2. no safety briefing was conducted under the Life Saving Equipment Regulations; 3. the vessel did not carry life rafts as required by the Life Saving Equipment Regulations; and 4. the vessel was not marked with its official number as required under the CSA 2001.

The vessel owner appealed the Notices of Violation by way of review before the Transportation Appeal Tribunal of Canada.1 The Decision Violation 1: The Minister of Transport was required to prove that the Vessel Certificate Regulations applied to the vessel and that the vessel owner failed to have the vessel inspected under those regulations. Specifically, the Minister was required to prove that the vessel was not in fact a pleasure craft at the time of the alleged violation — in other words, a vessel that does not carry passengers.

It was noted that the charterer was a detective who did not board the vessel on the day in question. The three police 1 078285 B.C. Ltd. and Minister of Transport, TATC File No. MP-0031-38, January 23, 2012.

This Appeal was successfully argued by Gary Wharton.

42 BC Shipping News March 2012

officers who did participate in the covert police operation unknown to the vessel owner, appeared to be onboard for pleasure purposes engaging in fishing and consuming alcohol.

...it is the contractual obligations and not the internal policies and views of Transport Canada which determine whether a vessel is deemed to be a pleasure vessel or a passenger vessel.

The Appeal Tribunal further found that as the vessel had been chartered, the three police officers were carried on the vessel by the charterer. As the three police officers did not pay the charterer for their carriage, they were guests carried on the vessel by the charterer (the detective who had not boarded) without remuneration. The three police officers brought their own beer onto the vessel and the only fee paid was the charter hire paid by the charterer. The Appeal Tribunal found that the object of the carriage of the three police officers onboard the vessel by the charterer was the undercover operation, not profit.

That the master was someone who owns half of the shares of the numbered company which owns the vessel, does not convert the guests who were carried onboard by the charterer into guests carried onboard by the owner of the vessel.

Accordingly, the three officers were not passengers on August 14, 2009.

Violation 2: In order for there to be a violation of the requirement that an authorized representative of a Canadian vessel must ensure that the crew and passengers receive safety training, the vessel must be first known not to be a pleasure craft at the time of the alleged violation. It was held that since the three officers were not passengers, the vessel, was not subject to the requirements of the Life Saving Equipment Regulations and therefore the violation 2 was not proven.

Violation 3: The violation alleges that the vessel did not carry life rafts as required under the Life Saving Equipment Regulations.

It was noted that those regulations do not apply to pleasure craft. In order to prove the alleged violation, the Minister was required to prove that the vessel was not a pleasure craft at the time of the alleged violation. Once again, that element and violation 3 had not been proven.

Violation 4: The last violation dealt with the alleged failure to ensure that the vessel was marked with its official number. As this vessel was registered, it was held that the requirement to mark the vessel with its official number was applicable to the subject vessel. However, the Appeal Tribunal noted the Minister’s submission that on the back of the “Registry Certificate” it is specified that the markings must be visible but that there was no submission that the Registry Certificate required the markings to be visible from outside the vessel. Further, the Registry Certificate in respect of the vessel was not introduced into evidence. Violation 4 was therefore not proven.

Determination The Transportation Appeal Tribunal determined on a balance of probabilities that the Minister of Transport had not proven that the vessel owner had violated the relevant provisions of the CSA 2001 as alleged in the Notice of Violation and therefore the penalties for each of the four violations were dismissed.

Underlying the decision is the fundamental proposition that it is the contractual obligations and not the internal policies and views of Transport Canada which determine whether a vessel is deemed to be a pleasure vessel or a passenger vessel.

Thomas Hawkins is a maritime lawyer with Bernard & Partners in Vancouver and can be reached at: Hawkins@bernardpartners.com.

OIL SPILL RESPONSE

Tankers in Canadian waters: are we ready?

Canada’s marine pollution preparedness and response on the West Coast

Part One—The traffic and the existing regime

By K.Joseph Spears

T

he public perception is that there are no oil tankers in west coast Canadian waters. That is simply not true. There is both destinational and in-transit tanker traffic. Tankers transit from Vancouver to export markets and have done so for 60 years. They carry bulk chemicals to and from Kitimat on a regular basis. The local petroleum market on the West Coast is served by a number of Canadian and U.S. companies. These companies are world leaders in tank barge movements and are highly regarded for their safety management systems using state-of-the-art tugs and double-hulled oil barges. As an oil importer, 70 per cent of Canada’s oil tanker traffic takes place on the East Coast with unloading at Canadian ports in Quebec City, Come by Chance, Port Hawkesbury, and Saint John.

There are approximately 20,000 tanker passages yearly in Canada with 3,000 on the West Coast. The safety record for tanker incidents in Canada has been a very good one as was noted in my previous article on the Pacific Pilotage Authority for all commercial vessels. Canada takes a private and public risk-based management approach

to ship-source oil pollution for all vessels including oil tankers. This ship risk management approach has been evolving over time to include governance and management practices. This was examined in earlier articles on Transport Canada’s Moving Forward document which sets out a strategic direction for safety and security management. There is a strong public perception that a total ban on oil tankers is the only option available to protect Canada’s West Coast marine environment from ship-source pollution. The reality is much different.

Canada takes a private and public risk-based management approach to ship-source oil pollution for all vessels including oil tankers.

Former Minister of Industry and Trade, David Emerson, wrote in the February 2011 issue of Policy Options a magazine article entitled “Why Canada needs an Energy Strategy”. He noted: “Canada has spent billions on the AsiaPacific Gateway Corridors Initiative, but failure to include 21st Century oil and gas transportation and logistics capacity is a

glaring gap that will seriously constrain the economy over time.”

Former Minister Emerson held that Canada should commit to a high standard of resource stewardship with environmental performance standards across air, water, land and ecosystem protection. It must be a cornerstone of Canada’s shipping regulation that we have a robust ship-source oil pollution preparedness and response capability which can be an integral component of a Canadian energy strategy and foreign policy. Prime Minister Harper recently stated at the World Economic Forum in Davos that his government is making it a priority to ensure we have the capacity to export our energy products to Asia.

There is only one way to do this — and that is by tanker.

Public attention has been focused on oil tanker traffic and the status of oil spill response because of recent energy export proposals. The proposed Enbridge Pipeline Northern Gateway Initiative would see 225 oil tankers yearly loading at Kitimat for the export of oil sands bitumen (a heavy synthetic crude oil). Increased tanker traffic of oil sands exports from Kinder Morgan’s Trans March 2012 BC Shipping News 43

OIL SPILL RESPONSE Mountain pipeline terminus at the Westridge Terminal through the Port of Vancouver (which has been ongoing for the last eight years) has created public, political and media interest and opposition. This article, the first of two parts, will provide an overview of Canada’s comprehensive industry-funded and managed “Marine Oil Spill Preparedness and Response Regime”(the regime).

Canada’s

approach

has

focused

primarly on pollution response and clean-up

rather

than

intervention

involving pollution salvage.

This regime can be traced back to the grounding of the oil tanker Arrow on Cerberus Rock in Chedabucto Bay off the entrance to Nova Scotia’s Strait of Canso. Since 1970, Canada has developed a robust response to the regulation of ship-source pollution and response and has led the way in pollution prevention matters at the international level at the International Maritime Organization (IMO). The provisions of the old Part 20 of the then Canada Shipping Act, was considered radical at the time. The regime has developed a strong overlapping fabric of prevention elements of a holistic risk management approach to ship-source marine pollution prevention and preparedness. There are many components which we have examined in earlier articles including marine pilotage and the NASP. Over time, this regime has developed and has responded to gaps and problems identified as lessons are learned from pollution incidents both domestically and internationally. In a September 2010 report to Parliament, the Office of the Auditor General and the Commissioner of the Environment and Sustainable Development examined and identified concerns which are being addressed by the Government of Canada. This, and the government’s response, will be examined in Part Two. 44 BC Shipping News March 2012

Canada’s approach has focused primarly on pollution response and cleanup rather than intervention involving pollution salvage for marine vessel casualties. The last major tanker incident in Canada was the break-up of the tanker Kurdistan in the Strait of Belle Isle off Nova Scotia in 1979. The Nestucca incident off Washington saw oil coming ashore on Vancouver Island during the Christmas period in 1988 from the holed barge. The Canadian response to the Nestucca spill and the Exxon Valdez three months later led to the Public Review Panel on Tanker Safety and Spills Response Capability, commonly referred to as the Brander-Smith report, chaired by David Brander-Smith, Q.C., and examined all aspects of pollution in Canadian waters. The BranderSmith report made specific reference to the need for prevention and specifically included this as one of its 107 recommendations. This served to shape the industry/government partnership which we see today. Here is one recommendation for the West Coast: In order to promote navigational safety: Decisions regarding shipping routes should take into account the environmental impact on the British Columbia coast of high seas break-ups or accidents.

The waters along the West Coast of Vancouver be submitted to the IMO for recognition as a “Special Area”. In the interim, a traffic separation scheme should be developed and implemented in the area…

Canada is dependent on foreign crude oil imports for a large portion of its energy supply. Our economy depends on exports from the Alberta oil sands to existing continental and foreign offshore markets. Since the development of Alaska’s North Slope oil and gas in 1977, tankers from Valdez, Alaska to ports in the lower 48 states of America have transited Canadian waters, both in the Exclusive Economic Zone (EEZ) and internal waters. In the period between 2002 and 2010, tankers made an average of 1,429 tankers port calls each year

in Puget Sound and Alaska. The state of Washington has passed a restriction limiting tankers to 125,000 dwt in state waters. The larger tankers transit to ports in California. Traffic density is set out on the attached table. The reality is that there is a large number of oil tankers transiting Canadian waters. The actual number of tankers from Valdez has decreased in recent years. From Victoria, it is possible to see oil-laden tankers in the Strait of Juan de Fuca inbound to Cherry Point and the four other petroleum refineries in Puget Sound — these cross into Canadian waters along with their escort tugs mandated by the State of Washington. These also include other non-Alaskan tankers inbound to Puget Sound.

It is important to realize that many non-tanker vessels have a substantial amount of bunker fuel that can, if released in the marine environment, cause a great deal of damage.

The American-flagged tankers, which range from 125,000 to 225,000 dwt are subject to the U.S. Jones Act (which requires movements between two American ports to be an American vessel) and transit West Coast waters on a daily basis. The U.S. tanker fleet is a relatively modern fleet with redundant propulsion and steering systems that exceed IMO tanker standards. This tanker traffic from Alaska led to a tanker exclusion zone (TEZ) in 1988 which keeps tankers more than 100 miles west off Haida Gwaii. This was a voluntary agreement between industry (Chamber of Shipping of America), the Government of Canada and the U.S. Coast Guard. It has no statutory or international (IMO) foundation such as a Special Area under MARPOL. The thinking being was this exclusion zone would allow salvage and/or assist tugs to take a disabled supertanker in tow well before grounding on Canada’s

OIL SPILL RESPONSE tankers. It is important to realize is that many non-tanker vessels have a substantial amount of bunker fuel that can, if released in the marine environment, cause a great deal of damage. On the West Coast we have over 13,000 foreign-flagged vessel movements each year of all types. This does not include pleasure vessels and Canadian-flagged commercial vessels or U.S. vessels transiting the Inside Passage.

Canada, unlike other coastal nations, has no prepositioned, dedicated, state-funded salvage tugs such as is seen in the United Kingdom or France.

It is estimated that up to 50 per cent of the U.S. tanker port calls will be vessels travelling under ballast (without cargo) due to the nature of products being shipped and the origin and destination of the cargo. The above graph is reprinted here with the permission of Wave Point Consulting Ltd. (from open source USMARD data).

West Coast and serve to protect the marine environment.

However, this has never been tested in real time or exercised to determine if a salvage tug could take a laden tanker under tow.

Canada, unlike other coastal nations, has no prepositioned, dedicated, state-funded salvage tugs such as is seen in the United Kingdom or France. The Canadian regime is silent with respect to pollution salvage. The tanker safety record on the Alaskan route has been effective to date save for the tanker Exxon Valdez in 1989 which spilled 67,000 tonnes of oil as a result of a grounding on Bligh Reef. Arguably, these new U.S.-flagged, double-hulled tankers have some of the most stringent safety requirements in the world and are subject to a joint Co-operative Canada/U.S. Vessel Traffic Management system operated by the Canadian and U.S. Coast Guards both offshore and in the Salish Sea. It is important to bear in mind that these waters are within the Canadian EEZ but are still subject to the right of innocent passage — i.e., a foreign-flagged vessel is able to transit these waters subject to Canadian marine laws for environmental protection as set out in the UN Law of the Sea Convention which Canada adopted but the United States has not yet ratified. There has been a great deal of attention focused on a legislated tanker ban in the northern portion of the coast in Dixon Entrance, Hecate Strait and Queen Charlotte Sound.

Bill C-606 was moved forward for debate but died on the order table when the present government of Stephen Harper was elected. In 2011, the private member’s bill banning tanker traffic was re-introduced as Bill C-21.

All the attention in the public debate has focused on oil

Spills from non-tankers can have as much of an environmental effect as tankers, especially if they occur in specific geographical areas during certain times of the year, for example around seabird colonies during breeding season. We only have to look to Italy to see the grounding of the cruise ship Costa Concordia off Giglio Island to see the environmental threat posed by cruise ship bunkers. Cruise ships and ferries frequent Canadian waters. The Queen of the North, with its bunkers remains in 1,200 feet of water off Hatley Bay. We have to remember that we have had a long-standing safe history of marine traffic moving oil to remote locations both in coastal communities and logging and mining camps. Potentially large VLCC tankers would also transit these internal waters if Kitimat is developed as a load port. It will be happening for LNG tankers.

In Canada, ship-source oil pollution response is governed under the Canada Shipping Act, 2001 in Parts 8 (Pollution Prevention and Response) and 9 (Pollution Prevention). This assumes that the oil has been discharged from the vessel which

March 2012 BC Shipping News 45

OIL SPILL RESPONSE was seen in the Deep Horizon oil spill from a fixed offshore oil production platform in the Gulf of Mexico, what works in theory may not always work in practice. It is important to have welldeveloped contingency plans in order to deal effectively with major incidents.

It is a cornerstone of Canada’s ocean management strategy to protect the marine environment and regulate shipping in an efficient and sustainable manner.

Oil tankers at the Anacortes Refinery in the Puget Sound. triggers the regime. There are three federal departments involved: Transport Canada, Environment Canada and the Canadian Coast Guard (under Fisheries and Oceans Canada). Transport Canada sets response policy and certifies the Response Organization. The Canadian Coast Guard is responsible for ensuring an appropriate response has been undertaken; and Environment Canada provides environmental advice. The Response Organization must be able to respond to ship-source oil spills of up to 10,000 tonnes. The onus is on the vessel owner and oil-handling facilities to have an arrangement with the Response Organization. The concept that the polluter pays and responds to its own oil spill can be traced back to the Brander-Smith Report in 1990. Ships in excess of 400 gross tonnes and tankers in excess of 150 gross tonnes must have an arrangement with the Response Organization. On the West Coast, the Response Organization is Western Canada Marine Response Corporation.

The regime has developed a strong overlapping fabric of prevention elements in a holistic risk management approach to ship-source marine pollution prevention. It is a cornerstone of Canada’s ocean management strategy 46 BC Shipping News March 2012

to protect the marine environment and regulate shipping in an efficient and sustainable manner. Part Two will examine recently identified gaps.

The Government of Canada, through the Canadian Coast Guard, takes a supervisory role and monitors the ship owner’s response to a spill. While the goal is for the polluter to be responsible for taking action, the CCG can request and cascade response capability from one region to another should it be felt that the response is unsatisfactory. As

The Canada Shipping Act, 2001 in section 180 allows the Government of Canada the necessary statutory power to take all available steps with respect to ship-source oil pollution response to prevent, mitigate or clean up pollution. Prior to 1995, the Canadian Coast Guard was the sole oil pollution response agency. North of 60° the Canadian Coast Guard is still the overseeing response agency and can step in on spills over 10,000 tonnes. Spills over the 10,000-tonne threshold can also activate the Federal Emergency Response Plan which brings with it a wider government response, including the use of resources from the provincial

This bulk carrier (seen entering Vancouver Harbour) holds roughly 2,000 to 2,500 tonnes of fuel.

OIL SPILL RESPONSE government. B.C. has been active in this field.

The pollution response approach taken in the United Kingdom, an island state with dense marine tanker traffic and offshore oil production, is in sharp contrast to Canada. The British approach is unique. One individual is appointed to take control of major oil spills as the Secretary of State’s representative (SOSREP) with clear and defined powers for control of pollution incidents to intervene and prevent the discharge of oil such as beaching a vessel in a port of refuge. It was held by the Donaldson Inquiry that a response could not be done by committee because of overlapping interests and jurisdictions. In Canada, with overlap between departments, the regime has never been tested in a real incident. It is important to realize that the Canadian Coast Guard may be required to take over when the vessel owners monetary pollution limits are reached. In a real incident this could happen in a matter of

days because of the high costs operating along a remote coastline.

The Canadian regime has worked in small spills but with increased proposed traffic we need a detailed risk assessment and a testing of response both in Canada and the United States to determine whether Canada is ready for a major oil spill on the West Coast. It has been over 40 years since there has been

The Canadian regime has worked in small spills but with increased proposed traffic we need a detailed risk assessment and a testing of response... a major ship-source pollution incident in Canadian waters. While we hope that there never is another pollution incident, we cannot let down our guard. As a coastal nation, Canada needs to train harder then we fight. It is hoped that we never get to find out whether Canada is ready for the big one.

The goal of marine safety management is to be strong at the prevention and protection phase so that we need never get to the response and mitigation phase of pollution response. This regime is an important pillar of Canada’s energy policy as former Minister David Emerson stated above. We need to develop the mechanisms and dialogue to ensure we get this right — whether as part of the Asia-Pacific Gateway Initiative or other shipping policy. Canada’s economic future depends on getting this right and being a leader in ship-source oil pollution prepardness and response if we are to export energy to Asian-Pacific markets. Part Two of this article will explore whether Canada is ready for the big one.

Joe Spears is the principal of HBMG and recently spoke with colleague Darryl Anderson of Wave Point Consulting at a Canadian Heavy Oil Association meeting on west coast tankers policy issues in Calgary. His father, Ken, sailed into Icco on Imperial oil tankers in 1948. He can be reached at kjs@oceanlawcanada.com

March 2012 BC Shipping News 47

workboats New EagleCraft pilot/patrol vessel for Nanaimo Port Authority: The NPA Osprey

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anaimo Port Authority has chosen Daigle Welding & Marine Ltd. of Campbell River, B.C. to design and build their new EagleCraft 39’ pilot/patrol boat. The NPA Osprey, designed by Steve Daigle and his naval architect Felipe Garcia, will be a multi-task vessel constructed specifically to meet the duties of a pilot boat, patrol vessel, fire boat and water ambulance for the Port of Nanaimo. It is expected to be in service this spring — just in time for the start of the port’s cruise ship season.

The NPA Osprey is the second vessel that Nanaimo Port Authority has

purchased in the past year from Daigle Welding & Marine Ltd. The NPA Eagle, a 32’ smaller version of the new 39’ vessel purchased in 2011, recently had a new 110 H.P. diesel fire pump installed with monitors on the bow and stern.

“We have been very pleased with the quality of work performed by [Daigle Welding & Marine] on our existing vessel, the NPA Eagle, and look forward to the completion of the new build. Having two near sister vessels will provide operational efficiencies from a critical spares and training perspective. Having a local builder produce a product of this calibre is a testament to the skills and innovation

of the West Coast boat building industry,” said Edward Dahlgren, Manager of Marine Operations and Harbour Master for NPA. Daigle Welding & Marine Ltd. have been designing and building EagleCraft custom aluminum boats in Campbell River since 1985. They have an international reputation for building quality aluminum boats and have shipped their products around the globe; including Russia, Norway, Chile, and the United States. Daigle has built several patrol vessels for the federal, provincial and municipal governments, and recently built the Vancouver City Police boat.

Electronics and electrical: • FLIR night vision camera & display.

• Two Lowrance HD10 color radar plotter depth finder, with side scan sonar.

• Four ICOM VHF radios, fire department VHF. • Two RCL 100 spotlights with three station controls.

• Magnum 2800 watt inverter.

• 1/2” 5086 H116 Propeller shaft tunnels.

• 1/4” 5086 H116 Sides.

• 5/16” 5086 H116 Transom.

• Diamond Sea Glaze windows and door.

• AWL Grip polyurethane paint top sides.

• Endura epoxy non-skid decks.

• Interlux Trilux II anti fouling bottom paint.

• Constructed to Transport Canada TP1332 construction standard for small commercial vessels, and TP10531 standards for pilot vessels.

• ISO 12217-1 Stability, ISO 11812 Cockpit drainage.

NPA Osprey specifications:

LOA 11.9 metres Beam (overall including fendering) 4.0 metres Draft displacement (estimated) 1.14 metres Fuel capacity 900 litres Estimated top speed 26 knots Estimated cruise speed 23 knots Approximate tonnage 13 gross tonnes Machinery: • Twin 370 H.P. Volvo D-6 3701-E BT diesel engines, c/w 3 station electric controls.

• Hurth HS801VE close coupled V drives, 2.49:1 ratio.

• KeyPower 8” hydraulic bow and stern thrusters c/w load sensing hydraulic pumps to be mounted on each engine. Three Station controls.

• Two 2 1/4” Aquamat propeller shafts with 26” x 24” four-blade Nibral Michigan wheels, counter-rotating.

Fire fighing equipment: • Steyr M0114K33 - 110 hp marine diesel.

• Aquis 1.5 foam system.

• Warous CPD direct drive water pump.

• GHH Rand 80 CFM compressor for the foam system.

• Two fire monitors.

48 BC Shipping News March 2012

Safety equipment: • Man over-board retrieval system.

• 16 man Zodiac life raft.

• C02 fire extinguisher system.

Vessel construction specifications: • 5/16” 5086 H116 Bottom Plate.

technology New benchmark to prove coatings performance

S

trong academic research and firm ship operating evidence of the correlation between applying specific fouling control coatings and reducing fuel consumption and CO2 emissions finds further backing, after a new industry partnership is formed that is likely to silence the doubters once and for all.

International Paint and BMT ARGOSS have come together and will utilize the new BMT SMARTSERVICES system to verify, through independent monitoring and software analysis, the contribution to vessel performance, fuel savings and reduced emissions made by International Paint’s highest performance fouling control coatings, Intersmooth®SPC (self polishing copolymer) antifouling and Intersleek® foul release coating.

Understanding hull roughness is an important factor in understanding ship performance, International Paint points

out. Any increase in hull roughness will increase the hull frictional resistance which will either require additional power and fuel to maintain vessel speed or, if maintaining constant power, will result in speed loss and longer voyage times.

International Paint claims fuel and emissions savings for its Intersmooth®SPC coating, citing evidence gathered from over 5,000 vessel drydock and inspections for fouling rating, combined with AHR (average hull roughness) measurements.

Behind this specific argument, the International Paint ‘Dataplan’ system has coating details of over 1.7 billion DWT, representing almost 200,000 drydockings that allow antifouling performance to be predicted and assessed.

Results are derived from analyzing the in-docking condition of a vessel, its coating performance and assessing the

type, severity and extent of any fouling, if present. In conjunction with the vessel’s trading pattern, operational profile and drydocking interval, an antifouling performance rating can be calculated.

Dataplan also records the vessel’s coating condition, including the type, severity and extent of any corrosion, cracking, blistering, detachment and mechanical damage, all of which contribute to and are included in, hull roughness measurement.

Full back-up International Paint also cites the report, ‘Energy and GHG Emissions Savings Analysis of Fluoropolymer Foul Release Hull Coating’, by Professor James Corbett’s Energy & Environmental Research Associates. The report is dated the 10th December 2010.

The report analyzed the latest fuel consumption data of three vessel types

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March 2012 BC Shipping News 49 08/09/11 02:44:28PM

technology coated with Intersleek® 900; Prem Divya, a single engine 21,126 horsepower (HP) tanker, Ikuna, a twin engine 3,400 HP bulker and five identical post panamax container vessels, three of which were coated with SPC antifoulings and two with Intersleek® 900.

The results are remarkable for the correlation they show between the coating applied and the fuel consumed. The report showed that fuel consumption was reduced by 10 per cent on the Prem Divya, 22 per cent on the Ikuna and by five per cent in five container vessels (based on all five ships carrying a comparable load). The report stated that if similar fuel efficiency results were realised by all tanker and bulk cargo vessels within the commercial fleet that: “annual fuel oil consumption could be reduced by roughly 16 million metric tons (MMT) per year, fuel expenditures could be reduced by $4.4 to $8.8 billion per year, and nearly 49 million tonnes of CO2 emissions could be avoided annually”.

At a more detailed level, the report stated that the latest generation fluoropolymer foul release coating could offer average fuel and emissions savings of up to nine per cent.

Challenge For some, though, such claims are always open to challenge. Critics argue that, no matter which coating is applied, a ship will naturally move through the water more smoothly if it has been blast-cleaned during drydocking.

Furthermore, they argue, the linkage between hull smoothness and reduced emissions is tenuous: traditionally, extra smoothness was more likely to lead to some ships being driven faster, not to fuel savings.

On the face of it, seemingly persuasive such arguments could be readily countered by observing the growing propensity for owners to operate slow steaming policies specifically in pursuit of fuel (and consequently emissions) savings. Again, while no one would dispute that depending upon the fouling control system employed, a newly 50 BC Shipping News March 2012

grit-blasted or hydroblasted, freshly coated hull will perform better than a hull at the end of its docking cycle, the point is surely to measure how quickly hull performance deteriorates over time in the context of the coating systems applied.

Methods of measurement For this reason, International Paint has been explicit in detailing the alternative methods that have been used as the means of establishing linkage between the fouling control system selected and potential fuel savings.

Going forward, International Paint has stated that it recognizes the importance of providing owners with as much information on the performance of its products as it can.

Breaking new ground The new relationship with BMT looks to do just that; it will provide the independent monitoring that the partners believe will make both the evidence and methodology cited above incontrovertible.

The BMT SMARTSERVICES system, developed by BMT ARGOSS, will capture and compile real vessel data and independently monitor and report on vessel performance. It will record data

Vessel efficiency diagram.

automatically from ships’ sensors to monitor engine torque, the speed log, navigational signals (heading and speed over ground), and provide performance information to the crew and to shorebased management for analysis. The system, which can be installed at the newbuilding stage or as a retro-fit, automatically records thousands of readings per day, providing unparalleled, accurate analysis of vessel performance.

The system will clearly and transparently measure the in-service performance of International Paint’s hull coatings, drawing on BMT’s 24/7 in-house high quality and validated MetOcean data.

The significance of the MetOcean data gathered automatically from high resolution, highly accurate satellite monitoring for use as part of BMT SMARTSERVICES should not be underestimated. While it is clearly essential to monitor information on board, such as the relationship between hull roughness condition and fuel consumption, this information needs to be integrated with the environmental conditions being experienced by the ship. This MetOcean data includes factors such as wind speed and direction, currents, (speed and direction)and wave height and direction.

technology The system has been modelled using weighted performance co-efficients to provide the basis for measurement of vessel performance against the condition of the propeller, hull, engine and fuel consumption. In depth analysis can be used to monitor the propulsive performance of a ship and to indicate how much additional power, or fuel, would be required as a consequence of the combined effects of weather and fouling or of the isolated effects of fouling on the hull or propeller. This analysis enables data trending which can be used to optimise any scheduling of hull and propeller cleaning events and can be subsequently used to quantify the effectiveness of any such events.

To ensure complete data integrity, all information collected will be sent to BMT. The client and International Paint will be able to view vessel data in graphical or tabular form to develop trend analysis via a secure access web interface but the data cannot be changed or manipulated.

Wider benefits The consortium points out that accurate monitoring has several benefits for the ship operator: • Proof of compliance to Charter Agreements • Ability to determine the energy efficiency of the vessel within the EEOI (Energy Efficiency Operational Index) encompassed in the SEEMP (Ship Energy Efficiency Management Plan) guidelines • Ability to act immediately on anything adversely affecting the optimum running of the vessel e.g. hull fouling, propeller fouling, trim optimisation, hull damage etc.

In achieving these benefits, it is essential to be able to show that there is an agreed way of recording standardised data, using an agreed scientific approach that will be generally accepted by the industry.

International Paint and BMT say they want to provide shipowners and operators with information in a completely

open and transparent way to provide clarity to those using the information.

They want owners to get fuel saving benefits, but want to make sure that there is a complete understanding of the actual savings possible rather than just accepting the largest number. It is from many years of proven in-service performance with data from owner/ operators, from Dataplan and from

independent testimony that they say they know exactly what benefits each of their technology types can deliver.

They believe that this new partnership will make that knowledge completely transparent.

Ed.Note: Due to spacing constraints, the details on the methods of measurement were omitted. For the full report, please visit: www.bcshippingnews.com.

March 2012 BC Shipping News 51

TECHNOLOGY New product from Hamann AG offers solution to black and grey water onboard treatment for any size vessel

A

s of January 1, 2010, stricter guidelines for onboard sewage treatment plants were brought in through Annex IV of IMO’s MARPOL Convention. The new standard called for sewage treatment plants whose effluence did not produce visible floating solids or cause discolouration of the surrounding water. Hamman AG’s new series of marine sewage treatment plants are proving to be a popular solution for new shipbuilding and refit projects.

Hamman AG — who are represented exclusively in Canada

by Jastram Technologies — has been designing and manufacturing marine sewage treatment plants since 1972. Their products can be found on a wide variety of ships – commercial carriers, cruise ships, yachts, naval and coast guard vessels as well as oil rigs and platforms for the oil and gas industry. With an emphasis on sustaining the environment for future generations, Hamann’s products , including their new HL Cont Plus wastewater treatment solutions, are constructed according to the rules of Germanischer Lloyd and meet with IMO’s Marpol Annex IV guidelines for standards. Hamman AG also

(Now effective)

52 BC Shipping News March 2012

maintains a quality management system in accordance with ISO 9001.

The HL-Cont Plus series and the Super Mini PLUS (which is a stand alone unit using slightly different technology) come in sizes to suit a range of capacities and represent the very latest in treatment technology. In addition to being uncomplicated, completely self-contained and configured to minimize installation space requirements, the Super Mini Plus only needs chlorine, the Slim 02 needs nothing and the Cont Plus only needs flocculant. The advantages of this kind of system are numerous: The small dimensions and low weight save space; the small vent connection saves installation costs; the low energy consumption saves operating costs; there are no sensitive parts like membranes and therefore no expensive spare parts required; it is easy to operate without any special training for crew; and it saves both time and money through automatic cleaning. In addition, because there is no growing time for bacteria needed, the system is flexible to accommodate the changing number of people onboard. Hamann AG has also established a worldwide engineering service network that can provide assistance easily no matter where the vessel is.

Here’s how the system works for the Slim 02 and Cont Plus: Using a proven waste water treatment method known as “dissolved air flotation”, the treatment plant effectively and efficiently treats black and grey water without the use of pre-filters or membranes. Air is used to saturate the waste water and begin the natural process of decomposition. The air is expanded to bind and carry away heavy waste matter while lighter sewage is further processed by a fixed bed reactor (Cont Plus only). The clear effluent is disinfected using ultraviolet light prior to discharge. The entire treatment process is completely automatic and requires no intervention by crew.

In the Super Mini Plus, the sedimentation occurs where the solids sink and are removed from the bottom, the output is treated with chlorine.

The best way to understand the process is to follow the schematic included with this article on the following page.

As mentioned, the HL-Cont Plus series comes in a variety of sizes to match the needs of different vessel sizes: • The Super Mini Plus: one of the world’s smallest marine sewage treatment plants. This compact plant provides the capacity to treat wastewater generated by up to 15 men. These units are currently being installed on the new Canadian Coast Guard Mid-Shore Patrol Vessels under construction at Halifax Shipyard.

• The HL-Cont PLUS 02 Slim has the capacity to treat all wastewater for up to 35 men. The Slim operates without any chemicals or consumables.

technology

Using the HL-Cont PLUS 02 Slim to illustrate: The physical process is combining micro flotation with ultraviolet light disinfection. The collected sewage water will be transferred from the ships sewage tank via the feeding pump (002) and through the macerator (001) into the flotation tank (007). At the same time the multiphase pump (003) is enriching the macerated sewage water with oxygenated water.

By entering the flotation tank the micro flotation process starts and the solids will be separated in a very effective way from the water. The collected sludge will be transferred automatically via the sludge pump (008) to the ships sludge tank. The effluent pump (005) transfers the purified water via the ultraviolet light (006) overboard. The life time of the UV lamp is 10.000h. The HL Cont PLUS 02 Slim is working fully automatically and controlled by analogue level switches (04 – 20 mA) in the ships tanks.

• The HL-Cont Plus 05, 10, 20, 40 and 80 all share a common, compact design and operational philosophy. Each system is provided as a self-contained, completely automatic treatment solution. Plant cleaning is completely automatic and requires no cleaning chemicals.

and impact on the environment, easily makes this one of our most popular products.”

JTL is a Canadian distributor of quality marine equipment. With a portfolio of more than 21 companies, JTL carries

the best equipment — “Engineered for Life at Sea”. As a nation-wide company, Jastram Technologies has offices in B.C., Ontario and Nova Scotia. For more information, visit: www.jastramtechnologies.com.

• The HL-Cont Plus provides treatment without membranes or pre-filters. This means that the treatment plant is significantly smaller, lighter and easier to operate.

As the Canadian representative for Hamann AG and the HL-Cont Plus series of waste treatment plants, Jastram Technologies Ltd (JTL) representative Shawn Burchett recognizes the benefits of the system: “Being able to meet the needs of any size vessel as well as the numerous ways to reduce costs

The HL-Cont PLUS 02 Slim waste treatment system.

March 2012 BC Shipping News 53

upcoming events 2012 Mari-Tech Conference & Expo April 10 - 11, 2012 Hampton Inn Ottawa Conference Centre Ottawa, Ontario

The Mari-Tech Society of Canada, the Society of Naval Arch-itects and Marine Engineers (SNAME), Eastern Canadian Section, and the Ottawa Branch of the Canadian Institute of Marine Engineering (CIMarE) invite you to Mari-Tech 2012.

The Conference, inlcuding over 50 exhibits, will be held April 10 - 11, 2012 at the Hampton Inn Ottawa and Conference Centre in Ottawa, Ontario.

Co-chaired by Jeffrey Smith (Chair, National Council and Ottawa Branch Representative, CIMarE), and Glenn Walters, (Chair, Eastern Canadian Section, SNAME), the Mari-Tech 2012 Conference Committee has decided on the theme of “Re-Birth of the Marine Technical Community”.

In addition to paper submissions, additional information on registration, exhibits, sponsorship opportunities and agenda topics can be found at www.mari-tech.org.

Vancouver Maritime Arbitrators Association invites you to ICMA XVIII — Vancouver 2012

The Vancouver Maritime Arbitrators Association (VMAA), is delighted to invite you to the International Congress of Maritime Arbitrators, ICMA XVIII, to be held at the Pan Pacific Hotel, Vancouver, British Columbia, May 13 to 18, 2012.

The maritime industry continues to lead the world in international alternate dispute resolution through arbitration.

Since 1972 ICMA has provided a forum for arbitrators, national maritime arbitration associations, marine insurers, ship owners, charterers, cargo interests and the legal community from around the world to come together to exchange views and developments.

After 21 years, ICMA returns to Vancouver in 2012.

The VMAA invites you to join the ICMA Forum at www. icma2012.com to post topic suggestions. Suggestions to cover a full range of issues including piracy, charter party agreements and the many facets of maritime arbitration.

To register or learn more, please visit: www.icma2012.com.

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